BHAVESHBHAI GOVINDBHAI PATEL,AHMEDABAD V. THE ACIT, CENTRAL CIRCLE-1(1) NOW THE ITO, WARD- 4(1)(1), AHMEDABAD

ITSSA 127/AHD/2023

AI Insights

The case involves multiple appeals by the assessee, Bhaveshbhai Govindbhai Patel, against the orders of the CIT(A)-11, Ahmedabad concerning various assessment years. The appeals primarily challenged the directions for a special audit under Section 142(2A) of the Income Tax Act, 1961, and several additions made to the assessee's income based on the special audit report. The Tribunal examined each ground of appeal in light of previous judgments and the specific facts of the case, including the absence of incriminating material during the search and seizure operation, the nature of the properties involved, and the financial transactions recorded.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 37182 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2024
• Assessment Year: 2006-2007
• Appeal Filed On: 04-09-2023
• Other Referred Cases: Late Govindbhai Mafatlal Patel, Hasmukhbhai Govindbhai Patel, Late Smt. Savitaben Govindbhai Patel
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VEERABADRAM VISLAVATH
• Assessee Lawyers: DHINAL SHAH; BHADRESH GANDHAKWALA; ARS
• Keywords: Set aside; Capital asset; Unexplained investment; Document seized; Documents seized; Search and seizure
• Section: 144; 142(1); 143(2); 132; 153A; 139(1); 69C; 69B; 13; 142(2A); 246A

Judgement Text

"IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 1 of 19 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 Assessment Years: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Bhaveshbhai Govindbhai Patel, 8, Manichandra Society Vibhag – III, Opp. Surdhara Bunglow, Thaltej, Ahmedabad – 380 051. [PAN – ABYPP 8214 A] Vs. The ACIT, Central Circle – 1(1), Ahmedabad. now the Income Tax Officer, Ward-4(1)(1), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Dhinal Shah & Shri Bhadresh Gandhakwala, ARs Revenue by Shri Veerabadram Vislavath, Sr. DR Date of Hearing 16.10.2024 Date of Pronouncement 12.11.2024 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER: These five appeals are filed by the Assessee against five different orders dated 30.06.2023, 04.07.2023, 30.06.2023, 04.07.2023 & 30.06.2023, passed by the CIT(A)-11, Ahmedabad for the Assessment Years 2005-06, 2006-07, 2007-08, 2009- 10 & 2011-12 respectively. 2. Firstly, we are taking IT(SS)A No.126/Ahd/2023 for Assessment Year 2005- 06. In this appeal, the Assessee has raised the following grounds :- “Technical: 01 The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 2 of 19 a need for special audit having regard to the nature and complexity of the accounts. 02. The learned CIT(A) has erred in not adjudicating Ground No.1 & 2 regarding special audit [Para No.8 on Page No.8 of CIT(A) Order dated 21.11.2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits. 03. The assessment order is bad in law since the order is passed on 23.10.2013 after the receipt of the special audit report. The assessment order should have been passed by 31.03.2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No.1. Merits: 04. The leamed CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under: (i) Capital Gain on sale of Thaltej Land Rs.1,68,34,012 (ii) Notional Rent on vacant House Properties Rs. 42,000 -------------------- Total: Rs.1,68,76,012 ============ 4.1 The learned CIT(A) has erred in confirming the addition in relation to alleged sale of land at Thaltej in as much as there is no transfer of the land or there is no consideration which is received towards alleged sale of land and that the learned CIT(A) has erred in relying the judicial decisions which are not relevant on the facts of the case. 4.1.1 Without prejudice to above, the learned CIT(A) has erred in confirming the capital gain of Rs.1,68,34,012/- in as much as the learned CIT(A) has erred in not following the correct computation of capital gain as per law. 05 The learned CIT(A) has erred in confirming the notional rent of Rs.42,000/- under Section 23 in as much as the addition made is not proper as per law.” 2.1 In this appeal, i.e. IT(SS)A No.126/Ahd/2023 for A.Y. 2005-06, the assessee has also raised the following additional ground :- IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 3 of 19 “The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search.” 3. The assessee has not filed original return of income under Section 139(1) of the Income Tax Act, 1961. A search and seizure operation was carried out under Section 132 of the Act in the Sadbhav Group of cases including the assessee on 05.10.2010. Subsequent to the search, the case of the assessee was centralised and notice under Section 153A of the Act was served on the assessee on 22.09.2011. The assessee was required to file his return of income within thirty days of receipt of the notice, however, the assessee did not file any return of income in response to the same. Thereafter, the assessee was again called upon on 21.08.2012 to furnish return of income within seven days from the letter dated 21.08.2012 but the assessee did not file return of income under Section 153A of the Act. Proceedings for launching prosecution under Section 276CC of the Act were initiated against the assessee. During the course of search/survey action, various books and documents were seized/impounded from various premises for which neither the assessee nor any member of his sub-group, either before the Investigation Wing or during these proceedings, offered any satisfactory explanation as per the observation of the Assessing Officer. The cases of the assessee and his group members were proposed for Special Audit under Section 142(2A) of the Act. The assessee was given opportunity vide notice under Section 142(2A) dated 19.02.2013. After considering the complexities involved in disposing the objections filed by the assessee and other group members and obtaining the necessary statutory approvals, the assessee was directed to get his books of accounts audited by Special Auditor. Meanwhile, the assessee filed his return of income on 29.11.2012 declaring total income at Rs.44,000/- in response to the notice issued under Section 153A of the Act for Assessment Year 2005-06. Subsequently, notice under Section 143(2) of the Act dated 30.11.2012 was issued and served on the assessee. The Special Auditors furnished report on 27.08.2013 and thereafter, a detailed questionnaire as well as show cause under Section 142(1) of the Act dated 26.09.2013 was issued and served upon the assessee. As there was no response from the assessee and, therefore, final show cause notice under Section 144 of the IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 4 of 19 Act dated 04.10.2013 was issued. The assessee did not respond to the same. Since the assessee has not furnished the desired informational/details and the Special Auditors during audit under Section 142(2A) of the Act observed several discrepancies in the books of accounts of the assessee Company and the assessee’s books were rejected by the Assessing Officer. The Assessing Officer on the basis of data available and report of the Special Auditors as well as seized/impounded documents found/observed that the amount of Rs.63,000/- has been shown as deposit in M/s. Savita Govind Export Pvt. Ltd. during the year under consideration. Since there was no response, the Assessing Officer made addition of Rs.63,000/- under provisions of Section 69B of the Act. The Assessing Officer further made addition of Rs.1,65,151/- in respect of loan investment under Section 69B of the Act. The Assessing Officer further observed that during the course of survey, certain documents marked as Annexure A11 containing pages 1 to 85 were impounded and was found that the assessee was one of the Share-holders in M/s. Savita Co-operative Housing Society. The Assessing Officer made enquiries with the Registrar of Co-operative Societies and observed that the assessee and other group members resigned from the said society and their shares were sold to Shri Narsinh G. Patel and his group. From the further enquiries, the Assessing Officer observed that the assessee and his group members including family members and the concerns mentioned on page no.6 of the Assessment Order received a total consideration of Rs.16,63,87,100/- towards sale of their shares in the Society. The search report was obtained from the office of the Sub-registrar and the Assessing Officer found that in the year 2000 the assessee has mortgaged three specific survey number mentioned in paragraph no.5.5 of the Assessment Order and during the previous year 2004-05 the assessee transferred the shares held in Savita Co- operative Housing Society wherein survey numbers mentioned in paragraph no.5.4. After taking cognisance of the reports, the Assessing Officer observed that as per confirmations and the seized documents and other evidences, the assessee earned sale consideration of Rs.1,69,76,683/- towards his share against which cost incurred towards his share was calculated at Rs.90,655/- as available from the books of the Society. Thus, the Assessing Officer calculated the Long Term Capital Gain and made addition of Rs.1,68,34,012/-. The Assessing Officer also made addition on IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 5 of 19 account of Notional Rent on vacant house properties amounting to Rs.42,000/- and also addition of Rs.10,36,323/- as undisclosed credit in undisclosed Bank account. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that regarding additional ground relating to no incriminating material found, the same was dismissed by the Tribunal in IT(SS)A Nos.84 to 89/Ahd/2023 for Assessment Years 2005-06 to 20011-12 by ITAT order dated 12.06.2024 in the case of Late Govindbhai Mafatlal Patel. 6. The Ld. DR submitted that this issue was dismissed by the Tribunal in paragraph no.10 of the order. 7. We have heard both the parties and perused all the relevant material available on record. The decision in the case of Late Govindbhai Mafatlal Patel, the Tribunal held in paragraph no.10 as under :- “10. We have heard the rival contentions of both the parties and perused the materials available on record. It is an admitted fact that the assessee has not filed any return of income for the year in dispute and therefore there was no occasion with the Revenue to carry out any assessment to determine the taxable income of the assessee. It was only when the search was conducted wherein the documents were found and seized and the search assessment proceedings were initiated, that the Revenue got the opportunity to determine the taxable income of the assessee. Furthermore, on questions by the AO about the documents found and seized during the search, the assessee did comply by furnishing the necessary details. In the absence of any cooperation from the assessee, the AO referred the matter for the special audit under section 142(2A) of the Act. Thereafter, the AO based on the audit report framed the assessment. As such, the audited report was based on the seized materials. Therefore, it cannot be said that assessment was framed by the AO without having any incriminating documents. As such, we are not inclined to accept the argument advanced by the ld. AR at the time of hearing that the assessment was not based on the incriminating documents. Accordingly, the ground of appeal raised by the assessee is hereby dismissed.” 7.1 Thus, the Tribunal has categorically mentioned about the search and seizure operation in case of Sadbhav Group of cases. Thus, the assessee’s case for additional ground has already been decided by the Tribunal against the assessee. IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 6 of 19 Thus, there was incriminating documents which has direct bearing on the additions and the observation made by the Assessing Officer in respect of escapement of income in assessee’s case. Thus, the additional ground is dismissed. 8. As regards ground no.1 to 3, the Ld. AR held that the same is not pressed as the same is now covered by the Tribunal’s decision in the case of Late Govinbhai Mafatlal Patel (supra). Thus, ground nos.1 to 3 are dismissed. 9. As regards ground nos.4(i), 4.1 & 4.1.1, the Ld. AR submitted that the Tribunal in the case of Late Govindbhai Mafatlal Patel has given a direction to the Assessing Officer to delete the said addition made in paragraph no.25.12. The facts are identical in the present case as well. 10. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). It is pertinent to note that Late Govindbhai Mafatlal Patel was also party to the property/Division of the Society namely Savita Co-operative Housing Society and Savita Co-operative Housing Society Limited Vibhag-1. Thus, the facts are identical in the present assessee’s case as well. The observations made by the Tribunal in paragraph no.25.12 are as under :- “25.12 A question also strikes in our mind that that the case was filed by the family members of the assessee after the substantial time, thus it appears to us that the case has been filed by the family members is just to avoid the tax liability. However, it is an undisputed fact that the matter is under litigation which is subjudice in the court of law. Such dispute does not come under our preview. Therefore, we find that for the dispute referred to above, we are not competent to investigate the veracity of such matter/litigation. Thus, in view of the above and considering the facts of the case as discussed in detail in the preceding paragraph, there cannot be any addition to the total income of the assessee on account of surrender of the membership in the given facts and circumstances. Hence, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.” 10.1 Thus, ground nos.4(i), 4.1 & 4.1.1 are partly allowed. 11. As regards ground no.4(ii) relating to Notional Rent on vacant house properties and ground no.5, the Ld. AR submitted that the possession of the flat was IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 7 of 19 received on 08.10.2009 i.e. Assessment Year 2010-11 and thus the assessee was not the owner of the property during the Assessment Year 2005-06. There was land dispute and the Tribunal’s order has categorically mentioned the registration date and the possession date, so there was no annual letting value. The Ld. AR pointed out at page no.188 of the Paper Book the receipt from the assessee and Prachimaben B. Patel amounting to Rs.7,50,000/- for Savita Govind Estate Developers Pvt. Ltd. wherein it was mentioned “deposit not purchase consideration”. At page no.189 of the Paper Book, the assessee has filed confirmation of Savita Govind Estate Developers Pvt. Ltd. on 16.04.2014 thereby confirming that the transfer of Flat No. A-24 is on 08.10.2009 and received possession and Rs.7,50,000/-. Since the assessee received the Flat in Assessment Year 2010-11, notional rent on vacant house properties cannot be added. 12. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 13. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) observed in paragraph no.9.18 that the assessee is the owner of a Flat for which no notional rent income is shown in return of income. The assessee claimed that he had given deposit of Rs.7,50,000/- on 24.08.1998 but had become owner of the property by obtaining possession on 08.10.2009. The possession receipt signifies that the actual date of possession in the hands of the assessee and the said possession date is a crucial date which is falling in Assessment Year 2010-11. The receipt of the deposit clearly mentions that the consideration has not been paid fully as on 24.08.1998 and the confirmation categorically mentions actual possession of the Flat on the particular date which is 08.10.2009. Thus, the Assessing Officer as well as the CIT(A) has totally ignored the facts and the documents produced by the assessee and, therefore, the notional rent on vacant house properties cannot be made as addition as the assessee has not received any rent which is the actual fact. Thus, ground no.4(ii) and ground no.5 are allowed. IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 8 of 19 14 Thus, IT(SS)A No.126/Ahd/2023 for Assessment Year 2005-06 is partly allowed. 15. Now coming to IT(SS)A No.127/Ahd/2023, for Assessment Year 2006-07, in this Appeal the assessee has raised the following grounds:- “Technical: 01 The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts. 02. The learned CIT(A) has erred in not adjudicating Ground No.1 & 2 regarding special audit [Para No.8 on Page No.8 of CIT(A) Order dated 21.11.2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits. 03. The assessment order is bad in law since the order is passed on 23.10.2013 after the receipt of the special audit report. The assessment order should have been passed by 31.03.2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No.1. Merits: 04. The leamed CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under: (i) Undisclosed Investment in Elentra Car under Section 69B Rs. 4,08,600/- (ii) Unaccounted Sale of Shares of M/s. Savita Govind Co-operative Housing Society Limited Rs.10,78,268/- (iii) Unaccounted Sale of Shares of M/s. Amardeep Co-op. Housing Society Limited Rs.59,94,250/- (iv) Unaccounted Loan given under Section 69B Rs. 85,245/- (v) Notional Rent on vacant house property Rs. 42,000/- IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 9 of 19 -------------------- Total: Rs.76,08,363/- =========== 4.1 The learned CIT(A) has erred in confirming partial addition of Rs.4,08,600/- under Section 69B for purchase of Car is not proper. 4.2 The learned CIT(A) has erred in confirming unaccounted sale of shares of M/s. Savita Govind Co-op. Housing Society Limited of Rs.10,78,268/- and unaccounted investment in shares M/s. Amardeep Co-op. Housing Society Limited of Rs.59,94,250/- in as much as there is no transfer of land in the case of the assessee. 4.3 The learned CIT(A) has erred in confirming the unaccounted loan given to M/s. Nitin Construction of Rs.85,245/- in as much as the same are explainable and only on account of reconciliation difference. 5. The learned CIT(A) has erred in confirming the notional rent of Rs.42,000/- under Section 23 in as much as the addition made is not proper as per law.” 16. As regards ground nos.1 to 3, the same is not pressed by the assessee as the same is decided in the case of Late Govindbhai Mafatlal Patel (supra). Hence, ground nos.1 to 3 are dismissed. 17. As regards ground no.4(i), the Ld. AR submitted that the same is not pressed. Thus, ground no.4(i) and ground no.4.1 are dismissed. 18. As regards ground no.4(ii) and 4.2, the same are decided in favour of the assessee in the case of Hasmukhbhai Govindbhia Patel in IT(SS)A No.91/Ahd/2023 for Assessment Year 2006-07 and the relevant paragraph no.204 of the Tribunal’s order dated 12.06.2024 which read as under :- “204. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the addition was made by the AO on the premise that the assessee has transferred the ownership right vested in the land held by the society upon the resignation of the assessee from the society. As per the revenue, the assessee has received consideration from the party namely Shri Govind Bhai Patel being the continuing member of the society upon the resignation of the assessee. According to the Revenue, such consideration was received by the assessee from the undisclosed income of Shri Govind Bhai Patel in unaccounted form. Similar addition was also made in the hands of Shri Govind Bhai Patel. IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 10 of 19 However, we find that the addition made in the hands of Shri Govind Bhai Patel has been deleted in his case for the same transaction. Thus, we are of the view that no addition is warranted in the hands of the assessee on hand for the same transaction being the alleged recipient of consideration. Thus, in view of the above and after considering the facts in detail/totality, we are not inclined to uphold the finding of the authorities below. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.” 18.1 Thus, ground nos.4(ii) and 4.2 are allowed. 19. As regards ground no.4(iii), the same are in connection to ground no.4(ii) and 4.2. Hence, the same is allowed. 20. As regards ground no.4(iv) relating to unaccounted loan given under Section 69B of the Act, the Ld. AR submitted that the difference of Rs.85,245/- is because of the journal entry passed by Shri Bhavesh G. Patel since Nitin Construction made payment by pay order to somebody on behalf of Shri Bhavesh G. Patel. Nitin Construction Limited debited Bhavesh G. Patel account since the payment was made on his behalf and of Shri Bhaveshbhai credited Nitin Construction Limited account and debated to capital account. The balance sheet as per the seized document when prepared, the person preparing the Balance Sheet as per the seized document was not aware about the journal entry. Therefore, the difference was noticed by the Special Auditor. Copy of account of Nitin Construction Limited from the books of Shri Bhavesh Patel and contra account i.e. copy of account of Shri Bhaveshbhai Patel from the books of Nitin Construction Limited clearly set out the reconciled account. Therefore, the addition should be deleted. 21. The ld. DR relied upon the Assessment Order and the order of the CIT(A). 22. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically mentioned that no details regarding payment was made by Nitin Construction was provided in the appellate proceedings and the assessee seems to have passed IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 11 of 19 journal entry in books of account to tally the same with seized material. Thus, the explanation of the assessee fails in respect of such loan and thus the Assessing Officer as well as the CIT(A) has rightly made the addition. Thus, ground nos.4(iv) and 4.3 are dismissed. 23. As regards ground no.4(v) and 5, the same is already disposed in Assessment Year 2006-07. Since the possession of the flat was received on 08.10.2009, the same will not be added in Assessment Year 2006-07 as well. Hence, ground no.4(v) and 5 are allowed. 24. Thus, IT(SS)A No.127/Ahd/2023 for Assessment Year 2006-07 is partly allowed. 25. Now coming to IT(SS)A No.128/Ahd/2023, for Assessment Year 2007-08, in this Appeal the assessee has raised the following grounds:- “Technical: 01 The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts. 02. The learned CIT(A) has erred in not adjudicating Ground No.1 & 2 regarding special audit [Para No.8 on Page No.8 of CIT(A) Order dated 21.11.2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits. 03. The assessment order is bad in law since the order is passed on 23.10.2013 after the receipt of the special audit report. The assessment order should have been passed by 31.03.2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No.1. IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 12 of 19 Merits: 04. The leamed CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under: (i) Sale of Ognaj Land- Jay Laxmi Kheti Sahkari Mandali Rs.30,00,000/- (ii) Notional Rent on vacant House Properties Rs. 42,000/- -------------------- Total: Rs.30,42,000/- ============ 4.1 The learned CIT(A) has erred in restricting the addition of sale of Ognaj Land- Jay Laxmi Kheti Sahkari Mandali of Rs.30,00,000/- out of Rs.62,61,856/- in as much as there is no transfer of land by the assessee and that the assessee has not received any consideration for the same. 05 The learned CIT(A) has erred in confirming the notional rent of Rs.42,000/- under Section 23 in as much as the addition made is not proper as aper law.” 25.1 In this appeal, i.e. IT(SS)A No.128/Ahd/2023 for Assessment Year 2007-08, the assessee has also raised the following additional ground :- “The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search.” 26. The additional ground relating to no incriminating material found is identical to additional ground for Assessment Year 2005-06. Hence, the same is dismissed. 27. As regards ground nos.1 to 3, the same are identical and not pressed by the assessee, hence dismissed. 28. As rears ground no.4(i) and 4.1, this ground is identical to that of the facts of the case of Late Smt. Savitaben Govindbhai Patel and the Tribunal has decided this issue in favour of the assessee therein in paragraph no.63 (IT(SS)A No.116/Ahd/2023). The relevant finding of the Tribunal are as under :- IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 13 of 19 63. We have heard the rival contentions of both the parties and perused the materials available on record. As per the special audit report, the society was formed sometime in the year 1991 by certain outside members. Society also owned certain survey numbers of the land. Subsequently, the society was acquired by the assessee during the years 1997 to 2003. However, society was treated as the owner of the land even before the society was acquired by the assessee. Undeniably, the members of society have obtained loans from the bank after mortgaging the lands of the society. Subsequently, to settle the dispute of the loan with the bank, lands were sold, and the consideration on the sale of land was given to the bank against the loan of the members. Now the issue in the present case is whether the consideration accrued to the society against the land transferred can be subject to the addition in the hands of the members of the society. In this connection, we are inclined to refer the judgement of the Hon’ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239/84 Taxman 630 (SC), has observed that \"The Income Tax Officer can, and he must, tax the right person and the right person alone. By 'right person' is meant person who is liable to be taxed, according to law, with respect to a particular income.\" In the case of hand, the exclusive ownership of the land was vested with the society and the revenue has not disputed the same. The entire basis of the revenue was thatthe consideration received upon the sale of the land was adjusted against the loan taken by the individual and therefore the same should be taxed in the hand is of such individuals after ignoring the fact that the land in dispute was owned by the society. 28.1 Thus, ground no.4(i) and 4.1 are allowed. 29. Ground nos.4(ii) and ground no.5 are identical to Assessment Year 2005-06 and hence allowed. 30. Thus, IT(SS)A No.128/Ahd/2023 for Assessment Year 2007-08 is partly allowed. 31. Now coming to IT(SS)A No.129/Ahd/2023 for Assessment Year 2009-10, in this appeal the assessee has raised the following grounds:- “Technical: 01 The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 14 of 19 return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts. 02. The learned CIT(A) has erred in not adjudicating Ground No.1 & 2 regarding special audit [Para No.8 on Page No.8 of CIT(A) Order dated 21.11.2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits. 03. The assessment order is bad in law since the order is passed on 23.10.2013 after the receipt of the special audit report. The assessment order should have been passed by 31.03.2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No.1. Merits: (i) Unaccounted Loan Given Rs.56,26,346/- (ii) Unaccounted Investment in Kalol Land Rs.25,50,000/- (iii) Unaccounted payment for Maninagar Land Rs.66,06,000/- (iv) Notional Rent on vacant house property Rs. 42,000/- ---------------------- Total: Rs.1,48,24,346/- ============= 4.1 The learned CIT(A) has erred in confirming the unaccounted loan given to Hiral Pipes P. Limited of Rs.2,00,000/- and Savita Govind Construction P. Limited of Rs.5,83,460/- and M/s. Nitin Construction of Rs.48,42,886/- amounting in all to Rs.56,26,346/- in as much as the same are explainable and there is only reconciliation difference and that loans given cannot be treated as income. 4.2 The learned CIT(A) has erred in confirming the addition of Rs.25,50,000/- in relation to alleged purchase of land at Kalol in as much as the land at Kalol was an agriculture land and therefore it is not capital asset within meaning of the Act and therefore the question of any capital gain does not arise. 4.3 The learned CIT(A) has erred in confirming the addition of Rs.66,06,000/- in relation to alleged purchase of land at Maninagar in as much as the appellant has not purchased land at Maninagar and that advances given for purchase of land was given out of explained source and threescore there is no question of any addition. IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 15 of 19 5. The learned CIT(A) has erred in confirming the notional rent of Rs.42,000/- under Section 23 in as much as the addition made is not proper as per law.” 32. Ground nos.1 to 3 were not pressed by the assessee and hence dismissed. 33. As regards ground nos.(i) and 4.1, the same is covered by the Tribunal’s decision in the case of Late Govindhai Mafatlal Patel (supra) in paragraph no.79.3 at page no.62 which is as under :- “79.3 Admittedly, the seized documents were found containing information relating to the company M/s Hiral Pipes Pvt Ltd. Furthermore, such documents did not match the records of the company. The controversy arises whether such entries recorded in the seized documents reflects the income of the assessee. The answer stands in negative. It is for the reason that the seized document in itself does not represent any income of the assessee until and unless it is corroborated by some documentary evidence. Admittedly the assessee was a director in the company and therefore the possibility of recording the transaction relating to the company by the assessee in the capacity of director cannot be ruled out. Thus, in the absence of any corroborative material, no addition is warranted in the hands of the assessee. Likewise, the transaction admittedly relates to the company and if any addition is required to be made, that can be made in the hands of the company until and unless it is brought on record that such transaction was carried out by the assessee from undisclosed sources on behalf of the company. But no such finding is emanating from the authorities below. Thus, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.” 33.1 The facts are identical and hence ground nos. (i) and 4.1 are allowed. 34. As regards ground nos.(ii), 4.2, (iii) and 4.3 relating to unaccounted payment for Maninagar land and Kalol land, the Ld. AR submitted that the Assessing Officer has made addition of Rs.33,62,000/- as unaccounted investment in A.D. Patel & Co. on the basis of Special Audit Report and seized documents. This Special Audit Report mentions the addition of Rs.17,00,000/- as unaccounted investment whereas the Assessing Officer made addition of Rs.33,62,000/- on the basis of seized documents. The sale deed was for Rs.21,00,000/- and the same was executed at the prevailing Jantry Rate and Stamp Duty was accordingly paid. The half share of the assessee i.e. Rs 10,50,000/- was paid by him in Assessment Year 2008-09 & IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 16 of 19 2009-10 as Rs.5,00,000/- & Rs.5,50,000/- respectively. The assessee also paid Rs.7,00,000/- to A.D. Patel & Co. in two assessment years i.e. Assessment Year 2008-09 and 2009-10. The same was paid by the confirming party Krishna Developers in Assessment Year 2009-10 and 2010-11. The assessee purchased the land at the prevailing market rate. The confirmation from land seller Shri Dhanjibhai and land developer Krishna Developers and joint owner A.D. Patel & Co. were also submitted by the assessee. As regards unaccounted payment for Maninagar land amounting to Rs.66,06,000/-, Shri Bhavesh Patel though intended to buy the land but not purchased the land and simply made the payment of Banakhat and then the said money was returned. Thus, the addition of Rs.66,06,000/- does not arise. 35. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 36. We have heard both the parties and perused all the relevant material available on record. The assessee has given all the details relating to investment in Kalol land related to payment for Assessment Year 2008-09 & 2009-10 and also given the confirmations from the parties in Assessment Year 2009-10 and 2010-11. From the perusal of the payments, it appears that the assessee’s investment was reflected and, therefore, the addition to that extent should be deleted. As regards the payment of Maninagar land, the purchase of the said land was not materialised and, therefore, the addition cannot be made without any corroborative evidence. Hence, ground nos.(ii) and (iii) and 4.2 & 4.3 are allowed. 37. As regards ground nos.(iv) and 5, the same are identical to ground nos 4.1 & 4.1.1 and 4(iv) for Assessment Year 2005-06. Hence, the same is allowed. 38. Thus, IT(SS)A No.129/Ahd/2023 for Assessment Year 2009-10 is partly allowed. 39. Now coming to IT(SS)A No.130/Ahd/2023 for Assessment Year 2011-12, in this appeal the assessee has raised the following grounds:- IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 17 of 19 “Technical: 01 The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts. 02. The learned CIT(A) has erred in not adjudicating Ground No.1 & 2 regarding special audit [Para No.8 on Page No.8 of CIT(A) Order dated 21.11.2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits. 03. The assessment order is bad in law since the order is passed on 23.10.2013 after the receipt of the special audit report. The assessment order should have been passed by 31.03.2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No.1. Merits: 04. The leamed CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under: (i) Undisclosed Expenditure under Section 69C Rs.79,251/- (ii) Notional Rent on vacant House Properties Rs.84,000/- -------------------- Total: Rs.1,63,251/- ============ 4.1 The learned CIT(A) has erred in confirming the addition of undisclosed expenditure under Section 69C of Rs.79,251/- in as much as the addition made is not proper as per law. 05 The learned CIT(A) has erred in confirming the notional rent of Rs.84,000/- under Section 23 in as much as the addition made is not proper as per law.” IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 18 of 19 39.1 In this appeal, i.e. IT(SS)A No.130/Ahd/2023 for Assessment Year 2011-12, the assessee has also raised the following additional ground :- “The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search.” 40. The additional ground is identical to the additional ground for Assessment Year 2005-06 and hence dismissed. 41. As regards ground nos.1 to 3, the same are not pressed and hence dismissed. 42. A regards ground nos.4(i) and 4.1 relating to undisclosed expenditure under Section 69C of the Act amounting to Rs.79,251/- the Ld. AR submitted that the assessee has given details relating to credit card payment received from HDFC Bank and the statement clearly shows that there is opening balance of Rs.44,405/- as on 07.04.2010 and, therefore, the journal voucher as passed by debiting the capital account for credit card account. All expenses in the credit card are debited to capital account and the capital account gives the entire idea related to expenditure. Since the amount added is reflected in the books of account by way of debit to capital account, the addition does not arise. 43. The Ld. DR relied upon the Assessment Order and the Order of the CIT(A). 44. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has given the details of the expenditure of credit card and the evidences produced was overlooked by the Assessing Officer as well as the CIT(A). hence, ground no.4(i) and 4.1 are allowed. 45. As regards ground no.4(ii) and 5, the same is related to the Notional Rent on vacant house properties. The Ld. AR submitted that the Special Auditor presumed that the assessee is the owner of the Flat No.A-24 and Flat No.B-112 of S.G. Plaza and that it is vacant. But, the Special Auditor missed his own report on sale of Flat IT(SS)A Nos.126, 127, 128, 129 & 130/Ahd/2023 A.Ys: 2005-06, 2006-07, 2007-08, 2009-10 & 2011-12 respectively Page 19 of 19 No.A-24 in SG Plaza Scheme which was sold during the Assessment Year 2010-11. Therefore, the addition of Notional Rent of Rs.42,000/- does not arise. As relates to Flat No.B-112 which was sold on 09.08.2011 the said flat was vacant throughout the Financial Year 2010-11 and if the vacancy allowance is considered then the question of any addition does not arise. The addition thus does not sustain. 46. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 47. From the perusal, it can be seen that it was not Revenue’s presumption that vacant property the assessee has incurred any notional rent when the property is sold the assessee has in fact proved that the flat was vacant at the relevant time and hence the addition in respect of national rent on vacant house property will not be applicable. Hence, ground no.4(ii) and 5 are allowed. 48. Thus, IT(SS)A No.130/Ahd/2023 for Assessment Year 2011-12 is partly allowed. 49. In the result, all the five appeals filed by the assessee are partly allowed. Order pronounced in the open Court on this 12th November, 2024. Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 12th November, 2024 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad "