CHHAYA VIKAS SHAH L/H OF LATE VIKAS A. SHAH,AHMEDABAD V. THE DY. CIT, CENTRAL CIRCLE-2(1), AHMEDABAD

ITSSA 392/AHD/2017

AI Insights

The case involves appeals by Chhaya Vikas Shah, the legal heir of the late Vikas A. Shah, against the orders of the Commissioner of Income Tax (Appeals) -12, Ahmedabad, which confirmed the additions made by the Assessing Officer under sections 153A(b) r.w.s. 144 of the Income Tax Act, 1961. The additions were primarily based on a Memorandum of Understanding (MoU) related to land transactions and other financial discrepancies noted during a search operation under Section 132 of the Income Tax Act. The Tribunal's decision focused on the lack of substantial evidence provided by the assessee to counter the additions and the validity of the MoU as a basis for the transactions in question.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29665 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-10-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-09-2024
• Assessment Year: 2003-2004
• Appeal Filed On: 16-08-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRITHVI RAJ MEENA
• Assessee Lawyers: SURESH GANDHI
• Keywords: Capital asset; Opportunity of being heard; Additional evidence; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Document seized; Peak credit; Documents seized; Onus to prove; Source of fund
• Section: 132; 13

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “डी“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD \u0016ी टी.आर. से\u001a\u001bल क ुमार, \u0011ाियक सद\u001d एवं \u0016ी मकरंद वसंत महादेवकर, लेखा सद\u001d क े सम#। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर(ss) अपील सं /IT(SS)A Nos.391 & 392/Ahd/2017 िनधा \u0013रण वष\u0013 /Assessment Years : 2002-03 & 2003-04 Late Vikas A. Shah (By his wife & Legal Heir Chhaya Vikas Shah) 210, Anal Flats Near Vijay Cross Roads Navrangpura Ahmedabad – 380 009 बनाम/ v/s. The Dy.CIT Central Circle-2(1) \u0017थायी लेखा सं./PAN: APWPS 4465 G (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee by : Shri Suresh Gandhi, A.R. Revenue by : Shri Prithviraj Meena, CIT-DR सुनवाई की तारीख/Date of Hearing : 23/09/2024 घोषणा की तारीख /Date of Pronouncement: 08/10/2024 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: Both the appeals by the assessee, Vikas A. Shah, arise from the orders of the Commissioner of Income Tax (Appeals) -12, Ahmedabad [hereinafter referred to as “CIT(A)”] dated 10-04-2017 for the Assessment Years (AY) 2002-03 and dated 20-04-2017 for AY 2003-04. These appeals before CIT(A) arising against the orders passed by the AO u/s 153(A)(b) r.w.s.144 of the Income Tax Act,1961 (hereinafter referred to as “the Act”). IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 2 Facts of the case: 2. The assessee, Vikas Arvindbhai Shah expired on 04-11-2019 and his wife Chhaya Vikas Shah filed an affidavit to admit her as a legal heir on 11-05-2022 and also filed revised form 36 before us. Accordingly, the order is finalised in the name of Chhaya Vikas Shah as a legal heir of Vikas Shah. 2.1. A search was conducted on Vikas A. Shah under Section 132 of the Income Tax Act on 09/02/2005, during which various documents, books of accounts, and valuables were seized from Vehicle No. GJ-1-HF-251 owned by the assessee. The seized documents included Annexure A/78, which contained a Memorandum of Understanding (MoU) dated 16/05/2001 between Vikas A. Shah and Shri Pravin K. Patel for the sale of land at Village Jaspur, which became the primary basis for the assessment and additions made by the Assessing Officer (AO). The AO completed the assessment under Section 153A(b) r.w.s. 144 of the Act for both the assessment years under appeal. Assessee preferred appeals before CIT(A) for both the years, who confirmed most of the AO's additions. The assessee preferred appeals before the tribunal and tribunal directed CIT(A) to re-examine the cases and provide the assessee with a reasonable opportunity to be heard. The CIT(A), post remand from the tribunal, passed the orders considering additions and gave relief there on as tabulated below: Particulars A.Y. 2002-03 A.Y. 2003-04 CIT(A)’s Post- Remand Order Date 10/04/2017 20/04/2017 Appeal No. CIT(A)- 12/553/CC1(2)/2015-16 CIT(A)- 12/554/CC1(2)/2015-16 - Rs. 6,34,52,484/-: Unexplained sale of land - Rs. 48,53,040/-: Unexplained investment in land IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 3 Key Additions Considered by CIT(A) - Rs. 8,27,000/-: Agricultural income - Rs. 15,21,879/-: Peak credit addition - Rs. 4,01,160/-: Disallowance of expenses Relief Granted by CIT(A) (Post- Remand) - Rs. 6,06,22,009/- out of Rs. 6,34,52,484/- deleted, retaining Rs. 28,30,475/-. - Rs. 42,84,780/- out of Rs. 48,53,040/- deleted, retaining Rs. 5,68,260/- (cash payment admitted by the assessee). - Telescoping of Rs. 8,27,000/- (agricultural income) into the confirmed addition of Rs. 28,30,475/-. - Peak credit addition reduced to Rs. 12,11,879/-, granting relief of Rs. 3,10,000/-. - Disallowance of Rs. 4,01,160/- reduced to Rs. 40,000/-, deleting Rs. 3,61,160/-. Net Additions Confirmed by CIT(A) - Rs. 28,30,475/- (Unexplained sale of land) - Rs. 5,68,260/- (Unexplained investment in land) - Agricultural income telescoped - Rs. 12,11,879/- (Peak credit addition) - Rs. 40,000/- disallowance of expenses 3. Aggrieved by the order of CIT(A), the assessee is in appeal before us with following grounds of appeal: Grounds of appeal in ITA No. 391/Ahd/2017 1. The Id. CIT(A) has erred in law and on facts in confirming the addition to the extent of Rs.28,30,475/- out of total addition of Rs.6,34,52,484/- made by the AO on mere surmises and conjectures and without appreciating the facts and evidences placed on record. In view of the elaborate submissions and evidences filed, the impugned addition of Rs.28,30,475/- also requires to be deleted. 2. The Id. CIT(A) erred in confirming the addition of Rs.8,27,000/- being agriculture income shown in the return of income as non-genuine while mechanically following the original appellate order passed by his predecessor without considering the fact that the impugned addition was beyond the jurisdiction of the AO since the said addition is not relatable to evidence found as a result of search and hence was not warranted as held by various courts of law. The impugned addition of Rs.8,27,000/- thus ought to have been deleted. IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 4 3. The Id. CIT(A) erred in confirming the addition to the extent of Rs.40,000/-out of total addition of Rs.4,01,160/- on account of disallowance of expense while mechanically following the original appellate order passed by his predecessor without considering the fact that the impugned addition was beyond the jurisdiction of the AO since the said addition is not relatable to evidence found as a result of search and hence was not warranted as held by various courts of law. The impugned addition of Rs.40,000/- thus ought to have been deleted. The appellant craves leave to add, amend, modify, alter or delete all or any of the above grounds as well as to raise additional grounds at the time of hearing of the appeal. Grounds of appeal in ITA No. 392/Ahd/2017 1. The Id. CIT(A) has erred in law and on facts in confirming the addition of Rs.48,53,040/- made by the AO without proper consideration and appreciation of the facts of the case. In view of the elaborate submissions and evidences filed, the impugned addition of Rs.48,53,040/- also requires to be deleted. 2. The Id. CIT(A) erred in confirming the addition of Rs.12,11,879/- out of total addition of Rs.15,21,879/- made by the AO applying the peak credit without proper consideration of the submissions and contentions of the appellant. In view of the elaborate submissions and evidences filed and since no addition on even on peak basis is warranted as explained by the appellant, the impugned addition of Rs.12,11,879/- also requires to be deleted. The appellant craves leave to add, amend, modify, alter or delete all or any of the above grounds as well as to raise additional grounds at the time of hearing of the appeal. 4. We now deal with each year-wise ground raised by the assessee as follows: • A.Y. 2002-03 Ground 1: Addition of Rs. 28,30,475/- out of Rs. 6,34,52,484/-. 4.1. The AO made an addition of Rs. 6,34,52,484/- as unexplained income based on a Memorandum of Understanding (MoU) dated 16/05/2001 between the assessee Vikas A. Shah and Pravin K. Patel. The MoU indicated a sale transaction of land at Jaspur. The AO’s assumption was that the entire IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 5 land of 67 bighas was sold during the relevant Previous Year (PY) at a rate of Rs.333/- per square yard, which totaled to Rs.6,34,52,484/-. The AO concluded that this amount was the assessee's unexplained income from the sale of land. The assessee contended that 49.38 bighas of land had been sold in earlier years (A.Y. 1999-00, 2000-01), and the remaining 20.30 bighas were still in possession of the assessee. The CIT(A) reviewed the MoU dated 16/05/2001, which detailed the understanding between the parties regarding the settlement of various accounts, including a transfer of 3675 square yards of land at a rate of Rs. 333/- per square yard. The AO used this MoU as the basis to assume that the entire land was sold at this rate during the relevant assessment year, resulting in the large addition. The assessee, however, argued that only a portion of the land (49.38 bighas) had been sold in earlier years and that the balance land (20.30 bighas) remained unsold. The assessee provided documentation showing that 21.79 bighas were sold in A.Y. 1999- 00, and 27.08 bighas were sold in A.Y. 2000-01. The remaining land of 20.30 bighas was claimed to be in possession of the assessee due to ongoing litigation. The CIT(A) accepted the assessee's contention that 49.38 bighas of land had been sold in earlier years and that the AO’s addition of Rs. 6,34,52,484/- was an overestimation based on an incorrect assumption that the entire land was sold in A.Y. 2002-03. The CIT(A) focused on the remaining 20.30 bighas of land and found that part of this land (3.37 bighas of Survey No. 639/1, admeasuring 7790 square meters) lacked evidence proving that it was still in the assessee's possession. The CIT(A) noted that despite multiple opportunities, the assessee could not substantiate the continued ownership of this portion of land through credible evidence. Hence, the CIT(A) upheld the addition of Rs.16,30,475/- as unexplained income, based on the fair market rate of Rs.175 per square yard for this IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 6 portion of land. The CIT(A) further noted that the MoU clearly documented an agreement to transfer 3675 square yards of land for Rs.12,24,000/- to Pravin K. Patel during the relevant year. This transaction was part of the settlement between the parties, and no evidence was provided to suggest that this transfer did not take place. Therefore, the CIT(A) confirmed the addition of Rs. 12,00,000/- related to this transfer of land as unexplained income. 4.2. After reviewing the detailed findings of the CIT(A), we concur with the CIT(A)’s decision to uphold the addition of Rs.28,30,475/-. The CIT(A)’s decision to focus on the remaining 20.30 bighas and uphold an addition only for the portion where ownership could not be substantiated (3.37 bighas) is sound and well-reasoned. The assessee’s failure to provide credible evidence for the continued ownership of 3.37 bighas justifies the addition of Rs.16,30,475/-. Despite several opportunities, the assessee could not produce documents proving that this land was not sold. Similarly, the addition of Rs. 12,00,000/- related to the MoU transaction is well-founded, as the assessee did not challenge the MoU or provide any evidence suggesting that this transfer of land did not take place. The AR’s contention that the entire addition was based on assumptions is partly correct regarding the initial assumption made by the AO, but the CIT(A) has already granted relief. The remaining addition of Rs. 28,30,475/- is supported by evidence or lack of rebuttal, and the assessee has not provided any new evidence before the Tribunal to warrant further relief. 4.3. In light of the above, the appeal on this ground is dismissed. Ground 2: Addition of Rs.8,27,000/- (Agricultural Income). IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 7 5. The AO made an addition of Rs.8,27,000/- to the assessee's income, rejecting the claim that it represented agricultural income. The AO's basis for this addition was that the assessee failed to provide sufficient evidence to substantiate the agricultural income declared. The assessee contended that the amount was derived from agricultural activities and should not be treated as unaccounted income. The assessee claimed this income in the return of income but did not furnish supporting documentation such as land ownership records, evidence of cultivation, or details of agricultural produce. The CIT(A) noted that despite being provided multiple opportunities, the assessee failed to furnish concrete evidence to support the claim of agricultural income. Specifically, the assessee did not produce land ownership documents showing that the land was used for agricultural purposes during the relevant financial year, evidence of agricultural activity, such as records of agricultural produce sold, bills, or other proof of farming operations, details of expenses incurred in carrying out agricultural activities. The assessee argued that the addition was outside the scope of the AO’s jurisdiction, as it was not based on any material found during the search. The CIT(A) examined this contention but found that the AO is well within the jurisdiction to make additions if the income declared is not substantiated, regardless of whether it was discovered during the search. The onus is on the assessee to substantiate the agricultural income claim, especially during scrutiny proceedings. As the agricultural income was disallowed in the original assessment, it was within the AO’s powers to make this addition based on lack of evidence. The CIT(A) observed that the same addition had been upheld in the earlier proceedings before the CIT(A)’s predecessor. Despite the assessee's contentions, no fresh evidence or new material was provided in the present appeal to challenge the original finding. The CIT(A) IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 8 reiterated the precedent established in earlier rulings that the burden of proof lies with the assessee to demonstrate that income claimed as agricultural is genuine. In this case, the assessee’s inability to substantiate the source of Rs.8,27,000/- warranted the addition. The assessee claimed that the CIT(A) mechanically followed the original appellate order. However, the CIT(A) clarified that the review of this case was conducted independently, and the findings were based on the merits of the evidence (or lack thereof) presented by the assessee. The CIT(A) concluded that, without substantive evidence, the income declared as agricultural could not be accepted, and therefore, the addition made by the AO was justified. The assessee argued that the addition of Rs.8,27,000/- should be telescoped against other additions confirmed by the CIT(A), particularly the Rs.28,30,475/- related to unexplained investment in land. The CIT(A) acknowledged the argument for telescoping but found that Rs.8,27,000/- was specifically claimed as agricultural income and needed to be independently verified. Since the assessee failed to prove this income, telescoping did not apply. 5.1. After reviewing the detailed findings of the CIT(A), we concur with the decision to uphold the addition of Rs.8,27,000/-. The assessee did not provide any documentary evidence to substantiate the claim of agricultural income, such as land records, proof of cultivation, or sales receipts. The CIT(A) rightly observed that the assessee had ample opportunity to furnish such evidence but failed to do so. The onus was on the assessee to prove that the income declared as agricultural was genuine. In the absence of such proof, the addition made by the AO stands justified. IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 9 5.2. The assessee did not present any new evidence or material during the proceedings before us to dispute the findings of the AO and CIT(A). Merely repeating the arguments from earlier proceedings without providing additional proof does not merit any relief. The CIT(A) independently reviewed the case and found no reason to deviate from the findings made in the original order, which were based on the assessee's failure to provide evidence. The assessee’s request for telescoping the addition against other confirmed additions, such as the Rs.28,30,475/-, is not applicable here. The addition of Rs.8,27,000/- is specific to agricultural income, and since the assessee failed to prove that the income was genuine, telescoping is not relevant. 5.3. In light of the above, the appeal on this ground is dismissed. Ground 3: Disallowance of Rs.40,000/- out of Rs.4,01,160/- (Expenses). 6. The AR did not press for this ground hence not adjudicated. • A.Y. 2003-04 Ground 1: Addition of Rs.48,53,040/- (Unexplained Investment in Land). 7. The AO made an addition of Rs.48,53,040/- towards unexplained investment in land at Survey No. 221, Village Motera based on two key documents found during the search, a registered sale deed showing a consideration of Rs. 18,73,040/- for the purchase of land and an unregistered Samjuti Karar (Settlement Agreement) showing an additional consideration of Rs.28,80,000/- for the same land. Out of the Rs.18,73,040/- shown in the registered document, the assessee admitted to paying Rs.4,68,260/- in cash and Rs.14,04,780/- via six cheques, each for Rs.2,34,130/-. However, the AO found that only one cheque of Rs.2,34,130/- had been cleared in the assessee's IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 10 bank account, and the remaining five cheques had not been cleared. The AO assumed that the remaining payment was made in cash from undisclosed sources and added Rs.48,53,040/- as unexplained investment. 7.1. The CIT(A) examined the submissions made by the assessee regarding the dispute with AUDA and the non-clearance of cheques. The assessee’s claim that the payments were halted due to land possession issues was not substantiated by any concrete evidence. No legal documents, court orders, or correspondence with AUDA were presented to support this claim. The CIT(A) agreed with the AO’s conclusion that the uncleared cheques could not be treated as non-payments based solely on the assessee's oral explanation. Since the assessee failed to provide any substantial evidence to support its claim of the land being under dispute, the CIT(A) upheld the AO’s assumption that the balance payment of Rs.11,70,650/- was made in cash from undisclosed sources. Regarding the Samjuti Karar for an additional payment of Rs.28,80,000/-, the CIT(A) held that the document clearly indicated an agreement to pay this amount. Since no evidence was provided by the assessee to show that this payment was not made, the CIT(A) upheld the AO’s addition of this amount as well. The CIT(A) pointed out that the Samjuti Karar was executed alongside the registered sale deed, further affirming that the parties intended to transfer the additional amount of Rs.28,80,000/- in cash. 7.2. We find no reason to interfere with the findings of the CIT(A). The assessee’s failure to provide substantial evidence to rebut the AO’s conclusions and the clear documentary evidence in the form of the Samjuti Karar and the registered sale deed fully justify the addition of IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 11 Rs.48,53,040/-. The AO’s estimation was made reasonably based on the available facts, and the assessee’s claims are not supported by any independent or credible evidence. 7.3. The CIT(A)’s decision is upheld, and the appeal on this ground is dismissed. Ground No. 2 Addition of Rs.12,11,879/- out of Rs.15,21,879/- (Peak Credit Addition). 8. During the course of search and subsequent assessment, a cash flow statement (Trial Balance) was seized, which reflected the assessee's cash receipts and cash outflows for the financial year. The AO observed that the total cash receipts were Rs.3,10,000/-, while the total cash outflows amounted to Rs.15,21,879/-, leading to a discrepancy of Rs.12,11,879/-. Since the cash outflows exceeded the cash receipts, the AO made an addition of Rs.15,21,879/- to the assessee’s income. The assessee contended that the actual peak credit should be much lower and requested telescoping of the opening balance or relief on peak credit calculation. The CIT(A) upheld the addition of Rs.12,11,879/-, as the assessee failed to provide adequate documentary evidence to explain the source of funds for the excess cash outflow. The CIT(A) found that the AO’s calculation was reasonable and in line with the principles of assessing unexplained credits or cash flows. The reduction of Rs. 3,10,000/- was granted as the assessee was able to prove this amount as legitimate cash receipts, but the remaining addition was sustained due to the absence of proper evidence or justification. IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 12 8.1. After reviewing the detailed findings of the CIT(A), we concurs with the reasoning and conclusions reached by the CIT(A) as the CIT(A) rightfully upheld the peak credit addition after considering the available evidence. The assessee failed to provide sufficient proof of an opening cash balance, which means the peak credit should be calculated based on the cash flows for the year in question. The AO’s method of calculating peak credit was appropriate, given the absence of credible evidence to the contrary. The CIT(A) correctly granted partial relief by reducing the addition from Rs.15,21,879/- to Rs.12,11,879/-. The assessee’s cash receipts of Rs.3,10,000/- were properly considered, and appropriate relief was provided for that amount. The assessee has failed to provide any additional evidence before us that would warrant a revision of the CIT(A)’s order. The peak credit calculation was properly done, and no substantive arguments or documents have been presented to suggest otherwise. In light of the above, we dismiss this ground. 9. In the combined result, the appeals of the assessee in IT(SS)A No.391/Ahd/2017 and IT(SS)A No.392/Ahd/2017 for AYs 2002-03 & 2003- 04 respectively are dismissed. Order pronounced in the Open Court on 8th October, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 08/10/2024 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS IT(SS)A Nos.391 & 392/Ahd/2017 Shri Vikas A. Shah vs. Dy.CIT Asst. Years 2002-03 & 2003-04: 13 आदेश की &ितिलिप अ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ( / The Appellant 2. &)थ( / The Respondent. 3. संबंिधत आयकर आयु* / Concerned CIT 4. आयकर आयु* ) अपील ( / The CIT(A)-12, Ahmedabad 5. िवभागीय &ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0013 फाईल / Guard file. आदेशानुसार/ BY ORDER, स)ािपत &ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 03.10.2024 2. Date on which the typed draft is placed before the Dictating Member. : 03.10.2024 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 8.10.24 7. Date on which the file goes to the Bench Clerk. : 8.10.24 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "