Pravakar Sahoo, Angul V. ACIT, Central Circle-1, Bhubaneswar

CO 18/CTK/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6643 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Fair market value; Valuation report; Assessment record
• Section: 132; 153A; 69B

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ, कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM आयकर अऩीऱ (तऱाशियाां और अशिग्रहण) सं./IT(SS)A No.57/CTK/2019 (नििाारण वषा / Assessment Year :2009-2010) ACIT, Central Circle-1, Bhubaneswar Vs Pravakar Sahoo, At: Baghuabol, PO : Hatatota, Talcher, Dist-Angul-759100 PAN No. : AGVPS 4613 C AND प्रत्याऺेऩक सं./Cross Objection No.18/CTK/2021 ( Ar is in g o u t o f I T ( SS) A No . 5 7 / CT K/ 2 0 1 9 ) (नििाारण वषा / Assessment Year :2009-2010) Pravakar Sahoo, At: Baghuabol, PO : Hatatota, Talcher, Dist-Angul-759100 Vs ACIT, Central Circle-1, Bhubaneswar PAN No. : AGVPS 4613 C (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT DR ननधााररती की ओर से /Assessee by : Shri P.K.Mishra, AR स ु नवाई की तारीख / Date of Hearing : 28/10/2021 घोषणा की तारीख/Date of Pronouncement : 10/12/2021 आदेश / O R D E R Per Bench: This is an appeal filed by the revenue and cross objection by the assessee against the order of the CIT(A)-2, Bhubaneswar dated 30.4.2019 for the assessment year 2009-2010. 2. As agreed by both the parties, first of all, we shall decide the cross objection of the assessee, wherein the assessee has raised the grounds as follows :- IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 2 1. For that, in absence of any incriminating material, the impugned Assessment so completed U/s.153A of the Act and consequential addition made therein of Rs.5,80,00,000.00 being illegal and without jurisdiction is not sustainable in the eye of law, as such, the same needs to be quashed in the interest of justice. 2. For that, after examining the seized material as well as the Assessment record, when the learned CIT(A) himself has accepted the fact that, there is no evidence on record found during course of search to suggest the payment of Rs.5,80,00,000.00 by the Respondent, the learned CIT(A) should have quashed the assessment order in the interest of justice. 3. For that after examining the seized material, and Assessment records of the Group, the learned CIT(A) when did not find any evidences of payment of Rs.5,80,00,000.00 by the respondent and the addition was made only on presumption, he rightly held that, section 69B has no application and rightly deleted the addition. Grounds taken by revenue being not backed by any evidence, the Appeal of Revenue needs to be dismissed and order passed by CIT(A) needs to be confirmed in the interest of justice. 4. For that, the allegations raised by the Revenue in the Grounds of Appeal No.1 to 4 that, there were under valuation of shares are wrong, without any basis, as such, it being devoid of merit needs to be dismissed in the interest of justice. 5. For that, the learned CIT(A) has rightly deleted the addition in absence of any concrete evidence of payment, as such, the order passed by the learned CIT(A) being just and proper, needs to be confirmed and the appeal filed by the Revenue being not sustainable in the eye of law, needs to be dismissed in the interest of justice. 6. For that, the learned CIT(A) after examining the facts in details with the seized material and Assessment record has rightly deleted the addition of Rs.10,00,278.00 made by the learned A.O. under the head unexplained investment. Since, the impugned addition was made in absence of any concrete evidence, the same is also not sustainable in the eye of law, as such, the ground N0.5 taken by the Revenue being devoid of any merit and contrary to the facts on record, needs to be dismissed in the interest of justice. 7. For that, the Respondent craves leave of this Hon'ble Tribunal to urge any other grounds of appeal, if any, at the time of hearing. IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 3 3. We have heard arguments of both the sides and the perused the material available on record of the Tribunal. Ld. Counsel submitted that from para 4.3 of the first appellate order it is amply clear that the AO has not brought any evidence whatsoever on record to suggest any incriminating material was found during the course of search indicating the payment either to BGKPL or to the erstwhile four directors. Ld. Counsel vehemently pointed out that the AO has made additions without having any incriminating material for A.Y.2009-2010 assessment of which was completed on the date of search and it is not a case of pending or abated assessment. 4. Further, elaborating the facts and circumstances of the case, ld. Counsel of the assessee has submitted that as noted by the AO in para 2 of the assessment order, search and seizure operation was conducted on 07.11.2013 u/s.132 of the Act in pursuance to the warrant of authorization dated 06.11.2013 issued by the DIT(Inv.) Bhubaneswar . ld. Counsel submitted that on the date of search i.e. on 07.11.2013 the assessment for A.Y.2009-2010 was completed and should not be considered as pending or abated for the purpose of Section 153A of the Act. Ld. Counsel drawing our attention to the copies of the Panchanama dated 20.11.2013 submitted that only some jewellery was found and seized during the course of search and seizure operation and no other material was found and seized by the searched team during the course of search u/s.132 of the Act, IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 4 therefore, no addition u/s.143(3) r.w.s.153A of the Act can be made in the hands of the assessee in the case of completed assessment without having any incriminating material as has been held by the various High Courts including the decision of Hon’ble jurisdictional High Court in the case of Smt. Jami Nirmala vs. Pr.CIT, in W.P.(C) No.2857 of 2018, dated 10.08.2021, Sri Sai Cashews Vs. Chief CIT in Writ Petition (Civil) No.2936 of 2018 and Smt. Smrutisudha Nayak Vs. UOI in W.P.(C) Nos.10587 of 2009 along with other connected petitions, dated 27.10.2021 and the decision of Hon’ble Delhi High Court in the case of Kabul Chawla, [2015] 61 taxmann.com 412 (Delhi). 5. On being asked by the Bench, ld.CITDR did not controvert the fact that on the date of search i.e. on 07.11.2013, the assessment for present assessment year i.e. A.Y.2009-2010 was completed and was not pending, thus, the same cannot be held as abated assessment. 6. From the relevant operation portion of the assessment order as well as the first appellate order at para 4.3, it is vivid that the AO has made two additions in the hands of the assessee but without having any incriminating material unearthed, found and seized during the course of search and seizure operation. Therefore, respectfully following the proposition rendered by the jurisdictional High Court in the cases cited above as well as by the Hon’ble Delhi High Court in the case of Kabul Chawla (supra), we are compelled to hold that the AO has made addition without having incriminating material in case of IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 5 completed assessment on the date of search, thus, such assessment order and addition made therein are bad in law and not sustainable. Accordingly, the cross objection of the assessee is allowed and the assessment order dated 31.03.2016 is hereby quashed and the additions made therein are hereby deleted. 7. Now, we shall decide the appeal of revenue in IT(SS)A No.57/CTK/2019, wherein the revenue has raised the following grounds :- “ i. In the facts and circumstances, the ld CIT(A) erred in deleting addition of Rs.5,80,00,000/- which was added by the AO u/s.69B of the I.T.Act on account of purchase of share of B.G.Kanan Pvt Ltd., as the assessee did not fully disclose the amount of investment in the books of account. ii. In the facts and circumstances, the ld CIT(A) ignored the fact that there was under valuation on purchase of 2000 numbers of shares of B.G.Karan Pvt Ltd by the assessee on 25.2.2009 on face value @ Rs.1000/- per shae as offer price when the same shares of 500 numbers were purchased by the on 28.2.2009 @ Rs.30,000/- per share. Hence, the ld CIT(A) was failed to appreciate the fact that the AO was justified in adding the undervalued amount of Rs.5,80,00,000/- regarding purchase of 2000 number of shares of B.G.Karan Pvt Ltd. In the hands of the assessee u/s.69B of the I.T.Act. iii. In the facts and circumstances, the ld CIT(A) ignored the fact that during the time of selling the shares of company B.G.Karan Pvt Ltd., 16.06 acres of land with fully grown up trees were not taken into consideration which indicates predetermined transfer of share less than the real market cost and this intentional reduction helped the assessee to utilize his unaccounted money in settling the difference of value out of books. iv. In the facts and circumstances, the ld CIT(A) ignored the fact that valuation report (dated 4.2.2012 & 17.1.2011) of immovable property of B.G.Karan Pvt Ltd., was found during the course of search and after applying reverse cost of indexation, the value of land and teak plantation of B.G.Karan Pvt Ltd., was found as 12.04 crore for the year under consideration. So, the value of each share (out of 2500 share) of B.G.Karan Pvt Ltd., was found much higher than the sale value of share by the directors to the IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 6 assessee which clearly indicates undervaluation of sale of share to the assessee by the directors. So, the AO was justified in adding the undervaluation amount of Rs.5,80,00,000/- in the hands of the assessee u/s.69B of the I.T.Act, 1961 on this account. v. In the facts and circumstances, the ld CIT(A) erred in deleting addition of Rs.10,00,278/- on account of unexplained investment in another four lands purchased during the year as the said addition was made by the AO after verification of difference of investment of lands found as per balance sheet filed with revised return and as per seized material found during course of search. The ld CIT(A) has accepted the explanation of assessee about capitalization of land at actual cost without considering any evidence on that matter.” 8. Ground Nos.(i) to (iv) relate to deletion of addition of Rs.5,80,00,000/- by the ld CIT(A) u/s.69B of the Act. 9. We have heard the rival submissions and perused the record of the case. We observe that the gist of the reasons mentioned by the Assessing Officer, as is incorporated by the ld CIT(A) in the impugned order as under: “a) Board meeting of B. G. Kanan Pvt. Ltd. (BGKPL) was held on 03.01.2009 in which existing shareholders slated that they were unable to infuse more funds in the company and expressed their intention to transfer all the shares in favour of other person willing to buy the same and there by acquire the company and its assets. b) Thereafter, on 25.02.2009. the existing shareholders in their capacity as directors convened a meeting and decided to issue 2000 shares @ 1000 per share to the appellant but while issuing the shares to the appellant, valuation of 16.06 acres of the land alongwith teak plants was not made. c) On 28.02.2009, the four existing shareholders namely: Neelamani Pany, Gatira Chandra Pany, Vijaya Kumar Jena and Vandana Jena who were holding 125 shares each (total 500 shares) of face value of Rs.1000/-, sold their shares to the appellant and his wife (250 shares each) @ Rs.30,000/- per share, the aggregate payment being Rs. 1.5 crore. IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 7 d) According to the Assessing Officer if the appellant and his wife paid existing shareholders Rs.30,000/- per share then the appellant must have acquired 2000 shares from BGKPL a! Rs.30,000/- each and therefore, his investment in BGKPL is of Rs.6 crore. The Assessing Officer reduced Rs.20 lakh paid by the appellant and made addition of Rs.5,80.00.000 e) Pages 15 to 21 of seized material identified as BNTO-25 is a valuation report of immovable property of BGKPL as on 04.02.2012 and in this valuation report fair market value of the property is shown as 11.24 crore. f) Pages 59-69 of seized material identified as BNTO-21 is another valuation report dated 17.01.201 I in which lair market values of the property is shown as 12.3 crore. g) Tie value of the teak plants on the land is Rs. 5 crore and therefore the total value of land and trees together will be 16.24 crore as on 04.02.2012 and by applying reverse cost of indexation the value of land and plants as on 25.02.2009 will be 12.04 crore. Further, according to the Assessing Officer if the aggregate value of Rs. 12.04 crore is divided by 2500 shares then the value per share will he of Rs.48,160/- which is much higher than the sale value of shares by the directors at Rs.30.000/-per shares. h) Huge unaccounted money is generated by the partnership firm Ms. Badrinarayan Transport in which the appellant is a partner who has disclosed 5.05 crore during the course of search and therefore addition of Rs.5,80.00,000/- is warranted. 4.2 During the course of appeal proceedings, the appellant has slated that before the appellant joined as a director of BGKPL, the company had issued only 500 shares to the four persons @ of Rs. 1000 per share. Thereafter, BGKPL issued 2000 shares to the appellant on 25.02.2009 again @ 1000 shares. After joining BGKPL as directors, the appellant and his wife, purchased 500 shares from the erstwhile the directors @ Rs.30,000/- per share to complete 100% control over the company. According to the appellant, issue of 2000 shares that BGKPL to the appellant is totally different from purchase of shares from the existing shareholders to gain 100% control over the company and therefore the two values of shares are not comparable. The appellant has further argued that, there is no evidence whatsoever that unaccounted money over and above Rs 2 lakh paid to the company was transferred to any person. The appellant has also relied upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Mahindra and Mahindra reported in 404 ITR 001 (2018) in which it has been held that when an assessee purchases a share or assets at a price lower IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 8 than a market price, under whatever circumstances, it could not be brought to tax u/s. 28(4) of the Income Tax Act. 1961. Moreover according to the appellant, stand taken by the Assessing Officer is contradictory in as much as the appellant has accepted issuance of shares at Rs. 20 lakh in the hands of BGKPL and on the other hand he is alleging that the appellant had paid Rs.6 crore for receiving those shares. The appellant has further submitted that when the appellant was issued 2000 shares of BGKPL, it was saddled with unsecured loan of about Rs.50 lakh and the existing directors were not able to service the loan. Moreover, according to the appellant, the net worth of BGKPL as on 31.03.2009 was 2,05,00,000/- and therefore FMV per share did not exceed Rs. 1,000/-and therefore the Assessing Officer cannot value the shares @ Rs.30.000/- per share. 4.3 I have carefully perused the assessment order and submissions of the appellant. It is important to note here that this is a case in which search operation u/s. 132 of the Income Tax Act. 1961 was conducted at the residential and business premises of (he appellant. The Assessing Officer has not brought any evidence whatsoever on record to suggest that any material was found during !he course of search indicating that the payment of Rs,5,80,00,000/- was made by the appellant either to BGKPL or to the erstwhile four directors. Even during the assessment proceedings, the Assessing Officer has not conducted any investigation or has not made any enquiries to justify that additional payment of Rs.5.80.00,000/- has been made by the appellant either to BGKPL or the erstwhile four directors. Suspicion alone cannot be taken place of evidence. There is no material on record to sustain the addition of Rs.5,80,00,000/- made by the Assessing Officer in the income of the appellant. Accordingly, the addition of Rs.5.80.00.000/- is ordered to be deleted. The grounds of appeal are allowed.” 10. Ld. CIT-Dr submitted that the AO was right in making the addition u/s.69B of the Act on account of purchase of shares of BGKPL as the assessee did not fully disclose the amount of investment in the books of account. Ld. CIT-DR also stated that the CIT(A) was failed to appreciate the fact that the AO was justified in adding the undervalued amount of Rs.5,80,00,000/- regarding purchase of 2000 number of shares in the hands of the assessee u/s.69B of the Act. It was also IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 9 contended by the ld. CIT-DR the first appellate authority has also ignored the fact that during the time of selling the shares of company B.G.Karan Pvt Ltd., 16.06 acres of land with fully grown up trees were not taken into consideration which indicates predetermined transfer of share less than the real market cost and this intentional reduction helped the assessee to utilize his unaccounted money in settling the difference of value out of books. The Ld. CITDR also pointed out that the value of each share was found much higher than the sale value of share by the directors to the assessee which clearly indicates undervaluation of sale of share to the assessee by the directors. Ld.CIT-DR drawing our attention to the assessment order submitted that the AO was justified in adding the undervaluation amount of Rs.5,80,00,000/- in the hands of the assessee u/s.69B of the I.T.Act, 1961 on this account. 11. Further, the ld. CIT-DR contended that the first appellate authority has erred in deleting addition of Rs.10,00,278/- on account of unexplained investment in another four lands purchased during the year as the said addition was made by the AO after verification of difference of investment of lands found as per balance sheet filed with revised return and as per seized material found during course of search. The ld. CIT-DR strenuously contended that the CIT(A) has has accepted the explanation of assessee about capitalization of land at actual cost without considering any evidence in this regard. IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 10 12. Replying to the above, ld. Counsel of the assessee drew our attention towards relevant operative paras i.e. 4.2 & 4.3 of the first appellate order and submitted that after considering the entire assessment record as well as the material placed before the ld. CIT(A), the ld. first appellate authority in para 4.3 has categorically held that this is a case in which search operation u/s.132 of the Act was conducted at the residential and business premises of the assessee and the AO has not brought any evidence whatsoever on record to suggest that any material was found during the course of search indicating that the payment of Rs.5,80,00,000/- was made by the assessee either to BGKPL or to the erstwhile four directors. Ld. counsel further pointed out that the ld.first appellate authority further noted that even during the assessment proceedings, the AO has not conducted any investigation or has not made any enquiries to justify that additional payment of Rs.5,80,00,000/- has been made by the assessee either to BGKPL or the erstwhile four directors. Suspicion alone cannot be taken place of substantial evidence. There is no material on record to sustain the impugned baseless addition made by the AO, therefore, the CIT(A) was right in deleting the same. 13. Keeping in view the grounds raised by the revenue as well as the submissions made by the ld. CIT-DR on behalf of the revenue, we are unable to see any evidence on record to establish that any material was found during the course of search indicating or establishing that the IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 11 payment of Rs.5.80 crores was made by the assessee either to BGKPL or to the erstwhile four directors. Neither any further investigation nor any enquiry has been made by the AO during the course of assessment proceedings, therefore, the CIT(A) was right in deleting the impugned addition made by the AO u/s.69B of the Act. At the cost of repetition, we may also point out that while adjudicating the cross objection of the assessee, on being asked by the bench, ld. CIT-DR could not controvert that the search was conducted on 07.11.2013 and the assessment for A.Y.2009-2010 was completed on the date of search, therefore, it is not a case of pending assessment or abated assessment. Thus, in view of the decisions of various High Courts including the decision of Hon’ble jurisdictional High Court in the case of Smt. Jami Nirmala vs. Pr.CIT, in W.P.(C) No.2857 of 2018, dated 10.08.2021, Sri Sai Cashews Vs. Chief CIT in Writ Petition (Civil) No.2936 of 2018 and Smt. Smrutisudha Nayak Vs. UOI in W.P.(C) Nos.10587 of 2009 along with other connected petitions, dated 27.10.2021 and the decision of Hon’ble Delhi High Court in the case of Kabul Chawla, [2015] 61 taxmann.com 412 (Delhi), no addition can be made in the hands of the assessee in completed assessment without having any incriminating material in the hands of AO. On this ground also, we have already quashed the assessment order as well as the subsequent proceedings and orders while deciding the cross IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 12 objections of the assessee, therefore, the grounds raised by the revenue in ground Nos.(i) to (iv), being devoid of merits, are dismissed. 14. In ground No.(v), the revenue has agitated that the CIT(A) has erred in deleting the addition of Rs.10,00,278/- on account of unexplained investment in another four lands purchased during the year. In this regard, ld. CIT-DR supporting the assessment order submitted that despite the notice dated 23.03.2016, the assessee did not comply and place any evidence or supporting documents to substantiate his claim, therefore, the AO was right in making the addition as unexplained investment of Rs.10,00,278/-. Ld.CIT-DR also submitted that the addition made by the AO deserves to be upheld. 15. Replying to the above, ld. counsel of the assessee submitted that this addition has also been made without any incriminating material found or seized during the course of search and the AO has made the above addition on its whims and fancies, which was rightly deleted by the CIT(A). ld. counsel drew our attention to para 5.1 & 5.2 of the appellate order and submitted that the value of land shown by the assessee in the balance sheet was the actual cost of land capitalized by the assessee and the assessee was not paid any amount over and above the actual cost of the land to the seller or anybody else, therefore, no addition in this regard should have been made. 16. On careful consideration of above rival submissions and on perusal of the findings recorded by the CIT(A) in its appellate order, we IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 13 observe that the CIT(A) has granted relief to the assessee after having following observations :- 5. Ground Nos. 5 and 6: 5.1 In these grounds, the appellant has contested the additions made by the Assessing Officer of Rs.1 0,00,278/-· on account of investment being a difference in value of land shown by the appellant in the balance-sheet of Rs.15, 17,341/- and valuation as per stamp duty authorities of R.s.25,17,619/-. During the course of appeal proceedings, the appellant has explained that the value shown in the balance sheet is the actual cost of land capitalised by him and since he has not paid any amount over and above the actual cost of land, no addition on account of unexplained investment can be made. 5.2 I have carefully examined the assessment order and submissions of the appellant. It is seen that the appellant has capitalised the land at the actual cost paid by him. There is no evidence that any amount over and above of Rs. 15,17 34l/- has been paid. Accordingly, addition of Rs.10,00,278/- is ordered to be deleted. The grounds of appeal are allowed. 17. In view of the above findings recorded by the first appellate authority, we are of the considered view that from the assessment order, we are unable to see any observation of the AO that the assessee has made payment over and above to the value shown in the balance sheet to the seller or anybody else. The AO has not brought on record any adverse material or positive evidence to establish the unexplained investment to the cost of land over and above to the value shown in the balance sheet which was actual cost of land capitalized by the assessee. As we have noted above that no incriminating material was found or unearthed during the search operation nor during the course of assessment proceedings by the AO by way of any fruitful enquiry or investigation to establish that the assessee has made IT(SS)A No.57/CTK/2019 & CO No.18/CTK/2021 14 payment of impugned amount over and above the actual cost of land shown in the balance sheet. Therefore, we are unable to see any valid reason to interfere in the findings established by the CIT(A) on this ground. Accordingly, ground No.(v) of the revenue is dismissed. 18. In the result, appeal of the revenue is dismissed and cross objection of the assessee is allowed. Order pronounced in pursuance with Rule 34(4) of ITAT Rules, 1963 on 10/12/2021, at Cuttack. Sd/- (मिीष बोरड़) (MANISH BORAD) Sd/- (सी.एम.गगा) (C.M.GARG) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 10/12/2021 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. वविागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ा पाईऱ / Guard file. सत्यावऩत प्रनत //True Copy//