M/s. Safal Homes, Ahmedabad V. The DCIT, Central Circle-1, Vadodara

CO 25/AHD/2021

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2847 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-04-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-04-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 27-06-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Question of law; Difference of opinion; Accommodation entries; Change of opinion; Set aside
• Section: 131; 132; 143(3); 250

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘बी’, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद । ।। । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER ITA No.90/Ahd/2021, Asst.Year 2011-12 AND Cross Objection No.25/Ahd/2021, Asst.Year 2011-12 ( in ITA No.90/Ahd/2021 – AY 2011-12) The DCIT Central Circle-1 Vadodara – 390 007 Vs M/s.Safal Homes B Safal Homes, Near Tej Motors b/h. Mirch Masala Restaurant Off. S.G. Highway Ahmedabad – 380 009 PAN: ABTFS 1039 F ी / (Appellant) / (Respondent & Cross Objector) Assessee by : Shri Vartik Chokshi, AR Revenue by : Shri Sudhendu Das, CIT-DR /Date of Hear ing : 1 7/0 4/202 4 /Da te of Prono u nce me nt: 24 /04/20 24 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER: The captioned appeal has been filed by the Department against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad (hereinafter referred to as “the Ld.CIT(A)”), arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year (AY) 2011-2012. The assessee has also filed the Cross ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 2 Objection to this appeal. Therefore, both were heard together and are being disposed of by this common order for the sake of convenience. 2. The Revenue has raised the following grounds of appeal: “[i] On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.767,50,000/- made on account of unexplained credit without appreciating the fact that the statement recorded u/s. 132(4) of the Act of Shri. Manoharlal Nangalia had evidentiary value. [ii] On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,67,50,000/- by holding that Shri. Manohar Lal Nangalia has disclosed all the name of all the entities he has used for providing entries, however, in his reply to Question No.9 of statement recorded on 14.11.2014, he was able to recollect the names of some of the companies viz. 18 companies, in which USPL is not there which does not mean that USPL is not shell / paper company. [iii] On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,67,50,000/- without considering the fact that Shri. Manohar Lal Nangalia has used around 250 companies for his entry providing business and USPL was one of such concerns. [iv] On the facts and in the circumstance of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.7,67,50,000/- ignoring the fact that Shri. Manohar Lal Nangalia has categorically mentioned the role of his son Mr. Arun Nangalia is that of dummy director in the shell /paper companies controlled and operated by him in providing entry in lieu of commission. [v] On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,67,50,000/- ignoring the fact that Question No.16 was in respect to those entities whose name was disclosed by Shri. Manohar Lal Nangalia in response to Question No.9 of the statement recorded on the same date, however, non- mentioning the name of the USPL does not mean that it is not shell/paper company. [vi] On the facts and in the circumstance of the case and in law, while deleting the addition of Rs.7,67,50,000/- Ld. CIT(A) has not appreciated the crux of the case that no prudent businessman ever relinquished his right without any gain or consideration. [vii] It is, therefore, prayed that the order the Ld. CIT(A) - 12 Ahmedabad may be set aside and that of the AO may be restored to the above extent. ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 3 [viii] The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” Facts of the case: 3. The original return of income relating to AY 2011-12 was filed on 20.09.2011 by the assessee declaring total income at Rs.15,38,430/-. Thereafter, the case was selected for scrutiny and assessment order u/s.143(3) of the Act was passed on 26.03.2014 determining the total income at Rs.15,38,432/-. Subsequently, the information received from DDIT Investigation Unit-1(2) Kolkata that the assessee is one of the beneficiaries of the accommodation entry provided by Shri Manoharlal Nagalia through paper/shell company M/s.Unicon Suppliers Pvt.Ltd. managed and controlled by them. The assessment was reopened u/s. 147 of the Act by issuing notice u/s.148 of the Act on 28.03.2018 after verification of the information that the assessee M/s. Safal Homes has taken benefit of accommodation entry to the tune of Rs.7,67,50,000/- from Shri Manoharlal Nagalia through concern M/s.Unicon Suppliers Pvt Ltd manage and controlled by him. The copy of reasons recorded were provided to the assessee. The assessee raised objection against the reopening of the assessment which was disposed of by Assessing Officer after passing speaking order on 16.07.2018. 3.1. The Assessing Officer issued the show cause notice on 06.03.2018 that is why the accommodation entries of Rs.7,67,50,000/- by making payment in cash out of undisclosed income should not be treated as unaccounted income and why it should not be added to your total income. ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 4 3.2. In response the assessee asked for the copies of the statements of Shri Manoharilal Nagalia recorded u/s.132(4) and 131 of the Act, the same were provided by the Assessing Officer on 27.08.2018. One more opportunity of being heard to the assessee by the Assessing Officer to furnish the reply to the show cause notice. 3.3. On 10.10.2018, assessee furnished the reply offering the explanation and sought the cross examination of the party. The Assessing Officer denied the same stating that Income Tax Proceedings are Civil proceedings and providing of seized material should be considered as fair opportunity. While doing so he placed reliance on some judicial pronouncements of Hon’ble Supreme Court. 3.4. The Assessee submitted that the amount of Rs.7,67,50,000/- was received from M/s.Unicon Suppliers Pvt. Ltd. (SUPL) as booking amount against 41 flats and the same was returned in piecemeal in Financial Year (FY) 2013-14, FY 2014-15 and FY 2015-16. The assessee also explained that the amount paid by SUPL was 68.34% of the total consideration and there by owning title rights in 41 flats. SUPL cancelled the booking extinguishing their rights in the flats and the amount was refunded to them in parts. 3.5. The assessee furnished the ledger copy of M/s.Unicon Supplier Pvt. Ltd for F.Ys.2011-12 to 2014-15 with confirmation of account. The assessee further submitted that M/s.Unicon Supplier Pvt. Ltd. has cancelled the entire booking in F.Y. 2013-14 and the booking amount was refunded in piecemeal basis i.e. Rs.75,00,000/- in F.Y.2013-14, Rs.6,60,00,000/- and Rs.32,50,000/- in F.Y.2015-16. Further, it was submitted that the assessee ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 5 has recognised the revenue of Rs.7,89,17,183/- to its Profit and Loss account for F.Y.2012-13 relevant to A.Y.2013-14 on the basis of percentage completion method of accounting and paid the due tax thereon. 3.6. Dissatisfied with the explanation offered by the assessee and concluding that “No prudent person will extinguish its right from property and also even not charged interest for the prolong period”, treated the amount of Rs.7,67,50,000/- as unexplained credit and added to the total income of the assessee. 4. Assessee filed an appeal before the Ld.CIT(A) against the order of the Assessing Officer. The Ld. CIT (A), considering the facts and submission of the assessee, partly allowed the appeal deleting the addition of Rs.7,67,50,000/-. While doing so, he recorded following observations and comments: (a) Mr. Nangalia has given list of companies managed and controlled by him, which does not include the name of USPL. (Para 4.15 of the order). (b) As name of USPL is not appearing in the list and at Sr. No.16 of the said list name of Neowoth Vyapar Pvt. Ltd. is appearing observation of AO that USPL name is appearing at Sr. No.16 as dummy company of Mr. Manohar Lal Nagalia is not correct and hence not accepted. (Para 4.15 of the order). (c) It is also apparent from the above statement of Mr. Arun Nangalia which is confirmed by his father Manohar Lal Nangalia that his son has admitted list of companies wherein he is dummy director, but this list does not include the name of USPL from whom appellant has received booking advance. Hence no adverse inference could be drawn. (Para 4.16 of the order). ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 6 (d) It is observed that appellant has received booking advance in the year under consideration and when booking was cancelled, such amount was refunded to USPL in AY 2014-15 and 2016-17. The Assessing Officer has not doubted repayments made by appellant in subsequent Assessment Years. The AO has not brought any other tangible evidence to prove that appellant has made cash payments against booking advance or received cash against repayment of booking amount. It is observed that entire transaction is held to be accommodative merely on presumption, which is not tenable. Reliance is placed on decision of Hon'ble Supreme Court Decision in Omar Salay Mohamed Sait v. CIT (37 ITR 151) (Para 4.18 of the order). (e) The appellant has provided complete details of the transactions along with affidavit of USPL. The Assessing Officer having not made any further enquiry with such party, impugned addition made by Assessing Officer on presumptive basis cannot be sustained, following the decision of Honorable Delhi High Court in case of PCIT Vs Adamine Constructions (P) Ltd. [2018] 99 taxmann.com 44 (Para 4.18 of the order). (f) It is also observed that appellant firm was incorporated in current year and there is no substantial business in the year under consideration and there is no evidence of generating undisclosed income or cash by appellant firm which could have been utilised against present booking advances received from USPL, thus addition cannot be sustained in absence of existence of undisclosed income. The view is supported by the following decisions (Para 4.19 of the order): (i) Honourable Supreme Court in case of Commissioner of Income Tax Vs. Bharat Engineering & Construction Co. [1972] 83 ITR 187. (ii) Honourable Lucknow Tribunal in case of Surendra Prasad Mishra Vs. Income Tax officer [2006] 7 SOT 457. (g) It is observed that during the course of assessment proceedings, appellant has asked AO to provide cross examination of third party whose statement was relied upon which was denied by Assessing ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 7 Officer. Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Sunita Dhadda 2018 (3) TMI (1610), has held as under: "Denial of natural justice - Addition of on money' received with respect to subject land of the assessee which was evident by the document seized during search u/s 132 - non making available opportunity of cross-examining - Held: SLP dismissed. (Para 4.21 of the order). 5. The Department has preferred an appeal before us raising aforementioned grounds of appeal. 5.1. While arguing the matter before us, the Ld.DR reiterated the facts mentioned by Assessing Officer in his order and said that the USPL is a shell company and engaged in the business of providing accommodation entries. He also mentioned that the USPL do not have any other business. 6. On the other hand, the Ld.Counsel argued that the assessee has explained the identity of the USPL and explained the source of the money. While explaining the source, the Ld.Counsel placed on records on various facts during the course of hearing: i. Copy of Bank Statement of USPL for the relevant period reflecting payment of Rs.7,67,50,000/- to the assessee and the source by way of redemption of mutual funds ii. Copy of mutual fund statement of HDFC Low Duration Fund – Regular Plan indicating the redemption iii. Copy of the audited annual accounts of USPL along with the Directors’ Report for the relevant AY indicating following facts – ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 8 a. USPL is engaged in the business of Non-banking Financial Institution and has obtained necessary certificates for the same. b. USPL is having total income of Rs.9,56,17,161.55 with profit before tax amounting to Rs. 1,25,93,970.32 as per profit and loss account. c. USPL has Net Owned fund of Rs. 63,14,40,169/-. d. USPL has paid advance against property of Rs.12,91,20,000/- as per Schedule 4 forming part of accounts. e. Copy of Account of Service Tax in the books of the assessee with relevant break-up indicating amount of service tax relating to USPL. f. Cancellation of booking of flats by USPL was their business decision. 6.1. At the time of hearing before us, the Ld. Counsel also relied on the following judicial pronouncements: i. Decision of Hon'ble Supreme Court of India in case of Odeon Builders reported in 110 taxmann.com 64(SC) in which it was decided that disallowance cannot be made solely on third party information without subjecting it to further scrutiny. ii. Decision of Hon'ble Jurisdictional High court in case of Ambe Tradecorp (P.) Ltd. reported in 147 taxmann.com 375 (Gujarat), wherein the decision of Tribunal of deleting the addition was affirmed as the Identity, creditworthiness and genuineness of loan transactions were established. iii Decision of Hon'ble Supreme Court of India in case of Andaman Timber Industries reported in [2015] 62 taxmann.com 3(SC), wherein it was decided that failure to give the assessee the right to cross-examine witnesses whose statements are relied on results in breach of principles of natural justice is a serious flaw. ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 9 iv. Decision of Hon'ble Jurisdictional High court in case of Indrajit Singh Suri reported in 33 taxmann.com 281 (Gujarat) in which it was decided that the addition cannot be made when the assessee proves the identity, genuineness and creditworthiness. v. Decision of Hon'ble Jurisdictional High court in case of Apex Therm Packaging (P.) Ltd reported in 42 taxmann.com 473 (Gujarat), wherein the Hon'ble High Court dismissed the revenue's appeal recording the fact that the loan was received by cheque and also has been returned through banking channel. vi. Decision of Hon'ble Jurisdictional High court in case of Naresh Nemchand Shah reported in 156 taxmann.com 346 (Gujarat) in which the Hon'ble High Court confirmed that there is no question of law when the addition based on the allegation of AO that the "transactions were accommodation entries" was deleted. 7. We have given our thoughtful consideration to the rival contentions. We have perused case file as well as paper-books furnished by assessee. We note that the assessee has provided necessary documents to prove the identity and genuineness. The assessee also explained the source of source by providing the details of redemption of mutual funds held by USPL, the booking amount was also returned by the assessee in subsequent years. 7.1. We also note that the Assessing Officer has relied on the third-party information gathered by the Investigation Wing of the Department without independently verifying the same information, and also the fact that the assessee has been denied the opportunity to cross-examine the witness, whose statement was the basis of reopening the completed assessment. ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 10 7.2. It is also noted that, it was neither accepted by Arun Nagalia nor Manoharlal Nagalia that the company USPL is the company managed and controlled by Manoharlal Nagalia to provide the accommodation entry. The company’s name was not specifically accepted by Manoharlal Nagalia and simply for the reason that the name of USPL is included in the list of directorships of Arun Nangalia, AO has assumed that USPL is a shell company and role of Arun Nagalia is of dummy director. No corroborative evidence was found. 7.3. Respectfully following the above-referred judicial pronouncements, considering the facts noted above, the addition made by the Assessing Officer is not sustainable and justifiable. The Ld.CIT (A) has rightfully deleted the addition. 8. The Ground Nos. 1 to 7, raised by Department are solely based on the statement recorded by the Investigation Wing and not independently verified by the Assessing Officer, hence the same are dismissed. Ground No.8 is general in nature and, hence, no need any independent adjudication. 9. In the result, the appeal of the Department is dismissed. Assessee’s C.O.No.25/Ahd/2021 10. The Assessee has raised the following Grounds in its Cross Objection: “1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has grossly erred in not holding that reassessment notice as well as reassessment order passed by Assessing Officer u/s 143(3) r.w. 147 is bad in law and deserves to be quashed. ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 11 2. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that reassessment notice issued by AO was on account of change of opinion on part of subsequent AO and there is nothing on record to prove that there was failure on part of appellant to disclose material facts along with return of income or during original assessment proceedings which makes impugned reassessment notice bad in law since inception. 3. The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal.” 11. In the absence of any grievance raised in the Cross Objection and also in view of the Revenue's appeal being dismissed, the Cross Objection filed by the assessee is rendered infructuous and, thus, dismissed. 12. In the combined result, the appeal filed by the Department is dismissed and the Cross Objection filed by the Assessee is dismissed as infructuous. Order pronounced in the Open Court on 24 th April, 2024 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V.MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, Dated 24/04/2024 . ी. य , . . ./T.C. NAIR, Sr. PS ITA No.90/Ahd/2021 (By Revenue) & Cross Objection No.25/Ahd/2021 (By Assessee). Asst. Year : 2011-12 12 ! "# /Copy of the Order forwarded to : 1. "!ी $% / The Appellant 2. &य$% / The Respondent. 3. '(')* य य + / Concerned CIT 4. य य + )"!ी (/ The CIT(A)- 5. . /ीय )* , य "!ी य ")* , ज /DR,ITAT, Ahmedabad, 6. / 12 3 /Guard file. / BY ORDER, &य ! //True Copy// ह य !'जी (Asstt. Registrar) य "!ी य ")* , ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 22.4 .2024 2. Date on which the typed draft is placed before the Dictating Member. : 22/23.4 .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. : 24.4.2024 7. Date on which the file goes to the Bench Clerk. : 24.4.2024 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 :