Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 2751 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
10 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
21-09-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
13-09-2022
Assessment Year
2013-2014
Appeal Filed On
09-11-2021
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e DCIT, Circle-3 (1 )(1), Ah medabad (Appellant) Vs Shri Illesh kumar P. Shah, Ho use No. 1, Sig ma Co mmerzone, Iscon Cross Road, S. G. Highway , Ah med abad PAN: AGO PS6965L (Resp ondent) Asses see b y : Shri Aseem Thak kar, A.R. Revenue by : Shri Alok Kuma r, CIT-D. R. Date of hearing : 14-09 -2 022 Date of pronouncement : 22-09 -2 022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by Revenue and Cross Objection filed the assessee against the order of the ld. Commissioner of Income Tax (Appeals)- IT(SS)A No. 86/Ahd/2021 Assessment Year 2013-14 Cross Objection No. 33/Ahd/2021 (in IT(SS)A No. 86/Ahd/2021) Assessment Year 2013-14 I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 2 12, Ahmedabad in Appeal no. CIT(A)-12/AHD/10279/DC C-3(3)/2018-19 vide order dated 15/03/2021 passed for the assessment year 2013-14. 2. The Department has raised the following grounds of appeal: “1. The Ld.CIT[A) has erred in law and on facts in deleting the addition of Rs.2,00,00,000/- made by the Assessing Officer on account of unexplained income. 2. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of Ld CIT(A) may be set aside and that of the Assessing Officer be restored.” 3. The assessee has raised the following grounds of cross objection: “1. The Ld. A.O. erred in law and in fact of the case in assessing the income of Rs. 2,00,00,000/- as unexplained income without mentioning under which provision of the act. The said income can be considered as unexplained either u/s. 68 or u/s. 69 of the act which, in the present case neither section is applicable. 2. The Ld. AO erred in law and in facts of the case in assessing the income of Rs. 2,00,00,000/- as unexplained income without any evidence in this regard and only on assumptions which is not sustainable in law. 3. Any other ground which may be raised before or during the time of hearing the appeal/cross objection. Total tax effect (see note below) Rs. 2,00,00,000/-” I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 3 4. The brief facts of the case are that the return of income was filed by the assessee on 31-03-2013 declaring total income of 30,20,855/ -. Thereafter, order under section 143(3) of the Act was passed on 18-02-2016, determining total income at 30,20,860/-. Meanwhile, search was conducted under section 32 of the Act in the case of various groups i.e. Venus infrastructure and developers Private Limited and Shri Ashok Sunderdas Vaswani on 10-3-2015, in which certain incriminating documents were found. On analysis of seized documents found during the course of search, it was noticed that the main business of the group was that it was engaged in land dealing. It was found on the basis of seized documents that Shri Ashok Vaswani and Rajesh Vaswani are the main persons of Venus group and Vaswani family members, who manage the finances of the Venus group. As per the notings made in the documents discovered during the course of search, a total amount of 3 crores has been paid by Venus group to Ronak Sigma and in lieu of this payment, amount of 3 crores was transferred to the bank account of Sunderdeep builders. Out of above amount of 3 crores, 1 crore was transferred from the account of Ronak Shah and an amount of 2 crores was transferred from the account of the assessee, Ilesh Shah. In view of the above, the AO recorded his satisfaction to the effect that documents found from the seized premises pertain/relate to the assessee and have a bearing on the determination of the total income. In the assessment order passed under section 143 (3) rws 153C of the Act, A.O. added a sum of 2 crores to the returned income of the assessee, with the following observations: I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 4 “From the above facts, it is clearly established that the amount of Rs. two crore given by Shri Ileshkumar P Shah from his bank account no.17910400002994 to Sunderdeep Builders were paid by cheque against the cash receipt. Further, Shri Rajesh Vaswani, the main person of Venus Group is proprietor of Sunderdeep Builder. All these sequence of facts found from the seized materials clearly established that the transaction was not purely of unsecured loan as stated by the assessee in his reply. In fact, the cheque issued and receipt is against the cash. The transaction of cash of Rs.2,00,00,000/- made in F.Y.2012-13 relates to cash payment and cash receipt by the Venus Group and assessee is one of the beneficiary. The source of cash transaction of Rs.2,00,00,000/- remains unexplained in view of the facts mentioned herein above. Therefore, the amount of 20,00,000/- is added to the total income of the assessee as his unexplained income. The penalty proceedings is initiated u/s. 271(l)(c) for furnishing inaccurate particulars of income. (Addition of Rs.2,00,00,000/-)” 4. Before Ld. CIT(Appeals), the assessee made three contentions: first, the assessment of the assessee for assessment year 2013-14 was already framed under section 143(3) and no incriminating material was found during search at third-party place, and therefore addition could not have been made while making assessment under section 153C. Second, the so-called documents seized during the search of Venus infrastructure and developers Private Limited did not “belong to” the assessee. Thirdly, in view of the judgments of the Jurisdictional Gujarat High Court in the case of Anilkumar Gopikkrishna Agrawal vs ACIT (2019) 418 ITR 25 (Guj) as also, Delhi High Court in the case of Pr CIT vs Dreamcity Buildwell (2019) 417 ITR 617 (Del) the amendment brought about in section 153C of the Income tax Act substituting the words "belong to " by the words "pertains or-pertain to, or any information contained therein relates to " is applicable only in respect of Searches initiated after 1 st June 2015 and I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 5 therefore if the documents etc did not belong to the assessee, assessment could be not made under section 153C of the Act based on documents pertaining to the assessee if they are seized during search proceedings initiated prior to 1 st June 2015. 6. The Ld. CIT(Appeals), on the issue of challenge to validity of initiation of proceedings under section 153C of the Act on the ground that in respect of searches initiated before 1 st June 2015, assessment could not be made under section 153C of the Act on the basis of documents that did “not belong” to the assessee, Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations: ‘4.3 In the instant case, the search at third party place took place on 10.03.2015 and thus the amended provisions substituting the words "belonging to " by the words "pertains or pertain to or information relates to " cannot be made applicable. On careful consideration of the facts of the case and the judgments cited in this regard, I am inclined to agree with the appellant that the AO has clearly noted in para 6.1 page 11 of the assessment order that he was satisfied that documents found and seized from the premises (i) Terrace of Crystal Arcade, Nr Navrangpura Telephone Exchange ,C.G.Road, Ahmedaabd and (ii) 901, Sapphire Complex, Opp: Ratnam, C.G.Road, Ahmedabad pertain, / relates to the assesse within the scope of section 153C of the Income tax Act. Since the amended provisions are not applicable as held by the Jurisdictional High Court and Delhi High Court, I am of the opinion that addition made on the basis of such documents cannot be sustained. The Jurisdictional Gujarat High Court has held in the case of Anilkumar Gopikrishna Agrawal vs ACIT 418 ITR 25 (Guj) as under: "While it is true that section 153C of the Act is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 6 virtue of the amendment, there is merely a change in the procedural provisions affecting the assessees who were covered by the unamended provision. By the amendment, a new class of assessees are sought to be brought within the sweep of section 153C of the Act, which affects the substantive rights of the assessees and cannot be said to be a mere change in the procedure. Since the amendment expands the scope of section 153C of the Act by bringing in an assessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, inasmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendment has been brought into force and based on the amendment, the petitioners who were not included within the ambit of section 153C of the Act as on the date of the search, are now sought to be brought within its fold on the ground that the satisfaction note and notice under section 153C of the Act have been issued after the amendment came into force. Therefore, this case does not relate to the interpretation of the provisions of any of the sections, but relates to the stage at which the amended section 153C of the Act can be made applicable, as to whether it relates to the date of search; or the date of recording of satisfaction by the Assessing Officer of the searched person; or the date of recording of satisfaction by the Assessing Officer of the other person; or the date of issuance of notice under section 153C of the Act. 19.9 In the facts of the present case, the search was conducted in all the cases on a date prior to 1st June, 2015. Therefore, on the date of the search, the Assessing Officer of the person searched could only have recorded satisfaction to the effect that the seized material belongs or belong to the other person. In the present case, the hard- disc containing in the information relating to the petitioners admittedly did not belong to them, therefore, as on the date of the search, the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C of the Act in case of the petitioners, did not exist. It was only on 1st June, 2015 when the I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 7 amended provisions came into force that the Assessing Officer of the searched person could have formed the requisite belief that the books of account or documents seized or requisitioned pertain to or the information contained therein relates to the petitioners. 19.10 In this backdrop, to test the stage of applicability of the amended provisions, a hypothetical example may be taken. The search is carried out in the case of HN Safal group on 4.9.2013. If the Assessing Officer of the searched person had recorded satisfaction that some of the seized/requisitioned material belongs to a person other than the searched person and forwarded the material to the Assessing Officer of the other person, had issued notice under section 153C of the Act prior to the coming into force of the amended provision. The notice under section 153C of the Act was challenged before the appropriate forum on the ground that the seized material does not belong to such other person and such issue was decided in favour of such person on a finding that the seized material does not belong to the other person. Thereafter, in view of the amendment in section 153C (1) of the Act, since the books of account or documents did not belong to the other person but did pertain to him or the information contained therein related to him, can the Assessing Officer of the searched person once again record satisfaction as contemplated under the amended provision and forward the material to the Assessing Officer of such other person. The answer would be an emphatic "no" as the Assessing Officer of the searched person after recording the earlier satisfaction would have already forwarded the material to the Assessing Officer having jurisdiction over the other person, therefore, there would be no question of his again forming a satisfaction as required under the amended provisions of section 153C of the Act." 4.4 The above judgment is later on followed by Gujarat High Court in the case of Mukesh Mankechand Sheth vs ACIT (2020) 166taxman.com618 (Guj). In view of the above binding judgments of the jurisdictional High Court, I am of the opinion that addition made by the AO on the basis of seized documents and loose papers recovered during the course of search on 10.03.2015 not belonging to the appellant cannot be sustained. As the AO has no jurisdiction to make such addition on the ground that such loose papers pertained or I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 8 information therein related to the appellant assesse , I direct to delete the addition of Rs. 2,00,00,000/-. 4.5 As regards the loose papers reproduced by AO at para 3.1 of the assessment order, the appellant had submitted in his reply dated 18.06.2018 that loose papers were not found from his premises, nor are written under his or his employees signature and are merely dumb documents containing either 110 name or date and amount not matching. Under the above circumstances it cannot be said that documents "belong to " the appellant. In the appellants objection to the show cause notice vide his reply dated 03.10.2018, reproduced by AO at para 5 page 7 to 9 of the assessment order , the appellant has categorically submitted that documents being some loose papers did not belong to him. The judgments in the case of Vijaybhai N.Chandrani vs ACIT 333 ITR 436 (Guj), CIT vs Gambhir Silk Mills Tax Appeal No: 1493 of 2010 Gujarat , Arpit Land Pvt. Ltd IT Appeal No: 83 of 2014 (Bombay High Court) were furnished to the AO. Also reliance has been placed on various other judgments to buttress the argument that merely because the name of assesse is found in the document, it cannot be held that such document "belongs to" the assesse. J Following the above judgments, I hold that even as per provisions which were in force till 1 st June 2015, as the documents seized do not belong to the appellant , no addition could be made based on such documents which could also not be treated as incriminating material. I am of the opinion that the AO was not justified to make assessment by relying on the dumb documents which did not belong to the appellant and direct to delete the addition of Rs. 2,00,00,000/-. In view of above discussion and considering the facts and legal position, grounds of appeal No: 1,2,3,7, 8 and 9 are allowed.” 7. Further, even on merits Ld. CIT(Appeals) allowed the assessee’s appeal with the following observations: “DECISION: I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 9 6.1 I have considered the facts of the case and the submission of the appellant carefully. Though on legality of the addition made by the AO by resorting to section 153C, it has been decided in the preceding grounds of appeal that AO had no jurisdiction to make addition in the absence of any incriminating documents belonging to appellant, for the sake of completeness of the decision on merits of the grounds taken , I have considered the facts on record and submission made by the appellant on above grounds. I find that the AO has made some presumption that the appellant who had taken a loan in earlier year i.e. A.Y. 2012-13 on various dates by way of cheque from Sunderdeep Builder must have paid cash against such loan and when in the year under appeal , the said loan was returned by appellant, he would have been paid back the cash and such cash transaction was unexplained. The appellant's contention that there is no such clinching evidence of any .cash being exchanged for receipt of loan and repayment thereof. Had it been so then such vouchers could have been found is during search. No such documents are identified by the AO. The appellant had taken loan by banking channel and paid interest thereon and TDS too was deducted as per law and no fault is found as regards payment of interest by the AO. It is further contended that once the loan is treated as genuine in the earlier year, there is no question of not accepting repayment by cheque made in later year (year under consideration) I am inclined to agree with the appellants contention that if the case of the AO is to be accepted (though it cannot be being based on no clinching evidence or cogent material) that the appellant might have paid cash in earlier year ie A.Y. 2012-13 against receipt of loan by cheque, and that (again presuming ) such cash would have been received back by the appellant during the year under consideration, while repaying the loan, how can addition be made in the year under consideration merely on such presumption as if at all there is any cogent evidence, the addition could only be made in AY 2012-13 when alleged cash might have been paid by appellant against receipt of loan. However, the law is clear that even while making any addition under section 69 of the Income tax Act, there has to be found as a matter of fact that there ' was such actual undisclosed investment and addition cannot be made merely on presumption or based on documents not found from the possession of assessee which do not belong to him. I find that the I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 10 AO has presumed that there is a cash transaction with Venus Group and that source of cash remained unexplained which he has added as unexplained income. Such an approach is not sanctioned by law as held by Gujarat High Court in the case of DCIT vs Narendra Garg and Ashok garg(AOP) 72 taxman.com 355 "The Assessing Officer cannot proceed on presumption u/s 134(2) of the Act and there must be something more than bare suspicion to support the assessment or addition" Considering totality of facts and also the case laws cited by the appellant in his submissions , I hold that the addition made by the AO without any cross examination and merely on the basis of some loose papers not recovered from the premises of appellant by making presumption cannot be sustained. I therefore allow the above grounds and direct the AO to delete the addition of Rs. 2,00,00,000/-. These grounds of appeal are allowed.” 8. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). The assessee has also filed its Cross objections against the aforesaid order. 9. Before us, the Ld. DR has reiterated the observations made by the Ld. Assessing Officer in the assessment order. In response, the counsel for the assessee has relied upon the observations made by Ld. CIT(Appeals) in the appellate order. The primary contention of the counsel for the assessee is that the assessment order passed under section 143 (3) r.w.s. 153C of the Act is unsustainable for the reason that the search operations were conducted prior to the insertion of amendment to section 153C, and therefore since it has been specifically noted by the AO that documents found during search “pertain /relate” to the assessee and did not “belong” to the assessee, the I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 11 assessment order framed under section 143 (3) r.w.s. 153C of the Act is void ab initio. Further, on merits, the counsel for the assessee relied upon the order passed by the Ahmedabad Tribunal in the case of DCIT v. Zodiac Mediquip Ltd in ITA number 1646/Ahd/2019, wherein on similar set of facts, addition was deleted by the Ahmedabad ITAT by holding that the provisions of section 68 of the Act did not apply to the instant set of facts. 10. We have heard the rival contentions and perused the material on record. In our considered view, we find no infirmity in the order of the Ld. CIT(Appeals), who specifically observed that in view of the specific satisfaction made in the assessment order to the effect that the documents “pertain/relate” to the assessee, it is evident that documents did not “belong to” the assessee, as was the mandate in view of various judicial precedents passed by the High Court/Tribunals in order to invoke provisions of 143(3) r.w.s. 153C of the Act prior to the amendment on 1 st June 2015. Therefore, we are of the view that the Ld. CIT(Appeals), after taking into consideration the facts of the case and applicable judicial precedents (including those of the jurisdictional Gujarat High Court), has correctly applied the law to the instant facts before us, and we accordingly uphold the order of Ld. CIT(Appeals). Without prejudice, even on merits of the case, the Ahmedabad Tribunal in the case of DCIT v. Zodiac Mediquip Ltd in ITA number 1646/Ahd/2019 on similar set of facts has deleted the additions with the following observations: “9.5. With respect to the addition made by the AO for Rs 5.25 crores under the provisions of section 68 of the Act, we note that such addition was based on the documents found from the 3 rd party which I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 12 were in the nature of cash vouchers as well as cash book wherein the entry was recorded for Rs. 5.25 crores. To our understanding, such addition is not sustainable at threshold on the reasoning that the documents were found from the premises of the 3 rd party and the presumption as provided under section 132(4A) of the Act comes into play which has not been complied by the revenue. The reasoning for the deletion of this addition shall remain the same as provided with respect to the deletion of the addition made by the AO for Rs. 6 crores as discussed in the preceding paragraph. 9.6. The AO has treated the amount of Rs. 5.25 crores as unexplained cash credit under section 68 of the Act, There is no dispute to the fact that the assessee on the previous occasion has advanced a sum of Rs. 6 crores through the banking channel and the assessee has claimed to have received the amount of Rs. 5.25 crores against such loan given to the party. Thus, the amount of Rs. 5.25 crores received by the assessee was duly explained and recorded in the books of accounts. Thus, the question of applying the provisions of section 68 of the Act in the given facts and circumstances does not arise. It is the reason that the entry in the account was duly recorded and the source of money was duly explained by the assessee which was also accepted by the Revenue. 9.7. Without prejudice to the above, it is also significant to note that the source of the transaction of Rs. 6 crores representing the payment was made by the assessee through the banking channel. Thus it is implied that source of Rs. 6 crores was never in doubt for the reason that it was carried out through the banking channel and no addition of whatsoever was made by the authorities below with respect to such amount. Now, the entire flow of cash transaction was out of such transactions of Rs. 6 crores. Thus, it appears to us there was no unaccounted money involved in the entire flow of Transaction whether it was the receipt of cash of Rs. 6 crores or payment of cash of Rs. 5.25 crores as all these transactions pertains to the source of money of Rs. 6 crores which was never doubted. Thus, we are of the view that once the basic source transaction has with accepted as genuine, the corresponding transaction which is the application of such transaction cannot be made subject matter of the addition either under section 68 or 69A of the Act. I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 13 9.8. At this juncture, it is also important to note that the assessee has given 6 crores of rupees as loan to the party which has come back in its entirety through the banking channel. This fad has nowhere been disputed by the authorities below. However, the cash payment and repayment for returning of the loan was found to the tune of Rs. 5.25 and 6 crores which did not match with the transaction of the assessee. Thus, a doubt may arise that the entry reflecting in the cash transaction of Rs. 5.25 crores may belong to some other party in the absence of any other corroborative evidence available on record. 9.9. In view of the above, and after considering the facts in totality, we do not find any reason to interfere in the order of the learned CIT- A. At the time of hearing the learned DR has also not brought anything on record contrary to the finding of the learned CIT-A. Thus, we uphold the order of the learned AIT-A. Hence the ground of appeal of the revenue is hereby dismissed. 10. In the result, the appeal of the Revenue is dismissed.” 10.1 Respectfully following the Ahmedabad ITAT ruling, we are of the view that there is no infirmity in the order passed by Ld. CIT(Appeals) on merits as well. 11. In the result, the appeal of the Department is dismissed. During the course of hearing, the counsel for the assessee submitted that he shall not be pressing for cross objections filed, and accordingly, the same is dismissed as not pressed. Order pronounced in the open court on 22-09-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A No. 86/Ahd/2021 & CO 33/Ahd/2021 A.Y. 2013-14 Page No. DCIT vs. Shri Illeshkumar P. Shah & Shri Illeshkumar P. Shah vs. DCIT 14 Ahmedabad : Dated 22/09/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद
