DCIT, CENTRAL CIRCLE-1, RAJKOT V. RAJOO ENGINEERS LTD., JUNAGADH

ITSSA 3/RJT/2024

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The case involves the Deputy Commissioner of Income Tax (DCIT), Central Circle-1, Rajkot, as the appellant, and M/s. Rajoo Engineers Ltd., as the respondent. The dispute arose from an assessment order under Section 153C read with Section 143(3) of the Income Tax Act, 1961, which was challenged by the Revenue following the deletion of an addition of Rs. 90,30,000 by the CIT(A). The addition was initially made by the Assessing Officer based on incriminating documents seized during a search operation, which suggested unexplained investments by the assessee. However, the CIT(A) found no evidence linking the assessee to the cash payments for the property in question, leading to the deletion of the addition. The Revenue's appeal contested the CIT(A)'s findings, but the Tribunal upheld the CIT(A)'s decision, emphasizing the lack of direct evidence of cash transactions by the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26379 (ITAT-RAJKOT)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R.B. SHAH; KARUN OZA
• Keywords: Unexplained investment; Document seized; Documents seized; Principle of natural justice; Search and seizure
• Section: 143(3); 142(1); 143(2); 139; 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकरअपीलसं./IT(SS)A No.3/RJT/2024 Assessment Year: (2017-18) (Hybrid Hearing) DCIT Central Circle-1, Rajkot Vs. M/s. Rajoo Engineers Ltd. Junagadh Road, Vill. Manavadar, Junagadh, Gujarat 362630 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCR3204M (Assessee) (Respondent) Assessee by Shri R. B. Shah, AR Respondent by Shri Karun Oza, CIT. DR Date of Hearing 19/12/2024 Date of Pronouncement 30/12/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [in short “the ld. CIT(A)”], dated 11.12.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 29.09.2021. 2. Grounds of appeal raised by the Revenue are as follows: 1) \"Whether, on the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition made on account of unexplained investment of Rs. 90,30,000/-u/s. 69 of the Income Tax Act. 2) Whether, on the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in considering that the name found in seized documents 'Raju Engineering' has extreme similarity to the name of the assessee company i.e. \"Rajoo Engineers Limited\". a Page | 2 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. 3) Whether, on the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in not considering that final sale deed was executed in the name of sister concern of the assessee- company which is a common practice in market.\" 3. The facts of the case which can be stated quite shortly are as follows: The assessee is an individual who earned income from house property and business. The return of income for the year has been filed u/s 139 of the Act, on 29.10.2017, declaring total income of Rs. 9,81,37,870/-. A Search and seizure action on \"Operation Star Alliance\" was conducted on 26.9.2018. The various builders and financiers were covered under this operation. During the search operation, various incriminating documents / digital data pertaining to the project, ‘Om Decora Square” which was developed by M/s Aryan Arcade, have been found and seized. Some of these documents/digital data contained information pertaining to the assessee. Thereafter, proceedings u/s 153(C) of the Act, was initiated by issuing notice u/s 153C, on 20.06.2020, whereby the assessee was requested to file the return of income. The assessee has filed the return of income on 22.10.2020, showing therein income of Rs. 9,81,37,870/-. Subsequently, notice u/s 143(2) of the Act was issued on 12.02.2021 and then notices u/s 142(1) of the Act, have been issued on 12.02.2021, seeking details and explanations from the assessee. In view of natural justice, copies of the seized documents containing the information related to the assessee, satisfaction note of both the assessing officers, and relevant part of statements have also been provided to the assessee. 4. During the course of assessment proceedings, on perusal of various submission files, and various incriminating document/digital found and seized during the search proceedings, the assessing officer observed that the transactions mentioned in the seized documents / digital data were not reflected in the books of account of the assessee. Therefore, a show cause a Page | 3 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. notice, proposing the additions, was issued requesting therein to furnish its reply in the matter. The said show- cause notice, is reproduced by the assessing officer, on page number two, of the assessment order. 5.In response to the show- notice issued by the assessing officer, the assessee submitted its reply before the assessing officer, which is reproduced by the assessee on Page Nos. 7 to 8 of the assessment order. The sum and substance, of the reply of the assessee, before the assessing officer, was that neither the assessee has purchased the said property from M/s Decora Group nor paid any cash, hence, addition should not be made in the hands of the assessee. 5. However, the assessee rejected the contention of the assessee and held that in the light of the incriminating materials on record the assessee has made unexplained investment of Rs.90,30,000/-, withing the meaning of Section 69 of the Act, therefore, assessing officer, made addition to the tune of Rs.90,30,000/- in the hands of the assessee. 6. Aggrieved by the order of the assessee, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition made by the assessing officer. The ld CIT(A) noted that assessee- company is listed public limited company and there is no records available which suggest that the assessee- company had paid cash to Decora group for the purchase of the said office No. A-504, in Om Decora Square 9 project. It is also an undisputed fact that the assessee -company had not purchased the said office property in its name. Based on these facts, the ld. CIT( A) deleted the addition. a Page | 4 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. 7. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 8. The Ld. DR for the Revenue, argued that the Ld. CIT(A) deleted the addition, stating that the property was not registered in the name of the assessee- company. However, the Ld. CIT(A) did not explain the issue about the existence of the cash deposit in its order. Therefore, addition made by the assessing officer, may be deleted. 9. On the other hand, Ld. Counsel for the assessee, submitted that property was never purchased by the assessee- company. No doubt, the property was booked by the shareholders, however, documents seized, do not show the live link between the documents and the assessee, to purchase the property, by making payment in cash. No cash has been paid by the assessee- company, therefore, no addition should be made in the hands of the assessee -company. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that solitary issue in this appeal, is the addition of Rs.90,30,000/- on account of unexplained investment u/s.69 of the Act. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The assessing officer, during the course of assessment proceedings, found from the perusal of the seized incriminating documents that the assessee -company had made payment of on-money amounting to a Page | 5 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. Rs. 1,10,30,000/- (Rs.90,30,000/- in A.Y.2017-18 and Rs.20,00,000/- in A.Y.2018- 19) to Decora Group for the purpose of purchase of office no. A-504 in Om Decora Square 9 project developed by M/s. Aryan Arcade Ltd. During the course of assessment proceedings, the assessee had taken various contentions before the assessing officer, that assessee has not purchased the property, at all, but the assessing officer had not accepted the contentions taken by the assessee. Therefore, the assessing officer had made addition of Rs.90,30,000/-, to the total income of the assessee, for the year under consideration while passing the assessment order. 11. During the course of appellate proceedings, the assessee has filed written submission in support of its claim, before the Ld CIT(A). On perusal of the submission, it was found by ld CIT(A) that the assessee has stated that neither the assessee has purchased the said property from Decora Group nor paid any cash. In support of its claim, the assessee has furnished the copy of affidavit of Khushboo C. Doshi, MD of the assessee- company wherein she has stated that the company has not purchased immovable property at A-504, Om Decora 9 Square, Rajkot developed by Aryan Arcade (Decora Group) and also not paid any cash/cheque payment in related to property purchased. The assessee has also furnished the copy of purchase deed of the said property, wherein it is seen that the said property was purchased by M/s. Shrutina Nexgen LLP. 12. The ld CIT(A) observed from the assessment order that noting of office no. A-504 had been written with the name of Raju Engineering (Kishorbhai), on the seized incriminating documents (page no. 284. & 293). It is further observed from the contact details of Shri Kuldeep J. Rathod seized in the form of digital data backup in the hard disk, from the premise of Kuldeep Rathod, that the mobile number 9824040631, was saved in the a Page | 6 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. name of \"Kishorbhal C Raju Engineering C\". Further, on verification of the said number on the true caller, it was found by the assessee that Kishor Doshi named appeared on the said mobile number. It is also a fact on record that the AO had find out the name \"Kishorbhai C Raju Engineering C\" shown in the contact details of Shri Kuldeep J. Rathod, was Shri Kishor Nanalal Doshi. As per the AO, Shri Kishor Nanalal Doshi had paid on- money, in cash, on behalf of company and therefore, the assessee had made addition in the hand of assessee- company. However, it is pertinent to mention here that the assessee company is listed public limited- company and there is no records available which suggest that the assessee- company had paid cash to Decora group for the purchase of the said office no. A-504 in Om Decora Square 9 project. It is also an undisputed fact that the assessee -company had not purchased the said office property in its name. On perusal of the sale deed furnished by the assessee- company, it was observed, that the said office property was purchased by M/s. Shrutina Nexgen LLP from M/s. Aryan Arcade Limited, vide registered sale deed dated 30.10.2021. The copy of the relevant page of registered deed is reproduced by the Ld CIT(A) on page No. 17 of his order. 13. Based on the above facts, the ld. CIT(A) held that as per the seized documents, cash was paid by Shri Kishorbhai and the said property has been finally registered in the name of M/s. Shrutina Nexgen LLP but not in the name of the assessee- company, M/s. Rajoo Engineering Ltd., which is a public listed company. Therefore, the addition cannot be sustained in the hands of the assessee. Therefore, ld CIT(A), deleted the addition.That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. a Page | 7 IT(SS)A No. 3/Rjt/2024 AY. 2017-18 DCIT vs. Rajoo Engineers Ltd. 14. In the result, the appeal filed by the revenue, is dismissed. Order pronounced in the Open Court on 30 /12/2024 at Rajkot. Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Ǒदनांक/ Date: 30/12/2024 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Rajkot 1. Draft dictated on (dictation sheet is enclosed with main file.) 18.12.2024 2. Draft placed before author 18.12.2024 3. Draft proposed & placed before the second member 4. Draft discussed/approved by Second Member 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Draft dictation sheets are attached "