DIPAKBHAI NAGINBHAI CHAUHAN,SURAT V. INCOME TAX OFFICER, WARD - 1(3)(6), SURAT

ITA 301/SRT/2024

AI Insights

The case involves Dipakbhai Naginbhai Chauhan, who appealed against the order of the CIT(A) confirming the AO's decision to reopen his assessment under section 147 of the Income Tax Act, 1961, and the subsequent addition of Rs.5,54,78,504/- as unexplained income. The AO had initially reopened the assessment based on information that Chauhan had sold immovable properties and received undisclosed cash. The CIT(A) upheld the AO's decision, leading to Chauhan's appeal to the Tribunal. The Tribunal found that while the reopening was valid, the matter required further examination to determine the correct tax liability regarding the cash receipts and the capital gains from the property sale.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473297 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-11-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2024
• Other Referred Cases: GKN Driveshafts vs. ITO, CIT vs. Kiranbhai Jamnadas Sheth (HUF), Silverdale Inn (P.) Ltd. vs. ITO, Raymond Woolen Mills Ltd. vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RITESH MISHRA
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Set aside; Corroborative evidences; Competent authority; Tangible material
• Section: 148; 143(3); 143(2); 250; 143(1)

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.301/SRT/2024 Assessment Year: (2014-15) (Physical Hearing) Dipakbhai Naginbhai Chauhan, 1, Agam Co. Op. Housing Society, Rander Road, Tadwadi, Surat - 395009 Vs. The ITO, Ward – 1(3)(6), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: ABMPC1615J (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Ritesh Mishra, CIT-DR Date of Hearing 11/11/2024 Date of Pronouncement 22/11/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 04.03.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2014-15. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in reopening the assessment u/s.147 of the Income Tax Act, 1961 and issuing notice u/s.148 of the Income tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.5,54,78,504/- on account of alleged unexplained income. 2 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan 3. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Brief facts of the case are that the assessee filed his return declaring total income of Rs.8,53,790/-. Based on information received from ADIT (Inv.), Surat that assessee had sold immovable properties but the sale consideration was not disclosed in the return of income for the subject year, the case was reopened u/s 147 of the Act after recording reasons and obtaining approval of the competent authority. Notice u/s 148 of the Act was issued on 30.09.2019. In response to the said notice, assessee filed return declaring the same income. Copy of reason recorded for reopening was given to assessee. Objection of the assessee was subsequently disposed of. The assessee is a partner of M/s Shashwat Developers which had constructed a project named Raj Harsh, Pal Road, Surat. The assessee had received cash of Rs.5,54,78,504/- from 18 persons, but he had not shown the transaction in his return of income. Initially, assessee did not comply with the notices issued to him, but in response to the show cause notice, he has filed reply which is reproduced at para 3 of the assessment order. The assessee submitted that he has not received cash in his individual capacity from the said 18 persons for transferring bungalow owned by him at Plot No.B/1, Agam Co-operative Housing Society. He submitted that the cash was received by partnership firm and not by him. Since the project could not be completed in time by M/s Shashwat Developers, it had to return the money to all 18 persons. As money was returned by the partnership firm, no 3 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan question of taxing any amount in assessee’s individual case as consideration towards sale of bungalow. He further stated that he has sold his bungalow by executing registered sale deed on 07.03.2014 for consideration of Rs.88,00,000/- which is much less than cash amount of Rs.5,54,78,504/-. The Assessing Officer (in short, ‘AO’) considered the reply of assessee but did not accept it. He stated that assessee had not filed return within stipulated time of reopening; however, objection was disposed of and the order was served upon assessee on 09.12.2019. 3.1 The AO mentioned that as per MoU, assessee had received cash from 18 persons. Two partners of M/s Shashawat Developers had retired on 30.10.2013 and the other partner’s name was not in the MoU. Hence, as per MoU, the assessee was the sole partner in this transaction and only he is liable for the transaction. The AO further stated that assessee had not been able to submit documentary evidence that the cash of Rs.5,54,78,504/- was transferred to the firm’s account. The AO also mentioned that ledger copy of Jayesh M. Bhutti and Bimal Chand Shah submitted by assessee, does not bear signature of above persons. The MoU was also on stamp paper in the name of assessee and it was duly notarized. In the MoU, assessee had acknowledged receipt of Rs.5,54,78,504/- from the above 18 persons. Further, assessee had agreed for sale of bungalow against said consideration of 18 flats as enumerated in the MoU. This fact confirms original sale of flats and subsequent sale of bungalow against repurchase of flats. The assessee was acting in personal capacity only. One of the purchasers, Shri Narayandas R. Sachwani, father of Bhumika 4 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan Sachwani, in his statement admitted that he had paid cash to the assessee. The AO has emphasized that the true owner of the property was assessee and not the partnership firm. In conclusion, AO held that assessee accepted money in cash of Rs.5,54,78,508/- from 18 persons by transferring a bungalow owned by him and these 18 persons have collectively made the above cash payment to the assessee who is the main and sole partner of M/s Shashawat Developers. However, assessee has not shown this amount in his return of income for the year. Therefore, this amount remains unexplained. Accordingly, the same was added to the total income of the Act. 4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The assessee challenged validity of reopening u/s 147 by issue of notice u/s 148 of the Act as well as merit of addition of Rs.5,54,78,504/- as unexplained income. Reply of the assessee is reproduced by CIT(A) at para 4 of his appellate order. Regarding the reopening of the reassessment, the CIT(A) has referred to the decision in case of GKN Driveshafts, 259 ITR 19 (SC) and stated that AO had received information regarding receipt of consideration by the appellant for sale of immovable property which was also supported by MoU signed by the appellant and 18 persons, who had paid cash in aggregate of Rs.5.54 Crore. The CIT(A) held that the above constitutes valid and complete information based on which assessment was reopened. The contentions of the assessee on various facts were not supported with any documentary evidences. Therefore, the action by AO could not be faulted with. The CIT(A) further held that the decisions relied upon by the assessee are not applicable in the instant 5 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan case. He further held that there was tangible material with AO to come to conclusion that income had escaped assessment, hence, the ground was not found to be tenable. 4.1 Regarding merits of the addition, the CIT(A) did not accept that cash of Rs.5,54,78,504/- was received by the firm M/s Shashwat Developers and not the assessee in his individual capacity. The CIT(A) has referred to the MoU signed by the appellant and the other persons and found that assessee had acknowledged that he had accepted, assumed and owned up the assets and liability of the firm. The CIT(A) further observed that despite opportunities given, the appellant has not produced any documents to support his contention. The appellant has also not contended that MoU is not reliable and was not signed by him or the contents therein are false. The reasons for which the MoU is stated to be not acted upon are unsubstantiated. The CIT(A) further stated that statement of Shri Narayandas Sachwani does not require cross examination as factual position in MoU is not changed. Hence, incidence of tax or otherwise in case of the firm has no relevance, so far as appellant is concerned as the MoU has not been challenged by the appellant in assessment or appellate proceedings. Hence, the ground was dismissed by CIT(A). 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) of the assessee filed a paper book including MoU, partnership deed, retirement deed, Bechan Dastaavej between 18 persons and the appellant, assessment orders of M/s Shashawat Developers for AY.2011-12, 2012-13 and 2013-14. He has again 6 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan reiterated the submission made before the AO and CIT(A). He emphasized that the payment of Rs.5,54,78,504/- was received by him from the 18 persons as a partner on behalf of M/s Shashawat Developers from the flat buyers. He has not received anything in his individual capacity. He submitted that in AYs.2011-12, 2012-13 and 2013-14, the cash receipts have been assessed in the hands of the registered firm i.e., M/s Shashwat Developers. This is clear from the assessment order made u/s 143(3) r.w.s 147 of the Act at pages 78 to 115 of the paper book. Only in the present AY.2014-15, the cash receipt has been taxed in the hands of the appellant. Therefore, he requested that the appeal may be set aside and AO should be directed to make fresh assessment to decide in accordance with law. 6. On the other hand, Learned Commissioner of Income-tax- Departmental Representative (Ld. CIT-DR) of the Revenue supported the orders of lower authorities. The Ld. CIT-DR submitted that the other three partners retired and assessee was the only person who received the consideration in cash and only he is liable for taxation for the impugned transactions. He has relied on the orders of AO and CIT(A). 7. We have heard both the parties and perused the materials available on record. The first issue is validity of reopening the assessment u/s 147 of the Act. The original assessment was processed u/s 143(1) and no regular assessment was made u/s 143(3) of the Act. Subsequently, information was received by AO from the Investigation Wing that assessee had sold immovable property and received cash of Rs.5,54,78,504/- from 18 persons. The sale consideration was 7 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan not disclosed in his original return of income. The assessee filed return in response to notice u/s 148 of the Act on 09.05.2019. Notice u/s 143(2) was issued on 15.07.2019 and copy of reasons recorded provided to assessee on 11.06.2019. The assessee filed objection vide letter dated 18.11.2019. The objection was disposed of on 09.12.2019 and re-assessment order has been passed on 24.12.2019. It is seen from the sequence of events stated above that the assessee has filed objection against reopening almost after six moths from filing the return u/s 148 of the Act; though the reason for reopening was provided within a month of filing the return u/s 148 of the Act. It is, thus, clear that objection was raised towards the fag-end of the assessment proceedings. Considering these facts, the CIT(A) has observed that the AO has followed the due procedure in consonance with the guidelines of Hon’ble Supreme Court in case of GKN Driveshafts (supra). He held that AO had information regarding receipt of consideration in cash by the appellant from sale of immovable property which was not disclosed in the return of income. The information was supported by MoU, which was signed by the appellant. Hence, there was valid and credible information which formed basis for reopening. Therefore, requirements of section 147 are satisfied. We do not find any infirmity in the decision of CIT(A). The Ld. AR has also not argued further and has only submitted that AO should provide reason for reopening and matter may be restored to AO. He has not given any evidence to prove as to how the action of the AO was not in consonance with provisions of section 147 of the Act. As stated earlier, the case was processed u/s 143(1) and no assessment was made 8 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan u/s 143(3) of the Act. The AO had also provided the assessee, the reasons for reopening. The Hon’ble Gujarat High Court in case of CIT vs. Kiranbhai Jamnadas Sheth (HUF), 39 taxmann.com 116 (Guj.) it was held that where original assessment of assessee was accepted u/s 143(1) without any scrutiny, condition of income having escaped assessment due to failure on part of assessee to disclose truly and fully all material facts, is not necessarily required to be established and revenue can reopen assessment beyond four years u/s 147 even otherwise. The Hon’ble jurisdictional High Court in case of Silverdale Inn (P.) Ltd. vs. ITO, 127 taxmann.com 679 (Guj.) held that where AO issued reopening notice against assessee on ground that an information was received from NMS (Non filler monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. It has also been held by the Hon’ble Supreme Court in case of Raymond Woolen Mills Ltd. vs. ITO, 236 ITR 34 (SC) held that in determining whether commencement of re-assessment proceeding was valid, it has only to be seen whether there was prima facie some material on the basis of which the Department court reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. In this case, we find that there was prima facie material with the AO that assessee had not disclosed the sale consideration received in cash from 18 persons in his return of income. Hence, considering the facts of the case and the precedents on the issue, we 9 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan hold that the reopening u/s 147 of the Act was in accordance with law and the ground is, accordingly, dismissed. 8. Regarding the merit of addition of Rs.5,54,78,504/-, the Ld. AR has submitted that the cash was received by him as a partner of M/s Shashwat Developers and not in his individual capacity. He has no authority to receive the consideration in his individual capacity. He further submitted that in all three immediately preceding assessment years i.e., AYs. 2011-12 to 2013-14, the cash receipt has been assessed in the hands of M/s Shashwat Developers, the partnership firm. Therefore, differential treatment cannot be made in the subject assessment year. The Ld. AR has enclosed copies of the assessment orders for these three years at pages 78 to 115 of the paper book. 9. On the other hand, Ld. CIT-DR has relied on the orders of the lower authority. Referring to the retirement deed of the other partners, he submitted that the appellant is the main person and sole beneficiary of the transaction. As per para 4(ii) of the assessment order, as per the MoU, the other two partners retired and the name of the third partner Shri Rajnikant Nagindas Chouhan was not included in the MoU. Hence, the assessee was the sole partner who performed the transaction and he is liable for all such transactions. The CIT(A) has also confirmed the finding of AO which has not been rebutted by Ld. AR by submitting any other document by the appellant. 10. We have heard both the parties and perused the materials available on record. We have also carefully perused the paper book and assessment orders of M/s Shashwat Developers, where assessee was a partner. It is contention of 10 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan revenue that assessee received the sale consideration of Rs.5,54,78,504/- in cash in his individual capacity and not on behalf of the above partnership firm. On the other hand, appellant has all through contended that he received the impugned sum on behalf of the partnership firm and not in his individual capacity. Therefore, the cash receipt may be considered for taxation in the hands of M/s Shashwat Developers. The Ld. AR has filed the assessment orders of M/s Shashwat Developers for AYs.2011-12 to 2013-14 and submitted that cash receipts of various amounts have been assessed by the Department in the hands of the said partnership firm. There is no reason why it should be assessed in the hands of the appellant in the current year. We have carefully gone through the orders u/s 143(3) r.w.s. 147 of the Act for AYs.2011-12 to 2013-14 in case of M/s Shashwat Developers, where the appellant is a partner. All these cases were reopened on the basis of information received from the ADIT (Inv.), Surat who was having a satakhat / MoU with regard to sale of flats and shops to different persons in the project Raj Harsh, Pal Road, Surat, developed by M/s Shashwat Developers. As per the assessment orders, the above firm had received cash of Rs.30,00,000/-, Rs.2,31,30,528/- and Rs.3,63,21,187/- from various purchasers in AYs.2011-12 to 2013-14 respectively, which had not been shown in the returns of M/s Shashwat Developers. After recording statement of some purchasers who confirmed payment of cash for purchase of flats / shops and after hearing assessee, additions of the above cash payments were made in AYs.2011-12, 2012-13 and 2013-14, in case of M/s Shashwat Developers. The facts in the instant appeal are similar. As discussed by the AO in para 2 of the 11 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan assessment order, assessee had received cash of Rs.5,54,78,504/- from 18 persons. In the assessment order, addition has been made in the hands of the appellant and not in the hands of M/s Shashwat Developers. It is not clear from the details submitted by the Ld. AR as to whether the appellant had signed the MoU as a partner of M/s Shashwat Developers or in his individual capacity. The fact about return of money to the persons who had booked the flats is also not clear from the assessment order or the details given by the appellant. It is also not ascertainable as to whether capital gain on sale of the bungalow by the assessee to the 18 persons was offered to tax by him. Further, nexus between sale of the bungalow and return of money to the 18 persons received earlier in cash is also not clear from the details on record. Further, there is nothing on record to show that the assessee has shown capital gain on sale of the bungalow and what was the actual sale consideration. These issues are germane to decide the taxability of the cash receipt of Rs.5,54,78,504/-. Therefore, we considered it proper to restore the matter to the file of AO to examine all these facts to arrive at a proper decision regarding taxability of the impugned cash receipt in the hands of the right person in accordance with law. The other issue of capital gain also needs thorough examination in accordance with law. Hence, the order of CIT(A) is set aside and the matter is restored to the file of AO for fresh assessment after obtaining explanation and necessary details/evidences discussed above from assessee and after granting reasonable and sufficient opportunity of hearing to assessee. Accordingly, this ground is allowed for statistical purpose. 12 ITA No.301/SRT/2024/AY.2014-15 Dipakbhai Naginbhai Chauhan 11. In the combined result, appeal of the assessee is partly allowed for statistical purposes. Order is pronounced in the open court on 22/11/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 22/11/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "