HIRALAL DAYARAM THAKKAR,AHMEDABAD V. DCIT, CENTRAL CIRCLE 2 4 , AHMEDABAD, AHMEDABAD

CO 41/AHD/2024

AI Insights

The case involves multiple appeals and cross objections related to the assessment years 2012-13, 2013-14, and 2014-15, concerning the assessee Hiralal Dayaram Thakkar, a builder and contractor. The primary issues revolved around the additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act for unexplained income and the estimation of profit on contractual receipts. The CIT(A) had deleted some additions and reduced the profit estimation from 20% to 10%, which the Revenue contested. The Tribunal found procedural lapses in the admission of additional evidences by the CIT(A) without allowing the AO to examine them, leading to a remand for re-evaluation on certain grounds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41012 (ITAT-AHMEDABAD)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KALPESH RUPAVATIA
• Assessee Lawyers: VIVEK CHAVDA; NISHIT
• Keywords: Set aside; Additional evidence; Unexplained cash credit; Rejection of books of accounts; Period of limitation; Principle of natural justice; Search and seizure; Time period of passing order
• Section: 250; 132; 68; 13; 145(3); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. Nos. 157, 158 & 159/Ahd/2024 & CROSS OBJECTION Nos. 39, 40 & 41/Ahd/2024 (Ǔनधा[रण वष[ / Assessment Years : 2012-13, 2013-14 & 2014-15) DCIT Central Circle-2(4), Ahmedabad Hiralal Dayaram Thakkar 1, Nilkanth Complex, Nr. TV-9, Jivraj Park, Gujarat - 380051 बनाम/ Vs. & Hiralal Dayaram Thakkar 1, Nilkanth Complex, Nr. TV-9, Jivraj Park, Gujarat – 380051 DCIT Central Circle-2(4), Ahmedabad èथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AANPT3721E (Appellant / Cross Objector) .. (Respondent) Assessee by : Shri Vivek Chavda & Shri Nishit Jesur, A.Rs. Revenue by : Shri Kalpesh Rupavatia, Sr. DR Date of Hearing 06/03/2025 Date of Pronouncement 12/03/2025 O R D E R PER BENCH : The three appeals are filed by the Revenue against the separate order of the Commissioner of Income Tax (Appeals)-12, Ahmedabad, (in short ‘the CIT(A)’), all dated 13.11.2023 for the Assessment Years 2012-13, 2013-14 & 2014-15. The assessee has filed cross objections in respect of all the three appeals of the Revenue. ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 2 – 2. The Registry has pointed out that there was a delay of 449 days in filing of cross objections by the assessee. An affidavit has been filed by the assessee explaining the reason for delay. It is submitted that though the appeals by the Revenue were filed on 28.01.2024, the same were communicated to the assessee on 05.04.2024 and the time limit of 60 days to file the cross objections expired on 04.06.2024. Thus, there was a delay of 175 days only in filing the cross objections. As regarding the reason for delay, the assessee has explained that he is a senior citizen, 85 years of old, and was suffering from various old age-related health issues. Further, the assessee was hospitalized during the period from 15.06.2023 to 21.06.2023. As the recovery of the assessee took considerable time, he could not consult his counsel in time which led to delay in filing of the CO. We have considered the explanation of the assessee. The assessee was hospitalized only after the time limit of 60 days to file the COs had expired and no explanation has been offered as to why the COs could not be filed within the normal limitation period. Though, we are not fully convinced with the reason for delay, it is found that the ground on which the CO has been filed by the assessee, is also contested by the Revenue in all the three years and it will be relevant to consider the explanation of the assessee while adjudicating those grounds. Therefore, the delay in filing the cross objections by the assessee is condoned. 3. As the issues involved in all the three appeals of the Revenue as well as the cross objections by the assessee were identical and interconnected, all the matters were heard together and are being disposed of vide this common order. ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 3 – 4. We will take ITA No.157/Ahd/2024 and CO No.39/Ahd/2024 for A.Y. 2012-13 as the lead case. 5. The grounds of appeal taken by the Revenue in this appeal are as under: “1). \"Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) is correct in deleting the addition of Rs.3,45,46,640/-made on account of unexplained income u/s. 68 of the Act?\" 2). \"Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) is correct in deleting the addition of Rs.1,25,37,717/- out of total addition of Rs.2,13,14,097/- made on account of suppression of income on sale of flats/plots by determining the profit @ 10% instead of 20%, without giving any reason?\" 3). On the facts and in the circumstances of the case and in law the Ld. CIT(A) ought to have upheld the order of the A.O. 4). It is therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 6. The grounds raised by the assessee in the Cross Objection are as under: “1.1 The order passed u/s. 250 on 13.11.2023 for A.Y.2012-13 by CIT(A)-12, Ahmedabad upholding the addition of Rs.1,25,37,687/- made by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the eccentric facts and evidence available with regard to the impugned additions. 1.3 The Ld. CIT(A) has grievously erred in law and on facts in not carrying out any inquiry with regard to the applicability of the provisions of Income tax Act and thereby violated the principle of natural justice. Therefore, the appellant shall be granted opportunity to produce additional evidences. 2.3 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the addition of Rs.1,25,37,687 being estimation of profit at 10% for suppression of income on sale of flats/plots as against 3% offered by the appellant. ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 4 – 2.4 That the Ld. CIT(A) ought not to have upheld the addition of Rs.1,25,37,687 being estimation of profit at 10% for suppression of income on sale of flats/plots as against 3% offered by the appellant.” 7. Succinctly, the facts of the case are that a search and seizure action was conducted u/s 132 of the Income Tax Act, 1961 (in short ‘the Act’) in the case of Dharmadev Group on 15.10.2013 and the premises of the assessee was also covered in the search operation. The assessee had filed his return of income for A.Y. 2012-13 belatedly, after the search action, on 31.10.2013 declaring total income of Rs.11,26,910/-. Since, the return was filed for the first time after the date of search, this was a case of abated assessment. In response to notice u/s.153A of the Act, the assessee had filed return on 07.10.2014 declaring the same income of Rs.11,26,910/-. The assessee is a builder and contractor and was engaged in undertaking various projects under his proprietary concerns. In the course of assessment, the AO found that the assessee had shown addition of Rs.31,88,001/- to the capital account of his proprietorship concern Neelkanth Builders. Similarly, there were additions to capital account of other proprietorship concerns viz. M/s. Harikrupa Builders and Swaminarayan Developers. In addition, unsecured loans were also taken in the various proprietorship concerns. In the course of assessment, the assessee did not furnish any explanation regarding additions to capital account and no evidence was brought on record in respect of unsecured loans taken during the year, in spite of specific requisition by the AO. Therefore, the AO treated the entire contract receipt of Rs.3,45,46,640/- as unexplained and accordingly made the addition u/s. 68 of the Act. Further, the assessee had disclosed net profit @ 3% on the gross ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 5 – contractual receipt. The AO found that the assessee was not maintaining his accounts in accordance with the recognized method of accounting of project completion or percentage completion method. Therefore, he rejected the books of accounts of the assessee and estimated the profit @ 20%. Accordingly, the assessment for A.Y. 2012-13 was completed u/s.143(3) r.w.s. 153A of the Act on 30.03.2016 at total income of Rs.5,69,88,460/-. 8. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned order. The Ld. CIT(A) had deleted the addition made by the AO in respect of unexplained credit of Rs.3,45,46,640/- and reduced the addition in respect of profit from 20%, as made by the AO, to 10% of the total booking receipts. 9. Shri Kalpesh Rupavatia, Ld. Sr. DR submitted that in the course of assessment, no compliance was made by the assessee and the details and evidences as called for by the AO were not furnished. No explanation was given by the assessee in respect of addition to capital account of various proprietorship concerns as well as in respect of unsecured loans taken during the year. Therefore, the AO had no option but to treat the entire contractual receipt of Rs.3,45,46,640/- as unexplained. The Ld. Sr. DR submitted that the Ld. CIT(A) had allowed relief to the assessee on this issue by considering additional evidences and without calling for any remand report from the AO, which was contrary to the provision of Rule 46A of the IT Rules. He, therefore, ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 6 – requested that the matter may be set aside to the file of the AO with a direction to examine the fresh evidences brought on record by the assessee before the Ld. CIT(A) in the course of appellate proceeding. 10. In respect of the second ground of estimation of income, the Ld. Sr. DR submitted that the Ld. CIT(A) had upheld the rejection of books of accounts by the AO. However, he was not correct in reducing the estimation of income as made by the AO from 20% to 10% without any basis. 11. Per contra, Shri Vivek Chavda, Ld. AR of the assessee submitted that the addition made by the AO was without any application of mind and, therefore, the Ld. CIT(A) had rightly allowed the relief. He submitted that the AO had not only made addition for entire contract receipt of Rs.3,45,46,640/- but also made addition of profit on the contract receipts @ 20%, which resulted into double addition. According to the Ld. AR, both the additions could not have been made by the AO. He, therefore, strongly supported the decision of the ld. CIT(A) deleting the addition of Rs.3,45,46,640/-, which was based on incorrect appreciation of facts of the case. With respect to admission of additional evidences by the ld. CIT(A) without allowing any opportunity to the AO, the ld. AR submitted that the matter may be set aside to the file of ld. CIT(A) and not to the AO. 12. As regarding addition on account of estimation of net profit, the Ld. AR submitted that the action of the Ld. CIT(A) in restricting the addition to 10% of the contract receipt was not ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 7 – correct. He submitted that the assessee was engaged in construction activity in remote area where the margin of profit was low and the profit rate of 3% as disclosed by the assessee was correct. The ld. AR submitted that the assessee had disclosed profit in all the earlier years at the same rate which was accepted by the Revenue. Therefore, the addition for profit sustained by the Ld. CIT(A) @ 10% was too high and not correct. The Ld. AR strongly supported the grounds in this regard in the CO of the assessee. 13. We have considered the rival submissions. It is found that no compliance was made by the assessee in the course of assessment proceedings and the details called in respect of addition to capital, unsecured loan, contract receipts etc. were not furnished. The AO had, therefore, treated the entire contract receipt of Rs.3,45,46,640/- as unexplained. Prima facie, the action of the AO in treating the entire contract receipt of the assessee as unexplained cannot be held as correct. The AO had made queries in respect of addition to capital accounts and fresh loans taken during the year. If the assessee did not comply in respect of these issues, the additions should have been restricted to these specific items. The action of the AO in treating the entire contract receipt as unexplained can’t be held as correct. Further when the entire contact receipt was treated as unexplained and added to income; there cannot be any justification for making further addition in respect of net profit derived out of such contractual receipt. It is found that the Ld. CIT(A) has given a detailed finding in respect of the source of the contractual receipts, after considering the additional evidence filed by the ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 8 – assessee, which is duly reproduced in the order of the Ld. CIT(A). However, as per provision of Rule 46A(3) of the IT Rules, the Ld. CIT(A) was prevented from taking into account any additional evidence filed in the course of appeal proceeding, without allowing a reasonable opportunity to the AO to examine the fresh evidences. It is found from the order of the Ld. CIT(A) that the AO was not allowed any opportunity to examine the additional evidences furnished by the assessee in the course of appeal proceedings. Thus, the order of the Ld. CIT(A) on this issue is patently in contravention to the provisions of Rule 46A(3) of IT Rules and can’t be sustained for this reason. The request of the assessee is to set aside the matter to the file of the Ld. CIT(A) while the Revenue has requested to set aside the matter to the AO. Since, the default of admitting additional evidence without allowing any opportunity to the AO, has been committed by the ld. CIT(A), we deem it proper to set aside the matter to the file of the first appellate authority. The ld. CIT(A) is directed to obtain a remand report of the AO on the additional evidences filed by the assessee in the course of appeal proceeding and thereafter re-adjudicate this issue. In the result, the ground no.-1 taken by the Revenue is allowed for statistical purposes. 14. The second ground taken by the Revenue is against restricting the addition of profit on sale of flats/plots from 20% to 10%. Further, all the grounds taken by the assessee in the cross objection, pertain to this addition only. The assessee had disclosed net profit @3% of the booking receipts. It was explained by the assessee that this percentage was based on his long-term experience of more than 20 years in the business of ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 9 – construction activities. The working of the profit by the assessee at a pre-conceived rate of 3% of the booking receipts cannot be held as correct. Merely because the Revenue had accepted the profit on this basis in the earlier years, the assessee cannot take a plea that the matter cannot be looked into in the current year. It is a settled position that the principle of res-judicata is not applicable to income tax proceedings. When the assessee was engaged in the construction activity, he was duty bound to follow the prescribed accounting standard of either project completion or percentage completion method. In the course of assessment, even the basic details of unit-wise or party-wise receipts of sales were not made available by the assessee. The AO had, therefore, rejected the books of accounts of the assessee, which was upheld by the Ld. CIT(A) by observing as under: “9.3 I have considered, the facts of the case. The AO has rejected the books of accounts by invoking provisions of section 145(3) of the Act and therefore the profit shown by the appellant. It is very clear, from perusal of the audited accounts of the appellant that information contained therein is very cryptic in nature. Accounts conceal as much as they reveal. It is also seen that the appellant has not made the accounts Project Wise. There is no clarity of the method of revenue recognition by the appellant. It submitted that the profit was shown @3% of the gross booking amount received. No data regarding the unit wise, party wise receipts of sale were available. The total amount per project was a lumpsum figure and on what basis the same was arrived at is not clear at all. In fact funds received in a particular project was merrily deposited in the individual account of the appellant and transferred/utilized merrily without giving any clarity regarding the receipts of the specific project. It looks that the appellant just decided on the amount of purported booking receipts for each project and showed 3% of the same as net income. No sound basis or scientific reasoning was provided by it to suggest that how he arrived at the 3% net profit figure. The amounts reflected as booking receipts for each of the project has enough room for tampering. The expenses shown are also shown in lumpsum. There is no evidence of the party wise amounts payment. In sum the gross receipts of a business reflected are arbitrary and difficult to verify the correctness of the amounts ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 10 – and the amount shown can be easily suppressed. Further, the appellant has shown 3% of the purported receipts as profit of the businesses which is arbitrary and whimsical and the rationale provided that why it chose 3% as the net profit rate for each of the project is unacceptable as it has no basis at all. It seems to be just the sweet will of the appellant to show 3% as net profit for each of the project. There is no method applied here. Therefore, I uphold the action of the AO to reject the book results as they are incomplete and incorrect.” 15. We do not find anything wrong with the order of ld. CIT(A) upholding the rejection of books of accounts of the assessee by the AO. When the books of accounts are rejected, the profit has to be worked out on estimate basis. The AO had applied a rate of 20% to work out the net profit out of the gross booking receipts. However, the AO didn’t give any reason or any basis for application of this rate. On the other hand, the Ld. CIT(A) had restricted the addition @10% of the contract receipts. The presumptive rate of tax as stipulated u/s.44AB of the Act is 8%. Therefore, the net profit rate of 10%, as applied by the Ld. CIT(A), is found to be reasonable. The decision of the ld. CIT(A) on this issue is, therefore, upheld. Accordingly, the ground taken by the Revenue as well as the cross objection filed by the assesse in respect of this addition, both are dismissed. 16. In the result, the appeal of the Revenue is partly allowed for statistical purposes and the cross objection filed by the assessee is dismissed. ITA No.158/Ahd/2024 & CO No. 40/Ahd/2024 –A.Y. 2013-14 17. The grounds raised by the Revenue in this appeal as well as ground of the assessee in this cross objection are identical to ITA ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 11 – No.157/Ahd/2024 and CO No. 39/Ahd/2024. Accordingly, decision in ITA No.157/Ahd/2024 and CO No. 39/Ahd/2024 is applicable mutatis mutandis to the appeal/CO for A.Y.2013-14. The appeal of the Revenue in ITA No.158/Ahd/2024 is partly allowed for statistical purposes and the cross objection in CO No. 40/Ahd/2024 is dismissed. ITA No.159/Ahd/2024 & CO No. 41/Ahd/2024 –A.Y. 2014-15 18. The first two grounds taken by the Revenue in ITA No.157/Ahd/2024 as well as the grounds of the assessee in CO No. 39/Ahd/2024 are involved in this appeal/CO for A.Y. 2014- 15 as well. Accordingly, the decision in those cases in respect of first two grounds and the CO, is applicable to ITA No.159/Ahd/2024 & CO No. 41/Ahd/2024 as well. 19. The additional ground taken by the Revenue in this year is as under: “3). \"Whether, on the facts and in the circumstances of the case and in law, the ld. CIT(A) is correct in deleting the addition of Rs.1,45,05,456/- out of addition of Rs.1,47,26,040/- made on account of suppression of income on sale of flats/plots?\" 20. The Ld. Sr. DR explained that as per AIR information, the assessee had sold two plots of land during the year for total consideration of Rs.2.82 Crore on which profit of Rs.8,95,218/- was disclosed by the assessee. In the course of assessment, no evidence in this regard was brought on record. The details of the property sold, copy of purchase deed, copy of sale deeds etc. were not brought on record in spite of specific requisition by the AO. The AO had found that identical transactions were made by the ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 12 – assessee in A.Y. 2010-11 & 2011-12, wherein the ratio of suppressed income was 52.22%. Accordingly, the AO had applied the same ratio and worked out the suppressed income of Rs.1,47,26,040/- in the current year. The Ld. Sr. DR submitted that the Ld. CIT(A) had deleted this addition by considering additional evidences and without allowing any opportunity to the AO to examine those evidences. He, therefore, requested that the matter may be set aside to the file of the AO. 21. Per contra, the Ld. AR submitted that the Ld. CIT(A) had not allowed entire relief but had confirmed addition to the extent of Rs.2,20,584/- after considering the evidences brought on record by the assessee. 22. We have considered the rival submissions. It is found that no evidence was brought on record in the course of assessment proceeding in respect of profit on sale of plots as disclosed by the assessee. The details of the property sold, copy of purchase deed, copy of sale deeds etc. were not furnished before the AO. The Ld. CIT(A) has allowed the relief after considering the additional evidences brought on record before him. It is found that the order of the Ld. CIT(A) is in contravention to Rule 46A(3) of the IT Rules as the AO was not allowed any opportunity to examine the fresh evidences filed in the appellate proceeding. We, therefore, deem it proper to set aside the matter to the file of the ld. CIT(A) with a direction to call for a remand report from the AO on the additional evidences filed by the assessee in the course of appeal proceeding and thereafter re- ITA Nos. 157, 158 & 159/Ahd/2024 A/w. CO Nos. 39, 40 & 41/Ahd/2024 - [Hiralal Dayaram Thakkar] A.Ys. 2012-13, 2013-14 & 2014-15 - 13 – adjudicate the matter. The ground of Revenue is allowed for statistical purposes. 23. In the result, appeal of the Revenue is partly allowed for statistical purposes and the cross objection of the assessee is dismissed. 24. In the combined result, all the three appeals of the Revenue are partly allowed for statistical purposes and all three cross objections of the assessee are dismissed. This Order pronounced on 12/03/2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 12/03/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "