The ACIT, Vapi Cir., Vapi V. Shri Ketan Dahyabhai Patel, Nani Daman

ITA 1445/AHD/2013

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1908 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S T BIDRI
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Gift; Business income; Depreciation; Business expenditure; Fair market value; Corroborative evidences; Deemed dividend
• Section: 45(2); 143(3); 50C; 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH ES, SURAT BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER THE ACIT, VAPI CIRCLE, VAPI (APPELLANT) VS SHRI KETAN DAHYABHAI PATEL, GHELWAD FALIYA, DABHEL, NANI DAMAN PAN: ADWPP2731L (RESPONDENT) THE ITO, WAR D - 4, DAMAN (APPELLANT) VS SHRI JIGNESH DAHYABHAI PATEL GHELWAD, FALIYA DABHEL, NANI DAANI PAN: ALJPP3816D (RESPONDENT) THE ITO, DAMAN WARD, DAMAN (APPELLANT) VS SMT. CHANCHELBEN DAHYABHAI PATEL, 40 - A, GHELWAD, FALIYA DABHEL, NANI DAANI - 396210 PAN: ALJPP3816D (RESPONDENT) REVENUE BY : S H RI S. T. BIDRI , CIT - D . R. ASSESSEE BY: SHRI RASESH SHAH, A.R. I T A NO . 1445 / A HD/20 13 A SSESSMENT YEAR 200 9 - 10 ITA NO. 3288 /AHD/20 14 ASSESSMENT YEAR 2009 - 10 ITA NO. 1918/AHD/2016 ASSESSMENT YEAR 2009 - 10 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 2 DATE OF HEARING : 19 - 11 - 2 018 DATE OF PRONOUNCEMENT : 20 - 12 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE THREE APPEALS FILED BY REVENUE FOR A. Y. 2009 - 10 , ARI SES FROM ORDER OF THE CIT(A) - VALSAD, AHMEDABAD DATED 07 - 03 - 2 013 , 08 - 10 - 2014 AND 05 - 05 - 2016 IN PROCEEDINGS UNDER SECTION 143(3) AND 143 R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1445/AHD/2013 1. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,24,27,515/ - MADE BY THE AO TREATING THE SAME AS UNDISCLOSED INCOME. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING/RESTRICT ING THE DISALLOWANCE AS UNDER: - 1. DISALLOWANCE AT 20% OUT OF DEPRECIATION ON CAR RS. 3,36,76.1/ - 2. TRAVELLING EXPENSES @ 15% OF RS. 14,28,554/ - RS. 2,14,283/ - 3. REPAIRS OF MACHINERY @ 15% OF RS. 9,24,500/ - RS. 1,38,675/ - INSTEAD OF DISAL LOWANCE MADE BY THE AO AS UNDER: - 1. BANK CHARGES AND INTEREST RS. 1,02,623/ - 2. SALARY AND WAGES RS. 9,50,000/ - 3. BUSINESS PROMOTION EXPENSES RS. 2,87,870/ - 4. DISALLOWANCE AT 20% OUT OF DEPRECIATION RS. 3,49,391/ - 5. DISALLOWANCE AT 20% OUT OF INSURANCE EXPENSES RS. 1,00,690/ - 6. LEGAL & CONSULTANCY EXPENSES RS. 4,52,960/ - 7. TRAVELLING EXPENSES RS. 14,28,554/ - 8. COMMISSION EXPENSES RS. 8,00,000/ - 9. PROFESSIONAL FEES RS. 80,000/ - 10. REPAIRS OF MACHINERY RS. 9,24,500/ - 11. ADVERTISEMENT EXPENSES RS. 50,000/ - 12. AUDIT FEES RS. 19,854/ - 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.17,30,000/ - MADE BY THE AO ON ACCOUNT OF CURRENT LIABILITY. 4. ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION_OF RS.1,32,22,540/ - MADE BY THE AO ON ACCOUNT OF UNACCOUNTED INVESTMENT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN4AW, THE ID. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.3,27,93,750/ - MADE BY THE AO ON U/S.2(24)(IV) OF THE ACT. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 3 3. THE BRIEF FACT OF THE CASE IS THAT RETURN OF INCOME DECLARING INCOME OF RS. 32 , 64 ,0 29/ - WAS FILED ON 31 ST MARCH, 2010. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 23 RD AUGUST, 2010. THE ORDER U/S. 143(3) OF THE ACT WAS PASSED BY THE ASSESSING OFFICER ON 30 TH DECEMBER, 2001 AND MADE VARIOUS ADDITIONS UNDER DIFFERENT HEADS. 4. THE REVENUE HAS FIL ED FIVE GROUNDS OF APPEAL AS ELABORATED ABOVE AGAINST THE DECISION OF LD. CIT(A) IN DELETING THESE ADDITIONS WHICH ARE ADJUDICATED AS UNDER : - DELETING ADDITION AS UNDISCLOSED INCOME OF RS. 1 , 24 , 27 , 515/ - 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS I N THE CASE OF SHRI LALITKUMAR UTTAMCHAND SHAH ON VERIFICATION OF SALE DEED OF THE LAND BEARING SEARCH NO. 65/3 - D ADMEASURING 71557 SQ. MT SITUATED AT RINGANWADA, DAMAN , THE ASSESSING OFFICER HAS NOTICED THAT SMT. CHANCHELBEN DAHYBHAI PATEL, SMT. KAMALB EN DHANPAT RANKA AND SHRI LALIT UTTAMCHAND SHAH W ERE JOINT VENTURE OF THE LAND BEARING SEARCH NO. 65/3 - D ADMEASU RING 71557 SQ. MT SITUATED AT RINGANWAD A, DAMAN. HOWEVER, T HE ASSESSEE MR. KETAN DEYABHAIA PATEL WAS THE CONFIRMING PARTY IN THE TRANSACTION. ON VERIFICATION, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS RECEIVED RS. 10 ,00000 VIDE CHEQUE NO. 113303/ - DATED 26 TH MARCH, 2008 AND RS. 1 , 14 , 27 , 515/ - VIDE CHEQUE NO. 113315 DATED 25 TH APRIL, 2006. THEREFORE, HE WAS OF THE VIEW THAT ASSESSEE H AS RECEIVED TOTAL AMOUNT OF RS. 1 , 24 , 27 , 515/ - AS CONFIRM ING PARTY FROM SHRI NAGRAJ KUND ANMAL, THE PURCHASER OF THE AFORESAID LAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS SHOW CAUSE D TO EXPLAIN WHY THE AMOUNT OF RS. 1 , 24 , 27 , 515/ - SH OULD NOT BE ADDED TO HIS TOTAL INCOME. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSE HAS NOT MADE COMPLIANCE TO THE SHOW CAUSE NOT ICE, THEREFORE, THE AMOUNT OF RS . 1 , 24 , 27 , 511/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 4 6. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE SAID ADDITION. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - DECISION : - I HAVE CONSIDERED THE FACTS OF THE CASE AND THE CONTENTIONS OF THE APPELLANT AS WELL A S THE OBSERVATION OF THE AO. I FOUND STRENGTH IN THE ARGUMENTS OF THE AR THAT THE APPELLANT HAD ALREADY OFFERED THE RECEIPT OF RS. 1,24,27,515/ - RECEIVED FROM SHRI NAGRAJ KUNDANMAL MEHTA AS CONFIRMING PARTY IN THE SALE TRANSACTION OF LAND SITUATED AT S.NO. 65/30 AT DAMAN. IT IS OBSERVED FROM THE DETAILS SUBMITTED THAT THE APPELLANT HAD RECEIVED THE AMOUNT IN TWO PARTS OF RS. 10,00,000 / - AND RS. 1,14,27,515/ - AND HE HAD OFFERED THE COMMISSION IN COME OF RS. 10,00,000/ - IN A.Y. 2008 - 20 09 AND THE BALANCE AMOUNT WHICH WAS RECEIVED IN THE YEAR UNDER APPEAL WAS OFFERED AS COMMISSION INCOME IN THE PROFIT AND LOSS AC COUNT SUBMITTED ALONG WITH RETURN OF INCOME. IT APPEAR THAT THE AO HAS OVERLOOKED OR MISUNDERSTOOD THIS FACT AS THE AMOUNT OF RS. 1,14,27,515/ - WAS APPEA RING AS COMMISSION INCOME IN THE P&L ACCOUNT SUBMITTED. THUS, THERE IS A FORCE IN THE CONTENTION OF THE AR T HAT IF A SUM OF RS. 1,24,27,515/ - IS AGAIN ADDED TO THE TOTAL INCOME OF THE APPELLANT, THEN IT WOULD RESULT INTO DOUBLE TAXATION. I, THEREFORE, DIRE CT THE AO TO DELETE THE ADDITION OF RS. 1,24,27,515/ - . THUS, THIS GROUND OF APPEAL IS ALLOWED. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS SUBMITTED THE PAPER BOOK CONTAINING DETAIL OF SUBMISSION MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) DURING T HE COURSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. HE HAS ALSO PLACED RELIANCE ON THE DECISION OF LD. CIT(A). 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CONNECTION, WE NOTICE IT IS UNDISPUTED FACT THAT ASSESSEE HAS ALREADY OFFERED THE AMOUNT OF RS. 10 LACS AS HIS COMMISSION INCOME IN THE A.Y. 2008 - 09 AND REMAINING AMOUNT OF RS. 1 , 14 , 27 , 515/ - WAS DISCLOSED AS COMMISSION INCOME IN THE P & L A/C FILED ALONG WITH THE RETURN OF INCOME DURING THE YEAR UNDER CONSIDERATION. THESE FACTS DEMONSTRATE THAT ASSESSEE HAS ALREA DY SHOWN THE AFORESAID INCOME OF COMMISSION RECEIVED AS A C ONFIRMING PARTY . IN VIEW OF THE ABOVE MENTIONED FACTS AND FINDING , WE CONSIDER THAT ASSESSING OFFICER HAS MADE THE AFORESAID ADDITION ON PRESUMPTION BASIS WITHOUT DISPROVING THE CLAIM OF THE ASSESSEE THAT AFORESAID INCOME HAS ALREADY BEEN OFFERED AS STATED IN THE FINDING I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 5 OF LD. CIT(A). THEREFORE, CONSIDERING THE ABOVE, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. DELETING /RESTRICTING THE DISALLOWANCE OF VARIOUS EXPENSES 9 . D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE AS UNDER: - (I) BANK CHARGES AND INTEREST THE ASSESSEE HAS CLAIMED BANK CHARGE AND INTEREST EXPENSES OF RS. 1 , 02 , 623/ - IN THE P & L A/C. T HE ASSESSING OFFICER HAS STATED THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME IN THE RETURN OF INCOME, THEREFORE, HE HAS DISALLOWED THE TOTAL AMOUNT OF RS. 1 , 02 , 623/ - AS NON - GENUINE EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. (II) SALARY & WAGE EXPENSES THE ASSESSING OFFICER HAS ALSO DISALLOWED AN AMOUNT OF RS. 9 , 5 0,000/ LACS AS SALARY AND WAGE EXPENSES ON THE GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME IN THE RETURN OF INCOME. (III) BUSINESS PROMOTION EXPENSES THE ASSESSEE HAS ALSO DEBITED BUSINESS PROMOTION EXPENSES OF RS. 2 , 87 , 870/ - IN THE P & L A/C. THE ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE SIMILAR GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS. (IV) DEPRECIATION THE ASSESSEE HAS CLAIMED DEPRECIATION EXPENSES OF RS. 17 , 4 6 , 956/ - IN THE P & L A/C. THE ASSESSING OFFICER HAS DISALLOWED 20% OF DEPRECIATION EXPENSES TO THE AMOUNT OF RS. 3 , 49 , 391/ - ON THE GROUND THAT ASSESSEE HAS NOT SUBMITTED FULL DETAIL IN SUPPORT OF THESE EXPENSES. (V) INSURANCE THE ASSESSEE HAS CLAIMED INSURAN CE EXPENSES OF RS. 503449/ - . THE ASSESS ING OFFICER HAS DISALLOWED 20% OF THESE EXPENSES TO THE AMOUNT OF RS. 1 , 00 , 690/ - FOR WANT OF FULL DETAIL AND SUPPORT ING EVIDENCES OF THESE EXPENSES. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 6 (VI) LEGAL AND CONSULTANCY FEES THE ASSESSEE HAS CLAIMED LEGAL AND CONSU LTANCY FEES TO THE AMOUNT OF RS. 4 , 52 , 960/ - IN THE P & L A/C. THE ASSESSING OFFICER HAS DISALLOWED THE FULL AMOUNT OF THESE EXPENSES ON THE GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME DURING THE YEAR UNDER CONSIDERATION. (VII) TRAVELLING EXPENSES TH E ASSESSEE HAS CLAIMED TRAVELLING EXPENSES TO THE AMOUNT OF RS. 14 , 28 , 554/ - . THE ASSESSING OFFICER HAS DISALLOWED THE FULL EXPENSES ON THE GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME. (VIII) COMMISSION EXPENSES THE ASSESSEE HAS DEBITED COMMISSION EXP ENSES OF RS. 8 ,00000 IN THE P & L A/C. THE ASSESSING OFFICER HAS DISALLOWED THE 100% OF EXPENSES ON THE GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS (IX) PROFESSIONAL FEES THE ASSESSEE HAS DEBITED RS. 80,000/ - IN THE P & L A/C. THE ASSESSING OFFICER HAS DISALLOWED THESE EXPENSES ON THE GROUND THAT ASSESSEE HAS NOT FURNISHED SUPPORTING EVIDENCES AND ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME . (X) REPAIR AND MAINTENANCE EXPENSES THE ASSESSEE HAS CLAIMED REPAIR AND MAINTENANCE TO THE AMOUNT OF RS. 9 , 24 , 500/ - WH ICH WAS FULLY DISALLOWED ON THE SIMILAR GROUND THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME AND NOT FURNISHED SUPPORTING EVIDENCES, (X I) A DVERTISEMENT EXPENSES . THE ASSESSEE HAS CLAIMED ADVERTISEMENT EXPENSES OF RS. 50,000/ - WHICH WAS ALSO DISALLOWED BY THE ASSESSING OFFICER STATING THE ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME AND NOT EXPLAINED THE GENUINENESS OF EXPENSES. (X II) AUDIT FEES THE ASSE SSEE HAS DEBITED AUDIT FEES OF R S. 19 , 854/ - IN THE P & L A/C WHICH WAS ALSO DISALLOWED BY THE ASSESSIN G OFFICER STATING THAT ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME AND NOT EXPLAINED THE GENUINENESS OF EXPENSES. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 7 10 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART O F THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 8.3 DECISION : - I HAVE GONE THROUGH THE SUBMISSION AS WELL AS THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. THE AO DISALLOWED THE EXPENSES ON THE GROUND THAT THE APPELLANT HAD SHOWN ONLY SALARY INCOM E, COMMISSION INCOME AND HAD NOT SHOWN BUSINESS INCOME AND HENCE THE EXPENSES COULD NOT BE ALLOWED AS THE APPELLANT HAD NO BUSINESS INCOME. ON THE OTHER HAND, THE ID. AR CONTENDED THAT THE APPELLANT HAD CARRIED OUT BUSINESS ACTIVITIES IN REAL ESTATE BUSINE SS AND HAD ACTED IN VARIOUS LAND TRANSACTIONS AS A MIDDLE MAN AND GOT ADVANCE AS A CONFIRMING PARTY BECAUSE THE SELLERS WERE NOT IN A POSITION TO FIND OUT SOME GOOD AND RELIABLE PARTIES THEMSELVES DIRECTLY. NORMALLY, THEY APPROACH THE APPELLANT WHO FACILIT ATES THE TRANSACTIONS BETWEEN BOTH THE PARTIES TO ENSURE SMOOTH TRANSFER OF THE PROPERTY TO THE PURCHASER. THE ID. AR SUBMITTED THAT DUE TO THE EFFORTS OF THE APPELLANT, THE SELLERS GET BETTER DEAL AND THE PURCHASER GET ASSURED OF CLEAN DEAL OF LAND. TO PR OVIDE WHOLESOME SERVICES RELATING TO LAND TRANSACTIONS, THE APPELLANT HAS HIS TEAM OF LAWYERS, ARCHITECTS AND PERSONS WHO ARE CONVERSANT TO LAND DEAL FOR DOCUMENTATION ETC. AS STATED BY THE ID. AR. FOR THE PURPOSE OF CONVINCING PROPOSED BUYERS THE APPELLAN T VISITED VARIOUS PLACES INCLUDING MUMBAI, DELHI ETC AND RETAINED VARIOUS STAFF MEMBERS AS BACK UP TEAM TO ASSIST HIM FOR WHICH THE APPELLANT HAD TO INCURRED VARIOUS BUSINESS EXPENDITURE WHICH IS ALLOWABLE AS PER LAW. FURTHER, THE ID. AR CONTENDED THAT NO INCOME CAN BE EARNED WITHOUT INCURRING EXPENDITURE. TO SUPPORT HIS CONTENTION HE MENTIONED THAT THE APPELLANT HAD SHOWN NET PROFIT AS HIGH AS ABOUT 80% IF ALL THE DISCLOSED INCOME TAKEN INTO CONSIDERATION. THE OTHER IMPORTANT POINT THE ID. AR BROUGHT TO MY NOTICE IS THAT ON ONE HAND, THE AO DENIED TO ACCEPT THE BUSINESS ACTIVITIES CARRIED ON BY THE APPELLANT AND ON THE OTHER HAND HE HAD ALLOWED DEPRECIATION ON CARS AND INSURANCE EXPENSES PARTLY AND ALSO INITIATED PENALTY PROCEEDINGS U/S. 2716 OF THE ACT FOR NOT GETTING BOOKS OF ACCOUNTS AUDITED U/S. 44AB OF THE ACT. I HAVE CAREFULLY APPLIED MY THOUGHT TO THE FACTS OF THE CASE. WHAT COMES TO THE MIND IS THAT CAN THERE BE INCOME, THAT TO FORM LAND DEAL, WITHOUT INCURRING EXPENDITURE ? THE ANSWER IS DEFINITELY A NO. IN THIS CASE, THE APPELLANT HAS EARNED MORE THAN RS. 3 CRORES DURING THE YEAR WHICH CANNOT BE UNLESS THERE IS REASONABLE CORRESPONDING EXPENSES. WHILE COMPLETING THE ASSESSMENT THE AO HAS DISALLOWED ENTIRE EXPENSES EXCEPT PART OF DEPRECIATION ON CARS & COMPUTER AND INSURANCE EXPENSES, PROBABLY CONNECTED TO THE CARS. LET US EXAMINED THE NATURE OF EXPENSES CLAIMED BY THE APPELLANT AND DISALLOWED BY THE AO. 1. ON ACCOUNT OF BANK CHARGES AND INTEREST 1,02,623 2. ON ACCOUNT OF SALARY AND WAGES 9,50,0 00 3. ON ACCOUNT OF BUSINESS PROMOTION EXPENSES 2,87,870 4. ON ACCOUNT OF DISALLOWANCE AT 20% OUT OF DEPRECIATION 3,49,391 5. ON ACCOUNT OF DISALLOWANCE AT 20% OUT OF INSURANCE EXPENSES 1,00,690 6. ON ACCOUNT OF LEGAL & CONSULTANCY EXPENSE 4,52,960 7. ON ACCOUNT OF TRAVELING EXPENSES 14,28,554 8. ON ACCOUNT OF COMMISSION EXPENSES 8,00,000 9. ON ACCOUNT OF PROFESSIONAL FEES 80,000 10. ON ACCOUNT OF REPAIRS TO MACHINERY 9,24,500 11. ON ACCOUNT OF ADV ERTISEMENT EXPENSES 50,000 12. ON ACCOUNT OF AUDIT FEES 19,854 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 8 THE APPELLANT HAD GIVEN NARRATIVE EXPLANATION LEADING TO INCURRING OF THESE : EXPENSES. THE AO HAD NOT BROUGHT ON RECORD WHY THE ENTIRE EXPENSES CANNOT BE ALLOWED EXCEPT THAT THE INCOME IS COMMISSION FOR WHICH BUSINESS EXPENSES ARE NOT ALLOWABLE. PRESUMING THAT THE INCOME EARNED BY THE APPELLANT IS COMMISSION INCOME STILL THEN TO EARN SUCH HUGE INCOME THE APPELLANT NEEDS TO INCUR EXPENDITURE. THE NATURE OF EXPENSES INDICATED IN THE ABOVE TABLE IS VERY MUCH RELEVANT FOR RUNNING AN ESTABLISHMENT TO EARN SUCH INCOME. IT IS SEEN THAT THE APPELLANT HAD SHOWN COMMISSION INCOME AS BUSINESS INCOME IN THE RETURN OF INCOME. THE APPELLANT HIMSELF OFFERED AND STATED THAT HE HAD EARNED PROFIT BY WAY OF COMMISSION AS A THIRD PARTY IN DEALING OF PLOTS OF LAND AND ACCEPTED THE SAME AS HIS BUSINESS ACTIVITIES. THE APPELLANT HAD ALSO CLAIMED VARIOUS EXPENSES UNDER DIFFERENT HEADS WHICH SHOWED THAT THE BUSINESS ACTIVITIES WERE CARRIED OUT BY HIM. MOREOVER, TH E AO CONTRADICTED HIS OWN STAND BY ALLOWING DEPRECIATION TO THE EXTENT OF 80% OF DEPRECIATION CLAIMED BY THE APPELLANT AND HAD ALSO LEVIED PENALTY U/S. 2716 OF THE ACT FOR NOT GETTING BOOKS OF ACCOUNTS AUDITED. THEREFORE, ON ONE HAND THE AO IS ACCEPTING TH AT THE APPELLANT HAD CARRIED OUT BUSINESS ACTIVITIES BUT HAD NOT GOT HIS BOOKS OF ACCOUNTS AUDITED U/S. 44AB OF THE ACT AND HENCE PENALTY U/S. 2716 WAS IMPOSABLE AND THE DEPRECIATION PORTION ATTRIBUTABLE TO PERSONAL USAGE COULD NOT BE ALLOWED TO THE APPELL ANT AND ON OTHER HAND HE TOOK THE STAND THAT NO BUSINESS ACTIVITIES WERE DONE. THEREFORE, FOUND FORCE IN THE CONTENTIONS OF THE AR THAT SINCE BUSINESS WAS CARRIED OUT BY THE APPELLANT AND SUBSTANTIAL BUSINESS INCOME WAS OFFERED, THE EXPENSES OUGHT TO HAVE BEEN ALLOWED. HOWEVER, AT THE SAME TIME, I CANNOT IGNORE THE OBSERVATION OF THE AO THAT CLAIM OF EXPENDITURE BY THE APPELLANT WAS NOT SUBSTANTIATED BY PROPER DOCUMENTARY EVIDENCES. ALTHOUGH IT IS WELL SETTLED LAW THAT ANY EXPENDITURE THE ASSESSEE CLAIMS, THE ONUS IS ON HIM TO ESTABLISH THAT SUCH EXPENDITURE IS INCURRED IN FURTHERANCE OF BUSINESS. IN THIS CASE THE APPELLANT HAD CLAIMED ONLY RS. 62.50 LAKHS AS EXPENDITURE AS AGAINST THE INCOME OF RS.307.16 LAKHS EXCLUDING DEPRECIATION I.E. 20.34%. IT IS OBSE RVED THAT THE AO DID NOT REJECT THE CLAIM OF EXPENSES ON ANY COGENT GROUND TO ESTABLISH THAT THE CLAIM OF EXPENSES WERE NEVER INCURRED BY THE APPELLANT. IN MY OPINION, THE APPELLANT DESERVE TO CLAIM EXPENSES UNLESS IT WAS PROVED OTHERWISE. THE AO HAS NOT G ONE INTO THE MERIT OF THE SPECIFICITY EXPENDITURE EXCEPT DEPRECIATION AND INSURANCE EXPENSES ON WHICH HE DISALLOWED 20%. HAVING OBSERVED AS ABOVE, IT IS ALSO FACT THAT THERE IS SCOPE FOR STRONG INFERENCE OF CERTAIN EXPENDITURE' INVOLVING PERSONAL ELEMENT/ PERSONAL IN NATURE. OUT OF THE 12 LISTED EXPENSES ONLY I) TRAVELLING EXPENSES AND II) REPAIRS TO MACHINERY (HERE THE APPELLANT REFERRED / CLASSIFIED CARS AND COMPUTER AS MACHINERY) HAVE PERSONAL ELEMENTS. THE AO HAS DISALLOWED 20% OF THE DEPRECIATION WHICH I AM NOT GOING TO INTERFERE. HOWEVER, I DIRECT THE AO TO ALLOW FULL INSURANCE EXPENDITURE BECAUSE INSURANCE COVER IS MANDATORY FOR RUNNING THE CARS AND INSURANCE COVER PROVIDES MONETARY SECURITY IN CASE OF ANY ACCIDENT TO THE VEHICLE AND THE PERSONS EFFEC TED IN THE ACCIDENT. INSURANCE PREMIUM HAS NO PERSONAL ELEMENT AND THEREFORE, CANNOT BE DISALLOWED IN PART. AS MENTIONED ABOVE, THERE ARE TWO EXPENSES OUT OF THE 12 LISTED EXPENSES, I) TRAVE LLING EXPENSES OF RS. 14,28,554/ - AND II) REPAI RS TO MACHINERY OF RS. 9,24,500/ - (HERE THE APPELLANT REFERRED / CLASSIFIED CARS AND COMPUTER AS MACHINERY) HAVE PERSONAL ELEMENTS. IN THE INTEREST OF FAIRNESS AND JUSTICE I DIRECT THE AO TO DISALLOW ONLY 15% OF THESE TWO EXPENSES BECAUSE OF PERSONAL ELEMENT INVOL VED THEREI N. IN SHORT, THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCES TO 15% ON I ) TRAVELLING EXPENSES OF RS. 14,28,554/~ AND II) REPAI RS TO MACHINERY OF RS. 9,24,500/ - AND 20% ON THE DEPRECIATION OF CARS ONLY. THUS, THIS GROUND IS PARTLY ALLOWED. 11 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS FURNISHED PAPER BOOK CONTAINING DETAILED SUBMISSION MADE BEFORE THE ASS ESS ING OFFICER AND LD. CIT(A) AND HAS ALSO PLACED RELIANCE ON THE ORDER OF LD. CIT(A) . I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 9 12 . WE HAVE HARD BOTH THE SIDES AND PERUSED USED THE MA TERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT ASSESSE HA D SHOWN COMMISSION INCOME UNDER THE HEAD BUSINESS INCOME AND PAID BANKING C HARGES DURING THE COURSE OF BUSINESS ACTIVITY AND ALSO PAID INTEREST ON CAR LOAN WHICH WAS USED FOR THE PURPOSE OF BUSINESS OF THE A SSESSEE. REGARDING SALARY AND WAGE EXPENSES , THE ASSESSEE HA D PAID THESE SALARY TO THE STAFF MEMBERS AND OTHER PROFESSION AL WHICH WAS SUPPORTED BY THE DOCUMENTARY EVIDENCES. THE A SSESSEE HA D INCURRED EXPENSES FOR VARIOUS MEETING S WHICH WERE ARRANGED WITH PROSPECTIVE BUYERS AND IT RESULTED IN EARNING COMMISSION ON SALE OF DIFFERENT PLOTS OF LAND DURING THE YEAR UNDER CONS IDERATION. THE INSURANCE EXPENSES HA D BEEN INCURRED ON INSURANCE OF CAR WHICH WAS USED BY THE ASSESSEE FOR THE BUSINESS ACTIVITIES . LEGAL AND CONSULTANCY FEES HA D BEEN INCURRED FOR MAKING PAYMENT TO ARCHITECT AND LEGAL CONSULTANT FOR RECEIVING PROFESSION AL GUIDANCE IN RESPECT OF PLOT OF LAND SOLD BY THE ASSESSEE ON WHICH COMMISSION INCOME WAS EARNED. THE TRAVELLING EXPENSES WERE INCURRED FOR VISITING VARIOUS PLACES IN THE COURSE OF ROUTINE BUSINESS ACTIVITIES. THE COMMISSION EXPENSES HAS BEEN INCURRED B Y THE ASSESSEE FOR VACATING THE POS SESSION OF THE LAND FROM THE OCCUPANTS BEFORE MAKING SALE . THE PROFESSIONAL FEES WAS INCURRED TOWARDS ACCOUNTING CHARGES AND OTHER LEGAL CONSULTANCY FEES PERTAINING TO THE BUSINESS OF THE ASSESEEE. REPAIRING AND MAINTEN ANCE WERE INCURRED T OWARDS CARS AND COM PUTERS DURING THE ROUTINE COURSE OF BUSINESS. ADVERTISEMENT EXPENSES WERE INCURRED ON GIVING ADVERTISEMENT IN JOURNALS AND MAGAZINES FOR THE PURPOSE OF RUNNING THE BUSINESS OF THE ASSESSEE. THE AUDIT FEES CLAIMED BY THE AS SESSEE WAS PAID BY CHEQUE AS AN INTERNAL AUDIT CHARGES PERTAINING TO THE BUSINESS OF THE ASSESSEE. CONSIDERING THE FACTS AND ELABORATE FINDING IN THE DECISION OF LD. CIT(A), WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE ON THIS ISSUE, THERE FORE, THE SAME IS DISMISSED. DELETING THE ADDITION OF RS. 17,30,000/ - ON ACCOUNT OF CURRENT LIABILITY I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 10 13 . DURING THE COURSE OF APPELLATE PROCEEDINGS ON VERIFICATION OF SCHE DULE - 3 OF CURRENT LIABILITY THAT ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS S HOWN EXPENSES AS PA YABLE OF RS. 17 , 3 0,000 / - . THE ASSESSEE WAS ASKED TO FURNISH THE FULL DETAIL OF THE AFORESAID CURRENT LIABILITIES WITH SUPPORTING EVIDENCES. THE ASSESSEE HAS NOT FURNISHED THE RELEVANT DETAILS , THEREFORE, THE ASSESSING OFFICER HAS T REA TED THE SAID LIABILITY AS NON - GENUINE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 14 . AGGRIEVED ASSESSEE HAS FILE D APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE REVENUE. RELEVANT PART OF THE DECISION OF LD. CIT(A) IS RE PRODUCED AS UNDER: - 9.3 DECISION : - I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE CONTENTION OF THE AR. THE - ADDITION MADE BY THE AO WAS OUT OF THE UNPAID EXPENSES BEFORE COMPLETION OF THE FINANCIAL YEAR WHICH IS SHOWN AS 'CURRENT LIABILITY' IN THE BALANCE SHEET. AS DISCUSSED IN GROUND NOS. 4 TO 15 HEREINABOVE, RELATED TO DISALLOWANCE OF EXPENSES, I HAVE HELD THAT THE EXPENSES CLAIMED, EXCEPT TO THE EXTENT CONFIRMED, BY THE APPELLANT IS ALLOWABLE. THE NATURAL COROLLARY IS THAT IF UNPAID EXPEN DITURES DURING THE YEAR IS SHOWN AS CURRENT LIABILITY IN THE BALANCE SHEET AND THEREFORE, CANNOT BE DISALLOWED. LIABILITY CAN BE ADDED TO THE INCOME OF AN ASSESSEE ONLY IF IT CEASES AND THE ASSESSEE HAS NO OBLIGATION TO PAY. IN THIS CASE, THE LIABILITY IS TOWARDS EXPENSES AND PERTAINING TO THE CURRENT YEAR. SUCH ADDITIO N WILL NOT BE TENABLE LEGALLY. THEREFORE, I DIRECT THE AO TO DELET E THE ADDITION OF RS. 17,30,000/ - . THUS, THIS GROUND OF APPEAL IS ALLOWED. 15 . WE HAVE HEARD THE RIVAL CONTENTION AND PERU SED THE MATERIAL ON RECORD CAREFULLY. IT IS NOTICED THAT ASSESSEE HAS SHOWN OUTSTANDING EXPENSES UNDER THE HEAD CURRENT LIABILITY. HOWEVER , THE ASSESSING OFFICER DISALLOWED ALL THE EXPENSES INCLUDING THE AMOUNT SHOWN UNDER THE HEAD CURRENT LIABILITY AS OU TSTANDING EXPENSES WHICH RESULTED IN DOUBLE ADDITION. IN ADDITION TO IT, WE HAVE ALSO CONSIDERED THAT ASSESSEE HAS SHOWN THESE EXPENSES UNDER THE HEAD LIABILITY AS THESE EXPENSES WERE STILL PAYABLE AND THE ASSESSING OFFICER HAS NOT GIVEN THE SPECIFIC REAS ON FOR DISALLOWING SUCH EXPENSES, THEREFORE, WE DO NOT FIND ANY ERROR IN THE DECISION OF LD. CIT(A). ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO DISMISSED. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 11 DELETING THE ADDITION OF RS. 1 , 32 , 2 2 , 540/ - ON ACCOUNT OF UNACCOUNTED INVESTMENT 16 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M /S. DAMAN HOSPITALITY PVT. LTD. , THE ASSESSING OFFICER NOTICED THAT ASSESSEE WAS THE HOLDER OF 12.5% SHARES IN KETAN PATEL AND GROUP. HE WAS OF THE VIEW THAT ASSESSEE HA D PURCHASED 12.5% SHARES OF M/S. DAMAN HOSPITALITY PVT. LTD. FOR WHICH HE HAD PAID RS. 83 , 84 , 780/ - ( 12.5% OF 67078240/ - ) TOWARDS SHARE CAPITAL AND RS. 49 , 37 , 760/ - (12.5 OF RS. 3 , 95 , 02 , 080) TOWARDS SHARE PREMIUM DURING THE YEAR UNDER CONSIDERATION. HOWEVER, AS PER THE RETURN OF I NCOME, THE ASSESSEE HAS SHOWN ONLY RS. 1,00000/ AS SHARE CAPITAL IN THE BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSEE WAS SHOW CAUSE D TO EXPLAIN WHY THE DIFFERENCE OF TOTAL SHARE CAPITAL OF RS. 1 , 32 , 22 , 540/ - ( 83 , 84 , 780/ - + RS. 49 , 37 , 760/ - ) SHOULD NOT BE TREATED AS UNDISCLOSED INVESTMENT. THE ASSESSEE HAS EXPLAINED T HAT SHARES WERE G IFTED BY HIS MOTHER SMT. CHANCHE LBEN PATEL OUT OF LOVE AND AFFECTION DUNG THE YEAR UNDER CONSIDERATION. HOWEVER , THE ASSESSING OFFICER HAS NOT ACC EPTED THE EXPLANATION OF THE ASSESSEE STATING THAT THE ASSESSEE HAS NOT SHOWN ANY GIFT RECEIVED FROM HIS MOTHER IN HIS RETURN OF INCOME. THEREFORE, HE HAS STATED THAT ASSESSEE HAS NOT SUBMITTED ANY COGENT EVIDENCE WITH REGARD TO INVESTMENT IN SHARE CAPITA L AND SHARE PREMIUM IN THE AFORESAID COMPANIES. THEREFORE, THE INVESTMENT OF RS. 1 , 32 , 2 2 , 540/ - WAS TREATED AS UNDISCLOSED INVESTMENT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 17 . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. C IT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER: - 10.3 DECISION : - I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS OF THE AR TOGETHER WITH THE FACTS OF THE CASE. IT CLEARLY APPEARS THAT THE AO HAS MISUNDERSTOOD THE FACTS RELATING TO THE SHARE HOLDING PATTERN AND INVESTMENT BY THE FAMILY MEMBERS OF KETAN PATEL GROUP IN DAMAN HOSPITALITY PVT. LTD. (HEREINAFTER REFERRED TO AS DHPL). THE ABOVE REFERRED CHART AS WELL AS THE FORMS AND DOCUMENTS AS PER THE COMPANIES ACT SUBMITTED BY THE AR RELATED I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 12 TO DHPL CLEARLY SHOWS THAT THE APPELLANT KETAN PATEL IN HIS INDIVIDUAL CAPACIT Y HAD INVESTED ONLY RS. 1,00,000 / - BY SUBSCRIBING TO SHARE CAPITAL AT THE TIME OF INCORPORATI ON OF THE COMPANY AND HAD PURCHA SED ONLY 10,000 SHARES AT RS. 10 / - EACH. THEREAFTER, THE COMPANY HAD ALLOTTED 58,10,000/= EQUITY SHARES OF RS. 10 / - E ACH AMOUNTING TO RS. 5,81,00,000 / - TO APPELLANT'S MOTHER MRS. CHANCHALBEN D. PATEL IN LIEU OF THE LAND SHE BROUGHT INTO THE COMPANY. SUBSEQUENTLY SMT. CHANCHALBEN D. PATEL HAD GIFTED SOME OF THOSE SHARES TO HER CHILDREN I.E. THE APPELLANT AS WELL AS HIS BROTHER AND SISTER. THEREAFTER, FURTHER ALLOTMENTS OF SHARES WERE ALSO MADE TO MRS . CHANCHALBEN D. PATEL ONLY . THE AR OF THE APPELLANT HAD SUBMITTED BEFORE ME ALL THE RELEVANT STATUTORY FORMS NO. 2 AND 3 FILED BEFORE THE REGISTRAR OF COMPANIES SHOWING ALLOTMENT OF SHARES BY THE COMPANY DHPL. THEREFORE, THE ACTUAL INVESTMENT OF THE APPELLANT IN THE COMPANY WAS RS. 1,00 ,000 / - ONLY WHICH WAS REFLECTED IN HIS BOOKS OF ACCOUNTS. SINCE 14,47,500 SHARES IN DHPL WERE RECEIVED BY THE APPELLANT FROM HIS MOTHER BY WAY OF GIFT, THERE WAS NO ; INVOLVEMENT OF ANY FINANCIAL TRANSACTIONS AND THERE WAS NO PAYMENT BY THE APPELLANT TO THE COMPANY DHPL FOR MAKING ANY INVESTMENT IN THE SHARES OF THE SAID COMPANY. THOUGH THE APPELLANT HAD NOT PASSED THE ENTRY OF GIFT OF SHARES RECEIVED BY HIM FROM HIS MOTHER IN HIS BOOKS OF ACCOUNTS BUT THAT DOES NOT MEAN THAT THE INVESTMENT WAS MADE BY THE APPELLANT OUT OF HIS UNEXPLAINED SOURCES. IT IS CLEAR FROM THE RECORDS THAT THE INVESTMENT IN THE SHARES OF THE COMPANY WAS MADE BY MRS. CHANCHALBEN D. PATEL IN KIND BY WAY OF TRANSFERRING HER LAND TO THE COMPANY. HENCE THERE IS NO LOGIC TO INFER THAT THE SHARES RECEIVED BY THE APPELLANT BY WAY OF GIFT WAS THE ACTUAL INVESTMENT OF THE APPELLANT IN DHPL. THE AR SUBMITTED THAT SINCE FINANCIAL TRANSACTION WAS NOT INVOLVED, THE BOOK ENTRY OF GIFT WAS NOT PASSED UNDER YEAR UNDER APPEAL BUT THE SAME WAS PASS ED IN SUBSEQUENT YEAR IN THE BOOKS OF ACCOUNTS. THUS, IT IS CLEAR THAT THE ACTUAL INVESTMENT IN THE COMPANY WAS MADE BY MRS CHANCHALBEN D. PATEL OUT OF HER OWN SOURCES AND SHE IS ALSO ASSESSED TO TAX AND NO INVESTMENT IS MADE BY THE APPELLANT AND HENCE THE ADDITION OF RS. 1,32,22,540/ - IS NOT JUSTIFIABLE IN THE HANDS OF THE APPELLANT AND THE AO IS DIRECTED TO DELETE THE SAME. THUS, THIS GROUND OF APPEAL IS ALLOWED. 18 . DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE H AS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAIL OF SUBMISSION MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS, LD. COUNSEL HAS CONTENDED T HAT ASSESSING OFFICER HAS MADE THE ADDI TI ON OF RS. 1 , 32 , 22 , 540/ - IN A ARBITRARY AND WRONG PRESUMPTION BASIS AND THE ASSESSING OFFICER HAS NOT UNDERSTOOD THE REAL FACT OF THE CASE. HE HAS PLACED RELIANCE UP ON THE ORDER OF LD. CIT(A). I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 13 19 . WE HAVE HEARD T HE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE GONE THROUGH THE SHARE HOLDING PATTERN OF THE ASSESSEE IN THE DAMAN HOSPITALITY PVT. LTD. WHICH IS REPRODUCED AS UNDER: - DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPIT AL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) DATE OF INCORPORATION 20000 KETAN PATEL GROUP 20OOOO 20OOOO 04 - 04 - 08 581000O KETAN PATEL GROUP 58100000 58100000 06 - 05 - 08 5830OOO THUNDERBIRD RESORTS LTD 58300000 2623 50000 32O65OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 30 - 11 - 08 442592 THUNDERBIND RESORTS LTD 4425920 19916640 24342560 21 - 01 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 21 - 01 - 09 435232 THUNDERB IRD RESORTS LTD 4352320 1985440 23937760 TOTAL 13415648 134156480 341354160 47510640 DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) KETAN D. PATEL GROUP DATE OF INCORPORATIO N 20000 KETAN PATEL GROUP 2OOOOO 20OOOO 04 - 04 - 08 581OOOO KETAN PATEL GROUP 58100OOO 5810OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 21 - 01 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 14 TOT AL 6707824 67078240 39502080 106580320 THUNDER BIRD GROUP 06 - 05 - 08 5830OOO THUNDERBIRD RESORTS LTD 583OOOOO 262350000 32O65OOOO 30 - 11 - 08 442592 THUNDERBIRD RESORTS LTD 4425920 19916640 24342560 21 - O1 - OP9 435232 THUNDERBIRD RESORTS LTD 4352320 1985440 23937760 TOTAL 6707824 67078240 301852080 368930320 IT IS NOTICED THAT M/S. DAMAN HOSPITALITY WAS INCORPORATED ON 23 RD AUGUST, 2007 BY SHRI KETAN D. PATEL AND SHRI JIGNESH PATEL BOTH BROTHERS WHO WERE THE INITIAL SUBSCRI BER S TO THE MEMORANDUM OF ASSOCIATION . I NITIALLY T HE COMPANY WAS INCORPORATED WITH SHARE CAPITAL OF RS. 2 ,00000 COMPRISING OF 20,000 SHARES RS. 10 EACH AND OUT OF SAID SHARE 10 ,0 00 SHARES WERE ALLOTTED TO SHRI KETAN PATEL AND 10 , 000 SHARES WERE ALLOTTE D TO SHRI JIGNESH PATEL. ASSESSEE HAS BEEN ALLOCATED THE AFORESAID SHARES AT THE TIME OF INCORPORATION OF THE COMPANY AT THE INITIAL STAGE, THEREFORE, THERE WAS NO QUESTION OF MAKING ANY PREMIUM ON THESE SHARES. SUBSEQUENTLY THE COMPANY HAD DECIDED TO PUR CHASE A SUITABLE LAND FOR ITS PROJECT FOR CONDUCTING HOTEL BUSINESS AND AFTER RECEIVING A PROPOSAL FROM MRS. CHANCHALBEN D. PATEL WHO HAD OFFERED TO SELL HER LAND TO THE COMPANY IN RETURN OF SHARES OF THE SAID COMPANY. THE MARKET VALUE OF TH E SAID LAND WA S DETERMINED BY THE APPROVAL VALUED AT RS.5, 81,00000 AND AFTER NECESSITY APPROVAL OF THE BOARD ,THE COMPANY HAD ALLOTTED 58,10,000 SHARES AS FULLY PAID UP SHARES OF RS.10 EACH TO MRS. CHANCHALBEN D. PATEL THEREAFTER MRS. CHANCHALBEN D. PATEL HAD GIFTED 14,47, 500 SHARES ON 05.04. 2008 TO THE ASSESSEE AND THE SHARES WERE TRANSFERRED ACCORDINGLY. ACCORDINGLY, THE SALE DEED OF THE LAND WAS EXECUTED IN FAVOUR OF THE COMPANY AGAINST WHICH THE SHARES WERE ALLOTTED TO CHANCHE LBEN PATEL AS CITED IN THIS ORDE R. OUT OF THE SAID I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 15 58,10,000/ - EQUITY SHARE M/S CHANCHE LBEN PATEL HAS GIFTED 14,97,500/ - SHARES ON 5 TH APRIL, 2008 TO THE ASSESSEE SHRI KETAN D. PATEL AND THE SHARES WERE TRANSFERRED IN THE NAME OF THE ASSESSEE AND A COPY OF GIFT DEED SHOWING GIFT TRANSAC TION AND COPY OF BOARD RESOLUTION APPROVING THE TRANSFER OF SHARES WERE PUT ON RECORD. IT IS CLEAR THAT THE SHARES TO THE WORTH OF RS. 1,44,75,000/ - WAS GIFTED BY THE MO THER OF THE ASSESSEE MS. CHANCHE LBEN PATEL FOR WHICH THE ASSESSEE HAS NOT PASSED ANY E NTRY BECAUSE SHARES WERE GIFTED AND NO FINANCIAL AMOUNT WAS INVOLVED IN OBTAINING THESE SHARES. AFTER CONSIDERING THE ABOVE FACTS AND FINDINGS OF LD. CIT(A), WE CONSIDER THAT ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITION ON PRESUMPTION BASIS WITHOUT DIS PROVING THE FACT AND CLAIM OF THE ASSESSEE AND , THEREFORE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF REVENUE, THEREFORE, THE SAME IS DISMI SS ED. DELETING THE ADDITION OF RS. 3 , 27 , 93 , 750/ - U/S. 2(24)(IV) OF THE ACT 20 . DURING THE COURSE OF ASSESSMENT PR OCEEDINGS FOR THE YEAR UNDER C ONSIDERATION THE AO HAS NOTICED THAT TWO GROUP THUNDER BIRD AND KETAN PATEL & GROUP WERE THE EQUAL SHAREHOLDER IN THE RATIO OF 50% IN THE M/S DAMAN HOSPITALITY PVT. LTD. HOWEVER THE THUNDERBIRD HAS PAID SHARE PREMIUM AMOUNT O F RS.30 , 18 , 52 , 080 BUT KETAN PATEL & GROUP HAS PAID ONLY RS.3 , 95 , 02 , 080 OF SHARE PREMIUM TO M/S DAMAN HOSPITALITY PVT. LTD FOR THE Y EAR UNDER CONSIDERATION. HE WAS OF THE VIEW THAT BOTH HAVE TO PAY THE SAME AMOUNT OF SHARE PREMIUM BUT KETAN PATEL & GROUP HA S PAID LESSER AMOUNT OF RS.26,23,50,0000( RS.30,18,52,080 - 3,95,02,080) TOWARDS SHARE PREMIUM TO THE COMPANY. HE FURTHER OBSERVED THAT T HE ASSESSEE MRS. KETAN D PATEL WAS THE SHAREHOLDER OF 12 .5% SHARE IN THE COMPANY SO DIFFEREN CE OF BENEFIT IN HIS CASE WAS WORKED OF RS.3,27,93,750( 12.5% OF RS. 26,23,50,000). HE WAS OF THE VIEW THAT THIS WAS THE BENEFIT FOR A DIRECTOR FOR HOLDING SHARES AS PROVIDED IN SECTION 2(24)(IV) OF THE I.T ACT 1961. THEREFORE, THE ASSESSING OFFICER HA D MADE ADDITION OF RS. 3 , 2 7 , 93 , 750/ - ON THE GROUND THAT THE ASSESSEE HAD OBTAINED BENEFIT FROM I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 16 THE COMPANY M/S DAMAN HOSPITALITY PVT. LTD. WHERE HE WAS A DIRECTOR BY INVOKING THE PROVISION OF SECTION 2(24)(IV) OF T HE ACT. 2 1 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A ). THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 11.3 DECISION : - I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE CONTENTIONS OF THE AR TOGETHER WITH THE FACTS OF THE CASE AS WELL AS ALLOTMENT PATTERN OF SHARES OF DAMAN HOSPITALITY PVT. LTD. (HEREIN AFTER REFERRED TO AS DHPL). THE AO OBSERVED THAT BOTH KETAN D PATEL GROUP AND THE FOREIGN COLLABORATOR M/S. THUNDERBIRD HOSPITALITY & RESO RT LTD. HELD SHARE IN THE RATIO OF 50:50. M/S. THUNDERBIRD HOSPITALITY & RESORT LTD. PAID RS. 13,18,52,080/ - FOR A SHARE HOLDING OF 50% WHEREAS KETAN D PATEL GROUP PAID ONLY RS. 3,95,02,080/ - FOR THE OTHER 50% OF THE SHARE. THEREFORE, THE AO CONCLUDED THAT KETAN D PATEL GROUP HAD UNDER PAID PREMIUM TO THE EXTENT OF RS. 26,23,50,000/ - (BEING THE DIFFERENCE OF PAYMENT BY M/S. THUNDERBIRD HOSPITALITY & RESORT LTD. AND KETAN D. PATEL GROUP) TO THE COMPANY AND THEREBY DERIVED BENEFITS FROM THE COMPANY. THE AO FU RTHER OBSERVED THAT SINCE THE APPELLANT HOLDS 12.5% SHARES IN DAMAN HOSPITALITY PVT. LTD., HE MADE ADDITION OF RS. 3,27,93,750/ - IN THE HANDS OF THE APPELLANT BY INVOKING SEC.2(24)(IV) OF THE ACT. 11.3.1 BEFORE I DEAL WITH THE APPLICABILITY OF THE SEC.2(24 )(IV) OF THE ACT IN THIS CASE, IT IS MOST IMPORTANT TO SET THE FACTS IN RIGHT PROSPECTIVE. THE AO HELD THAT IF THE SHARE HOLDING RATIO IN THE COMPANY WAS 50:50 BETWEEN KETAN D. GROUP & THE FOREIGN COLLABORATOR, THEN BOTH SHOULD HAVE CONTRIBUTED EQUAL AMOUN T FOR THE SHARE THEY HELD. THEREFORE, WHAT IS IMPORTANT TO UNDERSTAND HERE IS THE SHARE ALLOTMENTS AND PRICING/PREMIUM THEREOF. THE FOLLOWING TWO TABLES GIVE DETAILS OF SHARE ALLOTMENT TO BOTH THE GROUPS IN QUESTION. SHARES ALLOTMENT MADE BY M/S. DAMAN HOS PITALITY PVT. LTD. TO BOTH THE GROUPS. CHART 'A' DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) DATE OF INCORPORA TION 20OOO KETAN PATEL GROUP 2OOOOO 200000 04 - 04 - 08 5810000 KETA N PATEL GROUP 5810OOOO 581OOOOO 1 06 - 05 - 08 583000O THUNDERBIRD RESORTS LTD 583OOOOO 262350000 32065OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 30 - 11 - 08 442592 THUNDERBIRD RESORTS LTD 4425920 19916640 243425 60 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 17 21 - O1 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 21 - 1 - 01 - 09 435232 THUNDERBIRD RESORTS LTD 4352320 1985440 23937760 TOTAL 13415648 134156480 341354160 47510640 GROUP WISE CHART SHOWING PARTICULAR OF SHARES ALLOTM ENT BY DHPL TO BOTH GROUPS AND PREMIUM PAID BY THEM. CHART 'B' I DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) KETAN D. PATEL GROUP DATE OF INCORPORAT ION 2000O KETAN PATEL GROUP 20OOO O -- 200000 04 - 04 - 08 58100OO KETAN PATEL GROUP 58100000 ~ - 5810OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 21 - 01 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 TOTAL 6707824 67078240 39502080 1 O658O32O THUNDER BIRD GROUP 06 - 05 - 08 5830000 THUNDERBIRD RESORTS LTD 58300000 262350000 320650OOO 30 - 11 - 08 442592 THUNDERBIRD RESORTS LTD 4425920 19916640 24342560 21 - 01 - 09 435232 THUNDERBIRD RESORTS LTD 4352320 1985440 23937760 T OTAL 6707824 - 67078240 301852080 368930320 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 18 FURTHER, 58,10,000 SHARES ALLOTTED TO MRS. CHANCHALBEN D. PATEL BY DHPL AT PAR AT RS. 10/ - PER EQUITY SHARE IN LIEU OF THE LAND, WERE GIFTED BY HER IN THE FOLLOWING QUANTITY TO HER SONS / DAUGHTER VIZ GIF T DEED DATED. 5 TH APRIL 2008; A. 14,47,500 SHARES GIFTED TO SHRI KETAN D. PATEL (SON) B. 14,47,500 SHARES GIFTED TO SHRI JIGNESH D. PATEL (SON) C. 14,57,500 SHARES GIFTED TO MS. JAGRUTIBEN D. PATEL (DAUGHTER) THEREFORE, TILL 5 TH . APRIL 2008, THE SHAR E VALUE WAS RS. IO/ SHARE ALTHOUGH THE SHARE HOLDING DID UNDERGO CHANGE. IN OTHER WORDS, THE SHARE HOLDERS IN DHPL TILL 5 TH APRIL 2008 WERE I) MRS. CHANCHALBEN D. PATEL, II) SHRI KETAN D. PATEL, III) SHRI JIGNESH D. PATEL, AND IV) MS. JAGRUTIBEN D. PATEL A ND THE VALUE OF EACH SHARE WAS RS. IO/ - . THEN M/S. THUNDERBIRD HOSPITALITY AND RESORT ACQUIRED 58,30,000 SHARES ON 6 TH MAY 2008 AT A PRICE OF RS. 32,06,50,000/ - AND THE PREMIUM BEING RS. 26,23,50,000/ - I.E. THE PREMIUM PAID PER SHARE BY THUNDERBIRD WAS RS. 45/ - . THE SUBSEQUENT ALLOTMENT OF SHARES TO BOTH GROUP BY DHPL WAS ON 30.11.2008 & 21.01.2009 AND BOTH THE GROUPS HAD PAID EQUAL PRICE FOR THE SHARES THEY ACQUIRED ON THESE TWO OCCASIONS. IN THIS FACTUAL BACKGROUNDS, LET US EXAMINE THE LEGAL POSITION AS E NVISAGED IN SEC. 2(24) (IV) OF THE ACT WHICH THE AO DID INVOKE TO MAKE ADDITION IN THE HANDS OF THE APPELLANT. BENEFIT OF PERQUISITE OBTAINED FROM A COMPANY - 2(24)(IV) - SUB - CLAUSE (IV) OF CLAUSE (24) OF SECTION 2 INCLUDES WITHIN THE DEFINITION OF INCOME ; - (I) THE VALUE OF BENEFIT OF PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT OBTAINED FROM THE COMPANY - (A) EITHER BY A DIRECTOR, OR (B) BY A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY (C) BY A RELATIVE OF THE DIRECTOR OF SUCH PERSON AND (II) ANY SUM PAID BY THE COMPANY IN RESPONSE OF ANY OBLIGATOR WHICH BUT FOR SUCH PAYMENT WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR OTHER PERSON AFORESAID. BARE READING OF THE PROVISIONS INDICATE THAT THE FIRST PART OF SECTION 2(24)( IV) REFER TO ANY BENEFIT OR PERQUISITE OBTAINED FROM A COMPANY EITHER BY A DIRECTOR OR ANY PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR BY A RELATIVE OF THE DIRECTOR OF SUCH PERSON. THE SECOND PART REFERS TO ANY SUM PAID BY ANY COMPANY IN RESPEC T OF ANY OBLIGATION WHICH BUT FOR SUCH PAYMENT, WOULD HAVE BEEN PAYABLE BY THE DIRECTOR OR ANY PERSON REFERRED TO IN THIS CLAUSE. THEREFORE, THE PART REFERS TO THE BENEFIT OR PERQUISITE OBTAINED BY ANY ASSESSEE FROM A COMPANY WHEREAS, THE SECOND PART REFER S TO A SUM PAID BY SUCH COMPANY TO A THIRD PERSON. THE CLAUSE REFERS TO 'BENEFIT OBTAINED FROM A COMPANY'. THUS, THE CONTEXT IN WHICH SUCH WORD HAS BEEN USED WILL HAVE TO /BE BORNE IN MIND WHILE INTERPRETING THE WORD 'BENEFIT'. FURTHER, SECTION 2(24) (IV) SPEAKS OF THE VALUE OF ANY BENEFIT OR PERQUISITE TO BE CONSTRUED AS INCOME. THIS VALUE MAY BE IN TERMS OF CASH OR IN ENJOYMENT. EVEN A BENEFRB - OR PERQUISITE ENJOYED CAN BE TRANSLATED IN TERMS OF MONEY AS LONG AS THAT BENEFIT OR PERQUISITE OF MATERIAL THING OF LIFE. FOR THE PURPOSE OF THIS PROVISIONS, \ T IS IMMATERIAL WHETHER THE BENEFIT OR PERQUISITE IS CONVERTIBLE INTO MONEY OR NOT. IN THIS CIRCUMSTANCES, THE QUESTION SEEKS TO BE ANSWERED IS 'WHETHER THE APPELLANT DERIVED ANY BENEFIT OR PERQUISITE OBTAINED FROM A COMPANY EITHER BY A DIRECTOR OR ANY PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR BY A RELATIVE OF THE DIRECTOR OF SUCH PERSON ?. FROM THE SHAREHOLDING ANALYSIS DONE ABOVE CLEARLY ANSWERS THE QUESTION IN NEGATIVE. IN OTHER WORDS, THE APPE LLANT HAD NOT DERIVED ANY BENEFIT OR PERQUISITE OBTAINED FROM THE COMPANY EITHER BY A DIRECTOR OR ANY PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR BY A RELATIVE OF THE DIRECTOR OF SUCH PERSON. FROM THE REFERRED CHART A ABOVE SHARES ALLOTMENT BY DHPL, IT IS CLEAR THAT THE APPELLANT SHRI. KETAN PATEL WAS ALLOTTED ONLY 10,000 EQUITY SHARES OF RS. 10/ - EACH HAVING A VALUE OF RS. 1,00,000/ - I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 19 AND THEREAFTER, THE SUBSEQUENT ALLOTMENT OF 58,10,000 EQUITY SHARES OF PVS. 10/ - EACH HAVING THE VALUE OF RS. 5, 81,00,000/ - WASMA3E~TO MRS. CHANCHALBEN D. PATEL AGAINST TRANSFER OF HER LAND TO THE COMPANY. OUT OF THE SAID SHARES OWNED BY HER, SHE GIFTED 14,47,500 SHARES TO SHRI. KETAN D. PATEL I.E. THE APPELLANT. THAT MEANS THE SAID 14,47,500 SHARES WERE NOT SUBSCR IBED BY THE APPELLANT FROM THE COMPANY DIRECTLY BUT, THE SHARES WERE RECEIVED BY THE APPELLANT FROM HIS MOTHER BY WAY OF GIFT. THEREFORE, THE INVESTMENT WAS NOT MADE BY THE APPELLANT AND THE APPELLANT WAS NOT AN ORIGINAL ALLOTTEE OF THE SAID SHARES. IN VIE W OF THIS THERE WAS NO QUESTION OF GETTING ANY BENEFIT BY HIM ON ALLOTMENT OF SHARES AND IT CANNOT BE SAID THAT THE APPELLANT HAD DERIVED ANY BENEFIT DIRECTLY ON ALLOTMENT OF SHARES. IT APPEARS THAT THE AO HAS TOTALLY MISREAD THE ALLOTMENT PATTERN OF THE S HARES BY DHPL TO KETAN PATEL GROUP AND THUNDERBIRD TO COME TO THE CONCLUSION THAT THE APPELLANT HAD DERIVED BENEFIT ON THE REFERRED SHARE ALLOTMENT. IN VIEW OF THE ABOVE, I AM NOT INCLINED TO AGREE WITH THE VIEW TAKEN BY THE AO THAT THE APPELLANT HAD DERIV ED ANY BENEFITS IN THE PROCESS OF SHARE ALLOTMENT BETWEEN THE TWO GROUPS NAMELY KETAN D PATEL GROUP AND THUNDERBIRD. THUS, I DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,27,93,750/ - ON ACCOUNT OF BENEFIT OBTAINED FROM A COMPANY AS A DIRECTOR IN M/S. DAMAN HOSPITALITY PVT. LTD. IN TERMS OF SECTION 2(24)(IV) OF THE ACT. ACCORDINGLY, THIS GROUND IS ALLOWED. 2 2 . WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IN THIS CONNECTION, THE GROUP - WISE ALLOTMENT OF SHARES BY THE DAMA N HOSPITALITY PVT. LTD. IS REPRODUCED AS UNDER: - DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) DATE OF INCORPORATION 20000 KETAN PATEL GROUP 20OOOO 20OOOO 04 - 04 - 08 581 000O KETAN PATEL GROUP 58100000 58100000 06 - 05 - 08 5830OOO THUNDERBIRD RESORTS LTD 58300000 262350000 32O65OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 30 - 11 - 08 442592 THUNDERBIND RESORTS LTD 4425920 1991664 0 24342560 21 - 01 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 21 - 01 - 09 435232 THUNDERBIRD RESORTS LTD 4352320 1985440 23937760 TOTAL 13415648 134156480 341354160 47510640 I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 20 DATE NO. OF SHARES NAME OF SHARE HOLDER SHARE CAPITAL (RS.) SHARE PREMIUM (RS.) TOTAL (RS.) KETAN D. PATEL GROUP DATE OF INCORPORATION 20000 KETAN PATEL GROUP 2OOOOO 20OOOO 04 - 04 - 08 581OOOO KETAN PATEL GROUP 58100OOO 5810OOOO 30 - 11 - 08 442592 KETAN PATEL GROUP 4425920 19916640 24342560 21 - 01 - 09 435232 KETAN PATEL GROUP 4352320 19585440 23937760 TOTAL 6707824 67078240 39502080 106580320 THUNDER BIRD GROUP 06 - 05 - 08 5830OOO THUNDERBIRD RESORTS LTD 583OOOOO 262350000 32O65OOOO 30 - 11 - 08 442592 THUNDERBIRD RESORTS LTD 4425920 19916640 24342560 21 - O1 - OP9 435232 THUNDERBIRD RESORTS LTD 4352320 1985440 23937760 TOTAL 6707824 67078240 301852080 368930320 IT IS FURTHER EXPLAINED THAT BEFORE THE THUNDER BIRD RESORTS CAME INTO PICTURE, KETAN PATEL GROUP HAS ACQUIRED LAND, GOT IT REGISTERED IN THE NAME OF THE COMPANY, VARIOUS APPROVALS WERE TAKEN AND THE CONSTRUCTION OF THE SAID PROJECT WAS ALREADY STARTED. THE COMPANY DHPL HAD ISSUED SHARES TO BOT H THE GROUPS ON DIFF ERENT DATES . TH E ASSESSEE AND HIS BROTHER WERE THE INITIAL SUBSCRIBERS TO THE MEMORANDUM OF ASSOCIATION OF M/S DHPL. INITIALLY THE COMPANY WAS INCORPORATED WITH THE SHARE CAPITAL OF RUPEES 2,00000 COMPRISING OF 2,0000 SHARES OF RS.10 EACH AND OUT OF THE S AID SHARES 10,000 SHARES WERE ALLOTTED TO I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 21 THE ASSESSEE AND 1,0000 SHARES TO THE ASSESSEE'S BROTHER . SUBSEQUENTLY THE COMPANY HAD DECIDED TO PURCHASE A SUITABLE LAND FOR ITS PROJECT FOR CONDUCTING HOTEL BUSINESS AND AFTER RECEIVING A PROPOSAL FROM MRS. CHANCHALBEN D. PATEL WHO HAD OFFERED TO SELL HER LAND TO THE COMPANY IN RETURN OF SHARES OF THE SAID COMPANY. THE MARKET VALUE OF THE SAID LAND WAS DETERMINED BY THE APPROV ED VALUE AT RS. 5, 81,00000 AND AFTER NECESSITY APPROVAL OF THE BO ARD ,THE COMPA NY HAD ALLOTTED 58,10,000 SHARES AS FULLY PAID UP SHARES OF RS.10 EACH TO MRS. CHANCHALBEN D. PATEL THEREAFTER MRS. CHANCHAL BEN D. PATEL HAD GIFTED 14,47,500 SHARES ON 05.04. 2008 TO THE ASSESSEE AND THE SHARES WERE TRANSFERRED ACCORDINGLY. THEREAFTER, NEC ESSITY APPROVALS F ROM GOVERNMENT/ SEMI GOVERNMENT BODIES WERE DERIVED AND THE PROJECT OF THE COMPANY WAS DEVELOPING VERY FAST. LOOKING TO THE FUTURE PROSPECTS AND EARNINGS OF THE PROJECT, THUNDER BIRD GROUP DECIDED TO JOIN IN AS BUSINESS PARTNERS. FURTHER , IT IS NOTICED THAT ALLOTMENT OF 58,30,000 BY THE COMPANY TO KET AN PATEL GROUP AND THUNDER BIR D WERE ALTOGETHER DIFFERENT A ND BOTH THE ALLOTMENT WERE NOT COMPARABLE WITH EACH OTHER . A S THE SAID COMPANY THE DAMAN HOSPITALITY PVT. LTD. WAS INCORPORATED ON 23 RD AUGUST, 2007 FOR THE PURPOSE OF RUNNING HOSPITAL BUSINESS AND COMPANY WAS INITIALLY FORMED BY SHRI KETAN D. PATEL AND HIS FAMILY MEMBER AND LAT ER ON THEY DECIDED TO SET UP A HOTEL AT DAMAN AND THEY STARTED EXPLOITING THE FUTURE POTENTIALITY AND VIABI LITY OF THE PROJECT AND THEREAFTER THEY DECIDED TO PURCHASE THE LAND FOR SETTING UP A PROJECT. T HE THUNDER BIRD RESORT GROUP WAS NO - WHERE IN THE PICTURE WHEN THE PROMOTER OF THE COMPANY WERE EXPLORING THE POSSIBILITIES FOR JOINT VENTURE EACH OTHER COLLA BORATION TO SET UP HOTEL . THE AFORESAID FACTS AND THE DETAILED FINDINGS IN THE ORDER OF THE LD. CIT(A) DEMONSTRATE THAT THERE WAS NO QUESTION OF APPLYING THE PROVISION OF SECTION 2(24) OF THE ACT. THEREFORE, ACTION OF ASSESSING OFFICER FOR MAKING ADDITI ON OF RS. 32973750/ - IS NOT PROPER. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE INCLINED WITH THE FINDINGS OF LD. CIT(A) ON THIS ISSUE . ACCORDINGLY, THE APPEAL OF THE REVENUE ON THIS ISSUE IS DISMISSED. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 22 ITA NO. 3288 /AHD/2014 23 . THE REVEN UE HAS RAISED FOLLOWING SUBSTANTIVE GROUND OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,55,87,500/ - MADE BY THE AO U/S. 2(24)(IV) OF THE I.T.ACT. 24 . THE FACT AND ISSUE OF THIS GROUND OF APPEAL ARE IDENTICAL TO THE GROUNDS OF APPEAL NO. 5 AS ADJUDICATED SUPRA THE CASE OF OTHER ASSESSEE SH. KETAN PA TEL VIDE ITA NO. 1445/AH D/2013. THEREFORE AFTER APPLYING THE F INDINGS OF SH. KETAN PATEL VIDE ITA NO. 1445/AJD/2013 AS SUPRA TO THIS GROUND OF APPEAL OF THE REVENUE , WE DO NOT FIND ANY ERROR IN THE DECISION OF LD.CIT(A). THEREFORE, THIS GROUND OF THE REVENUE IS DISMISSED. ITA OF NO. 1918 /AHD/2016 2 5 . THE REVENUE HAS RAISED FOLLOWING SUBSTANTIVE GROUNDS OF APPEAL: - I) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT CALLING FOR A REMAND REPORT OF THE AO IN RESPECT CONTENTION OF THE ASSESSEE THAT SALE OF LAND IS WERE PART OF HER STOCK IN TRADE IGNORING THE FACT THAT THE ASSESSEE FAILED T O PROVIDE THE NECESSARY DETAILS BEFORE THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. II) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED DELETING THE ADDITION MADE BY THE AO OF RS. 6,55,87,500/ - BY APPLYING THE PR OVISIONS OF SEC. 2(24)(IV). II) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED DELETING THE ADDITION MADE BY THE AO OF RS. 64,13,00,000/ - AS SHORT TERM CAPITAL GAIN. GROUND NO. 1 : 26 . IT IS NOTICED THAT ALL THE NECESSARY DETAILS AND SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AN D THE ASSESSING OFFICER HAS FINALIZED THE ASSESSMENT AFTER TAKING INTO CONSIDERATION THE DETAILED INFORMATION FURNISHED BY THE ASSESSEE. THE ASSESSEE HAS ALREADY SHOWN THE S AME INCOME AS BUSINESS INCOME IN COMPUTATION OF INCOME HOWEVER THE ASSESSING OFFICER HAS COMPUTED SHORT TERM CAPITAL GAI N ON THE SALE OF LAND. T HE LE ARNED CIT(A) W AS INCLINED WITH THE ACTION OF THE ASSESSING OFFICER IN TAKING THE SALE OF LAND AS I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 23 TRANSFER OF CAPITAL ASSET LIABLE FOR THE CAPITAL GAIN BECAUSE DURING THE APPELLANT PROCEEDINGS BEFORE THE LEARNED CIT(A) THE ASSESSEE HAD NOT MADE ANY SUBMISSION TO SHOW THAT THESE LANDS WERE PART OF THEIR STOCK IN TRADE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION ON ACCOUNT OF SHORT - TERM CAPITAL GAIN AT RS.1,37,00,989 WAS CONFORMED SUBJECT TO THE DIRECTION THAT THE ASSESSING OFFICER DOES NOT TAX THE SAME INCOME UNDER TWO DIFFERENT HEADS SUCH AS BUSINESS INCOME AND AS A CAPITAL GAIN. IN THE LIGHT OF TH E ABOVE FACTS AND CIRCUMSTANCES WE DON'T FIND ANY MERIT IN THE GENERAL APPEAL OF THE REVENUE THAT LENDER CIT (A) HAS NOT C ALLED ANY REM AND REPORT OF THE ASSESSING OFFICER ON THIS ISSUE. ACCORDINGLY , THE SAME IS DISMISSED. GROUND NO. 2 27 . T HE FACT AND ISSU E OF THIS GROUND OF APPEAL ARE IDENTICAL TO THE GROUNDS OF APPEAL NO. 5 AS ADJUDICATED SUPRA THE CASE OF OTHER ASSESSEE SH. KETAN PATEL VIDE ITA NO. 1445/A JD /2013 . THEREFORE AFTER APPLYING THE FINDINGS OF SH. KETAN PATEL VIDE ITA NO. 1445/AJD/2013 AS S UPRA TO THIS GROUND OF APPEAL OF THE REVENUE WE DO NOT FIND ANY ERROR IN THE DECISION OF LD.CIT(A). THEREFORE, THIS GROUND OF THE REVENUE IS DISMISSED. THIRD GROUND OF APPEAL DELETING ADDITION OF RS. 64,13,00 0/ - AS SHORT TERM CAPITAL GAIN 28 . DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS STATED THAT THE OTHER GROUP NAMED THUNDER BIRD G ROUP HAS ACQUIRED 50% OF SH AR ES OF M/S. DAMAN HOSPITALITY PVT. LTD. BY MAKING AN INVESTMENT OF RS. 32 , 06 , 50 , 000/ - .THE ASSESSING OFFICER WAS OF TH E VIEW THAT THUNDERBIRD HAS ACQUIRED 50% SHARE IN THE ASSETS OF DHP LAND BY INVESTING OF RS.32,06,50,000 WHICH PRIMARILY COMPRISED OF LAND PURCHASED FROM SMT. CHANCHALBEN PATEL THEREFORE HE ASSUMED T HAT HUNDRED PERCENT OF THE LAND TO BE EFFECTIVELY VAL UED AT RS.64 , 13 ,0 0000. THEREFORE , HE HAS MADE AN ADDITION OF RS. 64, 13 ,00000/ - TO THE TOTAL INCOME OF THE ASSESEE. I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 24 29 . ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION. RELEVANT PART OF THE DECISION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - I HAVE GIVEN MY CAREFUL THOUGHTS TO THE RIVAL SUBMISSIONS. FROM THE FACTS STATED IN THE ASSESSMENT ORDER, IT EMERGES THAT THE ASSESSING OFFICER HAS TAKEN RS.64,13,00,000/ - AS FAIR MARKET VALUE OF THE CAPITAL ASSET I.E. LAND ALREADY SOLD BY THE APPELLANT. UNDER PARA 21 THE ASSESSING OFFICER MENTIONED AS UNDER: 'REGARDING THE THIRD ISSUE, I.E. ADDITION OF SHORT TERM CAPITAL GAIN OF RS. 64,13,00,000 / - ON ACCOUNT OF UNDERSTATEMENT OF FAIR MARKET VALUE OF THE PROPERTY SOLD BY THE ASSESSEE, THE ASSESSEE VI DE HER SUBMISSION DATED 10.03.20 15, - HAS NOT PROVIDED ANY SUBSTANTIAL DETAILS. THEREFORE, THE ASSESSEE WAS REQUESTED VIDE THI S OFFICE LETTER DATED 09.03.2015 TO SHOW CAUSE AS TO WHY RS. 64,13,00,000 / - SHOULD NOT BE ADDED TO HER TOT AL INCOME AS STCG ON LAND TRANSACTION. IN RESPONSE TO THE SAME, THE ASSESSEE VIDE HER LETTER DATED 09.03.2015 RECEIVED IN THIS OFFICE ON 10.03.2015, HAS SUBMITTED THAT - ' SHARES OF THE COMPANY WERE VALUED AT PREMIUM AND EXCEPT ONE ' OCCASION, PREMIUM WAS PAID BY BOTH THE PARTIES EQUALLY. ADDITIONAL SHARES WERE FURTHER ISSUED AT SAME PREMIUM ON 30TH NOV., 2008 AND ON 21ST JAN., 2009 AGGREGATING VALUE OF RS. 4,86,85,120 AND RS. 4 / 78,75,520/ - RESPECTIVELY. EVEN AT THAT TIME THE COMPANY HAD LAND ONLY AS THE VA LUABLE ASSET AND - IT CANNOT BE JUSTIFIED THAT FIRST PREMIUM PAID WAS FOR THE LAND AND OTHER TWO PREMIUMS WERE PAID FOR THE SHARES ONLY NOT FOR LAND. FURTHER, THE ASSESSEE HERSELF WILL NOT PAY THE AMOUNT TO THE COMPANY AGAINST HER OWN TRANSFERRED LAND. SINCE TWO PREMIUMS PAYMENT ARE ACCEPTED FOR SHARES, ON SIMILAR GROUND WE SUBMIT THAT PREMIUM ON PREVIOUS OCCASION WAS PAID FOR SHARES ONLY. THE PREMIUM PAID WAS FOR THE SHARES AND NOT FOR THE LAND. IN ADDITION, THE LAND WAS PROPERLY VALUED AT THE TIME OF TRANSF ER AND THE GOVT. RATE FOR THE LAND EVEN WAS NOT COMPARABLE.' FROM THE PLAIN READING OF THE ABOVE PARAGRAPH IT BECOMES CLEAR THAT THE ASSESSING OF FICER HAS TAKEN RS.64,13,00,000/ - AS FAIR MARKET VALUE OF LAND FOR LEVYING SHORT \ TERM CAPITAL GAIN. IN MY CONSI DERED VIEW NO CAPITAL GAIN CAN BE CHARGED ON THE TRANSFER OF CAPITAL ASSET UNDER THE CIRCUMSTANCES MENTIONED IN THE ASSESSMENT ORDER BY REPLACING THE 'FULL VALUE OF CONSIDERATION' RECEIVED OR - ACCRUING BY 'FAIR MARKET VALUE'. SECTION 45 IS A MACHINERY SECTI ON WHEREAS SECTION 48 IS A CHARGING SECTION. THE ACT PROVIDES REPLACEMENT OF TULL VALUE OF CONSIDERATION' BY FAIR MARKET VALUE UNDER CERTAIN CIRCUMSTANCES. THE HON'BLE ITAT AHMEDABAD WHILE DECIDING THE CASE OF NITIN JAYANTILAL SHAH IN ITA NO.L988/AHD/2009 A.Y.2006 - 07 HAS DEALT WITH THIS MATTER OF 'FULL MARKET VALUE' AND 'FULL VALUE OF CONSIDERATION' VIS - A - VIS THE CHARGING OF CAPITAL GAINS U/S 45 R.W.S. 48 OF THE I.T.ACT AND FOR REFERENCE TO DVO. ON GOING THROUGH THE PROVISIONS OF THE ACT, IT IS SEEN THAT MA INLY IN THE FOLLOWING SITUATIONS THE 'FAIR MARKET VALUE' OF THE ASSET CAN REPLACE THE 'FULL VALUE OF CONSIDERATION' FOR THE PURPOSE OF CAPITAL GAIN AND OTHERS: SR. NO. MODE OF TRANSFER DEEMED FULL VALUE OF CONSIDERATION RELEVANT SECTION APPLICABLE 1. MONEY OR ASSET RECEIVED FROM AN INSURER ON ACCOUNT OF DAMAGE OR DESTRUCTION OF ANY CAPITAL ASSET. VALUE OF MONEY AND/OR F.M.V. OF ASSET ON THE DATE OF RECEIPT SEC. 45(1A) I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 25 2. CONVERSION INTO OR TREATMENT OF CAPITAL ASSET AS STOCK - IN - TRADE F.M.V. OF T HE ASSET AS ON THE DATE OF ITS CONVERSION OR TREATMENT SEC. 45(2) 3. INTRODUCTION OF CAPITAL IN KIND INTO FIRM OR AOP/BOI BY PARTNER/MEMBER AMOUNT RECORDED IN THE BOOKS OF ACCOUNT OF THE FIRM OR AOP/ BOI AS THE VALUE OF THE CAPITAL ASSET SEC. 45(3) 4. DISTRIBUTION OF ASSET IN KIND ON DISSOLUTION OF FIRM OR AOP OR BOI F.M.V. AS ON THE DATE OF DISTRIBUTION SEC. 45(4) 5. SHAREHOLDERS RECEIVING ASSETS FROM THE LIQUIDATOR ON THE LIQUIDATION OF THE COMPANY 'MARKET VALUE OF THE ASSETS ON THE DATE OF DISTRIBUTION MINUS AMOUNT ASSESSED AS DEEMED DIVIDEND U/S 2(22)(E) SEC. 46(2) 6. GIFT, ETC. OF SHARES OR DEBENTURES ALLOTTED UNDER ESOP MARKET VALUE ON THE DATE OF GIFT, ETC. PROVISO 4 TO SEC. 48 7. TRANSFER OF LAND OR BUILDING OR BOTH NOT LESS THAN VALUE ADOPTED BY OR ASSESSED OR ASSESSABLE BY 'STAMP VALUATION AUTHORITY' IF CONSIDERATION DECLARED BY ASSESSEE IS LESS SECTION 50C 8. TRANSFER OF A CAPITAL ASSET WHERE CONSIDERATION IS NOT ASCERTAINABLE OR CANNOT BE DETERMINED. (INSERTED BY THE F INANCE ACT, 2012, W.E.F. A.Y. 2013 - 14) FAIR MARKET VALUE ON THE DATE OF TRANSFER SECTION SOD THE CONCEPT OF 'FULL VALUE' HAS BEEN EXPLAINED BY THE HON'BLE SURPRME COURT IN OT V/S GEORGE ANDERSON & CO. LTD. (CIT V. GEORGE ANDERSON & CO. LTD. [1967] 66 ITR 622 (SQ). IT IS HELD THEREIN THAT FULL VALUE OF CONSIDERATION IS THE FULL SALE PRICE ACTUALLY PAID. THE EXPRESSION 'FULL VALUE' MEANS THE WHOLE PRICE WITHOUT ANY REDUCTION WHATSOEVER AND IT CANNOT BE REFERRED TO THE ADEQUACY OR INADEQUACY OF THE PRICE BARGAINED. IT ALSO DOES NOT HAVE THE REFERENCE TO MARKET VALUE OF THE CAPITAL ASSET WHICH IS THE SUBJECT MATTER OF THE TRANSFER. BESIDES ABOVE THE HON'BLE APEX COURT HAS HELD IN THE CASE OF K.P. VARGHESE V/S NO THAT THE ACTUAL VALUE OF CONSIDERATION CANNOT BE DISTURBED UNLESS UNTIL THE ASSESSING OFFICER HAS EVIDENCE THAT MORE CONSIDERATION HAS BEEN RECEIVED IN ADDITION TO THE ACTUAL VALUE OF CONSIDERATION DECLARED AND SHOWN BY THE ASSESSEE. WHERE THE CONSIDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED BY TH E ASSESSEE OR IN OTHER WORDS THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLARED OR DISCLOSED BY HIM AND THE BURDEN OF PROVING SUCH UNDERSTATEMENT OR CONCEALMENT IS ON THE REVENUE. KEEPING IN VIEW THE FACTS OF THE CASE AS WELL AS THE PROVISIONS OF LAW APPLICABLE AND THE VARIOUS JUDICIAL DECISIONS EXPLAINING THE TERMS OF 'FAIR MARKET VALUE' AS WELL AS 'FULL VALUE OF CONSIDERATION', I AM OF THE CONSIDERED VIEW THAT NO CAPITAL GAIN UNDER THE I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 26 CIRCUMSTANCES CAN BE LEVIED ON THE FAIR MARKET VALUE AS ARRIVED AT BY THE ASSESSING OFFICER FOR WANT OF ANY SUPPORTING LEGAL PROVISIONS. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.64,13,00,000/ - AS SHORT TERM CAPITAL GAIN IS DELETED AND THE GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 30 . DURING T HE COURSE O F APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, LD. COUNSEL HAS CONTENDED THAT ASSESSING OFFICER HAS MADE THIS ADDITION ON ASSUMPTION BASIS WITHOUT ANY RELEVANT MATERIAL AND NOT CONSIDERED THE ACTUAL CONSIDERATION RECEIVED ON SALE OF LAND BY THE ASSESSEE. 31 . W E HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD CAREFULLY. B EFORE THE THUNDER BIRD RESORTS CAME INTO P ICTURE, KETAN PATEL GROUP HAD A CQUIRED LAND, GOT IT REGISTERED IN THE NAME OF THE COMPANY, VARIOUS APPROVALS WERE TAKEN AND THE CONSTRUCTION OF THE SAID PROJECT WAS ALREADY STARTED. SUBSEQUENTLY , THE COMPANY HAD DECIDED TO PURCHASE A SUITABLE LAND FOR IT S PROJECT FOR CONDUCTING HOTEL BUSINESS AND AFTER RECEIVING A PROPOSAL FROM MRS. CHANCHALBEN D. PATEL WHO HAD OFFERED TO SELL HER LAND TO THE COMPANY IN RETURN OF SHARES OF THE SAID COMPANY. THE M ARKET VALUE OF THE SAID LAND WAS DETERMINED BY THE APPROVAL VALUER AT RS. 5, 81,00000 AND AFTER NECESSITY APPROVAL OF THE BOARD , THE COMPANY HAD ALLOTTED 58,10,000 SHARES AS FULLY PAID UP SHARES OF RS.10 EACH TO MRS. CHANCHALBEN D. PATEL THEREAFTER, NECESSITY APPROVALS FROM GOVERNMENT/ SEMI GOVERNMENT BODIES WER E DERIVED AND THE PROJECT OF THE COMPANY WAS DEVELOPING VERY FAST. LOOKING TO THE FUTURE PROSPECTS AND EARNINGS OF THE PROJECT, THUNDER BIRD GROUP DECIDED TO JOIN IN AS BUSINESS PARTNERS. IT IS NOT ICED THAT THE ASSESSEE HAS SOLD HER LAND TO THE COMPANY, M/S DAMAN HOSPITALITY PVT. LTD. VIDE SALE DEED DATED 4 TH APRIL, 2008 FOR THE CONSIDERATION OF RS. 5.81 CRORES. THE ASSESSING OFFICER HAS NOT REBUTTED THE SALE INSTANCES. THE ASSESSING OFFICER HAS NOT MADE REFERENCE TO DVO FOR ASCERTAINING ACTUAL FAIR MAR KET VALUE OF LAND, WHICH CAN BE USED FOR CORROBORATION PURPOSE. NO EVIDENCE THAT THEY HAVE RECE IVED ANY UNDISCLOSED RECEIPTS. ON OUR MIND, NO EVIDENCE PROCESSED BY THE ASSESSING TO RECORD A CONCURRENT FINDING OF I.T.A NOS. 1445/AHD/2013, 3288/AHD/2014 & 1918/AHD/2016 A.Y. 2009 - 10 PAGE NO ACIT/ITO VS. THREE DIFFERENT ASSESSEES 27 THE FACT THAT THE ASSESSEE HAVE RECEIVED UN DISCLOSED RECEIPTS AND SELLER HAVE PAID SOMETHING IN CASH OVER AND ABOVE THE ONE STATED IN THE SALE DEED. NO EVIDENCE WAS PRODUCED TO ESTABLISH THE FACT. I T IS NOTICED THAT THERE IS NO MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS SOLD THE LAND FOR MORE THAN THE PRICE AS PER SALE DEED AND JUST ON PRESUMPTION BASIS THE ASSESSING OFFICER HAS ESTIMATED THE VALUE OF LAND IN A GENERAL MANNER AT HIGH PRICE WITHOUT ANY BASIS, THEREFO RE, WE DO NOT FIND ANY MERIT IN THE ADDITION MADE BY THE ASSESSING OFFICER, THEREFORE, THE FINDING OF THE LD. CIT(A) IS JUSTIFIED. THIS GROUND OF THE REVENUE IS DISMISSED. 32. IN THE RESULT, ALL THE THREE ITA APPEAL NOS. 1445/AHD/2013, 3288/AHD/2014 & 1 918/AHD/2016 FILED BY THE REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 2 0 - 12 - 201 8 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /12 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,