Shri Shivajirao R.Chavan, Ahmedabad V. The Income tax Officer, Ward-13(2), Ahmedabad

ITA 1578/AHD/2006

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7688 (ITAT-AHMEDABAD)
• Duration Of Justice: 17 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-01-2024
• Assessment Year: 2001-2002
• Appeal Filed On: 15-06-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Source of fund
• Section: 147

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ अहमदाबाद यायपीठअहमदाबाद यायपीठ अहमदाबाद यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.1578/Ahd/2006 Assessment Year : 2001-02 Shivajirao R. Chavan M-327, Sector 4, K.K. Nagar Opp: Water Tank, Ghalodia Ahmedabad. Vs. ITO, Ward-13(2) Ahmedabad. Assessee by : Shri Sakar Sharma, AR Revenue by : Shri C.S. Sharma, Sr.DR सुनवाई क तारीख/D a t e o f He a r in g : 25 /0 1 / 2 0 2 4 घोषणा क तारीख /D a t e o f P r o no u nc e me nt : 2 4 / 0 4 / 2 0 2 4 आदेश आदेशआदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER This appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-XX, Ahmedabad (in short referred to as “ld.CIT(A)”) dated 22.03.2006 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Years 2001-02. 2. The assessee raised additional grounds challenging validity of the assessment framed under section 147 of the Act. 3. At the outset, the ld.counsel for the assessee stated that he would not want to press the additional ground, therefore, at this stage of admissibility itself of the additional grounds the same is not considered. The additional ground raised by the assessee is accordingly not admitted for adjudication. ITA No.1578/Ahd/2006 2 4. Before proceeding to take up the grounds raised by the assessee in its appeal, it is relevant to bring out the facts leading to the assessment framed on the assessee. The assessee, late Shri S.R. Chavan was subjected to action by the CBI of Gandhinagar, being a government employee, and it was revealed that he had accumulated assets disproportionate to his known sources of income. On the basis of the inquiry made during this search by the CBI and the reports of the CBI, reassessment proceedings was initiated on the assessee, resulting in various additions being made to his income. Additions confirmed by the ld.CIT(A) have been challenged before us in various grounds raised before us. 5. The ground no.1 raised by the assessee reads as under: “1. The Ld. CIT (A) erred in law and on facts of the case in confirming the addition of Rs.3,05,000/- on account of rental income earned on the immovable properties held in the hands of the appellant despite the fact that the respective owners have shown the rental income in their I.T.Returns.” 6. In the above grounds, the assessee has challenged the addition made on account of rental income earned on immovable properties owned by his family members treating them to be benami properties of the assessee. The property is Ratna Jyoti Complex which was purchased in 1998-99 and treated as unexplained investment of the assessee in the assessment framed for the said year. The property was registered in the name of three co-owners, R.M Chavan, Shakuntalabai R . Chavan and Usha N .Pol, the father, mother and sister of the assessee respectively. Rent of Rs.7385/- per month received in the hands of all the three owners, amounting in all to Rs.2,65,860/- for the year, was treated as rental income of the assessee. Further rental income of Rs.40,000/- earned from Riddhi Siddhi Cellar, claimed to belong to his father Sh.RM Chavan, was also treated as income of the assessee. Thus total addition of ITA No.1578/Ahd/2006 3 Rs.3,05,000/- was made to the income of the assessee on account of rental income earned from aforestated properties owned by his family but held to be benami of the assessee. 7. The ld.counsel for the assessee contended before us that this rental income had been disclosed by the owners of the property in their returns, and the same had not been disturbed or disputed till the date. Our attention was drawn to evidence in this regard placed before us being copies of Income Tax Returns of all the owners of the said properties, i.e Sh. R. M Chavan, Smt Shakuntala Chavan & Mrs. Usha Pol , for the impugned year disclosing rental income earned from Ratan Jyoti Complex and Riddhi Siddhi Cellars wherever applicable. The said evidences were placed at P.B Page No.3, 6,& 10. Copy of municipal Tax Bill of Ratan Jyoti complex revealing owners name as above was also placed before us at P.B page 11. Attention was also drawn to the submissions made to the Ld.CIT(A) in this regard placed at P.B 51 to 61. The ld.counsel for the assessee contended that in his statement recorded during search by the CBI, the assessee had stated all the facts relating to these properties, as having been purchased by the respective owners and even all sources of purchases was revealed to the CBI. It was also stated in the statement that all the documents for the acquisition of the property and even bank documents for procuring loans for the purpose of the property were executed by the owners of the property, and they being the assessee’s relatives, and the assessee had no role to play in them at all. Our attention was drawn to PB Page No.57 to 61 being copy of the statement recorded of the assessee by the CBI search team, stating the aforesaid mentioned facts. 8. The ld.counsel for the assessee stated that the Hon’ble Kerala High Court in the case of CIT Vs. K.Mahim Udma, reported on (2000) ITA No.1578/Ahd/2006 4 108 TAXMAN 52 (Ker) had categorically held that the burden of showing that a particular transaction is benami and the owner is not real owner, always vests on person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of definite character, which would either directly prove facts of benami or establish circumstances unerringly and reasonably raising an inference of that fact. Copy of the order was placed before us. Our attention as also drawn to para 4 of the said order, which reads as under: “4. On consideration of the factual aspects, the Tribunal observed that there was no material to show that the assessee made investment for the property in question and/or regarding benami nature of transaction. Certain factual aspects were highlighted by the revenue, which were analysed in detail by the Tribunal to conclude that the revenue had failed to prove that the assessee was the real owner of the concerned properties. The Tribunal considered the relevant factual aspects. In the case at hand, ordinary presumption of law is that the apparent state of facts is real unless the contrary is proved and, therefore, the burden of proving that a transaction is sham or that the person in whose name the property stands is not the real owner but is only a benamidar for another, is on the taxing authorities. For determining the question no absolute formulae or acid test, uniformly applicable to all situations, can be laid down. Yet, in weighing the probabilities and for gathering the relevant indicia, Courts are usually guided by the following circumstances :- (1) the source from which the purchase money came, (2) the nature and possession of the property, after purchase, (3) motive, if any, for giving the transaction a benami colour, (4) the position of the parties and the relationship, if any, between the alleged real owner and benamidar, (5) custody of the title deeds after the sale, and (6) conduct of the parties concerned in dealing with the property after the sale. The above indicia are not exhaustive and their efficacy varies according to the facts of each case. Reference was made to the statements of various persons who claimed to be in possession of the property for the purpose of showing that they were the real owners.” 9. It was pointed out that this proposition was reiterated by the Hon’ble Apex Court in the case of Smt. P. Leelavathi (D) by LRs., vs. V. Shankarnarayana Rao (D) by LRs. In Civil Appeal No.1099 of 2008 dated 9.4.2019. Copy of the order was placed before us. ITA No.1578/Ahd/2006 5 The ld.DR however stated that the addition was made on the basis of the report of CBI, consequent to search conducted on the assessee and therefore, is justified. 10. We have heard the rival contentions and gone through the orders of the authorities below. The issue for adjudication is relating to addition made on account of rental income of Rs,3,05,000/- earned from properties owned by relatives of the assessee which were treated as benami of the assessee. The basis for treating the same as benami property of the assessee is the CBI search conducted on the assessee resulting in a preliminary report being prepared by the CBI making out a case of assets owned by the assessee disproportionate to his source of income. The ITAT has passed order in the case of the assessee pertaining to A.Y 1996-97 to A.Y 2000-2001 in ITA No.435/ Ahd/2005 & others dated 05/02/24 from which certain pertinent facts were noted by us. The order reveals that CBI had filed charge sheet based on a preliminary report prepared by it making out a case of disproportionate assets owned by the assessee. That this case was subsequently dropped on the death of the assessee during the pendency of proceedings before the court where charges were to be framed. 11. Thus, it is evident that the case of the Revenue of the impugned properties being benami of the assessee rests merely on the preliminary report of the CBI which did not see the light of day by framing concrete charges against the assessee. 12. Further, we have perused the statement recorded by CBI of the assessee placed before us at P.B 57-61 and as rightly pointed out by the Ld.Counsel the assessee denied having anything to do with ITA No.1578/Ahd/2006 6 the said properties, he stated the names of the owners of the properties and also revealed sources from where investment was made by them. None of the above facts stated by the assessee was contradicted by the Revenue at any point in time. The entire case of the Revenue rests on the CBI Charge sheet framed by the CBI which was subsequently dropped. 13. It is evident therefore that the Revenue has failed miserably to prove that the assessee was a benami owner of the impugned properties. The assessee therefore cannot be treated as owner of the properties. The decision referred to by Ld.Counsel for the assessee of the Hon’ble Kerala High Court in K. Mahim Udma (supra) casting an onerous burden on the party alleging benami transaction aptly covers the issue in hand, in favour of the assessee. In view of the same therefore there is no occasion to tax rental income earned therefrom in the hands of the assessee. 14. Further the fact that rental income from these properties was returned in the hands of respective owners has been accepted by the Revenue all along, also strengthens the case of the assessee. In view of the above we hold that the rental income of Rs.3,05,000/- cannot be treated to be that belonging to the assessee. Addition made of the same is directed to be deleted. 15. Ground of appeal No.1 is allowed. 16. Ground No.2 raised is as under: “2. The Ld. CIT (A) erred in law and on facts of the case in sustaining the addition of Rs.11,471/- being income earned by Shri J.R.Pawar on his ITA No.1578/Ahd/2006 7 investment with D.D. EEnterprise in the hands of the appellant although Shri J.R.Pawar has shown the income in his I.T.Return & paid tax thereon.” 17. The issue raised in the above grounds relates to alleged badla income earned by the assessee from DD Enterprises amounting to Rs.11,471/-. 18. The ld.counsel for the assessee first drew our attention to the document in which the said transaction was reflected placed at PB page no.12B. Referring to the same, he pointed out that the document was of DD Enterprise, and it reflected the account of one Shri J.R. Pawar. The ld.counsel for the assessee thereafter pointed out that the income from DD Enterprise had been returned to tax by Shri J.R. Pawar in his return of income filed for the assessment year 2001-02, and computation of return of income was placed at pager no.50. It was pointed out that Shri J.R. Pawar was in badla business, and income from the same had been reflected in its return of income. This badla business being carried out in M/s DD Enterprises. 19. Our attention was also drawn to the affidavit furnished by Shri J.R. Pawar stating that the assessee was not involved with him in his badla business. The ld.counsel for he assessee, therefore, stated that in view of the above evidences, there was no reasons to treat the amount of Rs.11,477/- as income from badla business of the assessee. The ld.DR, however, relied on the order of the ld.CIT(A) at para 12.1 as under: 21. We have heard the rival contentions. As noted above in earlier part of our order the entire case of the Revenue rests on the CBI charge sheet which ultimately did not culminate in any charges being framed on the assessee. Therefore, not much credence can be given ITA No.1578/Ahd/2006 8 to allegations levelled on the assessee in the charge sheet. Besides we have noted that Sh. Pawar filed an affidavit stating on oath that all income from badla activities carried out in D.D Enterprises related to him and had nothing to do with the assessee. The Revenue has been unable to point any infirmity in the affidavit of Shri Pawar. Even income from the badla business carried out in D D Enterprises was shown to be duly returned to tax by the said entity ,being proprietorship of Sh.Pawar. In the light of the above facts we do not find any substance in the addition made by the Revenue of income badla of Rs.11,477/-. The said addition is therefore deleted. 22. Ground of appeal No.2 is allowed. 23. Now we take up ground no.3 and 4 : 24. Ground No.3 and 4, it was stated related to the addition made to the income of the assessee on account of income earned from investments, which were held to be benami of the assessee. The ground no.3 being in relation to interest income earned on FDR being Rs.84,445/- though in the names of the family members of the assessee being benami of the assessee, treated the income to be benami income of the assessee. Ground no.4, related to the interest earned on Post-Office MIS of Rs.26,520/-. The investment being in the name of father of the assessee, Shri R.M. Chavan, treated to be benami of the assessee. Ground No.3 and 4 reads as under: ITA No.1578/Ahd/2006 9 “3. The Ld. CIT (A) erred in law and on facts in sustaining the addition of Rs.84,445/- being interest earned on FDRs made by the appellant and the other family members. The Ld. CIT(A) though taken cognizance of Rs.75,063/- offered by the appellant in the return of income but failed to give credit of the same while adjudicating the appellate order. 4. The Ld. CIT (A) erred in law and on facts in sustaining the addition of Rs. 26,5207- in the hands of appellant being Post Office MIS interest earned by Shri R M Chavan and offered in his I.T. Return even though the CIT(A) allowed the principal amount of Rs.2,04,000/- investment by late Shri R. M. Chavan in A.Y. 2000-01 vide para 11.3 page 9 of her appellate order.” 25. The ld.counsel for the assessee contended that his arguments vis-à-vis the impugned addition not being treated as income, was identical to that made in ground no.1, which related to income earned from investment in house property treated as benami of the assessee. He elaborated by stating that his pleadings taken in ground no.1 with the onus of proving that the assessee was benami owner of the investment, laid heavily on the Department, which had made this allegation on the assessee, and the same was not discharged in the present case, as the entire case of the Revenue merely rested primarily on the report of the CBI which did not see light of the day, by way of any charges being framed on the assessee in disproportionate asset case made out by the CBI on the assessee, since the said case was dismissed on the death of the assessee during the pendency of the proceedings before the CBI Court. He relied on the decision of the Hon’ble Kerala High Court in the case of K. Mahima Udma (supra), as referred to in ground no.1 above. 26. His contention was also to the effect that, the all such income, which were alleged to be relating to the assessee, were disclosed by the respective owners of the investments, which it was earned, in their returns filed for the said year, which was demonstrated to both the authorities below, and the said fact was accepted by the Department with no change in the stand till date. ITA No.1578/Ahd/2006 10 The ld.DR relied on the order of the ld.CIT(A). 27. We have heard contentions of both the parties. Since pleadings of the assessee admittedly with respect to the addition made to the income of the assessee on account of interest earned on FDRs. and Post-Office MIS owned by the family members of the assessee but treated to be benami investment of the assessee, is identical to that made in ground no.1 with respect to rental income earned from the alleged benami properties of the assessee our decision rendered in ground no.1 will squarely apply to the impugned issues also. We have dealt extensively with the contentions made by the assessee in ground no.1, at para 14 of our order above following which we hold that there is no case for treating the impugned income as that related to the assessee, since Revenue has been unable to discharge its onus of proving that these investments were benami of the assessee. 29. In view of the same, the addition made of interest income earned from FDR amounting to Rs.84,445/- and interest earned on Post Office MIS amounting to Rs.26,250/- are directed to be deleted. Thus, ground no.3 and 4 are allowed. 30. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 24 th April, 2024 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 24/04/2024 vk*