The ACIT, Central Circle-3, Surat V. M/s. Patel Enterprise, Surat

ITA 1790/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1706 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: KK SHAH
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Principle of natural justice; Opportunity of cross examination; Third party statement
• Section: 44AD; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.1790/AHD/2008 [ASSTT.YEAR 2006-07] DY. COMMISSIONER OF INCOME-TAX -VS M/S. PATEL ENTERPRISE, CENTRAL CIRCLE-2, SURAT G-3, RENUKA BHAVAN, OPP. SWAMINARAYAN SOCIETY, BOMBAY MARKET UNA GAM ROAD SURAT PAN NO.AAJFP0205D (APPELLANT) (RESPONDENT) ITA NO.3415/AHD/2008 [ASSTT.YEAR 2006-07] ASSTT. COMMISSIONER OF INCOME-TAX -VS- SHRI JAYAN TIBHAI T HIRPARA CENTRAL CIRCLE-2 SURAT 1-2, SARITA VIHAR SOCIE TY, OPP. RENUKA BHAWAN, PUNA BOMBAY MKT. ROAD, SURAT, PAN NO.AADPM7733E (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ALOK JOHRI, CIT-DR ASSESSEE BY: SHRI K.K. SHA H, AR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THESE ARE TWO REVENUES APPEALS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-II, AHMEDABAD IN APPEAL NOS. C IT(A)-II/CC.3/198- 262/07-08 BY DIFFERENT DATE I.E. 12-03-2008 & 23-07 -2008 FOR ASSESSMENT YEAR 2006-07. FIRST WE WILL DEAL WITH REVENUES APPEAL IN ITA NO. 3415/AHD/2008. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS:- ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 2 1. THE CIT(A) HAS ERRED IN LAW AND O FACTS OF THE CASE BY DELETING THE ADDITION OF RS.91,20,320/- MADE AS UNACCOUNTED INCO ME EARNED FROM JALWANT TOWNSHIP PROJECT, WITHOUT CONSIDERING THE S TATEMENT OF A CLOSE BUSINESS ASSOCIATES ON OATH. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLD ING THAT OPPORTUNITY TO CROSS-EXAMINE HAS NOT BEEN OFFERED TO THE ASSESS EE AND PRINCIPLE OF NATURAL JUSTICE HAVE BEEN VIOLATED. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED INCOME EARNED FROM C ONSTRUCTION PROJECT RELYING THE CASE LAW OF KISHANCHAND CHELARA M VS. CIT 25ITR 713 (SC). THE DECISION OF THE APEX COURT IN T HE CASE OF KISHANCHAND CHLARAM VS. CIT 25 ITR 713 (*SC) THE FA CTS OF THE PRESENT CASE ARE DISTINGUISHABLE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE SU BSEQUENT TO ACTION U/S.132 OF THE IT ACT IN ITS CASE FILED RETURN DECL ARING INCOME OF RS.1,00,81,270/- INCORPORATING THE AMOUNT OF RS.1 C RORE, WHICH WAS DISCLOSED BY HIM DURING THE SEARCH. THE ASSESSING OFFICER IN HIS ORDER NOTED THAT ASSESSEE HAD INDIVIDUALLY DEVELOPED JALWANT TOWNSH IP AND HAD DECLARED HIS UNDISCLOSED INCOME FROM THIS TOWNSHIP AT RS.70 LAKH . HOWEVER, HIS CLOSE ASSOCIATE A PARTNER, SHRI PARESH KALSARIYA, IN HIS STATEMENT AVERRED THAT THE ASSESSEE HAD NOT DISCLOSED THE CORRECT RECEIPTS. TH E ASSESSING OFFICER THEREFORE SERVED NOTICE TO ASSESSEE. ASSESSEE FILED DETAILED REPLY WHICH HAD BEEN REPRODUCED BY ASSESSING OFFICER IN HIS ASSESSM ENT ORDER. THE AO IN HIS SHOW-CAUSE LETTER REFERRED TO THE STATEMENT OF SHRI PARESH KALSARIYA TO POINT OUT THAT EACH FLAT IN THE JALWANT TOWNSHIP MEASURED 120 SQ.FT AND EACH SHOP 2.06 SQ.FT. THE SALE VALUE ON WHICH WAS AT RS.4.80 LAKH AND RS.2.37 LAKH RESPECTIVELY. THUS, THE TOTAL VALUE / TURNOVER FOR 32 FLATS AND 16 SHOPS IN THIS JALWANT TOWNSHIP CAME TO RS.57.74 CRORES AND PROFIT THEREFROM @ 20% OF RS.1.61 CRORES, WHEREAS THE VALUE / TURNOVER SHOWN BY ASSESSEE WAS AT RS.7.20 CRORES AND PROFIT AT RS.70 LAKH @ 9.7% (NET PROFIT) ONLY. THE AO, THEREFORE HELD THAT ADDITION FOR BALANCE PROFIT I.E . RS.91.20 LAKH WAS REQUIRED TO BE ADDED. IN HIS REPLY TO THIS SHOW-CAUSE NOTICE , THE ASSESSEE POINTED OUT THAT ADOPTION OF THE TOTAL VALUE AND PROFIT THEREUP ON AT 20% AS INDICATED BY AO ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 3 WERE NEITHER APPROPRIATE NOR JUSTIFIED ON VARIOUS G ROUNDS. IT WAS SUBMITTED THAT THE STATEMENT OF SHRI PARESH KALSARIYA HAD NO RELEVANCE/EVIDENTIARY VALUE ADMITTEDLY BEING A THIRD PARTY, WHO WAS NOT I NVOLVED IN THE PROJECT EITHER AS A PARTNER OR AS A SELLER. THE PROJECT WAS IN A B ACKWARD AREA FOR LOW INCOME GROUPS. THE VALUE OF FLATS ON THE BACK SIDE AND ON THE UPPER LEVEL COULD NOT BE TAKEN AS SAME FOR VALUE OF FLATS ON THE FRONT SIDE/ LOWER LEVEL. AS PER U/S 44AD THE PROFIT SHOULD HAVE BEEN TAKEN AT 8% ONLY, WHERE AS THE NET PROFIT SHOWN BY ASSESSEE CONSIDERING THE DISCLOSURE OF RS.70 LAKH W AS HIGHER I.E. 9.7%. IT WAS FURTHER SUBMITTED THAT AO HAS NOT CITED ANY COMPARA TIVE INSTANCES IN WHICH THE NET PROFIT HAD BEEN 20% AS TAKEN BY THE AO IN A SSESSEES CASE. IT WAS FURTHER ARGUED THAT IT HAS BEEN HELD JUDICIALLY THA T EVEN IF THE FACT OF ON-MONEY RECEIPTS WAS ACCEPTED THEN ALSO SUCH RECEIPTS CAN N OT BE CONSIDERED ENTIRELY AS INCOME. THE DECISIONS REPORTED IN THE CASE OF ABHISHEK CORPORATIONS, 158 CTR 374, 64 TTJ 543 (AHD) AND OTHER DECISIONS OF IT AT AHMEDABAD WERE FURNISHED BY ASSESSEE IN SUPPORT OF ITS REPLY TO TH E ASSESSING OFFICER. THE AO HOWEVER, WAS OF THE OPINION THAT THE CONTENTIONS OF ASSESSEE CONTAINED IN HIS REPLY WERE NOT ACCEPTABLE. ACCORDING TO HIM, SHRI P ARASH KALSARIYA WAS CLOSE ASSOCIATE WITH THE ASSESSEE AND HAD CONSTRUCTED B BLOCK OF THE JALWANT TOWNSHIP I.E. THE PROJECT DEVELOPED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY AND PROFIT RATE I.E. 10% FOR FLATS AND 20% FOR SHOP S WERE ALSO MODEST AND ACCEPTED BY DIFFERENT JUDICIAL AUTHORITIES, WHOSE D ECISIONS WERE QUOTED BY ASSESSEE. ASSESSING OFFICER WAS OF THE VIEW THAT TH E DECISIONS RELIED BY THE ASSESSEE WERE DISTINGUISHABLE ON FACTS, THEREFORE N OT APPLICABLE OF THE ASSESSEES CASE. THE ARGUMENT OF ASSESSEE THAT DISC LOSED/OFFERED INCOME OF RS.99 LAKH SHOULD BE ACCEPTED AS BEING FROM THE PRO JECT WAS ALSO NOT ACCEPTED. ACCORDING TO HIM, IT WAS AN AFTERTHOUGHT. THE AO THEREFORE FELT THAT RS.91,20,320/- WAS THE UNDISCLOSED INCOME FROM THE PROJECT NAMELY JALWANT TOWNSHIP AND ADDED TO THE INCOME OF THE ASSESSEE. 4. BEFORE LD. CIT(APPEALS) ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAD ESTIMATED THE TURNOVER AND THE NET PROFIT OF ASSESS EE ON THE BASIS OF THE ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 4 STATEMENT OF A THIRD PARTY, SHRI PARESH, WHO WAS NE ITHER A PARTNER TO THE CONSTRUCTION NOR HE WAS ENGAGED IN THE SALES OF THE FLATS AND PROJECT WAS MADE FOR LOW INCOME GROUP, I.E. LABOURS OF DIAMOND FACTORIES AND WOULD NOT HAVE FETCHED SUCH HIGH PROFIT CONSIDERING ITS LOCAT ION, CONSTRUCTION QUALITY ETC. THE AO HAS INCORRECTLY MENTIONED THAT SUCH HIGH PRO FIT HAS BEEN ACCEPTED BY JUDICIAL AUTHORITIES IN THE DECISIONS CITED BY ASSE SSEE. THIS WAS FACTUALLY INCORRECT AS IN ALL CITED INSTANCES, THE NET PROFIT RANGED FROM 5 TO 10% AND THERE IS NO EVIDENCED OF ANY ON-MONEY EARNED BY ASS ESSEE AND THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF K.P. VARGHESE APPLIED. THE ASSESSEE HAD INITIALLY ATTRIBUTED RS.7 0 LAKH OF HIS DISCLOSURE TO INCOME FROM JALWANT TOWNSHIP. THE ASSESSEE HAD HOWE VER MADE A TOTAL DISCLOSURE OF RS.1 CRORE OF WHICH THE INCOME OF RS. 1 LAKH WAS FROM DALALI/RENTAL INCOME AND THE BALANCE OF RS.99 LAKH WAS ONLY FROM CONSTRUCTION AT THE TIME OF INITIAL DISCLOSURE ITSELF IN HIS STA TEMENT U/S.132(4) OF THE I.T. ACT. THE STATEMENT THAT DISCLOSURE OF RS.30 LAKH IS ON A CCOUNT OF INCOME EARNED FROM/BY DIFFERENT FAMILY MEMBERS WAS GENERAL AND ON THE SPUR OF THE MOMENT. HOWEVER, AFTER CONSIDERING ALL DETAILS/FACTS, AT TI ME OF FILING OF RETURN, THE ENTIRE DISCLOSURE OF RS. 1 CRORE WAS MADE IN CASE OF THE A SSESSEE AND THERE WAS NO SEPARATE ASSESSMENT OF RS.30 LAKH IN THE NAME OF AN Y FAMILY MEMBERS. THUS, THE ENTIRE DISCLOSURE OF RS.99 LAKH SHOULD HAVE BEE N ACCEPTED AS OF ASSESSEE. THERE IS NO EVIDENCE OF TURNOVER BEING HI GHER THEN THAT SHOWN EVEN IF 10% PROFIT IS ASSUMED THEN ALSO THE EARNED UNDIS CLOSED INCOME WOULD HAVE BEEN AT RS.72 LAKH WHICH WAS COVERED BY THE DISCLOS URE OF RS.99 LAKH. THE SEARCH DID NOT YIELD ANY EVIDENCE TO SUGGEST THAT S ALE PRICE ADOPTED BY ASSESSING OFFICER AS PER THE STATEMENT OF SHRI PARE SH KALSARIYA WAS CORRECT. THE BARE STATEMENT OF A THIRD PARTY IN ABSENCE OF P OSITIVE EVIDENCE HAD NO EVIDENTIARY VALUE. SIMILAR ADDITION MADE IN CASE OF M/S PATEL ENTERPRISE, A SISTER CONCERN ON THE BASIS OF STATEMENT OF SHRI PA RESH KALSARIYA HAD BEEN DELETED BY LD. CIT. ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 5 5. AFTER TAKING INTO CONSIDERATION, THE SUBMISSION OF THE ASSESSEE LD. CIT DELETED THE ADDITION BY OBSERVING AS UNDER:- 9. THE CONTENTIONS WERE CAREFULLY CONSIDERED. IT I S SEEN THAT IN HIS STATEMENT U/S.132(4), RECORDED ON 7/3/2006, THE APP ELLANT IN REPLY TO Q. NOP.38 STATED THAT HE HAD CONSTRUCTED 20 BUILDINGS, EACH WITH 16 FLATS I.E. TOTAL 320 FLATS. EACH FLAT WAS ABOUT 300 SQ.FT . IT WAS STATED THAT AN INCOME OF RS.70 LAKHS HAD BEEN EARNED FROM THIS PRO JECT WHICH WAS INVESTED IN FURNITURE/VALUABLE ITEMS AND IN THE CON STRUCTION OF HIS BUNGALOW. THE APPELLANT, IN Q. NO.39 WAS ASKED IF H E HAD ANY OTHER INCOME TO DISCLOSE. IN RESPONSE THE APPELLANT STATE D THAT HE WAS DISCLOSING FURTHER AMOUNT OF RS.30 LAKHS FOR SELF A ND ON BEHALF OF HIS FAMILY MEMBERS AND INVESTMENT OF WHICH HAS BEEN IN BUILDING, FURNITURE/VALUABLES/HOUSEHOLDS EXPENSES, ETC. HE ST ATED FURTHER THAT THE BIFURCATION (OF THE INVESTMENT), ASSET/EXPENDITURE/ ASSESSEE WISE WOULD BE GIVEN LATER IN 2 TO 3 DAYS. IN ANSWER TO Q. NO. 40 THE ASSESSEE STATED THAT THE DISCLOSURE OF RS. 1 CRORE WAS APART FROM THE REGULAR INCOME. THE A.O HAS FELT THAT ONLY RS.70 LAKHS CAN BE CONSIDERED AS DISCLOSED IN RESPECT OF THIS PROJECT IN VIEW OF THE INITIAL RESPONSE. HOWEVER, THIS DISCLOSURE WAS MODIFIED BY THE APPELL ANT IN HIS ANSWER TO THE NEXT QUESTION AND THOUGH THE APPELLANT DID MENT ION THAT THIS DISCLOSURE, PARTIALLY, WAS ON BEHALF OF FAMILY MEMB ER ALSO, IT IS SEEN THAT IN THE RETURN OF INCOME FILED, THE ENTIRE DISCLOSUR E WAS INCORPORATED IN THE HANDS OF THE APPELLANT ONLY. IT IS SEEN FURTHER THAT THE FACTS AND CIRCUMSTANCES IN THE CASE OF THE APPELLANT WERE SIM ILAR TO THE FACTS AND CIRCUMSTANCES IN THE CASE OF A SISTER CONCERN, M/S. PATEL ENTERPRISES. IN THE CASE OF M/S. PATEL ENTERPRISES FOR A.Y 2006-07 THE DISCLOSED TURNOVER/SALE PRICE OF RS.6.15 CRORES, HAD BEEN TAK EN BY THE A.O AT THE ENHANCED VALUE OF RS.8.65 CRORES, ON THE BASIS OF T HE STATEMENT OF THE SAME, SHRI PARESH KALSARIA. SIMILARLY, THE A.O HAD TAKEN AN ENHANCED PROFIT OF RS.1.55 CRORES AS AGAINST DISCLOSED PROFI T OF RS.1.30 CORES AND HAD MADE THE ADDITION OF THE DIFFERENTIAL AMOUNT OF PROFIT I.E. RS.25.84 LAKHS. IN THE CONSEQUENT APPEAL BEFORE THE CIT(A)-I I, IN APPEAL NO. CIT(A)-II/CC./198/07-08, THE CIT(A)-II HELD THAT TH E ESTIMATE OF THE TURNOVER ON THE BASIS OF A THIRD PARTY STATEMENT (W HICH WAS NOT CONFRONTED) AND WHEN THE THIRD PARTY WAS NOT AN ASS OCIATED PERSON, HAD NO EVIDENTIARY VALUE. THE CIT(A) VIDE ORDER DATED 1 2/3/2008 IN THE AFOREMENTIONED APPEAL IN THE CASE OF A SISTER CONCE RN, HAD ACCORDINGLY DELETED THE ADDITION. IN THE CASE OF THE APPEAL, EV EN IF THE RATE OF PROFIT, AS ADOPTED BY THE A.O I.E. 10% FOR FLATS AND 20% ON SHOPS IS ADOPTED, THE PROFIT WOULD WORK OUT AS UNDER:- 10% PROFIT ON TOTAL SALES OF FLAT I.E. RS.7,20,00,000 RS.72,00,000 20% PROFIT ON TOTAL SALES OF SHOPS ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 6 I.E. RS.38,01,600 RS. 7,60,320 RS.79,60,320/- THE APPELLANT HAS ALREADY DISCLOSED RS.1 CRORE AS I NCOME AND SO THE ESTIMATE OF PROFIT GETS COVERED BY THE TOTAL DISCLO SURE. THUS ON THE BASIS OF THE JUDICIAL DECISIONS, FACTS, AND FOLLOWING THE ORDER OF THE CIT(A)-II, DATED 12/3/2008 FOR A.Y. 2006-07 IN THE CASE OF M/S PATEL ENTERPRISES, AN ASSOCIATED CONCERN, THE ADDITION MADE BY THE A.O IS NOT SUSTAINABLE AND IS DELETED. 6. AGGRIEVED BY THIS ORDER, REVENUE IS NOW IN APPEA L. 7. AT THE TIME OF HEARING LD. CIT-DR PLACING HEAVY RELIANCE ON THE ORDER PASSED BY ASSESSING OFFICER FURTHER SUBMITTED THAT ASSESSEE HAS NOT KEPT ANY BOOKS OF ACCOUNT, THEREFORE ESTIMATION OF INCOME OF ASSESSEE ON THE BASIS OF STATEMENT OF A THIRD PARTY, WHO HAS ALSO DEVELOPED A SIMILAR PROJECT IN THE VICINITY OF THE ASSESSEES PROJECT IS QUITE JUSTIFI ED ON THE PART OF AO. THE ASSESSEE HAS SHOWN 9.2% NET PROFIT WHILE ITS SISTER CONCERN M/S. PATEL ENTERPRISES HAS SHOWN 15% NET PROFIT. THEREFORE, AT LEAST NET PROFIT SHOULD BE TAKEN AT 15% IN THE ASSESSEES CASE. 8. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND, REITERATED THE ARGUMENT ADVANCED BY HIM BEFORE LOWER AUTHORITIES A ND FURTHER SUBMITTED THAT NO ADDITION IS JUSTIFIED IN THE PROCEEDINGS U/S.132 (4) OF THE I.T. ACT IF NO MATERIAL IS FOUND/SEIZED IN THE SEARCH PROCEEDINGS. FOR MAKING THIS SUBMISSION, HE RELIED ON THE VARIOUS CASE LAWS. HE FURTHER SUBMITTED THAT NO ADDITION IS JUSTIFIED ON THE STATEMENT OF A THIRD P ARTY UNLESS THE ASSESSEE IS GIVEN AN OPPORTUNITY TO CROSS-EXAMINE HIM. FOR MAKI NG THIS SUBMISSION, HE RELIED ON THE CASE OF HEIRS AND LRS OF LATE LAXMANBHAI S PATEL V. CIT (2010) 327 ITR 290 (GUJ) AND KISHANCHAND CHELARAM V. CIT (1980) 125 ITR 713 (SC). CONCLUDING HIS ARGUMENT LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT ORDER PASSED BY LD. CIT(A) MAY KINDLY BE UPHELD. ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 7 9. LD. CIT-DR IN REPLY SUBMITTED THAT SHRI PARESH K ALSARIYA IS NOT A THIRD PARTY AS HE WAS INVOLVED IN THE PART DEVELOPMENT OF THIS PROJECT ALSO SO HE IS NOT STRANGER TO JALWANT TOWNSHIP PROJECT OF THE ASS ESSEE AND HIS STATEMENT SHOULD NOT BE SUMMARILY BRUSHED ASIDE. 10. HEARD BOTH THE PARTIES AND PERUSED THE CASE REC ORDS WE FIND THAT A SEARCH AND SEIZURE OPERATION TOOK PLACE IN THE CASE OF ASSESSEE AND DURING SEARCH OPERATION, ASSESSEE DECLARED A SUM OF RS.1 C RORE, WHICH WAS REFLECTED BY HIM IN HIS RETURN OF INCOME SHOWING TOTAL INCOME OF RS.1,00,81,270/-. THE ASSESSEE HAS SHOWN TOTAL VALUE OF THE TURNOVER OF T HE PROJECT AT RS.7.02 CRORES AND PROFIT AT RS 70 LAKH AT THE NET PROFIT R ATE OF 9.7%. THE ASSESSING OFFICER ENHANCED THE TURNOVER OF THE ASSESSEE TO 57 .74% ON THE BASIS OF THE STATEMENT OF SHRI PARASH KALSARIYA. HE ALSO ENHANCE D THE PROFIT OF ASSESSEE TO RS.1.61 CRORES BY ADOPTING NET PROFIT OF 20% AND MADE ADDITION OF DIFFERENTIAL AMOUNT OF RS.91.20 LAKH TO THE DECLARE D INCOME OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT DURING THE SEARCH AND SEIZ URE OPERATION NOTHING WAS FOUND TO SUGGEST THAT SALE PRICE ADOPTED BY AO AS P ER THE STATEMENT OF SHRI KALSARIYA WAS CORRECT. WE FURTHER FIND THAT THE SUB MISSION OF THE ASSESSEE BEFORE ASSESSING OFFICER THAT PROJECT WAS FOR LOW I NCOME GROUP IN A BACKWARD AREA AND THEREFORE WOULD NOT HAVE FETCHED THE HUGE AMOUNT ESTIMATED BY HIM HAS NOT BEEN REBUTTED BY AO BY BRINGING ANYTHING CO NTRARY ON RECORD. THE STATEMENT OF SHRI KALSARIYA COULD AT BEST HAVE BEEN THE BASIS FOR MAKING INQUIRIES ABOUT THE TURNOVER OF THE PROJECT AND PRO FITABILITY TO THE ASSESSEE FROM THIS PROJECT, BUT STATEMENT ITSELF WITHOUT ANY EVIDENCE TO SUPPORT CANNOT BE THE BASIS FOR MAKING THE ADDITION IN THE HANDS O F THE ASSESSEE. SINCE THE STATEMENT OF SHRI KALSARIYA IS THE ONLY BASIS FOR M AKING THE ADDITION. ASSESSING OFFICER SHOULD HAVE GIVEN THE OPPORTUNITY OF CROSS-EXAMINING SHRI KALSARIYA TO THE ASSESSEE. IN THE ABSENCE OF SUCH C ROSS-EXAMINE, THE STATEMENT LOOSES ITS EVIDENTIARY VALUE. IN VIEW OF THIS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) DELETING THE ADDITIO N AND THE SAME IS HEREBY UPHELD. ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 8 NOW COMING TO REVENUES APPEAL IN ITA NO.1790/AHD/2 008. 11. THE REVENUE HAS TAKEN FOLLOWING GROUNDS, WHICH ARE SIMILAR TO THE GROUNDS AS TAKEN BY IN ITA NO.3415/AHD/2008,:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.25,84,000 BASED ON THE STATEMENT GIV EN BY ONE OF THE KEY PERSONS OF THE GROUP THAT THEY DISCLOSE ONLY 60 % OF THE TURNOVER BY HOLDING THAT STATEMENT OF THIRD PARTY CAN NOT BE US ED AGAINST THE ASSESSEE WITHOUT AFFORDING ANY CROSS-EXAMINATION. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS, HAS WR ONGLY CONSIDERED THE KEY PERSONS OF THE ASSESSEE AS A THIRD PERSON WITHO UT CONSIDERING THE FACT THAT SHRI PARESH KALSARIA HAD GIVEN THE STATEM ENT DURING THE COURSE OF SEARCH IN THE CAPACITY OF A RESPONSIBLE PERSON O F THE ASSESSEE FIRM. 12. IN THIS CASE ASSESSEE HAS DISCLOSED TURNOVER/SA LE PRICE OF RS.6.15 CRORES, WHICH WAS ENHANCED BY ASSESSING OFFICER AT THE VALUE OF RS.8.65 CRORES ON THE BASIS OF STATEMENT OF SHRI PARASH KAL SARIYA. SIMILARLY, THE ASSESSING OFFICER HAD TAKEN AND ENHANCED PROFIT OF RS.1.55 CRORES AS AGAINST DISCLOSED PROFIT OF RS.1.30 CRORES AND MADE ADDITIO N OF THE DIFFERENTIAL AMOUNT OF PROFIT I.E. RS.25.84 LAKHS. IN THE APPEAL, CIT(A ) HELD THAT ESTIMATE OF TURNOVER ON THE BASIS OF A THIRD PARTY STATEMENT, W HICH WAS NOT CONFRONTED TO THE ASSESSEE AND WHEN THE THIRD PARTY WAS NOT AN AS SOCIATED PERSON HAD NO EVIDENTIARY VALUE. HE, THEREFORE DELETED THE ADDITI ON. 13. FOR THE REASONS GIVEN BY US IN ITA NO.3415/AHD/2008, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) DELETING THE A DDITION OF RS.25.28 LAKH AND THE SAME IS HEREBY UPHELD. 13. IN THE RESULT, APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 18 TH MARCH, 2011 SD/- SD/- ( G.D.AGARWAL ) ( D.K. TYAGI ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 18/03/2011 ITA NO.1790 & 3415/AHD/2008 A.Y. 2006-07 DCIT/ACIT CC-2 SRT V. M/S PATEL ENTERPRISE & SH JAYANATI BHAI T HIRPARA PAGE 9 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-II, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD