Shri Harshadbhai J Shah, Ahmedabad V. The ITO, Ward-4(2)(2), Ahmedbad

ITA 1844/AHD/2019

AI Insights

This case involves cross appeals by the assessee, Dr. Harshad J. Shah, and the Revenue against the order of the Commissioner of Income Tax (Appeals)-4, Ahmedabad. The primary issue revolved around the validity of the reopening of the assessment under Section 147 of the Income Tax Act and the subsequent additions made to the assessee's income concerning unexplained investments in agricultural land. The Assessing Officer had initially made substantial additions based on a MOU found during a search operation, which was later contested by the assessee. The CIT(A) reduced the additions after finding that only a portion of the land purchased by the assessee was covered under the MOU. The Tribunal's decision further narrowed the additions, aligning with the CIT(A)'s findings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125716 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 11-09-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 12-12-2019
• Other Referred Cases: Raymond Woollen Mills Ltd. v. ITO, Priya Blue Industries (P.) Ltd. v. ACIT, Kottex Industries (P.) Ltd. v. ACIT, Bharatkumar Kalubhai Ghadiya, Sanjay Baulal Surana, Harish Textile Engrs. Ltd v. DCIT, Standard Tea Processing Co. Ltd., B. Nagendra Baliga, CIT vs. Anjum M.H. Ghaswala & Others, A. Shivashankar vs. DCIT, Mani Square Ltd., Kantibhai Revidas Patel
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Income from undisclosed sources; Search and seizure; Additional evidence; Reason to believe
• Section: 32; 147; 131; 69; 12; 69B; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I. T .A . N o .1 84 4 / Ah d/2 0 1 9 ( A s se ss m e nt Y e a r : 20 11- 12 ) Ha r sh ad bh a i J . S ha h, Ga ya t r i X - R a y C li n ic H e al th C ar e, B lo ck N o . 5, O p p. Ne taj i Na ga r , Me g h a n in a g a r, Ah me da bad - 3 80 01 6 V s.Th e I nc o m e Ta x O f fic er , Wa r d- 4( 2) ( 2 ) , A h m e d a b ad [ P AN N o. A B I P S3 2 32 P ] (Appellant) .. (Respondent) I. T .A . N o .1 86 5 / Ah d/2 0 1 9 ( A s se ss m e nt Y e a r : 20 11- 12 ) I nc o me Ta x Of f ic e r , War d- 4 ( 2 ) (2 ), Ah me da bad V s.H ar s h a d bh ai J . Sh a h, G a yat r i X - R a y C li n ic H e a l th C a r e , B lo c k N o. 5 , Op p. N et a j in a g a r, M eg ha n in a g ar , A h m e d a b ad-3 80 0 1 6 [ P AN N o. A B I P S3 2 32 P ] (Appellant) .. (Respondent) Appellant by : Shri M. K. Patel, A.R. Respondent by: Shri M. Anand Kumar, Sr. D.R. D a t e of H ea r i ng 12.09.2023 D a t e of P r o no u n ce me nt 26.09.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These cross appeals has been filed by the Assessee and the Revenue against the order passed by the Ld. Commissioner of Income Tax(Appeals)-4, (in short “Ld. CIT(A)”), Ahmedabad in Appeal No. CIT(A)-4/10512/2018-19, vide order dated 25.10.2019 passed for Assessment Year 2011-12. 2. The Assessee has taken the following grounds of appeal:- ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 2 - “(1) That on facts, and in law, the learned CIT(A) has grievously erred in holding that the re-opening of assessment u/s 147 of the Act is valid. (2) That on facts and in law, the learned CIT(A) has grievously erred in partly confirming the addition of Rs.22,49,614/- made in respect of unexplained investment towards purchase of agricultural land. (3) The appellant craves leave to add, alter, amend any ground of appeal.” 3. The Revenue has taken the following grounds of appeal:- “1. Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition made by the assessee on account of unexplained investment of RS. 2,51,95,680/- towards purchase of land without considering the facts of the case in totality. 2. Whether the Ld. CIT(A) has erred in law and on facts in not appreciating that the assessee has also purchased the parcels of land with survey numbers mentioned in the MOU between Shri Baldevbhai Patel and Shri Suryakantibhai Ambalal Patel, even though the same was not entered with the present assessee. 3. Whether the Ld. CIT(A) has failed to appreciate that there cannot be such a drastic drop in purchase price from Rs. 20,71,000/- as per MOU (even though it was entered with a different person) to purchase price of Rs. 1.40 lakhs as shown by the assessee for purchasing the same parcels of land which proves that cash transaction has taken place. 4. Whether the CIT(A) has erred in giving the finding that presumption arising out of search and seizure proceedings is to be used for limited purpose and cannot be extrapolated to make an addition in the present case. 1. On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 2. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” 4. The brief facts of the case are that as per information received by the Department, a search and seizure operation was carried out in the case of "Marwadi Group" of Ahmedabad on 13.06.2013. A loose paper file was ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 3 - impounded vide Annexure A-4 from the premises where search was carried out. At Page No. 13 of the said document was copy of an agreement dated 23.04.2010 between one Patel Suryakantbhai Ambalal (Lakhi Lenar) i.e. the person receiving the commitment and Shri Patel Baldevbhai Amrutlal (Lakhi Aapnar) i.e. the person giving the commitment. The AO observed that this document was an M.O.U. to sell a land parcel of Survey No. 171 paiki 2, 173 paiki 1, 173 paiki 2, 172, 176 paiki 1 at Lodhra Village and Survey No. 638 & 639 at Pundhra Village in respect of Agricultural land admeasuring 20 bighas approximately. The rate to sell per bighas is agreed upon at Rs. 21,70,000/- per bigha as per the aforesaid MOU. However, the above MOU and agreement could not be finalized between above named persons. Thereafter, around 14 bigha of the said land was purchased by the assessee, Dr. Harshad J. Shah along-with his wife and son from Shri Baldevbhai Patel for a sum of Rs.37,98,320/-, which was at a much lower rate that was mentioned in the aforesaid MOU. The Ld. Assessing Officer accordingly was of the view that the assessee had made cash payments for purchase of the aforesaid property and initiated 147 proceedings against the assessee on the basis of the above facts. During the course of assessment proceedings, the Ld. Assessing Officer was of the view that as per MOU (between Patel Suryakantbhai Ambalal and Shri Patel Baldevbhai Amrutlal seized during the course of search), the land cost of 14 bighas comes at Rs. 2,89,94,000/ - (rate agreed upon at Rs. 20,71,000/- × 14 bighas). In view of the above, the Ld. Assessing Officer was of the view that that assessee paid cash amounting to Rs. 2,51,95,680/- for purchase of the aforesaid properties (difference between the cost as per MOU rate of Rs. 2,89,94,000/- and the cost as per sale deed of Rs. 37,98,320/-). Accordingly, a sum of Rs. 2,51,95,680/- was added to the income of the assessee as his unexplained income by the Ld. Assessing Officer. ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 4 - 5. In appeal, Ld. CIT (Appeals) allowed the appeal of the assessee primarily on the ground that the entire assessment has been framed and the additions made in the name of the assessee on the basis of draft MOU. The Ld. CIT(Appeals) observed that from the contents of the MOU and the land purchased by the assessee (along with his family members), it is seen that only one plot of land, located at Survey No. 171 Paiki found mention in the aforesaid MOU. However, the other pieces / plots of land which were purchased by the assessee were not relating to the MOU relied upon by the AO. The Ld. CIT(Appeals) observed that out of 13.75 bighas purchased by the assessee, only 1.25 bighas was mentioned in the said MOU. Therefore, the Ld. CIT(Appeals) restricted the addition to only the plot of land measuring 1.25 bighas which was mentioned in the aforesaid MOU. However, with respect to the balance lands purchased by the assessee, Ld. CIT(Appeals) observed that the aforesaid pieces of plots of land were purchased by the assessee from third persons not forming part of the MOU and further, even the survey numbers mentioned were different from those that were mentioned in the MOU, and accordingly, no additions could be made in the hands of the assessee on the basis of information contained in the aforesaid MOU. Accordingly, Ld. CIT(Appeals) restricted addition to Rs. 22,49,614/- (and gave relief to the assessee to the tune of Rs. 2,29,46,066/-). While allowing the appeal of the assessee, Ld. CIT(Appeals) observed as under: “The first contention raised is that the land purchase transaction is on or higher value than the relevant jantri rate. On verification, the contention is found correct. The second contention is that whole of 13.75 bighas purchased by the appellant is not relating to “Banakhat/MOU” relied by the AO. In fact it was pointed out that only 1.25 bighas could be traced in the specified survey numbers mentioned in the said MOU. The detail furnished as per land records is as under: ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 5 - DR. HARSHAD J SHAH & OTHERS SR. LAND OWNER PURCHASER SURVEY NO. AREA DATE OF DEED AMT. (RS.) 1 ISHWARBHAI J PATEL HARSHADBHAI J SHAH 639 PAIKI 1 01-03-20 01-10-10 1145520 2 ISHWARBHAI J PATEL & BHAGABHAI J PATEL HARSHADBHAI J SHAH 173 PAIKI 1 0-87-05 29-12010 970000 3 BALDEV AMRTUIBHAI PATEL JINANG H SHAH, RITABEN H SHAH, HARSHAD JAYANTILAL SHAH 171 PAIKI 0-30-35 26-04-11 14000 4 AMBALAL GOPALDAS PATEL HARSHADBHAI J SHAH, RITABEN H SHAH & JINANG H SHAH 639 PAIKI 2 0-52-10 04-05-11 1303000 5 ANANDIBEN R NAYEE & OTHERS HARSHADBHAI J SHAH, RITABEN H SHAH & JINANG H SHAH 172 0-55-64 18-08-11 24000 NOT PERTAINING TO US 173 PAIKI 2 638 176 TOTAL.. 3798520 As can be seen above, survey no 171 is only common in the survey no. mentioned in MOD and the land purchased by the appellant and or family members. In other words, that MOU was between Baldev Amrutlal Patel and ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 6 - third parties. Therefore, it was contended that over-generalization to the total land purchased cannot be done on the basis of some material relating to 1.25 bighas of land mentioned in MOU. On verification the contention about 1.25 bighas of land is found correct. The third contention raised was that there have been many registration happening in the area at same point in time at the rate on which appellant has purchased the land. A copy each of 7 registrations was placed on record wherein the detail culled out is as under: Moje, Lodra, Village Lodra Sr. No. Date Amount(Rs.) Sq. Mtr. Rate for bighas 212 10.05.10 139620/- 0.2327 142760 212 paiki 11.05.10 145680/- 0.2428 142683 214 29.02.10 182500/- 0.3642 119281 216/2/B 10.05.10 133500/- 0.2225 142689 218 pailki 04.06.10 160860/- 0.2681 142682/- 216/1 abcde 10.05.10 722340 0.12039 142754/- 216/2/9 10.05.10 127500/- 0.2125 142777/- 1612000 0.27467 139567 Avg. Per bighas The average recorded purchase price for above 7 plots of land purchased by other parties is at Rs. 1,39,5677- per bigha(Supra) against the average purchase price shown by the appellant is at Rs. 1,42,6207- per bigha. The appellant has purchased land/registered on 01.10.2010 and the time period is almost same as mentioned in the information for 7 plots above. Copy of 7 documents from registration office has been perused. The contention of the appellant is found correct on corroboration of information on record. The fourth contention raised is that the MOU by land owner Shri Baldev A. Patel and third persons has not been acted upon, in other words, it remained unexecuted, hence was not legally acceptable document as per procedure. I have examined the contents of assessment order and find the contention raised by the appellant is correct. The fifth contention raised is that the AO has not brought on record any independent credible evidence so as to prove that the appellant has paid unaccounted cash in purchase of impugned land. The fact remains that any such information was further required to be corroborated by the AO and the same effort is missing. I have examined the contents of assessment order and find the contention raised by the appellant is correct. ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 7 - The AR also emphasized that no addition has been made in the case of other family members 1) Jinang H. Shah 2) Ritaben H. Shah Further, a copy of map of the area has been placed on record so as to indicate that other plots(as indicated in chart above) have been purchased by other persons at price which is similar or even slightly less than what has been disclosed by the appellant. The contents as highlighted in the map for various plots have been noted as they are in the close vicinity of land purchased by the appellant. I have perused the judgments by jurisdictional High Court as these are binding such as ITO Vs. Bharat A. Mehta 60 taxman.com 31(Guj) & CIT Vs. Kantibhai Ravidas Patel Tax Appeal No.910 of 2013 dated 11.11.2013 (Guj). I understand that the presumption arising out of search and seizure proceedings is to be used for limited purpose by corroborating with other facts and it does not have overriding effect to section 69. The relevant provisions for purchasers as per section 56(2)(vii) are not applicable to the assessment year involved. The provisions of section 69 are very clear in similar cases. Therefore, it is to be decided as to how much addition can reasonable be confirmed in this case by strictly adhering to the provisions of the Act. The appellant has stated that MOU was between Baldev A. Patel and third party (i.e. Suryakant Ambalal Patel) and the same should not be the basis for making addition. However, a part of land has been purchased from Baldev A. Patel and the appellant cannot escape from the rigour of the act so far matter pertaining to survey no.171 is concerned. The land purchased by the appellant as emanating from record is as under: From Baldevbhai Patel is = 1.25 bighas From Others = 12.50 bighas(approximately) In my opinion, it is not legally correct to extrapolate the computation for calculating the addition on the basis of facts-relating to 1.25 bighas to the total land 13.75 bighas purchased by the appellant as per Hon'ble Gujarat High Court(Supra). However, the fact remains that a copy of MOU has been part of seized material in the search action on Marwadi Group. Therefore, the plot of land which has been purchased from Shri Baldev A. Patel and has earlier been mentioned in the impugned MOU has to be considered for addition in this case. Therefore, the addition being confirmed is computed as under: ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 8 - Area corroborating with MOU Rate(per bigha) at which addition has been made in assessment order The purchase price estimated 1.25 bighas Rs.20,71,000/- Rs.25,88,750/- The cost proportionately as computed by AO is arrived at Rs.3,39,136/- and the same has to be deducted from Rs.25,88,750/-. As per this computation, the addition of Rs.22,49,614/- is hereby confirmed in this case. The appellant gets relief of Rs.2,29,46,066/-. The ground nos. 2, 3, & 4 of appeal are partly allowed. The AO is directed to issue revised demand notice accordingly. 4.2 The ground no.7 is relating to interest charged in the computation of tax payable by the AO. Interest is mandatory in view of Hon'ble the Apex Court's judgment in the case of 'CIT vs. Anjum M.H. Ghaswala & Others - 252 ITR 1 (SC)" wherein it has been held that interest u/s. 234A and 234D of the Act is mandatory in nature. The same is also held to be mandatory in the cases of "Vinodkumar vs. CIT - 253 ITR 578 (P&H)" and "Motorola Inc. vs. DCIT -95 ITD 269(Delhi)(SB)". Hence, appellant doesn't have a right to be heard before imposition of interest. In view of the above, the ground no.7 is dismissed.” 6. Both the Department and the assessee are in appeal before us against the aforesaid order passed by Ld. CIT(Appeals), partly allowing the appeal of the assessee. 7. Before us, the contention of the Counsel for the assessee is that the entire addition has been made in the hands of the assessee on the basis of MOU, which was never executed in the first place. The Counsel for the assessee submitted that the MOU on the basis of which the additions had been made by the Assessing Officer has since been cancelled and therefore did not materialise. Further, it was submitted that the parties to the aforesaid MOU were examined by the Assessing Officer and their statements were recorded by the Department under Section 131 of the Act. In the aforesaid statements, the ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 9 - parties to the MOU have confirmed that the aforesaid MOU has been cancelled. Further, it was submitted that the assessee is not a party to the aforesaid MOU and the same was entered between third parties. The assessee had purchased only a small part of the land from one of the parties to the MOU and the balance land was purchased from third parties, who were not part of the MOU. Therefore, Ld. CIT(Appeals) has erred in facts and in law in making the additions on the basis of MOU which has been cancelled and further to which the assessee was not part in the first place. Accordingly, it was submitted that the entire additions is liable to be deleted looking into the instant facts. 8. In response, the Ld. DR submitted that Ld. CIT(Appeals) has framed the appellate order in violation of the provisions of Rule 46A of the Income Tax Rules. The Ld. CIT(Appeals) has clearly observed that the assessee has not filed any application for admission of additional evidence (refer page 13 of the CIT order). However, while allowing the appeal of the assessee and granting substantial relief to the assessee, Ld. CIT(Appeals) relied on certain data / information which was furnished by the assessee for the first time during the course of appellate proceedings. However, while deciding the matter, the information / data on which reliance was placed by the assessee during the course of appellate proceedings was never placed before the Assessing Officer for his consideration. The Ld. DR submitted that Ld. CIT(Appeals) gave substantial relief to the assessee only on the basis of submission of the assessee that out of 13.75 bighas purchased by the assessee, only 1.25 bighas was relevant to the MOU, which formed the basis of which the additions by the Ld. Assessing Officer. However, it was submitted that while deleting the additions with respect to 12.5 bighas (13.75 bighas less 1.25 bighas), the Ld. Assessing ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 10 - Officer was never confronted with this information for his remarks / observations and Ld. CIT(Appeals) gave substantial relief to the assessee on Suo Motu basis. Secondly, it was submitted that Ld. CIT(Appeals) also took on record copies of 7 registrations deeds which were submitted by the assessee on record before Ld. CIT(Appeals)to substantiate that the purchase price by the assessee for the plots of land purchased by him was in line with the average price per bigha. Accordingly, it was submitted that the matter should be set aside to file of Ld. CIT(Appeals) for de novo consideration, after necessary compliance in terms of Rule 46A of the Income Tax Rules has been done by Ld. CIT(Appeals), and the Assessing Officer has been confronted with the facts placed on record. 9. We have heard the rival contentions and perused the material on record. Challenge to reopening of assessment under Section 147 of the Act 10. Firstly, we shall take up the assessee’s challenge to initiation of proceedings under Section 147 of the Act. On going to the facts of the instant case, we observe that search was carried out at the premises of Marwadi group, wherein certain documents in the form of MOU was found, which mentioned the prices at which certain properties were agreed to be purchased / transacted upon. On the basis of the aforesaid documents, the Ld. Assessing Officer observed that since the assessee had purchased part of such land from one of the parties to the aforesaid MOU, the Assessing Officer was of the view that since the aforesaid MOU mentioned the price of properties at a much higher value, the AO had “reason to believe” that substantial cash consideration was given by the assessee for the purchase of the aforesaid land and therefore, ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 11 - income had escaped assessment. It was on the basis of the aforesaid facts, that the Assessing Officer initiated proceedings under Section 147 of the Act. 11. In our view, the AO has given detailed reasonings on the basis of which he formed the belief that looking into the instant set of facts, the Ld. Assessing Officer had reasonable belief that the assessee had made cash payments in respect of purchase of the aforesaid properties, thereby leading to escapement of income. It is a well settled principle of law that that while recording the reasons, the AO need not establish the actual escapement of income. The belief at that time is only prima-facie and not conclusive. In the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), the Hon'ble Supreme Court observed that the Court has only to see whether there was prima-facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. On the scope of re-opening under Section 147 of the Act observed as under: “We have only to see whether there was prima-facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.” 12. In the case of Priya Blue Industries (P.) Ltd. v. ACIT [2022] 138 taxmann.com 69 (SC), the AO sought to reopen assessment in case of assessee on count that assessee was beneficiary of certain accommodation. The ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 12 - Assessee challenged impugned notice mainly on ground that jurisdictional facts were not established and hence, revenue could not have assumed jurisdiction and reopened assessment. The ITAT found that exercise of reopening had been made only after due inquiries and recording of statements of concerned persons and on having found prima- facie material, impugned notice had been issued to assessee. The Gujarat High Court held that where Assessing Officer had reason to believe that income chargeable to tax had escaped assessment and basis for formation of such belief were several inquiries and investigation by Investigation Wing that there had been escapement of income of assessee from assessment because of his failure to disclose fully and truly all material facts, reopening of assessment was justified, SLP against said impugned order was liable to be dismissed. 13. In the case of Kottex Industries (P.) Ltd. v. ACIT [2021] 129 taxmann.com 151 (Gujarat), the Gujarat High Court held that at the time of recording the reason for satisfaction of Assessing Officer, there should be prima- facie some material on the basis of which, the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. It will be open to the assessee to prove that the assumption of fact made in the notice was erroneous at the time of assessment proceedings. 14. In the case of Bharatkumar Kalubhai Ghadiya [2021] 129 taxmann.com 306 (Gujarat), the High Gujarat Court observed that only a prima-facie belief is required for re-opening of assessment. The High Court made the following observations in this regard: “5.2 Further, the term "reason to believe", however, is not defined in the Act but it can be gathered and available from the information, leading the ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 13 - Assessing Officer to reopen the assessment. The term itself is suggestive of its prima-facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer's prima-facie belief, of course, derived from the some material/ information, etc. leading him to reopen the assessment.” 15. In the case of Purviben Snehalbhai Panchhigar [2019] 101 taxmann.com 393 (Gujarat), the Gujarat High Court held that in the instant case the Assessing Officer has heard the material on record which would prima- facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long- term and short-term capital gain. The company was prima-facie found to be a shell company. The assessee had claimed exemption of long-term capital gain of Rs. 1.33 crores by way of sale of share of such company. 16. This was again affirmed by the Gujarat High Court in the case of Sanjay Baulal Surana [2021] 129 taxmann.com 375 (Gujarat). 17. Accordingly, in our view, the AO had sufficient material to form a prima facie belief that the assessee had made cash payments for purchase of aforesaid properties, thereby leading to escapement of income. Therefore, we find no infirmity in the order of Ld. CIT(Appeals) when he held that issuance of notice under Section 147 of the Act was valid in the instant set of facts. Violation of Rule 46 of the Income Tax Rules 18. Now we shall come to the allegation of Department that there was violation of Rule 46A of the Income Tax Rules in the instant set of facts, wherein the Ld. CIT(Appeals) did not confront the Assessing Officer with the additional information on the basis of which the relief was granted to the assessee. However, on going to the contents of the order passed by Ld. ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 14 - CIT(Appeals), we observe that the relief has been granted to the assessee only on the basis of the fact that on comparison of the MOU and the Registration Deed of properties which were purchased by the assessee, there was only one plot of land pertaining to survey number 171 palki which was mentioned in the MOU. The other plots of land which were purchased by the assessee did not form part of the MOU and were purchased from third parties / persons. Accordingly, we observe that no additional documents / information formed the basis for Ld. CIT(Appeals) allowing relief to the assessee which was not present before the Assessing Officer. During the course of appellate proceedings, Ld. CIT(Appeals) made a comparison between the contents of MOU and the details of properties which were purchased by the assessee, and on comparison of the two, the Ld. CIT(Appeals) was of the view that since there was only one common property in the aforesaid agreements, and therefore the additions could be made only on the basis of the aforesaid property which was mentioned in the MOU and not with respect to other properties not forming part of the MOU. 19. Accordingly, looking into the facts of the instant case, we are of the considered view that there was no violation of Rule 46A of the Income Tax Rules, since no additional documents / information / data was made the basis of allowing relief to the assessee which was not before the Assessing Officer at the time of framing the assessment. Department’s appeal 20. Before us, the Ld. DR argued that Ld. CIT(Appeals) has erred in facts and in law in giving part relief to the assessee and excluding those plots of land which should not form part of the MOU. In response, the Counsel for the ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 15 - assessee placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. 21. We have heard the rival contentions and perused the material on record. In the case of A. Shivashankar vs. DCIT in ITA Number 617 to 620/Chny/2017, the ITAT held that undisclosed income addition by extrapolation of documents is unsustainable. While passing the order, ITAT made the following observations: “8. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The first legal issue that needs to be resolved in the given facts and circumstances of the case is whether the AO is right in estimation of sales revenue from sale of plots by extrapolating sale price of few plots to remaining plots sold during the relevant period to other parties. It is a well settled principle of law by the decision of various Courts that there is no scope for the AO to extrapolate and estimate undisclosed income for block assessment proceedings. This legal principle is supported by the decision of the Hon’ble Bombay High Court in the case of M/s.Harish Textile Engrs. Ltd v. DCIT, reported in 379 ITR 160, wherein, it has been clearly held that on-money received on sale of Stenter Machines for the block period, cannot be estimated on the basis of evidences filed for few instances. A similar view had been taken by the Hon’ble Gujrat High Court in the case of M/s.Standard Tea Processing Co. Ltd., reported in 215 Taxman 659. The Hon’ble Karnataka High Court in the case of B. Nagendra Baliga, reported in 363 ITR 410, had also considered an identical issue and held that the AO is not entitled to extrapolate undisclosed income detected in the course of search for a particular period to entire block period on estimation basis. Therefore, from the above decisions, one common principle is very clear, in as much as there is no scope for the AO to estimate undisclosed income for the block assessments on the basis of evidences found during the course of search for part period or few instances. Although, the Ld.DR relied upon certain judicial precedents, including the decision of the Hon’ble Supreme Court in the case of Commissioner of Sales Tax v. H.M.EsufaliH.M.Abdulali (supra), we find that in case, before the Hon’ble Supreme Court, evidences were found for part of the period in respect of under reporting of sales turnover and on said basis, the Hon’ble Supreme Court held that the sales Revenue can be estimated for remaining period of the month. However, there is no findings from the court on extrapolation of said estimation of income to whole year or for entire block ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 16 - period. In this case, the AO has estimated undisclosed income of under reporting of sales Revenue from sale of plots on the basis of one agreement to sale with Mr.M.A.Salim and extrapolated said rate to remaining plots sold during the block period and estimated income. In our considered view, the reasons given by the AO to estimate income on the basis of one evidence of agreement to sale to entire block period is not in consonance with settled legal principles and thus, on this basis alone, additions made by the AO, cannot be sustained.” 22. In the case of Mani Square Ltd. 118 taxmann.com 452 (Kolkata - Trib.), the ITAT held that where Assessing Officer made independent enquiries from all flat purchasers in assessee's project, however, did not find any transaction which would in any manner suggest that other flat purchasers had paid any part of consideration in cash over and above declared sale consideration, extrapolation of unaccounted sales done by Assessing Officer on basis of singular instance would be untenable. 23. In the case of Kantibhai Revidas Patel 42 taxmann.com 128 (Gujarat), search operations carried out at premises of third party unearthed an agreement to sell which was entered into by assessee along with a co- purchaser. The third party was broker in said transaction However, the said transaction could not be materialised and sum paid by assessee was returned back to him by broker. The Assessing Officer relying on statement of said broker, held that cash paid by him to assessee towards cancellation of said deal was unaccounted income of assessee. The Tribunal noticed that with respect to co-purchaser for very transaction, co-ordinate Bench had deleted similar addition on same facts. The High Court held that since order passed by Tribunal in respect of co-purchaser deleting the addition came to be confirmed by High Court, Tribunal was justified in deleting said addition. ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 17 - 24. Accordingly, in the instant facts we observe that Ld. CIT(Appeals) while allowing the assessee’s appeal observed that no additions have been made by the Assessing Officer in the case of the other family members, who were the joint holders in the aforesaid property. We observe that in the instant facts the additions were made only on the basis of MOU entered between third parties and there was no mention of the assessee’s name in the MOU. Further, the aforesaid MOU on the basis of which additions were made by the Assessing Officer had also been subsequently cancelled and was not acted upon. Therefore, in view of the aforesaid judgements cited above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that it would not be legally correct to extrapolate the addition in the hands of the assessee on the basis of facts relating to 1.25 bighas mentioned in the MOU, to the total land of 13.75 bighas purchased by the assessee. 25. Accordingly, in light of the above observations and the decisions rendered by the jurisdictional Gujarat High Court and various Tribunals on the issue, the appeal of the Department is dismissed. Assessee’s appeal 26. Before us, the Counsel for the assessee submitted that the entire additions have been made only on the basis of MOU between third parties and the assessee had no part in such MOU. Further, it was submitted that even the MOU on the basis of which additions were made in the hands of the assessee was also subsequently cancelled and was not acted upon. Accordingly, it was submitted that there was no basis for making additions in the hands of the assessee only on the basis of an MOU which was subsequently cancelled as well. Further, it was submitted that in the instant facts there is no corroborative ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 18 - evidence to substantiate that the assessee had made any cash payments in respect of the purchase of the aforesaid property. Accordingly, it was submitted that the additions made in the hands of the assessee are liable to be deleted, looking into the instant facts. 27. In the case of Bharat A. Mehta 60 taxmann.com 31 (Gujarat), the assessee purchased a bungalow in a housing scheme from a builder firm during search, partners of said firm admitted having received certain amount as 'on money' from buyers of bungalows in said scheme. On basis of that material Assessing Officer made certain addition under Section 69 to income of assessee on account of 'on money' paid to builders. On appeal, Tribunal deleted addition holding that revenue failed to prove that assessee had made undisclosed investment in aforesaid bungalow. The High Court held that as findings recorded by Tribunal were based on appreciation of facts, no interference was called for. In the case of Vivek Prahladbhai Patel 66 taxmann.com 41 (Gujarat), the High Court held that where Assessing Officer on basis of an agreement to sell seized from one 'S' and statement of 'S' recorded under Section 131 made additions in crores under Section 69 to income of assessee and Tribunal upheld addition to extent of Rs. 11 lakhs, since revenue had failed to bring on record any evidence to prove that assessee had made actual investment in crores, order of Tribunal deserved to be upheld. In the case of Ajay Surendrabhai Patel69 taxmann.com 309 (Gujarat), the High Court held that here Revenue failed to bring any material on record to show that assessee had paid any amount higher than amount stated in registered deed of sale of plots, impugned addition made under Section 69B was to be deleted. ITA Nos. 1844/Ahd/2019 & 1865/Ahd/2019 Harshadbhai J Shah vs. ITO Asst. Year –2011-12 - 19 - 28. Accordingly, looking into the instant facts, we observe that the entire additions have been made by the Assessing Officer on the basis of a MOU which was subsequently cancelled and not acted upon. Further, there is no corroborative evidence to come to the conclusion that the assessee paid any amount in cash over and above the above mentioned in the registered sale deed. Further, even in the case of other co-owners of the aforesaid property, no additions have been made by the Assessing Officer / Department. Accordingly, looking into the instant facts and the judicial precedents on the subject cited above, we are of the considered view that the addition made in the hands of the assessee is liable to be deleted. 29. In the result, the appeal of the assessee is allowed. 30. In the combined result, the appeal of the assessee is partly allowed and the appeal of the Department is dismissed. This Order pronounced in Open Court on 26/09/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 26/09/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad