Dellip V. Kotecha, Jalgaon V. Assistant Commissioner of Income-tax,

ITA 203/PUN/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3913 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Search and seizure; Loose papers; Opportunity of being heard; Accommodation entries; Capital Gains
• Section: 69; 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.203/PUN/2016 िनधाᭅरण वषᭅ / Assessment Year: 2011-12 Dellip V. Kotecha, 1, Pradhan Apartment, Pratap Nagar, Jalgaon- 425001. PAN : ABCPK8441J Vs. ACIT, Central Circle- 1, Nashik. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 12, Pune [‘CIT(A)’ for short] dated 22.12.2015 for the assessment year 2011-12. 2. The appellant raised the following grounds of appeal :- “[A] Grounds of Appeal: 1. In the facts and circumstances of the case and in law, the learned A.O. erred in assessing the total income amounting to Rs. Assessee by : Shri Bhupendra Shah Revenue by : Shri J. P. Chadraker Date of hearing : 21.03.2022 Date of pronouncement : 25.04.2022 ITA No.203/PUN/2016 2 9,65,49,406/- even though the order u/s 127 transferring the case from Jalgaon to Nashik was invalid and therefore the assessment order passed by the Assessing Officer was without jurisdiction and therefore deserves to be quashed. 2. In the facts and circumstances of the case and in law, the Ld Assessing Officer erred in making the addition of Rs. 1,38,38,000/- as expenditure incurred out of undisclosed sources. 3. In the facts and circumstances of the case and in law, the Ld Assessing Officer erred in making the addition of Rs. 6,20,00,000/- as investments out of undisclosed sources. 4. In the facts and circumstances of the case and in law, the Ld Assessing Officer erred in passing the assessment order u/s 143(3) r.w.s. 153A without giving proper opportunity of being heard. 5. In the facts and circumstances of the case and in law, the Ld Assessing Officer erred in not giving credit of cash seizure of Rs 32,00,000/- and wrongly computing interest u/s 234A, B & C on the same. 6. In the facts and circumstances of the case and in law, the Ld Commissioner of Income Tax(A) erred in confirming all the above additions. [B1 Relief Prayed: The appellant therefore prays follows, 1. To quash the order passed u/s 143(3) r.w.s 153A on the basis of invalid order passed u/s 127. 2. To delete addition of Rs 1,38,38,000/- as expenditure incurred out of undisclosed sources. 3. To delete addition of Rs 6,20,00,000/- as investments out of undisclosed sources. 4. To give credit of seized cash of Rs. 32,00,000/- while calculating interest u/s 234A, B, C. 5. To quash the order passed u/s 143(3) r.w.s. 153A without giving proper opportunity of being heard. [C] General: • The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion. • This appeal is filed in time and may please be allowed in full. ITA No.203/PUN/2016 3 • A Detailed paper book along with case laws will be submitted at the time of hearing.” 3. Briefly, the facts of the case are as under : The appellant is an individual deriving income from the business in execution of civil contracts and investments in stock market. There was a search and seizure operations were conducted in the business and residential premises of the appellant on 09.08.2011 by DDIT (Inv.), Jalgaon. Subsequently, the jurisdiction of the assessee’s case was transferred from Jalgaon to Nashik by the Commissioner Income Tax-II, Nashik vide order dated 02.12.2011 passed u/s 127 of the Act. The notice u/s 153A was issued to the appellant on 18.05.2012 and the return of income was filed in response to the said notice u/s 153A on 03.06.2013. The appellant also disclosed the income of Rs.7 crores in the disclosure. The assessment against the said return of income was completed by the Assistant Commissioner of Income Tax, Central Circle- 1, Nashik (‘the Assessing Officer’) vide order dated 03.03.2014 passed u/s 143(3) r.w.s. 153A at a total income of Rs.9,65,49,046/-. While doing so, the Assessing Officer brought to tax a sum of Rs.1,38,38,000/- treating it as “unexplained expenditure” based on ITA No.203/PUN/2016 4 the material found as result of search and seizure operations and also added a sum of Rs.6,20,00,000/- based on the notings found in the loose sheets at page no.62 by holding that the notings in the said loose sheets indicated a payment of Rs.6,20,00,000/- outside the books of accounts. The factual matrix of the above additions is as under : During the course of search and seizure operations, the Investigation Wing of the Department found and seized loose sheet containing pages 25 marked as Annexure A-3 and page no.7 containing the notings. According to the Assessing Officer, when this material was confronted to the appellant, it is explained that the notings on these pages and working, done by subcontractor. This explanation has been rejected by the Assessing Officer by saying that the figure is only in relation to the transaction of loan payment which is not recorded in the books of accounts. Accordingly, he brought to tax said amount, as it remains unexplained. Similarly, the Investigation Wing of the Department also during the course of search and seizure operations found and seized incriminating material in the form of loose papers no.1 to 28 marked as Annexure- A/5 at page no.62 to the said documents containing handwriting ITA No.203/PUN/2016 5 notings made in Pen Drive under the head ‘Deelip Koteha’and ‘Sanjay Kotecha’. The notings also indicated sale of shares of M/s S.V. Electricals noted commission paid and profit booked. As per the notings found in the loose sheets, Shri Deelip Kotecha i.e. appellant before us had to make a total payment of Rs.6,26,58,771/-. Out of the sum of Rs.7,88,400/- was paid by cheque and balance of Rs.6,18,70,371/- was to be paid in cash and there is a clear noting indicating that, the appellant had paid a sum of Rs.6,20,00,000/-. When this information/material was confronted to the appellant on 21.01.2014, he denied having paid any amount in cash. He also confirmed the transactions of sale of sale of shares of M/s S.V. Electricals recorded in the books of accounts. However, the above contention had been rejected by the Assessing Officer by holding that since the cheque part of the consideration for purchase of these shares had been accounted for in the books of accounts. The Assessing Officer believed that cash portion of consideration had been paid. Accordingly, the Assessing Officer brought to tax a sum of Rs.6,20,00,000/- as an “unexplained income”. ITA No.203/PUN/2016 6 4. Being aggrieved by the above assessment order, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer by holding that : As regards to the sum of Rs.6,20,00,000/- was paid in cash as part of the accommodation entries for purchase of shares and bogus capital gains in respect of sale of shares of M/s S.V. Electricals. As regards Rs.1,38,38,000/-, the ld. CIT(A) confirmed the said addition by holding that the seized papers/documents revealed the transaction of advance of money and, therefore, upheld the addition. 5. Being aggrieved by the above decision of the ld. CIT(A), the appellant is in appeal before us. 6. As regard to the other contention of the appellant that the Assessing Officer had no jurisdiction to pass the assessment order, as no opportunity was offered by the Commissioner of Income Tax- II, Nashik while passing the order u/s 127 of the Act, we are of the considered opinion that this issue cannot be agitated in assessment proceedings, as assessment proceedings are independent of proceedings u/s 127 of the Act. The proceedings u/s 127 are independent of the assessment proceedings, in the event an assessee is aggrieved by an order u/s 127, necessary remedy lies elsewhere as ITA No.203/PUN/2016 7 held by the Hon’ble Punjab & Haryana High Court in the case of Jaswinder Kaur Koover vs. CIT, 295 ITR 80. 7. It is trite law that an assessee is barred from raising contention that no opportunity was given to the assessee while transferring the jurisdiction of the case u/s 127 from Jalgaon to Nashik as the order of the transfer of case u/s 127 was within the knowledge of the assessee during the course of assessment proceedings and still the assessee had chosen not to participate in the matter of jurisdiction of the Assessing Officer to whom the case has been transferred. The assessee cannot be allowed latter to challenge the jurisdiction of the Assessing Officer as held by the Hon’ble Supreme Court in the case of Pannalal Binjraj vs. Union of India, 31 ITR 565 (SC) and the Hon’ble Gujarat High Court in the case of Shivabhai Khodabhai Patel vs. CIT, 244 ITR 457 (Guj.-HC). The Hon’ble Patna High Court in the case of Steel Engg. & Processing Works vs. Union of India, 243 ITR 721 (Pat.-HC) after referring to the judgement of the Hon’ble Supreme Court in the case of Pannalal Binjraj (supra) held to the same effect by holding as under :- “19. But this is not all. The facts as are emerging from the records of this case cannot be lost sight of, which have been elaborately pleaded and described by the respondent-revenue in its counter-affidavit and ITA No.203/PUN/2016 8 also in the reply affidavit to the rejoinder affidavit stating that the proceeding for transfer of the case from Patna to Ranchi was initiated at the instance of the petitioner-assessee himself and it was he, who suggested that the entire records and books of account are at Ranchi and so it will be convenient for him to co-operate with the assessment at Ranchi. Besides laches in approaching the Writ Court, the assessee- petitioner also submitted to the jurisdiction of the transferee authority at Ranchi. 20. This being so, the party once acquiesced to the jurisdiction of the transferee Court, all statutory rights which the assessee gets by virtue of section 127 vanish and, therefore, the assessee cannot assert that without affording opportunity as required under section 127, the case has been transferred. In this regard see Halsbury’s Laws of England, Vol. II, 3rd Ed., page 140, Pr. 265 and also the case in O.A.O.K. Lakshmanan Chettiar v. Commissioner, Corporation of Madras AIR 1927 Mad. 130, which are referred to in the decision in the case of Pannalal Binjraj v. Union of India [1957] 31 ITR 565 (SC). 21. In the case of Pannalal Binjraj (supra), which is a Constitution Bench decision, the Supreme Court lays down the law to the effect that, "if an assessee has acquiesced in the jurisdiction of the Income-tax Officer to whom a case has been transferred, he cannot subsequently object to the jurisdiction of the officer and seek to get the order of transfer quashed by invoking the jurisdiction of the Court under article 226 of the Constitution". 22. This being the law in respect of cases where the assessee has acquiesced to the jurisdiction of the transferee Court, the submissions made by Shri Bajla have no application in this case. The writ petition is, therefore, dismissed.” 8. In the light of above legal position, the objection raised by the assessee challenging the transfer of jurisdiction of the case does not stand the test of the law. Thus, this contention is devoid of any merit and, accordingly, we dismiss the same. 9. Ground of appeal no.2 and 3 challenges the decision of the ld. CIT(A) in upholding the action of the Assessing Officer in making ITA No.203/PUN/2016 9 the addition of Rs.1,38,38,000/- on account of expenditure incurred out of undisclosed sources and Rs.6,20,00,000/- as investments out of undisclosed sources. The ld. AR submitted that the loose sheets found as result of search and seizure actions cannot form the basis for making the assessment and without bringing on record any corroborative evidence, the Assessing Officer was not justified in making the addition of Rs.1,38,38,000/- and Rs.6,20,00,000/- as unexplained expenditure as well as investments made out of undisclosed sources. He submitted that the cash had found and seized of Rs.32,00,000/- was not given credit against the tax liability determined. 10. On the other hand, ld. CIT-DR on merits of the addition, submitted that the assessee had failed to explain the source of unexplained investments of Rs.1,38,38,000/- and Rs.6,20,00,000/- as unexplained expenditure. Therefore, he submitted that the lower authorities were justified in drawing adverse inference against the assessee. 11. We heard the rival submissions and perused the material on record. ITA No.203/PUN/2016 10 As regards to the addition of Rs.1,38,38,000/-, the ld. AR submitted that the impugned addition was made based on the loose papers found and seized from the residential premises of the appellant as a result of search and seizure operations. We have carefully gone through the said loose documents which is also extracted by the Assessing Officer vide para no.8 of the assessment order, wherein, the documents dated 31.01.2011 indicates total payment of Rs.1,38,38,000/-. Obviously contents of the notings clearly indicate the payment of interest which means the appellant either repaid the loan with interest or made advance of loan for interest. Notings found therein represents the unexplained income out of which the loan or advance was made warranting addition under the provisions of section 69 of the Act. When this information/material was confronted to the appellant, the appellant had failed to explain the contents of the documents. Therefore, the Assessing Officer was justified in making the addition. Thus, we confirm the addition of Rs.1,38,38,000/-. Thus, the ground of appeal no.2 raised by the appellant stands dismissed. Similarly, as regards to the addition of Rs.6,20,00,000/-, the ld. AR submitted that this addition is based on the contents of page ITA No.203/PUN/2016 11 no.62 found and seized during the course of search and seizure operations marked as Annexure- A/5. We have carefully gone through the said page which is placed at page no.33 of the Paper Book, which clearly indicates the receipts and payments made in connection with the purchase and sale of share of M/s S.V. Electricals and it reflects the name of Shri Deelip V. Kotecha, the appellant before us, had paid cash of Rs.6,20,00,000/- to the agent involving in booking of accommodations entries. The ld. CIT(A) had clearly narrated the transaction that would have taken place the findings recorded by CIT(A) remains uncontroverted by the appellant. When this matter was confronted to the appellant, he gave vague answers and, therefore, presumption created u/s 132(4A) remains un-rebutted. In the circumstances, the lower authorities were justified in making the addition as undisclosed investments u/s 69 of the Act. Thus, the ground of appeal no.3 raised by the appellant stand dismissed. As regards to credit of Rs.32,00,000/- cash seized as result of search and seizure operations, we find that the said issue does not emanate from the assessment order. In the circumstances, this said issue raised in ground of appeal no.5 stands dismissed. ITA No.203/PUN/2016 12 12. Ground of appeal no.4 had not pressed at the time of hearing of the appeal and the same is dismissed as not pressed. 13. Ground of appeal no.6 general in nature is dismissed. 14. In the result, the appeal filed by the assessee stands dismissed. Order pronounced on this 25 th day of April, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 25 th April, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT, Central, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.