Navrachana Education Society, Baroda V. The ACIT.,Cent.Circle-1, Baroda

ITA 226/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6586 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: S N SOPARKAR
• Keywords: Income from undisclosed sources; Document seized; Charitable institution; Opportunity of being heard; Question of law
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 226/AHD./2008 : ASSESSMENT YEAR 2004- 05 NAVRACHANA EDUCATION SOCIETY, VADODARA VS- ACIT, CENTRAL CIRCLE-3, BARODA (PAN : AAATM 1262H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N.SOPARKAR, A.R. RESPONDENT BY: SHRI S.P.TALATI, D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT(A)-IV, AHMEDABAD DATED 25.09.2007 FOR THE ASSESSMENT YEAR 2004-2005. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A CHARITABLE TRUST REGISTERED UNDER BOMBAY PUBLIC TRUST ACT AND HAS BEEN ASSESSED TO TA X IN THE STATUS OF AOP TRUST FOR THE LAST MORE THAN THREE DECADES. THE TRUST UNDERTA KES ONLY EDUCATIONAL ACTIVITIES AND RUNS SCHOOL AND OTHER EDUCATIONAL INSTITUTIONS. A S EARCH ACTION UNDER SECTION 132 OF THE I.T. ACT WAS CARRIED OUT ON 04/03/2005, COVERIN G THE RESIDENTIAL AND BUSINESS PREMISES OF KABHAI CHAUHAN GROUP OF CASES. FROM THE PREMISES OF M/S. OM SHIVAM CORPORATION, CERTAIN DOCUMENTS (ANNEXURE A-2 PG. 16 6) WERE SEIZED WHICH PERTAIN TO THE ASSESSEE. AFTER RECORDING THE SATISFACTION NOTE , NOTICE UNDER SECTION 153C WAS ISSUED ON 08.11.2005. IN REPLY TO THE SAID NOTICE, THE ASSESSEE, VIDE LETTER DATED 20.11.2006, STATED THAT ORIGINAL RETURNS FILED SHOU LD BE CONSIDERED AS FILED IN RESPONSE TO NOTICE UNDER SECTION 153C. THEREAFTER, THE AO FR AMED THE ASSESSMENT UNDER SECTION 153C READ WITH SECTION 143(3) ON 27.12.2006 AT TOTA L INCOME OF RS.10 LAKHS. 3. ON APPEAL, IT WAS CONTENDED BY THE LD. A.R. OF T HE ASSESSEE BEFORE THE LD. CIT(A) AS UNDER: THE TRUST IS ENGAGED IN RUNNING A SCHOOL KNOWN AS NAVRACHANA SECONDARY AND HIGHER SECONDARY SCHOOL. THE TRUST IS ALSO RUNN ING OTHER EDUCATIONAL 2 ITA NO.226/AHD/2008 INSTITUTIONS LIKE VLDYANI VIDYALAY, NAVRACHANA COLL EGE OF EDUCATION, SAMA. THE TRUST WAS LOOKING OUT FOR SETTING UP AN INTERNA TIONAL PUBLIC SCHOOL AND THEREFORE WAS LOOKING OUT FOR SUITABLE LOCATION WHE RE SUFFICIENT LAND, AND NOT FAR AWAY FROM THE CITY, WAS AVAILABLE. THE TRUST HA D LOCATED SUCH A LAND AT VILLAGE BHAYALI AND ENTERED INTO A BANAKHAT DATED 1 2/06/2003 FOR THE PURCHASE OF THE LAND. THE LAND LOCATED WAS UNEVEN AND HAD LOT OF POTHOLE AND HAD TO BE LEVELED OUT BEFORE BUILDING COULD BE ERECTED THEREO N. THE BANAKHAT WAS FOR A TOTAL CONSIDERATION OF RS.65,60,931/-. THE AMOUNT S TATED IN THE BANAKHAT WAS THE UPPER LIMIT OF THE PRICE AND SINCE THE ACTUAL A MOUNT REQUIRED TO BE SPENT ON LEVELING OF THE LAND WAS NOT KNOWN BEFORE HAND. THE BANAKHAT WAS ENTERED INTO AS A TOKEN OF THE AGREEMENT AND HENCE THE STIPULATI ON IN THE BANAKHAT WERE NOT CARRIED OUT INTO ACTUAL TERMS. EXCEPT FOR THE FIRST TWO PAYMENTS NONE OF THE PAYMENT HAVE BEEN MADE AS HAS BEEN STIPULATED IN TH E BANAKHAT. THE APPELLANT FINALLY ENTERED INTO THE SALE DEED WITH THE SELLER SHRI BABUBHAI D. PATEL FOR- A CONSIDERATION OF RS.28,25,680/-. THE AMOUNT OF RS.2 7,35,251/- WAS PAID TOWARDS LAND LEVELING AND OTHER CHARGES. IN ALL, TH E APPELLANT MADE PAYMENT OF RS.55,60,931/- TOWARDS THE PURCHASE OF LAND. NOW DURING THE COURSE OF SEARCH PROCEEDINGS, THE OW NER OF THE LAND SHRI BABUBHAI D. PATEL WHOSE STATEMENT WAS RECORDED SUBMITTED THAT APART FROM TH E ABOVE PAYMENT, HE HAS ALSO RECEIVED SUM OF RS. 10,0 0,000/-. THE LEARNED ASSESSING OFFICER HAS RELIED ON THE STATEMENT OF SH RI BABUBHAI D. PATEL AND HAS DRAWN STRENGTH FROM THE PAY-IN-SLIP WHICH HAS B EEN IMPOUNDED DURING THE SEARCH WHICH STATE THAT THE AMOUNT DEPOSITED IN THE BANK REPRESENT MONEY RECEIVED FROM NAVRACHANA EDUCATION SOCIETY. : IT IS RESPECTFULLY SUBMITTED THAT THE LEARNED ASSES SING OFFICER HAS HEAVILY RELIED ON THE STATEMENT AND THE CORROBORATIVE EVIDENCE IN FORM OF PAY- IN-SLIP IMPOUNDED. IT IS SUBMITTED THAT THE APPELLA NT HAD NEVER ENTERED INTO TRANS ACTION WITH THE SELLER, WHICH WERE OUTSIDE THE BOOK S OF THE APPELLANT. THE SELLER OF THE LAND HAD SUBSTANTIAL LAND AND WAS IN THE PROCESS OF DISPOSING OF HIS OWN LAND HOLDING. THE STATEMENT THEREFORE CANNO T BE TAKEN ON FACE VALUE AND NEEDS TO BE LOOKED AT FROM THE CIRCUMSTANCES PR EVAILING. THE POSSIBILITY OF THE SELLER SHRI BABUBHAI D. PATEL HAVING BEEN RECEI VED THE MONEY FROM SOMEONE ELSE AND MENTIONING MAT IT WAS RECEIVED FRO M NAVRACHANA EDUCATION SOCIETY CANNOT BE RULED OUT. FURTHER THE STATEMENT OF SHRI BABUBHAI D. PATEL NOWHERE MENTIONS THAT THE MONEY HAS BEEN RECEIVED F ROM THE TRUST. THE STATEMENT ONLY MENTIONS THAT THE AMOUNT OF RS. 10,0 0,000/- IS RECEIVED BUT DOES NOT MENTION THE NAME OF THE APPELLANT. FURTHER THE LEARNED ASSESSING OFFICER 3 ITA NO.226/AHD/2008 HAS HEAVILY RELIED ON THE BANAKHAT WHICH MENTIONS R S.65,60,931/- AS THE CONSIDERATION AND ON THE OTHER HAND DOES NOT AGREE TO THE OTHER FACTS THAT THE OTHER TERMS AND CONDITIONS OF THE BANAKHAT AS REGAR DS THE PAYMENT WERE NOT STRICTLY FOLLOWED. THE FACTS THEREFORE PROVE THAT B ANAKHAT WAS ENTERED INTO AS A TOKEN OF AGREEMENT FOR THE SALE AND PURCHASE OF LAN D AND THAT THE BANAKHAT WAS NOT SACROSANCT TO THE TRANSACTION. THE LEARNED ASSESSING OFFICER THEREFORE HAS WRONGLY CONCLUDED THAT THE AMOUNT ALLEGED TO HA VE BEEN PAID BY NAVRACHANA EDUCATION SOCIETY WAS ACTUALLY PAID BY N AVRACHANA. IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT NEVER PAI D ANY MONEY FOR THE PURCHASE OF THE LAND OUTSIDE THE BOOKS OF ACCOUNT A ND THE PREMISES ON WHICH THE LEARNED ASSESSING OFFICER HAS BUILT UP HIS CASE SUFFERS FROM SERIOUS DEFECT ON FACTS-[AND THEREFORE CANNOT BE ACCEPTED IN LAW A S WELL. WITHOUT PREJUDICE TO ABOVE, IT IS SUBMITTED THAT AR GUING WITHOUT ACCEPTING EVEN IF THE LEARNED ASSESSING OFFICER WAS RIGHT, THERE WAS NO REASON FOR THE APPELLANT TO PAY ANY MONEY OUTSIDE THE BOOK S SINCE AS PER THE CONTENTION OF THE LEARNED ASSESSING OFFICER THE SEL LER HAS ALREADY OFFERED THE AMOUNT TO TAX IN HIS RETURN. THE INCOME OF THE TRUS T HAS BEEN EXEMPT FROM TAX; AS SUCH THERE CAN BE NO INDUCEMENT TO YOUR APPELLAN T TO OFFER ANY PAYMENT OUTSIDE TO BOOKS. THE APPELLANT, AS ANY PRUDENT PER SON WOULD DO, COULD HAVE EASILY ROUTED THE MONEY THROUGH THE BOOKS IF AT ALL THAT WAS THE INTENTION. THERE HAS BEEN NO INTENTION OF PAYMENT OUTSIDE THE BOOKS AND NO PAYMENT OUTSIDE THE BOOKS WAS MADE. THE FOUNDATION ON WHICH THE LEARNED ASSESSING OFFICER HAS TRIED TO BUILD THE CASE THEREFORE SUFFERS FROM SERI OUS DEFECTS AND THEREFORE NEED NOT BE ACCEPTED. THIS FACT PROVES THAT THERE WAS NO REASON WHATSOEVER WHICH PROMPTED THE APPELLANT FROM FILING INACCURATE PARTI CULARS OF INCOME OR CONCEALING THE INCOME. IN THE LIGHT OF THE ABOVE, IT IS SUBMITTED THE ORDE R OF THE LEARNED ASSESSING OFFICER SUFFERS FROM SERIOUS DEFECTS AND NEEDS TO BE QUASHED. IT IS PRAYED THAT IN THE LIGHT OF THE FOREGOING FACTS THE ADDITION OF RS.10,00,000/- BEING MADE TO THE TOTAL INCOME BE DELETED.' 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.10 LAKHS FOR TH E DETAILED REASONS GIVEN IN PARA 2.1, WHICH READS AS UNDER: 2.1 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF LD. COUNSEL AS WELL AS GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER, IT HAS BEEN NOTICED 4 ITA NO.226/AHD/2008 THAT ADMITTEDLY THE BANAKHA DATED 12/06/2003 WAS EN TERED IN WHICH AMOUNT OF RS.65,60,931/- WAS MENTIONED AS A CONSIDERATION FOR PURCHASE OF BHAILY LAND. THIS AMOUNT WAS AGREED FOR PURCHASE OF LAND AND ALS O CORROBORATED BY THE PAY-IN-SLIPS, IMPOUNDED DURING THE COURSE OF SEARCH . ON THE BACK OF BANK DEPOSIT PAY-IN-SLIPS, THE NAME OF THE APPELLANT WAS MENTIONED. AS PER THE PROVISIONS CONTAINED U/S.132(4A), IT IS PRESUMED UN DER THIS SECTION THAT CONTENTS OF BANK PAY-IN-SLIPS ARE TRUE. THEREFORE, THE CONTENTION OF THE LEARNED COUNSEL THAT THE TERMS AND CONDITIONS OF BANAKHAT W ERE NOT STRICTLY FOLLOWED AND THE LAND WAS PURCHASED FOR A LESSER VALUE OF RS .28,25,680/- AS PER SALE DEED EXECUTED ON 12/12/2003 CANNOT BE ACCEDED TO. H OWEVER, ON PERUSAL OF BANAKHAT, IT HAS BEEN NOTICED THAT NO SUCH CLAUSE W AS MENTIONED IN IT I.E. RS.65,60,931/- WAS OUTER LIMIT. HENCE, IT IS ADMITT ED BY THE APPELLANT THAT THE TOTAL PAYMENT OF RS.55,60,931/- WAS MADE TOWARDS PU RCHASE OF LAND AND RS.27,35,251/- WAS PAID TOWARDS LAND LEVELING AND O THER CHARGES. THEREFORE, THE CONTENTION OF THE LEARNED COUNSEL THAT LAND WAS BIASED FOR RS.28,25,6807- CANNOT BE ACCEDED TO SINCE THE APPELLANT HAD ALSO A DMITTED TOTAL COST OF LAND AS RS.55,60,931/-. THE PAYMENTS WERE ALSO MADE TO AN U NRELATED PARTY VIZ. GAYAJ MAJOR SAHKARI MANDLI. HENCE, IT IS EVIDENT THAT THE PAYMENTS IN CASH WERE ROUTED THROUGH GAYAJ MAJOR SAHKARI MANDLI. THE APPE LLANT FAILED TO EXPLAIN AS TO WHY THE PAYMENTS WERE MADE IN CASH TO AN UNRELAT ED PARTY. AS PER CONTENTS MENTIONED IN PAGE NO ; 166 OF ANNEXURE A-2 SEIZED FROM PREMISES OF M/S.OM SHIVAM, IT IS CLEARLY MENTIONED THAT PAYMENT OF RS. 6,00,000/- WAS MADE IN CASH ON 31/01/2004 AND RS.4,00,000/- WAS MADE IN CASH ON 21/02/2004. HENCE, IT IS EVIDENT THAT THE CASH PAYMENT OF RS.10,00,000/- WAS MADE OUT OF UNDISCLOSED SOURCES. THIS IS FURTHER CORROBORATED BY THE STATEM ENT OF OWNER OF THE LAND SHRI BABUBHAI D. PATEL THAT HE HAS ALSO RECEIVED ADDITIO NAL AMOUNT OF RS.10,00,000/- IN CASH. KEEPING IN VIEW OF ABOVE FA CTS AND CIRCUMSTANCES OF THE CASE, NO INTERFERENCE IS CALLED FOR IN MAKING ADDIT ION OF RS.10,00,000/-. HENCE, THE FIRST GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL ON THE FOLL OWING GROUND: THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS ERRED IN CONFIRMING AN ADDITION OF RS.10 LACS AS BEING INCOM E FROM UNDISCLOSED SOURCES. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI S.N.SOPARKAR APPEARED AND CONTENDED THAT THE ASSESSEE HAS RAISED THE FOLLOWING TWO ADDITIONAL GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING VALIDITY OF ORDER PASSED BY THE LD. AO U/S 143(3) R.W.S. 153C OF THE ACT. BOTH THE LOWER 5 ITA NO.226/AHD/2008 AUTHORITIES HAVE ERRED IN IGNORING PROVISIONS OF S. 153C(1), WHICH GIVES JURISDICTION TO ASSESSING OFFICER TO ASSESS INCOME OF THE ASSESSEE, PROVIDED ANY DOCUMENT SEIZED DURING THE COURSE OF SEARCH BELONGS TO THE ASSESSEE AND NOT TO THE PERSON SEARCHED. IN ABSENCE OF ANY MATERIAL SEI ZED BELONGING TO THE ASSESSEE, THE ASSESSING OFFICER ERRED IN ASSUMING J URISDICTION TO U/S 153C OF THE ACT. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. AO PASSED U/S 143(3) R.W.S. 153C OF THE ACT IS BEYOND JURISDICTION AND DESERVES TO BE QUASHED. 2. WITHOUT PREJUDICE TO THE GROUND CHALLENGING ADD ITION OF RS. 10 LACS AS INCOME FROM UNDISCLOSED SOURCES, THE APPELLANT CRAV ES LIBERTY TO SUBMIT THAT IN CASE OF THE ADDITION BEING CONFIRMED, IT IS PRAYED THAT AS THE SAID INCOME IS UTILISED FOR MEETING THE OBJECTS OF THE APPELLANT T RUST, BEING APPLICATION OF INCOME FOR THE TRUST PURPOSE, THERE WOULD BE NO UND ISCLOSED INCOME LIABLE TO BE SUBJECTED TO TAX. 5.1 RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION REPORTED IN 229 ITR 383, THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT BOTH THE GROUNDS SHOULD BE ADMITTED BECAUSE BOTH THE ADDITIONAL GROUNDS ARE LEGAL. ON MERIT ALSO, THE LD. COUNSEL A RGUED AT LENGTH. 6. ON THE OTHER HAND, SHRI S.P.TALATI, APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THAT TWO ADDITIONAL GROUNDS RAISED SHOULD NOT BE ADMITTED BECAUSE THESE WERE NOT RAISED BEFORE ANY OF THE DEPARTMENTAL AUTH ORITIES BELOW. WITHOUT PREJUDICE TO THIS CONTENTION, THE LD. D.R. POINTED OUT THAT IN C ASE BOTH THE ADDITIONAL GROUNDS ARE ADMITTED, IN THAT EVENT, THE TRIBUNAL SHOULD REMAND THE CASE TO LD. CIT(A), KEEPING IN VIEW THE RATIO OF JUDGMENT OF HONBLE MADHYA PRADES H HIGH COURT INDORE BENCH IN THE CASE OF CIT-VS- TOLLARAM HASSOMAL REPORTED IN 2 98 ITR 22 (MP). 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT TWO ADDITIONAL GROUNDS WHICH ARE RAISED BEFORE US WERE NOT RAISED BEFORE THE LD. CIT(A). TH E HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. ( SUPRA ) HELD THAT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER QUESTION OF LAW, WHATSOEV ER FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO R EASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO 6 ITA NO.226/AHD/2008 CORRECTLY ASSIST THE TAX LIABILITY OF AN ASSESSEE. ADMITTEDLY, ALL THE RELEVANT FACTS FOR ADJUDICATING BOTH THE ADDITIONAL GROUNDS OF APPEAL ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS. WE, THEREFORE, ADMIT BOTH THE ADDITION AL GROUNDS. 7.1 THE HONBLE MADHYA PRADESH HIGH COURT IN THE CA SE OF TOLLARAM HASSOMAL ( SUPRA ), RELIED ON BY THE LD. D.R., HELD AS UNDER: THAT THE TRIBUNAL HAVING PERMITTED THE ASSESSEE TO RAISE FOUR ADDITIONAL GROUNDS TREATING THEM TO BE LEGAL GROUNDS IN APPEAL FOR THE FIRST TIME, SHOULD HAVE SET ASIDE THE ORDER OF THE COMMISSIONER OF INC OME-TAX (APPEALS) AND REMANDED THE CASE TO THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR DECIDING THE APPEAL AFRESH ON ALL THE ISSUES INCLUDING ON TH OSE FOUR GROUNDS RAISED BY THE ASSESSEE IN THE APPEAL BEFORE THE TRIBUNAL RATH ER THAN TO DECIDE THE ADDITIONAL GROUNDS ON THE MERITS FOR THE FIRST TIME BY ITSELF. ( HEAD NOTES ) 7.2 WE, THEREFORE, FOLLOWING THE DECISION OF THE HO NBLE MADHYA PRADESH HIGH COURT IN THE CASE OF TOLLARAM HASSOMAL ( SUPRA ), SET ASIDE THE ORDER OF THE LD. CIT(A) AND REMAND THIS APPEAL TO HIM FOR DECIDING THE APPE AL AFRESH ON ALL THE ISSUES INCLUDING TWO ADDITIONAL GROUNDS RAISED BY THE ASSE SSEE IN APPEAL BEFORE US, AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES . 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S. 7 ITA NO.226/AHD/2008