Smt. Ramaben Jayantibhai Kapadiya, At. Jetpur, Dist. Rajkot V. The Income Tax Officer, Ward-1(2)(3), Rajkot

ITA 24/RJT/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1882 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-05-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR PANDEY
• Keywords: Reopening of assessment; Loose papers; Opportunity of cross examination
• Section: 148; 132; 143(3); 142(1); 153A; 143(2); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER And SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.24/RJT/2019 (Assessment Year: 2011-12) (Hybrid Hearing) Smt. Ramaben Jayantibhai Kapadiya, Rajkot Vs. The ITO, Ward-1(2)(3), Rajkot थायीलेखासं./जीआइआरसं./PAN/GIR No.: BUBPK3557Q (अपीलाथ /Assessee) ( यथ /Respondent) नधा रतीक ओरसे / Assessee by : Shri D.M. Rindani, AR राज वक ओरसे/Revenue by : Shri Ashish Kumar Pandey, Sr. DR स ु नवाईक तार ख/ Date of Hearing : 13/05/2024 घोषणाक तार ख/Date of Pronouncement : 31/05/2024 आदेश/ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the Assessee, pertaining to assessment year 2011-12, is directed against the order passed by the Commissioner of Income Tax ( Appeals) [ in brief “CIT(A)” ], which in turn arises out of an assessment order passed by the assessing officer u/s 143(3) r.w.s. 147 of Income Tax Act, 1961 (hereinafter referred to ‘as the Act’), dated 11 th December, 2017. I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 2 2. The grounds of appeal raised by the assessee, in Form No.36, are as follows: “1. The Income-tax Officer, Ward 1(2)(3), Rajkot erred in issuing notice u/s 148 in the light of reasons recorded and thus assessment framed u/s 143(3) r.w.s. 147 is bad in law. 2. The Learned Commissioner of Income-tax (Appeals) - 2, Rajkot erred in confirming addition of Rs. 25,25,000/- made by the assessing officer by way of difference in long term capital gain on sale of property. 3. The Learned Commissioner of Income-tax (Appeals) - 2, Rajkot failed to appreciate that evidence found during search at the business premises of Vadaliya Group does not substantiate receipt of 'on money' on part of assessee. 4. The assessee craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal. 3. The assessee submitted Prayer for admission of legal ground No.1, as stated in Form No.36, which reads as follows: “The assessee above-named prays for and seeks before your Honours the admission of following ground of appeal in the aforesaid appeal filed by the assessee. The said ground was raised by the Assessee in the Memo of Appeal filed in Form 36 before the Bench. The same is raised now as an additional ground. Legal ground: “The Income-tax Officer, Ward 1(2)(3), Rajkot erred in issuing notice u/s 148 in the light of reasons recorded and thus assessment framed u/s 143(3) r.w.s. 147 is bad in law.” 1.The assessee respectfully submits that the aforesaid ground of appeal is purely legal in nature and does not require any fresh facts to be investigated as it arises from the facts which are on record and goes to the root of the matter. 2.In any case, the said ground being wholly legal in nature which goes to the jurisdiction of the matter, can be raised at any stage of proceedings. Hence, the aforesaid legal ground as held by courts to be admissible at any stage of proceedings, may kindly be allotted to be admitted in the interest of justice: I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 3 CIT vs Singhad Technical Education Society (2017) 397 ITR 0344 (SC). National Thermal Power Co. Ltd. (1998) 229 ITR 383 (SC). In view of above, it is prayed that the aforesaid additional ground may kindly be allowed to be admitted.” 4. In addition to the above grounds of appeal, the assessee has also raised following additional legal ground of appeal, ( prayer for admission of additional ground of appeal had been filed by assessee), which reads as follows: “The order of assessment passed u/s 143(3) r.w.s. 147 of the Act is without jurisdiction and therefore bad in law in as much as it is not passed as per special provisions contained in section 153C r.w.s. 153A and 153B of the Act and is consequently also barred by limitation of time.” 5. First, we shall adjudicate ground Nos. 2 and 3 raised by the assessee, on merit, as stated in Form No.36, which are reproduced above. The sum and substance of these grounds are that Learned Commissioner of Income- Tax (Appeals) erred in confirming addition of Rs. 25,25,000/- made by the assessing officer by way of difference in long term capital gain on sale of property and ld CIT(A) also failed to appreciate that evidence found during search at the business premises of Vadaliya Group does not substantiate receipt of 'on money' on part of assessee. 6. The appeal arises this way. The assessee`s case was reopened under section 147 of the Income Tax Act, 1961, after recording the reasons regarding income escaping assessment within the meaning of Section 147 of the Act and also obtaining due approval of the Pr. Commissioner of Income Tax-1, Rajkot for reopening of assessment u/s 147 of the Act. The notice u/s I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 4 148 of the Income Tax Act, dated 31.03.2017, was issued and served on the assessee and Notice u/s 142(1) of the Act was also, issued on 01.08.2017. In compliance of the above notices, the assessee, vide letter dated 12-08-2017, has filed manual return of income. The Notice u/s 143(2) of the Act was also issued on 03.10.2017 along-with notice u/s 142( 1) calling for various details. 7. On perusal of return of income filed in compliance to notice u/s 148 of the Act, it was observed by assessing officer that the assessee has declared income of Rs.1,05,688/-; which includes long- term capital gain of Rs.70,995/-, and bandhan job work income of Rs.34,568/- and bank interest income of Rs. 125/-. 8. The assessee`s case was reopened, after recording the following reasons: “On verification of sale deed No. 2845, dated 15-06-2010, it is noticed that you along with other 4 co-owners have sold immovable property for consideration of Rs. 4,00,000/- in which your share was 25% being agricultural land, Revenue Suvey No. 258, admeasuring 6 acres 37 gunthas of Pedhala Village of Jetpur Taluka. During the course of search u/s. 132 of the Act, was carried out at the business premises of Vadaliya Group on 25.02.2011, loose papers and registers were seized, wherein transactions of land-purchase, was recorded in coded language reflecting actual figure of purchase price. On confronted, total disclosure, of Rs. 4.67 crores were made by the group, which includes "On Money" paid for Pedhla Land purchased for Rs. 105 lacs, and has offered corresponding share of on money in individual working of shri Jatin Vadaliya, Shri Vijay Vadaliya and Shri Rahul Vadaliya and paid tax on the same. Therefore, reason to believe that income chargeable to tax to the extent of Rs. 25.25 lacs of (Rs.26,25,000/- less 1,00,000) has escaped assessment.” I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 5 9. Then after, the assessing officer issued show -cause notice to the assessee, vide show-cause notice dated 28-11-2017, which is reproduced below: “On verification of sale deed No.2845, dated 15-06-2010, it is noticed, that, you along with other 4 co-owners have sold immovable property for consideration of Rs.4,00,000/- in which your share was 25% being agricultural land Revenue Suvey No. 258, admeasuring 6 acres 37 gunthas of Pedhala Village of Jetpur Taluka. During the course of search u/s.132 of the Act was carried out at the business premises of Vadaliya Group on 25.02.2011, loose papers and registers were seized, wherein transactions of land purchase was recorded in coded language reflecting actual figure of purchase price. On confronted, total disclosure of Rs.4.67 crores were made by the group, which includes "On Money" paid for Pedhla Land purchased for Rs. 105 lacs, and has offered corresponding share of on money in individual working of shri Jatin Vtidaliya, Shri Vijay Vadaliya and Shri Rahul Vadaliya and paid tax on the same. Accordingly, your 25% share of the sale consideration amount comes to Rs.26,25,000/- as against shown by you at Rs. 1,00,000/-. Thus, there is difference of Rs. 25,25,000/- in sale consideration amount. In this regard, you are show caused, as to why such difference of Rs. 25,25,000/- should not be treated as your LTCG on sale of above property, and why it should not be added to your total income in absence of any reply/explanation.” 10. In response to above show-cause notice, the assessee furnished submission dated 29-11-2017 before assessing officer. The assessee explained before the assessing officer that he has not received any "on money" in respect of sale of immovable property, because if the assessee has received such on money than it would have invested it or deposited in bank but there is no such, huge investment or cash deposits made during the relevant assessment year, which clearly indicates non- receipt of cash. The assessee further stated that any person never intends to hold such a huge cash on hand so the assessee has not received any ‘on money’, above the sales consideration, as specified in sale deed, and assessee has invested Rs,5,25,300/- only in purchase (inclusive stamp duty). I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 6 11. However, the assessing officer has rejected the above contention of the assessee and noted during the course of search u/s 132 of the Act, carried out at the business premises of Vadaliya Group on 25.02.2011, loose papers and registers were seized, wherein transactions of land purchase was recorded in coded language reflecting actual figure of purchase price. On confronted, total disclosure of Rs.4.67 crores were made by the group, which includes "On Money" paid for Pedhla Land purchased for Rs. 105 lacs, and has offered corresponding share of ‘on money’ in individual working of Shri Jatin Vadaliya, Shri Vijay Vadaliya and Shri Rahul Vadaliya and paid tax on the same. On verification of sale deed No.2845, dated 15-06-2010, it was noticed that assessee and other 4 co-owners have sold immovable property for consideration of Rs.4,00,000/-, being agricultural land Revenue Suvey No.258 admeasuring 6 acres 37 gunthas of Pedhala Village of Jetpur Taluka in which assessee's share was 25%, and accordingly, assessee’s 25% share of sale consideration of amount of Rs.105 lacs comes to Rs. 26,25,000/-, as against shown by assessee at Rs.1,00,000/. Thus, the difference of 25,25,000/- was treated by assessing officer as Long Term Capital Gain (LTCG) on sale of above property and added the same to the income of the assessee. 12. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the CIT(A), who has confirmed the action of the assessing officer. The ld CIT(A) noted that addition of 25,25,000/- was made by the assessing officer based on the evidence found during search in case of the purchaser of property from assessee. The seized documents contained information in coded figures about payment of ‘on money’ in I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 7 purchase of land by the person searched. The evidence was further corroborated in statement u/s 132(4) wherein the purchasing party had admitted to have paid ‘on money’ to assessee and other co-sellers of property. In view of these documentary evidences, the ld CIT(A) upheld the addition made by the assessing officer. 13. Aggrieved by the order of the ld. CIT(A), the assessee is in further appeal before us. 14. Shri D.M. Rindani, Learned Counsel for the assessee, begins by pointing out that loose papers referred by the assessing officer, in the assessment order, were found on the premise of third-party. Mainly, the reasons were recorded by the assessing officer based on the material found in A-6 seized paper from M/s Ekta Textile B/h Lions School Kendriya Vidhyalays Shrinathi udhyognapar, Jetsur. These loose papers found from third-party premises, do not contain the name of person to whom the amount was paid and from whom the amount was received. There is no signature on the loose papers, and it is also not certain that who wrote these loose papers. In the reasons recorded by assessing officer, the statement of Shri Nathabhai Lakhabhai Mavani, is mentioned and the assessing officer has taken the base of such statement to make the addition in the hands of the assessee, however, no opportunity of cross examination has been provided to the assessee during the assessment proceedings, so far statement of Shri Natabhai Lakhabhai Mavani is concerned. Therefore, ld Counsel submitted that the documents found during the search action do not have evidentiary value, these documents do not contain name of person, who received the amount I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 8 and paid the amount. No date and no any year are mentioned in these loose papers. Therefore, these are dumb documents and hence addition should not be made based on such dumb documents. Therefore, ld Counsel contended that addition made by the assessing officer may be deleted. 15. On the other hand, Ld. DR for the Revenue, argued that assessment was reopened by the assessing officer, under section 147 of the Act on the basis of loose papers found during the search action. The assessing officer made addition based on these papers found during search action, as these are factual documents which were confirmed by the statement of Shri Nathabahi Lakhabhai Mavani, therefore addition made by the assessing officer, may be upheld. 16. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We find that as per page No. 15 of Annexure A-6 seized from M/s Ekta Textile B/h Lions School Kendriya, Vidhyalays Shrinathi udhyognapar, Jetpur (original seized material available as per retention register Sr. No. 34 of ITO, Ward 1(2)(3) Rajkot), following noting were made: Page No. 15 of A-6 Other Expenses 115- Given to Suresh Desai 16- Given to Madhavjibhai I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 9 166- Junagadh Road, Mariyam Manzil 105- Paid for 17 Vigha Pedhla 40- paid for Rajkot block 20- paid for Haripur-12 121- payment related to Rajani 583-paid The above chart and annexure are mentioned by the assessing officer, in the reasons recorded by him under section 147 of the Act. The assessing officer interpreted the other expenses, viz: “105- Paid for 17 Vigha Pedhla” as if ‘on-money’ paid for pedhla land purchased for Rs.105 lacs. We note that assessing officer has verified sale deed No.2845, dated 15-06-2010, and it was noticed that assessee and other 4 co-owners have sold immovable property for consideration of Rs.4,00,000/-, being agricultural land, vide Revenue Suvey No.258 admeasuring 6 acres 37 gunthas of Pedhala Village of Jetpur Taluka in which assessee's share was 25%, and accordingly, assessee’s 25% share of sale consideration of amount of Rs.105 lacs comes to Rs. 26,25,000/-, as against shown by assessee at Rs.1,00,000/. Thus, the difference of 25,25,000/- was treated by assessing officer as Long Term Capital Gain (LTCG) on sale. However, we find that loose papers referred by the assessing officer, in the assessment order, were found on the premises of third-party. Mainly, the reasons were recorded by the assessing officer based on the material found in A-6 seized paper from M/s Ekta Textile B/h Lions School Kendriya Vidhyalays Shrinathi udhyognapar, Jetsur, as noted above. These loose papers found from third-party premises, do not contain the name of person to whom the amount was paid and from whom the amount was received. There is no signature on the loose papers, I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 10 and it is also not certain that who wrote these loose papers. In the reasons recorded by assessing officer, the statement of Shri Nathabhai Lakhabhai Mavani, is mentioned and the assessing officer has taken the basis of such statement to make the addition in the hands of the assessee, however, no opportunity of cross examination has been provided to the assessee, during the assessment proceedings, so far statement of Shri Natabhai Lakhabhai Mavani is concerned, therefore, we find merit in the arguments advanced by Ld. Counsel for the assessee. 17. We note that in the material found during the search action “other expenses, viz: “105- Paid for 17 Vigha Pedhla”, under the head “other expenses” 105 is mentioned and the assessing officer has added five zeros to make it 105,00,000/-. That is, Rs.105 lacs. We find that there is no bases to add five zeros, one can add eight zeros or ten zeros also, hence, it is a pure presumption of the assessing officer which is based on guess work. In assessee`s case under consideration there is absence of direct nexus, and we are of the view that there is no evidentiary value of such guess work done by the assessing officer to make addition in the hands of the assessee. Based on the factual position narrated above, we are of the view that estimation made by assessing officer is not based on sound reasoning.Hence, we are not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence, ground Nos. 2 and 3 raised by the assessee, on merit, are allowed. 18. Before parting, we would like to mention that since, we have deleted the addition made by assessing officer, by adjudicating ground Nos. 2 and 3 raised by the assessee, and allowed the appeal of the assessee, on merit, I.T.A No. 24/Rjt/2019 A.Y. 2011-12 Smt. Ramaben Jayantibhai Kapadia vs. ITO 11 therefore additional legal grounds raised by the assessee, viz: (i) challenging reopening of assessment under section 147 of the Act, and (ii) Legal issue raised under section 153C r.w.s. 153A and 153B of the Act, have not been adjudicated, as these legal issues are rendered academic and infructuous. 19. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 31-05-2024 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Dated: 31/05/2024 True Copy आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Rajkot 6. Guard file. By order/आदेश से, Assistant Registrar ITAT, Rajkot