The DCIT, Central Circle-1(1), Ahmedabad V. Shri Umang H. ThaKkar, Ahmedabad

ITA 2408/AHD/2008

AI Insights

The case involves cross-appeals by the assessee, Shri Umang Hiralal Thakkar, and the Revenue against the order of the CIT(A) concerning the assessment year 2004-05. The primary issues revolved around additions made to the assessee's income following a search operation under section 132 of the Income Tax Act, 1961, which resulted in the seizure of cash, jewelry, and documents. The Tribunal examined various grounds, including the legality of the DVO's reference for property valuation, the admissibility of additional evidence, and the treatment of unexplained cash credits and investments. The Tribunal's decision was influenced by precedents and legal principles emphasizing the need for concrete evidence linking the assessee to the alleged undisclosed investments and the proper application of legal standards in admitting additional evidence during appellate proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133499 (ITAT-AHMEDABAD)
• Duration Of Justice: 15 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-10-2023
• Assessment Year: 2004-2005
• Appeal Filed On: 24-06-2008
• Other Referred Cases: Sargam Cinema vs. CIT, CIT vs. Kamalben Sureshchandra Bhatti, CIT vs. Abhalbhai Arjanbhai Jadeja, CIT vs. Kantibhai Revidas Patel
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Unexplained investment; Value adopted by valuation officer; Depreciation; Loose papers; Additional evidence; Valuation report; Documents seized
• Section: 131; 68; 132; 144; 143(3); 153A; 69B; 13; 145(3)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ]BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER ITA No.2149/Ahd/2008 Assessment Year : 2004-05 Shri Umang Hiralal Thakkar Dharamadev House Shyamal Cross Road Satellite, Ahmedabad 380015. Vs. Dy.CIT., Cent., Cir.1(1) Ahmedabad. ITA No.2408/Ahd/2008 Assessment Year : 2004-05 Dy.CIT., Cent., Cir.1(1) Ahmedabad. Vs. Shri Umang Hiralal Thakkar Dharamadev House Shyamal Cross Road Satellite, Ahmedabad 380015 अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Shri S.N. Soparkar, Sr.Advocate & Ms.Urvashi Shodhan, AR Revenue by : Shri Vijay Kumar Jaiswal, CIT-DR स ु नवाई क तार ख/Date of Hearing : 05/10/2023 घोषणा क तार ख /Date of Pronouncement: 06/10/2023 आदेश/ O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER These are cross-appeals by the assessee and the Revenue against common order passed by the ld.CIT(A)-III, Ahmedabad dated 31.3.2008under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), for the assessment year 2004- 05. ITA No.2408 and 2140 /Ahd/2008 2 2. For adjudication of this issue, we take, briefly, facts as emanating from orders of the authorities below ,that the assessee is engaged in construction and hotel business. The assessee is proprietor of five concern, viz. (i) Hotel Neelkanth, (ii) Hotel Neeltop, (iii) Devnandan Builders, (iv) Ghanshyam Builders, and (v) Swamynarayan Farm. Further, he is also partner in M/s.Neel Harsh Enterprises and M/s.Netra Enterprises. A search under section 132 of the Act was conducted at the premises of the assessee on 9.2.2005, as a consequence, certain cash, jewellery and silver articles, besides some documents were seized. Subsequently, assessment was framed under section 153A(b) of the Act, making addition on various counts to the tune of Rs.17,62,65,010/- assessing the income of the assessee at Rs.17,75,70,330/-. Thematter was carried in appeal before the ld.CIT(A), who partly allowed the assessee’s appeal. Aggrieved by which, the assessee and the Revenue have come in appeal before us. 3. We shall first take up the assessee’s appeal being ITA No.2149/Ahd/2008. 4. The grounds of the above appeal read as under: 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by the A.O. of Rs.489/ for the alleged excess depreciation claimed by the appellant.. 2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs.20,214/- made by the A.O. @ 20% of the expenses on telephone/ mobile. 3. The learned Commissioner of Income Tax (Appeals) has erred in partly confirming the addition made by the Assessing Officer U/S.69B of the Act for the alleged unexplained investments i.e. to the extent of Rs. 2,00,599/- for construction of Swaminarayan Farm residence and to the extent of Rs. 18,25,521/-in construction of Hotel Neelkanth out of the total additions made of Rs.25,98,671/- i.e. Rs. 2,31,936/- & 23,66,735/- respectively. ITA No.2408 and 2140 /Ahd/2008 3 4 The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal.” 5. Further, the assessee has also raised additional grounds before us vide note dated 14.2.2020, which reads as under: “Appellant craves leave to raise this additional ground of appeal before the Hon'ble IT AT. This is a legal ground and therefore as per the decision of Hon'ble Supreme Court in the case of National Thermal Power (229 ITR 383) it can be raised before the Hon'ble ITAT. 1. Both the lower authorities erred in law and on facts in confirming additions in the assessment under section 143(3) r.w.s. 153A ignoring the fact that no incriminating material was found during course of search for making such additions and hence such additions are required to be deleted. It be so held now.” 6. During the course of hearing before us, the ld.counsel for the assessee stated that additional ground is not being pressed by him, as also ground nos.1 and 2 raised by the assessee. Ground Of appeal No.1,2 and the additional ground of the assessee are therefore dismissed as not pressed. The only effective ground for adjudication relates to ground no.3. 7. Taking up the said ground, the ld.counsel for the assessee contended that the issue/grievance of the assessee against order of the ld.CIT(A) was in relation to confirmation of addition made to the income of the assessee on account of unexplained investment in property, under section 69B of the Act, amounting to Rs.20,26,120/- . Drawing our attention to the facts of the case from page nos.27 to 31 of para-(d) of the assessment order, the ld.counsel for the assessee pointed out that the impugned addition related to investment in two properties, and the addition related to the difference in investment shown by the assessee and that determined by the DVO as under: ITA No.2408 and 2140 /Ahd/2008 4 Sr.No. Property Amount shown as invested by the assessee during the year Amount of investment estimated by the DVO i) Swaminarayan Farm, SG Highway, Ahd 1,85,894/- 4,17,830/- Difference of Rs.2,31,936/- added to the income of the assessee under section 69B of the Act. ii) Hotel Neelkanth 4,82,349/- 28,49,084/- Difference Rs.23,66,735/-added to the income of the assessee under section 69B of the Act. He pointed out that theLd.CIT(A) restricted the amount of undisclosed investment to Rs.2,00,599/- in respect of Swaminarayan residence, and Rs.18,25,521/- in respect of Hotel Neelkanth. 8. With respect to the residential house, it was pointed out that the DVO had determined the total value of the property at Rs.1,73,12,146/-, while the assessee had declared total investment in the same upto 31.3.2004 at Rs.77,02,238-. The AO took the cost of construction, as determined by the DVO and taking this as the basis for 31.3.2004, he determined the cost of construction as at the end of each preceding year, and in the same ratio. Accordingly, the cost of construction as per the valuation report as on 31.3.2004 for the impugned year i.e. Asst.Year 2004-05 was taken at Rs.4,17,830/-, and noting the cost of construction disclosed by the assessee for the year at Rs.1,85,894/-; the difference of Rs.2,31,936/- was added to the income of the assessee as ITA No.2408 and 2140 /Ahd/2008 5 unexplained investment in the residential house during the year. Similarly, in respect of investment made in Hotel Neelkanth, the DVO determined the cost of construction as on 31.3.2004 at Rs.28,49,084/- while the assessee showed cost of construction of Rs.4,82,349/-. The difference in the cost of construction of Rs.23,66,735/- was treated as undisclosed investment in this property in the absence of any information furnished by the assessee to justify its cost of construction in the property. 9. The ld.CIT(A) reduced the addition on account of unexplained investment in the residential house from Rs.2,31,936/- to Rs.2,00,599/- allowing adjustment to the DVO’s valuation on account of self-supervision/own purchases/variation in CPWD/local rates etc. at the rate of 15% as opposed to 7.5% granted by the DVO. With respect to Hotel Neelkantha, similar deduction of 15% was allowed in the estimated cost of construction; thus reducing unexplained investment made during the impugned year from Rs.23,66,736/- to Rs.18,25,521/- . 10. The argument of the ld.counsel for the assessee before us was that determination of cost of construction was referred to the DVO by the AO without rejecting the books of accounts of the assessee, which he pointed out has been categorically held by the Hon’ble Apex Court in the case of Sargam Cinema, 328 ITR 513 (SC) to be not in accordance with law. He further pointed out that identical reference made in the case of Sanjay H. Thakkar, brother of the assessee, was deleted by the ITAT, finding the same to be based on an invalid reference to DVO, on the basis of the decision of the Hon’ble Apex Court in the case of Sargam Cinema (supra). This decision of the ITAT he pointed out was confirmed by the Hon’ble jurisdictional High Court also. Our attention was drawn to the order ITA No.2408 and 2140 /Ahd/2008 6 of the ITAT in the case of Sanjay H. Thakkar, in IT(SS)A.No.849/Ahd/2010 dated 18.1.2016 and judgment of the Hon’ble High Court confirming the finding of the ITAT in Tax Appeal No.832 of 2016 dated 22.12.2016.Copies of both the orders were placed before us. 11. The ld.DR, though supported order of the ld.CIT(A) but was unable to controvert either the factual contention of the ld.counsel for the assessee that the reference for determination of cost of construction in the property of the assessee was made to the DVO without rejecting the books of accounts of the assessee; nor distinguish the decision of the Hon’ble Apex Court in the case of Sargam Cinema (supra) laying down the proposition of law that no reference to the DVO could be made without rejecting the books of accounts of the assessee. In view of the same, the decision rendered by the ITAT in the case of brother of the assessee, Shri Sanjay H. Thakkar which was confirmed by the Hon’ble jurisdictional High Court also, applies to the facts of the present case, following which, we hold that the addition made on account of unexplained investment in two properties of the assessee amounting to Rs.20,26,120/-, was not sustainable in law, since it was based on reference made to the DVO, which was illegal and not in accordance with law. In view of our above discussion, ground no.3 raised by the assessee is allowed. 12. In effect, the appeal of the assessee is partly allowed. 13. Now we take up the Revenue’s appeal in ITA No.2408/Ahd/008. ITA No.2408 and 2140 /Ahd/2008 7 The ground no.1 reads as under: “1. The CIT(A) has erred In law and on facts in admitting the fresh evidence u/s. 46A without considering the A.O.'s objection that none of the conditions mentioned under that Rule was satisfied.” 14. As is evident from the above, the Revenue is challenging admission of additional evidences by the ld.CIT(A) stating that the action of the ld.CIT(A) was not as per the Rule 46A of the Income Tax Rules, 1962. 15. The ld.DR pointed out that during the appellate proceedings admission of additional evidence was opposed by the AO in his remand report stating that the assessee had been given due opportunity during the assessment proceedings, and also the assessee did not give justification for not filing the same during the assessment proceedings; that therefore, the additional evidences ought not to have been admitted by the ld.CIT(A). 16. The ld.counsel for the assessee, on the other hand, relied on the order of the ld.CIT(A). He drew or attention to paa-5 of the ld.CIT(A)’s order pointing out there from that addition to the tune of Rs.50,86,380/- had been made to the income of the assessee on account of capital introduced in various proprietorship concerns of the assessee, the source of which remained unexplained, and addition to the tune of Rs.63,06,900/- was made to the income of the assessee on account of cash credit remained unexplained. It was also pointed out that the addition on account of unexplained investment in the properties of the assessee to the tune of Rs.25,98,671/- was made on the basis of DVO report. He thereafter pointed out that the assessee had contended to the ld.CIT(A) that the assessee was required to furnish voluminous evidences, with respect to all the above additions for seven assessment years, as also copies ITA No.2408 and 2140 /Ahd/2008 8 of bank statements for last nine years, which required substantial time for collection; that the addition on account of valuation difference in the properties based on the DVO’s report was made at the fag-end of the year, which hardily gave any opportunity to the assessee to put its stand on the matter; that accordingly, the assessee was prevented from sufficient cause from producing evidence at the assessment stage, and AO has also not given sufficient opportunity to admit evidence with respect to the grounds of appeal. He thereafter drew our attention to para 6.4 of the CIT(A)’s order wherein he appreciated these difficulties of the assessee in producing evidence, and therefore, on a holistic consideration, in the interest of justice, he admitted additional evidence, as held in para 6.4 of the CIT(A) as under: 17. Relying on the order of the ld.CIT(A), the ld.counsel for the assessee stated that the additional evidence, therefore had been ITA No.2408 and 2140 /Ahd/2008 9 rightly admitted by him. He further contended that the ld.CIT(A) had obtained a remand report from the AO on the additional evidences, and he pointed out that the Hon’ble jurisdictional High Court in the case of CIT Vs. Kamalben Sureshchandra Bhatti, 367 ITR 692 has held that where the Commissioner (Appeals) admitting additional evidence after calling for remand report and permitting the AO to comment on such additional evidence, the order of the Commissioner (Appeals) requires no interference. Copy of the said order is placed on record before us. 18. We have heard both the parties, and we find no reason to interfere in the order of the ld.CIT(A) admitting the additional evidences. The difficulties faced by the assessee in producing the additional evidences, relating to the cash creditors, and evidence to prove the capital introduced in the various partnership concerns, as noted by the ld.CIT(A) have not been controverted by the ld.DR before us. Further, we agree with the ld.CIT(A) that the evidences were voluminous, pertained to seven assessment years, and related to issue which were of nine years’ old, and this, we agree, requires considerable time for collection. We completely agree with the ld.CIT(A) that in the interest of justice, this additional evidence needed to be admitted, since the evidences went to the root of the matter to establish the case of the assessee. Further, we have noted that the report was sought from the AO on the additional evidence, and therefore, as per the decision of Hon’ble jurisdictional High Court in the case of Kamalben Sureshchandra Bhatti (supra), admission of the additional evidence by the ld.CIT(A) in the light of these facts, cannot be interfered with. Thus, we reject ground no.1 raised by the Revenue. ITA No.2408 and 2140 /Ahd/2008 10 19. Ground no.2 raised by the Revenue is as under: “The C1T(A) has erred in law and on facts in deleting the additions of Rs.63,06,900/- made on account of unexplained capital without considering the factual position that the assessee failed to prove identity and capacity, of the depositors and genuineness of the transactions.” 20. The above ground is with regard to the deletion of addition made by the ld.CIT(A) of Rs.63,06,900/- which was made on account of unexplained credit in the capital account amounting to Rs.50,86,380/- and unexplained cash credit amounting to Rs.12,20,520/-. The unexplained investment in capital pertained to the additional capital introduced in the below-mentioned proprietorship concerns of the assessee: i) Hotel Neelkanth : Rs.8,03,857/- ii) Hotel Neeltop : Rs.7,49,540/- iii) Ghanshyam Builders : Rs. 3,291/- iv) Sahajanand Enterprise : Rs. 2,000/- v) Devnandan Builders : Rs.35,27,692/- Total : Rs.50,86,380/- The unexplained credits pertained to the following deposits found in the aforementioned enterprises of the assessee : A) Sahajanand Enterprise i) Bihabhai R. Thakkar : Rs.51,770/- ii) N.R. Corporation : Rs.1,00,000/- iii) Chintan Traders : Rs.2,68,750/- Total Rs.4,20,520/- B) Ghanshyam Builders: i) Parul B. Chatani : Rs.8,00,000/- TOTAL : Rs.12,20,520/- 21. In the absence of the assessee proving genuineness of the transaction and source of these cash credits in termsof provisions of ITA No.2408 and 2140 /Ahd/2008 11 section 68 of the Act, the entire amount of Rs.63,06,900/- was added to the income of the assessee. 22. Before the ld.CIT(A), the assessee admitted additional evidences in the form of copies of the bank statement of Mahila Cooperative Bank Ltd., pointing out that addition to the capital accounts were the outcome of transaction between the different proprietary concerns and personal books of the assessee through banking channels, and in case of cash credit, all evidences to prove the identity, genuineness and credit-worthiness were filed by way of copies of PAN/IT returns and conformation of the said parties. All these evidences were forwarded to the AO for his comment, who was unable to refute the said evidence. Taking note of the same, the ld.CIT(A) deleted the addition made of Rs.63,06,900/- by holding at para 8 and 8.1 of his order as under: ITA No.2408 and 2140 /Ahd/2008 12 23. Before us, the ld.DR relied on the order of the AO and while the ld.counsel for the assessee relied on the order of the ld.CIT(A). 24. We have gone through the orders of the authorities below, and we see no reasons to interfere in the order of the ld.CIT(A) deleting the entire addition made on account of capital introduced in various proprietorship concerns of the assessee and other cash credits holding the source of all them to be proved by the assessee. We have noted that the ld.CIT(A) admitted the additional evidences filed by the assessee to prove source of both the capital introduced in various proprietorship concerns of the assessee, as also cash creditors. He noted that the assessee had filed copy of bank statement reflecting introduction of capital in various proprietorship concerns, as coming from the personal accounts of the assessee through bank channels. The AO was unable to refute this fact emerging from the bank statement of the assessee in the remand report. The ld.DR was unable to point out any infirmity in the same, and we have noted that only basis for the AO to make the addition was the lack of evidence to prove the source of capital introduced in the proprietorship concerns. Since the assessee duly filed evidence to prove the same, which were admitted by the ld.CIT(A) and examined by the AO, and no infirmity pointed out in the evidence, we have no hesitation in concurring with the ld.CIT(A) that the source of capital introduced in various proprietorship concerns of ITA No.2408 and 2140 /Ahd/2008 13 the assessee to the tune of Rs.50,86,380/- stood duly explained, and there was no case for making any addition under section 68 of the Act on this count. 25. Similarly, in the case of cash creditors, the ld.CIT(A) admitted all additional evidences by way of IT returns, copy of PAN and confirmation of the depositors noted by the AO to be unproved, and basis these evidences, he held that, the cash deposits/cash creditors to be duly explained, and deleted the addition to the tune of Rs.12,20,520/-. 26. The ld.DR has been unable to refute the finding of theld.CIT(A) regarding additional evidences filed by the assessee of proving genuineness of cash credits. Moreover, these additional evidences were examined by the AO also who pointed out no infirmity in the same. In view of the same, we hold that the ld.CIT(A) has rightly deleted the addition made on account of cash credit to the tune of Rs.12,20,520/-. In view of the above, the order of the ld.CIT(A) deleting the addition of Rs.63,06,900/- made under section 68 of the Act is uphold. The ground No.2 raised by the Revenue is dismissed. 27. Ground No.3 raised by the Revenue reads as under: “The CIT(A) has erred in law and on facts in deleting the addition of Rs.4,84,541/- made on account of disallowance of interest for non-business use of the borrowed funds, without considering the fact that borrowed funds .were used for non-business purpose.: ITA No.2408 and 2140 /Ahd/2008 14 28. The issue raised in the above ground relates to disallowance of interest expenditure claimed by the assessee to the tune of Rs.4,84,541/- which were deleted in entirety by the ld.CIT(A). 29. Brief facts relating to the issue that the assessee had claimed interest expenditure totaling to Rs.4,84,541/- in its below mentioned proprietorship concerns: i) Hotel Neelkanth : Rs.1,35,000/- ii) Hotel Neeltop : Rs.2,83,266/- iii) Dharamdev Hsg. Corpn : Rs. 40,145/- iv) Sahajanand Enterprise : Rs. 26,130/- Rs.4,84,541/- The AO noted, on perusal of the balance sheet of different proprietorship concerns of the assessee that it had advanced interest free loans as under: i) Ghanshyam Builders : Rs.9,40,000/- ii) Devnanddan Builders : Rs.5,73,03,577/- iii) DharmdevHsg. Corpn : : Rs.44,33,933/- iv) Sahajanand Enterprise : Rs.1,88,28,877/- v) Swaminarayan Enterprise : Rs.6,73,000/- 30. All the above facts emerge from page no.11 to 13 of the AO’s order, noting that the assessee has given huge advances, as interest free advances, and at the same time borrowed fund on which interest had been paid, the finding that the AO had failed to establish nexus between interest free fund available with him and interest free advance, as also business purpose of interest free advances. He disallowed entire interest expenditure claimed by the assessee amounting to Rs.4,84,541/-. The ld.CIT(A) deleted the disallowance, noting that, there was sufficient interest free funds available in the proprietorship concern, ITA No.2408 and 2140 /Ahd/2008 15 where interest free advances were noted to be given, and in some proprietorship concerns, where interest free advances were noted by the AO to be given, no claim of interest expenditure had been made by the assessee. His finding in this regard at para 9.1 to 9.2 of the order is as under: ITA No.2408 and 2140 /Ahd/2008 16 The quantum/factum of his being so itself has not been doubted by the AO. On a holistic consideration, the disallowance of interest was not justified and is deleted and the related ground of appeal is allowed.” 31. Before us, the ld.DR relied on the order of the AO, while the ld.counsel for the assessee relied on the order of the ld.CIT(A), and emphasized the fact that it is settled law that where interest free funds were available, it is presumed to have been utilised for making interest free advance calling for no disallowance under section 36(1)(iii) of the Act, as laid down by the Hon’ble Apex Court in the case of CIT Vs. Reliance Industries Ltd., 410 ITR 466 (SC). 32. We have heard rival submissions and have gone through the orders of the authorities below. We see no reason to interfere in the order of the ld.CIT(A), since the facts noted by him, and the proposition of law applied by him for deleting the disallowance of interest, which have not been controverted by the ld.DR before us. We have noted that in the case of proprietorship concerns of the assessee, viz. Ghanshyam Builders, where interest free advance to the tune of Rs.9,40,000/- was noted by the AO, to be given, the ld.CIT(A) noted the fact that no interest expenditure had been claimed by the assessee in the said proprietorship concern. This fact has remained uncontroverted by the Revenue before us. Therefore, in relation to the interest free advances made in the proprietorship concern, Ghanshyam Builders, there was no occasion to make any disallowance of interest. 33. In relation to other interest free advances given by other proprietorship concerns of the assessee, as noted by the AO, the ld.CIT(A) has noted, sufficient interest free funds are available in all other proprietorship concern. In the case of Devnandan Builders, he ITA No.2408 and 2140 /Ahd/2008 17 has noted the availability of interest free funds by way capital of Rs.28.49 lakhs and interest free advances received of Rs.6.68 crores. In the case of Dharamadev Hsg. Corporation, he has noted the availability of capital of Rs.2.34 crores and interest free booking amount of Rs.1.33 crores, as against interest free advance given of Rs.134.33 lakh. In the case of Sahajanand Enterprises, he has noted that the interest free advance available with the assessee of Rs.1.69 crores, apart from capital in this concern, which was sufficient for making the interest free advances of over Rs.1.86 crores. He further noted that if the entire interest free loans in M/s.Devnanadan Builder/Ghyanshyam Builders/Sahajanand Enterprise totaling to Rs.1.74 crores are considered, as noted by the AO, then also the facts remains that these concerns had availability of interest free funds of Rs.3.47 crores which was sufficient for making interest free advance. 34. All the above facts have remained uncontroverted by the Revenue before us. Further, it is settled that law that where sufficient interest free funds are available, it is to be presumed that the same have been used for making interest free advances for claiming disallowance of interest under section 36(1)(iii) of the Act. The Hon’ble Apex Court has settled this issue in the case of Reliance Industries Ltd. (supra). In view of the above uncontroverted factual finding of the ld.CIT(A) and the legal proposition applied by him, we see no reason to interfere in the order of theld.CIT(A) deleting the disallowance of interest amounting to Rs.4,84,51/-. 35. The ground no.3 raised by the Revenue is rejected. ITA No.2408 and 2140 /Ahd/2008 18 36. Ground No.4 reads as under: “The CIT(A) has erred in law and on facts in deleting the addition of Rs.1,49,252/- made on account of disallowance of depreciation on vehicles for personal use, without considering the facts that the assessee himself has admitted personal use of vehicles by disallowing 25% of vehicles expenses. Further the CIT(A) has not considered the provisions of section 38(2) of the Act.” 37. The issue raised in the above ground relates to disallowance of depreciation on vehicle, treating it as used for personal purpose. The AO had disallowed 25% of the total expenditure incurred on vehicle of Hotel Neelkanth and Hotel Neeltop, and had also disallowed 25% of the depreciation on this vehicle. Before the ld.CIT(A) the assessee pointed out that it had suo moto disallowed 25% of the expenditure on vehicle. But no disallowance had been made in respect of depreciation of these vehicles for business purpose. The ld.CIT(A) agreed with the contention of the assessee, and accordingly deleted the depreciation on vehicle amounting to Rs.1,49,252/-. 38. Before us, at the outset itself, it was pointed out by the ld.counsel for the assessee that this issue had been dealt with in the case of brother of the assessee, Shri Sanjay Thakkar by the ITAT in ITA No.851/Ahd/2010 granting relief in favour of the assessee. Copy of the order was placed before us. Our attention was drawn to para-3 of the said order, which reads as under: “3. The assessee's second substantive ground pleads that both the lower authorities have wrongly disallowed a sum of Rs. 1,26,387/-out of motor car expenses and depreciation on account of personal use. His only argument is that the authorities below have not properly appreciated the settled law in disallowing depreciation of Rs.4,98,010/- pertaining to the motor car in question since the same is very much allowable after forming part of the relevant block of assets. Learned Departmental Representative fails to dispute this legal position. We thus accept assessee's above argument and direct the Assessing Officer to delete depreciation disallowance of Rs.4,98,010/- as indicated hereinabove. This substantive ground is partly accepted.” ITA No.2408 and 2140 /Ahd/2008 19 39. It was therefore contended that the AO was not correct in making such disallowance in this case as well, and therefore the order of the ld.CIT(A) needed to be upheld. The ld.DR however relied on the order of the AO. 40. We have heard rival contention and perused orders of the authorities below. We have also gone through the decision of the ITAT in the case of Sanjay H. Thakkar (supra).We have noted that identical disallowance made in the case of Sanjay H. Thakkar (supra) was deleted by the ITAT, noting that once the motor car formed part of block of assets, depreciation on the same was allowable. In view of the same, we agree with the ld.counsel for the assessee that the issue stands decided in favour of the assessee by the order of the ITAT in the case of Sanjay H. Thakkar. Ground no.4 raised by the Revenue is, therefore, rejected and deletion of disallowance of depreciation on motor car amounting to Rs.1,49,252/- by the ld.CIT(A) is upheld. 41. Ground Nos.5 & 6, it was pointed out, pertained to the issue of addition made on account of unexplained source of investment in residential house and Hotel Neelkanth by the assessee, which was made by the AO to the tune of Rs.25,98,671/-, but was restricted by the ld.CIT(A) to the tune of Rs.20,26,120/-. The said ground reads as under: “The CIT(A) has erred in law and on facts in restricting the addition of Rs.25,98,671/- to Rs.20,26,120/- made on account of unexplained investment in residential house and hotel building without considering and appreciating the valuation report of District Valuation Officer. The CIT (A) has erred in law and on facts in not allowing opportunity of being heard to the Valuation Officer white deleting the addition made which were based on valuation report.” ITA No.2408 and 2140 /Ahd/2008 20 42. The Revenue in the above ground is disagreed by the restriction of disallowance from Rs.25,98,671/- made by the AO to Rs.20,26,120/- by the ld.CIT(A). 43. We have dealt with this issue in the assesee’s appeal in ITA No.2149/Ahd/2008 at ground no.3 wherein in para-20 above of the order, we have held the addition made on account of unexplained investment to be not sustainable in law, finding reference made to the DVO for determining quantum of investment made by the assessee, and which formed basis for making addition, to be not in accordance with law. Since we have held entire addition made by the AO under section 69B amounting to Rs.25,98,671/- not sustainable in law, the present ground raised by the Revenue seeking confirmation of addition is dismissed. The ground nos.5 & 6 raised by the Revenue is accordingly dismissed. 44. Ground No.7 raised by the Revenue is as under: “The CIT(A) has erred in law and on the facts in deleting the addition of Rs.55,41,922/- made on account of undisclosed income from construction business of Sahjanand Complex without considering the fact that work in progress disclosed was less than the total expenditure in this regard and further the gross profit shown was very less as compared to receipts and work in progress.” 45. Facts relating to the issue are that the AO noted from Trading and Profit & Loss account of the construction business carried out by the assessee in its concern Sahajanand Enterprise that it had shown work-in-progress at Rs.1,11,50,327/- therein and construction receipt of Rs.43,26,100/- against which net profit of ITA No.2408 and 2140 /Ahd/2008 21 only of Rs.1.50 lakh was shown. The AO noted that the assessee had incurred expenses on consumption of various building materials and labour charges amounting to Rs.1,52,74,223/-. The AO held, on the basis of the facts and figures noted by him ,that the assessee had wrongly reported the amount of WIP which according to him should have been atleast equivalent, if not more than the building material and labour charges consumed and labour charges paid during the year. He also noted that no stock-register was maintained by the assessee as to enable the determination of correct figure of WIP. Noting this defect, he rejected the books of accounts of the assessee under 145(3) of the Act, and thereafter adopted a figure of WIP at Rs.1,52,74,223/-. Accordingly, addition of Rs.41,23,896/- was made to the income of the assessee on account of under-valuation of WIP. The AO further computed net income of the assessee from its business by estimating at 8% on the amount of WIP at Rs.1,52,74,223/- and construction receipt of Rs.43,26,100/- which worked out to Rs.15,68,026/-, and noting that the assessee had already disclosed profit of Rs.1,50,000/-, addition of balance profit of Rs.14,18,026/- was made to the income of the assessee. Thus total addition on account of undervaluation of WIP and estimation of net profit, to the tune of Rs.55,41,922/-, was made to the income of the assessee. 46. Before the ld.CIT(A), it was pointed out that the AOhad incorrectly read the reporting made in its Trading and Profit & Loss account. It was pointed out to the ld.CIT(A) that against the construction expenses incurred by the assessee of Rs.1.2 crores, Rs.1.11 crore pertained to in-complete construction and reflected as WIP; that out of the balance completed construction, Rs.5,58,980/- remained in stock as unsold and the remaining was sold and ITA No.2408 and 2140 /Ahd/2008 22 reflected as sale of Rs.43,26,100/-. Thus resulting in GP of Rs.7,61,184/- to the assessee. It was pointed out that the AO had completely misread the financial statement and held the entire expenses incurred in construction to be reflected as WIP. It was therefore pointed out that there was as no undervaluation of WIP. It was also pointed out that the assessee had reflected the GP of 17.59% which was substantial as compared to the GP rate of 8% applied by the AO, and it was further pointed out that the AO had examined entire books of accounts, and had found no defect in the same, and the books could not be rejected merely on the ground of non-maintenance of stock register. 47. The ld.CIT(A) found merit in the contentions of the assessee and deleted the entire addition made holding at para 18 of the order as under: ITA No.2408 and 2140 /Ahd/2008 23 48. Before us, the ld.DR relied on the order of the AO while the ld.counsel for the assessee relied on the order of the ld.CIT(A) and further drew our attention to the Trading and Profit & Loss account of Sahajanand Enterprise placed before us at PB Page No.103 pointing out of the facts and figures relating to the activities carried out by it and noted by the AO, and as examined by the ld.CIT(A). 49. We have heard rival contentions and gone through the orders of the authorities below, and have also gone through the documents referred to before us. We see no infirmity in the order of the ld.CIT(A) and concur with him that the AO misread and misinterpreted the facts and figures noted in the Trading and P&L account. As explained by the assessee, the Trading and Profit & Loss account reflected expenses incurred by the AO in its construction business, which resulted in completed stock as well as in-completed stock of building, the in-completed stock being reflected as WIP; the completed stock either sold and reflected as sales and remaining unsold reflected as stock, in its trading account. There is no anomaly absolutely in its facts and figures, and there was no reason absolutely for the AO to hold that the entire expenses incurred on construction needed to be reflected as WIP. The addition made, therefore, on account of undervaluation of the WIP, has been correctly held by theld.CIT(A) to be entirely baseless, and has been rightly deleted by the ld.CIT(A). Further, we agree with theld.CIT(A) that despite going through the entire books of the accounts of the assessee, not a single anomaly was noted by the AO vis-à-vis purchases, expenses and even figure of sales and stock reflected by the assessee. There was no reason absolutely, therefore, rejecting the books of accounts of the assessee, and that too merely on the ground of non-maintenance of stock register. The estimation ITA No.2408 and 2140 /Ahd/2008 24 of GP, therefore was not in accordance with law, we agree with the ld.CIT(A). In any case, we have noted from the submission made by the assessee to the ld.CIT(A) that the assessee had reflected GP to the tune of 17.59% and while the AO applied the GP rate of 8%. On this score also, the entire exercise of the AO was baseless and has been rightly rejected by the ld.CIT(A). The addition made on account of undervaluation of WIP and by estimating the profits of the assessee in its construction business in M/s Sahajanand Enterprise, to the tune of Rs.55,41,922/-, we hold, has been rightly deleted by the ld.CIT(A). Ground No.7 raised by the Revenue is rejected. 50. Ground No.8 & 9: Raised by the Revenue relate to addition made to the income of the assessee on account of alleged investment in two properties, source of which remained unexplained. Basis of making both additions being the same, i.e. documents found and statement recorded of one Shri Vikash Shah. Therefore, both the additions have been dealt with together by the ld.CIT(A), and we accordingly take up both the issues for adjudication. The said grounds read as under: “8. The C1T(A) has erred in law and on the facts in deleting the addition of Rs.l1,86,64,000/- made on the basis of seized documents being page no.lll of Annexure A.21 seized in the case of Vikas A Shah and his statement, without considering the nature of entries which clearly indicate sale OF LAND to the assessee giving full particulars. 9. The CIT(A) has erred in law and on the facts in deleting the addition of Rs.4.5 crores made on account of unexplained investment in land at F.P.No.379, Village – Memnagar and cash payment without considering the entries recorded at seized documens being 30/45 of annexure A-62 and page no.78 of A.72 seized in the case of Vikas A Shah and his statement.” ITA No.2408 and 2140 /Ahd/2008 25 51. The facts relating to the issue are that during the search in the case of the assessee on 9.2.2005, vehicle of one Shri Vikash Shah parked at Vijay Char Rasta also searched, and number of documents were seized therefrom. The AO noted that these documents pertained primarily to land transaction of Vikash Shah, a land broker with whom the assessee had land dealings. His statement was recorded, and on the basis of the documents seized during the search, and the statement of Shri Vikhas Shah two parcels of the land were treated as investment of the assessee, the source of which remained unexplained, the same were added to the income of the assessee under section 69B of the Act. The details of land investment which were added to the income of the assessee, the quantum of investment allegedly made therein, and seized documents allegedly relating to these transactions are as under: i) Land admeasuring 32600 sq.yards situated at Survey No.188 & 189, Vasna, Ahmedabad. Amount of Investment : Rs.11,86,64,000/- (Documents seized placed at Page No.111 of Annexure A/21) ii) Land at Final Plot No.379 in Village Memnagar. Amount of Investment Rs.4.25 crores (Document is page no.30/35 (Anexure-62) 52. The ld.CIT(A) deleted both additions, noting that other than the statement of Vikas Shah and other third parties, there was no other evidences to treat the investment, as having been made by the assessee. ITA No.2408 and 2140 /Ahd/2008 26 53. We have heard both the parties and have also gone through orders of the authorities below. As also documents and case laws referred to before us. 54. The case of the ld.DR is that there was sufficient material and evidences to hold the above two investments as relating to the assessee. He pointed out that the documents seized from Vikas Shah coupled with the admission of Shri Vikas Shah in a statement recorded, attributing investments in these lands to the assessee, Shri Umang Thakkar categorically, could not be discarded and were sufficient to treat the investments as having been made by the assessee. In relation to the document marked as Page No.111 of Annexure A-1, relating to investment in land at Vasana, Ahmedabad for Rs.11.86 crores, the ld.DR pointed out from orders of the authority below that the said documents contained entries of different amounts, names, and lands, and Shri Vikas Shah in his statement had explained contents of these documents, as pertaining to land measuring 32,600 sq.yards situated in survey no.188-189, Vasana, Ahmedabad. He had stated that the land had been demarcated into plots measuring 21,190 sq.yards and had categorically stated that the land had been sold to the assessee, Umang Thakkar in December, 2003 at a sale price of Rs.5600 per sq.yards, of which part, payment of Rs.4 to 5 crores had been received. He pointed out that Vikas Shah had gone to the extent of explaining that entire transaction pertained to the land, pointing out that a sum of Rs.35 lakhs had been paid to Shri Dharmesh of Rajkot, who was acting on behalf of one Shri Mangaji Laji Thakkar, a tenant of the said land; that the land owner, Shri Ajay Hiralal Patel and Akshay Hiralal Patel were involved in civil suit filed against them since 1984 by one Ganesh Housing Corporation, who has paid ITA No.2408 and 2140 /Ahd/2008 27 amount to settle the disputes; that this land was purchased by two housing societies, viz. Chhatrachhaya Hsg. Society and New Chhaya Co-op Hsg. Society by registered agreements of possession and payment for purchase had been made by, one Mansi Builders Ltd. who had paid an amount of Rs.2.12 crores to the land owners. Shri Vikas Shah had also given all details of expenses incurred, such as judicial proceedings, lawyers etc. and stated that he had still to receive Rs.5 to 6 crores from the assessee, Umang Thakker and his associates. The ld.DR stated that in view of the detailed specific description of the document 111 of Annexure A/23 given by Shri Vikas Shah, categorically attributing investment in the land to Umang Thakkar, his statement could not be brushed aside as unreliable. He further pointed out that the AO had also noted that investigation of the AO revealed that though this land was purchased by the aforesaid housing cooperative societies, but the management and control was that of the assessee. His investigation had revealed that two members of the society viz. Shri Ajay Hiralal Patel and Akshay H. Patel were full-time employees of Akshay Enterprises and had not responded to repeated summons; that Shri Mineshbhai in his statement recorded under section 131 had admitted that the possession and beneficial interest in the land was of the assessee and his associates. The ld.DR further pointed out that similarly, one Shri Manoj Jadav, authorized signatory of the bank accounts of the two cooperative hsg. society also affirmed to the fact that the assessee, through his employee, one Shri Kishor K. Thakkar had introduced the bank account of these two cooperative housing societies in the Mahila Vikas Co-op. Bank at Vasna. He also pointed out that the AO had noted that funds in the bank accounts of these societies were flowed from one Shri Sanjay Kothari, proprietor of Kothari Finance, and also partner in ITA No.2408 and 2140 /Ahd/2008 28 M/s.Akshar Enterprise. The ld.DR pointed out that all these revealed that the assessee and the associates owned beneficial interest over the impugned land. The ld.DR further drew our attention to the fact that computer print-out of the hard-disc seized from the office of the assessee contained the agreement of the land owners, Shri Akshay and Ajay Patel with Ganesh Housing Corporation, in which the Chairman of both the cooperative housing societies i.e. Shri Minesh and Ajay were confirming party. He pointed out that Shri Minesh had affirmed in his statement recorded under section 131 of having signed this agreement on the instruction of the society, and contents of this agreement i.e. terms of settlement between the land owners and Ganesh Housing Corporation. The details of payments of Rs.25 lakhs made through cheques were corresponding with the entries seized from Vikas Shah in the impugned documents viz. page no.111 of Annexure A/21 from his car. He also pointed out that the AO had noted that some of the members of these housing societies were employees of the assessee. 55. Similarly, his contention with respect to the investment in other land of Rs.4.25 crores was also identical, as revealed by Shri Vikas Shah in his statement recorded. The ld.CIT(A) has noted the said fact at para 19.5 of his order as under: ITA No.2408 and 2140 /Ahd/2008 29 56. Clearly, the entire case of the Revenue rests primarily on the statement of Shri Vikas Shah alone. It is not the case of the Revenue that the documents seized mention the name of the assessee. During the course of hearing before us, the said documents were placed before at PB Page No.43 and it was pointed out that nowhere documents mentioned the name of the assessee. Also copy of the statement recorded by Vikash Shah was placed before us at PB Page No.3, answer to 12 wherein he mentions, the assessee as investor in the land at Vasana and we have noted that Shri Vikas Shah does not mention name of the assessee alone, but states that investment to have been made by Umang Thakkar and his associates. 57. The ld.counsel for the assessee during the course of hearing, drew attention to various decisions, both of the ITAT and Hon’ble Gujarat High Court, wherein additions made solely on the basis of the statement of third party were deleted. Our attention was drawn to the case of the assessee itself pertaining to Asst.Year 1998-99 in ITA No.2408 and 2140 /Ahd/2008 30 which. Pointing out therefrom i.e. ITA No.1963/Ahd/2016 dated 27.2.2009, wherein identical addition made on account of unexplained investment in the properties, was deleted and the ITAT holding that statement of third party recorded during the course of survey action cannot be conclusive evidence to decide against the assessee. The survey having been carried out in the case of the third party and the loose papers found from the possession of the third party, rough jottings on the papers are not in the hand-writing of the assessee or employees, and even the name of the assessee not mentioned in the documents so found, the onus is on the Revenue to prove that the land belonged to the assessee, and in the absence of any such onus being discharged by the Revenue, the ITAT held that the addition made by the AO could not be upheld. Thereafter, it was pointed out that this order of the ITAT was upheld by the Hon’ble Gujarat High Court vide its order in Tax Appeal No.1971 of 2009 dated 18.10.2011, categorically confirming the findings of the ITAT that no addition could be made on the basis of third party statements. Our attention was drawn to para-10 of the order as under: ITA No.2408 and 2140 /Ahd/2008 31 58. Thereafter, our attention was drawn to another decision of the Hon’ble Gujarat High Court in the case of CIT Vs. AbhalbhaiArjanbhai Jadeja inTax Appeal No.233 to 235 of 2013 dated 3.4.2013, and it was pointed out therefrom that identical addition made in the said case on account of unexplained investment on the basis of the statement of the same Shri Vikas Shah was untenable on the ground that except for the version of Shri Vikas Shah, there was nothing on record to substantiate the finding of the AO. Our attention as drawn to the finding of the Hon’ble High Court in this case as under: “We have heard learned counsel Shri Desai for the Revenue and also examined the orders of the authorities with his assistance. As could be noticed from the decision of the Tribunal, it has extensively quoted the findings of the CIT [A] and concluded that the sole reliance for such addition on the statement of Vikas Shah was not sustainable. The Tribunal also noted that there is nothing to indicate; except the statement that the assessee had entered into a deal in respect of the land and for cancellation of such deal, an amount of Rs. 15.50 lakhs having been paid and there was absolutely no justification for such additions. By extensively examining the statement of Vikas Shah, it was noted that the amount received by the assessee represents payment on account of cancellation of the deal and such amount cannot be considered as assessee’s income. We are in agreement with the view of CIT [A], duly concurred by the Tribunal. Except bare version of Vikas Shah, there was nothing on the record to substantiate the finding of the Assessing Officer, and therefore, both the authorities were justified in deleting the addition made in the hands of the assessee respondent. The question proposed is in the realm of facts essentially.” 59. Thereafter, it was pointed out that the following this decision, of the Hon’ble Gujarat High Court reiterated its proposition in the case of CIT Vs. Kantibhai Revidas Patel, Tax Appeal No.910 of 2013 vide order dated 11.11.2013 wherein identical addition on account of unexplained investment was made based on the documents seized and statement recorded of Shri Vikas Shah. 60. In view of the categorical judicial pronouncement as above, more particularly, rendered in identical set of facts - as the assessee, we agree with the ld.CIT(A) that the addition in the present case ITA No.2408 and 2140 /Ahd/2008 32 based merely on the documents and statement recorded of Shri Vikas Shah, the same were not sustainable. As for the statement recorded of other persons, being employees of the cooperative housing societies in which the lands were purchased, attributing the real owner of the land as the assessee, the ld.counsel for the assessee pointed out that copies of these statements were never provided to the assessee, which fact was pointed out to theld.CIT(A) and who has taken note of the same while deleting the addition. The ld.DR was unable to controvert the same. Therefore, we agree with the ld.CIT(A) that no cognizance could be taken of such statement recorded at the back of the assessee, which was not even confronted to him. 61. The ld.counsel for the assessee pointed out alternative pertinent facts before us that the addition on substantial basis on account of this impugned land transactions had been made in the case of Shri Vikas Shah for the Asst.Year 2004-05 which was framed under section 153A(b) read with section 144 of the Act dated 28.12.2006. He drew our attention to page no.39 of the CIT(A)’s order wherein this fact pointed out to the ld.CIT(A) also, and was reproduced in his order. 62. The ld.dR had no comment to offer to this contention of the ld.counsel for the assessee. Therefore, since substantial addition was made in the hands of Shri Vikas Shah of the impugned land transaction, there was no case for making addition of the same in the hands of the assessee also. For the above reasons, we hold that there is no case with the Revenue for treating the documents found from Shri Vikas Shah, as ITA No.2408 and 2140 /Ahd/2008 33 pertaining to the assessee, relating to the land purchased, and accordingly, make addition on account of unexplained investments to the tune of Rs.11,86,64,000/- and Rs.4,25,00,000/-. Thus, the ground no.8 and 9 raised by the assessee are rejected. 63. In the result, appeal of the assessee is partly allowed and that of the Revenue is dismissed. Order pronounced in the Court on 6 th October, 2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 06/10/2023