DHARMENDRA MEHTA, Jaipur V. ITO, Jaipur

ITA 250/JPR/2011

• Counselvise Citation: 25023114 RSA 2011
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARY
• Assessee Lawyers: G M MEHTA
• Keywords: Principle of natural justice; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 69; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.250/JP/2011 ASSESSMENT YEAR : 2005-2006 SH. DHARMENDRA MEHTA, VS. I.T.O. WARD-5(2), JAIPUR. JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.M. MEHTA RESPONDENT BY : SHRI VINOD JOHARY DATE OF HEARING: 04.10.2011 DATE OF PRONOUNCEMENT : 14.10.2011 ORDER PER SHRI N.L. KALRA, A.M. THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER OF LD. CIT (A)-II, JAIPUR DATED 08.02.2011. THE GROUNDS OF APPEAL RAISED ARE AS UND ER: THAT THE LD. CIT (A)-II, JAIPUR IS WRONG AND HAS ER RED IN LAW IN UPHOLDING THE PROCEEDINGS OF REASSESSMENT IN THE CASE OF ASSE SSEE INITIATED BY LD. A.O. U/S 147 AND ALSO IN UPHOLDING THAT NOTICE U/S 148 ISSUED BY A.O. WAS VALID AND PROPER. THAT THE LD. CIT (A)-II, JAIPUR IS WRONG AND HAS ER RED IN LAW REJECTING THE CONTENTION OF ASSESSEE THAT ASSESSMENT IN HIS CASE WAS MADE WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON THE BASIS OF WHOSE 2 STATEMENTS THE ADDITION OF RS.39,00,000/- U/S 69B W AS MADE AND, THEREFORE THE ASSESSMENT MADE BY A.O. IS IN VIOLATION OF PRIN CIPLE OF NATURAL JUSTICE. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)- II, JAIPUR IS WRONG AND HAS ERRED IN LAW IN CONFIRM ING THE ADDITION OF RS.39,00,000/- U/S 69B OF I.T. ACT, 1961 IN THE HAN DS OF ASSESSEE. 2. THE ASSESSEE HAS DECLARED INCOME UNDER THE HEAD CAPITAL GAIN AND SALARY. PROCEEDINGS U/S 147 WERE INITIATED AND NOTICE U/S 1 48 WAS ISSUED ON 16.03.2009 AND IN RESPONSE TO WHICH THE ASSESSEE VIDE REPLY DATED 28. 04.2009 REQUIRED THAT RETURN FILED EARLIER BE TREATED AS A RETURN IN RESPONSE TO NOTIC E U/S 148. 3. AN AMOUNT OF RS.39 LAKH WAS STATED TO BE PAID TO THE AGRICULTURALIST ON BEHALF OF COMPANY IN WHICH THE ASSESSEE WAS DIRECTOR. THIS IS EVIDENT FROM THE STATEMENTS OF THE AGRICULTURALIST AND SUCH SUM WAS IN EXCESS OF AMOUN T RECEIVED IN CHEQUE. THIS SUM WAS ADDED IN THE HANDS OF COMPANY AS LAND WAS PURCHASED BY THE COMPANY. THE COMPANY FILED AN APPEAL AND THE LD. CIT (A) RECORDED A FIND ING THAT THE AMOUNT CANNOT BE ADDED IN THE HANDS OF COMPANY AS IT WAS NOT INCORPORATED AT THE TIME WHEN PAYMENT WAS MADE. FOR MAKING ADDITION IN THE HANDS OF COMPANY, THE A. O. WHO HAS PASSED THE ASSESSMENT ORDER RECORDED THE STATEMENTS OF SH. GHASI MALI AND SH. HANUMAN SAHAI MALI. FACTS AS PER STATEMENTS ARE AVAILABLE AT PAGES 6 & 7 OF ASST T. ORDER. IN THE STATEMENTS, IT WAS ADMITTED BY BOTH OF THEM THAT THE CASH PAYMENTS WER E RECEIVED FROM THE ASSESSEE. IT WAS ALSO STATED AS TO HOW THE CASH WAS UTILIZED. THE A. O. HAVING JURISDICTION OVER THE COMPANY OBTAINED THE BANK ACCOUNTS OF THE AGRICULTU RALIST AND THEIR FAMILY MEMBERS. SUCH DETAILS ARE AVAILABLE AT PAGE 8 OF THE ASSESSM ENT ORDER. THE COMPANY FILED AN APPEAL AND THE LD. CIT (A) VIDE ORDER DATED 5.3.200 5 IN ITA NO.19/2007-08 HELD THAT CASH PAYMENTS WERE MADE BY SH. DHARMENDER MEHTA, TH E ASSESSEE AND THE ADDITION CAN 3 NOT BE MADE IN THE CASE OF COMPANY AS CASH PAYMENTS WERE MADE BEFORE THE COMPANY WAS INCORPORATED. ACCORDINGLY THE A.O. OF THE ASSES SEE WAS INTIMATED BY THE A.O. OF THE COMPANY ABOUT THE FINDING OF LD. CIT(A) GIVEN IN TH E APPEAL OF COMPANY AND ACCORDINGLY A.O. OF THE ASSESSEE ISSUED NOTICE U/S 147. THE ASS ESSEE WAS ISSUED SHOW CAUSE AS TO WHY THE SUM OF RS.39 LAKH BE NOT ADDED U/S 69B. THE ASS ESSEE REPLIED THAT LAND WAS PURCHASED BY THE COMPANY AND HE HAS NOT PAID THE SUM OF RS.39 LAKH. THE ASSESSEE REMAINED DIRECTOR OF THE COMPANY ONLY FOR 6 MONTHS. 4. BEFORE THE A.O. THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSIONS: ASSESSEE MR. DHARMENDRA MEHTA HAS ENTERED INTO TRAN SACTION OF SALE ON BEHALF OF COMPANY IN THE CAPACITY OF DIRECTOR ONLY FROM GHASI MALI AND KAN AND NO TRANSACTION OF ANY NATURE HAS EVER BEEN ENTERED BY THE ASSESSEE WITH THESE TWO NAMED VILLAGERS VIZ. GHASI MALI AND KANHA MALI IN HIS PERSONAL CAPACITY. ON PERUSAL OF STATEMENTS OF GHASI MALI AND HANUMAN MALI (PERSON WHO IS NOT RELATED/CONCERNED WITH THE TRANSACTION) IT CAN EASILY BE OPINED THAT TILL QUESTION NUMBER 15, THEY WERE MENTIONING THAT THE S ALE CONSIDERATION OF ONLY 13,58, 000/- HAS BEEN RECEIVED AND NO OTHER PA YMENT, WHATSOEVER HAS BEEN RECEIVED. THEY REPEATEDLY ADMITTED THAT CONSID ERATION OF 13,58,000/- ONLY HAS BEEN RECEIVED. IN CONTINUATION OF STATEMENTS AT QUESTION NUMBER 16 , THEY HAVE CHANGED THEIR STANDING WHICH CLEARLY SHOWS THAT SOME SORT O F THREAT OR UNDUE INFLUENCE MIGHT HAVE BEEN USED. THE TRUTH CAN ONLY BE UNEARTHED ON CROSS EXAMINATION OF THESE PERSONS. THEREFORE IN ORDER TO RELY ON THESE STATEMENTS AND MAKING ADDITIONS ON THIS VERY BASIS, WE WOULD LIKE TO CROSS EXAMINE THESE PARTIES ON THEIR STATEMENTS. THUS LOOKING ONTO CONTROVERSIAL RECORDED STATEMENTS OF THE VILLAGERS, THEY CANNOT BE RELIED UPON. IT IS NOT KNOWN THAT UNDER W HAT CIRCUMSTANCES SHRI GHASI MALI IN HIS ANSWER TO Q.NO.16 ABRUPTLY STATED FOR RECEIVING HIGHER CONSIDERATION IN PLACE OF ACTUAL SALE CONSIDERATION RECEIVED BY HIM WHICH WAS STATED IN EARLIER REPLIES OF HIS STATEMENTS. TH ERE IS ALWAYS POSSIBILITY 4 OF STATING SUCH THINGS FOR HIS OWN INTEREST OR OTHE R REASONS BEST KNOWN TO HIM. IT MAY FURTHER BE NOTED THAT THE SALE TRANSACTION H AS BEEN ENTERED IN THE MONTH OF AUGUST 2004 AND ALLEGED CASH PAYMENTS HAS BEEN MADE IN THE MONTH OF MAY AND JUNE. ON PERUSAL OF BANK ACCOUNTS. IT IS NOTED THAT ONLY RS.14,95,000/- HAS BEEN DEPOSITED IN ALL RELATED BA NK ACCOUNTS IN THE MONTH OF MAY AND JUNE. TILL THAT DATE NO TRANSACTIO N WITH COMPANY OR COMPANYS DIRECTOR HAS BEEN ENTERED THUS THE SOURCE OF DEPOSITS CAN ONLY BE EXPLAINED BY THE VILLAGERS THEMSELVES AND TRANSA CTION OF PURCHASE OF LAND IN AUGUST 2004 CANNOT BE RELATED TO DEPOSITS O F CASH IN THE MONTH OF MAY AND JUNE 2004. ITS A MATTER OF FACT THAT IN PROPERTY TRANSACTIONS , NO BIG PAYMENTS ARE MADE IN CASH IN TWO-THREE MONTHS ADVANCE WITHOUT AN Y AGREEMENT AND IT IS VERY CLEAR FROM THE STATEMENTS OF THE VILLAGERS AT QUESTION NO.9 THAT NO AGREEMENT WHAT SO EVER HAS BEEN ENTERED EXCEPT THE REGISTERED DOCUMENT. FURTHER THERE IS NO EVIDENCE THAT SUCH PAYMENTS HAV E BEEN MADE BY THE ASSESSEE. AS PER BACKGROUND OF THE ASSESSEE MENTIONED ABOVE, IT IS VERY CLEAR THAT HE IS NOT HAVING ANY MEANS OF PAYING HUGE SUM OF RS .39 LACS. HE IS JUST AN EMPLOYEE IN PRIVATE CONCERN AND EARNING A MEAGER SA LARY OF RS.7000/- PER MONTH. AN AFFIDAVIT OF THE ASSESSEE IN THIS RESPECT IS ENCLOSED. THUS LOOKING ON TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS HEREBY SUBMITTED THAT THE LAND PURCHASE TRANSACTION HAS BE EN ENTERED BETWEEN GHASI MALI/KANHA MALI AND M/S. ADINATH BUILDESTATE PRIVATE LIMITED AND ASSESSEE MR. DHARMENDRA MEHTA IS NO WHERE IN THE PI CTURE IN HIS PERSONAL CAPACITY. IF CASH HAS BEEN RECEIVED AND/OR EXPENDED BY TWO VI LLAGERS VIZ. GHASI MALI AND KANHA MALI THEY NEED TO EXPLAIN THE SOURCE . IN ANY CASE, MR. DHARMENDRA MEHTA, ASSESSEE IS NOT LIABLE IN HIS PER SONAL CAPACITY. THEREFORE IT IS REQUESTED TO KINDLY DROP THE PROCEE DINGS AGAINST THE ASSESSEE AND OBLIGE. 5. THE LD. A.O. RECORDED HIS FINDING AS UNDER: I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE. T HE CONTENTION THAT ANY THREAT OR PRESSURE WAS PUT ON SHRI GHASI MALI AND S HRI HANUMAN MALI IS TOTALLY BASELESS, SINCE STATEMENTS OF THESE PERSONS WERE RECORDED BY THE THEN ITO, WARD-2(2), JAIPUR IN THE PRESENCE OF SH. K.K. DUSAD 5 REPRESENTATIVE OF THE COMPANY AS WELL AS SHRI A.K. KHANDELWAL, WHO HAS ATTENDED ON BEHALF OF SHRI GHASI MALI & AHRI KANHA MALI. IT IS A FACT THAT THE TRANSACTION FOR PURCHASE OF AFORESAID LAND WAS MADE BY THE COMPANY THROUGH SHRI DHARMENDRA MEHTA, THE ASSESSEE. IT IS ALSO AN UNDISPUTED FACT THAT SHRI DHARMENDRA MEHTA HAS PAID THEM CASH AMOUNTING TO RS.39,00,000/-. HAD IT BEEN THE MONEY OF SOME OTHER PERSON, THEN THE ASSESSEE NAMELY SHRI DHARMENDRA MEHTA SHOULD MENTIO N NAME OF THAT PERSON ALONGWITH PROOF. IN ABSENCE OF ANY EXPLANATI ON GIVEN BY THE ASSESSEE SIMPLE DENIAL IS NOT SUFFICIENT. SINCE THE ASSESSEE IS NOT PROVIDING ANY EXPLANATION FOR SOURCE OF RS.39,00,000/-, THERE FORE, LAW OF ESTOPPEL IS ATTRACTED IN HIS CASE. THAT IS HE IS PREVENTING THE DEPARTMENT TO CAUSE FURTHER ENQUIRY. UNDER THESE CIRCUMSTANCES I HAVE N O OPTION BUT HOLD THAT THE PAYMENT OF RS.39,00,000/- WHICH WAS MADE BY SHR I DHARMENDRA MEHTA AND ADMITTED BY SHRI GHASI MALI ON OATH, IS T HE UNDISCLOSED INCOME OF THE ASSESSEE AND THUS ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 69B OF THE I.T. ACT, 1961. 6. THE A.O. HAVING JURISDICTION OVER THE COMPANY, H ELD AS UNDER IN THE ASSESSMENT ORDER OF COMPANY. I HAVE CONSIDERED THE MATERIAL AVAILABLE ON RECORD AND THE ASSESSEES SUBMISSION. THE CRUCIAL ISSUE IN THIS CASE WHICH HA S BEEN ESTABLISHED IS THAT THE ASSESSEE HAS PAID ON MONEY OVER AND ABOVE THE PURCHASE CONSIDERATION DISCLOSED ON BEHALF OF THE COMPANY, H ENCE HE WAS UNDER OBLIGATION TO EXPLAIN SOURCE OF CASH PAID TO THESE PERSONS. THIS FINDING IS BASED ON STATEMENT RECORDED ON OATH WHICH HAS ALSO BEEN STRENGTHENED WITH THE CASH DEPOSITED IN VARIOUS BANK A/C OF THE SELLERS AND THEIR FAMILY MEMBERS. IN THE SUBMISSION FIELD BY THE AR, THERE I S NO CONTRADICTORY MATERIAL FURNISHED WHICH CAN PROVE OTHERWISE AS STA TED IN THE SHOW CAUSE NOTICE. SHRI GHASI MALI & SHRI KANHA MALI WERE HAVING NO LI QUID FUNDS AND RATHER THEY WERE INDEBTED TO VARIOUS PERSONS AND FO R THAT REASONS THEY HAVE SOLD AGRICULTURAL LAND. THE FUNDS RECEIVED EIT HER IN CASH OR THROUGH BANKING CHANNELS WAS USED BY THEM AS STATED IN THEI R STATEMENTS. IN VIEW OF THESE FACTS, IT IS AN ESTABLISHED FACT THAT SHRI GHASI MALI & SHRI KANHA MALI WERE HAVING NO LIQUID FUNDS EXCEPT THE AMOUNTS RECEIVED FROM THE COMPANY. AS THE TRANSACTION WAS ENTERED INTO BY SHR I DHARMENDRA MEHTA FOR AND ON BEHALF OF THE COMPANY. THEREFORE IT IS T HE ASSESSEE WHO IS RESPONSIBLE FOR EXPLAINING THE SOURCE OF INVESTMENT MADE. IN THE PRESENT CASE, THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE CASH PAID OVER AND ABOVE THE DISCLOSED. 6 7. FOR ARRIVING AT THE ABOVE CONCLUSIONS, THE A.O. HAVING JURISDICTION OF COMPANY OBSERVED THAT IN REVENUE CASES, ONE HAS TO CONSIDER THE PREPONDERANCE OF PROBABILITY. REFERENCE HAS BEEN MADE TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V EAST COAST COMMERCIAL COMPANIES LTD. 63 ITR 449. RE FERENCE HAS ALSO BEEN MADE TO THE FOLLOWING OBSERVATION MADE TO THE FOLLOWING OBSERVA TION MADE BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF AMAR KUMARI SURANA V CIT 226 I TR 344: IT IS TRUE THAT MERELY ON THE BASIS OF THE FAIR MAR KET VALUE NO ADDITION CAN BE MADE UNDER SECTION 69 B OF THE ACT, 1961, BUT ON THE BASIS OF SUFFICIENT MATERIAL ON RECORD SOME REASONABLE INFERENCE CAN BE DRAWN THAT THE PETITIONER HAS INVESTED MORE AMOUNT THAN SHOWN IN T HE ACCOUNT BOOKS. 8. BEFORE THE LD. CIT (A), THE ASSESSEES SUBMISSIO NS ARE SUMMARIZED AS UNDER: (I) ALL THE FACTS WERE AVAILABLE TO THE A.O. HAVING JURISDICTION IN THE CASE OF COMPANY AND THE ADDITION WAS MADE IN THE CA SE OF COMPANY. NOW TO MAKE THE SAME ADDITION, THE A.O. HA S NO FRESH MATERIAL BUT THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF CHANGE OF OPINION. (II) THE OWNER OF LAND IS COMPANY AFTER THE SAME WA S SOLD BY AGRICULTURALISTS. (III) THE AGRICULTURALIST GAVE THE DETAILS OF RS.30 LAKH USED IN ACQUIRING A HOUSE, MAKING REPAYMENT OF LOAN AND PERFORMED MAR RIAGES OF DEPENDENTS, SUM WAS STATED TO BE RECEIVED BY 39 LAK H WHILE THE 7 UTILIZATION WAS SHOWN OF RS.30 LAKH. SOME OF THE AM OUNTS USED IN PERFORMING OF MARRIAGES WERE SPENT AFTER A GAP OF O NE TO 2 YEARS. (IV) THERE ARE CASH DEPOSITS, IN THE BANK ACCOUNT O F AGRICULTURALISTS OR THEIR FAMILY MEMBERS, CAN NOT BE CO-RELATED TO THE PAYMENTS ALLEGEDLY RECEIVED FROM ASSESSEE AND HENCE IT MEANS THAT AGRICULTURALISTS WERE HAVING THEIR OWN SOURCES OF U NDISCLOSED INCOME. (V) THE ASSESSEE CAN NOT BE IN A POSITION TO MAKE P AYMENTS AS THE ASSESSEE EARNING SALARY OF RS.7000 P.M. ONLY. (VI) ADDITION U/S 69 B CAN BE MADE IF THE ASSESSEE IS OWNER OF ANY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE AND ASS ESSEE IS UNABLE TO EXPLAIN THE SOURCE OF MAKING THE ABOVE REFERRED INV ESTMENTS. IN THE INSTANT CASE, THE ASSESSEE IS NOT OWNER OF THE ASSE T. 9. THE LD. CIT (A) HELD THAT A.O. WAS JUSTIFIED IN INVOKING PROVISIONS OF SECTION 147 AS THE EARLIER RETURN WAS PROCESSED AND ONLY INTIMA TION WAS USED. INTIMATION IS DIFFERENT FROM ASSESSMENT. FOR UPHOLDING THE RE-OPENING, THE LD. CIT (A) RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF RAJESH JHAVERI ST OCK BROKERS PVT. LTD. 291 ITR 500. THE LD. CIT (A) MADE THE FOLLOWING OBSERVATION. THE REOPENING REQUIRES SOME FACTUAL MATERIAL OR INF ORMATION WHICH CAN FORM THE BASIS OF REASON TO BELIEVE THAT INCOME H AS ESCAPED ASSESSMENT. THE DIRECTIONS BY THE CIT (A) TO THE AO CAN NOT BE CHALLENGED. IT WAS HELD BY HONOURABLE SUPREME COURT IN THE CASE OF CIT VS K ANPUR COAL SYNDICATE (53 ITR 22%) AND JUTE CORPORATION OF INDI A VS CIT (187 ITR 8 688) THAT THE APPELLATE ASSISTANT COMMISSIONER HAS PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS C O-TERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOM E-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IN THE PRESENT CASE, THE ALLEGATIONS LEVELED BY THE APPELLANT ARE NOT BASED ON SOUND FOOTING. IT IS FAR FETCHED STATEMENT THAT THE AO DID NOT HAVE ANY MATERIAL IN HIS POSSESSION TO ISSUE NOTICE US 148 OF THE I.T. ACT. EVEN THOUGH THE DEPARTMENT HAD TAKEN A STAND THAT THE AMOUNT OF RS. 39 LAKHS SHOULD BE TAXED IN THE HANDS OF M/S. ADINATH BUILDESTATE PVT. LTD. BUT AS THE SELLERS HAVE CLAIMED THAT THE SAID AMOUNT WAS PAID TO THEM BY THE APPELLANT, THE AO WAS WELL WITHIN HIS JURISDICTION TO FORM A BELIE F THAT THE INCOME HAS ESCAPED ASSESSMENT AND HAD INITIATED PROCEEDINGS RI GHTLY UNDER SECTION 147 OF THE ACT AS IT IS ALWAYS OPEN TO THE AO TO AS SESS THE INCOME IN THE RIGHT HANDS NOTWITHSTANDING THE FACT THAT THE SAME AMOUNT HAS BEEN ASSESSED IN THE HANDS OF ANOTHER PERSON. IN THE CAS E OF S. GYANI RAM AND CO. (47 ITR 472), THE HONOURABLE ALLAHABAD HIGH COU RT HELD THAT THE MERE FACT THAT A PARTICULAR INCOME HAS BEEN ASSESSE D IN THE HANDS OF A PARTICULAR PERSON AS HIS INCOME WILL NOT PREVENT TH E AO FROM COMING TO THE CONCLUSION THAT THAT INCOME IS THE INCOME OF AN OTHER PERSON. IN THE CASE OF R. DALMIA (84 ITR 616), THE HONOURABLE DELH I HIGH COURT HELD THAT WHERE THE ITEMS OF ESCAPED INCOME IN RESPECT O F WHICH THE ASSESSMENT IS PROPOSED IS SPECIFIC BUT HE QUESTION AS TO WHETH ER THE INCOME, IF EARNED, WAS EARNED BY ONE PERSON SINGLY OR BY HIM ALONG WIT H OTHERS, THERE IS NOTHING TO PREVENT HIM FROM INITIATING PROCEEDINGS AGAINST THE CONCERNED ASSESSES IN BOTH CAPACITIES. IN SUCH A CASE WHERE I T APPEARS TO THE INCOME- TAX OFFICER, THAT CERTAIN INCOME HAD BEEN RECEIVED DURING A PARTICULAR YEAR BUT IT IS NOT CLEAR WHO HAS RECEIVED THAT INCO ME, IT IS OPEN TO THE INCOME-TAX OFFICER TO START PROCEEDINGS AGAINST ALL THE PERSONS INDIVIDUALLY OR COLLECTIVELY TO ASCERTAIN THE CORRE CT POSITION. IN THE CASE OF SOHAN SINGH (158 ITR 174) THE HONOURABLE DELHI HIGH COURT HAS TAKEN A SIMILAR VIEW. IN THE CASE OF SMT. DURGAWATI SINGH ( 234 ITR 249), THE HONOURABLE ALLAHABAD HIGH COURT HELD THAT IT IS SET TLED THAT WHEN THERE IS A DOUBT AS TO WHICH PERSON AMONGST TWO WAS LIABLE T O BE ASSESSED, PARALLEL PROCEEDINGS MAY BE TAKEN AGAINST BOTH AND ALTERNATIVE ASSESSMENTS MAY ALSO BE FRAMED. IN THE CASE OF BANY AN AND BERRY (222 ITR 831), THE HONOURABLE GUJARAT HIGH COURT HELD TH AT WHERE THERE IS DOUBT OR AMBIGUITY ABOUT THE REAL ENTITY IN WHOSE H ANDS A PARTICULAR INCOME IS TO BE ASSESSED, THE ASSESSING AUTHORITY I S ENTITLED TO HAVE RECOURSE TO MAKING A PROTECTIVE ASSESSMENT IN THE C ASE OF ONE AND A REGULAR ASSESSMENT IN THE OTHER CASE. IT DOES NOT A FFECT THE VALIDITY OF THE OTHER ASSESSMENT IN AS MUCH AS IF ULTIMATELY ONE OF THE ENTITIES IS REALLY FOUND TO BE LIABLE TO ASSESSMENT, THEN THE ASSESSME NT IN THE HANDS OF THE ENTITY ALONE REMAINS THE EFFECTIVE ASSESSMENT AND T HE OTHER BECOMES INFRUCTUOUS. THE LEVY IS ENFORCEABLE ONLY UNDER ONE ASSESSMENT AND NOT UNDER BOTH. THE TAX CAN ONLY BE LEVIED AND COLLECTE D IN THE HANDS OF THE PERSON WHO HAS REALLY EARNED THE INCOME AND IS LIAB LE TO PAY TAX THEREON. 9 THEREFORE I HOLD THAT NOTICE U/S 148 ISSUED BY THE AO WAS VALID AND PROPER. 10. STATEMENTS OF THE SELLERS WERE RECORDED IN THE PRESENCE OF A/R OF THE SELLERS AND A/R OF THE COMPANY. ON THE BASIS OF THE STATEMENTS OF RECEIPT OF ON-MONEY AND THEIR UTILIZATION, ADDITION WAS MADE IN THE CASE OF COMPA NY. THE DOCUMENTS FOR PURCHASE OF LAND WERE SIGNED BY THE ASSESSEE MERE DENIAL IS NOT SUFFICIENT TO REBUT THE CIRCUMSTANTIAL EVIDENCES. THE LD. CIT (A) WHILE DISPOSING OF THE A PPEAL OF THE COMPANY HELD THAT PAYMENTS MADE IN CASH ARE TO BE TAXED IN THE HANDS OF SH. DHARMENDER MEHTA. 11. THE LD. CIT (A) HELD THAT SECTION 69 B IS NOT A PPLICABLE. THE LD. CIT (A) HELD THAT ASSESSEE HAS MADE PAYMENTS FROM SOURCES WHICH WERE NOT DISCLOSED AND HENCE A.O. WAS JUSTIFIED IN MAKING ADDITION OF RS.39 LAKH. 12. THE LD. CIT (A) NOTICED THAT THE A.O. PROVIDED OPPORTUNITY TO CROSS EXAMINE THE AGRICULTURALIST BUT THE ASSESSEE ON THE APPOINTED D AY SOUGHT ADJOURNMENT ON THE GROUND THAT HE WAS NOT FEELING WILL DUE TO DEHYDERATION. T HE MATTER WAS ADJOURNED TO NEXT DATE BUT ON THAT DATE ALSO, THE ASSESSEE FAILED TO APPEA R. MORE-OVER NO PREJUDICE CAN BE ASKED AS THE CROSS EXAMINATION WILL HAVE NO BEARING. RELI ANCE HAS BEEN PLACED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KUSUM LATA THUKRAL 327 ITR 424. 13. BEFORE US, THE LD. A/R FILED WRITTEN SUBMISSION S ALONGWITH PAPER BOOK CONTAINING 43 PAGES. THE SUBMISSIONS IN BRIEF ARE AS UNDER: 10 (I) BOTH AGRICULTURALISTS STATED THAT NO CASH PAYME NT WAS RECEIVED. SUBSEQUENTLY IN ORDER TO EXPLAIN THE DEPOSITS IN CA SH, THE AGRICULTURALIST ADMITTED TO HAVE RECEIVED THE AMOUNT. (II) PAYMENT OF RS.11 LAKH IN JUNE 2004 AND RS.28 L AKH IN AUGUST 2004. ON AUGUST 2004, THE COMPANY STOOD INCORPORATED AND PAY MENT WAS AT THE TIME OF REGISTRY. (III) THERE WAS NO AGREEMENT BEFORE PURCHASE OF LAN D, NO PRUDENT PERSON WILL PAY HUGE SUM WITHOUT AGREEMENT. (IV) NO SECOND APPEAL FILED BY THE DEPARTMENT AGAIN ST ORDER OF LD. CIT (A) IN THE CASE OF COMPANY IN WHICH THE LD. CIT (A) HELD T HAT ADDITION CAN NOT BE MADE IN THE HANDS OF COMPANY THOUGH RS.28 LAKH HAS BEEN PAID AFTER THE INCORPORATION OF THE COMPANY. (V) DEPOSITS IN THE BANK ACCOUNT OF AGRICULTURALIST IN MAY AND JUNE 2004 IS OF RS.15 LAKH WHILE THE SUM OF RS.11 LAKH HAS BEEN STA TED TO BE RECEIVED AGAINST SO CALLED ON MONEY ON SALE OF LAND BEFORE R EGISTRY. THIS SHOWS THAT AGRICULTURALIST WERE HAVING THEIR OWN FUNDS AND THE IR CROSS EXAMINATION WAS NECESSARY. (VI) OUR ALTERATION WAS DRAWN TO EXPLANATION 3 OF S ECTION 153 AND BEFORE RECORDING A FINDING AGAINST ASSESSEE IN THE APPELLA TE PROCEEDINGS IN THE CASE OF COMPANY, THE LD. CIT( A) WAS REQUIRED TO PR OVIDE AN OPPORTUNITY TO THE ASSESSEE. 11 (VII) THE ASSESSEE HAS MADE REQUEST TO ALLOW THE AG RICULTURALIST TO BE CROSS EXAMINED EVEN BEFORE LD. CIT(A), AND GROUND OF APPE AL WAS ALSO TAKEN THAT ON OPPORTUNITY WAS NOT GIVEN TO THE ASSESSEE. 14. ON THE OTHER HAND THE LD. D/R SUPPORTED THE ORD ER OF LD. CIT (A). THE COMPANY WAS NOT INCORPORATED AND HENCE ADDITION COULD NOT H AVE BEEN MADE IN THE CASE OF THE COMPANY. THERE HAS BEEN UNACCOUNTED DEPOSITS IN THE BANK ACCOUNT OF AGRICULTURALIST AND IT WAS EXPLAINED BY THEM THAT AMOUNT WAS RECEIVED F ROM THE ASSESSEE ON ACCOUNT OF SALE OF AGRICULTURAL LAND. HENCE THE ADDITION WAS REQUIR ED TO BE MADE IN THE CASE OF THE ASSESSEE. THE A.O. AFTER RECEIPT OF INFORMATION FRO M THE A.O. OF THE COMPANY, APPLIED HIS MIND AND ISSUED NOTICE U/S 148. 15. WE HAVE HEARD BOTH THE PARTIES STATEMENT OF SH. GHASI MALI WAS RECORDED ON 23.1.2007 BY THE A.O. HAVING JURISDICTION OVER THE COMPANY COPY OF SUCH STATEMENT IS AVAILABLE AT PAGES 5 TO 20 OF THE PAPER BOOK FILED BY THE LD. A/R. INITIALLY HE STATED THAT EXCEPT CONSIDERATION MENTIONED IN THE SALE DEED, NO OTHER PAYMENT WAS RECEIVED. CONSIDERATION WAS RECEIVED THROUGH SH. DHARMENDER M EHTA AND HE WAS CONTACTED BY SH. DHARMENDER MEHTA. SALE DEEDS ARE DATED 2.8.2004, 3. 8.2004 AND 5.8.2004. AGAIN IN Q.N.13, SH. GHASI MALI STATED THAT NO CASH WAS RECE IVED. 16. INITIALLY SH. GHASI MALI STATED THAT HE IS HAVI NG BANK ACCOUNT IN BANK OF RAJASTHAN SANGANER. HIS BROTHER IS HAVING SAVING BA NK ACCOUNT NO.2889 IN JAIPUR NAGOUR GRAMIN ANCHALIK (JNGA) BANK. DURING THE COURSE OF S TATEMENT, SH. GHASI MALI WAS SHOWN BANK PASS BOOK OF ACCOUNT NO.2887 IN JNAG BAN K VATIKA BRANCH AND AFTER 12 GETTING SUCH PASS BOOK READ FROM SH. HANUMAN SAHAY, HE ADMITTED THAT THE BANK ACCOUNT BELONGS TO HIM. AFTER SEEING SUCH BANK ACCOUNT DETA ILS, SH. GHASI RAM ADMITTED TO HAVE RECEIVED CASH PAYMENTS AGAINST SALE OF LAND. SH. GH ASI MALI GAVE THE DETAILS OF EXPENSES INCURRED OUT OF CASH RECEIPTS. SH. GHASI MALI STATE D THAT RS.5.5 LAKH WAS DEPOSITED IN HIS BANK ACCOUNT ON 18.6.2004 OUT OF ADVANCE RECEIVED A ND THE AMOUNT WAS WITHDRAWN WHEN SALE DEED WAS REGISTERED. WITHDRAWAL IS ON 5.8.2004 . STATEMENT WAS RECORDED IN THE PRESENCE OF A/R OF COMPANY AND HE DECLINED TO MAKE ANY CROSS EXAMINATION AND STATED THAT IF NEEDED THEY WILL PRODUCE SH. GHASI MALI AT THEIR COST. 17. STATEMENT OF SH. HANUMAN SAHAY MALI WAS ALSO RE CORDED ON OATH ON 23.1.2007. SH. HANUMAN SAHAY MALI IS COUSIN OF SH. GHASI RAM A ND IS THE ONLY SON OF BROTHER OF SH. GHASI RAM. HE AGREED WITH THE FACTS NARRATED BY HIS UNCLE. IN ANSWER TO QUESTION NO.5, HE STATED THAT A CASH AMOUNT OF RS.11 LAKH WA S RECEIVED AT THE TIME OF ORAL AGREEMENT OF SALE IN JUNE, 2004. THIS WAS EQUALLY D ISTRIBUTED BETWEEN HIM AND HIS UNCLE. SALE DEED WAS REGISTERED AT DLC RATE AS AGAINST LAN D SOLD AT 7.5 LAKH PER BIGHA. HE ALSO EXPLAINED AS TO HOW THE AMOUNT RECEIVED WAS UTILIZE D. HIS STATEMENT WAS ALSO RECORDED IN THE PRESENCE OF A/R OF THE COMPANY AND A/R STATED T HAT HE HAS NOTHING TO ASK IN CROSS EXAMINATION. 18. ON THE BASIS OF ABOVE EVIDENCES, THE ADDITION O F RS.39 LAKH WAS MADE IN THE CASE OF COMPANY VIDE ORDER DATED 26.03.2007 BY ITO WARD- 2(2) JAIPUR. THE LD. CIT (A) WHILE DISPOSING OF THE APPEAL IN THE CASE OF COMPANY HELD AS UNDER: 13 THE CONTENTION OF THE A/R IS CONSIDERED. IN THE STA TEMENT RECORDED ON OATH SHRI GHASI MALI INITIALLY CONFIRMED HAVING RECEIVED PAYMENT ONLY THROUGH CHEQUE/DRAFT BUT WHILE REPLYING QUESTION NO.16 HE A DMITTED THAT 7.5 BIGHA LAND WAS SOLD TO THE COMPANY AT THE RATE OF RS.7 LA CS PER BIGHA. THIS MAKES THE TOTAL CONSIDERATION OF RS.52.50 LACS. THO UGH THE CONSIDERATION OF RS.13,58,000/- ONLY WERE SHOWN IN THE SALES DEED . THE FACT IS THAT CASH OF AROUND 15 LACS ONLY WAS INITIALLY DEPOSITED IN T HE BANK ACCOUNT AND SHRI GHASI MALI AND OTHER SELLERS AS WELL AS THEIR FAMILY MEMBERS. THUS THE STATEMENTS OF THE SELLER AS WELL AS CASH DEPOSI T IN THE BANK ACCOUNT INDICATE THAT SOME CASH PAYMENT OVER AND ABOVE THE DECLARED CONSIDERATION WAS PAID TO THE SELLERS. HOWEVER, THE CASH DEPOSITS ARE IN THE MONTH OF MAY AND JUNE 2004 WHEREAS THE DEED WAS EXECUTED IN THE MONTH OF AUGUST 2004. IN HIS REPLY TO QUESTIN NO.10 SHRI GHASI MALI HAS ADMITTED THAT PAYMENT WAS MADE BY SHRI DHARMENDRA M EHTA ONLY AND NOBODY ELSE WAS INVOLVED. WHEN THE CASH WAS DEPOSIT ED IN BANK ACCOUNT THE COMPANY WAS NOT IN EXISTENCE AND STATEMENT OF S HRI GHASI MALI ALSO ESTABLISHED THE FACT THAT DEAL WAS BETWEEN THE SELL ER AND SHRI DHARMENDRA MEHTA ONLY. EVEN IF AT ALL ANY CASH HAS CHANGED HAN DS IT CAN NOT BE ATTRIBUTED TO THE COMPANY AS THE COMPANY WAS NOT IN EXISTENCE WHEN THE CASH WERE DEPOSITED IN THE BANK ACCOUNT. WHEN THE C OMPANY WAS NOT IN EXISTENCE IT CAN NOT BE HELD RESPONSIBLE FOR ANY TR ANSACTION ENTERED INTO BY ANY PERSON WHO SUBSEQUENTLY MAY BECOME THE DIRECTOR OF THE COMPANY, WHEN THE COMPANY WAS NOT IN EXISTENCE. IF ANY PAYME NT OVER AND ABOVE THE DECLARED CONSIDERATION WAS MADE IT WAS MADE BY SHRI DHARMENDRA ONLY AND AS ON THAT DATE THE COMPANY WAS NOT IN EXI STENCE, NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY AS UNEXPLAI NED INVESTMENT U/S 69B OF I.T. ACT. THE ADDITION MADE BY THE AO IS THE REFORE ORDERED TO BE DELETED. THE FIRST TWO GROUNDS OF APPEAL ARE DECIDE D IN FAVOUR OF THE APPELLANT. 19. THE A.O. OF THE ASSESSEE HAS REPRODUCED THE ABO VE OBSERVATIONS IN THE REASONS RECORDED AND THEREAFTER MENTIONED AS UNDER: IN VIEW OF ABOVE AND AS PER FACTS DISCLOSED IN YOUR RETURN OF INCOME, IT WAS FOUND THAT ASSESSEE DID NOT HAVE SUFFICIENT DECLARED FUND S TO MAKE SUCH A HUGE PAYMENT AS YOU WERE HAVING CAPITAL OF RS.15,02,840/- ONLY A ND UNSECURED LOANS WERE SHOWN OF RS.62,975/- ONLY. THUS THERE WAS A BELIEF THAT PAYMENTS HAS BEEN MADE FROM UNDISCLOSED SOURCES AND INCOME TO THE EXTENT O F RS.39 LAKH HAS REMAINED ESCAPED TO ASSESSMENT. 14 20. THUS THE A.O. WAS HAVING INFORMATION AND MATERI AL TO RE-OPEN THE CASE. IT IS NOT A CASE WHERE RE-OPENING IS WITH REFERENCE TO SECTION 150 AND HENCE EXPLANATION 3 TO SECTION 153 IS NOT APPLICABLE. THE RE-OPENING IS HELD AS VA LID. 21. A SUM OF RS.11 LAKH STANDS PAID BEFORE INCORPOR ATION OF THE COMPANY. FURTHER IT SEEMS THAT A SUM OF RS.28 LAKH HAS BEEN PAID AT THE TIME OF REGISTRATION. THE COMPANY IS ARTIFICIAL JURISTIC PERSON. THE PRIMARY ONUS WAS ON THE COMPANY AND IF THE COMPANY SAYS THAT MONEY WAS PAID BY SH. DHARMENDER MEHTA, THEN M ATTER WILL BE RECONSIDERED BY THE A.O. IN RESPECT OF ADDITION OF RS.11 LAKH, THE A.O. IN THE REASONS RECORDED HAS STATED THAT ASSESSEE HAS NOT DECLARED SUFFICIENT FUNDS. HENCE T HE REBATE IS TO BE GIVEN FOR THE DECLARED SUFFICIENT FUNDS. TO THE EXTENT OF SUFFICIENT FUNDS , ADDITION SHOULD NOT BE MADE. 22. THERE IS ONE OTHER REASON FOR SETTING ASIDE THE ASSESSMENT ORDER IS THAT THE ASSESSEE HAS NOT BEEN PROVIDED OPPORTUNITY TO CROSS EXAMINE SH. GHASI RAM AND SH. HANUMAN SAHAY. LD. CIT (A) ALSO RECORDED A FINDING AGAINST HIM WHILE DISPOSING OFF THE APPEAL OF THE COMPANY. THE ASSESSEE ASKED THE A.O. TO ALLOW H IM OPPORTUNITY. GROUND OF APPEAL WAS ALSO RAISED BEFORE LD. CIT(A) THAT OPPORTUNITY HAS NOT BEEN GIVEN HIM. TO ASCERTAIN THE UNDISCLOSED INCOME IN THE HANDS OF ASSESSEE, IT IS NECESSARY TO PROVIDE OPPORTUNITY OF CROSS EXAMINE THE AGRICULTURALIST. 23. WE ARE AWARE OF THE FACT SUCH OPPORTUNITY WAS N OT AVAILED WHEN MATTER WAS ADJOURNED TO 7.2.2007 BY I.T.O. WARD 2(2) JAIPUR. D URING THE COURSE OF ASSTT. PROCEEDINGS IN THE CASE OF COMPANY. HOWEVER, IN THE CASE OF ASS ESSEE NOTICE U/S 148 HAS BEEN ISSUED 15 16.3.2009 AND IT MEANS THAT THE PRESENT A.O, HAS NO T PROVIDED OPPORTUNITY TO THE ASSESSEE. WE UPHOLD THE RE-OPENING BUT ON MERITS OF ADDITION, THE ISSUE IS SETASIDE TO BE DECIDED AGAIN AS PER OUR OBSERVATIONS INDICATED ABO VE. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 14.10.201 1 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14.10.2011 *S.KUMAR* COPY FORWARDED TO:- 1. SHRI DHARMENDRA MEHTA, JAIPUR 2. THE INCOME TAX OFFICER, WARD-5(2), JAIPUR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.250/JP/2011 BY ORDER A.R., I.T.A.T., JAIPUR