M/s. Shanti Reality, Ahmedabad V. The Dy.CIT, Central Circle-1(1), Ahmedabad

ITA 304/AHD/2023

AI Insights

The case involves M/s. Shanti Reality, a partnership firm engaged in real estate brokerage, which appealed against the order of the CIT(A)-11, Ahmedabad, confirming various additions made by the Assessing Officer (A.O.) under Sections 69A and 69C of the Income Tax Act, 1961 for the Assessment Year 2017-18. The additions pertained to unaccounted income and unexplained expenditures identified during a survey. The Tribunal examined the evidences and arguments presented by both the assessee and the revenue, leading to a decision that partly favored the assessee by allowing some of the contested additions while upholding others.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129358 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 21-08-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 26-04-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Loose papers
• Section: 69C; 142(1); 143(2); 69A

Judgement Text

ITA No.304/Ahd/2023 Assessment Year: 2017-18 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.304/Ahd/2023 Assessment Year: 2017-18 M/s. Shanti Reality, 608, Milestone Building, Drive in Road, Ahmedabad – 380 054 [PAN – ACGFS 1501 G] Vs. Dy. Commissioner of Income Tax, Central Circle – 1(1), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Anil Kshatriya, AR Revenue by Shri Santosh Kumar, Sr. DR Da te o f He a r in g 22.08.2023 Da te o f P ro n o u n ce m e n t 08.09.2023 O R D E R This appeal is filed by the Assessee against order dated 09.03.2022 passed by the CIT(A)-11, Ahmedabad for the Assessment Year 2017-18. 2. The Assessee has raised the following grounds of appeal :- “1. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming an addition of Rs.2,37,500/-/- so made by the A.O. u/s.69A of the Act, when no such addition is warranted. 2. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming an addition of Rs.2,35,500/-/- so made by the A.O. u/s.69A of the Act, on account of related brokerage, when no such addition is warranted. 3. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming an addition of Rs.5,58,000/- so made by the A.O. u/s.69C of the Act on account of unexplained expenditure, when no such addition is warranted. 4. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in confirming an addition of Rs.90,000/-, so made by the A.O. u/s.69A of the Act, on account of unexplained money, when no such addition is warranted. ITA No.304/Ahd/2023 Assessment Year: 2017-18 Page 2 of 5 5. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in upholding action of the A.O. in taxiing special rate as per section 115BBE of the Act, when none of the items of impugned additions can be taxed u/s.68/69, so as to warrant taxation at special rate.” 3. The original return of income for the Assessment Year 2017-18 was filed under Section 142(1) of the Income Tax Act, 1961 on 03.11.2018 declaring total income at Rs.11,000/-, but the return was not e-verified by the assessee. The assessee’s case was selected for compulsory scrutiny in pursuance of survey action carried out in the in the case of the assessee. Notice under Section 143(2) of the Act was issued on 30.09.2019 and served upon the assessee. Notice under Section 142(1) of the Act was issued on 13.11.2009. The assessee did not file its reply and, therefore, the Assessing Officer made addition of Rs.5,58,000/- in respect of unexplained expenditure under Section 69C of the Act, addition of Rs.28,14,199/- in respect of unexplained money under Section 69A of the Act , addition of Rs.2,88,500/- on account of unaccounted income as well as addition of Rs.90,000/- in respect of unexplained money under Section 69A of the Act and unaccounted income . 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that the assessee is a partnership concern carrying on business of broking in real estate on a small scale. For A.Y. 2017-18 the assessee submitted return of income on 13.11.2018 declaring income of Rs.11,001/-. As regards ground no.1, the Ld. AR submitted that addition of Rs.2,37,500/- on account of Section 69A of the Act was not justifiable. The Ld. AR submitted that referring to some jotting and noting on a page of Annexure-1 impounded in survey action, the Assessing Officer made an addition of Rs.2,37,500/- as unaccounted income allegedly received from Shri Rajubhai. The Ld. AR further submitted that during the course of appellate proceedings, the assessee has submitted detailed explanation dated 03.03.2023 thereby stating that the amount has been withdrawn in cash on 28.06.2016 from assessee’s Bank account and in support furnished a copy of Bank statement on record. The Ld. AR further submitted that the observation of the CIT(A) that the assessee failed to discharge the onus regarding source of credit is not justifiable the assessee in fact ITA No.304/Ahd/2023 Assessment Year: 2017-18 Page 3 of 5 withdrawn Rs.2,37,500/- on 18.07.2016 from their account with ICICI Bank. Thus, the source was explained by the assessee. As regards to ground no.2 relating to addition of Rs.2,35,500/- on account of Section 69A of the Act, the Ld. AR submitted that the CIT(A) has noted in his order that the brokerage depends upon various factors such as availability of vacant accommodation, bargaining from both the sides, locality etc. and even during the course of survey, neither duplicate set of books of account are found nor any document indicating investment in moveable/immoveable properties has been found. However, in paragraph no.6.5 of CIT(A) in the middle of the paragraph the CIT(A) has categorically observed that the Assessing Officer has wrongly extrapolated the monthly unaccounted brokerage income for the whole year and further it is common knowledge that the brokerage is earned once only for a deal to let the property let out for whole year. Thus, the CIT(A) was not justified in sustaining the said addition. As regards to ground no.3 in respect of addition of Rs.5,58,000/- on account of Section 69C of the Act, the Ld. AR submitted that the jotting on the sheets are in the handwritings of Shri Maheshbhai G. Barot, Father of the partners of the firm and are in nature of personal expenses out of his past saving but still the CIT(A) has confirmed the addition on the ground that the assessee did not furnish any details of such expenses made out of past savings of his deceased father. The assessee has given all the details and also submitted before the Assessing Officer that the noting/jottings on the referred loose papers are in the handwriting of Maheshbhai Gordhanbhai Barot, Father of the partners and they revealed petty expenses purely on personal nature i.e. dry fruits, electricity, repair, interior at residence, music DVD player etc. which were done by the late Father of the partners from his old personal savings. The Assessing Officer made addition of Rs.5,58,000/-. Therefore, this addition does not sustain. Ground no.4 relating to addition of Rs.90,000/- on account of Section 69A of the Act, the ld. AR submitted that the Assessing Officer categorically observed that the assessee received some payments from J. Pathan through cheques and the assessee was asked to explain the same for which the assessee has given reply that the amount of Rs.66,000/- and Rs.24,000/- are withdrawal from the Bank for which the assessee has given details of bank account withdrawals as well as cash paid. Thus, this addition also does not sustain. As regards to ground no.5, the Ld. AR submitted that the Assessing Officer applied special rate of tax as per Section 115BBE of the Act but none of the items of impugned addition can be taxed under Section 68/69 ITA No.304/Ahd/2023 Assessment Year: 2017-18 Page 4 of 5 of the Act having regard to the nature of income referable to such highly disputed additions in the hands of the assessee. During the course of assessment proceedings, the assessee has categorically explained the nature of transaction and source thereof which refers the supporting documents and thus the assessee has discharged his onus and, therefore, provisions of Section 115BBE will not be applicable in assessee’s case. 6. The Ld. DR submitted that as regards to ground no.1 the assessee has given only receipt of Rs.34,000/- and no documents in respect of rest of the amount which comes to Rs.2,37,500/- and, therefore, the Assessing Officer has rightly made the addition. As regards to ground no.2, in respect of addition of Rs.2,35,500/-, the Ld. DR submitted that the impounded material found during the survey was substantiated for the said addition and the same was in fact brokerage income and the CIT(A) has rightly confirmed the addition. As regards to ground no.3 relating to addition of Rs.5,58,000/-, the expenses which are in the nature of partnership firms expenses has been categorically allowed by the CIT(A) and, therefore, remaining expenses which are personal in nature have been rightly deleted by the CIT(A). As regards to ground no.4, related to Rs.90,000/- on account of Section 69A of the Act was not explained by the assessee and, therefore, the addition was rightly made. As regards to ground no.5, the Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. As regards ground no.1, from the perusal of the records, it appears that the documents relating to amount of Rs.2,37,500/-, the assessee has given all the details of the withdrawal of cash on 28.06.2016 from assessee’s bank account but happened to be the partner of the assessee firm alongwith supporting Bank statement copy as justified source of the amount as well as other factors for which Section 69A of the Act cannot be applied. Thus, ground no.1 is allowed. As regards to ground no.2, from the perusal of the submissions, it is appears that the brokerage earned by the assessee was not duly reflected though the submissions of the assessee that the brokerage is earned once only for a deal to let the property let out for the whole year has not been disclosed by the assessee through the proper documents and, therefore, this addition has been rightly made by the Assessing Officer. Thus, ground no.2 is dismissed. As regards to ground ITA No.304/Ahd/2023 Assessment Year: 2017-18 Page 5 of 5 no.3 on account of addition of Rs.5,58,000/- on account of Section 69C of the Act, the CIT(A) has rightly observed that the expenses in the handwriting of Father of the partner was in fact personal expenses and the CIT(A) as well as the Assessing Officer has given the relief to the assessee though the expenses are related to partnership firm. Thus, ground no.3 is dismissed. As regards to ground no.4, the assessee has explained the amounts of Rs.66,000/- and Rs.24,000/- withdrawn from the Bank and, therefore, documentary evidence such as Bank statement has clearly established that the amount cannot be termed under Section 69A of the Act. Thus, ground no.4 is allowed. As regards to ground no.5, the assessee has not categorically explained in respect of amount relating to Rs.2,35,500/- as well as amount relating to Rs.5,58,000/- and, therefore, ground no.5 relating to taxiing special rate as per Section 115BBE of the Act was rightly applied by the Assessing Officer. Ground no.5 is thus dismissed. 8. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open Court on this 8 th September, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 8 th September, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad