Shri Maheshbhai Shantibhai Patel, Ahmedabad V. The Income Tax Officer, Ward-3(3)(8), Ahmedabad

ITA 3447/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8278 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 21-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Section: 143(3); 131

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND MS.MADHUMITA ROY, JUDICIAL MEMBER SR . NO. ITA NO. AND ASSTT.YEAR APPELLANT RESPONDENT 1. 3447/AHD/2016 A.Y.2008-09 MAHESHBHAI SHANTIBHAI PATEL (HUF) B-202, MARUTI TOWER NR.SHIVRANJANI CROSS ROAD SATELLITE AHMEDABAD 380015. PAN : AAFHP 6862 F ITO, WARD - 3(3)(8) AHMEDABAD. 2. 3450/AHD/2016 A.Y.2007-08 SHANTIBHAI P. PATEL (HUF) B-202, MARUTI TOWER NR.SHIVRANJANI CROSS ROAD SATELLITE AHMEDABAD 380015. PAN : AAFHP 6863 F ITO, WARD - 3(3)(8) AHMEDABAD. 3. 3449/AHD/2016 A.Y.2007-08 SMT.KASHIBEN SHANTILAL PATEL 22, SAKET BUNGALOW NR.TAKSHASHILA APARTMENT VASTRAPUR AHMEDABAD 380054. PAN : ABXPP 2955 R ITO, WARD - 3(3)( 2 ) AHMEDABAD. 4. 3451/AHD/2016 A.Y.2008-09 SMT.KASHIBEN SHANTILAL PATEL 22, SAKET BUNGALOW NR.TAKSHASHILA APARTMENT VASTRAPUR AHMEDABAD 380054. PAN : ABXPP 2955 R ITO, WARD - 3(3)(2) AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : MS.URVASHI SHODHAN, AR REVENUE BY : SHRI SAURABH SINGH, SR.DR / DATE OF HEARING : 02/05/2018 / DATE OF PRONOUNCEMENT: 11/05/2018 &'/ O R D E R ITA NO.3447/AHD/2016 AND 3 OTHERS 2 PER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER: THE CAPTIONED APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST RESPECTIVE ORDERS OF THE CIT(A) ARISING IN THE RESP ECTIVE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) R.W.S. 147 OF THE INCOME TAX ACT, CONCERNING VARIOUS ASSESSMENT YEARS CAPTIO NED ABOVE. 2. ISSUES IN ALL FOUR APPEALS ARE INTER-CONNECTED. ALL ASSESSEES ARE PARTNERS OF A COMMON FIRM GIVING RISE TO THE DISPUTE IN HAND . THEREFORE, ALL THE APPEALS WERE ARE BEING HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER. 3. WE FIRST TAKE ITA NO.3447/AHD/2016 AS LEAD CASE FOR ADJUDICATION OF THE DISPUTE. ITA NO.3447/AHD/2016 IN THE CASE OF MAHESHBHAI SHAN TIBHAI PATEL (HUF): 4. IN THE CAPTIONED APPEAL, FIRST TWO GROUNDS SEEKI NG QUASHING OF ORDER OF THE AO UNDER SECTION 143(3) R.W.S.147 IN TOTO , AND NOT PROVIDING ADEQUATE OF OPPORTUNITY OF HEARING HAVE NOT BEEN ADDRESSED FOR ADJUDICATION BY THE LD.COUNSEL FOR THE ASSESSEE, HENCE THE SAME ARE DIS MISSED. 5. IN GROUND NO.3 AND 4, ASSESSEE HAS AGITATED ADDI TIONS OF RS.9,75,000/- TOWARDS SHARE OF THE ASSESSEE IN THE UNDISCLOSED PR OFIT OF THE PARTNERSHIP FIRM. 6. BRIEFLY STATED, A SEARCH WAS CONDUCTED ON 27.4.2 011 IN THE CASE OF SAVVY GROUP INCLUDING PARTNERSHIP FIRM - SAVVY INFR ASTRUCTURE CO. IN THE COURSE OF SEARCH AND SURVEY PROCEEDINGS IN THE CASE OF SAVVY GROUP, CERTAIN INCRIMINATING MATERIAL WERE STATED TO BE FOUND AND IMPOUNDED. THE SAID ITA NO.3447/AHD/2016 AND 3 OTHERS 3 INCRIMINATING MATERIAL CONTAINED WORKING RELATED TO M/S.SAVVY SERENE PROJECTS BEING DEVELOPED UNDER THE PARTNERSHIP FIRM M/S.SAVVY INFRASTRUCTURE CO. AS PER THE PARTNERSHIP DEED, THE CAPTIONED ASS ESSEES IN THE PRESENT APPEALS HOLD CERTAIN PERCENTAGE OF SHARES OF PROFIT IN THE SAID PARTNERSHIP FIRM. INCRIMINATING MATERIALS WERE CONFRONTED THE PARTNER , SHRI MAHESH SHANTILAL PATEL (ASSESSEE HEREIN) ON 29.7.2011. A STATEMENT WAS RECORDED UNDER SECTION 131 OF THE ACT. IN COURSE OF REPLY IN 131-PROCEEDI NGS, THE SAID PARTNER CONFESSED THAT RS.69 LAKHS IN CASH WAS RECEIVED AS PROFITS OF THE PARTNERS AND HIS FAMILY MEMBERS WHICH HAS NOT BEEN DISCLOSED BY HIM OR OTHER FAMILY MEMBERS IN THEIR RETURN. THE SAID PARTNER ALSO ASS ERTED, IN THE CAPACITY AS PARTNER, THAT UNDISCLOSED INCOME SO FOUND HAS BEEN DISCLOSED IN THE HANDS OF THE PARTNERSHIP FIRM. IN THE COURSE OF ASSESSMENT, THE AO ON ENQUIRY INTO THESE FACTS FOUND THAT THE PARTNERSHIP FIRM HAS NEI THER DISCLOSED THE UNDISCLOSED INCOME IN ITS RETURN NOR HAS PAID ANY T AXES THEREON. THE AO ACCORDINGLY OBSERVED THAT THE ASSESSEE AND OTHER FA MILY MEMBERS (APPELLANTS HEREIN) ARE LIABLE TO PAY TAXES FOR THE SHARE OF UN DISCLOSED INCOME RECEIVED FROM THE PARTNERSHIP FIRM. THE AO THUS, ALLOCATED UNACCOUNTED PROFIT RELATABLE TO ASSESSMENT YEAR 2007-08 AND ASSESSMENT YEAR 2008-09 AS ADMITTED BY THE PARTNER IN THE HANDS OF RESPECTIVE PARTNERS HAVING REGARD TO THEIR RESPECTIVE SHARE OF INTEREST IN THE PARTNERSH IP FIRM. WORKING OF APPORTIONMENT IN THE UNDISCLOSED INCOME IN THE HAND S OF VARIOUS PARTNERS IS TABULATED BY THE AO AT PAGE NO.3 OF THE ASSESSMENT ORDER. AS A CONSEQUENCE OF ALLOCATION OF UNACCOUNTED PROFIT, THE AO FOUND T HAT THE ASSESSEE (MAHESH SHANTILAL PATEL HUF) HAS INTER ALIA FAILED TO DISCLOSE UNACCOUNTED PROFIT OF RS.9.75 LAKHS IN HIS HAND CONCERNING ASSESSMENT YEA R 2008-09. THE AO ACCORDINGLY ADDED RS.9.75 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE-PARTNER AS UNACCOUNTED PROFIT. ITA NO.3447/AHD/2016 AND 3 OTHERS 4 7. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 8. THE CIT(A) REVISITED THE FACTS AND ALSO NOTED VA RIOUS PLEA RAISED ON BEHALF OF THE ASSESSEES, BUT HOWEVER, DID NOT FIND MERIT THEREIN. THE CIT(A) REFUSED TO PAY HEED TO THE CONTENTIONS OF THE ASSES SEE THAT SHARE OF UNACCOUNTED PROFITS OF THE FIRM CANNOT BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE. PLEA OF THE ASSESSEE THAT SHARE OF UNDIS CLOSED INCOME OF THE FIRM (RS.9,75,000) WAS NOT LIABLE TO BE TAXED IN THE HAN DS OF THE ASSESSEE IN ITS CAPACITY OF A PARTNER, WAS NOT FOUND SUSTAINABLE. 9. THE CIT(A) INTER ALIA NOTED THAT WHERE THE PARTNERSHIP FIRM HAS NOT OFFERED THE UNDISCLOSED INCOME FOR TAXATION AS ADMI TTED, THE SAME IS REQUIRED TO BE ADDED IN THE HANDS OF PARTNERS INCLUDING THE ASSESSEE HEREIN. THE CIT(A) INTER ALIA OBSERVED THAT ADDITIONS HAVE BEEN MADE ON THE BASI S OF STATEMENT UNDER SECTION 131 OF THE ACT, WHICH HAS N OT BEEN RETRACTED AT ANY STAGE, AND THEREFORE, NO SUSTAINABLE GRIEVANCE ARIS E IN THE CASE OF THE ASSESSEE. THE CIT(A) ACCORDINGLY DECLINED TO INTERFERE WITH T HE ORDER OF THE AO. 10. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEA L BEFORE THE TRIBUNAL. 11. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD. AR FOR THE ASSESSEE, MS.URVASHI SHODHAN AT THE OUTSET SUBMITTED THAT THE ADDITIONS MADE BY THE LOWER AUTHORITIES ARE NOT SUSTAINABLE ON TWO PROMIN ENT GROUNDS, VIZ. (I) THE UNDISCLOSED INCOME HAS ARISEN IN THE HANDS OF THE P ARTNERSHIP FIRM AND NOT PARTNERS, AND THEREFORE, THE UNDISCLOSED INCOME CAN BE POSSIBLY TAXED ONLY IN THE HANDS OF THE PARTNERSHIP FIRM. IT WAS THUS CON TENDED THAT THE ASSESSEE HAS BEEN WRONGLY TAXED FOR THE INCOME BELONGING TO OTHE R ENTITIES, AND (II) THE PARTNERSHIP FIRM HAS INCLUDED THE IMPUGNED UNDISCLO SED INCOME IN THE SETTLEMENT APPLICATION MOVED BY THE PARTNERSHIP FIR M UNDER SECTION 245C(1) ITA NO.3447/AHD/2016 AND 3 OTHERS 5 OF THE INCOME TAX ACT, AND THEREFORE, ON THIS GROUN D ALSO, THE ALLEGED UNDISCLOSED INCOME CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE-PARTNER. 12. THE LD.AR EXTENSIVELY REFERRED TO THE ORDER OF THE SETTLEMENT COMMISSION DATED 30.5.2016 PASSED UNDER SECTION 245 D(4) OF THE ACT AND POINTED OUT THAT WHILE COMPUTING THE ADDITIONAL INC OME DISCLOSED BEFORE THE SETTLEMENT COMMISSION THE AFORESAID AMOUNT HAS ALRE ADY FORMED PART THEREOF. 13. THE LD.DR, ON THE OTHER HAND, VOCIFEROUSLY OPPO SED THE PLEA RAISED ON BEHALF OF THE ASSESSEE AND SUPPORTED THE ORDER OF T HE CIT(A). THE LD.DR SUBMITTED THAT IT IS NOT EVIDENT THAT THE AFORESAID AMOUNT FORMS PART OF UNDISCLOSED INCOME OFFERED BY THE PARTNERSHIP FIRM BEFORE THE SETTLEMENT COMMISSION OR NOT AND THE ONUS IS ON THE ASSESSEE T O DEMONSTRATE THE DISCLOSURE PURPORTEDLY MADE. 14. WE HAVE CAREFULLY CONSIDERED RIVALS SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE TAXABILITY OF UNDISC LOSED INCOME DETECTED IN THE COURSE OF SEARCH IN THE CASE OF PARTNERSHIP FIRM WH ERE THE ASSESSEE IS A PARTNER IS IN QUESTION. WE SHALL FIRST TAKE A LOOK INTO TH E SECOND PROPOSITION RAISED ON BEHALF OF THE ASSESSEE. ON BEHALF OF THE ASSESSEE, IT IS SOUGHT TO BE CONTENDED THAT THE ALLEGED UNDISCLOSED INCOME HAS ALREADY BEE N INCLUDED IN THE TAXABLE INCOME OF THE PARTNERSHIP FIRM IN THE COURSE OF SET TLEMENT PROCEEDINGS AND THUS THE SAME INCOME CANNOT BE TAXED AGAIN IN HANDS OF THE PARTNERS. WE FIND OURSELVES IN COMPLETE AGREEMENT, IN PRINCIPLE, WITH THE SAID PROPOSITION RAISED ON BEHALF OF THE ASSESSEE-PARTNER THAT THE UNDISCLO SED INCOME ONCE ALREADY CONSIDERED FOR TAXATION IN THE HANDS OF THE PARTNER SHIP FIRM CANNOT BE TAXED ONCE AGAIN IN THE HANDS OF THE PARTNER. HOWEVER, I N THE SAME VEIN, WE FIND THAT QUESTION AS TO WHETHER THE UNDISCLOSED INCOME IN CONTROVERSY, FORMS PART ITA NO.3447/AHD/2016 AND 3 OTHERS 6 OF THE ADDITIONAL INCOME DECLARED BEFORE THE SETTLE MENT COMMISSION OR NOT, IS ESSENTIALLY A QUESTION OF FACT. THIS ASPECT HAS NO T BEEN RAISED BEFORE THE LOWER AUTHORITIES, AND THUS REMAINED UNANSWERED. HENCE, AS A MEASURE OF FAIR-PLAY, THE ISSUE REQUIRES TO BE REMANDED BACK AND RESTORED TO THE FILE OF CIT(A) TO RE-APPRECIATE THE LIMITED ASPECT AS TO WHETHER INCO ME IN DISPUTE HAS ALREADY BEEN INCLUDED IN THE ADDITIONAL INCOME OFFERED BY T HE PARTNERSHIP FIRM BEFORE THE SETTLEMENT COMMISSION, DIRECTLY OR INDIRECTLY. THEREFORE, WE CONSIDER IT EXPEDIENT TO SET ASIDE THE ISSUE TO THE FILE OF THE CIT(A) FOR EXAMINATION OF THIS LIMITED ASPECT OF ASSESSMENT OF UNDISCLOSED IN COME IN THE HANDS OF THE PARTNERSHIP FIRM. NEEDLESS TO SAY, THE ASSESSEE CA NNOT BE TAXED ON THE UNDISCLOSED WHERE THE UNDISCLOSED INCOME IS ALREADY FOUND TO BE TAXED IN THE HANDS OF THE PARTNERSHIP FIRM. 15. WE SHALL NOW ADVERT TO THE FIRST PROPOSITION RA ISED ON BEHALF OF THE ASSESSEE THAT THE INCOME CAN BE TAXED ONLY IN THE H ANDS OF THE PARTNERSHIP FIRM. IT IS TRUE THAT INCOME IS REQUIRED TO BE TAX ED IN THE HANDS OF RIGHT PERSON ONLY. HOWEVER, WE ALSO BEAR IN MIND THAT THE PARTN ERSHIP FIRM IS ONLY A CREATURE OF AGREEMENT AND PARTNERS ARE INTRINSICALL Y CONNECTED CONTRACTUALLY UNDER THE PARTNERSHIP ACT. PARTNERS (ASSESSEES HER EIN) HOLD MUTUAL AGENCY ON BEHALF OF THE FIRM AND ARE LIABLE AND RESPONSIBLE F OR THE ACTS OF THE ASSESSEE- FIRM. A FIRM IS MERELY A COMPENDIOUS EXPRESSION FO R ITS PARTNERS. THIS APART, THE UNDISCLOSED INCOME OF THE PARTNERSHIP FIRM ULTI MATELY GOES TO THE PARTNERS BY WAY OF SHARE OF THEIR UNDISCLOSED INCOME. THERE FORE, A STRICT ADHERENCE OF TAXABILITY THAT TOO OF AN UNDISCLOSED INCOME IN THE HANDS OF THE PARTNERSHIP FIRM AS INSISTED UPON, WOULD NOT, IN OUR VIEW, CHAN GE THE GROUND REALITY. BESIDES, THE INCLUSION OF UNDISCLOSED INCOME IN THE HANDS OF PARTNERSHIP FIRM IN EXERCISE OF POWERS VESTED UNDER ERSTWHILE PROVIS IONS 153(3) IS ALSO PLAUSIBLE. HOWEVER, SINCE THE MATTER HAS ALREADY BE EN SET ASIDE AND REMANDED ITA NO.3447/AHD/2016 AND 3 OTHERS 7 TO THE FILE OF THE CIT(A), WE DO NOT CONSIDER IT NE CESSARY TO DELINEATE INTO THIS ASPECT OF REVENUE NEUTRAL EXERCISE ANY FURTHER. 16. IN VIEW OF THE AFORESAID DISCUSSION, THE ISSUE IS SET ASIDE AND REMANDED BACK TO THE FILE OF THE CIT(A) FOR ADJUDICATION OF THE ISSUE AFRESH IN TERMS OF DIRECTIONS NOTED ABOVE IN ACCORDANCE WITH LAW. 17. OTHER GROUNDS BEING CONSEQUENTIAL DO NOT CALL F OR ANY ADJUDICATION. 18. IN THE RESULT, ITA NO.3447/AHD/2016 IS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ITA NOS.3450, 3449 AND 3451/AHD/2016 19. THE CAPTIONED THREE APPEALS ALSO INVOLVE IDENTI CAL ISSUES. THE FACTS IN THESE APPEALS ARE STRIKINGLY SIMILAR EXCEPT VARIATI ON IN THE QUANTUM OF THE UNDISCLOSED INCOME. THEREFORE, IN THE BACKDROP OF OUR DISCUSSION MADE IN ITA NO.3447/AHD/2016 (SUPRA), ALL THESE THREE REMAI NING APPEALS ARE ALSO SET ASIDE TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICAT ION AS PER OUR DIRECTIONS GIVEN HEREINABOVE. 20. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 11 TH MAY, 2018 AT AHMEDABAD. SD/- ` SD/- ( MS. MADHUMITA ROY ) JUDICIAL MEMBER ( PRADIP KUMAR KEDIA ) ACCOUNTANT MEMBER AHMEDABAD; DATED 11/05/2018