Shri Hitesh Himmatlal Savani, Surat V. Income Tax Officer Ward 3(2)(3), Surat

ITA 347/SRT/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1610 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-06-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Income from undisclosed sources; Loose papers; Principle of natural justice; Tax effect; Reason to believe
• Section: 147; 131; 148; 133A; 143(1); 250; 208; 192; 64; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 347/Srt/2017 (Assessment Year: 2007-08) (Physical hearing) Shri Hitesh Himmatlal Savani, 20-21, Keshav Park Society, Ved Road, Surat-395008. PAN No. BIJPS 5821 H Vs. I.T.O. Ward-3(2)(3), Aayakar Bhavan, Majura Gate, Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri P M Jagasheth, CA Department represented by Shri Vinod Kumar, Sr.DR Date of hearing 01/07/2022 Date of pronouncement 30/09/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-3, Surat (in short, the ld. CIT(A) dated 15/09/2017 for the Assessment year 2007-08. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing in reopening the assessment and issuing notice u/s 148 of the Act, 1961. 2. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing in making addition of Rs. 34,85,466/- on account of alleged cash investment in property. ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 2 3. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Brief facts of the case are that the assessee has filed his return of income for the year under consideration on 29/01/2008 declaring total income of Rs. 1,29,242/-. In the computation of income, the assessee has shown interest income, remuneration and share from partnership firm namely M/s Krish Impex, commission income and income from house property. The case was processed under Section 143(1) of the Income Tax Act, 1961 (in short the Act). Subsequently, the case of assessee was reopened under Section 147 of the Act. Notice under Section 148 was issued to the assessee on 31/3/2014. The case of assessee was reopened by the Assessing officer by recording reasons that a survey action under Section 133A of the Act was carried out at the business premises of Shri Baldevbhai Bhikhabhai Patel on 23/03/2013 by the ACIT, Circle-3, Surat. In the survey action, certain loose papers and a diary was found and impounded as Annexure BFI-35. On perusal of such impounded documents, it was noted that loose papers relate to purchase and sale of land and expenditure. As per details, on page No. 16 of Annexure-BF I-35 of loose paper file, there was a transaction related to purchase of land at survey No. 223, 224 and 225 by Shri Hitesh Himmatlal Savani (assessee) ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 3 pertains to F.Y. 2006-07 relevant to assessment year 2007-08. To examine the transaction, the case of assessee was reopened after recording reasons by the Assessing officer that he has reason to believe that the assessee failed to disclose fully and truly all material facts of assessment for A.Y. 2007-08. In response to notice under Section 148, the assessee filed reply stating therein that the return filed on 29/01/2008 be treated as return in response to notice under Section 148 of the Act. During the reassessment, the Assessing Officer issued show cause notice to assessee, the contents of which is recorded in para 6 of assessment order. 3. In the show cause notice, the Assessing Officer noted that a Survey proceeding was conducted at premises of Shri Baldevbhai Bhikhabhai Patel wherein certain evidence was found regarding transaction of such land, which show transactions between Baldevbhai, Ravjibhai K Suthariya and assessee. The statement of Baldevbhai Bhikhabhai Patel was recorded under section 131, which corroborates the transaction that the assessee has purchased a land at survey No. 223, 224 and 225 at Vesu, Surat during F.Y. 2006-07. The total cost of land was Rs. 4.916 crores. The entries on relevant pages of impounded material shows the receipt of money on sale of such land by assessee. The Assessing Officer also mentioned that the statement of assessee was also recorded on 11/3/2015, wherein he has denied of knowing Baldevbhai Bhikhabhai ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 4 Patel. The Assessing Officer also mentioned in the show cause notice that from statement of Baldevbhai Bhikhabhai Patel, the assessee and Baldevbhai B Patel have made investment of 14.18% of total investment of Rs. 4.196 crores i.e. Rs. 69,70,932/- in cash. Considering the share of both the persons, the investment of assessee being 50% (50% of 69,70,932/-), was worked out to Rs. 34,85,466/-, which is not shown in the investment in the books of account of assessee. The assessee was asked to show cause as to why such amount should not be treated as income for F.Y. 2006-07. 4. The assessee filed his reply, contents of which is recorded in para 7 of assessment order. In reply, the assessee submitted that he never purchased any land out of survey No. 223, 224 and 225 at village Vesu and asked the Assessing Officer to provide the documents or any evidence of such purchase. The assessee explained that page No. 2,5,8 and 13 of BFI-16 does not describe any purchase. The name mentioned as Himmatlal Savani is not of the assessee, he may be some other Himmatlal Savani, such document does not bear the signature of assessee. The assessee furnished copy of income tax returns of four preceding years for comparing his signature. The assessee clearly denied any transaction with Baldevbhai Bhikhabhai Patel. The assessee further stated that these papers are not in the handwriting of assessee. The assessee never met ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 5 Shri Baldevbhai Bhikhabhai Patel and that similar facts were stated at the time of recording of his statement under Section131 of the Act. The assessee in alternative and without prejudice submission submitted that even for the days mentioned in such diary relates to A.Y. 2011-12 and how such addition in A.Y. 2007-08 arise when no transaction relates to period is concerned. 5. The reply of assessee was not accepted by the Assessing officer. The Assessing Officer took his view that the assessee is a dormant partner in the transaction of land of survey No. 223, 224 and 225 at Vesu, Surat. The transaction was conducted by Baldevbhai Bhikhabhai Patel who is active partner amongst the two, who had admitted in his statement under Section 131 as well. Though the name of assessee is not mentioned in the purchase deed of land but it cannot be denied that he is only a cash partner whose role was to invest money in cash and part away with sale proceed which is in direct corroboration with the fact of his signature on the sale proceeds as mentioned in Annexure-BFI-16. As the document bear the signature of assessee which shows his involvement in the sale of land, thus, his nexus in purchase of land is automatically proved. The payment of sale of land took place in F.Y. 2009-10 onwards which is recorded in document as Annexure BFI-16. The Assessing Officer also took his view that Ravjibhai Suthariya in his capacity as Karta of Ravjibhai ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 6 Suthariya (HUF) one of the persons in the transaction also disclosed in the statement under Section 131 the name of assessee as a cash partner with Baldevbhai Bhikhabhai Patel. The stand of assessee in denying the statement as a partner in the sale of land is simply an afterthought. The assessee has made investment of 7.09% of total investment i.e. Rs. 34,85,466/- (7.09% of Rs. 4,91,60,313) which has not been shown in the books of account for F.Y. 2006-07. On the basis of aforesaid observation, the Assessing Officer added Rs. 34,85,466/- on account of investment in land. 6. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee had challenged the validity of reopening under Section 147 as well as addition on merit. The assessee filed detailed written submissions on both the grounds of appeal. The submission of assessee are recorded in para 6 of order of ld. CIT(A). In the submission, the assessee in sum and substance submitted that his source of income is remuneration and interest from partnership firm, rental income and commission income. The assessee also furnished copy of ITR, computation of income, profit and loss account, capital account and balance sheet. On the basis of such details, the assessee asserted that he is not capable of making such huge investment of Rs. 34,85,466/-. The Assessing Officer only on the basis of statement of ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 7 “Hitesh Savani” mentioned in the diary made addition without proving that the assessee made investment or earned gain on sale of such land. On the basis of name mentioned in the seized material, the Assessing officer reopened the case of assessee. The assessee has not purchased such land out of survey No. 223, 224 and 225. The assessee is totally unaware of any such diary for producing land at Vesu which was seized by Income tax department from the premises of Shri Baldevbhai Bhikhabhai Patel. Neither the assessee had made any investment nor any transaction was registered in his name. Some random diary found at the premises of third person does not mean that the same person as mentioned in the diary is the assessee when the assessee does not know such third person. There is no signature of assessee on such diary. The assessee further submitted that on perusal of details mentioned in the diary it relates to A.Y. 2011-12 and 2012-13 and in any case, there is no base for making addition in the year under consideration. The assessee demanded the copy of any purchase deed if any with the department to prove that the assessee has made any purchase but no such copy of purchase deed was provided to assessee. The Assessing Officer merely contended that the name of assessee is shown as cash partner at the time of sale of said land in 2009-10 but no such sale deed was provided to the assessee. The Assessing Officer considered the assessee as dormant partner in the deal or cash partner ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 8 but there is no such evidence like copy of partnership deed or written agreement between the assessee or the said party. The addition is made only on the basis of statement of Shri Baldevbhai Bhikhabhai Patel and on the basis of his diary. The Assessing Officer failed to appreciate that the seized papers were found from the possession of third party, the seized paper are not in the handwriting of assessee. The at the time of recording statement, the assessee explained that he never purchased such land nor know Shri Baldevbhai Bhikhabhai Patel and Ravjibhai Suthariya. Neither the statement of third person was provided nor the assessee was allowed to cross examine such parties. The assessment was completed in full violation of principles of natural justice. The assessee also relied on certain case laws. The submissions of assessee was forwarded to the Assessing Officer for his remand report, the Assessing Officer was also directed to provide copy of impounded material, reasons recorded and the copy of statement of assessee. The Assessing officer furnished his remand report as recorded in para 8 of order of ld. CIT(A). 7. The ld. CIT(A) after considering the submission of assessee, contents of the assessment order and the remand report furnished by the Assessing Officer, held that Assessing Officer has not done the required investigation or conducted enquiries to ascertain exact identity of the ‘Hitesh Savani’ mentioned in the seized material BF1-16. Tax effect for A.Y. 2007-08 may ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 9 not be much but tax effect for A.Y. 2010-11/2011-12 is very much high, when the land was sold and the facts ascertained in assessment order are applicable for A.Y. 2010-11/2011-12. On such observation, the ld. CIT(A) examined the seized material. The ld. CIT(A) recorded that on his careful examination, the Assessing Officer missed two points (i) BF1-16 mentions name of ‘Hitesh Savani’ and Himmatbhai Savani, so it is likely that either they are siblings or father-son duo. The assessee’s father’s name is Himmatbhai Savani hence there is probability that assessee is the person referred in seized material. Thus, the Assessing Officer rightly reopened the assessment order of father of assessee but dropped the proceedings. The ld. CIT(A) also compared the signature of assessee on seized material with the signature of Income tax return of assessee and held that assessee is the same person and concluded that the assessing Officer rightly made addition for investment of 7.09% of total cost of Rs. 4.29 crores. 8. On the reopening, the ld. CIT(A) held that ‘A.R.’ is right in saying reasons recorded are based on wrong incriminating material. The reopening of assessment suffers from defect, however, it is not fatal or incurable enough to make reassessment invalid. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 9. We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 10 (Sr.DR) for the revenue. The ld. AR of the assessee submits that notice under Section 148 was issued by the ACIT, Range-9, who was not having jurisdiction over the Assessing Officer. The jurisdiction over the Assessing Officer is of ACIT, Range-3. Thus, the issuance of notice was without jurisdiction. The reasons recorded were not valid reasons. The ld. CIT(A) despite accepting the fact that reasons recorded are based on wrong incriminating material has not upheld the objection of assessee. Thus, the basis of reasons recorded itself was wrong therefore, the assessment order is void ab initio. On merit of the addition, the ld. AR for the assessee submits that assessee has no relationship with the seized material, seized from the premises of third person. There is no signature of assessee on seized material. The Assessing Officer merely relied on the statement of third party without any corroborative evidence to connect the assessee with the seized material. No independent investigation to connect the assessee with the seized material, was carried out by Assessing Officer. Neither the assessee has any relationship nor any transaction with Baldevbhai Bhikhabhai Patel. The Assessing Officer recorded the statement of assessee wherein, the assessee clearly denied his relationship or any contract with the Baldevbhai B Patel. 10. The ld AR for the assessee finally submits that Baldevbhai Bhikhabhai Patel on whom survey under section 133A was carried out by the investigation ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 11 team filed Petition before Income Tax Settlement Commission. In the said petition Baldevbhai B Patel in a statement admitted that he had received unaccounted cash from various dealings pertaining to land from October 2010 to December 2011 in respect of the same land. It was also the case of Baldevbhai B Patel that he along with one Hitesh Savani (assessee before us) had made unaccounted investment in the plot to the tune of 14.18%t. The land was sold at a price of Rs. 37.42 crores (rounded off) and along with Hitesh Savani had received a sum of Rs. 53 crores. 50 per cent of the share of Baldevbhai B Patel would therefore come to Rs. 26.50 crores (rounded off). It was the stand of Baldevbhai B Patel that he and Hitesh Savani had a share in the investment to the extent of 14.18 %. However, the Principal Commissioner of Income Tax-Surat, while preparing his Report under Rule 9 report, reported that the disclosure on behalf of Baldevbhai B Patel on such issues was without any supporting material. There was no full and true disclosure of the unaccounted income, in the application before the Settlement Commission. It was also reported that during the course of verification, the statement of Hitesh Savani was recorded under section 131, who denied any involvement in the land transaction. Hitesh Savani also denied receipt of any part of the sale proceeds as stated by the assessee. Thus, on the basis of the denial of Hitesh Savani of having any connection with the assessee the Principal ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 12 Commissioner opined that the entire sale proceeds of the land to the extent of Rs. 53 crores had to be construed as that of Baldevbhai B Patel. On the basis of such report the petition of Baldevbhai B Patel was rejected under section 245D(4) by Income Tax Settlement Commission vide order dated 29.09.2016. The order of Income Tax Settlement Commission was challenged by Baldevbhai B Patel before Hon’ble High Court, by filing Special Civil Application, however, the same was dismissed vide order dated 24.08.2017 (reported viz; (2017) 85 taxmann.com 250 Gujarat. 11. The ld. AR of the assessee submits that the Hon’ble Jurisdictional High Court in Baldevbhai Bhikhabhai Patel Vs Income Tax Settlement Commission (supra) held that when a person denied entry into such transaction and denied knowing the assessee, the commission was justified in denying application of assessee. The ld. AR submits that once such fact is accepted by the High Court, no addition is liable to be sustained against the assessee. 12. The assessee filed following documents on record; (1) Seized Material BF1-16 (2) Seized Material BF1-35 (3) Reason recorded for reopening u/s 147 of the Act. (4) Statement of Hitesh Himmatlal Savani recorded u/s 131 of the Act. (5) Copy of passports of Hitesh Himmatlal Savani ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 13 13. To support his various other submissions, the ld AR for the assessee relied on the following case laws; 1. Baldevbhai Bhikhabhai Patel Vs Income Tax Settlement Commission Additional Bench (2017) 85 taxmann.com 250 (Gujarat) 2. Shirishbhai Hargovandas Sanjanwala Vs ACIT (2017) 88 taxman.com 578(Gujarat) 3. ACIT Vs Resham Petrotech Ltd. (2012) 21 taxmann.com 161 (Ahd. Trib) 4. Pavan Morarka Vs ACIT (2022) 136 taxmann.com 2 (Bombay) 5. CIT Vs S. Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC) 6. CIT Vs. S. Goyanka Lime & chemical Ltd. (2015) 56 taxmann.com 390 (MP) 7. Jaysekhbhai Nanubhai Dudhat Vs ITO ITA No. 2677 & 2871/Ahd/2013 (ITAT Surat) 8. Shri Vimalchand M Jain Vs ITO ITA No. 1460/Ahd/2017 (ITAT, Surat) 9. Central India Electric Supply Co. Ltd. Vs ITO, company circle-X, New Delhi (2011) 10 taxmann.com 169 (Delhi) 10. Surani Steel Tubes Ltd. Vs ITO (2022) 136 taxmann.com 139 (Gujarat) 11. Gitaben Atulbhai Shah Vs ACIT SCA No. 26 of 2022 (Gujarat HC) 12. Sunrise Education Trust Vs ITO(E) (2018) 92 taxmann.com 74 (Gujarat) 13. Ankita A. Choksey Vs ITO Writ Petition No. 3344 of 2018 (Bombay) 14. Satish Kumar Khandelwal Vs ITO (2021) 127 taxmann.com 683 (Jaipur Trib) 15. Rinakumar A. Shah Vs ITO ITA No. 172/Ahd/2017 (ITAT, Surat) 16. Northern Exim (P) Ltd. Vs DCIT (2012) 20 taxmann.com 466 (Delhi) 17. 3i Infotech Ltd. Vs ACIT (2010) 192 Taxman 137 (Bombay) 18. Hindustan Level Ltd. Vs R.B. Wadker (2004) 137 Taxman 479 (Bombay) ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 14 14. On the other hand, the ld. Sr. DR for the revenue supported the order of the lower authorities. The ld. Sr. DR for the revenue on the objection against the jurisdiction of Assessing Officer, no such objection was raised by assessee either during the assessment or before 1 st Appellate Authority, thus, the assessee is now precluded from raising such legal or technical issue. On addition on merit, the ld. Sr. DR submits that during the survey proceedings, statement of Baldevbhai B Patel was recorded, who clearly named the assessee as his partner in purchase of land in question. The name of assessee is clearly mentioned in the evidence seized during the survey action. The assessee has cooked up the story that he has no relationship with Baldevbhai B Patel. 15. We have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the assessing officer made the addition by taking view that assessee is a dormant partner in the transaction of land of survey No. 223, 224 and 225 at Vesu, Surat. The transaction was conducted by Baldevbhai Bhikhabhai Patel who is active partner amongst the two, who had admitted in his statement under Section 131 as well. The name of assessee is not mentioned in the purchase deed of land, however, it cannot be denied that assessee is only a cash partner to invest money in cash and part away with sale proceed which is in direct corroboration. As the document bear the ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 15 signature of assessee which shows his involvement in the sale of land, thus, his nexus in purchase of land is automatically proved. The Assessing Officer also took his view that Ravjibhai Suthariya in his capacity as Karta of Ravjibhai Suthariya (HUF) one of the persons in the transaction also disclosed in the statement under Section 131 the name of assessee as a cash partner with Baldevbhai Bhikhabhai Patel. The stand of assessee in denying the statement as a partner in the sale of land is simply an afterthought. 16. As recorded above, before ld CIT(A) the assessee filed very detailed written submissions. The ld CIT(A) after considering the submissions of the assessee, despite taking view that that Assessing Officer has not done the required investigation or conducted enquiries to ascertain exact identity of the ‘Hitesh Savani’ mentioned in the seized material BF1-16, held that tax effect for A.Y. 2007-08 may not be much but tax effect for A.Y. 2010- 11/2011-12 is very much high, when the land was sold and the facts ascertained in assessment order are applicable for A.Y. 2010-11/2011-12. The ld CIT(A) further held that on his careful examination, he finds that the Assessing Officer missed two points that names mentioned on BSI-16, name of ‘Hitesh Savani’ and Himmatbhai Savani, so it is likely that either they are siblings or father-son duo. The assessees father’s name is Himmatbhai Savani hence there is probability that assessee is the person ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 16 referred in seized material. The ld. CIT(A) on comparing the signature of assessee on seized material with the signature of Income tax return of assessee and held that assessee is the same person. No opportunity was given to the assesse to explain his version on such comparison. We find that the stand of the assesse throughout the proceedings is that the assessee has not relation nor any business transaction with Baldevbhai P Patel. We find that said Baldevbhai P Patel filed Petition under chapter XIX- A of Income tax for settlement of his case and took similar plea as stated in his statement before survey team that assessee is one of his partner in making investment in land. However, such statement of assessee was not accepted by ld Income Tax Settlement Commission and the petition of Baldevbhai P Patel was dismissed and on further appeal Jurisdictional High Court was dismissed. For proper appreciation of facts, the entire relevant part of decision of Hon’ble High Court is extracted below; 2. Facts in brief are as under: The petitioner is an individual carrying on business as Labour contractor as well as a broker dealing in land and building. Survey under section 133A of the Act was conducted at the residence-cum-business premises of the assessee on 23.03.2013. During such survey, incriminating documents were found such as diaries and loose papers. These documents and papers were later impounded. According to the department, the documents impounded revealed unaccounted business dealings and unaccounted income of the assessee. The Income Tax authorities initiated re- assessment proceedings in respect of the assessment years 2007-08 to assessment years 2012-13 and notice under section 133(2) was issued in respect of the assessment year 2013-14. 3. On 30.03.2015, the petitioner filed an application under section 245C of the Act before the Settlement Commission, Mumbai. By an order dated 08.04.2015, the ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 17 Commissioner admitted the application and allowed the same to be proceeded further. 4. The Commissioner of Income Tax, Surat, received the order under section 245D on 13.04.2015. The due date of Report under section 245D(2B) was 13.05.2015. However, since no such report was filed on 14.05.2015, it was held that the Commissioner of Income Tax was presumed to have no objection to the application and accordingly, the Commission proceeded further. Rule 9 report was filed on 15.07.2016. 5. It was the case of the assessee that in view of the pending assessment proceedings he intended to make full and true disclosure of income by way of the application before the Settlement Commission. It was such purpose that, for the assessment years 2007-08 to 2013-14 the applicant disclosed the income of Rs. 32.60 crores (rounded off). 6. From the Rule 9 report filed by the authorities, it was found that, amongst other things, the assessee had, in a statement admitted that he had received unaccounted cash of Rs. 26.33 crores from various dealings pertaining to land from October 2010 to December 2011. This was in respect to the dealings in land bearing land Survey Nos. 223, 224 and 225 at Vesu, Surat. It was the case of the assessee that he along with one Hitesh Savani had made unaccounted investment in the plot to the tune of 14.18%. The land was sold at a price of Rs. 37.42 crores (rounded off). He alongwith Hitesh Savani had received a sum of Rs. 53 crores. 50% of the share of the applicant would therefore come to Rs. 26.50 crores (rounded off). The transactions with regard to the sale of land were denied when the assessee was questioned during the course of survey proceedings. It was the stand of the assessee that he and Shri Hitesh Savani had a share in the investment to the extent of 14.18 %. According to the statements made, he further stated that real owners of the land are one Ravjibhai Sutharia and Parbatbhai. 7. Before the Settlement Commission the assessee explained the manner in which income was derived. Primarily the explanation was on two issues. First, on the buying and selling of immoveable properties for and on behalf of third parties. Second on managing of third party funds by making contributions in immoveable properties on their behalf. According to the Principal Commissioner of Income Tax, Surat, the author of the Rule 9 report, the disclosure on behalf of the assessee on such issues was without any supporting material. There was no full and true disclosure of the unaccounted income, in the application before the Settlement Commission. The report recorded the fact that based on the furnished details identification of the said third parties, became extremely difficult. It was, therefore, difficult to find out whether the funds were indeed obtained from third parties. 8. During the course of verification, the statement of Shri Hitesh Savani was recorded under section 131 of the Act. Shri Hitesh Savani in such statement recorded on 11.03.2015 denied any involvement in the land transaction. He also denied receipt of any part of the sale proceeds as stated by the assessee, Shri Baldev Patel. In view of the denial of Shri Savani of having any connection with the assessee the Principal Commissioner of Income Tax opined that the entire sale ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 18 proceeds of the land at Vesu to the extent of Rs. 53 crores had to be construed as that of the assessee-Baldev Patel. The Rule 9 report recorded that the additional unaccounted income detected from the entries in the impounded documents of the assessment years 2007-08 to 2013-14, as against the disclosure of Rs. 32 crores was in fact, Rs. 85 crores the break up of which was as under: Asst. Year Additional Income detected from entries in the impounded documents. 2007-08 Rs. 42,09,77,000/- 2008-09 Rs. 3,78,79,073/- 2009-10 Rs.2,08,47,684/- 2010-11 Rs.3,55,59,570/- 2011-12 Rs.27,85,64,155/- 2012-13 Rs.3,35,56,000/- 2013-14 Rs.3,03,56,500/- Total Rs.85,77,39,982/- 9. To the Rule 9 report dated 15.07.2016, the petitioner submitted his comments dated 31.08.2016.The same were filed before the Commission on 09.09.2016. Based on the Rule 9 report and on the submissions so filed, a hearing was held by the Commission. The applicant requested for an opportunity to file copies of documents based on the Rule 9 report which he received on 18.07.2016. The hearing before the Commission was then adjourned to 23.08.2016. The documents were filed. The Principal Commissioner of Income Tax/AO was directed to examine the details and furnish comments. On 09.09.2016 comments of the AO were filed. The applicant furnished paper book of supplying requisite details. The assessee was asked to furnish details and evidence to support the transaction and substantiate his claim that there was dealing in land on behalf of third party. Rejoinder comments were filed by the assessee on 19.09.2016. Paper book was filed by the assessee on 20.09.2016 and hearing was scheduled on 26.09.2016. The Settlement Commission proceeded to hear the application and by the impugned order held that the assessee had failed to make full and true disclosure of the undisclosed income and therefore the application filed for settlement on 30.03.2015 was rejected. 10. Mr. Divetia learned advocate for the petitioner has primarily contended that the order of the Settlement Commission violated the principles of natural justice. No sufficient opportunity and sufficient time was given to him after filing of the Rule 9 report. Inviting our attention to the proceedings Mr. Divetia submitted that after the report was filed, the Commission proceeded to hear the application on 09.09.2016, 14.09.2016 and 20.09.2016. The hearing was concluded on 26.09.2016 so as to meet the time limit on 30.09.2016. 11. On the question of natural justice, it was Mr. Divetia's contention that Shri Hitesh Savani was examined on 11.03.2015 however a copy of the statement of Shri Hitesh was not provided to him. Shri Savani was also not offered for cross examination. This, according to counsel, amounted to breach of the principles of natural justice. 12. The other contention that Mr. Divetia advanced was on the merits of the order of the settlement commission. It was contended that sufficient evidence was on record by way of entries in the cash books and the ledger accounts to show the connection of ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 19 Shri Hitesh Savani with the dealing of the lands at Vesu. According to Mr. Divetia, one of the co-owner of the land Shri Parbat, on being questioned, categorically admitted that the assessee and Hitesh Savani had a share of investment to the extent of 14.18%. Shri Divetia during the course of arguments has taken us through the Statement of Shri Parbat which is annexed to the petition. 13. Mr. Divetia also invited our attention to the copies of the entries which are annexed to the paper book filed before the Settlement Commission, to establish the connection in the land dealings vis-a-vis Hitesh Savani. The entries in the ledger account showed that Hiteshbhai Savani was clearly associated with the assessee in the transactions. According to Shri Divetia there is substantial evidence on record to show the proximity of Shri Hitesh Savani as a partner. Therefore to hold that the entire income due to the unaccounted cash of Rs. 53 crores be added to the assessee's income was not just. 14. With regard to the second observation under Rule 9 report on the manner of disclosure of income vis-a-vis buying and selling of movable property for and on behalf of others in the name of third parties, it was suggested that in fact the assessee had dealt on behalf of one Shri Vince Patel who was a resident in USA. That the identity of Shri Vince was established by furnishing his address and also the details of ledger entries showing details of transactions with Mr. Vince Patel. 15. On this account, Mr. Divetia invited our attention to the loose paper extracts which were annexed to the petition to suggest that in fact there were dealings between Mr. Patel. Cash transactions suggesting that the amount was received on his behalf by the assessee and that the amount was returned was evident from the notings in these entries. 16. In other words, according to Mr. Divetiya, the order of the Settlement Commission rejecting the application of the petitioner on the ground that it did not disclose full and true particulars, which were a prerequisite for an application under section 245C(1) of the Act, was however, unjustified. 17. Mr. Bhatt learned advocate for the Revenue opposed the petition. According to Mr. Bhatt when the order of the Settlement Commission is read in light of Rule 9 report of the Principal Commissioner of Income Tax, no fault can be found in the finding of the Commission that there was no full and true disclosure on behalf of the petitioner with regard to income. 18. He also opposed the contention of the petitioner that violation of principles of natural justice was established. Shri Bhatt further suggested that this Court in exercise of powers under Article 226 of the Constitution should not interfere with the order of the Settlement Commission. 19. Having heard learned advocates for the respective parties, the question before us is whether the order of the Settlement Commission in rejecting the application of the petitioner-assessee on the account of he having not made a full and true disclosure deserves interference? 20. Section 245C of the Income Tax Act enables the assessee to make application at ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 20 any stage of a case relating to him. He can make such application in such form and the manner prescribed. The section further envisages that such an application imposed contain a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income payable on such income and such other particulars as may be prescribed. 21. As far as the assessee in question is concerned, he filed an application under section 245C on 08.04.2015. In the application so far filed, according to him the manner of deriving additional income was classified under various heads. Based on such classification and the manner of disclosure of such income, the assessee came forth to disclose the income before the Settlement Commission as under: Asst. Year Amount of additional income of Rs. Remarks 2007-08 17,57,000/- 2008-09 06,68,500/- 2009-10 58,85,730/- 2010-11 16,18,980/- 2011-12 2,07,75,640/- Including LTCG 2012-13 13,000/- 2013-14 18,99,400/- Total 3,26,14,940/- 22. The Principal Commissioner of Income Tax on 15.07.2016 submitted a report under Rule 9 of the Settlement Commission Procedure Rules, 1987. It was the case of the assessee that he had earned unaccounted income as a result of dealing in plots comprising of Survey Nos. 223, 224 and 225 at Vesu. These dealings, according to the assessee, were in association with Shri Hitesh Savani. From the total earning of Rs 53.00 Crores (rounded off) each of them had a share of Rs.26.50 Crores. 23. Shri Hitesh Savani, in a statement on 11.03.2015, denied having entered into such a transaction. In fact, he denied knowing the assessee. In order to establish the genuineness of the claim, the assessee was asked to furnish complete details of the persons in connected with such dealings. No justification came forth. Except for relying on entries in the cash book and ledger accounts in the paper book no other material was placed before the Settlement Commission to establish the nexus of such transactions. 24. Rule 9 report further indicated that even in case of dealing on behalf of third party in the lands, it became difficult to establish the identity of the third parties. In fact with respect to the question of the association of Shri Hitesh Savani with the land dealing in question, the Settlement Commission specifically came to a finding of fact as under: "10. The applicant has stated that the impounded documents that bears signatures of Shri Hiteshbhai Savani as a witness to the joint venture deal emerges from document no. BFI page No.2 and page No. 12(backside), [pages 598 and 604 of applicant's PB submitted on 26.09.2016]. BFI 16 page no 2 relates to cash of 1000 (the figures have a circle around them) with signatures dated 18.08.2010 and BFI 16 page 12 (backside) relates to amounts of 25000.00 (the figures have a circle around them) and 12250/00 with signatures dated 16.06.2011 and 12.07.2011 ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 21 respectively. Page 13 of the rule 9 report dated 15.07.2016 contains the English translated version of question no. 10,11 and 12 of the statement of the applicant recorded during the course of survey proceedings. Question No. 11 inter alia gives the details as per BFI 35 page No. 12 of the income plus money receivable as share on sale of land at survey no. 223,224 and 225 at Vesu, Surat. None of the dates in BFI 16 page 2 and page 12(backside) tally with the dates on which the share of sale of land of survey No. 223, 224 and 225 at Vesu Surat was received. Therefore, the connection sought to be made by the applicant that the amounts relate to payment of 50% share to Shri Hitesh Himmatbhai Savani is not established. Moreover, no evidence has been brought on record by the applicant to establish that the signatures are of Shri Hitesh Himmatbhai Savani. In the absence of any co-relation, the applicant's submission that section 292C(1)(iii) is applicable in respect of the signatures cannot be accepted. In paras No 11, 12 and 13 the applicant has sought to refers to entries in BFI 16 and claimed that Shri Hitesh Himmatbhai Savani has collected amounts which are distributed among the two partners and that money has also been collected on behalf of both the partners. However, although these entries show transactions relating to Hitesh the connection with the entries of amounts received as per BFI 35-page 12 (discussed above) is not. In para no. 14 of PB-V submitted by applicant on 26.09.2016, reference has been made to notings in the diaries at BFI 16 page 3. These notings have reference to "Baldevbhai + Himmatbhai Savani" (father of Hitesh) as well as "Baldevhai diary" and "Himmatbhai (diary)". The notings do not therefore support the applicant's contention of 50% share of Shri Hiteshbhai Savani. The detail of joint investments in Vesu land (para 15 of the applicant's PB-V filed on 26.09.2016) show receipts from a number of persons including the applicant and the name of Hitesh appears to be for only one amount. In view of these facts, the applicant's contention regarding 50% share of Shri Hitesh Himmatbhai Savani in the joint share of 14.18% relating to plot no. 223, 224 and 225 at Vesu Surat is not correct. The applicant's claim that the presumption u/s 292 C(1)(ii) of the Act is available to the applicant regarding his claim of 50% share of Shri Hitesh Himmatbhai Savani can not therefore be accepted. The contents of the impounded documents do not lead to the conclusion that Shri Hitesh Savani had 50% share. It is therefore, respectfully submitted that CIT v. Indeo Airways Pvt Ltd 349 ITR 85 (Delhi) is distinguishable and there is no inconsistent approach in view of the contents of the impounded documents not leading to the conclusion that Shri Hitesh Himmatbhai Savani had 50% share. The confirmation of Shri Hitesh Himmatbhai Savani has not been filed by the applicant. In his statement u/s. 131 of the Act recorded on 11.03.2015, Shri Hitesh Himmatbhai Savani has denied any involvement in the land transactions and denied having received any part of the sale proceeds as stated by Shri Baldevbhai Bhikhabhai Patel. The contents of the statement of Shri Hiteshbhai Himmatbhai patel have been discussed by the Pr CIT in his report under rule 9 submitted on 15.07.2016. The request for copy of the statement and cross examination of Shri Hitesh Himatbhai Patel is not made by the applicant even in the last hearing conducted on 26.09.2016. In view of these facts, the applicant's claim that the statement recorded behind the back of the assessee without an opportunity for cross examining the deponent has not ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 22 evidentary value can not be accepted. It is therefore, respectfully submitted that the judgments relied upon by the applicant in Annexure 2 of PB submitted on 26.09.2016 are not applicable, since no request for cross examination of Shri Hiteshbhai Savani was made by the applicant. In para no 32 of the report dated 15.07.2016 supra, the Pr CIT has noted that in response to question no.11 where Shri Hitesh Himmatbhai Savani was required to give his comments on the statement of the applicant about their joint share in the purchase and sale of the land at Vesu, the applicant has stated that he had properly read the statement but did not know any person by the name of Shri Baldevbhai Bhikhabhai Patel and was not involved in any joint share in the purchase and sale of the land at Vesu. The applicant has referred to the statement of Shri Parbatbhi one of the co-owners of Vesu land (especially replies to question no 4,5,6 and 9) to support the contention of the applicant that the parties are known to each other. In para no.32 of report dated 15.7.2016 supra the Pr CIT has referred to Shri Hitesh Himmatbhai Savani being also shown the statement of Shri Ravjibhai Karamsingh Sutharia who had stated that Shri Baldevbhai Bhikhabhai Patel and his friend Shri Hitesh Himmatbhai Savani has jointly invested in cash in the purchase of R.S. No 223, 224 and 225 Vesu, Surat and upon sale of the land, had taken their share of the sale proceeds and that in reply thereof, Shri Hitesh Himmatbhai Savani stated that he had read the statement shown to him but he did not know any person by the name of Shri Ravjibhai Karamsingh Sutharia or Shri Baldevbhai Bhikhabhai Patel and had no share in any transactions relating to the stated Vesu land. The applicant has referred to the statement of Shri Parbatbhai one of the co-owner of Vesu land, but has not given the details of the applicant's submissions/Department's submissions in which the copy of the statement is available." 25. The Settlement Commission in its order vis-a-vis land dealings at Vesu categorically observed that none of the dates, which were shown to be the dates of transactions tallied with the dates on which the consideration in the land was received. The Commission further observed that no evidence was brought on record by the applicant to establish his proximity with Shri Savani. In fact Shri Savani had denied his association with the assessee in a statement recorded on 11.03.2015. Based on such facts, backed by a Rule 9 Report the Commission came to the conclusion that there was no full and complete disclosure of income. So far as the contention of Divetia with regard to violation of principles of natural justice in not supplying statement of Shri Savani is concerned, what we observed from the proceedings before the Settlement Commission that at no point of time when the during the course of hearings before it on various dates i.e. on the 21.07.2016, 23.08.2016, 09.09.2016, 20.09.2016 and 26.09.2016, did the assessee object to or ask for a copy of the statement of Shri Savani or raised an objection on relying on such a statement without offering Shri Savani for cross- examination. Evidently therefore, the contention that, principles of natural justice, were violated is an afterthought. 26. With regard to the second transaction concerning the land dealings on behalf of Shri Vince Patel, the Commission has categorically observed as under: ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 23 "13. ... .... .... However the zip code is not given and no confirmation for the address is made available. The deployment of funds in Saroli land and Ved- Dabholi land is claimed to be out of India Rupees locally sent to the applicant by the father and brother of Shri Vince Patel. However, their present addresses are not given. Confirmations that the investments and further transactions were on behalf of Vince Patel, Piyush and Sanjay are not furnished. The complete details of the land have not been made available for determining the identity of the person entirely into the transactions. The entries in the impounded documents do not prove that the transactions are of third parties. None of the receipts or payments in the case of Shri Vince Patel are stated to have relation to any bank account. The main claim appears to be that since Vince Patel [refer pages 202 and 205 of PB-II submitted by the applicant on 23.08.2016]. However, the free English translation of loose paper BFI 8 page 15 (page 208 of applicant's PB submitted on 23.08.2016) shows that on the left side "Vince+Baldevbhai" is noted and therefore it appears that the claim that since Vince is written on top of the page, the transactions relate to him is not correct. The applicant has placed emphasis on BFI 8 pg 47 "returned to Vince (page no. 212 of applicant's PB-II submitted on 23.08.2016). However, the return has to be seen with reference to BFI 8 pg 15 discussed above in which Vince + Baldevbhai is noted. The claim of noting of returning of Rs 10 lacs plus Rs 20 lac by transaction through angadia to Mr. Vinci Patel is not supported by any details of the angadia or the mode of remittance to Mr. Vince Patel. As regards Sanjay, the transaction details available at page 215 and 216 of Rule 9 report are compatible with purchase of the flat in Vaishnu Devi property by the applicant and sale thereof. The applicant has worked out profit of Rs. 13,00,000/- in respect of this property and the sale is also offered to tax. It is concluded that for none of the transactions claimed to be made for third parties, the entries in the impounded documents show that these transactions relate to the third parties. It is therefore respectfully submitted that as discussed with relation to property at RS No 223, 224 and 225 Vesu Surat, the judgment of CIT v. Indeo Airways P Ltd 349 ITR 85 (Delhi) is distinguishable. No confirmations or any other evidence has been furnished by the applicant to prove that the transactions actually relate to third parties." 27. Based on such findings that even with regard to dealings of land in question no sufficient details were available suggesting full and complete disclosure the Commission found that there was lack evidence to suggest that this transaction was on behalf of third parties. In the final analysis, the Commission therefore observed that in its opinion, there is no material and their possession to come to a conclusion that there was full and true disclosure on behalf of the applicant. 28.xxxxxxxx. 29.xxxxxxxx. 30.xxxxxxxx. 31. Having considered the submissions of learned advocate for the respective parties what is apparent from the order passed by the Settlement Commission is: ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 24 a. Based on the feedback of the Principal Commissioner of Income Tax, on a report under Rule 9 on 15.07.2016, and on independent assessment of evidence the Settlement Commission has come to the conclusion that the assessee had not made a full and true disclosure of income as envisaged under the provisions of the Income Tax Act concerning the Settlement Commission. b. The decision making process of the Settlement Commission was certainly not flawed. Though the assessee has sought to oppose the order of the Settlement Commission on account of the order being violative of principles of natural justice, we do not find merit in such a submission so advanced. During the course of hearings that the Settlement Commission undertook at no point of time had the assessee comeforth requesting either for a copy of Shri Savani's statement of asking for permission to cross examine Shri Hitesh Savani. In absence of such a request the contention, is an afterthought. 32. In the order dated 26.09.2016, the Settlement Commission has found that there was no full and complete disclosure of income so as to entertain an application for settlement. Based on the report of the Principal Commissioner of Income Tax, it was found that though the applicant sought to disclose the income of Rs. 32 crores through the application, in fact the income that ought to have been disclosed was Rs. 85 crores (rounded off). The finding of fact was arrived at by the Commission holding that in absence of full and true disclosure at the hands of the assessee, the application did not merit consideration. 33. We do not find any reason to interfere in view of the narrow scope of judicial review to substitute our wisdom for the one taken by the Settlement Commission. The petition is, therefore, dismissed.” 17. Considering the categorical finding of the Income Tax Settlement Commission (ITSC) in its order vis-a-vis land of survey No. 223 to 225 at Vesu, Surat, in holding that none of the dates, which were shown to be the dates of transactions tallied with the dates on which the consideration in the land was received. The Commission further observed that no evidence was brought on record by Baldevbhai B Patel to establish his proximity with Hitesh Savani (assessee) and that the order of the ITSC has been affirmed by Jurisdictional High Court, therefore, we find merit in the ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 25 submissions of the ld AR for the assessee that there is no evidence to connect the assessee with the sized material except the statement of third party. We find that the statement of Baldevbhai P Patel is not accepted by ld. Principal Commissioner, on the basis of which the settlement petition of Baldevbhai P Patel was not allowed. On the basis of aforesaid factual discussion, we are of the view that the addition of Rs. 34,85,466/- on account of alleged cash investment in the land at survey No. 223 to 225 Vesu, Surat by assessing officer was not justified. Hence, we direct the assessing officer to delete the addition. In the result, the ground No. 2 of the appeal is allowed. 18. Keeping in view that we have allow the appeal of assessee on merit, therefore, discussions on the submissions of the parties on the validity of reopening has become academic. 19. In the result, the appeal of the assesse is allowed. Order pronounced in the open court on 30 th September, 2022 in open court at the time of hearing the appeal in virtual court hearing. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 30/09/2022 *Ranjan Copy to: 1. Assessee – ITA No.347/Srt/2017 Sh. Hitesh Himmatlal Savani Vs ITO 26 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat