The ACIT, Mehsana Circle, Mehsana V. Shri Rajni J.Desai, Mehsana

ITA 4041/AHD/2007

• Counselvise Citation: 404120514 RSA 2007
• Duration Of Justice: 6 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-12-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 05-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C PATWARI; SHANKARLAL MEENA
• Assessee Lawyers: G C PIPARA
• Keywords: Unexplained investment; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 4039/AHD/2007 A.Y.2001-02 THE ACIT, MEHSANA CIRCLE, MEHSANA. V/S. SHRI RAMESH J. DESAI 5, ASHOKNAGAR SOCIETY, RADHANPUR ROAD, MEHSANA. PAN: AAWPD 3249A (APPELLANT) (RESPONDENT) ITA NO. 4041/AHD/2007 A.Y. 2001-02 THE ACIT, MEHSANA CIRCLE, MEHSANA. V/S. SHRI RAJNI J. DESAI 5, ASHOKNAGAR SOCIETY, RADHANPUR ROAD, MEHSANA. PAN: AAWPD 3250B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI D.C. PATWARI AND SHANKARLAL MEENA, D.R. ASSESSEE(S) BY : SHRI G.C. PIPARA, A.R. / DATE OF HEARING : 19/09/2013 / DATE OF PRONOUNCEMENT: 13/12/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEAL ARE CONNECTED WITH EACH OTHER FILE D BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-XX I AHMEDABAD, BOTH DATED 06.08.2007. FOR BOTH THE CASE S, THE REVENUE HAD RAISED IDENTICALLY WORDED GROUNDS AS RE PRODUCED BELOW: ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 2 - 1. THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND O N THE FACTS IN DELETING THE ADDITION OF RS.2,50,000/- MADE ON PROT ECTIVE BASIS IN RESPECT OF UNACCOUNTED INVESTMENT IN SHAIL GANGA TE NEMENT. 2. THE LEARNED CIT(APPEALS) OUGHT TO HAVE HELD THAT THE ADDITION IS MADE ON PROTECTIVE BASIS IN THE REGULAR ASSESSME NT BECAUSE THE DECISION OF THE CIT(APPEALS) IN THE BLOCK ASSESSMEN T DELETING SUBSTANTIVE ADDITION IS NOT ACCEPTED AND AN APPEAL IS PENDING BEFORE THE HONBLE TRIBUNAL. 2. AS PER THE ASSESSMENT ORDER, FACTS IN BRIEF WERE THAT THE PROCEEDINGS WERE STARTED CONSEQUENCE UPON THE SEARC H AND REOPENING OF THE ASSESSMENT U/S. 148 OF IT ACT. IT WAS NOTED BY THE AO THAT DURING THE BLOCK ASSESSMENT PROCEEDINGS AN ADDITION WAS MADE OF RS.2,50,000/- AS PER ORDER PASSED U/S. 158B C, DATED 31.10.2002. A DOCUMENT WAS SEIZED FROM THE RESIDENC E OF ARVIND A. SHAH. AS PER THAT DOCUMENT, IT WAS NOTICED THAT AN INVESTMENT WAS MADE IN SHAILGANGA TENEMENTS. THE PROPERTY WAS DEVELOPED BY M/S. SHIV GANGA BUILDERS. WHILE PASSING THAT ORD ER OF BLOCK ASSESSMENT, IT WAS NOTED BY THE AO THAT AS PER ANNE XURE A-6 RS.2,50,000/- WAS INVESTED BY THE ASSESSEE IN CASH. THE ASSESSEE HAD NOT EXPLAINED THE SOURCE AND IT WAS HELD THAT T HE SAID INVESTMENT WAS NOT MADE OUT OF THE BOOKS OF ACCOUNT OF ASSESSEE. WITH THAT CONTEXT, THE AO IN THIS ORDER HAS NOTED T HAT WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHO RITY, IT WAS OBSERVED BY LEARNED CIT(A) THAT RS. 6 LACS WERE WIT HDRAWN FROM THE BANK OF MASTER DEVELOPERS. THAT AMOUNT WAS EX TENDED TO THE ASSESSEE FOR THE INVESTMENT IN SHAILGANGA TENEM ENTS. THE PRESENT AO HAS THEN REFERRED A STATEMENT OF THE SAI D ACCOUNTANT WHICH WAS RECORDED ON 20 TH OF OCTOBER, 2000 U/S. 132(4) OF IT ACT, WHEREIN, HE HAD STATED THAT THE BOOKS OF ACCOUNT OF MASTER ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 3 - DEVELOPERS WERE NOT WRITTEN FROM 01.04.2000. ACCORD INGLY, IT WAS HELD THAT THE WITHDRAWALS FROM THE BANK WERE NOT US ED FOR THE INVESTMENT IN SHAILGANGA TENEMENTS. SO THE PRESENT AO HAS HELD THAT THE CIT(A) HAD NOT TAKEN THE COGNIZANCE OF THE STATEMENT OF SRI JIVRAJ V. DESAI WHICH WAS RECORDED ON 20 TH OF OCTOBER, 2000 THE STATEMENT OF THE SAID ACCOUNTANT. ACCORDING TO HIM, IF IT WAS NOT TAXED IN THE BLOCK ASSESSMENT THEN PROTECTIVELY THE AMOUNT IS TO BE ASSESSED IN THE REGULAR ASSESSMENT. THE CONCL USION OF THE AO IS REPRODUCED BELOW: FROM THESE DETAILS, IT IS VERY CLEAR THAT LD. CIT(A ) COULD NOT TAKE INTO ACCOUNT THE STATEMENT OF SHRI JIVRAJ V. DESAI DATED 20.10.2000, REPLY OF THE ASSESSEE DATED 24.9.2002 AND THE PROOF OF CA SH PAYMENTS SEIZED IN THE FORM OF RECEIPT SLIPS OF SHIVGANGA BUILDERS P. LTD. FOR SHAILGANGA TENEMENT OF RS.2,50,000 IN CASH IN CASE OF THE ASSESSEE. HOWEVER, ID. CIT(A) HAS ACCEPTED THE BOOKS OF ACCOU NTS OF MASTER DEVELOPERS IN WHICH IT HAS REFLECTED THE CASH PAYME NT OF RS.6,00,000 PAID TO SHRI JIVRAJ V. DESAI (NOT TO THE ASSESSEE) AND THE BOOKS WHICH WERE WRITTEN AFTER THE SEARCH. THE ASSESSEE COULD N OT FURNISH THE COGENT EXPLANATION PERTAINING TO THE SOURCE OF RS.2 ,50,000 IN CASH WHICH WERE INVESTED IN SHAILGANGA TENEMENT FROM THE SEIZED MATERIALS. THEREFORE, IT IS VERY CLEAR THAT THIS EX PLANATION IS AN AFTERTHOUGHT, THE SAME CAN NOT BE ACCEPTED TO BE TR UE. IT REMAINED AN INTERESTING ISSUE TO BE EXPLAINED BY THE ASSESSEE T HAT IF HE WANTED TO PAY TO SHIVGANGA BUILDERS RS.2.5 LACS, WHAT WAS THE NEED TO FIRST WITHDRAW A SUM OF RS.2.5 LACS FROM THE BANK ACCOUNT OF A FIRM AND THEN GIVE IN CASH TO THE BUILDER INSTEAD OF DIRECTL Y GIVING A CHEQUE TO THE BUILDER AFTER TRANSFERRING THE REQUIRED AMOUNT FROM THE MASTER DEVELOPERS ACCOUNT INTO HIS ACCOUNT AND WOULD HAVE SQUARED UP THE LOANS BY PAYING THE SAME SUM TO MASTER DEVELOPERS, WHEN HE WAS HAVING THE MONEY IN FUTURE . THE DEPARTMENT HAS FILED AN APPEAL BEFORE HON'BLE I TAT, AHMEDABAD AGAINST THE ORDER OF ID. CIT(A) WHICH WAS PASSED AG AINST THE BLOCK ASSESSMENT ORDER IN WHICH A GROUND OF APPEAL HAS BE EN TAKEN THAT THE DELETION OF RS.2,50,000 BY THE ID. CIT(A) IS INCORR ECT. THEREFORE, IN THIS INCOME ESCAPING ASSESSMENT ORDER, A PROTECTIVE ADDITION OF RS.2,50,000 IS MADE IN THE HANDS OF THE ASSESSEE. I F A VIEW IS TAKEN BY HON'BLE ITAT THAT THE ADDITION OF RS.2,50,000 MADE AS UNDISCLOSED INVESTMENT IN THE HANDS OF THE ASSESSEE IN THE BLOC K ASSESSMENT ORDER ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 4 - IS NOT CORRECT ADDITION THEN THIS ADDITION WILL AUT OMATICALLY BECOME SUBSTANTIVE ADDITION IN THIS CASE. (PROTECTIVE ADDITION RS.2,50,000) 3. FOR BOTH THE CASES, AN APPEAL WAS PREFERRED. THE MAIN ARGUMENT OF THE ASSESSEE WAS THAT THE IMPUGNED AMOU NT OF RS.2,50,000/- WAS WITHDRAWN FROM M/S. MASTER DEVELO PERS. THE PURPOSE OF THE WITHDRAWAL WAS VERY SPECIFIC, I.E., INVESTMENT IN SHAILGANGA TENEMENTS. THE AMOUNT WAS RECEIVED BY TH E ASSESSEE IN THE CAPACITY AS A PARTNER OF THE FIRM M/S. MASTE R DEVELOPERS. IN THE REGULAR COURSE A VOUCHER HAS ALSO BEEN MADE WHI CH WAS DULY ASSIGNED. THE BALANCE SHEET AND THE BANK BALANCES O F M/S. MASTER DEVELOPERS HAVE ALREADY BEEN EXAMINED AND NO ADVERS E INTERFERENCE WAS DRAWN BY THE AO. NO DISCREPANCY WA S FOUND IN THOSE ACCOUNTS AS ALSO THE AVAILABILITY OF THE CASH AS PER THE BOOKS OF ACCOUNTS. THE INVESTMENT WAS RECORDED IN THE BOO KS OF ACCOUNT; HENCE, NO ADDITION SHOULD HAVE BEEN MADE. AN AMOUNT OF RS.6 LACS WAS WITHDRAWN ON 29.9.2000 FROM THE MEHSANA NAGRIK CO- OPERATIVE BANK LIMITED OF THE HYPOTHECATION ACCOUNT NO.83 OF THE SAID BANK. IN THE LIGHT OF ALL THOSE EVIDENCES AND THE EXPLANATION, LEARNED CIT(A) HAS DELETED THE ADDITIO N AFTER ASSIGNING FOLLOWING REASONS: 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, THE OBSERVATIONS OF THE A.O. AS WELL AS ARGUMENTS AND SUBMISSIONS OF THE APPELLANT. THE EVIDENCES PLACED ON RECORD HAVE ALSO BEEN CAREFULLY CONSIDERED BY ME. IT IS AN ADMITTED FACT THAT CASH HAS BEEN PAID ON 29/09/2000 AS OBSERVED BY THE A.O. IN THE ASSESSMENT ORDER AND AS EVIDENT FROM THE DOCUMENTS FILED WITH THE WRITTEN SUBMISSIONS. THAT SINCE THE A.O.'S MAIN GROUND FOR THE ADDITION BEING INCOMPLETE CASH BOOK AT THE TIME OF SEARCH, FIRSTLY THE SAID ISSUE IS EXAMINED BRIEF LY. IT IS SEEN THAT THE SEARCH TOOK PLACE ON 20/10/2000 AND AT THE TIME OF SEARCH THE STATEMENT OF APPELLANT'S FATHER WAS RECORDED ON 20/ 10/2000, WHICH HAS BEEN REFERRED BY THE A.O. IN THE BLOCK ASSESSMENT O RDER AS OBSERVED BY ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 5 - THE A.O. IT IS FURTHER OBSERVED THEREIN THAT IN REP LY TO Q.17, SHRI JIVRAJBHAI DESAI HAD SUBMITTED THAT CASH BOOK OF MA STER DEVELOPER AND ALL THE BOOKS OF ACCOUNTS OF OTHER FAMILY MEMBE RS HAVE BEEN WRITTEN FROM 1/04/2000. ASSESSING OFFICER HAS THERE AFTER FURTHER OBSERVED THAT BOOKS OF ACCOUNTS HAVE BEEN PRODUCED DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS TO EXPLAIN THE AVAI LABILITY OF THE CASH ON 29/09/2000, BUT HE HAS HELD THAT THE SAME IS OF NO CONSEQUENCE AND INVESTMENT IS CONSIDERED AS UNDISCLOSED INVESTMENT. THE SAID CASH BOOK HAS BEEN ACCEPTED BY THE CIT(A) IN THE APPEAL AGAINST THE BLOCK ASSESSMENT ORDER AND HENCE THIS ISSUE STANDS SETTLE D AND IN MY VIEW CANNOT BE UNDER CONSIDERATION IN THE REASSESSMENT P ROCEEDINGS OF THE REGULAR ASSESSMENT. THE ONLY POINT OF VERIFICATION WHICH REMAINS IS EXP LANATION REGARDING THE SOURCE OF CASH FOR INVESTMENT MADE BY THE APPEL LANT. DURING THE COURSE OF HEARING, THE APPELLANT HAS FILED BEFORE M E COPY OF CASH BOOK OF APPELLANT FOR THE PERIOD 01/09/2000 TILL 30/09/2 000, FROM THE PERUSAL OF WHICH, IT IS SEEN THAT APPELLANT HAS MAD E PAYMENT OF RS.2,50,0007- FOR TENEMENT NO.127 AT SHAILGANGA AND THE SOURCE OF THIS CASH PAYMENT HAS BEEN SHOWN AS CASH RECEIVED F ROM MASTER DEVELOPERS ON THE VERY SAME DATE, IN WHICH APPELLAN T IS A PARTNER. IT IS SEEN FROM THE EVIDENCES FILED THAT THE WITHDRAWAL O F RS.6,00,000/- FROM MEHSANA CO-OPERATIVE BANK BY M/S. MASTER DEVELOPERS FROM WHOM RS.2,50,000/- HAS BEEN RECEIVED BY THE APPELLANT IN CAPACITY AS A PARTNER HAS BEEN MADE ON 29/09/2000 FROM THEIR HYPO THECATION A/C. NO.83 AND THIS CASH OF RS.6 LACS WAS GIVEN TO THE A PPELLANT AND HIS TWO BROTHERS AT RS.2,00,000/- EACH ON THE VERY SAME DAT E I.E. ON 29/09/2000. THIS FACT IS EVIDENT FROM THE COPY OF B ANK STATEMENT AND CASH BOOK OF M/S. MASTER DEVELOPERS FURNISHED BEFOR E ME. THE SAID WITHDRAWAL OF RS.6,00,000/- AND FURTHER SUM OF RS.1 ,50,000/- OUT OF OPENING CASH BALANCE OF RS.29,49,814/- WERE TRANSFE RRED BY THE FIRM ON THE VERY SAME DATE AT RS.2,50,000/- IN THE ACCOU NTS OF THE 3 PARTNERS FROM WHICH THEY HAVE MADE INVESTMENT IN SH AILGANGA TENEMENTS. THE ABOVE FACT HAS ALSO BEEN BROUGHT ON RECORD AND OBSERVED BY THE CIT(A) ON PAGE NO. 34 AND 35 OF ORD ER DATED 23/12/2003 IN THE CASE OF RAMESH DESAI IN THE APPEA L AGAINST BLOCK ASSESSMENT ORDER ON THE ISSUE OF INVESTMENT OF RS.2 ,50,000/- IN SHAILGANGA TENEMENT, A COPY OF WHICH IS ALSO PLACED ON RECORD BEFORE ME. .. I ALSO FIND THAT NO EVIDENCES HAVE BEEN BROUGHT ON RECORD BY THE A.O. TO ESTABLISH THAT THE WITHDRAWAL MADE FROM THE BANK HAS NOT BEEN UTILIZED FOR INVESTMENT IN SHAILGANGA TENEMENTS. TH AT APART, SINCE THE INVESTMENT HAS BEEN 'SHOWN IN THE BALANCE SHEET AS AT 31/3/2001 AND THE INVESTMENT BEING OUT OF REGULAR SOURCE OF INCOM E, WHICH FACTS HAVE NOT BEEN CONTROVERTED BY THE A.O. BY BRINGING ON RE CORD ANY MATERIAL OR EVIDENCE TO DISPROVE THE SAME, TREATING THE INVE STMENT IN ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 6 - SHAILGANGA TENEMENTS AS UNDISCLOSED OR UNEXPLAINED INVESTMENT AND MAKING THE ADDITION EITHER ON PROTECTIVE BASIS IS N OT JUSTIFIED, THE SOURCE OF INVESTMENT OF RS.2,50,000/- BEING FULLY E XPLAINED. ON THE BASIS OF THE ABOVE FACTS, THE ADDITION OF RS.2,50,0 00/- IS HEREBY DELETED. 4. WE HAVE HEARD BOTH THE SIDES IN RESPECT OF THESE TWO APPEALS AND THEREAFTER WE ARE OF THE CONSIDERED OPINION THA T IN A SITUATION WHEN DURING THE BLOCK ASSESSMENT IT WAS NOTED THAT THE INVESTMENT IN SHAILGANGA TENEMENTS WAS MADE OUT OF THE BOOKS O F M/S. MASTER DEVELOPERS AND THE ADDITION WAS DELETED, THE N THERE WAS NO JUSTIFICATION FOR THE AO TO REPEAT THAT ADDITION DU RING THE REGULAR ASSESSMENT IN THE HANDS OF THE ASSESSEE, THAT TOO O N PROTECTIVE BASIS. ACCORDING TO US, LEARNED CIT(A) HAS RIGHTLY APPRECIATED THE EVIDENCES SUCH AS WITHDRAWAL OF AMOUNT FROM THE BAN K AND THE CORRESPONDING ENTRIES IN THE BOOKS OF ACCOUNT OF TH E SAID FIRM. THOSE FACTUAL FINDINGS OF LEARNED CIT(A) IS HEREBY CONFIRMED AND THE GROUNDS OF THE REVENUE ARE HEREBY DISMISSED. 5. IN THE RESULT, BOTH APPEALS OF THE REVENUE ARE D ISMISSED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 13/12/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY TRUE COPY TRUE COPY TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD ITA NO.4039 & 4041/AHD/2007 ACIT CIRCLE MEHSANA VS. RAMESH J. DESAI AND RAJNI J . DESAI A.YS. 2001-02 - 7 - 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD