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

ITA 4043/AHD/2007

• Counselvise Citation: 404320514 RSA 2007
• Duration Of Justice: 6 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2013
• 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; Loose papers; 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.4043/AHD/2007 A.Y. 2001-02 THE ACIT, MEHSANA CIRCLE, MEHSANA. V/S. SHRI RAJESH J. DESAI, 5, ASHOKNAGAR SOCIETY, RADHANPUR ROAD, MEHSANA. (APPELLANT) (RESPONDENT) REVENUE BY : S/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: 17/12/2013 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(A)-XXI, AHMEDABAD, DATED 06.08.2007. THE GROUNDS RAISED ARE REPRODUCED BELOW: (1) THE LD. CIT (A) HAS ERRED DIN LAW AND ON T HE FACTS IN DELETING THE ADDITION OFRS.2,50,000/- MADE ON PRO TECTIVE BASIS IN RESPECT OF UNACCOUNTED INVESTMENT IN SHAIL GANGA TE NEMENT. (2) THE LD. CIT (A) OUGHT TO HAVE HELD THAT THE ADDITION IS MADE ON PROTECTIVE BASIS IN THE REGULAR ASSESSMENT BECAUSE THE DECISION OF THE CIT(A) IN THE BLOCK ASSESSMENT DEL ETING SUBSTANTIVE ADDITION IS NOT ACCEPTED AND AN APPEAL IS PENDING B EFORE THE HONBLE TRIBUNAL. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON TH E FACTS IN DELETING THE ADDITION TO THE EXTENT OF RS.34,44,500BEING THE INCOME SIPHONED ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 2 - OFF AS EXPENDITURE FROM SOCIETY IN THE NAMES OF NO N-EXISTENT PARTIES THROUGH SELF INTRODUCED BANK ACCOUNTS. (3) THE LD. CIT (A) HAS FAILED TO APPRECIATE THAT T HE ASSESSEE IS ONE OF THE FAMILY MEMBERS OF THE GROUP VIZ. MASTER GROUP SEARCHED BY THE DEPARTMENT AND THE CONTROL AND MAN AGEMENT OF THE PROJECTS DEVELOPED BY IT REMAINED WITH THEM, AN D THEREFORE, THE ADDITION WAS CORRECTLY MADE OF ONE PLACE,ON THE BAS IS OF EVIDENCE SEIZED DURING SEARCH. (4) THE LD.CIT (A) HAS FAILED TO APPRECIATE THAT THERE WAS SIPHONING OFF OF THE INCOME OF THE CO-OP. SOCIETY B Y WAY OF EXPENDITURE IN FICTITIOUS NAMES BY OPENING BANK ACC OUNT FOR WHICH THE ASSESSEE WAS INTRODUCER THERETO. (5) THE LD. CIT(A) HAS ERRED IN HOLDING THAT IN THE CAS E OF THE CO- OP. SOCIETY THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTE D AND NO ADVERSE INFERENCE WAS DRAWN AND THEREFORE THE ADDIT ION IN HE CASE OF THE ASSESSEE WAS ALSO NOT WARRANTED. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE EN TIRE SIPHONED OFF EXPENDITURE IN THE CASE OF THE SOCIETY WAS ASSESSED IN THE HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCE AS NO WORK WAS FOUND TO BE CARRIED OUT AND THE ENTITIES WERE ALSO FOUND TO BE FICTITIOUS. (6) THE LD. CIT (A) HAS ERRED IN WRONGLY INTERPRETING C ERTAIN PART OF THE SHOW CAUSE DATED 10-03-2006 (PARA-11 OF THE ORDER) TO HOLD THAT THE A.O. HAS NOT DISPUTED THE FACT OF THE CONS TRUCTION. (7) THE LD. CIT (A) OUGHT TO HAVE APPRECIATED T HAT THE ADDITION WAS MADE AS SIPHONING OFF OF THE FUNDS OF THE CO-OP. SOCIETY CONTROLLED BY THE GROUP AND THE ASSESSEE HAD NOT RE PLIED DURING THE COURSE OF THE ASSESSMENT THAT THE PAYMENTS WERE MAD E TO THE PERSONS FOR A PARTICULAR WORK OR RETURN OF THE BOOK ING DEPOSIT OR REFUND OF THE CONSTRUCTED AMOUNT. (8) THE LD. CIT (A) HAVING CONSIDERED TO CONFIRM THE ADDITION TO THE EXTENT OF RS.1,11,000 AS PREMIUM AMOUNT EA RNED BY THE ASSESSEE HAS ERRED IN NOT CONFIRMING THE ENTIRE ADD ITION OF RS.15,55,000 AND THIS ACTION IS CONTRARY TO HIS OWN FINDING. (9) WITHOUT PREJUDICED TO THE ABOVE GROUND, THE FIN DING OF THE CIT(A) THAT RS.14,44,500 WAS REPAYMENT OF BOOKING AMOUNT, IS BASED ON NO EVIDENCE AND WITHOUT ANY CONFIRMATION F ROM THE CONCERNED PERSON I.E. SHRI PARESH MODI. (10) THE LD. CIT(A) HAVING CONSIDERED TO CONFIRM THE AD DITION TO THE EXTENT OF RS.1,11,000 AS PREMIUM AMOUNT EARNED BY THE ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 3 - ASSESSEE HAS ERRED IN NOT CONFIRMING THE ENTIRE ADD ITION OF RS.15,55,000 AND THIS ACTION IS CONTRARY TO HIS OWN FINDING. (11) WITHOUT PREJUDICE TO THE ABOVE GROUND, THE FINDING OF CIT (A) THAT RS.14,44,500 WAS REPAYMENT OF BOOKING AMO UNT, IS BASED ON NO EVIDENCE AND WITHOUT ANY CONFIRMATION FROM TH E CONCERNED PERSON I.E. SHRI PARESH MODI. (12) THE LD. CIT (A) HAS ERRED IN RELYING ON THE EVIDENC E OF RETURN OF INCOME OF SHRI MODI AT THE PREMISES OF THE GROUP DURING THE COURSE OF SEARCH FOR DELETING THE ADDITION TO THE E XTENT OF RS.14,44,500 INSTEAD OF CONFIRMING THE ENTIRE ADDIT ION BASED ON THE SAME EVIDENCE FOR THE TAX EVASION ADOPTED BY THE GR OUP. (13) THE LD.CIT (A) OUGHT TO HAVE APPRECIATED THAT THE A .O. HAS BEEN RATIONAL IN MAKING THE ADDITION IN THE CASE OF THE ASSESSEE AS INCOME FROM OTHER SOURCE OF THE SIPHONED OFF INCO ME BY WAY OF EXPENDITURE IN THE CASE OF THE SOCIETY ONLY IN THE CASE OF ONE ENTITY AND, THEREFORE NO UNINTENDED INFERENCE COULD HAVE B EEN DRAWN BY THE CIT (A). (14) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. (15) IT IS THEREFORE PRAYED THAT THE ORDER OF LD. CIT (A ) MAY BE SET ASIDE AND THAT OF THE A.O BE RESTORED TO THE ABOVE EXTENT. 2. AT THE OUTSET, LEARNED DR MR. D.C. PATWARI HAS I NFORMED THAT GROUND NOS.4 TO 15 ARE ARGUMENTATIVE IN NATURE REVOLVING AROUND THE ISSUES RAISED IN GROUND NOS.1 TO 3, THER EFORE, NO INDEPENDENT ADJUDICATION IS REQUIRED. IN THE LIGHT OF HIS STATEMENT, WE HEREINBELOW PROCEED TO DECIDE REST OF THE GROUND S. 3. APROPOS TO GROUND NOS.1 AND 2, FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 147, DATED 22.03.2006 FOR A.Y. 2001-02 WERE THAT CONSEQUENCE U PON THE BLOCK ASSESSMENT AND THE SEARCH CONDUCTED, THE YEAR UNDER CONSIDERATION WAS RE-OPENED BY ISSUANCE OF A NOTICE U/S. 148 OF IT ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 4 - ACT. IT WAS NOTED BY THE AO THAT AN ASSESSMENT WAS MADE U/S.158BC ON THE ASSESSEE, ORDER DATED 31.10.2002, WHEREIN AN ADDITION OF RS.2,50,000/- WAS MADE IN RESPECT OF IN VESTMENT IN SHAILGANGA TENEMENTS. AGAINST THE SAID ORDER PASSED U/S.158BC DATED 31.10.2002 AN APPEAL WAS PREFERRED BY THE ASS ESSEE AND THEREUPON LEARNED CIT(A) HAD PASSED AN ORDER DATED 23.12.2003 AND THEREUNDER HELD AS UNDER: NEXT GROUND OF APPEAL PERTAINS TO ADDITION OF RS.2 ,50,000 BEING INVESTMENT IN SHAILGANGA TENEMENTS. THE FACTS OF TH IS ADDITION IS ALSO IDENTICAL TO THAT OF RAMESH J. DESAI, WHEREIN SIMIL AR AMOUNTS ADDED BY THE AO. THE SUBMISSION OF THE APPELLANT IS ALSO IDENTICAL TO THE CASE OF RAMESH J. DESAI. CONSIDERING THE SOURCE OF THE C ASH AS AVAILABLE WITH THE APPELLANT FOR THE PURPOSE OF INVESTMENT IN THE SHAILGANGA TENEMENT, AS HELD BY ME IN THE CASE OF RAMESH J. DE SAI ADDITION MADE IN THE BLOCK ASSESSMENT IS DELETED AND THIS ISSUE R EQUIRES TO BE CONSIDERED IN THE REGULAR ASSESSMENT. ACCORDINGLY T HIS ADDITION IS DELETED. 3.1 ON ACCOUNT OF THE OBSERVATION OF LEARNED CIT(A) AS NOTED ABOVE THE AO HAD PROCEEDED IN REGULAR ASSESSMENT AG AINST THE ASSESSEE IN THE FOLLOWING MANNER:- FROM THESE DETAILS, IT IS VERY CLEAR THAT LD. CIT( A) COULD NOT TAKE INTO ACCOUNT THE STATEMENT OF SHRI JIVRAJ V. DESAI DATE D 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, LD. CIT (A) HAS ACCEPTED THE BOOKS OF ACCO UNTS 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 CANNOT BE ACCEPTED TO BE TRUE . 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 ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 5 - LOANS BY PAYING THE SAME SUM TO MASTER DEVELOPERS, WHEN HE WAS HAVING THE MONEY IN FUTURE. THE DEPARTMENT HAS FILED AN APPEAL BEFORE HONBLE I TAT, AHMEDABAD AGAINST THE ORDER OF LD. CIT (A) WHICH WAS PASSED A GAINST BLOCK ASSESSMENT ORDER IN WHICH A GROUND OF APPEAL HAS BE EN TAKEN THAT THE DELETION OF RS.2,50,000/- BY THE LD. CIT(A) IS INC ORRECT. 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 HONBLE 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 IS NOT CORRECT ADDITION THEN THIS ADDITION WILL AUT OMATICALLY BECOME SUBSTANTIVE ADDITION IN THIS CASE. PROTECTIVE ADDITION RS.2,50,000/- 4. THE AFORESAID PROTECTIVE ADDITION WAS CHALLENGED BEFORE LEARNED CIT(A) WHO HAS GIVEN A VERDICT IN ASSESSEE S FAVOUR IN THE FOLLOWING MANNER: ON THE BASIS OF THE ABOVE SUBMISSIONS, THE APPELLA NT HAS CONTENDED THAT THE A.PO. HAS PLACED HEAVY RELIANCE UPON THE F ACT THAT THE CASH BOOK WAS NOT UPDATED AT THE TIME OF SEARCH AND ACCO RDINGLY THE EXPLANATION FURNISHED IS AN AFTER THOUGHT. FURTHER , IT IS A.OS CONTENTION THAT THE APPELLANT HAD NOT FILED COGENT EXPLANATION IN RESPECT OF SOURCE OF INVESTMENT MADE. IN THIS RESPE CT, IT IS ARGUED THAT THE APPELLANT HAD FILED ELABORATE SUBMISSIONS DULY SUPPORTED BY EVIDENCES INCLUDING THE EXPLANATION ON UPDATING OF CASHBOOK ALONG WITH LEGAL POSITION VIDE LETTERS DATED 21-02-2006 O N THE ISSUE UNDER CONSIDERATION, WHICH WERE SELF-EXPLANATORY IN ITSEL F. BRIEFLY SPEAKING IT WAS CONTENDED IN THE SAID LETTERS THAT THE LD. CIT (A) IN PARA-8.2. OF THE APPELLATE ORDER PASSED AGAINST THE BLOCK ASSESS MENT ORDER HAS NOWHERE OBSERVED THAT ANY ADDITION SHOULD BE MADE I N REGULAR ASSESSMENT. THE LD. CIT (A) AFTER CONSIDERING THE D ETAILED SUBMISSION AND EVIDENCES FILED BEFORE HIM AS WELL AS DURING TH E ORIGINAL ASSESSMENT PROCEEDINGS HAS CATEGORICALLY OBSERVED T HAT SINCE THE INVESTMENT IS FOUND RECORDED IN THE BOOKS OF ACCOUN TS OF THE APPELLANT AND HAVING EXPLAINED THE SOURCE OF INVESTMENT AS AM OUNT RECEIVED FROM A PARTNERSHIP FIRM M/S. MASTER DEVELOPERS, THE ISSUE PERTAINING TO INVESTMENT IS REQUIRED TO BE CONSIDERED IN THE R EGULAR ASSESSMENT. IT IS ARGUED BY THE A.R. THAT FROM THE SAID OBSERVA TION OF THE LD. CIT (A) IT CANNOT BE CONSTRUED THAT THE ADDITION SHOULD BE MADE IN THE REGULAR ASSESSMENT. RATHER, THE CIT (A) HAS CATEGO RICALLY STATED AND CONFIRMED THE FACT THAT FIRSTLY THE INVESTMENT IS R ECORDED IN THE BOOKS OF ACCOUNT AND SECONDLY THE SOURCE OF INVESTMENT HA S ALSO BEEN PROPERLY EXPLAINED. THE APPELLANT IN SUPPORT OF HIS CONTENTION HAS FILED THE CASH FOR F.Y. 2000-01 AS WELL AS THAT OF M/S. MASTER ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 6 - DEVELOPERS, A PARTNERSHIP FIRM WHEREIN THE APPELLAN T IS ALSO A PARTNER AND WHEREFROM THE MONEY IS EXPLAINED TO HAVE BEEN R ECEIVED FOR INVESTMENT IN SHAILGANGA TENEMENTS. THE A.R. STATE D THAT FROM THE PERUSAL OF THE CASH BOOK OF ABOVE MENTIONED PERIOD IN CASE OF MASTER DEVELOPERS, IT CAN BE SEEN THAT CASH OF RS.6,00,000 /- HAVE BEEN WITHDRAWN ON 29-09-2000 FROM MEHSANA NAGRIK CO-OP. BANK LTD. FROM THEIR HYPOTHECATION ACCOUNT NO.83 AND THE SAID CASH OF RS.6,00,000 HAS BEEN GIVEN TO THE APPELLANT AND HIS 2 BROTHERS AT RS.2,50,000 EACH ON THE VERY SAME DATED 29-09-2000 I.E. RS.2,00,000 EACH FROM THE CASH WITHDRAWN AND RS.50,000/- EACH F ROM OPENING CASH BALANCE. FROM THE PERUSAL OF THE CASH BOOK FOR THE ABOVE PERIOD, IT CAN BE FURTHER SEEN THAT THERE IS AN OPENING CAS H BALANCE OF RS.29,49,814/- AND ACCORDINGLY, THE SAME WAS USED P ARTLY FOR WITHDRAWAL BY THE PARTNERS ON 29-09-2000 FOR THE PU RPOSE OF MAKING INVESTMENT IN SHAILGANGA TENEMENT. IT IS ALSO CONTE NDED THAT THE WITHDRAWAL OF CASH INSPITE OF CASH BALANCE IS A REG ULAR FEATURE IN CASE OF THE FIRM AND THE WITHDRAWAL OF RS.6,00,000/- IS NOT THE ONLY INSTANCE AS IS EVIDENT FROM THE CASHBOOK OF ONLY ONE MONTH S UBMITTED. FURTHER, EACH AND EVERY ENTRY OF CASH WITHDRAWN AND DEPOSITE D IN THE BANK WAS DULY EXPLAINED IN CASE OF THE FIRM M/S. MASTER DEVE LOPERS AND NO ADVERSE INFERENCE WAS DRAWN AND NO ADDITION WAS MAD E IN THE BLOCK ASSESSMENT IN THE FIRMS CASE. ACCORDINGLY, THERE I S A LIVE LINK BETWEEN THE SOURCE OF CASH WITHDRAWN AND GIVEN BY THE FIRM TO THE PARTNERS AND INVESTMENT MADE IN SHAILGANGA TENEMENTS BY THE PART NERS OF THE FIRM. THE WITHDRAWAL OF CASH BY THE FIRM, GIVING IT TO TH E PARTNERS OF THE FIRM AND INVESTMENT BY THE PARTNERS IS ALL ON THE SAME D AY I.E. 29-09- 2000.. 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- 2000, FROM THE PERUSAL OF WHICH, IT IS SEEN THAT APPELLANT HAS MAD E PAYMENT OF RS.2,50,000/- FOR TREATMENT NO.127 AT SHAILGANGA AN D 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 BAN K BY M/S. MASTER DEVELOPE RS FROM WHOM RS.2,50,000/- HAS BEEN RECEIVED BY THE APPELLANT IN CAPACITY AS A PARTNER HAS BEEN MADE ON 29-0-9-2000 FROM THEIR HYP OTHECATION A/C. NO.83 AND THIS CASH OF RS.6 LACS WAS GIVEN TO THE A PPELLANT AND HIS 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 BANK ST ATEMENT AND CASH BOOK OF M/S. MASTER DEVELOPERS FURNISHED BEFORE 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 TRANS FERRED BY THE FIRM ON THE VERY SAME DATE OF RS.2,50,000/- IN THE ACCOU NTS OF THE 3 PARTNERS FROM WHICH THEY HAVE MADE INVESTMENT IN SH AILGANGA ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 7 - TENEMENTS. THE ABOVE FACT HAS ALSO BEEN BROUGHT ON RECORD AND OBSERVED BY THE CIT (A) ON PAGE 34 & 35 OF ORDER D ATED 23-12-2003 IN THE CASE OF RAMESH DESAI IN THE APPEAL AGAINST B LOCK ASSESSMENT ORDER ON THE ISSUE OF INVESTMENT OF RS.2,50,000/- I N 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 A T 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 SHAILGANGA TENEMENTS AS UNDISCLOSED OR UNEXPLAINED INVESTMENT AND MAKING THE ADDITION ON PROTECTIVE BASIS IS NOT JUST IFIED, THE SOURCE OF INVESTMENT OF RS.2,50,000/- BEING FULLY EXPLAINED. ON THE BASIS OF THE ABOVE FACTS, THE ADDITION OF RS.2,50,000/- IS HEREB Y DELETED. 4.1 AGAINST THE SAID DELETION NOW THE REVENUE IS BE FORE US. AT THE OUTSET OUR ATTENTION HAS BEEN DRAWN ON THE FIND ING OF THE RESPECTED CO-ORDINATE BENCH C ITAT AHMEDABAD WHER EIN THE APPEAL IN RESPECT OF BLOCK PERIOD TITLED AS IT(SS)A NO.52/AHD/2004 BLOCK PERIOD 01.04.1990 TO 28.02.2000 IN THE CASE OF RAJESH J. DESAI, ORDER DATED 27 TH OF JUNE, 2008 IN RESPECT OF INVESTMENT IN SHAILGANGA TENEMENTS, IT WAS HELD AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND, PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOW LEDGE BY THE LEARNED DR WHICH MAY PROVE THAT THE PAYMENT MADE BY THE ASSESSEE WAS NOT OUT OF REGULAR ACCOUNT. THE CIT(A) HAS GIVE N A CLEAR-CUT FINDING THAT THE INVESTMENTS MADE BY THE ASSESSEE A RE FOUND RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE HAS FULLY EXPLAINED THE SOURCE OF SUCH INVESTMENTS AS AN AMOUNT RECEIVED FROM PART NERSHIP FIRM M/S. MASTER DEVELOPERS. SINCE THE INVESTMENTS WERE DULY FOUND OUT OF THE BOOKS OF ACCOUNT, THEREFORE, WE ARE OF THE VIEW THA T SUCH INVESTMENTS CANNOT BE ADDED IN THE BLOCK ASSESSMENT. BLOCK ASSE SSMENT CANNOT BE SUBSTITUTED BY REGULAR ASSESSMENT. THE ADDITION IN THE BLOCK ASSESSMENT CAN BE MADE ONLY IN RESPECT OF UNDISCLOS ED INCOME AS DEFINED U/S. 158B(B) OF THE ACT THE INVESTMENTS REC ORDED IN THE REGULAR BOOKS OF ACCOUNT CANNOT BE TREATED TO BE TH E UNDISCLOSED ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 8 - INCOME AND SUCH ADDITION IS OUTSIDE THE SCOPE OF CH APTER XIV-B. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A) IN DELE TING THE ADDITION OF RS.2,50,000/-. 5. AFTER HEARING THE SUBMISSION OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT IN ADDITION OF THE AFORESAI D ORDER OF THE TRIBUNAL, IT IS WORTH TO MENTION THAT WHILE DECIDIN G THE APPEAL OF SRI JIVRAJ V. DESAI, ITAT C BENCH AHMEDABAD, VIDE ORDER DATED 13.12.2013 IN IT(SS)A NOS.99 AND 106/AHD/2004 AS PE R GROUND NO.6 HAS FOLLOWED THE ORDER OF ITAT C BENCH, DATE D 27 TH JUNE, 2008 (CITED SUPRA) AND HELD THAT THE IMPUGNED INVES TMENTS HAVE ALREADY DISCLOSED IN THE REGULAR BASIS, THEREFORE, NOT TO BE TAXED IN BLOCK PROCEEDING; HENCE, CONFIRMED THE DELETION. 5.1 OUR ATTENTION HAS BEEN DRAWN ON THE FACT THAT T HE IMPUGNED ADDITION WAS MADE BY THE AO MERELY BECAUSE OF THE R EASON THAT THE CASH BOOK WAS NOT UPDATED AT THE TIME OF SEARCH ; HENCE, HE HAD HELD THAT THE INVESTMENT RECORDED IN THOSE BOOKS OF ACCOUNT LATER ON WERE UNDISCLOSED INVESTMENT. IN THIS REGARD, NOW THE FINDINGS OF THE REVENUE DEPARTMENT IS THAT THE IMPUGNED INVESTM ENT WAS FOUND RECORDED IN THE BOOKS OF ACCOUNT AND THE SOUR CE OF INVESTMENT WAS OUT OF THE AMOUNT RECEIVED FROM THE BOOKS OF THE PARTNERSHIP FIRM M/S. MASTER DEVELOPERS. THE CORRES PONDING ACCOUNTS OF M/S. MASTER DEVELOPERS WERE ALSO EXAMIN ED AND THEN IT WAS HELD THAT THE ASSESSEE HAPPENED TO BE A PART NER IN THE SAID FIRM AND THE SAID AMOUNT WAS RECEIVED FROM THE FIRM FOR THE INVESTMENT IN SHAILGANGA TENEMENTS. AN ANOTHER FIND ING WAS ALSO GIVEN BY LEARNED CIT(A) THAT THERE WERE WITHDRAWALS FROM THE BANK OF THE FIRM WHICH WERE USED FOR THE INVESTMENT IN SHAILGANGA ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 9 - TENEMENTS. IN THE ABSENCE OF ANY CONTRARY MATERIAL AND CONSIDERING THE BACKGROUND OF THE CASE AS DISCUSSED ABOVE, WE HEREBY AFFIRM THE FACTUAL FINDING OF LEARNED CIT(A) AND DISMISS THIS GROUND OF THE REVENUE. 6. APROPOS TO GROUND NO.3. IT WAS NOTED BY THE AO T HAT IN THE CASE OF PARTH SHOPS AND FLATS CO-OPERATIVE SOCIETY WHEREIN INVESTMENTS WERE MADE BY SOME PERSONS, NAMELY, PARE SH RATILAL MODI OF RS.15 LACS AND SRI V. N. RABARI OF RS.20 LA CS. THE ASSESSESS LINK AS PER AO WAS THAT THE BANK ACCOUNT S OF BOTH THOSE PERSONS WERE INTRODUCED BY THE ASSESSEE, I.E., RAJE SH J. DESAI. IT WAS FURTHER NOTED THAT AN ANOTHER SOCIETY, NAMELY, VISHRUT SOCIETY, ALTHOUGH IN THE NAME OF PARESH RATILAL MODI BUT FOU ND TO BE CONTROLLED BY SRI RAJESH J. DESAI. THEREFORE, THE A O HAD CONCLUDED THAT THE SUM OF RS.35,55,000/- WAS SIPHON ED OFF BY THE ASSESSEE THROUGH BENAMI ACCOUNT IN THE NAME OF THOS E PERSONS. THE RELEVANT PORTION FROM THE ASSESSMENT ORDER FOR READY REFERENCE IS REPRODUCED BELOW: DURING THE ASSESSMENT PROCEEDINGS IN CASE OF PARTH SHOPS & FLATS CO-OP. SOCIETY LTD., PARTH EMPIRE,RAMBAUG, MANINAGA R, AHMEDABAD, IT HAS BEEN FOUND THAT A SUM OF RS.15,00,000/- HAS BEEN WITHDRAWN BY SHRI PARESH RATILAL MODI, B-1 C.J. MARKET, FATEHBHA IS HAVELI,RATANPOLE, AHMEDABAD-380001 AND RS.20,00,000 /- HAS BEEN WITHDRAWN BY SHRI V.N. RABARI, PROPRIETOR OF K.A. C ORPORATION, C/O. FINAL INVESTMENT, GURUKUL ROAD, SONAL X ROAD, OP P. SUKETU FLATS, AHMEDABAD. THESE BOTH THE PERSONS WERE SUMMONED DUR ING THE ASSESSMENT PROCEEDINGS IN CASE OF PARTH SHOPS & FL ATS CO-OP. SOCIETY LTD., BUT SHRI PARESH RATILAL MODI COULD NO T ATTEND AND V.N. RABARI PROPRIETOR OF K.A. CORPORATION COULD NOT BE FOUND IN THE ADDRESS ASCERTAINED FROM THE BANK. BANK ACCOUNTS OF BOTH OF THESE PERSONS WERE INTRODUCED BY SHRI RAJESH J. DESAI, I. E. THE ASSESSEE. DURING THE SEARCH,FROM 5 VISHRUT SOCIETY, SUBHASH C HAWK, MEMNAGAR, GURUKUL ROAD, AHMEDABAD FROM ANN. A-78, P AGE-1 TO 183, THE ROLE OF SHRI PARESH RATILAL MODI WAS ALSO FOUND IN THE CONTROL ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 10 - AND POSSESSION OF SHRI RAJESH J. DESAI, I.E. THE AS SESSEE, THE SAME WAS SEIZED. THIS CLEARLY SHOWS THAT THESE PERSONS ARE B ENAMI OF SHRI RAJESH J. DESAI. FROM THE AUDITED BOOKS OF ACCOUNTS OF THE SOCIETY, IT HAS BEEN FOUND THAT IN THE BALANCE SHEET DATED 31-03-2001, RS.20,0 0,000/- HAS BEEN SHOWN DEBITED IN THE NAME OF K.A. CORPORATION AND R S.15,55,000/- IN THE NAME OF PARESHBHAI R. MODI. IN THE SUBMISSION D ATED 10-10-05, ON BEHALF OF SOCIETY, IT HAS BEEN STATED BY SHRI RAMES H J. DESAI, THE EX- CHAIRMAN OF PARTH SHOPS & FLATS CO-OP. SOCIETY LTD. AND BROTHER OF THE ASSESSEE THAT RS.20,00,000/- HAS BEEN PAID TO K .A. CORPORATION AGAINST CONSTRUCTION WORK CARRIED OUT BY IT, HOWEVE R, THE FACT IS THAT NO ANY CONSTRUCTION WORK HAS BEEN DONE AFTER THE BU ILDER PARTH HOUSING & ESTATE DEVELOPERS PVT. LTD. LEFT THE UNF INISHED WORK BEFORE THE SEARCH IN CASE OF MASTER GROUP I.E. BEFORE 20-1 0-2000. IT HAS BEEN CLAIMED THAT RS.15,55,000/- GIVEN TO PARESHBHAI R. MODI IS THE AMOUNT TRANSFERRED TO LAND AND CONSTRUCTION CONTRIB UTION ON F.Y. 2001-02, BUT THE SAME COULD NOT BE SUBSTANTIATED BY SHRI RAMESH J. DESAI, THE CHAIRMAN OF THE SOCIETY. IN THIS CASE AL SO THE FACT IS THAT NO CONSTRUCTION AND BUILDING DEVELOPMENT ACTIVITY HAS BEEN CARRIED OUT IN THE CLAIMED FINANCIAL YEAR. THUS A TOTAL SUM OF RS.35,55,500/- HAS BEEN SIPHONE D OFF BY SHRI RAJESH J. DESAI THROUGH THE BENAMI ACCOUNTS OF PARE SH RATILAL MODI AND K. A. CORPORATION AND THE SOCIETY HAS NOT EARNE D ANY INCOME. THE AMOUNTS HAVE BEEN WITHDRAWN BY THE ASSESSEE AS UNDE R: RS.15,00,000 ON 25-01-01 THROUGH PARESH RATILAL MOD I FROM THE MEHSANA NAGRIK SAHKARI BANK LTD., CHEQUE NO.11 6204. AND RS.20,00,000/- ON 22-03-01 THROUGH K. A. CORPOR ATION FROM SARVODAYA COMMERCIAL COOPERATIVE BANK LTD., BY CHEQUE NO.14201, 14202, 14203, 14204 IN THE AMOUNTS OF RS.5 LACS EACH HAS BEEN WITHDRAWN. THE ASSESSEE HAS CONTENDED THAT HE HAS NOTHING TO D O WITH THE AFFAIRS OF PARTH SHOPS & FALTS CO-OP. SOCIETY LTD. BUT THE CHAIRMAN OF THE SOCIETY WAS BROTHER OF THE ASSESSEE I.E. SHRI RAMES H J. DESAI. THE AFFAIRS OF THE SOCIETY HAS BEEN MANAGED BY THESE PE RSONS I.E. THE ASSESSEE AND SHRI RAMESHJ. DESAI. DURING THE ASSESS MENT PROCEEDINGS IN CASE OF THE SOCIETY FOR THE BLOCK ASSESSMENT THE IDENTITY OF THESE PERSONS WHICH WERE INTRODUCED BY THE ASSESSEE COULD NOT BE PROVED AND THESE PERSONS COULD NOT BE PRODUCED IN THIS OFF ICE. THE RETURNS OF INCOME OF SHRI PARESH RATILAL MODI WERE ALSO FOUND DURING THE SEARCH AND SEIZED FROM THE CONTROL OF THE ASSESSEE. PARTH HOUSING STATE DEVELOPERS PVT. LTD., LEFT THE UNFINISHED THE WORK AND THE SAME COULD NOT BE COMPLETED TILL DATE, THEREFORE, THERE WAS NO LOGIC OF MAKING THE PAYMENT TO SHRI PARESH MODI AND K.A. CORPORATION ON BEHEST OF COMPLETING THE UNFINISHED WORK OF THE SOCIETY. SHRI RAMESH J. DESAI ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 11 - I.E. BROTHER OF THE ASSESSEE IS THE EXCHAIRMAN OF T HE SOCIETY WAS IN THE CONTROL OF THE ASSESSEE AS WELL AS SHRI RAMESH J. D ESAI. THUS, THE ASSESSEE FAILED TO FURNISH THE COGENT EXPLANATION A S TO WHY THIS AMOUNT OF RS.35,55,500/-, WHICH HAS BEEN SIPHONED FROM THE SOCIETY, SHOULD NOT BE ADDED AS HIS INCOME BUT NO EXPLANATION COULD BE GIVEN BY THE ASSESSEE. HENCE THE ADDITION OF THIS AMOUNT IS MA DE IN HIS HANDS OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. ADDITION RS.35,55,000/-. 7. THE MATTER WAS CARRIED BEFORE LEARNED CIT(A) WHO HAS GRANTED RELIEF TO THE ASSESSEE MAINLY ON THE GROUND THAT THE AO HAD PRESUMED THAT THE INVESTMENT WAS MADE BY THE ASSESS EE BECAUSE HE HAD INTRODUCED A BANK ACCOUNTS OF THOSE PERSONS, HO WEVER, MERELY BECAUSE THOSE ACCOUNTS WERE INTRODUCED BY THE ASSES SEE IT WAS NOT TO BE PRESUMED THAT THOSE WERE BENAMIDARS OF THE AS SESSEE. THE LEARNED CIT(A) HAD MADE AN ELABORATE DISCUSSION, RE LEVANT PORTIONS ARE REPRODUCED BELOW: BRIEFLY SPEAKING, THE APPELLANT VIDE ABOVE SUBMISS IONS HAS ARGUED THAT THE IMPUGNED ADDITION OF RS.35,55,500/- ON ACC OUNT OF ALLEGED INCOME FROM PARTH SHOPS & FLATS CO-OP. HSG. SOCIETY LTD., HAS BEEN MADE BY THE A.O. MERELY ON SURMISES AND CONJECTURES AS WELL AS ASSUMPTION NS DISREGARDING THE FACTS AND EVIDENCES PLACED ON RECORD. IT IS RESPECTFULLY SUBMITTED BY THE APPELLANT THAT HE HAS NOTHING WITH THE AFFAIRS OF PARTH SHOPS & FLATS CO-OP. SOCIETY L TD. WHICH HAS PAID RS.15,55,500/- AND RS.20,00,000/- TO SHRI PARESH RA TILAL MODI AND K. A. CORPORATION AS STATED BY THE A.O. IT IS ARGUED THAT BOTH THE SAID MENTIONED PERSONS WERE KNOWN TO THE APPELLANT AND H ENCE WERE INTRODUCED BY HIM TO THE BANK TO FACILITATE THEM FO R OPENING THEIR ACCOUNTS. SHRI PARESH MODI WAS APPELLANTS NEIGHBOU R IN THE COMPLEX PARTH EMPIRE AND HENCE WAS KNOWN TO HIM. THE PROPRI ETOR OF K.A. CORPORATION SHRI VISHNUBHAI DESAI BEING THE CONTRAC TOR OF THE SAID BUILDING WAS ALSO KNOWN TO THE APPELLANT. IT IS SUB MITTED THAT APART FROM INTRODUCING THE SAID PERSONS TO THE BANK, THE APPELLANT HAD NO FURTHER RELATION WITH THEM OR THEIR BUSINESS AND TH AT MERELY BECAUSE THE APPELLANT HAD INTRODUCED THEM TO THE BANK ONLY TO FACILITATE THEM IN OPENING THEIR BANK ACCOUNTS AND THEY ARE NOT APP ROACHABLE BY THE DEPARTMENT, IT CANNOT BE CONSTRUED THAT THE SAID PE RSONS ARE BENAMIS OF THE APPELLANT IN ABSENCE OF ANY EVIDENCE IN SUPP ORT THEREOF. THE APPELLANT STRONGLY SUBMITS THAT HE HAS NEITHER OPER ATED THE SAID BANK ACCOUNTS NOR HAVE ANY KNOWLEDGE ABOUT THE TRANSACTI ONS THEREIN ENTERED INTO BY THE ACCOUNT HOLDERS. THE SAID ALLEG ATION AND THE ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 12 - CONCLUSION DRAWN THEREFROM FROM IS THUS BASED SOLEL Y ON PERSONAL ASSUMPTIONS AND HENCE IS DEVOID OF MERITS. THE A.O. HAS MERELY INDULGED IN SURMISES AND CONJECTURES SOLELY BASED O N THE FACT THAT THE SAID PERSONS WERE INTRODUCED BY THE APPELLANT TO TH E BANK. IT IS CONTENDED THAT MERELY BECAUSE THE APPELLANT INTRODU CED THE SAID PERSONS WHO WERE MADE PAYMENTS BY THE SOCIETY, THE SAID PERSONS COULD NEITHER BE TREATED AS BENAMIDARS OF THE APPEL LANTS NOR THE SAID PAYMENTS COULD NOT BE TREATED AS INCOME OF THE APPE LLANT BY ANY STRETCH OF IMAGINATION AND SUCH A CONCLUSION IS A H IGHLY ABSURD AND ILLOGICAL CONCLUSION NOT SUPPORTED BY ANY INDEPENDE NT FACTS OR EVIDENCES. THE OBSERVATION OF THE A.O. THAT SINCE FATHER AND BROTHER OF THE APPELLANT WERE THE MAIN PERSONS CONTROLLING THE AFFAIRS OF THE SOCIETY, THE APPELLANT ALSO MANAGED THE AFFAIRS OF THE SOCIETY IS NOT ONLY A WILD IMAGINATION AND ASSUMPTION ON PART OF T HE A.O. BUT A TOTALLY INCORRECT FACT.. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE PERUSED THE FACTS AND EVIDENCES FURNISHED ON RECORD BY THE APPE LLANT AND RELIED UPON BY THE A. O. ON PERUSAL OF THE SAME, IT IS SEE N THAT THE ADDITION HAS BEEN MADE WHILE HEAVILY RELYING UPON THE FACT T HAT THE APPELLANT HAD INTRODUCED THE TWO PERSONS TO WHOM PAYMENT HAS BEEN MADE BY PARTH SHOPS & FLATS CO-OP. SOCIETY LTD., WHOSE CHAI RMAN WAS BROTHER OF THE APPELLANT I.E. SHRI RAMESH J. DESAI. I FIND THAT IT IS NOT THE CASE OF THE A.O. THAT THE APPELLANT IS AN OFFIC E BEARER OF THE SAID SOCIETY EMPOWERING HIM TO MANAGE THE AFFAIRS OF THE SAID SOCIETY. THIS BEING THE CASE, IT IS SURPRISING AS TO HOW THE A.O. COULD CONCLUDE ON MERE ASSUMPTIONS THAT THE APPELLANT HAD ANY KIND OF ACCESS TO THE AFFAIRS OF THE SOCIETY IN ABSENCE OF ANY CONCRETE E VIDENCE. THUS, WHEN IT IS NOT ESTABLISHED BEYOND REASONABLE DOUBT THAT THE APPELLANT HAD MANAGED THE AFFAIRS OF THE SAID SOCIETY THE A.O'S S TAND OF TREATING THE PAYMENTS MADE BY THE SOCIETY TO TWO PERSONS. SO FAR AS PAYMENT OF RS.20,00,000/- TO M/S. K.A. CORPORATION IS CONCERNE D, THE APPELLANT HAS PLACED BEFORE ME A COPY OF THE BANK STATEMENT O F MEHSANA SAHKARI NAGRIK BANK LTD. FROM THE PERUSAL OF WHICH IT IS CLEAR THAT PAYMENT HAS BEEN MADE BY THE PARTH SHOPS & FLATS CO -OP. SOCIETY LTD. BY CHEQUE NO.30995 WHICH HAS BEEN DEBITED IN T HE BANK STATEMENT ON 22-03-2001 FOR AN AMOUNT OF RS.20,00,0 00/-. THE ONLY GROUND IN WHICH ADDITION HAS BEEN MADE BY THE A.O. IS THAT NO WORK HAS BEEN COMPLETED TILL DATE. HOWEVER, I HAVE ALSO CAREFULLY GONE THROUGH THE OBSERVATION OF THE A.O. IN HIS SHOW CAU SE NOTICE DATED 10- 3-2006 WHICH HAS BEEN REPRODUCED BY HIM IN PARA 4.2 OF THE ASSESSMENT ORDER UNDER:- IN THIS CASE ALSO THE FACT IS THAT NO CONSTRUCTION AND BUILDING DEVELOPMENT ACTIVITY HAS BEEN CARRIED OUT IN THE CL AIMED FINANCIAL YEAR. ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 13 - FROM WHICH IT IS CLEAR THE A.O. IS REFERRING TO THE FACT THAT NO CONSTRUCTION HAS BEEN CARRIED OUT IN THE RELEVANT F INANCIAL YEAR 2000- 01. THE PAYMENT HAS BEEN MADE BY THE SOCIETY ON 22- 03-2001 TO M/S. K. A. CORPORATION AND IT IS AN UNDISPUTED FACT THAT THE WORK OF THE SOCIETY WAS NOT COMPLETE AS ADMITTED BY THE A.O. HI MSELF. THEREFORE, HAVING MADE PAYMENT ON 22-3-2001 AND THEREFORE, THE OBSERVATION OF THE A.O. THAT CONSTRUCTION WAS NOT COMPLETE WITHIN THE FINANCIAL YEAR IS IRRELEVANT. MOREOVER, THERE IS A CLEAR CUT ADMIS SION BY THE SOCIETY IN THEIR MINUTES BOOK THAT THE CONSTRUCTION HAS BEEN C OMPLETED BY THE SAID M/S. K. A. CORPORATION. VARIOUS BOOKS OF ACCOU NTS OF THE PARTH SHOPS & FLATS CO-OP. SOCIETY LTD. HAS BEEN PRODUCED BEFORE THE A.O. DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS I N CASE OF THE SOCIETY AND NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE A.O. WHEREAS IN THE MINUTES OF THE MEETING OF THE SOCIETY DATED 25-3-1997 THE RESOLUTION PERTAINING TO THE CANCELLATION OF THE EA RLIER DEVELOPMENT AGREEMENT ETC. HAS BEEN DISCUSSED. THIS BEING THE F ACT IF THE PAYMENT IS MADE BY THE SOCIETY TO A PERSON FOR COMPLETING T HE WORK AND HAVING RECORDED SATISFACTION BY THE SOCIETY ABOUT HAVING C OMPLETED THE WORK BY M/S. K. A. CORPORATION, THE OBSERVATION OF THE A .O. THAT WORK WAS NOT COMPLETED TILL DATE SEEMS TO BE CONTRARY TO THE FACTS AS AVAILABLE ON THE RECORDS OF THE SOCIETY. MOREOVER, DURING THE COURSE OF SEARCH NO INCRIMINATING DOCUMENTS OR ANY PAPER PERTAINING TO M/S. K. A. CORPORATION WAS FOUND FROM THE POSSESSION OF THE AP PELLANT. THEREFORE, FOR MAKING PAYMENT BY THE SOCIETY TO M/S . K. A. CORPORATION FOR COMPLETING THE UNFINISHED WORK OF T HE SCHEME IN THE SUBSEQUENT YEAR FOR WHICH BILLS ARE RAISED BY K. A. CORPORATION AND HAVING RECORDED SATISFACTION BY THE SOCIETY FOR COM PLETION OF THE WORK, THE ADDITION MADE IN THE HANDS OF THE APPELLANT IS IMPROPER WHEN THE SAID M/S. K. A. CORPORATION ACCOUNT WAS NOT FOUND T O BE OPERATED BY THE APPELLANT AND THERE BEING NO RELATIONSHIP BETWE EN THE APPELLANT AND M/S.K. A. CORPORATION. THIS INFERENCE IS ALSO B ASED ON THE FACT THAT A. O. HIMSELF HAS COMPLETED THE SCRUTINY ASSES SMENT U/S. 158BD IN CASE OF PARTH SHOPS & FLATS CO-OP. SOCIETY LTD., IF AT ALL ANY IRREGULARITY IN THE PAYMENT MADE BY THE PARTH SHOPS AND FLATS CO-OP. SOCIETY LTD., THE SAME SHOULD HAVE BEEN POINTED OUT IN THE BLOCK PERIOD WHEREIN NO SUCH INFERENCE HAS BEEN DRAWN.FOR THISL AM RELYING UPON THE JUDGMENT OF THE HON'LE GUJARAT HIGH COURT IN THE CASE OF N. R. PAPER & BOARD 234 ITR 733, AS THE ADDITION IS BA SED ON THE LOOSE PAPERS FOUND AT THE TIME OF SEARCH IN THE CASE OF T HE APPELLANT AND BLOCK ASSESSMENT U/S. 15 SBC HAS ALSO BEEN COMPLETE D BY THE A.O. IN APPELLANT'S CASE ON 31-10-2002. MOREOVER, IF AT ALL ANY IRREGULARITY IN THE PAYMENT MADE BY THE PARTH SHOPS & FLATS CO-OP. SOCIETY LTD TO M/S. K. A. CORPORATION, A.O. IS AT LIBERTY TO TAKE NECESSARY ACTION IN THESE TWO CASES BUT ADDITION IN THE HANDS OF THE AP PELLANT FOR THE IMPUGNED TRANSACTION BETWEEN THE TWO IS NOT JUSTIFI ED AND THEREFORE, DELETED. ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 14 - SIMILARLY, REGARDING PAYMENT OF RS.15,55,000/- TO S HRI PARESH RATILAL MODI ON 25-01-2001& 15-12-2000 BY PARTH SHOPS & FLA TS CO-OP. SOCIETY LTD., IT IS AN UNDISPUTED FACT THAT ON31-03 -2000 IN THE BOOKS OF THE SOCIETY NECESSARY JOURNAL ENTRY HAS BEEN PASSED CREDITING THE ACCOUNT OF SHRI PARESH RATILAL MODI FOR THE PAYMENT MADE BY HIM TO THE EARLIER DEVELOPER AND DEBITING THE SAME TO THE ACCOUNT OF PARTH HOUSING & ESTATE DEVELOPERS LTD., ON ACCOUNT OF AMO UNT COLLECTED FROM THE MEMBERS. THE BLOCK ASSESSMENT OF PARTH SHI OPS & FLATS CO- OP. SOCIETY LTD., HAS BEEN COMPLETED ON 30-11-2005 FOR THE BLOCK PERIOD 1-4-1999 TO 20-10-2000 WHICH INTERALIA INCLU DES THE SAID CREDIT ENTRY OF RS. 14,44,500/- IN HE NAME OF SHRI PARESH RATILAL MODI IN THE BOOKS OF PARTH SHOPS & FLATS CO-OP. SOCIETY LTD. ON 30-10-2000, WHICH HAS BEEN ACCEPTED BY THE A.O. IN THE SAID BLO CK ASSESSMENT. HAVING ACCEPTED THE SAID FACT, THE REPAYMENT CANNOT BE CONSIDERED AS THE DIVERSION OF THE FUNDS. THE APPELLANT HAS CATEG ORICALLY EXPLAINED THE CIRCUMSTANCES IN WHICH THE SAID PERSONS WERE KN OWN TO HIM AND HENCE THE REASON FOR INTRODUCING THEM TO THE BANK. I AGREE WITH THE CONTENTION OF THE A.R. THAT MERELY BECAUSE THEY HAV E BEEN INTRODUCED TO THE BANK BY THE APPELLANT, THEY CANNOT BE HELD T O BE BENAMIDARS OF THE APPELLANT. HOWEVER, IT IS AN ADMITTED FACT THAT THE BANK ACCOUNT WAS INTRODUCED BY THE APPELLANT AND AVAILABILITY OF ITR AT THE RESIDENCE OF THE APPELLANT WAS FOUND DURING THE COU RSE OF SEARCH IN THE CASE OF THE APPELLANT. FOR THIS I AM RELYING UPON T HE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF N.R. PAPE R & BOARD 234 ITR 733, AS THE ADDITION IS BASED ON THE LOOSE PAPE RS FOUND AT THE TIME OF SEARCH IN THE CASE OF THE APPELLANT AND BLOCK AS SESSMENT U/S.158BC HAS ALSO BEEN COMPLETED BY THE A.O. IN AP PELLANT'S CASE ON DT. 31-10-2002. IT IS EQUALLY IMPORTANT TO NOTE THAT IN THE BLOCK A SSESSMENT ORDER PASSED ON 31-11-2005 U/S. 158BD R.W.S. 158 BC OF TH E ACT IN CASE OF PARTH SHOPS & FLATS CO-OP SOCIETY LTD., NO ADVERSE FINDING HAS BEEN GIVEN IN RESPECT OF THE WITHDRAWALS MADE BY THE SAI D PARTIES. IT HAS ALSO NOT BEEN HELD BY THE DEPARTMENT THAT PARTH SHO PS & FLATS CO-OP. SOCIETY LTD., IS A BENAMI OF THE APPELLANT. ACCORDI NGLY, I AGREE WITH THE APPELLANT THAT NO ADVERSE INFERENCE IS WARRANTE D ON THE SAID ISSUE. A COPY OF ABOVE MENTIONED ORDER IS PLACED ON RECORD BY THE APPELLANT. AS REGARDS PAYMENT OF RS. 15,55,500/- TO SHRI PARES H RATILAL MODI, THE PERUSAL OF DOCUMENTS FURNISHED DURING THE COURS E OF APPEAL PRIMA FACIE ESTABLISHED THAT SHRI PARESH MODI HAD BOOKED SHOP NO. 6 AT GROUND FLOOR OF THE PARTH EMPIRE, MANINAGAR I.E. TH E SCHEME OF PARTH SHOPS & FLATS CO-OP. SOCIETY LTD. AND HAD PAID RS. 14,44,500/- AS BOOKING AMOUNT ON 31-03-2000. THE CASH BOOK OF PART H SHOPS & FLATS CO-OP. SOCIETY LTD., DULY REFLECTS THE RECEIPT OF B OOKING AMOUNT RECEIVED FROM VARIOUS PARTIES AND SHOWN UNDER THE H EAD LAND AND CONSTRUCTION CONTRIBUTION WHICH INTERALIA INCLUDES THE NAME OF SHRI PARESH MODI. THAT SUBSEQUENTLY THE SAID BOOKING WAS CANCELLED BY SHRI PARESH MODI IN F.Y. 2000-01 AND THE SAID PREMI SES WAS ALLOTTED ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 15 - TO B2C INDIA LTD. ON CANCELLATION OF THE BOOKING BY SHRI PARESH MODI, HE WAS RETURNED THE BOOKING AMOUNT OF RS. 14,44,500 /- ALONG WITH PREMIUM OF RS. 1,11,000/- ON 25-01-2001 BY MAKING P AYMENT OFRS. 15,00,000/- ON 25-01-2001 AND RS.55,500/- ON 15-12- 2000 AS IT CLEARLY APPEARS IN THE CASH BOOK WHICH SHOWS PAYMEN T OF MONEY TO SHRI PARESH RATILAL MODI. A COPY OF THE SAID CASH B OOK EXTRACT IS ALSO PLACED ON RECORD. THAT SINCE THE BOOKING AMOUNT REC EIVED DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2000-01 WAS RETURNED TO SHRI PARESH MODI DURING THE YEAR UNDER CONSIDERATION I.E. A.Y. 2001-02, HIS NAME IS NOT APPEARING IN THE LAND AND CONSTRUCTION CONTR IBUTION AS APPEARING IN THE BALANCE SHEET OF SUBSEQUENT YEAR I .E. AS AT 31-03- 2002 AS EVIDENCE FROM THE COPY OF THE SAID BALANCE SHEET FILED IN SUPPORT OF THE SAID CONTENTION. IN VIEW OF THE ABOV E FACTS SINCE THE PAYMENT TO SHRI PARESH MODI DURING THE YEAR UNDER C ONSIDERATION BEING MERELY RETUNING OF HIS BOOKING AMOUNT RECEIVE D EARLIER, I AGREE WITH THE CONTENTION OF THE APPELLANT THAT TREATING THE REPAYMENT OF THE BOOKING AMOUNT OF RS. 14,44,500/- CANNOT BE CONSIDE RED AS DIVERSION OF FUNDS AS EVEN IF IN PRINCIPLE A. O'S OBSERVATION IS ACCEPTED THAT THE SAID PERSON'S INCOME TAX RETURN FOUND DURING THE CO URSE OF SEARCH FROM THE RESIDENCE OF THE APPELLANT, AT THE MOST TH E PREMIUM PAID BY THE SOCIETY TO HIM ON CANCELLATION OF BOOKING OF RS . 1,11,000/- CAN BE CONSIDERED AS THE PROFIT WHICH HAS BEEN DIVERTED BY THE SOCIETY AND THUS, CAN BE ADDED TO THE TOTAL INCOME OF THE APPEL LANT AND NOT THE ENTIRE AMOUNT. IT IS ALSO CLARIFIED THAT A.O. IN TH E ASSESSMENT ORDER HAS WRONGLY MENTIONED THAT PAYMENT OF RS.L5,55,000/-TO SHRI PARESH RATILAL MODI HAS BEEN PAID BY THE SOCIETY FOR COMPL ETION OF THE UNFINISHED CONSTRUCTION WHEREAS THIS PAYMENT IS NOT FOR COMPLETION OF THE CONSTRUCTION WORK BUT FOR RETURN OF THE BOOKING AMOUNT ON CANCELLATION OF THE SAME ALONG WITH PREMIUM OF RS. 1,11,000/-. THEREFORE, OUT OF THE TOTAL ADDITION MADE BY THE AS SESSING OFFICER OF RS.35,55,500/- ADDITION OF RS. 1,11,0007- IS CONFIR MED AND ADDITION OF RS.34,44,500/- IS DELETED. 9. HEARD BOTH THE SIDES. THE ASSESSEE HAD GIVEN THE REASONS FOR INTRODUCING THE BANK ACCOUNT OF THOSE PERSONS WHICH WERE DULY APPRECIATED BY LEARNED CIT(A). FURTHER, IT WAS ALSO NOTED BY LEARNED CIT(A) THAT THOSE INVESTMENTS HAVE ACTUALLY BEEN MADE RESPECTIVELY BY THOSE PERSONS. IN ONE OF THE CASE, I.E., PARESH MODI, THE AMOUNT WAS ALSO RETURNED BACK IN THE SUBSEQUENT YEAR. THERE WAS A DISCUSSION OF PAYMENT OF PREMIUM OF RS.1,11,0 00/- IN THE ORDER OF LEARNED CIT(A) WHICH WAS CONFIRMED IN THAT ORDER. ITA NO.4043/AHD/2007 ACIT, MEHSANA CIRCLE MEHSANA VS. SHRI RAJESH J. DES AI - 16 - CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES AND T HE DISCUSSION MADE IN THE ORDER OF LEARNED CIT(A), WE ARE ALSO OF THE VIEW THAT THE ADDITION WAS WITHOUT ANY LEGAL BASIS; HENCE, TH E RELIEF GRANTED BY LEARNED CIT(A) IS HEREBY CONFIRMED AND THIS GROU ND OF THE REVENUE IS ALSO DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 17/12/2013 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 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD