Smt. Shardaben K.Mody, Valsad V. The Income tax Officer, Ward-4, Valsad

ITA 4086/AHD/2008

• Counselvise Citation: 408620514 RSA 2008
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 19-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D V SINGH
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure; Reason to believe
• Section: 143(3); 133A; 147; 131; 69; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI A. MOHAN ALANKAMONY, AM AND SHRI KUL B HARAT, JM) ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 A. Y.: 1999-2000, 2000-01 AND 2005-06 SMT. SHARDABEN K. MODY, GANESH HALL, NANI MEHATWAD, NR. KASTURBA HOSPITAL, VALSAD P. A. NO. ABGPM 6227 Q VS THE INCOME TAX OFFICER, WARD -4, VALSAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJESH UPADHYAY, AR RESPONDENT BY SHRI D. V. SINGH, DR DATE OF HEARING: 04-06-2012 DATE OF PRONOUNCEMENT: -07-2012 O R D E R PER A. MOHAN ALANKAMONY: THESE THREE APPEALS IN ITA NO.3610/AHD/2007, 3611/AHD/2007 AND 4086/AHD/2008 A RE FILED BY THE ASSESSEE AGGRIEVED BY THE THREE SEPARATE ORDERS OF THE LEARNED CIT(A) IN APPEAL NO.CIT(A) VLS/467/06-07, IT(A) VLS /466/06-07 DATED 12-06-2007 FOR THE ASSESSMENT YEARS 1999-2000 , 2000-01 PASSED U/S 144 AND 147 READ WITH SECTION 250 OF THE ACT, AND CIT(A) VLS/397/2007-08 DATED 26-08-2008 FOR THE ASSESSMENT YEAR 2005-06 PASSED U/S 143(3) READ WITH SECTION 250 OF THE ACT RESPECTIVELY. 2. THESE CASES WERE RECALLED VIDE ORDER DATED 13-04 -2012 BY ALLOWING THE ASSESSEES MISC. APPLICATIONS NO.196, 197 AND ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 2 203/2011 IN ITA NOS. 3610 & 3611/AHD/2007 AND 4086/ AHD/2008 FOR AY 1999-2000, 2000-01 AND 2005-06. 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ALL THE THREE APPEALS: AY: 1999-2000 THE ASSESSEE HAS RAISED FIVE GROUNDS WHEREIN GROUND S NO.1 AND 5 ARE GENERAL IN NATURE AND REQUIRE NO ADJUDICATION. THE OTHER GROUNDS ARE REPRODUCED HEREIN BELOW: 1. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS TO PASS ORDER U/S 147 OF THE ACT WITHOUT POINTING ANY LAPSE S ON THE PART OF THE APPELLANT. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHELD ADDITIONS MADE BY THE LEARNED AO FOR RS.12,00,000/- UNDER THE HEAD UNEXPLAINED ADVANCES FROM CUSTOMERS. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHOLD ADDITIONS MADE BY THE LEARNED AO FOR RS.10,70,592/- AS UNEXPLAINED CREDITS. AY:2000-01 THE ASSESSEE HAS RAISED FOUR GROUNDS IN HER APPEAL WHEREIN GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT SURVIVE FOR ADJUDICATION. GROUND NO.4 IS RELATED TO GROUND NO.3. THUS, THE SU RVIVING TWO GROUNDS ARE REPRODUCED HEREIN BELOW: ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 3 1. THE LEARNED AO HAS ERRED IN LAW AND ON FACTS TO PASS ORDER U/S 147 OF THE ACT WITHOUT POINTING ANY LAPSES ON T HE PART OF THE APPELLANT. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS TO UPHOLD ADDITIONS MADE BY THE LEARNED AO FOR RS.3,29,410/- AS UNEXPLAINED CREDITS. AY: 2005-06 THE ASSESSEE HAS RAISED FIVE GROUNDS IN HER APPEAL. THE SAME ARE REPRODUCED HEREIN BELOW: 1. LEARNED A.O. HAS ERRED IN LAW AND ON FACTS TO MA KE ADDITION CONTRARY TO THE BOARDS CIRCULAR TO THE EF FECT THAT NO ASSESSMENT SHOULD BE MADE ON THE BASIS OF DISCLO SURE OF INCOME WITHOUT FINDING ANY MONEY, STOCK OR OTHER VALUABLE FOUND TO BE INVESTED FROM SUCH DISCLOSED I NCOME DURING SURVEY OR SEARCH. LR. CIT(APPLS,), VALSAD HA S ALSO ERRED IN SUSTAINING THE ORDER OF THE ITO. 2. LEARNED A. O. HAS ERRED IN LAW AND ON FACTS TO A DD AND AMOUNT OF RS.22,70,592/- BEING GENUINE BOOKING ADVANCES RECEIVED FROM PURCHASES OF FLATS & SHOPS A ND SUNDRY CREDITORS OF EARLIER YEARS, WITHOUT BRINGING ON RECORD THAT THEY ARE THE TRANSACTIONS MADE DURING T HE YEAR. LR. CIT(APPLS.), VALSAD HAS ALSO ERRED IN SUS TAINING THE ORDER OF THE A. O. 3. THE LEARNED A. O. HAS ERRED IN LAW AND ON FACTS TO ADD RS.22,70,592/- IN THE YEAR UNDER APPEAL AS THE SAID SUM ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 4 IS ALREADY TAXED IN A. Y. 1999-2000 ON SUBSTANTIAL BASIS WHICH MAY NOT PERMIT TO ADD SECOND TIME IN THIS YEA R. LR. CIT(APPLS.), VALSAD HAS ALSO ERRED IN SUSTAINING TH E ORDER OF THE A.O. 4. LEARNED A. O. HAS ERRED IN LAW AND ON FACTS TO A DD AN AMOUNT OF RS.10,00,000/- BEING EXPENSES MADE BY THE APPELLANT IN GANESH HALL, WITHOUT DISCHARGING ONUS U/S 69 C OF THE ACT. LR. CIT(APPLS.), VALSAD HAS ALSO ERRE D IN SUSTAINING THE ADDITION MADE BY THE A. O. 5. LEARNED A. O. HAS ERRED IN LAW AND ON FACTS TO A DD RS.3,29,408/- IN THE TOTAL INCOME OF THE APPELLANT, WITHOUT GIVING BREAKUP OR BIFURCATION OF SUCH ADDITION. LR. CIT (APPLS.), VALSAD HAS ALSO ERRED IN SUSTAINING THE A DDITION MADE BY THE A.O. GROUND NO.1 OF AY 1999-2000 AND 2000-01 3. THE ASSESSEE IS AN INDIVIDUAL, IN RESPONSE TO NO TICE U/S 148 OF THE IT ACT FOR THE AY 1999-2000 AND 2000-01 REQUEST ED THE LEARNED AO TO TREAT THE RETURN FILED ON 21-05-2000 AND 12-1 0-2000 TO BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE U /S 148 OF THE ACT VIDE LETTER DATED 9-11-2006. BOTH THE RETURNS WERE TAKEN ON RECORD. SUBSEQUENTLY, NOTICE U/S 143(2) OF THE ACT WAS ISSU ED ON 10-11-2006 FIXING THE DATE OF HEARING ON 20-11-2006. AS PER THE REQUEST OF THE ASSESSEE REASONS RECORDED FOR REOPENING WERE GIVEN. SINCE, THE ASSESSEE HAD NOT GIVEN THE COMPLETE DETAILS OF HER BUSINESS ACTIVITIES DURING THE PREVIOUS YEAR, THE LEARNED AO FINALIZED THE ASSESSMENT ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 5 BASED ON THE DETAILS AVAILABLE ON RECORD. THE ENTIR E ASSESSMENT PROCEEDINGS U/S 148 OF THE ACT WAS INSTITUTED AFTER MATH OF THE SURVEY ACTION U/S 133A OF THE ACT CARRIED OUT IN THE BUSIN ESS PREMISES AT GANESH HALL, NEAR KASTURBA HOSPITAL, VALSAD ON 3-1- 2006. SEVERAL INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED U/ S 131(3) OF THE ACT DURING THE COURSE OF SURVEY PROCEEDINGS. DURING THE COURSE OF THE SURVEY PROCEEDINGS IT WAS STATED THAT FOUR PROJECTS VIZ. BIMAL COMPLEX, BHARUCHA COMPLEX, SIDDHI VINAYAK A & B A ND TRILOKNATH COMPLEX WERE CONSTRUCTED. FURTHER, IT WAS FOUND FRO M THE DOCUMENTS IMPOUNDED U/S 131 (1) OF THE ACT AND FROM THE STATE MENT OF SHRI TARUNBHAI MODY AND FROM THE STATEMENT OF HIS PARTNE R SHRI SHIVPAL J. MISTRY THAT THERE WERE SEVERAL SHOPS AND FLATS WHI CH WERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. IN THE CASE OF TRILO KNATH COMPLEX IN WHICH THE ASSESSEE IS A PARTNER, THE RETURNS OF INC OME HAVE NOT BEEN FILED FOR THE LAST FIVE YEARS ALTHOUGH THEY WERE SE LLING FLATS AND SHOPS YEAR AFTER YEAR AS PER THE INFORMATION GATHERED ORA LLY. THERE WAS ALSO A SALEABLE LAND IN THE NAME OF TRILOKNATH COMPLEX. THE ASSESSEE WAS ALSO A PARTNER IN THE FIRM M/S. ANUKUL BUILDERS , VALSAD WHICH HAD CONSTRUCTED AN APARTMENT IN THE NAME OF CITY PALACE APARTMENT, VALSAD AND NO RETURN OF INCOME WAS FILED BY M/S. AN UKUL BUILDERS. 4. BEFORE THE LEARNED CIT(A) THE ASSESSEE CHALLENGE D THE RE- OPENING OF THE ASSESSMENT U/S 147 AND 148 OF THE AC T FOR AY 1999- 2000 AND 2000-01 WITH THE FOLLOWING CONTENTIONS: (1) THE ASSESSMENT WAS REOPENED U/S 147 OF THE ACT BY ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 3-2-200 6. HOWEVER, REASONS RECORDED FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT WAS ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 6 FURNISHED TO THE ASSESSEE ON 6-11-2006. THUS, THE N OTICE U/S 148 OF THE ACT WAS ISSUED AFTER FIVE YEARS AND SEVE N MONTHS PERIOD WHICH IS TIME BARRED AS PER LAW. (2) IT APPEARS THAT THE REASONS WERE RECORDED ON 3- 2-2006 AND THE NECESSARY PERMISSION WAS ALSO OBTAINED FROM ADDITIONAL CIT, VALSAD ON 3-2-2006. THE STATEMENT O F DHANSUKHBHAI RANGINDAS GERAGWALA WAS ALSO RECORDED ON 3-2-2006. HOWEVER, NO STATEMENT OF JAGDISHBHAI POON AMJI SANDESHA WAS RECORDED THOUGH LEARNED AO HAS STATED SO IN HIS REASONING STATEMENT. THEREFORE, IT IS APPARENT THAT THE LEARNED AO HAD NEITHER SATISFACTION OF ESCAPEMENT O F INCOME NOR HAS RECORDED REASONS ON THAT REGARD PRIOR TO IS SUANCE OF NOTICE U/S 148 OF THE ACT AND, THEREFORE, THE NOTIC E IS REQUIRED TO BE QUASHED. (3) THE LEARNED AO HAS RECORDED COMMON REASONS FOR THE TWO ASSESSEES (1) SHRI TARUN K. MODY AND (2) THE AP PELLANT. THE REASONS RECORDED ARE GENERAL IN NATURE AND NOT SPECIFIC FOR ANY PARTICULAR BUSINESS. THE APPELLANT IS PROPRIETO R OF M/S. GUNJAN CORPORATION WHICH HAD EXECUTED THE PROJECT O F VIMAL COMPLEX AND GANESH HALL. M/S. TRILOK CORPORATION VI Z. THE PARTNERSHIP FIRM HAD COMPLETED THE PROJECT OF TRILO KNATH COMPLEX. BHARUCHA COMPLEX AND SIDDHIVINASYAK A & B ARE PROJECTS EXECUTED BY SHRI TARUN K. MODY. THEREFORE, COMMON REASON RECORDED FOR THE ASSESSEE AND SHRI TARUN K. MODY BEING NOT SPECIFIC ARE ARBITRARY AND HENCE, BAD IN LAW. ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 7 (4) THERE WAS NO MATERIAL BEFORE THE AO IN CONNECTI ON WITH THE ESCAPEMENT OF INCOME PERTAINING TO THE ASSESSEE . NO SUCH INCRIMINATING DOCUMENT WAS FOUND AND, THEREFORE, PR OCEEDINGS U/S 147 OF THE ACT IS TOTALLY ILLEGAL AND LIABLE TO BE QUASHED. 5. HOWEVER, THE LEARNED CIT(A) DISMISSED THE GROUND OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS IN BOTH TH E APPEALS AS UNDER: 4.1 FROM THE FACTS OF THE CASE AS LAID OUT BEFORE ME, THE AO HAS ISSUED NOTICE U/S. 148 AFTER RECODING REASONS A ND ON THE BASIS OF MATERIAL IMPOUNDED DURING THE COURSE OF SU RVEY ACTION AT THE BUSINESS PREMISES OF THE APPELLANT. IN 3 RD PARA OF THE ASSESSMENT ORDER, THE AO HAS MADE A MENTION THAT TH E COPY OF THE REASONS RECORDED WAS PROVIDED TO THE APPELLANT AND THEREFORE, THE AO HAS ACTED WITHIN THE SPIRIT OF TH E PROVISIONS OF SECTION 147 AND 148. 4.2 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT CONTENDED THAT THERE WAS NO MATERIALS IN THE POSSES SION OF THE AO IN CONNECTION WITH ESCAPEMENT OF INCOME AND THE AO HAS RE-OPENED THE ASSESSMENT BASED ON A STATEMENT OF TH E THIRD PARTY AND THEREFORE, ACCORDING TO THE AR, THE NOTIC E ISSUED U/S. 148 REQUIRED TO BE QUASHED. THE AR FURTHER ARGUED T HAT COPY OF THE REASON RECORDED WAS NOT ISSUED BY THE AO PRIOR TO FINALIZING THE ASSESSMENT AND THEREFORE, THE ASSESSMENT IS INV ALID. THE AO HAS OBSERVED THAT NOTICE U/S. 148 WAS ISSUED AFTER RECORDING THE REASONS FOR THE SAME AND THE AO HAD A DEQUATE MATERIAL ON THE RECORD IN THE FORM INCRIMINATING MA TERIALS IMPOUNDED DURING THE COURSE OF SURVEY ACTION CARRIE D OUT AT THE BUSINESS PREMISES OF THE APPELLANT. THE AO DID SUPP LY COPY OF THE REASONS RECORDED TO THE APPELLANT AS THE AO HAS MENTIONED THE FACTS ON THE FACE OF THE ASSESSMENT ORDER I.E. IN 3 RD PARA OF THE ORDER. EVEN OTHERWISE, THE POWERS OF THE AO ARE AMPLITUDE. IT HAS BEEN HELD IN CASE OF RAYMOND WOOLEN MILLS LT D. V/S ITO REPORTED IN 236 ITR 34 (SC) THAT IN DETERMINING AS TO WHETHER COMMENCEMENT OF RE-OPENING ASSESSMENT ARE VALID, IT HAS ONLY ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 8 TO BE SEEN WHETHER THREE WAS PRIMA FACIE SOME MATER IAL ON THE BASIS OF WHICH DEPARTMENT COULD RE-OPEN THE CASE. I N VIEW OF THE AFORESAID FACTUAL AND LEGAL POSITION, THE APPEL LANTS CONTENTION THAT AO HAS ERRED IN RE-OPENING THE ASSE SSMENT HAS NO MERIT IN IT. THE APPELLANTS GROUND NO.1 & 2 ARE DISMISSED. 6. AT THE BEGINNING OF THE HEARING THE LEARNED AR P OINTED OUT THAT IN THE RELATED CASE OF SHRI TARUN K. MODY IN ITA NO .3606, 3607, 3608 AND 3609/AHD/2007 FOR AYS 2000-01, 2002-03, 2003-04 AND 2004-05 THE TRIBUNAL VIDE ORDER DATED 11-06-2010 HAD QUASHE D THE REASSESSMENT FRAMED BY THE LEARNED AO ON 29-12-2006 AND SET ASIDE THE ORDER OF THE LEARNED CIT(A). THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE: 12. ON PERUSAL OF THE REASSESSMENT ORDER AS PASSED BY THE LEARNED ASSESSING OFFICER SHOWS THAT NO ADDITION WA S MADE IN RESPECT OF THE ISSUE WHICH WAS RECORDED FOR REOPENI NG OF THE ASSESSMENT. ON THE OTHER HAND REASSESSMENT WAS COMP LETED ONLY AFTER DISALLOWING 20% OF DIRECT AND INDIRECT E XPENSES WHICH WERE ALREADY DISCLOSED IN THE ORIGINAL RETURN FOR W ANT OF EVIDENCES. APART FROM MAKING THE ADDITION BY WAY OF DISALLOWANCES OUT OF DISCLOSED EXPENSES THE ONLY OT HER ADDITION MADE IN RE-ASSESSMENT WAS FOR THE ASSESSMENT YEAR 2 004-05 WHICH WAS RS.5 LACS ON ACCOUNT OF SECURITY DEPOSIT WITH GENEXT POWER INDIA LTD., FOR OBTAINING AGENCY BUSINESS. WE THUS, FIND THAT IN THE REASSESSMENT FRAMED, NO ASSESSMENT WAS MADE IN RESPECT OF WHICH THE LEARNED ASSESSING OFFICER RECO RDED HIS REASONS TO BELIEVE ABOUT INCOME ESCAPING ASSESSMENT . IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE IMPUGNED REASSESSMENT ORDER WAS NOT VALID AND BAD IN LAW. PR OVISIONS OF SECTION 147 READ AS UNDER: IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE TH AT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISI ONS OF SS. 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 9 ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPE D ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION . THUS, IT IS OBSERVED THAT LEARNED ASSESSING OFFICER CAN ASSESS OTHER INCOME WHICH ESCAPED ASSESSMENT AND WHICH WAS NOTICED BY HIM DURING THE COURSE OF REASSESSMENT ON LY ALONG WITH THE INCOME WHICH HAS ESCAPED ASSESSMENT FOR WH ICH REASON TO BELIEVE WAS FORMED AND RECORDED UNDER SEC TION 148(2) OF THE ACT. OUR ABOVE VIEW FINDS SUPPORT FRO M THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHRI RAM SINGH (2008 ) 306 ITR 343 (RAJ.). WE THEREFORE, SET ASIDE THE ORDER O F THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND QUASH THE REASSESSMENT FRAMED BY THE LEARNED ASSESSING OFFICE R ON 29.12.2006 IN ALL THE YEARS UNDER CONSIDERATIONS. T HUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED IN ALL THE YEARS UNDER CONSIDERATION. 7. THE LEARNED AR ALSO POINTED OUT THE DECISION REN DERED IN THE RELATED CASE OF M/S. TRILOKNATH CORPORATION IN ITA NO.3613, 3614 AND 3615/AHD/2007 FOR AYS 2000-01, 2002-03 AND 2003-04 WHEREIN IT WAS HELD AS FOLLOWS: 4. WE HAVE CAREFULLY CONSIDERED ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. T HE COPY OF THE REASONS RECORDED AS SUBMITTED BY THE ASSESSEE A T PAGE NO.2 OF THE PAPER BOOK IS AS UNDER: REASONS FOR ISSUE OF NOTICE U/S.148 OF THE I.T.ACT IN THE CASE OF M/S.TRILOLKNATH CORPORATION, MADANWAD, VALS AD. REG: M/S.TRILOKNATH CORPORATION, TRILOKNATH COMPLEX, MADANWAD, VALSAD A.Y.2000-01 THIS IS A PARTNERSHIP FIRM ENGAGED IN CONSTRUCTION BUSINESS. THERE ARE TWO PARTNERS VIZ. SHRI TARUN K. MODY AND SHRI ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 10 SHIVPAL J. MISTRY HAVING 50% SHARE ACH AS PER THE P ARTNERSHIP DEED. THEY HAVE CONSTRUCTED 18 FLATS AND 10 SHOPS IN TRILOKNATH COMPLEX IN A LAND PURCHASED AS PER THE P URCHASE DEED. RETURN OF INCOME WAS NOT FILED BY THE FIRM A LTHOUGH THERE ARE NUMBER OF UNSOLD SHOPS AND OPEN LAND. SURVEY ACTION U/S.133A OF THE I.T. ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF ONE OF THE PARTNERS SHRI TARUN MODY AT GANESH HALL, HALAR, VALSAD ON 3.1.2006. DURING THE COURSE OF THE SURVEY PROCEEDINGS STATEMENT U/S.133A/131 OF SH RI TARUN MODY WAS RECORDED IN WHICH HE HAS STATED THAT HE IS A PARTNER IN THE FIRM OF TRILOKNATH COMPLEX AND THERE ARE UNS OLD SHOPS AND LAND IN THE TRILOKNATH COMPLEX, MADANWAD, VALSA D. I HAVE, THEREFORE, REASONS TO BELIEVE THAT THE INCO ME OF THE ABOVE FIRM CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT TO THE EXTENT OF THE INVESTMENT VALUE OF UNSOLD SHOPS/FLAT S AND OPEN LAND FOR THE A.Y.2001-2002. I, THEREFORE, PROPOSE TO ASSESS/RE-ASSESS THE INCOM E OF THE ASSESSEE WHICH HAS ESCAPED ASSESSMENT FOR THE A.Y.2 000-01 BY ISSUING NOTICE U/S.148 OF THE I.T.ACT. SD/- MATHEW THOMAS K. ITO, WD.4, VALSAD DATE :06-02-2006. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OF FICER HAS RECORDED THE FINDING THAT THE RETURN OF INCOME WAS NOT FILED BY THE ASSESSEE-FIRM. THIS BASIC FINDING IS FACTUALLY INCORRECT BECAUSE AT PAGE NO.7 OF THE ASSESSEES PAPER BOOK, THE ASSESSEE HAS FURNISHED THE COPY OF THE ACKNOWLEDGEM ENT FOR FILING OF THE RETURN OF INCOME FOR A.Y.2000-2001. M OREOVER, THE ASSESSING OFFICER HAS RECORDED THE FINDING OF THE E SCAPEMENT OF INCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT FOR A.Y.2001- 2002. BUT THE ASSESSMENT IS REOPENED FOR ASSESSMEN T YEAR 2000-2001 AND NOT FOR ASSESSMENT YEAR 2001-2002. N O SPECIFIC FINDING OF THE ESCAPEMENT OF INCOME FOR A. Y.2000-2001 ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 11 IS RECORDED. THE ONLY FINDING RELEVANT TO THE A.Y. 2000-2001 IS THAT THE ASSESSEE DID NOT FILE THE RETURN OF INCOME WHICH IS ALSO FACTUALLY INCORRECT. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING TH E ASSESSMENT OF A.Y.2000-2001 UNDER SECTION 147 OF THE INCOME TA X ACT. ACCORDINGLY, THE NOTICE ISSUED FOR REOPENING OF THE ASSESSMENT UNDER SECTION 148 FOR A.Y.2000-2001 IS QUASHED AND CONSEQUENTIAL ASSESSMENT ORDER FOR A.Y.2000-2001 PA SSED IN PURSUANCE TO NOTICE U/S.148 IS ALSO QUASHED. 8. FURTHER THE LEARNED AR RELIED UPON THE DECISION IN THE CASE OF CIT-V, MUMBAI VS JET AIRWAYS INDIA LTD. OF THE HON BLE BOMBAY HIGH COURT REPORTED IN 195 TAXMAN 117 (2010) WHEREI N IT WAS HELD THAT AFTER INSERTION OF EXPLANATION (3) TO SECTION 147 BY FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1-4-1989, SECTION 147 HA S AN EFFECT THAT ASSESSING OFFICER HAS TO ASSESS OR REASSESS INCOME (SUCH INCOME) WHICH ESCAPED ASSESSMENT AND WHICH WAS BASIS OF FOR MATION OF BELIEF AND IF HE DOES SO, HE CAN ALSO ASSESS OR REA SSESS ANY OTHER INCOME WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE DURING COURSE OF PROCEEDINGS. FURTHER, IT WA S HELD IF AFTER ISSUING A NOTICE U/S 148, HE ACCEPTS CONTENTION OF ASSESSEE AND HOLDS THAT INCOME, OF WHICH HE HAD INITIALLY FORMED A REASON TO BELIEVE THAT IT HAD ESCAPED ASSESSMENT, HAS, AS A MATTER OF FACT, NOT ESCAPED ASSESSMENT, IT IS NOT OPEN TO HIM TO INDEPENDENTLY ASSESS SOME OTHER INCOME. 9. BEFORE US, THE LEARNED AR REITERATED WHAT WAS SA ID BEFORE THE REVENUE AND THE LEARNED DR SUPPORTED THE ORDERS OF THE REVENUE. ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 12 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS BEFORE US. THE ASSESSEES CASE FOR THE A SSESSMENT YEAR 1999-2000 AND 2000-01 WAS REOPENED U/S 148 OF THE A CT DUE TO FINDINGS OF CERTAIN INCRIMINATING DOCUMENTS DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133 OF THE ACT IN THE BUSINE SS PREMISES OF THE ASSESSEE AND HER ASSOCIATES AT GANESH HALL NEAR KAS TURBA HOSPITAL, VALSAD ON 03-01-2006. THE LEARNED AO HAS RECORDED T HE REASONS FOR REOPENING JOINTLY FOR SHRI TARUN K. MODY AND SHARDA BEN K. MODY FOR THE ASSESSMENT YEAR 1999-2000 AND 2000-01 FOR IDENT ICAL REASONS WHICH ARE REPRODUCED HEREIN BELOW: IN THIS CASE, SURVEY ACTION U/S 133A OF THE ACT WA S CARRIED OUT IN THE BUSINESS PREMISES AT GANESH HALL, NEAR KASTU RBA HOSPITAL, VALSAD ON 3.1.2006. SEVERAL INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED U/S 131 (3) OF THE ACT. IN HIS STATEMENT U/S. 131 OF THE ACT DURING THE COU RSE OF SURVEY PROCEEDINGS ON 3.1.2006, IT IS STATED THAT HE HAS C ONSTRUCTED FOUR PROJECTS VIZ. BIMAL COMPLEX, BHARUCHA COMPLEX, SIDDHI VINAYAK- A & B AND TRILOKNATH COMPLEX. IT IS FOUND FROM THE DOCUMENTS IMPOUNDED U/S. 131 AND ALSO FROM THE STAM EN OF SHRI TARUNBHAI MODI AND FROM THE STATEMENT OF HIS P ARTNER SHRI SHIVPAL J. MISTRY THAT THERE ARE SEVERAL SHOPS AND FLATS IN HIS NAME WHICH ARE NOT ACCOUNTED FOR IN THE BOOKS OF AC COUNTS. IN THE CASE OF TRILOKNATH COMPLEX, IN WHICH HE IS A PARTNER, THE RETURNS OF INCOME HAVE NOT BEEN FILED FOR THE LAST 5 YEARS ALTHOUGH THEY ARE SELLING FLATS AND SHOPS YEAR AFTE R YEAR. THERE IS ALSO OPEN SALEABLE LAND IN THE NAME OF TRILOKNAT H COMPLEX. STATEMENTS U/S 131 OF SHRI DHANSUKHBHAI GARAGEWALA AND ALSO OF SHRI JAGDISHBHAI POONAMJI SANDESHA WERE RECORDED WHEREIN THEY HAVE STATED THAT THEY PURCHASED SHOPS FROM SHR I TARUNBHAI MODY IN CASH. MOREOVER, BEING A PARTNER O F THE ASSESSEE FIRM, SHRI TARUNBHAI HAS NOT SHOWN THESE R ECEIPTS OR INCOME THEREON ANYWHERE IN THE RETURN OF INCOME. ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 13 SIMILARLY, THERE ARE SEVERAL FLATS IN CITY PALACE A PARTMENT, JAWAHAR SOCIETY, HALAR ROAD EITHER IN HIS NAME OR I N THE NAME OF THE FIRM M/S. ANUKUL BUILDERS, VALSAD IN WHICH H E IS A PARTNER. M/S. ANUKUL BUILDERS HAVE CONSTRUCTED THE BUILDING CITY PALACE APARTMENT AND THE FLATS ARE BEING SOLD BY TH EM YEAR AFTER YEAR. HOWEVER, ON VERIFICATION OF RECORDS IT IS FOUND THAT NO RETURNS ARE BEING FILED IN THE CASE OF M/S. ANUKUL BUILDERS. I HAVE, THEREFORE, REASON TO BELIEVE THAT INCOME CH ARGEABLE TO TAX TO THE EXTENT OF THE INVESTMENT MADE IN THE LAN D AND BUILDING, FLATS AND SHOPS EITHER IN HIS NAME OR IN THE NAME OF SOMEBODY ELSE WHOSE OWNERSHIP APPEARS TO BE OF THE ASSESSEE ESCAPED ASSESSMENT AND I PROPOSE TO ASSESS/REASSESS THE INCOME OF THE ASSESSEE FOR A. Y . 1999- 2000/2000-01. ON PERUSING THE REASONS FOR REOPENING RECORDED BY T HE LEARNED AO DATED 03-02-2006 AS REFERRED ABOVE, IT IS EVIDENT T HAT THERE IS NO WHISPER OF ANY IRREGULARITIES COMMITTED BY THE ASSE SSEE MRS. SHARDABEN K. MODY. FURTHER, NO INCRIMINATING DOCUME NTS POINTING OUT THE ASSESSEE SUPPRESSING ANY MATERIALS TO ESTABLISH ESCAPEMENT OF INCOME IN HER HANDS WAS FOUND DURING THE COURSE OF SURVEY PROCEEDINGS WHICH IS EVIDENT FROM THE REASONS RECOR DED U/S 148 OF THE ACT. FURTHER, IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS A PROPRIETOR OF (1) M/S. GANESH HALL & DECORATORS AND (2) M/S. GUNJAN CORPORATION. THESE NAMES ALSO DO NOT FIND PLACE IN THE REASONS RECORDED BY THE LEARNED AO. THOUGH IT IS STATED IN THE REASONS RECORDED THAT THE ASSESSEE HAD CONSTRUCTED THE BILA L BUILDING COMPLEX NO ADVERSE COMMENTS WERE RECORDED WITH RESP ECT TO CONSTRUCTION OF THIS BUILDING COMPLEX. THE ASSESSEE WAS ALSO NOT FOUND TO BE THE OWNER OF ANY OTHER FLATS/SHOPS/PLOT S MENTIONED IN THE REASONS FOR REOPENING RECORDED BY THE LEARNED AO. I N THESE ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 14 CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT TO THE ASSESSEE. ON AN OVERALL R EVIEW OF THE DECISIONS RENDERED BY THE HONBLE APEX COURT THE LE ARNED AO WILL BE EMPOWERED TO REOPEN THE ORIGINAL ASSESSMENT ONLY IF THE FOLLOWING CONDITIONS ARE FOUND SATISFACTORY: (I) IF IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ESCAPED DUE TO OVERSIGHT, INADVERTENCE OR A MISTAKE COMMITTED BY THE INCOME TAX OFFICER IS BASED ON THE PRINCIPLE TH AT THE TAX PAYER WOULD NOT BE ALLOWED TO TAKE ADVANTAGE OF AN OVERSI GHT OR MISTAKE COMMITTED BY THE TAXING AUTHORITIES. (II) IF THE INFORMATION DERIVED IS FROM AN EXTERNAL SOURCE OF ANY KIND, IT WOULD INCLUDE DISCOVERY OF NEW AND IMPORTANT MAT TERS OR KNOWLEDGE OF FRESH FACTS WHICH WERE NOT PRESENT AT THE TIME O F THE ORIGINAL ASSESSMENT. (III) WHERE THE INFORMATION MAY BE OBTAINED EVEN FR OM THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF TH E MATERIALS ON RECORD, OR THE FACTS DISCLOSED THEREBY OR FROM OTHE R ENQUIRY OR RESEARCH INTO FACTS OR LAW. (IV) WHERE THE INFORMATION IS AS TO THE PROOF OR CO RRECT STATE OF LAW DERIVED FROM RELEVANT JUDICIAL DECISIONS. 11. IN THE CASE BEFORE US, NONE OF THE ABOVE CONDIT IONS SEEMS TO BE SATISFIED SINCE IN THE REASONS RECORDED THERE AR E NO ADVERSE COMMENTS WITH RESPECT TO ANY OF THE ISSUES PERTAINI NG TO THE ASSESSEE. THEREFORE, WE HEREBY QUASH THE ORDER OF T HE REVENUE PASSED U/S 147 AND 148 OF THE ACT FOR THE ASSESSMEN T YEAR 1999- 2000 AND 2000-01. FURTHER, WE RESTRAIN OURSELVES FR OM ADJUDICATING THE OTHER GROUNDS RAISED BY THE ASSESSEE WITH RESPE CT TO MERITS, SINCE WE HAVE SET ASIDE AND QUASHED THE ORDER OF TH E REVENUE FOR ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 15 WANT OF JURISDICTION U/S 147 AND 148 OF THE ACT. THUS, GROUND NO.1 OF THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000 AND 2000-01 ARE ALLOWED AND THE OTHER GROUNDS FOR T HE SAME ASSESSMENT YEARS RAISED BY THE ASSESSEE ARE DISPOSE D OFF AS INDICATED ABOVE. 12. ASSESSMENT YEAR 2005-06: THE ASSESSEE HAS RAISED FIVE GROUNDS IN HER APPEAL. THE FIRST GROUND IS RELATING TO BOARD CIRCULAR F. NO. 286/2/2003 DATED 10-03-2003 AND THE OTHER GROUN DS PERTAINING TO ADDITION OF RS.36,00,000/- THE BREAKUP OF WHICH ARE AS FOLLOWS: (I) INCOME FROM OTHER SOURCE ON PROTECTIVE BASIS R S.22,70,592/- (II) (A) FURNITURE & FIXTURES AT GANESH HALL RS.10,00,000/- (B) SUNDRY CREDITORS RS. 3,29,408/- RS.13,29,409/- RS.36,00,000/- THE ENTIRE ADDITION OF RS.36,00,000/- WAS MADE DUE TO THE STATEMENT RECORDED U/S 133A OF THE ACT FROM SHRI TARUNBHAI MO DY, SON OF THE ASSESSEE. FROM THE STATEMENT IT WAS ALSO APPARENT T HAT THE ASSESSEE STOOD BY THE SIDE OF HER SON SHRI TARUNBHAI MODY FO R THE DECLARATION OF RS.36,00,000/- MADE ON ACCOUNT OF HER UNDISCLOSE D INCOME. AT THE TIME OF SURVEY THIS DECLARATION WAS MADE VOLUNTARIL Y. THE LEARNED CIT(A) ALSO CONCURRED WITH THE VIEW OF THE LEARNED AO AND SUSTAINED THE ADDITION. NOW, THE ASSESSEE IS IN APPEAL BEFORE US. 13. AT THE OUTSET OF THE HEARING, THE LEARNED AR RE FERRED TO THE BOARD CIRCULAR F. NO.286/2/2003 DATED 10-03-2003 WH ICH READS AS UNDER: ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 16 INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WH ERE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED T O CONFESS UNDISCLOSED INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS IF NOT BASE D UPON EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSE SSEE WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES CO NFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS THEREFORE AD VISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTI ON OF EVIDENCES OF INCOME WHICH LEADS TO INFORMATION ON W HAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE INCOME TAX DEPARTMENT SIMILARLY WHILE RECORDING STA TEMENT DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS T O UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHAL L BE VIEWED ADVERSELY. FURTHER IN RESPECT OF PENDING ASSESSMENT PROCEEDING S ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCE/MA TERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATI ON OR THEREAFTER WHILE FRAMING RELEVANT ASSESSMENT ORDER. FROM THE FOREGOING INSTRUCTION, IT IS CLEAR THAT IT WOULD NOT BE OPEN FOR A. O. TO MAKE AN ASSESSMENT WRONGLY RELYIN G ON CONFESSIONAL STATEMENT OF THE ASSESSEE. THE A. O. W OULD BE BOUND TO MAKE AN ASSESSMENT ONLY ON THE BASIS OF EV IDENCE AND MATERIALS GATHERED DURING SURVEY/SEARCH OPERATI ONS. 14. THE LEARNED AR FURTHER RELIED ON THE CASE CIT V S KHADER KHAN SON REPORTED IN 300 ITR 157 (2008) (MAD.) WHERE IT WAS HELD AS UNDER: INCOME FROM UNDISCLOSED SOURCES ADDITION UNDER S ECTION 69. ADDITION BASED ON STATEMENT RECORDED DURING SURVEY PROVISION OF SECTION 133A DOES NOT EMPOWER ANY INCO ME-TAX AUTHORITY TO EXAMINE ANY PERSON ON OATH AND WHATEVE R STATEMENT RECORDED UNDER SECTION 133A IS NOT GIVEN AN EVIDENTIARY VALUE, THEREFORE, ADDITION MADE UNDER S ECTION 69 ON ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 17 THE BASIS OF STATEMENT RECORDED UNDER SECTION 133A WAS NOT VALID. 15. FROM THE FACTS OF THE PRESENT CASE BEFORE US, I T IS APPARENT THAT THE REVENUE HAS NOT COME OUT WITH ANY CORROBORATIVE EVIDENCE TO SUPPORT THE STATEMENT OBTAINED FROM THE ASSESSEES SON IN ORDER TO ESTABLISH THAT AN AMOUNT OF RS.36,00,000/- TO BE TH E UNDISCLOSED INCOME OF THE ASSESSEE. THE CIRCULAR OF THE CBDT WH ICH IS BINDING ON THE REVENUE SUPPORTS THE ARGUMENT OF THE ASSESSE E. FURTHER, THE DECISION CITED BY THE ASSESSEE SQUARELY ESTABLISHES THE FACTS THAT THE ADDITION MADE ON MERE STATEMENT ON OATH OBTAINED AT THE TIME OF SURVEY CANNOT BE RELIED UPON TO MAKE ADDITION WITHO UT BRINGING FORTH ANY OTHER MATERIALS ON RECORD TO SUPPORT THE STAND OF THE REVENUE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE HEREBY DELETE THE ADDITION OF RS.36,00,000/- MADE BY THE L EARNED AO WHICH WAS FURTHER SUSTAINED BY THE LEARNED CIT(A). THUS, ALL THE GROUNDS RAISED IN THIS APPEAL BY THE ASSESSEE ARE DECIDED I N ITS FAVOUR. 16. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1999-2000, 2000-01 AND 2005-06 ARE ALLOWED IN FAVOUR OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 20-07-2012 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ ITA NO.3610 & 3611/AHD/2007 AND 4086/AHD/2008 SMT. SHARDABEN K. MODY VS ITO, WARD-4, VALSAD 18 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT DICTATION ON AMS COMP UTER 03-06-2012/10-07-2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 13-07-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: