The Asstt. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. Femina Town, Ahmedabad

ITA 44/AHD/2023

AI Insights

The case revolves around the reassessment order passed under section 147 read with section 143(3) of the Income Tax Act, 1961, concerning the Assessment Year 2013-14. The assessee, Femina Town, a partnership firm engaged in the retail garment business, was initially assessed with a total income of Rs. 1,13,060. However, following a notice under section 148 of the Act, it was alleged that the firm had made a cash advance of Rs. 1.64 crores for purchasing a shop in a scheme by M/s. Dev Procon Ltd., which was considered undisclosed income. The Assessing Officer added this amount to the assessee's income, which was later contested and deleted by the CIT(A). The Revenue's appeal to the Tribunal challenged the CIT(A)'s decision, arguing that the deletion was erroneous.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114131 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-10-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 19-01-2023
• Other Referred Cases: ITO Vs. Bharat A. Mehta, CIT Vs. Vineeta Gupta, Heirs and Legal Representatives of Shri Laxmanbhai S Patel vs. CIT, Krishna Textiles vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Loose papers; Reason to believe; Set aside
• Section: 147; 69; 143(3); 143(1); 207; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The Asstt. Commissioner of Income Tax, Circle-2(1)1), Ahmedabad (Appellant) Vs Femina Town, Omkar House, C.G. Road, Navrangpura, Ahmedabad-380009 PAN: AAAFF4601Q (Respondent) Revenue Represented: Ms. Saumya Pandey Jain, Sr.D.R. Assessee Represented: Shri Sunil Talati, A.R Date of hearing : 04-10-2023 Date of pronouncement : 13-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the Appellate order dated 12.12.2022 passed by the Commissioner of Income Tax (Appeals)- 11, Ahmedabad arising out of the reassessment order passed under section 147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2013-14. ITA No. 44/Ahd/2023 Assessment Year 2013-14 I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 2 2. The brief facts of the case is that the assessee is a Partnership Firm engaged in Retail business of Garment. For the Assessment Year 2013-14, the assessee filed its original Return of Income admitting total income of Rs. 1,13,060/-. The return was processed u/s. 143(1) of the Act. Thereafter the case was reopened by issuing a notice dated 03-03-2017 u/s. 148 of the Act, recording the reason, from the proceedings before the Income Tax Settlement Commission by M/s. Dev Procon Ltd., which has submitted a Fund flow statement showing Rs. 80 crores as advance received from various customers in its Dev Aurum Scheme, during the Financial Year 2012-13 and the assessee firm has advanced an amount of Rs. 1.64 crores in cash for purchase of a shop in Dev Aurum Scheme. However on perusal of the Return of Income filed by the assessee firm, there is reason to believe that the cash advance to the tune of Rs. 1.64 crores is from undisclosed sources and therefore liable to be added to the total income of the assessee. This amount has escaped from assessment and assessable as unexplained investment and therefore notice u/s. 148 of the Act is issued. 2.1. The assessee vide its objection requested to provide the details of payment of Rs. 1.64 crores in cash to M/s. Dev Procon Ltd. (hereinafter referred as DPL), whether DPL had submitted any fund flow statement in the course of hearing before ITSC, more particularly any statement from DPL that the assessee had advanced an amount of Rs. 1.64 crores in cash. The assessee also sought for any piece of evidences that DPL received cash from the assessee. The assessee also requested for the copy of the information received by the Assessing Officer from Central Circle 2(1), Ahmedabad and copy of the ITSC Application/statement filed by DPL, copy of the alleged fund flow statement of DPL wherein it shows that it had received Rs. 80 crores from various customers, including Rs. 1.64 crores I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 3 from the assessee. On furnishing the above details, the assessee wish to cross-examine the so called persons of DPL. 2.2. The Ld. Assessing Officer has produced a reply letter received from DCIT Central Circle 2(1), Ahmedabad stating that in the list of persons provided by M/s. Dev Procon Ltd. from whom it has received advances of Rs. 80 crores. The assessee’s name is also reflecting in the list who was made booking an immovable property in Dev Aurum Project. Based on the above information, the Assessing Officer held that the assessee has paid a sum of Rs. 1.64 crores in cash and added as undisclosed income of the assessee and demanded tax thereon. 3. Aggrieved against the reassessment order, the assessee filed an appeal before Commissioner (Appeals). During the appellate proceedings, the assessee submitted that without considering the factual and legal position and without independent enquiries, the Ld. A.O. made huge addition of Rs. 1.64 crores, on the basis of alleged fund flow statement of M/s. Dev Procon Ltd. before Settlement Commission which is binding only to M/s. Dev Procon Ltd. and cannot bind to third parties who are not parties before Settlement Commission. The assessee was never provided with the alleged documents held with the A.O. and not provided cross examination of M/s. Dev Procon Ltd. There is no documentary evidence regarding cash payment made by the assessee. There is no chit or loose papers or diary indicating such payments received by M/s. Dev Procon Ltd. Therefore the addition made by the A.O. require to be deleted. 4. During the appellate proceedings, the Ld. CIT(A) to verify the claim of the assessee issued a letter dated 05-08-2022 to the Assessing Officer requesting him to furnish copies of the seized materials, statements/documents on the basis of which additions was made by the I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 4 A.O. In response, the Ld. A.O. vide his letter dated 09-09-2020 submitted his Remand Report which is reproduced as follows: I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 5 I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 6 I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 7 4.1. After considering the Remand Report, the Ld. CIT(A) held that the addition made by the A.O. is purely on the basis of cash flow statement submitted by the M/s. Dev Procon Ltd. before Hon’ble Settlement Commission, which was made after the date of search. Even in the cash flow statement name of the assessee is not disclosed by M/s. Dev Procon Ltd., but an adhoc amount of Rs. 80 crores was disclosed. Thus respectfully following judicial precedent of Hon’ble Delhi High Court in the case of Vineeta Gupta and other decisions, the Ld. CIT(A) deleted the addition made by the Assessing Officer. 5. Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: 1) "The Ld. CIT(A) has erred in law and on facts in deleting the addition made of Rs. 1,64,00,000/- on account of alleged cash payment from undisclosed sources to M/s Dev Procon Ltd. for purchasing a shop." 2) "The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary?" 3) "It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored". 6. Ld. Sr. D.R. Ms. Saumya Pandey Jain appearing for the Revenue supported the order passed by the Ld. Assessing Officer and prayed that the Ld. CIT(A) erred in deleting the addition made by the A.O., therefore the Revenue appeal is liable to be allowed. 7. Per contra Ld. Counsel Shri Sunil Talati appearing for the assessee supported the order of the Ld. CIT(A) and submitted that there is no evidence available with the department on payment of alleged cash by the assessee as extracted in the assessment order to the alleged Fund flow statement of M/s. Dev Procon Ltd. declares Rs. 80 crores as advance booking from Dev Aurum Project. There is no break-up of the various customers and break-up of cash payments made by the respective I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 8 customers. In the absence of the same, the Ld. Assessing Officer is not correct in making an addition in the hands of the assessee based on the statement of a third party and relied upon various case laws. Thus the appeal filed by the Revenue is liable to be dismissed. 8. We have given our thoughtful consideration and perused the materials available on record. In fact this Bench directed Ld. D.R. to produce copies of seized material/statements/documents on the basis of addition made by the Assessing Officer and also details of declaration made by the developer M/s. Dev Procon Ltd. before Income Tax Settlement Commission. In response the Ld. CIT-DR produced before us (1) M/s. Dev Procon Ltd. reply to Rule 9 Report before the Settlement Commission, (2) average rate on sale of flats as per loose papers seized, (3) part of the settlement order, (4) Fund flow statement filed by M/s. Dev Procon Ltd. and (5) Index to the Paper Book filed before Settlement Commission. 9. In the Rule 9 report, the reply filed by M/s. Dev Procon Ltd. reads as follows: “...19.12 Apart from the statement there is no whatsoever evidence of material that, has been found during the course of search to suggest that, either the land owners received an amount in excess of what has been stated in the conveyance deed or did the Applicant Company paid over and above the value mentioned in the conveyance deed. 19.13 It is submitted that the Dev Aurum Project had 60 Shops, 313 Offices and 134 Flats. The total area in the project was 7,00,381 sq. ft. (commercial units had 5,28,211 sq. ft. and residential units had 1,72,170 sq. ft). The PCIT had accepted the estimation of gross receipts in respect of commercial units at Rs. 297 crore, by not offering any adverse comment. The working of quantification of gross receipt of Rs. 207 crore is placed page no 597 of the SOF. It needs to be mentioned that the quantification of gross receipt of Rs. 297 crores takes into consideration the deal value in respects of 43 units, for which notings were found during the course of search, In fact it is on the basis of these 43 units the quantification of Rs. 297 crore is worked out.” I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 9 9.1. Based on the above Rule 9 Report and Rejoinder, the Income Tax Settlement Commission passed order as follows: “...(b) Dev Procon Limited received an advance on-money receipt of Rs. 80 crores from customers/investors for its Dev Aurum Project. The Department has suggested that the sum of Rs. 80 crores be taxed since the Applicant Company was unable to furnish the sales agreements, vouchers, etc. On the other hand, the AR of the Applicant stated that his on-money receipts was from the customers/investors from whom the corresponding cheque amount was received. He also stated that part of the details of such on-money receipt was itself was found and seized during the course of the search. He stated that complete details of the parties from whom the sum of Rs. 80 crores was received has been filed in the paper book submitted on 29 th August, 2016, 8 th September, 2016 and 15 th September, 2016. He accordingly summarized that this amount can be brought to tax in the year in which the respective conveyance deeds are executed, as per the method of accounting followed, since the said receipts can be said to have accrued to the Applicant only in the year in which the conveyance deed is executed. However, the Applicant in the spirit of settlement and put quietus to the issues, voluntarily accepted to offer estimated net profit margin, as agreed, on the advances of Rs. 80 crores in Assessment Year 2014-15 as per applicant’s letter dated 16.09.2016. The issue, thus, gets settled.” 10. Further perusal of Fund flow statement by M/s. Dev Procon Ltd. there is no break up of Rs. 80 crores declared by DPL. Even in the Index to the Paper Book filed by DPL before Settlement Commission, there is no reference about on money paid by the assessee Femina Town. Whereas the assessee admits that it had purchased Shop No. 5, Ground Floor at Dev Orum Building by availing bank loan from Kotak Mahindra Bank of Rs. 1.75 crores and Rs. 2 lakhs by way of cheque payment to DPL. Thus in the absence of any clinching evidences against the assessee mere declaration made by M/s. Dev Procon Ltd. before Settlement Commission cannot be a reason to make addition of Rs. 1.64 crores in the hands of the assessee. The above findings of ours are supported by the following Judgments rendered by Jurisdictional High Court and other High Courts as follows: 10.1 The Hon’ble Gujarat High Court in the case of ITO Vs. Bharat A. Mehta reported in [2015] 60 taxmann.com 31 wherein it was held as follows: I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 10 “Section 69 of the Income-tax Act, 1961- Unexplained Investment (Investment in property) - Assessment year 1992-93-Assessee purchased a bunglow in a housing scheme from a builder firm during search, partners of said firm admitted having received certain amount as 'on money' from buyers of bunglows in said scheme-On basis of that material Assessing Officer made certain addition under section 69 to income of assessee on account of 'on money' paid to builders - On appeal, Tribunal deleted addition holding that revenue failed to prove that assesses had made undisclosed investment in aforesaid bunglow Whether as findings recorded by Tribunal were based on appreciation of facts, no interference was called for-Held, Yes [Paras 9 and 10] [In favour of assessee]” 10.2. The Hon’ble High Court of Delhi in the case of CIT Vs. Vineeta Gupta reported in [2014] 46 taxmann.com 439 wherein it was held as follows: “Section 69B, road with section 245D, of the Income-tax Act, 1961 - Undisclosed investments (Settlement Commission) - Assessment years 2003- 04 to 2009-10 - During search, assessee along with her husband admitted that she had acquired 1/3 share in a property valuing 133 crores She had offered Rs. 36.73 crores as her undisclosed investment - Thereafter, she had approached Settlement Commission with disclosure of 7.61 crores and, thus, total disclosure amounted to Rs. 44.34 crores - Accordingly, Settlement Commission passed order - Revenue challenged said order on ground that sellers of said property offered higher amount in respect of said property as undisclosed investment Whether declaration made by sellers in respect of said - transactions could not bind assessee - Held, yes Whether since in Settlement Commission proceeding, full value of 1/3rd share had been accounted for, i.e., Rs. 44.84 crores, any addition could not be made to assessee's income in absence of any concrete evidence - Held, yes [Paras 12 & 13] [In favour of assessee]” 10.3. Jurisdictional High Court in the case of Heirs and Legal Representatives of Shri Laxmanbhai S Patel vs. CIT 327 ITR 290 (Guj) has observed as follows: “........The legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice. This is clearly stated by the Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra) wherein it is stated that before the Income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine. Except the statement of Shri Kantilal M. Patel and Shri Rameshbhai, there was no other evidence available with the department. A copy of the statement of Shri I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 11 Rameshbhai was not given nor an opportunity of cross-examining the said Shri Rameshbhai was given to the assessee..... “ 10.4. Gujarat High Court in the case of Krishna Textiles vs CIT 310 ITR 227 (Gujarat) has held that assessee cannot be called upon to explain the source of income, even if credited by the third party as assessee claimed that no such amount was invested or paid by it to third party. In this case addition was sought to be made on the basis of entries in the books of third party showing payment made by assessee to said party. The High Court has observed as follows: “Relying on the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram (supra), the Calcutta High Court in the case of Bimal Kumar Damani (supra) held that the question of presumption of possession is confined to the amount recovered from a particular person. Possession of another cannot be presumed to be possession of the assessee. If the ownership is disputed, the burden of proving that the possession was not possession as owner and that ownership was of someone else, is on the assessee. If the Department wants to assert that the assessee is the owner of the amount recovered from someone else, then the burden lies on the Department to prove the ownership of the assessee....” 11. Respectfully following the above judicial precedents, we have no hesitation in upholding the order passed by the Ld. CIT(A) who deleted the addition of Rs. 1.64 crores as unexplained investments in the hands of the assessee. Thus we do not find any merits in the grounds raised by the Revenue and the same is hereby dismissed. 12. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the open court on 13-10-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 13/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- I.T.A No. 44/Ahd/2023 A.Y. 2013-14 Page No ACIT Vs. Femina Town 12 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद