The DCIT, Central Circle-1(1), Ahmedabad V. Lavjibhai B. Kanani, Ahmedabad

ITA 490/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8975 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-07-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 13-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D B R V PRASAD
• Assessee Lawyers: G C PIPARA
• Keywords: Unexplained investment; Additional evidence; Cost of acquisition; Valuation report; Documents seized
• Section: 40A(3); 69B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI T.K. SHARMA, JUDICIAL MEMBER & SHRI N.S.SAINI, ACCOUNTANT MEMBER ITA NO. 490/AHD/2009 ASSESSMENT YEAR : 2001-02 DCIT, CENTRAL CIRCLE-1(1), VS SHRI LAVJI B.KANANI (HUF) AHMEDABAD AHMEDABAD PAN NO./GIR NO. AADHK0406K (APPELLANT) (RESPONDENT) APPELLANT BY: SH D.B.R.V.PRASAD (CIT DR) RESPONDENT BY : SH G.C.PIPARA ORDER PER T.K.SHARMA, J.M. THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER DAT ED 28.11.2008 OF CIT(A)- III, AHMEDABAD FOR THE ASSESSMENT YEAR 2001-02. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDE R:- THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN DE LETING THE ADDITION OF RS. 25,00,000/- MADE U/S 69B ON ACC OUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF TWO BUNGAL OWS, WITHOUT CONSIDERING THE FACTS AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSING OFFICER. 3. THE BRIEF FACTS OF THE CASE HAVE BEEN DISCUSSED BY THE CIT(A) IN PARA-4 OF HIS ORDER DATED 28/11/2008, ARE BEING RELEVANT TO THE ISSUE ARE REPRODUCED HEREUNDER:- THE APPELLANT HAD DECLARED NIL INCOME IN ITS RETUR N, FILED ON 8/2/2006, IN RESPONSE TO NOTICE U/S.153C. THE NOTIC E U/S.153C HAD BEEN SERVED ON 7/11/2005 CONSEQUENT TO THE FINDING/SEIZURE OF DOCUMENTS PERTAINING TO THE APPE LLANT, FROM THE RESIDENCE OF ONE SHRI DIPAK THAKKAR, U/S. 132 O F THE ACT, ON 9/2/2005. THE A.O. OBSERVED THAT THE DOCUMENTS SEIZED FROM SHRI DIPAK THAKKAR, (PAGES 29 TO 39 OF ANNEXUR E A-10) REVEALED THE PAYMENTS OF RS.25 LAKHS, IN CASH, BY T HE APPELLANT AND ONE KAMLABEN KANANI, TOWARDS PURCHASE OF BUNGAL OW 2 NOS.3 & 4, DEVPRIYA BUNGALOWS, FROM M/S DEVPRIYA BU ILDERS, OF WHICH SHRI DIPAK THAKKAR WAS A DIRECTOR. IN ITS RE PLY TO A.O.S QUERY, RECEIVED BY THE A.O. ON 12/10/2006, IT WAS E XPLAINED THAT THE APPELLANT JOINTLY OWNED ABOUT 45 BIGHAS OF AGRICULTURAL LAND AT AMRELI. THE OTHER JOINT OWNERS OF THIS ANC ESTRAL AGRICULTURAL LAND I.E. 7 OTHER BROTHERS OF THE CO-P ARCENER, LAVJIBHAIB KANANI HAD, THROUGH A MUTUAL UNDERSTANDI NG, AGREED TO PAY RS.50 LAKHS TO THE APPELLANT IN LIEU OF ITS 1/8TH SHARE IN THIS AGRICULTURAL LAND, TOOLS, ETC. AND TO WARDS ITS SHARE IN AGRICULTURE INCOME ACCRUED DURING THE LAST 27 Y EARS. ACCORDINGLY, THE OTHER JOINT OWNERS I.E. THE BROTHE RS HAD MADE PART PAYMENTS I.E. OF RS.20 LAKHS BETWEEN OCTOBER T O DECEMBER, 2000 AND ANOTHER RS.10 LAKHS BETWEEN JANU ARY TO JUNE 2006 TO THE APPELLANT HUF. THESE RECEIPTS WERE THE SOURCE OF THE PAYMENTS FOR ACQUIRING THE BUNGALOW N O.3, IN THE NAME OF THE APPELLANT HUF AND BUNGALOW NO.4 IN NAME OF KAMLABEN KANANI, CO-PARCERNERS WIFE, FOR RS.12.5 L AKHS EACH. 4. THE VARIOUS REASONS FOR WHICH A.O. MADE THE ADDI TION OF RS.25.00 LACS HAVE BEEN DISCUSSED BY THE CIT(A) IN HIS ORDER IN PARA NO.6 AND 6.1. THE ASSESSING OFFICER WENT THROUGH THE MEMORANDUM OF UNDERSTANDIN G BETWEEN THE BROTHERS IN RESPECT OF THE ANCESTRAL AGRICULTURAL LAND AND FELT THAT THIS MOU WAS NOT GENUINE. THUS (A) DATE OF AGREEMENT WAS NOT MENTIONED, THE M OU WAS NEITHER REGISTERED, NOR NOTARIZED (B) SHRI LAVJIBHAI HAD STATED ON OATH THA T THE SOURCE OF RS.12.5 LAKHS WAS PAST SAVINGS OF HUF FROM AGRICULTURE INCOME AND THA T OF KAMLABEN IT WAS FROM SAVINGS AND TUITION, THOUGH NO DOCUMENTARY EVIDENCE WAS FILED. HE HAD NOT MENTIONED ABOUT MOU, PARTITION OF HUF, RECEIPT OF A MOUNTS FROM OTHER BROTHERS, IN HIS STATEMENT (DURING POST SEARCH INVESTIGATION). (C) THE MOU WAS SILENT ABOUT THE NAMES AND ARRANGEMENTS FOR PAYMENT TO TWO OTHER BRO THERS WHO HAD ALSO FORGONE THEIR SHARE (D) THERE WAS NO VALUATION OF THE LAND TO DETERMINE THE SHARE OF THE ASSESSEE AND NO PARTITION OF MOVABLE PROPERTIES TOO K PLACE. THE MOU WAS ALSO SILENT ABOUT PAYMENTS RECEIVED BETWEEN OCTOBER, 2000 TO TH E DATE OF MOU, AND/OR ABOUT THE PAYMENT SCHEDULE, (E) THE NAME OF ASSESSEE STI LL FIGURED IN REVENUE RECORD DATED 30/1/2006 (F) THE COPIES OF SALE BILL FILED WITH SU BMISSIONS DATED 17/11/2006, WERE OF DECEMBER, 2005, JANUARY AND APRIL, 2006 AND WERE IN NAME OF THE ASSESSEE. THE A.O. ALSO FELT THAT EVEN OTHERWISE THE AGRICULTURE PRODUCE/INCOME FROM THIS LAND COULD NOT HAVE BEEN TO THE EXTENT CLAIMED SINCE (A) PRODU CTION WAS NOT UNIFORM EVERY YEAR. ALSO CROP WISE DETAILS IN QUANTITY AND VALUE TERMS HAD NOT BEEN GIVEN. (B) THE CLAIM THAT AGRICULTURE PRODUCE WAS OF RS.13.5 LAKHS PER Y EAR WAS NOT JUSTIFIED AS THE EXPENSES ITSELF WOULD HAVE BEEN ABOUT 50% I.E. RS.6 .75 LAKHS AND SO NET INCOME 3 COULD HAVE BEEN ONLY ABOUT RS.6.75 LAKHS, WHICH WO ULD AFTER ALLOWING FOR HOUSEHOLD EXPENSES, WOULD BE REDUCED GREATLY. THUS, AVAILABI LITY OF FUNDS, WITH THE BROTHERS WOULD NOT BE ADEQUATE TO AUTHENTICATE THE CLAIM OF PAYMENT OF RS.20 LAKHS RECEIVED FROM THE BROTHERS. CONSIDERING THAT THIS WAS DROUGH T PRONE AREA, THE BROTHERS WOULD BE LEFT WITH HARDLY ANY SURPLUS FUNDS. THE A.O. ALS O POINTED OUT THAT EVEN AS PER THE MOU, THE PAYMENT OF RS.20 LAKHS WAS STILL OUTSTANDI NG. IT IMPLIED THAT THE SAVINGS OF THE BROTHERS IN FIVE YEARS WAS ONLY ABOUT RS.10 LAK HS. THE A.O. ALSO NOTED THAT THE EVIDENCE/BILLS OF SALE OF AGRICULTURE PRODUCE (BETW EEN A.Y. 1999-2000 TO A.Y. 2005- 06), WERE NOT PRODUCED BEFORE THE A.O. AND SINCE NO BANK ACCOUNTS HAD BEEN MAINTAINED BY THE BROTHERS, THERE WAS NO EVIDENCE O F AGRICULTURE RECEIPTS. THE DATE AND MANNER IN WHICH THE BROTHERS HAD GIVEN THE AMOU NT, TO THE APPELLANT I.E. CHEQUE/PAY ORDER/DD, ETC. HAS ALSO NOT BEEN EXPLAIN ED/VERIFIED AND THE PAYMENT RECEIVED/RECEIVABLE HAS NOT BEEN DISCLOSED IN BALAN CE SHEETS/RETURNS FILED AND THE CONTRIBUTION OF EACH BROTHER WAS NOT QUANTIFIED. TH E A.O. THEREFORE, CONCLUDED THAT THE MOU RELIED UPON BY THE ASSESSEE, WAS FABRICATED . THE OTHER CO OWNERS I.E. THE BROTHERS, HAD NO CREDITWORTHINESS AND THE STATED TR ANSACTIONS WERE NOT PROVED AS GENUINE. THERE WAS NO INDEPENDENT SOURCE OF INCOME OF KAMLABEN. MOREOVER THERE WAS NO EXPLANATION FOR THE BALANCE AMOUNT PAID I.E. RS.5 LAKHS. AS SUCH THE A.O. CONSIDERED THE INVESTMENT OF RS.25 LAKHS AS UNEXPLA INED U/S.69B OF THE ACT IN HANDS OF THE APPELLANT AND OF RS.12.5 LAKHS IN HANDS OF K AMLABEN. 5. THE SAID ADDITION WAS DELETED BY THE CIT(A) IN V IEW OF HIS OBSERVATION IN PARA NO.8, 9, 10 AND 11 OF THE ORDER OF THE CIT(A). THE FOLLOWING IS THE IMPORTANT OBSERVATIONS OF THE CIT(A):- DURING THE APPELLATE PROCEEDINGS, BEFORE MY PREDEC ESSOR, THE APPELLANT FILED APPLICATION UNDER RULE 46A AND ADDI TIONAL EVIDENCE AS UNDER: (I) AFFIDAVITS DATED 24/4/2007 OF THE APPELLANT (ITS CO - PARCENER) SHRI LAVJIBHAI B. KANANI (II) AFFIDAVIT(S) DATED 21/4/2007 OF THE BROTHERS OF TH E APPELLANT (III) AFFIDAVIT DATED 21/4/2007 OF THE STATED WITNESS TO THE STATED MOU DATED 23/12/2000 4 (IV) COPY OF THE VALUATION REPORT FOR AGRICULTURAL LAND/VALUATION REPORT OF M/S KRISHNA POLYPLAST OF J OINTLY OWNED FAMILY PROPERTY, ETC. IT WAS SUBMITTED THAT THE ADDITIONAL EVIDENCE WENT TO THE ROOT OF THE ISSUES UNDER CONSIDERATION AND COULD NOT BE SUBMITTED EARLIER AS THE A.O. DID NOT PROVIDE ADEQUATE OPPORT UNITY DURING THE ASSESSMENT PROCEEDINGS. THE WRITTEN SUBMISSIONS OF THE APPELLANT IN THIS REGARD ALONG WITH COPIES OF THE A DDITIONAL EVIDENCE AND OTHER EVIDENCES WERE FORWARDED, IN ORI GINAL, BY MY PREDECESSOR CIT(A) TO THE DCIT, CENTRAL CIRCLE-1 (1), AHMEDABAD VIDE HIS LETTER DATED 18/5/2007 FOR COMMENTS/REMAND REPORT. REMINDER WAS SENT TO THE D CIT, CENTRAL CIRCLE-1(1), AHMEDABAD, AGAIN BY THE THEN CIT(A)-I, AHMEDABAD, VIDE LETTER DATED 23/11/2007. THE PRESEN T A.O. HAS FURNISHED A COPY OF THE REMAND REPORT OF THE DC IT, CENTRAL CIRCLE-1(1), AHMEDABAD, DATED 10/3/2008 ENDORSED BY THE ADDL. CIT, CENTRAL RANGE-I, VIDE HIS ENDORSEMENT DA TED 11/3/2008. THE COPY OF THE REPORT OF THE A.O. WAS P ROVIDED TO THE A.R. OF THE APPELLANT. THE REPLY OF THE APPELLA NT WAS RECEIVED ON 25/11/2008. THE CONTENTIONS REGARDING THE ADMISSION OF ADDITIO NAL EVIDENCE AND THE REMAND REPORT OF THE A.O. WERE CON SIDERED CAREFULLY. IT IS SEEN THAT THE AFFIDAVITS/EVIDENCE S WERE FORWARDED TO THE A.O. FOR HIS REPORT, AS EARLY AS ON 18/5/2007, WHICH WAS FOLLOWED BY A REMINDER. THERE IS NO EVID ENCE ON RECORD THAT THE A.O. HAD SOUGHT TO EXAMINE THE DEPO NENTS DURING THE INTERIM PERIOD. EVEN IN HIS REMAND REPO RT, THE A.O. HAS CONCLUDED THAT THE AFFIDAVITS WERE LARGELY IN T HE NATURE OF CONFIRMATION OF SOME OF THE FACTS AND SUBMISSIONS F ILED. IT IS FURTHER SEEN THAT THE A.O. IN HIS LETTER DATED 24/1 1/2006 HAD, SOUGHT SPECIFIC INFORMATION, (REFERRED TO IN PARA 8 .1 OF THIS ORDER) BY 30/11/2006 AND HAD NOT EXPRESSED HIS INTE NTION OF TREATING THE INVESTMENT IN THE BUNGALOWS AS UNEXPLA INED, THOUGH A SPECIFIC REQUEST FOR BEING ALLOWED FURTHER HEARING/OPPORTUNITY TO FILE EVIDENCE HAD BEEN MADE IN THIS REGARD BY THE APPELLANT, VIDE ITS LETTER DATED 13/1 1/2006. THE RATIO OF THE DECISIONS, CITED BY THE APPELLANT, AND REPORT IN 113 ITR 389 (DELHI), 172 ITR 166 (ALL), 104 ITR 120 (AL L), 13 SOT 61 (MUMBAI ITAT) AND 131 TAXMAN 743 (KERALA) IS ALS O SEEN TO BE APPLICABLE TO THE FACTS AND CIRCUMSTANCES IN CAS E OF THE APPELLANT. IN ITS REPLY DATED 30/11/2006 THE APPEL LANT FURNISHED DETAILS/CLARIFICATION IN RESPECT OF THE S PECIFIC FOUR QUERIES RAISED BY THE A.O. IN HIS LETTER DATED 24/1 1/2006. VIDE ITS LETTER DATED NIL (RECEIVED BY A.O. ON 12/10/06) AN OFFER WAS MADE TO PRESENT THE CO-OWNERS FOR EXAMINATION, IF D ESIRED. IN 5 THE EVENT, THE AFFIDAVITS, NEITHER CONTROVERTED NOR THE DEPONENTS EXAMINED, BY THE A.O., REQUIRE TO BE ADMI TTED UNDER RULE 46A OF THE I.T. RULES. IT HAS BEEN SUBMITTED THAT THE APPELLANT HAD 1/8T H SHARE IN THE AGRICULTURE LAND/BORE WELL,ETC. LOCATED IN AMRE LI DISTRICT. THE AGRICULTURE OPERATIONS WERE BEING CONDUCTED BY THE OTHER CO- OWNERS, BEING FAMILY MEMBERS I.E. BROTHERS OF THE K ARTA. THE SHARE OF THE APPELLANT IN AGRICULTURE INCOME IN LAS T SEVERAL YEARS WAS NOT BEING GIVEN AS THE FAMILY OF THE APPELLANT HUF WAS SETTLED IN AHMEDABAD AND THE KARTA WAS EMPLOYED WIT H THE STATE GOVERNMENT. THE ISSUE OF SEPARATING WITH THE BROTHERS WAS BEING DISCUSSED FOR QUITE SOMETIME AND WAS FORM ALIZED BY WAY OF AN AGREEMENT WHEREBY THE APPELLANT RELINGUIS HED ITS RIGHTS IN THE AGRICULTURAL LANDS, BORE WELL, ANIMAL S, TOOLS, FACTORY, ETC. AND ITS SHARE OF AGRICULTURE PRODUCE IN SEVERAL YEARS, FOR AN AMOUNT OF RS.50 LAKHS. THIS AGREEMENT WAS RECORDED ON A STAMP PAPER PURCHASED ON 20/12/2000 A ND CONSEQUENTLY THE OTHER CO-OWNERS PAID AMOUNT OF RS. 10 LAKHS ON 21ST DECEMBER, 2000 AND RS.10 LAKHS ON 23RD DE CEMBER, 2000 AND RS.5 LAKHS ON 27TH DECEMBER, 2000. THE A MOUNT SO RECEIVED WAS INVESTED SIMULTANEOUSLY FOR THE PURCHA SE OF BUNGALOWS FROM M/S DHARAMDEV BUILDERS, OF WHICH THE RELATED RECEIPTS WERE FOUND IN THE SEARCH, ON 9/2/2005. IT IS STATED THAT THE NEED FOR SETTLING THE MATTER, BECAME IMPER ATIVE AS M/S DHARAMDEV BUILDER HAD OFFERED THE PROPERTIES AT A C ONCESSIONAL PRICE, IF PAYMENTS THERE OF, WAS MADE OUTRIGHT. THE NEED FOR FUNDS HAS BEEN AFFIRMED IN THE AFFIDAVIT OF THE LAV JIBHAI, THE KARTA. THE FUNDS GIVEN TO THE APPELLANT WERE JOINTL Y CONTRIBUTED BY THE OTHER CO-OWNER BROTHERS. THE RECEIPTS WERE O N ACCOUNT OF RELINQUISHMENT OF RIGHT IN AGRICULTURE LAND, EQU IPMENTS, FACTORY ETC. AND WERE THEREFORE NOT TAXABLE AND WAS THEREFORE, NOT SHOWN IN THE RETURN OF INCOME FILED FOR A.Y. 20 01-02. THE CASH RECEIPTS WERE NOT DISALLOWABLE IN CASE OF AGR ICULTURAL INCOME CONSIDERING THE 6DD(J) OF I.T. RULES R.W.S. 40A(3) OF THE ACT. THE RECEIPTS WERE BY WAY OF THE FAMILY SETTLE MENT AND WERE IMMEDIATELY PAID TO THE BUILDER FOR AVAILING T HE CONCESSIONAL PRICE. THE AGRICULTURE LAND MEASURED 3 8,847 SQ. MTRS. AND WAS OF THE VALUE OF APPROXIMATELY RS.3.10 CRORES. THE ANCESTRAL PROPERTY ALSO INCLUDED A NON-AGRICULT URAL LAND MEASURING 1720 SQ. MTRS. WITH A BUILDING, OWNED BY ALL THE BROTHERS AND THEREFROM THE BUSINESS ACTIVITY OF M/S KRISHNA POLYPLAST WAS BEING CARRIED OUT BY ONE OF THE BROTH ERS. THE MARKET VALUE OF THIS PROPERTY AS ON 10/12/2006 WAS ABOUT 36.76 LAKHS. THE APPELLANT HUF HAD NOT RECEIVED ITS SHARES OF THE AGRICULTURE INCOME, SINCE 1967, WHEN THE FATHER OF ALL THE BROTHERS HAD DIED. CONSIDERING THE VALUE OF THE TO TAL ANCESTRAL 6 PROPERTY, ITS POTENTIAL THE SHARE OF AGRICULTURAL I NCOME, UNPAID SINCE 1967, THE NEED FOR IMMEDIATE FUNDS, ETC., THE APPELLANT HUF HAD RELINQUISHED ITS RIGHTS IN LIEU OF THE AMOU NT OF RS.50 LAKHS VIDE A FAMILY ARRANGEMENT FOR WHICH A FORMAL MOU WAS ENTERED INTO ON 23/12/2000. THE APPELLANT HAS RECEI VED RS.35 LAKHS IN CASH, TILL 10/6/2006. THE A.O. HAS BASED H IS ADDITION ENTIRELY BY POINTING OUT TO CERTAIN SHORT COMINGS/D EFECTS IN THE MOU. THE SUSPICION OF THE A.O. HAVE ALREADY BEEN R EBUTTED. THE A.O. HAS ALSO STATED THAT STATEMENT (PAGE 5 OF THE ASSESSMENT ORDER) OF SHRI LAVJIBHAI WAS RECORDED BY SUMMONING HIM, IN WHICH HE SUBMITTED THAT SOURCE OF RS.12.50 LAKHS WAS OUT OF THE PAST SAVINGS OF HUF FROM AGRIC ULTURE INCOME, WHICH WAS TO THE EXTENT OF RS.25,000/- PER ANNUM AND THAT THE SOURCE OF THE OTHER RS.12.50 LAKHS, INCOME OF KAMLABEN WAS FROM HER PAST SAVINGS AND INCOME FROM TUITION. HOWEVER, THE A.O. HAS NOT POINTED OUT THE DATE ON W HICH SUCH STATEMENT WAS RECORDED . THIS IS BECAUSE NO STATEM ENT WAS RECORDED AS SUCH AND IN THE MANNER AS STATED BY THE A.O. AND NO SUCH STATEMENT IS ON RECORD. THIS OBSERVATION W AS APPARENTLY MADE BY THE A.O. ON THE BASIS OF THE SUB MISSIONS OF SHRI LAVJIBHAI BEFORE THE INVESTIGATION WING OF TH E DEPARTMENT. EVEN THEN SHRI LAVJIBHAI HAD POINTED O UT TO THE ACCUMULATED AGRICULTURE INCOME OF OVER RS.12.50 LAK HS OF HIS HUF. THE SOURCE OF INCOME OF KAMLABEN, ATTRIBUTED B Y SHRI LAVJIBHAI TO SAVINGS AND TUITIONS, WAS ONLY IN ABSE NCE OF DETAILS THEN FOR WHICH AN ADVERSE INFERENCE WAS NOT WARRANT ED. THE BREAK UP OF THE RECEIPTS, DETERMINED IN THE MOU, WA S BROADLY, RS.9 LAKHS FOR PAST SHARE OF AGRICULTURE INCOME FRO M 1967 ONWARDS TILL DECEMBER, 2000, RS.35 LAKHS FOR THE ES TIMATED SHARE OF THE APPELLANT IN THE LAND, BUILDING, EQUIP MENT, BORE WELL, ETC. AND RS.11 LAKHS WAS THE ESTIMATED AMOUNT FOR APPRECIATION IN VALUE OF LAND AND AGRICULTURE INCOM E TILL THE PAYMENT OF THE ENTIRE AMOUNT OF RS.50 LAKHS. IT WA S AVERRED THAT FAMILY SETTLEMENTS DID NOT REQUIRE DISTRIBUTIO N OF FAMILY ASSETS IN EXACT PROPORTIONS. THE ABSENCE OF DETAILS OF A PARTICULAR CLAUSE IN MOU DID NOT RENDER IT INCORREC T OR FALSE. THE LONGER TERM FOR PAYMENT WAS TO ENABLE THE ARRANGEME NTS OF FUNDS, BY THE BROTHERS, ONCE THE IMMEDIATE NEEDS OF THE APPELLANT HUF TO MAKE INVESTMENT, WAS MET. SINCE TH E PAYMENT HAS NOT BEEN RECEIVED FULLY AND FINALLY, THE NAME OF THE APPELLANT WAS NOT STRUCK OFF THE REVENUE RECORD S. BUT THIS WAS TO BE DONE ONCE THE AMOUNT AGREED HAS BEEN RECE IVED IN FULL. IT WAS FURTHER ARGUED THAT THE A.O. HAS PROCEEDED ON PRESUMPTIONS AND GUESS WORK ABOUT THE QUANTUM OF AG RICULTURE 7 INCOME AND EXPENSES OF THE COME/SAVINGS OF THE CO-O WNERS DURING THE COURSE OF A LONG PERIOD. THE DETAILS OF PRODUCTION OF EACH CROP, YEAR-WISE, IN TERMS OF QUANTITY AND VALU E AS SOUGHT BY A.O. WAS NEITHER FEASIBLE NOT PRACTICABLE SINCE NO RECORDS/BOOKS OF ACCOUNT HAD BEEN MAINTAINED BY THE CO- OWNERS AS IT WAS AGRICULTURAL INCOME, NOT SUBJECT T O TAX. THE ASSUMPTION OF THE A.O. THAT AGRICULTURAL EXPENSES AMOUNTED TO ALMOST 50% OF THE AGRICULTURE INCOME, WAS JUST A SU RMISE. THE SAVINGS OF THE BROTHERS CO-OWNERS WERE FROM OUT OF AGRICULTURE INCOME AND SUBSTANTIAL, CONSIDERING THEIR SIMPLE RU RAL LIFE STYLE AND THE FACT THAT THE EXPENSES WERE MOSTLY MET BY A GRICULTURE PRODUCE AND AMOUNTS SENT TO THEM, FROM TIME TO TIME BY THEIR CHILDREN WHO WERE WELL SETTLED. IT IS ALSO POINTED OUT THAT THE KARTA OF THE APPELLANT HUF WAS THEN AN OFFICER IN T HE GOVT. OF GUJARAT AND HAD INFORMED OF THE TRANSACTIONS, TO TH E COMMISSIONER OF SALES TAX (VIGILANCE) VIDE INTIMATI ON DATED 6/2/2001. HE HAD ANNEXED, WITH HIS INTIMATION, THE PARTICULARS OF THE PROPERTIES AS ON 31/12/2000, WHICH INCLUDED BUNGALOW NO.3 & 4 OF DEVPRIYA BUILDERS, IN THE NAME OF HUF/W IFE OF KARTA KAMLABEN. THE SOURCE OF THE INVESTMENT HAD AL SO BEEN SHOWN AS THE AMOUNT RECEIVED BY THE HUF OF RS.25 LA KHS, BEING THE SHARE OF HUF FROM JOINT FAMILY PROPERTIES AND OUT OF AGRICULTURE INCOME. A COPY OF THIS STATEMENT/INTIM ATION WAS ALSO FILED. THE CONTENTIONS/DETAILS ON RECORD WERE CAREFULLY C ONSIDERED. IT IS SEEN THAT THE INVESTMENT OF RS.25 LAKHS WAS MADE IN DECEMBER 2000 IN ACQUIRING DEVPRIYA BUNGALOWS, ONE IN THE NAME OF THE APPELLANT AND THE OTHER IN THE NAME OF KAMLABEN, I.E. WIFE OF THE KARTA, LAVJIBHAI. THE SOURCE OF TH E INVESTMENT HAS BEEN PARTIALLY (RS.12.50 LAKHS) EXPLAINED BY LA VJIBHAI KANANI, DURING THE POST SEARCH INVESTIGATIONS, AS O UT OF THE PAST SAVINGS OF HUF FROM AGRICULTURE INCOME (AT APPROXIM ATELY RS.25,000/- PER ANNUM) WHILE THE INVESTMENT IN THE NAME OF KAMLABEN WAS STATED TO BE OUT OF PAST SAVINGS AND I NCOME FROM TUITION CLASSES. IN RESPECT OF HIS SUBMISSION REGARDING THE INVESTMENT IN THE BUNGALOW IN NAME OF KAMLABEN, IT IS CLARIFIED THAT THE EARLIER EXPLANATION WAS MORE ON THE SPUR O F THE MOMENT AND UNDER TENSION AND WITHOUT VERIFICATION O F FACTS PARTICULARLY AS THE DETAILS WERE NOT AVAILABLE AT T HE TIME OF MAKING THE SUBMISSION. IT IS EXPLAINED THAT THE EN TIRE AGRICULTURE LAND WAS BEING IRRIGATED BY BORE WELLS EXCEPT FOR THE AREA ON WHICH FACTORY WAS LOCATED. THE APPELLANT HU F HAD REACHED UNDERSTANDING WITH THE OTHER CO-OWNERS IN V IEW OF ITS URGENT NEED FOR FUNDS TO OBTAIN CONCESSIONAL RATES FROM THE DEVELOPERS. THIS IS EVIDENCED BY THE FACT THAT WHIL E THE 8 APPELLANT ACQUIRED A BUNGALOW FOR RS.12.50 LAKHS IN DECEMBER, 2000, ONE SHRI JAGDISHBHAI SHROFF, PURCHASED AN ADJ ACENT BUNGALOW FOR THE AMOUNT OF RS.17 LAKHS, JUST TWO YE ARS LATER. THE DEFECTS AS PER THE A.O. IN THE MOU HAVE BEEN EX PLAINED AND THE QUERIES OF THE A.O. ANSWERED BY THE APPELLA NT IN HIS REBUTTAL OF THE OBSERVATIONS OF THE A.O. IN THIS RE GARD (AS REPRODUCED IN PARA 7 OF THIS ORDER). THE APPELLANT HAS REFERRED TO THE REASONABLENESS OF THE AMOUNT, SEQUENCE OF EV ENT, RECORDS OF RIGHT FOR PROVING THE EXTENT OF AGRICULT URAL LAND AND THE HIGHER REVENUE YIELDING CROPS. IT HAS BEEN PO INTED OUT THAT IN ITS INITIAL REPLY (RECEIVED BY A.O. ON 12/1 0/2006 AS NOTED ON PAGE 30 OF ASSESSMENT ORDER) THE APPELLANT HAD I NFORMED THE A.O. OF HIS HAVING GIVEN INTIMATION TO THE STAT E GOVERNMENT ABOUT THE NATURE AND SOURCE OF THE RELATED TRANSACT IONS. THE A.O. HAD BEEN REQUESTED TO INFORM IF HE NEEDED THE VALUATION REPORT. IN FACT AN OFFER WAS MADE TO PRESENT THE O THER CO- OWNERS FOR EXAMINATION BUT THE A.O. HAD NOT CHOSEN TO EXAMINE THE CO-OWNERS, VALUATION REPORT OR THE INTI MATION GIVEN BY THE KARTA TO HIS EMPLOYER STATE GOVERNMENT. THU S THE ADDITION MADE BY THE A.O. WAS BASED ONLY ON SUSPICI OUS AND WITHOUT DISPROVING THE EXPLANATION. THE A.O. PROCEEDED ON THE ASSUMPTION THAT THE MOU WAS A SHAM AGREEMENT MADE SUBSEQUENTLY, IN AN ATTEMPT TO EXPLAIN THE INVESTMENT OF RS.25 LAKHS. APPARENTLY, THE A.O . FELT THT THE LIMITED EXTENT AND NATURE OF THE AGRICULTURAL LAND, THE NATURE OF CROPS GROWN, THE TIME PERIOD INVOLVED, THE ESTIMATE D EXPENDITURE ON HOUSEHOLD ETC., OF THE CO-OWNERS, T HE SHORTCOMINGS/DEFECTS IN THE MOU AS OBSERVED BY HIM, ETC. INDICATED THAT THE EXPLANATION OF THE ASSESSEE WAS NOT CREDIBLE. THE A.O. HAS HOWEVER NOT BROUGHT ANY EVIDENCE ON RE CORD TO JUSTIFY HIS SUSPICIOUS. NONE OF THE COPARCENERS, D EPONENTS WERE EXAMINED BEFORE SENDING THE REMAND REPORT. TH E REFERENCE BY THE A.O. TO A STATEMENT OF SHRI LAVJ IBHAI IS NOT SUBSTANTIATED FROM RECORD AND IT APPEARS THAT THE S UBMISSION OF SHRI LAVJIBHAI DURING POST SEARCH INVESTIGATIONS BE FORE THE ADIT, HAS BEEN EQUATED WITH A STATEMENT AS SUCH BY THE A.O. THE EXPLANATION FURNISHED TO THE A.O. WAS NOT DISPR OVED WITH POSITIVE EVIDENCE TO THE CONTRARY. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REL IED UPON THE FINDING OF THE A.O. AND SUBMIT THAT LEARNED CIT(A) DELETED THE ADD ITION WITHOUT PROPERLY CONSIDERING THE VARIOUS OBSERVATIONS OF THE A.O. THE LEARNED C IT(A), ACCEPTED THE ASSESSEES VERSION AND FRESH EVIDENCES IN FORM OF AFFIDAVITS T HEREBY INVOKING THE PROVISION OF 9 RULE 46-A OF I.T. RULES. THE ASSESSEE FAILED TO PRO VE IMMEDIATE SOURCE, CIRCUMSTANTIAL EVIDENCES, POST SEARCH ENQUIRY CLEARLY INDICATE THA T INVESTMENT OF RS. 25 LACS REMAINED UNEXPLAINED. ON THE OTHER HAND THE LEARNE D REPRESENTATIVE OF THE ASSESSEE, STRONGLY RELIED UPON THE ORDER OF THE CIT (A) AND TAKEN US THROUGH VARIOUS DOCUMENTARY EVIDENCES FILED DURING THE COURSE OF AS SESSMENT PROCEEDINGS AS WELL AS BEFORE THE CIT(A) AND REMAND REPORT OF THE A.O. HE ARGUED THAT IN VIEW OF OVERWHELMING EVIDENCES FILED BEFORE THE A.O. AS WEL L AS LEARNED CIT(A), SOURCE OF THE INVESTMENT IN THE HOUSE PROPERTY IS FULLY EXPLAINED , ALSO TOOK US THROUGH THE AFFIDAVIT OF THE BROTHERS AS WELL AS VARIOUS DOCUMENTARY EVID ENCES PERTAINING TO THE AGRICULTURE LAND, VALUATION OF THE PROPERTIES, AFFIDAVIT OF LAV JIBHAI KANANI, MOU ENTERED BETWEEN THE BROTHERS AND ALSO THE AFFIDAVIT OF THE BROTHERS . ON THE BASIS OF THIS, IT WAS ARGUED THAT ON BASIS OF VARIOUS EVIDENCES THE LEARNED CIT (A) HAS RIGHTLY DELETED THE ADDITION. THE LEARNED A.R. HAS ALSO TAKEN US THROU GH THE CONTENTS OF THE AFFIDAVIT, COPIES OF RECORDS OF RIGHTS AND CONTENDED FROM THES E IT IS ABSOLUTELY CLEAR THAT THE ASSESSEE WAS HAVING SHARES IN THE ANCESTOR PROPERTI ES, DETAILS OF COMPLETE AGRICULTURE LAND HOLDING IS ALSO GIVEN IN THE AFFIDAVIT AND COM PLETE DATEWISE SEQUENCE ARE ALSO GIVEN IN THE AFFIDAVIT. FURTHER, THE OTHER BROTHER S OF THE APPELLANT HAS ALSO CONFIRMED IN THEIR AFFIDAVIT ABOUT THE PAYMENT TO SHRI LAVJIB HAI B KANANI HUF. FROM THE PERUSAL OF THE REMAND REPORT IT IS CLEAR THAT ALL THESE EVI DENCES WERE FORWARDED TO THE ASSESSING OFFICER AND HIS REPORT WAS ALSO RECEIVED. AFTER CONSIDERING THE REMAND REPORT, AFFIDAVITS AND OTHER DOCUMENTS THE SOURCE O F INVESTMENT IS FULLY EXPLAINED AND THEREFORE, THE LEARNED CIT(A) IS FULLY JUSTIFIED I N DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 69B OF THE I.T. ACT. 7. WE HAVE CONSIDERED THE FACTS AND THE VARIOUS EVI DENCES AND GONE THROUGH THE ELABORATE FINDING GIVEN BY THE CIT(A) AND SPECIALLY THE DISCUSSION MADE BY THE CIT(A) IN PARA-7 OF HIS ORDER. IN THE SAID PARA-7 EACH AN D EVERY OBSERVATION OF THE A.O. HAS BEEN DISCUSSED AND AGAINST EACH OF THE A.O.S OBSER VATION, REBUTTAL OF THE APPELLANT IS ALSO DISCUSSED. FROM THE PERUSAL OF THE SAID TABLE LEARNED CIT(A) HAS EXAMINED THE 20 OBSERVATIONS OF THE A.O. RUNNING INTO 12 PAGES. IT IS ABSOLUTELY CLEAR, THAT EACH AND EVERY OBSERVATION OF THE A.O. HAS BEEN REBUTTED WITH DOCUMENTARY EVIDENCES AND THEREFORE, IN ABSENCE OF ANY SPECIFIC ISSUE BRO UGHT TO OUR NOTICE BY THE DEPARTMENTAL REPRESENTATIVE, THE FINDING GIVEN BY T HE CIT(A) BEING ON LOGICAL GROUND, CANNOT BE DISTURBED. FURTHER, IT IS SEEN THAT AS PER THE AFFIDAVIT DATED 24/4/2007 OF LAVJIBHAI KANANI, THE AMOUNT HAS BEEN INVESTED IN THE IMPUGNED HOUSE 10 PROPERTY ON THE VERY SAME DATE ON WHICH THE AMOUNT HAS BEEN RECEIVED FROM BROTHERS AND FURTHER, AS PER THE AFFIDAVIT DATED 21 /4/2007 OF ALL THE BROTHERS, THE DATE OF PAYMENT IS CONFIRMED IN PARA-10 OF THE SAID AFFI DAVIT. HOWEVER, FROM THE PERUSAL OF THE DOCUMENTARY EVIDENCES PERTAINING TO THE VALUAT ION OF THE PROPERTIES, AGAINST RELINQUISHMENT OF RIGHTS OF WHICH THE APPELLANT HAS RECEIVED AN AMOUNT OF RS.25 LAKHS, IT IS SEEN THAT THE ASSESSEE (HUF) HAS RELIN QUISHED ITS RIGHTS IN FAVOUR OF OTHER BROTHERS PERTAINING TO THE PROPERTIES WHICH ARE AGR ICULTURE LAND, FACTORY PREMISES, AGRICULTURE EQUIPMENTS, TOOLS, BORE WELL, ANIMALS E TC. WE HAVE ALSO GONE THROUGH THE REMAND REPORT OF THE ASSESSING OFFICER AS CALLED FO R BY THE CIT(A) WHEREIN IT IS CLEAR THAT VARIOUS EVIDENCES FURNISHED BY THE APPELLANT W ERE NOT CONTROVERTED BY THE ASSESSING OFFICER AND LEARNED ASSESSING OFFICER HA S STATED THAT THE ISSUE UNDER CONSIDERATION MAY BE DECIDED ON MERITS. MOREOVER, I N THE AFFIDAVIT DATED 21/04/2007 WHICH IS SIGNED BY ALL OTHER BROTHERS OF THE ASSESS EE COMPLETE DETAILS OF AGRICULTURE LAND AND THE REASONS FOR PAYMENT AS WELL AS DATE ON WHICH AMOUNT HAS BEEN PAID ARE CONFIRMED. THE COPIES OF THE RECORDS OF RIGHTS ALSO INDICATE THE HOLDING OF THE LAND BY VARIOUS FAMILY MEMBERS INCLUDING THE ASSESSEE, WHER EIN THE RIGHTS HAVE BEEN RELINQUISHED. 8. TO SUM UP, IN OUR OPINION, THE ENTIRE SOURCE OF INVESTMENT IN THE HOUSE PROPERTY HAS BEEN EXPLAINED BY THE ASSESSEE KEEPING IN VIEW THE DOCUMENTARY EVIDENCES, FACTS, VALUATION REPORT ETC. FURNISHED A ND AS ELABORATELY DISCUSSED BY LEARNED CIT(A) WHICH IS REPRODUCED BY US HEREINABOV E. HOWEVER, IN THE IMPUGNED ORDER, LEARNED CIT(A) COMPLETELY IGNORED THAT THE ASSETS RELINQUISHED BY HIM AMOUNT TO TRANSFER WITHIN THE MEANING OF SECTION 2( 47) OF THE INCOME TAX ACT, 1961. THEREFORE, THE ASSESSEE IS LAIBLE TO CAPITAL GAIN T AXED IN ACCORDANCE WITH LAW. 9. DURING THE COURSE OF HEARING, ASSESSEE WAS ASKED TO EXPLAIN WHY IT HAS NOT DECLARED CAPITAL GAIN. TO THIS, COUNSEL OF THE ASSE SSEE REPLIED THAT THIS WAS NOT EXAMINED BY ANY OF THE AUTHORITIES BELOW. HE FURTH ER POINTED OUT THAT ON AGRICULTURAL LAND, CAPITAL GAIN IS NOT LIABLE AND O NLY IN RESPECT OF ASSETS OTHER THAN CAPITAL GAIN, ARE LIABLE TO CAPITAL GAIN TAX LIABIL ITY OF THE ASSESSEE WHICH ACCORDING TO THE LEARNED COUNSEL OF THE ASSESSEE WORKS OUT TO RS . 46,408/- AS UNDER:- 11 INCOME FROM LONG TERM CAPITAL GAIN SALE OF PROPERTY AT S.NO.510/2P2/P2, AT CHAKKARGADH ROAD, AMRELI DIST. AMRELI, GUJARAT SALE VALUE RS.36,76,750/- RS.4,59,594 (BEING 1/8 TH SHARE OF TOTAL SALE CONSIDERATION I.E. RS.36,76,750 X 1/8) LESS: COST OF ACQUISITION TOTAL COST OF LAND AS PER VALUATION REPORT DATED 12/12/2006 RS.21,15,600/- THEREFORE, ASSESSEES 1/8 TH SHARE OF TOTAL COST OF LAND I.E. (RS.21,15,600 X 1/8) RS.2,64,450/- THEREFORE, COST OF LAND IN THE YEAR OF 1981 IS CONSIDERED RS.50,00 0 INDEXED COST OF ACQUISITION (RS.50,000 /100(1981-82) X 406 (2000-01) 2,03,000 ADD: TOTAL CONSTRUCTION COST IN THE YEAR OF 2000 AS PER VALUATION REPORT DTD.12/12/06 THEREFORE, 1/8 TH SHARE OF TOTAL CON- STRUCTION COST (I.E. RS.16,81,489 X 1/8) 2,10,186 RS. 4,13,186 LONG TERM CAPITAL GAIN ON SALE OF PROPERTY RS.46,408 10. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT HE HAS NO OBJECTION IN CASE THE ASSESSING OFFICER WILL VERIFY THE CORRECTNESS O F AFORESAID WORKING OF LONG TERM CAPITAL GAIN AND TAX THE SAME IN ACCORDANCE WITH LA W. IN OUR OPINION, WHETHER THE LAND TRANSFERRED WAS AGRICULTURAL LAND OR NOT ALSO NEED VERIFICATION AT THE END OF THE ASSESSING OFFICER. THEREFORE, ONLY FOR THIS LIMITE D PURPOSE, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OF FICER IS DIRECTED TO VERIFY THE CALCULATION OF CAPITAL GAIN FURNISHED BY THE ASSESS EE. ASSESSING OFFICER WILL ALSO 12 EXAMINE WHETHER THE AGRICULTURE LAND IS ALSO LIABLE TO CAPITAL GAIN. THE ORDER OF THE LEARNED CIT(A) DELETING THE ADDITION OF RS. 25 LAKH S U/S 69-B OF THE ACT IS ACCORDINGLY UPHELD SUBJECT TO RIDER THAT ASSESSING OFFICER WILL TAX ONLY THE CAPITAL GAIN IN ACCORDANCE WITH LAW AS INDICATED BY US HEREIN AB OVE. 11. IN THE RESULT FOR STATISTICAL PURPOSES, THE APP EAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/09/2009. SD/- SD/- (N.S.SAINI) (T.K.SHARMA) ACCOUNTNT MEMBER JUDICIAL MEMBER DATED: 18TH SEPTEMBER- 2009 RKK COPY FORWARDED TO :- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A). 4. THE CIT 5. DR 6. GUARD FILE BY ORDER DY./ASSTT. REGISTRAR, ITAT, AHMEDABAD. 13