Shri Bhavish Harilal Moradia, Rajkot V. The ITO Ward-1 (1) (3) , Rajkot

ITA 63/RJT/2023

AI Insights

The case revolves around an appeal by Bhavish Hiralal Moradia against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, which confirmed an addition of Rs. 8,50,000 to Moradia's income for the Assessment Year 2009-10. This addition was alleged to be 'on-money' paid for the purchase of a residential property, based on an affidavit from the builder's partner. Moradia contested this addition, arguing that it was unsupported by any material evidence and that he was not given an opportunity for cross-examination of the affidavit. The Tribunal agreed with Moradia, emphasizing that an addition cannot be made solely on the basis of a third party's affidavit without corroborative evidence and without affording the opportunity of cross-examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136001 (ITAT-RAJKOT)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 18-07-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2023
• Other Referred Cases: Aditi Construction vs. DCIT, Glass Line Equipments Co. Ltd vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEREVENUETORELY; SHRIK.L.SOLANKI
• Assessee Lawyers: SHRIM.N.MANVAR

Judgement Text

आयकरअपीलीयअधिकरण,राजकोटनायपीप,राजकोट। INTHEINCOMETAXAPPELLATETRIBUNAL RAJKOTBENCH,RAJKOT (THROUGHE-COURT) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.R.SENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं./ I.T.A.No.63/Rjt/2023 ( धििाधरणणवध /AssessmentYear2009-10) BhavishHiralalMoradia M.N.Manvar&Co., CharteredAccountants, 504,StarPlaza,Nr.Circuit House,PhulchhabChowk, Rajkot-360001 बिाम/ Vs. IncomeTaxOfficer, Ward-1(1)(3), Rajkot स्थयीलेखथसं./जीआइआरसं./PAN/GIRNo.:ACHPM6171H (अपीलथ््/Appellant) (प्््/Respondent) अपीलथ््थरसे/Appellantby: ShriM.N.Manvar,A.R प्््कीथरसे/Respondentby: ShriK.L.Solanki,Sr.D.R. सुनवथईकीतथरीख/DateofHearing 19/07/2023 घोषणथकीतथरीख/DateofPronouncement 02/08/2023 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceofAssesseeagainstthe orderoftheLearnedCommissionerofIncomeTax,[Ld.CIT(A)inshort],National FacelessAppealCentre(inshort“NFAC”),Delhidated14.02.2023arisinginthe matterofassessmentorderpassedunders.143(3)r.w.s.147oftheIncomeTax Act,1961(hereinafterreferredtoas"theAct")relevanttotheAssessmentYear (A.Y.)2009-10. ITANo.63/RJT/2023 A.Y.2009-10 -2- 2.Theassesseeinthegroundofappealhaschallengedtheinitiationofthe proceedingsunderSection147oftheActandtheassesseealsochallengedthe additionmadebytheAssessingOfficerforRs.8,50,000/-onaccountofon-money paidtothebuilder. 3.Thefactsinbriefarethattheassesseeinthepresentcaseisanindividual andengagedinthebusinessofmanufacturingandtradingofPSCsale.The assesseeintheyearunderconsiderationhaspurchasedaresidentialhousefrom thebuildernamelyParijatResidencyonthepaymentofRs.20,50,000/-asperthe saledeed.However,theAssessingOfficerwasoftheviewthattheassesseehas madepaymentincashforRs.8,50,000/-withoutrecordingthesameinthebooks onaccount.Thus,aspertheAssessingOfficertheassesseehasmadethe paymentofon-moneyforthepurchaseofresidentialpropertyforRs.8,50,000/- only.TheopinionoftheAssessingOfficerwasbasedontheaffidavitfurnishedby ShriRushabhChandrakantShethpartnerofParijatResidencywhichwasfurnished duringsearchunderSection132oftheAct.However,theassesseealsofurnished theaffidavitdated01.10.2016duringtheassessmentproceedingscontendingthat nopaymentoftheon-moneyhasbeenpaidforthepurchaseofresidentialhouse fromtheimpugnedpartnershipfirm.However,theAssessingOfficerwasnot satisfiedwiththecontentionoftheassesseeandtherefore,hemadetheaddition tothetotalincomeoftheassessee. 4.AggrievedassesseepreferredanappealtotheLd.CIT(A).Theassessee beforetheLd.CIT(A)submittedthattherewasnomaterialavailablewiththe AssessingOfficerformakingtheadditionofon-moneyofRs.8,50,000/-except theaffidavitfurnishedbythepartnerofthebuilder(ParijatResidency).Asper theassessee,therecannotbeanyadditionmerelybasedonthestatementofthe thirdpartyuntilandunless,thereisalsosomecorroborativematerialonrecord andthattoowithoutaffordingtheopportunityofcross-examination.However, theLd.CIT(A)wasnotsatisfiedwiththecontentionoftheassesseeonthe ITANo.63/RJT/2023 A.Y.2009-10 -3- reasoningthattheassesseehasnotmadeanyrequestforthecross-examination oftheaffidavitduringtheassessmentproceedings.Assuchtheassesseefirst timehasraisedtheissueofcross-examinationbeforetheLd.CIT(A).TheLd. CIT(A)furtherobservedthatthepartnerofParijatResidencyhasclearlyadmitted havingreceivedon-moneyanddeniedavailingtheopportunityofcross- examination.Likewise,theassesseealsoremainedsilentforavailingthe opportunityofcross-examinationduringtheassessmentproceedings.Thus,the Ld.CIT(A)afterconsideringallthefactswasoftheviewthattheassesseehas madethepaymentofon-moneyandaccordinglyconfirmedtheadditionmadeby theAssessingOfficer. 5.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 6.TheLd.ARsubmittedbeforeusfiledaPaperBookrunningfromPages1to 56andcontendedthatnoadditioncanbemadeintheabsenceofanymaterialon record. 6.1Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 7.Wehaveheardtherivalcontentionsandperusedthematerialsavailableon record.Inthepresentcase,theproceedingswereinitiatedunderSection148of theActandnotundertheprovisionsofSection153CoftheAct.Thus,itis transparentthattherewasnodocumentofincriminatingnaturefoundduringthe searchproceedingsatthepremisesofthebuilderbeingParijatResidency. Otherwise,theproceedingsunderSection153Ccouldhavebeeninitiatedbythe AssessingOfficer.However,theAssessingOfficerhasrecordedthereasonsto believefortheescapeofincomeforRs.8,50,000/-onthebasisoftheaffidavit furnishedbythepartnerofthebuilderi.e.ParijatResidency.Insimplewords,the ITANo.63/RJT/2023 A.Y.2009-10 -4- entirethrustoftheRevenuewasbasedontheaffidavitfortheimpugnedaddition whichwasnotcorroboratedbyanydocumentaryevidencesuggestingthatthe assesseehasmadepaymentbywayofon-moneyinthepurchaseofthe residentialproperty.Nowthecontroversyariseswhethertheadditioncanbe mademerelybasedontheaffidavitofthethirdparty.Theanswerisno.Itis becausetheaffidavitgivenbythethirdpartycannotbeusedagainsttheassessee withoutaffordingtheopportunityofcrossexamination.Itisequallyimportantto notethattheassesseehasalsofurnishedtheaffidavitdated01.10.2016stating thattherewasnoinvestmentofon-moneyinthepurchaseofresidentialproperty buttheauthoritiesbelowwithoutpointingoutanydefectorinfirmityinsuch affidavitoftheassesseeasreliedontheaffidavitofthethirdpartyformakingthe impugnedaddition.Inourconsideredview,itwastheonusupontheRevenueto disprovetheaffidavitfurnishedbytheassesseebasedoncogentreasons.Had therebeenrecoveredanytangiblematerialduringthesearch,theAssessing OfficerwouldhaveinitiatedtheproceedingsunderSection153CoftheAct,but thesituationestablishesthefactthatnomaterialofincriminatingnaturewas foundduringthesearchproceedingsbelongingtotheassessee.Accordingly,the AssessingOfficerinitiatedtheproceedingsunderSection147oftheActinplaceof theprovisionsofSection153CoftheAct.Itisthetritelawthataffidavitis writtenstatementandastatementgivenbythethirdpartycannotbindthe assesseeasheldbytheHon’bleBombayHighcourtinthecaseofAditi constructionvs.DCITreportedin454ITR456whereitwasheldasunder: 9.Wefindthatthejurisdictionalconditionsforinvokingsection147-148arenotsatisfiedasthere isnofailuretodisclosematerialfactsfullyandtruly.Itisnotindisputethatbytheletterdated11th September2015(ExhibitH)thePetitionerhavesubmittedalltheparticularsalongwithsupporting documentstotheRespondentNo.1.Hencethereasonstobelieveandapresumptionbasedonthe statementofShriBhanwarlalJain(athirdparty)inthecourseofasearch,thattheloansofthe entitieswerebogusoraccommodationentrieswasclearlydispelled.Moreover,thespecific provisionsofs.153Cwouldprevailoverthegeneralprovisionsofsection147inthecaseofsearch on3 rd party. 7.1Atthecostofrepetition,itisalsopertinenttonotethattheassesseealso furnishedcounteraffidavitbeforetheAObuttheAOononehandrelieduponthe affidavitofthirdpartybutrejectedtheaffidavitofassesseewithoutassigningany ITANo.63/RJT/2023 A.Y.2009-10 -5- reasontoit.TheHon’bleGujaratHighCourtinthecaseofGlassLineEquipments Co.Ltdvs.CITreportedin253ITR454helditisnotopenfortherevenuetorely uponpartoftheaffidavitwhichisfavorabletodepartmentandagainstthe assessee.TherelevantobservationoftheHon’bleHighCourtreadsasunder: AslaiddownbytheSupremeCourtinthecaseofMehtaParikh&Co.v.CIT[1956]30ITR181, noneoftheauthoritiesconsidereditnecessarytocross-examinethedeponentwithreferencetothe statementmadeintheaffidavit,and,hence,underthesecircumstancesitwasnotopentothe revenuetochallengethecorrectnessofthestatementmadebythedeponentintheaffidavit.In otherwords,consequently,theassesseewasentitledtoassumethattheauthoritiesweresatisfied withtheaffidavitassufficientproofonthispoint. InthepresentcaseitwasfoundthattheCommissioner(Appeals)whiledealingwiththeaffidavit, hadconvenientlychosentoacceptonlyonepartofthestatementwhichwasinfavourofthe revenueandagainsttheassesseewhileignoringtherestoftheportionwhereinspecificaverments weremadeinrelationtothebalanceitemsofexpenditure. Inviewofthesettledlegalposition,itwasnotopentoeithertheCommissioner(Appeals)orthe Tribunaltoignoreapartofthecontentsoftheaffidavit.ThefindingsrecordedbytheCommissioner (Appeals)andtheTribunalwereconcurrentasregardsthefactsandevidenceonrecordandbutfor theavermentsmadeintheaffidavitwhichhadbeenignored,thesaidfindingswouldnothavebeen interferedwith. 7.2Inviewoftheaboveandafterconsideringthenecessaryfacts,weareof theviewthattheadditionmadebytheauthoritiesbelowbasedonthethird-party statementisnotsustainable.Hence,weset-asidethefindingoftheLd.CIT(A) anddirecttheAssessingOfficertodeletetheadditionmadebyhim.As,wehave decidedtheissueinfavouroftheassesseeonmerit,wedonotfindanyreasonto interfereinGroundNo.1challengingthevalidityoftheinitiationofthe proceedingsunderSection148oftheAct.Assuchthetechnicalgroundraisedby theassesseebecomesinfructuous.Hence,thegroundofappealoftheassessee ispartlyallowed. 8.Intheresult,theappealoftheassesseeispartlyallowed. ThisOrderpronouncedinOpenCourton02/08/2023 Sd/-Sd/- (T.R.SENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER TRUECOPY Ahmedabad,Dated02/08/2023 Tanmay/Manish