M/s. Gopal Builders, Surat V. The Principal Commissioner of Income Tax, Surat

ITA 634/SRT/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7775 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 17-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: A P NANAVATY
• Keywords: Unexplained investment; Unexplained expenditure; Business income; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Maximum Marginal Rate; Additional evidence; Wrong claim; Revised return; Set aside
• Section: 69C; 143(3); 142(1); 201; 13; 131; 68; 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ ITA NOS.634/SRT/2018 & 28/SRT/2019 ( [ [ / ASSESSMENT YEARS: (2013-14 & 2014-15) (VIRTUAL COURT HEARING) M/S.GOPAL BUILDERS, 93, AKHAND ANAND SOCIETY, B/H. SWAMINARAYAN MANDIR, ADAJAN, SURAT 395009. V S. THE PRINCIPAL COMMISSIONER OF INCOME TAX 1, SURAT. ./ ./PAN/GIR NO.: AACFG 2281 R (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI A.P.NANAVATY - CA RESPONDENT BY : SHRI O.P.VAISHNAV CIT(DR) / DATE OF HEARING : 30/06/2021 / DATE OF PRONOUNCEMENT : 23/08/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: IN THESE TWO APPEALS, THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDERS PASSED BY THE LD.PRINCIPAL COMMISSIONER OF INCOME TAX [LD.PR.CIT], SURAT-1, UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15. 2. SINCE THE ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMON AND IDENTICAL, THEREFORE, THESE APPEALS HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, THE GROUNDS AS WELL AS THE FACTS NARRATED IN ITA NO.634/SRT/2018, FOR ASSESSMENT YEAR 2013-14, HAVE BEEN TAKEN INTO CONSIDERATION FOR DECIDING THE ABOVE APPEALS EN MASSE . 3. IN LEAD CASE OF ASSESSEES APPEAL, IN ITA NO.634/SRT/2018, FOR THE ASSESSMENT YEAR (A.Y.) 2013-14, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: PAGE | 2 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT 1) THE LD. PR. CIT HAS ERRED IN LAW AND ON FACTS IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT HOLDING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE TO THE EXTENT OF FAILURE OF A.O. TO TREAT INCOME DISCLOSED DURING SURVEY AS INCOME CHARGEABLE U/S 68/69/69C AND NOT TO ALLOW ANY STANDARD DEDUCTION U/S 24 OF THE ACT. 2) THE LD. PR. CIT HAS ERRED IN LAW AND ON FACTS HOLDING ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE DUE TO FAILURE OF A.O. TO ADD UNACCOUNTED INCOME OF RS. 1,00,00,000/- ADMITTED DURING SURVEY PROCEEDINGS BUT NOT DISCLOSED IN THE RETURN OF THE INCOME BY THE APPELLANT. 3) THE LD. PR. CIT HAS ERRED IN LAW AND ON FACTS HOLDING ORDER AS PREJUDICIAL AND ERRONEOUS TO THE INTEREST OF REVENUE FOR A.O. GRANTING SET OFF OF BROUGHT FORWARD LOSS OF RS. 18.05 LACS AGAINST UNACCOUNTED BUSINESS INCOME VIOLATING PROVISIONS OF SECTION 115BBE OF THE ACT. 4) THE LD. PR. CIT HAS ERRED IN LAW AND ON FACTS DIRECTING AO TO FRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH DISCUSSION & DIRECTION IN ORDER U/S 263 OF THE ACT NOT APPRECIATING THE FACT THAT DETAILED ORDER BY A.O. CONSIDERING RELEVANT FACTS AND PROVISIONS OF LAW NOT BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE DESERVED TO BE UPHELD AND OUGHT NOT BE SUBJECTED TO REVISIONAL PROCEEDINGS. 5) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, DELETE, SUBSTITUTE OR MODIFY ANY OR ALL OF THE GROUNDS OR GROUNDS OF APPEAL. 4. BRIEF FACTS QUA THE ISSUE ARE THAT ASSESSEE (M/S GOPAL BUILDERS) IS ENGAGED PRIMARILY IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. ITS RETURN OF INCOME FOR AY 2013-14 HAS BEEN FILED ON 03.08.2013, DECLARING LOSS OF RS.18,93,117/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A REVISED COMPUTATION OF INCOME WAS FILED, SHOWING GROSS TOTAL INCOME OF RS.90,56,883/- WHICH INCLUDED INCOME FROM HOUSE PROPERTY, UNDISCLOSED NET RENT INCOME AFTER CLAIMING STANDARD DEDUCTION @ 30% AND LOSS FROM BUSINESS. SCRUTINY ASSESSMENT U/S 143(3) WAS FINALIZED ON 14.03.2016 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.91,81,880/- BY MAKING DISALLOWANCES OF RS.1,25,000/-ON ACCOUNT OF INADEQUATELY VOUCHED CONSTRUCTION EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2013- 14, THE ASSESSEE HAD SUBMITTED A REVISED COMPUTATION STATEMENT FOR AY 2013-14 DISCLOSING ADDITIONAL INCOME UNDER INCOME FROM 'HOUSE PROPERTY' OF RS. 1,30,00,000/- IN PURSUANCE OF DISCLOSURE OF INCOME MADE DURING SURVEY OPERATION ON 26/10/2013 BY THE PARTNER SHRI MANJIBHAI PATEL, IN HIS STATEMENT RECORDED U/S 131 OF THE I T ACT. SUBSEQUENTLY, HOWEVER, THE ASSESSEE FILED A REVISED RETURN OF INCOME IN WHICH HE CLAIMED STANDARD PAGE | 3 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT DEDUCTION OF RS 39,00,000/- UNDER SECTION 24, @ 30% OUT-OF THE DISCLOSURE MADE OF RS. 1,30 00,000/- AND SHOWED THE BALANCE AMOUNT OF RS. 91,00,000 AS INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER ALLOWED THE STANDARD DEDUCTION CLAIMED OF RS 39,00,000/-. 5. LATER, LD.PRINCIPAL COMMISSIONER OF INCOME TAX [LD.PR.CIT], SURAT-1, HAS EXERCISED HIS JURISDICTION UNDER SECTION 263 OF THE ACT. THE LD PCIT NOTICED THAT AS FAR AS THE INCOME OF RS 1,30,00,000/- IS CONCERNED, IT IS NOT ESTABLISHED FROM ANY IMPOUNDED DOCUMENT OR FROM ANY DETAILS GIVEN BY THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS NOR STATED BY THE ASSESSEE IN HIS STATEMENT TO ESTABLISH THAT THE SAID AMOUNT OF RS 1,30,00,000/- WAS ACTUALLY RENTAL INCOME . THE AO HAS NOT ENQUIRED INTO THE ISSUE AND HAS NOT QUERIED THE ASSESSEE TO PROVE THAT THE SAME CAN BE CONSIDERED AS RENTAL INCOME. THUS WITHOUT ANY EVIDENCE, THE AMOUNT DISCLOSED IS ACTUALLY TAXABLE UNDER SECTIONS 68/69/69C OF THE ACT AND TAXED AT THE MAXIMUM MARGINAL RATE IN THE LIGHT OF SECTION 115BBE OF THE ACT. BENEFIT OF 30% STANDARD DEDUCTION, AGAINST THE SUM OF RS.1,30,00,000/- IS THEREFORE, NOT ALLOWABLE. 6. THE LD PCIT ALSO OBSERVED THAT, ASSESSEE HAS BEEN ALLOWED SET OFF OF RS.18.05 LAKHS AGAINST REGULAR BUSINESS INCOME WHICH IS NOT ALLOWABLE SINCE THE AMOUNT OFFERED DURING SURVEY SHOULD ACTUALLY BE TAXED U/S 68/69/69C OF THE ACT. 7. DURING THE COURSE OF SURVEY ON 26/10/2013, VARIOUS PAPERS WERE IMPOUNDED, OUT OF WHICH PAGES NO. 120-127 IMPOUNDED FROM THE ASSESSEES BHARAT NAGAR OFFICE WERE REGARDING LAND AT 171/A AND 171/B OF TPS SCHEME WHICH IS OF SIZE 15030 SQUARE METER IN KATARGAM, SURAT. PARTNER OF ASSESSEE FIRM, SHRI MANJIBHAI DUNGRABNI, IN HIS STATEMENT DURING SURVEY ON 26.10.2013, IN RESPONSE TO QUESTION NO. 15, HAS STATED THAT IN RESPECT OF THESE PAPERS, HE WAS OFFERING RS.2.85 CRORES IN HANDS OF GOPAL BUILDER FOR THREE YEARS, NAMELY RS.50,00,000/- FOR AY 2012-13,. RS.1,00,00,00/- FOR AY 2013-14 AND RS.1,35,00,000 FOR AY 2014-15. HOWEVER, NO SUCH INCOME OF RS.1 CRORE IS FOUND DISCLOSED IN THE RETURN/REVISED RETURN OF THE ASSESSEE FOR THE AY 2013-14. THUS, LD PCIT WAS OF THE VIEW THAT AO HAD FAILED TO PAGE | 4 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT QUESTION THE SAME DURING ASSESSMENT PROCEEDINGS AND FAILED TO ANALYZE THE DOCUMENTS IMPOUNDED AND STATEMENT GIVEN. NO ADDITION AND DISALLOWANCE WAS MADE BY THE AO IN THE ASSESSMENT ORDER ON ACCOUNT OF THE ABOVE. THUS, THE LD PCIT HELD THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO REVENUE. THEREFORE, BASED ON THESE FACTS, THE LD.PR.CIT ISSUED A SHOW CAUSE NOTICE DATED 14.03.2018, TO THE ASSESSEE, WHICH IS REPRODUCED BELOW: ON VERIFICATION OF THE RETURN OF INCOME, DETAILS AVAILABLE ON RECORD, AND THE ASSESSMENT ORDERED U/S 143(3) DATED 28/03/2016 FOR A.Y 2013-14 IN THE CASE OF M/S GOPAL BUILDERS, THE FOLLOWING FACTS ARE OBSERVED: (I) THE FIRM M/S GOPAL BUILDERS, ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT HAS FILED ITS RETURN OF INCOME ON 03.08.2013 DECLARING LOSS OF RS.18,93,117/- FOR AY 2013-14. DURING THE ASSESSMENT PROCEEDINGS, A REVISED COMPUTATION OF INCOME WAS FILED, SHOWING GROSS TOTAL INCOME OF RS.90,56,883/- WHICH INCLUDED INCOME FROM HOUSE PROPERTY, UNDISCLOSED NET RENT INCOME AFTER CLAIMING STANDARD DEDUCTION OF 30% AND LOSS FROM BUSINESS. (II) SCRUTINY ASSESSMENT U/S 143(3) WAS FINALIZED ON 14.03.2016 DETERMINING INCOME OF RS.91,81,880/- BY MAKING DISALLOWANCES OF RS.1,25,000/- OUT OF EXPENSES ON ACCOUNT OF IN INADEQUATELY VOUCHED CONSTRUCTION EXPENSES. (III) AS DISCUSSED ABOVE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR THE AY 2013-14, THE ASSESSEE HAD SUBMITTED A REVISED COMPUTATION STATEMENT FOR AY 2013-14 DISCLOSING ADDITIONAL INCOME UNDER INCOME FROM HOUSE PROPERTY OF RS.1,30,00,000/- IN PURSUANCE OF DISCLOSURE OF INCOME MADE BY THE PARTNER SHRI MANJIBHAI PATEL, IN HIS STATEMENT RECORDED U/S 131 OF THE I.T ACT. SUBSEQUENTLY, HOWEVER THE ASSESSEE FILED A REVISED RETURN OF INCOME IN WHICH HE CLAIMED STANDARD DEDUCTION OF RS.39,00,000/- OUT OF THE DISCLOSURE MADE OF RS.1,30,00,000/- AND SHOWED THE BALANCE AMOUNT OF RS.91,00,000 AS INCOME FROM HOUSE PROPERTY. HOWEVER, IN THE FACTS OF THE CASE, THE STANDARD DEDUCTION IS NOT ALLOWABLE SINCE, THE ENTIRE AMOUNT OF RS.1,30,00,000/- HAD BEEN DISCLOSED AS INCOME FROM HOUSE PROPERTY. (IV) THE ASSESSING OFFICER ALLOWED THE STANDARD DEDUCTION CLAIMED OF RS.39,00,000/-. AS FAR AS THE INCOME OF RS.1,30,00,000 IS CONCERNED IT IS NOT ESTABLISHED FROM ANY IMPOUNDED DOCUMENT OR FROM ANY DETAILS GIVEN BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS NOR STATED BY THE ASSESSEE IN HIS STATEMENT TO ESTABLISH THAT THE SAID AMOUNT OF RS.1,30,00,000 WAS ACTUALLY RENTAL INCOME. THE AO HAS NOT ENQUIRED INTO THE ISSUE AND HAS NOT QUERRIED THE ASSESSEE TO PROVE THAT THE SAME CAN BE CONSIDERED AS RENTAL INCOME. THUS WITHOUT ANY EVIDENCE, THE AMOUNT DISCLOSED SHOULD ACTUALLY BE TAXABLE UNDER SECTIONS 68/69/69C OF THE ACT AND TAXED AT THE MAXIMUM MARGINAL RATE IN THE LIGHT OF SECTION 115BBE OF THE ACT. BENEFIT OF 30% STANDARD DEDUCTION AGAINST THE SUM OF RS.1,30,00,000 IS THEREFORE, NOT PAGE | 5 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT ALLOWABLE. IT IS FURTHER SEEN THAT, THE ASSESSEE HAS BEEN ALLOWED SET OFF OF RS.18.05 LAKHS AGAINST REGULAR BUSINESS INCOME WHICH IS NOT ALLOWABLE SINCE THE AMOUNT OFFERED DURING SURVEY SHOULD ACTUALLY BE TAXED U/S68/69/69C OF THE ACT. (V) DURING THE SURVEY PROCEEDINGS ON 26.10.2013, VARIOUS PAPERS WERE IMPOUNDED, OUT OF WHICH PAGE NO. 120-127 IMPOUNDED FROM BHARATNAGAR WERE REGARDING LAND AT 171/A AND 171/B OF TPS SCHEME WHICH IS OF SIZE 15030 SQUARE METER IN KATARGAM AREA SURAST. PARTNER OF ASSESSEE FIRM, SHRI MANJIBHAI DUNGRANI IN HIS STATEMENT DURING SURVEY ON 26.10.2013 IN RESPONSE TO QUESTION NO. 15, HAS STATED THAT IN RESPECT OF THESE PAPERS, HE IS OFFERING 2.85 CRORES IN HANDS OF GOPAL BUILDER IN THREE YEARS, NAMELY RS.50,00,000/- FOR AY 2012-13, RS.1,00,00,000/- FOR AY 2013-14 AND RS.1,35,00,000 FOR AY 2014-15. HOWEVER, NO SUCH INCOME OF RS.1 CRORE IS FOUND DISCLOSED IN THE RETURN/REVISED RETURN OF THE ASSESSEE FOR THE AY 2013-14. THE AO FAILED TO QUESTION THE SAME DURING ASSESSMENT PROCEEDINGS AND FAILED TO ANALYZE THE DOCUMENTS IMPOUNDED, AND STATEMENT GIVEN. THUS THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO REVENUE. IN VIEW OF THE ABOVE FACTS THE ASSESSMENT ORDER DATED 14/03/2016 IN THE CASE OF THE ASSESSEE FOR THE AY 2013-14 IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HOWEVER, FOR THE SAKE OF NATURAL JUSTICE, YOU ARE HEREBY BEING PROVIDED AN OPPORTUNITY OF BEING HEARD TO OFFER EXPLANATION IF ANY, AS WELL AS TO ADDUCE EVIDENCE, IF ANY, AGAINST THE PROPOSAL OF REVISION U/S 263 OF THE INCOME TAX ACT. THE HEARING IN YOUR CASE FOR THE ABOVE PURPOSE IS HEREBY FIXED ON 20/03/2018 AT 04.30 PM BEFORE THE UNDERSIGNED IN ROOM NO. 123, AAYAKAR BHAVAN, MAJURA GATE, SURAT. YOU MAY ATTEND EITHER PERSONALLY OR THROUGH A REPRESENTATIVE DULY AUTHORIZED IN THIS BEHALF. IF YOU DO NOT WISH TO ATTEND PERSONALLY OR THROUGH AN AUTHORIZED REPRESENTATIVE, THEN YOU MAY SUBMIT WRITTEN EXPLANATION WHICH MUST REACH THIS OFFICE ON OR BEFORE THE DATE OF HEARING FIXED AS ABOVE. 8. IN RESPONSE TO ABOVE SHOW CAUSE NOTICE, THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSIONS, WHICH IS REPRODUCED BELOW: WE INVITE ATTENTION THAT YOU HAD SERVED SHOW CAUSE NOTICE DATED 14.03.2018 AND SERVED ON 19.03.2018 HENCE RULE OF NATURAL JUSTICE OF AFFORDING REASONABLE OPPORTUNITY HAS BEEN DENIED. WE FURTHER STATE THAT KINDLY PROVIDE US RECORD JUSTIFYING ADDITION U/S 68/69/69C OF THE IT ACT, 1961 BECAUSE WE BELIEVE THAT THERE IS NO SUCH RECORD AND PLEASE FURNISH US COPY OF SUCH RECORD JUSTIFYING ADDITIONS U/S 68/69/69C OF THE IT ACT, 1961 AND FURNISH COPY OF SUCH RECORD TO MAKE MEANINGFUL OPPORTUNITY OF BEING HEARD, FAILING WHICH WE SHALL BE DENIED OPPORTUNITY OF BEING HEARD. PAGE | 6 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT FURTHER WE STATE THAT WE HAVE NOT SOLD ANY LAND IN KATARGAM AND LAND OWNED BY US IS SHOWN IN BALANCE SHEET OF DHANAJIBHAI PATEL BEING ASSESSED AT CIRCLE 1(3) AND DISCLOSED AS ASSET IN RETURN OF INCOME IN AY 2017-18. SECONDLY, AS REGARD SALE OF IMMOVABLE PROPERTY IS CONCERNED, THERE SHOULD BE REGISTERED CONVEYANCE DEED AND THEREFORE PLEASE PROVIDE US SEIZED PAPERS REFERRED BY IN YOUR SHOW CAUSE NOTICE DATED 14/03/2018 AND COPY STATEMENT OF MANAJIOBHAI PATEL HIGHLIGHTING PORTION OF ADMISSION OF 2.85 CR. IN HIS STATEMENT IN NAME OF GOPAL BUILDERS AND ALSO REGISTERED CONVEYANCE DEED TRANSFERRING OWNERSHIP IN SAID KATARGAM. STILL IF YOU HAVE ANY OTHER EVIDENCE OF SALE OF KATARGAM LAND PLEASE ALSO FURNISH SUCH ADDITIONAL EVIDENCE. IN VIEW OF ABOVE SAID, SUBMISSION UNLESS YOU PROVIDE EVIDENCE AS STATED HEREINABOVE, THERE SHALL BE COMPLETE FAILURE OF RULE OF NATURAL JUSTICE AND PRIMA-FACIE IT APPEARS THAT THERE IS NO RECORD JUSTIFYING SUCH REVISION AND THERE APPEARS TO BE NEITHER APPLICATION OF MIND HAVING ANY MISTAKE OF LAW OR FACT. 9. HOWEVER, THE LD.PR.CIT HAS REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE, DATED 14.03.2016, PASSED U/S 143(3) OF THE IT ACT FOR A.Y 2013-14 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY, LD PCIT HAS DIRECTED TO THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH THE DISCUSSION AND DIRECTIONS IN THIS ORDER, AND AS PER THE PROVISIONS OF LAW. 10. AGGRIEVED BY THE ORDER OF THE LD.PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 11. LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US WRITTEN SUBMISSIONS, THE IMPORTANT PART OF THE WRITTEN SUBMISSIONS, ARE REPRODUCED BELOW: 1. THE FIRM M/S. GOPAL BUILDERS IS ENGAGED PRIMARILY IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE. ITS RETURN OF INCOME FOR A.Y. 2013-14 HAS BEEN FILED ON 03/08/2013 DECLARING LOSS OF RS. 18,93,117/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A REVISED COMPUTATION OF INCOME WAS FILED, SHOWING GROSS TOTAL INCOME OF RS.90, 56,883/- WHICH INCLUDED INCOME FROM HOUSE PROPERTY, UNDISCLOSED NET RENT INCOME AFTER CLAIMING STANDARD DEDUCTION @ 30% AND LOSS FROM BUSINESS. SCRUTINY ASSESSMENT U/S 143(3) WAS FINALIZED ON 14/03/2016 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 91,81,880/- BY MAKING DISALLOWANCES OF RS. 1,25,000/- ON ACCOUNT OF INADEQUATELY VOUCHED CONSTRUCTION EXPENSES. PAGE | 7 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT 2. THERE WAS SURVEY AT THE PREMISES OF M/S GOPAL BUILDERS ON 26/10/2013. STATEMENT OF PARTNER OF M/S GOPAL BUILDER RECORDED AND COPY THEREOF AT PAGE NO. 27 TO 34 WHICH STATEMENT WAS COMPLETED TEMPORARILY ON 26/10/2013 AT 1.30 P.M. AGAINST STATEMENT WAS RESUMED ON 26/10/2013 AT 3.30 P.M. WHICH CONTINUED UP TO 5.30 P.M. THERE AFTER STATEMENT WAS AGAIN RESUMED THAT 7.30 P.M. WHICH CONTINUED UP TO 9.15 P.M. THERE AFTER STATEMENT WAS AGAIN ON 28/10/2013 AT 1.30 P.M. AND COMPLETED AT LATE NIGHT. DURING THE COURSE OF SURVEY, STATEMENT OF ONLY SHRI MANJIBHAI P. PATEL WAS RECORDED AND NO OTHER PARTNER OR FAMILY MEMBER OF PARTNERS OF M/S GOPAL BUILDERS HAS BEEN EXAMINED. HENCE HEREIN AFTER STATEMENT OF SHRI MANJIBHAI P. PATEL SHALL BE REFERRED TO AS SAID STATEMENT. 3. DISCLOSURE OF INCOME MADE IN SAID STATEMENT WAS ALLOCATED TO RESPECTIVE INDIVIDUALS AND SUCH LIST OF DISCLOSURE OF INCOME PERSON WISE AND YEAR WISE IS AT PAGE NO. 200 OF PAPER BOOK NO.L. PAGE NO. 201 TO 213 ARE CONFIRMATORY LETTERS BY M/S. GOPAL BUILDERS AND OTHER INDIVIDUALS FOR AND ON BEHALF OF THEM DISCLOSURE OF INCOME WAS MADE BY PARTNER OF M/S GOPAL BUILDER IN SAID STATEMENT. WE INVITE ATTENTION TO PAGE NO. 202 AND 203 IN RESPECT OF M/S. GOPAL BUILDERS AND SHRI KARAN M. DUNGRANI. WE INVITE ATTENTION TO PAGE NO. 42 LISTING EACH AND EVERY INDIVIDUAL AND FIRM AGAINST WHOM DISCLOSED AMOUNT IS STATED, TAXABLE INCOME FOR YEARS FOR WHICH INCOME IS TO BE DISCLOSED AND LAST COLUMN STATE INCOME RETURNED INCOME (INCLUDING INCOME DISCLOSED) WHILE FILLING THE RETURN OF INCOME. IT IS PERTINENT TO NOTE THAT AGGREGATE AMOUNT OFFERED, AS DISCLOSURE AS INCOME WAS RS. 12,00,41,000/- AND ACTUAL INCOME DISCLOSED IS RS. 14,50,78,987/- AND AGGREGATE OF TAXABLE INCOME RETURNED BY ALL ASSESSEE IS RS. 16,23,12,126/-. PHOTO COPY OF ACKNOWLEDGEMENT AND STATEMENT OF TOTAL INCOME WITH ASSESSMENT ORDER ARE ENCLOSED IN PAPER BOOK NO. 1 AT PAGE NO. 120 TO 199. 4. SHOW CAUSE NOTICE AND FINAL ORDER U/S. 263 HAS DIRECTED A.O. AS UNDER: 'IN VIEW OF THE ABOVE FACTS, THE AO WAS REQUIRED TO TREAT THE ENTIRE INCOME DISCLOSED DURING THE SURVEY AS INCOME TAXABLE U /S. 68/69/69C AND NOT ALLOW ANY STANDARD DEDUCTION U /S 24. THE UNACCOUNTED INCOME OF RS. 1,00,00,000/- ADMITTED DURING THE SURVEY BUT NOT DISCLOSED IN THE RETURN OF INCOME WAS ALSO REQUIRED TO BE ADDED BY THE AO, IN VIEW OF THE PROVISION OF SECTION 115BBE, THE WRONG SET-OFF OF BROUGHT FORWARD LOSS OF RS. 18.05 LAKHS AGAINST UNACCOUNTED BUSINESS INCOME SHOULD HAVE BEEN DISALLOWED BY THE AO. SINCE NO SUCH DISALLOWANCE AND ADDITION HAVE BEEN MADE BY THE AO IN THE ASSESSMENT ORDER U/S 143(3) DATED 14/03/2016, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE.' 'IN THE LIGHT OF THE ABOVE DISCUSSIONS, THE ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE DATED 14/03/2016 PASSED U/S 143(3) OF THE I.T. ACT, 1961 FOR A.Y. 2013-14 IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY THE SAME IS SET ASIDE WITH DIRECTIONS TO THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH THE DISCUSSION AND DIRECTIONS IN THIS ORDER, IN TIME AND AS PER THE PROVISIONS OF LAW.' 4.1 IT IMPLIES FROM ABOVE SAID DIRECTIONS THAT (A) DEDUCTION OF 30% STANDARD DEDUCTION U/S 24 IS TO BE DISALLOWED IMPLYING THAT LD. PR. COMMISSIONER OF INCOME TAX - 1, SURAT HAS ACCEPTED DISCLOSURE OF INCOME OF RS. 1,30,00,000/- FROM RENT INCOME; PAGE | 8 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT (B) UNACCOUNTED INCOME OF RS. 1,00,00,000/- IS TO BE ADDED WITHOUT THERE BEING ANY REFERENCE TO SOURCE HOWEVER REFERRING TO QUESTION NO. 14 ABOUT PAGE NO. 120 TO 172( ALL PAPERS WERE IN GUJARATI WHICH ARE TRANSLATED AND FILE IN PAPER BOOK NO. 2 AT PAGE NO. 1 TO 119. (C) APPLICATION OF SEC. 115BBE OF THE I.T. ACT, 1961 WITH REFERENCE TO DEDUCTION OF BUSINESS LOSS OF RS. 18.05 LAKHS OF CURRENT YEAR U/S 70 OF THE I.T. ACT, 1961 AGAINST INCOME FROM HOUSE PROPERTY. WE INVITE ATTENTION TO PAGE NO. 36 TO 39 BEING REVISED COMPUTATION OF INCOME AFTER DECLARING TAXABLE RENT BEING INCOME FROM HOUSE PROPERTY AT RS. 91,00,000/- NET OFF DEDUCTION OF 30% OF RS. 39,00,000/- ON AGGREGATE RENT OF RS. 1,30,00,000/-. 12. ON THE OTHER HAND, THE LD.CIT(DR) FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE LD.PR.CIT, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 13. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD PCIT AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT LD PCIT, HAVING EXAMINED ALL THE FACTS OF THE ASSESSEE, HELD THAT UNACCOUNTED INCOME DISCLOSED DURING THE COURSE OF SURVEY PROCEEDINGS IS TAXABLE U/S68/69/69C OF THE ACT BEING UNACCOUNTED INCOME AND NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE OR SET OFF ANY LOSS IS ALLOWABLE AGAINST SUCH INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 115BBE OF THE IT ACT. HOWEVER, THE ASSESSEE IN THE RETURN OF INCOME FILED FOR THE YEAR TREATED THE SAID UNACCOUNTED INCOME AS INCOME FROM HOUSE PROPERTY AND CLAIMED DEDUCTION U/S 24 @ 30%, ALTHOUGH IT WAS NOT ESTABLISHED FROM ANY IMPOUNDED DOCUMENTS OR FROM THE ASSESSEES STATEMENT GIVEN DURING THE SURVEY PROCEEDINGS OR FROM DETAILS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT THE SAID UNACCOUNTED INCOME DISCLOSE DURING THE SURVEY WAS INCOME FROM HOUSE PROPERTY. THE PCIT NOTED THAT PARTNER OF THE ASSESSEE FIRM, SHRI MAJIBHAI DUNGRANI IN HIS STATEMENT DURING THE SURVEY, IN RESPONSE TO QUESTION N.15 HAS STATED THAT IN RESPECT OF PAGE NUMBERS 120 TO 127 IMPOUNDED FROM THE BHARAT NAGAR PREMISES PERTAINING TO LAND AT 171/A AND 171/B OF T.P. SCHEME IN KATARGAM SURAT, HE WAS OFFERING RS.2.85 CRORES IN HANDS OF GOPAL BUILDERS IN THREE YEARS VIZ RS.80 LAKHS FOR A.Y 2012-13, RS.1.00 CRORE IN RESPECT OF A.Y 2013-14 AND RS.1.35 CRORES IN PAGE | 9 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT RESPECT OF A.Y 2014-15. HOWEVER, NO SUCH INCOME OF RS.1.00 CRORE, IS FOUND DISCLOSED IN THE RETURN/REVISED RETURN OF THE ASSESSEE FOR A.Y 2013-14. THE LD PCIT NOTED THAT ASSESSEE HAS BEEN ALLOWED SET OFF OF LOSS OF RS.18.05 LAKHS AGAINST REGULAR BUSINESS INCOME WHICH IS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 115BBE OF THE I.T. ACT SINCE THE AMOUNT OFFERED DURING SURVEY, SHOULD ACTUALLY BE TAXED U/S 68/69/69C OF THE ACT. 14. WE NOTE THAT DURING THE REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT, THE ASSESSEE HAD ASKED FOR COPIES OF RECORDS TO JUSTIFY ADDITION REQUIRED TO BE MADE U/S 68/69/69C OF THE I.T. ACT. IN THIS CONTEXT, LD PCIT OBSERVED THAT THE FACTS WHICH LEAD TO THE CONCLUSION THAT ADDITION WAS REQUIRED TO BE MADE U/S 68/69/69C HAVE BEEN DESCRIBED IN THE STATEMENT RECORDED U/S 131 DURING THE SURVEY PROCEEDINGS. THE PARTNER OF THE ASSESSEE FIRM HAS CLEARLY ADMITTED THE UNACCOUNTED INCOME HITHERTO UNDISCLOSED IN RESPECTS OF VARIOUS ASSESSMENT YEARS. THE SAID UNACCOUNTED INCOME ADMITTED DURING SURVEY IN THE SWORN STATEMENT WAS TAXABLE U/S 68/69/69C , AS IT IS NOT ESTABLISHED FROM ANY IMPOUNDED DOCUMENTS OR FROM DETAILS SUBMITTED DURING ASSESSMENT PROCEEDINGS OR FROM THE STATEMENT OF THE PARTNER THAT THE UNACCOUNTED INCOME WAS RENTAL INCOME. AS A COROLLARY, NO STANDARD DEDUCTION U/S 24 IS ALLOWABLE TO THE ASSESSEE AGAINST SUCH UNACCOUNTED INCOME WHICH IS TAXABLE U/S 68/69/69C OF THE ACT. THE ASSESSEE IS ALREADY IN POSSESSION OF COPY OF SWORN STATEMENT OF PARTNER SHRI MANJIBHAI POPATBHAI DUNGRANI, AS EVIDENT FROM THE LIST OF ENCLOSURES WITH LETTER DATED 22.03.2018 FURNISHED ON 23.03.2018. IN THE LETTER DATED 22.03.2018 FILED ON 23.03.2018, FILED BY THE ASSESSEE DURING REVISION PROCEEDINGS, THE ASSESSEE ARGUED THAT ASSESSEE FIRM ATTRACTS TAX @ 30% AND THE RATE OF TAX U/S 115BBE IS ALSO 30%. THE ARGUMENT OF THE ASSESSEE IS BESIDES, AND AWAY FROM THE POINTS UNDER DISPUTE. THE QUESTION IS THAT THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION U/S24 @ 30% BY SHOWING UNACCOUNTED INCOME TAXABLE U/S 68/69/69C WRONGLY AND FALSELY AS INCOME FROM HOUSE PROPERTY, HAS NOT DISCLOSED IN THE RETURN OF INCOME, THE UNACCOUNTED INCOME DISCLOSED DURING THE SURVEY AND HAS WRONGLY CLAIMED AND WAS ALLOWED SET OFF OF LOSS AGAINST UNACCOUNTED INCOME IN VIOLATION OF THE PROVISIONS OF SECTION 115BBE OF THE ACT. THE ASSESSEE HAS STATED PAGE | 10 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT THAT IT DOES NOT ADMIT THAT THERE IS ANY MONEY CREDITED IN THE BOOKS TO JUSTIFY ADDITION U/S 68 NOR THERE IS ANY INVESTMENT, WHICH IS NOT RECORDED IN THE BOOKS JUSTIFYING THE ADDITION U/S 69 OF THE I.T. ACT NOR THERE IS DETECTION OF ANY UNDISCLOSED EXPENDITURE FROM THE STATEMENT OF SHRI MANJIBHAI DUNGRANI. HOWEVER, SUCH STATEMENT FROM THE SIDE OF THE ASSESSEE NOT TRUE, SINCE, THE SWORN STATEMENT WHICH IS BASED ON IMPOUNDED MATERIAL REVEALS UNACCOUNTED INCOME AND UNACCOUNTED INVESTMENT WHICH SHOULD HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT BUT HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT AS ADMITTED IN THE STATEMENT. WE NOTE THAT ASSESSEE HAS ARGUED BEFORE THE LD PCIT THAT MAJOR SOURCE OF INCOME IS RENT FROM GODOWN AND CALCULATION OF GODOWN RENT IS PROVIDED DURING ASSESSMENT AND AS REGARDS THE AMOUNT DECLARED IN THE STATEMENT BY THE SHRI MANJIBHAI P. DUNGRANI IS CONCERNED, THE ASSESSEE HAS ALREADY DISCLOSED THE SOURCE OF THE INCOME AND THE MODE OF EARNING OF THE INCOME. IN THIS CONTEXT, IT IS SEEN THAT, IN THE SWORN STATEMENT RECORD U/S 131 DURING THE SURVEY, THE PARTNER HAS NOWHERE STATED THE SOURCE OF UNACCOUNTED INCOME AS RENT INCOME. ON THE CONTRARY, HE HAS STATED IN THE STATEMENT THAT IT WAS UNACCOUNTED INCOME. SO THE WRONG AND UNTRUE REFLECTION OF THE UNACCOUNTED INCOME AS RENT INCOME IN THE ITR AND DURING SCRUTINY ASSESSMENT WAS NOT LIABLE TO BE ACCEPTED. THE ENTIRE DISCLOSURE SHOULD HAVE BEEN TREATED AS UNACCOUNTED INCOME LIABLE TO BE TAXED U/S 68/69/69C AND STANDARD DEDUCTION @ 30% SHOULD NOT HAVE BEEN ALLOWED BY THE AO AS THE CLAIM WAS AGAINST FACTS AND AGAINST LAW. THEREFORE, LD PCIT HELD THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 15. THE LD PCIT FURTHER OBSERVED ABOUT THE UNACCOUNTED INCOME RELATING TO THE LAND AT KATARGAM, SURAT, DISCLOSED IN THE STATEMENT RECORDED DURING SURVEY, THE ASSESSEE HAS STATED THAT OWNERSHIP OF THE LAND IS WITH SHARI DHANJIBHAI DUNGRANI AND THE LAND HAS NOT BEEN SOLD YET AND SO NO QUESTION OF ANY INCOME ARISES. HOWEVER, THIS STATEMENT BEING MADE NOW IS IN CONTRACT TO WHAT SHRI MANJIBHAI DUNGRANI HAS STATED IN THE STATEMENT RECORDED ON OATH. IN HIS ANSWER TO Q.NO.14,SHRI MANJIBHAI DUNGRANI HAS STATED CLEARLY THAT PAGE NOS. 120 TO 172 OUT OF LOOSE PAPER FILE INVENTORISED AS BF-1 FOUND FROM OFFICE SITUATED AT BHARAT NAGAR, SURAT PERTAINED TO PAGE | 11 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT FP 171/A AND 171/B OF T.P. SCHEME NO.3 OF KATARGAM, TALUKA CHORYASI, DISTRICT SURAT. IN ANSWER TO QUESTION NO.15, SHRI MANJIBHAI DUNGRANI HAS STATED THAT WITH REGARD TO DOCUMENT FOUND AT BHARAT NAGAR OFFICE FROM PAGES 120 TO 127, HE WAS OFFERING TAXABLE INCOME IN THE HANDS OF PARTNERSHIP FIRM M/S GOPAL BUILDERS FOR THREE ASSESSMENT YEARS VIZ., RS.50,00,000/- FOR A.Y 2012-13, RS.1,00,00,000/- FOR A.Y 2013-14 AND RS.1,35,00,000/- FOR A.Y 2014-15. SO THERE IS NO QUESTION ABOUT THE FACT THAT, UNACCOUNTED INCOME OF RS.1,00,00,000/- WAS REQUIRED TO BE SHOWN IN RESPECTS OF A.Y 2013-14. BUT NO SUCH UNACCOUNTED INCOME HAS BEEN SHOWN IN THE RETURN OF INCOME FOR A.Y. 2013-14. IN VIEW OF THE CLEAR ADMISSION IN THE SWORN STATEMENT THERE IS NO SCOPE TO DIVERT FROM THE DISCLOSURE MADE IN THE STATEMENT. THE ASSESSEE HAS AGAIN STATED THAT THIS UNACCOUNTED INCOME OF RS.1,00,00,000/- DISCLOSED IN A.Y 2013-14 IS RENT INCOME. BUT AS DISCUSSED EARLIER, THERE IS NO MATERIAL FOUND IN SURVEY AND STATED IN HIS SWORN STATEMENT DURING SURVEY WHICH SHOWS OR PROVES THAT THE UNACCOUNTED INCOME DISCLOSED, WAS RENT INCOME. 16. THE LD PCIT OBSERVED THAT ASSESSEE HAS NOT SUBMITTED ANY EXPLANATION OR COMMENTS ON THE POINT RAISED IN THE SHOW CAUSE NOTICE THAT THE ASSESSEE HAS BEEN WRONGLY ALLOWED SET OFF OF RS.18.05 LAKHS AGAINST REGULAR BUSINESS INCOME WHICH IS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 115BBE OF THE I.T. ACT, SINCE THE AMOUNT OFFERED DURING SURVEY SHOULD ACTUALLY BE TAXED U/S 68/69/69C OF THE ACT. IT IS THEREFORE UNDERSTOOD THAT THE ASSESSEE HAS NO EXPLANATION TO OFFER ON THIS POINT AND AGREES THAT THE CLAIM OF SET OFF OF BROUGHT FORWARD LOSS AGAINST BUSINESS INCOME IS A WRONG CLAIM, IS REQUIRED TO BE DISALLOWED. IN VIEW OF THE ABOVE FACTS, THE LD PCIT WAS OF THE OPINION THAT AO WAS REQUIRED TO TREAT THE ENTIRE INCOME DISCLOSED DURING THE SURVEY AS INCOME TAXABLE U/S 68/69/69C AND NOT ALLOW ANY STANDARD DEDUCTION U/S 24 OF THE ACT. THE UNACCOUNTED INCOME OF RS.1,00,00,000/- ADMITTED DURING THE SURVEY BUT NOT DISCLOSED IN THE RETURN OF INCOME WAS ALSO REQUIRED TO BE ADDED BY THE AO. IN VIEW OF THE PROVISION OF SECTION 115BBE, THE WRONG SET-OFF OF BROUGHT FORWARD LOSS OR RS.18.05 LAKHS AGAINST UNACCOUNTED BUSINESS INCOME SHOULD HAVE BEEN DISALLOWED BY THE AO. SINCE NO PAGE | 12 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT SUCH DISALLOWANCE AND ADDITION HAVE BEEN MADE BY THE AO IN THE ASSESSMENT ORDER U/S 143(3) DATED 14/03/2016, THEREFORE LD PCIT HELD THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE UPHOLD THE ABOVE FINDINGS OF LD PCIT FOR ASSESSMENT YEAR 2013-14. 17. IN THE ASSESSMENT YEAR 2014-15, LD PCIT OBSERVED THAT UNACCOUNTED INCOME RELATING TO THE LAND AT KATARGAM, SURAT DISCLOSED IN THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS, THE ASSESSEE HAS STATED THAT OWNERSHIP OF THE LAND IS WITH SHRI DHANJIBHAI DUNGRANI. THE DOCUMENTS ARE NOT BELONGING TO GOPAL BUILDERS AND PERTAIN TO THE PURCHASE OF PROPERTY BY SHRI DHANJIBHAI NARANBHAI PATEL IN HIS CAPACITY AS A PARTNER OF ERSTWHILE PARTNERSHIP FIRM M/S JAY CONSTRUCTION. THE LD PCIT NOTED THAT HOWEVER, THIS STATEMENT BEING MADE NOW IS IN CONTRAST TO WHAT SHRI MANJIBHAI DUNGRANT HAS STATED IN THE STATEMENT RECORDED ON OATH. IN HIS ANSWER TO Q. NO.14, SHRI MANJIBHAI DUNGRANI HAS STATED CLEARLY THAT PAGE NOS. 120 TO 172 OUT OF LOOSE PAPER FILE INVENTORISED AS BF-1 FOUND FROM OFFICE SITUATED AT BHARAT NAGAR, SURAT PERTAINED TO FP 171/A AND 171/B OF T.P. SCHEME NO.3 OF KATARGAM, TALUKA CHORYASI, DISTRICT SURAT. IN ANSWER TO QUESTION NO. 15, SHRI MANJIBHAI DUNGRANI HAS STATED THAT WITH REGARD TO DOCUMENT FOUND AT BHARAT NAGAR OFFICE FROM PAGES 120 TO 127, HE WAS OFFERING TAXABLE INCOME IN THE HANDS OF PARTNERSHIP FIRM M/S GOPAL BUILDERS FOR THREE ASSESSMENT YEARS VIZ., RS.50,00,000/- FOR A.Y 2012-13, RS.1,00,00,000/- FOR A.Y 2013-14 AND RS.1,35,00,000/- FOR A.Y 2014-15. SO THERE IS NO QUESTION ABOUT THE FACT THAT, UNACCOUNTED INCOME OF RS.1,35,00,000/- WAS REQUIRED TO BE SHOWN IN RESPECT OF A.Y 2014-15. BUT NO SUCH UNACCOUNTED INCOME HAS BEEN SHOWN IN THE RETURN OF INCOME FOR A.Y 2014-15. IN VIEW OF THE CLEAR ADMISSION IN THE SWORN STATEMENT THERE IS NO SCOPE TO DIVERT FROM THE DISCLOSURE MADE IN THE STATEMENT. THE ASSESSEE HAS AGAIN STATED THAT THIS UNACCOUNTED INCOME OF RS.1,35,00,000/- DISCLOSED IN A.Y 2014-15 IS RENT INCOME. BUT THERE IS NO MATERIAL FOUND IN SURVEY AND STATED IN HIS SWORN STATEMENT DURING SURVEY WHICH SHOWS OR PROVES THAT THE UNACCOUNTED INCOME DISCLOSED WAS RENT INCOME. THE ASSESSEE IN HIS SUBMISSION DATED 08.12.2016 FILED DURING THE ASSESSMENT PROCEEDINGS HAS SUBMITTED THE DOCUMENTS IN RESPECT OF FP 171/A AND 171/B OF T.P. SCHEME NO.3 PAGE | 13 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT OF KATARGAM, TALUIKA CHORYASI, DISTRICT SURAT BUT AS THE AO CONCERNED HAS FAILED TO BRING THAT AMOUNT OF RS.1,35,00,000/- DISCLOSED BY PARTNER OF ASSESSEE ON THE BASIS OF IMPOUNDED DOCUMENTS MAINLY 120-127 PAGES IMPOUNDED FROM BHARAT NAGAR TO TAX, AND EVEN FAILED TO ANLYZE THE DOCUMENTS IMPOUNDED, AND STATEMENT GIVEN. THE LD PCIT OBSERVED THAT IN PROFIT AND LOSS ACCOUNT OF ASSESSEE , THE ASSESSEE HAD CREDITED RENTAL INCOME OF RS.12,69,19,247/-, HOWEVER IN COMPUTATION OF INCOME, HAS REDUCED GODOWN RENT OF RS.3,79,19,247/- FOR YEAR UNDER CONSIDERATION AND THEN CALCULATED NET RENTAL INCOME OF RS.2,05,29,075/- AFTER DEDUCTING 30% STANDARD DEDUCTION OF RS.87,98,175/- AND MUNICIPAL TAX OF RS.85,91,997/-. IT WAS FURTHER SEEN THAT ASSESSEE HAS GIVEN DETAIL OF RENT RECEIVED ONLY FOR RS.1,69,19,247/- DURING ASSESSMENT PROCEEDINGS. THUS, IT IS CLEAR THAT ASSESSEE HAS RENTAL INCOME SUPPORTED WITH EVIDENCE OF ONLY RS.1,69,19,247/-, AND HAS CLAIMED RENTAL INCOME OF RS.2,10,00,000/- WITHOUT ANY EVIDENCE THAT FROM WHOM RECEIVED FOR WHICH PROPERTY RECEIVED ETC. THIS AMOUNT OF RS.2,10,00,000/- IS ACTUALLY RENTAL INCOME ALSO NOT SUPPORTED BY ANY OF EVIDENCE FOUND/IMPOUND DURING THE SURVEY OR EVEN STATED BY DURING STATEMENT. THE AO HAD CONSIDERED SAME RENTAL INCOME, WITHOUT EVEN ASKING ANY QUESTION FROM ASSESSEE. THUS, THIS AMOUNT OF RS.2,10,00,000/- SHOULD HAVE BEEN TREATED UNDISCLOSED INCOME U/S 68 OF I.T. ACT, 1961 R.W.S. 115BBF OF THE ACT. THE AO HAD CONSIDERED SAME RENTAL INCOME, WITHOUT EVEN ASKING ANY QUESTION FROM ASSESSEE OR PROOF THAT HOW SAME CAN BE CONSIDERED RENTAL INCOME ELIGIBLE FOR STANDARD DEDUCTION. THUS, LD PCIT HELD THAT BY NOT TREATING THE INCOME U/S 68 R.W.S. 115BBE, AND BY GIVING STANDARD DEDUCTION OF 30% ON SAME, AMOUNTING TO RS.63 LAKH, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO REVENUE. 18. THE LD PCIT OBSERVED THAT IN PROFIT AND LOSS ACCOUNT OF THE ASSESSEE, ASSESSEE HAD DEBITED ONLY RS.25,91,991/- FOR MUNICIPAOL TAXES, HOWEVER, IN COMPUTATION OF INCOME ASSESSEE HAS CLAIMED MUNICIPAL TAXES OF RS.85,91,997/-. THE ASSESSEE SUBMITTED THE DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE AO CONCERNED HAD NEITHER ENQUIRED ABOUT SOURCE OF SUCH PAYMENT, NOR ABOUT GENUINENESS THAT WHETHER ANY SUCH SUM HAS EVER BEEN PAID FOR MUNICIPAL TAXES, PAGE | 14 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT WHICH WAS NECESSARY BEFORE GIVING DEDUCTION AGAINST RENTAL INCOME. IT IS IMPORTANT TO MENTION THAT THIS AMOUNT OF RS.60,00,006/- (RS.85,91,997 -RS.25,91,991) HAS NOT BEEN PASSED THROUGH PROFIT AND LOSS ACCOUNT, OR EVEN IN CAPITAL ACCOUNT OR BALANCE SHEET, AND ASSESSEE HAS DESPITE CLAIMING EXPENSE OF SAME, HAS INCREASED HIS CAPITAL BY THIS AMOUNT. THUS, EFFECTIVELY AN AMOUNT OF RS.60,00,006/- SHOWN BY ASSESSEE AS MUNICIPAL TAXES PAID WAS CLEARLY UNEXPLAINED EXPENDITURE IN HANDS OF ASSESSEE, REQUIRED TO BE ADDED U/S 69 OF I.T. ACT 1961; AND ALSO IN LIGHT OF PROVISO TO SECTION 69C OF THE ACT AND TO THE FACT THAT ASSESSEE HASNT ESTABLISHED THAT SAME WAS PAID FOR MUNICIPAL TAXES SAME WAS NOT BE DEDUCTED AGAINST RENTAL INCOME. THUS, LD PCIT HELD THAT ASSESSMENT ORDER ON THIS ACCOUNT IS ERRONEOUS AND PREJUDICIAL TO REVENUE TO THE EXTENT OF RS.1,20,00,012/-. THE LD PCIT NOTED THAT AO HAS GROSSLY FAILED TO ANALYSE AND COMPREHEND THE IMPOUNDED DOCUMENTS, AND TO FIND OUT UNDISCLOSED INCOME RELATED TO ASSESSEE, OTHER FAMILY MEMBERS, AND EVEN THIRD PARTIES WHO HAS PAID THE MONEY OR RECEIVED THE MONEY AS GIVEN IN IMPOUNDED DOCUMENTS INFORMATION IN RESPECT OF WHICH SHOULD BE TRANSFERRED TO AO OF CONCERNED PARTIES. ONE OF THE EXAMPLE OF THAT ON PAGE NO. 180 TO 196 IMPOUNDED FROM 93, AKHANDAHAND SOCIETY, HAS TOTAL DETAILS OF PAYMENT OF MORE THAN 2.5 CRORES, HOWEVER, ONLY AN AMOUNT OF RS.1.53 CRORE FOR THESE PAPERS WAS DISCLOSED IN HANDS OF KARAN PATEL, AND REGARDING BALANCE NO ADDITION WAS MADE IN CASE OF KARAN PATEL. THE ASSESSEE IN HIS SUBMISSION DATED 08.12.2016 FILED DURING THE ASSESSMENT PROCEEDINGS HAS SUBMITTED THE DOCUMENTS IN RESPECT OF LAND AT ATODARA. BUT THE AO CONCERNED FAILED TO VERIFY THAT AS PER IMPOUNDED DOCUMENT, TOTAL PURCHASE PRICE AGREED WAS AT RS.2,87,45,788/- AND PAYMENT SCHEDULES WERE SPECIFICALLY RECORDED THEREIN. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, IT WAS STATED IN SUBMISSION DATED 27.12.2016 THAT DESPITE CONVEYANCE DEED IN APRIL, 2013, REGARDING PURCHASE OF THE SAID LAND, PAYMENT OF RS.1,37,45,000/- WAS NOT MADE AS POSSESSION OF THE LAND WAS NOT GIVEN DUE TO PART ENCROACHMENT AND THEREFORE THE AMOUNT OF RS.1,37,45,000/- WAS NOT OFFERED FOR TAXATION AND THE DISCLOSURE MADE OF RS.1,53,00,000/- WAS ADEQUATE. CONTENTION RAISED BY THE ASSESSEE IS NOT AT ALL ACCEPTABLE AS THE BASIC PRESUMPTION IN CASE OF DOCUMENTS FOUND DURING THE COURSE OF SEARCH AND SURVEY ACTION IS THAT THE TRANSACTIONS RECORDED THEREIN ARE TRUE AND IF PAGE | 15 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT THE TRANSACTION HAS BEEN CARRIED OUT, TRANSACTIONS RECORDED FOR FUTURE DATES SHOULD ALSO BE CONSIDERED AT THE VALUE GIVEN IN IMPOUNDED/SEIZED PAPERS. IN THE INSTANT CASE, THE SAID TRANSACTION IN LAND IS COMPLETED AS ACCEPTED BY THE ASSESSEE AND MOREOVER, TRANSACTION HAS ATTAINED FINALITY AS EVIDENT FROM THE PURCHASE DEED CERTIFICATE NO. IN-GJ45901892968713L CARRIED OUT ON 18.04.2013 BY SHRI KARANBHAI MANJIBHAI DUNGARANI & OTHERS. THEREFORE, IT IS TO BE UNDERSTOOD THAT THE PAYMENT ON FUTURE DATES WOULD ALSO HAVE BEEN MADE. NO SAME PERSON WHO HAD AGREED TO SALE LAND FOR RS.2,87,45,788/- WOULD MAKE THE SALE FOR JUST RS.1,53,00,000/-. THIS POINT HAS NOT BEEN PERUSED BY THE ASSESSING OFFICER CONCERNED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ACCEPTED THE CONTENTION PUT FORTH BY THE ASSESSEE WITHOUT MAKING ANY ENQUIRY. THE AO CONCERNED HAD NOT APPLIED HIS MIND THAT THE SANCTITY OF THE IMPOUNDED DOCUMENTS HAS BEEN PROVED IN VIEW OF THE REPLY TO Q. NO.12 WHEREIN SHRI MANJIBHAI DUNGRANI HAS ADMITTED THAT THESE PAGES PERTAIN TO HAND WRITTEN & OTHER PAPERS OF AFORESAID LAND AT VILLAGE AT ATODARA, DISTRIBUTING CONSIDERATION AMONG VARIOUS CO-OWNERS OF LAND. MOREOVER, IF TEST OF HUMAN PROBABILITIES IS APPLIED TO THE FACTS OF THE CASE BECOMES EVIDENT THAT TRANSACTION REFLECTING IN THE ABOVE MENTIONED IMPOUNDED DOCUMENT PERTAIN TO THE ASSESSEE AND HAVE TAKEN PLACE OTHERWISE NO REASON CAN BE THERE TO KEEP THE RECORD OF ANY FINANCIAL TRANSACTION. FURTHER SHRI MANJIBHAI PATEL HAD ADMITTED THAT THESE PAPERS WERE FOUND FROM HIS OFFICE WHICH LENDS TO CREDIBILITY THAT THE DOCUMENT IMPOUNDED ASSUMES MUCH GREATER VALUE THAN WHAT IT WOULD HAVE BEEN OTHERWISE. THEREFORE THE ENTRIES REFLECTING IN THE IMPOUNDED DOCUMENT(S) CANNOT BE WASHED AWAY LIGHTLY. ALSO, THE IMPOUNDED DOCUMENTS ITSELF AND MORE SO BECAUSE OF THE NATURE OF ENTRIES CONTAINED THEREIN DO NOT MAKE THOSE PAPERS AS A DUMB DOCUMENT. THEREFORE THE AO CONCERNED OUGHT TO CARRY OUT ENQUIRIES IN THIS ASPECT WHICH WAS NOT DONE AT ALL BY HIM DURING THE COURSE OF SCRUTINY PROCEEDINGS. FURTHER, THERE ARE PROOF IN FORM OF RECEIPTS, WHO HAS RECEIVED THIS PAYMENT, BUT THE AO CONCERNED FAILED TO ANALYSE THE SAME AND PASS ON THE INFORMATION TO THE JURISDICTIONAL AOS CONCERNED. FURTHER ON THESE PAGES IT IS MENTIONED THAT KARAN IS HAVING SHARE OF 53% REST 47% IS OF GOPALJI. HOWEVER, THE AO CONCERNED HAS ACCEPTED THE FACT THAT SHRI KARANKUMAR M DUNGRANT IS HAVING ONLY 53% SHARE IN THE LAND AND HE DID NOT PAGE | 16 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT ENQUIRED ABOUT THE OWNERSHIP OF REMAINING 47% IN THE IMPUGNED LAND WHETHER THE OWNERSHIP OF THE REMAINING 47% IS IN JUST A DUMMY NAME OR IN NAME OF SOME REAL PERSON, HAS NOT BEEN INVESTIGATED. ALL THESE FACTS NARRATED ABOVE HAVE BEEN ACCEPTED WITHOUT PROPER VERIFICATION WHICH HAS RESULTED IN THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO REVENUE. IN VIEW OF FACTS AND ABOVE OBSERVATIONS OF LD PCIT WE HOLD THAT ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, WE DO NOT FIND ANY INFIRMITY, SO FAR THE ABOVE FINDINGS OF LD PCIT IS CONCERNED FOR ASSESSMENT YEAR, 2014-15. WE, THEREFORE, UPHOLD THE ABOVE FINDINGS OF LD PCIT FOR ASSESSMENT YEAR 2014-15. 19. WE NOTE THAT ISSUES RAISED BY THE LD PCIT WERE NOT RESPONDED BY THE ASSESSEE DURING THE ASSESSMENT STAGE. THE ASSESSING OFFICER ALSO DID NOT RAISED THE QUERIES BY ISSUING NOTICE UNDER SECTION 142(1) OF THE ACT, THEREFORE, IT IS A CASE OF COMPLETE LACK OF INQUIRY. DURING THE COURSE OF HEARING, THE BENCH ASKED THE LD COUNSEL TO PRODUCE COPY OF NOTICES ISSUED BY ASSESSING OFFICER FOR ASSESSMENT YEARS 2013-14 AND 2014-15, UNDER SECTION 142(1) OF THE ACT, HOWEVER, LD COUNSEL HAS FAILED TO PRODUCE THE NOTICES ISSUED BY ASSESSING OFFICER UNDER SECTION 142(1) OF THE ACT, DURING ASSESSMENT STAGE. HENCE, WE NOTE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DID NOT RAISE QUESTIONS ABOUT THE ISSUES RAISED BY THE LD PCIT IN HIS 263 ORDER. THE LAW WITH REGARD TO EXERCISE OF JURISDICTION U/S.263 OF THE ACT ON THE GROUND THAT THE AO FAILED TO MAKE ENQUIRIES WHICH HE OUGHT TO HAVE MADE IN THE GIVEN CIRCUMSTANCES OF A CASE IS WELL SETTLED. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE PAGE | 17 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. WE DERIVE SUPPORT FOR THE PROPOSITION AS STATED ABOVE FROM THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES 99 ITR 375 (DEL). 20. HENCE, GOING BY THE FACTS NARRATED ABOVE, THE LANGUAGE OF THE PROVISIONS OF SECTION 263 AND THE INTERPRETATION PLACED ON THESE PROVISIONS BY THE VARIOUS COURTS, THE ORDER OF THE AO FALLS WITHIN THE CATEGORY OF BEING AN ORDER WHICH IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS INTERPRETATION OF THE PROVISIONS OF THE SECTION 263, WE ARE SUPPORTED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT DELIVERED IN THE CASE OF GEE VEE ENTERPRISES (SUPRA) THE SAME VIEW HAS ALSO BEEN HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD VS. CIT 243 ITR 83 (SC). THE RELEVANT PORTION OF THIS JUDGMENT WHICH SUPPORTS OUR VIEW, IS REPRODUCED AS UNDER: 'AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND.' THIS HAS ALSO BEEN SUBSEQUENTLY UPHELD/FOLLOWED BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. HIMACHAL PRADESH FINANCIAL CORPORATION (2010) 186TAXMANN 105(HP). IT IS WORTHWHILE TO MENTION HERE THAT THE ORDER U/S 263 OF THE I.T. ACT, 1961 IS VALID EVEN IF ONE OF THE SEVERAL ITEMS DEALT WITH THEREIN IS FOUND PREJUDICIAL TO THE INTEREST OF REVENUE AND FOR THIS PROPOSITION WE PLACE RELIANCE ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF INDIAN TEXTILES VS. CIT, 157 ITR 112 (MADRAS). FURTHER, IT IS ALSO IMPORTANT TO MENTION HERE THAT THE PROVISIONS OF SECTION 263 CAN BE INVOKED EVEN WHERE FULL FACTS ARE DISCLOSED BUT THE AO HAS NOT EXAMINED THESE DETAILS AS PER CORRECT PROVISIONS OF LAW. IN SUPPORT OF THIS, WE PLACE RELIANCE ON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT DELIVERED IN THE CASE OF CIT VS. EMERY STONE MANUFACTURING COMPANY, 213 ITR PAGE | 18 ITA NO.634/SRT/2018 & 28/SRT/2019 FOR A.Y. 2013-14 & 2014-15 GOPAL BUILDERS, SURAT 843 (RAJASTHAN). THEREFORE, BASED ON THE FACTS AND CIRCUMSTANCES, AS NARRATED ABOVE, WE ARE OF THE VIEW THAT REVISIONARY JURISDICTION EXERCISED BY THE LD. PCIT UNDER SECTION 263 OF THE ACT WAS IN TUNE WITH THE FACTS AND EVIDENCES ON RECORD, THEREFORE, WE UPHOLD THE ORDER PASSED BY THE LD PCIT UNDER SECTION 263 OF THE ACT FOR BOTH THE ASSESSMENT YEARS, 2013-14 AND 2014-15. 21. IN THE RESULT, APPEAL FILED BY THE ASSESSEE (IN ITA NO 634/SRT/2018 AND ITA NO 28/SRT/2019), ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23/08/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE 1963. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 23/08/2021 / SGR COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER // TRUE COPY // / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT