Shri Kalpesh Kantilal Patel, Ahmedabad V. ITO, Ward-1(1)(3), Ahmedabad

ITA 694/AHD/2019

AI Insights

The case involves an appeal by Kalpesh Kantilal Patel against the order of the Commissioner of Income Tax (Appeals) which confirmed certain additions under Section 68 of the Income Tax Act, 1961, for the Assessment Year 2009-10. The additions included unexplained cash credits and income from investments. The Tribunal examined the legality of these additions, particularly focusing on the nature of the gifts received and the basis of the additions which were primarily derived from a statement made by the assessee during a search operation, which he later retracted. The Tribunal concluded that the additions were not justified as they were based on a retracted statement without any substantial evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125382 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-08-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2019
• Other Referred Cases: PCIT V. Saumya Construction (P.) Ltd., Narendra Garg & Ashok Garg (AOP), Kailashben Manharlal Chokshi, Nageshwar Enterprises, Chetnaben J. Shah, Chandrakumar Jethmal Kochar
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Income from undisclosed sources; Principle of natural justice; Corroborative evidences; Retraction
• Section: 68; 56; 132; 154; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o . 6 9 4/ A h d /2 0 19 ( A s se ss m e nt Y e a r : 20 09- 10 ) K a l pe s h K a n ti lal P ate l, E/1 7, S u n tr ac k Fla t s, K. K . N a g ar R o ad, G h a tl od ia , A h m ed a ba d- 38 00 6 1 V s . In c o me Ta x Of f ic e r , War d- 1( 1 ) ( 3 ), Ah me da b ad [ P A N N o.A WQP P7 96 5B] (Appellant) .. (Respondent) Appellant by : Shri Parin S Shah, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D a t e of H ea r i ng 24.08.2023 D a t e of P r o no u n ce me nt 26.09.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-1, (in short “Ld. CIT(A)”), Ahmedabad in Appeal No. CIT(A)-1/ITO, Wd. 1(1)(3)/10319/2017-18 vide order dated 08.04.2019 passed for Assessment Year 2009-10. 2. The assessee has taken the following grounds of appeal:- “1. CIT(A) erred in confirming the addition u/s.68 as unexplained cash credit of investment of RS.720000/- made in Financial Year 2001-02 and income earned of Rs.460800/- in Financial Year 2001-02 as per Page No.17 of A-1/3 as income of the Assessment Year 2009-10 without any incriminating materials. This act of CIT(A) is also against the principle of natural justice and against the law. 2. CIT(A) erred in confirming the addition u/s. 68 as unexplained cash credit of Rs.45,142/- being gift received from father Shri Kantilal Jesingbhai Patel and agriculturist which is not taxable due to blood relation and exempt u/s.56 of the Income Tax Act 1961 because it is below the limit of Rs.50000/-. This act of AO is out of ambit of law. ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 2– 3. CIT(A) erred in confirming the addition u/s.68 as unexplained cash credit of Rs.270000/- as per Page no.5 of Annexure A-1/2. This act of CIT(A) is against the principle of natural justice and out of ambit of law. 4. CIT(A) erred in confirming the addition made by AO which was made by AO based on surmises & conjectures. This act of CIT(A) is against the principle of natural justice and against the law.” Ground Number 2: Ld. CIT(Appeals) erred in confirming addition under Section 68 as unexplained cash of Rs. 45,142/- being gift received by the assessee from his father 3. Before us, the Counsel for the assessee submitted that in the instant facts, it is not disputed that the aforesaid gift was received by the assessee from his father. Further, the quantum of gift received by the assessee is less than Rs. 50,000/- and is therefore exempt under Section 56 of the Act. Further, the Counsel for the assessee drew our attention to Page 27 of the Paper Book (computation of income), wherein the assessee had disclosed the aforesaid amount in the return of income filed by the assessee. Further, the Counsel for the assessee drew our attention to Page 36 of the Paper Book (written submissions filed before Ld. CIT(Appeals)), wherein the assessee submitted that that the aforesaid gift is not taxable in the hands the assessee due to relationship between the assessee and his father and further, the aforesaid gift is exempted Section 56 of the Act since it is below the limit of Rs. 50,000/-. 4. In response, the Ld. DR relied upon the observations made by the Ld. CIT(Appeals) in the appellate order. 5. We have heard the rival contentions and perused the material on record. On going to the facts of the instant case, we observe that it is not disputed that the assessee had received the aforesaid gift amounting to Rs. 45,142/- from his ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 3– father as ‘Gift”. Further, it is also observed that the aforesaid amount of gift of Rs. 45,142/- had been declared by the assessee in his return of income for the impugned assessment year. Further, since the gift received by the assessee from his father is below the exemption limit of Rs. 50,000/-prescribed under Section 56 of the Act, looking into the facts of the instant case,the aforesaid addition is directed to be deleted. 6. In the result, Ground No. 2 of the assessee’s appeal is allowed. Ground numbers 1 and 3: Ld. CIT(Appeals) erred in confirming addition of sum of Rs. 11,80,800/- and the sum of Rs. 2,70,000/-under Section 68 of the Act 7. The brief facts relating to these grounds of appeal are that a search under Section 132 of the Act was carried out in the in the case of the assessee on 23.05.2008. During the search, certain documents/receipts were found and the assessee admitted/ disclosed income of Rs. 61 lakhs in the statement recorded under Section 132(4) of the Act. However, the assessee retracted the statement on 05.07.2008 on the ground that no incriminating documents were found from his premises. The Assessing Officer passed the assessment order on 31.12.2010 making addition of Rs. 60,15,000/- under Section 68 of the Act. In appeal, Ld. CIT(Appeals) confirmed the addition to the extent of Rs. 17, 63,000/- on the basis of seized material. In further appeal, ITAT set aside the matter back to the Assessing Officer for de novo consideration. The Assessing Officer passed fresh assessment order on 29.12.2017 making an addition of Rs. 60,15,000/- under Section 68 of the Act. ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 4– 8. In appeal against the aforesaid order, Ld. CIT(Appeals) gave partial relief to the assessee. The Ld. CIT(Appeals) observed that as per noting submitted at Page number 17 of annexure A-1/3, the same shows receivable of Rs. 41 lakhs out of investment of Rs. 25 lakhs. On perusal of the relevant documents, Ld. CIT(Appeals) observed that out of the aforesaid amount of Rs. 41 lakhs, the assessee’s share comes to Rs. 11,80,800/- (which is the sum total of investment of Rs. 7.20 lakhs made by the assessee plus the profits on such investment) and the same was liable to be taxed as unaccounted income of the assessee for Assessment Year 2009-10. The Ld. CIT(Appeals) rejected the contention of the assessee that the aforesaid amount relates to and should be taxed in Financial Year 2001-02 for the reason that for the year under consideration, the assessee was not maintaining any books of account and has also not filed in the return of income till the date of search. Further, Ld. CIT(A) held that the assessee has not furnished any evidence that the entry recorded at PageNo. 17 of Annexure A-1/3 were relating to Financial Year 2001-02. Accordingly, Ld. CIT(Appeals) confirmed the additions in the hands of the assessee to the tune of Rs. 11,80,800/- as unexplained income under Section 68 of the Act. In addition to the above, Ld. CIT(Appeals) confirmed further additions on the basis of noting submitted at PageNo. 5 amounting to Rs. 2,70,000/- as unexplained income in the hands of the assessee. 9. The assessee has filed appeal before us against the aforesaid amount of Rs. 14,50,800/- (Rs. 11,80,800/- plus Rs. 2,70,000/-) confirmed by Ld. CIT(Appeals) as unexplained income under Section 68 of the Act. Before us, the Counsel for the assessee drew our attention to Page 116 of the Paper Book(statement recorded of assessee on 23.05.2008) and submitted that there is concurrent inflow and outflow of Rs. 2 lakhs as evident from the statement, ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 5– and the same being cross entries, therefore no addition can be sustained with respect to the amount of Rs. 2 lakhs. Further, it was submitted that on perusal of Page 116 of the Paper Book, it can be seen that the sum of Rs. 50,000/- only represents an “outstanding” amount and does not mean that it is the disclosed income of the assessee. Further, the Counsel for the assessee also pointed out that the statement of the assessee dated 23.05.2008 appearing at Page 115 of the Paper Book has since been retracted (Page 83 of the Paper Book) on 5 th July 2008. Further, it was submitted that apart from the statement of the assessee recorded, the Assessing Officer had no substantive evidence to sustain the aforesaid additions in the hands of the assessee. The Counsel for the assessee submitted that it is a well-settled principle of law that no additions can be made on the basis of statement of the assessee which has been retracted. Further, it was submitted that even the Assessing Officer is not clear as to the year of taxability. The Counsel for the assessee drew our attention to order under Section 154 of the Act passed by Ld. CIT(Appeals)-1 dated 08.04.2019, from which it is evident that there is a clear confusion as to year of taxability of this amount even on the part of the Department. It was pointed out that from the aforesaid order passed by Ld. CIT(Appeals)-1 under Section 154 of the Act, it is evident that the same amount was also taxed in Assessment Year 2003-04 and hence, even the Department is unclear as to the year of taxability of this amount. Further, the Counsel for the assessee submitted that the additions have been made on the basis of notings in a diary, which cannot be sustained since the same cannot be considered as books of accounts for the purposes of additions under Section 68 of the Act. To summarize, the Counsel for the assessee submitted that there is no specific adverse material found against the assessee so as to sustain the additions, the Department itself was in doubt as to the year of taxability of the aforesaid amount and the additions cannot be made ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 6– under Section 68 of the Act on the basis of statement made by the assessee which has later been retracted by the assessee. 10. In response, the Ld. DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. 11. We have heard the rival contentions and perused the material on record. In the instant facts, the Ld. Counsel for the assessee has contended that the aforesaid additions pertain to income pertaining to Assessment Year 2002-03, whereas the contention of the Department is that the assessee has not brought anything on record to demonstrate that the aforesaid income pertains to Assessment Year 2002-03. However, at the same time it is observed that the Department has added the same income twice, both for Assessment Years 2003-04 and Assessment Year 2009-10. Therefore, it is evident that the Department is also uncertain as to which Assessment Yearto which the aforesaid income pertains to. It would be useful to reproduce the relevant extracts of the order under Section 154 passed by Ld. CIT(Appeals), who deleted the additions for Assessment Year 2003-04 on the ground that since the aforesaid additions have also been made for Assessment Year 2009-10, it would amount to double taxation if the same additions are also sustained for Assessment Year 2003-04: “The Assessing Officer did not accept the explanation of the appellant and assessed the total receipt of Rs.41,00,000/- in Assessment Year 2009-10. However, the CIT(A) in first round of quantum appeal has held that only Rs.11,80,800/- was relating to appellant and confirmed the addition of Rs.11,80,800/- in Assessment Year 2009-10. The Assessing Officer though has not accepted the appellant’s explanation that Rs.11,80,800/- was relating to Financial Year 2001-02 has made addition of Rs.5,16,356/- in Assessment Year 2003-04 on the basis of same very computation that the transaction related to Financial Year 2001-02. The addition of Rs.5,16,356/- has been made on the ground that appellant’s explanation of the opening ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 7– balance as on 01/04/2003 is not correct. The addition of Assessment Year 2003-04 of opening balance as on 01/04/2003 cannot be sustained in view of decision of Honourable Gujarat High Court decision in the case of PCIT V. Saumya Construction (P.) Ltd. [2017] 81 Taxmann.com 292 (Guj) as addition is of opening balance and not on the basis of any incriminating material. Moreover, the addition of Rs.11,80,800/- of the return on the investment of Rs.7,20,000/- has already been considered in the Assessment Year 2009-10, therefore, addition on the basis of same material in Assessment Year 2003- 04 is a double addition and cannot be sustained. Addition made by the AO is accordinglydeleted.” 12. Secondly, we observe that the statement of the assessee on the basis of which additions were made dated 23.05.2008 was also subsequently retracted by the assessee on July 5, 2008. It is a well established law that no additions can be sustained in the hands of the assessee on the basis of a statement which has been reacted by the assessee. In the case of Narendra Garg & Ashok Garg (AOP) 72 taxmann.com 355 (Gujarat), the Gujarat High Court held that where assessee retracted from disclosure made in statement under Section 132(4) which was not accepted by Revenue, and if no undisclosed income was found during search, revenue could not make addition on bare suspicion and presumption. In the case of Kailashben Manharlal Chokshi 174 Taxman 466 (Gujarat), during search conducted at assessee’s premises, his statement was recorded under Section 132(4) of the Act wherein he disclosed certain undisclosed income. After two months, he retracted from said disclosure contending that it was made at mid night under pressure and coercion.The Assessing Officer, however, made addition on basis of disclosure made by assessee in statement recorded under Section 132(4) of the Act. The High Court held that merely on basis of admission, assessee could not be subjected to such addition, when despite retraction Revenue could not furnish any corroborative evidence in support of such admission. In the case of Nageshwar Enterprises122 taxmann.com 41 (Gujarat), the High Court held ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 8– that where Assessing Officer made addition in hands of assessee firm for unaccounted investment and purchases merely on basis of confessional statement of assessee firm's partner before DRI, but no other evidences were bought on record, said addition was to be deleted. In the case of Chetnaben J. Shah 79 taxmann.com 328 (Gujarat), the High Court held that where there was no material to show that assessee was carrying on speculation business in shares, addition on account of unexplained income from speculation business only on basis of assessee's disclosure under Section 132(4) could not be sustained. In the case of Chandrakumar Jethmal Kochar 55 taxmann.com 292 (Gujarat), the High Court held that merely on basis of admission that few benami concerns were being run by assessee, assessee could not be subjected to addition when assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such admission. Therefore, merely on the basis of the statement of the assessee, in our considered view, the additions cannot be sustained especially in light of the fact that the assessee has subsequently retracted the statement and further, the Department has not brought forth any corroborative evidences to sustain the additions in the hands the assessee during the impugned Assessment Year. 13. Thirdly, in respect of certain additions (refer Page 116 of the Paper Booki.e.statement recorded of assessee on 23.05.2008) it is seen that there is concurrent inflow and outflow of Rs. 2 lakhs as evident from the from the statement made by the assessee, and the same being cross entries, therefore no addition can be sustained with respect to the amount of Rs. 2 lakhs. Further, on a perusal of Page 116 of the Paper Book, we agree with the Ld. Counsel for the assessee that the sum of Rs. 50,000/- only represents an “outstanding” amount and does not mean that it is the disclosed income of the assessee. Accordingly, ITA No. 694/Ahd/2019 Kalpesh Kantilal Patelvs. ITO Asst.Year –2009-10 - 9– even on merits, certain additions are not sustainable in the hands of the assessee. 14. Accordingly, looking into the instant facts, we are of the considered view that for the aforesaid reasons, the additions confirmed by Ld. CIT(Appeals) are liable to be deleted. 15. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 26/09/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 26/09/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 22.09.2023(Dictation given on Dragon Software by Hon’ble Member on 22.09.2023) 2. Date on which the typed draft is placed before the Dictating Member 22.09.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .09.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .09.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 26.09.2023 7. Date on which the file goes to the Bench Clerk 26.09.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................