Mansukh Tejabhai Timbadia, Raigad V. Commissioner of Income-tax - II,

ITA 818/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1011 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHAVARDHINI BUTY
• Keywords: Income from undisclosed sources; Search and seizure; Opportunity of being heard; Assessment record

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.818/PN/2014 '% % / ASSESSMENT YEAR : 2009-10 MANSUKH TEJABHAI TIMBADIA, MANITEJ, PLOT NO.3, ROAD NO.7, SECTOR-1, NEW PANVEL, NAVI MUMBAI 410 206 DIST : RAIGAD PAN NO.AAPPT1888C . / APPELLANT V/S ACIT, PANVEL CIRCLE, PANVEL . / RESPONDENT / ASSESSEE BY : MS. HIRAL SEJPAL / DEPARTMENT BY : SMT. HARSHAVARDHINI BUTY / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24-03-2014 PASSED U/S.263 OF THE I.T. ACT FOR THE ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR AND ALSO DERIVES INCOME FROM HOUSE PROPERTY AND LONG TERM CAPITAL GAIN. / DATE OF HEARING :07.10.2015 / DATE OF PRONOUNCEMENT:09.10.2015 2 ITA NO.818/PN/2014 HE FILED HIS RETURN OF INCOME ON 27-01-2010 DECLARING INCOME OF RS.5,37,32,323 AND AGRICULTURAL INCOME OF RS.3,28,877/-. THE RETURN WAS ACCOMPANIED BY AUDITED PROFIT AND LOSS ACCOUN T AND AUDITORS REPORT AS PER PROVISIONS OF SECTION 44AB OF THE I.T. ACT. THE AO COMPLETED THE ASSESSMENT U/S.143(3) ON 18-11-201 1 DETERMINING THE TOTAL INCOME AT RS.5,38,72,320/- AND AGRICU LTURAL INCOME OF RS.3,28,877/-. 3. SUBSEQUENTLY, THE LD.CIT VERIFIED THE CASE RECORDS AN D NOTED THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAINS O F RS.5,20,81,805/- ON PURCHASE AND SALE OF VARIOUS LANDS BY CLAIMING HIGHER PURCHASE PRICE THAN THAT OF THE PRICE MENT IONED IN THE PURCHASE AGREEMENTS WHILE COMPUTING THE CAPITAL GAIN. THE AO SHOULD HAVE MADE THE VERIFICATION OF SALES AND PURCHASES OF LANDS. HE OBSERVED THAT THE ASSESSEE ALONG WITH SHRI SUNIL TUKA RAM PATIL AGREED TO PURCHASE CERTAIN LANDS AT VILLAGE WANGANI FROM SAASTHA WAREHOUSING LTD. FOR A CONSIDERATION OF RS.1,46,04,000/-. AS PER THE AGREEMENT ONLY AN AMOUNT OF RS.2 LAKHS WAS PAID AN D BALANCE WAS PAYABLE WITHIN 45 DAYS. MEANWHILE THE LAND WAS SOLD O N 07- 04-2008 TO EKDANTA LAND PVT. LTD. FOR RS.3,65,10,000/-. AFT ER DEDUCTING RS.1,44,04,000/- BEING THE AMOUNT PAYABLE BY THE ASSESSEE AS PER THE AGREEMENT DATED 20-03-2008 TO S AASTHA WAREHOUSING LTD. THE BALANCE AMOUNT OF RS.2,21,06,000/- WAS RECEIVED BY THE ASSESSEE. THE ASSESSEE HAS SHOWN ONL Y 50% OF THIS INCOME BEING RS.1,10,53,000/-. THE ENTIRE AMOUNT OF RS.2 LAKH S AS PER THE AGREEMENT DATED 20-03-2008 WAS PAID BY TH E ASSESSEE. THEREFORE, THE ENTIRE AMOUNT OF INCOME ARISING ON ACCOUNT OF THIS AGREEMENT PERTAINS TO THE ASSESSEE AND HE SHOULD HAVE OFFERED THE SAME FOR TAXATION. HE NOTED THAT SIMILAR TRANSACTION HAS BEEN 3 ITA NO.818/PN/2014 ENTERED IN RESPECT OF ANOTHER LAND AT SURVEY NO.7, WANGA NI WHERE ENTIRE AMOUNT OF ADVANCE OF RS.1 LAKH WAS PAID BY THE ASS ESSEE. HOWEVER, THE SALE PRICE HAS BEEN DISTRIBUTED BETWEEN TH E ASSESSEE AND SHRI SUNIL T. PATIL. 4. HE FURTHER NOTED THAT INFORMATION WAS RECEIVED FROM TH E JCIT, CENTRAL CIRCLE-29, MUMBAI THAT THE ASSESSEE HAS RECE IVED RS.9,28,72,500/- FROM M/S. KRUPA LAND LTD. IN CASH AGAINST T HE SALE OF LAND IN A.Y. 2009-10 WHICH HAS NOT BEEN OFFERED BY THE ASSESSEE FOR TAXATION. THE AO HAS NOT MADE PROPER ENQ UIRIES AND CROSS VERIFICATIONS WITH RESPECT TO TRANSACTIONS ENTERED INTO BY THE ASSESSEE AND THE INCOME EARNED BY HIM FROM THESE TRAN SACTIONS. THE ABOVE OMISSIONS ON THE PART OF THE AO RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE. ACCORDINGLY, HE ISSUED A NOTICE U/S.263 OF THE I.T. ACT T O THE ASSESSEE CALLING FOR HIS RESPONSE. 5. THE ASSESSEE IN HIS RESPONSE SUBMITTED THAT BOTH TRANSACTIONS MENTIONED IN THE NOTICE U/S.263 WERE EXPLAINE D BY HIM DURING THE ASSESSMENT PROCEEDINGS WITH SUPPORTING DOCUMENTS. THESE TRANSACTIONS WERE CARRIED OUT BY HIM JOINTLY WITH SHRI SUNIL T. PATIL. THE SALE CONSIDERATION WAS RECEIVED BY BOTH PARTIES SEPARATELY BY 2 SEPARATE DEMAND DRAFTS. SHRI SUNIL T. PATIL HAS DECLARED CAPITAL GAIN ON THESE TRANSACTIONS IN HIS RETURN OF INCOME. BY MUTUAL UNDERSTANDING, THE TOKEN AMOUNT OF RS.2 LAKHS AND RS. 1 LAKH WAS PAID BY THE ASSESSEE. HENCE, IT DOES NOT MEAN THAT HE IS THE SOLE OWNER OF THOSE LANDS AND THAT THE E NTIRE CAPITAL GAIN IS EARNED BY HIM. 4 ITA NO.818/PN/2014 5.1 SO FAR AS THE RECEIPT OF CASH AMOUNTING TO RS.9,28,72,50 0/- FROM M/S. KRUPA LAND LTD. IS CONCERNED THE ASSESSEE REP LIED THAT HE HAS NO KNOWLEDGE OR IDEA OF SUCH RECEIPT. 6. HOWEVER, THE CIT WAS NOT CONVINCED WITH THE SUBMISSIO NS MADE BY THE ASSESSEE. HE HELD THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION WITH RESPECT TO CLAIMING OF HIGHER PURCHASE PRICE WHILE COMPUTING SHORT TERM CAPITAL GAIN. FURTHER, THE ASSES SEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE PROVING THAT THE PURCHA SE CONSIDERATION OF RS.2 LAKHS AND RS. 1 LAKH HAS BEEN PAID BY HIM ON BEHALF OF BOTH PARTIES, I.E., HIMSELF AND SHRI SUNIL T. PATIL. THERE IS NO AGREEMENT BETWEEN THE ASSESSEE AND SAID SHRI SUNIL T. PATIL. THE ASSESSEE HAS EXPRESSED HIS IGNORANCE TOWARDS RECE IPT OF RS.9,28,72,500/- FROM M/S. KRUPA LAND LTD. THE JCIT, CENTRA L CIRCLE-39, MUMBAI VIDE HIS LETTER DATED 02-02-2012 INFORMS T HAT SEARCH AND SEIZURE ACTION U/S.132 WAS CARRIED OUT ON 05 -03-2009 IN THE CASE OF JAI CORP. GROUP, ITS EMPLOYEES AND CLOSE ASSOCIATES, WHO WERE INVOLVED IN THE PROCESS OF ACQUIRING LAND. M/S. KRUPA LAND LTD. IS A COMPANY WHICH PERTAINS TO JAI CORP. GROUP A ND IT HAS PURCHASED VARIOUS LANDS FROM SHRI MANSUKH TIMBADIA (I.E. THE ASSESSEE). AS PER THE DETAILS SUBMITTED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. KRUPA LAND L TD. AND THE INCRIMINATING EVIDENCES GATHERED DURING THE SEARCH AN D SURVEY OPERATIONS, IT IS SEEN THAT UNACCOUNTED CASH PAYMENTS O F RS.9,28,72,500/- WERE MADE BY M/S. KRUPA LAND LTD TO SH RI MANSUKH TIMBADIA (I.E. THE ASSESSEE), FOR PURCHASE OF LANDS IN NEVALI VILLAGE. THE ASSESSEE HAS NOT OFFERED THE AMOUNT FO R TAXATION. IN VIEW OF THE ABOVE, THE CIT HELD THAT THE OR DER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVEN UE AND 5 ITA NO.818/PN/2014 THEREFORE THIS IS A FIT CASE FOR INVOKING JURISDICTION U/S.263. ACCORDINGLY, HE SET ASIDE THE ORDER OF THE AO PASSED U/ S.143(3) ON 18-11-2011 WITH A DIRECTION TO REDO THE ASSESSMENT DEN OVO AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LD. CIT ERRED IN PASSING ORDER U/S.263 SETTING ASIDE THE ASSESSMENT OF MAKING FRESH ASSESSMENT DENOVO. 2. THE LD.CIT ERRED IN PASSING ORDER U/S.263 WITHOUT G IVING FINDING AS TO HOW THE ORDER IS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. 3. THE APPELLANT PRAYS THAT : (I) ORDER U/S.263 MAY BE SET ASIDE AND CANCELLED AND THE ORIGINAL ASSESSMENT ORDER MAY BE RESTORED. (II) RECOVERY OF DEMAND IN DISPUTE MAY BE STAYED. (III) PERSONAL HEARING MAY BE GRANTED. (IV) ANY OTHER RELIEF YOUR HONOURS MAY DEEM FIT 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT. SHE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FURNISHED ALL DE TAILS REGARDING THE LAND TRANSACTIONS. THE BOOKS OF ACCOUNTS WERE ALSO PRODUCED BEFORE THE AO WHO TEST-CHECKED THE SAME FOR CERTAIN EXPENSES AND LAND DEALS. REFERRING TO THE COPY OF THE AGREEMENT TO SALE PLACED AT PAGES 16 TO 27 SHE SUBMITTED THAT TH E ASSESSEE ALONG WITH SHRI SUNIL T. PATIL HAS AGREED TO SELL THE LAND T O SAASTHA WAREHOUSING LTD. REFERRING TO PAGES 28 TO 33 OF THE PAP ER BOOK SHE SUBMITTED THAT THE ASSESSEE ALONG WITH SHRI SUNIL T. PATIL HAS AGREED TO SELL THE LAND TO SHRI NAIDU ADIKESHAVULU REDDY. 6 ITA NO.818/PN/2014 REFERRING TO THE DEED OF CONVEYANCE PLACED AT PAGES 43 TO 49 SHE SUBMITTED THAT THE ASSESSEE ALONG WITH SHRI SUNIL T. PATIL IS THE CONFIRMING PARTY FOR THE DEED OF CONVEYANCE BETWEEN M/S . EKDANTA LAND PVT. LTD. AND M/S. SAASTHA WAREHOUSING LTD. THUS, IN ALL THE PURCHASE AND SALE TRANSACTIONS THE ASSESSEE HAS ENTER ED INTO SUCH TRANSACTIONS ALONG WITH SHRI SUNIL T. PATIL. THEREFORE, IT CAN NOT BE SAID THAT THE ENTIRE INCOME BELONGED TO THE ASSESSEE. SHE SUBMITTED THAT THE SALE CONSIDERATIONS WERE ALSO RECEIVED BY DEMAND DRAFTS SEPARATELY BY THE 2 PERSONS IN EQUAL SHA RE. THEREFORE, THE ASSESSEE HAD CORRECTLY SHOWN HIS SHARE OF CAPITAL GAIN WHICH HAS BEEN ACCEPTED BY THE AO AND THEREFORE T HE SAME IS IN ORDER. FURTHER, SHRI SUNIL T. PATIL HAS ALSO DECLARED HIS SHARE OF INCOME. BOTH THE PARTIES HAVE SEPARATELY RECEIVED THEIR SHARE OF SALE PROCEEDS IN DEMAND DRAFTS. THEREFORE, IT IS NOT CORRE CT TO SAY THAT THE ENTIRE RECEIPTS SHOULD HAVE BEEN OFFERED BY THE ASSESSEE IN HIS RETURN OF INCOME. THE AO AFTER DUE VERIFICATION OF THE LAND DEALS HAS ACCEPTED THE INCOME. THEREFORE, THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 9. SO FAR AS THE AMOUNT RECEIVED IN CASH FROM M/S. KRUPA LAND LTD. IS CONCERNED SHE SUBMITTED THAT THE ASSESSEE HAS NOT RECEIVED ANY SUCH CASH FROM M/S. KRUPA LAND LTD. THEREFORE, THER E WAS NO QUESTION OF ANY ENQUIRY BY THE AO ON THIS ISSUE. SHE ACC ORDINGLY SUBMITTED THAT THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, T HE ORDER PASSED U/S.263 BY THE CIT SHOULD BE SET ASIDE. SHE ALS O RELIED ON THE FOLLOWING DECISIONS : 1. CIT VS. GABRIEL INDIA LTD. REPORTED IN 203 ITR 10 8 2. CIT VS. ARVIND JEWELLERS REPORTED IN 259 ITR 502 7 ITA NO.818/PN/2014 3. BAGARIA VEGETABLE PRODUCTS LTD. VS. JCIT REPORTED IN 106 ITR 105 4. ANIL SHAH VS. ACIT REPORTED IN 162 TAXMANN 39 (M UM) 5. CIT VS. MEPCO INDUSTRIES LTD. REPORTED IN 294 ITD 121 (MADRAS) 6. CIT VS. NIRMA CHEMICALS WORKS PVT. LTD. REPORTED I N 309 ITR 67 7. PURANLAL AGRAWAL (HUF) VS. CIT REPORTED IN 131 T J 78 (NAG.) 8. CIT VS. VIKAS POLYMERS REPORTED IN (2010) 194 TAX MANN 57 (DELHI) 9. CIT VS. DESIGN & AUTOMATION ENGINEERS BOMBAY PVT. LTD. REPORTED IN 323 ITR 632 10. CIT VS. SUNBEAM AUTO LTD. REPORTED IN 332 ITR 1 679 11. CIT VS. ASHISH RAJPAL REPORTED IN 320 ITR 674 (DE LHI) 12. JAI KUMAR KANKARIA VS. CIT REPORTED IN 251 ITR 707 10. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE LD.CIT . 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT AND TH E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE LD.CIT INVOKED JURISDICTION U/S.263 ON TWO ISSUES, I.E. (I) INSTEAD OF SHOWING THE ENTIRE SALE PROCEEDS THE ASSESSEE HAS SHOWN ONLY 50% OF THE SALE PROCEEDS AS HIS INCOME WHICH THE AO FAILED TO VERIFY AND (II) THE AO HAS NOT MADE PROPER ENQUIRIES REGARDING THE CASH RECEIV ED AMOUNTING TO RS.9,28,72,500/- FROM M/S. KRUPA LAND LTD. AGA INST SALE OF LAND. 12. SO FAR AS THE FIRST ISSUE IS CONCERNED WE FIND FROM THE VARIOUS AGREEMENTS AND DEEDS OF CONVEYANCE THAT THE ASSESSEE HAS ENTERED INTO TRANSACTIONS WITH DIFFERENT PARTIES ALONG WITH SHRI SUNIL TUKARAM PATIL EITHER AS A PURCHASE OR AS A SELLER OR AS A CONSENTING PARTY. THE NAME OF THE ASSESSEE AS WELL AS SHRI SUNIL TUK ARAM PATIL APPEAR IN ALL THE DOCUMENTS RELATING TO LAND DEALS MENTIONED BY THE LD.CIT. THEREFORE, IT IS INCORRECT TO SAY THAT THE ENTIRE PROFIT SHOULD HAVE BEEN SHOWN BY THE ASSESSEE INSTEAD OF SHOW ING 50%. 8 ITA NO.818/PN/2014 WE FIND ALL THESE DOCUMENTS WERE FILED BEFORE THE AO WHO TE ST- CHECKED THE SAME AND HAS ACCEPTED THE INCOME SHOWN B Y THE ASSESSEE BEING 50% SHARE IN SUCH LAND DEALS. THEREFORE, IT CANNOT BE SAID THAT THERE WAS NON-APPLICATION OF MIND AND THAT T HE ORDER IS ERRONEOUS. 13. NOW COMING TO THE SECOND ISSUE WE FIND THE ASSESSMENT ORDER IN THIS CASE WAS PASSED ON 18-11-2011. THE ASSESSMENT RECORD WAS CALLED FOR DURING THE COURSE OF HEARING. IT WAS REVE ALED THAT THE JCIT VIDE LETTER DATED 02-02-2012 ADDRESSED TO THE AO HAS INTIMATED FOR APPROPRIATE ACTION U/S.147 IN THE CASE OF TH E ASSESSEE ON ACCOUNT OF RECEIPT OF UNACCOUNTED INCOME IN CASH IN RE SPECT OF LAND DEALS WITH M/S. KRUPA LAND LTD. IN A.Y. 2008-09 AND 2 009- 10. A COPY OF THE LETTER ADDRESSED BY THE JCIT TO THE AO WAS FILED BY THE LD. DEPARTMENTAL REPRESENTATIVE AT THE TIME OF H EARING WHICH IS PLACED ON RECORD. THEREFORE, AT THE TIME OF PASS ING OF THE ASSESSMENT ORDER THE AO WAS NOT IN POSSESSION OF THE LE TTER RECEIVED FROM JCIT (OSD) CENTRAL CIRCLE-39, MUMBAI. IN ABSEN CE OF ANY SUCH INFORMATION AT THE TIME OF COMPLETION OF THE ASSES SMENT THE AO COULD NOT HAVE ASKED THE ASSESSEE TO EXPLAIN TH E CASH TRANSACTIONS, IF ANY WITH M/S. KRUPA LAND LTD. THEREFORE, ON THE BASIS OF A SUBSEQUENT LETTER ADDRESSED TO THE AO AFTER COMPLETION OF THE ASSESSMENT THE LD.CIT COULD NOT HAVE ASSUMED JURIS DICTION U/S.263 ON THIS ISSUE HOLDING THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW O F THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT HAS WRO NGLY ASSUMED JURISDICTION U/S.263 WHICH IS NOT CORRECT UNDER T HE FACTS AND CIRCUMSTANCES OF THE CASE. WE THEREFORE SET ASIDE T HE ORDER 9 ITA NO.818/PN/2014 PASSED U/S.263 BY THE LD.CIT. THE GROUNDS RAISED BY TH E ASSESSEE ARE ACCORDINGLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09-10-2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER IQ.KS PUNE ; # DATED : 09 TH OCTOBER, 2015. LRH'K ( )'+ , / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( S / THE CIT- II , THANE 4. 5. ) ,, ,, IQ.KS / DR, ITAT, B PUNE; / GUARD FILE. / BY ORDER , ) ) //TRUE COPY// 0 , / SR. PRIVATE SECRETARY ,, IQ.KS / ITAT, PUNE