Astha Industrial Estate, Surat V. Dy. Commissioner of Income Tax, Circle -2 , Surat

ITSSA 1/SRT/2022

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4773 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-09-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-08-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 18-01-2022
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: ASHWIN K PAAREKH
• Keywords: Set aside; Additional evidence; Documents seized; Search and seizure; Bogus
• Section: 143(3); 142(1); 250; 132; 153A; 68; 153C; 271D

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर (खोज-और-जÞती) अपील सं./IT(SS)A No.01/SRT/2022 (Assessment Year: 2011-12) (Hybrid Hearing) Astha Industrial Estate Anjani Industrial EstateVibhag-1, Amroli- Sayan Road, Gothan, Surat- 394130 Vs. Deputy Commissioner of Income-tax, Central Circle-2, Surat, Aaykar Bhawan, Near Majura Gate, Opp. New Civil Hospital, Surat – 395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAQFA 6255 M (अपीलाथŎ/ Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Appellant by Shri Ashwin K Paarekh, CA राजˢ की ओर से /Respondent by Shri Ravi Kant Gupta, CIT- DR सुनवाई की तारीख Date of Hearing 12/08/2024 घोषणा की तारीख/Date of Pronouncement 05/09/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act [in short, ‘the Act’] by the Commissioner of Income-tax (Appeals) - 4, Surat [in short, ‘the CIT(A)’], dated 13.12.2021 for the assessment year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as follow: “1. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the additions of Rs.23,55,000/- u/s 68 of the Act for the booking money received and cancelled during the year for Industrial Plots booked by appellant firm without appreciating the evidences on name, address, PAN, booking receipts and cancellation endorsements. The addition of Rs.23,55,000/- should therefore be deleted. 2. The learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the addition of Rs.18,75,000/- u/s 68 of the Act for the boking money received during the year and repaid in A.Y 2012-13 and AY 2 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate 2013-14 for Industrial plots booked by appellant firm without appreciating the evidences of name, address, PAN, booking receipts and cancellation endorsements. The addition of Rs.19,75,000/- should therefore be deleted. 3. The Learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in confirming the addition in order u/s 153C of the Act in respect of amount accepted and repaid during the year Rs.23,55,000/- and booking money accepted during the year Rs.19,75,000/- in the absence of any incriminating material found during the course of search. The assessment order u/s 153C should be quashed. 4. The Learned Commissioner of Income-tax (Appeals) has grievously erred in law and on facts in assuming jurisdiction for order u/s 143(3) r.w.s.153C of the Act without having recorded satisfaction prior to issuance of Notice u/s 153C the proceedings u/s 153C being illegal, unlawful, null & void, the assessment order be quashed. The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing.” 3. Ground No.4 pertains to assumption of jurisdiction u/s 143(3) r.w.s 153C of the Act without having recorded satisfaction prior to issuance of notice u/s 153C of the Act. Before us, Ld.AR for the assessee has not pressed this ground and hence, the same is “dismissed as not pressed”. 4. The facts of the case in brief are that assessee is a partnership firm, which was engaged in the business of industrial plotting of land during the subject assessment year. A search and seizure operation u/s 132 of the Act was carried out on 17.07.2012 in cases of Daliya-Badshah-Babriya group of Surat. Assessee- firm was stated to have been covered during the search action u/s 132 of the Act. After centralization of the case, AO issued notice u/s 153A of the Act on 22.01.2013. In response, assessee filed its return of income on 20.03.2013 declaring total income of Rs.15,90,872/-. Statutory notices u/s 142(2) and 142(1) 3 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate were issued and served upon the assessee. During assessment, the AO found that the assessee was not covered u/s 132 and hence, a notice u/s 153C r.w.s. 153A was issued on 16.03.2015 for the reason that documents of assessee-firm were found from the premises from M/s Anjali Land Developers which was covered u/s 132 of the Act. The assessee submitted that the return filed u/s 153A may be treated as returned u/s 153C of the Act. During the year the assessee received booking money in cash of Rs.23,55,000/- and repaid said amount after cancelling the plot bookings. AO issued show-cause notice and asked the assessee as to why the so-called advances be not treated as cash credit u/s 68 of the Act because no documentary evidences were filed to substantiate that the nature and source of such advances are explained in the books of account. The AO also asked why penalty proceedings u/s 271D and 271E should not be initiated for violation of provisions of section 269SS and 269T of the Act. The AO also found that assessee has received booking advances of Rs.18,75,000/- during the year from various parties and such advances were refunded to them in the subsequent years. Since the documentary evidence for booking and cancellation had not been given, the nature and source of such advances were not explained in the books of account. The AO asked assessee to explained why the advance of Rs.18,75,000/- be not treated as cash credit u/s 68 of the Act. He also required the assessee to explain why the provisions of u/s 269SS and 269T should not be invoked. The assessee submitted copies of booking receipts and stated that as per normal trade practice whenever the bookings are cancelled, the original receipts issued to customers are taken back. 4 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate The explanations of the assessee were not accepted because assessee had not furnished PAN, address of booking parties to verify genuineness and nature of transactions. The assessee had received in cash booking advances and no evidence was given to show that it was withdrawn by the parties who booked various plots. Thus, AO held that assessee introduced its own money in the garb of loans and advances for meeting various expenses. A prudent customer could not cancel the booking of industrial plot in a short period. Further, the same customer has also booked plots in the project of the sister concerns in cash and received back their amount by cancelling the booking within a short period. In view of the above, the AO invoked the provisions u/s 68 of the Act and added Rs.23,55,000/-. The AO also added Rs.19,75,000/- u/s 68 of the Act of the amounts received as “booking advance” in cash and returned back in the subsequent years. Aggrieved by the additions made by AO, assessee preferred appeal before CIT(A). 5. Before the CIT(A), the assessee had raised two more additional grounds regarding validity of additions in the proceedings u/s 153C in absence of any incriminating material found during the search. It was also contested that the AO has erred in assuming jurisdiction for order u/s 143(3) r.w.s. 153C of the Act. The CIT(A) has reproduced submissions of the appellant at pages 3 and 4 of the appellate order. After going through the satisfaction recorded by the AO, the CIT(A) has given a finding that the documents seized in Annexure-A3 to A5 pertain to the appellant- firm. It is clear from the satisfaction note that 5 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate evidences of cash credit of appellant were found during the course of search and such evidences did not pertain to the persons searched but were pertaining to the appellant. Hence, AO has followed the due process of law and hence, notice u/s 153C of the Act was upheld. The CIT(A) placed reliance on the decisions of the jurisdictional High Court in the case of Rainbow Texchem Pvt. Ltd. vs. ITO, 129 taxmann.com 85 (Guj). Regarding addition of Rs.23,55,000/- u/s 68 towards the booking money received and cancelled during the year, the CIT(A) observed that assessee had not produced any evidence relating to receipt of advance for sale of plots and the refund of the same before the AO. He further stated that when an agreement to purchase an immovable property such as plot of land is entered into, some documentary evidence in the form of agreement to sale (satakhat) is signed between the parties. No such evidence was filed by the appellant. The assessee had submitted ledger extracts and ITRs of some persons for the first time before CIT(A). As no application for admitting the additional evidence was made to the CIT(A), the same was not entertained. The CIT(A) has discussed elaborately about admission of additional evidence under Rule-46A of the Income Tax Rules, 1962 in para 7.4 to 7.7 of the appellate order. The CIT(A) has observed that the assessee had not fulfilled one of the conditions laid down in sub-rule (1) of Rule-46A of the Income-tax Rules, 1962. On merit, the CIT(A) held that the assessee failed to produce any confirmation from the alleged persons who had given advances to assessee and assessee also failed to produce such persons before AO for cross-examination. All the advances were received in cash and not through banking channel. Therefore, genuineness of the 6 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate transactions were not established. The CIT(A) observed that the advances are in the nature of fake transactions of circulating one’s own unaccounted money in bogus name. The burden cast upon the assessee to establish the identity of the advances given, genuineness of the transactions and capacity of the persons for giving the advances had not been established. Hence, the addition of Rs.23,55,000/- was confirmed. Regrading the other addition of Rs.19,75,000/-, the CIT(A) held that facts are identical to the earlier ground and since no details of the advances were given, the addition made by the AO was confirmed. Aggrieved by the order of CIT(A), the assessee has filed an appeal before this Tribunal. 6. Before us Ld.AR of the assessee has filed paper book containing 314 pages and certified that no additional evidence is pressed before the Bench. The Ld.AR mainly relied on the written submission of assessee before the CIT(A). He submitted that the CIT(A) has not admitted the additional evidence under Rule- 46A of the IT Rules, 1962 only because application for admission was not filed along with the additional evidence. He requested that the case may be set aside to the CIT(A) for adjudication of both grounds on merit after admission of additional evidence. He submitted that appellant has a strong case on merit. The Ld.AR of assessee has relied on the following decisions: (i) Hon’ble Gujarat High Court in case PCIT vs. Saumya Construction in TA No.24 of 2016 dated 14.03.2016; (ii) Civil Appeal No.11080 of 2017 CIT vs. Sinhgad Technical Education Society dated 28.08.2017(SC); (iii) PCIT vs. Devangi Alia Rupa in TA 7 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate Nos.54 to 57 of 2017 dated 02.02.2017(Guj); (iv) CIT vs. Kabul Chawla in TA Nos.707, 709 and 713 of 2014 dated 28.08.2015(Del); (v) CIT vs. Ayachi Chandrashekhar Narsangji in TA No.992 of 2013 dated 02.12.2013(Guj); (vi) ITO vs. Apex Therm packaging Pvt. Ltd. ITA No.253/Ahd/2010 dated 23.05.2014 and (vii) CIT vs. Dipak J Panchal (2017) 98 CCH 74 (Guj) 7. On the other hand, Ld. CIT-DR supported the orders of the lower authorities. He submitted that industrial plots are not booked by ordinary persons and those having specific requirement only purchase industrial plots. Hence, the theory of cancellation within a short period is not as per normal behaviour, especially when all bookings have bene cancelled after a short period and amounts have been refunded. He further stated that in most cases advances have been received on three dates and the booking amount was also refund on three dates. There is no evidence that the persons who had booked the plots demanded or requested for cancellation. The CIT-DR also took us through the order of CIT(A) and submitted that there is no documentary evidence like agreement for sale etc., to support the claim of cash deposit by way of booking advances. No bank statements of purchasers were given to show that cash was withdrawn before payment to assessee. He submitted that the additional evidences are merely self-serving documents. On merit, he supported the reasons given by the CIT(A). 8 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate 8. In the rejoinder, the Ld.AR of the assessee submitted that the original records have been seized and are in the custody of the Department. He also submitted that the bookings were cancelled and subsequently the parties re- booked in other plots of the assessee-firm. 9. We have heard both the parties and perused the material on record carefully. We have also deliberated on the case laws relied upon by Ld.AR of the assessee. The AO has made two additions of Rs.23,55,000/- and Rs.19,75,000/-, both u/s 68 of the Act. The first addition was booking advances received in cash which were re-paid in the same financial year. Such details are pages 2 to 4 of the assessment order. The other addition pertains to booking advances received in cash and returned back in the subsequent years. The AO made the additions because assessee could not furnish any credible evidence regarding the genuineness of the transactions. Assessee also failed to prove the identity and creditworthiness of various parties who had booked the industrial plots by paying the booking advances in cash. Before the Ld.CIT(A), the assessee filed ledger extracts and ITRs of some persons who claimed to have given advances to the appellant for purchase of industrial plots. The CIT(A) found that these details had never been produced before AO and hence these were new evidence produced before CIT(A) for the first time. However, application for admission of additional evidence was not filed by the assessee and hence the same was not entertained by CIT(A). He stated that additional evidence filed before the first appellate authority cannot be admitted in a routine manner. The assessee is 9 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate required to satisfy the appellate authority that he has fulfilled one of the conditions laid down in sub Rule (1) of Rule-46A of IT Rules, 1962. Once the documents are admitted by CIT(A) after recording reasons, a reasonable opportunity should be given to AO to examine the same evidence and offer comment in the remand report. Therefore, the CIT(A) has not admitted the additional evidence and based on the material available on record and findings of the AO, he upheld the additions made by the AO. The Ld.AR has requested that the additional evidence should have been admitted by the CIT(A) in the interest of justice and fair play. 9.1 We have again examined the facts of the case. We find the CIT(A) did not admit the additional evidence because assessee had not made a formal request for admission of the additional evidence. When the factum of fresh evidence or document is not disputed, the CIT(A) should have given opportunity to the assessee to remove the defect in filing additional evidence in the interest of substantial justice. We find that these documents are, in fact, required to be examined to decide the issue of cash credit u/s 68 of the Act in the right perspective. In view of sub-rule (4) of Rule-46A of the IT Rules, 1962 and provisions of section 250 of the Act, the CIT(A) was not justified in rejecting the additional evidence produced by assessee straightway and he should have directed the AO to consider said evidence and find out identity, creditworthiness and genuineness of transactions, etc., of the persons who made the booking advances. We, therefore, set aside the order of CIT(A) and direct the CIT(A) to consider additional evidence as per law after giving adequate opportunities of 10 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate hearing to assessee. The assessee is also directed to follow the due procedure in filing additional evidence under Rule-46A of IT Rules, 1962 before CIT(A). The CIT(A) should thereafter consider the request of additional evidence and if he accepts the request, a reasonable opportunity should be afforded to Assessing Officer to examine the said additional evidence or documents or to cross- examine the witness or to produce any evidence or documents or witness in rebuttal of the additional evidence. With this remarks, we set aside the order of CIT(A) and restore the matter back to the file of CIT(A) to adjudicate the issue afresh. This ground of assessee’s appeal is allowed for statistical purposes. 9.2 We make it clear that no opinions have been expressed by us on merits of the additions. The assessee is also given liberty to argue the case on merit before CIT(A). The CIT(A) may make further enquiry as per the provisions u/s 250(4) of the Act. 10. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced on 05/09/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) Æयाियक सदÖय/ Judicial Member ल े खा सदÖय/ Accountant Member स ू रत/Surat Ǒदनांक/ Date: 05/09/2024 Dkp Outsourcing Sr.P.S 11 IT(SS)A No.01/SRT/2022 (A.Y 11-12) Astha Industrial Estate आद े श कì ÿितिलिप अú े िषत / Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आय ु ĉ/ CIT  आयकर आय ु ĉ (अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, स ू रत/ DR, ITAT, SURAT  गाड ª फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलȣय अͬधकरण, स ू रत