The ACIT, Central Circle-1(4), Ahmedabad V. Shri Tusharbhai Devjibhai Patel L/h of late Devjibhai G.Patel, Mehsana

ITSSA 142/AHD/2012

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0648 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Income from undisclosed sources; Loose papers; Opportunity of cross examination; Third party statement; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .. , ( .) , ! BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER (SS) ./ I.T(SS).A. NO.142/AHD/2012 ( / ASSESSMENT YEAR : 2009-10) THE ASST.CIT CENTRAL CIRCLE-1(4) AHMEDABAD / VS. SHRI TUSHARBHAI DEVJIBHAI PATEL LEGAL HEIR OF LATE SHRI DEVJIBHAI GANESHBHAI PATEL 40, UMIYA SOCIETY MILL ROAD, KADI MEHSANA % & ./ ./ PAN/GIR NO. : AKHPP 0988 M ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) AND CO NO.86/AHD/2012 FOR AY 2009-10 (IN IT(SS)A NO.142/AHD/2012 FOR AY 2009-10) TUSHARBHAI D.PATEL VS. THE ACIT , CC-1(4) MEHSANA AHMEDABAD (CROSS OBJECTOR) ... (RESPON DENT) REVENUE BY : SHRI O.P.VAISHNAV, CIT - DR ASSESSEE BY : SHRI VIJAY RANJAN, AR + ,- .& / DATE OF HEARING 27/05/2015 /012 - .& / DATE OF PRONOUNCEMENT 29/05/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.C OMMISSIONER OF INCOME IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 2 - TAX(APPEALS)-I, AHMEDABAD (CIT(A) IN SHORT) DATED 02/12/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2009-10. THE A PPEAL AND THE CROSS OBJECTION ARE TAKEN UP TOGETHER AND ARE BEING DISPO SED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E, I.E. IT(SS)A NO.142/AHD/2012 FOR AY 2009-10. THE REVENUE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL:- 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON AC COUNT OF UNACCOUNTED INCOME (RETIREMENT BENEFIT TO PARTNERS) OF RS.46,83,980/-. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTEN T. 2. BRIEFLY STATED FACTS ARE THAT A SEARCH ACTION U/ S.132 OF THE INCOME TAX ACT 1961 WAS CARRIED OUT IN THE CASE OF RAJA GR OUP OF KADI ON 05/02/2009. DURING THE COURSE OF SEARCH PROCEEDING S DOCUMENTS ANNEXURE A-10 BEING LOOSE-PAPER FILE SEIZED FROM TH E PREMISES OF M/S.SHREE ANNAPURNA RICE AND OIL MILL. PAGE NOS.15 6,158,159 AND ITS BACK SIDE AND 160 WHICH ARE RELATING TO PAYMENTS MA DE TO THE RETIRING PARTNERS OF THE FIRM M/S.SHREE ANNAPURNA RICE AND OIL MILL. THE CASE IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 3 - OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSME NT AND THE ASSESSMENT U/S.143(3) R.W.S.153B OF THE INCOME TAX ACT,1961 (H EREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/12/ 2010, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS .46,83,980/- ON ACCOUNT OF PAYMENTS MADE TO THE RETIRING PARTNERS O F THE FIRMS. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE FILED AN AP PEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS, D ELETED THE ADDITION. AGAINST THIS, NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN CROSS- OBJECTION THEREOF BEFORE US. 3. LD.CIT-DR SHRI O.P.VAISHNAV VEHEMENTLY ARGUED TH AT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N. HE SUPPORTED THE ORDER OF THE AO. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S HRI VIJAY RANJAN SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE AMOUNT IN THE NATURE OF PAYMENT TO THE RETIRING PARTNERS. THEREF ORE, THE SAME CANNOT BE SUBJECTED TO TAX. HE FURTHER SUBMITTED THAT THE PA YMENTS WERE RECEIVED BY THE RETIRING PARTNERS AND ALSO POINTED OUT THAT M/S. SHREE ANNAPURNA RICE AND OIL MILL HAS OFFERED THE AMOUNT BEFORE TH E SETTLEMENT COMMISSION. HE FURTHER POINTED OUT THAT THERE WAS A CHANGE IN THE IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 4 - CONSTITUTION OF THE PARTNERSHIP W.E.F. 01/04/2007, EVEN OTHERWISE ALSO, THE PAYMENTS SO RECEIVED CANNOT BE SUBJECTED TO TAX IN THIS YEAR. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON F ACT THAT READS AS UNDER:- ON CAREFUL CONSIDERATION OF ASSESSMENT ORDER RELEV ANT SEIZED MATERIALS AS WELL AS SUBMISSION OF APPELLANT, DEVJI BHAI PATEL HAS RETIRED FROM M/S ANNAPURANA RICE & OIL MILLS AND IT IS APPARENT FROM LOOSE PAPER NO 158 OF ANNEXURE A-10 SEIZED DUR ING THE COURSE OF SEARCH THAT CALCULATION OF RS.25,83,980 REFLECTED IN SUCH PAPER IS TOWARDS PAYMENT ON RETIREMENT OF APPELLANT WHICH ITSELF SUGGEST THAT LOOSE PAPER EVEN THOUGH FOUND FROM PRE MISES OF THIRD PARTY HAS CORRELATION WITH APPELLANT AND FACTS COIN CIDES WITH EVENTS HAPPENED IN CASE OF APPELLANT HENCE APPELLAN T'S ARGUMENT THAT ADDITION IS BASED ON THIRD PARTY STATEMENT OR DOCUMENTS FOUND FROM THIRD PARTY HENCE CANNOT BE TAXED IN HANDS OF HIM CANNOT BE ACCEPTED AND LOOSE PAPERS CONSIDERED IN PRESENT CAS E CANNOT BE CONSIDERED AS DUMB DOCUMENTS. EVEN IN CASE OF JANKI OIL MILLS, APPELLANT'S BROTHER HAS RETIRED FROM THE FIRM AND H IS SHARE WAS 0.07 PAISA WHICH IS REFLECTED-IN SEIZED PAPER AND A SSESSING OFFICER HAS ESTABLISHED THAT PAYMENT HAS BEEN MADE TO KEY P ERSON AND MADE APPEARING IN PARTNERSHIP DEED IS DUMMY HENCE E VEN SUCH PAPER CANNOT BE CONSIDERED AS DUMB DOCUMENT AS STAT ED BY APPELLANT. HOWEVER; THE SEIZED PAPERS FOUND DURING THE COURSE OF SEARCH AS WELL AS STATEMENT OF HIMANSHU KHAMAR RELI ED UPON BY ASSESSING OFFICER CLEARLY STATE THAT BOTH THE PAYME NTS HAVE BEEN IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 5 - MADE AS RETIREMENT BENEFITS AND WORKING IS ARRIVED AFTER TAKING INTO CONSIDERATION VALUATION OF BUSINESS GOODWILL E TC. EVEN, ASSESSING OFFICER IN HIS ORDER HAS CATEGORICALLY ST ATED THAT PAYMENTS MADE BY BOTH THE FIRMS ARE TOWARDS RETIREM ENT BENEFITS. IN SUCH A SCENARIO, IT IS ESTABLISHED LAW THAT SEIZ ED MATERIAL OR STATEMENT RECORDED DURING THE COURSE OF SEARCH SHOU LD BE READ AS A WHOLE AND CONTENTS OF ENTIRE DOCUMENTS SHOULD BE TREATED AS CORRECT OR REJECTED AS A WHOLE AND IT CANNOT BE REA D ONLY TO THE EXTENT IT IS ADVANTAGEOUS TO THE REVENUE AND NOT RE AD WHEN IT BECOMES DISADVANTAGEOUS TO THE REVENUE AS HELD BY H ON'BLE GUJARAT HIGH COURT IN CASE OF NAVJIVAN OIL MILLS V. CIT [2001] ITR 417 AND GLASS LINES EQUIPMENT & CO. LTD. V. CIT [2002] 253 ITR 454. THE ASSESSING OFFICER HAS CONSIDERED THE L OOSE PAPER FOR TAXING UNACCOUNTED RECEIPT IN HANDS OF APPELLANT BU T FAILED TO CONSIDER THE CONTENTS OF SUCH PAPERS WHICH ITSELF S UGGEST THAT ENTIRE PAYMENT IS TOWARDS RETIREMENT BENEFITS AND A S HELD BY HON'BLE SUPREME COURT IN CASE OF CIT VS. MOHANBHAI PAMABHAI 91 ITR 393 REFERRED SUPRA THAT WHERE ASSESSEES RETI RED FROM FIRM AND RECEIVED AMOUNT WHICH INCLUDED IN ITS BREAK-UP PROPORTIONATE SHARE IN VALUE OF GOODWILL, THERE WAS NO TRANSFER O F INTEREST BY ANY OF ASSESSEE IN GOODWILL WITHIN MEANING OF SECTION 2 (47) AND, THEREFORE, AMOUNT RECEIVED BY THEM IN RESPECT OF GO ODWILL COULD NOT BE REGARDED AS CAPITAL GAIN CHARGEABLE TO TAX . DECISION OF HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. P.H. PATEL 171 ITR 128 ALSO SUPPORTS THE VIEW THAT APPELLANT T HAT RETIREMENT BENEFITS ARE CAPITAL RECEIPT IN HANDS OF RECIPIENT. EVEN PROVISIONS OF SECTION 45(4) OF THE ACT ARE ALSO NOT APPLICABLE IN PRESENT CASE AS THERE IS NO DISTRIBUTION OF CAPITAL ASSETS OF TH E FIRM. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF APPELLANT'S C ASE AND RESPECTFULLY FOLLOWING DECISION OF HON'BLE SUPREME COURT AMOUNT RECEIVED BY APPELLANT IS TREATED AS CAPITAL RECEIPT IN HANDS OF APPELLANT. THE ADDITION MADE BY ASSESSING OFFICE IS DELETED. IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 6 - 4.1. THE LD.CIT(A) HAS FOLLOWED THE JUDGEMENT OF HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. P.H. PATEL (171 ITR 128). THE L.DCIT(A) HAS GIVEN A FINDING THAT EVEN THE AO OBSE RVED THAT BOTH THE PAYMENTS HAVE BEEN MADE AS A RETIREMENT BENEFITS AN D WORKING IS ARRIVED AFTER TAKING INTO CONSIDERATION VALUATION OF BUSINE SS, GOODWILL, ETC. THIS FINDING OF THE LD.CIT(A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY MATERIAL ON RECORD. THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. P.H. PATEL(SUPRA) HAS OBSERVED AS UNDER:- 10. THAT LEAVES US WITH THE QUESTION WHETHER ANY LIABI LITY TO CAPITAL GAIN EXISTS IN SO FAR AS THE SUM OF RS. 90, 000 CREDITED TO THE ASSESSEE'S ACCOUNT IS CONCERNED. LEARNED STANDING C OUNSEL INVITED OUR ATTENTION TO THE SO-CALLED DEED OF DISSOLUTION AND POINTED OUT THAT THE REAL EFFECT OF THE AVERMENTS CONTAINED IN THE DOCUMENT IS THAT THE ASSESSEE HAD TRANSFERRED HIS PARTNERSHIP I NTEREST IN FAVOUR OF THE CONTINUING PARTNERS AND SUCH A TRANSFER GAVE RISE TO CAPITAL GAIN. WE NEED NOT DEAL WITH THIS ARGUMENT OF LEARNE D STANDING COUNSEL IN DETAIL AS, IN OUR OPINION, THE MATTER IS CONCLUDED BY THE HIGHEST AUTHORITY. WE MAY REFER TO THE DECISION OF THE GUJARAT HIGH COURT IN CIT VS. MOHANBHAI PAMABHAI (1973) 91 ITR 3 93 (GUJ). IN THE AFORESAID DECISION, THE GUJARAT HIGH COURT H ELD THAT WHEN A PARTNER RETIRES FROM A PARTNERSHIP FIRM TAKING HIS SHARE OF PARTNERSHIP INTEREST, NO ELEMENT OF TRANSFER OF INT EREST IN THE PARTNERSHIP ASSETS BY THE RETIRING PARTNER TO THE C ONTINUING PARTNER WAS INVOLVED. THIS VIEW WAS UPHELD BY THE SUPREME C OURT WHILE DISPOSING OF THE APPEAL FILED BY THE DEPARTMENT. IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 7 - 4.2. IN THE LIGHT OF THE ABOVE JUDGMENT OF THE HON BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT VS. P.H.PATEL(SUP RA), WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), SAME I S HEREBY UPHELD. THUS, THE SOLE GROUND OF REVENUES APPEAL IS REJECTED. A S A RESULT, REVENUES APPEAL IS DISMISSED. 5. NOW, WE TAKE UP THE CROSS OBJECTION NO.86/AHD/20 12 FOR AY 2009-10 FILED BY THE ASSESSEE (OUT OF IT(SS)A NO.14 2/AHD/2012 FOR AY 2009-10 REVENUES APPEAL). THE ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS IN HIS CROSS-OBJECTION. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) ERRED IN UPHOLDING THE VALIDITY OF THE PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S.153C OF THE I.T.ACT. 2. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF CROSS OBJECTIONS EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE SAME. 6. AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE CO FILED IN SUPPORT OF THE ORDER OF THE LD.CIT(A) AND HE DOES NOT WISH TO PRESS THE SAME. THE LD.CIT-DR HAS NO OBJECTION. IN VIEW OF THE STATEMENT MADE BY THE LD.COUNSEL FOR THE ASSESSEE, THE CROSS- OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. IT(SS)A NO.142/AHD/2012 (BY REVENUE) AND CO NO.86/AHD/2012 (BY ASSESSEE) ACIT VS. VS. TUSHARBHAI D.PATEL ASST.YEAR 2009-10 - 8 - 7. IN THE COMBINED RESULT, REVENUES APPEAL IS DISM ISSED AND ASSESSEES CROSS-OBJECTION IS DISMISSED AS NOT PRES SED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 29 TH DAY OF MAY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( .) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 29/ 5 /2015 5...+ , .+../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 678 9 / CONCERNED CIT 4. 9 ( ) / THE CIT(A)-I, AHMEDABAD 5. : ;)+78 , .782 , 6 / DR, ITAT, AHMEDABAD 6. ; <= , / GUARD FILE. / BY ORDER, * :) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..27.5.15 (DICTATION-PAD 7+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 28.5.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.29/5/15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 29/5/15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER