Madhodas Nehchaldas Ramchandani, Ahmedabad V. The Income tax Officer, Ward-1(2)(3), Ahmedabad

ITSSA 152/AHD/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5794 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-05-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PARIMALSINH B
• Keywords: Rejection of books of accounts; Unexplained investment; Business income; Document seized; Opportunity of cross examination; Documents seized
• Section: 69; 132; 144; 142(1); 143(2); 139(1); 145(3); 153C

Judgement Text

IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 1 of 11 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Madhodas Nehchaldas Ramchandani, Prop. of M/s. Madhodas Nihchaldas, D-10, Ghantakaran Market, Sarangpur, Ahmedabad – 380 002. [PAN – AAOPR 9454 M] Vs. The Income Tax Officer, Ward – 1(2)(3), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, ARs. Revenue by Ms. Bhavnasingh Gupta, Sr. DR D a t e o f H e a ri n g 09.05.2024 D a t e o f P ro n o u n c e m e n t 16.07.2024 O R D E R PER SUCHITRA KAMBLE: This appeal is filed by the assessee against order dated 26.10.2023 passed by the CIT(A)-11, Ahmedabad for the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal :- “1. The Ld. CIT(A) has erred in law and on facts of the case in upholding initiation of proceedings u/s. 153C of the Act which are without jurisdiction and barred by limitation. 2. The Ld. CIT(A) has erred in law and on facts of the case in confirming the additions made by Ld. AO which are not emanating from any of the incriminating material found during the search. 3. The Ld. CIT(A) has erred in law and on facts of the case in not adjudicating the ground relating to framing of assessment u/s. 144 of the Act. IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 2 of 11 4. The Ld. CIT(A) has erred in law and on facts of the case in upholding the assessment order passed without providing the appellant with the material/information/statements relied upon by Ld. AO and opportunity of cross-examination, which is in gross violation to principles of natural justice. 5. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the addition of Rs.14,43,696/- as unexplained investment u/s. 69 of the Act. 6. The Ld. CIT(A) has erred in law and on facts of the case in not adjudicating the ground relating to rejection of books of accounts u/s. 145(3) of the Act. 7. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the addition of Rs.2,43,850/- at an estimated profit rate of 12%. 8. The Ld. CIT(A) has erred in law and on the facts of the case in confirming the addition of Rs.1,11,500/- without any basis whatsoever. 9. The Ld. CIT(A) has erred in law and on facts of the case in confirming. action of the Ld. AO in charging interest u/s.234A/B/C/D of the Act. 10. The Ld. CIT(A) has erred in law and on the facts in confirming the action of Ld. AO in initiating penalty u/s.271(1)(c) of the Act. 11. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of the Ld. A.O. in initiating penalty u/s.271(1)(b) of the Act.” 3. The assessee filed original return of income under Section 139(1) of the Income Tax Act, 1961 on 21.07.2012 declaring total income of Rs.7,73,230/-. This return of income has been processed on the retuned income as such. Thereafter, there was a search operation on various premises of HN Safal Group of cases and on scrutiny of seized documents, the Assessing Officer/Revenue observed that the assessee made investments in the office premises bearing Unit No.58B & 59 of ground floor in Sumel Park-2, a scheme organised by the HN Safal group of cases. Therefore, satisfaction note was prepared on the basis of such documents seized and the notice under Section 153C of the Act was issued on 06.03.2019. After rerecording the reasons, a notice under Section 153C of the Act dated 06.03.2019 was issued and served on the assessee. However, the assessee did not file the return of income and letter dated nil received on 18.03.2019 thereby intimating that the return of income originally filed on 21.07.2012 declaring total income of Rs.7,73,200/- which is correct one and requested IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 3 of 11 to issue the source of information on the basis of which the notice under Section 153C of the Act was issued. Thereafter, a notice under Section 142(1) of the Act was issued on 15.05.2019 requesting the assessee to file the return of income under Section 153C of the Act and furnished other relevant details. In response to this notice, the assessee filed letter dated 06.06.2019 stating therein that he has filed the original return on 21.07.2012 and has been doing the wholesale cloth business and earned the business income and income from house property. No return of income, as required to be filed under Section 153C of the Act, has been filed even after issuing the notice dated 15.05.2019. Thereafter, notice under Section 142(1) of the act dated 05.11.2019 was issued wherein the assessee informed about the transactions carried out with Safal HN Group of cases for purchase of two shops bearing No.59 & 58B on ground floor of Sumel Business Park-II, Kankaria, Ahmedabad. The assessee vide response dated 11.11.2019 furnished various details in relation to purchase of these two properties i.e. the copies of two sale deeds, copy of appellate order passed in the case of his relative Bhumika Manish Ramchandani for Assessment Year 2012-13 by the CIT(A) in support of the contention that notice issued under Section 153C of the Act is void ab initio in view of the decision of the Hon’ble Gujarat High Court in the case of Shri Anil Kumar Gopikishan Agrawal, 106 taxmann.com 137. After going through the details and the submissions of the assessee, the assessee was given final notice on 21.11.2019, thereafter, the assessee filed his return of income on 26.11.2019 in response to notice under Section 153C of the Act. The Revenue issued notice under Section 143(2) on 28.11.2019 and thereafter the assessee furnished details in response to show cause notice dated 28.11.2019 issued by the Assessing Officer. The assessee replied the same. After taking cognisance of the same, the Assessing Officer observed that there was an investment in immovable property as per the seized documents during the course of search wherein Annexure-A8 (Hard Disc) containing various residential and commercial projects. The Assessing Officer observed that the assessee alleged to have made on-money payment of Rs.7,21,848/- as per Sl. No.AJ Discount in respect of both the properties and the same should be understood as unaccounted money for the reason mentioned in the Assessment Order itself. The Assessing Officer made addition of Rs.14,43,696/- as unexplained investment under Section 69 of the Act and also rejected the books of account under Section 145(3) of IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 4 of 11 the Act of the assessee thereby the Assessing Officer computed the total income of the assessee at Rs.25,72,271/-. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that proceedings under Section 153C of the Act was initiated on the basis of material gathered during search carried out on 04.09.2013 in the case of a third party named NH Safal Group. The Assessing Officer of the assessee received information/material gathered during the search from the Assessing Officer of persons searched on 05.03.2019 i.e. during the F.Y. 2019-20 relevant to A.Y. 2020-21. The Assessing Officer thereafter issued notice under Section 153C of the Act for A.Y. 2012-13 on 06.03.2019. The Ld. AR submitted that A.Y. 2012-13 would not fall within the ambit of six assessment years immediately preceding the year of search, as envisaged under Section 153C of the Act. Since the seized material in question has been received by the Assessing Officer of the assessee in F.Y. 2019-20/AY 2020-21, proceedings under Section 153C of the Act shall be applicable for the A.Ys. 2014-15 to 2019-20 i.e. six assessment years immediately preceding year of search. The Ld. AR relied upon the decision of Hon’ble Apex Court in the case of CIT vs. Jagjit Singh, 458 ITR 437 (SC) and the first proviso to Section 153C of the Act. The Ld. AR submitted that on this ground itself proceedings under Section 153C of the Act for the year under consideration are not tenable in the eyes of law and hence the assessment deserves to be quashed. The Ld. AR also relied upon the decision of Hon’ble Apex Court in the case of PCIT vs. Shalimar Town Planner Pvt. Ltd. (2024) 161 taxmann.com 306 (SC). 5.1 As regards to ground nos.2 to 5, the Ld. AR submitted the following points:- “AO received following “Information” from “AO of person searched” consequent to which, proceedings u/s.153C have been initiated: - "search" action took place in the case of "H N Safal" (i.e. a third party) on 04.09.2013; IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 5 of 11 - A "hard disk" was seized from which an "excel sheet" was found which contained data of scheme named 'Samuel Business Park II ("scheme"); - The "excel sheet" contained record of "on-money" received by HN Safal from various customers who bought units in the said scheme - Assessee has purchased two units in the scheme and as per "excel sheet", assessee has paid on-money of Rs.14,43,696/- for purchasing such units. Assessee categorically made following submissions before AO during the course of proceedings u/s.153C of the Act: - Assessee denied payment of any on-money towards purchase of two units in the scheme (Pgs. 14, 15, 17 of Asst. Order); - Assessee categorially requested for material/information/statement sought to be used against assessee (Pgs.15 & 17 of Asst. Order); Eventually, AO framed assessment whereby impugned addition of Rs.14,43,696/- was made in respect of alleged on-money payment. The impugned addition came to be confirmed by CIT(A) as well. Hence, the present appeal is being filed before Hon'ble the ITAT. Impugned addition has been made "solely" on the basis of "information" received nom "AO of person searched" without conducting "independent inquiry" so as to demonstrate the factum of alleged on-money payment: The impugned addition has been made “solely" on the basis of "information" received AO of assessee from "AO of person searched". No independent "Inquiry" has been carried out by AO after receiving the "information" in question. No "specific data/material" pertaining to "assessee" has been brought on record by AO to even remotely demonstrate that assessee has paid alleged on-money. No cash trail has been found during the course of search carried out in the case of H N Safal to demonstrate that assessee has paid alleged on- money. As regards disclosure by HN Safal before Income Tax Settlement Commission, it is submitted that such disclosure was "general" and AO has not brought on record anything to demonstrate that such disclosure included alleged on-money received from assessee Also no person of H IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 6 of 11 N Safal has ever made any statement to the effect that assessee had paid alleged on-money. The said fact is further evident from the finding of CIT(A) in Para 5.15, Pg.32 of CIT(A)'s order. Thus, it is evident that the impugned addition has been made "solely" on the basis of "information" received AO of assessee from "AO of person searched after "presuming" that such on-money might have been paid by assessee. Thus, AO has not taken pains to carry out any 'independent inquiry so as to bring on record any cogent material based on which impugned addition can be justified. AO and CIT(A) have shifted the burden on the assessee by observing in their respective orders that assessee has not furnished any evidence to prove that cash in question has not been paid by assessee. AO and CIT(A) failed to submit that it is allegation of the revenue that assessee had paid such on-money whereas stand of assessee is that no such on- money has ever been paid. Under such circumstances, it is for the revenue to prove its allegation by adducing cogent evident. Assessee cannot be expected to prove the negative i.e. no on-money has been paid In view of the above stated facts and circumstances, the impugned addition is not justified in the eye of law. Hence, the impugned addition deserves to be deleted in the larger interest of justice. The same be held so now. No addition could have been made on the basis of "excel sheet" without any corroborative evidence demonstrating alleged "on-money payment” The impugned addition has been made solely on the basis of "excel sheer" found send seized during search carried out in case of third party Following vital aspects oy be appreciated. - Excel sheet has been prepared by some ‘third party’ - Excel sheet has not been prepared by ‘assessee’ - Excel sheet does not contain ‘signature’ of assessee, - There is no ‘confirmation from recipient’ as to receipt of on- money. - No cash trail emanate from the excel sheet, Thus, the impugned addition has been made merely on the basis of "entries" recorded in the excel sheet There is no corroborative evidence whatsoever in support of the allegation as to any search on-money payment having been made by the assessee. IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 7 of 11 It is a settled law that no addition can be made merely on the basis of contents of seized material" (here, "excel sheet"). Reliance is placed on following decisions - CIT vs. Maulikkumar K. Shah - 307 ITR 137 (Guj); - Common Cause vs. UOI - 394 ITR 220 (SC); - ITO vs. Bharat A. Mehta - 60 taxmann.com 1 (Guj); Assesses was never confronted with "relevant material/information/ statement" based on which the impugned addition has been made Before AO, assessee categorially requested for material/information/ statement sought to be used against assessee (Pgs.15 & 17 of Asst. Order). However, such material/information/statement has never been supplied by the department to the assessee. It is a settled law that if any material information/statement is not confronted to E it would not constitute as "admissible evidence" Hence, addition made based on such evidence is liable to be deleted. Reliance is placed on: - Kishinchand Chellaram-125 ITR 713 (SC); - Heirs & LR of Late Laxmanbhai S. Patel vs. CIT-327 ITR 290 (Guj) - H. R. Mehta vs. ACIT-387 ITR 561 (Bom); Opportunity of cross examination has not been afforded Neither any statement (explicitly naming the assessee) was provided to assessee nor was assessee afforded an opportunity of cross examination It is a seized law that in absence of cross-examination, no addition could have been made based on statements referred to and relied upon by AO while framing the assessment Reliance is placed on following decisions - Andaman Timber Industries vs. CCE - (2015) 62 тахтаnn.com 3 (SC); - PCTT vs. Chartered Speed P. Ltd.-Tax Appeal No.126 & 126 of 2015; - Jay Ace Technologies Ltd. (2023) 154 taxmann.com 45 (SC); - JPM Tools Lak (2023) 154 taxmann.com 44 (Delhi); 5.2 As regards to ground nos.6 to 8, the ld. AR submitted the following points:- IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 8 of 11 “AO made following two additions without there being any seized material - Rs 2,43,850/- in respect of estimated business income; - Rs 1,11,500/- in respect of Griss titak ubcine. CIT(A) confirmed the aforesaid additions and hence, assessee is in appeal before Hon’ble the ITAT. Additions are not based on any "seized material": AY 2012-13 "unabated assessment year" The impugned additions are not based on any seized material It is well settled that assessment u/s.143(3) r.w.x. 153A/153C of the Act is to be framed strictly on the basis of "incriminating material" found during the course of “search” action carried out in the case of "assessee concerned". Reliance is placed on the following decisions: - CIT vs. Singhad Technical Education Society - 397 ITR 344 (SC); - PCIT vs. Abhisar Buildwell P. Ltd. (2023) 454 ITR 212 (SC); - PCTT vs. Saumya Construction (2017) 387 ITR 529 (Guj); - CIT vs. Kabul Chawla - (2015) 380 ITR 573 (Del.); In view of the above, AO was not justified in making the impugned additions. Hence, both the additions are not justified in the eye of law. Even on merits, additions are not tenable in the eye of law: No valid reasoning has been assigned by AO while making impugned additions. As regards addition of Rs.1,11,500/-, - - There is no discussion in the Asst. Order - There is no clarity about the addition. - There is no basis for the addition - Under such circumstances, such addition is not tenable in the eye of law. As regards addition of Rs.2,43,850/-, - - Such addition is an outcome of estimation of business income. - Such addition is ad hoc in nature. - Such addition is without rejection of books of accounts. - There is no basis for estimating NP @ 12%. - Under such circumstances, such addition is not tenable in the eye of law. IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 9 of 11 In view of the above, the impugned additions are not justified in the eye of law. Hence, the same deserve to be deleted in the larger interest of justice.” 5.3 As regards to ground nos.9 to 12, the same are general and consequential grounds of appeal and hence there is no need to adjudicate the same at this juncture. 6. The Ld. DR submitted that the CIT(A) has categorically mentioned the jurisdictional High Court decision in the case of ITO vs. Vikram Sujit Kumar Bhatia & Others which was overturned by the Hon’ble Supreme Court (Civil Appeal No.911- 1026 of 2022) wherein it was held that the amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under Section 132 of the Act before 01.06.2015 i.e. the date of amendment. Thus, the Ld. DR submitted that the objection raised by the assessee is not tenable as the seized documents found and seized at the premises of the H N Safal clearly set out transactions of the assessee thereby the Assessing Officer assume jurisdiction to issue notice under Section 153C of the Act and Finance Act, 2015 has retrospective application. Hence, notice under Section 153C is held to be validly issued and Assessment Order is justifiable. As relates to meris of the case, the Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. As regards to ground no.1, the search took place on 04.09.2013 in the case of third party namely H N Safal Group. The assessment reopened in assessee’s case was validly done from A.Y. 2012-13 and the decision relied by the assessee in case of CIT vs. Jagjit Singh (supra) categorically mentions that if papers are in fact assigned under Section 153C of the Act after a period of four years, the third party the assessee’s prejudice is writ large as it would have to virtually preserve the records for at least 10 years which is not the requirement in law. Thus, in the present assessee’s case the search took place in 2013 but the reasons recorded/satisfaction note was dated 05.03.2019 which is after the amendment of Section 153C of the Act wherein the effective date is 01.04.2015 which is almost more than almost six years. If the IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 10 of 11 search took place in 2013 but satisfaction was recorded in 2019 in such scenario the decision of Hon’ble Supreme Court in the case of CIT vs. Jagjit Singh (supra) will be applicable as in the case before the Hon’ble Supreme Corut the search took place on 19.02.2009 and subsequently notice under Section 153C of the Act was issued. The facts are identical in the present case and, therefore, the issuance of Section 153C notice/proceedings are without jurisdiction and barred by limitation. Thus, ground no.1 is allowed. 8. As regards to ground nos.2 to 5, from the perusal of records, it can be seen that the assessee has given the details and during the search only the Excel Sheet was found. The Assessing Officer has not taken cognisance of the disclosure by H N Safal Group before the Income Tax Settlement Commission wherein there was no statement of that entity that the assessee had paid alleged on-money. This contention of the Ld. AR appears to be genuine as no enquiry was independently conducted by the Assessing Officer during the assessment proceedings. Thus, ground nos.2 to 5 are appears to be in favour of the assessee. 9. As regards to ground nos.6 to 8, A.Y. 2012-13 is unabated assessment year and the additions are not solely based on the seized material and is only based on estimation and surmises and thus this addition also does not sustain. 10. In the result appeal of the assessee is allowed. Order pronounced in the open Court on this 16 th July, 2024. Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 16 th July, 2024 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File IT(SS)A No.152/Ahd/2023 Assessment Year: 2012-13 Page 11 of 11 By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad