Rajni M.Patel, Ahmedabad V. The Dy.CIT.,Circle-9, Ahmedabad

ITSSA 31/AHD/2008

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1073 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-10-2015
• Assessment Year: misc
• Appeal Filed On: 04-02-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: DIPAK SONI
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Search and seizure
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM & MANISH BORAD, AM . IT(SS)A NO.31/AHD/2008 BLOCK PERIOD 1.4.1985 TO 31.3.1995 & 1.4.1995 TO 2 1.9.1995 .SHRI RAJNI M. PATEL, 23/24, SABANDH TWINS, B/H GURUDWARA, THALTEJ, AHMEDABAD. VS DY. CIT, CIR-9, AHMEDABAD. (APPELLANT) (RESPONDENT) PA NO/GIR NO.R.762 APPELLANT BY SHRI DIPAK SONI, AR RESPONDENT BY SHRI JAGDISH CIT,. DR DATE OF HEARING: 15/10/2015 DATE OF PRONOUNCEMENT: 15/10/2015 O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER. THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF ASSESSEE AGAINST THE ASSESSMENT ORDER DATED 26/12/2007 PASS ED U/S 158BC R.W.S. 143(3) & 254 OF THE I.T. ACT. THE GROUNDS OF APPEAL ARE NOT IN CONSONANCE WITH RUE-8 OF ITAT RULES, 1963. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF THE ASSESSEE IS THAT LD. AO FAILED TO CARRY OUT THE DIRECTIONS GIVE N BY THE TRIBUNAL WHILE SETTING ASIDE THE ASSESSMENT ORDER, HE MADE T HE ADDITIONS AGAIN WITHOUT ANY SUPPORTING DOCUMENTS FOUND AT THE TIME OF SEARCH. IT IS ALSO PLEADED THAT THE ASSESSEE WAS ENTITLED T O CLAIM TELESCOPIC BENEFIT OF THE SHARES OF PROFIT HE RECEIVED FROM TH E FIRM WHICH HAD IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 2 ALSO SUFFERED TAX AND SUCH AMOUNT OUGHT TO BE SET O FF AGAINST VARIOUS ADDITIONS MADE BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. 2. BEFORE ADVERTING TO THE SPECIFIC GRIEVANCE OF TH E ASSESSEE RAISED IN NUMBER OF GROUNDS OF APPEAL WE WOULD LIKE TO DISCUSS THE BRIEF HISTORY OF THE ASSESSMENT. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT T HE PREMISES OF THE ASSESSEE ON 21 ST SEPTEMBER, 1995. ALONG WITH THE ASSESSEE VARIOUS FIRMS AND ASSOCIATED CONCERNS WERE ALSO COV ERED UNDER THE SEARCH OPERATIONS. IN ORDER TO GIVE LOGICAL END TO THE SEARCH PROCEEDINGS, A NOTICE U/S 158BC OF THE ACT WAS SERV ED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICE, THE ASSESSEE H AS FILED RETURN OF INCOME ON 09/02/1996 DECLARING TOTAL INCOME OF RS.2 ,56,730/-. THE LD. AO FRAMED THE ASSESSMENT ON 30.09.1996 U/S 158B C R.W.S. 143(3), HE DETERMINED THE TOTAL INCOME OF THE ASSES SEE AT RS.57,71,793/-. DISSATISFIED WITH THE ASSESSMENT OR DER ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL VIDE ITA NOS .4407 TO 4415/AHD/1996. THE TRIBUNAL HAD SET ASIDE THE ASSES SMENT VIDE ORDER DATED 2.1.2006 AND SENT THE SAME BACK TO THE FILE OF AO. THE OBSERVATIONS MADE AND THE DIRECTIONS GIVEN BY THE T RIBUNAL ARE BEING REPRODUCED AT PAGE NO.2 OF THE ASSESSMENT ORDER, TH EY READ AS UNDER :- THE PROPER ORDER TO BE PASSED IN SUCH A CASE WOULD BE TO SET ASIDE THE ASSESSMENT AND TO DIRECT THE ITO TO MAKE A FRES H ASSESSMENT IN ACCORDANCE WITH PROCEDURE PRESCRIBED BY LAW. IT WOU LD NOT BE CORRECT IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 3 MERELY TO UPHOLD THE ASSESSMENT AND DIRECT THE ITO TO MAKE APPROPRIATE MODIFICATION. WE ACCORDINGLY SET ASIDE THE ASSESSMENT WITH THE DIRECTIONS TO MAKE IT AFRESH AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE AND MAKING THE MATERIAL AVA ILABLE WHICH IS TO BE UTILIZED AGAINST THE ASSESSEE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE FIND MERIT IN THE ARGUMENTS A.O. TO BE FRAMED AFRESH AFTER GIVING ASSESSEE ADEQUATE OPPORTUNITY O F BEING HEARD AND CONSIDERING MATERIAL, SUBMISSIONS AND CONTENTION OF THE ASSESSEE AND BY PASSING APPROPRIATE SPEAKING ORDERS. LD. AO HAD ISSUED A NOTICE U/S 143(2) R.W.S. 158BC ON 7.8.2007 UNDER THE SET ASIDE PROCEEDINGS AND THEREAFTER FRAM ED THE ASSESSMENT ORDER ON 26/12/2007. THE COMPUTATION OF INCOME DETERMINED BY THE AO READS AS UNDER :- COMPUTATION OF INCOME INDICATING UNACCOUNTED INCOME A.Y. 1986-87 HOUSE HOLD EXP. 50000 AY 1987-88 HOUSE HOLD EXP. 50000 AY 1988-89 HOUSE HOLD EXP. 50000 AY 1989-90 HOUSE HOLD EXP. 70000 AY 1990-91 UNDISCLOSED BANK ACCOUNTS HOUSE HOLD EXP. 200000 70000 270000 AY 1991-92 UNDISCLOSED BANK A/C HOUSE HOLD EXP. 200000 80000 280000 AY 1992-93 UNDISCLOSED BANK A/C HOUSE HOLD EXP. 200000 80000 280000 AY 1993-94 IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 4 UNDISCLOSED BANK A/C HOUSE HOLD EXP. 200000 80000 280000 AY 1993-94 UNDISCLOSED BANK A/C VISIT OF RELATIVES FROM FOREIGN COUNRTY HOUSE HOLD EXP. 200000 250000 90000 540000 AY 1994-95 UNDISCLOSED BANK A/C 200000 LAND AT SANGRALI VILLAGE 242000 VISIT OF RELATIVES FROM FOREIGN COUNTRY 250000 HOUSE HOLD EXP. 80000 UNACCOUNTED DEPOSITS IN NRE A/C 459987 FDR AS ABOVE 50000 1291987 LESS :SET OFF AS DISCUSSED ABOVE 23035 1268952 AY 1995-96 UNDISCLOSED BANK A/C 200000 HOUSE HOLD EXP. 110000 VISIT OF RELATIVES FROM FOREIGN COUNTRY 250000 UNACCOUNTED DEPOSITS IN NRE A/C 277374 837374 LESS : SET OFF AS DISCUSSED ABOVE NIL 837374 AY 1996-97 UNDISCLOSED BANK ACCOUNTS 78740 HOUSE HOLD EXP. 60000 UNACCOUNTED CASH 60000 UNEXPLAINED EXPENSE ON PAINTS 25000 UNEXPLAINED INVESTMENTS IN IVPS 82500 INVESTMENTS IN JAI MATA BHAVANI SOCIETY 26100 DEPOSIT IN THE NAME OF VARIOUS EMPLOYEES 1085000 EXP. ON THE VISIT OF RELATIVES FROM FOREIGN COUNTRIES 250000 UNDISCLOSED INVESTMENTS IN FDRS 930000 UNEXPLAINED EXPENDITURE 500000 3097340 LESS: SET OFF AS DISCUSSED ABOVE 1278600 1818740 TOTAL UNDISCLOSED INCOME 5515066 ADD: TOTAL INCOME INCLUDING UNDISCLOSED INCOME 1058438 6573504 LESS: RETURNED INCOME/ASSESSED INCOME 801711 TOTAL UNDISCLOSED INCOME 5771793 R/O 5771790 IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 5 3. LD. AR FOR THE ASSESSEE WHILE IMPUGNING THE ORDE R OF AO SUBMITTED THAT ASSESSEE IS A PARTNER HAVING 33.33% SHARES IN 8 FIRMS SHOWN IN THE PAPER BOOK PAGE 19. THE SEARCH U/S 132 OF THE ACT WAS CARRIED OUT SIMULTANEOUSLY ON THESE 8 FIRMS. THE FI RMS HAVE FILED THEIR RETURNS DISCLOSING UNDISCLOSED INCOME OF RS.1,64,92 ,162/-. THE ASSESSEE HAD A PROFIT SHARE RATIO OF 33.33%. THEREF ORE, OUT OF UNDISCLOSED INCOME THE AMOUNT FALLING TO THE SHARE OF ASSESSEE IS RS.54,97,387/-. THE ASSESSEE AND HIS WIFE ARE PARTN ERS IN M/S RAM ENTERPRISE. THEREFORE, THE ASSESSEE HAS 100% PROFIT SHARE RATIO IN THIS CONCERN. THIS CONCERN HAS OFFERED UNDISCLOSED INCOME OF RS.8,60,000/-. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE TOTAL AMOUNT OF RS.63,57,387/- HAS BEEN OFFERED BY VARIOU S FIRMS WHICH CAME TO THE SHARE OF ASSESSEE. HE SUBMITTED THAT EV EN IF THE MERITS OF ADDITIONS ARE NOT TO BE LOOKED INTO EXCEPT ONE A DDITION WHEREBY THE ADDITION OF UNEXPLAINED INVESTMENT IN THE BANK ACCO UNT HAVE BEEN MADE, THE ASSESSEE WILL BE SATISFIED IF TELESCOPIC BENEFIT OF THE ADDITIONS WERE GIVEN EQUAL TO THE AMOUNT AVAILABLE TO THE ASSESSEE FROM THE PARTNERSHIP FIRMS. 4. THE LD. DR RELIED ON THE ASSESSMENT ORDER. HE SU BMITTED THAT THE ASSESSEE FAILED TO GIVE PROPER DETAILS BEFORE T HE A.O. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE MATERIAL AVAILABLE ON RECORDS. WE FIND THAT ASSESSEE HAS IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 6 RAISED THE PLEA BEFORE THE AO WHO HAS NOTED ON PAGE 22 OF THE IMPUGNED ORDER. THE OBSERVATIONS OF THE AO READ AS UNDER:- IT HAS BEEN EMPHASIZED BY THE ASSESSEE THAT HE SHA LL NOT BE SUBJECTED TO DOUBLE TAXATION ON THE DISCLOSED AMOUN T IN VIEW OF THE CLEAR POSITION OF LAW LAID DOWN IN CHAPTER XIVB . THE ASSESSEE HAS FURTHER REQUESTED THAT THE DISCLOSURE MADE IN THE FIRMS REFERRED TO ABOVE REPRESENTS MAINLY THE UNACC OUNTED MONEY WHICH WAS UTILIZED BY HIM ALONG WITH SHRI AJA Y V. BHATT AND SHRI SURESH A. PATEL IN THE RATIO OF 33.33%. TH EREFORE, IT HAS BEEN REQUESTED BY THE ASSESSEE THAT HE SHALL BE ALLOWED CREDIT IN RESPECTIVE YEARS AGAINST THE UNACCOUNTED INCOME DISCLOSED BY THE FIRMS ACCORDINGLY. THE ASSESSEE HA S FILED A DECLARATION FORM OTHER PARTNERS OF THE FIRM DECLARI NG THAT. IT IS HEREBY DECLARED AND CONFIRMED BY ALL THE PARTNERS T HAT IF EACH OF THE AFORESAID PARTNER IS ALLOWED TO SET OFF THEI R 1/3 RD SHARES FROM THE UNDISCLOSED INCOME OF OUR SHARES FOR UNDIS CLOSED INCOME WILL BE CLAIMED BY WAY OF THE PARTNERS IN TH EIR INCOME TAX PROCEEDINGS. THE SUBMISSIONS MADE BY THE ASSESS EE HAVE BEEN EXAMINED CAREFULLY. THE ASSESSEE WILL BE ALLOW ED SET OFF OF 1/3 RD SHARE FROM THE DISCLOSED INCOME OF THE FIRMS REFER RED TO ABOVE AGAINST THE DISCLOSED/ACCEPTED AMOUNT OF UNDI SCLOSED INCOME IN AGAINST ANY AMOUNT WHICH HE HAS NOT ACCEP TED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. AO HAD AGREED THAT THE ASSESSEE IS ENTITLED FOR TELESCOPIC BENEFIT BUT, WHILE GIVING ACTUAL BENEFIT TO THE ASS ESSEE, HE RESTRICTED ALL THESE TO A SUM OF RS.13 LACS WHICH IS THE AMOUN T ASSESSEE HIMSELF DISCLOSED. WE ARE OF THE VIEW THAT ONCE AN ESTIMATED ADDITION ON ACCOUNT OF HOUSEHOLD EXPENSES, INVESTMENT IN LAN D, INVESTMENT ON FOREIGN TRAVEL ARE BEING MADE AND THE SOURCE OF SUC H EXPENDITURE IS STATED IS FLOWING FROM THE FIRM WHICH HAS SUFFERE D TAX AS UNDISCLOSED INCOME, THEN, TELESCOPIC BENEFIT SHOULD BE GIVEN TO THE TOTAL AMOUNT. IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 7 IN VIEW OF THE ABOVE DISCUSSION, WE REMIT THIS ISSU E BACK TO THE FILE OF AO WITH A LIMITED PURPOSE THAT LD. AO WOULD ASCERT AIN THE SHARE OF PROFIT COMING TO THE ASSESSEE FROM THE 9 PARTNERSH IP FIRMS TO THE EXTENT OF RS.63,57,387/-. THE LD. AO SHALL GIVE TEL ESCOPING BENEFIT OF THIS AMOUNT AGAINST VARIOUS ADDITIONS MADE BY HIM I N THE ASSESSMENT ORDER. 6. WITH REGARD TO THE ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT IS CONCERNED, ASSESSEE HAS CONTENDED THAT HIS SISTER SMT. SHARDABEN R. PATEL WAS THE OWN ER AND IN POSSESSION OF TWO FLATS, SHE HAS SOLD THOSE FLATS F OR A CONSIDERATION OF RS.17 LACS AND SHE HAD FILED HER RETURN OF INCOME F OR AY 1995-96 ON 2 ND AUGUST, 1995 I.E. BEFORE THE SEARCH. SHE HAS OFFER ED CAPITAL GAIN TAX ON THE TRANSFER OF THESE TWO FLATS. THE COPY OF THE ACKNOWLEDGEMENT DEMONSTRATING THE FILING OF RETURN IS AVAILABLE AT PAGE NO. 191 OF THE PAPER BOOK. IN COLUMN NO.14.A. THE INCOME-TAX HAS BEEN CALCULATED AT RS.1,77,000, THOUGH CAPITAL GAIN WAS SHOWN NIL, BECAUSE OF INDEXATION VALUE OF ACQUISITION.. A N INTIMATION TO THE ASSESSEE WAS SENT BY THE AO UNDER SECTION 143(1). C OPY OF SUCH INTIMATION IS AVAILABLE AT PAGE 196 OF THE PAPER BO OK. THE CONTENTION OF THE ASSESSEE IS THAT TWO FDS WERE MADE BY HIS SI STER THOUGH THEY WERE MAINTAINING A JOINT BANK ACCOUNT WITH THE BAN K OF MAHARASHTRA. THE CERTIFICATE OF THE BANK IS AVAILABLE AT PAGE 19 8. THE ASSESSEE HAS ALSO PLACED AN AFFIDAVIT OF SMT. SHARDABEN PATE L WHEREBY SHE HAS DEPOSED THAT SHE HAD INHERITED TWO FLATS ON THE DEATH OF HER HUSBAND SHRI RAMBHAI MATHURBHAI PATEL ON 12 TH DECEMBER, 1993. IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 8 THESE FLATS HAVE BEEN SOLD BY HER AND THE SALE PROC EEDS WERE DEPOSITED IN A BANK FIXED DEPOSIT. ON THE STRENGTH OF THE DOCUMENTS, ASSESSEE HAS CONTENDED THAT THOUGH FDS WERE FOUND W ITH HIM BECAUSE HER SISTER IS RESIDING IN USA BUT ACTUALLY THESE BELONGED TO HIS SISTER. THEREFORE, NO ADDITION HAS TO BE MADE. THE LD. CIT, DR DREW OUR ATTENTION TOWARDS PARA 12 AT PAGE 10 OF TH E ASSESSMENT ORDER AND CONTENDED THAT ASSESSEE HAS FAILED MISERA BLY TO PRODUCE ANY EVIDENCE EXPLAINING THAT THE FDS BELONGED TO HI S SISTER. ACCORDING TO HIM, IF THE ASSESSEE FAILS TO SUBMIT A NY EVIDENCE THEN THERE IS NO OPTION LEFT TO A.O. EXCEPT TO MAKE THE ADDITION IN THE NAME OF ASSESSEE. 7. WE HAVE ON DULY CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND MATERIAL ON RECORD, WE FIND THAT THE TRIBUNAL HAS SET ASIDE THE FIRST ASSESSMENT ORDER VIDE ORDER DATED 2.1.2006. THE LD. AO HAS STARTED INVESTIGATION ON 9 TH AUGUST, 2007 I.E. ALMOST AFTER ONE YEAR AND SEVEN MONTHS. THE ASSESSMENT WAS GOING TO BE TIME BARRED AT THE END OF DECEMBER, 2007. ACCORDING TO THE ASSESSEE, HE HAS FILED ALL THE DETAILS BEFORE THE A O BUT SOMEHOW THESE HAVE NOT BEEN LOOKED INTO. ON DUE CONSIDERATI ON OF THESE FACTS, WE ARE OF THE VIEW THAT ONCE SMT. SHARDABEN R. PATE L HAS RECOGNIZED THE SALE CONSIDERATION BY COMPUTING CAPITAL GAIN ON TRANSFER OF THE TWO FLATS AND THE RETURN WAS FILED BEFORE THE SEARC H, THEN IT HAS BEEN DEMONSTRATED THAT SOURCE OF THE FUNDS IN PURCHASING TWO FDS IS THE TRANSFER OF THE TWO FLATS BY SMT. SHARDABEN R. PATE L. THE ASSESSEE HAS DISCHARGED THE ONUS BEFORE US ALSO, AND THEREFO RE, NO ADDITION IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 9 CAN BE MADE IN PURCHASE OF FDS. WE ALLOW THIS GROUN D OF APPEAL. ADDITION OF RS. 9,80,000/- WHICH IS 50% OF THE SALE PROCEEDS ALONG WITH INTEREST CONSIDERED IN THE HANDS OF ASSESSEE I S DELETED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/10/2015 SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER DATED 15/10/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD IT(SS)A NO. 31/AHD/2008 BLOCK PERIOD1.4.1985 TO 31.3.1995 & 1.4.1995 TO 21.9.1995 10 1. DATE OF DICTATION: 15/10/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 15/10/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 16/10/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: