Dy. Commissioner of Income Tax , Central Circle-3, Surat V. Shri Pravinchandra Hiralal Shah, Surat

ITSSA 33/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1999 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 03-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 131; 132; 139; 143(3); 142(1); 143(2); 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 33/SRT/2021 (AY: 2015-16) (Hearing in Physical Court) D.C.I.T. Central Circle-3, Surat. Vs. Shri Pravinchandra Hiralal Shah, C-702, Regency Tower, Near Rajhans Cinema, Piplod, Surat-395007. PAN: ABIPS 4477 L APPELLANT RESPONDEDNT Department by Shri H.P. Meena, CIT-DR Assessee by Shri Rajesh C Shah, AR Date of hearing 29/04/2022 Date of pronouncement 13/06/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. The appeal by the Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-4, Surat [‘ld. CIT(A)’ for short] dated 30/03/2021 for the Assessment Year (AY) 2015-16. The Revenue in its appeal has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in restricting the addition of Rs. 1,50,00,000/- made on account of unexplained investment, even though Department was in possession of the incriminating documents in the form of MOU seized during the course of search proceedings which clearly showed the name of the assessee and share of the assessee in the said property.. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition without considering the fact that one of the co-owners of the property has admitted the fact of unexplained IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 2 investment in accordance with his share in the property in the statement recorded on oath. 3. It is, therefore, prayed that the order of the ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. 4. The appellants craves leave to ad, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 2. Brief facts of the case are that the assessee is a partner in the partnership firm namely Ambani Diamonds and engaged in the business of trading of diamonds. The assessee filed his return of income for the year under consideration on 20/10/2015 declaring total income of Rs. 5,15,720/-. In this case, a search action under Section 132 of the Income Tax Act, 1961 (in short, the Act) was carried out on 04/09/2015 in case of M/s Param Properties of Surat. During the course of search action, certain evidence containing details of unaccounted cash transactions of their clients, financers, other brokers and builders and showing nature of earning various nature of income and unaccounted investment by them, were found and such incriminating material was seized. The incriminating document includes the Memorandum of Understanding (MOU) seized as Annexure-BS-2. The said MOU was in respect of agricultural land having survey No. 135, Block No. 168, admeasuring 28328 sq. mts. At village Jothan, Talluka- Olpad, district-Surat. In the said MOU, the name of assessee was written with others as buyers. During the search action, statement of partner of M/s Param Properties namely Shri Aagam V. Vadecha was recorded on oath wherein he admitted that they made investment in Jothan land of Rs. 25.00 lacs in cash for IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 3 purchase of property referred in MOU and he is having 4% share in the said property. Name of assessee was written in the MOU, therefore, the Assessing Officer after recording satisfaction under Section 153C of the Act, issued notice to the assessee under Section 153C of the Act on 26/09/2017. In response to notice under Section 153C, the assessee filed his return of income on 09/11/2017 declaring the same income as declared in the return of income under Section 139 of the Act i.e. Rs. 5,15,720/-. The Assessing Officer after serving statutory notices under Section 143(2) and 142(1) of the Act, proceeded for assessment. The Assessing Officer extracted the relevant clause on MOU and the statement of Shri Aagam V. Vadecha in the assessment order. As per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share. The partner of param Properties has stated that they made part payment of Rs. 25.00 lacs in cash for 4% of their share, the Assessing officer took his view that 4% share of property is valued at a minimum of Rs. 25.00 lacs then the total actual value of entire property is at least of Rs. 6.25 crores and share of investment in property proportionate to their share would be as under: Name Share Amount i. Asheshbhai Nanalal Doshi 36% 22500000 ii. Mahendra C Mehta 36% 22500000 iii. Pravinbhai H Shah 24% 15000000 iv. Param Properties 4% 2500000 total 62500000 IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 4 On the basis of aforesaid observation, the Assessing Officer issued show cause notice as to why the amount of Rs. 1.50 crore should not be treated as unexplained expenditure. The assessee filed his reply vide reply dated 16/12/2017. The assessee stated that he has seen MOU for the first time while recording statement before the Investigating Wing. The assessee made payment of Rs. 50.00 lacs but it was received back as the MOU was never executed. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer recorded that the assessee questioned the sanctity of MOU on the ground that it is not signed and has no evidentiary value. The Assessing Officer held that the MOU in question correctly and accurately described the property. The land in question is actually registered in the name of one of the partner, whose name appears in the MOU and thirdly as per MOU the partners of property shall carry out development work in the land and if in future, the property is sold, they will divide the sale consideration after deducting the expenses. In the statement, partner of Param Properties stated that the assessee was 24% share. Fourthly, a purchase deed of property was seized from the premises of Param Properties which was registered on 31/3/2014. The details of property is identical as mentioned in the MOU. The firm Param properties was having share in the property hence the deed was kept in their possession. The Assessing officer further noted that in response to notice under Section 131 of the Act, statement of assessee, who is partner in the said MOU was recorded on 21/10/2015. In the statement, it was admitted that he entered IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 5 into a deed for purchase of land and had given unaccounted cash of Rs. 50.00 lacs. He further stated that he received the cash back in May, 2015. The said amount was surrendered as his undisclosed income for A.Y. 2016-17. The Assessing Officer on the basis of his aforesaid observation drawn his conclusion that the assessee made payment of Rs.1.50 crore for purchase of land recorded in MOU which is unaccounted in nature against which no plausible explanation is offered by assessee and was added to the income of assessee under Section 69 of the Act. 3. On appeal before the ld. CIT(A), the assessee objected against the validity of order under Section 153C r.w.s. 143(3) of the Act as well as addition on merit. The objection of assessee on validity of order under Section 153C was rejected by the ld. CIT(A) by taking a view that the assessee himself admitted that he has paid Rs. 50.00 lacs in cash for purchase of this land which was returned to him as the deal was cancelled. The said amount is disclosed by assessee in subsequent assessment order. Once the assessee himself admitted investment in the aforesaid land, which was returned to him, then taking stand that the notice under Section 153C is illogical and dismissed the corresponding grounds. 4. On the merit of addition, the assessee stated that the said MOU was unsigned and unregistered. The assessee in reply to show cause notice before the Assessing Officer explained the fact that the MOU was not signed by any one of four parties mentioned in the MOU. The alleged MOU was seized from the premises of Shri Aagam V. Vadecha and not from the assessee. The date of IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 6 MOU is mentioned as 05/03/2015 it was seized on 03/09/2015, for six months, none of the parties has signed which shows that it has no evidentiary value. The MOU does not speak about any payment made on or before date of MOU. There is no evidence or material on record to show that any payment was made as per MOU. In the post search inquiry, no evidence is found that the assessee honored this MOU. In the statement recorded under Section 131, the assessee stated that he paid Rs. 50.00 lacs for this land in April, 2015 and deal was cancelled in May, 2015 and he got back Rs. 50.00 lacs and that for such reason, he has not signed. In the search conducted on 03/09/2015, there is not a single evidence found that the assessee paid any amount to honour the deal. The presumption of Assessing Officer that Shri Aagam V. Vadecha has honored the deal means that all parties to the alleged unsigned MOU has honored is not unjustified but against the law. In without prejudice submission, the assessee stated that the alleged MOU is not an MOU at all even though its contents disclosed about the partnership firm but no partnership was made till date the how it can be presumed that all the partners have invested. The assessee also relied on certain case laws. 5. The ld. CIT(A) after considering the submission of assessee, observed that the assessee admitted that he paid Rs. 50.00 lacs for investment in land as recorded in the MOU which was returned back as the deal was not materialized. The assessee has disclosed Rs. 50.00 lacs in A.Y. 2016-17 and paid taxes thereon. On the basis of aforesaid facts and contention, the assessee contended that IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 7 unsigned MOU has no evidentiary value and cannot be accepted in one sided approach. This contention of assessee was rejected by ld. CIT(A). However, the ld. CIT(A) agreed with the contention of assessee that the additions are made under Section 153C on the basis of documents found during the course of search. No amount of consideration is mentioned in the MOU itself. The Assessing Officer taken the total sale consideration at Rs. 6.25 crores on the basis of statement Shri Aagam V. Vadecha, who is one of the partner, whose name if mentioned in the MOU, having 4% share. Since Shri Aagam V. Vadecha allegedly paid Rs. 25.00 lacs, the value of Rs. 25.00 lacs were taken as 4% and the Assessing Officer extrapolated the figure of sale consideration of entire land at Rs. 6.25 crores. The ld. CIT(A) recorded that it is settled principle that extrapolation on the basis of part period or part value is not permissible. The ld. CIT(A) further noted that no evidence found during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. The Assessing Officer made addition without having any documentary or oral evidence. The Assessing Officer made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the aforesaid observation, the ld. CIT(A) deleted the entire addition. 6. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before this Tribunal. IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 8 7. We have heard the submissions of the learned CIT-DR for the revenue and the learned authorised representative (AR) of the assessee and have gone through the orders of the lower authorities carefully. The ld. CIT-DR for the Revenue has vehemently supported the order of Assessing Officer. The ld. CIT-DR submits that firstly the MOU in question was correctly and accurately describes the property. The land in question is actually registered in the name of one of the partners Shri Ashesh N Doshi whose name appears in the MOU. The ld. CIT- DR further submits that as per MOU entry of cheques for purchase of property and interest paid on this entry should be paid proportionate their share ratios is one of the condition of the MOU. It was also recorded that the partners of property shall carry out development work for farm house in this land and shall pay their share of expenses in development work. It was also agreed if in future this property gets sold, they will divide the sale consideration amount after deduction the expenses. This fact is corroborated as not only before the investigation wing in Shri Agam Vadecha's statement. The admission of partners of admitting to investment in property mentioned in said MOU cannot be washed away lightly. The nature of unsigned version does not make it as a dumb document. The person from whose possession it had seized has admitted to have invested in property as per the conditions mentioned in MOU. The ld. CIT-DR also submits that the purchase deed of this property was seized from the premises of M/s. Param Properties vide registered No.7556/2014 dated 31.03.2014. The description of the property is identical as mentioned in MOU. IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 9 The firm Param Properties is also having the share in property hence the deed was kept on its possession. Another big question that arises is that why the document (may not be in original) of any unrelated person is found in the premises of a third person if they have no stake in the said land or have no relation with each other. The ld. CIT-DR prayed to reverse the order of ld CIT(A) and to restore the order of assessing officer. 8. On the other hand, the ld. AR of the assessee has reiterated the same arguments as were submitted before the ld. CIT(A) and vehemently supported the order of ld. CIT(A) and submits that the ld. CIT(A) has passed a well- reasoned and speaking order by discussing all the material facts and record. 9. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. The Assessing Officer made addition by taking a view that as per MOU, the assessee was having 24% share in the land and Param Properties was having 4% share. The partner of param Properties has stated that they made part payment of Rs. 25.00 lacs in cash for 4% of their share. The Assessing officer took his view that 4% share of property is valued at a minimum of Rs. 25.00 lacs then the total actual value of entire property would be of Rs. 6.25 crores. The Assessing Officer noted that the assessee questioned the sanctity of MOU on the ground that it is not signed and has no evidentiary value. The Assessing Officer held that the MOU in question correctly and accurately described the property, the land in question is actually registered in the name of one of the partner. In the statement, partner of Param IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 10 Properties stated that the firm was 4% share. As purchase deed of property was seized from the premises of Param Properties which was registered on 31/3/2014 and the details of property is identical as mentioned in the MOU. The Assessing Officer on the basis of his aforesaid observation drawn his conclusion that the assessee made payment of Rs.1.50 crore for purchase of land recorded in MOU which is unaccounted in nature against which no plausible explanation is offered by assessee and was added to the income of assessee. 10. We find that before the ld. CIT(A), the assessee not only objected against the validity of order under Section 153C r.w.s. 143(3) of the Act but the additions on merit. The objection of assessee on validity of order under Section 153C was rejected by the ld. CIT(A) by taking a view that the assessee himself admitted that he has paid Rs. 50.00 lacs in cash for purchase of this land which was returned to him as the deal was cancelled. It was held that once the assessee admitted investment in the aforesaid land, though which was returned to him, then taking stand that the notice under Section 153C is illogical and dismissed. The ld. CIT(A) held that the assessee admitted that he paid Rs. 50.00 lacs for investment in land as recorded in the MOU which was returned back as the deal was not materialized. The assessee has disclosed Rs. 50.00 lacs in A.Y. 2016- 17 and paid taxes thereon. On the basis of aforesaid facts and contention, the assessee contended that unsigned MOU has no evidentiary value and cannot be accepted in one sided approach. This contention of assessee was rejected by ld. CIT(A). We find that the ld. CIT(A) agreed with the contention of IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 11 assessee that the additions are made under Section 153C on the basis of documents found during the course of search. No amount of consideration is recorded on the MOU itself. The Assessing Officer worked out total sale consideration at Rs. 6.25 crores on the basis of statement Shri Aagam V. Vadecha, who is one of the partner, and his name is mentioned in the MOU, having 4% share. Because Aagam V. Vadecha allegedly paid Rs. 25.00 lacs, the value of Rs. 25.00 lacs were taken as 4% and the Assessing Officer extrapolated the figure of sale consideration of entire land at Rs. 6.25 crores. The ld. CIT(A) noted that extrapolation on the basis of part period or part value is not permissible. The ld. CIT(A) further noted that no evidence during the course of search or statement of any person which proved that the assessee had paid Rs. 1.50 crore for purchase of land. The Assessing Officer made addition without having any documentary or oral evidence. The Assessing Officer made addition without any basis of evidence. There is no document found during the course of search which may contain details of payment of Rs. 1.50 crore paid by assessee for purchase of land. On the basis of the said observation, the ld. CIT(A) deleted the entire addition. We find that the Ld. CIT(A) on proper appreciation of fact correctly held that the additions made by the assessing officer is not based on evidence on record. No contrary facts or law is brought to our notice to take other view, hence, we affirm the order of Ld. CIT(A). in the result, the grounds of appeal raised by the revenue are dismissed. IT(SS)A No. 33/SRT/2021 DCIT Vs Sh. Pravinchandra Hiralal Shah 12 11. In the final result, the appeal of the revenue is dismissed Order pronounced on 13 /06/2022 in open court and result was placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 13/06/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By Order // True Copy // Sr. Private Secretary, ITAT Surat