Shri Kantibhai Revabhai Prajapati , Ahmedabad V. The ACIT, Central Circle-1(4), Ahmedabad

ITSSA 375/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1134 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained cash credit; Search and seizure; Loose papers; Principle of natural justice; Block assessment
• Section: 68; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) IT(SS)A. NO: 375/AHD/2014 (ASSESSMENT YEAR: 2006-07) SHREE KANTIBHAI REVABHAI PRAJAPATI 11, REVABHAI SHOPPING CENTER, VASTRAL ROAD, ODHAV, AHMEDABAD V/S THE ACIT, CENTRAL CIRCLE 1(4),AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AGAPP3413E APPELLANT BY: SHRI S. N. SOPARKAR & PARIN SHAH RESPONDENT BY : SHRI SURENDRA KUMAR, CIT/DR ( )/ ORDER DATE OF HEARING : 20 -06-201 8 DATE OF PRONOUNCEMENT : 07-09-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, AHMEDABAD DATED 22.08.2014 PERTAINING TO A.Y. 2006- 07 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 375/ AHD/2014 . A.Y. 2006-07 2 1) IN LAW, ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, AHMEDABAD, HAS GROSSLY ERRED IN NO T CONSIDERING THE APPELLANT'S SUBMISSIONS MADE BEFORE HIM AS SUCH THE ORDER IS AGAINST PRINCI PLE OF NATURAL JUSTICE, BAD IN LAW AND DESERVES TO BE CANCELLED. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, AHMEDABAD, HAS GROSSLY ERRED IN NOT GIV ING THE SET OFF OF ADHOC DISCLOSURE MADE FOR A.Y. 2012-13 WITH A RIDER TO ALLOW SET OFF IN CASE O F UNDISCLOSED INCOME/TRANSACTION/NOTINGS FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AP PELLANT IS ENTITLED TO GET SET OFF OF RS. 1,99,25,000/- AGAINST THE ADHOC DISCLOSURE OF RS. 2 ,52,06,876/-MADE FOR A.Y. 2012-13. THE SAME KINDLY BE DIRECTED TO ALLOW THE SETOFF AND THE ADDITION MADE BE DELETED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, AHMEDABAD, HAS GROSSLY ERRED IN CONFIR MING THE CHARGING OF INTEREST U/S. 234A, 234B, 234C & 234D OF THE ACT. HE MAY BE DIRECTED TO W ITHDRAW THE SAME 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS AND AT THE TIME OF VERIFICATION OF INCR IMINATING LOOSE PAPERS, THE ASSESSING OFFICER HAS NOTICED AN ENTRY ON PAGE NO. 117 OF ANNEXURE-19 (PARTY 40). THE TRANSACTIONS IN THE NAME OF B.S. AS WELL A S CAPITAL ACCOUNT DRAWN IN THE NAME OF K.R. (KANTIBHAI R. PRAJAPATI). IN RESPECT T O THE ABOVE, THE APPELLANT HAS SUBMITTED THAT THE ENTRIES REGARDING SHRI KANTI LAL R. PRAJAPATI IS DULY INCORPORATED IN THE BOOKS OF ACCOUNT NO,2 PREPARED TO DISCLOSE THE ADDITIONAL INCOME IN THE HANDS OF THE VARIOUS PARTNERSHIP-FIRM S OF THE MADHAV GROUP CONCERNS, HE SUBMITTED THAT THE ENTRY IN THE NAME O F BS OF RS.1,99,25,000/- IS NOT PERTAINING TO THE APPELLANT, BUT TO BUY PEACE O F MIND AND AVOID LITIGATION, THE APPELLANT HAS OWNED UP THE ENTRY REGARDING BS. AT THE SAME TIME, HE CLAIMED THAT THIS UNEXPLAINED INCOME OF RS.1,99,25, 000/- SHOULD BE SET OFF AGAINST THE AD HOC DISCLOSURE OF RS.2.52 CRORES IN A.Y.2012-13. THE ASSESSING OFFICER DENIED THE SET OFF AND OPINED THAT AD HOC D ISCLOSURE OF RS.2.52 CRORES WAS MADE IN THE A.Y.2012-13 AND RS. 1.99 CRORES IS PERTAINING TO A.Y.2006-07 ITA NO. 375/ AHD/2014 . A.Y. 2006-07 3 AND INCOME OF A.Y.2006-07 CANNOT BE ADJUSTED AGAINS T THE INCOME DISCLOSED IN A.Y.2012-13. 3. ON THE OTHER HAND, THE ASSESSEES CONTENTION WAS BE FORE THE LOWER AUTHORITIES WAS AS FOLLOWS: '2.1 ON 21/22.07.2011, THE RESIDENTIAL PREMISES AS WELL AS THE BUSINESS PREMISES OF THE APPELLANT WAS SUBJECTED TO SEARCH AND SEIZURE PROCE EDINGS U/S 132 OF THE IT ACT. DURING THE COURSE OF SEARCH PROCEEDINGS, THE STATEMENTS MA DE OF THE GROUP PERSONS I.E. MOTIBHAI REVABHAI PRAJAPATI (BROTHER), SHRI KANLIBHAI REVABH AI PRAJAPATI (SELF), BHAGVANBHAI REVABHAI PRAJAPATI (BROTHER) WERE RECORDED. THE GRO UP LEADERS (SUPRA) HAVE MADE DISCLOSURE OF RS.40 CRORE IN THE STATEMENT RECORDED U/S 132(4) OF THE IT ACT. DURING THE COURSE OF SEARCH PROCEEDINGS, VARIOUS INCRIMINATING MATERIALS RELATING TO THE APPELLANT AS WELL AS APPELLANT GROUP CONCERNS WERE FOUND AND SEI ZED. 2.2 THE APPELLANT IS A REGULAR APPELLANT OF I HE DE PARTMENT AND FILING REGULAR RE L URN OF INCOME SINCE LONG BACK. HE HAS FILED HIS ORIGINAL RE TURN OF INCOME SHOWING TOTAL INCOME OF RS.12,48,340/- ON 15.12.2006. IN CONSEQUENCE OF SEA RCH AND SEIZURE ACTION TOOK PLACE, THE APPELLANT WAS SERVED WITH A NOTICE U/S. 153A(L)( A) OF THE ACT. IN RESPONSE THERETO, THE APPELLANT HAS FILED BLOCK RETURN OF INCOME SHOWING TOTAL INCOME OFRS. 12,48,34 O/-. 2.3 IT IS IMPORTANT TO NOTE THAT THE APPELLANT AND HIS BROTHERS SHRI MOTIBHAI REVABHAI PRAJAPATI AND SHRI BHAG\VANBHAI REVABHAI PRAJAPATI ARE THE LEADERS OF THE MADHCIV GROUP CONCERNS. DURING THE COURSE OF THE SEARCH PRO CEEDINGS, A STATEMENT U/S. 134(4) OF THE APPELLANT AS WE/1 AS HIS BROTHERS ' WERE RECORD ED WHEREIN THEY HAVE MADE DISCLOSURE OF RS.40 CRORES. AFTER MAKING DISCLOSURE OF RS. 40 CRO RES, THE APPELLANT AND THE GROUP HAS FILED BLOCK RETURNS OF INCOME ON THE BASIS OF INCRI MINATING MATERIAL AS WELL AS ON THE BASIS OF STATEMENT RECORDED U/S. 132(4) AND SHOWN DISCLOS URE OFRS. 40 CRORES IN THE BLOCK RETURN OF INCOME. 2.4 DURING THE COURSE OF THE BLOCK ASSESSMENT PROCE EDINGS AND AT THE TIME OF VERIFICATION OF INCRIMINATING LOOSE PAPERS, THE LD. A.O. HAS NOTICED THAT ON PAGE NO. 117 OFANNEXURE- 19 (PARTY 40), (A COPY OF THE SEIZED PAPER AND ITS F REE ENGLISH TRANSLATION IS ENCLOSED ON PAGE NO. ___) THE TRANSACTIONS IN THE NAME OFB.S. A S WELL AS CAPITAL ACCOUNT DRAWN IN THE NAME OF K.R.(KANTIBHAI R. PRAJAPATI) AS APPEARING. THE LD. A.O. HAS ASKED THE ITA NO. 375/ AHD/2014 . A.Y. 2006-07 4 EXPLANATION IN RESPECT THEREOF. IN RESPECT TO THE A BOVE, THE APPELLANT HAS SUBMITTED THAT THE ENTRIES REGARDING KR IS DULY INCORPORATED IN THE BO OKS OF ACCOUNT NO. 2 PREPARED TO DISCLOSE THE ADDITIONAL INCOME IN THE HANDS OF THE VARIOUS PARTNERSHIP-FIRMS OF THE MADHAV GROUP CONCERNS. HOWEVER, THE ENTRY IN THE NAME OF BS APPEARING IS NOT PERTAINING TO THE APPELLANT. HOWEVER, TO BUY PEACE OF MIND AND AVOID L ITIGATION, THE APPELLANT HAS OWNED UP THE ENTRY REGARDING BS. 2.5 IT IS IMPORTANT TO NOTE THAT WHILE ARRIVING TOT AL DISCLOSURE OF RS. 40 CRORES IN THE HANDS OF THE APPELLANT AS WELL AS IN THE HANDS OF T HE VARIOUS GROUP CONCERNS OF THE MADHAV GROUP, THE APPELLANT AND THE MADHAV GROUP CONCERN C OULD WORKED OUT THE TOTAL DISCLOSURE TO THE EXTENT OF RS. 32.45 CRORES ONLY ON THE BASIS OF INCRIMINATING MATERIAL. THE BALANCE OF RS. 7.55 CRORES WAS OFFERED AS ADHOC IN EQUAL SHA RING OF 3 BROTHERS I.E. THE APPELLANT, HIS BROTHERS SHRI MOTIBHAI PRAJAPATI AND BHAGVANBHA I PRAJAPATI. THE ADHOC DISCLOSURE SHOWN IN THE RETURN OF INCOME FOR A.Y. 2012-13 WITH A RIDER THAT ANY UNDISCLOSED ENTRY/INCOME/TRANSACTION WORKED DURING THE COURSE O F THE BLOCK ASSESSMENT PROCEEDINGS WILL BE .SET OFF AGAINST THIS ADHOC DISCLOSURE OFRS. 2.52 CRORES.A COPY OF RETURN OF INCOME ALONG WITH NOTES IS ENCLOSED ON PAGE NO.___. THE AP PELLANT HAS CLAIMED THIS ENTRY OF RS. 1.99 CRORES AS SET-OFF AGAINST THE ADHOC DISCLOSURE OF RS. 2.52 CRORES BUT THE LD. A.O. HAS NOT .GIVEN THE SAME BECAUSE HE HAS OPINED THAT THE ADHOC DISCLOSURE OFRS. 2.52 CRORES WAS MADE IN THE A.Y. 2012-13 AND RS. 1.99 CRORES IS PERTAINING TO A.Y. 2006-07. THEREFORE, THE APPELLANT IS NOT ENTITLED FOR THE LE GITIMATE SET OFF. 2.6 HERE, IT IS SUBMITTED THAT WHILE SHOWING THE DIS CLOSURE OF RS. 40 CRORES IN THE BLOCK RETURNS OF INCOME, THE APPELLANT WAS NOT IN A POSIT ION TO FORESEE THE EXACT ASSESSMENT YEAR- WISE AND CONCERN-WISE DISCLOSURE TO THE EXTENT OF R S. 7,55 CRORES AND THE APPELLANT AND HIS BROTHERS WERE NOT INTERESTED IN RETRACTING THE DISC LOSURE. THEREFORE, THEY HAVE DECIDED TO SHOW 1/3 OF THE DISCLOSURE (1/3 OF S. 7.55 CRORES) IN TH E HANDS OF THE APPELLANT AS WELL AS IN THE HANDS OF THE 2 BROTHERS ON ADHOC BASIS WITH A RIDER THAT ANY UNDISCLOSED INCOME/TRANSACTION/ENTRY WORKED OUT DURING THE COUR SE OF THE BLOCK ASSESSMENT PROCEEDINGS MAY KINDLY BE SET OFF AGAINST THIS DISCLOSURE. THE APPELLANT AND HIS BROTHERS COULD NOT FORESEE THAT THE ENTRY/TRANSACTION WILL BE WORKED O UT FOR THE A.Y. 2006-07. 2.7 SINCE THE ADHOC DISCLOSURE OF RS. 2.52 CRORES WA S MADE WITH A RIDER THAT ANY UNDISCLOSED INCOME/TRANSACTION/ENTRY FOUND DURING T HE COURSE OF THE BLOCK ASSESSMENT ITA NO. 375/ AHD/2014 . A.Y. 2006-07 5 PROCEEDINGS MAY KINDLY BE SET OFF AGAINST THIS DISC LOSURE, THE APPELLANT IS ENTITLED FOR THE LEGITIMATE CLAIM. IN VIEW OF THE ABOVE, YOUR HONOUR IS REQUESTED TO K INDLY DIRECT THE LD. A.O. ALLOW THE SET OFF TO THE DISCLOSURE AGAINST UNEXPLAINED ENTRY OF RS. 1.99 CRORES FOUND DURING THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS. ' 4. BUT LD. CIT(A) WAS NOT AGREED WITH THE CONTENTION O F THE APPELLANT. THUS, HE DISMISSED THE APPEAL OF THE APPELLANT. 5. LD. D.R. HAS RELIED HEAVILY ON THE ORDER OF LD. A.O . AND LD. CIT(A). 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. IN THIS CASE, ON 21/22.07,2011, THE RESIDENTIAL PREMISES AS WELL AS THE BUSINESS PREMISES OF THE APPELLANT WAS SUBJECTED TO SEARCH AND SEIZURE P ROCEEDINGS U/S 132 OF THE IT ACT. DURING THE COURSE OF SEARCH PROCEEDINGS, THE S TATEMENTS MADE OF THE GROUPPERSONSI.E.MOTIBHAIREVABHAIPRAJAPATI(BROTHER), SHRIKANTIBHAIREVABHAIPRA JAPATI (SELF), BHAGVANBHAI REVABHAIPRAJAPATI (BROTH ER) WERE RECORDED. THE GROUP LEADERS (SUPRA) HAVE MADE DISCLOSURE OF RS.40 CRORE IN THE STATEMENT RECORDED U/S 132(4) OF THE IT ACT. DURING THE COURS E OF SEARCH PROCEEDINGS, VARIOUS INCRIMINATING MATERIALS RELATING TO THE APP ELLANT AS WELL AS APPELLANT GROUP CONCERNS WERE FOUNDED SEIZED. 7. AND APPELLANT AND HIS BROTHERS SHRIMOTIBHAIREVABHAI PRAJAPATI AND SHRIBHAGWANBHAIREVABHAIPRAJAPATI ARE THE LEADERS OF THE MADHAV GROUP CONCERNS. DURING THE COURSE OF THE SEARCH PROCEEDIN GS, A STATEMENT U/S. 134(4) OFTHE APPELLANT AS WELL AS HIS BROTHERS' WERE RECOR DED WHEREIN THEY HAVE MADE DISCLOSURE OF RS.40 CRORES. AFTER MAKING DISCLOSURE OF RS. 40 CRORES, THE APPELLANT AND THE GROUP HAS FILED BLOCK RETURNS OF INCOME ON THE BASIS OF ITA NO. 375/ AHD/2014 . A.Y. 2006-07 6 INCRIMINATING MATERIAL AS WELL AS ON THE BASIS OF S TATEMENT RECORDED U/S. 132(4) AND SHOWN DISCLOSURE OF RS. 40 CRORES IN THE BLOCK RETURN OF INCOME. 8. DURING THE COURSE OF THE BLOCK ASSESSMENT PROCEEDIN GS AND AT THE TIME OF VERIFICATION OF INCRIMINATING LOOSE PAPERS, THE LD. A.O, HAS NOTICED THAT ON PAGE NO, 117 OF ANNEXURE-19 (PARTY 40), THE TRANSAC TIONS IN THE NAME OF B.S, AS WELL AS CAPITAL ACCOUNT DRAWN IN THE NAME OF K.R .(KANTIBHAI R. PRAJAPATI) AS APPEARING. THE LD. A.O. HAS ASKED THE EXPLANATION I N RESPECT THEREOF. IN RESPECT TO THE ABOVE, THE APPELLANT HAS SUBMITTED T HAT THE ENTRIES REGARDING KR IS DULY INCORPORATED IN THE BOOKS OF ACCOUNT NO. 2 PREPARED TO DISCLOSE THE ADDITIONAL INCOME IN THE HANDS OF THE VARIOUS PARTN ERSHIP-FIRMS OF THE MADHAV GROUP CONCERNS. HOWEVER, THE ENTRY IN THE NAME OF B S APPEARING IS NOT PERTAINING TO THE APPELLANT. HOWEVER, TO BUY PEACE OF MIND AND AVOID LITIGATION, THE APPELLANT HAS OWNED UP THE ENTRY REGARDING BS. IT IS IMPORTANT TO NOTE THAT WHILE ARRIVING TOTAL DISCLOSURE OF RS. 40 CRORES IN THE HANDS OF THE APPELLANT AS WELL AS IN THE HANDS OF THE VARIOUS GROUP CONCERNS OF THE MADHAV GROUP, THE APPELLANT AND THE MADHAV GROUP CONCERN COULD WORKED OUT THE TOTAL DISCLOSURE TO THE EXTENT OF RS. 32.45 CRORES ONLY O N THE BASIS OF INCRIMINATING MATERIAL. THE BALANCE OF RS. 7.55 CRORES WAS OFFERE D AS ADHOC IN EQUAL SHARING OF 3 BROTHERS I.E. THE APPELLANT, HIS BROTHERS SHRI MOTIBHAIPRAJAPATI AND BHAGWANBHAIPRAJAPATI. THE ADHOC DISCLOSURE SHOWN IN THE RETURN OF INCOME FOR A.Y. 2012-13 WITH A RIDER THAT ANY UNDISCLOSED ENTRY/INCOME/TRANSACTION WORKED DURING THE COURSE OF THE BLOCK ASSESSMENT PR OCEEDINGS WILL BE SET OFF AGAINST THIS ADHOC DISCLOSURE OF RS: 2.52 CRORES. T HE APPELLANT HAS CLAIMED THIS ENTRY OF RS. 1.99 CRORESAS SET-OFF .AGAINST THE ADH OC DISCLOSURE OF RS. 2.52 CRORES BUT THE LD. A.O. HAS NOT GIVEN THE SAME BECA USE HE HAS OPINED THAT THE ADHOC DISCLOSURE OF RS. 2.52 . CRORES WAS MADE IN T HE A.Y. 2012-13 AND RS. 1.99 ITA NO. 375/ AHD/2014 . A.Y. 2006-07 7 CRORES IS PERTAINING TO A.Y. 2006-07. IT IS PERTINE NT TO MENTION HERE THAT THE SAID SEIZED PAPER DOES NOT CONTAIN ANY DATE. 9. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED A JUDG MENT OF RAJASTHAN HIGH COURT [1975] 100 ITR 222 (RAJASTHAN) WHEREIN IT IS HELD : SECTION 68 READ WITH SECTION 69 OF THE INCOME-TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEAR 1962-63 - WHETHER FOR PURPOSES OF U NEXPLAINED INCOME WHICH IS CONTAINED IN BOOKS OF ACCOUNT IT IS ASSESSEE'S PREV IOUS YEAR WHICH SHALL BE RELEVANT FOR INCLUDING SUCH AN UNEXPLAINED CREDIT - HELD, YES - CASH CREDIT ENTRY WAS FOUND RECORDED ON 1-7-1961 -ADDITION WAS MADE I N ASSESSMENT YEAR 1961-62 BUT WAS DELETED BY AAC DIRECTING ITO TO CONSIDER AD DITION IN ASSESSMENT YEAR 1962-63 - IN ASSESSMENT YEAR IN QUESTION ADDITION W AS MADE REJECTING EXPLANATION AS TO SOURCE OF CASH CREDIT - RELEVANT PREVIOUS YEAR WAS 16-4-1960 TO 15-4-1961 - WHETHER ADDITION OF CASH CREDIT IN ASSE SSMENT YEAR 1962-63 WAS NOT JUSTIFIED - HELD, YES 10. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT AND SINCE THE ADHOC DISCLOSURE OF RS. 2.52 CRORES WAS MADE WITH A RIDER THAT ANY U NDISCLOSED INCOME/TRANSACTION/ENTRY FOUND DURING THE COURSE OF THE BLOCK ASSESSMENT PROCEEDINGS SHALL BE SET OFF AGAINST THIS DISCLOSUR E, THE APPELLANT IS ENTITLED FOR THE LEGITIMATE CLAIM. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07 - 09- 2018 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 07/09/2018