Jayantilal Dhanjibhai Patel (HUF), Surart V. Dy. CIT, Circle - 3(3), Surat (Old) Ward 2(3)(1), Surat (Present), Surat

ITSSA 53/SRT/2023

AI Insights

The case involves two appeals by Valjibhai Virjibhai Gangani and Jayantilal Dhanjibhai Patel (HUF) against the orders of the Commissioner of Income Tax (Appeals), which upheld the additions made by the Assessing Officer under section 153C r.w.s. 153A of the Income Tax Act, 1961. The additions were based on a 'sauda chithi' (a loose paper document) found during a search operation, which allegedly indicated a higher sale consideration for a property than what was recorded in the official sale deed. The Tribunal examined the validity of the 'sauda chithi' and the circumstances under which it was created and found that it was not a binding agreement and did not constitute incriminating material justifying the additions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301743 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-05-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 21-03-2023
• Other Referred Cases: K. P. Varghese v. ITO, Addl. CIT vs. Lata Mangeshkar, Dy. CIT vs. Alpesh Gokulbhai Kotadia, Vinodbhai Shamjibhai Ravani Vs. Dy. CIT, Central Circle, Surat, PCIT Vs. Saumya Construction Pvt. Ltd., Jai Steel (India), Jodhpur, Jayaben Ratilal Sorathia
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Loose papers; Opportunity of cross examination; Question of law; Block assessment; Reason to believe; Reassessment proceedings; Set aside; CHAPTER XIVB
• Section: 147; 131; 37; 132; 143(3); 142(1); 133A; 153A; 143(2); 48; 73; 13; 153; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./IT(SS)A No.52/SRT/2023 Assessment Year: (2012-13) (Physical Hearing) Valjibhai Virjibhai Gangani, 30/B, 1 st Floor, Shyam Sadan, Kalakunj Society, Varachha Road, Surat – 395006. Vs. The DCIT, Circle-3(3), Surat (Old)/ DCIT, Circle-1(1)(1), Surat (Present) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ABKPG0874F (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.53/SRT/2023 Assessment Year: (2012-13) (Physical Hearing) Jayantilal Dhanjibhai Patel (HUF), 1, Someshwar Society, Varachha Road, Surat – 395006. Vs. The DCIT, Circle-3(3), Surat (Old)/ DCIT, Circle-1(1)(1), Surat (Present) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AABHJ2759Q (Assessee) (Respondent) Assessee by Shri Rajesh Upadhyay, AR Respondent by Shri Ravinder Sindhu, CIT(DR) Date of Hearing 30/05/2023 Date of Pronouncement 27/07/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the different assessees, pertaining to same Assessment Year (AY) 2012-13, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], which in turn arise out of separate assessment orders passed by the Assessing Officer under section 153C r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Page | 2 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) 3. Since, the issues involved in all these appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in IT(SS)A No.52/SRT/2023, for assessment year 2012-13, have been taken into consideration for deciding the above appeals en masse. 4. Grounds of appeal raised by the assessee, in the lead case [IT(SS)A No. 52/SRT/2023), are as follows: “1. Ld. CIT(A) has erred in law and on fact to upheld AO’s action of reopening of assessment u/s 153C r.w.s. 153A of the I.T. Act. 2. Ld. CIT(A) has erred in law and on facts to upheld quantum addition of Rs.2,30,50,000/- under the head LTCG, ignoring the fact that the assessee has not received the said sum in consideration of sale of land situated at T.P No.14, F.P. No.97, Pal, Surat. 3. Ld. CIT(A) has erred in law and on fact to give specific direction to the AO that Rs.74,65,277/- has to be assessed as LTCG instead of STCG, as the year of acquisition fixed by him is 2006 and not 2010.” 5. Brief facts, as discernible from the orders of lower authorities are that in assessee`s case the return of income was filed on 28.02.2013, showing total income at Rs.1,12,89,580/-. The assessee is a partner in Gajanand Row House. The assessee`s case was reopened u/s 153C r.w.s 153A for the reason that certain loose papers containing ‘sauda chitty’ entered between Rajeshbhai N. Vaghani, Riteshbhai Katargamwala and assessee were seized during the course of search proceedings at the residence of Rajeshbhai Vaghani. The seized document shows that ‘saudha chitty’ was entered into 07.07.2010, which pertains to land situated at T.P. No. 14, F.P.No.97, Pal, Surat and which belonged to assessee and Jayantibhai Dhanjibhai Patel (HUF). This land admeasured 1706.63 sq. yard and was sold by them @ Rs.38,751 per sq. yd. The total consideration amount was Rs.6.61 crores. Page | 3 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) However, the registered sale deed for this property was executed on 08.07.2011 between M/s Hari Corporation and assessee and Jayantibhai Dhanjibhai Patel (HUF) for a consideration of Rs.2,00,00,000/-. As per assessing officer, there was concealment of income of Rs.4,61,00,000/-, which was paid in cash, which was not reflected in the regular books of accounts of assessee and Jayatibhai Dhanjibhai Patel (HUF). Accordingly, notice u/s 153C r.w.s 153A was issued on 27.10.2014 and served upon the assessee. Subsequently, notice u/s 142(1) of the Act, was issued on 10.12.2014 and served upon the assessee. The notice u/s 143(2) of the Act was issued on 20.11.2015 after receipt of letter from assessee stating therein that the original return may be treated in response to notice u/s 153C of the Act. 6. On perusal of computation of income, it was noted by the assessing officer that assessee has shown net long term capital gain of Rs.74,65,277/- on sale of agricultural land. The sale consideration of the property has been shown at Rs.1,00,00,000/-. On the basis of information received as mentioned above, a show cause notice was issued to the assessee, vide letter dated 14.03.2016 of assessing officer. The said show-cause notice is reproduced as under: “2. Action u/s 132 & 133A of the Act was carried out by the Investigation Wing, Surat in the Vaishnodevi Group of Surat on 29.11.2013. During the course of search proceedings at the residence of Rajeshbhai N. Vaghani, certain loose papers contained sauda chatty entered between Rajeshbhai Vaghani, Riteshbhai Katargamwala and yourself. The seized document shows sauda chitty entered on 07.07.2010. The sauda chitty pertains to the land situated at T.P. No. 14, F.P. No. 97, Pal, Surat which belonged to you and Jayantibhai Dhanjibhai Patel (HUF). The total consideration amount as per the sauda chitty seized is Rs.6.61 crores. However, the registered sale deed submitted for this property executed on 08.07.2011 between M/s Hari Corporation, Jayantibhai Dhanjibhai Patel (HUF) and yourself for a consideration of Rs.2,00,00,000/-. Hence you have concealed income of Rs. 4.61 crore which is paid in cash and not reflected in your regular books of account. During the course of search and later verification proceedings, statement of Shri Rajesh N. Vaghani was recorded u/s 131 wherein in reply to Q.No.6, he admitted that the difference amount of Rs.4.61 crore was Page | 4 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) paid in cash which is not reflected in the regular books of account. You have also admitted to have entered into this sauda chitty and terms and conditions mentioned therein. 3. In view of the above facts, you are requested to show cause as to why the amount of Rs.2,30,50,000/- (being 50% share of concealed income of Rs.4.61 crores) should not be treated as undisclosed long term capital gain in your hands.” 7. In response, the assessee submitted its reply to the assessing officer, which is reproduced below: “In respect of your contention regarding addition of Rs.2,30,50,000/- for difference in sale consideration, as per registered sale deed and sauda chitty seized from residence of Shri Rajeshbhai Vaghani of land situated at T.P. No.14, P.P. No.97, Pal, Surat we would like to submit that the assessee has received sale consideration of Rs.1.00cr, as per registered sale deed of land situated at T.P. No.14, P.P. No.97 Pal, Surat. But the land was bought by Shree Hari Corporation as the sauda chithi that was, seized from the premises of Rajesh Vaghani got cancelled. The assessee had also in his statement recorded u/s 131 of I.T. Act denied receipt of any money over and above the documentation amount and that to sale was not based on the sauda chithi that was seized. The sauda chithi was between Rajesh Waghani and Ritesh Katargamwala which subsequently got cancelled and the said land was sold to M/s Shree Hari Corporation subsequently which is a separate identity. Further the assessee clearly stated in his statement that he had received Rs.1.00 cr. For sale consideration of above mention land. The said sauda chithi was cancelled and subsequent to this some other buyer bought the land and took responsibility of removing the unauthorized occupants. Copy of 7/12 is submitted herewith to substantiate the fact. 2. The reason this sauda chithi was signed was that it was the buyer's responsibility to give clear possession of the said land but due to subsequent development it was not possible for the assessee to vacate the unauthorized occupants. The sauda chithi was signed by Rajesh Vaghania and Ritesh Katargamwala as prospective buyers. As the land was not clear and possession was not possible in absolute term, the prospective buyers cancelled the sauda chithi, hence the question of addition does not arise. 3. Subsequent to cancellation, a firm in the name of the assessee sold the land to M/s Shree Hari Corporation.” 8. However, assessing officer rejected the contention of the assessee and observed that Shri Rajesh Vaghani, partner of Shree Hari Corporation, who has purchased the land in question has categorically admitted in the statement recorded on oath during the course of post search proceedings that the Sauda Chitty pertains to the land situated at T.P. No.14, F.P. No.97, Pal, Surat which entered on 07.07.010. The land is admeasuring 1706.73 Page | 5 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) Sq. Yard which was purchased @ 38,751/- per sq. yd. and the total consideration was Rs.6.61 crores. However, the registered sales for this property was executed on 08.07.2011 between M/s Shree Hari Corporation and Shri Valjibhai Virjibhai Gangani & Jayantibhai Dhanjibhai Patel (HUF) for a consideration of Rs.2,00,00,000/-. He further admitted that the difference amount of Rs.4,61,00,000/- was paid in cash which was not reflected in the regular books of account. Therefore, assessing officer observed that sauda chithi was cancelled, as the land was not clear and possession was not possible, is nothing but an afterthought. The assessing officer noted that it is an admitted fact that Shri Rajesh Vaghani has paid cash of Rs. Rs.4,61,00,000/- to the assessee and Jayantibhai Dhanji Patel (HUF) which cannot be denied. Therefore, assessing officer made addition of Rs.2,30,50,000/- (being 50% share of amount of Rs. Rs.4,61,00,000/-). 9. The assessing officer also noted that the assessee has shown the gain from sale of above mentioned property, as long term. But on perusal of the purchase deed of the property, it was noted by Assessing Officer that even though the agreement for purchase of the land was made in November 2006, the possession of the property has been received by the assessee on 03.08.2010 and registered on the same date. Hence, the amount of Rs.3,30,50,000/- (1,00,00,000 + 2,30,50,000) was treated as short term capital gain. We make it clear that assessee had already offered Rs.1,00,00,000/- for taxation and computed long term capital gain at Rs.74,65,277/- in his return of income, vide paper book page no.66 of assessee`s paper book. However, assessing officer treated Rs.1,00,00,000/- short term capital gain. Finally, the assessing officer made addition to the tune of Rs.2,30,50,000/- (being 50% share of amount of Rs. Rs.4,61,00,000/-). Page | 6 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) 10. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the Assessing Officer. Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before us. 11. Shri Rajesh Upadhyay, Learned Counsel for the assessee, argued on merit that a loose paper is not a ‘Sauda Chithi’. The ‘Sauda Chithi’ so referred by the assessing officer does not contain any heading, that is, no such heading or title is appearing on it. The ‘Sauda Chithi’, so mentioned by the assessing officer, in the assessment order, does not contain name, address, PAN etc. of the assessee under consideration. No any stamp paper is used by the parties for making such ‘Sauda Chithi’, and it is neither notarized nor registered, thus there is no authenticity of such paper. Therefore, ld Counsel contended that such ‘Sauda Chithi’, is a dump document. The ld Counsel further pointed out that such Sauda Chithi’, is only a loose paper, found in search and kept in a file namely Annexure A/2. The fact is admitted by Shri Vaghani under his statement u/s 131 of the Act and it is with respect to agriculture land of Shri Valjibhai and Jayantibhai. It is being signed by only Valjibhai. As per the said loose paper dated 07.07.2010, the entire payment was to be made on or before 24.03.2011. There are also other conditions in the ‘Sauda Chithi’, such as non- agricultural land (NA), NOC, Kachcha entry, execution of sale deed etc. Even if, for the sake of argument, it is accepted that both party, had accepted its correctness then also transaction of sale falls in assessment year 2011-12 and not in assessment year (AY) 2012-13, under consideration. Therefore, income tax, on such transaction, cannot be levied in assessment year (AY) 2012-13, under consideration, hence addition made by the assessing officer should not be sustained. On merits of the case, the ld Page | 7 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) Counsel submitted before us written submission, which is reproduced below: “Case on Merits: 1. The AO has made addition of Rs.4.61 (i.e. 50% in Valjibhai and 50% in Jayantibhai) under the head STCG. Ld. CIT(A) has confirmed the quantum addition, however, directed to consider it as LTCG. Thus, addition was not made u/s 68/69/69A of the Act. 2. In working out STCG/LTCG, 'Full Value of Consideration' has to be taken as per section 48 of the Act. There are 4 documents available on record for determination of full value of consideration. These are: (i) Loose Paper found in search; (ii) Statement of Rajesh Vaghani u/s 131; (iii) Statement of assessee u/s 131 and (iv) Registered Sale Deed. It is needless to say that statement u/s 131 of Rajesh Vaghani and the assessee cannot be taken as document for sale of immovable property as it is the explanation on certain paper found in search. Secondly, their statements are contradictory w.r.t. facts of the case. So, both statements are not helpful to decide full value of consideration. 3. Thereafter, two documents are left: (i) Loose Paper found in search and (ii) Registered Sale Deed. If we look at loose paper, it speaks for consideration to be paid at the rate of Rs.38751/- per yard for 1,706.73 sq. yds, on or before 24/03/2011 on completion of certain terms. Main conditions are Kachi entry in revenue record, paki entry in revenue record, NA, NOC etc. After entering in to deal, buyers came to know that land was under reservation and so difficult to get NA, NOC, Plan pass etc. There are many minus factors related to land which are also mentioned by the Id. CIT(A) at Para 7.4, Page 7 of his appellate order. So, consideration fixed was on higher side and it was not acted upon. Subsequently, buyers have formed a firm namely Shree Hari Corporation on 01/11/2010 with other -05- partners. They all to gather took decision to purchase assessee's land at bargained price of Rs.2.00 crs by taking responsibility to get NA-plan-pass permission, to remove reservation, to remove encroachment etc. Page -117- and -119- and page no. -132- to page no. -139- of paper book are evidences. In order to have clear and marketable title of the land, considerable expenses and efforts needs to be invested. Therefore, cost o/land was bargained. 4. All above arguments were made before the Ld. CIT(A) in appellate proceedings but were not accepted only on the ground that, "the appellate has not been able to prove with any documentary evidence that the terms of Sauda chithi were changed before the sale deed was registered." Evidence as desired by the Ld. CIT(A) could not be produced because no such document was prepared because registered sale deed was immediately executed on 08/07/2011 against payment dated 18/06/2011 i.e. within the period of 20 days. This fact is correct as there is no indication of earlier deal or sauda chithti in registered sale deed. No proof of payment found in search. No evidence brought on record cither in assessment proceedings or in appellate proceedings. Buyer was unable to produce evidence for cash payment of Rs.4.61 crs. Even price fixed by the Government i.e. Jantry price or SVA price are evident that documentary value is Rs.2.00 crs is the correct value as no additional stamp was paid by the buyers. Therefore, Full Value of Consideration is only Rs.2.00 crs. Hence, addition of Rs.2.31 crs made by the AO and upheld by the Ld. CIT(A), in both cases, is prayed to be deleted. 5. Case Laws:: (i) K. P. Varghese v. ITO (1981) 131ITR 597 for the preposition that section 52(2) can be invoked only where the consideration for the transfer has been Page | 8 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such under-statement or concealment Is on the Revenue. Though section 52(2) is omitted by the Finance Act, 1987, w.e.f 1-4-1988, Judgment of K. P. Varghese has been a milestone verdict and a locuss classicus in income tax jurisprudence and it is still a good law even today in matters of interpretation of statutory taxation provisions like section 52(2) of the Act. Two Apex court decisions where K. P. Varghese in context of taxation statute is not only referred but heavily relied to flash the primary burden on revenue in context of anti abuse provisions inserted in the Act to address some tax avoidance etc. are Sati Oil Udyog, (2015) 372 ITR 746 (SC) and Rajasthan State Electricity Board v. Dy. CIT (2020) 424 ITR 704 (SC), both these decisions are towing the same line of thought as charted in K. P. Varghese case. (ii) Addl. CIT vs. Lata Mangeshkar 97 ITR 696 Bom : No Addition can be made on the basis of a statement of a search person and noting in a diary found from search person in search. (iii) Dy. CIT vs. Alpesh Gokulbhai Kotadia 256 Taxman 423 (SC) for the preposition that Where there was no tangible material available on record to form a reasonable belief that amount of sale consideration had been received by assessee in cash, merely on basis of sauda chitthi signed by assessee for sale of such land, it could not be said that sale consideration was received by assessee; SLP dismissed. (iv) Vinodbhai Shamjibhai Ravani Vs. Dy. CIT, Central Circle, Surat 393 ITR 491(GUJ) for the preposition that Where there was no tangible material available on record to foam a reasonable belief that amount of sale consideration on sale of land was received by assessee in cash, merely on basis of sauda chitthi signed by assessee for sale of such land, it could not be said that sale consideration was received by assesse. SLP filed by the department against this judgment was dismissed by the Supreme Court.” 12. Shri Upadhyay, Learned Counsel, also pleaded that satisfaction note issued under section 153C of the Act is defective. It is not clear that in whose case satisfaction is recorded. Loose paper is the only document seized in search. Statement of Rajesh Vaghani is not a seized document, it is totally silent about proof of payment of Rs. 4,61,00,000/- in cash on basis of core document found in search. No assessment year is mentioned in satisfaction note that for which year the income has escaped assessment. Therefore, the Jurisdictional requirement for initiating proceedings u/s 153C of the Act is not satisfied. The ld Counsel also pointed out that an opportunity of cross examination was not provided to the assessee, during Page | 9 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) the assessment stage, hence assessment order framed under section 153C of the Act, may be quashed. 13. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue, submitted that there is no dispute that the impugned transaction did not take place, and based on the ‘saudha chitthi’, the sale deed was made and the sale deed was executed in assessment year (AY) 2012-13, so transaction was materialized in assessment year (AY) 2012-13, therefore Assessing Officer was right in making the addition in the assessment year 2012-13. The Ld. DR submitted that no cross-examination was demanded by the assessee, during the assessment stage, therefore this ground of the assessee, should not be entertained. The Ld. DR also submitted that ground no.3 raised by the assessee, before the Tribunal first time, was not raised by the assessee before the Ld. CIT(A), therefore it should not be adjudicated. 14. Regarding satisfaction note issued under section 153C of the Act, the ld DR pointed out that it is within the legal frame work and in accordance with the provisions of section 153C of the Act, and just because there is a minor mistake in recording satisfaction, does not mean that entire assessment proceedings get invalidated. Therefore, assessment order framed by the assessing officer under section 153C read with section 153A dated 31.03.2016 should not be quashed. 15. In rebuttal, Shri Upadhyay, Learned Counsel, submitted that assessee has raised ground no.3 before the Tribunal and the said issue was also raised by the assessee, during appellate proceedings, which was without prejudice and the assessee stated before ld CIT(A) that if ‘on-money’ issue is held to be the assessee’s money then assessee should be taxable in the Page | 10 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) status of ‘Long Term Capital Gain’ at Rs.74,65,277/- and not in the status of ‘short term capital gain’. Therefore, the assessee has raised the ground no. 3 before this Tribunal, which is not the new ground, and which is without prejudice and alternative ground, that if the main ground is not allowed, then assessee’s ground no.3 may be allowed. Hence, Shri Upadhyay, argued that contention raised by ld DR about ground no.3 is not tenable. 16. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessee submitted before us, the following documents and evidences to substantiate his claim, which are enumerated below: (i) Copy of Loose Paper with its English translation (vide page nos.10 to 11 of paper book) (ii) ITO Ward-9(4), Surat letter dated 24.09.2014 with 02 Satisfaction Notes and Notice u/s 153C r.w.s. 153A, dated 27.10.2014 (vide page nos.12 to 15 of paper book) (iii) Copy of statement of Rajeshbhai N. Vaghani recorded u/s 131 of the IT Act on 30.01.2014 by the ITO (Inv.), Surat (vide page nos.16 to 46 of paper book) (iv) Copy of statement of Valjibhai Verjibhai Vaghhani & Jayantilal D. Patel recorded u/s 131 of the IT Act on 14.02.2014 by the ITO (Inv.), Surat (vide page nos.47 to 49 of paper book) (v) Copy of submission made before CIT(A), Surat-4 (vide page nos.50 to 59 of paper book) Page | 11 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) (vi) Dy. CIT show Cause Notice dated 14.03.2016 & assessees CA reply thereto (vide page nos.60 to 63 of paper book) (vii) ITR, Computation, Statement of Account for assessment year (A.Y.) 2012-13 (vide page nos.64 to 69 of paper book) (viii) ITR, Computation, Statement of Account for A.Y. 2011-12 (vide page nos.70 to 73 of paper book) (ix) ITR, Computation, Statement of Account for A.Y. 2007-08 (vide page nos.74 to 78 of paper book) (x) Copy of Sale Deed no. 12579 dated 08.07.2011 (vide page nos.79 to 131 of paper book) (xi) Copy of revenue record for a land bearing, Survey No, 380 of Village: Pal, District – Surat (vide page nos.132 to 148 of paper book) (xii) Copy of land purchased, deed dated 13.11.2006 for land bearing, Survey No.380 of Village: Pal, District – Surat (vide page nos.149 to 167 of paper book) 17. We have gone through the above documents and evidences filed by the assessee and observed the facts of the issue under consideration. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. We note that assessee is an individual and a partner in Gajanand Row House. The assessee had filed return of income declaring total income of Rs.1,12,89,580/-. Mr. Rajeshbhai N. Vaghani and Mr. Riteshbhai Katargamwala were subjected to Search u/s 132 of the Act. In the residence of Mr. Rajeshbhai Vaghani, a ‘sauda chitthi’ dated 07.07.2010, pertaining to land at TP No. 14, FP No.97, Pal, Surat was found. In the said sauda chithi, the assessee and Mr. Jayantibhai Dhanjibhai Page | 12 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) Patel HUF were the sellers of the said land and Mr. Rajeshbhai N Vaghani and Mr. Riteshbhai Katargamwala were the purchasers. The said land was 1706.63 sq. yards and was sold @ Rs.38,751/- per sq. yard for a total consideration of Rs.6,61,00,000/-to M/s Shree Hari Corporation. However, the recorded consideration for the said land was Rs.2,00,00,000/- and hence, as per assessing officer, the sale consideration was concealed to the tune of Rs.4,61,00,000/-. On the basis of this information, the assessing officer was satisfied that this information pertained to the assessee and hence, a notice u/s 153C of the Act was issued on 27.10.2014 to the assessee. The assessee filed a letter stating that the original return be treated as filed in response to notice u/s 153C of the Act. The assessing officer framed the assessment u/s 143(3) r.w.s 153C of the Act on 31.03.2016, assessing total income at Rs.3,43,39,580/-. In the said assessment, the assessing officer made an addition towards undisclosed ‘short term capital gain’ from a sale of property at Pal, Surat of Rs.2,30,50,000/-. On appeal by assessee, the ld CIT(A) had confirmed the addition made by the assessing officer by giving the direction to the assessing officer to tax the said capital gain as long term, therefore assessee is in appeal before us. 18. From the above facts and documents, we note that the assessee has received sale consideration of Rs.1 crore, as per registered sale deed of land situated at T.P. No.14, P.P. No.97 Pal, Surat. But the land was bought by Shree Hari Corporation as the ‘sauda- chithi’, which was, seized from the premises of Rajesh Vaghani got cancelled. The assessee had also in his statement recorded u/s 131 of Income Tax Act denied receipt of any money over and above the documentation amount and that to sale was not based on the sauda chithi, which was seized. The sauda chithi was between assessee (seller) and Rajesh Waghani (purchaser) and Ritesh Katargamwala (purchaser), which subsequently got cancelled. After cancellation of said Page | 13 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) ‘sauda chithi’, subsequently, the said land was finally sold to M/s Shree Hari Corporation which is a separate entity. The Registered sale deed was executed on 08/07/2011 for Rs. 2.00 crores, in the name of firm M/s Hari Corporation. Out of Rs. 2 crores, the assessee ( Valjibhai Virjibhai Gangani) received Rs. 1 crore, on account of 50% share in the land, and Rs. 1 crore, was received by Jayantilal Dhanjibhai Patel (HUF), on account of 50% share in the land. The both assessees ( Valjibhai Virjibhai Gangani and Jayantilal Dhanjibhai Patel (HUF) have shown Rs. 1 crore, each, in their return of income and paid the taxes on the capital gain. Further the assessee clearly stated in his statement that he had received Rs.1.00 crore, for sale consideration of above mentioned land, from M/s Hari Corporation, on account of 50% share in the land. Thus, we note that the said ‘sauda chithi’ was cancelled and subsequent to this, other buyer ( M/s Hari Corporation) bought the land and took responsibility of removing the unauthorized occupants. The assessee submitted the copy of 7/12 extract, and registered deed to substantiate this fact. Therefore, it is abundantly clear that impugned land has not been sold by the assessee, as per said sauda chithi, to Rajesh Waghani and Ritesh Katargamwala, as the said sauda chithi, was cancelled subsequently, hence, we are of the view that no addition should be made in the hands of the assessee, based on said ‘sauda chithi’. 19. We also find merit in the submission of ld Counsel that a loose paper is not a ‘Sauda Chithi’. The ‘Sauda Chithi’ so referred by the assessing officer does not contain any heading, that is, no such heading or title is appearing on it. The ‘Sauda Chithi’, so mentioned by the assessing officer, in the assessment order, does not contain name, address, PAN number etc, of the assessee under consideration. No any stamp paper is used by the parties for making such ‘Sauda Chithi’, and it is neither notarized nor registered, thus there is no authenticity of such paper. Therefore, ld Counsel Page | 14 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) contended that such ‘Sauda Chithi’, is a dump document. The ld Counsel further pointed out that such Sauda Chithi’, is only a loose paper, found in search and kept in a file namely Annexure A/2. The fact is admitted by Shri Vaghani under his statement u/s 131 of the Act and it is with respect to agriculture land of Shri Valjibhai and Jayantibhai. It is being signed by only Valjibhai. As per the said loose paper dated 07.07.2010, the entire payment was to be made on or before 24.03.2011. There are also other conditions in the ‘Sauda Chithi’, such as non-agricultural land (NA), NOC, Kachcha entry, execution of sale deed etc. Even if, for the sake of argument, it is accepted that both party, had accepted its correctness then also transaction of sale falls in assessment year 2011-12 and not in assessment year (AY) 2012-13, under consideration. Therefore, income tax, on such transaction, cannot be levied in assessment year (AY) 2012-13, under consideration.We note that section 4 read with section 2(31) of the Act state that the tax shall be charged on the total income of every person. Further, the term 'Person' has been defined in clause 31 of section 2 of the Act, to include seven categories of persons, all of which are independent and distinct from each other. A literal interpretation of the above provisions leads to the conclusion that only a right person as per the Act, is liable to pay tax on his income and no option is available to tax income in the hands of the person other than the one in whose hands it is taxable. The Hon’ble Supreme Court in ITO Vs. CH. Atchaiah (1996) 218 ITR 239 (SC) has held that the income should be assessed on the right person, right year and it should be on the right income. From the aforesaid decision of the Hon’ble Supreme Court only the right person and the right person alone is liable to be taxed and not the wrong person. Therefore, we agree with the contention of ld Counsel that said transaction of sale falls in assessment year 2011-12 and not in assessment year (AY) 2012-13, under consideration. Therefore, income tax, Page | 15 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) on such transaction, cannot be levied in assessment year (AY) 2012-13, under consideration. 20. We also note that no assessment was pending for assessment year (A.Y.) 2012-13, as on the date search i.e. 29-11-2013 and loose paper pertains to assessment year (A.Y.) 2011-12, therefore, without the aid of incriminating material no addition should be made in the assessment year 2012-13. For assessment year 2012-13, the Revenue authorities did not unearth any incriminating material, therefore addition should not be sustained in assessment year 2012-13. Therefore, the assessee's case is covered by the judgment of Hon'ble High Court of Gujarat, in the case of PCIT Vs. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj), wherein, the Hon`ble Court held as follows: “5. Before adverting to the merits of the rival contentions, reference may be made to the decisions of different High Courts on which reliance has been placed by the learned counsel for the respective parties. The lead judgment in this regard is the decision of the Delhi High Court in the case of Anil Kumar Bhatia (supra), wherein the court held thus : "18. A perusal of Section 153A shows that it starts with a non obstante clause relating to normal assessment procedure which is covered by sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31.5.2003. These sections, the applicability of which has been excluded, relate to returns, assessment and reassessment provisions. Prior to, the introduction of these three sections, there was Chapter XIV-B of the Act which took care of the assessment to be made in cases of search and seizure. Such an assessment was popularly known as "block assessment" because the Chapter provided for a single assessment to be made in respect of a period of a block of ten assessment years prior to the assessment year in which the search was made. In addition to these ten assessment years, the broken period up to the date on which the search was conducted was also included in what was known as "block period". Though a single assessment order was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is Page | 16 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of section 153A says that such proceedings "shall abate". The reason is not far to seek. Under section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the "total income" of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed Page | 17 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." 6. In Filatex India Ltd. (supra), the Delhi High Court has held thus : "2. On the first question, we note that the Assessing Officer, in the proceedings under Section 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18th January, 2006 and subsequent dates. A perusal of the impugned order by the Tribunal would disclose that incriminating material including statement of Sanjay Agrawal, GM(Marketing) have resulted in additions, which have been upheld. It is not the case of the appellant-assessee that initiation of proceedings under Section 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant-assessee is that the addition, which is the subject matter of questions No.(ii) and (iii),was/is not justified in the assessment order under Section 153A, as no incriminating material was found concerning the addition under Section 115 JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the additions need not be restricted or limited to the incriminating material, which was found during the course of search. There cannot be multiple assessments, once Section 153A of the Act is applicable. Section 153A(1) postulates one assessment, computing the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed in the order under Section 153A of the Act and the Section applies notwithstanding Sections 139, 147, 148, 149, 151 and 153 of the Act." 7. In Jai Steel (India), Jodhpur (supra), the Rajasthan High Court held thus : "15.A plain reading of the above provision would reveal that if a search or requisition is initiated after 31.05.2003, the AO is under an obligation to issue notice to such person, who has been subjected to search/requisition to furnish the return of income of six years immediately preceding the year of search. The AO is then required to assess or reassess total income of the said six years and, out of the six years, if any assessment or reassessment is pending on the date of initiation of the search, the same would abate i.e. pending proceedings qua the said assessment year shall not proceed thereafter and the assessment has to be made under Section 153A(1)(b) of the Act read with the first proviso thereunder. 16. Further provisions have been made contemplating a situation where an assessment made under sub-section (1) is annulled in appeal or other legal proceedings. The Section Page | 18 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) starts with a non obstante clause, which removes the restrictions upon the AO from assuming jurisdiction to reopen the assessment under Sections 147, 148 and 151 etc. 17. Prior to introduction of Sections 153A to 153C, Chapter XIVB of the Act took care of the assessments to be made in cases of search and seizure, which were called 'block assessment', whereby, a single assessment was required to be in respect of a period of block of ten years prior to the assessment year, in which, the search was made. After the introduction of Sections 153A to 153C, a single block assessment concept has been given a go bye and now the AO has been given the power to assess or reassess the 'total income' of the six years in question in separate assessment orders. 18. To consider the rival submissions made at the Bar in the context of the present case and the substantial question of law framed, the scope of 'assessment and reassessment of total income' under Section 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from Section 132(1) of the Act, as Section 153A of the Act cannot be read in isolation, inasmuch as, the same is triggered only on account of any search/requisition under Sections 132 or 132A of the Act. If any books of accounts or other documents relevant to the assessment had not been produced in the course of original assessment and, found in the course of search, such books of accounts or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. 19. The underline purpose of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of Section 153A a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under Section 153A of the Act would be the assessment for the said year. 20. The necessary corollary of the above second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee. 21. The argument raised by the counsel for the appellant to the effect that once a notice under Section 153A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: Page | 19 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Though such a claim by the assessee for the first time under Section 153A of the Act is not completed, the case in hand, has to be considered at best similar to a case where in spite of a search and/or requisition, nothing incriminating is found. In such a case though Section 153A of the Act would be triggered and assessment or reassessment to ascertain the total income of the person is required to be done, however, the same would in that case not result in any addition and the assessments passed earlier may have to be reiterated." 8. In Kabul Chawla, the Delhi High Court after considering its earlier decisions in the case of Anil Kumar Bhatia (supra), CIT v. Chetan Das Cachman Das [2012] 211 Taxman 61/25 taxmann.com 227, Filatex India Ltd. (supra) decision of the Karnataka High Court in the case of Canara Housing Development Company (supra) as well as the other decisions, held thus: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other Page | 20 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 9. Section 153A of the Act reads thus : "153A. Assessment in case of search or requisition.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 10. Since the assessment under section 153A is required to be made after a search under section 132 or requisition under section 132A, it may be germane to refer to the provisions of sections 132 and 132A of the Act. Section 132 of the Act provides for search and seizure, and to the extent the same is relevant for the present purpose, reads thus: Page | 21 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) "132. Search and seizure. - (1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Deputy Director or Deputy Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub- section (1) of section 37 of the Indian Income- tax Act, 1922 (11 of 1922) or under subsection (1) of section 131 of this Act, or a notice under sub- section (4) of section 22 of the Indian Income- tax Act, 1922 (11 of 1922), or under sub- section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income- tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be disclosed for the purposes of the Indian Income- tax Act, 1922 (11 of 1922) or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Director General or Director] or the Chief Commissioner or Commissioner, as the case may be, may authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant Commissioner or Income- tax Officer, or (B) such Deputy Director or Deputy Commissioner, as the case may be, may authorise any Assistant Director, Assistant Commissioner or Income-tax Officer, the officer so authorised in all cases being hereinafter referred to as the authorised officer to- (i) enter and search any building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the look of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in the building, place, vessel, vehicle or aircraft, if the authorized officer has reason to suspect that a such person has secreted about his person any such books of account, other documents, money bullion, jewellery or other valuable article or thing; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the are of jurisdiction of any Chief Commissioner or Commissioner], but such Chief Commissioner or Commissioner] has no jurisdiction over the person referred to Page | 22 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) in clause (a) or clause (b) or clause (c), then notwithstanding anything contained in section 120], it shall be competent for him to exercise the powers under this sub- section in all cases where he has reason to believe that any delay in getting the authorisation for the Chief Commissioner or Commissioner] having jurisdiction over such person may be prejudicial to the interest of the revenue:] Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control on the owner or the person who is in immediate possession or control thereof that he shall not remove part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii)" 11. Section 132A of the Act provides for "Power to requisition books of account, etc." and to the extent the same is relevant for the present purpose, reads thus: "132A. Powers to requisition books of account, etc. (1) Where the Director General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that - (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income- tax Act, 1922, or under sub-section (1) of sec. 131 of this Act, or a notice under subjection (4) of section 22 of the Indian Income- tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force, or (b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not or would not produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or (c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922, or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, the Director General or Director or the Chief Commissioner or Commissioner may authorise any Deputy Director, Deputy Commissioner, Assistant Director [Assistant Commissioner or Income-tax Officer] (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer." 12. Section 132 of the Act makes provision for search and seizure. The powers of search and seizure can be exercised thereunder provided the requirements of sub-section (1) thereof are satisfied. For exercise of powers thereunder, the Commissioner would have to record satisfaction that despite issuance of notice under section 142(1) of the Act, the assessee has omitted or failed to produce or cause to produce books of account or other documents; or if such Page | 23 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) notice is issued, the assessee would fail to produce the books of account or other documents; or the assessee possesses money, bullion, jewellery, or other valuable article or thing which represents income which is not wholly or partly income or property, which has not been or would not be disclosed by the assessee. Thus, it appears that the objective of a search under section 132 of the Act is to secure evidence which is not likely to be made available by issue of summons or by visiting, in ordinary course, the premises concerned. The authorities under the Act have powers to summon persons and documents and have to resort to search and seizure when there is evidence of undisputed documents or assets which have not been and would not have been disclosed in the ordinary course. 13. Similarly, under section 132A of the Act, the authorizing authority would acquire the jurisdiction to authorize an officer to requisition books of account or other documents or assets which have been taken into custody by an officer or authority under any law and thereafter to proceed to deal with the assets provided in the manner provided under sections 132 and 132B only where the authorizing authority has in consequence of any information in his possession reason to believe that such assets represent wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act by any person from whose possession or control such assets had been taken into custody by the officer or authority from whom these were requisitioned. 14. Essentially, therefore, both the provisions contemplate search and requisition where the assessee is not likely to disclose his income. It appears that the object of both the provisions is to unearth the income which the assessee has not or is not likely to disclose. 15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assessee the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is Page | 24 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. 17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross- examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. Page | 25 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed.” 21. Thus, the judgment of the Jurisdictional Gujarat High Court in the case of Saumya Construction Pvt. Ltd (supra) clearly says that no addition should be made without the aid of incriminating material in case of unabated assessment. On the date of search i.e. 29-11-2013, there was no assessment proceedings pending, which got abated. In the assessment order, there is no mention of any documentary evidence found or any oral evidence in the form of statement of anyone, which was made basis for the addition made by the assessing officer in assessment year 2012-13. Therefore, addition made in the assessment order cannot be sustained. 22. We note that during the assessment proceedings, the assessee submitted before the assessing officer that the actual sale consideration for the land in question was only Rs.2,00,00,000/-, (Rs.l,00,00,000/- pertaining to the assessee being 50% owner and another Rs.1,00,00,000/- pertains to Jayantilal Dhanjibhai Patel-HUF). The sauda chithi which was with Mr. Rajesh Vaghani and Mr. Riteshbhai Katargamwala, which got cancelled and thereafter the land was sold to M/s Shree Hari Corporation, which is a Page | 26 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) separate entity and hence, the question of any addition in the hands of the assessee not arise. There is no corroborative or any other evidence to show that the payment has been received by assessees, as mentioned in sauda chitthi. In the statement recorded under section 132(4) of buyer, from whose possession copy of sauda chitthi was found, has confirmed the fact that said sauda chitthi was cancelled and he was unable to give details of payment, evidence of payment, details of recipient of cash payment or any other credible evidence being proof of sale consideration of Rs.6.61 crores. Therefore such loose paper alone cannot be made the basis of addition without any corroborative evidence. Even in the satisfaction note of the AO of searched person, as well as assessee's AO, has nowhere stated that all payment, as per sauda chitthi, was made by Rajesh Vaghani and Ritesh Katargamwala to the assessee. Assessing officer has neither applied his mind nor satisfied himself before recording of satisfaction note that income of assessee was actually escaped assessment during the year under consideration. When both sauda chitthi and sale deed were not made in the year under consideration, that is, in assessment year 2012-13, there cannot be any income escaped from those transactions during the year under consideration. Hence addition cannot be made in assessment year 2012-13, on the basis of sauda chitthi, because the alleged cash transaction is pertaining to assessment year 2011-12. 23. We note that there was a condition in sauda chitthi that a Kachi Entry needs to be made in land revenue records during the period of down payment, which could not be possible due to litigations. As per another term of Sauda Chitthi, the land was agriculture land which has to be converted in to Non-Agricultural land, within the period of one month from the date of Kachi Entry. This condition could not be fulfilled that can be seen from sale deed itself. The Land was also kept under reservation by the Page | 27 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) Govt. authority i.e. ULC collector. There was also encroachment on the land. Buyers of lands, as per Sauda Chitthi, were land developers and project organizers of Vaishno-Devi Group, so they wanted to use the land for their project. They wanted to purchase land with clear titles, hence, sauda chitthi was cancelled by them, therefore no monetary transaction of Rs. 6.61 crores was made based on such Sauda Chitthi. Therefore, we are of the view that assessing officer has brought on record any evidence to establish that the so-called sellers have any authority to sell the impugned land or have received any on-money from purchaser. Nor there is any adverse inference drawn by the assessing officer in his assessment order, made under section 143(3) read with section 153C of the Act. Further, the ultimate purchaser party of the impugned land was M/s Shree Hari Corporation, who was not signatory of said sauda chitti. Therefore, in the light of above facts and evidences, we delete the entire addition made by the assessing officer. 24. In the result, ground No.2 raised by the assessee (in IT(SS)A No.52/SRT/2023) is allowed. 25. We note that similar issue is involved in IT(SS)A No.53/SRT/23, as Jayantilal Dhanjibhai Patel(HUF) is 50% co-owner of land, and the facts and issues involved in all these two appeals are analogous. Accordingly, our observations made in IT(SS)A No. 52/SRT/2023, for AY 2012-13, shall apply mutatis mutandis to the aforesaid other appeal of Assessee, namely, in IT(SS)A No.53/SRT/2023. For the parity of reasons, we allow the abovementioned appeal of the assessee, in IT(SS)A No.53/SRT/2023. Page | 28 IT(SS)A Nos. 52 &53/SRT/2023/AY.2012-13 Valjibhai V. Gangani 7 Jayantilal D. Patel (HUF) 26. In the combined result, ground No. 2 raised by the assessees in both appeals filed by different assessees (in IT(SS)A Nos. 52 and 53/SRT/2023) are allowed. 27. Before parting, we make it clear that since we have deleted the additions in both the appeals based on the merits of the case, therefore technical ground No.1 raised by the assessee (being section 153C- satisfaction note defective) and alternative ground no.3 raised by the assessee, become infructuous, hence we do not adjudicate them. Registry is directed to place one copy of this order in all appeals folder / case files. Order is pronounced on 27/07/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 27/07/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat