The DCIT, Central Circle-2(4), Ahmedabad V. Smt. Hetalben Hasmukhbhai Patel, Ahmedabad

ITSSA 6/AHD/2018

AI Insights

The case involves an appeal by the Department against the order of the CIT(Appeals) which deleted the additions made by the AO regarding unexplained investments in immovable properties by the assessee, Hetalben Hasmukhabhai Patel, for the assessment year 2011-12. The AO had made these additions based on documents seized during a search operation under section 132 of the Income Tax Act, 1961, at the premises of India Green Reality Group. The CIT(Appeals) found that the assessee was an illiterate person and merely a name lender in transactions funded by India Green Reality Group, which were already subjected to tax. The Tribunal upheld the CIT(Appeals)'s decision, agreeing that the additions constituted double taxation and that the assessee did not have the financial capacity to make such investments independently.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131345 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 04-01-2018
• Other Referred Cases: PCIT VS Daljit Singh Sra[2017] 80 taxmann.com 271, DCIT VS Dolphine Marbles (P.) Ltd[2011] 129 ITD 163 (Jab.)(TM), CIT VS Kamlaben Sureshchandra Bhatti [2014] 44 taxmann.com 459
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Additional evidence; Documents seized
• Section: 131; 132; 153A; 251; 153C

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e Dy. CIT, Central Circle-2(4), Ah medabad (Appellant) Vs Hetalben Hasmukhabhai Patel, 250, Navd hari Vas Mukh i Vas, Pipan TA San and, Ah medabad PAN: BMNPP3 649C (Resp ondent) Asses see b y : None Revenue by : Shri Vijay Kumar Ja isw al, CIT-D. R. Date of hearing : 01-03 -2 023 Date of pronouncement : 22-03 -2 023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Department against the order of the ld. Commissioner of Income Tax (Appeals)-13, Ahmedabad, in proceeding u/s. 250 vide order dated 27/10/2017 passed for the assessment year 2011-12. 2. The Department has filed the following grounds of appeal:- IT(SS)A No. 6/Ahd/2018 Assessment Year 2011-12 I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 2 “1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in law and/or on facts to deleting the addition of Rs. 2,74,37,150 made on account of unexplained investment in immovable property. 2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in law and on facts in deleting the addition of Rs. 804,700 made on account of agriculture income treated as income from other sources 3. On the facts and in the circumstances of the case and in law the Ld CIT(A) has failed to appreciate the facts brought about by the Assessing Officer in his assessment order an well as the objections raised in the remand report and has admitted the additional evidences. 4. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in law and/or on facts in not appreciating the provisions of section 153A of the IT Act which requires the total income to be brought under tax without any restriction 5. On the facts and in the circumstances of the case and in law the Ld CIT(A) has erred in law and/or on facts in holding that such assessment or re-assessment u/s 153A is restricted only to the incriminating materials found during the search. 6. On the facts and in the circumstances of the case and in law the Ld CIT(A) ought to have upheld the order of the Assessing Officer. 7. It is therefore, prayed that the order of the Ld. CIT (A) be set aside and that of the AO be restored to the above extent.” 3. The brief facts of the case are that a search action under section 132 of the Act was carried out in the group cases of India Green Reality Group on 15-03-2013 at various residential and business premises of this group. On examination of documents, it was observed that several documents I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 3 belonging to the assessee Smt. Hetalben Patel were found during the course of search. The AO initiated proceedings under section 153C of the Act on the assessee. On the basis of documents seized, the AO made three additions in the hands of the assessee as unexplained investments in properties. The first addition was with reference to land at Khata number 109, survey number 432 at village Zamp. The AO held that since the assessee could not provide any explanation regarding the investment in the aforesaid property, he added a sum of ₹ 8,31,400/- as unexplained investments in the hands of the assessee. The second addition was with respect to land notarised at serial number 304/210 dated 04-08-2010 at village Zamp. The AO held that from the documents it is clear that the actual amount of investment in the land was ₹ 63,66,600/-as against ₹ 7,92,500/-shown in the sale deed and the balance amount of ₹ 55,74,100/ -was added as on-money paid over and above the document price in the hands of the assessee as undisclosed investment during the period under consideration. The third addition was in respect of property situated at Khata number 109, survey number 462 at village Zamp. On analysis of documents found, the AO held that the actual amount of investment made by the assessee in this land deal was ₹ 2,10,31,650/- as against ₹ 6,54,400/-shown in the agreement and sale deed. Accordingly, the AO added a sum of ₹ 2,10,31,650/-as undisclosed investment in the hands of assessee in respect of this property. Accordingly, the AO made total addition of ₹ 2,74,37,150/- as unexplained investments in the hands of the assessee. 4. In appeal before Ld. CIT(Appeals), he deleted the additions on the ground that the assessee was an illiterate person residing in village and she was only name lender in the aforesaid transactions. From the analysis of I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 4 documents and assessment records, the Ld. CIT(Appeals) observed that it was actually M/s India Green Reality Group who had made investments in the aforesaid properties and since as per the relevant legal provisions, it was only an agriculturalist who could make investments in the agricultural properties, India Green Reality Group used the name of the assessee to make investments in the said property. Further, from the records it is quite evident that was the assessee made investment in such properties out of funds provided by India Green Reality Group and the Development Rights in respect of the aforesaid properties were then immediately transferred by the assessee to India Green Reality Group and the terms of the agreement clearly stated that all development rights in the aforesaid property vested with India Green Reality Group only. The Ld. CIT(Appeals) also observed that the assessee could not make necessary compliances / appearances before the AO during the course of assessment proceedings, since she was an illiterate person and further was under the bona-fide belief that since the entire transactions/investments in the aforesaid properties were being carried out by India Green Reality Group, it would be making the necessary representations in response to notice issued to the assessee. Further, Ld. CIT(Appeals) also observed that additions in respect of the investments made in the aforesaid properties were already made in the hands of India Green Reality Group for the impugned assessment year under consideration as is evident from the assessment records of India Green Reality Group. Therefore, in case the same addition is again made by way of unexplained investment in the hands of the assessee, it would clearly amount to double taxation. Further, the Ld. CIT(Appeals) also noted that one of the Directors of India Green Reality Group had submitted in a statement before the I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 5 Department that it was India Green Reality Group which had made investment in the aforesaid properties and the assessee was a mere name lender. In view of the above observations, the Ld. CIT(Appeals) deleted the aforesaid additions in the hands of the assessee and confirmed a minor addition of ₹ 5,48,743/ - being 2% as commission income earned by the assessee, by way of acting as name lender in the aforesaid transactions. While allowing relief to the assessee, the Ld. CIT(Appeals) made the following observations: “11. On careful consideration of entire facts as discussed in assessment order, remand report, submissions and rejoinder filed by appellant, it is observed that father-in-law of Appellant expired on 03/11/2014 and during the course of assessment proceedings, Appellant being illiterate has not made any explanation to details asked by assessing officer. The AO has made entire additions towards unexplained investment in land for documents found in search at the premises of IGRPL. It is observed that legal heirs were under bona fide belief that as land were purchased in the name of appellant by IGRPL through funds provided by them, reply to notice would be given by IGRPL. It is also observed that IGRPL was planning to file settlement application for its own case and other group members which is evident from assessment orders of IGRPL hence it was also under bonaflde belief that no further submission is required to be made and they have not complied with notices issued by AO. Under such circumstances and to provide natural justice to appellant, additional evidences submitted by appellant are admitted under Rule 46A. The AO in remand report has also observed that he has issued notice to appellant and same has returned un served but same cannot be the sole reason for not admitting additional evidences. On the contrary, AO himself has stated that appellant has not submitted any additional evidences as same were already considered by AO while passing original assessment order hence his plea that additional evidences should not be admitted cannot be accepted. The Hon'ble Punjab & Hariya High court in the case of PCIT VS Daljit Singh I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 6 Sra[2017] 80 taxmann.com 271 has held that "Where additional evidences filed under rule 46A was relevant for calculation of real income of assessee, same was to be admitted. The Hon'ble Jabalpur ITAT in the case of DCIT VS Dolphine Marbles (P.) Ltd[2011] 129 ITD 163 (Jab.)(TM) has held as under: "Section 250, of the Income-tax Act, 1961, read with Rule 46A of the Income-tax Rules, 1962 - Commissioner (Appeals) - Powers of -Assessment year 2005-06 - During assessment proceedings, Assessing Officer made an addition under section 68 in respect of share application money received by assessee from four shareholders - On appeal, assessee submitted an application under rule 46A of 1962 Rules before Commissioner (Appeals) for admission of additional evidences - Commissioner (Appeals) admitted additional evidences and on basis of those evidences, deleted addition made by Assessing Officer - On instant appeal, revenue challenged action of Commissioner (Appeals) in accepting additional evidences - It was noted from records that Commissioner (Appeals) had recorded reasons for admission of additional evidence - Further, as per rule 46A(3), Commissioner (Appeals) had also given opportunity to Assessing Officer to state his objections, if any, to admission of additional evidence and though Assessing Officer had raised objections to admission of additional evidence, yet he had not stated anything about veracity of additional evidence filed by assessee -Whether, on facts, it was to be held that Commissioner (Appeals) had not violated provisions of rule 46A and, therefore, impugned order passed by him was to be upheld - Held, yes The Hon'ble Gujarat High court in the case of CIT VS Kamlaben Sureshchandra Bhatti [2014] 44 taxmann.com 459 has held as under: "I. Section 251 of the Income-tax Act, 1961, read with rule 46A of the Income-tax Rules, 1962 - Commissioner (Appeals) - Powers of (Power to admit additional evidence) - In course of assessment, notice of hearing issued by Assessing Officer was received by assessee on date of hearing itself - Assessee thus I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 7 could not produce necessary evidence on such date - Subsequently, when assessee attended office of Assessing Officer with necessary evidence, he learnt that order of assessment was already passed - In such circumstances, Commissioner (Appeals) permitted additional evidence to be produced before him and while doing so, he also called remand report from Assessing Officer - Whether on facts, admission of additional evidence could not be stated to be in breach of requirement of rule 46A particularly when interest of revenue was safeguarded by calling for remand report and permitting Assessing Officer to comment on such additional evidence - Held, yes [Para 4] [In favour of assessee] Thus, entire additional evidences submitted by appellant (though AO has stated that they are not such evidences) along with plea raised by him are admitted under Rule 46A and issue involved in present appeal is adjudicated on merits here in under. 12 It is observed that AO has made addition towards unexplained investments in various land on the ground that appellant has not explained sources of such payment whereas appellant has argued that he is farmer and has acquired various land at the instances of IGRPL and entire funds were provided by said company because IGRPL being company cannot acquire agriculture land in its own name. The appellant has explained that appellant was in contact with Vinod Thakkar of IGRPL, the above lands were acquired by registered documents/POA executed in the name of appellant or his family members for the project of development of land at Village Zamp which was also placed by IGRPL. These facts were stated by appellant in appellate proceedings but same were not found incorrect by AO in remand report. It is pertinent to note that statement of Vinod Thakkar, director of IGRPL was also recorded u/s 131 wherein he as categorically admitted that funds were made available to the family of appellant by him or his company. The relevant excerpts of said statement dated 02/05/2013 are reproduced herein below: "Q-34: It is seen that land at Zamp has also been purchased by Shri HasmukhbhaiShankarbhai Patel and his family members. Please confirm whether IGRPL has financed the land I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 8 acquisition by these persons other than Directors of IGPRL and their family members? If so, what is the mode of payment? Ans: IGPRL has financed purchases made by HasmukhbhaiShankarbhai Patel and family. Both cheque and cash has been given. Cheque portion is reflected in books of account as advance. Cash payments have not been reflected in books of account. Source of the cash is the receipt from customers. Q-35: Please give the quantum of cash paid to Hasmukhbhai Shankarbhai Patel and family members. Ans: Approximately 1 crore cash has been Hasmukhbhai Shankarbhai Patel and family members. The above statement of Vinod Thakkar recorded during the course of search clearly supports the contention of appellant that funds for acquisition of such lands were provided by IGRPL and same does not represent undisclosed income of appellant. The appellant has also drawn attention to the assessment order of Shri Vinod Thakkar dated 17-12-2015 wherein facts regarding investment in land by appellant and its sources by IGRPL or its director is accepted at para 9 at Page NO. 31 to 35 of A.Y. 2011-12 as well in other Assessment Years. The Assessing Officer at para - 9 of the said order has observed that source of land purchased by Shri Hasmukh Patel and his family is money received from Vinod Thakkar and Appellant as well as his family members are benami of Appellant. In para - 9.1 Assessing Officer observed that financial capacity of Appellant and his family members for purchase of land is doubtful. The Assessing Officer at para -9.2 of the said order has also referred to statement of Shri Vinod Thakkar recorded on 2 nd May, 2013 which is reproduced herein above which also supports the contention of Appellant that finance for acquisition of land by family members are from IGRPL or Vinod Thakkar. It is observed that IGRPL being Company cannot acquire agricultural land on its own as per the Bombay Tenancy & Agricultural Lands Act, which is also applicable in Gujarat hence it has acquired the lands through farmers who can acquire agricultural land and after converting it into non-agricultural land, such lands are transferred to IGRPL. I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 9 It is pertinent to note that all the documents including registered documents were also found during the course of search at IGRPL and if IGRPL has no connection with such transactions, it is impossible to found records of all the lands belonging to appellant at the premises of IGRPL. During the course of Appellate Hearing, Appellant has submitted her ledger account from books of account of IGRPL, which reflects cheque payment of Rs. 8,52,600 made by IGRPL to Appellant and same was utilized for land payment of Rs.1,98,200 for land at Survey No. 432(1) and Rs.6,54,400 towards document value of Survey No, 460(2). T-.e ARs of Appellant have drawn attention to page No. 5 of Assessment Order wherein Assessing Officer has stated that Appellant has paid amount of Rs.1,98,200 on the date of agreement for land at Survey No. 432(1) and also drawn attention to page No. 12 of Assessment Order wherein Assessing Officer has stated that Appellant has paid Rs.6,54,400 on the date of agreement for land at Survey No. 462(4) which proves that funds received from JGRPL were used by Appellant towards purchase of land. When cheque amount is given by IGRPL, corresponding cash payment made towards acquisition of land should be considered as received from IGRPL which is also reflected in loose sheet of Rs. 32 crores being land payment found from IGRPL. The AO has rejected such evidence solely on the ground that it is not duly signed by IGRPL which is not material in present facts of case. It is observed that such ledger account reflects transactions already completed before the date of search and already forming part of computer records as well as audited annual accounts filed before search. It is also observed that AO had complete access of such documents and he would have easily verified such details. During the course of appellate hearing, appellant has also submitted^ development agreement executed with IGRPL wherein it is clearly stated that appellant has given possession of properties to IGRPL and they can develop the land as per their own wish for which appellant has no objection. Clause 7 and 8 of agreement was referred, to which provide authority to IGRPL to develop and sell such land and sale consideration would be received entirely by IGRPL. The development agreement also state that whenever IGRPL desires to sale land to third party, they can sell such land to them for which appellant would not have any objection. I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 10 12.1 It is pertinent to note that during the course of search at the premises of IGRPL, details of acquisition of land at various places were found in laptop and it was observed that aggregate cash payment made by IGRPL towards acquisition of such land is Rs 32.90 crore and such details are also part of assessment orders of said company. The AO has already made separate addition of Rs 32.90 crore rewards towards land in the hands of 1GRPL. It is observed that in the case of IGRPL, appellant has explained that sources of such payment is out of booking amount received in cash and cash received from shroff and on that basis, IGRPL has also submitted cash flow statement. During the course of appellate hearing, ARs of appellant have drawn attention that said details of Rs 32.90 crore as found in laptop includes payment towards two survey numbers of land at Zamp Wn\cVi 3K% subject matter of present assessment order and such amount is in excess of addition made by AO in present assessment year . Even cash flow statement submitted by appellant in the case of IGRPL includes above land transactions and during the course of appellate proceedings, appellant has submitted extracted fund flow statement containing survey number, amount , date etc pertaining to land acquired by appellant at the instance of IGRPL in current assessment year and same is already reproduced herein above. The said details clearly support the contention of appellant that payment towards acquisition of land is made by IGRPL and such payment is already subject matter of addition in the case of IGRPL hence no separate addition in present assessment year is called for. Considering the facts discussed herein above and documentary evidences found during the course of search, it is observed that appellant has acquired various land at the instance of IGRPL for which necessary funds were provided by IGRPL and such payment is already subject matter of addition in the case of IGRPL hence no separate addition in the case of Appellant for Rs 2,74,37,150 is called for. However, it is observed that appellant has acted at the instances of appellant and it is not possible to appellant would not have earned any commission towards such transaction hence reasonable commission or remuneration need to be estimated in present case. It is pertinent to note that in the case of Amitava D. Samanta, one of the I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 11 group cases, it was found that said person has acquired agricultural land on behalf of IGRPL in A.Y. 2012-13 for Rs. 2,44,80,200. The documents relating to such purchase were found during survey proceedings in the case of IGRPL, Calcutta. It is also observed that statement of said person was recorded under Section 132 on 5 th April, 2013 wherein in reply to question No. 10 he has stated that source of investment in property is by IGRPL for which he has received Rs. 4 to 5 lakhs as remuneration which works out to approximately 2% of total land value hence reasonable commission of 2% of land value is estimated in present case based upon seized material found during the course of search. Thus, commission income is estimated at Rs.5,48,743 being 2% of total payment of Rs 2,74,37,150. Thus, aggregate addition made by AO for Rs.2,74,37,150 is restricted to Rs.5,48,743. However, it is observed that appellant has acted at the instances of appellant and it is not possible to appellant would not have earned any commission towards such transaction hence reasonable commission or remuneration @ 2% of total payment of Rs 2,74,37,150 is made in the case of appellant which works out to Rs.5,48,743. Thus, aggregate addition made by AO for Rs.2,74,37,150 is restricted to Rs.5,48,743. The related grounds of appeal are partly allowed.” 5. The Department is in appeal before us against the aforesaid relief granted by the Ld. CIT(Appeals). Before us, the DR agreed that since the additions have already been made in the hands of India Green Reality Group, there is no infirmity/error in the order passed by Ld. CIT(Appeals) in deleting the additions in the hands assessee on the ground that the same would amount to double taxation. We further observe that in the instant set of facts the Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee was an illiterate person residing in village and from the facts and documents found from the assessment records and in light of the statement of the Directors of India Green Reality Group (reproduced in the Ld. CIT(Appeals) order), it is evident that the assessee did not have the I.T(SS)A No. 06/Ahd/2018 A.Y. 2011-12 Page No. Shri Dharmendra J. Patel vs. DCIT 12 necessary funds to make the aforesaid investment in property and the entire investments were made by India Green Reality Group only and the role of the assessee in the entire flow of events was to only act as name lender in view of the legal restrictions which did not permit India Green Reality Group to purchase the aforesaid properties. Therefore, looking into the facts of the case, we are of the considered view that Ld. CIT(Appeals) has not erred in deleting the additions made by the AO as unexplained investments in the hands of the assessee. 6. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 22-03-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/03/2023 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद