Shri Anvarali G.Varteji, Bhavnagar V. The ACIT.,Cent.Circle-1(4), Ahmedabad

ITSSA 7/AHD/2012

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2861 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Unexplained investment; Gift; Income from undisclosed sources; Search and seizure; Source of fund
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) IT(SS)A. NO: 7/AHD/2012 (ASSESSMENT YEAR: 2008-09) ANVARALI G. VARTEJI, 1 ST FLOOR, DAULAT NIVAS, AKA CINEMA ROAD, OPP. HOTEL MAUSAM, BHAVNAGAR- 364001 V/S THE ASST. CIT, CENT. CIRCLE-1, (4), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ABBPV5131H APPELLANT BY : SHRI T. P. HEMANI, AR RESPONDENT BY : SHRI DHARMVIR D. YADAV SR. D .R. ( )/ ORDER DATE OF HEARING : 09 -01-201 7 DATE OF PRONOUNCEMENT : 12 -01-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-I, AHMEDABAD DATED 14.11.2011 PERTAINING TO A.Y. 2008- 09. IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 2 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READ AS U NDER:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACT IN CON FIRMING THE ADDITION OF RS. 10,00,000/- MADE BY THE ASSESSING OFFICER, WHICH IS AN APPLICATION OF INCOMES EARNED, OFFERED AND ASSESSED IN A.Y. 2007-08 OF RS. 82 LACS. IT IS THEREFORE PRAYED THAT ADDITIONS SO MADE MAY KINDLY BE DELETED. 2. THE LD. CIT (A) HAS ALSO ERRED IN LAW AND ON FACT I N ENHANCING THE ADDITION BY RS. 22,00,000/-, WHICH IS MERELY AN APPLICATION OF INCO MES EARNED, OFFERED AND ASSESSED IN A.Y. 2007-08 OF RS. 82 LACS. IT IS THER EFORE PRAYED THAT ADDITIONS SO ENHANCED MAY KINDLY BE DELETED. 3. THE ASSESSEE IS A GEN. COMMISSION AGENT. A SEARCH A ND SEIZURE ACTION U/S. 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF MAHEK AGRO GROUP OF BHAVNAGAR ON 05/02/2009. 4. DURING THE COURSE OF SEARCH ACTION, THE ASSESSEE HA D ADMITTED TO HAVE PURCHASED AN OLD FACTORY SHED IN PANOLI FROM GSFC T HROUGH AUCTION AND A SUM OF RS. 10,00,000/- WAS EXPENDED FOR ITS RENOVAT ION AND ACQUISITION FROM THE UNDISCLOSED SOURCES OF INCOME. WHILE SCRUT INIZING THE RETURN OF INCOME, THE A.O. FOUND THAT THE ASSESSEE HAS NOT OF FERED THE SAID UNDISCLOSED INCOME TO TAX. 5. THE ASSESSEE WAS ASKED TO JUSTIFY ITS STAND. THE AS SESSEE EXPLAINED THAT THE INVESTMENT HAS BEEN MADE FROM THE PROFIT OF RS. 82 LACS EARNED FROM UNACCOUNTED SALES DURING A.Y. 2007-08 AND THE SAME WAS OFFERED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 3 6. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE COULD NEITHER PROVE THAT THE SUM RECEIVED FROM THE UNACCOUNTED SALES DURING A.Y. 2007-08 HAS BEEN UTILIZED FOR THE PURPOSE OF RENOVATION OF THE PROPE RTIES NOR PRODUCED ANY EVIDENCES IN SUPPORT OF HIS ARGUMENT. THE A.O. WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS FAILED TO PROVE THE DIRECT NEXUS B ETWEEN THE PROFIT EARNED FROM THE UNACCOUNTED SALES DURING A.Y. 2007-08 AND THE SUM EXPENDED FOR THE RENOVATION OF THE PROPERTY. THE A.O. ACCORDINGL Y MADE THE ADDITION OF RS. 10,00,000/- AS UNEXPLAINED INVESTMENT. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CONTENTION THAT THE INVESTMENT HAS COME OUT OF RS. 82 LACS OFFERED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) FOUND THAT IN ADDITION TO RS. 10 LACS, THE ASSESSEE HAS ALSO SPEN T A SUM OF RS. 22 LACS IN RENOVATION OF HOUSE DURING THE YEAR UNDER CONSIDERA TION ITSELF THOUGH THE SAME HAS BEEN ADDED BY THE A.O. IN THE SUBSEQUENT A SSESSMENT YEAR. THE FIRST APPELLATE AUTHORITY WAS OF THE FIRM BELIEF TH AT EVEN RS. 22 LACS HAS TO BE ADDED DURING THE YEAR UNDER CONSIDERATION IN ADD ITION TO RS. 10 LACS. AFTER GIVING NOTICE OF ENHANCEMENT, THE LD. CIT(A) DIRECTED THE A.O. TO TAX UNEXPLAINED INVESTMENT AT RS. 32 LACS. 9. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE INCOME OFFERED DURING THE COURSE OF SEARCH AND IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 4 SEIZURE OPERATION AND THE UTILIZATION OF THE SAME A ND THE SAME CAN BE UNDERSTOOD BY THE FOLLOWING CHART:- A. Y. 2007-08 INFLOW AMOUNT OUTFLOW AMOUNT UNDISCLOSED INCOME FROM COMMISSION BUSINESS. (PERIOD 15/01/07 TO 09/02/07) 8200000 INVESTMENT IN FACTORY SHED (IN MARCH 2007) 1000000 BALANCE AVAILABLE 7200000 TOTAL DISCLOSURE INCOME 8200000 TOTAL DISCLOSURE -ASSETS 8200000 A. Y. 2008-09 INFLOW AMOUNT OUTFLOW AMOUNT BALANCE AVAILABLE 7200000 INVESTMENT IN FACTORY SHED (IN APRIL 2007) 1000000 INVESTMENT IN RENOVATION OF HOUSE (IN APRIL 2007) 2200000 BALANCE AVAILABLE 4000000 TOTAL DISCLOSURE -INCOME 7200000 TOTAL DISCLOSURE -ASSETS 7200000 IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 5 10. IT IS THE SAY OF THE LD. COUNSEL THAT SINCE THE ASS ESSEE HAS ALREADY MADE DISCLOSURE OF RS. 82 LACS IN A.Y. 2007-08 ON INCOME BASIS, THE REVENUE AUTHORITIES OUGHT NOT TO HAVE MADE/ENHANCED ADDITIO N IN RESPECT OF UNDISCLOSED INVESTMENT SINCE SUCH INVESTMENTS HAVE BEEN MADE OUT OF INCOME DISCLOSED IN EARLIER YEAR AND THE SAME IS NO THING BUT APPLICATION OF INCOME. THE LD. COUNSEL FURTHER STATED THAT THE SOU RCE OF FUNDS AS WELL AS APPLICATION OF FUNDS BOTH CANNOT BE TAXED AS IT AMO UNTS TO DOUBLE TAXATION. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE A.O. AND RELIED UPON THE DECISIONS IN THE CASE OF HIRALAL MA GANLAL & CO. VS. DCIT (2005) 96 ITD 0113, CICA VS. MUKESH R. SHAH (2004) 186 CTR 0579 (GUJ), PRASANNA DUGAR VS. CIT (2016) 373 ITR 0681 (SC) , H UKUM CHAN JAIN VS. ACIT (2010) 191 TAXMAN.COM 319 AND PULLANGODE RUBBER PRO DUCE CO. VS. STATE OF KERALA (1973) 91 ITR 18 (SC). 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND HAVE CAREFULLY GONE THROUGH THE JUDICIAL DECISIONS RELIE D UPON BY THE RIVAL PARTIES. IT WOULD BE PERTINENT TO UNDERSTAND THE RELEVANT QU ESTION ASKED DURING THE COURSE OF THE SEARCH PROCEEDINGS IN THE STATEMENT U /S. 132(4) AND THE SAME READS AS UNDER:- Q. 16.YOU HAVE GIVEN DISCLOSURE OF RS. 786 LAKHS ON BEHALF OF YOUR GROUP, MEMBERS AND CONCERNS, KINDLY GIVE BREAK UP OF THE S AME, ITEM-WISE AND PERSON- WISE. A. 16. ON THE DATE OF SEARCH ON 05.02.2009, IN THE STATEMENT U/S. 132(4), I HAD DISCLOSED RS. 786 LAKHS, IN THIS REGARD, BREAK UP O F DISCLOSURE IS FURNISHED, THE ITEM-WISE BREAK UP OF THE SAME IS AS UNDER: IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 6 1 INVESTMENT IN FDRS WITH SBI IN THE NAMES OF SANSUDHA VINIMAY PVT. LTD. RS. 3,95,55,000/- II JEWELLERY RS. 24,62,393/- III EXCESS STOCK RS. 1,59,74,233/- IV INVESTMENT IN IMMOVABLE PROPERTIES RS. 19,20,000 /- V RECIEVABLES, REPAIRS, & RENOVATION OF HOUSE, INVESTMENT IN PANOLI FACTORY, HOUSEHOLD AND PERSONAL EXPENSES RS. 1,04,88,374/- VI UNACCOUNTED SALES RS. 82,00,000/- TOTAL RS. 7,86,00,000/- THE PERSON-WISE BREAK UP OF THE SAME IS AS UNDER: 1 ANVARALI G. VARTEJI RS.1,28,46,000/- II MEHNDI HASSAN A. VARTEJI RS. 1,33,75,000/- III MOSHIN ALI A. VARTEJI RS. 1,80,98,629/- IV ALIASGAR A. VARTEJI RS. 2,40,56,888/- V MAHEK AGRO MINERAL PVT. LTD. RS. 1,02,23,483/- TOTAL RS. 7,86,00,000/- 12. A PERUSAL OF THE ABOVE SHOWS THAT THE GROUP HAD MAD E A DISCLOSURE OF RS. 7.86 CRORES OUT OF WHICH RS. 1.28 CRORES WAS IN THE NAME OF THE ASSESSEE. IT APPEARS THAT THE ASSESSEE HAS INADVERTENTLY ADDED T HE APPLICATION OF THE INCOME IN THE DISCLOSURE ITSELF. A PERUSAL OF THE B REAK-UP OF THE DISCLOSURE PERTAINING TO THE ASSESSEE SHOW THAT THE INCOME DIS CLOSURE WAS RS. 82 LACS + 446000/- OUT OF WHICH RS. 446000/- PERTAINED TO T HE GIFT OF DHINOD PROPERTY. THE ENTIRE ADDITIONS HAVE BEEN MADE SOLEL Y ON THE BASIS OF THE STATEMENT OF THE ASSESSEE MADE U/S. 132(4) OF THE A CT DURING THE COURSE OF IT(SS)A NO. 7/AHD/2012 . A.Y. 2008-0 9 7 SEARCH AND SEIZURE PROCEEDINGS. EXCEPT FOR THIS, TH ERE IS NO EVIDENCE WHATSOEVER BROUGHT ON RECORD TO JUSTIFY THE IMPUGNE D ADDITIONS. IN OUR CONSIDERED OPINION, ONCE THE SOURCE OF FUNDS HAVE B EEN ADDED AS UNEXPLAINED INCOME THEN THE APPLICATION OF THE SAID FUND SHOULD BE ALLOWED. SINCE NO CASH IN HAND WAS FOUND AT THE TIM E OF SEARCH IN RESPECT OF THE INCOME ADDITION OF RS. 82 LACS, IT CAN BE SAFEL Y PRESUMED THAT THE SAID INCOME HAS FOUND ITS WAY IN SOME INVESTMENT OR EXPE NDITURE. SINCE THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAS MADE EXPENDITURE DURING THE YEAR UNDER CONSIDERATION, IT CAN ONCE AG AIN SAFELY BE PRESUMED THAT THE SAID INCOME MUST HAVE BEEN INVESTED IN SOM E PROPERTY. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE IMPUGNED AD DITIONS MADE BY THE REVENUE AUTHORITIES. IN OUR UNDERSTANDING OF THE FA CTS QUA THE ABSENCE OF ANY INCRIMINATING EVIDENCE, THE FINDINGS OF THE FIR ST APPELLATE AUTHORITY DESERVE TO BE SET ASIDE. SETTING ASIDE THE FINDING S OF THE FIRST APPELLATE AUTHORITY, WE DIRECT THE A.O. TO DELETE THE IMPUGNE D ADDITION OF RS. 32 LACS. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 01- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY AC COUNTANT MEMBER AHMEDABAD: DATED 12/01/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)