Shri Dinesh Lilachand Patel, Mehsana V. The Dy.CIT.,Cent.Circle-1(2), Ahmedabad

ITSSA 773/AHD/2010

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2925 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-01-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADUSUDAN
• Keywords: Unexplained investment; Loose papers; Share purchase agreement

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ IT(SS)A.NO.773/AHD/2010 / ASSTT. YEAR: 2002-2003 SHRI DINESH LILACHAND PATEL C/O. VIMAL ELECTRIC CO. 31, GIDC ESTATE MEHSANA. PAN : ABXPP 2989 F VS DCIT, CENT.CIR.1(2) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI VARTIK CHOKSHI REVENUE BY : SHRI MADUSUDAN, SR.DR / DATE OF HEARING : 03/01/2017 / DATE OF PRONOUNCEMENT: 20/03/2017 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-II, AHMEDABAD DATED 6.9.2010 PASSED FOR THE ASSTT.YEAR 2002-03. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.19,64,320/- WHICH WAS ADD ED BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT BY THE ASSESSEE IN SHARES OF VIMAL OIL & FOOD LTD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED HIS RETURN OF INCOME ON 10.10.2002 DECLARING TOTAL INCOME AT RS.2 ,23,419/-. A NOTICE UNDER SECTION 153A(A) WAS ISSUED UPON THE ASSESSEE ON 27.1.2005 REQUIRING HIM TO FILE RETURN AFTER THE SEARCH CARRIED OUT UPO N THE ASSESSEE. IN RESPONSE TO THIS NOTICE, THE ASSESSEE HAS FILED HIS RETURN OF I NCOME ON 29.6.2005 DECLARING TOTAL INCOME AT RS.2,23,420/-. A NOTICE UNDER SECT ION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOU NTS, THE LD.AO HAS IT(SS)A NO.773/AHD/2010 2 OBSERVED THAT DURING THE COURSE OF SEARCH CERTAIN P APERS INVENTORISED AS ANNEXURE A-13 AND ANNEXURE 7 WERE FOUND AND SEIZED. ON VERIFICATION OF PAGES 45 OF A/13, IT WAS FOUND BY THE AO THAT INVES TMENT IN SHARES OF VIMAL OIL & FOOD LTD. HAS BEEN MADE AT RS.19,64,320/- (17 6300 SHARES AT THE RATE OF RS.11.14 PER SHARE). THE AO FURTHER FOUND THAT DIV IDEND OF RS.2,31,560/- AND RS.3,48,000/- WAS SHOWN TO BE RECEIVED ON 21.11 .2002 AND 19.12.2003. THE AO HAS CONFRONTED THE ASSESSEE TO SHOW SOURCE O F INVESTMENT IN THESE SHARES AS WELL AS WHERE THE DIVIDEND INCOME WERE AS SESSED TO TAX. IN RESPONSE TO THE QUERY OF THE AO, THE ASSESSEE FILED DETAILED REPLY WHICH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER. IT READS AS UNDER: A) VIDE POINT NO.1 & 2 OF THE NOTICE YOU HAVE CALL ED FOR TO EXPLAIN REGARDING PAGE NO.7 TO 58 OF ANNEXURE 7 AND 45 OF A NNEXURE 13 WHICH CONTAINS THE DETAILS OF INVESTMENT MADE IN VI MAL OIL & FOODS LTD AND DETAILS AS TO DIVIDEND OF RS 2,31,560 AND RS 3,48,000 PERTAINING TO AY 2003-2004 AND 2004-2005. IN THIS CONNECTION THE ASSESSEE STATES AS UNDER AT THE OUTSET THE ASSESSEE WOULD LIKE TO STATE THAT THE SAID LOOSE PAPERS ARE NOT PERTAINING TO ME BUT ON THE BASIS OF EXPLANATION GIVEN, IS PERTAINING TO DINESHCHANDRA & OTHERS (AOP ) WHICH IS BEING SEPARATELY ASSESSED TO TAX AT MEHSANA. THE PA RTNERS OF THE AOP ARE (I) DINESHCHANDRA L PATEL (II) JAYARITIBHAI A PATEL (III) CHANDUBHAI I PATEL (IV) DAYHABHAI S PATEL B) THE SAID PARTNERS WERE CARRYING ON THE BUSI NESS OF MANUFACTURING AND REPAIRING OF BOOSTER IN BOOSTERS, AS AOP THE NECESSARY EVIDENCE REGARDING THE SAME CAN BE VERIFI ED FROM 15 OF ANNEXURE A-13 SEIZED, THAT SHRI DINESHBHAI AND O THER PARTNERS HAD WITHDRAWN THE AMOUNT, WHICH WOULD ALSO GO ON TO PROVE TO FACT THAT THEY WERE CARRYING ON THE SAID B USINESS . IT(SS)A NO.773/AHD/2010 3 C) THE PERMANENT ACCOUNT OF DINESHCHANDRA & O THERS (AOP) IS AAAAD3770B. FURTHER ON THE BASIS OF EXPLANATION, TH E SAID LOOSE PAPERS AS MENTIONED BY YOUR GOODSELVES, HAVE BEEN TAKE CARE AND HAS BEEN CONSIDERED IN THE RETURN OF INCOM E FILED. D) WITH REFERENCE TO THE INVESTMENT MADE IN TH E SHARES OF VIMAL OILS AND FOODS LTD THAT THE ASSESSEE STATES THAT TH E SAID INVESTMENT WAS BEING BY AOP, IN NOVEMBER 2001 I.E. ASST YEAR 2002-2003. SINCE IT WAS A JOINT DECISION TAKEN BY A LL THE MEMBERS OF AOP, THE SAME IS TO BE TAKEN INTO CONSID ERATION IN THE HANDS OF AOP AND NOT IN INDIVIDUAL CAPACITY OF THE ASSESSEE E) THE SAID SHARES WERE BEING PURCHASED FROM ADD ITIONAL INCOME OFFERED DISCLOSED BY VIMAL SALES AND SERVICE CENTRE , DISA AND VIMAL PUMP P LTD IN AY 1999-2000 TO 2002-2003 WHICH AMOUNTED TO RS 24,05 LACS WHICH IS AS MENTIONED AT POINT NO F HERE UNDER. FURTHER THE PARTNERS OR MANAGING PERSON S OF VIMAL SALES AND SERVICE CENTRE, DISA AND VIMAL PUMP P LTD ARE EITHER THE SONS, BROTHER OR NEPHEW OF THE PARTNERS OF DINE SHCHANDRA AND OTHERS AND THEY HAD GIVEN THE SUM FOR THE PURPO SE OF INVESTING IN THE SHARES OF VIMAL OIL& FOODS LTD. AC CORDINGLY THE SAID INVESTMENT WAS BEING MADE BY DINESHCHANDRA AND OTHERS (AOP) TO THE TUNE OF RS 19,64,320 (176300 SHARES AT THE RATE OF RS11.14 PER SHARE - AS PER PAGE NO 45 OF A13). SINC E THE OWNERSHIP OF THE SHARES VESTED WITH DINESHCHANDRA & OTHERS, THE SAID SHARES WERE SOLD BY DINESHCHANDRA AND OTHERS ( AOP) IN ASST YEAR 2005-06 AND THE GAIN ARISING ON SUCH SALE HAS BEEN CONSIDERED IN THE RETURN OF INCOME FILED OF AOP FOR ASSESSMENT YEAR 2005-06. ACCORDINGLY THE APPLICATION OF THE INCOME DISCLOSED IN VIMAL SALES AND SERVICE DISA AND VIMAL PUMP P LTD WAS BEI NG UTILSED IN PURCHASING THE SHARES OF VIMAL OIL AND FOODS LTD . THE DETAILS ARE AS UNDER: A.Y. PARTICULARS SOURCE APPLICATION VIMAL PUMP P LTD VIMAL SALES & SERVICE, DISA 1999-00 ADDITIONAL INCOME OFFERED IN ROI FILED 55000 50000 IT(SS)A NO.773/AHD/2010 4 U/S.153A 2000-01 ADDITIONAL INCOME OFFERED IN ROI FILED U/S.153A 440000 475000 2001-02 ADDITIONAL INCOME OFFERED IN ROI FILED U/S.153A 385000 275000 2002-03 ADDITIONAL INCOME OFFERED IN ROI FILED U/S.153A 385000 340000 TOTAL 1265000 1140000 2002-03 INVESTMENT IN SHARES OF VIMAL OIL & FOODS LTD. 1964320 G) THE SAME HAS ALREADY BEEN SHOWN AS APPLICA TION OF INCOME IN THE BOOKS OF ACCOUNTS OF AOP AND ACCORDIN GLY THE SAME IS NOT REQUIRED TO BE TAXED IN THE HANDS OF TH E ASSESSEE. H) ACCORDINGLY THE ENTIRE TRANSACTION OF INVEST MENT AND SALE OF SHARES OF VIMAL OIL & FOODS LTD HAS BEEN DISCLOS ED IN THE ROI FILED BY DINESHCHANDRA AND OTHERS (AOP) AND DOES NO T BELONG TO ASSESSEE IN HIS INDIVIDUAL CAPACITY. I) FURTHER THE ASSESSEE WOULD LIKE TO STATE T HAT AT THE TIME OF SEARCH OPERATION BEING CARRIED OUT ON 20.8.2004, TH E ASSESSEE WAS NOT PRESENT AND ACCORDINGLY THIS IS THE FIRST T IME THE ASSESSEE IS BEING REQUIRED TO EXPLAIN SUCH NOTINGS AND ACCOR DINGLY THE SAME IS NOT AN AFTERTHOUGHT VIEW TAKEN BY THE ASSES SEE. J) WITHOUT PREJUDICE TO ABOVE, IF YOUR GOODSE LVES IS OF THE VIEW THAT THE SAID INVESTMENT WAS MADE BY TH E ASSESSEE, THEN THE ASSESSEE WOULD LIKE TO STATE THAT THE SAID INVESTMENT WAS MADE OUT ADDITIONAL INCOME DISCLOSED AND OFFERED TO TAX BY VARIOUS VIMAL GROUP OF COMPANIES PARTICULARLY VIMAL SALES AND SERVICE CENTRE AND VIMAL PUMP P LTD IN THE SAME MAN NER AS DISCUSSED HEREIN ABOVE. IT(SS)A NO.773/AHD/2010 5 WITHOUT PREJUDICE TO WHAT HAS BEEN STATED ABOVE, TH E ASSESSEE IS PART OF VIMAL OF GROUP OF COMPANIES. TH E GROUP HAS THE FOLLOWING FIRMS/ORGANIZATIONS/ENTITIES, ' DEALI NG IN VARIETY OF PRODUCTS: I. VIMAL CABLES LIMITED II. VIMAL FLEXSOL LIMITED III. VIMAL PUMPS PRIVATE LIMITED IV. VIMAL DAIRY LIMITED V. VIMAL OIL & FOODS LIMITED VI. VIMAL MARKETING VII. VIMAL COMPUTERS PRIVATE LIMITED VIII. VIMAL PUMPS PRIVATE LIMITED IX. VIMAL SALES & SERVICE CENTRE SINCE THE GROUP CONSISTS OF THE ABOVE FIRMS/ COMPAN IES, HAD HUGE CASH BALANCE AS ON VARIOUS DATES BELONGING TO THE S AID FIRMS./ COMPANIES WHICH WAS BEING UTILSED IN MAKING THE PAY MENT OF SHARES OF VIMAL OIL AND FOODS LTD. UNDER SUCH CIRCU MSTANCE NO ADVERSE ACTION OR VIEW IS TO BE TAKEN IN THE CASE O F THE ASSESSEE, SINCE THE SOURCE REGARDING THE SAME WAS CASH AVAILA BLE WITH VARIOUS VIMAL GROUP OF COMPANIES. K) IN CONTINUATION OF THE ABOVE ARGUMENT, THE ASSESSEE STATES THAT THE INVESTMENT BELONG TO DINESHCHANDRA AND OTH ERS AOP, THE DIVIDEND INCOME SO RECEIVED AMOUNTING TO RS 2,3 1,560 AND RS 3,48,000 PERTAINING TO AY 2003-2004 AND 2004-200 5 HAS BEEN CREDITED IN THE BOOKS OF ACCOUNTS OF AOP AND D UE TAX THEREON HAS BEEN PAID .ACCORDINGLY DIVIDEND INCOME SO RECEIVED IS NOT MY INCOME BUT IT IS THE INCOME OF THE ASSOCI ATION OF PERSONS NAMED AS DINESHCHANDRA AND OTHERS. L) FURTHER ON THE BASIS OF EXPLANATION GIVEN T HE ASSESSEE WOULD ALSO LIKE TO STATE THAT AFTER CONSIDERING ALL THESE PAPERS INCLUDING THE LOOSE PAPERS MENTIONED BY YOURSELF, DINESHCHANDRA AND OTHERS (AOP) HAS PAID TAX TO THE TUNE OF RS. 12,91,182 TO THE CREDIT OF GOVERNMENT. THE COPIES O F RETURN OF INCOME FILED WITH THE DEPARTMENT IS ENCLOSED VIDE A NNEXURE 2 M) MOREOVER DINESHCHANDRA & OTHERS HAS ALSO PRO VIDED CONFIRMATION, CONFIRMING THE ABOVE STATED FACTS TO YOUR GOODSELVES, THE SAME OF WHICH IS ENCLOSED VIDE ANNE XURE 3 IT(SS)A NO.773/AHD/2010 6 N) ACCORDINGLY THE SAID LOOSE PAPERS MENTIONED BY YOUR GOOD SELVES ARE NOT BELONGING TO ASSESSEE IN HIS INDIVID UAL CAPACITY BUT IS OF DINESHCHANDRA & OTHERS (AOP). 4. THE LD.AO HAS CONSIDERED THIS REPLY OF THE ASSES SEE, BUT DID NOT FIND ANY MERIT. THE LD.AO WAS OF THE VIEW THAT BUSINESS MAN AND BUSINESS ENTITY ARE TWO DIFFERENT JURISTIC PERSONS. THEREFORE, IT COULD NOT BE SAID THAT SAID INVESTMENT WAS MADE OUT OF ADDITIONAL INCOME OFFERE D/DISCLOSED BY VIMAL SALES & SERVICE CENTRE AND VIMAL PUMPS P. LTD. THU S, THE AO DID NOT ACCEPT THE SOURCE OF INVESTMENT FROM ADDITIONAL INC OME OFFERED BY THESE TWO CONCERNS. HE ALSO OBSERVED THAT MEMBERS OF THE AO P WERE NEITHER PARTNER NOR DIRECTORS IN THESE TWO CONCERNS. THEREFORE, AD DITIONAL INCOME DISCLOSED IN THESE CONCERNS CANNOT BE TREATED AS SOURCE OF INVES TMENT IN THESE SHARES. HE FURTHER OBSERVED THAT THIS PLEA WAS TAKEN BY THE AS SESSEE AFTER SEARCH CARRIED OUT BY THE DEPARTMENT. ACCORDINGLY, THE LD.AO MADE ADDITION OF RS.19,63,320/- ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE IN SHARES OF VIMAL OIL & FOODS LTD. APPEAL TO THE CIT(A) DID N OT BRING ANY RELIEF TO THE ASSESSEE. 5. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE HAS R EITERATED HIS CONTENTION AS WERE RAISED BEFORE THE LD.CIT(A). IN ORDER TO B UTTRESS THE CLAIM OF THE ASSESSEE HE DREW MY ATTENTION TOWARDS PAGE NO.21 OF THE PAPER BOOK WHEREIN COPY OF THE RETURN FILED BY SHRI DINESHCHANDRA L. P ATEL & OTHERS (AOP) HAS BEEN PLACED ON RECORD. IN THIS RETURN, TOTAL INCOM E OF RS.2,31,160/- HAS BEEN OFFERED FOR TAXATION. THE BREAK-UP OF THIS INCOME HAS BEEN PLACED AT PAGE NO.22. SIMILARLY, RETURNS FOR OTHER YEARS HAVE ALS O BEEN PLACED ON RECORD. ON THE STRENGTH OF THESE DOCUMENTS, IT WAS CONTENDED T HAT PAGE NO.45 SHOWING INVESTMENT IN SHARES DOES NOT BELONG TO THE ASSESSE E, THOUGH IT WAS FOUND FROM THE PREMISES OF THE ASSESSEE. THE AO HAS ERRE D IN TREATING THIS PAGE AS BELONGING TO THE ASSESSEE. HE FURTHER SUBMITTED TH AT ASSESSEE HAS EXPLAINED IT(SS)A NO.773/AHD/2010 7 HIS POSITION WITH REGARD TO THIS EVIDNECE BEFORE TH E AO AS WELL AS LD.FIRST APPELLATE AUTHORITY. 6. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ERS OF THE REVENUE AUTHORITIES. HE CONTENDED THAT PAGE WAS FOUND FROM THE PREMISES OF THE ASSESSEE, AND THEREFORE, THERE IS A PRESUMPTION THA T IT BELONGS TO THE ASSESSEE. IT IS THE ASSESSEE WHO HAS TO DEMONSTRATE THAT THIS PAGE DOES NOT BELONGING TO THE ASSESSEE. 7. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. AS FAR AS EXISTENCE OF AOP IS CONCERNED THAT WAS NOT DISPUTED BY THE REVENUE. AOP HAS FILED ITS RETURN ALSO THOUGH SUBSEQUENT TO THE SEARCH. IT HAS DISCLOSED INVESTMENT IN SHARES OF VIMAL OILS & FOODS LTD. THIS EXPLANATION OF THE ASSESSEE WAS REJECTED BY THE REV ENUE ON THE GROUND THAT RETURN WAS FILED AFTER SEARCH BY THE AOP IN ORDER T O EXPLAIN THIS INVESTMENT. TO MY MIND, IT MAY BE A CORROBORATIVE CIRCUMSTANCE TO RAISE SUSPICION AGAINST THE EXPLANATION TO THE ASSESSEE. BUT IT IS PERTINE NT TO MENTION THAT THE LD.AO SHOULD BEAR IN MIND THAT FIRST 44 PAGES FOUND FROM THE PREMISES OF THE ASSESSEE WERE RELATED TO AOPS BUSINESS. THE AOP W AS ENGAGED IN THE BUSINESS OF BOOSTERS. WHEN THE ASSESSEE HAD TAKEN THIS STAND, THEN ATLEAST FROM THE ACCOUNTS OF VIMAL OIL & FOODS LTD. IT SHOU LD BE VERIFIED WHO HAS MADE INVESTMENT AND IN WHICH YEAR THESE INVESTMENTS WERE MADE. THE ASSESSEE HAS PRODUCED COPY OF DEMAT ACCOUNT DISCLOS ING THE NAME OF MEMBERS OF AOP AND ALSO PRODUCED DETAILS OF SHARES. THE SHARE CERTIFICATE BEARING FOLIO NO. 0007385 ISSUED BY VIMAL OIL & FO ODS LTD. IS IN THE NAMES OF PATEL CHANDUBHAI, PATEL JAYANTIBHAI AND PATEL DI NESHCHANDRA. PRIMA FACIE THE ASSESSEE HAS DEMONSTRATED THAT SHARES WERE PURC HASED BY AOP AND NOT PROMOTERS. IN SUCH SITUATION, PAGE DISCLOSING INVE STMENT OUGHT TO BE CONSTRUED AS BELONGING TO THE AOP AND ITS AVAILABIL ITY WITH ONE OF THE AOP IT(SS)A NO.773/AHD/2010 8 MEMBERS IS NOT UNUSUAL FACTORS. THE DEPARTMENT OUG HT TO HAVE INVESTIGATED THIS ISSUE IN THE HANDS OF THE AOP, STAND OF THE AS SESSEE FROM THE VERY BEGINNING IS TO THIS EFFECT. THEREFORE, IN MY OPI NION, THIS ADDITION IS NOT SUSTAINABLE IN THE HANDS OF THE ASSESSEE AND THE IS SUE OUGHT TO HAVE INQUIRED IN THE HANDS OF THE AOP WHICH IS AN INDEPENDENT TAXABL E ENTITY. I ALLOW APPEAL OF THE ASSESSEE AND DELETE THE IMPUGNED ADDITION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 20 TH MARCH, AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 20/03/2017