MR. HEMANT V.PATEL, V. THE ACIT,CIR-2,

ITSSA 95/AHD/2002

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9358 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-04-2010
• Assessment Year: misc
• Appeal Filed On: 29-04-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SRDR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER IT(SS)A NO.95/AHD/2002 BLOCK PERIOD 1/4/1985 TO 15/12/1995 DATE OF HEARING:1.4.10 DRAFTED:7.4.10 MR. HEMANT V PATEL, TIMBA KHADKI, GORWA, BARODA PAN NO.AIFPP1479H V/S. ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-2, AYAKAR BHAVAN, BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.SOPARKAR, AR RESPONDENT BY:- SMT. NEETA SHAH, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, BARODA DATED 28-03-2002. U/S.158BD R.W.S. 158BG & 254 OF THE INCOME-TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) FOR BLOCK PERIOD 01-04-1985 TO 15-12-1995. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE BLOCK ASSESSMENT ORDER OF THE ASSESSING OFFICER IN MAKING THE ADDITI ON OF UNDISCLOSED INCOME OF AMOUNT DEPOSITED/PAID TO SHARE BROKER M/S. P.N. PAT EL & CO. AMOUNTING TO RS.15,94,150/-. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LD. AO HAS ERRED IN LAW AND IN FACTS MAKING AN ADDITION OF RS.15,94,150/- BEING THE AMOUNT DEPOSITED / PAID TO SHARE BROKER M/S. P.N.PATEL & CO. THE SOURCES OF THESE AMOUNTS IS FUL LY EXAMINED. DESPITE SO, THE SAME IS TREATED AS UNEXPLAINED INVESTMENT AND A N ADDITIONS OF RS.15,94,150/- IS MADE WHICH BEING UNJUSTIFIED IN L AW AND IN FACTS DESERVES TO BE DELETED. IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 2 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ORIGINAL BLOCK ASSESSMENT WAS COMPLETED U/S.158BC R .W.S. 158BD OF THE ACT FOR THE BLOCK PERIOD FROM 01-04-1985 TO 15-12-1995 VIDE ORD ER DATED 29-04-1997. SUBSEQUENTLY, THIS BLOCK ASSESSMENT WAS SET ASIDE DE NOVO BY THE TRIBUNAL IN IT(SS)A NO.117/AHD/1997 DATED 03-08-2000 VIDE WHICH IT DIRECTED TO REFRAME THE ENTIRE BLOCK ASSESSMENT I.E. AFTER EXAMINATION OF S HRI N.S. SATANI AND SHRI PANKAJ N PATEL WITH WHOM THE ASSESSEE HAS ENTERED INTO CERTA IN CONTRACT FOR SALE & PURCHASE OF SHARES AND ALSO FOUR PERSONS VIZ. SRI VINODBHAI GORDHANBHAI PATEL, SHRI KIRITBHAI GORDHANBHAI PATEL, SMT. RANJANBEN RAJEDRABHAI PATEL AND SMT. SHANTABEN GORDHANBHAI PATEL. IN VIEW OF THE DIRECTIONS OF TH E TRIBUNAL, THE ASSESSING OFFICER HAS ALLOWED OPPORTUNITY TO THE ASSESSEE AND THE STA TEMENT OF SHRI N.S.SATANI AND THE ABOVEMENTIONED FOUR PERSONS WERE EXAMINED U/S.1 31 OF THE ACT. DURING THE COURSE OF REFRAMING OF SET ASIDE BLOCK ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAD CARRIED ON BUSINESS IN SHARE TRADING AND DEPOSI TED A SUM OF RS.18,60,300/- WITH M/S. P.N. PATEL & CO. AND OUT OF THIS CASH, A SUM O F RS.2.66 LAKH WERE PROFIT EARNED BY THE ASSESSEE FROM SHARE TRADING BUSINESS. THE AO REQUIRED TO EXPLAIN THE BALANCE SUM OF RS.15,94,150/-. THE ASSESSEE EXPLAI NED THAT HE ALONG WITH THE ABOVEMENTIONED FOUR PERSONS OWNED A PIECE OF LAND J OINTLY WAS SOLD AND THE ENTIRE SALE PROCEEDS WERE DEPOSITED IN BANK ACCOUNT NO.519 3 MAINTAINED WITH DENA BANK, SUBHANPURA BRANCH. IT WAS STATED THAT OUT OF THE W ITHDRAWAL MADE FROM BANK ACCOUNT NO.5193 WITH DENA BANK BY ALL THE FOUR CO-O WNERS THEY HAVE BEEN ADVANCED THIS AMOUNT OF RS.15,94,150/- AS LOAN TO T HE ASSESSEE WITHOUT INTEREST. THIS FACT WAS ADMITTED BY SHRI VINODBHAI GORDHANBHA I PATEL, SHRI KIRITBHAI GORDHANBHAI PATEL AND SMT. RANJANBEN RAJENDRABHAI P ATEL IN THEIR STATEMENT RECORDED U/S.131 OF THE ACT DURING REFRAMING BLOCK PROCEEDINGS CONFIRMING TO HAVE GIVEN LOAN TO THE ASSESSEE OUT OF WITHDRAWAL MADE F ROM THE BANK ACCOUNT NO.5193. EXCEPT SMT. SHANTABEN GORDHANBHAI PATEL WHO WAS BED RIDDEN BUT MADE HER STATEMENT BEFORE THE INSPECTOR AND CONFIRMED TO HAV E GIVEN THE LOAN TO THE ASSESSEE. THE ASSESSING OFFICER FOUND FAULT WITH T HE AFFIDAVITS FILED BY THESE FOUR PERSONS AND THE SUBSEQUENT CONFIRMATION THAT THE AF FIDAVITS FILED DO NOT INDICATE THE DETAILS OF LOAN GIVEN BY EACH PERSON AS WELL AS THE DATE, AND THE LOAN AMOUNTS. ACCORDING TO THE ASSESSING OFFICER, ALL THE FOUR PE RSONS BEFORE THE SALE OF LAND WERE IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 3 OF NO MEANS AND THESE FOUR PERSONS ARE CLOSELY RELA TED TO THE ASSESSEE AND HE STATED THE RELATIONS AS UNDER:- 4. SHRI VINODBHAI GORDHANBHAI PATEL, IS FATHER OF THE ASSESSEE, SHRI KIRITBHAI G PATEL IS HIS UNCLE, SMT.RANJANBEN RAJENDRABHAI PA TEL IS SISTER OF ASSESSEES FATHER AND SMT. SHANTABEN G PATEL IS HIS MOTHER. THE ASSESSING OFFICER FURTHER NARRATED THAT THERE A RE WITHDRAWALS UP TO 13-11-1994 AMOUNTING TO RS.8 LAKH AND THEREAFTER THE FIRST DEP OSIT OF AMOUNT AS ON 05-05-1995 IS AT RS.5,300/- AND OTHER CASH DEPOSITS ARE SUBSEQ UENT TO 05-05-1995 AND ACCORDINGLY HE HELD THAT IT IS NOT CREDIBLE TO HOLD THAT ANY CASH DEPOSITS WITH SHRI P.N. PATEL WAS OUT OF THESE WITHDRAWALS OF RS.8 LAK H AND OTHERS. THE AO NARRATED THE WITHDRAWALS FROM THE BANK AND WITHDRAWAL OF CAS H DEPOSITS DATE-WISE AND ACCORDINGLY HE HOLDS THAT THERE IS NO NEXUS BETWEEN THE WITHDRAWALS MADE FROM THE BANK AND REST OF THE DEPOSITS WITH SHRI P.N. PATEL. THIS AMOUNT WAS ADDED AS UNDISCLOSED INCOME BEING UNEXPLAINED INVESTMENT OF THE ASSESSEE FOR THE BLOCK PERIOD. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US . 4. AFTER GOING THROUGH THE FACTS OF THE CASE, WE FI ND THAT THE ASSESSEE HAS MADE WITHDRAWALS BY TAKING THE ENTRIES, AS DETAILED OUT BY THE ASSESSING OFFICER IN REFRAME BLOCK ASSESSMENT ORDER, FROM BANK ACCOUNT NO.5193 M AINTAINED WITH DENA BANK, SUBHANPURA AS UNDER:- DATE PARTICULARS CHEQUE AMOUNT RS. 25/02/94 TO SELF 41 50000 01/03/94 TO SELF 42 50000 12/03/94 TO SELF 44 50000 12/03/94 TO SELF 43 50000 02/06/94 TO SELF 45 50000 02/06/94 TO SELF 46 50000 11/06/94 TO SELF 47 50000 11/60/94 TO SELF 48 50000 27/10/94 TO SELF 50 75000 IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 4 27/10/94 TO SELF 49 75000 01/11/94 TO SELF 711 50000 02/11/94 TO SELF 712 50000 02/11/94 TO SELF 713 50000 23/11/94 TO SELF 714 50000 30/11/94 TO SELF 715 50000 FURTHER, WE FIND FROM THE ASSESSEES PAPER BOOK, WH ERE THE TOTAL CASH WITHDRAWALS MADE ARE ANNEXED AT PAGE NO.137 AMOUNTING TO RS.16, 63,240/- ON VARIOUS DATES FROM THIS BANK ACCOUNT AS UNDER:- TOTAL CAS H WITHDRAWAL CHO.NO. 1. 25-2-94 SELF 041 50,000/- 2. 1-3-94 042 50,000/- 3. 12-3-94 044 50,000/- 4. 043 50,000/- 5. 2-6-94 045 50,000/- 6. 046 1,50,000/- 7. 11-6-94 047 50,000/- 8. 048 50,000/- 9. 27-10-94 050 75,000/- 10. 049 75,000/- 11. 1-11-94 711 50,000/- 12. 2-11-94 712 50,000/- 13. 713 50,000/- 14. 23-11-94 714 50,000/- 15. 30-11-91 715 50,000/- 16. 4-5-95 253719 2,50,000/- 17. 9-5-95 720 2,50,000/- 18. 1-8-95 83083 63,240/- 19. 81 50,000/- 20. 82 50,000/- 21. 2-3-95 716 50,000/- 22. 9-3-95 718 50,000/- IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 5 23. 10-3-95 717 1,00,000/- 16,63,240/- 5. IN VIEW OF THE ABOVE DETAILS OF WITHDRAWALS, IT IS CLEAR THAT THE TOTAL CASH AVAILABLE WITH THE ASSESSEE WAS TO THE TUNE OF RS.1 6,63,240/- OUT OF THE CASH WITHDRAWAL FROM THE BANK ACCOUNT OF SHRI KIRITBHAI GORDHANBHAI PATEL, WHERE THE SALE PROCEED OF LAND JOINTLY OWNED WAS DEPOSITED AN D WITHDRAWAL MADE TO THAT EXTENT. IT IS AN ADMITTED FACT THAT THE PROPERTY WA S SOLD FOR A SUM OF RS.16,63,240/-. THE MAIN PREMISE OF THE ASSESSING OFFICER FOR MAKIN G ADDITION OF THIS AMOUNT WAS ONLY THAT THERE IS NO NEXUS BETWEEN THE WITHDRAWAL MADE FROM THE BANK ACCOUNT AND DEPOSITED MADE WITH M/S. P.N. PATEL & CO. IT SEEMS THAT THE WITHDRAWALS WERE MADE IN 1994 AND IN THE EARLIER PERIOD OF 1995 I.E. MARC H TO MAY. ALL THE CO-OWNERS OF THE LAND ADMITTED THAT THEY HAVE SOLD THE LAND AND THE SALE PROCEED WAS DEPOSITED IN THE BANK ACCOUNT NO.5193 MAINTAINED BY SHRI KIRITBHAI G ORDHANBHAI PATEL WITH DENA BANK, SUBHANPURA AND ALL THESE CO-OWNERS ADMITTED T HAT THEY HAVE ADVANCED THIS SUM AMOUNTING TO RS.16.50 LAKH TO SHRI HEMANT V PAT EL, THE ASSESSEE. THE REVENUE COULD NOT PROVE THAT THIS AMOUNT WAS UTILIZ ED BY THESE PERSONS ANY WHERE ELSE, EXCEPT GIVING LOAN TO THE ASSESSEE OR FUNDS W ITHDRAWN WAS NOT AVAILABLE WITH THESE PERSONS. IN THE ABSENCE OF THIS FACT THAT THE IMMEDIATE SOURCE OF THIS DEPOSIT IS ESTABLISHED AND THAT ALSO BY SALE OF LAND BY THESE CO-OWNERS, THE PROCEEDS WERE DEPOSITED IN BANK ACCOUNT AND WITHDRAWAL WAS MADE. ONCE IT IS ESTABLISHED THAT THIS AMOUNT DEPOSITED IS THE SAME AMOUNT, NO ADVERSE INF ERENCE CAN BE DRAWN FOR TREATING THE CASH DEPOSIT OF RS.15.94 LAKH BY THE A SSESSEE WITH M/S. P.N. PATEL & CO. AND CANNOT BE TREATED THE SAME AS UNDISCLOSED I NCOME OF THE ASSESSEE BEING INVESTMENT IN SHARES. ACCORDINGLY, WE DELETE THE A DDITION AND TO THAT EXTENT THE ORDER OF THE ASSESSING OFFICER IS REVERSED. THIS I SSUE OF THE ASSESSEES APPEAL IS ALLOWED. 6. NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGA INST THE BLOCK ASSESSMENT ORDER OF ASSESSING OFFICER IN TREATING THE SUM OF R S.3 LAKH AS UNDISCLOSED INCOME OF THE ASSESSEE BEING AMOUNT PAID TO SATANI & CO. FOR THIS, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 6 2. THE LD. AO HAS ERRED IN LAW AND IN FACTS MAKING AN ADDITION OF RS.3,00,000/- BEING THE AMOUNT PAID TO SATANI & CO. THE SOURCE OF SUCH PAYMENT IS FULLY EXPLAINED, DESPITE SO, THE SAME IS TREATED AS AN UNEXPLAINED INVESTMENT AND AN ADDITION OF RS.3,00,000/- IS MADE WHICH BEING UNJUSTIFIED IN LAW AND IN FACTS DESERVES TO BE DELETED. 7. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE CASE RECORDS, WE FIND THAT DURING THE COURSE OF ORIGINAL BLOCK ASSES SMENT PROCEEDINGS, THE ASSESSEE SURRENDERED THIS AMOUNT OF RS.3 LAKH, PAID TO M/S. SATANI & CO. ON 09-10-1995 BY WAY OF DEMAND DRAFT, AS UNDISCLOSED INCOME. EVEN DU RING THE COURSE OF REFRAMING OF SET ASIDE BLOCK ASSESSMENT, THE ASSESSEE HAS NOT CO NTENDED ANYTHING AND THE ASSESSING OFFICER ACCORDINGLY TREATED THIS INCOME A S UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. EVEN NOW THE ASSESS EE COULD NOT ADDUCE ANYTHING IN SUPPORT OF HIS CLAIM. ACCORDINGLY, WE HAVE NO ALTE RNATIVE EXCEPT TO CONFIRM THIS ADDITION. ACCORDINGLY THIS ISSUE OF ASSESSEES APP EAL IS DISMISSED. 8. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF SET O FF OF UNDISCLOSED LOSS OF RS.4,54,452/- INCURRED FROM SHARE TRADING BUSINESS DURING THE BLOCK PERIOD. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.3 :- 3. THE LD. AO. HAS ERRED IN LAW AND IN FACTS IN DI SALLOWING THE APPELLANTS CLAIM OF SET OFF OF UNDISCLOSED LOSS OF RS.4,54,452 /- OF THE BLOCK PERIOD AGAINST UNDISCLOSED INCOME ASSESSED FOR THE BLOCK P ERIOD. THE DENIAL OF SUCH SET OFF IS UNJUSTIFIED IN LAW AND IN FACTS AND ACCORDINGLY, DESERVES TO BE ALLOWED AS CLAIMED BY THE APPELLANT. 9. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THIS LOSS IS INCURRED ON ACCOUNT OF SHARE TRADING BUSINESS AND THIS IS EMANA TING OUT OF SEIZED MATERIALS OF THE ASSESSEE. WHEN THIS WAS CONFRONTED TO THE SR-D R THE PAPER ENCLOSED IN THE ASSESSEES PAPER BOOK FROM PAGES 15 TO 76, SHE CLEA RLY STATED THAT THESE PAPERS WERE NEVER EXAMINED BY THE ASSESSING OFFICER AND IT SEEMS THAT THERE ARE NOT SEIZED PAPERS. SHE STATED THAT LET THIS BE REFERRE D BACK TO THE FILE OF ASSESSING OFFICER FOR EXAMINATION, WHETHER THESE PAPERS ARE P ART OF SEIZED MATERIALS OR NOT. LD. COUNSEL FOR THE ASSESSEE AGREED THAT LET THESE PAPERS BE VERIFIED, WHETHER THESE SEIZED PAPERS ARE PART OF SEIZED PAPERS OR NOT. IN VIEW OF THE ARGUMENTS OF BOTH THE IT(SS)A NO.95/AHD/2002 B.P. 1/4/85 TO 15/12/95 MR. HEMANT V PATEL V. ACIT CIR-2, BRD PAGE 7 SIDES, WE ARE OF THE VIEW THAT THE ASSESSING OFFICE R HAS TO COMPUTE THE LOSS IN TERMS OF THESE PAPERS AND ACCORDINGLY DECIDE THE ISSUE. I N PRINCIPLE, THE ASSESSEE IS ENTITLED FOR BUSINESS LOSS IN CASE THERE IS LOSS IN CURRED FROM SEIZED PAPERS AND IN CASE THESE PAPERS ARE NOT SEIZED PAPERS, THE ASSESS EE IS NOT ENTITLED TO CLAIM OF LOSS. IN VIEW OF THIS DIRECTION, THIS ISSUE OF THE ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF AO FOR FRESH VERIFICATION AND ADJUDICATION. THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 30/04/2010 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 30/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD