LATE VIKAS A SHAH (BY HIS WIFE L/H CHHAYA VIKAS SHAH),AHMEDABAD V. THE ACIT, CENTRAL CIRCLE-2(2), AHMEDABAD

ITSSA 13/AHD/2021

AI Insights

The case involves appeals by the late Vikas A. Shah's wife against the orders of the CIT(A) for the assessment years 2007-08 and 2008-09. The appeals were primarily concerned with additions made to the assessee's income based on seized documents during a search operation under Section 132(2) of the Income Tax Act, 1961. The main issues included the addition of alleged rent income and unexplained investments in a company. The tribunal examined the legality of these additions and the adequacy of the CIT(A)'s justifications for them.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37181 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. P. SINGH
• Assessee Lawyers: SURESH GANDHI
• Keywords: Unexplained investment; Income from undisclosed sources; Documents seized; Search and seizure; Earning of tax free income; Loose papers
• Section: 142(1); 153A; 139

Judgement Text

"IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 1 of 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah), 210, Anal Flats, Near Vijay Cross Roads, Navrangpura, Ahmedabad – 380 009. [PAN – APWPS 4465 G] Vs. The Assistant Commissioner of Income Tax, Central Circle – 2(2), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Suresh Gandhi, CA Revenue by A.P. Singh, CIT-DR Date of Hearing 15.01.2025 Date of Pronouncement 25.02.2025 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER: These two appeals are filed by the Assessee against two separate orders, both dated 11.12.2020, passed by the CIT(A)-12, Ahmedabad for the Assessment Years 2007-08 & 2008-09. 2. The assessee has raised the following grounds of appeal :- IT(SS)A No.12/Ahd/2021 for Assessment Year 2007-08 “1. The Ld. CIT(A) has erred in law and on facts while confirming the Net addition of Rs.1,27,089/- on account of rent income alleged as received by the assessee on the basis of seized leave and license agreements without proper appreciation and consideration of the facts of the case. Considering the actual rent received by the assessee which has been offered in the return of income, no addition on account of alleged rent income is required to be upheld. IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 2 of 7 2. The Ld. CIT(A) has erred in law and on facts while confirming the addition of Rs.4,00,000/- on account of unexplained investment in the company - Red Carpet Resorts Pvt. Ltd. on the basis of seized material without proper appreciation and consideration of the facts of the case as well as without allowing the telescoping of the said amount against the opening cash on hand balance of Rs.3,15,65,904/- as on 01/04/2005 (closing balance on 31/03/2005) available with the assessee as per the cash flow statement filed during the course of appellate proceedings for A.Y. 2004-05 & 2005-06. 3. The Ld. CIT(A) has erred in law and on facts while confirming the addition of Rs.1,13,500/- on the basis of seized page no.6 of Annexure A11 as unexplained/unaccounted investment without proper appreciation and consideration of the facts of the case as well as without allowing the telescoping of the said amount against the opening cash on hand balance of Rs.3,15,65,904/- as on 01.04.2005 (closing balance on 31.03.2005) available with the assessee as per the cash flow statement filed during the course of appellate proceedings for A.Y. 2004-05 & 2005-06.” IT(SS)A No.13/Ahd/2021 for Assessment Year 2008-09 “1. The Ld. CIT(A) has erred in law and on facts while confirming the Net addition of Rs.5,42,826/- on account of rent income alleged as received by the assessee on the basis of seized leave and license agreements without proper appreciation and consideration of the facts of the case. Considering the actual rent received by the assessee which has been offered in the return of income, no addition on account of alleged rent income is required to be upheld. 2. The Ld. CIT(A) has erred in law and on facts while confirming the addition of Rs.48,01,694/- on account of cash deposited in the bank accounts of the assessee during F.Y. 2007-08 considering the cash report furnished during the course of appellate hearing but without considering the opening cash on hand balance of Rs.3,15,65,904/- as on 01/04/2005 (closing balance on 31/03/2005) available with the assessee as per the cash flow statement filed during the course of appellate proceedings for A.Y. 2004-05 & 2005-06, available for subsequent years including the year under appeal. . 3. The Ld. CIT(A) has erred in law and on facts while confirming the addition of Rs.38,11,362/- on account of other credit entries (other than cash deposit) in the bank accounts of the assessee during F.Y. 2007- 08 without proper appreciation and consideration of the facts of the case.” IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 3 of 7 3. Firstly, we are taking up Assessment Year (A.Y.) 2007-08, being IT(SS)A No.12/Ahd/2021. Search operation under Section 132(2) of the Income Tax Act, 1961 was conducted in the case of Vikas A. Shah on 03.01.2013 at his residence. During the search, various documents, books of accounts & other valuable articles/other things were found and seized. Books of account/documents seized were inventorised as per Annexure-A, Sr. No.1d to 23 dated 03/04.01.2013 and Annexure-AA, Sr. No.1 to 2 dated 27.02.2013. In view of the provisions of Section 153A(a) of the Act, the assessment proceedings were initiated by issuing notice under Section 153A(a) of the Act on 24.12.2013. in response to the notice under Section 153A(a) of the Act, the assessee did not file any return of income and has not given any explanation/ submission. Due to non-compliance, the notice under Section 142(1) of the Act along with questionnaire was issued on 29.12.2014 which was responded but no details were filed and has only requested to adjudicate the hearing. In response to the show cause notice, the assessee on 18.02.2015 filed written submission on single issue and on the same day filed his return of income in response to notice under Section 153A of the Act at a total income of Rs.2,35,970/-. The Assessing Officer observed that during the search and seizure proceedings, as per annexure A-9 certain copies of leave and licence agreements were seized from the residence of the assessee which was summarise in page nos.3 to 5 of the Assessment Order. The assessee submitted that the copies of property tax bill for different number of godowns which was in assessee’s name or electricity bill for such godown, copy of receipt of land revenue paid by the assessee was submitted before the Assessing Officer. 3.1 The Assessing Officer made addition of Rs.21,00,000/- in respect of the Banakat seized as per Annexure A-18, page nos.107 to 121 for the source of which the assessee could not explain and added the same as unexplained investment arising out of unaccounted income. The Assessing Officer further made addition of Rs.4,00,000/- in respect of investment in Red Carpet Resorts Pvt. Ltd., thereby stating that for the A.Y. 2007-08 the said document/Annexure A-20, page no.85 demonstrates that the assessee had invested Rs.88,00,000/- in Red Carpet Resorts Pvt. Ltd. and payment was made in November 2006 in cash and December 2006 in cash. The Assessing Officer also made addition of Rs.5,87,600/- which was claimed IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 4 of 7 as exempt income due to the agricultural land holding by the assessee. The Assessing Officer held that the assessee has not filed his return of income under Section 139 of the Act and without any documentary evidence the assessee cannot claim exempt income. The Assessing Officer added Rs.6,240/- as dividend income. The Assessing Officer further made addition of Rs.1,13,500/- towards the seized material/documents for the A.Y. 2007-08. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that as regards ground no.1 addition on account of rent income on the basis of seized leave and licence agreements found during the course of search in the receipt of seized material Annexure 9. The assessee has offered the actual rent receipt in the return of income in respect of response to notice under Section 153A(a) of the Act. The Ld. AR further submitted that this addition could not be made in an assessment completed under Section 153A without any reference to the seized material. The Ld. AR submitted that the notional and estimated income is beyond the scope of Section 153A of the Act. The Ld. AR submitted that the assessee had given the leave and licence agreement upon which the assessee earned rental income of Rs 19,35,240/-. The assessee has given the details of godowns which was rented by the assessee alongwith receipt of monthly rent amount and security deposit amount of each of the documents (leave and licence agreement) for the relevant assessment year assessee has offered rental income of Rs.34,564/- and since the assessee has given the details of leave and licence agreement date and the effective period of rental premises which categorically reflect in chart which is reproduced at pages nos.3 to 5 of the Assessment Order. Thus, the assessee has explained the details and, therefore, no addition should have been made on this count in this assessment year. 5.1 As regards ground no.2 relating to unexplained investment in Red Carpet Resorts Pvt. Ltd., the Ld. AR submitted that the gist of the report pages which was reproduced categorically mentions the cheque details which are offered for tax in the A.Y. 2009-10 and, therefore, only cash component of Rs.4,00,000/- which was added due to November 2006 and December 2006 has been explained by the IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 5 of 7 assessee as the Banakat at page nos.107 to 121 of seized Annexure A18 clearly mentions the cheque dated 03.05.2006 of ICICI Bank received by the seller and in fact Cheque for Rs.21,00,000/- was prepared but not given to the parties and thus the said cheque was not cleared in Bank account of the assessee with ICICI Bank as there was no deal executed/performed as per Banakat.. Since no payment of Rs 21,00,000/- has been made and no such cheque has been cleared in the bank account of the assessee, the question of unexplained investment by the assessee does not arise. 5.2 As regards ground no.3, the Ld. AR submitted that the addition in respect of seized materials & loose papers recorded in Annexure-11, page no.16 is not pressed. 6. The Ld. DR submitted that the seized material has been found to be related to the leave and licence agreement for which the assessee has not given the details of cash component for the relevant assessment year and, therefore, the Assessing Officer as well as the CIT(A) has rightly made the addition. As regards unexplained investment in Red Carpet Resorts Pvt. Ltd., the same also has not been explained by the assessee. The Ld. DR relied upon the order of the Assessing Officer and the order of the CIT(A) 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically mentioned in paragraph nos.4 to 4.3 that the actual rent income was shown by the assessee and the rent which was received was also offered to tax and after perusal of the Assessment Order for assessment year 2009-10 it appears to be justifiable. The assessee has given the working of the rental income before the CIT(A) calculating it to be Rs.5,16,120/- and it is categorically mentioned in the rent for the period of 11 months, 12 months, 5 months, 5 months, 11 months and 4 months and due to this the assessee has given all the details and there was no need to make addition and this was verified by the CIT(A) correctly and has confirmed it to the extent of Rs.1,27,089/- rightly. Thus, ground no.1 is dismissed. 7.1 As regards ground no.2 relating to unexplained investment in Company Red Carpet Resorts Pvt. Ltd., it can be seen from the statement that there is an entry for IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 6 of 7 cheque return charges of Rs.281/- debited on 03.05.2006 in respect of Cheque No149502 of the amount of Rs 21,00,000/-. Thus, since the negotiation has been failed and there was no transaction, the same was deleted but as regards Red Carpet Resorts Pvt. Ltd., at page nos.85 and 90 of the seized Annexure A20 and page nos.393 to 395 of seized Annexure A10, the CIT(A) has categorically mentioned that the cash flow statement for the A.Y. 2006-07 and 2007-08 is not supporting the assessee’s case with any documents and, therefore, the same is rightly confirmed by the CIT(A) with the detailed findings. Hence, there is no need to interfere with the findings of the CIT(A). Thus, ground no.2 is dismissed. 7.2 As regards to ground no.3, the same was not pressed and hence dismissed. Thus, IT(SS)A No.12/Ahd/2021 for A.Y. 2007-08 is dismissed. 8. Now coming to Assessment Year 2008-09, being IT(SS)A No.13/Ahd/2021, ground no.1 is identical, hence the same is confirmed. Thus, ground no.1 is dismissed. 8.1 As regards to ground no.2, the CIT(A) has categorically mentioned the cash report and the telescoping of rental income earned as on 31.03.2005 was given to CIT(A) during the A.Y. 2004-05 has been demonstrated by the CIT(A). There is no need to interfere with the finding of the CIT(A). Thus, ground no.2 is dismissed. 8.2 As regards ground no.3 related to other credit entries in bank account, the said addition is not based on seized material but on verification of bank account, as mentioned by the Ld. AR, the seized material mentions about the bank and the assessee’s account and, therefore, the said submission is rejected due to telescoping of rental income offered in return of income filed by the assessee not allowed by the CIT(A). The assessee has made investment and the dividend income which should have been excluded. Hence, ground no.3 is partly allowed. Thus, IT(SS)A No.13/Ahd/2021 for A.Y. 2008-09 is partly allowed. IT(SS)A Nos.12 & 13/Ahd/2021 Assessment Years: 2007-08 & 2008-09 Late Vikas A. Shah (By his Wife & LH Chhaya Vikas Shah) vs. ACIT Page 7 of 7 9. In the result, IT(SS)A No.12/Ahd/2021 is dismissed and IT(SS)A No.13/Ahd/2021 is partly allowed. Order pronounced in the open Court on this 25th February, 2025. Sd/- Sd/- (DR. BRR KUMAR) (SUCHITRA KAMBLE) Vice President Judicial Member Ahmedabad, the 25th February, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad "