MOHAN THANKURDAS GURNANI,NAVI MUMBAI V. DY CIT -CC-5(2), MUMBAI

MA 184/MUM/2024

AI Insights

The case involves multiple miscellaneous applications filed by Shri Mohan Gurnani, challenging the additions made to his income for the assessment years 2011-12 to 2015-16. The additions were based on the notional rent from house properties and alleged bogus long-term capital gains from the sale of shares. The Tribunal had previously found incriminating material during a search operation, which led to these additions. The assessee contended that no such material was found during the search and that the additions were unjustified. However, the Tribunal dismissed these contentions, referencing similar findings in the case of the assessee's daughter, Ms. Priya Gurnani, and citing judicial precedents that supported the additions made based on the incriminating material found during the search.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 36945 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-10-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-10-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 30-07-2024
• Other Referred Cases: Abhisar Buildwell Pvt Ltd vs. Principal Commissioner of Income Tax, CIT vs. Kabul Chawla, Ms Priya Gurnani vs. Income Tax Department
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Documents seized; Accommodation entries; Bogus
• Section: 254(2); 153; 132; 153A; 139(1); 131; 22; 13; 10; 20

Judgement Text

"Page 1 of 18 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI PAVAN KUMAR GADALE, JM MA No 180/Mum/2024 In ITA No. 710/Mum/2021 (Assessment Year 2011-12) MA NO 181/mum/.2024 In ITA No. 711/Mum/2021 (Assessment Year 2012-13) MA No 182/MUM/2024 in ITA No. 712/Mum/2021 (Assessment Year 2013-14) MA No 183/MUM/2024 in ITA No. 709/Mum/2021 (Assessment Year 2014-15) MA No 184/MUM/2024 in ITA No. 713/Mum/2021 (Assessment Year 2015-16) Shri Mohan Gurnani 2101, Moraj Casa Grande, Plot No. 57, Sector 17, Koperkhairne, Maharashtra-400709 (Applicant) Vs. The Deputy Commissioner of Income tax CC-5(2) 1908, 19th Floor, Air India Building, Nariman Point, Mumbai-400021 (Respondent) PAN No. AACPG8827D Date of hearing: 18/10/2024 Date of pronouncement: 30/10/2024 O R D E R 1. These are five miscellaneous applications filed by the assessee in the order of the coordinate bench passed in case of the Page 2 of 18 assessee for assessment year 2010 – 11 to 2016 – 17 on 17/11/2023. The miscellaneous application is filed in case of five assessment years whereas the appeal was decided for seven assessment years. 2. For assessment year 2012 – 13 the miscellaneous application is identically worded and therefore request was to delete the addition on account of annual value of house property. 3. For assessment year 2013 – 14 the miscellaneous application is identically worded and requested for deletion of addition on account of annual value of house property. 4. For assessment year 2014 – 15 the miscellaneous application is identically worded but here over and above deletion of the addition on account of Annual value of House property, also request for deletion of addition of Rs. 109,174,422/– earned by the assessee as bogus long-term capital gain under section 10 (38) on sale of shares of sunrise Asia Ltd which also became taxable because of the finding of the coordinate bench that the incriminating material was found during search. 5. For assessment year 2015 – 16 the miscellaneous application is identically worded however the addition is requested to be deleted of bogus long-term capital gain earned by the assessee under section 10 (38) of Rs 314,085,020/– on sale of shares of sunrise Asia Ltd in connivance with Mr Vipul Vidhur Bhatt , the chartered accountant of the assessee, and the office staff of the assessee. 6. Therefore, the only claim of the assessee in these miscellaneous applications are that there is no Page 3 of 18 incriminating material found during search, therefore addition on account of notional rent of income from house property on the house property could not have been added and for subsequent two assessment years bogus long-term capital gain of Rs. 41 crores should also not have been added. 7. The lead miscellaneous application is ITA number 180/M/2024 in ITA number 710/MUL/2021 for assessment year 2011 – 12 the assessee has raised following contentions: - i. In ground of appeal number 1, the applicant challenged the action of the assessing officer in applying the provisions of section 153A of the act inter alia stating that the assessing officer has exceeded his jurisdiction to make an addition without there being any incriminating material found from the premises of the applicant during search. ii. ITAT hasin order at paragraph 65 on page number 10 dismissed the aforesaid ground of appeal stating that ‘ground number 1 is with respect to the application of provisions of section 153A of the income tax act which is identical to ground number 1 of the appeal for assessment year 2015 – 16 which is dismissed by us. For similar reasons we dismiss ground number 1 of the appeal. ‘ iii. Coming to the disposal of ground of appeal number 1 for assessment year 2015 – 16, tribunal has discussed Page 4 of 18 various materials found from various assessment years and has held that for assessment year 2011 – 12, incriminating material in the form of balance sheet was found from which it was gathered that the applicant was the owner of various properties, income from which was not disclosed under the head income from house property. Accordingly, tribunal referred to the decision of the Supreme Court in case of Abhisar Build well private limited (149 taxmann.com 399), and also referred to the decision of the Mumbai tribunal in case of daughter of the applicant Mrs Priya Mohan Gurnani (ITA number 715/M/2021 and others) and dismissed the ground of appeal raised by the applicant. The relevant findings and observation of the tribunal were then extracted and reproduced inpara number 26, 29, 32, 33. iv. Tribunal held that balance sheet to be an incriminating material found during search and reached the aforesaid conclusion. v. The applicant submits that this is a mistake apparent from record which needs to be rectified. The applicant tried to demonstrate that no such balance sheet was found during search. vi. The applicant submits that there is absolutely no averment or observation either in the order of the assessing officer, or in the order of the CIT (A), that the alleged incriminating material namely, the balance sheet, has been found during search. Page 5 of 18 vii. The fact is that the balance sheet has formed the basis of making the addition by the assessing officer was never found during the search operations conducted by the investigation wing of the income tax Department but is furnished by the applicant for the first time to the assessing officer by letter dated 20 January 2017, pursuant to his notice under section 142 (1) dated 12/1/2017. The assessing officer also in the entire assessment order, has not stated that the balance sheet is unearthed during the search operations. In fact, it is stated in paragraph number 5.1 of the assessment order that, ‘It was also noticed, during assessment proceedings that there appeared various immovable properties in the balance sheet. However, notional income was not shown from the same.’ However, the tribunal, it seems inadvertently and as mentioned above, has concluded that incriminating material in the form of balance sheet was found during search and hence, a mistake apparent from the record which needs to be rectified. viii. Investigation wing by summons dated 17thMay 2016 in point number 2 of annexure A, issued to the applicant, required him to furnish the details of immovable properties held in the name of various family members mentioned therein. The applicant, pursuant to the said Page 6 of 18 summons, furnished the letter dated May 24, 2016, to the Deputy director of income tax (investigation), unit 7 (4), Mumbai, giving the details of immovable properties inter alia held by the applicant. ix. Applicant also referredto sequence of events that the balance sheet was filed during the post search proceedings/assessment proceedings, and not found during the search operations. a) refer statement on North of the applicant recorded under section 132 (4) during search. There is no question relating to the alleged unearthed balance sheet. b) Refer summons dated 17 May 2016 issued under section 131 of the act to the applicant during post search proceedings requiring him to furnish the list of immovable properties held in the name of the applicant. c) Refer response of the applicant buys letter dated May 24, 2016, to the aforesaid summons – point number 2 and annexure IVA giving details of immovable properties. d) Refer notice of the assessing officer dated 12/1/2017 issued under section 142 (1) e) Refer response dated January 20, 2017, by the applicant to the aforesaid notice – furnishing ‘copies of balance sheet and capital account along with its schedule for assessment year 2011 – 12 is enclosed’. It is here that the balance sheet is, for the first time furnished by the applicant to the Page 7 of 18 department (two the assessing officer) refer page number 13 of the paper book. f) Refer assessment order wherein there is not even a whisper of any incriminating documents seized during the search proceedings for bringing to tax notional income of immovable properties. In fact, in para 5.1, second paragraph the assessing officer states “it was also noticed, during assessment proceedings that there appeared various immovable properties in the balance sheet. However, notional income was not shown from the same.’ Thus, the assessing officer states that it was during the assessment proceedings he noticed that the immovable properties appearing in the balance sheet, thus, the balance sheet is not seized during search operations on the applicant. x. Thus , it was submitted that balance sheet was not unearthed during the search operations, is observed by the honourable tribunal, but was filed by the applicant, after the conclusion of search operations, that is, during the assessment proceedings, by his letter dated January 20, 2017, in response to notice dated 12/1/2017 issued under section 142 (1) of the act. xi. Further in Para 28 on page number 20, tribunal has relied on its own decision in the case of Ms Priya Gurnani (ITA number 715/M/2021 and others). The applicants would like to bring to the notice of the tribunal that a separate miscellaneous application is been filed by Ms Page 8 of 18 Priya Gurnani to show that the said order contain certain mistakes apparent from record. xii. In ground of appeal number 2, the applicant has challenged the action of the assessing officer in making an addition of notional rent. The assessee submits that once the submission made by the applicant accepted that no incriminating material pertaining to the relevant assessment year was found during the course of search, then following the decision of the honourable Supreme Court in case of Abhisar Build well private limited (149 taxmann.com 399), the addition made by the assessing officer would have to be deleted. 8. Therefore, the assessee was requesting to amend the order dated 17/11/2023. 9. It was also stated that identical facts in case of the daughter of the assessee three a moment Gurnani exists and therefore in those appeal is also miscellaneous applications are preferred. 10. Coordinate bench has categorically held that there is incriminating material found duringsearch based on which the addition has been made on account of notional rent and the bogus long-term capital gain of Rs. 41 crores earned by the assessee in connivance with Mr Vipul with your but, chartered accountant of the assessee and staff of the assessee. 11. The learned authorised representative reiterated the same facts as stated in the miscellaneous application. 12. The learned departmental representative vehemently objected to the miscellaneous application and it was submitted that it is an attempt by the assessee to get out of the main addition of Rs 41 crores which has been restored back to the file of the Page 9 of 18 learned assessing officer by the coordinate bench for assessment year 2013 – 14 onwards wherein there is a connivance of the assessee, Mr Vipul Bhatt, chartered accountant of the assessee and staff and complete trial is noticed of giving funds in cash for obtaining bogus long-term capital gain in the whole family. The learned departmental representative imminently stated that identical issue has already been decided by the coordinate bench in case of the daughter of the applicant wherein also the identical findings were given. This decision is also rendered partly relying upon that decision.it was further submitted that this miscellaneous application is asking the tribunal to modify its decision which is given on finding of the facts. In fact, it is not the addition based on the balance sheet but based on the information available in the balance sheet of the several properties which were not charged to tax under the head income from house property. The complete information is available to the assessing officer only on the basis of the search and posts search enquiries. 13. In the end the learned departmental representative vehemently stated that the miscellaneous application raises the contents for the revision of the order of the coordinate bench which is not permitted and only power given to the tribunal is to rectify the mistake apparent from the record. Review of the order is not permitted. Several judicial precedents were also cited before us stating that review of the order of the coordinate bench in the garb of miscellaneous application is not provided and permitted by the act. It was therefore submitted that this miscellaneous application should be dismissed. Page 10 of 18 14. We categorically noted here that the chartered accountant who argued the matter before us is not the arguing counsel of the assessee in this miscellaneous application, i.e., they are different. 15. We have carefully considered the content of the miscellaneous application, rival contentions of the parties and the order of the coordinate bench dated 17/11/2023. We find that identical issue has already been decided in the case of the daughter of the assessee in miscellaneous application number in MA No 137 to 140 and 185 to 187/Mum/ 2024 [ 7 Miscellaneous Application] for AY 2010-11 to 2016-17 on 24/10/2024 where in MAs were dismissed holding as under: - “8. We have carefully considered the rival contentions; persuade the orders of the coordinate bench. The ld. AO in Para no 5.1 has held that: - \" 5. 1 During the search, it was noticed that assessee is an owner of various house property. However, the assessee has notshown rent income in the return of income, from the said premises. \" 9. The ld. CIT (A) in Para no 4.5 of the order has categorically held that: - \"4.5 During the search, it was noticed that the appellant was owner of the following house properties: - 1. Flat no 13, Model House CHS, Above Chirag Motors, Plot no 158 Sion, Mumbai 2. Flat no 14, Model House CHS, Above Chirag Motors, Plot no 158, Sion, Mumbai Page 11 of 18 This fact has been recorded by the AO in Para5.1 of the assessment order dated 26/12/2018. Existence of these properties in the name of the appellant itself is the incriminating evidence. Further the case laws relied up on by the appellant are not applicable to the facts of the case of the appellant. In view of the facts as discussed above, the assessment order passed by the AO u/s 153 A of The Act is valid order passed after following due procedure of law laid down in the IT Act. \" 10. Tribunal in its impugned order held as under: - \"023. During the course of hearing, bench put to the notice of the parties the decision of Honourable Supreme court in case of Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd. (24.04.2023 - SC): MANU/SC/0434/2023 [ 2023 SCC OnLine SC 481] [2023] 149 taxmann.com 399 (SC). The Ld. AR submits that that decision supports his contention, as there is no incriminating material. The LD DR submitted that decision supports the case of revenue as the incriminating material is found during the course of search and LD AO is authorized to determine Incriminating material income and other material income to compute total income. 024. We have carefully considered the rival contentions and perused the orders of the lower authorities. All the decision cited by the parties are perused, but now culminated and subsumed in the decision of Honourable Supreme court in case of Page 12 of 18 Abhisar Buildwell Pvt Ltd, [supra] therefore, now none of them is required to be further discussed. If in a concluded assessment, there is an incriminating material LD AO is authorized to make addition on account of incriminating material and other income to compute total income. In absence of any incriminating material, the concluded assessment cannot be disturbed. 025. In this case, search took place on 4/2/2016. Assessee filed return of Income u/s 139(1) of the Act on 25/3/2011 at ₹ 996,620/-. This return was not assessed. Therefore, on the date of search, i.e., on 4/2/2016, the assessment for assessment year 2010 - 11 was concluded. Therefore, according to the binding judicial precedents, such income could have been enhanced only based on incriminating material found during the course of search related to such enhancement. If there is no incriminating material found during the course of search, no addition could have been made by the learned assessing officer. The only material referred by the learned AO is the balance sheet of the assessee where certain properties are shown. Further, when this issue was raised before the learned CIT - A, he held that the existence of immovable properties in the name of the assessee itself is incriminating evidence. It is stated by the learned departmental representative before us that those immovable properties are disclosed in the balance sheet of the assessee and the assessee Page 13 of 18 before the lower authorities never disclosed such balance sheet and therefore, unearthing balance sheet of the assessee, during the course of search itself is the incriminating evidence. Thus, there is reference of material found during the course of search, which suggests that the income of the assessee is required to be adjusted upwardly. It is the case of the revenue that assessee did file return of income for earlier years as well as for this year, prior to search and these properties or the balance sheet were not disclosed by the assessee for earlier years. The assessee does not deny these facts that balance sheet was found during the course of search and it was earlier not disclosed to the LD AO prior to search. 026. The honourable Supreme court in Abhisar Buildwell Pvt Ltd [ Supra] has held that [ 1] in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns and [2] in case no incriminating material is unearthed during the search, the AO cannot assessee or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated Page 14 of 18 assessments, no addition could be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act. 027. As in the present case there is an incriminating material in the form of balance sheet where certain properties are stated l to be owned by assessee with respect to the addition made by the AO of notional income from house property u/s 22 of The Income Tax Act, the addition deserves to be upheld holding that assumption of jurisdiction u/s 153A is valid. Accordingly, ground number 1 of the appeal of the assessee is dismissed.\" 11. What is incriminating material has already been held by Honourable Delhi High court in CIT V kabul Chawla [2015] 61 taxmann.com 412 (Delhi)/ [2015] 234 Taxman 300 [ affirmed in 149 taxmann.com 399 (SC)] where in para no 37 (vii) it is held that: - vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 12. Further in reply before Dy Director of Income tax (Investigation) Unit -7 (4) in response to summons Page 15 of 18 father of the assessee in letter dated 24/05/2016 stated that Assessee owns the property Flat No 13 and Flat no 14 Model House are lying vacant. the properties are shown in the balance sheet but no income from such house property is offered. It is not the investment in acquisition of property which is taxed in the hands of the property but the status of the property ' Vacant\" which comes to the knowledge of the revenue only during the course of search and therefore the income 'under the head \"income from House property\" is chargeable in the hands of the assessee as income unearthed during the course of search which was not disclosed to the revenue that such property shown in the balance sheet are lying vacant and income from it is liable to income tax u/s 22- 23 of the Act. 13. The powers under Section 254(2) are specifically for rectifying mistakes that are apparent from the record and do not allow for a complete re-examination of the case or a fresh hearing of the appeal. Except the legal arguments which are dealt with in the order of the ITAT nothing was shown to us that tribunal has committed an apparent error. Even on that argument also we do not find any error in the orders of Tribunal. 14. Honourable supreme court inAssistant Commissioner of Income tax, Rajkot V Saurashtra Kutch Stock Exchange Ltd [2008] 173 Taxman 322 (SC)/ [2008] has held that: - \"37. In our judgment, therefore, a patent, manifest and self-evident error which does not require Page 16 of 18 elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long- drawn-out process of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no Court would permit it to remain on record. If the view accepted by the Court in the original judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the record.\" 15. Thus, the balance sheet of the assessee showed property which were vacant and so chargeable to tax u/s 22 and 23 of the act and properties so disclosed in the balance sheet were lying vacant was never disclosed to the revenue which came to knowledge of revenue only on search and communication by father of the assessee to investigation wing. Thus, ITAT has correctly held so relying on the decision of Honourable supreme court and honourable high courts. 16. Thus, we do not find any merit in the miscellaneous application filed by the assessee and same is dismissed. Page 17 of 18 17. All other miscellaneous application of the assessee are identical, except the above point no other error was pointed out, arguments of the parties are also ad verbatim same, Therefore, in view of our decision in MA NO 137/M/2024 [ ITA No 715/M/2021] we dismiss all those M A also. 18. In the result all the miscellaneous applications are dismissed as no error rectifiable u/s 254 of the act exist in the order of the ITAT.” 16. Further during the course of hearing of the case on 4/2/2016 on simultaneous search the statement of Mr Kalpesh and her journey was also recorded wherein in answer to question number 37 , 12 annexures were found which were related to Mr Vipul Bhatt, and when Mr Bhatt was examined on 6/2/2016 in response to question number 12 he categorically referred to those papers of accommodation entries. In answer to question number 61, on the basis of the documents found he identifies the chartered accountant of the Gurnani group who are the beneficiaries of long-term capital gain.Therefore it is incorrect to say that there is no incriminating material found during the course of search. 17. As it iscontested that facts are identical in this case as compared to the case of daughter of the assessee Ms Priya Gurnani in whose cases identical MAs were filed and same were disposed of as above, we do not find any reason to deviate from the same and accordingly dismiss all the MA is preferred by the assessee involving identical issue. Page 18 of 18 18. In the result, miscellaneous applications filed by the assessee are dismissed. Order pronounced in open court on 30/10/2024 Sd/- Sd/- Sd/Sd Sd/- (PAVAN GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 30.10.2024 Dragon Copy of the Order forwarded to : The Appellant, The Respondent, TheCIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "