RAJESH NARENDRAKUMAR DESAI,AHMEDABAD V. THE DY.CIT., CIRCLE-4(2), AHMEDABAD

ITSSA 150/AHD/2023

AI Insights

The case involves appeals by Rajesh Narendrakumar Desai against the orders of the Commissioner of Income Tax (Appeals)-11, Ahmedabad, which confirmed the additions made by the Assessing Officer under sections 143(3) read with section 153C of the Income Tax Act, 1961. The additions were based on alleged on-money payments made by the assessee for the purchase of a bungalow from HN Safal Group, which were documented in seized materials during a search operation. The Tribunal examined the legality of these additions, considering the lack of direct evidence linking the assessee to the alleged payments and the admissions made by HN Safal Group to the Income Tax Settlement Commission.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470081 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-09-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2023
• Other Referred Cases: Andaman Timber Industries Vs. CCE, ITO Vs. Bharat A Mehta, Krishna Textiles vs. CIT, CIT Vs. Vineeta Gupta, Heirs and Legal Representatives of Shri Laxmanbhai S Patel vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKIT JAIN
• Assessee Lawyers: SANJAY R. SHAH
• Keywords: Unexplained investment; Salary income; Document seized; Documents seized; Capital Gains; Principle of natural justice; Loose papers; Opportunity of cross examination
• Section: 143(3); 69; 13; 153C; 20

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member Rajesh Narendrakumar Desai 5, Parth Bunglows Opp. Karnavati Club, SG By-pass Road, Ahmedabad, Gujarat - 380015 PAN: ACVPD5410G (Appellant) Vs Dy. CIT, Circle-4(2), Ahmedabad (Respondent) Assessee by: Shri Sanjay R. Shah, A.R. Revenue by: Shri Ankit Jain, Sr. D.R. Date of hearing : 10-09-2024 Date of pronouncement : 26-11-2024 आदेश/ORDER PER : TR SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by the assessee as against the common order dated 16-10-2023 passed by Commissioner of Income Tax (Appeals)-11, Ahmedabad arising out of the assessment orders passed u/s. 143(3) r.w.s. 153C of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) relating to the assessment years 2011-12 and 2012-13. Since common issue is involved in both the appeals, for the sake of convenience the same are disposed of by this common order. IT(SS)A Nos. 150 & 151/Ahd/2023 Asst. Years 2011-12 & 2012-13 I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 2 2. Brief facts of the case, the assessee is an individual having income from salary, share of profit from Partnership firm, trading in shares & securities, capital gains and income from other sources. The assessee filed his original Return of Income for the assessment year 2011-12 on 29-09-2011 declaring total income of Rs.1,20,57,700/-. The return was processed u/s.143(1) of the Act vide order dated 21-02-2012 and was accepted the returned income. Thereafter, in consequence of search conducted at the premises of HN Safal Group on 04-09-2013, the Assessing Officer issued notice u/s.153C of the Act on 15-11-2018 on the ground that assessee has purchased a bungalow no.99 of Amrakunj Scheme developed by Safal Estate and made on-money payment of Rs. 20 lakhs and Rs. 67 lakhs for the assessment years 2011-12 & 2012-13 respectively. Pursuant to the search action, the HN Safal group has admitted before the Income Tax Settlement Commission the receipt of on-money as additional income in respect of various schemes floated by them. Accordingly, Hon’ble Settlement Commission has passed the order u/s. 245D(4) of the Act and Safal Group paid the appropriate tax. The excel sheet sized during the course of search clearly depicts bungalow no.99 of Amarkunj scheme and entry of on-money by various purchasers. Therefore, the AO made addition of Rs. 20 lakhs and 67 lakhs as on-money paid by the assessee relevant to the assessment years 2011-12 and 2012-13 and demanded tax thereon. 3. Aggrieved against the assessment orders, the assessee filed appeals before the Ld. CIT(A), who confirmed the additions made by the AO by observing as follows:- I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 3 “5.20 It is also a fact that seized document contains details of transactions carried out by the appellant with H. N. Safal group. Here, other party has admitted noting’s mentioned in the diary before the Hon'ble Settlement Commission and even name of the appellant is appearing in the seized material found from the premises of H. N. Safal group. Therefore, the transaction recorded in the seized documents pertain to H. N. Safal group and were not recorded in the books of account and noting’s in such seized material pertains to appellant, hence there is live nexus between transactions entered by third party with appellant and the seized documents cannot be said as dumb documents. The appellant has also not produced any confirmation of the said H.N. Safal group stating that noting’s in such seized material does not pertain to the appellant. 5.21.1 In the referred case i.e. Andaman Timber Industries Vs. CCE (Supreme 5.21 Court), order was based upon the statement of two witnesses. However, in the instant case, order was based upon the incriminating documents in the form of excel sheet found/seized during the course of search action in the case of H.Ν. Safal Group, wherein the details of property purchase by the appellant, details of cheque/cash were mentioned on the same page. It is also mention here that the details of cheque as mentioned on the seized excel sheet was matched with the cheque details mentioned at registered sale deed. It is important to mention here that H. N. Safal Group had also admitted the contents of the seized incriminating material offered in the working of cash flow before the Hon'ble Settlement Commission and paid tax on it. Hence, the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE (Supreme Court) is not applicable to the case of appellant due to specific set of facts. It is also a settled law that the no judgement/order can be simply applied unless the facts of the cases are similar. The part of the judgement cannot be lifted and applied unless the context under which such judgments are passed also matches. 5.23 In view of elaborate discussion made herein above, addition made by AO for Rs.20,00,000/- being on money payment towards purchase of bunglow from HN Safal Group is confirmed. Thus, the related grounds of appeal are dismissed.” 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal :- I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 4 “1. The order passed by the Learned Assessing Officer u/s. 153C of the Act is bad in law and the Learned Commissioner of Income Tax (Appeals) erred in upholding the same. It is submitted that it be so held now and the order passed by the Learned Assessing Officer u/s 153C of the Act as upheld by the Learned Commissioner of Income Tax (Appeals) be quashed. 2. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Learned Assessing Officer without providing opportunity of cross examination of the person on whose statement department relies and also without providing details of full petition filed before the settlement commission. It is submitted that it be so held now and addition of 20,00,000/- made without providing adequate opportunity to the Appellant and thus denying natural justice be deleted. 3. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Learned Assessing Officer in utter disregard of the submissions made by the Appellant before him and on solely relying on the record kept by the HN Safal group a third party and the petition filed before the Income Tax settlement commission by them. 4. The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in confirming the addition on account of undisclosed income of ₹ 20,00,000/- on the basis of the records seized during the search u/s. 132(1) of the Act from the premises of HN Safal group, a third party and on the assumption that, the Appellant has paid 20,00,000/- to M/s. Safal Estate as on money towards purchase of property. Your Appellant submits that it be so held now and the addition of Rs. 20,00,000/- made as undisclosed income by the learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) be deleted. 5. Without prejudice to any of the forgoings, the Learned Assessing Officer erred in making addition on the basis of the order of settlement commission wherein no income is offered by the third party for AY 2011-12 and on that ground also the addition made in AY 2011-12 in the hands of the Appellant be deleted. 6. Without prejudice to the any of the forgoings, even if it is held that addition made by the Learned Assessing Officer and as confirmed by the Learned Commissioner of Income Tax (Appeals) is to be upheld, the addition can be sustained only for Rs. 20,000/- I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 5 which is mentioned in the record of the third party and wrongly interpreted by the Learned Assessing Officer and Commissioner of Income Tax (Appeals) at Rs. 20,00,000/-. 7. Your Appellant reserves the right to add, alter, amend and/or withdraw any of the above Grounds of Appeal.” 5. Heard rival submissions at length and perused the materials available on record including the Paper Books and case laws filed by the parties. On perusal of the seized material from M/s. Safal Estate which is reproduced at Page No. 5 of the assessment order reads as follows: 5.1. The name of the parties is shown as Dr. Rajesh N. Desai (assessee herein) and Dr. Meena R. Desai as the co-owner of the property relating I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 6 to Bungalow No. 99. Based on the above information, the Assessing Officer has initiated u/s. 153C proceedings only against the assessee herein namely Dr. Rajesh N. Desai not against Dr. Meena R. Desai. Perusal of the Sale Deed dated 29-05-2013 which is available at Page Nos. 38 to 56 makes it clear the assessee and his wife are the co-owners who purchased the above property. The total sale consideration of Rs. 99 lakhs were paid by both the parties. Thus the Assessing Officer initiated the assessment proceedings only against one co-owner without making verification of the seized material which is not sustainable in law. There is no other evidence or seized material found by the Department for making the addition on account of on-money of Rs. 20 lakhs and Rs. 67 lakhs paid by the assessee for the Asst. Years 2011-12 & 2012-13 respectively. 5.2. On an identical case, the Hon'ble Gujarat High Court in the case of ITO Vs. Bharat A Mehta reported in [2015] 60 taxmann.com 31 wherein it was held as follows: \"Section 69 of the Income-tax Act, 1961- Unexplained Investment (Investment in property). Assessment year 1992-93-Assessee purchased a bunglow in a housing scheme from a builder firm during search, partners of said firm admitted having received certain amount as on money from buyers of bunglows in said scheme-On basis of that material Assessing Officer made certain addition under section 69 to income of assessee on account of on money paid to builders - On appeal, Tribunal deleted addition holding that revenue failed to prove that assesses had made undisclosed investment in aforesaid bunglow Whether as findings recorded by Tribunal were based on appreciation of facts, no interference was called for –Held, Yes Paras 9 and 10) (in favour of assessee\" 5.3. Hon’ble Gujarat High Court in the case of Krishna Textiles vs. CIT reported in 310 ITR 227 (Gujarat) has held that assessee cannot be called upon to explain the source of income, even if credited by the third party as assessee claimed that no such amount was invested or paid by it to third party. In this case addition was sought to be made on the basis I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 7 of entries in the books of third party showing payment made by assessee to said party. The Hon’ble High Court held as follows \"Relying on the decision of the Hon'ble Supreme Court in the case of Kushinchand Chellaram (supra), the Calcutta High Court in the case of Bimal Kumar Damani (supra) held that the question of presumption of possession is confined to the amount recovered from a particular person. Possession of another cannot be presumed to be possession of the assessee if the ownership is disputed the burden of proving that the possession was not possession as owner and that ownership was of someone else is on the assessee. If the Department wants to assert that the assessee is the owner of the amount recovered from someone else then the burden lies on the Department to prove the ownership of the assessee...” 5.4. The Hon'ble High Court of Delhi in the case of CIT Vs. Vineeta Gupta reported in [2014] 46 taxmann.com 439 wherein it was held as follows \"Section 69B, road with section 245D. of the Income-tax Act 1961 Undisclosed investments (Settlement Commission)-Assessment years 2003 04 to 2009-10- During search, assessee along with her husband admitted that she had acquired 1/3 share in a property valuing 133 crores She had offered Rs. 36.73 crores as her undisclosed investment- Thereafter, she had approached Settlement Commission with disclosure of 7.61 crores and, thus total disclosure amounted to Rs. 44.34 crores -Accordingly, Settlement Commission passed order Revenue challenged said order on ground that sellers of said property offered higher amount in respect of said property as undisclosed investment Whether declaration made by sellers in respect of said transactions could not bind assessee - Held yes Whether since in Settlement Commission proceeding full value of 1/3rd share had been accounted for, i.e, Rs. 44.84 crores, any addition could not be made to assessee's income in absence of any concrete evidence -Held, yes Paras 12 & 13 in favour of assessee\" 5.5. Jurisdictional High Court in the case of Heirs and Legal Representatives of Shri Laxmanbhai S Patel vs. CIT 327 ITR 290 (Guj has observed as follows: “......The legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, the addition is made the same is required to be deleted on the ground of violation of the principles of natural justice. This is clearly stated by the Hon’ble Supreme I.T(SS).A Nos. 150 & 151/Ahd/2023 A.Y. 2011-12 & 2012-13 Page No. Rajesh Narendrakumar Desai vs. Dy. CIT 8 Court in the case of Kishinchand Chellarum (supra) wherein it is stated that before the Income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine. Except the statement of Shri Kantilal M. Patel and Sin Rameshaha, there was no other evidence available with the department. A copy of the statement of S Rameshbhai was not given nor an opportunity of cross- examining the said Shri Rameshbhai was given to the assessee.......” 6. Respectfully following the above judicial precedents, we hold that the additions made by the Lower Authorities on account of payment of on- money is not sustainable in law. Therefore the additions are liable to be deleted. 7. In the result, the appeals filed by the Assessee are hereby allowed. Order pronounced in the open court on 26 -11-2024 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad Dated 26/11/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "