SHAILESH CHHAGANLAL HARIA SHAH,BHIWANDI V. ACIT, CIRCLE-1, KALYAN, KALYAN

ITA 1177/MUM/2025

AI Insights

The case revolves around the reopening of the assessment for the Assessment Year 2010-11 for Shailesh Chhaganlal Haria Shah, based on information from a search operation on Sheth Developers Pvt. Ltd., which allegedly revealed unaccounted 'on-money' transactions. The Assessing Officer (AO) added Rs. 8,80,000 as unexplained investment under section 69 of the Income Tax Act, which was contested by the assessee. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal, after examining the submissions and the legal precedents, ruled in favor of the assessee, highlighting the lack of independent investigation and the failure to provide an opportunity for cross-examination of the witness whose statement was crucial for the AO's findings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361138 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2010-2011
• Other Referred Cases: Mr. Hoshang Jamshed Mohta vs ITO, Jawaharbhai Atmaram Hathiwala vs ITO, Amitabh Bansal vs ITO, ACIT vs Sharad Nagnath Rajbhoj, PCIT vs N.C. Cables Ltd., Saraswat Co-operative Bank vs ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADNYA GHOLAP
• Assessee Lawyers: DHARMESH SHAH; JIGNA JAIN; REFERRING CONTENTS
• Keywords: Unexplained investment; Principle of natural justice; Loose papers; Validity of assessment; Opportunity of cross examination
• Section: 147; 148; 68; 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 1177/MUM/2025 (AY : 2010-11) (Physical hearing) ShaileshChhaganlalHaria Shah 1068/2, Gala No. 2, Gupta Compound, Kalyan Road, New Kaneri Bhiwandi, Bhiwandi, Maharashtra-421301. [PAN No. ADLPN 6590 Q Vs ACIT, Circle-1, Kalyan 1st Floor, Mohan Plaza, Wayle Nagar, Khadakpada, Kalyan(W), Maharashtra-421301. Appellant / Assessee Respondent / Revenue Assessee by Shri Dharmesh Shah & Ms. Jigna Jain, ARs Revenue by Ms. PradnyaGholap, Sr. DR Date of institution of appeal 20.02.2025 Date of hearing 15.04.2025 Date of pronouncement 20.05.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the assessment order of ld. CIT(A), NFAC dated 12.02.2015for A.Y. 2010-11.The assessee has raised the following grounds of appeal: 1. The ld. CIT(A) has erred in law and in facts in passing order u/s 250 of the Act and confirming the addition made by ld. AO. 2.The ld. CIT(A) has erred in law and in facts in passing order without complying with the principles of natural justice. 3. The ld. CIT(A) has erred in law and in facts in confirming the action of ld. AO in not granting the opportunity of cross-objection of Mr. Ashwin N Sheth. 4. The ld. CIT(A) has erred in law and in facts in confirming the addition made by ld. AO on account of unexplained invoking section 69 of the Act amounting to Rs. 8,80,000/-. 5. The appellant craves leave to add, amend, alter or delete all or any of the foregoing grounds of appeal.” ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 2 2. Brief facts of the case are that assessee is individual filed his return of income for A.Y. 2010-11 on 15.10.2010 declaring income of Rs. 32,28,020/-. Initially, the case was processed u/s 143(1). Subsequently, the case was reopened u/s 147 on an information received from DCIT, Central Circle, Mumbai that a search was carried out on 01.10.2012 on Sheth Developers Pvt. Ltd. (SDPL)/ Builder, Mumbai. During the search, loose papers were found and impounded on 05.10.2012 as Annexure A-11 from sales office at Borosil Plot, Andheri (E), Mumbai which revealed the details of on-money received from various clients. The assessee is one of them to whom the builder sold a flat in their project. Further, statement of Ashwin Sheth, one of the Director of said builder company was recorded, who admitted in his statement that they have received on-money on sale of flats of its four projects over and above, the agreement value. In the investigation in post search proceedings, SDPL/ builder provided year-wise and flat-wise details of on-money by various customers. It was admitted by the director that such on-money is not recorded in their regular books of accounts. On the basis of such information it was noted that Sheth Developers Pvt. Ltd. received an amount of Rs. 8,80,000/- from assessee as ‘on-money’ in cash for sale of Flat no. 1901 in project Vasant Lawns Greens Thane to assessee. On the basis of such information, the assessing officer recorded the reasons of reopening and form his belief that income chargeable to tax to the extent of Rs. 8,80,000/- has escaped assessment. The assessing officer recoded that he issued notice under section 148 dated 30.03.2017 on the latest address of assessee on his latest return. The assessing officer recorded that various ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 3 notices were issued but no compliance was made by assessee. The assessing officer in para 4.1 of assessment order recorded that show cause notice dated 07.11.2017 was issued for treating the cash payment of Rs. 8,80,000/- for purchase of flat should not be treated as unexplained investment. In response to such notice, the assessee replied. In reply, the assessee stated that he has not paid any amount as on-money. The assessee demanded reasons recorded. Reasons recorded was provided to the assessee. The assessing officer further recorded that in response to show cause notice, the assessee furnished details of payment and copy of agreement with builder. The assessee furnished the bifurcation of payment details of expenditure that he has booked a Flat no. 1901 in Greens Vasant Lawns, situated at E.E. Highway, Thane (W), jointly with his wife Mrs. Reena S. Haria from Sheth Developers Pvt Ltd vide agreement dated 11.10.2009. The assessee furnished detail of various payment aggregating to Rs. 44,12,240/-. It was explained that a supplementary agreement dated 17.03.2016 for various other expenses was also entered and he has paid Rs. 7,25,000/- and in addition to a parking fees of Rs. 2,00,000/- for allotment of parking was also paid. The assessee furnished capital account and balance sheet of assessee in his case as well as in case of his wife. The assessee by referring contents of question no. 5 & 6 and its reply from the statement of Ashwin Kumar N. Sheth recorded during search action, explained that from the question and answer, it is clear that Ashwin Kumar Sheth clearly stated “we do not receive any unaccounted cash on the date of booking. “On-money comes into picture only after we issue the allotment letter in the name of buyer”. It was stated ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 4 that the assessee has booked the flat in the year under consideration and paid on a sum of Rs. 9,70,305/- by cheque including stamp duty & registration charges out of total payment of Rs. 44,12,240/- and no allotment letter issued to the assessee so there is no question of payment of on-money. The assessee specifically denied that he has paid in amount of Rs. 8,80,000/- in cash for booking of flat. The assessee stated that assessing officer is primarily relying upon the statement recorded under section 132(4) by Investigation Wing without making any independent enquiry. Therefore, opportunity to cross examine Ashwin Sheth is necessary, whose statement is relied by department. The reply of assessee was not accepted by assessing officer. The assessing officer repeated the contents of show cause notice and information received from Investigation Wing. On the request of cross- examination of Ashwin N Sheth, the assessing officer recorded that statement of Ashwin Sheth is based on the evidence found during search, such statement along with the annexure was provided to the assessee. The onus is on the assessee to disprove the payment of on-money. The assessee has purchased Flat from said builder and he could not produce him as a witness to prove otherwise. The assessing officer held that there is no reason why Ashwin Sheth will accept the receipt of on-money from assessee, if he had not received such on-money from assessee. The assessing officer on the basis of his aforesaid observation added Rs. 8,80,000/- as unexplained investment under section 68 while passing assessment order on 08.12.2017 passed under section 147. ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 5 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee challenged the validity of assessment order as well as addition on merit. Before ld. CIT(A), the assessee filed his detail written submission. The submission of assessee are recorded in para 3 of impugned order. The assessee in its submission submitted that his case was reopened on the basis of information from DCIT, Central Circle, Mumbai by recording reasons to believe that income of assessee chargeable to tax on the extent of Rs. 8,80,000/- as escaped assessment. The assessee stated that he is not received any notice dated 16.11.2017 as recorded by assessing officer. The assessee in his reply dated 24.11.2017 furnished of details as required by assessing officer and explained that no on money was paid he has filed capital account and balance sheet as well as his wife for A.Y. 2009-10 and 2010-11 and explained the source of income and nature and there is no source of income which established that assessee has source of income for generating the cash. The assessee also explained the reply of question no. 5, 6 and 9. In the statement of Ashwin Kr. Sheth, director of Sheth Developers Pvt. Ltd. The assessee further stated that assessing officer primarily relied on the statement under section 132(4) by Investigation Wing. No independent enquiry is made by assessing officer. Notice was issued on behest of Investigation Wing. No opportunity of cross examination of Ashwin Kr. Sheth was given whose statement was relied by assessing officer. The assessee also converted various contention of assessing officer in assessment order. IN support of his submission, the assessee also relied on various case laws. ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 6 4. The ld. CIT(A) after considering the submission of assessee upheld the action of assessing officer in issuing notice under section 148 as well as addition under section 69A. The ld. CIT(A) held that during assessment proper opportunity was allowed to the assessee but neither the issuance of notice under section 148 was challenged nor the jurisdiction of assessing officer hence, the objection raised by assessee has no force. On merit, the ld. CIT(A) held that assessee failed to explain source of cash in appellate proceeding. The assessee failed to discharge the onus he did not find any infirmity in the assessment order thereby rejected both the grounds. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue. Ground no. 1 is general and needs to specific adjudication. Ground no. 2 relates to violation of principles of natural justice. No specific submission was made during the hearing by ld. AR of the assessee. Hence, this ground of appeal is treated as not pressed. Ground no. 3 relates to not allowing cross examination of Ashwin Kr. Sheth and ground no. 4 relates to addition under section 69 of Rs. 8,80,000/-. The ld. AR of the assessee submits that addition of on money in reopening under section 147 is not valid. The assessing officer reopened the case of assessee on the basis of search on a third party. The reasons recorded are general. There is no reference in the reasons recorded that as and when the assessee made payment of alleged on-money. No evidence was provided by the builder about payment of all alleged on-money. Thus, reasons recorded are ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 7 not valid reasons. The approval under section 151 of reasons recorded is not valid. The assessing officer himself was not sure about the validity of reasons, in the last sentence, the assessing officer himself proposed for reopening “if approved”. The PCIT has not considered the reasons recorded in proper perspective. During the hearing, it was confronted with ld. AR that assessee has not raised any specific ground of appeal in challenging the validity of reopening or nor filed additional ground. The ld. AR of the assessee vehemently submitted that he has raised a legal plea in his submission which can be raised at any stage without raising specific grounds of appeal. 6. On merit, the ld. AR of the assessee submits that in the statement of directors of Sheth Developers Pvt. Ltd., there is no specific payment about on-money by assessee. The assessee during the assessment by referring the contents of statement of Ashwin Kr. Sheth has explained that alleged on- money was paid at the time of issuance of allotment letter. No such money was paid by assessee. The assessee right from the beginning sought cross examination of Ashwin Kr. Sheth. Such cross examination was not allowed by assessing officer nor did the assessing officer ask the assessee to call Ashwin Kr. Sheth as witness of assessee. The assessing officer wrongly concluded that onus was on assessee to disprove the payment of on-money. The assessee cannot discharge onus in negative. It is settled law that party who assert the facts has to prove it. The assessing officer in the reasons recorded took stand on the basis of statement of Ashwin Kr. Sheth that assessee paid on-money, thus the onus on assessing officer to prove it by bringing ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 8 sufficient evidence or record, or if relying on the statement of Directors of Sheth Builder Pvt Ltd, should have allowed his cross examination. The assessee in his reply before assessing officer has substantiated entire payment against the sale consideration. The ld. CIT(A) while confirming the action of assessing officer held that assessee failed to explain the source of cash payment. It was never the case of assessee that he made in cash payment thus, there was no occasion to prove source when the assessee right from the beginning as denied payment of on-money. The assessee made certain payment in addition to payment of sale consideration of flat that is with regard to parking charges of Rs. 2.00 lacs which was paid as per confirmation letter dated 18.04.2010. Besides that the assessee entered in a supplementary agreement for payment of certain expenses. The ld. AR reiterated that no other amount of on-money was paid. Supplementary agreement was made for payment of Rs. 7,25,000/- on account of furniture work, electricity supply, operation permission for elevators and development of green building. Except those payments no other payment was made by assessee. To support his submission on the various grounds of appeal, the assessee filed a number of decisions in the form of legal paper book. However, at the time of making submission, the ld. AR on the issue of not allowing cross examination relied upon the following decision:  Mr. Hoshang Jamshed Mohta vs ITO (ITA No. No. 36/Mum/2023) dated 31.03.2023,  Jawaharbhai Atmaram Hathiwala vs ITO (128 TTJ 36).,  Amitabh Bansal vs ITO (175 ITD 401),  ACIT vs Sharad Nagnath Rajbhoj (ITA No. 5661/Mum/2024) dated 24.01.2025. ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 9 7. On the issue of validity of reopening mainly relied on the decision of Delhi High Court in PCIT vs N.C. Cables Ltd. (391 ITR 11) and the decision of the Hon’ble Bombay High court in the case of Saraswat Co-operative Bank vs ACIT (166 taxmann.com 360). 8. On the other hand, ld. Sr. DR for the Revenue supported the order of lower authorities. Against the submission of validity of reopeningand assessment order, the ld. Sr. DR for the Revenue submits that no such grounds of appeal challenging the action under section 147 is raised by assessee. So, it should not be entertained for adjudication. However, to counter the submission of ld. AR, it was submitted that assessee was supplied reasons recorded, copy of approval accorded was also provided. During the assessment, the assessee was provided full opportunity to contest the various issues before assessing officer. The assessing officer made addition on the basis of evidence found during the search action on builder. Generally, no direct evidence is found with regard to such transaction if the submission of assessee is accepted, then, the sanctity of search action would be lost. In the rejoinder of submission, the ld. AR of the assessee submits that no addition can be made in the hands of assessee merely on the basis of statement of third party, without allowing the cross examination. 9. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. Ground no. 2 & 3 relates to not allowing opportunity of cross examination and cross examination of Ashwin Kr. Sheth and addition under section 69. I find it during the assessment, the assessing officer solely relied upon the statement of Ashwin ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 10 Kr. Shah recorded during the search action. Admittedly, the assessing officer has not carried out any independent investigation of fact. No material is brought on record to substantiate the fact as to why the figure of Rs. 8,80,000/- has come in the notice of assessing officer. There is no iota of evidence to connect such alleged on-money with the assessee. The assessee in its reply dated 24.11.2017, filed before assessing officer referred the question no. 5, 6 & 9 and the answer made by Ashwin Kr. Sheth recorded during search action, even from such questions, no such figure is coming out. Rather, the reply of question no. 9 with relates to payment of parking charge by way of cheque supports the case of assessee. I find that the assessee right from the beginning has submitted that he has not paid any additional amount except the agreed amount or the payment made in pursuance of supplementary agreement dated 13.03.2016. The statement of a person can be read against individual, if it is supported with corroborated evidence qua against him. Mere statement of a person can never be treated as evidence against third person unless it is tested by cross examination. 10. I find that co-ordinate bench of Tribunal in Hoshang Jamshed Mohta vs ITO (supra) on similar allegation of on-money against the same builder, on the plea of not allowing cross examination deleted the similar addition by following the decision of Hon’ble Supreme Court in Andaman Timber Industries vs CCE (281 CTR 241) (SC) and CIT vs Odeon Builders Pvt. Ltd. (2019) (418 ITR 314). Considering the aforesaid factual and legal discussion, I do not find any justification of making addition on the basis of third party ITA No. 1177/Mum/2025 Shailesh Chhaganlal Haria Shah 11 statement without affording opportunity of cross examination. In the result, ground no. 3 & 4 of the appeal is allowed. 11. Considering the fact that I have allowed relief to the assessee on merit, therefore, considering and adjudicating other submissions of the parties on validity of reopening has become academic. 12. In the result, the appeal of assesseeis allowed. Order pronounced in the open Court on 20/05/2025. - S/-S Sd/-S PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 20/05/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "