SHRI VIKASH R.PATEL,AHMEDABAD V. THE INCOME TAX OFFICER, WARD-6(5), AHMEDABAD

ITSSA 79/AHD/2016

AI Insights

This case involves an appeal by Shri Vikas R. Patel against the penalty levied under section 271(1)(c) of the Income Tax Act, 1961, concerning the Assessment Year 2008-09. The penalty was imposed following the protective addition of unaccounted cash payments made during the purchase of land by M/s. Uma Shakti Corporation, a firm in which the assessee was a partner. The Tribunal examined the circumstances under which the unaccounted payments were made and the subsequent legal and procedural handling of these payments in the tax assessments of the involved parties. The Tribunal's decision was influenced by a co-ordinate bench's earlier ruling, which addressed similar issues concerning the same partners and transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474778 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Other Referred Cases: Partnership Firm and other two Partners in M.A. No. 10/AHD/2022 arising out of IT(SS)A No. 196/AHD/2013 and Others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri T.R. Senthil Kumar, Judicial Member And Shri Makarand Vasant Mahadeokar, Accountant Member Shri Vikas R Patel 23, Uma Bunglows, R.C. Technical Road, Near Nirman Tower, Ghatlodiya, Ahmedabad-380061 PAN: ACIPP4640D (Appellant) Vs Income Tax Officer Ward-6(5), Ahmedabad (Respondent) Assessee Represented: Shri D.K. Parikh, A.R. Revenue Represented: Shri A P Singh, CIT-DR Date of hearing : 29-01-2025 Date of pronouncement : 18-03-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 14.12.2015 passed by the Commissioner of Income Tax (Appeals)-4, Ahmedabad confirming the levy of Penalty under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2008-09. IT(SS)A No: 79/Ahd/2016 Assessment Year: 2008-09 I.T(SS)A No. 79/Ahd/2016 A.Y. 2008-09 Page No Shri Vikas R. Patel vs. ITO 2 2. Brief facts of the case is that the assessee was a partner in M/s. Uma Shakti Corporation. The firm purchased a land bearing Survey No. 217/1 & 217/2 at Chandlodiya for a consideration of Rs.2.5 crores against which Rs. 1.63 crores was made unaccounted collection from 27-02-2007 to 11-07-2007, whereas the Firm M/s. Om Shakti Corporation was came into existence on 20-10-2007 vide Partnership Deed. Since the unaccounted cash payments were made before formation of the Partnership Firm, addition were protectively made in the name of three Partners namely Shri Vikas R. Patel (the assessee herein), Shri Brijesh Sukhdevbhai Patel and Shri Deepak G. Prajapati. 3. On further appeal, Ld. CIT(A) has given relief of Rs. 20,00,000/- out of total payment made for acquisition of land at Rs.1,63,00,000/- by observing that M/s. Uma Shakti Corporation had made payment of Rs. 20,00,000/- by cheque for the purchase of this land which is included in the sum of Rs. 1,63,00,000/-. The said payment is recorded in the books of accounts of M/s. Uma Shakti Corporation. As such this payment of Rs. 20,00,000/- cannot be said to be made from unexplained sources. Since the cheque was issued by M/s. Uma Shakti Corporation from its regular income recorded in the books of accounts and M/s. Uma Shakti Corporation is assessed to tax regularly, therefore, out of the total payment of Rs. 1,63,00,000/- a sum of Rs. 20,00,000/- is held to be out of explained sources and remaining amount of Rs.1,43,00,000/- is held as paid by erstwhile partners of the firm. As a result, addition of Rs. 47,66,666/- is confirmed by Ld. CIT (A). I.T(SS)A No. 79/Ahd/2016 A.Y. 2008-09 Page No Shri Vikas R. Patel vs. ITO 3 3.1. After the appellate order, the Assessing Officer levied penalty for concealed income of Rs.47,91,866/- and demanded penalty of Rs.16,25,970/-. 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The Learned CIT(A) has erred in confirming the penalty u/s 271(1)(c) of the Income Tax Act, 1961 for Rs. 16,25,970/-. The Appellant craves Leave to add, alter, amend, vary, modify or delete any of the grounds taken above. 5. Heard rival submissions at length and perused the materials available on record. Ld. Counsel for the assessee drawn our attention to the Memorandum of Outstanding dated 03-04-2007 entered between the parties wherein the assessee is not a party to the transaction for the so called on-money paid. Thus there cannot be any protective addition in the hands of the assessee consequently no penalty u/s. 271(1)(c) of the Act is to be levied in the hands of the assessee. 6. We have perused the materials available on record as well as Co- ordinate Bench decision in the case of Partnership Firm and other two Partners in M.A. No. 10/AHD/2022 arising out of IT(SS)A No. 196/AHD/2013 and Others dated 24-07-2024 wherein the Co- ordinate Bench held that a sum of Rs. 41,00,000/- taxable in the Asst. Year 2007-08 is not to be assessed in the present Asst. Year 2008-09. Accordingly an addition aggregating to Rs.41,00,000/- was deleted. Further the Co-ordinate Bench held that the three Partners namely Shri Vikas R. Patel (the assessee herein), Shri Brijesh Sukhdevbhai Patel and Shri Deepak G. Prajapati were the I.T(SS)A No. 79/Ahd/2016 A.Y. 2008-09 Page No Shri Vikas R. Patel vs. ITO 4 only Partners had utilized the funds received from the housing projects for making payments towards purchase of land by observing as follows: “17. The assessee filed MA against the order of ITAT. The ITAT observed that the Counsel for the assessee highlighted a mistake in the previous Tribunal order regarding the addition of unexplained cash payments. The Counsel for the assessee submitted that this amount was apportioned equally among the three partners at 33% each. However, the Counsel for the partners pointed out that Rs. 41 lakhs of this payment had been made in the preceding financial year, indicating that it should not have been included in the taxable income for the current year. The ITAT in the Miscellaneous Application proceedings observed that learned Departmental Representative (DR) acknowledged this point during the proceedings, agreeing that the issue needed to be evaluated in light of the provisions of the Income Tax Act, which dictate that additions related to unexplained investments should reflect the year in which the payments were actually made. Consequently, the Tribunal recalled the earlier order of ITAT dated 08-11-2021 by observing that the inclusion of Rs. 41 lakhs in the current year's taxable income was indeed erroneous and had not been properly addressed / examined in their earlier order. Additionally, the Counsel for the assessee partners highlighted another mistake in order of ITAT, noting that while the cash payment to the landowners was attributed to all three partners, the Memorandum of Understanding (MOU) seized during the search explicitly named only one partner, Shri Brijesh Sukhdevbhai Patel, in connection with the cash payment. The Counsel for the assessee assessee partners further contended that there were actually eight partners in the firm, yet the cash payment was solely attributed to three individual partners without any rationale for this selective attribution. The DR agreed that there was a lack of justification for the proportionate addition of the unaccounted investment across the partners, further emphasizing the apparent inconsistencies in the earlier ruling. Given the DR's concessions regarding these errors in the Tribunal's order, the Tribunal recalled the earlier order of ITAT for re-adjudicated to assess the appropriate attribution among the partners involved. 18. Before us, the Counsel for the assessee reiterated the submissions made earlier at the time of hearing of Miscellaneous Application. The Counsel for the assessee also filed submission dated 30.09.2024 in support of it’s arguments. After going through the written submissions as well as the oral arguments of the Counsel for the assessee and the records of the instant case, we agree with the Counsel for the assessee that so far as three payments aggregating to Rs. 41 lakhs is concerned (listed at Page 7 of the ITAT order dated 08.11.2021) the same were made on 22.02.2007, 23.02.2007 and 25.03.2007 and accordingly, the same could not be the subject matter of the I.T(SS)A No. 79/Ahd/2016 A.Y. 2008-09 Page No Shri Vikas R. Patel vs. ITO 5 addition for the impugned assessment year i.e. A.Y. 2008-09, since the same pertain to A.Y. 2007-08. Accordingly, the addition aggregated to Rs. 41 lakhs is directed to be deleted. 19. However, we are unable to agree with the contention of the Counsel for the assessee that the CIT(A) erred in facts and in law in making the additions only in the hands of three partners i.e. Shri Vikas R. Patel, Shri Brijesh S. Patel and Shri Dipak G. Prajapati. We observe that in the assessment order, the AO has noted that vide assessee’s submission dated 23.12.2011, the assesse have itself submitted that the main partners of both the projects viz. UTAP and UTRE are only the three partners namely Shri Vikas R. Patel, Shri Brijesh S. Patel and Shri Dipak G. Prajapati. It was submitted by the assesse that it was only these partners to had utilised the funds received from UTAP and UTRE projects for making payments towards purchase of land. Accordingly, it was keeping in view these particular facts wherein the Department has observed specifically that it was only these three operational partners who were in charge of the affairs of the company that the addition was made in the hands of these three partners. Accordingly, we find no infirmity in the order of Ld. CIT(A) in confirming the additions in the hands of these three partners only.” 6.1. This order passed by the Co-ordinate Bench has become final and no further appeal or stay obtained from the Jurisdictional High Court. Therefore, we confirm the protective addition made in the hands of the assessee. Consequently, the Assessing Officer is hereby directed to revise the penalty order invoking Section 275(1A) of the Act by giving proper opportunity of hearing to the assessee. 7. In the result, the appeal filed by the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 18-03-2025 Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 18/03/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- I.T(SS)A No. 79/Ahd/2016 A.Y. 2008-09 Page No Shri Vikas R. Patel vs. ITO 6 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 "