THE INCOME TAX OFFICER, WARD 2(3) V. SHANTI ENTERPRISE

TAX APPEAL NO. 485 of 2008

AI Insights

The case revolves around a dispute between the Income Tax Officer, Ward 2(3), and Shanti Enterprise concerning the assessment of unexplained credits amounting to Rs.1,45,00,000 during the Assessment Year 2000-01. The Income Tax Officer had initially added this amount to the assessee's income, deeming it unexplained. However, the CIT (A) partly allowed the assessee's appeal, which led to the Tribunal's decision in favor of the assessee, dismissing the revenue's appeal. The High Court's examination focused on whether the Tribunal was correct in its decision to delete the addition made by the Assessing Officer.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 361526 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Assessment Year: 2000-2001
• Other Referred Cases: Deputy Commissioner of Income Tax v. Rohini Builders
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Assessment; Income Tax; Penalty proceedings; Reopening of assessment; Unexplained credits
• Section: 148; 142(1); 143(2); 143(1); 271(1)(c); 234B

Judgement Text

"O/TAXAP/485/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 485 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI Sd/- and HONOURABLE MR.JUSTICE G.R.UDHWANI Sd/- ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No ================================================================ THE INCOME TAX OFFICER, WARD 2(3)....Appellant(s) Versus SHANTI ENTERPRISE....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR RK PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE G.R.UDHWANI Date : 10/06/2016 Page 1 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION O/TAXAP/485/2008 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By filing this appeal, the revenue has challenged the order dated 15.6.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad, in ITA No.3573/Ahd/2004, whereby the Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the revenue. 2. The assessee is a partnership firm engaged in construction of textile market known as “Millenium Market”. The assessee filed return of income on 19.10.2000 for the Assessment Year 2000-01 declaring 'nil' income. Said return was processed under Section 143 (1) of the Income Tax Act, 1961 (for short, “the Act”). Thereafter, the Assessing Officer, issued notice under Section 148 of the Act for reopening assessment. After the return was filed, notice under Section 143 (2) of the Act was issued and, thereafter notice under Section 142 (1) of the Act was also issued. In response to the said notice, the representative of the assessee attended the hearing before the Assessing Officer from time to time and submitted details, which were called for by the Assessing Officer. The Assessing Officer, after considering the details submitted on behalf of the assessee and determined total income of the assessee at Rs.1,45,00,000/- vide order dated 29.4.2004. The Assessing Officer also directed initiation of penalty proceedings to levy penalty under Section 271 (1) (c) of the Act. 3. Being aggrieved by the said order dated 29.4.2004, the assessee preferred an appeal before the CIT (A), which was partly allowed vide order dated 29.04.2004 in favour of the assessee. Page 2 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION O/TAXAP/485/2008 JUDGMENT 4. Feeling aggrieved by order of CIT (A) deleting the addition of Rs.1,45,00,000/- made by Assessing Officer, the assessee preferred an appeal before the Income Tax Appellate Tribunal being ITA No.3573/Ahd/2004. 5. By order dated 15.6.2007, Tribunal dismissed the appeal filed by the revenue. Therefore, present appeal is preferred by the department. 6. At the time of admitting present appeal, this Court has framed following question of law:- “Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in deleting the addition made by the Assessing Officer on account of unexplained credits of Rs.1,45,00,000/- in the names of 19 creditors?” 7. From the record, it emerges that during the course of assessment proceedings for the Assessment Year 2000-2001, it was noticed that the assessee had shown receipts from booking deposit, out of which Rs.1,55,50,000/- had been received from the following persons:- Sr. No. Name of the person Amount in Rs. Date of deposit 1 Ashoka Diamond 5,75,000 20.07.1999 2 Bhartibhai Vaghjibhai Vora 6,00,000 20.07.1999 3 Bhanwarlal K. Nama 5,55,000 20.07.1999 4 Bharat Gems 5,30,000 20.07.1999 5 Chinubhai R. Shah 6,00,000 20.07.1999 Page 3 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION O/TAXAP/485/2008 JUDGMENT 6 Chunilal B. Savalia 5,00,000 20.07.1999 7 Chandrakant C. Soni 5,50,000 20.07.1999 8 Dhara Gems 5,00,000 20.07.1999 9 Ganesh N. Prajapati 5,60,000 20.07.1999 10 Heena Diamond 5,00,000 20.07.1999 11 Hirabhai Dalichand Patel 5,60,000 20.07.1999 12 Jaysukh S. Mehta 5,50,000 20.07.1999 13 Jayantilal T. Mehta 5,90,000 20.07.1999 14 Jayantibhai Kalubhai Patel 55000 20.07.1999 15 Jignesh M. Doshi 5,50,000 20.07.1999 16 K.P.Diamond 5,70,000 20.07.1999 17 Kailshbhai Tulsibhai Patel 5,30,000 20.07.1999 18 Manisha Synthetics 35,00,000 20.07.1999 19 Mahendra Chandulal Doshi 5,00,000 20.07.1999 20 Pravinbhai Dhanjibhai Kubadia 5,50,000 20.07.1999 21 Rameshbhai B. Patel 5,50,000 20.07.1999 22 Rahul Gems 5,50,000 20.07.1999 23 S.P.Enterprise 5,50,000 20.07.1999 Total 1,55,50,00 0 8. Aforesaid entries were not found to be genuine and, therefore, the Assessing Officer directed to issue demand notice and challan and to charge interest under Section 234B of the Act. He also directed to issue penalty notice under Section 271 (1) (c) of the Act. 9. Mr.Sudhir Mehta, learned counsel for the appellant contended that amount which has been referred to in the table given above is the source of income of the assessee and, therefore, the Assessing Officer, after giving elaborate reasons, directed to initiate the proceedings as above. He also Page 4 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION O/TAXAP/485/2008 JUDGMENT submitted that the Assessing Officer has discussed the evidence with regard to all these 23 entries, therefore, the Tribunal could not have passed the impugned order in favour of the assessee. 10. Mr.R.K.Patel, learned advocate for the respondent- assessee supported the impugned order and submitted that the Tribunal has not committed any error while passing the impugned order. 11. We have heard both the learned counsel and perused the record. We have also gone through the impugned order. The Tribunal has observed that all the aforesaid 23 persons, except Shri Kailashbhai Tulsibhai Patel, from whom deposits were received are the income tax assessees. They are having PAN numbers. The amounts have been received through the banking channels. Copies of accounts of each depositor were duly filed. The assessee has duly explained in respect of each of the depositors and the circumstances under which deposits were received by the assessee. The deposited money represents the amounts towards booking received initially through M/s.Siddharth Corporation along with which the assessee has engaged in joint venture of developing the project on the land which was allotted from Surat Municipal Corporation. This is an admitted fact that the assessee has not carried out any business during the year under consideration. No evidence on record has been brought that the assessee had earned income during the year. It is rightly found by the tribunal that the assessee has duly discharged its burden of proof. In the case of Deputy Commissioner of Income Tax Page 5 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION O/TAXAP/485/2008 JUDGMENT v. Rohini Builders reported in 256 ITR 360, amounts were received by the assessee by account payee cheques and initial burden of proving the credits was discharged. It is held that the assessee need not prove the source of the credits and the fact that the explanation was not satisfactory would not automatically result in deeming amounts as income of the assessee. Therefore, in our view, the view taken by the Tribunal is just and proper and it is not required to be interfered with. In that view of the matter, question posed for our consideration is answered in favour of the assessee and against the department. Accordingly, this Tax Appeal is dismissed. Sd/- (K.S.JHAVERI, J.) Sd/- (G.R.UDHWANI, J.) *malek Page 6 of 6 Downloaded on : Tue Jun 03 15:30:15 IST 2025 Uploaded by R.S. MALEK(HC00180) on Wed Jun 29 2016 2016:GUJHC:21211-DB NEUTRAL CITATION "