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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals), Ahmedabad, dated 08/09/2016 arising in the matter of assessment order passed under s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2007-08.
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The assessee has raised the following grounds of appeal: 1. The learned CIT (A) has erred in law and on facts in holding that the addition of Rs.1,05,51,219/- made by the AO is justified and thereby in confirming the said addition. 2. The learned CIT (A) has grievously erred in completely failing to take into account, consider and deal with several contentions, duly supported by binding judgments of the Hon. Supreme Court, Gujarat High Court, other High Courts and the ITAT, Ahmedabad Bench, thereby rejecting these contentions and the case-law relied upon by the appellant in a blatantly arbitrary manner and without assigning any reasons whatsoever. 3. The learned CIT (A) has further erred in law and on facts in holding that the legal contention challenging the validity of reassessment proceedings going to the root of the matter based on facts available on record cannot be considered ignoring the fact that the addition made by the AO was contested as erroneous not only on facts but also in law. 4. On the facts and in the circumstances of the case and in law the learned CIT (A) ought to have quashed the reassessment proceedings, annulled the assessment made in pursuance thereto and ought to have deleted the addition of Rs.1,05,51,219/-. 5. It is therefore prayed that the reassessment proceedings may be quashed, the assessment may be annulled and the addition of Rs.1,05,51,219/- may be deleted. 6. Your appellant craves leave to add, alter or amend any ground of appeal at the time of hearing.
The interconnected issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 1,05,51,219/- being income from undisclosed sources on account of unaccounted investments made in the land.
3.1 The facts in brief are that the assessee in the present case is an individual and earning income from salary, house property and capital gain. The assessee along with Shri Kanchanbhai Baldevbhai in the year under consideration has purchased piece of land bearing survey number 311/4 & 311/6 for ₹ 6 Lacs only. The share of the assessee in the land was 50% only. Therefore, the assessee has shown investments at ₹3 Lacs in the income tax return.
3.2 There was a search and seizer operation under section 132 of the Act carried out at Himalaya group dated 22nd April 2008. Among other documents seized during the search, the document bearing No. 84 of annexure A1/6 was also seized. On
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confrontation of such document to the key persons of the Himalya group namely Shri Rohit Modi and Shri Kamlesh Modi, admitted in a statement furnished under section 132(4) of Act that they have sold the land to the assessee and Shri Kanchanbhai Baldevbhai for ₹ 6 Lacs on papers whereas they have received unaccounted cash of ₹ 2,11,02,438/- from both the parties which was offered to tax by Himalya Group in their respective income tax returns as undisclosed income.
3.3 Based on the above information, the proceedings under section 147 of the Act were initiated against the assessee after recording the reasons that the income of the assessee has escaped assessment. Accordingly, a notice under section 148 of the Act was issued upon the assessee.
3.4 The assessee during the assessment proceedings contended that he has purchased the land along with Shri Kanchanbhai Baldevbhai from Smt. Pareshben Dahyalal Modi for ₹6 Lacs only and his share of Rs. 3 Lacs was duly disclosed in the books of accounts/income tax return. The assessee further claimed that no amount over and above the documented price was paid by him. Accordingly, the assessee contended the statement furnished by the Shri Rohit Modi and Shri Kamlesh Modi cannot be used for any kind of addition in the hands of the assessee as they were not the concern party in the transaction.
3.5 It was also submitted by the assessee that he is not concern about the fact how the transaction for the sale of land was recorded by the vender in her books of accounts. The onus lies upon the revenue to establish based on the documentary evidence that the assessee has made any unaccounted investments.
3.6 However, the AO disregarded the contention of the assessee by observing that seized documents showing the receipt in cash and cheque against the sale of impugned land. The transaction of cash was duly admitted by the key persons of Himalaya Group namely Shri Rohit Modi and Kamlesh Modi by offering the same to
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tax. Furthermore, the seller being Smt. Pareshben D Modi belongs to the same Himalaya group. Therefore, the evidence in the form of seized paper and the statement furnished by the person namely Shri Rohit Modi and Kamlesh Modi who are son of seller cannot be ignored merely on the reasoning that the land was sold by Smt. Pareshben D Modi.
3.7 Likewise, there was no request made by the assessee for the cross verification of the statements recorded under section 132(4) of the Act of the persons namely Shri Rohit Modi and Kamlesh Modi which was used for making the addition in the hands of the assessee. Thus, the conduct of the assessee suggests that he had no explanation for having made investment of his unaccounted income in the impugned land. Thus the AO, in view of the above, treated the sum of Rs. 1,05,51,219/- being 50% of Rs. 2,11,02,238/- as unaccounted investment and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A)
4.1 The assessee before the learned CIT (A) submitted that the seized materials which have been used for making the addition have not been provided by the AO for his rebuttal. Likewise, the statement of the 3rd party cannot be used against the assessee for the purpose of the addition.
However, the learned CIT (A) rejected the contention of the assessee by observing as under: 3.5. The facts of the case and the submissions are considered. The AO has made the addition or. the basis of seized material and the statement of the main person of the Himalaya Group. In the statement, Shri Rohit Modi who is the main person of Himalaya Group had clearly admitted that he had received Rs.2,11,2238/- in cash for sale of land in Shela at SurveyNo.311/4 and 311/6, Block No.400, admeasuring 9438 sqr. Yards. The AO has referred to the documents seized from the various, premises of the Himalaya Group and particularly page No.84 of annexure -A -1/6. There is no dispute regarding the 'purchase'of the said land by the assessee alongwith Shri Kanchanbhai B. Patel. The assessee has simply deny the cash portion of the transaction, however, evidentiary value of seized documents as well as statement of the main person cannot be denied. Considering the above, the addition
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made by the AO is justified and the same is confirmed. Thus the ground of appeal is dismissed. 4. In the written submission the appellant has submitted that the proceedings initiated u/s.147 of the Act are not valid and deserves to be quashed. However, the appellant has not raised any ground regarding the validity of the reassessment u/s.147 of the Act in the ground of appeal filed alongwith Form No.35. Therefore, the submission of the appellant regarding the validity of reopening of assessment cannot be considered.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 59 and submitted that the land in dispute was not purchased from the search party. Furthermore, the opportunity of cross examination was not provided of the persons relied by the Revenue for the purpose of addition. In the case of co-owner, the addition was deleted by the ld. CIT-A.
On the contrary the learned DR before us contended that there was not made any request by the assessee for the cross examination of the statement and seized documents. The ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case are undisputed which have been elaborated and discussed in the preceding paragraph. For the sake of brevity and convenience, we are not inclined to repeat the same.
9.1 Admittedly, the entire basis of the addition in the hands of the assessee on account of unaccounted investment in the land was based on the documents seized from the premises of 3rd party in the course of search wherein the person namely Shri Rohit Modi and Kamlesh Modi have also accepted to have received the unaccounted money in cash from the assessee and other co-owner which was also offered to tax. First of all, we note that the land was sold by Smt. Pareshben D. Modi to the assessee and other co-owner and not by the parties as discussed
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aforesaid. Indeed, the vendor is the mother of the aforesaid person namely Shri Rohit Modi and Kamlesh Modi. Thus there is close connection between the vendor of the land viz a viz the parties in whose possession the material was seized/admission to have received with respect to the unaccounted money paid in cash. Thus the 1st issue arises whether the materials seized and the statement furnished by the aforesaid parties can be used against the assessee. The answer stands in affirmative. It is for the reason that the opportunity for the rebuttal to the assessee for the seized documents and the statements recorded under section 132(4) of the Act are sine qua non in order to meet the principles of natural justice. This requirement has to be complied with by the revenue even in a situation where the assessee does not demand for the seized materials/statements recorded under section 132(4) of the Act if revenue seeks to make the addition on the basis of such material and statement. It is for the simple reason that the documents which have been relied upon by the revenue for making the addition to the income of the assessee has to be provided to the assessee for the rebuttal. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Smt. Varshaben Bharatbhai Shah vs. Appropriate authority reported in 221 ITR 819, the relevant part of the judgment is reproduced here under: As held in a catena of decisions, if the adjudicator is going to rely on any material, evidence or document for basing his decision against the individual, then the same must be placed before him for comments and rebuttal It is regarded as a fundamental principle of natural justice that no material should be relied on against a party without giving him an opportunity of explaining the same. The right to know the materials on which the authority concerned is going to take a decision is a part of the right to defend oneself. Non-disclosure of evidence to the affected party has been held to be fatal to the hearing proceedings.
9.2 Since, the due process of providing the opportunity for the rebuttal of the assessee has not been done, the additions made in the assessment under section 143(3) read with section 147 of the Act are not sustainable.
9.3 It is also important to note that the assessee has acquired the impugned land as co-owner but there was no proceedings initiated against the co-owner by issuing notice under section 148 of the Act. Thus it is transpired that the revenue in the
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hands of one party has accepted the transaction for making the investment of ₹ 3 Lacs only but in the case of other party being the assessee it has not been accepted. Thus, it appears that the Revenue has adopted different approaches for the similar transactions with respect to different assessee. In our considered view, the Revenue is not expected to pick and choose the particular assessee for the purpose of the assessment with respect to the common transactions carried out by the parties.
9.4 Before parting, it is also important to bear in mind that there was the search proceedings with respect to the co-owner namely Kanchanbhai Baldevbhai under the provisions of section 132 of the Act. As a result of search proceedings, assessment order was framed under section 153A of the Act where addition was made on account of unaccounted investment in the land as discussed above which was subsequently deleted by the learned CIT (A) by observing as under: 9.1 We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, and having noted that the additions of Rs.11,05,51,0007- is not based on any incriminating material found during the search operations on the assessee, we delete the said addition." Since the issue, related to the addition which was not based on any seized incriminating material and the proceedings in the assessment year under consideration were not abated on the date of initiation of search, has been adjudicated, there is no need to comment on the merit of the issue." 9.2 In view of the above, the powers of the AO to make addition were confined to the extent of availability of seized and incriminating material on record and also the other evidence gathered by the AO in the course of assessment proceedings to correlate the same with such incriminating material found and seized in the search. As discussed above, there is no indication in the contents of the assessment order that the addition was made on the basis of seized material. The Remand Report of the A.O. was also silent on this issue. Therefore, after considering the facts of the case, position of law on the issue and respectfully following the decisions of the jurisdictional ITAT and the Hon'ble High Court, in my considered opinion, the action of the AO was not justified. Accordingly, the ground of appeal is allowed.
9.5 From the above finding of the learned CIT (A), we find that the issue on merit was not decided rather the appeal was decided on technical reason that there cannot be any addition with respect to the unabated assessment years until and unless there was found some document of incriminating nature. Admittedly, there was no document found from the premises of the co-owner in the course of search with respect to the impugned unaccounted investments. Further, the order of the
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learned CIT (A) was not maintainable before the ITAT for the simple reason that the tax effect in the dispute was less than Rs. 50 lacs.
9.6 Be that as may be, the issue in respect of the co-owner has reached to the finality that there was no addition made in his hand despite he was the co-owner in the deal of purchase of the land as discussed above. Thus to our understanding, there cannot be any addition in the hands of the assessee being the co-owner of the property purchased from the party namely Smt. Pareshben D Modi. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 09/12/2021 at Ahmedabad.
Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 09/12/2021 Manish