CHANDULAL A.SHAH(HUF),SURAT vs. THE ITO, WARD-3(3)(1),, SURAT

आदेश /O R D E R PER O.P.MEENA, AM: 1. These two appeals filed by the Assessee in HUF and Individual capacity are directed against the common order of Commissioner of Income-Tax (Appeals)-3, Surat [in short “the CIT(A)”] dated 09-06-2017 & 13-07-2017, for the assessment years 2000-01 & assessment year 2004- 05 respectively. I.T.A.No. 83/SRT/2017/A.Y. 2000-01/ By Chandulal A Shah- HUF:

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 2 of 15 2. Additional ground: During the currency of appeal, the assessee has raised additional grounds regarding reopening of assessment and issuing

notice u/s.148 of the Act. 3. We have heard the rival submissions and perused the relevant

material on record. We find that the additional ground raised by the

assessee is purely legal and does not involve any investigation of facts,

hence, same is being purely legal ground is allowed to be admitted by

following that ratio laid down by the Hon’ble Supreme Court in the case

of National Thermal Power Corporation v. CIT (1998) 229 ITR 383 (SC)

wherein it was held that the additional ground of appeal can be

admitted, whereas the issue involved in law and not involving any

investigation of facts. 4. Additional ground are raised by the assessee read as under:-

“1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in re-opening the assessment and issuing notice u/s.148 of the I.T. Act, 1961.”

placed at paper book page no.15, wherein it was observed that the

opening capital as on 01-04-1999 was shown at Rs.16,97,250/- at page

No.4, whereas the file indicated that the return of income was filed for

the A.Y.2000-01 first the time. Accordingly, the assessee has claimed his

opening capital by Rs.16,97,252/-. Further, the interest income of

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 3 of 15 Rs.51,630/- was shown. Thus, there is escapement of income of at least

to the tune of Rs.17,48,882/-. The loose paper shows such facts which

are reasons to believe that the income of Rs.17,48,882/- chargeable to

tax has been escaped assessment for the AY.2000-01, therefore, it is

required to be re-assessed by initiating provision of section 147 of the

Act. The ld. counsel further submitted that this is the second round of

proceedings before the ITAT. The ITAT, Ahmedabad vide its order in ITA

No.2082/AHD/2008 dated 17-02-2012 has set-aside the entire issue to

the file of the assessee with the specific direction whether the assessee

has utilized and taken at the instance of such proper entries on later

years which is very material to decide the taxability or otherwise of the

addition in question. The ld. counsel referred the assessment order and

submitted that the assessment was reopened on the ground that income

has escaped on account of opening capital as on 01-04-1999 of

Rs.16,97,252/-. However, no addition has been made on account of

opening capital in the assessment order, therefore, the reopening of

assessment is bad in law and not sustainable in law in the light of decision

of Hon’ble Gujarat High Court in the case of CIT v. Mohmed Juned Dadani

(2013) 30 taxmann.com 1 (Gujarat), wherein it was held that when on

ground on which reopening of assessment was based, no addition was

made by Assessing Officer, he could not make additions on some other

grounds which did not form part of reasons recorded by him. The ld.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 4 of 15 counsel further relied on the case of CIT v. Jet Airways (I) Ltd. (2010)

195 Taxman 117 (Bombay). 6. On the other hand, the ld. Sr. D.R. drew our attention to Para 14 of

the assessment order wherein the AO mentioned that on examination on

capital account. The assessee has shown opening capital balance at

Rs.16,97,252/-, the assessee asked to furnish the details of show-cause

notice dated 24-02-2014. The reply was furnished by the assessee

reproduced at para 14 of the assessment order. Further, referred at Para

13 of the assessment order wherein the AO has mentioned that the

various investments made a discussion in the above mentioned

paragraphs separately for an amount of Rs.12,70,054/- is not justifiable

after creation to proportionate capital only these investments were

brought into books of account. Likewise, the assessee shown various

loans and advances shown in balance sheet and proportionately

increased the capital balance. Therefore, it is proved that, the assessee

utilized the bogus capital created at Rs.16,97,252/- to the extent of

investments discussed in above paragraphs in the present year and the

remaining capital was accommodated by various cash loans and

advances, to brought the undisclosed investments already held by the

assessee in future course of time. Thus, the AO has made the addition

and consider the opening capital created by the assessee and allowed

the same set-off after addition made against the investment. Therefore,

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 5 of 15 the opening capital has been duly considered for addition and no

separate addition made against the said opening capital. 7. We have heard the rival submissions and perused the relevant

material available on record. We find that the reopening of assessment

was based on utilization of creation of bogus capital at Rs.16,97,252/-.

The AO has duly discussed this fact in the assessment order and observed

that the addition made by him in respect of various instalments

amounting to Rs.12,70,054/- and other amount of Rs.54,433/- are

covered by the bogus capital created at Rs.16,97,252/- to the extent of

investments discussed in the assessment order and the remaining capital

was accommodated in various cash and various loan advances. Thus, we

find that the AO has duly considered the addition to be made because of

opening capital, but did not make separate addition of said amount, as

he allowed set-off of the same against the investment holding that same

is made out of bogus capital created by the assessee. Therefore, the

contention of the assessee that no addition is made on account of

opening capital is devoid of any merits and not correct on facts and in

law. Hence, same is rejected. Accordingly, we hold that the reopening

of the assessment done by the AO is perfectly in order and as per law.

Since the facts of the present case are entirely different from the case

laws cited above by the assessee, hence, these are not applicable in the

present fact of the case. In view of this, the additional ground raised by

the assessee is therefore treated as dismissed.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 6 of 15 8. Ground No.1 relates to confirming the action of the assessing officer

in making addition of Rs.1,32,341/- on account of alleged unexplained

cash u/s.69A of the Act. 9. The AO found that the assessee has shown cash on hand at

Rs.64,806/- for which a show-cause notice was issued on 24-02-2014,

however, no details were filed. Further, the AO noted that the perusal

of balance sheet with the return of income shows that the assessee has

made investment of Rs.19,000/- in Diamond Jubilee Co-op. Bank Ltd of

Rs.12,813/- with Diamond Jubilee Co-op. Bank Ltd. of Rs.10,000/- and

Rs.10,000/- with the State Bank of India. Further, another cashbook of

the assessee shows cash in hand on Rs.67, 535/- for which no explanation

was provided. Accordingly, the AO has made an addition of Rs.1,32,341/-

. 10. In appeal, no details were provided, accordingly this addition has

confirmed. 11. Being aggrieved, the assessee filed this appeal before this Tribunal.

The ld. counsel submitted that the AO has considered two balance sheets

of the assessee showing cash in hand of Rs.64,806/- and another scan

copy of balance sheet of Rs.67,535/-. The second cash book has been

disowned by the assessee only one addition can be made which may be

correct. 12. Per contra, the ld. Sr. DR relied on the order of lower authorities.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 7 of 15 13. We have heard the rival submissions and perused the relevant material available on record. We find that there were two balance sheets

prepared by the assessee, however, one was appeared to be authentic

and has been prepared by Pankaj Danawala, and Chartered Accountant

for bogus capital entry and assets, without any actual transaction has

taken place. Therefore, the addition, if any, can be made any respective

of one balance sheet for the same period, therefore, the addition of

Rs.64,806/- is confirmed and the other addition on amount of

Rs.67,535/- is deleted. This ground of appeal is partly allowed. 14. Ground No.2 relates to confirming the addition of Rs.1,20,944/- on

account of alleged unexplained and undisclosed investment u/s.69B of

the Act. 15. The AO noted that the assessee has invested in bank FD with

Diamond Jubilee Co-op. Bank Ltd on 29-02-2000 amounting Rs.10,000/-

and FD with State Bank of India on 24-02-1998 amounting Rs.10,000/-

and FD with Diamond Jubilee Co-op. Bank Ltd. on 05-08-1997 amounting

of Rs.10,000/- and Rs.10,000/- with Diamond Jubilee Co-op. Bank Ltd.

Accordingly, the AO made addition of Rs.1,20,944/- which was also

confirmed by the CIT(A). 16. Being aggrieved, the assessee filed this appeal before this Tribunal.

The ld. counsel submitted that except the investment in Diamond Jubilee

Co-op. Bank Ltd. of Rs.13,482/- which was invested on 29-02-2000 and

the other FD could be the same for the other invested on 24-02-1998 &

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 8 of 15 08-05-1997 respectively. Therefore, the AO accordingly made the

addition of Rs.1,20,944/- on this account. 17. Per contra, the ld. Sr. DR relied on the order of the AO and CIT (A). 18. We have heard the rival submissions and perused the relevant material available on record. We find that the FDR of Rs.13,482/- dated

29-02-2000 and the other FDR does not fall during the year under

consideration. Hence, the addition of Rs.13,482/- is confirmed and the balance addition therefore, is deleted. This ground of appeal is

therefore, partly allowed. 19. Ground No.3 relates to confirming the addition of Rs.5,35,776/- on account of alleged unexplained investment in building u/s.69B of the

Act. 20. The AO noticed that the balance sheet of the assessee has shown

investment of Rs.2,71,076/- in A-74, Saifee Society, building a/c story

construction at Rs.2,64,700/-, factory shed at Rs.3,85,741/- and flat purchase at Rs.95,251/-. The assessee has not invested in the factory

shed shown in the balance sheet nor has submitted balance sheet for the

period under consideration but also in the balance sheet furnished to the

department in the later years i.e. 2001-02, 2002-03, 2003-04 & 2004-05 respectively. Therefore, the AO treated the same as undisclosed income

u/s.69B investment of Rs.5,35,766/-. 21. Being, aggrieved, the assessee filed an appeal before the Ld. CIT

(A). However, CIT (A) upheld the addition made by the AO.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 9 of 15 22. Being, aggrieved the assessee filed this appeal before the Tribunal.

The learned counsel for the assessee submitted that A-74, Saifee Society

property was purchased in the year 1989 and the document was made in

the year 1990. The building and shed were shown as per disowned balance sheet. Hence, no addition on this account could be made. 23. Per contra, the ld. Sr. D.R. relied on the orders of lower authorities. 24. We have heard the rival submissions and perused the relevant material on record. Since the property in question was purchased in the

year 1989 and same was registered in 1990. Therefore, the investment

so made does not pertains to assessment year under consideration. The investment thereon is shown out of disowned balance sheet. Therefore,

said addition is also not justified. In view of these facts and circumstances, the addition made by the AO is therefore, deleted. This

ground of appeal is allowed. 25. Ground No. 4 relates to unexplained investment of Rs. 4,80,992 on account of alleged unexplained expenditure and unaccounted

investment made under section 69A of the Act. 26. The AO noted that the balance sheet of the assessee had shown

investment in factory shed of Rs. 3,85,741 and flat purchase amount of Rs. 95,251 totaling to Rs. 4,80,992 not shown in the balance sheet for

the period under consideration, hence, same was treated as unexplained

expenditure under section 69 of the Act. 27. In appeal, CIT (A) has confirmed the same.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 10 of 15 28. Being, aggrieved the assessee filed this appeal before the Tribunal.

The learned counsel for the assessee submitted that this investment is

same as in Chandulal A Shah, Individual, the factory shed was purchased

in the year 1984 and construction of Rs. 95,241 was shown for disowned balance sheet. Hence, addition for the period under consideration is

justified. 29. Per contra, the ld. Sr. D.R. relied on the orders of lower authorities. 30. We have heard the rival submissions and perused the relevant

material on record. We find that the addition made for the assessment

year under consideration does not pertains to assessment year under consideration, hence, same is therefore, is deleted. This ground of

appeal is allowed. 31. Ground No. 5 relates to confirmation of unexplained investment of

Rs. 4,03,400 under section 69 of the Act. 32. Ground No.6 relates to confirmation of unexplained investment of Rs. 5,70,000 under section 69 of the Act. Ground No. 5 relates to

confirmation of unexplained investment of Rs. 5,70,000 under section 69

of the Act. 33. Ground No.7 relates to confirmation of unexplained investment of Rs. 2,56,000 under section 69 of the Act. 34. Ground No.8 relates to confirmation of unexplained expenditure of

Rs. 2,24,800 under section 69C of the Act.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 11 of 15 35. Ground No.9 relates to confirmation of unexplained expenses of

Rs.2,35,000 under section 68 of the Act. 36. The AO made addition in respect of investment and expenditure as

mentioned in Ground No. 5 to 9 of appeal as no details were filed. The

CIT (A) has accumulated losses confirmed the same. 37. Being, aggrieved the assessee filed this appeal before the Tribunal.

The learned counsel for the assessee submitted that the entity addition

made in respect of Ground No. 6 to 9 are related to disowned balance

sheet , which was prepared by Shri Danawala Chartered Accountant, for

certain of bogus balance sheet and bogus assets without any actual

investment made by the assessee. The assessee has disowned the said

balance sheet. In number of case laws, it was found to be bogus and

addition stand deleted. Therefore, considering these facts, these

addition made by the AO are therefore, directed to be deleted.

Accordingly, Ground No. 5 to 9 of appeal are allowed. 38. In the result, the appeal of the assessee HUF for A.Y. 2000-01 is

partly allowed.

I.T.A.No. 84/SRT/2017/A.Y. 2004-05/ Chandulal A Shah- Individual: 39. Ground No.1 to 9 are relates to confirming various addition

amounting to Rs. 21,88,791 including addition of Rs. of Rs. 1,10,000 made

in original assessment order and other additions made in fresh assessment

made in consequence to ITAT order.

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 12 of 15 40. At the outset, the learned counsel for the assessee submitted that

original assessment was completed under section 143 (3) on 26.12.2006

determining total income of Rs. 4,64,870 after making addition of Rs.

1,10,000 on account of unexplained expenditure FDR. Pf Rs. 47,968 on

account of unexplained capital creation and Rs. 28,000 on account of

interest on bank. The assessee has filed an appeal before CIT (A), who

dismissed the appeal of the assessee and confirmed the addition made by

the AO. Aggrieved with order of CIT (A), the assessee has filed an appeal

before tribunal, who vide order dated 17.02.2012 has set-aside with

specific direction. In consequence, to order of ITAT, the AO has passed

fresh assessment order under section 144 read with section 254 of the Act

on 20.03.2014. The assessee has again filed an appeal before CIT (A) who

had confirmed the addition made by the AO. The assessee is therefore,

now in appeal before this Tribunal. The learned counsel for the assessee

referred assessment order made in consequence of Tribunal order kg

addition of Rs. 21,88,786 as against which the addition of Rs. 1,10,000

made and returned in fresh assessment order. Therefore, it was submitted

that in set-aside order of Tribunal the AO cannot enhance the income

originally assessed by him, in the light of ratio laid down by the Hon’ble

Gujarat High Court in the case of Saheli Synthetics (P) Ltd. v. CIT [2008]

302 ITR 126 (Gujarat) , Hon`ble Supreme Court in the case of Mcorp Global

(P) Ltd. v. CIT [2009] 309 ITR 434 (SC) Fidelity Shares And Securities Ltd.

v. DCIT [Tax Appeal No. 187 of 2001 dated 13.06.2016 of Hon’ble Gujarat

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 13 of 15 High Court] (PB-15 to 23). It was submitted that only addition sustained

out of original assessment order is at Rs.1,10,000 hence, same can be

sustained and balance needs to be deleted. 41. Per contra, the ld. Sr. D.R. relied on the orders of lower authorities. 42. We have heard the rival submissions and perused the relevant

material on record. We find that in original assessment order the AO has

made addition of Rs. 3,94,320 and assessed total income at Rs. 4,64,870.

However, in fresh assessment the AO made addition of Rs. 21,88,786 and

assessed the total income at Rs. 22,59,341. The learned counsel for the

assessee relying on the judgement of Hon’ble Gujarat High Court in the

case of Saheli Synthetics (P.) Ltd. v. CIT [2008] 302 ITR 126 (Gujarat) in

which it was held that where an assessment is set-aside simpliciter,

without any enhancement proposal, it is always in the context of the

appeal against an order of assessment and cannot be read to mean that

the appellate authority granted power to Assessing Officer in relation to

items of assessment which were never framing part of appeal before

appellate authority. The Hon`ble Supreme Court in the case of MCorp

Global (P) Ltd. v. CIT [2009] 309 ITR 434 (SC)/[2009] 178 Taxman 347 (SC)

following decision in the case of Hukumchand Mills Ltd. v. CIT [1967] 63

ITR 232 (SC) held that It is well-settled that the Tribunal is not authorized

to take back the benefit granted to the assessee by the Assessing Officer.

It has no power to enhance the assessment. In the instant case, the

Assessing Officer had granted depreciation in respect of 42,000 bottles

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 14 of 15 out of the total number of 5,46,000 bottles. That benefit was sought to

be taken away by the Tribunal, which was not permissible in law. That

was the infirmity in the impugned judgments of the High Court and the

Tribunal. [Para 6]. Similarly, the Hon’ble Gujarat High Court in the case of Fidelity Shares And Securities Ltd. v. DCIT[Tax Appeal No. 187 of 2001

dated 13.06.2016] following the ratio of decision of Hon`ble Supreme

Court in the case of MCorp Global (P) Ltd. v. CIT [2009] 309 ITR 434 (SC),

[2009] 178 Taxman 347 (SC) and Hukumchand Mills Ltd. v. CIT [1996] 62

ITR 232 (SC) held that the Tribunal has no power under Income Tax Act,

to enhance the assessment in Appeal In view of the statutory provisions. 43. In the light of ratio laid down in above judgements of Hon`ble

Supreme Court and Hon`ble Jurisdictional High Court of Gujarat, we are

of the considered opinion that the AO cannot enhanced the income

originally assessed under section 143 (3) Is set-aside proceeding in

consequence of direction of the tribunal. Since in original assessment, the

addition were made in respect of unexplained investment in FDRs at Rs.

1,10,000 and addition of Rs. 28,000 made on account of unexplained

investment in Plot No. 48 in Block No. 15 village Vareli, which in fresh

assessment has been made at Rs.25,000. Therefore, the original addition

made by the AO in subsequent fresh assessment is only at Rs.1,35,000/

i.e. [ Rs. 1,10,000 + 25,000=1,35,000] has been returned in set-aside

assessment. Hence, only addition can be sustained up to Rs. 1,35,000 as

per original assessment. Therefore, other additions so made are amounts

Chandulal A Shah (HUF) v. ITO, Ward-3(3)(1),Surat/ITA. 83 & 84/SRT/2017/A.Y.2000-01 & 2004-05 Page 15 of 15 to enhancement of income to that extent, which is not permissible in law.

Hence, same is therefore, deleted. We are aware that original assessment

was made at Rs. 4,64,870 whereas set-aside assessment has been made

at Rs. 22,59,341 including returned income of Rs. 70,550. Therefore, we

set-aside this issue for Limited verification by the AO whether there is

other addition which has been made in original assessment and same is

again retained set-aside assessment by the AO, if so he has liberty modify

the figures of income to that extent. In view of above, Ground No. 1 to 9

of appeals are partly allowed. 44. In the result, the appeal of the assessee, Ind for A.Y. 2004-05 is

partly allowed. 45. In sum up , appeal of the assessee (HUF) for the assessment year

2000-01 and the assessee (Individual) for assessment year 2004-05 is partly

allowed. 46. This order is pronounced by listing the case on the Notice Board of

Tribunal under proviso to Rule 34(4) of Income Tax Appellate Tribunal

Rules 1963.

Sd/- Sd/- (SANDEEP GOSAIN) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat: Dated: 4th,2020/Samanta, PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ Guard file of ITAT. By order // TRUE COPY // Assistant Registrar, Surat