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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI SANDEEP GOSAIN & SHRI O.P.MEENA
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.”
The ld. counsel referred the reasons for reopening of assessment 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 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).
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.
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.
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/- .
In appeal, no details were provided, accordingly this addition has confirmed.
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.
Per contra, the ld. Sr. DR relied on the order of the AO and CIT (A).
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.
Per contra, the ld. Sr. D.R. relied on the orders of lower authorities.
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.
Per contra, the ld. Sr. D.R. relied on the orders of lower authorities.
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.
Per contra, the ld. Sr. D.R. relied on the orders of lower authorities.
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.
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.
In the result, the appeal of the assessee, Ind for A.Y. 2004-05 is partly allowed.
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.
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.