DCIT-CC-4(3),MUMBAI, MUMBAI vs. LALIT SHAH, MUMBAI

Based on the information available, Appellant contends that, the Learned AO erred in law by initiating proceedings under section 153C of the ITA, 1961 after 01/04/2021. The Appellant further contends that, the search material is received by the AO only after 01/04/2021. As such the proceedings are bad in law and liable to be quashed.

Appellant Assessee herein craves leave to add/ modify / alter/ delete all/ any of the grounds of appeal.“ 3. Brief facts of the case are that assessee is individual filed return of income for A.Y. 2017-18 on 02.10.2017 declaring income of Rs. 14,65,990/-. A search action was carried out in Yuvraj Sitaram Dhamale and Wellbuild Merchants Private Limited. This group were engaged in the real estate development. In the search action certain incriminating material was found / loose papers and registers pertaining to acceptance of on-money on sale of various units / property by Wellbuild Merchants Private Ltd. were found and seized. Wellbuild Merchants Private Limited filed an application before Income Tax Settlement Commission (ITSC) wherein they allegedly accepted the on-money in cash on account of sale of flat and other units. The assessee has purchased a flat no. 1703 Tower A in the project Rajgruhi Residency developed by Wellbuild Merchants Private Limited for consideration of Rs. 1.07 crore. The AO also noted that assessee has paid cash amount of Rs. 79.00 lacs against purchase of said property from Wellbuild Merchants Private Limited. On the basis of material found and seized in the search, the AO issued notice under section 153C. In response to notice under section 153C, the assessee filed his return of income declaring same income as filed declared originally. During assessment, the AO asked the assessee to furnish complete details and documents to prove the source of on-money paid in cash for purchase of flat and as to why same should not be treated as undisclosed income. The AO recorded that assessee filed reply dated 20.12.2021. The contents of reply are recorded / scanned on page no. 3 of assessment order. In the reply, the assessee stated that he has not paid any cash amount nor has any idea about the entries reflecting in the diaries of search person. The assessee furnished copy of agreement and allotment letter, bank statement and bank passbook. The reply of assessee was not accepted by AO. The AO recorded / extracted statement of key person of Wellbuild Merchants Private Ltd. wherein they have allegedly disclosed about receipt of on-money. The AO recorded certain questions and answers recorded by Investigation Wing. The AO also recorded certain hand written entries on page no. 11 of assessment order which relates to flat no. A 1703 which contend the reference of name of assessee. By referring various entries on loose papers the AO on page no. 11 of assessment order recorded that assessee has paid Rs. 25.00 lacs in cash on 20.04.2016 and Rs. 20.00 lacs on 05.10.2016 which were confronted to the assessee in the show cause notice. The AO further recorded that director of Wellbuild Merchants Private Limited has admitted of receipt of on-money against the sale of flat from various customers which were not recorded in the books of accounts maintained by them. From the facts of on-money receipts and the application filed by said builder before Income Tax Settlement Commission, it is found that assessee has paid Rs. 79.00 lacs as on- money for purchase of flat. The AO accordingly added Rs. 79.00 lacs on account of unexplained investment by taking view that assessee failed to establish nature and source of unaccounted cash money. The addition of Rs. 79.00 lakhs was taxed under section 115BBE. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee challenged the additions under section 69 in the assessment order passed under section 153C. The assessee filed detailed written submission. In the written submission, the assessee also challenged the action of AO in completing assessment under section 153C. The submission of assessee are recorded in para 5 of order of ld. CIT(A). The assessee in his submission stated that under the provisions of section 153C, AO is not empowered to make addition other than those based on documents found during search and seizure action. The assessee also raised plea against recording of satisfactory note and relied upon the CBDT Circular No. 24 & 25 of 2015 dated 31.12.2015. By referring the contents of CBDT circular, the assessee stated that as per circular it is mandatory on recording a satisfaction note and to transfer the record to the other AO to his jurisdiction over other persons under section 158BD/153C. As per circular, it is mandatory for the AO to prepare a satisfaction note before transmitting record to the AO having jurisdiction over the other person. Satisfaction note serves as a crucial document confirming that conditions for proceeding under these sections are meted out. In case of assessee, the AO failed to comply with requirement of satisfaction note before transferring the record. Non- compliance of mandatory requirement as severe implications. The assessee also challenged the addition on merit. On merit, the assessee stated that as per para 3.2 of assessment order, the assessee booked flat no. 1703 and whereas loose papers found by assessee contend flat no. 1203. The assessee has agreement for flat no. 1703. Thus, the addition of Rs. 79.00 lacs is not justifiable. Further, as per incriminating document, excel sheet found from third party that is Pravin Gawli states that total cost of the flat is Rs. 1,00,26,590/-. The AO added on-money of Rs. 79.00 lacs which is around 80% which is practically impossible. Further, as per the registered agreement, the assessee purchased flat for a consideration of Rs. 71.50 lacs. However, in excel sheet, it is recorded that consideration of flat is of Rs. 27,24,090/-. Thus, the amount of total consideration alleged on-money and cheque portion are contrary to each other. Such facts clearly denote that incriminating documents are baseless and AO has failed to make any enquiry. With respect to another evidence of Rs. 20.00 lacs, the name of assessee is mentioned as “Lalit Manikchand Shah” as can be seen from the index II (title of registered document) whereas the name found any evidence is “Lalitkumar Shah”. Thus, it is not concrete evidence for making evidence. The assessee also relied on the decision of Pune Tribunal in case of Bharat M. Jain vs ACIT in ITA Nos. 898 to 905/PUN/2022 wherein similar addition was deleted. 5. The ld CIT(A) after considering the submissions of the assessee and the material available on record deleted the entire addition of on money by taking view that on the basis of same search action, similar addition was made in case of Akash Ashok Mehta on account of on-money payment of Rs. 12.00 lacs The additions were deleted by Tribunal. Further, in case of Bharat & Jain, similar addition was deleted by Tribunal in ITA No. 898 & 899/Pune/2022. The ld. CIT(A) in para 6.2 of his order also recorded that initial cash payment (on-money) was stated to be made on 22.04.2016 whereas the agreement was actually executed on 12.08.2020. However, on the legal objection with regard to non-compliance in recording satisfaction, the ld CIT(A) has not given any finding. 6. Aggrieved by the order of ld CIT(A), the revenue has filed present appeal before this Tribunal. On receipt of Memorandum of appeal, the assessee has filed his C.O. raising various grounds as recorded in para-2 above.

We have heard the submissions of the parties and have gone through the orders of lower authorities carefully. At the outset of hearing the learned authorised representative (AR) of the assessee submits that in his CO he has raised legal ground which goes to the root of the matter and may be considered first. The ld. AR of the assessee fairly submits that there is delay of 196 days in filing C.O. The notice of appeal by Revenue was received on 16.12.2024. The delay is neither intentional nor deliberate. At the time of service of notice of appeal filed by Revenue, copy of Form 36, grounds of appeal and other papers were not provided to assessee. The assessee filed application before Tribunal and copy of Form 36 and grounds of appeal were provided on 29.01.2025. The assessee filed application before AO / DCIT Central Circle for providing copy of satisfaction note to enable the assessee for preparing C.O. The copy of satisfaction note was not provided to the assessee. In absence of requisite details, no opinion could be received on the matter. However, on consultation with experts, cross objection was filed on 29.07.2025. The time spent during the intervening period is unintentional. There is no melafide on the part of assessee. The assessee has good case on merit on the grounds raised in C.O. The ld. AR of the assessee prayed for condoning the delay in filing C.O. to support his submission relied upon the decision of Lucknow Tribunal in UP State Food & Essential Commodities Ltd. vs ITO in ITA No. 520/Lkw/2015 dated 30.11.2022 and Kolkata Tribunal in ACIT vs Manaksia Limited in ITA No. 1611/Kol/2019 dated 22.04.2022

In support of his CO, the ld AR of the assessee submits that AO has recorded common satisfaction for different assessment years against various assesses who has booked flat with Dhamale Group of Pune. The satisfaction under section 153C has to be recorded for each assessment year for each of the assessee. Consolidated satisfaction note vitiate the entire assessment proceedings. On similar set of fact, the Pune Tribunal in Chitra Narendra Parmer vs ACIT in ITA No. 1262 & 1269/Pun/2024, Ashok Bharti Goswami in ITA No. 1263 & 1272/Pun/2024 and in Ramanalal Vikulal Shah in ITA No. 1264 & 1268/Pun/2024 held that consolidated satisfaction note recorded for different assessment years would vitiate the entire assessment proceedings. The consolidated satisfaction note is not in accordance with law, therefore, entire assessment proceedings is liable to be quashed. On merit, the ld. AR of the assessee submits that AO acted on the basis of third party information. There is no evidence of actual payment of on-money. The assessee has paid entire consideration by way of banking channel. The transaction is duly recorded in the registered document. On similar set of fact, similar addition was deleted in case of Bharat & Jain vs ACIT (supra). The ld. CIT(A) while allowing relief to the assessee has followed the order of Tribunal. 9. On the other hand, the ld. Senior Departmental Representative (ld. Sr. DR) for the Revenue supported the order of AO. The ld. Sr. DR for the Revenue submits that during the search action on Wellbuild Merchants Pvt. Ltd. sufficient incriminating material was found and seized which reveals payment of on-money by various customers of the group. The AO recorded satisfaction and completed assessment. As per performa recording satisfaction, the assessee has paid cash of Rs. 25.00 lacs on 20.04.2016 and Rs. 20.00 lacs on 05.10.2016. The key person of such party in his statement has accepted about payment of on-money. The assessee has purchased a flat in Rajgruhi Residency Project developed by searched person. The search person in the application filed before Income Tax Settlement Commission accepted payment of on-money. 10. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws. On careful perusal of grounds of appeal raised by Revenue, we find that AO / revenue has challenged the action of ld CIT(A) in deleting the addition of Rs. 79.00 lacs. Admittedly, the tax effect involved in the present appeal is less than the threshold limit of Rs. 60.00 lacs for filing appeal before Tribunal. Though, the AO has mentioned that tax effect in the present appeal is of Rs. 61,02,750/-, which is factually incorrect. The addition in the present case does not falls in the exception clauses of CBDT Circular No. 03/2028. Thus, the appeal of Revenue is not maintainable on this technical issue alone. Hence, the same is dismissed as not maintainable. However, the revenue is given liberty to get the appeal revived if at later stage it is discovered that the nature of additions falls in the exception clause of any Circulars of CBDT. 11. Further, considering the facts that we have dismissed the appeal of revenue on technical issue of tax effect, hence the adjudication on the grounds raised in the C.O. of the assessee have become academic. In the result, the grounds of appeal raised by the revenue are dismissed. 12. In the result the appeal of Revenue is dismissed and C.O. filed by assessee have becomes as infructuous and dismissed as such.