THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(4),, AHMEDABAD vs. SHRI VIRENDRA MAHSUKHBHAI THAKER,, BARODA

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ITSSA 9/AHD/2018Status: DisposedITAT Ahmedabad14 August 2024AY 2012-138 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) rightly admitted the additional evidence as the assessee could not file all evidence before the AO due to circumstances beyond control. Regarding unexplained investments in Sakar VII and land, the Tribunal found that the assessee provided documentary evidence, including sale deeds and payment details, which were verified by the CIT(A), and thus dismissed the Revenue's grounds. For unexplained cash credit, the Tribunal noted that the assessee provided details of identity and creditworthiness before the CIT(A), leading to deletion of the addition, and dismissed the Revenue's ground. On the proprietor capital account, the Tribunal upheld the CIT(A)'s finding that while the difference in opening balance was not reconciled, other entries were accepted as reflected in audited accounts, dismissing the Revenue's ground. Regarding unexplained cash deposits, the Tribunal noted the CIT(A) had granted partial relief, considering the cash deposit derived from agricultural activities, and dismissed the Revenue's ground. The Tribunal also dismissed the Revenue's ground concerning agricultural income treated as income from other sources. Consequently, the Revenue's appeal was dismissed. For the assessee's cross-objection, grounds 2 and 3 were not pressed. Ground 1 regarding agricultural income was dismissed as the CIT(A) had made a categorical finding. Ground 4, concerning the ad hoc disallowance of 50% of expenditure, was partly allowed, with the Tribunal restricting the disallowance to 25% of the expenditure, considering the totality of facts and the lack of supporting evidence before the AO and CIT(A).

What were the facts?

A search action under Section 132 of the Income Tax Act, 1961, was conducted on March 15, 2013, covering the assessee, Shri Virendra Mahsukhbhai Thaker, and other entities in the India Green Reality Group. Notices under Section 153A were issued for Assessment Years 2007-08 to 2012-13. The assessee filed a return for AY 2012-13 on March 6, 2013, declaring income from business, profession, and other sources, including agricultural income. A return under Section 153A was later filed on January 27, 2015. During the assessment proceedings, the Assessing Officer (AO) made several additions, including for unexplained investment in Sakar VII, land, cash credit, proprietor capital account, cash deposits, and agricultural income treated as income from other sources. The assessee appealed to the CIT(A), who partly allowed the appeal. The Revenue appealed this decision, and the assessee filed a cross-objection.

What were the issues?

1. Whether the CIT(A) erred in admitting additional evidence, contrary to the Assessing Officer's findings and the opportunity provided to the assessee. 2. Whether the CIT(A) erred in deleting the addition of Rs. 76,57,700/- on account of unexplained investment in Sakar VII. 3. Whether the CIT(A) erred in deleting the addition of Rs. 5,25,000/- on account of unexplained investment in land. 4. Whether the CIT(A) erred in deleting the addition of Rs. 63,62,611/- on account of unexplained cash credit. 5. Whether the CIT(A) erred in restricting the addition of Rs. 25,00,000/- on account of unexplained proprietor capital account to Rs. 1,00,000/-. 6. Whether the CIT(A) erred in deleting the addition of Rs. 19,39,000/- on account of unexplained cash deposit in bank account. 7. Whether the CIT(A) erred in deleting the addition of Rs. 7,00,000/- on account of agricultural income treated as income from other sources. Assessee's Contentions: - Additional evidence was rightly admitted as the assessee was not given sufficient opportunity by the AO. - Relied on CIT(A)'s order for merits of additions partly allowed. - Cross-objection grounds 2 & 3 (disallowance of depreciation and ad hoc disallowance of expenditure) were not pressed. - Ground 1 of cross-objection: CIT(A) erred in confirming addition in respect of agricultural income. - Ground 4 of cross-objection: CIT(A) erred in confirming ad hoc disallowance of 50% of expenditure. Revenue's Contentions: - CIT(A) failed to appreciate that additional evidence should not have been admitted. - Investments in Sakar VII and land were not explained to the AO. - Genuineness, creditworthiness, and identity of creditors for cash credit were not discharged. - CIT(A) erred in deleting additions on unexplained investments, cash credit, and cash deposits. - CIT(A) erred in restricting the addition on proprietor capital account. - CIT(A) erred in deleting addition on agricultural income treated as income from other sources. - Relied on AO's order and prayed for its restoration.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 142(1),Section 271(1)(b),Section 144,Section 139,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD

Before: Ms. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Sunil Maloo, CA
For Respondent: Shri H. Phani Raju, CIIT-DR
Hearing: 25.06.2024Pronounced: 14.08.2024

PER SUCHITRA KAMBLE, JUDICIAL MEMBER:

This appeal is filed by the Revenue and Cross Objection is filed by the assessee against order dated 28.10.2017 passed by the CIT(A)-13, Ahmedabad for the Assessment Year 2012-13.

IT(SS)A No.9/Ahd/2018 & C.O. No.48/Ahd/2019 Assessment Year: 2012 & 13 Page 2 of 8 2. The Revenue has raised the following grounds of appeal :-

“1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) failed to appreciate the facts brought about by the Assessing Officer in his assessment order as well as the objections raised in the remand report and has admitted the additional evidences. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in law and/or on facts in deleting the addition on unexplained investment in Sakar VII of Rs.76,57,700/ 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition on unexplained investment in land of Rs.5.25,000/- 4. On the facts and in the circumstances of the case and in law, the Ld.CITA) has erred in law and/or on facts in deleting the addition on unexplained cash credit of Rs.63,62,611/- 5. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in law and/or on facts in restricting the addition of unexplained proprietor capital account of Rs.25,00,000/- to Rs.1,00,000/- 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition on unexplained cash deposit in bank account of Rs.19,39,000/- 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.7,00,000/- on account of agricultural income treated as income from other sources 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O 9. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” The assessee, in his Cross Objection, has raised the following grounds:-

“1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming addition in respect of agricultural income to the extent of Rs.9,14,762/- on the assumption that the aforesaid agricultural income was in the nature of income from other sources. 2. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming addition to the extent of Rs.1,00,000/- from out of the total addition of Rs.25,00,000/- made by the Assessing Officer on the alleged ground that the aforesaid opening capital balance was in the nature of undisclosed income.

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3.

On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming disallowance of depreciation on printer of the cost of Rs.5,700/- and other machinery of the cost of Rs.1,05,000/- acquired by the respondent during the previous year relevant to the present assessment year only for business purposes which were duly reflected in the accounts. 4. On the fats and in the circumstances of the case, the learned CIT(A) erred in confirming addition of Rs.4,67,453/- being ad hoc disallowance @ 50% of the total expenditure incurred by the respondent for business purposes.” 3. A search action under Section 132 of the Income Tax Act, 1961 was carried out in the group cases of India Green Reality Group on 15.03.2013. The assessee was also covered under the search along with other cases of the Group. Notices under Section 153A of the Act were issued on 28.10.2013, requiring the assessee to file his return of income for the A.Y. 2007-08 to 2012-13 within 30 days. The notices were duly served upon the assessee but the assessee did not file the requisite returns within the stipulated period. Later on, notice under Section 142(1) of the Act alongwith questionnaire was issued on 14.10.2014 and another notice under Section 142(1) of the Act was issued on 31.10.2014 alongwith penalty notice under Section 271(1)(b) of the Act for non-compliance of notice under Section 142(1) of the Act issued earlier. Since no response received from the assessee, the Assessing Officer called upon the assessee vide questionnaire dated 14.1.2014 as to why the assessment should not be completed ex-parte as per provision of Section 144 of the Act. One letter was received by the Department asking upon time for furnishing the details. The Assessing Officer proceeded on the basis of material available and observed that return of income for A.Y. 2012-13 was filed on 06.03.2013 under Section 139 of the Act declaring income of Rs.5,68,850/-. The assessee derives income by way of income from Businessmen & Profession and income from Other Sources. Agricultural income of Rs.17,14,762/- was also shown in the return. Return under Section 153A of the Act was filed on 27.01.2015 declaring the same income as declared in original return. Copy of sale deed dated 22.05.2011 was seized from assessee’s residence and as per the said deed, it was registered on 22.05.2011. The assessee purchased an Office at Ahmedabad admeasuring 1324 sq. ft. for a consideration of Rs.73,00,000/- from Nandlal Bhikhabhai Trada. Stamp Duty of Rs.3,57,700/- was also paid by the assessee. A copy of Sale Deed dated 17.05.2011 was seized from the assessee’s residence wherein from the said registered documents it was observed that the

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assessee had purchased a piece of land at Amreli admeasuring 20234 sq. mtr. for a consideration of Rs.5,00,000/- from Jitendrabhai Vallabhbhai Sarvaiya. Stamp Duty of Rs.25,000/- was paid by the assessee. From the perusal of the Balance Sheet as on 31.03.2012, the Assessing Officer observed that the assessee raised unsecured loan of Rs.63,62,611/- during the F.Y. 2011-12 and assessee did not prove the genuineness of the said amount. Thus, the Assessing Officer made addition of Rs.63,62,611/- as unexplained credit under Section 68 of the Act. The Assessing Officer further made addition of Rs.76,57,700/- as unexplained investment, addition of Rs.5,25,000/- as unexplained investment. The Assessing Officer also made addition of Rs.25,00,000/- as undisclosed income, addition of Rs.4,67,453/- being 50% of the expenses, addition of Rs.2,18,036/- thereby disallowing depreciation, addition of Rs.17,14,762/- as income from other sources and addition of Rs.19,39,000/- as unexplained cash deposits in Banks.

4.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. DR filed the additional ground and submitted that as regards ground no.1, the CIT(A) failed to appreciate that the additional evidence should not have been admitted as the assessee was given ample opportunity by the Assessing Officer during the assessment proceedings. As regards to ground nos.2 & 3 related to unexplained investment in Sakar-VIIl at Rs.76,57,700/- and unexplained investment in land at Rs.5,25,000/- the same was explained by the assessee before the CIT(A) through documentary evidences but was not explained to the Assessing Officer and in fact the said alleged investment are loan taken from India Green Reality and was not explained by the assessee. As regards to ground no.4, related to unexplained cash credit amounting to Rs.63,62,611/-, the Ld. DR relied upon the Assessment Order and stated that genuineness, creditworthiness and the identity of the creditors were not discharged by the assessee and in fact before the CIT(A) also the creditworthiness was not established. As regards to ground no.5, regarding restricting addition of unexplained proprietary capital account of Rs.25,00,000/- to Rs.1,00,000/- by the CIT(A), the Ld. DR submitted that without any basis the CIT(A) has restricted the proprietary capital account. As regards to ground no.6, the Ld. DR submitted that the

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CIT(A) erred in deleting addition on unexplained cash deposit in the Bank account amounting to Rs.19,39,000/- as the same deposit were not corresponding as observed by the Assessing officer. As regards to ground no.7, the Ld. DR submitted that the addition of Rs 78,00,000/- on account of agricultural income treated as income from other source was rightly done by the Assessing Officer as the assessee failed to establish that the said income was received from agricultural activities.

6.

The Ld. AR relied upon the order of the CIT(A) and stated that the additional evidences were rightly admitted as the assessee was not given sufficient opportunity and was not in a position to submit all the evidences during the assessment proceedings. As regards to merits of the addition which was partly allowed by the CIT(A), the ld. AR relied upon the order of the CIT(A).

6.1 The Ld. AR further submitted that the assessee has filed Cross Objection in respect of addition on account of agricultural income to the extent of Rs.2,58,854/- and also addition of Rs.4,67,453/- being adhoc disallowance at 50% of the total expenditure incurred by the assessee for business purpose. The Ld. AR submitted that ground nos.2 & 3 of the Cross Objection are not pressed.

7.

The Ld. DR, in respect of ground nos.1 & 4 of the Cross Objection, relied upon the Assessment Order.

8.

We have heard both the parties and perused all the material available on record. It is pertinent to note that as regards to ground no.1, since the assessee, due to the circumstances beyond his control, could not file all the evidences before the Assessing Officer during the assessment proceedings and has availed the remedy before the CIT(A) by filing additional evidence. Therefore, the CIT(A) has rightly admitted the same. Thus, ground no.1 of the Revenue’s appeal is dismissed.

8.1 As regards to ground nos.2 & 3 relating to unexplained investment in Sakar-VII and unexplained investment in respect of land purchased at Amreli, the assessee has given all the documentary evidences. In fact, the Assessing Officer has noted that the unexplained investment in respect of Sakar-VII, the assessee has given the deed of

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purchase of the land as well as details of the payment to the parties along with the registered deed including payment of stamp duty. The same is also given in the investment related to land purchase at Amreli. These documents were properly verified by the CIT(A) and, after detailed observation, the CIT(A) has deleted the same. There is no need to interfere with the finding of the CIT(A). Hence, ground nos.2 & 3 of Revenue’s appeal are dismissed.

8.2 As regards to ground no.4 relating to unexplained cash credit amounting to Rs.63,62,611/-, the assessee has given details as well as the identity and creditworthiness of the creditors before the CIT(A) and after explaining the same, the CIT(A) has deleted the said addition. Thus, there is no need to interfere with the same. Hence, ground no.4 of Revenue’s appeal is dismissed.

8.3 As regards to ground no.5, relating to restricting addition of unexplained Proprietary Capital Account, the CIT(A) has given categorical finding that the difference in opening balance in capital account was not reconciled by the assessee and barring the difference, other entries mentioned in such capital account remains to be accepted and the same is reflected in audited annual account. Thus, the CIT(A) has given detailed explanation while restricting the said addition. There is no need to interfere with the finding of the CIT(A). Hence, ground no.5 of Revenue’s appeal is dismissed.

8.4 As regards to ground no.6, relating to unexplained cash deposit in Bank Account, the CIT(A) has observed that the Assessing Officer has taxed the entire net agricultural income as undisclosed income which partially sustained by the CIT(A) as the cash deposit is derived from the income of agricultural activities. Thus, the CIT(A) has rightly deleted the said addition by granting partial relief. Hence, ground no.6 of Revenue’s appeal is dismissed.

8.5 As regards to ground no.7, relating to deletion of addition of Rs.7,00,000/- on account of agricultural income treating the same as income from other sources, the CIT(A) has given categorical finding as observed in paragraph no.10.4 of the Order of

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the CIT(A). There is no need to interfere with the same. Hence, ground no.7 of Revenue’s appeal is dismissed. Appeal of the Revenue is thus dismissed.

9.

Now coming to the Cross Objection filed by the assessee, ground nos.2 & 3 are not pressed and hence the same are dismissed.

9.1 As regards to ground no.1, the CIT(A) has given categorical finding relating to agricultural income and there is no need to interfere with the said finding as the component of income from other sources or the agricultural income to that extent was not demonstrated by the assessee. Ground no.1 of the assessee’s Cross Objection is thus dismissed.

9.2 As regards to ground no.4, relating to adhoc disallowance at 50% of the total expenditure incurred by the assessee for business purpose, the Assessing Officer had made the disallowance of 50% of expenditure as no voucher or supporting evidence was filed. No such evidence was filed even before the CIT(A), hence he confirmed the addition. The Ld. AR submitted that the estimation of disallowance is on higher side. Considering the totality of the facts, it will be reasonable to restrict the disallowance of 25% of the expenditure. Hence, ground no.4 of assessee’s Cross Objection is partly allowed. Cross Objection filed by the assessee is thus partly allowed.

10.

In the result, IT(SS)A No.9/Ahd/2018 filed by the Revenue is dismissed and Cross Objection No.48/Ahd/2019 filed by the assessee is partly allowed.

Order pronounced in the open Court on this 14th August, 2024.

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 14th August, 2024 PBN/*

IT(SS)A No.9/Ahd/2018 & C.O. No.48/Ahd/2019 Assessment Year: 2012 & 13 Page 8 of 8

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

By order UE COPY

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad

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