THE ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD vs. SHRI RAMESHBHAI CHATURBHAI PRAJAPATI, MEHSANA

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ITSSA 58/AHD/2021Status: DisposedITAT Ahmedabad03 October 2024AY 2017-187 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal and the assessee's Cross Objection. Regarding the addition under Section 69A, the Tribunal found no reason to interfere with the CIT(A)'s observations concerning the jewellery component, referencing the VDIS 1997 disclosure and detailed findings. For the cash component, the CIT(A) rightly held that no explanation was offered for the source of old currency notes, which were legal tender. The addition of Rs.7,50,140/- was confirmed by the CIT(A) as no explanation was provided by the assessee. Thus, Ground No. 1 of the Revenue's appeal was dismissed. Concerning the addition under Section 69B, the Tribunal upheld the CIT(A)'s decision to delete the addition, finding that the loose papers lacked transaction details and property identification, deeming them 'dump documents'. The statement relied upon by the AO also lacked specificity. The assessment framed under Section 153A was considered by the CIT(A). Therefore, Ground No. 2 of the Revenue's appeal was dismissed. For the addition under Section 69, the Tribunal agreed with the CIT(A)'s deletion, noting that the assessee subsequently retracted the statement and denied knowledge of the transaction, and the loose papers were not correlated with any transactions or the assessee's alleged share in a land deed. Thus, Ground No. 3 of the Revenue's appeal was dismissed. The assessee's Cross Objection was dismissed as both grounds were not pressed.

What were the facts?

This case involves an appeal by the Revenue and a cross-objection by the assessee, Rameshbhai Chaturbhai Prajapati, for Assessment Year 2017-18. The dispute arises from a search and survey action conducted on February 15, 2017, on the assessee's group. The Assessing Officer (AO) made additions under Sections 69A, 69B, and 69 of the Income Tax Act, 1961, concerning unexplained cash, jewellery, and undisclosed investments. The assessee had filed a return of income on October 24, 2019, declaring a total income of Rs. 1,13,35,550/-. The Commissioner of Income Tax (Appeals) partly allowed the assessee's appeal, leading to the present appeal by the Revenue and cross-objection by the assessee.

What were the issues?

1. Whether the deletion of Rs.26,02,666/- out of the total addition of Rs.29,02,666/- made under Section 69A by the AO on account of unexplained cash and jewellery was legally sustainable? - Revenue's Contention: The CIT(A) erred in deleting the addition, as the assessee failed to provide details regarding the cash and jewellery found during the search. The AO's order should have been upheld. - Assessee's Contention: The Cross Objection regarding the confirmed amount of Rs.3,00,000/- was not pressed. The assessee argued that the Rs.3,00,000/- was old currency from the demonetisation period and could not be deposited in a bank account. 2. Whether the deletion of Rs.36,93,000/- made under Section 69B by the AO on account of undisclosed investment was legally sustainable? - Revenue's Contention: The CIT(A) ignored incriminating material found during the search, which indicated unaccounted deals by the assessee. The assessee did not discharge its onus of providing purchase or sale deeds, and documents found from a third party belonged to the assessee. - Assessee's Contention: The assessee relied on the CIT(A)'s order. 3. Whether the deletion of Rs.21,85,000/- made under Section 69 by the AO on account of undisclosed investment was legally sustainable? - Revenue's Contention: The AO correctly found that the assessee admitted to a transaction related to pages found at a third party's premises, indicating the assessee's share in a proposed land deal. - Assessee's Contention: The assessee relied on the CIT(A)'s order, noting that the statement was subsequently retracted and the loose papers were not correlated with any transactions.

Which sections of the Income-tax Act were involved?

Section 69A,Section 69B,Section 69,Section 132,Section 133A,Section 153A,Section 139(1),Section 142(1),Section 143(2),Section 153C

AI-generated summary — verify with the full judgment below

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

Before: Ms. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri K.C. Thaker, AR
For Respondent: Shri Sudhendu Das, CIT(DR)
Hearing: 18.09.2024Pronounced: 03.10.2024

PER SUCHITRA KAMBLE, JUDICIAL MEMBER:

These are appeal filed by the Revenue and Cross Objection filed by the assessee against order dated 08.03.2021 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad for the Assessment Year 2017-18.

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 2 of 7 2. The Revenue, in its appeal, has raised the following grounds :-

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.26,02,666/- out of total addition of Rs.29,02,666/- made u/s. 69A by the AO on account of unexplained cash and jewellery. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.36,93,000/- made u/s 69B by the A.O. on account of undisclosed investment. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.21,85,000/- made u/s 69 by the A.O. on account of undisclosed investment. 4. 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. 5. 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 its Cross Objection, has raised the following grounds :-

“1. The Ld. CIT(Appeals) has erred in law and on facts in confirming the addition of Rs.7,50,000/- out of the cash found during the course of search. 2. The learned CIT(Appeals) also erred in law and on facts in confirming the addition of Rs.16,54,200/- treated as capital expenditure.”

3.

A search and survey action under Section 132/133A of the Income Tax Act, 1961 was carried out on 15.02.2017 on ‘Rameshbhai Chaturbhai Prajapati & Others Group’ of interconnected individuals of Mehsana, Visnagar and Mumbai. The group indulged mainly in the clandestine activities of cricket betting alongwith their close associates and also involved in the business of trading of jewellery, running of commercial co-operative bank, running safe deposit vault, and property dealing. Consequent to the search, the assessee’s case was covered under Section 132(1) of the Act, accordingly the Department has applied provisions of Section 153A of the Act for Assessment Years 2011-12 to 2016-17. The return for the Assessment Year 2017- 18 was also required to be filed till July 2017 but the assessee had not filed return under Section 139(1) of the Act. Hence, notice under Section 142(1) of the Act was issued on 05.09.2019 requiring the assessee to file return of income. The assessee filed his return of income on 24.10.2019 declaring total income of Rs.1,13,35,550/-.

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 3 of 7

Notice under Section 143(2) of the Act was issued on 04.11.2019 and notice under Section 142(1) dated 04.11.2019 alongwith the questionnaire was issued and served to the assessee. In response to the statutory notices, the Chartered Accountant and Authorised Representative of the assessee furnished requisite details and documents. The Assessing Officer observed that during the course of search and seizure action at the residencia premises of the assessee, cash of Rs.6,00,000/- was seized as per annexure-CS to the Panchnama dated 16.02.2017 and further cash of Rs.1,50,140/- was also seized from Flat No.302 situated at Mumbai. The assessee was also asked to explain the source of cash and jewellery found. The assessee submitted the reply dated 09.12.2019 and stated that the assessee declared gold and diamond jewellery worth Rs.6,99,344/- under the VDIS 1997 and submitted a certificate to that effect. The Assessing Officer held that there is excess jewellery valued at Rs.18,52,526/- found in Locker No.1507 with Mehsana Nagrik Sahakari Bank and, therefore, made addition on account of unexplained jewellery to that extent. The Assessing Officer also made addition of Rs.10,50,140/- treating the said cash as unexplained and thus, a total addition of Rs.29,02,666/- under Section 69A was made by the Assessing Officer. The Assessing Officer further observed that during the search action under Section 132 of the Act at the residential premises of Shri Nikul Kumar Somnath Nayak, Mehsana, some incriminating evidences in the form of loose papers, dairies etc. were found and seized which were inventorised as Annexure A-1 to A-7. The same was confronted to the assessee. The assessee submitted that the said seized papers related to Harsiddh Party Plot which was pertaining to Assessment Year 2017-18 and expenses of Rs.1,44,04,149/- were duly considered in cash flow statement and the same was placed before the Assessing Officer. The assessee has also given the ledger account of various expenses totalling to Rs.19,32,000/- which were recorded in the books of account. The Assessing Officer held that since the assessee admitted that expenses amounting to Rs.1,66,35,549/- incurred in Harsiddh Party Plot, the same is undisclosed income, however, the assessee claimed Rs.19,32,000/- considered as his expenses which was not allowed by the Assessing Officer and made addition to that extent. The Assessing Officer further observed that there was unaccounted deal of the assessee related to the incriminating evidences found as Annexure A-1 to A-7 related to purchase deeds and, therefore, the same was added to the income of the assessee to the extent of Rs.36,93,000/- under Section 69B of

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 4 of 7

the Act as undisclosed investment. The Assessing Officer further made addition of Rs.21,85,000/- as undisclosed investment under Section 69 of the Act relating to the proposed land deal along with Devendra Kothari, Vishnubhai Shambhubhai Prajapati and the assessee.

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 submitted that as relates to the ground no.1, the CIT(A) was not right in deleting the addition of Rs.26,02,666/- out of total addition of Rs.29,02,666/- made under Section 69A of the Act by the Assessing Officer on account of unexplained cash and jewellery. The Ld. DR relied upon the order of the Assessing Officer and submitted that the entire amount should have been confirmed by the CIT(A) as the assessee has not given the details related to the cash as well as the jewellery component found during the search.

6.

The Ld. AR relied upon the order of the CIT(A) and further submitted that the Cross Objection in respect of the confirmed amount of Rs.3,00,000/- is not pressed. The Ld. AR further submitted that the amount of Rs.3,00,000/- was of during the demonetisation period. The same could not be deposited in Bank account and the seized amount was in the old currency.

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has given a categorical finding in paragraph no.7.1 related to the component of jewellery found in locker as well as the reference made to the disclosure during the VDIS 1997 and has given a detailed observation. There is no requirement to interfere with the said observations related to the jewellery components. Besides this, in regard to the cash component seized from the assessee’s premises, the CIT(A) has rightly held that no explanation was offered about the source of old currency notes and it was legal tender during the relevant Assessment Year. Therefore, the same was rightly upheld by the CIT(A). As regard to the deletion of addition of Rs.7,50,140/-, the assessee has not given any

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 5 of 7

explanation to that effect and, therefore, the addition was rightly confirmed by the CIT(A). Thus, ground no.1 of Revenue’s appeal is dismissed.

8 As regards to ground no.2 relating to the deletion of addition of Rs.36,93,000/- made under Section 69B of the Act on account of undisclosed investment, the ld. DR submitted that the CIT(A) has totally ignored the fact that incriminating material found during the search and seizure clearly implies that there was unaccounted deal between the assessee which he is denying. The assessee has not discharged its onus for providing the whole purchase deed or sale deed and the documents found from the premises of Nikul Kumar Somnath Nayak belongs to the assessee only.

9.

The Ld. AR relied upon the order of the CIT(A).

10.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the loose papers showing certain noting of figures has not given the details or date of transaction or identification of the property or names of the parties and, therefore, the CIT(A) has rightly treated the same as dump documents. Further, the statement of Nikul Kumar Somnath Nayak which was relied upon by the Assessing Officer also do not show any identification of property or date of survey of the transaction and thus it was rightly taken into account by the CIT(A) while deciding the issue. Further, in respect of non-invocation of Section 153C of the Act wherein the material found was from the premises of the third party, the assessment framed under Section 153A of the Act was taken into account by the CIT(A). Thus, the CIT(A) has rightly deleted the addition and there is no need to interfere with the finding of the CIT(A). Hence, ground no.2 of Revenue’s appeal is dismissed.

11.

As regards to ground no.3 relating to deletion of addition of Rs.21,85,000/- under Section 69 of the Act on account of undisclosed investment, the Ld. DR submitted that the Assessing Officer has rightly given the finding that the assessee has admitted the transaction relating to the pages found at the premisses of Nikul Kumar Somnath Nayak and in fact it clearly states that Vishnubhai Shambhubhai Prajapati had a share of 15% in the proposed deal alongwith Devendra Kothari will be

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 6 of 7

having 40% share and the assessee will be having 25% of share. The CIT(A) ignored this fact.

12.

The Ld. AR relied upon the order of the CIT(A).

13.

We have heard both the parties and perused all the relevant material available on record. The statement was retracted by the assessee subsequently which has been mentioned in the Assessment Order in paragraph no.8.4(1) itself. The assessee has denied the said transactions with Vishnubhai Shambhubhai Prajapati but also denied the knowledge about the said transaction in his statement and in fact these loose papers were not corelated with any of the transactions or any of the other subsequent documents that the assessee is having 25% of share in the land deed. Thus, the CIT(A) has rightly deleted the said addition. Hence, ground no.3 of Revenue’s appeal is dismissed.

14.

As regard to ground no.2 of the Cross Objection filed by the assessee, the Ld. AR submitted that the same is not pressed. Ground no1 also, at the time of hearing, it was stated that the same is not pressed. Hence, Cross Objection filed by the assessee is dismissed.

15.

In the result, appeal field by the Revenue and Cross Objection filed by the assessee, both are dismissed.

Order pronounced in the open Court on this 3rd October, 2024.

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 3rd October, 2024 PBN/*

IT(SS)A No.58/Ahd/2021 & C.O. No.27/Ahd/2022 Assessment Year: 2017-18 Page 7 of 7

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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