COMMISSIONER OF INCOME TAX II vs. KANTIBHAI REVIDAS PATEL

Aggrieved by the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) dated 08/03/2013 in IT(SS) No. 543/Ahd/2010 with respect to the Assessment Year 2005-06 the revenue has preferred the present Tax Appeal with the following proposed substantial questions of law; (A) “Whether in facts and in law the tribunal was justified in deleting the addition of Rs.92,00,000/- made on account of unaccounted investment?” (B) “Whether in facts and circumstances of the case and in law the tribunal was right in holding that documents seized from third party cannot be a base for addition?” (C) “Whether in facts and circumstances of the case and in law the tribunal was justified in ignoring the statement of the seller recorded under Section 131 of the Act confirming receipt of Rs.92,00,000/- as on money?”

A search operation under Section 132(2) of the Income Tax Act was carried in the case of one Shri Vikas A. Shah. During the search operation under Section 132(2) of the Income Tax Act, various books of accounts, articles and valuables were seized. From these documents, it was noticed that agreement to sell of the land had been entered into between one Shri Bhikaji Jesanji Thakore and the assessee. Accordingly, proceedings under Section 153C(1) of the Income Tax Act came to be initiated. The assessee had filed the return of income for the Assessment Year 2005-06 declaring the total income of Rs.5,48,509/-, including the agricultural income of Rs.1,28,220/-. Subsequently, notice under Section 142(1) of the Income Tax Act was issued and served upon the assessee and further notice under Section 142(1) of the Income Tax Act was issued on 20/11/2009 and was duly served upon the assessee. In response to the notice issued, the assessee appeared. On noticing certain documents, the Assessing Officer asked for the explanation from the assessee and not being satisfied by the explanation, relying on the statement of Shri Vikas A. Shah, made under Section 131A of the Income Tax Act, the cash paid by him to the assessee towards cancellation of the deal was held to be the income of the assessee. The Assessing Officer passed the assessment order making the addition of Rs.92,00,000/- as unaccounted income and directed penalty proceedings to be initiated under Section 27(1)(c) of the Income Tax Act. Being aggrieved and dissatisfied with the order of assessment passed by the Assessing Officer making the addition of Rs.92,00,000/- as on money received, the assessee preferred appeal before the CIT(A). The CIT(A) partly allowed the appeal preferred by the assessee however deleted the addition of Rs.92,00,000/- made by the Assessing Officer on account of unaccounted investment (on money received)

Being aggrieved and dissatisfied with the order passed by the CIT(A) in deleting the addition of Rs.92,00,000/- made on account of unaccounted investment, the revenue preferred appeal before the ITAT and the ITAT dismissed the appeal by the impugned judgment and order confirming the order passed by the CIT(A).

We have heard Shri Manav Mehta, learned Counsel appearing on behalf of the appellant-revenue. It is not in dispute that while passing the impugned judgment and order, the ITAT has relied upon its own earlier order with respect to the co-purchaser-Abhalbhai Arjanbhai Jadeja with respect to the very transaction by which the ITAT had earlier confirmed the order passed by the CIT(A) deleting the similar addition. The tribunal while passing the impugned order has observed in paragraph nos. 4 and 5 as under; “Now the revenue is before us. Learned Senior D.R. vehemently upon the order of the A.O. whereas on the side of the appellant, no-one appeared before us. As discussed above, the similar addition was made in case of Abhalbhai Arjanbhai Jadeja, who has 50% share in this land has already been deleted by the Co-ordinate ‘B’ Bench in ITA Nos. 174, 175 & 176/Ahd/2009 for 2003-04, 04-05 & 05-06 & C.O. No. 6, 7 & 8/Ahd/2010 for above years. The operative portion of the respected co-ordinate Bench decision is as under; “13. In assessment year 2005-06, the facts are slightly different. In this year, the addition of Rs.91.50 lacs was made on account of alleged payment of on money. In this year also, the AO was of the opinion that addition of Rs.44.80 lacs is required to be made in respect of payment by Shri Vikas A. Shah as dalali/brokerage but since addition Rs.91.50 lacs was made on account of on money, a separate addition of Rs.44.80 lacs was not made in this year. The addition of Rs.91.50 lacs in this year was deleted by ld. CIT(A) on this basis that except the noting on the reference paper and the statement of Shri Vikas A. Shah, there is no other corroborative material/evidence to suggest that the assessee paid on money or Rs.92 lacs. It is further noted by ld. CIT(A) that Shri Vikas A. Shah stated that he is yet to receive Rs.32 lacs from the assessee, which appears to be improbable because no prudent man could leave such a huge amount outstanding when the sale transaction is registered. He further noted that the land was purchased by the assessee and Kantibhai jointly and as per the documents for purchase which is registered with the sub- registrar at the value of Rs.9 lacs and this valuation has not been challenged by the Stamp Duty Authority and, therefore, there is no reason for presumption that the assessee has made any payment in excess of the said purchase price of Rs.9 lacs. Finally, ld CIT(A) has deleted this addition by stating that in the absence of any other corroborative evidence and in view of the fact that in the remand proceeding also, no further corroborative evidence have been gathered to justify the addition, the addition cannot be made on the basis of presumption and on the basis of presumption and on the basis of the statement of any third party and particularly when seized document was recovered from third party’s premises. Considering all these facts, we are of the considered opinion, no interference is called for in the order of ld. CIT(A) in respect of the addition made by the A.O. of Rs.91.50 lacs on account of alleged on money payment by the assessee or in respect of addition of Rs.44.80 lacs ultimately not made by the A.O. in respect of receipt of dalali/brokerage by the assessee from Shri Vikas A. Shah. Hence, in this year also, we decline to interfere with the order of the ld. CIT(A)”

We have heard rival contentions and gone through the material on record. Ld. A.O. has used third party statement of Vikas A. Shah in framing the assessment. The statement of Shri Vikas A. Shah recorded under Section 131(1A) not under Section 132 of the IT Act on 14/03/2005 and 19/04/2005. The ld. A.O. had used this statement without allowing cross examination of Vikas A. Shah which is against the principle of natural justice. This land had registered document and the value has been accepted as to correct by registering authority to the charge of stamp duty. There was no material or evidence that any on money was paid by the appellant on the transaction. Ld. A.O. had not referred this land to the DVO for determining the market value on date of registration. The statement given by Vikas A. Shah was self service statement without any supporting evidence. There was no search carried out on the appellant. The seized papers were found in the possession of Shri Vikas A. Shah. The third person evidence cannot be base for addition on the basis of any entries therein. The ld. CIT(A) had also considered following decisions. I. Prathana Construction Pvt. Ltd. 70 TTJ 122 (Ahmedabad) II. Prabhat Oil Mills reported in 52 TTJ 533 (Ahmedabad) III. Jaindal Stainless Ltd. 9 DTR 345 (ITAT, Delhi) After considering all the facts and legal position of this issue, we do not find any reason to intervene in the order of the CIT(A). Accordingly, we uphold the order of the CIT(A).”

It is required to be noted that the order passed by the ITAT in the case of the co-purchaser-Abhalbhai Arjanbhai Jadeja was further carried before this Court by way of Tax Appeal No. 233/2013 and other allied appeals and it is reported that vide order dated 03/04/2013, the Division Bench of this Court has dismissed the said appeal confirming the order of deletion of similar addition in the case of Abhalbhai Arjanbhai Jadeja-co- purchaser.

In view of the above, when in the case of the co- purchaser, similar addition came to be deleted by the CIT(A), which came to be confirmed up to this Court, it cannot be said that the tribunal has committed any error in dismissing the appeal preferred by the revenue and consequently confirming the order passed by the CIT(A) deleting the addition of Rs.92,00,000/- made on account of unaccounted investment. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Siji