THE ACIT, CIRLCE-3(1)(1), AHMEDABAD vs. SHRI AMITKUMAR LAXMANBHAI PATEL , AHMEDABAD

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ITSSA 65/AHD/2020Status: DisposedITAT Ahmedabad06 September 2023AY 2007-0810 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal. The Tribunal noted that the CIT(A) had categorically found no incriminating material during the search from the assessee, making additions under Section 153A impermissible as the assessment for the year was not pending on the date of search and had become final. The Tribunal also noted that the assessment proceedings for AY 2007-08 were not pending on the date of search, and thus the assessment did not abate. Furthermore, the material found in the case of Maruti Group could not be treated as incriminating material in the assessee's case, especially since the Settlement Commission had observed that the investment was made by M/s. Maruti Buildcon, a partnership firm of the assessee. With the Settlement Commission accepting contentions regarding on-money payments in other related cases, the need for a protective assessment in the assessee's case was negated. Therefore, the CIT(A) was held to have rightly deleted the addition. The Cross Objection filed by the assessee was dismissed as academic.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2007-08. A search under Section 132 was conducted in the Maruti Group on April 27, 2011, and a warrant was issued in the assessee's name. Subsequently, a notice under Section 153A was issued. The assessee filed a return declaring a total income of Rs. 4,21,714. The Assessing Officer noted a partnership between Maruti Group and Savvy Group for a residential scheme. The land for this scheme was sourced from four individuals who were also covered in the search. The Assessing Officer observed that cash payments for the land were made between July 19, 2006, and April 1, 2007, predating the formation of the firm M/s. Savvy Organiser. Based on the assessee's confirmation of cash payments made by firms, the Assessing Officer made a protective addition of Rs. 5,50,69,428/- as undisclosed income. The CIT(A) allowed the assessee's appeal.

What were the issues?

1. Whether the addition of Rs. 5.5 Crores made by the Assessing Officer was on a protective basis, and if the substantive addition was made in the hands of two firms, M/s. Savvy Organiser and M/s. Maruti Buildcon, as held by the CIT(A), when no such distinction was mentioned in the orders (Revenue's contention: CIT(A) erred in holding the addition as protective without basis). 2. Whether the CIT(A) erred in holding the addition in the assessee's case as protective and the addition in the firms' cases as substantive, without appreciating that a protective assessment cannot precede a substantive assessment, citing M P Ramchandran and JK Consultant Ltd. (Revenue's contention: CIT(A) erred in law and facts). 3. Whether the CIT(A) erred in holding that the Assessing Officer ought to have passed an order under Section 153C instead of Section 153A, given that the assessee was issued a warrant under Section 132 as part of the search, and citing Dr. Mansukh Kanjibhai Shah for the principle that completed assessments get reopened upon search (Revenue's contention: CIT(A) erred in law and facts). 4. Whether the CIT(A) erred in holding that an assessment under Section 143(3) read with Section 153A is bad in law in the absence of incriminating material found in the assessee's possession, and that material found elsewhere cannot be used (Revenue's contention: CIT(A) erred in law and facts). 5. Whether the CIT(A) erred in holding the assessment under Section 143(3) r.w.s. 153A as bad in law due to absence of incriminating material in the assessee's possession, without appreciating that incriminating documents were unearthed from sellers' premises and citing CIT Chennai Vs. S Ajith Kumar for the principle that material found during a simultaneous search of a connected person can be used (Revenue's contention: CIT(A) erred in law and facts). 6. Whether the CIT(A) erred in holding that the Assessing Officer ought to have made assessment under Section 153C, without appreciating that Section 153C applies only to persons other than those referred to in Section 153A (Revenue's contention: CIT(A) erred in law and facts). 7. Whether the CIT(A) erred in deleting the addition made on a protective basis amounting to Rs. 5.50 crores as undisclosed price for land at Motera, Ahmedabad (Revenue's contention: CIT(A) erred in law and facts). Assessee's arguments: The addition of Rs. 5.50 Crore on a protective basis under Section 153A is illegal and should be deleted because (i) no incriminating material was found during the search at the appellant's premises, and no assessment was pending on the date of search; (ii) the two partnership firms disclosed and accepted on-money payments and declared unaccounted money before the Settlement Commission, negating the need for a protective addition; (iii) the addition is based on a loose paper found during a search at a third party's premises, and the AO failed to record satisfaction under Section 153C before using it against the appellant. Relied on Vijaybhai N Chandrani, Himanshu Chnadulal Patel, Arpit Land (P) Ltd, Krytika Land (P) Ltd, and Canyon Financial Services Ltd.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 153C,Section 139,Section 245D(4)

AI-generated summary — verify with the full judgment below

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

Before: SMT. ANNAPURNA GUPTA & Ms. SUCHITRA KAMBLE

For Respondent: Shri Sudhendu Das, CIT (DR)
Hearing: 07.08.2023Pronounced: 06.09.2023

PER SUCHITRA KAMBLE, JUDICIAL MEMBER :

This appeal is filed by the Revenue against order dated 07.08.2020 passed by the CIT(A)-11, Ahmedabad for the Assessment Year 2007-08.

2.

The Revenue has raised the following grounds of appeal :-

“1) The Ld. CIT(A) has erred in law and on facts in holding that the addition of Rs.5.5 Crores made by the Assessing Officer was on a protective

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 2 of 10 basis and the substantive addition had been made in the hands of the two firms M/s. Savvy Organiser and M/s. Maruti Buildcon, whereas there is no mention of protective addition or substantive addition in any of the orders.

2) The Ld. CIT(A) has erred in law and on facts in holding that the addition made in the case of assessee vide order dated 27-03-2014 was a protective addition and the addition made in the case of Savvy Organisers and Maruti Buildcon vide order dated 28.03.2014, i.e. one day after the order in the case of the assessee, was substantive addition, without appreciating that no protective assessment can be made under the law before the substantive assessment as held by the Hon'ble Mumbai ITAT in the case of M P Ramchandran (2009) [2009] 32 SOT 592 (MUM.) and as held by the Hon'ble Delhi ITAT in the case of JK Consultant Ltd. vs. ITO, ITA No. 1502/Del/2013.

3) The Ld. CIT(A) has erred in law and on facts in holding that the Assessing Officer ought to have passed the assessment order u/s.153C of the Act in place of order u/s. 153A of the Act without appreciating the fact that the assessee was also one of the person in whose name warrant u/s. 132 of the Act was issued as a part of search proceedings in the case of Maruti Group and as held by the Hon'ble Jurisdictional ITAT , Ahmedabad Bench in the case of Dr. Mansukh Kanjibhai Shah v. Assistant Commissioner of Income-tax, Central Circle [2011] 129 ITD 376 (Ahd.) in the light of the provisions of section 153A of the Act, it would be clear that once the warrant of authorization or requisition is issued and search is actually conducted, Panchnama is drawn, the completed assessments for all the relevant years would get reopened irrespective of whether any incriminating material is found or not in relation to a particular assessment year.

4) The Ld. CIT(A) has erred in law and on facts in holding that the assessment\framed by the Assessing Officer u/s. 143(3) rws 153A in absence of any incriminating material found in possession of the appellant during the course of search is bad in law without appreciating the fact that there is no such legal requirement in section 153A that incriminating documents should be found in the possession of the assessee and that the incriminating material relating to the assessee, found at other premises, cannot be used for making assessment u/s 153A.

5) The Ld. CIT(A) has erred in law and on facts in holding that the assessment framed by the Assessing Officer u/s. 143(3) r.w.s. 153A in absence of any incriminating material found in possession of the appellant during the course of search is bad in law without appreciating the fact that incriminating documents were unearthed from the premises of the sellers of the land who were subjected to action u/s.132 in the same group search and without appreciating that any material or evidence found/collected in a Survey/Search which has been simultaneously made at the premises of a connected person can be

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 3 of 10 utilized while making the Block Assessment in respect of an assessee as held by the Hon'ble Supreme Court in the case of CIT Chennai Vs. S Ajith Kumar [2018] 93 taxmann.com 294 (SC) in the context of Section 158BB.

6) The Ld. CIT(A) has erred in law and on facts in holding that the Assessing Officer ought to have made assessment u/s. 153C without appreciating the fact that provisions of section 153C were applicable only to a person other than a person referred to in section 153A.

7) The Ld. CIT(A) has erred in law and on facts in deleting the addition made on protective basis amounting to Rs.5.50 crores as undisclosed price in respect of land situated at Motera, Ahmedabad.

8) On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

9) It is, therefore, prayed that the order of Ld. ClT(A) may be set aside and that of the Assessing Officer be restored. ”

3.

A search under Section 132 of the Income Tax Act, 1961 was conducted in the case of Maruti Group on 27.04.2011 and subsequent dates. A warrant of authorisation under Section 132 of the Act was also issued in the case of the assessee as part of the Maruti Group which was one of the sub groups covered under the aforesaid search and seizure operations conducted on 27.04.2011. Subsequently, notice under Section 153A of the Act was issued on 22.09.2011. In response to notice under Section 153A of the Act, the assessee filed return of income on 21.12.2012 declaring total income of Rs.4,21,714/-. Thereafter, a notice under Section 143(2) of the Act was issued on 26.12.2012 and served upon the assessee alongwith questionnaire. The original return of income for the A.Y. 2007-08 was filed under Section 139 of the Act on 30.03.2009 declaring total income of Rs.4,21,714/-. In response to the notice, the Ld. AR of the assessee furnished details before the Assessing Officer. The Assessing Officer observed that Maruti Group has entered into a partnership agreement with Savvy Group to construct residential scheme named “Savvy Solaris” at Motera, Ahmedabad. The land on which the scheme is being constructed was sourced from four persons belonging to one family and these sealers were also covered in the search action. The Assessing Officer further held that the firm Savvy Organiser came into existence on 23.02.2007 as per the deed of partnership submitted in the case of the firm. As per page no.40 of Annexure A-11 seized from the residence of Shri Baldev P. Patel, the payments of unaccounted cash

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 4 of 10 for the land were made in the period from 19.07.2006 to 01.04.2007. Thus, the land deal and the consequent transactions were made well before the firm M/s. Savvy Organiser came into existence. From the statements of the assessee, the Assessing Officer held that the assessee has confirmed that the cash payments were made by the firms but he was the main person who was dealing in the above land transaction. Thus, the Assessing Officer made the addition of Rs.5,50,69,428/- as unaccounted income on protective basis in assessee’s case.

4.

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee. 5. At the time of hearing, none appeared on behalf of the assessee despite giving notices which were duly served.

6.

The Ld. AR signed on behalf of the assessee and filed Written Submissions dated 04.08.2023 before us which are as follows :-

“From: Amitkumar Laxmanbhai Patel 8, Maruti Hills Bungalows, Near Arya Bungalows, Opp. Shaligram -3, Satellite, Ahmedabad 380015. August 4, 2023

To,

Hon'ble D Bench ITAT, Ahmedabad

Ref.: Appeal Bearing ITSS No. 65/Ahd/2020 & CO No.4/Ahd/2021 for A.Y. 2007-08

Sub.: Written Submission

In addition to submission made to CIT (A) and findings by CIT (A) in his Order, Appellant is submitting herewith written submissions and requesting to decide appeals on this submission:

Brief Facts

• The appellant is an individual deriving income mainly by way of share from partnership firms, House property and other sources. During the course of assessment, the AO made addition of Rs. 5,50,00,0007- on protective basis in the hands of appellant on account of undisclosed

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 5 of 10 income on the ground that the appellant had paid said sum in cash to vendors of land.

• This was on account of the fact that appellant had entered into partnership with Savvy Group to construct residential house under the scheme called "Savvy Solaris" at village Motera on a land bearing Survey Nos.197/1,198/1, and 199/2 which land belonged to family of Vendors namely Shri Baldevbhai Patel. • In the search proceedings in the case of Shri Baldevbhai Patel (Vendor), a handwritten receipt book was found where in entries relating to cash & cheque payments were noticed. On the basis of the statements recorded of Shri Baldevbhai Patel and his son Shailesh Patel on 27.11.2011, and statement of Shri Mukesh Patel recorded on 28.11.2011 and statement of Shri Sanjay Patel in which they disclosed total amount of Rs. 4.92 Crores and Rs. 1.49 crores, addition was made on substantive basis in the case of M/s Savvy Organizers a partnership firm in which the appellant was a partner and protective addition was made in the hands of the appellant by assuming that the said amount of Rs. 5,50,00,0007- must have been paid by the appellant.

Submission:

Proposition 1: Two Partnership firms has accepted substantive addition before Hon'ble Settlement Commission then there is no need for protective addition.

• On above grounds, the appellant respectfully submits that the AO has made addition of Rs. 5.50 Crores on protective basis. It is submitted that the addition is made on presumption and without any evidence as regards the payment being made by the appellant. • No cross examination of the persons whose statements was taken as basis for initiation of proceedings was furnished and law is very clear that statement of third person cannot be relied on without providing opportunity of cross examination as held by Hon'ble Supreme Court in case of Andaman Timbers Pvt. Ltd. 62 taxmann.com 3(SC).

• Further, the appellant had specifically denied having made any payment of the sum in respect of land transactions by him. It is trite law that the statement of the third party cannot be made basis of addition and the statement cannot be relied on in part.

• As the appellant had never stated that he had made any such investment or payments, addition is unjustified on protective basis as the assessment under section 153A is based on material found during search.

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 6 of 10 • It is further submitted that in the case of the firm namely M/s Maruti Buildcon, (Partnership firm of assessee) final order of Hon'ble Settlement Commission under section 245D(4) is passed on 29.12.2014 in which it is concluded that the investment of Rs. 1.49 Crores was made by the firm and as such there remains no question of any protective assessment, once substantive addition is accepted in the case of the firm. Copy of settlement commission order is attached at pages 09 to 32.

• The Settlement Commission has accepted in Order passed u/s 245D(4) dated 30.05.2016 in case of Savvy Infrastructure Co, the contention regarding declaration of On-money payment towards land which were made out of on-money receipts of project "Savvy Serene" [ Para 2.4 & 2.5 of Order u/s 245D(4) ] The Commission has accepted total offer of additional income at Rs. 5,43.44,680,'- [ Additional Rs. 3,2921,484/- plus Rs. 2,14,23,196'- already declared in the returns vide Para 2 read with Para 10 of Order u/s 245D(4)]. Copy of settlement commission order is attached at pages 33 to 47.

• It is thus found that the so-called investment or payment of on money if any was not made by the appellant but if at all it would have been made, it was by the concerned firms. These two firms have already declared same before the settlement commission and accordingly, once substantive addition has been accepted and confirmed, there is no need for protective addition. It is therefore urged that erroneous addition made in the hands of the appellant on protective basis at Rs. 5.50 Crores is required to be deleted. (Refer page 37 to 42, para 7 to 7.8 of CIT(A) Order).

Proposition 2: There is no incriminating material was found from the premises of appellant and accordingly there can be no addition u/s 153A of the Act.

• Appellant respectfully submits that during the course of search & survey, no incriminating material was found regarding any undisclosed income and hence recourse to the provisions of section 153A is illegal and against the sanction of law. It is now well settled by the judicial pronouncements in several cases that assessment under section 153A is permissible only if there is any incriminating material discovered during the course of search.

• It is very clear that nowhere in the assessment order, it is alleged that any incriminating material was found during the search in the case of the appellant. There is no justification for abating the assessment as no assessment was pending for the year under

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 7 of 10 appeal and hence the same could not have been covered by the proceedings of assessment u/s 153A.

Appellant relied on following judicial precedents in support of arguments:

• Abhisar Buildwell Pvt. Ltd. 454 ITR 212 (Guj.) • Saumya Construction Pvt. Ltd. 387 ITR 529 (Guj.) • Sunrise Finlease Pvt. Ltd. 89 taxmann.com 1(Guj.) • Devangi 394 ITR 184(Guj.) • Kabul Chawla 380 ITR 573(Del.) • Continental Warehousing Nhava Sewa Ltd.

Proposition 3: The alleged seize material has been found from the premised of vendor Shri Baldevbhai Patel and others and AO failed to record satisfaction as mentioned in Section 153C that alleged seize material belongs to appellant.

• It is undisputed facts that there was search proceedings in the cases of Shri Baldevbhai Fulabhai Patel, Shri Shailesh Baldevbhai Patel, Shri Mukesh Ramchandra Patel and Shri Sanjay Baldevbhai Patel who were the sellers of land at Survey No: 197/1,198/1 and 199/2 being land sold to M/s Savvy Organisers.

• It is also submitted that some hand written receipt seized being Annexure A-1 was found and seized from the premises of said sellers namely Baldevbhai Patel Group and not from the premises of appellant and during search from appellant.

• It is therefore very clear that the said alleged loose paper did not belong to the appellant. The law is now well settled that when any assessment is sought to be made in the hands of another person (Person other than searched person) the document found from searched person must be established to be "Belonging to "the another person and satisfaction to that effect must be noted by the AO of searched person. In the instant case no such satisfaction is drawn nor the document alleged to be found from the premises of sellers 8s stated to be "belonging to " the as appellant. Hence assessment in the case of your appellant based on said document is illegal and void ab initio. • The appellant is relied on following judicial precedents in support of his arguments:

a. Vijaybhai N Chandrani 333 ITR 436 (Guj) b. Himanshu Chnadulal Patel 419 ITR 202 (Gujarat) c. Arpit Land (P) Ltd 393 ITR 276 (Bombay) d. Krytika Land (P) Ltd 103 taxman.com 9(SC)

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 8 of 10 Dismissing Department's SLP against Bombay High Court judgment in 83 taxman.com 161 (Born). e. Canyon Financial Services Ltd 90taxman.com 169 (SC)

Summary of Arguments:

Entire Addition of Rs. 5.50 Crore on protective basis in assessment u/s 153A is illegal and deserves to be deleted as: (i) There is no incriminating material found during search at appellant premises and no assessment is pending on date of search which became final on 30.09 .2009.

(ii) The two partnership firms who purchased the land has disclosed and accepted on money payment and declare their unaccounted money before Hon'ble Settlement Commission and accordingly there is no need of protective addition as substantive addition has been confirmed as narrated above.

(iii) Addition is made based on loose paper found during search at third party premises and AO failed to record satisfaction u/s 1 53C before using the same against the appellant.

Your honour is requested to take above submissions and pass necessary order.

Yours faithfully,

Sd/- (D.H. Mehta)”

7.

We are proceeding on the basis of Written Submissions filed by the assessee.

8.

The Ld. DR submitted that the CIT(A) was not right in deleting the protective addition as during the course of search proceedings at the place of vendors namely Shri Baldevbhai Patel Group, one hand written receipt marked as Annexure A1 page 36 containing entries of payments relating to cheque and cash in relation to purchase of land at Survey Nos.197/1, 198/1 & 199/2 by the partnership firms namely M/s. Savvy Organisers and M/s Maruti Buildcon was found and seized. The Ld. DR further submitted that the CIT(A) was not correct in holding that the Assessing Officer could make the addition based upon the incriminating documents found during the search proceedings ought to have under Section 153C of the Act. Ld. DR submitted that the CIT(A) has wrongly deleted the addition on merit as well.

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 9 of 10 9. We have heard the Ld. DR and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has categorically given finding that there was no incriminating material found during the search from the assessee and, therefore, no addition under Section 153A of the Act is permissible since the assessment for the year under appeal was not pending on the date of search or the return was filed on 31.03.2005 and as such assessment which became final on 30.08.2005 and hence did not abate on the date of search i.e. 27.04.2011. There is no need to interfere with the said finding. Besides this, the CIT(A) has categorically mentioned that no assessment proceedings for A.Y. 2007-08 were pending on the date of search and, therefore, the assessment for the year under consideration was not abated. The material found in the case of Maruti Group cannot be treated as the incriminating material in assessee’s case as the Settlement Commission has already observed that the investment of Rs.1.49 crores was made by M/s. Maruti Buildcon (Partnership firm of the assessee) and as such there remain no question of protective assessment once substantive addition is accepted in the said case of the firm. The Settlement Commission has accepted in order passed under Section 245D(4) dated 30.05.2016 in case of M/s. Savvy Infrastructure Company, contention regarding declaration of on-money payment which were made out of on-money in respect of Savvy Serene and thus the protective assessment in assessee’s case does not sustain. Hence, the CIT(A) has rightly deleted the addition.

10.

Appeal of the Revenue being IT(SS)A No.65/Ahd/2020 is dismissed.

11.

As regards to Cross Objection No.4/Ahd/2021, the same is in respect of the assessee’s additional ground filed before the CIT(A) which appears to be academic in nature and hence the Cross Objection filed by the assessee is dismissed.

12.

In the result, appeal filed by the Revenue as well as the Cross Objection filed by the assessee are dismissed.

Order pronounced in the open Court on this 6th September, 2023.

Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 6th day of September, 2023

IT(SS)A No.65/Ahd/2020 & C.O. No.4/Ahd/2021 Assessment Year: 2007-08 Page 10 of 10

PBN/*

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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