PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT vs. M/S. MONAREECA ENTERPRISE

C/TAXAP/530/2022 ORDER DATED: 12/09/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 530 of 2022 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT Versus M/S. MONAREECA ENTERPRISE ========================================================== Appearance: MR. M.R.BHATT, SR. ADV. WITH MR. KARAN SANGHANI FOR M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 12/09/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr. M. R. Bhatt assisted by learned advocate Mr. Karan Sanghani for M. R. Bhatt & Co. for the appellant. 2. This Tax Appeal filed under section 260A of the Income Tax Act, 1961 arises out of order dated 16.3.2022 of the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad in Income Tax Appeal No. 2386 of 2018 in respect of Assessment Year 2013-2014. 3. The facts involved were that the respondent assessee engaged in the business of real estate development business, was a firm constituted on 3.2.2011, wherein Jiten Oza and Neetaben Patel were partners, who contributed their capital of Rs. 4 lakhs and Rs. 2,61,07,304/- respectively mainly on account of development agreement and bestowing the land to the firm. Subsequently, withdrawal was made by Neetaben resulting into reduction in contribution. 3.1 The assessee filed return of income under section 139 of the Page 1 of 5

C/TAXAP/530/2022 ORDER DATED: 12/09/2022 Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 3.8.2013 declaring total income to be ‘Nil’. 3.2 The return of income was processed under section 143(1) of the Act. Search under section 132 of the Act was carried out in Bafana Panchal group, which also covered the residential premises of the partners of the firm. 3.3 On the basis of statement of partner, the Assessing officer concluded that the assessee had actually paid Rs. 12.60 crores for purchase of land and the sale deed was amount of Rs. 2.5 crores, which was reflected in books of account. It was, therefore, concluded that the assessee had made undisclosed investment of Rs. 10.10 crores (12.60 crores – 2.5 crores) Therefore, the assessment was finalised making addition of Rs. 10.10 crores under section 69 of the Act on the ground of undisclosed investment in law for the year under consideration. 3.4 The assessee preferred appeal before the Commissioner of Income Tax (Appeals) who deleted the said addition. Thereafter, the Revenue filed appeal before the appellate Tribunal. The appellate Tribunal concurred with the decision taken by the Commissioner of Income Tax (Appeals) and dismissed the appeal of the revenue. Therefore, the present appeal came to be filed before this court. 4. In the appeal, the following questions are proposed by the revenue claiming to be arising as substantial questions of law, “(A) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition of Rs.10,10,00,000/- without appreciating the fact that, the impugned addition was made by the Assessing Officer on the basis of the incriminating document found and impounded during the course of survey u/s 133A of the Act and statement on oath recorded from the Page 2 of 5

C/TAXAP/530/2022 ORDER DATED: 12/09/2022 partner of the assessee-firm? (B) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in not appreciating the fact that the partner of the firm himself has categorically admitted that the incriminating document contains the cost details of the project, "Monalisa Lakewood", including the cost of land of Rs. 12,60,00,000/-. (C) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal despite appreciating the fact that other entries in the loose sheet paper, though based on estimate, were clearly matching with the books of accounts and no other investments was shown in the books of accounts, erred in not considering. the amount of Rs.12.60 Cr. appearing in the incriminating documents towards the land cost? [D] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in not appreciating the fact that the incriminating document found during the course of survey proceedings were confronted to the partner of the firm and his statement on oath was recorded on the same under Section 131(1) of the Act, wherein he explained the contents of the incriminating documents which includes the cost of land and hence, such un-retracted statement of partner of the assessee-firm carries an evidentiary value and it can be considered as corroborative evidence and the additions made based on such evidences is justified?” 5. While allowing the appeal of the assessee, the Commissioner of Income Tax (Appeals) deleted the addition resting on the following grounds, “(a) The land was purchased by Smt. Neetaben Patel in her individual capacity and that the investment was made by her for the purchase of the said land in her own name and that she was the absolute owner of the said land. (b) The land came into possession of the appellant partnership form in lieu of capital contribution of Smt. Neetaben Patel and the partnership firm got unrestricted development right because of the Page 3 of 5

C/TAXAP/530/2022 ORDER DATED: 12/09/2022 development agreement between Smt. Neetaben Patel and the firm. (c) If at all there was any unexplained investment at the time of purchase of the land, it could be by Smt. Neetaben patel in the A.Y. 2011-2012 and no action could be made in the hands of the firm in the A.Y. 2013-2014”. 5.1 The appellant Commissioner recorded detailed reasons in para 5.2 onwards. 6. The Tribunal while upholding the view of the appellate Commissioner inter alia observed that search action under section 132 of the Act was undertaken on 7.1.2014 in Bafana group of cases which covered the residential premises of Smt. Neetaben Patel- partner of the assessee firm, however, there was no record to show any incriminating material relating to the purchase of the land in question and no such material could be recovered by the department. It was, therefore, held by the Tribunal that addition made under section 69 of the Act to the tune of Rs. 10.10 corres was not sustainable. The Tribunal gave its findings, extracting from para-10, “It could be seen from the loose sheet that the land cost was Rs. 12.60 crores while the land cost reflected in the sale deed was Rs. 2.5 crores. The contention of the same cannot be accepted on two grounds; (a) the original cost of land purchased by Smt.Nitaben Patel for a consideration of Rs.2.5 crores starting from 28.7.2009 upto 7.2.2011 by instalment payments during the financial year 2009-10 and 2010-11 and also introduced capital contribution Rs.2,61,07,304/- by Smt.Nitaben to the firm on 31.3.2012. Thus, the land cost could not be estimated at Rs.12.60 cores; (b) other entries in the loose sheet papers related to the cost of construction of nine bungalows, development expenses, over- hea.d expenses etc. which are clearly matched with the expenses maintained by the assessee-firm in its books of accounts. In the absence of any other investment to the extent of Rs.10.10 crores, the estimation made by the AO is baseless. Further, the AO has also not made any attempt to verify the cost of the land from any partners of the firm or Page 4 of 5

C/TAXAP/530/2022 ORDER DATED: 12/09/2022 from previous owner of the land. Thus, the addition was made based on the assumption that the cost of landd was Rs. 12.60 crores, the difference of Rs.10.10 crores ought to have been added in the hands of Smt.Nitaben and not in the hands of assessee's firm relating to the Asstt. Year 2011-12. But the AO made the addition in the hands of the assessee firm which is not legally correct.” 6.1 The Tribunal relied on the decision of this court in Principal Commissioner of Income Tax vs. Nageshwar Enterprises [122 taxmann.com 41 (Guj)], wherein it was inter alia held that until some corroborative evidence is found in support of evidence, merely on the basis of admission, the assessee could not be subjected to addition in the income. The department can not start with the confessional statement. The confessional statement has to be utilised in aid of other material on record. When other material on record are not available, basing the action on mere admission would not be permissible. 6.2 This court is in agreement with the concurrent findings recorded by the authorities below. The dismissal of the appeal of the revenue by the appellate Tribunal could be said to be based on cogent reasons. 7. No question of law much less any substantial question of law could be said to be arising as proposed. No other question arises in the petition in the facts of the present case. The appeal is summarily dismissed. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) C.M. JOSHI Page 5 of 5