Principal Commissioner vs. M/S Golden Realties

1 IN THE HIGH COURT OF MADHYA PRADESH AT J A B A L P U R BEFORE HON'BLE SHRI JUSTICE SHEEL NAGU & HON'BLE SHRI JUSTICE DWARKA DHISH BANSAL ON THE 13th OF OCTOBER, 2022 INCOME TAX APPEAL No. 80 of 2022 BETWEEN:- PRINCIPAL

COMMISSIONER

OF INCOME TAX 1 DISTRICT-BHOPAL (MADHYA PRADESH) .....PETITIONER (BY SHRI SANJAY LAL-ADVOCATE ) AND M/S

GOLDEN

REALITIES

THROUGH AUTHORISED OFFICER 1 GOLDEN CITY BESIDE NANAK NAGAR, GRAM BIJANWADA, PANCHMARHI ROAD, PIPARIYA (MADHYA PRADESH) .....RESPONDENT ---------------------------------------------------------------------------------------------------- This appeal coming on for admission this day, JUSTICE DWARKA DHISH BANSAL passed the following: ORDER 2 The present appeal has been preferred by the Revenue under Section 260(A) of the Income Tax Act, 1961 assailing the order dtd. 04.10.2021 passed by the Income Tax Appellate Tribunal, Indore in IT(SS)A No.61/IND/2019. 2. In short the facts are that the respondent/assessee firm is engaged in the business of real estate. Upon search and seizure operation conducted u/s 132 of the IT Act, 1961, the assessment order was passed on 28.12.2017 under section 153C r/w section 143(3) of the IT Act for A.Y. 2012-13 to 2015-16 and under section 143(3) of the IT Act for A.Y. 2016-17. 3. Being aggrieved by the order dtd. 28.12.2017 passed by the A.O., assessee preferred appeal before the CIT(A) who vide its order dated 8.2.2019 allowed appeal of assessee in part by holding that the assessee maintained its regular books of accounts supported by bills/vouchers and other record duly subjected to audit. 4. Against the order dtd. 8.2.2019, the Revenue as well as assessee filed appeal before the ITAT who vide the impugned order dtd. 4.10.2021 has set aside the findings of the learned CIT(A) and quashed the assessment framed for the AY 2013-14 to 2016-17 on the issue of proceedings initiated u/s 153C of the IT Act. 5. Learned counsel for the Revenue has proposed following substantial questions of law: "(1) Whether, on the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in law in quashing the assessments 3 framed and proceedings initiated u/S 153C of the Income Tax Act made by the A.O ? (2) Whether on the facts and circumstances of the case that the ITAT was justified in law in upholding the decision of the CIT(A) in disallowing the addition on account of undisclosed investment u/S 69 B made by the A.O. ?” 6. With a view to understand the applicability of the section 153C and section 69B of the IT Act, these provisions are quoted as under : “153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of 4 section 153A shall be construed as reference to the date of receiving Golden Realities (SS)59 of 2019 and others the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules13 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.” “69B Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable 5 article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.”

(i) The assessee should have made the investments or is found to be the owner of any bullion, jewellery or valuable articles;

(ii) Based on the material facts, the AO finds that the amount expended on such investment actually exceeds the amount recorded in the books of account

(iii) The assessee either offers no explanation about the nature and source of investment or the explanation offered is not satisfaction in the opinion of the AO;

(iv) The satisfaction of the AO can not be arbitrary and subjection but has to be based on the relevant material. The investment made by the assessee have been duly shown in the books of account and the findings of the AO are arbitrary and not subjective and are also not based on relevant material. The AO ought to have stressed upon some independent and arbitrary material which could establish that the income offered by the appellant is not fully recorded in books of account. The only point which lies in the favour of the AO is that he has alleged that appellant failed to provide any satisfactory explanation regarding the investment. Appellant during 7 the course of survey has disclosed additional income on account of construction material. 4.4.2 The AO in his assessment order has simply stated that the explanation offered by the assessee is not satisfactory, which cannot be any basis for reclassification of income of assessee. The AO should have elaborately explained that the income disclosed by the assessee was not earned from business or the income shown was not related to business of the assessee. The AO has also not pointed out whether the appellant has been doing some other business apart from the disclosed source of income. Thus, the AO has no locus to reclassify income of the appellant without having anything incriminating on record. The satisfaction of the AO should be on some specific finding, which is missing in the case of appellant. Thus, the findings of the AO lacks merit and are not specific. In view of the above discussion and following the decision of Hon’ble ITAT Indore in the case of Mukesh Sangla HUF vs DCIT (supra) the AO was not justified in reclassification of declared income of the assessee u/s 69B of the Act. The AO is directed to treat the income of the appellant as income from other sources as declared by the assessee in regular return of income. Therefore, appeal on this ground is Allowed.” 47. The above detailed finding of Ld. CIT(A) has not been controverted by the Ld. DR by bringing any contrary material on record. The facts discussed above squarely reveal that the assessee made voluntary disclosure of undisclosed investment in construction to the tune of Rs.2,95,00,000/- in AY 2016-17 which was also offered for tax while filing return of income for AY 2016-17. The assessee contended that provisions of section 69B of the Act would not be applicable since it was not found in possession of any bullion, jewellery or other valuable article as stated u/s 69B of the Act. The Ld. Assessing Officer also did not specifically comment whether the additional income declared was a part of regular books of accounts or not more so when section 69B of the Act can be invoked only for income which is not fully disclosed in books of accounts and not in respect of income which is already incorporated in the books of accounts. In view of the detailed findings of the Ld. CIT(A) and reliance placed on the decision of the Hon’ble Jurisdictional Bench in the case of Mukesh Sangla HUF vs 8 DCIT, we do not find any infirmity in the finding of Ld. CIT(A) and the same needs to be confirmed. In the result, Ground No. 2 of the revenue’s appeal in IT(SS)A No. 82/Ind/2019 stands dismissed. 48. Ground No. 3 of these appeals is general in nature and requires no adjudication. 49. In the result, Revenue’s appeals in IT(SS)A No. 80/Ind/2019 for AY 2014-15, IT(SS)A No. 81/Ind/2019 for AY 2015-16 and IT(SS)A No. 82/Ind/2019 for AY 2016-17 are dismissed. 50. Finally, appeals filed by the assessee are partly allowed whereas that filed by the Revenue are dismissed.” 8. Upon perusal of entire record and after close scrutiny of the findings recorded by learned authorities, the findings recorded by learned ITAT with regard to disclosure of additional income of Rs.2,95,00,000/- on account of construction material, which was also shown while filing return of income for AY 2016-17, do not appear to be illegal or perverse. 9. Thus this Court is of the considered view that no substantial question of law as proposed by the Revenue arises in this appeal preferred by the Revenue under Section 260A of Income Tax Act. 10. Consequently, the appeal deserves to be and is therefore dismissed at admission stage. (SHEEL NAGU) (DWARKA DHISH BANSAL) JUDGE JUDGE ss Digitally signed by SWETA SAHU Date: 2022.10.18 17:51:52 +05'30'