SHITAL DHORDA,MUMBAI vs. ITO-22(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL
“SMC” BENCH MUMBAI

BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
Shital Dhorda
1002, 10th Floor,
Vibgyor, S.V. Road,
Santacruz (W),
Mumbai – 400054. Vs. ITO – 22(3)(3)
408, Piramal Chambers
Lalbaug, Mumbai –
400012. PAN/GIR No. AJVPD0456H
(Applicant)
(Respondent)

Assessee by Shri Snehal Shah
Revenue by Shir Vithal Machindra Bhosale, Sr.
DR

सुनवाईक तारीख/Date of Hearing
16.12.2024
घोषणाक तारीख/Date of Pronouncement
14.01.2025

आदेश / ORDER

PER SANDEEP GOSAIN, JM:

The present appeal has been filed by the assessee challenging the impugned order dated 04.07.2023, passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the Learned Commissioner of Income Tax (Appeals) / National
Faceless
Appeal
Centre,
Delhi
(‘Ld.
CIT(A)’), for the assessment year 2012-13. The assessee has raised the following grounds of appeal:
1. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO by treating amount of Rs. 32,28,750/-

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Shital Dhorda, Mumbai as unexplained investment without appreciating the facts of the case.
2. The Learned CIT(A) NFAC, Delhi has erred in confirming the action taken by the Ld. AO of relying on the pen drive and some documents seized during search and seizure operation u/s 132
in case of Kamala Group without even confronting the appellant with such pen drive found from one Mr. Nilesh Gawade/
Mahendra Rawal or without confronting with the statement of Oath alleged to have been admitted by the employees and further without giving copy of any statement alleged to have been recorded 132(4) and u/s 131 of the Income Tax Act, 1961 as claimed to have been admitted by them.
3. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO by relying on admission by the employees of Kamala Group and ratification of the same by the directors/partners of the group without giving any opportunity to the appellant to cross examine each of such employees/directors/partners.
4. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO by failing to appreciate that the appellant has neither been interrogated by the investigation wing
DGIT(INV), Mumbai nor does the learned Assessing Officer is in possession of any evidence whatsoever to even remotely conclude that the appellant has paid "on money" for purchase of property
5. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO as the Appellant is unable to understand as to what an amount of Rs. 129.150 signifies? It is evident that the learned Assessing Officer is interpreting the same based on his own understanding, invented facts, and above all based on his own arithmetical calculations at least in terms of figures being displayed in Rupees in hundreds, thousands, lacs, millions crores or whatever best known to him only.
6. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO and has grossly erred in concluding

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Shital Dhorda, Mumbai that the appellant alongwith three other co-owners has indeed paid Rs. 1.29,15,000/- in cash, especially since the learned
Assessing Officer has neither collected any evidence of any incriminating nature whatsoever in the course of assessment proceedings nor any of the answers to the questions raised pursuant to statement recorded u/s 131 even remotely suggest that the appellant has paid any "On Money" whatsoever.
7. The Learned CIT(A), NFAC, Delhi has erred in confirming the action taken by the Ld. AO in making a reference to the Indian
Evidence Act, 1872 which states that "whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove those facts exist." It is pertinent to note that the appellant has extremely clearly stated during the entire assessment proceedings that no cash payment has been made and thus there can be no documentary evidence for proving the fact that no cash has been paid. On the other hand, the department claims that the appellant has made cash payment to Natraj Realtors and thus citing the above provision of the Indian Evidence Act, 1872, the onus is on the department to prove the said allegation with documentary evidences which the department has grossly failed in.
8. The ground of appeal is without prejudice to the other
9. The appellant reserve the right to amend, alter or add to the grounds of appeal.
2. The brief facts of the case are that assessee along with other family members had purchased a residential unit located at Santa Cruz from Natraj Realtors, which got registered during the year under consideration.
3. While framing the assessment under section 143(3) r.w.s
147
of the act, the AO made additions of Rs.32,28,750/- on account of ‘on-money’ paid by the assessee to the builder i e Natraj Realtors for allotment of the 4
Shital Dhorda, Mumbai residential unit and this addition was sustained by Ld.
CIT(A) as well.
4. Aggrieved by the order of Ld.CIT(A), the assessee has preferred the present appeal before me on the grounds mentioned hereinabove.
5. All the grounds raised by the assessee are interconnected and interrelated and relates to challenging the order of Ld. CIT(A) in sustaining the additions made by the AO. Therefore, I have decided to dispose of all the grounds raised by the assessee through the present consolidated order.
6. Ld. AR appearing on behalf of the assessee, reiterated the same arguments as were raised by him before the revenue authorities. It was submitted that the price paid by the assessee for the purchase of the residential unit to the builder, is much above the market value prevalent and adopted by the stamp duty authorities. Hence, there was no occasion for the assessee to make any cash payment on account of ‘on-money’ to the builder, it was also submitted that merely relying upon the information received from the Investigation Wing Mumbai, AO made the additions without carrying out any independent enquiries or considering the submissions of the assessee. The assessee also relied upon his written submissions and same are reproduced here in below:

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Shital Dhorda, Mumbai

The Appellant is an Individual and is regularly assessed to tax.
The Appellant had filed the original return of income on 19/08/2012 declaring income at Rs. 1,81,506/-. Thereafter, a notice u/s 148 of the Income-tax Act, 1961 (the "Act') dated
27/02/2014 was issued to the Appellant. In response to the notice, the Appellant filed a letter dated 18/03/2014 stating that the original return of income may be treated as return filed in response to notice u/s 148 of the Act.

On perusal of Para 5.3 of the order, it is emphatically stated that the Learned AO has received information vide letter dated
24/03/2014
from DCIT
Central
Circle-44/Kamala
Group search/2013-14 only during assessment proceedings. In other words, the Learned AO did not have any information prior to issuance of notice u/s 148 of the Act. It is pertinent to note that the copy of such letter dated 24/03/2014 was received by the Learned
AO only after issuance of notice u/s 148
on 27/02/2014. It is therefore concluded that the Learned AO did not have any "reason to believe" to reopen the case of the Appellant before issuing notice u/s 148 of the Act. Hence, the notice issued u/s 148 is illegal, bad in law and ultra-vires the provisions of the Act.

Without prejudice to the above, the Appellant emphatically denies having paid any amount over and above the agreement value to purchase immovable property valued at Rs. 2,39,15,000/- along with 3 other family members which please note. Copy of the purchase agreement is enclosed as Exhibit 1. Para 5.3 of the order states that a pen drive with details of cash transactions with respect to Natraj Realtors was found during search and seizure action conducted on Kamala Group on 08/01/2013 which was confirmed through statement of Shri
Nilesh Gawade and Shri Mahendra Rawal recorded under section 132(4) of the Act. The Learned AO has neither confronted the contents of Para 5.4 of the order which clearly states that the statement of the Appellant was recorded on oath on 19/03/2015
wherein it is amply clear that:

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Shital Dhorda, Mumbai

It is amply clear from the above that the Learned AO did not have any tangible material so as to form an opinion as regards
"Reason to believe" that any income chargeable to tax has escaped assessment within the meaning of section 147 of the Act.

While the Appellant has never been provided with a copy of reasons recorded, on the basis of the contents of the Assessment
Order it appears that the Learned AO has incorporated the reasons recorded in his Assessment Order and the Appellant objects to the same as under The Learned Assessing Officer in Para 2 of her Assessment Order has mentioned the Reasons
Recorded that prompted the reopening of the case of the Appellant. The Appellant strongly objects to the Reasons Recorded by the Learned AO. The objection is as under: -

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Shital Dhorda, Mumbai recorded do not mention as to whose statements on oath, recorded if any from the aforesaid Kamala Group have been relied upon as information received by the DGIT(Inv), Mumbai before making such wild allegations and thereby questioning the conduct of the Appellant It is learnt from all the members of Vibgyor CHS' that none of them has made any payment in cash as alleged and it is further learnt from the records of Vibgyor
CHS that the agreement value of Flat No. 1002 displays the highest rate per sq. feet and hence the question of arriving at any adverse view only in the case of the Appellant just does not arise

In the light of the above, it is evident that the reasons recorded by the Learned AO are null and void and hence the notice issued under section 148 is bad in law and ultra-vires the provisions of the Income-tax Act, 1961. View of the Learned AO i Para 2 of the Assessment order states that:

"Information is received from DGIT(Inv) in the search case of Kamala Group, that assessee along with 3 other members has purchased immovable property agreement valued at Rs.2,39,15,000/-. During the course of search proceedings, it is 8
Shital Dhorda, Mumbai found that cash of Rs.1,29,15,000/-has been paid over and above the agreement value."

The Appellant humbly states that the Learned Assessing Officer had no "Relevant Material" whatsoever that could even remotely result in formation of a requisite belief that income of the Appellant has escaped assessment. Hence the stand taken by the Learned Assessing Officer is devoid of any merit since, it is far away from the facts and material arrived at such a conclusion. Resultantly, the notice u/s 148 of the Act is issued neither having a requisite belief nor having requisite juri iction as claimed.

Accordingly, a bonafide 'belief towards escapement of income is clearly absent in the present case. The entire action of the Learned Assessing Officer is a complete non-starter and thus requires to be struck down. It is a well settled law that the proposition that re-assessment notice for mere verification or for conducting an enquiry is not permissible in law notwithstanding that the return of income was not subjected the scrutiny under section 143(3) of the Act and there are long lines of judicial precedents delivered both by the Juri ictional High Court as well as other High Courts in this regards The action of the Learned Assessing Officer for invoking juri iction is not consistent with the mandate of law and therefore requires to be quashed.

i. The Learned Assessing Officer has neither provided the "Pen- drive" "seized" during search and seizure action on Kamala
Group nor statement on oath from Nilesh Gawde and Mahendra
Rawal was provided. Moreover, the Appellant was not given any opportunity to cross examine the aforesaid persons.

ii. Moreover, in para 5.6 and 5.7 on page 5 and Page 6 of the Assessment Order, the Learned Assessing Officer has quoted
Section 101, 103, 106 of the Indian Evidence Act, 1872 which is stated as follows:

"5.6 Section 101 of the Indian Evidence Act, 1872 states that whoever desires any Court to give judgment as to any right or 9
Shital Dhorda, Mumbai liability dependent on the existence of facts which he asserts, must prove that those facts exits. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. According to Section 103 of the Indian
Evidence Act, 1872, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence. Section 106 of Indian Evidence Act, 1872 says that when any fact is especially within the knowledge of any person, then burden of proving that fact is upon him.

The Learned Assessing Officer relies on the above provisions of the Indian Evidence Act, 1872 to push the burden of proof on the Appellant. Whereas in fact in this case the burden of proof lies on the shoulders of the Learned Assessing Officer to prove the assertion that 'on-money' has been given by the Appellant for the purchase of flat at Vibgyor CHS since all the "proof" which she claims to be with her has not been provided by her to the Appellant at any point of time during the re-assessment proceedings despite the Appellant's reminders iii. On 17/03/2015, summons u/s 131 of the Act were issued on the Appellant. The Appellant attended summons personally on 19/03/2015
and again reiterated that neither she was questioned by the investigating authority nor is in receipt of the "pen drive" or any other "incriminating evidence" as claimed by the Learned AO

In the light of the above, the Appellant humbly submits as under:
- i. No fresh/ tangible material on record before the Learned
Assessing Officer for initiating reassessment assessment. The Learned AO has merely relied on the forwarded information received from the office of DGIT (Inv.) Mumbai. The Learned Assessing Officer has merely relied on the information received and was not in possession of the any necessary documents and evidences. There has been no independent application of mind on part of the Learned Assessing Officer.

ii. There is no "reason to believe"

Section 147 of the Act provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 of the Act, assess or reassess such income. The Appellant submits that it is a well settled principle of law that the existence of a valid "reason to believe" is a sine qua non to the exercise of juri iction under section 147 of the Act. It has been held in a number of decisions by the Hon'ble
Supreme Court and the High Courts that the expression "reason to believe" postulates a bona fide belief that income has escaped assessment and there must exist objective reasons for that belief. The said belief must be held in good faith and founded on material which is not irrelevant or arbitrary. The said reason to believe cannot be based on conjectures. The Appellant submits that it is very clear from the reading of the reasons recorded for the reopening that the entire belief is based on certain information disregarding the well settled law laid down by the Hon'ble Supreme Court and the High Courts and, hence, the belief cannot be valid in law. The Learned Assessing Officer has erred in assuming juri iction to issue notice under section 148
of the Act without any 'reason to believe' that income has escaped assessment and has proceeded on an erroneous assumption that the Appellant has entered into "On Money"
payments by buyers/ prospective buyers with Kamala Group against whom the Appellant was neither provided any opportunity to cross examine the person/s who had given statement on oath nor the appellant has received any such "incriminating evidences" such as "pen-drive" till date on the basis of which such reassessment proceedings was initiated at any point of time during the reassessment proceedings.

iii. No link between the material and the formation of belief

It is a well settled law that in order to validly reopen an assessment, there must be a live link between the material, on which an Assessing Officer places reliance to reopen the assessment and the formation of his belief that certain income chargeable to tax has escaped assessment. In the instant case, the material on which the Assessing Officer has placed reliance appears to be merely a claim that she was in receipt of an information, the basis whereof is not known to the Appellant especially since she has not even provided any documentary evidence of the same,

Cannot reopen assessment to make an enquiry For a valid re- assessment proceeding, there must be some positive material to establish that income chargeable to tax has escaped assessment.
The law does not permit an Assessing Officer to initiate reassessment proceedings with a view to embark upon enquiries to gather material to come to a conclusion that income has escaped assessment. The duty cast upon the Appellant to make a full and true disclosure of all material facts does not absolve the Learned Assessing Officer from performing his duty to apply his mind and make intelligent inquiries. It is his duty to exercise due care and caution to make intelligent inquiries

V. Impugned order marred with non-application of mind

In order to initiate reassessment proceedings, there has to be a thorough application of mind followed by a reason to believe that income chargeable to tax has escaped assessment. However, a perusal of the impugned order would show that there has been no application of mind on the part of Learned Assessing Officer in disposing off the Appellant's objections and proposing to initiate the reassessment proceedings vi. No income which has escaped assessment assessment.

View of the Learned CIT (A)

At the very outset, it is submitted that Para 1 of the order states that a remand report had been called from the Learned
Assessing Officer on 06/02/2023, 08/06/2023 and 20/06/2023
respectively. In this respect, the Appellant attended the remand proceedings from time to time during FY 2017-18 itself and it was learnt that the remand report has been forwarded to the Ld.
CIT (A)-31, Mumbai. While the Appellant is striving to get a copy of this remand report, the JAO has not made the same available yet. Hence, the Appellant has been deprived of the remand report which has been relied upon by the Ld. CIT (A), NFAC, Delhi before passing the order.

The Learned CIT(A) on Page 2 of the order reproduces the Grounds of Appeal raised by the Appellant which is as under: -

II GROUNDS OF APPEAL

The Appellant is shocked and surprise that the Ld. CIT(A), NFAC,
Delhi has chosen to completely ignore the Appellant's letter dated
15/01/2018 where the Appellant has submitted Amended
Grounds of Appeal without giving any reason whatsoever. Copy of the Appellant's letter dated 15/01/2018 along with the amended grounds of appeal is attached as Exhibit 2. Upon reviewing the order, the Appellant respectfully wishes to draw your attention to the fact that the CIT (A) has passed the order without adequately considering the amended grounds of appeal submitted. These amended grounds, which were filed in accordance with the provisions of the Act, cover all pertinent issues related to the case and provide substantial evidence and reasoning that warrant reconsideration. The issues raised in the amended grounds are crucial for arriving at the logical conclusion and ignoring these grounds compromises the fairness and integrity of the proceedings. It is well established that appellate authorities are required to consider all grounds raised in appeals. The omission to consider the amended grounds is contrary to established legal principles, as noted in various judgments of the ITAT and higher courts.

The Ld. CIT (A) has grossly erred in treating the arguments of the Appellant as "WEAK" despite the fact that the Department has not produced a single corroborative evidence on record to prove their case. The Learned Assessing Officer has kept on repeating his justification that he has certain information based of a pen drive and statements given by one Mr. Nilesh Gawde and Mr.
Mahendra Rawal.

The Learned CIT(A) in para V2 on page 7 of the order himself summarizes that the findings of the Learned Assessing Officer is only on account of the following: -

None of the above details/documents has been provided to the Appellant despite continuously requesting for the same and the Ld. CIT (A) has preferred to stay silent on this aspect which your goodself may please note.

Legal Position

Hence, the proceedings-initiated u/s 147 of the Act is bad in law, null and void and ultra vires the provisions of the Act. We place our reliance on the following judgements:

We have heard the parties and perused the record. We have held that the information found in the pen drive/laptop of employees cannot be considered as credible evidences, unless they have been corroborated with any other evidence. Accordingly, no credence could be given to the abstract entries made in the pen drive/laptop. Accordingly, we are of the view that the AO could not have made additions on the basis of those information.
1138/Ahd/2016) held that re-opening is not permissible merely to seek investigation of facts.

ITAT Jaipur held that addition solely on the basis of PEN drive found during the search proceedings, without checking the veracity/ reliability of the data recorded in the PEN drive, is unsustainable in law

CONCLUSION

In view of the same not only the entire re-assessment proceedings deserve to be quashed and thereby treated as null and void-ab-initio, but even on merits, the entire addition of Rs.32,28,750/-made u/s 69A is without any basis and hence deserves to be deleted.
7. On the other hand, Ld DR appearing on behalf of the department, relied upon the orders passed by the revenue authorities.
8. I have heard the arguments for both the parties and have also perused the material placed on record, judgements cited before me and the orders passed by the revenue authorities. From the records, I noticed that the assessment was reopened on account of the fact that AO received information that during search on Kamla Group, it was found that assessee along with three other members had purchased immovable property valued at Rs.2,39,15,000/- and cash of Rs.1,29,15,000/- was paid over and above the agreement value. And in this regard a pendrive with the details of cash transactions with respect to Natraj Realtor was found, which was confirmed through statement of Shri Nilesh, Gavade and Mahendra Rawal recorded U/s 132(4) of the Act and on this basis, reassessment order was framed and the same was upheld by the Ld.CIT(A).
9. Whereas throughout the proceedings, the assessee categorically denied having paid any amount in cash over and above the agreement value. The AO has neither confronted assessee with any of the material found during the search on Kamla Group and even no evidence or seized document has been referred to where any name of the assessee has been explicitly mentioned of paying on-money.
Nilesh Gavade or Mahendra Rawal was confronted.
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Therefore, in my view, the information if any found in the pendrive etc., cannot be considered as ‘credible evidence’, unless they have been corroborated with any other evidence.
In my humble opinion, since the assessee was not provided with the adverse material, if any, based on which notice u/s 148 of the Act, was issued, it hampers the primary and fundamental requirement of natural justice.
11. As far as information claimed in pendrive is concerned, the same was not found from the possession of the assessee but was found as per order of assessment, during search and seizure conducted in the case of third party therefore, in the absence of corroborative evidence to establish that the contents of pendrive are correct and authenticated to the extent assessee paid ‘on-money’ in cash. No addition can be made and even otherwise during the entire reassessment proceedings the veracity and reliability of the data recorded in the pendrive was not checked or tested. Therefore, in such a scenario no addition is warranted in the case of assessee. For the above proposition I relied upon the decision in the following cases:
1. ITO Vs. Vinod Aggarwal, ITA No. 2573/Mum/2017
2. ITO Vs. Nikhil Vinod Aggarwal, ITA No. 2574/Mum/2017
3. Heena
Nos. 3264 to 3268/Mum/2022. 12. Hence, considering the totality of the facts and circumstances and also legal proposition, as discussed by me, I direct the AO to delete the additions thus all the grounds raised by the assessee or allowed
13. In the result the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 14.01.2025. (SANDEEP GOSAIN)
JUDICIAL MEMBER

Mumbai, Dated 14/01/2025

KRK, PS
आदेश की ितिलिप अेिषत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER,
सािपत ित ////