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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 437/JP/2016
PER VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 24.02.2016 of ld. CIT (A)-2, Jaipur for the assessment year 2006-07. The assessee has raised the following grounds of appeal :-
“ 1. Under the facts and circumstances of the case, the learned CIT (A) has erred on fact & in law in confirming the validity of order passed u/s 147/148. She has further erred in holding that assessee has not objected in to reopening of assessment order before the learned assessing officer. 2. Under the facts and circumstances of the case, the learned CIT (A) has erred on fact & in law in confirming the addition of Rs. 24,05,760/- :
2 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur. • On the basis of page 51 of Annexure AA-2 showing account Balaji Vihar found at the business premises of M/s. Vedang Colonizers Pvt. Ltd. when such page doesn’t pertain to assessee. • When Sh. Atal Behari Gupta has confirmed that assessee has no interest in the scheme and filed an affidavit to that effect. • When ¼ share of income as page 51 of Annexure AA-2 has already been assessed in the hands of Sh. Atal Behari Gupta. • When assessee has established that plots of the scheme were sold prior to assessment year under consideration.
Under the facts and circumstances of the case, CIT (A) has erred in confirming the addition without bringing on record any corroborative evidence and simply on the basis of statement of third party.
The appellant prays to leave to, add, alter or amend aforesaid grounds of appeals at or before the time of hearing of appeal.
The necessary cost of appeal be allowed to assessee.”
Ground No. 1 is regarding validity of the order passed under section
147/148 of the IT Act.
The assessee is an Individual and derives income from property brokerage. The assessee has filed his return of income on 30th March, 2007 declaring total
income at Rs. 97,520/- which was processed under section 143(1). There was a
survey under section 133 conducted at the business premises of M/s. Vedang
Colonizers Pvt. Ltd. on 13/14.08.2012 wherein certain incriminating documents were
impounded which includes Annexure AA-2 containing 69 pages. During the course
of survey, statement of Shri Rajesh Tambi @ Ratan Tambi, the Director of the said
3 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
company was recorded. Shri Tambi in his statement stated that Balaji Vihar-II
Scheme was developed by M/s. Laxmi Grah Nirman Sahkar Samiti in which he along
with other persons have done the work of brokerage. Further, the assessee in
partnership with one of the four persons has also done some transactions of
purchase and sale of properties and earned profits. Since the assessee did not
disclose any income from purchase and sale of the properties, therefore, the AO proposed to re-open the assessment by issuing notice under section 148 on 22nd
March, 2013. In the re-assessment proceedings, the assessee objected to the
addition on account of the income from transactions of purchase and sale of the
properties in Balaji Vihar-II. However, the AO has made an addition of Rs. 24,05,760/- being 1/8th share of the assessee in the profits found recorded in the
impounded material Annexure AA-2. The assessee challenged the action of the AO
before the ld. CIT (A) and also raised the objection against the re-opening of the
assessment but could not succeed.
Before us, the ld. A/R of the assessee has submitted that the ld. CIT (A) has
committed a mistake in holding that the assessee has not filed objection to the re-
opening of the assessment whereas the objections were filed by the assessee before the AO in response to the letter dated 22nd January, 2014. The assessee has also
specifically requested to provide the material/evidence and papers which reveals the
alleged income of the assessee being the share of profit in the land transactions
proposed to be assessed by the AO in the re-assessment proceedings. The AO did
not dispose off the objections of the assessee and proceeded to complete the
reassessment. Thus the rejection of the objections by the CIT (A) is contrary to the
fact when the assessee has raised the objections before the AO. The ld. A/R has
4 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
relied upon the decision of Hon’ble Delhi High Court in the case of Principal CIT vs.
Tupperware India Pvt. Ltd., 236 Taxman 494 (Delhi) and submitted that the order of
the AO is not sustainable when the AO has not disposed off the objections
separately by a speaking order. The second leg of argument of the ld. A/R is that
the reasons recorded by the AO for reopening of the assessment is based on the
statement of Shri Rajesh Tambi without any tangible independent material to show
that income assessable to tax has escaped assessment. Thus the assessment
reopened on the basis of statement without any corroborative independent evidence
is not sustainable. He has relied upon the decision of Hon’ble Gujarat High Court in
the case of CIT vs. Shardaben K. Modi, 365 ITR 169 (Guj.) and submitted that the
Hon’ble High Court has held that the reopening of the assessment based on the
statement recorded under section 133A is not permitted without any corroborative
evidence. The ld. A/R has also relied upon the decision of Hon’ble Bombay High
Court in the case of Hindustan Lever Ltd vs. R.B. Wadkar, 268 ITR 332 (Bom.) and
submitted that it is for the AO to disclose and open his mind through reasons
recorded by him. It is for the AO to form his opinion and reasons recorded should
be clear and unambiguous and should not suffer from any vagueness. The
provisions of section 147 cannot be resorted to conduct an enquiry and to ascertain
whether an income assessable to tax has escaped assessment.
3.1. On the other hand, the ld. D/R has submitted that the ld. CIT (A) has clearly
given a finding that the assessee did not raise any objection against the notice
issued under section 148 of the Act and, therefore, the objections raised by the
assessee are without any basis. Further, the ld. CIT (A) has decided the issue of
validity of reopening. Hence, the ld. D/R has submitted that the objections and
5 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
explanations of the assessee filed before the AO are only on the merits of the issue
of addition made by the AO and not against the notice issued under section 148.
We have considered the rival submissions as well as relevant material on
record. The first objection raised by the assessee is that the AO has not disposed
off the objection raised against the notice issued under section 148 prior to the
passing of the reassessment order and, therefore, the reassessment order is not
valid and sustainable. We find that in response to the notice under section 148, the
assessee vide letter dated 30.08.2013 stated that return filed under section 139(1)
may be treated as return filed under section 148 of the Act. In the said letter the
assessee has also requested for supply of the copy of the reasons which was provided to the assessee on 8th November, 2013. Thereafter, the AO raised certain queries vide letter dated 22nd January, 2014 and in response to the said letter of the
AO, the assessee stated to have filed a letter without any date and
acknowledgement. Copy of the alleged letter is placed at pages 47 and 48 of the
paper book. In the first part of the said letter the assessee has submitted that there
is no material or evidence found in the course of survey or after survey which can
reveal the income assessable to tax has escaped assessment in the hand of the
assessee. The assessee then requested the AO to provide the material/evidence
which suggests that assessee has share of profit in the alleged land transactions.
However, nowhere in the said letter the assessee has questioned the validity of
notice issued under section 148 or insufficiency of reasons recorded by the AO. The
second part of the letter deals with the issue on merits. Therefore, we find that the said letter in the assessment proceedings in response to the letter dated 22nd
January, 2014 cannot be considered as an objection filed by the assessee against
6 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
the notice issued under section 148. Though the AO has issued notice under section 142(1) vide letter dated 22nd January, 2014, however, there is no mention of the
reply of the assessee as claimed by the assessee. Further, the alleged reply does
not bear any date or receipt/acknowledgement of filing before the AO. It is
pertinent to note that when the assessee has been participating in the assessment proceedings till the reassessment order was passed on 27th March, 2014 without
raising any such objection against the notice under section 148, then we do not find
any substance or merits in the contention of the assessee that the reassessment
order is invalid as the AO has not disposed off the objection of the assessee against
the notice issued under section 148.
4.1. The second contention of the ld. A/R of the assessee is that the reopening of
the assessment is based only on the statement of Shri Rajesh Tambi without any
corroborative evidence/document and, therefore, in the absence of tangible
material, the AO is not permitted to reopen the assessment. Thus the second
objection of the assessee is regarding the sufficiency of the reasons recorded by the
AO to form the belief that the income assessable to tax in the hands of the assessee
on account of transactions of purchase and sale of land in the Balaji Vihar-II Scheme
has escaped assessment. The AO has recorded the reasons for reopening of the
assessment as under :-
“ During the course of survey u/s 133A conducted on 13/14.08.2012 at the business premises of M/s. Vedang Colonizers Pvt. Ltd., E-61, Malviya Nagar, Jaipur certain incriminating documents were impounded for further verification. The impounded record includes Annexure AA-2 containing 69 pages. Statement of Sh. Rajesh Tambi, B-81, Janta
7 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
Colony, Jaipur were recorded u/s 131 on 13.03.2013 by ITO, Ward 6(1), Jaipur wherein he has explained the transaction recorded in these documents. As per his statement, page no. 51 relates to the transaction of purchase and sale of land on account of Balaji Vihar Scheme which was developed by M/s. Laxmi Grah Nirman Sahkari Samiti Ltd. executed by the four persons. The assessee is partner with one of the above persons. The net profit of each person on the transaction recorded in this page is Rs. 48,11,521/- on total investment of Rs. 4,65,40,000/-. Since the share of the assessee is not ascertainable, it may be taken at 1/8th of the above investment amounting to Rs. 58,17,500/- and net profit amounting to Rs. 24,05,760/- (4811521/2). The assessee has not declared any income from transaction in real estate in his return of income. Thus, the assessee did not disclose fully & truly all the material facts necessary for his assessment.”
As per the reasons recorded by the AO, it is revealed that a survey under section
133A was conducted at the business premises of M/s. Vedang Colonizers Pvt. Ltd.
During the course of survey proceedings certain documents were impounded
including Annexure AA-2 containing 69 pages. When these documents were
confronted with Shri Rajesh Tambi, Director of the said company, he has replied that
the transactions recorded in the documents are relating to the purchase and sale of
land in respect of Balaji Vihar-II Scheme which was developed by M/s. Laxmi Grah
Nirman Sahkari Samiti. The assessee is the Secretary of M/s. Laxmi Grah Nirman
Sahkari Samiti and thus the role of the assessee in development of Balaji Vihar-II
Scheme cannot be ruled out. Shri Tambi has further explained the transactions
recorded in the impounded documents that the net profit of each person on the
8 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
transactions of purchase and sale of land is Rs. 48,11,521/-. Since the assessee has
allegedly carried out these transactions along with one partner, therefore, the AO was of the opinion that 1/8th of the total investment of Rs. 4,65,40,000/- is
amounting to Rs. 58,17,500/- and net profit amounting to Rs. 24,05,760/- belongs
to the assessee who has not declared any income from the transactions in real
estate in his return of income. There is no dispute that the assessee has not
declared any income from the transaction of purchase and sale of land. Therefore,
the material impounded during the survey conducted in the case of M/s. Vedang
Colonizers Pvt. Ltd. and subsequent enquiry conducted in the said case reveals that
the assessee along with four other persons have carried out the transactions of
purchase and sale of land in Balaji Vihar-II Scheme. The connection of the assessee
with the Society M/s. Laxmi Grah Nirman Sahkari Samiti which has developed Balaji
Vihar-II Scheme is not in dispute. Therefore, when the assessee has not declared
any income on account of transactions in real estate, then the said detection of
income from the real estate transaction is certainly sufficient to form the belief that
an income assessable in the hands of the assessee has escaped assessment. At the
time of reopening of the assessment, only a prima facie opinion is formed and,
therefore, even if the exact amount of the profit or share of the assessee in profit
was not ascertainable from the documents, once the income on account of
transactions in purchase and sale of land is discovered in the survey proceedings
and post survey enquiry as well as statement recorded under section 131 of the Act,
the same constitutes a tangible material to form the belief. When the return of
income does not disclose any such income on account of purchase and sale of land
and the same was processed under section 143(1), then the reopening of the
9 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
assessment is proper and justified. Accordingly, we do not find any error or illegality
in the order of the ld. CIT (A) qua this issue. The decision relied upon by the
assessee will not help the case of the assessee when a new source of income was
detected during the survey and post survey enquiry as well as the statement
recorded under section 131 of Shri Rajesh Tambi. Accordingly, in our humble view
the decisions relied upon by the assessee are not applicable in the facts of the
present case.
Ground No. 2 is regarding the addition of Rs. 24,05,760/- on
account of the share of the assessee in the profits of purchase and sale of
land at Balaji Vihar-II Scheme.
The ld. A/R of the assessee has submitted that the AO has made the addition
on the basis of statement of Shri Rajesh Tambi on account of purchase and sale of
land in Balaji Vihar-II Scheme. The AO has proceeded on the basis that the
assessee is partner with one of these persons Shri Atal Behari Gupta and, therefore, determined the share of the assessee at 1/8th of the profit in the land deal as stated
by Shri Rajesh Tambi in the statement. The ld. A/R has submitted that the
documents impounded during the survey do not reveal any specific transaction, date
of transaction, nature of transaction and the parties to the transaction. Therefore,
these documents are dumb documents and cannot be held as an evidence in
support of the claim that the transactions recorded in the loose papers are the land
deals entered into by the assessee. The ld. A/R has further contended that the
assessee’s name has not been mentioned in these documents. However, only on the
basis of statement of Shri Rajesh Tambi the AO concluded that the assessee was a
partner of one Shri Atal Behari Gupta and accordingly made the addition in question.
10 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
The ld. A/R has further contended that the assessee filed the affidavit of Shri Atal
Behari Gupta who has confirmed that he never worked in partnership with the
assessee in any land dealings or brokerage business. Therefore, when the assessee
has filed the affidavit of Shri Atal Behari Gupta then in the absence of any contrary
material or fact, the addition made by the AO is not justified. The ld. A/R has
further contended that the land in question was purchased by the Society M/s.
Laxmi Grah Nirman Sahkari Samiti in the year 1997 and the plots were sold by 2001.
Therefore, the plots of the Scheme were sold prior to the assessment year under
consideration. In support of his contention, he has referred to the copies of the
purchase agreement and list of plots allotted along with date of allotment. He has
further contended that the AO has not doubted the genuineness of these documents
and, therefore, once all the plots were allotted prior to the assessment year under
consideration, no addition can be made on account of the transaction of sale of land
in the assessment year under consideration. Hence the ld. A/R has submitted that
the impounded documents do not reveal any transaction carried out by the assessee
in the alleged sale of land and, therefore, the addition made by the AO is not
sustainable.
5.1 On the other hand, the ld. D/R has submitted that there was a litigation in
respect of the purchase and sale of land and the assessee has signed the documents
as Manager of M/s. Laxmi Grah Nirman Sahkar Samiti. He has further contended
that even as per the document at page 13 of the paper book, the transactions of
allotment of plots were upto the year 2004 and, therefore, it is not correct that all
the plots were allotted prior to the assessment year under consideration or upto the
year 2001. Further, the transactions recorded in the impounded material pertains
11 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
to the assessment year under consideration. The ld. D/R has referred to the
statement of Shri Atal Behari Gupta at pages 74 to 81 of the paper book and
submitted that in reply to question no. 6, Shri Atal Behari Gupta has stated that the
transactions recorded in the impounded material pertains to the year under
consideration and in respect of the transactions of sale of plots. He has accepted
the receipts of the amount of Rs. 21,94,149/- against the sale of the plots. He has
also accepted the fact that he has received the brokerage in respect of the
transactions of sale of plots by various persons in the Balaji Vihar Scheme. The
transactions were done in the month of September, 2005 to December, 2005. Thus
the ld. D/R has submitted that Shri Atal Behari Gupta has accepted the transactions
recorded in the impounded material pertain to the year under consideration. He has
relied upon the orders of the authorities below.
We have considered the rival submissions as well as relevant material on
record. The documents impounded during the survey carried out at the business
premises of M/s. Vedang Colonizers Pvt. Ltd. reveal the transactions of sale of
land/plots in Balaji Vihar Scheme which was developed by M/s. Laxmi Grah Nirman
Sahkari Samiti. The assessee was the Secretary of the said society which has
developed the Balaji Vihar Scheme. However, since the name of the assessee does
not appear in any of the documents or transactions recorded in the impounded
documents, therefore, the impounded documents itself are not sufficient to reach to
the conclusion that the assessee was a party to those transactions of sale of land
and received or earned income therefrom. The said material impounded during the
survey is sufficient for conducting a further enquiry for ascertaining the correct facts
as to how the assessee was involved in the transactions of sale of land and further
12 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.
how much income has been earned by the assessee from these transactions. In the
statement, Shri Rajesh Tambi has only indicated that Shri Atal Behari Gupta has
done the transactions along with three other persons and the assessee was also a partner. Therefore, the AO proceeded to assess the income @ 1/8th share in the
profits of the transactions of sale of land. The AO at the time of recording the
reasons was not sure about the exact amount of share of the assessee. During the
assessment proceedings, the AO has not conducted any further enquiry but relied
upon the statement of Shri Rajesh Tambi as well as the impounded materials which
do not reveal the name of the assessee but only Shri Rajesh Tambi in his statement
has explained that the transactions were carried out by four persons and one Shri
Atal Behari Gupta was working with the assessee and, therefore, the share of the assessee was 50% of 1/4th share in the transactions. The AO has not brought on
record what are the exact transactions of land, the plots of land, the documents of
sale of land and who were the parties to these documents under which the alleged
sale of land transactions were carried out. In the absence of the documents of
transfer of the land, it cannot be ascertained who has actually sold these lands. It
may be a case that the assessee may have played some role in the sale of
transactions being the office bearer of the society. However, once the plots were
allotted to the members of the society, then the subsequent sale of the plots of land
can be only by the allottee and not by the society. Even if the plots are sold by the
Society, the office bearers cannot be held as executor in their personal capacity.
Accordingly in the absence of all the necessary relevant material and the documents
under which the sale transactions took place, the addition made by the AO based on
the impounded materials and the statement of Shri Rajesh Tambi is not justified.
13 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur. The AO though recorded the statement of Shri Atal Behari Gupta who has only accepted the role as a Broker but has not stated in the statement that the transactions were carried out by the assessee in any capacity. Accordingly, in the facts and circumstances of the case when the necessary relevant material is not brought on record to show that the assessee has sold these lands having any title, interest in the alleged land, the addition made by the AO is not sustainable. Accordingly, we delete the addition made by the AO on account of sale and purchase of the land. 7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 11/05/2018. Sd/- Sd/- ¼ HkkxpUn½ ¼ fot; iky jkWo ½ (BHAGCHAND) ( VIJAY PAL RAO ) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/05/2018. das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-Shri Ram Avtar Gupta, Jaipur. 2. izR;FkhZ@ The Respondent-The ITO Ward 5(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 437/JP/2016} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत
14 ITA No. 437/JP/2016 Shri Ram Avtar Gupta, Jaipur.