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Facts
The assessee's income tax return was selected for scrutiny. During a search on the Nila Sambhav Group, an MOU detailing a land sale by the assessee for Rs.32.1 crores, including a Rs.19.2 crore cash component, was discovered. The assessee claimed the deal was cancelled and the amount received via cheque was returned, denying any cash receipt, leading the AO to accept the return without addition. The PCIT initiated revision proceedings under Section 263, alleging that the AO's order was erroneous and prejudicial to revenue as it lacked proper inquiry into the cash component and considered the cancellation an afterthought to evade tax.
Held
The tribunal held that while the cancellation of the deal might have been an afterthought to avoid tax liability, the fact remains that the deal was cancelled and any amount received by cheque was refunded. The PCIT could not rebut the cancellation of the deed. Therefore, the tribunal concluded that no unaccounted income could be taxed at this stage, the AO's view was plausible, and the assessment order was not erroneous. The PCIT's revision order under Section 263 was deemed unsustainable and quashed.
Key Issues
Whether the PCIT was justified in setting aside an assessment order under Section 263, on the grounds that the AO failed to inquire into a significant cash component from a land deal that was subsequently cancelled by the assessee.
Sections Cited
263, 143(3)
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Income Tax Appellate Tribunal, “ A” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
"ी संजय गग", "ाियक सद" एवं अ"पूण" गु!ा, लेखा सद" के सम%। ] ] Before Shri Sanjay Garg, Judicial Member And Annapurna Gupta, Accountant Member आयकर अपील सं / Year : 2021-22 Naman Vidyapati Patel The Pr.CIT (Central) बनाम/ M/s.Markettic Ahmedabad – 380 009 v/s. Mahalaxmi Compound Opp. Rustom Mills Dudheshwar Road Ahmedabad – 380 004 "थायी लेखा सं./PAN: ACOPP 9233 C (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri S.N.Divatia, AR & Shri Samir Vora, AR Revenue by : Shri Alpesh Parmar, CIT-DR सुनवाई की तारीख/Date of Hearing : 30/07/2025 घोषणा की तारीख /Date of Pronouncement: 25/09/2025 आदेश/O R D E R
Per Sanjay Garg, Judicial Member:
The present appeal preferred by the assessee is against the order of learned Principal Commissioner of Income-Tax (Central), Ahmedabad [hereinafter referred to as “Ld. PCIT” for short] dated 27/03/2025 passed in exercise of his revision jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as "the Act" for short] for Assessment Year (AY) 2021-22. Naman Vidyapati Patel vs. The Pr.CIT Central Asst. Year : 2021-22
The assessee, in this appeal, has contested the very validity of the impugned revision order of the Ld. PCIT u/s 263 of the Act.
The brief facts of the case are that the assessee is an individual and had filed his return of income declaring total income of Rs.48,10,920/-. His source of income was from salary, house property and other sources. The assessee’s return of income was selected for compulsory scrutiny u/s.143(3) of the Act.
3.1. During the course of assessment proceedings, the Assessing Officer (AO) noted that a search action was conducted on the Nila Sambhav Group (real estate developer) on 08/09/2021. During the course of search, an MOU dated 02/04/2019 executed between the assessee (potential seller) and Shri Manoj B. Vadodaria, Director of one of the companies of the Nila Sambhav Group, which contained the transaction details of land situated at Village Vasna, Ahmedabad was found. As per the said MOU, the assessee agreed to sell his land at Vasna for a a total consideration of Rs.3,21,00,000/-. Further, during the course of search proceedings, certain handwritten loose-papers were also found which showed cash transactions related to the said land. The copy of the MOU as well as the loose-paper notings have been reproduced by the Ld. PCIT in the impugned order. The Ld. AO from the said papers observed that the total sale consideration for the land in question was settled at Rs.3,21,00,000/- out of which an amount of Rs.1,29,00,000/- was paid as advance by cheque and the remaining amount of Rs.1,92,00,000/- was paid in cash. Further, certain vouchers were also recovered which showed that the assessee had taken cash in relation to the transfer of his land. During the course of assessment proceedings, the AO show-caused the assessee as to why the said amount of Rs.1,92,00,000/- received in cash from the purchasers Naman Vidyapati Patel vs. The Pr.CIT Central Asst. Year : 2021-22 Shri Manoj B. Vadodaria should not be treated as his unaccounted income and, accordingly, be added into the income of the assessee. In reply to the show-cause notice, the assessee admitted that, in fact, an MOU to sell his land was agreed between him and Shri Manoj B. Vadodaria and further that the sale consideration was agreed at Rs.3,21,00,000/-. He, however, submitted that only an amount of Rs.1,56,00,000/- was paid by Shri Manoj Vadodaria to him which was paid through banking channel and TDS was duly deducted thereupon. That the balance amount was pending and, hence, not received by the assessee. That there was mutual agreement to the effect that the assessee would get Non-Agriculture (NA) permission for the said land. But due to delay in getting NA permission and because of some legal issues, the deal was cancelled on 03/01/2022 and the total amount paid by Shri Manjo Vadodaria was returned to him. The assessee also furnished the ledger account of Shri Manoj Vadodaria in his accounts, along with the copy of cancellation letter. The assessee denied having received any amount in cash and submitted that the said loose-papers/documents found from the premises of the Nila Sambhav Group did not establish that the assessee had received any cash consideration. The Ld. AO considering the above submissions of the assessee, did not make any addition and accepted the returned income.
Thereafter, the Ld. PCIT exercising his revision jurisdiction observed that there was enough and reliable evidences found during the search action conducted at the Nila Sambhav Group which showed that assessee had received an amount of Rs.1,92,00,000/- in cash, which was not accounted for by the assessee. He show-caused the assessee as to why not the order of the AO be revised and the addition of the said amount be made to the income of Naman Vidyapati Patel vs. The Pr.CIT Central Asst. Year : 2021-22 the assessee. The assessee reiterated his submissions before the Ld. PCIT as were made before the Ld.AO. The Ld. PCIT, considering the submissions of the assessee, observed that, in this case, the assessee had received the cash consideration of Rs.1,92,00,000/-. That the search was conducted at Nila Sambhav Grou on 08/09/2021 during which, apart from the cheque component, the evidence of receipt of cash component was also found. The amount received by way of cheque by the assessee was allegedly refunded on 27/12/2021, i.e. three months after the date of search. That the said cancellation of the deal was an after-thought as the assessee was found to have received the cash consideration of Rs.1.92 crores as per MOU dated 02/04/2019. He observed that the said amount was not likely to be declared in regular accounts by the assessee. He observed that in view of the facts and circumstances of the case, the assessment order passed by the AO dated 15/12/2022 was without making the necessary examination/ verifications/enquiries on the abovementioned issue and, accordingly, he held that the said assessment order as erroneous and prejudicial to be interests of the revenue. He set aside the impugned assessment order dated 15/12/2022 and the matter was restored to the file of the AO for examining the above issue in detail.
Being aggrieved by the order of the Ld. PCIT, the assessee has come in appeal before us.
We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. A perusal of the impugned order of the Ld.PCIT woud reveal that the Ld.PCIT has mainly stressed that from the seized material, it was found that the assessee had received cash component Naman Vidyapati Patel vs. The Pr.CIT Central Asst. Year : 2021-22 of Rs.1.92 crores, as per the MOU dated 02/04/2019. Further that, the assessee was not likely to enter the said amount in his regular accounts. Further, that the alleged cancellation of the MOU was an after-thought of the assessee after the search action to avoid the tax liability.
6.1. May it be so, the cancellation of deed has not been rebutted or denied by the Ld .PCIT. Though it appears that the MOU was cancelled after the search action to avoid the tax liability on the receipt of alleged cash component of Rs.1.92 crores, however, the fact on the file is that the deal was cancelled and the amount received by the assessee by way of cheque was also refunded. Therefore, it is most likely that when the deal was cancelled, if the assessee would have received any cash component that would also have been returned by the assessee. Under the circumstances, though the step of the assessee to cancel the deed/MOU may be an after-thought pursuant to the search action, but the fact on the file is that the deal between the parties has been cancelled and the amount received by the assessee has been returned. Therefore, it cannot be said that the assessee has earned any unaccounted income which is required to be taxed at this stage. Though, the intention of the assessee might have been to avoid his tax liability on the cash component received through MOU, however, the assessee has taken the timely step to cancel the deed. Therefore, under the circumstances, at this stage, it is not a case of any escapement of income. At the most, it can be summed up that the assessee was clever enough to take the timely step of cancellation of deed to avoid his apprehended tax liability. The AO duly considering the aforesaid facts and circumstances has not made any addition. The view of the AO is a plausible view, hence, the assessment order passed by the AO cannot be said to be erroneous. Therefore, we do not find Naman Vidyapati Patel vs. The Pr.CIT Central Asst. Year : 2021-22 justification on the part of the Ld.PCIT in setting aside the said assessment order. Thus, the revision order passed by the Ld. PCIT u/s.263 of the Act, is not sustainable and the same is hereby quashed.