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Income Tax Appellate Tribunal, “A” BENCH,
Before: SHRI S.S.GODARA & DR.DIPAK P.RIPOTE
Per S.S.Godara, JM: These twin assessees’, as many appeals, both for AY.2007-08, arise against the Commissioner of Income Tax (Appeals)-4, Pune’s separate orders dated 20.02.2017 passed in Case Nos.PN/CIT(A)-4/ITO, Ward-6(1), Pune/72/2015-16/119 and PN/CIT(A)-4/ITO, Ward- 5(3),Pune/71/2015-16/205, respectively, in proceedings u/s.143(3) of the Income Tax Act, 1961, in short “the Act”.
& 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
Heard both assessees’ as well as the department. Case files perused.
Mr. Kulkarni first of all took us to the former assessee Shri Shyamjibhai Shivjibhai Shah’s appeal raising the following substantive grounds :
“1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition made by the A. O. of the order of Rs. 2,12,00,000/-. The Ld. CIT(A) also erred in not consideration the written submissions placed before him in its proper perspective. The addition made by the A.O. in his confused state of mind and confirmed by the Ld. CIT(A) is not sustainable. It be quashed.
2. On the facts and in the circumstances of the case and in law when the objection raised in appeal going to the root of the matter and seriously affecting the jurisdiction of the A. O. to frame assessment under S. 147 r.w.s 143(3) were raised before Ld. CIT(A), the Ld. CIT(A) failed to appreciate the legal issues causing great prejudice to the appellant. The order of the Ld. CIT(A) be set aside resultantly cancelling the assessment order.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) ought to have considered the legal issues raised before him that no reasons for reopening of the assessment u/s 147 were recorded before the issue of the notice u/s 148 and also copy of reasons recorded was not furnished to the assessee. The authorities failed to consider the mandate of the Hon'ble Supreme Court in the matter. The appeal order of the Ld. CIT(A) be set aside and the order of the A. O. be cancelled for the same reasons. 4. On the facts and in the circumstances of the case and in law the claim of the assessee, in the alternatives, the 1/3 of Rs. 2.12 crores was assessable in the hands of the assessee was ignored by both the authorities below. It be held accordingly deleting the addition. 5. On the facts and in the circumstances of the case and in law the delay of 23 days occurred in the filing of the appeal which should have been filed on or before 23rd July 2017 as the impugned order was received on 24-05-2017. The affidavit in support of application for condonation of delay will be filed separately.”
& 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
After vehemently arguing in support of the assessee’s legal grounds inter alia absence of reopening reasons recorded as well as non approval by the prescribed authority at the time of initiation of section 147/148 proceedings beyond the period of 4 years from the end of the relevant assessment year, Mr. Kulkarni submitted that he does not wish to press for these legal issues herein. Rejected accordingly.
Next comes the sole substantive addition issue on merits involving a sum of Rs.70,66,666/- (substantive basis) and Rs.1,41,33,334/- (protective basis); totalling to Rs.2,12,00,000/- as unexplained investment u/s.69 of the Act added in both the lower proceedings. It emerges from a perusal of the Assessing Officer’s assessment order dated 27-03-2015 that he had received a complaint along with “authentic documents” through the DIT (Inv.), Pune about the taxpayer having acquired two shops after paying the foregoing sum in cash. The contents of the said document(s) form part of page 3 of the assessment order.
The Assessing Officer thereafter recorded the assessee’s as well as his son’s statements wherein they simply denied their respective signatures despite the fact that the loose sheets received from Investigation Wing had duly indicated them to have acquired the two shops. He thus proceeded to treat this entire sum in assessee’s hands on protective and substantive basis (supra) in above terms. & 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
The CIT(A) has affirmed the assessment findings as follows :
“5.3 DECISION : I have perused the assessment order and the submission made by the appellant as above carefully. I find that the AO had reopened the assessment by resorting to the provisions of section 147 of the Act and after issuing a notice u/s.148 of the Act. The AO had received a complaint against the assessee from the DCIT(Inv.) that the assessee had acquired two shops by paying Rs.2.12 Crores in cash in Laxmi Road area of Pune City, i.e. Shop nos.30 & 31 owned by a Charitable Trust viz., Maharashtra Girls Education Society. The AO found that the two shops were given on rent to Mrs. Sushilabai B. Agarwal who died and after her death the society searched for tenants, through the legal heirs of the deceased were reluctant to hand over the possession in favour of the Trust. Therefore, the negotiation was made amongst 5 persons of Shah Family and Mehta family (on behalf of Society) and a written agreement dated15/07/2006 was performed. The AO found from the agreement that a figure was written as “0-20”, which was considered as transfer fee. The AO further found that in the letter dated 02/02/2006 written in Marathi, it was stated that Rs.20,00,000/- had been given “2-12”, which indicated the amount of Rs.2,12,00,000/-. It was noticed by the AO that out of the said amount, an amount of Rs.1,87,00,000/- was given to Shri Rajkumar B Agarwal, the legal heir of late Smt. Sushilabai B Agarwal for getting the possession of the two shops. Since these documents were attached in their complaints by the complainants, the AO held that these were not the sufficient documents for formation of reasonable belief for issuing of notice u/s. 148 of the Act by reopening the assessment u/s. 147 of the Act. The AO, thereafter, after recording the statement of Shri Shyamjibhai u/s. 131(1) of the Act and referring to the decision of the Hon’ble Supreme Court in the case of Sumati Dayal vs CIT [1995] 214 ITR 80, wherein the point of human probability was discussed and it was held that there was no question of human probability when it can be analyzed on actual facts and the inferences and finally had made the additions of Rs.70,66,666/-, being 1 /3rd of Rs.2,12,00,000/- on substantive basis as unaccounted, undisclosed, unexplained investment u/s. 69 of the Act and further an amount of Rs. 1,41,33,334/-, being 2/3rd of Rs.2,12,00,000/- on protective basis as parts as portion of the appellant’s two sons, in case the failed to disclose the same in their returns. The AO contended that against answer to question no. 15, the assessee had stated that if & 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah the Income Tax Department was determined to make addition, then only 1/3rd of the gross amount of Rs.2,12,00,000/- could be added back in his name because the agreement was signed by him and his two sons viz. Ramesh Shah and Shri Ashishbhai Shah. Accordingly, the AO made addition as above.
5.3.1 The appellant, on the other hand, contended that it was clear from the assessment order that the notice u/s. 148 was issued on 28/03/2014 and was served on 28/03/2014. It was contended that since the notice was issued after 4 years, the approval of the additional CIT Range-5, Pune was obtained by the AO vide his letter dated 26/03/2014. The appellant contended that the provisions of section 151 titled “sanction for issue of notice” were amended with retrospective effect from 1/06/2013 by Finance (No.2) Act, 2014. After quoting the said provisions, the appellant contended that the sanction was said to be given u/s. 151(1) was “Mechanical”. The appellant further referring to para 4 of the assessment order contended that it was not understood who was the AO who had recorded the reason for reopening u/s. 148(2) of the Act. The appellant contended that he had furnished his return of income in response to notice u/s. 148 with a declaration that the return already filed on 08/10/2007 be taken to have been filed in response to notice u/s., 148 of the Act. It was contended that the assessee was not explained who was the complainant. The appellant referred to the decision of the Hon’ble Karnataka High Court in the case of Kothari Metals vs ITO [2015] 377 ITR 581 (Kar) contending that on the identical facts as in the case of the appellant, the Hon’ble Court held that the reasons recorded but not furnished to the assessee even after furnishing of the return and / or filing declaring to the effect that the return already filed be taken to have been filed in response to notice u/s.48 of the Act, the action to reopen was not valid. The appellant has also cited the Hon’ble Supreme Court decision in the case of CIT vs S Goyanka Line and Chemical Ltd. [2016] 67 (I) ITCL 393 (SC) contending that the SLP filed by the revenue in the said case was dismissed against the order of the High Court wherein it was held that since the reasons recorded by Jt. CIT for according sanction for issuing notice u/s. 148 was without application of mind and was mechanical in manner, reopening of assessment was not valid. The appellant finally contended that the above may be considered and as raised in the grounds of appeal, the assessment made was not sustainable and be quashed.
& 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
5.3.2 I find the submission and contention of the appellant is without merit and baseless. First of all, the appellant as apparent from the assessment order, sought for the reasons for issuing notice u/s. 148 of the Act which were supplied to the appellant. The appellant had raised objection challenging the validity of issuing notice u/s. 148 of the Act which were rejected by proper application of mind by the AO. The AO had scanned the copy of agreement and passed in the assessment order and also had formed the belief recording reasons regarding discrepancies found in the incriminating documents as above that income chargeable to tax had escaped assessment. Such reasons were also provided to the appellant. Therefore, all the procedural formalities for issuing notice u/s. 148 were fulfilled by the AO. There was no infirmity in AO’s action in this regard. Secondly, the main contention of the appellant is that the approval for issuing notice u/s. 148 of the Act was given by the Additional CIT, Range-5, Pune in mechanical manners, which were not in accordance with the Act after the amendment of section 151 with retrospective effect from 01/06/2013 by the Finance (N0.2) Act, 2014. The appellant also had cited two decisions in his submission in this context contending that if the sanctioned is given by the Addl. CIT in a mechanical manner, the proceedings would be invalid. As already stated above, after duly stating the facts and finding out the misrepresentation and discrepancies in the agreement by and between the Shah family in the coded figures written in the said agreement, the AO as 'well as the DCIT (Inv) could decipher the coded entries that there were a transactions by and between the Shah family and the Mehta family represented for the Maharashtra Girls Education Society a Trust, there was a concealment of income on the on the part of the appellant and his two 'sons worth Rs.2,12,00,000/-. After recoding such reasons, the AO sought for the approval of the Addl. CIT who was the prescribed authority according sanctioned. The Addl.CIT after going through the said facts had approved for issuing notice u/s. 148 of the Act. Such an action of the Addl. CIT can in no circumstances be stated as mechanical, as has been alleged by the appellant. No such facts could be brought out by the appellant as to how the sanctioned accorded by the Addl. CIT for issuing notice u/s. 148 of the Act was “Mechanical”. I find that the appellant had made a while delegation only to frustrate the valid addition made by the AO in the assessment order. Nowhere in the submission had the appellant contested about the facts relating to such transactions, which had actually taken place. Therefore, the argument and submission of the appellant that the sanctioned was granted by the Addl. CIT in a & 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
Mechanical manner is not only baseless but far from the factual and legal matrix in the case of the appellant. The cases cited are not only misplaced but also are not at all applicable in the case of the appellant for the .aforesaid facts. Thirdly, the appellant himself had admitted against reply to question no. 15 in the statement recorded u/s. 131 of the Act that he admitted for addition 1/3rd of the amount of Rs.2,12,00,000/- as the remaining 2/3rd pertain to his two sons viz. Shri Ramesh Shah and Shri Ashishbhai Shah, who were also the signatories in the agreement. It indirectly implied that the transaction of Rs.2,12,00,000/- had actually taken place for the transfer of the land. As already stated above, the appellant did not contest the addition on merit in the appeal under consideration but by raising wild allegation about the procedural defect, that too wrongly had contested the appeal, requesting to treat the assessment as invalid such a request of the appellant cannot be acceded to for the detailed reason given above. I, therefore, hold that the AO had rightly initiated the proceedings u/s. 147 / 148 of the Act after obtaining sanctioned from the Addl. CIT Range-5, Pune within the 4 corners of the provisions of the Act and the Addl. CIT had rightly accorded sanction u/s. 151 of the Act. No interference in AO's action / Addl. CIT Action is called for. The assessment order was passed by the AO validly in accordance with provisions of the Act. The prayer made by the appellant for quashing the assessment is, therefore, rejected, thereby confirming the addition made in the assessment order. Ground nos. 1 to 7 raised by the appellant are accordingly dismissed.”
Suffice to say, learned Counsel could hardly rebut the clinching nexus amongst the assessee and his two sons namely Shri Ramesh and Ashish Shamjibhai Shah as not only having acquired the two shops but also they put on their signatures on the agreement concerned. We, accordingly affirm the impugned addition in assessee’s hands as his unexplained investment u/s.69 in principle. & 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
Next comes equally important aspect of quantification of the impugned addition. The Revenue could hardly rebut that it is not this former assessee Shri Shyamjibhai Shivjibhai Shah only who has acquired the twin shops in his name but also his two sons namely Shri Ramesh and Ashish Shamjibhai Shah (supra). We thus see no reason to make the entire addition in this former assessee’s hands. We are next informed that the department has already added 1/3rd each of the foregoing sum in his two sons cases as well. And that Shri Ramesh Shamjibhai Shah is already in appeal herein. Faced with this situation, we direct the learned assessing authority to assess this first assessee Shri Shyamjibhai Shivjibhai Shah only to the extent of 1/3rd amount in the impugned sum of Rs.2,12,00,000/- followed by the remaining 1/3rd each in the hands of Shri Ramesh Shamjibhai Shah and Shri Ashish Shamjibhai Shah (sons). Ordered accordingly. Necessary computation shall follow as per law.
This former assessee’s appeal is partly allowed in above terms.
Next appeal filed by Shri Ramesh Shamjibhai Shah (former son of the first assessee – Shri Shyamjibhai S. Shah) is dismissed since we have already upheld 1/3rd of the addition on substantive basis (supra). Ordered accordingly. 10. No other ground or argument has been raised before us. & 2135/PUN/2017 for A.Y. 2007-08 Shyamjibhai S. Shah & Ramesh S. Shah
To sum up, the former assessee Shri Shyamjibhai S. Shah appeal Shri Ramesh Shamjibhai Shah’s appeal is dismissed in above terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open Court on 23rd September, 2022.