DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, 4, SURAT vs. KISHORKUMAR DHIRAJLAL KATHROTIYA, SURAT

आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 24.04.2023 by the Commissioner of Income-tax (Appeals) - 4, Surat [in short “the CIT(A)”] for the assessment year (AY) 2015-16. 2. Grounds of appeal raised by the Revenue for the appeal are as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.10,00,00,000/- made by the AO u/s.69B of the I-T Act on account of unexplained investment by the assessee in the project Casa Amorina despite the fact that addition has been made on the basis of incriminating details/document recovered during the survey proceedings and information collated during the course of assessment proceedings. 2. In addition to the ground no.1, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting addition of Rs.10,00,00,000/- made by the AO u/s.69B 1

ITA No.434/SRT/2023/AY 2015-16 of the I.T. Act on account of unexplained investment by the assessee in the land of project Casa Amorina observing that total amount is mentioned on page 3 goes to suggest ‘the total amount paid’ despite the fact that on the impounded documents mention found is as ‘Parat Aapel kul rakam’ means total amount returned to Shri Maganbhai Kathrotiya who was owner of 11.859% of land. 3. In addition to the ground no. 1, on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting addition of Rs.10,00,00,000/- made by the AO u/s.69B of the Act on account of unexplained investment by the assessee in the land of project Casa Amorina without appreciating the fact the assessee that the assessee in the land of project Casa Amrina without appreciating the fact that the assessee has failed to explain as to why the diary in which the amount is mentioned in coded form has been maintained by the assessee if all the payments were made in cheque. 4. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.10,00,00,000/- made by the AO u/s.69B of the I.T. Act on the basis of one sided story of assessee and by completely ignoring the facts of the case as are emanating from the details and documents recovered during the course of survey u/s.133A of the I.T. Act. 5. In addition to above grounds, on the facts and in the circumstances of the case and in law, the CIT(A) has granted relief dehorse provisions of section 292C of the Assessee. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO ignoring the principles of “Human Probability Test”, i.e., preponderance of probabilities, which is applicable for Income tax proceedings. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) -4, Surat ought to have upheld the order of the Assessing Officer. 8. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that the AO may be restored to the above extent. 9. The assessee craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before3 or during the course of the hearing of the appeal on the basis of submission to be made.." 3. Brief facts of the case are that the assessee is an individual NRI and is engaged in the development of residential project namely Cassa Amorina on land at Block No. 62, FP -11, TP – 53, Parvat Patiya, Surat, which is consisting of 2 towers

ITA No.434/SRT/2023/AY 2015-16 having 48 flats. The assessee filed return of income on 28.09.2015 declaring total income at Rs.5,89,460/-. The original assessment u/s.143(3) of the Act was completed on 29.12.2017 determining total income at Rs.6,38,77,670/- by making addition of Rs.6,10,05,901/- on account of unexplained cash credit and addition of Rs.22,82,312/- on account of non-genuine interest expense thereon. The assessee had accepted the addition made by the AO by paying the taxes under the IDS-2016 out of total disclosure of Rs.1,50,000/-, Rs.50,00,000/- pertains to AY 2015-16. Thus, the assessment made u/s. 143(3) of the Act had reached finality as is evident from Form No.5 issued by the Pr. CIT (Central), Surat dated 20.09.2021. 3.1 Subsequently, the assessee was subjected to survey u/s.133A of the Act on 06.02.2020 as part of Kuberji Group of cases and certain incriminating materials were found and impounded from the project site of the assessee. On the basis of the said incriminating material, case of the assessee was reopened and notice u/s 148 of the Act was issued by the AO on 30.03.2021. In response to the same, the assessee filed return of income on 13.05.2021 declaring the same income of Rs.5,89,640/-, as declared u/s 139 of the Act. The project ‘Cassa Amorina’ consisted of two residential towers containing 48 flats. All the flats were of equal size of 4 BHK and having super built up area of 3870 sq. ft. During survey action, ‘Sale agreement and Kabja receipt cancellation deed’ with respect to six parties were found and from the same it was ascertained that the lands for the project under reference have been purchased from these persons. For the development of this project, the

ITA No.434/SRT/2023/AY 2015-16 assessee had purchased the said land from the six parties through “Sale agreement and Kabja receipt cancellation deed”. Rest of the land was in the ownership of the assessee.. 3.2 On perusal of the copy of cancelled Kabja receipt agreement between the assessee and Shri Magan Kathrotiya, it is seen that the said plot had been purchased by Shri Magan Kathrotiya in the year 2006 on Kabja receipt. Thereafter, the said plot had been re-purchased by the assessee from Shri Magan S. Kathrotiya through cancellation of the said Kabja receipt. As per cancellation of Kabja receipt agreement, cheque payment of Rs.1,07,69,000/- had been made by the assessee to Shri Magan Kathrotiya during the year under consideration. Further, during survey action, several incriminating material were found and impounded. Out of the same, one pocket diary was also found wherein details of some land transaction were written. On being questioned about the same, Shri Devang L. Maalviya in his statement recorded u/s.131 of the Act stated that out of total land on which project Cassa Amorina was made, 11.859% of the said land belonged to Shri Maganbhai Kathrotiya. On this page, share of Shri Magabhai Kathrotiya was mentioned at 11.859%, total area was at 500 Var and total area with road was 688.68 Var. An amount of Rs.1,18,59,000/- was also mentioned against date 01.04.2014. 3.3 It was observed by the AO that for his share of 11.859% in the said land Shri Magan S. Kathrotiya had received Rs.1,18,59,000/- in cash on 01.04.2014. On this basis, total cash payment made for the purchase of land for the above project

ITA No.434/SRT/2023/AY 2015-16 worked out to Rs.10,00,00,000/-, which had been paid in FY 2014-15. It was also observed that the cheque amount had been received by Shri Magan Kathrotiya at Rs.1,07,69,000/- for his share in land at 11.859%, therefore, the total amount of cheque payment for purchase of land came to Rs.9,08,08,668/-. Accordingly, amount of Rs.10,00,00,000/- was treated as unaccounted investment in land in the hands of the assessee.Subsequently, the AO completed the assessment u/s.143(3) r.w.s. 147 of the Act on 29.03.2022 assessing the total income of assessee at Rs.16,38,77,670/- including total income of Rs.6,38,77,670/- u/s 143(3) dated 29.12.2017. In the said assessment, the AO has made a single addition, being unexplained investment u/s.69B of the Act of Rs.10,00,00,000/- in the project land. 4. Aggrieved by the assessment order, assesseepreferred appeal before CIT(A) on 27.04.2022. The CIT(A) observed that the total area of the land originally owned by the appellant was 5808 sq. yards, out of which the appellant had sold to the said 6 parties area of 3656 sq. yards in 2006 and the appellant was still possessing 2152 sq. yards. Hence, what the appellant had repurchased from these 6 persons was 3656 sq. yards and not the entire land of 5808 sq. yards. Therefore, the extrapolation done by the AO on the basis of the diary of Mr. Magan Kathrotiya for the entire land is incorrect and hence proportionate addition to the tune of Rs.3,70,52,342/- was deleted. Regarding the balance amount of Rs.6,29,47,658/- (Rs.10,00,00,000 – Rs.3,70,52,342) for 3656 sq. yards of land purchased from 6 parties, the appellant had already debited Rs.7,85,91,700/- as the purchase cost in

ITA No.434/SRT/2023/AY 2015-16 his books of account and the same amount has been received back by the appellant as sale consideration for the flats sold to these 6 parties. The sale agreement and Kabja receipt cancellation deeds impounded during survey, in case of all the 6 parties, also evidenced total payment of Rs.7,85,91,700/- to the said parties, which is reflected in the books of the appellant as purchase consideration. From the impounded material found relating to Mr. Magan Kathrotiya, there was no evidence of the cash payment, sale agreement and the Kabja receipt cancellation deeds found do not show any payment of on-money. The CIT(A) also observed that figures found on the diary have been satisfactorily explained by the appellant during assessment as well as appellate proceedings and there are no other corroborative evidences or statements of any person regarding payment or receipt of on money with reference to the re transfer of the 6 plots of land to the appellant. In view of the above, the addition of Rs.6,29,47,658/- was deleted. Accordingly, the total addition made by the AO of Rs.10,00,00,000 /- (3,70,52,342 + 6,29,47,658) was deleted. 5. Aggrieved by the appellate order passed u/s.250 of the Act by the CIT(A), the Revenuehas preferred appeal before this Tribunal. The Ld. CIT(D.R.) for the revenue relied on the order passed by the AO and contended that the CIT(A) has not appreciated the fact that the assessee has made payment of Rs.1,07,69,000/- through cheques as revealed from the incriminating material. The said incriminating material is “Cancellation of Kabja Receipts Agreement” between the assessee and

ITA No.434/SRT/2023/AY 2015-16 Shri Magan Kathrotiya, who was having 11.859%share in land. Apart from the above payment, it was also revealed from the page no. 1 to 3 of the seized diary that the assessee had made payment of Rs.1,18,59,000/- to Shri Magan Kathrotiya in cash on 01.04.2014. It is further contended that CIT(A) failed to appreciate that at page no. 03 of this pocket diary, details of some land are written and that Shri Devang L. Malviya in his statement recorded u/s.131 of the Act stated that out of the total land on which project Cassa Amorina was made, 11.859% of the said land belonged to Shri Maganbhai Kathrotiya. On this page, share of Shri Maganbhai Kathrotiya is mentioned at 11.859%, total area is 500 Var and total area with road is 688.68 Var. On this page, an amount of 118590=00 is also mentioned against date 01.04.2014. The area written on the page no. 3 is exactly matching with the land area purchased from Shri Maganbhai Kathrotiya for the development of the project Cassa Amorina. It may be noticed that 11.859% has been written which is the share of the land out of total land area, i.e., 5808 sq. yard. Hence, the AO rightly made the addition. The ld. CIT-DR relied on the order of AO and requested to set aside the order of CIT(A). 6. On the other hand, the ld. AR reiterated the stand taken by him before CIT(A). It is stated that the entire land admeasuring 5808 sq. yards on which the project Cassa Amorina was developed was originally owned by the assessee. During the F.Y. 2005-06, assessee had sold 6 plots in the said land to 6 different persons on Kabja receipt basis, however due to some reasons, the development of subject land could not be carried out from the FY 2005-06 till FY 2014-15.

ITA No.434/SRT/2023/AY 2015-16 Thereafter, in the year under consideration, assessee decided to construct 2 towers on the said land by the project named Cassa Amorina wherein, it was decided that the aforesaid 6 land owners would sell their plots back to him and against which they would books flats in the project Cassa Amorina, for which the rate of land was fixed at Rs.17,220/- per sq. yard for the area of the original plot, i.e. inclusive of roads and other amenities. 6.1 It is further submitted that at the time of making the aforesaid proposal to Shri Mehul M. Kathrotiya (son of Shri Maganbhai Kathrotiya), the area of the final plot of 500 sq. yards of their sub plot was known to both the parties, but the original area of the said plot (OP) which was inclusive of roads and other amenities was estimated at 688.68 sq. yards, since the same was not properly known. On this estimated area, the total price of Rs.17,220/- was applied to arrive at the full amount of consideration (i.e., Kul Rakam in Gujarati language) of Rs.1,18,59,000/-. However, on taking the actual measurement of the land, it was revealed that the original area (OP) of the plot including roads was not 688.68 sq. yards, as estimated earlier, but it actually worked out to 625.39 yards. Therefore, as per the agreed rate of Rs.17,220/- per sq. yrd, total amount of Rs.1,07,69,000/- (i.e., 625.39 sq. yrds X Rs.17,220/- per sq. yd. = Rs.1,07,69,215/-) was paid as against the earlier agreed amount of Rs.1,18,59,000/-, which was for an area of 688.68 sq. yrds. The actual amount of full consideration paid to Shri Mehul M. Kathrotiya was Rs.1,07,69,215/- which was paid by account payee cheque and was fully reflected in the regular

ITA No.434/SRT/2023/AY 2015-16 books. Hence, no cash payment was involved in respect of purchase of the said land. 6.2 It is also submitted that the impounded paper (Annexure A-4) mentioned the word “Kul Rakam” meaning “Full amount”, against the amount of Rs.1,18,59,000/-, which meant that the said figure was the amount of total consideration and did not involve cash component. It is also submitted that word ‘Cash’ has nowhere been used in the impounded material. As regards, the total amount of Rs.1,00,00,000/- noted down in the impounded diary, against Flat No. A- 601 and A-602, it is submitted that the said amount was agreed by Shri Maganbhai Kathrotiya to be given back to the assessee towards booking of flats from the consideration of land given by assessee to him and as against the said initial amount, a total amount of Rs.1,28,70,000/- stands received by the assessee from the family members of Maganbhai Kathrotia, which is fully recorded in assessee’s regular books of account as booking advance for the said 2 flats. It is therefore, submitted by the ld. AR that AO had erroneously estimated total cash payment of Rs.10 crores for purchase of said land. 6.3 It is further submitted, without prejudice to the above contention, that the agreements for the purchase of the sub plots of land from the aforesaid 6 parties, have been executed on 29.04.2015, i.e., 2016-17 and even the cheque payments for the same have also been made during the A.Y. 2016-17. Therefore, as per law, the issue of purchase of land would have to be considered only in the year of execution

ITA No.434/SRT/2023/AY 2015-16 of the agreements, i.e., A.Y 2016-17 and not in the year under consideration, i.e., AY 2015-16. The ld. AR relied on the decisions in cases of CIT(Central) vs. Happy Home Corporation, 414 ITR 524 (Guj.) and CIT vs. Ashaland Corporation, 133 ITR 55 (Guj.). 7. We have heard both the parties and perused the materials available on record. We have also deliberated upon the case laws relied upon by the parties. The AO made the addition on the basis of the diary where the amount of Rs.1,18,59,000/- was reflected pertaining to Shri Maghanbhai Kathodiya, who was the owner of the land of 500 sq. yards i.e., being 11.859% of the total land. The AO made the addition of Rs.10,00,00,000/- by extrapolating the amount on the entire land. The ld. AR submitted that the assessee never paid the amount of Rs.1,18,59,000/- but it was adjusted against the sale of the flat. He also submitted that the land area, which was re-purchased, was only 3656 sq. yards and not the entire land of 5808 sq. yards as 2152 sq. yard was still lying with the assessee. On this basis, the amount of Rs.6,29,47,658/- was worked out for 3656 sq. yards of land purchased from 6 parties. As against this, the appellant had already debited Rs.7,85,91,700/- towards the purchase cost of land, which is reflected in the books of account of the appellant. The AO held that the appellant had paid Rs.1,18,59,000/- on 01.04.2014 over and above the amount reflected in the books of account as per page no.3 of Annexure – A-4. However, it was clearly mentioned in this page that the amount was received back (Parat Aavel) and not the amount paid. Further, it was also mentioned “Kul Rakam”, which means total amount and

ITA No.434/SRT/2023/AY 2015-16 not only the cash portion. In any case, it was written as amount received back and not paid. Therefore, adding it towards payment of on-money is not correct. 7.1 The revenue has taken another ground that the CIT(A) has not considered the provisions of section 292C of the Act. The ld. AR submitted that the said provisions is not applicable as the alleged material was not recovered from the assessee but from a third person, i.e., Shri Devang Malaviya. Though, section 292C of the Act raises a presumption regarding documents found during a search/survey, such presumption is rebuttable and cannot operate in isolation. The diary entry by itself, without corroboration through independent evidence (statements, cash flow, confessions, etc.), cannot sustain an addition u/s 69B of the Act. 7.2 The revenue also raised a ground regarding application of the test of human probability in the instant case. However, in the present case, all transactions are (i) fully documented with registered agreements, (ii) are through banking channels, (iii) are reflected in the books and (iv) are also properly explained with rationale and evidence. No deficiency or defect has been found between the documentary trail and actual conduct of the assessee. Hence, the presumption of unaccounted cash fails the test of human probability. 7.3 It is also found that the agreements for purchase of the plots of land from the 6 parties were executed on 29.04.2015 and the cheques were also paid in FY 2015-16 (AY 2016-17). Since the appellant has accounted for entire land acquisition in subsequent AY 2016–17, making the addition in AY 2015-16 unsustainable. The

ITA No.434/SRT/2023/AY 2015-16 decisions of the Hon’ble Gujarat High Court in cases of Happy Home Corporation (supra) and Ashaland Corporation (supra) support such view. It may also be mentioned that the appellant had declared Rs.1.5 crore as net on-money profit from the project Casa Amorina and, therefore, any unaccounted investment for purchase of land has already been considered and telescoped with the disclosure made under IDS-2016. In light of the above facts and decisions cited supra, we find no infirmity in the order of CIT(A). The grounds are accordingly dismissed. 8. Ground Nos.7, 8 and 9 are general in nature and do not require adjudication. 9. In the result, the appeal of the revenue is dismissed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 15/09/2025. Sd/- Sd/- (T. R. SENTHIL KUMAR) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 15 /09/2025 Dkp outsourcing Sr.PS/SS Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order //TRUE COPY// Assistant Registrar/Sr. PS/PS ITAT, Surat