CHANCHALBEN DAHYABHAI PATEL,DAMAN vs. ITO, DAMAN

4. In para 12 of the assessment order there is an addition of Rs.20,00,000 as unexplained investments. All fixed deposits are made and paid from the bank accounts itself. It is evident from the bank statements, where from fixed deposits are made.in the previous two paragraphs all the credit entries are added as income. Then fixed deposits creation is outflow from the inflow already added as income. This addition is the fit case of DOUBLE TXATION. Once as the credit entries in the bank and second as the fixed deposit creation outflow from the bank.

5. In para 13 of the assessment order there is an addition of Rs.3,00,000 as rental income. This, we already have offered as income.

6. In para 14 of the assessment order there is an addition of Rs.9,69,119 as unaccounted interest income. These receipts were already added as income and taxed in para 10 & 11 of the order. This is evident from the para 10 & 11 explanations. Where all bank credit entries were considered as income. These receipts were already considered as income at the time of making addition of credit entries. This is again the case of DOUBLE TAXATION.

7. In para 15 of the assessment order there is an addition of Rs.15,75,764. This income is already taxed in para 10 of the order. This is evident from the profit and loss account affixed & considered in the para 10 of the order. This -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel fig is clearly showing in the profit and loss account as income. This is again the case of DOUBLE TAXATION.

8. In para 16 of the assessment order thee is an addition of Rs.60,37,040 as profit from sale of shares. These receipts were already added as income and taxed in para 10 & 11 of the order. This is evident from the para 10 &11 explanations. Where all bank credit entries were considered as income. These receipts were already considered as income at the time of making addition of credit entries. This is the case of DOUBLE TAXATION. Once as receipts of amount and second as profit on sale of these receipts. When full receipts were added as income, then adding profit on sale is the case of double taxation.

9. In para 17 of the assessment order there is an addition of Rs.3,65,000 as interest income on KVP. The interest is calculated on estimated basis.”

(AY 2013-14) “1. I am a senior citizen widow lady. I am a tax complaint citizen. In the past I lost my husband (ex MP Daman) during unfortunate corona pandemic. Since then I was not in stable healthy/mental condition to follow up and comply the departmental notices. I have discontinued all business activities. Even now, I am struggling with my bad health.

2. In the assessment year under consideration, there were sale of land for Rs.97,02,500 and Rs.1,19,87,500 (vide related survey numbers 136, 138, 137 etc.) 2.1 in para 6 of the A.Yr. 2013-14, assessment order under the head “income from capital gain”. The entire sale proceeds are considered as ‘SHORT TERM CAPITAL GAIN” without appreciating the facts of actual date of purchases of the same land. The lands were purchased in financial years, 2006-07, 2007-08 onwards. The gain in this case is Long term capital gain not short term capital gain as considered in the order. 2.2. Even the purchase consideration and improvement thereon was considered as NIL. This is an absurd consideration for raising an exorbitant demand to make a dossier case without appreciating the facts of the case. Calculation of LTCG is attached in annexure of the submission. 2.3. These additions may be deleted/corrected considering the facts of the case.

3. In para 7 of the assessment order for the A.Yr. 2013-14 an income of Rs.38,30,450 was added under the head “income from other sources”. These time deposits are not made out of the current year’s income. These time deposits are not the income of the current year. These are accumulating with interest from the previous year/years. These additions are against the facts of the case. This may be deleted.

-1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel 3.1 These deposits are added as the UNEXPLAINED INVESTMENTS under sec. 69 of the Income Tax Act, 1961. 3.2 As per sec 69 unexplained investments are investments made are not recorded in books of account. This is not the fact. All investments are well recorded and accounted for in the records. Time deposits referred as income in the order are continuing from the previous year as cumulative balances. These are not unexplained investments. These are well recorded investments in the form of time deposit continuing from previous year.

4. In para 6 of the assessment order for the A.Yr. 2013-14 an income from interest of Rs.23,72,006 was added under the head “income from other sources”. These interest incomes may be considered as income after sec 80T deductions. I already have offered this as income. In the computation shown these incomes are considered as taxable income. The TDS deducted on these interest income are not considered in the demand calculation. These may be allowed. This will accordingly reduce the demand for recovery.

8. I further request for early hearing of my appeals so that I may get relief against the undue exorbitant tax dues.”

(A.Y. 2014-15) “1. I am a senior citizen widow lady. I am a tax compliant citizen. In the past I lost my husband (ex MP Daman) during unfortunate corona pandemic. Since then I was not in stable healthy/mental condition to follow up and comply the departmental notices. I already have discontinued all my business activities since long. Currently I am struggling with my bad health.

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2. In the assessment year under consideration, there was a sale of land for Rs.62,55,000 (vide related survey numbers 136, 138, 137 etc). 2.1 In para 6 of the A.Yr. 2014-15 assessment order under the head “income from capital gain”. The entire sale proceeds are considered as “SHORT TERM CAPITAL GAIN” without appreciating the facts of actual date of purchases of the same land, which were in financial year 2007-08 and so on. This gain is long term capital gain not short term capital gain as considered in the order. This may be corrected and long term gain may be considered. 2.2 Even the purchase consideration and improvement thereon was considered as NIL. This is an absurd consideration for raising an exorbitant demand to make a dossier case without appreciating the facts of the case. Calculation of LTCG is evident in the Annexure. 2.3 These additions may be deleted/corrected considering the facts of the case and demand may be reduced accordingly.

3. In para 7 of the assessment order for the A.Yr 2014-15 an income of Rs.23,88,317 was added under the head “income from other sources”. These time deposits are not made out of the current year’s income. These time deposits are not the income of the current year. These are continuing from the previous year/years. These additions are against the facts of the case. This may be deleted.

4. In para 7 of the assessment order for the A.Yr. 2014-15 an income from interest of Rs.6,64,435 was added under the head “income from other sources”. These interest incomes may be considered as income after Sec.80T deductions. Even the TDS deducted on these interests are not deducted from demand calculation of the order. These may be allowed to reduce the demand. This will accordingly reduce the demand for recovery. 5. In para 9 of the assessment order for the A.Yr. 2014-15 an income from business of Rs.14,62,549 was added. This is total gross receipts. Total gross receipts cannot be the table income 8% of the gross receipt i.e. 1,17,004 is the table income. This is as per the accepted norms of 8% of gross receipts, thus business income of Rs.1,17,004 may be considered as taxable income. 6. I further request for early hearing of my appeals so that I may get relief against the undue exorbitant tax dues.”

(A.Y.2015-16) “1. I am a senior citizen widow lady. I am a tax compliant citizen. In the past I lost my husband (ex MP Daman) during unfortunate corona pandemic. Since then I was not in stable healthy/mental condition to follow up and comply the departmental notices. I already have discontinued all my business activities since long. Currently I am struggling with my bad health.

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4. In para 7 of the assessment order for the A.Yr. 2015-16 an income from interest of Rs.5,57,409 was added under the head “income from other sources”. These interest incomes may be considered as income after Sec.80T deductions as offered in computation of income. Even the TDS deducted on these interests are not deducted from demand calculation of the order. These may be allowed to reduce the demand. This will accordingly reduce the demand for recovery. 5. In para 9 of the assessment order for the A.Yr. 2015-16 an income from business of Rs.6,11,400 was added. This is total gross receipts. Total gross receipts cannot be the table income 8% of the gross receipt i.e. Rs.48,912 is the table income, which is as per the accepted norms. Thus business income of Rs.48.912 may be considered as taxable income. 6. I further request for early hearing of my appeals so that I may get relief against the undue exorbitant tax dues.” for A.Y. 2011-12 is taken up as the “lead” case. The CIT(A) has also relied on his appellate order for A.Y 2011-12 while disposing of appeals for other three AYs.

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The assessee replied that due to some legal disputes and investigation, all lap top/computer and related records were seized by the local authority. She requested to allow further time to make the submission. However, no further submission was made till finalization of the assessment order. The AO, however, called for the information from the Sub-Registrar to find out cost and year of the acquisition of the property at survey No.165/3 sold deriving the year by assessee. He allowed cost of acquisition of Rs.17,10,000/- out of the assessee’s share of Rs.62,70,000/- and added Rs.45,60,000/- as short-term capital gain.

-1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel 4.1 Similarly, the AO allowed index cost of acquisition in respect of the property mentioned at para-5.2 of the assessment order and added Rs.1,05,17,905/- as long-term capital gains. The consideration received from the remaining properties were taxed as short-term capital gains after allowing cost of acquisition. The addition of STCG was Rs.1,60,80,000/-, which is at para-5.3 of the assessment order.

4.2 The AO has discussed about the survey u/s 133A of the Act conducted by ADIT(Inv), Unit-2, Vapi wherein assessee had submitted her profit and loss account showing net income of Rs.2,13,66,916/-. However, the assessee had not filed any return of income. The AO issued show cause notice and requested assessee to submit details and nature of income reported in the profit and loss statement along with supporting evidences. The assessee filed a reply asking for further adjournment which was not accepted by AO. The AO thereafter reproduced statement of Shri Surendra Babubhai Patel, accountant of the assessee, recorded u/s 131(1A) of the Act by the ADIT(Inv.) He had replied that assessee was owner of a petrol pump from FYs 2009-10 to 2014-

-1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel The AO has not allowed expenses of Rs.31,42,213/- in absence of any explanation by assessee to justify the expenses.

4.3 The AO also added Rs.6,81,005/-, being profit @ 3.25% on account of difference of receipt of Rs.2,09,54,009/- on account of C.D. Petroleum-2 because out of total deposits of Rs.13,91,98,359/- only Rs.10,93,44,350/- was shown as sales by the appellant. The AO has, however, excluded cash deposit of Rs.89,00,000/- while working out profit on the above difference.

4.4 The AO found that assessee was maintaining seven bank accounts which are mentioned at page-15 of the assessment order. He has added total deposits of Rs.1,85,09,780/-, Rs.20,00,000/-, Rs.2,16,34,384/- and Rs.18,00,000/- totalling to Rs.4,39,44,164/- in five bank accounts because the assessee failed to explain these amounts during assessment proceedings by submitting requisite details. The AO observed that the amounts do not pertain to inter-bank transfers or sale proceeds of properties.

4.5 The AO has also discussed about various cash deposits of Rs.2,05,00,000/- in four bank accounts at para-9 of the assessment order. After listing the date and amount of deposits, he has trifurcated the deposits into three periods i.e., 06.04.2010 to 08.05.2010, 21.06.2010 to 25.10.2010 and 19.03.2011 to 31.03.2011. During the above periods cash of Rs.1,08,00,000/-, Rs.35,00,000/- and Rs.62,00,000/- were deposited by the assessee. The AO found that the assessee sold three properties to M/s Wellknown Polyesters -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel Ltd. and M/s Alkem Laboratories Ltd. The AO has extracted copy of the documents impounded from the premises of M/s Alkem Laboratories Ltd. wherein cash payment of Rs.1,92,06,000/- was made by the said company. The share of the assessee was Rs.55,40,937/-. Since this amount was closer to cash deposit of Rs.62,00,000/-, AO added Rs.62,00,000/- as on-money received in cash. Similarly, he added Rs.1,08,00,000/- as cash on-money on account of the other properties sold on 29.04.2010 to M/s Wellknown Polyester Ltd. The AO also added another sum of Rs.35,00,000/-, being the cash deposit in SBI during 21.06.2010 to 25.10.2010 because assessee failed to explain the nature and source of such cash deposits. In the result, the AO added Rs.10,40,32,963/- to the total income of assessee. The total income was determined at Rs.10,40,32, 960/-.

5. Aggrieved by the order of AO, assessee filed appeal before CIT(A). The CIT(A) issues five notices between 24.12.2020 and 24.204.2023, in response to which assessee filed written submission on 23.05.2023 and 31.05.2023. The CIT(A) issued further notices on 10.01.2024, 08.04.2024 and 02.07.2024. He has extracted the assessment order at pages 3 to 41 of the appellate order.

The submissions of the appellant are at pages 41 to 50 of the appellate order.

In the submission dated 23.05.2023, appellant submitted that she was not keeping well after the death of her husband during the Covid-19. All the business activities are either discontinued or mismanaged. She had a petrol pump which was started by her husband. The other line of activity was sale -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel and purchase of lands. The AO has wrongly treated the profit on sale of lands as income from capital gains instead of business income. In the subsequent submission to the CIT(A), she again submitted that business profit had been wrongly taxed under the head capital gain. The assessee had submitted the profit and loss account in two parts, which had been wrongly treated as separate profit and loss accounts by the AO. No business expenses were also allowed by him. She also submitted that certain credits in bank accounts are loans from family members and in any case, total credits cannot be taken as sales. She further submitted that some income has been taxed twice. Other credit entries include temporary advance from M/s Patel Builders and M/s Patel Developers, which were wrongly added by AO. She also submitted that loans were received from SBI against fixed deposits which has been incorrectly added by the AO. It was also submitted that the cash deposits were out of the cash withdrawals from the bank accounts. It was also submitted that the AO himself is not sure about the cash deposits and he has used the word “appears” many times in the order. Regarding the seized paper, in case of M/s Alkem (supra), the paper was unsigned and name of the assessee was not mentioned anywhere in the paper. Further, the transaction was done 11 months earlier from the date of survey on Alkem.

5.1 The above submissions were forwarded by the CIT(A) to the AO for remand report because assessment order was passed u/s 144 of the Act. In the remand report, the AO requested not to admit any additional evidence. In fact, -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel he submitted that no additional evidence had been submitted by the assessee, as contended in her submission to the CIT(A). He referred to Rule-46A of the Income-tax Rules, 1962 and contended that the assessee has not made out a case of sufficient cause which prevented assessee from producing the impugned evidences. Regarding the merit of additions, the AO has replied in a tabular form which is at pages 55 to 57 of the appellate order. He submitted that the assessee did not produce any relevant documents or evidences in support of her claim due to which additions were made in the assessment order.

5.2 After considering submissions of assessee and remand report, the CIT(A) has given the decisions at pages 57 to 59 of the appellate order. He observed that the assessee did not file any return of income nor any tax was paid by the assessee. Only certain amount of TDS was made by the deductors, credit of which was given by the AO. The assessee has also not maintained any books of account and the accounts of the appellant are not audited despite the sale amount running into crores of rupees. Even the interest income was not offered for taxation. The assessee also did not file any reply to the AO and even in course of appellate proceedings, two submissions were made without any supporting evidences. The submissions are limited to controverting the action of AO without giving any evidence or reasons as to why such actions are incorrect. The CIT(A) further observed that the AO himself had tried to get details from all possible sources and given credit wherever such details -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel warranted relief. The AO has also fairly reduced the credits which could be explained by the assessee. Considering all these facts, the CIT(A) did not interfere with the additions made by the AO and dismissed the appeal of assessee.

6. Further aggrieved by the order of CIT(A) assessee has filed appeal before the Tribunal. The Ld. AR of the assessee has mainly relied on the submissions made before the lower authorities. He submitted that the main source of income of the assessee was from the petrol pump in the name and style of M/s. C.D Petroleum. The assessee was also engaged in sale and purchase of lands during the relevant year under consideration. The income from trading of land was shown as business income in the profit and loss account. Advance tax was also paid on such profit, which is reflected in 26AS of the year. However, the AO has assessed the income from land dealing as short- term capital gains or long-term capital gains depending on the period of holding. The assessee had submitted before AO that she had two sources of income i.e., petrol pump and trading in land. Her monthly income from petrol pump was Rs.40,000/- to Rs.50,000/-. The profit on sale of land has also been included in the profit and loss account reproduced by the AO in the assessment order. Profit on sale of land of Rs.1,71,31,940/- was reflected in the profit and loss account at page 11 of assessment order. Hence, the AO was not correct in taxing the profit on sale of land as capital gain.

-1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel 6.1 The Ld. AR also submitted that assessee had filed two written submissions before the CIT(A) on 23.05.2023 and 31.05.2023. In the said submissions, the assessee has contested various additions made by the AO.

The AO also did not allow the expenses against the income treated by him as business income. Assessee also submitted that the AO has wrongly added all the credits in the bank account which include amounts received from family members as temporary advances and also loans received from various firms.

There are also transfer entries between different bank accounts whose benefits were not given and the total credit of all banks have been considered as income of assessee. The assessee had also withdrawn various amounts in cash which were used for subsequent cash deposits in the banks, but AO has made total additions of such deposits. Some credit entries are loans against fixed deposits from SBI and such credits cannot be income of assessee. The Ld. AR also submitted that a remand report was called for from the AO which was submitted by him to the CITI(A) and it has been reproduced in pages 50 to 57 of the appellate order. The appellant was not given copy of the remand report to offer her comments. The CIT(A) has simply relied on the findings of AO and dismissed the appeal of assessee. He, therefore, requested that the appellate order has been passed in the violation of the principles of natural justice.

7. On the other hand, Ld. Sr-DR for the Revenue supported the lower authorities. He submitted that AO has passed a speaking order after granting adequate opportunity of hearing to the assessee. He has allowed relief -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel wherever the circumstances so warranted. The assessee did not comply with various notices issued by the AO. Despite non-compliance by the assessee, the AO has obtained information from the registering authority and bankc and has passed the order in a logical manner in accordance with law. Before CIT(A), the appellant filed two written submissions which were duly forwarded to the AO for remand report. The CIT(A) after receiving the remand report has considered all facts on record and passed the appellate order confirming all the additions because appellant did not support the claims in the written submission with supporting evidences. Hence, the CIT(A) has rightly upheld the additions made by the AO and dismissed the appeal.

Hence, we find merit in the contentions raised by the Ld.AR of assessee that profit on sale of lands should be taxed under the head “Profits and gains of business or profession” u/s 28 of the Act.

8.1 We find that the appellant has raised grounds on all the additions made by the AO. The Ld. AR submitted that the appellant is a senior citizen. Her husband died during the Covid-19 period. She was not in a stable and healthy mental condition to comply with the notices issued by the CIT(A). The Ld. AR also submitted that the business has been discontinued and mismanaged. Due to some legal disputes and investigation, all computer/laptops and related records were seized by the local authorities. Hence, complete details could not be furnished before the lower authorities. However, written submissions were -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel duly filed before the CIT(A) explaining the facts of the case and incorrect additions made by the AO. However, the CIT(A) has upheld all additions made by the AO.

8.2 We have again perused the records in view of the submissions of the Ld. counsels. It is seen that the AO has passed an ex parte order u/s 144 r.w.s. 147 of the Act due to non-compliance by the assessee. Before CIT(A), the assessee filed two written submissions wherein it was submitted that even the business expenses were not allowed by the AO on the wrong presumption that assessee was not doing any business. The fact of the matter was that assessee actually carried on business of petrol pump and land dealing during the subject year.

Further, all credits were considered as income of assessee ignoring the fact that temporary advances were received by assessee from family members and other firms. The assessee had also received loans from SBI against fixed deposits, which were also considered as unexplained income. Further, the papers found M/s Alkem Laboratories Ltd. was unsigned and did not bear the name of the assessee. These facts were explained to the CIT(A) by the assessee vide two written submissions (supra), who rightly forwarded the submissions to the AO for remand report. The AO, in the remand report, objected to the admission of additional evidence and has also reiterated the same reasons given in the assessment order to contend that additions were made because assessee did not produce any relevant documents/evidences before him.

However, we find that the CIT(A) has not forwarded a copy of the remand -1038/Srt/2024 (AYs 11-12,13-14 to 15-16 Chanchalben D Patel report to the assessee to file her rejoinder. The impugned appeal has been filed by the assessee and she was entitled to rebut the objections of AO in the remand report. However, the appellant was not given any opportunity by the CIT(A) to file rejoinder to the remand report. The CIT(A) passed the appellate order without eliciting reply of assessee on the remand report of the AO.

Further, the assessee also could not furnish details because the records were seized by the local authorities. Hence, objection to additional evidence by revenue is not proper. Further, on a conjoin reading of section 250 and Rule 46A, we find that the restrictions placed on appellant to produce evidence do not affect the power of CIT(A) u/s 250(4) of the Act to make further enquiry as he thinks fit before disposing of an appeal. Considering all these facts and the clear statutory provisions, we find that there is clear violation of the principles of natural justice. Hence, in the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to pass a speaking order in accordance with law after granting adequate and reasonable opportunity of being heard to the assessee. The assessee is also directed to be vigilant and to furnish all details and explanation as needed by AO by not seeking adjournment without valid reason. With this direction, the grounds of appeal raised by the assessee are treated as allowed for statistical purposes.