ITO-WD-1(2)(1), AHMEDABAD, AHMEDABAD vs. AVS CORPORATION, AHMEDABAD
Facts
The assessee, a construction firm, had its assessment reopened for AYs 2017-18 to 2019-20 based on incriminating material (excel sheet from a third-party search) indicating receipt of Rs. 7,65,00,000/- as unaccounted cash (on-money) for housing projects. The Assessing Officer (AO) also made an estimated addition of Rs. 62,94,200/- for undisclosed business receipts, treating the on-money as unexplained under Section 69A read with Section 115BBE.
Held
The CIT(A) deleted both additions, ruling that the reopening of assessment was invalid due to 'borrowed satisfaction' from the Investigation Wing without independent inquiry by the AO, and because the assessee was denied the right to cross-examine third parties whose statements formed the basis of the additions. The Tribunal upheld the CIT(A)'s decision, emphasizing the AO's failure to conduct independent verification, establish a money trail, or provide necessary evidence, thus dismissing the Revenue's appeals.
Key Issues
Whether the assessment could be validly reopened under Section 147 based on borrowed satisfaction from an investigation wing's appraisal report without independent inquiry, and whether additions made under Section 69A and for estimated sales could be sustained without establishing a money trail, conducting proper verification, or allowing cross-examination of third-party information.
Sections Cited
Section 250, Income Tax Act, 1961, Section 143(1), Section 147, Section 148, Section 69A, Section 115BBE, Section 144B, Section 132(4), Section 131, Section 132, Section 133A, Section 153C, Rule 34 of ITAT Rules, 1963
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Shri Makarand V. Mahadeokar
Per Sanjay Garg, Judicial Member: The captioned three appeals have been preferred by the Revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Years (AYs) 2017-
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
2018, 2018-19 & 2019-20. Since identical facts and issues are involved in these appeals, hence the same were heard together and are being disposed of by this common order. ITA No.1627/Ahd/2024 preferred against the order of the CIT(A) dated 24/07/2024 for the assessment year 2017-18 is taken as the lead case for the purpose of narration of facts.
ITA 1627/AHD/2024: 2. The Revenue, in this appeal, has taken the following grounds of appeal:
“Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition made of Rs.7,65,00,000/- u/s 69A r.w.s. 115BBE of the Act. being unexplained money, without appreciating the fact that sufficient evidence was found during search and providing cross examination to assessee is not necessary when other evidences are available?"
“Whether on the facts and in the circumstances of the case and in law, the Id CIT(A) wat justified in deleting the addition made to the lune of Rs.62,94,200/-as estimated addition to sales as per details available in open source, without appreciating the fact that sufficient evidence was found during search and providing cross examination to assessee is not necessary when other evidences ate available?”
“The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
4" If is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?"
In this appeal, the Revenue has challenged the deletion of addition of Rs. 7,65,00,000/- made under section 69A read with section 115BBE of the Act and the deletion of addition of Rs. 62,94,200/- made on account of estimated sales.
3.1. The brief facts of the case are that the assessee is a firm engaged in the business of construction of housing projects. For this purpose, the assessee entered into a development/joint venture agreement dated 18th July 2014
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
with M/s. Shaswat Homes LLP in respect of construction and development of a residential housing project titled as Satva Homes on the land belonging to M/s. Shaswat Homes LLP. The assessee filed its original return of income for the assessment year 2017-18 on 6th October 2017 declaring an income of Rs. 55,92,550/-. The said return was processed under section 143(1) of the Act.
3.2. Thereafter, based on information received from the Investigation Wing (IW) consequent to the search initiated on 28th January 2020 in A. Shridhar Group of cases, Ahmedabad, indicating that the assessee was in receipt of on- money (unaccounted cash) during the year under consideration, the case of the assessee was reopened under section 147 of the Act by the Jurisdictional Assessing Officer by issue of notice under section 148 dated 30th March 2021. The incriminating material found during the search operation from the Laptop and Pen drive of one Shri Gautam J Shah contained various details of the booked/sold projects out of which some allegedly belonged to the assessee. Therefore, by relying upon the appraisal report of the Investigation wing, the Assessing Officer formed the belief that the assessee received unaccounted cash (on-money) during the relevant previous year and the same escaped assessment as defined under section 147 of the Act. He, therefore, reopened the assessment by issuing notice u/s 148 of the Act to the assessee.
3.3. The reasons recorded by the Assessing Officer for reopening the assessment have been reproduced in the assessment order itself, which read as under:
“On perusal of the details and information, it is very clear that the assessee has receipt unaccounted cash of Rs. 6,60,80,000/-during the year under consideration. In view of the above facts, I have reason to believe that income Rs. 6,60,80,000/- has escaped assessment within the meaning of section 147
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
4 of the Act. Therefore, it is a fit case for reopening of the assessment by invoking the provision of section 147 of the I.T. Act 1961. Accordingly, it is fit case for issuing notice u/s. 148 of the I.T. Act.”
3.4. In response to the notice issued under section 148 of the Act, the assessee filed the return of income on 27th April 2021 declaring an income of Rs. 55,92,550/-. The assessee also filed objections against the reopening of the assessment, which were disposed of/dismissed by the AO vide order dated 21st February 2022. During the course of assessment proceedings, the assessee submitted that the details mentioned in the excel sheet found during search/survey were part of an inquiry form and that it reflects the data towards the Walk in Customers, who visited the site of the assessee for inquiry. The assessee explained that these were notings in general nature done by the marketing person at the site and kept in records for future reference and follow up, without any knowledge or consent of the assessee. That the said marketing person was even not appointed by the assessee.
3.5. However, the reply was not accepted by the Assessing Officer for the reason that remarks like interested, booked etc. were mentioned against the names. Noting that the names of various angadias (person who facilitate movement of cash/cash transactions on commission basis) were also mentioned in the excel sheet, the Assessing Officer construed that the cash was received by Shri Gautam Shah against the units of the housing project. The Assessing Officer was also of the opinion that the assessee firm was involved in availing accommodation entries through entry operators. Based on the evidences found during the search/survey, the Assessing Officer concluded that the receipts recorded by the Shri Gautam shah in the excel sheet found from his pen drive were nothing but unaccounted cash receipts.
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
3.6. The Assessing Officer held that the cash received during the relevant previous year as per the excel sheet was as under: On 25th February 2017, cash of Rs. 80,00,000/- was received from Mitesh Patel (42 Gram O). On 26th February 2017, cash of Rs. 1,25,00,000/- was received from Trikambhai Soni (rly). On 26th February 2017, cash of Rs. 1,00,00,000/- was received from Dalsaniya Vijay. On 26th February 2017, cash of Rs. 1,00,00,000/- was received from Monik Soni. On 26th February 2017, cash of Rs. 1,50,00,000/- was received from Hitendra Patdiya. On 20th February 2017, cash of Rs. 1,00,00,000/- was received from Kalidas Patel. On 17th June 2017, cash of Rs. 1,10,00,000/- was received from Hasmukh Ratanchand (Angadia Ratanpole). Thus the total cash received as per the excel sheet was Rs. 7,65,00,000/-. The Assessing Officer treated the above amounts totalling to Rs. 7,65,00,000/- as unexplained money under section 69A read with section 115BBE of the Act and added back to the returned income.
3.7 Further, based on the report of the Investigation wing that the units developed by the assessee firm were quoted at a higher price in the open sources (advertisements etc. issued by third parties) as compared to the sale price booked in its books of accounts, the Assessing Officer estimated 10 percent of project receipts of Rs. 6,29,42,000/- being Rs. 62,94,200/- as undisclosed business receipts and added to the returned income. Thus, the reassessment was completed under section 147 read with section 144B on an assessed income of Rs. 8,83,86,750/-.
Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A).
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
After considering the submissions made by the assessee, the Ld. CIT(A) deleted both the additions holding that the reopening was based on borrowed satisfaction without any independent inquiry by the Assessing Officer; that the Assessing Officer failed to bring any cogent material on record to establish the money trail in the hands of the assessee; that no attempt has been made by bringing in reliable evidence to disprove the contention of the assessee that the information found in the excel sheet was nothing but the site inquiry form; that in the absence of any real finding or independent clinching evidence to prove the money trail in the hands of the assessee and to corroborate the information received from the Investigation Wing, it cannot be held that the Assessing Officer applied his independent mind for making the impugned additions; that the Assessing Officer has borrowed satisfaction from the Investigation officers to reopen the assessment which was not permissible under the law, and that it is undisputed that the Assessing Officer simply relied upon the information from the Investigation Wing and did not cause further enquiries to corroborate with the information received. The Ld. CIT(A), therefore, held that the action of the AO in reopening the assessment by relying on third party statement/information without conducting independent enquiries on the basis of borrowed satisfaction was bad in law.
5.1. The Ld. CIT(A) further held that the entire addition in this case was based on third party information gathered by the Investigation Wing of the Department and that the assessee had discharged its onus by placing relevant material/explanation on record. The burden of proof was lying on the Assessing Officer to be discharged by adducing necessary proof for making
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
impugned additions. However, the Assessing Officer failed to discharge the onus, as he had not brought on record any cogent material. No statements were recorded from any of the partner/owner or key persons for having allegedly paid such huge amount in cash to sustain the allegation that the figures found in the excel sheet indeed represent the unaccounted on money transactions. He further held that the Assessing Officer also failed to satisfactorily explain how the mentioning of the name(s) of ‘angadia’ in the excel sheet has led to the belief that only cash was received by Shri Gautam Shah. Further, the Assessing Officer failed to establish a link between the evidence found in the search in case of third party and the alleged on-money receipts in the hands of the assessee. That the Assessing Officer failed to bring out the relation of Gautam Shah with the assessee firm and his locus standi in the entire transactions. That it was not clear under whose instructions Gautam Shah had made the notings in the excel sheet. The Assessing Officer failed to bring the deposition of Gautam Shah recorded during the search action on record. Even the Assessing Officer failed to establish the existence of circumstantial evidence for making the impugned addition of Rs. 7,65,00,000/-. He further noted that the observation of investigation wing given below the excel sheet was that “on analysis of the above file it is found that it contains the details the booking of the Bungalow at the Satva-2 Bungalows project. The On Money evidences of the same has discussed in the Appraisal report. The Assessing Officer may examine the above excel sheet and take necessary action against the persons who have booked the flat and carried out on money transactions under the relevant provision of the act.” The Ld. CIT(A) in this respect observed, that as can be seen from the above note, the Investigation Wing ordained the Assessing Officer to examine the excel sheet and take necessary action against the persons who have booked the flat and carried out on money transactions
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
under relevant provision of the Act. The contact numbers of the members/customers of the project were available in the excel sheets disclosing their identity. None of these members were contacted/examined to cross verify the correctness of the information in the excel sheets. Thus, from the facts of the case, the Ld. CIT(A) did not see that the Assessing Officer has made any efforts to examine any of the entries found in the excel sheet.
5.2. The Ld. CIT(A) held that he has carefully gone through the submissions of the assessee and the facts available on record. Based on the facts of the case, he is convinced that the Assessing Officer has simply relied on the information received from the Investigation Wing and has not done any further enquiry to confirm the information. Thus, the entire disallowance in this case based on third party information gathered by the Investigation Wing of the Department is illegal as held by the Supreme Court in the case of CIT vs. Odeon Builders (P.) Ltd. reported in 110 taxmann.com 64 (SC).
6.4. The Commissioner of Income Tax (Appeals) held that the Supreme Court in the case of CIT vs. Odeon Builders (P.) Ltd. (supra) held that the disallowance based solely on third party information, which was not subjected to any further scrutiny is illegal. The Commissioner of Income Tax (Appeals) held that as regards the issue of borrowed satisfaction from another officer, the assessee relied upon the judicial pronouncement of Gujarat High Court in Munir Ismail Voraji vs. ITO reported in 82 taxmann.com 92 and Delhi High Court in PCIT vs. Meenakshi Overseas (P) Ltd reported in 82 taxmann.com 300, where it was held that the reopening under section 147 of the Act merely based on borrowed satisfaction is bad in law.
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
5.3 The Ld. CIT(A) held that in the facts of the case, he is of the considered opinion that except relying on the information received from the Investigation wing, the Assessing Officer failed to bring any cogent material on record to establish the money trail in the hands of the assessee. Further, no attempt has been made by bringing in suitable evidence to disprove the contention of the assessee that the information found in the excel sheet is nothing but the site inquiry form and that it reflects the data towards the Walk-in customers who visit its site for inquiry. Thus, in the absence of any real finding or independent clinching evidence to prove the money trail in the hands of the assessee and to corroborate the information received from the Investigation Wing, it cannot be held that the Assessing Officer applied his independent mind for making the impugned additions. He is of the considered view that in the facts of the matter, the Assessing Officer has borrowed satisfaction from the Investigation officers to reopen the assessment, which is not permissible under the law. It is undisputed that the Assessing Officer simply relied upon the information from the Investigation Wing and did not cause further enquiries to corroborate with the information received. In the light of above facts and circumstances and in view of the judicial precedents, the Commissioner of Income Tax (Appeals) allowed the technical grounds holding that relying on third party statement/information without conducting independent enquiries and making additions on borrowed satisfaction is bad in law.
5.4. The Ld. CIT(A) also noted that the Assessing Officer has made the addition of Rs. 7,65,00,000/-, out of which addition of the person namely Hasmukh Ranchod (Angadia Ratanpole) of Rs. 1,10,00,000/- was dated 17th June 2017. The date 17th June 2017 was not falling in financial year 2016-17 relevant to assessment year 2017-18, but in financial year 2017-18 relevant to
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
assessment year 2018-19 and assessment year 2018-19 was also under scrutiny assessment under section 147 read with section 144B of the Act and the Assessing Officer while passing the order for assessment year 2018-19 has also made the addition of the said amount of Rs. 1,10,00,000/- pertaining to the said entry in the name of Hasmukh Ranchod (Angadia, Ratanpole) dated 17th June 2017. Hence, out of the addition of Rs. 7,65,00,000/-, the addition of Rs. 1,10,00,000/- being duplicate/double addition on the said amount, was required to be reduced from the total amount of addition of Rs. 7,65,00,000/-.
5.5. The Ld. CIT(A) held that the Assessing Officer had not provided any opportunity to the assessee of cross examination of third party whose statement was relied upon by the Assessing Officer. He, in this respect, referred to the decision of the Hon’ble Supreme Court in “State of J&K vs. Bakshi Ghulam Mohammad” reported in AIR 1967 SC 122, wherein, it has been held that the right of cross examination depends upon the circumstances of each case and also on the statute concerned. The Ld. CIT(A) observed that he was of the considered opinion that in the circumstances and facts of the case where the information from the Investigation Wing and third party statement was relied upon by the Assessing Officer to make the impugned additions, the assessee deserved the right of cross examination, which was not provided. That such a denial of cross examination was violative of the principles of natural justice. He, in this respect, relied upon the another decision of the Hon’ble Supreme Court in “A.K. Kraipak vs. Union of India” reported in AIR 1970 SC 150. He, relying on the above decisions of Hon’ble Supreme Court and other courts, held that not allowing the assessee to cross- examine the third parties whose statements were made the basis of the
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
impugned order was a serious flaw which made the order vitiated and invalid and, therefore, the additions made were not sustainable in law.
As regards the estimated addition of Rs. 62,94,200/-, the Ld. CIT(A) held that the Assessing Officer, in this respect, has referred to the screen shot of the official website of one ‘Manav Properties’ showing an advertisement and observed that the Bungalows (units) were offered in the range of Rs. 1.14 crores to 1.30 crores, whereas the documentation amount was in the range of Rs. 85,00,000/- to Rs. 1,05,00,000/-. The assessee explained at the assessment stage that the advertisement in question was given by the broker, Manav Properties, who added all incidental expenses to the cost of the property like Maintenance expenses, GEBAMC and other related expenses, stamp duty, brokers commission etc., which resulted in showing more price in their website than the actual price of the units. The assessee further explained that the assessee had no concern with the said broker, namely ‘Manav Properties’. The Ld. CIT(A) observed that it was undisputed that the Assessing Officer relied upon the official website of ‘Manav Properties’ to draw the conclusion that on money was received by the assessee. That the assessee had duly explained reasons for the difference in the rates before the Assessing Officer. The assessee had also submitted that ‘Manav Properties’ (whose advertisement was found in the open source) was not a broker of the assessee and that it had not provided any brokerage for sale of any of its units in the scheme Satva Homes and that the assessee had no control over the price quoted by the project advertiser (Manav Properties). The Ld. CIT(A) further observed that the Assessing Officer has not carried out any enquiry with the advertiser/broker that how it had quoted the prices of the units of the scheme, Satva Homes on its website. No brokerage agreement between Manav Properties and the assessee, if any, is brought on record. No evidence
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
whatsoever indicating that ‘Manav Properties’ has really sold the units (on behalf of assessee) and that ‘Manav Properties’ received brokerage/commission from the assessee was available on record. The Assessing Officer simply relied on the report of the Investigation Wing and drew his conclusions from the information available in the open source, without cross verifying the same. The Ld. CIT(A) also relied upon various case laws and finally deleted the impugned additions on merits also.
Aggrieved by the said order of the Ld. CIT(A), the Revenue is now in appeal before this Tribunal.
As noted above, the Ld. CIT(A) has decided the appeal of the assessee both on legal grounds as well as on merits. The Ld. CIT(A) has categorically held that the reopening in this case solely on the basis of appraisal report of the Investigation Wing and without cross-verification of such information and in the absence of any enquiries upon such information on the basis of borrowed satisfaction obtained from the appraisal report was bad in law and, accordingly, decided the legal issue in favour of the assessee. However, a perusal of the above reproduced grounds of appeal raised by the Revenue, would reveal that the Revenue has challenged the action of the Ld. CIT(A) in deleting the impugned additions on merits and has not assailed the findings of the Ld. CIT(A) on the legal ground. As contended by the Ld. Counsel for the assessee, even if the Revenue succeeds in its grounds taken on merits still the finding of the Ld. CIT(A) that the reopening of the assessment was bad in law remained uncontested and, accordingly, since the assessment has been quashed on this legal ground, any finding on merits in respect of the validity of the impugned additions would be rendered just academic in nature.
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
We find force in the aforesaid contentions of the Ld. Counsel for the assessee. The Revenue has not assailed the impugned order of the Ld. CIT(A) in respect of his findings on the legal issue holding that the reopening of the assessment u/s.147 was bad in law. Even irrespective of the grounds taken by the Revenue in respect of aforesaid legal issue, we have examined the said findings of the Ld. CIT(A) and have also consulted the record. We find that the reasons recorded by the AO for forming the belief that the income of the assessee has escaped assessment are general and vague. The Ld. AO has simply mentioned that on analysis of the appraisal report available on Insight Portal it was found that it contains the details the booking of the Bungalow at the Satva-2 Bungalows project and that the On Money evidences of the same have been discussed in the Appraisal report. However, as noted by the AO himself it has been recommended in the appraisal report that “The Assessing Officer may examine the above excel sheet and take necessary action against the persons who have booked the flat and carried out on money transactions under the relevant provision of the act.” This shows that the appraisal report recommended for further enquiries. Incidentally, the excel sheet recovered from the premises of Shri Gautam J Shah did not contain the name of any project of the assessee. So far as the names of the purchasers mentioned in the said excel sheet were concerned, the corresponding mobile numbers were also mentioned. The AO even did not make any call to them to verify as to whether they have made any transaction of purchase of Flat, etc. with the assessee, what to say of any ‘on-money’ passed on by them to the assessee. Even despite demand, the AO neither provided the copy of such appraisal report to the assessee nor was given the copy of the statement recorded of Shri Gautam J Shah u/s 132(4) of the Income Tax Act, 1961. The objections filed by the assessee have been dismissed by the AO in a
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
summarily and mechanical manner violating the principles of natural justice. The reopening in this case is entirely based on borrowed satisfaction objection from the Investigation Wing without correlating or verifying the same, either with the assessee or with the alleged purchasers, whose names were found in the excel sheet. No material was provided to the assessee in this respect. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) in holding the reopening of the assessment as bad in law. Moreover, as observed above, the Revenue even has not contested the said finding of the Ld. CIT(A), and thus has attained finality. Therefore, the order of the Ld. CIT(A) holding the assessment is bad in law remains confirmed.
Even on merits, it is a matter of record that the assessment was reopened and the impugned additions has been made by the AO on the basis of alleged incriminating material found during the search operation from the Laptop and Pen drive of Shri Gautam J Shah. The assessee has denied his relation or concern with said Shri Gautam J Shah. The Assessing Officer did not conduct any independent enquiry to verify the information received from the Investigation Wing. The Assessing Officer failed to establish a link between the evidence found in the search/survey in case of Shri Gautam J Shah and the alleged on-money receipts in the hands of the assessee. The Assessing Officer failed to bring out the relation of Gautam Shah with the assessee firm and his locus standi in the entire transactions. It is not clear under whose instructions Gautam Shah had made the notings in the excel sheet. The Assessing Officer failed to bring the deposition of Gautam Shah recorded during the search/survey on record. The contact numbers of the members/customers of the project were available in the excel sheets disclosing their identity. None of these members were contacted/examined to cross verify the correctness of the information in the excel sheets. Thus, it
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
is clear that the Assessing Officer has not made any efforts to examine any of the entries found in the excel sheet.
At this stage, During the course of arguments, the learned DR has produced on the file, the copy of the statement recorded u/s 132(4) of the Act of Shri Gautam Jayantilal Shah. He has referred to question number nine of the said statement, whereby, Shri Gautam Shah was asked by the search party to give details of the contract receipts received from A. Shridhar Infracon, in response to which he stated that he sits in the marketing office of A. Sridhar Infracon. That he has to call to the customers at the site to give information about the project. Thereafter, the customers are called to meet Shri Harinder Yadav, marketing manager at the head office of A. Sridhar Infracon. Shri Harinder Yadav quotes the final price, and if the party agrees to the same, then the details are sent to him ( Gautam J. Shah ) so that he can follow up with the customer for payments. The Ld. DR has further referred to question number 10, wherein he has stated that he along with another person makes call to different customers as per the data received from head office and sometimes walk in customers also come in. The learner DR has also referred to question number 12, whereby, Mr. Shah was asked by the search party to name the undergoing projects of A. Shridhar Infracon. In reply, Sh. Gautam Jayanti Lal Shah named four projects that is 1.Anantara residential, 4BHK, Sai Bagh 2. Athens, commercial Shivranjani 3. Vistara, Shilaj Circle and 4. Soham, Shilaj Circle. He further stated that out of these four projects he was doing marketing in respect of Anantara and Athens projects. The learned DR has further referred to question number 23 vide which the search party confronted him of the data taken from his laptop marked as annexure A-2 and after seeing the printout of the data, Shri Gautam Jayanti Lal Shah stated that the said data pertains to the projects Satav-1 and Satav-2. The Ld.
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
DR, therefore, has stated that the data recovered from Shri Gautam Shah also contained the details of the customers, etc. of the projects of the assessee, namely Satva-1 & Satva-2 .
The learned A R, however, has referred to page 7 of the assessment order where in in point (v) of the assessee’s submissions, it has been specifically submitted to the assessing officer : “ v) Your honour has also not brought on record the statement of Gautam Shah who recorded the entry in the excel sheet and found from his pen drive. Hence, there is no any statement of any person recorded during the course of search proceedings in the case of A. Shridhar Group affirming that the excel sheet relied upon by your honour is showing the cash receipts. Hence the observation of your honour is baseless” . The Ld. AR has further brought our attention to page 108 of the paper book which is the copy of the letter /objections dated Feb8, 2022 to the reasons recorded for reopening of the assessment, written by the assessee to the assessing officer, wherein, at page 111 at point ( e) , the assessee has pointed out that the AO has failed to bring on record any tangible incriminating material, proving that the assessee has received unaccounted cash inter alia in the form of statements recorded u/s. 132(4) of the Act/131 of the Act of any partner or key-person of the concerned parties, who allegedly paid such huge cash to the assessee. It was also pointed out that it was not disclosed as to whether they have stated that they have made any cash payment to the assessee. The Ld. AR has further invited our attention to page 134 of the paper book, which is copy of the letter written by the assessing officer to the assessee seeking clarification as to whether any search action under section 132 or survey under section 133A was carried out in the premises of the assessee ‘AVS Corporation’ or any of its partners? In reply to which, the assessee vide its letter dated February 18, 2022 stated that no such search or survey action was carried out in the name of the assessee,
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and further that no such notice either in search or survey proceedings was ever issued in the name of the assessee.
The aforesaid factual details show that the name of any project of the assessee was not specifically mentioned in the seized material from Shri Gautam Shah. It was during his lengthy statement that he mentioned in respect of some data that the same pertained to Satva Project. However, he has nowhere in his statement stated that he has ever accepted any cash, over and above, the accounted sale consideration for and on behalf of assessee. The alleged incriminating documents recovered from Shri Gautam Shah were just some information which required further enquiries and verification to find out as to whether the assessee had accepted any ‘on-money’, and that was so recommended by the Investigation Wing in the appraisal report. But the AO, in the case in hand, without making any post search enquiries or any inquiries during the assessment proceedings , simply made the impugned additions on the basis of general, vague and unsubstantiated report of the Investigation Wing. Moreover, as demonstrated by the Ld. AR, the AO never produced on the record the statement recorded u/s.132(4) of the Act of Shri Gautam Shah, what to say or confronting the assessee with the same. In this case, neither the AO made any meaningful enquiries nor gave the assessee any opportunity to cross-examine any person especially Shri Gautam Shah. Further, that the AO has failed to establish the locus standi of Gautam Shah to maintain any data relating to the projects of the assessee. The AO has relied upon some advertisement given by a broker however, without establishing any connection of the assessee with the said broker. Even no statement of the said broker was obtained by the assessing officer. No statement of any purchaser was recorded. No cross enquiry was made by the assessing officer from the purchasers. Even the Ld. AR has submitted that the alleged names
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
of the purchasers mentioned in the list were not actual purchasers of any Flats from the assessee. The assessee had duly furnished the list of the purchasers, project wise and year wise, but the AO did not make any enquiry from them. The AO neither made any enquiry from the persons mentioned in the seized documents from Shri Gautam Shah nor from the purchasers whose name were recorded in the books of the assessee. No cash voucher or cash trail was found either from the seized material of the searched person or from the assessee. The Hon’ble Supreme Court in the case of “CIT vs. Odeon Builders (P.) Ltd.” reported in 110 taxmann.com 64 (SC) held that the disallowance based solely on third party information, which was not subjected to any further scrutiny is illegal.
The Ld. CIT(A) has given detailed and well reasoned findings after considering all the facts and circumstances of the case and the submissions made by the assessee. We do not find any infirmity in the same. The impugned order of the Ld. CIT(A) is, therefore, upheld.
At this stage, it is pertinent to mention here that the Ld. AR of the assessee has also raised a legal/jurisdictional ground to the effect that consequent to the recovery of alleged incriminating material found in the course search action in the case of third party, namely, Shri Gautam J. Shah, the only course available to the Assessing Officer was to proceed u/s.153C of the Act and not u/s.147 of the Act. Since we have decided the legal issue relating to the reopening of the assessment being based on borrowed satisfaction as well as the issues on merits relating to the validity of the impugned additions in favour of the assessee, therefore, we are not inclined
ITA Nos.1627, 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20
to deliberate upon this issue at this stage and the same is kept open with liberty to the assessee to raise the same at appropriate juncture, if need be.
The appeal of the Revenue is dismissed.
ITA Nos. 1620/Ahd/2024 & 1621/Ahd/2024 for AYs 2018-19 & 2019-20 respectively.
Since the facts and issues involved in these appeals are identical to that have been discussed as above in Revenue’s appeal for AY 2017-18 in ITA No.1627/Ahd/2024, hence, our findings given above on the identical issues will mutatis mutandis apply herein, and these appeals of the Revenue are also dismissed.
In the result, all the three appeals of the Revenue stand dismissed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 26 /02/2026.
Sd/- Sd/- (Makarand V. Mahadeokar) ( Sanjay Garg ) Accountant Member Judicial Member िदनांक/Dated 26/02/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की ितिलिप अ!ेिषत/Copy of the Order forwarded to : 1. अपीलाथ# / The Appellant 2. $थ# / The Respondent. संबंिधत आयकर आयु% / Concerned CIT 3. 4. आयकर आयु% अपील ( ) / The CIT(A)- (NFAC), Delhi 5. िवभागीय ितिनिध आयकर अपीलीय अिधकरण अहमदाबाद /DR,ITAT, Ahmedabad. , , गाड� फाईल / 6. Guard file.
आदेशानुसार/ BY ORDER, $ािपत ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad
