ITO-WD-1(2)(1), AHMEDABAD, AHMEDABAD vs. AVS CORPORATION, AHMEDABAD

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.

Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A).

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.

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 , 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.

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 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 , 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. , 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, , 1620 & 1621/Ahd/2024 ITO vs. AVS Corporation Asst.Years : 2017-18 to 2019-20 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 , 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 , 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.

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 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.