AJIV YASHWNAT PATIL,THANE vs. ACIT,CENTRAL CIRCLE-3,THANE, THANE

Per Kavitha Rajagopal, J M:

These are cross appeals filed by the assessee and the Revenue, challenging the

order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short),

Pune-11 passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the

Assessment Year (‘A.Y.’ for short) 2008-09.

2 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil 2. The assessee has challenged this appeal on the grounds of reopening and the

addition of Rs.2,73,50,000/- being the unexplained investment and disallowance of

Rs.37,62,530/- towards cost of improvement.

Rs.30,70,00,000/- and restricting the disallowance on cost of development to 50% out of

Rs.75,25,060/-.

return of income dated 24.12.2018, declaring total income at Rs.37,31,830/-. Pursuant to

a search and seizure action carried out in the group cases of Ameya dated 31.07.2014,

certain incriminating documents were found and seized which disclosed cash receipts,

pertaining to the assessee with regard to Alkapuri land. The assessee’s case was reopened

vide notice dated 10.02.2015 u/s. 148 of the Act and the assessee vide his reply stated

that his original return of income may be treated as ‘return of income’ filed in response to

notice u/s. 148 of the Act. The assessee was served notices u/s. 143(2) and 142(1) of the

Act dated 17.08.2015. The assessee then filed his objection for reopening vide his letter

dated 14.12.2015 and sought for a copy of the reasons recorded along with the relevant

documents relied upon by the Assessing Officer ('A.O.' for short). The ld. A.O. then

furnished the copies of the reasons for reopening vide letter dated 04.11.2015 and

disposed of the objections raised by the assessee. The ld. A.O. then passed the assessment

order dated 21.03.2016 u/s. 143(3) r.w.s. 147 of the Act where the ld. A.O. determined

the total income at Rs.37,67,07,665/- by making various additions/disallowances.

3 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil 5. Aggrieved by the said order, the assessee was in appeal before the ld. CIT(A),

challenging the reopening and the impugned additions/disallowances.

the assessee.

impugned order of the ld. CIT(A).

assessment u/s. 147 of the Act.

Act carried out in the Ameya group of cases dated 31.07.2014, the assessee’s residents

was also covered under the said search. It is observed that certain incriminating

documents were found and seized. The ld. A.O. proceeded to reopen the cases of the

assessee u/s. 147 of the Act and had duly recorded the reasons for reopening this

assessment year which falls under unabated assessment. The reasons for reopening are

cited hereunder for ease of reference:

Reasons for belief that the income has escaped assessemtn in the case of Shri Ajiv Yashwant Patil for A.Y. 2008-09 The information regarding receipt of Rs.3583.50 lacs by Shri Ajiv Y. Patil during A.Y. 2007-08 is received from DDIT (Inv) – 1, Thane vide his letter No. THN/DDIT(Inv)-1/Ameya/14- 15/222 dated 22.01.2015. Wherein it is stated that a search u/s. 132 was carried out in the case of Ameya Group of Virar on 31.07.2015. Wherein it stated that a search u/s. 132 was carried out in the case of Ameya Group of Virar on 31.07.2014. Page No. 1 & 2 of annexure A-2 of bundle No. 1 seized from the residence of Shri Rajeev Patil (Party No. A-14) shows that cash was received by the assessee Shri Ajiv Yashwant Patil in respect of Alkapuri land. Copy of the loose papers is enclosed. The page no. 1 shows the date and amount in abbreviated form. The figures are to be read in lacs, for example against 09.08.2007 amount written is 77.00. this should be read as 77 lacs. The total cash receipt is shown as Rs.273.50 and cheque receipt is shown at 140.00. On

4 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil lower portion cheque received from Sanjiv Patil A/c No. 17859 is shown at 100.00. These figures should be read as under: Cash: 273.50 should be read as Rs.273.50 lacs : 140.00 should be read as Rs.140.00 lacs : 100.00 should be read as Rs.100.00 lacs Thus the total payment received for Alkapuri land is Rs.513.50 lacs. The page No. 2 shows the Alkapuri land statement. Upper portion of this page shows receipt of Rs.1670.00 las and payment of Rs.1670.00 lacs. On lower portion of this page receipt of Rs.1400.00 lacs and payment of Rs.1400.00 lacs is written. During the post search proceedings, the assessee has stated that these are old transactions for A.Y. 2007-089 which is beyond the period covered by search. As per AST module of the ITD system, assessee has not filed return of income for the A.Y. 2008-09. Therefore, I have reason to believe that the income of the assessee amounting to Rs.3583.50 lacs has escaped assessment for the reason of failure on the part of the assessee, to disclose fully and truly all the material facts for the assessment of income for A.Y. 2008-09.” Sd/- (Alok Malviya) DCIT, Central Circle-3, Thane

lacs pertaining to the assessee for the relevant assessment year was found during the

search which had mentioned that the same pertain to Alkapuri Land along with the date

and amount in abbreviated form on various occasions. The A.O. made an addition of

Rs.5,13,50,000/- as ‘unexplained investment’ and Rs.30,70,00,000/- as ‘unexplained cash

receipts’ and Rs.1,60,00,000/- as ‘unexplained income’ and made addition aggregating to

Rs.37,67,07,665/-. The assessee has contended that the A.O. had mentioned that no

income tax return was filed by the assessee for the impugned year which was factually

incorrect for the reason that the assessee has filed his original return of income dated

24.12.2008. The assessee contended that the notice u/s. 148 of the Act was bad on the

ground that the A.O. had failed to consider the original return of income filed by the

assessee. The assessee relied on the decision of the Hon’ble Gujarat High Court in the

case of Mumtaz Haji Mohd. Memon vs. ITO (in Sp. Civil Appl. No. 21030 of 2017 dated

21.03.2018 (Guj)) which held on identical facts that the reopening was bad in law. The

5 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil assessee further to this contended that the ld. A.O. in the reasons recorded had stated that

the assessee has received a sum of Rs.35.83 crores for Alkapuri land which the assessee

contends that belongs to M/s. Sharp Realtors in which the assessee is not a partner and,

hence, the assessee was not entitled to receive the said amount for the purpose of

Alkapuri Land. The assessee further to this contended that the ld. A.O. had stated in the

assessment order that Rs.5.13 crores was ‘unexplained investment’ out of Rs.35.83 crores

and that the balance Rs.30.70 crores was held by the assessee and paid to Shri Deepak

Shah who was one of the partner of M/s. Shark Realtor. The assessee contended that the

reopening was on the basis of one ground and addition was made by the A.O. on a

different issue. The assessee in addition to this stated that the A.O. did not have any

incriminating material to reopen the assessment year which falls under the unabated

assessment year. It was also contended that except payment of Rs.1 crores by the assessee

towards proposed acquisition of development right from M/s. Sharp Realtors for a minor

portion of Alkapuri land, there was no other material on record to justify the action of the

ld.A.O. The assessee relied on the decision of the Hon'ble Apex Court in the case of ITO

vs. Lakmani Mewal Das [1976] 103 ITR 437 (SC). The ld. A.O. after considering the

assessee’s submission made the impugned addition/disallowance.

the seized paper has accepted the transaction of Rs.1 crore dated 24.09.2007 which was

related to payment made to M/s. Sharp Realtors pertaining to Alkapuri land. The ld.

CIT(A) further held that the seized paper discloses the name of the assessee and his

brother along with the amounts and dates specified on various occasions. The ld. CIT(A)

6 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil further held that the assessee’s contention was that the ld. A.O. has wrongly specified that

the assessee has not filed his return of income during the impugned year which could be

because the assessee must have filed his return of income mainly with the ld. A.O. who

did not have the jurisdiction and, hence, the same could not be located on the AST

module of ITD system. The ld. CIT(A) further stated that the assessee has not contended

that the cash transaction found in the seized papers are already declared in the original

ITR filed by the assessee. There was no scrutiny assessment done in the assessee’s case

for A.Y. 2008-09 for which the only requirement to initiate the proceeding u/s. 148 of the

Act was reason to believe that the income has escaped assessment based on the prima

facie material. The ld. CIT(A) relied on the decision of the Hon'ble Apex Court in the

case of Asst. CIT vs. Rajesh Zhaveri Stock Brokers [2007] 291 ITR 500 (SC), Central

Provinces Manganese Ore Co. Ltd. vs. ITO [1991] 191 ITR 662, Raymond Woollen Mills

Ltd. vs. ITO [1999] 236 ITR 34 (SC) along with various other decisions which has held

that for the purpose of reopening the assessment, the A.O. merely has to have prima facie

material for reason to believe that income has escaped assessment nor to confer

jurisdiction for reopening. It was further held that sufficiency or correctness of the

material is irrelevant at the stage of reopening. The ld. CIT(A) distinguished the decisions

relied upon by the assessee in the case of Hon’ble Gujarat High Court in the case of

Mumtaz Haji Mohd. Memon (supra) and Lakmani Mewal Das (supra). The ld. CIT(A)

upheld the order of the ld. A.O. in reopening the assessment. The assessee has challenged

the grounds of reopening before us.

7 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil 12. The ld. AR for the assessee contended that the ld. A.O. had reopened the

assessment on the wrong reasons that the assessee has not filed his return of income for

A.Y. 2008-09 which was factually incorrect. The ld. AR further stated that the ld. A.O.

has recorded the reasons that the assessee has received a sum of Rs.35.83 crores towards

acquiring Alkapuri land which was also factually incorrect as the said land was acquired

by M/s. Sharp Realtors and not by the assessee. The ld. AR also stated that the reasons

recorded states that the assessee has received amount in cash towards the said amount

whereas the addition of Rs.5.13 crores was made by the ld. A.O. as unexplained

investment and that the balance Rs.30.70 crores was said to have been collected by the

assessee from various parties and paid to M/s. Deepak Shah who was the partner of the

M/s. Shark Realtors. The ld. AR stated that the addition of reopening was done for one

reason and addition was made on a different ground. The ld. AR relied on the decision of

the Hon'ble Supreme Court in the case of Mumtaz Haji Mohd. Memon (supra) and

Lakmani Mewal Das (supra).

contended that the reopening in the case of the assessee was rightly made by the ld. A.O.

for the reason that the seized material during the search proceeding contained the details

of payments pertaining to Alkapuri and along with the name of the assessee and his

brother Shri Rajiv Y Patel. The ld. DR further stated that the assessee has also admitted

part of the transaction mentioned in the seized material pertaining to Rs.1 crore which

was the transaction with regard to Alkapuri land. The ld. DR thus stated that the ld. A.O.

has reopened based on the tangible material related to the transaction made by the

8 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil assessee related to Alkapuri land. The ld. DR relied on the order of the ld. CIT(A) which

has extensively dealt with the contention of the assessee.

record. It is evident that there was no scrutiny assessment made u/s. 143(3) of the Act in

the assessee’s case during the impugned year and based on the information received from

Investigation Wing that the assessee has received cash in respect of Alkapuri land based

on page nos. 1 & 2 of Annexure A-2 of bundle no. 1 seized from the residents of Shri

Rajiv Patel during the search proceedings carried out in the case of Ameya Group of

Virar dated 31.07.2014. It is observed that page no. 1 of the seized material contained

date and amount in abbreviated form on various occasions reflecting a cash receipt

aggregating to Rs.273.50 lacs and cheque receipt of Rs.140.00 lacs. It also reflects the

cheque received from Shri Sanjiv Patel amounting to Rs.100.00 lacs where the total

payment received was Rs.513.50 lacs. Page no. 2 of the seized material shows receipt of

Rs.1670.00 lacs and payments of Rs.1670.00 lacs and receipt of Rs.1400.00 lacs and

payment of Rs.1400.00 lacs. The reason specified by the ld. A.O. is that the assessee has

not filed his return of income as per ASD module of ITD system and that there was

failure on the part of the assessee to disclose fully and truly all material facts pertaining to

Rs.3583.50 lacs which has escaped assessment.

carried out by the assessee relating to the Alkapuri Land which the assessee has admitted

to the extent of Rs.100 lacs by way of cheque payment dated 24.09.2007. The assessee

has further contended that only a small portion of development rights in Alkapuri land

9 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil was to be acquired by the assessee from M/s. Sharp Realtors was not supported by any

documentary evidences. Presumably it is seen that the assessee has dealt with Alkapuri

land for which payments were received and made both in cash as well as in cheque. The

provision of section 147 of the Act for reassessment stipulates a condition that the ld.

A.O. should have reason to believe that income has escaped assessment and the above

mentioned facts are suffice for the purpose of invoking the provision of section 147 of the

Act in the said case. The assessee’s contention that the addition was made on one ground

whereas the reason for reopening was on another ground does not hold good in the

present case where the A.O. is not bound to conclusively determine as to why the

reopening was to be made. Mere ‘reason to believe’ that income has escaped assessment

based on some tangible material is suffice to reopen the assessment which in this case

was the seized material which showed cash and cheque payment along with the name of

the assessee and the dates on various occasions where payment was made. The assessee

has also not completely denied the transaction that M/s. Sharp Realtors pertaining to

Alkapuri land. Though in the remand proceeding, M/s. Sharp Realtors have admitted to

the said transaction but has stated that due to various reasons the sale of development

rights to the assessee did not materialize and that the amount received as advances were

substantially refunded by account payee cheques. These facts go about to state that the

assessee had transacted for sale of development rights with M/s. Sharp Realtors thereby

corroborating the seized material found during the search proceeding.

reopening that the assessee has not filed his return of income ipsofacto cannot be a reason

10 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil to hold the reassessment proceeding as invalid unless the assessee proves that he had

declared the payments found in the seized material in his original ITR. Neither before the

lower authorities nor before us, the assessee has failed to establish the said fact.

rightly invoked the provision of section 147 of the Act and there is no merits in the

submission of the assessee. We, therefore, dismiss ground nos. 1 & 2 raised by the

assessee.

appeal pertains to the addition of Rs.2,73,50,000/- being the unexplained investment

made by the assessee for acquiring development rights for Alkapuri Land. It is observed

that the assessee has admitted that Rs.100 lacs reflecting in the seized paper pertain to the

transaction made by the assessee with regard to Alkapuri Land and paid to Shri Deepak

Shah partner of Shark Realtors. The assessee further contended that Rs.40 lacs reflected

in the seized paper pertains to the amount paid to Raj Enterprises on 18.08.2007 appeared

as loan by journal entry in the books of the assessee. The assessee has admitted these two

amounts which were for acquiring development rights in Alkapuri land. The ld. A.O. held

that since the assessee has accepted the above mentioned transaction as per the seized

paper then the other entries amounting to Rs.273.50 lacs and Rs.100 lacs which was a

cheque received from Shri Sanjiv Patel also pertains to acquiring development rights in

Alkapuri land thereby making an addition of Rs.5,13,50,000/- as unexplained investment.

The ld. CIT(A), on the other hand, had partly allowed this ground of appeal raised by the

assessee and restricted the addition to the extent of Rs.2,73,50,000/- on the ground that

11 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil the assessee has failed to explain the source of the cash payment which constitute the

unexplained investment made by the assessee for acquiring development rights of

Alkapuri land.

upholding the addition made by the A.O. to the extent of Rs.2,73,50,000/-.

lacs and Rs.40 lacs and has denied the other transactions in the seized paper nos. 1 & 2 of

bundle no. 1 to be that of the assessee. The ld. AR stated that the Alkapuri land was

acquired by M/s. Sharp Realtors not by the assessee and the assessee has merely agreed

to acquire development rights from M/s. Sharp Realtors only to a small portion of the

Alkapuri land. The ld. AR further stated that the seized paper not only contain the

assessee’s name but also various other persons names were also mentioned which

establishes that the entire amount does not belong to the assessee. The ld. AR contended

that the assessee’s name does not find place in the list of on-money receipts received by

M/s. Sharp Realtors and stated that the assessee has not made any payment in cash to

M/s. Sharp Realtors.

assessee himself has admitted part of the transaction reflected in the seized paper, it is

evident that there have been transactions made by the assessee by cash and cheque for the

purpose of acquiring the development right of Alkapuri land. The ld. DR further stated

that the assessee has not discharged his onus to prove that the remaining amount does not

12 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil pertain to the assessee but to third parties. The ld. DR also stated that the assessee has not

given any documentary evidence to show that the other transaction does not relate to the

assessee. The ld. DR relied on the order of the ld. A.O.

record. It is observed that the seized documents from the residents of the assessee

evidences transaction made by the assessee with regard to the Alkapuri land. Though the

assessee has admitted part of the seized document to be genuine remaining part stands

denied by the assessee. The ld. A.O. interpreted 273.50 being the net amount on the right

hand portion of the seized paper to be Rs.273.50 lacs and Rs.140/- and Rs.100/- was

interpreted as Rs.140 lacs and Rs.100 lacs being the cheque transactions pertaining to

Alkapuri land. This fact has been corroborated by the confirmation given by M/s. Sharp

Realtors to the extent of Rs.2,40,00,000/- out of Rs.513.50 lacs. The ld. A.O. proceeded

to make an addition on the entire amount of Rs.513.50 lacs reflected in the seized paper.

The ld. CIT(A) restricted the same to Rs.273,50,000/- for the reason that the assessee has

explained the source to the extent of Rs.2,40,00,000/- which was made through banking

channel. Both the lower authorities have failed to accept the assessee’s contention that

various other names were mentioned in the upper half of the seized paper was not related

to the assessee for the reason that the onus is on the assessee to prove the contents of the

seized paper where he has partly accepted the figures mentioned as cheque transaction.

The ld. CIT(A) held that the assessee cannot pick and choose the entries in the seized

paper by accepting the cheque payments and denied the cash payments.

13 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil 23. From the above observation, it is evident that the addition of Rs.2,73,50,000/-

alleged to be the cash paid to M/s. Sharp Realtors by the assessee as per the seized paper

records pertains to the development rights of Alkapuri land which was to be acquired by

the assessee from M/s. Sharp Realtors. The lower authorities have not brought anything

on record to show that the said project was materialized. On the contrary, the assessee

had contended that neither the assessee nor his brother has acquired the development

rights of Alkapuri land from M/s. Sharp Realtors, for which no on-money payments were

made to M/s. Sharp Realtors. It is also observed that the remand report submitted by the

ld. A.O. has furnished the details of on-money receipts received by M/s. Sharp Realtors

which has been confirmed by the ld. CIT(A)-11, Pune vide order dated 31.03.2017 in the

case of M/s. Sharp Realtors for the A.Y. 2008-09 where the assessee’s name is not in the

list of alleged on-money depositors. It is also to be noticed that the seized paper contains

names of various third parties whose involvement in the said transaction has not been

established by the ld. A.O.

have failed to establish that the assessee has made the impugned on-money payment to

M/s. Sharp Realtors. In the absence of any corroborating evidence, we deem it fit to

direct the ld. A.O. to delete the impugned addition towards the unexplained investment

made by the assessee. Ground no. 3 raised by the assessee is allowed and ground nos. (i)

& (ii) raised by the Revenue are hereby dismissed.

improvement being expenditure claimed by the assessee in working of LTCG arising on

14 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil sale of the land at Virar. It is observed that the assessee has claimed the development

expenses towards land filling, labeling, compound wall and other related expenditure for

which the assessee had claimed total expenditure of Rs.75,25,060/-. The assessee had

contended that the said payments were made through banking channels and copies of

ledger extracts have been furnished by the assessee. The ld. A.O. had denied the said

claim on the ground that the assessee had failed to furnish the copies of invoice or

confirmation from the concerned persons to substantiate that the said amount was

expended for development of land paid to three persons namely M/s. Padmavati Realtors,

M/s. Y K Real Estate and Shri Manish Patil.

expenditure and confirmed Rs.37,62,530/- on the ground that the conveyance deed dated

14.08.2007 for land admeasuring 2993.934 sq. mtrs. which was sold to the Immaculata

Society for a consideration of Rs.1,60,00,000/- which was reserved for a school. As per

the said conveyance deed, the assessee was bound to undertake and completed the

infrastructure work.

challenging the order of the ld. CIT(A).

dated 14.08.2007 for the sale of land to Immaculata Society which was not before the ld.

A.O. but furnished before the ld.CIT(A). This was considered by the first appellate

authority where the recitals of the said conveyance deed has specified in clause (4) that

15 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil the assessee had to carry out the infrastructure work such as land filling, compound wall

and other allied work to be completed by the assessee. The said expenses incurred by the

assessee were made through banking channels which details were before the lower

authorities. The ld. A.O. has failed to make any further enquiry from the parties who have

received the payment for carrying out the said work. The ld. CIT(A) has also not justified

in making an adhoc disallowance of 50% towards the expenditure claimed by the

assessee.

discharged the primary onus by giving the details of the payments made by the assessee

to the concerned parties which nevertheless was through banking channel. In the absence

of any justification in upholding the impugned addition/disallowance, we hereby allow

ground no. 4 raised by the assessee is allowed and ground no. (iii) raised by the Revenue

is hereby dismissed.

are general in nature and requires no further adjudication.

by the Revenue is dismissed.

Order pronounced in the open court on 15.02.2024.

Sd/- Sd/-

(Gagan Goyal) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 15.02.2024 Roshani, Sr. PS

16 ITA Nos. 549 & 610/Mum/2022 (A.Y.2008-09) Ajiv Yashwant Patil Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai