VARDHAMAN J PATEL,MUMBAI vs. ACIT 17(3), MUMBAI

These appeals were earlier dismissed exparte by way of orders of even number dated 10.05.2016, for reason of non prosecution by the assessee on account of not being present or represented on various dates on which these appeals were fixed in response to notices issued. Subsequently, the miscellaneous applications in MA Nos. 403 to 406/ Mum/2016 were filed by the assessee seeking recall of the exparte order dated 10.05.2016, for various reasons mentioned therein, inter alia, (i) that he was away at Rajasthan and not at the given address at Mumbai and therefore the notices issued for hearings could not be received by him or be served on him and (ii) that the Coordinate Bench of this Tribunal in the assessee’s appeals on quantum issues vide order in ITA 2 Shri Vardharam J. Patel Nos. 8077 to 8080/Mum/2010 dated 24.04.2015 for these assessment years, i.e. 2001-02 to 2004-05 had set aside the issues on which the levy of penalty under section 271(1)(c) of the Act was based in the impugned orders and restored the same to the file of the Assessing Officer (AO) for fresh examination and adjudication. In this factual matrix of the case, the Bench in the interest of equity and justice had recalled its orders of even number dated 10.05.2016 and took up these four appeals for hearing afresh. 3.1 We have heard the rival contentions and perused and carefully considered the material on record. In these appeals before us, for assessment years 2001-02 to 2004-05, the assessee has raised similar grounds challenging the action of the learned CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. At the outset of the hearing, the learned A.R. of the assessee submitted that the aforesaid penalty levied under section 271(1)(c) of the Act by the AO and upheld by the learned CIT(A) for these assessment years are unsustainable, since the basis for its imposition; i.e. the quantum additions made by the authorities below, have been set aside and restored to the file of the AO for fresh examination and adjudication by the decision of the Coordinate Bench of this Tribunal in assessee’s own case in ITA Nos. 8077 to 8080/Mum/2010 vide order dated 24.04.2015 (copy of which has been placed on record). 3.2 We have carefully perused the aforesaid order of the Coordinate Bench (supra) and find that the assessee’s appeals for assessment years 2001-02 to 2004-05 on quantum additions, that form the basis for levy of penalty, have been set aside and restored to the file of the AO for re- examination and fresh adjudication, holding as under at paras 7 to 11 thereof : - “7. Having heard the rival submissions, we have carefully perused the orders of the authorities below and the documentary evidences referred to during the course of the appellate proceedings before us. Claim of agricultural income – There is no dispute that the assessee was having substantial holding of agricultural land. The ownership of 3 Shri Vardharam J. Patel agricultural land has not been denied by the Revenue authorities. Considering the holding of the agricultural land by the assessee, in our considered opinion, the agricultural income shown by the assessee in these four years under appeal appear to be very reasonable. We further find that the AO has referred the matter to the District Collector to know the agricultural income in the case of one Shri Armsingh whose village is in the immediate vicinity with that of the assessee. We find the District Collector has given a report of agricultural income in the case of Armsingh as per the records of the Revenue authorities for last 10 years as per the revenue records. We also find that such report has been called by the same AO who has assessed assessee’s income. We fail to understand why the same procedure was not adopted by the AO in the case of the assessee. Considering the undeniable fact that the assessee was having substantial agricultural holding, in our considered opinion, the AO should have verified the agricultural income from the Revenue records of the District Collector as he has done in the case of other persons living in or around the same area. Therefore, in the interest of justice and fair play, we restore this issue to the file of the AO. The AO is directed to verify the agricultural income as per the Revenue records of the District Collector by calling information or sending I.T. Inspector as the case may be and after giving a reasonable opportunity of being heard to the assessee, decide the issue afresh. Grievance relating to the admissibility of agricultural income is allowed for statistical purpose.

The only ground remains is that for A.Y. 2002-03 which is in respect of the addition of Rs. 6 lakhs.

At the very outset, it has to be understood clearly that the entry which was found credited in the books of account is of Rs. 5 lakhs and not 6 lakhs as taken by the AO. 9.1. Page-12 of the Paper Book 1A is the copy of the order u/s. 131(3) which gives details of books impounded during the course of assessment proceedings of A.Y. 2002-03. The impounded books contain cash book and ledger accounts for the period 1.4.2001 to 31.3.2002. Page-165 of the paper book 1B is the cash book entry as on 20.11.2001 which shows credit of Rs. 5 lakhs on account of sale of agricultural land. Page-167 of the same Paper book contains cash book entries of 5.12.2001, the said entries show credit of Rs. 1,50,000/- from the books of money lending business. Page-168 shows cash book entries of 6.12.2001 which show credit of Rs. 9 lakhs on account of Customs department. At page-8 of the Paper Book 1A, we find affidavit of Shri Gajaji Nanji Choudhary wherein he has categorically stated that he has agreed to purchase agricultural land from the assessee for a consideration of Rs. 6 lakhs for which he has paid Rs. 5 lakhs in front of two witnesses and for some reason he has cancelled the said deal. We find that this affidavit was filed before the Ld. CIT(A). A remand report was called by the Ld. CIT(A). There is a reference by the AO in his remand proceedings in respect of this affidavit. The remand report is at pages 292 to 295 of the Paper Book-1C. The reasons given for rejecting the claim of the assessee in 4 Shri Vardharam J. Patel the remand proceedings is that the assessee could not verify the contents of the affidavit as the assessee failed to produce the witnesses and the person making the affidavits. At page-214 of the Paper Book-1B, we find an affidavit of Shri Laxmanaram J. Choudhary who stated that he was a witness to the land deal between the assessee and Shri Gajaji Choudhary. In this affidavit, we further find that the witness has clearly stated that he has appeared before the ACIT 17(3) on 5.10.2009.

We do not find anything which could suggest the admissibility or otherwise of this affidavit of the witness since the AO has rejected the claim of the assessee in the remand proceedings holding that the witness was not produced before him. This affidavit of the witness is in contradiction to the claim of the AO. However, in the interest of justice and fair play, we restore this issue to the file of the AO. The assessee is directed to produce the witnesses and also the purchaser of the impugned land before the AO for verification. The AO is directed to verify and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. Ground relating to the addition of Rs. 6 lakhs on account of credit entries found in the books of account is allowed for statistical purpose.

In the result, the appeals filed by the assessee are allowed for statistical purpose.” 3.3 In view of the decision of the Coordinate Bench setting aside the issues in the quantum appeals for assessment years 2001-02 to 2004- 05 for fresh examination and de novo adjudication (supra), the quantum issues on the basis of which penalty under section 271(1)(c) of the Act for these years was levied do not now survive for consideration and, therefore, the said orders levying penalty under section 271(1)(c) of the Act being unsustainable, we cancel the same. Consequently, we allow the assessee’s appeals for assessment years 2001-02 to 2004-05 seeking the deletion of penalty levied under section 271(1)(c) of the Act.