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Facts
During a search operation on a real estate group, the assessee, a partner in M/s Titanium Buildcon LLP, was found to have unexplained expenses. The Assessing Officer made a protective addition of Rs. 1,84,99,937/- to the assessee's income under Section 69C, as the substantive addition was made in the firm's hands. The CIT(A) deleted this protective addition, stating that the substantive addition in the firm's case had been deleted.
Held
The Tribunal noted that the CIT(A) deleted the protective addition because the substantive addition in the firm's hands was also deleted. However, the Tribunal decided to set aside the matter and restore it to the AO to verify if the amount of Rs. 1,84,99,937/- was indeed added in the hands of Titanium Buildcon LLP and to adjudicate the matter according to law after giving the assessee an opportunity to be heard.
Key Issues
The key legal issue is whether the protective addition made in the assessee's hands for unexplained expenses can survive when the substantive addition in the firm's hands has been deleted by the CIT(A).
Sections Cited
Section 69C, Section 115BBE, Section 147, Section 148, Section 143(2), Section 142(1), Section 151, Section 271AAC, Section 234A, Section 234B, Section 234C
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & DR. DINESH MOHAN SINHA
आदेश / ORDER Per, Dr. Dinesh Mohan Sinha, JM: Captioned two appeals filed by the department, pertaining to Assessment Years (AYs) 2018-19 & 2020-21, are directed against the separate orders passed by the Learned Commissioner of Income Tax(Appeals), in short “the Ld. CIT(A)”], dated 05.08.2024, which in turn arise out of separate assessment orders passed by Assessing Officer (in short ‘the AO”) u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), vide order dated 11.04.2023.
Grounds of appeal
raised by the department, are as follows:
1. 1. 1. 1. 1. 1. 1. On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the protective addition of Rs.1,84,99,937/- made on account of unaccounted expenses u/s. 69C r.w.s. 115BBE of the Income Tax Act.
& 744/RJT/2024 Dff DCIT v. Jagjivan R. Sakhiya 2. The revenue craves leave to add, alter, amend and or substitute any or all of the grounds of appeal. ”
Brief facts of the case that the assessee has filed his return of income for the year under consideration on 10-10-2018 declaring total income at Rs. 54,71,210/- which consisted of Salary of Rs. 21,00,000/-, Long Term Capital Gain of Rs. 34,95,274/-, Other income of Rs. 66,940/- and deduction as per Chapter VI-A of Rs. 1,91,000/-. On 27-09-2021, the income of the assessee has been assessed at Rs. 7,29,10,595/-. A Search, Seizure and Survey action was carried out by the office of DDIT (Inv.), Unit-1, Rajkot in the case of leading real estate builders of Rajkot and their key associates on 24.08.2021. Four different groups were covered in the operation including R K Group (Sonwani Family). All the four groups are in the business of real estate and are mainly concentrated in and around Rajkot. A total of forty-three (43) premises were covered, out of which 32 premises were covered under section 132 of the Income Tax Act 1961 and the other 11 premises were covered u/s 133A of the Income Tax Act 1961. The premises covered were a mix of residential and business premises of their related entities, their family members, key associates and employees. Hence, looking to the overall facts of the case, the sources of shortage of the funds (being excess expenses incurred) to the extent of Rs. 10,47,22,650/- remains unexplained in the hands of the assessee-firm. Accordingly, Rs. 10,47,22,650/- being unexplained sources of expenses is being treated as deemed income in the hands of the assessee firm for the year under consideration (Substantively) and in the hands of the respective partners in proportion of their unexplained shares (Protectively) i.e., Shri Harish Lakhani (Rs. 29,72,997/-); Shri Darshan Lakhani (Rs. 2,77,49,906/-); Shri Atul Ganatra (Rs. 5,54,99,811/-); Shri Jagjivan Sakhia (Rs. 1,84,99,937/-) for the year under consideration within the meaning of section 69C r. w. s. 115BBE of the Act.
Page 2 of Dff DCIT v. Jagjivan R. Sakhiya 4. Accordingly, in view of the above remarks from the assessment order of the firm M/s Titanium Buildcon LLP protective addition of (Rs. 3,59,44,575/- + Rs. 3,14,94,810/- = Rs. 6,74,39,385/-) in the return of income and the total income was assessed at Rs. 9,14,10,532/- is made in the hands of the assessee within the meaning of section 69C r.w.s. 115BBE of the Act.
The transactions pertaining to the assessee have been gathered from the seized material during the search operation, a notice under section 148 of the Act has been issued on 25-08-2022 to the assessee after following due procedure as per the Act and with prior approval of the specified authority as per section 151 of the Act. In response to the notice issued under section 148, the assessee has filed an Income tax return on 26-09-2022. Subsequently, a notice u/s 143(2) of the Income-tax Act has been issued and served on 18-12-2022 on the e-filing portal of the Assessee. Subsequently, notices u/s 142(1) have been issued from time to time seeking primary as well as further details from the assessee for carrying out the assessment. The objections raised by the assessee against initiation of proceedings u/s 148 of the Act have been disposed of and the images of original seized material pertaining to the assessee have been supplied and discussed in the notices issued u/s 142(1) of the Act from time to time.
That the assessee filed an appeal against the order of the AO, before the Ld.CIT(A). that the Ld.CIT(A) partly allowed the appeal of the assessee, observing as follows: “7.14 In this regard, it is relevant to mention that the undersigned has adjudicated the appeal in the case of Titanium Buildcon LLP for the said land and deleted the addition made on account of unexplained expenses u/s.69C of the Act vide appeal no. CIT(A), Ahmedabad-11/11149/2017-18 dated 26/06/2024. 7.15 Since, the undersigned has deleted the substantive addition made by the AO on account of unaccounted cash payment for purchase of land for Rs. 10,47,22,650/- in the hands of Titanium Buildcon LLP, on merit, therefore, the protective addition made for the share of the appellant does not survive.
Page 3 of Dff DCIT v. Jagjivan R. Sakhiya 7.16 In view of elaborate discussion, the addition made by the AO on account of unaccounted cash payment for purchase of land for Rs.1,84,99,937/- is deleted. Thus, the ground of appeal no. 6 is allowed.
8. The ground of appeal no. 7 is against initiation of penalty proceedings u/s. 271AAC of the I.T. Act being premature is not entertained and is dismissed.
9. The ground of appeal no. 8 is against the AO charging interest u/s.234A, 234B & 234C of the Act. Since charging interest is mandatory in nature, this ground of appeal is dismissed.
10. In the result, this appeal is partly allowed.”
That the department filed an appeal against the impugned order dated 05.008.2024 before this Tribunal.
During the course of hearing, the Ld.DR for the revenue submitted that the addition on account of unaccounted expenses was deleted by first appellate authority amounting to Rs. 1,84,99,937/- .
On the other hand, the Ld.AR of the assesse relied on the order of the Ld.CIT(A).
We have heard both the parties and perused the material available on record and perused the impugned order dated 05.08.2024. We note that AO made an addition u/s. 69C of the Act on account of the expenses being shortage of fund (excess expenditure) in the hand of the assesse which remain unexplained on proposition of their unexplained share i.e., Rs. 1,84,99,932/- for the assesse. However the Ld. CIT(A) has deleted the addition on the ground that addition on protective basis since substantial income taken into consideration in the hand of that Titanium Buildcon LLP since expenses related to land and the land belong to Titanium Builcon LLP. We are of the view that matter is to be set aside and proceeding restore before the AO with the direction to examine that whether this amount of Rs. 1,84,99,937//- has been added in the hands of the Titanium Buildcon LLP, and adjudicate the matter in accordance with law, after giving due opportunity of being heard to the assessee.
In the result, both the appeals of the revenue, are dismissed.
Order is pronounced in the open court on 09/03/2026.