GHANSHYAM HARJIVANDAS PATADIA,MUMBAI vs. ITO WD 25(3)(1), MUMBAI

This appeal is filed by the assessee against the order of the Ld. CIT(A)-35, Mumbai dated 14.2.2014 pertaining to assessment year 2005-06 arising out of the order passed u/s. 144 of the Act by the Assessing Officer.

Brief facts are that in this case, information was received by the revenue department from Hon'ble Bombay High Court and it was directed therein to conduct necessary enquiries. It was pointed out by the Hon'ble High Court in Notice of Motion NO.3778 of 2007 in suit No.2763 of 2007 that the plaintiff Shri Prashant Navnitbhai Parekh, etc. had paid Rs.50 lakhs in cash towards sale of some property to defendant, Shri Ghanshyam Harjivandas Patadia, on the insistence of Shri Ghanshyam Harjivandas Patadia that his accounts were frozen by the I.T. Department. As the defendant held power of attorney pertaining to the property under consideration and due to some dispute and revoking of power of attorney, the property was not transferred to the plaintiff, whereas it was claimed by them to have made payment of Rs.50 lakhs in cash out of total Rs.52.5 lakhs consideration. It was observed in the assessment order that the subject matter of assessment order is only for verification as per the directions of the High Court, regarding how the defendant has accepted such huge amount in cash. Relevant para of the High Court order is reproduced.

In fact, the matter requires to be investigated by the Income Tax Department against plaintiffs as to how cash amount of Rs.50.00 lakhs was available with the plaintiffs, which they claim to have parted to defendant no.I that too in spite of knowledge that the bank account of defendant no.I was already attached by the Income Tax Department. The Income Tax Department will also have to pursue appropriate action against defendant no.I who has accepted such huge amount in cash/ which is the case made out of the plaintiffs on affidavit. A copy of this order be forwarded to the Commissioner of Income Tax (Vigi1ance, Aayakar Bhavan, Mumbai to consider all these aspects and take the matter to its logical and against plaintiffs and defendant no.1, as may be advised. The Commissioner of Income Tax to appraise this Court about the course of action adopted by him in the fact situation of this case. That report be submitted within six weeks from today. Copy of this order be also forwarded to the Standing Counsel for the Income Tax Department as also the Additional Solicitor General of India (Office at Mumbai) for necessary action. "

A letter was issued to the Assessing Officer by the Chief Commissioner of Income-tax, Mumbai dated 17.2.2010 forwarding the above order of High Court and directed to conduct necessary verification in respect of Shri Ghanshyam H Patadia. To first verify the veracity of the claim of the plaintiffs the assessee was issued notice u/s.133(6) dated 18.3.2010 with permission of the Commissioner of Income-Tax- 25, Mumbai to furnish following details.

However the assessee failed to file any reply before the prescribed date and hence the case was reopened by issue of notice u/s.148 dated 29.3.2010 recording the following reasons. “The Hon’ble High Court, Bombay vide order dated 1.11.2007 in the matter Suit No.2763 of 2007 in the case of Prashant Navnitbhai Parekh and another (Plaintiff) Vs. Ghanshyambhai Harjivandas Patadia and others (Defendants) has directed to investigate and pursue appropriate action against respondent; Shri Ghanshyambhai H. Patadia who has accepted cash of Rs.50 lakhs from plaintiff, Prashant Navnitbhai Parekh (AGPPP6105N) and Rajesh Mahashankar Joshi (AIVPJ7180M) on executing an agreement dated 21.3.2005 in relation to property admeasuring about 25000 sq.mtrs. for which Ghanshyambhai h. Patadia had Power of Attorney.

Later, the assessee filed only a letter in response to 133(6) dated 18.3.2010 in which he stated as follows: “As I received above notice saying that I entered into sale transaction of Rs.50 Lac on 21.03.2005 and accept the cash, in regards I clarify that I entered into transaction but party make fraud with me and money is not paid. In this reference I already file police complaint against Mr.Prashant Navneet Perekh, Raju Faddu and others on 13th February, 2006. For your ready reference and clarification I attached herewith photocopy of FIR (First Information Report).

During the assessment proceedings, the Assessing Officer further issued notice u/s. 142(1) dated 3.8.2001 to substantiate the allegation. The assessee failed to respond the notice. The assessee also failed to respond the notice u/s. 148 and no return was filed since information and material was not coming forth from the assessee. The Assessing Officer made best judgement assessment u/s. 144 r.w. Sec. 147 of the Act and brought to tax the alleged receipt of Rs. 50 lakhs in cash in the hands of the assessee.

On appeal, the Ld. CIT(A) sustained the order of the Assessing Officer observing that the assessee has entered into an agreement for sale of land on 21.3.2005 with the buyer. Later on deed of cancellation was entered into on 10.2.206 with the buyer. Both assessee and the buyer disputed with regard to the agreement for selling and buying land. The Ld. CIT(A) was also of the view that since the deed of cancellation signed by both the parties mentioned that the buyer had enjoyed physical possession of the property from the date of agreement till the date of deed of cancellation, he was of the view that the assessee might have received the payment as there is a transfer right to cancellation therefore he sustained the contention of the Assessing Officer that there is a transfer and the assessee has received the payment.

It was further submitted during the remand proceedings before the Assessing Officer as under: a) During the year under assessment assessee has made a sale deed for plot of land dated 21st March 2005 for a sum of Rs. 52, 50, 000/- with Mr. Prashant Naveet Parekh. b) As the purchasing party i.e. ( Mr. Prashant Naveet Parekhhas cheated assessee by not paying the above sum, so deed of Cancellation has been made dated 10th February 2006. c) FIR has been lodged against Mr. Prashant Naveet Parekh dated 12th February 2006 FIR No. 55/06, Year 2006, Kandivali Police station (Mumbai). d) The above plot land has been compulsorily acquired by the Government of India with New Survey No. 378 under Salt Section. e) The proposed buyer has also filed a suit against the seller for the refund of the earnest money of Rs.50,00,000/- together with the interest at the rate of 18% per annum as specified in the petition filed by the buyer (para. d page no 3) f) The case is still pending for in Bombay High Court for its final Order.

The Ld. Counsel for the assessee submits that none of the submissions were considered by the Ld. CIT(A) or the Assessing Officer, the assessment was made ex-parte. He submits that since the matter is still pending with the Hon’ble High Court, the issue may be remanded to the Assessing Officer for fresh examination and in the light of the decision of the Hon’ble High Court.

The Ld. Departmental Representative vehemently supports the orders of the authorities below.

We have heard the rival submissions and perused the orders of the authorities below. This assessment was made ex-parte by the Assessing Officer u/s. 144 as best judgement assessment as the assessee could not file the requisite details called for. The assessee submitted before the Assessing Officer as under: “Out of the total consideration of Rs.52,50,000/- amount equal to Rs.50,00,000/- received by the assessee is considered as 'earnest money' received.

None of the above submissions have been considered/examined by the authorities below in proper perspective. We also noticed that the Hon’ble High Court observed that it is required to make investigation by the department against the plaintiffs as to how cash amount of Rs. 50 lakhs was available with them which they claimed to have paid to the assessee. The department has not carried out any enquiry with the plaintiffs whether any sum was available with them which was said to have been paid to assessee. Therefore, in the absence of any such enquiry and since the department did not find any cash having been possessed with the plaintiffs, it cannot be presumed that the same was paid to the assessee. Therefore taking the totality of facts and circumstances into consideration we are of the considered view that this issue has to be restored to the file of the Assessing Officer for proper and thorough examination and the assessee shall co-operate with the proceedings. Thus, we restore the issue to the file of the Assessing Officer with a direction to examine the issue thoroughly and pass appropriate orders in accordance with law after giving adequate opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purpose.