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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR
PER MAKARAND V. MAHADEOKAR, AM: These four appeals by two different Assessees are directed against the separate revisionary orders passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad–3 (hereinafter referred to as “Ld.PCIT”), for the Assessment Years (AYs) 2015-16 & 2017-18 arising from the reassessment orders passed by the Assessing Officer (hereinafter referred to as “AO”) u/s. 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Since the facts are identical they are decided together with this common order for the sake of convenience.
Facts of the case: 2. The assessees are individual(s), who filed their returns of income and the case(s) for A.Y. 2015-16 and A.Y. 2017-18 were reopened and the reassessments were completed by accepting the returned income as detailed below:
Sr Particulars A.Y. 2015-16 A.Y. 2017- A.Y. 2015- A.Y. 2017- 18 16 18 SAURABH SUMANT KALPANA SAURABH PATWA PATWA 1 Date of filing 11/08/2015 17/07/2017 11/08/2015 06/07/2017 Return of Income 2 Total Income Rs. Rs. Rs. Rs. Declared 5,67,230/- 10,83,400/- 7,68,020/- 8,45,520/- 3 Original 143(3) NA 143(3) NA Assessment Order Passed & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 under section of the Act
4 Date of the 30/10/2017 NA 31/08/2017 NA Order 5 Assessed Rs. NA Rs. NA Income 5,67,230/- 7,68,020/- 6 Date of Issue 31/03/2021 31/03/2021 31/03/2021 31/03/2021 of Notice U/s 148 7 Date of filing 09/04/2021 09/04/2021 27/04/2021 09/04/2021 of Return of Income in response to notice u/s 148 8 Income Rs. Rs. Rs. Rs. Declared in Rs.5,67,230/- 10,83,400/- 7,68,020/- 8,45,520/- return of income filed in response to Notice u/s 148 9 Date of 17/02/2022 17/02/2022 14/03/2022 14/03/2022 Order passed u/s 147 r.w.s. 144B of the Act 10 Income Rs. Rs. Rs. Rs. Reassessed Rs.5,67,230/- 10,83,400/- 7,68,020/- 8,45,520/- u/s 147 r.w.s. 144B of the Act 11 Date of 30/01/2024 30/01/2024 29/01/2024 31/01/2024 Order passed u/s 263 of the Act & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 2.1. The reason for re-opening the assessment u/s.148 of the Act, as stated in the order(s) of the Ld.PCIT, was the allegation of "on-money" payments made by the assessee for the purchase of Unit No.122 in the "Kalhaar Blues and Greens" (KBG) Project developed by Navratna Organizers and Developers Pvt. Ltd. (NODPL). This information was based on a report from the Investigation Wing which indicated that, during a search operation on NODPL, the builder admitted to receiving "on-money" in cash payments for the sale of villas. An excel file found during the search reportedly showed details of these cash payments, and the reopening was initiated on the basis of this seized evidence, implicating the assessee in making such a payment for the property purchased. The property was purchased jointly in the name of Saurabh Sumant Patwa, Kalpana Saurabh Patwa, Gopi Saurabh Patwa and Shimoli Vishal Shah from NODPL.
2.2. During the reassessment proceedings for the AY 2015-16, the assessees raised significant objections regarding the validity of the re-opening of the assessment. Despite repeated requests, the AO failed to provide the assessee with the actual copy of the reasons recorded for re-opening the assessment, which had been submitted to the Ld.Principal Commissioner of Income Tax for approval. The assessees denied making any payments beyond what was declared in the Sale Deed for the purchase of Unit No. 122 in the Kalhaar Blues and Greens project. While the AO alleged the possibility of undisclosed “on-money” payments, whereas the assessees maintained that the entire consideration as per the Sale Deed had been fully disclosed. & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 2.3. The assessees further contended that the investment in the property was scrutinized in the original assessment proceedings under section 143(3) of the Act for AY 2016-17, wherein the AO accepted the investment as declared. The assessee argued that documents found during a search operation did not directly mention the assessee’s name, nor did they establish any direct connection between the assessee and the third-party information. The assessee requested clarification on the names of the individuals against whom the search was conducted and the specific link between the assessee and the said search action. Additionally, the assessee sought clarity regarding the role of Shri Marutibhai Trivedi, whose name appeared in connection with backup data related to the Kalhaar Blues and Greens project, and whether Shri Trivedi was an employee or related to the person being searched. The assessee also stated that the housing unit was purchased by her parents, however, for the purpose of inheritance assessee’s name was added.
2.4. For AY 2017-18, the assessee similarly submitted various documents related to the purchase of property, contending that no cash payments were made and demanding copies of the data retrieved during the search of Murlidhar Trivedi's premises. The assessee compared the Jantri rate with the actual purchase price, asserting that the property was acquired at a rate higher than the government-determined value. The assessee provided complete details of the purchase, the total payments made, the source of funds, as well as relevant ledgers and bank statements.
2.5. After going through the submissions of the assessee, the AO passed the order u/s.147 r.w.s. 144B of the Act accepting the returned income. Later on, & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 the Ld.PCIT observed that the AO has not made any enquiry or conscious efforts to examine the facts reported by the Investigation Wing. Therefore, he issued the show cause notice to the assessee u/s.263 of the Act for both the assessment years.
2.6. In reply to the notices u/s.263 of the Act, the assessee objected to the notices and stated that the Ld.PCIT has not given any details of information received, its analysis and independent inquiry. The assessee also stated that during the reassessment proceedings the AO has already conducted the inquiry about the impugned issue and completed the reassessment. The assessee also argued that where two views are possible and one view is adopted by the AO, then existence of other possible view alone would not be sufficient to assume jurisdiction u/s.263 of the Act. Additionally, without prejudice to her contentions, the assessee submitted the details of deed of conveyance, details of payments made by way of purchase consideration, copy of bank account passbook and confirmation from the developer (NODPL) to bring on record that she was not party to any “on-money” payment consideration.
2.7. The Ld.PCIT set aside the orders of AO by passing order u/s.263 of the Act. While doing so, the Ld.PCIT rejected the contentions of the assessee stating that details noted in incriminating documents i.e. excel sheet had proper details of KBG units such as number of unit, selling price of land, construction cost, amount received were matching with the unit of the assessee and the NODPL, on the basis of seized documents, accepted the & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 receipt of “On Money” before the Settlement Commission and paid due taxes on it.
Aggrieved by the order(s) of the Ld.PCIT, the assessees are in appeal(s) before us with the following grounds of appeal:
Common Grounds of Appeal(s) in to 512/Ahd/2024 (For AYs 2015-16 & 2017-18) respectively.
1. In law and in the facts and circumstances of the Appellant's case, the impugned order u/s. 263 passed by the Ld. PCIT is bad in law and deserves to be quashed.
2. In law and in the facts and circumstances of the case, the Ld. PCIT has erred in holding that Assessment Order passed by the Assessing Officer was without proper verification and was, therefore, erroneous and prejudicial to the interest of Revenue. Such conclusions are contrary to the facts of the case. As such. Provisions of Section 263 are unjustifiably invoked.
3. In law and in the facts and circumstances of the Appellant's case, the order passed by the Ld. PCIT may please be held to be unjustified, unwarranted and may please be quashed.
4. The Appellant craves leave to add to, amend or to raise any further ground(s) of appeal, as the case may arise.
During the course of hearing before us, the Ld.Authorised Representatives (ARs) of the assessee submitted the copies of documents submitted to the AO and the Ld.PCIT and stated that the similar issue in case of co-owner Gopi Saurabh Patwa in and 776/Ahd/2024 dated 10/09/2024 was already decided. The facts are exactly same and relate to the same property. The AR also stated the assessee placed reliance on the same & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 decision of the Co-ordinate Bench. Per Contra, the Departmental Representative (DR) relied on the order(s) of the Ld.PCIT.
5.1. For the sake of clarity, we reproduce the relevant paras of the decision of Co-ordinate Bench in case of and 776/Ahd/2024 dated 10/09/2024: “5. During the course of hearing before us, the Ld.Authorised Representative (AR) of the assessee took us through the notices issued by the AO during the course of re- assessment proceedings and submissions made in response thereto. The Ld.AR argued that the purchase was legitimate and supported by a registered-deed and banking documents. The Ld.AR also stated that the unit was initially booked by a third party, Shri Ajay Mittal, who later cancelled the booking and the excel sheet cited by the Department pertained to transactions between NODPL and Shri Ajay Mittal, and not the assessee. The Ld.AR contended that the sheet contained errors and could not be relied upon. The Ld.AR also emphasized that no evidence was provided to show any cash trail or vouchers supporting the "on-money" allegations. The assessee also highlighted discrepancies in the area and cost calculations mentioned in the excel-sheet, labeling it a "dumb document." The Ld.AR specifically explained the contents of excel-sheet in which the name of Shri Ajay B. Mittal appeared against Unit No. 122 and name(s) of S.K. Mittal/Urmila Mittal appeared against Unit No.
The date of booking is 02/12/2009 and 28/01/2010 at Sr. No. 248 and 299 of the excel sheet representing Unit No. 541 and 122 respectively. The Ld.AR also submitted that these units were originally booked by Shri Mittal, who cancelled the bookings as per his letter dated 30-05-2011 to NODPL which was submitted to the AO. While denying the contents of the excel-sheet, the Ld.AR stated that the assessee’s parents booked the unit No. 641 in February-2015 and paid the initial consideration of Rs.61,79,250/-, whereas the dates showing the details in excel are of 2013. The Ld.AR, to sum up the arguments, stated that the order passed by the Ld.PCIT need to be treated as bad at law and even on merit, in absence of any evidence, deserve to be vacated. The Ld.AR placed reliance on the decision of Co- ordinate Bench in case of Divyesh Bhupendra Desai Vs. PCIT in dated 29-08-2024.
6. On the other hand, the Ld.Departmental Representative (DR), relied on the order of the Ld.PCIT and also stated that the since the AO has failed in conducting the inquiry, the order passed by him is erroneous and prejudicial to the interests of the Revenue. The Ld.DR placed reliance on the decision of ITAT Rajkot Bench in case of Prakashbhai Ishwarbhai Changela Vs. PCIT, Rajkot in & 47/Rjt/2022 dated 10-04-2024.
& 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18
We have heard the rival contentions and perused the material on record. It is well-settled law that for invoking Section 263 of the Act, the Ld.PCIT must demonstrate that the order passed by the AO was erroneous and prejudicial to the interests of the Revenue. The primary reason cited by the Ld.PCIT for invoking Section 263 of the Act is that the AO did not sufficiently inquire into the alleged “on-money” payments. However, it is evident from the assessment records that the AO had conducted an inquiry into the assessee’s property purchase. The assessee provided documentary evidence, including the sale deed, bank account statements, and payment confirmations, which were duly examined by the AO. Further, the assessee's name does not appear in the incriminating documents, and the AO did not question the explanation that the unit was purchased by the assessee's parents, and her name was added only for inheritance purposes. The reliance placed by the Ld.DR on Prakashbhai Ishwarbhai Changela (supra) is misplaced. In that case, the AO had accepted a large sum of unexplained cash deposits without any inquiry and the Ld.PCIT held that the entire amount should have been taxed, particularly in the absence of plausible explanations. In that case it was noted that the assessee made contradictory submissions—first, claiming the deposits did not belong to him, and second, stating that they were related to his business. The AO accepted the latter without sufficient inquiry into either of these explanations. In contrast, the present case involves a detailed inquiry conducted by the AO into the property purchase, supported by documentary evidence, including the sale deed, bank statements, and confirmations from the developer. The assessee consistently denied making any “on- money” payments, and the AO found no direct evidence implicating the assessee. Therefore, unlike in the case of Prakashbhai Ishwarbhai Changela (supra), the AO’s assessment in the present case was based on a proper examination of all relevant facts and documents, and there were no contradictory explanations that warranted further inquiry.
7.1. The facts of the present case are more akin to the decision in Divyesh Bhupendra Desai Vs. PCIT (supra), where the Tribunal held that when the AO has taken a plausible view based on inquiry and material on record, the invocation of Section 263 of the Act is unwarranted. The Co-ordinate Bench relied on the judgment of the Hon’ble Gujarat High Court in Kaushik Nanubhai Majithia Vs. PCIT (Tax Appeal No. 20 of 2024), where the Hon’ble Court ruled that initiating proceedings solely based on an excel- sheet found during a search in the premises of a third party (as in the present case) does not provide a valid basis for assuming the existence of a transaction between the assessee and the developer. The Court noted that the excel sheet, which allegedly contained payment details from the assessee to the developer, lacked any corroborative material or signature, making it an unreliable document. The Hon’ble Court also found that there was no direct evidence, such as corroborative material, linking the assessee to the alleged payments and, therefore, the reliance on the developer having paid taxes on amounts shown in & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 the excel-sheet before the Settlement Commission was deemed insufficient. The Hon’ble High Court emphasized that unless there is clear adjudication or substantiating evidence that the assessee actually made those payments, mere entries in an excel sheet found from a third party cannot form the basis for proceedings against the assessee.
7.2. Thus, in light of the facts and the principles established by the judicial precedents, we find that the PCIT’s order under Section 263 is unjustified. The AO's original assessment was based on a proper examination of the relevant material, and there is no error or prejudice to the interests of the Revenue. Accordingly, we quash the orders passed by the Ld.PCIT for both the Assessment Years 2015-16 and 2017- 18 and allow the appeals of the assessee.
In the combined result, both the appeals of the assessee; i.e.
& 776/Ahd/2024 are allowed.”
After considering the facts of the case, submissions of the assessees and the cited decision of the Co-ordinate Bench, we find merit in the contentions of the assessees that the orders passed by the Ld. Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961, are unsustainable in law. The Ld. PCIT invoked Section 263 of the Act on the grounds that the Assessing Officer (AO) had not conducted a proper inquiry into the alleged "on-money" payments associated with the assessees' property purchase. However, upon perusal of the assessment records, it is evident that the AO conducted proper inquiry during the reassessment proceedings, wherein the assessees duly provided supporting documentary evidence, including sale deeds, bank statements, and payment confirmations, which were duly examined. The AO accepted the explanation provided by the assessees, and no direct evidence was found to substantiate the allegation of "on-money" payments by the assessees. & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 6.1. It is a settled principle that for invoking the jurisdiction under Section 263 of the Act, the twin conditions that the order passed by the AO must be both erroneous and prejudicial to the interest of the Revenue must be satisfied. In the present case, the AO's assessment was based on a plausible view taken after proper examination of all relevant facts and documents. The mere reliance by the Ld.PCIT on an excel sheet found during a search operation at the premises of a third party, without any corroborative evidence linking the assessees to the alleged payments, is insufficient to render the AO’s order erroneous or prejudicial to the interest of the Revenue. The Co- ordinate Bench of the Tribunal in the case of Divyesh Bhupendra Desai vs. PCIT and the Hon’ble Gujarat High Court in Kaushik Nanubhai Majithia vs. PCIT have consistently held that an excel sheet or any such unverified document, without supporting evidence, cannot be the sole basis for adverse proceedings against the assessees.
6.2. We also note that in the case of co-owner Gopi Saurabh Patwa, daughter of Assessee, in and 776/Ahd/2024, decided on 10/09/2024, the Tribunal under similar circumstances had quashed the order passed under Section 263 of the Act, holding that the AO’s view, being plausible and based on inquiry, cannot be interfered with under Section 263 merely because the Ld.PCIT holds a different view. The facts of the present appeals are identical, and the principles laid down in the said case fully apply here.
6.3. In view of the above discussions, we conclude that the orders passed by the Ld. PCIT under Section 263 for the Assessment Years 2015-16 and 2017- 18 are unjustified. The AO's reassessment orders were neither erroneous nor prejudicial to the interest of the Revenue. Therefore, we quash the impugned & 510/Ahd/2024 and & 511/Ahd/2024 Saurabh Sumant Patwa and Kalpana Saurabh Patwa vs. Pr.CIT-3 Asst. Years : 2015-16 & 2017-18 orders of the Ld. PCIT and allow the grounds of appeal(s) raised by the Assessee(s) in AYs 2015-16 & 2017-18.
7. In the combined result, all the four appeals of the assessee(s), i.e., & 510/Ahd/2024 in the case of Saurabh Sumant Patwa and & 512/Ahd/20242024 in the case of Kalpana Saurabh Patwa, are allowed.
Order pronounced in the Open Court on 30th September, 2024 at Ahmedabad.