THE ACIT, CENTRAL CIRCLE-2(4), AHMEDABAD vs. DARSHANBHAI MANUBHAI PATEL, AHMEDABAD

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

“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.19,71,00,000/- made as unexplained investment u/s. 69 of the I.T. Act without going into the decision in the case of substantive addition made.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the AO is not justified in making the impugned addition by restoring to the provisions contained in section 292C of the I.T. Act.

ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 2–

ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 3– investment in project Divine Marutinandan, which did not materialize, however, Ketanbhai Patel has failed to file revised return taking into consideration the above investment as part of his total income. In view of the above, sanctity cannot be accorded to the statement of Shri Ketanbhai Patel. Therefore, in order to protect the interest of the Revenue, the Assessing Officer made addition of Rs. 19,71,00,000/- in the hands of the assessee, on “protective basis”, treating the same as unexplained investments under Section 69 r.w.s. 115BBE of the Act.

4. Before CIT(A), the assessee submitted that the Assessing Officer has made the aforesaid addition solely relying on the entry in the loose paper sheets found and impounded during the survey under Section 133A carried out in the case of unrelated third party and by relying on the statement recorded during the survey of an unrelated third party (accountant of surveyed party) and made an addition of Rs. 19,71,00,000/- on protective basis. The assessee submitted that the addition is illegal since it has been made without offering an opportunity to the assessee to cross-examine Shri Shaileshbhai R Patel, whose statement has been relied upon for making the impugned addition. The assessee relied upon several judicial precedents which have held that no addition can be made on the basis of an unrelated third party, without offering the assessee an opportunity to cross-examine the such person. The assessee submitted that denial of an opportunity to cross-examine the deponent in spite of specific request made in this regard is violation of principle and natural justice and therefore, the impugned addition is not sustainable in the eyes of law, in light of the decision of Hon’ble Supreme Court in the case of M/s. Andaman Timber Industries

ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 4– vs. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006) and also the judgment in the case of CIT vs. Odeon Builders Pvt. Ltd. in SLP No. 9604-9605 dated 21.08.2019. Secondly, the assessee submitted that loose paper sheets found and impounded during the course of survey under Section 133A in case of an unrelated third party has no evidentiary value in the case of the assessee and the assessee relied upon the decision of Hon’ble Supreme Court in the case of CBI vs. VC Shukla and others 35 SSC 410 and also in the case of Common Causes vs. Union of India 77 taxmann.com 245 (SC) in this regard. Thirdly, the assessee submitted that Shri Ketanbhai Ratilal Patel, the main person / partner of Marutinandan Developers and other group concerns has without any ambiguity owned up the loose paper sheets found and impounded during the course of survey and admitted that loose paper sheets belonged to Marutinandan Developers Group and had nothing to do with the assessee. Shri Ketanbhai Ratilal Patel vide letter dated 27.12.2019 addressed to ACIT, Income Tax Circle 2(4), Ahmedabad has clearly submitted that the papers in question belong to Marutinandan Developers and that the lettes DM at Sr. No. 22 of Page 1 of Annexure A-1 denotes “Divine Marutinandan” and DM was used as an acronym for the proposed scheme of “Divine Marutinandan”, which was subsequently abandoned. Further, the assessee submitted that the Assessing Officer has not disputed the contents of the said letter, wherein Shri Ketanbhai Ratilal Patel has without ambiguity and in clear terms acknowledged and accepted the fact that the loose paper sheets impounded during the survey pertains to their firm and that the letters DM stand for “Divine Merutinandan” and not Darshanbhai Manubhai Patel i.e. the assessee. Further, the Assessing Officer has also not disputed the veracity

ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 5– of the contents of the aforesaid letter written by Shri Ketanbhai Ratilal Patel. Further, the assessee submitted that the Assessing Officer has not brought on record any evidence to show that it was the assessee who had made the alleged investments. Accordingly, the assessee submitted that the action of Assessing Officer in making the protective addition is unwarranted especially when Shri Ketanbhai Ratilal Patel has admitted and owned up the transactions in a letter written to the Assessing Officer, the contents of which have not been disputed.

“9. I have considered the facts and surrounding circumstances carefully. I have also gone through the written submission filed by the appellant and also the case laws relied upon by the AR during the appellate proceedings. I have also carefully perused the assessment order under appeal. I find considerable force in the written submission filed by the appellant and the oral arguments put forth by the AR in the course of appellate proceedings. It is found that the impugned protective addition has been made solely on the ground that Shri Ketanbhai R Patel has not filed Revised Return of Income for the relevant period. Further, it also emerges from the oral arguments that the impugned addition on protective basis has been made by placing reliance on the alleged entries recorded on the loose paper found and impounded during the course of survey from the business premises of third party. This is on record that the appellant was not allowed an opportunity to cross examine Shri Shaileshbhai R Patel the said deponent whose statement was relied upon by the A.O. while making the impugned addition. This is an undisputed fact that the alleged loose paper sheet on which the AO had relied upon for making the impugned addition was not found in the possession and control of the appellant. It is held in the case of Common Cause vs Union of India (supra) that computer print outs, loose paper sheets, print outs from the pen drives etc. are not admissible evidences under the Indian Evidence Act. In the case of Andaman Timber Industries (Supra) and also in the case of Odeon Builders (supra) in which the Hon'ble Supreme Court has held that an addition made on the basis of statement of Third party without affording the assessee an opportunity to cross examine a deponent whose statement has been relied upon for making the addition is not sustainable in the eyes of law. Having regard to the totality of the facts and circumstances of the case and respectfully following the judgement of the Supreme Court cited supra and also the ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 6– judgement of the High court and ITAT including the jurisdictional ITAT relied upon in the written submission filed by the appellant, I don't find any justification in making the impugned addition albeit on protective basis by the A.O. … 15. I have carefully considered the written submission made by the appellant in the course of appellate proceedings. I have also gone through the assessment order under appeal in this regard. It is worthwhile to state that when the person surveyed has duly acknowledged, admitted and accepted that the transactions recorded on the impounded loose papers i.e. pages 1 and 2 of Annexure A/1 found and impounded during the course of survey were carried out by the said Shri Ketan R Patel, the undisputed emerging fact legal position is that any profit or gains arising from such transaction shall be taxable in the hands of the person concerned. Moreover, Shri Ketan R Patel has categorically stated that the appellant namely Darshanbhai Manubhai Patel is in no way connected to the transactions referred to the Annexure A/1. In view of this the action of the AO in making addition on the protective basis in the case of the appellant on the ground that Shri Ketan R Patel has not filed a revised return of income is misconceived and misdirected. It has further been noted that the AO himself is not convinced prima facie about the taxability of impugned amount in the hands of the appellant in absence of corroborative evidence. Besides the owning up of the transaction by Shri Ketan Patel made the facts abundantly clear that there was no ground for adding the same in the hands of the appellant. However, the AO still went ahead for making the addition on protective basis for the sake of making the addition somehow. Therefore in view of the above discussions and surrounding facts I don't find any ground for making an addition on protective basis before making any substantive additions thereof in the hands of other person.”

ACIT vs. Darshanbhai Manubhai Patel Asst.Year –2017-18 - 8– Assessing Officer have not been disputed by the Department at any stage of the proceedings. Further, the Assessing Officer has not brought on record any concrete evidence to prove that the words DM stand for Darshan Manubhai Patel, and no evidence has been brought on record to show that it was the assessee who had made investments in the said project. Further, in the assessment of Shri Ketanbhai Ratilal Patel, the words DM have been accepted to denote “Divine Marutinandan”, a project of Shri Ketanbhai Patel. Accordingly, looking into the instant facts, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.

Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05/04/2024 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file.