DY. COMMISSIONER OF INCOME TAX, CENTRAL CIR.,-3, SURAT vs. SHRI PANNALAL MAHENDRA KOTHARI, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 46/SRT/2021 (AY 2016-17) (Hearing in Virtual Court) Deputy Commissioner of Shri Pannalal Mahendra Income-tax, Central Circle-3, Kothari, 8A, Abhishek Vs Room No.507, 5thFloor, Apartment, S.D. Road, Ayakar Bhavan, Majura Gate, Surat Surat-395001 PAN : AIZPK 3155 F Appellant / Revenue Respondent / assessee

Assessee by Mr Rushi Parekh, CA Revenue by Mr.Deependra Kumar,Sr-DR Date of hearing 25.04.2022 Date of pronouncement 20.06.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-3, Surat [for short to as “ld. CIT(A)”] dated 04.02.2021, which in turn arise from assessment order under section 143(3) of the Income Tax Act,1961 (hereinafter referred to as ‘the Act) dated 05.12.2018 for assessment year (AY) 2016-17. The Revenue has raised the following grounds of appeal:- “(1). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the incriminating documents seized during the search action u/s 132 of the Act as dumb document and deleting the addition made of Rs.77,11,000/- on account of unexplained cash payments.

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) (2). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the incriminating documents seized during the search action u/s 132 of the Act as dumb documents and deleting the addition made of Rs.84,17,105/- on account of unexplained receipts against cheque payments.

(3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the documents on which the Assessing Officer was relied upon was seized during the course of search proceedings and the person from whom it was has categorically explained the contents therein which has a correlation with the property purchased by the assessee.”

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) 65, 68 & 69 of BS-1 entries of cash / cheque payments made by Kamlesh Doshi / Pannalaji for booking / purchases of flat No.E-1102 the project Florence developed by Enn Enn Corporation Ltd. The transaction was routed through Param Properties. The Assessing Officer further recorded that Kamlesh Doshi / Pannalalji was not identified by partners of Param Properties. The mobile No. of ‘Kamlesh Doshi/Pannalalji was traced out of i-phone contracts of Agam Vadecha, partner of M/s Param Properties. It was further recorded that enquiries with the Mobile service provider revealed that the actual name of the party is Shri Kamlesh Mangaldas Doshi who is a resident of B-1/1002, Arihant Villa, Deepa Complex, Opp. Nehru Bridge, Adajan Road, Surat holding PAN No.AHHPS3641M. On further enquiry during assessment proceedings, from Enn Enn Corp. Ltd., it was ascertained that flat No.E-1002 was sold to Shri Pannalal Mahindra Kumar Kothari, r/o 5-C, Anmol Tower, Near Ashwini Apartment, Opposite Sardar Nagar, Samul Dairy Road, Surat. It was found that assessee holding PAN NO. AIZPK3155F. It was also noted that cheque payment received by Enn Enn Corp. Ltd., in respect of this flat till 30.09.2015 3

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) was Rs.95,17,200/-. The Assessing Officer noted that the transaction related to assessee was reflected in the documents seized from the premises of Param Properties, which is recorded by Assessing Officer in para-5 of his order in the following manner;

Kamlesh Rathod Doshi/ Pannalalji Payments made by Kamlesh Doshi/ Pannalalji FY 2015-16 Amount Narration Annexure Page Date FRN-E/1102 BS-1 69 15.07.2015 2,11,000/- FRN E-1102 BS-1 15.06.2015 5 1,00,000/- Token FRN E-1102 BS-1 16.06.2015 64 12,00,000/- C/o Kamlesh Doshi BS-1 16.06.2015 6 11,00,000/- FRN E- Receipts by Kamlesh Doshi/ Pannalalji FY 2015-16 Amount Narration Annexure Page Date FRNE/1102 BS-1 68 11.07.2015 50,00,000/- Cash against (a/g) cheque FRNE/1102 BS-1 13.07.2015 68 15,99,450/- Cash a/g cheque 18,17,655/- FRNE/1102 BS-1 21.07.2015 69 Cash a/g cheque ---

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) 3. On the basis of the alleged entries on seized documents as compiled by assessing officer, the assessee was asked to explain the contents of these documents and transaction reflected therein. The Assessing Officer recorded that assessee simply stated that he does not know these persons nor had entered into any transaction with Param Properties and Kamlesh Doshi. He had purchased flat from Enn Enn Corporation Ltd., and major amount was financed by ICICI Bank and payment of Rs.95,17,200/- was made to the builder on different dates through cheques and the transaction was registered in the name of assessee and his wife. The Assessing Officer further recorded that vide order entry dated 13.11.2018, the assessee was again asked to explain the transaction reflected in seized material as to why in absence of proper and satisfactory explanation, the transaction reflected in the seized material should not be treated as unexplained cash receipt and payment should not be added to the income of the assessee. In response to show cause notice dated 13.11.2018, the assessee filed his reply. In reply, the assessee stated that he explained earlier that he has not entered into 5

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17)

any transaction either with Param Properties or Kamlesh

Doshi. The assessee is maintaining his regular books of

account and furnished Bank transaction to assessing officer on

17.08.2018. In his without prejudice submission on the

detailed compiled by Assessing Officer on the basis of alleged

seized documents, the assessee explained that the sale deed of

flat was executed on 08.07.2015 and that value which has

been accepted by Surat Municipal Corporation. From the

detailed transaction in the said tabular form none of the

cheques were paid either to builder or anyone else, following

tabular form is reproduced:-

Amount as paid towards the Amount as receipts (refer table) Amount referred to as paid flat B (after Registry of the flat) C (after Registry of the flat) A Rs Date Rs. Date Rs. Date 65,00,000 11.07.2015 50,00,000 10.07.2015 11,00,000 30.06.2015 16,72,028 13.07.2015 15,99,450 15.07.2015 2,11,000 07.07.2015 12,50,000 21,07,2015 18,17,655 -- -- 07.07.2015 95,172 -- --- --- --- TDS 95,17,200 84,17,105 13,11,000

financed and rest of the payment was made from self-finance

(own sources). The transaction recorded in loose sheet (seized 6

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) document) from third party who is the parties to the registered sale deed of the flat are unrealistic and unreliable to seized material was found from the premises of third party and was not in the possession of the assessee. The documents are not in his hand-writing. The contents of reply of the assessee were not accepted by the Assessing Officer. The Assessing Officer noted that entries mentioned in the seized documents clearly indicate that total payment of Rs.1.61 crores were made in cash on different dates by assessee c/o Kamlesh Doshi for booking / purchase of flat as per entry date 11.07.2015, 13.07.2015 and 21.07.2015 respectively (Annexure-BS-1) are returned of cash against cheque payments shows that flat No.E-1102, Florence, Vesu Surat was finalized of Rs.1.61 crores and that same amount of cash was returned. The flat No. E/1102, Florence, Vesu Surat is registered in the name of assessee. The documents seized in the course of search action under section 132 is having evidentiary value, which is corroborated by other evidence i.e. data related to back up of i- phone of Agam Vadecha. The assessee denied the entries in the seized documents and to have received such payment of any 7

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) amount. However, as per enquiry, the evidence gathered by department during the course of search as well as post-search residence, it is proved beyond reasonable doubt that evidence seized during the course of search that evidence / seized documents from Param Properties which is related to the assessee. The partner of Param Properties admitted in his statement about the aforesaid documents in his hand-writing proved the authenticity, which assumes the greater value. The admission of partners about the entry reflecting in the seized documents cannot be washed away. On the basis of aforesaid observation, the Assessing Officer held that on the basis of clinching evidence, inference can be drawn by him for taxing of Rs.1.61 crores on undisclosed source, out of which Rs. 77,11,000/- on account of unexplained cash payment and Rs. 84,17,105/- on account of unexplained cash received against cheque, which is reflected on the seized documents, in the hands of assessee on substantive basis. 5. Aggrieved by the addition in the assessment, the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written submission. The assessee explained that 8

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) he purchased flat No. E-1102 Florence, Vesu Surat vide cheque issued dated 07.07.2015 on a consideration of Rs.95.17 lakhs in his joint name along with his wife, Anju Pannalal Kothari. The assessee submitted that consideration of Rs.16,72,028/- was paid from Surat Peoples Co-operative Bank vide cheque drawn on A/c No.104141059080; Rs.12,50,000/- from his wife in Surat Peoples Co-operative Bank vide cheque drawn on A/c No.104141056158 and Rs.65,61,948/- by way of cheque from ICICI bank loan. The assessee further submitted that apart from the aforesaid amount the assessee paid Rs.39,386/- on account of professional fees; Rs.4,66,500/- on account of stamp duty; Rs.9,023/- on account of miscellaneous expenses; Rs.95,450/-on account of registration fees; Rs.95,172/- on account of TDS and total amount Rs.11,05,254/- most of the expenses were incurred by cheque. During the course assessment proceedings, the assessee came to know about the search action under section 132 carried out in case of Param Properties, Surat that in such search action several incriminating documents were found, which seized entries pertaining and information allegedly related to the 9

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) assessee. During the course of assessment proceedings, Assessing Officer furnished copy of Annexure-BS-1, which reveals entry of cash / booking of purchase of flat No.E-1102 Florence. The Assessing Officer alleged that transaction was routed through Param Properties Kamlesh Doshi/Pannalalji was identified by the partners of M/s Param Properties, their mobile No. of Kamlesh Doshi /Pannalalji as recorded in i- phone contracts of Agam Vadecha. Such mobile No.9825284836 does not belong to assessee. The Assessing Officer on the basis of alleged incriminating evidence tried to connect the assessee with the flat No. E-1102 Florence purchased by assessee. The Assessing Officer failed to bring out any true and correct fact to establish the nexus between incriminating materials found in the search on Param Property, with the assessee. The assessee right from the beginning took his stand that he neither knows Kamlesh Doshi nor Param Properties and that he purchased flat No.E-1102 Florence directly from Enn Enn Corporation Ltd., major amount financed through ICICI bank home loan. In reply to show cause notice dated 13.11.2018, the assessee explained the fact; but 10

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) the Assessing Officer disbelieved the reply of assessee and made addition of Rs.77 lakh (round figure) and Rs. 84 lakh (round figure) respectively on the ground that cash payment made by Kamlesh Doshi and cash against cheque writing on various payees of Annexure-BS-1 are eligible written by someone else. Thus, the conclusion drawn on the presumptive basis on extract of Annexure-BS-1 has no evidentiary value. The Assessing Officer neither submitted the information collected from i-phone nor allowed / call of Kamlesh Doshi or Param Properties for cross-examination. The assessee entered in a direct transaction with Enn Enn Corporation Ltd. and has nothing to do with the seized documents / papers. The Assessing Officer just tried to connect the assessee with the seized documents. The whole story based on presumption without any basis. The Assessing Officer made addition of Rs.77.11 lakhs as noted payment to Kamlesh Doshi to whom the assessee has no connection. The Assessing Officer made addition of Rs.84.17 lakhs on baseless and without any basis that amount were returned back in cash to assessee against cheque issued. The assessee has not issued any such cheque 11

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) nor was any cash returned. The assessee’s maintained bank account with Surat People Co-Operative Bank and all the details of said bank account was produced. The Assessing Officer could not bring out any tangible material to show that assessee received cash or that he has issued any cheque against which cash was received. The Assessing Officer randomly held that cheques are given without there being any distinctive cheque number or the details of cheque or the name of withdrawal bank. The assessee has no knowledge about the extract on various papers of Annexure-BS-1. The Assessing Officer recorded that many person and other consequences whose names appearing in the cash book they themselves admitted the fact mentioned on the seized material and voluntarily offered the income with the department. No details of such persons, who admitted or made addition not were provided to the assessee. The statement on which Assessing Officer relied was not provided to the assessee. The assessee has disclosed the source of his income and bank account was duly disclosed all money paid or purchased of flat was routed through bank account. The assessee has no unaccounted 12

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) money in his bank account from where the cheques were issued. The said deal was executed as per the rate at the prevailing stamp duty determined by Government of Gujarat. The assessee specifically stated that he has neither given any on-money in cash over and above the sale amount nor received cash bank against cheque issued. The assessee also provided bifurcation and source of investment in his written statement. The assessee relied on certain case law on the ratio that an entry in the note book of third person is not sufficient to charge any person with liability. 6. The Ld. CIT(A) after considering the facts of the case and submission of assessee noted that assessee has purchased flat No.E-1102 Florence, Vasu, Surat vide cheques of various dates vide sale deed dated 07.07.2015 for consideration of Rs.95.17 lakhs in joint name with his wife. The Ld. CIT(A) held that consideration was paid by account payee cheque through Surat Peoples Co-Operative Bank on 07.07.2015 on his account and from the account of his wife also and loan availed from ICICI bank. The assessee also incurred income of other expenses of Rs.11.05 lakh of TDS and thus total of Rs.1.05 13

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) crores (round figure). The same amount is shown in his regular books of account and assessee specifically claimed that he did not purchase the flat through Shri Kamlesh Doshi or M/s Param Properties. He was not identified by Param Properties rather his name was mentioned by Assessing Officer in the assessment order. The Ld. CIT(A) held that documents were seized from the premises of Param Properties during the course of search and not from the premises of assessee and such documents are not in the hand-witting of assessee not signed by assessee. The Assessing Officer himself mentioned that on enquiry from Param Properties admitted the assessee was not identified as a person engaged in the transaction recorded on those papers. The mobile number recorded in Agan Vadecha i- Phone pertains to Kamlesh Doshi and not of assessee. In such a situation, the seized documents pertaining to related a party which is not in any way related to assessee. The Assessing Officer was not justified to making the addition as far as assessee’s concerned. The mobile number of assessee was not found in the mobile phone details of Agam-Vadecha and no SMS transaction or telephone conversation has been 14

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) found in the Agam Vadecha about the transaction or conversation. The Ld. CIT(A) further held that no enquiry was made from Kamlesh Doshi whose name and telephone number was mentioned in the seized material. No enquiry was made through Enn Enn Corp. Ltd., who is seller of said flat. Thus, the addition of unaccounted investment is not justified. The Ld. CIT(A) also held that out of payment shown in nine instalments ( in the seized document), four are made before the date of registration and remaining five transactions were made after the date of registration. Generally, it is not a practice in the market that cash is paid after the execution of sale documents and its registration. The Ld. CIT(A) after referring the decision of Hon'ble Supreme Court in the case of CIT Vs Lavani Land Pvt. Ltd. (2017) 397 ITR 246 (SC) held that in the documents found from the third party without corroborative evidence cannot be used against assessee. 7. On the addition of unexplained cash received, Ld. CIT(A) held that Assessing Officer recorded same reasoning as recorded from unaccounted investment. The assessee made similar contention as made against the addition of unaccounted 15

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) investment. The assessee furnished his bank account which are regularly maintained and disclosed before the Income-tax Department. In the bank account, which was verified and found that there is no transaction through cheques with Kamlesh Doshi or Agam Vadecha or Param Properties. Therefore the finding of Assessing Officer is factually incorrect and deleted the addition of alleged unexplained cash received from Kamlesh Doshi. Aggrieved by the order of the Ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 8. We have heard the submissions of Ld. Senior Departmental Representative (DR) for the Revenue and Ld. Authorized Representative (AR) for the assessee. The ld. Sr. DR for the Revenue submits that the entry mentioned in the seized documents clearly demonstrated that total payment of Rs.1.61 crores was made in cash in different dates by assessee (Pannalalji c/o Shri Kamlesh Doshi for booking / purchased flat vide entries dated 11.07.2015, 13.07.2015 and 21.07.2015 respectively and returned of cash against issued cheque of flat No.E-1102 Florence, Vesu, Surat is registered in the name of assessee. The document seized in the premises of Param 16

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) Properties during the search operation has strong evidentiary value with clearly suggests the transaction of unexplained investment and the cash received against the cheque. 9. On the other hand, Ld. AR for the assessee supported the order of Ld. CIT(A). Ld. AR for the assessee submits that assessee purchased the flat No.E-1102 Florence, Vasu, Surat vide sale deed dated 07.07.2015 for a sale consideration of Rs.95.17 lakhs jointly with his wife. The assessee made other expenses of Rs.11.05 on registration, service charges miscellaneous expenses stamp duty and professional fees including of TDS. The sale / purchase of flat is duly registered with the Registrar of Office. The assessee paid consideration as per the prevailing rate of stamp duty fixed by Govt. of Gujarat. The Assessing Officer relied on the third party information and document recovered at the premises of third party. There is no casual connection of such third party evidence with these. The assessee purchased flat directly from Enn Enn Corp. Ltd. And paid entire consideration through account payee cheque as explained earlier. The substantial amount was paid by availing home finance through ICICI Bank. The Assessing Officer has 17

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) not made any investigation from the builder / Enn Enn Corp. Ltd. The assessee has not given any cheque to Param Properties or Shri Kamlesh Doshi and no cash was received against alleged payment through issued cheque. The assessee furnished copy of his bank statement and his wife and submitted that no cheque was issued from their bank accounts to Param Properties or Shri Kamlesh Doshi. The Assessing Officer has not given the details of such cheques. The entire addition is made on purely assumption and presumption basis. The Assessing Officer has not brought any evidence on record to prove that assessee has given any cheque to Param Properties from their partners. The Ld. CIT(A) on appreciation of fact came to the conclusion that there is no such evidence of giving any cheque and receiving cash against such issued cheque payment or unaccounted investment in purchasing flat No. E-1102 Florence, Vesu, Surat. 10. We have considered the submission of both the parties and have gone through the orders of authorities below. The Assessing Officer made the addition by taking view that entries mentioned in the seized documents in the search action on 18

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) Param Property clearly indicate that total payment of Rs.1.61 crores were made in cash on different dates by assessee are returned of cash against cheque payments shows that flat No.E-1102, Florence, Vesu Surat. The flat No. E/1102, Florence, Vesu Surat is registered in the name of assessee. The documents seized in the course of search action under section 132 is having evidentiary value and that it is corroborated by other evidence of back up of i-phone of Agam Vadecha. It was also held by assessing officer as per enquiry and the evidence gathered by department during the course of search as well as post-search residence, it is proved beyond reasonable doubt that evidence seized during the course of search from Param Properties, is related to the assessee. The partner of Param Properties admitted in his statement about the aforesaid documents in his hand-writing assumes the greater evidentiary value and that admission of partners about the entry reflecting in the seized documents cannot be washed away. The Assessing Officer held that on such evidence, inference can be drawn to tax Rs.1.61 crores on undisclosed source, out of which Rs. 77,11,000/- on account of unexplained cash 19

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) payment and remaining of Rs. 84,17,105/- on account of unexplained cash received against cheque. As recorded above, before, ld CIT(A) the assessee filed detailed written submissions and on considering such submissions the ld CIT(A) held that the assessee purchased flat No.E-1102 Florence, Vasu, Surat and made payment vide cheques of various dates as per sale deed dated 07.07.2015 for a consideration of Rs.95.17 lakhs in joint name with his wife. The consideration was paid by account payee cheque through Surat Peoples Co-Operative Bank on 07.07.2015 from bank his account and from the account of his wife and loan availed from ICICI bank. The assessee shown to have incurred expenses of Rs.11.05 lakh of TDS and thus total of Rs.1.05 crores (round figure). The entire amount is shown in his regular books of account and assessee claimed that he did not purchase the flat through Shri Kamlesh Doshi or Param Properties or that he was not identified by Param Properties rather his name was mentioned by Assessing Officer in the assessment order. The Ld. CIT(A) held that documents were seized from the premises of Param Properties during the course of search and not from the 20

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) premises and are not in his hand-witting nor signed by him. The Assessing Officer himself recorded that on enquiry from Param Properties, the assessee was not identified as a person engaged in the transaction recorded on those papers. The mobile number recorded in Agan Vadecha i- Phone pertains to Kamlesh Doshi and not of assessee. The ld CIT(A) held that in such a situation, the seized documents pertaining to third party which is not in any way related to assessee and that the Assessing Officer was not justified to making the addition at the hand of assessee. The mobile number of assessee was not found in the mobile phone data of Agam-Vadecha or no SMS transaction or telephone conversation has been found in the Agam Vadecha about the transaction or conversation with assessee. 11. We find that the Ld. CIT(A) recorded that no enquiry was made from Kamlesh Doshi whose name and telephone number was mentioned in the seized material. No enquiry was made through Enn Enn Corp. Ltd., who is seller of said flat to the assessee and on his observation held that the addition of unaccounted investment or cash receipt is not justified. We 21

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) find that the Ld. CIT(A) also examined the fact that out of payment shown in nine instalments ( in the seized document), four are made before the date of registration and remaining five transactions were made after the date of registration. It was held that generally, it is not a practice in the market that cash component is paid after the execution of sale documents and its registration. The Ld. CIT(A) also relied on the decision of Hon'ble Supreme Court in the case of CIT Vs Lavani Land Pvt. Ltd. (supra) wherein it was held that in the documents found from the third party without corroborative evidence cannot be used against assessee. 12. We find that the assessee furnished the details of his bank account, the details in the banks account was not verified. Further there is no transaction through cheques with Kamlesh Doshi or Agam Vadecha or Param Properties. As recorded by ld CIT(A) no corroborative evidence was brought on record by assessing officer to connect the assessee with the alleged evidence seized in the search action. Even, mobile number of assessee was not found in the mobile phone data of Agam- Vadecha and/ or no transaction of even SMS conversation has 22

ITA No.46/SRT/2021 Pannalal M Kothari (A.Y 16-17) been found in the Agam Vadecha about the transaction with assessee. Therefore, with the above additional observations, we affirm the finding of ld CIT(A) that the finding of Assessing Officer is factually incorrect. No contrary fact or law is brought to our notice to take other view. In the result, the grounds of appeals raised by the revenue fail. 13. In the result, the appeal of the Revenue is dismissed. Order pronounced in open court on 20/06/2022 and result was also placed on the notice board of the Bench. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 20/06/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order

Sr.P.S /Assistant Registrar, ITAT, Surat