ITAT Ahmedabad Judgments — December 2023

The Tribunal decided the appeals by applying the findings from a lead case, IT(SS)A No. 53/Ahd/2022 for AY 2014-15 in the case of Narmada Concast Pvt. Ltd. The Tribunal noted that the issues raised by the Revenue in its appeals for AY 2015-16 and AY 2018-19 were identical to those in the lead case. Similarly, the Assessee's appeal for AY 2014-15 and AY 2015-16 was also decided based on the findings in the lead case. Specifically, for the Assessee's appeal (IT(SS)A No. 60/Ahd/2022 for AY 2014-15), the Tribunal dismissed the grounds related to the validity of the assessment order and the additions made under Section 68, as these were decided against the assessee in the lead case. For the Revenue's appeals (IT(SS)A No. 53/Ahd/2022 for AY 2014-15 and IT(SS)A No. 59/Ahd/2022 for AY 2015-16, and IT(SS)A No. 32/Ahd/2022 for AY 2018-19), the Tribunal dismissed the grounds of appeal, finding in favour of the assessee and against the Revenue, as per the decision in the lead case. The operative directions were to dismiss the Revenue's appeals and partly allow the Assessee's appeals.

The Tribunal decided the appeals by applying the findings from a lead case, IT(SS)A No. 53/Ahd/2022 for AY 2014-15 in the case of Narmada Concast Pvt. Ltd. The Tribunal noted that the issues raised by the Revenue in its appeals for AY 2015-16 and AY 2018-19 were identical to those in the lead case. Similarly, the Assessee's appeal for AY 2014-15 and AY 2015-16 was also decided based on the findings in the lead case. Specifically, for the Assessee's appeal (IT(SS)A No. 60/Ahd/2022 for AY 2014-15), the Tribunal dismissed the grounds related to the validity of the assessment order and the additions made under Section 68, as these were decided against the assessee in the lead case. For the Revenue's appeals (IT(SS)A No. 53/Ahd/2022 for AY 2014-15 and IT(SS)A No. 59/Ahd/2022 for AY 2015-16, and IT(SS)A No. 32/Ahd/2022 for AY 2018-19), the Tribunal dismissed the grounds of appeal, finding in favour of the assessee and against the Revenue, as per the decision in the lead case. The operative directions were to dismiss the Revenue's appeals and partly allow the Assessee's appeals.

The Tribunal held that the addition of Rs. 7,00,000/- under Section 69A of the Act was liable to be deleted. The Tribunal noted that the assessee consistently maintained that the deposit was out of cash withdrawals made from the same bank account in April 2016, and the bank statements supported both the withdrawals and the deposit. Crucially, the Department had not been able to produce any cogent evidence to demonstrate that the cash withdrawn in April 2016 had been invested or utilized elsewhere by the assessee. The Tribunal relied on several judicial precedents, including Sudhirbhai Pravinkant Thaker, Ajit Bapu Satam, Jaspal Singh Sehgal, and Om Parkash Nahar, which held that if an assessee demonstrates cash withdrawals and there is no finding by the authorities that this cash was invested or utilized for other purposes, additions based on unexplained deposits are not sustainable. The Tribunal concluded that the Department had not disputed the withdrawals or provided evidence of alternative utilization, making the addition unsustainable.

The Tribunal held that the addition under section 68 can only be made on sums credited during the year. Since the CIT(A) found that the amounts treated as fresh unsecured loans by the AO were actually repayments of loans from earlier years, and this finding was not controverted by the Revenue, the addition under section 68 was not sustainable. Consequently, the addition under section 69C, which was based on the premise of taking fresh loans, was also dismissed. Regarding the protective addition for investment in GRPL, the Tribunal noted that the issue of on-money paid against the purchase of land/acquisition of the project had been decided in another appeal (IT(SS)A No. 359/Ahd/2018), and found no infirmity in the CIT(A)'s order deleting this addition. The Tribunal dismissed the Revenue's grounds of appeal related to these issues. The appeals of the Revenue were dismissed. The assessee's appeal in IT(SS) No. 302/Ahd/2018 was dismissed as infructuous, and the assessee's appeal in IT(SS) No. 303/Ahd/2018 was allowed.

The Tribunal held that the addition under section 68 can only be made on sums credited during the year. Since the CIT(A) found that the amounts treated as fresh unsecured loans by the AO were actually repayments of loans from earlier years, and this finding was not controverted by the Revenue, the addition under section 68 was not sustainable. Consequently, the addition under section 69C, which was based on the premise of taking fresh loans, was also dismissed. Regarding the protective addition for investment in GRPL, the Tribunal noted that the issue of on-money paid against the purchase of land/acquisition of the project had been decided in another appeal (IT(SS)A No. 359/Ahd/2018), and found no infirmity in the CIT(A)'s order deleting this addition. The Tribunal dismissed the Revenue's grounds of appeal related to these issues. The appeals of the Revenue were dismissed. The assessee's appeal in IT(SS) No. 302/Ahd/2018 was dismissed as infructuous, and the assessee's appeal in IT(SS) No. 303/Ahd/2018 was allowed.

The Tribunal held that the addition under section 68 can only be made on sums credited during the year. Since the CIT(A) found that the amounts treated as fresh unsecured loans by the AO were actually repayments of loans from earlier years, and this finding was not controverted by the Revenue, the addition under section 68 was not sustainable. Consequently, the addition under section 69C, which was based on the premise of taking fresh loans, was also dismissed. Regarding the protective addition for investment in GRPL, the Tribunal noted that the issue of on-money paid against the purchase of land/acquisition of the project had been decided in another appeal (IT(SS)A No. 359/Ahd/2018), and found no infirmity in the CIT(A)'s order deleting this addition. The Tribunal dismissed the Revenue's grounds of appeal related to these issues. The appeals of the Revenue were dismissed. The assessee's appeal in IT(SS) No. 302/Ahd/2018 was dismissed as infructuous, and the assessee's appeal in IT(SS) No. 303/Ahd/2018 was allowed.

The Tribunal held that since the assessee had approached the Vivad Se Vishwas Scheme, 2022, and their application was approved by the PCIT, Ahmedabad, leading to a full and final settlement for Assessment Year 2005-06, and the Revenue had no objection to the withdrawal of the appeal, the appeal was to be dismissed as withdrawn. The reasoning was based on the mutual consent and the procedural closure of the dispute under the VSVS. The operative direction was to dismiss the appeal as withdrawn. No issue was expressly left undecided.

The Tribunal held that the deletion of the addition on account of deemed rental income on unsold flats was correct. The assessee is engaged in the business of constructing residential buildings and holds these properties as stock-in-trade for sale. The jurisdictional High Court in the case of Neha Builders Pvt Ltd held that income derived from stock-in-trade would be income from business, not income from house property. The Tribunal emphasized that the decision of the jurisdictional High Court is binding. Furthermore, the amendment to Section 23(5) of the Act, which mandates taxing deemed rental income on unsold units, is applicable from 1st April 2018 (AY 2018-19) and thus not applicable to the assessment year under dispute. Therefore, the addition made by the AO was deleted, confirming the CIT(A)'s order on this issue. Regarding the on-money issue, the judgment states the appeals are "partly allowed" in the combined result, indicating a decision was made on this issue, but the detailed reasoning for the partial allowance is omitted in the provided text. The operative direction for the deemed rental income issue was to delete the addition.

The Tribunal held that the seized excel sheets containing details of both unaccounted cash receipts and payments must be read in their entirety. Citing Section 132(4A) and 292C of the Act, the Tribunal noted the legal presumption that contents of documents found during a search are true, meaning the revenue cannot selectively accept parts of the documents. The Tribunal relied on the jurisdictional High Court's decisions in CIT Vs Hynoup Food & Oil Ind. (P) Ltd. and M/s Navjivan Oils Mills vs. CIT, which state that seized material must be read as a whole and it's not permissible to pick and choose. Furthermore, referencing CIT vs. President Industries, the Tribunal reiterated that in cases of undisclosed business receipts, only the element of profit embedded therein should be brought to tax, not the gross amount. Therefore, the Tribunal confirmed the CIT(A)'s finding that only the net amount of receipts adjusted by payments should be treated as income. The Revenue's grounds of appeal were dismissed.

The Tribunal held that the seized excel sheets containing details of both unaccounted cash receipts and payments must be read in their entirety. Citing Section 132(4A) and 292C of the Act, the Tribunal noted the legal presumption that contents of documents found during a search are true, meaning the revenue cannot selectively accept parts of the documents. The Tribunal relied on the jurisdictional High Court's decisions in CIT Vs Hynoup Food & Oil Ind. (P) Ltd. and M/s Navjivan Oils Mills vs. CIT, which state that seized material must be read as a whole and it's not permissible to pick and choose. Furthermore, referencing CIT vs. President Industries, the Tribunal reiterated that in cases of undisclosed business receipts, only the element of profit embedded therein should be brought to tax, not the gross amount. Therefore, the Tribunal confirmed the CIT(A)'s finding that only the net amount of receipts adjusted by payments should be treated as income. The Revenue's grounds of appeal were dismissed.

The Tribunal held that the deletion of the addition on account of deemed rental income on unsold flats was correct. The assessee is engaged in the business of constructing residential buildings and holds these properties as stock-in-trade for sale. The jurisdictional High Court in the case of Neha Builders Pvt Ltd held that income derived from stock-in-trade would be income from business, not income from house property. The Tribunal emphasized that the decision of the jurisdictional High Court is binding. Furthermore, the amendment to Section 23(5) of the Act, which mandates taxing deemed rental income on unsold units, is applicable from 1st April 2018 (AY 2018-19) and thus not applicable to the assessment year under dispute. Therefore, the addition made by the AO was deleted, confirming the CIT(A)'s order on this issue. Regarding the on-money issue, the judgment states the appeals are "partly allowed" in the combined result, indicating a decision was made on this issue, but the detailed reasoning for the partial allowance is omitted in the provided text. The operative direction for the deemed rental income issue was to delete the addition.