Income Tax Appellate Tribunal - Ahmedabad
Jamadar Travels, Bharuch vs Cit-Iii,, Baroda on 20 April, 2017
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'बी', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सव ी द प कुमार के डया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
And SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
Sl. IT(ss)A No(s) Assessment Appeal(s) by
Nos. / Year (s) Appellant vs. Respondent
ITA No(s). Appellant Respondent
1. 271/Ahd/2010 2004-05 M/s.Jamadar Travels CIT-III
Dandia Bazar Baroda
Bharuch
AABFJ 9426 G
2. 541/Ahd/2011 2004-05 -do-assessee The ACIT
Central Cir.2
Baroda
3. 272/Ahd/2011 2006-07 -do-assessee -do Revenue
4. ITA1086/Ahd/11 2007-08 -do-assessee -do Revenue
5. ITA 615/Ahd/13 2004-05 -do-assessee ITO Ward-1
Bharuch
6. ITA 616/Ahd/13 2007-08 -do-assessee -do-Revenue
7. 52/Ahd/2014 2006-07 -do-assessee -do-Revenue
8. 158/Ahd/2014 2006-07 -do-assessee -do-Revenue
9. 48/Ahd/2014 2001-02 Mohmoodbhai -do-Revenue
P.Jamadar
Dandia Bazar
Bharuch
PAN: ACAPJ 5828D
10. 18/Ahd/2014 2005-06 Shri Babubhai ITO
P.Jamadar, Dadia Ward-4
Bazar, Bharuch Bharuch
PAN: ACAPJ 5829 N
11. 96/Ahd/2014 2002-03 Vijesh P.Jamadar -do-Revenue
Dandia Bazar,
Bahruch
PAN: ACHPJ 7661F
Assessees by : Sl.Nos.1 to 09 Shri M.K. Patel, AR
Sl.Nos.10 & 11 Shri B.T. Thakkar, AR
Revenue by : Shri Jagadish, CIT-DR
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT
Babubhai P.Jamadar vs. ITO
Mohmoodbhai P.Jamadar vs. ITO
-2-
ु वाई क! तार ख /
सन Date of Hearing 22/03/2017
घोषणा क! तार ख /Date of Pronounce ment 20/ 04 /2017
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
The above captioned appeals relate to Assessment Years (AYs) 2004-05, 2006-07 & 2007-08 in the case of M/s.Jamadar Travels (eight appeals) against the respective orders of the Commissioner of Income-tax (Appeals)-IV, Ahmedabad [CIT(A) in short]. Other three captioned assessees, namely Babubhai P.Jamadar, Vijaesh P.Jamadar and Mohmoodbhai P.Jamadar also filed appeals. Since the issues involved are broadly similar, all the appeals were heard together and are being disposed of by way of consolidated order for the sake of convenience.
2. The IT(ss)A No.271/Ahd/2011 for Assessment Year (AY) 2004- 05 is taken as a lead year for the adjudication purposes.
IT(SS)A No.271/Ahd/2011 - AY 2004-05 - Assessee's appeal
3. The captioned appeal arises from the order of the CIT(A), Ahmedabad passed under s.263 dated 26/03/2010. The grounds of appeal raised by the Assessee read as under:-
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -3- (1) That the learned Commissioner of Income-tax-III, Baroda has grievously erred in law and on facts in not affording sufficient and reasonable opportunity of hearing and in passing the order u/s.263 of the Act ex-parte.
(2) That on facts and in law, the learned Commission or Income-
tax-III, Baroda has grievously erred in assuming jurisdiction u/s.263 of the Act.
(3) That on facts and in law, the assessment order passed u/s.153A(b) rws 143930 of the Act was neither erroneous nor prejudicial to the interest of Revenue within the meaning of section 263 of the Act.
(4) That in law and on facts, action u/s.263 could not be initiated as the assessment order was already subject - matter of dispute before CIT(A), and CIT(A) had decided appeal prior to initiation of proceedings u/s.263 of the Act on the same issue sought to be revised.
(5) That, on merits, the learned CIT(A)-III, Baroda has grievously erred in law and on facts in directing to make addition of Rs.55,77,701/- based only on valuation report, without any independent evidence of unaccounted investment made in construction of property.
4. Briefly stated, the assessee derives income from travel agency in the name and style of Jamadar Travels and income from vehicle hiring. A search under s.132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was carried out in the case of M/s.Jamadar Group of cases including assessee herein on 17/01/2007. Consequent to search action, proceedings under s.153A of the Act were undertaken. In the IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -4- course of the assessment under s.153A, it was noticed by the Assessing Officer (AO) that during the course of search, partner of the assessee- firm was found to have constructed a big palatial bungalow at Bharuch, the area-wise construction of which was recorded in the assessment order. It was noted by the AO that the assessee-firm has shown the cost of construction of the aforesaid bungalow at Rs.59,31,517/- in its books of accounts which includes bank loan of Rs.29,80,548/-. During search, the partner of the assessee-firm Shri Mehmoodbhai admitted Rs.20 lacs as unaccounted investment in bungalow in reply to question No.40 of the statement dated 17/01/2007. It was asserted by the AO that the assessee failed to produce any bills of construction of the bungalow at the time of search or even in the post search investigations. The AO found that the assessee-firm has disclosed only Rs.7,77,820/- (in AY 2007-08) in the return filed after search as against the admitted disclosure towards bungalow construction of Rs.20 lakhs. The AO accordingly made a differential addition of Rs.13,28,717/- for the AY 2004-05. The AO simultaneously made reference to the valuation cell for determination of the correct valuation of the bungalow under section 142A of the Act. Pending report of the Valuation Officer, the assessment was framed. The report of the Valuation Officer as called for in the course of assessment was received after the assessment order was made.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -5-
5. As per valuation Officer's Report, the fair cost of construction was reported at a significantly higher figure as tabulated hereunder:-
Sr.No. Period of A.Y. Expenditure Assessed cost Difference Construction as stated by of assessee construction
1. 2003-04 2004-05 67,59,874/- 1,20,37,575/- 55,77,701/-
2. 2005-06 2006-07 5,00,000/- 8,90,370/- 3,90,370/- 3 2006-07 2007-08 7,77,820/- 13,85,095/- 6,07,275/-
Total 80,37,694/- 1,43,13,040/- 62,75,346/-
6. The Commissioner of Income Tax in exercise of revisional power vested under s.263 sought to review the aforesaid assessment order passed under section 153A of the Act relevant to AY 2004-05 on account of aforesaid the differences in the cost of construction reported by the Valuation Cell. Show-cause notice under s.263 of the Act was issued for various assessment years seeking explanation from the assessee whereby question towards enhancement or cancellation of the assessment order was raised in view of the valuation report so received subsequent to the assessment order. The CIT in its order passed under s.263 of the Act (which is under challenge) observed that the assessee did not comply with the show-cause notice under s.263 at all. The CIT observed that as per the valuation report, the assessed cost of construction for the assessment year 2004-05 under consideration stands at Rs.1,20,37,575/- as against the expenditure of Rs.67,59,874/- as stated to be incurred by the assessee. Consequently, the CIT observed that a difference of IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -6- Rs.55,77,701/- in the valuation of investment in construction was found which remains to be assessed. The CIT accordingly observed that the order passed by the AO under s.153A is erroneous in so far as prejudicial to the interests of the revenue and accordingly set aside the assessment order for fresh adjudication.
7. The aforesaid order of the CIT passed under s.263 dated 08/02/2011 is sought to be agitated in the present appeal.
8. The Ld.AR for the assessee M.K. Patel, at the outset, submitted that the controversy revolves around the correctness of the cost of construction of bungalow which was shown in the regular books of accounts and the balance-sheet of the assessee. The Ld.AR vehemently submitted that no incriminating documents/material was found during search regarding alleged unaccounted investment in bungalow. The Ld.AR canvassed that adhoc addition of Rs.20 lacs was made in the statement during the search without reference to any incriminating material. The entire amount of aforesaid income declared has been assessed under s.143(3) rws 153A of the Act. Whereas Rs.7,77,820/- was included by the assessee in the return of income filed under s.153A, the balance amount of Rs.13,28,717/- was added by the AO in the assessment framed under s.143(3) r.w.s. 153A of the Act. The Ld.AR IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -7- contended that during the course of search proceedings as well as during the assessment, all the details, bills & vouchers were filed by the assessee and no defect were found therein by the revenue. The Ld.AR contended that the action of the CIT under s.263 of the Act is based on Department Valuation Officer's (DVOs) Report obtained after the assessment under s.153A of the Act. The Ld.AR contended that in view of the decision of Hon'ble Gujarat High Court in the case of Saumya Constructions in Tax Appeal No.24 of 2016 order dated 14/03/2016 no such addition can be made in the search assessment under s.143(3) rws 153A of the Act until and unless any incriminating material was found during the search. The ld.AR accordingly contended that addition based on DVO's Report is not sustainable in assessment order passed under s.153A rws 143(3) of the Act. Thus, no error can be found with the assessment order passed under s.153A which is prejudicial to the interest of revenue. The Ld.AR also pointed out that DVO's valuation cannot be sound basis for making additions in search assessment. He supported this contention by the decision of Co-ordinate Bench Ahmedabad Tribunal in the case of Jayantilal T.Jariwala in IT(ss)A No.65/Ahd/2009 order dated 29/10/2015. The Ld.AR accordingly submitted that the jurisdiction assumed by the CIT under s.263 for revision of the assessment order under s.153A of the Act suffers from inherent jurisdictional defect and thus vitiated in law. He accordingly urged that order passed under s.263 be set aside.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -8-
9. The Ld.DR Mr. Jagadish CIT-DR, on the other hand, contended that in the course of search in the case of the assessee herein, an opulent bungalow of 'palatial' class was found. The bills/vouchers etc. to support the cost of the construction of the bungalow were asked by the search team in the course of the search as well as in the post search proceedings. However, no documentary evidence was furnished. The assessment was completed based on adhoc declarations made by the assessee in the course of search under s.132(4) to cover the unaccounted cost incurred in aforesaid bungalow. However, in order to find out the proper and correct cost of construction of the bungalow, the reference under s.142A was made to the valuation officer. Pending the receipt of the valuation report, the assessment was completed which was found erroneous and prejudicial to the interest of the Revenue owing to a vast difference in the declaration made towards the cost of construction as against the true and fair cost involved in such construction. The Ld.DR accordingly contended with force that highly luxurious bungalow was found, the cost of construction of which could not be supported by the assessee in the search proceedings by any bills. An estimated declarations made by the assessee was later on found to be untrue. Thus, a case of under declaration of the cost of construction emerged. Hence, the CIT was fully justified in invoking section 263 of the Act on receipt IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO -9- of valuation report on the basis of assessment records (including valuation report) before it within the limitation period available for initiating such action. The Ld.DR accordingly contended that the argument advanced on behalf of the assessee that no incriminating documents were found in the course of search proceedings is fallacious to its core. The assessee has failed to avail the opportunity offered by the CIT to rebut the logical questions emerged on receipt of the valuation report. Thus, the action of the CIT cannot be faulted in exercising its revisional powers. The Ld.DR further contended that assessment order has been merely set aside and the assessee was offered opportunity to explain and rebut contents of the valuation report if it so desires before the AO. He therefore urged that no interference with the action of the CIT is called for.
10. We have considered the rival submissions and perused the orders of the authorities below and case laws cited. The short question in the present appeal is whether the CIT was justified in invoking section 263 of the Act in the facts of the present case as noted above. In terms of s.263 of the Act, the revisional authority may call for record and examine the record of any proceedings under the Income Tax Act and exercise revisional powers on satisfaction of conditions as prescribed under s.263 of the Act. The 'record' for the purpose of section 263 IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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means record as it exists at the time of action of the revisional authority. Thus, record includes not only the records as it stands at the time when the order in question was passed by the AO but also include the documents which have come on record subsequent to the assessment. Thus, the examination by the Commissioner is not required to be confined to the records existing at the time of assessment in view of the decision of Hon'ble Supreme Court in the case of CIT vs. Manjunathesware Packing Products 231 ITR 53(SC). The valuation report, in the instant case, was not available at the time of assessment but was received post-assessment which had a material bearing on the assessment so completed. The valuation revealed that the cost of construction adopted by the AO keeping in mind the declaration made by the assessee at the time of search was not in confirmity with the true or fair costs thereof. Consequently, it will not be out of reckoning to say that the order of the AO (subject matter of revision) suffers from errors which is prejudicial to the interests of the revenue. Therefore, the action of the CIT for assumption of jurisdiction under s.263 cannot be prima- facie faulted.
11. The second question that arises is whether the CIT can exercise power under s.263 in the facts of the case where, allegedly, no incriminating documents relatable to the construction of the bungalow IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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was found. Thus, a question that requires to be answered is whether when the AO itself is not alleged to be competent to make the additions on account of differences reported by the valuation report in the absence of any incriminating documents, per se, whether the CIT can assume jurisdiction under s.263 of the Act or not. Reliance in this regard was placed by Assessee on the decision of Hon'ble Gujarat High Court in the case of Pr.CIT vs. Soumya Construction Pvt.Ltd. in Tax Appeal No.24 of 2016 order dated 14/03/2016.
11.1. Citing reference to the aforesaid decision, it was contended on behalf of the assessee that the AO while framing assessment under S.153A of the Act may make additions having regard to incriminating material only found as a consequence of search.
11.2. Bearing this legal proposition in mind, we examine the facts of the case. In the instant case, as noted above, the assessee was found to be in control and possession of a palatial and opulent bungalow in the course of search. The assessee could not corroborate the cost of construction of the bungalow as recorded in the books of accounts with supporting bills, etc. qua what was physically found in the course of search. Thus, while the cost of investment in bungalow was purportedly recorded in the books of accounts, the true value thereof could not be established by IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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supporting papers and documents. These facts have been stated and re- stated by the lower authorities. The assessee having found itself at the slander ground readily offered an estimated amount of Rs.20 lakhs as unrecorded component of the cost of construction of bungalow. The aforesaid amount of Rs.20 lakhs was assessed in the hands of searched persons under s.153A, subject however, to the true determination of appropriate investment cost of the aforesaid bungalow. For this purpose, the AO referred the matter to the valuation cell in exercise of power under 142A, the report whereof was received subsequent to the completion of the assessment. The valuation report revealed vast difference between the investment cost adopted by the assessee (including the amount of declaration) and the estimated cost. The aforesaid difference in our view, bears proximate and rational connection to the determination of true undisclosed income owing to event of search The investment cost of the bungalow in question was taken note of in the search proceedings and enquiry thereon was conducted under s.132(4) as well as post search. The assessee failed to offer satisfactory corroboration towards outlay on construction of bungalow. Therefore, the endeavour of the AO to explore the true value of the palatial bungalow and consequently truthfulness of the adhoc admission was within its scope of power available under s.153A of the Act.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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11.3 Be that as it may, in the captioned appeal, the scope of power of CIT under s.263 is in challenge. The legality of assessment proceedings under s.153A with reference to existence of 'incriminating material' cannot be challenged in s.263 proceedings. The assessment order passed under s.153A thus subsists as valid order and continues to draw legitimacy. The application of s.263 on a legal and subsisting order of AO is in review in present appeal which is required to be tested on the parameters inbuilt in s.263. At this subsequent stage of review, the jurisdictional aspects of assessment under s.153A cannot, in our opinion, be weighed.
11.4 The reference made under s.142A for determining the proper value of the investment in bungalow cannot be seen as independent enquiry unconnected to the events occurred at the time of search. The absence of documentation to support the investment in bungalow found at the time of search in itself incriminates the assessee. The onus was therefore on the assessee to rebut the inference of undisclosed investment. Having failed to do so, the assessee offered an estimated amount, the truthfulness of which was put under aspersion on account of the valuation report prepared by a statutory functionary. Under these circumstances, the case made out on behalf of assessee that the addition could not have been IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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sustained on the basis of valuation report in a search assessment is totally devoid of merit in the context of the facts of the case.
11.5. Thus, calling of report by the AO and consequent and action of the CIT vs. 263 are found to be within the domain of the respective authorities and cannot thus be discredited. Consequently, we do not force in the substantive ground for inapplicability of 263 canvassed in the course of hearing before us. The reliance placed on behalf of the Assessee in the case of ACIT vs. Jayanti T.Jariwala (supra) to assail the reference to valuation officer is grossly misplaced. The facts in that case are materially different. No incriminating documents were found in search in such case. In the instant case, the palatial bungalow was found the cost of which was not supported at all by bills and evidences. The assertions made on behalf of the assessee for existence of supporting bills and documents towards cost of construction purportedly recorded in books is bald and unsupported. We are thus not inclined to dwell on other aspects of the proposition made in this regard.
12. We simultaneously note that the assessee raised few other connected grounds assailing the action of the CIT. We observe that the ld.AR for the assessee did not address us on any of the remaining grounds. However, we simultaneously observe that the action of CIT under s.263 IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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alleged to be without affording sufficient and reasonable opportunity lacks merit. As seen from the order of the CIT, the opportunity granted by the Commissioner was squandered by the assessee for which assessee himself has only to be blamed for. No reasons have been assigned before to us as to what prevented the assessee to avail the opportunity so provided. Therefore, we do not see any justification in such complaint. The assessee also seeks to raise a point that the assessment order under review of CIT was subject matter of appeal before the CIT(A) and thus, owing to doctrine of merger, the order of the AO stands excluded from the scope and ambit of S.263. We do not find any merit in this line of argument either. The quantum of undisclosed income arising out of bungalow was neither subject matter of appeal nor determined by the CIT(A) in an appellate proceedings before him. Therefore, the issue unconnected to the appellate proceedings before the CIT(A) was subjected to the proceedings under s.263 for which there does not appear to be any impediment.
13. Consequently, appeal of the assessee in IT(ss)A No.271/Ahd/2011 for AY 2004-05 is dismissed.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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ITA No.615/Ahd/2012 for AY 2004-0514. The present appeal of the assessee emanates from the consequential assessment order arising as a sequel to action of the CIT under the provisions of section 263 challenged in IT(ss)A No.271/Ahd/2011(supra).
15. The assessment order made earlier under s.153A was revised and an addition of Rs.52,77,701/- was made by AO in pursuance of the direction of the CIT under s.263 of the Act. In first appeal thereon, the CIT(A) has recorded a finding of fact that investment in bungalow is shown in the balance-sheet of the assessee-firm. The assessee-firm has not pointed out any defect in the valuation report resulting in disputed addition of Rs.52,77,700/-. Resultantly, the CIT(A) confirmed the action of AO.
16. In the appeal before Tribunal, it was represented to be a consequential appeal and has not been addressed in any elaboration in the course of hearing. However, the main plea on behalf of the assessee appears to be that no independent evidence of incurring of unaccounted IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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expenditure of Rs.52,77,700/- was found in the course of search and therefore the addition based on the valuation report is not justified.
17. We do not subscribe to the aforesaid argument. A tangible asset in the form of immovable property was found in the course of search. The partner of the assessee-firm admitted presence of undisclosed investment in the aforesaid property albeit at a smaller figure. Thus, the consummation of undisclosed income cannot be doubted. It is only the quantum of undisclosed component of investment which is sought to be vexed with reference to the absence of any incriminating evidence. The valuation report issued by the department valuer is available before the revenue which seeks to implicate the assessee on the quantum of undisclosed investment. No bias of any substantive nature in the valuation report of DVO is on record. The assessee has failed to discharge onus to rebut the allegation of additional differential component of undisclosed investment alleged to be Rs.52,77,700/-. Therefore, in the absence of any cogent explanation forthcoming from the assessee, we do not seek to disturb the elaborate findings of the CIT(A) in this regard. We also note the ground raised by the assessee that the bungalow is not owned by the assessee-firm. In this connection, we also note that this point has also been addressed by the CIT(A). It has been noted that the disclosed component of the bungalow was declared in IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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the books of accounts in the partnership-firm. As a corollary, the undisclosed component is also required to be tagged along with disclosed component. Thus, in our view, elaborate order of CIT(A) does not call for any interference.
18. In view of the aforesaid discussion, we find no merit in the appeal of the assessee. As a result, appeal of the assessee in ITA No.615/Ahd/2013 for AY 2004-05 is dismissed.
IT(ss)A No.541/Ahd/2011 for AY 2004-05
19. In this appeal, the assessee challenged the differential addition of Rs.13,28,717/- in the pre-revised assessment under s.153A of the Act on the basis of statement recorded during the search.
20. As noted earlier, the assessee had declared Rs.20 lakhs towards undisclosed component of the investment in bungalow in the statement under S.132(4) in the course of search. However, the assessee admitted an amount of Rs.7,77,820/- only in the return of income under s.153A of the Act. The balance amount of Rs.13,28,717/- offered in search was added in the course of assessment proceedings under s.153A of the Act pursuant to search. The aforesaid amount merely represents differential figure between amount offered qua amount declared in the statement IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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under s.132(4) of the Act. The confessional statement under s.132(4) has not been shown to be rebutted or retracted. Therefore, the sanctity of undisclosed investment in the residential bungalow which was admitted by the assessee himself and not discredited at any stage, cannot be disturbed. Therefore, the action of the AO in making aforesaid addition based on the confession of the assessee himself cannot be faulted. The CIT(A) is thus right in upholding the action of the AO.
21. In the result, appeal of the assessee in IT(ss)A No.541/Ahd/2011 for AY 2004-05 is dismissed.
IT(SS)A No.272/Ahd/2011 - AY 2006-07
22. The present appeal concerns AY 2006-07. As noted in the earlier in appeals relevant to AY 2004-05, a search under s.132 of the Act was carried out in the case of Jamadar Group cases on 17/01/2007. The assessment under s.153A was made pursuant to the aforesaid search action for various years including AY 2006-07 herein. To reiterate the facts, during the search under s.132 in the cases of Jamadar Group, it was noticed by the Income Tax Department that the assessee has constructed a palatial bungalow near village Asuriya in Bharuch. The cost of construction of bungalow was shown at Rs.59,31,157/- in the books of IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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accounts of Jamadar Travels. The AO observed in the assessment proceedings under s.153A of the Act that the assessee did not produce any details of construction at the time of search and in post search investigation. However, the assessee admitted disclosure of Rs.20 lakhs as unaccounted investment in the bungalow. An amount of Rs.13,28,717/- was added in the hands of Shri Vijesh Jamadar protectively and M/s.Jamadar Travels substantively for the AY 2004-05. As in the case of Jamadar Travels, the assessee disclosed only Rs.7,77,820/- (in AY 2007-08) as against the admitted disclosure of Rs.20 lakhs on this account. During the course of assessment proceedings, for the assessment years covered in 153A proceedings, reference was made to the Valuation Cell under s.142A of the Act. The report of the Valuation Officer was received subsequent to the assessment order passed under s.153A of the Act. As per the Valuation report by DVO, the assessed cost of construction was tabulated for the different assessment years in para No.5 of this order. As per DVO's report, the assessed cost of construction for AY 2006-07 is Rs.8,90,370/- as against expenditure of Rs.5 lakhs stated by Assessee. The income was thus found to be under assessed to the extent of Rs.3,90,370/- as per Valuation Report.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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23. Based on the subsequent report from the Valuation Officer, the action under s.263 of the Act was taken in various assessment years in question, the grievances of the assessee on the maintainability of action under s.263 on identical grounds as raised in the present appeal has been dealt with earlier appeal relevant to AY 2004-05 in IT(ss) No.271/Ahd/2010 hereinabove. It was found therein that action of the CIT under s.263 of the Act was within the authority of law and thus cannot be faulted. Detailed reasons were provided for coming to such conclusion. The facts in issue are identical except for the variations on account of quantum and change in assessment year. In parity with the conclusion drawn for the assessment year 2004-05 on analogues facts, we decline to interfere with the order of the CIT passed under s.263 of the Act. Consequently, appeal in IT(ss)A No.272/Ahd/2011 for AY 2006-07 is dismissed.
IT(SS)A No.158/Ahd/2014 - AY 2006-07
24. The present appeal is the consequence of assessment order passed under s.143(3) r.w.s.153A r.w.s.263 of the Act dated 20/12/2011 which was confirmed by the CIT(A) in its order dated 03/02/2014.
25. For the parity of reasoning given for ITA No.615/Ahd/2012 for AY 2004-05, we do not find any merit in the appeal of the assessee. As a IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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result, the appeal of the Assessee in IT(ss)A No.158/Ahd/2014 for AY 2006-07 is dismissed.
ITA No.1086/Ahd/2011 - AY 2007-0826. The ground of appeal raised by the assessee against the order of CIT under s.263 of the Act dated 08/02/2011 passed for AY 2007-08 are similar to IT(SS)A No.271/Ahd/2010 for AY 2004-05.
27. As per DVO's report, the assessed cost of construction for AY 2007-08 is Rs.13,85,095/- as against the expenditure of Rs.7,77,820/- stated to be inward by the assessee. Thus, a difference of Rs.6,07,275/- was found in the investment made after assesses under S.153A was carried out.
28. The facts being analogous to IT(ss)A No.271 of 2005, no interference with the order of the CIT under s.263 of the Act is called for in parity. In the result, appeal of the assessee in ITANo.1086/Ahd/2011 for AY 2007-08 is dismissed.
ITA No.616/Ahd/2013 - AY 2007-0829. The present appeal is against the assessment order passed under s.143(3) r.w.s.153A(b) r.w.s.263 of the Act dated 20/12/2011 which was in turn confirmed by the CIT(A) in its order dated 31/12/2012. The IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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present appeal is thus consequential to ITA No.1086/Ahd/2011(supra). The facts and issue involved are analogous to IT(SS)A No.271/Ahd/2010 (supra) and consequential appeal in ITA No.615/Ahd/2013. In parity, we decline to interfere with the order passed in consequence of direction of CIT under s.263 of the Act.
30. In the result, assessee's appeal in ITA No.616/Ahd/2013 for AY 2007-08 is dismissed.
IT(SS)A No.52/Ahd/2014 - AY 2006-07
31. The impugned appeal relates to penalty of Rs.1,70,000/- under s.271(1)(c) of the Act on the differential income returned under s.139(1) of the Act prior to search (Rs.13,65,603/-) qua the income returned under s.153A in consequence of search (Rs.18,62,049). The AO imposed penalty on the understated income of Rs.4,96,446/- in the original return of income qua the return filed in response to notice under s.153A holding the same as concealed income of the assessee.
32. It is the case of the assessee that in view of the decision of the Hon'ble Gujarat High Court in the case of Kirit Dahyabhai Patel vs. ACIT (2015) 280 CRT 216 (Guj.), no penalty can be imposed once the IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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undisclosed income is reported in the subsequent return under s.153A filed in pursuance of the search.
33. The issue has been dealt with in great length in the case of Vijay K. Shah in IT(ss)A Nos.54 to 57/Ahd/2014 for AYs 2003-04 to 2006-07, order dated 13/04/2017. The relevant para dealing with the contention of the assessee is self-explanatory and thus is reproduced herewith.
"9. Notwithstanding that the issue is affirmed in favour of the assessee in the given facts of the case, we are equally inclined to dwell upon the cardinal plea raised on behalf of the assessee for the proposition that as soon as return is filed under s.153A, the imposition of penalty or otherwise has to be seen only with reference to the return filed under s.153A and return filed earlier under s.139 prior to search showing lesser quantum of income fades into insignificance in all circumstances. For this proposition, the decision of the Hon'ble Gujarat High Court in Kirit Dahyabhai Patel vs. ACIT (2015) 280 CTR 216 (Guj.) was heavily relied upon in the course of hearing. In essence thus, it is the case of the assessee that income discovered as a result of search and included in the return filed under s.153A in post search proceedings are not susceptible to penalty under s.271(1)(c) of the Act at all notwithstanding Explanation-5 subsisting in statute at the relevant time.
9.1. We straight away reckon that such sweeping proposition does not find any semblance of acceptability. As noted earlier, Explanation-5 to section 271(1)(c) specifically addresses the aforesaid situation where it is specifically provided that notwithstanding the fact that undisclosed income found as a result of search was declared in the return of income furnished after the date of search, the assessee shall be deemed to fall within the sweep of section 271(1)(c) unless the assessee is covered by 'exit route' provided in the Explanation-5 itself. Thus, the aforesaid proposition canvassed by the assessee that once the return is filed by the assessee after the search in response to notice issued under s.153A including undisclosed income IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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discovered in the course of search, the assessee gets indefeasible right to shun away penalty proceedings on such undisclosed income is squarely at loggerheads with deeming fiction created under Explanation-5 for this purpose. Needless to say, this generic proposition towards non-applicability of penalty on undisclosed income, if seen in affirmative, will render the legislative fiat under Explanation-5 relatable to search cases as otiose and infructuous. As can be seen, the benefit of immunity provided under Explanation-5 is well defined and structured. As provided, it is available only in respect of such year where the due date of filing of the return has not expired before the date of search subject to fulfillment of conditions as contemplated in the said Explanation.
9.2. We shall now advert to the decision in the case of Kirit Dahyabhai Patel (supra) referred to and extensively relied upon on behalf of the assessee. We notice that in that case, the 'substantial question of law' framed for decision before the Hon'ble Gujarat High Court was confined to availability of immunity under clause(2) to Explanation-5 of Section 271(1)(c) in the facts of the case. For ready reference, it is reproduced hereunder:-
"Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in restoring the penalty imposed under Section 271(1)(c) of the Act holding that benefit under explanation 5 to Section 271(1)(c) of the Act would be available only for period where due date for filing the return under Section 139(1) of the Act had not expired?"
In the context of above question posed, the Hon'ble Gujarat High Court after referring to series of decisions of various Courts found that the assessee has broadly satisfied all the conditions required for claiming immunity from payment of penalty under s.271(1)(c) of the Act.
9.3. Significantly, the assessee himself after having raised the general proposition towards claiming immunity towards undisclosed income included in S.153A return, in exercise of its wisdom, paused and went on to withdraw IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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the same at a later stage before the Ld.Third Member in the ITAT proceedings in Kirit Dahyabhai Patel vs. ACIT reported in (2009) 121 ITD 159 (TM) which decision was subject matter of appeal before the Hon'ble Gujarat High Court. Thus, apparently, the Assessee himself while in appeal before Hon'ble High Court, was no longer aggrieved by the proposition that return under s.153A is amenable to penalty provisions under s.271(1)(c) of the Act. To elaborate, the Ld.Third Member clearly recorded a finding that the assessee has not disputed the position that section 271(1)(c) is applicable to an assessment made under s.153A. The substantive question that emerged before the Ld.Third Member of ITAT on account of difference of opinion was whether immunity granted under Explanation-5(2) to section 271(1)(c) is available to the assessee. Thus, on nuanced and contextual analysis of the judgement rendered by the Hon'ble Gujarat High Court in appeal under s.260A of the Act, it is difficult to reckon the case made out by the assessee that additional income declared in the post search returns would be entitled to immunity from penalty in a sweeping manner regardless of the satisfaction of conditions as provided for its non-applicability as enumerated under clause(2) of Explanation-5.
9.4. Needless to say, sentences used while rendering a judgment cannot be read in isolation and their purport and contents are derived from their context. As noted, the law is codified for applicability of penalty in search cases. The legislature has made conscious distinction between the cases where the return of income has already been filed prior to search qua the cases where the return is yet to be filed and has put them on a different pedestal. It is trite law that a judgement cannot be read out of context in which the question arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of a Court divorced from the context of the question in consideration and to treat it to be the complete law declared by the Court. A judgment must be read as a whole and the observations from the judgment have to be considered in the light of questions which were presented before the Court. A decision of the Court takes its colour from its question in which it is rendered as enumerated in CIT vs. Sun Engineering works Pvt.Ltd. (1992) 198 ITR 297 (SC). Thus, context holds the key and the decision of the Court has to be read in the context of the facts involved therein and not on the IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
- 27 -
basis of what logically flows there from. A stray sentence cannot be allowed to be put into service to draw a meaning which was never probably meant by the author himself. A judgment is not to be read as statute. Thus, in the light of question framed for decision by Hon'ble Gujarat High Court, we are inclined to hold that the abstract proposition of non-applicability of penalty proceedings in all circumstances (wherever undisclosed income has been included in the return filed post-search) is singularly misplaced and is not supported by the factual context in which the decision in Kirit Dahyabhai Patel(supra) was rendered."
34. In view of the aforesaid findings, we do not find any merit in the plea of the assessee. No other plea has been raised on merits to absolve the assessee from imposition of penalty. Consequently, the appeal of the assessee in IT(ss)A No.52/Ahd/2014 for AY 2006-07 is dismissed.
IT(SS) No.48/Ahd/2014 - AY 2001-02
35. The present appeal of the assessee is against the imposition of penalty under s.271(1)(c) on the income understated in the original return of income filed under s.139(1) prior to search qua the return of income filed under s.153A of the Act subsequent to search. The assessee originally filed return of income under S.139(1) at Rs.1,96,764/-. Subsequent to search, in pursuance of notice under s.153A of the Act, the assessee filed income under S.153A at Rs.3,07,421/-. The AO considered the additional income of Rs.1,10,657/- included in the IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
- 28 -
subsequent return under s.153A as concealed income of the assessee and accordingly imposed penalty of Rs.38,840/- thereon.
36. In the appeal before us, the reliance was placed on the decision of Kirit Dahyabhai Patel(supra) by the assessee for exoneration from penalty. In parity with the issue discussed in IT(SS)A No.52/Ahd/2014 , we do not subscribe to the plea of the assessee. No other plea has been raised on behalf of the assessee at the time of hearing to dislodge peanlty. Consequently, appeal of the assessee in IT(SS)A No.48/Ahd/2014 is dismissed.
IT(SS)A No.18/Ahd/2014 - AY 2005-06
37. The present appeal is against the order of the AO towards imposition of penalty on income underreported in the original return filed under s.139(1) prior to search qua the income return filed under s.153A subsequent to search.
38. The assessee filed return of income under s.139(1) prior to search at Rs.52,078/-. Subsequent to search, the return was filed at Rs.1,00,691/- in pursuance of notice under s.153A of the Act. The AO considered the additional income of Rs.52,078/- filed in the later return post search as concealed income of the assessee and imposed penalty of Rs.14,580/- thereon. The CIT(A) confirmed the action of the AO.
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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39. The assessee seeks to rely upon the decision of the Hon'ble Gujarat High Court in the case of Kirit Dahyabhai Patel(supra) for relief towards imposition of penalty on the additional income reported in the subsequent return.
40. In parity with IT(SS)A No.52/Ahd/2014 for AY 2006-07 (supra), we do not find any infirmity in the order of the CIT(A) appealed against.
41. In the result, appeal of the assessee in IT(SS)A No.18/Ahd/2014 for AY 2005-06 is dismissed.
IT(SS)A No.96/Ahd/2014 - AY 2002-03
42. This appeal is against the confirmation of penalty of Rs.10,520/- by the CIT(A) as imposed by the AO under s.271(1)(c) of the Act. The facts in issue are identical to appeal in IT(ss)A No.18/Ahd/2014 for AY 2005-06(supra). In this appeal, the assessee declared income of Rs.2,72,471/- in pursuance of notice under s.153A of the Act filed post search as against the income returned at Rs.2,38,091/- in the original return filed under s.139(1) of the Act. The AO deemed the differential income between the returns filed post-search and pre-search as concealed IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT Babubhai P.Jamadar vs. ITO Mohmoodbhai P.Jamadar vs. ITO
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income of the assessee and accordingly imposed penalty of Rs.10,520/- thereon.
43. The facts being analogous, we decline to interfere with the order of the CIT(A) confirming the penalty in parity with IT(ss)A No.18/Ahd/2014(supra).
44. In the result, assessee's appeal in IT(SS)A No.96/Ahd/2014 for AY 2002-03 is dismissed.
45. In the combined result, all the appeals of the assessees are dismissed.
This Order pronounced in Open Court on 20/ 04 /2017
Sd/- Sd/-
(महावीर साद) ( द प कुमार के डया)
या यक सद य ले खा सद य
( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 20/ 04 /2017
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
IT(ss)A Nos.271/Ahd/2011 & 10 Ors.
Jamadar Travels vs. ACIT/CIT
Babubhai P.Jamadar vs. ITO
Mohmoodbhai P.Jamadar vs. ITO
- 31 -
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ0 / The Appellant
2. 1यथ0 / The Respondent.
3. संबं3धत आयकर आयु5त / Concerned CIT
4. आयकर आयु5त(अपील) / The CIT(A)-IV, Ahmedabad
5. 6वभागीय त न3ध, आयकर अपील य अ3धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स1या6पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 10/17.4.17 (dictation-pad 41+20 pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...10/17.4.2017
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......20/4/17
7. Date on which the file goes to the Bench Clerk.....................20/4/17
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................