Income Tax Appellate Tribunal - Ahmedabad
Mahendra A. Patel, Ahmedabad vs Department Of Income Tax on 11 April, 2012
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'सी
सी'
सी अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" C " BENCH, AHMEDABAD
सव[ौी मुकुल कुमार ौावत, Ûयाियक सदःय एवं ौी टȣ.आर.मीणा, लेखा सदःय के सम¢ ।
BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER AND
SHRI T.R. MEENA, ACCOUNTANT MEMBER
Sl. ITA No(s) Assessment Appeal(s) by
No(s). Year(s)
Appellant Respondent(s)
(s)
1. 866/Ahd/2008 1998-99 DCIT Shri Sandip M.Patel
Central 199/A, Patel Vas
Circle-2(2) Kocharab
Ahmedabad Paldi
Ahmedabad
PAN:AGEPP5176A
2. 867/Ahd/2008 1999-2000 -do-Revenue Shri Mahendra
A.Patel
199/A, Patel Vas
Ahmedabad
PAN:ABBPP5057A
3. 868/Ahd/2008 2000-01 Revenue ShriMahendraA.Patel
4. 869/Ahd/2008 2001-02 Revenue Shri MahendraAPatel
5. 870/Ahd/2008 2003-04 Revenue Shri MahendraAPatel
6. 871/Ahd/2008 2001-02 Revenue Shri Sandip M.Patel
7. 1016/Ahd/2008 2002-03 Shri Mahendra Revenue
A.Patel
8. 1339/Ahd/2008 2002-03 Revenue Shri MahendraAPatel
Revenue by : Shri S.K.Gupta, CIT-D.R.
Assessee(s) by : Shri S.N.Divatia
सुनवाई कȧ तारȣख/
/ Date of Hearing : 11/04/2012
घोषणा कȧ तारȣख /Date of Pronouncement: 30/04/2002
आदे श/O R D E R
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
In the case of Mahendra A.Patel for A.Y. 2002-03 cross appeals have been filed arising from the order of the CIT(A)-III, Ahmedabad dated 31.01.2008. For rest of the years, i.e. A.Ys. 1999-2000 2000-01, ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -2- 2001-02 & 2003-04 Revenue is in appeal. For A.Ys. 1999-2000, 2001- 02 and 2003-04 separate orders have been passed by ld.CIT(A) all dated 31/10/2007 and for A.Y. 2000-01 the date of order is 27/11/2007. In the case of Sandip M.Patel, Revenue is in appeal for AYs 1998-99 & 2001-02 and the orders of the ld.CIT(A) are respectively dated 19/10/2007 & 23/10/2007. In all these eight appeals facts are stated to be identical, hence we have proceeded to decide all these appeals by this common order.
2. At the outset, we have been informed that for A.Ys. 1999-2000, 2000-01, 2001-02 & 2003-04 the respondent-assessee has filed cross objections, however, those cross objections were dismissed, being withdrawn by the assessee, vide ITAT "C" Bench Ahmedabad order dated 01/11/2011. The Respected Co-ordinate Bench has also noted that those cross objections were belatedly filed and time-barred by 1170 days as well. Considering the said request of withdrawal, the Bench has decided as follows:-
"3. It may be noted that in all the Cross Objections the assessee challenged initiation of proceedings u/s.153C of the IT Act. The learned Counsel for the assessee submitted that the grounds of Cross Objections have been decided by the learned CIT(A) against the assessee and submitted that delay in filing the Cross Objections was due to the bona fide belief that the assessee could support the order passed by the learned CIT(A) without filing the Cross Objections because Rule 27 of the Appellate Tribunal Rules permit the Respondent in departmental appeal to support the order appealed against on any of the grounds decided against him. He has, therefore, submitted that the assessee however, due to ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -3- abandoned precaution filed the Cross Objections. The learned DR submitted that the points raised in the Cross Objections are decided against the assessee by the learned CIT(A) and submitted that the above reason would not disclose any sufficient cause for filing the Cross Objections belatedly. The learned DR submitted that the apprehension of the assessee is misplaced in moving the Cross Objections; therefore, same should be dismissed being time barred. The learned Counsel for the assessee in view of the above facts stated that the assessee may be permitted to withdraw the Cross Objections with liberty to argue the validity of the assessment in the departmental appeal being the Respondent.
4. On consideration of the above facts, we permit the assessee to withdraw the Cross Objections Rule 27 of the Appellate Tribunal Rules provides that the Respondent (assessee) though he may not have appealed, may support the order appealed against him on any of the grounds decided against him. Since the points raised in the Cross Objections have been decided by the learned CIT(A) against the assessee, therefore, remedy under Rule 27 of the Appellate Tribunal Rules is available to the assessee and as such no sufficient cause is disclosed in the affidavit of the assessee for explaining the delay in filing the Cross Objections. The Cross Objections of the assessee are accordingly dismissed as withdrawn with liberty to the assessee to argue the same points at the time of disposal of the departmental appeals."
2.1. Before we proceed further, we have noticed from the order-sheets of this case that in the past these appeals were adjourned on number of occasion due to the reason that the Ld.Counsel has requested to consolidate these appeals along with an appeal of this very assessee for A.Y 2004-05(ITA No.4575/ahd/2007) and an appeal of Shri Tarun Karia for A.Y. 2004-05 (ITA No.2310/Ahd/2010). At that time, prima-facie, it was felt that rest of the group of eight appeals, listed in the nomenclature, might be connected with A.Y. 2004-05 appeals. But the fact is that the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -4- directions of the Hon'ble Jurisdictional High Court in Tax Appeal No.1798 of 2010 order dated 19/10/2010 pertained to A.Y. 2004-05 and not for any other assessment years. Otherwise also, the issue involved in the case of Mahendra A.Patel for A.Y. 2004-05 is altogether different because of the fact that as per the grounds of appeal the only objection raised is that ld.CIT(A) ought to have held that the cash and jewellery requisitioned u/s.132A belonged to the assessee, i.e. Mahendra A.Patel and not Shri Dharan Karia. Likewise, in the case of Tarun D.Karia the issue is in respect of assessment of cash and jewellery in his hands. Considering these reasons, those two appeals for A.Y. 2004-05 have been segregated and we have decided to proceed with this group of eight appeals and those two appeals have been adjourned as per the notings on the order-sheet of those cases. We have made this clarificatory remark to overcome any confusion or misunderstanding, may arise in future.
3. At the start of the hearing, Ld.AR Mr. S.N.Divatia has raised an issue, that in the light of the observation of the ITAT "C" Bench order dt. 1.11.2011 (referred supra), the respondent-assessee is entitled to invoke the provisions of Rule 27 and thereupon wanted to challenge the initiation of proceedings u/s.153C of the I.T.Act. His vehement contention is that the withdrawal of Cross Objection was conditional as is appearing from the language of the said judgement of the Tribunal. The appellant has a right to raise a legal issue. Since the assessee wants to challenge the initiation of proceedings u/s.153C of IT Act, therefore the issue being a legal issue therefore the same can be raised at any stage of appeal. He has contested that even though the cross objections have ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -5- been withdrawn but under Rule 27 of Appellate Tribunal Rules, he may be permitted to raise this legal ground. In support of this contention, reliance is placed on the following decisions:-
Sl.No(s) In the case of .... Reported in...... 1. CIT vs. Abdul Rahman Sait 306 ITR 142 (Mad.) 2. Dahod Sahakari Kharid Vechan 282 ITR 321 (Guj.) Sangh Ltd. vs. CIT 3. DCIT vs. Turquoise Investment & 299 ITR 143 (M.P.) Finance Ltd. 4. ITO vs. Bloosom Floriculture 134 TTJ 51 (UO) 5. ACIT vs. M.P.Export Corporation 120 ITD 460 Ltd. 6. ITO vs. Smt. Gurinder Kaur 102 ITD 189 (Del) 7. DCIT vs. Anant Raj Industries Ltd. 124 ITD 284 (Del) 8. Deep Chand Kothari vs. CIT 171 ITR 381 (Raj.)
3.1. From the side of the Revenue, ld.DR Mr.S.K.Gupta has strongly objected this preliminary objection of ld.AR. Ld.DR has pleaded that such an issue on the face of records is irrelevant and obnoxious specially under circumstances when the assessee has opted to withdraw the cross objection. Those cross objections were hopelessly belated 1170 days. The cross-objector had no hope of condonation of such huge delay, therefore chosen to withdraw the same. It appears that ld.AR now wants to raise a substantial question of jurisdiction but for the disposal of the same there is no ground of appeal or any cross-objection as on date available before this Respected Bench. Even the assessee has not preferred any appeal, though ld.CIT(A) has adjudicated on the issue vide para-4 reproduced below:-
ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -6-
"4. On careful considerations of the submissions of the appellant, it is seen in respect of first ground of appeal agitating the validity of the assessment, that the AO had correctly assumed the jurisdiction and had specifically mentioned the fact of his satisfaction. In these circumstances, there was no infirmity in the action of the AO in assuming jurisdiction and in initiating the proceedings u/s.153C r.w.s. 153A of the Act. The related ground of appeal is rejected."
3.2. Ld. Commissioner Mr.Gupta has also raised an interesting argument that Rule 27 simply prescribes that a respondent may support the order appealed against. However, the ld.AR is trying to agitate/attack a finding of ld.CIT(A) on the issue of jurisdiction under the guise of ITAT Rule 27. He has no legal right to agitate under Rule 27, but the only right available is to support an order appealed against. Ld.DR has placed reliance on Kanpur Industrial Works vs. CIT 59 ITR 407 (Allah.) and B.R.Bamasi vs. CIT 83 ITR 223(Bom.).
3.3. A legal issue has been raised pertaining to the applicability of Rule 27 of Income Tax Rules, for ready reference, reproduced below:-
"Respondent may support order on grounds decided against him
27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him."
3.4. The meaning of the phraseology used in this Rule has been not been defined either in the I.T.Act or in the I.T.Rules. Therefore we have studied few case laws. The moot question is that the assessee-respondent ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -7- having not appealed against the order of the first appellate authority, whether entitled to contend the question of jurisdiction of the assessment in a Department's appeal before the Tribunal. Such a situation arises when the assessee has accepted the decision of CIT(A), but the department did not, so the Commissioner of Income-tax filed an appeal before the Tribunal against it. During the hearing of the appeal before the Tribunal it was admitted that although no appeal had been filed but also withdrawn the Cross Objection and that under rule 27 of the Income- tax Appellate Tribunal Rules, 1946, the respondent is entitled to support the order of the CIT(A) on any of the grounds decided against him though the respondent has not appealed and prayed that he be allowed to support the order on any ground even on the question of the jurisdiction. Assessee's counsel also pressed orally that he should be allowed to argue on the question of assessability also in view of Rule 27. It would mean that he would be cutting at the very root of the matter and if he is successful would completely destroy the CIT(A)'s order. So the question is that whether such an action through which an order could get annulled be termed as an action in support of it? Otherwise in this appeal the Revenue has challenged the quantum deletions and there is no ground in respect of the issue of jurisdiction. Rather the Revenue Deptt. ought not to be aggrieved since the validity of the invocation of Sec. 153C was decided in favour of the Revenue. Can the respondent - assessee be allowed to raise the fundamental issue of the assessability as such, when admittedly no appeal has been filed against the said verdict of CIT(A) and on top of it the Cross Objection has also been withdrawn?. To resolve the controversy we have to see the parallel provisions in the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -8- other act, i.e. Civil Procedure Code , rather that was the source of incorporation of Rule 27 in the Tribunal Rules. Before we go to that area of legislation it to be clarified that the Commissioner Appeal's powers are slated in sec 251(1)(a). He can confirm, reduce, enhance or annul the assessment. Therefore in exercise of those powers, the issue of validity of the provisions of Sec. 153C was decided in favour of the revenue and the impugned assessment order was not annulled. Reverting back, the law enacted and the procedure adopted in civil matters is as per the Order 41, rule 22(1), of Civil Procedure Code, to the effect that "any respondent, though he may not have appealed from any part of the decree, may not only support the decree on any of the grounds decided against him in the court below but take any cross-objection to the decree which he could have taken by way of appeal, provided he has filed such objection in the Appellate Court within one month from the date of service on him or his pleader " and it is in the form of a memorandum of appeal. This position of law has been elaborately explained by the Honble Allahbad High Court in the case of Kanpur Industrial Works 59 ITR 407 (All.) and the relevant portion is necessary to reproduce :-
"The Tribunal's power, vide sub-s. (4), is to "pass such orders thereon as it thinks fit". Rule 27 of the ITAT Rules is as follows:
"27. The respondent, though he may not have appealed, may support the order of the AAC on any of the grounds decided against him."
This provision reminds one of order 41, r. 22(1), CPC to the effect that "any respondent though he may not have appealed from any part of the decree, may not only support the decree on any of the grounds decided against him in the Court below but take any cross-objection to the decree which he could have taken by way of appeal, provided he has filed such objection in the appellate Court within one month from the date of service on him or his pleader" and it is in the form of a memorandum of appeal.
ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04 -9- When a trial Court decrees or dismisses a suit entirely, no difficulty arises about the respondent's rights in the appellate Court. In such a case the appeal, whether it is by the plaintiff or by the defendant, is in respect of the whole subject- matter of the suit (unless he gives up a portion of it and it is therefore out of consideration). Whatever is the judgment of the trial Court, whether accepting the plaintiff's case, or rejecting it, in toto, it may be based upon one ground or more than one ground. A plaintiff may have one, or more than one, ground of attack and similarly a defendant have may have one, or more than one, ground of defence. To simplify the discussion I would confine myself to one ground and two grounds of attack and one ground and two grounds of defence. When both grounds of attack are accepted by the trial Court, it cannot be doubted that the defendant-respondent has a right to urge that both of them are wrong. Actually in order to succeed in the appeal he must show that both are wrong. When both grounds of attack are rejected the plaintiff has right to urge that both or either of them is valid and in order to succeed he must show at least that either of them is valid. When both grounds of defence are accepted the plaintiff has a right to, and must, urge that both of them are untenable. When both grounds of defence are rejected the defendant has a right to urge that both or either of them is valid and cannot succeed unless he shows that at least either of them is valid. Complications arise when one ground of attack is accepted and the other rejected or one ground of defence is accepted and the other is rejected. When one ground of attack is accepted the appeal must of necessity be by the defendant because on either ground being accepted the judgment is in the plaintiff's favour and he cannot file an appeal merely against the finding rejecting the other ground of attack. An appeal lies from the operative judgment and not from the reasons in support of it or the findings given on the issues whether of fact or law on which the operative part of the judgment is based. A successful party cannot appeal merely to have a finding given adversely to him corrected; as notwithstanding the adverse finding the operative judgment is in his favour he is not aggrieved by it and cannot gain anything by appealing against the adverse finding. Similarly, when one of the two grounds of defence is accepted and the other is rejected, the appeal must be by the plaintiff and there can be no appeal by the defendant since the operative judgment is in his favour. When a defendant appeals he appeals from the acceptance of one ground of attack and if he succeeds the appeal must be allowed and the suit must be dismissed. But if the rejection of the other ground of attack is wrong, justice requires that the suit must not be dismissed because if there is one valid ground of attack the plaintiff must succeed. Consequently he must have an opportunity of urging in the appeal that the rejection by the trial Court of the other ground of attack was wrong. Since he could not appeal against the rejection of the other ground of the attack there is no question of his being barred by res judicata or estoppel from contending that it was wrongly rejected. This is the reason behind r. 22(1) of order 41, CPC. This result also follows from the doctrine that an appeal is a continuation of the suit and that in the absence of provisions to the contrary an appellate Court has all the powers of the trial Court in respect of the subject-matter of the suit and the whole suit is laid open before it (barring, of course, what has been given up in appeal). Both grounds of attack are again for consideration before the appellate Court, the one accepted by the trial Court and brought before it by the defendant- appellant and the other rejected by it and brought before it by the plaintiff- respondent in his oral argument. It is not necessary for the plaintiff even to file a cross-objection against the rejection, which is merely a substitute for an appeal. In ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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the same way when one ground of defence is accepted and the other rejected the defendant-respondent in the appeal filed by the plaintiff has a right to urge that the trial Court had wrongly rejected the other ground; if he succeeds the appeal will fail even though the plaintiff succeeds in showing that one ground was wrongly accepted. So far I have been dealing with decreeing or dismissing a suit in toto.
Now I come to the complicated case of a suit being decreed in part and dismissed in part. This is a case different from that of a suit being decreed on accepting one ground of attack and rejecting the other or a suit being dismissed on accepting the ground of defence and rejecting the other. When a suit is partly decreed and partly dismissed either party can be the appellant--the plaintiff in respect of the part of his claim that was rejected and the defendant in respect of the part that was accepted. If the plaintiff wants a decree for the remaining part of the claim he must file an appeal or a cross-objection as permitted by r. 22(1) of order 41, CPC, in an appeal by the defendant and if a defendant wants that the decree for part of the claim should be quashed he must file an appeal or a cross-objection in the plaintiff's appeal as permitted by r. 22(1) of order 41. It is to be noted that an appeal and the cross-objection filed in the appeal relate to two different subject matters even though both arise out of one decree or judgment of the trial Court. The subject- matter of a cross-objection has nothing to do with the subject-matter of the appeal. On account of part of the suit being decreed and part being dismissed the decree is split up into two parts or is treated as two decrees and the appeal is from one decree and the cross-objection from the other. This is made clear by r. 22, which speaks of an appeal from part of a decree and of the decree being supported by the respondent on any of the grounds decided against him. If the plaintiff had two grounds of attack and one of them was accepted and the other rejected by the trial Court in respect of part of the claim and the defendant files an appeal from the decree passed in his favour he may support it on the other ground rejected by the trial Court. But if he wants a decree for the remaining part of the claim he must file a cross-objection in the defendant's appeal if he has not filed an appeal himself. This cross- objection is to the decree, e.g., the remaining part of the decree and not to the decree passed in his favour and forming the subject-matter of the appeal. The provision that he can support the decree on any of the grounds decided against him deals exhaustively with his right in respect of the decree passed in his favour for part of his claim and, consequently, the further provisions relating to cross-objection must relate to the decree in respect of the other part of his claim which was rejected. The cross- objection is to be in the place of an appeal which he could have filed and he could have filed an appeal only in respect of the decree regarding the other part of his claim. Therefore, the words "the decree" with reference to the cross-objection in the rule mean the part of the decree other than that dealt with in the earlier part of the rule and in respect of which he has been given the right of supporting it on any of the grounds decided against him. It is important to bear this distinction in mind and the failure to do so has resulted in confusion and error.
The provision in r. 27, with which we are concerned, is to be distinguished from that in order 41, r. 22(1). While r. 22(1) gives two rights to the respondent, one in respect of part of the claim decreed in his favour, and the other in respect of the part disallowed, r. 27 deals with the order of the lower Court, viz., the AAC in its entirety. It does not contemplate the splitting of the AAC's order into two parts for the simple ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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reason that an assessment order is incapable of being treated as an order partly allowing something and partly disallowing the other thing. While in respect of a claim of a plaintiff it can be said that part of it is allowed and part disallowed the same cannot be said in respect of an assessment order and it cannot be said to involve two orders partly assessing something and partly disallowing assessment of another thing. When a person is assessed he is assessed on all the income found assessable. There are no two parties before an ITO or an AAC and there is no claim by one party to be met by the other; so the analogy of a suit part of which may be decreed and part rejected, does not apply to an assessment proceeding. A dispute may arise in an assessment proceeding about certain receipts being income or not income or the assessees being entitled to a certain deduction or being not entitled to it and the assessment order is passed after deciding the dispute. The dispute may be decided partly in favour of the assessee and partly against him. But since the assessability is indivisible the order assessing the income is treated as one indivisible order and the facts on account of which the various receipts are held to be assessable income are treated as various grounds of attack and the various facts on account of which deductions or exemptions are allowed or receipts are not treated as assessable income are treated as grounds of defence. So an assessment order is based upon allowing and disallowing grounds of defence. An appeal to the Tribunal whether by the Department or by an assessee is like an appeal by a defendant or a plaintiff from a decree accepting or rejecting the entire claim of the plaintiff. There is no scope for any cross-objection and consequently no scope for the respondent's, e.g., the assessee's or the Department's urging for reduction in the assessed income or increase in the assessed income, as the case may be. If the appellant before the Tribunal is the Department claiming increase in the assessed income all that the assessee can urge is that there should be no increase; that is the only subject-matter of the appeal. If the assessee desires reduction in the assessed amount he himself must file an appeal; he has not been given the right to file a cross-objection. The only right given to him is of urging that there should be no increase, not only for the ground of defence accepted by the AAC but also for the other ground of defence rejected by him. This is the only right given to him by r. 27. There is only one order of the AAC that assessing the income at a certain figure, and the right given to him is of urging another ground, though rejected by the AAC, in support of it; he must support the order, i.e., must not ask for any variation (in his favour) in the order. In other words he must not ask for any reduction in the assessed income. Asking for any reduction in the assessed income is not supporting the order assessing it. "
3.5. From the above reproduction few important points of law emerges, to be highlighted so as to resolve the controversy. (1) An appeal lies from operative part of the judgement and not from the reasons in support of it. Naturally certain findings ought to have been given, whether on facts or on law, on which the operative part of the judgement ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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is based, but those ought not to be the ground of an appeal. (2) A successful party, i.e. presently the respondent- assessee, cannot appeal merely in respect of a finding given adversely to get corrected, as notwithstanding the said adverse finding, the operative judgement is in his favour. He is not aggrieved by the outcome of the judgement. (3) An appeal lies by an aggrieved litigant, if not aggrieved no appeal. There is no gain by appealing against an adverse finding. That could be a cause of grumble but not a cause of grievance. An appeal is a redress or recompense or restitution of a substantial grievance for an aggrieved party arising from the result of a judgement. (4) A cross-objection is a substitute for an appeal. It is not permissible simply to file a cross- objection against the rejection of any argument or point of attack. (5) When one line of defence is accepted but the other rejected, the defendant/ respondent in an appeal, filed by the aggrieved party against the judgement, has a right to defend that part of the finding which was adversely expressed, though not appealed against by him. Rule 27 covers this situation only. The defendant has a right to urge under Rule 27 that a particular finding was wrongly given and if that adverse finding is upheld than the favourable result of the appeal may get over-turned. (6) That a cross-objector has a legal right to support an order of the first appellate authority but no right is enshrined under Rule 27 to attack that judgement. (7) That Rule 27 sanctions a defendant only to "support" the order of CIT(A) and not permitted to "attack" the judgement. (8) That by the very language of Rule 27 a respondent can support the verdict of the first appellate authority and side by side can argue against any of the grounds held against him. This shows that the grounds against the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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respondent is within the circumference of the favourable judgememt. Such finding or the grounds thus are linked to the final verdict of the issue decided and has a direct link with the final view taken. The ground is not independent of the issue decided, because while arriving to the conclusion, in between the process of drafting of an order, there is a possibility of taking an adverse view by rejecting any of the argument or the grounds of defence taken. (9) Lastly, how a respondent can support "any of the grounds decided against him" as worded in Rule 27?. But the Hon'ble Courts have removed this confusion by explicitly mentioning that the judgement being favourable but could have an adverse finding or reasoning and that ground though against the respondent can be defended in Rule 27, nevertheless by supporting the final verdict. The interpretation of the word "grounds" is in wider sense because the same is not at par with the "ground" of appeal.
3.6. On this issue, there is one more decision pronounced by the Hon'ble Bombay High Court in the case of B.R. Bamasi vs. CIT 83 ITR 223 (Bom.), wherein the assessee wanted to raise a new point as a ground of defence in the appeal but stopped to raise due to the reason that such new point may affect the validity of the entire assessment proceedings. The Court has said that the point would have served as a weapon of defence against the appeal, but it could not be made a weapon of attack against the order insofar as it was against the assessee. Relevant portion of this judgement is reproduced below:-
ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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"It has further held that the respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the lower Court in his favour may not have been based on those grounds. It has further held that if the appellant in his challenge to the decree of the lower Court is entitled to take a new ground not agitated in the Court below by leave of the Court, there appears to be no reason why a respondent in support of the decree in his favour passed by the lower Court should not be entitled to agitate a new ground and subject to the same limitation. A Division Bench of the Allahabad High Court has taken a similar view in Kanpur Industral Works vs. CIT (1966) 59 ITR 407 (All). That judgment has considered the position of an appeal under s. 33 of the IT Act along with the relevant Rules and that of an appeal under the CPC and the provisions of O. XLI, r. 22. The judgment holds that when the Department files an appeal for an increase in the assessed income, the subject-matter of the appeal is the increase claimed by the Department and the assessee can urge any ground of defence even though it might have been rejected by the AAC for showing that there should be no increase. It has further held that that the assessee is not liable to be assessed at all is a ground for showing that there should be no further assessment and the Department ' s appeal can therefore be resisted on that ground and that there is no incongruity in maintaining the assessment order passed against the assessee and yet refusing to increase it on the ground that he was not liable to be assessed at all. The judgment points out however that if the Tribunal accepts the ground of defence that the assessee was not liable to be assessed, it can only refuse to increase the assessed income as only such an order would be within the scope of the appeal filed by the Department and anyother order such as annulling the assessment would be outside the scope of the appeal. That judgment holds that the position of an appeal under s. 33 of the IT Act and an appeal under the CPC is identical. A Full Bench of the Madras High Court has in Venkata Rao vs. Satyanarayanamurthy ILR 1944 Mad 147 : AIR 1943 Mad 698 (FB) held that it was open to a respondent in appeal who had not filed cross-objection with regard to the portion of the decree which had gone against him to urge in opposition to the appeal of the plaintiff a contention which if accepted by the trial Court would have necessitated the total dismissal of the suit, but the decree in so far as it was against him would stand. The judgment of the Tribunal in our case clearly shows that, although the assessee wanted to raise a new point as a ground of defence in the appeal, he specifically stated that he wanted to rely upon it only for the purpose of having the appeal by the Department for enhancement in income-tax dismissed. But even if the assessee had not made such a statement, the above judgment shows that the assessee would be entitled to raise a new ground, provided it is a ground of law and does not necessitate any other evidence to be recorded the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. If the ground succeeds, the only result would be that the appeal would fail. The acceptance of the ground would show that the entire assessment proceedings were invalid, but yet the Tribunal which hears that appeal would have no power to disturb or to set aside the order in favour of the appellant against which the appeal has been filed. The ground would serve only as a weapon of defence against the appeal. If the respondent has not himself taken any proceedings to challenge the order in appeal, the Tribunal cannot set aside the order appealed against. That order would stand and would have full effect in so far as it is against the respondent. The Tribunal refused to allow the assessee to take up this ground ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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under an incorrect impression of law that if the point was allowed to be urged and succeeded, the Tribunal would have not only to dismiss the appeal, but also to set aside the entire assessment. The point would have served as a weapon of defence against the appeal, but it could not be made into a weapon of attack against the order in so far as it was against the assessee."
3.7. An another legal proposition has been raised that the Tribunal passes an order u/s.254(1) of IT Act and empowered to "pass such orders thereon as it thinks fit". Section is reproduced below:-
Sec.254 (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
The word "thereon" restricts the jurisdiction of the Tribunal to the subject matter of appeal. If this word "thereon" is to be read in conjunction with Rule 27, then the respondent is to support the order appealed against but required to confine to the subject matter of the appeal. Interestingly, in the present case though the first appellate authority has decided the issue of the applicability of the provisions of section 153C of IT Act, which was one of the ground of appeal raised by the assessee before ld.CIT(A), but even after an adverse decision of the CIT(A) on the said legal ground, no appeal was preferred by the assessee. Because of this reason, the Tribunal is not empowered to pass an order "thereon" on the subject matter which is not in appeal as per the appeal memo to be adjudicated upon. As far as the question of withdrawal of cross-objection is concerned, in our humble opinion, in the light of the above discussion, had the cross-objection was not withdrawn, even then, such a legal issue was beyond the scope of the adjudication through a cross-objection under Sec.253(4) of IT Act because the impugned legal issue was altogether an independent as well as a separate issue, then the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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issue decided in favour of the assessee which are to be supported but u/s.27 of Appellate Tribunal Rules. The applicability as also the operation of Sec.253(4) of I.T.Act (i.e. the procedure of filing of cross- objection) is distinct than the area of operation of Rule 27. In any case, provisions of Rule 27 and the provisions of Sec.253(4) do not over-lap each other; rather operate in two different situations. Admittedly, right now, we are not on the adjudication of a cross-objection but on the question of granting permission to argue an independent legal ground under the shelter of Rule 27 of the Tribunal Rules. 3.8. The assessee's Counsel Mr.Divatia has cited a decision of Hon'ble Gujarat High Court pronounced in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. vs. CIT reported at 282 ITR 321 (Guj.), wherein the ld.CIT(A) has decided the issue of levy of penalty in favour of the assessee by deleting in entirety, hence cross-objection was not filed by the assessee. It was quoted that the Tribunal has lost the sight of the fact that there was no occasion for the assessee to feel aggrieved by that favourable verdict, hence no cross-objection or an appeal was filed. The Court has opined that in a case a party having succeeded before CIT(A) opts not to file cross-objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or accepted the part thereof which was against the respondent-assessee. The Hon'ble Court has therefore concluded that the Tribunal has unfortunately drawn such an inference which was not favourable to the respondent-assessee. If the inference drawn by the Tribunal is accepted as correct proposition, it would render Rule 27 of Tribunal Rules redundant and nugatory. Even in the case of DCIT vs. ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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Turquoise Investment & Finance Ltd. reported at 299 ITR 143 (M.P.) on the question whether the issue could be raised by the assessee before the Tribunal for the first time having dismissed the cross-objection of the assessee, it was found that the said issue was very much in appeal of the Revenue Department and the said legal plea was supporting the claim of the assessee. Likewise, in the case of CIT vs. Abdul Rahman Sait reported at 306 ITR 142 (Mad.), cited by ld.AR, the Court has observed that incidentally, an attempt was also made on behalf of the Revenue that the Tribunal ought not to have held that the reopening of assessment was not in order, as the finding of the Commissioner that reopening of assessment, was held to be in order remained unchallenged by the assessee. But, in our considered opinion, rule 27 of the income-tax Rules, which provides that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him, takes care of the right of the assessee to sustain the order of the Commissioner. Even rest of the decisions are also on the same lines and the fine distinction; as drawn out hereinabove; have been taken care of, hence do not support the stand of the ld.AR. In our conscientious view since the assessee has not appealed against a verdict on section 153C held against him by CIT(A) and that the cross-objection, if any admissible on this issue, are also not available for our adjudication, therefore this issue is no more subjudice before us, hence cannot be entertained. The plea raised by the assessee in this regard is hereby rejected.
4. Lead Assessment Year is A.Y. 1999-2000. Ld.DR has opened the case of the Revenue by referring the facts of A.Y.1999-2000.
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A. Revenue's appeal (ITA No.867/Ahd/2008); relevant grounds hereby adjudicated are as under:
1) The learned CIT(A) erred in law and on facts in deleting addition of Rs.5,00,000/- made on account of unexplained investment in purchase of land.
4.1. Facts in brief as emerged from the corresponding assessment order for A.Y. 1999-2000 dated 29/12/2006 were that the assessee in individual capacity has filed return of income u/s.153C of IT Act. As per the assessment order, it was noted that in the case of M/s.Kalgi, Tarun D.Karia and one Mr. Dinesh Babulal Thakkar a warrant of authorization u/s.132A was issued on 22/10/2003 as a consequence of a police raid conducted. The police raid was conducted at the premises of M/s.Kalgi on 26/08/2003. Certain documents were requisitioned and on the basis of those documents, it was found that some of them were belonging to the assessee. Due to that reason, a notice u/s.153C r.w.s. 153A(a) of the IT Act was issued. In respect of the above ground, it was noted that the assessee has purchased an agricultural land at Thor from one Mr. Dhiren J.Raval on 01/01/1999. The assessee was asked to explain the source of acquisition of the property. The mode of payment was stated to be "cash and hawala". As per the sale documents, a sale consideration of Rs.5 lacs was paid in respect of the pieces of land having four survey numbers 1920, 1921, 1924 and 1930 situated at Thor, Kadi, Mehsana. The AO has examined the "sale deed" wherein it was found that the impugned sum of Rs.5 lacs was paid to the seller in earlier years. As per AO, since the assessee has not filed any balance- sheet or capital account in the past either in the regular return or the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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return filed u/s.153C of IT Act, therefore it was not proved that the impugned amount of Rs.5 lacs was paid in earlier years. However, during the course of hearing, a balance-sheet for A.Y. 1997-98 was produced. Even on perusal of that balance-sheet, there was no indication of any outstanding advance in the name of Shri Dhiren J.Raval, seller of the property. As per AO, it was an unexplained investment since the assessee has not established the source of investment. An another fact has also been noted that the sale deed was duly executed and the registration expenses and stamp duty were duly paid and reflected in the cash book for the relevant assessment year. The AO has taxed the impugned sum of Rs.5 lacs as unexplained investment in the hands of the assessee. Being aggrieved, the matter was carried before the first appellate authority.
6. Ld. CIT(A) has decided the issue in cryptic manner in favour of the assessee vide following paragraphs:-
"7. The next ground of appeal relates to the addition of Rs.5 lakhs as unexplained investment. The A.O. noted that the assessee had purchased agriculture land from one Dhiren Raval, on 1/1/1999 and had made payment of Rs.5 lakhs to the seller in earlier years, the source of which had not been explained as the balance-sheet/capital account, etc. were not filed with the return of income. The A.O. observed that the payment towards registration and stamp duties were however reflected in the cash book of the relevant assessment year 1999-2000) and so did not make addition of the amount spent on registration/stamp duty.
7.1. Before me, it was submitted that the appellant had agreed to purchase land of Shri Dhiren Raval, and accordingly credited his account by journal voucher entries individually, in respect of all four survey numbers i.e. 1920, 1921, 1924 and 1930 of the impugned land. There was no payment of advance as such, since the land was under dispute and was sought to be acquired by the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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Government under section 43 r.w.s. 32P(2) of the Land Revenue Code and it was eventually acquired also by the Government, vide the order dated 01/03/2006 of the Mamlatdar, Kadi Village. It was submitted that the affidavit of Shri Dhiren Rawal to this effect was also submitted before the A.O. in this regard.
7.2. The contentions were carefully considered. From the details submitted it is seen that the entries passed in respect of the four survey numbers of the impugned land were journal entries and that the transaction did not materialize in view of the acquisition of this land by the Government. In view of these details, the addition of Rs.5 lakhs made by the A.O. was not justified and is deleted."
7. From the side of the Revenue, Ld.DR Mr.S.K.Gupta has appeared and argued that the assessee has debited the registration charges and stamp duty, therefore it was established that the land was indeed purchased by the assessee. Why a person would sell the land before getting the sale consideration?, Ld. D.R. questioned. Also, it was wrong on the part to claim that the said amount of Rs.5 lacs was paid in earlier years. The assessee has utterly failed to prove that in fact the said amount of Rs.5 lacs was ever paid in the past. In some of the documents, the seller has denied of receiving any payment as sale consideration, however, on some of the documents the assessee was treated as the owner of the property being purchased through a registered sale-deed. Ld.DR has drawn our attention on all the said sale-deeds pertaining to the respective piece of land as per their distinctive survey numbers and informed that identically it was noted as per one of the clause of the sale- deeds that the sale consideration was received in piece-meal, i.e. small amounts of cash in pieces. Ld.DR has therefore pleaded that the said language do not demonstrate that the small portions of the impugned ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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amount was paid in the past because the impugned amount could have been paid in small installments during one year, i.e. within the Financial Year in question. Ld.DR has therefore vehemently contested that once on record an investment was made, then there was no occasion on the part of ld.CIT(A) to hold that no consideration was paid and thus wrongly decided this ground in favour of the assessee. Ld. CIT DR has filed English translation of all the sale-deeds pertaining to the survey numbers 1920, 1921, 1924 & 1930 and on that basis vehemently argued that in fact the entire amount was accepted as paid and thereupon the sale-deeds were executed.
8. From the side of the respondent-assessee, ld.AR Mr.S.N.Divatia appeared and his only contention was that the amount in question was paid in piece-meal in the past years, therefore the investment did not belong to the year under consideration. He has pleaded that it was wrong on the part of the Revenue Department to assess the entire amount of Rs.5 lacs in A.Y. 1999-2000.
9. We have heard both the sides. We have perused the orders of the authorities below. On perusal of the sale-deeds in question, we are of the considered view that since all those sale-deeds have undisputedly been registered and the assessee has paid the registration amount, then it is difficult to accept that without passing of the sale consideration, duly stated therein, a vendor i.e. Shri Dhiren J.Raval has executed the sale in favour of the assessee. Those sale-deeds are complete in all respects and there is no ambiguity about the sale consideration agreed upon between the parties. The only reason of confusion was that the amount of consideration was mentioned as paid in cash by the purchaser in "piece-
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meal". In our opinion, the assessee wants to take the advantage of the word "piece-meal" by alleging that the amount was paid in the past years. But the assessee has failed to establish that the impugned amount was actually paid in the past financial years. Even the documents placed on record have not established conclusively that the amount of sale consideration was actually handed over in the past years. In this regard, the AO had deliberated upon and stated that none of the document furnished by the assessee have even established that the said amount was shown as either deposit or loan in the name of Shri Dhiren J.Raval ever in the past. Even the stand of the assessee kept on changing for the reason that at one place in the affidavit Mr. Dhiren Raval has stated that no consideration was received , but when it was questioned that why without receiving any consideration a prudent man would sell the land, the other stand was taken that the amount in question was received in the past year so not to be taxed in the year under consideration. This dilly-dally conduct has thus created doubt. We are convinced with the argument of the ld. CITDR Mr. Gupta that the amount of consideration might have been received by the vendor in piece-meal but within the financial year under consideration. Hence the investment has actually been made during the year under consideration. Otherwise, the legal presumption is that the documents which have found belonging to the assessee should be read as it was noted, therefore, the investment is to be considered in the year in which a document is registered and the property is purchased. Therefore we hold that the issue is very straight that the four pieces of land were purchased through registered sale deeds, admittedly the registration fees plus stamp duty was paid by the assessee, therefore the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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consideration of Rs. 5 Lacs had been paid, the source of which remained un-explained hence rightly taxed by the A.O. Under the totality of the facts and circumstances of the case, we find force in the ground of the Revenue resultantly allow the same.
10. Ground No.2 and sub-grounds read as under:-
2. The learned CIT(A) erred in law and on facts in deleting addition of Rs.8,00,000/- made on account of unexplained cash credit.
2.1. The learned CIT(A) erred in accepting the explanations furnished by the assessee especially when no documentary or other evidences were furnished in support of such explanations.
2.2. The learned CIT(A) ought to have considered the fact that the assessee had claimed to have received gift/loan of Rs.8,00,000/-, Rs.3,33,333/-, Rs.6,00,000/-, Rs.26,22,796/-, Rs.67,22,716/- totaling to Rs.1,10,78,845/- from his son in various assessment years from 1999-2000 to 2003-04 and that the assessee failed to establish the creditworthiness of the person form whom such huge sums were received.
10.1. It was noted by the AO that the assessee has received an amount of Rs.8 lacs from his son Shri Biral M.Patel alias Gulu, stated to be an NRI and staying in USA. A confirmation letter of the son was filed through his father. It was explained that the payment was made by the son through his NRE account with Punjab National Bank. On perusal of the return of income filed by the son in India, it was noted by the AO that a small amount of Rs.40,690/- was declared for A.Y. 1998-99. It has also been noted by the AO that in past five-six years, son had made huge ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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gifts and loans to various family members. A chart was made by the AO through which it was demonstrated that in A.Ys. 1999-2000 upto 2003- 04 the son had gifted or given loan of a total amount of Rs.1,44,22,123/-. AO has also noted that the source of the income of the son from USA was salary income. There was a discussion in the assessment order that the son has sold a Convenient Store for a consideration of US$ 330,000 in the year 2000-01. It was also claimed that Shri Biral M.Patel, son, has also sold a restaurant for US$ 110,000 in the year 1999. AO was not convinced and finally held as under:-
"The details filed by the assessee have been carefully perused. Shri Biral M.Patel is staying in USA with his family and his net income has to be seen in light of household expenses there and cost of living in USA. The availability of funds on account of sale of store, if any, to Shri Atul Doshi cannot be considered relevant to assessment year under consideration as such sale is said to have occurred during subsequent years. Most importantly the specific details of expenses incurred for purchase of such 'store' and sources thereof are not given in the letter of Shri Biral M.Patel as it would have been determinative for finding out the net profit generated out of such sale. In fact the claim of sale of store and restaurants by Biral M.Patel in USA remain unsubstantiated as no documentary evidences such as deed, agreement or legal documents for such sales were produced during hearings despite the fact that assessee is father of Biral M.Patel and assessment proceedings were going on in the cases of both the assessee and Shri Sandip M.Patel respectively father and brother of Biral M.patel. The issue of verification of gifts and unsecured loans from Biral M.patel to assessee and his family members was know to Authorized representative and the assessee both since the beginning of proceedings. A letter alone alongwith confirmation form purchases of property in USA cannot be considered enough proof of creditworthiness of Shri Biral M.Patel. The income of ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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Rs.40690/- shown in the return of income filed in India is meager looking at the quantum of payments made towards gifts and unsecured loans by Biral M.patel, as shown above. No copy of return of income filed in USA was furnished. In view of above discussion, the creditworthiness of Shri Biral M.Patel could not be proved by assessee.
Thus the assessee could not discharge the onus cast upon u/s.68 of the I.T.Act, 1961 with regard to cash credit of Rs.800000/-. Therefore the same is treated as unexplained cash credit and added to the total income of the assessee during relevant assessment year.
(Addition Rs.8,00,000)"
11. The matter was carried before the first appellate authority.
12. It was argued before the ld.CIT(A) that the requisite details, such as, confirmation, source, i.e. NRE account of Punjab National Bank and the identification of the person along with the relationship with the assessee, i.e. father & son, have duly been placed on record but the AO has rejected all those evidences without any basis and taxed the amount in the hands of the assessee. It was vehemently contested that the amount in question was passed through normal banking channels and the source was duly explained. On due consideration of the evidences on record, ld.CIT(A) has decided the issue in assessee's favour as under:-
"6.2. The contentions were carefully considered. In his letter (copy filed during appeal proceedings), the donor, Biral Patel has stated that he worked on a salary of 2000$ per month between 1988 to 1992 and saved the entire money. In 1993, he also purchased a house by taking loan and earning net rental income of 1000$ from per month. In 1995, he invested in a partnership from ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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running a store which he purchased from the other partners in 1997 and started earning from the store. In 1998 he also opened a restaurant for one year by purchasing it for 70,000$ and selling it later for 1,10,000$. He also sold the store in 2001 to one Shri Atul Joshi. He had married in 1991 and his wife was also earning about 1500$ per month till 1999, after which she was earning about 3,000$ per month. He explained that his bank transactions were being continuously scrutinized by the IT department in Us and the copies of the bank accounts could not be obtained but that the gifts were made out of his income, savings, sale of assets, etc. and the remittance was through proper channel. Shri Biral had settled in USA and had sent the amount through banking channels and was the real son of the appellant. Also that the amount had been received in the bank account of the appellant from out of the NRE bank account of his son. In view of these facts and the decisions of the Hon'ble Gujarat high Court in the case Murlidhar Lahorimal and in case of Nemichand Kothari, 264 ITR 254 (Cal), the addition made by the A.O. is not justified and is therefore deleted. The related ground of appeal is allowed."
13. From the side of the Revenue, ld.DR Mr. Gupta has placed reliance on the order of the AO and pleaded that without giving an opportunity to the Revenue Department, ld.CIT(A) has unduly granted relief to the assessee. Ld.DR Mr.Gupta has also argued that the son was earning a paltry salary income, therefore he has insufficient funds to advance as loan/gift to any of his family members. He has cited a decision of Hon'ble Gujarat High Court pronounced in the case of Dinesh Babulal Thakkar vs. ACIT 341 ITR 632(Guj.), but for the proposition that the assessee failed to establish the relationship with the donor, hence the impugned addition thus deserves to be confirmed.
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14. From the side of the respondent-assessee, ld.AR Mr.Divatia appeared and informed that the mode of payment, i.e. through NRE account, was not in dispute. The assessee's son has confirmed the transaction. He has supported the view taken by the ld.CIT(A) and placed reliance on Nemichand Kothari 264 ITR 254 (Gau.) and Murlidhar Lahorimal 280 ITR 512 (Guj.).
15. We have heard both the sides at some length. Undisputedly, a confirmation letter of Shri Biral M.Patel is on record, though undated. His copy of passport is also on record. At the outset, it was clarified before us that the AO has wrongly presumed that the income declared by the assessee in India for A.Y. 1998-99 of Rs.40,690/- was the only income of the said son. It was clarified that the return was filed in India in respect of the interest income earned in India. In addition to the said income earned in India, the son is subjected to tax in USA. An information about a tax debt with the Florida Department of Revenue and therefore a Notice for collection by AMO Recoveries is placed on record. In respect of the source of funds, it was claimed that the assessee has sold a Convenient Store, therefore sated to be in possession of sufficient funds. Even ld.CIT(A) has noted that the impugned amount was received by a cheque No.858287 of NRE Account No.10372 with Punjab National Bank. On account of these facts and the corroborative evidences, we hereby hold that such issue was dealt with by the Hon'ble Gujarat High Court in the case of Murlidhar Lahorimal(supra), wherein it was opined that the donor having confirmed the gift and explained the source thereof, the onus on the donor, i.e. the assessee u/s.68 was discharged.
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Further, in the case of Nemichand Kothari(supra) the Hon'ble Gauhati High Court has opined that the burden of the assessee to prove the genuineness of a transaction, as well as creditworthiness of the creditor is confined to the transactions which have taken place between the assessee and the creditor and it is not the burden of the assessee to show the sources of the creditor or to prove the creditworthiness of the sources of the sub-creditors. As far as the decision of Dinesh Babulal Thakkar(supra) as cited by the ld.DR is concerned, the issue was about the gift where the relationship could not be established. It was found that the gift was without occasion, without any relationship and there was no family connection with the donor. In the absence of non-availability of the details and the activities of the donor in USA the view taken by the Tribunal was upheld. As far as the present case is concerned, the Honble Gujarat High court's view is worth to record that the genuineness of the transaction is established having the transaction been made through bank and if revenue not satisfied with the sufficiency of funds of the donor , it was up to the revenue to take appropriate action and at best those could be the factors to be called upon from the donor, but that could not be a ground for disbelieving a gift. Respectfully following the verdict, we therefore hold that the ld.CIT(A) has rightly deleted the addition, hence this ground of the Revenue is hereby dismissed.
16. Rest of the sub-grounds shall be dealt with in the following paragraphs. Revenue's appeal for A.Y. 1999-2000 is partly allowed.
ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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B. Revenue's appeals, ITA Nos.868, 869, 1339 and 870/Ahd/2008, respectively for A.Ys. 2000-01, 2001-02, 2002-03 and 2003-04 .
17. Revenue has raised the following ground it its appeals:-
1. The learned CIT(A) erred in law and on facts in deleting addition of Rs.3,33,333/- [ Rs.6 lacs for A.Y. 2001-02], [Rs.26,22,796 for A.Y. 2002-03] and of [ Rs.67,22,616 for A.Y. 2003-04 ] made on account of unexplained cash credit.
17.1. In respect of all these grounds, the AO has made the respective additions in the identical manner assigning the same reasons. Even the first appellate authority has granted relief following the view taken in the lead Asst.Year 1999-2000, discussed in foregoing paragraphs. Before Ld.CIT(A), few facts relevant for these years have further been elaborated as under:-
"6.1. Before me, it was submitted that the A.O. had erroneously taken the amount of gift received by the appellant from his son, Biral alias Gulu Patel at the quantum of Rs.67,22,616/-. The A.O. had not given the details of this quantum/its break up. In fact, the gift received in the period relevant to A.Y. 2003-04 amo8unted to Rs.37,10,986/- which were received directly from USA and deposited in the bank amount No.9394 of the appellant, in Punjab National Bank and its break up was as under:
Date Amount Mode
20/5/2002 Rs.8,29,801/- From USA
7/11/2002 Rs.14,42,634/- From USA
10/12/2002 Rs.9,60,100/- From USA
27/12/2002 Rs.4,78,451/- From USA
These gifts were credited in the aforementioned bank account, copies (bank account of which had been filed before the A.O. and also furnished in the appeal proceedings. Photo copies of the two ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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pay-in-slips of the Punjab National bank had also been furnished. As per the one, the amount of 1000$ was deposited on 26/11/2002 in the Punjab National Bank account of the appellant. This amount was received by cheque no.021201383, drawn on the Merchant Bank of New York. As per the other pay-in-slip, cheque No.067006432 drawn on First Union National Bank of Florida, for 30,000$, was also deposited in the Punjab National Bank account of the appellant, on 30/10/2002. It was pointed out that there was no other gift in the previous year. The other entries in the Punjab National Bank Account No.9394 related to other transactions, as was narrated in the copy of the bank account in the books of the appellant. These gifts had also been disclosed in the capital account of the appellant filed before A.O., a copy of which was also furnished in the appeal. It was therefore argued that the A.O. had not only adopted the quantum of the gift erroneously at exaggerated figure but had also overlooked the fact that these were gifts received from the real son, Shri Biral alias Gulu Patel, settled abroad, whose creditworthiness had been adequately explained even though the source of the source was not required to be proved. The entire receipts had passed through normal banking channels. The son, Biral had settled in USA and was sending his savings as gifts/loans to his real family members, as would be expected from a son."
18. Having heard the submissions of both the sides and on due consideration of the evidences placed on record about the source of gift being made by the son found to be settled in USA and the amount being remitted through NRE bank transaction and that the source was satisfactorily explained, we are of the considered view that the findings on facts given by ld.CIT(A) is hereby confirmed. For all the years, this issue goes in favour of the Assessee and grounds in this regard are hereby ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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dismissed. Resultantly, appeals for AYs 2000-01, 2001-02, 2002-03 & 2003-04 are dismissed.
C. Assessee's appeal, ITA No.1016/Ahd/2008 for A.Y. 2002-03
19. Number of grounds have been raised, however the main grounds which were pressed before us are as follows:-
2.1. That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought to have held that the proceedings u/s.153C initiated by the AO were illegal, unlawful and without jurisdiction.
3.2. That in the facts and circumstances of the case, the Ld.CIT(A) was not justified in upholding the addition of Rs.41,30,550/- made by the AO as unexplained income though the same was a sale consideration.
19.1. Apropos to ground No.2.1, on M/s.Kalgi, etc. a police raid on 26/08/2003 was conducted and certain documents were found to be belonging to the assessee. A warrant of authorization u/s.132A of the IT Act was thereupon issued on 22/10/2003. On the basis of those documents, proceedings u/s.153C of the Act in the case of assessee were initiated. A satisfaction note was also made. The said satisfaction note is dated 27/03/2006; reproduced below:-
"This case has been assigned to the undersigned as per the order u/s.127(1) of the I.T.Act passed by the CIT Central-II, Ahmedabad being No.CIT (CEN)-II/127(1)/Kalgi Gr.& Royal Gr./2005-06 dated 01/03/2006.
ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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In the case of Kalgi group of cases, a Police raid was conducted on 26/08/2003 at the premise of M/s.Kalgi, Old Sharda Mandir Road, Ellisbridge, Ahmedabad. The assets and documents seized by the Police were requisitioned by the Department u/s.132A of the I.T. Act on 22/10/2003. The warrant of authorization u/s.132A contained the name of Shri Tarun D.Karia, Dinesh Babulal Thakkar & M/s.Kalgi. After verification of seized documents, it is noted that certain papers/documents seized as details given below pertain to Shri Mahendrabhai A.Patel.
Sr.No. Papers/documents seized as per Police
Panchnama (Page Numbers)
1. 325, 331/2, 339, 341, 361/1, 365, 366, 367,
384 & 397
2. 245, 246, 247, 248 & 249
In view of these documents, I have to reason to believe that the income has escaped assessment and need to be assessed u/s.153C of the I.T. Act. Notice u/s.153C r.w.s. 153A of the I.T. Act is issued."
19.2. Not only this, on 27/03/2006 there was a correspondence, copy placed, between the concerned officers of the Revenue Department through which the seized material was forwarded from one officer to an another officer, which was found pertained to Shri Mahendrabhai A.Patel and Shri Sandip M.Patel (Kalgi Group). Those papers and the documents were duly listed and numbered as per the Police Panchnama. Ld.AR Mr.Divatia has drawn our attention on those documents and stated that those were electricity bills, a bill of hotel in the Residency, telephone bill of Bharat Sanchar Nigam Ltd., there was a cash memo of Kiran Motors, a Gujarat written-slip and Invoices of Toyota, lists and amounts in Gujarati. So, the ld.AR argued that those documents did not reveal any ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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material through which it could be judged that the assessee has concealed the income. However, it is not in dispute that in compliance of the said notices, the assessee has filed a return of income on 04/09/2006 and declared an income of Rs.8,20,107/-. Ld.AR has placed reliance on a decision of Hon'ble Gujarat High Court pronounced in the case of Vijaybhai N.Chandrani 333 ITR 436 (Guj.). In this decision, the scope of section 153C of the Act was discussed and it was found that the loose-papers found at the time of search though in the name of assessee but did not belong to the assessee. On the basis of the peculiarity of that case in respect of the documents found, a finding on fact was that undoubtedly those documents did not belong to the assessee. As against that, as indicated hereinabove while perusing the satisfaction note recorded by the Revenue Department and the list of the documents seized, it was noticed that those documents have in fact belonged to the assessee. Due to this vital distinction we can hold that the reliance is misplaced.
19.3 Ld.AR has also placed reliance on Gambhir Silk Mills 45 SOT 20 (Ahd.), (URO) and in that case neither during the search nor during the course of survey any valuable article was either found or seized, however, AO had framed the assessment on the assessee by invoking the provisions of section 153C of the IT Act. Rather, a finding was given that for all relevant years, returns were originally filed and processed and there was no additional material which was found and could be held belonging to the assessee. Naturally, this decision do not apply on the facts of this case because undisputedly this assessee has not ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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filed the return of income in the past and that the material referred did belong to the assessee.
19.4. Ld.AR has also placed reliance on Sinhgad Technical Education Society vs. ACIT (2011) 57 DTR 241(ITAT Pune Bench) and the opening remark was that there was absence of incriminating material. A search u/s.132 was carried out in the case of one N, (President of the Assessees' Society) and the AO has issued notice u/s.153C of the Act but in the impugned notices there was no mention of incriminating information and it was silent insofar as discovery of material relating to the assessee was concerned. Rather, it was found that the satisfaction note was very general one. On those grounds, it was concluded that the impugned assessment years could not be disturbed merely for making routine addition, hence action u/s.153C of the Act was held bad in law. Even this precedent do not apply on the present appeal because the appellant before us is not found to be a regular tax-payer under Income Tax Act. This is not the case where a search was conducted, but the case is that a police action took place on the group and the requisition was made. On the basis of the requisition and on examination of the incriminating material communicated to the Revenue Department, the AO thought it proper to start the proceedings by issuing notice u/s.153C of IT Act.
19.5. We are of the conscientious view that in a situation where certain incriminating material has been forwarded by an another Government Authority, i.e. Police Department to the AO and those requisitioned documents did belong to the assessee, then the only recourse left with the AO was to start the proceedings, so that the ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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investigation on those documents could be made. In the present case as well, on receiving the information in the shape of documents seized, the AO had to proceed with the investigation. The right recourse was to issue notice u/s.153C of IT Act. If prima-facie, certain documents are found to be belonging to an another person, nevertheless on the face of impugned documents it may or may not reveal the concealment amount of income, the AO is duty bound first to investigate and then only be able to decide about the factum of concealed income. Therefore, as a first step, a notice u/s.153C is a sine-qua-non for starting the proceedings. We, therefore, hold that there was no fallacy in the issuance of notice u/s.153C of IT Act. This ground of Assessee is dismissed.
20. Apropos to Ground No.3.2, it was observed by the AO that the assessee had shown long-term capital gain of Rs.5,88,307/- for sale of land at Chandlodiya for a total consideration of Rs.41,30,550/-. The land was purchased on 04/06/1991 and sale on 27/09/2001. The assessee had shown an "improvement cost" of Rs.26,21,740/- and the cost of acquisition was shown of Rs.4,30,000/-. An important fact was noted that on perusal of the said sale-deed, it was found that the assessee was neither a seller nor a purchaser. The assessee was only a confirming party. Therefore a query was raised to explain the nature of interest held by the assessee in the said property. As per AO, documentary evidences, such as, Banakhatnama/Power of Attorney could not be produced. It was also noted that the said property was not reflected in the return filed by the assessee for the block period of earlier years. As per AO, the assessee ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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had failed to prove any right over this property. About payment of AUDA, the observation of the AO was that the payment through payment-slips was not made by the assessee himself. Those payments were made on behalf of the assessee. The AO has finally held as under:-
'In view of above discussion, it cannot be said that the assessee has made any payment whether in the nature of cost of acquisition or improvement cost in respect of said property. It is also held that assessee could not prove that he had the right in this property by virtue of which he was entitled for showing capital gain. It is a case in which assessee has received certain amount from some persons for a undisclosed purpose which could not be explained by the assessee. Therefore, total amount of Rs.41,30,550/- received in cash and by cheque is held to be income from undisclosed sources and brought to tax. As the assessee has shown long term capital gain of Rs.5,88,307/- the same is excluded from the computation of income.
(Addition Rs.41,30,550)"
21. Being aggrieved the matter was carried before the first appellate authority. Before ld.CIT(A), a copy of ledger account was placed containing the narrations. The sale consideration was stated to be received by cheque. A letter was filed from Ganesh Park, Co-operative Housing Society, Chandlodiya, confirming the reimbursement amount of Rs.25 lacs by the assessee. On the basis of those evidences, it was argued ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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that the expenses were incurred by the assessee. However, ld.CIT(A) was not convinced and held as under:-
"9.6. Further the appellant had claimed incurri8ng "cost of improvement of Rs.25 lakhs by cash payment made to the housing society on 31/3/2002. This payment to society is explained to be the reimbursement of expenses that society incurred on behalf of the appellant by paying fees / of Rs.25 lakhs dues to AUDA, all in cash (though copies of receipts of AUDA filed, total only about Rs.8.16 lakhs). Strangely, these receipts of AUDA are dated 20/1/2002, 19/7/2002, 28/10/2002 i.e. after the sale deed was registered in favour of the society on 28/9/2001. There is no explanation why the appellant would have continued to deposit amount(s) with AUDA even when the impugned land had been transferred. It is also interesting to note that the cash availability in bank account of the appellant is due to receipt of cheques of over Rs.22 lakhs, having been shown as confirming party in the sale deed. There are also cash deposits of over Rs.14.99 lakh (Rs.1.74 lakh + Rs.2.55 lakhs + Rs.10.70 laks). Thereafter, payment of Rs.25 lakh is shown made to the Society on 31/3/2002 by way of withdrawn cash. Thus in effect, the amount received from Society by cheques has been returned again to the society. This smacks of a quid pro quo arrangement. Further the expenses on registration etc. claimed to have been incurred by the appellant were not proved. In fact, as the A.O. has pointed out that as per the sale deed itself this was the liability of the purchaser (i.e. ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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Society) and not the appellant. In these facts and circumstances, there is no infirmity in the action of the A.O. in treating the entire receipts of Rs.41,30,550/- as income of the appellant. The addition is therefore confirmed and related ground of appeal is rejected."
22. Having heard the submissions of both the sides, we are of the view that the documents which were filed before the ld.CIT(A) were not before AO and so the investigation has not been done. There is a reference that the assessee was subjected to search earlier as well. At that time there was a disclosure of investment in properties along with cash and jewellery. Whether that list contained the land in question, i.e. Chandlodiya land has been verified? The assessee has filed return of wealth. In those returns, there was a mention of agricultural land at Chandlodiya, Survey No.149. There was an advance by the assessee in the past but whether that advance was supported by any written agreement has also not been proved or disproved. The initial investment also require investigation for the reason that as per the Wealth Tax returns the investment was declared at Rs.2,15,000/- for "Agriculture land at Chanlodia S.No.149) but the cost of acquisition for Captal Gain purpose was claimed at Rs.4,30,000/-. In the absence of certain documents which were yet to be called for examination, at present it was uncertain whether the land was developed by the assessee having ownership right. There was a reference of clause-15 through which it was alleged that the assessee had acquired right w.e.f. 04/06/2001. If it was so, then whether the assessee had rightly shown long term capital gain in ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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his hands? Nevertheless as mentioned above, in the absence of requisite information and complete details of the transaction, it is difficult for us to conclusively hold that it was a case of long-term capital gain tax. On the other hand, Revenue has also created doubts about the said claim. Due to this reason, we are hereby restoring this ground back to the stage of AO for de novo consideration in the light of our observation made hereinabove. This appeal of the Assessee is partly allowed, but for statistical purposes.
Revenue's appeals; ITA Nos.866 & 871/Ahd/2008 for A.Ys. 1998-99 and 2001-02 respectively in the case of Sandip M.Patel
23. For A.Y. 1998-99 grounds raised are as under:
1) The learned CIT(A) erred in law and on facts in deleting the addition of Rs.22,53,279/- (Rs.6,28,520/- for A.Y.2001-02) made on account of unexplained cash credit.
1.1) The learned CIT(A) erred in accepting the explanations furnished by the assessee especially when no documentary or other evidences were furnished in support of such explanations.
1.2) The learned CIT(A) ought to have consider the fact that the assessee had claimed to have received gift/loan of Rs.22,53,279/- and Rs.6,28,520/- totaling to Rs.28,81,799/- from his brother in assessment year 1998-99 and 2001-02. Apart from the above, assessee's father Shri Mahendra A.Patel had claimed to have received gifts/loan amounting to Rs.1,10,78,845/- from the very same person i.e. Shri Biral M.Patel. In the above background of facts, the learned CIT(A) should have held that the assessee failed to establish ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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the creditworthiness of the persons from whom huge sums were received.
2) The learned CIT(A) erred in law and on facts in deleting the addition of Rs.41,30,000/- made on account of unexplained cash credit.
23.1. Apropos to above Ground No.1 and sub-grounds, the basis for addition(s) was the several amounts received from USA through bank transaction from Shri Biral M.Patel. We have already discussed the applicability of the provisions of section 68 considering the circumstances of the case while deciding the identical issue in the case of Shri Mahendra A.Patel(supra). In the present case, as well the payments were credited in the Bank Account No.9397 with Punjab National Bank and the transaction was through banking channel. Therefore, on the same lines, we hereby confirm the findings of ld.CIT(A) and dismiss this ground of the Revenue for both the years.
24. Apropos Ground No.2 in Assessment Year 1998-99, the AO has noted that by clearing a sum of Rs.41,30,000/- was found credited in Bank Account No.9397 with PNB on 25/07/1997. As per AO, no explanation was offered in respect of the said credit entry. However, the contention of the assessee was that on one hand, there was a credit entry on 25/07/1997, but on the other hand, that entry was reversed on 26/09/1997 as the cheque was not honoured. On that ground, ld.CIT(A) has held that since no amount was received by the assessee, therefore there was no reason for making the impugned addition in the hands of the assessee. Considering the facts of the case and the material placed on ITA Nos.866 to 871, 1016 and 1339/Ahd/2008 DCIT vs. Shri Mahendra A.Patel and Sandip M.Patel AYs 1998-99 to 2003-04
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record, we find no infirmity in the view taken by the ld.CIT(A), hence dismiss this ground of the Revenue. In result, Revenue's appeals in the case of Sandip M.Patel are dismissed.
25. As a result, we summarize the result are as under:-
(i) Revenues' appeal in ITA No.867/Ahd/2008 for A.Y. is partly allowed.
(ii) Revenue's appeals in ITA Nos.868,869,1339 and 870/Ahd/2008 respectively for AYs 2000-01, 2001-02, 2002-03 & 2003-04 are dismissed and Revenue's appeals in ITA Nos.866 & 871/Ahd/2008 (in the case of Shri Sandip M.Patel) for A.Ys. 1998-99 & 2001-02 are also dismissed.
(iii) Assessee's appeal in ITA No.1016/Ahd/2008 for A.Y. 2002-03 is allowed but for statistical purposes.
Sd/- Sd/-
(टȣ.आर.मीणा) (मुकुल कुमार ौावत)
लेखा सदःय Ûयाियक सदःय
( T.R. MEENA ) ( MUKUL Kr. SHRAWAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 30/ 04 /2012
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/
षत Copy of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-III, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad