Gujarat High Court
The Principal Commissioner Of Income ... vs Shri Dharmesh Bharatbhai Thakkar on 3 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/546/2024 ORDER DATED: 03/11/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 546 of 2024
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THE PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL SURAT
Versus
SHRI DHARMESH BHARATBHAI THAKKAR
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Appearance:
KARAN G SANGHANI, SR. STANDING COUNSEL for the Appellant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 03/11/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1 Heard learned Senior Standing Counsel Mr.Karan Sanghani for the appellant. This appeal is filed under Sec.260A of the Income Tax Act, 1961 (for short 'the Act), proposing the following substantial questions of law arising out of the order dated 31.07.2023 passed by the Income Tax Appellate Tribunal, Surat Bench, (for short 'the Tribunal'), in ITA No. 287/SRT/2022 for the Assessment Year 2017- 18:
"[A] Whether on the facts and in the circumstances of the case and in law, the order of the Hon'ble Appellate Tribunal is ex facie Page 1 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined perverse, because the Hon'ble Appellate Tribunal has deleted the addition of Rs. 6,31,50,000/- made u/s. 69 of the Act, despite the fact that the addition was made on the basis of incriminating details/document i.e notarized agreement recovered during the survey proceedings, and without appreciating the entire gamut of facts brought on record by the Assessing Officer?
[B] Whether on the facts and in the circumstances of the case and in law, the order of the Hon'ble Appellate Tribunal is ex facie perverse, because the Hon'ble ITAT has deleted the addition made by the AO, by accepting the submission of the assessee that the notarized agreement was signed by him though coercion and threat and against which he has field complain with the various government/police authorities including PMO, without appreciating the fact that none of the complaints have yet reached finality or conclusion in order to accept that the said document was prepared under threat or duress and the contents of the same are not correct?
[C] Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in ex facie perverse, because the Hon'ble ITAT has deleted the addition of Rs.6,31,50,000/- by observing that the addition was made only on the basis of notarized agreement found in the mobile phone of the assessee and the assessee had denied having made such investment over and above Rs.28,00,000/- and this being the case, the DDIT/AO should have investigated the related facts as mentioned in the agreement to take the Page 2 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined case to logical conclusion, without taking recourse to the provisions of Sec. 250(4) of the Act which confers jurisdiction to the first appellate authority to make such further enquiries as he thinks fit or may direct the AO to make such further enquiries and report the result of the same to the CIT(A) before deciding the appeal?
[D] Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in ex facie perverse, because the Hon'ble ITAT has held that the matter cannot be remitted to AO and the Assessing officer can't be given second inning as he has already scrutinized the agreement, despite the facts that the agreement is duly notarized and clearly mentioned that the assessee has made payment of Rs.6,31,50,000/- in pieces through bank transfers to the bank account of the first party of the agreement, being his contribution towards the work order, and that too before the execution of the agreement and therefore, there cannot be a case of coercion for signing such agreement as it only suits the assessee as a person who made such investments?
[E] Whether on the facts and circumstance of the case and in law, the impugned order of the Hon'ble Appellate Tribunal is ex facie perverse because the Hon'ble Appellate Tribunal has deleted the addition holding that the agreement dated 21.12.2019 has become null and void despite the facts that the notarized agreement date 21 12 2019 has not been declared null and void by any court or competent authority, the assessee has not taken any step for treating the Page 3 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined contract as Void and the Hon'ble ITAT has no power to declare an agreement as null and void under the Indian Contract Act 18727 [F] Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is ex facie perverse, because the Hon'ble ITAT has deleted the addition of Rs.6,31,50,000/- made by the AO u/s 69 of the IT. Act ignoring the principles of "Human Probability Test" ie. preponderance of probabilities which is applicable for Income Tax proceedings?"
2 Brief facts of this appeal are as follows:-
2.1 The respondent- assessee filed Return of Income for the Assessment Year 2017-18 on 28.03.2018, declaring total income of Rs.37,33,440/- and agricultural income of Rs.2,55,360/-. The Return of Income was processed under Sec.143(1) of the Act.
Thereafter, the case of the assessee was selected for scrutiny assessment and the Assessment Order under Sec.143(3) of the Act was passed on 10.12.2019 accepting the Return of Income.
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NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined 2.2 A Survey under Sec.133A of the Act was conducted on 14.10.2020 at the premises of the respondent - assessee. During the course of Survey proceedings, various incriminating documents were found and impounded. On verification of backup of mobile of the respondent - assessee, a notarized agreement dated 21.12.2019 was found and it was noticed by the Assessing Officer that total investments of Rs.6,31,50,000/- was executed between the respondent - assessee and the third party. Accordingly, the case of the assessee was reopened and notice under Sec.148 of the Act was issued on 30.03.2021.
2.3 In response to the notice under Sec.148 of the Act, the respondent - assessee on 23.04.2021 filed the Return of Income which was filed earlier. Thereafter, the assessment proceedings were undertaken by issuing notice under Sec.142(1) of the Act on Page 5 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined 24.10.2021 requiring the assessee to provide details/explanation.
2.4 The assessee, in response to the notice, contended that he was engaged in the business of scrap sales in the name and style of M/s. Balaji Scrap Trader & Balaji Transport. With regard to the notarized agreement, it was submitted that the assessee has invested only Rs.26,50,000/- during the Financial Year 2016-17. The assessee also provided the capital account, bank book, statement of bank account and ledger accounts of one Mr.Jatin K. Goswami and Suresh R. Thorat from whom the payment of Rs.26,50,000/- was made by the respondent - assessee.
2.5 The Assessing Officer, however, presumed that the amount of Rs.6,31,50,000/- is unaccounted investment of the assessee for the year under consideration and has made an addition in the Page 6 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined Assessment Order dated 26.03.2022 passed under Sec.143 read with Sec.147 of the Act. 2.6 Being aggrieved, the assessee preferred an appeal before the CIT (Appeals). The CIT (Appeals), after considering the submissions made by the assessee along with the relevant documents, deleted the addition. Being aggrieved the appellant - Revenue preferred the appeal before the Tribunal. The Tribunal, after considering the documentary evidence on record and the submissions made by both the sides, upheld the order passed by the CIT (Appeals) observing as under:
"16. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the Id. CIT(A) and other material brought on record. The Ld CIT(A) observed from the assessment order, that the addition has been made only on the basis of the notarized agreement found in the mobile phone of the assessee. The assessee has denied, having made the investment over and above Rs 28,00,000/-Page 7 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025
NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined during the survey proceedings This being the case, the DDIT/AO should have investigated the related facts as mentioned in the agreement to take the case to its logical, conclusion. As per the agreement, the assessee has paid the amount of Rs.6,31,50,000/-, out of which Rs 28,00,000/- is admitted by the assessee. The balance Rs.6,03,50,000/- which is not admitted, by the assessee is stated, to be paid through, banking channels in the agreement. In such case it was the responsibility of the DDIT/AO to find out from the parties to the agreement as to from which bank account the funds have travelled to the bank accounts of recipients. This is the core investigation for taking this case to its logical conclusion, which has not been done. The assessee has been, stating which is evident from his complaints filed before PMO, Home Ministry and Police that he was coerced into signing the said, agreement. Under these circumstances, the other parties to the agreement should have been examined to ascertain, the details of the bank transactions which are referred in the agreement. Since, these bank transactions are not proved to have been taken, place as per the agreement, therefore Id CIT(A) held that the addition cannot be made only on the basis of the agreement found in the mobile phone of the assessee.
17. The Ld CIT(A) further noted that assessing officer found a particular evidence in the form of the agreement, the contents of which the assessee has partly disputed (amounting t Rs.6,03,50,000/-). This disputed portion should have been further corroborated by the A.O with, the help of bank accounts showing transfer of Page 8 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined funds as mentioned in the agreement so that the unexplained alleged to have been made by the assessee would have been proved beyond doubt. In the instant case, no such effort to corroborate the transaction mentioned in the agreement were made either by the DDIT or assessing officer. In fact, the other parties to the agreement were not even summoned, to ascertain whether the contents of the agreement were true. The fact that the assessee had filed the complaint against the other parties to the agreement before the PMO and the Home Ministry before date of Survey proved that the assessee was really coerced into signing agreement in absence of any other facts brought on record, contrary to submissions of the assessee. In view of the above facts, the Id CIT(A) held that the investment of Rs.6,03,50,000/- alleged to have been made by the assessee has not been proved The said investment cannot be taxed merely on the basis of the agreement found without there being any statements from the recipients of the money or without corroboration with the banking transactions, showing flow of funds from the assessee to the other parties.
18. As regards the admitted portion, of Rs 28,00,000/- is concerned, the Id CIT(A) noted that the same is reflected in the books of the assessee in the name of Mr Jatin K. Goswami as on 31.03.2017 Rs 26,50,000/- and in the name of Mr. Suresh R. Thorat as on 31.03,2017, and Rs 1,50,000/- Thus, the unexplained investment to the tune of Rs.6,03,50,000/- in the business by the assessee is not proved by AO, and as regards Rs.28,00,000/- the sources are proved which is evident from the books of accounts maintained Page 9 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined by the assessee. Accordingly, the addition made u/s 69 of the Act amounting to Rs.6,31,50,000/- was deleted by Id CIT(A).
19 We also find merit in the submission of ld Counsel to the effect that matter should not be remitted back to the file of the Assessing Officer to examine the agreement afresh. We have gone through the assessment order and observed that entire agreement has been reproduced by the Assessing Officer in his assessment order, and assessing officer has considered and analyzed the agreement, moreover, based on the said agreement, the assessing officer made the impugned addition, hence second inning should not be given to the assessing officer to examine the said agreement, which he has already scrutinized.
20. The said investment mentioned in the agreement, which is dump document, cannot be taxed merely on the basis of the agreement found without there being any statements from the recipients of the money or without corroboration with the banking transactions, showing flow of funds from the assessee to the other parties. Therefore, we note that said notarized agreement dated 21.12.2019 already became null and void. That, said agreement was not materialized and paper amount as reflected in the notice as well as agreement has never been executed. Besides, said agreement was not executed as per the notice amount and therefore it is not shown in respective balance sheets. Therefore, we note that said agreement should be treated as null and void in the eye of law. We have gone through the above findings of id Page 10 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined CIT(A) and noted that conclusion reached by Id CIT(A), are correct and admit no interference by us. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed."
2.7 The CIT(Appeals) deleted the addition made by the Assessing Officer on the count that no investigation was made by the DDIT / Assessing Officer to corroborate the details mentioned in the notarized agreement. It appears from record that the assessee disputed the notarized agreement and accepted only that the assessee invested Rs.26,50,000/- in the name of Mr. Jatin K. Goswami as on 31.03.2017 and Rs.1,50,000/- in the name of Mr.Suresh R. Thorat and also provided the details of their bank accounts etc., before the Assessing Officer. 2.8 The Assessing Officer / DDIT has only considered and analyzed the agreement and based upon the agreement has made the impugned addition without Page 11 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined issuing any summon to the third party to ascertain whether the contents of the agreement were true or not. The Tribunal also considered the fact that the respondent - assessee had filed complaint against the third party to the agreement before the PMO and the Home Ministry before the date of survey alleging that the assessee was made to sign the agreement under coercion which proves that the assessee was really coerced into signing the agreement. The CIT (Appeal) and the Tribunal, therefore, has rightly deleted the addition made on the basis of such notarized agreement without any corroboration of the bank transactions showing flow of funds from the assessee to the other parties.
3 We are, therefore, of the opinion that no question of law, much less any substantial question of law arises from the impugned orders of the Tribunal as there are concurrent findings of fact recorded by both Page 12 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025 NEUTRAL CITATION C/TAXAP/546/2024 ORDER DATED: 03/11/2025 undefined the appellate authorities.
4 The appeal, therefore, being devoid of any merits is accordingly rejected.
(BHARGAV D. KARIA, J) (PRANAV TRIVEDI,J) BIMAL Page 13 of 13 Uploaded by BIMAL B CHAKRAVARTY(HC01089) on Tue Nov 11 2025 Downloaded on : Sat Nov 15 00:19:21 IST 2025