Income Tax Appellate Tribunal - Ahmedabad
Manoj B. Vadodariya, Ahmedabad vs Department Of Income Tax on 19 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER
AND SHRI T.R. MEENA, ACCOUNTANT MEMBER
IT(ss)A No. 191/Ahd/2006
The ACIT, Central Circle- Shri Manoj B.
10, Ahmedabad. V/s. Vadodariya,
61 Adarsh Building
Swastik Char Rasta
Navranpura
Ahmedabad.
PAN: AALPV 5038N
(Appellant) (Respondent)
CO No. 216/Ahd/2006
Shri Manoj B. The ACIT, Central
Vadodariya, V/s. Circle-10, Ahmedabad.
61 Adarsh Building
Swastik Char Rasta
Navranpura Ahmedabad.
PAN: AALPV 5038N
(Appellant) (Respondent)
Revenue by : Shri D.C. Patwari and Shankarlal
Meena, D.R.
Assessee(s) by : S/Shri S.N. Soparkar and P.M.
Mehta, A.R.
सुनवाई कᳱ तारीख/ Date of Hearing : 19/09/2013
घोषणा कᳱ तारीख /Date of Pronouncement: 13/12/2013
आदेश/O R D E R
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
Revenue is in appeal, However, assessee is in Cross Objection emanating from the order of learned CIT(A)-III, Ahmedabad, dated 30th of March, 2006. For the sake of IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -2- convenience both are clubbed and hereby decided by this common order:-
A. IT(ss) A No.191/Ahd/2006 (Revenue's Appeal)
2. Revenue has raised the following grounds, connected with each other, reproduced below:
"The learned CIT(A) has erred in law and on facts in deleting the addition of Rs.72,62,215/- on account of undisclosed profit earned by the assessee in releasing the right in land."
2.1 Facts in brief as emerged from the corresponding assessment order passed u/s. 158 BD r.w.s. 158BC, dated 29.12.2004 are that the proceedings in the present case was in consequence of a search u/s. 132 carried out in the case known as "Master Group". The search was conducted on 20th of October, 2000. It was noted in the assessment order that the search was also carried out on the residential premises of one Sri Arvindbhai A. Shah, an accountant, and a diary was seized which was marked as Annexure A-1. Certain other materials have also been seized. On the basis of the jottings on the diary etc., it was found that the name of the assessee was mentioned; hence, the proceedings were started. In compliance of the notice, the assessee has filed a return at Rs.NIL. In the diary A-1, it was found at pages 134 to 137 that there was an account of the assessee. The AO has reproduced the contents of the accounts. Apart from the above accounts, some jottings on the chits have also been noticed by the AO. All those seized materials were confronted to the assessee. The assessee's argument was that the diary as maintained by Mr. Shah was as per the instructions of IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -3- others; hence, the contents of the said diary did not belong to the assessee. On the other hand, the AO has placed reliance on the reply of Sri Jivraj V. Desai wherein he has shifted the burden on this assessee. Those replies were also confronted to this assessee. The assessee was also provided the copies of the statement of Sri Arvind A. Shah and Jivraj V. Desai. The assessee's main contention was that in the statement given by Sri Arvind A. Shah he has clearly stated that the said diary was written under the instructions of J.V. Desai. The assessee has also contested that none of the papers were found in his hand writing. It was also contested that none of the papers or the diary were either found from his premises or possession. The assessee has also drawn attention on a statement recorded on 3rd October, 2002 of J.V. Desai where he had admitted that the diary was written by Mr. Shah in respect of his sharafi business. In respect of the land transaction and the entries recorded in the diary, the assessee has explained that his account was debited and there was an opening debit balance which was nothing but a hawala entry about some land transaction. According to assessee, it was recorded only as a Hawala entry hence there was no actual money transaction. The assessee has also pleaded that Sri J.V. Desai had taken a different view during the appellate proceedings and contented that the financial transactions recorded in the said diary were not connected with the sharafi business but pertained to the Thaltej land transaction. The assessee had objected before the AO that the said change in the stand of J.V. Desai was incorrect. Thereafter the AO has discussed the details of the land transaction and the IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -4- statements recorded. At one place it was informed by the assessee to AO that J.V. Desai had spent the money and debited the account of the assessee but later on the said account was squared up by crediting the account of the assessee on 1.12.1999 after the settlement of the land deal. On 1.12.1999, the transaction related to the land was over, the same amount of Rs.28,440/- (without three zeroes) was credited to the accounts of the assessee. However, the AO had discussed the entries of the said diary pertaining to the assessee in detail. According to AO, the impugned opening balance of Rs.23,43,08,700/- as on 1.11.1999 was nothing but in the nature of finance. As far as this assessee was concerned, according to AO, the finance had been extended to the assessee from three sources, first is the account of the assessee himself which was not related to Vithoba land, second finance is emanating from the hawala entries given to the assessee from the accountant and third the J.V. Desai has financed the assessee on behalf of the one Natubhai Popular. On the other hand, the assessee has strongly contested that he had no role to play in the said land deal. The AO has discussed the details of the land transaction and thereupon arrived at the conclusion that on release of the land the assessee had earned profit. The profit in assessee's hand was computed by the AO in the following manner:-
"It is relevant to mention here that from the narration given in Page- 134 of Annex. A-1 along with this credit entry of Rs.2,84,40,000/-, it is found that the area of this land is 25280 sq. yard which is also equal with the area shown in the books of accounts of these four persons. From the block assessment order in case of above four persons, it has been found that true market value of these plots has been computed as produced above, the same is again produced as under:
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -5- Document price True market value Undisclosed Investment Plot No.292/1, Rs.1058925 Rs.10133912 Rs.9074987 Plot No.292/2, Rs. 783475 Rs. 7497855 Rs.6714390 Plot No.293/1, Rs.2138628 Rs.2046669 Rs.18328041 Plot No.293/2 Rs.444850 Rs.4257214 Rs.3812364 From the above table, it is found that the AO has made addition of Rs.3,79,29,782/- considering the same as undisclosed investments. Whereas he has considered the total market value of the above plots of the lands at Rs.4,23,55,650/-. Now since the assessee has half of the interest on the above plots of the land, the investment on the same by the assessee may be considered at Rs.2,11,77,825/- as per the working of the AO in case of Shri Jivraj V. Desai, Shri Rajesh J. Desai, Shri Ramesh Desai, and Shri Rajni Desai. This amount has already been added in the hands of Shri Jivraj V. Desai and his three sons as 50% of the total amount investment of Rs.4,23,55,650/-. Even if it is considered that the 50% of this amount, i.e. Rs.2,11,77,785/- was invested by the assessee then also the source of this investment is available from more than Rs.23 Cr. debit balance in the account of the assessee reflecting in pages 134-137 of Annex. A-1. Therefore, the investment has been made by or out of the funds of Jivraj V. Desai in the above mentioned land. The share of the assessee is to the extent of Rs.2,11,77,785/- but the investment has been made by Shri Jivraj V. Desai and his three sons or out of funds given by Shri Jivraj V. Desai and his three sons to the assessee as is evident from the seized records. The entry of Rs.2,84,40,000/- appearing on page 134 of Annex. A-1 and page 96 of Annex. A-3 clearly indicates that the assessee has received this much credit on account of the sale of land as stated above. From the meaning the phrase '28440-hawalo Jamin malye Majre Aapya date 1.12.1999 Jamin 25280 var x 1125' which means after settlement of land deal a hawala credit of Rs.2,84,40,000 has been given to the assessee, it is clear that this much balance credit has been given to the assessee. Therefore, the undisclosed profit earned in releasing the right in the above said land by the assessee is calculated as Rs.72,62,215 (Rs.2,84,40,000-Rs.2,11,77,785). Substantive addition Rs.72,62,215/-"
3. This addition was challenged before CIT(A). We have noted that learned CIT(A) has given a general observation about the controversy as under:
"I have carefully considered the relevant facts and provisions of law with regard to the issue involved. I find that the action against the IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -6- appellant has been initiated on the strength of documents recovered from 3rd party, i.e. Mr. Jivraj V. Desai and his accountant, Shri Arvindbhai A. Shah. The search action took place on 20.10.2000. the relevant documents are a seized diary - annexure - A-1, loose papers contained in annexure A-2, A-3 & A-4. The normal presumption u/s. 132(4A) is that the documents were belonging to Shri Jivraj V. Desai"
and that it's contents were true. With regard to fastening of liability of a 3rd party on the basis of these seized documents, these documents may provide a good lead for further investigations. However, it was a basic principle of natural justice that on the basis of these documents alone, no liability can be fixed on the 3rd party unless such 3rd party owns up the transaction or the documents themselves were in the handwriting of such 3rd party or the notings or transactions recorded in these documents are duly authenticated with the signatures of such 3rd pary. During the course of search action on 20.10.00, an exhaustive statement of Shri Jivraj V. Desai was recorded. A statement from Shri Arvindbhai A. Shah, accountant of Shri Jivraj V. Desai was also recorded. But none of them indicated to be recording any transactions in appellant. Even Shri Arvindbhai A. Shah on 24.9.2002, he stated that the documents were in his handwriting. He had written these documents for Mr. Jivraj V. Desai and that these documents indicated sarafi loan transactions and consequential unaccounted investments of Shri Jivraj V. Desai. It is at a very late stage that Shri Jivraj V. Desai came forward with the theory that the diary marked Annexure A-1 was maintained by Shri Arvindbhai A. Shah at the instance of some other person. Such claim of Shri Jivraj V. Desai was in itself not sufficient to fix up a liability on the appellant. This is particularly so because none of the transactions being assigned to the appellant are authenticated by the appellant in any manner. The appellant has not been allowed cross examination of Shri Jivraj V. Desai and his accountant, Shri Arvindbhai A. Shah who come up with such a theory to shift a part of their tax liability towards the appellant. There are no instances or cogent evidences which support such contentions of Shri Jivraj V. Desai. It is in the light of these facts that various grounds of appeal taken up by the appellant in this appeal are required to be adjudicated upon. The plea of the appellant in this regard finds due support from th landmark judgement of Hon'ble Supremem Court in the case of CBI Vs. V.C. Shukla & Others reported in 3-SC cases- 410, wherein the Apex Court clearly laid down that entries in the documents maintained by a 3rd party had only probative value and such entire salon were not sufficient to charge any person with a liability. Corroborative independent evidences were essential to establish trust worthiness of such entries in order to fasten a libality on a person. The case of the appellant also finds support from the decision of Hon'ble Mumbai High court in the case of Addl. CIT Vs. Lata mangeshwar 97 ITR 696(Mumbai). I, therefore, hold that the entries in the documents recovered from Shri Jivraj V. Desai and his accountant Shri Arvindbhai A. Shah in themselves were not sufficient IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -7- to fasten a liability on the appellant. The various grounds of appeal raised by the appellant are therefore, decided on the basis of above adjudication."
3.1. About the impugned addition, it was reiterated by learned CIT(A) that the AO has held that the properties in question bearing Survey No.292/1; 292/2; 293/1; 293/2 were purchased by Sri Jivraj V. Desai jointly with the assessee, i.e., Sri Manoj B. Vadodaria; because the assessee's name was appearing as a second name on those documents. There was also a reference of a release document by the AO. The AO has thereafter referred the entry made in the diary. The narration of the credit entry in the name of the assessee was an amount of Rs.28440 on 1.12.1999 as "hawala for land". So the AO had decoded and added three zeroes "000". In the case of Sri J.V. Desai, the AO had worked out the market value of the Sola land at Rs.4,23,00,000/-; and the assessee's share was allegedly held at 50% at Rs.2,11,77,825/- Then the AO had said that by crediting the assessee's account by an amount of Rs.2,84,40,000/-; because that amount was received by the assessee for surrendering the right of sale of land pieces. The undisclosed profit was thus computed at Rs.72,62,215/- (Rs.2,84,40,000/ - Rs.2,11,77,785/-). Against the said addition the assessee had contested before the learned CIT(A) as follows:-
"27.2 Along with the five Sale Deeds aforesaid, the search party had also found five original Release Deeds (xerox compies attached at Annexures-"H-1 to H-5") dated 25.8.2000 executed by me in favour of the respective other purchasers viz., Shri Jivraj Desai and the other three members of his family, thereby undoing my having been joined in the execution of the aforesaid Sale deeds even though I had not paid any purchase consideration to the sellers of the lands. At the time of executing these Release Deeds. I had been paid an amount of Rs.25,000 each under each of the five Release Deeds by means of IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -8- cheques drawn by Shri Jivraj Desai and the other three members of his family on their respective bank accounts.
27.3 Among the papers seized along with the aforesaid Sale Deeds and Release Deeds, the search party also found and seized a letter dated 24.8.2000 addressed by Shri Rajesh J. Desai (one of the purchasers of the land in question) to the Sarvodaya Co-operative Bank ltd. Whereas I have not been provided with any copy of this letter, it is clear from the relevant portion of the impugned block assessment order that letter was addressed by Shri Rajesh J. Desai to the bank in connection with a borrowing facility against the security of the land in question. He has indicated in that letter that the value of one of the plots ( which were the subject matter of purchase under the five Sale Deeds in question) viz., 292/2, was about Rs.75 lacs. It is the stand of the assessing officer making assessment of Shri Jivraj Desai and his aforesaid family members as also of the learned Assessing Officer making my assessment vide the impugned order, that since the aforesaid plot no.292/2 measured about 4477 sq. yds, its value of Rs.75 lacs indicated in the aforesaid letter to the bank must be representing its market value which worked out to Rs.1675 (Rs.75 lacs / 4477) ..............
"31.1 In my humble submission, when it is the admitted position that the entire purchase consideration that was payable for the purchase of the lands in question vide the five Sale Deeds, had actually been paid by Shri Jivraj Desai and three members of his family, there can be no question for suggesting that merely because I had joined in the execution of the Sale Deeds as one of the purchasing parties (please not that my name has been mentioned as the second party in all the cases), any beneficial rights in the lands had vested in me. In my humble submission, therefore, any suggestion that I had received any consideration for executing the Release Deeds beyond the amounts actually paid to me viz. Rs.25,000 each at the time of (and not in consideration of) execution of the Release Deeds, is entirely misplaced. In my further submission, there really is no basis or evidence for making the suggestion that I had received any such consideration and that the amount of such consideration was Rs.2,84,40,000 as indicated by the credit entry in the account appearing on pages 134-137 of the seized diary at Annexure-A/1. As elaborately pointed out while narrating the fundamental facts of my present case, especially considering that I had myself noting to do with the maintenance of the record contained the said diary, a credit entry in an account appearing therein admittedly made by the Accountant of Shri Jivraj Desai, presumably at his instance, cannot form any basis for making an addition of such a huge amount in my hands I may also point out that the suggestion, made by the learned Assessing Officer making assessments of Shri Jivraj Desai and the members of his family, that the aforesaid credit entry of Rs.2,84,40,000/- indicated IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria -9- consideration payable to me for execution of the Release Deeds in respect of Sola lands, has been dismissed by Shri Jivraj Desai and his family members out of hand (not that their stand would have bound me if it had been in agreement with the stand of the Department. In any case, it being the well settled legal position that an assessee can be subjected to tax in respect of only that income which he has received, and the existence of income must be proved by the Department alleging it with the help of cogent evidence, there can be no question for making any addition in my hands, either protective or substantive, on the assumption that the aforesaid credit entry of Rs.2,84,40,000 represented consideration for executing Release Deeds. In this connection, I beg to rely, inter alia, on the authorities form which relevant extracts are given at Anenxure-I hereof.
4. After considering the aforementioned explanation learned CIT(A) had deleted the addition after assigning following reasons; relevant portion reproduced:
"I have carefully considered the relevant facts and provision of law with regard to the two additions made by the AO which have been disputed by the appellant through second and third grounds of appeal. The basic documents leading to these additions are Annexure A-31 and A-62. The sale deeds dated 22.10.1999 indicated purchase of five identified land pieces by Shri Jivraj Desai and his family members. In all these documents, the name of the appellant appeared as second name. These pieces of land have been referred to by the AO as sola land. The evidences on record clearly indicate that all purchase consideration as appearing in these five sale deeds dated 22.10.99 was paid by Shri Jivraj Desai and his family members. It was thus, apparent from the evidences on record that there was no investment by the appellant in purchase of sola land. No such evidence was also recovered during the course of search action which could in any manner suggests that there was investment by appellant in sola land. The claim of the appellant is that his name was included as second name in these sale deeds dated 22.10.99 with the sole purpose of procuring professional services of the appellant for approaching various authorities for obtaining clearance for development of land in question. This plea of the appellant prima facie has substance because as per the conveyance deed itself, though the appellant's name appeared as second name, the whole payment mentioned in the conveyance deed has been made by Shri Jivraj Desai and his family members. Other documents, identified as Annexure A-62 are release deeds through which the appellant released his rights created through the sale deeds dated 22.10.99 in lieu of receipt of his profession fees of Rs.25,000/- per piece of land in lieu of the services rendered by him. This amount totaling to Rs.1,25,000/- is received by the appellant IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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through banking channel and has been also duly disclosed in his return of income. The AO while framing the assessment in the case of shri Jivraj Desai made an addition of Rs.1,83,28,041/-. This was done by the AO on the basis of a document of a bank wherein the market value of Plot No.292/2 was indicated to be Rs.75 lakhs as against the document value of Rs.7,83,475/-. The whole investment in sola land has been treated by the AO also to be by Mr. Jivraj Desai and his family members. This addition was however deleted at first appellate level in the hands of Shri Jivraj V. Desai on the ground that here was no evidence of unaccounted investment in sold land. The total addition made by the AO in the case of Shri Jivraj Desai & his family members was of Rs.3,79,29,782/- by considering the total market value of sola land plots to be Rs.4,23,55,650/-. On the presumption that the appellant had half interest in the above plots of land, the investment of the appellant has been worked out to Rs.2,11,77,785/-. As this investment of Rs.2,11,77,785/- also came from substantial debit balance of over Rs.23crores in appellant's account on page No.134 to 137 of Annexure A-1, the AO held that there was no investment by the appellant. However, as the addition made in the case of Shri Jivraj Desai and his family members was deleted, the AO brought ot tax this estimated investment of Rs.2,11,77,785/- on protective basis in the hands of the appellant. This action of the AO is contrary to findings in the asstt. order of Shri Jivraj Desai and his family members wherein it was held that the whole of investment in sola land was of Shri Jivraj Desai and his family members is deleted by the CIT(A) Not on the ground that a part of the investment was of the appellant but on the ground that there was no unaccounted investment in purchase of sola land. The documents seized during the course of search action clearly established that there was no investment by the appellant in sola land and therefore there was no justification of brining to tax unaccounted investment, if any, in the hands of the appellant even on protective basis. This is in total contrast to A.O's finding that even if there was any investment, it came from debit balance of about 23 crs. In the appellant's account. The nexus proposed by the AO with the addition made in the case of Shri Jivraj Desai and his family members and the deletion of the same on totally different ground is totally illogical. On the contrary adjudication of CIT(A) in the case of Jivraj Desai is that there was no unaccounted investment in Sola land and even if same is followed no addition can be made in appellant's hand. As no evidence of any investment by the appellant is available on record, the addition of Rs.2,11,77,785/- made by the AO on protective basis in the hands of the appellant is deleted. In a similar manner, the calculation of substantive addition of Rs.72,62,215/- by the AO is with the theory that there was a credit of Rs.2,84,40,000/- in the account of the appellant on 1.12.99 on page 134 of annexure A-1. My observations in para 14 above with reference to evidential value of this documents are squarely applicable here. The theory put up by the AO that this credit entry was with reference to release of his rights by the appellant in IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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sola land is not supported by any document. Further to above, the appellant relinquished his rights in sola land on 28.5.2000 and therefore, the question of giving any credit to the appellant on 1.12.99, i.e. before 8 months of the release deed does not arise. I, therefore, find that as per evidences on record, the appellant received Rs.1,25,000/- for rendering professional services through banking channel and the same was disclosed in the return of income for the relevant assessment year. The transaction was duly completed in the above manner before day of search and therefore there was no basis or justification in bringing to tax in the appellant's hand any further profit on substantive basis with reference to release of his rights of the sola land. The addition of Rs.72,62,215/- made by the AO on substantive basis in the hands of the appellant was not supported by any evidence and thus not justified. The same is, therefore, deleted. These two grounds of appeal are, therefore, treated as follows."
5. We have heard both the sides at some length. From the side of the Revenue, learned D.R., Shri D.C. Patwari and Sri Shankarlal Meena and from the side of the assessee, learned A.R., Sri S.N. Soparkar and Sri P.M. Mehta have appeared and advanced lengthy arguments. We shall discuss the facts and the respective arguments in brief hereinunder.
5.1 We have been informed that a search was conducted at the premises of Vishrut Society in consequence of the search proceedings conducted in the case of "Master Group" on 20th of October, 2000. The impugned addition is on the basis of certain documents which were found from the said premises bearing survey no.292/1, 292/2, 293/1, 293/2 of Sola land. The AO has observed that the said Sola land was sold to Sri Jivraj V. Desai and the family members as follows:
Sr. No. Survey Persons to whom the land Value of the land as No. belongs per legal document
1. 292/1 Rajnibhai J. Desai and 10,58,925 IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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Manoj B. Vadodariya
2. 292/2 Rajesh J. Desai and Manoj 07,83,475 B. Vadodariya
3. 293/1 Jivraj V. Desai and Manoj 21,38,628 B. Vadodariya
4. 293/2 Ramesh J. Desai and Manoj 04,44,850 B. Vadodariya 5.2 As per document, the Sola land was stated to be sold on 22.10.1999. The said document was marked as Annexure A-62.
Further it was also noted by the AO that Sri Manoj Vadodaria, i.e., the assessee, release his rights and interest over the said land in favour of J.V. Desai, Rajesh J. Desai, Sri Ramesh J. Desai and Sri Rajni Desai. It was noted by the AO that the said document was a notarized document dated 28.5.2000 through which the assessee had released his interest in respect of Sola land in favour of J.V. Desai and others. As per the said document, the assessee had received a total sum of Rs.1,25,000/- for those five plots. The said sum of Rs.1,25,000/- has also appeared in the account of the assessee in the diary marked as Annexure A-1, written by the accountant Sri Arvind Shah. The amount written in the diary towards debit side was as, quote "125 4-9-00 cheque 4 dastavej"
unquote. It was informed to the AO that in the return of income the assessee had disclosed the said amount of Rs.1,25,000/- in respect of the release of his rights pertaining to those plots. On the other hand, the AO has noted that on the said diary there was a credit entry in the account of Sri Manoj Vadodaria, i.e., the assessee as under:-
"28444-Hawala Jaminno Majre Apyo 1-12-1999 Jamin 25280 Varx 1125 (page 89 AO)"
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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5.3 At this juncture, it is worth to mention that the area of the land as alleged by AO in the diary was 25280 sq. yd., however, as per the comment of the AO it was approximately equal to the area of those plots. It is also worth to mention that in respect of those plots an addition of Rs.1,83,28,041/- was made in the hands of the Sri J.V. Desai. While deciding the said appeal in IT(ss)A No.106/Ahd/2004 and IT(ss)A No.99/Ahd/2004 order of even date by us we dealt with this issue in ground no.4 of the Revenue's appeal are held as under:
"Having heard the submissions of both the sides, we have noted that learned CIT(A) had granted relief by referring her decision taken in the case of Sri Ramesh J. Desai. Now before us a consolidated order of ITAT 'C' Bench Ahmedabad dated 27.06.2008 is placed; wherein in appeal IT(ss)A Nos.54, 55 & 56/Ahd/2004 for the block period 91-92 to 2001-02 in the case of Sri Remesh J. Desai, Sri Rajni J. Desai and Sri Rajesh J. Desai it was held that a letter dated 24.08.2000 was written by Sri Rajesh J. Desai to the Sarvoday Commercial Co- operative Bank, which was applied to avail the loan facility. It was also noted by the Respected Co-ordinate Bench that the investment had already been disclosed in regular books hence out of the ambits of Block assessment. Since on those very facts the respected co-ordinate bench had taken a view and confirmed the relief granted by learned CIT(A), therefore, on the same lines we hereby confirm the relief given by learned CIT(A). Hence, this ground of the Revenue is hereby dismissed."
5.4 Further our attention has also been drawn in other group cases, namely, Sri Rajni J. Desai, Ramesh J. Desai, Rajesh J. Desai bearing IT(ss)A No.51, 52, 53, 54/Ahd/2004 order dated 27th of June, 2008 passed by ITAT "C" Bench Ahmedabad, wherein in respect of this land a view was expressed that merely on the basis of the loan application the impugned investment should not be assessed at the higher value while passing the order under Chapter XIVB of the Act for the block period.
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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5.6 Apart from these two afore-cited decisions of the co- ordinate Benches certain facts have also been brought to our notice. We have been informed that the Sola land was purchased by the following persons and the area of the plot was as under:
"1. A-31 seized from Vishrut Society contains papers related to sale deed dtd. 22.10.1999 in respect of land at Sola Village Survey Nos. 292/1, 292/2, 293/1 & 293/2, the details thereof are as under:
S.No. 292/1 5059 sq. mtrs. Rajnibhai J. Desai & M.B. Vadodaria S.No.292/2 3743 sq. mtrs. Rajeshbhai J. Desai & M.B. Vadoaria S.No.293/1 10218 sq. mtrs. Jivrajbhai V. Desai & M.B. Vadodaria S.No.293/2 2125 sq. mtrs. Rameshbhai J. Desai & M.B. Vadodaria Total 21,145 sq. mtrs."
5.7 However, the area as noted in the diary as well as in the Annexure A-3, page 96 was "25280 Var". It was strongly contested before us that the AO has wrongly presumed that the entry in the said diary was in respect of Sola land although the area did not match at all. Rather, we have noted that the AO himself has doubted about the area, therefore, he has mentioned that the area as per the diary was approximately equal to the area of the plots. Relevant observation of the AO from page 89 of the order is reproduced below:
"It is relevant to mention here that this coded entry of 28440 connotes the amount of Rs.2,84,40,000 because it has been written in the coded form after removing '000'. The area of this land is 25280 sq. yds. which is approximately equal to the area of these plots shown in the books of accounts of Shri Jivraj V. Desai, Shri Rajesh J. Desai, Shri Ramesh Desai, and Shri Rajni Desai. In case of block assessment order of these four persons, the AO has added undisclosed income in this regard. In case of Shri Jivraj V. Desai, the addition of Rs.1,83,28,041/- has been made."
5.8 The above contention of the assessee appears to be correct that merely on an imagination and hypothesis the AO has presumed that the impugned credit entry in diary pertained to the IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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Sola land transaction. We have also noted that while surrendering the rights, this assessee has been paid Rs.25,000/- by each of the members of the family through cheque as a commission and the payment was as under:-
"Date Cheque No. of Rs.
25.8.2000 005893 Rajnibhai Desai 25000
25.8.2000 003320 Ramesh Desai 25000
25.8.2000 005200 Rajesh Desai 25000
25.8.2000 000617 Jivraj Desai 25000
25.8.2000 000618 Jivraj Desai 25000
5.9 In the light of the above details of the payments, the contention of the assessee is that his name was added in the document merely for the purpose to assist in documentation and clearances from certain offices but in fact the property was purchased by the family members of J.V. Desai. The initial consideration paid at the time of purchase of Sola land was also duly reflected in their respective accounts. The details of each person have already been reproduced above. Under the totality of the facts, circumstances and the nature of evidence placed on record, we are of the considered opinion that learned CIT(A) has rightly held that no profit was earned by the assessee on release of his rights in respect of Sola land. We hereby respectfully follow the decision of the co-ordinate Benches in the light of other details as discussed supra and dismiss this ground of the Revenue.
6. Ground No.3 of the Revenue's appeal is reproduced below:
"The learned CIT(A) has erred in law and on facts in deleting the protective addition of Rs.2,11,77,785/- on account of unaccounted investment in land."
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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7. In the light of the addition made in respect of Sola land by the AO, as discussed above, he had an apprehension about the outcome of the appeals, therefore, to protect the interest of the Revenue he had mad a protective addition in the following manner.
"As has been produced before, the ld. CIT(A) has reduced the unaccounted investment in the above mentioned land to Nil in all the four cases i.e. Shri Jivraj V Desai and his three sons. Department has not accepted the decision of the CIT(A). Moreover, if the view of the CIT(A) is held to be correct by final fact finding authority i.e. Hon'ble ITAT then it would automatically mean that assessee also had invested Nil unaccounted money in this land and in that case the profit earned in releasing the right on the above said land would be entire credited amount of Rs.2,84,40,000/-. As Rs.72,62,215/- has already been added on substantive basis, the remaining amount of Rs.2,11,77,785/- (Rs.2,84,40,000 - Rs.72,62,215) is added on protective basis."
8. Being aggrieved, the matter was carried before learned CIT(A). He has noted that the 50% investment in the hands of the assessee was made by the AO merely on presumption and that too on protective basis. According to him, the AO has given contradictory version. On one hand, it was held by the AO that whole of the investment in Sola land was made by Sri Jivraj Desai and his family members and the appellant had not made any investment. But on the other hand, the estimated investment was assessed merely on the protective basis in the hands of the assessee. Learned CIT(A) has opined that as far as the case of Sri Jivraj Desai is concerned, while adjudicating this controversy, learned CIT(A) had granted relief on the ground that there was no evidence of unaccounted investment in Sola land. On that basis in the present case, learned CIT(A) had held that there was no IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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evidence of investment of the assessee on record, the protective addition was deleted.
9. Having heard the submissions of both the sides and in the light of the discussion made hereinabove, we hereby affirm the findings of learned CIT(A) due to main reason that the AO had enhanced the value of the land merely on the basis of a letter issued by one of the family member of J.V. Desai to obtain loan from the bank. That basis of enhancement in the value of the land had already been rejected by us. In consequence thereupon, the protective addition made in the hands of the assessee does not survive. We, therefore, conclud that in the light of the evidences placed on record and the view expressed by the respected co- ordinate Benches, learned CIT(A) has rightly deleted the addition. We find no force in this ground, hence dismissed.
10. Ground No.2 of the Revenue's Appeal is reproduced below:
"The ld. CIT(A) has erred in law and on facts in deleting the protective addition of Rs.6,10,86,200/- on account of hawala interest."
11. In this regard, the AO had made an elaborate statement to establish that the assessee had earned interest on finance business. In his opinion, the opening balance of Rs.23,43,08,700/- was nothing but related to the finance transaction. The relevant observation of the AO is reproduced below:
"From the above observations, it is very clear that the opening balance of Rs.23,43,08,700 as on 1.11.99 is nothing but the finance. This finance has been extended to the assessee from the three sources, first is in the account of the assessee itself appearing in page 98-100 of Annex. A-3 and this is not relating to any transaction fo Vithoba land. Second finance is emanating from the hawala entry given to the IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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assessee from the account of Natubhai Popular and from the account of Natubhai Popular himself appearing in page 90-93 of Annex. A-3, it is clear that this hawala is also a finance hawala. From the account of Ntubhai Popular it can be seen that Jivraj V. Desai has given him the finance. And thereafter the amount of Rs.8 Crore has been transferred to Shri Manoj Vadodariya as finance hawala and not as land hawala. Though it is a fact that there is an entry in this account dated 01.08.98 of Rs.2.5 Crores with the narration 'hawalo V.V.' but it does not make it clear as to how this a land hawala. This entry only indicdates that Shri Jivraj has given this amount to V.V. Rabari as loan on behalf of Natubhai Popular. In the case of Vithoba trust has not finalized, therefore also this amount automatically becomes finace. Thirdly since Shri Jivraj V. Desai is not the purchaser as per his own submission and as per material facts found so far, therefore also he has only financed this sum on behalf of Natubhai Popular to Shri V.V. Rabari. It is also very relevant to mention there that at the top right corner of the account of Natubhai Popular appearing at page 96 of Ann. A-3, 2.6 is written, this clearly indicates the rate of interest charged by Shri Jivraj V. Desai.
Third finance is emanating from page-96 of Annex. A-3 which is starts with hawala entry of Rs.10,00,000 in the name of Hemendrabhai Singh dated 1.7.99. In this regard, the summons u/s. 131 was issued to Shri Jivraj V. Desai dated 23.12.2004 to identify this person Shri Hemendrabhai Shah and also to explain if at all, this person is related with the land deal of Vithobha trust. But in his submission dated 27- 12-2004 he has not given any indication in this regard. It is also relevant to mention here that at any stage from the assessment proceedings, till appellate proceedings and in the summons issued u/s. 131 of the Act Shri Jivraj V. Desai has not given any link of Hemendrabhai Shah with the Vithobha land deal. Also from the nature of the accounts found in the seized material as Annex. A-1 to A-6, it has been found that Shri Jivraj V. Desai has mostly done the business of finance. Special in the case of the assessee, it has been found that the interest has been applied @ 3% which is written in top right corner of Page-34 of Annex. A-1, therefore, it is very clear that this account is only finance account. The nature of finance of this account is also well proved from the fact that the interest has been applied by Shri Jivraj V. Desai on every month. From the working given to the assessee in the final show cause notice dated 27-12-204 it is cleat that the assessee had made payment if interest only. Therefore, it is concluded that this account of Shri Manoj B. Vadodariya appearing in page-134-137 is nothing a finance account."
11.1 The AO has also furnished a working of the interest. Thereafter, it was also observed by the AO that in the case of J.V. IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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Desai, CIT(A) had deleted the addition made on account of receipt of interest in the hands of J.V. Desai. The said deletion of interest contain an amount of Rs.6,10,86,200/- which was "Hawala interest" in the account of Sri Manoj Vadodaria. According to AO, if the aforesaid deletion is found correct by the Hon'ble ITAT in pending appeal in the case of J.V. Desai that the said account pertained to land deal of Vithobha Trust then the automatic conclusion should be that the opening balance was the land hawala amount and on the amount the interest was earned by the assessee from undisclosed sources. The relevant observation of the AO for ready reference is reproduced below:
"the observation of ld. CIT(A in case of appellate order of Shri Jivraj V. Desai has been produced in the body of this assessment order. From this observation, it emanates that the account of Shri Manoj Vadodariya appearinjg in Page134-137 of Annex. A-1 is pertaining to land deal of Vithobha Trust. With this observation, ld. CIT(A) has deleted the addition made on account of receipt of interest in the hands of Shri Jivraj V. Desai. This deletion of interest contains the amount of Rs. 6,10,86,200 appearing as hawala interest in this account of Shri Manoj Vadodariya. The final show cause notice given to the assessee dated 27-12-2004 has been produced in the body of this assessment order, this contains the working of hawala interest of Rs. 6,10,86,200 worked out in this account and payment made by the assessee to Shri Jivraj V. Desai of Rs. 6,92,26,900 and receipt of Rs. 1,22,35,000 from Juvraj V. Desai. If this observation of ld. CIT(A) is found correct in the appellate proceedings pending before Hon'ble ITAT in case of Shri Jivraj V. Desai that this account pertains to land dealing of Vithobha Trust, the it will be automatic to conclude that the opening balance of this account is a land hawala amount. In that case the interest amount of Rs. 6,10,86,200 would be considered as income of the assessee earned from undisclosed sources. Therefore, the addition of Rs. 6,10,86,200 is made in the hands of the assessee on the protective basis. The addition is made on protective basis because the transaction have already been treated asfinance transactions while making substantive addition in the hands of Jivraj V. Desai. This addition in the hands of the assessee can be made if these transactions are considered as land transactions in the appellate proceedings.
[Protective addition Rs. 6,10,86,200]"
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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12. Being aggrieved the matter was carried before the First Appellate Authority. It was contested before learned CIT(A) that while deciding the case of Sri J. V. Desai, the AO had given a clear finding that the account of the assessee, Sri Manoj Vadodaria has no relevance with the transaction of Vithobha land. The AO has held in that case that apparently it was a financing account in the books of Sri J.V. Desai, wherein he had advanced substantial funds to the assessee on an interest rate of 3%. Interest was also worked out by Sri J.V. Desai every month. Therefore placing reliance on the observation of the AO in the assessment order, the assessee had further contended that the document did not indicate that Sri Manoj Vadodaria had played any role in the said land deal. In that case of Mr. Desai, it was held as a loan transaction and the entry was treated as interest of Rs.6,10,86,200/- payable by Sri Manoj Vadodaria to Sri Desai. Hence, the argument of the assess is that no addition could be made in the hands of the assessee because all along there was a heavy debit balance and the impugned interest was interest expenditure. According to argument of the assessee, there was no element of income to be taxed in the hands of the assessee. In support of this contention, the relevant discussion was made by learned CIT(A) on the basis of the said diary and connected accounts. Finally, the decision of the learned CIT(A) was that there was no authentication that the alleged transaction of the land belonged to the assessee. In his opinion the whole exercise of Sri J.V. Desai was to exclude the interest income from his hand. The AO had brought on record enough material to establish that the first entry of Rs.23 crore was nothing but a IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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brought forward balance. Thereafter, there was a calculation of periodical interest @ 3% per month. On the basis of the said calculation the aggregate interest of over Rs.6 crores had been worked out. Learned CIT(A) has given a finding as follows:
"I, therefore, uphold the observation of the AO that the evidence on record clearly established that the account maintained in the name of appellant on page 134 to 137 of Annexure A-1 represented financial transactions of Shri Jivraj Desai and the periodical interest calculated in this account represents interest income of Shri Jivraj Desai. The question of bringing to tax the same in the hands of the appellant was thus in total contrast to the above conclusion reached by the AO."
12.1 Learned CIT(A) has held that on the basis of the documents, it was not justified even to assess the amount on protective basis in the hands of the assessee, relevant portion is reproduced below:
"The AO has also rightly observed that there was a heavy debit balance in the account maintained in the name of the appellant on page 134 to 137 of Annexure A-1. It is obvious that when there was a continuous debit balance in the ledger account of a particular person, the interest periodically debited on such debit balances can never represent interest income of the person in whose name the account is maintained because such interest is only increasing his ability whereas income would appear on credit side of such ledger account and will result in reduction of liability. I, therefore, find that the question of bringing to tax any income in the hands of the appellant on the basis of these documents was not justified even on protective basis and even when it is presumed that this account was pertaining to the appellant. The assessment on protective basis is normally framed only when there was a prima facie case that certain income was either belonging to one or the other person. In the appellant's case, however, there was only a borrowing and not income and, therefore, liability cannot be fixed on the appellant solely in an eventuality of such interest income assessed in the hands of Shri Jivraj Desai on account of financing business, represented by the documents at page 134 to 137, getting deleted at appellate level. In fact, these documents themselves indicated that such income of Shri Jivraj Desai would be in fact loss of the appellant and the question of bringing to tax such loss as income in the hands of the appellant was not justified by any logic. I, therefore, hold that the conclusion drawn by the AO to bring to tax Rs.6,10,86,200/- even on protective basis was contrary to the conclusions drawn by him in the assessment order and evidences on IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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record in the form of relevant seized material. The addition of Rs.6,10,86,200/- made by the AO on protective basis in the hands of the appellant is, therefore, deleted. This ground of appeal, is therefore, treated as allowed. "
13. We have heard both the sides at some length. At the outset, it is worth to mention the while deciding the appeal of Sri J.V. Desai, we have also taken a view that transaction in question was nothing but "sharafi business" of Sri Desai. There were several evidences as well as the statements through which we have arrived at that conclusion. Even, the AO had made the impugned addition merely on protective basis to overcome an apprehension that in case the ITAT delete the addition of J.V. Desai and hold that the impugned transactions were not the finance transaction but related to the land deal then in that eventuality it is to be held as an alternate, to assessees amount as a finance transaction in the hands of the assessee. Now the present position in view of our decision in the case of J.V. Desai, is that the said apprehension of the AO get resolved; hence, there was no necessity of any protective addition. Resultantly, we hereby confirm the findings of learned CIT(A) and this ground of the Revenue is hereby deleted.
B. CO No.216/Ahd/2006
14. Through this Cross Objection, the assessee has raised the following grounds:
"On the facts and in the circumstances of the case, the CIT(A) has erred in not upholding the assessee's first ground of appeal before him (which is reproduced in para-6 on page-6 of the appellate order dated 30.3.2006) urging in effect that the assessment order dated 29.12.2004 was barred by limitation and deserves to be quashed."
IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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15. Our attention has been drawn that the impugned order passed u/s. 158BD was dated 29.12.2004. The contention is that the said order is time barred. It is stated that a notice u/s.158BD was issued on 23.10.2002 and on the basis of the said notice the period of limitation for passing an order u/s. 158BD had expired on 31.10.2004. Although, the learned CIT(A) had held that there was no bar in law for issuing another notice u/s.158BD, but before us it was fairly informed by learned AR that the impugned notice was cancelled and a new notice was issued on 29.12.2004. Be that as it was, without entering into the legal controversy as raised by the assessee, we hereby hold that in a situation when on merits the assessee had already succeeded, therefore, this legal ground has become redundant. Because of the outcome of our decision on merits, we are of the view that the Cross Objector should not have any grievance. We, therefore, dismiss this ground of the Cross Objection being redundant in nature.
16. In the result, the appeal of the Revenue as well as Cross Objection of the assessee are dismissed.
Sd/- Sd/-
(T.R. MEENA) (MUKUL Kr. SHRAWAT)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 13/12/2013
Prabhat Kr. Kesarwani, Sr. P.S.
TRUE COPY
आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to :
1. अपीलाथᱮ / The Appellant
2. ᮧ᭜यथᱮ / The Respondent.
3. संबंिधत आयकर आयुᲦ / Concerned CIT IT(ss) No.191/Ahd/2006 & CO No.216/Ahd/2006 ACIT Ahmedabad Vs. Shri Manoj B. Vadodaria
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4. आयकर आयुᲦ(अपील) / The CIT(A)-III, Ahmedabad
5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाडᭅ फाईल / Guard file.
आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad