Income Tax Appellate Tribunal - Ahmedabad
Sejal Gopalbhai Shah, Ahmedabad vs Assessee on 7 August, 2015
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'C' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER
आयकर अपील सं./ IT(SS)A No.378, 379 and 380/Ahd/2011
नधा रण वष /Block Asstt. Year: 2002-03, 2003-04 and 2004-05
Sejal Gopalbhai Shah ACIT, Cent.Cir.2(4)
11, Chandrakrupa Society Vs Ahmedabad.
Nr. Shivranjani Cross Roads
Satellite, Ahmedabad.
PAN : AGDPS 3217 Q
अपीलाथ&/ (Appellant) '(यथ&/ (Respondent)
Assessee by : Shri Sakar Sharma
Revenue by : Shri Surendra Kumar, CIT-DR
सन
ु वाई क तार ख/ Dateof Hearing : 04/08/2015
घोषणा क तार ख / Date of Pronouncement: 07/08/2015
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
The ld. First Appellate Authority has decided two appeals of the assessee for the Asstt.Years 2002-03 and 2003-04 by way of a common order dated 22.2.2001 and the appeal for the Asstt.Year 2004-05 was decided vide order dated 23.2.2011. All these orders are being impugned by the assessee in the present three appeals. The issues involved in the appeals are common, and therefore, we heard them together, and deem it appropriate to dispose of these appeals by this common order.
IT(SS)A No.378/Ahd/2011- 3 Appeals 2
2. Before adverting to the specific grievance of the assessee, in each assessment year, we deem it appropriate to make reference to certain fundamental facts.
3. Search and seizure operation under section 132 of the Income Tax Act was carried out in Sejal Mahindra group of cases on 25.7.2007. In order to give a logical end to the proceedings, notice under section 153A dated 7.2.2008 was issued upon the assessee with request to file return within 30 days on receipt of notice. However, the assessee did not file return as required in the notice. The ld.AO, thereafter, issued notice along with questionnaire under section 142(1). The assessee has filed the return in the Asstt.Years 2002-03 to 2004-05 on 09.12.2009. The assessment was to be framed by 31.12.2009. Along with return, the assessee attached a note. This note has been reproduced by the AO in the assessment order as well as by the ld.CIT(A) in the impugned orders.
4. In brief, Ms.Sejal Shah has contended that she had been doing business of trading in shares and commodities, speculation business, real estate transactions, investment in shares for short term and long term gain and brokerage/ commission business. For carrying out these business activities, she has operated bank accounts in her name, in the name of her father, late Shri Gopalbhai Shah, mother Smt. Pareshaben G. Shah, brother Shri Mit G. Shah, her friend Ms. Rajvi Shah as well as in the different trade name entities, proprietorship concerns etc. She has annexed a list Exhibit-I along with return. The assessee had owned up all transactions in these names and offered the income. The assessee has also contended that transactions in the bank account and cash book were intermingled in such a manner that there were overlapping of funds. She has rotated cash available with her. Thus, there may be duplication of certain entries. She has offered income of IT(SS)A No.378/Ahd/2011- 3 Appeals 3 Rs.10.00 crores in the Asstt.Years 2002-03 to 2008-09 This income has been worked out on the basis of peak level in the cash book seized by the department, and from the bank account maintained by the assessee, and other family members and concerns, whose names have been given in Exhibit-I. The assessee has compiled the details in tabular form exhibiting the particulars of assets/investments identified against the amount of additional income offered in the return for each assessment year. This paper has been reproduced by the ld.First Appellate Authority at page nos.4 & 5 of the paper book in the Asstt.Year 2002-03 to 2004-05. The returns have been filed on 9.12.2009. There was only 22 days' time left with the AO for scrutinizing the details submitted by the assessee. Therefore, it exhibits that the assessee did not cooperate with the AO in the assessment proceedings. With this factual background, let us examine each issue agitated by the assessee in these three years.
5. The ground nos.1 and 2 are common in all the assessment years. In these grounds, the assessee has pleaded that the assessment orders have been passed by the AO after 12o clock in the mid-night of 31-12- 2009. Therefore, the assessment orders are time barred, and consequently be quashed. The additional ground of appeal to this effect was raised by the assessee in all these three years before the ld.First Appellate Authority also.
6. With the assistance of the learned representatives, we have gone through the record. The ld.counsel for the assessee has drew our attention towards page no.5 of the assessment order passed in the Asstt.Year 2002-03 and took us through the following paragraphs:
"The reply of queries asked vide first questionnaire dtd 20.08.2009 was also filed in piecemeal manner starting from 16.12.2009. In last two days as many as 9 different replies were IT(SS)A No.378/Ahd/2011- 3 Appeals 4 submitted in the case of the assessee. Similar was the position in other group cases. Even at 12.15 am of night of 31st December, 2009, four replies were received from the Assessee. Despite the odd hour much after office time, all the replies were duly received by the assessee."
7. The ld.counsel for the assessee contended that the contentions of the AO available, in this paragraph indicates that he has passed the assessment order at 12:15 of 31st December, 2009, meaning thereby, the assessment order was not passed before the 31-12-2009. Hence, it is time barred.
8. On the other hand, the learned DR relied upon the findings of the CIT(A) who has specifically dealt with this issue after perusing the order sheet entries in the assessment record. It is pertinent to take note of the findings recorded by the CIT(A) on this issue.
"4. I have considered the submissions of the appellant regarding the additional ground raised by the appellant On the perusal of the case records, it is seen that the assessment order has been served on the brother of the appellant Shri Mit Shah on 31.12.009. The fact that the assessment order has been served upon the appellant on 31.12.2009 was also accepted by the AR of the appellant before me If the order was not passed by the AO prior to 31.12.2009, then the same could not have been served upon the appellant on 31.12.2009 This clearly shows that there is a mistake in the assessment order.
4.1 For this purpose, the order sheet of the assessment records was verified by me. From the perusal of the order sheet, it is seen that on30/12/2009 the AO has made two notings prior to this noting of 31/12/2009 in the order sheet regarding the receipt of two replies from the appellant. The first noting on 31/12/2009 at 12.15 a.m. is regarding the receipt of the submissions dated 28/12/2009, 29/12/2009 and 30/12/2009. It is seen that the representative of the appellant Shri C.P. Rawal has also signed this order sheet entry by mentioning the date as 31/12/2009 at 12.15. It is thus clear that the assessment proceedings continued throughout the day of 30/12/2009 beyond 12.15 o'clock in the night. This is proved by the signature of the representative of the appellant Shri C P Rawal, who has also, mentioned the time at IT(SS)A No.378/Ahd/2011- 3 Appeals 5 12.15 a.m. on 31/12/2009. Prior to this order sheet entry, no hearing has taken place on 31/12/2009! It is not expected that the AO has started the hearing in this case on 31/12/2009 in midnight. Further after this entry in the note sheet, there is another entry on 31/12/2009 at 3 PM as per which the assessment order under section 153A/143 (3) for assessment year 2002-2003 to 2008-2009 are passed by the AO. The acknowledgement slip also shows the signature of Shri Mit Shah, the brother of the appellant as on 31/12/2009. The date of service of assessment order, demand notice and penalty notices- is shown as 31/12/2009. Therefore, there is an apparent mistake in the order passed by the AO as mentioned above. Either instead of the word "morning",' the AO wrongly used the word "night" as it is a common mistake committed by many persons under the belief that after 12 o'clock in the night, the period is treated as night till the morning or instead of 30/12/2009 the AO has wrongly mentioned as 31/12/2009. The correct sentence should have been as Even at 12.15 A.M. of morning (and not night as mentioned by the AO) of 31st December, 2009 four replies were received from the assessee. Despite the odd hour much after the office time all the replies were duly received from the assessee" or Even at 12.15 o' clock of night of 30th December, 2009 four replies were received from the assessee. Despite the odd hour much after the office time all the replies were duly received from the assessee.
4.2 In view of the above discussion, the additional ground raised by the appellant is factually incorrect and has been raised with an intention to mislead the appellate authorities. The same is therefore, dismissed."
9. The ld.counsel for the assessee further contended that the assessment order has been served upon the assessee on 1st January, which indicates that the assessment order was processed by the AO upto 1st January, and it was not released by him. Therefore, it becomes clear that the assessment order was passed by the AO on 1st January, 2010 after expiry of limitation. On due consideration of the facts and circumstances, we do not find force in the submissions of the ld.
IT(SS)A No.378/Ahd/2011- 3 Appeals 6 counsel for the assessee. Firstly, the ld. AO has mentioned a time at 12:15 am, meaning thereby, it is morning of 31-12-2009. Rather, the CIT(A) has rightly pointed out that instead of expression "night", the ld.AO should have recorded "morning". It is only incorrect use of word at the end of the AO. Otherwise, he has passed the assessment order on 31.12.2009 after 12oclock next day would begin. Had it been 12:15am after 31st January, then the AO would not have mentioned 31.12.2009, rather it would have been 1st January, 2010. The learned First Appellate Authority has made elaborate discussions on this point in the findings extracted (supra), and we do not find any merit in the submissions of the learned counsel for interfering in the above findings of the CIT(A). This ground of appeal is rejected in all three years.
10. The ground no.3 and 4 is also common in all these three years. The assessee has pleaded that the ld.CIT(A) has erred in confirming the addition of Rs.15.00 lakhs, Rs.9.50 lakhs and Rs.15.50 lakhs made by the AO on account of alleged investment/expenditure in the property situated at 6, Kaushal Co-op. Hsg. Society only on surmises and conjectures, and without bringing any evidence on record in respect of these transactions in the Asstt.Years 2002-03 to 2004-05 respectively.
11. Brief facts of the case are that during the course of search, various promissory notes, cheque and copies of agreement were found and inventorised as page nos.101 to 107, 108 to 110 of Annexure-A/73. On perusal of these papers, it revealed that Shri Hasubhai T. Thakkar, Alka Automobiles, Ashish Motors etc. have received a sum of Rs.40 lakhs from father of the assessee, Shri Gopal Shah, mother Pareshaben Shah and from the assessee. The details of money given are ; (a) for the F.Y.2001-02 Rs.15.00 lakhs, F.Y.2002-03 Rs.9,50 lakhs and F.Y.2003-04 Rs.15.00 lakhs. The borrowers, in lieu of this loan of Rs.40 lakhs had issued undated cheque of equal amount. They have executed IT(SS)A No.378/Ahd/2011- 3 Appeals 7 promissory notes and Shri Hasubhai Thakkar, and Naynaben Thakkar had executed an agreement intending therein that an amount of Rs.40 lakhs given by Sejal Shah and family members on various dates, would be returned by 28.2.2004 or maximum by 31.5.2004 along with interest. If the amounts are not returned then the property at 6, Kaushal Co-op. Hsg. Society will be transferred to Sejal Shah as per the market value. There is another document seized from the premises, as page no.5 to 8 of the Annexure-50, which is irrevocable power of attorney dated 29.6.2004 for the above said property given to Shri Gopalbhai Shah by Hasubhai Thakkar and Nayna Thakker. The money was not returned and ultimately on the basis of power of attorney, the property was transferred to the name of Pareshaben Gopalbhai Shah vide registered deed dated 11.11.2005, and in this deed, consideration has been shown at Rs.10 lakhs only. The AO has confronted the assessee to explain the source of the loan advanced by Shri Sejal Shah and from the members to Hasubhai Thakkar and his concern. Before the AO, the assessee did not file any submission exhibiting the source of funds. Accordingly, the AO has treated the above loans given by the assessee as unexplained and made addition of Rs.15.00 lakhs in the Asstt.Year 2002-03, Rs.9.50 lakhs in the Asstt.Years 2003-04 and Rs.15.50 lakhs in the Asstt.Year 2004-05 respectively.
12. Appeal to the CIT(A) did not bring any relief.
13. Before us, the assessee raised three fold submissions. In the first fold, it was contended that the assessee has disclosed additional income of Rs.11.80 lakhs in the Asstt.Year 2002-03 on the basis of peak theory. Credit of this amount should be given to the assessee towards this unexplained advancing of loans. In the second fold, it was contended that the property situated at 6, Kaushal Co-op. Hsg. Society was already sold to one Shri Kishorebhai V. Thakkar for Rs.13 lakhs on IT(SS)A No.378/Ahd/2011- 3 Appeals 8 7.2.2005. Therefore, the second sale deed executed by father of the assessee, on the strength of irrecoverable power of attorney, cannot be executed. It indicates that no investment was made by the assessee in purchase of 6, Kaushal Co-op. Hsg. Society. In the third fold submission, it was contended that the assessee has sufficient cash withdrawal in earlier years. Out of which, it can be assumed that loans have been given by the assessee. For buttressing this contention, the learned counsel for the assessee has filed a summary of cash available, prepared from the bank statements of various persons.
14. The ld.CIT-DR has, on the other hand, relied upon the order of the CIT(A). He contended that all these aspects have already been considered by the learned First Appellate Authority.
15. We have duly considered rival contentions and gone through the record carefully. Before the ld.First Appellate Authority, the assessee has contended that the property viz. 6, Kaushal Co-op. Hsg. Society was sold by its owner to one Shri Kishorebhai V. Thakore for Rs.13 lakhs vide sale deed dated 17.2.2005. If that be so, then how the power attorney holder, i.e. father of the assessee could transfer this property to Smt.Pareshaben Shah (mother of the assessee) on 11.11.2005. The ld.First Appellate Authority has called for a remand report on all these aspects and rejected the contentions of the assessee. To our mind, reference to this transfer of the property is totally irrelevant. The settlement deed executed at the time of borrowing fund was to the effect that, if the amount taken by Shri Hasubhai Thakkar and his concern is not returned by 28.2.2004 or maximum by 31.5.2004 along with the interest, then the property at 6, Kaushal Co-op. Hsg. Society will be transferred to Sejal Shah at the market value. In order to give effect to this settlement an irrevocable power of attorney dated 29.6.2004 was executed in favour of Shri IT(SS)A No.378/Ahd/2011- 3 Appeals 9 Gopalbhai Shah (father of the assessee). It is to be appreciated that the loan of Rs.40 lakhs was already given and in order to safeguard the recovery of the loan, the assessee got executed a promissory note, received undated cheques of equal amounts and also irrecoverable power of attorney for transfer of a property. If the borrower failed to make the payments, the assessee could file a suit for recovery on the basis of the promissory note. In her second option, she could put the date on the cheques and present to the bank. In case the cheques are bounced, a complaint under section 138 of the Negotiable Instrument Act could be filed against the borrower, and in her third option, she could get the property transferred in her name on the strength of irrecoverable power of attorney. So the efforts at the end of the assessee that since this property was already sold to someone else, therefore, it be construed that no unexplained investment is made by the assessee, is totally meaningless. The addition is not of unexplained investment in the property. The addition is that of advancement of loan and failure to explain the source of the loan. One of the arguments taken before the ld.First Appellate Authority was that the assessee has shown income of Rs.11.80 lakhs in the Asstt.Year 2002-03. Credit of this income ought to have been given. This aspect has been considered by the ld. CIT(A) and it has been held that the credit of this additional income has already been taken by the assessee in the return itself towards investment in bungalow no.12 at Charankrupa Society. Therefore, this amount was not available with the assessee, out of which, it can be alleged that the loan to this extend was advanced from this amount in the Asstt.Yewar 2002-03. As far as the arguments of the ld.counsel for the assessee that if all the bank accounts are perused minutely, then it will reveal that the assessee has sufficient withdrawal, and therefore, it would construe that advancement of loan was made out of this withdrawal. We have perused the alleged fund flow statement submitted by the ld.counsel for the assessee at the time of IT(SS)A No.378/Ahd/2011- 3 Appeals 10 hearing. However, we don't find any merit in this contention, because the assessee has not taken any such plea before the ld.First Appellate Authority. The assessee has not submitted any fund flow statement for the purpose of explaining the source before the AO. It is impossible to reconcile this statement with the availability of funds at a given point of time. There is no head and tail of the exact amount available on a particular date, out of which, it can be alleged that the investment was made in the advancement of loans.
16. The ld.counsel for the assessee has further contended that in the Asstt.Year 2002-03, one of the promissory notes was executed on 21.2.2002. This promissory note is for Rs.7 lakhs. This Rs.7 lakhs was given by way of a cheque issued from the bank account of her mother. The ld.counsel for the assessee took us through page nos.73 of the paper book, where the copy of promissory note is available as well as at page no.93 of the paper book-II, where the bank statement of Ms.Pareshaben Gopalbhai Shah is available. No doubt, on 21.2.2002, cheque bearing no.0303541 for Rs.7 lakhs has been cleared. But this cheque number has not been mentioned in the promissory note. It cannot be said that the loan of Rs.7 lakhs in the Asstt.Year 2002-03 was given through account payee cheques, and that the cheque was bearing no.0303541. In the promissory note, there is a cutting of cash with the cheque, but neither the assessee has alleged the cheque number during the assessment proceedings nor mentioned in the promissory note. This fact can easily be demonstrated before the AO by producing the bank account of the borrower indicating the fact that cheque no.0303541 was credited to his account, but no such effort was made by the assessee during the assessment proceedings. Before us, it is not possible to cross-verify this aspect at this stage. Therefore, we do not find any merit in this contention of the ld.counsel for the assessee. This ground is rejected in all three years.
IT(SS)A No.378/Ahd/2011- 3 Appeals 11
17. No other ground was pressed in the Asstt.Years 2002-03 and 2003-04, and hence, both the appeals are rejected.
18. In the Asstt.Year 2004-05, next ground of appeal is that the ld.CIT(A) has erred in confirming the addition of Rs.12.25 lakhs.
19. Brief facts of the case are that during the course of search, papers inventorised as in Annexure A/73 were found and seized. A perusal of page no.97 of this annexure A/73, indicates that it is an allotment letter dated 21.10.2004 of 1st Floor of Bhagyodaya Plaza by Bhagyodaya Owners' Association. It is mentioned that 1350 sq.ft area at 1st floor excluding lift and stairs is allotted to Shri Gopalbhai N. Shah & Other members of his family for a consideration of Rs.40 lakhs. The payments have been made during the period of 1.1.2004 to 21.10.2004 in cash. The possession letter of this property to the father and mother of the assessee was given on 21.10.2004. This document was at page no.98 of the Annexure A/73. Apart from these documents, page nos.1 to 22 inventorised as Annexure A/73 were also found. These pages are copies of receipts issued by Bhagyodaya Owners' Association to Shri Gopalbhai Shah. The total receipts are for Rs.40 lakhs, out of the above, payment of Rs.12.25 lakhs was made in F.Y.2003-04 and Rs.27.75 lakhs in the F.Y.2004-05. The AO has made an addition of Rs.12.25 lakhs in the Asstt.Year 2004-05 and Rs.27.75 lakhs in the Asstt.Year 2005-06.
20. Dissatisfied with these additions, the assessee took the matter with the ld.CIT(A). It was contended before the CIT(A) that Shri Hasubhai Thakkar is the Chairman of Bhagyodaya Owners' Association. He had issued alleged allotment and possession letter along with receipt of payment. In fact, this person, along with his family members took loan of Rs.40 lakhs. He executed promissory note, issued undated cheques and an agreement vide which it was intended that in case he IT(SS)A No.378/Ahd/2011- 3 Appeals 12 failed to repay the amount, then the plot no.6, Kaushal Co-op. Hsg. Society would be transferred in the name of assessee at the market rate. For this purpose, he has executed an irrevocable power of attorney in favour of the assessee's father, Shri Gopal Shah on 29.6.2004. Before, the father of the assessee got the sale deed executed in the name of assessee's mother, Smt. Pareshaben Shah by executing the power of attorney on 11.11.2005, the said plot was sold by owner to one Shri Kisohorebhai V. Thakkar on 7.2.2005 for consideration of Rs.13 lakhs. Faced with this development, Shri Hasubhai Thakkar has issued this document in respect of Bhagyodaya Plaza. In other words, the explanation of the assessee is that these documents were issued in lieu of security of the loan earlier advanced by the assessee to Hasubhai Thakkar. According to the assessee, Shri Hasubhai Thakkar has given a declaration that Bhagyodaya Plaza was never constructed and no possession was given to the assessee.
21. The ld. First Appellate Authority has gone through all these aspects, but rejected the contentions of the assessee. According to the ld.CIT(A) loan of Rs.40 lakhs was advanced by the assessee during the financial years 2001-02, 2002-03 and 2003-04. The first loan advanced by the family members was promised to be repaid by 28.2.2004 and not latter by 31.5.2004. The irrecoverable power of attorney for plot no.6, Kaushal Co-op. Hsg. Society was executed on 29.6.2004, meaning thereby, the first loan remained unpaid. The ld.First Appellate Authority further observed that the loan appearing in the receipts was given, started from 1.1.2004 to 21.10.2004. This is a different transaction and the payment is established. Thus, forty lakhs were advanced for a proposed area in Bhagyodaya Plaza. According to the ld.CIT(A) both these transactions are separate transactions and assessee failed to explain the source of payments. In this way, the ld.CIT() has confirmed the additions.
IT(SS)A No.378/Ahd/2011- 3 Appeals 13
22. With the assistance of the ld. representative, we have gone through the record carefully. Copies of the receipts from pages 1 to 22 inventorised as Annexure-A/73 are available at page nos.101 to 118 of the paper book. The assessee has compiled the details available in these receipts in tabular form and placed these details at page no.100 of the paper book. We have gone through these details. A perusal of the details would indicate that Shri Gopalbhai Shah has made payment of Rs.40 lakhs to Shri Hasubhai Thakkar, who had issued the receipt. The charge against the assessee is that she has to explain the source of this payment. The explanation of the assessee is two folds, viz. it is the second alternative security for the loan amount which was given from financial year 2001. The need for execution of these papers was felt because, Plot No.6, Kaushal Co-op. Hsg. Society, though transferred by way of registered sale deed in the name of her mother, by her father, on the basis of irrecoverable power of attorney, but in fact, this plot was already transferred by the owner to one Shri Kishorebhai on 7.2.2005 for consideration of Rs.13 lakhs. In order to buttress this argument, it was contended that Bhaghyodaya Plaza was never constructed, and Shri Hasmukh Thakkar has filed a letter deposing therein that he had never received any sum from Shri Gopalbhai Shah and Smt.Pareshaben Shah. On due consideration of these contentions, we are of the view that as far this letter from Shri Hasubhai Thakkar is concerned, it was not taken on record by the ld.CIT(A). The assessee sought to produce this letter by way of additional evidence. But prayer of the assessee was rejected. The copies of the receipts indicate that the payment of Rs.12.25 lakhs in the accounting year relevant to the Asstt.Year 2004-
05. Had the amount was not given, then it was for the assessee to demonstrate, as to why the necessity to execute such type of receipts, in this methodical way, was felt. As far as security of the first loan amount is concerned, the assessee has taken undated cheques from IT(SS)A No.378/Ahd/2011- 3 Appeals 14 Shri Hasubhai Thakkar. She had also got executed promissory notes. These two sureties were also there in existence. Therefore, in our opinion, the First Appellate Authority has rightly concluded that payment of Rs.40 lakhs was made by the assessee to Shri Hasubhai Thakkar or his concern. This payment was made during the accounting year relevant to the Asstt.Year 2004-05 and 2005-06. It is a separate amount than the one given in financial year 2001-02 or 2002-03. We do not find any merit in this contention of the assessee. This ground of the assessee is dismissed.
23. In the next ground of appeal, the assessee has contended that the ld.First Appellate Authority has erred in confirming the addition of Rs.24,05,384/-.
24. Brief facts of the case are that on analysis of DEMAT account it revealed to the AO that the assessee had made investment in shares of limited companies listed with BSE and NSE. The AO on the basis of details available in DEMAT account, prepared a statement of the assessee's investment of last day of each year. He has annexed this statement along with assessment order. According to the AO, the assessee did not submit any details of purchase value of these shares, therefore, he adopted the value of the shares on the basis of last day transaction, as available in BSE/NSE data, and worked out the value of the investment made by the assessee. The working made by the AO reads as under:
"Date Financial Assessment Value Undisclosed
Year to Year investment
which it for the year
pertains
A B C D E
31.03.2004 2003-04 2004-05 2405384 2405384
31.03.2005 2004-05 2005-06 3953619 1548235
31.03.2006 2005-06 2006-07 10645153 6691534
31.03.2007 2006-07 2007-08 32100453 21554300
IT(SS)A No.378/Ahd/2011- 3 Appeals
15
"
25. The ld.AO in this way made addition of Rs.24,05,384/- on account of unexplained investment in shares.
26. On appeal, the ld.CIT(A) has confirmed the addition. The findings of the ld.CIT(A) is worth to note in this connection.
"6.2 I have considered the submission of the appellant. As per the Annexure attached to the assessment order, the AO has worked out the total investment of Rs.24,05,384/- in shares in the name of the appellant, her brother Mit Shah, her father Gopalbhai Shah, her mother Mrs.Pareshaben Shah. In the absence of any details whatsoever given by the appellant before the AO, the AO worked out the' investment in shares from the DMAT account of the above mentioned persons as on 3173/2004 by taking the market rate of the shares as on 31/3/2004. The case of the appellant is that the AO should have adopted the cost or the market rate whichever is lower for the purpose of valuation of the shares. Another contention of the appellant is that since the appellant has worked out her income on the basis of peak theory, the AO should have not made separate addition on account of the investment in shares. As regards the investment in shares as on 31/3/2004, the appellant has not disputed the finding of the AO regarding the number of shares held as on 31/3/2004. For the purpose of unaccounted investment in the shares on the basis of DMAT account, the AO has taken the closing balance of the shares as on 31/3/2004 and subtracted the opening balance of shares as on 1/4/2003. In the absence of the details of purchase and sale of shares given by the appellant during the year under consideration, the AO had no option but to take the market value of the shares as on 31/3/2004. Even before me, no such details of purchase and sale of shares was furnished. Therefore, the AO was justified to adopt the market value of the shares as on 31/3/2004 as the cost of the shares was not known to the AO, nor was such details provided by the appellant either before me or before the AO. As regards the second contention of the appellant that since the appellant has worked out the additional income on the basis of the peak theory, no separate addition on account of investment in shares should have been made by the AO, it is to be stated that in the return of income the appellant has disclosed total additional income of Rs. 12.16 Lacs but in the chart of the unaccounted income attached with the return of income, the -appellant has IT(SS)A No.378/Ahd/2011- 3 Appeals 16 shown the identification of assets against the' said additional income as under:
Purchase of computer Rs.1,27,000
Investment in flat at panchvihar Rs.9,89,000
Equity shares in Manibhadra Rs.1,00,000
Tradelink Pvt. Ltd.
Cash given by Sejal Shah to Rs.40,000
Manibhadra Tradelink Pvt.Ltd.
Total Rs.12,56,00
6.3. In other words, from the statement of additional income disclosed by the appellant, it is seen that, the appellant has only disclosed the investment of Rs. one lakh in the equity shares of Manibhadra Tradelink Pvt Ltd, a private limited company of the appellant. No other investment in other shares of limited companies which are listed with the BSE and NSE is disclosed in the said disclosure. In other words, even on the basis of peak theory, the investment in limited company's shares should also have been included in the total unaccounted income of the appellant. As the appellant has worked out the additional income on the basis of the income or the investments, whichever is higher, and for assessment year 2004-2005, the additional income has been worked out on the basis of investments, the investment of Rs. 24,06,389/- should have formed part of the total investments as on 31/3/2004. This means that, the peak theory adopted by the appellant has not considered the investment in the listed companies which has been worked out by the AO at Rs. 24,06,389/- in assessment year 2004-2005. In fact, the appellant has not included any investment in the shares of limited companies in any of the assessment years. I have, therefore, no hesitation in holding that the amount of Rs. 24,06,389/- represent the unaccounted investment of the appellant in the various shares of limited companies. In other words, the AO was justified in making addition of Rs. 24,06,389/- on account of undisclosed investment in the shares of listed companies in assessment year 2004-2005. The addition made by the AO is therefore confirmed."
27. The ld. counsel for the assessee submitted that the AO has made additions of the shares which were held by the assessee prior to the year under consideration. In other words, the investment made in earlier years has also been included in the addition. According to him, IT(SS)A No.378/Ahd/2011- 3 Appeals 17 there is a variation in the quantity appearing in the DEMAT account and quantity for which the addition has been made.
28. On the other hand, the ld.DR relied on the order of the CIT(A).
29. We have duly considered rival submissions and gone through the record carefully. The ld.AO has annexed a list of shares which have been considered by him as unexplained investment of the assessee. The major item of investment worked out by him is with regard to Smt.Pareshaben Shah. The client ID is 10735254. The balance has been shown at Rs.13,90,888/-. Against this ID, 56 scrips have been noticed by the AO, in the annexure appended with the assessment order. All these shares have been shown pertained to F.Y.2003-04. The ld. Counsel for the assessee failed to pin point, out of these 56 scrips, which were purchased by this person in earlier years. He merely stated that some of the shares which have been included were purchased in earlier years, but after this list, at least the assessee should identify, which are those scrips deserve to be excluded on the ground that the investment does not pertain to this year. No such efforts have been made. The AO has, accordingly, recorded a finding that the assessee did not submit any detail. He has worked out the details on analysis of DEMAT account. The ld.CIT(A) has also considered this aspect in the findings extracted (supra). No material has been brought to our notice which can suggest this erroneous approach adopted by the Revenue authorities. We, therefore, do not find any merit in this ground of appeal. It is rejected.
30. In the next ground of grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.1,45,293/-. This addition was made with the aid of section 2(22)(e) of the Act.
IT(SS)A No.378/Ahd/2011- 3 Appeals 18
31. Brief facts of the case are that the AO on an analysis of the account of assessee in the company, Manibhadra Tradelink Pvt. Ltd. and Shaan Leisure Ltd., it was found that the companies have made payment to Mit Gopalbhai Shah and Sejal Gopalbhai Shah. These payments were shown under the head "loans and advances". The assessee is director in these companies. She is having substantial share holding of more than 10% of voting power. Therefore, the loans and advances were treated as deemed dividend. The addition of Rs.1,45,293/- in the Asstt.Year 2004-05 has been made with the aid of section 2(22)(e) of the Act.
32. The ld.counsel for the assessee at the very outset submitted that the company was incorporated on 1.9.2003. The first balance sheet was prepared on 31.3.2003. The profit of the company has to be determined at the end of the year, and therefore, the accumulated profit is to be worked out on the date of closing of the accounts. In the Asstt.Year 2004-05, there was no accumulated profit before the close of the accounts i.e. 31.3.2004. If it is presumed that the assessee has taken loan from this company, then these were taken before 31.3.2004, and there was no accumulated profit before this date. Therefore, no addition under section 2(22)(e) of the Act can be made. For buttressing his contention, he relied upon the decision of the ITAT, Ahmedabad Bench in the case of M.B. Stock Holding Pvt. Ltd. Vs. ACIT, 84 ITD 542 (Ahd). He also relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Damodaran, 121 ITR 572. According to the ld.counsel for the assessee, the Hon'ble Supreme Court has held that the accumulated profit shall not include the current year's profit.
33. The learned DR, on the other hand, contended that this plea was never raised by the assessee, and this issue has not been looked into by the ld. Revenue Authorities below.
IT(SS)A No.378/Ahd/2011- 3 Appeals 19
34. We have duly considered rival contentions and gone through the record carefully. The assessee has never raised any plea that the company was incorporated on 1.9.2003. The ld.counsel drew our attention towards page no.119 where certificate issued by the Asstt.Registrar of Companies, Gujarat, exhibiting the incorporation of the company has been placed on record. He also drew our attention towards copy of the balance sheet prepared on 31.3.2004. These documents were not brought to notice of the AO during the assessment proceedings. Therefore, we deem it proper to set aside this issue to the file of the AO for re-adjudication. The ld.AO shall determine the date of incorporation of the company, and thereafter, decide whether, there was any accumulated profit or not, out of which it can be alleged that the loans have been given to the assessee. This ground of appeal is allowed for statistical purpose.
35. In ground no.9, the assessee has pleaded that the ld.First Appellate Authority has erred in not accepting the contentions of the assessee that the assessment suffers from multiple additions and the additions on account of peak credit as well as investment of assets/ expenditure made separately. No arguments were addressed specifically on this issue. Peripheral arguments raised on the issues involved in this appeal have been considered by the ld.CIT(A). After looking into the facts that the assessee has disclosed income on the basis of peak theory, the ld.First Appellate Authority specifically pointed out that whatever additional income has been disclosed by the assessee in a particular year, has already been utilized against the asset. No additional income was available for giving a set off against the proposed additions on the basis of particular seized material. We, therefore, do not find any merit in this ground. It is rejected.
IT(SS)A No.378/Ahd/2011- 3 Appeals 20
36. The ground no.10 of the appeal does not call for any findings required to be recorded at the end of the ITAT, hence, it is also rejected.
37. In the result, the IT(SS)A No.378/Ahd/2011 and 379/Ahd/2011 are dismissed. The IT(SS)A.No.380/Ahd/2011 is partly allowed for statistical purpose.
Order pronounced in the Court on 7th August, 2015 at Ahmedabad.
Sd/- Sd/- (ANIL CHATURVEDI) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER