Income Tax Appellate Tribunal - Ahmedabad
Sejal Gopalbhai Shah, Ahmedabad vs Assessee on 8 February, 2016
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 MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ IT(SS)A No.386/Ahd/2011
नधा रण वष /Block Asstt. Year: 2005-06
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 : Mrs.Vibha Bhalla, CIT-DR
सन
ु वाई क तार ख/ Dateof Hearing : 08/12/2015
घोषणा क तार ख / Date of Pronouncement: 08/02/2016
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
The assessee is in appeal before us against the order of the ld.CIT(A)-III, Ahmedabad dated 31.3.2011 passed for the Asstt.Year 2005-2006. The assessee has taken following grounds of appeal:
"1. The learned Commissioner of Income Tax (Appeals) has erred in dismissing the additional ground raised by the Appellant stating that the Assessing Officer has erred in passing an order u/s.153A rws. 143(3) of the Income Tax Act, 1961 which is time barred and hence the same is illegal and bad in law.
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 2
2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the order passed by the Assessing Officer which is barred by limitations prescribed under the I.T. Act, 1961 hence the same is void and illegal. Therefore, the assessment so made should be cancelled.
3. The Ld. CIT(A) has erred in setting aside the order of the AO for re-verification of the issues which is in violations of the provisions of sec. 251(l)(a) of the Act.
4. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.27,75,000/- made by the Assessing Officer for the alleged on money paid to Bhagyoday Owners Association.
4.1 The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition made by the Assessing Officer without issuing any show cause notice for making such addition on the basis of loose papers. Hence the addition so made without giving reasonable opportunity of being heard to the appellant, is against the principles of natural justice should be cancelled.
4.2 The learned Commissioner of Income Tax (Appeals) has erred in confirming the said addition of Rs.27,75,000/- in respect of the said property even though no actual transaction has been taken place.
4.3 The learned Commissioner of Income Tax (Appeals) has erred in not admitting the additional evidence produced by the appellant for the addition of Rs.27,75,000/- made by the A.O. in respect of Bhagyodaya Plaza building.
5. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition made by the Assessing Officer even though the appellant has disclosed an income of Rs.10 Crores from A.Yrs. 2002-03 to 2008-09 worked out by her on the basis of peak credit statement prepared on the basis of the books & documents seized by the Department and from the bank accounts maintained by her.
6. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.39,06,870/- made by the Assessing Officer for the alleged unaccounted investment in the purchase of property at 20, Charankrupa Society, Satellite, Ahmedabad.
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 3
7. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.4,24,75,000/- made by the Assessing Officer for the payments made to Ganesh Housing Corporation for the alleged unaccounted investment in land Nr. Star Bazar, Ahmedabad.
8. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 15,48,242/- made by the Assessing Officer on account of estimation of investment only on the basis of Demat accounts statement without considering the peak credit statement worked out by the appellant and without granting telescoping against investments.
9. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.81,50,000/- made by the Assessing Officer on account of transaction with respect to takeover of Jindal Online only on surmises and conjectures.
10. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition in respect of Jindal Online only on the basis of material found from the residence of Sanjiv Shah without giving copy of the said material and also any opportunity of rebuttal to the appellant. He ought to have considered the fact while making this addition the Assessing Officer has failed to grant an opportunity to cross examine Shri Rashmikant C. Shah. Hence the addition so made being against the principles of natural justice and law requires to be cancelled.
11. The learned Commissioner of Income Tax (Appeals) has erred in confirming the Addition of Rs.3,80,7057- made by the Assessing Officer on account of deemed dividend u/s.2(22)(e) of the Income Tax Act, 1961.
12. The learned Commissioner of Income Tax (Appeals) has erred in not accepting the contention that the assessment suffers from multiple additions & the additions on account of peak credit as well as investment in assets/expenditure have been separately added.
12.1. The Learned Commissioner of Income Tax (Appeals) has adopted contradictory stand while adjudicating the appeal . He has stated that income is being computed on investment basis & thereafter proceeded to confirm additions of income separately.
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 4
13. The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal on or before the date of hearing of appeal."
2. Before adverting to the specific grounds of appeal, we deem it appropriate to make reference to certain fundamental facts. A search and seizure action under section 132 of the Income Tax Act was carried out in Sejal Mahindra group of cases on 25.7.2007. The ld.AO has issued notice under Section 153A of the Act dated 7.2.2008 requiring the assessee to file return of income within 30 days from the receipt of the notice. However, the assessee did not file return as required in the notice. In order to set the assessment machinery in motion, the ld.AO has issued notice under section 142(1) alongwith questionnaire on 20.8.2009. The assessment was going to be time barred on 31.12.2009. The assessee has filed her return of income on 17.12.2009. Along with return, the assessee has filed a note which has been reproduced by the AO as well as the ld.CIT(A) in the impugned orders. In this note, the assessee has disclosed her modus operandi of doing the business in share trading, commodities, speculation business, real estate transactions etc. According to the assessee for carrying out these business activities, she was operating bank account 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. We deem it appropriate to take cognizance of this note. It reads as under:
"5. In the returns of income, the assessee attached notes as under:
(i) That during the previous year's relevant to Assessment years 2002-
2003 to 2008-2009. I have carried out the business activities of trading in shares and commodities, speculation business, Real estate transactions, investment in shares for short term and long IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 5 term gain and brokerage / commission business. For carrying out the aforesaid business activities, I have operated the bank accounts in my name, in the name of my father late Shri Gopalbhai Shah, mother Smt. Pareshaben G. Shah, brother Mr. Mit G. Shah, my friend Miss Rajvi Shah as well as in the different Trade name entities as my proprietary entity. The particulars of the said bank accounts operated and controlled by me is attached herewith as per EXHIBIT-1. I am a/so a partner in M/s Shaan Infrastructure a partnership firm. I am also a Director in various companies and the particulars of Directorship in various companies are attached herewith as per EXHIBIT-11.
(ii) That as per detailed discussion in Para 1, I have operated various bank accounts and own up the transactions in the said bank accounts as pertaining to me. The unexplained funds in the said- .bank accounts are already been considered by me in the peak theory working for determination of income offered in the Return of Income filed by for A.Y.2002-03 f? 2008-09. In respect of particulars of bank accounts please refer Exhibit-l.
(iii) That I have instructed and directed to my mother Smt. Pareshaben Gopalbhai Shah, my brother Mit Gopalbhai Shah, my friend Rajvi Shah, to open the bank accounts / Demat accounts in their name for myself and the transactions carried out in the bank accounts / Demat accounts of the aforesaid persons are belonging to myself and the income / loss arising out of the same is also pertaining to me. My father Late Shri Gopalbhai Shah had also operated various bank accounts as per my directions and all the transactions in the bank accounts / Demat accounts operated by him and income / loss arising from the transactions of the said bank accounts is also pertaining to me and it has already been considered in working out peak balance, as per principle of peak theory. In this regard, I am attaching herewith Affidavit of myself, my brother Mit G. Shah, my mother Pareshaben G. Shah, Pareshaben Legal Heir of Gopalbhai Shah and my friend Rajvi Shah as per Exhibit-Ill.
(iv) That during the course of search proceedings, voluminous seized material have been found from my residential premises as well as from office premises including Annexure A/17 & A/57 found from my residential premises and Annexure A/45 found from office premises which were in the nature of common cash book written by my late father Shri Gopalbhai Shah and also computer print of common cash book was a/so found and seized. That the bank account owned up by me being operated and controlled by me for its transactions as per the particulars given in Exhibit - I and the common cash book, other computer data and other seized records are having various entries which are in the nature of rotation of cash funds belonging to me which are intermingled and inter-related as well as having IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 6 duplication also and accordingly, the cash rotation of funds in the bank account as well as in the common cash book as well as in the computer data which were standing in, the name of various fictitious persons are actually belonging to me being cash rotation and the same has been considered by me for working out the peak working as per the principle of peak theory after eliminating rotation of funds.
(v) That the income offered in the return of income is out of the source of income in the nature of profit from share trading, investment in shares through demat account generating short term gain and long term gain, trading in commodities and speculation business, real estate transactions and brokerage / commission business activities. As I have not maintained complete books of accounts, I have considered the principle of peak theory as well as principle of real income vis-a-vis unexplained assets found during the course of search proceedings and the income has been offered on the basis of the source of income or unexplained assets whichever is higher.
(vi) That the investment in shares as an investor has generated the income in the nature of long term .capital gain, which is exempt from tax and short term capital gain which is subject to lower tax rate of 10%, however, as the funds of the said capital gain profit has got merged in rotation of funds, the net income determined after claiming expenditure incurred for earning the said income has been offered for taxation in the return of income on the basis of principle of real income which is accepted as fundamental rules for taxability of income in the case of any assessee as per provisions of I.T. Act and judicial pronouncements of Hon'ble Supreme Court.
(vii) ------
Alongwith this declaration the copies of affidavit of assessee Sejal G Shah her Mother Paresh G Shah, Brother Mit G Shah and her Friend Rajvee P Shah were submitted. The contents of the affidavit were same as para (i) of the notes attached with the return."
3. The stand of the assessee before the AO was that the 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 Rs.10.00 cores 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 7 maintained by the assessee, and other family members and concerns, whose names have been given in Exhibit-I appended with the return. 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.CIT(A) at page nos.6 and 7 of the impugned. It reads as under:
Particulars of assets/investments 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Total indentified against the amount of Rs.
additional income offered in the
ROI
Purchase of Computer 127000 127000
Investment in flat at Panchvihar 989000 225000 49050 79153 170786 1512989
Flat at Ratnmani/Jodhpur cross 1710000 1710000
road Satelite
FDR's with HDFC Bank in the name 1000000 1000000
of Paresha G Shah( 5 FOR of Rs. 2
Lacs each)
Equity shares in shaan leisure ltd 418000 418000
(Self + Rajvi Shah)
Equity shares in Shaan energy ltd 490000 490000
(MGS+GNS+PGS)
Equity shares in 100000 100000
Manibhadra Tradelink ltd(Self+
MGS) •
Equity shares in Prathna Farming 485200 485200
Pvt Ltd(Self+ MGS)
Share Application Money (Prathana 5T5000 515000
farming Pvt Ltd)
Share Application Money 315000 315000
(Manibhadra Perto-chem Pvt Ltd)
Investment in gold Ornaments 800000 2700000 3500000
& Jewellaries
IT(SS)A No.386/Ahd/2011
Asstt.Year 2005-2006
8
Bunglow No. 12 at charankrupa 1180000 1180000
Soc, Opp. Jai Shefali Row
House, satellite, Ahmedabad
Marriage Expenses 350616 1020854 1371470
Credit card Expenses 657346 999083 77290 1733719
Personal Expenses 3083912 3594969 1105255 7784136
Film Expenses 650000 400000 1050000
Cash given by Gopalbhai N Shah to 250000 58300 308300
Manibhadra Tradelink Pvt Ltd
for expenses (Net of cash return
back by the company)
Cash given by Mit G Shah 18000 18000
to Manibhadra Tradelink Pvt Ltd
for expenses (Net of cash return
back by the company)
Cash given by Mit G Shah to 17600 17600
Manibhadra Perto Chem Pvt Ltd for
expenses (Net of cash return back
by the company).
Cash given by Mit G Shah to Shaan 15000 15000
Energy Pvt Ltd for expenses (Net of
cash return back by the company)
Cash given by Sejal G Shah 10500 10500
to Prathana Farming . Pvt Ltd
for expenses (Net of cash return
back by the company)
Cash given by Sejal G Shah 40000 40000
to Manibhadra Tradelink Pvt Ltd
for expenses (Net of cash return
back-by the company)
1180000 0 1256000 1160600 7731008 6300121 6074185 2370191
4
4. The ld.AO has passed the assessment order on 31.12.2009. He determined the taxable income of the assessee for the year under consideration at Rs.6,04,29,234/-. The AO has computed the income for various years in para-18 of the assessment order. The working made by the AO read as under:
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 9 "18. To sum up the case, as discussed above, the undisclosed income of each Assessment year of assessee is computed as under:
Particulars of assets / AY AY AY AY AY AY AY Total Rs.
investments indentified 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Total from Table in 1180000 0 1256000 1160600 7731008 6300121 6074185 23701914
point no 15
Mandava Land 30716220 1372857 32089077
Plot No 17 & 18 Near 43700000 51200000 94900000
Vaishno Devi,
Ahmedabad
Investment in Villages 3125999 69989153 Z0366276 93481428
Near Ahmedabad
Plot No 6, Kaushal Co- 1500000 950000 1550000 4000000
Op
Bhagyodaya Plaza 1225000 2775000 4000000
Land at Madhya 25000 25000
Pradesh
20, Charan Krupa 3906870 3906870
Society
Land Near Star Bazaar 42475000 42475000
Investment in shares as 2405389 1548242 6691534 21554300 32199465
discussed in Para
Profit from share 13385314 13385314
trading with AARP, Jitu,
etc
Share Profit as per 1736841 1736841
Para
Share profit other than 12508542 12508542
AARP, etc
Jindal Online 8150000 8150000
Investment
Fixed Deposits with IDB 2000000 2000000
Bank
Investments in Swaan- 17380000 17380000
Leisure Ltd
IT(SS)A No.386/Ahd/2011
Asstt.Year 2005-2006
10
Investment in Swan 1600000 1600000
Mills by way of
unexplained Loan
Deemed Dividend u/s 145293 180372 380705 706370
2(22)(e)
TOTAL 2680000 950000 6581682 60196084 49864761 145686120 122287174 388245821
5. With this background we take the grounds in seriatim. In ground no.1 and 2 the assessee has pleaded that the assessment orders have been passed by the AO after 12oclock in the mid-night of the 31-12-
2012, therefore, the assessment order is time barred.
6. With the assistance of the ld. representatives, we have gone through the record carefully. The ld.counsel for the assessee conceded that similar issue was raised by the assessee in the Asstt.Years 2002- 03, 2003-04 and 2004-05. The Tribunal has already decided this against the assessee in IT(SS)A.No.378/Ahd/2011 passed on 7.8.2015 in the Asstt.Years 2002-03 to 2004-05. The discussion made by the Tribunal on this issue read as under:
"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 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, IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 11 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 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 12 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. 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 13 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.'
7. We do not find any disparity on facts in these assessment years. Therefore, following our order in the Asstt.Years 2002-03 to 2004-05, we do not find any merit in the ground nos.1 and 2. They are rejected.
8. In ground no.3, the assessee has pleaded that the ld.CIT(A) has erred in setting aside the order of the AO for re-verification of the issue. The ld.counsel for the assessee submitted that by way of Finance Act (2001) w.e.f. 1-6-2001, the power of the CIT(A) to set aside any issue to the AO has been taken away by amendment in section 251(1) of the Income Tax Act. Therefore, after this, the ld.CIT(A) has no power to set aside any issue for re-verification or re-adjudication at the level of the AO. The ld.CIT-DR did not dispute this contention of the ld.counsel for the assessee.
9. On due considerations of all the facts and circumstances, we are of the view that prior to 1.6.2001, the ld.First Appellate Authority has power to set aside any issue to the file of the AO for re-adjudication. This power has been omitted from sub-clause (a) of section 251(1) of the Income Tax Act. Thereafter, the CIT(A) has to adjudicate the issue on merit and no issue can be set aside to the file of the AO. The ld.CIT(A) can exercise the power of the AO and call for any information which requires for adjudication of an issue. As far as this contention of the ld.counsel for the assessee is concerned, we do not have any IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 14 hesitation in accepting it, but, we would evaluate in the subsequent part of the order, the issue which alleged to have been set aside. We would find out whether such an action at the end of the CIT(A) amounts to exercise of powers beyond the one contemplated in section 251(1)(a) of the Act. For statistical purpose, this ground is being treated as allowed.
10. In ground no.4, the assessee has taken sub grounds i.e. ground nos.4.1 to 4.3. In all these grounds of the appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.27,75,000/-.
11. The ld.counsel for the assessee, at the very outset, submitted that though this issue is covered against the assessee on merit by the order of the ITAT passed in the Asstt.Year 2004-05 in IT(SS)A.No.380/Ahd/2011, but, since in this year, the assessee has offered an additional income of Rs.2.45 crores, any addition confirmed should be set off against the additional income declared by the assessee.
12. On the other hand, the ld.CIT-DR relied upon the order of the Tribunal for the Asstt.Years 2003-03 and 2004-05. The discussion made by the Tribunal in the Asstt.Year 2004-05 on this issue read as under:
"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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 15 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 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 16 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.
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 Shri Hasubhai Thakkar. She had also got IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 17 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."
13. The total investment made by the assessee was of Rs.40 lakhs, a sum of Rs.12.25 lacs was invested in accounting period for Asstt.Year 2004-05 and it was added in that year. The balance paid in Asstt.Year 2005-06, therefore, the addition of Rs.27.75 lakhs has been made in this year. On the basis of our finding in Asstt.Year 2004-05, it is to be confirmed in this year also.
14. The ground no.5, is a general ground of appeal, wherein the assessee has pleaded that the ld.CIT(A) erred in confirming the addition made by the AO, even though, the assessee has disclosed an income of Rs.10 crores for the Asstt.Year 2002-03 to 2008-09, which has been worked by her on the basis of peak credit prepared on the basis of cash book, loose paper seized by the department and from various bank accounts maintained by her. The ld.counsel for the assessee contended that in principle, the AO as well as the CIT(A) has agreed that income of the assessee has to be determined on the basis of peak theory. The conclusion made by the AO in para -18 of his order is also based on this theory. But the AO failed to strictly adhere to this method. The AO has also failed to give set off of the income offered by the assessee for taxation against various additions.
15. On perusal of the record, we find that facts are intermingled in such a way that there is quite difficult to draw any straight inference or arrive at any firm conclusion, because, the entries of funds in the loose IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 18 viz-a-viz bank accounts and other seized are overlapping. The income of an assessee is to be determined either on the basis of assets possessed by an assessee or on the basis of evidence showing expenditure incurred by an assessee. In the present case, these are investments in real estate representing assets but expenditure are also there. Some of the assets were liquidated and investments were recovered. The Ld.CIT(A) has made reference to a large number of accounting entries from cash book as well as from bank accounts etc. Both the authorities have agreed that income of the assessee would be computed on the basis of peak investments at a given point during the year. But again the AO had made separate addition also on the basis of alleged seized material. In our opinion, nothing substantial would turn under this ground, because the grievance of the assessee is that peak theory has not been applied properly. We will examine this aspect while taking specific grievance of the assessee in other ground. Therefore, this ground is disposed off as allowed for statistical purpose.
16. In ground no.6, the assessee has pleaded that the ld. CIT(A) has erred in confirming the addition of Rs.39,06,870/- which was added by the AO on account of alleged unaccounted investment in purchase of property at 20, Charankrupa Society, Satellite, Ahmedabad.
17. The brief facts of the case are that during the course of search, a registered sale deed inventorised as page nos. 378 to 389 of Annexure A/78 was seized from the residence of the assessee. This document pertains to purchase of land at 20, Charankrupa Society, Satellite, Ahmedabad. As per this document, the vendee is Smt. Pareshaben Gopalbhai Shah and the seller is one Mitaben Tusharbhai Parikh. The total consideration involved is Rs.36.50 lacs. The assessee has disclosed an expense of Rs.3,06,870/- on account of registration and other incidental charges. The payments of Rs.36.50 lacs was made IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 19 through two cheques of Rs.18.25 lacs each. This payment was made on 24th April, 2004. According to the A.O., when assessee was confronted with these evidences, she contended that the land was purchased by her mother and payments were made through account payee cheques. Therefore, it was acquired through explained sources and no addition ought to be made. The ld. A.O. has rejected the contentions of assessee on the ground that assessee failed to produce the copy of relevant bank account of Pareshaben G Shah from where two cheques of Rs.18.25 lacs each were issued by her. The assessee has further admitted that amount of Rs.18.25 lacs has been considered by her while working out the undisclosed income on the basis of peak theory. According to the A.O., the assessee has taken responsibility of the accounts maintained in the name of her mother. Therefore, the assessee has to explain the source of the investment in this property. Accordingly, ld. A.O. has made addition.
18. On appeal, ld. CIT(A) Confirmed the addition for the reasons that out of two payments amounting to Rs.18.25 lacs and Rs.18.25 lacs each made on 24.04.2004. The assessee herself included a sum of Rs.18.25 lacs in working out the undisclosed income on the basis of peak theory, meaning thereby that assessee failed to explain the source of payments.
19. Before us, ld. counsel for the assessee contended that payments were made by the assessee through account payee cheque in the account of her mother and out of that account finally payments were made to the vendor. However, when we confronted the ld. counsel for the assessee to show us the bank's statements exhibiting debit of money from her accounts and crediting in the account of her mother. He failed to show any such document to us. He alternatively contended that since the assessee has disclosed an income of Rs.2.45 crore in this IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 20 year. Therefore, even if this amount is added, then benefit of telescoping to be granted to the assessee.
20. On due consideration of the facts and circumstances, we are of the view that assessee failed to explain the source of investment with supporting evidences, but since assessee has already disclosed the additional income, therefore, addition even if confirmed under this head, it will be set off against the additional income. To be more specific, this addition of Rs.39,06,870/- is confirmed but the A.O. is directed to grant telescoping benefit of this addition qua the additional income disclosed by the assessee. This ground of appeal is partly allowed for statistical purpose.
21. In Ground no.7, the assessee has pleaded that the ld.CIT(A) has erred in confirming the addition of Rs.4,27,75,000/- which has been made by the AO on the ground that during the course of search, the documentary evidence found and seized exhibits that the assessee has made payment to Ganesh Housing Corporation for the alleged unaccounted investment in the land near Star Bazar, Ahmedabad.
22. The discussion with regard to this addition has been made by the AO in para-10 on page no.33 of the impugned order. The brief facts of the case are that during the course of search, certain loose papers, agreements were found and seized. These documents have been inventorised in Annexure A/77. Page no.98 of this document, was seized from the residence of the assessee, it indicates that an investment was made in land near Start Bazar, Nalsarovar and Sanand. This investment was alleged to have been made during the accounting period relevant to this assessment year and continued in subsequent years also. According to the AO, this page has been discussed at various places of the assessment order. The AO has reproduced this page on page no.34 of the assessment order. It read as under:
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 21 Sr.No. Particulars
1. A/c No.(1) Sejal Shah's credit Rs.1,01,56,000) Against welworth -
shares - both A/c 2. A/c No.(2) settled by MAS within 2 1,28,00,000/- months) Sejalben's credit
3. A/c.No.3 1 lac to Alchemist at final settlement (2 months)
4. (1) cr Rs.V.V.'s in the possession of Sejalben credit
5. Alchemist New purchase A/c as per list.
6. House interface - A/c 50/50% to treat as outstanding / total inv. By MAS.
7. Jindal Online Total inv. By MAS percentage 60/40%
8. Swan Mills - inv. By S.S. 3/30 Inv. By MAS 2/10 wife market purchase
9. Star Bazar A/c MAS's credit 3/47 along with flat payment 3=12 + 35 = 3/47 Land flat
10. Nalsarovar MAS' credit 27,00,000
11. Sanand's land MAS's credit 18,30,000 As a date on 25/05/06
23. For the purpose of addition agitated in this ground, entry at Sr.No.9 is relevant. The ld.AO made detailed analysis of the seized material and held that the payment of Rs.4,24,75,000/- has been made to Ganesh Housing Corporation till 31.3.2005 which required to be added in the hands of the assessee. Accordingly, the AO made an addition of Rs.4,24,75,000/-.
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 22
24. On appeal, the ld.CIT(A) confirmed the conclusions of the AO. The ld.counsel for the assessee, at the very outset, submitted that since the assessee has offered additional income of Rs.2.45 crores in this year, it can take care of any additions made to the income of the assessee below Rs.2.45 crores. This additional income was offered with an idea that even if some addition has been made by the AO then, that addition can be set off against the additional income. With this background in mind, he took us through the seized paper and pointed that a perusal of the seized paper would suggest that Rs.3.47 crores has been contributed by Shri Mahendrabhai Amrutlal Shah ("MAS" for short). He further contended that addition of Rs.3.47 crores has been made in the hands of "MAS" also. He placed on record copy of the assessment order dated 29.12.2009 passed in the case of "MAS" having PAN AMDPS 8299 N. According to the ld.counsel for the assessee, without going into the merits of the addition, if amounts which stands against the name of "MAS" and which has already been added in the hands of "MAS", is excluded from the total addition made by the AO under this head, then, the total income assessed in the hands of the assessee in this year would fall below the additional income disclosed by the assessee. Assessee will have no grievance, if after confirming the part addition alleged to have been paid by the assessee in Star Bazar Land, and thereafter, set off that addition against the additional income declared by the assessee. The ld.CIT(A)-DR, on the other hand, relied upon the order of the AO. However, she could not controvert as to how the same amount can be added in the hands of the two assessees independently.
25. We have duly considered rival contentions and gone through the record carefully. We find that in para-10 on page no.28, the ld.AO has made discussion on this issue in the case of "MAS". After reproducing the reply of the assessee, he made an addition of Rs.3.47 crores on the IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 23 basis of narrations found on page no.98 of the Annexure A/77. He made identical discussion in the case of "MAS" also. Only variation is that in the reply dated 21.12.2009, "MAS" has observed that if it be held that he had made investment in Star BazarLand, then, the amount invested had been recovered by Sejal Shah and by exercising the power under section 226(3), the taxes should be recovered from her. The discussion made by the AO on page no.32 read as under:
"The reply of assessee is carefully considered. The submission of assessee are not true, due to following reasons:
(i) The document at page no.98 of Annexure A-77 seized from the residence of Sejal Shah is signed by both the parties, therefore, it is as per their understanding of their joint investment as on date of document i.e. 25.05.2006.
(ii) As discussed, in earlier paras that as per MOU between Sejal Shah Group and Mahendra Shah, Shri Mahesh Shah is the financier for the project.
(iii) Mahendra Shah & Mahesh Shah themselves admitted part investment of Rs.25.50 lacs in land and investment of Rs.35.00 lacs in Ratnamani flats. The investment in Ratnamani Flats was part & partial of development of land near Star Bazar and only for the purpose of this, these flats were acquired by the Groups.
In view of discussion held above, it is proved that the amount of Rs.3.47 crores as mentioned in the page no.98 of Annexure A-77, as invested by Mahendra Shah in Star Bazar land is indeed the investment made Mahendra Shah. It is immaterial whether Shri Mahendra Shah transferred the fund to Sejal Shah or the figure of Rs.3.47 crores as his investment is arrived after Working out any mutual adjustment of fund by both groups.
It was observed that Ratna mani Flats were purchased by tie group in the year 2005-06 and the agreement between Manibhadra Tradelink Pvt Ltd and Mafiesh Shah for the purpose of land ner Star Bazar was executed on 29.04.2005, therefore, the total investment of Shri Mahendra Shah in Star Bazar land and Ratnamani Flats is considered in the year 2005-06 i.e. A.Y.2006- IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 24
07. Therefore, the amount of Rs.3.47 crores is added to the to the income of assessment year 2006-07."
26. We further find that in para 18 the AO has made an addition of Rs.3.47 crores while working out the total income of "MAS" at Rs.3,63,34,380/-. The AO has determined taxable income of "MAS" at Rs.1,58,14,700/-. This income has been determined here at this figure, because in para 18.1, the ld.AO has observed that in view of intermingling of various accounts, investments and transactions in various benami names including the names of companies by the assessee, the net additional income is to be computed on the basis of peak theory and telescoping effect of assets/investment/expenses is given for utilization of peak for the same. Therefore, if the amounts routed through Karnavati Dyechem Pvt. Ltd. and Rekmo Dyes Pvt.Ltd. is found in excess of amount invested/expenditure incurred by him, the same is added to respective assessment years. In other words, in the computation of income, he made addition of Rs.3.47 crores on account of investment in Star Bazar Land and Ratnamani Flats. This addition has been made on the basis of narrations available at serial no.9 of page no.98 of Annexure A/77. The same amount has been added in the case of assessee - Sejal Shah while working out the total amount of Rs.4,24,75,000/-. We have also been informed that "MAS" has not filed appeal against assessment order dated 29.12.2009. Thus, that addition, as on today - almost after seven years - stands confirmed. The stand of the assessee is that the alleged investment in Star Bazar Land was being made by "MAS" to the extent of Rs.3.47 crores. This stand gets fortified with the stand of AO taken in the case of "MAS". Apart from the above perusal of Sr.No.9 of the seized paper also indicate that contribution was made by some "MAS", therefore, there is no justification for adding this amount of Rs.3.47 crores again in the IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 25 hands of the assessee. We delete an amount of Rs.3.47 crores out of the total addition of Rs.4,24,75,000/-.
27. Apart from the above, ld. counsel for the assessee has placed on record the following details exhibiting the net investment required to be considered as unexplained investment in hands of the assessee qua Star Bazar Land. The details submitted by the ld counsel for the assessee read as under:
Investment position of appellant and Shri Mahendra Shah in Star Bazar Property Total Investment in Star Bazar in A.Y. 2005-06 [CIT(A) 42475000 order Page No. 31-32)] Total Investment in Star Bazar in A.Y. 2006-07 [CIT(A) 9000000 order Page No. 79-80)] Total Investment in Star Bazar in A.Y. 2007-08 [CIT(A) 150000 order Page No. 30)] 51625000 Less: Amount received back:
Amount received back in A.Y. 2005-06 [CIT(A) order Page 0 No. 29)] Amount received back in A.Y. 2006-07 [CIT(A) order Page 11000000 No. 29-30)] Amount received back in A.Y. 2007-08 [CIT(A) order Page 2500000 No. 30)] 13500000 Net Investment in Star Bazar 381250000 Less: Amount invested by Shri Mahendra Shah [AO Page 34700000 No.34] Net Investment by Ms Sejal Shah 3425000 Total Investment in Star Bazar upto 25/05/2006 40475000 Investment by Shri Mahendra Shah as per seized 34700000 document [AO Page No.34] Net Investment by Ms Sejal Shah as on 25/05/2006 5775000
28. Since, all the appeals were listed before us when we heard this appeal, the hearing in A.Y. 2006-07 and 2007-08 could not take place on account of non-availability of the complete working of peak investment at the end of assessee in respect of other issues. The IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 26 addition on account of investment in Star Bazar land has only been made in A.Y. 2005-06. In other years, such addition is not discernible as can be seen from the total income computed by the A.O. extracted from page 9 of this order. However, from the working given by the ld. counsel for the assessee, it reveals that a sum of Rs.90 lacs was alleged to have been made in A.Y. 2006-07 and Rs.15 lacs in A.Y. 2007-08, against these investment she has recovered Rs.1.11 crore in A.Y. 2006- 07 and Rs.25lacs in A.Y. 2007-08. That is the reason ld. A.O. has not made any addition qua investment in Star Bazar land in these two years. Because in net there was no investment in these two years. These are the workings referred by the assessee in order to demonstrate peak theory. Therefore, taking into consideration the total investment made by the assessee and Shri Mahendra Shah vis-à-vis the investment received back by the assessee for rotation of funds. The net amount worked out to be Rs.57,75,000/- which is to be added in the hands of the assessee ultimately. Accordingly, the addition to this extent is confirmed as against the addition of Rs.4,24,75,000/- made by the A.O. This ground of appeal is partly allowed.
29. In the next ground of appeal, the grievance of the assessee is that ld. CIT(A) has erred in confirming the addition of Rs.15,48,242/-. Ld. counsel for the assessee at the very outset submitted that in A.Y. 2004-05 an addition of Rs.20,05,384/- was made by the A.O. The addition was made on the ground that assessee has made investment in shares. The ld. A.O. has made analysis of the demat account of the assessee. The Tribunal has made following discussion on this issue in A.Y. 04-05:
"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/-.
IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 27
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 "
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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 28 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 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 29 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, 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 IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 30 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.
In the present assessment year, ld. CIT(A) has not recorded any independent finding rather confirmed the addition of Rs.15,48,242/- by following his finding recorded in A.Y. 2004-05. When we confronted the ld. counsel about the finding of ld. CIT(A) recorded in the impugned order, he agreed that issue in dispute is covered against the assessee. He made alternative prayer submitting therein that telescoping of this addition be granted to the assessee against the additional income disclosed by her. We do not find any merit in this ground of appeal, but, we accept the alternative submission of the assessee. The addition of Rs.15,48,242/- will be set off against the additional income disclosed by the assessee.
30. In the next ground of appeal, the grievance of the assessee is that ld. CIT(A) has erred in confirming the addition of Rs.81,50,000/-. The brief facts of the case are that during the course of search a draft memorandum of understanding dated 08th January, 2005 between Yamunadutt Agarwal and Mit G. Shah was found at the residence of Ms. Sejal G Shah. This document was inventorised as Annexure A-4 page no. 25 & 26. On perusal of this document showed that Mr. Mit G. Shah and his associate agreed to take over the business of Jindal Online as going concern by buying 3,00,73,651 shares belonging to Amit Agarwal and his family members for a consideration of Rs.1,72,00,000/-. Over IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 31 and above this amount, Rs.22,44,000/- is to be paid for bank balances and deposits and amount of Rs.27 lacs was to be paid for value of plant and machinery. Ld. A.O. further observed that page no.97 of Annexure A-77 seized from the residence of Sejal G Shah indicate that a sum of Rs.1,73,73,132/- was received from Mahendrabhai and the balance due was Rs.9,68,482/-. The ld. A.O. thereafter made reference to a register which was inventorised as Annexure BS-10, seized from the residence of Shri Rashmi Kant Shah, who is maternal uncle of the assessee. Page no.40 of this Annexure contains details of transaction with Amit Yamunadutt Agarwal in respect of Jindal Online. Similarly, he made discussion of the documents recovered from the premises of Sanjiv P. Shah which contains the heading 'Jindal Online / KDPL / RDPL'. The KDPL & RDPL are short form of Karnavati Dyechem Pvt. Ltd. & Rekmo Dyes Pvt. Ltd. These companies were acquired by Sejal & Mahendra Group for the purpose of acquiring Jinal Online. The A.O. thereafter ultimately arrived at a conclusion that cash payment shown by her on page no.40 of Annexure BS-10 is the rotation of cash, was not acceptable. Ld. A.O. worked out the payment of Rs.81,50,000/- by the assessee and accordingly made addition.
31. Appeal to the ld. CIT(A) did not bring any relief to the assessee.
32. Before us, ld. counsel for the assessee at the very outset submitted that stand of the assessee from the very beginning was that document found at the residence inventorised as page nos. 25 & 26 of Annexure A-4 was a draft memorandum of understanding. The Jindal Online was not ultimately acquired by the assessee. Therefore, the alleged payment in cash has not been actually given effect and no addition ought to be made. He made reference to the reply of assessee reproduced on page no.49 of the assessment order. Apart from this, ld. counsel for the assessee further contended that as discernable from the IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 32 seized documents, 60% of the stake in the alleged Jindal Online Company was of Shri Mahendra Shah and therefore the addition to the extent of 60% of Rs.81,50,000/- out to be made in the hands of Shri Mahendra Shah and the 40% attributable in the hands of assessee which come out to Rs.36,10,000/-. According to the ld. counsel for the assessee if these additions have been confirmed, then benefit of telescoping against additional income be granted to the assessee.
33. The ld. D.R. on the other hand relied upon the order of ld. CIT(A).
34. We have duly considered the rival contentions and gone through the record carefully. In order to make an addition of Rs.81,50,000/-, ld. A.O. has made reference to three documents, namely, page nos. 25 & 26 of Annexure A-4, page no.97 of Annexure A-77 and page no.40 of Annexure BS-10. On the strength of entry found in these documents, ld. A.O. has held that assessee has made investment for acquiring Jindal Online. As far as page nos.25 & 26 of Annexure A-4 are concerned, this document is a draft MOU dated 08.01.2005 between Yamunadutt Agarwal and Mit G. Shah for a deal of equity share of Jindal Online. This document was not signed by the parties and undated. The date referred as 0801.2005 is reference in the opening line. Thus, on the strength of this document, it cannot be held that assessee has actually acquired Jindal Online. The second document referred by the A.O. is page no.97 of Annexure A-77. This document does not contain the complete print out of the payments, so, this was an incomplete document and ld. A.O. in order to complete this document made reference to page no.5 of Annexure A-1 which was seized from the residence of one Sanjiv P. Shah. The A.O. never disclosed the premises from where this document was seized. He never supplied the copy of the document or copy of the hard disc from where this document was said to be recovered. The ld. A.O. only made reference, that the entry IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 33 available in the document are talling with the entries in Annexure A-77 and therefore the entries which are not eligible in the A-77 can be taken from this document. To our mind, the Revenue authorities have failed to establish the live link between these documents. A.O. could not establish the source of the document and how Sanjiv P. Shah was supposed to keep a document similar to Annexure A-77. Thus, this document cannot be used for corroborative purposes. The other document is page no.40 of Annexure BS-10. This document was seized from the residence of Shri Rashmikan C. Shah. According to A.O., this document contains the details of receipt of money between 21.11.2005 & 07.02.2006 amounting to Rs.36,10,000/- as against which total payments on various dates between 08.11.2004 to 04.02.2005 comes to Rs.81,50,000/-. On the basis of newspapers, the A.O. has proceeded to add Rs.81,50,000/-. This page was not found from the residence of the assessee. It was not in the handwriting of assessee or any of her employees or by any family members. The papers have been found from Shri Rashmikant C. Shah who is a third party. The A.O. has drawn inference that entries available in these pages are belonging to the assessee but he failed to bring conclusive evidence in support of his conclusions. If all these evidences are looked with the angle that ultimately Jindal Online was not acquired by the assessee, then what is the relevancy of the payment which is to be included in the peak investment. The ld. First Appellate Authority instead of independently deciding this issue proceeded to make an observation that since assessee has taken a sum of Rs.81,50,000/- while working out the peak investment during the year, therefore, she has accepted the working made by the A.O. This was an alternative contention of the assessee. The first issue is whether the department was possessing conclusive evidence showing investment made by the assessee in acquiring Jindal Online. The ld. CIT(A) made reference to the movement of price of the IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 34 shares of Jindal Online.Com Ltd. from the website of Bombay Stock Exchange but that was not a relevant evidence. Revenue ought to have collected the evidence from the Registrar of the Companies, Stock Exchange etc. which could demonstrate the actual acquisition of Jindal Online.Com Ltd. by the assessee. As far as cheque payments are concerned in respect of these transactions, the case of the assessee was that it was negotiated but it was not materialized. The payments made through account payee cheque has been duly shown in the books of account, they have been accounted. The A.O. has not made the addition of these amounts rather he calculated the addition of Rs.81,50,000/- as cash payment but to our mind, there is no conclusive evidence to this effect. Apart from the above, the contribution of the assessee at the most can be of Rs.36,10,000/- because she has only 40% stake rest of the stake was of Mahendra Shah. Thus, addition of more than Rs.36.10lacs cannot be made even as per the stand of A.O. himself. That aspect has also not been considered by the Revenue authorities. We allow this ground of appeal of the assessee and delete the addition of Rs.81,10,000/-.
35. In the next ground of appeal, grievance of the assessee is that ld. CIT(A) erred in confirming the addition of Rs.3,80,705/- which was added by the A.O. with the aid of Section 2(22)(e) of the Act. Ld. counsel for the assessee prayed that this ground has been raised erroneously, it pertains to A.Y. 2007-08 as per assessment order. Therefore, he made a prayer to withdraw this ground of appeal. The prayer of the ld. counsel for the assessee is accepted and this ground is rejected as withdrawn.
36. Before we part with the order, we would like to make an observation that we have made a detailed analysis of the record. We find that there is overlapping of funds between different documents i.e. IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 35 loose papers, cash book, bank statements in the name of assessee and other family members which have been owned up by her. The investments made by the assessee were partly recovered in subsequent years. Therefore, the ld. A.O. has accepted in principle that income of the assessee is to be assessed on peak investment theory in a particular year. Though in the computation of income assessee has identified the assets at Rs.11,60,600/- only, but after various additions, we find that in this year on account of different assets possessed by the assessee, the peak investment is to be worked out as under:
Investment in Bhagyoday Owners Association 2775000 Investment in 20, Charankrupa Society presuming 3650000 cheque payments were also unexplained Investment in Star Bazar 5775000 Investment in shares held in demand accounts even 1548242 if action of Assessing Officer is held to be justified Total 13748242 As against this addition, we find that assessee has declared an additional income of Rs.2,45,00,000/- in this year. Therefore, we direct the A.O. to grant a telescoping benefit to the assessee with regard to these additions vis-à-vis the additional income disclosed by the assessee. The balance unutilized additional income shall be carried forward to the next year for grant of telescoping benefit. The assessee has offered a consolidated figure of Rs.10 crore in all these years and allocated according to the nature of investment made in a particular year. Investment in some of the assets might be continued in one or two years like the investment in Star Bazar. We have worked out the net investment in the Star Bazar land otherwise from the details IT(SS)A No.386/Ahd/2011 Asstt.Year 2005-2006 36 extracted (supra), it revealed that in A.Y. 2006-07 assessee made further investment of Rs.90lacs and in A.Y. 2007-08 Rs.15,00,000/-. The additions qua these amounts in A.Y. 2006-07 and 2007-08 had not been made by the A.O. because in these years assessee has received back a sum of Rs.1.35 crore out of that investment and therefore, the net investment considered is of Rs.57,75,000/- in the hands of the assessee as against the total investment worked out by the A.O. at Rs.4,24,75,000/-. Keeping in mind this background, we observe that unutilized portion of additional income in this year would be available to the assessee as an opening amount for investment in the subsequent year. With the above observation, the appeal of the assessee is partly allowed.
37. In the result, appeal of the Assessee is partly allowed.
Order pronounced in the Court on 8th February, 2016 at Ahmedabad.
Sd/- Sd/-
(MANISH BORAD) (RAJPAL YADAV)
ACCOUNTANT MEMBER JUDICIAL MEMBER
True Copy
Ahmedabad; Dated 08/02/2016
आदे श क+ ' त-ल.प अ/े.षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त(अपील) / The CIT(A)
5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण / DR, ITAT,
6. गाड* फाईल / Guard file.
ु ार/ BY ORDER, आदे शानस उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad