Income Tax Appellate Tribunal - Ahmedabad
Kaushik S .Desai, Ahmedabd vs Assessee on 9 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH - AHMEDABAD
(BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. K. GARODIA, AM)
IT(SS)A No.41/Ahd/2000
B. P.: 01-04-1987 to 31-03-1997 & 01-04-1997 to 28-08-1997
Shri Kaushik S. Desai, Vs The JCIT (Assessment),
4, Preyas Bungalow, Special Range-2,
Opp. Rushil Bungalow, Ahmedabad
Nr. Bodakdev, AUDA Fire Station,
Judges Bungalow, Ahmedabad
PA No. --
(Appellant) (Respondent)
IT(SS)A No.84/Ahd/2000
B. P.: 01-04-1987 to 31-03-1997 & 01-04-1997 to 28-08-1997
The JCIT (Assessment), Vs Shri Kaushik S. Desai,
Special Range-2, 4, Preyas Bungalow,
Ahmedabad Opp. Rushil Bungalow,
Nr. Bodakdev, AUDA Fire Station,
Judges Bungalow, Ahmedabad
PA No. --
(Appellant) (Respondent)
IT(SS)A No.42/Ahd/2000
B. P.: 01-04-1987 to 31-03-1997 & 01-04-1997 to 28-08-1997
Shri Vikram S. Desai, Vs The JCIT (Assessment),
4, Preyas Bungalow, Special Range-2,
Opp. Rushit Bungalow, Ahmedabad
Nr. Bodakdev, AUDA Fire Station,
Judges Bungalow, Ahmedabad
PA No. --
(Appellant) (Respondent)
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 2
Shri Kaushik S Desai and Shri Vikram S Desai
IT(SS)A No.86/Ahd/2000
B. P.: 01-04-1987 to 31-03-1997 & 01-04-1997 to 28-08-1997
The JCIT (Assessment), Vs Shri Vikram S. Desai,
Special Range-2, 4, Preyas Bungalow,
Ahmedabad Opp. Rushit Bungalow,
Nr. Bodakdev, AUDA Fire
Station,
Judges Bungalow, Ahmedabad
PA No. --
(Appellant) (Respondent)
Assessee by Shri Dhiren Shah, AR
Department by Shri S. S. Parida, CIT DR
Date of hearing: 09-01-2012
Date of pronouncement: 20-01-2012
ORDER
PER BHAVNESH SAINI: This order shall dispose of all the above appeals which are connected with each other.
2. Briefly, the background leading to filing of the appeals are that there was a search and seizure operation u/s 132 of the IT Act at the residential premises of Shri Kaushik S. Desai, the above assessee on 28-08-1997. In addition to above, simultaneous search operation u/s 132 of the IT Act were also carried out on the same day at the office and residential premises of S/Shri Sendhabhai M. Desai, Vikram S. Desai, Karamsibhai Desai, Tushar J. Patel, Jethabhai Patel, Kamlesh Patel, Balwant Thakkar, M/s. Square Reality Pvt. Ltd., Mahesh P. Patel and Surendra B. Bhatt. Large numbers of books of accounts, papers and documents were found and on that basis business IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 3 Shri Kaushik S Desai and Shri Vikram S Desai income was estimated. Now, we take up the appeals for the purpose of disposal as under:
IT(SS)A No.41/Ahd/2000 IT(SS)A No.84/Ahd/2000 (Assessee- Shri Kaushik S. Desai)
3. These cross appeals are directed against the order of the learned CIT(A) -IV, Ahmedabad dated 10-04-2000 for the above block period.
4. The assessee on ground No.1 challenged the addition of Rs.2,80,699/- out of total addition of Rs.6,01,432/- on account of peak of bank accounts. The revenue in ground No.2 of the appeal challenged the deletion of addition out of peak of bank balances amounting to Rs.3,20,733/-. It is noted in the impugned order that the AO made observations that as per the assessee, the assessee has filed a combined peak balances in respect of three bank accounts and the peak balance was worked out at Rs.6,01,432/-. The AO rejected the explanation of the assessee that the said three bank accounts have been operated by the assessee as per the instruction given by his father Shri Sendhabhai Desai and he has operated the bank accounts as a nominee of his father. The AO rejected the explanation of the assessee that the cash deposits and other entries in the bank accounts are mainly from agricultural operation. The AO also noted that the assessee is a major and competent to enter into any contract because of his majority and all the accounts were opened and operated by the assessee and he was sole owner of the same. All the bank accounts are operated by the assessee only. The IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 4 Shri Kaushik S Desai and Shri Vikram S Desai AO accordingly made the addition of Rs.6,01,432/- as undisclosed income of the assessee on account of peak of the bank accounts. It was explained before the learned CIT(A) that the assessee has no independent source of income and was of the age of 23 years old at the time of search. The bank accounts were operated as nominee of his father and further cash was deposited out of family agricultural income, therefore, no addition should be made against the assessee.
In the alternate contention, it was submitted that the assessee received an amount of Rs.3,20,733/- on account of sale of banakhat rights of the property known as Subhash Bungalow which was also deposited in the said bank account. Telescoping benefit of Rs.3,20,733/- was accordingly claimed. The learned CIT(A) considering the explanation of the assessee reduced the addition by a sum of Rs.3,20,733/-. His findings in Para 3.2 are reproduced as under:
"3.2 I have considered the rival submissions. The fact remains that the appellant is a major he had opened the bank accounts in question and that he was operating th4e bank accounts. Also at the time of search it was revealed that the appellant was looking after Hotel Savera (Q. 2 Party No.2). Also the construction of Amar Complex was undertaken by the appellant and his family members (Q. 12 Party No.2). Thus the appellant was not sitting idle but was engaged in the income earning activities. Further, as per appellant's own admission he has acted as a mediator and earned income therefrom. Also there is no justification that the appellant's father who has operated his own bank a/cs open bank account in appellant's name and monitor the said bank a/cs through his son i.e. the appellant. Therefore, the appellant's contention is not acceptable. However, there is some merit in appellant's alternative argument about giving set off for the income of Rs.3,20,733/-IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 5
Shri Kaushik S Desai and Shri Vikram S Desai earned by him. The A. O. is accordingly directed to reduce the addition in question by the sum of Rs.3,20,733/."
5. The learned Counsel for the assessee reiterated the submissions made before the learned CIT(A) and submitted that the addition may be considered in the hands of his father Shri Sendhabhai Patel. He has referred to PB-107 to 116 which are the details of three bank accounts and the peak working given at PB-169. The learned Counsel for the assessee on going through stated that telescoping benefit granted by the learned CIT(A) pertained to cheque No.118975 dated 27-11-1996 and the peak is worked out at PB-169 on 2/3-09-1996.
6. On the other hand, the learned DR relied upon the order of the AO and submitted that the bank accounts are in the name of the assessee and the deposits therein have not been disputed. Telescoping benefit has been wrongly granted in favour of the assessee because the cheques deposited in the bank account on account of sale of banakhat right was after the date of working of the peak deposits and as such the entire addition should be made against the assessee.
7. We have considered the rival submissions and do not find any justification to reduce part addition on the matter in issue. It is not in dispute that the assessee maintained three bank accounts and also operated the same. The assessee was major at the time of search while maintaining all the three bank accounts. The deposits made in the bank accounts maintained by the assessee are also not in IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 6 Shri Kaushik S Desai and Shri Vikram S Desai dispute. Thus, it is proved on record that the assessee was owner and beneficiary of all the deposits in his bank accounts. Since unaccounted deposits were found in the bank accounts of the assessee, therefore, onus was upon the assessee to explain and prove that the deposits did not belong to him. However, no evidence was filed before the authorities below to their satisfaction, therefore, the learned CIT(A) was justified in holding that the assessee is owner of the bank accounts and there was no justification for the assessee's father to open bank accounts in the name of the assessee. The explanation of the assessee was accordingly rightly rejected. As far as the benefit given by the learned CIT(A) of Rs.3,20,733/- is concern, the learned CIT(A) failed to note that the working of the peak submitted by the assessee in the bank accounts in a sum of Rs.6,01,432/- was found on 2/3-09-1996 (PB-169). The AO noted in the assessment order in Para 7.1 that Vasupujya Holdings Pvt. Ltd. who entered into alleged banakhat dated 21-04-1996 with the assessee had issued a cheques of Rs.4,00,000/- bearing No.118975 on 27-11-1996 which was deposited in the bank account of the assessee and cleared on 28-11-1996 (PB-170). Further, when banakhat was executed on 21-04-1996 there is no entry in the bank account of the assessee nearby April, 1996 of the same amount of telescoping benefit was claimed. Thus, it is clear that the assessee was not entitled for any set off of the amount of Rs.3,20,733/- because the said cheques was never cleared in the bank account of the assessee prior to the working of the peak on 2/3-09-1996. The learned CIT(A) was, therefore not justified in granting benefit of telescoping to the assessee of that amount. We accordingly, confirm IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 7 Shri Kaushik S Desai and Shri Vikram S Desai the order of the learned CIT(A) in confirming the addition on account of peak deposits as is made by the AO, however, the learned CIT(A) was not justified in granting benefit/set off of the amount of Rs.3,20,733/-. His order to that extent is set aside and the order of the AO is restored. In the result, ground No.1 of the appeal of the assessee is dismissed and the ground No.2 of the appeal of the revenue is allowed.
8. On ground No.2, the assessee challenged the addition of Rs.3,20,733/-. The AO found from the evidences on record that the assessee entered into deal related to property and received Rs.3,20,733/-. The AO also found from the said sale documents pertaining to the property at TPS -19, Final Plot No.582 of Memnagar, Ahmedabad that the assessee in fact entered into banakhat agreement dated 21-04-1996 with original owners of the land Shri K. R. Patel Gandhi. In the meantime, M/s. Vasupujya Holdings Pvt. Ltd., Ahmedabad got interested in the property and entered into banakhat right sale agreed with the said Company and after payment of Rs.3,20,733/- pertaining to his one third share in the property entered into banakhat agreement dated 21-04-1996. Thus, payment was found to be in respect of sale of banakhat right in favour of M/s. Vasupujya Holdings Pvt. Ltd. Thus, from the evidences it was found that there is no indication that this amount has been paid to the assessee for vacating or clearing from encroachment from the said property. The evidences produced by the assessee reveal that payment of Rs.3,00,000/- to two persons for clearing of encroachment are not reliable and could not be cross verified in the IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 8 Shri Kaushik S Desai and Shri Vikram S Desai absence of complete details. Addition of Rs.3,20,733/- was accordingly made being unaccounted income of the assessee for the block period. The assessee reiterated the same submissions before the learned CIT(A) and submitted that evidences have been placed on record to show that the assessee spent Rs.3,00,000/- towards clearance of the encroachment of the property and the papers are filed at PB- 190 and 191. It was, therefore, prayed that addition may be deleted. The learned CIT(A) however, confirmed the addition. His findings in Para 5.2 of the impugned order are reproduced as under:
"5.2 I have considered the observation of the A. O. in the assessment order and the appellant's reply dated 16.8.99 and 24.8.99 and the papers and documents compiled in the paper book as well as the oral arguments of the Authorised Representative. From the perusal of the evidences compiled in the paper book at page No.190 and 191 which is in respect of expenditure incurred by the appellant for clearance of encroachment in respect of the property for which the appellant has acted as a mediator, no addresses of the persons to whom the said payments were supposed to have been made are mentioned. It is only a statement on a piece of paper and cannot be verified on the basis of details submitted by the appellant. The A. O. is, therefore, justified in rejecting the appellant's claim of Rs.3 lacs against the amount of Rs.3,20,733/- received by the appellant. The addition of Rs.3,20,733/- is, therefore, confirmed."
9. The learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB- 184 which is reply of the assessee on the same line for clearance of encroachment by unauthorized persons in the property and referred to the receipts for the same in the paper book filed at PB-190 and
191. IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 9 Shri Kaushik S Desai and Shri Vikram S Desai
10. On the other hand, the learned DR relied upon the orders of the authorities below and submitted that the assessee's claim is not verifiable and there is no co-relation with the payment and the amount received through banakhat and referred to Page 97 of the assessment order to show that the documents did not disclose any amount spent by the assessee for vacating or clearing the encroachment in the property.
11. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the assessee. The assessee has not disputed receipt of the amount of Rs.3,20,733/- for executing banakhat right sale agreement with M/s. Vasupujya Holdings Pvt. Ltd. The said payment is also cleared in the account of the assessee. The assessee however, claimed that he has spent Rs.3,00,000/- for removal of the encroachment. But no satisfactory evidence could be filed. The AO also noted that in the documents found during the search and evidences available on record it was not found that amount was paid for vacating or clearance of the encroachment in the property. Since the assessee claimed deduction of expenditure out of the income, therefore, onus is upon the assessee to prove that the amount has been expended for earning the said income. However, no satisfactory evidence was filed before the authorities below in support of the claim made in this regard. The authorities below were, therefore, justified in rejecting the claim of the assessee. In the result, ground No.2 of the appeal of the assessee is dismissed.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 10Shri Kaushik S Desai and Shri Vikram S Desai
12. In the result, the appeal of the assessee in IT(SS)A No.41/Ahd/2000 is dismissed.
13. The revenue on ground No.1 challenged the deletion of addition of Rs.97,500/-. The AO rejected the contention of the assessee that the amount of rent was received by him in his representative capacity on behalf of Kaushik Desai, Sandhabhai Desai, Vikram Desai and Smt. Geetaben Desai. The AO found that lease agreement for rent in respect of the property occupied by Macon India Ltd. has been entered into by Shri Sendhabhai Desai on behalf of the owner and as per the terms of the lease deed rent is to be paid to all the four persons and share of the assessee for rent is credited in his bank account. Addition was accordingly made. It was explained before the learned CIT(A) that the property in question belonged to the Company and the assessee received rent on behalf of the Company M/s. Savera Hotel Pvt. Ltd. Audited accounts of M/s. Savera Hotel Pvt. Ltd. were also produced in which the rent income has been reflected in the profit & loss account. The property is also shown in the fixed assets of the Company. It was, therefore, submitted that the assessee is not entitled to receive any rent in his personal capacity. The learned CIT(A) found that the AO has accepted that the tenanted property belonged to M/s. Savera Hotel Pvt. Ltd. and the assessee is not owner of the same. It was, therefore, found that rent was received on behalf of the owner of the property which is reflected in their accounts. Addition was accordingly deleted. The learned DR merely relied upon the order of the AO.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 11Shri Kaushik S Desai and Shri Vikram S Desai
14. On consideration of the rival submissions we do not find any merit in this ground of appeal of the revenue. The assessee is not owner of the property which was let out to the tenant. The assessee received rent on behalf of the owner which is reflected in their accounts. Therefore, the learned CIT(A) was justified in deleting the addition in the hands of the assessee. Ground No.1 of the appeal of the revenue is dismissed.
15. On ground No.3, revenue challenged deletion of addition of Rs.11,04,460/-. The AO made observation that in the absence of adequate documentary evidences regarding the source of investment in the land deals the contention of the assessee cannot be accepted. The assessee's share in the land comes to one third of Rs.33,13,381/- which comes to Rs.11,04,460/- and the same was treated as undisclosed income in the block assessment. It was submitted before the learned CIT(A) that all the papers, documents and source of the investment in the property have been explained through the family of the assessee, therefore, no addition could be made. It was also submitted that details of the payment through the family members and family concerns M/s. Geeta Enterprises, M/s. Desai Enterprises and M/s. Gujarat Livestock Agencies and in the name of Sendhabhai HUF along with copies of accounts were furnished to show that all investments in the property have been duly explained out of the funds withdrawn by family concerns. It was further submitted that all the sources of investment have been explained and no addition could be made. The learned CIT(A) accepted the contention of the assessee because the sources of IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 12 Shri Kaushik S Desai and Shri Vikram S Desai payment along with acknowledgment of return of income of all the family concerns and their copies of the accounts were produced to show that investment was made from known sources. Addition was accordingly deleted.
16. The learned DR relied upon the order of the AO. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB- 196 which is complete details of the sources of the investment, party wise details, draft number/amount and date etc. which are also supported by acknowledgement of return of income and accounts of the parties.
17. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The assessee produced complete details of sources of investment in the property before the learned CIT(A) which clearly proved that various family concerns made investment in the properties through known sources. Details are noted in the accounts of the family concerns and shown to the revenue department by filing the return of income. Therefore, same cannot be treated as undisclosed investment. The learned CIT(A) on proper appreciation of facts, evidences and materials on record rightly deleted the addition. In the result, ground No.3 of the appeal of the revenue is dismissed.
18. In the result, the appeal of the assessee in IT(SS)A No.84/Ahd/2000 is dismissed and the appeal of the revenue is partly allowed.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 13Shri Kaushik S Desai and Shri Vikram S Desai IT(SS) A NO.42/Ahd/2000 IT(SS) A No.86/Ahd/2000 (Assessee - Shri Vikram S. Desai)
19. Both the cross appeals are directed against the order of the learned CIT(A)-IV, Ahmedabad dated 12-04-2000 for the above block period.
20. The assessee on ground No.1 of the appeal challenged the addition of Rs.33,704/-. The AO noted that the assessee has either not owned the entries or has tried to explain that in the form of gifts or giyana received by his wife. Assessee's explanation was rejected and addition of Rs.52,484/- was made on account of Annexure -A/7 party No.4 of the seized materials. It was submitted before the learned CIT(A) that the seized annexure were the bills/vouchers of miscellaneous, jewellery, and sarees purchased and labour payment for jewellery. The assessee produced photo copies of the same in the paper book before the learned CIT(A) and argued that not a single bill has been paid by the assessee. Some bills were found in the name of wife of the assessee which according to the assessee was paid by his wife's personal savings and some jewellery gifted by his father-in- law to his daughter. Rests of the bills were explained to be the amounts spent through agricultural income of the family. The learned CIT(A) found from some of the bills that these were rough jottings but three bills of Rs.10,000/-, Rs.5,000/- and Rs.15,704/- were in the name of assessee's wife for purchase of jewellery etc. To that extent addition of Rs.30,704/- was confirmed.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 14Shri Kaushik S Desai and Shri Vikram S Desai
21. On consideration of the rival submissions, we do not find any justification to interfere with the order of the learned CIT(A). The authorities below found all three bills that the same pertained to the expenses spent by the wife of the assessee. The source of the amount spent was not explained. The source of the amounts spent was not explained. The assessee took the plea that same amount is spent out of personal savings of his wife or occasional gifts made by her father. However, no satisfactory evidence or source is explained or filed before the authorities below. Even, during the course of argument, the learned AR did not point out any specific evidence to explain the seized papers. Since the additions have been made on basis of specific seized papers which were found in the name of wife of the assessee, therefore, the assessee shall have to explain the same through reliable and cogent evidences. However, the assessee failed to explain the same seized papers, therefore, the addition was rightly confirmed by the learned CIT(A). Ground No.1 of the appeal of the assessee is accordingly dismissed.
22. On ground No.2, the assessee challenged the addition of Rs.2,83,915/- on account of peak of the bank accounts. The revenue on ground No.5 challenged the deletion of addition of Rs.3,20,733/-. The AO made found that the assessee filed combined peak balances in respect of five bank accounts and the peak balance was worked out at Rs.6,04,648/-. Addition was accordingly made by rejecting the contention of the assessee that the bank accounts was operated on the instructions given by the father of the assessee Shri Sendhabhai Desai. The assessee made similar explanations as were given in the IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 15 Shri Kaushik S Desai and Shri Vikram S Desai case of Kaushik S. Desai (supra) and set off of Rs.3,20,733/- was claimed on sale of banakhat right of property known as Subhash Bungalow which was deposited in the said bank account. The learned CIT(A) partly accepted the contention of the assessee for giving benefit of Rs.3,20,733/- as was given in the case of Kaushik S. Desai.
23. The learned Counsel for the assessee submitted that the issue is same as is considered in the case of Kausik S. Desai and further submitted that details are same as were noted above. The learned DR also submitted that the issue is same.
24. Considering the facts of the case noted above, we find that the issue is same as is considered in the case of the assessee Kaushik S. Desai (supra). By following the order in that case, we confirm the order of the learned CIT(A) in confirming the addition on account of peak deposits in the bank accounts of the assessee. However, the learned CIT(A) was not justified in deleting the addition of Rs.3,20,733/-. The order in the case of Kaushik S. Desai is directed to be followed in this case.
25. In the result, ground No.2 of the appeal of the assessee is dismissed and ground No.5 of the departmental appeal is allowed.
26. On ground No.3, assessee challenged the addition on sale of banakhat right of the property known as Subhash Bungalow of Rs.3,20,733/-. The learned CIT(A) following the order in the case of Kaushik S. Desai confirmed the addition. Both the parties submitted IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 16 Shri Kaushik S Desai and Shri Vikram S Desai that the issue is same as is considered in the case of Kaushik S. Desai. By following the order in the case of Kaushik S. Desai (supra) we confirm the order of the learned CIT(A) and dismiss this ground of appeal of the assessee.
27. On ground No.4, the assessee challenged the addition of Rs.21,000/- on account of advance booking amount paid in respect of UNO car. The AO has made observation that sources of payment of Rs.21,000/- as booking amount of UNO car being agricultural income of assessee's father Sendhabhai Desai was rejected and addition was accordingly made. It was submitted that the assessee has no activity and source of income is out of agricultural operation by his father Sendhabhai Desai and no evidence has been brought on record to show any business activity of the assessee. Source of advance amount of Rs.21,000/- for UNO car is out of agricultural income of the father of the assessee which is exempt. The learned CIT(A) found on examination of the documents that the assessee is owner of some immovable properties and was also earning income out of brokerage. Booking of car in the name of the assessee clearly proves that the assessee made payment from unaccounted source. Addition was accordingly confirmed.
28. On consideration of the rival submissions, we do not find any justification to interfere with the orders of the authorities below. The assessed could not explain source of the amount paid by him in respect of booking of UNO car. The assessee explained on the basis of reply that booking amount was paid by Demand Draft dated 08-08- IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 17 Shri Kaushik S Desai and Shri Vikram S Desai 1996 for an amount of Rs.21,000/- which was paid out of agricultural income of his father. The learned CIT(A) found on examination of the documents that the car has been booked in the name of the assessee. Therefore, the assessee is under obligation to explain the source of the deposit of the amount for booking of the car which the assessee failed to explain. No specific evidence is filed to prove that the amount was paid out of agricultural income of father of the assessee. Accordingly, we do not find any merit in this ground of appeal of the assessee. The same is accordingly dismissed.
29. In the result, the appeal of the assessee in IT(SS)A No.42/Ahd/200 is dismissed.
30. On ground No.1, the revenue challenged the deletion of addition of Rs.1,56,480/- on account of estimate of brokerage. The AO made observation in the order that on the basis of evidences on record, it cannot be held that the assessee dealt in land on principal to principal basis. However, since the evidence in respect of land has been recovered from the residential premises of the assessee, the evidences cannot be ignored completely. It was noted that onus is upon the assessee on recovery of the seized documents from his possession which onus has not been discharged by the assessee. Accordingly, it was held that the assessee dealt in the land in his capacity as a broker and brokerage shall be charged to income @ 5% of the total value of the land. The AO has further observed in the order that perusal of the documents from page 20 to 23 of Annexure A/4 Party No.4 which is Memorandum of Understanding of the said IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 18 Shri Kaushik S Desai and Shri Vikram S Desai land reveals that land at 972/4 is admeasuring 15,000 sq. yds. The value of the land has been mentioned at page 22 of Annexure A/4 Party No.4 at Rs.151/- per sq. yd. The AO accordingly worked out the cost of the land and made the addition accordingly. It was submitted before the learned CIT(A) that the land did not belong to him and the assessee is not aware of any such transactions. No brokerage has been earned. The AO has not identified the purchaser. Therefore, addition is unjustified. The learned CIT(A) accepted the contention of the assessee and noted that the AO has not brought on record any cogent material or evidence that the assessee has acted as broker/dalal. Addition was accordingly deleted.
31. The learned Counsel for the assessee at the outset conceded that ITAT Ahmedabad "C" Bench in the group cases of Shri Tushar J. Patel and Jethabhai P. Patel decided the appeals in IT(SS) A No.85/Ahd/2000 etc. vide order dated 28-07-2011 and considering the seized papers, it was found that Shri Tushar J. Patel acted as a land broker and in that case instead of 5% brokerage the Tribunal considered 2% as brokerage as reasonable and accordingly the departmental appeal has been partly allowed. He has further submitted that while deciding the appeal of the assessee, the Tribunal also directed that set off shall be given of the undisclosed investment against brokerage income. Copy of the order is placed on record. He has, therefore, submitted that in the case of the assessee since the facts are identical, therefore, 2% brokerage may be confirmed and set of against the undisclosed investment may be IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 19 Shri Kaushik S Desai and Shri Vikram S Desai given as is directed in the case of Shri Tushar J. Patel. The learned DR also submitted accordingly.
32. On consideration of the above facts, we are of the view the order in the case of Shri Tushar J. Patel (supra) decided by the Tribunal have relevance to the issue in the matter. It is undisputed fact that search was conducted in the case of the assessee and several other persons including Shri Tushar J. Patel. On the basis of appreciation of the seized materials and documents on record and on identical facts, the Tribunal in the case of Shri Tushar J. Patel found on factual position that Shri Tushar J. Patel acted as a land broker. Accordingly, instead of 5% brokerage, the Tribunal confirmed the brokerage @ 2%. It is also directed in the said order that set off shall be given against the undisclosed investment from the brokerage income. Both the parties submitted that facts are identical in the present case also, therefore, following the order of the Tribunal in the group cases of Shri Tushar J. Patel (supra) we set aside the order of the learned CIT(A) in deleting the addition and restore the order of the AO for making addition on account of brokerage. However, the AO is directed to make addition of 2% on account of brokerage instead of 5% and the assessee shall be entitled for set off of brokerage income against the undisclosed investment. In this view of the matter, ground No.1 of the appeal of the revenue is partly allowed.
33. On ground No.2, revenue challenged the deletion of addition of Rs.17,94,493/- on account of unexplained investment in lands.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 20Shri Kaushik S Desai and Shri Vikram S Desai
34. Briefly, the facts of the case are that the AO made observation that the assessee was major and capable in handling his own affairs and was eligible to enter into contract. There was no dispute regarding the fact that the property at Paldi has been registered in t he names of three persons out of which the assessee is having one third interest. Since the other two persons have disclosed an amount of Rs.5,83,033/- each in their block period by way of investment of their share in the said property, the amount was added as income of the assessee for the block period on account of his share of interest in the said property. The assessee explained before the learned CIT(A) that he is merely nominee of his father Shri Sendhabhai Desai and the family has agricultural operation and evidences of the same were filed, therefore, investment was made out of agricultural income of approximately Rs.5,00,000/- per annum. Necessary supporting evidence of earning of agricultural income was filed. It was alternatively claimed that since the addition of peak balance in the bank account was made of Rs.6,04,648/-, therefore, benefit of the same may be given because the peak balance was worked out for September, 1996 and thereafter there is consistent reduction in the peak balance and conveyance deed for Paldi property was executed on 09-01-1997. Therefore, the amount withdrawn from the bank account is available to the assessee for set off. The learned CIT(A) on merit confirmed the addition holding that the assessee made investment in the property in his name which is also confirmed from the seized material. Therefore, theory of property purchased at the instance of father is not accepted. However, alternative contention of the assessee was accepted that set off may be given out of peak balance IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 21 Shri Kaushik S Desai and Shri Vikram S Desai of the bank account which is invested in the property at Paldi. Telescoping benefit was given and addition of Rs.5,83,033/- was accordingly deleted.
34.1 The AO further observed that investments have been made by the assessee as per documents found during the course of search and assessee's share comes to Rs.33,000/- which was added as income of the assessee in respect of the property in the Scheme in Mehsana land - survey No.1730. The learned CIT(A) on merit confirmed the order of the AO because transaction of real estate was in the name of the assessee but benefit of agricultural income earned by the assessee's father Shri Sendhabhai Desai of Rs.5,00,000/- per annum was considered and it was held that sufficient cash balance was available with the family of the assessee and investment was made out of the agricultural income available with the assessee's father and the family. Addition of Rs.33,000/- was accordingly deleted.
34.2 The AO similarly found from the documents that the assessee made investment in the property being one sixth share in Mehsana land - survey No.1725. Addition of Rs.32,000/- was accordingly made against the assessee. The learned CIT(A) found that the investment was made in the name of the assessee. The learned CIT(A) similarly noted that the assessee furnished details of sale of crops for the block period which works out to approximately Rs.45 lacs to 50 lacs. Therefore, assessee's family earned Rs.5 lacs per annum out of agricultural income and after meeting household IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 22 Shri Kaushik S Desai and Shri Vikram S Desai expenses of approximately Rs.1 lacs to Rs.1.50 lacs, balance is available for explaining the investment made in the above property. Addition of Rs.32,000/- was accordingly deleted.
34.3 The AO further found from the documents the investment is made in the land of survey No.474/1 at village Daskol and the assessee's one sixth share comes to Rs.42,000/-. It was submitted that it is double addition as was considered in respect of various lands in Para 7.10 of the order. The learned CIT(A) found the contention of the assessee to be correct and held that separate addition of Rs.42,000/- should be deleted. Addition was accordingly deleted.
34.4 The AO further found from the documents that assessee's share in the land will be one third of Rs.33,13,381/- and his share comes to Rs.11,04,460/- which was in respect of the land bearing survey numbers starting from 371 to 387 and 717 and 421. The assessee explained the source of payment through various different concerns belonging to the assessee's family. It was explained that investment in this property has been made out of withdrawals made from different concerns of the family namely M/s. Geeta Enterprises, M/s. Desai Enterprises, M/s. Gujarat Livestock Agencies and Sendhabhai Desai HUF. The learned CIT(A) found that investments have been made out of withdrawals made from the family concerns of the assessee and thus payments are explained and these firms have filed their return of income for the said period. Therefore, addition was deleted.
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 23Shri Kaushik S Desai and Shri Vikram S Desai
35. The learned DR relied upon the order of the AO and submitted that there is no link of the investments with the sources explained above. The learned DR submitted that this issue relates to five properties as above and on the first property at Paldi the sale deed was executed on 09-01-1997, therefore, no telescoping benefit of peak credit should be given. The learned DR submitted that no evidence of agricultural income was filed; therefore, addition should not be deleted.
36. On the other hand, the learned Counsel for the assessee reiterated the submissions made before the learned CIT(A) and referred to peak balances PB-248 in the bank account of Rs.6,04,648/- as on 2/3-09-1996 and submitted that investments have been made after working of the peak balance. Withdrawals have been made from the bank accounts which are available to the assessee to make investments. Agricultural income of the family is available to the assessee for which sufficient evidences were filed. As regards addition of Rs.11,04,460/-, he has submitted that this issue is same as ground No.3 in the appeal of Shri Kaushik S. Desai above on which the assessee explained the sources from family concerns. Details in the paper book of Shri Kaushik S. Desai have been filed at page 196 of the paper book.
37. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The issue of investment of Rs.11,04,460/- is considered in the case of Shri Kaushik S. Desai (supra). It was found that withdrawals have been made from several IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 24 Shri Kaushik S Desai and Shri Vikram S Desai concerns of the family of the assessee and they have also filed return of income and investments have been explained. Addition was accordingly deleted by following the order in the case of Shri Kaushik S. Desai. Departmental appeal on this issue is dismissed.
37.1 So far as telescoping benefit granted by the learned CIT(A) of peak deposits, the peak was worked out in September, 1996 and investment in Paldi property was made on 09-01-1997. There are withdrawals from the bank accounts; therefore, peak is available to the assessee for investments. The learned CIT(A) was, therefore, justified in holding that telescoping effect of peak balance of bank accounts is available to the assessee for making investments in the property at Paldi. Addition of Rs.5,83,033/- was, therefore, rightly deleted by the learned CIT(A). On one of the issues, the learned CIT(A) found that it is double addition made on which no comments have been offered by the learned DR during the course of arguments. Therefore, no interfere is called for. The rests of the two investments are of small amount and considering the agricultural income earned by the family members of the assessee, we are of the view that learned CIT(A) on proper appreciation of facts and material on record rightly given benefit to the assessee. This ground of appeal of the revenue is accordingly dismissed.
38. In the result, ground No.2 of the appeal of the revenue is accordingly dismissed.
39. On ground No.3, revenue challenged the deletion of addition of Rs.3,03,195/- on account of unexplained investments in Preyas IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 25 Shri Kaushik S Desai and Shri Vikram S Desai Bungalow and on account of bills of hardware and building materials. It was explained before the learned CIT(A) that the assessee has not made any investment in this property, because his father is the owner of the bungalow and he is merely staying in the property. All the construction and repair works have been done by his father. The learned CIT(A) on consideration of the facts and material on record accepted the contention of the assessee and deleted the addition of Rs.2,37,636/-. The learned CIT(A) similarly deleted the addition of Rs.65,359/- on account of material purchased for construction of the same bungalow. On consideration of the rival submissions we do not find any merit in this ground of appeal of the revenue. Nothing is produced before us to contradict the findings of the learned CIT(A) that the bungalow in question stands in the name of the father of the assessee. All the construction materials for practical purposes would have been purchased by the owner of the property, therefore, additions have been rightly deleted by the learned CIT(A). This ground of appeal of the revenue is accordingly dismissed.
40. On ground No.4, revenue challenged the deletion of addition of Rs.3,53,010/- on account of income earned on unexplained advances. The AO observed on examination of the seized paper page 44 of Annexure A/7 Party No.4 that the same page contained the details of loans and advances and interest earned against numbers of lands, survey numbers. The AO, therefore, calculated the total of all the documents being Rs.3,53,010/- and made the addition against the assessee. It was submitted before the learned CIT(A) that the seized documents is not written by the assessee and did not IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 26 Shri Kaushik S Desai and Shri Vikram S Desai pertain to the assessee and the assessee denied the transaction contained thereon. It was submitted that no evidence was found to prove that the assessee earned interest income on any advance. No corroborative evidence was produced. It was, therefore, submitted that no addition should be made merely on the basis of noting and jottings in the seized paper which even did not pertain to the assessee. The learned CIT(A) accepted the contention of the assessee on examination of the seized paper and found that the AO has not brought any evidence on record to prove that the assessee earned interest income. Addition was accordingly deleted.
41. The learned DR relied upon the order of the AO and submitted that since the seized paper was recovered from the possession of the assessee, therefore, presumption is against the assessee that the assessee earned interest. On the other hand, the learned Counsel for the assessee reiterated the submission made before the authorities below.
42. On consideration of the rival submission we do not find any merit in this ground of appeal of the revenue. The assessee specifically explained that the seized paper did not pertain to him and is not in his hand writing. No corroborative evidence was found to support the findings of the AO. Merely on noting and jottings in the seized paper, addition could not be made against the assessee. The learned CIT(A), therefore, rightly held that no evidence is brought on record to prove that the assessee earned interest income. No material is produced before us to contradict the findings of the IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 27 Shri Kaushik S Desai and Shri Vikram S Desai learned CIT(A). Accordingly, we do not find any merit in this ground of appeal of the revenue. The same is accordingly dismissed.
43. On ground No.6, the revenue challenged the deletion of addition of Rs.60,433/- on account of construction bills of Preyas Bungalow. The learned CIT(A) following his findings on ground No.3 above deleted the addition. Both the parties submitted that the issue is same as is considered above. Since the property belong to the father of the assessee Shri Sendhabhai Desai, therefore, on proper appreciation of the facts and material on record rightly deleted the addition. In the result, ground No.6 of the appeal of the revenue is dismissed.
44. In the result, the appeal of the revenue is partly allowed.
45. In the result, both the appeals of the assessees are dismissed and both the appeals of the revenue are partly allowed.
Order pronounced in the open Court.
Sd/- Sd/-
(A. K. GARODIA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Deka/--
Lakshmikant Deka/
IT (SS) A No. 41, 42, 84 and 86/Ahd/2000 28
Shri Kaushik S Desai and Shri Vikram S Desai
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Dy. Registrar, ITAT, Ahmedabad