Income Tax Appellate Tribunal - Ahmedabad
Brirendrasingh K. Bhadoria,, vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A"
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI N.S. SAINI, ACCOUNTANT MEMBER
Date of hearing: 30.03.10 Drafted on:30.03.10
IT(SS)A No.158/AHD/2004
Block Period: 1-4-86 to 21-1-97
ACIT, Circle-6, Vs. Shri Birendrasingh K.
C.U.Shah Chambers, Bhadoria
Ashram Road, Kalyan Dham, Opp. Priya
Ahmedabad. Cinema, Nr. B.K. Tenament,
N.H.No.8, Ahmedabad.
(APPELLANT) .. (RESPONDENT)
IT(SS)A No.131/AHD/2004
Block Period: 1-4-86 to 21-1-97
Shri Birendrasingh K. Vs. ACIT, Circle-6,
Bhadoria C.U.Shah Chambers,
Kalyan Dham, Opp. Ashram Road, Ahmedabad.
Priya Cinema, Nr. B.K.
Tenament, N.H.No.8,
Ahmedabad.
(APPELLANT) .. (RESPONDENT)
ITA No.1912/AHD/2005 & 1913/AHD/2005
Assessment Year : 1997-98 and 1998-99
ITO, Vs. Shri Bhadoria Birendrasingh
Ward 9(2), Vasupujya Kalyansingh.
Chambers, 'A' Wing, Kalyan Bhavan, Opp. Priya
Ashram Road, Cinema, Saijpur Bogha,
Ahmedabad. Ahmedabad.
PAN/GIR No. : ABKPB 6913G
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri Kumar Hrishikesh Sr.
D.R.
Respondent by: Shri S.N.Divetia Adv.
-2-
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
The IT(SS)A No.158/Ahd/2004 and 131/Ahd/2004 are the cross appeals filed by the revenue and assessee against the order of Learned Commissioner of Income Tax (Appeals)-XI, Ahmedabad dated 19.02.2007 passed in the block period 1-4-86 to 21-1-97. The ITA Nos. 1912/Ahd/2005 and 1913/Ahd/2005 are the appeals filed by the revenue against the consolidated order of the Learned Commissioner of Income Tax(Appeals)-XV, Ahmedabad Dated 25.05.2005 passed in the Assessment Years 1997-98 and 1998-99.
2. In the appeal filed against the order of the Learned Commissioner of Income Tax(Appeals) passed in the Block period, the assessee has challenged the validity of the assessment order passed by the Learned Assessing Officer under section 158BC reads with section 158BD of the Act and therefore, the same is being decided first. The ground taken by the assessee reads as under:-
"1.1 The order passed by CIT(A)-XII, Ahmedabad partly confirming the order of block asstt. passed u/s.158BD r.w.s. l58BC on 29.10.2003 by ACIT, Cir-6, Ahmedabad determining undisclosed income at Rs.12,94,875 towards his shares in the alleged purchase of land at Nikol, Ahmedahad is wholly illegal and unlawful.
1.2 The proceedings initiated by AO u/s. l58BD r.w.s. 158BC were illegal, unlawful and without jurisdiction."
3. The brief facts are that the assessee submitted before the Learned Commissioner of Income Tax(Appeals) that the block proceedings under section 158BD initiated by the Learned Assessing Officer are illegal as the appellant has not been informed about the material on the basis of which the satisfaction have been reached by the Learned Assessing -3- Officer and therefore, on receipt of copy of the said material the appellant would be able to make better and further submissions relating to this ground of appeal.
4. The Learned Commissioner of Income Tax(Appeals) observed that the order of the Learned Assessing Officer has been considered and the arguments of the appellant are taken into consideration. From the assessment order, it is found that the document was seized pertaining to the purchase made by the appellant from the premises of Shyam Builders in which Shri Jashwant K. Patel was interested. Also the statement of Shri Jashwant K. Patel at the time of search clearly mentioned the appellant's name as one of the buyers of the land as appearing in the document seized. He therefore, held that the Learned Assessing Officer was justified in initiating the proceedings under section 158BD of the Income Tax Act, 1961.
5. The Bench on 13.07.2009 passed an order vide order sheet Entry No.12 directing both the parties to produce the satisfaction note and the connected records on the next date of hearing. The said order reads as under:-
"The Ld. Counsel for the assessee raised the issue of satisfaction to be recorded before 31.01.99, but was unable to produce the satisfaction note. This is crucial to the decision in respect of the ground no.1. Accordingly, both the parties are directed to produce the satisfaction note and the connected records at the next date of hearing. Adjourned to 31.08.2009. PIC.
Sd/- Sd/-
(NSS)(AM) (RVE) (VP)"
6. Thereafter, the hearing of the appeal was adjourned to 31.08.2009, 3.09.2009, 26.10.2009 at the request of the Learned Departmental -4- Representative. Neither the Department has produced the records to show that any satisfaction note was recorded before issue of notice under section 158BD of the Act nor the assessee has produced the order passed under section 158BC of the Act in the case of Shyam Builders Group, the searched person which could be gone through by the bench to ascertain whether satisfaction regarding the income in the seized paper belonging to the assessee could be ascertained by Bench. Further, it is an established position of law that the onus is on the person who alleges that no satisfaction note was recorded before the issue of notice under section 158BD of the Act. Since, the assessee has alleged that no satisfaction note was recorded before the issuance of notice under section 158BD of the Act to the assessee, the onus was on the assessee to file evidence in support of the same. As no such evidence has been filed therefore, this ground of appeal of the assessee is rejected.
7. The other grounds of appeal for the block period in the appeal of the assessee and the revenue are as under:-
Assessee "2.1. The Id.CIT(A) has erred in law and/or on facts in confirming that
(a) the appe11ant was party to the purchase of land bearing No.776 and 777 at Nikol, Ahmedabad jointly with three others.
(b) the appellant had executed so called banakhat and other documents in respect of the said land.
(c) the appellant had paid Rs.12,94,875 at the rate of 25% towards the purchase price of the said land.
(d) Shri Jaswant K. Patel had confirmed in his statement of appellant having made such payment.
(e) The appellant had signed the papers concerning this transaction.
(f) the denial of opportunity to cross examine Shri J.K.Patel was an after thought.
-5-2.2 That in the facts and circumstances of the case as well as evidence on the record, the Ld.CIT(A) ought NOT to have come to the above said conclusions. On the contrary, the averments made and conc1usions reached by both the authorities are wholly unjustified on proper-appreciation of the material on record and explanations furnished by the appellant.
2.3 The Ld.CIT(A) ought to have held that the appellant had neither executed any such banakhat or papers relating to said land nor paid any such amount for the aforesaid purchase.
3.1 The Ld.CIT(A) has erred in law and on facts in relying upon the statements given by Shri Jaswant K. Patel. The Ld.AO ought to have allowed the authorized representative of the appellant Shri Samir M. Shah C.A. to cross examine Shri Jaswant Patel.
3.2 Without prejudice to the above, on a proper reading of the statements of Shri Jaswant Patel, the Ld. CIT(A) ought to have held that the appellant was not a party to the aforesaid transaction and had not paid any such amount.
4.1 the Ld.CIT(A) has erred in law and/or on facts in holding that Rs.12,94,875/- was the undisclosed income of the appellant much less for Assessment Year 1997-98. 4.2 That in the facts and circumstances of the case, the Ld. CIT(A) ought not to have held that the appellant had made undisclosed investment of Rs.12,94,875 towards the purchase of said land in A.Y. 1997-98.
5.1 The ld. CIT(A) ought to have allowed a reasonable opportunity to the appellant to cross examine other parties to the alleged transaction and the appellant should have been furnished certified true copy of the seized documents relied upon by AO.
6.1 The above grounds of appeal are in the alternative and without prejudice to each other."
Revenue "1. The Ld. Commissioner of Income tax (A)-XII, Ahmedabad has erred in law and on facts in directing the Assessing Officer to consider only Rs.12,94,875/- as income of the assessee from undisclosed sources instead of Rs.43,16,250/-.
2. The Ld. Commissioner of Income tax (A)-XII, Ahmedabad has further erred in law and on facts in not appreciating that the total consideration was Rs.1,72,65,000 and it has not -6- been proved that the balance consideration of Rs.1,29,48,750/- was paid after date of search.
3. On the facts and in the circumstances of the case, the Ld. Commissioner of Income-Tax(A)-XII, Ahmedabad ought to have upheld the order of the Assessing Officer as has been done by CIT(A)-III, Ahmedabad on 17.02.2003 in the case of Shri Jaswantlal K. Patel, a co-partner of the assessee in the dealing of the land at issue.
4. It is, therefore, prayed that the order of the Ld. Commissioner of Income-tax (A) may be set aside to the above extent and that of the Assessing Officer be restored."
8. In the above grounds of appeal, the assessee is challenging the order of the Learned Commissioner of Income Tax(Appeals) confirming addition of Rs.12,94,875/- towards the share in the alleged purchase of land at Nikol, Ahmedabad and the revenue is challenging the reduction of addition of Rs.43,16,215/- to Rs.12,94,875/- on account of undisclosed investment in the alleged purchase of land.
9. The Learned Commissioner of Income Tax (Appeals) has decided this issue as under:-
"3. With regard to the two grounds of appeal, the facts of the case as brought out on record by the AO are as under:-
There are a search proceedings in the case of Shyam Builders Group on 21.01.1997 and one 'Banakhat' was seized from the site office of Syam Dham Scheme of Shyam Builders Group. This banakhat is in respect of 15000 Sq. Yds land bearing Survey No. 776 &777 at Nitol, Naroda, Ahmedabad. As per this banakhat this land is sold by Shri Vallabhbhai Patel & Keshubhai Patel and this land is purchased by the following four persons:
1. Jashwant K Patel
2. Rajkumar M Dugar
3. Birendrastngh K Shadoria
4. Maganlal S Gupta -7- During the search on 22.01.1997 statement of Jashwant K Patel u/s. 132(4) of the Act was recorded and as per the answer to question No.8, Shri Jashwant K. Patel stated that the land has purchased @ Rs.1151/- per sq yds. and in response to question No.9, Shri Jashwant K. Patel stated that Rs.52 lacs has been paid by the four persons for the purchase of the land and his share comes to Rs.13 lacs. Before the AO, the assessee denied his involvement in the transactions in connection with the land under consideration as discussed above and during the course of assessment proceedings further statement of Shri Jashwant K Patel was recorded on 24.10.2003 u/s. 131 of the I.T. Act and the assessee was allowed to cross examine Shri Jashwant K Patel. In this statement Jashwant K Patel the same facts as stated earlier before ADIT that the transaction in land in question was entered into with three other persons including Birendrasing K Bhadoria, the assessee. Opportunity was given to Shri Birendrasingh K. Bhadoria to cross examine Jashwant K. Patel in the cross examination by the assessee, Jashwant K. Patel categorical stated that papers concerning this transactions was signed by Birendrasingh K. Bhadoria, which were received by him through Shri Rajubhai. During this cross examination, the assessee decided not to ask any further questions to Jashwani K. Patel regarding the land transaction.
After having allowed the assessee the cross examination of Shri Jashwant K. Patel, the assessee was asked to explain further as per the order sheet entry dated 24.10.2003 as under:
Shri Jasvantbhai K. Patel and the assessee Shri Bireridrasingh K. Bhadoria attended alongwith their CAs. Assessesse's attention is drawn to his submission dated 14.10.2003 wherein he has stated that he has stated that he has had no connection what so ever in connection with toe transaction in Survey No.776 and 777 situated at Nikol, Naroda, Ahmedabad. In this regard, his attention was drawn to the statement of Shri Jasvantbhai K. Patel, wherein he has stated that the assessee i.e. Shri Birendrasingh is a partner and that he has signed all the documents. This fact has also been confirmed by Shri Jaswantbhai K. Patel, in your cross examination. From this fact, it is clear that you have entered into this transaction in all respect Please explain what you have to say about this?"
The AO further stated in his order that in response to this query the assessee replied that he has not signed the said banakhat in -8- which the details of purchase of land having 15,000 sq yd area and bearing survey No.776 and 777 which was seized from Shri Jashwant K Patel's place at the time of search conducted on 21.1.1997. Further, he had not paid any amount to anybody as mentioned in the said Banakhat and also stated by Shri Jashwant K Patel.
After considering the assessee's explanation, the AO in his order further observed as under:
However, he could not bring out any evidence to substantiate his claim that he has no concern what so ever in the transaction of land in question. On the contrary, Shri Jashwant K Patel, in his statement recorded during the search u/s. 132 as also in his statement recorded u/s. 131 on 24.10.2003 has clearly stated that the assessee is a partner in the land transition. Even in cross examination, Shri Jashwant K. Patel reconfirmed his earlier submission stand.
In view of the above facts it is very much dear on the basis of evidence and statement of Shri Jashwant K. Patel that the assessee has purchased the above (and with three persons and further payment has already been made in respect of cost of land at Rs.1,72,65,000. Therefore, investment in the above land made by the assessee is unaccounted one and not in the regular books of accounts. Without prejudice the findings that may be or may have been given in this case or in any other case under Income-Tax Act or any other Act held that the income and investment worked out herein below is taxable in the hands of the assesses.
The AO, thereafter, calculated the investment in the above land by the appellant by relying on the entries on page 72 of Annexure-A-20 seized from the site office of Shyam Dham Scheme, where working of Rs.1,72,65,000 was given and based on this working, the AO considered the purchase of this land of 15000 sq. yds at Rs.1,72,65,000 against the amount paid of Rs.52 lacs as stated by Jashwant K. Patel and concluded that the share of the appellant being 1/4th comes to Rs.43,16,250. The AO accordingly computed the undisclosed income in this land transactions by way of unexplained investment at Rs.43,16,250 and added the same to the income of the appellant as undisclosed income for the block period.
4. With regard to the first ground of appeal, the appellant submitted that the block proceedings u/s.158BD initiated by the AO are illegal as the appellant has not been informed about the -9- material on the basis of which the satisfaction have been reached by the AO and therefore, on receipt of copy of the said material the appellant would be able to make better and further submissions relating to this ground of appeal. The order of the AO has been considered and the arguments of the appellant are also taken into consideration. I find from the assessment order that the document was seized pertaining to the purchase made by the appellant from the premises of Shyam Builders in which Shri Jashwant K. Patel was interested. Also the statement of Shri Jashwant K Patel at the time of search clearly mentioned the appellant's name as one of the buyers of the land as appearing in the document seized. I, therefore, hold that the AO was justified in initiatin0 the proceedings u/s, 158BD of the I.T. Act.
5. Before the undersigned with regard to the second ground against addition of Rs.43,16,250, the appellant made the following submissions by their letter dated 19.12.2003:-
"The AO has wrongly concluded that the appellant had paid his share of alleged purchase price of Rs.1,72,65,000 which comes to Rs.43,16,250. The appellant had time and again pointed out that he had not executed the so called banakath nor he had paid any such sum and he was unaware about such transaction. The AO has not brought on record any material except alleged statement of Shri Jashwant K Patel to show that the impugned payment must have been made by the appellant. Therefore, in absence of any cogent and direct evidence to show that the impugned payment was made by the appellant, no addition could be made in case of the appellant for such amount.
The appellant states that the following observations made and conclusion reached by AO are grossly incorrect.
a. The appellant was party to the purchase of land bearing No. 776 and 777 at Nikol, Ahmedabad jointly with three others.
b. The appellant had executed so called Banakhat and other documents in respect of the said land.
c. The appellant had paid Rs.43,16,250 at the rate of 25% towards the purchase price of the said land.
- 10 -
d. Shri Jaswanf K Patel had reconfirmed in his statement of appellant having made such payment e. The appellant had signed the papers concerning this transactions.
On the contrary, it is found from the xerox copy of so called banakath pages 35 to 39 furnished to the appellant that (a) pages 37 to 39 (internal page 1 to 6) are handwritten and rest of the pages 35 to 36 (internal pages 7 to 9) are typed pages,
(b) there is no execution of the said agreement since there is no such page, it is therefore surprising as to how such an incomplete an inadmissible document in evidence could be relied upon much less held that the payment has been made by the appellant. The appellant is not able to make out how it is alleged by AO that any such document has been executed by the appellant.
The AO has heavily relied upon the statement of Shri Jashwant K. Patel for the purpose of making impugned addition. However, he has failed to appreciate that the said statement could not be relied upon by AO or treated as a conclusive evidence against the appellant without allowing opportunity of cross examination by the appellant or his authorise representative. The appellant would like to point out that the authorise representative of the appellant Shri Samir M Shah, C.A had asked the AO to allow such opportunity when his statement was recorded on 24.10.2003 but the same was orally refused on the ground that the cross examination could be carried out by the appellant himself. It will be appreciated that the appellant is not capable enough or legally well equipped to carry out any such cross examination yet he had asked few questions to Shri Jashwant K Patel. It is now a well established position in law that unless the opposite party is allowed to be cross examined or the material relied upon is confronted to the assesses, no adverse inference could be drawn by AO and the impugned addition is liable to be quashed.
Without prejudice to above and in alternative, the appellant submits that even on a proper reading of the statements of Shri Jashwant K Patel, the conclusion reached by AO is not justified, because:
(a) Shri Jaswant Patel in his reply to question No.2 In cross examination on 24.10.2003 by the appellant had dearly
- 11 -
stated that no any such amount was received from the appellant towards the purchase of the land In question.
(b) Shri Jaswant K Patel in reply to question No.3 of the said cross examination had categorically stated that Rajubhai M Dagha had suggested name of the appellant as a partner. This is reiterated also in reply to question No.1. In view of these facts, the explanation given by the appellant that he was unaware about any such transaction and has not made any such payment is correct.
(c) Shri J.K. Patel in his statement on 24.10.2003 has admitted to have paid Rs.13 lakhs of his 25% share, but he has not stated that similar amounts have been paid by the other partners and therefore, it cannot be concluded that the appellant had paid any such sum.
Even on going through the statement of Shri J.K. Patel recorded at the time of search 22.1,1997 and more particularly his reply to Q. 6, 9 & 10, it is very clear that he has not stated that the appellant had made the impugned payment. On the contrary Shri J.K. Patel admitted the payment of Rs.52 lakhs towards the said land and his share at 25% at Rs.13 lakhs. Therefore, how could it be concluded that the appellant has paid Rs.43,16,250 of his 25% share.
In view of above, the appellant submits that the AO has wrongly construed the statement of Shri J.K. Patel recorded on 24.10.2003 and 22.1.1997 and thus drawn in correct conclusions therefrom, and the same are completely devoid of facts. Without prejudice to above, the appellant submits that the AO has not brought on record any material to prove that the aggregate payment of Rs.1,72,65,000 was made towards purchase of this land by the joint owners. Even Shri J. K. Patel has not stated in any of his statements that payment to the tune of Rs.1,75,65,000 has been made, it appears that the AO has drawn inference from the notings made on page 72 of Annexure A-26, but even the said notings cannot be construed as having made payments because the search has taken place on 22.1.97 whereas the dates mentioned against each payment of Rs.20 lakhs and odd relates to the post search period. Thus, the conclusion reached by AO is a presumption and surmise. In any view of the matter, how could it be concluded that any such
- 12 -
payments have been made on those dates. The post search period cannot be included in the block assessment because it is not covered by the block period is defined under the Act. Further, it is submitted that the so called banakath and loose papers were found from the office of Shyam Dham Scheme which has got no relevance with the appellant and he was not connected with the said scheme. Therefore, no adverse inference could be drawn against the appellant. In any view of the matter, when loose papers found from the possession of a third party and they are not in the handwriting of the appellant, the same cannot be considered as conclusive proof against the appellant. Reliance is placed on the decision of CBI Vs. V.C. Shukla (1996) 5 SC and Prarthana Construction Ltd. Vs. DCIT (70 TTJ 120) (Ahd.) Lastly, the appellant would like to make alternate submission without prejudice to the aforesaid contentions or amounting to admission that when J.K. Patel has admitted to have made payment of Rs.12 lakhs, the AC could not have held that payment of Rs.43,16,250 was made. And even said payment should be held to be made by Rajubhai M Daga as per reply to Q. 3 of Shri J.K. Patel on 24.10.2003. Therefore, the impugned addition is also liable to be deleted."
With the above submissions, the AR of the appellant submitted that the addition made by the AO is to be deleted.
I have considered the order of the AO, the facts of the case and the submissions of the appellant, I have also gone through the copy of Banakat seized from the premises of Shyam Dham Scheme of Shyam Builders, two statement of Shri Jaswant K. Patel as well as the cross examination by the appellant of Jaswant K. Patel on 24,10.2003 and seized document on page 72 of the Annexure-A-26. which was also seized from the site office of Shyam Dhaym Scheme, where the working of Rs.1,72,65,000 was given. The appellant's argument that no opportunity to cross examine Shri Jaswant K. Patel was given is totally unwarranted. A clear opportunity was given to the appellant to cross examine Shri Jaswant K. Patel on 24.10.2003 and on this occasion appellant also questioned Shri Jaswant K. Patel, however, the appellant did not question Shri Jaswant K. Patel on the validity of the document for the purchase of land found during the search In the case of Shyam
- 13 -
Builders. The appellant also did not question Shri Jaswant K. Patel with regard to the payment made by him of his 1/4th share for the purchase of land. The appellant did not question the answers given by Shri Jaswant K. Patel in his statements recorded during the course of search proceedings as well as in respect of second statement of Jaswant K. Patel, who had referred to the name of the appellant. This argument of the appellant is, therefore, rejected that no opportunity to cross examine Shri Jaswant K. Patel was given. In the submissions the appellant stated that the appellant was orally refused to cross examine Shri Jaswant K. Patel cannot be sustained on the ground that at no point of time the appellant put it in writing before the AO that he was denied his full right of cross examination of Shri Jaswant K. Patel right from the date he was allowed to cross examine Jaswant K. Patel. It is only for the first time in the submissions made before the undersigned that he is leveling this allegation, which is nothing, but an alter thought and therefore, deserves to be rejected. It is ample clear from the statement of Jaswant K Patel that the land bearing Nos. 776 and 777 at Nikol was purchased by him alongwith three other persons including the appellant and each one paid equal amount for the same. I have also pone through the order of Ld.CIT(A)-III, Ahmedabad in the case of Shri Jaswant K. Patel for the block period where the Ld.CIT(A)-III upheld the addition on account of one forth payment for purchase of land by Shri Jaswant K. Patel. I, therefore, conclude that the appellant alongwith Jaswant K. Patel and two other persons purchased the said land by paying the purchase consideration @ Rs.1151 per Sq. Yds. The share of the appellant, therefore, comes to 1/4th of the payment made for the purchase of the said land of 15000 Sq.Yds. This ground of the appellant is, therefore, rejected.
However, the alternative submissions of the appellant that total payment made for the purchase of the said land by the four persons was only Rs.52,00,000 and not Rs.1,72,65,000 is acceptable. From the seized documents (page 72 of the Annexure A-26), it is seen that as per the notings made on this paper the payments were made in the following manner.
1151 X 15000 = 1,72,65,000 51,79,500
01.12.97 20,00,000
01.03.97 20,00,000
- 14 -
01.06.97 20,00,000
01.09.97 20,00,000
01.12.97 20,00,000
01.03.97 20,00,000
1,72,65,000
From the notings on this paper, it is clear that payment made upto the date of search could be only Rs.51,79,500. The remaining payments dates are the dates subsequent to the date of search i.e. 21.01,1997. Since the assessment is for the block period upto 21.01.1997, any payment made subsequent to this date cannot be considered for the purpose of assessment of the block period. The AO is tree to take action in respect of payments made after this date. Thus the payment made for the purchase of land upto date of search was Rs,51,79,500 and hence the share of the appellant, which is 1/4th comes to Rs.12,94,875. I, therefore, agree with the arguments of the appellant that only an amount of Rs.12,94,875 can at all be considered as payment made by the appellant. Since the appellant has not declared the source of this amount either before the AO or before the undersigned, I hold that this amount of Rs.12,94,875 has to be considered as income of the appellant from undisclosed sources for the block period, in addition to any undisclosed income declared by the appellant in the return of income. The AO is, therefore, directed to amend his order for the block period accordingly. To this extent this ground of appeal is treated as partly allowed."
10. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, search under section 132 of the Act was carried out on 21.01.1997 in the case of Shyam Builders Group and one 'Banakhat' was seized from the site office of Syam Dham Schem of Shyam Builders Group. This Banakhat was in respect of 15000 sq. Yrd. land bearing survey no.776 and 777 at Nikol, Naroda, Ahmedabad. As per this Banakhat this land was sold by Shri Vallabhbhai Patel and Keshubhai Patel to four persons namely Jashwant K. Patel, Rajkumar M. Dugar, Birendrastngh K. Shadoria and Maganlal S. Gupta.
- 15 -
During the search on 22.01.1997 statement of Jashwant K Patel u/s. 132(4) of the Act was recorded and as per the answer to question No.8, Shri Jashwant K. Patel stated that the land was purchased @ Rs.1151/- per sq. yds. and in response to question No.9, Shri Jashwant K. Patel stated that Rs.52 lacs has been paid by the four persons for the purchase of the land and his share comes to Rs.13 lacs. Before the AO, the assessee denied his involvement in the transactions in connection with the land under consideration as discussed above and during the course of assessment proceedings further statement of Shri Jashwant K Patel was recorded on 24.10.2003 u/s. 131 of the I.T. Act and the assessee was allowed to cross examine Shri Jashwant K Patel. In this statement Jashwant K Patel stated the same facts as stated earlier before ADIT that the transaction in land in question was entered into with three other persons including Birendrasing K Bhadoria, the assessee. Opportunity was given to Shri Birendrasingh K. Bhadoria to cross examine Jashwant K. Patel. In the cross examination by the assessee, Jashwant K.Patel categorical stated that papers concerning this transactions was signed by Birendrasingh K. Bhadoria, which were received by him through Shri Rajubhai. During this cross examination, the assessee decided not to ask any further questions to Jashwant K.Patel regarding the land transaction. Thereafter, the assessee was show caused by the Learned Assessing Officer. The assessee submitted that he had not signed the said Banakhat in which details of purchase of land having 15,000 sq. yrd. area and having survey no.776 and 777 which was seized from Shri Jaswant K. Patel's place at the time of search on 21.01.1997. The assessee also denied to have paid any amount to any body as mentioned in Banakhat and also stated by Shri Jaswant K. Patel. The Learned Assessing Officer observed that the assessee could not bring
- 16 -
any evidence to substantiate his claim that he had no concern in the transaction of land in question. In view of the above facts, the Learned Assessing Officer held that the assessee had purchased the land with 3 persons and payment for the same was made at Rs.1,72,65,000/-. Therefore, investment in the above land by the assessee was unaccounted and not entered in regular books of account. The Learned Assessing Officer further observed that without prejudice to the finding that may be or may have been given in this case or any other case under the Income Tax Act or any other Act, and held that income and investment by the assessee was taxable. He observed that entries on page 72 of Annexure-A-20 shows working of Rs.1,72,65,000/- against which amount paid was Rs.52 lacs as stated by Shri Jaswant K. Patel and concluded that the share of the assessee being 1/4th comes to Rs.43,16,215/- and accordingly, made addition of the same as undisclosed investment in this land transaction.
11. In appeal, the Learned Commissioner of Income Tax(Appeals) held that the argument of the assessee that no opportunity to cross examine Shri Jashwant K. Patel was unwarranted. The assessee was given opportunity to cross examine Shri Jashwant K. Patel on 24.10.2003 on which occasion, the assessee also questioned Shri J. K. Patel and did not question him on the validity of the document for purchase of land found during the search in the case of Shyam Builders. The assessee also did not question Shri Jaswant K Patel regarding payment made by him of his 1/4th share in the purchase of land. The assessee did not question the answer given by Shri Jaswant K. Patel in his statement recorded during the course of search proceedings as well as in respect of second statement of J. K. Patel who had referred to the name of the assessee. Therefore, the argument
- 17 -
that no opportunity to cross examine Shri Jaswant K. Patel was given was rejected. The Learned Commissioner of Income Tax(Appeals) further observed that the submission of the assessee that assessee was orally refused to cross examine Shri Jashwant K. Patel cannot be sustained as at no point out time, the assessee put in writing before the Learned Assessing Officer that he was denied his full right of examination of Shri Jashwant K. Patel from the date he was allowed to cross examine Shri Jashwant K. Patel. It is only for the first time in the submission before the Learned Commissioner of Income Tax(Appeals), the assessee was leveling this allegation which was an after thought and deserves to be rejected. Further, the Learned Commissioner of Income Tax(Appeals) observed that from the notings on the seized paper, it was clear that payments made upto the date of search was only Rs.51,79,500/-. The remaining payments dates are date subsequent to the date of search i.e. 21.01.1997 and any payment made subsequent to this date cannot be considered for the purpose of assessment for the block period. Accordingly, he held that only amount of Rs.12,94,875/- can be considered as payments made by the assessee. Since, the assessee had not declared the source of this amount either before the Learned Assessing Officer or before him, he held that Rs.12,94,875/- has to be considered as income from undisclosed sources of the assessee for the block period and modified the order of the Learned Assessing Officer accordingly.
12. In the above facts and circumstances of the case, we are of the considered opinion that the statement of Shri Jashwant K. Patel was connected with the search matter and was therefore, evidence found relating to the course of search. In his statement, he has explained the seized document and the mode of payment made by the co-owner of
- 18 -
the property in question. The assessee was allowed cross examination to his statement. The assessee did not put the leading question to him to deny his complicit in the transaction. Even no suggestion was given during the course of cross examination that assessee was not involved in the transaction in question. The assessee also not disputed that the assessee did not pay any amount being 1/4th share in the transaction. The Learned Counsel for the assessee pointed out Question No.3 to the statement of Shri Jashwant K. Patel to show that the name of assessee was put on the agreement alongwith his signature at the instance of Rajubhai Nangalchand Daga. The above submission of Learned Counsel for the assessee clearly proved that the name of assessee was validly used for the purpose of entering in the transaction of the purchase of the property and that the assessee was aware of the unaccounted transaction in the matter. Since, the above facts were leading conclusively to the fact that the assessee was involved in the transaction of purchase of the property which are based upon the seized material found during the course of search therefore, it is not a simple case of solitary statement of Shri Jashwant K. Patel involving the assessee in the transaction. Since, prima facie evidence recovered during the course of search was pointing out towards the assessee that the assessee paid unaccounted money in the transaction, therefore, burden would shift upon the assessee to prove that the assessee was not involved in any of the transaction. The authorities below therefore, on the basis of the seized material and other material collected during the course of inquiry, clearly proved that the assessee participated in the transaction of the purchase of the property. In the absence of any specific cross examination to the statement of Shri Jashwant K. Patel, we do not find any error in the order of the Learned Commissioner of Income Tax(Appeals) in sustaining part addition against the assessee.
- 19 -
13. Further, the assessee has not filed any evidence to show that it has stated before the Learned Assessing Officer that he was denied cross examination of Jashwant K. Patel. No material was also brought on record by the assessee to rebut the observation by the Learned Assessing Officer in his order that cross objection of Shri Jashwant K. Patel was allowed on 24.10.2003 and the assessee did not question Shri Jashwant K. Patel about the validity of document for purchase of land found during the search in the case of Shyam Builders and also did not question Shri Jashwant K. Patel with regard to the payment made by him of his 1/4th share of the purchase of land. Thus, the Learned Assessing Officer after allowing the assessee to cross examination of Shri Jashwant K.Patel has conclusively proved that the assessee was one of the partners in the purchase of land at Nikol, Ahmedabad having 1/4th share in the same and that he paid 1/4th amount of Rs.51,79,500/- which comes to Rs.12,94,875/-. Therefore, the ground of appeal of the assessee is dismissed.
14. With regard to the revenue's appeal that the Learned Commissioner of Income Tax(Appeals) was not justified in restricting the addition for undisclosed investment in purchase of land to Rs.12,94,875/- in place of Rs.43,16,250/-, we find that the Learned Commissioner of Income Tax(Appeals) has observed that from the seized document page 72 of Annexure-A-26, it is seen that the payment made before the date of search i.e.21.01.1997 was only Rs.51,79,500/- and the other amounts in the seized paper are after the date of search. No error in this finding of the Learned Commissioner of Income Tax(Appeals) could be pointed by the Learned Departmental Representative who merely supported the order of the
- 20 -
Learned Assessing Officer. It is a well settled position of law that addition in a block assessment can be made only of the amount of income found in the seized document during the block period which has not been disclosed by the assessee to the department. In absence of any such evidence being brought on record, to show that the entire amount of Rs.1,72,65,000/- was paid before the date of search and the source of which was not disclosed to the department, we do not find any error in the order of the Learned Commissioner of Income Tax(Appeals) in restricting the addition to Rs.12,94,875/- in place of Rs.43,16,250/-. Therefore, the ground of appeal of the revenue is dismissed.
ITA No.1912/Ahd/2005 and ITA No.1912/Ahd/200515. In these appeals, the revenue as taken the following common ground:-
"1. The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the A.O. in respect of undisclosed investment in land amounting to Rs.10,00,000/- for Assessment Year 1997-98 and Rs.20,00,000/- for Assessment Year 1998-99."
16. The Learned Commissioner of Income Tax(Appeals) has held as under:-
"4. I have considered the submissions of the Authorised Representative carefully and have also gone through the details filed by the Authorised Representative. I have gone through the case records of the appellant and I find that Banakhat has not been signed by the appellant. Except the Banakhat incorporating the name of the appellant, there is no material with the Assessing Officer to conclude that the appellant has made investment in land in F.Y.1996-97 and 1997-98, Further Sri Jaswant Patel in the statement of cross examination on 24.10.93 has stated that he had not received any money from the appellant for purchase of such land and that the name of the appellant was written in Banakhat as one Shri Rajubhai had given his name. Subsequent
- 21 -
transaction in the said land shows that the land of 10065 sq. yds. has been purchased on 24.11.2002 @ Rs.115/- per sq. yd and the said sale price is also in agreement with the valuation as per report of Registered valuer Shri J.D. Gajjar. The appellant had clearly denied his involvement in the land transaction before the Assessing Officer at the time of assessment proceedings.
4.1 Addition has been made in the hands of the appellant on the basis of the banakhat and the seized loose paper seized from Jaswant Patel and the statement of Jaswant Patel. The said banakhat and the loose paper have been found from the possession of a third party i.e. Jaswant K. Patel of Shyam Builders group. As per the decision of Hon'ble Supreme Court in the case of C.B.I. Vs. V.C.Shukla & Others reported in 3 Supreme Court cases 410 to treat the material of the third party's case as a material in the case of the assessee, the burden is on the department to bring it on record the independent clinching evidences and cogent material and/or evidences of the relevancy of the facts of the alleged amount transactions. Unless and until this burden is discharged under the act, the material of the case of third party cannot be treated as a material in the case of the assessee. In this case it was also held that the existence of entries in the books of accounts would not alone be adequate to fasten liability of any person and it was incumbent on the authority concerned to substantiate the correctness or otherwise of those entries in the books of accounts or other records by independent and reliable evidences to corroborate the entries in the accounts/records tailing which no adverse inference can be drawn against any person merely on the basis of the book entries in accounts etc. The Hon'ble Supreme Court also held that the oral statement of any person made in regard to entries jotted in the books of accounts and/or records shall not alone be the sufficient evidence to charge any person with liability.
4.2 In the decision of ITAT, Ahmedabad Bench in the case of Prarthana Construction (P) Ltd. Vs. DC1T reported in 70 TTJ 122 (Ahmedabad), it has been held that loose papers and documents cannot possibly be construed as books of accounts regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section
- 22 -
34 of the Evidence Act, 1872. The Revenue would not be justified in resting its case on the loose papers and documents found from the residence of a third party even if such documents contain narrations of transactions with the assessee. The presumption under the provisions of Section 132(4A) would not be applicable to a third party from whose possession such papers and documents have been found by the Revenue. The ITAT, Ahmedabad Bench has also held in the case of CIT Vs. Prakash Oil Industries & Ginning Factory reported in 52 TTJ (Ahmedabad Tribunal) 514 that mere entries in the accounts of third party are not sufficient to prove that they had indulged in such transaction, as there was no guarantee that the entries were genuine. The ITAT, Mumbai Bench in the case of ITO Vs. M/s. N.V. Vale & Co. reported in Appeal No.3172 to 3176 order dated 12/8/1998 has held that merely on the basis of some writing in the diaries that too in the handwriting of an outsider, no addition can be made till some corroborative independent evidence to support the entries is brought out on record. In the case of the appellant books of accounts have not been found from Jaswant Patel showing entries of any payment by the appellant, but a loose paper and banakhat were only found which can not be held as books of accounts and the evidence would be outside the purview of Evidence Act as held in the case of Prarthana Construction (P) Ltd. Vs. DCIT reported in 70 TTJ 122 (Ahmedabad). The ratio of the case of ITO Vs. M/s. N.V. Vale & Co. also supports the said finding. Thus on the basis of loose papers no addition can be made in the hands of the appellant.
4.3 Here the sellers have not been questioned about the receipt of on money if any from the appellant or to confirm if the appellant had made any transaction of land in the impugned years . Even in the seized loose paper page 72 of Annexure A-26 name of the appellant does not appear. Only in the preamble of banakhat the name of the appellant appears, but the banakhat has not been signed by the appellant and the appellant has denied to have carried out any transaction in land in the impugned two years.
4.4 . In the case of Shankerlal Nebumal (HUF) Vs. DCIT reported in 135 Taxman Magazine p-33, the addition made on account of unexplained investment in the purchase of shops was deleted by 1TAT, Ahmedabad Bench 'C' by
- 23 -
observing that the Assessing Officer had made the additions presumably by invoking the provisions of Section 69B and as such, the onus was on him to prove by evidence that the assessee had in fact paid any 'on money' over and above the money which had been recorded in the books of account for making investments in the purchase of shops. Here the Assessing Officer has not established any such payment of on money if any by the appellant in purchase of Nikol land. In fact the said land to the extent of 10065 sq.yds. has been purchased by the appellant alongwith other co-owners on 24.11.2002.
4.5 . In the case of Bharat A. Mehta Vs. ITO reported in 116 Taxman 301 (Ahd.) (Mag.) the addition relating to on money was deleted by observing that in spite of search ,the revenue could not lay hand on any document to show that the assessee had paid 'on money'. Moreover the revenue could not give any material to justify the calculation of the amount added to assessee's income. In this case it was held that "where based on statement /admission of builders of bungalows under a particular scheme regarding receipt of 'on money' on sale of bungalows, addition under Section 69 was made in case of assessee who had purchased a bungalow under said scheme but, when examined in presence of assessee, builders denied receipt of any * on money' from assessee, addition was to be deleted."
4.6 Further even if there is some suspicion that price mentioned in sale deed is not correct, or that some 'on money' has been paid, the registered sale deed has to be accepted as authentic in absence of evidence to the contrary. Similar finding has been given in the case of CIT Vs. Smt. K.C. Agnes and others reported in 262 ITR 354 (Ker). In that case sale deed was showing lesser amount of sale price than that specified in an earlier agreement. The Hon'ble Kerala High Court observed that there was no evidence that greater amount than that shown in the sale deed has been received and it held that "when a document shows a fixed price, there will be a presumption that that is the correct price agreed upon by the parties. U is not necessary that the price staled in the agreement will be the price shown in the sale deed. Sometimes, it may be higher and sometimes, it may be lower. Sometimes intentionally a lesser value may be shown in the
- 24 -
sale deed. Even it' it is assumed to be so, unless it is proved that the agreement was acted upon and unless the amount stated in the agreement was paid for the sale, the Court cannot come to the conclusion that the price mentioned in the sale deed is not correct,"
4.7. Considering the facts of the case and the ratio laid down in the above cases, I am of the opinion that there is no clinching evidence to show that the appellant has paid Rs.10,00,000/- and Rs.20,00,000/- in the two years for purchase of Nikol land, when the appellant has denied to have carried out any transaction in the said land in the two years involved in appeal. Further the payments made if any after the date of search i.e.22.1.1997 as recorded in the loose paper p.72 of Annex A-26 seized at the time of search have not been examined to be correct or to have been carried out, nor Jaswant Patel has been questioned on the entries beyond 22.1,1997 i.e. the date of search found in the loose paper, if at all the said entries might indicate proposed payment schedule and there is no evidence with the Assessing Officer to show that the said transactions have been carried out, nor Jaswant Patel from whom the said loose paper was found has been questioned, nor the recipients i.e. the sellers of land have been questioned on the said entries. In view of the above facts I do not find any justification for addition of undisclosed investment in land in the hands of the appellant, hence the addition of undisclosed investment in land for the two years involved in appeal made by the Assessing Officer are deleted tor both the years .
5. In the result, the appeals are allowed for both the years."
17. From the above, we find that the Learned Commissioner of Income Tax(Appeals) in both the appeals, specifically noted that the payment schedule given as per seized material, pertained to schedule of payment after the search. It was therefore, a mere schedule of payment but no evidence is brought on record, if the assessee or anybody else made any payment of the aforesaid amount after conclusion of the search. In the absence of any adequate material on record to prove conclusively that
- 25 -
assessee has made any payment after the search on several dates from 1.12.1997 to 1.03.1997, the Learned Commissioner of Income Tax(Appeals) was justified in deleting both the additions. We therefore, confirm the order of the Learned Commissioner of Income Tax(Appeals) and dismiss the ground of appeal of the revenue in both the years under consideration.
18 In the result, the appeal of the assessee and the appeals of the revenue all are dismissed.
Order signed, dated and pronounced in the Court on 01/04/2010.
Sd/- Sd/-
(BHAVNESH SAINI) ( N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 01/04/2010
Paras#
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad