Income Tax Appellate Tribunal - Ahmedabad
Hasmukhbhai Govindbhai Patel , ... vs The Acit, Central Circle-1(1) Now Acit, ... on 12 June, 2024
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ''D'' BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER Sr. No. IT(SS)A/ITA No. Asstt. Year Name of Appellant Name of Respondent 1-6. IT(SS)A Nos.84 to 2005-06 to Hasmukhbhai Govindbhai A.C.I.T., 89/Ahd/2023 2011-12 Patel Central Circle-1(1), (Legal Heir of Late Ahmedabad Govindbhai Mafatlal Patel), (Now D.C.I.T., Circle-
31, Ajanta Park Society, 3(1)(1), Ahmedabad)
Opp. St. Xavier School,
Memnagar, Ahmedabad-
380052
PAN No: ABEPP8982F
7-11. IT(SS)A Nos.90 to 2005-06 to Hasmukhbhai Govindbhai A.C.I.T.,
94/Ahd/2023 2010-11 Patel, Central Circle-1(1),
31, Ajanta Park Society, Ahmedabad
Opp. St. Xaviers School, (Now the ACIT, Circle-
Memnagar, Ahmedabad- 4(1)(1), Ahmedabad
380051
PAN No: ABEPP8989Q
12. IT(SS)A No. 2005-06 Alkaben Nitinbhai Patel, A.C.I.T.,
95/Ahd/2023 9-A, Hindu Colony, Opp. Central Circle-1(1),
Sardar Patel Stadium, Ahmedabad
Navrangpura, Ahmedabad- (Now I.T.O. Ward-
380009 5(3)(1), Ahmedabad
PAN No: ANMPP4913E
13. IT(SS)A No. 2005-06 Prachina Bhaveshbhai Patel, A.C.I.T.,
96/Ahd/2023 8, Manichandara Society-3, Central Circle-1(1),
Opp. Surdhara Bunglows, Ahmedabad
Thaltej, Ahmedabad-380054 (Now I.T.O.,
PAN No: ANTPP1837C Ward-3(3)(1),
Ahmedabad
14. IT(SS)A No. 2005-06 Priyank Hasmukhbhai Patel, A.C.I.T.,
97/Ahd/2023 31, Ajanta Park Society, Central Circle-1(1),
Opp. St. Xaviers School, Ahmedabad
Memnagar, Ahmedabad- (Now A.C.I.T.,
380051 Ward-4(1)(1),
PAN No: AQXPP2246A Ahmedabad
15. IT(SS)A No. 2005-06 Kaminiben Hasmukhbhai A.C.I.T.,
98/Ahd/2023 Patel, Central Circle-1(1),
31, Ajanta Park Society, Ahmedabad
Opp. St. Xaviers School, (Now I.T.O.,
Memnagar, Ahmedabad- Ward-3(3)(1),
380051 Ahmedabad
PAN No: ADZPP3693C
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others
A.Ys. 2005-06 to 2011-12
2
16. IT(SS)A No. 2005-06 Hasmukhbhai Govindbhai A.C.I.T.,
100/Ahd/2023 Patel (Legal Heir of Late Central Circle-1(1),
Savitaben Govindbhai Ahmedabad
Patel), (Now I.T.O., Ward-
9-A, Hindu Colony, Opp. 3(3)(5), Ahmedabad
Sardar Patel Stadium,
Navrangpura, Ahmedabad-
380009
PAN No: ABCPP1803F
17-18. IT(SS)A Nos. 101 & 2005-06 & Alkaben Nitinbhai Patel A.C.I.T.,
102/Ahd/2023 2006-07 (Legal Heir of Late Nitinbhai Central Circle-1(1),
Govindbhai Patel), Ahmedabad
9-A, Hindu Colony, Opp. (Now D.C.I.T.
Sardar Patel Stadium, Circle-3(1)(1),
Navrangpura, Ahmedabad- Ahmedabad
380009
PAN No. ABBPP5469Q
19. IT(SS)A No. 2007-08 Hasmukhbhai Govindbhai A.C.I.T.,
116/Ahd/2023 Patel Central Circle-1(1),
(Legal Heir of Late Ahmedabad
Savitaben Govindbhai (Now I.T.O.,
Patel), Ward-3(3)(5),
9-A, Hindu Colony, Opp. Ahmedabad
Sardar Patel Stadium,
Navrangpura, Ahmedabad-
380009
PAN No. ABCPP1803F
20. IT(SS)A No. 2007-08 Nitinbhai Govindbhai Patel A.C.I.T.,
31/Ahd/2023 (Legal Heir of Alkaben Central Circle,
Nitinbhai Patel), Ahmedabad
9-A, Hindu Colony, Opp. (Now D.C.I.T.,
Sardar Patel Stadium, Cricle-3(1)(1),
Navrangpura, Ahmedabad- Ahmedabad)
380009
PAN No. ABBPP5469Q
21. IT(SS)A No. 2010-11 D.C.I.T, Shri Hasmukhbhai
60/Ahd/2023 Circle-3(1)(1), Govindbhai Patel, (Legal
Ahmedabad Heir of Late Shri
Govindbhai M. Patel),
9-A, Hindu Colony, Opp.
Sardar Patel Stadium,
Navrangpura,
Ahmedabad-380009
PAN No. ABEPP8982F
Assessee by : Shri Dhinal Shah & Shri Bhadresh Gandhakwala,
A.Rs.
Revenue by : Dr. Darsi Suman Ratnam, CIT-DR
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others
A.Ys. 2005-06 to 2011-12
3
सुनवाई क तार ख/ Date of Hearing : 20/03/2024
घोषणा क तार ख / Date of Pronouncement: 12/06/2024
आदे श/O R D E R
PER BENCH:
The above 21 appeals have been filed by the Assessee and the Revenue against the separate orders of the Ld. Commissioner of Income-Tax (Appeals)-11, Ahmedabad, arising in the matter of the Assessment Order passed u/s 144/153A r.w.s. 142(2A) of the Act Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the various Assessment Years as mentioned in the cause title.
2. Since common issues are involved in the captioned appeals, therefore all of them were heard together for the sake of convenience and adjudication by way of this consolidated order.
3. First, we take up IT(SS)A No. 84/Ahd/2023, an appeal by the assessee, Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2005-06. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2 A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-1 1-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 4 Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(ii) Undisclosed Cash Expenses under Section 69C Rs.55,784
(iii) Capital Gain on sale of Thaltej Land Rs.5,13,86,362
------------------
Total: Rs.5,14,42,146
------------------
4.1 The learned CIT(A) has erred in confirming the addition of Rs. 5,13,86,362 in relation to alleged sale of land at Thaltej in as much as there is no transfer of the land or there is no consideration which is received towards alleged sale of land and that the learned CIT(A) has erred in relying the judicial decisions which are not relevant on the facts of the case.
4.1.1 Without prejudice to above, the learned CIT(A) has erred in confirming the capital gain of Rs.5,13,86,362 is an much as the learned CIT(A) has erred in not following the correct computation of capital gain as per law.
4.2 The learned CIT(A) has erred in confirming the addition in relation to undisclosed cash expenses of Rs.55,784 in as much as all the expenses are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper."
4. The assessee vide application dated 31-01-2024 has also filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search."
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
5. It was pleaded by the assessee in the application filed for the admission of the additional grounds of appeal that the issues raised in the additional grounds of appeal are legal in nature and go to the root of the matter. The necessary facts qua such legal grounds are already available on record as they arise from the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 5 order of authorities below. Accordingly, it was prayed by the learned AR for the assessee that the same should be admitted for adjudication.
6. On the other hand, the learned DR opposed admitting the additional grounds of appeal on the reasoning that they were not raised before the authorities below.
7. We have heard both the parties and perused the materials available on record. The Hon'ble Supreme Court in the case of National Thermal Power Co. Limited vs. CIT reported in 229 ITR 383 has held as under:
" Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier.
7.1 From the above, it transpired that the view that the Tribunal is confined only to those issues arising out of the appeal before Commissioner (Appeals) is too narrow a view to describe the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from the facts which were on record during the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Since the claim of the assessee is purely legal claim thus, it is not justified in not admitting the purely legal ground raised by the assessee for IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 6 the first time. Therefore, we admit the additional ground raised by the assessee and accordingly proceed to adjudicate the same.
8. Admittedly, the assessee group was subject to search proceedings under section 132 of the Act dated 5th October 2010 i.e. during the A.Y. 2011-12. In consequence to search proceedings the assessment for the year under consideration i.e. A.Y. 2005-06 was reopened under section 153A of the Act as the year under consideration was falling under the specified period of 6 assessment years preceding to assessment year in which search was carried out. Thereafter, the AO framed the assessment under section 143(3) r.w.s. 153A of the Act wherein various additions to the total income were made.
9. The learned AR for the assessee before us contended that there was not found any document of incriminating nature during the search proceedings and likewise the AO has also not referred in his order to the documents of found during the search proceedings while making the additions. Therefore, in the absence of any document of incriminating nature, no addition can be made in the hands of the assessee for the years in dispute.
9.1 On the other hand, the learned DR before us submitted that the assessee is non-filer of income tax return and did not cooperate during the assessment proceedings. There were numerous documents found during the search proceedings which were not explained by the assessee and therefore the matter was referred to the special auditor. As per the learned DR the additions were made based on the documents of incriminating nature and thus, he relied on the order of the authorities below.
10. We have heard the rival contentions of both the parties and perused the materials available on record. It is an admitted fact that the assessee has not filed any return of income for the year in dispute and therefore there was no occasion with the Revenue to carry out any assessment to determine the taxable income of the assessee. It was only when the search was conducted wherein the documents IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 7 were found and seized and the search assessment proceedings were initiated, that the Revenue got the opportunity to determine the taxable income of the assessee. Furthermore, on questions by the AO about the documents found and seized during the search, the assessee did comply by furnishing the necessary details. In the absence of any cooperation from the assessee, the AO referred the matter for the special audit under section 142(2A) of the Act. Thereafter, the AO based on the audit report framed the assessment. As such, the audited report was based on the seized materials. Therefore, it cannot be said that assessment was framed by the AO without having any incriminating documents. As such, we are not inclined to accept the argument advanced by the ld. AR at the time of hearing that the assessment was not based on the incriminating documents. Accordingly, the ground of appeal raised by the assessee is hereby dismissed.
11. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
12. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
13. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 55,784/- under section 69C of the Act on account of alleged payment of credit card bill.
14. The facts in brief are that the assessee in the present case, an individual, was subject to search proceedings under section 132 of the Act dated 05-10-2010 along with his family members. Consequence to search various documents/papers etc. were found and impounded. The assessee or his group member did not come to explain the seized document at the time of search, after search proceedings IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 8 and during the assessment proceeding. Therefore, the special auditor under section 142(2A) of the Act was appointed.
14.1 The special auditor based on CIBIL statement reported that the assessee has paid a credit card bill of Rs. 55778/- as on 23-12-2005 the source of which was not disclosed/ explained. On question during the assessment proceedings by the AO, the assessee stated that he does not hold any credit card and the so called CIBIL report was not brought to his notice.
14.2 However, the AO held that the CIBIL report clearly reflects the payment of credit card of Rs. 55778/- as on 23-12-2005 by the assessee. It was the duty of the assessee to explain the source of such payment, but the assessee failed to discharge the onus. Thus, the AO treated the same as deemed income of the assessee under the provision of section 69C of the Act.
15. On appeal by the assessee, the learned CIT(A) found that the assessee was holding the credit card which was closed on 10-04-2004 but as per CBIL report, the last bill payment for Rs. 55778/- was made on 23-12-2005. The onus was on the assessee to explain the source of impugned payment which he fails. Hence learned CIT(A) confirmed the addition made by the AO.
16. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
17. The ld. AR before us filed 4 Paper books i.e. "Paper Book" running from pages 1 to 255, "Paper Book-I" running from pages 1 to 176, "Paper Book-II"
running from pages 1 to 100 and "Paper Book-III" running from pages 1 to 48 submitted that the assessee does not hold any credit card and therefore there is no question of making any payment against such credit card as alleged by the revenue based on CIBIL report. Furthermore, there is no corroborative material available on record suggesting any payment made by the assessee towards such a credit card.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 9
18. On the other hand, the ld. DR contended that the CIBIL report is self- explanatory, evidencing that the assessee was holding the credit card, and the payment was made for the outstanding amount in the year under consideration. The Ld. DR vehemently supported the order of the authorities below.
19. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, there was a CIBIL report of the assessee containing various information. Among other information, the following information are relevant:
i. Amount mentioned in the CIBIL report under the head "high credit:
55784"
ii. Closing of the credit card dated 10th of April 2004 iii. Last payment dated 23 December 2005 19.1 Based on the information stated above, the AO concluded that there was a payment by the assessee for the amount of Rs. 55784 against the credit card which has not been disclosed by the assessee. Therefore, the AO has made the addition which was subsequently confirmed by the learned CIT-A. 19.2 At the 1stinstance, we note that high credit does not represent the payment by the assessee as on 23 December 2005 as alleged by the revenue authorities.
High credit given in the CIBIL report may have different purposes i.e. high credit outstanding during the period when the credit card was active. In our considered view the high credit does not represent the payment against the credit card.
19.3 In addition and without prejudice to the above, we also find that the payment was made by the assessee dated 23 December 2005 which falls during the financial year 2005-06 corresponding to the assessment year 2006-07. Therefore, if at all any addition is warranted, that can be done only in the assessment year 2006-07. As such, we are of the view that no addition is IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 10 warranted in the year under consideration. Hence the ground of appeal of the assessee is hereby allowed.
20. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 5,13,86,362/- on account of long-term capital gains on the alleged sale of Thaltej lands.
21. During the search/survey proceedings at the assessee's group, certain documents/papers marked as pages 1 to 85 of annexure A-11, were found, and impounded. Page 85 of the impugned page contains summary of transaction which are as under:
As per book of N.G. Particulars Amount in Rs.
Statement No 1 14,26,87,100/-
Statement No 2 3,50,00,000/-
Total 17,76,87,100/-
Less: Repaid as per Statement No 1 (1,13,00,000/-)
16,63,87,100/-
21.1 The special auditor reported that the transactions recorded in the aforesaid seized materials are in connection with the sale of lands held by the society namely M/s Savita Cooperative Housing Society Ltd. in the guise of transfer of share of the society held by the assessee group.
21.2 The special auditor based on seized materials, evidence gathered from the registrar of cooperative society, land revenue collector office, TP scheme from Municipal Corporation and Urban Development Authority noted that the assessee (late Govind Mafatlal Patel) and his family members, comprising of Late Savita Govind Patel-SGP(wife), Hashmukh Govind Patel(Son), Bhavesh Govind Patel (Son), Nitin Govind Patel (son), Kamini/KanatabenHashmukh Patel, Prachina Bhavesh Patel, Alka Nitin Patel and Priyanka Hasmukh Patel combinedly termed as Patel Group were owner of lands in and around Ahmedabad District. In the year 1994, they decided to consolidate their lands holding and make further purchases IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 11 of land for which they created several Kheti Sahkari Mandali and one such Mandali was named as Savita SamudayikKheti Sahkari Mandali. The assessee family made certain lands contribution situated at Thaltej in the said society as on 4-12-1996 which are detailed as under:
Survey No. Transferor Amount (in Rs.)
476/1 Govind M Patel/Savita Govind Patel/Nitin Govind 1,99,235/-
Patel/Hashmukh Govind Patel/Bhavesh Govind Patel
476/2 -do- 2,04,270/-
477 Govind M Patel 4,28,706/-
479 Nitin Govind Patel/Hashmukh Govind Patel/Bhavesh 3,53,055/-
Govind Patel
482/1 Govind M Patel/Savita Govind Patel 3,53,055/-
482/2 Govind M Patel / Hashmukh Govind Patel 2,74,886/-
21.3 Thus, from the date of 04-12-1996, the said society became the owner of the lands bearing survey numbers mentioned above. The Society further purchased/ acquired the ownership of the land bearing survey numbers 478/1, 480/1, 481. The assessee (GMP) and its family member were the majority shareholders of the society and took all the decisions. As such, the members other than the family member of assessee (GMP) in the above mentioned Sahakari Mandali or other Mandali created by Patel group were only acting as dummy members.
21.4 In the year 2002, the Kheti Mandali i.e. Savita Samudayik Kheti Sahkari Mandali was converted into Housing society with the name being Savita Co- operative Housing Society Ltd.
21.5 In the meantime, the assessee along with others has borrowed money in the name of various concerns of the group from banks and thereafter, they were facing a financial crunch due to pressure from lenders. The assessee group, to repay the borrowings, sold their holdings/ ownership interest in the land of the society (Savita Co-Op Housing Society) which were contributed by them to Shri Narsing G Patel and others. As such the assessee group till March 2005, were the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 12 majority shareholders in the society and the assessee-GMP was the chairman. However, he along with family members resigned from the society as member and in their place, family members of Shri Narsing G Patel became member and Shri Narsingh G Patel also became chairman of the society w.e.f. 4th April 2005. All the controls and records were transferred to Shri Narsigh Patel Group. For this transaction, Shri Narsingh G Patel, M/s NG Developer (A firm controlled by Shri Narsingh G Patel) and the society Savita Cooperative housing society made payment of Rs. 16,63,87,100/- in three different assessment years being AY 2005- 06 to 2007-08 in the manner provided in the table reproduced at page 7 of the assessment order.
21.6 The AO also enquired from Shri NG Patel whether the lands in question were acquired by way of becoming a member in the impugned society who vide letters dated 17 August 2013 and 11 October 2013 confirmed that by becoming member in the impugned society, he has acquired certain pieces of land bearing survey numbers 476/1, 476/2, 477, 479, 481 and 482/1 having aggregate admeasuring land about 55,135 square yards out of the total lands of the society admeasuring 1,13,135 square yards. As per Shri NG Patel, the consideration of ₹ 16,63,87,100/- were paid for the acquisition of the impugned survey numbers in the manner discussed above. It was also confirmed by Shri NG Patel that subsequently he has developed the plots in the impugned land after getting necessary approvals from the different competent authorities.
21.7 In the backdrop of the above stated facts, the AO made certain observations as detailed below:
"5.17. In response to the show cause, the assessee has not furnished any 1 submission or explanation. Thus, considering the confirmations filed by Shri N.G. Patel & Group (buyer); the fact that the assessee, Shri Govindbhai M. Patel, and his family members have resigned from the membership of the housing society in favour of the buyers; the fact that the land of the society has subsequently been developed into plots and a township under the name, Ashwavilla Bunglows, was launched by N.G. Patel & Group, there is no iota of doubt that Shri Govindbhai M Patel & family members have sold all their legal right in aforesaid land.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 13 5.18. Further, looking at the nature of the transaction carried out by the assessee amounts to Transfer of Land as per Section 2(47) (vi) of the Income Tax Act, 1961 which considers shares held in co-operative society as an immovable property for the purpose of charge of capital gain. The section can be referenced as under:
Section 2(47)(vi) reads as Transfer in relation to capital asset includes "Any transaction (whether by ivay of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
5.19. It may further be noted that the population of Thaltej as per 2001 census is 42713 in numbers. Hence the lands falling within the jurisdiction of Thaltej Gram Panchayat would be covered in the definition of capital asset as the population is more than 10,000.
So even if land is held as Agricultural Land in the Land revenue records, it would not make any difference to taxability upon sale as per Section 2(14)(iii) of The Income- Tax Act, 1961 which is reproduced as under:
"Agricultural land in india means, not being land situated
(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand [according to the last preceding census of which the relevant figures have been published before the first day of the previous year]; or
(b) in any area within such distance, not being more than eight kilometres, front the local limits of any municipality or cantonment board referred to in item
(a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette],"
Hence, the transaction is not a sale of Agricultural land on the ground of definition reiterated above. Therefore, the transaction carried out by the ass6ssee entails transfer of capital asset and hence profit arising from the transfer should be treated as long term capital gain.
Thus, it is clearly established that:
a. Payment has already been received by Shri Govindbhai M. Patel and his family members.
b. Possession of the above said land has already been taken by the purchaser party (N.G. Patel & Group).
c. After possession, the purchaser has successfully developed plotting and bungalow schemes after getting necessary permissions. d. The land was registered in the name of the society and after March 2005, Shri Govindbhai M. Patel and his family members do not have any share holding in the society. It means they do not have any legal right on the land. e. Shri Govindbhai M. Patel and his family members had never paid any wealth tax on aforesaid land.
5.21. Further, as a part of realisation of the consideration Rs.202.01 lakhs has been received from two parties, viz., Savita Co-operative Housing Society Ltd (Rs. 61.76 Lakhs) IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 14 and Narsinh G. Patel (Rs. 140.25 Lakhs) during the PY 2004-05, which has been paid to various group companies for repayment of bank loans taken by the group companies.
Further, out of Rs. 202.01 Lakhs, Rs. 139.01 Lakhs is being carried forward in the books as unsecured loan till the end of block of assessment 2010-11. It is also evident from the books of accounts of Savita Govind Co-operative Housing Society Ltd provided by Mr. Narsinh G. Patel (Chairman of the society) that the amount given to Shri Govindbhai Patel & his family members by the society and N.G. Patel & Group is not shown as Loans & Advances in the Balance Sheet of Savita Cooperative Housing Society Ltd as at 31-03- 2005. whereas the assessee has shown Rs. 2,21,95,1 OO/- as unsecured loans in his books of accounts and rest amount of Rs. 3,02,91,729 (Rs.5,24,86,829/- less Rs.2,21,95,100/-) has not been shown in his books of accounts during any of the year under block assessment. Further, during previous year 2006-07, Rs.88,44,100/- has been received from two parties, viz., Savita Co-operative Housing Society Ltd (Rs, 25 Lakhs) and N.G Developers (Rs, 53,44,100) which has been paid to various group companies for repayment of bank loans taken by the group companies. Further, total amount of Rs. 88,44,100, is being carried forward in the books as unsecured loan till the end of our block of assessment 2010-11.
5.22. Further, it can be seen from the copy of the ledger accounts of Shri Govindbhai M. Patel & Ms family members that Shri Govindbhai M, Patel has received a sum of Rs. 2,02,01,000/- in the FY 2004-05 and Rs. 19,94,100/- in later years. Thus, total amount of Rs. 2,21,95,100/- has been received by Shri Govindbhai M. Patel and remaining amount of Rs. 3,02,91,729/- was paid directly to the outside parties on behalf of Shri Govindbhai M. Patel. Therefore, Shri Govindbhai M. Patel, alone has received total consideration of Rs. 5,24,86,829 as his share. Thus as per confirmations, the seized documents and other evidence gathered, the assessee has earned sale consideration of Rs. 5,24,86,829 towards his share against which cost incurred towards his share is Rs, 6,99,255/- as available from the books of societv.
5.23 The working of the LTCG after giving the benefit of indexation is made as under:
Calculation of Long Term Capital Gain:
Sr. No. Particulars Financial Year Index Amount (Rs.) A Year of Purchase of Land 1996-97 305 B Year of Sale of Land 2004-05 480 C Cost of the Land (Govindbhai M. Patel' s share) 6,99,255 D Sales Consideration 5,24,86,829 E Index cost of Purchase (Rs.6,99,255 * 480/305) 11,00,467 F=D-E Long Term Capital Gain 5,13,86,362 Hence, addition of Rs.5,13,86,362/- has been made in the hands of the assessee under the head of "Long term capital gain". Penalty proceedings u/s. 271(1)(c) are also initiated for furnishing inaccurate particulars leading to concealment of income."
21.8 In view of the above, the AO reached the conclusion that effectively there is transfer of ownership rights in the land held by the assessee/ his family members in the guise of transferring membership in the society by the assessee/ family members of the assessee. According to the AO, such transfer of land should IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 15 have been made subject to the addition under the head capital gain by virtue of the provisions of section 2(47)(vi) of the Act. Thus, the AO computed the amount of capital gain in the hands of the assessee and his family members in proportionate to the land contributed by them in the society. Accordingly, the amount of long-term capital gain computed in the hands of the assessee for ₹ 5,13,86,362 was added to the total income of the assessee.
22. Aggrieved assessee preferred an appeal to the learned CIT-A. 22.1 The assessee before the learned CIT(A) submitted that the assessee and his family members become members of The Savita Cooperative Housing Society Ltd by paying share contribution of Rs. 250/- and made land contribution. The lands were owned by the society and plots not allotted to the members against the land contribution. The assessee and family members held most of the shares, and the controlling management of the society was with the assessee and his family, which they continue to enjoy till F.Y. 2004-05. The assessee and his family members surrendered their shares on 12-03-2005 and the same day fresh shares were issued to Shri Narsinh G Patel and accordingly the managing control of the society was handed over to the Narsinh G Patel Group. Thus, what was transferred was the controlling and management of the society and not the land/interest in land held by the society for the reason that there was no interest of the assessee in the land owned by the society as society has not allotted any land/plot to members yet.
22.2 Further, on surrendering of the shares held and parting the control and management, it was decided that the society will refund share amount of Rs. 250 and land contribution along with compensation for parting the controlling interest.
The assessee family was going through financial problems therefore it was also decided that the Narsinh G Patel group will provide interest free loan to the assessee to meet his liabilities. To this effect, a MOU was entered between the Society, the assessee, and his family members and the incoming members wherein it was decided that the assessee family will receive an amount of Rs.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 16 9,24,28,000/- from the society towards refund of land contribution and compensation for parting the controlling managing interest and Shri Narsinh G Patel group will provide interest free loan of Rs. 7,39,59,100/- only. Thus, the total of Rs. 16,63,87,100/- received on account of interest free loan and compensation.
22.3 In view of the above, it was contended that receipt of compensation amounting to Rs. 9,24,28,000/- was for parting the control and management and not for transfer of any capital assets. Therefore, the same represents capital receipt not chargeable to tax. As such, the society was the owner of the land before surrender of share by the assessee group and continued to be the owner of land after the surrender by the assessee group. Therefore, the allegation of transfer of ownership interest in the land owned by the society is based on wrong assumptions of facts as there was not any interest of the assessee group in the land owned by the society. Further, it is established that only managing and controlling interest was transferred/parted and there is no cost incurred by the assessee group for holding managing and controlling interest over the society.
22.4 Regarding the interest free loan of Rs. Rs. 7,39,59,100/- from the Shri Narsinh G Patel group which was alleged to be transferred by them towards land cost of the society, it was contended that what treatment Shri Narsinh G Patel group has given in their books, it is not known to the assessee. The assessee group still intended to repay the loan amount wherever it convenient for him.
22.5 However, the learned CIT(A) rejected the contention of the assessee and confirmed the addition made by the AO by observing as under:
"In the present case, it is undisputed fact that appellant and other family member had transferred shares in the name of NG Patel Group and by such act, they have relinquished their rights in land held by society in favour of other party. The Transfer of such shares and relinquishment of rights in favour of third party and further confirmed by such party clearly prove that appellant is liable for income from capital gain on sale of shares and consideration received by him from NG Patel group as discussed herein above and incorrectly shown as "liability" in books of account represent sale value of such shares (holding rights in land indirectly).
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 17 9.9 It is relevant to refer to decision of Commissioners of Inland Revenue v. Wesleyan and General Assurance Society, NO. 1396-HIGH COURT OF JUSTICE (KING'S BENCH DIVISION)-Viscount Simon expressed the principle as follows:
"It may be well to repeat two propositions which are well established in the application of the law relating to Income Tax. First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction. To call a payment a loan if it is really an annuity does not assist the tax-payer, any more than to call an item a capital payment would prevent it from being regarded as an income payment if that is its true nature. The question always is what is the real character of the payment, not what the parties call it.
Secondly, a transaction which, on its true construction, is of a kind that would escape tax, is not taxable on the ground that the same result could be brought about by a transaction in another form which would attract tax."
9.9.1 The accounting entries passed in appellants books of account is not material considering the fact that payees have classified such payment as "land payment" in their books of account and evidences found during the course of search clearly establishes the fact that payment received by appellant is towards transfer of shares and does not represent "loan liability" as considered by the appellant. 9.10 In addition to above, it is pertinent to note following aspect of aforesaid transactions which also prove that funds received by appellant is not towards loan lability.
(i) In this transaction Shri NG Patel group has acquired shares of cooperative society and has become member in the cooperative society. This has effect of enabling enjoyment of immovable property as held by cooperative society in the hands of Shri NG Patel group.
(ii) Further, it is pertinent to mention that the N.G. Patel Group developed the society land into plots and after obtaining requisite permissions, launched a scheme name "Aswavilla Bunglows". No person can obtain rights in land held by society and developing the scheme without making any payment i.e. by making minor payment towards shares held in society. Rights in land were obtained by NG Patel Group by making substantial payment to appellant and other family members directly or indirectly as stated supra.
(iii) It is clear the Shri Govindbhai Patel and group by surrendering his shares enabled Shri N G Patel group to enjoy the said immovable property.
(iv) The deed of understanding dated 26.112004 by virtue of which Shri NG Patel group became the member of M/s Savita Cooperative Housing Society Ltd and lead to exit of Shri Govindbhai Patel group was also carefully perused. On careful perusal of this deed of understanding, it was clear that by virtue of the transaction executed through this deed, it is clear the Shri Govindbhai Patel and group by surrendering his shares enabled Shri N G Patel group to enjoy the said immovable property. Hence, this transaction is clear case of transfer as per the provisions of Section 2(47)(vi)of the Act.
9.11 It is observed that appellant has repeatedly claimed that appellant and other family members had received from NG Patel group as loan and they are not aware of the fact that NG Patel has transferred the interest free loan to land account. This argument of appellant is without any substance for the reason that confirmations filed by NG Patel group was already on record of appellant and even such confirmations found were part of seized documents. During the course of assessment proceedings, appellant was allowed to cross examine NG Patel but appellant or AR has not taken such cross examination which IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 18 prove beyond doubt that appellant was aware that his argument of receipt of loan is without any group for construction. The land which was held by society were already used by NG Patel construction of scheme and no prudent person will transfer shares of society without any consideration.
9.12 Further, assessee group has claimed that it has received Rs.7,39,59,100/- (though amount mentioned in MOU is Rs. 10,89,31,0007-) as Long term interest free loan from NG Patel group and this amount is not the compensation received for the transfer of land. Assessee has also claimed that amount of 115.9,2428,000/- (Amount mentioned in MOU was Rs.6,73,80,000/-) as received tan the M/s Savita Cooperative Housing Society Ltd is on account of parting control and management of the society and not in the nature of consideration for transfer of capital asset. In this regard, it is submitted that this amount has been recognized as consideration by NG Patel group in their books of account. It is observed that appellant group has actually received Rs. 16,63,87,100/- (Rs.7,39,59,100 + 9,24,80,000/-) referred supra as against amount of Rs.17,62,39,000/- (Rs. 10,89,31,000 + 6,73,08,000/-) mentioned in MOU. This amount of Rs. 16,63,87,100/- tallies with seized document found during the course of search and such amount is considered as proportionate sale consideration in the hands of various family members while making addition in assessment order. Following elements clearly indicate that this receipt of Rs. 16,63,87,100/- which is also getting tallied with Seized document) is the consideration received by Shri Govindbhai Patel and group from Shri NG Patel group on account of transfer of the immovable property held by the society:
(a) It is to be noted that this amount has been received by Shri Govindbhai Patel group on account of transfer of their shares in Cooperative Society to Shri NG Patel group.
(b) Shri Govindbhai Patel group need not pay any interest on aforesaid receipt from Shri NG Patel group.
(c) In addition to above, Shri Govindbhai Patel group is not bound to return this receipt from Shri NG Patel group.
(d) Amount has been received by Shri Govindbhai Patel group on account of transfer of control and management of cooperative society to Shri NG Patel group. This has enabled the enjoyment of immovable property held by the society in the hands of Shri NG Patel group. Hence, this receipt is also in the nature of consideration received for the transfer of immovable property.
Hence, the argument of the appellant that amount of Rs. 16,63,87,100/- as received on account of transfer of shares of M/s Savita Cooperative Housing Society Ltd is not in nature of consideration was found to be highly flawed and hence not acceptable. In view of these facts, there is no substance in the argument of appellant that it has surrendered share certificates of society for consideration of Rs.250 per share.
9.13 The appellant has also contended that his group has surrendered the share to the society and the society has issued fresh shares to NG Patel group which means that society has parted controlling interest in favour of NG Patel group and such interest cannot be embedded in the land of the society since the land continues to be owned by the society. It is observed that appellant and his family members had taken loan by mortgaging the land of societies and as they were facing huge financial issues, NG Patel group has paid them consideration directly or by repaying their dues and for same They obtained rights in land and asking appellant & other family members by surrendering their rights in favour of society. The NG Patel & group have become the shareholders of the society only when appellant and other family members have surrendered their shares in favour of society as they were under obligation to do so as their personal debts were repaid by NG Patel group and even, they were given part consideration directly. The IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 19 appellant & other family members instead of selling the land of society and obtaining funds against surrendering shares had camouflaged the transactions by only transferring management control of society to NG Patel group in lieu of funds as stated supra. Once one takes holistic view of entire transaction, one can come to know motive of such transaction and it prove beyond doubt that funds are sale proceeds against transfer of shares/surrender of share certificate which is liable for Income from capital gain.
9.14 The appellant has argued that provisions of Section 2(47)(vi) are not applicable to him but such contention is not accepted for the reason that appellant was holding shares of society which in turn was holding land. Once the appellant has surrendered such shares to society and society thereafter issues shares to new group, appellant has relinquished his rights in land of society held through shares of society, it is undisputed fact that at relevant point of time, shares certificates of society were with appellant & other family members (even chairman of the society was one of the family members) and entire management control was later on was with NG Patel Group, If it is presumed that land of society is sold to NG Patel group at that point of time, funds would have come to society and later on such funds would have been distributed amongst the shareholder but rather that adopting such long route, appellant & other family members surrendered shares in favour of society and society issued new shares certificates to NG Patel group & received consideration directly in their hands clearly proves that receipt of money was towards surrender of rights in land held by each family member which was acquired through ownership of shares of society or towards relinquishment of rights in land hence AO has correctly held that appellant is liable for capital gain.
9.15 During the course of appellate hearing, appellant has argued that even if it is assumed that appellant has received sale consideration, income from long term capital gain is required to be computed at Rs. Nil as there is no cost against such sale value and for this argument, appellant has relied upon various decisions. However, the AO in the remand report has correctly observed that cost of acquisition of the shares of the cooperative society is the initial cost of the acquisition in case of the appellant group hence, computation as per provisions of Section 48 of the Act do not fail and hence, capital gains can be computed in the case of the appellant. This observation of AO is not rebutted by appellant in rejoinder to remand report hence even on this count, argument of appellant fails.
9.16 During the course of appellate hearing and in remand proceedings, appellant has asserted that Ld. Additional Registrar (Appeal) Cooperative Societies, Gujarat State, Gandhinagar vide order dated 26.10.2021 has cancelled the alleged sale of land at Thaltej to Shri NG Patel group and declared the same as void ab-initio and illegal. However, it is pertinent to note that this order would not have any favorable impact in the case of the appellant due to following reasons:-
(a) by virtue of transaction of transfer of shares of M/s Savita Cooperative housing Society Ltd, Shri Govindbhai Patel group has enabled the enjoyment of immovable property to Shri NG Patel group.
(b) by virtue of transaction of transfer of shares of M/s Savita Cooperative Housing Society Ltd, Shri NG Patel group had taken the physical possession of the immovable property as held by M/s Savita Cooperative Housing Society Ltd.
(c) Shri Govindbhai Patel group has received consideration from Shri NG Patel group on account of transfer of control and management of immovable property as held by M/s Savita Cooperative Housing Society Ltd.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 20
(d) Further, it is pertinent to mention that the N,G. Patel Group developed the society land into plots and after obtaining requisite permissions, launched a scheme name "Aswavilla Bungalows" and ultimately sold the plots to third parties.
(e) The appellant and other family members have never repaid any funds to NG Patel group in spite of lapse of more than 15.years.
(f) The matter in the alleged case has not even reached finality and the question is whether any such order will have any meaningful impact on the transfer taken place 17-18 years back. It is observed that rights in land held by appellant are already extinguished in current year in favour of other parties hence appellant is liable for capital gain on transfer of such property. As stated supra, scheme was also made by other parties and units were further sold to customers decade ago hence outcome of civil matter as claimed by appellant would not impact taxability of amount received by appellant and his family members in lieu of transfer of shares. The appellant has even not claimed that other party has even claimed the refund of such amount. On the contrary, the AO has already observed that other party has claimed amount paid to appellant as "land cost" in their books of account and same Is allowed accordingly as expenditure hence they have waived of their rights of amount given to appellant.
9.17 In view of holistic consideration of entire facts, it is observed that appellant has received consideration from NG Patel group as stated supra towards relinquishment of rights or against surrender of shares to society and such sale proceeds is liable for Income from Capital gain. For detailed discussion made herein above, addition made by AO for Rs.5,13,86,362/- is confirmed. This part of ground of appeal is dismissed."
23. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
24. The learned AR before us made written submissions running from pages 1 to 4 and the relevant submission relating to the issue on hand is extracted below:
"Appellant's submission:
(i) The appellant has surrendered the shares and new shares were issued to new members by the society and therefore there is no transfer of shares as contemplated under Section 2(47)(vi). The Supreme Court in the case of Vania Silk Mills 191 ITR 647 [SC in the case of Grace Collies & Others 248 ITR 323 has slightly distinguished the decision of Vania Siik Mills to the extent of extinguishment of assets versus extinguishment of a right. However, the above referred observation of SC in relation to principle of transfer have not been distinguished and therefore this principle holds good] has held that transfer resumes both existence of assets and of the transferring to whom it is transferred.
In the present case, the shares held by the appellant on surrender, looses the existence of the assets and that there is no transferee. Thus, there is no transfer within the meaning of Section 2(47)(vi).
(ii) The MOU dated 02-03-2005 on Page No.84 to 158 of Paper Book dated 08-01- 2024 refers to understanding between the parties - Para No.2 on Page No. 152 and I52A refers to payment of interest free long term deposits. This MOU has been signed by Shri N.G. Patel and his group being party of the 4th part from Page IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 21 No. 89 to 91. Subsequently, he has changed his stand in the statement before the AO that same is towards purchase of land. Thus, this statement cannot be taken as a reliable evidence for the purpose of making any addition.
(iii) The MOU dated 02-03-2005 was allegedly signed by Alkaben Nitinbhai Patel.
Alkaben N. Patel was in Jail till 07-04-2005 as per Order of Gujarat High Court dated 07-04-2005 on Page No. 66 of Paper Book No. II dated 22-01-2024. She has filed Civil Suit dated 16-08-1993 before Principal Senior Civil Judge challenges the MOU dated 02-03-2005. The copy of Suit filed is available on Page No. 1 to 20 in Paper Book No. Ill dated 05-02-2024.
(iv) The appellant has also challenged the title to the land by objection letter dated 17- 02-2020 and 16-03-2020 [both available on Page No. 41 to 48 of Paper Book No. Ill dated 05-02-2024].
(v) Shri Nitinbhai and Shri Hasmukhbhai has challenged the minutes of the meeting dated 12-03-2005 before Board of Nominee Court [copy available on Page No. 21 to 40 of Paper Book No. Ill dated 05-02-2024] stating that there has not been any such meeting and therefore the entire basis of addition is bad in law.
(vi) Section 2(47)(vi) provides that any transaction whether by way of any arrangement or in any other manner which has the effect of transferring the enjoyment of immovable property. The CBDT has issued a Circular No. 495 dated 22-09-1987 [available on Page No. 70 and 80 of Legal Paper Book] explained that this sub-clause was introduced about any allotment or otherwise of a plot of land in a multistoried building developed by Co.op. Society. In the present case, the appellant has only surrendered the membership of the society and there is no transaction or an arrangement for transfer of interest in the plot. This sub-clause is applicable where there is a transfer or interest in the plot of land and riot otherwise. Please refer Para No.7 of Delhi High Court judgment available on Page No. 176 to 181 in the case of Guishan Malik [2014] 43 taxmann.com 200 (Del), therefore there is no application of Section 2(47)(vi) in the facts of the case.
(vii) The appellant may have transfer the control and management of the society and has not transferred any right or interest in the property. The transfer of control and management is not contemplated as taxing event under Section 2(47) r.w.s
245.
(viii) The accounting entries passed by NG Patel and his group has no relevance as to whether a surrender of membership amounts to transfer. It is accepted judicial principle that accounting entries do not override the law. Please refer decisions at Sr. No. 16 & 17 of Legal Paper Book dated 24-01-2024.
(ix) There have not been any underlined written documents for the purpose of alleged transfer after 01-09-2001. Any transaction which is treated as conveyance has to be subject to payment of stamp duty and compulsory registration. Please refer Notification under Bombay Stamp Act dated 01-09-2001 [available on Page No. 254 and 255 of Paper Book dated 08-01-2024]. Further, please refer the Gujarat Stamp Act [relevant sections are available on Page No.1 to 8 of Legal Paper Book], the Transfer of Property Act [relevant Section 53 A and 54 available on Page No. 9 & 10 of Legal Paper Book], the Registration Act of 1908 [relevant Section 17 available on Page No. 11 to 17 of Legal Paper Book] and Gujarat Co.op. Society Act [Section 42 available on Page No. 15 to 16 of Legal Paper Book].
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 22 All the above referred provisions of law mandates that every transaction of conveyance, is mandatorily required to be stamped and requires registration under the "Registration Act.
In the present case, there was no underlying documents which has been stamped or any registration has been made. The Special Auditor on Page No. 98 of Paper Book dated 23-01-2024 also confirms that no stamp duty was paid.
In the absence of any underlying documents and consequential payment of stamp duty and registration, there is no conveyance and therefore there is no transfer within the meaning of Section 2(47)(vi). Section 2(47)(vi) has to be read along with other applicable provisions referred to above and cannot be read independently.
This principal is confirmed in the following decisions:
Suraj Lamp and Indus. P. Ltd. SLP(C) No. 13917 of 2009 [SC] - Para No. 12 CIT V/s. Balbir Singh Maini 398 ITR 531 [SC] C.S. Atwal V/s. CIT 378 ITR 244 [P&H]
(x) The Savita Gosaad Co.op. Housing Society Ltd. [Registration No. GH/20683 was divided into two societies namely, Savita Co.op. Housing Society Ltd. [Registration No. GH/21427] and Savita Govind Co.op. Housing Society Ltd. [Registration No. GH/21428]. This division was challenged by the appellant and the Additional Registrar (Appeals) by Order dated 26-01-2021 [copy of Order is available on Page No. 210 to 240 of Paper Book dated 08-01-2024] has cancelled the sub-division.
(xi) The unsecured loan had been given by Shri N.G. Patel and his group entities. How can a payment can be received from group entities who are not members of the society?
(xii) There is no accrual of a real income in the hands of the appellant. The Supreme Court in the case of Excel Industries Ltd. 358 ITR 295 has held that income accrues when there is a right to receive and correspondingly there is an obligation to pay. In the present case, there was no right which has accrued on mere surrender of a shares and therefore there is no accrual of an income. Section 45 is applicable when there is consideration which is accruing or received. In the present case, no consideration has been received on surrender of a shares and that the unsecured long term deposits cannot be treated as consideration in relation to alleged transfer. Therefore, no income has accrued in the hands of the appellant."
24.1 On the other hand, the learned DR before us submitted that the assessee by surrendering the membership right, which were subsequently allotted to the other parties by the registrar of the society who effectively acquired the ownership rights in the land, has effectively transferred the land and therefore the same should be subject to the capital gain under the provisions of law. The learned DR vehemently supported the order of the authorities below.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 23
25. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note certain undisputed facts as detailed below:
i. There was a housing society, namely M/s Savita Cooperative Housing Society Ltd bearing registration No. GH/20683 dated 28-10-2002 which was controlled and managed by the assessee along with his family members. It was established in the year 1994 as Savita Samudayik Kheti Shahkari Madli Limited which was later converted as housing society dated 28-10-2002.
ii. The assessee along with his family members have contributed lands in the society bearing survey numbers 476/1, 476/2, 478/1, 477, 479, 482/1, 482/2. Further, the society has also acquired certain pieces of land bearing survey numbers 478/1, 480/1, and 481.
iii. The assessee along with his family members in the year 2005 i.e. as on 12-03-2005 has surrendered their memberships in the society namely M/s Savita Cooperative Housing Society Ltd bearing registration No GH/20683 dated 28-10-2002 in general meeting of the society held on 12-03-2005 and on the same day fresh shares were allotted to the Shri Narsinh G Patel Group.
iv. The new members including Shri Narsing Patel have paid total consideration to the assessee and his family members amounting to Rupees 16,63,87,100/- in the following manner:
1) Amount received from Shri Narsingh Patel and group Rs.
7,39,59,100/-
2) Amount received from the society namely M/s Savita Cooperative Housing Society Ltd Rs. 9,24,28,000/-
v. Undeniably, the ownership of the impugned land bearing different survey numbers remained/ vested with the society, but the managing committee of the society got replaced with the new members.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 24 vi. The AO was of the view that there is transfer of ownership right in the lands bearing different survey numbers from the old members to the new members by virtue of the surrender of the membership by the old members and acquisition of the membership by the new members. vii. Thus, the AO opined that such transactions should be brought under the net of tax on account of transfer of land which has taken place in the guise of transfer of membership.
viii. There was fund transfer by the new members to the assessee along with his family members amounting to Rs. 7,39,59,100/- which the assessee claimed as interest free loan whereas the amount Received from the society is of Rs. 9,24,28,000/- as compensation from society, the AO was of the view that such amount represents the consideration against the transfer of land.
ix. Accordingly, the AO worked out the long-term capital gain of each member who surrendered the membership and received the consideration and added to the total income of the assessee and his family members in the manner available on pages 14 to 15 and 18 of the assessment order.
x. The view adopted by the AO was also upheld by the ld. CIT-A in his order.
25.1 The 1st controversy arises for our adjudication whether there is transfer of right in the land by virtue of the change of membership between the old members and the new members in the society. Generally, for transfer of the underlying assets being land in the present case on hand in the name of the society by virtue of transfer of membership to the new members, the following steps/procedures as mandated under the provisions of law are to be adopted.
i. The application in the prescribed form as per the bylaws for the transfer of the membership along with share certificate.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 25 ii. The application in the prescribed form from the proposed transferee for acquiring the membership.
iii. Resignation by the member in the prescribed form.
iv. Valid reason for transfer of the membership.
v. Letter of consent from the person acquiring the membership in the
society.
vi. Registration of the document which should be supported by the
requisite stamp duty.
vii. Payment of the transfer fee by the member resigning and admission fee
to be paid by the transferee.
viii. Filing of NOC from a financing agency if any and required.
25.2 Coming to the facts of the present case, admittedly there is no procedure
adopted by the assessee detailed above while transferring the land held by the society on account of surrender of membership to the registrar and the allotment of new membership by the registrar to the new members. There was no payment of stamp duty paid by the assessee for transferring the membership to the new parties. As such, the members retiring/resigning from the membership have tendered their resignations to the registrar of the society and at the same time the society has admitted the members which apparently is nothing but the transfer of membership but without due process. This fact can be verified from the observations made by the special auditor as detailed below:
"It is also critical to Note that there was also a violation of article 20 of stamp duty Act, 1958 as mentioned in the Paripatra Karmank S.T/P102001-1424/9-1of Gandinagar Mehesul Vibhag as no documents evidencing sale of land were registered with the office of sub registrar which is required even when the sale of land takes place through the transfer of shares in cooperative society. "
25.3 There was no transfer form or any other document available suggesting that there was the transfer of membership to the new members which eventually resulted in the transfer of land of the society. For transferring the membership, there has to be some instrument executed for the transfer of such membership supported by the payment of the stamp duty as mandated under the Registration IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 26 Act 2001 effective from the year 2001, for transferring the membership, the same has to be registered and the stamp duty has to be paid. For drawing such inference, we are inclined to refer the silent features of the Registration Act of 2001 as detailed below:
Amendment of section 17 In section 17 of the Registration Act,-(a) after sub- section 1, the following sub- section shall be inserted, namely:-" (1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882 ) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement, then, they shall have no effect for the purposes of the said section 53A.";
25.4 The Hon'ble Gujarat High Court in the case of Akbarbhai Kesarbhai Sipai vs. Mohanbhai Ambabhai Patel in R/ second appeal No. 183 of 2014 order dated on 12 July 2019 observed as under:
"The Perusal of aforesaid Section 17 clearly suggests that the document/instrument, which intends/purports to create right/title to an immovable property having value of Rs.100/- should be registered. Similarly, the perusal of Section 49 of the Act suggests that the documents, which are required to be registered under Section 17 shall not affect any immovable property; comprised therein or confer any power to adopt or to receive any evidence to any transaction affecting the said property or conferring power unless it has been registered."
25.5 There was also a similar question before the Hon'ble Supreme Court in case of Shakeel Ahmed V. Syed Akhlaq Hussain bearing civil appeal No. 1598 of 3023 where it was observed as under:
"Having considered the submissions at the outset, it is to be emphasized that irrespective of what was decided in the case of Suraj Lamps and Industries(supra) the fact remains that no title could be transferred with respect to immovable properties on the basis of an unregistered Agreement to Sell or on the basis of an unregistered General Power of Attorney. The Registration Act, 1908 clearly provides that a document which requires compulsory registration under the Act, would not confer any right, much less a legally enforceable right to approach a Court of Law on its basis. Even if these documents i.e. the Agreement to Sell and the Power of Attorney were registered, still it could not be said that the respondent would have acquired title over the property in question. At best, on the basis of the registered agreement to sell, he could have claimed relief of specific performance in appropriate proceedings. In this regard, reference may be made to sections 17 and 49 of the Registration Act and section 54 of the Transfer of Property Act, 1882. 11.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 27 Law is well settled that no right, title or interest in immovable property can be conferred without a registered document. Even the judgment of this Court in the case of Suraj Lamps & Industries (supra) lays down the same proposition. Reference may also be made to the following judgments of this Court:
(i). Ameer Minhaj Vs. Deirdre Elizabeth (Wright) Issar and Others
(ii). Balram Singh Vs. Kelo Devi
(iii). M/S Paul Rubber Industries Private Limited Vs. Amit Chand Mitra &Anr."
25.6 In view of the above and after considering the details as discussed above, we hold that there was no valid transfer of the membership from the old members to the new members in the absence of the mandatory provisions not followed by the respective parties.
25.7 However, if we analyze the substance of the transactions in the light of the facts stated above, it is seen that new members have recorded the transactions of the payment made by them to the assessee as cost of acquisition of the land though the assessee claimed as loan but there was no repayment of such loan by the assessee. All these circumstances in aggregation strongly suggest that there was a transfer ownership interest in the land effectively by bringing change in the membership of the society. As such the surrender of membership to the registrar and allotment of membership to the new members by the registrar, represents the device so as to avoid the tax liability which may arise/ fall to the assessee along with his family members.
25.8 Moving ahead, however, we note certain compelling circumstances/ facts arising from the order of the learned CIT-A. i. The resignations were filed by the assessee family member namely Smt. Savitaben G Patel, Smt. Alkben Nitinbhai Patel, Shri Bhaveshbhai G Patel, Amt Prachinaben G Bhavehbhai Patel, Shri Hasmukh Bhai G Patel and SmtKaminiben Hasmukhbhai Patel in the General meeting held on 06-03-2005. But one of the family members of the assessee, namely Smt. Alkaben Nitinbhai Patel has challenged her resignation. According IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 28 to her, she was behind bars during the relevant time and therefore she has never signed such resignation. Thus, a case was filed by her in the Court of The Hon'ble Principal Senior Civil Judge of Ahmedabad (Rural) vide dated 16-08-2023.
ii. Subsequently, there was the division of society in two societies.
Originally, the society was bearing the registration number GH/20683 dated 28-10-2002 and thereafter it was converted into two societies namely Savita Co-operative Housing Society bearing registration numbers GH/21427 and Savita Co-operative Housing Society Ltd Vibhag-1 bearing Registration No GH/21428 vide dated 30-09-2005. This change was made under the order passed by the Assistant District registrar Co-operative Societies, District Panchayat, Ahmedabad office No. Pachat-sahak-Vibhajan V-3198 to 3202 dated 30-09-2005. Such division of the society was challenged by Shri NitinBhai G patel, Hasmukhbhai G patel, Bhaveshbhai, G patel before the Aditional Registrar (Appeal) Co-Operative Societies Gujarat State Gandhinagar on the following reason:
1) The Order passed by the Additional Registrar for division of the Savita Co-operating housing society having land at thaltej in Ahmedabad bearing survey No 476/1,476/2, 477,479,481,482/2, 495/1 is against the statutory provision of the Act and Against the true facts on record and therefore, the same is illegal.
2) The above parties claimed not to have sold their rights, shares, and property situated on the land of Society. No document was executed. Their names were illegally removed from the records of society.
25.9 The Hon'ble Additional Registrar (Appeal) Co-Operative Societies Gujarat State Gandhinagar has not accepted such division of the society and restored the issue to the file of the registrar of societies Assistant District registrar Co-operative IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 29 Societies, District Panchayat, Ahmedabad vide order dated 26-10-2021 by observing as under:
"The appeal No. 10/2021 is hereby allowed and the order No. Panchat/Sahak/Vibhajan-V- 3198 to 3202/2005 dated 30/9/2005 issued by the respondent No. 1 is hereby quashed. For submitting formal proposal before the respondent No.2 regarding the division by the respondent original Co-operative Society and for taking the decision after taking into consideration the provisions of Co-operative act with transparency, this case is remanded to the respondent No.2."
25.10 From the above, it is transpired that, the title of the society was in dispute and therefore the underlying assets in the society was not free from incumbrance. Thus, the question arises, can there be any capital gain in a situation where the title of the property is defective. There was a similar question before the Hon'ble Supreme Court in case of CIT Vs. Balbir Singh Maini reported in 86 taxmann.com 94 wherein it was held as under:
27. In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, for want of permissions, the entire transaction of development envisaged in the JDA fell through. In point of fact, income did not result at all for the aforesaid reason. This being the case, it is clear that there is no profit or gain which arises from the transfer of a capital asset, which could be brought to tax under Section 45 read with Section 48 of the Income Tax Act.
28. In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessees by the developers and therefore, the assessees have not acquired any right to receive income under the JDA. This being so, no profits or gains "arose" from the transfer of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act.
25.11 From the above, it is revealed that cannot be any question of charging the income under the head capital gain in a situation where the title is defective.
25.12 A question also strikes in our mind that that the case was filed by the family members of the assessee after the substantial time, thus it appears to us that the case has been filed by the family members is just to avoid the tax liability.
However, it is an undisputed fact that the matter is under litigation which is sub- judice in the court of law. Such dispute does not come under our preview. Therefore, we find that for the dispute referred to above, we are not competent to investigate the veracity of such matter/ litigation. Thus, in view of the above and IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 30 considering the facts of the case as discussed in detail in the preceding paragraph, there cannot be any addition to the total income of the assessee on account of surrender of the membership in the given facts and circumstances. Hence, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.
26. In the result the appeal filed by the assessee is hereby partly allowed.
Coming to IT(SS)A No. 85/Ahd/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2006-07
27. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
28. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
29. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 63 Lakhs under section 68 of the Act by treating the unsecured loan as unexplained cash credit.
30. The special auditor reported that the assessee during the year obtained unsecured loans of Rs. 63 Lacs for which no detail was provided. The parties from whom impugned loan received were detailed as under:
1. Kam Associates Rs. 50 Lakhs (07-04-2005)
2. Karitial Associates Rs. 13 Lakhs (12-04-2005) 30.1 The special auditor further reported that after receiving the aforesaid amount, the same was transferred to Shri Narsing G Patel immediately. The loan IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 31 from the above parties is still outstanding (i.e. till A.Y. 2010-11) and the assessee has not paid any interest on the same. Thus, the AO required the assessee to furnish the necessary explanation, but the assessee failed to furnish any reply.
Hence, the AO treated the same as unexplained cash credit as per the provisions of section 68 of the Act and added the same to the total income of the assessee.
31. The aggrieved assessee preferred an appeal before the learned CIT(A).
31.1 The learned CIT(A) found that the assessee has provided ledger confirmation only. As such, the assessee failed to provide ITR, bank statement, other proof of creditworthiness etc. Hence, the learned CIT(A) held that the assessee failed to discharge the onus cast under section 68 of the Act.
32. Being aggrieved by the order of the learned CIT(A), the assessee is appeal before us.
32.1 The learned AR before us filed a paper book running from pages 1 to 129 contended that it is undisputed fact that the unsecured loan from the impugned parties were received through banking channel, utilized for repayment of loan taken from NG Patel through Banking channel. Thus, the genuineness of the transaction is established. Further, the assessee has discharged his primary onus by furnishing address, PAN, and ledger confirmation. The onus shifted on the revenue to make further enquiry which the revenue failed to do so. The assessee is not liable to explain the source of the source of such loan.
32.2 On the contrary, the learned DR submitted vehemently supported the order of the authorities below.
33. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee has shown receipt of unsecured loan of Rs. 63 Lakhs from two parties which was utilized immediately by him by transferring to the other party namely Shri N.G. Patel. The impugned unsecured loan amount was outstanding for more IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 32 than 6 years, and the assessee has also not paid any interest on the same. The provision of section 68 of the Act requires the assessee to explain the nature and source of any sum credited in the books of accounts to the satisfaction of the AO, otherwise the AO is empowered to treat the same as the income of the assessee for the relevant previous year. Over the period, the judicial authority laid down that in the case of sum credited in the books, the primary onus is on the assessee to provide the proof of identity of the creditor, genuineness of the transaction and the creditworthiness of the creditor. Once the assessee discharges the primary onus, then the burden shifts on the department to bring the contrary material by conducting necessary inquiry from the concern party before rejecting the primary evidence provided by the assessee as not satisfactory.
33.1 In the present case the assessee has provided name, address, PAN of the parties and ledger confirmation from the parties. It is undisputed that the amount was received by the assessee through the banking channel. Thus, the assessee has provided the primary details, and the AO before rejecting the primary evidence provided by the assessee was required to disprove the evidence based on independent inquiry. We note that no independent inquiry was conducted by the revenue to hold that the identity, genuineness of the transaction and creditworthiness of the party was not established. The revenue authority merely because the assessee has not provided the copy of bank statement and ITR of the loan party held that the assessee did not discharge the onus cast upon him. On the contrary, the assessee has provided names, addresses, and PAN of the loan party, the AO/CIT-A should have verified the return data of the loan party from ITD-data base, the revenue authority was also empowered to call bank statement of assessee/ partly directly from the bank but the AO/CIT-A have not conducted independent inquiry which they could have done based on the details provided by the assessee neither they made verification from the loan party by issuing notice under section 133(6)/131(1) of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 33 33.2 Hence, in view of the above discussion, we hereby hold that the assessee has discharged the primary onus cast under section 68 of the Act in the given facts and circumstances until and unless the contrary material is brought on record. Therefore, the addition made by the Revenue cannot be sustained. Thus, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal raised by the assessee is hereby allowed.
34. The next interconnected issue raised by the assessee in ground Nos. 3 and 4 is that the learned CIT(A) erred in confirming the addition of Rs. 48,06,287/- and Rs. 78,31,299/- on account of alleged unaccounted interest income and unaccounted investment.
35. During the search, an excel sheet marked as pages 139-140 of annexure A- 1 was found and seized. The impugned excel sheet contained loan transaction and calculation of interest between the appellant assessee and M/s Savita Govind Estate Developers Pvt. Ltd. (Hereafter M/s SGEDPL). The special auditor reported that as per the impugned sheet, the opening balance of loan amount advanced by the assessee to M/s SGEDPL is at Rs. 1,81,56,299/- whereas in the books of the assessee the same is shown at Rs. 33,25,000/- leading to a difference of Rs. 1,48,31,299/- only. The special auditor further reported that as the impugned excel sheet, M/s SGEDPL has shown interest of Rs. 48,06,287/- given to the appellant assessee but no such interest income recorded in the books of the assessee.
35.1 Accordingly, the AO requires the assessee to explain the difference in opening balance of loans/ advance and interest income not recorded in the books, but the assessee did not respond. Hence, the AO treated the difference amount in the opening balance of loan advance for Rs. 1,48,31,299/- and interest amount of Rs. 48,06,287/- as income of the assessee being unexplained investment and unaccounted interest income respectively.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 34
36. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the addition of unaccounted interest whereas restricted the addition of unaccounted investment to the extent of Rs. 78,31,299/- only. The relevant finding of the learned CIT(A) is extracted as under:
"On perusal of above referred sheet, it Is observed that such Excel sheet contains opening balance, interest, profit in the ledger account of appellant from Savita Estate Developers Pvt Limited (SGEDPL). The ledger account shows wise interest payable by SGEDPL to appellant i.e. Rs.28,70,818/- for September quarter, Rs.9,52,080/- for December quarter, Rs.9,83,389/- for March quarter and aggregate figure works out to Rs.,48,06,287/- It is observed that such interest income is not offered to tax by appellant. The theory of appellant that it is acme rough working cannot be accepted as same is prepared in quarter to quarter basis and at the end of each quarter, closing balance is derived. The working of interest as reproduced in above referred seized material contains date wise payment which clearly proves that interest working is actual and not rough working as stated by appellant. The Assessee has claimed that appellant has made investment of Rs.33,25,000/- only in the year in SGEDPL and in books of account, it is apparent that no interest is shown to be payable by SGEDPL to appellant hence such interest income cannot be taxed. However, such contention of appellant is devoid of merits as interest income is unaccounted hence there is question of linkage of transactions recorded in books of account and seized paper. There is no reason for treating the calculation as projection because interest and profit component is computed upto last digit and rounded off as may be case when working if rough. The seized material clearly show systematic working of interest, distribution of profit and such figures are not entered into books of account and same represent undisclosed income of the appellant. The addition made by AO for Rs,48,06,287/- is confirmed and this part of ground of appeal is dismissed.
9.4 So far as addition on account of unaccounted loans given to SGEDPL for Rs. 1,48,31,299/- is concerned, AO found that there is difference in ledger account of appellant as appearing in books of account of SGEDPL (Rs.33,25,000/-) and seized material (Rs.1,81,56,299/-). The appellant has not provided any explanation as to how such investment is recorded in books of account. While adjudicating addition of unaccounted interest, it is already held that loose paper found during the course of search is not rough working and it represent systematic unaccounted transactions entered by appellant with SGEDPL hence in absence of corroborate details, addition made by AO is upheld. On perusal of seized material, it is apparent that balance of Rs.1,81,56,299/- is after considering entries of Rs.35,00,000/- twice for 14//11/2003 which means that addition of Rs.70,00,000/- cannot be made in current year. Considering facts discussed herein above, addition made by AO for Rs. 1,48,31,299/- is restricted to Rs.78,31,299/-. This part of ground of appeal is partly allowed."
37. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
37.1 The learned AR before us submitted that the amount of interest written on the seized documents represents only rough noting and jottings. As such, there was no interest received or accrued to the assessee other than the amount shown IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 35 in the books of accounts. Moreover, the company has also not shown any expenditure over and above the amount shown by the assessee as income by way of interest in its books of accounts. There was no documentary evidence found reflecting the amount of deposits in the books of the company as alleged by the AO. Furthermore, the books of accounts of the company were duly audited and no addition whatsoever was made in the hands of the company. As such, no addition can be made in the hands of the company based on the seized documents until and unless it is corroborated by the documentary evidence.
37.2 Regarding the alleged unaccounted loan of ₹ 78,31,299.00 in the company, the learned AR contended that no addition can be made in the hands of the assessee based on the seized documents being in the nature of rough noting and jottings until and unless, such seized documents are supported by the corroborative materials.
37.3 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
38. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that certain excel sheets were found during the course of search proceedings. Based on the same, it was alleged that the assessee has given unaccounted loans & advances of Rs. 1,81,56,299/- to the company namely M/s SGEDPL in which the assessee was a director and further the assessee earned undisclosed interest income of Rs. 48,06,287/- on the impugned loan and advances. On appeal by the assessee, the learned CIT(A) confirmed the addition of unaccounted interest income whereas reduced the addition of unaccounted loan and advances to the extent of Rs. 78,31,299/- only.
38.1 On the other hand, it was contended by the assessee that no loan over & above Rs. 33,25,000/- was advanced to the company which was given in the year 2003 and the same duly recorded in his books of account as well as in the books IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 36 of the company. The company did not pay any interest on the loan and advances either in the year under consideration or in the earlier years. It was further contended by the assessee that the excel sheet relied on by the revenue is not corroborated by any other material, therefore no credence can be given to such uncorroborated material. We find force in the contention of the assessee in this regard. We note that neither the AO nor the learned CIT(A) found that the entry recorded in the seized excel sheet was corroborated by any independent material. The revenue authority merely on the basis that the impugned sheet contains name of the assessee and transaction on the same recorded in systematic manner drew an inference against the assessee. We also pursued the impugned excel sheet available on record and we note that there were some banking entries noted on the same along with the date but there was no finding that such transaction was materialized. If assuming the transaction noted on the excel sheet were actual transactions as alleged by the revenue authority, then it was very much possible to corroborate such transaction with reference to the bank of the assessee and the company as the date wise banking transaction were noted therein. However, nothing was brought on record suggesting that the transactions noted on the seized excel sheet were materialized. Therefore, we are of the considered opinion that in absence of any corroborating material, no inference can be drawn against the assessee in the given facts and circumstances. Therefore, we hereby set-aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him based on excel sheet. Hence, the ground of appeal of the assessee is allowed.
39. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 32,35,000/- on account of alleged unaccounted investment.
40. It was found that the assessee and other 3 members of his family namely Shri Hasmukh Govind Patel, Bhavesh Govind Patel and Nitin Govind Patel were members of the society namely M/s Savita Govind Co-operative Housing Society IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 37 Ltd. The said society was originally created as kheti Sahakari Mandali in the year 1996, but later it was converted into housing society. The society was holding several land properties at different locations which are detailed as under:
- Sola bearing survey number 69
- Gota bearing survey No 446, 447, 448, 449/1, 449/2,450
- Ognaj bearing survey No. 926, 947/2, 803, 800, 802/1, 801, 802/2, and 1060 40.1 As per the inquiry conducted during post search proceedings and information received from the office of sub-registrar, the lands held by the impugned society were disputed property except for land situated at Ognaz bearing survey No. 947/2, 803 and 1060/- having aggregate area of 24,388.64 sq. mts.
40.2 As per the audit report of the society for financial year 2005-06 and shareholder register obtained from the registrar of the society, it was found that during the year other 3 member of society namely Shri Hasmukh Govind Patel, Bhavesh Govind Patel and Nitin Govind Patel resigned from membership as on 18-
09-2005. The appellant assessee (Late Govind M Patel) continues to be member and taken over the chairmanship from Shri Bhavesh Govind Patel.
40.3 In view of the above facts and in absence of any explanation from the assessee, the AO held that all the 4 members had ownership interest in the land property held by the society. As 3 out of the 4 members resigned from their membership meaning thereby, they have transferred their 3/4th ownership interest in favor of the appellant assessee in the land held by the society who continue to be the member and chairman. The AO further held that the share transferred by the outgoing member of society in favour of continuing member represents the transfer of immovable property under the provision of section 2(47)(vi) r.w.s. 269UA(d) of the Act. Accordingly, 3/4th ownership interest of outgoing member was received by the appellant assessee which represents his investment, but IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 38 sources of such investment was not explained. Hence, the AO invoked the provision of section 69 of the Act. Since the value of transfer was not available on record, the AO has taken the Jantri value as the value of the transfer. As other properties held by the society were disputed, therefore the AO only made addition regarding impugned 3 properties, the title of which was not disputed. Hence, the AO computed the amount of unexplained investment regarding survey number 947/2, 803, 1060 situated at Ognaj only at Rs. 32.35 Lakh and added the same to the total income of the assessee.
41. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that the AO wrongly assumed that in earlier years, the assessee, and his 3-family members namely Shri Bhavesh Govind Patel, Shri Nitin Govind Patel and Hasmukh Govind Patel only were the shareholders of the society i.e. M/s Savita Govind Co.op. Housing Society Ltd. As such as on 31stMarch 2005, there was a total of 10 members/shareholders in the society. During the financial year 2005-06, Shri Bhavesh Govind Patel, Shri Nitin Govind Patel and Hasmukh Govind Patel surrendered their membership from the society on 15-09-2005, 22-07-2005 and 16-09-2005 and in their places, 5 new members were entered. The shares surrendered by the said members did not have any value as no land was allotted by the society to its members. The land continues to be held by society only. As such, they only surrender their shareholdings and not any right in the property. The assessee further submitted that he has not made any payment to the outgoing member. There, being no material in this regard found during search proceeding. The AO merely relied on some facts highlighted by the special auditor and without conducting further inquiry presumed that he (assessee) has made unexplained investment on account of surrendering of shares by 3 outgoing members.
41.1 The learned CIT(A) found that the AO in the body of assessment order has made addition of Rs. 32.35 Lakhs. However, while commuting total income, made addition of Rs. 33.25 Lakh. Therefore, the learned CIT(A) deleted the excess IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 39 addition of Rs. 90,000/- only. The learned CIT(A) while confirming the addition for Rs. 32.35 Lakh observed as under:
"9.6 It is observed that appellant was shareholder in above referred Society as on 31/03/2005, The appellant has resigned as a Member of such Society in current year. There was aggregate 10 Members as on 31/03/2005. The 3 Members have resigned as a Member of Society and 5 new Members were taken during the year by the Society, It is observed that society was holding land hence appellant was indirectly holding rights in land through shares of society owned by it When appellant had resigned as shareholder of society, it has extinguished rights in the society hence AO was correct in taxing transaction in the hands of appellant as undisclosed consideration.
9.7 During the course of assessment proceedings, AO asked appellant to submit exact nature of transactions, where this investment was shown in books of account, bank statement reflecting the money of the transferee but no such details were submitted by Appellant. This fact is also mentioned by AO in remand report reproduced herein above.
9.8 During the course of appellant proceedings, appellant had submitted copy of 7/12 extracts of the land which clearly establishes that land is owned by the Society and appellant is not having any direct right in such land. However, this contention of appellant is devoid of merits as appellant has transferred his rights and of society held through shares in favour of new members which defines "transfer" to include any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882). Section 2 (47) reads as under.-
"2. Definitions (47) "transfer", in relation to a capital asset, includes,--
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero-coupon bond; or
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1881 (4 of 1882); or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.' It is observed that by virtue of sale of shares of the co-operative society, the appellant had transferred part of control and management of immovable property controlled by the society to other members. The AO was correct in holding that this transaction has effect of enabling the enjoyment of immovable property as held by co-operative society in the hands of other members of the society.
9.9 During the course of appellate proceedings, appellant has claimed that provisions of Section 2(47)(vi) is not applicable but appellant has not considered relevant provisions as referred supra which clearly states phrase" fey way of any agreement or any IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 40 arrangement or in any other manner whatsoever" which clearly prove that such provisions are applicable. As appellant along with other three co-owners have resigned and new five members have Joined, there is transfer of, property and AO has correctly taxed proportionate JANTRl value of land as unaccounted income in the hands of appellant. Considering such facts, consequential addition made by Assessing Officer for Rs.31,35,000/- is confirmed."
42. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
42.1 The learned AR before us submitted that the addition has been made in the hands of the assessee by the AO based on his surmise and conjecture. There was no evidence that there was any consideration by the assessee against the surrender of the memberships of 3 members as discussed above. As such, the special auditor in his report has commented that the AO should investigate the matter on this issue but the AO without investigating the same as drawn a conclusion that the assessee has acquired the shares in the land held by the members resigned from the society. There was no documentary evidence that the assessee has made any payment of acquiring the interest held by the members resigning from the society. Furthermore, there was a close connection between the transferor and the transferee being the father and the sons. Therefore, no adverse inference can be drawn against the assessee.
42.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
43. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the AO has assumed that there are only 4 members of the society namely M/s Savita Govind Co-operative Housing Society belonging to the family of Shri Govind Bhai. But the fact is that there were 10 members in the society as on 31-03-2005. This fact can be verified from the annual report of the society for the year ending 31-03-2005 placed on pages 70 to 74 of the Paper Book. After the resignation of 3 members, there were left only 7 members in the society. But on perusal of the annual report of the society as on IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 41 31 March 2006, there were total 12 members, meaning thereby new 5 members joined the society during the year which can be verified from the annual report of the society as on 31-03-2006 placed on pages 75 to 83 of the Pape Book. But we find that the order of the AO is silent on all these aspects. Accordingly, it cannot be inferred that upon the resignation of 3 members, the ownership interest vested of these 3 members in the land held by the society was transferred to the assessee against the consideration. Furthermore, there was no material available on record suggesting that the assessee on the resignation of 3 members has made any payment to such members from undisclosed sources. In our considered view, the AO has assumed that the assessee must have made a payment to the members resigned from the society without having any materials available on record. Even the special audit report has not pointed out any material suggesting that there was any exchange of consideration between the assessee and members resigned.
43.1 The entire thrust of the special audit report is based on the premise that no prudent person will resign without having the consideration for the ownership right vested in the land held by the society but ignoring the fact, without admission, that the transaction was between the close relatives being father and son. Thus, such transaction can also not be regarded as transfer by virtue of the clause (iii) of section 47 of the Act.
43.2 It is also important to note that the special audit report is nothing but an opinion of an expert and the same cannot be treated as sacrosanct to draw any adverse inference against the assessee. As such, the revenue has also not verified the details of the members of the society from the Registrar of the society to disprove the submission of the assessee based on the cogent materials. Likewise, there was not any iota of evidence about the exchange of any consideration between the parties discussed above. Thus, in view of the above and after considering the facts in detail/totality, we are not inclined to uphold the finding of the authorities below. Accordingly, we set aside the finding of the learned CIT-A IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 42 and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.
44. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,78,83,000/- on account of alleged unaccounted investment in M/s Amardeep Co.Op. Housing society.
45. At the outset, we note that the issue raised by the assessee in captioned ground of appeal is identical to the issue raised by the assessee in immediate previous ground of appeal in connection with the transfer of land in Savita Govind Cooperative Housing Society Ltd. Therefore, the findings given vide paragraph no. 43 for immediate previous issue raised by the assessee shall also be applicable for the captioned ground of appeal. Vide said paragraph No.43 of this order, we have decided the issue in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the previous of ground in connection with Savita Govind Cooperative Housing Society Ltd shall also be applied for the issue raised in connection with M/s Amardeep Co.Op. Housing Society. Hence, the ground of appeal filed by the assessee is hereby allowed.
46. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 9,10,125/- only on account of sale of land at Ognaj.
47. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
48. In the result the appeal filed by the assessee is hereby partly allowed.
Coming to IT(SS)A NO. 86/Ahd/2023, an appeal by the assessee, Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2007-08 IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 43
49. The assessee has raised following grounds of appeal:
"Technical
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Cash Credit under Section 68 Rs. 28,00,000 (ii) Unaccounted Interest Income Rs. 44,97,660 (iii) Unaccounted Loan given under Section 69B Rs. 2,41,859 (iv) Sale of Ognaj Land - Jay Laxmi Kheti Sahakari Rs. 30,00,000 MandaliLtd. Total : Rs. 1,05,39,519 4.1 The learned CIT(A) has erred in confirming the addition of Rs. 28,00,000 in nation
to cash credit in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper.
4.2 The learned CIT(A) has erred in confirming notional interest income of Rs.
44,97,660 in as much as there is no actual interest earned by the assessee and that merely based on ceased material without any corroborative evidence, the addition cannot be made.
4.3 The learned CIT(A) has erred in confirming the addition of unaccounted loan given of Rs. 2,41,859 in as much as without any corroborative material and merely based on loose papers, the addition cannot be made.
4.4 The learned CIT(A) has erred in restricting the addition of Sale of Ognaj Land- Jay Laxmi Kheti Sahkari Mandali of Rs. 30,00,000 in as much as there is no transfer of land by the assessee and that the assessee has not received any consideration for the same."
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 44
50. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
51. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
52. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 28,00,000/- only on account of unexplained cash credit under section 68 of the Act.
53. The special auditor reported that the assessee during the year obtained loans of Rs. 28 Lacs for which no detail was provided. The party from whom impugned loan received were detailed as under:
1. Shri Ajay D. Sridhar Rs. 25 Lakhs
2. M/s H jayantilal and co. Rs. 3 Lakhs 53.1 Thus, the AO required the assessee to furnish the necessary explanation, but the assessee failed to furnish any reply. Hence, the AO treated the same as unexplained cash credit as per the provisions of section 68 of the Act and added the same to the total income of the assessee.
54. The aggrieved assessee preferred an appeal before the learned CIT(A).
54.1 The learned CIT(A) found that the assessee has provided ledger confirmation only. As such the assessee failed to provide ITR, bank statement, other proof of creditworthiness etc. Hence the learned CIT(A) held that the assessee failed to discharge the onus cast under section 68 of the Act.
55. Being aggrieved by the order of the learned CIT(A), the assessee is appeal before us.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 45 55.1 The learned AR before us filed a paper book running from 1 to 166 pages and contended that it is undisputed fact that the unsecured loan from the impugned parties were received through banking channel and repaid in the same AY through banking channel along with interest. Hence, the genuineness of the same was established beyond doubt.
55.2 On the other hand, the learned DR vehemently supported the order of the authorities below.
56. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee has received unsecured loans of Rs. 28,00,000/- from 2 parties as discussed above which was treated by the AO as unexplained cash credit under section 68 of the Act and confirmed by the learned CIT(A). At the outset, we note the learned AR of the assessee drawn our attention on pages 34, and 35 of the paper books vide dated 11-01-2024 for A.Y. 2007-08 where ledger copies of the parties namely M/s H. Jayantilala and Company and Shri Ajay D Sridhar were placed. On the perusal of the same, we note that the impugned unsecured loan was taken by the assessee through banking channel and the same was repaid through banking channel to the party in the year under consideration. In addition to that the assessee also paid interest on such unsecured loan of 25 Lakh from the party namely Shri Ajay D Shridhar. It is trite law that once the amount received through banking channel and repayment of the same was also made through banking channel then the genuineness cannot be doubted. In this respect, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under:
"The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques."
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 46 56.1 In view of the above facts, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.
57. The next interconnected issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 44,97,660/- and Rs. 2,41,859/- on account of alleged unaccounted interest income and unaccounted investment with M/s Savita Govind Estate Developer Pvt. Ltd.
58. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2007-08 is identical to the issue raised by the assessee in IT(SS)A No. 85/AHD/2023 for the assessment year 2006-07. Therefore, the findings given in IT(SS)A No. 85/AHD/2023 shall also be applicable for the assessment year 2007-08. The appeal of the assessee for the A.Y. 2006-07 has been decided by us vide paragraph No. 38 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2006-07 shall also be applied for the assessment year 2007-08. Hence, the ground of appeal filed by the assessee is hereby allowed.
59. The next issue raised by the assessee is that the learned CIT(A) erred in confirming addition of ₹30,00,000 on account of sale of Ognaj land of M/s Jayalakshmi Kheti Sahkari Mandali Ltd.
60. The necessary facts are that the appellant assessee and his family members namely Late Smt. Savita G Patel, Shri Hasmukh G Patel, Shri Nitin G Patel, Shri Bhavesh Patel were shareholders in the cooperative society namely M/sJayalakshmi Kheti Sahkari Mandali (hereafter society). The society hold several lands bearing survey numbers 1286/1287/1288/1289/1290/1291/1292/1441 situated at Ognaj Ahmedabad District. The above-mentioned survey numbers except 1286 were mortgaged with Kalupur Commercial Cooperative Bank against the borrowing made by Shri Hasmukh G Patel, M/s Priyanka Quarry Works Pvt. Ltd., Nitin Construction Ltd and M/s Priyank Infrastructure Limited for an amount IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 47 aggregating to Rs. 2,80,47,427/- only. During the year under consideration, the mortgaged lands were sold by the Society for Rs. 1,22,56,922/- and thereafter, the bank agreed to release the mortgage property for loan settlement of loan Rs. 1.5 crores. The Kalupur bank was also the confirming party in the sale of the impugned land by the society.
60.1 The AO from the action of the assessee family i.e. mortgaging the land for availing borrowing in individual capacity and for their concern, construed that the ownership over the land was vested in the assessee family group. Therefore, the sale proceeds of Rs. Rs. 1,22,56,922/- should be distributed among the family members of the assessee holding membership in the society.
60.2 The AO further noted that the Kalupur Commercial Cooperative Bank released the land from lien on payment of full and final settlement of loan 1.5 crore. Accordingly, the AO drawn an inference that loan settlement amount to the bank over and above Rs. 1,22,56,920/- which comes at Rs. 27,43,080/- must have been paid by the assessee group from unaccounted sources or from realisation of sale of land held in the name of society bearing survey number 1286 which was not the part of mortgage.
60.3 Thus, the AO proposed to make an addition of 1/5th of sale proceeds of land of Rs. 1,22,56,920/- and 1/5th of Rs. 27,43,080/- as LTCG by issuing notice to the assessee. But the assessee did not respond to such notice. Hence, the AO in the absence of any reply added the amount of Rs. 30 Lakh (1/5th of 1.5 crores) to the total income of the assessee.
61. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that the owner of the land was the society and not the assessee/ his family members. As such, the assessee and his family members were only the shareholders of the society and not the owner of the land. Therefore, capital gains, if any arising on the sale of land it is to be taxed in the hands of society only.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 48 61.1 However, the learned CIT(A) rejected the contention made by the assessee by holding that the land was mortgaged by the assessee and his family members for borrowing taken by the family member and their concerns. The sale proceeds were utilized directly for repayment of loan. The assessee and his 4 family members were the only shareholders in society, and they have directly benefited by selling the land of society in which they had controlling interest. It is an established fact that society has not offered capital gain on the sale of the land. The controlling right and interest in the property was transferred from assessee and his family members to the buyer of the property, even assuming the society still owns the land.
62. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
62.1 The learned AR of the assessee before us contended that the land was owned by society which was also sold by the society. The sale proceeds were paid directly to bank against the outstanding loan taken by the group concern of the assessee. No consideration was received by the assessee and his family members. Society has recorded the transfer in its books. Therefore, no addition can be made in the hands of the assessee and his family members on such transfer of land.
62.2 On the other hand, the learned DR vehemently supported the order of the authorities below.
63. We have heard the rival contentions of both the parties and perused the materials available on record. As per the special audit report, the society was formed sometime in the year 1991 by certain outside members. Society also owned certain survey numbers of the land. Subsequently, the society was acquired by the assessee during the years 1997 to 2003. However, society was treated as the owner of the land even before the society was acquired by the assessee. Undeniably, the members of society have obtained loans from the bank after mortgaging the lands of the society. Subsequently, to settle the dispute of IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 49 the loan with the bank, lands were sold, and the consideration on the sale of land was given to the bank against the loan of the members. Now the issue in the present case is whether the consideration accrued to the society against the land transferred can be subject to the addition in the hands of the members of the society. In this connection, we are inclined to refer the judgement of the Hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239/84 Taxman 630 (SC), has observed that "The Income Tax Officer can, and he must, tax the right person and the right person alone. By 'right person' is meant person who is liable to be taxed, according to law, with respect to a particular income." In the case of hand, the exclusive ownership of the land was vested with the society and the revenue has not disputed the same. The entire basis of the revenue was that the consideration received upon the sale of the land was adjusted against the loan taken by the individual and therefore the same should be taxed in the hand is of such individuals after ignoring the fact that the land in dispute was owned by the society.
63.1 Without prejudice to the above, it is important to note that the amount of gross value of the loan was taxed in the hands of the assessee without giving the benefit of corresponding cost of the land which is against the provisions of law. Once the revenue has taken a stand that the consideration on the transfer of land in question should be taxed in the hands of the assessee, then the corresponding cost of the land should be allowed as deduction, but the revenue has not done so. Thus, in view of the above and after considering the facts in totality, we are not inclined to uphold the findings of the authorities below. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him.
64. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A No. 87/Ahd/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2009-10.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 50
65. The assessee has raised following grounds of appeal:
"Technical
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Cash Credit under Section 68 Rs. 1,09,55,000 (ii) Undisclosed Advances given in cash U/s.69B Rs. 82,70,507 (iii) Undisclosed Cash Expenses under Section 69C Rs. 96,000 (iv) Undisclosed Cash Receipt towards Land Rs. 73,00,000 Total : Rs. 2,66,21,507 4.1 The learned CIT(A) has erred in confirming addition of cash credit under Section
68 of Rs. 86,50,000 in as much as the loan taken are from genuine parties with explained sources and creditworthiness and that all the details were furnished and therefore the addition cannot be made.
4.1.1 The learned CIT(A) has erred in confirming addition of cash loan of Rs. 23,05,000 by rejecting the peak balance in as much based on the facts the addition is required to be restricted only to the peak balance.
4.2 The learned CIT(A) has erred in confirming addition of undisclosed advances given of Rs. 82,70,507 out of Rs. 90,30,859 in as much as the addition merely based on ceased material and without any corroborative evidences cannot be made. 4.2.1 The appellant says and submits that certain amounts are reflected in the books of accounts and therefore same cannot be treated as uncounted investment.
4.2.2 The appellant further says and submits that certain advances are part of the cash transaction and once it is a part of peak balance which has been added, no separate addition can be made.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 51 4.3 The learned CIT(A) has erred in confirming addition of undisclosed cash expenses of Rs. 96,000 out of Rs. 7,93,552 and that such expenses are a part of cash flow and therefore no separate addition can be made.
4.4 The learned CIT(A) has erred in confirming the Undisclosed Cash Receipt towards Land of Rs. 73,00,000 without appreciating the facts and that such amount is not income and that merely based on surmises and conjunctures and without appreciating the facts, the addition cannot be made.
4.4.1 The appellant says and submits that the addition has been confirmed by CIT(A) without invoking any provision of law and that the amounts received is from genuine parties."
66. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
67. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
68. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,09,55,000/- by treating the unsecured loan as unexplained cash credit under section 68 of the Act.
69. The AO during the assessment proceedings found that the assessee has received unsecured loans aggregating to Rs. 1,09,55,000/- from 21 different parties but the necessary details regarding identity and creditworthiness of the creditor, genuineness of transaction were not provided by the assessee. Hence the AO treated the same as unexplained cash credit under section 68 of the Act and added it to the total income of the assessee.
70. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT-A submitted that out of the total loan, an amount of Rs. 86,50,000/- was received through banking channel from 9 parties and the remaining amount of Rs. 23,05,000/- was received in cash from 12 different IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 52 parties. The assessee provided names and details of the amount of loan received from every party along with their ledger copy in his books of accounts.
70.1 The assessee with respect to loan received through banking channel provided confirmation letter of the parties and provided their addresses, and PAN wherever available. The assessee also claimed that in majority of the cases, the loan amount was repaid during the year itself. Accordingly, the assessee contended that the necessary documents available with him have been furnished and in case of any other additional requirement which needs to be complied with, the notices should directly be issued to parties. As such, the impugned addition needs to be deleted.
70.2 Regarding the cash loan, the assessee submitted that the same has already been repaid to such cash loan parties. However, confirmation from such parties was not received despite making efforts. Therefore, the assessee requested to tax the cash loan on peak credit basis after providing telescoping of cash deposit and cash outgoing or disbursed during the years i.e. A.Y. 2009-10 and A.Y. 2010-11.
70.3 The learned CIT(A) after discussing the facts, the provision of section 68 of the Act and various case laws in length found that the assessee in the cases of loan received through banking channel, only provided confirmation letters from the parties without providing the bank statement and without explaining the source of the deposits. Hence, the ld. CIT-A concluded that the assessee failed to discharge the burden cast under the law.
70.4 The learned CIT(A) regarding cash loan found that the assessee has not advanced loan to the same parties from whom cash loan was received by the assessee. Therefore, the benefit of peak credit theory cannot be extended in the given facts and circumstances. Thus, the learned CIT(A) confirmed the addition made by the AO for Rs. 1,09,55,000/- (Rs. 23,05,000 cash + 86.5 Lakh through bank).
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 53
71. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
71.1 The learned AR before us submitted that the assessee in many of the cases has filed the confirmation along with PAN which implies that the assessee has discharged the primary onus cast under section 68 of the Act upon him. Likewise, the amount of loan taken by it during the year was repaid either in the same assessment year or subsequent assessment year and therefore the same cannot be subject to the addition. The assessee for the year under consideration is not supposed to discharge the source of source for the loan obtained by him. Likewise, the AO was provided necessary details about the loan parties but the Revenue without carrying out any verification has treated the loan received by the assessee as an unexplained cash credit under section 68 of the Act which is undesirable under the provisions of law. As such, the assessee has discharged the onus, and the same was shifted to the Revenue to disprove the contention of the assessee based on the tangible material. But the Revenue has not done so. Therefore, according to the AR, no addition is warranted in the given facts and circumstances.
72. On the other hand, the learned DR vehemently supported the order of the authorities below.
73. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee's books of accounts were credited on account of unsecured loans received from various parties through banking channel as well as in cash. The revenue authority held that the assessee has not discharged the burden of establishing the identity and creditworthiness of creditors and genuineness of the transactions. Thus, the addition was made under section 68 of the Act.
73.1 From the perusal of the materials available on record, we note that the assessee has shown loan through banking channel for Rs. 86.5 Lakh from 9 IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 54 different parties and cash loan of Rs. 23.05 Lakh from 12 parties. We first proceed to adjudicate the issue of loan received through banking channel in the manner given in the following paragraphs.
Smt. Alkaben Mohanbhai Jha, Shri Bhaveshbhai Jivabhai Bharvad, M/s H Jatinbhai & Co., Shri Mohan Ramdev Jha and Smt. Pushpaben Manubhai Patel.
73.1.1. Of the above 5 stated parties, the assessee claimed to have received loans of Rs. 3.5 Lakh, 16 Lakhs, 3 Lakhs, 11.25 Lakhs and Rs. 3 lakhs respectively. The assessee in support of genuineness of transaction furnished ledger copy, PAN, Address, and confirmation letter. Thus, in our considered opinion the assessee has provided the primary details to the Revenue. The AO, before rejecting the primary evidence provided by the assessee, was required to disprove the evidence filed by the assessee based on independent inquiry. We note that there was no independent inquiry conducted by the revenue to hold that the identity, genuineness of the transaction and creditworthiness of the parties were not established. The revenue authority merely because the assessee has not provided the copy of bank statement and ITR of the loan parties held that the assessee did not discharge the onus cast upon him. On the contrary, the assessee has provided names, addresses, and PAN of the loan parties. The AO/ld. CIT-A should have verified the income tax return data of the loan parties from ITD-data base and could have made verification from loan parties by issuing notices under section 133(6)/131(1) of the Act but failed. Therefore, we do not agree with the finding of the learned CIT(A) and thus, direct the AO to delete addition of Rs. 3.5 lakhs, 16 Lakhs, 3 Lakhs, 11.25 Lakhs and Rs. 3 lakhs on account of loan from the 5 parties as stated above.
Hiteshbhai, H.P Patel and Meetaben Nimesh Patel 73.1.2. Of the above-mentioned 3 parties, the assessee has shown having received unsecured loan of Rs. 6 Lakh, 3 lakhs and 20 lakhs respectively. In the case of these 3 parties, the assessee only furnished a leger copy. As such, no IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 55 PAN, address, confirmation, bank statement etc. were provided. However, the assessee claims about the loan received from Smt. Meetaben Nimesh Patel for Rs. 20 Lakh to have repaid but no bank statement of the assessee or of the party was available on record to verify the same. Thus, in our considered opinion, the assessee failed to discharge the burden cast upon him. Hence, we do not find any reason to interfere in the finding of the learned CIT(A) to the extent of loan transaction with the parties namely Shri Hiteshbhai, H.P. Patel and Smt. Meetaben Nilesh Patel for Rs. 6, 3 Lakhs and 20 lakhs respectively.
Smt. Anita M Jha 73.1.3. The loan amount shown by the assessee form Smt. Anita M Jha is of Rs. 20.75 Lakh. The assessee in support of the genuineness of the transaction only furnished ledger copy and confirmation letter but other detail such as PAN, ITR, bank statements were not provided. Therefore, in our considered opinion, the assessee has not furnished complete details to establish the identity, creditworthiness of the party, and genuineness of the transaction. Hence, we do not find any reason to interfere in the finding of the learned CIT(A) to the extent of addition confirmed for Rs. 20.75 Lakh on account of unsecured loan from Smt. Anita M Jha.
73.2 Now coming to the issue of cash loan of Rs. 23.05 Lakhs from 12 parties, we note that the assessee before the learned CIT(A) owned up the amount as income in absence of necessary details. However, the assessee requested to make addition of cash loan based on peak credit theory. But the ld. CIT-A denied applying the peak credit theory on the grounds that the parties from whom the loan was received and the party to whom the loan was given were different. The peak credit theory is generally applied where the inflow and outflow of cash correspond with each other, meaning thereby, if the assessee has withdrawn money from the bank then it can be assumed, if further cash has been deposited in the bank, that such cash deposit is out of the cash withdrawal from the bank on the earlier date provided there is no information available on record that such cash IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 56 withdrawn earlier has not been utilized somewhere else. In the present case, admittedly the amount of cash received has been shown from the different parties which have no link with the parties to whom the advance has been given by the assessee. Hence, we do not find any infirmity in the order of the ld. CIT-A. Hence, the ground of appeal of the assessee is hereby dismissed. In view of the above detailed discussion, the ground of appeal raised by the assessee is hereby partly allowed.
74. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 82,70,507/- under section 69B of the Act representing unaccounted advances.
75. The necessary facts are that during the search at the assessee's premises, certain documents marked as annexure-A-1.1 were found and seized. The special auditor regarding the impugned documents reported that the amount noted on the same represents loan and advances given by the assessee to various parties but the same was not recorded in regular books of the assessee which are detailed on pages 6 to 7 of the assessment order.
75.1 The assessee was asked by the AO to furnish necessary details and explanation, but the assessee failed to respond. Accordingly, the AO treated the same as unexplained investment as per the provisions of section 69B of the Act and added to the total income of the assessee.
76. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee in the submission made before the learned CIT(A) divided the alleged unaccounted loan and advances noted on seized document into 7 parts and explained the same in the manner as detailed in the following paragraphs.
Part-1: Dharmesh Patel entry at S. No. 1 to 3 of the table reproduced above.
76.1 As per the table on page 31, annexure A-1.1 of seized document, the assessee made following advances to Shri Dharmesh Patel:
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 57
1. 30-12-2008 Rs. 10 Lakh
2. 31-01-2009 Rs. 10.Lakh
3. 02-02-2009 Rs. 4.5 lakhs 76.1.1. The assessee with respect to noting at S. No. 1 for Rs. 10 Lakh submitted that there was another seized document where 2 entries noted on the same date i.e. 30-12-2008 against the name of Shri Dharmesh Patel for Rs. 4,95,000/- each which is duly recorded in the books of account. The assessee contended that the date and amount with minor difference noted on 2 different pages is matching, therefore the page which matching with books of account should be accepted. The assessee regarding difference in the amount stated that some time he used to make noting on dairy on estimation basis which might be a reason for minor difference in amount. Identical contention was made by the assessee for Rs. 10 lakhs as on 31-01-2009.
76.1.2. Likewise, regarding the amount of Rs. 4.5 Lakh as on 02-02-2009, the assessee submitted that such an amount was given to Smt. Darshanaben Rameshbhai Patel through the banking channel which was duly recorded in the books of accounts. Smt. Darshanaben Rameshbhai Patel is a relative of Shri Dharmesh Patel and her name was also noted on the seized document used for making addition by the AO.
76.1.3. The assessee accordingly contended that no addition should be made on account transaction with Shri Dharmesh Shah for Rs. 24.5 Lakhs. The alternative contended that if contention in connection first 2 entries is not accepted, then same should be allowed to be taken for computation of peak cash being cash loan received and cash advance given.
Part-II: Neno Project Expenses S. No. 4 to 16 of the table reproduced above.
76.2 Regarding the amount aggregating to Rs. 16,45,507 noted as "Neno Project Expenses", the assessee claimed that said noting represents expenses incurred in IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 58 the project which belongs to M/s Nitin Construction Ltd. All the expenses incurred in the Neno project have been recorded in the books of M/s Nitin Construction Ltd. The special auditor has also not made any comment about such expenses. Therefore, the same should not be added to his total income as unaccounted investment without having any corroborative material.
Part-III: Hiral Pipes Pvt. Ltd. at S. No. 17 to 19 of the table reproduced above.
76.3 As per the table reproduced by the AO in his order on page 20 of annexure- A-1.1 of seized documents, the assessee claimed to have given advances to the alleged party of the following amount:
17. 28-11-2008 Rs. 2.4 Lakh
18. 02-03-2009 Rs. 1.25 Lakh
19. 02-03-2009 Rs. 2.00 Lakh 76.3.1. The assessee stated that the party, namely M/s Hiral Pipes Pvt Ltd is a sister concern and whatever transactions entered with it were duly recorded in the books of accounts. The transactions recorded in his books duly tally with the books of the party. However, the date and amount noted on seized document does not tally with the books for the reason that he (the assessee) used to make noting on diary according to his convenience and without referring to the records.
Part-IV: Jemco Roller S.No. 20 to 22 of the table reproduced above.
76.4 The assessee submitted that amount at S. Nos. 20 to 22 noted on impugned sheet represents transactions carried out between M/s Nitin Construction Ltd and Jemco Roller which are duly recorded in their respective books of accounts.
Part-V: Nitaben S. Nos. 23 & 24 of the table reproduced above.
76.5 The amount noted at S. Nos. 23 & 24 were found noted on page 27 of annexure A-1.1 of seized document, the assessee claimed that on the seized document, there is cross mark "X" against the amount at S. No. 23 for Rs. 15 IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 59 lakhs dated 03-12-2008 meaning thereby the transaction was cancelled. Hence no addition can be made.
76.5.1. Regarding the amount of Rs. 20.5 lakh at S. No. 24, the assessee claimed that on the seized document, the name of the party was noted as Nitaben, but the actual name of the party is Smt. Meetaben Nitish Patel from whom unsecured loan was received during the year. The amount noted on impugned document represents repayment of the loan.
Part-VI: Nitin Construction Ltd. S.No. 25 & 26 of the table reproduced above.
76.6 The assessee submitted that both the entries are through cheque and the same were credited in the bank account of M/s Nitin Construction.
Part-VII: Nitinbhai (Seth) S. No. 27 of the table reproduced above.
76.7 The assessee only submitted that this amount was treated as part of the peak credit of cash loan received and cash loan disbursed during A.Y. 2009-10 and 2010-11.
77. The learned CIT(A) after considering the submission of the assessee deleted the addition for the amount at S. No. 20 to 22, and 25 & 26 in connection with Jemco Roller and M/s Nitin Construction Ltd aggregating to Rs. 7,60,352/- and confirmed the remaining amount of Rs. 82,70,507/- in connection with other 5 parties.
77.1 The learned CIT(A) regarding unaccounted loan advances to Shri Dharmesh Patel for Rs. 24.5 lakh noted at S. No 1 to 3 of the table on page 31 of annexure A-1.1 found that the entry in the ledger account did not match the amount recorded on the seized material. Therefore, the contention of the assessee that transaction with Shri Dharmesh already recorded in regular books and the seized document are only rough noting cannot be accepted. Further the notings on seized document are made in systematic manner and the other noting are IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 60 corroborating with regular books. Hence, the same cannot be held as rough noting. No correlation was established by the assessee between Smt. Darshanaben Rameshbhai and Shri Dharmesh Patel. Hence, the claim that Rs. 4.5 Lakh noted on the seized material received from Smt. Darshanaben Rameshbhai is not acceptable. Identical, finding was given by the learned CIT(A) regarding unaccounted advances to M/s Hiral Pipes Pvt Ltd. and Smt. Nitaben for the amount aggregating to Rs. 5,65,000/- and Rs. 35.5 lakh respectively at S. Nos. 17 to 19 and 23 to 24 of the table.
77.2 Regarding the amount at S. Nos. 4 to 16 of the table aggregating to 16,45,507.00 the claim of the assessee is that these are expenditures of the project of M/s Nitin Construction Ltd. The learned CIT(A) found that the assessee merely furnishes the details of various expenditure recorded in the books of M/s Nitin Construction Ltd but failed to reconcile and identify the amount noted in seized document with the expenditure debited in the books of M/s Nitin Construction Ltd.
77.3 Regarding the advance to Shri Nitinbhai (Seth) for Rs. 60,000/- at S. No. 27 of the table above, the learned CIT(A) rejected the claim of the assessee for considering the same as part of peak credit by holding that parties from cash were received and cash was paid are different.
78. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
78.1 The learned AR before us made identical submissions as made before the learned CIT(A). On the other hand, the learned DR vehemently supported the order of the authorities below.
79. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the entire issue raised by the assessee has been divided into seven parts which have been detailed in the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 61 preceding paragraph. Out of the addition made by the AO in seven parts, we find that the learned CIT-A has deleted the addition with respect to 2 parts discussed above and the Revenue is not in appeal for the same. Accordingly, we are going to deal individually for the remaining 5 parts of the addition in the manner detailed below:
Part-1: Dharmesh Patel entry at S. No. 1 to 3 of the table referred above.
79.1. Based on the seized document, it was found that the assessee has given advances amounting to ₹ 24.50 lakhs to the party namely Shri Dharmesh Patel which was treated as undisclosed advance and therefore the addition was made by the AO. From the preceding discussion we note that the assessee has submitted that there 4 entries of ₹ 4.95 lakhs each appearing on the other seized documents on the same dates which were duly recorded in the books of accounts.
Thus, the assessee's entries to the tune of ₹ 19.80 lakhs matched with the accounting entries recorded in the accounts. There is a marginal difference of ₹ 20,000 that is clearly because these entries were recorded in the seized document based on the memory. As such there is a marginal difference only in the accounts. We find force in the argument advanced by the learned AR of the assessee. It is for the reason that the amount of the seized documents viz a viz the amount quoted in the accounts are substantially matching. Accordingly, we are inclined to delete the addition made by the Revenue authorities for Rs. 20 lakhs.
79.1.1. Regarding the balance amount of Rs. 4.50 lakhs, we find that name of the party namely Smt. Darshna Ben Ramesh Bhai Patel was appearing on the same seized document. Accordingly, we are of the view that the seized document should be read as a whole. Accordingly, we are convinced of the argument of the ld. AR that the amount of Rs. 4.50 lakhs advanced to the party namely Smt. Darshna Ben Ramesh Bhai Patel which was duly recorded in the books of accounts. Accordingly, we are inclined to delete the addition made by the Revenue authorities for Rs. 4.50 lakhs.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 62 Part-II: Neno Project Expenses S. No. 4 to 16 of the table referred above 79.2. Regarding the above expenses, we note that such expenses undisputedly relate to the Neno Project which is undeniably owned by the company namely M/s Nitin Construction Ltd. Likewise, the assessee was a director in such a company. But the assessee cannot be made liable for the addition of the expenses relating to the impugned project until and unless some material is brought on record suggesting that the expenses were incurred by the assessee out of his undisclosed income. It is the responsibility of the company to justify whether such expenses were recorded in the books of accounts or not. If the expenses have not been recorded by the company, then, the addition has to be made in the hands of the company only and not in the hands of the assessee as done by the revenue authorities. The company is a different person and taxed as a separate entity though controlled and managed by the assessee, yet the assessee cannot be made liable to the addition for the expenses relating to the impugned project. As such, the assessee in the capacity of the director has to explain the expenses but, in the event, if company fails, then the assessee cannot be made subject to the addition in his hands for the impugned expenses. Thus, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.
Part-III: Hiral Pipes Pvt Ltd. at S. No. 17 to 19 of the table referred above.
79.3 Admittedly, the seized documents were found containing information relating to the company M/s Hiral Pipes Pvt Ltd. Furthermore, such documents did not match the records of the company. The controversy arises whether such entries recorded in the seized documents reflects the income of the assessee. The answer stands in negative. It is for the reason that the seized document in itself does not represent any income of the assessee until and unless it is corroborated IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 63 by some documentary evidence. Admittedly the assessee was a director in the company and therefore the possibility of recording the transaction relating to the company by the assessee in the capacity of director cannot be ruled out. Thus, in the absence of any corroborative material, no addition is warranted in the hands of the assessee. Likewise, the transaction admittedly relates to the company and if any addition is required to be made, that can be made in the hands of the company until and unless it is brought on record that such transaction was carried out by the assessee from undisclosed sources on behalf of the company. But no such finding is emanating from the authorities below. Thus, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.
Part-IV: Jemco Roller S.No. 20 to 22 of the table referred above.
79.4 The addition made by the AO in this regard has been deleted by the learned CIT(A), accordingly the same is not in dispute before us.
Part-V: Nitaben S. Nos. 23&24 of the table referred above.
79.5 In the present case, it was explained by the assessee that there is a cross (X) in the seized document against the payment of ₹ 15 lakhs which evidences that payment of Rs. 15 lacs were not paid by the assessee. On perusal of the seized document, we find that there is cross against the payment of ₹ 15 lakhs. The word cross generally indicates cancellation of the transaction. Accordingly, in our considered view such addition of ₹ 15 lakhs is not warranted. For the balance amount of ₹ 20.50 lakhs, we disagree with the contention of the ld. AR for the reason detailed below:
i. There is mismatch in the name of Smt. Meetaben and Nitaben. The assessee has notexplained such mismatch based on the documentary evidence that Smt. Nitaben is the same person as Smt. Meetaben. ii. Indeed, the date of payment matches as claimed by the assessee but there is a mismatch in the amount as discussed above.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 64 iii. The repayment to Smt. Nitaben as claimed by the assessee represents the cash transaction whereas the transaction recorded in the ledger of Smt. Meetaben is a banking transaction.
79.5.1. In view of the above mismatch, we do not find any force in the contention of the ld. AR of the assessee. However, we note that an addition of ₹ 20 lakhs under section 68 of the Act has already been added in the hands of the assessee for the loan received from Smt. Meetaben, and therefore the advance given to Smt. Nitaben can be treated an application loan of loan from Smt. Meetaben.
Thus, the addition of ₹ 20.50 lakhs is not liable to be added again in the hands of the assessee. Thus, in our considered view, such addition of ₹ 20.50 lakhs is liable to be deleted.
Part-VI: Nitin Construction Ltd. S. No. 25 & 26 of the table referred above.
79.6 The addition made by the AO in this regard has been deleted by the learned CIT(A), accordingly the same is not in dispute before us.
Part-VII: Nitinbhai (Seth) S.No. 27 of the table referred above.
79.7 In the present case, the assessee has not advanced any argument except contending that the same should be treated as part of the peak credit which we have already discarded in the preceding paragraph. Accordingly, we are of the view that such an addition made by the revenue authorities cannot be treated as part of the peak credit. However, we are conscious of the fact that the addition under section 68 of the Act on account of cash receipt has already been added for the sum of Rs. 23 lacs. Thus, the cash advance of ₹ 60,000 can treated as part of as the application of such unexplained cash credit under section 68 of the Act. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him.
79.8 In view of the above detailed discussion the ground of appeal raised by the assessee is hereby allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 65
80. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 96,000/- on account of unaccounted cash expenses.
81. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
82. The last issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 73 lakhs on account of cash received towards the land.
83. During the search proceedings, certain documents marked as annexure A- 1.2 were found and seized. The special auditor regarding the transaction recorded on the impugned document reported that such transaction represents the cash receipt by the assessee in land deal from the following parties:
1. Bhaveshbhai Desai Rs. 8 Lakh
2. C.J. Chavda Rs. 2 Lakh
3. Nitin Construction Ltd Rs. 45 Lakh
4. Purshottam Darji Rs. 3 Lakh
5. Savita Govind Construction Pvt Ltd Rs. 15 Lakh Total Rs. 73 Lakh 83.1 The AO observed that the assessee does not hold any land for which he can accept cash. Further, the cash received from above mentioned parties was not returned to them either in the year under consideration or in subsequent years.
Accordingly, the AO in absence of any explanation or submission from the assessee treated cash receipt as income and added to the total income of the assessee.
84. The aggrieved assessee preferred an appeal before the learned CIT(A) and submitted that he has received amount as advance against the land but no IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 66 agreement for sale of land entered into. The amount received from Nitin Construction Ltd and Savita Govind Construction Pvt Ltd for Rs. 45 and 15 Lakh has been confirmed by them, their contra ledgers are available on record. Hence, no such addition should be sustained for Rs. 60 Lakh. The assessee regarding the remaining amount of Rs. 13 lakhs from 3 other parties stated that confirmation from those parties was not received. Therefore, the same should be taken in computing peak credit.
84.1 However, the learned CIT(A) rejected the contention of the assessee and held that there was no agreement to sale of land provided by the assessee. Merely the counter party has shown the amount as advance against land does not establish that the amount received is liability in the hands of the assessee especially considering the fact that the assessee does not hold any land, but claimed to have entered into any agreement for sale and does not return the money to the parties. The assessee was not able to explain the exact nature of the receipt. Hence, the learned CIT(A) confirmed the addition made by the AO for Rs. 73 lakhs.
85. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
85.1 The learned AR before us contended that the amount shown as advance does not represent the undisclosed receipt. As such, the amount of receipt was from the group concerns against the proposed sale of land which is supported by the board resolution of the companies. Since the amount was disclosed in the respective books of accounts, the same cannot be treated as income of the assessee even in a situation where such advance was not made towards the sale of land. Furthermore, the impugned amount has not ceased to exist as alleged by the ld. DR and therefore the same cannot be treated as income under section 41 of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 67 85.2 On the other hand, the learned DR vehemently supported the order of the authorities below.
86. We have heard the rival contentions of both the parties and perused the materials available on record. Regarding the receipt of ₹ 45 lakhs and 15 lakhs from the companies namely M/s Nitin Construction Ltd and M/s Savita Govind Construction Pvt. Ltd., we note that such companies belong to the group of the assessee and such transactions have already been disclosed in their respective books of accounts. Accordingly, we are of the view that such transactions cannot be treated as unexplained income as alleged by the AO. Thus, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.
86.1 Regarding the remaining amount of ₹ 13 lakhs, we have already discarded the peak credit theory in the preceding paragraph, accordingly we do not find any force in the argument of the ld. AR. Accordingly, we dismiss the same. As such, we uphold the finding of the authorities below.
86.2 In view of the above discussion the ground of appeal raised by the assessee is partly allowed.
86.3 In the result, the appeal filed by the assessee is partly allowed.
Coming to IT(SS)A No. 88/AHD/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2010-11.
87. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 68
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Cash Credit under Section 68 Rs. 16,00,000 (ii) Undisclosed Advances given in cash under Section 69B Rs. 1,37,86,807 (iii) Other Undisclosed Advances under Section 69B Rs. 12,80,000 (iv) Undisclosed Cash Expenses under Section 69C Rs. 76,800 (v) Undisclosed Cash Receipt towards Land Rs. 39,50,000 (vi) Addition of deemed income under Section 2(22)(e) Rs. 1,55,556 (vii) Undisclosed Investment in Flat No. A-93 Rs. 8,58,969 (viii) Unaccounted Income From sale of Flat No.A-113 Rs. 30,00,000 Total: Rs. 2,47,08,132 4.1 The learned CIT(A) has erred in confirming the addition of Rs. 16,00,000 in
relation to undisclosed cash credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed is not proper.
4.2 The learned CIT(A) has erred in confirming addition of undisclosed advances given of Rs. 1,37,86,807 out of Rs. 2,03,32,739 in as much as the addition merely based on ceased material and without any corroborative evidences cannot be made.
4.2.1 The appellant says and submits that certain amounts are reflected in the books of accounts and therefore same cannot be treated as uncounted investment.
4.2.2 The appellant further says and submits that certain advances are part of the cash transaction and once it is a part of peak balance which has been added, no separate addition can be made.
4.3 The learned CIT(A) has erred in confirming the addition of Rs. 12,80,000 in relation to undisclosed cash credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed is not proper.
4.3.1 The learned CIT(A) has erred in confirming addition of undisclosed advances given of Rs. 12,80,000 out of Rs. 42,14,125 in as much as the addition merely based on ceased material and without any corroborative evidences cannot be made.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 69 4.3.2 The appellant says and submits that certain amounts are reflected in the books of accounts and therefore same cannot be treated as uncounted investment.
4.4.4 The appellant further says and submits that certain advances are part of the cash transaction and once it is a part of peak balance which has been added, no separate addition can be made.
4.5 The learned CIT(A) has erred in confirming addition of undisclosed cash expenses of Rs. 76,800 and that such expenses are a part of cash flow and therefore no separate addition can be made.
4.6 The learned CIT(A) has erred in confirming the Undisclosed Cash Receipt towards Land of Rs. 39,50,000 without appreciating the facts and that such amount is not income and that merely based on surmises and conjunctures and without appreciating the facts, the addition cannot be made.
4.6.1 The appellant says and submits that the addition has been confirmed by CIT(A) without invoking any provision of law and that the amounts received is from genuine parties.
4.7 The learned CIT(A) has erred in confirming addition of Rs. 1,55,556 out of Rs. 5,65,000 under Section 2(22)(e) in as much as the addition cannot be made basis the facts of the case.
4.8 The learned CIT(A) has erred in confirming addition of Rs. 8,58,969 being undisclosed investment in Flat No. A-93 in as much as the addition cannot be made merely based on presumption and without any tangible or corroborative evidences. 4.9 The learned CIT(A) has erred in confirming addition of Rs. 30,00,000 being unaccounted income from sale of Flat No. A-113 in as much as the addition merely based on ceased material without any corroborative evidences cannot be made."
88. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
89. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
90. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 16 Lakh/- by treating the unsecured loan as unexplained cash credit under section 68 of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 70
91. It was found during the assessment proceedings that the books of the assessee were credited on account of unsecured loans from certain parties in the year under consideration. The details of the same stand as under:
1. Shri Maitribhai Rs. 1 lakh
2. Shri Meena M Shah Rs. 5 lakh
3. Smt. Sunitaben Bhandari Rs. 10 lakh Total Rs. 16 Lakh 91.1 The AO, in the absence of any explanation from the assessee, treated the same as unexplained cash credit under the provisions of section 68 of the Act and added to the total income of the assessee.
92. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that the cash loan of Rs. 1 lakh from Shri Matribhai was treated as part of peak credit. The assessee regarding the amount credited from Shri Meena M Shah (Jha) of Rs. 5 Lakh furnished ledger copy and letter of confirmation and contended that loan was received through banking channel and party also confirmed the same. Hence, no addition is required to be made. With respect to the credit of Rs. 10 lakh from Smt. Sunitaben Bhandari, the assessee only filed the ledger copy.
93. The learned CIT(A) after considering the facts in totality confirmed the addition made by the AO by observing that the assessee only furnished confirmation letter from third parties without providing other detail such as Bank statement, ITR etc. The cash loan received cannot be taken for computing the peak credit as the party from cash loan received and party to whom cash loan advanced are different.
94. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 71 94.1 The learned AR before us filed a paper book running from 1 to 178 paged and submitted that the confirmation from the party along with PAN was furnished in majority of the cases and in this regard the learned AR referred the pages 41 to 46 of the paper book dated 08-01-2024. The learned AR accordingly contended that the assessee discharges the onus to prove the genuineness of the transactions, identity, and creditworthiness of the depositor. The learned AR also contended that the assessee is not required to explain the source of source.
94.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
95. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee's books of accounts got credited on account of unsecured loan from certain parties stated in the preceding paragraph which was treated as unexplained cash credit by the revenue authorities. The provisions of section 68 of the Act cast a burden on the assessee to explain the nature and source of the credit in the books. The primary onus of the assessee is to prove the identity and creditworthiness of the creditor and genuineness of transaction.
95.1 In the present case the assessee has shown himself to have received unsecured loans from 3 parties discussed in the previous paragraphs. On perusal of the materials available on record, we note that no detail except the ledger copy in the books of accounts of the assessee has been provided in case of the parties namely Shri Matribhai and Smt. Sunitaben Bhandari from whom loan of Rs. 1 lakh and 10 lakhs respectively were shown to have received. As such, the address, PAN and other necessary documents were not provided by the assessee. Likewise in the case of Shri Meena M Shah/jha, the assessee provided only ledger copy and confirmation letter. The confirmation and ledger do not contain the address and PAN of the party. As per the ledger account, the assessee received an amount of Rs. 5 Lakh in his Indian Overseas Bank Account as on 17th November 2009 and squared up on same day by passing journal entry in the name of Smt. Anita M Jha IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 72 but no detail was available explaining the correlation between Shri Meena M Shah and Anita M Jha. Therefore, we are of the considered opinion that the assessee failed to provide complete details discharging the onus cast under section 68 of the Act.
95.2 Before parting, we note that the assessee has prayed to treat the loan amount of Rs. 1 lakh received in cash from the party namely Matribhai as part of peak cash, but the request of the assessee has already been rejected in the own case of the assessee in the earlier assessment year 2009-10 in IT(SS)A 87/AHD/2023 vide paragraph No. 73.2 of this order. The same reasoning shall also be applicable for the year under consideration. Therefore, we uphold the addition of Rs. 1 Lakh as confirmed by the authorities below. Hence, the ground of appeal of the assessee is dismissed.
96. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,37,86,807/- under section 69B of the Act representing unaccounted advances.
97. During the search at the premises of the assessee group at 31 Ajanta Park Society Memnagar, certain documents/papers were found marked as pages 1 to 92 of annexure S-2(2). The special auditor reported that the amount/transaction noted on the impugned seized materials represent cash loans & advances given by the assessee which are not recorded in the regular books of accounts. Accordingly, the special auditor based on seized materials drawn a table (S. Nos., name of party and amount) of such unaccounted cash advances given to various parties. As per the table prepared by the special auditor, reproduced at pages 5 to 6 of assessment order, the assessee made an aggregate unaccounted advance of Rs. 2,03,32,739/- to several parties containing at S. Nos. 1 to 39 of the impugned table.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 73 97.1 As the assessee failed to make response to the notices issued regarding the above stated advances, the AO treated the same as income of the assessee under the provisions of 69B of the Act.
98. The aggrieved assessee preferred an appeal before the learned CIT(A).
98.1 The assessee before the learned CIT(A) made detailed submission/ explanation for each amount contained at S. Nos. 1 to 39 of the table available at pages 5 to 6 of assessment order.
98.2 The learned CIT(A) after considering the facts in totality found that the transaction appearing at S. Nos. 1, 2, 5, 6, 8 to 10, 14, 31, 32, 36 and 37 of the table produced in assessment order representing the transactions belonging to group concern of the assessee namely M/s Nitin Construction Ltd and M/s Savita Govind Construction Ltd and the same are reflected in the respective books of accounts of the said companies. Likewise, the transaction appearing at S. No. 39 of the impugned table in the name of Smt. Visaben Desai is duly recorded in the books of the appellant assessee. Hence, the learned CIT(A) deleted the addition made with respect to the amounts appearing in the respective serial numbers above stated.
98.3 The learned CIT-A further with respect to the transactions appearing at serial numbers 15 to 27 of the table in the name of LG A/c found that there was a single transaction of ₹ 27.12 lakhs at S. No. 21 which was appearing in the books of accounts of M/s Nitin Constructions Limited and thus he deleted the same. Likewise, the Ld. CIT-A found there were duplicate entries/ transactions of ₹ 12,85,000 appearing at S. Nos. 22-23 & 26 which have been added twice and therefore he deleted the same. As such, the ld. CIT-A partly confirmed the addition with respect to the remaining transactions with LG A/c on the reasoning such transactions were not reflected in the books of accounts of M/s Nitin Constructions Limited.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 74 98.4 Regarding the reaming transactions appearing at S. Nos. 3-4, 7, 11-13, 28- 30, 33-35 and 38 the learned CIT(A) found that the assessee made different claims/explanations regarding these transactions, but the claim/explanation of the assessee was not supported by corroborative evidence. Hence the learned CIT(A) confirmed the addition made by the AO in respect of transaction/amount appearing at above stated serial numbers of the table reproduced in assessment order.
99. Being aggrieved by the order of the learned CIT(A), both the assessee and the revenue are in appeal before us. The assessee is in appeal against the addition confirmed for Rs. 1,37,86,807/- whereas the revenue is in appeal for addition deleted for Rs. 62,45,932/- only. The relevant ground of appeal of the revenue in IT(SS)No. 60/Ahd/2023 read as under:
"(b) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.
62,45,932/- out of Rs. 2,03,32,739/- made by the AO by treating the same as undisclosed advances given in cash u/s. 69B of the IT Act on the basis of report of the Special Auditor."
99.1 The ld. AR before us reiterated the contentions raised before the authorities below. Both the ld. AR and the DR before us vehemently supported the order of the authorities below to the extent as favourable to them.
100. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there were found materials in the course of search at the premises of the assessee based on which it was alleged that the assessee has made unaccounted advances aggregating to Rs. 2,03,32,739/- to certain parties detailed in the preceding paragraph. The AO, in absence of any explanation or submission from the assessee, treated the same as unaccounted investment under the provision of section 69B of the Act whereas the learned CIT(A) partly deleted the addition made by the AO.
100.1 For the sake of convenience, we are dividing the issue in three parts:
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 75 Part -I i. 100% deletion of the addition made by the AO with respect to the entries appearing at serial numbers 1, 2, 5, 6, 8 to 10, 14, 31-32, 36-37 and 39 of the table being transaction carried out with different parties. Part-II ii. The addition of Rs. 1,11,43,000/- made by the AO for the transactions being L.G. A-c appearing at S. Nos. 15 to 27 pf the table were restricted by the learned CIT-A to the extent to Rs. 74,33,000/-. (Note: there is some calculation error in the amount as noted from the order of the ld. CIT-A) Part-III iii. 100% confirmation of the addition made by the AO with respect to the entries appearing at serial numbers 3-4, 7, 11-13, 28-30, 33-35 and 38 of table reproduced in assessment order.
Finding of Part-I 100.2 Regarding the 100% deletion of the addition with respect to transaction appearing at said S. Nos. 1, 2, 5, 6, 8 to 10, 14, 31-32, 36-37 and 39, we note that the addition was made by AO in the absence of any explanation by the assessee. Furthermore, as per the AO, such advances were not recorded in the books of accounts. However, the learned CIT-A deleted the addition by observing that such advances were duly recorded in the books of accounts in the group concern of the assessee and such transactions were not pertaining to the assessee. At the time of hearing, Ld. DR did not bring anything contrary to the finding of the ld. CIT-A. Likewise, we find that the ld. CIT-A has given detailed and reasoned findings for deleting the addition made by the AO. Therefore, we don't find any infirmity in his order and hence, we uphold the same.
Finding at Part-II IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 76 100.3 Regarding the restrictions of the addition by the ld. CIT-A with respect to the transactions under L.G. account at S. Nos. 15 to 27, we note that admittedly the learned CIT-A has accepted that part of the transactions in the account of L.G. pertains to M/s Nitin Constructions Limited and part of the transactions pertains to the assessee. We are unable to convince ourselves with the finding of the ld. CIT- A. It is for the reason that once it has been established that the transactions relating to the L.G. account pertains to M/s Nitin Constructions Limited then even such transactions are not recorded in the books of accounts of M/s Nitin Constructions Limited, the same cannot be added in the hands of the assessee. If any addition is warranted for such transactions, that can be proceeded with M/s Nitin Constructions Limited. Accordingly, we hold that such transactions with LG account cannot be subject to the additions in the hands of the assessee. Thus, the ground raised by the assessee relating to the transactions under LG account is allowed whereas the ground raised by the revenue relating to the transactions under LG account is dismissed.
Finding at Part-III 100.4 In this regard, we note the primary contention of the assessee is that these seized documents were not reliable which were written by the assessee on estimate basis for the transactions which may likely to happen and based on memory in respect of various concern of the group. Besides the primary contention, the assessee regarding the transactions categorized by us as Part-III, furnished the details explaining each entry. But the authorities below, without bringing contrary material or the corroborating material supporting the allegation of unaccounted advance given by the assessee, rejected the explanation furnished by the assessee. In other words, the explanation furnished by the assessee has not been controverted by the AO/ ld. CIT-A based corroborative evidence. As such the AO/Ld. CIT(A) merely on the basis of noting made on loose sheets/diary found during the course of search proceeded to make the addition. At this juncture, it is equally important to refer the provisions of section 132(4A) and 292C of the Act IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 77 which provides a presumption that the documents impounded from the premises of the assessee belongs to the assessee and the contents of the same are true. However, such presumption is rebuttable, and assessee based on evidence can rebut the same. Even though the provision of section 292C and 132(4A) of the Act provides presumption to the assessing authority to presume that the document belong to the assessee and contents are true about the documents found from the possession of the assessee but that does not mean that such documents shall be brought under the tax net. To tax income based on loose sheets, it is necessary to bring finding on record that noting made in such documents are actual transactions which have been materialized leading to income in the hands of the assessee and such income has been unaccounted or unexplained by the assessee. Even the CBDT from time to time has discouraged the assessing authority from making addition in arbitrary manner or based on statement or surrender during the course of search/survey. In this regard the instructions issued by the CBDT in F.No. 286/2/2003-IT(Inv.11) dated 10-03-2003 and F.NO. 286/98/2013-IT(Inv.11) dated 09-01-2014 would be relevant to be looked into. Further, the Higher Judicial forum has time and again held that the no addition merely on the basis of noting in diary/loose paper etc. can be made unless other corroborative materials are brought on record by the revenue to hold that the assessee earned unaccounted income. In this regard reference can be made to the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Maulikkumar K Shah reported in 307 ITR 137 wherein it was held that:
"Notings in the seized diary found from the premises were the only material on the basis of which the Assessing Officer had made the impugned additions. The Assessing Officer had not brought any corroborative material on record to prove that such sales were made and 'on-money' was received by the assessee outside the books of account. The Assessing Officer had not examined any purchaser to whom the sales of shops were effected. Onus heavily lay on the revenue to prove with corroborative evidence that the entries in the seized diary actually represented the sales made by the assessee. Such onus had not been discharged by the revenue. Mere entries in the seized material were not sufficient to prove that the assessee had indulged in such a transaction.
The inference of the Assessing Officer that the assessee has received 'on-money', was merely based on suspicion and surmises and there was no material whatsoever to support the conclusion of the Assessing Officer that the assessee had in fact received any 'on-
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 78 money'. The addition as made by the Assessing Officer being based on mere presumptions and assumptions and without any corroborative evidence, could not be sustained.
100.5 We also draw support and guidance from the order of Mumbai ITAT in case of DCIT vs. Padmasree DR D.Y. Patil University in ITA No. 3264 to 3668/Mum/2022 where with respect to evidentiary value of loose paper found in the course of search has held as under:
30. In the decision rendered by Hon'ble Supreme Court in the case of Common Cause (a registered society) reported in 394 ITR 220, it was held that the documents recovered by the authorities will have no evidentiary value unless it is corroborated with any other independent evidence, i.e., uncorroborated loose papers found in the search cannot be taken as sole basis for determination of undisclosed income. The Hon'ble Supreme Court has held in the case of CBI vs. V C Shukla (supra) that even correct and authentic entries in books of account cannot fix a liability upon a person without independent evidence of their trustworthiness. We notice that the Hon'ble Supreme Court has dealt with the entries made in a diary which was considered to be regular books of account and held that it cannot be relied upon. However, in the instant case, the evidences relied upon by the AO are certain abstract statements maintained by the employees in their respective laptops.
Hence, in our view, it cannot be said that those uncorroborated materials have any evidentiary value viz-a-vis the assessee unless any other independent material is brought on record to prove the trustworthiness of those abstract information.
100.6 In the case on hand, the assessee has explained that he used to make noting on the diary on estimation and memory basis for the transaction of the group concern which may likely to take place. The assessee has furnished details showing the majority of the noting in those sheets which were already recorded in the books of accounts of group concerns. Therefore, in our considered view, making further addition based on such document will lead to double addition. Thus, in view of the above and after considering the facts, we hold that no addition is liable to me made in the given facts and circumstances based on uncorroborated seized materials. Therefore, we hold that the addition of amount appearing at S. Nos. 3-4, 7, 11-13, 28-30, 33-35 and 38 of the table reproduced in assessment order pages 5 to 6 cannot be sustained. In view of the above detailed discussion, the ground of appeal raised by the Revenue is hereby dismissed whereas the ground of appeal of the assessee is hereby allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 79
101. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 12.8 Lakh made under section 69B of the Act representing other unaccounted advances.
102. During search at the premises of the assessee's group at 31 Ajanta Park Society Memnagar, a diary was found, marked as annexure -S2(3). The special auditor reported that as per the impugned seized materials, the assessee made cash advances of Rs. 42,14,125/- to various parties which were not recorded in the regular books of accounts, the details of the same stand as under:
Sl. Name of the Party Unaccounted
No Amount of Other
Advance
1 A. K. SINDHE 112,125
2 GOVINDBHAI M. PATEL 80,000
3 KODHIAR AUTO PARTS 50,000
4 MOHAN RAMDEV JHA 900,000
5 MOHAN RAMDEV JHA 300,000
6 Paid to Chartered Accountant 322,000
7 Paid to Chartered Accountant 100,000
8 SAVITA GOVIND ESTATE DEVELOPERS PVT, LTD. 1,000,000
9 SAVITA GOVIND ESTATE DEVELOPERS PVT. LTD. 300,000
10 SAVITA GOVIND ESTATE DEVELOPERS PVT. LTD. 350,000
11 SAVITA GOVIND ESTATE DEVELOPERS PVT. LTD. 400,000
12 SAVITA GOVIND ESTATE DEVELOPERS PVT. LTD. 300,000
TOTAL 4,214,125
102.1 As the assessee failed to make response to the notices issued regarding the above stated advances, the AO treated the same as income of the assessee under the provisions of 69B of the Act.
103. The aggrieved assessee preferred an appeal before the learned CIT(A). It was submitted before the learned CIT(A) that the seized diary was written by the assessee (Shri Govindbhai M Patel) with respect to the transactions of various concerns in which he was in-charge. The transactions noted in the diary are not IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 80 the transactions which have taken place but the transactions which were likely to take place or Shri Govindbhai noted the transactions based on his memory without any supporting material. The assessee further explained that the notings recorded in each page of the diary were the basis for making the addition. The explanation submitted by the assessee is discussed as under:
- The alleged advance of Rs. 1,12,125/- to Shri AK Shinde was based on the noting made on page 18 of annexure S-2(3) of seized materials. It was indeed a payment made by M/s Nitin Construction Ltd through banking channel to Shri AK Shinde (advocate) against professional fee of Rs. 1.25 Lakh after TDS. The transaction duly recorded in the books of M/s Nitin Construction.
- The alleged addition representing unaccounted advance for Rs. 80,000/- was appearing on page 14 of seized documents. The entry on the seized paper was recorded in the name of the assessee himself. Furter, the impugned page contains 5 entries, but the addition was made only for one entry. Therefore, no addition of unaccounted advance can be made based on the noting on the impugned page.
- The addition of Rs. 50000/- on the alleged unaccounted advance by the assessee to Khodiyar Auto Part represents payment made by M/s Nitin Construction Ltd through Cheque which was duly recorded in the regular books of accounts of the company.
- The addition of Rs. 12 Lakh made on account of advance to Shri Mohan Ramdev Jha, based on page 11-A of annexure - S 2(3), where 2 entries of Rs. 9 and 3 lacs were appearing dated 19 and 20 June 2009. There was similar amount noted on page 5 of annexure-S-2(2) for Rs. 12 Lakh dated 16 June 2009.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 81
- The next addition of Rs. 4.22 Lakh on account of alleged unaccounted advance being "paid to chartered accountant" but no such entry was found in the seized document. The same was also not reported by the special auditor in his report. Hence, no addition can be sustained.
- The next addition for Rs. 23.50 Lakh based on page 15 of seized document annexure-S-2(3) on the allegation of unaccounted advance to M/s Savita Govind Estate Developers Pvt Ltd (hereafter M/s SGEDPL). However, the impugned transaction represents the amount received by M/s SGEDPL in its Indian Overseas Bank Account. So, no addition is warranted in such facts and circumstances.
103.1 The learned CIT(A) after considering the facts in totality confirmed the addition to the extent of Rs. 12.8 Lakh on account of unaccounted advances made to Shri Govind Patel and Mohan Ramdev Jha whereas deleted remaining addition of Rs. 29,34,125/- only. The detailed finding of the learned CIT(A) is available at para 9.3 to 9.3.7 on pages 31 to 33 of his order.
104. Being aggrieved by the order of the learned CIT(A), both the assessee and the Revenue are in appeal before us. The assessee is in appeal against the addition confirmed for Rs. 12,80,000/- whereas the revenue is in appeal for the deletion of the addition for Rs. 25,12,125/- only. The relevant ground of appeal of the revenue in IT(SS) No. 60/Ahd/2023 reads as under:
"(c) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.
25,12,125/- out of Rs. 42,14,425/- made by the AO by treating the same as undisclosed advances given u/s. 69B of the IT Act on the basis of report of the Special Auditor."
104.1 Both the ld. AR and the learned DR before us before us supported the order of the authorities below to the extent favourable to them.
105. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that during IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 82 the search, a diary was found based on which it was alleged that the assessee has made unaccounted advances aggregating to Rs. 42,14,125/- only to 5 parties, detailed at page 7 of the AO, and the same was treated as income of the assessee under section 69B of the Act. However, the learned CIT(A) confirmed the addition with respect to 2 parties out of 7 for Rs. 12.8 lakh. Now both the assessee and revenue are before us on the issue. We first proceed to adjudicate the assessee's ground of appeal.
105.1 The first amount of alleged unaccounted advance, confirmed by the learned CIT(A) is for Rs. 80,000.00 based on page 18 of annexure S-2(3) of the seized document. We note that as per impugned page, the revenue authority alleged that the unaccounted advance was given to Shri Govindbhai M Patel meaning thereby that the assessee has given unaccounted advance to himself. Further, the impugned sized page of diary contains 5 transactions, but the AO cherry picked one transaction only without giving any reason for the same and without having any corroborative material suggesting the amount noted on the impugned page is the income of the assessee. Therefore, we are of the considered opinion that no addition can be sustained in the given facts and circumstances as the there is no corroborative material that the amount recorded on the impugned page of diary represents income of the assessee and the assessee cannot give advance to himself. Hence, the addition of Rs. 80000.00 on account of alleged advances to Shri Grovind M Patel is hereby deleted.
105.2 Against the addition of Rs. 12 Lakhs on account of the alleged unaccounted advance to Shri Mohan Ramdev Jha dated 19/20th June 2009, the assessee submitted that similar noting was also found on page 5 of annexure - S-2(2) of the seized material dated 16th June 2009 on another paper seized during the course of search which was separately added as unaccounted advance. But the same was deleted in the absence of corroborative material. Since the transaction on hand is identical to the earlier transaction, therefore, following the same IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 83 reasoning as discussed at para 95 of the order, we hereby set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him.
105.3 Now coming to the grounds of appeal of the revenue, at the outset we note the assessee before the learned CIT(A) based on supporting materials explained that the transaction recorded in the seized materials in respect of party namely A.K. Shinde and Khodiyar Auto part for Rs. 1,12,125/- and 50,000/- belong to M/s Nitin Construction Ltd which was carried out through the banking channel and duly recorded in books of account of M/s Nitin Construction Ltd. Accordingly, the learned CIT(A) deleted the addition. Once it is established that transactions found in the seized materials have already been recorded in the regular books of the concern organization of which he is in charge, in our considered opinion, the same cannot be held as unaccounted income. Likewise, notings made in the name of M/s Savita Govind Estate Developers Pvt Ltd (M/s SGEDPL) for the amount aggregating to Rs. 23.5 Lakh, the learned CIT(A) based on evidence provided by the assessee found that the same represents the cash deposited by the M/s SGEDPL in their bank account which was duly accounted for in the books of accounts. The finding of the learned CIT(A) has not been controverted by the learned DR. Hence, we do not find any infirmity in the order of the learned CIT(A) in this regard and thus, direct to AO to delete the addition by him for Rs. 25,12,125/- only.
105.4 In view of the above detailed discussion, the ground of appeal raised by the assessee is hereby allowed whereas the ground of appeal raised by the revenue is hereby dismissed.
106. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 76,800/- made on account of undisclosed cash expenses.
107. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 84 captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
108. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 39,50,000/- on account of cash received for land from M/s Nitin Construction.
109. At the outset, we note that the issues raised by the assessee in the captioned grounds of appeal for the AY 2010-11 is identical to the issue raised by the assessee in IT(SS)A No. 87/AHD/2023 for the assessment year 2009-10. Therefore, the findings given in IT(SS)A No. 87/AHD/2023 shall also be applicable for the assessment years 2010-11. The appeal of the assessee for the A.Y. 2009- 10 has been decided by us vide paragraph No. 85 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment year 2010-11. Hence, the ground of appeal filed by the assessee is hereby allowed.
110. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,55,556/- as deemed dividend under section 2(22)(e) of the Act.
111. The AO found that the assessee has received a loan of Rs. 5,65,000/- from M/s Nitin Construction Ltd in which he holds more than 10% share. Accordingly, the AO invoked the provisions of section 2(22)(e) of the Act and made an addition of Rs. 5,65,000/- as deemed dividend.
112. On appeal by the assessee, the learned CIT(A) found that the loan amount was treated as deemed dividend by the AO including opening balance and repayment of loan given by the assessee to the company for Rs. 2,09,444/- and Rs. 2,00,000/- respectively. Accordingly, the learned CIT(A) restricted the addition of deemed dividend to the extent of Rs. 1,55,556/- only.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 85
113. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
113.1 The learned AR of the assessee before us contended that as per the provisions of section 115-O read with section 10(34) of the Act, deemed dividend under section 2(22)(e) of the Act is chargeable to tax in the hands of company. Hence, no addition is to be made to the total income of the assessee.
113.2 On the other hand, the learned DR vehemently supported the order of the authorities below.
114. We have heard the rival contentions of both the parties and perused the materials available on record. The assessee holds more than 10% shares in M/s Nitin Construction Ltd with whom the assessee has entered a transaction of short loan and advances. As such, the assessee has an opening receivable balance from the company for Rs. 2,09,444/- and the assessee has given further advance of Rs. 2 Lakh to the company. Thereafter, the assessee received payment of Rs. 5.65 Lakh in the month of June and Sept. 2009 from the company due to which advance becomes liability by Rs. 1,55,556/- only. The learned CIT(A) treated the amount of Rs. 1,55,556/- as deemed dividend in hands of the assessee as per the provision of section 2(22)(e) of the Act. It is important to highlight that the assessee as on 18 November 2009 made payment of Rs. 3.5 Lakh due to which the ledger balance again converted from liability of Rs 1,55,556/- to loan & advances of Rs. 1,94,444/- which was still receivable at the end of the year.
114.1 From the above stated facts, it is transpired that the transactions entered into by the assessee with the company was in the nature of running account in which the assessee has receivable balance except for the brief period of 8 September to 17 November 2009 where the assessee has payable balance of Rs. 1,55,556/- only. Therefore, in our considered opinion, such payable balance in ledger account for brief period cannot be treated as loans extended by the company to the assessee for the purpose of deemed dividend as specified under IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 86 the provisions of section 2(22)(e) of the Act. Accordingly, we hereby set aside the finding of learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal raised by the assessee is hereby allowed.
115. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 8,58,969/- on account of undisclosed investment in Flat.
116. It was found that the assessee along with other parties purchased residential Flat A-93 in SG Plaza from M/s Savita Govind Estate Developer Ptd Ltd for a consideration of Rs. 19,75,993/- only. The assessee's share in the flat is 50% only. Accordingly, the assessee's share comes at Rs. 9,87,969/- only. However, in the assessee's books, the payment of Rs. 1.29 lakh only was shown without corresponding liability against the impugned purchase of Flat. Therefore, the AO assumed that the assessee has already made payment for the remaining consideration of Rs. 8,58,969/- only from unaccounted source and accordingly made the addition of same.
117. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) claimed that the amount of Rs. 8,59,969/- was shown as outstanding liability in his books and as debtor balance in the books of M/s Savita Govind Estate Developer Ptd Ltd. The same is still outstanding for the reason that the assessee could not make the payment due to the financial crisis. Therefore, the allegation that the payment was made from unaccounted income is incorrect.
117.1 However, the learned CIT(A) did not accept the claim of the assessee for the reason that the impugned flat is in the possession and full ownership of the assessee which was not possible without making full payment. Hence the learned CIT(A) confirmed the addition made by the AO.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 87
118. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
118.1 The learned AR before us reiterated the contentions made before the learned CIT(A).
118.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
119. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee has purchased a residential flat from M/s Savita Govind Estate Developer Pvt Ltd against which the assessee was liable to pay a consideration of Rs. 9,87,969/- only. However, the assessee has only paid Rs. 1,29,000/- and the remaining amount has been shown as liability which is still outstanding for the last several years. The revenue authorities presumed that the assessee must have paid the remaining consideration from unaccounted income for the reason that in the property dealing, the sale deed is executed, and possession of property is given only after full payment of consideration. As such, there is no material available on record to establish the allegation that the assessee had paid the remaining consideration out of unaccounted sources. The authorities merely on surmises and conjectures presumed that the assessee had made an unaccounted investment. It is trite law that doubt, surmise and conjecture howsoever strong, cannot take place the character of evidence. Therefore, no addition can be made based on doubt, surmises, conjecture without having corroborative material to support the allegations. Further in the given case the assessee has purchased the residential flat from the company in which he is shareholder/director. The assessee and the company both are showing amount payable and receivable in their respective books of account. The view of the learned CIT(A) that the execution of sale deed and transfer of possession is only given after payment of full consideration, might hold good when transaction carried out between unrelated parties which is not the case here. Therefore, we are of the considered opinion that revenue authority IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 88 erred in making the addition in the hand of the assessee merely based on assumptions and presumption and without bringing materials on record. Thus, we hereby set aside the order of the learned CIT(A) and direct the AO to delete the addition made by him. Accordingly, the ground of appeal of the assessee is hereby allowed.
120. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of ₹30 lakh on account of unaccounted income from sale of Flat bearing number A-93.
121. The AO found that during the search, certain papers marked as pages 1 to 21 of annexure AS (1)-1 containing details of sale of Flat No. A-113 in SG Plaza were found. As per the seized documents, the assessee has sold the impugned flat to the parties namely Shri Alpesh Ramani and Smt. Ranjana Ramani for a consideration of Rs 42.51 lakh, subsequently overwritten as 45.51 lakh with words approximately. The seized document also contains information that sale deed will be executed at Rs. 12.51 lakh on or before 31st March 2010. The statement of Shri Govindbahi M Patel (assessee) was recorded during the search in this regard, and he explained that he intended to sale the impugned Flat to the above-mentioned party for Rs. 42.51 lakh but the party only paid Rs. 18 Lakh out of which Rs. 12.51 Lakh received through cheque and remaining through cash. The AO made an inquiry from the Municipal office, and it was found that the present owners of the flat are Shri Alpesh Ramani and Smt. Ranjana Ramani. Accordingly, the AO was of the view that the transaction recorded in seized document is correct and proposed to make the addition of Rs. 30 Lakh being difference between consideration as per seized document of Rs. 42.51 Lakh and as per sale deed executed Rs. 12.51 in the hands of the assessee being the main person of the group and the same has not been recorded in the books of any person of the group. But the assessee failed to make any reply. Hence, the AO in absence of any detail made the addition to the total income of the assessee.
122. The aggrieved assessee preferred an appeal before the learned CIT(A).
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 89 122.1 The assessee before the learned CIT(A) submitted that seized documents itself contain the word "for estimated about Rs. 42.5 Lakh" which represents only estimation whereas in the statement recorded during the search it was explained that only Rs. 18 Lakh fetched from the party. Further, the sale deed was executed for Rs. 12.51 Lakh at Jantry value between the buyer and owner of the Flat M/s Savita Govind Estate Developer Pvt Ltd as the party only paid Rs. 12.51 Lakh. If any addition is required to be made, then such an addition can only be made in the hands of M/s Savita Govind Estate Developer Pvt Ltd for reason it is the company which was the owner of the Flat and not the assessee, Shri Govindbhai M Patel.
122.2 However, the learned CIT(A) confirmed the addition made by the AO by observing that it is clear from the seized document that the Flat was sold for Rs. 42.51 lakh therefore the explanation of the assessee that the sale consideration was received for Rs. 18 Lakh only was not acceptable and that too without having supporting evidence.
123. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
123.1 The learned AR before us contended that the owner of flat was the company M/s Savita Govind Estate Developer and the same was sold by the company. Therefore, the question of receipt of undisclosed consideration by the assessee does not arise. There is no amount received by the assessee against the sale of Flat by the company.
123.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
124. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the issue on hand have been elaborated in the preceding paragraph which are not in dispute. Hence, we are not inclined to IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 90 repeat the same for the sake of brevity and convenience. We note that the owner of the scheme, SG Plaza was the company i.e. M/s Savita Govind Estate Developer Ltd and not the appellant assessee. The sale deed was executed between the company and the buyer. There is no material on record suggesting the assessee was the owner of the impugned flat and whatever the sales consideration was received by the appellant assessee. Therefore, in our considered opinion that if any amount of cash consideration over the amount on which sale deed was executed, then such amount can only be taxed in the hands of the company M/s Savita Govind Estate Developer Ltd and not the appellant assessee. Accordingly, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal raised by the assessee is hereby allowed.
125. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A NO. 60/Ahd/2023, an appeal by the Revenue in case of Shri Hashmukh bhai Govindbhai Patel (Legal heir of Late Shri Govind bhai M Patel) for AY 2010-11.
126. The Revenue has raised following grounds of appeal:
"(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.
1,51,00,000/- on account of unexplained investment u/s. 69 of the Act.
(b) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 62,45,932/- out of Rs. 2,03,32,739/- made by the AO by treating the same as undisclosed advances given in cash u/s. 69B of the IT Act on the basis of report of the Special Auditor.
(c) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 25,12,125/- out of Rs. 42,14,425/- made by the AO by treating the same as undisclosed advances given u/s. 69B of the IT Act on the basis of report of the Special Auditor.
(d) The appellant craves leave to add, alter and / or to amend all or any of the ground before the final hearing of the appeal."
127. The first issue raised by the revenue is that the learned CIT(A) erred in deleting the addition of Rs. 1.51 crore being unaccounted investment in Bodekdev Land.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 91
128. During the search, a letter dated 22-02-2010 written by Shri Narsinh G. Patel to the assessee was found and seized. As per the impugned letter, Shri Narsinh G Patel made payment of Rs. 46 Lakh (36 Lakh cash + 10 Lakh Cheque) to Shri Dharmesh Patel on behalf of the appellant assessee in connection land dealing of Rs. 1.51 crore situated at Bodekdev bearing survey No. 97/1 Plot No. 63 for an area of 1150 sq. mts. The AO made an inquiry from the land revenue office and noticed that the assessee was the owner of the impugned land.
128.1 Further, based on the seized document and special auditor report, it was found that the assessee has received an amount of Rs. 40 Lakh from Shir Dharemesh Patel against outstanding advance of Rs. 52.35 Lakh. Based on the above, the AO assumed that the assessee was the owner of the impugned land and Shri Narsinh G. Patel wanted to purchase such land in which Shri Dharmesh Patel maybe a confirming party. But the impugned land was not disclosed in the books of the assessee. Therefore, the AO held that the assessee has undisclosed property having a market value of Rs. 1.51 crores and accordingly in the absence of explanation/submission from the assessee treated the market value of Rs. 1.51 crore as unexplained investment of the assessee.
129. The aggrieved assessee preferred an appeal before the learned CIT(A).
129.1 The assessee before the learned CIT(A) claimed that the special auditor and the AO wrongly interpreted the contents of the letter. Indeed, Shri Narsinh G Patel stated that he has made payment to Shri Dharmesh Patel which Shri Dharmesh Patel was not repaying. Therefore, Shri Narsinh G Patel requested the appellant assessee to look into the matter and in case of default of shri Dharmesh Patel, the assessee should execute the sale deed of a piece of land having equivalent value of Rs. 46 lakh only. In the said letter it is nowhere stated the Shri Narsinh G Patel made payment on behalf of the appellant assessee.
129.2 The assessee further submitted that land bearing survey no. 97/1 plot no. 63 at Bodekdev admeasuring 10,890 sq. yrd. was purchased by him along with IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 92 other co-owners for Rs. 76,230/- as on 11-09-1983 in which his share is only 890 square yards. Thus, his cost of acquisition comes at Rs. 6,230/- only. The same was not disclosed in the books of account as he was not maintaining complete books of account. Accordingly, the assessee contented that an investment made in the year 1983 cannot be made subject to addition in the A.Y. 2010-11 as an unexplained investment.
129.3 The learned CIT(A) after considering the facts in totality deleted the addition made by the AO. The finding of the learned CIT(A) is briefly discussed as under:
- From the purchase deed provided by the assessee, it is clear that such land was purchased on 11/10/1983 at a consideration of Rs. 76,230/- only.
- As per the seized document, the transaction was between Shri Narsinh G Patel and Shri Dharmesh Patel for acquiring the land at Rs. 1.51 crore which does not mean that assessee has acquired such land in the year under consideration.
- Seized documents nowhere mention that Shri Dharmesh Patel received the amount on behalf of the assessee.
- Merely land not shown in the books of the assessee does not mean that the assessee has made an unaccounted investment of Rs. 1.51 crores in the year under consideration when such land was acquired in earlier years.
- Assessee has received payment of Rs. 40,00,000/- from Shri Dharmesh Patel in cash against the opening balance of Rs. 52.35 lacs. This transaction has no connection with the amount received by Shri Dharmesh Patel from NG Patel.
130. Being aggrieved by the order of the learned CIT(A), the revenue is in appeal before us.
130.1 Both the learned DR and the learned AR before us vehemently supported the order of the lower authorities to the extent as favourable to them.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 93
131. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the land in dispute was acquired by the assessee in the earlier assessment year as emanating from the order of the learned CIT-A. Therefore, we are of the considered opinion that no addition in the year under consideration can be made in the hands of the assessee on account of investment in the land. Thus, we find no reason to interfere in the finding of the learned CIT-A and accordingly, we uphold the same. Hence the ground of revenue's appeal is hereby dismissed.
132. The next issue raised by the revenue is that the learned CIT(A) erred in deleting addition of Rs. 62,45,432/- and Rs. 25,12,125/- on account of unaccounted advances and other unaccounted advances given by the assessee.
133. At the outset, we note that the issue raised by the revenue in the captioned ground of appeal has been adjudicated along with the assessee's grounds of appeal in IT(SS)A No. 88/AHD/2023. The relevant grounds of appeal of appeal of the assessee in IT(SS)A No. 88/AHD/2023 has been decided by us vide paragraph no. 100 and 105 of this order where we have decided the issue in favour of the assessee and against the revenue. For detailed discussion, please refer to the aforesaid paragraph number of this order. Hence, the ground of appeal raised by the Revenue is hereby dismissed.
133.1 In the result, the appeal of the Revenue is hereby dismissed.
Coming to IT(SS)A NO. 89/Ahd/2023, an appeal by the assessee, Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Shri Govindbhai M Patel) for AY 2011-12.
134. The assessee has raised following grounds of appeal:
"01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 94 accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Undisclosed Cash Receipt towards Land Rs. 15,20,000
(ii) Cash Credit under Section 68 Rs. 5,51,000
(iii) Unaccounted Income From Sale of Flat No.B- Rs. 38,50,000 23 & B-114
(iv) Unaccounted Income From Sale of Flat Rs. 93,49,000 No.B-104 & A-112 & A-93 Total: Rs. 152,70,000 4.1 The learned CIT(A) has erred in confirming the addition Undisclosed Cash Receipt towards Land of Rs. 15,20,000 out of Rs. 39,50,000 in as much as mere receipt of money without actual transaction towards sale of flat cannot be treated as an income.
4.2 The learned CIT(A) has erred in confirming the addition of Rs. 5,51,000 in relation to undisclosed credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper.
4.3 The learned CIT(A) has erred in confirming addition of Rs. 38,50,000 being unaccounted income from sale of Flat No. B-23 and B-114 on the basis of loose papers found during search in as much in as the addition merely based on ceased material without any corroborative evidences, the addition cannot be made.
4.4 The learned CIT(A) has erred in confirming addition of Rs. 93,49,000 being unaccounted income from sale of Flat No. B-104 & A-112 & A-93 on the basis of loose papers found during search in as much in as the addition merely based on ceased material without any corroborative evidences, the addition cannot be made."
135 The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 95
136. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
137. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of 15.20 Lakh being unaccounted cash receipt towards advance for land from M/s Nitin Construction.
138. At the outset, we note that the issues raised by the assessee in the captioned grounds of appeal for the AY 2011-12 is identical to the issue raised by the assessee in IT(SS)A No. 87/AHD/2023 for the assessment year 2009-10. Therefore, the findings given in IT(SS)A No. 87/AHD/2023 shall also be applicable for the assessment years 2011-12. The appeal of the assessee for the A.Y. 2009- 10 has been decided by us vide paragraph No. 85 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2009-10 shall also be applied for the assessment years 2011-12. Hence, the ground of appeal filed by the assessee is hereby allowed.
139. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 5,51,000/- being unexplained cash credit under section 68 of the Act.
140. The assessee during the year has received unsecured loans of Rs. 5,51,000/- from the following persons:
1. Dr. Chavda Rs. 51,000/-
2. Parshottamdas B Patel Rs. 1,00,000/-
3. Parshottam Darji Rs. 4,00,000/-
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 96 140.1 The AO in absence of any explanation and submission from the assessee treated the same as unexplained cash credit under section 68 of the Act and added to total income of the assessee.
141. The aggrieved assessee preferred an appeal before the learned CIT(A).
141.1 The assessee before the learned CIT(A) regarding the receipt of Rs. 51,000/ from Dr. Chavda stated that the same was taken as part of peak credit.
141.2 Regarding loan of Rs. 1 Lakh from Shri Prushottamdas B Patel, the assessee furnished copy of ledger account showing amount received through bank and filed a copy of confirmation letter. Likewise, the assessee regarding loan of Rs. 4 Lakh from Shri Purshottam Darji furnished copy of ledger, confirmation, and PAN. Accordingly, the assessee contended that the question treating such receipt as unexplained credit does not arise.
141.3 The learned CIT(A) confirmed the addition by holding that the assessee has not discharged the burden cast upon him.
142. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.
142.1 The learned AR before us submitted that the assessee has total outstanding loan from Shri Purshottamdas B Patel is at Rs. 1 Lakh but out of which only Rs. 50,000/- was received during the year and balance amount of Rs. 50000/- was carried forward from the previous year. Therefore, the addition if any is to be made under section 68 of the Act, such addition should be restricted to Rs. 50,000/- only. Likewise, the learned AR submitted that during the year only Rs. 1 lakh was received form the party Shri Purshottam Darji and Rs. 3 Lakh is opening balance carry forwarded from earlier year, hence total outstanding at the end of the year was Rs. 4 lakhs, out of which Rs. 1.45 Lakh was repaid in subsequent years. Therefore, no addition is required to be made on account of loan from Shri Purshottam Darji.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 97 142.2 On the other hand, learned DR before us vehemently supported the order of the authorities below.
143. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee during the year received unsecured loan from 3 parties. Therefore, the assessee as per the provisions of section 68 of the Act was required to explain the nature and source of credit by establishing identity, genuineness, and creditworthiness of the creditor.
143.1 Regarding the party namely, Dr. Chavda from whom loan of Rs. 51,000/- was received, we note that the assessee has not provided any detail except ledger account. The assessee claimed that such credit has been taken as part of peak credit working. At the outset, we note that the assessee has made identical claim for the addition made under section 68 of the Act in ground of appeal raised for AY 2009-10 in IT(SS)A No. 87/AHD/2023 which we have rejected and relevant finding in this regard is given in paragraph no. 73.2 of this order. Hence, we hereby confirm the addition made for Rs. 51000/- on account of loan, from Dr. Chavda.
143.2 Coming to the loan from the party namely Shri Purshottamdas B Patel, the AO has made addition of Rs. 1 Lakh whereas the learned AR before us claimed that only Rs. 50 thousand was received during the year. In this regard, we perused the ledger account of the impugned party available at page 30 of the paper book and found that the claim of the learned AR is correct. Therefore, the excess addition of Rs. 50 thousand on account of loan from said party is deleted. Regarding the remaining amount of Rs. 50 thousand which was received during the year, we note that the assessee only provided ledger copy and confirmation letter, but such letter does not contain PAN and Bank detail from which the amount was disbursed. The bank statement of appellant assessee was also not available on record. Therefore, we are of the considered opinion that the assessee has not discharged complete burden regarding identity, creditworthiness, and genuine of the party. Hence, we hereby confirm the addition of Rs. 50 thousand IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 98 on account of receipt of loan from Shri Purshottamdas B Patel as unexplained credit under section 68 of the Act.
143.3 Coming to unsecured loan from Shri Purhsottam Darji, we note that the AO has held that the assessee received total loan of Rs. 4 Lakh from the impugned party. However, on perusal of the ledger account placed on page 33 of the paper book, we find that during the year only an amount of Rs. 1 lakh was received from the impugned party and the remaining amount of Rs. 3 lakh represents opening balance. Therefore, the AO/CIT(A) wrongly applied the provision of section 68 of the Act on opening balance of Rs. 3 Lakh which is hereby deleted. Regarding the amount of Rs. 1 Lakh received during the year, the assessee has provided primary documents such as ledger copy, PAN, and confirmation letter. It is important to note that the assessee has received the loan amount during the year and in the earlier year through banking channel and part of the loan amounting to Rs. 1.45 Lakh was repaid to the party in the immediate next assessment year. Thus, to our understanding, the assessee, in the case of the party on hand, has discharged the onus cast under section 68 of the Act. Furthermore, the identity, creditworthiness of the party and genuineness of the transaction was accepted by the Revenue with respect to the loan received in the earlier year. Hence, no addition is warranted for the loan of Rs. 4 lacs as discussed above. In view of the above detailed discussion, the ground of appeal raised by the assessee is partly allowed.
144. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 38.5 Lakh and Rs. 93.49 lakh on account of unaccounted receipt against sale of flat Nos. B-23 & B-114 and B-114, A-112 & A- 93 of SG Plaza respectively.
145. At the outset, we note that the issues raised by the assessee in the captioned grounds of appeal for the AY 2011-12 is identical to the issue raised by the assessee in IT(SS)A No. 88/AHD/2023 for the assessment year 2010-11. Therefore, the findings given in IT(SS)A No. 88/AHD/2023 shall also be applicable for the assessment years 2011-12. The appeal of the assessee for the A.Y. 2010- IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 99 11 has been decided by us vide paragraph No. 124 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2010-11 shall also be applied for the assessment year 2011-12. Hence, the ground of appeal filed by the assessee is hereby allowed.
146. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A No. 100/Ahd/2023, an appeal by the assessee, Shri Hashmukhbhai Govindbhai Patel (Legal heir of Late Smt. Savitaben Govindbhai Patel) for AY 2005-06.
147. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) LTCG on sale of Thaltej Land Rs. 1,43,12,097
(ii) Notional Rent on vacant House Property Rs. 8,400
Total: Rs. 1,43,20,497
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others
A.Ys. 2005-06 to 2011-12
100
4.1 The learned CIT(A) has erred in confirming the addition in relation to alleged sale
of land at Thaltej in as much as there is no transfer of the land or there is no consideration which is received towards alleged sale of land and that the learned CIT(A) has erred in relying the judicial decisions which are not relevant on the facts of the case.
05. The learned CIT(A) has erred in confirming the notional rent under Section 23 in as much as the addition made is not proper as per law."
148. The assessee vide letter dated 31-01-2024 also filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
149. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2005-06 in IT(SS)A No. 100/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal of the assessee for AY 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 100/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
150. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 101
151. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
152. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,43,12,097/- on account of long-term capital gains on the alleged sale of Thaltej lands.
153. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2005-06 in IT(SS)A No. 100/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned ground of appeal of the assessee for AY 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph No. 25 of this order in favor of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 100/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
154. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 8,400/-being notional rent on vacant property.
155. The AO found that that the assessee was the owner of 2 properties being bungalows at Hindu colony and Narol Godown. Therefore, the AO treated the property with higher value i.e. Hindu colony bungalow as self-occupied property and treated the Narol Godown for purpose of deemed rental. Accordingly, the AO worked out the notional rent @ Rs.1,000/- per month and after providing standard deduction made addition of Rs. 8400/- to the total income of the assessee.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 102
156. On appeal by the assessee, the learned CIT(A) also confirmed the addition made by the AO.
157. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
157.1 The learned AR for the assessee before us submitted the property i.e. Narol Godown is held for business purposes. Therefore, the provision of section 22 of the Act cannot be applied.
157.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
158. We have heard the rival contentions of both the parties and perused the materials available on record. We note that the appellant assessee was owner of a Bungalow and a Godown. The revenue authority taxed notional rental income on the Godown in accordance with the provision of section 23(4) of the Act.
158.1 The provision of section 22 of the Act provides that the annual value of property consisting of any building or land appurtenant thereto other than property used for the purpose of business or profession shall be chargeable to tax under the head house property. The learned AR before us contended that the Godown is held for the purposes of business, but no evidence was furnished to establish that the assessee was carrying on any business or profession, and the impugned Godown was used by assessee for its business or profession. Therefore, we do not agree with the contention of the learned AR. Accordingly, we uphold the finding of the learned CIT-A. Hence, the ground of appeal of the assessee is hereby dismissed.
159. In the result appeal of the assessee is hereby partly allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 103 Coming to IT(SS)A NO. 116/Ahd/2023, an appeal by the assessee Shri Hashmukh bhai Govindbhai Patel (Legal heir of Late Smt. Savitaben Govindbhai Patel) for AY 2007-08.
160. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 23-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Ognaj Land - Jay LaxmiKhetiSahakariMandali Ltd. Rs. 30,00,000
(ii) Undisclosed Income from sale of Shela Land Rs. 1,81,44,345
(iii) Notional Rent on vacant House Property Rs. 8,400 Total: Rs. 2,11,52,745 4.1 The learned CIT(A) has erred in confirming the addition of Sale of Ognaj Land -
Jay Laxmi Kheti Sahkari Mandali of Rs. 30,00,000 in as much as there is not transfer of land by the assessee and that the assessee has not received any consideration for the same.
4.2 The learned CIT(A) has erred in confirming the addition of Rs. 1,81,44,345 regarding Shela land in as much as the sale of land was an agriculture land and that the same is not capital assets and therefore not chargeable to capital gain.
05. The learned CIT(A) has erred in confirming the notional rent under Section 23 in as much as the addition made is not proper as per law."
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 104
161. The assessee vide letter dated 31-01-2024 also filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
162. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2007-08 in IT(SS)A No. 116/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal of the assessee for A.Y. 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 116/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
163. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
164. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 105
165. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 30 Lakh on account of sale of Ognaj Land- Jay Laxmi Kheti Sahkari Mandali.
166. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2007-08 in IT(SS)A No. 116/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 86/AHD/2023 for the assessment year 2007-08. Therefore, the findings given in IT(SS)A No. 86/AHD/2023 shall also be applicable for the captioned ground of appeal of the assessee for AY 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 86/AHD/2023 has been decided by us vide paragraph No. 63 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in IT(SS)A No. 86/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 116/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
167. The next issue raised by assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,81,44,345/- being undisclosed income on account of sale of shela Land.
168. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
169. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 8,400/-being notional rent on vacant property.
170. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2007-08 is identical to the issue raised by the assessee in the in IT(SS)A No. 100/AHD/2023 for the assessment year 2005- IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 106
06. Therefore, the findings given in IT(SS)A No. 100/AHD/2023 shall also be applicable for captioned ground of appeal of the assessee for AY 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 100/AHD/2023 has been decided by us vide paragraph No. 158 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in A.Y. 2005-06 shall also be applied for the ground raised in A.Y. 2007-08. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby dismissed.
171. In the result, appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A No. 90/Ahd/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel for AY 2005-06.
172. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books, of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Capital Gain on sale of Thaltej Land Rs. 1,64,69,800 IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 107
(ii) Undisclosed Cash Receipts towards Land Rs. 60,95,302
(iii) Undisclosed Bank Account Rs. 1,00,03,120
(iv) Notional Rent on vacant House Properties Rs. 42,000 Total: Rs. 3,26,10,222 4.1 The learned CIT(A) has erred in confirming the addition in relation to alleged sale of land at Thaltej in as much as there is no transfer of the land or there is no consideration which is received towards alleged sale of land and that the learned CIT(A) has erred in relying the judicial decisions which are not relevant on the facts of the case.
4.1.1 Without prejudice to above, the learned CIT(A) has erred in confirming the capital gain of Rs. 1,64,69,800 in as much as the learned CIT(A) has erred in not following the correct computation of capital gain as per law.
4.2 The learned CIT(A) has erred in confirming the addition in relation to undisclosed cash receipts and undisclosed credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper.
05. The learned CIT(A) has erred in confirming the notional rent under Section 23 in as much as the addition made is not proper as per law."
173. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
174. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2005-06 in IT(SS)A No. 90/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal by the assessee for A.Y. 2005-06. The relevant ground of appeal of the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 108 assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 90/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
175. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
176. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
177. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,64,69,800/- on account of long-term capital gains on the alleged sale of Thaltej lands.
178. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2005-06 in IT(SS)A No. 90/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned ground of appeal by the assessee for AY 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph No. 25 of this order in favor of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in in IT(SS)A No. 84/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 90/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 109
179. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 60,95,302/- on account of cash receipt towards land.
180. The AO in the present case has treated the cash receipt towards land from 3 parties as income in the absence of any detail in support of such cash receipt and added to the total income of the assessee. On appeal, the ld. CIT-A also confirmed the finding of the AO.
181. Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.
182. The ld. AR before us submitted that the assessee has not received any amount towards the land in the year under consideration. This fact was also admitted by the special auditor in his report which can be verified from page No. 70 of the special audit report placed in the paper book.
182.1 On the contrary, the learned DR before us could not controvert the arguments advanced by the ld. AR of the assessee. However, the ld. DR submitted that the impugned advances have not been returned by the assessee. Therefore, the provisions of section 41(1) of the Act should be applied so as to bring such advances under the net of tax.
183. The Ld. AR in his rejoinder submitted that the assessee still owes such liabilities which have not ceased to exist in the books of accounts. Furthermore, such advance is not related to the business or trading liability. Therefore, such advances cannot be treated as income under the provisions of section 41(1) of the Act. Without prejudice to the above, the Ld. AR submitted that even if it is assumed that such liability has ceased to exist then same should be treated as capital in nature not chargeable to tax. The Ld. AR in support of his contention relied on the judgement of Hon'ble Gujarat High Court in the case of M/s Chetan IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 110 Chemicals Private Limited reported in 267 ITR 770. It was prayed by the Ld. AR that no addition in the given facts and circumstances needs to be made.
184. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the advances shown by the assessee as stated above were not received in the year under consideration. Therefore, the same cannot be treated as income for the year in dispute.
184.1 Regarding the cession of liability under the provisions of section 41 of the Act, we note that a trading liability is the one which has been allowed as deduction while computing income from the business or profession but has not been paid except claiming the same on accrual basis and resultantly, shown in the balance sheet as a liability. Thus, section 41(1) of the Act relates only to trading liability and not to any other type of liability. The liability relating to capital field cannot be considered as deduction while computing income of the assessee. It is only the trading liability which can be considered for allowing deduction in the profit and loss account or trading account. In addition to a liability being of the nature of trading liability as discussed above, it has to be further shown that it was already been considered as deduction in an earlier year. But the assessee has not been allowed any deduction for such liability in the earlier year. Furthermore, the assessee is not carrying out any business, therefore we are of the view that the provisions of section 41 of the Act cannot be applied in the given facts and circumstances. In holding so, we place reliance on the judgement of Hon'ble Gujarat High Court in the case of Chetan Chemicals private limited (supra) wherein it was held as under:
On a reading of the provisions, it is apparent that before the section can be invoked, it is necessary that an allowance or a deduction has been granted during the course of assessment for any year in respect of loss, expenditure or trading liability which is incurred by the assessee, and subsequently during any previous year the assessee obtains, whether in cash or in any other manner, any amount in respect of such trading liability by way of remission or cessation of such liability. In that case, either the amount obtained by the assessee or the value of the benefit accruing to the assessee can be deemed to be the profits and gains of a business or profession and can be brought to tax as income of the previous year in which such amount or benefit is obtained. In the facts of the case on hand, without entering into the aspect as to whether the liability to repay the loans would be a trading liability or not, it is an admitted position that there had been no allowance or deduction in any of the preceding years and hence, there is no question of applying the provision as such.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 111 184.2 In view of the above and after considering the facts in totality discussed above, we set aside the order of the ld. CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.
185. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,00,03,120/- on account of undisclosed bank account.
186. It was found that the assessee was having bank account (A/C No. 0033100065) with Kalupur Commercial Co-operative Bank (KCCB) in which a secured loan was taken and repaid of Rs. 2,42,95,551/- over the period of time.
However, the impugned bank account was not disclosed in the books of account. There was no explanation furnished by the assessee regarding the source of repayment of the loan and the nature of account. Therefore, the AO worked out the peak credit amount in the impugned bank account for A.Ys. 2005-06 to 2007-
08. Accordingly, the AO made addition of Rs. 1,00,03,120/- in the year under consideration i.e. A.Y. 2005-06 to the total income of the assessee.
187. The aggrieved assessee preferred an appeal before the learned CIT(A).
187.1 The assessee before the ld. CIT-A submitted that the impugned bank account is joint bank account with Smt. Savita Govind Patel. During the year, there were only 3 credits in the impugned bank account. The first credit of Rs. 3120 dated 02-09-2004 on account of divided from KCCB which is exempt from tax as the dividend from cooperative bank is not taxable. The next credit was Rs. 50 Lakh dated 05-11-2004 which was deposited by Shri Biren Ramjibhai Desai and confirmation from the party is enclosed. Likewise, the last credit of Rs. 50 Lakh dated 06-11-2004 was representing the sale proceeds of agricultural land situated at Rakanpur which is not taxable.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 112 187.2 However, the learned CIT(A) found that the receipt of dividend is covered under section 115-O of the Act is exempt from tax but dividend from cooperative bank is not covered under the provision of section 115-O of the Act. Hence the ld. CIT-A confirmed the addition of Rs. 3,120/- only.
187.3 Regarding credit of Rs. 50 Lakh from Shri Biren Ramjibhai Desai, the learned CIT(A) found that the assessee only furnished PAN and confirmation but failed to furnish the detail of source, such as copy of ITR and bank statement of the party which is necessary under the provisions of section 68 of the Act. Hence, the ld. CIT-A confirmed the addition of Rs. 50 Lakh.
187.4 The learned CIT(A) regarding the claim of Rs. 50 Lakh credited on account of sale of agricultural land found that the assessee failed to furnish copy of sale deed to establish the land sold was agricultural land only, the detail of agricultural activities carried out and copy of GIS map to ascertain the location of the land. Hence, the learned CIT(A) rejected the claim of the assessee and confirmed the addition made by the AO.
188. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
188.1 The learned AR before us filed a paper book running from pages 1 to 138 and contended that the sum of Rs. 50 lakhs were received through account payee cheque from Shri Biren Ramji bhai Desai which is supported by the PAN, Confirmation and address placed on pages 190 of the PB. A copy of the bank statement is also available on pages 188 to 189 of the paper book demonstrating the amount was received through banking channel.
188.2 It was also submitted that the cash of ₹ 50 lakhs was deposited in the impugned bank account out of the sale proceeds of agricultural land which is not chargeable to tax. The Ld. AR in support of his contention drew our attention on IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 113 pages 191 to 193 of the paper book demonstrating that land in dispute is an agricultural land.
188.2 On the other hand, the learned DR before submitted that there was no sale deed filed by the assessee during the proceedings before the AO and the learned CIT-A and vehemently supported the order of the authorities below.
189. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee was having an undisclosed joint bank account in Kalupur Commercial Cooperative Bank (KCCB) in which there were 3 credit entries for the amount aggregating to Rs. 1,00,03,120/- during the year. The AO and the learned CIT(A) treated the same as income of the assessee for reason discussed in their respective order.
189.1 At the outset, we note the learned AR of the assessee regarding the credit of dividend of Rs. 3120/- before us submitted that he was instructed by the assessee not to press the issue on such addition made by the Revenue. Hence, the addition to the extent of dividend income of Rs. 3120/- is hereby confirmed.
189.2 Regarding the credit of Rs. 50 Lakh dated 05-11-2004, we note that the assessee claimed that same is loan from Shri Biren Ramjibhai Desai which is supported by the address, PAN, and confirmation letter from the party. Indeed, under the provision of section 68 of the Act, the primary onus is on the assessee to provide details regarding the identity of the creditor, genuineness of transaction, and creditworthiness of the creditor. Once the primary details provided by the assessee, the burden shift upon the Revenue to disprove the same based on cogent material brought on record after conducting necessary inquiries and verification. In the present case the assessee has provided name, address, PAN, and confirmation of the creditor of Shri Biren Ramjibhai Desai to prove the identity, creditworthiness of the creditor, and genuineness of the transaction. However, the revenue authority without disproving the same and without conducting the inquiry and verification treated the credit from impugned IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 114 party as unexplained cash credit merely for the reason that the assessee has not provided copy of ITR and bank statement of the party. On the contrary, the PAN of the party was made available. If the revenue authority was keen to verify the ITR of the party, they should have verified the same from ITD data base. But the revenue authority did not make independent inquiry either from ITD database or directly from the party whose address, PAN were made available by the assessee. Hence, in view of the above discussion, we hereby hold that the assessee has discharged the primary onus cast under section 68 of the Act in the given facts and circumstances. Therefore, the addition made by the Revenue cannot be sustained for the credit of Rs. 50 Lakh from Shri Biren Ramjibhai Desai.
189.3 Regarding the credit of Rs. 50 Lakh dated 06-11-2004, the assessee claimed that the same was on account of the sale of agricultural land. However, the learned CIT(A) rejected the claim of the assessee for the reason that the assessee has not provided copy of sale deed, detail of agricultural activity carried out and GIS Map to establish the land sold was agricultural land. The provisions of section 2(14)(iii) of the Act as applicable at the relevant time reads as under:
iii) agricultural land41 in India, not being land situate--
(a) in any area which is comprised within the jurisdiction of a municipality 41 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population 41 of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette 42;] 189.4 As per the assessee, the land in question is agricultural land as per the clause (b) stated above in terms of the notification issued by the CBDT bearing Notification No. [SO 9447] (File No. 164/3/87-ITA.I)], dated. 6-1-1994. According to the assessee the land in question is situated at Rakanpur village which is far more than 5 KM from Kalol being a Municipal Corporation whereas the distance IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 115 from the limits of Municipal Corporation limit should be with 3 KM as per the aforesaid notification. The contention of the assessee raised before the ld. CIT-A is supported by the Certificates of Talati which are placed on pages 191 to 193 of the paper book. The ld. CIT-A has also not pointed out any infirmity in the submission filed by the assessee before him. As such, we find that the ld. CIT-A has gone in the details of verifying the GIS Maps, Sales deed and whether agricultural activities were carried out which were relevant but not decisive for the issue on hand in the light of the contention raised by the assessee before him.
The notification of the CBDT discussed above is very much available in the public domain and the same was also referred by the assessee before the ld. CIT-A. There were also certificates available issued by the TALATI, placed on pages 191 to 193 of the PB in respect of which no infirmity was pointed by him. Hence, we are of the view that no addition on account of sale of agricultural land is to be made. Hence, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is partly allowed.
190. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of notional rental income of Rs. 42,000/- only.
190.1 The AO found that the assessee was the owner of 4 different immovable properties which are detailed as under:
S. No. Property Value of property
1. Rakanpur Farmhouse Rs. 4,84,629/-
2. Narol Godown Rs. 1,00,000/-
3. Flat Rs. 1,500,000/-
4. Farmhouse Rs. 4,65,716/-
190.2 The assessee was not offering any rental income. Therefore, the AO treated the property with higher value i.e. Flat as self-occupied property and treated the other immovable properties as deemed let-out property. Accordingly, the AO IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 116 worked out the notional rent @ Rs.2,000/- per month from Rakanpur Farmhouse, Rs. 1000 from Narol Godown and Rs. 2000 per month from another Farmhouse and after providing standard deduction @ 30%, made addition of Rs. 42,000/- to the total income of the assessee.
191. The aggrieved assessee preferred an appeal before the learned CIT(A).
191.1 The assessee before the learned CIT(A) submitted that property being "Narol Godown" and "Farmhouse" were not owned by him. Therefore, the question of letting out the property by him does not arise. Likewise, no rental income was received on the property being "Rakanpur Farmhouse" as the property was not let-out. Therefore, the annual value of the same is to be NIL as per the provision of section 23(1)(c) of the Act as the property was vacant for the whole of the year under consideration.
191.2 However, the learned CIT(A) confirmed the addition made by the AO by observing that the assessee has referred the provisions of section 23(1)(c) of the Act but the same are not applicable in case of the assessee as the assessee has not established that impugned properties were let-out in earlier year but vacant in the year under consideration or any effort was made to let out the same.
192. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.
192.1 The learned AR of the assessee before us submitted that no notional rent can be charged on the property "Rakanpur Farmhouse" as the same was sold away during the year under dispute and sale proceeds were deposited with Kalupur Commercial Co-operative which was subject to addition by the AO. Likewise, the property "Farmhouse" is an open agricultural land therefore same is outside the purview of section 22 of the Act. Similarly, the "Narol Godown" is a business asset accordingly the same is also outside the purview of section 22 of the Act.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 117 192.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
193. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that it was alleged that the assessee was the owner of 3 immovable properties other than the residential property being flat. Such 3 immovable properties on which notional rental income was computed by the AO include "Rakanpur Farmhouse" and an another "Farmhouse". It was contended before us that the immovable property being "Rakanpur Farmhouse" was sold. Thus, the question arises whether the deemed/notional rental income be computed on the sold property. The answer stands in negative for the reason that the provision of section 22 of the Act stipulate "the annual value of the property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, ... shall be chargeable to tax under the head income from house property". Once the ownership is transferred and the assessee is not anymore, owner of the property consisting of any building or lands appurtenant thereto, no tax under the head income from house property can be charged. Therefore, in our considered opinion the notional rent added to the total income of the assessee on account of "Rakanpur Farmhouse" property cannot be sustained. Accordingly, we direct the AO to delete the same.
193.1 Likewise, the AR before us submitted that immovable property "Farmhouse" is an open agricultural land. The contention of the learned AR of the assessee has not been controverted by the learned DR appearing on behalf of revenue neither the AO nor the learned CIT(A) in their respective orders found that the immovable property being "Farmhouse" is a house property. As such they merely proceeded to compute notional rent on the assumption that the assessee is owner of more than 1 immovable property. On perusal of provision of section 22 of the Act, it can be seen that what is taxable under the head income from house property is the income emanating from "any building or lands appurtenant thereto" not the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 118 income emanating from open land. The expression appurtenant thereto means the land which is necessary for enjoyment of building and not the land only. In holding so, we draw support and guidance from the judgment of Hon'ble Punjab & Haryana High court in case of Gowardhan Das & Sons vs. CIT reported in 158 taxman 465 wherein it was held as under:
7. A plain reading thereof provides that it is the income from property consisting of any 'building' or 'land appurtenant thereto' which is assessed under section 22 of the Act and not the income from renting out of open land or some kutcha plinth only. In the present case, no building having been let out, there is no question of treating the rent received for letting out of land only as income from house property.
8. What is covered by the expression "appurtenant" is the land which is necessary for enjoyment of the building and not the land only. Similar issue came up for consideration before Madras High Court in M. Ramalakshmi Reddy v. CIT[1998] 232 ITR 281 1, where the issue was decided against the assessee and in favour of the revenue.
193.2 In view of the above discussion, we are of the considered opinion that no notional rent can be charged on the property being "Farmhouse" which is an open agricultural land and direct the AO to delete the addition made by him.
193.4 Now coming to the issue of notional rent computed on the property being "Narol Godown", we note that the assessee before the learned CIT(A) submitted that he is not the owner of the impugned property and now the learned AR for the assessee before us changed the stand and submitted the impugned property is business assets. However, no supporting evidence furnished by the assessee that the impugned property was being used in the business or profession carried on by him (the assessee). Therefore, we do not agree with the contention of the learned AR of the assessee. Accordingly, we are upholding the finding of the learned CIT-A regarding notional rent form "Narol Godown". In view of the above detailed discussion, the ground of appeal of the assessee is hereby partly allowed.
194. In the result, the appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A NO. 91/Ahd/2023, an appeal by the assessee Shri Hashmukh bhai Govindbhai Patel for AY 2006-07.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 119
195. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Unaccounted Sale of Shares of M/s. Savita Govind Rs.10,78,268 Co.op. Housing Society Ltd.
(ii) Unaccounted Investment in Shares M/s. Amardeep Rs.59,94,250 Co.op. Housing Society Ltd.
(iii) Undisclosed Bank Account Rs. 13,53,120
(iv) Capital Gain on sale of Bhadaj Land Rs. 5,00,000
(v) Notional Rent on vacant House Properties Rs. 42,000
Total: Rs.89,67,638
4.1 The learned CIT(A) has erred in confirming Unaccounted Sale of Shares of M s.
Savita Govind Co.op. Housing Society Ltd. of Rs.10,78,268and Unaccounted Investment in Shares M/s. Amardeep Co.op. Housing Society Ltd. of Rs.59,94,250in as much as there is no transfer of land in the case of the assessee.
4.2 The learned CIT(A) has erred in confirming the addition of Rs. 5,00,000 in relation to alleged sale of land at Bhadaj in as much as the land at Bhadaj was an agriculture land and therefore it is not capital asset within meaning of the Act and therefore the question of any capital gain does not arise.
4.3 The learned CIT(A) has erred in confirming the addition in relation to undisclosed credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 120
05. The learned CIT(A) has erred in confirming the notional rent of Rs. 42,000 under Section 23 in as much as the addition made is not proper as per law."
196. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
197. At the outset, we note that the issue raised by the assessee in the application of additional ground of appeal for the AY 2006-07 in IT(SS)A No. 91/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal raised by the assessee for A.Y. 2006-07. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied to the additional ground raised for AY 2006-07 in IT(SS)A No. 91/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
198. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
199. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 121 captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
200. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 10,78,268/- on account of unaccounted sale of share of Savita Govind Co.Op. Housing society.
201. It was found that the assessee and other 3 members of his family namely late Shri Govindbhai M Patel, Bhavesh Govind Patel and Nitin Govind Patel were members of the society namely M/s Savita Govind Co-operative Housing Society Ltd. The said society was holding several land properties at different locations. As per the inquiry conducted during the post search proceedings and information received from the office of sub-registrar, the lands held by the impugned society were disputed properties except for land situated at Ognaz bearing survey No. 947/2, 803 and 1060 having aggregate area of 24,388.64 sq. mts.
201.1 Further, the special auditor reported that during the financial year 2005-06, the assessee along with other 2 members of society namely Bhavesh Govind Patel and Nitin Govind Patel resigned from membership and only Late Shri Govindbhai M Patel continues to be member and taken over the chairmanship from Shri Bhavesh Govind Patel.
201.2 In view of the above facts and in the absence of any explanation from the assessee, the AO held that all the 4 members had ownership interest in the land property held by the society. As the assessee and 2 other members resigned from their membership, meaning thereby, they have transferred their ownership interest in favor of Late Shri Govind bhai M Patel who continue to be the member and chairman. The AO further held that the shares transferred by the outgoing member (assessee and 2 other) of society in favour of continuing member represents the transfer of immovable property under the provision of section 2(47)(vi) r.w.s. 269UA(d) of the Act. Accordingly, the assessee sold 1/4th ownership interest in the property held by the society and therefore, 1/4th of value IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 122 of the property represents the undisclosed sales amount. Since the value of transfer was not available on record, the AO has taken the Jantri value as the value of the transfer. As other properties held by the society were disputed, therefore the AO only made addition regarding impugned 3 properties, the title of which was not in dispute. Hence, the AO computed amount of undisclosed sale regarding survey number 947/2, 803, 1060 situated at Ognaj at Rs. 10,78,268/- and in the absence of purchase details, the cost of the acquisition was taken at NIL. Thus, the addition of Rs. 10,78,268/- was made to the total income of the assessee.
202. On appeal by the assessee, the learned CIT(A) subsequently also confirmed the addition made by the AO.
203. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
203.1 The learned AR before us filed a paper book running from 1 to 105 pages and contended that there was the surrender of membership which cannot be equated as transfer of the membership as envisaged under the provisions of section 2(47)(vi) of the Act. Likewise, the land continued to be a property of the society even after the surrender of the membership by the assessee. There was no allotment of any land to the assessee and therefore the question of any transfer of such land does not arise. The transaction in dispute was alleged between the father and son after ignoring the fact that there were 15 members which can be verified from page 21 of the paper book. Similarly, the special auditor in his report submitted that the AO should investigate this issue in detail, yet the AO has drawn adverse inference again the assessee without conducting detailed enquiry. There was no consideration received by the assessee and accordingly the same cannot be subject to the provisions of section 45 of the Act. Without prejudice to the above, the ld. AR contended that the transaction in dispute should be allowed to be treated as gift as the transaction is between the relatives.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 123 203.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
204. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the addition was made by the AO on the premise that the assessee has transferred the ownership right vested in the land held by the society upon the resignation of the assessee from the society. As per the revenue, the assessee has received consideration from the party namely Shri Govind Bhai Patel being the continuing member of the society upon the resignation of the assessee. According to the Revenue, such consideration was received by the assessee from the undisclosed income of Shri Govind Bhai Patel in unaccounted form. Similar addition was also made in the hands of Shri Govind Bhai Patel. However, we find that the addition made in the hands of Shri Govind Bhai Patel has been deleted in his case for the same transaction. Thus, we are of the view that no addition is warranted in the hands of the assessee on hand for the same transaction being the alleged recipient of consideration. Thus, in view of the above and after considering the facts in detail/totality, we are not inclined to uphold the finding of the authorities below. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.
205. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 59,94,250/- on account of unaccounted sale of share of Amardeep Co.Op. Housing society.
206. At the outset, we note that the issues raised by the assessee in the captioned grounds of appeal is identical to the issue raised by the assessee in immediate previous ground of appeal in connection with transfer of land in Savita Govind Cooperative Housing Society Ltd. Therefore, the findings given vide paragraph no. 204 for immediate previous issue raised by the assessee shall also be applicable for the captioned ground of appeal. Vide said paragraph no 204, we decided the issue in favour of the assessee. The learned AR and the DR also IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 124 agreed that whatever will be the findings for the previous ground in connection with Savita Govind Cooperative Housing Society Ltd shall also be applied for the issue raised in connection with M/s Amardeep Co.Op. Housing Society. Hence, the ground of appeal filed by the assessee is hereby allowed.
207. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 13,53,120/- on account of undisclosed bank account.
208. It was found that the assessee was having bank account (A/C No. 0033100065) with Kalupur Commercial Co-operative Bank (KCCB) which was not disclosed in books of account. There was no explanation furnished by the assessee regarding the nature of the account. Thus, the AO worked out the peak credit amount in the impugned bank account for A.Y. 2005-06 to 2007-08. Accordingly, the AO made an addition of Rs. 18,53,120/- to the total income of the assessee in the year under consideration i.e. A.Y. 2006-07.
209. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that the addition of Rs. 18,53,120/- includes following credit entries:
1. Deposit from Shri Biren Ramjibhai Desai Rs. 13.5 Lakh
2. Sale proceeds of Bhadaj Land Rs. 5 Lakh
3. Dividend received from KCCBL Rs. 3,120/-
209.1 The assessee regarding the dividend from KCCB claimed that the same is exempt from tax as the dividend from cooperative bank is not taxable. Regarding the credit from Shri Biren Ramjibhai furnished confirmation letter.
209.2 The learned CIT(A) after considering the facts in totality deleted the addition of Rs. 5 Lakh credited in impugned bank on account of sale proceed of the land whereas confirmed the addition of Rs. 13.5 lakh and Rs. 3,120/- being a IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 125 loan from Shir Biren Ramjibhai Desai and Dividend. Thus, the learned CIT-A allowed the appeal of the assessee in part.
210. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.
210.1 The learned AR before us submitted that the sum of ₹ 13.50 lakhs represents the amount of loan received from Shri Biren Ramjibhai Desai which is supported by the identity, creditworthiness, and genuineness of the transaction along with the confirmation and therefore the same cannot be made subject to the addition under section 68 of the Act. The copy of the confirmation is placed on page 78 of the paper book and similarly the copy of the bank statement is placed on pages 76-77 of the paper book.
210.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
211. We have heard the rival contentions of both the parties and perused the materials available on record. As far as credit of Rs. 13.5 Lakh from Shri Biren Ramjibhai Desai is concerned, we note that in the immediate previous assessment year, similar deposit was made by the impugned party in the same bank account which was treated as unexplained by the AO and learned CIT(A). However, on appeal by the assessee in IT(SS)A No. 90/AHD/2023, we have deleted the addition made by the lower authorities. The relevant finding in this regard is available in paragraph No. 189 of this order. Hence on the same reasoning the addition made for Rs. 13.5 lakh is hereby deleted.
211.1 Coming to issue of credit of dividend of Rs. 3120/-, we note that the issue has not been pressed by the learned AR on instruction of the assessee. Hence the addition of Rs. 3120 is hereby confirmed. Accordingly, the ground of appeal raised by the assessee is partly allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 126
212. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 5 Lakh on account of sale of Bhadaj Land.
213. During the search, an excel sheet was found on the hard disk, containing the details of land property held by the assessee group. As per the impugned sheet, the assessee along with Late Smt. Savita Govind Patel was the co-owner of the land bearing block No. 111 admeasuring 26507 sq. yd. located at Bhadaj which is 6.7 Km away from the Ahmedabad Municipal corporation. Further as per the land revenue record obtained by revenue authority, the impugned land was sold vide registered sale deed no. 6528 dated 29-08-2005 to Shri Vishnu Natwarlal and group for consideration of Rs. 11 Lakh. In the land transaction deal, the Kalupur Commercial Co-operative Bank was confirming party. Out of total sales consideration of Rs. 11 Lakh paid by the buyer, a sum of Rs. 10 lacs were paid to the bank against the borrowing of the assessee group and remaining Rs. 1 lakh was shared in equal proportion between the assessee and co-owner.
213.1 However, the impugned land property transaction was neither shown in the books of the assessee nor offered to tax. The assessee also failed to give any explanation in this regard. Hence the AO treated the share of sales consideration for Rs. 5.5 Lakh as undisclosed income and added to the total income of the assessee.
214. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that the Population of "Bhadaj" as per last census is less than 10000/- and distance from municipal limit is more than 8Km. The assessee in support of his claim referred to the certificate from Talati and Engeenering Division of AMC. The assessee regarding distance from municipal limit at 6.7 Km as reported by the special auditor, stated that report of the auditor is based on google map which uses areal distance and not the distance by road. The distance should be measured by road as held by Punjab-Haryana High court in case of CIT vs. Satindar Pal Singh 229 CTR 82.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 127 214.1 The assessee further submitted that the sale proceeds of Rs. 5 Lakh was deposited in a joint loan account whereas the remaining amount of Rs. 50,000/- was included in miscellaneous income (Rs. 87,000/-) which is already offered to tax.
214.2 The learned CIT(A) after considering the facts in totality found that the distance from AMC as per google map is less than 8 KM but assessee is claiming more than 8 KM. Be that as maybe, considering the limit from AUDA which is town area committee, similar to municipal corporation as defined under section 2(14)(iii) of the Act, then the distance is less than 8 KM. Further, the assessee himself offered part amount of consideration received by him (Rs. 50000/-) as income, then the part consideration paid directly to the bank against borrowing should also be offered as income. Hence, the learned CIT(A) confirmed the addition made by the AO to the extent of Rs. 5 Lakh.
215. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
215.1 The learned AR before us contended that the land in dispute was agricultural land and therefore the sale proceeds of such land cannot be made subject to the addition in view of the provisions of section 2(14) of the Act. As per the learned AR, it is not necessary for the assessee to carry out the agricultural operation on the land to classify such land being agricultural.
215.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
216. We have heard the rival contentions of both the parties and perused the material available on record. The limited dispute before us is whether the land sold by the assessee is agricultural land referred under the provisions of section 2(14)(iii) of the Act or capital assets liable to tax under the head capital gain. The provision of section 2(14)(iii) of the Act provides that the agricultural land not IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 128 situated within the municipal corporation, notified area committee, town area committee etc or within the distance of 8KM from the local limit of municipal corporation, notified area committee, town area committee etc shall be kept outside the purview of capital assets. In the present case the AO based on google map has alleged that the land in dispute is situated at the distance of 6.7 KM from local limit of Ahmedabad Municipal Corporation (AMC) i.e. within 8KM, whereas the assessee before the learned CIT(A) contended that the impugned land is situated beyond 8KM from local limit of AMC if distance is measured by road. However, the learned CIT(A) has given a finding that if the distance of impugned land is measured from local limit of Ahmedabad Urban Development Authority (AUDA), then the same is less than 8KM by road also. However, we note that the finding of the learned CIT(A) has not been supported by the documentary evidence. Nevertheless, we find contrary contentions of the ld. AR and the DR regarding the situation of the land in dispute. Therefore, in the interest of justice and fair play, we are inclined to extend one more opportunity to the assessee to represent his case before the AO so as to establish that the land in dispute is situated beyond 8 KM from the local limits in the manner provided under section 2(14) of the Act. Hence, the ground of appeal raised by the assessee is hereby allowed for the statistical purposes.
217. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 42,000/ being notional rental income.
218. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2006-07 is identical to the issue raised by the assessee in IT(SS)A No. 90/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 90/AHD/2023 shall also be applicable for captioned ground of appeal of the assessee for AY 2006-07. The relevant ground of appeal of the assessee in IT(SS)A No. 90/AHD/2023 has been decided by us vide paragraph No. 193 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 129 ground raised in A.Y. 2005-06 shall also be applied for the ground raised in A.Y. 2006-07. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby partly allowed.
219. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A NO. 92/Ahd/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel for AY 2007-08.
220. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Cash Credit under Section 68 Rs. 5,00,000 (ii) Sale of Ognaj Land- Jay LaxmiKhetiSahkariMandali Rs. 30,00,000 (iii) Shela Land Rs. 1,81,44,345 (iv) Undisclosed Bank Account Rs. 1,62,29,371 (v) Notional Rent on vacant House Properties Rs. 42,000 Total: Rs. 3,79,15,716 4.1 The learned CIT(A) has erred in restricting the addition of Sale of Ognaj Land- Jay
LaxmiKhetiSahkariMandali of Rs. 30,00,000 out of Rs. 62,61,856 in as much as there is not IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 130 transfer of land by the assessee and that the assessee has not received any consideration for the same.
4.2 The learned CIT(A) has erred in confirming the addition of Rs. 1,81,44,345 regarding Shela land in as much as the sale of land was an agriculture land and that the same is not capital assets and therefore not chargeable to capital gain.
4.3 The learned CIT(A) has erred in confirming the addition in relation to undisclosed cash receipts and undisclosed credit in the bank account in as much as all the credits are from genuine sources and that the same have been submitted and explained with appropriate evidences and therefore the additions confirmed are not proper
05. The learned CIT(A) has erred in confirming the notional rent of Rs. 42,000 under Section 23 in as much as the addition made is not proper as per law."
221. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
222. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2007-08 in IT(SS)A No. 92/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned additional ground of appeal by the assessee for AY 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied to the additional ground raised for A.Y. 2007- 08 in IT(SS)A No. 92/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 131
223. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
224. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
225. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 5 Lakh under the provisions of section 68 of the Act.
226. The assessee during the year has received an unsecured loan of Rs. 5 Lakh from the party namely Pravinaben Girishbhai Chabada. The AO in the absence of necessary details treated the same as unexplained cash credit as per the provision of section 68 of the Act and added to the total income of the assessee.
227. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that unsecured loan from the party namely Pravinaben Girishbhai Chabada was received through cheque in the month of July and October 2006 and was repaid subsequently vide cheque as on 14-04- 2008. Further the assessee provided address, PAN, and confirmation of the party.
227.1 However, the learned CIT(A) confirmed the addition made by the AO by observing that the assessee failed to make proper, reasonable, and acceptable explanation. The assessee only furnished PAN and confirmation but failed to furnish the ITR and bank statement to establish the genuineness and credit worthiness.
228. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 132 228.1 The learned AR before us submitted that the assessee by furnishing the address, PAN, confirmation and thus discharged the primary onus. As such, the burden shifted on the revenue. The genuineness of the loan was established by the fact that the loan was received through the banking channel and subsequently repaid through banking channel.
228.2 On the other hand, the learned DR vehemently supported the finding of the authorities below.
229. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the books of accounts of the assessee were credited by Rs. 5 Lakh on account of unsecured loan. Thus, in accordance with the provisions of section 68 of the Act, the assessee is required to explain the nature and source of the credit. The assessee in this regard furnished primary details such as name, address, PAN of the party along with the confirmation letter. The ledger account shows that the loan amount was received through the banking channel which was repaid through the banking channel in the subsequent year. It is the trite law that once the amount received through banking channel and repayment of the same was also made through banking channel, then the genuineness cannot be doubted. In this respect, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under:
"The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques."
229.1 In view of the above facts, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 133
230. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 30 Lakh on account of sale of Ognaj land of Jay Laxmi SahkariMandali.
231. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2007-08 in IT(SS)A No. 92/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 86/AHD/2023 for the assessment year 2007-08. Therefore, the findings given in IT(SS)A No. 86/AHD/2023 shall also be applicable for captioned ground of appeal by the assessee for A.Y. 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 86/AHD/2023 has been decided by us vide paragraph No. 63 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in in IT(SS)A No. 86/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 92/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
232. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,81,44,345/- on account of sale of Shela Land.
233. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
234. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,62,29,371/- on account of undisclosed bank account.
235. It was found that the assessee was having bank account (A/C No. 0033100065) with Kalupur Commercial Co-operative Bank (KCCB) which was not disclosed in the books of accounts. There was an explanation furnished by the IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 134 assessee regarding the source of repayment of loan and the nature of account. However, the AO worked out the peak credit amount in the impugned bank account for A.Y. 2005-06 to 2007-08. Accordingly, the AO made an addition of Rs. 1,99,39,371/- to the total income in the year under consideration i.e. A.Y. 2007-
08.
236. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) explained the credit entry in the bank in following manner:
1. Cash Deposits aggregating to Rs. 29,371/- only.
2. Transfer from M/s Nitin Construction Ltd aggregating to Rs. 9,85,000/-
which can be verified from ledger account in the books of Nitin Construction and from confirmation letter.
3. Transfer from M/s Priyank Infrastructure Pvt Ltd aggregating to Rs. 27,25,000/- which can be verified from the ledger account in the books of M/s Priyank Infrastructure Pvt Ltd and from the confirmation letter.
4. Rs. 17 Lakh received from Shri P.K. Shroff as on 01-05-2006 and confirmation of same was enclosed and amount aggregating to Rs. 70 Lakh received from Shri Biren Ramjibhai Desai
5. Rs. 75 lakhs were credited on account of sale proceeds of land of M/s Jay Laxmi Samudayik Kheti Sahakari Mandali.
236.1 The learned CIT(A) after considering in facts in totality confirmed the addition to the extent of Rs. 1,62,29,371/- which includes cash deposit of Rs. 29,371/-, credit from Shri Biren Ramjibhai Desai for Rs. 87 lakh and Rs. 75 Lakh credited on 19-10-2006 claimed by the assessee against the sale proceeds on sale of land of Jay Laxmi KhetiSahakariMandali. The addition on account of cash IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 135 deposit of Rs. 29,371/- was confirmed for the reason that assessee did not furnish any explanation. The addition of Rs. 87 lakh credited from Shri Biren Ramjibhai Desai for the reason that the assessee has not furnished bank statement and copy of ITR of impugned party to discharge the genuineness of the transaction and creditworthiness of the party. Likewise, the learned CIT(A) found that the assessee failed to establish the credit of Rs. 75 Lakh on 19-10-2006 which was claimed against the proceeds of sale of land by Jay laxmi Kheti Sahakari Mandali. Hence, the addition was confirmed.
237. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
237.1 The learned AR before us submitted that the sum of ₹ 87 lakhs represents the amount of loan received from Shri Biren Ramjibhai Desai which is supported by the identity, creditworthiness, and genuineness of the transaction along with the confirmation and therefore the same cannot be made subject to the addition under section 68 of the Act. The copy of the confirmation is placed on page 76 of the paper book and similarly the copy of the bank statement is placed on pages 74-75 of the paper book. Regarding the addition of Rs. 75 lacs, it was submitted by the assessee that such amount represents the sale proceeds of the land of the society namely Jay Laxmi SamudayKhetiSahakariMandali Ltd. which can be verified from the balance sheet of the society placed on pages 77 to 81 of the paper book.
237.2 On the other hand, the learned DR vehemently supported the finding of the authorities below.
238. We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the issue on hand have been elaborated in the preceding paragraphs, therefore we are not inclined to repeat the same for the sake of brevity. As far as the addition of Rs. 29,371/- on account of cash deposit in impugned undisclosed bank account is concern, we note that the assessee has not furnished any explanation either before the authorities below or IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 136 before us. Hence, in absence of any explanation by the assessee regarding nature and source of such deposit, we uphold the addition of the same for Rs. 29,371/- only.
238.1 Coming to the issue of credit of Rs. 87 Lakh from Shri Biren Ramjibhai Desai, we note that identical deposit/credit was made by the impugned party in the same bank account in the A.Y. 2005-06 which was treated as unexplained by the AO and learned CIT(A). However, on appeal by the assessee in IT(SS)A No. 90/AHD/2023, we have deleted the addition made by the lower authorities. The relevant finding in this regard is available in paragraph no. 189 of this order. Hence on the same reasoning the addition made for Rs. 87 Lakh is hereby deleted.
238.2 Now coming to the credit of Rs. 75 Lakh as on 19-10-2006, we find contrary stands of the Revenue and the learned AR appearing before us. Therefore, in the interest of justice and fair play we are inclined to extend one more opportunity to the assessee to present his case before the AO afresh. Hence the ground of appeal of the assessee is hereby partly allowed for the statistical purposes.
239. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 42,000/ being notional rental income.
240. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2007-08 is identical to the issue raised by the assessee in IT(SS)A No. 90/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 90/AHD/2023 shall also be applicable for captioned ground of appeal by the assessee for AY 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 90/AHD/2023 has been decided by us vide paragraph No. 193 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in A.Y. 2005-06 shall also be applied for the ground raised in A.Y. IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 137 2007-08. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby partly allowed.
241. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A NO. 93/Ahd/2023, an appeal by the assessee Shri HashmukhbhaiGovindbhaiPatel for AY 2009-10.
242. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Other Unaccounted Loan Given Rs. 2,62,26,710
(ii) Notional Rent on vacant House Properties Rs. 42,000
Total: Rs. 2,62,68,710
4.1 The learned CIT(A) has erred in confirming unaccounted loan given to others of
Rs. 2,62,26,710 in as much as the same are explainable and only on account of reconciliation difference.
5. The learned CIT(A) has erred in confirming the notional rent of Rs. 42,000 under Section 23 in as much as the addition made is not proper as per law."
243. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 138 "While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
244. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2009-10 in IT(SS)A No. 93/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned additional ground of appeal by the assessee for A.Y. 2009-10. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in in IT(SS)A No. 84/AHD/2023 shall also be applied additional ground raised for A.Y. 2009-10 in IT(SS)A No. 93/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
245. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
246. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
247. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 2,62,26,710/-.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 139
248. The AO based on seized material and report of the special auditor on seized material found that the assessee has given loan & advances outside the books of account to the following parties:
1. Hiral Pipes Pvt Ltd. Rs. 63,80,529/-
2. Savita Govind Construction Pvt Ltd Rs. 60,53,817/-
3. Savita Govind Construction Pvt Ltd Rs. 34,69,710/-
4. Nitin Construction Ltd. Rs. 1,03,22,654/-
Total Rs. 2,62,26,710/-
248.1 The AO in absence of explanation from the assessee treated the same as his income under the provisions of section 69B of the Act.
249. The aggrieved assessee preferred an appeal before the learned CIT(A).
249.1 The assessee before the learned CIT(A) regarding advance of Rs. 63,80,529/, 60,53,817/- and 1,03,22,654/- to party namely Hiral Pipes Pvt Ltd, Savita Govind Construction Pvt Ltd and Nitin Construction Ltd respectively submitted that impugned transaction is in the joint name of Hasmukh bhai (assessee) and Savita Govind Patel and in the books of the respective parties also shown the same are under joint ledger account. Therefore, the transaction of loan and advances was not recorded in his individual books of account.
249.2 Likewise, the assessee regarding the amount of Rs. 34,69,710/ with Savita Govind Construction Pvt Ltd furnished ledger copy from the books of the party and accordingly submitted the impugned amount are on account of some JV entry passed on 1st April 2008.
249.3 However, the learned CIT(A) confirmed the addition made by the AO by observing as under:
"9.4 With regards to addition made by AO for Rs 63,80,529.33/- in concerned, it is apparent that seized document being trial balance from books of account of Hiral Pipes Pvt Limited (refer paper book Page No 105) contains name of appellant with Savitaben hence appellant has claimed that such ledger account was not reflected in his books of account.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 140 This explanation of appellant is devoid of any merits. The appellant has even not submitted that such ledger account was appearing in books of account of Savitaben. It is observed that when entries in the name of appellant is found in seized data and in trial balance of other entities, onus is on appellant to prove that transactions as appearing in books of account of other party is also reflected in books of account of appellant or Joint Holder. The submission filed by appellant is without any corroborative evidences and even appellant has not made any documentary evidences even after remand report or observation of AO is incorrect. In view of these facts, it is observed that the appellant or Savitaben has not reconciled transactions with Hirai Pipes Pvt Limited hence addition made by AO for Rs.63,80,529.33/- is confirmed.
9.5 With regards to addition made by AO for Rs.60,53,817/ and Rs.1,03,22,654/-, appellant has given explanation similar to Hiral Pipes Pvt Limited (supra). Therefore, for the reasons mentioned supra addition made by AO for Rs.60,53,817/- and Rs.1,03,22,654/- are confirmed.
9.6 With regards to addition made by AO for Rs 34.69.710/- for Savita Govind Construction Pvt Limited, appellant has explained that difference is on account of various JVs passed in such account. As pointed out by AO in remand report that appellant has not ascertained the reason behind such JVs in books of account of Savita Govind Construction Pvt. Limited nor explained the nature of JVs. The accounting entries in books of account are passed by appellant hence onus is on AO to explain the nature of entries and what was the reason for passing such JV. Even in rejoinder to remand report, appellant is unable to explain difference, therefore, addition made by AO for Rs 34,69,710/- is confirmed."
250. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
250.1 The learned AR before us filed a paper book running from 1 to 265 pages and submitted as follows:
As regards Rs. 34,69,710 in relation to Savita Govind Construction P. Ltd., the same is reflected in the books of Hasmukh G. Patel and also corresponding entry in the books of Savita Govind Construction P. Ltd. at Page No. 45 to 47 of the Paper Book dated 10- 01-2024. Hence, no addition is warranted.
As regards Govindbhai M. Patel the same is reflected in the books of Hasmukh G. Patel and also corresponding entry in the books of Govindbhai M. Patel at Page No. 40 to 41 of the Paper Book dated 10-01-2024. Hence, no addition is warranted.
As regards Rs. 63,80,529 in relation to Hiral Pipes P. Ltd., the same is reflected in the separate joint books in the name of Hasmukh G. Patel and Savitaben G. Patel. The separate books were furnished to the special auditor but the same have not been considered. Further, the amount pertains to earlier years and therefore there is no question of any addition. The copy of separate books of accounts in the name of Hasmukh G. Pate! and Savitaben G. Pate! reflecting these transactions and copy of IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 141 balance sheet of Hiral Pipes P. Ltd. reflecting this entry in the earlier year are part of additional Paper Book dated 05-02-2024 on Page No.l to 60.
As regards Rs. 60,53,817 in relation to Savita Govind Construction P. Ltd., the same is reflected in the separate joint books in the name of Hasmukh G. Patel and Savitaben G. Patel. The separate books were furnished to the special auditor but the same have not been considered. Further, the amount pertains to earlier years and therefore there is no question of any addition. The copy of separate books of accounts in the name of Hasmukh G. Patel and Savitaben G. Patel reflecting this transaction and copy of balance sheet of Savita Govind Construction P. Ltd. reflecting this entry in the earlier year are part of Additional Paper Book dated 05-02-2024 on Page No. 61 to 138.
As regards Rs. 1,03,22,653 in relation to Nitin Construction Ltd., the same is reflected in the separate joint books in the name of Hasmukh G. Patel and Savitaben G. Patel. The separate books were furnished to the special auditor but the same have not been considered. Further, the amount pertains to earlier years and therefore there is no question of any addition. The copy of separate books of accounts in the name of Hasmukh G. Patel and Savitaben G. Patel reflecting this transaction and copy of balance sheet of Nitin Construction Ltd. reflecting this entry in the earlier year are part of Additional Paper Book dated 05-02-2024 on Page No. 139 to 265.
250.2 On the other hand, the learned DR before us vehemently supported the order of the authorities below.
251. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, we note that the AO has made the addition based on the seized documents found during the search. As such the assessee has given advances to various parties which were not recorded in the books of accounts. The list of the parties to whom the assessee has given advances has already been reproduced somewhere in the preceding paragraph.
There is no doubt that the assessee has given the advances either individually or jointly, to the parties discussed above. But the question arises for our consideration whether such advances, being allegedly undisclosed in the books of the assessee were advanced in the year under dispute. In this regard, we have perused the financial statements of the organizations to whom the assessee has made advances allegedly being undisclosed in the year before us or in earlier assessment years. From all the financial statements of parties, we note that all the advances were given by the assessee in the earlier assessment years. For the sake IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 142 of understanding, the financial statement of M/s Savita Govind Construction Pvt Ltd placed on pages 72 to 107 was referred and it was found that such advances were given by the assessee in earlier years. As such M/s Savita Govind Construction Pvt Ltd was showing the balance of the assessee along with the joint account in the year ending 31st March 2003 for Rs. 62,38,817/- thereafter some transactions were carried out during F.Y. 2004-05 and closing balance at end of 31st March 2005 was at Rs. 60,53,817/- and same balance carried as it is till 1st April 2008.Thus, it becomes transparent that since the organizations listed above in dispute have taken advances from the assessee in the earlier years, thus the question of making the addition of the same in the current year does not arise. Accordingly, we set aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal raised by the assessee is hereby allowed.
252. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 42,000/ being notional rental income.
253. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2009-10 is identical to the issue raised by the assessee in the in IT(SS)A No. 90/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 90/AHD/2023 shall also be applicable for captioned ground of appeal by the assessee for AY 2009-10. The relevant ground of appeal of the assessee in IT(SS)A No. 90/AHD/2023 has been decided by us vide paragraph No. 193 of this order partly in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in A.Y. 2005-06 shall also be applied for the ground raised in A.Y. 2009-10. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby partly allowed.
254. In the result appeal of the assessee is hereby partly allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 143 Coming to IT(SS)A NO. 94/Ahd/2023, an appeal by the assessee Shri Hashmukhbhai Govindbhai Patel for AY 2010-11.
255. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) ShelaLand Rs. 1,26,400
(ii) Notional Rent on vacant House Properties Rs. 84,000
Total: Rs.2,10,400
4.2 The learned CIT(A) has erred in confirming the addition of Rs. 1,26,400 regarding
Shela land in as much as the sale of land was an agriculture land and that the same is not capital assets and therefore not chargeable to capital gain.
05. The learned CIT(A) has erred in confirming the notional rent of Rs. 84,000 under Section 23 in as much as the addition made is not proper as per law."
256. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 144 "The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
257. At the outset, we note that the issue raised by the assessee in the application for the additional ground of appeal for the AY 2010-11 in IT(SS)A No. 94/AHD/2023 is identical to the issue raised by the assessee in the capacity of legal heir of late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned additional ground of appeal by the assessee for A.Y. 2010-11. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the additional ground raisedin IT(SS)A No. 84/AHD/2023 shall also be applied to the additional ground raised in IT(SS)A No. 94/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
258. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
259. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
260. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 83,72,000/- on account of long-term capital gains on the sale of Shela land.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 145
261. It was found that the assessee was the owner of the land located at Shela bearing block No. 330 admeasuring 14164 sq mts. The impugned land property was purchased by the assessee in the year 1981 for Rs. 20,000/- and the same was converted into N.A. land in the year 1982. The impugned land was sold by the assessee to the parties namely Shri Dushyant Manishankar Pandya, Dipak Parmanand Nimbak and Hitesh Rasiklal Vyas for Rs. 84,98,400/- vide registered agreement No. 1694 dated 15-05-2005. However, the impugned land was not shown in the books of the assessee under fixed assets and the sale proceeds were directly credited to the capital account of the assessee. Accordingly, the AO treated the sale proceeds amounting to Rs. 84,98,400/- as undisclosed income of the assessee.
262. The aggrieved assessee preferred an appeal before the learned CIT(A).
262.1 The assessee before the learned CIT(A) submitted that permission for the N.A. Land was given subject to the compliance of certain conditions which were not fulfilled. Therefore, the impugned land was agricultural land as the land was situated at Shela which was beyond 8 KM from AMC and populations is also less than 10000.
262.2 The assessee alternatively submitted that the capital gain is to be computed after providing index cost of acquisition whereas the AO made addition of gross sales amount.
262.3 However, the learned CIT(A), found that there is no evidence produced by the assessee that the N.A. approval has been revoked. On the other hand, the sale agreement clearly states the land sold was a N.A. land. There is no evidence produced on record suggesting that the land was used for agricultural purposes by the assessee. Hence, the learned CIT(A) confirmed the addition made by the AO.
263. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 146 263.1 The learned AR before us filed a paper book running from 1 to 60 pages and contended that the transfer of the property in dispute has effectively taken place during the financial year 2006-07 corresponding to assessment year 2007-08 in pursuance to the provisions of clause (v) of section 2(47) of the Act and therefore the same cannot be made subject to the addition in the year in dispute. The Ld. AR in support of his contention has filed the copy of the agreement dated 14 December 2006 and the sale deed of the property in dispute which is available on pages 32 to 55 of the paper book.
264. On the other hand, the learned DR vehemently supported the order of the authorities below.
265. We have heard the rival contentions of both the parties and perused the materials available on record. The law relating to transfer and the year of taxability of capital gains on transfer of immovable property under clause (v) to section 2(47) of the Act can be understood from the definition of 'transfer' contained in s. 2(47) of the Act which provides that the "transfer", in relation to a capital asset, among other transaction, includes the transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act,1882. In order to constitute 'transfer' within the meaning of the Income-tax Act under clause (v) to section 2(47) of the Act, the transaction should satisfy the following conditions:
(a) There should be a contract in writing signed by both the parties from which terms necessary to constitute the transfer can be ascertained.
(b ) Transferee has taken possession of the property.
(c) Transferee has performed or is willing to perform his part of his contract.
(d ) The contract, that is required to be registered has to be registered under the amended law after 2001.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 147
e) The transferor shall be debarred from claiming any right in respect of the property in possession of transferee.
265.1 If the above conditions are satisfied, such transaction would constitute transfer within the meaning of clause (v) of section 2(47) of the Act. In the light of the above stated discussion, we proceed to verify whether above conditions have been satisfied in the transaction relating to the transfer of the property stated above.
i. On perusal of the contract in writing, it is seen that it has been signed by both the parties under the relevant terms and conditions mentioned therein.
ii. The possession of the property has been transferred by the vendor to the vendee.
iii. There is exchange of the consideration between the parties as evident from the contract.
iv. The contract has been duly registered.
265.2 In view of the above discussion, we hold that, the transfer of the property in the given facts and circumstances under clause (v) of section 2(47) of the Act has taken place in the financial year 2006-07 corresponding to assessment year 2007-08 and therefore the same should be subjected to tax in the year of transfer and not in the year under dispute. As such, we hold that the Revenue authorities has imposed tax in the year under dispute on the transfer of the property whereas the transaction relating to the transfer of the property has taken place much earlier.
265.3 Before parting, however we find that the AR has not raised the contention that transaction relating to the transfer of the property in dispute has taken place in the earlier assessment year 2007-08 before the authorities below. In our considered view, before we express our view, we in the interest of justice and fair IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 148 are inclined to express that the contention of the ld. AR before us should also pass the test before authorities below. Accordingly, we set aside the issue file of the AO for fresh adjudication in the light of the above stated discussion and as per the provisions of law. Hence, the ground of appeal of the assessee is allowed for statistical purpose.
266. The last issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of notional rent of Rs. 84,000/-.
267. The necessary brief facts are that the revenue alleged that the assessee during the year under dispute was owner of 5 immovable properties. Thus, the AO considered the property with higher value as self-occupied and accordingly computed notional rental income and added to the total income of the assessee which was subsequently confirmed by the learned CIT(A). The details of the properties which are in dispute stand as under:
- Narol Godown
- Ranakpur Farmhouse
- Farmhouse
- Flat 103 in S.G. Plaza
268. As far as first three properties are concerned, we note that notional rent on the same was computed and added to the total income in the previous assessment years also. As such the issue of notional rent on the above said first 3 properties has been decided by us in assessee's appeal for AY 2005-06 in IT(SS)A No. 90/AHD/2023 where we have deleted the addition of notional rent on the property being Ranakpur Farmhouse, and Farmhouse whereas conformed the addition with regard to Narol Godown. The detailed finding in this regard is available on paragraph No. 193 of this order. The said finding shall be applicable for the year under dispute also. Accordingly, we hereby delete the addition of IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 149 notional rent on the property "Ranakpur Farmhouse and Farmhouse" whereas confirmed the addition of notional rent on the property "Narol Godown.
269. Coming to the property bearing Flat 103 in S.G. Plaza, we note that the contention of the ld. AR before us is that such property does not belong to him but belongs to Smt. Kaminiben H. Patel and therefore the same cannot be made subject to the addition in his hands. It is true that for calculating the income under the head house property, the assessee should be the owner of the property whereas the assessee denies the ownership in the given case. However, we find that all these facts were not brought to the notice of the authorities below and therefore in the interest of justice and fair play, we are inclined to set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. Hence the ground of appeal of the assessee is partly allowed for statistical purposes.
270. In the result, the appeal of the assessee is partly allowed for the statistical purposes.
Coming to IT(SS)A No. 101/Ahd/2023, an appeal by the assessee Smt. Alkaben Nitinbhai Patel legal Heir of Late Nitinbhai Govindbhai Patel for AY 2005-06.
271. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 150
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Merits:
04. The learned CIT(A) has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
Long Term Capital Gain [LTCG] on Sale of Thaltej Land of Rs. 1,90,84,551 4.1 The learned CIT(A) has erred in confirming the addition in relation to alleged sale of land at Thaltej in as much as there is no transfer of the land or there is no consideration which is received towards alleged sale of land and that the learned CIT(A) has erred in relying the judicial decisions which are not relevant on the facts of the case.
4.1.1 Without prejudice to above, the learned CIT(A) has erred in confirming the capital gain of Rs. 1,90,84,551 in as much as the learned CIT(A) has erred in not following the correct computation of capital gain as per law."
272. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
273. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2005-06 in IT(SS)A No. 101/AHD/2023 is identical to the issue raised in the case of the assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal by the assessee for A.Y. 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 151 applied for additional ground raised in IT(SS)A No. 101/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
274. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
275. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
276. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 1,90,84,551/- on account of long-term capital gains on the alleged sale of Thaltej lands.
277. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2005-06 in IT(SS)A No. 101/AHD/2023 is identical to the issue raised in the case of assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned ground of appeal by the assessee for AY 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph No. 25 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in in IT(SS)A No. 84/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 101/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
278. In the result appeal of the assessee is hereby partly allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 152 Coming to IT(SS)A No. 102/Ahd/2023, an appeal by the assessee Smt. Alkaben Nitinbhai Patel legal Heir of Late Nitinbhai Govindbhai Patel for AY 2006-07.
279. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
03. The assessment order is bad in law since the order is passed on 24-10-2013 after the receipt of the special audit report. The assessment order should have been passed by 31-03-2013 as required under Section 153B since the special audit is not warranted under Section 142(2A) as per Ground No. 1.
Metirs:
04. The learned CIT(A0 has erred in confirming the following additions only on the basis of special audit report without appreciating the legal provisions as under:
(i) Unaccounted Sale of Shares of M/s. Savita Rs. 10,78,268 Govind Co.op. Housing Society Ltd.
(ii) Unaccounted Investment in Shares M/s. Rs. 59,94,250 Amardeep Co.op. Housing Society Ltd.
Total: Rs. 70,72,518
4.1 The learned CIT(A) has erred in confirming Unaccounted Sale of Shares of M/s.
Savita Govind Co.op. Housing Society Ltd. of Rs.10,78,268 and Unaccounted Investment in Shares M/s. Amardeep Co.op. Housing Society Ltd. of Rs.59,94,250 in as much as there is no transfer of land in the case of the assessee."
280. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 153 "The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
281. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2006-07 in IT(SS)A No. 102/AHD/2023 is identical to the issue raised in the case of the assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2006-07. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal by the assessee for A.Y. 2006-07. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 102/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
282. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
283. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
284. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 10,78,268/- on account of sale of shares of M/s Savita Govind Co-Operative Housing Society.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 154
285. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2006-07 is identical to the issue raised in the case of the assessee Shri HasmukhbhaiGovindbhai Patel in IT(SS)A No. 91/AHD/2023 for the assessment year 2006-07. Therefore, the findings given in IT(SS)A No. 91/AHD/2023 shall also be applicable for the captioned ground of appeal by the assessee for A.Y. 2006-07. The relevant ground of appeal of the assessee in IT(SS)A No. 91/AHD/2023 has been decided by us vide paragraph No. 204 of this order in the favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the ground raised in IT(SS)A No. 91/AHD/2023 shall also be applied for ground raised in IT(SS)A No. 102/AHD/2023. Hence, the issue raised by the assessee in the ground of appeal is hereby allowed.
286. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 59,94,250/- on account of sale of shares of M/s Amardeep Co-Operative Housing Society.
287. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2006-07 is identical to the issue raised in the case of the assessee Shri HasmukhbhaiGovindbhai Patel in IT(SS)A No. 91/AHD/2023 for the assessment year 2006-07. Therefore, the findings given in IT(SS)A No. 91/AHD/2023 shall also be applicable for the captioned ground of appeal of the assessee for AY 2006-07. The relevant ground of appeal of the assessee in IT(SS)A No. 91/AHD/2023 has been decided by us vide paragraph Nos. 206 of this order in the favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the ground raised in IT(SS)A No. 91/AHD/2023 shall also be applied for ground raised in IT(SS)A No. 102/AHD/2023. Hence, the issue raised by the assessee in the ground of appeal is hereby allowed.
288. In the result appeal of the assessee is hereby partly allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 155 Coming to IT(SS)A No. 31/Ahd/2023, an appeal by the assessee Smt. AlkabenNitinbhai Patel legal Heir of Late NitinbhaiGovindbhai Patel for AY 2007-08.
289. The assessee has raised following grounds of appeal:
"Technical:
01. The learned CIT(A) has erred in confirming the direction by AO for the special audit under Section 142(2A) without examining the books of accounts and without having regard to the nature and complexity of the accounts of the assessee in as much as the assessee did not file the return and that AO had no opportunity to examine the books of accounts, therefore he could not have formed the opinion that there is a need for special audit having regard to the nature and complexity of the accounts.
02. The learned CIT(A) has erred in not adjudicating Ground No. 1 & 2 regarding special audit [Para No. 8 on Page No. 8 of CIT(A) Order dated 21-11-2016] on the ground that Section 246A does not provide any appeal against such ground in as much as the appeal was preferred against the Order under Section 144 and not against the special audit and that the ground regarding special audit was part of the grounds raised before CIT(A) and therefore the learned CIT(A) ought to have adjudicated on merits.
Merits:
3. The learned CIT(A) has erred in confirming the addition of Rs. 30,00,000 being capital gain without appreciating the merits and facts of the case."
290. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
291. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2007-08 in IT(SS)A No. 31/AHD/2023 is identical to the issue raised in the case of the assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2006-07. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 156 for the captioned additional ground of appeal by the assessee for A.Y. 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 31/AHD/2023. Hence, the issue raised by the assessee in the additional ground of appeal is hereby dismissed.
292. The first issue raised by the assessee vide ground Nos. 1 to 3 of its appeal is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
293. At the outset, we note that the learned AR for the assessee before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessee is hereby dismissed as not pressed.
294. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 30,00,000.00on account of sale of land M/s Jay Laxmi KhetiSahakariMandali.
295. At the outset, we note that the issue raised by the assessee in the captioned ground of appeal for the AY 2007-08 in IT(SS)A No. 31/AHD/2023 is identical to the issue raised in the case of the assessee late Shri Govindbhai M Patel in IT(SS)A No. 86/AHD/2023 for the assessment year 2007-08. Therefore, the findings given in IT(SS)A No. 86/AHD/2023 shall also be applicable for captioned ground of appeal of the assessee for AY 2007-08. The relevant ground of appeal of the assessee in IT(SS)A No. 86/AHD/2023 has been decided by us vide paragraph No. 63 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in IT(SS)A No. 86/AHD/2023 shall also be applied for the ground raised in IT(SS)A IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 157 No. 31/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
296. In the result appeal of the assessee is hereby partly allowed.
Coming to IT(SS)A No. 95 to 98/Ahd/2023, an appeal by the assessee Smt. Alkaben Nitinbhai Patel, Smt. Prachinaben Bhaveshbhai Patel, Smt. Priyank Hasmukhhai Patel and Smt. KaminibenHasmukhbhai Patel for AY 2005-06.
297. The issues involved in all the above mentioned 4 appeals of different assessee are identical, therefore we have clubbed these 4 appeals together for adjudication purposes and finding given in one case will be applicable for all the appeals. For the purpose of convenience/ adjudication, the facts of the ITA No. 95/AHD/2023 are being adopted.
298. The assessee vide letter dated 31-01-2024 filed additional ground of appeal which reads as under:
"While filing the appeal, the following ground is to be left out at the time of filing of appeal. The same is raised as under:
"The learned AO has erred in making an addition for the year under consideration in the absence of any incriminating material found during the course of search. "
The above referred ground was not raised before the AO and CIT(A). however, this being a legal ground, the appellant is of the view that same can be raised based on the Supreme Court decisions in the case of NTPC Ltd. V/s. CIT 229 ITR 383 (SC) and Jute Corporation of India Ltd. V/s. CIT 187 ITR 688 (SC)."
299. At the outset, we note that the issue raised by the assessee in the application for additional ground of appeal for the AY 2005-06 in IT(SS)A No. 95/AHD/2023 is identical to the issue raised in the case of the assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for the captioned additional ground of appeal of the assessee for A.Y. 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 158 been decided by us vide paragraph Nos. 5 to 10 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for additional ground raised in IT(SS)A No. 84/AHD/2023 shall also be applied for additional ground raised in IT(SS)A No. 95 to 98/AHD/2023. Hence, the issue raised by these assessees in their additional grounds of appeal is hereby dismissed.
300. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the direction of special audit under section 142(2A) of the Act.
301. At the outset, we note that the learned AR for these assessees before us submitted that the assessee is not intended to press the issue raised in the captioned ground of appeal. Hence, the ground of the appeal of the assessees is hereby dismissed as not pressed.
302. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition on account of long-term capital gains on the alleged sale of Thaltej lands of Savita Co-operative Housing Society.
303. At the outset, we note that the issue raised by these assessees in the captioned ground of appeal for the AY 2005-06 in IT(SS)A No. 95 to 98/AHD/2023 is identical to the issue raised in the case of assessee late Shri Govindbhai M Patel in IT(SS)A No. 84/AHD/2023 for the assessment year 2005-06. Therefore, the findings given in IT(SS)A No. 84/AHD/2023 shall also be applicable for captioned ground of appeal of the assessee for AY 2005-06. The relevant ground of appeal of the assessee in IT(SS)A No. 84/AHD/2023 has been decided by us vide paragraph No. 25 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings given for ground raised in in IT(SS)A No. 84/AHD/2023 shall also be applied for the ground raised in IT(SS)A No. 95 to 98/AHD/2023. Hence, the issue raised by the assessee in the captioned ground of appeal is hereby allowed.
IT(SS)A Nos.84 to 89/Ahd/2023 and 15 others A.Ys. 2005-06 to 2011-12 159
304. In the result appeals of these assessees are hereby partly allowed.
305. In the combined result, all the appeals of the assessee are partly allowed except in IT(SS)A Nos. 91, 92 & 94/AHD/2023 which are partly allowed for statistical purposes whereas the Revenue appeal bearing IT(SS)A No. 60/AHD/2023 is hereby dismissed.
Order pronounced in the Court on 12/06/2024 at Ahmedabad.
Sd/- Sd/-
Sd/- Sd/- Sd/-
(SIDDHARTHA NAUTIYAL) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy)
Ahmedabad; Dated 12/06/2023
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आय!
ु त(अपील) / The CIT(A)
5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण / DR, ITAT,
6. गाड* फाईल / Guard file.
आदे शानुसार/BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.Registrar)
आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation : 31/05/2024 (Dictated on dragon software by Hon'ble Member)
2. Date on which the typed draft is placed before the Dictating Member /05/2023
3. Date on which the approved draft comes to the Sr.P.S./P.S. - /05/2023
4. Date on which the fair order is placed before the Dictating Member for Pronouncement /05/2024
5. Date on which the file goes to the Bench Clerk.. : /05/2024
6. Date on which the file goes to the Head Clerk..................................
7. The date on which the file goes to the Assistant Registrar for signature