Gujarat High Court
Principal Commissioner Of Income Tax-2 vs Kamlesh Prahladbhai Modi on 18 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/TAXAP/331/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 331 of 2018
With
R/TAX APPEAL NO. 332 of 2018
With
R/TAX APPEAL NO. 333 of 2018
With
R/TAX APPEAL NO. 334 of 2018
With
R/TAX APPEAL NO. 335 of 2018
With
R/TAX APPEAL NO. 336 of 2018
With
R/TAX APPEAL NO. 337 of 2018
With
R/TAX APPEAL NO. 339 of 2018
With
R/TAX APPEAL NO. 344 of 2018
With
R/TAX APPEAL NO. 345 of 2018
With
R/TAX APPEAL NO. 359 of 2018
With
R/TAX APPEAL NO. 360 of 2018
With
R/TAX APPEAL NO. 361 of 2018
With
R/TAX APPEAL NO. 363 of 2018
With
R/TAX APPEAL NO. 364 of 2018
With
R/TAX APPEAL NO. 365 of 2018
With
R/TAX APPEAL NO. 367 of 2018
With
R/TAX APPEAL NO. 368 of 2018
==========================================================
PRINCIPAL COMMISSIONER OF INCOME TAX-2
Versus
KAMLESH PRAHLADBHAI MODI
==========================================================
Appearance:
MR MANISH BHATT, SR COUNSEL WITH MRS MAUNA M BHATT(174) for
Page 1 of 9
C/TAXAP/331/2018 ORDER
the PETITIONER(s) No. 1
MR SN SOPARKAR, SR COUNSEL WITH MR KIRTIKANT THAKER(2055)
for the RESPONDENT(s) No. 1
MR. ARCHIT P JANI(7304) for the RESPONDENT(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 18/04/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These tax appeals arise out of common orders passed by the Assessing Officer, CIT(Appeals) and the Tribunal. The Revenue has challenged the judgment of Income Tax Appellate Tribunal dated 28.6.2017.
2. Tax appeal can be broadly classified into two sets. In first set of tax appeals, Tax Appeal No.331/2018 being the representative tax appeal, the Revenue has proposed the following question of law:
"Whether the Income Tax Appellate Tribunal is right in law and on facts in deleting the addition made in respect of investment in land?"
3. The other set of tax appeals, Tax Appeal No.335/2018 being the lead matter, the Revenue has proposed the following question of law :
"Whether the Income Tax Appellate Tribunal is right in law and on facts in deleting the addition made in respect of unaccounted income in the form of onmoney from sale of shops at Himalaya mall?"Page 2 of 9
C/TAXAP/331/2018 ORDER
4. Between all these tax appeals, the Revenue has argued two issues before us. Before we take note of these issues, we may briefly record the background of the cases.
5. Respondent assessees are Kamlesh Prahladbhai Modi and his brother Rohit Prahladbhai Modi. They are engaged in the business of land development and other real estate development activities. The Revenue refers to them and their entities as Himalaya group of business. Himalaya group was subjected to search operation on 22.4.2008 which resulted into notices being issued under section 153A of the Income Tax Act 1961 for the assessment years 20032004 to 20082009. It appears that parallel search was also conducted in the premises of one Dasrath Patni. From the premises of Dasrath Patni, several loose papers were seized and impounded. These loose papers allegedly contained the details of various land transactions entered into by the assessees. These transactions could either be of buying and selling of land in and around the city of Ahmedabad. The Revenue also seized typed copies found from the premises of Dasrath Patni of the above earlier referred loose documents which were in handwritten. Major difference being that typed copies contained a description "PROJECTIONS".
6. From the basis of documents seized from the premises of the assessees as well as from the premises of Dasrath Patni, the Assessing Officer undertook the task of ascertaining the assessees' cash transactions in such land deals. The assessees were confronted with two principal aspects. First was that in many of these loose documents, Page 3 of 9 C/TAXAP/331/2018 ORDER there was reference to 'RP' , 'PD' and 'KM'. The assessees explained that 'RP' referred to Rohit P. Modi, 'PD' referred to one P. Dubey and 'KM' referred to one K.Mehta. The assessees also conveyed to the Assessing Officer that the transactions recorded against the name of 'PD' and 'KM' were the assessees' transactions. These persons were involved for the purpose of registration of documents as they had the status of agriculturist and in State of Gujarat only an agriculturist could purchase agricultural lands. With respect to handwritten documents and the typewritten copies of such handwritten documents found from the premises of Dasrath Patni, the assessees did not dispute either their connection with such land dealings or the contents of the documents. The principal defence of the assessees was that in many of the cases referred to in these documents, the final deal of buying or selling of the lands did not materialise and that therefore, projected profit did not result.
7. During the course of the assessment proceedings, the assessees did disclose sizeable unaccounted cash receipts which was duly taxed. However, with respect to several land dealings the assessees contended that the final sales did not materialise and therefore, there was no onmoney receipts by the assesses. This represents the first issue where the Tribunal held against the Revenue which is being argued before us.
8. The second issue that the Revenue has brought before us relates to the sale of commercial space in one Himalaya mall situated in the city of Ahmedabad. The Assessing Page 4 of 9 C/TAXAP/331/2018 ORDER Officer noted that the assessees had total saleable carpet area of 2,00,733 sq. ft., out of which the assessee had already sold 1,64,579 sq ft. Remaining area had remained unsold. Out of total carpet area sold by the assessee, the seized documents showed onmoney receipts in sale of 1,14,761 sq. ft. The assessees admitted such cash transactions. However with respect to the balance area of 49,818 sq. ft., the assessees claimed that no onmoney was received in sale thereof. The Assessing Officer ignoring the assessees' objections made the additions on par with the sale of the remaining commercial area in the said mall. CIT(Appeals) deleted the said additions. The Tribunal confirmed the view of the CIT(Appeals). This is the second issue the Revenue seeks to raise in these appeals.
9. With respect to the first issue we may notice that the Assessing Officer mainly proceeded on the following basis :
1) That loose documents were found from the premises of Dasrath Patni. These handwritten loose documents tallied with the typewritten copies found from the same premises.
2) The assessees owned up to their involvement in the land deals referred to in such documents.
3) The assessees agreed that reference to 'PD' and 'KM' was of their dummies.
4) In the land dealings in which the assessees had admitted receiving onmoney consideration, similar transactions were found from the same set of papers.Page 5 of 9
C/TAXAP/331/2018 ORDER There was no material difference between two sets of papers. The assessees' defence that sales eventually did not take place cannot be accepted.
10. CIT(Appeals) reexamined the issue by giving independent reasons. However on similar factors, he confirmed the additions, upon which, the assessee went in further appeal before the Tribunal. The Tribunal deleted the additions. The principal consideration which weighed to the Tribunal were as under :
1) Documents were dumb documents.
2) They were not found from the premises of the assessee but from that of Dasrath Patni.
3) The typewritten copies of the handwritten documents carried a title "PROJECTIONS".
4) The assessees' contention that the land deals referred to in such documents did not materialise and, therefore, the projected income was not generated.
5) The Assessing Officer did not dislodge the evidence produced by the assessees in the form of affidavit of the proposed sellers of the land that eventually the land deals fell through.
11. As noted, the assessees themselves did not dispute their involvement in the land deals referred to in the documents found from the premises of Dasrath Patni nor did they Page 6 of 9 C/TAXAP/331/2018 ORDER disown the reference to two persons 'PD' and 'KM'. In fact, they pointed out that these two dummies whose names would be used for registration of documents since they had status of agriculturist and in the State of Gujarat, agricultural lands could be brought only by an agriculturist. Thereafter however, the assessees sought to bifurcate two sets of deals. One where the land deals were completed and sales executed. In such set of cases, the assessees accepted receipt of onmoney in the eventual transactions. However, with respect to the rest of the deals, the assessees pointed out that they were merely proposed deals and documents themselves suggested that figures were on projected basis. There was nothing on record to suggest that the sale itself did eventually materialise.
12. We may take the case of Vejalpur land as a test case. CIT(Appeals) has also recorded that for such land, the assessees had paid through cheques a total sum of Rs.22,02,100/ to one Sherin Co. Op. Hsg. Soc. Ltd. during the period between 28.7.2003 to 31.1.2005. CIT(Appeals) also noted that entire amount was repaid by Sherin Co. Op. Hsg. Soc. Ltd. in different cheques during the period between 2.6.2005 to 5.12.2005. The Revenue did not have any further material to suggest that though the assessee might have exited from the land deal, Sherin Co. Op. Hsg. Soc. Ltd. had eventually sold the land to third party and in the process, the assessee had extracted its share of profit. The Tribunal therefore, accepted the assessees' contention that the loose documents did not refer to the actual receipt of onmoney since the documents itself carried a title "PROJECTIONS" and further that the Page 7 of 9 C/TAXAP/331/2018 ORDER Assessing Officer had nothing to discard the assessees' theory that these land deals did not eventually materialise.
13. Essentially the Tribunal having referred to the materials on record and come to factual conclusion, in our opinion, no question of law arises.
14. The second issue, we may recall, pertains to the Assessing Officer making addition of projected onmoney receipts by the assessee in sale of 49,929 sq. ft. of carpet area of Himalaya mall. The Assessing Officer had projected the on money received by the assessee and duly admitted during the course of assessment proceedings for the remaining carpet area of commercial property in the Himalaya mall on the basis of documents found during search. The assessees' defence was that not necessarily in all sales, premium would be available. 49,929 sq. ft. carpet area represented the shops which did not command prime location. These shops were sold to the family members and in some cases to outsiders without charging any premium. The assessees pointed out that many of these shops were not tenanted thereby suggesting that these shops did not have ready income generating potential. CIT(Appeals) and the Tribunal both accepted the assessees' viewpoint. There was no concrete material suggesting that in the sale of remaining shops also, the assessees had accepted the on money. Merely because in rest of the sales, the assessees had admitted having received onmoney, such admission cannot be projected for the remaining area where there was no such matching material found or admission made by the assessees. This was the view of the Tribunal.
Page 8 of 9C/TAXAP/331/2018 ORDER Significantly, the seized material did not include any reference of onmoney with respect to these remaining shops.
15. This issue therefore, is virtually factual. CIT(Appeals) and Tribunal having concurrently held in favour of the assessees, we do not entertain this issue.
16. In the result all the tax appeals are dismissed.
(AKIL KURESHI, J) (B.N. KARIA, J) raghu Page 9 of 9