Commissioner of Income Tax-V vs Indrajit Singh Suri

Sonia Gokani, J.—Aggrieved by the order of the Income Tax Appellate Tribunal dated 25.05.2012, this Tax Appeal is preferred raising

following substantial questions of law for our consideration:

(A) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 3,46,189/- and Rs.

72,956/- being difference between the opening capital balance as on 01/04/1999 and closing balance as on 31/03/1999 treating the same as

income of the assessee from undisclosed sources, without appreciating the correct facts brought out by the Assessing Officer and CIT(A) in their

respective orders?

(B) ""Whether the Appellate Tribunal is right in law and on facts in not appreciating the fact that the findings given by the Assessing Officer

emanates from the circumstances revealed during the course of search proceedings including the fact that, no regular books of accounts were being

maintained at all up to the date of search and therefore, everything disclosed by the assessee for the I.T. proceedings conducted for the earlier

years was not based on any day to day records as are required to be maintained in regular course of business activity?

(C) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 2,01,000/- made by Assessing Officer on account of

gift received from assessee''s mother as undisclosed income, by not appreciating the fact that the creditworthiness of the donor and genuineness of

the transactions were never proved by the assessee?

(D) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 20 lakhs being

unaccounted investment in Ninad Co-op. Housing Society without considering the fact that the employees of the assessee had accepted that the

investment in the flats and the suit for possession were made at the behest of the assessee and that the assessee himself has also accepted the

same?

(E) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 5 lakhs being

unaccounted investment made with Shri Yogesh Raval, without considering the statements of Mr. Raval and only considered the version of the

assessee to conclude that the investment was made beyond the Block period?

(F) ""Whether the Appellate Tribunal is right in law and on facts in deleting addition made by Assessing Officer of Rs. 5 lakhs on account of

unaccounted investment made with Shri Dinesh Dhabalia without considering the fact that Shri Dhabalia had given statement that the assessee had

lent Rs. 5 lakhs against the property where possession was given to the assessee, and therefore, the assessee had clearly made an investment in the

property, if the loan theory is not accepted?

(G) ""Whether the Appellate Tribunal is right in law and on facts in deleting addition made by Assessing Officer of Rs. 7,43,000/- and Rs.

2,00,000/- on account of unaccounted investment made in Jay Shiv Apartments, without considering the fact that the assessee had accepted the

contention of Mr. Upendra Mistry in his original statement that 2 lakhs was paid in cash but for the balance he relied on the retraction filed by Mr.

Upendra Mistry?

(H) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 10 lakhs being

unaccounted investment in land purchased from Bhavya Ghantakarnan Cottage Association, without considering the seized material in form of

loose paper files Annexure A/1, pages 82 to 110 containing receipts of investment made in cash, and also not appreciating the fact that the

assessee has failed to explain satisfactorily the source of income of investments of Rs. 10 lakhs mad by cheque and cash either before Assessing

Officer or before the CIT(A)?

(I) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 5.51 lakhs being

unaccounted investment in Dwirup Bunglows, without appreciating the fact that the assessee did not explain the source of investment either before

the Assessing Officer or before the CIT(A) and without considering the fact that, no books were prepared or maintained by any member of the

assessee group?

(J) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 1,80,000/- being

unaccounted investment in Santro Car, without appreciating the fact that, the assessee himself has admitted during the course of search

proceedings that he had purchased the Car of Rs. 1,80,000/- and also without considering the fact that the assessee has not been able to explain

the source of investment either before the Assessing Officer or before the CIT(A)

(K) ""Whether the Appellate Tribunal is right in law and on facts in deleting the addition made by Assessing Officer of Rs. 3 lakhs being fictitious

entries in the name of Bharat Textiles without appreciating the fact that the assessee has failed to explain the source of investment and without

considering the fact that the books were prepared subsequent to the date of search, and as such, for the purpose of Block assessment they cannot

be relied upon?

(L) ""Whether the Appellate Tribunal is right in law and on facts in restricting the addition made by Assessing Officer of Rs. 1,17,900/- to Rs.

76,635/- being unaccounted investment in shares without considering the findings brought out by the Assessing Officer?

We have heard learned counsel Ms. Mauna Bhatt for the revenue and with her assistance, determined these questions.

Brief facts leading to filing of this Tax Appeal are as follow.

2.1 A search and seizure operation u/s 132(1) was carried out on 06.09.2001. Pursuant to such operation, a notice was issued u/s 158BC on

04.02.2003 by the Assessing Officer directing the assessee to file return of income for the relevant block period. The assessee filed return of

income on 02.06.2003 where he disclosed certain incomes for different assessment years. Inquiries were made and the assessee-respondent was

found to be the main person looking after the financial affairs of family members. Different returns of income were preferred reflecting maintenance

of books of account, bank accounts etc.

2.2 The Assessing Officer made certain additions which were challenged before the CIT(Appeals) and the Tribunal by the assessee. Those all the

additions which were deleted in favour of the assessee and against the revenue, the revenue has challenged before this Court. Each question shall

need to be dealt with separately.

Taking firstly Question Nos. [A] and [B], they pertain to deletion of addition made by Assessing Officer of Rs. 3,46,189/- and Rs. 72,956/-

being difference between the opening balance and closing balance where the Assessing Officer and the CIT(A) treated such income of the

assessee from the undisclosed source. The Tribunal deleted the entire amount relying on the decisions of this Court rendered in cases of N.R.

Paper and Board Limited and Others Vs. Deputy Commissioner of Income Tax, and Commissioner of Income Tax Vs. Shambhulal C.

Bachkaniwala, . It is also needed to be noted that in case of wife of the present assessee-respondent, these questions had been raised in Tax

Appeal No. 847 of 2012 which have not been entertained by this Court vide order dated 01.03.2013. The Tribunal noted thus:

10.5 We are in agreement with the findings of the CIT(A) that the assessee had filed his return of income for the AY 99-00 earlier and the

Revenue had not initiated any proceedings u/s. 147 of the Act for that year. Therefore, the capital of the assessee as an individual together with the

capital of Nanak Cutlery Mart as reflected in that return of income should be taken into consideration by the AO while determining the difference

between closing balance for the AY 1999-00 and the opening balance for AY 2000-01 and the difference between the same would be upheld as

addition. Though the assessee has agreed in principle that the personal books, the account of Nanak Cutlery Mart shows balance of Rs.

2,03,591/- whereas in the books of NCM, the capital shown was Rs. 1,30,635/-, such difference being not reconcilable, the addition may be

sustained. However, this had not arisen from the seizure of the assets/records during search; such addition cannot be made in view of the rulings of

the jurisdictional Hon''ble High Court cited supra. In conformity with the rulings of the Hon''ble High Court, the addition requires to be deleted.

Hence, both the additions of Rs. 3,46,189/- and Rs. 72,956/- are deleted.

We are in complete agreement with the findings of the Tribunal and the facts being so glaring with substantiating evidences, the Tribunal has rightly

applied law to the facts in this case and therefore, no interference is necessary.

Question No. [C] pertains to deletion of addition of Rs. 2,01,000/- made by Assessing Officer on account of gift received from assessee''s

mother as undisclosed income. Revenue challenged that neither genuineness of the transaction nor creditworthiness of the donor has been proved

by the assessee. The Tribunal noted that the identity of donor had been proved and the cash book of donor was found to be having sufficient cash

balance to gift a sum of Rs. 2.01 lakhs leaving a balance of Rs. 84,790/-. There was a declaration of gift executed on 30.08.1999 and all the

accounts of the donor had been maintained by computerized books. Thus, we find no error in the reasonings of the Tribunal to interfere as the

assessee succeeded in proving identity, genuineness of the transaction and creditworthiness of the donor. The assessee had discharged the burden.

The revenue not having proved any defect in such reasonings, this issue deserves no further consideration.

As far as Question No. [D] is concerned, it pertains to deletion of addition of Rs. 20 lakhs made by Assessing Officer being unaccounted

investment in Ninad Co-op. Housing Society.

Learned counsel for the revenue argued that the assessee and his employees agreed that this was the investment made in the flats and the suit for

possession was also preferred at the behest of the assessee. Therefore, the Tribunal has committed an error in deleting such amount.

It appears that the Tribunal extensively dealt with such issue taking note of all the contentions raised by both the sides and concluded in favour of

the assessee. It recorded that there was no conclusive documentary evidence to hold that the assessee-respondent had invested a sum of Rs. 20

lakhs in Ninad Co-op. Housing Society by using his four employees as conduits for booking of flats. The Tribunal, therefore, in absence of any

conclusive evidence, deleted such amount.

The entire issue is based on factual matrix presented before the authorities. We are in complete agreement with the findings of the Tribunal that the

Assessing Officer had largely proceeded on the basis of the statement of one Shri Gajjar in whose books of account, the said transaction of Ninad

Co-op. Housing Society had emerged. It further appears that no opportunity of cross examination of Shri Gajjar, though requested for, was

granted by the Assessing Officer. Cumulatively, thus, when the Tribunal found that there was violation of principles of natural justice by not

allowing cross examination despite such request coupled with absence of any evidence, no error much less any substantial error is committed by

the Tribunal in deleting the said amount. This issue, therefore, requires no further consideration.

Question No. [E] relates to deletion of addition made by Assessing Officer of Rs. 5 lakhs being unaccounted investment made with Shri Yogesh

Raval.

It is argued by learned counsel that proof of payment to Shri Raval was not at all considered by the Tribunal while deleting the said amount.

The respondent-assessee had booked a cellar no. 3 in Nirmal Apartment. The payment of Rs. 4.5 lakhs was made in cash and Rs. 50,000/- was

given by cheque as reflected in the computerized book. The statement of Shri Yogesh Raval was recorded by the Assessing Officer, however, no

permission was granted to cross examine him. Although it can be noticed that the legal suit was initiated against the builder & necessary documents

were also produced. The agreement concerned was of March, 1995 whereas the block period was from 01.04.1996 to 06.09.2001. The

Tribunal rightly held that the transaction would not fall within the block period under consideration and therefore on that count also, this issue

deserves no further consideration.

Question No. [F] concerns deletion of addition made by Assessing Officer of Rs. 5 lakhs being unaccounted investment alleged to have been

made with Shri Dinesh Dhabalia.

A Civil Suit was preferred by Shri Dinesh Dhabalia against the assessee-respondent seeking possession of the documents pertaining to the flat

situated at Thaltej. The statement of Shri Dinesh Dhabalia indicated that he needed to raise loan of Rs. 5 Lacs. He was therefore required to part

with the documents to the assessee who lent the said amount. It was further stated that the amount was paid back, however, it was alleged that the

assessee never returned the documents. On the basis of such facts, a sum of Rs. 5 lakhs had been added to the income of the assessee. The

Tribunal held that there was no proof of transaction as solemnized in the petition before the Court by Shri Dinesh Dhabalia. No opportunity was

granted to the assessee to cross examine Shri Dinesh Dhabalia. It, therefore, deleted such addition by holding that the revenue failed to bring on

record any unambiguous document to hold against the assessee on this count.

The Tribunal, on the basis of evidence available to it, has sufficiently discussed the entire factual issue and has held in favour of the assessee-

respondent. We see no reason to interfere in absence of any error much less perversity.

Question No. [G] concerns deletion of addition of Rs. 7,43,000/- and Rs. 2,00,000/- made by Assessing Officer being unaccounted investment

made in Jay Shiv Apartments.

It is contended by the learned counsel that the assessee had accepted the contention of Mr. Upendra Mistry where he stated that Rs. 2 lakhs had

been paid in cash, but, for the balance he relied on the retraction filed by Ms. Upendra Mistry & this glaring fact was ignored by the Tribunal and

therefore, it deleted the entire amount.

It can be noticed from the record that this amount was added as undisclosed income of the assessee on the basis of statement of one of the

partners of the Scheme of Jay Shiv Apartment who stated that the flats were sold at Rs. 7,04,000/- each. The Assessing Officer concluded that

difference of Rs. 7,43,000/- between cost of Rs. 14,80,000/- less the payment of Rs. 6,65,000/- represented payment in cash out of unaccounted

income. The Tribunal held thus:

16.4 We have duly considered the contention of the assessee and also perused the documentary evidences produced by the assessee. On perusing

the facts it is apparent that the addition is made based on the general practice of cash payments made outside the books of accounts in the case of

immovable property transactions. Revenue was of the opinion that there are ample instances that cash payments are made almost about 50%

outside the books of accounts in effecting real estate transactions and therefore, the statement made by one of the partner can be relied and the

addition sustainable. However, we do not subscribe to this view of the revenue. In order to establish that the assessee had paid amount outside the

books of account for effecting real estate transactions substantial evidence has to be placed on record which is absence in this case. It would be

unjust if an addition is made on the appellant based on a statement made by one of the partners of the firm without further making inquiries and

collecting evidence. Therefore, we hereby delete the addition of Rs. 7,43,000/- and Rs. 2,00,000/- made by the Ld. AO and confirmed by the

Ld. Commissioner of Income Tax (Appeals).

This entire question is based on facts and therefore, no interference is necessary.

Question No. [H] concerns deletion of addition of Rs. 10 lakhs made by Assessing Officer being unaccounted investment in the land purchased

from Bhavya Ghantakarnan Cottage Association.

It is argued before us by the learned counsel that the Tribunal disregarded the seized material in the form of loose paper files containing receipts of

investment made in cash. We notice that the entire issue has been dealt with by the Tribunal at length. The assessee had also claimed investment of

Rs. 5 Lacs through cheques which is also reflected in his books of account, books of account of his mother and that of Nanak Cutlery Mart. It had

details of cheques and names of the banks. The authority had never verified this claim of the assessee. The assessee also produced voucher and

the possibility was made out that agreement was entered between the assessee and BGCOA. Nothing was brought on record to indicate that the

assessee had wanted to earn interest by advancing Rs. 5 lakhs either to Shri Kishorebhai Shah or BGCOA. Therefore, the Tribunal has

appropriately concluded that it was only on the basis of presumption on the part of the Assessing Officer. In view of the advancement made to Shri

Kishorebhai Shah, the assessee-respondent received post dated cheques by way of security. We see no reason to interfere and therefore, this

issue requires no further consideration.

Question No. [1] relates to deletion of addition of Rs. 5.51 lakhs made by Assessing Officer being unaccounted investment in Dwirup

Bunglows. The Assessing Officer noted a Civil Suit where the assessee claimed possession of the property from Shri Jaishil A. Patel against the

payment of Rs. 5 lakhs and another sum of Rs. 50,000/- given as registration charges. Such amount was, therefore, added as undisclosed income

of the assessee. The Tribunal noted from the evidence on record that the Assessing Officer''s assumption was contrary to the reality by holding

thus:

18.3 It was submitted by the assessee that he had acquired Bunglow No. 3, Dhwirup Bunglow through commission issued by the court. Shri

Mahendrakaur Suri had paid Rs. 2 lakh, Smt. Manjeetkaur Suri paid Rs. 1 lakh besides his contribution of Rs. 2 lakh. It was submitted that all the

above transactions were duly reflected in their books of account. After obtaining the possession of the property, the assessee came to know that

the said property has been mortgaged with SBI, Laghu Udhyog Branch and a copy of legal suit filed has also been produceds proof. With regards

to payment of Rs. 5 lakh, it was claimed that it has been properly accounted for and supported by a sale deed executed by Shri Jayseel Patel in

favour of the assessee dated 15.10.1999. The registration charges of Rs. 51,000/- has also been reflected in the assessee''s books of account. It

was further, submitted that the assessee was having sufficient cash balance with him and family members as per the books of the account.

However, the AO had rejected such books of account and held that the investment though mentioned in the books of account they were from

unaccounted income. It was submitted that though the AO had not accepted the cash credit, but, no addition of unexplained cash credit was made.

In conclusion, it was pleaded that the assessee had debited the amount in the books of account, the cash balance available was fully proved and

thus there was no justification in making the addition of Rs. 5.51 lakh which requires to be deleted.

18.4 On a perusal of the evidences produced by the assessee, it has been observed that the payment of Rs. 3 lakh made through cheques have

been duly reflected in the books of account of Mahendrakaur N Suri and the assessee and Rs. 2 lakh of cash was paid from the account of Nanak

Cutlery Mart [Refer: Pages 173,174 and 175 of PB]. They had sufficient cash balance to make such payments. Documents on a stamp paper

[worth Rs. 50,000/-] was executed for the purchase of the said house from Jayseel Patel [source P 176-180 PB] duly acknowledging the sale

consideration through cheques for Rs. 3 lakh and cash of Rs. 2 lakh. The said documents has been registered and the stamp authorities have

accepted the price and accordingly, collected the stamp charges of Rs. 51,000/- [refer: P 193-208]. The assessee had produced documentary

proof to belie the assumption of the AO who took a stand that the investment of these amounts were not open to verification etc., which in out

view, is quite contrary to the reality.

18.5 Taking all the facts and circumstances of the issue into consideration, we are of the opinion that the investment made by the assessee stands

explained and therefore, the addition of Rs. 5.51 lakh deserves to be deleted. It is ordered accordingly.

The Tribunal was not at all in error in deleting such amount when it was apparent from the books of account maintained by the assessee & books

of account of other family members as also from those of Nanak Cutlery Mart that sufficient cash balance was available to make such payment.

The applicant had also accepted, price and tax authorities had collected the stamp charges. Such addition therefore was rightly held unsustainable.

The next Question No. [J] pertains to deletion of addition of Rs. 1,80,000/- made by Assessing Officer considering the investment in Santro

Car.

The Tribunal deleted such addition by taking into consideration the totality of facts and circumstances. A receipt of payment of Rs. 1 lakh was

noticed. Assessee could not pay the balanced sum of Rs. 80,000/- as promised. He, therefore, returned the car & received back the sum of Rs. 1

lakh advanced. This was a used car and documents were found at the time search operation. As these facts were crystal clear and. are based on

facts essentially, this issue deserves no further consideration.

Question No. [K] pertains to deletion of addition of Rs. 3 lakhs made by Assessing Officer on the ground that there were fictitious entries in

the name of Bharat Textiles. The Tribunal noted that the drafts have been purchased from the cash available at the relevant period as there were

sufficient and adequate balance. In absence of any contrary evidence adduced by the revenue, it rightly deleted such addition. No question of law

arises and therefore, this issue deserves no consideration.

Question No. [L] pertains to deletion of addition made by Assessing Officer. of Rs. 1,17,900/- and Rs. 76,635/- being unaccounted

investment in shares. The Assessing Officer did not consider the genuineness of the entries appearing in computerized cash book. The Tribunal,

therefore, made detailed examination of rival contentions and did not endorse the rejection of assessee''s explanation by the Assessing Officer.

Majority of the investments made through cheques and the paper books presented had contained all the details. The Tribunal also expressed

displeasure over the rejection of assessee''s contentions by the Assessing Officer. However, it reduced the addition of Rs. 1,17,900/- to Rs.

76,635/- by reducing disallowance by 65%. This reduction as raises no legal issue & is based on factual matrix, no interference is required.

Cumulatively, it can be noticed that majority of the questions are in the realm of facts. No question of law much less any substantial question of law

arises for entertaining the Tax Appeal. Resultantly, this Tax Appeal deserves to be dismissed and the same is dismissed.