Commissioner of Income Tax-V vs Umang H Thakkar

Honourable Ms Justice Sonia Gokani

The Appellant-Revenue being aggrieved by the order of Income Tax Appellate Tribunal dated 27th February, 2009, has preferred the present Appeal u/s 260-A of the Income Tax Act, 1961, (hereinafter referred to as "the Act") proposing the following questions of law for determination of this Court:

1 Whether the Appellate Tribunal is right in law and on facts inholding that the impounded documents do not pertain to theAssessee ignoring the fact that the same premises was Assessee''s "site office" for construction of the said project and there wasno evidence to prove the date of vacating the same premises bythe Assessee - Moreover, the documents impounded,particularly Page No. 83 wherein the said premises, BasementA-3, Swaminarayan Avenue is shown as unsold, which provesbeyond doubt the ownership of the documents ?

2 Whether the Appellate Tribunal is right in law and on facts inholding that the impounded documents do not pertain to theAssessee ignoring the fact that the basic principle ofinterpretation of the Statute as well as documents is that it hasto be read as a whole - Most of the documents impounded,particularly, the allotment letters and receipts issued by theAssessee in the name of the Ghanshyam Builders proves beyonddoubt the ownership of the documents ?

3 Whether the Appellate Tribunal is right in law and on facts innot considering the very crucial evidence that the Assesseehimself was receiving the money from the customer for the landas well as the construction ?

4 Whether the Appellate Tribunal is right in law and on facts indeleting the addition of Rs. 2.80 crores without considering thefacts and circumstances of the case ?

Briefly to state the facts -In a search operation carried out u/s 132 of the Income Tax Act at the premises of Assessee-Respondent, office of his father was covered u/s 133A of the Act. Present Assessee is the proprietor of M/s. Ghanshyam Builders who had constructed the building known as "Swaminarayan Avenue". His father''s office is situated at the basement of Swaminarayan Avenue in Shop No. 3.

From the office of father of Assessee file containing loose paper (176 pages) was impounded and on the basis of the notings made in this file, Assessing Officer added the sum of Rs. 2.8 crores as the Assessee''s unaccounted investment in land.

This action of Assessing Officer was challenged before the CIT(A) by the Assessee-Respondent being aggrieved by such an order of addition. CIT(A) deleted the entire addition on the basis that the papers were not seized from the premises of the Assessee but that of his father who had no business connection with the Assessee-Respondent. It also noted that the investment in land was not by an individual Assessee but by the Non-Trading Corporation ("NTC" for short) and there was overwhelming evidence in support of that aspects which was not possible to be disregarded.

Being aggrieved by this order of CIT(A) revenue approached ITAT which concurred with the findings of CIT(A) and dismissed the appeal.

The impugned order is challenged by proposing the aforementioned questions of law.

Having heard Learned Counsel Mr. Manish Bhatt and on duly considering the material evidence on record as well as on examining the orders of adjudicating authorities, the question proposed before this Court are answered as follows:

At the outset, it is required to be noted that though there are four questions raised for consideration the issue hinges on one aspect and i.e. Whether addition made by Assessing Officer to the tune of Rs. 2.8 crores by way of unaccounted investment can be sustained or not ?

It is contended before this Court by Learned Counsel for the Revenue that there is gross error on the part of authorities below to ignore the facts that the office from where the documents have been impounded not only belongs to his father but same the site office of Assessee-Respondent of the project of Swaminarayan Avenue. It is further submitted that the findings of the Tribunal that the addition was made on presumptive basis is fully misconceived in as much as there were glaring facts clearly leading to conclusion that this was an unaccounted investment of Assessee himself. It is further contended both the authorities disregarded the fact that NTC was also managed by the Assessee. Application of the ratio by CIT(A) of the case of K.P. Varghese Vs. Income Tax Officer, Ernakulam and Another, also was contended to be misplaced, because in case of K.P. Varghese (Supra), transaction was between the Assessee and his close relative and there was absence of allegation in respect of under-statement of consideration or concealment of consideration in connection with asset transfer, but the addition was made on the basis of market value of asset. But in the present case, there is clear evidence suggesting the cost of land at Rs. 3,20,00,000/-. Tribunal has considered this issue by holding thus:

We have carefully considered the rial submissions and perused the material record. We have also one through the order of the authorities below. We find that the agreement to sale is dated 25.7.1996 by which three Non-Trading Corporations, viz. Kinjal NTC, Kanth NTC and Janak NTC purchased the land by executing five separate documents of Rs. 25 lacs each. It is not denied that the land is purchased by Non-Trading Corporation. The land has been purchased and possession has been taken by Non-Trading entities on 25.7.1996. The Assessee has made the disclosure in his VDIS, 1997 disclosing the advances made to the NTC''s in the Assessment Years 1996-97 and 1997-98. The property is owned by the NTCs and is in the possession of NTCs. There is no question that the addition should be made in the hands of the Assessee. The addition has been made by the Assessing Officer merely on the basis of the statement of the third party. It is the settled law that no addition can be made on the basis of the statement of third party. The CIT(A) has duly asked for the remand report on the submissions made by the Assessee and after considering the remand report, has exhaustively dealt with the issue and deleted the addition. In our opinion, when the investments in the land are made by the NTCs and NTCs and the Assessee, both are different persons in the eyes of law, no addition can be made in the hands of the Assessee in the absence of any concrete evidence that the Assessee had paid the own money for the purchase of land. The onus is on the Revenue to prove that the land belonged to the Assessee and the Assessee has paid the own money. The statement of third party recorded during the course of survey operations cannot be conclusive evidence to decide against the Assessee. The survey has been carried out in the case of the third party and the loose papers are found from the possession of the third party. The rough jottings on the papers are not in the handwriting of the Assessee or his employees. Even the name of the Assessee is also not mentioned in the loose papers so found during the course of survey. The onus is on the Revenue to prove that the loose papers belonged to the Assessee and the land also belonged to the Assessee and Non-Trading Corporations are benamidars of the Assessee. In the absence of any such onus being discharged by the Revenue, we are of the view that no interference is called for in the order of the CIT(A). The CIT(A) in our opinion, has rightly deleted the addition by relying on the various case laws to which we agree. We accordingly, uphold the order of the CIT(A).

It can be seen from the findings of the Tribunal noted above that addition made by the Assessing Officer has been rightly deleted by the Tribunal upholding the version of CIT(A). Firstly on the settled law that no addition could be made on the basis of statement of the 3rd party, this deletion is made. Even if the person concerned was the father of Assessee. Tribunal had noted that alleged loose papers/documents where the rough jottings were made on the papers, they were not handwriting of either Assessee or any of his employees neither was there were any dates nor the figures indicative of anything.

There was yet another potent ground why Tribunal did not uphold the said addition since investment in the land was made by the NTCs and NTCs and the Assessee,both are different persons in the eyes of law. Tribunal was of the firm opinion and correctly hled that unless onus is duly discharged by the Revenue that the papers belonged to the Assessee assurance could not be saddled with the liability of any addition in his income. Purchase of such land by NTC on 25th July 1996 and other substantiating documents were clearly brought on the record. As can be clearly noted the issue is largely determined on the basis of the evidence which were presented before the Tribunal. This Court also had directed to produce paper book related to all the documents and on due regard to the material placed before this Court and on appreciation of entire gamut of facts, Court finds no infirmity in either findings of the Tribunal or conclusion thereof. No question of law having arisen for consideration, much less the substantial question of law, Resultantly, this Tax Appeal is dismissed.