2012 (8) TMI 419 - AT - Income Tax

Scope of the term thereon - Jurisdiction of the Tribunal - favorable decision - adverse findings - held that - Hon ble Courts have removed this confusion by explicitly mentioning that the judgment being favourable but could have an adverse finding or reasoning and that ground though against the respondent can be defended in Rule 27, nevertheless by supporting the final verdict. The interpretation of the word grounds is in wider sense because the same is not at par with the ground of appeal. The word thereon restricts the jurisdiction of the Tribunal to the subject matter of appeal. If this word thereon is to be read in conjunction with Rule 27, then the respondent is to support the order appealed against but required to confine to the subject matter of the appeal. Interestingly, in the present case though the first appellate authority has decided the issue of the applicability of the provisions of section 153C of IT Act, which was one of the ground of appeal raised by the assessee before ld. CIT(A), but even after an adverse decision of the CIT(A) on the said legal ground, no appeal was preferred by the assessee. Because of this reason, the Tribunal is not empowered to pass an order thereon on the subject matter which is not in appeal as per the appeal memo to be adjudicated upon. In any case, provisions of Rule 27 and the provisions of Sec. 253(4) do not over-lap each other; rather operate in two different situations.

Summary

Issues Involved:

1. Legality of proceedings initiated under Section 153C of the Income Tax Act.
2. Deletion of additions made on account of unexplained investments in purchase of land.
3. Deletion of additions made on account of unexplained cash credits.
4. Deletion of additions made on account of unexplained income from sale consideration.

Issue-wise Detailed Analysis:

1. Legality of Proceedings Initiated under Section 153C of the Income Tax Act:

At the outset, we have been informed that for A.Ys. 1999-2000, 2000-01, 2001-02 & 2003-04 the respondent-assessee has filed cross objections, however, those cross objections were dismissed, being withdrawn by the assessee, vide ITAT "C" Bench Ahmedabad order dated 01/11/2011. The Respected Co-ordinate Bench has also noted that those cross objections were belatedly filed and time-barred by 1170 days as well. Considering the said request of withdrawal, the Bench has decided as follows:-

"3. It may be noted that in all the Cross Objections the assessee challenged initiation of proceedings u/s. 153C of the IT Act. The learned Counsel for the assessee submitted that the grounds of Cross Objections have been decided by the learned CIT(A) against the assessee and submitted that delay in filing the Cross Objections was due to the bona fide belief that the assessee could support the order passed by the learned CIT(A) without filing the Cross Objections because Rule 27 of the Appellate Tribunal Rules permit the Respondent in departmental appeal to support the order appealed against on any of the grounds decided against him. He has, therefore, submitted that the assessee however, due to abandoned precaution filed the Cross Objections. The learned DR submitted that the points raised in the Cross Objections are decided against the assessee by the learned CIT(A) and submitted that the above reason would not disclose any sufficient cause for filing the Cross Objections belatedly. The learned DR submitted that the apprehension of the assessee is misplaced in moving the Cross Objections; therefore, same should be dismissed being time barred. The learned Counsel for the assessee in view of the above facts stated that the assessee may be permitted to withdraw the Cross Objections with liberty to argue the validity of the assessment in the departmental appeal being the Respondent.

4. On consideration of the above facts, we permit the assessee to withdraw the Cross Objections Rule 27 of the Appellate Tribunal Rules provides that the Respondent (assessee) though he may not have appealed, may support the order appealed against him on any of the grounds decided against him. Since the points raised in the Cross Objections have been decided by the learned CIT(A) against the assessee, therefore, remedy under Rule 27 of the Appellate Tribunal Rules is available to the assessee and as such no sufficient cause is disclosed in the affidavit of the assessee for explaining the delay in filing the Cross Objections. The Cross Objections of the assessee are accordingly dismissed as withdrawn with liberty to the assessee to argue the same points at the time of disposal of the departmental appeals."

3. At the start of the hearing, Ld. AR Mr. S.N. Divatia has raised an issue, that in the light of the observation of the ITAT "C" Bench order dt. 1.11.2011 (referred supra), the respondent-assessee is entitled to invoke the provisions of Rule 27 and thereupon wanted to challenge the initiation of proceedings u/s.l53C of the I.T. Act. His vehement contention is that the withdrawal of Cross Objection was conditional as is appearing from the language of the said judgment of the Tribunal. The appellant has a right to raise a legal issue. Since the assessee wants to challenge the initiation of proceedings u/s. l53C of IT Act, therefore the issue being a legal issue therefore the same can be raised at any stage of appeal. He has contested that even though the cross objections have been withdrawn but under Rule 27 of Appellate Tribunal Rules, he may be permitted to raise this legal ground.

2. Deletion of Additions Made on Account of Unexplained Investments in Purchase of Land:

1) The learned CIT(A) erred in law and on facts in deleting addition of Rs.5,00,000/- made on account of unexplained investment in purchase of land.

4.1. Facts in brief as emerged from the corresponding assessment order for A.Y. 1999-2000 dated 29/12/2006 were that the assessee in individual capacity has filed return of income u/s.153C of IT Act. As per the assessment order, it was noted that in the case of M/s.Kalgi, Tarun D.Karia and one Mr. Dinesh Babulal Thakkar a warrant of authorization u/s.132A was issued on 22/10/2003 as a consequence of a police raid conducted. The police raid was conducted at the premises of M/s.Kalgi on 26/08/2003. Certain documents were requisitioned and on the basis of those documents, it was found that some of them were belonging to the assessee. Due to that reason, a notice u/s.153C r.w.s. 153A(a) of the IT Act was issued. In respect of the above ground, it was noted that the assessee has purchased an agricultural land at Thor from one Mr. Dhiren J.Raval on 01/01/1999. The assessee was asked to explain the source of acquisition of the property. The mode of payment was stated to be "cash and hawala". As per the sale documents, a sale consideration of Rs.5 lacs was paid in respect of the pieces of land having four survey numbers 1920, 1921, 1924 and 1930 situated at Thor, Kadi, Mehsana. The AO has examined the "sale deed" wherein it was found that the impugned sum of Rs.5 lacs was paid to the seller in earlier years. As per AO, since the assessee has not filed any balance sheet or capital account in the past either in the regular return or the return filed u/s.153C of IT Act, therefore it was not proved that the impugned amount of Rs.5 lacs was paid in earlier years. However, during the course of hearing, a balance-sheet for A.Y. 1997-98 was produced. Even on perusal of that balance-sheet, there was no indication of any outstanding advance in the name of Shri Dhiren J.Raval, seller of the property. As per AO, it was an unexplained investment since the assessee has not established the source of investment. An another fact has also been noted that the sale deed was duly executed and the registration expenses and stamp duty were duly paid and reflected in the cash book for the relevant assessment year. The AO has taxed the impugned sum of Rs.5 lacs as unexplained investment in the hands of the assessee. Being aggrieved, the matter was carried before the first appellate authority.

6. Ld. CIT(A) has decided the issue in cryptic manner in favour of the assessee vide following paragraphs:-

"7. The next ground of appeal relates to the addition of Rs.5 lakhs as unexplained investment. The A.O. noted that the assessee had purchased agriculture land from one Dhiren Raval, on 1/1/1999 and had made payment of Rs.5 lakhs to the seller in earlier years, the source of which had not been explained as the balance-sheet/capital account, etc. were not filed with the return of income. The A.O. observed that the payment towards registration and stamp duties were however reflected in the cash book of the relevant assessment year 1999-2000) and so did not make addition of the amount spent on registration/stamp duty.

7.1. Before me, it was submitted that the appellant had agreed to purchase land of Shri Dhiren Raval, and accordingly credited his account by journal voucher entries individually, in respect of all four survey numbers i.e. 1920, 1921, 1924 and 1930 of the impugned land. There was no payment of advance as such, since the land was under dispute and was sought to be acquired by the Government under section 43 r.w.s. 32P(2) of the Land Revenue Code and it was eventually acquired also by the Government, vide the order dated 01/03/2006 of the Mamlatdar, Kadi Village. It was submitted that the affidavit of Shri Dhiren Rawal to this effect was also submitted before the A.O. in this regard.

7.2. The contentions were carefully considered. From the details submitted it is seen that the entries passed in respect of the four survey numbers of the impugned land were journal entries and that the transaction did not materialize in view of the acquisition of this land by the Government. In view of these details, the addition of Rs.5 lakhs made by the A.O. was not justified and is deleted."

7. From the side of the Revenue, Ld.DR Mr.S.K.Gupta has appeared and argued that the assessee has debited the registration charges and stamp duty, therefore it was established that the land was indeed purchased by the assessee. Why a person would sell the land before getting the sale consideration?, Ld. D.R. questioned. Also, it was wrong on the part to claim that the said amount of Rs.5 lacs was paid in earlier years. The assessee has utterly failed to prove that in fact the said amount of Rs.5 lacs was ever paid in the past. In some of the documents, the seller has denied of receiving any payment as sale consideration, however, on some of the documents the assessee was treated as the owner of the property being purchased through a registered sale-deed.

Ld.DR has drawn our attention on all the said sale-deeds pertaining to the respective piece of land as per their distinctive survey numbers and informed that identically it was noted as per one of the clause of the saledeeds that the sale consideration was received in piece-meal, i.e. small amounts of cash in pieces. Ld.DR has therefore pleaded that the said language do not demonstrate that the small portions of the impugned amount was paid in the past because the impugned amount could have been paid in small installments during one year, i.e. within the Financial Year in question. Ld.DR has therefore vehemently contested that once on record an investment was made, then there was no occasion on the part of ld.CIT(A) to hold that no consideration was paid and thus wrongly decided this ground in favour of the assessee. Ld. CIT DR has filed English translation of all the sale-deeds pertaining to the survey numbers 1920, 1921, 1924 & 1930 and on that basis vehemently argued that in fact the entire amount was accepted as paid and thereupon the sale-deeds were executed.

8. From the side of the respondent-assessee, ld.AR Mr.S.N.Divatia appeared and his only contention was that the amount in question was paid in piece-meal in the past years, therefore the investment did not belong to the year under consideration. He has pleaded that it was wrong on the part of the Revenue Department to assess the entire amount of Rs.5 lacs in A.Y. 1999-2000.

9. We have heard both the sides. We have perused the orders of the authorities below. On perusal of the sale-deeds in question, we are of the considered view that since all those sale-deeds have undisputedly been registered and the assessee has paid the registration amount, then it is difficult to accept that without passing of the sale consideration, duly stated therein, a vendor i.e. Shri Dhiren J.Raval has executed the sale in favour of the assessee. Those sale-deeds are complete in all respects and there is no ambiguity about the sale consideration agreed upon between the parties. The only reason of confusion was that the amount of consideration was mentioned as paid in cash by the purchaser in "piece meal". In our opinion, the assessee wants to take the advantage of the word "piece-meal" by alleging that the amount was paid in the past years.

But the assessee has failed to establish that the impugned amount was actually paid in the past financial years. Even the documents placed on record have not established conclusively that the amount of sale consideration was actually handed over in the past years. In this regard, the AO had deliberated upon and stated that none of the document furnished by the assessee have even established that the said amount was shown as either deposit or loan in the name of Shri Dhiren J.Raval ever in the past. Even the stand of the assessee kept on changing for the reason that at one place in the affidavit Mr. Dhiren Raval has stated that no consideration was received , but when it was questioned that why without receiving any consideration a prudent man would sell the land, the other stand was taken that the amount in question was received in the past year so not to be taxed in the year under consideration. This dilly-dally conduct has thus created doubt. We are convinced with the argument of the ld. CITDR Mr. Gupta that the amount of consideration might have been received by the vendor in piece-meal but within the financial year under consideration. Hence the investment has actually been made during the year under consideration. Otherwise, the legal presumption is that the documents which have found belonging to the assessee should be read as it was noted, therefore, the investment is to be considered in the year in which a document is registered and the property is purchased.

Therefore we hold that the issue is very straight that the four pieces of land were purchased through registered sale deeds, admittedly the registration fees plus stamp duty was paid by the assessee, therefore the consideration of Rs. 5 Lacs had been paid, the source of which remained un-explained hence rightly taxed by the A.O. Under the totality of the facts and circumstances of the case, we find force in the ground of the Revenue resultantly allow the same.

3. Deletion of Additions Made on Account of Unexplained Cash Credits:

2. The learned CIT(A) erred in law and on facts in deleting addition of Rs.8,00,000/- made on account of unexplained cash credit.

2.1. The learned CIT(A) erred in accepting the explanations furnished by the assessee especially when no documentary or other evidences were furnished in support of such explanations.

2.2. The learned CIT(A) ought to have considered the fact that the assessee had claimed to have received gift/loan of Rs.8,00,000/-, Rs.3,33,333/-, Rs.6,00,000/-, Rs.26,22,796/-, Rs.67,22,716/- totaling to Rs.1,10,78,845/- from his son in various assessment years from 1999-2000 to 2003-04 and that the assessee failed to establish the creditworthiness of the person form whom such huge sums were received.

10.1. It was noted by the AO that the assessee has received an amount of Rs.8 lacs from his son Shri Biral M.Patel alias Gulu, stated to be an NRI and staying in USA. A confirmation letter of the son was filed through his father. It was explained that the payment was made by the son through his NRE account with Punjab National Bank. On perusal of the return of income filed by the son in India, it was noted by the AO that a small amount of Rs.40,690/- was declared for A.Y. 1998-99. It has also been noted by the AO that in past five-six years, son had made huge gifts and loans to various family members. A chart was made by the AO through which it was demonstrated that in A.Ys. 1999-2000 upto 2003- 04 the son had gifted or given loan of a total amount of Rs.1,44,22,123/-.

AO has also noted that the source of the income of the son from USA was salary income. There was a discussion in the assessment order that the son has sold a Convenient Store for a consideration of US$ 330,000 in the year 2000-01. It was also claimed that Shri Biral M.Patel, son, has also sold a restaurant for US$ 110,000 in the year 1999. AO was not convinced and finally held as under:-

"The details filed by the assessee have been carefully perused. Shri Biral M.Patel is staying in USA with his family and his net income has to be seen in light of household expenses there and cost of living in USA. The availability of funds on account of sale of store, if any, to Shri Atul Doshi cannot be considered relevant to assessment year under consideration as such sale is said to have occurred during subsequent years. Most importantly the specific details of expenses incurred for purchase of such 'store' and sources thereof are not given in the letter of Shri Biral M.Patel as it would have been determinative for finding out the net profit generated out of such sale. In fact the claim of sale of store and restaurants by Biral M.Patel in USA remain unsubstantiated as no documentary evidences such as deed, agreement or legal documents for such sales were produced during hearings despite the fact that assessee is father of Biral M.Patel and assessment proceedings were going on in the cases of both the assessee and Shri Sandip M.Patel respectively father and brother of Biral M.patel. The issue of verification of gifts and unsecured loans from Biral M.patel to assessee and his family members was know to Authorized representative and the assessee both since the beginning of proceedings. A letter alone alongwith confirmation form purchases of property in USA cannot be considered enough proof of creditworthiness of Shri Biral M.Patel. The income of Rs.40690/- shown in the return of income filed in India is meager looking at the quantum of payments made towards gifts and unsecured loans by Biral M.patel, as shown above. No copy of return of income filed in USA was furnished. In view of above discussion, the creditworthiness of Shri Biral M.Patel could not be proved by assessee.

Thus the assessee could not discharge the onus