2024 (2) TMI 866 - AT - Income Tax

Unexplained investment in agricultural lands - loose paper seized relied upon - HELD THAT - From perusal of this loose paper the cash transactions are between 31.08.2006 to 17.12.2006 which pertaining to the Assessment Year 2007-08. Whereas the purchase of lands by the assessees in the name of the Firm were between 17.04.2008 to 08.10.2008 which is clearly falls under the Assessment Year 2009-10. However the Ld AO determined the cash and cheque ratio as 4.5 1 based on this seized loose sheets which has no relevance to the purchase of agricultural lands by the assessee in the name of its Partnership Firm VIDC. On perusal of the various Sale Deeds executed in the names of the assessees herein, the original land owners only executed the Sale Deed in favour of the assessee on behalf of the Firm VIDC and the Partnership Firm VIDC had made cheque payments to the sellers of the land, which is reflecting in the various Sale deeds executed at the office of the Sub Registrar. Furthermore, the Partnership Firm VIDC sold few part of the lands during the Asst. Year 2012-13 for a consideration which is clearly shown in the Profit and Loss account of the firm as business profit and offered for taxation while filing the Return of Income in Form ITR-5. Further the sale consideration received by the Firm VIDC is reflected in its bank account. This apart the very same seized material is used by the department in the case of M/s. Sopan Industrial Infrastructure Park relating to the Assessment Year 2007-08 wherein this Hon ble Tribunal dismissed the Revenue appeal. On further appeal by the Revenue before the Hon ble Gujarat High Court 2019 (4) TMI 569 - GUJARAT HIGH COURT the Hon ble High Court dismissed the Revenue appeal observing that there is nothing to connect the assessee with the contents of the seized material. Loose sheets was not seized from the assessee but on the basis of some noting made by a third party. No conclusion could be drawn that the same pertains to the assessee namely Sopan Industrial Infrastructure Park and no conclusion could be drawn that the same pertains to the assessee, more so, when the seized documents nowhere referred to the assessee. Thus no hesitation in confirming the order passed by the Ld. CIT(A) who was deleted the addition made by the Assessing Officer. Decided in favour of assessee.

Summary

Issues Involved:
1. Unexplained Investment in Agricultural Lands.
2. Ownership of Agricultural Lands.
3. Validity of Evidence (Loose Papers) for Addition.
4. Cross Examination of Witnesses.

Summary:

1. Unexplained Investment in Agricultural Lands:
The Revenue appealed against the deletion of an addition of Rs. 4,04,14,657/- made by the Assessing Officer (A.O.) as unexplained investment in agricultural lands for the Assessment Years 2008-09 and 2009-10. The A.O. based the addition on a loose paper seized during a search, which allegedly indicated unaccounted cash payments. The A.O. calculated the cash and cheque ratio as "4.5:1"� and attributed the unexplained cash payments to the assessee.

2. Ownership of Agricultural Lands:
The Commissioner of Income Tax (Appeals) [CIT(A)] found that the agricultural lands were purchased by the Firm Vadsar Industrial Development Corporation (VIDC) in the names of its farmer partners due to legal restrictions on non-farmers purchasing agricultural lands. The funds for the purchases were provided by the Firm VIDC and recorded in its books of accounts. The lands were reflected in the Firm's balance sheet and not in the individual partners' balance sheets. The Firm VIDC also sold some of these lands and declared the profits in its income tax returns.

3. Validity of Evidence (Loose Papers) for Addition:
The CIT(A) and the Tribunal noted that the loose paper seized did not contain any names or signatures linking it to the assessee or the Firm VIDC. The document was seized from a third party, Shri Pareshbhai B. Patel, who had no connection with the assessee. The Tribunal cited several judicial precedents, including the Supreme Court's decision in CBI vs. V.C. Shukla, which held that loose sheets without corroborative evidence cannot be used to assess undisclosed income.

4. Cross Examination of Witnesses:
The assessee was not given an opportunity to cross-examine Shri Pareshbhai B. Patel, from whom the loose paper was seized. The CIT(A) observed that the A.O. made the addition based on assumptions without providing any source of unaccounted investment by the assessee. The Tribunal upheld the CIT(A)'s decision, noting that the seized document did not contain any reference to the assessee or the Firm VIDC.

Conclusion:
The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s deletion of the addition made by the A.O. The Tribunal found no merit in the Revenue's grounds and upheld the CIT(A)'s findings that the agricultural lands belonged to the Firm VIDC and that the loose paper seized was not sufficient evidence to support the addition of unexplained investment. The Tribunal also dismissed the cross-objections filed by the assessees, as they were in support of the CIT(A)'s order. The appeals filed by the Revenue and the cross-objections filed by the assessees were both dismissed.