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TMI Blog2018 (1) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... A Nos. 93 to 98/Ahd/2014 for assessment years 2005-06 to 2010-11 emanate from the CIT(A)-III, Ahmedabad's common order dated 30.10.2013 passed in case nos. CIT(A)-III/8 to 13/DCIT-CC-2(2)/13- 14; respectively. The assessee raises the following identical substantive grounds in all these six appeals as follows: "1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the Order u/s.147 r.w.s. 143(3) of the Income Tax Act and taxing the income of Rs. 6,00,300/- in the hands of the appellant firm. It is submitted that complete details were filed by the appellant at the time of original assessment and there was no failure on the part of the assessee to furnish any details or Return of Income. Similarly no new information has been received by the Assessing Officer under which the reopening can be done. It is submitted that the reopening done u/s.147 and consequential order passed is bad in law as the provisions of section 148 are not applicable. It is submitted that the reopening being bad in law, the assessment be set aside. 2. Without prejudice to the above, the learned CIT(A) has erred in confirming addition of Rs. 6,00,300/- on the ground that 50% of the on mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-13 reversing Assessing Officer's action making on money additions of Rs. 23.63lacs qua sale of shops in Sahyog Plaja and Rs. 46.57lacs paid alongwith Rs. 9.60lacs received in purchase and sale of Lapkaman Project and Lapkaman land respectively. This follows assessee's cross objection thereto CO No. 81/Ahd/2015. Assessment year 2008-09 comprises of the assessee's appeal ITA No.394/Ahd/2015 directed against the CIT(A)-10, Ahmedabad's order dated 08.01.2015 passed in case no. CIT(A)-10/WD- 3(1)/43/14-15 involving the following substantive grounds: "1.1 The order passed u/s.250 on 8-1-2015 for A.Y.2008-09 by CIT(A)-10 Abad, not only upholding the additions of Rs.l,15,20,000/-but making enhancement by Rs. 9,60,000/- is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant. 1.3 The Ld. CIT(A) has grievously erred in upholding the impugned addition aggregating to Rs. 1,24,80,000/- without giving any opportunity to the appellant and thereby violating the principles of natural justice. The appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands dismissed since involving low tax effect (supra). 4. The Revenue and third assessee Shri Gordhanbhai B Patel have instituted ITA No.2455 & CO No. 281/Ahd/2014 against the CIT(A)-XX, Ahmedabad's order dated 30.06.2014 in case no. CIT(A)-XX/255/13-14 inter alia reversing Assessing Officer's action making on money additions of Rs. 23,28,500/- paid in cash for Lapkaman project and Rs. 62,40,000/- received in cash for Lapkaman Lands; respectively after upholding validity of re-assessment forming subject matter of challenge in latter's cross objection hereinabove in assessment year 2007- 08. 5. Lastly come fourth assessee Shri Narshibhai Somabhai Patel's two appeals ITA Nos. 1357 & 1358/Ahd/2015 for assessment years. 2007-08 & 2008-09, arising against the CIT(A)-10, Ahmedabad's separate orders dated 23.03.2015 & 20.03.2015 in case nos. CIT (A) -10/WD-6(5)/561/2014-15 & CIT (A) -10/WD- 6(5)/558/2014-15 inter alia affirming Assessing Officer's identical action making on money additions of Rs. 11,65,250/- and Rs. 19,55,750/- in respect of Lapkaman land after upholding validity of re-assessment proceedings. This completes narration of the relevant pleadings in all these appeals. 6. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was requested to explain the contents of the 'note book' (Annexure BS-10). Assessee in its reply vide letter dated 24.10.2011 has submitted explanation of the same. As per the explanation, submitted by Shri Govindbhai Mulchand Prajapati following receipts have not been accounted for in the books of 'Sahyog Plaza'. The assessment year wise details of unaccounted receipts o Sahyog Developers received an account of sale of shops at 'Sahyog Plaza' are as under. A.Y. Unaccounted cash admitted by Govind M. Prajapati Group being 50% partner in 'Sahyog developers' Receipts Unaccounted cash by 'Sahyog Developers' Total receipts 2005-06 638,000 12,76,000 2006-07 25,88,472 51,76,944 2007-08 23,63,400 47,26,800 2008-09 322,500 645,000 2009-10 24,90,000 49,80,000 Total 84,02,372 168,04,744 Thus, it is clear that the assesses has not recorded cash sales of Rs. 12,76,000/- in it books of accounts for the A.Y 2005-06. Further, as per BS-9 (a note book) seized from the premises of Shri Govindbha Mulchand Prajapati at 228-6, M.K. House, Near Vishat Petrol Pump, Gandhinaga Highway, Sabarmati, Ahmedabad, various de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajapati belongs to family of ShrM3ovindbhai Mulchand Prajapati. During the course of search assessment proceedings in the case of "Shri Govindbhai Mulchand Prajapati and family", a reply dtd. 24.10.2011 has been submitted in respect of aforesaid note book Annexure - BS10. As per the explanation submitted by Shri Govindbhai Mulchand Prajapati following receipts have not been accounted for in the books of "Sahyog Plaza", assessment wise details of unaccounted receipts of Sahyog Developers received on account of sale of shops at "Sahyog Plaza" are as under:- A.Y. Unaccounted cash admitted by Govind M. Prajapati Group being 50% partner in "Sahyog developers" Receipts Unaccounted cash by "Sahyog Developers" Total receipts 2005-06 6,38,000/- 12,76,000/- 2006-07 25,88,472/- 51,76,944/- 2007-08 23,63,400/- 47,26,800/- 2008-09 3,22,500/- 6,45,000/- 2009-10 24,90,000/- 49,80,000/- TOTAL 84,02,372/- 1,68,04,744/- As per the copy of letter dtd. 24.10.2011 and 02.12.2011 (Annexure A & B) filed by Shri Shailesh D. Prajapati "Brother of Dhaval D. Prajapati" who has owned up the entire on-money receipts as his income. From the submission dtd. 24.10.2011, 50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding Shri Shailesh Keshavlal Patel. Shri Shailesh Keshavlal Patel, is 20% partner, therefore, out of total cash received of Rs. 62400000/- the 20% share works out to Rs. 1,24,80,000/-. Out of total share of Rs. 1,24,80,000/-, Rs. 960000/- is received in F.Y, 2006-07 relevant to A.Y. 2007- 08 and balance of Rs. 1,15,20,000/- is received in F.Y. 2007-08 relevant to A.Y. 2008-09. In view of the above and on the basis of material available on record I am of the view and I have reason to believe that income chargeable to tax, of more than Rs. 1,18,42,500/- (Rs.3,22,500/-+Rs. 1,15,20,000/-) has escaped the assessment, for the year under consideration, due to failure of the assessee to disclose fully, and truly all material facts necessary for assessment. Therefore, I propose to reopen the assessment of the assessee for A.Y. 2008-09...." 9. The Assessing Officer thereafter took up consequential re-assessment proceedings in these two assessees' cases. The firm assessee inter alia pleaded that only the above Prajapati had handled all of its affairs so as to be assessed qua the relevant half share of the unaccounted income and expenditure, there was no question of assessing it qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the unaccounted receipts as undisclosed income by the appellant firm. The Assessing Officer has reproduced the detailed reply filed by the assessee after reproducing the reasons recorded on Page-2. Reproducing the detailed rep/)i up to Page-6, the Assessing Officer summarily in last Para-5 held that one of the partner Shri Shailesh D. Prajapati has accepted 50% of the unaccounted income in his Return of Income and he is so assessed. Balance 50% has been added by the Income Tax Officer, Ward-3(l) in the case of Shri Shailesh K. Patel, the other partner at 50%. As such both the partners have accepted that On money was received by them and this is not the income of the firm M/s. Sahyog Developers. However, the Assessing Officer has made the addition on protective basis. It is submitted that there is no material or evidence to make such protective addition as there are no indications in the diary or papers seized that On money is received by the firm. None of the partners have stated that unaccounted income belongs to the firm. On the contrary the partners have accepted 50% income in their individual assessment. Therefore, in absence of any material or evidence whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... your honour's convenience as under: a) In the Para 2, the learned A. O has stated that, the assessment for A. Y. 2005-06 to 2007-2008, orders U/s 143(3) r.w.s. 147 have been passed and additions in A.Y. 2005-05, 2\006-07 and 2007-08 of Rs. 6,38,000/-, Rs. 25,88,472/- and Rs. 23,63,4001-respectively were made, considering it to be 50% of Share received by assessee Shri Shailesh K.Patel as "On Money" from Sahyog Developers. b) In the Para 4 also he has confirmed the fact that, the Asst. for A. Y 2008-09 and A. Y. 2009-10 are re-opened. In respect of A.Y. 2010- 11, he has stated that no informations was received from the DCIT, CC-2(2), Ahmedabad & therefore the assessment was not reopened. In short, it is submitted that, the learned Assessing Officer of other Partner namely Shri Shailesh K.Patel have confirmed the fact regarding the taxing of balance share of 50 % in "On Money" from Sahyog Developers " for A. Y. 2005-06 to 2009-10 & for A. Y. 2010-2011 he has not received the information from the DCIT-CC- 2(2), Ahmedabad, because of smallness of quantum of addition only to the extent of Rs. 20,350/- being remaining 50 % of Rs. 40,700/- even though the facts for re-opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly made additions in the case of appellant firm for all the years. Additions of Rs. 6,00,303/- for A.Y. 2005-06, Rs. 23,43,995/- for A.Y. 2006-07, Rs. 20,30,432/- for A.Y. 2007- 08, Rs. 2,03,652/- for A.Y. 2008-09, Rs. 24,23,085/- for A.Y. 2009-10 and Rs. 20,350/- for A.Y. 2010-11 are confirmed. Grounds No.2,3&4 of the appeal are dismissed." This leaves the firm assessee aggrieved filing its six appeals ITA Nos. 93 to 98/Ahd/2014 relevant to assessment years 2005-06 to 2010-11 respectively proposing to challenge correctness of both the lower authorities' action taking recourse to Section 148 proceedings culminating it the above stated unaccounted income and expenditure additions (supra). 11. It is evident that the Assessing Officer framed substantive assessments in partner assessee Shri Shailesh Keshavlal Patel's cases in remaining assessment years 2007-08 to 2009-10 adding on money receipts of Rs. 23.63lacs pertaining to Sahyog Plaza shops, Rs. 46.57lacs and Rs. 9.6lacs (latter two amounts paid and received) qua Lapkaman project and land respectively in said first assessment year. Assessment year 2008-09 involved Sahyog Plaza and Lapkaman land on money additions of Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant. Therefore, there was no basis on which A.O. could have proceeded under the provisions of Sec. 153A r.w.s. 153C. In this connection, it is seen that the Jurisdictional Gujarat High Court in the case of Vijaybhai N. Chandrani Vs. ACIT.(333 1TR 436) [2010] held as under: " 14. Examining the facts of the present case in the-light of the aforesaid statutory schema, it is an admitted position as emerging from the record of the case, that the documents in question, namely the three loose papers recovered during the search proceedings do not belong to the petitioner. It may be that there is a reference to the petitioner in as much as his name is reflected in the list under the heading 'Samutkarsh members details' and certain details are given under different columns against the name of the petitioner along with other members, however, it is nobody's case that the said documents belong to the petitioner. It is not even the case of Revenue that the said three documents are in the handwriting of the petitioner, In the circumstances, when the condition precedent for issuance of notice is not fulfilled any action taken under s. 153C of the Act stands vitiated. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer had neither supplied copy if the relevant incriminating evidence nor afforded "Prajapatis'" cross examination opportunity. He was thus of the opinion that the said Prajapati had never mentioned assessee's name at all qua the on money in question. The CIT(A) held that the relevant additions pertaining to Sahyog Plaza and Lapkaman lands could have been made only in assessment year 2008-09 as follows: "5.10 I have considered the facts of the matter. Impugned additions of payment and receipt of 'On Money' were made relying primarily on the alleged acceptance of Shri Vijay Prajapati during his assessment proceedings. As accepted by the A.O in the remand report copy of the statement of Vijay Prajapati was not provided to the appellant during the assessment proceedings. Perusal of the Free English translation of the said statement [recorded in Gujarati on 08-12-2009] furnished by the A.R. shows that there was nothing incriminating the appellant. No opportunity of cross-examination was provided. In the letter dtd. 03-01-2013 enclosed to the remand report A.O. had disposed of the objections raised by the appellant against the re-opening. In the letter dtd. 11-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... welve cases whose pleadings stand narrated in the beginning of our instant order. 15. Mr. Talati represents the above firm assessee. His first plea is a legal one quoting Section 153C(1) opening words as follows: "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the a having jurisdiction over such other person." 16. Learned counsel's plea therefore is that this firm assessee happens to be the third person and distinct assessee in relation to its partner Prajapatis for the purpose of on money issue. He submits that the Assessing Officer therefore has erred in law in initiating Section 148 instead of Section 153C proceedings. He emphasizes the point that the above search assessment procedure forms a complete code in itself excluding operation of the normal reopening prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to believe that any taxable income arising from the above on money payments has escaped assessment. Learned counsel alleges that both the lower authorities have made the impugned addition without allowing him to cross examine the above Prajapatis or furnishing relevant incriminating evidence. Learned counsel then quotes hon'ble jurisdictional high court's judgment in CIT vs. Mohamed Juned Dadani [2014] 355 ITR 172 (Guj) that once addition based on sole reopening reason pertaining to Sahyog Plaza is deleted, Lapkaman on money addition must also follow the suit as the entire re-assessment in such a case deserves to be quashed. Case law [2013] 356 ITR 493(Guj) Ratna Trayi Reality Services vs. ITO (on legality issue), IT(SS)A No.260/Ahd/2013 Anil Kumar G Darji vs. ACIT dated 31.05.2016 as affirmed in hon'ble jurisdictional high court's judgment dated 21.02.2017 in Tax Appeal No. 18 of 2017 confirming on money addition in a single co-owner's hands than in case of all such joint owners in corresponding proportion, ITO vs. Girish & Associates ITA No.1282/Mum/2010 dated 18.11.2009 on the issue of binding nature of a partner's general service statement, CIT vs. Umang H. Thakkar Tax Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the firm as well as Shri Patel. These two assessees therefore seek to shift the impugned assessments on each other as indicated in their respective arguments. Hon'ble apex court landmark judgment in ITO vs. Ch Atchaiah [1996] 218 ITR 239 (SC) holds that only the right person is to be taxed qua an income in question. We rely on the said judicial precedent as well as quote Section 184 of the Indian Partnership Act, 1932 to opine that an income in question is to be assessed only in a firm assessee's hands in case there exists the partnership deed instrument specifying its partners' respective shares. This firm assessee first of all fails to dispel application of the relevant provision in the Indian Partnership Act, 1932. Section 2(a) defines act of a firm to mean act or omission by any or all of its partners. Section 18 thereof envisages that a partner acts as agent of the firm for the purpose of its business. Section 23 of the said law makes it clear that a partner's admission or representation concerning a firm's affair is in the nature of evidence against the latter. We find the same to be squarely applicable herein as firm assessee's partner carried business in its name in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) making the very on money additions. The said case law are accordingly distinguished. We accordingly hold that the impugned protective assessment would become substantive in case the Revenue looses its appeals in the above partners' cases hereinbelow. 24. Mr. Talati's third argument that both the lower authorities' action making the impugned addition in firm's hands reduces partner assessees' tax liability from 50% to 25% is also devoid of merits as the crucial test in such a case is to file the right assessee in whose hands such an income has to be assessed as per hon'ble apex court's above referred judgment in Ch Atchaiah's case (supra). We have already concluded that the said right person herein has to be the firm assessee only. We therefore decline Mr. Talati's instant last argument as well. The firm assessee looses in all of its six appeals ITA Nos. 93 to 98/Ahd/2014. Both the lower authorities' action making the impugned on money additions after initiating Section 148 proceedings stands upheld. 25. We now advert to Mr. Divatia's arguments. His first plea challenging correctness of Section 148 proceedings already stands adjudicated in firm assessee's cases in Revenue's fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patis and Shri Patel are partners from the very beginning. A logical inference that flows from the above narration of facts is that they are co-sharers in all deals relating to Sahyog Plaza and Lapkaman. It is therefore very much unlikely that only Prajapatis participated in all on monies without involving any or all of other co-sharers. There is hardly any dispute that the relevant parcels of commercial as well as Lapkaman deals involve more than one co-owners. The said properties admittedly are co-owned without any demarcation of share in metes and bounds. None of the co-owners particularly in Lapkaman deals is sure as to where his corresponding share would be allotted. We therefore are of the view that it is humanly impossible in such cases that a single co-owner only collects all or a portion of the on money in question running into huge sums. We refer to Prajapatis' search statements declaring Rs. 2crores on money as unaccounted income. The on money amount has been proportionately spread over in all these assessees' cases. We accordingly quote reasonable preponderance of probability that the impugned on money has been proportionately received by all the co-owners to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed discussion hereinabove to conclude that the said partner / co-owner's search statement (supra) as reiterated in Gordhanbhai Patel's case forms sufficient reason to infer that the impugned on money has been paid in the instant project deal. We therefore revive the impugned addition in this partner's hands in the impugned assessment year as the relevant deal was struck on 17.07.2006 in previous year relevant to the impugned assessment year. The Revenue's instant substantive ground is therefore accepted. 31. The Revenue's third substantive ground challenges correctness of the CIT(A)'s findings holding that addition of Rs. 9.6lacs being receipt of on money in cash on sale of Lapkaman lands ought not to have been made since the relevant deal took place on 24.01.2008 i.e. in assessment year 2008-09 instead of 2007-08. Learned Departmental Representative fails to dispute this crucial fact. We therefore reject Revenue's instant substantive ground. Its appeal ITA No.2455/Ahd/2014 is therefore partly accepted. We decline this partner assessee's cross objections CO No.81 & 10/Ahd/2015 challenging validity of reopening in assessment years 2007-08 & 2009-10 respectively in view of our de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d addition in firm assessee's hands. We therefore see no reason to accept the Revenue's instant substantive ground. This appeal ITA No.3343/Ahd/2014 fails. 34. We now come to Revenue's appeal ITA No.2455 and assessee's cross objection CO No.281/Ahd/2014 in case of third assessee Shri Gordhanbhai B. Patel's case in assessment year 2007-08. The Revenue's first substantive ground pleads for reviving on money payment addition of Rs. 23,28,500/- pertaining to Lapkaman project whose deal was struck on 17.07.2006. Its latter substantive ground pleads that the CIT(A) has erred in deleting on money addition of Rs. 62.40lacs on account of the instant assessees' 10% share in the said Lapkaman land for the reason that the relevant transaction took place on 24.01.2008 i.e. in assessment year 2008-09. We have already declined similar substantive grounds in earlier assessee's case. We therefore adopt consistency herein to reject the Revenue's instant latter substantive ground. 35. We now stay back on Revenue's former substantive ground. There is no dispute that the Assessing Officer initiated Section 148 proceedings based on incriminating evidence as well as Prajapatis' search statements. We no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the relevant preponderance of probability as per all the surrounding circumstances. Learned counsel then pleads that the Assessing Officer nowhere furnished reopening reasons in both the impugned assessment years. The CIT(A) holds in his lower appellate order that there is no evidence on record indicating the assessee to have sought for the said reopening reasons. The very factual position continues herein as well. We therefore see no reason to accept assessee's instant latter substantive ground as well. His instant two appeals ITA Nos. 1357 & 1358/Ahd/2015 fail. Ordered accordingly. 38. We rely on our above detailed discussion to dismiss firm assessee's six appeals ITA Nos. 93 to 98/Ahd/2014. Revenue's appeal ITA No. 1122/Ahd/2014 in second assessee's case is partly accepted. Its latter appeal ITA No.3343/Ahd/2014 is dismissed. The very assessee's cross objection CO No.80/Ahd/2015 is dismissed as not pressed. His remaining two cross objection CO Nos. 81 & 10/Ahd/2015 as well as appeal ITA No.394/Ahd/2015 are dismissed. Revenue's appeal ITA No.2455/Ahd/2014 in third assessee's case is partly accepted whereas latter's cross objection CO No.281/Ahd/2014 is dismissed. Fourth asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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