TaxTMI 
TaxTMI 
2018 (1) TMI 711
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....Act'. The firm assessees' six appeals ITA 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 ....
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....y CIT(A)'s order dated 18.02.2014 in case no. CIT(A)-VI/Wd.3(1)/151/12-13 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 opportu....
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....s above second cross objection CO No. 80/Ahd/2015 for assessment year 2006-07 as the Revenue's appeal ITA No.627/Ahd/2014 stands 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....
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....sed brother. During the search assessment proceedings in the case of 'Shri Govindbhai Mulchand Prajapati and Family' the assessee 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 ....
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....f sale of shops at Sahyog Plaza a commerical complex developed by Sahyog Developers "were recorded". Sahyog Developers is a partnership firm in which Shri Shailesh K. Patel and Shri Dhaval D. Prajapati are partners. Shri Dhaval D. Prajapati 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 84,02,37....
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.... 3000=00 3,00,000/- 62,40,000/- Shri Vijay G. Praqjapati has accepted to have received above amount in cash, during the course of assessment proceedings. As Shri Vijay G. Prajapati has only 10% share in the said land. Thus, total cash component received on sale of this land works out to Rs. 6,24,00,000/-. The remaining amount received in cash is required to be brought to tax in the hands of other owners of this land including 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 asse....
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....nts of the Note book it was stated by Shri Govindbhai M. Parajapati that the Note book contains the amount received on the sale of Building "Sahyog Plaza", which were not recorded in the books. The Assessing Officer has reopened the assessment on the ground that income not accounted in the books represents the unaccounted receipts and unexplained expenditure of the assessee firm of different years being different amount as noted in the diary. The Assessing Officer has blindly made the addition in all the assessment years considering 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....
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....11 submitted through Jt.CIT-Ahmedabad Range-3, Ahmedabad dated 04-10-2013. On going through the contents of the same, we have found that the A.O. has stated and repeated the facts, which were already stated by the learned Assessing Officer in the order passed for making/reasoning the addition on protective basis for the Asst.year 2005-06 to 2010-2011 under appeal. The learned Income-tax Officer, Ward 3(1), Ahmedabad of Shri Shailesh K.Patel (Partner of M/s Sahyog Developers ) clearly stated the following facts in his Remand Report, which is reproduced for sake of 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....
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.... 12. The other argument of the appellant that there is no evidence with the department that the appellant firm was in receipt of on money is also factually incorrect. In view of reasons given in detail by AO in the assessment order, it is clear that appellant firm received unaccounted cash in respect of sale of shops at Sahyog Plaza, a commercial complex which was developed by the appellant firm. During the course of search note book was also seized, which records various expenses incurred in respect of Sahyog Plaza, which are not recorded in the books of appellant firm. Keeping in view all these facts, I hold that AO has 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 authori....
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....u/s 153C [and not u/s 147]. As seen from the assessment order the re-opening was done on the basis of Annexure -BS-10 and page-10 of BS-2 seized during the search in the case of Govindbhai Mulchandbhai Prajapati Group on 08-12-2009 and the statements recorded from Shri Govindbhai Prajapati and Shri Shailesh Prajapati. The material seized during the course of search pertained to the 'On Money' receipts on the sale of shops by the firm M/s Sahayog Developers, of which the appellant was a partner. In other words no material belonging to the appellant was found during the course of search. The material seized was not in the handwriting of the 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 proc....
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....one hand and reasons recorded for re-opening on the other hand. Therefore I am of the view that the re-opening the assessment order was in conformity with law. Accordingly, these grounds of appeal are dismissed." 13. The CIT(A) thereafter proceeded to deal with merits of the on money additions relating to Sahyog Plaza as well as Lapkaman. He accepted assessee's primary contention that the property in question had been transferred not in assessment year 2007-08 but on 24.01.2008 relevant in assessment year 2008-09. We reiterate that we are dealing with this partner assessee's cases for assessment years 2007-08 to 2009-10 only. The CIT(A) considered the fact that the 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 re....
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....then took note of his corresponding findings in assessment year 2007-08 denying taxation of on money of Rs. 9.6lacs to make consequential enhancement in assessment year 2008-09 after concluding that the assessee in question is the same. The CIT(A)'s order of assessment year 2009-10 deletes on money addition pertaining to "Sahyog Plaza" in partner assessee's hands after taking cue from his order in assessment year 2006- 07 onwards that this second assessee had not received any on money since it was the firm assessee who had developed the abovestated commercial project. All the above re-assessments and CIT(A)'s orders in these two formers assessees' cases give rise to the corresponding twelve 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 requ....
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....e remaining three assessees. He takes us to Assessing Officer's reopening reason in second assessee's case reproduced in preceding paragraphs. He states the same to be not sustainable as the right course herein was to initiate Section 153C proceedings and not u/s.148 process. He then submits that the above Prajapatis have nowhere alleged in their search statement that the partner assessee has received or paid any on money in both Sahyog Plaza or Lapkaman deals. Learned counsel clarifies that this second assessee's name nowhere figures either in search statement or in the alleged incriminating material seized during search. He thus contends that there is no tangible material as well which could form reasons 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....
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....st recapitulate with brief facts once again. It is an admitted fact that the firm assessee consists of two partners Dhaval Prajapati/Prajapatis and second assessee herein Shri Shailesh Keshavlal Patel. The said former partner undisputedly admitted on money payments/unaccounted receipt income in shops sold in Lapkaman deals and sale of Sahyog Plaza shops. There is hardly any quarrel that the firm assessee's partnership deed reveals both the said partners to be having half share each in its business receipts. The said other partner / Prajapatis stands assessed qua 50% of the on money amounts. He has not even filed any appeal against the same. The Assessing Officer therefore initiated Section 148 proceedings against 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 o....
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....ption but to set into motion the general provision u/s.148 of the Act after taking cognizance of Prajapatis' statements binding the firm assessee as per the relevant provisions in partnership law. We thus reject the firm assessee's first argument hereinabove. 23. We find no reason to concur with the firm assessees' second argument as well challenging correctness of the impugned protective assessments in light of the abovestated case law starting with G K Consultants (supra) dealing with an instance wherein no substantive assessment had been finalized. We repeat that this is not the case before us as the Assessing Officer had indeed framed corresponding substantive assessments in partner assessees' cases (supra) 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 ....
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....8/2006 decided on 02.09.2015 involving statements of third parties than partners/co-owners deserves to be distinguished. We therefore quote above provisions of partnership law once again to hold that these two partners carried firm's business, of sale of shops in Sahyog Plaza to utilize the same in Lapkaman deals. We thus reject assessee's instant arguments. 27. We now deal with learned counsel's next argument that there is no evidence whatsoever against this second partner assessee about having collected or paid any on money. We once again reiterate the above provisions of partnership law (supra) making it clear that action of one partner binds the firm as well as all other partners. It has come on record that Prajapatis 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 ....
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.... above case law does not apply in peculiar facts before us. 29. We now come back to assessment year 2007-08 involving Revenue's appeal ITA No.1122/Ahd/2014. Its first substantive ground seeks to revive on money addition amount of Rs. 23.63lacs qua 50% share of the instant partner assessessee in Sahyog Plaza. Suffice to say, we have already upheld the said addition in firm assessee's case after concluding that the same has to be made in the said partnership firm's hands u/s.184 of the Act. We therefore reject Revenue's instant substantive ground. 30. The Revenue's second substantive ground seeks to reverse the CIT(A)'s action deleting on money addition of Rs. 46.57lacs pertaining to Lapkaman project. We rely upon our detailed 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 in....
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....,20,000/- in question pertaining to Lapkaman deals. The assessee's second substantive ground challenging validity of reopening already stands rejected in preceding paragraph. His third substantive ground is found to be a repetitive one challenging correctness of the impugned on money addition for Lapkaman lands which already stands adjudicated in Revenue's favour. This appeal ITA No.394/Ahd/2015 is rejected accordingly. 33. We come to assessment year 2009-10 now containing Revenue's appeal ITA No. 3343/Ahd/2014 seeking to revive Sahyog Plaza commercial project on money addition of Rs. 24.90lacs made in partner assessees' hands during substantive assessment as deleted in lower appellate proceedings. We have already upheld the said 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 ....