TaxTMI 
TaxTMI 
2021 (2) TMI 22
X X X X Extracts X X X X
X X X X Extracts X X X X
....ef facts of the case are that a search action under section 132 of the Income Tax Act was conducted in 'Akshar Group' of cases on 22.9.2015. In the course of search, certain documents inventorised in various annexures allegedly belonging/pertaining/relating to the assessees were seized from the premises of Managing partner of searched firm i.e. Shri Mehul G. Patel of 'Akshar Group'. Based on the documents found from the premises of searched person purportedly relating to the assessees herein, proceedings under section 153C of the Act were initiated in the case of the assessee herein [Shri Kantibhai Patel, IT(SS)A.No.156/Ahd/2019] and other appellant Shri Chhotalal P. Patel, IT(SS)A.No.155/Ahd/2019 by invoking provisions of the section 153C of the Act. In response to the notice under section 153C of the Act, the assessee, namely Kantibhai P. Patel filed a return of income similar to the return filed under section 139(1) of the Act dated 27.9.2014. In the course of assessment proceedings, the AO referred to a loose page numbered 17 in Annexure A/3 reproduced at page no.3 of the assessment order. The aforesaid page was stated to contain details of payments made to assessee and other j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the sale of land amounting to Rs. 2,20,83,717/- was reflected in the assesee's profit & loss account for the financial year 2013-14 and duly offered as business income in the return filed for the assessment year 2014-15. 6. On the basis of hand written loose paper found at the premises of purchaser (searched person), the AO observed that such loose paper clearly mentions the cash amount of Rs. 5.30 crores involved towards purchase of the land for these three projects to the land owners i.e. Kantilal P. Patel, Shri Chhotlal Premjibhai Patel and Rakesh K. Patel. The searched person, Shri Mehul G. Patel was confronted with the aforesaid loose page numbered 17 in annexure A/3 found and seized from the residential premises at the time of recording statement under section 132(4) on 13.9.2015 in the course of ongoing search and an inquiry was inter alia posed on the contents of the page. It was noted by the AO that maker of statement (Mehul G Patel), under section 132(4) of the Act on behalf of Sun Infra (purchasers), confirmed the payment of unaccounted cash in his statement as attributable to three projects noted above to the owners of the land. The AO consequently concluded that a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee in the form of affidavit of Shri Mehul G. Patel dated 16.10.2018 with certain annexures. Having taken cognizance of submissions and evidence placed before him, the CIT(A) declined to grant any relief to the assessee against such additions towards unaccounted cash/'onmoney'. The relevant operative para of the order of the CIT(A) denying relief to the assessee reads as under: DECISION: 6. Before the appellant's submission grounds of appeal-wise are taken up and the issues decided, it appears pertinent to deal with legality of additions made in the impugned assessment order u/s. 143(3) r.w.s. 153C. From the catena of decisions of various the Courts and the Tribunals including those of Jurisdictional High Court of Gujarat and Jurisdictional ITAT of Ahmedabad in Pr. CIT Vs Saumya Construction P. Ltd. and other cases and of the Apex Court in CIT Vs. Singhad Technical Education Society, it is the law as of now that pursuant to search, additions to the total income for the elapsed/unabated assessment years (the years for which either the assessments/re-assessments have been completed or the time limit for issue of notice u/s 143(2) has elapsed) can be made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....perusal of seized Page no. 17 of Annexure - A/3 (which is already described at para 3.2 on page 2 and 3 of this order), it is seen that the page at its best shows payment of Rs. 6.50 crores in cheque for land Block No.501, Rs. 2,58,75,000/- for land Block No.503, 505 and 506 and Rs. 85 lakhs (to be read as Rs. 1.35 crore) for land Block No.499/500 and of Rs. 72 lakh, Rs. 30.50 lakh and Rs. 53.40 lakh in kind in terms of allotment of units in the projects and cash payments of Rs. 5,37,00,000/- out of which Rs. 7,00,000/- is to some Bharward. Thus !:he total payment as per page no. 17 of Annexure A-3 comes to Rs. 17,36,79,000/- (Rs. 15,30,75,000/- in cheques and cash excluding the kind in terms of constructed units in the projects) against which actual documented sale price for all the lands claimed to be accounted in the books of the appellant as well as Shri Chhotabhai Patel and Shri Rakesh Patel is Rs. 17,73,00,000/-. 7.4 In view of the submission made by the appellant during the appellate proceedings, the AO vide letter dated 24/9/2018, was requested to send the copies of assessment order made in the case of Shri Mehul G. Patel for A.Y.2013-14 and the statement(s) record....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atel has clearly confirmed the cash payment of Rs. 5,37,00,000/- to the land owners of the three projects apart from cheque payments and this was unaccounted payment and that Shri Kantilal P. Patel, Shri Chhotalal P. Patel arid Shri Rakesh K. Patel were the owners of the land and that the affidavit of Shri Mehul G. Patel filed by the appellant during the course of appeal proceedings is an afterthought of the assessee in connivance with Shri Mehul Patel to misguide the Revenue and that the said affidavit cannot be accepted because there is no reason for Shri Mehul Patel to make huge cash payment to the persons who were no longer having the title on the land in question and that the affidavit tantamount to retraction of his statement u/s 132(4) recorded on oath on 24/9/2015 after three years and that Shri Mehul G. Patel should come clear and disclose the names of the recipients of the amount along with PAN, address, date/days on which amount was paid along with any supporting documents i.e. agreement, confirmation from the recipients so that the interest of the Revenue can be protected and this unaccounted cash receipt can be taxed in the hands of the recipient. The appellant's r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s i.e the appellant and his relatives. 7.8 As far as the legal position is concerned, the fact remains that Shri Mehul G. Patel, in his statement u/s 132(4) has admitted to have paid cash to sellers/ owners and not mentioned the names of the appellants and his relatives (i.e. co-sellers) but natural presumption will be that the said sellers/owners are the appellant and his relatives. As far as the legal position is concerned whether the co-sellers including the appellant are bound by such statement of Shri Mehul G. Patel, I am of the considered view that Shri Mehul G. Patel is the buyer of property and payer of the consideration and his statement cannot be brushed aside merely calling him to be a third party and also on the ground that opportunity of cross examination was not granted to the appellant and other co-sellers because Shri Mehul Patel is a party to these transactions. Now the only question in context of proceeding u/s 153C remains is whether the document Page 17 relates to the appellant and other co-sellers. There is no doubt (and not denied by the appellant and other co-sellers) that the said document relates to the lands - Block No.499, 500, 501, 503, 505 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The profits on sale of land amounting to Rs. 2,20,83,717/- was accordingly recorded in the books relevant to the financial year 2013-14. The balance sheet and profit & loss account as well as Return of Income (ROI) for the Asstt.Year 2014-15 were referred to assert that the taxable event on sale of impugned land arises in the financial year 2013-14 relevant to the Asstt.Year 2014-15. It was contended that in the absence of any sale consideration in the financial year 2012-13, no income on alleged cash receipts can be taxed in the financial year 2012-13 concerning Asstt.Year 2013-14 in question. The ld. Senior Counsel thus submitted that the AO has no permissible occasion at all in law to assess the impugned unaccounted cash receipts on sale of land in the hands of the assessee for the Asstt.Year 2013-14. For the proposition that the alleged income out of purported cash receipt would accrue to the assessee only in the year in which property is sold and not prior thereto, the ld.senior counsel referred to para-15 of the order of the Coordinate Bench in M/s.D.R. Construction Vs. ITO in ITA No.2735/Ahd/2010 order dated 8.4.2011. The ld.Senior Counsel also relied upon decision of Co-or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, the ld.senior counsel referred to para-7.4 of the order of the CIT(A) and submitted that the assessee in the course of first appellate proceedings requested the ld.CIT(A) for copy of the assessment order made in the case of purchaser, Shri Mehul G. Patel for the Asstt.Year 2013-14 as well as statement recorded from Shri Mehul G. Patel. As requested, the ld.CIT(A) also directed the AO to record a fresh statement of Shri Mehul G. Patel and allow the assessee to cross-examine Shri Mehul G. Patel with regard to the transaction of Rs. 5.30 crores in cash. An affidavit of Shri Mehul G. Patel was also filed in support of the contentions of appellants wherein he categorically affirmed that payment in cash was unaccounted payment to land owners of the three projects, but these persons, to whom cash payments were made were some old land owners (banakat holders) (bharwad/farmers) who were also claiming the ownership in the said land. It was categorically asserted in the affidavit that no such cash payment was made to either of three owners i.e. Shri Kantibhai P. Patel; Chhotalal P. Patel or Rakesh Patel. Continuing further, Shri Soparkar submitted that despite directions of the ld.CIT(A), ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l cases laws to dislodge the addition made by the AO which we shall deal with in the subsequent part of this order where considered expedient. 10.6 In conclusion, the ld. Senior Counsel submitted that the addition made by the AO has no rational connection with the evidence relied upon in the form of loose paper and statement of the third-party which is neither incriminating nor permitted to be examined in cross. It was thus contended that orders of the Revenue authorities are without any legally sound basis. 11. Per contra, the ld.DR for the Revenue strongly relied upon the observations made in the concurrent order of the AO and the CIT(A) and vehemently supported orders of the authorities below. The ld.DR submitted that extreme act of search action at the premises of the purchaser of the land in question under section 132 of the Act could only unearth tangible incriminating documents in the form of loose paper under reference. The ld.DR submitted that the most relevant fact to be borne in mind is that the loose paper clearly gives account of cheque payments in respect of three projects as well as aggregate cash payment of Rs. 5.30 crores in the same breath. The cash componen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g such statement. It was thus contended that the statement under section 132(4) was recorded dutifully in cordial atmosphere and therefore there is no reason to disbelieve its contents. The admission made under section 132(4) is an admissible piece of evidence. It was further contended that merely because a fresh cross-examination of witness to the assessee has not been provided as directed by the CIT(A), it will not impinge upon the action taken adverse to the assessee as observance of direction in the remand report by the CIT(A) is a cause between the CIT(A) and the AO. The assessee has no role to play in this case. The CIT(A) has ultimately endorsed the action of the AO. Consequently, it can be inferred that the CIT(A) was also satisfied with the quality of evidence before him against the assessee. The ld.DR accordingly contended that no interference with order of the AO is called for. 12. In rejoinder, the ld.senior counsel for the assessee submitted that the statement under section 132(4) was confronted to the assessee for the first time by way of show cause notice under section 142(1) dated 23.11.2017 only. Therefore, it is not correct to say that affidavit has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uently assessment proceedings under S. 153C was initiated in the hands of the person other than searched person i.e. assessee herein. On being confronted with loose paper and statement of searched person (MGP) as recorded at the time of search under S. 132(4) of the Act, in the course of assessment under S. 153C of the Act, the Assessee sellers asserted that the sale transactions have been carried out through banking channel and has been duly recorded in books and accounted for the purposes of determination of tax liability. The Appellant seller denied having received any unaccounted money over and above recorded transactions towards sale consideration. However, the AO disregarded the stand of the assessee and proceeded to make estimation of unaccounted receipts arose to the respective sellers i.e. appellants herein on sale of their respective holdings in land. The unaccounted income was estimated in proportion to the respective holdings of these sellers viz. Shri Kantilal P. Patel (KPP); Shri Chhotalal P. Patel(CPP) and Rakesh K. Patel(RKP). On the basis of proportionate land holdings of respective sellers, the AO apportioned the unaccounted on-money receipt at Rs. 2,90,22,746/- i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hhotalal P. Patel is fully justified on merits. The CIT(A) also upheld action of the AO for assuming jurisdiction for assessment under S. 153C of the Act on the ground that the loose paper found in search clearly relates to the Appellants. 14.3. In the backdrop capsuled in preceeding para, the seized loose paper reproduced in para-4 hereinabove of this order is bedrock for additions in controversy. It is an admitted position that seized loose paper in question was found from the possession of the third party i.e. searched person Mehul G. Patel. The notings are not in the handwriting of any of the appellants herein nor stated to be signed by assessee. A bare glance at the loose paper reveals that the amounts written in the said loose paper does not bear any objective details on identity of recipients and is quite vague and muted. The dates on which purported payments or some kind of break-up as to when and how it has been paid is sorely missing. It is just one page writing in a summaried manner where the payments through banking channel are stated to have been paid not only to the sellers of the land, but also to other persons like Dineshbhai etc. who are stated to be previous ow....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... holding so, the AO observed that the parties are relatives and the land belonged to in the same family and hence cash payment for the total land relates to these three projects. While recording the statement no logical enquiry appears to have been made on the cash payments. The search officials were contented with a mere bald confession of the maker of statement. Neither the identification of parties to whom the payments were allegedly made nor the manner and date of such payments to various parties involved is discernible from the so called statement of MGP examined in this regard. The AO has obdurately relied upon such a totally unintelligible assertion of MGP to implicate a third party namely the appellants herein without any enquiry. In our view, the CIT(A), as noted in para 7.4 of its appellate order, rightly directed the AO for fresh examination of MGP in the circumstances. A sworn affidavit of MGP which appears to be only clarificatory and an extension of his earlier stand under S. 132(4), filed by Assessee before CIT(A) in first appellate proceedings was also forwarded to the AO for his comments. Besides, the CIT(A) also directed the AO to provide cross examination of MGP ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to rebut it. It is also well settled that Assessing officer is not entitled to make a pure guess while making an assessment. There must be more than bare suspicion to support an assessment. As observed earlier, the loose paper does not categorically identify the name of the recipients of cash payments allegedly given by the purchaser of various parcels of land. The statement in corroboration also continues to remain silent on the specific details. A basic enquiry towards flow of payments is absent. The initial onus was always on Revenue to justify its allegation of payment of on-money by the sellers to the assessee. The decision of Hon'ble Supreme Court in K. P. Verghese vs. ITO (1981) 131 ITR 597(SC) may be referred in this regard. This primary onus could never be shifted upon the assessee successfully in the instant case. The Revenue has not adduced any cogent material which could expose the falsehood in the records of the assessee. Despite drastic action of search on a third party, no material other than the loose document of inexplicable nature whose author is not known and which does not bear any material particulars, was brought on record to implicate the assessee. A lump....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of statement would arise only in the event of any assertion adverse to the assessee. The CIT(A) has approved the action of AO despite complete defiance of statutory directions as well as natural justice. Needless to say that proper opportunity to an affected party is not a gift but an absolute and salutary right which cannot be simply bye-passed. The legitimate expectation of the assessee to seek cross-examination of a person who supposedly made adverse comment against the assessee, to enable it to traverse the assertions, cannot be shunted in subversion of judicial propriety while weighing the issue. The infringement of basic principle of natural justice has thus vitiated order of the AO to the core. We are unable to subscribe to the position taken by the Revenue for exercise of power in a manner most beneficial to the Revenue and consequently most adverse to the assessee in total disregard to the fairness in his action. The nondescript loose paper found from the possession of third party and an unintelligible statement of such third party without specific particulars is of no consequence in so far as the assessee herein is concerned. The findings of the CIT(A) is thus dev....