TaxTMI 
TaxTMI 
2023 (9) TMI 1334
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....nexplained investment towards purchase of agricultural land. (3) The appellant craves leave to add, alter, amend any ground of appeal." 3. The Revenue has taken the following grounds of appeal:- "1. Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition made by the assessee on account of unexplained investment of Rs. 2,51,95,680/- towards purchase of land without considering the facts of the case in totality. (2) Whether the Ld. CIT(A) has erred in law and on facts in not appreciating that the assessee has also purchased the parcels of land with survey numbers mentioned in the MOU between Shri Baldevbhai Patel and Shri Suryakantibhai Ambalal Patel, even though the same was not entered with the present assessee. (3) Whether the Ld. CIT(A) has failed to appreciate that there cannot be such a drastic drop in purchase price from Rs. 20,71,000/- as per MOU (even though it was entered with a different person) to purchase price of Rs. 1.40 lakhs as shown by the assessee for purchasing the same parcels of land which proves that cash transaction has taken place. (4) Whether the CIT(A) has erred in giving the finding that....
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....tween the cost as per MOU rate of Rs. 2,89,94,000/- and the cost as per sale deed of Rs. 37,98,320/-). Accordingly, a sum of Rs. 2,51,95,680/- was added to the income of the assessee as his unexplained income by the Ld. Assessing Officer. 5. In appeal, Ld. CIT (Appeals) allowed the appeal of the assessee primarily on the ground that the entire assessment has been framed and the additions made in the name of the assessee on the basis of draft MOU. The Ld. CIT(Appeals) observed that from the contents of the MOU and the land purchased by the assessee (along with his family members), it is seen that only one plot of land, located at Survey No. 171 Paiki found mention in the aforesaid MOU. However, the other pieces / plots of land which were purchased by the assessee were not relating to the MOU relied upon by the AO. The Ld. CIT(Appeals) observed that out of 13.75 bighas purchased by the assessee, only 1.25 bighas was mentioned in the said MOU. Therefore, the Ld. CIT(Appeals) restricted the addition to only the plot of land measuring 1.25 bighas which was mentioned in the aforesaid MOU. However, with respect to the balance lands purchased by the assessee, Ld. CIT(Appeals) observed t....
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....arties. Therefore, it was contended that over-generalization to the total land purchased cannot be done on the basis of some material relating to 1.25 bighas of land mentioned in MOU. On verification the contention about 1.25 bighas of land is found correct. The third contention raised was that there have been many registration happening in the area at same point in time at the rate on which appellant has purchased the land. A copy each of 7 registrations was placed on record wherein the detail culled out is as under: Moje, Lodra, Village Lodra Sr. No. Date Amount(Rs.) Sq. Mtr. Rate for bighas 212 10.05.10 139620/- 0.2327 142760 212 paiki 11.05.10 145680/- 0.2428 142683 214 29.02.10 182500/- 0.3642 119281 216/2/B 10.05.10 133500/- 0.2225 142689 218 pailki 04.06.10 160860/- 0.2681 142682/- 216/1 abcde 10.05.10 722340 0.12039 142754/- 216/2/9 10.05.10 127500/- 0.2125 142777/- 1612000 0.27467 139567 Avg. Per bighas The average recorded purchase price for above 7 plots of land purchased by other parties is at Rs.....
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....to how much addition can reasonable be confirmed in this case by strictly adhering to the provisions of the Act. The appellant has stated that MOU was between Baldev A. Patel and third party (i.e. Suryakant Ambalal Patel) and the same should not be the basis for making addition. However, a part of land has been purchased from Baldev A. Patel and the appellant cannot escape from the rigour of the act so far matter pertaining to survey no.171 is concerned. The land purchased by the appellant as emanating from record is as under: From Baldevbhai Patel is = 1.25 bighas From Others = 12.50 bighas(approximately) In my opinion, it is not legally correct to extrapolate the computation for calculating the addition on the basis of facts-relating to 1.25 bighas to the total land 13.75 bighas purchased by the appellant as per Hon'ble Gujarat High Court(Supra). However, the fact remains that a copy of MOU has been part of seized material in the search action on Marwadi Group. Therefore, the plot of land which has been purchased from Shri Baldev A. Patel and has earlier been mentioned in the impugned MOU has to be considered for addition in this case. Therefo....
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....ird parties, who were not part of the MOU. Therefore, Ld. CIT(Appeals) has erred in facts and in law in making the additions on the basis of MOU which has been cancelled and further to which the assessee was not part in the first place. Accordingly, it was submitted that the entire additions is liable to be deleted looking into the instant facts. 8. In response, the Ld. DR submitted that Ld. CIT(Appeals) has framed the appellate order in violation of the provisions of Rule 46A of the Income Tax Rules. The Ld. CIT(Appeals) has clearly observed that the assessee has not filed any application for admission of additional evidence (refer page 13 of the CIT order). However, while allowing the appeal of the assessee and granting substantial relief to the assessee, Ld. CIT(Appeals) relied on certain data / information which was furnished by the assessee for the first time during the course of appellate proceedings. However, while deciding the matter, the information / data on which reliance was placed by the assessee during the course of appellate proceedings was never placed before the Assessing Officer for his consideration. The Ld. DR submitted that Ld. CIT(Appeals) gave substantial ....
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....ef that looking into the instant set of facts, the Ld. Assessing Officer had reasonable belief that the assessee had made cash payments in respect of purchase of the aforesaid properties, thereby leading to escapement of income. It is a well settled principle of law that that while recording the reasons, the AO need not establish the actual escapement of income. The belief at that time is only prima-facie and not conclusive. In the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), the Hon'ble Supreme Court observed that the Court has only to see whether there was prima-facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. On the scope of re-opening under Section 147 of the Act observed as under: "We have only to see whether there was prima-facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to th....
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....servations in this regard: "5.2 Further, the term "reason to believe", however, is not defined in the Act but it can be gathered and available from the information, leading the Assessing Officer to reopen the assessment. The term itself is suggestive of its prima-facie characteristics and not established or conclusive facts or information. Meaning thereby, it is the Assessing Officer's prima-facie belief, of course, derived from the some material/ information, etc. leading him to reopen the assessment." 15. In the case of Purviben Snehalbhai Panchhigar [2019] 101 taxmann.com 393 (Gujarat), the Gujarat High Court held that in the instant case the Assessing Officer has heard the material on record which would prima- facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of longterm and short-term capital gain. The company was prima-facie found to be a shell company. The assessee had claimed exemption of long-term capital gain of Rs. 1.33 crores by way of sale of share of such company. 16. This was again affirmed by the Gujarat High Court in the case of Sanjay Baulal Surana [2021] 129 taxmann.c....
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....d in facts and in law in giving part relief to the assessee and excluding those plots of land which should not form part of the MOU. In response, the Counsel for the assessee placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order. 21. We have heard the rival contentions and perused the material on record. In the case of A. Shivashankar vs. DCIT in ITA Number 617 to 620/Chny/2017, the ITAT held that undisclosed income addition by extrapolation of documents is unsustainable. While passing the order, ITAT made the following observations: "8. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The first legal issue that needs to be resolved in the given facts and circumstances of the case is whether the AO is right in estimation of sales revenue from sale of plots by extrapolating sale price of few plots to remaining plots sold during the relevant period to other parties. It is a well settled principle of law by the decision of various Courts that there is no scope for the AO to extrapolate and estimate undisclosed income for block assessment proceedings. This legal principl....
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....ction which would in any manner suggest that other flat purchasers had paid any part of consideration in cash over and above declared sale consideration, extrapolation of unaccounted sales done by Assessing Officer on basis of singular instance would be untenable. 23. In the case of Kantibhai Revidas Patel 42 taxmann.com 128 (Gujarat), search operations carried out at premises of third party unearthed an agreement to sell which was entered into by assessee along with a copurchaser. The third party was broker in said transaction However, the said transaction could not be materialised and sum paid by assessee was returned back to him by broker. The Assessing Officer relying on statement of said broker, held that cash paid by him to assessee towards cancellation of said deal was unaccounted income of assessee. The Tribunal noticed that with respect to co-purchaser for very transaction, co-ordinate Bench had deleted similar addition on same facts. The High Court held that since order passed by Tribunal in respect of co-purchaser deleting the addition came to be confirmed by High Court, Tribunal was justified in deleting said addition. 24. Accordingly, in the instant facts we obse....