Jayesh D Valia v. DCIT 9(3), Mumbai
[Citation -2016-LL-0930-260]

Citation 2016-LL-0930-260
Appellant Name Jayesh D Valia
Respondent Name DCIT 9(3), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 30/09/2016
Assessment Year 1987-88, 1988-89, 1989-90, 1990-91, 1991-92, 1992-93, 1993-94, 1994-95, 1995-96, 01/04/1996-19/07/1996
Judgment View Judgment
Keyword Tags opportunity of being heard • reasonable opportunity • unexplained investment • investment in share • search and seizure • search proceedings • undisclosed income • managing director • share application • unexplained cash • block assessment • business purpose • seized material • natural justice • profit on sale • regular return • estimate basis • actual deposit • cash deposited • interest paid • ad hoc basis • block period • capital gain • public issue • on money • benami • hundi
Bot Summary: Out of the estimated amount of cash deposit of 4 Rs.10,00,000/-, a sum of Rs.9,01,900/- have been declared in the hands of the following persons: i Assessee Rs.5,68,900/- Ii Paresh Valia Rs.64,000/- Iii Pratibha Kanakia Rs.2,69,000/- Rs.9,01,900/- The AO made an addition of the balance amount of Rs.98,100/- Rs.9,01,900/-) as the assessee s undisclosed income. As 50 of it has been brought to tax in the hands of the assessee s brother Shri Paresh Valia, the AO made an addition of Rs.4,37,500/- as assessee s share and treated it as undisclosed income. 8.1 The AO relied upon the findings of his predecessor-in-office and came to a finding that the assessee has diverted his interest bearing borrowed funds for the purpose of making benami investment in the public issue of shares of M/s Vasparr Fischers Ltd. Holding such interest expense claimed by the assessee as not for business purpose, the AO made an addition of Rs. 4,01,102/- as assessee s undisclosed income. Counsel of the assessee submitted that addition only on the basis of statement of Mrs. Pratibha Kanakia s husband that shares belong to the assessee cannot be sustained as investments as well as capital gains are duly reflected in the income filed by Mrs. Pratibha Kanakia. 10.1 The AO noted that as per the seized documents at page 143 to 148 the assessee has advanced the following amounts in cash to persons whose names are mentioned below: i Yogini Bhatt Rs.3 lakhs Ii Ramaben Bhatt Rs.2 lakhs Iii Bharat Bhatt Rs.3.5 lakhs Iv Shashikant Rs.5 lakhs Khatra V Vijay Khara Rs.5 lakhs vi Vimaladevi Kedia Rs.1.5 lakhs 10 The AO relied on the statement recorded on oath of Shri Bharat Bhatt and the submission made by the assessee on 1st July 1997 accepting that the amount of Rs.20,00,000/- was advanced by him out of sale proceeds of shares of Vasparr Fischers Ltd. The AO treated the above amount of Rs.20,00,000/- as assessee s undisclosed income. The assessee vide his submission dated 1.7.97 had accepted that the amount of RS.20 lakhs was advanced by him out of sale proceeds of shares of Vasparr Fischers Ltd. Therefore, in the light of admission made by the assessee Rs.20 lakhs was treated as undisclosed income of the assessee. Counsel of the assessee submitted that the assessee had been requesting the AO to provide copies of the working from data obtained from the Registrar and Transfer Agents on the basis of which the alleged working is stated to have been made, but the same has not been provided to the assessee by the AO. 16.


1 IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J , MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTATNT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER IT(SS)A No. 8/MUM/2012 Block Period: 1987-88 to 19-07-1996 Shri Jayesh D Valia Vs. DCIT 9(3), Court Chambers, 4th Floors, 4th Floor, S. V. Road, S.V. Road, Borivali, (W) Mumbai - Mumbai- 400092 PAN No. AAFPV5698G (Appellant) (Respondent) Assessee by : Shri. M. Subramaniam, AR Revenue by : Shri. K. Krishnamurty, DR Date of Hearing : 11/07/2016 Date of pronouncement : 30/09/2016 ORDER PER R.C.SHARMA(A.M.) This is appeal filed by assessee. relevant assessment year is block period 1987-88 to 19th July 1996. appeal is directed against order dated 19th December 2011 of Assessing Officer (AO) completed u/s 158BC r.w.s 254 of Income Tax Act 1961(in short Act ). 2. It is relevant to mention here proceedings so far. assessee is Managing Director of M/s Vasparr Fischers Ltd., formerly known as Vasparr Engineering Ltd. Search and Seizure proceedings u/s 132 of Act was carried out by Department in assessee s premises on 19th July 1996. original assessment order (we may call it 1st assessment order) was completed by AO on 30th July 1997 u/s 143(3) r.w.s. 158BC determine total undisclosed income at Rs.1,96,90,888/-. said order of 2 AO was set aside by ITAT Bench Mumbai, on 3rd February 2006 [IT(SS)A No. 151/Mum/1997] with following observation: In these facts of case we hold that in interest of natural justice it shall be justified to set aside assessment to file of Assessing Officer with direction to frame de novo assessment on merits in accordance with law after providing reasonable opportunity of hearing to assessee and also after providing copies of relevant documents in possession of revenue to assessee. In pursuance to order of ITAT, AO made assessment u/s 158BC r.w.s. 254 ( we may call it 2nd assessment ) on 22nd December 2006 arriving at total undisclosed income of Rs.1,96,90,888/-. This order passed by AO was set aside by ITAT J Bench, Mumbai on 25th August 2010 [IT(SS)A No. 10 (Mum)/2007)] with following observation: Learned counsel for assessee submitted that assessee was deprived of adequate opportunity and therefore prayed that opportunity may be given to assessee to explain its case before Assessing Officer. Learned Departmental Representative has no objection for remitting matter to Assessing Officer. 3. Having considered matter, we are of opinion that in interests of justice, matter should go back to Assessing Officer for affording opportunity to assessee. We, therefore, set aside order of Assessing Officer and direct him to decide matter afresh after affording reasonable opportunity of hearing to assessee. In pursuance to above order of ITAT, AO again made assessment u/s 158BC r.w.s. 254 (we may call it 3rd assessment order) on 29th December 2011 determining total undisclosed income at Rs.1,96,87,068/-. assessee is in appeal before us against above order dated 29th December 2011 passed by AO. 3. 1st, 2nd, 3rd, 14th & 15th grounds raised by assessee are general in nature. Now we come to 4th ground raised by assessee which is that AO has erred in making addition of Rs.1,68,302/- on account of unexplained expenditures on renovation. 3 3.1 AO on basis of page no. 1, 2 and 3 to 17 of File No. A-1 seized from premises of assessee came to finding that assessee had no evidence to disprove fact that balance amount of Rs.1,68,302/- out of total expenditure of Rs.12,68,302/- was incurred on renovation, furniture and fixture. On basis of above, AO made addition of Rs.1,68,302/- as unexplained expenditure. 3.2 ld. Counsel of assessee submitted that assessee filed before AO on 23rd August 2011 during course of assessment proceedings that loose papers do not indicate expense of Rs.12,68,302/-. 3.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 3.4 We have carefully considered matter. We find that AO has relied on various papers contained in file No. A-1 to arrive at addition of Rs.1,68,302/-. AO has mentioned it at Para 9.1 (a) of assessment order. In case of CBI vs. V.C. shukla (1998) 3 SCC 410, it has been held by Hon ble Supreme Court that file containing loose sheets of papers are not books and hence entries therein are not admissible u/s 34 of Evidence Act, 1872. above decision has been followed by ITAT, Hyderabad Bench on similar issue in case of Sri K. Babu Rao & Smt K. Rani [ITA Nos. 329-335/Hyd/2012]. We follow ratio laid down by Hon ble Supreme Court in above case and direct AO to delete addition of Rs.1,68,302/- 4. 5th ground raised by assessee in this appeal is that AO erred in making addition of Rs.98,100/- being unexplained cash deposit in bank. 4.1 AO found that assessee had made declaration of Rs.10,00,000/- in his preliminary statement recorded during course of search on estimate basis. Out of estimated amount of cash deposit of 4 Rs.10,00,000/-, sum of Rs.9,01,900/- have been declared in hands of following persons: i Assessee Rs.5,68,900/- Ii Paresh Valia Rs.64,000/- Iii Pratibha Kanakia Rs.2,69,000/- Rs.9,01,900/- AO made addition of balance amount of Rs.98,100/- (Rs.10,00,000/- (-) Rs.9,01,900/-) as assessee s undisclosed income. 4.2 ld. Counsel of assessee submitted that during course of search, assessee in preliminary statement offered to disclose Rs.10,00,000/- on account of cash deposited in banks on estimate basis. On actual verification, cash deposited in banks were found to be Rs.9,01,900/- only. It was submitted that disclosure was made on estimate basis during search but finally was offered in return income for block period on basis of actual figure, therefore, addition of Rs.98,100/- made by AO be deleted. 4.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 4.4 We have carefully considered matter. We find that assessee had made declaration of Rs.10,00,000/- in his preliminary statement recorded during course of search on estimate basis. This has been mentioned by AO at Para 9.2 (c) at page 5 of assessment order. However, on actual verification, cash deposited in banks were found to be Rs.9,01,900/-. There is no gainsaying fact that one should be guided by actual deposit of cash. Therefore, AO is directed to delete addition of Rs. 98,100/-. 5. 6th ground raised by assessee in this appeal is that AO has erred in making addition of Rs.4,37,500/- on account of on money payment for flat. 5 5.1 AO found that on page no.1 of seized Annexure A-3, description of amount of Rs.8,75,000/- is appearing. This amount has been paid to Karma Trading and Investments P. Ltd. as on money for purpose of acquiring residential premises. AO was not convinced with submission of assessee that payments details shown by cheque are duly reflected in books. As 50% of it has been brought to tax in hands of assessee s brother Shri Paresh Valia, AO made addition of Rs.4,37,500/- (50% of Rs.8,75,000/-) as assessee s share and treated it as undisclosed income. 5.2 ld. Counsel of assessee submitted that AO has made addition on basis of statement of assessee and that same cannot be made on basis of statement. It is stated by him that in block assessment proceedings, addition can be made only in respect of evidence found during course of search and up to date of search. 5.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 5.4 We have carefully considered matter. We find that AO has relied upon page no. 1 of seized Annexure A-3 wherein description of amount of Rs. 8,75,000/- is appearing. Also AO has relied upon statement recorded from assessee on 15th July 1997. It has been held in case of ITO vs. M.A. Chidambaram [1997] 63 ITD page 203 (Mad-Trib-TM) and in case of ACIT vs. Shailesh S. Shah [1997] 63 ITD page 153 (Mum-Trib) that no addition is justified on basis of papers alone in absence corroborative evidence. AO has not made any attempt to justify his addition on basis of corroborative evidence. Therefore, we direct AO to delete above addition of Rs.4,37,500/-. 6. 7th ground raised by assessee is that AO erred in making addition of Rs.1,50,000/- on account of investment in shares. 6 6.1 AO observed that during course of search proceedings, shares certificates worth Rs.4,27,000/- were seized from residential premises of assessee. He noted that in original assessment, AO had treated amount of Rs.1,50,000/- as unexplained investment. AO rejected submission made by assessee during course of assessment proceedings and made addition of Rs.1,50,000/- which were allegedly paid in cash for acquiring shares and treated same as unexplained investment. 6.2 ld. Counsel of assessee submitted that said shares belong to family members who are assessed to tax separately and therefore, no addition can be made in hands of assessee. Also it was stated that shares belonging to assessee are duly reflected in assessee s books prior to search and hence no addition can be made in this regard on ad hoc basis in block assessment in respect of shares of family members. 6.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 6.4 We have carefully considered matter. We find that AO has relied upon same addition made by his predecessor-in-office. AO has mentioned it at Para 9.4 (a) at page 7 of his assessment order. As we mentioned earlier 1st assessment dated 30th July 1997 made by AO has been set aside by ITAT on 3rd February 2006. 2nd assessment dated 22nd December 2006 made by AO has been again set aside by ITAT on 25th August 2010. This is 3rd assessment dated 29th December 2011 made by AO. We come across that AO has repeated finding of his predecessor-in-office. He has not found out any material facts. In view of above, addition of Rs.1,50,000/- made by AO on estimate is deleted. 7. 8th ground raised by assessee is that AO erred in making addition of Rs.1,58,671/- on account of investment in jewellery. 7 7.1 AO noted that during course of search proceedings, jewellery worth Rs.1,58,671/- was seized from locker. He was not convinced with reliance placed by assessee on Board s Instruction No.1916 dated 11th May 1994. AO made addition of Rs.1,58,671/- as undisclosed income of assessee being investment in jewellery. 7.2 ld. Counsel of assessee submitted that jewellery (old ornaments 379.800 gms.) belongs to three lady members in family and it is evident as per panchanama of seized paper book 1(page 201/202). He also stated that he had filed confirmations by three lady members during course of original assessment proceedings. 7.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 7.4 We have carefully considered matter. We find that AO has summarily rejected confirmation filed by three lady members of family of assessee. We have taken into account panchanama dated 4th September 1996 and confirmations filed during assessment proceedings. We feel that there was no material before AO to make above addition. Therefore, we direct AO to delete above addition of Rs.1,58,671/-. 8. 9th ground raised by assessee in this appeal is that AO erred in making addition of Rs.4,01,102/- on account of interest paid for non- business purpose. 8.1 AO relied upon findings of his predecessor-in-office and came to finding that assessee has diverted his interest bearing borrowed funds for purpose of making benami investment in public issue of shares of M/s Vasparr Fischers Ltd. Holding such interest expense claimed by assessee as not for business purpose, AO made addition of Rs. 4,01,102/- as assessee s undisclosed income. 8 8.2 ld. Counsel of assessee submitted that AO has disallowed in block assessment, interest claimed as expenditure in regular return of income for A.Y. 1993-94 to 1996-97 filed by assessee before date of search. He took us to his submission dated 23rd August 2011 filed before AO during course of assessment proceedings. It was thus submitted that interest was claimed in return income filed before date of search and therefore, no addition can be made in block assessment. 8.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 8.4 We have carefully considered matter. We find that AO has relied upon findings of his predecessor-in-office which he has extracted at page 14 of assessment order. We have mentioned earlier that ITAT has set aside twice assessment order passed by AO. Still them AO in present assessment dated 29th December 2011 has relied upon findings in original assessment without trying to establish facts. Also we find that claim of assessee that interest was reflected in return of income filed before date of search has not been refuted by AO. It has been held in Sunder Agencies vs. DCIT [1997] 63 ITD 245 that provisions of sec. 158BA do not provide license to Revenue to make roving enquiries connected with completed assessments. In view of above, we direct AO to delete addition of Rs.4,01,102/-. 9. 10th ground raised by assessee is that AO erred in making addition of Rs.8,18,303/- on account of capital gain on sale of shares of Mrs. Pratibha Kanakia. 9.1 AO found that search and seizure proceedings u/s 132 were also carried out in case of Harshad Kanakia, brother- in- law of assessee. Shri Harshad Kanakia in his statement recorded on oath stated that all such investments in his name and in name of his family members were done by assessee. Further shares allotted to Mrs. Pratibha Kanakia, 9 was sold in period relevant to A.Y. 1996-97. Therefore, AO brought to tax capital gains of Rs.8,18,303/- as undisclosed income of assessee since he is beneficial owner of such shares. 9.2 ld. Counsel of assessee submitted that addition only on basis of statement of Mrs. Pratibha Kanakia s husband that shares belong to assessee cannot be sustained as investments as well as capital gains are duly reflected in income filed by Mrs. Pratibha Kanakia . Also it was stated that addition is unwarranted as it would amount to double taxation. 9.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 9.4 We have carefully considered matter. We have gone through return of income filed by Mrs. Pratibha Kanakia for A.Y. 1996-97 which is at page no. 149-151 of paper book filed by assessee. We find that there is no material to tax it in hands of assessee when Mrs. Kanakia has filed return of income for A.Y. 1996-97 disclosing capital gains of Rs.8,18,303/-. This would lead to double taxation. In view of above, we direct AO to delete addition of Rs.8,18,303/-. 10. 13th ground raised by assessee is that AO erred in making addition of Rs.20,00,000/- on account of unexplained cash advances. 10.1 AO noted that as per seized documents at page 143 to 148 (Annexure A-11) assessee has advanced following amounts in cash to persons whose names are mentioned below: i Yogini Bhatt Rs.3 lakhs Ii Ramaben Bhatt Rs.2 lakhs Iii Bharat Bhatt Rs.3.5 lakhs Iv Shashikant Rs.5 lakhs Khatra V Vijay Khara Rs.5 lakhs vi Vimaladevi Kedia Rs.1.5 lakhs 10 AO relied on statement recorded on oath of Shri Bharat Bhatt and submission made by assessee on 1st July 1997 accepting that amount of Rs.20,00,000/- was advanced by him out of sale proceeds of shares of Vasparr Fischers Ltd. AO treated above amount of Rs.20,00,000/- as assessee s undisclosed income. 10.2 ld. Counsel of assessee submitted that addition in block assessment should be made on account of evidence found during search. addition of Rs.20,00,000/- has been made by AO on basis of inventory of books and documents found during survey of his office premises at Court Chambers on 8th August 1996 u/s 133A of Act. Thus it was submitted that addition of Rs.20,00,000/- made by AO be deleted. 10.3 ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 10.4 We have considered rival contention and found from record that during course of search proceedings, incriminating records were seized. On such seized material as per Annexure A-11 contains few pages wherein it has been mentioned that different persons have received cash from assessee. As per pages 143 to 148, it is seen that assessee has advanced following amounts in cash to persons whose names are mentioned as below :- i) Yogini Bhatt Rs. 3 Lakhs (ii) Ramaben Bhatt Rs. 2 Lakhs (iii) Bharat Bhatt Rs. 3.5 Lakhs (iv) Shashikant Khatra Rs.5 lakhs (v) Vijay Khara Rs.5 lakhs (vi) Vimaladevi Kedia. Rs.1.5 lakhs Thus, total amount of Rs.20,00,000/- by way of cash was advanced to above persons by assessee. In this connection, statement on oath of Shri Bharat Bhatt was recorded. He in his statement recorded on oath on 8.7.97 11 has admitted that he and his wife Yogini Bhatt and mother Ramaben Bhatt have received amount of Rs.2 lakhs, Rs.3.5 lakhs and Rs.2 lakhs respectively from assessee. This amount was stated to have been received by them against equal amount of cheque issued to assessee. cheques were received by assessee in December, 1994 were utilized for purpose of investment in shareholding of assessee's company. Vide letter dated 20.6.97, assessee was asked to show cause as to why this amount of Rs.20 lakhs should not be taxes as undisclosed income in light of admission made by Bharat Bhatt and others. assessee vide his submission dated 1.7.97 had accepted that amount of RS.20 lakhs was advanced by him out of sale proceeds of shares of Vasparr Fischers Ltd. Therefore, in light of admission made by assessee Rs.20 lakhs was treated as undisclosed income of assessee. 11. By impugned order, CIT(A) confirmed action of AO by observing that Cash Hundi (six in number) totalling to Rs.20,00,000/- in name of Shri Jayesh Valia is treated as assessee s undisclosed income. In view of assessee's own admission made by his letter dated 01.07.1997 and no new evidences to' contradict same having been made before him, sum of Rs.20,00,000/- was treated as assessee's undisclosed income. 12. detailed finding recorded by lower authorities have not been controverted by brining any positive material on record. Accordingly, we do not find any reason to interfere in order of lower authorities confirming addition of Rs.20 lakhs. 13. Now we take up together ground no. 11 & 12 of appeal filed by assessee as they address common issue. assessee has raised in ground no. 11 that AO has erred in making addition of Rs.56,69,500/- on account of unexplained investment in shares in fictitious names. assessee has raised in ground no. 12 that AO has erred in making addition of Rs.1,01,34,680/- on account of profit on sale of shares in fictitious names. 12 14. AO reproduced findings of his predecessor-in-office in original assessment and made addition of Rs.56,69,500/- and Rs.1,01,34,600/- as undisclosed income. He held Rs.56,69,500/- as unexplained investment in share application and allotment money and Rs.1,01,34,680/- as profit on sale of shares held in fictitious names. 15. ld. Counsel of assessee submitted that assessee had been requesting AO to provide copies of working from data obtained from Registrar and Transfer Agents (RTA) on basis of which alleged working is stated to have been made, but same has not been provided to assessee by AO. 16. ld. DR relied on addition made by AO in assessment order dated 29th December 2011 . 17. We have considered rival submissions and perused relevant material on record. perusal of page 14-25 of assessment order dated 29th December 2011passed by AO indicates that he has produced findings of his predecessor-in-office in original assessment order. We find that same narration has been repeated by AO in spite of two orders of ITAT setting aside assessment order. We direct AO to provide assessee copies of working from data obtained from Registrar and Transfer Agents (RTA). We also direct assessee to produce before AO relevant Transfer Form / Contract Note. 18. In view of above, we are of opinion that in interest of justice, issue of addition of Rs.56,69,500/- and Rs.1,01,34,600/- should go back to AO for affording opportunity to assessee. We, therefore, set aside order of AO on above two issues and direct him to decide above two issues afresh after giving reasonable opportunity of being heard to assessee. Thus ground no. 11 & 12 are treated as allowed for statistical purpose. 19. In result, appeal is partly allowed. 13 Order pronounced in open court 30/09/2016 Sd/- sd/- (SANDEEP GOSAIN) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/09/2016 AKV(On Tour)/Karuna, SPS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai Jayesh D Valia v. DCIT 9(3), Mumbai
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