C/TAXAP/803/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 803 of 2019 With R/TAX APPEAL NO. 804 of 2019 PRINCIPAL COMMISSIONER OF INCOME TAX, SURAT 3 Versus GHANSHYAM DUNGARBHAI SUTARIA Appearance: MRS KALPANAK RAVAL(1046) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 10/02/2020 COMMON ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1 Both appeals are filed at instance of Revenue under Section 260A of Income Tax Act, 1961 [for short, 'the Act, 1961'] arising out of common judgment and order passed by Income Tax Appellate Tribunal, Surat Bench, Surat [for short, 'Tribunal'] dated 6th June 2019 in ITA No.1615/Ahd/2014 filed by assessee and ITA No.1730/Ahd/2014 filed by Revenue before Tribunal for Assessment Year 2009 10. 2 Revenue has proposed following question as substantial question of law in Tax Appeal No.803 of 2019 out of appeal filed by assessee before Tribunal being ITA No.1615/Ahd/2014: Whether on facts and circumstances of case and in law, Page 1 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) without considering effect of provisions of Section 292C of I.T. Act? 3 following questions of law are proposed as substantial questions of law in Tax Appeal No.804 of 2019 arising out of appeal filed by Revenue before Tribunal being ITA No.1730/Ahd/2014: (a) Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) in respect of addition made on account of unaccounted loan and advances and interest of Rs.4,82,56,000/ by accepting explanation of assessee? (b) Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) in respect of addition made on account of unaccounted income of Rs.1,50,000/ by accepting explanation of assessee? (c) Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) in respect of additions made on account of unaccounted income of Rs.12,63,96,132/ and on account of receipt of on money of Rs.40,27,600/ by accepting explanation of assessee? (d) Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) and dismissing appeal filed by Revenue in respect of addition made on account of unexplained expenditure u/s 69C of Rs.97,24,958/ ? (e) Whether on facts and circumstances of case and in law, Page 2 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER Hon'ble ITAT erred in upholding order passed by Ld.CIT(A) on account of unaccounted income of Rs.34,82,000/ , Rs.1,42,60,000/ and Rs.5,43,49,000/ to Rs.1,34,86,000/ , by accepting explanation of assessee? (f) Whether on facts and circumstances of case and in law, Hon'ble ITAT is correct in upholding order passed by Ld. CIT(A) and dismissing appeal filed by Revenue without considering that assessee during assessing proceeding failed to explain documents / loose papers found and impounded from his premises and even disowned same whereas provisions of Section 292C of I.T. Act were clearly applicable? (g) Whether on fact and circumstances of case and in law, Hon'ble ITAT is perverse in upholding order passed by Ld. CIT(A) deleting additions made by AO on basis of loose papers found and impounded from his premises of assessee, which were not explained or disowned by assessee during assessment proceedings and by completely ignoring provisions of Section 110 of Indian Evidence Act where burden of proof as to ownership has been defined as whether any person is owner of anything of which he is shown to be in possession, burden of proving that he is not owner is on person who affirms that he is not owner? 4 facts giving rise to these appeals may summarised as under: 4.1 survey action under Section 133A of Act, 1961 was conducted on 26th March 2009. During course of survey proceeding, books of accounts and documents found were investorised and impounded. 5 assessment order under Section 143(3) of Act, 1961 was Page 3 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER passed by Assessing Officer determining total income of Rs.28,49,83,580/ against returned income of Rs.1,71,550/ . Assessing Officer made following additions: Sr. Nature of addition Amount (Rs.) No. 1 On account profit earned in year form 86,44,340 unaccounted receipts 2 On account of unaccounted income 4,82,56,000 3 On account of unaccounted income 5,72,000 4 On account of unaccounted income 1,50,000 5 On account of unaccounted income 12,6396,132 6 On account of unaccounted on money receipts 40,27,600 7 On account of unaccouned expenditure u/s 97,24,958 69C of Act 8 On account of unaccounted income 34,82,000 9 On account of unaccounted income 1,43,60,000 10 On account of unaccounted income 5,43,49,000 6 assessee being aggrieved filed appeal filed before CIT(A). CIT(A) by order dated 26th March 2014 confirmed additions of Rs.86,44,340/ pertaining to profit earned in year from unaccounted receipts and Rs.5,72,000/ pertaining to unaccounted income. CIT(A) granted relief to assessee as under: Sr. Nature of addition Amount (Rs.) Addition No. confirmed / deleted by CIT(A) 1 On account of profit earned in 86,44,340 Confirmed y ear form unaccounted receipts 2 On account of unaccounted 4,82,56,000 Deleted income 3 On account of unaccounted 5,72,000 Confirmed income Page 4 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER 4 On account of unaccounted 1,50,00,000 Deleted income 5 On account unaccounted income 12,63,96,132 Deleted 6 On account of unaccounted on 40,27,600 Deleted money receipts 7 On account of unaccounted 97,24,958 Deleted expenditure u/s 69C of Act 8 On account of unaccounted 1,43,60,000 Partly allowed income by restricting 9 On account of unaccounted 1,43,60,000 addition to income Rs.1,34,86,000 / out of total 10 On account of unaccounted 5,43,49,000 addition made income of Rs.7,21,91,000 7 CIT(A) also enhanced following addition under Section 251(1) read with Section 251(2) of Act, 1961: [1] Rs.1,90,00,000/ on account of unaccounted disclosed capital grain. [2] Rs.38,90,500/ on account of cash deposit from undisclosed sources. 8 assessee being aggrieved by addition sustained by CIT(A) preferred ITA No.1615/Ahd/2014 whereas Revenue being aggrieved by order passed by CIT(A) preferred ITA No.1730/Ahd/2014 before Tribunal. 9 Tribunal partly allowed appeal filed by assessee giving partial relief to assessee in respect of amount of Rs.5,72,000/ on account of unaccounted income by restricting addition to Rs.72,000/ by applying telescoping with respect to addition sustained of Rs.86.44 lakhs on account of profit earned from unaccounted receipts. Page 5 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER Tribunal upheld finding arrived at by Assessing Officer and CIT(A) by invoking presumption under Section 292C of Act, 1961. Tribunal held as under: 16 We have heard rlval submissions and perused material available on record. We find that lmpounded material BF 2 page 51 was found from premises of assessee being computer printout indicating that loan of Rs.1 Iakh each was given 4 persons namely Premjibhai, Lavjibhai, Rameshbhai and Pareshbhai indicating loan agreement and clearly mentioning that principal amount with monthly interest and yearly interest from each individuals. Therefore, unless otherwise proved, it will be presumed that such books of accounts etc., belongs to such person and its contents are true as per provisions of section 292C of Act. We, further f nd that Id. CIT(A) has supported his view with regard to presumption u/s.292C of Act by placing reliance in case of Asstt. CIT v.Vatika Greenf eld (P) Ltd. [2009] 121 ITJH (Delh ) 208 and decision of Hon ble Gujarat High Court in case of Hiren Vasantlal Shah [2012] 19 taxmann.com 241 (Gujarat) wherein it was held as under: It was held that section 292C of Income tax Act, 1961 Presumption as to assets, books of account, etc. Pursuant to search at assessee s premises, certain documents were found and one of such documents contained working of interest at rate of 3 per cent on total sum of Rs. 3 Iakh Assessee was directed to explain contents of document found during course of search Assessee explained that contents of said document were rough working and no loan was given out Assessing Officer rejected assessee s explanation Whether on basis of material recovered during search, lower authorities had rightly drawn presumption in terms of section 292C Held, yes Whether, therefore, impugned addition was to be confirmed Held, yes [In favour of revenue] 17. Since incriminating documents was recovered from premises of assessee, therefore, we find no reason to draw adverse inference in finding recorded by lower authorities, accordingly same is confirmed. However, addition on basis of seized material is worked out to Rs. 4,72,000 [being loan amount of Rs. 4 Lakhs and interest of Rs.72,000/ ]. Therefore, addition of Rs. 4,72,000 is confirmed and balance addition of Rs. 1,00,000 is deleted. However, since assessee has claimed that telescoping should be allowed with respect to addition sustained in Ground No. 1 above Rs.86.44 lakhs. assessee is entitled to telescoping of Rs.4 lakhs. Therefore, same is allowed out of Rs.86.44 lakhs. Therefore, addition of Rs.4 lakhs sustained is covered by telescoping and balance Page 6 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER addition of Rs.72,000/is upheld. Accordingly, this ground of appeal of assessee is partly allowed. 10 In view of aforesaid finding given by Tribunal, question raised by Revenue cannot be termed as substantial question of law as Tribunal has considered effect of provision of Section 292C of Act, 1961 as applied by CIT(A) applying telescoping reduced addition giving partial relief to assessee. 11 In such circumstances, no question of law much less any substantial question of law arises out of order of Tribunal in respect of Tax Appeal No.803 of 2019. Accordingly, Tax Appeal No.803 of 2019 stands dismissed. 12 With regard to questions of law arising out of order from appeal filed by Revenue being Tax Appeal No.804 of 2019 are concerned, Tribunal has arrived at finding of fact for each of questions as under: Question [a]: Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld.CIT(A) in respect of addition made on account of unaccounted loan and advances and interest of Rs.4,82,56,000/ by accepting explanation of assessee? We have heard rival submissions and perused relevant material on record. We Find that impounded sheet contained name of probable lenders as date of interest column dated and amount of interest payable has been found as blank. Further, six persons mentioned in chart have denied to have done any financial transactions with assessee. AO has wrongly treated these as loans given We have heard rival submissions and perused relevant material on record. We Find that impounded sheet contained name of probable lenders as date of interest column dated and amount of interest payable has been found as blank. Further, six persons mentioned in chart have denied to have done any Page 7 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER financial transactions with assessee. AO has wrongly treated these as loans given whereas list / chart indicates probable lenders. We Find that AO has not brought on record anything contrary to submissions made by assessee. Therefore, in such circumstances, we do not find any infirmity in order of CIT(A), accordingly, same is upheld. This ground of appeal of revenue is therefore, dismissed. Question [b]: Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) in respect of addition made on account unaccounted income of Rs.1,50,00,000/ by accepting explanation of assessee? We have heard rival submissions and perused relevant material on record. We find that BF 2 Page No. 40 reflected 10 number cheques of Rs. 15 Lakh each in respect of Five person. These cheques were pertaining to Bhavnagar District Co operative Bank Ltd. with whom assessee, nor any of his family members were having any bank account. Further, such cheques were not cleared or deposited with bank account of assessee maintained with Surat Peoples Co operative Bank Ltd. These facts stands verified by AO during remand report proceedings and by Ld. CIT(A) in appellate proceedings. Therefore, in absence of any corroborating evidences, addition made by AO in respect of cheque entries has been rightly deleted. Having careful consideration of facts and circumstances, we do not find any infirmity in order of CIT(A), accordingly, it is upheld. Accordingly, this grounds of appeal of revenue is therefore, dismissed. Question [c]: Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) in respect of additions made on account of unaccounted income of Rs.12,63,96,132/ ad on account of receipt of on money of Rs.40,27,600/ by accepting explanation of assessee? We have heard rival submissions and perused relevant material on record. We Find that AO has made addition based on impounded Anx BF 2 Page No. 1 to 39 which reflected payments of and on money in respect of 170 persons against whom details are mentioned. However, Page 8 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER during remand report proceedings, AO had made enquiries on basis of address available on record, details were called for under section 133(6) of Act from Smt. Kirtiben Vishrambhai Moradia, Shri Vishrambhai Kanjibhai Moradia, Smt. ]agrutiben Jitendra Navadiya , Shri Ramesbhai Diyabhai Goyani, whose names were reflecting in Sarajn and asked to furnish details of address of Sarjan, copy of sale deed, payment details with Sarjan and transaction carried out with assessee during period from 01.04.2008 to 31.03.2009 with details of IT returns, PAN and photo identity proof. AO has reported that above mentioned parties submitted their replies wherein they have stated that Sarjan is registered co operative society with name of Sarjan (Katragam) Co Operative Housing society Ltd. incorporated on 20.10.2004, situated Laxmikant Road Katargam Surat. It was noticed that Shr Pareshbhai Davera (Patel) signed certificate as Pramukh. Therefore, summons under section 131 of Act was issued to Paresh Patel, whose statement was recorded on 04.12.2012 in which he stated that Shri Ghanshyambha D Sutariya is having no connection with his society. He is neither member nor holding any plot in Sarjan society. He do not know as to how papers of Sarajn were found during survey at premises of Ghanshyam D Sutariya. Other members from whom information was collected under section 133(6) also denied knowing appellant or having any type of financial transactions with appellant. In view of these facts, CIT(A) observed that appellant has in no way associated with Sarjan Co operative Society. Having careful consideration of above facts, we are of considered opinion there was no corroborating evidences on record, which suggested that transactions, were related to in any manner with assessee. In view of these facts and circumstances, we are of considered view that Ld. CIT(A) was not in error in deleting addition so made by AO. Therefore, this grounds of appeal of revenue is accordingly, dismissed. Question [d]: Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) and dismissing appeal filed by Revenue in respect of addition made on account of unexplained expenditure u/s 69C of Rs.97,24,958/ ? We have heard rival submissions and perused relevant material on record. We find that AO has made enquiries during course of remand proceedings wherein he has examined Shri Lavjibhai Haribhai Patel, President of Madhav Darshan Co op Housing Society Ltd. who developed Laxmi Darshan Complex. It has been emerged that assessee has acted as Panch in resolving dispute arose between members Page 9 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER of society on reducing alignment of shops by SMC. Since CIT(A) as well AO has accepted that assessee has no financial deahngs with Laxmi Darshan Complex. copy of papers of society being copy of decision taken by member of society was found in possession of assessee as he being Panch has retained copy of decision taken by Panchayat. Having careful consideration of facts, we are of view that Ld. CIT(A) was correct in deleting addition made as unexplained expenditure of Rs.97,24,958/ . Accordingly, this grounds of appeal of Revenue is therefore, dismissed. Question [e]: Whether on facts and circumstances of case and in law, Hon'ble ITAT erred in upholding order passed by Ld. CIT(A) on account of unaccounted income of Rs.34,82,000/ , Rs.1,42,60,000/ and Rs.5,43,49,000/ to Rs.1,34,86,000/ by accepting explanation of assessee? This question is also arising in appeal filed by assessee as CIT(A) partly allowed appeal filed by assessee by restricting addition to Rs.1,34,86,000/ out of total addition made of Rs.7,21,21,91,000/ on account of unaccounted income by Assessing Officer. Therefore, there were cross appeals filed by assessee as well as Revenue respectively. Tribunal while deciding appeal in respect of addition sustained by CIT (A) of Rs.1,34,86,000/ held as under: 27 We have heard rival submissions and perused material available on record. We Fund that entries appearing in impounded material being Anx BF 3, Page No. 86 and 92 and other loose papers contained details of receipts of booking money in respect of various plots total of such plot has been worked out as ten number of plots of which explanation was filed by assessee vide his letter dated 13.03.2014 which has been reproduced by ld.CIT(A) in para No.6.8.4, as reproduced above. Accordingly, total payments by buyers was computed at Rs.74,66,000/ and interest compensation to buyers was computed at Rs.60,20,000/ aggregating to Rs.1,34,86,000/ . ld.CIT(A) has also considered and decoded amount mentioned in respect of these plots, considered and cited specific example in respect of Plot No.86 amount which was written in coded figures and arrived at Page 10 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER correct figure of which working is given in Para 6.8.5 of his order as reproduced in this appellate order above. Thus, considering totality of facts and details entries pertaining to each plot recorded in impounded document showed that assessee has sold 10 plots to various 10 buyers and had received sum of Rs.74,66,000/as advanced towards sale of plot. It is further noticed that assessee has paid simple interest @2% per month on amount deposited by buyer which has been calculated at Rs.60,20,000/ by Ld. CIT(A). Thus, total amount returned back to various buyers has been worked out at RS.1,34,86,000/ [ 74,66,000 + 60,20,000] which included interest as well as principal amount. Since, assessee was not able to furnish any details regarding source of these payments ld.CIT(A) has rightly upheld addition to this extent. Therefore, we do not find any infirmity in order ld.CIT(A) in sustaining addition of Rs.1,34,86,000/ , hence, same is upheld. With regard to Revenue s ground of appeal in respect of deletion of addition of Rs.34,82,000/ we find that this amount of addition is already been covered by addition of Rs.1,34,86,000/sustained in respect of plot no.86 and 92 which are figuring in para 6.8.4 at Sl.No.6 & 9 of table. Therefore, we do not find any infirmity in deleting of said addition by Id.CIT(A), accordingly this ground of appeal of Revenue is dismissed. Similarly, with regard to addition of Rs.5,43,49,000/ , we find that these additions have been made on basis of impounded Page No.73 & 74 of Annexure B, F3 which has been already taken care of by ld. CIT(A) while considering total number of 10 plots as discussed and appearing in para 6.8.4 at Page No.29 of appellate order as reproduced above. Therefore, we are of considered opinion that Id.CIT(A) has analyzed all entries appearing in impounded material and also have obtained remand report from AO. Therefore, since factual aspects has been examined by Id.CIT(A), hence we do not find any infirmity in order of Id.CIT(A), accordingly restriction addition of unaccounted income of Rs.34,82,000/ Rs.1,42,60,000/ and Rs.5,43,49,000/ to Rs.1,34,86,000/ is correctly found to be correct. In view of this matter, we do not find any infirmity in order of Id.CIT(A), accordingly Ground No.5 of Revenue appeal is therefore dismissed. With regard to claim of benefit of telescoping out of remaining addition of Rs.74,66,000/ . We are of view that same is required to be co related with amount of received from prospective buyers at time of booking. This aspect has not been examined by lower authorities. Accordingly, set aside for limited purpose to file of Assessing Officer, for examination if there is any co relation between income of Rs.74.66 Iakhs generated and said amount was available for set off against amount paid. Assessing Officer will examine claim of cash flow fund out of which, how much amount can be telescoped by way of these payments. Therefore, this ground is set aside for limited verification. Accordingly, this ground of assessee is dismissed with limited verification and ground No.5 of Revenue is dismissed. Page 11 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER 13 With regard to above questions, as Tribunal on basis of materials produced before it and after analysing same has arrived at finding of fact, no interference is warranted. As there are concurrent finding of fact by both authorities, none of questions of law being questions No.[a] to [e] can be termed as substantial questions of law, appeal stands dismissed. 14 As regards to questions Nos.[f] is concerned, same pertains to application of Section 292C of Act, 1961 and perversity in order of Tribunal. As Tribunal has, in fact, confirmed application of Section 292C of Act, 1961 invoked by CIT(A), question No.[f] does not arise from impugned order of Tribunal. 15 As regard to question No.[g], Tribunal has arrived at finding of fact on basis of materials placed before it, there is nothing on record to come to conclusion that Tribunal has ignored material which is required to be considered or has taken into consideration material which is not relevant. Moreover, it is not case of Revenue that Tribunal has arrived at aforesaid finding of fact without any evidence. Therefore, application of Section 100 of Indian Evidence Act cannot be said to be ignored by Tribunal, as canvassed by Revenue. In facts of case, Tribunal has considered in detail in respect of each of additions deleted by CIT(A) and after analysing material, Tribunal has confirmed order passed by CIT(A). As such there are concurrent finding of fact as stated hereinabove, it cannot be said that order of Tribunal is perverse in upholding order passed by CIT(A) deleting additions made by Assessing Officer on basis of loose papers found and impounded from premises of assessee. Tribunal has also upheld inference drawn by CIT(A) under Section 292C Page 12 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 C/TAXAP/803/2019 ORDER of Act, 1961 so as to sustain additions made by CIT(A). 16 Tribunal has given cogent reasons and arrived at conclusion on basis of materials and fact found on record, which cannot be interfered in absence of any material on record to show contrary fact on record. 17 In such circumstances, both appeals fail, and are, accordingly, dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) CHANDRESH Page 13 of 13 Downloaded on : Mon Feb 17 09:50:36 IST 2020 Principal Commissioner of Income-tax, Surat-3 v. Ghanshyam Dungarbhai Sutaria