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 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

ITO, Ward 9(3),Surat Vs. Shri Ramesh Narsinhbhai Patel,Prop. Vikas Medical Stores,5, Tribhuvan Nagar Society,Ved Road, Katargam, Surat
June, 18th 2012
     IN THE INCOME TAX APPELLATE TRIBUNAL,
              " D " BENCH, AHMEDABAD
      Before Shri A. K. GARODIA, ACCOUNTANT MEMBER
           and Shri KUL BHARAT, JUDICIAL MEMBER
                   I.T.A. No.2080, 2081 / Ahd/2008
                (Assessment year 2001-02 & 2002-03)

ITO, Ward 9(3),                    Vs.       Shri Ramesh Narsinhbhai
Surat                                        Patel,
                                             Prop. Vikas Medical Stores,
                                             5, Tribhuvan Nagar Society,
                                             Ved Road, Katargam, Surat
                                           PAN/GIR No. : AEPPP0506F

                       I.T.A.No. 398, 816/Ahd/2009
                  (assessment years 2001-02 & 2002-03)

Maruti Developers.                   Vs.     ITO, Ward 9(3), Surat
27, Sardar Complex,
Mini Bazar,
Varchha Road, Surat

(APPELLANT)                                  (Respondent)

         Appellant by:                Shri B L Yadav, Sr. DR
         Respondent by:               Shri Sapnesh Sheth, AR

           Date of hearing:       03.05.2012
           Date of pronouncement: 15. 06.2012
                            ORDER

PER SHRI A. K. GARODIA, AM:-

     Out of these four appeals, two appeals are filed by the assessee in
the case of Maruti Developers for the assessment years 2001-02 and
2002-03 and the remaining two appeals are filed by the revenue in the
case of Ramesh Narsinhbhai Patel, Surat for the same two assessment
years. These appeals are connected because additions were made by the
                                      2        I.T.A.No.2080,2081,398,816 /Ahd/2008




A.O. on protective basis in the case of individual Shri Ramesh
Narsinhbhai Patel and on substantive basis in the case of the firm, M/s.
Maruti Developers of which the individual is one of the partners. Such
additions were deleted by Ld. CIT(A) in the case of the individual for
both these years and, therefore, revenue is in appeal and the same was
confirmed in the case of the firm and therefore, the assessee is in appeal.
2.    In the case of the firm, in both these years, ground No.1 raised by
the assessee is regarding validity of reopening proceedings.
3.    On this issue, it was submitted by the Ld. A.R. before us that no
notice was issued u/s 142(1) and straightaway, notice u/s 148 was issued
and, therefore, the reopening is not valid.
4.    Ld. D.R. supported the order of Ld. CIT(A) in both these years.
5.    We have considered the rival submissions and have gone through
the orders of authorities below. We find that it is noted by the A.O. in the
assessment order for the assessment year 2001-02 that in the course of
assessment proceedings in the case of the individual Shri R. N. Patel, it
was noted that the assessee M/s. Maruti Developers has made payment of
Rs.83.25 lacs on various dates during 25.12.2000 to 06.03.2001 towards
purchase of land and that firm is neither assessed to tax nor it has filed
any return of income in respect of these years or for any earlier
assessment years. It was noted that the assessee firm was not having any
regular and known source of income and, therefore, the source of
payment made against purchase of land remained unverified and
unexplained as per the A.O. and hence, the A.O. was of the view that the
concealed income of the assessee firm can be there. He further noted that
the addition was made in the hands of individual Shri R N Patel on
protective basis and, therefore, the assessment of this assessee was
                                    3        I.T.A.No.2080,2081,398,816 /Ahd/2008







reopened u/s 147 of the Income tax Act, 1961 and notice u/s 148 was
issued on 05.01.2007. Since the proviso to Section 147 is not applicable
in the present case and the notice was issued by the A.O. after recording
the reasons, we do not find any infirmity in the order of the authorities
below regarding reopening of the assessment u/s 147 and hence, ground
No.1 of the assessee's appeal is rejected in both the years in the case of
the firm M/s. Maruti Developers.
6.    The issue in dispute on merit is regarding addition of Rs.70.45 lacs
and 13.25 lacs made by the A.O. and confirmed by Ld. CIT(A) in respect
of plot booking advances and capital introduced by the partners
respectively in assessment years 2001-02 and of Rs.1,11,500/- in
assessment year 2002-03 in respect of plot booking advance treated as
unexplained cash credit u/s 68.
7.    It was agreed by both the side that the issue in dispute is identical
in both the years and the facts of the assessment year 2001-02 can be
considered and on the basis of this, the matter in both the years can be
decided.   Regarding introduction of capital by the partners in the firm of
Rs.13.25 lacs in assessment year 2001-02, it was submitted that this issue
is now covered in favour of the assessee by the judgment of Hon'ble
Gujarat High Court rendered in the case of CIT Vs Pankaj Dyestuff
Industries as reported in (Income tax Reference No.241 of 1993) order
dated 06.07.2005. Regarding plot booking advance received form 41
persons of Rs.70.45 lacs in assessment year 2001-02, it was submitted
that only 3 parties could be produced who have confirmed before the
A.O. and for the remaining 20 parties, affidavits were filed. He also
submitted that possession could not be given to these parties of plots
because the assessee could not get possession and therefore, these parties
                                    4        I.T.A.No.2080,2081,398,816 /Ahd/2008




are not helping and the case is going on. He submitted that under these
facts, addition made by the A.O. is not justified and in support of this
contention, reliance was placed on the judgment of Hon'ble Apex Court
rendered in the case of Mehta Prakash & Co. Vs CIT as reported in 30
ITR 181 and the judgment of Hon'ble Gujarat High Court rendered in
the case of Glass Lines Equipments Co. Ltd. Vs CIT. as reported in 253
ITR 454.
8.    Ld. D.R. of the revenue supported the order of Ld. CIT(A).
9.    We have considered the rival submissions, perused the material on
record and have gone through the orders of authorities below and the
judgements cited by the Ld. A.R. We find that the amount in question of
Rs.70.45 lacs received as advance towards plot booking was received
form 41 persons out of which the assessee produced only 3 persons
before the A.O.    The A.O. also stated that mere filing of identity and
copies of land record i.e. 7/12 do not prove the creditworthiness of
depositors and genuineness of transaction. Regarding these three persons
produced before the A.O., it was observed by the A.O. that none of them
could prove that they have booked a plot in the project of the assessee
because they did not have any record in the form of booking receipt of the
plot, purchasing agreement or any other document relating to the alleged
booking of the plot in the project of the assessee.   The A.O. also noted
that all these three person produced before him are diamond cutting and
polishing labours having meager income and hardly meet both the ends
and therefore, it was beyond imagination for these three labourers to
invest such a huge amount of Rs.3 lacs and Rs.1.50 lacs in plots which
many of them have never seen. Ld. CIT(A) has given a finding that the
assessee has failed to produce any evidence regarding creditworthiness of
                                      5      I.T.A.No.2080,2081,398,816 /Ahd/2008




the alleged depositors.   Before us also, no such evidence regarding
creditworthiness of the depositors and genuineness of transaction could
be produced by the Ld. A.R. and hence, we do not find any reason to
interfere in the order of Ld. CIT(A) on this issue. Therefore, we confirm
the addition of Rs.70.45 lacs in assessment year 2001-02 and
Rs.1,11,500/- in assessment year 2002-03 u/s 68 in respect of plot
booking advances alleged to have been received by the assessee.
10.   Regarding introduction of capital by the partners in assessment
year 2001-02 of Rs.13.25 lacs, we find that this issue is now covered in
favour of the assessee by the judgement of Hon'ble Gujarat High Court
rendered in the case of Pankaj Dyestuff (supra) and hence, no addition
could be made in the hands of the firm but the revenue is at liberty to
reopen assessment of the partners as per law and this issue can be
examined in their cases as to whether they could explain the source of
investments in the assessee firm or not. The addition of Rs.13.25 lacs is
deleted in assessment year 2001-02.
-     Regarding reliance placed by the Ld. A.R. on the judgement of
Hon'ble Apex Court rendered in the case of Mehta Parikh & Co. (supra),
we find that this judgment is not applicable in the present case because
the facts are different. In that case, the issue in dispute was regarding
assessment of Rs.30,000/- from out of mere 60,000/- for income tax and
excess profit tax business profit tax purpose representing the value of
high denomination notes which was encashed on 18th day of Jan 1946. In
the present case, the dispute is regarding addition made by the A.O. u/s
68 in respect of amount said to have been received by the assessee from
41 depositors on account of plot booking advances for which the assessee
could not establish the creditworthiness of the depositors and genuineness
                                     6         I.T.A.No.2080,2081,398,816 /Ahd/2008




of transaction. Hence, this judgement is not applicable in the present case
because the facts are different.
-     Reliance was also placed by the Ld. A.R. on the judgment of
Hon'ble Gujarat high Court rendered in the case of Glass Lines
Equipments Co. Ltd. (supra). In that case, the issue in dispute was
different.   In that case, the dispute was regarding as to whether the
expenditure of Rs.1,69,218/- was part of actual cost of plant or not
whereas, in the present case, the dispute is regarding applicability of
section 68 in respect of amount received by the assessee as deposits for
plot booking advances and the assessee could not establish the
creditworthiness of the depositors and genuineness of transaction. Facts
and the issue in dispute being different, this judgement of Hon'ble
Gujarat High Court is also not applicable in the present case.
11.   In the result, appeal of the assessee in the case of M/s. Maruti
Developers is partly allowed in assessment year 2001-02 and dismissed in
the assessment year 2002-03.
12.   Now, we take up the revenue's appeal in the case of Shri R. N.
Patel for the assessment year 2001-02 and 2002-03. In assessment year
2001-02, the revenue is disputing the deletion of addition made by the
A.O. of Rs.110.25 lacs and in assessment year 2002-03, the revenue is
disputing regarding deletion of addition of Rs.1 lacs made by the A.O. on
account of unexplained investment toward purchase of land in both these
years. For this case also, it was agreed by both the sides that the issue can
be decided in assessment year 2001-02 and on the same basis, the issue
may be decided in assessment year 2002-03.
                                     7        I.T.A.No.2080,2081,398,816 /Ahd/2008







13.   We find that Ld. CIT(A) has passed a combined order in the case
of Shri R N Patel for the assessment years 2001-02 and 2002-03 and the
last para of his order is the relevant para which is reproduced below:
      "I have carefully considered the arguments given by assessing
      officer & the submissions of Id. AR. As stated by Id. AR the
      addition on substantive basis is already made in case of the firm
      M/s Maruti Developers. As such addition made on protective basis
      in assessee's case is required to be deleted as genuineness of
      investment is required to be verified in case of assessee's who
      claims to have made investment & for which addition on
      substantive basis is also made. In the instant case, investment to
      the extent of Rs.84,47,500/- is claimed to have been made by the
      firm M/s Maruti Developers & addition in their case is made on
      substantive basis. This investment is also reflected in the balance
      sheet of partnership firm-M/s Maruti Developers & hence, in my
      opinion genuineness of the same is required to be verified in the
      case of the firm. The balance investment of Rs.27,00,000/- is
      claimed to have been made by another firm M/s Hari Om Dyg. &
      Ptg. Mills & this fact is also confirmed by partner Shri Pranjivan
      Bhagat in reply to letter of assessing officer u/s 133(6) of the Act.
      This investment is also reflected in the books of M/s Hari Om Dyg.
      & Ptg. Mills & as such addition cannot be made to the income of
      assessee even on protective basis. The addition can be sustained
      only in the case of the above two firms, if source relating to
      investment in land could not properly be explained."

14.   We find that the entire addition in both the years was deleted by
Ld. CIT(A) on this basis that substantive addition has already been made
in the case of the firm M/s. Maruti Developers and therefore, the
protective addition made in the hands of the individual partner is to be
deleted. In the case of M/s. Maruti Developers, substantive addition was
made of Rs.84,47,500/- and such addition was already confirmed by us in
the above para and balance addition of Rs.27 lacs is said to have been
invested by another firm M/s. Hariom Dying and printing Mills and it is
noted by Ld. CIT(A) that partner of this firm Shri Pranjivan Bhagat has
                                       8         I.T.A.No.2080,2081,398,816 /Ahd/2008




confirmed the investment by this firm of Rs.27 lacs and the same is
reflected in the books of this firm. Therefore, this finding is given by Ld.
CIT(A) that no addition can be made in the hands of the assessee on
protective basis. Considering these facts, we do not find any reason to
interfere in the order of Ld. CIT(A) in both these years.
15.      In the result, both these appeals of the revenue are dismissed.
16.      In the combined result, both the appeals of the revenue are
dismissed and the appeal of assessee in assessment year 2001-02 is partly
allowed and in assessment year 2002-03 is dismissed.
17.      Order pronounced in the open court on the date mentioned
hereinabove.
         Sd./-                                          Sd./-
(KUL BHARAT)                                    (A. K. GARODIA)
JUDICIAL MEMBER                                 ACCOUNTANT MEMBER
Sp
Copy of the Order forwarded to:
   1.    The applicant
   2.    The Respondent
   3.    The CIT Concerned
   4.    The Ld. CIT (Appeals)
   5.    The DR, Ahmedabad                              By order
   6.    The Guard File
                                                        AR,ITAT,Ahmedabad
      1. Date of dictation......12/6
      2. Date on which the typed draft is placed before the
         Dictating Member......13/6. Other Member ............
      3. Date on which the approved draft comes to the Sr. P.S./P.S.14/6
      4. Date on which the fair order is placed before the Dictating Member
         for pronouncement ......15/6
      5. Date on which the fair order comes back to the Sr. P.S./P.S.15/6
      6. Date on which the file goes to the Bench Clerk ...15/6
      7. Date on which the file goes to the Head Clerk .......................
      8. The date on which the file goes to the Assistant Registrar for
         signature on the order .........................
      9. Date of Despatch of the order. .....................
 
 
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