Gujarat High Court on 25 February, 2020 held that when Search and seizure of incriminating material is at third party and have not in the name of or in hand writings or signature of the assessee, also no such transaction is with third party then in the absence of any other independent material to corroborate the statement of third party no addition can be made.
IN THE GUJARAT HIGH COURT
J.B. PARDIWALA & BHARGAV D. KARIA, JJ.
Pr. CIT v. Mukesh Keshavlal Patel
R/Tax Appeal No. 838, 840 of 2019 25 February, 2020
Sections 68, 132, 143(3), 147, 260A AY 2006-07
Appellant(s) by: Mauna M Bhatt, (174)
Opponent(s) by: None
JUDGMENT
J.B. Pardiwala, J.
Since the question of law as proposed by the Revenue in both the captioned tax appeals are common, those were heard analogously and are being disposed of by this common judgment and order.
- For the sake of convenience, the Tax Appeal No.838 of 2019 is treated as the lead appeal.
- This tax appeal under Section 260A of the Income Tax Act, 1961 [for short ‘The Act, 1961’] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmeabad ‘C’ Bench, Ahmedabad dated 26-6-2019 in the ITA No.963/AHD/2016 for the assessment year 2006-07.
- The facts giving rise to the captioned Tax Appeal may be summarized as under.
4.1 The assessee filed his return of income for the assessment year 2006-07 declaring total income to the tune of Rs. 3,24,920.
It appears that a search was carried out under Section 132 of the Act in the case of one Shri Bhikhubhai Padsala. In the course of the search, few documents were recovered and seized by the Investigation Wing. The documents seized by the officials of the Investigation Wing indicated certain notings of cash payments made on various dates with respect to certain parcels of land situated at the Village Jagatpur. Shri Bhikhubhai Padsala furnished a cash flow statement before the Settlement Commission. Shri Bhikhubhai Padsala made a statement before the Settlement Commission that a particular amount in cash was received by him from the assessee and one another person viz.Shri Kamlesh A. Patel. The said cash flow statement was accepted by the Settlement Commission. On the basis of the aforesaid information, the case of the assessee herein was reopened and was completed by passing the assessment order under Section 143(3) read with Section 147 of the Act. The assessing officer treated certain amount as unexplained and added the same to the total income of the assessee.
4.2 The assessee herein being dissatisfied with the addition made by the assessing officer preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal and deleted the addition.
4.3 The Revenue being dissatisfied with the order passed by the Commissioner (Appeals) went in appeal before the Appellate Tribunal. The Appellate Tribunal concurred with the findings recorded by the Commissioner (Appeals) and dismissed the appeal preferred by the Revenue.
4.4 Being dissatisfied with the order passed by the Appellate Tribunal, the Revenue is here before this Court with the present appeal.
- The Revenue has proposed the following question of law for the consideration of this Court :–
Whether the Appellate Tribunal has erred in law and on facts by deleting the addition made for various assessment years on account of unexplained by income without appreciating the facts of the case in its entirety?
- We take notice of the following findings recorded by the assessing officer in the impugned order :–
From the above description, it become clear that the amount of total transaction involves Rs. 10,46,72,668 out of which Rs. 4,01,00,001 was paid in cash during the year under consideration. The assessee has further argued that he has not purchased any land at Jagatpur from B.N. Padsala or M/s. B. Nanji Group. This argument is also not found acceptable. From the description of the above pages and cash flow statement submitted by Shri Bhikhubhai Padsala before Hon’ble Settlement Commission it become clear that the cash was paid by assessee but it is possible that sale deed may not have been executed till date. Hon’ble Settlement Commission has accepted the cash flow statement submitted by Shri Bhikhubhai Padsala and hence it is established that the assessee paid Rs. 4,01,00,001 in cash for purchase of land. Since, the assessee has not explained any source of payment made in cash for purchase of the land situated at Jagatpur the cash of Rs. 4,01,00,001 is stated as unexplained income and accordingly added to the total income of the assessee. Penalty proceeding under section 271(1)(c) is hereby initiated for concealment of income and furnishing of inaccurate particular of income.
- The aforesaid findings recorded by the assessing officer did not find favour with the Commissioner (Appeals) for the following reasons as recorded in the order passed by the Commissioner (Appeals) :–
(i) The documents on the basis of which additions have been made were not found at the premises of the appellant but at the premises of third party Shri Bhikhubhai Padsala.
(ii) The documents found during the course of search at the premises of Shri Bhikhubhai Padsala are not in the hand writings of the appellant.
(iii) Name of the appellant was no where mentioned in the documents relied upon for making the additions.
(iv) The documents relied upon are not signed by the appellant.
(v) The appellant did not enter into land transaction with Shri Bhikhubhai Padsala. If the payment in cash would have been made, the sale deed of the land would have been registered after that. But even after search, the land has not been found registered having name of the appellant as purchaser of the Jagatpur land.
(vi) Apart from the documents found during the course of search & cash flow statement submitted by Shri Bhikhubhai Padsala before the Hon’ble Settlement Commission, no other independent inquiry was made by the assessing officer to find out the correct facts.
- The aforesaid findings recorded by the Commissioner (Appeals) ultimately came to be affirmed by the tribunal.
- The entire edifice of the revenue’s case is the statement made by Bhikhubhai Padsala before the Settlement Commission. Shri Bhikhubhai Padsala stated before the Settlement Commission that he had received the amount in cash from the assessee for the purpose of purchase of the land at Village Jagatpur. According to the assessing officer, the same was sufficient for the purpose of addition under Section 68 of the Act.
- In the aforesaid context, many decisions of the Supreme Court as well as this High Court and other High Courts have been relied upon by the Commissioner (Appeals). One common principle in all the said decisions is that the assessee need not to be asked to explain the entries or notings in the books of a third party. In the absence of any other independent material to corroborate the statement of Shri Bhikhubhai Padsala made before the Settlement Commission, it would not be prudent to take the view that there was a transaction between the assessee and Shri Bhikhubhai Padsala in cash with regard to the purchase of certain parcels of land.
- It appears that the Commissioner (Appeals) relied upon the decision of the Delhi High Court in the case of CIT v. Vineeta Gupta (2014) 46 taxman.com 439 (Delhi) : 2014 TaxPub(DT) 2474(Del-HC), wherein, the view taken is that the declaration made by another party before the Settlement Commission is not binding upon the assessee, therefore, no additions can be made in absence of any independent material.
- In view of the concurrent findings of fact recorded by the two authorities, we are of the view that the question of law as proposed by the Revenue cannot be termed as a substantial question of law.
- In the result, this appeal fails and is hereby dismissed.