TMI Blog2023 (9) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. [ 1997 (12) TMI 12 - 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. Accordingly, in our view, the AO had sufficient material to form a prima facie belief that the assessee had made cash payments for purchase of aforesaid properties, thereby leading to escapement of income. Therefore, we find no infirmity in the order of Ld. CIT(Appeals) when he held that issuance of notice under Section 147 of the Act was valid in the instant set of facts. Violation of Rule 46 of the Income Tax Rules - allegation of Department that there was violation of Rule 46A of the Income Tax Rules in the instant set of facts, wherein the CIT(Appeals) did not confront the AO with the additional information on the basis of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the MOU, to the total land of 13.75 bighas purchased by the assessee. - SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER For the Appellant : Shri M. K. Patel, A.R. For the Respondent : Shri M. Anand Kumar, Sr. D.R. ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These cross appeals has been filed by the Assessee and the Revenue against the order passed by the Ld. Commissioner of Income Tax(Appeals)-4, (in short Ld. CIT(A) ), Ahmedabad in Appeal No. CIT(A)-4/10512/2018-19, vide order dated 25.10.2019 passed for Assessment Year 2011-12. 2. The Assessee has taken the following grounds of appeal:- (1) That on facts, and in law, the learned CIT(A) has grievously erred in holding that the re-opening of assessment u/s 147 of the Act is valid. (2) That on facts and in law, the learned CIT(A) has grievously erred in partly confirming the addition of Rs. 22,49,614/- made in respect of unexplained 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. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid land was purchased by the assessee, Dr. Harshad J. Shah along-with his wife and son from Shri Baldevbhai Patel for a sum of Rs. 37,98,320/-, which was at a much lower rate that was mentioned in the aforesaid MOU. The Ld. Assessing Officer accordingly was of the view that the assessee had made cash payments for purchase of the aforesaid property and initiated 147 proceedings against the assessee on the basis of the above facts. During the course of assessment proceedings, the Ld. Assessing Officer was of the view that as per MOU (between Patel Suryakantbhai Ambalal and Shri Patel Baldevbhai Amrutlal seized during the course of search), the land cost of 14 bighas comes at Rs. 2,89,94,000/ - (rate agreed upon at Rs. 20,71,000/- 14 bighas). In view of the above, the Ld. Assessing Officer was of the view that that assessee paid cash amounting to Rs. 2,51,95,680/- for purchase of the aforesaid properties (difference between 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 (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 2 ISHWARBHAI J PATEL BHAGABHAI J PATEL HARSHADBHAI J SHAH 173 PAIKI 1 0-87-05 29-12010 970000 3 BALDEV AMRTUIBHAI PATEL JINANG H SHAH, RITABEN H SHAH, HARSHAD JAYANTILAL SHAH 171 PAIKI 0-30-35 26-04-11 14000 4 AMBALAL GOPALDAS PATEL HARSHADBHAI J SHAH, RITABEN H SHAH JINANG H SHAH 639 PAIKI 2 0-52-10 04-05-11 1303000 5 ANANDIBEN R NAYEE OTHERS HARSHADBHAI J SHARITABEN SHAH JINANG SHAH H, H H 172 0-55-64 18-08-11 24000 NOT PERTAINING TO US 173 PAIKI 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is at Rs. 1,39,5677- per bigha(Supra) against the average purchase price shown by the appellant is at Rs. 1,42,6207- per bigha. The appellant has purchased land/registered on 01.10.2010 and the time period is almost same as mentioned in the information for 7 plots above. Copy of 7 documents from registration office has been perused. The contention of the appellant is found correct on corroboration of information on record. The fourth contention raised is that the MOU by land owner Shri Baldev A. Patel and third persons has not been acted upon, in other words, it remained unexecuted, hence was not legally acceptable document as per procedure. I have examined the contents of assessment order and find the contention raised by the appellant is correct. The fifth contention raised is that the AO has not brought on record any independent credible evidence so as to prove that the appellant has paid unaccounted cash in purchase of impugned land. The fact remains that any such information was further required to be corroborated by the AO and the same effort is missing. I have examined the contents of assessment order and find the contention raised by the appellant is correct. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Area corroborating with MOU Rate (per bigha) at which addition has been made in assessment order The purchase estimated price 1.25 bighas Rs.20,71,000/- Rs.25,88,750/- The cost proportionately as computed by AO is arrived at Rs. 3,39,136/- and the same has to be deducted from Rs. 25,88,750/-. As per this computation, the addition of Rs. 22,49,614/- is hereby confirmed in this case. The appellant gets relief of Rs. 2,29,46,066/-. The ground nos. 2, 3, 4 of appeal are partly allowed. The AO is directed to issue revised demand notice accordingly. 4.2 The ground no.7 is relating to interest charged in the computation of tax payable by the AO. Interest is mandatory in view of Hon'ble the Apex Court's judgment in the case of 'CIT vs. Anjum M.H. Ghaswala Others - 252 ITR 1 (SC) wherein it has been held that interest u/s. 234A and 234D of the Act is mandatory in nature. The same is also held to be mandatory in the cases of Vinodkumar vs. CIT - 253 ITR 578 (P H) and Motorola Inc. vs. DCIT -95 ITD 269(Delhi)(SB) . Hence, appellant doesn&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) gave substantial relief to the assessee only on the basis of submission of the assessee that out of 13.75 bighas purchased by the assessee, only 1.25 bighas was relevant to the MOU, which formed the basis of which the additions by the Ld. Assessing Officer. However, it was submitted that while deleting the additions with respect to 12.5 bighas (13.75 bighas less 1.25 bighas), the Ld. Assessing Officer was never confronted with this information for his remarks / observations and Ld. CIT(Appeals) gave substantial relief to the assessee on Suo Motu basis. Secondly, it was submitted that Ld. CIT(Appeals) also took on record copies of 7 registrations deeds which were submitted by the assessee on record before Ld. CIT(Appeals)to substantiate that the purchase price by the assessee for the plots of land purchased by him was in line with the average price per bigha. Accordingly, it was submitted that the matter should be set aside to file of Ld. CIT(Appeals) for de novo consideration, after necessary compliance in terms of Rule 46A of the Income Tax Rules has been done by Ld. CIT(Appeals), and the Assessing Officer has been confronted with the facts placed on record. 9. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs. 12. In the case of Priya Blue Industries (P.) Ltd. v. ACIT [2022] 138 taxmann.com 69 (SC), the AO sought to reopen assessment in case of assessee on count that assessee was beneficiary of certain accommodation. The Assessee challenged impugned notice mainly on ground that jurisdictional facts were not established and hence, revenue could not have assumed jurisdiction and reopened assessment. The ITAT found that exercise of reopening had been made only after due inquiries and recording of statements of concerned persons and on having found prima- facie material, impugned notice had been issued to assessee. The Gujarat High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2021] 129 taxmann.com 375 (Gujarat). 17. Accordingly, in our view, the AO had sufficient material to form a prima facie belief that the assessee had made cash payments for purchase of aforesaid properties, thereby leading to escapement of income. Therefore, we find no infirmity in the order of Ld. CIT(Appeals) when he held that issuance of notice under Section 147 of the Act was valid in the instant set of facts. Violation of Rule 46 of the Income Tax Rules 18. Now we shall come to the allegation of Department that there was violation of Rule 46A of the Income Tax Rules in the instant set of facts, wherein the Ld. CIT(Appeals) did not confront the Assessing Officer with the additional information on the basis of which the relief was granted to the assessee. However, on going to the contents of the order passed by Ld. CIT(Appeals), we observe that the relief has been granted to the assessee only on the basis of the fact that on comparison of the MOU and the Registration Deed of properties which were purchased by the assessee, there was only one plot of land pertaining to survey number 171 palki which was mentioned in the MOU. The other plots of land which were purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. This legal principle is supported by the decision of the Hon ble Bombay High Court in the case of M/s.Harish Textile Engrs. Ltd v. DCIT, reported in 379 ITR 160, wherein, it has been clearly held that on-money received on sale of Stenter Machines for the block period, cannot be estimated on the basis of evidences filed for few instances. A similar view had been taken by the Hon ble Gujrat High Court in the case of M/s.Standard Tea Processing Co. Ltd., reported in 215 Taxman 659. The Hon ble Karnataka High Court in the case of B. Nagendra Baliga, reported in 363 ITR 410, had also considered an identical issue and held that the AO is not entitled to extrapolate undisclosed income detected in the course of search for a particular period to entire block period on estimation basis. Therefore, from the above decisions, one common principle is very clear, in as much as there is no scope for the AO to estimate undisclosed income for the block assessments on the basis of evidences found during the course of search for part period or few instances. Although, the Ld.DR relied upon certain judicial precedents, including the decision of the Hon ble Supreme Court in the case of Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant facts we observe that Ld. CIT(Appeals) while allowing the assessee s appeal observed that no additions have been made by the Assessing Officer in the case of the other family members, who were the joint holders in the aforesaid property. We observe that in the instant facts the additions were made only on the basis of MOU entered between third parties and there was no mention of the assessee s name in the MOU. Further, the aforesaid MOU on the basis of which additions were made by the Assessing Officer had also been subsequently cancelled and was not acted upon. Therefore, in view of the aforesaid judgements cited above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that it would not be legally correct to extrapolate the addition in the hands of the assessee on the basis of facts relating to 1.25 bighas mentioned in the MOU, to the total land of 13.75 bighas purchased by the assessee. 25. Accordingly, in light of the above observations and the decisions rendered by the jurisdictional Gujarat High Court and various Tribunals on the issue, the appeal of the Department is dismissed. Assessee s appeal 26. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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