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Sejal Gopalbhai Shah Versus ACIT, Cent. Cir. 2 (4) , Ahmedabad.

Validity of assessment - assessee has pleaded that the assessment orders have been passed by the AO after 12o clock in the mid-night of 31-12-2009. Therefore, the assessment orders are time barred, and consequently be quashed - Held that:- On due consideration of the facts and circumstances, we do not find force in the submissions of the ld. counsel for the assessee. Firstly, the ld. AO has mentioned a time at 12:15 am, meaning thereby, it is morning of 31-12-2009. Rather, the CIT(A) has rightly .....

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. Society - Held that:- The assessee has not submitted any fund flow statement for the purpose of explaining the source before the AO. It is impossible to reconcile this statement with the availability of funds at a given point of time. There is no head and tail of the exact amount available on a particular date, out of which, it can be alleged that the investment was made in the advancement of loans.No doubt, on 21.2.2002, cheque bearing no.0303541 for ₹ 7 lakhs has been cleared. But this .....

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of the borrower indicating the fact that cheque no.0303541 was credited to his account, but no such effort was made by the assessee during the assessment proceedings. Before us, it is not possible to cross-verify this aspect at this stage. Therefore, we do not find any merit in this contention of the ld.counsel for the assessee - Decided against assessee.

Unexplained source of payment - explanation of the assessee is that these documents were issued in lieu of security of the loan ear .....

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f ₹ 12.25 lakhs in the accounting year relevant to the Asstt.Year 2004-05. Had the amount was not given, then it was for the assessee to demonstrate, as to why the necessity to execute such type of receipts, in this methodical way, was felt. As far as security of the first loan amount is concerned, the assessee has taken undated cheques from Shri Hasubhai Thakkar. She had also got executed promissory notes. These two sureties were also there in existence. Therefore, in our opinion, the Fir .....

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which have been considered by him as unexplained investment of the assessee. The major item of investment worked out by him is with regard to Smt.Pareshaben Shah. The client ID is 10735254. The balance has been shown at ₹ 13,90,888/-. Against this ID, 56 scrips have been noticed by the AO, in the annexure appended with the assessment order. All these shares have been shown pertained to F.Y.2003-04. The ld. Counsel for the assessee failed to pin point, out of these 56 scrips, which were pu .....

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ial has been brought to our notice which can suggest this erroneous approach adopted by the Revenue authorities. We, therefore, do not find any merit in this ground of appeal. It is rejected. - Decided against assessee.

Addition on deemed dividend u/s 2(22)(e) - Held that:- The assessee has never raised any plea that the company was incorporated on 1.9.2003. The ld.counsel drew our attention towards page no.119 where certificate issued by the Asstt.Registrar of Companies, Gujarat, exh .....

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alleged that the loans have been given to the assessee. - Decided in favour of assessee for statistical purpose. - IT(SS)A No.378, 379 and 380/Ahd/2011 - Dated:- 7-8-2015 - SHRI RAJPAL YADAV AND SHRI ANIL CHATURVEDI, JJ. For The Assessee : Shri Sakar Sharma For The Revenue : Shri Surendra Kumar, CIT-DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: The ld. First Appellate Authority has decided two appeals of the assessee for the Asstt.Years 2002-03 and 2003-04 by way of a common order dated 22.2.2001 .....

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zure operation under section 132 of the Income Tax Act was carried out in Sejal Mahindra group of cases on 25.7.2007. In order to give a logical end to the proceedings, notice under section 153A dated 7.2.2008 was issued upon the assessee with request to file return within 30 days on receipt of notice. However, the assessee did not file return as required in the notice. The ld.AO, thereafter, issued notice along with questionnaire under section 142(1). The assessee has filed the return in the As .....

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iness. For carrying out these business activities, she has operated bank accounts in her name, in the name of her father, late Shri Gopalbhai Shah, mother Smt. Pareshaben G. Shah, brother Shri Mit G. Shah, her friend Ms. Rajvi Shah as well as in the different trade name entities, proprietorship concerns etc. She has annexed a list Exhibit-I along with return. The assessee had owned up all transactions in these names and offered the income. The assessee has also contended that transactions in the .....

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in Exhibit-I. The assessee has compiled the details in tabular form exhibiting the particulars of assets/investments identified against the amount of additional income offered in the return for each assessment year. This paper has been reproduced by the ld.First Appellate Authority at page nos.4 & 5 of the paper book in the Asstt.Year 2002-03 to 2004-05. The returns have been filed on 9.12.2009. There was only 22 days time left with the AO for scrutinizing the details submitted by the asses .....

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The additional ground of appeal to this effect was raised by the assessee in all these three years before the ld.First Appellate Authority also. 6. With the assistance of the learned representatives, we have gone through the record. The ld.counsel for the assessee has drew our attention towards page no.5 of the assessment order passed in the Asstt.Year 2002-03 and took us through the following paragraphs: The reply of queries asked vide first questionnaire dtd 20.08.2009 was also filed in piecem .....

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ed the assessment order at 12:15 of 31st December, 2009, meaning thereby, the assessment order was not passed before the 31-12-2009. Hence, it is time barred. 8. On the other hand, the learned DR relied upon the findings of the CIT(A) who has specifically dealt with this issue after perusing the order sheet entries in the assessment record. It is pertinent to take note of the findings recorded by the CIT(A) on this issue. 4. I have considered the submissions of the appellant regarding the additi .....

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in the assessment order. 4.1 For this purpose, the order sheet of the assessment records was verified by me. From the perusal of the order sheet, it is seen that on30/12/2009 the AO has made two notings prior to this noting of 31/12/2009 in the order sheet regarding the receipt of two replies from the appellant. The first noting on 31/12/2009 at 12.15 a.m. is regarding the receipt of the submissions dated 28/12/2009, 29/12/2009 and 30/12/2009. It is seen that the representative of the appellant .....

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hearing in this case on 31/12/2009 in midnight. Further after this entry in the note sheet, there is another entry on 31/12/2009 at 3 PM as per which the assessment order under section 153A/143 (3) for assessment year 2002-2003 to 2008-2009 are passed by the AO. The acknowledgement slip also shows the signature of Shri Mit Shah, the brother of the appellant as on 31/12/2009. The date of service of assessment order, demand notice and penalty noticesis shown as 31/12/2009. Therefore, there is an a .....

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plies were received from the assessee. Despite the odd hour much after the office time all the replies were duly received from the assessee or Even at 12.15 o clock of night of 30th December, 2009 four replies were received from the assessee. Despite the odd hour much after the office time all the replies were duly received from the assessee. 4.2 In view of the above discussion, the additional ground raised by the appellant is factually incorrect and has been raised with an intention to mislead .....

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rce in the submissions of the ld. counsel for the assessee. Firstly, the ld. AO has mentioned a time at 12:15 am, meaning thereby, it is morning of 31-12-2009. Rather, the CIT(A) has rightly pointed out that instead of expression night , the ld.AO should have recorded morning . It is only incorrect use of word at the end of the AO. Otherwise, he has passed the assessment order on 31.12.2009 after 12oclock next day would begin. Had it been 12:15am after 31st January, then the AO would not have me .....

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addition of ₹ 15.00 lakhs, ₹ 9.50 lakhs and ₹ 15.50 lakhs made by the AO on account of alleged investment/expenditure in the property situated at 6, Kaushal Co-op. Hsg. Society only on surmises and conjectures, and without bringing any evidence on record in respect of these transactions in the Asstt.Years 2002-03 to 2004-05 respectively. 11. Brief facts of the case are that during the course of search, various promissory notes, cheque and copies of agreement were found and inve .....

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khs had issued undated cheque of equal amount. They have executed promissory notes and Shri Hasubhai Thakkar, and Naynaben Thakkar had executed an agreement intending therein that an amount of ₹ 40 lakhs given by Sejal Shah and family members on various dates, would be returned by 28.2.2004 or maximum by 31.5.2004 along with interest. If the amounts are not returned then the property at 6, Kaushal Co-op. Hsg. Society will be transferred to Sejal Shah as per the market value. There is anoth .....

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fronted the assessee to explain the source of the loan advanced by Shri Sejal Shah and from the members to Hasubhai Thakkar and his concern. Before the AO, the assessee did not file any submission exhibiting the source of funds. Accordingly, the AO has treated the above loans given by the assessee as unexplained and made addition of ₹ 15.00 lakhs in the Asstt.Year 2002-03, ₹ 9.50 lakhs in the Asstt.Years 2003-04 and ₹ 15.50 lakhs in the Asstt.Year 2004-05 respectively. 12. Appe .....

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hai V. Thakkar for ₹ 13 lakhs on 7.2.2005. Therefore, the second sale deed executed by father of the assessee, on the strength of irrecoverable power of attorney, cannot be executed. It indicates that no investment was made by the assessee in purchase of 6, Kaushal Co-op. Hsg. Society. In the third fold submission, it was contended that the assessee has sufficient cash withdrawal in earlier years. Out of which, it can be assumed that loans have been given by the assessee. For buttressing t .....

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ty viz. 6, Kaushal Co-op. Hsg. Society was sold by its owner to one Shri Kishorebhai V. Thakore for ₹ 13 lakhs vide sale deed dated 17.2.2005. If that be so, then how the power attorney holder, i.e. father of the assessee could transfer this property to Smt.Pareshaben Shah (mother of the assessee) on 11.11.2005. The ld.First Appellate Authority has called for a remand report on all these aspects and rejected the contentions of the assessee. To our mind, reference to this transfer of the pr .....

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ther of the assessee). It is to be appreciated that the loan of ₹ 40 lakhs was already given and in order to safeguard the recovery of the loan, the assessee got executed a promissory note, received undated cheques of equal amounts and also irrecoverable power of attorney for transfer of a property. If the borrower failed to make the payments, the assessee could file a suit for recovery on the basis of the promissory note. In her second option, she could put the date on the cheques and pre .....

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is not of unexplained investment in the property. The addition is that of advancement of loan and failure to explain the source of the loan. One of the arguments taken before the ld.First Appellate Authority was that the assessee has shown income of ₹ 11.80 lakhs in the Asstt.Year 2002-03. Credit of this income ought to have been given. This aspect has been considered by the ld. CIT(A) and it has been held that the credit of this additional income has already been taken by the assessee in .....

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out of this withdrawal. We have perused the alleged fund flow statement submitted by the ld.counsel for the assessee at the time of hearing. However, we don t find any merit in this contention, because the assessee has not taken any such plea before the ld.First Appellate Authority. The assessee has not submitted any fund flow statement for the purpose of explaining the source before the AO. It is impossible to reconcile this statement with the availability of funds at a given point of time. Th .....

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ge nos.73 of the paper book, where the copy of promissory note is available as well as at page no.93 of the paper book-II, where the bank statement of Ms.Pareshaben Gopalbhai Shah is available. No doubt, on 21.2.2002, cheque bearing no.0303541 for ₹ 7 lakhs has been cleared. But this cheque number has not been mentioned in the promissory note. It cannot be said that the loan of ₹ 7 lakhs in the Asstt.Year 2002-03 was given through account payee cheques, and that the cheque was bearin .....

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fy this aspect at this stage. Therefore, we do not find any merit in this contention of the ld.counsel for the assessee. This ground is rejected in all three years. 17. No other ground was pressed in the Asstt.Years 2002-03 and 2003-04, and hence, both the appeals are rejected. 18. In the Asstt.Year 2004-05, next ground of appeal is that the ld.CIT(A) has erred in confirming the addition of ₹ 12.25 lakhs. 19. Brief facts of the case are that during the course of search, papers inventorised .....

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letter of this property to the father and mother of the assessee was given on 21.10.2004. This document was at page no.98 of the Annexure A/73. Apart from these documents, page nos.1 to 22 inventorised as Annexure A/73 were also found. These pages are copies of receipts issued by Bhagyodaya Owners Association to Shri Gopalbhai Shah. The total receipts are for ₹ 40 lakhs, out of the above, payment of ₹ 12.25 lakhs was made in F.Y.2003-04 and ₹ 27.75 lakhs in the F.Y.2004-05. Th .....

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cuted promissory note, issued undated cheques and an agreement vide which it was intended that in case he failed to repay the amount, then the plot no.6, Kaushal Co-op. Hsg. Society would be transferred in the name of assessee at the market rate. For this purpose, he has executed an irrevocable power of attorney in favour of the assessee s father, Shri Gopal Shah on 29.6.2004. Before, the father of the assessee got the sale deed executed in the name of assessee s mother, Smt. Pareshaben Shah by .....

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en a declaration that Bhagyodaya Plaza was never constructed and no possession was given to the assessee. 21. The ld. First Appellate Authority has gone through all these aspects, but rejected the contentions of the assessee. According to the ld.CIT(A) loan of ₹ 40 lakhs was advanced by the assessee during the financial years 2001-02, 2002-03 and 2003-04. The first loan advanced by the family members was promised to be repaid by 28.2.2004 and not latter by 31.5.2004. The irrecoverable powe .....

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iled to explain the source of payments. In this way, the ld.CIT() has confirmed the additions. 22. With the assistance of the ld. representative, we have gone through the record carefully. Copies of the receipts from pages 1 to 22 inventorised as Annexure-A/73 are available at page nos.101 to 118 of the paper book. The assessee has compiled the details available in these receipts in tabular form and placed these details at page no.100 of the paper book. We have gone through these details. A peru .....

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red by way of registered sale deed in the name of her mother, by her father, on the basis of irrecoverable power of attorney, but in fact, this plot was already transferred by the owner to one Shri Kishorebhai on 7.2.2005 for consideration of ₹ 13 lakhs. In order to buttress this argument, it was contended that Bhaghyodaya Plaza was never constructed, and Shri Hasmukh Thakkar has filed a letter deposing therein that he had never received any sum from Shri Gopalbhai Shah and Smt.Pareshaben .....

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e, as to why the necessity to execute such type of receipts, in this methodical way, was felt. As far as security of the first loan amount is concerned, the assessee has taken undated cheques from Shri Hasubhai Thakkar. She had also got executed promissory notes. These two sureties were also there in existence. Therefore, in our opinion, the First Appellate Authority has rightly concluded that payment of ₹ 40 lakhs was made by the assessee to Shri Hasubhai Thakkar or his concern. This paym .....

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revealed to the AO that the assessee had made investment in shares of limited companies listed with BSE and NSE. The AO on the basis of details available in DEMAT account, prepared a statement of the assessee s investment of last day of each year. He has annexed this statement along with assessment order. According to the AO, the assessee did not submit any details of purchase value of these shares, therefore, he adopted the value of the shares on the basis of last day transaction, as available .....

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nvestment in shares. 26. On appeal, the ld.CIT(A) has confirmed the addition. The findings of the ld.CIT(A) is worth to note in this connection. 6.2 I have considered the submission of the appellant. As per the Annexure attached to the assessment order, the AO has worked out the total investment of ₹ 24,05,384/- in shares in the name of the appellant, her brother Mit Shah, her father Gopalbhai Shah, her mother Mrs.Pareshaben Shah. In the absence of any details whatsoever given by the appel .....

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ition on account of the investment in shares. As regards the investment in shares as on 31/3/2004, the appellant has not disputed the finding of the AO regarding the number of shares held as on 31/3/2004. For the purpose of unaccounted investment in the shares on the basis of DMAT account, the AO has taken the closing balance of the shares as on 31/3/2004 and subtracted the opening balance of shares as on 1/4/2003. In the absence of the details of purchase and sale of shares given by the appella .....

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orked out the additional income on the basis of the peak theory, no separate addition on account of investment in shares should have been made by the AO, it is to be stated that in the return of income the appellant has disclosed total additional income of ₹ 12.16 Lacs but in the chart of the unaccounted income attached with the return of income, the -appellant has shown the identification of assets against the said additional income as under: Purchase of computer Rs.1,27,000 Investment in .....

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es which are listed with the BSE and NSE is disclosed in the said disclosure. In other words, even on the basis of peak theory, the investment in limited company s shares should also have been included in the total unaccounted income of the appellant. As the appellant has worked out the additional income on the basis of the income or the investments, whichever is higher, and for assessment year 2004-2005, the additional income has been worked out on the basis of investments, the investment of &# .....

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ent the unaccounted investment of the appellant in the various shares of limited companies. In other words, the AO was justified in making addition of ₹ 24,06,389/-on account of undisclosed investment in the shares of listed companies in assessment year 2004-2005. The addition made by the AO is therefore confirmed. 27. The ld. counsel for the assessee submitted that the AO has made additions of the shares which were held by the assessee prior to the year under consideration. In other words .....

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of investment worked out by him is with regard to Smt.Pareshaben Shah. The client ID is 10735254. The balance has been shown at ₹ 13,90,888/-. Against this ID, 56 scrips have been noticed by the AO, in the annexure appended with the assessment order. All these shares have been shown pertained to F.Y.2003-04. The ld. Counsel for the assessee failed to pin point, out of these 56 scrips, which were purchased by this person in earlier years. He merely stated that some of the shares which have .....

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brought to our notice which can suggest this erroneous approach adopted by the Revenue authorities. We, therefore, do not find any merit in this ground of appeal. It is rejected. 30. In the next ground of grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of ₹ 1,45,293/-. This addition was made with the aid of section 2(22)(e) of the Act. 31. Brief facts of the case are that the AO on an analysis of the account of assessee in the company, Manibhadra Trade .....

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Act. 32. The ld.counsel for the assessee at the very outset submitted that the company was incorporated on 1.9.2003. The first balance sheet was prepared on 31.3.2003. The profit of the company has to be determined at the end of the year, and therefore, the accumulated profit is to be worked out on the date of closing of the accounts. In the Asstt.Year 2004-05, there was no accumulated profit before the close of the accounts i.e. 31.3.2004. If it is presumed that the assessee has taken loan from .....

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ble Supreme Court has held that the accumulated profit shall not include the current year s profit. 33. The learned DR, on the other hand, contended that this plea was never raised by the assessee, and this issue has not been looked into by the ld. Revenue Authorities below. 34. We have duly considered rival contentions and gone through the record carefully. The assessee has never raised any plea that the company was incorporated on 1.9.2003. The ld.counsel drew our attention towards page no.11 .....

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