TMI Blog2018 (1) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... s application is not attracted, the Assessing Officer herein had no other option but to set into motion the general provision u/s.148 of the Act after taking cognizance of Prajapatis’ statements binding the firm assessee as per the relevant provisions in partnership law. We thus reject the firm assessee’s first argument hereinabove. We find no reason to concur with the firm assessees’ second argument as well challenging correctness of the impugned protective assessments in light of the abovestated case law starting with G K Consultants (2014 (7) TMI 680 - ITAT DELHI) dealing with an instance wherein no substantive assessment had been finalized. We repeat that this is not the case before us as the Assessing Officer had indeed framed corresponding substantive assessments in partner assessees’ cases (supra) making the very on money additions. The said case law are accordingly distinguished. We accordingly hold that the impugned protective assessment would become substantive in case the Revenue looses its appeals in the above partners’ cases hereinbelow. Third argument that both the lower authorities’ action making the impugned addition in firm’s hands reduces partner assessees’ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), S/Shri Shailesh Keshavlal Patel (partner), Gordhanbhai Patel and Narshibhai Somabhai Patel. Relevant proceedings in all these cases are u/s.147 r.w.s. 143(3) of the Income Tax Act, 1961; in short the Act . The firm assessees six appeals ITA Nos. 93 to 98/Ahd/2014 for assessment years 2005-06 to 2010-11 emanate from the CIT(A)-III, Ahmedabad s common order dated 30.10.2013 passed in case nos. CIT(A)-III/8 to 13/DCIT-CC-2(2)/13- 14; respectively. The assessee raises the following identical substantive grounds in all these six appeals as follows: 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the Order u/s.147 r.w.s. 143(3) of the Income Tax Act and taxing the income of ₹ 6,00,300/- in the hands of the appellant firm. It is submitted that complete details were filed by the appellant at the time of original assessment and there was no failure on the part of the assessee to furnish any details or Return of Income. Similarly no new information has been received by the Assessing Officer under which the reopening can be done. It is submitted that the reopening done u/s.147 and consequential order passed is bad in law as the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 10lacs on 15.12.2015) arises against the CIT(A)-VI, Ahmedabad s order dated 28.01.2014 in case no. CIT(A)-VI/Wd.3(1)/150/12-13. Next assessment year 2007-08 involves Revenue s appeal ITA No.1122/Ahd/2014 arising against the very CIT(A) s order dated 18.02.2014 in case no. CIT(A)-VI/Wd.3(1)/151/12-13 reversing Assessing Officer s action making on money additions of ₹ 23.63lacs qua sale of shops in Sahyog Plaja and ₹ 46.57lacs paid alongwith ₹ 9.60lacs received in purchase and sale of Lapkaman Project and Lapkaman land respectively. This follows assessee s cross objection thereto CO No. 81/Ahd/2015. Assessment year 2008-09 comprises of the assessee s appeal ITA No.394/Ahd/2015 directed against the CIT(A)-10, Ahmedabad s order dated 08.01.2015 passed in case no. CIT(A)-10/WD- 3(1)/43/14-15 involving the following substantive grounds: 1.1 The order passed u/s.250 on 8-1-2015 for A.Y.2008-09 by CIT(A)-10 Abad, not only upholding the additions of Rs.l,15,20,000/-but making enhancement by ₹ 9,60,000/- is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10, 2006-07 and 2007-08 respectively seek to challenge validity of reopening as confirmed in the corresponding lower appellate proceedings. Mr. Divatia is fair enough at the outset in pointing out that the assessee no more wishes to press for his above second cross objection CO No. 80/Ahd/2015 for assessment year 2006-07 as the Revenue s appeal ITA No.627/Ahd/2014 stands dismissed since involving low tax effect (supra). 4. The Revenue and third assessee Shri Gordhanbhai B Patel have instituted ITA No.2455 CO No. 281/Ahd/2014 against the CIT(A)-XX, Ahmedabad s order dated 30.06.2014 in case no. CIT(A)-XX/255/13-14 inter alia reversing Assessing Officer s action making on money additions of ₹ 23,28,500/- paid in cash for Lapkaman project and ₹ 62,40,000/- received in cash for Lapkaman Lands; respectively after upholding validity of re-assessment forming subject matter of challenge in latter s cross objection hereinabove in assessment year 2007- 08. 5. Lastly come fourth assessee Shri Narshibhai Somabhai Patel s two appeals ITA Nos. 1357 1358/Ahd/2015 for assessment years. 2007-08 2008-09, arising against the CIT(A)-10, Ahmedabad s separate orders dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial complex developed by 'Sahyog Developers' are recorded. Sahyog Developers is a partnership firm of Shri Shailesh K. Patel and Shri Dhaval D. Prajapati. Shri Shaval D. Praiapati belongs to the family of Shri Govindbhai Mulchand Prajapati being son of deceased brother. During the search assessment proceedings in the case of 'Shri Govindbhai Mulchand Prajapati and Family' the assessee was requested to explain the contents of the 'note book' (Annexure BS-10). Assessee in its reply vide letter dated 24.10.2011 has submitted explanation of the same. As per the explanation, submitted by Shri Govindbhai Mulchand Prajapati following receipts have not been accounted for in the books of 'Sahyog Plaza'. The assessment year wise details of unaccounted receipts o Sahyog Developers received an account of sale of shops at 'Sahyog Plaza' are as under. A.Y. Unaccounted cash admitted by Govind M. Prajapati Group being 50% partner in 'Sahyog developers' Receipts Unaccounted cash by 'Sahyog Developers' Total receipts 2005-06 638,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is evident from a combined perusal of the case records that the Assessing Officer recorded similar satisfaction of taxable income having escaped assessment in second assessee / partner s case as well in assessment years 2006-07 to 2009-10. The said first assessment year no more requires any mention as we have already dismissed assessee s CO No.80/Ahd/2015 as not pressed (supra). Next assessment year 2007-08 contains the Assessing Officer s following reopening reasons: .... As per the information received from A.C.I.T. Central Circle - 2(2), Ahmedabad vide no. ACIT/DC-2(2)/Passing Info./2011-12 dtd. 13.03.2012, it is noticed that search action was carried out at the premises of Shri Govindbhai Mulchand Prajapati on 08.12.2009 and various docuements were seized. As per BS10(Note book) seized from premsies of Govindbhai M. Prajapati at 228-B, M. K. House, Nr. Visat Petrol Pump, Sabarmati, Ahmedabad, details of receipts on account of sale of shops at Sahyog Plaza a commerical complex developed by Sahyog Developers were recorded . Sahyog Developers is a partnership firm in which Shri Shailesh K. Patel and Shri Dhaval D. Prajapati are partners. Shri Dhaval D. Prajapati belongs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he information received from the ACIT Cen. Cir 2(2), Ahmedabad vide letter No. ACIT/DC-2(2)/Passing lnfo./2011-12 dtd. 18.05.2012, in the case of Shri Govind Mulchand Prajapati. It is found that land was purchased by Shri Vijay Govindbhai Parajapati-Sabarmati, Ahmedabad, having 10% share, and other co-owners, including Shri Shailesh Keshavlal Patel- Sabarmati, Ahmedabad, having 20% Share in the land. The said land was sold. It was found that cash has also been received on sale of this land at village Lapkaman. On examination of the submission filed during the assessment proceedings it has been found that Shri Vijay G. Prajapati has received following amounts aggregating to ₹ 62.40 Lacks as cash consideration over and above documented price for the sale of the Lapkaman Land. Annexure Page No. Date Noting in Seized Annexure Decoded Amount Annexure BS-8 page-2 20.3.2007 4800=00 4,80,000/- 03.05.2007 18500=00 18,50,000/- 15.10.2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the said another partner was already facing Section 148 proceedings leaving no requirement to tax it once again. The Assessing Officer rejected the same in his assessment order dated 26.03.2013 to make protective addition in the firm s hands qua the remaining 50% shares in unaccounted income of ₹ 6,38,000/- i.e. ₹ 12.76lacs and ₹ 75,394/- / 2 = ₹ 37,694/-; respectively. All this followed similar protective additions being made in latter five assessment years 2006-07 to 2010-11 as narrated hereinabove. 10. This firm assessee preferred its separate appeals in all six assessment years. It raised an identical legal plea first of all that the above re-opening was not sustainable as it had filed all the relevant details in corresponding regular returns submitted during original assessments. The CIT(A) s common order under challenge declines the same in page 3 para 5 after holding that the Assessing Officer had rightly initiated the impugned re-opening as per the relevant information collected during search in question indication suppression of sale amount as well as expenditure regarding shops sold in Sahyog Plaza . He thereafter approves assessment fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner has accepted the income at 50% by disclosing in his Return of Income, being the tax and interest, accepting the order and not filing appeal, the protective addition made in the firm be deleted. 9. Since it was argued by the appellant that 50% of the unaccounted income has been claimed by Shri Shailesh K Patel, who is a partner of appellant firm, enquiries were made in this regard from ITO, Ward-3(Tj. 'He sent his report vide letter dtd. 30.09.2013 in which he stated that 2. In this case, the assessments for A.Y. 205-06 to 2007-08, orders u/s. 143(3) r.w.s. 147 have been passed and additions in A.Y. 2005-06 2006-07 and 2007-08 of ks.6,38,000/-, ₹ 25,88,472 and ₹ 23,63,400/- respectively were made, considering it to be 50% of share received by the assessee Shri Shailesh K. Patel as on money from Sahyog Developers. 3. The assessee has filed appeal before the ld. CIT(A)-VI, Ahmedabad against the all the three assessment years. 4. The assessment for A.Y. 2008-09 and 2009-10 are re-opened by issue of notices u/s. 148, which are pending. In respect of A.Y. 2010-11, no information was received from the DCIT, CC-2(2), Ahmedabad and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 are absolutely similar in nature. As such both the partners have accepted that On money was received by them and this is not the income of the firm M/s. Sahyog Developers. However, the Assessing Officer has made the addition on protective basis. It is submitted that there is no material or evidence to make such protective addition as there are no indications in the diary or papers seized that On money is received by the firm. None of the partners have stated that unaccounted income belongs to the firm. On the contrary the partners have accepted 50% income in their individual assessment. Therefore, in absence of any material or evidence whatsoever there is no basis or justification to make even protective addition in the hands of the Firm. As one of the partner has accepted the income at 50% by disclosing in his Return of Income, being the tax and interest, accepting the order and not filing appeal in other partner's case, the re-opening/addition have been already made, therefore there is no question of now making the protective addition in the firm same may be deleted. 11. In view of report of ITO, Ward-3(l), Ahmedabad as mentioned above it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 3,22,500/- and ₹ 1,15,20,000/- respectively. Last assessment year 2009-10 saw on money addition of ₹ 24.90lacs in respect of Sahyog Plaza commercial projects only. The Assessing Officer placed a very strong reliance on Prajapatis statements to make the above impugned additions in partner assessee s hands on substantive basis in all these assessment years. 12. This partner assessee preferred his appeals. He raised legal plea first of all challenging validity of reopenings in question in all these three assessment years. The CIT(A) followed his reasoning in assessment year 2006-07 rejecting similar arguments as under: 3.4. In this case appellant had filed return of income on 07-04-2006 admitting share income from partnership firm M/s Sahayog Developers of ₹ 95,820/-. The return of income was processed u/s 143(1). Notice u/s 148 was issued on 29-03- 2012 and was served on 30-03-2012. The reasons recorded were provided to the appellant vide the letter dtd. 22-11-2012. Objections raised against the re-opening were disposed of by the A.O. vide his order dtd. 03-01-2013. Thus no assessment order u/s 143(3) had been parsed prior to the issue of notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act stands vitiated. 15. For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notices did. 7th Oct., 2009 issued by the respondent under s. 153C of the Act are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs. In the instant case also the documents seized in the other case did not belong to the appellant nor were they in his handwriting. Therefore in the light of the above decision the contention of the ld. A.R. that A.O. must have proceeded u/s 153C has to fail. 3.6 The second contention of the A.R. is that invoking the provisions of Sec. 147 was not in accordance with law. lie contended that the 'On Money noticed during the search was received by M/s Sahyog Developers, which plotted the scheme of Sahyog Plaza; the material relied upon the A.O. was a note book marked as 'BS-10' and the statements of Sim Shailesh Prajapati and Shri Govindbhai Prajapati; even the said material did not show that the appellant had received any 'On Money' and therefore the material could not have constituted the basis to form belief. I have considered the contentions. As seen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant against the re-opening. In the letter dtd. 11-01-2013 enclosed to the remand report appellant simply requested to accept the income returned in the original return of income. On perusal of the question no. 16 of the statement of Govind Prajapati it is seen that he stated to have received ₹ 23.28 lakhs towards his 10% share in Lapkaman land. However, there was no mention of the appellant having paid or received 'On Money' in connection with the land. As seen from the sale-deed of lapkaman land, the land was purchased on 17-07-2006 and was sold on 24-01-2008. Even presuming that on-money was received by the appellant, its assessability is to be considered in the succeeding A.Y. 2008-09 [and not in the year under consideration]. Copy of the seized material relied on by the A.O., i.e. Annexure BS-8 was not furnished to the appellant either during assessment or during appellate proceedings. Further, there is no basis as to how the sum of ₹ 9.6 lakhs was arrived at as pertaining to the year under consideration. Hence, impugned additions of ₹ 46.57 lakhs ₹ 9.6 lakhs are not sustainable. They are deleted. These grounds of appeal are allowed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search assessment procedure forms a complete code in itself excluding operation of the normal reopening provision enshrined u/s.147 r.w.s. 148 of the Act. Case law ACIT vs. Shamsundar Laxman Jagtap Ors. ITA No. 1278, 1333 1334/Pune/2013 dated 21.08.2015 quoting hon ble apex court s decision in Manish Maheshwari vs. ACIT [2007] 289 ITR 349 (SC) that lack of a proper satisfaction u/s.158 BD (pari materia to Section 153C now) renders the entire assessment invalid. 17. Mr. Talati s next argument is that both the lower authorities have gravely erred in making protective assessments in firm assessee s cases not sustainable in the eyes of law as held in G K Consultants Ltd. vs. ITO ITA No. 1502/Del/2013 decided on 27.06.2014, Ketan V Shah vs. ACIT ITA No.2321 2322/Mum/2013 decided on 26.06.2015 and CIT vs. Durgawati Singh 234 ITR 249 (Allahabad). He contends that an Assessing Officer can indeed frame a protective assessment but appellate authorities have to confirm additions on substantive basis only. 18. Mr. Talati s third vehement contention is that both the lower authorities have erred in taxing the firm assessee qua 50% of the Sahyog Plaza on money addition amount as the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2009 on the issue of binding nature of a partner s general service statement, CIT vs. Umang H. Thakkar Tax Appeal No.1971/2009 dated 18.10.2011 dealing with on money addition issue; is strongly relied upon both for quashing reassessment as well as for deleting the remaining Lapkaman on money addition on merits. 20. Learned Departmental Representative draws strong support from both the lower authorities action initiating Section 148 proceedings qua both Sahyog Plaza as well as Lapkaman on money additions. He pleads that Prajapatis statements during search admitting unaccounted payments/receipts in both Sahyog Plaza as well as Lapkaman formed sufficient material for the Assessing Officer to reopen these cases u/s.148 of the Act. Mr. Singh submits that both the above Prajapatis had carried business in firm s name. It is very much unlikely that the partner assessee did have no knowledge or concurrence qua the same. Mr. Singh vehemently contends that it is humanly not possible that only a single partner / a co-owner collects or pays on money qua the very parcel of commercial complex or land without knowledge of the remaining partners / co-sharers. He quotes case law Mrs. Malini R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter. We find the same to be squarely applicable herein as firm assessee s partner carried business in its name in developing Sahyog Plaza commercial complex. We further find that the twin conditions in Section 184 of the Act duly fulfilled in facts of the instant case. We have with us a copy of the above partnership deed specifying 50% share each of the above two partners. We thus hold that both the lower authorities have rightly assessed the firm assessee qua the impugned on money amounts pertaining to Sahyog Plaza shops in assessment years 2005-06 to 2010-11 in principle as made in the course of assessment and affirmed in lower appellate proceedings. 22. We now come to firm assessee s first argument that the impugned reassessment are not sustainable since hit by the non obstante clause in Section 153C (1) (supra) expressly excluding operation of Section 147/148 in case of a third person other than the searched assessee. Mr. Talati seeks to treat the firm assessee as a third person. We see no merit in the instant argument. Section 153C(1) of the Act before its amendment by the Finance Act 2015 w.e.f. 01.06.2015 provided for its application only if any money, bullion, jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t plea challenging correctness of Section 148 proceedings already stands adjudicated in firm assessee s cases in Revenue s favour. We further quote Section 4 of the above partnership law (supra) making it clear that a partnership is a relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all. Learned counsel fails to dispute application of the said law in the instant facts. We thus observe that Prajapatis search statement formed sufficient tangible material for the Assessing Officer to issue Section 148 notices in all these assessment years from 2007-08 to 2009-10. Case law of Ratna Trayi Reality (supra) holding pre-existence of tangible material before forming reasons to believe of escapement of taxable income from being assessed is distinguished accordingly. 26. Mr. Divatia s next argument inter alia alleging that both the lower authorities have not afforded him cross examination of the above Prajapatis is also without any merit. It is evident that the said Prajapatis search statements had never claimed Shri Patel to have collected or paid any on money. It further transpires that the relevant incriminating materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable preponderance of probability that the impugned on money has been proportionately received by all the co-owners to the extent of their respective shares. The assessee s instant argument is therefore rejected. 28. We now advert to the relevant case law. We have already narrated the relevant citations. We find that hon ble jurisdictional high court s decision in Mohmed Juned Dadani case does not apply in facts of the instant case since the Assessing Officer therein had initiated Section 148 proceedings for X reason. He thereafter framed consequential re-assessment making Y addition. Hon ble jurisdictional high court quashed reopening in such circumstances. We make it clear that the Assessing Officer had in fact made addition on X issue as well hearing forming the reopening reason. The said case law is therefore distinguished. We proceed further to notice that the co-ordinate bench order in Darji s case (supra) upholding on money addition in one of the co-owner s hands instead of all of them is also not applicable herein as the quantum of on money herein is the relevant issue instead of assessment thereof. We reiterate that we have invoked preponderance of probability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s cross objections CO No.81 10/Ahd/2015 challenging validity of reopening in assessment years 2007-08 2009-10 respectively in view of our detailed discussion in preceding paragraphs. 32. Next assessment year 2008-09 involves assessee s appeal ITA No.394/Ahd/2015. Its only substantive ground on merits seeks to reverse both the lower authorities action making on money addition of ₹ 1,15,20,000/- pertaining to Lapkaman land based on the incriminating evidence in question. The same lead to decoding of the relevant on money amount of ₹ 6,24,0000/- wherein the instant assessee s share was 20% coming to ₹ 1,15,20,000/- as the remaining ₹ 9.6lacs had been added in assessment year 2007-08. The CIT(A) therefore takes note of his order in said earlier assessment year to enhance the above addition to the tune of ₹ 9.6lacs as he had held therein that this sum ought to have been added in the impugned assessment year since the relevant transaction took place on 24.01.2008. Learned counsel strongly argues that the lower appellate authority has erred in making the above enhancement. He however fails to dispute the CIT(A) s jurisdiction to be co-termin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k on Revenue s former substantive ground. There is no dispute that the Assessing Officer initiated Section 148 proceedings based on incriminating evidence as well as Prajapatis search statements. We notice that this assessee pleaded in the course of assessment that the said Prajapatis were not allowed to be cross examined. The Assessing Officer produced the said deponents in the instant assessee s case on 24.03.2014 who once again admitted on money qua his share. Learned counsel therefore vehemently contends that such an extrapolation is not permissible so as to make the impugned on money addition in all co-owners cases. We find no merit in the instant argument in view of our detailed discussion in preceding paragraph quoting preponderance of probability in such joint ownership cases wherein it is humanly impossible that only one copurchaser or co-seller pays or collects on money qua 10% share only without participation of the remaining joint owners. We accordingly reiterate our said reasoning herein as well to accept Revenue s arguments seeking to revive the impugned on money addition of ₹ 23,28,500/-. Its former substantive ground is accepted. Appeal ITA No.2455/Ahd/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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