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TMI Blog2021 (8) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of appeal in IT(SS) A No.194 & 195/Ind/2017 "On the facts and in the circumstances of the cases the Ld. CIT(A) erred in deleting the addition of Rs.4,62,66,000/- made by the Assessing Officer on account of undisclosed investment u/s 69 of the Income Tax Act, 1961 in purchase of land properties." Whereas, the assessee has raised following grounds of appeal in CO No.02 & 03/Ind/2019 1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in holding that the additions could have been made in the hands of the cross objector even on the basis of material seized from the possession of another person. 2. The impugned seized material was neither found and seized from the cross objector, nor mentioned the name of the cross objector and nor was written by the Cross objector therefore the Ld. CIT(A) ought not to have upheld the creditability and the evidentiary value of the same in the case of the cross objector. 3. The Cross objector craves leave to add, alter modify, substitute and/or withdraw all or any of the grounds of appeal at any stage of the appellate proceedings." 4. Brief facts of the case are that the assessees formed a partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks for purchase of land at Mayakhedi. 5. Felt aggrieved, the assessees filed the appeals before ld. CIT(A) who after considering the facts, material on record and submissions deleted the addition. The relevant findings of the ld. CIT(A) is reproduced hereunder: "4. I have gone through the assessment order and the detailed submissions made by the appellant. The appellant has submitted that the contents and data of documents LPS - AV-1 on the basis of which addition has been made, were recovered from the pen drive of Shri Ashok Vaishnav and not from the possession of the appellant. The appellant has challenged the reliance placed by the Assessing Officer on the said seized material and also "'on the statements of Shri Ashok Vaishnav. As the appellant has separately challenged this issue through ground no. 2 it will be dealt with while dealing with the said ground. 4.1 The appellant has submitted that the land admeasuring 3.93 hectare was purchased by the firm M/s RNR Devcon for Rs. 350 Lacs vide registered sale deed and complete details of the persons from whom the said property was purchased by the firm are available in the registered sale deed. The 5. It is also submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raunak Maru were the two partners in M/ s. RNR Devcon having 50% shares each. The firm purchased a plot of land admeasuring 3.93 hectares of land for a consideration recorded in the books at Rs. 3. 8] crores, during F. Y. 2009-10. The actual consideration for this purchase was Rs. ] 3. 06 crores as found out from documents seized during the course of search (L.P.S. - AB-l) as well as on the basis of statement recorded during search. [ii] The above land was sold for Rs.22.5 crores in two trenches during F.Y.2011- 12 and 2012-] 3. The total sale consideration was Rs. 22.50 crores. The first sale was of 1.62 hectares as per agreement dated 14.2.2012, when the firm M/ s. RNR Devcon sold the land to M/ s. Veekay Infracom Pvt. Ltd. Thereafter as per partnership deed dated 31.03.2102 two new partners Shri Naresh Kakiuani and Shri Jainarayan Kakuiani were admitted as partners. The capital gain of Rs. 74,21,668/ - on sale of 1.62 hectares of land was offered in the hands of the firm as capital gain for A. Y.2012-13. (iii) Thereafter as per deed of retirement dated 25.07.2012, Shri Rajul Bhargava and Shri Raunak Maru retired from the firm with Shri Naresh Kakwani and Shri Jainarayan K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO? or a BOI whether incorporated or not. There are no words in the present act which empower the ITO or give him an option to tax either the AO? or its members individually or for that matter to tax the firm or its partners individually. If it is the income of the AO? in law, AO? alone has to be taxed; the members of the AO? cannot be taxed individually in respect of the income of the AO?s. Consideration of the interest of the revenue has no place in this scheme. When s. 4( 1) of the present Act speaks of levy of income tax on the total income of every person, it necessarily mean the person who is liable to pay income tax in respect of that total income according to law." 6.1 Section 69 governs the taxability of unexplained investments and it is provided that where the assessee has made investments which are not recorded in the books of accounts and no satisfactory explanation is offered about the nature and source of the investments, the value of the investments may be deemed to be the income of the assessee. In the instant case the investment has been made in the name of M/ s RNR Devcon and also recorded in the books of accounts of the firm and therefore, the addition was req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of the partners as has also been held by the Hon'ble Supreme Court in ITO V/s CH. Atchaiah (1996) 218 ITR 0239 explaining the provisions of section 2(13), 3 and 4 that if it is the income of the AOP in law, AOP alone has be taxed and that the members of the AOP cannot be taxed individually in respect of the income of the AOP. The Assessing Officer did not consider the fact that investment in the impugned land was made by the partnership firm. The impugned land was registered in the name of the partnership firm. The said investment was recorded in the books of the firm. Subsequently, when part of the land was sold, the resultant profit was offered in the hands of the firm, which has been assessed by the department. No notings of details of any cash payments were found in the search. Therefore, there is no basis of making the addition in the case of the assessees. The addition made is purely on surmises and conjectures. Further, the assessees have filed the application before the ITSC for settlement of their cases in the first round of litigation. The PCIT (Central) Bhopal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the interpretation of provision of section 10(2A) clarifies that income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of the partners. Further, the Assessing Officer failed to consider that the investment in the said land was made by the partnership firm and also the land was registered in the name of the partnership firm. The said investment was recorded in the books of the firm and when part of the land was sold, the resultant profit was offered in the hands of the firm, which has been assessed by the department. We find that there is no noting found in any seized material that the alleged payment in cash was made by the assessee partner. Therefore, the addition made is purely on surmises and conjectures as there is no basis for making the addition in the case of the present assessees. Thus, the addition on account of alleged additional investment made in the said land ought not to have been made in the hands of the partners i.e. present assessees. We also find that the addition made by the Assessing Officer is contrary to the findings of the ld. PCIT(Central) in the assessee's own case as the assessees ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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