Assistant Commissioner of Income-tax Vs Shroff Krishnarajasetty Satheesha (ITAT Bangalore)
ITAT Bangalore held that addition under section 69B of the Income Tax Act for unexplained investment solely on the basis of the document that didn’t contained name of the assessee is unsustainable as the same is outside the purview of definition of section 153C(1)(a) & (b).
Facts-
A search action u/s 132 of the Act was conducted in the case of M/s. C. P. Exports. During the course of search proceedings some documents were found and seized related to the purchase of property by the assessee from Sr.E. Jawahar, partner of M/s. C.P.Exports after recording satisfaction in the file of M/s.C.P. Exports, the proceedings u/s 153A of the Act had been initiated that the seized documents were belonged to the assessee and the information contained therein relates to the assessee. The proceedings u/s. 153C of the Act were initiated against the assessee.
Post inquiry and reply, AO made addition u/s 69B of IT Act for cash payments observed by him over and above the stamp duty of the property at Rs. 1,00,57,500 and determined the income u/s 115JBE of Rs. 1,22,57,500.
CIT(A) concluded that this is a case where the provisions of section 153C of the Act couldn’t have been applied. Being aggrieved, revenue has preferred the present appeal.
Conclusion-
The sole basis for making addition by the A.O. u/s 69(B) of the Act for unexplained investment is based on the page 161 marked as A/CPE/ 17-18/33, but it cannot be said that this document belongs or pertains to / or any information contained therein relates to the assessee, therefore, the same does not come within the purview of definition of section 153C(1)(a) & (b) of the Act, because there is no name of assessee . In view of the foregoing reasons, we do not find any infirmity in the order of the CIT(A), the same is upheld. It is ordered accordingly.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the Revenue against the order passed by the CIT(A)-2, Panaji, dated 28th July, 2022. The relevant assessment year is 2017-2018. The revenue has raised following grounds:-
“1.The order of CIT(A) is opposed to law and facts of the case.
2. The Ld.CIT(A) has erred in not appreciating the fact that the proceedings u/s. 153C of the Act in the assessee’s case is valid as the seized material are co-related to each other and in fact a continuity of one another in sequence.
3. The Ld.CIT(A) has erred in holding that the assessment order passed u/s. 1 53C rws. 143(3) of the Act is unsustainable when incriminating materials were found against the assessee and satisfaction note was recorded.
4. The Ld.CIT(A) has erred in deleting the additions on the ground that there was no incriminating material found and seized whereas during the search proceedings the documents found in possession of searched person clearly shows the transactions done with assessee.
5. The Ld.CIT(A) has erred in not appreciating the fact that the very loose sheet, contained notings of the cheque transaction and cash transaction. Hence accepting the cheque transaction to be genuine while rejecting cash transaction is erroneous.
6. The Ld. CIT (A) has erred in not appreciating the fact that mere non-appearance of the assessee’s name on a particular page or sheet of the seized material does not amount to the material being irrelevant and not pertaining to the assessee.
For these and such other grounds that may be urged at the time of hearing with the plea that the orders of the CIT(A) may be set aside and that assessment order may be restored.”
2. The brief facts of the case are that the assessee is a partner in a firm filed his return of income u/s 139(1) of the I.T.Act for the impugned assessment year on 25.10.2017 declaring income of Rs.35,28,450 and agricultural income of Rs.2,29,954. A search action u/s 132 of the Act was conducted on 26.04.2017 in the case of M/s. C.P.Exports, Plot No.12, KIADB Industrial Area, Kushalnagar, Kudlure, Kodagu. During the course of search proceedings some documents were found and seized related to the purchase of property by the assessee from Sri.E.Jawahar, partner of M/s.C.P.Exports on 31.01.2020 after recoding satisfaction in the file of M/s.C.P.Exports in which proceedings u/s 153A had been initiated that the seized documents were belonged to the assessee and the information contained therein relates to the assessee and having bearing on the determination of total income of the assessee, the satisfaction along with the material on which the satisfaction was based, was sent to the Income-tax Officer, who had jurisdiction over the assessee, which was received by the jurisdictional A.O. on 03.02.2020. The jurisdictional A.O. after recording satisfaction that the information contained therein relates to the assessee and has bearing on the determination of the income of the assessee. Proceedings u/s 153C of the Act were initiated and notice u/s 153C was issued on 11.02.2020. In response to the notice u/s 153C of the Act, the assessee filed return of income on 16.03.2020 declaring the same income as declared in the original return filed u/s 139(1) of the Act. Thereafter, statutory notices were issued to the assessee. In response to the notices, the AR of the assessee appeared and filed written submissions. The copy of the seized materials were also provided to the AR of the assessee. During the course of search proceedings, three documents were found and on that basis of proceedings u/s 153C of the Act was initiated. The first document is Annexure A/CPE/ 17-18/25 (page No.36 to 39). It was a copy of sale agreement dated 17.03.2016 between Sri.E.Jawahar and the assessee for sale of property for a sum of Rs. 1,69,57,500 for 8 acre 37 guntas (2 acre + 3 acre 32 guntas + 3 acre 0.05 guntas) land bearing Sy.No.26/1, Sy No.26/2 and Sy No.27/3 at Manchadevanahalli Village, Kasaba Hobli, Periyapatna Taluk, respectively. The next document was marked as A/CPE/ 17-18/25 (page 29-35). It was a sale deed dated 09.04.20 17 executed between Sir.E.Jawahar and the assesee. The sale consideration as per sale deed was
Rs.49.00/- lakhs and the payment was shown as under:-
On 03.03.20 16 Rs.5,00,000
On 04.06.20 16 Rs.34,00,000
On 19.11.2016 Rs.10,00,000
Stamp duty paid Rs.3,26,280.
The next document marked as A/CPE/17-18/33 page 161. These documents were seized from the business premises of M/s.C.P.Exports at KIADB Industrial Area. The third document marked as A/CPE/ 17-18/33 page 161 is the ledger copy of the account of sale of land at Manchadevanahalli for 9 acres, in which debit and credit entry hsa been made for cash and cheque and two other transactions interest and commission are appearing . From the above documents, the A.O. inferred that the documents were related and pertains to the assessee and having bearing of the determination of the total income in the hands of the assessee. The AO noted from the sale deed and sale agreement that the assessee has got registered the property at less than the value fixed in the sale agreement, whereas, the assessee had paid on-money of Rs. 1,20,57,000 over and above the registered consideration to Sri.E.Jawahar. A statement was also recorded from Sri. E. Jawahar (vendor of the property question answer No.59, 60,6 1 and 62) on the date of search in which he had accepted that out of Rs.1,69,57,500, an amount of Rs.1,20,57,500 was received in cash and not recorded in the books of account and the balance amount of Rs.49 lakh was received in cheque.
3. In the return of income for assessment year 2016-2017, the assessee had offered Rs.20 lakh as additional income. The A.O. issued notice u/s 142(1) of the Act on 02.02.2021 for explaining the source for the cash payment totaling to Rs.1,00,57,000. In response, the assessee filed reply on 02.03.202 1 and various case laws, which read as follows:-
4. The written submission filed by the assessee was examined by the A.O., but the A.O. did not accept the same. During the course of assessment proceedings, the assessee sought for cross-examination of Sri.E.Jawahar, which was arranged by the A.O., but the assessee did not appear on the scheduled date & time. Thereafter, the A.O. recorded the statement of Sri.E.Jawahar on 12.03.2021. During the course of assessment proceedings, the assessee filed an affidavit executed on 13.03.2020 by Sri.E.Jawahar, which was notarized by Sri.S.K.Manjunatha, Advocate and Notary, Kushalnagar showing the transaction has been done and paid Rs. 69,00,000/- only . In this regard, during the course of recording of statement of Sri.E.Jawahar, he stated that – yes, the affidavit was signed by me in a hurry and signed it in my office without reading the contents, but took the precaution of taking a copy of the same before Sri.Sateesha left. When I went through the contents of the affidavit as evidenced by my copy, I realized that Sri Satheesha has mentioned only an amount of Rs.69,00,000 as the total consideration as against Rs. 1,69,57,500. I immediately whatsapped him that the affidavit was wrong on 18.03.2020. On 19th March, 2020, I consulted my advocate and I executed a rectification affidavit on the same day and whatsapped the same to Sri SK Satheesha on 20.03.2020. Copy of the whatsapp conversion is provided to the Assessing Officer. The facts were stated in full in the rectification affidavit and the rectification affidavit was filed by Sri.E.Jawahar. A copy of the statement recorded by Sri.E.Jawahar was provided to the assessee. In response, the assessee filed reply on 19.03.2021.. The copy of cash register contents at page 161 of A/ CPE/ 17-18 which is part of a register found in the premises of CP Exports and the scanned copy is as under:-
5. On perusal of the above register, the A.O. observed that the name of the assessee is not mentioned in the register but there are too many similarities between the transactions mentioned in the sale agreement and the sale deed which have been accepted by the assessee. He further noted that in the sworn affidavit of Sri.E.Jawahar, he has accepted that the property has sold at Rs. 1,69,57,000 as per the rectification affidavit filed, but not at Rs.69 lakh. It was also noted from the submissions that the vendor of the land has also offered before the Settlement Commission, Bench-I, Mumbai in his case and admitted the capital gain of Rs. 1,20,57,000 in cash and paid tax thereon with quoting the name of the purchaser of the property. It was also noted by the Revenue Authorities that Sri.E.Jawahar was maintaining records of his personal transaction in the register which were maintained in the premises of M/s.C.P.Exports, in which he is a partner. The A.O. further noted from the contention of the assessee that the land was full of encumbrances resulting and reduction of the sale price and that the agreement required conveyance within 5 months which did not happen rendering it void and that Sri E.Jawahar could not ensure transfer of other land which is situated between the pucca road and the impugned land and that the selling price was renegotiated is not supported by any evidences and has been denied by Sri.Jawahar. The A.O. further observed that Sri.Jawahar was also denied that there was an arrangement to transfer some other land and stated that one side of the boundary of the impugned land was the land belonging to the assessee and access to the property was easy to the assessee. During the course of assessment proceedings, the assessee also relied on various case laws, which was not accepted by the A.O. He made addition u/s 69B of the I. T. Act. for cash payments observed by him over and above the stamp duty of the property at Rs. 1,00,57,500 and determined the income u/s 1 15JBE of Rs. 1,22,57,500.
6. Aggrieved by the order of the A.O., the assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee has filed a detailed written submissions. The learned CIT(A) called for remand report from the A.O. The A.O. submitted his nremand report on 22.06.2022 vide letter dated 23.06.2022 and the same was also conveyed to the assessee for filing rejoinder. In response, the assessee filed his rejoinder on 29.06.2022. The learned CIT(A) after considering the detailed submissions and remand report submitted by the A.O, allowed the appeal of the assessee by observing as under:-
