Jones Ganj, Ajmer v. Commissioner Of Income Tax, Udaipur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 145/ 2003 GANPAT SINGH PALARIA, Jones Ganj, Ajmer ----Appellant Versus 1. Commissioner of Income Tax, Udaipur. 2. The ACIT, Circle-2, Ajmer. ----Respondent __________________________________________ For Appellant :Mr. P.K.Kasliwal For Respondents : Ms. Parinitoo Jain __________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE DINESH MEHTAJudgment 07/12/2016 1.By way of this appeal, the appellant has challengedthe judgment and order of the Tribunal whereby the Tribunalhas partly allowed both the appeals preferred by the assesseeand the department and dismissed the cross objections filed bythe assessee. 2.This court while admitting the appeal on 18.08.2004 framed the following substantial question of law: “Whether the Tribunal was justified in law intreating the investment of Rs.1,50,000/- andprofit of Rs.2,28,750/- on sale of landpurchased from Phool Chand Ubana asundisclosed income without examining theownership, purchase deed, sale agreement,registry of land and held that burden has notbeen discharged by the appellant, and whether such a conclusion is perverse andnot sustainable in the eye of law?” 3.The facts are that a search and seizure operationwas conducted at the residence of assessee on 20.01.1998.Various incriminating papers and documents were found andseized from the residence of assessee. Cash amounting toRs.22,800/- and jewellery valuing Rs.74,059/- were found athis residence. Valuable consisting of IVP KVP and FDRs etc.valuing Rs.1,69,205/- were found and seized from hisresidence. 4.Assessee was employed with Indian Railways andwas also engaged in property business either singly or togetherwith his brother namely Bhagwan Singh Palaria and his brother-in-law Shri Tarachand Banasia. According to the AO, most ofthe seized documents contained papers related to his propertybusiness. Certain papers/documents indicating his propertydealings have also been found at the residences of ShriBhagwan Singh and Shri Tarachand Banasia and have beenseized from there. Shri Ganpat Singh in his statement recordedon 21.01.1998 i.e. a day after the search accepted that he hasbeen doing property dealing business both on commission basisand also purchasing land and then selling it. He further statedthat he has been doing this business for last about 8 years.During the course of proceedings, he is admitted to havepurchased one half bigha land in the name of his wife at GulabBari for Rs.5.50 lakhs, which according to the AO tallied withpurchase of land from Shri Phoolchand Ubana as per document at page No.107 Annexure A-16. The assessee had not filed anyincome tax return prior to search, and no regular books ofaccounts were maintained by him. The assessee was asked bythe AO to get audit completed under section 142(2A) andsubmit the report by 30[th] June, 2000. However, assessee didnot submit report under section 142(2A) by the 30[th] June,2000. 5.The Assessing Officer has assessed income for theblock period at Rs.1,1985,197/-. However, the CIT (Appeals)has partly allowed the appeal in favour of the assessee, againstwhich the both, the assessee and the department havepreferred appeals before the Tribunal. The assessee filed crossobjection also. 6.Counsel for the appellant, Mr. P.K. Kasliwal, hasmainly contended that there is no documentary evidence foundor seized from the assessee showing that he had invested anamount of Rs.1,50,000/- for purchase of property. The AO hasarbitrarily taken the figure by misreading a document seizedduring the search and has treated as investment, whichcontains entries as under: Rs.10,000/-01.07.1995givenRs.40,000/-03.07.1995givenRs.1,00,000/-08.01.1996given 5.The Assessing Officer has assessed income for theblock period at Rs.1,1985,197/-. However, the CIT (Appeals)has partly allowed the appeal in favour of the assessee, againstwhich the both, the assessee and the department havepreferred appeals before the Tribunal. The assessee filed crossobjection also. 6.Counsel for the appellant, Mr. P.K. Kasliwal, hasmainly contended that there is no documentary evidence foundor seized from the assessee showing that he had invested anamount of Rs.1,50,000/- for purchase of property. The AO hasarbitrarily taken the figure by misreading a document seizedduring the search and has treated as investment, whichcontains entries as under: Rs.10,000/-01.07.1995givenRs.40,000/-03.07.1995givenRs.1,00,000/-08.01.1996given 7.Learned counsel for the appellant submits that thereis nothing on record except above entry on the loose paperdocument Exhibit A-1, seized from the assessee. 8.Ms. Parinitoo Jain, counsel for the department hastaken us to the order of the Assessing Officer and tried tojustify her contention. The Assessing Officer has held as under: “Regarding land purchased from PhoolChand same modus operandi has beenadopted. The land was purchased andpossession was taken from Ubana, thensmall plots out of this land were cut andsold to various parties. Here again the salesdocuments of the plots were prepared usingattorney taken from Phool Chand Ubana toremove assessee’s name from the propertytransaction. However, in the case of thisentire deal almost all the necessary areavailable in the seized material whichestablished that the sale of plots wasactually by Ganpat Singh as owner of theland. Land was purchased from ShriPhulchand Ubana, Gulabbari-page 28 ofAnnexure-A-1 gives complete detail ofpayment made to Shri Phulchand Ubana. Asper page No.28 the total payment to bemade was Rs.5,50,000/- out of whichpayment of Rs.3,25,000/- was made to Sh.Phulchand Ubana on various dates. SinceShri Phulchand has already expired, thefacts were verified from Shri Dhanna LalS/o Phulchand Ubana. Even Sh. Dhanna LalUbana had confirmed this in his statementrecorded by this office. The most clinchingevidence in the whole matter is at pageno.107 of seized Annexure-A-16, which is acopy of agreement of sale of this land in thename of assessee’s wife Smt. RameshwariPalana. On these agreement paperscomplete date-wise details of payment ofRs.3.25 lacs has also been mentioned,which tallies with date-wise details given atPage No.28 of Annexure-A-1. Therefore,Rs.3,25,000/- is clearly unexplainedinvestment of assessee in this land. Out oftotalinvestmentofRs.3,25,000/-Rs.1,75,000/- pertain F.Y. 95-96 andRs.1,50,000/- pertain F.Y. 96-97, hencethey are added back in these respectiveyears as undisclosed investment.” The CIT (Appeals) has observed as under: The CIT (Appeals) has observed as under: “13.4 On careful consideration it is seenthat the AO made assumptions, which werenot valid, even from the facts contained inthe seized records. Thus her assumption foradopting the rate at Rs.700/- per sq.yd. forthe sale of entire land, for the appellant tohave derived profits etc. are incorrect. LateShri Phoolchand had given power ofattorney to two different persons. Theseized agreements also show ShriDhannalal and Pannalal as the power ofattorney holders of late Sh. Phoolchand.The agreement with Smt. Rameshwari,pg.107 of Anne.A-16 and pg.28 of Ann.A-21are the two pages directly connected to theappellant. These documents show paymentof Rs.3.25 lacs only. Thus apart from thispayment the other receipts flowing to theappellant is from brokerage on arrangingthe sale of the plots. The total receipts fromplots on this land, appearing from theseized papers (pages 1 to 83 of Ann.A-1)total approx. Rs.4,35,250 on which thebrokerage of appellant at 3% is reasonablyestimated to be Rs.13,057. Thus, theaddition is sustainable to the extent ofRs.3,25,000/- plus 13,057 and the rest isdeleted.” 10.The ground relating to the subject addition has beenheld in favour of the department by the Tribunal. However, theTribunal has failed to take into consideration that there isnothing on record that any property was purchased by anydocument to establish that the assessee was owner of theproperty. As such, the addition in question is based on nomaterial or evidence and deserves to be deleted. 11.In that view of the matter, we answer the issue infavour of the assessee and against the department. 12.The appeal is allowed. (DINESH MEHTA)J. (K.S. JHAVERI)J. bblm