Principal Commissioner Of Income Tax (Central), Surat v. M/S. Monareeca Enterprise

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 530 of 2022 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT VersusM/S. MONAREECA ENTERPRISE ==========================================================Appearance:MR. M.R.BHATT, SR. ADV. WITH MR. KARAN SANGHANI FOR M R BHATT& CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ==========================================================CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 12/09/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr. M. R. Bhatt assisted by learnedadvocate Mr. Karan Sanghani for M. R. Bhatt & Co. for the appellant. 2.This Tax Appeal filed under section 260A of the Income Tax Act,1961 arises out of order dated 16.3.2022 of the Income Tax AppellateTribunal, Ahmedabad Bench, Ahmedabad in Income Tax AppealNo. 2386 of 2018 in respect of Assessment Year 2013-2014. 3.The facts involved were that the respondent assessee engaged inthe business of real estate development business, was a firm constitutedon 3.2.2011, wherein Jiten Oza and Neetaben Patel were partners, whocontributed their capital of Rs. 4 lakhs and Rs. 2,61,07,304/- respectivelymainly on account of development agreement and bestowing the land tothe firm. Subsequently, withdrawal was made by Neetaben resulting intoreduction in contribution. 3.1The assessee filed return of income under section 139 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 3.8.2013declaring total income to be ‘Nil’. 3.2The return of income was processed under section 143(1) of theAct. Search under section 132 of the Act was carried out in BafanaPanchal group, which also covered the residential premises of thepartners of the firm. 3.3On the basis of statement of partner, the Assessing officerconcluded that the assessee had actually paid Rs. 12.60 crores forpurchase of land and the sale deed was amount of Rs. 2.5 crores, whichwas reflected in books of account. It was, therefore, concluded that theassessee had made undisclosed investment of Rs. 10.10 crores (12.60crores – 2.5 crores) Therefore, the assessment was finalised makingaddition of Rs. 10.10 crores under section 69 of the Act on the ground ofundisclosed investment in law for the year under consideration. 3.4The assessee preferred appeal before the Commissioner of IncomeTax (Appeals) who deleted the said addition. Thereafter, the Revenuefiled appeal before the appellate Tribunal. The appellate Tribunalconcurred with the decision taken by the Commissioner of Income Tax(Appeals) and dismissed the appeal of the revenue. Therefore, thepresent appeal came to be filed before this court. 4.In the appeal, the following questions are proposed by the revenueclaiming to be arising as substantial questions of law, “(A) Whether on the facts and in the circumstances of the case and inlaw, the Appellate Tribunal was justified in deleting the addition ofRs.10,10,00,000/- without appreciating the fact that, the impugnedaddition was made by the Assessing Officer on the basis of theincriminating document found and impounded during the course ofsurvey u/s 133A of the Act and statement on oath recorded from the partner of the assessee-firm? (B) Whether on the facts and in the circumstances of the case and in law,the Appellate Tribunal was justified in not appreciating the fact that thepartner of the firm himself has categorically admitted that theincriminating document contains the cost details of the project,"Monalisa Lakewood", including the cost of land of Rs. 12,60,00,000/-. partner of the assessee-firm? (B) Whether on the facts and in the circumstances of the case and in law,the Appellate Tribunal was justified in not appreciating the fact that thepartner of the firm himself has categorically admitted that theincriminating document contains the cost details of the project,"Monalisa Lakewood", including the cost of land of Rs. 12,60,00,000/-. (C) Whether on the facts and in the circumstances of the case and in law,the Appellate Tribunal despite appreciating the fact that other entries inthe loose sheet paper, though based on estimate, were clearly matchingwith the books of accounts and no other investments was shown in thebooks of accounts, erred in not considering. the amount of Rs.12.60 Cr.appearing in the incriminating documents towards the land cost? [D] Whether on the facts and in the circumstances of the case and inlaw, the Appellate Tribunal was justified in not appreciating the fact thatthe incriminating document found during the course of surveyproceedings were confronted to the partner of the firm and his statementon oath was recorded on the same under Section 131(1) of the Act,wherein he explained the contents of the incriminating documents whichincludes the cost of land and hence, such un-retracted statement ofpartner of the assessee-firm carries an evidentiary value and it can beconsidered as corroborative evidence and the additions made based onsuch evidences is justified?” 5.While allowing the appeal of the assessee, the Commissioner ofIncome Tax (Appeals) deleted the addition resting on the followinggrounds, “(a) The land was purchased by Smt. Neetaben Patel in herindividual capacity and that the investment was made by her for thepurchase of the said land in her own name and that she was theabsolute owner of the said land. (b) The land came into possession of the appellant partnership formin lieu of capital contribution of Smt. Neetaben Patel and thepartnership firm got unrestricted development right because of the development agreement between Smt. Neetaben Patel and the firm. (c) If at all there was any unexplained investment at the time ofpurchase of the land, it could be by Smt. Neetaben patel in the A.Y.2011-2012 and no action could be made in the hands of the firm inthe A.Y. 2013-2014”. 5.1The appellant Commissioner recorded detailed reasons in para 5.2onwards. 6.The Tribunal while upholding the view of the appellateCommissioner inter alia observed that search action under section 132 ofthe Act was undertaken on 7.1.2014 in Bafana group of cases whichcovered the residential premises of Smt. Neetaben Patel- partner of theassessee firm, however, there was no record to show any incriminatingmaterial relating to the purchase of the land in question and no suchmaterial could be recovered by the department. It was, therefore, held bythe Tribunal that addition made under section 69 of the Act to the tune ofRs. 10.10 corres was not sustainable. The Tribunal gave its findings,extracting from para-10, 5.1The appellant Commissioner recorded detailed reasons in para 5.2onwards. 6.The Tribunal while upholding the view of the appellateCommissioner inter alia observed that search action under section 132 ofthe Act was undertaken on 7.1.2014 in Bafana group of cases whichcovered the residential premises of Smt. Neetaben Patel- partner of theassessee firm, however, there was no record to show any incriminatingmaterial relating to the purchase of the land in question and no suchmaterial could be recovered by the department. It was, therefore, held bythe Tribunal that addition made under section 69 of the Act to the tune ofRs. 10.10 corres was not sustainable. The Tribunal gave its findings,extracting from para-10, “It could be seen from the loose sheet that the land cost was Rs. 12.60crores while the land cost reflected in the sale deed was Rs. 2.5 crores.The contention of the same cannot be accepted on two grounds; (a) theoriginal cost of land purchased by Smt.Nitaben Patel for a considerationof Rs.2.5 crores starting from 28.7.2009 upto 7.2.2011 by instalmentpayments during the financial year 2009-10 and 2010-11 and alsointroduced capital contribution Rs.2,61,07,304/- by Smt.Nitaben to thefirm on 31.3.2012. Thus, the land cost could not be estimated atRs.12.60 cores; (b) other entries in the loose sheet papers related to thecost of construction of nine bungalows, development expenses, over-hea.d expenses etc. which are clearly matched with the expensesmaintained by the assessee-firm in its books of accounts. In the absenceof any other investment to the extent of Rs.10.10 crores, the estimationmade by the AO is baseless. Further, the AO has also not made anyattempt to verify the cost of the land from any partners of the firm or from previous owner of the land. Thus, the addition was made based onthe assumption that the cost of landd was Rs. 12.60 crores, thedifference of Rs.10.10 crores ought to have been added in the hands ofSmt.Nitaben and not in the hands of assessee's firm relating to the Asstt.Year 2011-12. But the AO made the addition in the hands of theassessee firm which is not legally correct.” 6.1The Tribunal relied on the decision of this court in PrincipalCommissioner of Income Tax vs. Nageshwar Enterprises [122taxmann.com 41 (Guj)], wherein it was inter alia held that until somecorroborative evidence is found in support of evidence, merely on thebasis of admission, the assessee could not be subjected to addition in theincome. The department can not start with the confessional statement.The confessional statement has to be utilised in aid of other material onrecord. When other material on record are not available, basing theaction on mere admission would not be permissible. 6.2This court is in agreement with the concurrent findings recordedby the authorities below. The dismissal of the appeal of the revenue bythe appellate Tribunal could be said to be based on cogent reasons. 7.No question of law much less any substantial question of law couldbe said to be arising as proposed. No other question arises in the petitionin the facts of the present case. The appeal is summarily dismissed. (N.V.ANJARIA, J) C.M. JOSHI (BHARGAV D. KARIA, J)