Taxap/108/2008 Of The Commissioner Of Income Tax-I v. Purshottamdas P Patel

C/TAXAP/108/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 108 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE DR.JUSTICE A. P. THAKER ================================================================1 Whether Reporters of Local Papers may be allowed to see the judgment ?2 To be referred to the Reporter or not ?3 Whether their Lordships wish to see the fair copy of the judgment ?4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?================================================================THE COMMISSIONER OF INCOME TAX-IVersusPURSHOTTAMDAS P PATEL================================================================ Appearance: MRS MAUNA M BHATT(174) for the APPELLANTMR BS SOPARKAR(870) for the RESPONDENT ================================================================ CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANIand HONOURABLE DR.JUSTICE A. P. THAKER Date : 07/01/2019 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1.This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) is directed against the order dated 15.06.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench “A” in IT(SS)A No.101/Ahd/2003 for block period 1.4.1986 to 21.1.1997. 2.By an order dated 19.03.2008, this appeal came to be admitted on the following substantial questions of law: “(A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition of Rs.97,12,500/- being 50% of alleged profit on sale of land and Rs.1,64,18,750/- being 50% of alleged unexplained investment in land on protective basis? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition on account of 50% of profit on sale of land of Rs.97,12,500/-? (C) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition on account of 50% of unexplained investment in land of a sum of Rs.1,64,18,750/-? (D) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in reducing the sales consideration of land from Rs.1,94,250,000/- to Rs.77,70,000/-? (E) Whether the Appellate Tribunal is right in law and on facts giving the credit of income of Rs.38.50 lakhs disclosed under VDIS 1997?” 3.The assessment is for the block period 01.04.1986 to 21.01.1987. The facts stated briefly are that a search came to be conducted under section 132 of the Act at the premises of Shyam Builders Group on 21.01.1997, during the course of which, a banakhat dated 30.06.1996 was found and seized. The banakhat was for sale of land admeasuring 92,500 square yards, located at Vastral, Taluka Dascroi, District Ahmedabad. As per the banakhat, the land was purchased by Shri Bhagwandas K. Patel and his associates from Shri Udaybhai D. Bhatt and Shri Purshottambhai P. Patel, viz., the assessee herein, at the rate of Rs.565/- per square yard. The total purchase consideration for the land worked out to Rs.5,22,62,500/- (Rs.565 x 92500). In terms of the banakhat, the seller of the land had received Rs.1,31,00,000/- in cash on 30.06.1996. Thereafter, Shri Udaybhai Bhatt and Shri Purshottambhai Patel had signed on revenue stamp on page-7 of the banakhat confirming that they had received a further sum of Rs.78,00,000/- in cash on 01.11.1996 as first installment, as agreed in the banakhat. 3.1During the course of assessment proceedings in group cases of Shyam Builders, the Assessing Officer arrived at a finding that the incriminating documents found and seized belonged to Shri Udaybhai D. Bhatt and Shri Purshottambhai P. Patel, whereupon the said Assessing Officer requested the then DCIT, Central-2(3), Ahmedabad to initiate proceedings under section 158BD of the Act in the case of the assessee - Shri Purshottambhai P. Patel. Accordingly, the then DCIT, Investigation Circle 2(1), Ahmedabad issued a notice under section 158BD read with section 158BC of the Act on 12.01.2000. 3.2The Assessing Officer passed the order under section 158BD read with section 158BC of the Act, computing the undisclosed income of the assessee at Rs.5,22,62,500/-. Being aggrieved, the assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals), who, vide order dated 28.01.2003 deleted the additions. Being aggrieved, the appellant-revenue went in appeal before the Tribunal, which concurred with the findings recorded by the Commissioner (Appeals) and dismissed the appeal. 4.Mrs. Mauna Bhatt, learned senior standing counsel for the appellant submitted that the additions made by the Assessing Officer are based on the documents found and seized during the course of search operation and that as per the banakhat dated 30.09.1996 found from the premises of Shyam Builders, it is clear that the entire land admeasuring 92,500 square yards at Vastral was proposed to be sold by the assessee. Moreover, Shri Bhagwanbhai K. Patel, in his statement under section 132(4) of the Act, had accepted this fact and hence, the Assessing Officer had rightly added the amount of Rs.97,12,500/- in the hands of the assessee. 4.1As regards proposed question “C”, viz., 50% of unexplained investment in land of Rs.1,64,18,750/-, it was submitted that the assessee has failed to prove the nexus between the receipt of sale consideration from the purchase party and the payment thereof to the seller of the land and hence, the Assessing Officer had rightly added the amount of Rs.1,64,18,750/- as undisclosed investment in the hands of the assessee. 4.2It was further submitted that the Tribunal had erred in giving credit of income of Rs.38,50,000/- disclosed under the Voluntary Disclosure of Income Scheme, 1997 (hereinafter referred to as “VDIS 1997”), inasmuch as in terms of the provisions of section 64(2)(ii) of the VDIS 1997, the benefit of the said Scheme is not available to the “income” in respect of previous year in which search under section 132 of the Act was initiated. It was submitted that in this case, search under section 132 of the Act was initiated on 21.01.1997 and the incriminating documents were found and seized during the course of search, which led to the additions in question and, therefore, the benefit of the scheme was not available to the assessee in respect of the income detected during the course of search under section 132 of the Act. It was submitted that the Assessing Officer had, therefore, rightly held that the declaration made by the assessee under the VDIS 1997 is an after-thought. It was, accordingly, urged that the Tribunal was not justified in upholding the order passed by the Commissioner (Appeals) and in deleting the additions made by the Assessing Officer. 5.Opposing the appeal, Mr. B. S. Soparkar, learned advocate for the respondent-assessee submitted that the impugned order passed by the Tribunal is based upon the concurrent findings of fact recorded by it after appreciating the material on record and that in the absence of any perversity in the findings recorded by the Tribunal, no question of law can be stated to arise out of the impugned order. 5.Opposing the appeal, Mr. B. S. Soparkar, learned advocate for the respondent-assessee submitted that the impugned order passed by the Tribunal is based upon the concurrent findings of fact recorded by it after appreciating the material on record and that in the absence of any perversity in the findings recorded by the Tribunal, no question of law can be stated to arise out of the impugned order. 6.The facts as emerging from the record reveal that a search came to be carried out in the office premises of Shyam Builders Group on 21.01.1997, wherein a banakhat dated 30.06.1996 was found and seized. The banakhat related to sale of land admeasuring 92,500 square yards at Vastral, Taluka Dascroi, District Ahmedabad. The statement of Shri Bhagwanbhai K. Patel was recorded, who had affirmed the purchase of Vastral land at Rs.565/- per square yard. The Assessing Officer has, accordingly, computed the purchase consideration at Rs.5,22,62,500/-. However, it was the case of the assessee that subsequently, the assessee and Shri Udaybhai Bhatt had entered into a supplementary deed dated 20.06.1996 and had thereafter executed an agreement with Shri Bhagwanbhai K. Patel and Shri Ashwinbhai B. Patel for an agreed price at Rs.565/- per square yard on 30.06.1996 and received Rs.1,31,00,000/- by way of advance consideration and a further amount of Rs.78,00,000/- on 01.11.1996 as per agreement. Thus, they had received a total amount of Rs.2,09,00,000/-, out of which they had paid Rs.1,00,00,000/- on 30.06.1996 and Rs.31,00,000/- on 01.11.1996 to Shri Babubhai Pothani, the person from whom the assessee Shri Udaybhai Bhatt had got the assignment for arranging the land deal and the rate at which payment was made to Shri Bhagwanbhai Patel and others was Rs.355/- per square yard. It was stated that a total amount of Rs.1,31,00,000/- was paid to Shri Babubhai Pothani, leaving the balance of margin of Rs.77,00,000/- for both the assessee and Shri Udaybhai Bhatt in equal proportion, that is, Rs.38,50,000/- being the assessee’s share. It was further stated that the assessee had made disclosure of income of Rs.42,50,000/- on 31.12.1997 under VDIS 1997 and had paid tax of Rs.12,75,000/- thereon. The certificate under section 68(2) of the VDIS 1997 had also been issued to him by the Commissioner of Income Tax, Gujarat III Ahmedabad. Thus, the income of Rs.38,50,000/- in the above mentioned deal of land had been disclosed under VDIS 1997, prior to issue of notice under section 158BA of the Act. 7.It appears that due to a litigation instituted in the City Civil Court being Civil Suit No.767 of 1997, the deal for the entire land admeasuring 92,500 square yards could not be executed and hence, while the original agreement was for sale of 92,500 square yards of land, subsequently by a memorandum of understanding dated 07.03.1997, the deal was finalised for 37,000 square yards of land out of total 92,500 square yards. 8.The Commissioner (Appeals), after appreciating the material on record, found that in the present case, the notice under section 158BC of the Act had been issued on 26.05.1999, while the disclosure under VDIS Scheme was made on 28.12.1997. He, accordingly, found that there was no infirmity in the action of the CIT, Gujarat III Ahmedabad in issuing certificate under section 68(2) of the Finance Act, 1997 under the VDIS 1997. The Commissioner (Appeals) noted that no search had taken place in the case of the appellant and that the CIT, Gujarat III, Ahmedabad had issued the certificate under section 68(2), accepting the disclosed income of Rs.42,50,000/-. He, accordingly, directed the Assessing Officer to give credit of income of Rs.42,50,000/- disclosed under the VDIS 1997 to the assessee. 9.Insofar as the addition of Rs.97,12,500/- is concerned, the Commissioner (Appeals) took note of the fact that while the initial banakhat was executed on 30.06.1996, thereafter final document was executed on 15.09.2000 relating to only 37,000 square yards instead of 92,500 square yards. He further found that in the documents referred to by the Assessing Officer as well as the statement of Shri Bhagwanbhai K. Patel, there was no mention that he had paid any amount more than Rs.2,10,00,000/-. The Commissioner (Appeals), accordingly, held that the Assessing Officer was not justified in drawing any inference that the sale was for 92,500 square yards of land and directed him to adopt the sale price/profit rate to the assessee only for 37,000 square yards at the rate of Rs.210/- per square yard, that is, Rs.77,70,000/- instead of Rs.1,94,25,000/-. 10.Insofar as the addition of Rs.1,64,18,750/- being 50% of the alleged unexplained investment in land is concerned, the Commissioner (Appeals) noted that it was the case of the assessee that the source of payments was from the amounts received on account of sale of 37,000 square yards of land. He, accordingly, accepted the submission and deleted the addition. 11.The Tribunal, in the impugned order, found that the action of the Assessing Officer in relying upon the earlier banakhat without any material suggesting that more land was conveyed is not acceptable. The Tribunal, accordingly, held that the assessees had earned profits as per the subsequent Memorandum of Understanding, that is, Rs.38,50,000/- each. On the issue of credit of VDIS, the Tribunal agreed with the Commissioner (Appeals) and held that once a proper certificate under section 68(2) of the Finance Act, 1997 under the VDIS Scheme is issued, another authority cannot sit in appeal on the contents of the certificate, which has to be given due effect. 12.Thus, both, the Tribunal as well as the Commissioner (Appeals) have recorded concurrent findings of fact that the land was sold to the extent of 37,000 square yards and not 92,500 square yards as held by the Assessing Officer. Both, the Commissioner (Appeals) as well as the Tribunal, have recorded that the total amount of consideration received by the assessee together with Shri Udaybhai Bhatt was Rs.2,09,00,000/- out of which Rs.1,31,00,000/- paid to Shri Babubhai Pothani, and that the assessee and Shri Udaybhai Bhatt had together received Rs.77,00,000/-, and that the assessee’s share at 50% came to Rs.38,50,000/-, which had been duly disclosed by him by filing a declaration under the VDIS 1997 in respect of which, a certificate dated 09.06.1998 had been issued by the Commissioner of Income Tax under section 68(2) of the Finance Act, 1997 under the VDIS Scheme. Thus, the Tribunal has recorded concurrent findings of fact to the effect that the assessee’s share out of the amount received from the land deal came to Rs.38,50,000/-, which was duly disclosed under the VDIS 1997 and therefore, he was entitled to the credit thereof. The learned counsel for the appellant is not in a position to point out any infirmity in the findings of fact recorded by the Tribunal. 13.One of the contentions raised on behalf of the revenue was that the search having been carried out on 30.06.1996 and the declaration under the VDIS 1997 having been made subsequent thereto, the same could not have been accepted as the benefit of the said scheme is not available to the “income” in respect of previous year in which search under section 132 of the Act was initiated. The said contention does not merit acceptance for the reason that in this case, though the search came to be carried out on 30.06.1996, the notice under section 158BD read with section 158BC of the Act came 13.One of the contentions raised on behalf of the revenue was that the search having been carried out on 30.06.1996 and the declaration under the VDIS 1997 having been made subsequent thereto, the same could not have been accepted as the benefit of the said scheme is not available to the “income” in respect of previous year in which search under section 132 of the Act was initiated. The said contention does not merit acceptance for the reason that in this case, though the search came to be carried out on 30.06.1996, the notice under section 158BD read with section 158BC of the Act came to be issued subsequent to the declaration having been filed under the VDIS 1997. This court is, therefore, in the agreement with the view adopted by the Tribunal and the Commissioner (Appeals) that once the certificate under section 68(2) of the Finance Act, 1997 under the VDIS Scheme had been issued by the Commissioner of Income Tax, it was not permissible for the Assessing Officer to go behind such certificate, but is required to accept the same. Thus, the assessee having included the amount of Rs.38,50,000/- in the disclosure made under the VDIS 1997, he was rightly given the credit thereof. 14.Insofar as question “C” relating to 50% of unexplained investment in land of Rs.1,64,18,750/- taxed in the hands of the assessee substantively being 50% of alleged unexplained investment in land is concerned, the Commissioner (Appeals) has found that the source of payments made by the assessee was out of moneys received from Shri Bhagwanbhai K. Patel and Shri A. B. Patel discussed in the assessment order. The Commissioner (Appeals), therefore, was of the view that the observation of the Assessing Officer that the source was not explained or the nexus was not established cannot be accepted. 15.Thus, the conclusions arrived at by the Tribunal are based upon concurrent findings recorded by it after appreciating the material on record. Nothing has been pointed out to this court to indicate that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor has the learned senior standing counsel for the appellant been able to dislodge the findings of fact arrived by the Tribunal after appreciating the material on record. In the absence of any perversity in the findings of fact recorded by the Tribunal, it is not possible to state that the same suffers from any legal infirmity so as to warrant interference. 16.The appeal, therefore, fails and is, accordingly, dismissed. The questions are accordingly, answered in favour of the assessee and against the revenue. (HARSHA DEVANI, J) B.U. PARMAR (A. P. THAKER, J)