Taxap/440/2005 Of Jayantilal Satyadev Patel v. Income Tax Officer

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 440 of 2005 to TAX APPEAL NO.442 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.DEVANI ============================================================== JAYANTILAL SATYADEV PATEL - Appellant(s) Versus INCOME TAX OFFICER - Opponent(s) ============================================================== Appearance : MRS SWATI SOPARKARfor Appellant(s) : 1, MR BB NAIK for Opponent(s) : 1, ================================================================== and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 21/12/2005 COMMON ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) 1.The assessee-appellant has proposed the following sixidentically worded questions in all the three appeals. “(i)Whether, in the facts and circumstances of the case theITAT was right in law in holding that the appellant has madeunexplained investments in the residential flat purchased by his wife ?1.Whether, in the facts and circumstances of the case the ITATwas right in law in not appreciating that the appellant washaving sufficient agricultural income to justify theinvestment made in the residential flat ? 2.Whether, in the facts and circumstances of the case the ITATwas right in law in holding that conversion of protectiveassessment in to substantive assessment does not amount toenhancement of income ? 3.Whether, in the facts and circumstances of the case the ITATwas right in law in holding that issuing a notice ofenhancement of assessment is not mandatory under law ? 4.Whether, in the facts and circumstances of the case the ITATwas right in confirming such enhancement of income withoutissuance of notice which is not permissible under the law ? 5.Whether, in the facts and circumstances of the case the ITATwas right in law in not considering and adjudication on thealternate contention raised by the Appellant before them ? 1.After hearing Mr. S.N.Soparkar, the learned Senior advocateon behalf of the appellant on 14[th] November, 2005, theCourt had issued notice for final disposal only in relationto proposed question No.6. Thereafter, the matter was heardat length on 8[th]December, 2005 and the learned advocate forthe appellant was permitted to tender additional affidavitin support of the alternative contention raised by theappellant before the Tribunal. Accordingly the appellanthas tendered additional affidavit dated 17[th] December, 2005 and the matter was heard at length, but due to paucity oftime no orders could be made yesterday i.e. 20[th] December,2005. The facts for all the three appeals are identical andhence the facts for assessment year 1992-93 may be statedin brief. 2. For assessment year 1992-93 the relevant accounting periodis 31[st]March, 1992. It appears that a search took placeunder Section 132 of the Income Tax Act, 1961 (the Act ) atthe residential premises of one Shri Manhar. N. Kakadia on19[th] January, 1994. The search revealed that the assesseehad invested a sum of Rs.1,75,000/= for booking flat No.101at Deepa Complex, Adajan Road, Surat. Thereupon summonsunder Section 131 of the Act was issued and served on theassessee and his statement was recorded on 2[nd]February,1994. In the said statement the assessee accepted that theflat in question was booked by him and investment amountingto Rs.1,75,000/= had been made by him. The AssessingOfficer has taken note of further averments made in thestatement recorded on 2[nd]February, 1994. One of theaverments pertains to another property situated at 14,Neelkanth Society, Bhatar Road, Surat, acquisition whereofwas explained by the assessee as being investment made byhis father from agricultural income. The assessee alsoaccepted that flat No.102 in Deepa Complex had been bookedby his wife Smt. Geetaben. J. Patel. 3.On 7[th] February, 1994, one more statement was recordedpursuant to summons issued under Section 131 of the Actwherein the assessee flatly denied having booked anyproperty in Deepa Complex, either in his name or name ofhis family member. However in response to question Nos.14and 15 it was stated by the assessee that the flat wasbooked in his name by his uncle Shri Narottambhai Patel,residing at U.S.A. 4.Thereafter, notices under Section 148 of the Act wereissued and assessments for the three years reopened. Inresponse to notice under Section 143 (2) of the Act theassessee put forth a version that flat No.101 had beenbooked by the assessee out of agricultural income, and insupport he produced extracts of village form No.7/12, 8-Aetc. as well as some receipts showing sale of sugar-cane. 5.The Assessing Officer did not accept the explanation sotendered and came to the conclusion that though the assessee might have agricultural income it was notsufficient to invest the amount for booking the flat,subsequent statement dated 7[th]February, 1994 could not beaccepted, and ultimately on the basis of appraisal reportproposed that the investment made in names of six differentpersons, including the assessee, had to be taxed in thehands of Shri Manhar. N. Kakadia. The Assessing Officerfurther took note of the fact that Shri Manhar N. Kakadia,was approaching the Settlement Commission by filing anappropriate application, and considering the fact that theassessment was getting barred by limitation the investmentmade by six persons would be added in the hands of ShriManhar.N. Kakadia on substantive basis. However as aprotective measure to safeguard the interest of revenue,the assessee was protectively assessed. It was found by theAssessing Officer that out of total amount ofRs.1,75,000/=, a sum of Rs.75,000/= was liable to be taxedin assessment year 1992-93, Rs.25,000/= in the assessmentyear 1993-94, and remaining Rs.75,000/= in assessment year1994-95. 6.The assessee carried the matter in appeal beforeCommissioner (Appeals). After hearing the CharteredAccountant of the assessee, the Commissioner (Appeals) cameto the conclusion that flat No.101 of Deepa Complexbelonged to the assessee and had to be substantivelyassessed in his hands. That there was no basis to come tothe finding that the flat should be assessed substantivelyin the name of the builder. In relation to the explanationof the assessee that the source of investment wasagricultural income, it was held by the Commissioner(Appeals) that even if there was any agricultural income,the same would be forming part of investment made in theproperty being 14, Nilkanth Society. That the assessee hadalso booked flat No.102 in the name of his wife. Therefore,agricultural income would also have been used for makinginvestment in the name of wife. The Commissioner (Appeals)therefore concluded that the source of investment in flatNo.101 was not proved. 7.The assessee filed Second Appeal before the Tribunal. Videimpugned order dated 1[st] September, 2003, the Tribunal cameto the conclusion that it was not inclined to interferewith the findings of the Commissioner (Appeals) who had given cogent reasons for sustaining the addition inquestion for all the three years. The Tribunal also upheldthat “other grounds of appeal are of general nature whichneed no adjudication and hence the same are dismissed.” 8.The assessee moved an application for rectification of theorder of the Tribunal under Section 254 (2) of the Act onthe ground that the Tribunal while disposing of the appealhas not disposed of ground No.3 which reads : “Theappellant submits that such an action amounts to 7.The assessee filed Second Appeal before the Tribunal. Videimpugned order dated 1[st] September, 2003, the Tribunal cameto the conclusion that it was not inclined to interferewith the findings of the Commissioner (Appeals) who had given cogent reasons for sustaining the addition inquestion for all the three years. The Tribunal also upheldthat “other grounds of appeal are of general nature whichneed no adjudication and hence the same are dismissed.” 8.The assessee moved an application for rectification of theorder of the Tribunal under Section 254 (2) of the Act onthe ground that the Tribunal while disposing of the appealhas not disposed of ground No.3 which reads : “Theappellant submits that such an action amounts to enhancement and since no notice was given, the order isrequired to be cancelled.” has not been disposed of whiledisposing of the appeal. 9.After hearing both the sides vide order dated 28[th] July,2004, the Tribunal rejected the Miscellaneous Applicationholding that conversion of a protective assessment into asubstantive assessment did not amount to enhancement ofincome,and therefore there was no necessity for issuing anynotice. The Tribunal also held that when it had stated inparagraph No.4 that other grounds of appeal which are ofgeneral nature need no adjudication and hence the same weredismissed would mean that even ground No.3 had been dealtwith by the Tribunal and dismissed. 10.In the aforesaid backdrop of facts and circumstances of thecase the appellant has proposed the aforesaid sixquestions. However considering the fact that all the authorities have concurrently recorded findings of factafter appreciating the evidence on record, the Court hadissued notice only in relation to proposed question No.6.It was submitted by the learned advocate that thealternative contention to show that the builder has beensubstantively taxed, and as a consequence, the assesseecould not be taxed, was required to be dealt with by theTribunal and the Tribunal had failed to carry out the saidexercise. Therefore, after hearing the learned counsel theCourt had directed the appellant to file additionalaffidavit to place on record, so as to satisfy the Courtprima facie, as regards the evidence which would go to showthat the builder had been actually taxed in relation to thedisputed property. 11.The additional affidavit dated 17[th] December, 2005, readsas under. “1. I am the Appellant herein and aware of the facts givingrise to the controversy. I am, therefore, competent andauthorized to file this affidavit. 2. I say that this additional affidavit is being filed by mefor the purpose of placing on record the evidence, which showsthat the alleged property was never allotted to me and I wasnever given the possession of the said alleged. 3. It is most respectfully submitted that the flat no.101 ofVimal Villa Service Society, A-1, situated in Deepa Co-operative Housing Society, Surat ( the “alleged property” forshort ) is in the name of one Shri Maheshkumar Himmatlal Shah.A letter dated 20[th] July 2003 is attached herewith and annexedhereto as Annexure “A” to this affidavit. 4. It is most respectfully submitted that the alleged propertywas earlier in name of Manubhai Desai from 1993 to 2003 andfrom 2003 onwards it is in the name of one Shri Mahesh H. Shahas stated in para 3 above. A letter dated 17-12-2005 isattached herewith and annexed hereto as Annexure “B”to thisaffidavit. 5. I further submit that I have to no objection if the Hon'bleCourt observes that the alleged property be vested to anythird party.Solemnly affirmed at Surat on 17[th] day of December 2005.” 4. It is most respectfully submitted that the alleged propertywas earlier in name of Manubhai Desai from 1993 to 2003 andfrom 2003 onwards it is in the name of one Shri Mahesh H. Shahas stated in para 3 above. A letter dated 17-12-2005 isattached herewith and annexed hereto as Annexure “B”to thisaffidavit. 5. I further submit that I have to no objection if the Hon'bleCourt observes that the alleged property be vested to anythird party.Solemnly affirmed at Surat on 17[th] day of December 2005.” 1.On going through the said affidavit it is apparent that whatis stated in paragraph No.2 is bald averment withoutsupporting evidence. Even when one reads the affidavit inits entirety, it is not possible to hold that the assesseewas never the owner of the property, or that the assesseewas never in possession of the property, or that the builderhad been taxed qua the self-same property. 2.In these circumstances, in absence of any evidence to primafacie support alternative contention, it is not possible tohold that the Tribunal has committed any error which wouldgive rise to a substantial question of law. The prayer,therefore, that the matter may be restored to the file ofthe Tribunal, requires to be rejected. 3.In absence of any infirmity in the impugned order ofTribunal so as to give rise to a substantial question oflaw, the appeals are dismissed. 4.The Registry is directed to place a copy of this order inall connected matters. *mithabhai ( D.A.MEHTA, J.) (HARSHA DEVANI,J.)