GEETHA MEHRA,CHENNAI V. DCIT CEN CIR 44, MUMBAI

ITA 4065/MUM/2016

AI Insights

Ms. Geetha Mehra, a promoter director of M/s Synergy Art Foundation Ltd., faced multiple additions to her income assessments for the years 2002-03 to 2007-08 following a search and seizure operation under section 132 of the Income Tax Act, 1961. The primary issues revolved around unaccounted personal household expenses and unexplained increases in capital. The Tribunal's decision addressed the adequacy of evidence provided by the assessee regarding her personal expenses and the source of capital gains from sold paintings, ultimately leading to a partial allowance of her appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781100 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2004-2005
• Appeal Filed On: 14-06-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA
• Assessee Lawyers: PRASHANT S. GHUMARE
• Keywords: Capital asset; Unexplained expenditure; Salary income; Cost of acquisition; Gift; Search and seizure; Wrong claim; Bogus
• Section: 143(3); 132; 153A; 68; 69; 69C; 139; 2(14)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE JUSTICE (RETD.) C V BHADANG, PRESIDENT & MS PADMAVATHY S, AM I.T.A. No. 4035/Mum/2016 (Assessment Year: 2002-03) I.T.A. No. 4036/Mum/2016 (Assessment Year: 2003-04) I.T.A. No. 4065/Mum/2016 (Assessment Year: 2004-05) I.T.A. No. 4037/Mum/2016 (Assessment Year: 2005-06) I.T.A. No. 4038/Mum/2016 (Assessment Year: 2006-07) I.T.A. No. 4039/Mum/2016 (Assessment Year: 2007-08) Ms. Geetha Mehra, C/o Synergy Art Foundation Ltd., 6/19, II Floor, Grant Building, Arthur Bunder Road, Colaba, Mumbai-400005. PAN: AAGPM9039H Vs. ACIT-3(1)(1), Room No. 607, Aayakar Bhavan, M.K. Road, Mumbai-400020. Appellant) : Respondent) Assessee / Appellant by : Shri Prashant S. Ghumare, AR Revenue / Respondent by : Shri Arun Kanti Datta, CIT-DR Date of Hearing : 17.09.2025 Date of Pronouncement : 22.10.2025 Printed from counselvise.com 2 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra O R D E R Per Padmavathy S, AM: These appeals by the assessee are against the order of the Commissioner of Income Tax (Appeals)-8, Mumbai [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) for Assessment Years (AY) 2002-03 to 2007- 08. The common issues contended by the assessee in all these appeals pertain to i. Unaccounted personal household expenses added under section 69C – AY 2002-03 to 2007-08. ii. Unexplained increase in capital added under section 68 – AY 2007-08 2. The assessee is an individual and is a promoter director of M/s Synergy Art Foundation Ltd. A search and seizure operation under section 132 of the Act was carried out on 17.04.2007 in the premises of M/s Synergy Art Foundation Ltd. along with the premises of the assessee. Consequently notice under section 153A of the Act was issued for AY 2002-03 to 2007-08. The assessee in response filed the return under section 153A of the Act and the assessment was completed on 30.11.2009 under section 153A r.w.s. 143(3) of the Act making various additions. The details of the income returned and the income assessed are as tabulated below: Assessment Year Returned Income (Rs.) Assessed Income (Rs.) 2002-03 2,25,169/ 7,65,170/- 2003-04 3,62,065/- 20,74,570/- 2004-05 4,96,751/- 7,96,750/- 2005-06 4,04,042/- 7,54,040/- 2006-07 14,26,833/- 18,26,830/- 2007-08 22,19,815/- 1,02,42,370/- 3. On further appeal the CIT(A) confirmed the addition/disallowances made by the AO against which the assessee went on further appeal before the Tribunal. The Printed from counselvise.com 3 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra Tribunal passed a combined order on 31.07.2012 for AY 2002-03 to 2007-08 and 2008-09 restoring the issue of additions on account of low drawing back to the AO to consider the details, evidences and the electricity and the telephone bills to decide the issue afresh. The Tribunal also restored the issue of unexplained increase in capital back to the AO. The AO after considering the submissions of the assessee passed the order once again making the same additions / disallowances as in the first round of assessment proceeding and the CIT(A) upheld the findings of the AO. The assessee is in appeal for the second time before the Tribunal against the order of the CIT(A). Unaccounted personal household expenses under section 69C 4. The AO in second round of assessment proceeding issued a show-cause notice to the assessee stating that cash withdrawals from the bank account of the assessee is very low and to explain how the personal expenses are incurred by the assessee. The AO called on the assessee to furnish the telephone bills, electricity bill, etc. as per the directions of the Tribunal. The AO also called on the assessee to furnish the details of family members, own or rental house, kitchen expenses and gas bill, electricity and telephone bills, medical expenses, society maintenance, entertainment expenses and details of purchase of household articles. In response, the assessee submitted that the assessee being a single does not have any major household expenses and that the assessee travels extensively in connection with her line of work during which time the personal expenses are taken care of by the company. The assessee also submitted details with regard to the expenses incurred through Credit Card and Cheque to submit that most of the expenses are not incurred in cash and accordingly cash withdrawal cannot be the reason to hold that the assessee has not incurred any personal expenses. The AO however did not Printed from counselvise.com 4 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra accept the submissions of the assessee stating that the assessee did not submit the details of telephone and electricity bill as per the directions of the Tribunal. Accordingly, the AO made adhoc additions as per below details towards unexplained personal expenses under section 69C Assessment Year Addition towards unexplained expenses – Rs. AY 2002-03 2,00,000/- AY 2003-04 2,50,000/- AY 2004-05 3,00,000/- AY 2005-06 3,50,000/- AY 2006-07 4,00,000/- AY 2007-08 4,50,000/- 5. The CIT(A) though held that the assessee incurred certain personal expenses through Credit Card deleted the addition to the tune of Rs. 1,50,000/- in AY 2007- 08 and confirmed the addition for rest of the AYs. 6. The ld. AR submitted that the assessee is unmarried and lives alone without any dependent. The ld. AR further submitted that the assessee is travelling most of the time of the year for Art Exhibitions, Art purchase etc. during which time the expenses are taken care of by M/s Synergy Art Foundation Ltd. The ld. AR also submitted that the other sundry expenses are driver's salary, petrol, maintenance etc. are borne by M/s Synergy Art Foundation Ltd. and the assessee uses to Credit Cards for buying day to day requirements towards grocery etc. The ld. AR argued that the assessee has tabulated the details of expenses incurred through Credit Card, Cheque etc. before the lower authorities and the same has not been considered. The ld. AR further argued that the AO in the second round has confirmed the additions made in earlier year stating that the assessee has failed to produce electricity or telephone bills ignoring the fact that the assessee has given the breakup of expenses incurred towards personal expenses. The ld. AR also raised the legal contention that the addition towards personal expenses is not Printed from counselvise.com 5 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra based on any incriminating material found during the course of search but is merely for the reason that the cash withdrawal from the bank account are less. Accordingly, the ld. AR argued that the addition made by the AO on adhoc basis towards personal expenses cannot be sustained. 7. The ld. DR on the other hand submitted that the assessee failed to substantiate the household expenses and did not file any details except the table containing expenses incurred through various modes. The ld. DR further argued that the Tribunal has given a specific direction to submit the evidence in the form of telephone bills, electricity bills, etc. and that the assessee in the second round of assessment proceeding also did not file any documentary evidences. Accordingly, the ld. DR supported the orders of the lower authorities. 8. We heard the parties and perused the material on record. The AO noticed from the perusal of bank statements that assessee's withdrawals towards personal expenses are very low. The AO accordingly made adhoc addition as unexplained expenditure which was confirmed by the CIT(A) in the first round. The coordinate bench of the Tribunal on further appeal remitted the issue back to the AO to consider the issue afresh by calling for relevant documents such as telephone & electricity bill etc. The AO in the second round called for such details and the assessee made detailed submission with regard to the personal expenses incurred through credit card, cash withdrawals, cheque payments, rental income in cash etc.(page 313 to 347 of paper book). The assessee further submitted that she was staying in the company guest house and hence could not produce the telephone and electricity bill as called for by the AO. The details submitted with respect to the personal expenses are tabulated below – Printed from counselvise.com 6 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra Particulars 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Through Credit card 93,376 1,26,957 1,11,875 76,955 73,788 1,75,586 Through Cash withdrawals 10,000 75,000 1,35,000 2,37,000 1,90,000 3,71,800 Through cheque payments 35,850 65,450 58,500 41,385 1,41,832 7,06,780 Through rental income received in cash 72,000 Total 2,11,226 2,67,407 3,05,375 3,55,340 4,05,620 12,53,166 9. On perusal of the AO's order we notice that the AO has made the addition for the reason that the assessee has not furnished the electricity and telephone bills as directed by the Tribunal and that personal expenses as mentioned in the credit card statement pertain to travel and hotel expenses. The AO further held that the expenses incurred through cheque are not supported by bills etc. The CIT(A) has confirmed the addition based on his predecessor's order in the first round of appellate proceedings. On perusal of the details of credit card statement submitted by the assessee (page 313 to 348 of paper book) we notice that the annual credit card expenses of the assessee was in the range of Rs.2,00,000 to Rs.6,00,000 between AY 2002-03 to AY 2007-08 and the assessee out of the total spend has carved out what is paid by her and what is born by the company. We further notice that the assessee travelled frequently during these period which is evidenced by the purchase air tickets through credit card. Though there may be merit in the contention of the revenue that the assessee has not submitted any bills/evidences for the personal expenses, the details which are part of records as tabulated above cannot be completely ignored. The fact that the assessee is single and travels often for the purpose of work also merits consideration. Further the addition under Printed from counselvise.com 7 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra section 69C towards low withdrawals could be made if it evidenced that the life style and the spending pattern of the assessee is not commensurate with the withdrawals. However in assessee's case, the revenue has not brought anything on record to show that the above tabulated expenses are not commensurate with the lifestyle and spending pattern of the assessee. Further the assessee in the second round of proceedings had made submissions regarding personal spending such Family members, servants/pets, rental expenses, household expenses, telephone expenses, entertainment expenses, purchase of personal assets etc., (page 349 to 350 of paper book). The lower authorities during both the rounds of proceedings have not recorded any adverse view with regard to the details furnished by the assessee but has made /sustained the addition on the ground of non-production of specific documents such as telephone & electricity bill etc. The lower authorities also did not examine the details submitted on merits before rejecting the submissions of the assessee. In fact in the first round assessment proceedings, the AO notes down the fact with regard to personal expenditure through credit but still proceeds to make the adhoc addition. In our considered view, the adhoc addition made towards low withdrawals for personal spending cannot be sustained since the revenue has not brought anything on record to show that the spending through various sources such as credit card/cash withdrawal/cheque payments/payments made by company etc., are not adequate as compared to the lifestyle and spending pattern of the assessee. Accordingly we hold that the adhoc addition made under section 69C towards personal expenses is not sustainable and the AO is directed to delete the same for AY 2002-03 to 2003-04. Unexplained increase in capital – AY 2007-08 10. During the course of search proceeding, 44 paintings were seized by the revenue. The assessee submitted that out of the 44 paintings 26 paintings belong to Printed from counselvise.com 8 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra her which were received as gifts from various artist and 18 paintings belonged to M/s Synergy Art Foundation Ltd. which were kept in her house as the company was shifting its operations. The AO valued the said paintings through team of experts from Nehru Art Gallery to arrive at value of Rs. 29,14,500/-. The AO treated the said amount as unexplained under section 69 for AY 2008-09 and during appellate proceedings in second round the CIT(A) deleted the addition made by the AO accepting the submissions of the assessee. During AY 2007-08 the assessee has sold 11 paintings earning a Long Term Capital Gain (LTCG) of Rs. 46,15,000/- and 3 paintings to earn a STCG of Rs. 16,50,000/-. Accordingly the assessee declared the total Capital Gain of Rs. 62,65,000/- while filing the return of income for AY 2007-08 (page 391 of PB). The AO in the second round of assessment proceedings called on the assessee to submit the details of source of acquisition of the paintings sold. The assessee submitted that out of the total paintings sold 11 paintings are out of her personal collection collected during the period 1983 to 1990 and since considerable time has passed could not provide proper details. The assessee further submitted that the balance paintings were acquired during the previous year relevant to AY 2006-07 and the gain is accordingly is declared as STCG. The assessee in substantiation of purchase and sale furnished the list of parties from whom purchase are made, the bank statement reflecting the payments, the bank statements reflecting the receipt of sale consideration. The AO while concluding the assessment for AY 2007-08 accepted the submission of the assessee towards 3 paintings and accordingly reduced Rs. 2,50,000/- as explained. The AO treated the balance amount of Rs. 60,15,000/- as unexplained increase in capital account on account of alleged sales of paintings and made addition accordingly. The relevant findings of the AO in this regard are extracted below: Printed from counselvise.com 9 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra “7.7.1 The explanation of the assessee has been considered and the same is found to be not acceptable. It can be seen that assessee did not offer any specific explanation with regard to purchase of paintings. The assessee failed to satisfactorily explain the return of income filed with DCIT-7(2), Mumbai. Further, it is worth mentioning here that assessee all along was filing return of income at Chennai and even return for the year under consideration are filed there only disclosing salary and rent income. Assessee, as an afterthought, tried to furnish a false claim that gifts were received long back from various artists before search by claiming to have filed return for A.Y 2005-06. Further, the return register for F.Y. 2006-07 bearing receipt No.0720000316 dated 23.11.2006 shows that return was filed in the name of Mr. Chedda Haresh Nagii and does not pertains to assessee. No return of income for the year under consideration was filed as per Return Register of DCIT-7(2), Mumbai. Further, assessee has not brought any documentary evidence in the form of bank statement where such sale proceeds had been credited and to show that the same were reflected in the balance sheet. It is pertinent to mention here that assessee till A.Y. 2005-06 had shown only salary income and rental income and how gifts of earlier years had come into the balance sheet for the year under consideration had not been properly explained. Hence, it is clear that assessee was claiming alleged tax free receipts from purported sale of paintings to artificially inflate the capital account to balance the insertion of bogus figures on asset side representing value of paintings owned by the assessee. In the nutshell, it can be said that assessce has not been able to satisfactorily explain the filing of return of income at Mumbai and explain the source of investment in the painting by correlating the purchases and payments made. In view of the above, the sum of Rs. 60,15,000/- being unexplained increase in capital account on account of alleged sales of paintings is added to the total income.” 11. On further appeal the CIT(A) confirmed the addition without recording any factual findings. 12. The ld. AR submitted that the lower authorities have completely jumbled the various categories of paintings found during the course of search and sold by the assessee before the date of search. The ld. AR further submitted that the assessee during the FY relevant to AY 2006-07 has purchased 33 paintings for a total consideration of Rs. 29,08,337/- and the purchases is done through proper banking Printed from counselvise.com 10 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra channel (page 264 to 274 of PB). The ld. AR also submitted that out of these 33 paintings the assessee sold 3 paintings during the FY relevant to AY 2007-8 resulting in STCG of Rs. 16,50,000/-. The ld. AR in this regard drew our attention to the return of income filed for AY 2007-08 where the STCG has been declared by the assessee after paying the tax on the same (Page 1 to 6 of Paper book). The ld. AR submitted that the assessee also sold 11 paintings during the AY 2007-08 earning a LTCG of Rs. 46,15,000/- and these paintings are assessee's personal collection over a period of 1983 to 1990. The ld. AR further submitted that since these are collected over a period time the assessee could not provide the details of purchases however the assessee has duly declared the LTCG while filing the return of income for AY 2007-08. Accordingly the ld. AR argued that there is no reason for the AO to treat the already declared income in the return as unexplained while completing the assessment under section 153A of the Act. The ld. AR drew our attention to the findings of the AO as extracted in the earlier part of this order to submit that the AO has not stated the reason for treating the Capital Gain as unexplained and no show-cause notice was issued to the assessee in this regard. The ld. AR reiterated that no incriminating material with regard to the sale is found during the course of search since the assessee has substantiated each sale by proper documentary evidences such as the bank statement etc. and therefore the addition made by the AO should fail on that count also. 13. The ld. DR on the other hand submitted that the return filed by the assessee has not been accepted by the AO and in this regard drew the attention to the findings to the AO's order where the PAN of the assessee in the registered maintained by the Department does not evidenced the return filed by the assessee. The ld. DR further argued that the addition have been made for the reason that the Printed from counselvise.com 11 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra assessee could not substantiate the source of purchase and accordingly supported the orders of the lower authorities. 14. We heard the parties and perused the material on record. The assessee during the AY 2007-08 has declared LTCG as well as STCG from sale of paintings while filing the original return of income. Subsequently while filing the return of income in response to notice under section 153A, the assessee removed the capital gain for the reason that the definition of capital asset to include paintings came into effect only from AY 2008-09 and not applicable for AY 2007- 08. From the perusal of the AO's order we notice that the AO has made the addition towards capital gain declared in the original return for the reason that (i) The assessee's claim of having filed the return for AY 2006-07 in Mumbai is false since as per department records the name of the assessee is different for the same acknowledgement number (ii) The receipt of sale consideration is not supported by credits in the bank statement (iii) The claim that the assessee has collected the paintings from 1983 to 1990 is not substantiated properly and claim of purchase during AY 2006-07 is not supported by documents 15. With regard to the allegation in (i) above we notice that the assessee vide acknowledgement number 0720000316 dated 23.11.2006 has filed the return of income for AY 2006-07 declaring a total income of Rs.14,26,833 (page 391 of paper book). The contention of the AO is that the said acknowledgement number as per records is reflecting against a different assessee and that assessee is making a false statement. However on perusal of the records with manual noting (page 392 of paper book) we notice that acknowledgement number 0720000315 and Printed from counselvise.com 12 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra acknowledgement number 0720000316 are showing the name of the assessee as Mr. Chedda Haresh Nagii with the same PAN of AABPC6476H for AY 2006-07 where two different total income is reflected. It is also relevant to note that the AO in the order under section 153A r.w.s.143(3) r.w.s.254 passed for AY 2006-07 has acknowledged the fact that the assessee has filed the original return under section 139 on 23.11.2006 and has not recorded any adverse findings in this regard. Accordingly we see merit in the argument that the said noting recorded manually is erroneous and cannot be relied on when the assessee's claim is substantiated by the copy of the ITR bearing the department seal. 16. With regard to the contention in (ii) above we notice that the assessee before the CIT(A) has furnished the breakup of LTCG and STCG declared in the original return as detailed below:- Printed from counselvise.com 13 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra 17. During the course of hearing, the ld AR took the bench though the bank statements where each of above sale consideration is reflected (page 373 to of paper book) the details of which are tabulated below Date of credit Sl.No in the above table Amount – Rs. 28.04.2006 1 to 4 (LTCG) & 1 (STCG) 14,50,000 04.05.2006 2 (STCG) 3,00,000 30.05.2006 6 (LTCG) 9,00,000 14.06.2006 7 (LTCG) 85,000 23.06.2006 8 (LTCG) 7,00,000 08.09.2006 3 (STCG) 11,50,000 14.09.2006 9 (LTCG) 1,30,000 03.11.2006 10 (LTCG) 8,00,000 Cash sales 5 & 11 (LTCG) 7,50,000 Total 62,65,000 Printed from counselvise.com 14 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra 18. From the perusal of the above it is clear that the findings of the AO that the sale proceeds are not reflecting in the bank statement of the assessee is factually incorrect. Further the bank statements reflecting the above credits are part of records submitted before the AO/CIT(A) which have not been examined. Accordingly treated the proceeds as unexplained on this ground is not tenable. 19. Now coming to the contention that the purchases are not substantiated it is submitted by the assessee that the said paintings are acquired over a period of time from 1983 to 1990 as part of personal collections and that the assessee did not maintain any records. In this regard we notice that in the above table while arriving at the LTCG the assessee has not claimed any deduction towards the cost of acquisition and the entire sale consideration is declared as LTCG which reflected in statement of accounts by the assessee. Therefore treating the same as undisclosed for the reason that purchases remain unsubstantiated in our view is not correct since no deduction has been claimed by the assessee towards the cost of purchase. 20. The assessee while filing the return of income in response to notice under section 153A has removed the LTCG & STCG offered to tax in the original return of income. The reason as stated by the assessee is that the definition of capital asset as per section 2(14) included paintings with effect from 01.04.2018 i.e. AY 2008-09 only. The revenue while concluding the assessment under section 153A r.w.s.143(3) r.w.s.254 did not contend the removal by the assessee in the return filed by the assessee but treated the same as undisclosed for the reasons stated herein above. Therefore in our considered view it is not the case of the revenue whether the gain arising out of sale of paintings is taxable or not and accordingly Printed from counselvise.com 15 ITA Nos. 4035 to 4039 & 5065/Mum/20216 Ms. Geetha Mehra we direct the AO to delete the addition made towards sale of paintings as undisclosed income under section 68 of the Act. 21. The AO while completing the assessment for AY 2003-04 has made an addition towards alleged hawala transaction entered into by the assessee to the tune of Rs. 14,65,500/-. During the course of hearing the ld. AR submitted that the ground raised against the said addition made by the AO is not pressed for the reason that the assessee is contending the impugned issue before the Hon'ble High Court and prayed that the same may be left open. Accordingly, the ground raised in this regard is dismissed as not pressed. 22. In result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 22 -10-2025. Sd/- Sd/- (JUSTICE (RETD.) C.V. BHADANG) (PADMAVATHY S) President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "