The ACIT, Circle-5, Surat V. Dr.Maheshkumar K.Shah, Surat

ITA 234/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80553 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: ANIL K SHAH
• Keywords: Unexplained investment; Gift
• Section: 143(3); 131; 68; 69; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFO RE SHRI MUKUL KR. SHRAWAT, J.M & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 234 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2006 - 07) THE ACIT CIRCLE - 5, SURAT V/S DR. MAHESHKUMAR K. SHAH 103, RUCHITA , OPP. S.B.I, NANPURA, TIMALIYAWAD, SURAT (APPELLANT) (R ESPONDENT) PAN: AEDPS0292M APPELLANT BY : SHRI M.K. SINGH, SR. D.R. RESPONDENT BY : SHRI ANIL K. SHAH, A.R. ( )/ ORDER DATE OF HEARING : 18 - 11 - 2014 DATE OF PRONOUNCEMENT : 28 - 11 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - IV, SURAT DATED 19.10.2010 FOR A.Y. 2006 - 07. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A DOCTOR AND STATED TO BE DERIVING INCOME FROM HOUSE PROPERTY , PROFESSION, CAPITAL GAINS AND OTHER SOURCES . ASSESSEE FILED HI S RETUR N OF INCOME FOR A.Y. 06 - 07 ON 29.12.2006 DECLARING TOTAL INCOME OF RS. 69,68,350 / - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER ITA NO 234/AHD/2011 . A.Y. 2006 - 07 2 SE CTION 143(3) VIDE ORDER DATED 28.11.2008 AND THE TOTAL INCOME WAS DETERMINED AT RS. 82,63,355/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 19.10.2010 GRANTED PARTIAL RELIEF TO THE AS SESSEE. AGGRIEVED BY THE A FORESAID ORDER OF CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND ; - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT HAS ERRED IN DELETING THE ADDITION OF RS. 12,42,747/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69 OF THE I.T. ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE AIR INFORMATION, A.O NOTICED THAT INVESTMENTS AGGREGATING TO RS. 12,42,747/ - WAS MADE IN HDFC MUTUAL F UNDS AND WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. ASSESSEE WAS ASKED TO SUBMIT HIS EXPLANATION AND ALSO THE SOURCE OF INVESTMENTS TO WHICH ASSESSEE INTERALIA SUBMITTED THAT THE INVESTMENTS WERE IN THE NAME OF HIS MINOR SON MALAK SHAH. IT WAS FURTHER SUB MITTED THAT HIS SON HAD RECEIVED ORNAMENTS FROM HER GREAT GRANDMOTHER THROUGH WILL AND THE SAME ORNAMENTS WERE SOLD TO B.J. ENTERPRISES FOR RS. 5,60,700/ - IN THE YEAR 2003. IT WAS FURTHER SUBMITTED THAT THE AMOUNT RECEIVED ON THE SALE OF ORNAMENTS WERE INV ESTED IN VARIOUS MUTUAL FUNDS AT THAT TIME AND ON VARIOUS DATES THOSE MUTUAL FUNDS WERE REDEEMED AND THE AMOUNT AVAILABLE ON REDEMPTION WAS INVESTED IN HDFC MUTUAL FUNDS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O FOR THE REASON TH AT THE ASSESSEE HAD NEVER SUBMITTED THE DETAILS OF GIFT IN THE RETURN OF INCOME IN ANY PREVIOUS YEARS UNDER THE CLUBBING PROVISIONS OF THE ACT, NO WEALTH TAX RETURNS WERE FILED WHEREIN THE ORNAMENTS WERE SHOWN TO HAVE POSSESSED BY THE ASSESSEE OR HIS MINOR SON AND THE DETAILS OF INVESTMENTS WERE ALSO NOT REFLECTED IN THE BOOKS OF ACCOUNTS. HE ACCORDINGLY CONSIDERED THE INVESTMENTS IN HDFC MUTUAL FUNDS TO HAVE BEEN MADE FROM UNDISCLOSED SOURC ES OF INCOME AND ADDED IT U/S 6 8 OF THE ACT. AGGRIEVED BY THE ORDE R OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE REMAND REPORT FROM THE A.O AND THE COMMENTS OF THE ASSESSEE TO THE REMAND REPORT DELETED THE ADDITION BY HOLDING AS UNDER: - ITA NO 234/AHD/2011 . A.Y. 2006 - 07 3 7. I HAVE GONE THRO UGH THE OBSERVATIONS OF THE A.O., SUBMISSIONS OF THE A.R, REMAND REPORT AND COUNTER COMMENTS TO THE REMAND REPORT. I HAVE ALSO GONE THROUGH THE EVIDENCES SUBMITTED BY THE APPELLANT. THE A.O. HAD RECEIVED INFORMATION THROUGH A.I.R. REGARDING INVESTMENT IN M UTUAL FUNDS BY THE APPELLANT. THE APPELLANT EXPLAINED THAT THE INVESTMENTS WERE OF MINOR SON 'SHRI MALAK SHAH' AND HIS PAN WAS REFLECTED IN THE INVESTMENT ONLY IN CAPACITY OF GUARDIAN. THE SOURCE AND FUND FLOW WAS EXPLAINED BY THE APPELLANT TO, THE A.O. AN D ALSO BEFORE ME. THIS WAS THROUGH SALE OF ORNAMENTS, RECEIVED THROUGH INHERITANCE FROM GREAT GRAND MOTHER TO M/S. B.J. ENTERPRISES IN THE YEAR 2003. THIS AMOUNT WAS CLAIMED AS INVESTED, REDEEMED AND REINVESTED FINALLY INTO THE MUTUAL FUNDS NOW HELD BY THE A.O. AS UNEXPLAINED. IN SUPPORT OF THIS CLAIM, THE APPELLANT HAS GIVEN RELEVANT EVIDENCES, VIZ. WILL, COMPLETE EVIDENCES FOR SALE OF THE ORNAMENTS RECEIVED THROUGH WILL, EXTRACTS FROM THE BOOKS MAINTAINED BY THE MINOR, STATEMENT OF MUTUAL FUNDS AND RELEVA NT BANK STATEMENTS. THESE EVIDENCES HAVE NOT BEEN CONTROVERTED BY THE A.O. THE A.O. SEEMS TO HAVE COME TO HIS CONCLUSIONS ON CONSIDERATION OF THE FACT THAT ORNAMENTS WERE ONLY OF GOLD AS DIAMONDS WERE NOT SPECIFICALLY MENTIONED AND THE PURCHASER (M/S. B.J. ENTERPRISES) DID NOT APPEAR IN RESPONSE TO THE SUMMONS U/S 131 OF THE ACT. THIS HAS BEEN SHOWN BY THE APPELLANT TO BE ON ACCOUNT OF INSUFFICIENT TIME GIVEN FOR APPEARANCE AND NON ACCEPTANCES OF EVIDENCES SOUGHT TO BE, SUBMITTED BY M/S. B.J. ENTERPRISES. T HE SAID EVIDENCES ACCEPTED DURING THE COURSE OF APPEAL PROCEEDINGS WERE FORWARDED TO THE A.O. WHO HAS NOT BEEN PROVED THEM TO BE NOT GENUINE. THE OTHER FACT INFLUENCING THE A.O. WAS THAT INVESTMENTS OF THE MINOR WERE NOT SHOWN IN THE BOOKS OF THE APPELLANT AND ALSO BY THE FACT THAT INCOME IN THE NATURE OF CAPITAL GAIN/LOSS AND INCOME BY WAY OF DIVIDENDS WERE NOT CONSIDERED FOR CLUBBING. THE EXPLANATION GIVEN BY THE A.R. THAT INVESTMENTS WERE NOT REQUIRED TO BE CLUBBED U/S 64 OF THE IT ACT AND THE INCOME IN THE NATURE OF LONG TERM CAPITAL GAIN AND DIVIDEND / PPF INTEREST WERE EXEMPT AND THEREFORE NOT REQUIRED TO BE CLUBBED U/S 64 OF THE IT ACT WITH INCOME OF THE PARENTS IS R E QUIRED TO BE UPHELD. ONLY TAXABLE INCOME OF THE MINOR WHICH IS EARNED OTHER THAN BY U SE OF SKILLS OF THE MINOR ARE REQUIRED TO BE CLUBBED WITH THE INCOME OF THE PARENTS. 7.1 FROM THE MUTUAL FUND STATEMENT, IT IS SEEN THAT IT CLEARLY MENTIONS THE NAME OF THE MINOR WHICH SHOWS THAT THE INVESTMENT WAS OF THE MINOR. THE PAN OF THE APPELLANT IS MENTIONED AS THAT OF THE GUARDIAN AND ALSO THE INVESTOR SINCE THE HOLDER IS A MINOR. THE BANK STATEMENTS AND EXTRACTS FROM THE BOOKS OF THE MINOR ESTABLISH/THE FLOW OF FUNDS FROM SALE PROCEEDS OF ORNAMENTS TO INVESTMENT IN THE MUTUAL FUND CONSIDERED A S UNEXPLAINED BY THE A.O. IN MY OPINION, THE APPELLANT HAS BEEN ABLE TO SHOW THAT THE MUTUAL FUND INVESTMENT WAS OF HIS MINOR SON. HE HAS ALSO BEEN ABLE TO ESTABLISH THE NATURE AND SOURCE OF THE FUNDS USED FOR INVESTMENT. SINCE NATURE AND SOURCE OF THE INV ESTMENT IS EXPLAINED, TREATING THE SAME AS UNEXPLAINED WAS INCORRECT. ADDITION WAS UNWARRANTED AND LIABLE TO BE DELETED. GROUND NO. 1 TO 8 OF THE APPELLANT ARE ALLOWED. THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE U/S 69 OF THE IT ACT MOUNTING TO RS.12 ,42,747/ - 5. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. ITA NO 234/AHD/2011 . A.Y. 2006 - 07 4 6. BEFORE US, LD. D.R. POINTED TO THE VARIOUS FINDINGS OF A.O AND REPORTED THAT THE INVESTMENTS OR THE GIFT WAS NEVER SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME OR HIS BOOKS OF ACCOUNTS. HE FURTHER POINTED THAT A.O HAD ISSUED SUMMONS U/S 131 TO THE PARTY TO WHOM THE ASSESSEE HAD SOLD THE ORNAMENTS BUT NO RESPONSE /COMPLIANCE WAS RECEIVED. HE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND REITERATED THE SUBMISS IONS MADE BEFORE CIT(A) AND ALSO POINTED TO THE VARIOUS SUBMISSIONS MADE BY IT IN THE REMAND REPORT. HE FURTHER SUBMITTED THAT THE ORNAMENTS WERE RECEIVED AS GIFT AND THE SALE PROCEEDS OF THE ORNAMENTS WERE USED FOR MAKING THE INVESTMENTS. THE LD. A.R. ALS O PLACED ON RECORD TH E TRANSLATED COPIES OF THE WILL OF MANGLABEN (GREAT GRANDMOTHER OF MALAK SHAH) . HE ALSO PLACED ON RECORD THE AFFIDAVIT OF VIKAS SHAH WHEREIN HE HAS STATED TO HAVE PURCHASED POLISH ED DIAMONDS FROM MALAK SHAH AND ALSO HAD CONFIRMED THE P AYMENTS MADE THOUGH D.D. IT WAS FURTHER SUBMITTED IN THE AFFIDAVIT THAT DUE TO VERY SHORT TIME DURING DIWALI VACATION HE COULD NOT APPEAR BEFORE A.O ON THE APPOINTED DATE BUT SUBSEQUENTLY HE HAD APPEARED BEFORE THE A.O AND FUR NISHED THE NECESSARY DETAILS. THE LD. A.R. THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , SUBMISSIONS OF THE ASSESSEE TO BE REMAND REPORT AND THE COMMEN TS OF THE A.O ON THE REMAND REPORT HAS DELETED THE ADDITION. HE HAS FURTHER GIVEN A FINDING THAT ASSESSEE THROUGH THE FUND FLOW HAS EXPLAINED THE INVESTMENTS AND HAD ALSO PLACED ALL THE RELEVANT EVIDENCES WHICH HAVE NOT BEEN CONTROVERTED BY A.O. HE HAS FUR THER GIVEN A FINDING THAT THE MUTUAL FUNDS STATEMENTS CLEARLY MENTIONS THE NAME OF MINOR IN WHOSE NAME THE INVESTMENTS HAVE BEEN MADE AND THE PAN NUMBER OF THE ASSESSEE HAS BEEN MENTIONED AS OF THE GUARDIAN. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL O N RECORD TO CONTROVERT THE FINDINGS OF CIT(A) NOR HAS PLACED ANY MATERIAL ON RECORD TO DISPROVE THE AFFIDAVIT OF THE PURCHASER OF THE ORNAMENTS OF THE WILL OF SMT. MANGLABEN (GREAT GRAND MOTHER OF MALAK SHAH) . IN VIEW OF THE AFORESAID FACTS, WE FIND NO REA SON TO INTERFERE WI T H THE ORDER OF CIT(A) AND THIS GROUND OF REV E NUE IS DISMISSED. ITA NO 234/AHD/2011 . A.Y. 2006 - 07 5 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28 - 11 - 201 4 . SD/ - SD/ - (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMB E R ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONC ERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD