ASSOCIATED CAPSULES P.LTD, MUMBAI V. ASST CIT CEN CIR 42, MUMBAI

ITA 2750/MUM/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6651 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Transfer pricing; International transaction; Cost of acquisition
• Section: 13; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI , .'#$ ,'( BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER . 2750 / /201 4 (. . 2008-09 ) ITA NO.2750/MUM/2014 (A.Y.2008-09) ASSOCIATED CAPSULES PVT. LTD. 1001, DALAMAL HOUSE, 10 TH FLOOR, NARIMAN POINT, MUMBAI 400 021 PAN: AAACA4769K ...... / / APPELLANT VS. THE ASSTT. CIT, CENTRAL CIRCLE -42, AAYKAR BHAVAN, M.K.ROAD, MUMBAI- 400 020 ..... 01/ RESPONDENT /2/ APPELLANT BY : SHRI J.D. MISTRY, SR. ADVO CATE WITH SHRI. MADHUR AGARWAL, ADVOCATE 012/ RESPONDENT BY : SHRI AKHTAR H. ANSARI, 31 / DATE OF HEARING : 22/07/2020 456 31 / DATE OF PRONOUNCEMENT : 07/09/2020 / ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI-38 (IN SHORT THE CIT (A)) DATED 31/01/2014 FOR THE ASSESSMENT YEAR 2008-09. 2 ITA NO.2750/MUM/2014(A.Y.2008-09) 2. THE ASSESSEE IN APPEAL HAS PRIMARILY RAISED THRE E ISSUES. THE CONCISE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE AS UNDER:- 1.0 GROUND NO.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSTT. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE -42, MUMBAI (HAO) IN TREATING THE PROVISION OF CORPORATE GUARANTEE BY TH E APPELLANT TO ITS AE AS AN INTERNATIONAL TRANSACTION. 2.0 GROUND NO.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI ( CIT(A))ERRED IN HOLDIN G THE RATE OF GUARANTEE COMMISSION AT 2.5% AS THE ARMS LENGTH PRICE ON THE GUARANTEE AMO UNT OF RS.15,19,44,000/- WITHOUT APPRECIATING THAT THE ASSOCIATE ENTERPRISE HAS AVAI LED THE FACILITY TO THE EXTENT OF RS.2.48 CRORES. 3.0 GROUND NO.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-38, MUMBAI (CIT(A))ERRED IN UPHOLDI NG THE ORDER OF THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-42, MUMBAI (AO') IN MAKING AN ADDITION OF RS . 1,66,80,000/- TO TOTAL INCOME ON ACCOUNT OF UNEXPLAINED PAINTINGS . 2. SHRI J.D. MISTRY, APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT IN GROUND NO.1 OF THE APPEAL, THE ASSESSEE HAS ASSAILED THE F INDINGS OF ASSESSING OFFICER AND THE CIT(A) IN TREATING THE PROVISION OF CORPORATE GUARA NTEE BY THE ASSESSEE FOR ITS ASSOCIATE ENTERPRISE (AE) AS INTERNATIONAL TRANSACT ION. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CORPORATE GUARANTEE OFF ERED BY THE ASSESSEE ON BEHALF OF ITS AE IS NOT AN INTERNATIONAL TRANSACTION AND H ENCE, NO ARMS LENGTH PRICE (ALP) IS REQUIRED TO BE DETERMINED FOR SAID TRANSACTION. TO SUPPORT HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOL LOWING DECISIONS:- (1) BHARTI AIRTEL LTD. VS. ACIT, 161 TTJ 428 (DEL.) (2) MICRO INK LTD. VS. ACIT, 175 TTJ 8 (AHD.) (3) REDINGTON (INDIA) LTD. VS. JCIT, 49 TAXAMANN.CO M 146 (CHENNAI) 3 ITA NO.2750/MUM/2014(A.Y.2008-09) 2.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T WITHOUT PREJUDICE TO HIS PRIMARY CONTENTION, IF AT ALL CORPORATE GUARANTEE I S TREATED AS AN INTERNATIONAL TRANSACTION, THEN THE ADJUSTMENT FOR THE SAME SHOUL D BE RESTRICTED TO 0.5% OF THE FACILITY AVAILED BY THE ASSESSEE APPELLANT. THE LD . COUNSEL OF THE ASSESSEE SUBMITTED THAT THE TOTAL LOAN SANCTIONED BY THE BANK IN FAVOU R OF ASSOCIATED ENTERPRISE (AE) WAS RS.15.19 CRORES FOR WHICH CORPORATE GUARANTEE WAS G IVEN BY THE ASSESSEE. HOWEVER, THE AE DURING THE RELEVANT PERIOD HAD AVAILED LOAN FACILITY ONLY TO THE EXTENT OF RS.2.48 CRORES. THE AE HAD NOT TAKEN BENEFIT OF THE ENTIRE SANCTIONED AMOUNT, THEREFORE, THE ALP ON CORPORATE GUARANTEE SHOULD BE RESTRICTED TO THE EXTENT FACILITY AVAILED. THE LD. COUNSEL FOR THE ASSESSEE POINTED THAT THIS PRAYER WAS MADE BEFORE THE CIT (A), HOWEVER, NO FINDINGS WERE GIVEN BY THE FIRST APPELLATE AUTHORITY. 3. IN RESPECT OF GROUND NO.3, THE LD. COUNSEL FOR T HE ASSESSEE NARRATING THE FACTS SUBMITTED, THAT THE ASSESSEE IS A COLLECTOR OF PAIN TINGS. THE ASSESSEE HAD COLLECTION OF RARE PAINTINGS ACQUIRED OVER A LONG PERIOD OF TI ME. DURING THE COURSE OF SEARCH ACTION UNDER SECTION 132 OF THE ACT ON 17/4/2007 AT THE PREMISES OF THE GROUP COMPANIES AND THE RESIDENTIAL PREMISES OF PROMOTERS CERTAIN COSTLY PAINTINGS WERE SEIZED. THE ASSESSEE HAD FURNISHED BILLS, VOUCHERS AND VARIOUS OTHER EVIDENCES IN THE FORM OF MAGAZINE REPORTS, ETC. TO ESTABLISH THAT TH E PAINTINGS WERE ACQUIRED/PURCHASED BY THE ASSESSE EITHER DIRECTLY F ROM THE PAINTERS OR FROM THE GALLERIES OVER THE PERIOD OF TIME. OUT OF 288 PAIN TINGS FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE 71 PAINTINGS AMOUNTING TO RS.9,99,20,000/- WERE SEIZED. THE REVENUE ACCEPTED THE EVIDENCES FURNISHED BY TH E ASSESSEE IN RESPECT OF MAJORITY OF THE PAINTINGS, HOWEVER, THE ASSESSING O FFICER WAS NOT CONVINCED BY THE DOCUMENTS FURNISHED BY THE ASSESSEE IN RESPECT OF P AINTINGS (AS PER ANNEXURE TO ASSESSMENT ORDER) VALUED AT RS.1,66,80,000/-. THE L D. COUNSEL OF THE ASSESSEE 4 ITA NO.2750/MUM/2014(A.Y.2008-09) ASSERTED THAT EVEN OTHERWISE THE ADDITION IS UNSUST AINABLE AS THE PAINTINGS IN QUESTION WERE ACQUIRED PRIOR TO SEARCH BLOCK PERIOD , THEREFORE, ADDITION QUA SUCH PAINTINGS CANNOT BE MADE IN SEARCH BLOCK PERIOD. TH E LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ADDITIONS IN RESPECT OF PAIN TINGS WERE MADE IN THE CASE OF MS. KAVITA SINGH, ONE OF THE PROMOTERS OF THE ASSESSEE COMPANY. THE ISSUE TRAVELLED TO THE TRIBUNAL IN ITA NO. 1242/MUM/2012. THE TRIBUNAL VIDE ORDER DATED 08/12/2017 ACCEPTED THE DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSE DURING SEARCH AND ASSESSMENT STAGE AND DELETED THE ADDITION. THE CASE OF THE ASSESSEE IS ON SAME PEDESTAL, THEREFORE, THE ADDITIONS IN THE CASE OF A SSESSE DESERVES TO BE DELETED ON SAME ANALOGY. 4. PER CONTRA, SHRI AKHTAR H. ANSARI, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER AND PRAYED FOR DISMISSI NG THE APPEAL OF ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE CIT VS. EVEREST KENTO CYLINDERS LTD. REPOR TED AS 378 ITR 57, HAS HELD THAT CORPORATE GUARANTEE TO AN OVERSEAS AE IS AN INTERNA TIONAL TRANSACTION. 4.1. IN RESPECT OF GROUND NO.3 ASSAILING ADDITION O N ACCOUNT OF UNEXPLAINED PAINTINGS, THE LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE HAS FAILED TO BRING ON RECORD COGENT EVIDENCES TO SUPPORT DATE OF PURCHASE, COST OF PAINTING AND FROM WHOM PAINTINGS WERE PURCHASED. THE DOCUMENTS P RODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE CIT (A) WERE N OT GENUINE. THE ASSESSEE FAILED TO FURNISH CONFIRMATION FROM THE PAINTERS FROM WHOM TH E PAINTINGS WERE ALLEGEDLY PURCHASED. THE ASSESSEE NEITHER FURNISHED PAN DETAI LS NOR THE ADDRESSES OF THE PAINTERS. THE VOUCHERS ON WHICH THE ASSESSEE HAS P LACED HEAVY RELIANCE ARE SELF- SERVING DOCUMENTS AND HENCE, NO RELIANCE CAN BE PLA CED ON SELF-GENERATED EVIDENCE. 5 ITA NO.2750/MUM/2014(A.Y.2008-09) 5. CONTROVERTING THE ARGUMENTS ADVANCED BY LD. DEPA RTMENTAL REPRESENTATIVE, THE LD. COUNSEL FOR THE ASSESSEE ASSERTED THAT THE DETAILS OF THE PAYMENTS FOR PURCHASE OF PAINTINGS WERE PROVIDED TO THE ASSESSIN G OFFICER/CIT (A). SINCE SOME OF THE PAINTINGS WERE PURCHASED LONG TIME BACK, THE AS SESSEE COULD NOT TRACE THE PAINTERS. THE LD. COUNSEL FOR THE ASSESSE REFERRIN G TO ANNEXURE I, II AND III AT PAGES 14 TO 91 OF THE PAPER BOOK, AS A SAMPLE CHECK EXPLAINE D FROM THE DOCUMENTS ON RECORD THE DETAILS OF PAINTINGS SEIZED, PROOF OF PAYMENT F OR THE SAID PAINTINGS, SOURCE OF PAINTINGS AND THE DATE OF PURCHASE. WITHOUT PREJUDICE TO THE INITIAL ARGUMENT, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONS HAVE BEEN MADE BY THE REVENUE BY ADOPTING CURRENT VALUE OF THE PAINTINGS. THE ASSESSEE ACQUIRED THES E PAINTINGS OVER A PERIOD OF TIME AND WERE PART OF ASSESSEES COLLECTION GARNERED GRA DUALLY. THE VALUE OF SOME RARE PAINTINGS INCREASED AS THE TIME ELAPSED. THEREFORE, FOR THE PURPOSE OF ADDITION, THE PURCHASE VALUE SHOULD BE CONSIDERED AND NOT THE CUR RENT VALUE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO EXAMINED TH E DOCUMENTS PLACED ON RECORD BY THE ASSESSEE IN THE FORM OF PAPER BOOK AND THE DECI SIONS ON WHICH RELIANCE HAS BEEN PLACED. 7. THE ASSESSEE IN GROUND NO.1 OF THE APPEAL HAS AS SAILED ADDITION MADE ON ACCOUNT OF CORPORATE GUARANTEE FACILITY PROVIDED BY THE ASSESSEE FOR ITS OVERSEAS AE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACT URING EMPTY HARD GELATINE CAPSULES. THE ASSESSEE PROVIDED CORPORATE GUARANTEE OF 2.4 MILLION EUROS (EQUIVALENT TO RS.15,19,44,000/-) TO ITS CROATIAN A E. THE ASSESSEE DID NOT MAKE ANY ADJUSTMENT ON ACCOUNT OF CORPORATE GUARANTEE FACILI TY PROVIDED TO ITS AE. THE TRANSFER PRICING OFFICER (TPO) HELD THAT THE CORPOR ATE GUARANTEE IS AN INTERNATIONAL 6 ITA NO.2750/MUM/2014(A.Y.2008-09) TRANSACTION. THE TPO APPLIED CUP TO BENCH MARK THE INTERNATIONAL TRANSACTION HOLDING GUARANTEE COMMISSION @3% AND MADE ADJUSTME NT OF RS.20,89,230/- . THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE CIT (A). THE FIRST APPELLATE AUTHORITY UPHELD THE FINDINGS OF TPO IN TREATING CORPORATE GU ARANTEE AS INTERNATIONAL TRANSACTIONS. HOWEVER, THE RATE OF COMMISSION WAS R EDUCED FROM 3% TO 2.5%. AGAINST THE ADDITION CONFIRMED, THE ASSESSEE IS IN APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSE IN SUPPORT OF HI S SUBMISSIONS THAT CORPORATE GUARANTEE IS NOT AN INTERNATIONAL TRANSACTION HAS P LACED RELIANCE ON TRIBUNAL DECISIONS. THE CONTENTIONS RAISED BY LD.COUNSEL ARE UNSUSTAINABLE IN THE LIGHT OF DECISION RENDERED BY HON'BLE JURISDICTIONAL HIGH CO URT IN THE CASE OF EVEREST KENTO CYLINDERS LTD. (SUPRA). THUS, WE HOLD CORPORATE GUA RANTEE FACILITY PROVIDED TO OVERSEAS AE BY THE ASSESSE IS AN INTERNATIONAL TRAN SACTION. IN SO FAR AS THE RATE OF COMMISSION IS CONCERNED, THE HONBLE HIGH COURT IN THE AFOREMENTIONED DECISION HAS UPHELD CORPORATE GUARANTEE COMMISSION AT 0.5%. THE CORPORATE GUARANTEE RATE IN THE PRESENT CASE IS ACCORDINGLY RESTRICTED TO 0.5%. THE GROUND NO.1 OF THE APPEAL IS PARTLY ALLOWED IN THE TERMS AFORESAID. 9. IN GROUND NO.2 OF THE APPEAL, THE ASSESSEE HAS A SSAILED THAT THE ALP OF THE CORPORATE GUARANTEE COMMISSION SHOULD BE RESTRICTED TO THE EXTENT OF FACILITY AVAILED BY ASSESSEES A.E. THE LD. COUNSEL FOR THE ASSESSE HAS POINTED THAT AS AGAINST THE FACILITY OF RS.15.19 CRORES, THE AE OFASSESSE HAS A VAILED BENEFIT TO THE EXTENT OF RS.2.48 CRORES ONLY. WE FIND MERIT IN THE SUBMISSIO NS MADE BY THE LD. COUNSEL. THE TRIBUNAL IN CATENA OF DECISIONS HAS HELD THAT BANK GUARANTEE AND CORPORATE GUARANTEE ARE AT VARIANCE. IN THE CASE OF BANK GUAR ANTEE FINANCIAL AND CAPITAL ASSETS OF THE ENTITY ARE TAKEN AS SECURITY BY THE BANK TO COVER THE FINANCIAL RISK. THUS, THE ASSETS OF THE ENTITY ARE BLOCKED TO MEET THE OBLIGA TION IN THE CASE OF DEFAULT AS A 7 ITA NO.2750/MUM/2014(A.Y.2008-09) CONSIDERATION FOR EXTENDING GUARANTEE FACILITY, THE BANK CHARGES COMMISSION ON THE ENTIRE GUARANTEE FACILITY EXTENDED. WHEREAS, IN THE CASE OF CORPORATE GUARANTEE THERE IS NO COMMITMENT OF FINANCIAL OR CAPITAL ASSE TS OF THE ENTITY. THE GUARANTEE IS ISSUED WITHOUT ANY SECURITY OR UNDERLYING ASSET. CORPORATE GUARANTEE IS EXTENDED BY ONE CORPORATE ENTITY TO A THIRD PARTY FOR OR ON BEH ALF OF ITS SUBSIDIARY/GROUP ENTITY/ASSOCIATED ENTERPRISE. IT IS IN THE NATURE O F CONTINGENT LIABILITY. KEEPING IN VIEW, THE NATURE AND EXTENT OF EXPOSURE AND LIABILI TY OF GUARANTOR IN THE CASE OF CORPORATE GUARANTEE, IT WOULD BE JUSTIFIED IF GUARA NTEE COMMISSION IS CHARGED TO THE EXTENT OF ACTUAL EXPOSURE OF FACILITY AVAILED INSTE AD OF GROSS AMOUNT OF FACILITY EXTENDED. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUN AL IN THE CASE OF M/S BS LIMITED VS. ASST. COMMISSIONER OF INCOME TAX REPORTED AS 94 TAXMANN.COM 346 (HYD.). THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED HEREIN BELOW: 14.2 FURTHER, LD. AR SUBMITTED THAT THE ASSESSEE HAS EX TENDED THE CORPORATE GUARANTEE TO THE AE WHEREAS AE HAS NOT UTILIZED THE FULL FINANCI AL FACILITY DURING THE YEAR, HENCE, THE QUANTUM CANNOT BE DETERMINED IN FULL VALUE OF CORPO RATE GUARANTEE. WE ARE IN AGREEMENT WITH THE ASSESSEE THAT CORPORATE GUARANTEE IS CONTI NGENT LIABILITY, RELEVANT CONSEQUENCE DEPENDS UPON FUTURE EVENT. HOWEVER, THE QUANTUM OF EXPOSURE SHOULD BE ON THE BASIS OF ACTUAL EXPOSURE. IN THIS CASE, IT IS NOT CLEAR FROM THE DOCUMENT SUBMITTED BEFORE US THE ACTUAL EXPOSURE. THEREFORE, WE FIND IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF TPO/AO TO DETERMINE THE ACTUAL EXPOSURE OF CONTINGE NT LIABILITY FOR THIS AY AND APPLY THE RATE OF 0.53% AS PER THE RATIO OF GLENMARK PHARMACE UTICALS LTD. (SUPRA) ON THE ACTUAL CONTINGENT LIABILITY. IN VIEW OF OUR ABOVE DISCUSSION, THE GROUND NO. 2 I S ALLOWED IN PRINCIPLE. IN THE INSTANT CASE, THE ASSESSE HAS PURPORTEDLY AVAILED F ACILITY OF RS.2.48 CRORES AS AGAINST CORPORATE GUARANTEE OF RS.15.19 CRORES. FOR THE PUR POSE OF DETERMINATION OF CORPORATE GUARANTEE COMMISSION IN LINE WITH OUR OBS ERVATIONS AND FOR THE PURPOSE TO ASCERTAIN/VERIFY THE EXTENT OF CORPORATE GUARANTEE EXPOSURE, WE DEEM IT APPROPRIATE 8 ITA NO.2750/MUM/2014(A.Y.2008-09) TO RESTORE THIS ISSUE TO THE ASSESSING OFFICER. THE GROUND NO. 2 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE IN THE ABOVE SAID T ERMS. 10. THE THIRD GROUND OF APPEAL IS IN RESPECT OF ADD ITION OF RS.1,66,80,000/- ON ACCOUNT OF UNEXPLAINED PAINTINGS FOUND DURING SEARC H OPERATION AT THE PREMISES OF THE ASSESSEE. THERE WERE IN TOTAL 288 PAINTINGS WHI CH WERE INVENTORIED HAVING AGGREGATE VALUE OF RS. 19,39,92,950/-. THE ASSESSE WAS ASKED TO EXPLAIN SOURCE OF PURCHASE OF THE SAID PAINTINGS. OUT OF 288 PAINTING S, 71 PAINTINGS HAVING AGGREGATE VALUE OF RS.9,99,20,000/- WERE PUT UNDER CONSTRUCTI VE SEIZURE. THE ASSESSEE FURNISHED EVIDENCES IN THE FORM OF BILLS, VOUCHERS, MAGAZINES, ETC. TO SHOW THE PURCHASE COST OF THE PAINTINGS, AS WELL AS THE DATE OF PURCHASE OF PAINTINGS. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION AN D THE DOCUMENTS FURNISHED BY THE ASSESSE IN RESPECT OF SOME OF THE PAINTINGS. THE PR IMARY REASONS FOR REJECTION OF EVIDENCES BY THE ASSESSING OFFICER WERE:- (I) THE DESCRIPTION OF THE PAINTINGS MENTIONED ON T HE VOUCHERS DO NOT MATCH; (II) KUTCHA BILLS FURNISHED BY THE ASSESSEE DO NOT HAVE THE DESCRIPTION OF THE PAINTINGS; (III) VOUCHERS FURNISHED ARE WITHOUT DESCRIPTIONS OF THE PAINTERS/ARTISTS; (IV) EVIDENCE FURNISHED IN THE FORM OF OLD MAGAZIN ES ARE NOT VERIFIABLE AND THEREFORE, DIFFICULT TO ASCERTAIN GENUINENESS. THE ASSESSING OFFICER THUS, MADE ADDITION OF RS.1,6 6,80,000/- IN RESPECT OF 40 PAINTINGS (AS PER ANNEXURE TO THE ASSESSMENT ORDER) AS UNEXPLAINED INVESTMENT. IN FIRST APPEAL, THE CIT(A),, UNCONVINCED WITH THE EX PLANATIONS AND CONTENTIONS MADE ON BEHALF OF THE ASSESSE, CONFIRMED THE ADDITION IN TOTO. 11. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSE E WAS ASKED TO DEMONSTRATE FROM 9 ITA NO.2750/MUM/2014(A.Y.2008-09) THE DOCUMENTS ON RECORD THAT THE DESCRIPTIONS OF TH E PAINTINGS FOUND AT THE PREMISES OF THE ASSESSEE TALLY WITH THE DESCRIPTIONS MENTION ED IN THE DOCUMENTS FURNISHED. AS A SAMPLE, THE LD. COUNSEL EXPLAINED THAT THE FIRST PAINTING MENTIONED IN THE ANNEXURE TO THE ASSESSMENT ORDER IS WOMAN WITH POTS BY B. PRABHA. THE LD. COUNSEL REFERRED TO PAGES 16 AND 110 TO 116 OF THE PAPER BO OK. AT PAGE 16 THE DETAILS OF THE PAINTING ARE GIVEN ALONG WITH ITS IMAGE, LOCATION A ND THE AREA WHERE THE PAINTING IS PLACED. IN THE DESCRIPTION OF THE PAINTING THE NAM E OF ARTIST IS MENTIONED ALONG WITH THE MEDIUM OF PAINTING I.E. OIL ON CANVASS AND THE SIZE OF THE PAINTING I.E. 39 X 93 INCHES. AT PAGES 110 TO 116 IS AN ARTICLE FROM MAGA ZINE INSIDE OUTSIDE OCTOBER/NOVEMBER 1991 EDITION. THE ARTICLE TITLED STYLE ENCAPSULATED IS ON THE COLLECTION OF PAINTINGS BY ASSOCIATED CAPSULES GROU P. AT PAGE 111 IS A PHOTOGRAPH WHEREIN THE PAINTING WOMAN WITH POTS CAN BE SEEN PLACED AT OFFICE RECEPTION. THE EDITION OF MAGAZINE IN WHICH THE ARTICLE WAS PUBLIS HED INDICATES THAT THE PAINTING WAS PURCHASED BY THE ASSESSEE PRIOR TO OCTOBER/NOVEMBER , 1991. SINCE THE PAINTING IS OLD AND WAS NOT ACQUIRED DURING THE BLOCK PERIOD, T HE ADDITION CANNOT BE MADE IN RESPECT OF SAID PAINTING. THE REASON GIVEN BY ASSES SING OFFICER FOR REJECTING THE EVIDENCE FURNISHED BY THE ASSESSEE IS THAT IT IS DI FFICULT TO ASCERTAIN THAT IT IS THE SAME PAINTING AS SHOWN IN THE OLD MAGAZINE. THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER PURELY ON SURMISES AND CONJECTURES. 12. THE NEXT PAINTINGS TAKEN AS A TEST SAMPLE BY TH E LD. COUNSEL FOR THE ASSESSEE IS AT SERIAL NO.2 AND 3 OF THE ANNEXURE TO ASSESSMENT ORDER I.E. PAINTINGS TITLED 2 HANDS (BRONZE) AND 2 HANDS (BLACK) BY SHAMSHAD. THE L D. COUNSEL FOR THE ASSESSEE REFERRING TO PAGES 19, 20 AND 21 OF THE PAPER BOOK SUBMITTED THAT THE PAINTINGS WERE PURCHASED FROM LAWRENCE ART GALLERY ON 19/12/1997. THE INVOICE OF THE PAINTING IS AT PAGE 19 OF THE PAPER BOOK. AT PAGES 20 AND 21 AR E THE DESCRIPTION OF PAINTINGS 10 ITA NO.2750/MUM/2014(A.Y.2008-09) ALONG WITH THE IMAGE AS WELL AS THE LOCATION OF THE OFFICE WHERE PAINTINGS ARE PLACED. THE ASSESSING OFFICER HAS REJECTED THE DOCUMENTS FU RNISHED BY THE ASSESSEE ON THE GROUND THAT THE DESCRIPTION OF THE PAINTINGS DOES N OT MATCH WITH THE BILL DATED 19/12/97. A PERUSAL OF THE INVOICE AT PAGE 19 OF TH E PAPER BOOK WOULD SHOW THAT THE NAME OF ARTIST SHAMSHAD IS MENTIONED AGAINST 2 PA INTINGS. BOTH THE PAINTINGS BEAR THE SIGNATURE OF THE ARTIST ON REVERSE. THE LD. COU NSEL FOR THE ASSESSE POINTED THAT IN SO FAR AS TITLE OF THE PAINTINGS IS CONCERNED, IT M AY DIFFER AS THE TITLES WERE GIVEN BY THE ASSESSEE. AS REGARDS SIZE, MEDIUM AND NAME OF THE ARTIST, THERE CAN BE NO DISPUTE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LIKEWISE FOR OTHER PAINTINGS IN RESPECT OF WHICH ADDITIONS HAVE BEEN MADE, EVIDE NCES WERE FURNISHED BY THE ASSESSE. THE ASSESSING OFFICER REJECTED THE EVIDENC ES MERELY ON PRESUMPTIONS, WITHOUT ASSIGNING ANY VALID AND SUSTAINABLE REASONS . 13. WE HAVE EXAMINED THE EVIDENCES FURNISHED BY THE ASSESSEE TO SUBSTANTIATE GENUINENESS OF PURCHASE OF THE PAINTINGS. WE FIND THAT FOR SIMILAR REASONS ADDITIONS WERE MADE IN THE HANDS OF MS. KAVITA SINGH AND ANOT HER GROUP CONCERN M/S. ACG ARTS AND PROPERTIES PVT. LTD. IN THE ASSESSMENT YEA R 2008-09. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MS. KAVITA SINGH IN ITA NO.1242/MUM/2012 DECIDED ON 08/12/2017 DELETED THE ADDITION QUA UNEXPLAINED INV ESTMENTS IN PAINTINGS. SINCE THE NUMBER OF PAINTINGS INVOLVED IN THE AFORESAID A PPEAL WERE COMPARATIVELY LESS, THE CO-ORDINATE BENCH TOOK PAINS TO EXAMINE EVIDENC E IN EACH OF THE PAINTINGS. IN THE CASE OF M/S. ACG ARTS AND PROPERTIES PVT. LTD. VS. DCIT, IN ITA NO.2749/MUM/2014 DECIDED ON 29/01/2020, THE TRIBUNA L RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE I N THE LIGHT OF DECISION RENDERED IN THE CASE OF MS. KAVITA SINGH. THE RELEVANT EXTRACT OF T HE ORDER READS AS UNDER:- 11 ITA NO.2750/MUM/2014(A.Y.2008-09) 4. UPON DUE CONSIDERATION, WE FIND THAT THE ISSUE O F ADDITION ON ACCOUNT OF UNEXPLAINED PAINTINGS, UNDER SIMILAR FACTUAL MATRIX, WAS SUBJEC T MATTER OF APPEAL BEFORE THIS VERY BENCH IN THE CASE OF MS. KAVITA SINGH VIDE ITA NO. ITA NO . 1242/MUM/2012 ORDER DATED 08/12/2017. IN THE SAID ORDER, THE BENCH AT PARAS 6 TO 9, APPRECIATED THE VARIOUS DOCUMENTARY EVIDENCES FURNISHED BY THE ASSESSEE IN SUPPORT OF ACQUISITION OF PAINTINGS AND ADJUDICATED THE MATTER SUBSTANTIALLY IN ASSESSEES FAVOR IN THE LIGHT OF THESE EVIDENCES. SIMILAR EVIDENCES ARE STATED TO HAVE BEEN PLACED BE FORE US IN THE PAPER-BOOK AND THE ASSESSEE HAS DRAWN ANALOGY BY TABULATING THE SAME I N THE FOLLOWING MANNER: - SR.NO. ANNEXURE EVIDENCE NO. OF PAIN TINGS ADDITION BY A.O. (IN RS.) ITAT ORDER OF MRS. KAVITA SINGH-ITA NO.1242/MUM/2012 DATED 8 OCTOBER, 2017 SIMILAR ISSUE PRIOR TO BLOCK PERIOD (ANNEXURE -I TO III) 1 ANNEXURE-I MAGAZINES 11 1,20,00,000 2 ANNEXURE-II PHOTOGRAPHS 3 60,50,000 3 ANNEXURE-III VOUCHERS, BILLS 11 88,50,000 PAGE 6 &7, PARA-7 4 ANNEXURE IV PANCHNAMA 11 1,42,00,000 PAGE-6, PARA -7 5 ANNEXURE V LOW VALUE 5 2,55,000 PAGE-8, PARA -9 6 ANNEXURE VI VOUCHERS, BILLS (DURING THE BLOCK PERIOD) 4 2,79,00,000 PAGE-8, PARA-9 SINCE FACTS AS WELL AS CIRCUMSTANCES OF ADDITIONS A RE PARI-MATERIA THE SAME, WE RESTORE THE MATTER BACK TO THE FILE OF LD. AO AND DIRECT HIM TO RE-APPRECIATE THE EVIDENCES FURNISHED BY THE ASSESSEE IN THE LIGHT OF ADJUDICATION RENDERED BY US IN THE CASE OF MS. KAVITA SINGH (SUPRA) WITH A DIRECTION TO THE ASSESSEE TO SUBSTAN TIATE HIS STAND, IN THIS REGARD. THE LD. CIT (A) HAS OBSERVED THAT MANY OF THE PAINTINGS WERE NO T REFLECTED AS PART OF STOCK-IN-TRADE OF THE ASSESSEE. HOWEVER, WE FIND THAT THE ASSESSEE HA S BEEN SADDLED WITH ADDITION ON ACCOUNT OF UNEXPLAINED PAINTINGS ON AGGREGATE BASIS FOR VAR IOUS GROUP ENTITIES AND THEREFORE, IN SUCH A CASE, FEW OF THE PAINTINGS WOULD NOT BE REFLECTIN G IN THE STOCK-IN TRADE HELD BY THE ASSESSEE. WITH THESE OBSERVATIONS, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. AO AS AFORESAID. 14. WE HAVE EXAMINED THE EVIDENCE ON RECORD IN RESP ECT OF ONLY THREE PAINTINGS, AS TEST CHECK. THE ASSESSING OFFICER HAS FAILED TO REBUT THE EVIDENCES FURNISHED BY THE ASSESSE. THE ASSESSING OFFICER HAS REJECTED THE EVI DENCES FURNISHED BY THE ASSESSEE BY MAKING GENERIC REMARKS. WE FIND MERIT IN THE CON TENTIONS OF LD. COUNSEL, THESE 12 ITA NO.2750/MUM/2014(A.Y.2008-09) PAINTINGS WERE ACQUIRED BY THE ASSESSE IN ASSESSMEN T YEARS MUCH PRIOR TO THE DATE OF SEARCH. HENCE, ADDITION IN RESPECT OF SAID PAINTING S CANNOT BE MADE IN SEARCH PROCEEDINGS. THERE ARE OTHER 37 PAINTINGS IN RESPEC T OF WHICH DOCUMENTS/EVIDENCES ON RECORD ARE REQUIRED TO BE EXAMINED. THE FACTUAL MATRIX, MANNER OF ADDITION AND NATURE OF EVIDENCE IN THE PRESENT CASE IS SIMILAR T O THE CASE OF MS. KAVITA SINGH (SUPRA). TAKING INTO CONSIDERATION ENTIRETY OF FACT S, WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE IN LINE WITH THE TRIBUNAL DECISION IN THE CASE OF MS. KAVIT A SINGH (SUPRA). THE ASSESSING OFFICER WHILE RE-APPRECIATING THE EVIDENCES SHALL G RANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSE, IN ACCORDANCE WITH LAW. ERG O, GROUND NO.3 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 7 TH DAY OF SEPTEMBER, 2020. SD/- SD/- (S.RIFAUR RAHMAN ) (VIKAS AW ASTHY) ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 8&/ DATED: 07/09/2020 VM , SR. PS(O/S) 13 ITA NO.2750/MUM/2014(A.Y.2008-09) /COPY OF THE ORDER FORWARDED TO : 1. / / THE APPELLANT , 2. 01 / THE RESPONDENT. 3. 91 ( )/ THE CIT(A)- 4. 91 CIT 5. :; 01& , . . . , / DR, ITAT, MUMBAI 6. ;<= #> / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI