FAISAL SIDDQUI, MUMBAI V. ASST CIT CEN CIR 47, MUMBAI

ITA 301/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1365 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 17-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANAND MOHAN ITA NO M A Y T
• Assessee Lawyers: AJAY R SINGH
• Keywords: Unexplained investment; Search and seizure; Opportunity of being heard; Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI , , , , ' BEFORE SHRI C.N.PRASAD, JM AND SHRI RAJESH KUMAR, AM / I.T.A. NO. 301/MUM/2015 ( # $# / ASSESSMENT YEAR: 2011-12) SHRI FAISAL SIDDIQUI A WING, 604A, SIMLA HOUSE, NAPEAN SEA ROAD, MUMBAI - 400036 / VS. ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 47 MUMBAI / I.T.A. NO. 296/MUM/2015 ( # $# / ASSESSMENT YEAR: 2011-12) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8(4) 6 TH FLOOR, ROOM NO.658, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 / VS. SHRI FAISAL SIDDIQUI A WING, 604A, SIMLA HOUSE, NAPEAN SEA ROAD, MUMBAI - 400036 ./ ./PAN/GIR NO. : AAKPS6024L ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 12.01.2017 /DATE OF PRONOUNCEMENT: 07.04.2017 / O R D E R PER C.N.PRASAD, JM: ASSESSEE BY : SHRI AJAY R. SINGH REVENUE BY: SHRI ANAND MOHAN (CIT-DR) ITA NO.301&296/M/2015 A.Y.2011-12 2 THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-47, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 06 .01.2015 FOR THE A.Y. 2011-12. 2. THE ASSESSE IN HIS APPEAL RAISED THE FOLLOWING G ROUND OF APPEAL:- I. FOREIGN CURRENCY OF RS.7,63,340/- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.7,63,340/- BEING FOREIGN CURRENCY FOUND AT TIME OF SEARCH ACTION, WITHOUT APPRECIATING THE FACT THAT T HE SAID AMOUNT WAS DULY ACCOUNTED IN THE BOOKS OF M/S.FOURWAYS TRAVEL PVT. LTD. AND FURTHER THESE AMOUNTS WERE RETURNED TO THE COMPANY BY THE ASSESSE E, THEREFORE THE ADDITION OUGHT TO BE DELETED. II. DEEMED DIVIDEND RS.90,00,000/- 2. THE LEARNED CIT(A) ERRED IN SUSTAIN THE ADDITION OF RS.90 LACS U/S.2(22)(E) OF THE ACT, AS DEEMED DIVID END WITHOUT APPRECIATING THE CORRECT FACTS, THEREFORE T HE ADDITION OUGHT TO BE DELETED. III. ADDITION OF JEWELLERY OF RS.15,44,780/- 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF JEWELLERIES AT RS.15,44,780/- WITHOUT APPRECIATING THE COMPLETE FACTS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS IN TO TRAVEL AGENCY BUSINESS AND THERE WAS SEARCH AND SEIZURE ACTION U/ S.132 OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) ON 22.02.2011 AT THE RESIDENCE AND BUSINESS PREMISES OF ZAKA GROUP TO WHICH THE ASSESS EE BELONGS TO. DURING THE COURSE OF SEARCH PROCEEDINGS FOREIGN CURRENCY V ALUED AT RS.7,63,340/- ITA NO.301&296/M/2015 A.Y.2011-12 3 WAS FOUND AT ASSESSEES PREMISES AND THE DETAILS OF THE DENOMINATION OF THE SUCH FOREIGN CURRENCY WAS GIVEN AT PAGE 2 OF THE AS SESSMENT ORDER. DURING THE COURSE OF SEARCH PROCEEDINGS, STATEMENTS WERE R ECORDED FROM THE ASSESSEE REGARDING THE FOREIGN EXCHANGE FOUND AND I T WAS SUBMITTED BY THE ASSESSEE THAT THIS FOREIGN EXCHANGE WAS DRAWN FROM FOURWAYS TRAVELS PVT. LTD. AND INDO SAUDI SERVICES (TRAVEL) PVT. LTD. BEI NG THE DIRECTOR IN THESE COMPANIES AND FREQUENTLY TRAVELLING ABROAD FOR BUSI NESS PURPOSE. IT WAS ALSO SUBMITTED THAT THIS CURRENCY IS FULLY ACCOUNTE D FOR IN THE BOOKS OF ACCOUNTS OF THE SAID COMPANIES. HOWEVER, THE ASSES SING OFFICER WHILE COMPLETING THE ASSESSMENT PRESUMED THAT SINCE ASSES SEE MADE VARIOUS FOREIGN VISITS AND FOREIGN CURRENCIES WERE PROVIDED BY THE COMPANY ON EVERY FOREIGN TRIP, THE SURPLUS FOREIGN CURRENCY HA S BEEN KEPT BY THE ASSESSEE WITH HIM INSTEAD OF RETURNING IT TO THE CO MPANY. THEREFORE HE ADDED FOREIGN CURRENCY VALUED AT RS.7,63,340/- AS U NDISCLOSED INCOME. ON APPEAL THE CIT(A) SUSTAINED THIS ADDITION OBSERVING THAT THE REMAND REPORT SENT BY THE ASSESSING OFFICER IS SILENT ON THIS ISS UE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THA T IN THE COURSE OF REMAND PROCEEDINGS ALL THE INFORMATION WAS FURNISHE D, DETAILS WERE GIVEN TO THE ASSESSING OFFICER AND IT WAS EXPLAINED THAT THE CURRENCY SEIZED DOES NOT BELONG TO THE ASSESSEE AND MERELY BECAUSE THE CURRE NCY IS SEIZED FROM THE ASSESSEES PREMISES IT IS NOT A GROUND FOR MAKING AD DITION IN ASSESSEES HANDS. THE LEARNED COUNSEL FURTHER SUBMITS THAT T HE FOREIGN CURRENCY WAS RECEIVED BY THE ASSESSEE FROM FOURWAYS TRAVELS PVT. LTD. AND IS DULY ACCOUNTED FOR AND IT BELONGS TO THE COMPANY. THE F OREIGN CURRENCY WAS ITA NO.301&296/M/2015 A.Y.2011-12 4 RETURNED TO THE COMPANY ON 31.03.2011, THEREFORE, T HE ADDITION IS NOT JUSTIFIED. THE DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON HEARING BOTH THE SIDES WE AR E OF THE CONSIDERED VIEW THAT THIS ISSUE HAS TO BE EXAMINED AND VERIFIED BY THE ASSESSING OFFICER WITH REFERENCE TO THE SUBMISSIONS MADE BY THE ASSES SEE THAT THE FOREIGN CURRENCY IS BELONGS TO THE COMPANY AND IT HAS BEEN ACCOUNTED FOR IN COMPANYS BOOKS AS ON 31.03.2011. THE LEARNED COU NSEL FOR THE ASSESSEE FURTHER SUBMITS THAT AS PER THE RBI RULES AND REGUL ATIONS ASSESSEE CAN RETAINED THE FOREIGN EXCHANGE FOR 180 DAYS. THUS W E RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL PROVIDE NE CESSARY DETAILS TO THE ASSESSING OFFICER TO SUBSTANTIATE HIS CLAIM. NEEDL ESS TO SAY THE ASSESSING OFFICER SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. THE SECOND GROUND RAISED BY THE ASSESSEE IS IN R ESPECT OF DEEMED DIVIDEND. ASSESSEE IS CHALLENGING THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.60,00,000/- U/S.2(22)(E) OF THE ACT AS DEEMED DIVIDEND. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITS THAT THE ASSESSEES ONLY PLEA IS THAT THE DEEMED DIVIDEND IS TO BE REST RICTED TO THE ACCUMULATED PROFITS OF THE COMPANY. THE DR HAS NO SERIOUS OBJE CTION IN RESTRICTING THE DEEMED DIVIDEND TO THE ACCUMULATED PROFITS OF THE C OMPANY. ON HEARING BOTH SIDES IN PRINCIPLE WE HOLD THAT THE CIT(A) IS JUSTIFIED IN SUSTAINING THE ADDITION MADE U/S.2(22)(E) OF THE ACT. HOWEVER, SU CH ADDITION SHOULD BE RESTRICTED ONLY TO THE ACCUMULATED PROFITS OF THE C OMPANY AS SPECIFIED IN THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THEREFO RE, FOR THE LIMITED PURPOSE ITA NO.301&296/M/2015 A.Y.2011-12 5 ON VERIFICATION AND QUANTIFICATION OF DEEMED DIVIDE ND WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SHALL QUAN TIFY THE DISALLOWANCE U/S.2(22)(E) OF THE ACT RESTRICTING TO THE ACCUMULA TED PROFITS OF THE COMPANY. 7. THE LAST ISSUE IN THE ASSESSEES APPEAL IS IN RE SPECT OF CONFIRMATION OF ADDITION TOWARDS JEWELLERIES OF RS.15,44,780/-. BRIEFLY STATED THE FACTS ARE THAT DURING THE COURSE OF SEARCH, GOLD, DIAMOND AND SILVER VALUABLES WORTH RS.49,35,502/- WERE FOUND IN THE WARDROBE OF THE ASSESSEES RESIDENCE. IN THE COURSE OF SEARCH PROCEEDINGS IT WAS STATED IN THE STATEMENT THAT THE SAID GOLD, DIAMOND AND SILVER JEWELLERIES BELONGS TO FAMILY MEMBERS. IT WAS FURTHER STATED THAT THOUGH THE ENT IRE JEWELLERY BELONGS TO HIS FAMILY MEMBERS SOURCE OF ACQUISITION CANNOT BE EXPLAINED. IN THE STATEMENT IT WAS ALSO STATED THAT GOLD, DIAMOND AND SILVER JEWELLERY LYING IN THE WARDROBE VALUED AT RS.49,35,502/- ALSO BELONGS TO HIS FAMILY. HOWEVER, THE SAME IS EXPLAINED AND ACQUIRED IN THE CURRENT FINANCIAL YEAR I.E. 2010-11 RELEVANT TO THE A.Y.2011-12. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE JEWE LLERY WORTH RS.49,35,502/- FOUND IN THE COURSE OF SEARCH SHOULD NOT BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE A.Y.2011 -12. THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED THAT JEWELLERY VALUED OF APPROXIMATELY RS.25,00,000/- BELONG TO HIS FOREFATH ERS AND WERE COLLECTED OVER THE PERIOD OF TIME ON VARIOUS OCCASIONS IN FAM ILY AND THE REMAINING JEWELLERY WERE ACQUIRED IN FINANCIAL YEAR ENDING 31 .03.2011 RELEVANT TO A.Y.2011-12. IT WAS ALSO STATED THAT THE ASSESSEE HAS ALREADY PAID ITA NO.301&296/M/2015 A.Y.2011-12 6 RS.51,82,505/- VIDE PAY ORDER DATED 24.03.2011 FOR THE UNDISCLOSED INCOME RELATING THE VALUE OF UNACCOUNTED JEWELLERY FOUND I N THE WARDROBE AND THE BANK LOCKERS. IT WAS FURTHER SUBMITTED THAT THE IN HERITED JEWELLERY WAS PASSED ON OVER AGES IN HIS FAMILY. NOT SATISFIED W ITH THE EXPLANATION OF THE ASSESSEE THE ASSESSING OFFICER ADDED THE JEWELLERY, DIAMOND AND VALUABLE WORTH RS.54,96,155/- AS AGAINST RS.49,35,502/-. TH E CIT(APPEALS) CONSIDERING THE SUBMISSION OF THE ASSESSEE AND APPL YING CBDT INSTRUCTION NO.1916 DATED 11.05.1994 AND LOOKING INTO THE SOCIA L STATUS OF THE FAMILY, AGREED WITH THE ASSESSEES SUBMISSION AND PARTLY AL LOWED THE GROUND OF APPEAL BY FOLLOWING VARIOUS DECISIONS OF THE HONBL E HIGH COURTS AND ALSO THE MUMBAI BENCH OF TRIBUNAL IN ITA NO.5706/MUM/200 9 IN THE CASE OF SHRI HITEN MEHTA VS. ACIT. THE CIT(A) RESTRICTED T HE ADDITION TO RS.15,44,780/- ACCEPTING THE ALTERNATE CONTENTION T HAT IF AT ALL IT IS TO BE TREATED AS UNEXPLAINED INCOME IT IS ONLY RS.15,44,7 80/- AS PER THE WORKING SUBMITTED IN THE COURSE OF APPELLATE PROCEEDINGS BE FORE THE CIT(A). THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THAT THE JEWELLERY WAS PURCHASED IN EARLIER YEARS AND ITS SOURCE. THEREFORE WE DO NOT SEE ANY GOOD REASON TO HOLD THAT THE ASSESSEE EXPLAINED THE SOURCES FOR TH E JEWELLERY FOUND WORTH RS.15,44,780/-. HENCE THE CIT(A) ORDER IS SUSTAINE D AND GROUND RAISED BY THE ASSESSEE IS REJECTED. ITA NO. 296/MUM/2015 (REVENUES APPEAL):- 9. THE ONLY ISSUED IN THE GROUND NUMBERS1 TO 4 OF T HE REVENUES APPEAL IS REGARDING THE DELETION OF ENTIRE ADDITION OF RS. 54,96,155/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY. AS EXPLAINED IN THE ABOVE PARA WE FIND THAT THE CIT(A) OBSERVING THAT THE CORRECT ADD ITION SHOULD HAVE BEEN ITA NO.301&296/M/2015 A.Y.2011-12 7 RS.49,35,040/- AND NOT RS.54,96,155/-, RESTRICTED T HE ADDITION TO RS.15,44,780/- BASED ON THE CBDT INSTRUCTION NO.191 6 DATED 11.05.1994 AND THE CASE LAWS REFER TO THEREIN. IN THE CIRCUMS TANCES WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE DIRECTIONS OF TH E CIT(A) IN RESTRICTING THE ADDITION TO RS.15,44,780/-. ACCORDINGLY THIS GROUN D IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND APPEAL OF THE REVENUE I S HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH APRIL, 2017 . SD/- SD/- (RAJESH KUMAR) (C.N.PRASAD) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 7 TH '% , 2017 MP % &$% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , ( ) / THE CIT(A)- 4. , / CIT 5. / , / , / DR, ITAT, MUMBAI 6. .01 / GUARD FILE. / BY ORDER, % % //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI