Rakesh Kapoor, Gurgaon V. Pr. CIT- 12, New Delhi

ITA 3249/DEL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1258 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 22-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Revision of order; Depreciation; Assessment record
• Section: 68; 54; 263; 143(3); 133(6)

Judgement Text

1 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.3249 /DEL/2017 Asstt.Yr: _2012-13 RakeshKapoor, 5, ArjunMarg, DLF Phase-I, Gurgaon PAN- AAWPK0660L Vs Pr. CIT-12, New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Sh. T. Kipgen, CIT DR Date of hearing 20.04.2022 Date of pronouncement 25.05.2022 O R D E R PER N.K. CHOUDHRY, JM: The Assessee has preferred the instant appeal against the order dated 22.03.2017 passed by the learnedPrincipal Commissioner of Income tax-12, New Delhi (in short “PCIT”) for assessment year 2012-13 u/s 263 of the Income Tax Act, 1961 (in short “the Act”). 2 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT 2. Grounds of appeal are as under: “1. That on facts and in the circumstances of the case, the learned Principal CIT erred in issuing notice u/s.263 and subsequently passing the impugned order dated 22 ni of March 2017 u/s.263 in the name of the appellant assesee. 2. That on facts and in the circumstances of the case, the learned Principal CIT erred in assuming his jurisdiction u/s.263 of the I.T. Act, whereas the mandatory conditions for assuming such jurisdiction were totally absent, with the result that the impugned order passed u/s.263 is bad in law. 3. That on the facts and in the circumstances of the case, the learned Principal CIT erred in arriving at a conclusion without any basis whatsoever to the effect that the assessment order passed by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue. 4. That on the facts and circumstances of the present case the learned Principal CIT failed to appreciate that there is no error apparent from the record within the meaning of section 263 of the I.T. Act, 1961. 5. That on the facts and in the circumstances of the case, the learned Principal CIT erred in cancelling the assessment order passed by the Assessing Officer on 24.12.2014 u/s 143(3) of I.T. Act and further in directing the Assessing Officer to "make fresh assessment". 6. That on the facts and in the circumstances of the case and in law, learned Principal CIT erred in holding that assessment order dated 24-12- 2014 passed by the Assessing Officer u/s 143(3) of the Act with regard to deduction of interest on borrowed capital to the tune of Rs. 1,50,000/- was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act 7. That on the facts and in the circumstances of the case and in law, learned Principal CIT erred in holding that assessment order dated 24-12- 2014 passed by the Assessing Officer u/s 143(3) of the Act with regard to cash deposits in the bank accounts of the assessee was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act. 3 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT 8. That on the facts and in the circumstances of the case and in law, learned Principal CIT erred in holding that assessment order dated 24-12- 2014 passed by the Assessing Officer u/s 143(3) of the Act with regard to forfeiture of advance money received from Pranav Sports Academy Pvt. Ltd. was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act. 9. That on the facts and in the circumstances of the case and in law, learned Principal CIT erred in holding that assessment order dated 24-12- 2014 passed by the Assessing Officer u/s 143(3) of the Act with regard to investment in property at Palm Drive Unit No. M-805 was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act. 10. That on the facts and in the circumstances of the case and in law, learned Principal CIT erred in holding that assessment order dated 24-12- 2014 passed by the Assessing Officer u/s 143(3) of the Act with regard to with regard to alleged notional income was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act. 11. That on the facts and in the circumstances of the case and in law, the learned Principal CIT erred in not himself conducting necessary/proper enquiry and verification of issues mentioned in the notice issued u/s. 263 of the Act and setting aside the assessment order for a de-novo adjudication on issues mentioned there in which is wrong and contrary to the provisions of the Act, and the Rules made there under. 12. That the appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. In this case return of income was filed by the Assessee on 31.3.2013, being an individual, by declaring taxable income of Rs. 50,42,110/-, which was assessed at an income of Rs. 51,78,398/- u/s 143(3) of the Act, by making addition of Rs. 1,36,288/- on account of various expenses debited 4 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT qua vehicle repair & maintenance, insurance on car, insurance on car loan and car depreciation, which were claimed by the Assessee as expenses. Later on, the case of the Assessee was opened by the learned PCIT u/s 263 of the Act by issuing show cause notice dated 4.8.2015 served upon the Assessee. The learned PCIT raised the following issues in the notice u/s 263 of the Act: “2. The facts of the case is that the Return of Income was filed by the assessee for A. Y. 2012-13 on 31.03.2013 in the capacity of an Individual, declaring taxable income of Rs. 50,42,110/-which has been assessed at an income of Rs 51,78,400/- u/s 143 (3) of the Act. 3. The assessee is real estate commission agent and runs business in the name and style M/'s Kapoor Estate. Perusal of the assessment records shows following facts: 1. The records of assessee were examined and it was observed that assessee also claimed deduction of Rs. 1,50,000/- as interest on borrowed capital under the head ‘Income from House Property’ on the same self occupied property which was occupied by his wife Smt. DeepaKapoor and has claimed deduction of Rs. 1,50,000. Thus the authenticity of the claim of deduction needs to be established. Further, as per the claim of Smt. DeepaKapoor the residential premise is being used by assessee for running company owned by him. But assessee in his ITR has claimed the same premise being used for his residential purpose as well. If the premise was being used for the purpose of running a company then the owner must be getting rent. But assessee has not shown any income from house property, instead it claimed deduction on account of interest on 5 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT borrowed capital. Thus the claim of assessee was erroneous with the design to under assess the income chargeable to tax. 2. Perusal of the records shows that the assessee has large credit entries in his bank account with HDFC Bank and Axis Bank for Rs.3.5 crore and Rs.1.33 crores which includes heavy cash deposits. Assessee has given details of bank account: HDFC (66138, jointly held with DeepaKapoor), Axis (3643, jointly held with DeepaKapoor), HDFC (0652, held in the name of assessee’s proprietorship concern M/s Kapur Estates). In all these bank accounts credit entries of cash deposits, unaccounted deposits of several crores were found. However, it is noted that the AO has not made any enquiry on the source of such deposits appearing in these accounts. There is no explanation by the assessee on this issue. The AO should have examined the source of these deposits u/s 68 of IT Act, 1961. 3. It is observed that large sum of money to the tune of Rs.2.50 crores was paid to DeepaKapoor/RakeshKapoor by M/s Pranav Sports Academy Pvt. Ltd, Laxmi Nagar. On perusal of the records it is observed that the AO had sent notices to M/s Pranav Sports Academy on the Laxmi Nagar address given by assessee, which were all returned undelivered. When assessee was questioned to explain this, he produced Axis Bank statement of Pranav Sports Academy showing the payment made via DD on various dates. In this regard it may be relevant to mention that it is well settled that in order to discharge the onus u/s 68, the assessee must prove the following: i. The identity of the creditor, ii. The genuineness of the transaction, and iii. The capacity of the creditor to advance money. 6 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT In the given case assessee failed to prove identity of creditor, genuineness of transaction and creditworthiness of creditor to advance money. Merely the transaction is through banking channel, credit entry cannot be proved unless all the above three ingredients are not proved. 4. Further, this amount of Rs.2.5crore was paid to assessee as an advance consideration against the agreement to sale of house property at Flat No. 601, Vipul Belmont, Gurgaon. Since the deal was not finalized the amount was forfeited by them. However, later the same property was sold at comparatively lesser price of Rs.l.72crores. The above transaction leads to reasonable suspicion as to how come the deal w.r.t. sale of property did not materialize at Rs.2.5crores was concluded later at lesser price of Rs. 1,72crores. The above transaction leads to under assessment. The AO has not made any enquiry on this issue as evident from the assessment order. It is also noted that no verification u/s 133(6) was done in respect of M/s Pranav Sports Academy Pvt. Ltd. Later on enquiry in the case of Mrs. DeepaKapoor conducted by the CIT-17 office at the given addresses, it was found that the firm was non existent. During the proceedings u/s 263 in the case of Mrs. DeepaKapoor no explanation was filed. Thus, the assessment order in the case of assessee is erroneous to the said extent and has led to loss of revenue. 5. Perusal of the record shows that the assessee had shown investment in property at Palm Drive Unit No. M-805 of Rs. 1.11 crores as reflected in the balance sheet. The AO has not examined the source of such investment. Further, it is noticed that the investment in such property at Palm Drive from the HDFC account was not examined by AO at the time of assessment. 6. It is also observed that the assessee and his wife Smt. Kapoor were the owner of more than one residential house at the time of transfer, so was not eligible for exemption u/s 54 of IT Act, 1961. On examination of the records it is observed that assessee has made investments during the FY 2011-12 which include flat at Palm Drive. As per the observation of Pr. CIT- 17, wife of assessee was the owner of other properties, namely 601, Vipul Belmonte, Palm Drive and H. No. 5, AijunMarg, in DLF, etc. and thus not eligible for 7 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT exemption u/s 54. It is observed that asseessee and his wife generally own properties jointly. Therefore assessee is required to be probed with respect to assets/properties owned by him individually and in joint ownership with his wife in the beginning and end of the financial year. Therefore the claim of assessee in respect of exemption u/s 54 was required to be examined by the AO. 7. Further, it is noticed that the assessee has not shown notional income from house property in respect of several properties owned by him during the year under consideration. The AO did not probe or made any enquiry on this issue of taxability of notional rental income as per provisions of section 23(4) of IT Act, 1961. The AO has also not verified the Wealth Tax Return, if any filed by the assessee. It is also observed that the during the course of 263 proceedings, the assessee did not give details of assets held individually and in joint ownership in the beginning and end of the year. 8. The aforesaid issues discussed above were not properly enquired and investigated by the AO in the assessment proceedings u/s 143(3) of the Act. It is well settled on this point that if the assessment is completed without making enquiries, the assessment order would be erroneous and prejudicial to the interest of Revenue. Therefore, in view of the above assessment order is erroneous and prejudicial to the interest of Revenue. Under such circumstances, the assessement made by the AO is required to be treated as erroneous and prejudicial to the interest of revenue and requires being reframed u/s 263 of the I.T. Act,1961.” 4. The Assessee appeared before the learned PCIT and filed its reply. Thereafter considering the same, the learned PCIT cancelled the assessment order and directed the assessing officer to make the assessment afresh after considering factual and legal position in accordance with the findings given in the revisionary order passed u/s 263 of the Act by holding the assessment 8 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT order as erroneous and prejudicial to the interests of the revenue. The directions given by the learned PCIT are as under: i. Disallow the claim of deduction in respect of interest against income from house property u/s 24 of the Act. ii. The long term capital gain needs to be re-computed as under Sale consideration on sale of property taken at the market value as per sale deed dated 2.03.2012 Rs. 17200000 Less: cost of purchase as claimed Rs. 12494169 LTCG chargeable to tax Rs. 4705831 Less: Exemption u/s 54 denied as per discussion in this order Rs. Nil iii. The claim of exemption u/s 54 has to be disallowed on account of the reasons given in this order. Thus exemption of Rs. 18530000 claimed by the assessee u/s 54 needs to be withdrawn. iv. The forfeiture of advance of Rs. 2.50 crores is to be treated as unexplained cash credit and 50% of the same of Rs. 1.25 crores needs to be added to the total income of the assessee u/s 68 of the Act. v. The credit in bank accounts should be examined after making proper enquiry on the source of such credits and investigation into the creditworthiness of the parties from whom the payments have been received. The AO should make necessary additions on all such unexplained cash credits appearing in the bank u/s 68 of the Act.” 9 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT 32. Accordingly, the assessment order in this case for AY 2012-13 u/s 143(3) is hereby cancelled and the Assessing Officer is directed to make fresh assessment after considering the factual and legal position in accordance with the findings given in this revision order u/s 263 of the Act. Further, the finding in this revision order may also be communicated to the assessing officer of Mrs. DeepaKapoor to make remedial measures as highlighted in this revision order. 6. Against the impugned order, the Assessee has preferred the instant appeal. Though various notices have been issued to the Assessee at the address mentioned in form no. 36, however, none has been served to the Assessee and therefore, Assessee failed to substantiate its appeal before us. However, learned DR on the contrary supported the order passed by the learned PCIT and vehemently submitted that the order under challenge is a reasoned, logical and appropriate order as per peculiar facts and circumstances of the case and, therefore, does not require any interference. 7. We have perused the orders passed by the authorities below and submissions of the learned DR and find that from the assessment order it does not reflect as to whether the points raised by the learned PCIT have been considered by the learned AO or not. Therefore, the order impugned wherein the learned PCIT has given its finding seems to be logical and based on the peculiar facts and circumstances of the case. Even otherwise we do not find any reason or material to controvert the findings of the learned PCIT in the impugned order. Hence, we are inclined not to interfere with the impugned order. 10 ITA no. 3249/Del/2017 RakeshKapoor Vs. PCIT 8. In the result, appeal filed by the Assessee stands dismissed. Order pronounced in open court on 25.05.2022. Sd/- Sd/- (PRADIP KUMAR KEDIA) (N.K. CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP*