Shri Om Prakash Bhatia, New Delhi V. ACIT, New Delhi

ITA 3269/DEL/2009

AI Insights

The case involves multiple appeals by Pooja Bhatia, the legal heir of Late Om Prakash Bhatia, and Om Prakash Bhatia (HUF) against the assessments made by the Income Tax Department for the Assessment Years 2005-06, 2006-07, and 2007-08. The primary issues revolved around the existence and recognition of the HUF for tax purposes, the estimation of gross profit, and the treatment of undisclosed income following a search and seizure operation. The Tribunal examined the evidences presented, including the establishment of the HUF through gifts and the handling of business profits and property transactions under different tax identities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130574 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-08-2023
• Assessment Year: 2005-2006
• Appeal Filed On: 19-07-2009
• Other Referred Cases: CIT vs. K Satyendra Kumar, Pullangode Rubber Produce Co. Ltd vs. State of Kerala & Anr, S. Arjan Singh vs CWT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Gross profit estimation; Gift; Search and seizure; Document seized; Tax effect; Documents seized
• Section: 132; 142(1); 153A; 13; 153; 145(3); 22

Judgement Text

Page 1 of 27 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.3269/Del/2009 (ASSESSMENT YEAR 2005-06) Pooja Bhatia L/H Late Om Prakash Bhatia 31/B-8, Rajpura Road Delhi-110 054 PAN-AAOPB 9342E Vs. ACIT Central Circle-17 New Delhi (Appellant) (Respondent) ITA No.6564/Del/2014 (ASSESSMENT YEAR 2007-08) Pooja Bhatia L/H Late Om Prakash Bhatia 31/B-8, Rajpura Road Delhi-110 054 PAN-AAOPB 9342E Vs. Income Tax Officer Ward-29(2) New Delhi (Appellant) (Respondent) ITA No.3270/Del/2009 (ASSESSMENT YEAR 2006-07) Late Om Prakash Bhatia 606/607, Katra Ishwar Bhawan, Khari Baoli New Delhi PAN-AADPB 7746H Vs. ACIT Central Circle-17 New Delhi (Appellant) (Respondent) ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 2 of 27 ITA No.6563/Del/2014 (ASSESSMENT YEAR 2007-08) Om Prakash Bhatia & Sons (HUF) 31-B/8, Rajpura Road New Delhi PAN-AAAHO 2991L Vs. Income Tax Officer Ward-29(2) New Delhi (Appellant) (Respondent) ITA No.1555/Del/2009 (ASSESSMENT YEAR 2005-06) ITA No.1556/Del/2009 (ASSESSMENT YEAR 2006-07) Om Prakash Bhatia (HUF) C/o M/s RRA Taxindia D-28, South Extension Part-I New Delhi-110 049 PAN-AAAHO 2991L Vs. Asst.CIT Central Circle-17 New Delhi (Appellant) (Respondent) Appellant by Dr. Rakesh Gupta and Sh. Somil Agarwal, Advocates Respondent by Ms. Sarita Kumari, CIT-DR Date of Hearing 17/08/2023 Date of Pronouncement 13/09/2023 ORDER PER M. BALAGANESH AM: All these appeals are filed by the respective assessees for Assessment Years: 2005-06, 2006-07 and 2007-08. ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 3 of 27 2. The issues involved in all these appeals are inter connected and identical and hence they are taken up together and disposed of by this common order for the sake of convenience. 3. Let us take up the appeal of assessee individual and assessee HUF for the Asst Year 2005-06 first. 4. The additional ground raised by the assessee HUF for the Asst Year 2005-06 was stated to be not pressed by the ld. AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly the same is hereby dismissed as not pressed. 5. The Original Ground Nos. 1 & 2 raised by the assessee HUF for the Asst Year 2005-06 was stated to be not pressed by the ld. AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly the same are hereby dismissed as not pressed. 6. The Grounds to be adjudicated would be Ground Nos. 3, 4 5,6 & 7 raised by the assessee HUF for the Asst Year 2005-06. The same are reproduced hereunder:- “3. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO without any basis and has further erred in holding that appellant HUF was not in existence as per law and fact and has further erred in holding that entire income declared under ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 4 of 27 (HUF) is directed to be included in the case of Sh. Om Prakash Bhatia (Individual) and has further erred in not deciding the appeal on merit. 4. That in any case and in any view of the matter Ld. CIT (A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO which not sustainable on various legal and factual grounds. 5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not deleting the addition made by Ld. AO of Rs.24,40,930/- on account of low gross profit and has further erred in applying gross profit rate @ 4.5% to the total sales as against gross profit returned. 6. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest as per rules. 7. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 7. The grounds raised by the assessee individual for the Asst Year 2005-06 are as under:- “1. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law & on facts in confirming the action of Ld. A.O. in holding that status of HUF was bogus and further erred in rejecting the status of HUF and further erred in holding that any income declared in the hands of HUF shall be clubbed u/s 64(ii) in the hands of the assessee and has further erred in making addition of Rs.7.64,685/-- 2. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law & on facts in confirming the action of Ld. A.O. in making addition of Rs.2,80,131/-on account of sale of property by denying the benefit of indexation and by holding that the impugned property was not disclosed by the assessee and as further erred in observing that the sale proceeds of the impugned property should be treated as income of the assessee. 3. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. A.O. in charging interest. ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 5 of 27 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 8. We have heard the rival submissions and perused the materials available on record. The preliminary issue to be decided in these appeals is that whether there was a valid HUF that had come into existence. The assessee pleaded that his HUF had come into existence in Asst Year 2002-03 and accordingly had obtained the PAN in the name of HUF as AAAHO2991L. It was submitted that income tax returns were filed by the HUF regularly. The Karta of HUF is Om Prakash Bhatia. 8.1. A search and seizure action u/s 132 of the Act was conducted on the dealers of Hing and Dry Fruits on 12.12.2005 on the assessee HUF. Along with the said search on HUF, the Karta of HUF Om Prakash Bhatia was also subjected to search on the same date in his individual capacity. Hence Om Prakash Bhatia (Individual) and Om Prakash Bhatia (HUF) both were searched by the income tax department u/s 132 of the Act on 13.12.2005 through separate search warrants. ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 6 of 27 8.2. It would be pertinent to understand the basic facts pertaining to activities carried out by individual and HUF as under:- Individual File Name Late Om Prakash Bhatia (Individual) PAN AADPB7746H Name of the Concern ‘Pradeep Trading Co. Nature of Business Dealing in Hing and Dry Fruits Status of assessee Individual Address in which business was carried out 606-607, Katra Ishwar Bhawan, Khari Baoli, Delhi -110006 Registration with Sales Tax department Ward No.27 Sales Tax Registration Number LC/027/110359/0685 Whether registered with Director General of Foreign Trade Yes Whether closure of business intimated Sales Tax Registration was surrendered by Individual file. This has been acknowledged by the Sales tax department which is evident from Page 96 of the Paper Book. HUF File Name Om Prakash Bhatia (HUF) PAN AAAHO2991L Name of the Concern ‘Pradeep Trading Co. Nature of Business Dealing in Hing and Dry Fruits Status of assessee HUF Address in which business was carried out 251-252, Dina-Ka-Talao, Malka Ganj, Delhi – 110007 Registration with Sales Tax department Ward No.28 Sales Tax Registration Number LC/68/9000244726/0801 Whether registered with Director General of Foreign Trade Yes Import Export Code (IE Code) Obtained Yes IEC Number 0501025731 Date of issue 31.07.2001 Bank Account opened in the name of HUF Yes ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 7 of 27 8.3. Notice u/s 153 A of the Act was issued by the Ld. A.O. on 29.10.2007 for HUF case and on 9.7.2007 for Individual case. Om Prakash Bhatia expired on 01.06.2012 and is represented by his wife and legal heir Smt. Pooja Bhatia as per her duly sworn affidavit placed on record. The ld. AO observed that it is not clear how the HUF got created in Asst Year 2002-03 and accordingly, he doubted the existence of HUF itself. Accordingly, the assessment was completed by the ld. AO u/s 153A of the Act on 28.12.2007 for the Asst Year 2005-06 in the hands of assessee individual determining Gross Profit rate @ 4.5.% on sales on Substantive Basis and making the same addition in the hands of HUF on Protective Basis. 8.4. The ld. CIT(A) observed that there should be ancestral property for creation of HUF and no evidence has been produced by the assessee to prove whether the HUF was created out of any ancestral property. Accordingly, the ld. CIT(A) held that upto Asst Year 2001-02, the same trading business was carried out by the assessee in his individual capacity and in Asst Year 2002-03, he had sought to transfer the same to HUF status. Since HUF status itself is doubted, he held that the ld. AO was justified in estimating ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 8 of 27 the profit substantively in Individual hands and protective in HUF hands. Aggrieved, both individual as well as the HUF are in appeals before us. 8.5. At the outset, we find that the income tax department had conducted search u/s 132 of the Act based on independent search warrant in the name of HUF on 12.12.2005. We find that individual file and HUF file have two different PANs. When the search itself was conducted by the income tax department u/s 132 of the Act based on independent search warrant, it would not be correct on the part of the revenue to state that HUF had never come into existence. We find that the ld. AO had issued notices u/s 153A, 143(2) and 142(1) of the Act to individual and HUF separately which got served independently. Moreover, the assessment also has been framed by the ld. AO u/s 153A of the Act in the status of HUF. Further, we find that the ld. AO had mentioned in the assessment order of the Individual file that individual has transferred his funds to the common hotchpot of the HUF and thus AO rejected the status of HUF but in the same breath, the ld. AO applies the provisions of section 64(2) of the Act which inherently implies the ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 9 of 27 existence of HUF and therefore bringing this inherent contradiction in the conclusion of the ld. AO. 8.6. We find that the assessee had given enough evidences to prove that the HUF had already come into existence. It was submitted that a gift of Rs 11,000/- in cash and Jewellery of Rs 1,08,000/-was received from Mrs Channo Devi Bhatia (eldest sister of Om Prakash Bhatia) and gift of Rs 11,000/- in cash and Jewellery of Rs 91,000/- from Mr Pradeep Kurseja, brother in law of Om Prakash Bhatia. In support of this, the HUF had filed copy of gift deed before the lower authorities. This total property of Rs 2,21,000/- constituted initial nucleus for creation of Om Prakash Bhatia (HUF). The Om Prakash Bhatia (HUF) comprises of Om Prakash Bhatia as Karta, Mrs Pooja Bhatia (Karta’s wife) and three minor children i.e. Sagar Bhatia, Rahul Bhatia and Deepika Bhatia. A Wealth Tax Return of HUF was filed for the Asst Year 2003-04 on 28.11.2003 was also furnished before the lower authorities showing aggregate value of movable properties and declaring taxable net wealth of Rs 2,27,500/- over and above basic exemption provided under Wealth Tax Act, 1957 of Rs 15,00,000/-. This Wealth Tax Return was accepted by the revenue. Further Wealth Tax ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 10 of 27 assessments were framed on Om Prakash Bhatia (HUF) u/s 16(3) of the Wealth Tax Act, 1957 on 14.05.2008 for Asst Year 2006-07 and on 27.06.2008 for Asst Year 2007-08 accepting the returned wealth of HUF. Further, income tax search assessment was framed u/s 153A of the Act on 28.12.2007 in the hands of Om Prakash Bhatia (HUF) and amounts received by HUF from Om Prakash Bhatia in the sum of Rs 34,68,000/- was even added as undisclosed income of the HUF on substantive basis. The assessee had furnished the Balance Sheet as on 31.03.2002 of Om Prakash Bhatia (HUF). The said balance sheet contained a loan receipt of Rs 34,68,000/-. This represents loan received by HUF from Om Prakash Bhatia (Individual) by Cheques of Rs 21,60,000/- ; Rs 1,08,000/- and Rs 12,00,000/- and the said cheques were duly deposited in the Current Account No. 352293 opened with Tamilnadu Mercantile Bank, Chandni Chowk, Delhi in the name of HUF. These cheques were issued by Individual from his Punjab & Sind Bank account. All these evidences were duly submitted by the assessee before the lower authorities. Infact Om Prakash Bhatia (Individual) even provided the source of advancing loan to HUF file by stating as under:- ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 11 of 27 a) Through sale of Accent Car - Rs 4,00,000 (copy of delivery receipt, cash receipt and Form 29 of Motor Vehicles Act enclosed by assessee) b) Amount received from M/s Om Prakash Rahul Kumar on account of realization of debtors - Rs 22,09,379.61 (Copy of ledger account of Pradeep Trading Co.- Proprietorship concern of Mr Om Prakash Bhatia, Bank statement of M/s Om Prakash Rahul Kumar Showing issue of cheques of Rs 22,05,000/- . Bank statement of Mr Om Prakash Bhatia showing Receipt of cheque from M/s Om Prakash Rahul Kumar , Confirmation from M/s Om Prakash Rahul Kumar and copy of acknowledgement of income tax Return of Om Prakash Rahul Kumar were furnished) c) Amount received from Om Prakash Rahul Kumar as capital withdrawals being Partner in M/s Om Prakash Rahul Kumar - Rs. 9,38,000 (Confirmation of Om Prakash Rahul Kumar confirming Capital withdrawal by issue of cheque of Rs 9,38,000/-, Copy of Om Prakash drawings account in the books of Om Prakash Rahul Kumar, copy of bank statement of Om Prakash Rahul Kumar showing issue of cheque of Rs 9,38,000/- and copy of bank statement of Mr. Om Prakash Bhatia showing receipt of cheque of Rs 9,38,000/-.) 8.7. From the various details as tabulated above in Individual Name and HUF Name, it is evident that Om Prakash Bhatia had surrendered the sales tax registration obtained by him in Individual capacity and had taken fresh sales tax registration in HUF capacity ; addresses where businesses were carried out by Individual and HUF were totally different ; sales tax jurisdiction is also different for Individual and HUF ; two different PANs were allotted by the Income Tax department ; fresh bank account opened in HUF name ; wealth ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 12 of 27 tax assessments framed in the hands of HUF u/s 16(3) of the Act for Asst years 2006-07 and 2007-08; income tax assessment in the hands of HUF was framed for the Asst Year 2002-03 u/s 153A of the Act on 28.12.2007 , wherein the HUF’s existence was accepted for the purpose of making addition towards capital contribution of Rs 34,68,000/- on substantive basis , whereas for the purpose of gross profit addition of business of dealing in Hing and Dry Fruits, HUF’s existence was doubted and accordingly gross profit addition was made on protective basis. 8.8. In this regard, it would be relevant to address the observations made by the Hon’ble Supreme Court in the case of CIT vs. K Satyendra Kumar reported in 232 ITR 360 (SC) which is as under:- 3. The following question of law was referred by the Tribunal to the High Court (see [1983] 140 ITR 840, 842) : "Whether, on the facts and in the circumstances of the case, the status of the assessee was rightly determined as individual for the assessment years 1968-69 and 1969-70?" 4. The High Court relied upon the following proposition (page 843) : "Property may be joint property without having been ancestral. Where the members of a joint family acquire property by or with the assistance of joint funds or by their joint labour or in their joint business or by a gift or a grant made to them as a joint family, such property is the coparcenary property of the persons who have acquired it, whether it is an increment to ancestral property, or whether it has arisen without any nucleus of ancestral property." The High Court took into account the nature of the gift and referred to the arbitration decision. The High Court noted that the decree was ultimately passed in terms of the above. The High Court ultimately observed (page 843) : ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 13 of 27 "There is clear evidence that Srimathi K. Shyamalambal, wife of K. Satyanarayana, had funds of her own and with the clear intention of benefiting the family as a whole she provided funds to K. Appa Rao and with the assistance of the money so advanced and keeping the said money as a nucleus, K. Appa Rao did business and also entered into various transactions as a result of which various properties came to be acquired by him either in his name or in the names of others.... At no time K. Appa Rao intended to hold the property, as his own self- acquired property but acting always under the guidance and help of the senior- most member of the family, K, Satyanarayana, he did various transactions which were clearly intended for the benefit of the entire family.'... It is enough that the coparcener concerned disclaims his separate dominion over his self-acquired property. No doubt, the present case is not one where what was initially the separate property of a member, subsequently, got clothed with the character of joint family property either by a declaration or by appropriate conduct on the member's part. For, here is a case where ab initio, at the very moment the property was acquired, it was so acquired as joint family property. Appa Rao was merely the hand which received the funds, but Shyamalambal who provided the funds made it perfectly clear that those funds were to be utilised only for the benefit of the family." 5. The dispute in this case was whether the assessee was liable to be assessed to tax in the status of Hindu undivided family. The properties held by the assessee came from a lady relative. The Tribunal was of the view that since the source of the property was a gift it could not be treated as a joint family property. The High Court pointed out that the donor, Smt. Shyamalambal, wife of K. Satyanarayana, had funds of her own. With a clear intention of benefiting the family as a whole she provided funds to K. Appa Rao. The money in the hands of K. Appa Rao has to be treated as joint family property because Smt. Shyamalambal clearly indicated at the time of making of the gift that the funds were to be utilised only for the benefit of the family. K. Appa Rao, M. Satyendra Kumar and other brothers jointly held the property. The Tribunal (High Court?) from all these facts came to the conclusion that the money received by the assessee was part of the joint family property. The assessee has to be taxed in the status of an individual (HUF?). 6. We do not find any reason to interfere with the findings of the High Court. The appeals are dismissed and no order as to costs. 8.9. In the instant case before us, we find that the ld. CIT(A) had observed that money should come from ancestral property to create HUF. But the Hon’ble Supreme Court in the aforesaid case had held that HUF could be created even by way of gift received from relative based on the intention of the donor. On perusal of the gift ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 14 of 27 deed, it is very clear that both sister and brother in law of Om Prakash Bhatia had categorically stated that the gift of cash and Jewellery is being given only to Om Prakash Bhatia (HUF) and not to Om Prakash Bhatia (Individual) and that the said monies should have to be utilized only for the welfare of the family of HUF. Even the names of members of HUF were mentioned in the said gift deed. Hence the HUF was created based on this initial nuclear corpus itself. 8.10. All these facts clearly prove that the HUF had validly come into existence in Asst Year 2002-03 itself and hence there is absolutely no case for assessing the profits of the business of Pradeep Trading Co. in the hands of the individual on substantive basis. On the contrary, the same should be assessed in the hands of HUF on substantive basis which is already declared by the assessee. Moreover, there is no case made out by the revenue for estimating the gross profit at the rate of 4.5% on sales either in the case of Individual or in the case of HUF. Hence we have no hesitation in directing the ld. AO to delete the estimated gross profit additions both in Individual hands and also in HUF hands, both ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 15 of 27 substantively and protectively, as the case may be. Accordingly, the Ground No. 3 raised by the assessee HUF is allowed. 9. The Ground Nos. 4 and 7 raised by the assessee HUF are general in nature and does not require any specific adjudication. 10. The Ground No. 5 raised by the assessee HUF regarding chargeability of interest is consequential in nature in view of our decision in Ground No. 3 above. 11. In the result, the appeal of the assessee HUF is partly allowed for Asst Year 2005-06. 12. In view of our decision in Ground No. 3 in assessee HUF supra for Asst Year 2005-06, the Ground No. 1 raised by Om Prakash Bhatia (Individual) for Asst Year 2005-06 is allowed. 13. The Ground No. 2 raised by Om Prakash Bhatia (Individual) for Asst Year 2005-06 is challenging the action of the lower authorities in not granting the benefit of deduction towards cost of acquisition of the property together with its indexation. 13.1. We have heard the rival submissions and perused the materials available on record. During the year under consideration, Om Prakash Bhatia (Individual) sold plot at Bagdola. The ld. AO observed that on perusal of assessee’s (individual) income tax and ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 16 of 27 wealth tax records do not reflect the property and hence the entire sale proceeds of the said plot was brought to tax as income from other sources while completing the assessment. Accordingly, the benefit of cost together with its indexation in the sum of Rs.2,80,131/- claimed by the assessee was denied and addition to that extent was made by the ld. AO. The assessee (individual) submitted before the ld. CIT(A) that he had purchased a plot at Bagdola, Dwarka, Delhi on 18.04.1996 for Rs 1,78,000/- which was sold during the year under consideration. The purchase agreement was filed before the ld. AO and the same was also disclosed in the Wealth Tax Returns for the Asst Year 2004-05 wherein a sum of Rs 5,00,000/- was disclosed as net wealth. The ld. CIT(A) however observed that assessee only filed the photostat copy of the agreement entered on 18.04.1996 between Smt Kiran Pahwa and assessee individual, authenticity of which was highly doubtful and accordingly denied to take cognizance of the same. The ld. CIT(A) also observed that the copy of net wealth statement relied upon by the assessee cannot be given much weight in view of the categorical observation of the ld. AO in respect of verification of earlier Income Tax and Wealth Tax records. The ld. CIT(A) further proceeded to ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 17 of 27 state that the property was not even registered in the name of the assessee and assessee individual had not even obtained a power of attorney to effect the sale during the year under consideration. No evidence was furnished for incurrence of expenditure for acquisition of the said plot and accordingly no benefit of deduction towards cost of plot and its indexation could be granted to the assessee in respect of sale of this plot. With these observations, the ld. CIT(A) upheld the action of the ld. AO. 13.2. Before us, no arguments at all were advanced by the ld. AR to substantiate the claim of the assessee individual. Hence we do not deem it fit to interfere with the findings of the ld. CIT(A) in this regard. Accordingly, the Ground No. 2 raised by the assessee individual for the Asst Year 2005-06 is dismissed. 14. The Ground No. 3 raised by the assessee individual for the Asst Year 2005-06 regarding chargeability of interest is consequential in nature. 15. The Ground No. 4 raised by the assessee individual for the Asst Year 2005-06 is general in nature and does not require any specific adjudication. ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 18 of 27 16. In the result, the appeal of the assessee individual for the Asst Year 2005-06 is partly allowed. 17. Let us now take up the appeal of Om Prakash Bhatia (Individual) and Om Prakash Bhatia (HUF) for the Asst Year 2006- 07. 18. The Original Ground Nos. 1, 2 & 5 raised by the assessee HUF for the Asst Year 2006-07 was stated to be not pressed by the ld. AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly the same are hereby dismissed as not pressed. 19. The Ground Nos. 4 and 7 raised by the assessee HUF for the Asst Year 2006-07 are general in nature and does not require any specific adjudication. 20. The Ground No. 3 raised by the assessee HUF for the Asst Year 2006-07 is identical to Ground No. 3 raised for the Asst Year 2005-06 which had been already adjudicated hereinabove for assessee HUF. The decision rendered thereon would apply with equal force for this Asst Year 2006-07. ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 19 of 27 21. The Ground No. 6 raised by the assessee HUF for the Asst Year 2006-07 regarding chargeability of interest is consequential in nature in view of our decision in Ground No. 3 above for the Asst Year 2006-07. 22. In the result, the appeal of the assessee HUF is partly allowed for Asst Year 2006-07. 23. The Ground Nos. 1 & 2 raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07 are identical to Ground No. 1 raised by him for the Asst Year 2005-06 and hence the decision rendered by us thereon shall apply with equal force for the Asst Year 2006-07 also. 24. The Ground No. 3 raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07 is challenging the Gross Profit addition made on estimated basis @ 4.5.% of sales. 24.1. We have heard the rival submissions and perused the materials available on record. We find that the ld. AO had resorted to estimation of gross profits at the rate of 4.5.% on sales and made an addition of Rs 7,39,000/- for the Asst Year 2006-07 in the hands of Om Prakash Bhatia (individual). We find that the ld. CIT(A) had deleted the addition on the ground that the ld. AO had not rejected ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 20 of 27 the books of accounts u/s 145(3) of the Act by pointing out certain defects thereon. We find that similar additions made by the ld. AO in the case of Om Prakash Bhatia (Individual) for the Asst Years 2004-05 and 2005-06 were deleted by the ld. CIT(A) and further appeals of revenue before this tribunal were dismissed due to low tax effect. Further, we find that the assessee had duly furnished the complete details of sales together with their ledger accounts, details of domestic purchases made together with their ledger accounts, ledger account of import purchases made along with import documents on sample basis, quantity reconciliation of opening stock, purchases, sales and closing stock on monthwise basis , details of monthly basis import and local purchases with quantity before the ld. AO. Details of sundry creditors exceeding Rs 50,000/- were also furnished before the ld. AO. No defect whatsoever was found by the ld. AO in the books of accounts and documents furnished by the assessee. Accordingly, the ld. AO had not resorted to even reject the books of accounts and book results of the assessee. Once this is not done, there is absolutely no case for the ld. AO to estimate the gross profit on sales at 4.5.% . ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 21 of 27 Accordingly, the Ground No. 3 raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07 is allowed. 25. The Ground No. 4 raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07 is challenging the addition made in the sum of Rs 43,61,800/- in respect of income allegedly surrendered but not offered to tax in the return. 25.1. We have heard the rival submissions and perused the materials available on record. We find that the ld. AO had observed that during post search investigations, the assessee [ Om Prakash Bhatia (individual) ] came forward and surrendered a sum of Rs 60,00,000/- as undisclosed income and paid taxes on the same. However, while filing the income tax return, the assessee did not offer any undisclosed income for the Asst Years 2000-01 to 2005-06 and in Asst Year 2006-07, the assessee offered a sum of Rs 16,38,200/- as undisclosed income comprising of (i) investment in stock of Rs 6,38,200/- and (ii) cash expenses etc of Rs 10,00,000/-. When questioned, the authorized representative of Om Prakash Bhatia (individual) explained that surrender of Rs 60 lacs was mistakenly done and actual undisclosed income was only to the ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 22 of 27 extent of Rs 16,38,200/- which was duly included in the taxable income for the Asst Year 2006-07. The ld. AO however did not agree to this contention and proceeded to add the differential sum of Rs 43,61,800/- (60,00,000 – 16,38,200) as income surrendered but not offered by the assessee, while completing the assessment. The ld. CIT(A), in principle, upheld the action of the ld. AO , but however, gave credit for the estimated income of Rs 7,39,000/- and Rs 6,31,225/- and sustained the addition to the extent of Rs 29,91,575/-. 25.2. It is pertinent to note that the surrender of income of Rs 60 lacs was not made at the time of search by Om Prakash Bhatia (individual) as is evident from the search statement dated 13.12.2005 placed on record. It was only on 24.01.2006 where Om Prakash Bhatia (individual) was summoned, wherein he made a surrender of Rs 60 lacs to avoid protracted litigation and to buy peace of mind. We find that this surrender was however subject to receiving the photocopies of the documents seized / impounded from the residence and business premises. Om Prakash Bhatia (individual) accordingly after verification of the seized and impounded documents arrived at the actual undisclosed income ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 23 of 27 only to the extent of Rs 16,38,200/- which was duly offered to tax as additional income while filing the return for the Asst Year 2006- 07. It was argued that there was no other material in the form of any money, bullion, jewellery, investments, incurrence of cash expenses for personal account, loans given, etc were found at the time of search. The revenue is harping mainly only on the statement without bringing on record any corroborative evidence thereon. We hold that an addition cannot be made merely on the basis of surrender made, which stood subsequently retracted, when it is not backed by undisclosed assets or incurrence of expenditure outside the books. Merely certain seized documents were confronted to Om Prakash Bhatia (individual) does not mean that there is some concealed income in the said seized documents. In the instant case, Om Prakash Bhatia (individual) had after verification of the seized documents had come forward to retract his statement partially and offered the actual undisclosed income of Rs 16,38,200/- representing investment in stock and incurrence of cash expenses. He had not only offered the income but had also stated the application thereon. Hence Om Prakash Bhatia (individual) was right in retracting his statement making surrender ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 24 of 27 of income and offering only Rs.16,38,200/- in the return. Reliance in this regard is placed on the celebrated decision of Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd vs. State of Kerala & Anr. reported in 91 ITR 18 (SC) wherein it was held as under:- 4. There is material on record to show that in respect of the assessment year 1963-64, the year previous to the one with which we are concerned in this case, the Tribunal refused to refer similar questions which the assessee wanted it to refer to the High Court. But, at the instance of the assessee those questions were referred to the High Court as ordered by the High Court and the High Court answered those questions in favour of the assessee. It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. 25.2.1. Similar view was also taken by the Hon’ble Jurisdictional High Court in the case of S. Arjan Singh vs CWT reported in 175 ITR 91 (Del) . 25.3. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, the Ground No. 4 raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07 is allowed. 26. The Ground No. 5 raised by Om Prakash Bhatia (Individual) for the Asst Year 2006-07 regarding chargeability of interest is ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 25 of 27 consequential in nature in view of our decision for other grounds above for the Asst Year 2006-07. 27. The Ground No. 6 raised by Om Prakash Bhatia (Individual) for the Asst Year 2006-07 is general in nature and does not require any specific adjudication. 28. In the result, the appeal of Om Prakash Bhatia (individual) for the Asst Year 2006-07 is partly allowed. 29. Let us now take up the appeal of Om Prakash Bhatia (Individual) and Om Prakash Bhatia (HUF) for the Assessment Year 2007-08. 30. The grounds raised by Om Prakash Bhatia (HUF) for the Asst Year 2007-08 are identical to grounds raised in Asst Year 2005-06 and hence the decision rendered by us hereinabove for Asst Year 2005-06 shall apply with equal force for Asst Year 2007-08 also except with variance in figures. 31. In the result, the appeal of the assessee HUF is partly allowed for Asst Year 2007-08. 32. The grounds raised by Om Prakash Bhatia (Individual) for the Asst Year 2007-08 are identical to grounds raised in Asst Year ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 26 of 27 2005-06 and Asst Year 2006-07 and hence the decision rendered by us hereinabove for Asst Years 2005-06 and 2006-07 shall apply with equal force for Asst Year 2007-08 also except with variance in figures. 33. In the result, the appeal of Om Prakash Bhatia (individual) is partly allowed for Asst Year 2007-08. 34. To sum up, all the appeals of Om Prakash Bhatia (individual) and Om Prakash Bhatia (HUF) are partly allowed. Order pronounced in the open court on 13 th September, 2023. Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 13/09/2023 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Page 27 of 27