M/s Bikramjeet Singh HUF, Mohali V. ITO, Mohali

ITA 392/CHANDI/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8333 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Unexplained cash credit; Gift; Corroborative evidences; Valuation report
• Section: 142(1); 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 392/CHD/2011 ASSESSMENT YEAR: 2006-07 SH. BIKRAMJIT SINGH HUF, VS. THE ITO, WARD 6(3), MOHALI MOHALI PAN NO. AADHB0251K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. AJAY JAIN RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 19.02.2016 DATE OF PRONOUNCEMENT : 30.03.2016 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)-CHANDIGARH DATED 23.11.2010 RELATING TO ASS ESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - CHAN DIGARH ('LD. C1T{A)') HAS ERRED IN LAW AND IN FACTS, IN CO NFIRMING THE ADDITION OF RS 13,12,140/- ON ACCOUNT OF CAPITAL RE CEIPT RECEIVED ON SALE OF JEWELLERY IN THE- SUBJECT ASSESSMENT YEA R, 2 2. THAT THE ORDERS OF THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEAL) ARE AGAINST LAW AND FACTS AN D ARE LIABLE TO BE SET ASIDE. 3. THAT THE FIRST APPELLATE AUTHORITY HAS WRONG LY MENTIONED IN PARA 11 OF THE ORDER THAT THERE IS NO JUDICIAL DECI SION SUPPORTING THE ARGUMENT OF THE APPELLANT THAT ONCE SOME EVIDEN CE IS SENT FOR REMAND REPORT FROM THE CONCERNED ASSESSING OFFICER, IT HAS TO BE ADMITTED. THE APPELLANT RELIED UPON THE JUDGMENT OF THE IT AT, MUMBAI BENCH IN CASE OF SHARUKH KHAN VS DOT (2007) 13 SOT 61 . THE APPELLANT AUTHORITY HAS MENTIONED THE SAME IN PARA 10 OF THE ORDER HUT HAS NOT CONSIDERED THE SAME AT THE TIME OF DISPOSAL OF THE APPEAL. 4. THAT THE STATUS OF THE APPLICANT IS HUF AND NOT INDIVIDUAL AS MENTIONED IN THE ASSESSMENT ORDER. THE APPELLA TE AUTHORITY HAS NOT ORDERED ON THIS GROUND AND THE STATUS OF TH E APPELLANT MAY PLEASE BE TAKEN AS HUF. 5. THAT THE DATE OF FORMATION OF HUF IS 17/10/1996 AND IT MAY PLEASE BE ACCEPTED ON THE BASIS OF THE DOCUMENTARY EVIDENCE AND SETTLED LAW. 6. THAT THERE IS NO LIABILITY OF INTEREST AS PER L AW U/S 234B AS CHARGED BY THE ASSESSING OFFICER 3. BRIEFLY STATED, THE FACTS OF THE PRESENT CASE AR E THAT THE ASSESSEE SUBMITTED ITS RETURN OF INCOME ON 30.10.2006 DECLAR ING LOSS OF RS. 3,05,936/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-T AX ACT, 1961 (IN SHORT 'THE ACT') AND A REFUND OF RS. 1,35,000/- WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE ASSESSING OFFICER ISSUED STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE ACT, TO THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INTRODUCED AN AMOUNT OF RS. 13,12,140/- IN THE CAPI TAL ACCOUNT. THE ASSESSEE FILED THE RETURN UNDER THE STATUS OF HUF. THE ASSES SING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF ABOVE INVESTMENT IN THE CAPITAL ACCOUNT WITH 3 DOCUMENTARY EVIDENCE. IN RESPONSE TO THE ABOVE QUE RY, THE ASSESSEE EXPLAINED THAT THE INVESTMENT OF RS. 13,12,140/- WAS MADE BY THE ASSESSEE OUT OF SALE PROCEEDS OF JEWELLERY, WEIGHING 2082.67 GMS, THE DE TAILS ARE AS UNDER:- S.NO. PARTICULARS OF ITEMS NO. OF ITEMS NET WEIGHT 1 KARES 18 683.920 GMS 2 CHANIS 16 676.980 3 HAR SETS 3 6 BANGLES 44 721.77 GMS 7 PATLA (RHODIUM) 5 TOTAL WEIGHT 2082.67 THE ASSESSEE WAS FURTHER REQUIRED TO PRODUCED THE PURCHASE BILLS IN RESPECT OF JEWELLERY SHOWN TO HAVE BEEN SOLD FOR RS. 13,12,140 /-. IN RESPONSE TO THE SAID QUERY, THE ASSESSEE FILED A WRITTEN REPLY DATED 26. 12.2008 WHEREIN IT WAS CONTENDED THAT JEWELLERY IN QUESTION WAS GIVEN TO T HE FAMILY OF THE BIKRAMJIT SINGH (KARTA) ON THE OCCASION OF MARRIAGE OF KARTA IN THE YEAR 1996 AND GIFTS BY PARENTS / GRAND-PARENTS ON VARIOUS FAMILY FUNCT IONS. THE ASSESSEE FURTHER STATED THAT PERSONAL ASSETS INCLUDING THE JEWELLERY HAVE BEEN OWNED AND POSSESSED BY SHRI BIKRAMJIT SINGH HUF FOR WHICH NO ACCOUNTS WERE REQUIRED TO BE MAINTAINED. IT WAS ALSO STATED THAT MOST OF THE AFORESAID JEWELLERY EXITED IN THE YEAR 1997 EVEN PRIOR TO THE ESTABLISHMENT OF TH E BUSINESS UNIT OF HUF, AS WAS EVIDENT FROM VALUATION REPORT DATED 22.5.1997 O F A GOVERNMENT APPROVED VALUER NAMELY SHRI KUDAN LAL KOHLI OF M/S NEW JEHLU M JEWELLERS, NEW DELHI AND AGAIN THE SAME JEWELLERY WAS GOT VALUED ON 18.1 2.2004 BY THE SAME VERY VALUER. THE ASSESSING OFFICER DID NOT ACCEPT THE EX PLANATION OF THE ASSESSEE FOR THE REASONS STATED IN PARAS 6 TO 12 OF THE ASSESSME NT ORDER. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE MA INLY ON THE GROUND THAT 4 JEWELLERY RECEIVED BY A PERSON ON HIS MARRIAGE BELO NGED TO THE PERSON, IN INDIVIDUAL CAPACITY AND NOT IN A HUF CAPACITY. THE ASSESSING OFFICER FURTHER POINTED OUT THAT THE JEWELLERY MENTIONED HEREIN A BOVE CONTAINED ITEMS WHICH ARE USED BY WOMEN, THEREFORE, THE JEWELLERY SO RECE IVED AT THE TIME OF MARRIAGE CAN IN NO WAY BE HELD BELONGING TO A HUF. THE ASSES SING OFFICER ALSO POINTED OUT THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THA T SHRI BIKRAMJIT SINGH HUF WAS CREATED IN THE YEAR 1996. THE ASSESSING OFFICER CONCLUDED THAT THE AMOUNT OF RS. 13,12,140/- INTRODUCED BY THE ASSESSEE IN TH E CAPITAL ACCOUNT IN THE GARB OF SALE OF JEWELLERY WAS TO BE TREATED THE INCOME O F THE ASSESSEE FORM UNDISCLOSED SOURCES AS PER PROVISIONS OF SECTION 68 OF THE ACT, AND THE ASSESSING OFFICER ADDED THE AMOUNT OF RS. 13,12,140 /- BEING THE SALE VALUE OF JEWELLERY WEIGHING 2082.67 GMS. 4. ON APPEAL, THE CIT(A) UPHELD THE ADDITION OF RS. 13,12,140/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. 5. I HAVE HEARD SH. AJAY JAIN, LD. COUNSEL FOR THE ASSESSEE AND ALSO SHRI S.K. MITTAL LD. DR AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE ASSESSING OFFICER MADE TH E ADDITION OF RS. 13,12,140/- U/S 68 OF THE ACT, AND THE ADDITION MADE SO HAS BE EN CONFIRMED BY LD. CIT(A). IT IS TRUE THAT IN ORDER TO DISCHARGE THE ONUS CAST ON THE ASSESSEE U/S 68 OF THE ACT, THE ASSESSEE MUST PROVE THE - (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY: AND, (III) THE GENUINENESS OF THE TRANSACTION THE CASE OF THE ASSESSEE IS THAT SHRI BIKRAMJIT SIN GH HAD RECEIVED JEWELLERY FROM HIS CLOSE RELATIVES AT THE TIME OF HIS MARRIAGE IN THE YEAR 1996. IN ORDER TO SUBSTANTIATE THIS CLAIM THE ASSESSEE HAD FURNISHED A COPY OF THE GIFT DEED DATED 5 18.10.1996 DULY NOTARIZED AND IT IS STATED THAT THE SAME WAS FURNISHED AT THE TIME OF ASSESSMENT PROCEEDINGS ALONG WITH COPY OF RECEIP T ISSUED BY THE NOTARY. IN THE SAID GIFT DEED, SHRI GURJEET KAUR HAS SPECIFICALLY MENTIONED THAT THE JEWELLERY WAS GIVEN TO SHRI BIKRAMJIT SINGH HUF AND THEIR COM ING CHILDREN, IN FUTURE. THE SAID GIFT WAS EXECUTED BY SMT. GURJEET KAUR WHO IS THE MOTHER OF SHRI BIKRAMJIT SINGH. IT IS APPARENT FROM THE RECORD THAT THE ASSE SSEE HAS FILED INCOME TAX AND WEALTH TAX RETURNS IN THE STATUS OF HUF FOR ASSESSM ENT YEARS 2004-05 TO ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS FURNISHED A COPY OF THE WEALTH TAX RETURN FOR ASSESSMENT YEAR 2004-05, WHICH WAS SUBMI TTED BY THE ASSESSEE ON 29.12.2004 I.E. BEFORE START OF ASSESSMENT PROCEEDI NGS FOR THE YEAR UNDER CONSIDERATION. THE WEALTH TAX RETURN WAS SUBMITTED TOGETHER WITH COMPLETE DETAILS OF ALL THE ASSETS OWNED BY ASSESSEE, HUF IN CLUDING JEWELLERY. IT IS ALSO APPARENT FROM THE RECORDS THAT THE ASSESSEE GOT THE JEWELLERY VALUED FROM GOVERNMENT APPROVED VALUER SHOWING VALUE OF JEWELL ERY AS ON 31.3.1997. A COPY OF THE VALUATION REPORT DATED 22.05.1997 IS A VAILABLE AT PAGE 58 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO FURNISHED A COPY OF THE VALUATION REPORT DATED DECEMBER 18, 2004 FROM GOVERNMENT APPROVED VALUER S HOWING VALUE OF JEWELLERY AS ON 31.3.2004. A COPY OF THE VALUATION REPORT IS AVAILABLE AT PAGE 59 OF THE ASSESSEES PAPER BOOK. IT WAS ALSO WORTHWHILE TO M ENTION HERE THAT THE ASSESSEE SUBMITTED THE WEALTH TAX RETURN FOR ASSESSMENT YEAR 2004-05 ON 29.12.2004 TOGETHER WITH STATEMENT OF NET WEALTH TAX. IN THE S AID RETURN, THE ASSESSEE HAS SHOWN THE JEWELLERY WEIGHING 2465.46 GMS AND THE VA LUE OF THE SAME IS SHOWN AT RS. 14,77,482/-. THE WEIGHT OF THE JEWELLERY AND TH E VALUE SHOWN IN THE GOVERNMENT APPROVED VALUER REPORT DATED 22.5.1997 A ND 18.12.2004 TALLIES WITH THE STATEMENT OF WEALTH MENTIONED IN THE WEALTH TAX RETURN FILED ON 29.12.2004. THE WEALTH TAX RETURN WAS FILED IN THE STATUS OF HU F FOR THE ASSESSMENT YEAR 2004-05, WHICH HAS BEEN ACCEPTED BY INCOME TAX / WE ALTH TAX OFFICER WITHOUT ANY ADVERSE COMMENTS. THE ASSESSEE HAS RECEIVED THE ENT IRE CONSIDERATION AMOUNTING TO RS. 13,12,140/- THROUGH ACCOUNT PAYEE CHEQUE FRO M REGISTERED JEWELLERS 6 HAVING SALES TAX AND CST NUMBER AND THE REVENUE AUT HORITIES HAVE NOT DOUBTED THE GENUINENESS OF SALE OF JEWELLERY AND MADE THE A DDITION MERELY ON THE GROUND THAT JEWELLERY BELONGED TO SHRI BIKARMJIT SINGH (IN DIVIDUAL) OR HIS WIFE AND NOT TO THE ASSESSEE (HUF). IN MY OPINION, THE ADDITION U/S 68 CANNOT BE MADE ON THE ABOVE GROUND AS THE GENUINENESS OF THE SALE / TRANS ACTIONS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IT IS ALSO RELEVANT TO OBSER VE HERE THAT THE ASSESSING OFFICER HAS ACCEPTED THE INCOME TAX AND WEALTH TAX RETURNS FILED BY THE ASSESSEE IN THE STATUS OF HUF INCLUDING THE YEAR UNDER CONSIDERATIO N. IN MY CONSIDERED VIEW, ONCE THE FACTUM OF EXISTENCE OF JEWELLERY IS ACCEPT ED IN THE WEALTH TAX RETURN FOR THE ASSESSMENT YEAR 2004-05 BY THE REVENUE DURING W EALTH TAX ASSESSMENT PROCEEDINGS, THEN LATER ON REVENUE CANNOT TAKE THE CONTRARY VIEW IN THE INCOME TAX PROCEEDINGS REGARDING THE EXISTENCE OF JEWELLER Y POSSESSED BY THE ASSESSEE HUF. AS REGARDS THE FORMATION OF HUF, IT IS WELL SE TTLED THAT THE FAMILY COMES INTO EXISTENCE AND IS ENTITLED TO BE ASSESSED AS HU F IMMEDIATELY AFTER THE MARRIAGE OF KARTA OF THE HUF, THE KARTA WITH HIS WI FE CONSTITUTES VALID HUF. IN THIS CASE THE REVENUE RAISED AN ISSUE THAT HUF WAS NOT IN EXISTENCE PRIOR AS TO 7.2.2001 BECAUSE AS PER THE COPY OF THE PAN ALLOTTE D TO HUF, THE DATE OF FORMATION OF HUF IS 7.2.2001. IN MY OPINION, THIS O BJECTION OF THE REVENUE IS NOT SUSTAINABLE BECAUSE THE STATUS OF HUF CANNOT BE DE TERMINED ON THE BASIS OF DATE MENTIONED IN THE APPLICATION SUBMITTED FOR OBTAININ G THE PAN NUMBER. THE HUF IS PURELY A CREATURE OF LAW AND CANNOT BE CREATED BY AN ACT OF PARTIES (EXCEPT IN CASE OF MARRIAGE, ADOPTION AND RE-UNION). IT APPEAR S THAT THE AUTHORITIES BELOW HAVE MADE THE ADDITION WITHOUT ANY BASIS. AS I HAVE ALREADY OBSERVED HEREIN ABOVE THAT THE ASSESSING OFFICER HAS NOT DOUBTED TH E GENUINENESS OF THE SALE OF JEWELLERY. IT IS NOT THE CASE OF THE REVENUE THAT T HE TRANSACTION WAS SHAM, THEREFORE, THE AMOUNT OF RS. 13,12,140/- RECEIVED O N ACCOUNT OF SALE OF JEWELLERY CANNOT BE ADDED U/S 68 OF THE ACT. IN THE CASE OF C IT V A. K DAGA & SONS (2008) 296 ITR 623 (MAD.), THE HON'BLE HIGH COURT IN SIMIL AR CIRCUMSTANCES HELD AS UNDER:- 7 THE ASSESSEE HAD ALREADY EXPLAINED THE NATURE AND SOURCE OF CREDITS WITH SUPPORTING EVIDENCES. THE AUTHORITIES BELOW HAVE GIVEN A FINDING THAT THE ASSESSING OFFICER, EXCEPT DESCRIBING IT AS A SHAM TRANSACTION, HAD NOT BROUGHT ANY ADDIT IONAL EVIDENCE TO SUPPORT HIS CONTENTION. THE ADDITION MA DE UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDIT IS NOT BASED ON ANY MATERIAL OR EVIDENCE. BOTH THE FIRST APPELLA TE AUTHORITY AS WELL AS THE TRIBUNAL HAVE GIVEN A FIND ING THAT THERE IS NO MATERIAL BROUGHT ON RECORD TO SUGGEST T HAT THE TRANSACTION WAS SHAM AND HENCE IT WAS HELD THAT THE SUM RECEIVED ON ACCOUNT OF SALE OF JEWELLERY COULD NOT BE BROUGHT TO TAX UNDER SECTION 68 OF THE ACT. IN THE INSTANT CASE, THE ASSESSEE HUF HAD RECEIVED THE SALE CONSIDERATION OF RS. 13,12,240/- THROUGH ACCOUNT PAYEE CHEQUE FROM THE REGISTERED JEWELERS HAVING SALES TAX AND CST NUMBERS. AS PER THE WEALTH TAX RE TURN SUBMITTED FOR 2004-05, IT IS CLEAR THAT THE REVENUE HAS ACCEPTED THE STATU S OF THE ASSESSEE AS HUF, AND THEREFORE, THERE WAS NO OCCASION FOR TAKING A CON TRARY STAND IN THE INCOME TAX PROCEEDINGS IN THE YEAR UNDER CONSIDERATION. EVEN I N THE INCOME TAX PROCEEDINGS FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06, THE R EVENUE HAS ACCEPTED THE STATUS OF THE ASSESSEE AS HUF. 6. IN VIEW OF THE ABOVE, I DO NOT SEE ANY JUSTIFIC ATION IN MAKING THE ADDITION U/S 68 OF THE ACT AND ACCORDINGLY, I DELETE THE ADD ITION OF RS. 13,12,140/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT AND CON FIRMED BY THE CIT(A). ACCORDINGLY, GROUND NOS. 1 TO 5 OF THE APPEAL ARE ALLOWED. 7. GROUND NO.6 OF THE APPEAL RELATES TO CHARGING OF INTEREST U/S 234B OF THE ACT. IT IS STATED THAT THIS GROUND OF APPEAL IS CON SEQUENTIAL IN NATURE AND I HOLD 8 ACCORDINGLY, AND DIRECT THE ASSESSING OFFICER TO GI VE CONSEQUENTIAL RELIEF TO THE ASSESSEE IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.03.2016 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 30 TH MARCH, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR