Ashok Harlalka, CHENNAI V. ACIT, CHENNAI

ITA 555/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0913 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: T VASUDEVAN
• Keywords: Income from undisclosed sources; Valuation report; Retraction
• Section: 250; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER) .. I.T.A. NOS. 554 & 555/MDS/2010 ASSESSMENT YEARS : 2005-06 & 2007-08 SHRI ASHOK HARLALKA, NEW NO.47, OLD NO.23, JONES STREET, CHENNAI 600 001. PAN : AABPH2844J (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE IV(3), CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI T. VASUDEVAN RESPONDENT BY : SHRI K.E.B. RENGARAJAN JUNIOR STANDING COUNSEL O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS BY THE ASSESSEE AGAINST THE ORDE RS DATED 18.1.2010 OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-I, CHENNAI, FOR THE RESPECTIVE ASSESSMENT YEARS. 2. FIRST, WE TAKE UP APPEAL FOR ASSESSMENT YEAR 200 5-06. SHORT FACTS APROPOS ARE THAT ASSESSEE IS ENGAGED IN THE S TEEL BUSINESS. IN THE ASSESSMENT DONE FOR THE IMPUGNED ASSESSMENT YEA R, A SUM OF I.T.A. NOS. 554 & 555/MDS/10 2 RS.2,00,000/- WAS ADDED AS INCOME FROM UNDISCLOSED SOURCES. THE NARRATION GIVEN BY THE A.O. FOR MAKING THIS ADDITIO N IS AS UNDER:- A STATEMENT OF SRI MANOJ KUMAR WAS RECORDED U/S 13 1 OF THE I.T.ACT 1961, ON 10.11.08 BY ADIT(INV.), CHENNAI . IT HAS BEEN STATED BY SRI MANOJ KUMAR IN HIS STATEMENT THAT RS.2 LAKHS WHICH WAS CONTRIBUTED AS SHARE CAPITAL OF M/S TAGACH TECH NOLOGIES (P) LTD. WAS IN FACT GIVEN TO HIM BY SHRI ASHOK HARLALKA IN CASH AND THE SAME WAS IN HIS ACCOUNT FOR TRANSFERRING THE SA ID AMOUNT TO THE ACCOUNT OF M/S TAGACH TECHNOLOGIES (P) LTD. TH E ASSESSEE VIDE THIS OFFICE LETTER DATED 25.11.08 WAS REQUESTE D AS TO WHY RS.2 LAKHS SHOULD NOT BE TREATED AS UNDISCLOSED INC OME. THE ASSESSEE WAS ASKED TO GIVE HIS REPLY WITHIN 5 DAYS. TILL DATE NO EXPLANATION/SUBMISSION WAS RECEIVED FROM THE ASSESS EE ON THIS COUNT. HENCE, IT IS CLEAR THAT THE ASSESSEE GAVE R S.2 LAKHS TO SRI MANOJ KUMAR IN CASH IN ORDER TO ENABLE SRI MANOJ KU MAR TO DEPOSIT THE SAME IN HIS ACCOUNT (MANOJ KUMAR A/C) F OR TRANSFERRING THE SAME TO THE ACCOUNT OF TAGACH TECH NOLOGIES (P) LTD. IN VIEW OF THE ABOVE, RS.2 LAKHS IS TREATED A S UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED TO THE TOTAL INCOM E. 3. BEFORE THE CIT(APPEALS), ASSESSEE SUBMITTED THAT SHRI MANOJ KUMAR WAS NEVER ALLOWED TO BE EXAMINED BY THE ASSES SEE. ON THE ASPECT OF CROSS-EXAMINATION, LD. CIT(APPEALS) CALLE D FOR REMAND REPORT FROM THE A.O. SUBMISSION OF THE A.O. IN THE REMAND REPORT IS AS UNDER:- DURING THE REMAND STAGE, THE ASSESSEE HAS FILED AN AFFIDAVIT GIVEN BY SRI MANOJ KUMAR DATED 22.06.09, T HEREIN IT IS STATED THAT SRI MANOJ KUMAR HAS GIVEN RS.2,00,000 O UT OF HIS SAVINGS AND INCOME FROM HIS BUSINESS I.E. DRESS DES IGNING WORKS TOWARDS HIS SHARE CAPITAL WITH M/S TAGACH TECHNOLOG IES PVT. LTD. DURING THE F.Y.2004-05. FURTHER HE HAS STATED THAT HE HAS TAKEN I.T.A. NOS. 554 & 555/MDS/10 3 SHORT TERM ADVANCES FROM DIFFERENT PERSONS AFTER RE CEIVING THE SAME WAS DEPOSITED IN HIS SB ACCOUNT WITH PNB, KILP AUK BRANCH. IT IS FURTHER STATED THAT RS.2,00,000 WAS HIS OWN A MOUNT NOT GIVEN BY ANYBODY. THIS AMOUNT WAS SHOWN AS HIS CAPITA L IN THE BALANCE SHEET AS ON 31.03.05 AND 31.03.06. ALSO HE HAS STATED THAT THE STATEMENT GIVEN BY HIM ON 10.11.08 BEFORE A DIT(INV.) WAS NOT TRUE AND GIVEN UNDER PRESSURE (COPY ENCLOSED ). IN THIS REGARD HE HAS FILED THE DETAILS OF AMOUNT RECEIVED FROM VARIOUS PERSONS AS UNDER: RECOVERY OF SHORT TERM ADVANCE FROM: SRI OM PRAKASH GOUR, CHENNAI-19 RS. 18,000 SRI SURESH, CHENNAI-19 RS. 22,000 SRI HARI PRASAD, CHENNAI-1 RS. 20,000 SRI DINESH, CHENNAI-19 RS. 18,852 AMOUNT OUT OF SALE OF STOCKS OF DRESS MATERIAL RS. 1,21,148 RS.2,00,000 SHRI MANOJ KUMAR HAS FILED CONFIRMATION FROM THOSE PARTIES TO SUBSTANTIATE THE GENUINENESS OF HIS CLAIM (COPIES E NCLOSES AS ANNEXURE A). 1. THE STATEMENT WAS GIVEN BY SRI MANOJ KUMAR U/S 131 BEFORE THE ADIT ON 10.11.08. 2. NOW SRI MANOJ KUMAR IS FILING RETRACTION STATEMENT IN THE FORM OF AFFIDAVIT FROM THE NOTARIZED ADVOCATE DATED 22.06.09, WHICH IS ALMOST AFTER 7 MONTHS OF THE ORI GINAL STATEMENT GIVEN BEFORE THE ADIT. 3. THIS MAY BE AFTER THOUGHT OF THE ASSESSEE. 4. I RELY ON THE JUDGEMENT IN THE CASE OF M/S RAMESHCHA NDRA & CO. VS CIT 168 ITR 375 BOMBAY (HC). WHEREIN IT IS PRONOUNCED VERY CLEARLY THAT, IF THE ASSESSEES STATE MENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT UNDER A MISTAKEN BELIEF OF FACT OR LAW, THAT HE SHOULD MAKE AN APPLICATION FOR RECTIFICATION TO THE AUTHORITY WHICH PASSED THE ORDER BASED UPON THE STATEMENT. UNTIL RECTIFIC ATION IS MADE, AN APPEAL IS NOT COMPETENT. I.T.A. NOS. 554 & 555/MDS/10 4 5. FURTHER, I RELY ON THE JUDGEMENT IN THE CASE OF M/S V KUNHAMBU & SONS VS CIT 219 ITR 235 KERALA (HIGH COU RT). CONSIDERING THE ABOVE, THE ADDITION OF RS.2,00,000 HAS TO BE CONFIRMED. 4. LD. CIT(A) WAS OF THE OPINION THAT SHRI MANOJ KU MAR HAD GIVEN THE AFFIDAVIT RETRACTING HIS EARLIER STATEMENT AFTE R A LAPSE OF 7 MONTHS. ACCORDING TO HIM, THERE WAS NO EXPLANATION FROM SHR I MANOJ KUMAR AS TO WHY THE EARLIER STATEMENT GIVEN BY HIM UNDER SECTION 131 OF THE ACT WAS NOT CORRECT. THEREFORE, HE WAS OF THE VIEW THAT THE AFFIDAVIT FILED BY SHRI MANOJ KUMAR COULD NOT BE RELIED UPON. HE, THEREFORE, CONFIRMED THE ADDITION. 5. NOW BEFORE US, THE LEARNED A.R., STRONGLY ASSAIL ING THE ORDER OF THE CIT(APPEALS), SUBMITTED THAT SHRI MANOJ KUMAR H AD CLEARLY GIVEN SOURCE OF HIS SAVINGS OUT OF WHICH HE HAD CONTRIBUT ED TO THE SHARE CAPITAL OF M/S TAGACH TECHNOLOGIES (P) LTD. ACCORD ING TO HIM, THE ASSESSEE WAS ABLE TO SHOW THAT THE SOURCE OF MONEY FOR SHRI MANOJ KUMAR WAS NOT IN ANY WAY CONNECTED TO HIM. HE THER EFORE, ARGUED THAT THE ADDITION MADE BY THE A.O. WAS NOT JUSTIFIE D. 6. PER CONTRA, THE LEARNED D.R. SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. I.T.A. NOS. 554 & 555/MDS/10 5 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. NO DOUBT, SHRI MANOJ KUMAR HAD GIVEN STATEMENT UNDE R SECTION 131 OF THE ACT THAT A SUM OF RS.2,00,000/- CONTRIBUTED BY HIM AS SHARE CAPITAL IN M/S TAGACH TECHNOLOGIES (P) LTD. HAD COM E FROM THE ASSESSEE. BUT, IT IS A FACT THAT THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE SHRI MANOJ KUMAR. WHEN ASSESSEE WAS GIVEN A CHANCE, ASSESSEE DID PRODUCE AN AFFIDAVIT FROM SHRI MANOJ KUMAR SAYING THAT THE AMOUNT GIVEN BY SHRI MANOJ KUMAR WA S OUT OF HIS SAVINGS. IT IS TO BE NOTED THAT SHRI MANOJ KUMAR H AD ALSO FILED CONFIRMATIONS FROM THE PARTIES FOR THE SOURCE OF RS .2,00,000/- WHICH HE HAD INTRODUCED AS SHARE CAPITAL IN M/S TAGACH TE CHNOLOGIES (P) LTD. THEREFORE, WE DO NOT FIND ANY REASON WHY THE AFFIDAVIT FILED BY SHRI MANOJ KUMAR WAS IGNORED. THERE WAS NO VERIFIC ATION DONE BY THE A.O. OR CIT(APPEALS) ON THE AFFIDAVIT FILED BY SHRI MANOJ KUMAR AND IT WAS REJECTED FOR A SIMPLE REASON THAT THE AF FIDAVIT WAS GIVEN AFTER SEVEN MONTHS. WE ARE OF THE OPINION THAT THI S WAS NOT AN APPROPRIATE REASON FOR REJECTING SUCH AFFIDAVIT. T HE AFFIDAVIT WAS CLEAR REGARDING THE SOURCE OF THE MONEY. HENCE, ASSESSEE COULD NOT BE FASTENED WITH A LIABILITY OF A SUM OF RS.2,00,000/- INTRODUCED BY SHRI MANOJ KUMAR AS SHARE CAPITAL IN M/S TAGACH TECHNOLO GIES (P) LTD. I.T.A. NOS. 554 & 555/MDS/10 6 THE ADDITION MADE PURELY ON ASSUMPTION STANDS DELET ED. THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06 THUS STANDS ALLOWED. 8. NOW, WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2 007-08. 9. GRIEVANCE OF THE ASSESSEE IS THAT AN ADDITION OF RS.10,37,019/- WAS SUSTAINED BY THE CIT(APPEALS) OUT OF A TOTAL AD DITION OF RS.22,68,400/- MADE BY THE A.O. FOR UNEXPLAINED JEW ELLERY. 10. THERE WAS A SEARCH UNDER SECTION 132 OF INCOME- TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN THE PREMISES OF T HE ASSESSEE ON 27.3.2007. DURING SEARCH, GOLD JEWELLERY OF 1.374 KGS WERE FOUND. THIS WAS VALUED BY AN APPROVED VALUER AT RS.27,35,3 23/-. EXPLANATION OF THE ASSESSEE FOR THIS 1.374 KGS OF G OLD JEWELLERY WAS AS UNDER:- FROM FATHER THROUGH WILL : 672 GMS GIVEN TO WIFE BY HER FATHER DURING MARRIAGE : 392 GMS GIVEN TO DAUGHTER BY GRAND- PARENTS : 94 GMS GIVEN TO SON BY GRAND- PARENTS : 88 GMS RECEIVED AT THE TIME OF MARRIAGE : 142 GMS I.T.A. NOS. 554 & 555/MDS/10 7 11. HOWEVER, THE A.O. WAS OF THE OPINION THAT NO DO CUMENTARY EVIDENCE WAS FURNISHED WITH REGARD TO THE GOLD JEWE LLERY RECEIVED FROM ASSESSEES FATHER EXCEPT A PHOTOCOPY OF THE WI LL. FURTHER, ACCORDING TO A.O., WHAT COULD BE ACCEPTED AS RECEIV ED BY ASSESSEES WIFE AT THE TIME OF MARRIAGE WOULD BE 200 GMS AND T HAT OF THE ASSESSEE 100 GMS. HOWEVER, A.O. CONSIDERED 200 GMS AS RECEIVED BY THE ASSESSEE FROM HIS MOTHER. IN OTHER WORDS, A SSESSING OFFICER ACCEPTED 500 GMS AS EXPLAINED AND THE BALANCE OF 87 4 GMS WAS CONSIDERED AS UNEXPLAINED AND THE VALUE TAKEN AT RS .22,68,400/-. 12. IN HIS APPEAL BEFORE THE CIT(APPEALS), SUBMISSI ON OF THE ASSESSEE WAS THAT THE ORIGINAL WILL COULD NOT BE PR ODUCED SINCE ASSESSEES MOTHER WAS SICK AND SHE HAD THE CUSTODY OF THE WILL. CIT(APPEALS) SOUGHT A REMAND REPORT IN THIS REGARD. IN THE REMAND REPORT, IT WAS SUBMITTED BY THE A.O. AS UNDER:- THE ASSESSEE HAS CONTENDED THAT THE WILL OF THE FA THER WAS FOUND AT THE TIME OF SEARCH FROM THE LOCKER MAI NTAINED BY THE FAMILY AND A NOTE ABOUT THE SAME WAS MADE BY THE INVESTIGATING OFFICER. THE ORIGINAL WILL COULD NOT BE PRODUCED BEFORE THE A.O. AT THE TIME OF ASSESSMENT, AS THE M OTHER OF THE ASSESSEE, WHO HAD THE CUSTODY OF THE WILL WAS SICK AND SHE COULD NOT BE DISTURBED. DURING THE REMAND STAGE, THE ASS ESSEE HAS PRODUCED THE ORIGINAL WILL FOR PERUSAL AND RETURN. A XEROX COPY OF THE WILL WHICH IS IN HINDI PRODUCED. ALSO A TRA NSLATED COPY OF I.T.A. NOS. 554 & 555/MDS/10 8 THE SAME WILL IN ENGLISH IS FILED. IN THE WILL THE TOTAL JEWELLERY IS MENTIONED APPROXIMATELY AS 56 TOLAS. EACH TOLAS EQU AL TO 11.664 GMS AND ACCORDINGLY THE TOTAL JEWELLERY COMES TO 653. 184 GMS. TOTAL JEWELLERY AS PER THE VALUATION REPORT 1374.1 GMS LESS: 500 GMS CONSIDERED IN THE ASST. ORDER 500 GM S BALANCE UNEXPLAINED JEWELLERY 874.1 GMS THERE IS UNEXPLAINED JEWELLERY OF 874.1 GMS. IT IS SEEN FROM THE JEWELLERY VALUATION REPORT BY THE APPROVED VALUER THA T MOST OF THE JEWELLERY ITEMS MENTIONED IN THE WILL IS STUDDED EITHER WITH DIAMONDS OR PRECIOUS STONE (COPY ENCLOSED). THE EXC ESS JEWELLERY HAS BEEN RIGHTLY WORKED OUT BY THE A.O. AFTE R CONSIDERING 500 GMS OF JEWELLERY FOR THE FAMILY MEMBE RS. FOR THE 653.184 GMS IS MEANT FOR ALL THE FAMILY MEMBERS OF THE ASSESSEE AND THE ASSESSEE HAS NOT BROUGHT OUT HIS S HARE AS PER THE WILL. THEREFORE I AM NOT ABLE TO WORK OUT THE QUANTITY OTHERWISE COULD BE CONSIDERED AS PER THE WILL OF TH E FATHER. THE ASSESSEE HAS NOT PRODUCED EVIDENCES TO PROVE HIS SH ARE OF JEWELLERY AND THEREBY I REQUEST YOUR GOODSELF TO CONS IDER HIS SHARE AGAINST 653.184 GMS AS PER WILL AND THIS ALON E CAN BE CONSIDERED FOR DEDUCTION FROM 874.1 GMS. 13. THE CIT(APPEALS) AFTER CONSIDERING THE REMAND R EPORT, THE WILL AND THE VALUATION REPORT, ACCEPTED 653.184 GMS AS R ECEIVED BY THE ASSESSEE THROUGH THE WILL OF HIS FATHER. HE ALSO A GREED WITH THE A.OS FINDING THAT WHAT WOULD HAVE BEEN GIVEN BY TH E ASSESSEES FATHER-IN-LAW TO HIS WIFE AT THE TIME OF MARRIAGE C OULD BE ONLY 200 GMS. VIS--VIS 100 GMS ACCEPTED BY THE ASSESSING O FFICER AS RECEIVED BY THE ASSESSEE AT THE TIME OF MARRIAGE AN D 200 GMS RECEIVED BY THE ASSESSEE FROM HIS MOTHER, LD. CIT( APPEALS) WAS OF I.T.A. NOS. 554 & 555/MDS/10 9 THE OPINION THAT THERE WAS NO JUSTIFICATION FOR ACC EPTING THE CLAIM OF ASSESSEE IN THIS REGARD. IN OTHER WORDS, OUT OF 13 74 GMS, THE CIT(APPEALS) ACCEPTED 853.14 GMS AS EXPLAINED. THU S, ON PRO RATA BASIS AN ADDITION OF RS.10,37,019/- WAS SUSTAINED. 14. NOW BEFORE US, SUBMISSION OF THE LEARNED A.R. W AS THAT ASSESSEE HAD GIVEN REASONABLE EXPLANATION FOR THE J EWELLERY. RELIANCE WAS PLACED ON CBDT INSTRUCTION NO. 1916 DA TED 11.5.94. PER CONTRA, LD. D.R. SUPPORTED THE ORDER OF CIT(APP EALS). 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. INSTRUCTION NO.1916 [F.NO.286/63/93-I.T(INV.II)] DA TED 11.5.94, CLEARLY ALLOW 500 GMS FOR MARRIED LADY, 250 GMS FOR UNMARRIED LADY AND 100 GMS FOR MALE MEMBER OF A FAMILY AS QUANTUM OF JEWELLERY WHICH WAS NOT NECESSARILY TO BE SEIZED, IN THE COUR SE OF A SEARCH OPERATION. HERE, IF WE LOOK AT THE FAMILY OF THE A SSESSEE, IT CONSISTED OF ASSESSEE, HIS MOTHER, HIS DAUGHTER AND HIS WIFE. SO, BY MERE ARITHMETIC CALCULATION THEY COULD HAVE HAD 1.350 KG S WHICH IN VIEW OF THE ABOVE CIRCULAR COULD NOT HAVE BEEN CONSIDERED A S UNEXPLAINED. FURTHER, COPY OF THE WILL OF ASSESSEES FATHER WAS FOUND AT THE TIME OF SEARCH AND NEITHER THE A.O. NOR THE CIT(APPEALS) HA S GIVEN CLEAR I.T.A. NOS. 554 & 555/MDS/10 10 REASONS FOR NOT ACCEPTING IT. IF WE CONSIDER ALL T HESE TOGETHER IT IS EVIDENT THAT 1.374 KGS OF JEWELLERY FOUND, STOOD MO RE THAN EXPLAINED. WE ARE OF THE OPINION THAT THE ADDITION WAS NOT JUS TIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ADDITION IS DEL ETED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 17. TO SUMMARISE THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE STAND ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH MARCH, 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 25 TH MARCH, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, CHENNAI (4) CIT (5) D.R. (6) GUARD FILE