DCIT, New Delhi V. Mr. Jagdish Parshad Khanna, New Delhi

ITA 57/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3925 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 06-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEVENDRA SINGH
• Assessee Lawyers: ANIL KUMAR F
• Keywords: Source of fund; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH D DELHI ] BEFORE SHRI C. L. SETHI, JM AND SHRI K. D. RANJAN, AM I. T. APPEAL NO. 57 (DEL) OF 2010. ASSESSMENT YEAR : 2006-07. DY. COMMISSIONER OF INCOME-TAX, MR. JAGDISH PARSHAD KHANNA, C I R C L E : 31 (1), VS. 21 A, AURANGZEB LANE, N E W D E L H I. N E W D E L H I. PAN / GIR NO. AAN PK 2492 D ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI U. N. MARWAH; C. A.; & SHRI ANIL KUMAR, F. C . A.; DEPARTMENT BY : SHRI DEVENDRA SINGH, SR. D.R. ; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2006 -07 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS)-XXVI, NEW DELHI. 2. THE GROUND OF APPEAL, RAISED BY THE REVENUE, IS REPRODUCED AS UNDER :- LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDI TION OF RS.26,35,000/- ON THE BASIS OF DETAILS AND DOCUMENTS FURNISHED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS, FOR WHICH NO OPPORTUNITY WAS AFFORDED TO THE AO BY LD. CIT (APPEALS) BEFORE DECIDING THE CASE, WHICH I S A MANDATORY CONDITION UNDER RULE 46A OF INCOME/TAX RULES, 1962. 2 I. T. APPEAL NO. 57 (DEL) OF 2010. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.26,35,000/- ON THE BASIS OF DETAILS AND DOCUMENTS FURNISHED BY THE ASS ESSEE, DURING APPELLATE PROCEEDINGS IN VIOLATION OF RULE 46-A OF THE INCOME-TAX RULES, 196 2. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT SHRI JAGDISH PARSHAD KHANNA, THE ASSESSEE RECE IVED AN AMOUNT OF RS.26,35,000/- FROM JAGDISH PARSHAD KHANNA [HUF] BY WAY OF TWO CHEQUES; ONE AMOUNTING TO RS.19,50,000/- ISSUED ON 11/10/2005 AND ANOTHER FOR RS.6,85,000/- ISSUED ON 18/02/2006. IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAID AMOUNT WAS RECEIVED BY HIM O N PARTITION OF JAGDISH PARSHAD KHANNA [HUF] AS HIS SHARE ON SETTLEMENT OF ACCOUNT. IN SU PPORT THEREOF THE ASSESSEE HAD FURNISHED A COPY OF DOCUMENT TITLED MEMORANDUM OF PARTITION OF JAGDISH PARSHAD KHANNA [HUF] WHICH WAS EXECUTED ON RS.100/- STAMP PAPER ON 23 RD FEBRUARY, 2006. THIS DEED SHOWED THAT AN AMOUNT O F RS.26,35,000/- WAS DUE TO THE ASSESSEE FROM THE SAI D HUF. IT WAS ALSO SUBMITTED THAT VIDE SAME SETTLEMENT SAID AMOUNT WAS WAIVED OFF AS SETTLEMENT OF HIS DUES RECEIVABLE ON PARTITION OF THE HUF. THEREFORE, THE AMOUNT WAS NOT TAXABLE UNDER S ECTION 10(2) OF THE ACT. HOWEVER, THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT PROVISIONS O F SECTION 10(2) SIMPLY TAKE CARE OF, FOR AVOIDING DOUBLE TAXATION OF INCOME I.E. ONCE IN THE HANDS OF HUF AND SECOND TIME IN THE HANDS OF INDIVIDUAL MEMBER AND THE SECTION DOES NOT PROVI DE THAT ANY AMOUNT OF ANY NATURE WHATSOEVER RECEIVED BY AN INDIVIDUAL FROM HIS HUF WILL NOT BE TAXABLE. THE ASSESSING OFFICER ALSO OBSERVED THAT THE DEED OF PARTITION DATED 23 RD FEBRUARY, 2006 WAS EXECUTED ON A STAMP PAPER OF RS .100/- AND WAS UN-WITNESSED AND UN-REGISTERED, WHILE THE A SSESSING OFFICER FELT THAT WHERE ON PARTITION OF A HUF ESPECIALLY WHERE SOME IMMOVABLE PROPERTIES WERE ALSO SUBJECT MATTER, THE PARTITION DEED HAS TO BE EXECUTED ON NON-JUDICIAL STAMP PAPER FOR APPROPRIATE VALUE TO BE CALCULATED AS PER STAMP ACT. IN THE CASE OF ASSESSEE, THE DEED WAS S IGNED BY THE ASSESSEE AND SHRI M. P. KHANNA, FATHER OF THE ASSESSEE, WHO HAD SIGNED ON BEHALF OF OTHER THREE MEMBERS OF HUF, WITHOUT PROOF OF HAVING ANY POWER OF ATTORNEY FOR THIS PURPOSE. THE ASSESSING OFFICER ALSO NOTED THAT THERE WAS NO COMPLETE PARTITION OF HUF UNDER SECTION 171 AND HENCE PARTITION COULD NOT BE SAID TO BE GENUINE. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF FUNDS RECEIVED BY HUF, WHICH HAD GIVEN TH E AFORESAID TWO CHEQUES TO THE ASSESSEE. IN VIEW OF THESE FACTS, THE ASSESSING OFFICER OBSERVED THAT GENUINENESS OF THE TRANSACTION AND CAPACITY REMAINED UNPROVED. HE ACCORDINGLY MADE TH E ADDITION OF RS.26,35,000/-. 3 I. T. APPEAL NO. 57 (DEL) OF 2010. 4. ON APPEAL, IT WAS CONTENDED THAT THE AO WAS PROV IDED WITH THE COPY OF MEMORANDUM OF PARTITION OF HUF AS ALSO RESPECTIVE BANK ACCOUNTS O F JAGDISH PARSHAD KHANNA [HUF] AND THAT OF THE ASSESSEE AND THE ACKNOWLEDGEMENTS OF RETURN OF INCOME IN CASE OF HUF FOR ASSESSMENT YEAR 2006-07 ALONG WITH COPY OF APPLICATION FOR ACCEPTAN CE OF PARTITION BY THE AO UNDER SECTION 171(3) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSE E ALSO FURNISHED A COPY OF BALANCE SHEET OF HUF AS ON 22 ND FEBRUARY, 2006, WHICH SHOWED AN AMOUNT OF RS.26,35 ,000/- OUTSTANDING WITH THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO SU BMITTED THAT THE AO HAD PASSED ORDER UNDER SECTION 171(3) ON 17 TH APRIL, 2009, COPY THEREOF WAS FURNISHED BEFORE THE LD. CIT (APPEALS). THE LD. CIT (APPEALS) EXAMINED THE CASE WITH REFERE NCE TO PROVISIONS OF SECTION 68. HE NOTED THAT THE ASSESSING OFFICER HAD ACKNOWLEDGED THAT TH E AMOUNT WAS RECEIVED BY THE ASSESSEE BY WAY OF TWO CHEQUES FROM HUF. THE ASSESSEE HAD FURNISHE D BALANCE SHEET OF THE HUF ON THE DATE OF PARTITION, WHICH SHOWED THAT THE AMOUNT WAS OUTSTAN DING WITH THE ASSESSEE, WHICH WAS TREATED AS FULL AND FINAL SHARE OF THE ASSESSEE FROM HUF ON PA RTITION. THE LD. CIT (APPEALS), THEREFORE, WAS OF THE VIEW THAT ALL THE THREE TESTS I.E. THE IDENT ITY, THE CAPACITY AND GENUINENESS OF THE TRANSACTIO N WAS PROVED. THEREFORE, PROVISIONS OF SECTION 68 OF THE ACT WERE NOT APPLICABLE. AS REGARDS THE CONTENTION OF THE ASSESSING OFFICER THAT PROVISIONS OF SECTION 10(2) WERE NOT APPLICABLE AS THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE RECEIPT OF RS.26,35,000/- FROM HUF WAS OUT OF INCOME OF HUF, WAS NOT CORRECT. IN THE CASE OF ASSESSEE THE AFORESAID AMOUNT WAS A LOAN OUTSTANDING WITH THE ASSESSEE FROM HUF A ND, THEREFORE, THE SAME DID NOT NEED ANY EXEMPTION UNDER SECTION 10(2) BEING NOT IN THE NATU RE OF INCOME ITSELF. FURTHER THE CONCERNED ASSESSING OFFICER HAD PASSED ORDER UNDER SECTION 17 1(3) OF THE ACT, WHICH CONFIRMED THAT THE PARTITION OF HUF ON 23 RD FEBRUARY, 2006 WAS A COMPLETE PARTITION OF THE SAI D HUF AND, THEREFORE, ANY PAYMENT IN PURSUANCE THEREOF COULD NOT BE QUEST IONED UNDER SECTION 68 OF THE ACT. 5. BEFORE US, THE LD. AR OF THE ASSESSEE REITERATED SIMILAR ARGUMENTS. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE MEMORANDUM OF PARTITION OF JA GDISH PARSHAD KHANNA [HUF] DATED 23 RD FEBRUARY, 2006. WE HAVE ALSO GONE THROUGH THE BANK ACCOUNT WITH CITY BANK IN RESPECT OF JAGDISH KHANNA, HUF. M/S. JAGDISH KHANNA, HUF HAD FILED RETURN FOR ASSESSMENT YEAR 2006-07 ON 30 TH JULY, 2006 ADMITTING INCOME FROM HOUSE PROPERTY AT RS.8,03,320/-. THE HUF HAD PAID 4 I. T. APPEAL NO. 57 (DEL) OF 2010. TAX OF RS.1,94,815/- FOR ASSESSMENT YEAR 2006-07. FROM THE BANK ACCOUNT OF HUF WITH CITY BANK, IT IS APPARENT THAT PAYMENTS HAD BEEN MADE TO THE ASSESSEE BY WAY OF CHEQUE FOR RS.19,50,000/- ON 18 TH OCTOBER, 2005 AND ANOTHER CHEQUE WAS ISSUED FOR RS .6,85,000/- ON 6 TH FEBRUARY, 2006. THE ASSESSEE HAD APPLIED FOR TOTAL PARTITION OF HUF VIDE LETTER DATED 17/11/2006. THE AO HAD PASSED ORDER UNDER SECTION 171(3) ON 23 RD FEBRUARY, 2006. THE AO HAD ACCEPTED THE CLAIM OF ASSESSEE FOR TOTAL PARTIT ION, WHICH WAS EFFECTED ON 23 RD FEBRUARY, 2006. IN THIS ORDER THE AO HAD ADMITTED THAT SHRI JAGDISH PARSHAD KHANNA HAD RECEIVED 65,962 EQUITY SHARES OF RS.10/- EACH IN THE SHARE CAPITAL OF M/S. EASTERN INTERNATIONAL HOTEL LTD., MUMBAI AND A SUM OF RS.26,35,000/- RECEIVED BY THE ASSESSEE FROM HUF ON TWO DATES. SINCE THE AO HAD PASSED ORDER UNDER SECTION 171(3) RECOGNIZING THE T OTAL PARTITION OF THE HUF UNDER WHICH THE AMOUNT OF RS.26,35,000/- WAS RECEIVED BY THE ASSESS EE FROM HUF. THE AO WHILE RECOGNIZING THE TOTAL PARTITION OF HUF HAD NOT DOUBTED THE AVAI LABILITY OF CASH WITH THE HUF. THEREFORE, IN OUR CONSIDERED OPINION, NO ADDITION CAN BE MADE UND ER SECTION 68 OF THE ACT IN RESPECT OF THE AMOUNT RECEIVED BY THE ASSESSEE. THE LD CIT (A) HA D RIGHTLY DELETED THE ADDITION. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A). AS REGARDS ADMISSION OF ADDITIONAL EVIDENCE WITHOUT HEARING THE ASSESSING O FFICER, NO PURPOSE WILL BE SERVED BY SETTING ASIDE THE ISSUE TO THE FILE OF THE AO FOR SIMPLE RE ASON THAT THE AO HIMSELF IN ORDER UNDER SECTION 171(3) HAD ACCEPTED THE CONTENTION OF THE ASSESSEE THAT A SUM OF RS.26,35,000/- WAS RECEIVED BY HIM ON PARTITION OF HUF. THEREFORE, IN OUR CONSIDE RED OPINION, NO ACTION IS NEEDED FOR ANY VERIFICATION BY THE ASSESSING OFFICER. THEREFORE, THE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 14 TH MAY, 2010. SD/- SD/- [ C. L. SETHI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14 TH MAY, 2010. *MEHTA * 5 I. T. APPEAL NO. 57 (DEL) OF 2010. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 6 I. T. APPEAL NO. 57 (DEL) OF 2010. 7 I. T. APPEAL NO. 57 (DEL) OF 2010.