ACIT, New Delhi V. Gurnam Arora, New Delhi

ITA 616/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6553 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: ANANYA KA
• Keywords: Unexplained investment; Gift; Search and seizure; Principle of natural justice; Onus to prove; Revised return
• Section: 143(3); 142(1); 139(5); 132; 139

Judgement Text

ITA NO.616/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 616 /DEL/201 2 A.Y. : 20 0 8 - 0 9 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-22, NEW DELHI VS. SH. GURNAM ARORA, 201, VIPPS CENTRE, 2, COMMUNITY COMPLEX, MASJID MOTH, G.K.-II, NEW DELHI 110 048 (PAN:AAJPA1064F) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. A.K. SAROHA, CIT(DR) ASSESSEE BY : SH. SALIL KAPOOR, ADV.; SH. ARUN VIR SINGH & MS. ANANYA KAPOOR, ADVOCATES DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 23 2323 23- -- -02 0202 02- -- -201 201 201 2016 66 6 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 01 0101 01- -- -3 33 3- -- -201 201 201 2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-III, NEW DELHI DATED 23.11.2011 PERTAINING TO ASSESSMENT YEAR 2008-09 ON THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 80,64,000/- MADE BY THE AO U/S. 69A OF THE INCOME T AX ACT, 1961 ON ACCOUNT OF UNEXPLAINED INVESTMENT WITHOUT A PPRECIATING ITA NO.616/DEL/2012 2 THE FACT THAT THE ASSESSEE HAS NOT DISCHARGED ITS O NUS TO EXPLAIN THE SOURCE OF ACQUISITION OF PRECIOUS WATCHES. 2. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY / ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE HAS FILED ORIGINAL RETURN U/S. 139 OF THE ACT ON 29.8.2008 DECLARING INCOME OF RS. 84,07,792/-. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN U /S. 139(5) DECLARING A TOTAL INCOME OF RS. 71,27,578/-. ASSESSEE HAS SURRENDERE D RS. 20 LACS UNDER THE SUB-HEAD MISCELLANEOUS INCOME UNDER THE HEAD INCOM E FROM OTHER SOURCES. A SEARCH AND SEIZURE ACTION U/S. 132 OF THE I.T. AC T WAS CARRIED OUT IN KOHINOOR FOODS LTD. GROUP OF CASES ON 5.12.2007. THE NOTICE U/S. 143(2) DATED 12.5.2009 WAS SERVED UPON THE ASSESSEE. ON 19.5.200 9 NOTICE U/S. 143(2) DATED 13.8.2009 WAS ISSUED AND SERVED UPON THE ASSE SSEE ON 13.8.2009. NOTICE U/S. 143(2) AND 142(1) ALONGWITH QUESTIONN AIRE DATED 25.9.2009 WAS ISSUED AND CASE WAS FIXED FOR HEARING ON 6.10.2009 . IN RESPONSE TO THE SAME, A.R. APPEARED. DURING THE SEARCH AND SEIZURE ACTIO N PRECIOUS AND BRANDED WRIST WATCHES OF FOREIGN MAKE WERE FOUND. THE EN QUIRIES WERE MADE FROM LOCAL WATCH DEALERS WHO SELL SUCH BRANDED AND PREC IOUS WRIST WATCHES AND THE VALUE WHICH WERE DISCOVERED ARE MENTIONED AGAINST T HEIR NAME IN THE LIST MENTIONED BY THE AO AT PAGE 2 & 3 OF THE ASSESSMENT ORDER AND AO ESTIMATED THE TOTAL COST OF 50 WATCHES AS RS. 1,00,64,000/- ( 50.32/25*50). THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THIS IN VESTMENT VIDE LETTER DATED 25.9.2009 AND 16.11.2009. IN RESPONSE TO THE SAME ASSESSEE FILED THE REPLY DATED 27.11.2009 AND STATED THAT MOST OF THE WATCHE S WERE PURCHASED BY THE ITA NO.616/DEL/2012 3 ASSESSEE OVER A PERIOD OF TIME OUT OF PERSONAL DRAW INGS. BESIDES, THERE COULD BE SOME WATCHES RECEIVED BY THE ASSESSEE AS GIFT ON VARIOUS OCCASIONS FROM FRIENDS AND RELATIVES. THE AO AFTER CONSIDERING THE REPLY OF THE ASSESSEE HAS HELD THAT ASSESSEE HAS NOT GIVEN THE DETAILS OF HIS PAST WITHDRAWALS TO SHOW HOW MUCH HAVE BEEN INVESTED IN THESE WATCHES FROM THE PAST W ITHDRAWALS AND ASSESSEE HAS ALSO NOT GIVEN ANY EVIDENCE TO SHOW THE ACQUISI TION OF THESE PRECIOUS ITEMS THROUGH THE BANK ACCOUNT ENTRY OR BOOK ENTRIES. TH E AO FURTHER HELD THAT ASSESSEE HAS NOT DISCHARGED ONUS TO PROVE THE SOURC E OF ACQUIRING THE ASSETS AND LASTLY HE HAS GIVEN THE BENEFIT OF RS. 20 LACS TO THE ASSESEE AND ADDED THE BALANCE OF RS. 80,64,000/- TO THE INCOME OF THE ASS ESSEE AS UNEXPLAINED INVESTMENT IN WRIST WATCHES. SECONDLY, THE AO ALS O HELD IN THE ASSESSMENT ORDER THAT DURING THE COURSE OF SEARCH ACTION A CASH AMOU NTING TO RS. 6,26,000/- WAS FOUND OUT OF RS. 5 LACS WAS SEIZED. THE ASSESSEE WA S ASKED TO EXPLAIN THE SOURCE OF THIS CASH AND ASSESSSEE SUBMITTED THAT WI THDRAWAL OF RS. 3,10,000/- ON 3.7.2010 AND RS. 2 LACS ON 1.11.2007. ASSESSEE HAS NOT SUBMITTED ANY WRITTEN SUBMISSIONS SHOWING THE CASH BALANCE OF RS. 6,26,000/-. AO ACCEPTED THE EXPLANATION OF THE ASSESSEE TO THE EXT ENT OF RS. 3.10 LACS AS CASH WAS WITHDRAWN WHICH IS 2 DAYS PRIOR TO THE DATE OF SEARCH AND THE BALANCE OF RS. 3.16 LACS ADDED TO THE TOTAL INCOME AS UNEXPLAI NED INVESTMENT U/S. 69A OF THE ACT AND COMPLETED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT ON 29.12.2009. 3. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSE SSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 23.11.20 11 HAS ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITIONS IN DISPU TE. 4. AGGRIEVED WITH THE IMPUGNED ORDER, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. ITA NO.616/DEL/2012 4 5. AT THE TIME OF HEARING, LD. DR RELIED UPON THE ORDER PASSED BY THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVEN UE IN THE GROUNDS OF APPEAL. HE FURTHER STATED THAT LD. CIT(A) HAS WRONGLY DELET ED THE ADDITION IN DISPUTE WITHOUT APPRECIATING THE FACTS THAT ASSESSEE HAS NO T DISCHARGED HIS ONUS TO EXPLAIN THE SOURCE OF PRECIOUS AND BRANDED WATCHES. HE FURTHER STATED THAT IN VIEW OF THE SETTLED LAW THAT THE OPINION OF AO CANN OT BE QUESTIONED ON SUFFICIENCY OF MATERIAL. IT CAN BE QUESTIONED IF IT IS PERVERSE OR PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. NO SUCH SITUATION IS THERE IN THE PRESENT CASE. HE FINALLY STATED THAT MATERIAL ON RECORD SHOWS THAT A O PROVIDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND HE APPLIED HIS MIND TO FORM AN OPINION ON THE BASIS OF THE MATERIAL AVAILABLE AND FORMED OPINION THAT THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY AND THE ASSESSMENT ORD ER IS AS PER LAW AND THE IMPUGNED ORDER MAY BE CANCELLED AND ALLOW THE APPEA L OF THE REVENUE. 6. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT DURING THE COURSE O F SEARCH ACTION PRECIOUS AND BRANDED WRIST WATCHES OF FOREIGN MAKE WERE FOUND AND ASSESSEE HAS STATED THAT THESE PRECIOUS AND BRANDED WRIST WATCHES THE ASSESSEE HAS PURCHASED FROM THE LAST 40 YEARS AND SOME OF THEM HAVE BEEN GIVEN AS GIFT BY HIS FRIENDS AND RELATIVES. HE FURTHER STATED THAT AO HAS NOT CALLE D THE NAME AND ADDRESS OF THE FRIENDS AND RELATIVES AS WELL AS NOT ASKED FOR ANY EVIDENCE OF 40 YEARS BACK. HE ITA NO.616/DEL/2012 5 EMPHASIZED ON THE ARGUMENTS THAT THE AO HAS WRITTEN IN THE ASSESSMENT ORDER THAT ENQUIRIES WERE MADE FROM LOCAL WATCH DEALERS W HO SELL SUCH BRANDED AND PRECIOUS WRIST WATCHES AND THE AO VALUED THESE ALL 50 WATCHES ESTIMATED THE VALUE OF 50 WATCHES OF RS. 1,00,64,000/- BUT THE AO HAS NOT GIVEN ANY INQUIRY REPORT TO THE ASSESSEE AS WELL AS HAS NOT INVITED THE ASSESSSEE TO JOIN THE ENQUIRY MADE BY HIM. AO HAS MADE THE EXPARTE ENQUIRY AND MADE THE ADDITION IN DISPUTE WITHOUT CONFRONTING THE SAME WHICH IS CONTR ARY TO THE PRINCIPLE OF LAW AND JUSTICE AND THEREFORE, THE ADDITION IN DISPUTE DESERVE TO BE CANCELLED. HE FURTHER STATED THAT IN THE APPEAL FILED BY THE ASSE SSEE BEFORE THE LD. CIT(A), LD. CIT(A) HAS ASKED THE AO WHETHER HE HAS CONFRONTED THE INQUIRY REPORT TO THE ASSESSEE OR NOT AND THE AO STATED THAT THIS IS A R EPETITION OF SUBMISSION MADE DURING THE ASSESSMENT PROCEEDINGS AND NOTHING NEW H AS BEEN SUBMITTED. THEREFORE, NO FURTHER COMMENTS ARE REQUIRED TO BE MADE. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE ALONGWITH THE DOCUMENTA RY EVIDENCE AND THE REMAND REPORT FROM THE AO ON THE SUBMISSIONS OF TH E ASSESSEE, CIT(A) HAS DELETED THE ADDITIONS. HE FURTHER STATED THAT THE AO HAS ARBITRARILY ESTIMATED THE COST OF WRIST WATCHES WITHOUT ANY BASIS AND WITHOUT ANY PRESCRIBED FORMULA EXPARTE WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE, WHICH IS CONTRARY TO THE PRINCIPLE OF NATURAL JUSTICE. ITA NO.616/DEL/2012 6 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. AS STATED ABOVE, THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION SOME PRECIOUS AND BRANDED WRIST WATCHES OF FOREIGN MAKE WERE FOUN D AND THE AO ESTIMATED THE COST OF THESE 50 WRIST WATCHES AT RS. RS. 1,00, 64,000. WE FIND THAT AO AT PARA NO. 4 AT PAGE NO. 2 & 3 OF THE ASSESSMENT ORDE R HAD ESTIMATED THE COST OF 50 WRIST WATCHES AMOUNTING TO RS. 50.32 LACS AND MU LTIPLIED TO 50 WHICH COMES TO RS. 1,00,64,000/-. THE AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THIS INVESTMENT AND THE REPLY FILED BY THE ASSESSEE WAS THAT MOST OF THE WRIST WATCHES WERE PURCHASED BY THE ASSESSEE OVER A PERIOD OF TIM E OUT OF HIS PERSONAL DRAWINGS AND BESIDES, THIS THERE COULD BE SOME WATC HES RECEIVED BY THE ASSESSEE AS GIFT ON VARIOUS OCCASIONS FROM HIS REL ATIVES AND FRIENDS. ASSESSEE HAS ALSO STATED THAT DRAWINGS OF THE ASSESSEE DURIN G THE BLOCK PERIOD IS AROUND RS. 3.5 CRORES OVER AND ABOVE CONTRIBUTION MADE TOW ARDS LIC PREMIUM AND OTHER STATUTORY PAYMENTS. BUT THE AO HAS NOT ACCEPT ED THE REPLY OF THE ASSESSEE AND HAS GIVEN THE RELIEF OF RS. 20 LACS AND ADDED R S. 80.64 LACS TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT IN WRIST WATCHES. SECONDLY, HE HAS ALSO MADE THE ADDITION OF RS. 3.16 LACS ON ACCO UNT OF UNEXPLAINED INVESTMENT WHILE COMPLETING THE ASSESSMENT. IN APPEAL LD. CIT (A) DELETED THE BOTH THE ADDITIONS BY CALLING THE REMAND REPORT FROM THE AO AND HELD THAT AO HAS ITA NO.616/DEL/2012 7 ESTIMATED THE VALUE OF WRIST WATCHES WITHOUT ANY BA SIS AND WITHOUT ANY SUPPORTING MATERIAL ON RECORD WHICH IS IN POSSESSIO N OF THE AO. LD. CIT(A) HAS ALSO HELD THAT THE ASSESSEE HAS NOT CONFRONTED WITH THE SO-CALLED INQUIRY REPORT MADE BY THE AO FROM THE LOCAL DEALERS WHO SELL SUCH BRANDED AND PRECIOUS WRIST WATCHES. AO MADE THE ADDITION ON THE BASIS OF THE INQUIRY REPORT WHICH HAS NOT BEEN SUPPLIED TO THE ASSESSEE. LD. CIT(A) HAS ALSO HELD THAT IN THE IMPUGNED ORDER THE WITHDRAWALS OF THE ASSESSEE IS S UFFICIENT IN THE PREVIOUS ASSESSMENT YEARS AND ASSESSEE HAS ALSO PURCHASED SO ME OF THE WATCHES OVER A PERIOD OF TIME FROM HIS PERSONAL DRAWINGS AND ALSO SOME WATCHES WERE RECEIVED BY HIM ON VARIOUS OCCASIONS FROM HIS FRIENDS AND RE LATIVES AS GIFT. AFTER GOING THROUGH THE IMPUGNED ORDER, WE ARE OF THE CONSIDERE D VIEW THAT THE ESTIMATION MADE BY THE AO ON THE COST OF 50 WRIST WATCHES FOUN D DURING THE SEARCH AND SEIZURE OPERATION IS ON THE ASSUMPTION AND PRESUMP TION BASIS AND WITHOUT SUPPORTING ANY EVIDENCE AND HENCE, IS NOT SUSTAINAB LE IN THE EYES OF LAW. SECONDLY, THE ESTIMATION MADE BY THE AO ON AVERAGE COST IS ALSO BASELESS AND WITHOUT ANY EVIDENCE AND IS NOT JUDICIOUS. SUBSEQU ENT TO SUCH ESTIMATION THE AO HAS PROCEEDED TO ESTIMATE THE 50 WATCHES BASED ON A VERAGE COST OF 25 WATCHES WHICH IS ESSENTIALLY ESTIMATED OVER EARLIER ESTIMATION. THUS THERE IS NO BASIS OF ESTIMATION OF 50 WATCHES OF RS. 1,00,64,00 0/- IN SPITE OF THE FACT THAT HE HIMSELF ACCEPTED THE WITHDRAWAL MADE BY THE AS SESSEE DURING THE BLOCK ITA NO.616/DEL/2012 8 PERIOD OF AROUND RS. 3.5 CRORES WHICH IS OVER AND A BOVE THE CONTRIBUTION MADE TOWARDS THE LIC PREMIUM ETC. KEEPING IN VIEW OF TH E FACTS AND CIRCUMSTANCES EXPLAINED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION IN DISPUTE BY PASSING A WELL REASONED ORDER, WHICH DOES NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME BY DISMISSING THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/3/2016. SD/- SD/- [ [[ [P PP PRASHANT MAHARISHI RASHANT MAHARISHI RASHANT MAHARISHI RASHANT MAHARISHI] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 01/3./2016 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES