Sh. Rohit Gandhi, New Delhi V. ITO, New Delhi

ITA 6798/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3023 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 18-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 30-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEETA SINGH
• Assessee Lawyers: AKSHAT JAIN CAS
• Keywords: Unexplained investment; Gift; Income from undisclosed sources; Search and seizure
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6798/DEL./2013 (ASSESSMENT YEAR : 2008-09) SHRI ROHIT GANDHI, VS. ITO, WARD 31 (2), 14, GOLF LINKS, NEW DELHI. NEW DELHI 110 003. (PAN : AAIPG2926R) ITA NO.1130/DEL./2014 (ASSESSMENT YEAR : 2008-09) ITO, WARD 31 (2), VS. SHRI ROHIT GANDHI, NEW DELHI. 14, GOLF LINKS, NEW DELHI 110 003. (PAN : AAIPG2926R) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI RAJAT JAIN & AKSHAT JAIN, CAS REVENUE BY : SMT. MEETA SINGH, CIT DR DATE OF HEARING : 20.03.2018 DATE OF ORDER : 23.03.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OF BY WAY OF CONSOLIDATE D ORDER TO AVOID REPETITION OF DISCUSSION. ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 2 2. THE APPELLANT, ROHIT GANDHI (HEREINAFTER REFERRE D TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 11.11.2013 PASSED BY LD. CIT(A PPEALS)-VI, NEW DELHI QUA THE ASSESSMENT YEAR 2008-09 ON THE GR OUNDS INTER ALIA THAT :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN CONFIRMI NG ESTIMATED ADDITION OF RS 58,00,1001- OUT OF RS. 1,00,00,0001- IN RESPECT OF UNDISCLOSED INVESTMENT IN PAINTINGS MADE BY THE ASSESSING OFFICER WITHOUT APP RECIATING THE FACT THAT THE APPELLANT HAS NOT MADE ANY UNDISC LOSED INVESTMENT ON SUCH PAINTINGS AS THE SAME WERE RECEI VED BY HIM AS GIFTS FROM THE ARTISTS ONLY. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) ERRED BOTH IN FACT AND IN LAW IN NOT GIVI NG CONSIDERATION TO THE FACT THAT THE SOURCE OF THE AL LEGED UNDISCLOSED INVESTMENT IN SUCH PAINTINGS FOUND AT T HE RESIDENCE CUM BUSINESS PREMISES OF THE APPELLANT CA N BE OUT OF UNDISCLOSED INCOME OF RS.1.25 CRORE ALREADY DECL ARED BY M/S R & R ARTS, A FIRM WHICH WAS RUNNING FROM THE RESIDENTIAL PREMISES OF THE APPELLANT. 3. THE APPELLANT, INCOME TAX OFFICER, WARD 31 (2), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILIN G THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 11.11.2013 PASSED BY LD. CIT(APPEALS)-VI, NEW DELHI QUA THE AS SESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA THAT :- 1. THE CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 6,00,000/- MADE BY THE AO ON ACCOUNT OF HOUSEHOLD E XPENSE INCURRED FROM THE UNDISCLOSED SOURCES. ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 3 2. THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.58,00,100/- OUT OF TOTAL ADDITION OF RS.1,00,00, 000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PAINTINGS. 3. THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.20,00,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLA INED INVESTMENT IN PAINTINGS BY ANJILIE ELA MENON WITHOU T APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT E XPLAIN THE SOURCE OF ACQUISITION OF THIS PAINTING. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS AN INDIVIDUAL TAX PAYEE AND WAS ONE OF THE DIRECTORS OF M/S. CUE APPAREL PRIVAT E LIMITED AND ALSO PARTNER OF M/S. R & R ARTS. A SEARCH AND SEIZ URE OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES OF M/S. R & R ARTS ON 17.04.2007 AND CONSEQUENTLY, THE CASE WAS SELECTED FOR REGULAR ASSESSMENT UNDER SECTION 143 (3) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). ASSESSEE FILED RETURN OF INCOME FOR AY 2008-09 DECLARING HIS INCOME AT RS.18,40,524/- WHICH WAS CO MPLETED BY THE ASSESSING OFFICER AT RS.1,44,62,994/- BY MAKING ADDITION OF RS.1,26,22,470/- (RS.22,470/- + RS.1,00,00,000/- + RS.20,00,000/- + RS.6,00,000/-) ON ACCOUNT OF INTEREST ON SAVING B ANK ACCOUNTS AND UNDISCLOSED INVESTMENT IN PAINTINGS AND INCOME FROM UNDISCLOSED SOURCES. 3. ASSESSEES CARRIED THE MATTER BY WAY OF FILING AP PEAL BEFORE THE LD. CIT (A) WHO HAS GRANTED THE RELIEF BY MAKIN G DELETION OF RS.67,99,900/- AND CONFIRMED THE ADDITION OF RS.58, 22,570/- BY ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 4 PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, BOT H THE ASSESSEE AS WELL AS REVENUE HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE APPEALS. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 OF ITA NO.6798/DEL/2013 (ASSESSEES APPEAL) GROUND NO.2 OF ITA NO.1130/DEL/2014 (REVENUES APPEAL) 5. UNDISPUTEDLY, DURING THE SEARCH AND SEIZURE OPER ATION, SIX PAINTINGS OF DIFFERENT SIZES WERE SEIZED FROM THE R ESIDENTIAL-CUM- BUSINESS PREMISES OF THE ASSESSEE WHICH ARE DETAILE D AS UNDER :- S.NO. ARTIST SIZE 1 SHIBU NATESAN 40 X 60 2 BHUPEN KAKKAR 10 X 9 3 F N SOUZA 10 X 9 4 MANJIT BAWA 10 X 10 5 JOGEN CHOWDHARY 5 X 5 6 ARPANA CAUR 8 X 10 6. IT IS ALSO NOT IN DISPUTE THAT THE AO HAS MADE T HE ADDITION OF RS.1,00,00,000/- BY ESTIMATING THE VALUE OF THE AFO RESAID PAINTS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS FURNIS HED CONFIRMATION OF THE GIFTS RECEIVED FROM BHUPEN KAKKAR AND F.N. S OUZA DURING ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 5 ASSESSMENT PROCEEDINGS WHEREAS EVIDENCE IN RESPECT OF THE GIFT RECEIVED FORM ARPANA CAUR HAS BEEN SEIZED, AS ANNEX URE A-7 OF THE PANCHNAMA, FOUND FROM THE PREMISES OF THE ASSES SEE. IT IS ALSO NOT IN DISPUTE THAT IN CASE OF PAINTINGS STATED TO HAVE BEEN GIFTED BY MANJIT BAWA, IT IS MENTIONED THAT, TO ROHIT AND RAHUL . IT IS ALSO NOT IN DISPUTE THAT ASSESSEE FILED CONFIRMATION FRO M BHAVNA BAWA, D/O SHRI MANJIT BAWA AS MANJIT BAWA REMAINED IN COM A FOR THREE YEARS AFTER SUFFERING A STROKE PRIOR TO HIS DEATH O N 29.12.2008. 7. IT IS ALSO NOT IN DISPUTE THAT THE LD. CIT (A) H AS CALLED FOR REMAND REPORT DURING THE APPELLATE PROCEEDINGS WHIC H WAS SUBMITTED VIDE LETTER DATED 23.06.2011. ASSESSEE S TATED TO HAVE NOT FILED CONFIRMATION FROM SHIBU NATESAN AND JOGEN CHO UDHARY ON THE GROUND THAT THEY WERE RESIDING IN PARIS, FRANCE AND SHANTINIKETAN, WEST BENGAL DURING ASSESSMENT PROCEE DINGS BUT THEIR CONFIRMATIONS HAVE BEEN FILED DURING APPELLAT E PROCEEDINGS BEFORE LD. CIT (A). 8. THE ASSESSEE CLAIMED TO HAVE RECEIVED AFORESAID PAINTINGS AS GIFT. DURING THE APPELLATE PROCEEDINGS, LD. CIT (A ) WHILE CONCURRING WITH AO HAS NOT ACCEPTED THE THEORY OF G IFTING TO THE ASSESSEE IN QUESTION PUT FORTH BY THE ASSESSEE. DU RING THE ARGUMENTS BEFORE THE BENCH, THE ASSESSEE HAS FAILED TO BRING ON RECORD PLAUSIBLE AND SUSTAINABLE REASONS AS TO WHY SUCH COSTLY ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 6 PAINTINGS IN QUESTION HAVE BEEN GIFTED BY THE CELEB RATED ARTISTS. ASSESSEE HAS ALSO NOT BROUGHT ON RECORD THE FACT TH AT IF HE WAS RELATED TO AFORESAID SIX ARTISTS OR WAS HAVING CLOS E FAMILY RELATIONS. MOREOVER FORM THE FACTS ON RECORD, IT IS PROVED THA T THE ASSESSEE BEING PARTNER OF M/S. R & R ARTS AND DIRECTOR OF M/ S. CUE APPAREL PVT. LTD. HAD BEEN TRANSACTING WITH AFORESAID ARTIS TS FOR SALE AND PURCHASE OF PAINTINGS. WHEN A CELEBRATED ARTIST WA S HAVING BUSINESS INTEREST WITH THE ASSESSEE, THE QUESTION O F GIFTING PAINTINGS ALL OF SUDDEN BY ALL OF THEM IS NOT ACCEPTABLE. SO , WE CONCUR WITH THE FINDINGS OF AO AS WELL AS CIT (A) TO THE EXTENT THAT THOUGH THE CREDITWORTHINESS OF THE DONORS HAS BEEN PROVED BUT OCCASION AND RELATIONSHIP OF THE DONOR WITH THE DONEE HAS NOT BE EN PROVED BEYOND DOUBT. 9. NOW, THE NEXT QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER ADDITION MADE BY THE AO ON ACCOUNT O F UNDISCLOSED INVESTMENT IN THE PAINTINGS BY THE ASSE SSEE TO THE TUNE OF RS.1,00,00,000/- BY THE AO AND RESTR ICTED TO RS.58,00,100/- BY THE LD. CIT (A) ON ESTIMATE BA SIS IS SUSTAINABLE? 10. THE LD. AR FOR THE ASSESSEE CHALLENGING THE EST IMATION ON EXORBITANT RATE BY AO/CIT (A) DREW OUR ATTENTION TO WARDS BILLS FOR SALE OF PAINTINGS BY SHIBU NATESAN FOR AN AMOUNT OF RS.4,01,200/- ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 7 AS AGAINST THE ESTIMATION OF RS.12,00,000/- MADE BY THE LD. CIT (A), BILL ISSUED BY MANJIT BAWA FOR SALE OF PAINTIN G FOR RS.2,00,000/- AS AGAINST ESTIMATION OF RS.12,00,000 /- MADE BY THE LD. CIT (A), BILL ISSUED BY JOGEN CHOWDHARY FOR RS. 6,00,000/- IN THE SAME RATE ESTIMATED BY THE LD. CIT (A), BILL IS SUED BY ARPANA CAUR FOR RS.2,66,700/- FOR SALE OF PAINTING AS AGAI NST ESTIMATION OF RS.8,00,000/- BY LD. CIT (A), THESE BILLS HAVE NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES BELOW. HOWEVER, NO SUCH BI LLS HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE TO HAVE A FAIR AN D REASONABLE VALUE OF THE PAINTINGS ALLEGED TO HAVE BEEN GIFTED BY BHUPEN KAKKAR AND F.N. SOUZA, THE VALUE OF WHICH HAS BEEN ESTIMATED BY THE AO AT RS.10,00,000/- EACH. 11. THOUGH THE AFORESAID BILLS ARE NOT QUA THE PAIN TINGS IN QUESTION BUT AT THE SAME TIME, VALUE OF THE PAINTIN GS BEING AN INTANGIBLE CANNOT BE EXACTLY ESTIMATED EXCEPT BY TA KING A HOLISTIC VIEW IN THE LIGHT OF THE BILLS BROUGHT ON RECORD HA VING BEEN ISSUED BY SAME ARTISTS DURING THE PERIOD IN QUESTION. 12. SO, WE ARE OF THE CONSIDERED VIEW THAT THE VALU E OF THE PAINTINGS OF SHIBU NATESAN, BHUPEN KAKKAR, F.N. SOU ZA, MANJIT BAWA, JOGEN CHOUDHARY AND ARPANA CAUR IS TO BE ASSE SSED AT RS.4,01,200/-, RS.10,00,000/-, RS.10,00,000/-, RS.2 ,00,000/-, RS.6,00,000/- AND RS.2,66,700/- RESPECTIVELY. SO F AR AS VALUE OF THE ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 8 PAINTINGS OF F.N. SOUZA AND BHUPEN KAKKAR ARE CONCE RNED, NO SUCH BILLS FOR COMPARISON HAVE BEEN BROUGHT ON RECO RD BY THE ASSESSEE, SO ITS VALUE BE DETERMINED AT RS.10,00,00 0/- EACH. IN THESE CIRCUMSTANCES, ADDITION OF RS.58,00,100/- IS ORDERED TO BE RESTRICTED TO RS.34,67,900/-. CONSEQUENTLY, GROUND NO.2 OF THE APPEAL FILED BY THE REVENUE IS DECIDED AGAINST THE REVENUE AND GROUNDS NO.1 & 2 OF THE APPEAL FILED BY THE ASSESSE E IS PARTLY DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.1 OF ITA NO.1130/DEL/2014 (REVENUES APPEAL) 13. SO FAR AS THE QUESTION OF DELETING THE ADDITION OF RS.6,00,000/- MADE BY THE AO IS CONCERNED, BEFORE L D. CIT (A), THE ASSESSEE HAS PROVED THE FACT THAT HE IS MEETING HIS HOUSEHOLD EXPENSES OUT OF SALARY TO THE TUNE OF RS.8,40,000/- AND RS.3,60,000/- FROM M/S. CUE APPARELS PVT. LTD. AND M/S. R & R ARTS RESPECTIVELY AND RENTAL INCOME OF RS.10,50,000 /-. MOREOVER, HOUSEHOLD EXPENSES ARE BEING MET BY HIS MOTHER, SMT . SHASHI GANDHI WHO IS EARNING MEMBER, OUT OF DRAWINGS OF RS .4,61,585/- FROM HER PROPRIETORSHIP CONCERN, M/S. R.S. ENTERPRI SES AND HAS BROUGHT ON RECORD SCHEDULE 12 TO ACCOUNTS ATTACHED FORMING PART OF THE BALANCE SHEET FOR AY 2007-08. ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 9 14. LD. CIT (A) WHILE DELETING THE ADDITION ALSO TA KEN INTO ACCOUNT THE DELETION MADE BY LD. CIT (A) ON ACCOUNT OF HOUSEHOLD EXPENSES IN CASE OF SHASHI GANDHI, MOTHER OF THE AS SESSEE FOR AY 2002-03, 2006-07 AND 2007-08. SO, IN THESE CIRCUMS TANCES, WE FIND NO SCOPE TO INTERFERE INTO THE FINDINGS RETURN ED BY THE LD. CIT (A), HENCE GROUND NO.1 OF THE REVENUES APPEAL IS A LSO DETERMINED AGAINST THE REVENUE. GROUND NO.3 OF ITA NO.1130/DEL/2014 (REVENUES APPEAL) 15. THE LD. CIT (A) DELETED THE ADDITION OF RS.20,0 0,000/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN P AINTING MADE BY ANJOLIE ELA MENON ON THE GROUND THAT ASSESSEE HA S FAILED TO EXPLAIN THE ACQUISITION OF THIS PAINTING. 16. UNDISPUTEDLY, THE PAYMENT OF RS.20,00,000/- IS SHOWN TO HAVE BEEN MADE BY THE ASSESSEE BY CHEQUE NO.880110 BUT HE HAS FAILED TO FURNISH THE SOURCE OF THE SAME. THE AO H AS INVOKED THE PRESUMPTION OF OWNERSHIP OF THE PAINTING IN FAVOUR OF THE ASSESSEE U/S 132 (4A). HOWEVER, THE ASSESSEE HAS TAKEN THE DEFENCE THAT THE RECEIPT DATED 04.03.2007 WAS ACTUALLY ISSUED TO M/S . VIBHUTI INVESTMENT COMPANY LTD., MUMBAI BY MENTIONING THE C HEQUE NO.880110 DATED 26.02.2007 DRAWN ON BANK OF INDIA, PRABHA DEVI, MUMBAI FOR RS.20,00,000/- THOUGH THE TRANSACTION WA S MADE ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 10 THROUGH M/S. R & R ARTS BUT STAFF OF THE SAID ARTIS T, DUE TO INADVERTENT MISTAKE, RECORDED THE NAME OF M/S. R & R ARTS IN THE RECEIPT. 17. WHEN WE EXAMINE RECEIPT DATED 26.02.2007, AVAIL ABLE AT PAGE 26 OF THE PAPER BOOK, UNDISPUTEDLY IT IS ISSUE D BY ANJOLIE ELA MENON IN THE NAME OF M/S. R & R ARTS OWNED BY THE A SSESSEE BEARING CHEQUE NO.880110. HOWEVER, AFTER RECTIFICA TION OF MISTAKE, ANOTHER RECEIPT DATED 04.03.2007 HAS BEEN BROUGHT ON RECORD, AVAILABLE AT PAGE 27 OF THE PAPER BOOK, WHI CH IS ISSUED IN THE NAME OF M/S. VIBHUTI INVESTMENT COMPANY LTD. BE ARING SAME CHEQUE NUMBER DRAWN ON BANK OF INDIA, PRABHA DEVI, MUMBAI. 18. WHEN THE PAYMENT OF RS.20,00,000/- IS PROVED TO HAVE BEEN MADE BY WAY OF CHEQUE BEARING NO.880110 DATED 26.02 .2007 IN THE NAME OF M/S. VIBHUTI INVESTMENT COMPANY LTD. AND TH IS FACT HAS BEEN VERIFIED BY THE AO DURING ASSESSMENT PROCEEDIN GS AS WELL AS DURING THE REMAND PROCEEDINGS AND RECTIFIED RECEIPT HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE AND THE ASSESSEE IS NOT HAVING GOT ISSUED ANY CHEQUE BOOK BEARING SERIES OF CHEQUE NO.880110, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION OF RS.20,00,000/-. GROUND NO. 3 OF THE REVENUES APPEAL IS DETERMINED AGAINST THE REVENUE. ITA NO.6798/DEL/2013 ITA NO.1130/DEL/2014 11 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE RE VENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 23 RD DAY OF MARCH, 2018. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 23 RD DAY OF MARCH, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XVII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.