ACIT, New Delhi V. M/s. J.S. Sharma (HUF), New Delhi

ITSSA 27/DEL/2014

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3831 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 05-06-2017
• Assessment Year: misc
• Appeal Filed On: 05-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA
• Assessee Lawyers: RAJ RANI CA MS SNEHA KHANNA
• Keywords: Search and seizure
• Section: 27; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND S MT BEENA A. PILLAI, JUDICIAL MEMBER IT SS A NO. 27 /DEL/201 4 [BLOCK PERIOD ENDING 31.3.2003 THE A. C. I.T VS. M/S J.S. SHARMA [HUF] CIRCLE 24(1) 1073/A - 3, WARD NO. 1 NEW DELHI MEHRAULI, NEW DELHI PAN : AA DHJ 9716 R [APPELLANT] [RESPONDENT] DATE OF HEARING : 0 4 . 0 7 .201 8 DATE OF PRONOUNCEMENT : 0 6 .0 7 .2018 ASSESSEE BY : SMT. RAJ RANI, CA MS. SNEHA KHANNA, CA REVENUE BY : S HRI VIJAY VARMA, CIT - DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (A) - XXIII , NEW DELHI DATED 2 1 . 0 2 .201 4 PERTAINING TO BLOCK PERIOD ENDING ON 31.03.2003 . 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 18,03,200/ - ON ACCOUNT OF UNDISCLOSED INCOME. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH OPERATION WAS CARRIED OUT U/S 132 OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] ON 31.01.2003 AT THE RESIDENTIAL PREMISES OF SHRI JATINDER SINGH SHARMA, SMT. MANJU SHARMA AND M/S KAMDHENU RESTAURANT. CERTAIN INCRIMINATING DOCUMENTS RELATING TO RENTAL INCOME AND UNEXPLAINED CASH WERE FOUND AND SEIZED ON THE STRENGTH OF WHICH THE ASSESSING OFFICER FRAMED ASSESSMENT. THE MATTER TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 10.01.2011 IN ITA NO. 55/DEL/2009 RESTORED THE ASSESSMENT TO THE FILE OF THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT. 4. PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL, FRESH PROCEEDINGS WERE STARTED. DURIN G THE COURSE OF SEARCH SOME RENT AGREEMENTS BELONGING TO SHRI J.S. SHARMA, HUF WERE FOUND. SHRI J.S. SHARMA, HUF HAD INHERITED A TEMPLE KNOWN AS YOG MAYA MANDIR WITH OTHER FAMILY MEMBERS. SHRI J.S. SHARMA, HUF INHERITED 1/162 SHARE AS PER FAMILY DIVISION . THE PORTION INHERITED BY SHRI J.S. SHARMA, HUF HAD BEEN USED 3 BY THE FAMILY MEMBERS FOR RESIDENCE. AS PER PREVAILING CUSTOM, SHRI J.S. SHARMA, HUF IS ENTITLED TO PERFORM PUJA AND ACCEPT OFFERING. AS PER FAMILY DIVISION, THE TERM FOR PERFORMING PUJA AND ACCEPT OFFERINGS COMES AFTER EVERY 18 YEARS FOR A YEAR. IN THE YEAR 2002 - 03, THE HUF ACCEPTED THE OFFERING AMOUNTING TO RS. 1.60 LAKHS. THE TEMPLE PREMISES WHICH WAS PREVIOUSLY SELF - OCCUPIED BY FAMILY MEMBERS WAS RENTED OUT DURING THE YEARS 2001 TO 2003 . 5. DURING THE SEARCH PROCEEDINGS, SOME AGREEMENTS WERE FOUND FROM WHICH IT WAS FOUND THAT FROM SHRI DALIP GUPTA [TENANT] RENT OF RS. 12,000/ - P.M WAS RECEIVED AND IN ASSESSMENT YEARS 2002 - 03 TO 2003 - 04 THE HUF RETURNED THE SAME IN ITS RETURN OF INCOME. SIMILARLY, SHRI SATISH CHANDER GUPTA [TENANT] WAS PAYING RENT OF RS. 38,000/ - P.M. AND RENTAL INCOME OF RS. 2,92,600/ - WAS SHOWN. RENTAL INCOME FROM SHRI ADARSH GUPTA AND SMT. KANCHAN GUPTA WAS RS. 8000/ - P.M. AND THE SAME WAS SHOWN IN ASSESSMENT YEAR 20 03 - 04 WHICH INCREASED TO 50,000/ - FROM NOVEMBER 2002 TO MARCH 2003. 6. BESIDES, RENTAL INCOME FROM THE TEMPLE PREMISES, THE HUF WAS ALSO IN RECEIPT OF CHADAWA [DONATION FROM GENERAL PUBLIC]. 4 7. THE ASSESSEE, IN HIS COMPUTATION STATEMENT, ENCLOSED WITH BLO CK RETURN, HAS ADMITTED THAT RENTAL INCOME AS ON 1.9.2001 TO 30.09.2001 WAS @ 12000 P.M. WHICH, UPON REVISION, SUBSEQUENTLY RESULTED IN A SUBSTANTIAL HIKE TO RS. 50,000/ - P.M. 8. ON THE BASIS OF RENTAL INCOME SHOWN BY THE ASSESSEE, THE ASSESSING OFFICER P RESUMED THAT IN THE EARLIER YEARS OF THE BLOCK PERIOD, THE ASSESSEE MUST HAVE RECEIVED RENTAL INCOME AND ACCORDINGLY COMPUTED THE TOTAL UNDISCLOSED INCOME OF THE BLOCK PERIOD AS UNDER: PREVIOUS YEAR (CHRONOLOGICALLY ) ASSTT. YEAR TOTAL INCOME FOR THE YEAR RETURNED INCOME UNDISCLOSED INCOME 1 ST 1997 - 98 2,00,800 NIL 2,00,800 2ND . 1998 - 99. 2,10,800 NIL 2,10,800 3M 1999 - 00 2,20,800 NIL 2,20,800 4 TH 2000 - 01 2,30,800 NIL 2,30,800 5 TH 2001 - 02 2,40,800 NIL 2,40,800 6 TH 2002 - 03 3,68,400 50,400 3,18,000 7 TH 2003 - 04 4,45,600 64,400 3,81,200 TOTAL UNDISCLOSED INCOME 18.03.200 9. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD. CIT( A) AND CONTENDED THAT ASSESSMENT OF BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH. IT WAS CONTENDED 5 THAT THE ASSESSING OFFICER WENT BEYOND HIS BELIEF AND COMPUTED TOTAL UNDISCLOSED INCOME ON ESTIMATION BASIS, WHICH IS AGAINST THE LAW. 10. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE LD. CIT(A) HELD AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ARGUMENTS OF THE ID. AR. I HAVE ALSO CAREFULLY PERUSED THE JUDGMENTS OF HONBLE SUPREME COURT AND HONBLE JURISDICTIONAL HIGH COURT PLACED ON RECORD BY THE ID. AR IN FAVOR OF HIS CLIENT. I AM OF THE CONSIDERED OPINION THAT WHILE FRAMING ASSESSMENT ORDER U/S. 158BD OF THE ACT, THE AO SHOULD HAVE RESTRICTED HIMSELF TO THE SEIZED MATERIAL AND OT HER DOCUMENTS/INFORMATION FOUND AND GATHERED DURING THE COURSE OF SEARCH. HE SHOULD NOT HAVE GONE ON TO ESTIMATE THE INCOME OF THE APPELLANT FOR THE WHOLE BLOCK PERIOD BY EXTRAPOLATION. SUCH POWERS OF EXTRAPOLATION OF INCOME TO EARLIER YEARS IS NOT AVAILAB LE TO THE AO IF NO SEIZED MATERIAL, DOCUMENTS OR BOOKS OF ACCOUNTS HAVE BEEN FOUND DURING THE COURSE OF SEARCH, INDICATING THAT THE APPELLANT HAD EARNED UNACCOUNTED IN COME IN SIMILAR FASHION IN EARLIER YEARS ALSO. THE LAW HAS B EEN CLEARLY LAID DOWN BY HON' BLE SUPREME COURT IN THE CASE OF HOTEL BLUE MOON (SUPRA) AND HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF ASHOK KHETRAPAL (SUPRA). THEREFORE, THE AO IS HEREBY DIRECTED TO RE - CALCULATE THE INCOME OF THE APPELLANT ON THE BASIS OF DOCUMENTS F OU ND AND SEIZ ED DURING THE COURSE OF SEARCH, WITHOUT ANY ESTIMATION OR EXTRAPOLATION, EITHER IN THE CASE OF RENTAL INCOME OR IN THE CASE OF CHADHAW A INCOME. 6 11. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 12. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. IT WAS THE SAY OF THE LD. DR THAT RENT RECEIVED FOR THE FIRST FIVE ASSESSMENT YEARS IN THE BLOCK PERIOD HAS BEEN ESTIMATED AT RS. 12,000/ - P.M. THE LD. DR STRONGLY STATED THAT THIS ESTI MATION DONE BY THE ASSESSING OFFICER IS BASED UPON THE RENTAL INCOME SHOWN BY THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEARS. IN SO FAR AS CHADAWA INCOME IS CONCERNED, THE LD. DR STATED THAT THE SAME WAS ESTIMATED ON REDUCING SCALE OF RS. 10,000/ - PER Y EAR FOR EARLIER YEARS. THE LD. DR POINTED OUT THAT THE SET OFF OF CORRESPONDING RETURNED INCOME HAS BEEN GIVEN WHILE COMPUTING UNDISCLOSED INCOME AT RS. 18.03 LAKHS. IT WAS THE SAY OF THE LD. DR THAT THE ASSESSEE DID NOT FURNISH ANY EVIDENCE THAT PROPERT Y WAS SELF OCCUPIED AND NO CHADAWA WAS RECEIVED IN THE EARLIER YEARS. ON THE ISSUE OF EXTRAPOLATION, RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DR. M.K.E MEMON 248 ITR 310 WHEREIN IT HAS BEEN HELD THAT THE A SSESSING OFFICER CAN MAKE ESTIMATE WHICH SHOULD NOT BE ARBITRARY. 13. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE FINDINGS OF THE LD. CIT(A). 7 14. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE HUF INHERITED A FAMOUS TEMPLE KNOWN AS YOGMAYA MANDIR WHICH WAS AN ANCESTRAL PROPERTY AND THE ASSESSEE HUF BECAME PUJARI WITH OTHER FA MILY MEMBERS. THERE IS ALSO NO DISPUTE THAT SHRI J.S. SHARMA WITH HIS OTHER FAMILY MEMBERS WAS RESIDING IN THE TEMPLE PREMISES. IT IS ALSO NOT IN DISPUTE THAT DURING THE SEARCH OPERATION, CERTAIN RENT AGREEMENTS WERE FOUND AND ON THE BASIS OF WHICH THE A SSESSING OFFICER CAME TO THE KNOW THAT THE TEMPLE PREMISES WAS RENTED OUT TO SHRI DALIP GUPTA, SATISH CHANDER GUPTA AND LATER ON TO SHRI ADARSH GUPTA AND SMT. KANCHAN GUPTA. RENT SHOWN IN THE RENT AGREEMENT WITH THESE PERSONS WAS OFFERED BY THE ASSESSEE - H UF IN THE RETURN OF INCOME. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE WAS ENTITLED FOR CHADAWA AND HIS TURN COMES ONCE IN 18 YEARS AND THAT YEAR WAS ASSESSMENT YEAR 2002 - 03. 15. ON THE BASIS OF THESE DETAILS FOUND AT THE TIME OF SEARCH, THE ASSESSING O FFICER HAD ESTIMATED THE RENTAL INCOME AND CHADAWA INCOME FOR EARLIER ASSESSMENT YEARS WHERE THE ASSESSEE DID NOT SHOW ANY SUCH INCOME. WE FIND THAT IN SO FAR AS CHADAWA INCOME IS CONCERNED, ESTIMATION MADE BY THE ASSESSING OFFICER IS WITHOUT ANY 8 BASIS AN D WITHOUT GOING INTO THE FACT THAT THE ASSESSEE WAS ENTITLED FOR CHADAWA ONCE IN 18 YEARS AND, THEREFORE, THERE WAS NO REASON FOR ESTIMATING THE CHADAWA INCOME FOR THE YEAR IN WHICH THE ASSESSEE WAS NEVER ENTITLED TO RECEIVE CHADAWA INCOME. THEREFORE, THE ADDITION ON ACCOUNT OF CHADAWA INCOME IS UNCALLED FOR AND THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. 16. COMING TO THE RENTAL INCOME, AS MENTIONED ELSEWHERE, THE ASSESSEE WITH OTHER FAMILY MEMBERS WAS RESIDING IN THE TEMPLE PREMISES AND THIS FACT HAS N OT BEEN REJECTED BY THE ASSESSING OFFICER. THE ONLY POINT OF DISPUTE IS THE ASSESSMENT MADE BY THE ASSESSING OFFICER THAT ONCE THE PREMISES WAS RENTED OUT, THE SAME MUST HAVE BEEN RENTED OUT IN THE EARLIER ASSESSMENT YEARS ALSO. NO DOUBT, THE BASIS OF ES TIMATION OF THE RENTAL INCOME IS THE ACTUAL RENT SHOWN BY THE ASSESSEE AS FOUND IN THE RENT AGREEMENT. 17. THE CONTENTION OF THE ASSESSEE THAT THE PREMISES REMAINED VACANT IN EARLIER ASSESSMENT YEARS CANNOT BE BRUSHED ASIDE LIGHTLY. AT THE SAME TIME, WHA T IS TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY IS THE ANNUAL LET OUT VALUE [ALV] OF THE HOUSE PROPERTY AND THE ALV IS DETERMINED AS PER SECTION 23 OF THE ACT WHEREIN IT HAS BEEN 9 PROVIDED THAT THE ALV SHALL BE THE S U M FOR WHICH THE PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR OR THE ACTUAL RENT RECEIVED/RECEIVABLE. THUS, IN THE CASE IN HAND, THE ALV HAS BEEN ESTIMATED ON THE BASIS OF ACTUAL RENT RECEIVED BY THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS. BUT, AT THE SAME TIME, THERE IS NO EVIDENCE ON RECORD WHICH COULD SUGGEST THAT THE PROPERTIES WERE ACTUALLY LET OUT IN THE EARLIER ASSESSMENT YEARS. 18. BUT THE ALV HAS TO BE TAXED AND, THEREFORE, TO THIS EXTENT, WE AGREE WITH THE LD. DR. SINCE THE LETTING OUT OF THE PROPERTY WAS D ISCOVERED DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS, THEREFORE, IN OUR CONSIDERED OPINION, THE ALV OF THE PROPERTIES HAVE BEEN RIGHTLY TREATED AS INCOME OF THE ASSESSEE. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) TO THIS EXTENT AN D RESTORE THAT OF THE ASSESSING OFFICER. 19. TO SUM UP, THE ADDITION ON ACCOUNT OF CHADAWA INCOME IS DIRECTED TO BE DELETED AND THE ADDITION ON ACCOUNT OF ALV OF THE HOUSE PROPERTY IS CONFIRMED. 10 20 IN THE RESULT, THE APPEAL OF THE REVENUE IN IT SS A NO. 27 /DEL/201 4 IS PARTLY ALLOWED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 0 6 .0 7 .2018. SD/ - SD/ - [ BEENA PILLAI ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 6 T H JU LY , 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI 11 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER