The DCIT, Central Circle-1, Surat V. Shri Praful A.Shah, Surat

ITSSA 520/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0719 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained investment; Valuation report
• Section: 143(3); 153A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G. D. AGARWAL , VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER IT (SS) A NO . 520 /AHD/2011 A. Y . 200 9 - 10 DCIT, CENTRAL CIRCLE - 1, SURAT. VS SHRI PRAFUL A. SHAH, GARDEN MI LL COMPLEX, SAHARA GATE, SURAT . (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH BAINS , CIT - D.R. . ASSESSEE(S) BY : SHRI J.P. SHAH, A.R. / DATE OF HEARING : 07 / 0 4 /201 5 / DATE OF PRONOUNCEMENT: 17 / 04 /201 5 / O R D E R PER: S. S. GODARA , JUDICIAL MEMBER THIS REVENUE S A PPEAL EMANATES FROM ORDER DATED 30.06.2011 PASSED BY LEARN ED CIT(A) - II AHMEDABAD IN A PPEAL NO . CIT(A) - II/CC.1/213/2010 - 11 , IN PROCEEDINGS U/S. 143(3) R.W.S.153 A OF THE INCOME TAX ACT (IN SHORT THE ACT ). 2. THE REVENUE S SOLE SUBSTANTIAL GROUND READS AS FOLLOWS: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.29,45,000/ - MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PAINTING PURCHASED BY THE ASSESSEE EVEN THOUGH THE ASSESSING OFFICER HAS ESTABLISHED IN THE BODY OF THE ASSESSMENT ORDER THAT THE SAID INVESTMENT IN PAINTINGS ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 3. THE ASSESSEE ; AN INDIVIDUAL IS A PAINTER. THE D EPARTMENT CONDUCTED A SEARCH IN HIS RESIDENTIAL AND OFFICIAL PREMISES AT SURAT IT (SS) A NO. 520 /AHD /201 1 SHRI PRAFUL A. SHAH FOR A.Y. 200 9 - 10 - 2 - AND MUMBAI ON 12.06.2008. IT HAD SEIZE D VARIOUS ART WORKS IN CO URSE THERE OF. IT SOUGHT TO ASCERTAIN VALU E OF THE ART WORK SEIZED FROM THE HEAD OF DEPARTMENT ( DRAWING AND PAINTING ) , J.J. SCHOOL OF ARTS, MUMBAI. THE SAID EXPERT APPEARS TO HAVE OPINED THAT SOME OF THE PAINTING SEIZED WERE NOT ASSESSEE S CREATION S . A ND AL SO THAT THERE WAS DIFFERENCE IN VALUATION OF THE ART WORK S SEIZED IN MUMBAI TO THE TUNE OF RS.29.45 LAC. 3.1 THE AO INITIATED SECTION 153A PROCEEDINGS. THE ASSESSEE FILED HIS RETURN ON 30.09.2009 ADMITTING INCOME OF RS.3,23,65,443/ - . H E DISCLOSED UNACCOUN TED INCOM E OF RS.1.25 CRORE AS WELL . THE ASSESSING OFFICER TOOK UP SCRUTINY . HE SOUGHT TO ADD THE AFORESAID DIFFERENTIAL VALUATION OF RS.29.45 LAC S . S OME OF THE PAINTING SEIZED FROM THE ASSESSEE S PREMISES DID NOT CONTAIN HIS SIGNATURES. HE CLAIM ED THE S AID ART WORK TO BE HIS CREATION. H E CLAIMED TO BE AN AMATEUR AND NOT A COMMERCIAL ARTIST TO PUT HIS SIGNATURE. THE ASSESSING OFFICER INTER ALIA OBSERVED THAT ANY ART IST ; COMMERCIAL OR AMATEUR PUT S HIS NAME OR SIGNATURES ON THE ART WORK CREATED. THE ASSESSE E PLACED ON RECORD CERTAIN PHOTOGRAPHS OF HIS EXHIBITIONS IN THE YEAR 1997 AND 1998 DEPICTING SOME O F THE ART WORK IN QUESTION TO BE HIS CREATION . THE ASSESSING OFFICER QUOTED LACK OF SUBSTANTIVE EVIDENCE. HE PLACED HUGE RELIANCE UPON THE EXPERT S VALUATIO N. T HE ASSESSEE HAD VALUED WORTH TO THE ART WORK IN QUESTION BETWEEN RS.2,000 TO RS.5,000/ - . THE VALUER ADOPTED A DIFFERENT APPROACH AND DETERMINED THE SAME TO BE RANGING BETWEEN RS.25,000 TO RS. 1 5,00,000/ - . THE A SSESSING A UTHORITY IN ASSESSMENT ORDER DAT ED IT (SS) A NO. 520 /AHD /201 1 SHRI PRAFUL A. SHAH FOR A.Y. 200 9 - 10 - 3 - 31.12.2010 INVOKED S ECTION 69 OF THE ACT TO TREAT THIS DIFFERENTIAL AMOUNT OF RS.29.45 LAC AS UNEXPLAINED INVESTMENT S . 4. THE ASSESSEE PREFERRED A N APPEAL. THE CIT(A) HAS ACCEPTED HIS CONTENTIONS AS UNDER: 8. I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE LEARNED AR. IT IS SEEN THAT THE ADDITION HAS BEEN MADE ON THE GROUND THAT PAINTINGS FOUND AT THE TIME OF SEARCH AT THE PREMISES OF THE APPELLANT AT SURAT AND MUMBAI AND SOURCE OF INVESTMENT WAS NOT EXPLAINED. THE DEPARTMENT HAD TAKEN VALUATION REPORT OF MR. YANDE WHO WAS HEAD OF THE DEPARTMENT OF J.J. SCHOOL OF ARTS. THE APPELLANT'S EXPLANATION WAS THAT MOST OF THESE PAINTINGS WERE CREATED BY PRAFULBHAI SHAH AND THAT THE COST OF MATERIAL RELATING TO THE PAINTINGS WAS DULY ACCOUNT ED AND THAT THERE WAS NO OTHER; COST RELATING TO THESE PAINTINGS BEING SELF MADE. MR. YANDE IN HIS REPORT HAS ACCEPTED SOME OF THE PAINTINGS TO HAVE BEEN CREATED BY PRAFUL SHAH BEING SR. NO.85 TO 92 OF HIS REPORT. THE A.O., THEREFORE, PRESUMED THAT THE REM AINING PAINTINGS HAVE NOT BEEN CREATED BY PRAFUL SHAH. IT IS STATED THAT MR. YANDE HAS IN HIS REPORT NOT STATED ANYTHING THAT THE REMAINING PAINTINGS WERE CREATED BY PRAFUL SHAH. THEREFORE, THE A.O. HAS TAKEN THE VALUE OF SUCH PAINTINGS TO BE UNEXPLAINED I NVESTMENT DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ON THE OTHER HAND EXPLAINED THAT THE PAINTINGS WERE CREATED BY PRAFUL SHAH AS PART OF HIS HOBBY. HE WAS REGULARLY MAKING PAINTINGS WORKS. EVEN EXHIBITION OF HIS PAINTINGS WERE HELD IN THE 19 97 - 98. SOME OF THE PAINTINGS IN THE BACK GROUND IN THE PHOTOGRAPH AT THE TIME OF EXHIBITION WERE FOUND TO BE PART OF THE PAINTINGS FOUND AT THE TIME OF SEARCH. THE A.O. HAS, THEREFORE, ACCEPTED SUCH PAINTINGS AS CREATED PRIOR TO THE SIX - YEAR FROM THE SEARC H ASSESSMENT YEAR. THE APPELLANT HAS ALSO EXPLAINED THAT EVEN 3 PAINTINGS CREATED BY SHRI PRAFUL SHAH OR HIS WIFE SHILPA P. SHAH ARE CONSIDERED TO BE UNEXPLAINED BY THE A.O. THE APPELLANT HAS ALSO STATED THAT THOSE PAINTINGS ARE NOT SIGNED BY THE CREATER A ND PRAFUL SHAH BEING A BUSINESS MAN HAVING ONLY HOBBY OF PAINTING AND WAS NOT HAVING ANY COMMERCIAL INTEREST FOR SELLING THOSE PAINTINGS SO HE HAS NOT PUT ANY SIGNATURE ON ANY OF THE PAINTINGS CREATED BY HIM. 8.1 ON CONSIDERING OF THE SUBMISSIONS OF THE AP PELLANT AND THE OBSERVATION OF THE A.O. I AGREE WITH THE APPELLANT'S SUBMISSION THAT THE PAINTINGS CANNOT BE CONSIDERED TO BE UNEXPLAINED FOR THE REASONS SUMMARISED AS UNDER: - I) SHRI PRAFUL SHAH IS ACCEPTED TO BE CREATING PAINTINGS BY THE ASSESSING OFFICER BY THE SEARCH PARTY AND BY THE VALUER AND SPECIALIST MR. YANDE. HE BEING IN BUSINESS HAS NO COMMERCIAL INTEREST AS OTHER COMMERCIAL PAINTERS AND SELLING THOSE PAINTING AND HENCE HE IS NOT PUTTING ANY SIGNATURE OR MARKING OF HIS CREATION. THE CIRCU MSTANTIAL EVIDENCES AND THE FACTS NARRATED BY THE APPELLANT MENTIONED IN EARLIER PARAGRAPHS, CLEARLY SHOW THAT THE PAINTINGS CREATED BY SHRI PRAFUL SHAH ARE NOT SIGNED. IT (SS) A NO. 520 /AHD /201 1 SHRI PRAFUL A. SHAH FOR A.Y. 200 9 - 10 - 4 - II) EVEN MR. YANDE HAS ACCEPTED THAT PAINTINGS AT SR.NO. 85 TO 92 OF HIS REPORT HA VE BEEN CREATED BY SHRI PRAFUL SHAH AND HAS SUBSTANTIAL VALUE AS PER THE SAID REPORT AND THESE PAINTINGS WERE ALSO NOT SIGNED BY MR. PRAFUL SHAH. III) THE ABOVE POSITION ESTABLISHES AND ONE HAS TO ACCEPT THAT PRAFUL SHAH HAS CREATED PAINTINGS BUT WERE NOT SIGNED BY HIM. THE PHOTOGRAPHS OF SUCH PAINTINGS SUBMITTED DURING THE COURSE OF HEARING SHOW THAT THE PAINTINGS FOR WHICH ADDITION IS MADE, ARE NOT SIGNED. IV) THERE IS NO EVIDENCE FOUND AT THE TIME OF SEARCH IN THE FORM OF ANY SEIZED MATERIAL BY WAY OF LOOSE PAPER, NOTINGS WHICH SHOW THAT THE APPELLANT HAS MADE ANY PAYMENT FOR SUCH PAINTINGS. V) IT IS FURTHER NOTICED THAT, APART FROM THE ABOVE, 3 PAINTINGS OF THE WIFE, SHILPA SHAH ARE CONSIDERED TO BE UNEXPLAINED AND HAVE BEEN CREATED BY SH RI PRAFUL SHAH, WERE NOT SIGNED BY HIM. VI) APART FROM THE ABOVE, THE APPELLANT HAS MADE DISCLOSURE OF RS.125 LAKH IN THE YEAR UNDER CONSIDERATION FOR WHICH NO CREDIT FOR INVESTMENT/APPLICATION HAS BEEN CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME OR ANY SUBSEQUENT YEARS ACCOUNTS. TAX HAS ALREADY BEEN PAID BY THE APPELLANT ON THIS DISCLOSED AMOUNT. THE VALUE OF PAINTINGS IS COVERED BY SUCH DISCLOSURE AND THE APPELLANT HAS SUBMITTED THAT NO CAPITALIZATION TO THE TUNE OF RS. 29.45 LACS SHALL BE CLAIMED. VII) HAVING REGARD TO THE ABOVE, I HOLD THAT THE ADDITION MADE FOR UNEXPLAINED INVESTMENT IS NOT JUSTIFIED FIRSTLY FOR THE REASONS THAT THE INVESTMENT IS NOT ESTABLISHED TO HAVE BEEN MADE BY THE APPELLANT AND FURTHER IN VIEW OF THE FACT THAT THE DISCLOS URE OF RS. 1.25 CRORE REFERRED TO ABOVE IS MORE THAN VALUE OF SUCH PAINTINGS FOR WHICH ADDITION OF RS. 29.45 LACS WAS MADE BY THE A.O. ACCORDINGLY, THE ADDITION IS DIRECTED TO BE DELETED. THIS LEA VES THE REVENUE AGGRIEVED. 5 . WE HAVE HEARD BOTH SIDES AN D PERUSED THE CASE FILE. THE ISSUE BETWEEN THE PARTIES IS THAT OF ALLEGED UNEXPLAINED INVESTMENT IN PAINTING / ART WORKS OF RS.29.45 LAC. IT TRANSPIRES THAT SOME OF THE ART WORK SEIZED DOES NOT CONTAIN ASSESSEE S NAME OR SIGNATURES. THE REVENUE TREATED THE SAME NOT BE THE ASSESSEE S CREATION, GOT ITS VALUATION REPORT (SUPRA) AND ADDED THE SAID SUM AS HIS UNEXPLAINED INVESTMENT. WE REITERATE THAT THE ASSESSEE HIMSELF IS A RENOWNED PAINTER. THESE FACTS LEAD US TO AN INFERENCE THAT IF THAT IS THE CASE , HE CAN B E RE ASONABLY PRESUMED TO HAVE CREATED THE ART WORK IN IT (SS) A NO. 520 /AHD /201 1 SHRI PRAFUL A. SHAH FOR A.Y. 200 9 - 10 - 5 - QUESTION. THE REVENUE SEEKS TO HOLD US OTHERWISE. HOWEVER, IT FAILS TO PRODUCE ANY COGENT EVIDENCE COLLECTED DURING SEARCH SUPPORTING ITS CONTENTION . THEREFORE, WE UPHOLD THE CIT(A) S FINDINGS UNDER C HALLENGE. 6 . T HE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 17TH DAY OF APRIL, 2015. SD/ - SD/ - ( G. D. AGARWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 17 / 0 4 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . S / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD