Shashi Garg, V. DCIT, Circle-35(1),

ITSSA 79/DEL/2004

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8806 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-10-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-09-2010
• Assessment Year: misc
• Appeal Filed On: 10-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RANI JAIN C AS
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL IT(SS)A NO. 79(DEL)/2004 BLOCK PERIOD: 1.4.1990 TO 2.6.2000 SMT. SHASHI GARG, DEPU TY COMMISSIONER OF INCOME B-256, SURAJ MAL VIHAR, VS. TAX, CIRCL E 35(1), NEW DELHI. DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN & MS. RANI JAIN, C.AS. RESPONDENT BY: SHR I R.K. GUPTA, D.R. ORDER PER K.G. BANSAL : AM THE FACTS OF THE CASE ARE THAT SEARCH AND SEI ZURE OPERATIONS WERE CONDUCTED AT THE RESIDENTIAL PREMISES OF THE AS SESSEE ON 25.5.2000. LOCKER STANDING IN THE NAME OF THE ASSESSEE JOINT LY WITH SHRI P.K. GARG WAS ALSO SEARCHED ON THE AUTHORIZATION ISSUED ON 25.5.2000. THE ASSESSEE FILED RETURN OF INCOME FOR THE BLOCK PERIOD ON 6. 6.2001 DECLARING NIL INCOME. THE ASSESSMENT WAS COMPLETED ON 31.5.2 002 COMPUTING THE UNDISCLOSED INCOME AT RS. 20,10,930/-. THE MATTER CAME UP TO THE TRIBUNAL, WHICH CANCELLED THE ASSESSMENT ON THE GROUND THA T THE WARRANT OF AUTHORIZATION WAS ISSUED BY THE ADDITIONAL DIREC TOR OF INCOME-TAX (INVESTIGATION), WHO WAS NOT COMPETENT TO DO SO. THIS MATTER WAS AGITATED IT(SS)A NO. 79(DEL)/2004 2 IN APPEAL BEFORE THE HONBLE HIGH COURT, WHO IN ORDER DATED 19.3.2010 REMANDED THE MATTER TO THE TRIBUNAL FOR DECIDING T HE APPEAL ON MERITS. 2. GROUND NOS. 1 AND 2 BEING PRELIMINARY IN NATUR E, CHALLENGING THE JURISDICTION TO MAKE THE ASSESSMENT AND TO COMPUTE UNDISCLOSED INCOME STAND REJECTED AS THESE WERE NOT ARGUED BY TH E LD. COUNSEL FOR THE ASSESSEE. IN ANY CASE, THE DIRECTION OF THE HONB LE HIGH COURT IS TO DECIDE THE APPEAL ON MERITS. THIS DECISION FORTIFIES THE AFORESAID CONCLUSION. 3. GROUND NO. 3 IS AGAINST INCLUSION OF A SUM OF RS. 5.50 LAKH IN THE UNDISCLOSED INCOME IN RESPECT OF INVESTMENT IN PRO PERTY SITUATED AT B-256, SURAJMAL VIHAR, DELHI. IT IS MENTIONED THAT THE PROPERTY WAS SHOWN IN THE RETURN OF INCOME FILED BEFORE THE DATE OF SEAR CH. IT IS FURTHER MENTIONED THAT THE PROPERTY BELONGED TO THE HUSBAND, SHRI P .K. GARG, WHO TRANSFERRED IT TO THE ASSESSEE. 3.1 IN THIS CONNECTION, IT WAS REPRESENTED BEFORE THE LD. CIT(APPEALS) THAT THE PROPERTY WAS PURCHASED BY SHRI P.K. GARG , AND HIS BROTHER SHRI R.K. GARG, IN THE YEAR 1991 FOR A SUM OF RS. 5 .50 LAKH. THE SOURCE OF INVESTMENT WAS THE SALE PROCEEDS OF THE OLD HO USE BELONGING TO THE IT(SS)A NO. 79(DEL)/2004 3 AFORESAID TWO PERSONS. THIS FACT WAS DISCLOSE D IN THE RETURNS OF THESE PERSONS. IN THE YEAR 1998, THE PROPERTY WAS TR ANSFERRED BY THESE PERSONS TO THE ASSESSEE FOR A SUM OF RS. 5.50 LAKH BY WA Y OF ORAL FAMILY SETTLEMENT, AS REFLECTED IN THE SEIZED MATERI AL OF PAGE NOS. 1 TO 30 OF ANNEXURE A-30. THE PROPERTY WAS SHOWN BY THE A SSESSEE IN HER BALANCE- SHEET ON 31.3.1999 FILED WITH THE RETURN OF INC OME. THEREFORE, THE PROPERTY HAD ALL ALONG BEEN DISCLOSED AND, THUS, THERE WAS NO REASON TO BRING ANY UNDISCLOSED INVESTMENT TO TAX. THE LD. CIT(A) CONSIDERED THESE FACTS AND MENTIONED THAT THE AO HAD REQU ESTED THE ASSESSEE TO FURNISH DETAILS OF THE COST OF CONSTRUCTION, THE PERIOD OF CONSTRUCTION AND THE INVESTMENT MADE IN PURCHASE OF LAND. THESE DETAILS WERE NOT FURNISHED. THEREFORE, THE AO WAS JUSTIFIED IN B RINGING THE AMOUNT TO TAX AS UNDISCLOSED INCOME. 3.2 BEFORE US, THE LD. COUNSEL REFERRED TO THE RE TURN OF INCOME FILED BY THE ASSESSEE ON 26.10.2000 FOR ASSESSMENT YEAR 1999-00, IN WHICH THE PROPERTY IS SHOWN IN THE BALANCE-SHEET AT RS. 5. 50 LAKH. THESE DETAILS ARE AVAILABLE ON PAGE NOS. 51 AND 53 OF THE PAPE R BOOK. PAGE NO. 54 SHOWS CREDIT BALANCE IN THE NAME OF SHRI P.K. GA RG AT RS. 2,76,793/-. IT MAY, HOWEVER, BE MENTIONED THAT THE RETURN WAS FI LED AFTER THE DATE OF IT(SS)A NO. 79(DEL)/2004 4 SEARCH AND, THEREFORE, IT CANNOT FORM THE BASIS FOR COMING TO A CONCLUSION WHETHER THE AMOUNT REPRESENTED UNDISCLOSED INCOM E OR NOT. FURTHER, THE BALANCE-SHEET OF SHRI P.K. GARG AS ON 31.3.1992 SHOWS INVESTMENT OF RS. 2,52,500/-, BEING HALF SHARE IN THE AFORESAID P ROPERTY. THE BALANCE-SHEET OF SHRI R.K. GARG ALSO SHOWS INVESTMENT IN THE AFORESAID PROPERTY AT RS. 2,52,500/-. THE CASE OF THE LD. COUNSEL IS THAT TH E HUSBAND OF THE ASSESSEE AND HER BROTHER-IN-LAW OWNED HALF SHARE EACH IN THE PROPERTY, WHICH WAS TRANSFERRED TO THE ASSESSEE IN THE COURSE OF FAMI LY SETTLEMENT. THUS, THE ACQUISITION OF THE PROPERTY STANDS DULY EXPLAINE D. 3.3 IN REPLY, THE LD. DR SUBMITTED THAT THE INVE STMENT IN PROPERTY HAS NOT BEEN EXPLAINED IN THE HANDS OF SHRI P.K., GAR G AND SHRI R.K. GARG. THEREFORE, NECESSARY DIRECTIONS MAY BE ISSUED TO V ERIFY THEIR SOURCES OF INVESTMENT. 3.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE HUSBAND OF THE ASSESSEE AND HER BROTHER-IN-LAW OWNED THE PROPERTY WITH HALF SHA RE EACH, WHICH WAS ACQUIRED IN THE YEAR ENDING ON 31.3.1992. THIS P ROPERTY WAS TRANSFERRED TO THE ASSESSEE IN THE YEAR ENDED ON 31.3.1999. THUS, NOTHING IS LIABLE TO IT(SS)A NO. 79(DEL)/2004 5 BE INCLUDED IN HER HANDS AS UNDISCLOSED INCOME O N ACCOUNT OF INVESTMENT THEREIN. IN SO FAR AS INVESTMENT OF PREVIOUS OW NERS ARE CONCERNED, THE DEPARTMENT CAN ALWAYS TAKE ACTION AS PER LAW AND WE DO NOT FIND ANY NECESSITY TO ISSUE ANY DIRECTION IN THE MATTER . THUS, THIS GROUND IS ALLOWED. 4. GROUND NO. 4 IS AGAINST INCLUSION OF A SUM OF RS. 45,062/-AS UNDISCLOSED INVESTMENT IN PURCHASE OF JEWELLERY. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE NO. 86 OF TH E PAPER BOOK, WHEREIN THE DETAILS OF THE JEWELLERY ARE MENTIONED. THE JEW ELLERY HAS BEEN VALUED AT RS. 45,062/- AND AFTER DEDUCTING ADVANCE OF R S. 43,662/-, A SUM OF RS. 1,400/- IS SHOWN AS PAYABLE. THIS PAPER BEARS THE NAME OF SHRI P.K. GARG AT THE TOP. THE LIMITED CASE OF THE LD. COUNS EL IS THAT THE JEWELLERY BELONGS TO SHRI P.K. GARG AND NOT TO THE ASSE SSEE AS IT WAS PURCHASED BY HIM. THEREFORE, IT IS CONTENDED THAT NO A DDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. IN REPLY, THE LD. DR SU BMITTED THAT THE JEWELLERY HAS NOT BEEN ACCOUNTED FOR BY SHRI P.K. GARG A LSO, WHICH SHOWS THAT UNACCOUNTED INVESTMENT HAS BEEN MADE IN ACQUISIT ION THEREOF. THE ASSESSEE WAS FOUND TO BE OWNER OF THE JEWELLERY. THEREFORE, IT WAS AGITATED THAT THE ADDITION SUSTAINED BY THE LD. CIT(A) MAY BE UPHELD. IT(SS)A NO. 79(DEL)/2004 6 4.1 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE FINDING OF THE LD. CIT(A) IS THA T INVESTMENT OF RS. 45,062/- WAS MADE IN FINANCIAL YEAR 1994-95 IN PURCHASE OF THE JEWELLERY. IN THE COURSE OF SEARCH, SHRI P.K. GARG STATED THAT THE INVESTMENT WAS ON ACCOUNT OF JEWELLERY PURCHASED BY THE ASSESSEE B UT NOT RECORDED IN THE BOOKS OF ACCOUNT. IN VIEW THEREOF, THE ADDITI ON WAS SUSTAINED. FURTHER, ON PERUSAL OF THE ASSESSMENT ORDER IT IS SEEN THA T THE JEWELLERY WAS FOUND IN THE LOCKER JOINTLY HELD BY THE ASSESSEE AND H ER HUSBAND. THE STATEMENT OF SHRI P.K. GARG WAS THAT THE JEWELLERY WAS PU RCHASED BY THE ASSESSEE, BUT INVESTMENT WAS NOT RECORDED IN HER BOOKS OF ACCOUNT. LOOKING TO THESE FACTS, IT IS CLEAR THAT THE ASSESSEE HAD PUR CHASED THE JEWELLERY AND HER HUSBAND STATED THAT INVESTMENT THEREIN IS NOT RECORDED IN THE BOOKS OF ACCOUNT. FURTHER, THE DESCRIPTION OF THE JEWEL LERY IS SUCH THAT ONLY LADIES CAN WEAR IT. THUS, THE ARGUMENT THAT THE PAPER FOUND IN THE COURSE OF SEARCH WAS ONLY AN ESTIMATE AND DOES NOT REPR ESENT THE ACTUAL PURCHASE IS NOT ACCEPTABLE. IN THESE CIRCUMSTANCES, THER E IS GREATER CREDIBILITY IN THE CASE OF THE REVENUE THAT THE JEWELLERY BELONGED T O THE ASSESSEE, PURCHASED BY HER AND INVESTMENT THEREIN WAS NOT RECORDED I N HER BOOKS OF ACCOUNT. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHE LD ON THIS GROUND. IT(SS)A NO. 79(DEL)/2004 7 5. GROUND NO. 5 IS AGAINST INCLUSION OF A SUM OF RS. 32,126/- IN THE UNDISCLOSED INCOME IN RESPECT OF PAYMENTS MADE TO DISCHARGE THE LOAN TAKEN FOR PURCHASE OF CAR. IN THIS CONNECTION, I T IS MENTIONED IN THE ASSESSMENT ORDER THAT THREE SUMS OF RS. 10,708/- EACH WERE PAID ON 24.10.1998, 16.11.1998 AND 15.12.1998. IT WA S SUBMITTED THAT THREE CHEQUES WERE ISSUED TO PAY MONTHLY INSTALLMENT OF THE LOAN TAKEN FROM APEE JAY FINANCE CO. FOR PURCHASE OF CAR. THE AM OUNTS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT. THE AO DID NOT ACCEPT THE CONTENTION FOR THE REASON THAT THE SAME HAS NOT BEEN SUBSTANTIATED WI TH REFERENCE TO ANY DOCUMENTARY EVIDENCE. THE LD. CIT(A) UPHELD THE DECISION BY MENTIONING THAT THE HOUSE-HOLD WITHDRAWALS WERE RS. 8,000/- PER MONTH, WHICH COULD NOT BE SUFFICIENT TO MEET THE AFORES AID PAYMENTS. 5.1 BEFORE US, THE LD. COUNSEL REFERRED TO THE F INDINGS OF THE AO AND THE LD. CIT(A) AND ARGUED THAT NOTHING COULD BE ADD ED TO THE UNDISCLOSED INCOME ON THIS GROUND. ON THE OTHER HAND, THE LD . DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES BY SAYING THAT THE WI THDRAWALS WERE NOT SUFFICIENT TO MEET THESE EXPENSES. IT(SS)A NO. 79(DEL)/2004 8 5.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. FROM THE ASSESSMENT ORDER, IT IS SEEN THAT THE PAYMENT WAS MADE BY WAY CHEQUES AND NOT BY WAY OF CASH. THE CONTE NTION WAS REJECTED BY THE AO BY STATING THAT IT HAS NOT BEEN SUBSTANTIAT ED BY ANY DOCUMENTARY EVIDENCE OR BY STATEMENT OF AFFAIRS OF THE ASS ESSEE. HER WITHDRAWALS FOR HOUSE-HOLD EXPENSES AMOUNTED TO RS. 8,000/- P.M. O NLY. WE FIND THAT THE ASSESSEE DID NOT MAKE OUT A CASE TO EXPLAIN THE SOURCE OF AFORESAID PAYMENTS BY FILING HER BANK ACCOUNT. HOWEVER, THE PAYMENT IN RESPECT OF CAR CANNOT BE INTER-LINKED WITH THE HOUSE-HO LD WITHDRAWALS FOR THE REASON THAT THE CAR IS AN ASSET AND PAYMENTS OF INSTALLMENT GO TO REDUCE THE LIABILITY OF THE FINANCIER, APEEJAY FINANCE LT D. THESE DETAILS ARE AVAILABLE ON RECORD IN THE STATEMENT OF AFFAI RS. THEREFORE, IT IS HELD THAT THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN UPHOLDI NG THIS ADDITION. 6. GROUND NO. 6 IS AGAINST ADDITION OF RS. 67,150 /- ON ACCOUNT OF INVESTMENT IN FIXED DEPOSITS AND NATIONAL SAVINGS CERTIFICATES (NSCS). IN THIS CONNECTION, THE LD. COUNSEL DREW OUR ATTENT ION TO PAGE NO. 22 OF THE PAPER BOOK, WHICH IS THE INVENTORY OF THE FIXED D EPOSITS AND THE NSCS. IT WAS SUBMITTED THAT THE INVESTMENT IN NSCS WAS R OLLED OVER TO OBTAIN THE FIXED DEPOSITS, AS WILL BE CLEAR FROM THE INVE NTORY ITSELF. IN REPLY, THE LD. IT(SS)A NO. 79(DEL)/2004 9 DR SUBMITTED THAT THE INVESTMENT IN FIXED DEPOSIT S HAS NOT BEEN EXPLAINED WITH REFERENCE TO ENTRIES IN THE BANK ACCOUNT. WE HAVE CONSIDERED THE FACTS OF THE CASE. WE FIND FROM THE INVENTORY THAT THE ASSESSEE HAD BEEN INVESTING IN NSCS AMOUNTING TO RS.10,000/-, WHI CH MATURED TO RS. 20,150/-. THE AMOUNT WAS INVESTED IN FIXED DEPOS ITS. THUS, IT IS A CASE OF ROLL OVER OF MONEY RATHER THAN MAKING ANY FRES H INVESTMENT. THEREFORE, IT IS HELD THAT NO ADDITION COULD BE MADE ON TH IS ACCOUNT. 7. GROUND NO. 7 REGARDING LEVY OF SURCHARGE WAS NOT ARGUED BY THE LD. COUNSEL IN VIEW OF THE DECISION OF HONBLE SUPREM E COURT IN THE MATTER. THUS, THIS GROUND IS ALSO DISMISSED. 8. CHARGING OF INTEREST IS MANDATORY IN NATURE . HOWEVER, THE AO SHALL RECOMPUTED THE INTEREST AS PER TAX ON UNDISCLOSED INCOME DETERMINED ON GIVING EFFECT TO THIS ORDER. GROUND NO. 8 IS DEC IDED ACCORDINGLY. 9. IN THE GROUND, THE APPEAL IS PARTLY ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2010. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 21ST OCTOBER, 2010. SP SATIA IT(SS)A NO. 79(DEL)/2004 10 COPY OF THE ORDER FORWARDED TO: SMT. SHASHI GARG, DELHI. DCIT, CIRCLE 35(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT RE GISTRAR.