RAJESH MANGLA,FARIDABAD V. DCIT, CENTRAL CIRCLE-II, FARIDABAD

ITA 2815/DEL/2018

AI Insights

The case involves two appeals by Rajesh Mangla against the orders of the Deputy Commissioner of Income Tax, Central Circle-II, Faridabad, pertaining to the assessment year 2013-14. The first appeal (ITA No. 2815/Del/2018) challenged the assessment order which included various additions to the income of Rajesh Mangla based on alleged undisclosed sources and unaccounted income. The second appeal (ITA No. 2998/Del/2022) contested the penalty imposed under section 271AAA of the Income Tax Act, which was based on the same additions. The Tribunal examined the grounds of appeal, the evidence presented, and the arguments made by both parties, ultimately deciding to favor the appellant by rejecting the additions and the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 27025 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MAILK
• Assessee Lawyers: S SOMIL AGARWAL; DEEPESH
• Keywords: Set aside; Opportunity of being heard; Unexplained investment; Salary income; Income from undisclosed sources; Principle of natural justice; Search and seizure
• Section: 143(3); 142(1); 143(2); 153A; 274; 234B; 20

Judgement Text

" ITA No. 2815/Del/2018 & ITA No.2998/Del/2022 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 2815/Del/2018 Assessment Year: 2013-14 Rajesh Mangla, H. No. 536, Sector-14, Faridabad PIN: 121 007 Vs. DCIT, Central Circle-II, Faridabad ITA No. 2998/Del/2022 Assessment Year: 2013-14 Rajesh Mangla, H. No. 536, Sector-14, Faridabad PIN: 121 007 Vs. DCIT, Vs. DCIT, Central Circle-II, Faridabad PAN :AKBPM6493Q (Appellant) (Respondent) ORDER PER ANUBHAV SHARMA: JUDICIAL MEMBER Assessee by S/Shri Somil Agarwal & Deepesh Garg, Advs. Respondent by Ms. Suman Mailk, CIT DR Date of hearing 04.02.2025 Date of pronouncement 25.02.2025 2 ITA No. 1030/Del/2024 The appeal ITA No. 2815 if preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-2, Gurgaon [hereinafter referred to as “CIT(A)”] dated 22.07.2018 pertaining to assessment year 2013-14 and arises out of the assessment order dated 19.03.2015 under sections 153A r.w.s. 143(3) of the Income Tax Act, [hereinafter referred as ‘the Act’] passed by the Deputy Commissioner of Income Tax, Central Circle II, Faridabad (here in after referred as the assessing officer or in short ‘AO’) and the ITA 2998 is the appeal arising out of penalty proceedings and order u/s 271AAA of the Act, under the same assessment. 2. The grounds taken by the assessee in ITA No. 2815 are as under: “1. That the appellant denies his liability to be assessed at total income of Rs. 42,86,789/- against returned income of Rs.11,23,960/- and accordingly denies his liability to pay tax and interest demanded thereon. 2. That having regard to the facts and circumstances of the case, the issue of notice u/s 143(2) and the assessment proceedings in the case are bad in law and against the facts of the case and, therefore, the assessment framed is bad in law against the facts of the case and void-abinitio. 3. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in framing the impugned assessment u/s 153A rws 143(3) without serving 3 ITA No. 1030/Del/2024 mandatory notice u/s 143(2) within the statutory allowable period. 4. That in any view of the matter and in any case, the assessment framed is bad in law and against the facts of the case.” 5. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making addition of Rs. 1,00,000/- on account of cash deposited in the bank account as alleged income from undisclosed sources. 6. That in any view of the matter and in any case, the addition of Rs. 1,00,000/- made in the assessment order is bad in law and against the facts and circumstances of the case. 7. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making addition of Rs. 19,859/- on account of saving bank interest. 8. That in any view of the matter and in any case, the addition of Rs. 19,859/-made in the assessment order is bad in law and against the facts and circumstances of the case. 9. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making addition of Rs. 27,00,000/- on account of alleged payment allegedly made by the assessee, for purported sale of some property by the assessee, on the basis of page no. 47 of seized document no. A- 1 and more so when the document in question is dumb, inchoate and non-speaking. 10. That in any view of the matter and in any case, the addition of Rs. 27,00,000/- made in the assessment order on account of alleged payments from undisclosed sources is bad in law and against the facts and circumstances of the case. 11. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making addition of Rs. 3,42,970/- on account of alleged long term 4 ITA No. 1030/Del/2024 capital gain on sale of property by not allowing benefit of indexation on the cost of improvement. 12. That in any view of the matter and in any case, the addition of Rs. 3,42,970/- made in the assessment order is bad in law and against the facts and circumstances of the case. 13. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in making the above additions and disallowances without giving an adequate opportunity of being heard, without giving cogent reasons and by not observing the principles of natural justice and by recording incorrect facts. 14. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in law and on facts in charging interest u/s 234B of the Income Tax Act, 1961. 15. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 3. On hearing both the sides we find that by virtue of the authorization of the Director of Income-tax (Investigation), Delhi, under section 132(1)(A) in the case of the assessee, the residential as well as business/office premises of M/s SRS Group, were subjected to search and seizure operations on 09.05.2012. Assessment jurisdiction over the assessee were transferred to Central circle II, Faridabad, by passing an order u/s 127 of the Act by the Commissioner of Income Tax Faridabad, vide F. No. CIT/FBD/127/09/2012-13/6050 dated 08.02.2012. During the 5 ITA No. 1030/Del/2024 previous year relevant to the A.Y. 2013-14, the assessee was drawing income from salary. In accordance with the provisions of section 153A (1) (a) of the Act a notice dated 06.08.2013, u/s 153A (1) (a) was issued and served upon the assessee, requiring to file his return of income in respect of assessment year 2013- 14, an assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. In his case, the search was conducted on 09.05.2012. In response to the said notice, the assessee filed his return of income, returning a total income of Rs. 11,23,960/- on 09.10.2013. Notices under section 143(2) and 142(1) along with a questionnaire were issued to the assessee on 08.08.2014, which were duly served upon the assessee. In response to the said notices, Sh. Charitra Gupta& Naresh Goyal, C.A/Authorized representatives on behalf of the assessee attended the assessment proceedings from time to time with whom the case was heard and discussed by the AO. On perusal of the bank account statement of the assessee, Ld. AO observed that cash deposit of Rs. 1,00.000/- on 11/7/2012. Ld. AO has mentioned that when the assessee was asked to explain the source of the said cash deposits, the assessee submitted that 6 ITA No. 1030/Del/2024 cash was deposited in to bank account out of cash withdrawn from bank itself but ld. AO concluded that assessee has failed to substantiate his claim with providing documentary evidence. Accordingly, made an addition of Rs. 1,00,000/- treating the same income from undisclosed sources. 3.1 Further, on perusal of the bank account statement of the assessee it was noticed that assessee has earned interest of Rs.29,859/- from saving bank account and did not added this income in to his taxable income. Accordingly, an addition of Rs.19,859/- was made to his taxable income after allowing deduction. 3.2 Then ld. AO observed that as per Page No.47 of Document No.A-1 Seized from the residence of the assessee, the assessee has sold a property for Rs.27 Lacs. The assessee was asked to explain the transaction and sources of payment. The assessee explained as reproduced below:- \"Page no.47 of the documents contains some undated rough jotting which are not the handwriting of the assessee. This is non speaking paper slip and page do not contain name of any person. The same dose not relate to the assessee. The assessee has not entered into any property transactions as has been alleged and there is no collaboration of the figures. This also proves that this some visitor/guests of the assessee had inadvertently dropped this clip which contain some calculations done by him. This slip in no way give any details 7 ITA No. 1030/Del/2024 of any actual property transactions as such. No property is identified, no person is named and no date is mentioned. It appears to be only some sort of planning. Since there is no property particular are mentioned there is no question of any unaccounted investment and that too by the assessee.\" 3.3 The explanation given by assessee was not accepted and the ld. AO held that as in the paper area of properties, rate and amount is written and after deducting payment of Rs. 27 Lac mentioned balance is written in the documents itself. Against the payment of Rs.27 Lacs Mangla is written. Thus it is evident that payments of Rs.27 Lacs was made by the assessee from the sources not disclosed to the department. Accordingly addition of Rs.27 Lac was made on this account. Further, the ld. AO held that as the assessee had not disclosed this income suo-moto and without the search operation, this income would not have been unearthed had there been no search on the premises of the assessee therefore being satisfied that the assessee has failed to disclose income and specify the manner in which such income has been derived and initiated the penalty u/s 271AAA of the Act. 3.4 Next, as per page no.50 to 52 of documents no. A-1 Seized from the residence of the assessee. Ld. AO noticed that the assessee as sold as shop situated New Sabji Mandi, Ballabgarh for Rs.38 Lacs on 20 April 2012. The assessee was asked to 8 ITA No. 1030/Del/2024 explain the transaction and whether any tax has been paid on capital gain. The assessee explained as under:- \"This was a plot for shop which was auctioned by market committee on 17.07.1998. M/s. BT Industries Limited had made the successful bid and the amount was paid to it by the assessee for payment to the committee. After approval of auction the plot was allotted in the name of M/s. BTL Industries Limited on 08.06.1999 and the payment of the same was also made by the assessee. An agreement to sell executed after allotment with the company is also attached in support of purchase of the property along with the allotment letter. The remaining payments were made by the assessee direct. The assessee constructed two floors and on the plot. The no conveyance deed was executed due to restrictions by market committee. Later the assessee has sold this property to Smt. Ajay Rani for Rs.38 Lacs in financial year 2012-13. The sale deeds have not been executed. However, the assessee earned no capital gain in the transactions. A detail of computation of capital gain is attached.\" 3.5 Ld. AO observed that in the Computation of capital gain the assessee has shown Long Term Capital Loss Rs. 14051/-after claiming in indexation benefit on the cost of purchase and cost of improvement. The cost of improvement is shown at Rs.3,25,000/- up to 28.07.2000 but no evidence is filed to show that the shop were constructed before 28.07.2000. Ld. AO observed that more over the assessee has not shown any rental income from these shops in any assessment year. Thus ld. AO held that it cannot be accepted that shop were constructed before 28.07.2000 and 9 ITA No. 1030/Del/2024 accordingly benefit of indexation was not allowed on the cost of improvement and capital gain was calculated as under:- Cost of Sale (20.04.2012) Rs.38,00,000/- Cost of Purchase Rs. 14,30,000/- as on 10.06.1999 Index cost of purchase Rs.31,32,030/- Add cost of Improvement Rs.3,25,000/- Rs.34,57,030/- Long Term Capital Gain Total Rs. 3,42,970 3.6 Accordingly Rs.3,42,970/- was added to taxable income on account of Long Term Capital Gain and ld. AO held that as the assessee had not disclosed this income suo-moto and without the search operation, this Income would not have been unearthed had there been no search on the premises of the assessee. During the assessment proceedings the assessee has failed to substantiate the manner of earning such undisclosed income as per the provisions of section 271AAA and therefore, a separate notice u/s 274 read with section 271AAA was issued in respect of Disclosure/addition. 4. During the course of hearing, ground nos. 1,2, 5 and 6 were not pressed, hence, dismissed as withdrawn. Ld. AR has supported made out a case on basis of facts and assertions as made before ld. Tax authorities below. Ld. DR has relied the order 10 ITA No. 1030/Del/2024 of ld. CIT(A) and submitted that on well reasoned findings the additions were sustained. Accordingly we proceed to decide the grounds as follows. 5. Ground nos. 3 and 4; The grounds relate to addition of Rs.1,00,000 made by the Assessing Officer on account of cash deposited in the bank on 11.07.2012 as has been confirmed by the Ld. CIT(Appeals). The case of assessee is that this amount was deposited out of the funds available with the assessee as on 01.04.2012. In this context ld. AR has made out a case before us on the basis of Tribunal decision in A.Y. 2012-13 in ITA NO. 2814/ DEL/2018 order dated 21.02.2022 where it was held that assessee was having aggregate amount of Rs. 14,62,200/- during F.Y. 2011-12 out of which Rs. 11,72,000/- was deposited and thus, according to the finding of Tribunal a sum of Rs.2,90,200/- was available with the assessee as on 01.04.2012 out of which the impugned deposit of Rs. 1,00,000/- was made on 11.7.2012. Since the amount involved is not too large to be doubted that same may not be out of closing balance which stands approved judicial scrutiny, we consider the claim to be quite plausible and accept the same. The addition deserves to be deleted. Accordingly the grounds no. 3 and 4 are sustained. 11 ITA No. 1030/Del/2024 6. Ground Nos.7-8; These grounds relate to the addition of Rs. 27,00,000/- made by Ld. A.O. on the basis of page no. 47 of seized Document No. Al on the ground that payment of Rs. 27,00,000/- was made by the assessee from undisclosed source and this addition was confirmed by Ld. CIT(A). Now before us in PB at page 15 there is the copy of disputed document page no. 47 of seized document A-1 and it is quite apparent that document has some rough noting. It does not bear the name of the assessee and nothing has been brought on record by Ld. A.O that any property was purchased by the assessee or the payment was made by the assessee. The document lacks material details of any identifiable and enforceable transaction. Then at PB 18-26 is the statement of the assessee recorded at the time of search wherein at PB-24, assessee explained that this paper did not belong to him nor the paper was in his hand writing. Therefore, we are of considered view that the addition is on the basis of dumb document and contents required some material corroboration, which is absent. In absence of any evidence that assessee has purchased any property or any payment of Rs. 27,00,000/- was made, it was not justified on the part of the Ld. A.O to make the 12 ITA No. 1030/Del/2024 impugned addition. Same deserves to be deleted. The ground nos. 7 and 8 are sustained. 7. Ground nos. 9-10; These grounds relate to the addition of Rs. 3,42,970/- as Long Term Capital Gain on the sale of property by denying the indexation as to the cost of improvement of Rs.3,25,000/-. Appellant sold a shop in Ballabgarh for Rs. 38,00,000/-. Its cost of purchase has been accepted and indexation of that cost has been given. Before us relying PB page 37 the calculation of capital gain showing inter-alia the cost of improvement at Rs. 3,25,000/- and its indexation at Rs. 6,82,019/-, cost of improvement of Rs. 3,25,000/- as claimed on which also indexation was claimed, the ld. AR has submitted that Ld. A.O accepted the cost of improvement but has not allowed the indexation. Contention of the assessee is that when cost of improvement has been accepted there is no justification for Ld. A.O not to allow indexation of that cost of improvement. We are of the considered view that indexation follows the event of acquisition of assets or improvements made there in. Where the cost of improvement is accepted by the AO, as per the submissions of assessee then in the absence of anything to the contrary the same set of evidence should be basis to accept the 13 ITA No. 1030/Del/2024 plea as to when the expenditure on such improvements was made. There ought to be presumption that if one event of expenditure is correct then the timing or period in which such expenditure was made should be also accepted. Thus the findings of ld. Tax authorities below on rejecting indexation benefit on cost of improvements need to be set aside. Accordingly the ground nos. 9-10 are sustained. 8. Consequently the appeal of assessee deserves to be allowed and as the penalty order u/s 271AAA of the Act was on basis of aforesaid additions, which are no more sustainable, the appeal against the penalty order also deserves to be allowed. Both the appeals are allowed. Order pronounced in the open court on 25.02.2025. Sd/- Sd/- (S RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25th February, 2025 Mohan Lal Copy forwarded to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "