$~43
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% DECIDED ON: 19.12.2017
+ ITA 1164/2017, CM APPL.46236/2017
PRINCIPAL COMMISSIONER OF INCOME TAX-18 ..... Appellant
Through: Mr. Zoheb Hossain, Sr. Standing Counsel.
versus
SHRI OM PRAKASH CHANDNA ..... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A.K. CHAWLA
S.RAVINDRA BHAT, J. (ORAL)
1. The question of law sought to be urged by the revenue in its
appeal under Section 260A of the Income Tax Act, 1961 is with respect
to the alleged error in setting aside the additions made by the Assessing
Officer ("AO") in the course of a search assessment under Section
158BC of the Income Tax Act, 1961.
2. The appellate Commissioner who considered the findings, made
essentially upon remand by the ITAT, set aside the addition of
`22,25,885/- attributed to the assessee. The AO had held that the
additions of the amount which was not hitherto disclosed by the assessee
was warranted because he had contributed in the purchase of a Lajpat
Nagar property (F-18, Lajpat Nagar-II, New Delhi) by his wife. Further
additions were made by the AO.
3. Search operations were conducted upon the assessee on
22.02.1996 leading to block returns. The initial assessments under
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Section 158BC were appealed against. Ultimately, the ITAT on
24.11.2003 remitted the matter after its initial decision was set aside by
this Court under Section 260 on 21.09.2007. The ITAT after remand
remitted certain issues for re-determination to the AO on 19.11.2007.
The issues pertained to the following: -
1. Addition of `36,80,855/- on account of investment in property
number F-18, Lajpat Nagar-II, New Delhi.
2. Addition of `83,96,785/- by adopting six percent as net profit
rate on the undisclosed turnover from these benami concerns
estimated by the AO at `13,99,46,424/-.
3. Addition of `70,49,757/- as alleged capital contribution in the
benami business units.
4. Income of Maruti Draw.
4. The AO after remand added a total amount of `1,00,95,347/-.
The assessee appealed to the CIT (A) with respect to substantially two
items i.e. investment in the property and initial capital in the benami
units. The ITAT further remitted the matter with respect to the
assessment vis-a-vis the property and the amounts added.
5. The CIT (A) restricted the additions to a minimal amount and
held as follows: -
"6. I have carefully considered the facts of the case, based on
the directions of the Hon'ble ITAT, remand report and
rejoinders submitted by the appellant. On careful
consideration, I find that on the first issue relating to
investment in the property at F-18, Lajpat Nagar-I, New Delhi,
the Hon'ble ITAT New Delhi vide their order dated
19.09.2008 had directed the AO to ascertain how much
amount has been contributed by the assessee for the cost of
construction of the house and then compute the undisclosed
investment in the house in the hands of the assessee and
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whatever the amount found and shown invested by the wife of
the assessee that has to be taken in the hand of the wife of the
assessee and not in the hand of the assessee as the wife of the
assessee is assessed to tax regularly. It is a matter of fact,
which I have verified that the Agreement to sell the same
property was duly registered in the name of the wife of the
appellant, Smt. Asha Chandana. There is no adverse
observation in this regard by the AO as well. No new facts
have been drawn by the AO to suggest whether the appellant
had contributed any consideration for purchase of this
property, though disclosed and undisclosed sources. In view
of this, keeping in view the fact that the property was duly
registered in the name of the wife of the appellant and there
was no evidence that the appellant had contributed towards it,
there was no cogent reason on the part of the; AO to have
made additions in the hands of the appellant in respect of
undisclosed investment in the property. The addition made,
therefore, is baseless and liable to be deleted.
6.2 On the 2nd issue regarding undisclosed investment in the
opening capital of the various Benami firms of the appellant
the Hon'ble ITAT had categorically directed as under: -
"The AO, is, therefore, directed to ascertain the
factual figure of undisclosed capital contribution on
the basis of opening of various bank accounts
relating to these three concerns."
Since the Hon'ble ITAT had separately considered the
undeclared sales, therefore, keeping in view the above
specific and categorically clear direction, it is evident that
the AO was directed to verify the figures relating to
amounts introduced for opening various bank accounts of
the three benami firms by the appellant. Under the
circumstances, the Ld. AO was requited to verify the
figures from the bank statements in respect of the above 3
benami firms. In view of this, the additions made by the
Ld. AO in respect of amounts over and above the amounts
introduced by the appellant in the bank while opening up
bank accounts are to be deleted. The Ld. Counsel has
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furnished bank statements before the AO and before this
authority. On careful consideration the amounts shown by
the appellant in the table below are found correct: -
Bank Name of the Date of Description Initial
A/c Bank opening Capital
1386 State Bank 06.11.95 By cash 5,000/-
of Patiala
15224 Bank of 06.05.95 By cash 5,000/-
Baroda
1111 Delhi 03.05.95 By cash 1,000/-
Nagrik
Sehkari
Bank
1913 Andhra 23.04.93 By cash 1,000/-
Bank
Therefore, the addition on this ground is restricted to that extant.
In view of this, appeal is allowed."
6. The CIT (A) also disagreed with the AO and set aside the findings
with respect to additions of `70,49,757/-. The ITAT was of the opinion
that so far as the additions made on account of payments attributable to
the assessee through his wife for an acquisition were concerned, the AO
took note of the fact that she was separately assessed to the income tax
and yet made the addition in the final decision. As far as the question of
addition of `70,49,757/- is concerned, the ITAT endorsed the view of
the CIT (A) who applied the rule of consistency - having regard to the
orders made in the case of Satish Kumar Chandna, the assessee's brother
and business partner/associates. The findings of the ITAT in this regard
are as follows: -
"25. In fact, identical addition of Rs.45,00,000/- had been set
aside in the case of brother of assessee Sh. Satish Kumar
Chandna wherein too the Assessing Officer after consideration
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the reply of the assessee dated 10.02.2010 (pages 321 to 323 of
paper book) and direction of the Tribunal of (extracted above in
para 4.2) held in order dated 07.05.2010 (pages 296 of paper
book) as under: -
"9 Initial capital contribution in benami business units:
The observations of ITAT vide order dated 19.09.2008 on
these issues are as under:
"In the present case as stated above, nothing has been found to
suggest that the assessee has made any capital contribution
towards the unrecorded sales. However, we are of the view that
opening capital in these three concerns cannot be said that the
same was put of profit or out of profit or out of sale proceeds.
Therefore, to that extent the capital has to be treated as
undisclosed. The assessing officer is, therefore, directed to
ascertain the factual figure of undisclosed capital contribution on
the basis of opening of various bank account relating to these
three concerns. Accordingly, this ground of the assessee is
allowed in part."
9.2 The assessee vide letter dated 10.02.2000 submitted the
opening balances of various bank accounts which are as under
and filed copies of these bank accounts:
Bank Name of the Date of Description Initial
A/c Bank opening Capital
106374 Allahabad 01.09.1995 By Cash 5,000/-
Bank
11123 Union Bank 14.06.1995 By Cash 2,000/-
of India
106293 Allahabad 05.04.1995 By Cash 1,000/-
Bank
15723 Bank of 16.08.1994 By Cash 5,000/-
Madurai
106314 Allahabad 04.05.1995 By Cash 2,500/-
Bank
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9.3 Therefore, by following the direction of the ITAT vide order
dated 19.09.2008 the initial capital contribution of the assessee in
the benami concerns taken at Rs.15,500/-."
26. In light of the aforesaid binding directions of the Tribunal
and, the order of assessment in the case of brother of the
appellant, addition made of Rs.70,49,757/- directed to be deleted
and is restricted to Rs.12,000/- (as directed by the Tribunal)
which too I covered by other addition made of Rs.8,19,905/- and
not disputed in this appeal.
27. With prejudice to the above, the assessee is admittedly a
whole seller in grey cloths and that, substantial transaction of
such turn over are recorded by him in his books, whereas other
transactions carried by him in the names of three concerns, for
the same business and conducted from the same stocks of supplies
have not been recorded. It was never a case of the assessee that
the assessee had made any investment for earning an aforesaid
income and such investment came to be made out his undisclosed
income. It is an admitted fact that, no evidence has been found as
a result of search that the assessee had made any such investment,
which has been estimated by the AO at Rs.70,49,757/-. It is an
admitted fact that, assessee has been carrying on business of
supply of grey cloth on wholesale basis. It is again an admitted
fact that the part of the supplies made, were unrecorded. It is
again an admitted fact, as in evident from the copy of an account
that, the supplies were obtained by the assessee on the basis of
credit and after the sale proceeds were received by the assessee
the amounts payable, were paid by the assessee to the suppliers.
In any case, there was substantial sufficient stocks in respect of
the stocks dealt by the assessee and were duly recorded in the
books of accounts. It was submitted that unless there is an
evidence found or is estimate any such an alleged investment,
which too is based on no basis. It was also submitted that the
entire addition made was based on hypothetical and surmise full
consideration based on no valid material and was merely
conjectural.
28. Also there is no basis to allege that the assessee had made
any investment purportedly as a capital contribution. It is a
ITA 1164/2017 Page 6 of 8
matter of record that the assessee was supplying the Grey Cloth
and was making payment only on the receipt of the sale proceeds
and that too at time even much later which is evident from the
copy of the bank accounts which shows as soon as the sales were
effected, monies were withdrawn either in case or by making the
payments by cheque to the suppliers. This is verifiable from the
bank statement which is on record.
29. It has been held by the Hon'ble Delhi High Court in its
order in the case of CIT v. Pradip Goyal in ITA No.651/2007
dated 20.05.2008 that where no evidence of investment is found in
respect of the undisclosed turnover and the assessee has been
carrying on the business in an unaccounted manner, no addition
of investment can be made. In this case also a search had been
conducted where in similar manner, the assessee has in various
bank account held in benami names deposited sale proceeds and
admitted that such unaccounted turnover in respect of sales
amounted to Rs.8 crore in the block period. He was finally
assessed by applying a rate of 1.5% as against 2.5 adopted by the
AO. The AO has made addition on account of undisclosed
investment of Rs.10 Lacs, which was reduced by VIT (Appeals) to
Rs.5 lacs and on the basis of theory of peak investment, the
Tribunal deleted the addition. On appeal the Hon'ble High Court
held that the Tribunal was correct in doing so as there was no
evidence found to that the assessee has made any such investment
and no addition can be made of any such amount. The Hon'ble
Allahabad High Court in the case of CIT v. Ashok Rastogi
reported in 100 CTR 204 wherein their Lordships in para 4 have
held that no addition can be made unless the assessee is found to
have made any investment. Reliance is also placed on the
following judicial pronouncements:
i) IT(SS)No.6/D/86 Dated 31.07.2002 Nihalsons Jewellers
Vs. Dy.CIT.
ii) IR (SS) No.87/Del/1997 dated 12.10.2000 M/s Kuwer
Fibers (P) Ltd. Vs. Dy.CIT"
7. This Court is of the opinion that the chequered history of the
litigation shows unanimity of one aspect: that the assessee's wife was
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separately assessed to income. She had declared the acquisition of the
property. She was the registered owner. No attempt was made on the
part of the revenue to add that income in her hands. Likewise in the case
of the other additions, findings are concurrent and rendered after
examination and analysis of the material evidence. Having regard to
these factual conclusions, the Court is of the opinion that no question of
law arises; the appeal is, therefore, dismissed.
S. RAVINDRA BHAT
(JUDGE)
A.K. CHAWLA
(JUDGE)
DECEMBER 19, 2017
/vikas/
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