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ACIT Central Circle-13, New Delhi Vs. Sh. Kuldeep Rai Chawla, C-17, Nizamuddin East,New Delhi
September, 26th 2012
               IN THE INCOME TAX APPELLATE TRIBUNAL
                     DELHI BENCH: `D' NEW DELHI

     BEFORE SHRI G.D. AGRAWAL, HON'BLE VICE-PRESIDENT AND
               SHRI I.C.SUDHIR, JUDICIAL MEMBER

                           I.T.A. NO. 760/Del/2011

                          Assessment Year: 2007-08

ACIT                                                 Sh. Kuldeep Rai Chawla,
Central Circle-13,                    Vs.            C-17, Nizamuddin East,
New Delhi                                            New Delhi.
                                                     PAN: AADPC8728Q
(REVENUE)                                            (ASSESSEE)
                                AND

                        C.O. No.53/Del/2011
                    (In ITA No. 760/Del/2011)
                    Assessment Year: 2007-08
Sh. Kuldeep Rai Chawla,                              ACIT
C-17, Nizamuddin East,                               Central Circle-13,
New Delhi                                            New Delhi.
PAN: AADPC8728Q
(ASSESSEE)                                           (REVENUE)

            Revenue by: Shri D.K. Mishra, DR.
            Assessee by: Shri Rajkumar, CA
            Hearing on: 4/07/2012
            Order Pronounced on the Date: ...........



                                  ORDER

PER I.C.SUDHIR, JM:

      Parties have questioned the common first appellate order. The revenue

has questioned first appellate order on the following grounds:

      1.    "The order of the Ld. CIT (Appeals) is not correct in law
            and facts.
                                      2                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

      2.    On the facts and in the circumstances of the case, the Ld.
            CIT (A) has erred in law and facts in deleting addition
            towards unexplained investment in jewellery at
            Rs.26,31,990/- found during search whereas no
            explanation was furnished to explain source of
            investment in jewellery during the course of search and
            seizure operations under section 132 of Income Tax Act,
            1961 and evidence filed during assessment was after
            thought and could not be substantiated.

      3.    On the facts and in the circumstances of the case, the Ld.
            CIT (A) has erred in law and facts in deleting addition of
            unexplained income of Rs.10,73,000/- out of an addition
            of Rs.13,57,200/- towards unexplained cash found during
            search after admitting additional evidence under Rule
            46A."

2.     The assessee has raised following objection against the first appellate
order:
             "That under the facts and circumstances, there is no
             justification in law as well as on merits in holding cash of
             Rs.284200/- as unexplained and consequentially in
             making and sustaining the addition to that extent."

4.    The relevant facts are that search and seizure action u/s 132 of the Act

was carried out in Suresh Nanda Group of cases on 28.2.2007. The case of

the assessee was centralized by Commissioner of Income Tax vide order u/s

127 (2) of the Act. The assessee, a practicing lawyer, filed his return of

income declaring income of Rs.6,19,998/- on 27.2.2008 from profession.

The assessee had shown a receipt of Rs.8,62,511/- during the year. Against

this receipt the assessee claimed expenses of Rs.4,50,454/-. Thus net income

of Rs.4,12,057/- was shown from the profession. During the course of search
                                      3                  ITA No. 760/Del/2011
                                                       & C.O. No. 53/Del/ 2011

jewellery worth Rs.17,85050/- was found from the first floor of C-17,

Nizamuddin East, New Delhi and jewellery worth Rs.13,86,940/- was found

from the locker no. 480 Punjab National Bank, Nizamuddin West, New

Delhi. Regarding jewellery worth Rs.17,85,050/-, the assessee claimed it to

be of his wife who accumulated it since their marriage in 1967 as gift from

parents from both sides and relatives during the wedding. It was submitted

that the wife has filed her wealth tax return declaring the same jewellery.

Regarding jewellery worth Rs.13,86,940/- found in the locker, the assessee

explained that these jewellery belongs to him, which were inherited by him

after the demise of his mother late Smt. Chanan Devi alias Smt. Dhan Devi

wife of S. Girdhara Singh, who expired in the year 1988. The AO was not

convinced with the explanation. The AO as per the guidelines of Central

Board of Direct Taxes as well as status of the assessee treated the jewellery

being 600 gm worth around Rs.5,40,000/- at the time as explained.

Remaining jewellery valued at Rs.26,31,900/- was treated by him as

unexplained and added to the taxable income of the assessee under the

provisions of Section 69 of the Act. The Ld. CIT (A) has deleted this

addition against which revenue is in appeal.

5.    During the course of search proceedings cash of Rs.14,57,200/- was

found. The AO was not convinced with the explanation of the assessee
                                      4                 ITA No. 760/Del/2011
                                                      & C.O. No. 53/Del/ 2011

regarding the source of the amount and he made addition of Rs.13,57,200/-

as unexplained income of the assessee out of the cash amount after treating

income of Rs.1,00000/- from profession as explained on estimate basis. The

Ld. CIT (A) has treated Rs.10,73,000/- as explained and has deleted the

same while restricting the addition to Rs.2,84,200/- as unexplained. Parties

have questioned this action of the Ld. CIT (A).

6.    We have heard and considered the arguments advanced by the parties

in view of orders of the authorities below, material available on record and

the decisions relied upon.

Ground No. 1 (Department)

7.    The ground is general in nature, hence does not need independent

adjudication.

Ground No. 2 (Department)

8.    We have already discussed the basic facts on the issue wherein above.

During the course of search jewellery worth Rs.31,71,990/- was found. Out

of this jewellery worth Rs.17,85,050/- was found from the residential

premises of the assessee i.e. C-17, first floor, Nizamuddin East, New Delhi

and Rs.13,86,940/- was found from the locker no. 480, PNB, Nizamuddin

West, New Delhi. The AO was not satisfied with the explanation of the

assessee regarding the source of these jewellery and thus after treating the
                                      5                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

jewellery being 600 gm worth Rs.5,14,000/- at that time as explained as per

the guidelines of CBDT, he treated the remaining jewellery worth

Rs.26,31,900/- as unexplained. The Ld. CIT (A) has accepted the

explanation of the assessee regarding the source of the jewellery and has

deleted the addition of Rs.26,31,900/-.

9.    In support of the ground the Ld. DR has referred the contents of the

assessment order on the issue. He submitted that no evidence was furnished

by the assessee in support of his explanation of source of the above

jewellery. The assessee has tried to explain the jewellery worth

Rs.17,85,050/- as belonging to his wife accumulated since their marriage in

1967. The assessee explained the source as gift from parents of both the

sides and relatives during the wedding. In addition some jewellery were

claimed to have acquired during her married life from her agricultural

income. It was claimed that no jewellery was acquired from the year 2000 to

the date of search. The assessee also contended that his wife has filed while

tax return declaring the same jewellery. The Ld. CIT (A) has accepted this

explanation of the assessee without appreciating that the wife had filed her

wealth tax return declaring the jewellery after the date of search. The Ld. DR

in this regard cited decisions of Hon'ble Supreme Court in the case of ITO

Vs. Ch. Atchaiah 218 ITR 239 (Supreme Court)
                                     6                   ITA No. 760/Del/2011
                                                       & C.O. No. 53/Del/ 2011

10.   He submitted further that regarding the source of the jewellery valued

at Rs.13,86,940/- found in the locker, the explanation of the assessee

remained that he had acquired this jewellery from his mother through her

will. A reconciliation of the items of jewellery as per will and as per the

valuation report were also furnished to the AO. The explanation was

doubted by the AO in absence of evidence that his mother Smt. Chanan Devi

was having the means to acquire the said jewellery. The Ld. CIT (A) has

however accepted the explanation of the assessee without appreciating that

even source of source can be examined as per the following decisions:

            1. CIT Vs. Biju Patnaik. 160 ITR 674 (Orissa)

            2. ACIT Vs. Dhanalaxmi Steel Re-rolling Mills 57

               ITD 361(Hyd.)

            3. Pradip Kumar Loyalka Vs. ITO 63 ITD 87 (TM)

               (Patna)

11.   The Ld. AR on the other hand tried to justify the first appellate order

on the issue. He reiterated the submissions made before the authorities

below. He submitted that wealth tax assessment on the basis of return filed

by his wife declaring her jewellery was completed before the present

assessment of the assessee. Search was conducted at the residence of

assessee and his wife. The locker from where jewellery in question was
                                      7                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011




found was in the joint name of assessee and his wife. The jewellery

belonged to the assessee through will of his mother who died in the year

1988. The Ld. AR submitted that father of the assessee was having

agricultural income from 65 acres of agricultural land. He referred page nos.

22 & 23 of the paper book i.e. copies of original will and its English

translation. The will is duly executed by the mother of the assessee and

witnessed by 3 persons. At Page no. 24 of the paper book has been made

available the reconciliation of jewellery seized vis--vis will of the mother.

The Ld. AR submitted that the AO has not doubted the genuineness of the

will and he has not aspected the explanation of the assessee in this regard on

the basis that there was no evidence that mother of the assessee was having

sufficient source to acquire the said jewellery. The Ld. AR submitted that

the assessee cannot be accepted to explain the source of acquisition in the

hands of the deceased mother.

12.   Considering the above submissions we find that the Ld. CIT (A) has

deleted the addition in question on the basis that wife's jewellery had been

declared in her wealth tax return though filed after the date of search but

duly valued in her name during the search and assessed in her hands by the

wealth tax officer. The Ld. CIT (A) has noted further that while assessing

the same jewellery as an unexplained investment u/s 69 of the Act in the
                                      8                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

hands of the assessee, the AO has not been able to make out a valid case as

to how the same jewellery which has been valued in the wife's name and

assessed in her hands by the Department is now being held to be

unexplained investment in the hands of the husband/assessee. The Ld. CIT

(A) has accordingly treated the jewellery worth Rs.17,85,050/- as explained.

We find the first appellate order in this regard as reasoned one, hence no

interference is required thereto. The same is upheld.

13.   As regard the jewellery worth Rs.13,86,940/- claimed to have been

inherited from the mother and found in the bank locker, the Ld. CIT (A) has

treated the same as explained on the basis that AO was not justified in

questioning the source of the source. Undisputedly genuineness of the will

executed by the mother of the assessee who expired in the year 1988 has not

been doubted by the AO. Thus we fully concur with the finding of the Ld.

CIT (A) that the objection regarding source of acquisition in the hands of the

mother cannot become ground for addition of the same in the hands of the

assessee. In the worst case the matter could have been referred to the AO of

the late mother who would have the valid jurisdiction to examine the source

of acquisition in her hands. Under these facts we are of the view that the Ld.

CIT (A) was justified in deleting the addition of Rs.13,86,940/- while

accepting the explanation of the assessee in this regard. The first appellate
                                       9                ITA No. 760/Del/2011
                                                      & C.O. No. 53/Del/ 2011

order on the issue is thus upheld. In result ground no. 2 (Department) is

rejected.

Ground no. 3 (Department) & Objection (C.O.-Assessee)

14.   During the course of search cash of Rs.14,57,200/- was found. The

explanation of the assessee regarding the source of the said amount remained

as under:

Given to me by my brother Mr. S.C. Rs.10,00,000/-

Chawla, Director of M/s R.H. Agro

Overseas Pvt. Ltd for booking of a

property    (as   per   confirmation

enclosed)

Received from Consumer Forum on Rs.73,000/-

behalf of Mrs. Suchita Puri and

others in the case filed against M/s

Pushpa Builders

Savings lying with me over a period Rs.3,84,200/-

of 44 years of my active practice as

an Advocate and out of agricultural

income and other income of family

members.
                                     10                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

Total                                  Rs.14,57,200/-



15.     The AO did not agree with the above explanation of the assessee on

the basis that it is not supported by evidence. The AO however, estimated

Rs.1,00,000/- earned from the professional income and thus restricted the

unexplained income at Rs.13,57,200/- out of the cash found of

Rs.14,57,200/- during the search. After detailed discussion the Ld. CIT (A)

after considering the submission of the assessee and remand report of the

AO has accepted the explanation of the assessee regarding the source of

Rs.10,73,000/- (Rs.13,57,200/- (- ) Rs.2,84,200/-) as explained.

16.     Opposing the relief given by the Ld. CIT (A) at Rs.10,73,000/-, the

Ld. DR placed reliance on the assessment order. He submitted that the Ld.

CIT (A) has given relief of the above amount only on the basis of self

serving statement of the assessee. No evidence was furnished in support of

the explanation of the assessee. He submitted further that statement of the

assessee recorded during the course of search is also not reliable since there

was variation in the said statements. He placed reliance on the following

decisions:

        1. Bharti Telecom Finance Ltd. Vs. ACIT 296 ITR 249 (Del.)

        2. Ramjidas Jaini & Co. & Kuppuswami Vs. CIT 84 ITR 287 (Bom)
                                    11                  ITA No. 760/Del/2011
                                                      & C.O. No. 53/Del/ 2011

17.   The Ld. AR tried to justify the relief granted by the Ld. CIT (A). He

submitted further that the assessee had explained the source of the cash

seized and keeping in view the long standing practice of 44 years as an

Advocate by the assessee and his agricultural income, other income of

family members, the Ld. CIT (A) should have deleted the addition of the

entire amount of Rs.13,57,200/-. He submitted that the statement of the

assessee recorded during the course of search is a valuable piece of

evidence. There is consistency in the statements of the assessee explaining

the source of the cash, hence it has been rightly relied upon by the Ld. CIT

(A). The Ld. AR submitted that Rs.10,00,000/- was given by Sh. S.C.

Chawla who is brother of the assessee and Director of R.H. Agro Overseas,

(P) Ltd. for booking a flat for R.H. Agro. He submitted that during the

course of search in his statement recorded the assessee had stated that

Rs.10,00,000/- was given by his brother Sh. S.C. Chawla, on 26.7.2007 for

purchase of office of the company. In his statements Sh. B.L. Khurana of

R.H. Agro Overseas (P) Ltd. recorded on 18.11.2009 has affirmed the same.

He submitted that Sh. Khurana had appeared in response to summons issued

by the AO to the company on 13.11.2009. He referred statements of Sh.

Khurana made available at page no. 26 of the paper book. At page no. 25 of

the paper book has been furnished the copy of summons issued by AO to the
                                     12                   ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

company on 13.11.2009 and at page no. 27 of the paper book has been

placed certificate dated 16.3.2007 issued by the company. The Ld. AR also

referred page no. 28 to 47 of the paper book which are copies of cash

voucher dated 26.2.2007 of the company, ledger account of Sh. S.C. Chawla

in the books of the company, cash book of the company as on 26.2.2007,

PAN card of the company and audited balance sheet of the company i.e.

R.H. Overseas (P) Ltd. as on 31.3.2007. The Ld. AR submitted that assessee

is a practicing Advocate and on the date of search he was in active practices

for the last 44 years. He was having agricultural land and agricultural

income as well. The assessee had received Rs. 73,000/- on behalf of his

client Mrs. Suchita Puri in a case against Usa Builders Ltd. before National

Consumer Commission, a copy of order dated 6th March, 2006 of the

National Consumer Dispute Redressal Commission between M/s Puspa

Builders Ltd. and Mrs. Suchita Puri has been placed at page nos. 48 and 49

of the paper book. He submitted that the cash of Rs.73,000/- was found in an

envelop in the name of Mrs. Suchita Puri. These facts were also recorded in

the statements during search. In this regard he referred page no. 4 of the

assessment order.

18.   Regarding the addition of cash of Rs.2,84,200/- upheld by the Ld. CIT

(A), the Ld. AR explained that assessee was in active practice for 44 years as
                                      13                  ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

an Advocate and on the date of search, he was also having agricultural land

and agricultural income, hence there was no reason to disbelieve the

explanation of the assessee regarding saving of Rs.2,84,200/- of the assessee

and his family members.

19.   Considering the above submission and having gone through the orders

of the authorities below, we find that there was sufficient evidence, as

discussed above, to support the explanation of the assessee is regarding

receipt of Rs.10,00,000/- stated to be given to the assessee by his brother Sh.

S.C. Chawla for the purchase of an office of their company. The Ld. CIT

(A), in our view has thus rightly accepted this amount as explained.

Regarding the explanation of Rs.73,000/- claimed to have been received

from National Consumer Forum on behalf of Mrs. Suchita Puri in a case

filed against M/s Puspa Builders, we find from the memo of the order in the

revision petition filed before the National Consumer Dispute Redressal

Commission, New Delhi made available at page no. 48 & 49 of the paper

book that name of the assessee as an Advocate is appearing for the

respondent. These circumstantial facts support the explanation of the

assessee also in view that during the course of search the assessee had stated

that approximately Rs.75,000/- were received in account of Mrs. Suchita

Puri regarding Civil matter. His submission was that on disposal of the
                                      14                  ITA No. 760/Del/2011
                                                        & C.O. No. 53/Del/ 2011

matter before the Consumer Forum Rs.73,000/- were awarded which was

received by the assessee in the capacity of custodian / trustee to be delivered

to Mrs. Suchita Puri. It was also submitted that the cash was lying in a folder

which was of Suchita Puri in Consumer Forum matter and this cash was

lying therein to be delivered to her. Under this background the Ld. CIT (A)

in our view has rightly treated the amount of Rs.73,000/- as explained.

20.   So far as cash of Rs.2,84,200/- is concerned, the explanation of the

assessee remained that it was saving of the assessee over a period of 44

years of his active practice as an Advocate and out of agricultural income

and other income of family members. Submission of the assessee remained

that he owns approximately 9 acres of cultivable land in village Udaikemari

from which he gets substantial income from the agricultural operations

varying from Rs.2,50,000/- to 3,50,000/- from year to year depending upon

the type of crops and sale of the agricultural produce. This explanation of the

assessee was against Rs.3,84,200/- out of which the AO accepted the

estimated income of the assessee from practice and agricultural operations at

Rs.1,00,000/- as explained and remaining amount of Rs.2,84,200/- has been

added by him which has also been affirmed by the Ld. CIT (A). Looking

into the period of active practice as a lawyer for the last 44 years as on the

date of search and other income of family members from agriculture etc. we
                                      15                     ITA No. 760/Del/2011
                                                           & C.O. No. 53/Del/ 2011

are of the view that estimation made by the AO and Ld. CIT (A) is on very

lower side. We are of the view that it would be just and proper to estimate

Rs.3,00,000/- on account of the said professional income and other income.

We are thus direct the AO to restrict the addition at Rs.84,200/- in this

regard after excluding the estimated income at Rs.2,00,000/- out of

Rs.3,84,200/- as explained. The ground no. 3 (Department) of the appeal

preferred by the revenue is rejected and the objection raised in the cross-

objection filed by the assessee is partly allowed.

21.   Consequently appeal preferred by the revenue is dismissed and the

cross-objection filed by the assessee is partly allowed.

22.   Order pronounced in the open Court on the day of 21/09/2012.

                   Sd/-                              Sd/-
             G.D.AGRAWAL )                      (I.C.SUDHIR)
             VICE-PRESIDENT                   JUDICIAL MEMBER

Dated 21/09/2012
*AK VERMA*
Copy forwarded to:
1.     Appellant
2.     Respondent
3.     CIT
4.     CIT(Appeals)
5.     DR: ITAT


                                                     ASSISTANT REGISTRAR
 
 
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