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
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& 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
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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
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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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