Income Tax Appellate Tribunal - Lucknow
Mahesh Singh Patel, Lucknow vs Asstt. Commissioner Of Income Tax, ... on 15 March, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI. A. D. JAIN, VICE PRESIDENT
AND SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No.419 to 425/LKW/2014
Assessment Year:2003-04 to 2009-10
Shri Mahesh Singh Patel, ACIT
B-983, Mahanagar, Central Circle 1
Lucknow. Lucknow
TAN/PAN:AEDPP 6032
(Appellant) (Respondent)
Stay Application No.10 & 11/Lkw/2019
(in I.T.A. No.423 & 424/Lkw/2014)
Assessment year:2077-08 & 08-09
Shri Mahesh Singh Patel, ACIT
B-983, Mahanagar, Central Circle 1
Lucknow. Lucknow
TAN/PAN:AEDPP 6032 J
(Appellant) (Respondent)
Appellant by: Shri Rakesh Garg, Advocate
Ms. Sweta Mittal, FCA
Respondent by: Shri A. K. BAR CIT (DR)
Date of hearing: 25 02 2019
Date of pronouncement: 15 03 2019
ORDER
PER BENCH:
This is a group of seven appeals filed by the assessee against the consolidated order of the ld. CIT(A) dated 30/12/2011. These appeals were earlier dismissed ex-parte qua assessee vide Tribunal order dated 19/01/2016 but these were recalled for hearing on merits vide Tribunal order dated 27/04/2016.ITA No.390 to 396/LKW/2014 Page 2 of 55
2. At the outset, Learned counsel for the assessee invited our attention to the fact that there has been a delay of 10 days in filing the appeal. The assessee has submitted the condonation application dated 02/05/2018 duly supported by sworn in affidavit stating therein that the appellant responsible to file the appeal was suffering from pancreatitis infection and was not in a position to manage his office therefore, the appeal could not be filed in prescribed time. Medical certificate for the same was also enclosed. Learned A. R. prayed that Keeping in view the above facts, the delay of 10 days in filing the appeals may be condoned.
3. Learned D. R. had no objection to condonation of delay and therefore, keeping in view the facts and circumstances of the case, the delay was condoned and Learned A. R. was asked to argue on merits.
4. The assessee originally had taken a number of legal grounds along with grounds on merits, however, which were later on simplified and concise/revised grounds of appeals were filed vide letter dated 02/05/2018. All the appeals involve similar issues and these were heard together, therefore, for the sake of convenience, a common and consolidated order is being passed. For the sake of convenience concise/revised grounds of appeal taken by the assessee in assessment year 2003-04 are reproduced below:-
1. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing the order which is illegal, improper and against the principles of natural justice.
2. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing the order without giving adequate opportunity of being heard.
3. The Ld. Commissioner of Income-tax (Appeals)has erred in law and on facts in sustaining the addition u/s 69 of Income-tax Act on account of unexplained investment in the ITA No.390 to 396/LKW/2014 Page 3 of 55 following properties on the basis of report of Ld. Valuation Officer, which itself suffers from various infirmities:i. Plot No. 32, 49, 50, 52 & 53 and Khasra No. 46
situated at Gaura Bagh, Lucknow.
ii. M/s Megha Bajaj, 29 Sanjay Gandhi Puram, Faizabad Road, Lucknow.
iii. Plot No. 35, 45 and 46 & Khasra No. 45 situated at Gaurabagh, Kursi Road, Lucknow (1/2 share, other ½ share belonging to Smt. Anju Patel.) iv. Farm House, Chandrika Devi Road, Bakshi Ka Talab.
v. 5-ML/200, Vikas Nagar, Lucknow.
4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in not giving full benefit of amount surrendered by Shri K. N. Singh Patel,
5. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in not considering the expenditure incurred by the appellant between 01/04/2009 and date of inspection by the valuation officer.
6. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.28,00,000/- u/s 68 of the I.T. Act on account of non-genuineness of gift received by the minor children of the appellant through banking channel.
7. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.6,69,800/- u/s 69 of the I.T. Act on account of undisclosed investment in purchase of plots or land.
8. The learned CIT(A) has erred in law and on facts in not granting relief sought by the appellant in appeal.
9. The appellant craves leave to add, amend, alter or withdraw any ground of appeal or raise any new ground of appeal during the pendency of appeal.
5. Besides above grounds taken in assessment year 2003-04, the assessee has taken further grounds in succeeding years, which for the sake of completeness are reproduced below:
ITA No.390 to 396/LKW/2014 Page 4 of 55ASSESSMENT YEAR 2004-05:
6. The ld. CIT(A) has erred in law and on fats in sustaining the addition of Rs.9,00,892/- under section 68 of the Act on account non genuineness of gift received by the appellant through banking channel.
ASSESSMENT YEAR 2005-06:
6. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.1,86,100/- u/s 69 of the I.T. Act on account of undisclosed investment in purchase of plots or land.
7. The ld. A.R. of the assessee has erred in law and on facts in sustaining the addition of Rs.6,90,000/- under section 68 of the Act on account of undisclosed cash deposited in bank.
ASSESSMENT YEAR 2007-08
6. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.11,90,100/- u/s 69 of the I.T. Act on account of undisclosed investment in purchase of plots or land.
ASSESSMENT YEAR 2008-09
6. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.5,50,000/- u/s 68 of the I.T. Act on account of undisclosed cash deposited in bank.
ASSESSMENT YEAR 2009-10
6. The learned CIT(A) has erred in law and on facts in sustaining the addition of Rs.16,25,000/- u/s 69 of the I.T. Act and Rs.2,50,000/- u/s 69C of the I.T. Act."
6. The brief facts as noted in the assessment order in various years are that a search and seizure operation under section 132A of the Act was carried out on Harsingar Gutkha/Patel group of cases on 19/11/2008 and several commercial and residential premises of the assessee were covered under this operation. Simultaneously, survey ITA No.390 to 396/LKW/2014 Page 5 of 55 proceedings under section 133A of the Act were also carried out at many places belonging to the assessee group and its business associates. As a result of search/survey operations, various documents were seized/impounded, resultant to which the group as a whole agreed to surrender a sum of Rs.10 crores as undisclosed income/investment. The declaration to this effect was originally made by Shri O. N. Singh Patel, Shri Mahesh Singh Patel, Smt. Anju Singh and Smt. Anita Singh. Subsequently, on 25/2/2009 an affidavit was filed by Shri. K. N. Singh Patel, who is the head of the family, showing therein detailed declaration and head-wise amount of undisclosed income/investment. In the affidavit, Shri. K. N. Singh Patel owned up the whole surrender of Rs.10 crores and furnished details of assets/investments which were made by him during several years in the name of his family members, namely, Smt. Anju Singh, Shri Mahesh Singh, Smt. Rajni Patel, etc. The Assessing Officer during the assessment proceedings in the case of the assessee, required the assessee to prove and demonstrate the source of funds for making investment in various immoveable assets and in reply the assessee submitted that the investments in these assets were duly covered by the declaration of surrender made by Shri. K. N. Singh Patel. The reply of the assessee to this effect as reproduced by the Assessing Officer at page 19 of his order is reproduced below:-
1. Plot No. 36 at Gaurabagh, Kursi Road, Lucknow. Purchased on
07.04.2000 for Rs.1,68,200/-.
2. Plot No. 35 at Gaurabagh, Kursi Road, Lucknow. Purchased on 17.06.2002 for Rs.99,600/- vide demand draft no. 739252 dated 15.07.2002 for Rs.75,000/-.
3. Plot No. 45 at Gaurabagh, Kursi Road, Lucknow it is in the name of Smt. Anju Singh.
4. Plot No. 46 at Gaurabagh, Kursi Road, Lucknow. Purchased on 18.08.1999 for Rs.98,500/-.
5. Plot No. 66 A & 67 at Gaurabagh, Kursi Road, Lucknow. Purchased on 15.10.1999 for Rs.1,07,700/-.
ITA No.390 to 396/LKW/2014 Page 6 of 556. Plot No. 66 at Gaurabagh, Kursi Road, Lucknow. Purchased on 10.07.2002 for Rs.67,200/- vide demand draft no. 739196 dated 01.07.2002 for Rs.50,000/-.
7. Plot No. 32 at Gaurabagh, Kursi Road, Lucknow. Purchased on 09.11.2004 for Rs.83,100/- vide demand draft no. 191863 dated 08.11.2004 for Rs.60,000/-.
8. Plot No. 33 it is in the name of Shri Om Narain Singh Patel.
9. Plot No. 49 at Gaurabagh, Kursi Road, Lucknow. Purchased on 05.03.1999 for Rs.91,400/-.
10. Plot No. 50 at Gaurabagh, Kursi Road, Lucknow. Purchased on 05.03.1999 for Rs.75,000/-.
11. Plot No. 64 & 65 at Gaurabagh, Kursi Road, Lucknow. Purchased on 03.11.2004 for Rs.1,03,000/- vide demand draft no. 191821 dated 02.11.2004 for Rs.75,000/-.
12. Plot No. 34 at Gaurabagh, Kursi Road, Lucknow. Purchased on 19.06.1995 for Rs. 1,04,355/-.
13. Plot No. 29 at Sanjay Gandhi Puram Faizabad Road, Lucknow it is in the joint name of Mahesh Singh Patel and Anita Singh. Purchased on 27.07.2006 for Rs.23,23,100/- vide demand draft No.145447 dated 27.07.2006 for Rs.21,00,000/-.
14. Plot No. 53 3 at Gaurabagh, Kursi Road, Lucknow. Purchased on 24/05/1999 for Rs.45,000/-.
15. Plot No. 52 at Gaurabagh, Kursi Road, Lucknow. Purchased on 24/05/1999 for Rs.55,000/-.
16. Plot No.5/ML-200 Vikas Nagar, Sector-5, Lucknow. Purchased on 31/01/2004 for Rs.1,33,68,530/-. The payments were made to the U.P. Awas Awam Vikas Parishad on various dates between 29.05.2003 to 27.02.2007.
17. Property of B.N. College of Engineering and Technology. It is in the name of trust.
The assessee also informed investment made by him in two other properties: -
1. House no. 537/183, Purania, Sitapur Road, Lucknow. Purchased on 28.12.2006 for Rs.20,00,000/- vide cheques nos. 796308, 796309, 796310 and 796311 all dated 28.12.2006 for Rs.5,00,000/- each.
2. 604, Iradat Nagar, Daliganj, Lucknow purchased on 18.03.1993 for Rs.35,000/-."
The replies given by assessee and reproduced by Assessing Officer in his assessment order were similar in all years.
7. The Assessing Officer observed that assessee had made investment towards construction in various properties and therefore, he ITA No.390 to 396/LKW/2014 Page 7 of 55 referred the properties to the Valuation Officer. In the Valuation Report submitted by the Valuation Officer and in those estimated investments declared by the assessee, there were certain differences and, therefore, the Assessing Officer held that the valuation as done by the Valuation Officer will have to be taken into account and, therefore, he added the difference in cost of construction between the cost of construction declared by the assessee and estimated by the Valuation Officer. When the Valuation reports were confronted to the assessee, the assessee submitted that the investment made in assessment year 2002-03 cannot be taken into account, as the same was beyond the period covered under search. However, the Assessing Officer did not accept the contention of the assessee and instead he divided the amount of investment in assessment year 2002-03 into six years and added back the proportionate amount from assessment years 2003-04 to 2008-09. After taking into account all these factors, the Assessing Officer held that the assessee had made total investments in various years as under:-
A.Y. Total investment
during the year
2003-04 80,81,407
2004-05 47,84,980
2005-06 1,13,26,927
2006-07 2,65,14,935
2007-08 2,03,99,279
2008-09 1,08,30,373
2009-10 76,55,425
Total 8,95,95,326
ITA No.390 to 396/LKW/2014 Page 8 of 55
8. The Assessing Officer after noting down the investments made by the assessee on the basis of DVO's report and other adjustments, allowed the benefit of declaration made by Shri. K. N. Singh Patel during the respective assessment years. The respective assessment years for which Shri. K. N. Singh Patel had made surrender in the name of the assessee and as considered by the Assessing Officer are as under:-
(i) In assessment year 2003-04, the Assessing Officer has held the investment to the tune of Rs.99,77,772/-, out of which he allowed the relief on account of surrender made by Shri. K. N. Singh Patel to the extent of Rs.11,00,000/- and, therefore, made a net addition of Rs.69,81,407/-.
(ii) Similarly, in assessment year 2004-05, the Assessing Officer made an addition of Rs.47,84,980/- and did allow full relief on account of declaration made by Shri. K. N. Singh Patel, as in that year the surrender was to the tune of Rs.70 lacs.
(iii) Similar is the finding in assessment year 2005-06 wherein against the investment of Rs.11,32,692/-, the Assessing Officer did not allow any relief on account of surrender made by Shri. K. N. Singh Patel by holding that the amount surrendered by Shri K.N. Singh Patel in this year in the name of Anju Singh was Nil.
(iv) During assessment year 2006-07, again the Assessing Officer did not allow any relief on the same ground and made the addition to the extent of Rs.2,65,14,935/-.
(v) Same was the position in assessment year 2007-08.
(vi) However, during assessment year 2008-09, the Assessing Officer held that the investment made by the assessee was Rs.1,08,30,373/- against which Shri. K. N. Singh Patel had surrendered an amount of Rs.50,00,000/-, therefore, he made addition to the extent of Rs.58,30,373/-.
(vii) During the assessment year 2009-10, again the Assessing Officer did not make any addition by holding that the surrender made by Shri. K. N. Singh Patel was more than the amount of investment assessed in the hands of the assessee.ITA No.390 to 396/LKW/2014 Page 9 of 55
9. All these facts noted together reflect that the Assessing Officer during these years though gave credit for the surrender made by Shri. K. N. Singh Patel wherein the surrendered amount was more than the investment made by the assessee, but, in the process, he ignored the excess surrender made by Shri. K. N. Singh Patel for these years. On the other hand, whereas as per Valuation Report, the assessee had made investment in a particular year which was not covered by the surrender of Shri K.N. Singh in that year he made the addition. This is what the grievance of the assessee is whereby it is aggrieved that the Assessing Officer and the ld. CIT(A) should have taken a holistic view of the issue and should have considered the entire surrender amount with respect to the declaration made by Shri K. N. Singh in the case of assessee irrespective of difference in years.
9.1 Besides the above main addition, the Assessing Officer further made the following additions in various years:
Assessment year 2003-04
1. Addition u/s 69 for purchase of plots 1,66,800 No.35 & 36
2. Addition u/s 69 for purchase of plot 5,03,000 on Khasra No. 305 and others
3. Addition u/s 68 being gifts received 10,00,000 from Santosh Agarwal, D.K. Agarwal
4. Addition u/s 68 being gift received 8,00,000 from Puneet Gupta
5. Addition u/s 68 being gift received 10,00,000 from Ankur Goel, Sandeep Agarwal and D. K. Agarwal Assessment year 2004-05
1. Addition u/s 68 being gift received 9,00,892 from Sarad Agarwal Assessment year 2005-06 ITA No.390 to 396/LKW/2014 Page 10 of 55
1. Addition u/s 69 being investment in 1,86,100 Plot No. 32,64 and 65
2. Addition u/s 68 being amount 6,90,000 deposited in saving bank account No. 9612 with Allahabad Bank Assessment year 2007-08
1. Addition u/s 69 being investment in 11,90,100 plot No.29 and house No.537/183 Assessment year 2008-09
1. Addition u/s 68 being amount 5,50,000 deposited in Allahabad bank Assessment year 2009-10
1. Addition u/s 68 being deposits in 16,25,000 bank account
2. Addition on account of house hold 2,50,000 expenses
10. On appeal before the ld. CIT(A), the ld. CIT(A) deleted part additions made by the Assessing Officer which were made by the Assessing Officer in various six years starting from assessment year 2003-04 and which was based on the investments made before assessment year 2002-03 by holding that the investment made before assessment year 2002-03 were not covered by the search period and, therefore, the action of the Assessing Officer in dividing the investment of assessment year 2002-03 into six parts and allocating the same to six assessment years was not justified and, therefore, he deleted the same. The ld. CIT(A) also allowed relief to the assessee by ignoring the Valuation Report estimates where the difference between declared value and valuation report was less than 15%. However, he upheld the addition on the basis of valuation reports wherever the difference was more than 15%.
ITA No.390 to 396/LKW/2014 Page 11 of 5511. For the sake of convenience, the year-wise findings of the ld. CIT(A) are reproduced below:-
Assessment year:2003-04 3.7.3 I have considered the submission made. The assessee was found to have invested in land from June 95 onwards, and in the properties under reference, investment in land was made from March 1999 onwards.
Thus, it cannot be outrightly rejected that no construction was made in the earlier years, more so when in respect of all other years, the Assessing Officer has accepted the version of the assessee regarding investment being made, subject to the report of the DVO. The Assessing Officer is justified in not considering the investment claimed to be made subsequently. The assessee has shown investment in various years and even in assessment year 2008-09 investment in building at Plot Nos. 32. 49. 50. 52, 53 and Khasra No. 46, Gaura Bagh, Kursi Road, Lucknow has been shown at Rs.36,32,557/- by the assessee himself. No evidence was apparently found in the course of the search that the construction had not taken place in the earlier years as claimed, but took place in the subsequent years. Even the claim of investment made in all the other years has been accepted by the Assessing Officer subject to variation as per the valuation report. Even the DVO has estimated the value in the years as claimed by the assessee without giving any contrary finding. The Assessing Officer has himself mentioned that the value estimated by the Valuation Officer is being taken as the final value of the building in their respective years in which it has been found by the Valuation Officer as such and no relief in the cost of construction can be provided to the assessee at this stage of the proceedings. Once the Assessing Officer has accepted the value estimated by the Valuation Officer in various years and has also accepted the investment made by the assessee in the years relevant to the assessment years for which the proceedings were pending before him, there does not appear any justification for not accepting the investment made in the earlier years as no evidence has been brought on record in support of the claim that no investment was made in the assessment years prior to assessment year 2003-04 as claimed by the ITA No.390 to 396/LKW/2014 Page 12 of 55 assessee. Thus, spreading over the investment of earlier years by the Assessing Officer in respect of properties being building at Plot Nos. 32, 49, 50, 52, 53 and Khasra No. 46, Gaura Bagh, Kursi Road, Lucknow and building at Plot No. 35, 45 & 46, Khasra No. 45. Gaura Bagh, Kursi Road, Lucknow is not justified and the unexplained investment in various years shall be estimated by considering the valuation as made by the Valuation Officer in the respective years. Further, it has been held in Income-tax Officer v. Ram Nath Agganval [2004] 2 SOT 471 (ITAT ASR. Bench)(SMC) that the valuation of an asset is not an exact science. Mathematical calculation is not possible. The valuation of the immovable property is also estimated on the basis of the facts and circumstances. Therefore, it could not be said that whatever the Valuation Officer had stated was final word in the matter. The word 'estimate' itself suggests that there is always possibility of some amount of inaccuracy and uncertainly. It was, therefore, obvious that report of the Valuation Officer could not be held as true and correct. There is always a room for error or omission. The Commissioner (Appeals) was justified in allowing 10 per cent relief on account of difference of opinion.
Keeping in view the entire facts of the present case, the Commissioner (Appeals) had correctly decided the issue and, therefore, there was no reason to interfere with his order.
In the appeal was to be dismissed.
3.7.4 In the case of Bimla Singh v. CIT [2009] 308 ITR 71 /222 CTR (Pat.) 404 during search it was found that the assessee had made huge investments in house property. According to the assessee they had invested a sum of Rs.11,15,000/- in construction of the house but according to the report of the valuer, cost of construction was Rs.12,99,700/-. It was held that in valuation of the house property bona fide difference is bound to occur. In the absence of any statutory provision, no hard and fast rule can be laid down in regard to the percentage of difference which can be ignored. The difference between the assessee and the valuer was less than 15 per cent. Not only this, the construction of the house was spread over a period of 7 years. In the facts of the present case the ITA No.390 to 396/LKW/2014 Page 13 of 55 difference between the plea of the assessee on the issue on investment on home property and valuer's report was so meagre that one could assume it to be bona fide difference fit to be ignored.
3.7.5 Hence, as the difference in the revised estimate made by the Valuation Officer and that claimed by the assessee works out to less than 15% in respect of the three buildings, and valuation is only an estimate, therefore, in view of the decisions relied upon by the appellant and those mentioned above, the same shall be ignored for computing the unexplained investment and the investment shown by the assessee in respect of building at Plot Nos. 32, 49, 50, 52, 53 and Khasra No. 46, Gaura Bagh, Kursi Road, Lucknow. building at M/s Megha Bajaj, 29-Sanjay Gandhi Puram, Faizabad Road. Lucknciw, and building at Plot No. 35, 45 & 46, Khasra No. 45, Gaura Bagh, Kursi Road. Lucknow shall be adopted for various years in place of estimate made by the Assessing Officer. In the years in which the credit can be given for investment made by Shri K. N. Singh Patel, as done by the Assessing Officer, the required credit shall be given. Hence, the investment made by the assessee during various years (in Rupees) is recomputed as under:
A.Y. Investment in value of property at: Total Plot No.32,49, M/s Megha Farm House, 5-ML/200, investment 50,52,53 and Bajaj, 29- Chandrika Vikas Nagar, during the Khasra No.46, Sanjay Gandhi Devi Road, Lucknow (as year Gaura Bagh (as Puram, Bakshi Ka estimated by shown by the Faizabad (as estimated the valuation assessee Road, (as by the officer) shown by the valuation assessee) officer) 2001-02 6284300 6284300 2002-03 4960000 4960000 2003-04 262000 Nil 4811438 5073438 2004-05 180000 Nil 2568068 2748068 2005-06 195000 Nil 9103144 9298144 2006-07 235500 5540000 18329541 24105041 2007-08 273300 4424520 13390602 18088422 2008-09 200000 4000000 2504685 6704685 1009-10 3409900 1500000 691099 5600999 Total 16000000 15464520 7379506 44019071 82863097 ITA No.390 to 396/LKW/2014 Page 14 of 55 3.7.6 Similarly, the share of the assessee in the building at Plot No. 35, 45 & 46, Khasra No. 45, Gaura Bagh, Kursi Road. Lucknow is taken as that shown by the assessee himself and assuming 50% share of the appellant, as the difference in the estimate of the DVO and the investment shown by the assessee works out to 10.22% and can be ignored:
TABLE -B A.Y. Total Share of investment Shri as shown Mahesh by the Singh assessee Patel 2002-03 1750000 875000 .2003-04 2030000 1015000 2004-05 276800 138400 2005-06 258000 129000 2006-07 275000 137500 2007-08 225000 112500 2008-09 3578200 1789100 Total 8393000 4196500 3.7.7 The total investment (in Rs) in various years accordingly works out as under:
TABLE - C A.Y; Investment Investment Total as per as per investment Table-A Table-B during the year 2001-02 6284300 6284300 2002-03 4960000 875000 5835000 2003-04 5073438 1015000 6088438 ITA No.390 to 396/LKW/2014 Page 15 of 55 2004-05 2748068 138400 2886468 2005-06 9298144 129000 9427144 2006-07 24105041 137500 24242541 2007-08 18088422 112500 18200922 2008-09 6704685 1789100 8493785 2009-10 5600999 NIL 5600999 For the year under consideration, the total investment is recomputed at Rs.6088438/- in place of Rs.8081407/- computed by the Assessing Officer and after allowing credit for a sum of Rs.1100000/- as done by the Assessing Officer, the addition is reduced to Rs.4988438/- in place of Rs.6981407/- made by the Assessing Officer resulting into consequential relief and grounds no. 5, 6 and 7 are partly allowed.
3.8 Grounds no. 8, 9 and 10 are relating to the gifts aggregating to Rs.28,00,000/- received by the minor children of the appellant. The Assessing Officer has observed as under tor making the addition:
During the course of search proceedings, an inventory of bank account found at the residence of the assessee was made. A copy of this inventory was provided to the assessee and he was asked to explain the credit entries in these bank accounts. These bank accounts included a savings bank account no. 12327 with O.B.C., Aliganj in the name of Somya Singh U/G of Shri Mahesh Singh. Somya Singh is minor daughter of Shri Mahesh Singh and this account is also operated by Shri Mahesh Singh. In this account, the following credit entries were seen:
Date Amount
------------ --------------
11/03/2003 2,50,000
11/03/2003 2,50,000
ITA No.390 to 396/LKW/2014 Page 16 of 55
22/03/2003 5,00,000
--------------
Total 10,00,000
--------------
The assessee has stated that these amounts were gifts received from Santosh Agarwal (Rs.2,50,000/-, Sanjeev Agarwal (Rs.2,50,000/-) and D.K. Agarwal (Rs.5,00,000/-). There confirmatory certificates and copies of ITR has been submitted in support. However, copies of bank account of none of these persons have been provided. Therefore, only the identity of the person is proved and the creditworthiness and genuineness of the transaction is not proved. As such this amount of Rs.10,00,000/- remains unexplained credit entry in the bank account of the assessee. Accordingly, this amount of Rs.10,00,000/- is added to the total income of the assessee u/s 68 of the I.T. Act. 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initialed separately for this default. (Addition: Rs.10,00,000/-) During the course of search proceedings, an inventory of bank account found at the residence of the assessee was made. A copy of this inventory was provided to the assessee and he has asked to explain the credit entries in these bank accounts. These bank accounts included a savings bank account no.9900 with O.B.C., Aliganj in the name of Rajat Singh Paiel U/G of Shri Mahesh Singh. Rajat Singh Patel is minor son of Shri Mahesh Singh and this account is also operated by Shri Mahesh Singh. In this account, the following credit entries were seen:
Date Amount
------------ ----------------
23/10/2002 3,50,000
23/10/2002 4,50,000
----------------
Total 8,00,000
----------------
The assessee has slated that these amounts were gifts received from Punit Gupta (Rs.8,00,000/-). His ITA No.390 to 396/LKW/2014 Page 17 of 55 confirmatory certificate and copy of ITR has been submitted in support. However, copy of bank account of Shri Punit Gupta has not been provided. Therefore, only the identity of the person is proved and the creditworthiness and genuineness of the transaction is not proved. As such this amount of Rs.8,00,000/- remains unexplained credit entry in the bank account of the assessee. Accordingly, this amount of Rs.8,00,000/- is added to the total income of the assessee u/s 68 of the I.T. Act, 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default. (Addition, Rs.8,00,000/-) During the course of search proceedings, an inventory of bank account found at the residence of the assessee was made. A copy of this inventory was provided to the assessee and he was asked to explain the credit entries in these bank accounts. These bank accounts included a savings bank account no. 9920 with O.B.C., Aliganj in the name of Megha Singh U/G of Shri Mahesh Singh. Megha Singh is minor daughter of Shri Mahesh Singh and this account is also operated by Shri Mahesh Singh. In this account, the following credit entries were seen:
Date Amount
11/03/2003 2,50,000
11/03/2003 2,50,000
22/03/2003 5,00,000
10,00,000
The assessee has stated that these amounts were gifts received from Anshu Goyal (Rs.2,50,000/-), Sandeep Agarwal (Rs.2,50,000/-) and D.K. Agarwal (Rs.5,00,000/-). There confirmatory certificates and copies of ITR has been submitted in support. However, copies of bank account of none of these persons have been provided. Therefore, only the identity of the person is proved and the creditworthiness and genuineness of the transaction is not proved. As such this amount of Rs.10,00,000/- remains unexplained credit entry in the bank account of the assessee. Accordingly, this amount of Rs.10,00,000/- is ITA No.390 to 396/LKW/2014 Page 18 of 55 added to the total income of the assessee u/s 68 of the I.T. Act. 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default. (Addition, Rs.10,00,000/-) 3.8.1 During the course of the appeal, vide written submission filed, the appellant has submitted in this regard as under:
(a) Gifts aggregating Rs.27,00,892/-: As stated earlier, no incriminating material with regard to the gifts received by the appellant, was found during the course of search and seizure action. Therefore, no addition could be made on this issue. In any case, the appellant had submitted affidavits of the donors during the course of assessment proceedings duly accompanied by relevant information and material. On a due consideration of the same, no addition as has made by the Assessing Officer was called for.
3.8.2 I have considered the submission made. The Assessing Officer has given ample justification for the additions made as the creditworthiness of the donors had not been established. Even in the course of the appeal it has not been explained as to what the occasion for the gifts was and how the donors were related. It has been held in CIT v. Anil Kumar [2008] 167 Taxman 143 (Delhi) that in the case of cash gifts recorded in the books of the donee, mere identification of the donor and showing the movement of the amount through banking channels is not sufficient to prove the genuineness of the gift. The onus lies on the donee not only to establish the identity of the donor but also the donor's capacity to make such a gift. Where there was nothing on record to show as to tit what was the financial capacity of the donors, (ii) what was the creditworthiness of the donors, (Hit what was the kind of relationship the donors had with the donee-assessee, (iv). what are the source of funds gifted to the assessee, and
(v) whether the donors had the capacity of giving large amount of gift to the assessee, (he Tribunal would not be ITA No.390 to 396/LKW/2014 Page 19 of 55 justified in deleting the additions made by the Assessing Officer, especially when the assessee did not appear in person before the Assessing Officer despite being asked to do so. Further, it has been held in Jaspal Singh Vs CIT (P&H) 290 ITR 306 that the burden of proof is on assessee to establish that donor had means and gift was genuine, for natural love and affection. Hon'ble Apex Court in CIT Vs P. Mohankala 291 ITR 278 (SC) have also held similar views. Hence, on the facts as stated, the Assessing Officer was justified in making the addition us the appellant had fulled to discharge the onus which lay upon him and these grounds of appeal are hereby rejected.
3.9 Grounds no. 11 and 12 are against the addition of Rs.669800/- on account of undisclosed investment in the purchase of plots. The Assessing Officer has observed as under for making the addition.
A perusal of documents seized during the course of search/survey proceedings revealed that the assessee was owner of several immovable properties. In order to examine the total investment made by the assessee in various immovable properties the following query was made from him vide notice it's 142(1) dated 04.08.2010: -
"1. During the course of examination of seized documents, investment in the following properties in your name has come to the knowledge:-
I. Piot no. 36, 35, 45, 66A, 67, 66, 65B, 32, 49, 50, 52, 53, Khasra 46, 33, 34, 64, and 65 situated at Gaurabagh, Zahirpur. Lucknow. II. Plot no. 29, Sanjay Gandhi Purum, Faizabad Road, Lucknow.
III Plot No. 10/CP-05. Vikus Nugar, Lucknow IV. Properly at B.N. College of Engineering and Technology, Nabikot Nandana , Rudahi, Bakshi Ka Talab, Sitapur Road, Lucknow.
V. Farm House at Chandrika Devi Road, Bakshi Ka Talab, Lucknow ITA No.390 to 396/LKW/2014 Page 20 of 55 In this connection you are hereby required to furnish following details: -
(i) Details of total investments made by you in each property, including investment in purchase of land. Submit copies of purchase deeds of each property. Please also provide copies of valuation report, if any.
(ii) Submit details of mode of payments (including date and cheque numbers) made for the above investments.
(iii) Evidence in support of source of investment of each of these investments.
(iv) Whether the transactions are duly recorded in the regular books of accounts and duly shown in the IT Returns filed with the Department.
(v) In case, the investment is funded through
secured loans, submit complete
documentary proof of the loan
disbursement.
(vi) In case, the investment is funded through
unsecured loans raised by you, submit
complete addresses, confirmation,
complete copy of IT Returns of persons
and copy of Bank Statements of each
person from whom the loan is taken, as
documentary-proof.
2. In case you own any immovable
property/properties other than those mentioned above, full details as per points (i) to (vi) as enumerated above, may be furnished in respect of those property/properties also.
The reply to this query was furnished by the assessee vide letter dated 08.09.2010. The details of various investments were explained by him as under: -
1. Plot No. 36 at Gaurabagh, Kursi Road, Lucknow.
Purchased on 07.04.2000 for Rs.1,68,200/-.
ITA No.390 to 396/LKW/2014 Page 21 of 552. Plot No. 35 at Gaurabagh, Kursi Road, Lucknow. Purchased on 17.06.2002 for Rs.99,600/- vide demand draft no. 739252 dated 15.07.2002 for Rs.75,000/-.
3. Plot No. 45 at Gaurabagh, Kursi Road, Lucknow it is in the name of Smt. Anju Singh.
4. Plot No. 46 at Gaurabagh. Kursi Road, Lucknow. Purchased on 18.08.1999 for Rs.98,500/-.
5. Plot No. 66 A & 67 at Gaurabagh, Kursi Road, Lucknow. Purchased on 15.10.1999 for Rs.1,07,700/-.
6. Plot No. 66 at Gaurabagh, Kursi Road, Lucknow. Purchased on 10.07.2002 for. Rs.67,200/- vide demand draft no. 739196 dated 01.07.2002 for Rs.50,000/-.
7. Plot No. 32 at Gaurabagh, Kursi Road, Lucknow. Purchased on 09.11.2004 for Rs.83,100/- vide demand draft no. 191863 dated 08.11.2004 for Rs.60,000/-.
8. Plot No. 33 it is in the name of Shri Om Narain Singh Patel.
9. Plot No. 49 at Gaurabagh, Kursi Road, Lucknow. Purchased on 05.03.1999 for Rs.91,400/-.
10. Plot No. 50 at Gaurabagh, Kursi Road, Lucknow. Purchased on 05.03.1999 for Rs.75,000/-.
11.Plot No. 64 & 65 at Gaurabagh, Kursi Road, Lucknow:
Purchased on 03.1 1.2004 for Rs.1,03,000/- vide demand draft no. 191821 dated 02.11.2004 for Rs.75,000/-.
12.Plot No.34 at Gaurabagh. Kursi Road, Lucknow. Purchased on 19.06.1995 for Rs.1,04,355/-.
13.Plot No. 29 at Sanjay Gandhi Puram Faizabad Road, Lucknow it is in the joint name of Mahesh Singh Patel and Anita Singh. Purchased on 27.07.2006 for Rs.23,23,100/- vide demand draft no. 145447 dated 27.07.2006 for Rs.21,00,000/-.
14.Plot No. 53 at Gaurabagh, Kursi Road, Lucknow. Purchased on 24.05.1999 for Rs.45,000/-.
15.Plot No. 52 at Gaurabagh. Kursi Road. Lucknow, Purchased on 24.05.1999 for Rs.55,000/-.
16.Plot No. 5/ML-200 Vikas Nugar, Sector-5, Lucknow. Purchased on 31.01.2004 for Rs.1,33,68,530 -. The payments were made to the U.P. Awas Awam Vikas Parishad on various dales between 29.05.2003 to 27/02/2007.
17.Property of B.N. College of Engineering and Technology. It is in the name of trust. The assessee also informed investment made by him in two other properties: -
ITA No.390 to 396/LKW/2014 Page 22 of 551. House no. 537/183, Purania, Sitapur Road, Lucknow.
Purchased on 28.12.2006 for Rs.20,00,000/- vide cheques nos. 796308, 796309, 796310 and 796311 all dated 28.12.2006 for Rs.5,00,000/- each.
2. 604. Iradat Nagar, Daliganj Lucknow purchased on 18.03.1993 for Rs.35,000/-.
The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:
(i) Plot No. 35 purchased for Rs.75,000/- by the way of demand draft and stamp duty amounting to Rs.24,600/-. A perusal of bank account reveals that no such payments have been made from this bank account. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I.T. Act, 1961.
(ii)Plot AD 66 purchased for Rs.50,000/- by the way of demand draft and stamp duty amounting to Rs.17,200/-. A perusal of bank account reveals that no such payments have been made from this bank account. This amount has, therefore, been paid out of the undisclosed income of the assessee and is therefore, added to his total income u/s 69 of the I.T. Act, 1961 Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs.1,66,800/- which is being added to the total income of the assessee u/s 69 of the I.T. Act. 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initialed separately for this default. (Addition, Rs.1,66,800/-) It is also seen that during the year under consideration, the assessee has purchased two more properties on which the farm house at Chandrika Devi Road has been constructed by him. The details of these properties are as under:
1. Khasra No. 305, purchased for Rs.50,000/- and stamp duty of Rs.4,000/- on 10.12.2002. No source of this purchase has been informed by the assessee. This amount has, therefore, been paid out of the undisclosed income of ITA No.390 to 396/LKW/2014 Page 23 of 55 the assessee, and is, therefore, added to his total income us 69 of the I T. Act. 1961.
2.Various khasra numbers purchased for Rs.4,00,000/- and stamp duty of Rs.49,000/- on 10.12.2004. No source of this purchase has been informed by the assessee. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I.T. Act. 1961.
Therefore, the total undisclosed invesnnenl in respect of cost of acquisition of above properties is Rs.5,03,000/- which is being added to the total income of the assessee u/s 69 of the I.T. Act. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default. (Addition"Rs.5,03,000/-) 3.9.1 During the course of the appeal, vide written submission filed, the appellant has submitted in this regard as under:
(a) Investment in purchase of properties: The said investment is wholly covered by the withdrawals from the bank account of the appellant and information to that effect had duly been given during the course of assessment proceedings.
3.9.2 I have considered the submission made. As the Assessing Officer has given adequate justification for making the addition and during the course of the appeal, the appellant has not furnished any evidence to controvert the finding of the Assessing Officer nor the details of bank account have been furnished, therefore, the addition made is hereby confirmed and these grounds of appeal are rejected.
3.10 Ground no. 13 summarizes the additions made and the same are stated to be beyond the scope of the assessment made under section 153A. In view of the findings made in respect of specific additions made, this ground of appeal is rejected as in the assessment under section 153 A of the I.T. Act, 1961 the total income has to ITA No.390 to 396/LKW/2014 Page 24 of 55 be computed, which has been done by the Assessing Officer.
3.11 In view of the above, the appeal for A.Y. 2003-04 is partly allowed."
Assessment year 2004-05 "4.1 Grounds no. 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1. 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.
4.2 Grounds no. 6, 7 and 8 relate to the addition of Rs.9,00,892/- made on account of gift received from Shri Sharad Agarwal, a non-resident. (Ground no. 5 is not mentioned). The Assessing Officer has observed as under for making the addition:
During the course of search proceedings, an inventory of bank account in the case of assessee was prepared. A copy of this inventory was provided to the assessee and he was asked vide notice u/s 142(1) dated 19.11.2010 to provide explanation of entries in the bank account along wvith supporting evidences of deposits in these bank accounts. A summary of these accounts has been provided by the assessee. It is seen that on 27.10.2003, there is a credit entry for amount of Rs.9,00,892/-. In support of this credit entry, the assessee has submitted a of letter of one Shri Sharad Agarwal which slates that this amount has been provided us gift to Shri Mahesh Singh Palel by Shri Sharad Agarwal. A copy of passport of Shri Sharad Agarwal has also been enclosed which suggests that he is a nonresident Indian. It is seen that Shri Mahesh Singh Patel has no relationship with Shri Sharad Agarwal and in the absence of any relationship, how and why this gift has been given is not clear. Moreover, the assessee has not provided any documentary evidences to prove the creditworthiness of Shri Sharad Aganml. It is not known as to what are his sources of income and whether he is assessed to tax in India or not. Thus only the identity of the person is established and the creditworthiness of the person and the genuineness of ITA No.390 to 396/LKW/2014 Page 25 of 55 the transaction is not established. As such this amount of Rs.9,00,892/- added to the total income of the assessee u/s 68 of the I. T. Act, 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and therefore penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default.
(Addition, Rs.9,00,892/-) 4.2.1 During the course of the appeal also no further evidence has been filed by the assessee regarding the source of the gift or the creditworthiness of the donor. Even the occasion for the gift has not been mentioned. Hence, in view of the findings made in para 3.8.2 on similar issue, these grounds of appeal an rejected.
4.3 Ground no. 9 is rejected in view of the findings in para 3.10.
4.4 Grounds no 10 and 11 arc general in nature and do not require any separate adjudication.
4.5 In the result, the appeal is dismissed."
Assessment year 2005-06 "5.1 Grounds no. 1,2,3, & 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.
5.2 Grounds no. 5, 6 and 7 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.94,27,144/- in place of Rs.1,13,26,927/- made by the Assessing Officer resulting into consequential relief. The assessee has erroneously mentioned the addition as Rs.22,23,783/- in Ground no. 5 in place of Rs.1,12,26,927/- made by the Assessing Officer.
5.3 Grounds no. 8 and 9 are against the addition of Rs.1,86,100/- made by the Assessing Officer by observing us under:
ITA No.390 to 396/LKW/2014 Page 26 of 55The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:
(ii) Plot No. 32 purchased for Rs.60.000/- by the way of demand draft and stamp duty amounting to R.s.23,100. A perusal of bank account reveals that no such payments have been made from this bank account. This amount has therefore been paid out of the undisclosed income of the assessee and is therefore, added to his total income u/s 69 of the I.T. Act, 1961.
(ii) Plot No. 64 & 65 purchased for Rs.75,000/- by the way of demand draft and stamp duty amounting to Rs.28,000/-.
A perusal of bank account reveals that no such payments have been made from this bank account. This amount has, therefore, been paid out of the undisclosed income of the assessee and is therefore, added to his total income u/s 69 of the I.T. Act, 1961.
Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs.1,86,100/- which is being added to the total income of the assessee u/s 69 of the I.T. Act. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default. (Addition, Rs.1,86,100/-).
5.3.1 During the course of the appeal, no further evidence has been filed in this regard. Hence, both these grounds of appeal are rejected in view of finding in para 3.9.2 in relation to investment in plots and the addition of Rs.1,86,100/- made is hereby confirmed.
5.4 Grounds no. 10 & 11 are against the addition of Rs.6,90,000/-. The Assessing Officer required the assessee to explain the deposits in the S.B. a/c No. 9612 during 27.09.2004 to 28.10.2004 amounting to Rs.6,90,000/- which the appellant stated to be deposited out of sale proceeds of Sonata car purchased by him earlier. However, no supporting documents were produced to substantiate the claim, therefore, the sum was added to the income of the appellant.
ITA No.390 to 396/LKW/2014 Page 27 of 555.4.1 During the course of the appeal, the appellant has field written submission in this regard as under:
(c) Sale proceeds of cars: sale proceeds of the cars stood deposited in the regular bank account of the appellant, which stood already disclosed. Therefore, addition for sums aggregating Rs.12,40,00,000/- as had been made in the assessment year 2005-06 and 2008-09, could not have been validly made. As regards the addition of Rs.16,25,000/- in the assessment year 2009-10, the same too is not maintainable, as the assessment had been made in utter haste. For completion of the regular assessment, time limit was available to the Assessing Officer upto 31.12.2011, still he passed the assessment order on 31.12.2010, without giving the appellant a due and effective opportunity of being heard.
5.4.2 I have considered the submission made. As even during the course of the appeal, no evidence has been filed regarding the sale proceeds of the car, the Assessing Officer was justified in making the addition. The Assessing Officer has added the sum of Rs.6,90,000/- u/s 68 of the I.T. Act, 1961 while the same should be added as unexplained deposits in the bank account u/s 69 of the l.T. Act, 1961 and he is directed accordingly to add the same u/s 69 of the I.T. Act, 1961 and these grounds of appeal are rejected.
5.5 Ground no. 12 is rejected in view of the finding in para 3.10.
5.6 Grounds no. 13 and 14 are general in nature and do not require any separate adjudication.
5.7 In the result, the appeal is partly allowed."
Assessment year 2006-07 "6.1 Grounds No. 1,2,3 & 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for assessment year 2003-04.
6.2 Grounds no. 5, 6 and 7 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced ITA No.390 to 396/LKW/2014 Page 28 of 55 to Rs.2,42,42,541/- in place of Rs.2,65,14,935/- made by the Assessing Officer resulting into consequential relief. The assessee has erroneously mentioned the addition as Rs.92,66,982/- in Ground no. 5 in place of Rs.2,65,14,935/- made by the Assessing Officer.
6.3 Ground no. 8 is rejected in view of the finding in para 3.10.
6.4 Grounds no. 9 and 10 are general in nature and do not require any separate adjudication.
6.5 In the result, the appeal is partly allowed.
Assessment year 2007-08 "7.1 Grounds no. 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1. 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.
7.2 Grounds no. 5, 6 and 7 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.1,82,00,922/- in place of Rs.2,03,99,279/- made by the Assessing Officer resulting into consequential relief. The assessee has erroneously mentioned the addition as Rs.1,67,40,299/- in Ground no. 5 in place of Rs.2,03,99,279/- made by the Assessing Officer.
7.3 Grounds no. 8 and 9 are against the addition made on account of purchase of plots. The Assessing Officer has observed as under for making the addition:
The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:
(i)Plot No. 29, Faizabad Road, purchased for Rs.21,00,000/- and payment made out of bank.
However, the stamp duly amounting to Rs.2,23,100/- has been paid in cash and is from the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I.T. Act.
(ii)House No.537/183, Purania, Sitapur Road, Lucknow purchased for Rs.20,00,000/- and payment made out of bank. However, the stamp duty amounting to Rs.9,67,000/- has been paid in cash and is from the ITA No.390 to 396/LKW/2014 Page 29 of 55 undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I.T. Act. Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs.11,90,100/- which is being added to the total income of the assessee u/s 69 of the I.T. Act. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act are being initiated separately for this default.
(Addition:Rs.11,90,000/-) 7.3.1 During the course of appeal, no further evidence has been filed in this regard. Hence, both these grounds of appeal are rejected in view of finding in para 3.9.2 in relation to investment in plots and the addition of Rs.11,90,11/- made is hereby confirmed. The appellant has erroneously mentioned the amount of addition as Rs.6,69,800/- in ground No. 8 while the same is Rs.11,90,100/-.
7.4 Ground No. 10 is rejected in view of the finding in para 2.10.
7.5 Ground No. 11 & 12 are general in nature and do not require any separate adjudication.
7.6 In the result, the appeal is partly allowed.
Assessment year 2008-09 "8.1 Grounds no. 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.
8.2 Grounds no. 5, 6 and 7 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.34,93,785/- (after allowing credit of Rs.50,00,000/- on account of admission of investment made by Shri K. N. Singh Patel out of the total investment worked out at Rs.8493785) in place of Rs.5830373 made by the Assessing Officer resulting into consequential relief. The assessee has erroneously mentioned the addition as Rs.9641159 in Ground no. 5 in place of Rs.5830373 made by the Assessing Officer.
ITA No.390 to 396/LKW/2014 Page 30 of 558.3 Grounds no. 8 and 9 are against the addition made on account of purchase of plots. The Assessing Officer has not made any addition on account of purchase of plots in the assessment order and both these grounds of appeal are rejected as they do not emanate from the order of the Assessing Officer. It may be mentioned that a sum of ?550000 has been added by the Assessing Officer on account of unexplained cash deposited in the bank account which is said to be out of the sale proceeds of Corolla car and for which no evidence was filed in the course of the appeal although in the written submission filed, submission similar to A.Y. 2005-06 has been made. Hence, in view of the finding in para 5.4.2. no relief is allowable to the appellant and the addition is liable to be made u/s 69 of the IT. Act. 1961.
8.4 Ground no. 10 is rejected in view of the finding in para 3.10.
8.5 Grounds no. 11 and 12 are general in nature and do not require any separate adjudication.
8.6 In the result, the appeal is partly allowed.
Assessment year 2009-10 "9.1 Grounds no. 1 and 2 are against the addition of Rs.16,25,000-/ made on account of purchase of plots. The Assessing Officer has not made any addition on account of purchase of plots in the assessment order and both these grounds of appeal are rejected as they do not emanate from the order of the Assessing Officer It may be mentioned that a sum of Rs.16,25,000/- has been added by the Assessing Officer on account of unexplained cash deposited in the bank account which is said to be out of the sale proceeds of vehicles and for which no evidence was filed in the course of the appeal although in the written submission filed, submission similar to A.Y. 2005-06 has been made. The appellant contends that the assessment order has been passed in a hurry; however, even during the course of the appeal, no evidence in this regard could be filed. Hence, in view of the finding in para 5.4.2, no relief is allowable to the ITA No.390 to 396/LKW/2014 Page 31 of 55 appellant and the addition is liable to be made u/s 69 of the I.T. Act. 1961 9.2 Grounds No. 3 & 4 are against the addition made on account of household goods. The Assessing Officer has observed as under for making the addition:
During the course of search at the residential premises of assessee situated at HIG-114, Sector-E, Aliganj, Lucknow, several valuable items like airconditioners, TVs, refrigerators and exercisers etc. were found which were inventorised also. Vide notice u/s 142(1) dated 19/11/2010 the following query in this regard was made:
"Several valuable electrical/electronic items like air conditioners, TV and exercisers etc. were also found and inventorized during the search proceedings, a copy of which has already been provided to you. Please explain the sources of acquisition of these assets along with documentary evidences. Please also explain as to why not investment made by you in these assets be treated as unexplained in your hands and taxed accordingly in the assessment year 2009-
10. The assessee vide reply dated 29/11/2010 has submitted as under:
The several valuable items found during search are purchase in regular course out of my regular income:
The reply furnished by the assessee is not found convincing for the reasons already discussed above. The inventory of valuable articles reveals that there are several Airconditioners, TVs including LCD and Plazma TV and exercisers etc. the assessee has not produced any bill or voucher of purchases of any item. The total value of these assets is therefore, estimated at Rs.10 lacs. At this resident premises there are four adult members of the assessee family these are Shri Mahesh Singh Patel, Shri Om Narain Singh Patel, Smt. Anita Singh and Smt. Anju Singh. The amount of Rs.10 lacs is divided equally among the four members and the share of each member works out to Rs.2,50,000/-. This amount of Rs.2,50,000/- is therefore, treated as unexplained ITA No.390 to 396/LKW/2014 Page 32 of 55 expenditure in the hands of the assessee and is added to her total income u/s 69C of the I.T. Act. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and therefore, penalty notice u/s 271(1)(c) of the I.T. Act is being initiated separately.
9.2.1 In the written submissions filed, the appellant has stated that Shri K. N. Singh Patel had voluntarily disclosed an amount of Rs.10 lacs on this account in the year of search, which is included in the sum of Rs.20 lakhs but the Assessing Officer has added a sum of 1/4th of the amount in the hands of the appellant.
9.2.2 1 have considered the reply and the addition made. As no specific details with regard to the amount considered u/s 69C were furnished, therefore, the benefit of the so called surrender made Hy Shri K.N.Singh Patel cannot be allowed and the addition of Rs.2,50.000/- made is hereby confirmed, as no evidence for the source of acquisition of these household goods was furnished and the assets have been valued at Rs.10,00,000/- and have been equally considered in the hands of all the four family members.
Hence, both these grounds of appeal are rejected."
12. At the outset, the ld. A.R. of the assessee invited our attention to the findings of the Assessing Officer and the ld. CIT(A), by which they have not allowed set off to the assessee for investments made by him in the years in which declaration of surrender made by Shri K. N. Singh was more than the investment declared by the assessee; whereas, on the other hand, the authorities below had made additions where the investments made by the assessee was more than the amount declared by Shri K. N. Singh in that particular year. The ld. A.R. of the assessee submitted that this action of the authorities below is not justified at all, as the undisputed fact is that the properties in all the years remained the same and the Valuation Officer had valued the properties. The total value of each property is almost same as those declared and surrendered by Shri K. N. Singh. It was argued that the authorities below should have considered total value of various properties with the surrender amount of Shri K. N. Singh and should not have considered ITA No.390 to 396/LKW/2014 Page 33 of 55 the comparison on year-to-year basis. It was further argued that even if the investment is to be considered year-wise, then in those years where the amount of surrender was more than the investment, the same should have been carried forward for adjustment in the next year. The ld. A.R. of the assessee further argued that in some of the years, the ld. CIT(A) has ignored the valuation arrived at by the Valuation Officer by holding that the difference between the declared value and those estimated by the Valuation Officer was less than 15% and the ld. CIT(A) has accepted the valuation declared by the assessee. Therefore, it was argued that when ld. CIT(A) has ignored the valuation reports, the findings of Valuation Officer with respect to year-wise investments should also be ignored. It was further argued that it will amount to double taxation of the same investment declared and surrendered by Shri K. N. Singh as Shri K. N. Singh has already surrendered an amount of Rs.10 crores which represented investment made in the name of various relatives which included the assessee also. It was submitted that in the case of the assessee, Shri K. N. Singh had surrendered an amount of Rs.3,06,00,000/- whereas the value of all the properties as declared by the assessee from assessment year 2003-04 onwards was Rs.2,47,96,758/- and in this respect our attention was invited to a chart showing the value of investment in various properties as declared by the assessee and the amount of surrender made by Shri K. N. Singh in the name of the assessee. Learned A. R. further invited our attention to the fact that the assessee had further surrendered an amount of Rs.1,55,00,000/- against the property at 5ML/200, Vikas Nagar, Lucknow whereas in the affidavit, filed at the time of surrender, certain other properties were mentioned. It was submitted that the mistake was immediately pointed out to the Assessing Officer and in this respect our attention was invited to the order of the Assessing Officer at page ITA No.390 to 396/LKW/2014 Page 34 of 55 32 where the Assessing Officer has noted the contentions of the assessee but did not give any relief. Learned A. R. further submitted that the grievance was also taken to learned CIT(A) who also, after reproducing the contentions of the assessee at page 21 of his order, did not allow any relief to the assessee. Learned A. R. in this respect filed a duly signed and sworn in affidavit of Shri K. N. Singh Patel and it was prayed that appropriate directions may be issued to the Assessing Officer to allow appropriate relief to the assessee.
13. Arguing ground No. 6 in assessment year 2003-04, Learned A. R. submitted that minor children of the assessee had received gifts of Rs.10,00,000/- from Shri Santosh Agarwal, Shri Sanjeev Agarwal and Shri D. K. Agarwal. It was submitted that the assessee has submitted copy of ITRs in support of the gifts but the authorities below rejected the contention of the assessee holding that creditworthiness and genuineness was not proved. Similarly it was argued that an amount of Rs.8,00,000/- was received by minor son from Shri Puneet Gupta which also has been rejected and similarly minor daughter had received Rs.10,00,000/- from Anshu Goel, Sandeep Agarwal and D. K. Agarwal and confirmatory certificates and copy of ITRs were also filed but the authorities below have not accepted the contentions of the assessee therefore, it was prayed that these should be allowed as the assessee had discharged its onus of gift.
14. Arguing ground No. 7 in assessment year 2003-04, Learned A. R. submitted that the addition of Rs.6,69,800/- was made as the authorities below held that assessee was not able to prove the investment in acquisition of properties of Rs.1,66,800/- and Rs.5,03,000/- whereas the assessee had submitted the details.
ITA No.390 to 396/LKW/2014 Page 35 of 5515. Arguing ground No. 6 in assessment year 2004-05, Learned A. R. submitted that assessee had received gift of Rs.9,00,892/- which the authorities below have wrongly rejected. It was submitted that gift was received from Shri Sharad Agarwal, who was non-resident. It was submitted that in support of the gift the assessee had filed a copy of letter from Shri Sharad Agarwal wherein he has affirmed that he has given the gift and copy of passport was also submitted and therefore, the authorities below should have accepted the gift received by the assessee.
16. Arguing ground No. 6 in assessment year 2005-06, Learned A. R. submitted that assessee had invested an amount of Rs.1,86,100/- in plots which was duly covered by the declaration of Shri K. N. Singh patel which the authorities below have wrongly not accepted.
17. Arguing ground No. 7 in assessment year 2005-06, Learned A. R. submitted that assessee had duly explained the deposits of Rs.6,90,000/- in the bank account and authorities below have wrongly made addition u/s 68 of the Act.
18. Arguing ground No. 6 in assessment year 2007-08, Learned A. R. submitted that the investment in plots amounting to Rs.11,90,000/- was duly covered by the declaration of Shri K. N. Singh patel which the authorities below have wrongly not accepted.
18. Further arguing ground No. 6 in assessment year 2008-09, Learned A. R. submitted that the deposit of Rs.5,50,000/- were made out of sale of Sonata car which authorities below have wrongly upheld.
20. Arguing ground No. 6 in assessment year 2009-10, Learned A. R. submitted that authorities below have wrongly made the addition of Rs.2,50,000/- on account of house hold expenses and further authorities ITA No.390 to 396/LKW/2014 Page 36 of 55 were not justified in making the addition of Rs.16,25,000/- when the sale of duly explained.
21. The ld. D.R., on the other hand, placed reliance on the orders of the ld. CIT(A) and submitted that ld. CIT(A) has allowed substantial relief to the assessee wherever the year of investment and year of surrender was same. It was submitted that investment made by assessee in earlier years cannot be covered by surrender of Shri K. N. Singh in succeeding years.
22. We have heard the rival parties and have gone through the material placed on record. We find that the main dispute between the parties is that the declaration of surrender made by Shri K. N. Singh, head of the family should be completely set off against the investments made by the assessee in various years. This grievance has been taken by the assessee in ground No.4 in all the appeals. Therefore, we first take up this ground for adjudication. The Revenue has not allowed complete set off of surrender against the investment, as there was difference in the years of investment estimated by the assessee and the years in which Shri K. N. Singh had made surrender. From the records it is apparent that Shri K. N. Singh had made total surrender of Rs.3,06,00,000/- for the investments made by Shri Mahesh Singh in various properties and the surrender was made and in the affidavit Shri K. N. Singh had mentioned that such amount of Rs.3,06,00,000/- was invested by him in the name of Shri Mahesh Singh. The year-wise amount of surrender made by Shri K. N. Singh in the name of Smt. Anju Singh is as under:-
(1) Assessment Year 2003-04 : Rs. 11,00,000/-
(2) Assessment year 2004-05 : Rs. 70,00,000/-
(3) Assessment Year 2008-09 : Rs. 50,00,000/-ITA No.390 to 396/LKW/2014 Page 37 of 55
(4) Assessment Year 2009-10 : Rs.1,75,00,000/-
Total : Rs.3,06,00,000/-
23. We further find that Shri K. N. Singh in the affidavit had affirmed as under:-
"8. That during the course of said search and seizure action, Shri Mahesh Singh Patel elder son of the deponent gave a statement whereby an additional income of Rs. 10 Crores. (Ten crores) was agreed to be disclosed on behalf of various persons. A copy of the said statement dated 19.11.2008 is enclosed and the same has been marked as ANNEXURE - 1 hereto.
9. That the Authorized officers sought for ratification of the said statement, from other family members also namely (i) Shri Om Narain Singh Patel (second son of the deponent) (ii) Smt. Anita Singh wife of Shri Mahesh Singh Patel and (iii) Smt. Anju Singh wife of Shri Om Narain Singh Patel. Copies of the said statements are enclosed and the same have been marked as ANNEXURE - II, III, & IV hereto.
10. That it is clarified and submitted that all the statements referred to above i.e. the statements given by (i) Shri Mahesh Singh Patel, (ii) Shri Om Narain Singh Patel, (iii) Smt. Anita Singh and (iv) Smt. Anju Singh pertain to the disclosure of consolidated sum of Rs. 10 Crores (Ten crores), as additional income.
11. That looking to the fact that the deponent himself has been instrumental in setting up various "business entities" and/or creating various "source of income" acquisition of capital assets etc, and he himself has been playing a pivotal role in running and managing such "business entities'/'source of income" and "investments" appearing in the names of various business and other entities, "individuals", "groups of individuals", and in keeping with letter and spirit of the statements referred to in paras 8, 9 & 10 hereinfore, the deponent himself has owned the said disclosure of income of Rs.10 Crores (Ten Crores) and he undertakes and agrees to pay taxes as are payable with reference to the same.
12. That, in this respect, it is clarified that pursuance of the said undertaking, the deponent himself had already arranged for payment of taxes aggregating Rs. 1 Crores, through four separate cheques, as per particulars given below:-ITA No.390 to 396/LKW/2014 Page 38 of 55
Sl. Cheque No. Date Amount (Rs.)
No.
(i) 836761 15/12/2008 25,00,000
(ii) 836763 25/12/2008 25,00,000
(iii) 836762 05/01/2009 25,00,000
(iv) 836764 25/01/2009 25,00,000
which have been drawn on his own Bank Account No. 2410000100132967 at Punjab National Bank, Rakabganj.
13. That the present statement is being given under section 132(4) of the Act and is of clarificatory in nature of the statements/ rectification referred in paras 9, 10 & 11 and the said statements rectifications should be deemed to have been telescoped in the present statement.
14. That as far as the "Manner" in which the said income aggregating Rs.10 Crores (Ten Crores) has been earned, is given hereunder:-
(i) The deponent hails from District Kannauj and while living in that area, he had developed strong linkage with the rural class and also with the small time perfumers operating in that region;
(ii) During the course of his association with such class of people, he has been rendering assistance to them in selling their products at "fair price". Although such services were being rendered on humanitarian ground and out of concern for upliftment of the backward class of the society as a whole, without there being any commercial angle involved in the same, the deponent has been occasionally getting gifts in cash and/or in kind from the persons of that starta, out of their sense of gratitude for the deponent;
(iii) At that stage, he had an opportunity to interact with small time perfumers and on account of such an "interaction" he had developed a very strong sense for processing of herbs, blending, ITA No.390 to 396/LKW/2014 Page 39 of 55 mixing and re-mixing of perfumes and perfumery products and in order to try his luck in this larger field, he shifted to Lucknow in early 1980's and continued the activities that were being carried on by him while at Kannauj, this time in a much wider area and diversified field.
(iv) After he got settled at Lucknow, he continued to assist the inhabitants of his native place in the manner mentioned above and hi lieu number of the persons who felt benefited, both socially as well as economically by the advice and assistance rendered by the deponent.
All these sources taken together constitute the ''manner" in which the deponent got enriched to the extent of the disclosure of Rs.10 Crores (Ten) as made during the course of search that had commenced oh 19.11.2008.
15. That the sums so collected by the deponent from time and over a period of years, remained invested on the date of search as per details given below:-
(a) Financial Year 2002-03 SI. Name. Head of Expenditure/Investment etc. Rs.
No.
(i) Anju Singh Construction & acquisition of Capital Assests At 75,00,000 Gaura Bagh, Kursi Road, Lucknow
(ii) Anju Singh & Construction & acquisition of Capital Assests At 22,00,000 Mahesh Singh Gaura Bagh, Kursi Road, Lucknow
(iii) Other unexplained investment/ Expenditure 2,00,000 Etc. Total 99,00,000
(b) Financial Year 2003-04 SI. Name Head of ExpenditureAnvestment etc. Rs. No.
(i) Mahesh Singh Construction & acquisition of Capital Assets 70,00,000 at Farm House Chandrika Devi Road ITA No.390 to 396/LKW/2014 Page 40 of 55
(ii) Other unexplained investments/ Expenditure 3,005000 etc Total 73,00,000
(c) Financial Year 2004-05 SI. Name Head of Expenditure/Investment etc. Rs.
No.
(i) Other unexplained investments/ Expenditure 5,00,000
etc.
Total 5,00,000
(d) Financial Year 2005-06
SI. Name Head of Expenditure/Investment etc. Rs.
No
(i) Smt. Rajni Construction & acquisition of Capital Assests 30,00,000
Patel At Gaura Bagh, Kursi Road, Lucknow
(ii) Anju Singh Land at Aadar Khera BKT 3,00,000
Megha Workshop 2,00,000
(iii) Sanatan Cold Loan to Farmers 75,00,000
Storage Ltd.
(iv) Other unexplained investments/ Expenditure 3,00,000
etc.
Total 1,13,00,000
Financial Year 2006-07
SI. Name Head of Expenditure/Investment etc. Rs.
No
(i) Om Narain Land of Farm House IIM Road 2,00,000
Singh
(ii) Pankaj Verma Land at Amrapali Road, Hardoi Road 5,00,000
ITA No.390 to 396/LKW/2014 Page 41 of 55
(iii) Other unexplained investments/ Expenditure 3,00,000
etc.
Total 10,00,000
Financial Year 2007-08
Sl. Name Head of Expenditure/Investment etc. Rs.
No.
(i) Anju Singh Construction & acquisition of Capital Assets 90,00,000
at Gaura Bagh, Kursi Road, Lucfcnow
(ii) Mahesh Patel & Construction & acquisition of Capital Assets 50,00,000
Anita Singh at Faizabad Road, Lucknow
(iii) Other unexplained investment/Expenditure 10,00,000
etc.
Total 1,50,00,000
Financial Year 2008-09
SI. Name Head of Expenditure/Investment etc. Rs.
No
(i) Anju Singh Construction & acquisition of Capital 1,25,00,000
Assets at Gaura Bagh, Kursi Road,
Lucknow
(ii) Mahesh Singh Construction & acquisition of Capital 1,75,00,000
Assets at Gaura Bagh, Kursi Road,
Lucknow
(iii) Om Narain Farm House, IIM Road (Land Only) 30,00,000
Singh
(iv) PPPL Excess stock 60,00,000
(v) Baijnath Construction & acquisition of Capital 40,00,000
Charitable & Assets
Educational
Trust
(vi) Sanatan Construction & acquisition of Capital 25,00,000
Cold Storage Assets
Ltd.
(vii) Cash Seiuzed At various places 25,00,000
ITA No.390 to 396/LKW/2014 Page 42 of 55
(viii) Maa Construction of Building 50,00,000
Sharda
Buildtech Pvt.
Ltd.
(ix) Other unexplained mvestment/Expenditure 20,00,000
etc
5,50,00,000
10,00,00,000
16. That income aggregating Rs.10 Crores (Ten) as spread over in different financial years and as stood reflected at the "relevant time" in the acquisition of capital asset/other investment and expenditure etc. remained undisclosed earlier, as the deponent has all along been under a bonafide belief that the sums (which come to be invested in the aforesaid manner) were not of taxable nature., as the receipts were by way of gifts only nor liable for taxation.
17. That for the reason that with the passage of time, the deponent does not have in the possession all the relevant details and evidences in support of the same, which may reach the level of acceptability by die Income tax department, the deponent has been advised to surrender the same as additional income for being taxed solely in his hands, irrespective of the names in which the investment/expenditure etc stands/incurred.
18. That the disclosure is being made by the deponent in a bonafide manner and with a view to extend all the cooperation to the Income Tax Department, so as to avoid litigation and to buy mental peace for the deponent himself and his family members, and for the sake of expeditious completion of assessment and/or other related proceedings.
19. That the additional income as aforesaid, has been surrendered on the stipulations that: -
(i) the statements that is being given in terms of the present sworn statement should be treated as statement given by the deponent under section 132(4) read with explanation 5 to section 271(1)(c).ITA No.390 to 396/LKW/2014 Page 43 of 55
(ii) the income so disclosed by the deponent should be treated to cover the effect of all such material/ information, in whatever form, that had been found during the course of search/ survey and/or that may be found to be so related later to the said search/survey in *Patel Group* as a whole, that had commenced on 19.11.2008.
(iii) entire income as aforesaid shall be assessed in the hands of the deponent only, without affecting the assessments of any other "business entities" "other entities" "individuals" and or "group of individuals" forming the "Patel Group" etc.
(iv) the additional income so surrendered by the deponent shall be allowed to be accounted for in the books of account and other relevant records related to the "persons" concerned, in the name of the deponent himself.
(v) all taxes as are payable on such additional shall be borne exclusively by the deponent himself and he himself shall be held liable to pay and discharge 'the same;
(vi) complete waiver from interest if any, found to be payable under any provisions of the "Act" shall be considered sympathetically.
(vii) Immunity from penalty under section 271(1)(c) and/or any other penal provisions under the Act shall be granted not only to the deponent but also to other "persons" forming part of 'Patel Group* as a whole, wherever the additional income and/ or part thereof is accounted for or deemed to have been accounted for/accounted;
(viii) complete immunity from prosecution and /or other such provisions shall be granted in the case of the deponent and/or other person(s) forming 'Patel Group' who are found/held to be affected by the said disclosures; and
(ix) the conduct of the deponent, the matter of disclosure of income shall be duly reciprocated by the Income-tax Department and neither he himself nor any other person or persons belonging to Patel Group shall be subjected to any harassment and their assessment shall be completed expeditiously;
20. That it is further stated that the deponent is aggregating to all such adjustments as to the year of taxability of the additional ITA No.390 to 396/LKW/2014 Page 44 of 55 income aggregating Rs.10 Crores (Ten Crores) or part thereof as may be found to be pertinent at the stage of completion of assessment."
24. From the above contents of the affidavit along with facts about surrender of Shri K. N. Singh, it is apparent that at the time of surrender, Shri K. N. Singh had owned up the investments made in the name of various family members including the assessee. There is no dispute regarding identification of property, as undisputedly the properties declared by Shri K. N. Singh in the name of the assessee remained the same. Against the total surrender of Rs.3,06,00,000/- for investments in the name of assessee, the amount of additions as sustained by the ld. CIT(A) is as follows:-
Assessment year 2003-04 Rs.60,80,438/-
Assessment year 2004-05 Rs.47,84,980/-
Assessment year 2005-06 Rs.94,27,144/-
Assessment year 2006-07 Rs.2,42,42,541/-
Assessment year 2007-08 Rs.1,82,00,922/-
Assessment year 2008-09 Rs.84,93,785/-
Assessment year 2009-10 76,55,425/-
Total Rs.7,48,85,235/-
25. Against the above year-wise sustained addition, the ld. CIT(A) allowed relief to the assessee on account of his surrender in various years and upheld the addition for balance while he ignored the excess surrender during some years. The working of such addition is as per table below:-
Assessment Addition Relief allowed Net addition Excess year sustained by ld. on account of surrender CIT(A) surrender ignored ITA No.390 to 396/LKW/2014 Page 45 of 55 2003-04 Rs.60,88,438 Rs.11,00,000/- 49,88,438/- Nil 2004-05 Rs.47,84,980/- 70,00,000/- Nil 22,15,020/-* 2005-06 Rs.94,27,144/- Nil Rs.94,27,144/- Nil 2006-07 Rs.2,42,42,541/- Nil Rs.2,42,42,541/- Nil 2007-08 Rs.1,82,00,922/- Nil Rs.1,82,00,922/- Nil 2008-09 Rs.84,93,785/- Rs.50,00,000/- 34,93,785/- Nil 2009-10 76,55,425/- Rs.1,75,00,000/- Nil Rs.98,44,575/-
** *In this year the Assessing Officer had made the addition of Rs.47,84,980/- which learned CIT(A) had sustained and had allowed adjustment of Rs.70,00,000/- but ignored the excess.
**In this year the Assessing Officer had made the addition of Rs.76,55,425/- which learned CIT(A) had sustained and had allowed adjustment of Rs.1,75,00,000/- but ignored the excess.
26. These all facts indicate that Mr. K. N. Singh has been subjected to tax for his surrender which was represented by investments in the name of various persons. In the name of persons the same investment has been subjected to tax wherever the amount of surrender in a particular year was less than investment in that year and on the other hand no benefit has been given for the excess of surrender over the amount of investment. In these circumstances, we are of the opinion that the Revenue should have taken a holistic view of the position and total investment in a property during the period under search should have been compared with the total surrender towards that particular property. We find that in the assessment of Shri K. N. Patel in various years the Assessing Officer himself has completed the assessment after holding that the total surrendered amount has to be compared under total cost of construction estimated by the Valuation Wing. The relevant findings of Assessing Officer in the case of Shri K. N. Patel are reproduced below:-ITA No.390 to 396/LKW/2014 Page 46 of 55
"Several of the immovable properties owned by the family members of the assessee were referred to the valuation wing of the Department and the estimate of cost of construction was obtained. As a result, the value of investment in almost all the properties has been estimated on the higher side by the valuation wing. The assessees were confronted with the valuation report and their comments and counter comments of the valuation wing were obtained. Thereafter, the final comments of the assessee were once again obtained.
Vide reply dated 30.12.2010, the assessee has submitted as under:
"With reference to the above cied subject and regarding explanation for construction in the following building before 01.04.2002:
1. Construction at Plot No. 32, 49, 50, 52, 53 and Khasra No.46, Gaura Bagh, Kursi Road, Lucknow.
2. Construction at Plot 37, 38, Gaurabagh, Kursi Road, Lucknow.
3. Construction at Plot No. 35, 45, 46, Gaurabagh, Kursi Road, Lucknow.
We are here to submit that as the some construction was done before 01.04.2002 as already mentioned in the report submitted by the DVO and in support to which affidavit of the assessee, before your honour is being enclosed at Annexure-A, B and C respectively.
In addition to above we are enclosing the comparison at annexure-D, between the amount surrendered by the assessee in various properties and valuation done by the DVO of Income Tax Department.
Your honour will appreciate that even if no leverage of variation of 15% is considered the amount surrendered is much more than the valuation done by the valuation officer Rs.73,23,639.59 to be precise.
It is hereby requested to considered the above facts before the finalizing the assessment and let us know if any other ITA No.390 to 396/LKW/2014 Page 47 of 55 explanation/clarification is required by your honour in this regard."
A reconciliation chart of valuation and surrender has been submitted by the assessee which is as under:
1. Total value as per valuation officer 213,262,452.55
2. Less:Expenses prior to FY 02-03 as -19,914,044.14 per valuation report
3. Less:Expenses incurred after FY08-09 -71,093,822.00
4. Remaining valuation for the period 122,254,586.41 Between FY 02-03 to 08-09
5. Out of above, expenses directly incurred and recorded in the respective books of accounts
-By Maa Sharda Buildtech -10,041,204.00
-By Baijnath Charitable Trust -28,372,502.00
-By Mahesh Singh for Megha Bajaj, -13,964,520.00 Faizabad Road -------------------
6. Amount to be covered under the 69,876,360.41 surrender of K.N. Singh
7. Amount actually surrendered by K.N. -77,200,000.00 singh against construction (as per sheet enclosed)
8. Net difference -7,323,639.59 Alongwith the above chart, the assessee has furnished details of amount surrendered by Shri K.N. Singh Patel against construction and these are as under:
F.Y. Particulars Amount Amount
2002-03 Construction of Anju Singh 7500000
Construction of Anju Singh & 2200000 9700000
Mahesh Singh
2003-04 Construction of Mahesh Singh 7000000
2005-06 Construction of Rajni Patel 3000000
2007-08 Construction of Anju Singh 9000000
Out of unexplained investment/ 500000
Expenditure for Vikas Nagar
Megha Bajaj 5000000 14500000
2008-09 Construction of Anju Singh 12500000
Construction of Mahesh Singh 17500000
Construction of Om Narain Singh 3000000
Construction of Baijnath Charitable 4000000
trust
Construction of Maa Sharda 5000000
Buildtech Pvt. Ltd.
ITA No.390 to 396/LKW/2014 Page 48 of 55
Out of unexplained investment/ 1000000
Expenditure
For Vikas Nagar 43000000
77200000
The above reconciliation submitted by the assessee is not acceptable because the amount was surrendered as a whole against various properties and there is no justification for excluding the cost of construction prior to F.Y. 2002-03. It has already been admitted by the assessee vide letter dated 13.12.2010 that the year wise and property wise details of investment were not known to him at the time of surrender.
However, the description of property is also not mentioned in the affidavit and it is not ascertainable as to against property what amount has been surrendered. Therefore, the amount has to be compared with the total cost of construction as estimated by the valuation wing. It is also noteworthy that the valuation officer has estimated only the cost of construction of the properties and the cost of acquisition of land has not been considered by him. Whereas, in the total amount of surrender the cost of acquisition as well as the cost of construction both are included by Shri K.N. Singh Patel.
As has been seen above, the total surrendered amount against construction and acquisition of capital assets is Rs.7,72,00,000/- as per the affidavit. The valuation officer has estimated the cost of construction at Rs.21,32,62,452/-. Out of this, the amount incurred after F.Y. 2008-09 is Rs.7,10,93,822/- and the amount invested by various assessees as per books is Rs.5,23,78,226/-. The balance amount left, therefore, is Rs.8,97,90,404/- and this does not include the cost of acquisition of various properties. Therefore, the actual net difference in the cost of construction as estimated by the valuation wing and as surrendered by Shri K.N. Singh Patel is actually much more than being claimed by the assessee now.
The benefit of surrender made by Shri K.N. Singh Patel is, therefore, being restricted in respective hands only to the extent of surrendered amount which includes the cost of acquisition of assets. The difference in cost of construction that remains after allowing the benefit of surrendered amount is therefore, being added in the respective hands with respect to various properties in various years.
ITA No.390 to 396/LKW/2014 Page 49 of 55As far as the comments on the three affidavits being submitted now, it will be sufficient to state that no supporting evidences have been enclosed to substantiate the claim made in the affidavits. Therefore, these cannot be taken to be true. In this regard, reference is again drawn towards the case of Sri Krishna Vs CIT, Kanpur & Others reported in 142 ITR 618 (Alld.),. This is a judgment delivered by the jurisdictional High Court and the ratio laid down by this judgment is as under:-
"It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements .on .affidavit. with truthfulness and reliability."
In view of above facts, all the arguments made by the assessee e again disposed off and rejected.
The various details and documents submitted by the counsel of assessee have been examined. After examination of all details and documents, including the seized/impounded documents, the assessment in the case of assessee for this year is completed on total income of Rs.1,00,94,010/-."
27. In the above assessments of Shri K. N. Singh, the Assessing Officer has not made any addition and has accepted the returns filed by him u/s 153A of the Act which means that he has accepted the declaration of surrender made by Shri K. N. Singh in the respective years of surrender. Therefore, keeping in view all the facts and circumstances, we set aside the order of learned CIT(A) on this account and remit the matter back to the office of the Assessing Officer to recalculate the addition, if any, after taking into account the total amount of surrender in various years with respect to the total investments in various properties, irrespective of the year of investment.
ITA No.390 to 396/LKW/2014 Page 50 of 55Though the Revenue has not challenged the action of learned CIT(A) in rejecting the valuation done by valuer where the difference was less than 15% but in this case, we deem it appropriate that Assessing Officer should consider Valuation Officer's valuation of various properties irrespective of year of investment. While doing so, the Assessing Officer should compare the total investment during search period as valued by registered valuer towards various properties. For the purpose of comparison, the construction done before and after the search period has to be ignored. If the value, so assessed by valuation officer during the search period, exceeds the surrender amount for that property, the difference has to be assessed as income of the assessee. We further find that at the time of surrender Shri K. N. Singh Patel had surrendered an amount of Rs.10 crore against various properties. However, after declaration and filing of the affidavit, Shri K. N. Singh Patel approached Assessing Officer with the request that he had mentioned certain properties which were not part of surrender as their investments were duly reflected in the books of account and he further requested the Assessing Officer to give credit for the surrender for an amount of Rs.1,55,00,000/- for investments in other properties. Such request of the assessee has been reproduced by the Assessing Officer in his at page 32. The same submissions were also made before the learned CIT(A) which he has recorded in his order at page 22. For the sake of completeness, the submissions, as reproduced by learned CIT(A), are reproduced below:
"5. With respect to property at 5-ML/200, Vikas Nagar, Lucknow, the assessee has submitted the following reply with regard to difference of cost of construction:
"In this regard, we have to submit that in addition to the above investments, following investments were also made with respect to the above said construction in building:ITA No.390 to 396/LKW/2014 Page 51 of 55
(i)The assessee made following investments in construction of building at Vikas Nagar out of the surrenders made by the father of the assessee Shri K. N. Singh Patel in the years given below:
F.Y.2007-08 Rs.50 lacs Amount given by Sri Amount surrendered by K.N. Singh Patel for Sri K.N. Singh Patel in Megha Bajaj, financial year 2007-08 Faizabad road but the funds were deviated in construction of property at Vikas Nagar Rs.5 lacs Given by Sri K.N. Out of Rs.10 lacs Singh Patel surrendered by Sri K.N. Singh Patel in financial year 2007-08 Rs.40 lacs Amount given by Sri Amount surrendered by F.Y.08-09 K.N. Singh Patel for Sri K.N. Singh Patel in construction of financial year 08-09 Baijnath Engg.
College but the
funds were deviated
bin construction of
property at Vikas
Nagar
Rs.50 lacs Amount given by Sri Amount surrendered by
K.N. Singh Patel for Sri K.N. Singh Patel in construction of financial year 08-09 property at Vikas Nagar Rs.10 lacs Given by Sri K.N. Out of Rs.20 lacs Singh Pate surrendered by Sri K.N. Singh Patel in financial year 08-09 The authorities below have not considered the above request of the assessee. In this respect we are of the considered opinion that the surrender made by Sri K.N. Singh Patel has to be considered in a holistic view and if by mistake the assessee had declared wrong properties in the affidavit, which mistake was rectified by the assessee, then the Assessing Officer should have considered the request of the assessee. The Learned A. R. had invited our attention to the fact that some of the investments mentioned in the affidavit were already covered by the investments recorded in their books of account and therefore, remaining amount of surrender should have been considered in ITA No.390 to 396/LKW/2014 Page 52 of 55 other properties. We find force in the arguments of Learned A. R. and therefore, we direct Assessing Officer to consider part of surrender towards another properties if he is satisfied that the properties mentioned in the affidavit were already covered by investments disclosed in their respective books of account.
27.1 In view of the above, ground No. 4 in all the appeals relating to assessment year 2003-04 to 2008-09 is allowed for statistical purposes.
28. As regards ground No. 6 in assessment year 2003-04 regarding non acceptance of gifts amounting to Rs.28 lacs received by children of the assessee, we find that Assessing Officer should reconsider the arguments of the assessee and should decide afresh after taking into account all the evidences which the assessee had placed on record. In view of the above, ground No. 6 in assessment year 2003-04 is allowed for statistical purposes.
29. As regards ground No. 7 in assessment year 2003-04, we find that assessee maintains that the investment of Rs.6,69,800/- was covered by the declaration of Sri K.N. Singh Patel which, in our opinion, is not correct as the declaration by Sri K.N. Singh Patel was only for construction and therefore, the investment in plots cannot be adjusted against the surrender. In view of the above, ground No. 7 in assessment year 2003-04 is dismissed.
30. As regards ground No. 6 in assessment year 2004-05 regarding non acceptance of gifts amounting to Rs.9,00,892/- received by children of the assessee, we find that Assessing Officer should reconsider the arguments of the assessee and should decide afresh after taking into account all the evidences which the assessee had placed on record. In view of the above, ground No. 6 in assessment year 2004-05 is allowed for statistical purposes.
31. As regards ground No. 6 in assessment year 2005-06, we find that assessee maintains that the investment of Rs.1,86,100/- was covered by the ITA No.390 to 396/LKW/2014 Page 53 of 55 declaration of Sri K.N. Singh Patel which, in our opinion, is not correct as the declaration by Sri K.N. Singh Patel was only for construction and therefore, the investment in plots cannot be adjusted against the surrender. In view of the above, ground No. 6 in assessment year 2005-06 is dismissed.
32. As regards ground No. 7 in assessment year 2005-06, we find that no credible evidence was filed before the authorities below neither any evidence was filed before us. Therefore, we do not find any force in this ground of appeal of the assessee. This ground is dismissed.
33. As regards ground No. 6 in assessment year 2007-08 regarding investments in plots, we find that the declaration made by Shri K. N. Singh Patel was relating to construction only and therefore, the investment in plots remained unexplained and therefore, ground No. 6 in assessment year 2007- 08 is dismissed.
34. As regards ground No. 6 in assessment year 2008-09, we find that the assessee had claimed that deposit in bank account was made out of sale of Sonata Car. Learned A.R. argued that assessee has in his possession the evidence of sale of Sonata car therefore, we remit this ground to Assessing Officer to verify the cash deposit of Rs.5,50,000/- with respect to claim of the assessee that the same was made from the sale of Sonata car. This ground is allowed for statistical purposes.
35. Regards ground No. 6 in assessment year 2009-10 regarding deposits of Rs.16,25,000/-, we find that no credible evidence was filed before the authorities below and neither any evidence has been filed before us therefore, the contention of Learned A. R. has no force and same is dismissed.
36. As regards the addition of house hold expenses amounting to Rs.2,50,000/-, we find that in the similar case of Smt. Anju Singh in I.T.A. Nos. 390 to 396/Lkw/2014, we have dismissed ground of appeal by holding as under:ITA No.390 to 396/LKW/2014 Page 54 of 55
"29. Now coming to only ground of appeal in assessment year 2009-10, we find that the Assessing Officer had made addition of Rs.2,50,000/- on account of low house hold expenses. The learned CIT(A) has held that benefit of surrender made by Shri K. N. Singh cannot be allowed as no evidence of source of acquisition of various house hold goods, present in the house, was furnished. We further find that Assessing Officer had made a total addition of Rs.10,00,000/- on account of various house hold goods available in the house at the time of search for which no evidence was filed and the total of such assets was taken at Rs.10,00,000/-. As the amount of Rs.10,00,000/- was distributed among four members of the family and the share of assessee, out of such sum, was Rs.2,50,000/-. We find that learned CIT(A) has rightly upheld the addition by rejecting the contention of the assessee that this amount was to be adjusted against the surrender of Shri K. N. Singh. Therefore, the only ground taken in assessment year 2009-10 is dismissed."
In view of the above, this ground of appeal of the assessee stands dismissed.
37. In the result, the appeals for assessment year 2003-04 to 2008-09 are partly allowed for statistical purposes and partly dismissed and stay applications having become infructuous, are dismissed.
(Order pronounced in the open Court on 15/03/2019) Sd/. Sd/.
[A. D. JAIN] [T.S. KAPOOR]
VICE PRESIDENT ACCOUNTANT MEMBER
DATED:15/03/2019
*Singh
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar
ITA No.390 to 396/LKW/2014 Page 55 of 55
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