Income Tax Appellate Tribunal - Delhi
Ram Kakar,, vs Department Of Income Tax on 8 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'D
'D' : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SHRI ABY T. VARKEY,
VARKEY, JUDICIAL MEMBER
IT(SS)
IT(SS) A.No
A.No.
No.514/Del/2003
Block Period : 01.04.1987 to 18.02.1997
Shri Ram Kumar, Vs. Assistant Commissioner of
Village Nathupur, Income Tax,
Gurgaon.
Gurgaon. Gurgaon Circle,
Gurgaon.
(Appellant) (Respondent)
IT(SS)
IT(SS) A.No
A.No.523/Del/2003
No.523/Del/2003
Block Period : 01.04.1987 to 18.02.1997
Assistant Commissioner of Vs. Shri Ram Kumar,
Income Tax, Village Nathupur,
Gurgaon Circle, Gurgaon.
Gurgaon.
(Appellant) (Respondent)
Assessee by : Shri Gautam Jain, CA.
Revenue by : Ms. Sulekha Verma, CIT-DR.
ORDER
PER G.D. AGRAWAL, VP :
IT(SS) A.No.514/Del/2003 :-
:-
This appeal by the assessee is directed against the order of learned CIT(A), Faridabad dated 2nd September, 2003 for the block period 01.04.1987 to 18.02.1997.
2 IT(SS)-514 & 523/Del/2003
2. The assessee, in addition to the grounds raised as per the grounds of appeal filed alongwith the memorandum of appeal, has also sought permission to raise the following additional ground vide letter dated 27th April, 2009 :-
"That since no notice u/s 143(2) of the act was issued and served on the assessee after the filing of return of undisclosed income in response to notice u/s 158BC of the Act and as such, the order of block assessment u/s 158BC/143(3) of the act dated 26.02.1999 and, the impugned order of block assessment framed 250/158BC/143(3) dated 28.03.2002 are without jurisdiction and, hence deserved to be quashed as such."
3. The assessee contended that the additional ground proposed to be raised is a legal ground and all material facts relating to disposal of such grounds of appeal are already on record. Therefore, such additional ground should be allowed to be raised. In support of this contention, he relied upon the following decisions:-
(i) National Thermal Power Co.Ltd. Vs. CIT - [1998] 229 ITR 383.
(ii) CIT Vs. Varas International P.Ltd. - [2006] 284 ITR 80.
4. Learned DR, on the other hand, submitted that this is a second round of litigation. The original assessment order was passed on 26th February, 1999 against which assessee had filed the appeal before the CIT(A) and has not raised any such ground. After the remand by the CIT(A), the Assessing Officer again passed the assessment order dated 28th March, 2002. These appellate proceedings are against this second assessment order dated 28th March, 2002. From a perusal of both the assessment orders, it is evident that adequate opportunity of being heard was allowed to the assessee and the assessee's counsel 3 IT(SS)-514 & 523/Del/2003 represented during both the assessment proceedings. Therefore, the raising of the additional ground at this late stage should not be permitted. In support of this contention, she relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Aravali Engineers P.Ltd. Vs. CIT and Another - [2011] 335 ITR 508. She submitted that under identical facts, Hon'ble Jurisdictional High Court held that the issue of timely service of notice could not be raised for the first time before the ITAT.
5. We have carefully considered the arguments of both the sides and perused relevant material placed before us. Before coming to the legal aspect of admission of the additional ground, let us first record the chronological sequence of events, which is as under:-
Sr.No. Date Particulars
i) 18.2.1997 Search u/s 132 of the Act at the residence of assessee Village
Nathanpur, District Gurgaon
ii) 10.10.1997 Notice u/s 158BC of the Act
iii) 1.2.1999 Return of undisclosed income was filed by appellant declaring Nil
income
iv) 26.2.1999 Assessment framed u/s 158BC/143(3) of the Act at an undisclosed
income at Rs.3,88,26,942/-
v) 29.10.1999 CIT(A) restored the aforesaid assessment to the file of AO
vi) 28.3.2002 Assessment framed u/s 158BC/143(3) of the Act at an income of
Rs.5,31,41,480/-
vii) 2.9.2003 CIT(A) partly allowed the appeal of the assessee.
6. In the original assessment order dated 26th February, 1999, at page 2 paragraph 3, the following finding is recorded:-
"3. In response to notices u/s 142(1) and 143(2), Shri Rajesh Girhotra, Advocate attended and filed details from time to time. Written submission have been made as per letters dated 17.2.1999 & 23.2.1999."
4 IT(SS)-514 & 523/Del/2003
7. Thus, as per the finding recorded by the Assessing Officer in the original assessment order dated 26th February, 1999, it is evident that notice under Section 143(2) was served and, in response to such notice, assessee appeared before the Assessing Officer and also filed the written submission. Against the above assessment order, the assessee filed the appeal before the learned CIT(A) but never claimed that notice under Section 143(2) was not served. The CIT(A), vide his order dated 29th October, 1999, restored the aforesaid assessment to the file of the Assessing Officer. Thereafter, fresh assessment was completed on 28th March, 2002. In this assessment order also, at page 1 paragraph 1, the Assessing Officer recorded the finding "Notice u/s 143(2) was issued and served upon the assessee". The assessee filed appeal before the CIT(A). However, no ground was raised against the non-service of notice under Section 143(2). The assessee filed appeal before the ITAT on 7th November, 2003. However, the letter proposing to raise the additional ground was filed for the first time on 27th April, 2009. On this factual backdrop of events, we find that the decision of Hon'ble Jurisdictional High Court in the case of Aravali Engineers P.Ltd. (supra) would be squarely applicable. In the said case, the assessee has sought to raise the additional ground for the first time before the ITAT with regard to non-service of notice under Section 143(2). The ITAT denied to admit such additional ground because the assessee did not raise this plea earlier inspite of opportunity being available. The assessee challenged the decision of the ITAT before Hon'ble Punjab & Haryana High Court, and their Lordships at paragraph Nos.4 to 7 of the order, held as under:-
"4.
4. It may also be mentioned that the assessee raised plea of the assessment being barred by limitation on the ground that notice under section 143(2) of the Act was not served within the stipulated time. The Tribunal held that the assessee did not raise the plea earlier in spite of 5 IT(SS)-514 & 523/Del/2003 opportunity being available and on a question of fact, such a plea could not be allowed to be raised for the first time before the Tribunal. Reference was made to the judgments of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) and Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC).
5. The appeal was admitted by this Court to consider the following substantial questions of law claimed by the assessee :-
"(i) Whether in facts and circumstances of the case the Tribunal had fallen in error in disallowing the appellant from raising an additional issue, contrary to ratio of the Supreme Court in National Thermal v. CIT (supra) when all evidence for adjudicating the same was placed before it ?
(ii) Whether in facts and circumstances of the case the provisions of section 73 could be invoked against the assessee when the assessee was squarely covered by Explanation of section 73 vide which the sale and purchase of shares by a company would not be speculative in nature in case its income was mainly derived from house property or capital gains or income of like nature ?
(iii) Whether in facts and circumstances of the case the Hon'ble Tribunal was right in law in holding that the brokerage paid was not an admissible expenditure under section 24 of the IT Act even though the rent actually received by the assessee or the tenant was after deducting the brokerage paid ?"
6. We have heard learned counsel for the parties.
7. As regards question (i), we do not find any reason to take a view different from the view taken by the Tribunal. No doubt that an appellate authority can allow a question to be raised for the first time even if such a question was not raised at a lower forum but the discretion to do so has to be exercised in the interest of justice in the facts and circumstances and not mechanically. Normally a question of fact may not be allowed to be raised for the first time as 6 IT(SS)-514 & 523/Del/2003 it may prejudice the other side. If such question is raised at the earliest opportunity, the other side can lead evidence which it may not be able to do if such a question is raised for the first time before the appellate authority. Of course, there can be no total bar on such question being allowed, if interest of justice so requires. In National Thermal Power Ltd.'s case (supra) it has not been laid down that in every case a question of fact can be mechanically allowed to be raised for the first time. The Madhya Pradesh High Court in CIT v. Premium Capital Market & Investment Ltd. (2005) 198 CTR (MP) 680 : (2005) 275 ITR 260 (MP) held that question of validity of notice may not be allowed to be raised for the first time in appeal. Subsequent legislative amendment adding section 292BB supports this principle. The question has, thus, to be answered against the assessee."
8. That the ratio of above decision of Hon'ble Jurisdictional High Court would be squarely applicable to the facts of the assessee's case because in the case of the assessee, the original assessment order was passed in the year 1999 in which there is a specific mention of service of notice under Section 143(2). The assessee filed the appeal before the CIT(A) but did not dispute the service of notice under Section 143(2). After the setting aside of the assessment order by the CIT(A), the Assessing Officer again passed the assessment order in the year 2002. In the said assessment order also, there is a mention about the service of notice under Section 143(2). The assessee filed the appeal before the CIT(A) but did not dispute the service of notice under Section 143(2). The assessee filed appeal before the ITAT in the year 2003. However, the assessee sought to raise this additional ground for the first time in 2009. Considering these facts, in our opinion, the above decision of Hon'ble Jurisdictional High Court in the case of Aravali Engineers P.Ltd. would be squarely applicable. We also find that in the aforesaid case, their Lordships have considered the decision of Hon'ble Apex Court in the case of National Thermal Power Co.Ltd. (supra) relied upon by the learned counsel for admission of this 7 IT(SS)-514 & 523/Del/2003 additional ground. The learned counsel for the assessee has also relied upon the decision of Hon'ble Apex Court in the case of Varas International P.Ltd. (supra). However, we find that the facts in the above case were also altogether different. In view of the totality of above facts, we are of the opinion that the decision of Hon'ble Jurisdictional High Court in the case of Aravali Engineers P.Ltd. (supra) would be squarely applicable and, respectfully following the same, we decline to admit the additional ground sought to be raised by the assessee.
9. Ground Nos.1 & 2 of the amended grounds of appeal read as under:-
"1. That having regard to the facts and circumstances of the case learned CIT(A) has erred in law and on facts in not allowing relief out of assessed undisclosed income aggregating to Rs.90,000/- being the amount of returned income in various years as under as these were below the basic exemption limit.
Assessment Year Returned Income Basic Exemption
Limit
1987-88 15,000 18,000
1993-94 25,000 28,000
1994-95 25,000 30,000
1995-96 25,000 35,000
2. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in not allowing relief aggregating to Rs.98,000/- being the amount equal to the basic exemption limits in the following years.
Assessment Year Basic Exemption Limit
1988-89 18,000
1989-90 18,000
1990-91 18,000
8 IT(SS)-514 & 523/Del/2003
1991-92 22,000
1992-93 22,000"
10. At the time of hearing before us, it is submitted by the learned counsel that in four of the assessment years forming part of the block of assessment, the returned/assessed undisclosed income was below the basic exemption limit and, therefore, the same cannot be considered as undisclosed income. In other words, it is submitted by the learned counsel that the rebate for the basic exemption limit is to be allowed because the tax is to be charged on the income above the basic exemption limit. In support of this contention, he relied upon the decision of Hon'ble Rajasthan High Court in the case of Chain Sukh Rathi Vs. CIT - 270 ITR 368 and of Hon'ble Calcutta High Court in the case of CIT Vs. Ashim Krishna Mondal - 270 ITR 160.
11. Learned DR, on the other hand, relied upon the orders of authorities below and she submitted that the facts of the case relied upon by the learned counsel are not at all applicable to the assessee's case because the assessee has not filed the regular return of income. While, in the case cited by the learned counsel, the assessee had filed the regular returns. She, therefore, submitted that the order of learned CIT(A) in this regard may be sustained.
12. We have carefully considered the submissions of both the sides and perused relevant material placed before us. So far as ground No.1 is concerned, we find this issue to be squarely covered in favour of the assessee by the decision of Hon'ble Calcutta High Court in the case of Ashim Krishna Mondal (supra), wherein their Lordships, after considering the amendment in Section 158BB, held that the income below the taxable limit of the previous year could not be included as 9 IT(SS)-514 & 523/Del/2003 undisclosed income for the block period. The relevant portion of the decision of their Lordships at page 162 of ITR 270 reads as under:-
"In the present case, when the learned Tribunal had given its decision, this amendment was not there. It seems that the learned Tribunal had correctly interpreted the law and given a right decision in excluding the income for the years below the taxable limit as was held in M.M. George [2002] 254 ITR 45 by the Kerala High Court. The amendment so brought about has since been given effect from July 1, 1995, viz., before such search and seizure was held. Therefore, the amendment should be deemed to have been in the statute at the time when search and seizure were held and such benefit that has been given to the assessee by the Tribunal can be said to be justified and in accordance with law. Similar question arose in CIT v. M.M. Thomas [2004] 265 ITR 327 again before the Kerala High Court where it was held that since the search under section 132 of the Income-tax Act, 1961, was conducted on November 22, 1995, that is after the retrospective amendment of sub-clause (B) of clause (c) of sub-section (1) of section 158BB, the income below the taxable limit of a previous year could not be included as undisclosed income of the block period."
13. Learned DR has objected to application of the above decision on the ground that the facts in the case of the assessee are altogether different than the facts before the Hon'ble High Court. We find that the decision of Hon'ble High Court is purely based upon the interpretation of provisions of Section 158BB specially the amendment therein by the Finance Act, 2005 with retrospective effect from 1st July, 1995. Therefore, the above decision would be applicable in the case of the assessee also. We, therefore, respectfully following the above decision of Hon'ble Calcutta High Court as well as the amended provisions of Section 158BB((1)(c)(b), allow ground No.1 of the assessee's appeal.
10 IT(SS)-514 & 523/Del/2003
14. In so far as ground No.2 is concerned, we find the same to be covered in favour of the assessee by the decision of Hon'ble Rajasthan High Court in the case of Chain Sukh Rathi (supra). In the above mentioned case, their Lordships have discussed this issue at page 372 of ITR 270. The relevant portion of the same reads as under:-
"Mr. Jhanwar, learned counsel for the assessee submits that in view of the provisions of section 158BB the income should be computed in accordance with the provisions of this Act and the income exempted to that extent should not be taxed.
The reading of section 158BB is as under :
"Computation of undisclosed income of the block period. - Amendment has been made by inserting the following words 'in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence."
When some material was seized connecting the concealed income, the Income-tax Officer can compute the income on that basis but that should be computed and taxed in accordance with the provisions of the Act, 1961, therefore, the tax exemption limit has to be kept in mind and to that extent, income not chargeable to tax, tax should not be charged on that part of the income.
We agree with Mr. Jhanwar that concealed income should be computed in cases of search in accordance with the provisions of section 158BB and after computing the total concealed income, it should be taxed as per the rates specified for the concealed income, in each year."
15. No contrary decision has been brought to our knowledge but the learned DR objected to the application of this decision also on the ground that the facts of the assessee's case are different. However, we are unable to agree to this submission of the learned DR because 11 IT(SS)-514 & 523/Del/2003 this decision is also based upon the interpretation of Section 158BB. In view of the above, we direct the Assessing Officer to allow appropriate relief to the assessee as per the above decision of Hon'ble Rajasthan High Court. With this observation, ground No.2 of the assessee's appeal is disposed of.
16. Ground No.3 of the assessee's appeal reads as under:-
"That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in not giving relief of Rs.11,19,355/- being the amount of income earned during the year of search which can not be treated as undisclosed income."
17. At the time of hearing before us, the learned counsel for the assessee fairly submitted that though in the grounds of appeal, the relief claimed is `11,19,355/-, but, actually, the assessee is claiming the relief of only `79,355/-. He fairly admitted that for AY 1997-98, the assessee did not file any regular return of income either before the search or after the search. That in respect of the amount of `79,355/-, the tax was deducted at source and therefore, to that extent, the income of `79,355/- should not be considered as undisclosed income because the tax has already been paid by the assessee by way of tax deduction at source. In support of his contention, he relied upon the decision of Hon'ble Punjab & Haryana High Court in the case of Rajesh Syal Vs. CIT - [2009] 185 TAXMAN 369 (P & H) and of Hon'ble Delhi High Court in the case of CIT Vs. A.T. Invofin India P.Ltd. and others - [2011] 335 ITR 370 wherein it was held that if the assessee has paid the advance tax, it can be treated as disclosure of income by the assessee.
12 IT(SS)-514 & 523/Del/2003
18. Learned CIT-DR submitted that the assessee had income of more than `10 lakhs for AY 1997-98 and he did not file the return either before or after the search. No disclosure in any other manner was made by the assessee. The assessee has not paid any advance tax or self assessment tax. That merely because some TDS was deducted by the payee, it cannot be presumed that the income is disclosed by the assessee so as to exclude the same from the undisclosed income under Chapter XIV-B. She also stated that in both the cases relied upon by the learned counsel, the Hon'ble Courts have accepted the assessee's contention on the ground that the payment of advance tax can be considered the disclosure of income by the assessee.
19. We have carefully considered the arguments of both the sides and perused relevant material placed before us. Hon'ble Delhi High Court in the case of A.T. Invofin India P.Ltd. and others (supra) relied upon by the learned counsel held as under:-
"Held, allowing the appeal, that the search had taken place after the last date of filing the return under section 139(1) of the Act. There was no overt act on the part of the assessee which would indicate that the assessee had the intention to disclose the income. On the contrary, it was only after the documents relating to the sale of shares leading to income in the form of long-term capital gains were seized during the search on January 13, 2000, that the return was filed on March 31, 2000, disclosing this transaction. The provisional balance-sheet in the possession of the assessee at the time of search would not meet the test of "disclosure". The overt act has to be of the nature from which it can be concluded that the assessee had disclosed the income to the Department before the date of search in some form like payment of advance tax, etc. It could not be said that the assessee had made disclosure of the long-term capital gains before the date of search and as the time for filing the return had expired by that time, the provisions of section 158BB(1)(c) of the Act were rightly applied by the Assessing Officer."
13 IT(SS)-514 & 523/Del/2003
20. Similar view is expressed by Hon'ble Punjab & Haryana High Court in the case of Rajesh Syal (supra) relied upon by the learned counsel. However, the facts of the assessee's case are altogether different. For AY 1997-98, though the assessee had income of more than `10 lakhs, he did not file any return at all. The assessee has not paid any advance tax. Therefore, there was no overt act on the part of the assessee which would indicate that the assessee had the intention to disclose the income. Therefore, on the facts of the assessee's case, both the above decisions relied upon by the learned counsel would be in favour of the Revenue rather than the assessee. That merely because TDS is deducted by a third party, which he was obliged to deduct under the statute, cannot be indicative of the intention of the assessee to disclose the income. In view of the above, we find no merit in ground No.3 of the assessee's appeal. The same is rejected.
21. Ground Nos.4, 6, 7 & 8 of the assessee's amended grounds of appeal read as under:-
"4. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in sustaining the addition on account of profit from the deals of Gopal Das Estate & Housing Pvt.Ltd., and that too in the hands of the appellant whereas it was not the appellant in individual capacity who earned the same and therefore, such profit ought Not to have been taxed in the hands of the appellant.
4.1 That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in holding that profit arising from M/s Gopal Das Estate & Housing (P) Ltd. was Rs.2,47,85,040/- wherein it was quite less than the said amount.
6. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in 14 IT(SS)-514 & 523/Del/2003 confirming the disallowance of Rs.60,00,000/- being the amount of commission paid to M/s North India Iron India & Steel Co.Ltd. (NIISCO).
7. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in sustaining the disallowance of Rs.19,99,000/- out of commission paid to Mr. Tara Chand, Mr. Balbir and Mr. Sunder and their associates.
8. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in not allowing the deduction of Rs.12,00,000/- on account of miscellaneous expenses claimed by the assessee."
22. Though by these grounds of appeal the assessee has claimed substantial deductions from the profit from land deals, however, at the time of hearing before us, the learned counsel restricted the claim of deductions from all these grounds to `19,83,350/- only, the details of which are as under:-
Sr.No. Nature Assessment Year Assessment Year Total 1996-97 (Page 1997-98 (Page 161 of Paper 163 of Paper Book-I) Book-I)
1. Commission paid to 10,83,350/- ---- 10,83,350/-
Northern India iron and
Steel Co.Ltd. (hereinafter
referred to "NIISCO" (B1)
2. Brokerage paid to Tara 2,00,000/- 5,00,000/- 7,00,000/-
Chand, Sh. Balbir, Sh.
Suresh and their
associated people (B2)
3. Expenses incurred in 1,20,000/- 80,000/- 2,00,000/-
documentation,
conveyance,
entertainment, obtaining
revenue records of sellers
of land (B3)
Total B=B1+B2+B3 14,03,350/- 5,80,000/- 19,83,350/-
15 IT(SS)-514 & 523/Del/2003
23. Ground No.1 of the Revenue's appeal which is also related to these grounds reads as under:-
"On the facts and circumstances of the case, whether the Commissioner of Income Tax (Appeals) was right in law :-
(i) in directing that the share of profit earned by Sh.
Ram Kanwar the assessee should be brought to tax out of addition of Rs.2,12,68,390/- as profit from M/s Gopal Dass Estate & Housing (P) Ltd."
24. The facts of the case are that search and seizure operation under Section 132 was carried out at the residence of the assessee i.e. Shri Ram Kumar on 18.02.1997. During the course of search, various documents/loose papers were found and seized. From those documents, it was gathered by the Assessing Officer that the assessee alongwith his brother, wife and sons had paid advance to purchase the land admeasuring to 80 acres in Village Wazirabad and Bindapur. In the original assessment order dated 26.2.1999 at page 3, the Assessing Officer had given the details of the advance given by the assessee and various family members. Later on, these lands were sold to M/s Gopal Dass Estates & Housing (P) Ltd. and the assessee and his brothers received commission from M/s Gopal Dass Estates & Housing (P) Ltd. amounting to `2,47,85,040/-. That the family members of the assessee had disclosed the income of `1,43,66,105/- under the VDIS. The Assessing Officer allowed the credit for the same for which at paragraph 22 of the order, he recorded the following finding:-
"22. Certificates have been issued in January 1998 by the worthy Commissioner of Income Tax, Range. Therefore credit of Rs.1,43,66,105/- is to be given while determining the undisclosed income of the assessee in form of profits from M/s Gopal Dass Estates Pvt.Ltd."
16 IT(SS)-514 & 523/Del/2003
25. The Assessing Officer also allowed the deduction of `18 lakhs paid to Tara Chand, Balbir, Suresh and their associates by cheque. It may be clarified that the assessee and his associates had claimed the payment of commission of `60 lakhs + `42 lakhs by them to various persons. The Assessing Officer had allowed only `18 lakhs which was paid by cheque. The assessee had already disclosed the income of `17,16,650/- in the block assessment. In view of the above, the Assessing Officer made the addition of `69,02,285/- as profit from M/s Gopal Dass Estates & Housing (P) Ltd. The assessee filed appeal before the CIT(A) who, vide order dated 29.10.1999, restored the assessment to the file of the Assessing Officer. The Assessing Officer made fresh assessment vide order dated 28th March, 2002. In this order, the Assessing Officer determined the profit from M/s Gopal Dass Estates & Housing (P) Ltd. at `2,12,68,390/-. In the fresh assessment order, the Assessing Officer denied to allow the rebate for the income disclosed under the VDIS by the family members with the following finding:-
"Photocopies of the certificates under section 68(2) of the VDIS issued in favour of the above named family members of Shri Ram Kanwar were also filed at the time of framing original assessment and credit of the income disclosed under VDIS by the family members of the assessee was claimed out of the profits from M/s Gopal Dass Estate & Housing Pvt.Ltd. contention of the assessee on this point was rejected by my predecessors on the following grounds :
As the assessee has not brought anything new on record and has simply repeated the same story which he did at the time of framing original assessment, there is no reason to diverge from the view taken by my predecessor on this point. Hence, no deduction out of these is allowed from the profit of Rs.2,47,85,040/-. As such, the addition of Rs.2,12,68,390/- as was made at the time of framing original assessment is made on account of profit from M/s 17 IT(SS)-514 & 523/Del/2003 Gopal Dass Estate (P) Ltd., in the undisclosed income of the assessee, Shri Ram Kanwar."
(emphasis by underlining provided by us)
26. The assessee, aggrieved with the order of the Assessing Officer dated 28th March, 2002, filed appeal before the learned CIT(A) who held as under:-
"17.5 It is a fact that the AO has not brought out anything on record - there is not an iota of evidence - which could show that the investments in the hands of the various family members were made by the appellant, and that the land actually belonged to the appellant and not to be different family members. The onus was entirely on the AO to bring forth all necessary evidence to substantiate his conclusion that the entire profits were to be taxed in the hands of Sh. Ram Kanwar and that all the deposits in the bank accounts in the form of cash and cheque represented income of the appellant. Unfortunately the AO has failed to discharge the onus. There is no evidence which can even remotely suggest that the appellant was the de-facts owner of the properties, that the appellant had made investment in the properties and therefore, all incomes arising there from would be his income. By simply stating that the appellant was in the fore front of all negotiations and that other members did not have income, the AO could not be under the law and on facts burden the appellant with all the incomes arising out of the transactions carried out by the different members of the family and to go further and tax all the monies deposited in the bank accounts of the family members in cash and cheque as undisclosed income of the appellant. Under the circumstances the conclusion arrived at by the AO cannot be upheld and the AO is directed to recompute the income segregating and excluding the profits earned by the other family members from the income of the appellant."
27. The Revenue, aggrieved with the above finding of learned CIT(A), is in appeal before us vide ground No.1 of its appeal.
18 IT(SS)-514 & 523/Del/2003
28. We have heard the arguments of both the parties and their arguments are carefully considered. It is not in dispute that various family members including the assessee had entered into an agreement for purchase of the land in Village Wazirabad and Bindapur. At page 3 of the assessment order, the Assessing Officer has given the details of the advance given by various family members which read as under:-
"The advance given by each of the persons to respective sellers is as under :-
Sr.No. Name of Person Amount of advance
1. Sh. Raj Kumar S/o Sh. Nathan Singh 49,46,990/-
2. Sh. Vijay Pal S/o Sh. Ram Kanwar 35,45,570/-
3. Smt. Kiran W/o Sh. Raj Kumar 19,39,410/-
4. Sh. Ram Kumar S/o Sh. Nathan 31,43,580/-
5. Sh. Sahib Ram S/o Sh. Ram Kanwar 30,27,240/-
Total 1,66,02,790/-"
29. From the above, it is evident that out of the total advances given for purchase of land at `1,66,02,790/-, the advance given by the assessee is only `31,43,580/-. That the commission was received by various family members including the assessee and in the original assessment order, the Assessing Officer, after considering the income disclosed by the family members in VDIS, assessed only the income of Shri Ram Kumar. That after the set aside in the second assessment order dated 28th March, 2002, the Assessing Officer observed to take the view similar to the view taken by the Assessing Officer in the original order. He observed "There is no reason to diverge from the view taken by my predecessor on this point". However, he misread the original assessment order because in the original order, the Assessing Officer himself determined the income of the assessee after reducing from the gross commission the income declared by the family members under VDIS. Therefore, even as per the view of the Revenue, 19 IT(SS)-514 & 523/Del/2003 the income of the assessee only was to be assessed in the hands of the assessee and not of the family members. Even otherwise, it is a settled law that in the case of the assessee, only his income can be assessed and not the income of the family members. If the Revenue is of the opinion that the family members are the benami of the assessee, then the onus was upon the Revenue to establish so. That no evidence is brought on record by the Assessing Officer to establish that the other family members were benami of Ram Kumar. On the other hand, in the original assessment order, the Assessing Officer himself accepted that income of only Ram Kumar is to be assessed in his hands and not the income of family members. In the set aside assessment order, the Assessing Officer himself stated that there is no reason to take a different view than the view taken in original assessment order. In view of the totality of above facts, we do not find any infirmity in the direction of learned CIT(A) for excluding the profit earned by other family members from the income of the appellant. Accordingly, we reject ground No.1 of the Revenue's appeal.
30. Now, we come to ground Nos.6 to 8 of the assessee's appeal wherein assessee has claimed the deduction for commission paid to various persons and also the miscellaneous expenses claimed to have been incurred in respect of land deals. As per grounds of appeal, the assessee has claimed the deduction of `60 lakhs + `9.99 lakhs + 12 lakhs. However, at the time of hearing before us, the assessee restricted its claim to the proportionate deduction in respect of commission paid/expenses incurred which in total amounted to `19,83,350/-.
31. We have heard the arguments of both the sides and perused relevant material placed before us. The assessee alongwith his family members entered into an agreement for purchase of some 80 acres of 20 IT(SS)-514 & 523/Del/2003 land at Village Wazirabad and Bindapur. However, before the assessee and family members got the land transferred in their names, they could find a buyer for a higher value and instead of getting the land transferred in his or family member's name, they got the land transferred directly in the name of such buyer viz., M/s Gopal Das Estate & Housing (P) Ltd. and received commission from M/s Gopal Das Estate & Housing (P) Ltd. Admittedly, incurring of some expenditure by the assessee and family members on brokerage/commission at the time of purchase of land i.e. agreement to purchase, and transfer of land to M/s Gopal Das Estate & Housing (P) Ltd. cannot be ruled out. Similarly, incurring of the expenditure on conveyance, documentation, obtaining revenue records of the sellers etc. cannot be ruled out. The assessee has not maintained complete details of these expenditure incurred by him and his family members. The matter is quite old i.e. pertaining to the block period of 1.4.1987 to 18.2.1997 and therefore, the chances of getting any further information in this regard would be negligible. Considering the totality of all facts and arguments of both the sides, in our opinion, it would meet the ends of justice if the deduction of `10 lakhs is directed to be allowed to the assessee as against `19,83,350/- claimed by the assessee, for brokerage, commission and other expenses.
32. Ground No.2 of the Revenue's appeal reads as under:-
"On the facts and circumstances of the case, whether the Commissioner of Income Tax (Appeals) was right in law :-
(ii) in directing that the addition in respect of bank accounts found in the name of family members be deleted."
21 IT(SS)-514 & 523/Del/2003
33. We have heard the arguments of both the sides and perused relevant material placed before us. In this regard, learned CIT(A) has recorded the following finding:-
"The AO shall also exclude all the cash and cheque deposited in the accounts of the different members of the family which have been taken as the income of the appellant. While recomputing the income the AO shall also take into account the bank account with the Union Bank of India, Gurgaon - account No.3233 - wherein it can be seen that there is no deposit of Rs.29,50,000/- and it is also apparent from the account that a sum of Rs.8,05,600/- has been added twice in the financial year 1993-94. While recomputing the income the AO is directed to take note of his reply in para (a) and (b) of his submissions dated 27.08.2003 wherein it has been stated that the only deposit was of Rs.3095 on 27.3.1996 in account No.3233, Union Bank of India, Gurgaon which was closed on 23.07.1996. The AO vide its letter has also placed on record the letter of Corporation Bank, Gurgaon wherein it has been certified that a cheque of Rs.4,02,800/- was returned unpaid on 15.06.2003."
34. After considering the arguments of both the sides and the facts of the case, we do not find any infirmity in the above direction of learned CIT(A). That the cash/cheque deposited in the bank account of various family members is to be considered in their hands and if any part remains unexplained, then the addition, if any, can be made in their hands. The bank accounts of various family members cannot be added in the hands of the assessee unless the Revenue proves that these bank accounts were benami accounts of the assessee. It is a settled law that the onus of establishing that the bank accounts in the name of family members are benami accounts of the assessee is upon the Revenue. The Revenue has not brought on record an iota of evidence to establish that these bank accounts in the name of various family members were the bank accounts belonging to the assessee. In view of the above, the direction of the CIT(A) to the Assessing Officer 22 IT(SS)-514 & 523/Del/2003 to exclude the cash and cheque deposited in the accounts of different members of the family cannot be said to be unjustified or incorrect. We, therefore, find no merit in ground No.2 of the Revenue's appeal. The same is rejected.
35. Ground No.9 of the assessee's appeal reads as under:-
"9. That having regard to the facts and circumstances of the case, ld.CIT(A) has erred in law and on facts in not giving credit of Rs.1,43,66,105/-0 being the income disclosed under VDIS 1997 by the family members of the appellant."
36. We have heard the arguments of both the sides and perused relevant material placed before us. When the CIT(A) has already directed to consider the income of the assessee only from the land dealing business, the question of giving credit of the income declared by various family members in the VDIS does not arise. Therefore, ground No.9 of the assessee's appeal is infructuous. The same is rejected.
37. Ground No.10 of the assessee's appeal reads as under:-
"10. That having regard to the facts and circumstances of the case, ld.CIT(A) has erred in law and on facts in confirming the disallowance of Rs.1,00,000/- paid to Mr. Tara Chand as commission."
38. At the time of hearing before us, no specific arguments were advanced in this regard and moreover, while dealing with ground Nos.6, 7 & 8 of the assessee's appeal, we have already directed to allow the deduction for the commission paid to the brokers and other miscellaneous expenses relating to land dealing business at `10 lakhs, 23 IT(SS)-514 & 523/Del/2003 therefore, no separate relief is due by ground No.10. The same is rejected.
39. Ground No.11 of the assessee's appeal reads as under:-
"That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in confirming the charging interest u/s 158BFA(1)."
40. At the time of hearing before us, the learned counsel fairly admitted that this ground is consequential. We, therefore, direct the Assessing Officer to recompute the interest, if any, in accordance with law after final determination of the income.
41. In the result, the appeal of the Revenue is dismissed while the appeal of the assessee is partly allowed.
Decision pronounced in the open Court on 8th August, 2014.
Sd/- Sd/-
(ABY T. VARKEY)
VARKEY) (G.D. AGRAWAL)
AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 08.08.2014
VK.
Copy forwarded to: -
1. Appellant : Shri Ram Kumar,
Village Nathupur, Gurgaon.
2. Respondent : Assistant Commissioner of Income Tax, Gurgaon Circle, Gurgaon.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar