Income Tax Appellate Tribunal - Delhi
Mahinder Kumar Valecha, Faridabad vs Department Of Income Tax on 15 January, 2016
1 ITA No. 6396/DEL /12 & 81/DEL/13
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'F' NEW DELHI
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
AND
SMT SUCHITRA KAMBLE, JUDICIAL MEMBER
I.T.A .No.-6396/Del/2012
(ASSESSMENT YEAR-2010-11)
Mahinder Kumar Valecha vs ACIT
C/o Rakesh Raj & Associates, CA Central Circle-1
D-28, South Extension, Part-1 Faridabad
New Delhi (Respondent)
ADAVP0436E
(APPELLANT)
I.T.A .No.-81/Del/2013
(ASSESSMENT YEAR-2010-11)
ACIT vs Mahinder Kumar Valecha
Central Circle-1 C/o Rakesh Raj & Associates,
Faridabad CA
(APPELLANT) D-28, South Extension, Part-1
New Delhi
ADAVP0436E
(Respondent)
Appellant by Sh. Rakesh Gupta, Adv &
Sh. Somil Agrawal, CA
Respondent by Smt. Nandita Kanchan, CIT
(DR)
Date of Hearing 26.10.2015
Date of Pronouncement
15..01.2016
2 ITA No. 6396/DEL /12 & 81/DEL/13
ORDER
PER SUCHITRA KAMBLE, JM
These appeals are filed by the assessee as well as by the Revenue against the order dated 19/10/2012 passed by Ld. CIT(A)'s Central Gurgaon.
2. The Grounds of appeal raised by the assessee are as follows:-
"1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in upholding the action of the Ld. A.O in making addition of Rs.77,200/- on account of cash found at the residence of assessee, which was not seized, treating the same as undisclosed income.
2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in allowing a rebate of only 1500 gms of jewelry in respect of the entire family, out of 2732.8 gms found but not seized during search, and thereby upholding the addition made by the Ld. A.O of the balance of 1232.8 gms, on account of unexplained investment in jewellery u/s 69 of the Income Tax Act, 1961.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. A.O in making an addition of Rs.88.900/- on account of undeclared business income.
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in upholding the action of Ld. A.O in making addition on account of low drawings made by the assessee for household expenses to the extent of Rs.300000/-.
5. In any view of the matter and in any case the order under appeal is bad in law and against the facts and circumstances of the case.
The Grounds of appeal raised by the revenue are as follows:
"(i) Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition made of Rs.39,37,392/- on account of unexplained jewellery found at the time of search by ignoring the facts that no evidences has been produced by the assessee neither at the time of assessment proceedings not at the time of appellate proceedings to explain the source of jewellery found and which has been accepted by the Ld. CIT(A) also?3 ITA No. 6396/DEL /12 & 81/DEL/13
(ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition on account of law household withdrawals by ignoring the fact that the assessee has not produced any documentary evidence or shown any withdrawals from Bank Account in support of his claim neither at the time of assessment proceedings?
(iii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in directing to adjust the seized cash of Rs.2,00,000/- towards payment of advances tax liability ignoring the fact that section 132B of the Income Tax Act, 1961 clearly requires adjust of seized cash only against the existing liability if any?."
3. The assessee derived income from business and profession as well as income from other sources. Return of income for the A.Y 2010-11 was filed on 21/10/2011 declaring an income of Rs.7,87,070/-. During the course of search and seizure operation conducted at the residence of the assessee, cash amounting to Rs.2,77,200/- was found, out of which cash of Rs.2,00,000 was seized by the authorities as no proper explanation was offered by the assessee. The assessee in his reply submitted that an amount of Rs.2,77,200/- was found as cash out of which Rs.2 lacs was seized and the balance amount was returned. In fact the amount of Rs. 77,200/- found was not seized in view of the same belonging to all family members and out of their past savings and accumulated income. According to assessee, in such a large family consisting of 8 members including very old females, this much of cash jointly belonging to all was quite reasonable and requested the Assessing Officer to accept the source and treat the same as explained. The amount of Rs.2,00,000 which was seized from the assessee was part of total undisclosed income of Rs.8,00,000 declared by the assessee relating to Assessment Year 2010-11 as per letter of declaration-cum-statement u/s 132(4) submitted by the assessee dated 7/9/2009 at the time of search. From the said letter, it was noticed that the cash of Rs.2,00,000 was declared by the assessee in his statement recorded during search proceedings. As far as the matter regarding balance cash of Rs.77,200/- was concerned no documentary evidence in support of his explanation was filed by the assessee. Therefore this amount of Rs.77,200/-
4 ITA No. 6396/DEL /12 & 81/DEL/13was added to total income of the assessee for the assessment year 2010-11. During the course of search proceeding conducted at the residence of the assessee jewellery of Rs.39,37,792/- was found but not seized. Assessee in his letter dated 1/12/2011 submitted that the jewelry found at the residence was belonging to different 9 family members and as per CBDT instruction No. 1194 the jewellery may be treated as out of declare sources. The Assessing Officer considered the submission offered by the assessee but did not find reasonable on grounds that the CBDT instruction is applicable at the time of search operation so that proper benefit of each female member of 500 gram and male member of 100 gram and female child of 250 gram has to be allowed at the time of seizure made by the authorized officer. But during the course of assessment proceedings the assessee explained the source of purchase of jewellery in this case. Assessee did not furnish any evidence with regard to source of investment for purchase of jewellery, therefore, the whole amount of Rs.39,37,792/- was added back in the total of the assessee income u/s 69 of the Income Tax Act, 1961 by the Assessing Officer. As relates to addition of Rs. 88,900/- under Section 44AD of the Income Tax Act, 1961, the Assessing Officer rejected the assessee's contention of falling within the ambit of section 44AD as the assessee was not found involved in construction work as per details furnished and that the assessee was a contractor doing business in the capacity of a partner as well in his individual capacity. The total receipts shown at Rs. 68.89 lacs, therefore, Section 44AD was held not applicable by the AO. As regards the surrendered income for the year under reference the same was not accepted by Assessing Officer as evidence of involvement in construction work was not produced. Therefore, the Assessing Officer proceeded to determine the profit @ 10% instead of 8% leading to the addition of Rs. 88,900/-. As relates to low drawing, the AO made addition of Rs.3,00,000/- stating that no withdrawal was made by assessee from his bank account and considering the total number of family members, estimated the household expenses @ Rs. 25,000/- per month.
5 ITA No. 6396/DEL /12 & 81/DEL/134. The CIT(A) made addition of Rs. 77,200/-, as Rs. 2 lakhs has been surrendered by the assessee. As relates to jewellery of Rs.39,37,792/- the CIT(A) held that in hindu custom gold ornaments are gifted during auspicious occasions. Instruction no. 1916 dated 11.05.1994 of the CBDT, which was also referred to by the assessee, relates to exemptions from seizure to some extent in respect of the family member. It does not however exclude jewellery found from being assessed if sources of acquisition are not satisfactorily explained. The Instruction mentions that in case of person not assessed to wealth tax, gold jewellery and ornaments to the extent of 500 gms. Per married lady, 250 gms. Per unmarried lady and 100 gms. per male member of the family need not be seized. It further provides that having regard to the status of the family and custom and practice of the community to which the family belongs, the officer may exclude a larger quantity of jewellery and ornaments from seizure. Therefore restricted the addition to the balance after giving the benefit of 1500grams and directed the Assessing Officer to work out value of jewellery after giving appeal effect. The CIT(A) has uphold the finding of the Assessing Officer as relates to addition of Rs. 88,900/- under Section 44AD. As relates to low drawing addition of Rs. 3,00,000/- by the AO, the CIT(A) held that this ad hoc estimation added back without any incriminating evidence whether direct or circumstantial cannot be sustain.
5. The AR submitted that Ground No. l relates to addition of Rs. 77,200/- out of the cash found as unexplained which was confirmed by CIT(A). A sum of Rs. 2,77,200/- was found out of which Rs. 2,000,00/- was surrendered for which there is no dispute but the balance amount of Rs.77,200/- which was explained to be past saving of 8 members family was not accepted by any of the authorities. Though Ld. CIT(A) finds force in the argument of the assessee that it is reasonable to have Rs.77,200/- by a family of eight members but in the 6 ITA No. 6396/DEL /12 & 81/DEL/13 same breath she held that there was no necessity to keep cash. It is submitted that family of the assessee consists of super senior citizens of 92 years, 80 years and therefore for such kind of a family to have reasonable amount of cash to meet any medical contingency is not something which is improbable. The family members detail showing super senior citizen in the family was annexed to pg. 60 of the Paper Book filed by the assessee. Ground no. 2 the AR submitted relating to the addition of Rs. 39,37,792/- made by Ld.AO, as unexplained jewellery on the ground that jewellery found at the time of search amounting to Rs.39,37,792 was not explained by the assessee. Ld. CIT (A) has allowed the rebate to the extent of 1500 gms. and confirmed the addition for the balance jewellery. Jewellery weighing 2855.400 gms. were found on the date of search. Assessee was living in joint family consisting of 8 family members and as per CBDT Instruction, the jewellery comes to 2700 gms. and if value of gold of Rs. 1522/gm applicable on the date is applied, it comes to 41.09 lacs as against the value of jewellery of Rs. 39.37 lakhs found during the course of search. Hence there should be no question of any addition on account of jewellery.
Case laws on which reliance is made by the AR as follows:.
CIT vs. MS Aggarwal (HUF) (2008) 11 DTR 169 (MP) CIT vs. Ratanlal Vyaparilal Jain (2010) 45 DTR 290 (Guj.) Rajendra C. Shah vs. Jt. CIT (2007) 158 Taxman 170 (Mum.) Dy.CIT vs. Arjun Dass Kalwani 101 ITD 337 (Jodh.) Smt. Bommana Swama Rekha Vs. Asst. CIT 95 TTJ 885 (Visakha) Sint. Sulochna Devi Jaiswal vs. Dy. CIT 90 TTJ 974 (Jab)
6. The AR further submitted as relates to Ground No.3 that Ld.AO made addition of Rs.88,900/- on the ground that assessee had turnover Rs. 68.89 7 ITA No. 6396/DEL /12 & 81/DEL/13 lakhs on which assessee has declared income at the rate of 8% but section 44AD being not applicable, profit rates of 10% should be applied which comes to Rs.6,88,900/- and since assessee has surrender Rs.6 lakhs, the excess amount of Rs.88,900/- was treated as unexplained income and which was confirmed by CIT(A). Case of the assessee is that assessee is into the business since last several years income from which was being shown u/s 44AD at the rate of 8 % and therefore the same percentage to be applied in the year under appeal. Even if it is assumed that sec 44AD is not applicable, the fact remains that the assessee was showing his income at 8% which was accepted also and thus in year under appeal also, same percentage of profit be applied, more so when there is no basis or evidences for applying higher rate of 10%. Next contention of the appellant is that assessee has made surrender of Rs.2 lakhs also on account of cash found which should be telescoped against the said addition of Rs. 88,900/-. The copies of return/assessment order of the assessee accepting 8% profits were annexed to pg. 6 to 32 of the Paper Book filed by the assessee. As relates to Ground No.4 the AR submitted that since CIT(A) has deleted the addition, hence not aggrieved.
7. The AR further submitted that First ground of departmental appeal is common with Ground No. 2 of the assessee's appeal. GROUND NO.2 it relates to the addition of Rs.3,00,000/- deleted by Ld. CIT(A)Ld. A.O. has discussed this issue in Para--8 of the assessment order whereas Ld. CIT(A) has discussed this issue in Para 8 at Page 8-9 of the CIT(A)'s order. The AR submitted that there was no adverse evidence and the addition was made on estimate and that the total withdrawal by the family members was Rs. 3,48,000/- The chart given to Ld. A.O. which shows that total withdrawal was more than the withdrawals made in earlier years. The cash flow chart of various members of the family showing the amount of withdrawal was annexed to pg. 41 to 45 of the Paper Book filed by the assessee. As relates to GROUND NO.3 it relates to the adjustments of seized cash towards the advance tax liability. Ld. CIT(A) has discussed this issue in Para--9 and case laws 8 ITA No. 6396/DEL /12 & 81/DEL/13 mentioned therein.
8. The DR relied upon the Assessment order and stated that the assessing Officer has passed proper order. As relates to Section 44AD the DR submitted that contradictory statement was made and therefore the AO has rightly stated that it is not covered under Section 44AD of the Income Tax Act, 1961. Ad hoc 8% cannot be taken into account as books of account not maintained. As relates to Department's appeal, the DR submitted that the CIT(A) has wrongly deleted the addition made by the AO on the jewellery restricting the same as to the balance after giving the benefit of 1500 grams only and while giving the appeal effect, the value of the jewellery may be worked out. The DR further submitted that the deletion of house hold withdrawals to the restriction of Rs.77,200/- and adjusting the seizure cash of Rs.2,00,000/- is also not correct as assessee could not produce any evidence to that effect.
9. We have perused all the records and proceedings as well as heard both the parties. It is pertinent to note that as relates to addition sustaining to Rs. 77,200/- out of cash of Rs.2,77,200/- was properly explained by the assessee and there was case made out to the extent that there were several members in the family who would require the medical assistance at any time. The fact that Rs.2,00,000/- was surrendered by the assessee should be in support of the assessee and hence the said addition of Rs.77,200/- is allowable and AO as well as CIT(A) has overlooked the said factor. As relates to the Gold jewelllery the CIT(A) has rightly directed the AO restricting the same as to the balance after giving the benefit of 1500 grams only and while giving the appeal effect, the value of the jewellery may be worked out. As relates to the addition of Rs. 88,900/- on account of undeclared business income, the CIT(A) has justified its finding by stating that AO has come to the conclusion on the basis of the seized documents which was not challenged by the assessee at any point of time. The addition on account of low drawings made by the assessee for 9 ITA No. 6396/DEL /12 & 81/DEL/13 household expenses to the extent of Rs. 3,00,000/- are properly dealt by the CIT(A). Therefore, the appeal of the assessee in respect of ground no. 1 is allowed. As relates to Ground no. 2, 3, 4 are dismissed. The appeal of the Revenue is dismissed in view of the findings given in respect of assessee's appeal.
10. In result, the appeal of the assessee is partly allowed for statistical purpose and the appeal of the Revenue is dismissed.
The order is pronounced in the open court on 15th of January, 2016.
Sd/- Sd/-
(INTURI RAMA RAO) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 15/01/2016
R. Naheed*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date
1. Draft dictated on 26.10.2015 PS
2. Draft placed before author 27.10.2015 PS
10 ITA No. 6396/DEL /12 & 81/DEL/13
3. Draft proposed & placed before .10..2015 JM/AM
the second member
4. Draft discussed/approved by JM/AM
Second Member.
5. Approved Draft comes to the 15 .01.2016 PS/PS
Sr.PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
15.01.2016
8. Date on which file goes to the AR
9. Date on which file goes to the
Head Clerk.
10. Date of dispatch of Order.