Income Tax Appellate Tribunal - Pune
Assistant Commissioner Of ... vs Mrs. Sharon Ashok Ranpise,, Pune on 23 January, 2018
आयकर अपील
य अ धकरण] पण
ु े यायपीठ "बी" पण
ु े म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE MS. SUSHMA CHOWLA, JM AND
SHRI ANIL CHATURVEDI, AM
आयकर अपील सं
. / ITA No.2187/PUN/2013
नधा रण वष / Assessment Year : 2008-09
Asst. Commissioner of Income Tax, .......... अपीलाथ /
Central Circle 2(2), Pune. Appellant
बनाम v/s
Mrs. Sharon Ashok Ranpise, .......... यथ /
Flat No.701 to 704, Jasmine
Respondent
Building, Flower Valley,
Wanworie, Pune - 411 040.
PAN : AFHPR1986B.
Assessee by : Shri Sunil V. Shinde.
Revenue by : Smt. Nirupama Kotru.
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 16.01.2018 Date of Pronouncement: 23.01.2018
आदे श / ORDER
PER ANIL CHATURVEDI, AM :
1. This appeal filed by the Revenue is emanating out of the order of Commissioner of Income Tax (Appeals) - Central, Pune dt.30.09.2013 for the assessment years 2008-09.
2. The relevant facts as culled out from the material on record are as under :-
2.1 Assessee is an individual stated to be engaged in Fashion Designing. A search action u/s 132 of the Act was conducted on 18.11.2009 at Flat Nos.701 to 704, Jasmine Building, Flower Valley, Wanowrie, Pune occupied by Shri Ashok Babanrao Ranpise, Mrs. 2 Sharon A Ranpise and other family members. As there was warrant in the name of the assessee, notice u/s 153A of the Act was issued to the assessee on 26.08.2010 in response to which, assessee filed her return of income declaring total income of Rs.9,87,576/-. Thereafter, the case was taken up for scrutiny and assessment was framed u/s 143(3) r.w.s. 153A of the Act vide order dt.30.12.2011 and the total income was determined at Rs.1,68,67,580/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide consolidated order dt.30.09.2013 for A.Y. 2004-05 to A.Y. 2010-11) (in appeal No.PN/CIT(A)-CENTRAL/ACIT Cent. Cir.2(2)/181,182,183,184, 185,186,187/2011-12) granted substantial relief to the assessee.
Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us for A.Y. 2008-09 and has raised the following grounds :
"1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition on account of unexplained credit entry of Rs.7,50,000/- in the bank account of the assessee, on basis of confirmation letter wherein there was nothing to prove the creditworthiness of the lender ?
2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was correct in holding that the renovation cost of four flats is Rs.30,00,000/- as against Rs.1,50,00,000/- estimated by the Assessing Officer ?
3. The order of the Ld.CIT(A) may be vacated and that of the Assessing Officer be restored."
3. First ground is with respect to deleting the addition of unexplained credit of Rs.7,50,000/-.
3.1. During the course of search u/s 132 of the Act at the residential premises of the assessee, certain loose papers were found and seized. As per the loose paper bundle No.6 (containing 91 pages) there were 3 certain entries for the period from 01.02.2007 to 06.02.2008 in respect of Account No.110010100016807 with Axis Bank, Wanowrie Branch and there was a credit entry of Rs.7,50,000/- transferred from Dhariwal Singh on 31.12.2007. AO noted that assessee could not explain the entry being credited in the bank account and he therefore considered it as unexplained income of the assessee and made its addition. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who deleted the addition by observing as under :
"36. Ground-C: This ground pertains to an addition made on account of credit entry in the bank amounting to Rs.7,50,000/-. The AO has discussed this issue in para 07 of the assessment order. He noted that during the search action u/s.132 at the residential premises of the appellant, certain loose papers were found and seized. Page No.48 to 51, 59 to 62 & 78 to 81 of Loose Paper Bundle No.6 showed certain transactions for the period from 01/02/2007 to 06/02/2008 in respect of the Account No.110010100016807 with AXIS Bank,Wanowrie Branch. It was observed from the entries that there was a credit entry of Rs.7,50,000/- transferred from one Dhariwal Singh on 31/12/2007. The AO has noted that the appellant could not explain the said entry. As such, he considered the said amount credited in the bank account as unexplained income of the appellant and added the same to income.
36.1 In her statement of facts, the appellant has contended that she had taken a loan from Mr. Jaqdish Dhariwal of Bangalore. The amount was subsequently transferred from Bangalore to Pune in the Axis Bank via RTGS. It is submitted that the loan was duly reflected in the appellant's return of income filed on 31/03/2009. It is also contended that this fact was duly brought to the notice of the AO through the appellant's written correspondence dated 14th Feb. 2011. Further, on 28/11/2011, a summary of the bank deposits was also submitted to the AO. It is also stated by the appellant that page-wise explanations for the seized material had also been submitted before the Investigation Wing in December, 2009. Upon these facts, the appellant has challenged the addition of the said amount of Rs.7,50,000/-and initiation of penalty proceedings on the basis thereof.
36.2 During the course of appellate proceedings, the appellant has made further written submissions date 31/05/2012 wherein the appellant submitted a confirmation letter dated 21/05/2012 on the letterhead of "J.S. Dhariwal" duly signed by the author of the letter, who has given his address as 204, Silver Oaks, Vittal Mallya Road, Bangalore, in confirmation of having advanced Rs.7,50,000/- to his sister in law Mrs. Sharon A. Ranpise. The appellant has further filed her balance sheet as on 31/03/2008 which is stated to have been filed with the return of income for A.Y 2008-09 filed on 31/03/2009, a copy of the acknowledgement for having filed the return on the said date is also filed.4
36.3 The above submissions of the appellant along with the supporting evidence filed were forwarded to the AO for his comments on the admissibility as well as the merits of the evidence vide my predecessor's letter dated 11/07/2012 along with the submissions and evidence filed in respect of AY 2004-05 as stated in para 6.7 above. However, there has been no response whatsoever from the AO as stated in that paragraph. Accordingly, the additional evidence filed by the appellant is admitted and after careful consideration thereof, the addition of Rs.7,50,000/- made by the AO is hereby deleted. As such, Ground -C is hereby allowed."
Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us.
4. Before us, Ld.D.R. submitted that during the course of assessment proceedings the assessee was asked to explain the credit entry of Rs.7.50 lacs which has been transferred from Dhariwal Singh. She submitted that assessee could not explain the entry. Ld.D.R. further submitted that Ld.CIT(A) granted relief only on the basis of the confirmation letter. From the order of Ld.CIT(A), she pointed that the confirmation was on the letter head of "J.S. Dhariwal" and there was no evidence to show that "J.S. Dhariwal" and "Dhariwal Singh" are one and the same persons. Ld.D.R. further submitted that before Ld.CIT(A) assessee has submitted that she has taken loan from Jagadish Dhariwal. She therefore submitted that there are inconsistencies in the submissions of the assessee and assessee has not proved the genuineness of the transaction and therefore the order of AO be upheld. She further submitted that merely by submitting the confirmation letter, it cannot be stated that assessee has proved the creditworthiness and the other requirements that are required u/s 68 of the Act. She therefore submitted that the addition made by the AO be upheld. Ld.A.R. on the other hand, supported the order of AO. 5 He further submitted that during the course of assessment proceedings and appellate proceedings no question was asked to prove the creditworthiness of the said transaction. In such a situation, no fault can be found with the order of Ld.CIT(A). He thus supported the order of Ld.CIT(A).
5. We have heard the rival submissions and perused the material on record. The issue in the present case is with respect to addition u/s 68 of the Act. The reading of the provision of Sec.68 of the Act makes it clear that the assessee has to prima facie prove (1) the identity of the creditor (2) the genuineness of the transaction and (3) the creditworthiness or financial strength of the creditor. Once these three essential requirements are prima facie proved by the assessee, the onus would shift to the Department. Further merely by establishing the identity of the creditor or any one of the other conditions, the assessee cannot claim to have discharged the initial burden cast upon assessee. The assessee has also to satisfy the Revenue as to the genuineness of the transaction and the creditworthiness of the individual who has advanced amounts. Initial burden is cast upon the assessee to offer an explanation about the nature and source of the money found credited in its bank of accounts and if that explanation is not satisfactory in the opinion of AO, the sum so credited be charged as income for the previous year. It is also a settled law that the fact that the amounts have been transferred through cheque payments does not be itself means that the transactions are genuine. In the present case, it is an undisputed fact that the credit entry of Rs.7,50,000/- was found in the bank account 6 of the assessee and the assessee was asked to explain the credit entry. On failure of the assessee to give any cogent explanation AO made its addition. Ld.CIT(A) deleted the addition as the additional evidences forwarded by him to the AO had remained un-responded by the AO. Before us, no evidence has been furnished by the assessee to prove that she has been able to prove the requirements of Sec.68 of the Act the identity, genuineness and creditworthiness of transaction and has thus complied with. We further find that the Ld.CIT(A) has noted three different names of the creditor namely, "Dhariwal Singh", "Jagadish Dhariwal" and "J.S. Dhariwal". Before us, no material has been placed by the assessee to prove that all these persons are one and the same. In such a situation, we are of the view that the onus cast upon the assessee has not been discharged and therefore the AO was fully justified in making the addition. We therefore set aside the order of Ld.CIT(A) and thus, the ground of the Revenue is allowed.
6. Second ground is with respect to addition of Rs.30 lacs on account of renovation cost of four flats.
6.1. During the course of search action at the residential premises of the assessee, copies of valuation report of flat Nos. 701 to 704, the property belonging to the assessee, was found. It was found that four flats were purchased through separate agreements dt.12.03.2003 and the aggregate purchase cost as per the agreements was Rs.52,74,600/-. The valuation report dt.20.03.2008 of Shri Arvind S. Joshi from A.S. Joshi and Associates showed the valuation of flats at Rs.6,77,65,260/-, the fair market value at Rs.6.51 crores (rounded off) 7 and the realizable value at Rs.6.19 crores. During the course of search, statement of Ashok B. Ranpise was recorded wherein he stated that the valuation of the flats was obtained for the purpose of mortgage of flats to PNB, Kalyaninagar Branch, Pune. AO noticed that there was big difference between price paid to the builder and the price mentioned in valuation report made by the Registered Valuer. He was of the view that the difference in the value was very high and in such a situation the unaccounted investment in the flats cannot be ruled out. The difference of Rs.5.99 crores, according to him, could not be attributed to the appreciation in the investment value of the flats from 01.04.2003 to 20.03.2008. AO on comparison of the specifications given as per the agreements made with the builder and the specifications of the property as per the valuation, concluded that the assessee had spent huge amounts towards beautification of the flats and the interior work and other improvements were carried out after taking the possession because the specifications in the agreements and the valuation report did not match. The difference in the specifications as per the agreements and as per the valuation report is tabulated by the AO in his assessment order. The assessee was asked to reconcile the difference between the values. The submission of the assessee was not found acceptable to the AO. AO considered the difference between the value as shown by the valuer (at Rs.6.19 crores) and the value as per the agreements (Rs.52,74,600/-) of Rs.5,05,62,000/- to be on account of interior decoration and furniture and fixture of the flats. He therefore concluded that assessee has spent certain money which has not been reflected in the books of accounts. In the absence of any data, he 8 considered Rs.1.50 crore as being spent on renovation, which has not been reflected in the return of income and accordingly made its addition. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who granted partial relief by observing as under :
"38.10 I have given careful consideration to all the facts before me. It is the AO's case that the appellant had made a substantial investment in renovation of the flat after the purchase thereof. In the absence of any concrete data, he has estimated the same at an amount of Rs.1,50,00,000/-. As against this, the appellant has contended that the inflated valuation report obtained from the registered valuer was only for obtaining a loan from the bank and apart from the natural appreciation in the market value of the property, there was no substantial difference in the value of the property at the time of its purchase and at the time of obtaining the valuation report. I have considered the rival submissions and am of the view that the contentions of the appellant are not without merit. No doubt the valuer has assigned a value of Rs.6,19,70,000/- to the property and has also made certain specific observations that the flat owner might have spent huge amount towards this beautification of these flats; that although the owner has made for separate agreements with the builders, actually the flat is only one because the passage in between these flats are also in her possession vide allotment letter dated 15/03/2003; that the open terrace above these flats is owned and also 6 car parking spaces are exclusively owned by the owner of the flats and that on the terrace, a servant's quarter is housed. However, apart from the general comment that the house owner might have been spent huge amount towards beautification there is nothing in these observations to substantiate that such huge investment was made by the appellant in renovation of the said flats. The appellant's contention that his inflated valuation report was obtained by him for the purpose of obtaining a substantial loan also cannot be rejected out of hand. The appellant has also submitted that the bank did not attach much credence to this report and only sanctioned a loan of Rs.1,62,85,000/- which, no doubt also factors in the natural appreciation in the market value of the property since its purchase, apart from the improvements made by the appellant. At the same time, however, considering all the material on record including certain specific observations of the valuer, and the difference in specifications which has been brought out in some detail by the AO, I am of the view that an appreciable amount of money must, no doubt, have been invested by the appellant in renovation of/ improvements to the flats. Accordingly, I am of the view that the ends of justice will be met if the investment made by the appellant in the flat is estimated conservatively at Rs.30 lakh. Accordingly, the addition is sustained to this extent. This ground of appeal is thus partly allowed."
Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us.
9
7. Before us, Ld.D.R. took us through the findings of AO and submitted that the modifications made by the assessee in the flats were not reflected in the books of accounts of the assessee and in such a situation, AO was reasonable enough and only made an addition of Rs.1.50 crore. She submitted that the basis of the relief granted by Ld.CIT(A) is also not supported by any evidence and therefore submitted that the order of AO be upheld. Ld.A.R. on the other hand, submitted that no addition is called for in the present case.
8. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to estimation of addition. It is the case of AO that the difference in the value as reported by the Valuer and has reflected in the purchase agreement is on account of the renovation made to the flats and the expenditure towards renovation of flats have not been reflected in the books of accounts. On the other hand, it is assessee's submission that the valuation report was obtained for the purpose of obtaining loan from the bank and it did not reflect the true value of the flat and there were certain errors in the valuation report. In the present case, it is an undisputed fact that addition has been made on the basis of an estimation made by the AO and is not supported by any evidence that was found during the course of search. Ld.CIT(A) restricted the addition to Rs.30 lacs as against Rs.1.50 crore made by the AO. Before us, assessee has also not placed any material on record to substantiate the expenditure incurred by the assessee towards the renovation cost of flats. It is also a fact that against the additions 10 upheld by Ld.CIT(A), assessee is not in appeal. Considering the totality of the facts, we are of the view that the ends of justice shall meet if the addition is restricted to Rs.50 lacs as against Rs.30 lacs made by Ld.CIT(A). We thus direct accordingly. Thus, the ground of the Revenue is partly allowed.
9. In the result, the appeal of the Revenue is partly allowed.
Order pronounced on 23rd day of January, 2018.
Sd/- Sd/-
(SUSHMA CHOWLA) (ANIL CHATURVEDI)
या यक सद!य / JUDICIAL MEMBER लेखा सद!य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 23rd January, 2018.
Yamini
आदे श क# $ त&ल'प अ(े'षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. The CIT(A), Central, Pune.
4. The CIT, Central, Pune.
5 "वभागीय %त%न&ध, आयकर अपील य अ&धकरण, "बी" / DR, ITAT, "B" Pune;
6. गाड, फाईल / Guard file.
आदे शानस ु ार/ BY ORDER // True Copy // व.र/ठ %नजी स&चव / Sr. Private Secretary आयकर अपील य अ&धकरण ,पुणे / ITAT, Pune.