Income Tax Appellate Tribunal - Mumbai
Abhishek Lodha, Mumbai vs Dcit Cen Cir 7(3), Mumbai on 19 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL "B ", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM ITA No.5554/Mum/2015 (Assessment Year :2011-12) Shri Abhishek Lodha Vs. DCIT, Central Circle th 412, 4 Floor 7(3) (Erw. CC-42) 17G, Vardhman Chamber Mumbai Cawasji Patel Road Horniman Circle, Fort, Mumbai - 400 001 PAN/GIR No. ABWPL7723N Appellant) .. Respondent) ITA No.5555/Mum/2015 (Assessment Year :2011-12) Shri Abhinandan Lodha Vs. DCIT, Central Circle th 412, 4 Floor 7(3) (Erw. CC-42) 17G, Vardhman Chamber Mumbai Cawasji Patel Road Horniman Circle, Fort, Mumbai - 400 001 PAN/GIR No. ABWPL7722P Appellant) .. Respondent) ITA No.5556/Mum/2015 (Assessment Year :2011-12) Mrs. Sheetal Abhinandan Lodha Vs. DCIT, Central Circle 412, 4th Floor 7(3) (Erw. CC-42) 17G, Vardhman Chamber Mumbai Cawasji Patel Road Horniman Circle, Fort, Mumbai - 400 001 PAN/GIR No. BDCPS7295H Appellant) .. Respondent) ITA No.5557/Mum/2015 (Assessment Year :2011-12) Mrs. Manjula Mangal Prabhat Vs. DCIT, Central Circle Lodha 7(3) (Erw. CC-42) 412, 4th Floor Mumbai 17G, Vardhman Chamber Cawasji Patel Road Horniman Circle, Fort, Mumbai - 400 001 PAN/GIR No. ACCPL5846M Appellant) .. Respondent) 2 ITA No.5554/Mum/2015 and other appeals ITA No.5578/Mum/2015 (Assessment Year :2011-12) Shri Mangal Prabhat Lodha Vs. DCIT, Central Circle th 412, 4 Floor 7(3) (Erw. CC-42) 17G, Vardhman Chamber Mumbai Cawasji Patel Road Horniman Circle, Fort, Mumbai - 400 001 PAN/GIR No. AABPL6198L Appellant) .. Respondent) ITA No.5596/Mum/2015 (Assessment Year :2011-12) DCIT, Central Circle Vs. Smt. Sheetal Lodha 7(3) (Erw. CC-42) 216, Shah & Nahar Industrial Mumbai Estate, Off. Dr. E. Moses Road Worli, Mumbai - 18 PAN/GIR No. BDCPS7295H Appellant) .. Respondent) ITA No.5597/Mum/2015 (Assessment Year :2011-12) DCIT, Central Circle Vs. Smt. Manju Mangal Prabhat 7(3) (Erw. CC-42) Lodha Mumbai 216, Shah & Nahar Industrial Estate, Off. Dr. E. Moses Road Worli, Mumbai - 18 PAN/GIR No. ACCPL5846M Appellant) .. Respondent) ITA No.5598/Mum/2015 (Assessment Year :2011-12) DCIT, Central Circle Vs. Shri Mangal Prabhat Lodha 7(3) (Erw. CC-42) 216, Shah & Nahar Industrial Mumbai Estate, Off. Dr. E. Moses Road Worli, Mumbai - 18 PAN/GIR No. AABPL6198F Appellant) .. Respondent) Assessee by Shri Jitendra Jain / Shri Ravikant S. Pathak Revenue by Shri Manjunatha Swamy Date of Hearing 21/03/2018 Date of Pronouncement 19/06/2018 3 ITA No.5554/Mum/2015 and other appeals आदे श / O R D E R PER R.C.SHARMA (A.M):
These are the cross appeals filed by assessee and Revenue against the order of CIT(A)-48, Mumbai dated 30/09/2015 for A.Y.2011-12 in the matter of order passed u/s.153 A r.w.s. 143(3) of the IT Act.
2. Common grounds have been taken by all the assessees. The following grounds taken by the assessee in ITA No.5554//Mum/2015 reads as under:-
1) On the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the Assessment order as the PAN was not transferred to the new jurisdiction even on the date of the order.
2) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs 12,50,000 on account of watches found during the search and seizure action, ignoring the fact these were part of the watches worth Rs 18,46,390 declared by the by the 'Lodha Group' company M/s Shreeniwas Cotton Mills Ltd, before the Income tax Settlement Commission.
3) On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs.28,716 being the value of 30.48 cts of diamond jewellery as unexplained investment of the appellant, ignoring the fact that this 30.48 cts. forms part of the 287.58 cts of diamond jewellery offered by the 'Lodha Group' company M/s Shreeniwas Cotton Mills Ltd, before the Income tax Settlement Commission.
4) On the facts and circumstances of the case and in law, the learned CIT(A) erred in adding the value of diamond jewellery of Rs 18,15,316 found in the case of assessee's HUF in assessee's hands, for want of evidence ignoring the fact that the HUF did not have taxable wealth, hence no evidence could be produced to prove the same.
5) The appellant craves leave to add to or modify the above grounds of appeal. .
3. The following grounds have been taken by Revenue. 4 ITA No.5554/Mum/2015 and other appeals
m On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the value of gold bars and coins weighing 4060 grams found in the locker of Sheetal A Lodha without appreciating the fact that the assessee had not explained as to why the gold bars and coins belonging to the companies were lying in the locker of the assessee and as such not discharged her onus of proving that the gold bars and coins did not belong to her?"
2. 'On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition ofRs.31,048/- as Long Term Capital Gain on account of sale of jewellery without appreciating the fact that the assessee had not explained the reasons for the shortage of 48.86 grams of jewellery found during the course of search as against the quantity of jewellery declared in the Wealth Tax return and as such not discharged her onus during the course of the assessment proceedings?"
The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary.
4. Common grounds in all the cases pertain to addition made on account of diamond jewellery found during the course of search as unexplained investment in case of all the assessees. The AO has passed identical assessment orders in all the assessee's cases. Here, we are dealing with the case of Smt. Manjula Lodha as a lead case wherein highest addition has been made by the AO. Only ground disputed in appeal by the assessee is against the action of the CIT(A) in confirming the addition of Rs.1,38,68,142/- being the value of 99.31 carats of diamond jewellery. During the course of search action, diamond jewellery of 376.57 carats were found from the residential premises and also from the various lockers held in the name of assessee's family members. The assessee was asked to match the same with wealth tax return. In the 5 ITA No.5554/Mum/2015 and other appeals wealth tax return of the assessee jewellery shown was 167.40 carats. The assessee also produced the bills for purchase of 109.86 carats; thus, the assessee explained 277.26 carats of diamond jewellery. The assessee was asked to explain the remaining diamond jewellery of 99.31 carats. The assessee submitted that during the course of search action total unexplained diamond jewellery (including assessee and other family members) aggregating to 287.5 carats (comprises of 36 items) has been found from the premises of assessees and her family members or their lockers which has been identified and valued at Rs. 84,82,639/- by the department valuer. The assessee submitted that various group companies of Lodha's have filed application before the Income Tax Settlement Commission(ITSC) and it was stated therein that the diamond jewellery found from the premises of the assessee and her family members are application of undisclosed income offered; therefore, it was stated before the ITSC that the amount of Rs. 84,82,639/- pertaining to diamond jewellery shall be treated as utilisation of undisclosed income in the hand of Shreeniwas Cotton Mills. However, the AO made the addition on the ground that assessee could not reconcile each item found in search and also on the reason that the assessee failed to explain the source of purchases of diamond jewellery. The total addition made for the entire lodha group (including the assessee) are as under:
As owned up (A) Disclosed in wealth tax Purchase bills after Difference (D) return (B) 31.03.2010 © Cls Netwl value CIS Netwt value Cts Netwt value CIS Net wt value 6 ITA No.5554/Mum/2015 and other appeals MPL 239.19 1347.08 8811906 155.05 977.63 7287248 - - - 84,14 369.45 1524658 ABK 152.11 725.76 4343159 114.28 339.29 4039702 7.35 65.55 274741 30.48 320.92 28716 ABN 195.29 1541.67 6481055 119.37 1030.40 5045292 - - 75.92 511.27 1435763 MML 376.57 2077.67 26386690 167.40 468.89 5832091 109.86 338.60 6686457 99.31 1270.18 13868142 VAL 75.43 363.72 3938267 51 00 234.27 3899464 2443 129.45 38803 SAL 6567 396.97 5265666 45.40 319.50 3S79850 4.65 36 19 166192 15 62 41 2R 1219624 MPL HUF ABK 122.85 494.86 3827775 122.63 362.58 2012459 0.22 132.28 1815316 HUF ABN 127.23 367.39 3871765 12548 331.60 198187 1 75 35 79 1889892 HUF Total I354.34 7315.12 62126283 652.50 3369. 9S 29983647 369.97 1134.5 11121722 131.8 1810.62 21820914
5. The addition has been confirmed by the CIT(A) holding that the ITSC has not given any specific direction that the unaccounted diamond jewellery can be treated as utilization of unaccounted money.
6. It was argued by learned AR that the assessee belongs to Lodha group and the said group is engaged in the business of real estate development. The modus operandi of the business model of the Lodha group is that the business of real estate is carried on by private limited companies and firms. None of the individuals of Lodha group carry on business as sole proprietor. The individuals source of income consists of salary and bank interest. The AO in the assessment order on page 1 against the row "Nature of Business" has accepted that the assessees earn salary income. The individual assessee does not have any business income. The salary and other income are regularly offered for tax in the regular tax returns of the assessee. The business model of the group has 7 ITA No.5554/Mum/2015 and other appeals been stated on oath in application before ITSC which is at pgs 32 to 65 of the paper book. "
7. On the other hand, learned DR relied on the order of the lower authorities.
8. We have considered rival contentions and carefully gone through the orders of the authorities below and the order passed by Income Tax Settlement Commission in the case of Lodha Group. From record we found that after the search action u/s 132 of the Act, 42 entities of the Lodha group (other than individual) filed a settlement application before ITSC and the order passed in the case of all these entities is enclosed at pages 66 to 165 of the paper book. The income of the 42 entities was determined by ITSC at Rs. 122 Crores arising on account of on-money, car parking, etc. The AO at paragraph 4-e of the assessment order has stated that the premises are shared by all the family members where the diamond jewellery was found and the issue is to be considered in a cohesive manner to arrive at comprehensive view on the same. Therefore, the overall view including the group entities should be considered. For this proposition, reliance can be placed on the following decisions (copy submitted during the course of hearing):
- Rajni M. Patel vs DCIT [(2017) 88 taxmann.com 349 Ahd]
- Jagmohan Singh Arora vs DCIT [101 TTJ 0682 Mum]
- DCIT vs Kiritbhai V Patel 8 ITA No.5554/Mum/2015 and other appeals
9. From the record we found that a company of Lodha Group namely Shree Niwas Cotton Mills Ltd (SNCML) has in its application before ITSC stated on oath that diamond jewellery is to be treated as application of income offered to tax in the Petition before ITSC. The said statement appears at pg 56, para 2 1.3 of the paper book. The income of SNCML determined by ITSC is Rs. 18.70Crores and same appears at page 1 64 of the paper book. It is submitted that the said entity has offered 287.58 carats of diamond jewellery in the wealth tax returns for A.Y. 201 1-12 to A.Y. 2015-16 and same has been accepted by the Department. The sample copy of the wealth tax returns for one of the A.Y., i.e., A.Y. 201 1- 12 is at pages 166-168 of the paper book. Out of 331 carat, 287 carat is duly explained as belonging to the SNCML. The said statement on oath has not been found to be false by ITSC in its order and therefore 287.58 carat cannot be treated as unexplained investment. It is submitted that the Hon'ble Bombay High Court in a Writ Petition filed by the Revenue (WP 2562 of 2015) challenging order passed by ITSC has at page 17, paras 20 and 21 observed that the statement made on oath by the assessee cannot be disbelieved on mere whim and fancy and the statement is also not found by ITSC to be false. Thus, as per learned AR out of 331 carat, 287.58 carat is duly explained and cannot be added in the hands of the individual assessees.
10. During the course of hearing it was contended by learned AR that from the balance diamond jewellery of 44 carats (i.e. 331 carat -287 9 ITA No.5554/Mum/2015 and other appeals carat), these diamonds were weighed without removing the same from the jewellery during the course of search action. Therefore, there could be some variation in the actual weight and weighing without removing the same from the jewellery. It was also submitted that total weight of the diamond jewellery found was 1354.34 carats and 44 carats works out to 3.25% of the total carats found. It was, therefore, respectfully submitted that in view thereof due to some approximation 44 carats cannot be treated as unexplained. As per learned AR it is also to be noted that in sheet No.2 forming part of the assessment order certain diamond jewellery is considered as gold jewellery. This also indicates the approximation and error in exact weight of the jewellery found in the course of the search.
11. It was further contended that SNCML did not have a locker and therefore the diamond jewellery was kept with the individual who had lockers. The AO at page 4 of his order has noted the name of the person who held the locker from which diamond jewellery was found and the name of SNCML does not appear. Therefore, the AO and CIT(A) observation that Lodha companies have their own lockers is incorrect. It is further submitted that during the course of search action, cash was found from the premises and lockers of individual assessees and same was offered as income of the entities (other than individual) before ITSC and same has been accepted by the Revenue. Accordingly, the issue 10 ITA No.5554/Mum/2015 and other appeals relating to diamond jewellery should also be examined from this perspective.
12. In the alternative, learned AR submitted that the individual assessees earn substantial salary from the group entities running into crores of rupees if one looks at the returns of the past years. Considering the status of the individual assessee as belonging to HNI and the quantum of salaries earned by them 44 carats can be said to have been acquired by the individual assessees out of the salary and other income offered for tax in earlier years and therefore no addition can be made by treating the same as unexplained. In the alternative, the assessee submits that assuming 44 carats is treated as unexplained then it is respectfully submitted that 44 carats be equally assessed in the hands of the 5 individuals before the Hon'ble Tribunal. The value of the aforesaid 44 carats should be arrived at by taking value of 287.58 carats at Rs. 84,82,639/- which is the value arrived at by the Revenue at the time of the search action as evident from page 5 of the AO order read with page 7 (2) of the AO order whereby the AO has given a finding that the quantity and valuation of the jewellery cannot be disputed. Inspite of the same the addition was made by the AO by valuing diamond jewellery at Rs. 2.18 crores which was agitated in appeal by the assessees and CIT(A) did not accept the contention of the assessee. The assessee submits that if 84 lakhs is taken as a basis then the value of 44 carats would be Rs. 12.87 lakhs which can be apportioned amongst the 5 individual 11 ITA No.5554/Mum/2015 and other appeals assessees. If 2.18 cr. is taken as a basis then the value of 44 carats would be around Rs. 30 lakhs. In view of above, the ground of appeal in the assessees appeal with respect to diamond jewellery be treated as having explained and the addition be deleted in the assessment of the individual assessees."
13. We had carefully gone through the Income Tax Settlement Commission order in respect of Lodha Group wherein we found that Shree Niwas Cotton Mills Ltd., (SNCML) in its application before Settlement Commission had stood on oath that diamond jewellery is to be treated as application of income offered to the tax in that petition before the commission. We also found that the income of SNCML determined by the Settlement Commission is Rs.18.70 Crores. We found that the SNCML had offered 287.58 carats diamond jewellery in the wealth tax returns for the A.Y.2011-12 to 2015-16 and the same has been accepted by the Department. Accordingly out of 331 carats 287 carats is duly explained as belonging to the SNCML. We also observe that the said statement on oath has not been found to be false by the Settlement Commission in its order and therefore 287.58 carat cannot be treated as unexplained investment. We had further observed that Hon'ble Bombay High Court in a Writ Petition filed by the Revenue challenging order passed by the Settlement Commission had observed at page 17 that the statement made on oath by the assessee cannot be disbelieved on mere whims and fancy and the statement is also not found to be false by the Settlement Commission. 12 ITA No.5554/Mum/2015 and other appeals
14. The addition on account of diamond jewellery as unexplained investment arises in all the assessees appeal. The AO has passed identical assessment orders in all the assessees case. However, for the present submission the assessment order passed in the case of Manjula Lodha is considered and referred to.
15. The AO has discussed this issue at internal pgs 25 to 28 of the order and the chart appearing therein shows the alleged excess diamond jewellery which is treated as unexplained investment in the hands of all the assessees. The AO has added Rs. 2.18 cr. on account of 331.87 carats being treated as unexplained diamond jewellery in the hands of all the individual assessees put together. The CIT(A) has discussed this ground from pg 14 of his order and the findings of the CIT(A) start from pg 18, para 7.8 whereby he has confirmed the addition.
16. The assessee belongs to Lodha group and the said group is engaged in the business of real estate development. On 10th January 2011, an action u/s 132 was taken against the group. The modus operandi of the business model of the Lodha group is that the business of real estate is carried on by private limited companies and firms project specific. None of the individuals of Lodha group carry on business as sole proprietor. The individuals source of income consists of salary and bank interest. The AO in the respective assessment order on pg 1 of the said order against the row "Nature of Business" has accepted that the assessees earn salary income. The individual assessee does not have any business income. The 13 ITA No.5554/Mum/2015 and other appeals salary and other income are regularly offered for tax in the regular tax returns of the assessee. The business model of the group has been stated on oath in application before ITSC.
17. After action u/s 132 of the Act, 42 entities of the Lodha group (other than individual) filed a settlement application before ITSC and the order passed in the case of all these entities is enclosed at pgs 66 to 165 of the paper book. The income of the 42 entities was determined by ITSC at Rs. 122 cr. arising on account of on-money, car parking, etc. This is also accepted by the AO at pg 7 in para above 4(f). The AO has stated that the premises are shared by all the family members where the diamond jewellery was found and the issue is to be considered in a cohesive manner to arrive at comprehensive view on the same. Therefore, the overall view including the group entities should be considered.
18. From the record we also found that Shree Niwas Cotton Mills Ltd. has in its application before ITSC stated on oath that diamond jewellery is to be treated as application of income offered to tax in the Petition before ITSC. The said statement appears at pg 56, para 21.3 of the paper book. The income of Shree Niwas Cotton Mills Ltd. determined by ITSC is Rs. 18.70 cr. and same appears at pg 164 of the paper book. The said entity has offered 287.58 carats of diamond jewellery in the wealth tax returns for A.Y. 2011-12 to A.Y. 2015-16 and same has been accepted by the Department. The copy of the wealth tax returns for one of the A.Y., i.e., A.Y. 2011-12 is at pgs 166-168 of the paper book. Thus, out of 313 carat, 14 ITA No.5554/Mum/2015 and other appeals 287 carat is duly explained as belonging to the group entity, Shree Niwas Cotton Mills Ltd. The said statement on oath has not been found to be false by ITSC in its order and therefore 287.58 carat cannot be treated as unexplained investment. The Hon'ble Bombay High Court in a Writ Petition filed by the Revenue (WP 2562 of 2015) challenging order passed by ITSC has at pg 17, paras 20 and 21 observed that the statement made on oath by the assessee cannot be disbelieved on mere whim and fancy and the statement is also not found by ITSC to be false. Therefore, out of 313 carat 287.58 carat is duly explained and cannot be added in the hands of the individual assessees. This proposition is supported by Jagmohan Singh Arora vs DCIT [101 TTJ 0682 Mum], Rajni M. Patel vs DCIT [88 taxmann.com 349 And], DCIT vs Shri Kiritbhai V. Patel [IT (SS)A No45/Ahd/2009].
10. We also observe that that Shree Niwas Cotton Mills Ltd. did not have a locker and therefore the diamond jewellery was kept with the individuals who had lockers. The AO at pg 4 of his order has noted the name of the person who held the locker from which diamond jewellery was found and the name of Shree Niwas Cotton Mills Ltd. does not appear. Therefore, the AO and CIT(A) observation that Lodha have their own lockers is incorrect.
11. Keeping in view the totality of facts and circumstances of the case, we held that 44 carats of the diamond is being unexplained in thehands of all the family members. We therefore, direct that it should be added 15 ITA No.5554/Mum/2015 and other appeals equally in the hands of five individuals. The value of 44 carats would be Rs.30,00,000/-. Furthermore, keeping in view the quantum of returns filed by each of the assessee, we direct the AO to give credit of Rs.5,00,000/- in the hands of each individual as having been spent out of earning so made by the assessee. In the result, addition in the hands of each individual is restricted to Rs.1,00,000/-. We direct accordingly.
12. In Ground No.1, revenue is aggrieved by the order of CIT(A) for deleting addition of Rs.4,28,146/- being alleged long term capital gains in the hands of Smt. Manjula Lodha in ITA No.5597/Mum/2015.
13. Rival contentions have been heard and record perused.
14. Brief facts are that during the course of search action at the premises of the assessee, silver jewellery/utensil weighing 1.5 Kgs were found from the residential premises. She was asked to match the same with wealth tax return. In the wealth tax return, the silver jewellery/utensil shown was 15.600 Kgs; thus, she was asked to explain the reason for shortage of silver jewellery/utensil found as compare to silver jewellery/utensil shown in the wealth tax return. She was also asked to explain why shortage shall not be treated as sale and accordingly Long Term Capital Gain shall be taxed in her hand as the silver utensil was bought in year 2001. Assessee vide letter dated 27.02.2013 objected the proposal of the AO in taxing the shortage as Long Term Capital Gain. She contested that there is no evidence suggesting that she has sold any silver jewellery/utensil; hence, no such 16 ITA No.5554/Mum/2015 and other appeals addition is justifiable in absence of any material. Not satisfied with the reply of the assessee, the AO made the addition of Rs. 4,28,146/- being Long Term Capital Gain which has been worked out as under:
Particulars Working Amount Sale consideration 14.100 Kgs X Rs. 43,000 per kg 6,06,300/- Indexed cost of (14.100 Kgs XRs. 7.215 per kg X 1,78,155/- acquisition 711 406 LONG TERM CAPITAL GAIN 4,28,146
The above addition made by the AO holding that assessee failed to appreciate that be variety of reasons for not finding the silver utensil/jewellery at the premises of the (for example jewellery kept at some relatives place, kept at some office, given to jewellers remaking etc.). It is not prudent to presume by an AO that if an assessee owns a valuable item the same cannot move out of the residential premises of the assessee. Such kind of presumption is not justified on the part of the AO. CIT(A) also held that the AO failed to appreciate that only real income, supported by the documentary evidences, can be taxed and not the income determined on the basis of presumption. In the present case, no material, whatsoever remote, has been brought on record by the AO suggesting that the assessee has transferred the silver utensil on a particular date to a particular person. Neither the date of transfer nor the details of transferee has been pointed out by the AO. The Addition made 17 ITA No.5554/Mum/2015 and other appeals by the AO is solely on presumption that if lesser silver utensil is found than the shown in wealth tax return then it means that the assessee has transferred the remaining. Such kind of presumption is totally unjustified. C1T(A) held that in order to tax income, there must be something more than an allegation and presumptions which is missing in the case of the assessee as no material has been brought on record by the AO substantiating that the assessee has transferred the silver utensil jewellery. The precise observation of CIT(A) was as under:-
3.6 I have considered'the submission, paper book and rejoinder to remand report filed by the AR and assessment order and remand report of the AO. The sole reason emerging from the assessment order for making the addition is silver utensils / jewellery found at the time of search is lesser than what is recorded and shown in the wealth tax return. It is not in dispute that assessee belongs to a very rich and reputed family. The AO failed to appreciate that there could be variety of reasons, for not finding the silver utensils / jewellery at the premises of the assessee (for example, jewellery kept at some relatives place, kept at some office, given to jewellers for remaking etc:). It is not prudent to presume by the AO that if an assesses owns a valuable item then the same cannot move out of the residential premises of the assessee. Such kind of presumption is not justified on the part of the Assessing Officer. The AO also failed to appreciate that only real income, supported by the documentary evidences, can be taxed and not the income determined by the AO on his own presumption. In the present case, no material whatsoever remote has been brought on record by the AO suggesting that the assessee has transferred the silver utensil on a particular date to a particular person.
Neither the date of transfer nor the details of transferee has been pointed out by the AO. The addition made by the AO is solely on presumption that if lesser silver utensil is found than shown in wealth tax return then it means that the/assessee has transferred the remaining. As stated above such kind of presumption is totally unjustified. As reiterated by the Hon'ble Supreme Court from time to time in order to tax an income there must be a real income. In order to tax income, there must be 18 ITA No.5554/Mum/2015 and other appeals something more than, an allegation and presumptions which is missing in the case of the v assessee as no material has been brought on record by the AO substantiating that the assessee has transferred the silver utensils /jewellery. Therefore, the addition made by the AO is deleted. This ground, of appeal is allowed.
16. We have considered rival contentions and carefully gone through the orders of the authorities below. From the record we found that addition has been made by the AO in the presumption that the valuable items cannot be moved out of the residential premises of the assessee, therefore, the CIT(A) has correctly appreciated that only real income, supported by the documentary evidences, can be taxed and not the income determined on the basis of presumption. In the present case, no material, whatsoever remote, has been brought on record by the AO suggesting that the assessee has transferred the silver utensil on a particular date to a particular person. Neither the date of transfer nor the details of transferee has been pointed out by the AO. The Addition made by the AO is solely on presumption that if lesser silver utensil is found than the shown in wealth tax return then it means that the assessee has transferred the remaining. Since the silver utensils so found were not more than what has been declared by the assessee in wealth tax returns, there is no justification for making addition. Furthermore, the detailed finding so recorded by CIT(A) at para 3.6 of his appellate order are as per material on record which do not require any interference on our part. 19 ITA No.5554/Mum/2015 and other appeals
17. Next grievance of revenue relates to deleting addition of 4060 Grams of gold bars and coin made u/s 69 of the Act found during the course of search action from the premises of the assessee, her spouse and sons.
18. Facts as emerged from the assessment order and CIT(A)'s order are that during the course of search action, various gold bars and coins were found from the residence of the assessee or lockers belonging to her family members. The list of bars and coins found are annexed as "sheet No 2" to the assessment order. The assessee was asked to explain the said gold bars and coins. The assessee filed a reconciliation of the jewellery which is part of assessment order annexed as "Sheet No 3 ". The assessee's explanation was found satisfactory by the AO except for bars and coins weighing 21,108.02 grams. Out of the bars and coins weighing 21.108.02 grams, the assessee explained that bars and coins weighing 1,780 grams and 2,280 grams belongs to M/s. Lodha Developers Limited (LDL) and M/s. Macrotech Construction Private Limited (MCPL) respectively which are recorded in their respective books of accounts.
19. For the remaining bar and coin weighing 17,048.02 grams (i.e. 21,108.02 grams - 1,780 grams -2,280 grams), the assessee explained that the said bars and coins belongs to a firm Shree Sainath Enterprises (SSE), who has filed an application before the Income Tax Settlement Commission (ITSC) wherein they have disclosed the bars and coin and 20 ITA No.5554/Mum/2015 and other appeals stated to be utilisation of additional income offered before the ITSC. However, the AO made the addition of 21,108.02 grams valuing to Rs. 4,53,82,200/- for the reason that if the bars and coins are belonging to the individuals then there can be no possible reason for keeping the companies gold and bars in the premises and lockers of the individuals. Therefore, the AO made the addition in the hand of following assessees belonging to the same family:
Sr.No Name Weight in grams Amount
1 Sheetal Lodha 295 6,34,250/-
2 Vinti Lodha 555 11,93,250/-
3 Manju Lodha 20,258 4,35,54,700/-
(Assessee)
Total 21,108 4,53,82,200/-
20. The AO also made the protective addition of Rs. 2,58,62,199/- in the hand of Sheetal Lodha for the reason that the assessee and Sheetal Lodha jointly held locker number 1084 in Dena Bank where jewellery weighing 12,028.93 grams were found; substantive addition of the same was made in the hand of the assessee.
21. Before the CIT (A), the assessee submitted that the gold bars weighing to 17,048/- has been already offered for tax by SSE before the Income Tax Settlement Commission (ITSC). In order to substantiate the contention, the assessee filed the order u/s 245D(4) of the Act passed by 21 ITA No.5554/Mum/2015 and other appeals the ITSC. For the remaining gold bars, the assessee submitted that bars and coins weighing 1.780 grams and 2,280 grams belongs to LDL and MCPL respectively which are recorded in their respective books of accounts. The assessee filed audited financials statement of the above companies, ledger of gold bars bought and bills raised by the vendors reflecting the gold bars and coin. Being satisfied by the explanation of the assessee, the CIT(A) deleted the addition holding that the only reason for not accepting the explanation of the assessee by the AO is that if the gold bars and coins are belonging to the companies then why were kept at the premises of individual assessee. The CIT(A) held that above companies are closely held companies belonging to Lodha group. In the case of closely held companies, there is nothing un-natural if the documents/movable things of the companies are lying in the premises of their founder and promoters. Moreover, it is not in doubt that the gold bar and coins to the extent of 4,060 grams are accounted in the books of LDL and MCPL, for which payments have been made from the respective companies and bills are also issued at their names. Therefore, transferring the ownership of the coins and bars in the hand of individual assessees and taxing the same in their hand is grossly unjustified. Similarly, the addition of 17,048 grams of gold bars and coin was also deleted by the CIT(A) holding that the same is offered by the SSE before the ITSC.
22. Against the above order of CIT(A), the department is in further appeal disputing deletion of addition of Gold Bars weighing 17.048 grams. 22 ITA No.5554/Mum/2015 and other appeals We had carefully gone through copy of bills raised by the vendor on LDL and MCPL, ledger account of vendor in the books of LDL and MCPL, relevant extract of audited financial statement showing that the gold bars are shown in financial statement of LDL and MCPL. In view of the above facts and in the light of supporting documents as stated above, the CIT(A) has correctly deleted the addition; hence, his order is being upheld and department's ground is dismissed.
23. Last grievance in Departmental appeal relates to CIT(A)'s action in deleting the addition of Rs.31,00,000/- being cash received by the assessee from the undisclosed sources.
Facts in brief are that during the course of search action, one diary and some loose papers were found from the premises of one Shri Somnath Nair. In the diary it was observed by the AO that there is a mention that Shri Somnathan Nair has given Rs. 25,00,000/- and Rs. 6,00,000/- (in cash) on two occasion aggregating to Rs. 31,00,000/- to the assessee. The assessee was asked to explain the said transaction. She explained that the said amount has been received by her out of unaccounted car parking and on-money received by the various Lodha group of companies and the said car parking and on-money are offered by them for tax in their application before the ITSC. However, the AO made the addition on the ground that assessee is not denying receipts of cash; thus, this was the income of the assessee.
23ITA No.5554/Mum/2015 and other appeals
24. Before the CIT(A), the assessee filed the (i) loose paper found from the premises of Somnath on the basis of which addition has been made in the hand of the (ii) relevant extract of statement recorded of Somnathan Nair (iii) relevant extract of explanation offered before the investigation
(iv) relevant extract of SOF filed before ITSC and (v) relevant extract of ITSC's order passed u/s 245D(4) of the Act. With the above documents, the assessee explained that the above cash receipts are out of the on- money and car parking received by various lodha group companies which are separately taxed; therefore, the addition made in the hand of assessee was deleted by CIT(A) as the source of the above cash is already taxed.
25. During appellate proceedings these documents were sent to the AO by the CIT(A) for his comment. The AO in the remand report accepted the contention of the assessee that the said amount/transaction was out of car parking and on-money which has been considered and determined as income in the hand of various assessees before the 1TSC and addition thereof again in the hand of Smt Manju Lodha will result into double addition. CIT(A) deleted the addition holding that it was observed from the remand report of the AO that he has accepted the explanation of the AR in the remand proceeding and agreed that the amount of Rs, 31,00,000/- has been received by her out of unaccounted car parking and on-money received by the various Lodha group of companies which are taxed in their hand by the ITSC. Thus, the source of the amount is car 24 ITA No.5554/Mum/2015 and other appeals parking and on-money which is already taxed in the hands of respective companies.
26. From the record we found that the AO himself has agreed that the source of amount given to assessee is taxed before the ITSC then there is no point in raising the same in appeal. Considering the documents placed on record, we find that remand report has been sent by the AO. The CIT(A) after considering the remand report and after giving due justification and detailed finding deleted the addition. We observe that source of fund given to assessee is car parking and on money which have already been taxed in the hands of the respective companies. Accordingly, there is no justification for doubting the source of funds. Accordingly, we upheld the order of CIT(A) on this issue.
27. Next grievance of Revenue relates to deleting the addition of Rs.3,54,293/- being alleged long term capital gains.
28. Facts and circumstances of this ground are same as discussed by in Ground No.1 of revenue's appeal. Following the reasoning elaborately discussed by us while disposing ground no.1 of revenue's appeal, we upheld the order of CIT(A) for deleting addition of Rs.3,54,293/-
28. In the result, appeal of the Revenue in ITA No.5597/Mum/2015 is dismissed whereas appeal of assessee in ITA No.5557 is allowed in part. ITA No.5598/Mum/2015 25 ITA No.5554/Mum/2015 and other appeals
29. Ground No.1 & 2 and the Departmental appeal is against the deletion of the addition of Rs. 11,09,169/- and Rs. 10,01,032/- being alleged long term capital gains on sale of silver and jewellery respectively.
30. We found that these grounds of appeal are same as ground number 1 and 4 in the case of Smt. Manjula Lodha. Following the reasoning given hereinabove, we confirm the action of CIT(A) for deleting addition made on account of long term capital gains on sale of silver and jewellery.
31. Department is also aggrieved for deletion of addition of Rs.65 lakhs being cash received by assessee from the undisclosed sources.
30. Rival contentions have been heard and record perused. From the record we found that during the course of search action, one diary and some loose papers were found from the premises of Shri Somnath Nair. In the loose paper it was observed by the AO that there is a mention that that Shri Somnathan Nair has shown expenditure of Rs. 65,17,000/- out of the cash of Rs. 65,00,000/- received from the assessee. However, cash was not accounted in the books of the assessee; therefore, the AO made the addition in the hand of the assessee.
31. Before the CIT(A), the assessee filed the (i) loose paper found from the premises of Somnath on the basis of which addition has been made in the hand of the assessee (ii) relevant extract of statement recorded of Somnathan Nair (iii) relevant extract of explanation offered before the investigation (iv) relevant extract of SOF filed before ITSC and (v) 26 ITA No.5554/Mum/2015 and other appeals relevant extract of ITSC's order passed u/s 245D(4) of the l.T. Act. From the above documents, the assessee explained that the above cash receipts are out of the on-money and car parking received by various lodha group companies which are separately taxed; therefore, the assessee prayed that addition made in the hand of Assessee should be deleted as the source of the above cash is already taxed. Being satisfied with the explanation of the assessee, the CIT(A) deleted the addition holding that assessee's income is from salary. So, he has no other unaccounted source of income except car parking and on-money received in the various group companies which are already taxed by the ITSC in the cases of respective companies. CIT(A) relied on paragraph 23 of the ITSC's order wherein after recording all the facts pertaining to expenses done by Shri Nair it has been stated that "We also find that the surplus of about Rs. 200 Cr by way of cash expenditure made through Shri Somnathan Nair has direct bearing and reference from cash generated out of OM and CP, hence no further addition is called for." In the light of above facts, the CIT(A) deleted the addition.
32. The precise observation of CIT(A) was as under:-
7:8 1 have considered the assessment order, remand report, appellant's submission and rejoinder to the remand report. My attention was drawn at page 50 and 51 of paper book containing paper found'from the premises of Somnath Nair on the basis of which addition has been made. On the said papers, unaccounted expenses of Rs. 65 lakh were noted. The said pages shows that an amount of Rs. 65 lakh has been received by Shri Nair, the sajjd receipts are shown on top of the page at right side corner. Thereafter, from the mid of the page certain expenses are 27 ITA No.5554/Mum/2015 and other appeals mentioned -which are met out of the cash receipts stated in the top. It was explained by Mr. Nair that the amount stated at the top has been received from the appellant; however, it is also to be" appreciated that on the same page the details of expenses are also; given which were discussed by the ITSC in their order passed u/s 245D(4) of the l.T. Act.
7.9 'My attention was also drawn to paragraph 20 to 23 of the ITSC's order wherein the transaction of diary found from the premises of Mr Nair has been analysed which inter alia includes the cash expenses met out of earmarking and on-money. Then, ultimately my attention was drawn paragraph 23 of the ITSC's order wherein after recording all the facts pertaining to expenses done by Shri Nair it has been stated that "We also find that the surplus of about Rs. 200 Cr by way of cash expenditure made through Shri Somnathan Nair has direct bearing and reference from cash generated out of OM and CP, hence no further addition is called for.
From the above finding of the ITSC it is quite clear that the source of above expenses are car parking and on-money which are already taxed in the hands of the respective companies; hence, the addition thereof in the hands of the assessee is unjustified. Therefore, the addition made by the AO is deleted. This ground of appeal is allowed.
33. In view of the above discussion, we can safely conclude that assessee's main source of income is salary from Lodha Group which is duly accounted in the books of accounts. He has no other source of income. The AO submitted that, the Assessees before the ITSC has attached the paper found from the premises of Somnath Nair on the basis of which addition has been made. On the said papers, unaccounted expenses of Rs. 65 Lakh were noted. The amount for meeting these expenses have been given by the assessee; which in turn has been received by him out of on-money and car parking as he has no other 28 ITA No.5554/Mum/2015 and other appeals source of getting the unaccounted funds. When Mr. Nair was confronted with the said papers, he stated that these are expenses which were met out of funds received from the assessee. Thus, the unaccounted expenses have been met out of funds received from the assessee which in turn received by him out of car parking and on-money. In this factual background and context, the Hon'ble ITSC, at paragraph 23 of their order has stated that "We also find that the surplus of about Rs. 200 Cr by way of cash expenditure made through Shri Somnathan Nair has direct bearing and reference from cash generated out of OM and CP, hence no further addition is called for. "
34. We found that clear and detailed finding has been given by the Settlemet Commission to the effect that the unaccounted expenditure has a direct bearing form the cash generated from on money and car parking (which are separately taxed.). Accordingly, there is no infirmity in the order of CIT(A) for deleting the same. The detailed finding so recorded by CIT(A) are as per material on record which do not require any interference on our part.
35. In the result, appeal of Revenue is dismissed. ITA No.5578/Mum/2015
36. Learned AR has not pressed Ground No.1,2 & 4, the same are therefore, dismissed in limini as not pressed. Ground No.3 pertains to CIT(A)'s action in confirming addition of Rs.59,24,658/- being value of 81.14 carats of diamond jewellery. As discussed in the case of Smt. 29 ITA No.5554/Mum/2015 and other appeals Manjula Lodha hereinabove and following the reasoning given therein we confirm the addition to the extent of Rs.1 lakh.
ITA No.5554/Mum/2015
37. Ground No.1 was not pressed, the same is therefore dismissed in limini.
38. Grounds of appeal No 2 refers to action of the CIT(A) in confirming the addition of Rs. 12,50,000/- being value of watches found during the course of search action. Facts and circumstances of this ground in appeal is identical to ground taken by Smt. Manju Lodha in her appeal which are not repeated here for the sake of brevity. However, in brief facts are that the precious watches of Rs. 12,50,000/- found during the search action has been stated to be treated as application of unaccounted income in the SOF filed before the ITSC by SNCML. Subsequently, in Rule 9 report, the department contested before the ITSC that as the assessees from whose premises, residence or lockers, the said watches were found are not before the settlement commission, no application of income shall be granted. Thereafter, in report u/s 245D(3) the department requested for investigation so as to ascertain the correctness of the year and the assessee in the hand of which it is owned; the said request of the department has been turned down by the ITSC. In rejoinder to report u/s 245D(3) of the I.T. Act, the assessees again stated that the precious watches of Rs. 18,46,390/- (inch also includes Rs. 12,50,000/- shall be treated as application of unaccounted income in the hand of SNCML. 30 ITA No.5554/Mum/2015 and other appeals
39. From the record we found that in the light of these facts, Settlement Commission at paragraph 2, in their order passed u/s 245D(4) of the Act has stated the facts that watches of Rs. 18,46,390/- which were not disclosed earlier have been treated as application of additional income offered to tax in the present sets of application filed. The watches have been treated as application of income in the case of SNCML as there is no adverse remark of the ITSC that the request of SNCML for application of income are rejected or capitalization is not granted. Accordingly, we do not find any merit in the addition made in respect of watches found the source of which was duly explained and accepted by the Settlement Commission being money received on account of on money and parking charges received by SNCML.
40. Ground No.3 regarding addition of Rs.28,716/- being value of 38.48 carats of diamond jewellery have already been discussed by us while disposing the appeal of Smt. Manjula Lodha hereinabove. AO is directed accordingly.
41. Ground No.4 relates to addition of jewellery pertaining to assessee's HUF amounting to Rs.18,15,316/-. The addition of diamond jewellery made by the AO which is disputed in this ground of appeal pertains to Abhisheck Lodha (HUF) . However, the assessee could not explain the source of funds in the hands of HUF. Accordingly, we upheld the addition of Rs.18,15,316/- so made by AO.
42. In the result, this ground of assessee's appeal is dismissed. 31 ITA No.5554/Mum/2015 and other appeals ITA No.5555/Mum/2915:-
42. Ground No.1 is not pressed. The same is therefore, dismissed in limini.
43. Grounds of appeal No 2 refers to action of the CIT(A) in confirming the addition of Rs. 5,96,390/- being value of watches found during the course of search action.
44. Facts and circumstances of this ground in appeal is identical to ground taken by Smt. Manjula Lodha in her appeal which are not repeated here for the sake of brevity. However, in brief the precious watches of Rs. 5,96,390/- found during the search action has been stated to be treated as application of unaccounted income in the SOF filed before the 1TSC by SNCML. Subsequently, in Rule 9 report, the department contested before the ITSC that as the assessees from whose premises, residence or lockers, the said watches were found are not before the settlement commission, no application of income shall be granted. Thereafter, in report u/s 245D(3) the department requested for investigation so as to ascertain the correctness of the year and the assessee in the hand of which it is owned; the said request of the department has been turned down by the ITSC. In rejoinder to report u/s 245D(3) of the IT. Act, the assessees again stated that the precious watches of Rs. 18,46,390/- (inch also includes Rs. 5,96,390/-) shall be treated as application of unaccounted income in the hand of SNCML. We found that in the light of above narrated facts, the Hon'ble ITSC, at 32 ITA No.5554/Mum/2015 and other appeals paragraph 2, in their order passed u/s 245D(4) of the Act has stated the facts that watches of Rs. 18,46,390/- which were not disclosed earlier have been treated as application, of additional income offered to tax in the present sets of application filed. We found that the watches have been treated as application of income in the case of SNCML as there is no adverse remark of the ITSC that the request of SNCML for application of income are rejected or capitalization is not granted. Accordingly, we do not find any justification for the addition so made.
45. Next grievance of assessee relates to the addition of Rs.14,35,763/- being the value of 75.92 carats of diamond jewellery. Facts and circumstances of this ground of appeal of the assessee is identical to facts and circumstances of ground in appeal of Smt. Manju Lodha concerning diamond jewellery; therefore, the same is not repeated here for the sake of brevity. Following the reasoning given hereinabove, we confirm the addition of Rs.1 lakh.
46. Last grievance of assessee relates to action of the AO confirmed by the CIT(A) in taxing the diamond jewellery pertaining to assessee's HUF for Rs. 18,89,892/- in the hand of the assessee.
47. We found that the addition of diamond jewellery made by the AO which is disputed in this ground of appeal pertains to Abhisheck Lodha (HUF). As the assessee could not explain the source of funds in the hands of HUF, we upheld the addition so made by AO and confirmed by CIT(A). ITA No.5596/Mum/2015 33 ITA No.5554/Mum/2015 and other appeals
48. Grounds of appeal No 1 refers to action of the CIT(A) in deleting the addition of gold bard and coin weighing to 4060 grams in the hand of the assessee on protective basis. The substantive addition of the above ground was made in the hand of Smt. Manju Lodha which has been deleted by the CIT(A). In the appeal filed by the department in the case of Smt. Manjula Lodha, the department has challenged the deletion vide ground of appeal no 2. Following reasoning given hereinabove, we confirm the action of CIT(A) on this issue.
49. Grounds No 2 of departments appeal is against the CIT (A)'s action in deleting the addition of Rs. 31,048/- being alleged long term capital gains. The facts and circumstances of the case are identical to ground No 1 of the departments appeal; hence, the CIT(A)'s order deleting the addition is being upheld and departments appeal is dismissed.
50. In the results appeals of Revenue are dismissed whereas appeals of assessee are allowed in part.
Order pronounced in the open court on this 19/06/2018
Sd/- Sd/-
(AMARJIT SINGH) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai; Dated 19/06/2018
Karuna Sr.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
DR, ITAT, Mumbai
5. BY ORDER,
6. Guard file.
सत्यापित प्रतत //True Copy//
(Asstt. Registrar)
ITAT, Mumbai