Income Tax Appellate Tribunal - Chandigarh
Acit,, Chandigarh vs Sh. Jagdish Mittar,, Chandigarh on 8 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
IT(SS)A No.4/Chd/2004
(Block Period 1.4.1987 to 20.11.1997)
The A.C.I.T., Vs. Sh.Jagdish Mittar,
Circle I(1), H.No.1458, Sector 42B,
Chandigarh. Chandigarh.
PAN: -
(Appellant) (Respondent)
Appellant by : Shri Sushil Kumar, DR
Respondent by : Shri Tej Mohan Singh
Date of hearing : 03.10.2016
Date of Pronouncement : .02.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
The appeal filed by the Revenue is directed against the order of Ld. Commissioner of Income Tax 2 (Appeals), Chandigarh dated 31.10.2003 for the above block period.
3. Briefly stated, the facts of the case are that search under section 132(1) of the Income Tax Act, 1961 (in short 'the Act') was conducted at the residential premises of the assessee Shri Jagdish Mitter on 20.11.1997. At the time of search, he was employed as Superintending Engineer with Chandigarh Administration. Notice under section 158BC r.w.s. 142(1) of the Act was issued on 30.7.1998 and the assessee filed the requisite details in response to the questionnaire dated 26.8.1999. The assessment for the entire block period was thereafter made on a total un-disclosed income of Rs.61,92,006/-. The same was challenged before the Ld. CIT (Appeals), who vide his order dated 31.10.2003 deleted substantial additions and upheld part of the additions. Aggrieved by the same, the Revenue is in appeal before us.
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4. During the course of hearing before us, detailed arguments were made by both the parties which have been heard by us and the material available on record has been perused. Since it is a block assessment case, therefore, before proceeding to decide the addition on merit it would be relevant to consider the provisions of block assessment.
5. Chapter XIV-B starts with section 158B and provides the definition of "block period" and "undisclosed income". The "undisclosed income" is relevant in this case which is reproduced below as amended by the Finance Act, 2002 with retrospective effect from 1.7.1995:
S.158(b) "undisclosed income" includes any money, bull ion, je wellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, je wellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed f or the purposes of this Act , or any expense, deduction or allo wance claimed under this Act which is found to be f alse.
6. This section shows that the following conditions must be specified to treat the income as undisclosed income :
1) I t mu s t b e i n t h e f o r m o f mo n e y , b u l l i o n , j e we l l e r y o r o t h e r v a l u a b l e a r t i c l e o r t h i n g or should constitute i n c o me or property 4 based on any entry in the books of account o r o t h e r d o c u me n t o r t r a n s a c t i o n .
2) It should be averred that the assets or entry
in the books represents wh o l l y or partly
i n c o me o r p r o p e r t y wh i c h h a s n o t b e e n o r
wo u l d not have been disclosed for the
purpose of this Act.
3) It could also include any expense, deduction
o r a l l o wa n c e c l a i me d u n d e r t h i s h e a d wh i c h is f ound to be f alse.
7. Section 158BB(1) provides for computation of undisclosed income for the block period and is reproduced as under :
"(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, 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 AO and relatable to such evidence as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,-
(a) where assessments u/s 143 or sec. 144 or sec. 147 have been concluded [prior to the date of commencement of the search or the date of requisition], on the basis of such assessments;
(b) where returns of income have been filed u/s 139 [or in response to a notice issued under sub-section (1) of sec. 142 or section 148] but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns;5
[(c) where the due date for filing a return of income has expired, but no return of income has been filed,- (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) On the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);]
(d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of sec. 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years;
(e) where any order of settlement has been made under sub-section(4) of sec. 245D, on the basis of such order;
(f) where an assessment of undisclosed income had been made earlier under clause (c) of sec. 158BC, on the basis of such assessment.
Explanation.-For the purpose of determination of undisclosed income, -
(a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of [this Act] without giving effect to set off of brought forward 6 losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32;
[provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of sec. 32;]
(b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called [to any partner not being a working partner];
Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;]
(c) assessment under section 143 includes determination of income under sub-section (1) or sub-section (1B) of sec. 143.
(2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or the requisition, as the case may be, shall be on the assessee.
(4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 7 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments."
8. After considering the above provisions, we are of the opinion that that the block assessment pertaining to a number of years in pursuance to search conducted, remains distinct from regular assessment under section 143(3) of the Act which pertains to a single year. The block assessment is restricted to undisclosed income discovered as a result of evidence found during the course of search and not as a result of documents or material which came to the possession of the Assessing Officer subsequent to the conclusion of search operation unless and until such material or document is relatable to such evidence recovered during the course of the search. The definition of 'undisclosed income' u/s 158B and computation thereof prescribed u/s 158BB as mentioned above clearly suggests that some evidence is to be found as a result of search operation and it is only thereafter that the remaining part of the provisions come into play and that too the remaining evidence must be relatable to the evidence recovered during the course of search.
9. The Hon'ble Calcutta High Court in the case of Bhagwati Pd. Kedia vs. CIT, 248 ITR 562 (Cal.) observed as under :
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"The explanation to sec. 158BA of the IT Act, 1961 makes it clear that the Legislature thought it fit to make a distinction between the block assessment and the regular assessment. In the case of regular assessment, the AO is free to examine the veracity of the return as well as the claims made by the assessee, whereas the undisclosed income is taxed by way of block assessment as a result of search and seizure. The logic behind the two different modes of assessment is that concealment of income and claiming deduction or exemption in respect of a disclosed income cannot be treated at par. The former is an offence which goes to the root of the matter and the other is on the basis of the causes shown by the assessee where the AO is free to accept the justification shown or reject the same.
There was a search and seizure resulting in block assessment of the assessee. During the block assessment, the assessee was called upon to explain the advance taken from a company. The assessee had filed the confirmation letter of loan from the company including income tax file numbers of the creditor. The income-tax authority held that the said loan was a fictitious one and was to be considered as undisclosed income of the assessee during the period under consideration. On the question whether the AO was entitled to question the loan amount which was the subject matter of regular assessment, while making block assessment.
Held, that the AO was not entitled to question in block assessment the loan which was a subject matter of the regular assessment. The AO was wrong in holding that the said sum could be taxed in block assessment although the same featured in the regular books of account. When the loan creditor was an assessee and in whose assessment the loan advanced had been accepted by the Revenue, the AO was wrong in holding that the assessee was liable to pay tax on that loan money taken from the assessee."9
10. In case of CIT vs. Ravi Kant Jain, 250 ITR 141 (Del.), the Hon'ble Delhi High Court observed:
"Block assessment under Chapter XIV-B of the IT Act, 1961, is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the AO. Evidence found as a result of search is relatable to sections 132 and 132A.
Held, that, admittedly the undisclosed income was not determined on the basis of any search material and the AO was proceeding within the scope of the assessment and not within the scope of exercising jurisdiction under Chapter XIV-B and sec. 158BA. Therefore, sec. 158BA of the Act had no application to the facts of the case."
11. Hon'ble Calcutta High Court in the case of CIT vs. Ashim Krishna Mondal, 270 ITR 160 at pages 163 and 164 observed:
"The principle that has been laid down for the purpose of making assessment are settled proposition as was referred to by the ld. Tribunal in the case of Sunder Agencies vs. DCIT [1997] 63 ITD 245 (Mumbai); T.S. Kumarasamy vs. ACIT [1998] 65 ITD 188 (Mad), at page 206 and Indore Construction (P) Ltd. vs. ACIT [1999] 71 ITD 128 (Indore) wherein the Mumbai Bench of the ITAT, the Madras Bench of the ITAT and the Indore Bench of the ITAT, respectively, had held that the income for block assessment under search and seizure procedure is to be computed strictly on the basis of the documents seized; and it cannot proceed on conjectures 10 and/or surmises and arrive at an estimation instead of computation. The word "computation" connotes a different meaning than estimation or appraisal. Computation presupposes a calculation on the basis of the materials, which is something different from estimation or appraisal and it must be based on methodical calculation with some amount of approximity to mathematical process on the materials available on search and seizure."
12. The Hon'ble Madras High Court in CIT Vs. G.K. Sennippan in 284 ITR 220 observed as under:-
"The assessee was engaged in the business of chit fund and real estate. In a search conducted against a third person it was f ound that the assessee had- util ised undisclosed income f or making contributions to certain unregistered chits conducted by the said person. Thereaf ter, a survey was conducted in the business premises of the assessee which indicated certain real estate transactions carried on by the assessee and prof its derived thereon had not been disclosed to the Department. The Assessing Off icer included under section 158BB the undisclosed income f ound during the survey made under section 133A. The Commissioner (Appeals) excluded that portion which had been included based on the material f ound during the survey on the premises that in respect of block assessment under section158BBmaterial collected during the survey under section133Acould not be taken into consideration. This was conf irmed by the Tribunal. On appeal contending that the material gathered in the course of survey under section 133A could also be regarded as a material f or the purpose of block assessment under section 158BB :11
Held accordingly, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal having decided the issue in accordance with the statutory provisions, it required no interference."
13. The Hon'ble Delhi High Court in the case of C IT Vs. Girish Chaudhary, 163 taxman 608 in the head-note held -
"under chapter XIVB, bef ore an addition of an undisclosed income can be made, the Assessing off icer has to bring on record the material to show that an evidence found as a result of search, there is an undisclosed income represented by credits appearing in the books of account. In the instant case, there was no material on record to sho w as to what on basis the AO reached the conclusion that the f igure "48" was to be read as Rs.48 l akhs. The document recovered during the course of search in the instant case was dumb document. Thus, the Tribunal rightly deleted the addition made by Assessing off icer on account of undisclosed income on the basis of seized material".
14. In view of the legal position, we now decide the matters as under :
15. During the course of hearing before us a query was raised by the Bench to the Ld. DR whether the additions made in the impugned case was based on any evidence found during the search and the Ld. DR was further asked to furnish copies of documents on the basis of which the additions had been made. The Ld. DR filed his submissions on the issue in writing vide letter dated 28.9.2016 and further made oral submissions before us. The sum and substance of his submissions was that : 12
a) The Bench could not raised this issue since the assessee himself has not raised it in Cross Objection filed, nor before the Assessing Officer and CIT (Appeals). Reliance was placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of Aravali Engineers Pvt. Ltd. Vs. CIT, 335 ITR 508 in this regard.
b) Alternatively, the issue if admitted should be sent back to the assessee for examination since it was not examined by him. Reliance was placed on the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT Vs. Tollaram Hassomal, 298 ITR 22.
c) The scope of undisclosed income as defined under section 158BB and as explained by the CBDT Circular No.8 of 2002 dated 27.8.2002 is that it is to be based on evidence found during search and on material or information gathered in post search enquiry made on the basis of evidence found in search.
d) That in any case all additions were based on material and evidence found during search and post search enquiry.
16. The Ld. counsel for the assessee, on the other hand, rebutted by stating that the issue had been raised before the CIT (Appeals) and further contended that the 13 additions were not based on evidence found during search. The Ld. counsel for the assessee drew our attention to the order of the Assessing Officer and CIT (Appeals) in support of his aforesaid contentions.
17. In the backdrop of the legal position regarding scope of undisclosed income as defined under section 158B of the Act and in the light of submissions made by both the parties, we hold that the assessment of undisclosed income in the present case is to be based only on evidences found in the course of search. We find no merit in the arguments of Ld. DR that the issue cannot be raised at this stage by the Bench in the absence of the same having been raised by the assessee himself. It is not denied that the issue relates to the very fundamental, on the basis of which undisclosed income is to be computed and assessment made, post search conducted under section 132 of the Act and the same has been interpreted by various Courts to be based only on material found during the course of search. Therefore, any addition made not based on material found during search would only go against the basic gain and purport of the section and would be in contravention of the law laid down in this regard. It is a legal issue which can be raised even suo moto by the Bench, its duty being to adjudicate the matters both on law and facts. Having said so, we proceed to apply the above law to various additions made in the present case on account of undisclosed 14 income and further add that the Ld. DR in this regard relied upon the order of the Assessing Officer and did not furnish copies of any document which formed basis of the additions.
DEPARATMENTAL APPEAL
18. In ground No.1 the Revenue has challenged the deletion of addition of Rs.34,78,758/-, for the financial years 1987-88 to 1997-98 falling within the block period, on account of deposits in bank Account Nos.6108, 2880, 46490 and 161 all of which did not belong to the assessee and also deposits in bank Account Nos.3601, 273 and 4443, which belonged to the assessee.
19. Brief facts relating to the issue are that the Assessing Officer observed that during search inventory of various bank accounts operated by the assessee Shri Jagdish Mitter and family was prepared and analysis of the bank statement showed that there were regular cash deposits in these bank accounts. During assessment proceedings, the assessee was given copies of the bank deposits to submit his explanation. The assessee filed reply in this regard explaining various deposits. Copy of the reply is incorporated in the order of the Assessing Officer. Thereafter the Assessing Officer observed that the assessee had linked the deposits in bank Account No.46490 to Shri Kartar Singh and had explained that he had nothing to do with the deposits in the account of Smt. 15 Brijinder Pal Kaur and Shri Kartar Singh. The Assessing Officer found that Shri Kartar Singh had very limited sources of income and that there was no truth in the explanation of the assessee that he should not be asked about the deposits earlier to his marriage to Smt. Brijinder Pal Kaur in the year 1992. The Assessing Officer further referred to heavy deposits in the accounts of Shri Kartar Singh which the assessee explained to be loans taken from S/Shri Jaswant Singh and Gurnam Singh both of whom were examined u/s 131 on 18.1.1989 and admitted to have given the loans to Shri Kartar Singh but the Assessing Officer considered both of them to be not creditworthy. Thereafter the deposits in bank Account No.161 jointly held by the assessee with his brother Shri Ved Mitter was discussed. The analysis of the accounts showed that there were cash deposits in this account which the Assessing Officer considered to be that of the assessee for the reason that there was no logic for Shri Ved Mitter to keep a bank account at Chandigarh, that too for depositing cash, while he himself resided at Ropar and also the Assessing Officer held that being a pensioner Shri Ved Mitter did not have the capacity to deposit so much cash. In sum and substance the cash deposits in the bank accounts were treated as relating to the assessee and unexplained and accordingly added to the income of the assessee u/s 69 of the Act for the different financial years.
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20. The Ld. CIT (Appeals) deleted the additions made agreeing with the contention of the assessee that the deposits in the bank account of his wife Smt.Brijinder Pal Kaur and her father Shri Kartar Singh could not be linked to the assessee prior to his marriage to Smt.Brijinder Pal Kaur on 3.4.1992. Further the Ld. CIT (Appeals) held that the brother of the assessee Shri Ved Mitter had independent source of income and his son was well-placed and, therefore, the Ld. CIT (Appeals) did not concur with the Assessing Officer that the funds of the assessee were transferred to this account.
21. Before us, rival submissions both for and against the addition were made by both the parties. On considering the same and in the light of the legal proposition discussed above, we do not find any justification to interfere with the order of the Ld. CIT (Appeals) in deleting the addition. It is an admitted fact that the additions have been made on account of cash deposits in the bank accounts of the wife of the assessee Smt.Brijinder Pal Kaur, father-in-law of the assessee Shri Kartar Singh and brother of the assessee Shri Ved Mitter. There is no discussion in the order of the Assessing Officer regarding cash deposits made in the bank account of the assessee himself and it was admitted by both the parties that no addition on account of the same have been made. Therefore, no cognizance needs to be taken of the cash deposits in the bank account of the assessee in 17 Account Nos.3601, 273 and 4443. As for the rest of the bank accounts, admittedly and undeniably they do not pertain to the assessee, nor is it the case that the bank passbooks relating to the same or any cheque books relating to the same were found in the possession of the assessee during the course of search. In fact, as stated by the Assessing Officer himself, during search inventory of various bank accounts operated by Shri Jagdish Mitter and family were prepared and on scrutinizing those accounts the deposits in the bank accounts of his wife, father-in-law and brother were linked to the assessee and addition made. Therefore, no incriminating material was found as a result of search on this issue vis-à-vis the assessee and in view of the legal proposition relating to block assessments, discussed above, the Ld. CIT (Appeals) was justified in deleting the addition.
22. Even on merits, we find that the Ld. CIT (Appeals) has correctly appreciated the facts and deleted the addition made. It is not denied that the assessee got married to Smt.Brijinder Pal Kaur on 3.4.1992 and, therefore, there cannot be any transfer of funds from the assessee to his wife or father-in-law up to 1991-92. The basis of the Assessing Officer for making the addition that the assessee had known Smt.Brijinder Pal Kaur even prior to marriage, cannot form the basis for arriving at the conclusion that it was the assessee's funds which was transferred to these accounts as it is an highly improbable 18 and illogical presumption. Moreovoer, the deposits in the account of Shri Ved Mitter have been admitted and claimed by him to be his own money from his own independent source of income as well as from money received from his son. The Assessing Officer has without displacing this admittance of Shri Ved Mitter by way of concrete adverse material, incorrectly rejected the same and linked the cash deposits to the assessee merely for the reason that he found that Shri Ved Mitter is not having enough source of income. The addition has been made merely on the basis of suspicion, conjectures and surmises totally disregarding the explanation given by the assessee and therefore, the Ld. CIT (Appeals) has rightly deleted the same. In case of Shri Kartar Singh also, the cash deposits attributed to loans received from S/Shri Jaswant Singh and Gurnam Singh has also been wrongly rejected by the Assessing Officer as undeniably both were examined u/s 131 of the Act and admitted to have given the same to Shri Kartar Singh. In view of the same, both on account of the legal proposition and facts of the case, we hold that there was no case for making any addition at all on account of cash deposits in the aforestated bank accounts of the assessee's wife, his father-in-law and his brother amounting to Rs.34,78,758/- and the same are, therefore, held to have been rightly deleted by the CIT (Appeals). The ground of appeal of the Revenue is, therefore, dismissed.
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23. In ground No.2(i) Revenue has challenged the deletion of addition of Rs.1,18,142/- made on account of unexplained investment in renovation of house No.2663, Sector 40C, Chandigarh.
24. Brief facts relating to the issue are that during the course of search as well as assessment proceedings it was submitted by the assessee that a built up house measuring 123 sq.yard had been allotted to him by the Chandigarh Housing Board (hereinafter referred to as CHB) for which an initial amount of Rs.13,000/- in the year 1980 was paid and thereafter monthly installment of Rs.558/- was paid till 1986. Another sum of Rs.23,184.50 during the period 1986-87 and Rs.1826.257- during the period 1987-88 were paid to CHB. In the immovable property return filed on 31.12.1991, total investment including payments made to Chandigarh Housing Board and on renovation had been shown at Rs.1,70,000/-. Breakup of the said amount reproduced in the CIT (Appeals)'s order is as follows :
Payment to CHB: Rs.72145/- (Confirmed by CHB PB 379) Expenditure on renovation Rs.83858/ Details attached and also on page 242 of the paper book Minor Expenditure from Rs. 14000-
1980 to 1990
25. Total withdrawals for renovation were stated to be Rs.83858/- which was over and the normal household withdrawals. Moreover a loan of Rs.60,000/-was taken from GPF for this purpose. The Assessing Officer did not accept the contention of the assessee and held that the 20 withdrawals shown by him included household withdrawals and reducing the same from the withdrawals shown by the assessee the Assessing Officer worked out the unexplained investment in house property to the extent of Rs.1,18,142/- as follows :
Total investment in the house Rs.1,70,000/- Withdrawals between Nov.,1990 to June 1991 Rs.8 3 . 8 5 8 / -
Less for household Rs .32,000/- @ Rs.4000/- p.m. for 8 months Funds available for construction Rs.51,858/- Unaccounted expenditure (Rs.l,70,000-Rs.51,858)=1,18,142/- 26. Before the Ld. CIT (Appeals), the assessee contended that it had incurred expenses on account of renovation to the extent of Rs.83,858/- only and
submitted the entire details regarding the additions and alterations made. The assessee submitted that the source of the expenditure made had also been explained as being out of bank withdrawals. The assessee further submitted that there was no question of including or presuming withdrawals for household purpose in the above withdrawals since the withdrawals for household purpose had been reflected separately by the assessee and shown to the Assessing Officer also. The assessee further submitted that the addition made in any case was outside the purview of section 158B since it was not based on any evidence found during the course of search but merely on the basis of surmises and conjectures.21
The Ld. CIT (Appeals) after considering assessee's submissions deleted the disallowance made holding that the assessee had all along in statement recorded on 20.11.1997 maintained that a total amount of Rs.1,70,000/- had been spent on the house including various additions/alterations and since the Assessing Officer had proceeded to make the addition on the presumption that the withdrawals shown for renovation included withdrawals made for household purpose which was factually incorrect. The assessee having shown withdrawals for household purpose separately, the addition made could not be sustained. The Ld. CIT (Appeals) further held that since the addition was based on estimate of household expenditure, the same was outside the purview of Chapter XIV-B of the Act. He, therefore, held that both on legal and factual position the addition made by the Assessing Officer could not be sustained and, therefore, deleted the same.
27. Before us, the Ld. DR relied upon the order of the Assessing Officer, while the Ld. counsel for the assessee relied upon the order of the Ld. CIT (Appeals).
28. On consideration of the rival submissions and in the light of the legal position discussed above, we do not find any justification to interfere with the order of the Ld. CIT (Appeals) in deleting the addition. It is an admitted fact that the total investment in the house amounted to 22 Rs.1,70,000/-. On being questioned about the source, the assessee stated that it included payment to Chandigarh Housing Board made from the period 1980 to 1986 being Rs.13,000/- initially amount and Rs.558/- monthly installment. The balance pertained to renovation which the assessee explained as being sourced from loan taken from GPF amounting to Rs.60,000/- and his own savings.
The details of expenditure incurred on renovation and withdrawals made from bank in this regard was filed before the Assessing Officer. The Assessing Officer has made addition for the reason that the withdrawals included withdrawals for household purpose and assuming household expenditure @ Rs.4000/- per month reduced the same from the withdrawals shown by the assessee for the purpose of renovation. Clearly, there was no evidence as such found during search which formed the basis of the addition. In fact, it was based only on the estimation and the quantum of household expenditure by the Assessing Officer which in any case we find is incorrect basis since the assessee had separately shown household withdrawals and thus there was no need to reduce the same from the withdrawals shown by him for investment purpose. We, therefore, hold that the impugned addition was not based on any evidence found during search and, therefore, needs to be deleted for this reason alone.
29. Even otherwise, on merits we find no justification to interfere with the order of the Ld. CIT (Appeals). The Ld. 23 CIT (Appeals) has correctly appreciated the facts in the present case. The quantum of investment in the house of Rs.1,70,000/- is an admitted fact . Also, the assessee has all along been stating that the same includes the amount paid to Chandigarh Housing Board and amount paid on renovation. The amount paid to Chandigarh Housing Board has been stated and confirmed from Chandigarh Housing Board as amounting to Rs.72,145/-. Therefore, the issue remains confined only the expenditure incurred on account of renovation which the assessee has explained by way of withdrawals from bank account. The contention of the Ld. DR that it includes withdrawals for household purpose is factually incorrect and we concur with the Ld. CIT (Appeals) in this regard that the assessee had separately shown withdrawals for household purpose and the same need not to be reduced from the withdrawals made for household purpose. Therefore, entire investment in the house stands explained and even on merits there is no case for making any addition. In view of the above, ground No.2(i) raised by the Revenue is dismissed.
30. Ground Nos. 2(ii) & (iii) - Both the grounds raised by the Revenue are against the deletion of addition of Rs. 15,49,838/- made in respect of House No. 1458, Sector 42-B, Chandigarh. The said addition has two limbs; one addition of Rs. 8,50,000/- on account of unexplained investment in plot [ground No.2 (ii)] and second addition of Rs. 6,99,838/- 24 [ground No. 2 (iii)] being unexplained investment towards construction done in the said plot.
31. As regards the addition made of Rs. 8,50,000/- on account of unexplained investment in plot, the Assessing officer made the said addition on account of difference between the amount stated in the sale deed and the statement of seller Shri Swaran Singh who is stated to have received Rs. 13 lakhs as against Rs. 4,50,000/- stated in the sale deed. The Assessing officer observed that during search the documents belonging to H.No . 1458, Sector 42-B were found at the residence of the assessee and on being questioned, the assessee explained that the house belong to Shri Kartar Singh and the documents were lying with him in safe custody. He explained that his father-in-law has bought this plot for his house in May 1997 for Rs. 4,50,000/- from one Shri Swaran Singh Jaiswal. He further added that due to old age of his father-in-law the power of attorney to construct the house was executed in his name any the original allottee Shri G.N. Gupta. He explained that he was doing the construction of the house but the money was paid by his father-in-law and todate expenses incurred on construction of the house amounting to Rs. 3,60,422/- . The Assessing officer further examined Shri Swaran Singh Jaiswal and during the course of recording of statement, Shri Swaran Singh admitted to have received Rs. 13 lakhs from Shri Chhabra on behalf of the purchaser. The assessee was given copy of statement of the seller and he submitted a written reply dated 24.3.1998 rebutting the stand 25 of the Assessing officer. Thereafter the Assessing officer determined the actual cost at which the plot was purchased and the actual owner of the said plot. For the first proposition, he submitted the reserve price of certain plots auctioned by the estate office and reached a conclusion that the price of said plot was Rs. 13 lakhs. For the second proposition, as to who is the owner of the plot, the Assessing officer rejected the contention of the assessee that the plot belong to his father-in-law and the documents were kept with him for safe custody. The Assessing officer stated that payment for the plot has been made by the assessee and the said plot being a lease hold plot of the assessee, could not be sold in this manner and, therefore, the sale agreement had no legal value and the power of attorney executed on the stamp paper in favour of the assessee and his wife was only legal document. Further referring to section 132 (4A), the Assessing officer drew a conclusion that since assessee had not discharged the onus, the Department could proceed on the assumption that the transaction recorded on the document was true. The Assessing officer thereafter stated that the legal owner of the house was the assessee himself and Shri Kartar Singh was used as a 'Benamindar" since he was an old man, already had a house in sector 43 and thus there was no need for him to construct a new house. The Assessing officer further arrived at a conclusion that the payment of Rs. 13 lakhs was made by way of DD of Rs. 3,25,000/- prepared from the bank account of the assessee, DD of Rs. 1,25,000/- from the bank account of his wife and Rs. 8,50,000/- i.e. the 26 balance amount paid in cash by the assessee who had unaccounted income. He, therefore, considered Rs. 8.5 lakhs as unexplained income of the assessee and added the same as deemed income u/s 69 of the Income Tax Act.
32. During the appellate proceedings, the assessee contended that no addition on account of said plot could be made in the hands of the assessee since the sale agreement was not in his name, the sale agreement mentioned the price of the plot at Rs. 4,50,000/- only and no document intimating cost at Rs. 13 lakhs was found during the course of search, the sale agreement signed by the two independent witnesses who had confirmed the purchases of the said plot by Sh. Kartar Singh in their letter filed during assessment proceedings and finally for the reason that even the seller has not stated to have received Rs. 13 lakhs from the assessee. The assessee contended that the purchase price of Rs. 13 lakhs was a mere fiction of imagination by the Assessing officer and the onus u/s 69 of the Income Tax Act being on the Department to prove investment made by the assessee have not been discharged, the addition could not have been made. The assessee further explained as to why Rs. 4,50,000/- the price of the said plot was paid by him by way of a loan to his father-in-law and further stated that the price of Rs. 13 lakhs taken by the Assessing officer by comparing rates with open auction in different sections was incorrect and improper. The assessee also rebutted all the issues raised by the seller Shri Swaran Singh, filed certificates of the two independent 27 witnesses stated that sale agreement was made in their presence and also two comparable cases stating the price of the plot in the year 1997 at Rs. 4,25,000/-. The assessee also stated that the power of attorney in his name was only with respect to the construction of the house. He stated that no incriminating documents were found to establish that the money had been paid over what was reflected by the assessee for the purchase of immovable properly and therefore, the said addition could not be sustained. The Ld. CIT(A) after considering the submissions made by the assessee found merit in the contention of the assessee. The CIT(A) held that the basis for making the addition is the statement of Shri Swaran Singh which on examination he found could not be relied upon for the reason that Shri Swaran Singh had stated that he had dealt with one broker Shri Chhabra for the said deal whom he had got to know only before two months from the sale of plot by reading a road sign. The Ld. CIT(A) also found that the seller had stated that he did not consult any other property dealer regarding price of the plot and he received the money through the dealer Shri Chhabra without meeting the purchaser at all. He found that Shri Swaran Singh had stated and admitted to have signed the sale agreement and had also stated that the signatures of the purchasers witnesses might have been done afterwards. The Ld. CI T(A) on analysis of the statement of the seller held that it was quite improbable that a seller would sell the property through an unknown property dealer without meeting the actual purchaser. Thus, he rejected the statement of the seller and held that the same 28 could not form the basis for making the addition. The Ld. CIT(A) further found that no other evidence of receiving amount over and above that stated in the sale agreement was found during the course of search or thereafter and also the comparable cases to prove the sale price of the said plot bought by the assessee had not been rebutted by the Assessing officer. He, therefore, held that the said addition on account of unexplained investment could not be made in the hands of the assessee. The Ld. CIT(A) further found that Sh. Kartar Singh had admitted being owner of the property and the agreement had been entered into between Shri Kartar Singh and Shri Swaran Singh, thus he held that Assessing officer was incorrect in concluding that the property belong to the assessee. For the aforesaid stated reasons, the Ld. CIT(A) deleted the addition made of Rs. 8,50,0000/- on account of unexplained investment.
33. Before us, the Ld. Counsel reiterated the submissions made before the lower authorities while Ld. DR relied on the orders of the Assessing officer. After considering the rival submissions, we do not find any merit in this ground of appeal. Admittedly, the only claim relating to impugned property found during the course of search was the sale agreement which was entered into between Shri Kartar Singh and Shri Swaran Singh for a price of Rs. 4,50,000/-. This document was explained by the assessee as being found from the premises since it was kept with him for the purpose of safe custody. As regards the payment of Rs. 4,50,000/- made by 29 him on account of purchase of property, the assessee explained that the same was given by way of loan to his father-in-law. This fact was admitted and agreed to by his father in law who also admitted to the fact that the said plot belong to him and he was the owner of the said plot. Clearly, therefore, the document found during the course of search could not be said to contain any thing incriminating leading to belief that the assessee was the owner of the said plot or had made investments over and above the stated amount in the said plot as rightly been pointed out by the Ld. CIT(A), the only basis for making the impugned addition was the statement of Shri Swaran Singh which we find has been correctly analyzed by the Ld. CI T(A) and held to be unreliable since as per the statement the seller Shri Swaran Singh, he had entered into the deal of the sale of the said plot through a broker whom he did not know personally but came to know in the reading of the road side sign and deals with him in the sale of the said plot without consulting any other property dealer, took the money for the said deal without meeting the purchaser and signed the document in the absence of the purchaser and the witnesses whom he stated "might" have signed the document later on meaning thereby he was not sure about the presence of the witnesses which statement was controverted by the witnesses who have stated to have signed the agreement in their presence. Thus, the statement of Shri Swaran Singh being highly improbable could not found the basis of arriving at the conclusion that the said plot was sold of Rs. 13 lakhs and as stated earlier since no other document 30 was found showing the sale price of the said plot over and above what was stated in the agreement, we are in complete agreement with the Ld. CI T(A) that there was no basis for making the said addition. Further, as rightly pointed out by the Ld. CI T(A), the assessee had brought comparable cases for the stated sale price of the said plot which was not rebutted by the Assessing officer. Therefore, in the absence of any incriminating material found as a result of search, and in view of the legal submissions made in this behalf in the earlier part of our order, we hold that Ld. CIT(A) was justified in deleting the addition.
34. In ground No. 2(iii), the Revenue has challenged the deletion of addition of Rs. 6,99,838/- made on account of unexplained investment by the assessee for the financial year 1997-98 relating to assessment year 1998-99 for the construction of House No. 1458, Sector 42-B, Chandigarh owned by Shri Kartar Singh, Assessee's father-in-law.
35. Briefly stated the Assessing officer observed in his order that during search certain bills and vouchers were found from the residence of the assessee. On being questioned, assessee stated that these papers pertained to the expenses incurred for the construction of House No. 1458, Sector 42 B, Chandigarh being constructed for his father-in-law. Further during assessment proceedings, the assessee explained the cash expenses on construction of the house by stating that the same was being constructed by him on behalf of his father-in- 31 law out of money given by his father in law and on account of the fact that he was holder of General Power of Attorney to construct the house. The assessee stated that his father-in- law Shri Kartar Singh had given him Rs. 5.5. lakhs for the construction of the house which was withdrawn from his saving bank account No.. 46490 and to which his father-in- law had admitted in his statement recorded on 3.4.1998. The Assessing officer rejected the contention of the assessee by holding that the said account was being operated by the assessee only and all cash deposits in the said account belonged the assessee only. He thereafter referred the valuation of the property to the valuation cell to quantify the valuation of the construction, which was done by DVO at Rs. 12,49,838/-. The Assessing officer treated the difference between this value and Rs. 5,50,000/- shown as withdrawn for construction of the house, amounting to Rs. 6,99,838/-, as unexplained investment of the assessee for the financial year 1997-98 and made addition of the same to the income of the assessee.
36. During appellate proceedings, the assessee reiterated the contention made before the Assessing officer that the construction was done from money given by Shri Kartar singh only. Further, he challenged the cost of construction by the DVO stating that it was very sketchy and did not carry any detailed calculation. The assessee further stated that request for the details of the calculation was made to the DCIT but the same were never supplied to him. The assessee also stated 32 that the entire construction was sourced from cheques issued from the bank account of Shri Kartar Singh and from cash withdrawal from his account. The details of the same were submitted showing total investment in cash and by way of cheque amounting to Rs. 8,35,000/-. The details are reproduced at pages 15 & 16 of the order of the CIT(A). The assessee also stated that if the valuation of the house was calculated on CPWD norms, the total cost of fully constructed house would come to Rs. 9,28,289/- which was well below that shown by the DVO on 6.2.1998 when the house was only 70% complete. The assessee further stated that the addition made was unwarranted since it was based on the DVO report. Reliance was paced on the decision of the Hon'ble Delhi Tribunal in the case of Atul Kumar Jain 64 TTJ 786 and also in the case of Vrishali Hotels P. Ltd Vs. CI T 66 TTJ 692 (Pune). The Ld. CIT(A) after considering the assessee's submission deleted the addition made by holding that other than the DVO's report, the Assessing officer has no other basis for making the addition. No documentary evidence was found during search to show that the amount over and above as disclosed by the assessee have been spent for construction and the addition was made only on assumption basis, on the basis of report of the DVO which was prepared in a hurried manner without taking consideration the details provided by the assessee. The Ld. CI T(A) held that for the aforesaid stated reasons, the addition made went against the spirit of provisions of section 158 BC of the Act. The Ld. CI T(A) further held that the valuation report submitted by the assessee was 33 more comprehensive and more reliable as against that by DVO which he found to be unreasonable and not based on facts. He further found that the withdrawal shown by the assessee's father-in-law Shri Kartar Singh upto 6.2.1998 for the purpose of construction amounting to Rs. 8,35,000/- justified the cost of construction as per the details filed by the assessee at Rs. 7,76,042/- and the registered valuer's cost of construction at Rs. 7,63,500/-. Therefore, considering the above facts, Ld. CIT(A) deleted the addition made in the hands of the assessee.
37. On consideration of the rival submissions, we do not find any merit in this ground of the appeal of Revenue. Undisputedly, as per the facts stated above, the addition in the present case has been made on account of the difference in the cost of construction of the house as estimated by the DVO and the amount withdrawn from the account of Shri Kartar Singh for the purposes of construction. Thus, it is the DVO's report which forms the basis of the impugned addition. Clearly, the addition has been worked out merely on estimate basis and not on the basis of any material or evidence found during the course of search. Therefore, in the background of the legal proposition discussed in the earlier part of the order, we are in complete agreement with the Ld. CIT(A) that the impugned addition is unwarranted and could not have been made in block assessment proceedings. This ground of appeal of the Revenue is accordingly dismissed. 34
38. Ground No.2 (iv) raised by the Revenue pertains to deletion of addition of Rs.30,855/- on account of capital gains on sale of shares during the block period. The addition had been made on the ground that the assessee was asked to submit the date of acquisition of shares seized during search, which was not supplied while the analysis of the bank account showed that certain shares were sold and capital gains tax was not paid against such transactions.
39 Before the Ld. CIT (Appeals), the assessee submitted that the addition made was unjustified since the shares belonged to Smt.Brijinder Pal Kaur and not the assessee and further the addition has been made on totally hypothetically figures without giving the detail of the shares sold, the basis of value and the owner of the shares. The Ld. CIT (Appeals) agreed with the contention of the assessee that the addition made was arbitrary and not duly supported by details of shares transacted and, therefore, the addition made was deleted.
40. We have heard the rival contentions and in the light of the legal proposition discussed above, we do not find any justification to interfere with the order of the Ld. CIT (Appeals) in deleting the addition. Admittedly, the shares were purchased by Smt.Brijinder Pal Kaur and not the assessee. This fact is evident from the discussion by the Assessing Officer at page 19 of his order wherein the investment in shares was discussed and the Assessing 35 Officer observed that the shares worth Rs.2,62,305/- were seized during the search at the assessee's premises. When asked to explain the same, the assessee admitted that the shares belong to Smt.Brijinder Pal Kaur who had purchased most of them prior to her marriage. This fact of the ownership of shares, we find, has not been displaced by the Assessing Officer either in assessment order or before the Ld. CIT (Appeals) or even before us. Thus, undisputedly, the shares belong to Smt.Brijinder Pal Kaur. The same does not constitute incriminating material relating to the assessee so as to warrant any addition on account of undisclosed income, in the hands of the assessee as discussed above in the earlier part of the order. Further even on merits, the Ld. DR has not been able to displace contention of the Ld. CIT (Appeals) that the addition made is arbitrary and no details of working of the capital gain on the basis of which the addition has been made has been supplied. Therefore, even on merits, there was no case for making any addition on account of capital gains. The Ld. CIT (Appeals) was, therefore, justified in deleting the addition. Therefore ground of appeal of the Revenue is accordingly dismissed.
41. Ground No.2(v) raised by the Revenue is against deletion of addition of Rs.66,153/- on account of application money deposited with the Chandigarh Housing Board, Chandigarh(in short 'CHB') for allotment of house which on refund was deposited in bank Account No.2880 36 belonging to Smt.Brijinder Pal Kaur, the wife of the assessee and in the Account No.46490 belonging to Shri Kartar Singh, father-in-law of the assessee. The Assessing Officer made this addition for the reason that the assessee was found to have applied to CHB on two occasions and the plot was not allotted as follows :
i) 13.1.1990 Rs.20,000/- Refund deposited in Account No.2880
ii) 21.9.1996 Rs.46,153/- Refund deposited in Account No.46490
42. On being asked to explain the same, the assessee submitted that the same related to deposits in the account of his wife and father-in-law. The Assessing Officer, therefore, treated the investments made by the assessee by way of application to CHB as unexplained and made addition on account of the same u/s 69 of the Act to the income of the assessee for the financial years 1989-90 and 1996-97.
43. Before the Ld. CIT (Appeals), the assessee submitted that the deposits in the bank accounts relating to refunds received from CHB had no connection with the assessee and were in fact refunds of application money deposited by Smt.Brijinder Pal Kaur and Shri Kartar Singh, who had received back the refunds and deposited the same in their accounts. Further, the assessee submitted that since the addition on account of cash deposits made in these accounts had already been made, it was a case of double addition. The Ld. CIT (Appeals) 37 agreed with the contention of the assessee and deleted the addition made.
44. We have heard the rival contentions and we do not find any merit in this ground of appeal of the Revenue. No document has been produced before us found during the course of search which could lead to the belief that the deposits made with the CHB were made by the assessee. In the absence of any such incriminating material, we are unable to agree with the Ld. DR that the addition on account of the same is sustainable that too in block assessment proceedings on account of the legal proposition as discussed in the earlier part of the order. Clearly, the only evidence before the Assessing Officer was the refunds received from CHB credited in the bank accounts of Smt.Brijinder Pal Kaur and Shri Kartar Singh. These refunds on the face of it cannot be attributed to the assessee and cannot be treated as incriminating material vis-à-vis undisclosed income of the assessee. The onus is on the Revenue to prove that these refunds in the bank account of third party constitute incriminating material vis-à-vis the assessee which we find they had failed miserably in the present case. Therefore, in the absence of any incriminating material vis-à-vis the addition mae on account of money deposited in CHB the Ld. CIT (Appeals) was justified in deleting the addition. This ground of the Revenue is accordingly dismissed. 38
45. In ground No. 2(vi), the Revenue has challenged the deletion of addition of Rs. 94,395/- made on account of unexplained jewellery found during the course of search.
46. Brief facts relating to the issue are that during the course of search, 355 gms of jewellery was found at the residential premises of the assessee who stated that 49 tola had been given to him by his mother and further 65 gms had been purchased by him. He also stated that he had sold some jewellery and was thereafter left with 25 tolas of jewellery. The balance 8 to 9 tolas was stated to be belonging to his wife. The Assessing officer examined his wife who in answer to a question put to her stated that she did not receive anything at the time of marriage. Further, the Assessing officer found that the assessee had sold 417 gms of jewellery as per his bank account while he had stated sale of additional jewellery of 280 gms before him. The Assessing officer therefore, treated the unexplained jewellery of 417 gms valued at Rs. 435 per gm amounting to Rs. 94,395/- as unexplained investment and deemed income of the assessee.
During appellate proceedings the assessee contended that the unexplained jewellery attributed to him actually belong to his wife and her father Shri Kartar Singh, the details of which along with supporting documents had been submitted during investigation. The assessee also controverted the contention of the Assessing officer that the bank statement showed 417 gms of jewellery stating 39 that the same was incorrect. The assessee further submitted break-up explaining of the jewellery found at his premises amounting to 35 tolas as being attributable to gold inherited from his mother - 49 tolas, purchased by him - 6.5 tolas and sold by him - 23.08 tolas, the sale proceeds of which were deposited in his bank account, proof of which were also filed and he was shown to be left with 32.42 totals while that found during the search was 35.5 tolas. The excess of 3.88 tolas was stated to as belonging to his wife. The Ld. CIT(A) agreed with the contention of the assessee and deleted the addition.
47. Having heard the contentions of both the parties we see no reason to interfere in the order of the Ld. CIT(A). The assessee, we find had given a detailed reconciliation of the gold found during the search. The assessee had stated that he had acquired total jewellery of 54.5 tolas out of which 49 tolas was inherited from his mother and 6.5 tolas was purchased out of his own sources. These facts are not disputed. The assessee had further stated to have sold 23.08 total for which he furnished complete details of dates on which sold, the quantity sold, the account in which money received was deposited and all other proofs relating to the same.
48. The Revenue, on the other hand, has contended that assessee sold 417 gms of jewellery. The basis for the same as per the Assessing officer is the bank account of the assessee. We fail to understand as to how the bank 40 account could have reflected the sale of 417 gms of jewellery. In the entire assessment order, on the issue relating to the addition made on account of jewellery, we find no basis has been mentioned for arriving at the quantity of 417 gms of jewellery sold by the assessee except stating that the bank account reflects the same. In the absence of any further explanation, we cannot agree with the contention of the Revenue in this regard that the assessee had sold 417 gms of jewellery and are left with no option but to agree with the contention of the assessee that he had sold only 23.08 gms of jewellery which is duly evidenced and explained by him. Since the addition has been made primarily for this difference on account of the quantity of gold shown to have been sold by the assessee, which we have rejected, we find no reason to interfere in the order of the CIT(A) in this regard and the addition made, therefore, on account of unexplained jewellery is, therefore, held to be found rightly rejected by the Ld. CIT(A). The ground of appeal raised by the Revenue is, therefore, rejected.
49. In ground No.2(vii) the Revenue has agitated the deletion of addition made on account of investment in Maruti car amounting to Rs.55,000/-.
50 Briefly stated, during his statement recorded u/s 132(4) of the Act, the assessee admitted having purchased a Maruti car in cash. During assessment proceedings he was asked to justify the source of the 41 same, which he stated as having been purchased in 1988 from the sale proceeds of his ancestral house at Khanna, sale of gold, loans raised from friends and from his pay savings. The assessee submitted that all these details were reflected in his property return submitted to his office and further that the details of the bank account from which money was withdrawn for the purpose had also been supplied during investigation stage. The assessee further stated that it was Shri Kartar Singh who had purchased a car in 1996 who had admitted to the same in his statement dated 3.4.1998 and had also stated that the same was sold in April, 1997. Necessary documents were also supplied in this regard. The Assessing Officer rejected the contention of the assessee that the car was purchased by Shri Kartar Singh for the reason that he was too old to drive the car and the seller of the car could not be located for cross verification as also for the reason that Shri Kartar Singh had no source of his own to buy car amounting to Rs.55,000/-. He, therefore, treated the investment in car as unexplained investment of the assessee and made addition of the same amounting to Rs.55,000/- u/s 69 of the Act for the financial year 1996-
97.
51. Before the Ld. CIT (Appeals), the assessee reiterated the contentions made before the Assessing Officer that the car belonged to Shri Kartar Singh, documents of ownership of which had been filed before the 42 Assessing Officer. The Ld. CIT (Appeals) agreed with the assessee's contentions and further found that Shri Kartar Singh had disclosed the purchase of car under VDIS and, therefore, there was no occasion to make any addition in the hands of the assessee on account of unexplained investment in the car.
52. We have heard the rival submissions and in the light of the legal proposition discussed above, we do not find any justification to interfere with the order of the Ld. CIT (Appeals) in deleting the addition. The basis for making the addition is the statement recorded of Shri Jagdish Mitter in which he had admitted having purchased a car in cash. No other document or incriminating material was found during the search to lead to the belief that the assessee had made any investment that too unaccounted in any cash in the financial year 1996-97. Moreover, even as per the facts of the case, it had been categorically proved that the car purchased in financial year 1996-97 belonged not to the assessee but to Shri Kartar Singh who had disclosed the same under VDIS. This fact has not been controverted by the Ld. DR. In view of the same, in the absence of any incriminating material relating to investment made in purchase of car by the assessee and in view of the fact that the same was found to have been made by the father-in-law of the assessee and not the assessee himself, we hold that the Ld. CIT (Appeals) has correctly appreciated the facts of 43 the case and law and deleted the addition. The ground raised by the Revenue is, therefore, dismissed.
53. Ground No.2(viii) raised by the Revenue relates to deletion of addition made on account of low household withdrawals amounting to Rs.1,83,000/- for the financial years falling within the block period. The Assessing Officer made an estimated addition based on the price index on account of inadequate household withdrawals. During the appellate proceedings, the assessee submitted that the details of withdrawals for household purposes was supplied during the assessment proceedings to the Assessing Officer as also in proceedings u/s 154 of the Act and it was also submitted to the Assessing Officer that for the period 1987 to 1992 the expenditure was incurred only on himself and thereafter after his marriage in 1992 on a small family of three members only. The assessee submitted that the addition made was arbitrary based on estimate and could not be made in the absence of any incriminating material or evidence. The Ld. CIT (Appeals) agreed with the contention of the assessee and held that the household expenses shown by the assessee for the block period were quite reasonable and further in the absence of any material found by the Assessing Officer to establish that the household withdrawals were inadequate, the Ld. CIT (Appeals) held the addition made to be unjustified.
44
54. On consideration of the rival submissions and in the light of the legal proposition discussed above, we do not find any justification to interfere with the order of the Ld. CIT (Appeals) in deleting the addition. Clearly, the addition is not based on any incriminating material found during the course of search and is based merely on estimates. Moreover even estimates are not justified as correctly held by the Ld. CIT (Appeals) since the Assessing Officer had not established as how the withdrawals for household purposes made by the assessee were inadequate. Therefore, the Ld. CIT (Appeals) on correct appreciation of the facts and law has correctly deleted the addition made by the Assessing Officer. The ground raised by the Revenue is dismissed.
55 In ground No.3 the Revenue has challenged the reduction of addition made on account of unexplained investment in shares from Rs.2,62,305/- to Rs.51,420/-.
56. Briefly stated, the facts of the case are that the Assessing officer has discussed the above issue on pages 19, 20 & 21 of his order and the basis of making this addition has been that on examination of bank accounts of Smt. Barjinder Pal Kaur and Shri Jagdish Mitter, it was found that they have been regularly doing transaction in shares. Since for carrying out transaction in shares, various formalities like selection of the shares, filling of share application form, correspondence with companies, 45 depositing of dividends and refunds in the bank have to be undertaken, Shri Jagdish Mitter was asked to explain as to who was doing all these formalities upto 1992 on behalf of Smt.Barjinder Pal Kaur. In his statement recorded on 21.3.1998, Shri Jagdish Mitter stated that he was helping her fill up the application forms. Thereafter, the Assessing Officer reached a conclusion that that Shri Jagdish Mitter had made the investment in shares in the name of Smt. Barjinder Paul Kaur and the investment of Rs.2,62,305/- in shares has been treated as unexplained and considered as deemed income of Shri Jagdish Mitter under section 69 of the Income Tax Act, 1961 for the different financial years.
57. Before the Ld. CIT (Appeals), the Ld. counsel for the assessee contended that all the shares belonged to his wife and the same were purchased before marriage with the assessee. Further, the assessee stated that the same were duly disclosed in the details of her wealth, which was submitted during the assessment proceedings for assessment year 1993-94. Further, the assessee contended that except for shares of value of Rs.21,000/- which were invested in cash the rest were purchased by cheque through his wife's bank account. The assessee also contended that there was no evidence whatsoever with the Assessing Officer to believe that the investment had been made by the assessee and the addition made was purely on suspicion and surmises.
46
58. The Ld. CIT (Appeals) held that the investment made by cheque to be in order. As regards investment made in cash, the Ld. CIT (Appeals) tabulated year-wise cash savings deposited in bank, cash investment in shares by the assessee and cash investment in shares of daughter @ Rs.2000/- per annum beginning from 1992-93 and estimating the reasonable yearly cash savings of the assessee's wife at Rs.5000/- per year, worked out excess cash investments made by her and attributed the same to having flown from the assessee. He, therefore, treated the same as unexplained investment in the hands of the assessee. The amount thus was worked out at Rs.12,360 for financial year 1992-93, Rs.7240/- for financial year 1993-94, Rs.6110/- for financial year 1994-95 totaling to Rs.25,710/-. The addition to this extent was upheld while the balance of Rs. 2,10,885/- was deleted.
59. Before us, the Ld. DR contended that the shares though in the name of the assessee's wife, in fact, were made by the assessee himself as pointed out by the Assessing Officer from his own undisclosed income since his wife had no source of income after 1987 when she resigned from services in Punjab School Education Board and the assessee was in touch with her even before marriage as admitted by the assessee himself in his statement recorded on 21.3.1998 wherein he has stated that he introduced Smt.Barjinder Kaur his wife at the time 47 of opening bank account even before marriage and advised and guided her for making investment.
60. The Ld. counsel for the assessee, on the other hand, stated that the investments made prior to marriage cannot in any way be linked to the assessee merely because he guided her and it cannot lead to the inference that he invested his own money in her name. The Ld. counsel for the assessee stated that it was a very far fetched arguments which defined all logic and no prudent nor would make investment in name of a person totally unrelated. As far the investment made post marriage the Ld. counsel for the assessee stated that the entire investment attributed to the savings and money received by his wife from her father and other relatives.
61. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The present addition has been made on the basis of share certificate found at the searched premises. Admittedly, all the shares are in the name of Smt. Barjinder Kaur, assessee's wife. The same was attributed to the assessee disbelieving the creditworthiness of his wife. It is not disputed that the investments were made from the bank account of the wife of the assessee who had explained the source of deposits in the bank account has been from gifts, shaguns, savings etc. A part was attributed to 48 having been made in cash. The Assessing officer, we find has completely rejected the explanation for no cogent reason at all but simply stating that she had no regular source of income. Thus, clearly no evidence was found during search and during post-search enquiry which could attribute that investment in shares to the assessee and the addition is merely based on estimate and conjecture. Thus, in the absence of any incriminating material found at all with the assessee and in view of the legal proposition discussed in the earlier part of the order, we hold that there was no justification in making the addition on account of investment in shares at all and the addition made is therefore, deleted.
62. Ground Nos. 4, 5 & 6 raised by Revenue are in relation to the grievance of the Revenue that the CIT(A) had ignored the statement given by the assessee to the Chief Judicial Magistrate admitting to have received Rs. 3,50,000/- as illegal commission as also in ignoring the diaries and cashbook seized during search operation from the residence of two contractors who implemented the work of the Chandigarh Administration and wherein entries of illegal gratification paid to the assessee were recorded as also against the action of the Ld. CIT(A) in admitting additional evidences produced by the assessee.
63. Since, the additions made in the case of the assessee have been deleted by us primarily for the reason that no incriminating material relating to the same were 49 found during the course of search, we find no merit in the impugned grounds raised by the assessee since they have no impact on the decision rendered by us nor these allegations made by the Revenue change the fact that no incriminating material relating to the additions made was found during the course of search. It may also be noted that statement given by the assessee before the Chief Judicial Magistrate is also not part of the incriminating material found during the course of search. How statement of the assessee made as accused in Criminal Court is admissible is not explained by the Revenue. Further, we do not find if Ld. CIT(A) admitted any additional evidence in violation of Rule 46A of the Income Tax Rules. In view of the same, these grounds raised by the Revenue are also treated as dismissed. In effect, the appeal of the Revenue is dismissed.
64. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court.
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 8 t h February, 2017
*Rati/rkk*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
50
Assistant Registrar,
ITAT, Chandigarh