Income Tax Appellate Tribunal - Mumbai
Mangatram Arora, Mumbai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'I' : MUMBAI
BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKOTAIAH ,(AM)
IT(SS)A No.101/Mum/2006
Assessment Year : Block Period :01.04.1990 to 07.02.2001
Shri Mangatram Arora
4, Shivdarshan
Sarojini Naidu Road
Santacruz(W)
Mumbai-400 054. .....(Appellant)
P.A. No.(ABNPA 3327 L)
Vs.
Asstt. Commissioner of Income tax
Central Circle-41, IT Department
Aayakar Bhavan, M.K. Road
Mumbai-400 020. ... (Respondent)
IT(SS)A No.113/Mum/2006
Assessment Year : Block Period :01.04.1990 to 07.02.2001
Jt. Commissioner of Income tax (OSD)
Dy. Commissioner of Income tax
Central Circle-43, Room No.659, 6th Floor
Aayakar Bhavan, M.K. Road
Mumbai-400 020. .....(Appellant)
Vs.
Shri Mangatram Arora
Mumbai-400 054. .....(Respondent)
Assessee by : Shri M.Subramaniam
Department by : Shri N.K. Balodia and
Shri Ajaykumar Srivastava
ORDER
Per D.K. AGARWAL (JM).
These cross appeals by assessee and revenue are directed against the order dated 20.01.06 passed by the ld. CIT(A) for the block period 1.4.1990 to 7.2.2001. Both these appeals are disposed of by this common order for the sake of convenience. 2 IT(SS)A No.101 & 113/M/06
A.Y:BP
2. Briefly stated facts of the case are that the assessee, an individual, derives income from salary and income from other sources i.e. interest income from bank. A search action u/s.132(1) of the I.T. Act, 1961(the Act) was carried out on 7.2.2001 at the residence of the assessee wherein certain loose papers files, cash and jewellery were found. A notice u/s.158 BC of the Act was issued to the assessee and in response the assessee filed return for the block period declaring undisclosed income at Rs. Nil. However, the assessment was completed on a total undisclosed income of Rs.64,84,620/- vide order dated 28.2.2003 passed u/s.158 BC(c) of the Act. On appeal, the ld. CIT(A) has allowed part relief to the assessee.
3. Being aggrieved by the order of the ld. CIT(A) the assessee and the revenue both are in appeal before us.
4. Ground No.1 and 2 in the assessee's appeal and last ground in revenue's appeal are general in nature and in the absence of any specific plea the same are therefore rejected.
5. Ground No.3, 4, 5, 6 and 7 in assessee's appeal are against the sustenance of addition of Rs.15.00 lacs out of cash found and seized Rs.27.00 lacs.
3 IT(SS)A No.101 & 113/M/06
A.Y:BP
6. Ground No.1 in revenue's appeal is against the relief of Rs.12.00 lacs allowed by the ld. CIT(A) out of cash found and seized Rs.27.00 lacs.
7. The brief facts of the above issue are that it was observed by the AO that the assessee was found to be joint holder of bank locker No.434 with Indian Overseas Bank, Khar Branch, Santacruz(W), Mumbai with his wife Smt. Sanyogita M. Arora wherein cash of Rs.27.00 lacs was found and seized. The assessee was asked to explain the source of cash found in the locker. It was explained by the assessee that the total cash found by the department during the course of search was Rs.38.00 lacs including Rs.11.00 lacs found and seized from residence. The bifurcation of total cash found was as under :-
i) Arora Poultry Products Ltd. -Rs.11 lacs as per cash book
ii) Mangatram Arora Fin. Ltd. - Rs.7 lacs "
iii)Mangatram Arora - Rs.5 lacs as per Balance sheet
iv) Mrs. Sanyogita Arora - Rs. 5 lacs "
v) Rajnish Arora - Rs.3 lacs "
vi) Kamal Arora - Rs.4 lacs "
vii) Late Suraj Arora - Rs.3 lacs "
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Rs.38 lacs
It was further stated that all the above parties are income tax assessees and their GIR/PAN are already submitted. It was further stated that the assessee has filed the sufficient proof including the 4 IT(SS)A No.101 & 113/M/06 A.Y:BP acceptance that the cash of Rs.11.0 lacs was adjusted against outstanding demand of the Arora Poultry Products Limited and the said party has also given his consent letter for accepting the liability.
Further the assessee has filed confirmation letters from all other parties namely Kamal Arora-Rs.4.00 lacs, Rajnish M. Arora-Rs.3.00 lacs, Mangatram Arora -Rs.5.00 lacs Smt. Sanyogita Arora-Rs.5.00 lacs, late Suraj Arora - Rs.3.00 lacs and Mangatram Arora Finance Ltd.-Rs.7 lacs. However, the AO did not accept the assessee's explanation for the following reasons :
1. During search proceeding of the locker, a statement from Smt. Sanyogita M. Arora was recorded. She was asked about these cash. The relevant question and its answer is reproduced as under
:-
Q.2] During the course of search & seizure action of your locker No.434 in Indian Overseas Bank, cash amounting to Rs.27 lakhs has been found. You are requested to explain the source of the cash as well as to whom the cash belongs.
A.2] The cash has been given to me by my husband Shri Mangatram Arora for keeping in the locker. I am not aware of the source and he will explain its source.
2) A statement of Shri Mangatram Arora was recorded on 01.03.2001.
The relevant question and its answer is reproduced as under . Q.3] During the course of search and seizure action cash amounting to Rs.27,00,000/- has been found. Your wife has stated that she is not aware of the source and it can be explained by you. Please explain the same.
A.3] I am not able to account for.
3) Smt. Sanyogita M. Arora is having the income being rent receipt.
The cheques received by her are being deposited in M/s. Mangatram Arora Finance Ltd. She has filed a return for the A.Y. 5 IT(SS)A No.101 & 113/M/06 A.Y:BP 1999-00 and 2000-01 on 09.03.2001 without a balance sheet as on the relevant dates. Therefore, her contention that Rs.5 lacs belonging to her is not acceptable.
4) Shri Suraj M. Arora is a dead person. The confirmation letter is signed by the assessee himself. The same is not acceptable. Accordingly the Assessing Officer added unexplained cash of Rs.27.00 lacs as income from undisclosed sources for the block period.
8. On appeal, the ld. CIT(A) observed that in the case of M/s. Mangatram Arora Finance Ltd., copy of cash book extract as on 6.2.2001 and 7.2.2001 was filed to substantiate that the closing balance on 6.2.2001 was Rs.8,58,327/- and same appeared as opening balance as on 7.2.2001 showing that the cash of Rs.7.00 lacs found and seized from Shri Mangatram Arora (individual) was part of Rs.8.50 lacs being opening balance on 7.2.2001. She further observed that there is no discussion in the assessment order as to why the AO has not accepted the appellant's contention. She held that from the documents filed it is seen that the cash balance to the extent of Rs.7.00 lacs is explained as belonging to M/s. Mangatram Arora Finance Ltd. and accordingly she deleted the addition of Rs.7.00 lacs. 8.1 In respect of cash of Rs.5.00 lacs belonging to the assessee the ld. CIT(A) observed that Shri Mangatram Arora was regular assessee and filed the returns regularly up to Assessment Year 2000-01. A copy of balance sheet as on 7.2.2001 was also filed to substantiate the 6 IT(SS)A No.101 & 113/M/06 A.Y:BP cash and bank balance of Rs.6,65,960/-. The ld. CIT(A) after considering the same while observing that the appellant has been able to satisfactorily explain the source of cash and accordingly she deleted the addition of Rs.5.00 lacs.
8.2 In the case of cash of Rs.4.00 lacs stated to be belonging to Mrs. Kamal Arora, the ld. CIT(A) observed that the assessee has filed confirmation letter of Mrs. Kamal Arora together with a statement of total income as well as net wealth to substantiate the cash and bank balance of Rs.4,37,890/- as on 31.3.1999. However, in view of the time lag between 31.3.1999 (date of balance sheet) and 21.2.2003 (date of confirmation letter) and mere filing of confirmation letter in no way proves that the cash belongs to Mrs. Kamal Arora, daughter of the appellant, and hence, she upheld the addition made by the AO. 8.3 Similar view was taken by the ld. CIT(A) in respect of cash of Rs.3.00 lacs stated to be belonging to Mr. Rajnish Arora. 8.4 In respect of claim of cash of Rs.5.00 lacs belonging to Mrs. Sanyogita Arora, the ld. CIT(A) observed that mere filing of confirmation in no way proves that the cash belongs to Mrs. Sanyogita Arora. The AO has analysed in the order that there was no known source of income of Mrs. Sanyogita Arora to substantiate her claim 7 IT(SS)A No.101 & 113/M/06 A.Y:BP that the cash belongs to her and hence, she confirmed the addition made by the AO.
8.5 In respect of cash of Rs.3.00 lacs in the name of late Suraj Arora, the ld. CIT(A) observed that the assessee has failed to substantiate that the cash belonged to late Shri Suraj Arora and hence, she confirmed the addition made by the AO.
9. At the time of hearing, the ld. Counsel for the assessee while reiterating the same submissions as submitted before the AO and the ld. CIT(A) further submits that the assessee has duly filed his explanation, confirmations from all the parties along with copy of acknowledgement of returns, statement of total income, balance sheet, copy of assessment order passed u/s.143(3) in the case of Shri Mangatram M. Arora for Assessment Year 1999-2000, copy of assessment order passed u/s.143(3) in the case of Mrs. Sanyogita M. Arora for the Assessment Year 1999-2000, copy of order of the ld. CIT(A) in the case of Mrs. Sanyotia M. Arora for the block period 1.4.90 to 7.2.2001 appearing at page 21 to 53, 56 & 68 of assessee's paper book. In the light of the above documentary evidence the ld. Counsel for the assessee submits that the assessee has discharged his burden to show that the cash which was found in the locker belonged to respective parties/family members. He further submits that in the 8 IT(SS)A No.101 & 113/M/06 A.Y:BP absence of any finding in this regard in the remand report appearing at page 57 to 59 of assessee's paper book, the ld. CIT(A)was not justified in sustaining the addition of Rs.15.00 lacs and the same be deleted.
10. On the other hand the ld. DR while strongly relying on the order of the AO submits that the confirmation letters filed by the assessee are bald statements and self serving documents. The returns along with statement of income and balance sheet were filed merely to establish that the cash found in the locker was available with them. He further submits that in any case those returns are non-est returns and cannot be considered as valid returns in the eye of law. He further submits that the assessee has totally failed to establish the capacity and credit worthiness of the parties. He further submits that in the case of M/s. Mangatram Arora Fin. Ltd., it was stated by the assessee that the said company was having closing balance of Rs.8,58,327/- on 6.2.2001 and the same was appearing as opening balance on 7.2.2001 i.e. on the date of search, however, from the enquiries conducted from the bank it was found that prior to the date of search the bank locker was operated on 25.1.2001 and not after that, therefore, the explanation given by the assessee is without any basis/merit and hence, the same is liable to be rejected. In support he also placed on record the copy of the bank's letter dated 9.2.2010 alongwith details of operation of bank locker for the period of 3 9 IT(SS)A No.101 & 113/M/06 A.Y:BP months prior to 7.2.2001 to show that bank locker was last operated on 25.1.2001 before the date of search. The reliance was also placed in I.A.C vs. Indian Art Emporium (1994) 121 CTR (Bom.) (Trib.) (TM) 291 and Raghubir Singh Vs. ITAT and Ors. (2007) 209 CTR (P&H) 394 to show that the returns having been filed after the search merely to establish the income disclosed in the return without bringing on record the capacity and source of cash credit, the addition has rightly been made. The reliance was also placed on the decision of Sumati Dayal vs. CIT (1995) 214 ITR 801(SC) for the proposition that after applying the test of human probabilities, the assessee's claim about the amount being her winnings from races is not genuine. He therefore, submits that in these circumstances, the ld. CIT(A) was not justified in allowing a relief of Rs.12.00 lacs to the assessee and hence the addition made by the AO Rs.27.00 lacs be restored.
11. In the rejoinder, the ld. Counsel for the assessee submits that all the decisions relied on by the ld. DR are not applicable as the impugned assessment was made under block assessment under separate chapter and for this proposition the reliance was also placed in CIT vs. Dr. M.K.E. Menon (2001) 248 ITR 310(Bom.) . He therefore, submits that the addition made by the AO Rs.27.00 lacs be deleted.
10 IT(SS)A No.101 & 113/M/06
A.Y:BP
12. We have carefully considered the submissions of the rival parties and perused the material available on record. In the case of Mangatram Arora Finance Ltd. it was stated by the assessee that a sum of Rs.7.00 lacs was deposited out of cash available in the books of the company on 6.2.2001 as a closing balance and the same appeared as opening balance on 7.2.2001 and hence the deposit of cash of Rs.7.00 lacs in the bank locker was part of Rs.8.50 lacs being opening balance on 7.2.2001. Similar stand was taken by the assessee in respect of deposit of Rs.5.00 lacs each in the case of Shri Mangatram Arora, assessee and Smt. Sanyogita M. Arora, wife of the assessee that the amount of Rs.5.00 lacs each was deposited out of cash available with them as on 7.2.2001 i.e. before the search as per copy of their balance sheet appearing at page 31 and 37 of the assessee's paper book. Per contra, the claim of the revenue is that on enquiry made from the bank it was found that prior to the date of search the bank locker was operated on 25.1.2001, therefore, the assessee's claim cannot be accepted and in support the ld. DR has also filed copy of letter dated 9.2.2010 alongwith details of operation of bank locker for a period of 3-months prior to 7.2.2001. Since the evidence filed by the ld. DR is a new evidence which was not available before the AO and the ld. CIT(A) and keeping in view the rule of audi alteram partem i.e. , no man should be condemned unheard, we are of the 11 IT(SS)A No.101 & 113/M/06 A.Y:BP view that in the interest of justice the issue should be restored back to the file of the AO and accordingly, we set aside the order passed by the revenue authorities on this account and send back the matter to the file of the AO who shall decide the same afresh in the light of our observations hereinabove and according to law after providing reasonable opportunity of being heard to the assessee. Accordingly the part of ground No.3 and ground No.4 taken by the assessee and ground No.1 taken by the revenue are partly allowed for statistical purposes.
13. With regard to the addition of Rs.3.00 lacs, Rs.4.00 lacs and Rs.3.00 lacs stated to have been kept in the locker by the assessee out of cash available with Shri Rajnish Arora, Mrs. Kamal Arora and Late Shri Suraj Arora respectively we find, that the assessee has filed confirmatory letters of all the above depositors inasmuch as in the case of Mrs. Kamal Arora the assessee has also filed copy of acknowledgement of returns alongwith copy of statement of total income and statement of wealth as on 31.3.1997, 31.3.1998 and 31.3.1999. After considering the totality of the facts and circumstances of the case and the decision relied on by the parties we are of the view that the assessee's explanation can not be accepted for the reasons namely (i) The returns in the case of Mrs. Kamal Arora were filed on 9.3.2001 i.e., after the date of search on 7.2.2001. (ii) 12 IT(SS)A No.101 & 113/M/06 A.Y:BP There is no nexus in the cash and bank balance of Rs.4,37,890/- as on 31.3.1999 and deposit of Rs.4.00 lacs in the bank locker in the case of Mrs. Kamal Arora. (iii) There is no copy of return, statement of income and balance sheet in the case of Shri Rajnish Arora and Late Shri Suraj Arora and (iv) The assessee has failed to prove the source, capacity of the depositors and genuineness of the deposits in all these three cases during the relevant year of search. Accordingly the addition made by the AO and sustained by the ld. CIT(A) in the case of Shri Rajnish Arora Rs.3.00 lacs, Mrs. Kamal Arora Rs.4.00 lacs and Late Shri Suraj Arora Rs.3.00 lacs aggregating to Rs.10.00 lacs is upheld. The grounds taken by the assessee in this regard are, therefore, rejected.
14. Ground No.8 to 10 in assessee's appeal are against the sustenance of addition of Rs.2,54,526/- as undisclosed income invested in FDs.
15. The brief facts of the issue are that during the course of search FDRs of Rs.6.00 lacs from bank locker, FDRs of Rs.97,684/- and Rs.1,56,842/- were found from the residence of the assessee. The AO in the absence of any source of investment added the aggregate amount of FDR of Rs.8,54,526/- in the income of the assessee as undisclosed income. On appeal, the ld. CIT(A) after considering the remand report of the AO wherein he has concluded that FDRs of 13 IT(SS)A No.101 & 113/M/06 A.Y:BP Rs.6.00 lacs have been disclosed to the Department, has accepted the source of investment in FDRs of Rs.6.0 lacs and confirmed the addition of balance amount of FDRs Rs.2,54,526/-.
16. At the time of hearing the ld. Counsel for the assessee submits that all the FDRs are included in the balance sheets and statement of net wealth of the respective family members appearing in the assessee's paper book, therefore, no addition is called for.
17. On the other hand the ld. DR supports the order of the AO and the ld. CIT(A).
18. Having heard the submissions of the rival parties and perusing the material available on record we find that the details of the FDRs of Rs.97,684/- are as under :
S.No. Name of Holder Name of Bank Dt. of issue Payment
1. Master Suraj U/g Smt. Oriental Bank of Commerce 28.12.91 12,614.00 Sanyogita Arora
2. Master Suraj U/g Smt. Oriental Bank of Commerce 14.11.91 25,275.00 Sanyogita Arora
3. Baby Kamal U/g Smt. Oriental Bank of Commerce 28.12.91 14,000.00 Sanyogita Arora
4. Suraj M. Arora U/g Mr. Dena Bank 28.11.94 15,265.00 Mangatram M. Arora
5. Rajnish M. Arora U/g Mr Dena Bank 28.11.94 15,265.00 Mangatram M. Arora
6. Kamal M. Arora Dena Bank 28.11.94 15,265.00 Total 97,684.00 14 IT(SS)A No.101 & 113/M/06 A.Y:BP We further find that the following fixed deposits issued on 24.2.1998 by The United Western Bank were also found and seized:-
Sr.No. Name of the Holder Amount
1. Arora Mangatram 21,128.00
Arora Sanyogita Mangatram
2. Arora Mangatram 21,128.00
Arora Sanyogita Mangatram
3. Arora Suraj Mangatram 21,128.00
Arora Mangatram
4. Arora Kamal Mangatram 21,128.00
Arora Sanyogita Mangatram
5. Arora Rajnish Mangatram 24,110.00
6. Arora Suraj Mangatram 24,110.00
7. Arora Kamal Mangatram 24,110.00
Total 1,56,842.00
From the above chart of FDRs it is observed that the FDRs are old/renewed and there is no evidence to show that the FDRs were taken by the assessee during the block period. This being so and keeping in view that the FDRs are in the name(s) of the respective holder of the FDRs and in the absence of any material to show that the assessee has diverted his undisclosed income in the name of his family members as above and also keeping in view that the assessee has shown the income from other FDRs in his regular returns which has been assessed by the AO under scrutiny assessment after the date of 15 IT(SS)A No.101 & 113/M/06 A.Y:BP search for the Assessment Year 1999-00 vide order dt.26.3.2003 passed u/s.143(3) of the Act, we are of the view that the addition of Rs.2,54,526/- made by the AO and sustained by the ld. CIT(A) is not sustainable and accordingly the same is deleted. The grounds taken by the assessee in this regard are therefore, allowed.
19. Ground No.11 in assessee's appeal is against the sustenance of addition of Rs.7,028/- as undisclosed income invested in shares.
20. The brief facts of the above issue are that a sum of Rs.4,62,020/- was added in the block assessment as unexplained investment in shares as the assessee could not produce any evidence in support of his claim in investment in shares. On appeal the ld. CIT(A) on the basis of the remand report of the AO wherein it has been stated that ".... the assessee has filed statement of investment alongwth copies of brokers note which reflects that the assessee has purchased these shares in the year 1991, 1996 and 1997. The total value of shares works out to Rs.4,55,000/- and the same may be treated as explained", deleted the addition of Rs.4,55,000/- and sustained the addition of Rs.7,028/-.
21. After considering the submissions of the rival parties and perusing the material available on record we are of the view that since the AO in his remand order has accepted the total value of shares as 16 IT(SS)A No.101 & 113/M/06 A.Y:BP explained and in the absence of any contrary material to show as to which investment was not disclosed by the assessee or falls in the block period, the addition of Rs.7,028/- made by the AO and sustained by the ld. CIT(A) is deleted. The ground taken by the assessee is therefore allowed.
22. Ground No.12 in assessee's appeal is against the sustenance of addition of Rs.5,24,115/- as undisclosed income utilised for flat renovation.
23. The brief facts of the above issue are that on the basis of seized material it was found by the AO that the assessee has incurred expenses of Rs.9,41,320/- for renovation of the flat in Amardeep Society and claimed the same belonged to his son Rajnish Arora. The AO in the absence of any evidence to show that the renovation expenses were incurred by assessee's son Shri Rajnish Arora added Rs.9,41,320/- as undisclosed income in the hands of the assessee. On appeal, the ld. CIT(A) called the remand report from the AO. The AO in his remand report dated 21.2.2005 has stated as under :-
"Flat renovation expenses: As per the assessment order, addition of Rs.9,41,320/- was made by holding that the expenditure was incurred from unaccounted source for the flat renovation done by the assessee. The assessee was given to inspect the seized material page 11 to page
18. The assessee stated that page No.14, 15, 16 are the quotation while page No.17 and 18 are the advance payment amounting to Rs.1,70,000/- and Rs.20,000/- respectively made to the person for renovation of flat, 17 IT(SS)A No.101 & 113/M/06 A.Y:BP these expenses (Rs.1,70,000/- + Rs.20,000/- = Rs.1,90,000/-) is made out of unaccounted renovation expenses of Rs.5,24,115/-. Thus the addition on account of flat renovation expenses may be taken at Rs.5,24,115/- instead of Rs.9,41,320/- taken by my predecessor."
The ld. CIT(A) on the basis of the remand report of the AO has sustained the addition of Rs.5,24,115/- and allowed relief of Rs.4,17,204/-.
24. At the time of hearing the ld. Counsel for the assessee while reiterating the same submissions as submitted before the AO and the ld. CIT(A) further submits that since the flat does not belong to the assessee and the same is belonging to his son Shri Rajnish Arora, therefore no addition is called for.
25. On the other hand the ld. DR supports the order of the AO and the ld. CIT(A).
26. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the flat belongs to assessee's son Shri Rajnish Arora who is separately assessed to tax vide P.A.No.ABJPA 21934. Merely because the assessee is living jointly with his son does not mean that the assessee has incurred expenses on renovation of the flat belonging to his son. This being so and in the absence of any material to show that the renovation expenses were incurred by the assessee out of his 18 IT(SS)A No.101 & 113/M/06 A.Y:BP undisclosed income the addition made by the AO and sustained by the ld. CIT(A) is deleted. The ground taken by the assessee is therefore allowed.
27. Ground No.13 in the assessee's appeal is against the sustenance of addition of Rs.2,48,000/- as undisclosed income invested in IVP.
28. Ground No.3 and 4 in Revenue's appeal are against the relief of Rs.4.00 lacs allowed by the ld. CIT(A) in this regard and to restore the order of the AO.
29. The brief facts of the issue are that during the course of search Indra Vikas Patrika(IVP) valued at Rs.2,25,000/- and Rs.4,23,000/- were found. During the course of assessment proceedings it was explained by the assessee that IVP worth Rs.4.00 lacs belonged to Shri T.M. Dedhia, IVP worth Rs.1,10,000/- belonged to Smt. Bhagwanti Arora, mother of the assessee and in respect of balance IVP worth Rs.1,38,000/- no explanation was offered. The AO after considering the assessee's explanation and keeping in view the statement of assessee's wife that all three are in the name of my family members, treated Rs.6,48,000/- value of IVP as undisclosed income of the assessee for the block period . On appeal, the ld. CIT(A) after considering the assessee's explanation that the IVP worth 19 IT(SS)A No.101 & 113/M/06 A.Y:BP Rs.4.00 lacs belonged to Shri T.M. Dedhia which was kept with the assessee as a security has deleted the addition of Rs.4.00 lacs and sustained the addition of Rs.2,48,000/-.
30. At the time of hearing, the ld. Counsel for the assessee reiterated the same submissions as submitted before the AO and the ld. CIT(A).
31. On the other hand the ld. DR while relying on the order of the AO submits that the assessee's explanation that the IVP of Rs.4.00 lacs belonged to Shri T.M. Dedhia is without any merit as the loan was given to Shri T.M. Dedhia on 24.12.96 and the IVPs are of a later date i.e., IVPs worth Rs.1,20,000/- were received on 27/31.12.96, IVPs worth Rs.2,53,000/- were issued on 23.4.97 and IVP worth Rs.50,000/- was issued on 13.10.98. He therefore, submits that the addition made by the AO be restored.
32. In the rejoinder the ld. Counsel for the assessee submits that Shri T.M. Dedhia has offered the security of IVP of Rs.4.00 lacs after the date of issue of promissory note dated 24.12.96, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO.
33. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts 20 IT(SS)A No.101 & 113/M/06 A.Y:BP are not in dispute. We further find that the ld. CIT(A) after considering the Demand Promisory Note dated 24.12.96 and the IVPs worth Rs.1,20,000/- received on 27/31.12.96, IVPs worth Rs.2,53,000/- issued on 23.4.97 and IVPs worth Rs.50,000/- was issued on 13.10.98 kept as a security at a later stage has held vide para 9.1 of his order as under :
"9.1 I have gone through the facts brought on record by the AO, the papers filed by the appellant during the course of assessment proceedings as well as the contentions of the appellant. On the basis of the documents filed, it is clear that the IVP in question was in favour of M/s. Mangatram Arora Finance Ltd., and not in favour of Shri Mangatram Arora (Individual). This is apparent from the order of the AO, who has reproduced the promissory note on page-16 of his order, which the promissory note promises to pay M/s. Mangatram Arora Finance Ltd., the sum of Rs.4.00 las and not to Shri Mangatram Arora (Individual). Further, the AO has not taken cognizance of the backside of the promissory note. It is a fact that IVPs carry no name and hence there is no merit in the action of the AO rejecting the explanation of the appellant on that ground. The appellant has been able to satisfactorily explain the connection between the loan taken by Shri T.M. Dedhia from M/s. Mangatram Arora Finance Ltd., and the promissory note in favour of M/s. Mangatram Arora Finance Ltd., given in return. The AO has not brought any fact on record and rebut the contention of the appellant. On the basis of facts as analysed above, the addition of Rs.6,48,000/- as undisclosed income of the appellant is deleted."
In the absence of any other contrary material brought on record by the revenue and keeping in view that it is not the case of the revenue that the aforesaid IVPs were not offered as a security by Shri T.M. Dedhia at a later date we are of the view that the ld. CIT(A) was fully justified in accepting the assessee's explanation with regard to the addition of 21 IT(SS)A No.101 & 113/M/06 A.Y:BP Rs.4.00 lacs. Further in the absence of any other supporting material placed on record by the assessee to show the source and capacity of Smt. Bhagwanti Devi Arora, mother of the assessee in respect of IVP of Rs.1,10,000/- stated to be belonging to her and no explanation offered before the ld. CIT(A) in respect of IVP of Rs.1.38 lacs, we are inclined to uphold the order of the ld. CIT(A) in sustaining the addition of Rs.2,48,000/- and accordingly the ground taken by the assessee and the revenue are rejected.
34. Ground No.14 and 15 in assessee's appeal are against the confirmation of the action of the AO in treating the income for Assessment Year 1997-98 and 1998-99 as undisclosed income of the assessee.
35. The brief facts of the above issue are that the AO observed that the assessee filed returns of income declaring net taxable income of Rs.1,30,130/- for Assessment Year 1997-98, Rs.1,17,420/- for Assessment Year 1998-99 and Rs.2,28,265/- for Assessment Year 1999-00 on 9.3.2001 but did not file return for Assessment Year 2000- 01 though having taxable income of Rs.2,18,360/-. The assessee was asked as to why the income declared after the search should not be treated as undisclosed income. In the absence of any explanation of the assessee the AO treated the declared income for the Assessment 22 IT(SS)A No.101 & 113/M/06 A.Y:BP Years 1997-98, 1998-99, 1999-00 and 2000-01 as undisclosed income of the block period. On appeal, the ld. CIT(A) while observing that there has been deduction at source and advance tax paid for the Assessment Years 1999-00 and 2000-01, therefore the returns of the said Assessment Years do not fall within the ambit of section 158 BC and in respect of the returns for the Assessment Years 1997-98 and 1998-99 no TDS had been made nor any advance tax was paid and hence, the AO has rightly invoked the provisions of section 158 BC(1)(BB)(ca) of the Act.
36. At the time of hearing the ld. Counsel for the assessee submits that sec. 158 BB(1)(c) does not say that any income shown in return filed after expiry of time limit is to be treated as undisclosed income, therefore, the addition made by the AO treating the undisclosed income for the Assessment Years 1997-98 and 1998-99 be deleted. The reliance was also placed in C.P. Nanda vs. Dy. CIT(2005) 144 Taxman 13 (ITAT-Pune).
37. On the other hand the ld. DR supports the order of the AO and the ld. CIT(A).
38. Having carefully heard the submissions of the rival parties and perusing the material available on record we find that there is no dispute that the assessee has filed returns for the Assessment Years 23 IT(SS)A No.101 & 113/M/06 A.Y:BP 1997-98 and 1998-99 declaring an income of Rs.1,20,130/- and Rs.1,17,420/- respectively on 9.3.2001 i.e., after the search. However, the particulars of income contained in such belated returns showing the earning of corresponding income by the assessee are the same as was shown in the Assessment Years 1999-00 and 2000-01. Moreover, the AO has also assessed the income for the Assessment Year 1999-00 at Rs.2,38,000/- vide order dated 26.3.2002 passed u/s.143(3) of the Act as against returned income of Rs.2,28,265/-. If that be so, a mere filing of returns after the search conducted on 7.2.2001, by itself, will not entitle the revenue to treat the income admitted by the assessee in these years as undisclosed income of the assessee for the block assessment in view of the observation in the case of C.P. Nanda (supra) and accordingly the AO is directed to exclude the above income for the Assessment Years 1997-98 and 1998-99 from the undisclosed income of the assessee. The grounds taken by the assessee are therefore, allowed.
39. Ground No.16 in assessee's appeal is against the interest charged u/s.158 BFA(1) of the Act.
40. At the time of hearing the ld. Counsel for the assessee without pointing out as to why the interest charged u/s.158 BFA(1) is invalid, 24 IT(SS)A No.101 & 113/M/06 A.Y:BP submits that consequential relief in respect of levy of interest u/s.158 BFA(1) be allowed which was not objected to by the ld. DR.
41. That being so, and in the absence of any other supporting material placed on record by the assessee the AO is directed to allow consequential relief in this regard. The ground taken by the assessee is therefore, partly allowed.
42. Ground No.17 in assessee's appeal is against the levy of surcharge.
43. The ld. Counsel for the assessee submits that the issue of surcharge has been referred to the larger Bench by the Hon'ble Supreme Court, therefore, the issue may be decided accordingly.
44. On the other hand, the Learned DR relied on the decision of Hon'ble Supreme court in the case of CIT vs. Suresh N Gupta (2008) (297 ITR 322)(SC) holding that the levy of surcharge is justified.
45. Having carefully heard the submissions of rival parties and perusing the material available on record we find that the Hon'ble Supreme Court after the judgment in Vatika Township P. Ltd dated 6.1.2009 reported in (2009) (314 ITR 338) has held in CIT vs Rajiv 25 IT(SS)A No.101 & 113/M/06 A.Y:BP Bhatara (2009) 310 ITR 105(SC) vide judgment dated February 19, 2009 at page 106 head note as under:-
"Held reversing the decision of the High Court, that surcharge leviable under the Finance Act was a distinct charge not dependent for its leviability on the assessee's liability to pay income-tax but on assessed tax. Therefore, even without the proviso to section 113 of the Income-tax Act, 1961, relating to tax in the case of block assessment of search cases, the Finance Act, 2001, was applicable to block assessment under Chapter XIV-B in relation to the search initiated on April 6, 2000, and accordingly surcharge was leviable".
Respectfully following the above authoritative pronouncement of the Hon'ble Supreme Court, we are of the view that levy of surcharge is justified and accordingly we are inclined to uphold the finding of Learned CIT (A) in this regard. The ground taken by the assessee is therefore rejected.
46. Ground No.2 in Revenue's appeal is against the deletion of addition of Rs.3,62,119/- being unaccounted jewellery.
47. The brief facts of the above issue are that it was interalia observed by the AO that jewellery worth Rs.3,62,119/- was seized as per panchnama dated 1.3.2001. On being asked it was explained by the assessee that the said jewellery belongs to Smt. Bhagwanti Arora and it is inherited property reflected in the balance sheet. However, the AO was of the view that during the search proceedings a 26 IT(SS)A No.101 & 113/M/06 A.Y:BP statement of Shri Mangatram Arora was recorded on 1.3.2001 wherein in answer to question No.6 it was stated by the assessee that "the jewellery belongs to all the family members including part of the jewellery belonging to my mother..." . It was further observed by the AO that the statement of Smt. Sanyogita Arora was also recorded on 1.3.2001 to explain the source of jewellery. It was stated by Smt. Sanyogita Arora that "Part of the jewellery has been given to me by my mother-in-law and part of the jewellery belongs to my daughter Kamal Arora. I had also received some jewellery at the time of my marriage...". The AO after considering the above statements observed that it is seen from the balance sheet of Smt. Sanyogita Arora that no jewellery has been shown in her balance sheet and Shri Managtram Arora has never filed balance sheet with return of income and hence, he treated the value of seized jewellery Rs.3,62,119/- as undisclosed income of the assessee. On appeal, the ld. CIT(A) while observing that there is no discussion in the order regarding why the AO come to the conclusion that the jewellery did not belong to Mrs. Bhagwanti Arora, deleted the addition of Rs.3,62,119/-.
48. At the time of hearing the ld. DR supports the order of the AO.
49. On the other hand the ld. Counsel for the assessee relied on the order of the ld. CIT(A).
27 IT(SS)A No.101 & 113/M/06
A.Y:BP
50. Having carefully heard the submissions of the rival parties and perusing the material available on record and keeping in view that it is not the case of the revenue that the jewellery seized is in excess of the limits prescribed in the CBDT's guidelines vide instruction No.1916 dated 11.5.1994, we decline to interfere with the order passed by the ld. CIT(A) in deleting the addition of Rs.3,62,119/- and accordingly the ground taken by the revenue is rejected.
51. In the result, both the appeals are partly allowed for statistical purposes.
Order pronounced in the open court on 8.3.2010.
Sd/- Sd/-
(B. RAMAKOTAIAH) ( D.K. AGARWAL )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 8.3.2010.
Jv.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
28 IT(SS)A No.101 & 113/M/06
A.Y:BP
Details Date Initials Designation
1 Draft dictated on 11,12,15/2.10 Sr.PS/PS
2 Draft Placed before author 12,15,17/10 Sr.PS/PS
3 Draft proposed & placed before the JM/AM
Second Member
4 Draft discussed/approved by JM/AM
Second Member
5. Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
6. Kept for pronouncement on 8.3.10 Sr.PS/PS
7. File sent to the Bench Clerk 9.3.10 Sr.PS/PS
8 Date on which the file goes to the
Head clerk
9 Date of Dispatch of order