Case Law Details
DCIT Vs Smt. Ashu Ashok (ITAT Delhi)
ITAT Delhi Deletes Income Addition Because Section 44AD Did Not Require Detailed Expense Proof; Jewellery Addition Removed as Prior Disclosure Before Settlement Commission Covered Search Findings; No Estimated Expense Disallowance Allowed Under Section 44AD; ITAT Delhi Upholds Deletion of Jewellery Addition Due to Earlier Settlement Disclosure.
In DCIT Vs Smt. Ashu Ashok, the ITAT Delhi dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting additions made towards undisclosed income and unexplained jewellery for Assessment Year 2022-23.
The Revenue challenged the deletion of two additions: Rs.18,15,787/- made on account of undisclosed income and Rs.73,84,020/- added as unexplained investment in jewellery. According to the Revenue, the assessee had failed to produce documentary evidence regarding expenditure incurred for earning income and proof relating to ownership and source of jewellery found during search proceedings.
The case arose from a search and seizure operation conducted under Section 132 of the Income Tax Act on 22.10.2016 at various premises of the “Sukhija Group” in Delhi, a group engaged in running restaurants and bars. During the search, incriminating documents and jewellery were found. The assessee filed her return of income declaring total income of Rs.10,35,680/-. Notices under Sections 143(2) and 142(1) along with questionnaires were issued during assessment proceedings, and the authorised representative furnished details from time to time.
Regarding income from paying guest business, the Assessing Officer observed that the assessee had offered income after deductions and therefore, according to the AO, was not eligible for the benefit of Section 44AD. Since the assessee failed to prove that expenditure had been incurred wholly for business purposes, the AO rejected the expenditure claim but allowed 30% of gross receipts as estimated expenditure. Consequently, an addition of Rs.18,15,787/- was made to the assessee’s income. The AO also treated a bank credit entry of Rs.8,16,000/- as unexplained cash credit after finding that the assessee had failed to explain the source.
Further, during the search operation, jewellery valued at Rs.95,94,917/- was found at the assessee’s residential and business premises and lockers. The AO asked the assessee to furnish supporting evidence to establish the source of cash and jewellery. Since the assessee allegedly failed to provide satisfactory explanation, the AO relied on CBDT Instruction No.1916 and the Finance Ministry press release dated 1.12.2016 and treated jewellery amounting to Rs.73,84,020/- as unexplained investment. These additions were challenged before the CIT(A), who partly allowed the assessee’s appeal and deleted the additions.
Before the Tribunal, the Departmental Representative relied upon the assessment order and reiterated the grounds raised by the Revenue. The assessee’s representative supported the order of the CIT(A), submitting that it was a well-reasoned order requiring no interference.
The Tribunal examined the deletion of the addition of Rs.18,15,787/- and observed that the assessee had disclosed net income from the business at a rate higher than the minimum prescribed rate of 8% under Section 44AD. Once the case fell under Section 44AD, the assessee was not required to maintain books of accounts or supporting documents to justify expenditure incurred for earning gross receipts. The Tribunal held that estimation of expenditure and income in such cases was outside the domain of the Assessing Officer where income exceeding the prescribed presumptive rate had already been declared. Therefore, the deletion of the addition by the CIT(A) was upheld.
With regard to deletion of the jewellery addition of Rs.73,84,020/-, the Tribunal noted the assessee’s claim that she was not the owner of all the jewellery found. It was observed that the assessee’s husband had already declared jewellery before the Settlement Commission and made disclosure of jewellery purchases amounting to Rs.1,91,34,200/- for purchases made between 15.09.2015 and 08.10.2016. The Tribunal noted that the jewellery disclosed before the Settlement Commission exceeded the value of jewellery found during the search. It further observed that the Interim Board for Settlement Commission had not suggested any further addition in the husband’s case over and above the declared amount. Respectfully following the order of the Interim Board for Settlement Commission-VII, Chennai, the Tribunal upheld deletion of the addition relating to jewellery.
Accordingly, the Tribunal dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by revenue is preferred against the order of National Faceless Appeal (NFAC)/CIT(A), Delhi 16.10.2023 for Assessment Year 2022-23.
2. The revenue has raised the following grounds in appeal:-
1. That on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 18,15,787/- made on account of undisclosed income in the hand of the assessee.
2. The Ld. CIT(A) has erred in deleting the addition of Rs. 18,15,787/- made on account of undisclosed income and ignoring the facts that assessee was failed to produce any documentary evidence in respect of expenditure made for income earned and proof of ownership of the property.
3. That on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 73,84,020/- made on account of unexplained assets (jewellery).
4. The Ld. CIT(A) has erred in deleting the addition of Rs. 73,84,020/- made on 1 account of unexplained assets (jewellery) and ignoring the facts that the assessee has submitted the incorrect facts before the IBS-VI, Chennai and Ld. CIT(A) both. The facts were factually not correct as the jewellery found in the lockers were purchased well before the dates declared by the assessee in the cash flow statement, therefore, the jewellery found in the lockers could not be commensurate with cash flow statement and hence, it remains unexplained in the hands of the assessee.
5. That the order of the Ld. CIT(A) is perverse, erroneous and is not tenable on facts in law.
6. That the grounds of appeal are without prejudice to each other.
7. That the appellant crave leave to add, amend, alter or forgo any / all of the grounds of appeal.
3. Brief facts of the case are that pursuant to the warrant of authorization issued by the Pr. Director of Income Tax (Inv.)-2, New Delhi, a search and seizure operation u/s. 132 of the Income Tax Act, 1961 was conducted on 22.10.2016 in different business and residential premises of “Sukhija Group” of cases based at Delhi including the assessee. This group is found to be a group running Restaurants and Bars. Various incriminating papers/ documents were found and seized during the course of search and seizure operation in the group case. The assessee filed her return of income on 30.3.20218 declaring total income of Rs. 10,35,680/-. Notice u/s. 143(2) of the Act dated 24.9.2018 issued for compliance on 3.10.2018. Another notice u/s. 142(1) cum questionnaire was issued on 31.10.2018. Further notice u/s. 142(1) cum questionnaire issused on 5.11.2018 for compliance on 14.11.2018 of the Act. In response to the aforesaid notices, Ld. AR attended the hearings and furnished the details from time to time. After considering the same with regard to income earned from paying guest, AO noted that assessee has decided to offer income after deduction by the Department and therefore, she is not eligible for benefit of u/s. 44AD of the Act. Since the assessee failed to discharge her onus to prove that the expenditure was incurred for the purpose of business, the claim of expenditure was not accepted, however, 30% of gross receipts was allowed as expenditure on estimated basis and Rs, 18,15,787/- was added to the total income of the assessee. Further, on perusal of the bank account and bank statement of the assessee, there was a credit entry of Rs. 8,16,000/- on 3.5.2016. AO asked the assessee to explain the credit entries in bank account, however, assessee failed to explain the credit entries in her bank account and the amount of Rs. 8,16,000/- was considered as unexplained cash credit and added in the hands of the assessee. Further, AO noted that during the search and seizure action carried out by the department at various residential / business premises and lockers of assessee, jewellery found amounting to Rs. 95,94,917/-. The AO asked the assessee to furnish all supporting evidence in order to prove the genuineness of the source of cash and jewellery found from residential / business premises and lockers of the assessee. However, the assessee has failed to file any explanation, hence, in view of the CBDT Instruction NO. 1916 and press release dated 1.12.2016 of the Finance Ministry, the excess jewellery found amounting to Rs. 73,84,020/- was added in the hands of the assessee as unexplained investment in jewellery to the total income of the assessee. Against the above action, assessee appealed before the CIT(A), who deleted the additions by partly allowing the appeal of the assessee.
4. Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
5. On the other hand, Ld. AR for the assessee relied upon the order of the Ld. CIT(A) and submitted that Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part.
6. We have heard the rival contentions and perused the records. As regards deletion of addition of Rs. 18,15,787/- is concerned, it is noted that assessee has shown net income from this business more than the minimum prescribed rate of @8% of the gross receipts and once her case fall under section 44AD, the assessee is not required to maintain the books of accounts and documents to justify the expenditure for earning these gross receipts. The estimation of expenses and consequent income, in cases falling u/s. 44AD and showing income more than the prescribed rate of @8% of the gross receipts, is not within the domain of the AO, hence, addition made on estimate basis was rightly been deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and reject the ground no. 1 and 2 raised by the revenue accordingly.
6.1 As regards deletion of addition of Rs. 73,84,020/- made on account of unexplained assets (jewellery) is concerned. We note that Ld. CIT(A) in his order has noted that it was the claim of the assessee that she is not the owner of all these jewellery, however, her husband namely Shri Raju Ashok has already declared jewellery before the Settlement Commission, Delhi and has made the adequate disclosure of jewellery, details thereof have been reproduced in the order of the Ld. CIT(A). The relevant part of the cash flow showing purchase of jewellery submitted by Mr. Raju Ashok before the Settlement Commission was amounting to Rs. 1,91,34,200/- which was purchased on different dates from 15.9.2015 to 08.10.2016. Ld. CIT(A) observed that the amount considered by the Settlement Commission towards purchase of jewellery was Rs. 1,91,34,200/- while jewellery found from the assessee is worth Rs. 95,94,917/- and in view of para 16.6, the ITSC has not suggested any further addition in case of husband of assessee namely Sh. Raju Ashok, over and above what he has declared. Therefore, respectfully following the order dated 23.6.2023 of the Interim Board for Settlement Commission-VII, Chennai and further considering the fact that the jewellery before the ITBSC is more than the jewellery found during search operation, hence, the addition of Rs. 73,84,020/- on account of unexplained investment in jewellery was rightly been deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and reject the ground no. 3 and 4 raised by the revenue accordingly.
7. In the result the appeal of the revenue is dismissed.
Order pronounced in the open court on 08/5/2026.
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