Ms. Priyanka Chopra Vs DCIT (ITAT Mumbai)
Issue- Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.1,20,00,000/- being undisclosed income received during the wedding ceremonies without appreciating the fact that the addition has been made on the basis of statement of assessee’s personal secretary Shri Chand Mishra, who handled and managed her entire business I endorsement and which is corroborated by other evidences seized during the course of search?”
Addition on this account was made by the assessing officer by holding as under:
Further, in the statement recorded on 24-01-2011 of Shri Chand Mishra, the secretary he had admitted that he had arranged 4 wedding functions for the assessee, -wherein an amount of Rs.30 lacs., was charged in cash for each function, which was not accounted for in the books of accounts.
In this regard, in the retraction statement Smt. Madhu Chopra had submitted that such weddings was attended in view of and part of contract with M/s.Cineyug Media & Entertainment FVt Ltd and no cash component has been received. Except the above written retraction, Smt. Madhu Chopra had not submitted any substantive evidence like copy of contract agreement with M/s.Cineyug Media & Entertainment reflecting the attendance of wedding functions as part of their contract nor the details of receipts offered as income of the assessee. Therefore, the cash component for the said 4 weddings is worked out at Rs.1.20 crores and the same is added as unaccounted income of the assessee for A. Y. 2011-12 and is taxed accordingly.
Held by CIT (A)
The said addition was deleted by the ld. Commissioner of Income Tax (Appeals) by holding as under:
9.1 This addition has been made on the basis of statement recorded of Shri Chand Mishra/ secretary of the appellant that he had arranged 4 wedding functions for appellant to which, appellant has charged Rs. 30 lakhs cash for each of such function, appellant explained that she had attended one marriage at Mahalaxmi Race Course/ Mumbai as a part of contractual agreement entered into with M/s. Cineyug Media & Entertainment Pvt Ltd for certain events. The details of the same were submitted to AO vide appellants letter dated 26.12.2012. However, AO has not taken cognizance of the same. Further during appellate hearing the undersigned called for the statement recorded of Chand Mishra during the course of search and the same has been perused and kept on record.] It can be seen that there is no evidence whatsoever or any incriminating documents which indicates attendance of marriage functions by the appellant. The addition made by the AO on the basis of the statement of her secretary is not correct since it is based on hearsay and has no evidentiary value. I have carefully perused both the assessment order and the appellants’ submission and accordingly the explanation of the appellant is accepted. The ground of appeal is therefore allowed.
Held by ITAT
We have heard both the counsel and perused the records. We find that this addition has solely been made on the basis of a statement obtained from the secretary of the assessee. There is no corroborative material whatsoever. A mere statement by the secretary cannot be said to be a conclusive proof of undisclosed income earned. Hence, we are of the considered opinion that the ld. Commissioner of Income Tax (Appeals) has correctly accepted the assessee’s submission in this regard and deleted the addition. Hence, we accept the ld. Commissioner of Income Tax (Appeals)’s finding and affirm her order.
FULL TEXT OF THE ITAT JUDGMENT
These are appeals relating to two different assessee’s. Since the issues are common and connected and the appeals were heard together these are being consolidated and disposed of by this common order.
ITA Nos. 4601 & 4565/Mum/2015
These are cross appeals by the assessee and Revenue arising out of order of the ld. Commissioner of Income Tax (Appeals) dated 15.05.2015 and pertain to the assessment year 2011-12.
2. The grounds of appeal raised in assessee’s appeal read as under:
1.The Hon’ble Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs. 4,80,000/- made by the Ld. AO, being alleged unaccounted/ undisclosed income in respect rent received in cash from Shivani Oil and Gas Exploration. It is submitted that Ld. AO has made such addition on the basis of loose paper marked as Annexure A-l page no. 127 found in premises of Mr. Chand Mishra. It is submitted that no such rent receipts have been received in cash by the appellant.
It is further submitted that neither evidences whatsoever have been found by the Income Tax Search team nor any loose papers have been found during search proceedings which indicates that your appellant has received such Rs.4,80,000/-out of books and therefore assumption and presumptions of receipt of alleged undisclosed Income of Rs.4,80,000/- is unreasonable and unlawful.
Without prejudice, we would like to state that appellant follows Cash system of accounting and therefore, such receipts can be taxed only on the basis of evidence of receipt of such cash. It is further submitted that no evidence regarding receipt of cash has been found by search party as well as by the Ld. AO hence, adding of same on assumptions and presumptions is against basic of principles of law and against Natural justice. In view of the above facts, such addition should be deleted.
2. On the facts and circumstances of the case and in law, Hon’ble Commissioner of Income Tax (Appeal) erred in confirming addition made by AO of Rs. 14,00,000/-being alleged notional rent for penthouse at Flat no.901 and 904 of Navkaran, It is submitted the Ld AO erred in relying on the statements (recorded during search proceedings) made by the Ms. Deepika Prakash Rajjak (employee of Appellant) wherein she stated that the said office was never utilized for business or residence. During the assessment proceedings, It was explained to the Ld AO that the said employee was not in employment with Appellant during the year under consideration and accordingly making addition on the basis of such statement is not unjustified and bad in law.
It is further submitted that the Ld AO was explained that the assumption of flat no.901 and 904 by treating the same as deemed let out is unreasonable, as it is submitted that for the AY 2008-09 as well as for AY 2009-10 the flat no. 402 (owned by Ashok Chopra and Madhu chopra) and 403 (owned by the Appellant) were let out on rental basis and in view of such flats being given on rent, the flat at 901/904 was used for office purpose of the Appellant’s business / profession. It is further submitted that the details of rent receipts for such intervening period in respect of Flat no. 402 and 403 were submitted to the Ld AO and duly explained to Hon’ble Commissioner of Income Tax (Appeal). In view of these the presumption of Hon’ble Commissioner of Income Tax (Appeal) that flat no.901/904 being vacant and not utilized for business of the Appellant is not justified and incorrect.
Further the Hon’ble Commissioner of Income Tax (Appeal) erred in confirming the action of Ld AO who stated that Appellant representative have made only oral statement, however Ld AO as well Hon’ble Commissioner of Income Tax (Appeal) has failed to appreciate the submission made before them wherein all of the facts relating to this issue was explained to him in detailed.
Without prejudice, it is submitted that Hon’ble Commissioner of Income Tax (Appeal) erred in confirming the action of Ld AO who has arbitrarily calculated such notional rent @ 7% of Rs.2,00,00,000/-, being cost of the flat. It is submitted that the Hon’ble Commissioner of Income Tax (Appeal) ad Ld AO while determining the notional rent has erred in relying in the case of Smt. Radhadevi Dalmiya Vs. CIT 125 ITR 134 wherein hon’ble ITAT had adjudged that fair return of about 7% on the investment in properties can be taken into account for determining Annual ratable value.
It is further submitted that consequential to the above act of determining the notional rent, Hon’ble Commissioner of Income Tax (Appeal) erred in confirming the action Ld. AO who erred in making disallowance of depreciation of Rs.18,43,347/- as claimed by your appellant in respect of said office on the pretext that the same was not used for the office purpose for the year under consideration. It is to state that such assumptions and presumptions were made by the learned assessing officer without verifying the facts.
It is therefore prayed to your honour to delete such addition made on arbitrary basis and allow the depreciation claim in respect of such office. It is therefore prayed to give necessary direction in this regard.
3. The grounds of appeal raised in Revenues appeal read as under:
(i) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.3,35,00,000/- being cash component of the payment for purchase of commercial property from MIs.Arjun Realtors Private Limited without appreciating the fact that the addition has been made on the basis of documents seized from assessee’s premises and voluntarily admitted by her mother Smt. Madhu Chopra during the search to be cash component of the payment made to the said party over and above payment of Rs.4.3 crores made by cheque and subsequently retracted without giving any supporting evidence to the contrary ?
(ii) “Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.1,06,00,000/-, made on substantive basis, being unaccounted I undisclosed income towards cash payment for purchase of property at Sawantwadi at Coa without appreciating the fact that the addition has been made on the basis of documents seized from assessee’s premises and voluntarily admitted by her mother Smt. Madhu Chopra during the search to be cash component of the payment for purchase of property at Sawantwadi and subsequently retracted without giving any supporting evidence to the contrary ?
(iii) “Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.50,000/- being cash payment to Ms.Suzzan Roshan for interior decoration in Raj Classic, but not recorded in the books by allowing credit of disclosure made by Smt.Madhu Chopra mother of the assessee as undisclosed income without appreciating the fact that the credit of disclosure made by assessee’s mother cannot be allowed to assessee Ms.Priyanka Chopra?”
(iv) “Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.1,70,000/- being cash payment for expenses not explained by the assessee by allowing credit of disclosure made by Smt.Madhu Chopra mother of the assessee as undisclosed income without appreciating the fact that the credit of disclosure made by assessee’s mother cannot be allowed to assessee Ms.Priyanka Chopra?”
(v) Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.1,20,00,000/- being undisclosed income received during the wedding ceremonies without appreciating the fact that the addition has been made on the basis of statement of assessee’s personal secretary Shri Chand Mishra, who handled and managed her entire business I endorsement and which is corroborated by other evidences seized during the course of search?”
Assessee’s appeal:
4.Apropos ground no.1 – addition of Rs.4,80,000/- being undisclosed income in respect of rent received in cash from Shivani Oil and Gas Exploration:
4.1 On this issue the assessing officer made the addition by observing as under:
On verification of the Annexure A-l page no, 127 of the loose papers seized from Navkaran Office on 21-03-2011, it is seen that the assessee was charging an amount of Rs.55,000/- as gross rental per month from M/s.Sivani Oil & Gas Exploration Services in respect of Sky Garden, Oberoi property and as per the scribbling on the back side, it is evident that along with Rs.55,000/- in cheque on which TDS was being deducted by the payee, the assessee was also receiving Rs.60,000/- per month in cash. Thus the total monthly rent comes to Rs.1,15,000/-per month, while the assessee is offering only Rs.55,000/- per month in the books. Thus from combined reading of all these papers, it is very evident that assessee from June, 2009 onwards has been charging Rs.60,000/- in cash from M/s.Shivani Oil & Gas Exploration Services Ltd. Thus the same amount for 18 months, till November, 2010 comes to Rs.10,80,000/- i.e., from June, 2009 to March, 2010 total rent is Rs.6,00,000/- (A.Y.2010-11) and from April, 2010 to November, 2011 total rent is Rs.4,80,000/- (A.Y.201M2).
During the course of assessment proceedings, the assessee was asked to show cause why the cash rental receipts should not be added to her income. In this regard, the assessee vide her representative’s letter dated 17-12-2012 has submitted as under;
“This is working of rental received in cash ofRs.60,000/-from M/s,Shivani Oil and gas Exploration services Ltd. It is submitted that your assessee i.e. Mrs.Madhu Chopra, Mr. Ashok Chopra and Ms.Priyanka Chopra has already offered such cash rental receipts in respect of rent received as undisclosed income in the return filed in response to notice U/S.153A of Income Tax Act, 1961 in A.Y.2009-10 and 2010-11 and the details of the same is as under:
