In absence of documentary evidence addition for jewellery claimed as gift allowed

Spureet Kaur Negi Vs ACIT (ITAT Mumbai)

ITAT find that jewelry has been found during the course of search from the possession of the assessee. The jewellery was inventorised. The claim of the assessee that this has been received as a gift from relatives and friends is not at all substantiated but merely remained a claim. In view of this we do not find any infirmity in the orders of the learned lower authorities in confirming the addition of ₹ 1,867,098/– u/s 69B of the act after granting benefit of 500 g of gold jewellery to the assessee in terms of CBDT instruction number 1916.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These are the seven appeals filed by one Assessee Mrs Supreet Kaur Nagi [Assessee/ Appellant] for seven assessment years where in assessment is made by the Assessing officer pursuant to search on 30/5/2008. Many of the issues involved in these appeals are common. Both the parties argued them together and therefore these [7] appeals are disposed by this common order.

2. ITA No. 5940/Mum/2019 is filed by the assessee against the order of Commissioner of Income-tax (Appeals)-51, Mumbai [the learned CIT (A)] dated 24.07.2019 for A.Y. 2003-04 raising following grounds of appeal:-

“1. The learned CIT (A) has erred in law and on the facts of the case in confirming the action of Assessing Officer in making addition of ₹2,69,736/- and ₹1,30,000/- under Section 69A of the Income Tax Act. The action is unjustified and unwarranted.

2. The learned CIT (A) had erred in law and on the facts of the case in confirming the action of Assessing Officer in disallowing adhoc allowance of ₹44,249/- i.e. 25% of ₹1,76,997/- under section 37(1) of the Income Tax Act. The action is unjustified and unwarranted.”

3. The brief fact of the case shows that assessee is an individual deriving income from business and profession from interior designing and artist. She filed her return of income on 20th October, 2003, declaring total income of ₹1,51,320/-. Subsequently, search took place on Nagi Group on 30 May 2008. Notice under Section 153A of The Income-Tax Act, 1961 (the Act) was issued. In response to that notice, assessee filed a return of income on 17th November 2009, at ₹ 2,55,585/-.

4. On scrutiny, the Assessing Officer noted that credit in the bank account of the assessee was of ₹16,38,128/-. Assessee could not explain satisfactorily the source of such credit to the extent of ₹12,89,721/- which was added by the learned Assessing Officer under section 69A of the Act. Assessee has claimed business expenditure of Rs 176997/-. The learned Assessing Officer further disallowed 25% of such expenditure as assessee failed to furnish third party documentary evidences. Therefore, disallowance out of the expenditure was of ₹44,249/-. Accordingly, the assessment was completed under section 153A read with section 143(3) of the Act at ₹15,89,560/-.

5. Assessee, aggrieved with assessment order preferred appeal before the learned CIT(A). With respect to the addition of ₹12,89,721/-, ld CIT [A] noted that the correct sum is not ₹16,33,128/- but only ₹15,90,555/-. He examined each of the credits and ultimately held that a sum of ₹2,69,736/- and another sum of ₹1,30,000/-remains unexplained. Therefore, the addition was confirmed to that extent. With respect to the disallowance of the expenditure of ₹44,249/-, it was confirmed as assessee agreed for the same adhoc disallowance during the course of assessment proceedings. Assessee also could not dispute that she is not in possession of complete third party evidences in respect to the expenses. Accordingly, appeal of the assessee was partly allowed.

6. Assessee is aggrieved with that order and therefore, is in appeal before us.

7. Learned Authorised Representative submitted a Paper Book and case law compilation.

8. With respect to ground no [1] , He submitted that total cash summery was submitted before the learned Assessing Officer, which has been confirmed by the learned Assessing Officer in the remand report. He submitted that ₹1,30,000/- has been received from the relatives of the assessee and looking to the nature of the family, above small loan of ₹1,30,000/- should not have been

added as income of assessee. He further
submitted that the loan amount is very small and therefore, the Permanent Account Number as well as the confirmation could not be obtained. He stated that the names of the family members are already available on the record.

9. With respect to the addition of ₹2,69,736/-, he submitted that out of ₹4,63,500/- the learned CIT(A) has considered the amount of cash sales only of ₹1,93,764/- and made the addition of ₹2,69,736/-. He submitted that cash deposit of ₹4,63,500/- is part of the cash sales and part of cash withdrawn from her own bank account. He further referred to the cash summery of the withdrawal. He submitted that assessee has withdrawn cash of ₹3,29,735/- and has also cash sales of ₹1,93,764/- out of which ₹4,63,500/- has been deposited back. The learned CIT(A) has only accepted the cash sales of ₹1,93,764/- but has not accepted ₹2,69,736/- and confirmed the addition.

10. With respect to Ground no. [2], he submitted that merely because the assessee agreed during the course of assessment proceedings the expenditure could not have been disallowed. He submitted that compete details of such expense in form of ledgers accounts and vouchers/supporting were produced but it is not possible to maintain 100 % third party evidences.

11. The learned Departmental Representative supported the orders of the lower authorities.

12. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first ground of appeal is with respect to the confirmation of the addition of ₹2,69,736/- and ₹1,30,000/- under section 69A of the Act. We find that assessee has deposited a cash of ₹4,63,500/-. The claim of the assessee is that she has withdrawn cash of ₹3,29,735/- from her bank accounts and has also shown cash sales of ₹1,93,764/-. Thus, she is having source of cash deposit available with her, amounting to ₹ 5,86,163/-. Out of that she has deposited ₹ 4,63,500/- in the bank account. The learned CIT(A) accepted the cash deposit to the extents of ₹1,93,674/- being cash sales but disbelieved redeposit of cash in bank account holding that whether that cash was available with her to be deposited in the bank account was not proved. We find that unless the Revenue authorities have any evidence that the above cash withdrawn from bank account has been used by the assessee for any other purpose, the credit for available cash withdrawn from her own bank account and subsequent redeposit in cash cannot be denied. In the present case, the learned CIT(A) has confirmed the disallowance for the reason that the assessee could not explain the reasons for earlier withdrawal of the cash from her bank account and subsequent redeposit. We find that because of this reason, the availability of cash in the hands of the assessee does not vanish. When assessee is submitting that she has not used that cash but redeposit, it is for revenue to prove that such cash has already been used by assessee. In view of this, the addition of ₹2,69,736/- deserves to be deleted.

13. With respect to the credit of ₹1,30,000/- claimed to have been received from friends and relatives added in the hands of the assessee as assessee could not file the Permanent Account Number and confirmation of those relatives, admittedly, assessee did not furnish the confirmation and Permanent Account Numbers of the relatives. However, assessee has stated that these are merely gifts received by assessee on various occasions and assessee has never stated that these are the loans received from the relatives. The assessee has stated that ₹1,30,000/- was available to her on account of cash received on various instances from her relatives when proving the sources of credits in her bank accounts. On careful examination of the arguments of the assessee, we find that assessee did not explain, who are those relatives and on what occasions those sums have been received. In any way, under the Provisions of Section 56(1)(v) of the Act, sum of money exceeding of ₹25,000/- is only taxable. Though above provisions are applicable from 1/4/2005, but it can be used as a guide. Therefore looking at the facts and circumstances of the case, we find that out of addition of ₹1,30,000/-, assessee deserves relief of ₹25,000/- which is considered as reasonable and hence, addition to that extent is deleted. Further, assessee is also entitled to the excess of ₹5,86,163/– minus (-) ₹1,22,663/-.

Therefore, even otherwise, the addition of ₹1,30,000/- is covered as expenditure. In view of this, the learned Assessing Officer is directed to delete the addition of ₹2,69,736/- and ₹1,30,000/-on account of deposited in the bank account. Thus, ground no. 1 of the appeal is allowed.

14. Ground no. 2 is with respect to disallowance of expenses being 25% of ₹1,76,997/- which has been agreed by the assessee before the learned Assessing Officer. The assessee also did not deny that the complete third party evidences are not available with her. Accordingly, we do not find any infirmity in the order of the learned CIT(A) in confirming this disallowance. Accordingly, ground no. 2 of the appeal is dismissed.

15. Accordingly, ITA No. 5940/Mum/2019 for Ay 2003-04 filed by the assessee is partly allowed.

ITA No. 5941/Mum/2019

AY 2004-05

16. ITA No. 5941/Mum/2019, is filed by the assessee against the order of the learned CIT(A) for A.Y. 2004-05 dated 24.07.2019 raising following grounds of appeal:-

“1. The learned CIT (A) has erred in law and on the facts of the case in confirming the action of Assessing Officer in making addition of ₹3,20,000/- under Section 69C of the Income Tax Act. The action is unjustified and unwarranted.

2. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of Assessing Officer in making addition of ₹3,83,000/- under Section 69A of the Income Tax Act. The action is unjustified and unwarranted.”

17. Brief fact of the case shows that assessee filed her return of income on 6th January 2005, at ₹1,36,002/-. Pursuant to search, on issue of notice under section 153A of the Act, She filed her return of income on 17th November, 2009, at ₹5,09,466/-. The learned Assessing Officer found that assessee has deposited ₹22,49,052/- in her bank account, out of which she could not satisfactorily explain source of ₹19,58,733/-, which was added under section 69A of the Act. Further, total expenditure of ₹2,86,042/- was claimed as allowable deduction, assessee could not furnish third party documentary evidences and therefore, ₹71,510/- being 25% of the various expense was disallowed. Further, Assessing Officer noted that assessee has renovated her flat and therefore, made addition of ₹3,20,000/- as unaccounted expenditure. Consequently, the assessment order was passed under section 143 read with section 153A of the Act on 30th December, 2010, at ₹28,59,710/-.

18. On appeal, the learned CIT(A),

i. Out of the addition of ₹19,58,733/-confirmed the addition of only ₹3,83,000/-. The assessee explained the above sum out of her bank account withdrawals, which CIT(A) disbelieved and hence, confirmed. The learned CIT(A) also noted that assessee has not deposited in her bank account ₹22,49,052/- which was added back by the learned Assessing Officer but only ₹11,16,590/-. Thus, out of ₹22,49,052/-for which the learned Assessing Officer has made an addition of ₹19,58,733/-, the addition to the extent of ₹3,83,000/-was retained.

ii. The disallowance of 25% on the expenditure was upheld.

iii. He also upheld the addition of ₹3,20,000/- on account of flat renovation. Before him, the assessee submitted that addition has been made only based on a quotation given by one of the clients. Assessee also submitted a confirmation before the learned CIT(A) of Orion Enterprises but the learned CIT(A) held it to be an afterthought and confirmed the addition.

19. The assessee is aggrieved with that order and is in appeal before us.

20. The learned Authorized Representative submitted a paper book and case law compilation.

21. With respect to Ground no [2] he submitted that on identical reasons as prevalent in A.Y. 2003-04, assessee submitted that total credit of ₹11,16,590/- is out of known sources. He referred to page no. 5, stating that while explaining the sources of the same, assessee has stated that these are the cash deposits out of the funds withdrawn from her bank account. He referred to the page no. 6 of the order of the learned CIT(A), wherein the submissions are made. He submitted that undisputedly the cash of ₹3,83,000/- has been withdrawn from the bank account which has not been used by the assessee anywhere else and therefore, while explaining the total source of deposits in bank account of ₹11,16,590/-, the credit of ₹3,83,000/- should have been allowed to the assessee.

22. With respect to Ground no [1] , addition of ₹3,20,000/- under section 69C of the Act, he submitted that during the course of search a loose paper was found belonging to Orion Enterprises where quotation of ₹6,40,000/- was given to a customer in respect of interior designing work at the residence of the customer. The learned Assessing Officer presumed that assessee along with her husband has spent above amount and thereby, addition of ₹3,20,000/- was made. The assessee submitted before the learned CIT(A), the confirmation of Orion Enterprises stating that above work was done in case of customer at flat no. 902, Imperial Heights, Pali Hill and it is merely a quotation of that working. Assessee also submitted confirmation from that party, however, it was disbelieved and learned Assessing Officer and learned CIT (A) has assumed that the work has been carried out at the flat of the assessee. Thus, the addition was made without any evidence. Hence, it deserves to be deleted.

23. The learned Departmental Representative vehemently supported the order of the lower authorities. With respect to ground no. [2] On account of availability of cash out of earlier bank withdrawals the learned Departmental Representative submitted that it is the duty of the assessee to show that for what purposes cash was withdrawn and why it is re-deposited. According to him, unless this is explained, the addition cannot be deleted. With respect to the disallowance of expenditure [ Ground no [1]] on addition of ₹3,20,000/- under section 69A of the Act, he relied upon the orders of the lower authorities.

24. We have carefully considered the rival contentions and perused the orders of the lower authorities. During the course of assessment proceedings, it was found that assessee has deposited ₹11,16,590/- in her bank account. The assessee explained that ₹4,48,270/- has already been offered as income, ₹2,90,320/- is on account of sales and ₹3,83,000/- is cash deposited by the assessee from her own fund which are available with the assessee on account of her withdrawal from bank account. Revenue authorities denied the set off ₹3,83,000/- hold that assessee need to explain the reason for withdrawal from the bank account as well as its redeposit. We find that this is identical to ground No.1 in appeal of the assessee for A.Y. 2003-04. In this year also, there is no evidence with the Revenue that earlier cash withdrawal from the bank account by the assessee has been used for any other purpose other than re­depositing it in the bank account of the assessee. In absence of any contrary finding, merely because assessee did not submit the reason for withdrawal of cash and its redeposit, addition could not have been made. This is also so, because, the withdrawal from the bank account is of small sum and redeposit is also of small sum. Accordingly, we direct the learned Assessing Officer to delete the addition of ₹3,83,000/- under section 69A of the Act. Accordingly, ground no. 2 of the appeal is allowed.

25. Ground no. 1, is with respect to the addition of ₹3,20,000/- under section 69C of the Act. During the course of search a loose paper pertaining to Orion Enterprises was found wherein the extra work of ₹6,40,000/- was mentioned. There was no address or date mentioned there on. During the course of appeal before the learned CIT(A), assessee submitted letter dated 23rd December 2011 from Orion Enterprises that above document belongs to them. It was further stated that this was a quotation for the work to be done for Mr. Marwah, in his flat at 902, Imperial heights, Pali hill. Orion Enterprises further stated that assessee has received advances on account of the above work and it has been offered for income tax as income in A.Y. 2006-07. Assessee also submitted the copy of account of advance received from Mr. Manish Marwah for the above work by Orion Enterprises and also the copy of the invoice and agreement for work done. There is no evidence that the above work was done at the flat of the assessee. Admittedly, the seized document is on the letterhead of Orion Enterprises and not the assessee. Though assessee is one of the partners of Orion Enterprises, the overwhelming evidences submitted before the CIT(A) where the document is explained, this addition of ₹3,20,000/- on account of alleged repair work in the flat owned by the assessee cannot be made in her hands, when the income has already been offered in AY 2006-07 by Orion Enterprises undisputedly. In case of Orion enterprises, for this year it is merely advance received which culminated in to income in Ay 2006­07. Ld Lower authorities neither examined the books of Orion enterprise nor examined Mr. Marwah and rejected evidences placed on record purely on guesswork . Further during search it was also not found that assessee has got any work done on renovation at her flat. Thus the addition was on rejection of evidences produced without examination and making additions on presumptions without evidences. Accordingly, we direct the learned Assessing Officer to delete the addition of ₹3,20,000/- under section 69C of the Act. Accordingly, ground no. 1 of the appeal is allowed.

26. In the Result, ITA No. 5941/Mum/2019 filed by the assessee for A.Y. 2004-05 is allowed.

ITA No. 5947/Mum/2019

AY 2005-06

27. This appeal is filed by assessee against the order of learned CIT(A) dated 24th July, 2019 for A.Y. 2005­06 raising solitary ground of appeal regarding confirmation of addition of ₹2,08,242/- and ₹8,35,300/- under section 69A of the Act.

28. The fact of the case shows that assessee filed her return of income on 6th January 2005 at ₹ 1,74,389/-. Consequent to search and in response to notice under section 153A of the Act, she filed her return of income on 17th November, 2009, at ₹6,24,638/-.

29. During the course of assessment proceedings, the learned Assessing Officer found that she has deposited ₹57,22,157 in her bank account out of which she could not explain source of ₹55,35,768/-and therefore, same was added under section 69A of the Act. Consequently, assessment order under section 143(3) read with Section 153A of the Act was made on 30th December, 2010 at a total income of ₹61,60,410/-.

30. Assessee preferred the appeal before the learned CIT(A), who after taking remand report of the learned Assessing Officer noted that the correct figure of bank deposit is only ₹41,31,305/- against ₹57,22,157/- mentioned by the learned Assessing Officer. As per the records of the earlier assessment orders, the learned CIT(A) disbelieved and confirmed the addition of ₹2,08,242/- and ₹8,35,300/-.

31. Assessee is aggrieved by that order and has preferred this appeal before us.

32. The learned Authorized Representative submitted a paper book where n he submitted cash flow statement as well as other documentary evidences.

33. He submitted that sum of ₹2,08,242/- is loan and gifts received from relatives and further cash deposit of ₹8,35,300/- is from the bank accounts. He referred to the cash flow statement placed at page no. 2 and 3 of his Paper Book. He also referred to the remand report placed at page 11 of the Paper Book. Therefore he submitted that sum deposited in bank accounts is partly out of sales, cash withdrawn from bank accounts earlier and loan from relatives.

34. The learned Departmental Representative supported the order of the learned CIT(A).

35. We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that during the year, the correct deposit in various bank account of the assessee was only ₹41,31,305/- which was explained by the assessee by submitting a cash flow statement and also reconciliation statement. The learned CIT(A) has accepted all other details but has refused to accept that a sum of ₹8,35,000/- deposited in the bank account is out of the funds available with the assessee. The assessee submitted that she has opening cash balance of ₹19,654/-, cash withdrawn from bank account of ₹3,47,536/- and further, cash sales of ₹ 6 lacs which resulted into availability of cash on hand amounting to ₹9,67,190/- and out of which she has deposited ₹8,35,300/-in her bank account. Identical issue arose in the case of assessee for A.Y. 2003-04 and 2004-05. For this year also, the Revenue has not shown any evidence that above sum has been used by the assessee for any other purpose other than depositing in the bank account. The withdrawal and deposit is also of small denomination. We have deleted the identical addition for A.Ys. 2003-04 and 2004-05 giving the reasons for that. For similar reasons, we direct the learned Assessing Officer to delete the addition of ₹8,35,300/- under section 69A of the Act.

36. Further, with respect to the loan, the assessee gets relief of ₹25,000/- as per earlier year’s reasoning out of the addition of ₹2,08,242/- and balance addition of ₹1,83,242/- is confirmed. Accordingly, the solitary ground of appeal no. 1 is partly allowed.

37. In the result, ITA No. 5942/Mum/2019 for A. Y. 2005-06 filed by the assessee is partly allowed.

ITA No. 5943/Mum/2019

AY 2006-07

38. ITA No. 5943/Mum/2019 is filed by the assessee against the order of the learned CIT(A) dated 24th July 2019, for A.Y. 2006-07. Assessee is aggrieved by the order of confirmation of addition of ₹50,000/- under section 69A of the Act and further, the disallowance of 25% of total expenditure of ₹10,54,973/- i.e. ₹2,63,743/- on adhoc basis.

39. The brief fact shows that assessee filed her return of income on 30th October 2006, at ₹6,80,851/-. On search, in response to notice under section 153A of the Act on 17th November, 2009, she filed her return of income declaring income of ₹8,73,615/-.

40. During the course of assessment proceedings, the learned Assessing Officer found that total credits in the bank account of the assessee is ₹71,94,129/-out of which source could not be explained to the extent of ₹58,16,658/- which was added under section 69A of the Act. Further, ₹2,63,743/- being 25% of the total expenditure was disallowed on adhoc basis. Assessment order passed on 30th December 2010, at ₹69,54,020/-.

41. Assessee approached the learned CIT(A), who after obtaining the remand report from the learned Assessing Officer held that there is no credit of 58,16,658/- but the correct sum of credit is only ₹16,21,552/-. He upheld the addition to the extent of ₹50,000/- which was stated to be out of cash withdrawal from the bank account. He further confirmed the disallowance of ₹2,63,743/- out of the expenses.

36. The assessee is aggrieved with that order and is in appeal before us.

37. The learned Authorised Representative and learned Departmental Representative are heard. The Paper Book submitted by the assessee is perused. On careful consideration, we find that during the course of assessment proceedings ₹16,21,552/-was found to be deposited as credit entries in the bank statement. The assessee submitted the reconciliation statement as well as the cash summery ₹50,000/- was shown by the assessee as cash deposited in the bank account. At page no. 3, assessee submitted a cash summary, as per cash summary total opening cash on hand is ₹1,31,890/-. Further, cash withdrawal from the bank account of ₹39,000/- and cash sales of ₹53,764/- resulted into total availability of cash of ₹2,24,654/- . Out of this, assessee explained that she has deposited ₹50,000/- in her bank account. We find that cash withdrawal of ₹39,000/- as well as cash sales of ₹53,764/- are undisputed. The opening cash balance is traced from the earlier Assessment year. Therefore, ₹50,000/- deposited in the bank account could not be said to be unexplained investment of the assessee. Identical addition has been deleted by us for A.Ys. 2003-04 to 2005-06. Accordingly, for the similar reasons, we direct the learned Assessing Officer to delete the addition of ₹50,000/- under section 69A of the Act. Accordingly, ground no. 1 of the appeal is allowed.

44. Ground no. 2 is with respect to the disallowance of expenditure. We find that assessee has given a detailed summary of expenditure, which are reproduced at page no. 2 of the assessment order. The complete detail of ₹10,54,973/- of various expenditure includes depreciation of ₹2,28,640/- is available in assessment order itself. Further, interest expenditure on motorcar is of ₹45,131/-has been incurred by the assessee for which third party evidences are available. The gross receipts of the assessee from business is shown at ₹13,77,471/-. The books of the assessee are audited under section 44AB of the Act. The reasons given by the learned Assessing Officer for the disallowances are as given in earlier years that assessee has agreed to the adhoc disallowance of ₹2,63,743/- being 25% of total expenditure. Further, we find that the depreciation as well as motorcar interest expenditure cannot be considered for adhoc disallowance. Further, in absence of any agreement of the assessee for this year, though she agreed for earlier years, 25% of disallowance out of total expenditure, when accounts are audited, is also not warranted. However, we are of the view that personal nature of expenses also cannot be ruled out. In view of this, in the interest of justice, we direct the assessee to restrict adhoc disallowance of expenses to only 10% of total expenditure other than depreciation. Thus, out of the total expenditure of ₹8,26,359/-, the adhoc disallowance at the rate of 10% i.e. ₹ 82,635/- is confirmed and balance disallowance deserves to be deleted. Accordingly, ground no. 2 of the appeal is partly allowed.

45. In the result, ITA No. 5943/Mum/2010 for A.Y. 2006-07 is partly allowed.

ITA No. 5944/Mum/2019

AY 2007-08

46. This appeal is filed by the assessee against the order of the learned CIT(A) dated 24th July, 2019, for A.Y. 2007-08 raising following grounds of appeal:-

“1. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of assessing officer in making addition of Rs. 5,15000/-and Rs. 6,31,790/- and Rs. 4,00,000/- under section 69A of the Income Tax Act. The action is unjustified and unwarranted.

2. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of assessing officer in making addition of Rs. 24,92,000/- under section 69B of the Income Tax Act. The action is unjustified and unwarranted.

3. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of assessing officer in disallowing adhoc allowances of Rs. 6,92,293/- i.e. 25% of Rs. 27,69,172/-under section 37(1) of the Income Tax Act. The action is unjustified and unwarranted.”

47. The fact shows that the assessee filed her return of income on 26th July 2007, at ₹5,94,620/-. Pursuant to search on 30th May, 2008, notice under section 153A of the Act was issued and in response to that assessee filed return of income on 16th November, 2009, at ₹5,94,620/-.

48. During the course of assessment proceedings, the learned Assessing Officer found that assessee has credited ₹1,23,73,928/- in her bank account out of which source of credit amounting to ₹95,64,561/-could not be explained and therefore, same was added under section 69A of the Act. As in earlier years, adhoc disallowance of 25% of total expenditure of ₹27,69,172/- amounting to ₹6,92,393/- was also made. The learned Assessing Officer also made an addition of ₹14,87,000/- being unaccounted investment in office premises as per the documents seized. The learned Assessing Officer also made an addition of ₹10,05,000/- being unaccounted investment in fixed deposits. Accordingly, assessment order was passed on 30th December 2010 at a total income of ₹1,33,43,470/-.

49. Assessee preferred an appeal before the learned CIT (A). The learned CIT(A) held that

i. The correct amount of credit in the bank account is not of ₹1,23,73,928/- but only ₹1,01,48,472/-. After obtaining the remand report, he upheld the addition of ₹5,15,000/-being cash available with the assessee from earlier withdrawals as per his earlier order. Further, the credit of ₹6,31,790/- was the dividend and mutual fund income, which was not shown in the return of income of the assessee. Therefore , he confirmed the addition. Further, in absence of any documentary evidence, he also confirmed the addition of ₹4 lacs on account of fixed deposits.

ii. The learned CIT(A) also confirmed the addition of ₹24,92,000/- on account of cash payment for purchase of flat of ₹14,87,000/- and investment in fixed deposits on the basis of noting in loose sheet paper no. 22 of ₹10,05,000/-.

50. Therefore, assessee is aggrieved with that order and has preferred the appeal before us.

51. The ground no. 1 is against the confirmation of addition of cash deposit of ₹5,15,000/-, ₹ 4 lacs on account of unexplained fixed deposit and ₹6,31,790/- on account of dividend and mutual fund income not offered for taxation.

52. On careful consideration and on perusal of hearing both the parties, we find that the assessee has explained the source of cash deposit of ₹5,15,000/-being withdrawal from her own bank account. This ground is identical to ground in earlier years, where the learned CIT(A) disbelieved that cash withdrawn from the bank account of the assessee are available with her. The learned CIT(A) held that it is merely a bald statement without any supporting evidence. In the earlier years, we have reversed the finding of the learned CIT(A) and deleted the above addition for the reason that if there is no other evidence with the Revenue of spending the above amount anywhere else , credit for same cannot be denied. Therefore, for the similar reason, we direct the learned Assessing Officer to delete the addition of ₹5,15,000/-

53. The next addition is of ₹6,31,790/-. This amount has been shown by the assessee as dividend income and mutual fund receipts. The learned Assessing Officer and the learned CIT(A) disbelieved the explanation of the assessee that any such income from dividend has been shown by assessee not in her return of income. We also find that no dividend income has been shown by assessee in her return of income. However, the assessee has stated before us that she has received certain dividend and also received the maturity or redemption of mutual funds. It was stated that such mutual fund might have resulted into some income but the whole receipt of ₹6,31,790/- cannot be considered as income. On hearing both the parties, we set aside this issue back to the file of the learned Assessing Officer with a direction to the assessee to show the dividend income received by her and its taxability. Similarly, she is also directed to show the redemption of mutual fund and income arising there from. The learned Assessing Officer may examine the details and after that may decide the issue in accordance with law. We also make it very clear that as assessee has stated that ₹ 6,31,790/- has been received on redemption of mutual fund and dividend income, it is the duty of the assessee to show about chargeability of the income.

54. With respect to sum of ₹ 4 lacs being shown as received from fixed deposits, fact shows that at the time of explanation with respect to total credit entries in the bank statement, assessee has stated that ₹4 lacs are credited in the bank statement on account of maturity of fixed deposits. Naturally, when the sum is credited in the bank account of ₹4 lacs same cannot be said to be an unexplained investment for that year. However, it is not clear and could not be shown by the assessee before the lower authorities that when the fixed deposit was obtained and when it matured, and consequently what the interest thereon is. As assessee has stated that amount received is on account of maturity of fixed deposit, the onus lies on the assessee to show that when the fixed deposit was obtained and taxability of corresponding interest thereon. She is directed to submit relevant details before the learned Assessing Officer. The learned Assessing Officer may examine the same and decide this issue.

55. Accordingly, ground no. 1 of the appeal is allowed with above direction.

56. The [2] ground of appeal is with respect to the addition of ₹24,92,000/-. The fact shows that a loose paper numbers 21 and 22 are found during the course of search. On page no. 22 certain noting were found which shows that there is an office area of 390 sq. Ft. . Noting also has reference of ₹ 28,80,000/-. This sum is bifurcated in ₹13,93,000/- has been shown in cheque and ₹ 14,87,000/- have been shown in cash. The noting also shows details relating to registration of the property. The backside of the above page shows details of various fixed deposits. It is also mentioned that per sq. ft. rate is ₹7,236/-. When it is multiplied to area of 398 sq. ft., the resultant figures is ₹28,79,928/-. As there is mention of ₹13,93,000/- by cheque, the remaining amount of ₹ 14,87,000/- was added as unexplained investment of the assessee under Section 69B of the Act. The learned CIT(A) confirmed the action of the learned Assessing Officer.

57. Similarly, on the backside of the same paper there is a mentioned of fixed deposit amounting to ₹10,05,000/- and the learned Assessing Officer also made the addition of the same which was also confirmed by the learned CIT (A).

58. Before us, the assessee stated that while making the addition, the learned Assessing Officer has clearly ignored page no. 21. According to page no. 21, the cost of flat purchased by the assessee is shown at ₹13,93,000/- situated at 602, Crystal Plaza. This flat was acquired by assessee on 28th October 2006, from Parekh Builders. Payment for the purchase of the flat was made from the bank account. Further, in page no. 22, there is proposed sale of this flat for ₹28,80,000/- and further, the same flat was sold in Assessment Year 2008-09 at ₹28,79,028/-. Therefore, the sale consideration has been offered by the assessee for taxation in Assessment Year 2008-09 where capital gains of ₹9,45,064/- was shown. Therefore, the addition of ₹14,87,000/- is incorrectly made. In the remand report, the learned Assessing Officer has not made any comment on the fact stated by the assessee but has merely stated that the averments made by the assessee are contradictory and merely an afterthought.

59. Ld DR also supported orders of lower authorities.

60. We have carefully considered the contentions of parties as well as reasons given by authorities in their orders. On careful perusal of page nos. 21 and 22, it is apparent that details mentioned at page no. 21 at page no. 22 relates to the same property, we hold se because of the area of the property as well as price of the property matches. The page no. 21 is for purchase of the property and page no. 22 is for the sale of the property. Further, sale consideration offered by the assessee for long term capital gain of ₹28,79,928/- are offered for taxation which is exactly to the sum of ₹28,80,000/-mentioned at page no. 22 and subsequently, long term capital gain of ₹9,45,064/- has been offered by the assessee. As the transaction is not for purchase of property but for sale of property by the assessee and capital gain on which has already been offered by assessee, we find no reason to uphold the addition. Therefore addition of ₹14,87,000/- on account of unexplained investment in the property, deserves to be deleted. Hence, delete.

61. With respect to the addition of ₹10,05,000/-, there is a mention of fixed deposits of ₹10,05,000/- on that loose paper. Assessee has stated that she has fixed deposit of ₹ 45 lacs as on that date. Therefore, amount of ₹10,05,000/- is covered in the fixed deposits of ₹ 45 lacs. Assessee has also stated that the details are available in the balance sheet of the assessee. The learned Assessing Officer as well as the learned CIT(A) both did not consider the above explanation of the assessee. We hold that when assessee is having fixed deposit of ₹45 lacs and when assessee claims that fixed deposits stated in page no. 22 is not an unaccounted fixed deposit but included in the same. Ld AO did not found that in which bank this FDR is placed. During search also there is no recovery of such FDRs. Further, when assessee is showing that the fixed deposits of ₹ 10 lacs is also part of the total deposit of ₹45 lacs already disclosed by the assessee and when there is no mention of the name of bank etc, same cannot be added to the total income of the assessee. It is also to be seen that the learned Assessing Officer has held that assessee has obtained fixed deposits of ₹10,05,000/- by paying cash. However, there is no corroborative material that in which bank account the fixed deposits have been placed. However, as the assessee contends that this fixed deposit mentioned in page no. 22 is already included in the fixed deposits owned and disclosed by the assessee. We set aside this issue back to the file of the learned Assessing Officer with a direction to the assessee to show that she does not own any other fixed deposit other than sum of ₹ 45 lacs. If the learned Assessing Officer was of the view that assessee is holding this fixed deposit out of her books of accounts over and above this Rs 45 lacs then, it would be the duty of the learned Assessing Officer to show that in which bank account assessee owns fixed deposit. Thus, ground no. [2 ] Of the appeal is allowed with above directions.

62. Ground no. 3 is with respect to the disallowance of 25% expenditure of ₹ 27,69,172/- amounting to ₹ 6,92,293/- on account of inadequate information & non-availability of third party evidences. We find that according to Para 5.1 of the assessment order the learned Assessing Officer himself stated that the assessee was able to produce majority of expenses for Assessment Years 2007-08 and 2008­09. When adequate details were produced for this year, we are of the view that the disallowance made 25% of the total expenditure amounting to ₹ 6,92,293/- is not proper. More so, the assessee has incurred interest expenditure of ₹2,62,490/- and also depreciation of ₹ 4,66,162/-. Thus, out of ₹27,69,172/-, the expenditure and allowance of ₹7,28,652/- cannot be disputed. This leaves with the balance expenditure of ₹20,40,520/-. The assessee has already offered total sales of income of ₹33,41,527/-. Against this, the disallowance made by the learned Assessing Officer is disproportionate [25%] and not justified. Therefore, in the interest of justice, we direct the learned Assessing Officer to retain the disallowance of such expenses at the rate of 10% of total expenses of ₹20,40,520/-. Thus, against the disallowance of ₹6,92,293/-, the disallowance of ₹1,04,052/-is confirmed and balance disallowance is deleted. Accordingly, ground no. 3 of the appeal is partly allowed.

63. In the result, ITA No. 5944/Mum/2019 filed by the assessee for Assessment Year 2007-08 is partly allowed.

ITA No. 6458/Mum/2019

Ay 2008-09

64. ITA No. 6458/Mum/2019 is filed by the assessee for Assessment Year 2008-09. The following grounds of appeal are raised:-

“1. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of the assessing officer in making addition of Rs. 34,00,000/- u/s 69A of the Act. The action is unjustified and unwarranted.

2. The Ld CIT (A) has erred in law and on the facts. of the case in confirming the action of the assessing officer in making addition of Rs. 15,89,027/- u/s 69A of the Act. The action is unjustified and unwarranted.

3. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of the assessing officer in making addition of Rs. 8,84,792/- u/s 69A of the Act. The action is unjustified and unwarranted.

4. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of the assessing officer in making addition of Rs. 9,00,000/- u/s 69A of the Act. The action is unjustified and unwarranted.

5. The Ld CIT (A) has erred in law and on the facts of the case in confirming the action of the assessing officer in making addition of Rs. 1,17,164/-u/s 69A of the Act. The action is unjustified and unwarranted.

6. You Petitioner crave leave to add, amend, alter and /or withdraw any or all the aforesaid ground of appeal.”

65. The fact shows that the search took place in the case of the assessee on 30th May, 2008 and subsequently, on 29th September, 2008, assessee filed her return of income at ₹1,54,080/-. Notice under Section 153A was issued on 16th September 2009. In response to which, assessee filed her return of income on 16th November 2009, at ₹99,64,080/-. The learned Assessing Officer issued notice and passed assessment order under Section 143(3) read with Section 153A of the Act on 13th December, 2010, wherein the total income of the assessee was assessed at ₹2,33,82,840/-. The learned Assessing Officer made several disallowance and addition. The assessee aggrieved with that preferred an appeal before the learned CIT(A) who passed an order on 30th August 2019, partly allowing the appeal of the assessee. Therefore, assessee is aggrieved with that.

66. Ld CIT [A] sustained following disallowances / additions :

i. Addition under Section 69A of the Act of Rs 34 lacs on the basis of noting on certain loose papers. On these loose papers there were two items mentioned of ₹ 5 lacs and 29 lacs and same is confirmed.

ii. Addition of ₹15,89,027/- under Section 69C of the Act on account of addition of ₹ 17 lacs of outstanding labour provisions, wherein CIT(A) granted relief of ₹1,10,973/-.

iii. The addition of ₹9 lacs on account of accommodation bills obtained for furniture and fixtures on the basis of loose paper

iv. The additions of ₹1,17,164/- on account of noting on page number 36.

67. The ld AR submitted the paper book containing seized documents as well as submissions before lower authorities. He also submitted a case law paper book.

68. Ld DR relied up on orders of lower authorities with respect to each of additions.

69. We have carefully heard the rival contentions and perused the orders of lower authorities, paper book placed before us and judicial precedents relied up on.

70. The first ground of appeal is against the addition of ₹34 lacs confirmed by learned CIT(A). The fact shows that during the course of search a paper was found as annexure A-1 of 47. This document is placed at page no. 4 of the paper book submitted. On reading of the above paper, the learned Assessing Officer noted that there are two figures mention of

‘AB 15

MSF 14’

71. There is one more figure of ₹5,00,000 mentioned against MSF and therefore, the learned Assessing Officer was of the view that as figure against the name of MSF is mentioned ₹ 5,00,000/- , the figure mentioned against AB of 15 and MSF of 14, are also in lacs but written in two digits. Therefore, the learned Assessing Officer was of the view that against the AB, the sum is ₹ 15 lacs instead of ‘15’ and Sum against the MSF is ₹ 14 lacs against ‘14’ and therefore, the total addition of ₹29 lacs (+) plus 5 lacs was made under Section 69A of the Act. Order of ld AO was confirmed by ld CIT [A] .

72. Assessee explained that this is merely a loose paper and does not have any evidentiary value. It was stated that the learned Assessing Officer unnecessarily and without any basis stated that figures written in two digits are transaction lakhs.. It was further stated that merely because one of the figure is mentioned in lacs, the double-digit figures could not be also considered to be in lacs. It was stated by the assessee that even on the same page there are figures mentioned in Thousands also . Therefore, considering the figures in lacs is without any basis. Even on the merits, assessee stated that assessee has paid ₹ 15,000/- to Mr. Atul Bhalla towards the gift, who is the broker for the services rendered by the assessee. It was submitted that gift of Rs 15,000/- is already included in expenses incurred by the assessee.

73. With respect to the MSF 14, it was stated that Mark S Fernandez is a loan creditor of Orion Enterprises, in which the assessee is a partner. ₹14,000/- was the interest amount payable to Mark S Fernandez on the loan with Orion Enterprise. Since, assessee is working partner of Orion Enterprise; these transactions are noted by her. It was also stated that Mark S Fernandez has given a loan of ₹12 lacs on 18th January 2007, to Orion Enterprises out of which ₹10 lacs was repaid on 31.03.2007 and therefore, addition of ₹ 14 lacs is unwarranted. It was submitted that interest expenditure of Rs 14000/- pertains to Orion enterprises as claim by the lender but same is not paid at all. Further assessee has nothing to do with the transaction except being partner of Orion Enterprises.

74. Assessee also stated that in remand report also, the learned Assessing Officer did not comment on the same but justified by saying that though the figures are returned in double digit but they are in lacs. The learned Authorized Representative therefore submitted that addition of ₹ 29 lacs confirmed by the lower authorities is on conjuncture and
surmises.

75. The learned Departmental Representative vehemently supported the order of the lower authorities.

76. We have carefully considered the rival contentions. we have also perused page no. 5 of Annexure A-1, which is placed at page no. 4 of the paper book. On careful perusal of the above document, it is apparent that there are figures mentioned in thousands, in five digits, in six digits and also in two digits. Therefore, it is apparent that there is no justification for considering a double-digit figure mentioned on the seized document as 7 digit figures. If that be so then all those double-digit figures must be considered as amounts in lakhs and sums mentioned in lakhs should also be extrapolated. The seized paper is a reference of ‘AB-15’ and ‘MSF-14’ which have been interpreted by the lower authorities at ₹ 15 lacs and 14 lacs. The assessee gave the explanation that ₹15 is with respect to the gift of ₹ 15,000/- to Mr. Atul Bhalla and ₹ 14 is with respect to interest to Mark S Fernandez on his loan of ₹10 lacs repaid. With respect to the transaction of Mark S Fernandez, assessee has stated that he has given a loan of ₹12 lacs to M/s Orion Enterprises on 8th January 2007, and which has been repaid on 31st March 2007, to the extent of ₹10 lacs and assessee has maintained this explanation consistently. There is no evidence that assessee has paid ₹ 15 lacs to Mr. Atul Bhalla and ₹ 14 lacs to Mark S Fernandez. The learned Assessing Officer has also not called for examination of these two individuals. In view of this, addition of ₹ 29 lacs made by the lower authorities is merely on conjunctures and surmises. Therefore, we do not agree with the addition confirmed by the lower authorizes to the extent of ₹ 29 lacs. However, with respect to addition of ₹ 5 lacs mentioned on the same loose paper with respect to Mark S Fernandez cannot be faulted with because of the reason that the assessee remained silent before the learned Assessing Officer, learned CIT(A) and even before us. In view of this out of the total addition of ₹ 34 lacs, in ground no. 1 the addition of ₹5 lacs is confirmed and balance of addition of ₹ 29 lacs is deleted.

77. The second ground of appeal is with respect to addition of ₹ 15,89,027/- confirmed by the learned CIT(A) under Section 69A of the Act. The fact shows that addition of ₹17 lacs is based on the noting on page nos. 5-6 of Annexure A-2 of the loose paper found from the premises of M/s Orion Enterprises at serial no. 5 of that page. It is mentioned that ‘details of outstanding expenses for labour charges of ₹17 lacs’ and therefore, the learned Assessing Officer was of the view that above expenditure has been incurred by the assessee, which is outstanding and therefore same is added as expenses.

78. During the course of assessment proceedings, assessee stated that whatever the labour charges outstanding in the books of account is only of ₹ 1,10,973/- as payable as on 31st march, 2008. It was submitted that there was no outstanding labour charges of ₹ 17 lacs. The learned Assessing Officer disbelieved these explanations and made the addition of ₹ 17 lacs. The learned CIT(A) granted the credit of ₹ 1,10,973/- and confirmed the addition of ₹ 15,89,027/-.

79. The learned Authorized Representative referred to page no. 9 of the paper book and submitted that these are the documents prepared by audit team at the time of finalization of the accounts, where certain noting were made by the auditors. This document is not in the hand wiring of the assessee. He further stated that assessee has shown the business income of ₹ 79,19,563/- and there cannot be an outstanding of ₹ 17 lacs on account of labour charges. Assessee submitted that this paper does not record any transaction with respect to the assessee. Even otherwise, the above paper merely shows an outstanding expenditure, which is not at all been paid and therefore, no addition can be made. It was further contended that the loose paper was found from the office premises of Orion Enterprises and not from the assessee. When the documents were found from the Orion Enterprises, how the additions could have been made in the hands of the assessee.

80. The learned Departmental Representative supported the orders of the lower authorities.

81. We have carefully considered the rival contentions and found that the impugned document was found from the premises of Orion Enterprises. Admittedly, in the seized paper the name of the assessee is not mentioned. Further, the learned Authorized Representative of the assessee has specifically stated that these documents are the audit query sheets of the auditors and not in the handwriting of the assessee. When these documents do not pertain to the assessee and when assessee has stated that the query should be raised in case of Orion Enterprises from where the document is found. The remand report also confirms that document is found from the premises of Orion Enterprises then, how these documents are related to the assessee and why assessee is asked to explain the same in her individual capacity is not known. Further, even otherwise the expenditure of ₹ 17 lacs has not been incurred by the assessee at all and therefore it cannot be outstanding. There is no reference that when the same were paid or from which source the same have been paid and to whom. In view of this, the addition of ₹ 17 lacs in the hands of the assessee is devoid of any merits. The learned CIT(A) has restricted it to ₹15,89,027/-. In view of this, ground no. 2 of the appeal is allowed.

82. Ground no. 3 is with respect to the addition of ₹

8,84,792/-. This addition has arisen on account of seized document. The copy of such seized document is placed at page no. 10 of the Paper Book. It mentions that assessee has received ₹ 1,59,792/- from M/s Sundram Motel on 6th November 2007. Further, on 28th June 2007, ₹75,000/- was received and on 11th July 2007, ₹6,50,000/- was received. Thus, the learned Assessing Officer was of the view that a sum of ₹8,84,792/- is received from the above party which has not been disclosed by the assessee and therefore, the same was added. The learned CIT(A) also held that above unrecorded receipts from Sundram Motel has been correctly added by the learned Assessing Officer.

83. The learned Authorized Representative submitted that these are the loose papers not in the handwriting of the assessee, it is undated. Assessee further submitted that ₹1,59,792/- received on 6th November 2007, is a part redemption amount received from BNP Paribus fund. This is not from Sundram Motel but Sundram Mutual Fund. It was stated that the resultant capital loss is also disclosed in computation of total income as capital gain/loss of the assessee and further, the same was also received in the bank account of the assessee. Therefore, it cannot be unaccounted income of the assessee.

84. Assessee, with respect to the sum of ₹6,50,000/-on 11th July, 2007, it is submitted that this fund is transferred from assessee’s own bank account no. 201086 with HDFC bank vide cheque no. 161459 and therefore, it is not unaccounted professional fees but transfer of funds from one bank account to another bank account. Both the bank accounts are placed in the paper book.

85. With respect to ₹70,000/- received on 26th November, 2007, assessee submitted that it is already shown in the sale proceedings in the name of Mr. Sandeep Bhumar, who paid the above consideration by cheque no. 287862 of ICICI Bank. The learned Authorized Representative submitted that neither there is a Sundram Motel nor Sundram Hotel as customer of the assessee. He further minutely referred to the seized document and pointed out that it clearly shows Sundram Mutual fund, which has been misinterpreted by the Revenue Authorities as Sundaram Hotel etc.

86. The learned Departmental Representative supported the orders of the lower authorities. The learned Departmental Representative supported the order of the lower authorizes. He submitted that the assessee did not submit proper information before the lower authorities.

87. We have carefully considered the rival contentions and perused the order of the lower authorities. On careful consideration of the various information submitted by the assessee, we find that the above additions made in the hands of the assessee is on account of complete misreading and misunderstanding on the part of the lower authorities. On 6th November 2007, the assessee received a sum of ₹ 1,59,792/-, which is credited in the bank statement, which is also placed at page no. 49 of the Paper Book. This is received from Sundram BNP Paribas Mutual Fund on account of redemption proceeds. Further, ₹ 6,50,000/-credited on 11th July 2007, is also transferred from HDFC Bank Ltd by cheque no. 161459 from the account of the assessee. Respective bank account of HDFC bank of the assessee from where the same has come and where it is deposited has also been placed on record. With respect to ₹75,000/-, assessee has already included the same in the sale account. In view of this, we find that the learned lower authorities are not correct in sustaining addition of ₹8,84,792/- in the hands of the assessee. Accordingly, ground no. 3 of the appeal is allowed.

88. Ground no. 4 of the appeal is against sustaining the addition of ₹ 9 lacs under Section 69 of the Act. The fact of the case shows that based on certain seized documents there is mention of ‘bills to be obtained for furniture and fixture of ₹ 9 lacs’. The assessee submitted that these are mere noting during the course of audit but no such transaction has taken place. Or it is that in case of Orion enterprises , the auditors did not find the relevant bills in the files at the time of their examination and it is mentioned I so in their audit query sheet. The learned Assessing Officer did not believe assessee and made the addition of ₹ 9 lacs.

89. Before the learned CIT(A) assessee reiterated the submission made before the learned Assessing Officer and stated that there is no expenditure incurred by the assessee and further, this document was found at the premises of Orion Enterprises and no addition is required to be made. The learned CIT(A) confirmed the addition stating that assessee has not provided any evidence that no such bills were obtained.

90. The learned Authorized Representative reiterated the same submission before us also and stated that these were the discussions during the course of audit of Orion Enterprises, the documents were found from the premises of Orion Enterprises and therefore, no addition should be made in the hands of the assessee.

91. The learned Departmental Representative supported the order of lower authorities.

92. We have carefully considered the rival contentions and perused the orders of the lower authorities. The seized documents were placed at page no. 8 of the Paper Book which reference to Orion Export for the year ended on 31st March 2008. The title of the page says that it is ‘checking of ledgers’. At serial no. 4, there is mention that purchase bills are required for furniture and fixtures account for ₹ 9 lacs. The assessee has explained that there is no addition of furniture and fixture in the audited balance sheet and further, these expenses were wrongly booked by the accountant under the head furniture and fixtures, which was subsequently rectified. Therefore, no addition can be made in the hands of the assessee. Assessee was asked to prove negative before the lower authorities that no such accommodation bills were obtained by her. If the evidence of incurring some expenditure is found, source of such expenditure can be asked. However, we fail to understand that how assessee will prove that she has not obtained any accommodation bills of furniture. In fact additions made by her in Furniture and fixture and other assets can be verified and if those additions are found bogus, additions of the same can be made. Therefore, in our opinion the addition of ₹9 lacs in the hands of the assessee is unjustified. Hence, ground no. 4 of the appeal is allowed.

93. Ground no. 5 is with respect to the addition of ₹ 1,17,164/-. No arguments are advanced on this ground. In view of this, no interference is called for and ground no. 5 is dismissed.

94. Accordingly, the appeal of the assessee for Assessment Year 2008-09 in ITA No. 6548/Mum/2019 is partly allowed.

In ITA No. 6835/Mum/2019

AY 2009-10

95. In ITA No. 6835/Mum/2019 for Assessment Year 2009-10 the assessee has raised following nine grounds of appeals against the order passed by the learned CIT(A) dated 20th September, 2019:-

“1. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of `4,00,000/– under section 69A of the Act. The action is unjustified and unwarranted.

2. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of `90,00,000/– under section 69A of the Act. The action is unjustified and unwarranted.

3. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of `12,80,000/– under section 69B of the Act. The action is unjustified and unwarranted.

4. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of ` 3,83,000/– under section 69B of the ct. The action is unjustified and unwarranted.

5. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of ₹1,36,900/– under section 69B of the Act. The action is unjustified and unwarranted.

6. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of ₹18,67,098/– under section 69B of the Act. The action is unjustified and unwarranted.

7. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of `19,76,500/– under section 69B of the Act. The action is unjustified and unwarranted.

8. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in making addition of `66,34,555/– under section 69B of the Act. The action is unjustified and unwarranted.

9. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in disallowing adhoc allowance of ₹4,57,300/– i.e. 25% of ₹18,29,201/– under section 37(1) of the Income Tax Act. The action is unjustified and unwarranted.”

96. The fact shows that the on the basis of search on 30th May, 2008, return of income filed on 16th October, 2009, at a total income of ₹6,67,100/-. The assessment under Section 143 read with Section 153B of the Act was passed on 13th December, 2010, at the total income of ₹4,89,07,513/-. The learned Assessing Officer in all made twelve different additions/ disallowances amounting to ₹4,82,40,353/-. The assessee preferred an appeal before the learned CIT(A), who partly allowed the appeal of the assessee and therefore, assessee is in appeal against the additions sustained by the learned CIT(A).

97. The first ground of appeal is against the addition of ₹ 4 lacs. The fact shows that according to page no. 1 Annexure A-1, seized during the search, it shows that assessee received gift of ₹2 lacs each from his father and his brother. Assessee was questioned and it was stated that no such transactions took place. However, during the course of assessment proceedings on 16th December, 2010, assesses submitted that she is the only daughter and her father and brother has decided to give 2 lacs each to her and therefore, these gifts are received by the assessee from relatives is exempted. The learned Assessing Officer made additions of these sums holding that there are inconsistent submissions of the assessee and no documentary evidence is produced. On perusal before the learned CIT(A), she reiterated the above submission and also submitted the affidavit of receipt of the gift. The learned CIT(A) confirmed the above addition for the reason that only assessee had completely denied receiving the above gift and furthermore, assessee has not provided dividend to explain the source of gifts from the donors. Therefore, assessee is in appeal before us.

98. Before us, assessee has submitted confirmation letter of receipt of gift of Rs.2 lacs each from the father and brother of the assessee. Same are placed at page no. 50 and 51 of the Paper Book. On careful consideration of the same, we find that the father of the assessee, Col. GS Sudan, retired, residing at Jammu Tawi, having a Permanent Account Number AHYPS3964L, as confirmed that he has given a gift of ₹ 2 lacs to her daughter. Further, Mr. Amrit Pal Singh, residing at Gurgaon, brother of the assessee having Permanent Account Number AOBPS5351P, has also confirmed that he has also given gift of ₹2 lacs to her sister. These confirmations were not available before the lower authorities. In view of this, we set aside ground no. 1 back to the file of the learned Assessing Officer with a direction to assessee to show that the gift has been received from her father and brother of ₹ 2 lacs each. The learned Assessing Officer may examined the claim of the assessee in view of above confirmation and decide the issue afresh. Hence, Ground no. 1 is partly allowed accordingly.

99. Ground no. 2 is against the addition of 90 lacs confirmed by the learned CIT(A). Facts noted from the orders of the lower authorities shows that the learned assessing officer has made an addition of Rs 2.70 crores on account of unexplained investment u/s 69C in respect of acquisition of one property at Delhi on the basis of Notings in the seized material. The assessing officer noted that as per one seized document placed at page number 6 of annexure A – 1, there were Notings of loan taken from banks et cetera aggregating to ₹ 536 lakhs and EMI for loan was also mentioned. In the loans, a loan was included of Rs 105 lakhs for a property at Delhi . Below the Notings of the loans there were Notings suggesting that the aggregate consideration for the Delhi property is for ₹ 265 lakhs which comprised of cheque component of rupees hundred and 40 lakhs and cash component of ₹ 125 lakhs.. Down payment of ₹ 35 Lacs for the said loan of rupees hundred and 5 lakhs for the property was to be arranged from internal sources of the assessee. As per seized document i.e. page number seven of annexure A – 1, cash component of rupees hundred and 25 Lacs for the Delhi property was to be organised from internal sources of ₹ 45 lakhs, loan already taken from Mr ATul Bhalla of ₹ 45 lakhs and balance ₹ 35 lakhs from the cash amount of ₹ 95 lakhs to be arranged by one finance broker. Further the balance cash of ₹ 60 lakhs from finance broker was to be utilised for repaying the loan of ₹ 45 lakhs to Atul Bhalla and the balance of ₹ 15 lakhs for payment of income tax. Based on this the learned assessing officer asked the assessee to explain the above noting based at page number 6 and 7 of annexure A – 1. The assessee submitted that she is in the habit of making notes of the various proposals and the transactions in respect of the loans from the banks in respect of property at Mumbai, personal loans and vehicle loans have all materialised however the transactions related to loan for Delhi property did not materialise. The learned that assessing officer is believed the explanation of the assessee and he noted that Delhi property though is not reflected in the balance sheet of the assessee but as per the detailed noting in the newspaper there is a reference of acquisition of property and therefore he made an addition of Rs 2. .70 crores in the hands of assessee u/s 69C of the act.

100. The matter reached before the learned CIT – A. He considered the explanation of the assessee as well as the remand report and rejoinder of the assessee. He rejected the argument of the learned authorised representative before him that the documents seized is a dumb document. However he noted that though assessee was in discussion with one broker at Delhi for purchase of one property for an aggregate consideration of ₹ 265 lakhs where there is a reference of cheque component of rupees hundred and 40 lakhs and cash component of ₹ 125 lakhs. However the said transaction did not materialise. To show that the about transaction did not materialise, assessee produced the copies of the balance sheet of her family members as well as the group concerns to show that the property to the extent of the cheque component of rupees hundred and 40 lakhs did not appear anywhere. The learned CIT – A noted that if the transaction had actually materialised at least the cheque amount of rupees hundred and 40 lakhs would have been shown in the balance sheet or in the bank account of the assessee or its group concern. It is not so. Therefore he deleted the addition of ₹ 2.70 crores. However he noted that the assessee has made noting as to how the cheque component of rupees hundred and 40 lakhs and cash component of ₹ 125 lakhs related to the said Delhi property are to be organised. He noted that with respect to cash component of ₹ 125 lakhs which is required to be arranged out of loan availed from Atul Bhalla of 45 lakhs and a further amount of ₹ 45 lakhs will be from internal sources and therefore the assessee is in possession of ₹ 90 Lacs despite the transaction in the Delhi property did not materialise. Therefore he made the addition to the extent of ₹ 90 lakhs on this account.

101. Therefore the assessee is aggrieved, the learned authorised representative referred to the paper book and submitted that though the learned CIT – A as agreed that the transaction of Delhi property has not materialised, still he proceeded to make an addition of ₹ 90 lakhs out of the same. He submitted that the main reason for which the learned CIT – A has made the addition is with reference to the assumption made by him that assessee has already having ₹ 90 lakhs in her hand. He submitted that this is the case of search, had the amount been available with the assessee, it would have been found during the course of search. There is no reason given by the learned CIT – A that if the Delhi property has not materialized by the assessee, why would assessee borrow a loan of ₹ 45 lakhs from somebody else and where from the assessee would on a further 45 lakhs. He therefore submitted that the addition of ₹ 90 lakhs made by the learned CIT – A is merely on the basis of conjectures and surmises and with no evidence. He further submitted that the newspaper also do not indicate that assessee is having those sums

102. The learned departmental representative vehemently supported the orders of the lower authorities.

103. We have carefully considered the rival contention and perused the orders of the lower authorities. It is apparent that the learned assessing officer on the basis of the seized paper has made an addition of ₹ 2.70 crores in the hands of the assessee stating that the loose papers shows that how the funds would be arranged for payment of consideration of above property partly by cheque or partly by cash. Therefore it was assumed by the learned assessing officer that assessee has purchased the above property. This fact was proved by the assessee in negative by showing that this property been purchased by any of the group concerns of the assessee on assessee herself, at least the cheque consideration would have been recorded in the books of account of these concerns or assessee herself. Further for payment of cheque consideration, there would have been a corresponding bank transactions. There is no such evidence. The learned CIT – A therefore deleted the addition of ₹ 2.70 crores in the hands of the assessee. However the learned CIT – A stated that for cash payment the assessee has arranged a loan of ₹ 45 lakhs from another person as well as has source of her own of ₹ 45 lakhs. The learned CIT – A noted that assessee was already in possession of the sum. The learned CIT – A has held that loan from Atul Bhalla is already available with the assessee, however in para number 6.3.3 of his order Mr ATul has confirmed the loan to the assessee only by cheque. Further such to place in case of the assessee, had assessee been in possession of cash of ₹ 90 lakhs, there would have been seizure of the sum or there would have been a reference through some Notings et cetera where the above cash is kept by the assessee. Even CIT – A did not have evidence to show that assessee was having unaccounted income of ₹ 45 lakhs as well as loan of ₹ 45 lakhs available in cash with her. We have also carefully perused the seized documents and we do not find any evidence that the transaction of loan of ₹ 45 lakhs already materialised and assessee was having the same in her possession. Similar is the case with respect to ₹ 45 lakhs stated to be personal. Further, when the transactions with respect to the acquisition of property at New Delhi has not at all materialised, the financial transactions with respect to that property also did not materialise, in absence of any contrary evidence. In view of this the addition made by the learned CIT – A of ₹ 90 lakhs u/s 69A is without any merit. Hence deleted. Accordingly ground number 2 of the appeal is allowed.

104. Ground number 3 is with respect to the addition of ₹ 1,280,000/– u/s 69B of the act confirmed by the learned CIT – A. During assessment proceedings AO noted that in the course of search action certain slips giving description of jewelry and also the value/amount were seized aggregating to ₹ 1,280,000/–. When questioned, assessee submitted that the above slips are merely estimates and the transactions have never materialised. The AO noted that description of the jewelry on the sale slips do not match with any of the jewelry items found at the time of search action and therefore he made the addition.

105. The matter reached before the learned CIT – A after obtaining the remand report on submission of the assessee as well as the joint of the assessee confirmed the above addition.

106. The learned authorised representative submitted that these are the loose papers which does not have any evidentiary value and are merely estimation. Assessee has never purchase such jewelry. He stated that the assessing officer and stated that assessee might have sold the jewelry to pay of the existing liability. He therefore submitted that addition has been made purely on the guesswork.

107. The learned departmental representative vehemently supported the orders of the lower authority and stated that the assessee is giving contradictory submissions before the lower authorities and therefore the addition deserves to be confirmed.

108. We have carefully considered the rival contention and perused the orders of the lower authorities. The learned assessing officer has categorically noted that page 8 of annexure A – 1 newspaper five pages 1 – 47 papers for seized during the course of search at the office premises of orean enterprise, CSR designers, orion exports and other concerns. The page contains the Notings including the value of jewelry items of ₹ 1,280,000/–. We have carefully perused the above document. On the above document on the upper side the reference of several flight details of four different persons. At the bottom of the page assessee has mentioned as Under:-

“1) Enamel Earrings Pair 4,00,000

2) Dia Bangles 5,00,000

3) Princess Cut stone 1,90,000

4) Emerald Cut 1,90,000 “

109. total of the above four items is ₹ 1,280,000. The learned assessing officer has noted in para number 6.1 that why it should not be treated that these jewelleries are sold to pay off existing liability. On looking at that page, we do not find that there is any description except as mentioned above is available. During the course of search, no such jewelry was found. The seized documents also do not show that assessee has sold such jewelry. There is no other indication available in the seized documents that assessee has purchased such jewelry during the year. In view of this we do not find any reason to uphold the addition of ₹ 1,280,000 in the hence of the assessee u/s 69B of the act. Accordingly ground number 3 of the appeal is allowed.

110. Ground number 4 is with respect to the addition of ₹ 383,000 u/s 69B on the basis of the Notings in the seized material. During the course of assessment proceedings the learned assessing officer observed that certain documents having Notings of purchases/remaking of jewelry were seized. Assessee could not explain the Notings with evidences and therefore this was added as income of the assessee.

111. On appeal before the learned CIT – A, the submissions of the assessee, remand report of the AO and rejoinder of the assessee was considered and the addition was confirmed.

112. Learned authorised representative reiterated the submissions made before the lower authorities. The learned departmental representative supported the order of the learned CIT – A.

113. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that seized documents shows that there are Notings of making charges of ₹ 22,000 and also cost of stone emerald of ₹ 107,000/–. This fact was not denied by the assessee before the lower authorities or before us. In view of this we dismiss ground number 4 of appeal.

114. Ground number 4 is with respect to the addition of ₹ 1,236,900 u/s 69B of the act. The fact shows that ₹ 9.55 lakhs were added by the learned assessing officer u/s 69B on the basis of inventory of expensive watches and electronic item is made at the time of search. Further in addition of ₹ 281,000 was also made on the basis of inventory of luxurious purses at the time of search. Therefore the addition of ₹ 1,236,900/– was made. Before the assessing officer assessee contested that the valuation is on higher side and further certain watches are received as gift and therefore could not have been added to the income of the assessee.

115. When the matter reached before the learned CIT – A, he considered the submission of the assessee, obtained remand report of the learned AO, and rejoinder of the assessee. He held that the claim of the assessee that the above expensive watches, electronic items and luxury purses have been received as a gift from her clients and friends without any evidences. No such evidences were placed before us. It is also unlikely that the assessee will get gift of Rolex watch or Omega watch. . The assessee has not also cared to give evidence of the name and address from whom gifts are received. In view of this we do not find any infirmity in the order of the lower authorities in confirming the addition of ₹ 1,236,000 u/s 69B of the act. Accordingly ground number 5 of the appeal is dismissed.

116. Ground number six is with respect to the addition confirmed by the learned CIT – A of ₹ 1,867,098/– u/s 69B of the act. The facts relating to this ground shows that during the course of search jewelry amounting to ₹ 2,299,004/– was found. The source of such jewelry was questioned. The assessee submitted that these are the gift received at the time of her marriage however did not submit any evidence substantiate the same. Therefore the learned assessing officer granted the benefit of 500 g as per instruction number 1916 and made the addition of the balance sum of ₹ 1,867,098/– as unexplained income u/s 69B.

117. The matter was agitated before the learned CIT – A. The submission of the assessee, remand report of AO and rejoinder of the assessee was considered and thereafter he confirmed the addition of ₹ 1,867,098/–.

118. The learned authorised representative stated that assessee has not purchased above jewelry but has been received by her from various relatives and friends at the time of her marriage and therefore no addition in her hand can be made.

119. The learned departmental representative payment please supported the orders of the lower authorities and referred to the inventory of jewelry found. He submitted that if the assessee has received these items as gift from her friends and relatives at the time of marriage, she should have submitted the confirmation or at least the details from womb these gifts have been received. In absence of this there is no infirmity in the order of the lower authorities.

120. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that jewelry has been found during the course of search from the possession of the assessee. The jewellery was inventorised. The claim of the assessee that this has been received as a gift from relatives and friends is not at all substantiated but merely remained a claim. In view of this we do not find any infirmity in the orders of the learned lower authorities in confirming the addition of ₹ 1,867,098/– u/s 69B of the act after granting benefit of 500 g of gold jewellery to the assessee in terms of CBDT instruction number 1916. Accordingly, ground number 6 of the appeal is dismissed.

121. Ground number 7 is with respect to the confirmation of addition of ₹ 1,976,500/– the facts relating to the above addition so is that on the basis of the inventory of paintings made at the time of search the learned assessing officer observed that the inventory total to ₹ 1,976,500/–. The assessee submitted that most of these paintings were personal paintings made by her and the balance are commercial paintings which have been shown in her books of accounts at the actual cost. The learned assessing officer noted that the number of paintings are commercial paintings and the value adopted by the Department while valuing them is the cost incurred for the paintings. Therefore he made an addition of ₹ 1,976,500/–.

122. When the matter reached before the learned CIT – A the assessee gave a list of 44 paintings and it was stated that the big and small paintings found the assessee’s personal collections and has been made by herself as an artist and muralist by profession. It was also stated that these paintings are not for sale but for assessee’s own use. The other commercial paintings have already been shown in the books of accounts. The learned assessing officer also submitted his remand report where it was confirmed that number of paintings have been made by the assessee herself and the balance paintings are by little-known artists. The learned CIT – A held that as assessee is not in a position to segregate paintings into the paintings made by other painters and her own paintings and therefore he confirmed the addition. He further stated that with respect to the paintings of the other painters the onus is on the assessee to provide the supporting will. Further the paintings made by the assessee should have certain cost which should have been incurred by the assessee. In absence of any such detail there is no infirmity found in the order of the learned AO.

123. The learned authorised representative submitted before us that assessee is by profession and artist and muralist. The paintings inventorise itself shows the name return of the assessee on those paintings. The paintings which are purchased by the assessee are already accounted for in her books of accounts. He therefore submitted that the inventory of the paintings if verified from the physical stock of paintings it would be apparent that no addition is required to be made. He further stated that the paintings in the balance sheet are included in the residential premises cost of the assessee.

124. The learned departmental representative vehemently supported the orders of the lower authorities.

125. We have carefully perused the orders of the lower authorities and the submission made before us. The inventory of the paintings are also produced before us. It is apparent that in most of the paintings the name of artist/painter “Rouble Nagi” is mentioned. It is stated before us that this is the name used by the assessee for her paintings. Most of the other paintings, the name of the artist is unknown. The valuation has been made by the revenue for each of the painting and there is no basis available that how the above paintings have been valued. Naturally if the paintings are made by the assessee herself, it cannot be added in the hence of the assessee u/s 69B of the act. In view of this we set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to segregate each of the painting if made by her. The AO is directed to verify and reduce the addition to that extent. Further, the amount of printing already recorded in the books of accounts of the assessee should also be reduced from un accounted income u/s 69B of the act. The assessee is directed to produce such details before the learned assessing officer, which may be examined and issue may be decided afresh. In the result, ground number 7 is allowed with above directions.

126. Ground number 8 is with respect to the addition of ₹ 6,634,555/– u/s 69B of the act. The fact relating to the above addition shows that certain slips having noting of sale/purchase of jewelry which were seized at the time of search action shows that there is sale and purchase of jewelry. There were such 43 slips. The assessing officer questioned the assessee. The assessee having denied that these are only estimates and have never materialised. The learned assessing officer made an addition for the reason that in some of the slips actual payments are also mentioned. Accordingly the total amount of ₹ 6,634,555/– was added.

127. The matter reached before the learned CIT – A. The remand report on the submission of the assessee and rejoinder of the assessee was obtained. The learned CIT – A noted that in the statement of author recorded at the time of such assessee herself has admitted that the jewelry mentioned in 43 slips are actual purchases. Further some of the jewelry mentioned in the same slip was actually found at the time of search. On some of the slips there is a mention of actual payment. Accordingly the addition was confirmed.

128. The learned and authorised representative submitted that all these loose lips are prepared by the jeweler Anmol Jwellers, turner Road Bandra Mumbai. It was also stated that the above is well is ready to confirm that the jewelry mentioned on loose lips were neither sold to the assessee nor purchased.

129. The learned departmental representative vehemently supported the orders of the lower authorities.

130. We have carefully considered the rival contention as well as perused the orders of the lower authorities. We have also verified annexure A – one wherein 42 small slips in numbers on 19 white sheets was found. On verification of those sheets, it was mentioned on each of them as an estimate. In some of these Sheets there is also the mention of balance payment. There are also references that he folded jewelry is given back there would also be some credit in the name of Mr Sanjay Kumar amounting to ₹ 2 lakhs which is paid by credit card of HDFC bank. Invoice is prepared by Anmol Jwellers. The total transactions recorded in all these jewelry slips is ₹ 6,634,555/–. However at the time of search only jewelry worth ₹ 1,867,098/– was found. There is a wide variance between the jewelry recorded in this slips with the jewelry found during the course of search in possession of the assessee. Looking at the slips, it is apparent that these jewelries are not purchased by the assessee for her own use, otherwise those would have been found at the time of search. Further most of the slips do not bear any date. But it is true that these documents were found during the course of search from possession of the assessee. The claim of the assessee is that all these slips belong to Anmol Jwellers and he would confirm their real nature of the transaction. Despite this statement, the learned AO did not summon Anmol Jwellers. In view of this, we set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to produce Anmol Jwellers before the learned assessing officer and explain the purposes and content of the above slips. Merely stating that these are estimates will not serve the purpose unless, assessee proves the intent and purpose of preparing those estimates as well as the contents of receipt of money. Further assessee is also directed to show how the bill of sanjaykumar which is paid credit card of HDFC bank is found in possession of asseseee where bill is issued by Anmol Jwellers. On furnishing the above details, the learned AO may decide the above issue on its own merits. However when the assessing officer decides that above income is required to be added, then the learned assessing officer may also consider the finding of the learned and CIT – A that some of the items in those bills are also found during the course of search and which have been added in the hands of the assessee u/s 69B of the act. Such addition is deserves to be eliminated as it will amount to double addition. Accordingly ground number 8 of the appeal is set-aside to the file of the learned assessing officer for deciding it afresh. Accordingly this ground is allowed with above direction.

131. Ground number 9 is with respect to the disallowance of expenditure to the extent of 25%. The assessee has incurred total expenditure of ₹ 1,829,201/– the learned assessing officer disallowed 25% thereof amounting to ₹ 4,57,300/–. The learned CIT – A also confirmed the same.

132. Both the parties submitted that this is identical to the ground decided in the case of the assessee for assessment year 2008 – 09.

133. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that we have already decided this issue in assessee’s own case for assessment year 2008 – 09 wherein we have directed the learned assessing officer to restrict the disallowance of expenditure to the extent of only 10%. The learned that AO is further directed to not to disallow any portion of depreciation allowance as well as motor car interest expenditure. In the result ground number 9 of the appeal is allowed.

134. In the result ITA number 6835/M/2019 four assessment year 2009 – 10 filed by the assessee is partly allowed.

Order pronounced in the open court on 31.05.2022.