Case Law Details
Brief of the Case
ITAT Kolkata held In case of ACIT vs. M/s Prem Lal Jain that no addition could be made u/s 69 as the entire investments in shares made by the assessee have been duly recorded in the books of accounts of the assessee which are part of the seized documents and sources for the same are also explained from the same seized documents. In the given case business income from the proprietary concern M/s Jain Finance Corporation has been accepted by the AO and hence there is no need to dispute the various investments recorded in the books of accounts of the said proprietary concern. AO had not properly appreciated the contents and explanations of the seized documents in proper perspective. In view of these facts and circumstances, we hold that the sources for investments in shares are explained by the assessee beyond doubt.
Facts of the Case
Addition on account of unexplained investment
The assessee is an individual and was subjected to search and seizure operation in his residential and business premises on 26.7.1994. There was a family partition on 25.1.1991, partition deed of which was found in the course of search of the assessee’s premises. This fact was duly accepted by the department as mentioned in assessment order for Asst Year 1995-96 wherein it was also mentioned that the assessee received the business of M/s Jain Finance Corporation (JFC) in family partition which had substantial capital investment of its own. Accordingly, the assessee became the proprietor of JFC pursuant to partition. Initially the assessee was of the opinion that the said income from JFC would be taxed only in h is HUF capacity and not as Individual. Later on he agreed to the correct position of law and accepted to the fact that the income from JFC shall be taxable only in his Individual capacity. M/s Jain Finance Corporation is engaged in the business of providing finance or hire purchase transactions in relation to automobile industry.
The assessee claimed that the capital at the beginning of the Asst Year 1992-93 came from the partition and the same was recorded in the regular books of account related to Asst Year 1992-93 to Asst Year 1995-96 of JFC, which were seized in the course of search. The said capital was not accepted by the AO in the assessment proceedings. The Learned AO made an addition of Rs. 1,95,93,435/- on account of unexplained investment in shares and share application money during the assessment year under appeal. This addition was primarily made based on the seized document.
Addition on account of unexplained expense
The AO found during the course of search that an amount of Rs. 47,063/- was paid to M/s Air Construction and Consultants Pvt Ltd for extra work in the flat at No. 24/1, Ballygunge Circular Road, Kolkata. The Learned AO found that this seized document was found in the premises of the assessee and hence added the same u/s 69C.
Contention of the Assessee
The ld. counsel for the assessee submitted that the entire investments in shares were duly accounted in the books of JFC and which is also reflected in the cash book, bank statements and journal vide seized document. He further argued that the AO despite being given another opportunity to examine the seized documents during remand proceedings arrived at the same conclusion even after verification of the relevant seized documents which are quite staring and conclusive that the entire investments in shares have been duly accounted in the books of JFC.
He further submitted that the entire assessment has been approached by the AO with a preconceived notion to make an addition somehow or other which only reflects the total biased and prejudicial approach of the Learned AO.
Contention of the Revenue
The ld counsel of the revenue supported the order of the AO.
Held by CIT (A)
Addition on account of unexplained investment
The CIT (A) deleted this addition appreciating the contentions of the assessee that the entire investment in shares have been duly accounted for in the books of Jain Finance Corporation which is also part of the seized records and which was also verified by the Learned AO in remand proceedings.
Addition on account of unexplained expense
It was submitted by the assessee that the payment of Rs. 47,063/- was made by M/s Air Construction and Consultants Pvt Ltd for extra work done on second floor of the flat situated at No. 24/1, Ballygunge Circular Road, Kolkata which belonged to Pinku Sonu Investment Pvt Ltd who were owners of the said premises and argued that this expenditure does not belong to him. Accordingly, the CIT (A) deleted the addition.
Held by ITAT
Addition on account of unexplained investment
CIT (A) held that the monies which were deposited in the bank accounts came from his business of financing in vehicles on hire purchase basis and that the impugned investments were duly recorded in the books of accounts of the assessee, the impugned addition u/s. 69 made by the AO is found to be unjustified and deserves to be deleted. We find that the Learned DR did not controvert any of the findings recorded by the CIT (A) in his order before us.
We hold that the AO had not properly appreciated the contents and explanations of the seized documents in proper perspective and resorted to repeat the same addition as was made in the first round of proceedings. In view of these facts and circumstances, we hold that the sources for investments in shares are explained by the assessee beyond doubt. We are in agreement with the arguments of the Learned AR that the business income from the said proprietary concern M/s Jain Finance Corporation has been accepted by the AO and hence there is no need to dispute the various investments recorded in the books of accounts of the said proprietary concern.
We also hold that no addition could be made u/s 69 as the entire investments in shares made by the assessee have been duly recorded in the books of accounts of the assessee which are part of the seized documents and sources for the same are also explained from the same seized documents and hence we do not find any infirmity in the order of the CIT (A) in this regard. Accordingly, the ground no.1 raised by the revenue is dismissed.
Addition on account of unexplained expense
We find that the CIT (A) had only deleted this addition on the plea that the subject mentioned flat does not belong to assessee but belongs to Pinku Sonu Investment Pvt Ltd. We find that while deciding the ground no. 3 hereinabove, we have held that this flat belongs to the assessee and the sources for the same have been duly reflected in the accounts of M/s Jain Finance Corporation, a proprietary concern of the assessee and hence there is no scope for making any addition.
We find that the CIT (A) had proceeded to grant relief to to the assessee on mistaken understanding of facts. Since the seized document was found in the premises of the assessee, it is for the assessee to explain the same with satisfactory explanation. We find no satisfactory explanation for incurrence of this expenditure of Rs. 47,063/- was given by the assessee. Accordingly, this ground raised by the revenue is allowed.
Accordingly appeal of the revenue partly allowed.
