Addition made U/s. 153A merely on the basis of bank pass book are not sustainable

Nanoomal Gupta Vs ACIT (ITAT Agra)

From the assessee’s return of income, the AO observed that the assessee had shown gifts received of Rs.10,00,000/-, i.e., Rs. 5,00,000/- from Kaushalya Devi, New Delhi and Rs.5,00,000/- from Shri Shree Bhagwan, New Delhi. The AO required the assessee to furnish the complete details of the donors, their copies of accounts, date and mode of receipt of the gifts and confirmations and to justify the gifts in terms of the identity of the donors, their creditworthiness and the genuineness of the gifts. However, since as per the assessment order, the required details were not filed, the AO added the entire amount of Rs.10,00,000/- to the income of the assessee as unexplained under section 68 of the IT Act.

Ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in confirming the addition wrongly made under section 153A of the Act, without there being any adverse material on record against the assessee; that since the assessee had no business income, no books of account were maintained and the addition was made only on the basis of the assessee’s pass book, which is not a book of account; that as such, the addition made under section 68 of the Act is not sustainable.

It is undisputed that the addition was made only on the basis of the assessee’s bank pass book, which, is not sustainable in law.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-

I.T.A No. 275/Agra/2013

This is assess appeal for A.Y. 2003-04, raising the following grounds:

“1. Because in any view, the addition made u/s 68 of Rs.10,00,000/- of amount of gifts received (Rs.5,00,000/-+ Rs.5,00,000/-) in the Assessment u/s 153A without having any adverse material, and by not appreciating the evidences on record, the addition confirmed by ld. CIT(A) is grossly unjust, arbitrary, and against the facts and law of the case.

2. Because in any view, the interest charged u/s 234B as per notice of demand is wrong and illegal.”

2. The following additional ground has also been taken:

“3. Because in any view, the addition made by the AO without any incriminating material find during search & survey is wrong & illegal.”

3. The ld. Counsel for the assessee has stated that at the bar that the additional ground is not pressed. Rejected as not pressed.

4. Apropos Ground No. 1, from the assessee’s return of income, the AO observed that the assessee had shown gifts received of Rs.10,00,000/-, i.e., Rs. 5,00,000/- from Kaushalya Devi, New Delhi and Rs.5,00,000/- from Shri Shree Bhagwan, New Delhi. The AO required the assessee to furnish the complete details of the donors, their copies of accounts, date and mode of receipt of the gifts and confirmations and to justify the gifts in terms of the identity of the donors, their creditworthiness and the genuineness of the gifts. However, since as per the assessment order, the required details were not filed, the AO added the entire amount of Rs.10,00,000/- to the income of the assessee as unexplained under section 68 of the IT Act.

5. The ld. CIT(A) confirmed the assessment order.

6. We have heard the parties and have perused the material on record. The ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in confirming the addition wrongly made under section 153A of the Act, without there being any adverse material on record against the assessee; that since the assessee had no business income, no books of account were maintained and the addition was made only on the basis of the assessee’s pass book, which is not a book of account; that as such, the addition made under section 68 of the Act is not sustainable. In this regard, reliance has been placed on the following case laws:

(i) ‘CIT vs. Bhaichand H. Gandhi’, 141 ITR 67 (Bombay)

(ii) ‘CIT vs. Taj Borewells’, 291 ITR 232 (Mad)

(iii) ‘Shri Narendra Kishore Goswami vs. ITO’, order (APB 50/1) of the ITAT, Agra (SMC), passed in ITA No. 249 and 250/Agra/2007, for A.Y. 2003-04.

(vi) ‘ Bhagwati Devi vs. ITO’, 118 Taxation 53 (Trib).

(v) ‘ITO vs. Sanyasi Majhi’, 13 ITD 61 (Cal.).

(vii) ‘Smt. Shanta Devi vs. CIT’, 37 Taxman 104 (P & H)

(vii)  Madhu Raitani vs. ACIT’, 45 SOT 231 (Gauhati) (TM); and

(viii) ‘Harsh Saluja vs. ITO’, an order (APB 62/1-62/8) of the ITAT Agra, (SMC) Bench passed on 01.12.2017, in ITA No.165/Agra/2016, for A.Y. 2011-12.

7. On the other hand, no decision contrary to the above case laws has been cited. It is undisputed that the addition was made only on the basis of the assessee’s bank pass book, which, in accordance with the aforesaid decisions, is not sustainable in law.

8. Therefore, respectfully following the above decisions, Ground No.1 is accepted and the addition is deleted.

9. Ground No.2 is consequential.

10. Hence, the appeal is partly allowed.

I.T.A No. 276/Agra/2013

11. This is assessee’s appeal for A.Y. 2004-05, taking the following grounds:

“1. Because in any view, the addition confirmed of Rs.2,254/-out of addition of Rs. 18,033/- under the head Income from House Property u/s 23(4) is wrong, illegal and against the facts and law of the case.

2. Because in any view, the addition made u/s 68 of Rs.5,00,000/- of amount of gift received in the Assessment u/s 153A without having any adverse material on record, and by not appreciating the evidences, the addition confirmed by ld. CIT(A) is grossly unjust, arbitrary, and against the facts and law of the case.

3. Because in any view, the addition confirmed of Rs.45,000/- w.r.t. tea/sugar business by not properly appreciating that it relates to preceding A.Y. 2003-04 which it has already been shown as income in the relevant Return of Income filed, and even otherwise it will tantamount to double addition, thus the addition made is arbitrary, wrong, and illegal.

4. Because in any view, without prejudice and without admitting the above additions the ld. CIT(A) has erred in not telescoping the addition of income of Rs.45,000/- of above Ground No.3 and income from other source further shown in Return u/s 153A of Rs.2,58,060/-, with addition of investment of Rs.5,00,000/- of Ground No.2 above.

5. Because in any view, the interest charged u/s 234B as per notice of demand is wrong and illegal.”

12. Ground No.4 is stated to be not pressed. Rejected as not pressed.

13. Apropos Ground No.1, the AO observed that the assessee was having several house properties; that the one at B-5, Shanti Kunj, Hathras was self-occupied; that the assessee had purchased another property, a flat at Bankey Bhawan, Hathras for Rs.3,68,025/-; and that no rental income from this flat had been shown. The AO held that in keeping with ‘Radha Devi vs. CIT’, 125 ITR 134 (All), the notional annual value in respect of more than one self-occupied property is to be assessed under section 23(4) of the IT Act, which provision is applicable to the case of the assessee concerning the flat. The AO worked out the notional ALV of the property at Rs.18,033/- and added it to the income of the assessee as income from house property. While doing so, the AO applied ALV @ 7%.

14. Before the ld. CIT(A), the assessee claimed that the flat was vacant and that so, vacancy allowance should have been allowed to him.

15. The ld. CIT(A), sustaining the addition to the extent of Rs.2,254/-, observed that no effort had been made by the assessee to let out the flat.

16. Before us, the ld. Counsel for the assessee has contended that where the assessee has two houses, one is deemed to have been let out. Reliance in this regard has been placed on ‘ Prabha Sanghi vs. Deptt. Of Income Tax’, order (APB 61/1 to 61/12) of the Delhi Bench of the Tribunal, passed in ITA No.2217/Del/2010, for A.Y. 2004-05.

17. The ld. DR, on the other hand, has placed strong reliance on the impugned order.

18. It is seen that the provisions of section 23(4) (b) of the Act stipulate that where the property consists of more than one house, the annual value thereof shall be determine under section 23(1), as if such property had been let out. It has also been so held in ‘ Prabha Sanghi’, (supra). In accordance with the same, the grievance by way of the ground no.1 is accepted. The addition is deleted.

19. The issue in Ground No.2 is the same as that concerning Ground No.1 in ITA No. 275/Agra/2013 (supra). Therefore, our observations with regard to Ground No.1 in ITA No.275/Agra/2013 (supra) are squarely applicable, mutatis mutandis, to the year under consideration also. Therefore, Ground No.2 in the present appeal is accepted and the addition of Rs.5 lacs is deleted.

20. So far as regards Ground No.3, the AO observed that from page 16 of Annexure -2 found during the seasrch, it was seen that the same contained details of sugar business as on 31.03.2005 and earlier years, i.e., A.Y. 2004-05 and 200506 and that the profit of the tea business for A.Y. 2004-05 was Rs.3,03,060/- and that for A.Y. 2005-06 was Rs.2,67,502/-. The AO took the profit from the tea and sugar business of Rs.3,03,060/- and deducted the profit shown by the assessee at Rs.2,58,060/-. The resultant figure of Rs.45,000/- was added.

21. The CIT(A) asked for a remand report from the AO, but none was submitted. The ld. CIT(A) observed from a perusal of the seized document that it had been drawn on 31.03.2005 and as such, it pertains to A.Y. 2005-06; that in this document, profit during the A.Y. 2005-06 had been shown at Rs.2,76,502/- and that for A.Y. 2004-05 was of Rs.3,03,060/-, as ‘Pichhala Labh’. Accordingly, the ld. CIT(A) confirmed the assessment order.

22. As before the Authorities below, the assessee has maintained that no tea and sugar business had been done by the assessee and the amount related to tea and meetha chooran business done by the assessee on behalf of his father; that this business was being done on a very small basis, although it was being done by the family in the name of M/s Gupta Aushadhi Bhandar, Hathras, by the father of the assessee, late Shri Devi Das, who, regularly assessed, had expired on 15.06.2004; that this income had been declared by the assessee as estimated by him in the statement recorded under section 132(4) of the Act, for A.Ys. 2003-04 and 200405; that the nature of the business was that of tea and sugar chooran and not of sugar; that out of Rs.3,03,060/-, as mentioned in the seized document, the assessee had declared Rs.45,000/- for A.Y. 2003-04 and the balance amount of Rs.2,58,060/- for A.Y. 2004-05. The ld. Counsel for the assessee has drawn our attention to the seized document, APB 55, the assessee’s computation of income A.Y. 2004-05, APB 29 and the assessee’s computation of total income for A.Y. 2003-04, APB 60/2. It has been contended that the ld. CIT(A) has sustained this addition by observing that it was not found in the seized document; it has been submitted that however, it should have been allowed in view of the stand taken by the assessee.

23. The ld. DR has placed strong reliance on the impugned order. It has been contended that as available from the assessment order, the business itself had not been disclosed. It has been argued that therefore, the amount was not in the return and it was found during the search.

24. The computation of income, (APB 60/2) for A.Y. 2003-04 shows the amount of Rs.45,000/- to be disclosed as follows:

“Income/investment in tea/sugar business……………………Rs.45,000/-“. The contention that the computation of income for A.Y. 2004-05 shows the investment in tea/sugar business to be of Rs.3,03,060/-. In the seized document (APB 55), the relevant recital is ‘Pichhala Labh’………………………Rs.3,03,060/-. In the computation of income for A.Y.2004-05, the profit shown from the tea/sugar business for A.Y. 2002-03 has been shown at Rs.45,000/-. The figure of Rs.2,58,060/- has been arrived at after reducing this amount of Rs.45,000/-from the amount of Rs.3,03,060/-.

25. In view of the above, we find the observation of the ld. CIT(A) to be correct. The amount of Rs.45,000/- was declared for A.Y. 2003-04. The balance amount of Rs.2,58,060/- was declared for A.Y. 2004-05. In the seized document, the profit for A.Y. 2004-05 stand shown at Rs.2,76,502/-. As such, no set off of the amount of Rs.45,000/- has been given to the assessee for the year under consideration. The amount of Rs.45,000/- was declared for A.Y. 2003-04. Hence, the action of the ld. CIT(A) is correct. Accordingly, Ground No.3 is rejected.

26. Therefore, ITA No.276/Agra/2013 for A.Y. 2004-05 is partly allowed.

I.T.A No. 277/Agra/2013

27. This is assessee’s appeal for A.Y. 2005-06, raising the following grounds:

“1. Because in any view, the addition confirmed by Id. C.I.T.(A) of Rs.18,033/- under the head Income from House Property u/s 23(4) is wrong, illegal and against the facts and law of the case.

2. Because in any view, the addition confirmed of Rs.2,76,502/- w.r.t. tea/ sugar business by not properly appreciating that this in not the profit, but the investment as on 31.03.2005 i.e. A.Y.2005-06 showing loss of Rs.26,558/-, rather after reducing the profit Rs.3,03,060/-relating to preceding year (i.e. Rs.45,000/- of A. Y. 200304 and Rs,2,58,060/- of A. Y. 2004-05) which has already been shown as income in the relevant Return of Income filed, and even otherwise it will tantamount to double addition thus the addition made is arbitrary, wrong, and illegal.”

28. Ground No.1 is similar to Ground No.1 involved in ITA No.275/Agra/2013 (supra), for A.Y. 2003-04. Therefore, our observations therein are, mutatis mutandis, squarely applicable to the year under consideration also. In accordance therewith, Ground No.1 is accepted.

29. The issue in Ground No.2 is the same as that in Ground No.3 for A.Y. 200405, in ITA No.276/Agra/2013 (supra). As rightly contended, for the year under consideration, the figure concerned is that of a loss. The addition of Rs.2,76,502/-is, as such, a double addition, which is not sustainable. The same is, accordingly, deleted.

30. ITA No.277/Agra/2013, for A.Y. 2005-06 is allowed.

I.T.A No. 278/Agra/2013

31. This is assessee’s appeal for A.Y. 2006-07, raising the following grounds:

“1. Because in any view, the addition confirmed by ld. CIT(A) of Rs. 18,033/- under the head income from House Property u/s 23(4) is wrong, illegal and against the facts and law of the case.

2. Because in any view, the addition confirmed by ld. CIT(A) u/s 69C of Rs.1,53,181/- out of addition of Rs. 5,00,000/- made u/s 69 of amount of expenditure for “Goad Bharai Ceremony” is arbitrary, unjust, wrong and illegal.”

32. Ground No.1 is the same as Ground No.1 for A.Y. 2003-04, involved in ITA No. 275/Agra/2013. In accordance with our observations on the issue for that year, Ground No.1 for the present year is accepted.

33. Coming to Ground No.2, the AO made addition of Rs.5 lacs, being unexplained investment in ‘Goad Bharai Ceremony’. It was observed that there was no mention of the expenses on ‘Goad Bharai’, in the details of the surrendered amount of Rs.33 lacs. The ld. CIT(A) found that an amount of Rs.2,88,181/- stood recorded as expenditure on ‘Goad Bharai’, in the seized document, observing that the estimate of Rs.5 lacs, as made by the AO, was without any basis. He, therefore, restricted the amount of addition to this figure of Rs.2,88,181/-.

34. As submitted by the ld. Counsel for the assessee, at APB 32 is a copy of the particulars of the assessee’s income, as per statement under section 132(4) of the IT Act. It shows an amount of Rs.33 lacs as follows:

“Income shown as per statement u/s 132(4) read with  

explanation 5 to section 271(1)(c)

Particulars

Income from seized papers/declared cash at residence Rs.2,00,000/- investment in jewellery Rs.4,00,000/- Expenditure in construction etc. in property at B-5, Shanti Kunj Rs.16,00,000/-, Amount as per Annexure A-2 page 44 dt. 27.02.2006 for property Rs.5,00,000/-, Expenditure in property at Kalwari, Agra Road, Hathras (including Pool/Tank) Rs.4,00,000/- Others Rs.2,00,000/- (including cash of Rs.1lac found in Locker/……………….and other expenditure as per seized papers. (including Tea & Sugar business)

33,00,000/-

Total

33,00,000/-

Note:

In the statement u/s 132(4) during search conducted on 28.02.2006 the expenditure/investment was declared as income and simultaneously under misconception the income of Rs.9,00,000/- from tea & sugar business was also separately declared although it was to be included in the income declared in expenditure/investment and hence this income is not being shown separately.”

35. Thus, there is no contradiction in the submissions on behalf of the assessee. Moreover, no credit for the shagun received by the assessee in the ‘Goad Bharai Ceremony’ has been given. Considering this, the addition is scaled down from Rs.1,53,181/- to Rs.53,181/-. Ground No.2 is, accordingly, partly accepted.

36. Thus, ITA No.278/Agra/2013 for A.Y. 2006-07 is partly allowed.

37. In the result, in ITA No.275/Agra/2013 is partly allowed, ITA No.276/Agra/2013 is partly allowed, ITA No.277/Agra/2013 is allowed and ITA No.278/Agra/2013 is also partly allowed.

Order pronounced in the open court on26/03/2018.