Case Law Details
Madhav Kumar Swarup Vs ACIT (ITAT Delhi)
Introduction: In the case of Madhav Kumar Swarup vs. ACIT, the attribution of credit card expenditure is a central issue. The Assessing Officer (AO) attributed the expenses to the assessee based on the mention of PAN in the credit card transaction. However, the assessee claimed that the credit card did not belong to him. The appeal challenges the addition of Rs. 4,34,168 made by the AO.
Detailed Analysis: The primary contention revolves around the proper attribution of credit card expenses. The AO and CIT(A) relied on the PAN mentioned in the transaction but failed to conduct a thorough inquiry into the ownership and usage of the credit card. The absence of evidence supporting the assessee’s connection with the credit card raises questions about the validity of the attribution.
The bench opines that a mere mention of PAN does not conclusively establish ownership or usage. A more extensive inquiry into the application, issuance, and usage of the credit card is essential. The lack of discussion on evidentiary aspects in the impugned orders underscores the need for a comprehensive examination.
Conclusion: The appeal is allowed, and the impugned orders are set aside. The case is remanded to the Assessing Officer for a fresh determination. A proper inquiry into the ownership and usage of the credit card should be conducted, providing the assessee with an opportunity to present evidence. The attribution of credit card expenses requires a meticulous examination beyond the PAN mention.
Appreciating the matter on record, the bench is of considered opinion that the Ld. AO has attributed the credit card expenditure to assessee while assessee had claimed that card did not belong to him. The Ld. AO and the Ld. CIT(A) have attributed this expenditure to assessee as PAN no. of assessee was mentioned in the use of the credit card. There is no discussion of any evidences in the impugned orders or otherwise on record to show also if the said credit card was otherwise applied, obtained and used by the assessee only. The matter required a more extensive inquiry into aforesaid aspects which seems to be missing. Only due to mention of PAN, the credit or transaction cannot be attributed to any assessee.
FULL TEXT OF THE ORDER OF ITAT DELHI
The assessee has come in appeal against appellate order dated 05.07.2017 in appeal no. 5689-5001 for the assessment year 2009-10 passed by Commissioner of Income Tax (Appeals), Muzaffarnagar (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in appeal before it against assessment order dated 10.11.2016 u/s 143(3) of the income Tax Act, 1961 passed by ACIT, Circle-1, Muzaffarnagar (hereinafter referred to as the Assessing Officer ‘Ld. AO’).
2. The facts in brief are that during the year under hands, the department claimed to be have been in possession of an AIR/CIB information that the assessee has purchased units of mutual funds and paid totaling amount of Rs. 31,00,000/- (Rs. 28,00,000/- + Rs. 3,00,000/-) on his residential address given at 51-A, Friends Colony East, New Delhi. To verify the transaction and source of investment made for purchase of mutual funds, notice u/s 133(6) of the Income tax Act, 1961 was issued on 06.06.2012 to the assessee after taking prior approval from the Commissioner of Income Tax, Muzaffamagar.
2.1 Then during assessment proceedings, the Ld. AO found that the assessee could not explain the source of investment made during the year except Rs. 3,00,000/- out of Rs. 31,00,000/-. The assessee had explained that the investment made whereby wife Smt. Saroj Rani Swarup with her PAN. Ld. AO however observed that assessee had unexplained investment an addition of Rs. 28,00,000/- was made.
2.2 Further Ld. AO observed at page no. 3 “As per AIR information available with the Department, the assessee has made payment of Rs. 4,34,168/- from his credit card during the financial year 2008-09. During the course of assessment proceedings, the assessee has denied any payment from his credit card. As the department is having sufficient reason to believe that the assessee has made payment of Rs. 4,34,168/- through his credit card and the PAN of the assessee was used during the course of payment. No evidence was filed by the assessee in support of his claim. On the basis of material available on record, a sum of Rs. 4,34,168/- is being added to the income of the assessee vide this order on account of unexplained source of payment through credit.” Accordingly, an addition of Rs. 4,34,168/- was made.
2.3 In appeal the ld. CIT(A) had deleted the addition of Rs. 28,00,000/-but sustained the addition of Rs. 4,34,168/-.
4. The assessee has come in appeal raising following grounds :-
“1. That on the facts and in the circumstances of the petitioner’s case, the Learned Commissioner of Income Tax (Appeals) Muzaffar Nagar, (U.P.) erred in law and on facts in upholding the orders of the learned assessing officer in confirming the addition of Rs. 4,34,168/- inspite of the fact that the payment made through credit card of Americal Express Banking Corporation does not belong to the appellant.
2. That the learned assessing officer erred in law in charging interest under section 234A and 234B of the Act.”
5. The case was called for hearing on 26.05.2022 but non-appeared. The record shows earlier also on 07.03.2022, none had appeared. Service report is filed by the department that notices have been served upon the assessee through his accountant and the copy of acknowledgement has been submitted. It appears that assessee is not interested to pursue the matter before the Bench. Therefore, arguments of Ld. DR were heard who supported the findings of ld. First Appellate Authority.
6. Appreciating the matter on record, the bench is of considered opinion that the Ld. AO has attributed the credit card expenditure to assessee while assessee had claimed that card did not belong to him. The Ld. AO and the Ld. CIT(A) have attributed this expenditure to assessee as PAN no. of assessee was mentioned in the use of the credit card. There is no discussion of any evidences in the impugned orders or otherwise on record to show also if the said credit card was otherwise applied, obtained and used by the assessee only. The matter required a more extensive inquiry into aforesaid aspects which seems to be missing. Only due to mention of PAN, the credit or transaction cannot be attributed to any assessee.
7. In the light of aforesaid, the appeal is allowed and impugned orders of Ld Tax Authorities below are set aside. The issue is restored to the files of Ld. AO for afresh determination of the controversy after reasonable inquiry on his part and opportunity of hearing to the assessee, to rebut the evidences, if any collected.
Order pronounced in the open court on 15th June, 2022.
