Case Law Details
Kavita Samtani Vs DCIT (ITAT Jaipur)
In a recent judgment, the Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) quashed additions made by the Assessing Officer (AO) to the declared income of taxpayer Kavita Samtani for the Assessment Year (AY) 2017-18. The ITAT’s order overturns findings upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] in relation to undisclosed transactions and investments, on the grounds of lack of incriminating material.
Case Background
The case centers on undisclosed deposits and investments by Ms. Samtani, which were highlighted during a search and seizure operation conducted on March 29, 2018, at her residence and her husband’s business premises in Bhilwara. The AO raised two key additions based on financial documents recovered during the search.
- Unexplained Cash Deposits: Ms. Samtani had deposited ₹1,22,000 and ₹54,000 on July 8, 2016, and January 7, 2017, respectively, in an account held by M/s Mohan Broker Agency, a business entity associated with her husband, Mr. Deepak Samtani. The AO flagged these as unexplained cash deposits under Section 69 of the Income Tax Act, ultimately adding ₹1,76,000 to her income.
- Undisclosed Property Purchase: A purchase deed dated March 27, 2016, indicated Ms. Samtani’s acquisition of a plot valued at ₹12,20,600 in Suwana. The AO determined that the source of this purchase was insufficiently explained, leading to an additional inclusion of ₹12,20,600 in her income.
Following the search, the AO issued a notice under Section 153A, to which Ms. Samtani responded with a revised income declaration. However, the AO was not satisfied with her explanations for the above transactions, which led to additional scrutiny and the final assessment order.
Arguments Presented
During the ITAT proceedings, Ms. Samtani’s Authorized Representative (AR) challenged the assessment, focusing on the lack of incriminating evidence related to the transactions under dispute. The AR argued that:
- Documented Source of Income: Ms. Samtani’s income tax return for AY 2017-18 showed an income of ₹2,14,000. Her declared sources included business income (₹3,16,800) and other income (₹53,537). Her AR contended that given her historical earnings, the amounts in question were reasonable and explainable.
- Loan from M/s Mohan Broker Agency: Ms. Samtani’s husband confirmed that a sum of ₹5,68,000 was due from his business entity, M/s Mohan Broker Agency, to her as of March 31, 2017. The AR presented a loan confirmation letter to substantiate this transaction, arguing that it accounted for the amounts deposited in Ms. Samtani’s account.
- Documentary Evidence for Property Transaction: The AR pointed out that Ms. Samtani had paid ₹12,28,000 by cheque for the plot purchase, while the AO’s questions related to unexplained cash portions. The AR highlighted her previous years’ savings to show sufficient capacity for these payments, adding that she should not be penalized for an addition of ₹92,700 based solely on cash components in the transaction.
ITAT’s Observations and Ruling
The ITAT panel, after reviewing the documentary evidence and hearing both sides, concluded that the AO’s reliance on documents found in the search did not justify the additions made. The ITAT provided a detailed assessment on each disputed point.
- Unexplained Deposits: The Tribunal noted that the AO had based the additions solely on the deposits observed in M/s Mohan Broker Agency’s account. Since these were duly reflected in the agency’s books and linked to a confirmed loan to Ms. Samtani, the ITAT held that the transactions did not constitute undisclosed income, ruling that the addition of ₹1,76,000 was unsustainable.
- Property Purchase and Cash Transactions: Regarding the property transaction, the ITAT took into account the AR’s submission on Ms. Samtani’s historical income and savings, observing that her financial profile could reasonably support the payment of ₹92,700 in cash. The Tribunal dismissed this addition as well, stating that no further evidence was presented by the AO to substantiate the allegations.
- Procedural Grounds for Appeal: The appellant had also raised procedural issues related to the assessment order, including the absence of a Document Identification Number (DIN) and alleged lapses in digital signatures and necessary approvals. However, the Tribunal chose not to engage with these procedural issues, as the substantive additions had already been set aside on merit.
Outcome of the Appeal
Based on the above findings, the ITAT allowed Ms. Samtani’s appeal and set aside the assessment order for AY 2017-18. In its concluding statement, the Tribunal directed that the file be closed, with orders to place it in the record room.
The case highlights the importance of sufficient evidence when raising additions to income based on search findings, setting a precedent on how entries in related business accounts may impact assessments under Section 69.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The above captioned appeal has been filed by Smt. Kavita Samtani while challenging order passed by ld. CIT(Appeal), relating to Assessment Year 2017-18.
2. Vide impugned order, ld. CIT(Appeal) has upheld assessment order passed, in respect of above said assessment year.
3. The Assessing Officer framed assessment due to the following reasons:
“7. During the course of search at her residence at 29, Sindhu Nagar, Bhilwara and business premises of her Husband Shri Deepak Samtani, seized loose papers as Annexure AS-2, Page No. 15 to 20 and AS Exhibit-6, Page No. 3 to 6 & Page No. 11 to 14. in reply to the same, it was stated that the document Exhibit AS-6, Page No. 11 to 14 are ledger account of M/s Mohan Broker Agency and M/s Hariom Agency and the same are not related to her. However, perusal of these documents reveal that during the F.Y. 2015-16, she had credited a sum of Rs. 54,000/- in the books of M/s Mohan Broker Agency.
Further, as per document Annexure AS, Exhibit-2, Page No. 15 to 20, it is a purchase deed dated 27.03.2016 of Rs. 11,51,000/- (Sub-registrar held the DLC value Rs. 12 lac and levied stamp duty of Rs. 48,000/- + other expenses of Rs. 21,600/-) in regard to a plot at Suwana but she has not disclosed anything in her ITR or in her reply about the source of buying of the said property for an overall consideration of Rs. 12,20,600/-. The entire payment has been made in cash to the vendors Shri Atul Kumar Surana and Smt. Kanta Devi Sadhwani. Considering the same, it is held that assessee has got no explanation regarding the source of this investment of Rs. 12 ,20,600/- Considering the same, an addition u/s 69 is made to the total income of the assessee of Rs. 12 ,20,600/-.Further, the undersigned records his satisfaction that the assessee has concealed her income particulars within the purview of provisions of Sec. 271AAB(1A) for A. Y. 2016-17. Notice u/s 271AAB (1A) r.w.s. 274 is being issued.
The assessee’s A/R simply brushed aside the issue by saying that this is only related to M/s Mohan Broker Agency (a concern of her husband, Shri Deepak Samtani), but ignored this issue that she has credited a sum of Rs. 54000 /- in the said account of her husband but source of which has not been explained. Hence, considering the same as her unexplained investment u/s 69 of the L, T Act, an addition of Rs. 54000 /- is made to the total income for A.Y. 2016-17. Further, the undersigned records his satisfaction that the assessee has concealed her income particulars within the purview of provisions of Sec. 271AAB(1A) for A. Y. 2017-18. Notice u/s 271AAB (1A) r.w.s. 274 is being issued.”
4. Arguments heard. File Perused
5. The assessee had filed his original return of income on 7.10.2017 declaring therein total income of Rs.214800/-. Total income of Rs.214800/-was offered in the valid return of income filed on 21.09.2019 in compliance with notice u/s 153A of the I.T.
6. As noticed above, one addition is to the tune of Rs. 12,70,000/-whereas the other addition is to the tune of Rs. 1,76,000/-. Both have been made, due to undisclosed investments, while resorting to the provisions of section 69 of the Act.
7. As regards first mentioned addition, the Assessing Officer observed that the assessee had purchased a property for a consideration of Rs. 12,48,000/- , from one Kapila Jadra, and further that the assessee made payment of Rs. 12,28,000/- by cheque, but the remaining amount of Rs.20,000/-and a sum of Rs. 92,700/- towards stamp duty, the assessee failed to furnish any explanation.
8. AR for the appellant has contended that in her Income Tax Return filed u/s 139 of the Act, the assessee declared total income of Rs. 2,14,000/-, which consisted of Rs. 3,16,800/- by way of income from business and profession, and Rs. 53,537/- by way of income from other sources. In this regard, reliance has been placed on the table depicting income during the financial years 2012-13, 2013-14 and 2014-15, as available in the written submissions, to contend that the assessee had the capacity to pay of Rs. 92,700/-, and as such said addition deserves to be set aside.
9. As regards the second mentioned addition of Rs. 1,76,000/- once again, same contention has been advanced that having regard to the savings of the last 3 years and income of the assessee as declared in the Income Tax Return for the relevant year, it was not unusual for her to pay of Rs. 1,76,000/-.
10. It may be mentioned here that the Assessing Officer, while going through the record found that the assessee had deposited a sum of Rs. 1,22,000/- and a sum of Rs. 54,000/- on 08.07.2016 and 07.01.2017, respectively, in the account of her husband.
11. The Assessing Officer held that the assessee had failed to explain the source of the said amount of Rs. 1,76,000/-, as she simply pleaded that the ledger account pertained to M/s Mohan Broker Agency.
12. On behalf of the appellant, reliance has been placed at page 9 and 10 of the paper book, which is copy of letter dated 08.12.2019 said to have been submitted by the assessee, by way of reply to the notice dated 07.12.2019 issued by the Assessing Officer.
As per details of loan and advances as on 31.03.2017, Kavita Samtani-appellant was advanced a loan of Rs. 5,68,000/- by M/s Mohan Broker Agency. So, as submitted on behalf of the appellant, her husband had depicted the said credits in books of accounts. Reliance has been placed on confirmation letter issued by her husband- Shri Deepak Samtani on 10.12.2019 (available at page 29 of the paper book).
As per this confirmation, the husband of the assessee confirmed on 10.12.2019 that as on 31.03.2017 a sum of Rs. 5,68,000/- was due to him from Kavita Samtani.
As per para-9 of the reply by the assessee submitted to the Assessing Officer, the assessee had availed of unsecured loan of Rs. 5,68,000/- from M/s Mohan Broker Agency. Available at page 27 and 28 are copies of statement on account of M/s Mohan Broker Agency.
It is true that the Assessing Officer observed that the assessee had deposited a sum of Rs.1,22,000/-and a sum of Rs.54,000/-on 8.7.2016 and 7.1.2017 in the account of M/s Mohan Broker Agency, and credit of Rs.5,68,000/-was also shown by M/s Mohan Broker Agency on 7.1.2017, and the assessee did not disclose in her Income tax return about said transaction, once said credit dated 7.1.2017 had been depicited in said statement of M/s Mohan Broker Agency, and no action was taken as regards the Income tax return furnished by the husband of the appellant in the relevant Assessment Year, it cannot be said that this is a case of discovery of any incriminating material only on search and seizure action on 29.3.2018.
Therefore, this addition of Rs.1,76,000/-made by resorting to provisions of section 69 of the Act deserved to be set aside. We order accordingly.
13. As regards the other addition, the only submission on behalf of the appellant is that having regard to the income declared by the assessee for the year under consideration and income declared in the previous 3 years, it cannot be said that the assessee had not the capacity to make payment of Rs.92,700/-, and as such, this addition deserves to be set aside.
14. It is true that the sale consideration in respect of the immovable property was Rs.12,48,000/-, and the assessee admittedly paid Rs.12,28,000/-by way of cheque. As such, the assessee was required to disclose source of payment of remaining sale consideration and stamp duty charges, total amounting to Rs.92,700/-, as submitted by Learned DR. But having regard to the income of the assessee during the last 3 years, and the income of the year under consideration as shown in the ITR, (as per table available in para 1 of the written submissions under Ground of Appeal No.2), it cannot be said that payment of this much amount remained unexplained.
In view of all this, as is established from the documentary evidence, which was also made available before the Assessing Officer and Learned CIT(A), we find that said addition of Rs.92,700/-also deserves to be set aside. We order accordingly.
15. It may be mentioned here that subsequently, during pendency of the appeal, on behalf of the appellant an application came to be presented with the prayer seeking permission to raise three grounds mentioned therein. First additional ground is that no DIN number having been generated as regards the impugned assessment order, same is nullity being non-est. Second additional ground is that the impugned assessment order has not been digitally signed as per procedure prescribed by CBDT, same is non-est. The third additional ground is that no prior approval, as mandated by section 153D of the Act was obtained and as such the impugned assessent has been framed without any jurisdiction.
In this regard, it may be mentioned that as noticed above, the impugned order passed by Learned CIT(A) and the impugned assessment framed by the Assessing Officer deserve to be set aside, for the abovesaid discussion and reasons, the three additional grounds sought to be raised on behalf of the appellant for academic purposes, are not being taken up,
16. No other argument has been advanced before us.
17. In view of the above findings, the appeal is allowed and as such the impugned order passed by Learned CIT(A) and the impugned assessment framed by the Assessing Officer are hereby set aside.
18. File be consigned to the record room after the needful is done by the office.
Order pronounced in the open court on 23/10/2024.
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