Case Law Details
DCIT Vs Raja Sundaram (ITAT Chennai)
ITAT Chennai held that addition as unexplained investment for quantity of jewellery within the permissible limits as per CBDT instruction no. 1916 dated 11.05.1994 is unsustainable.
Facts-
Revenue has preferred the present appeal protesting deletion of addition of Rs. 7.67 lacs which represented unexplained investment in jewellery. As per valuation report, gold jewellery of 815.10 grams and 19.41 carats of diamonds worth Rs.29.24 Lacs was found. Most of the jewellery was stated to be gifted by assessee’s father on the occasion of marriage in the year 2000 as streedhan and the balance was stated to be received in gift on occasion of family functions.
Conclusion-
It could be seen that Ld. AO has granted concession as per CBDT Instruction No.1916 dated 11.05.1994 but it failed to give applicable concession for minor son and daughter. If further quantities for minor son and daughter are considered, nothing would remain to be added since the quantity of jewellery fall within the permissible limits. Another fact to be noted is that the assessee has also discharged the onus of establishing the source of jewellery. Accordingly, the impugned additions have rightly been deleted by Ld. CIT(A). The ground raised by the revenue stand dismissed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
Manoj Kumar Aggarwal (Accountant Member)
1. The facts as well as issues in both the appeal of the department for Assessment Year (AY) 2016-17 are same. The impugned orders have been passed by learned Commissioner of Income Tax (Appeals)- 18, Chennai [CIT(A)] on 18.10.2018. The grounds raised by the revenue in ITA No.3085/Chny/2018 read as under: –
1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.
2. The learned CIT(A) erred in directing the AO to delete the addition undisclosed income amounting to Rs.2,42,29,375/-.
2.1 The learned CIT(A) ought to have appreciated the fact that the addition was based on the sworn statement recorded from the assessee’s brother, Shri. Murugu Sundaram u/s.132(4) on 06.07.2015, that he alongwith his brother had made payment of Rs.9.44 crores to M/s. BSR Builders, together with cash of Rs. 11.20 crores.
2.2 The learned CIT(A) ought to have appreciated the fact that the assessee had admitted the cash & Cheque components but not disclosed the payments in the form of DD as they were from a totally undisclosed source.
2.3 The learned CIT(A) erred in directing the AO to allow the assessee’s claim without pinpointing the exact entries, even though the assessee did not furnish the details of all the payments but had only submitted the extract of the Balance Sheet and entries in the financials to prove that a payment of Rs.2,50,75,050/- to M/s. BSR Builders were spread over a period of 1.4.2012 to 31.3.2016.
2.4 The learned CIT(A) erred in directing the AO to allow the assessee’s claim even though the retraction statement was made after a considerable period of nearly two years and hence, the retraction statement cannot have any evidentiary value.
2.5 The Id.CIT(A) did not consider the decision of the Hon’ble Chattisgarh Court in the case of ACIT v. Hukum Chand Jain (337 ITR 238) wherein it has held that ‘retraction should be made at the earliest opportunity and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily.’
2.6 The Id.CIT(A) should have considered the decision of the Hon’ble Kerala High Court in the case of CIT v. O. Abdul Razak (350 ITR 71) has held that a self-serving retraction, without anything more cannot dispel statement made under oath under Sec. 132(4).
3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
RELIEF CLAIMED IN APPEAL
The order of the learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.
2. The Ld. CIT-DR advanced arguments supporting the assessment framed by Ld. AO. The Ld. AR, on the other hands, relied on the adjudication of Ld. CIT(A) in the impugned order. Having heard rival submissions, our adjudication would be as under.
Assessment Proceedings
3.1 The assessee being resident individual is stated to be an Oncologist by profession. The assessee and his brother (Dr. Murugu Sundaram) were subjected to search action u/s 132 on 06.07.2015 wherein a statement u/s 132(4) was recorded from the assessee and his brother. The assessee admitted to have earned unaccounted income from freelancing surgeries in earlier years and admitted to have made investment out of such income as his share in a mall being constructed by M/s BSR Builders. The assessee agreed to offer the on-money as undisclosed income and pay due taxes on the same.
3.2 One of the seized documents includes an agreement entered into by the assessee jointly with his brother (Dr. Murugu Sundaram) with M/s BSR Builders. The said agreement contained clauses for payment of on-money of Rs.1 1.2 Crores for purchase of 25% share in the proposed mall in OMR, Thoraipakkam. This was apart from payment in Cheuqe to builders. Accordingly, notice u/s 153A was issued and an assessment was framed for AY 201 6-17 on 31 .12.2017.
3.3 Honoring its statement as given u/s 132(4), the assessee offered undisclosed income of Rs.5.60 Crores in AYs 2013-14 to 201 6-17 and paid due taxes. The returned income was accepted for AYs 2010-11 to 2015-16. For this year, the assessee offered income of Rs.335.39 Lacs which include Rs.50 Lacs which is part of offered undisclosed income of Rs.560 Lacs. However, Ld. AO made further addition of Rs.242.29 Lacs as undisclosed income.
3.4 he addition stem from the statement of Dr. Murugu Sundaram recorded on 06.07.2015 wherein it was stated that on the date of search, sum of Rs.944.14 Lacs was paid jointly in the form of Demand Draft from the year 2012 onwards. The Ld. AO concluded that apart from payment of on-money in cash, an amount of Rs.944.14 Lacs was also paid. The assessee, on the other hand, admitted to have made cheque payment of Rs.459.55 Lacs. The difference in payment value for Rs.484.59 Lacs (Rs.944.14 Lacs – Rs.459.55 Lacs) could not be explained by the assessee and accordingly, half of the same was added to the income of the assessee which resulted into impugned addition of Rs.242.29 Lacs. Similar addition was made in the hands of Joint holder Dr. Murugu Sundaram.
Appellate Proceedings
4.1 The assessee submitted that no amount was paid by way of demand draft and the addition was based on total misconception of facts. The assessee drew attention to subsequent statement given by the brother on 29.12.2017 wherein he clearly explained the modalities of payment of the agreed amount and submitted that the wrong statement given earlier had been retracted.
4.2 Concurring with assessee’s submissions, Ld. CIT(A) deleted the impugned additions by observing as under: –
7.3 This being the case, it is found that the addition undertaken in para 11 of the Asst. order is found to be incorrect. The addition of Rs.2,42,29,375/- has been added as unaccounted and undeclared income without any deliberation on the aspect as to why the said sum is unaccounted. Irrespective of the mode of payment, the AO has to examine as to whether the source for the payment has been disclosed or otherwise for the purpose of income tax. It cannot be relied on a mere statement which was later retracted. More particularly when the original deposition had been retracted, the AO has to cross the barrier and establish that the source of payments towards this sum of Rs.2,42,29,375/- has not been disclosed in the financials or in the books of accounts of the assessee. The AO had failed to undertake this essential process of investigation to ascertain the fact and has made a huge addition without proper verification of facts and without deliberating the evidences produced by the applicant and countering the same.
7.4 On the contrary, the appellant was able to prove that this payment to M/s BSR Builders over and above the cash payment has been undertaken through banking channels. The extract of the balance sheet and the entries in the financials clearly prove that the payments spread over a period from 1.4.2012 to 31.3.2016 being a sum of Rs.2,50,75,050/- which includes registration charges of Rs,18,38,200/- paid to M/s BSR Builders have been accounted for the purpose of income tax. The AO failed to examine the balance sheet filed along with the returns of income and satisfy himself about the nature and characteristic of the payment. The AO has rather made an addition without any basis and therefore the same is directed to be deleted. Accordingly, this ground of appeal is allowed.
Aggrieved, the revenue is in further appeal before us.
Our findings and Adjudication
5. From the facts, it emerges that the assessee and his brother Dr. Murugu Sundaram were subjected to search action u/s 132 on 06.07.2015 and statement u/s 132(4) was recorded from both of them. One of the seized documents includes an agreement entered into by the assessee jointly with his brother with M/s BSR Builders for purchase of 25% share in the proposed mall in OMR, Thoraipakkam. As per the agreement, the assessee has his brother agreed to pay on-money of Rs.1 1.20 Crores to the builders. This was apart from payment in Cheque to builders. Accepting the same, the assessee and his brother offered unaccounted income of Rs.5.60 Crores each and declared this income in the returns of income for various years. It could thus be seen that whatever on-money was mentioned in the agreement, the same was admitted as well as honored by the assessee and his brother and due taxes were paid on the same. According to terms of the agreement, no other on-money was to be paid. The payment made through cheques has obviously been paid through banking channels and the payment so made could not be held to be unaccounted money. There is no such allegation by Ld. AO also that the money paid through banking channel is out of undisclosed sources.
6. We find that the impugned addition stem from the observation of Ld. AO that there were inconsistencies in the payment made through demand drafts. The assessee admitted to have paid Rs.459.55 Lacs through cheques till the date of search. Dr. Murugu Sundaram admitted to have paid amount of Rs.944.14 Lacs through demand drafts. Accordingly, the difference of the two i.e., Rs.484.59 Lacs was further added as undisclosed income of the two brothers. However, the statement made by the brother is stated to have been retracted on 12.2017 wherein the brother clearly explained the modalities of the payments of the agreement amount. It could also be seen that except for retracted statement of brother, there is not material before Ld. AO to support this addition. No independent investigation is shown to have been carried out to bring on record any concrete material to show that further money flowed to M/s BSR Builders apart from the amounts mentioned in the agreement.
7. The reply to Question No.6 as given by the assessee was as follows: –
Q. No.6 During the course of search proceedings conducted at the First Floor, No.49/20, Perianna Maistry Street, Periamedu, Chennai – 600 003 some loose sheets were found and seized vide ANN/KVK/SPS/LS/S-1 (pages 1-22) in which BSR Builder Engineers and Contractors received a sum of Rs.1 1.20 Crores from you and your brother Mr. Murugu Sundaram from July 2012 to May 2015. Please explain for what purpose it has to be given?
Ans. I along with my brother Dr. S. Murugusundaram purchased a property with equal share from BSR Builders, Engineers and Contractors admeasuring UDS share about 9191 Sq. Ft. at Okkiam, Thoraipakkam, OMR Road, Chennai for a sum of Rs.4,59,55,000/- by way of cheque. Apart from the cheque payment, we paid a cash portion of Rs.1 1.20 Crores to BSR Builders on various dates, for which the receipts were given by BSR Builders.
From the statement, it is quite clear that the assessee and his brother agreed to purchase the property for a sum of Rs.459.55 Lacs by way of cheque. Apart from Cheque payment, cash payment of Rs.1 1.20 Crores was paid. The payment made by Dr. Murugu Sundaram has been clarified by him in reply to question no.5 in subsequent statement recorded from him on 27.12.2017 as under: –
Ans. I submit that apart from cash component of Rs.5.60 Crores paid to BSR, the balance amount was paid only way of cheques. I shall furnish details of cheque payments
The same has further been clarified in statement dated 28.12.2017 as under: –
Q.No.4 Kindly tell ask how much payment you are supposed to make to M/s BSR builders for the purchase of part of the portion in the BSR OMR mall? in the F.Y.2015-16 and 14-15 how much payment you have made through cheque. Also how much you have paid in cheque till date.
Ans. The agreed portion of the total payment to BSR for the purchase of our share of the property in BSR OMR mall is Rs.8,17,33,509/- (for both). In the F.Y.2014-15 the payment made by cheque by each of us is Rs.1,32,57,500/- in F.Y. 2015-16 relevant to A.Y.16-17, no payment was made. Total payment till date by Cheque is Rs.3,47,27,500/- for myself and Rs.3,57,27,500/- for my brother Dr. Raja Sundaram thus totalling to Rs.7,04,55,000/-.
Q. No.5 During the search action u/s 132 of the I.T. Act, you have deposed in the sworn statement recorded on 06.07.2015 that you and your brother together paid Rs.9,44,40,475/- in the form of demand draft from the year 2012 onwards. kindly explain
Ans. In this regard I submit that the total price to be paid to M/s BSR was under negotiation at that time. I had not stated the revised cost arrived at after negotiations. The total consideration after negotiation with BSR was fixed at Rs.19,37,33,509/- as against the amount stated in the statement dated 06.07.2015. Due to this reduced amount, the payment by Cheque was finally accepted at Rs.8,1 7,33,509/-. The total area purchased was 27,421 Sq. Ft. for which the original cost per Sq. Ft. was Rs.7,527/- which was negotiated to Rs.7065/- per Sq. Ft. This rate is inclusive of the cash portion to be paid. Further I state that as there was a cash portion to be paid out of the total consideration accepted, I could negotiate and pay the balance amount.
The above clarification makes it clear that besides cash payment of Rs.1 1.20 Crores, there was no other unaccounted payment by the assessee or his brother. There was no payment through demand drafts. The payment through Cheques, as already noted, was duly accounted for and there is no allegation that the same were sourced out of unaccounted sources.
8. Therefore, in the background of above facts, the impugned order could not be faulted with. The impugned additions have rightly been deleted by Ld. CIT(A) in the impugned order. The appeal stands dismissed.
Appeal of Dr. Murugu Sundaram, ITA No.3086/Chny/2018
9. This assessee has been assessed in similar manner on 31 .12.2017. The Ld. AO made further addition of Rs.242.29 Lacs on similar lines which was deleted by Ld. CIT(A). Aggrieved, the revenue is in further appeal before us. Facts being pari-materia the same as in ITA No.3085/Chny/201 8, our adjudication therein would mutatis mutandis apply to this appeal also. The ground urged by the revenue stand dismissed.
10. The other ground in the appeal is deletion of addition of Rs.7.67 Lacs which represent unexplained investment in Jewellery. As per valuation report, gold jewellery of 815.10 grams and 19.41 carats of diamonds worth Rs.29.24 Lacs was found. Most of the jewellery was stated to be gifted by assessee’s father on the occasion of marriage in the year 2000 as streedhan and the balance was stated to be received in gift on occasion of family functions. In support, the assessee filed affidavit of father-in-law and relied on Board’s Instructions Nos.1916 dated 11.05.1994 which provide concession of 500 grams gold jewellery to married lady, 250 grams to unmarried lady and 100 grams to male member of the family. Thus, the assessee submitted that jewellery of 815 grams could reasonably be expected to be in the possession of the household. The Ld. AO, granting concession of 500 gram for assessee’s wife as well as 100 grams concession for the assessee, added the balance amount of Rs.7.67 Lacs to the income of the assessee. The Ld. CIT(A) noted that AO did not gave benefit for assessee’s minor son and daughter. After giving further concession of 350 grams, the impugned addition was deleted. Aggrieved, the revenue is in further appeal before us.
11. It could be seen that Ld. AO has granted concession as per CBDT Instruction No.1916 dated 11.05.1994 but it failed to give applicable concession for minor son and daughter. If further quantities for minor son and daughter are considered, nothing would remain to be added since the quantity of jewellery fall within the permissible limits. Another fact to be noted is that the assessee has also discharged the onus of establishing the source of jewellery. Accordingly, the impugned additions have rightly been deleted by Ld. CIT(A). The ground raised by the revenue stand dismissed.
Conclusion
12. Both the appeal stand dismissed.
Order pronounced on 02nd November, 2022.
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