2012 (10) TMI 213 - AT - Income Tax

Non giving reasonable opportunity to the assessee by the AO - Undisclosed income - search and seizure - Held that - Though AO issued 3 to 4 show cause notices one after another without giving sufficient time to the assessee to file the necessary details, however, when the CIT(A) issued a remand order and the assessee was given another opportunity to file all the details and evidence as well as defend the case during the remand proceedings, then the said grievance of the assessee against the AO is no more exist. Accordingly, no substance or merit in the ground of the assessee and the same is dismissed - against assessee. Unexplained investment in paintings - Holding the assessee as Trader in paintings - Held that - For AY 2003-04 only part payment was shown to be made as per the invoices seized during the search operation and despite the opportunities given by the CIT(A), the assessee failed to furnish any evidence to show that the balance payment was made by the ultimate purchaser and the company has received the commission income. The addition has not made solely on the ground that the assessee purchased and owned these paintings, but it was made on the ground that only part payment has been shown in the invoices, which are in the name of the assessee and therefore, the balance payment was made through hawala route - against assessee. Trader in paintings - For AY 2009-09 find force and merit on the point that some of the paintings belong to the company and written off because of low/commercial value, if the said claim of the assessee is supported by the relevant record. Both AO and CIT(A) have not examined the said factual claim of the assessee and rejected the same on technical grounds that the assessee did not declare the same at the time of search, thus set aside the issue of addition on account of unexplained investment in paintings for the assessment year 2008 09 to the record of AO to reconsider it afresh as assessee is at liberty to produce any evidence with regard to the valuation of the paintings - in favour of assessee for statistical purposes. Addition on account of low drawings - unexplained expenditure on account of personal household expenses under section 69C - Held that - the issue requires a proper verification and examination at the level of AO - Also as regards the estimate of personal expenditure at Rs.40,000/- to Rs. 50,000/- per month by the CIT(A) the assessee is directed to produce the electricity bill and telephone bills for the relevant period before the AO in this respect. Unexplained source for purchase of land - Held that - AO has made an addition of Rs. 4 lakhs as unexplained investment whereas in view of the new facts brought out by the assessee that the actual consideration paid for purchase of land is Rs. 15 lakh, the issue requires to be considered afresh. As that the issue was not properly verified by the authorities below and decided the same summarily accordingly the issue remitted back to AO for deciding the same after considering all the relevant facts and material. Unexplained increase in the capital account - addition on account of opening capital balance - Personal effect - Held that - it is clear from the order of CIT(A) that the explanation of purchase and sale was rejected without examining the correctness of the same. Therefore, the issue is required to be examined on the point of correctness of the factual aspect as claimed by the assessee. Cash found in the locker - Held that - It is clear from the record that the assessee never took this plea that the locker of HDFC Bank belongs to the company and not to the assessee. Even no record was filed to show this fact. Therefore, this fresh plea cannot be accepted without investigation of facts. Hence, no entertainment of this fact at this stage is required. In the absence of any material to show the availability of the funds to correlated with the cash found in the locker, no merit in the grounds of the assessee hence the same is dismissed - against assessee.

Issues Involved:
1. Reasonable Opportunity to Assessee
2. Classification as Trader in Paintings
3. Addition on Account of Low Drawings
4. Unexplained Investment in Paintings
5. Unexplained Source for Purchase of Land
6. Addition on Account of Opening Capital Balance
7. Unexplained Cash Found in Locker

Issue-wise Analysis:

1. Reasonable Opportunity to Assessee:
The assessee claimed that the assessment was completed in haste without proper opportunity to rebut the allegations made in the show cause notices. The Assessing Officer issued multiple show cause notices within a short span, and the assessment was completed on 30th November 2009. The CIT(A) called for a remand report and provided an opportunity for the assessee to present details and evidence. The Tribunal held that since the CIT(A) provided an opportunity during the remand proceedings, the grievance against the Assessing Officer no longer existed, and the ground was dismissed.

2. Classification as Trader in Paintings:
This issue was deferred to be dealt with along with another related issue for the assessment year 2007-08.

3. Addition on Account of Low Drawings:
The Assessing Officer added amounts for unexplained personal household expenses under Section 69C due to no cash withdrawals for personal expenses. The CIT(A) sustained the addition based on the social status of the assessee. The Tribunal noted that the addition was not based on any incriminating material found during the search and required proper verification. The issue was remanded back to the Assessing Officer for fresh consideration, except for the assessment year 2008-09, where the addition was deleted by the CIT(A).

4. Unexplained Investment in Paintings:
For the assessment year 2003-04, the Assessing Officer added Rs. 14,62,500/- as unexplained investment in paintings. The CIT(A) confirmed the addition, noting that the assessee failed to provide corroborative evidence of payments made by prospective buyers. For the assessment year 2008-09, the Assessing Officer added Rs. 29,14,500/- for 44 paintings found during the search, valued by experts. The CIT(A) confirmed the addition, rejecting the assessee's claims of gifts and low commercial value. The Tribunal remanded the issue back to the Assessing Officer for fresh consideration, allowing the assessee to produce relevant evidence.

5. Unexplained Source for Purchase of Land:
The Assessing Officer added Rs. 4 lakhs for unexplained investment in land at Murud. The CIT(A) confirmed the addition, noting discrepancies in the assessee's explanation. The Tribunal remanded the issue back to the Assessing Officer for fresh verification, considering the new facts brought by the assessee.

6. Addition on Account of Opening Capital Balance:
The Assessing Officer added Rs. 60,15,000/- as unexplained increase in the capital account, rejecting the assessee's claim of tax-free receipts from the sale of paintings. The CIT(A) confirmed the addition, noting inconsistencies in the assessee's explanations. The Tribunal remanded the issue back to the Assessing Officer for fresh consideration, emphasizing the need for proper verification of the factual aspects.

7. Unexplained Cash Found in Locker:
The Assessing Officer added Rs. 2 lakhs as unexplained cash found in the assessee's locker. The CIT(A) confirmed the addition, rejecting the assessee's explanation of cash availability from drawings and gifts from her mother. The Tribunal did not entertain the fresh plea that the locker belonged to the company and dismissed the ground due to lack of supporting material.

Conclusion:
The appeals filed by the assessee were partly allowed for statistical purposes, with several issues remanded back to the Assessing Officer for fresh consideration and verification. The Tribunal emphasized the need for proper evidence and verification in deciding the issues related to unexplained investments and additions.

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