2014 (8) TMI 757 - AT - Income Tax

Assessment made u/s 143(3) r.w. Section 153A Income from salary as well as commission earned from pearls business Failure to furnish name/address of any other firm on whose behalf commission business in pearls was claimed - Held that - Following the decision in Anil Kumar Bhatia 2012 (8) TMI 368 - DELHI HIGH COURT - determination of income in the orders passed in terms of S.153A would be similar to the orders passed in any re-assessment, where the total income determined in the original assessment order and the income that escaped are clubbed together and assessed as total income - As for the quantum of additions sustained by the CIT(A), as for the air-fares, it is based on the fares of the relevant time, the CIT(A) found no justification to tinker with the additions made by the AO on that count - there is no justification for any further relief from out of the additions sustained by the CIT(A) on account of daily expenditure incurred by the assessee for the days spent abroad in each of these years the order of the CIT(A) is upheld and the grounds of the assessee on the issue of unexplained expenditure incurred on foreign trips are rejected. Addition of unexplained investment in property Held that - There is no evidence as to the person in whose hands the unexplained investment was assessed on substantive basis, the CIT(A) treated the protective addition made in the hands of the assessee, as a substantive one - It is settled principle of law that any income has to be assessed in the hands of right person - the land on which the building was constructed as in the name of assessee s mother, right person to be assessed in respect of unexplained investment in the construction, was assessee s mother and not the assessee, and it on this ground only that the AO, has made only protective addition in the assessment of the assessee - merely because the assessee is in exclusive possession and enjoyment of the property, it cannot be said that he is the person in whose hands substantive addition is due - on purchase bills and other papers, often, for the convenience of delivery of material, easy identification etc., instead of exposing the woman, names of head of family or other prominent male members of the family are mentioned. Revenue has not brought on record any clinching evidence, to conclude that the unexplained investment has indeed been made by the assessee only - the view taken by the CIT(A) cannot be upheld in treating the addition made on protective basis by the AO into a substantive one and in confirming the same - If at all, any addition on account of unexplained investment is warranted, it would lie in the assessment of assessee s mother, who is the actual owner of the land and the constructed property, and not in the hands of the assessee Decided in favour of Assessee.

Summary

Issues Involved:
1. Unexplained expenditure on foreign travel.
2. Unexplained investment in property.

Detailed Analysis:

1. Unexplained Expenditure on Foreign Travel:
The assessee, an individual earning income from salary and commission from pearls business, was subjected to a search and seizure operation on 29.4.2008. Following this, assessments were made under S.143(3) read with S.153A for the assessment years 2003-04 to 2008-09 and under S.143(3) for the assessment year 2009-10. The Assessing Officer (AO) noted that the assessee made numerous visits to China and Hongkong for business purposes. The assessee claimed that these trips were funded by companies in Mumbai and Jaipur, but failed to provide substantial evidence. The AO, finding inconsistencies in the ledger accounts and lack of corroborative evidence, estimated the unexplained expenditure on foreign travel for the years 2003-04 to 2009-10, totaling amounts ranging from Rs. 5,19,000 to Rs. 7,67,290.

On appeal, the CIT(A) found no merit in the assessee's claim of additional income declaration to buy peace and upheld the AO's estimation of air-fare but reduced the incidental expenditure per day, providing partial relief to the assessee for each year. The assessee further appealed, arguing that no estimated addition should be made in the absence of incriminating material found during the search. The tribunal upheld the CIT(A)'s decision, finding the relief granted reasonable and rejecting the grounds of the assessee on this issue.

2. Unexplained Investment in Property:
For the assessment year 2008-09, an issue arose regarding an addition of Rs. 74,22,385 on account of unexplained investment in a property. The property in question, located at 21-3-75, Chelapura, Hyderabad, belonged to the assessee's mother, with the construction cost declared in her return. The AO, based on a valuation report and certain bills found in the name of the assessee, concluded there was unexplained investment and made an addition on a protective basis in the hands of the assessee.

The CIT(A) converted this protective addition into a substantive one, citing the absence of evidence of assessment on a substantive basis in any other person's hands and the factual aspects indicating the assessee's possession and enjoyment of the property. The assessee appealed, arguing that the addition should be in the assessment of the mother, the property owner, and not the assessee.

The tribunal agreed with the assessee, stating that the right person to be assessed for unexplained investment is the mother, as the property is in her name. The tribunal noted that the protective addition should remain until the substantive assessment of the mother is resolved. The tribunal found no clinching evidence to conclude that the unexplained investment was made by the assessee and allowed the appeal on this issue.

Conclusion:
The tribunal dismissed the appeals related to unexplained expenditure on foreign travel, upholding the CIT(A)'s partial relief and the AO's estimations. However, the tribunal allowed the appeal concerning unexplained investment in property for the assessment year 2008-09, directing that any addition should be made in the assessment of the assessee's mother, the property owner.