2014 (10) TMI 144 - AT - Income Tax

Addition u/s 69 - Difference in amount in capital account Investment in house property Held that - The assessee has replied before the AO that the flat was purchased in the A.Y. 1998-99 by Shri Surendra Uppal where she has been living since then and it is seen that at the time of search Sh. Surendera Uppal and the assessee were found living at the same address - the assessee included this amount in the Balance Sheet under the Fixed Assest schedule forming part of the Balance Sheet - this specific addition to Capital was not depicted as addition to capital separately thus, the payment for the flat was made in 1998-99 AY and nothing has been placed by the revenue to controvert these facts Decided against revenue. Unexplained household expenses Held that - The averments made and the findings recorded have not been rebutted by the revenue on facts by any evidence whatsoever - the confirmation by the mother of assessee who was a retired Doctor from Central Government Health Services who also confirms the fact that the daughters of the assessee were residing with her all the expenses for telephone, electricity and household expenses for the assessee were being met by her - The education expenses of the daughters of the assessee it is seen were met by the ex-husband of the assessee and the assessee has placed details of alimony settlement monies given by her ex-husband and his family along with copy of affidavit of the ex-husband - None of these have been rebutted by the Revenue the order of the CIT(A) is upheld Decided against revenue. Unexplained gift - Genuineness of gift Held that - CIT(A) rightly was of the view that the order does not warrant any interference - Copy of the gift deed along with copy of the bank statement of the donor reflecting the gift made by Sh. Surendra Uppal is available - nothing has been placed to controvert the finding that the gift has been made by Shri Surendra Uppal on account of love and affection for the assessee with whom admittedly he was living - The fact that he had been living with the assessee over the years has been admitted by Shri Surendra Uppal in his assessment proceedings over the years prior to the search is available on record - This has not been rebutted by the Revenue the contention of the revenue cannot be accepted that there ought to have been specific reason for making the gift is of no relevance as admittedly the assessee who has received a flat from Shri Surendra Uppal in 1998 which is registered in her name in the year under consideration was offered professional and consultation fees relatively of very small amount for interior decoration and consultancy does not require the existence of any specific occasion for which a gift of ₹ 25 lacs should be made as affection for the assessee over the years is evident on record Decided against revenue.

Issues Involved:
1. Deletion of addition on account of difference in capital account.
2. Deletion of addition on account of unexplained household expenses.
3. Deletion of addition on account of alleged unexplained gift.
4. Quashing of penalty imposed under section 271(1)(c).

Detailed Analysis:

Issue 1: Deletion of Addition on Account of Difference in Capital Account
The Revenue challenged the deletion of Rs. 13,44,000/- added by the AO as unexplained difference in opening capital. The CIT(A) deleted this addition, accepting the assessee's explanation that the flat was purchased in the A.Y. 1998-99 by Shri Surendra Uppal and included in the balance sheet for the year under consideration. The Tribunal upheld the CIT(A)'s decision, noting that the payment for the flat was indeed made in the A.Y. 1998-99 and no evidence was provided by the Revenue to dispute this fact.

Issue 2: Deletion of Addition on Account of Unexplained Household Expenses
The AO added Rs. 1,50,000/- as unexplained household expenses, which was deleted by the CIT(A). The CIT(A) accepted the assessee's claim that her household expenses were met by her mother and her ex-husband. The Tribunal upheld this decision, noting that the confirmations from the mother and ex-husband were not rebutted by the Revenue, and the addition was based on pure estimation without any supporting evidence.

Issue 3: Deletion of Addition on Account of Alleged Unexplained Gift
The AO added Rs. 25,00,000/- as an unexplained gift, which was also deleted by the CIT(A). The CIT(A) accepted the assessee's explanation supported by a gift deed and bank statements showing the gift from Shri Surendra Uppal. The Tribunal upheld the deletion, noting that the gift was made out of love and affection, and the relationship between the assessee and Shri Uppal was well-documented and not disputed by the Revenue.

ITA No. 2317/Del/2011
The same issues were raised for the A.Y. 2005-06, with the AO adding Rs. 3,00,000/- for unexplained household expenses and Rs. 6,20,000/- for an unexplained gift. The CIT(A) deleted both additions, and the Tribunal upheld the deletions, reiterating the reasons provided in the earlier assessment year.

Issue 4: Quashing of Penalty Imposed Under Section 271(1)(c)
The AO imposed penalties under section 271(1)(c) for the A.Y. 2003-04, 2004-05, and 2005-06. The CIT(A) quashed these penalties, noting that the additions in the quantum proceedings were deleted. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's decision in CIT vs. Reliance Petro Products Pvt. Ltd., which held that penalty cannot be imposed if the additions are deleted.

Conclusion:
The Revenue's appeals were dismissed, and the CIT(A)'s orders deleting the additions and quashing the penalties were upheld. The Tribunal found no merit in the Revenue's grounds, as the explanations provided by the assessee were supported by evidence and not rebutted by the Revenue. The cross objections filed by the assessee were dismissed as not pressed.

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