2015 (12) TMI 117 - HC - Income Tax

Undisclosed investment in Lamorghini Car - addition u/s 69 - ITAT deleted the addition - Held that - Assessee had produced sufficient material to establish that the vehicle had been imported by the Sanjay Bhandari (in the name of VKTT) and evidence was also produced to show payment of the cost of the vehicle. The AO on the other hand, has discovered no evidence or material on the basis of which it could be concluded that the cost of the vehicle and the initial duty had not been paid by Sanjay Bhandari. The assertion that the Letter of Credit had been issued by Oriental Bank of Commerce on 21st December, 2004 and subsequently, the Bank Account of M/s History Logistics had been debited by a sum of ₹ 70,77,773/- towards cost of the vehicle has not been contested by the AO or the CIT(A). Neither the AO nor the CIT(A) has any material to dispute these assertions. In the circumstance, we are inclined to agree with the Tribunal that the question whether an investment had been made or not is a matter of fact and the same cannot be presumed. In the present case, it is probable that either the Assessee or any other person related to the Assessee, would have paid for acquiring the vehicle in question. An investigation into the sources of the funds of Sanjay Bhandari/VKTT may perhaps have established a link between the funds used for the purchase of the vehicle and JCT/Sameer Thapar/the Assessee. However, no such link has been established. In absence of any material to show that the consideration for the vehicle had not been paid by Sanjay Bhandari/M/s History Logistics, it is not possible to conclude that the Assessee had made an investment in purchase of the vehicle in question. - Decided in favour of the Assessee and against the Revenue.

Issues Involved:
1. Interpretation of Section 69 of the Income Tax Act, 1961.
2. Determination of ownership and unexplained investment in a Lamborghini car.
3. Examination of the Tribunal's order for perversity.

Issue-wise Detailed Analysis:

1. Interpretation of Section 69 of the Income Tax Act, 1961:

The court scrutinized whether the Income Tax Appellate Tribunal (ITAT) correctly interpreted Section 69 of the Income Tax Act, 1961. Section 69 pertains to the addition of unexplained investments to an assessee's income if such investments are not recorded in the books of accounts and if the assessee fails to provide a satisfactory explanation regarding the nature and source of the investments. The court emphasized that for Section 69 to apply, three conditions must be met: the assessee must have made an investment, the investment must not be recorded in the books of accounts, and the assessee must fail to provide a satisfactory explanation for the investment.

2. Determination of Ownership and Unexplained Investment in a Lamborghini Car:

The primary controversy revolved around a Lamborghini car used by Mr. Sameer Thapar, a major shareholder of the assessee company. The Revenue contended that the assessee was the de facto owner of the vehicle and sought to tax its value as an unexplained investment under Section 69. The Tribunal, however, found that the assessee was not the registered owner of the vehicle under Section 2(30) of the Motor Vehicles Act, 1988, and there was no material evidence indicating that the assessee paid for the car or that the transaction was benami.

The court examined the facts: the vehicle was imported by Mr. Sanjay Bhandari under the EPCG Scheme and was later seized by the Department of Revenue Intelligence (DRI) for duty violations. The assessee company paid the differential duty, fine, and penalty for the vehicle's release and capitalized these payments in its books. The court noted that the assessee's actions, such as paying the duty and capitalizing the vehicle in its books, contradicted its claim of merely hiring the car for trial purposes.

The court also referred to the Settlement Commission's order, which highlighted deceitful practices in the import of vehicles under the EPCG Scheme. Despite the vehicle being registered at the address of a related entity, the court found no concrete evidence linking the funds used for the car's purchase to the assessee.

3. Examination of the Tribunal's Order for Perversity:

The court assessed whether the Tribunal's order was perverse. It concluded that the Tribunal's decision was not perverse as it was based on the absence of material evidence proving that the assessee made an investment in the vehicle. The Tribunal had accepted the assessee's explanation and the additional evidence provided, which included invoices, letters of credit, and payment proofs indicating that the vehicle was imported and paid for by Mr. Sanjay Bhandari's proprietorship concerns.

Conclusion:

The court held that the threshold condition of the assessee making an investment was not satisfied. The Revenue failed to provide evidence to contradict the assessee's explanation or to establish a link between the funds used for the vehicle and the assessee. Consequently, the court affirmed the Tribunal's decision, answered the questions of law in favor of the assessee, and dismissed the appeal.

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