2018 (2) TMI 2083 - AT - Income Tax

Assessment u/s 153A - unexplained credit in HSBC Bank - HELD THAT - In the instant case, the return of income for the AY 2006-07 was filed by the assessee on 31.07.2006 declaring total income - AO completed the assessment u/s 143(3) on 14.07.2008 arriving at the same income as disclosed by the assessee. Department conducted the search and seizure action u/s 132 in the premises of the assessee on 22.02.2011. We find that in the original assessment completed by the AO u/s 143(3) that the assessee filed the details called for. We find of the assessment order passed u/s 153A r.w.s. 143(3) that during the course of assessment proceedings pursuant to search, the AO asked the assessee to produce the bank statement for the year under consideration. It was not seized during the course of search. In Continental Warehousing Corporation 2015 (5) TMI 656 - BOMBAY HIGH COURT it is held that finalized assessment/reassessment shall not abate. Only undisclosed income and undisclosed assets detected during search could be brought to tax in respect of those years. As the assessment for the AY 2006-07 was already finalized by the AO by making the assessment u/s 143(3) dated 14.07.2008, following the above decision of the Hon ble Bombay High Court, we delete the addition confirmed by the Ld. CIT(A). Disallowance u/s 2(22)(e) as deemed dividend - HELD THAT - It is agreement by choice. In the present case it is tinged heavily with personal disputes. In the instant case, the assessee had received Rs.2,50,00,000/- from ISSCPL in which he was having 50% shareholding. Also ISSCPL is not a party to the consent term dated 15.12.2009. The present factual matrix is to tested on the anvil of the aforesaid enunciation of law. Examined on the touch-stone of the afore-noted legal principles, we confirm the order of the Ld. CIT(A) restricting the disallowance u/s 2(22)(e) to the accumulated profit as on 15.12.2009 of Rs.1,66,80,010/-. Unexplained jewellery - streedhan of assessee s wife - Scope of CBDT Instruction No. 1916 of 11.05.1994 - HELD THAT - We are of the considered view that the Ld. CIT(A) has rightly confirmed an addition and deleted the balance addition on the basis of the CBDT Instruction No.1916. We uphold the same. Corporate credit card expenses - allowable business expenses OR personal expenses - HELD THAT - Having perused the relevant materials on record, we agree with the Ld. CIT(A) that the AO has made adhoc addition without bringing out the instances of expenditure which are personal in nature. Since the said expenditure was incurred by the assessee on behalf of the company in which he was the Director, the Ld. CIT(A) has rightly deleted the disallowance made by the AO.

Summary

Issues Involved:
1. Addition of capital gain on account of unexplained credit in HSBC Bank.
2. Disallowance under section 2(22)(e) as deemed dividend.
3. Addition based on loose paper not related to the assessee.
4. Addition of jewelry as undisclosed income.
5. Addition of corporate credit card expenses.

Issue-wise Detailed Analysis:

1. Addition of Capital Gain on Account of Unexplained Credit in HSBC Bank:
The assessee contested the addition of Rs. 29,50,000/- as capital gain on unexplained credit in HSBC Bank, arguing that the amount was received pursuant to a will. The AO found no correlation between the cash credit and the will, as the will was executed years before the deposits. The CIT(A) upheld the AO's decision, citing incriminating materials found during the search. However, the Tribunal, referencing the Continental Warehousing Corporation case, determined that since the addition was not based on seized material or incriminating evidence found during the search, it should be deleted. Thus, the appeal was allowed in favor of the assessee.

2. Disallowance under Section 2(22)(e) as Deemed Dividend:
For AY 2010-11, the AO added Rs. 1,66,80,010/- as deemed dividend received from ISSCPL, where the assessee held a 50% share. The CIT(A) confirmed this addition. The Tribunal upheld the CIT(A)'s decision, stating that the transaction was not a commercial one but personal, and thus fell under deemed dividend provisions. For AY 2011-12, a similar issue arose with an addition of Rs. 28,87,984/-, which the Tribunal also upheld, applying the same reasoning as for AY 2010-11.

3. Addition Based on Loose Paper Not Related to the Assessee:
For AY 2011-12, the AO added Rs. 19,00,000/- based on a loose paper found during the search. The assessee claimed it was related to Islam Gymkhana, not his business. The CIT(A) upheld the AO's decision, but the Tribunal found no correlation between the loose paper and any transaction, criticizing the AO for not conducting further inquiries. The addition was deleted, and the appeal was allowed in favor of the assessee.

4. Addition of Jewelry as Undisclosed Income:
During the search, jewelry worth Rs. 54,96,155/- was found. The AO added this amount as undisclosed income. The CIT(A) confirmed an addition of Rs. 10,85,915/- and deleted the rest, referencing CBDT Instruction No. 1916, which provides guidelines for non-seizure of jewelry. The Tribunal upheld the CIT(A)'s decision, noting that the jewelry was explained as ancestral or received on various occasions, and the assessee was entitled to the benefit of the CBDT instruction.

5. Addition of Corporate Credit Card Expenses:
The AO made an ad-hoc addition of Rs. 1,00,000/- for corporate credit card expenses, assuming personal use. The CIT(A) deleted this addition, stating the AO did not provide specific instances of personal use. The Tribunal agreed with the CIT(A), finding no evidence of personal expenditure and dismissed the Revenue's appeal.

Summary:
The Tribunal allowed the assessee's appeal for AY 2006-07, dismissed the appeal for AY 2010-11, and partly allowed the appeal for AY 2011-12. The Revenue's appeal for AY 2011-12 was dismissed. The Tribunal's decisions were based on the lack of incriminating evidence, proper application of legal principles, and adherence to CBDT instructions.