2021 (7) TMI 883 - AT - Income Tax

Unexplained cash - search action at the residence and lockers of the assessee and his wife cash was found from residence and locker at Vijay Bank and at Central Bank of India held jointly by the assessee and his wife - HELD THAT - CIT(A) has recorded the finding of the fact that imprest balance of 5.00 lakhs with Sri Suresh Garg is duly recorded in the combined daybook of M/s MDL and MFL maintained by the cashier which has been seized during the course of the search. This factual finding has not been disputed by the Revenue. The daybook has been maintained in regular course of the business and therefore evidentiary value of the same cannot be ignored. On the date of the search cash in hand in cash book of M/s MFL at Paota Sahib was of 5 40, 401/- whereas physical cash of 1 15 412/- was only found from the factory premises of M/s MFL and M/s MDL. Thus there was a physical shortage of the cash at the premises of the companies. The revenue has not pointed out any other application of the cash which has not been found physically. The assessee has explained transfer of money from Sri Suresh Garg to the assessee by way of supporting evidences - DR has not brought on record any documentary evidence including statements u/s 132(4) of the Act of the assessee or sh Suresh Garg or personals of the company M/s MFL to contradict the claim of the assessee of transfer of money from sh Suresh Garg to the assessee. Similarly regarding the availability of Pin money and savings the assessee has explained with the help of cash flow statement supported by assessment orders of assessee his wife and their HUF copies of their respective balance sheets and their cash withdrawal as reproduced by the Learned CIT(A) in para 4.1(m) of the impugned order. No reason not to accept availability of cash in the hands of the assessee and his wife to explain the cash has been made in the hands of the assessee. - Decided against revenue. Addition of unexplained foreign exchange - CIT-A deleted the addition - HELD THAT - Revenue has failed to point out any error in the finding of the Ld. CIT(A) on the issue in dispute except the issue of the additional evidences which has already been dealt by the Tribunal in order sheet dated 05/10/2009. In our opinion the assessee has discharged his onus of explaining the source of currency found from his premises and the Revenue has not pointed out any fault in the evidences filed by the assessee. In such circumstances we uphold the finding of the ld CIT(A) on the issue of dispute. Addition on account of unexplained investment in the shares - HELD THAT - AO has not attempted to examine the source of investment in the shares of the companies. The Assessing Officer has neither conducted any inquiries form Dr Shamsher Prakash. Before the Ld. CIT(A) the assessee has provided details of source of investment by Dr Shamsher Prakash and thus the assessee has discharged his onus. Thus where source of investment has been duly explained through banking transaction from the account of Sh Shamsher Prakash the investment in shares cannot be held as unexplained investment of the assessee. The finding of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly we uphold the same. Addition on account of deposit in City Bank Singapore - CIT- A deleted the addition - HELD THAT - It is the onus of the assessee to substantiate its claim of entries of investment in fixed deposits or mutual funds and reinvestment of liquidation of the same in the bank statement under reference. In view of the above facts and circumstances we feel appropriate to restore this matter to the file of the Assessing Officer for examining application of the peak balance theory and addition to be made for deposits in the bank statement on the basis of the documentary evidences which would be furnished by the assessee before him. If the amount of USD 16 953 and USD 12 430 8R are found to be credited as a result of liquidation of earlier investment made out of the same bank statement then following the peak balance theory no addition could be made to the extent of original investment amount in such mutual funds etc - This ground of the appeal of the Revenue is allowed for statistical purposes. Unexplained expenditure - HELD THAT - Narration of the items includes Tin plates spoons Singh etc. but the document does not speak whether the number(s) represent quantity or currency. In our opinion even if we presume that this document belongs to the assessee and the assessee has failed to rebut presumption under section 132(4A) of the Act but the document nowhere reflects whether it is a purchase of the goods or merely estimate. The document is not a bill of purchase andit mentions only certain items/name and certain figures against them. The document is dumb as far as indication of purchase or investment by the assessee or the number as currency. In our opinion to treat those figures as purchase or investment by the assessee is based on the presumption without any corroborating evidence and therefore Ld. CIT(A) is justified in deleting the addition. Unexplained investment - investment/expenditure recorded in concerned loose paper was different from alleged investment by Dr Shamsher Prakash - CIT-A deleted the addition - HELD THAT - We find that first two dates mentioned in the loose paper is date next to what mentioned as remittance date. The amounts of these two dates are also approximately matching. The date and amount mentioned against NRO in the loose paper is matching exactly with the remittance from NRO account received in the bank account of M/s Mahaan Protein Ltd. In our opinion matching of the date and amount of investment from NRO account establish that other entries in the loose paper are also related to investment by Dr Shamsher Parkash because in case of other entries in loose paper the amount are approximately equivalent to INR ( Indian rupees ) equivalent of amount remitted by Dr Shamsher Prakash. In our opinion the assessee has discharged his onus of rebutting the presumption by the Assessing Officer under section 132(4A) of the act. We also find that the Assessing Officer has not been able to identify any other investment made by the assessee despite carrying out thorough search of his residential and official premises. In the circumstances the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we uphold the same. - Decided against revenue. Unexplained investment in jewellery - as during the course of search action at the residence of the assessee a loose paper containing some amount against rough estimate by the jeweller has been found which is inventorised - HELD THAT - We find that no where it is mentioned that those items of the jewelry have been actually purchased by the assessee. There is no mention of any payment made by the assessee also. The addition cannot be made only on the basis of the existence of alleged well-known practice presumed by Assessing Officer. AO was required to bring on record name of the jeweller and corresponding purchase bills if any before making addition in the hands of the assessee on the basis of this loose paper. In our opinion the Assessing Officer has squarely failed in bringing any such documentary evidence and thus no addition can be made without evidence of actual purchase of jewellery by the assessee. Even if we presume for a moment that the jewellery listed in the loose paper was purchased by the assessee same is than included in the list of the jewelry found from the premises and therefore no separate addition on the basis of this loose paper is required. In view of the above facts and circumstances the finding of the Learned CIT(A) on the issue in dispute is upheld. Addition on account of unexplained deposit - burden of proof was on the assessee that the amount was the part of the disclosed asset or belong to some other person and in failure to do so the AO is justified in making the addition - CIT-A deleted the addition - HELD THAT - We find that there is no mention of the name of the assessee. On this paper card No. has been mentioned as 8496. The document is on the letterhead of some bank having name as Bank One . AO has not carried out any enquiry from the relevant bank and ascertained to whom this card or the transaction relates. Making addition on the basis of incomplete information only on the basis of the guess work is not justified in cases of search assessment. No infirmity in the finding of the Learned CIT(A) on the issue in dispute and accordingly we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. Block assessment - Unexplained gifts - undisclosed income to be made as per section 158BA(2) - HELD THAT - We find that gifts received were appearing in books of accounts and disclosed for the purpose of Income-tax return by the assessee and no incriminating material much less any material related to such gifts was found during the course of the search . The Ld. CIT(A) has relied on the decision of the Hon ble Delhi High Court in the case of Ravi Kant Jain 2001 (3) TMI 52 - DELHI HIGH COURT wherein it is held that block assessment is not substitute for regular assessment. We do not find any error in the order of the Learned CIT(A) in following decision of the Hon ble jurisdictional High Court. No error in the order of the Learned CIT(A) on the issue in dispute and accordingly uphold the same. Unexplained expenditure on foreign travel - HELD THAT - It is settled law that addition under block assessment can be made for undisclosed income only as laid down under section 158BA(2) of the Act read with explanation thereof - finding of the Learned CIT(A) that addition could be made in block assessment only on the basis of the evidence found during the course of the search or inquiries made in relation to material found during the course of the search is justified which is also supported by the binding precedents of Hon ble Delhi High Court in the case of Ravi Kant Jain 2001 (3) TMI 52 - DELHI HIGH COURT Further the Ld. CIT(A) has also held that the assessee has discharged onus of explaining the source of the expenditure which has been incurred mostly by the business concerns in which assessee is director. Foreign travel expenses in relation to his wife/family has been added by the Assessing Officer on the basis of presumption that wife/family must have travelled along with the assessee during foreign visit. In our opinion no such addition could be made merely on the basis of presumption without bringing any evidence on record. In view of these facts and circumstances we uphold the finding of the Ld. CIT(A) on the issue in dispute. The ground of the appeal of the Revenue is accordingly dismissed. Unexplained investment in household goods - HELD THAT - AO has simply rejected the claim of the assessee of year and amount of the investment and valued at current market price. Each item must have been having detail of manufacturing and their year of sale could have been easily verified from the respective manufacturer or distributor or dealer of those goods. No attempt has been made by the Assessing Officer for verifying the year of purchase of these goods by the assessee and has simply valued the price of the goods at current market value. In some cases the assessee has also supported investment by way of the bills which are also not been accepted by the Assessing Officer. Assessing Officer has also not considered the household withdrawal of the assessee and his family members. Where investment is recorded in the books of accounts of companies in which assessee is director the source of investment stands explained and hence no addition for unexplained source can be made in the hands of the assessee. In view of the above we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the same.

Summary

Issues Involved:
1. Unexplained cash of ?1,52,150.
2. Unexplained source of foreign exchange of ?3,96,484.
3. Unexplained investment in shares of ?16,49,330.
4. Unexplained bank deposits of ?22,00,346.
5. Unexplained expenditure of ?3,17,530.
6. Unexplained investment of ?20,79,110.
7. Unexplained investment in jewelry of ?1,37,500.
8. Unexplained deposits of ?2,51,198.
9. Unexplained gifts of ?25,96,077.
10. Unexplained expenditure on foreign travel of ?8,83,276.
11. Unexplained investment in household goods of ?2,52,500.

Detailed Analysis:

1. Unexplained Cash of ?1,52,150
The Assessing Officer (AO) found cash totaling ?6,42,150 during a search operation at the assessee's residence and lockers. The assessee explained that ?4,90,000 was withdrawn from M/s Mahaan Foods Ltd., ?50,150 was 'Pin money' accumulated over the years, and ?1 lakh was offered to tax in the block return. The AO rejected this explanation due to discrepancies in the cash book and the absence of withdrawal records. The CIT(A) accepted the explanation based on seized documents showing imprest balances and deleted the addition. The Tribunal upheld the CIT(A)'s decision, finding no reason to disbelieve the explanation provided by the assessee.

2. Unexplained Source of Foreign Exchange of ?3,96,484
The AO found US$ 911 during the search. The assessee explained US$ 111 as unspent travel money and US$ 800 as money left by a friend. The CIT(A) accepted this explanation based on supporting documents. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to point out any error in the CIT(A)'s findings or the additional evidences.

3. Unexplained Investment in Shares of ?16,49,330
The AO found shares in the name of Dr. Shamsher Prakash and concluded they were benami investments by the assessee. The CIT(A) found that the investments were made through banking channels with RBI permission and deleted the addition. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not verify the source of the investments or conduct inquiries with Dr. Shamsher Prakash.

4. Unexplained Bank Deposits of ?22,00,346
The AO found deposits in a CitiBank, Singapore account and did not accept the peak balance theory proposed by the assessee. The CIT(A) deleted the addition, accepting the peak balance theory. The Tribunal found that the peak balance theory needed further verification and restored the matter to the AO for re-examination.

5. Unexplained Expenditure of ?3,17,530
The AO found a loose paper indicating expenditure and added the amount as unexplained expenditure. The CIT(A) deleted the addition, finding the document to be a 'dumb document' incapable of leading to any inference of unaccounted income. The Tribunal upheld the CIT(A)'s decision, noting the lack of corroborating evidence.

6. Unexplained Investment of ?20,79,110
The AO found a loose paper indicating investment amounts and added the amount as unexplained investment. The CIT(A) deleted the addition, accepting the assessee's explanation that the amounts represented investments by Dr. Shamsher Prakash. The Tribunal upheld the CIT(A)'s decision, noting the lack of any other identified investment by the assessee.

7. Unexplained Investment in Jewelry of ?1,37,500
The AO found a loose paper indicating jewelry purchase and added the amount as unexplained investment. The CIT(A) deleted the addition, finding the document to be a rough estimate and not proof of actual purchase. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence of actual purchase.

8. Unexplained Deposits of ?2,51,198
The AO found a loose paper indicating a bank balance and added the amount as unexplained investment. The CIT(A) deleted the addition, noting the lack of any indication that the bank account belonged to the assessee. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence.

9. Unexplained Gifts of ?25,96,077
The AO added the amount as unexplained gifts received by the assessee's children. The CIT(A) deleted the addition, noting that the gifts were disclosed in regular returns and supported by affidavits and bank certificates. The Tribunal upheld the CIT(A)'s decision, noting that block assessments should be based on evidence found during the search.

10. Unexplained Expenditure on Foreign Travel of ?8,83,276
The AO added the amount as unexplained expenditure based on the lack of details provided by the assessee. The CIT(A) deleted the addition, noting that no incriminating evidence was found during the search and that the expenses were accounted for in the books of the business concerns. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence.

11. Unexplained Investment in Household Goods of ?2,52,500
The AO added the amount as unexplained investment based on the estimated market value of household goods. The CIT(A) deleted the addition, noting that the AO did not consider household withdrawals and the documentary evidence provided. The Tribunal upheld the CIT(A)'s decision, noting the lack of verification by the AO.

Conclusion
The Tribunal upheld the CIT(A)'s decisions on most issues, finding that the AO's additions were often based on presumptions without sufficient evidence. The matter of unexplained bank deposits was remanded to the AO for further verification. The appeal was allowed partly for statistical purposes.