2023 (11) TMI 1150 - AT - Income Tax

Addition u/s 68 - Having Two PAN and using differnt names - Validity of claim of the Assessee that he is running Hotel Management Business - assessee has made huge cash deposits in the bank account with Axis Bank operated in the name of Shri Rajiv Rama Pattanayak - assessee is filing two separate returns of income on two different names and PANs. - A.Y. 2010 11 - HELD THAT - As no details are available on record as to whether TDS was deducted from the Hotel Management Charges. There are also no details regarding the purchase of raw materials for running the catering business during the year under consideration. There is no breakup of various expenses charged to the profit and loss account against the income of Rs. 14,15,620 from Hotel Management Charges. Thus, we agree with the findings of the AO that the balance sheet does not show any fixed asset that can be used as a hotel, and the profit and loss account does not show payment of rent against the use of rented premises. It is evident from the record that sufficient opportunity was granted to the assessee during the reassessment proceedings to produce the documentary evidence in support of the submission that the income is earned from the Hotel Management Business. Assessee neither before the lower authorities nor before us produced any evidence to substantiate its claim beyond doubt. Therefore, in the absence of satisfactory documentary evidence, we do not find any merit in the plea of the assessee that the income is on account of Hotel Management Business. Assessee pleaded that the entire turnover cannot be brought to tax and only the real income embedded therein would be held as suppressed income - As assessee has not discharged its onus to satisfactorily prove the incurring of expenditure for running the alleged Hotel Management Business. Ledger account of the Hotel Management receipts and salary paid to the staff is also not furnished by the assessee in the year under consideration. Therefore, in the absence of satisfactory documentary evidence, the plea of the assessee is rejected and the addition made by the AO under section 68. - Decided against assessee. Addition u/s 68 in receipts of agricultural activity - differences in address, non-mentioning of invoice no., the difference in the design of invoice, rate of paddy, and variation in the signature of the proprietor - reply to the notice issued under section 133(6) of the Act was not received from the genuine trader of the paddy - HELD THAT - Assessee has managed to get the letter to his associates and prepared reply to it himself with forged signatures. In view of the facts and circumstances, we are of the considered view that if the Revenue doubts the genuineness of the documents submitted by the assessee then it is either required to direct the assessee to produce the person who has executed such document or issue summons to such person in this regard. The documents cannot be doubted without completing the enquiry in all respects. During the hearing, the learned AR placed on record the copy of the order passed by the learned CIT(A) for the assessment year 2013-14, wherein it was accepted that the assessee was involved in agricultural activity. However, from the record, it is evident that in the present case, the Revenue has doubted this aspect. Therefore, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after examination of all the details filed by the assessee. Assessee appeal allowed for statistical purposes. Addition of the gift received from assessee s mother - HELD THAT - We are of the view that the AO is not an expert in handwriting and if there was any doubt regarding the mismatching of the handwriting of assessee s mother then the opinion of the expert in this field could have been taken. Once the AO has chosen not to do so, rejecting the plea of the assessee on this basis appears to be merely a pretext. As undisputed that the amount was given as a gift to the assessee in cash, and assessee s mother has already furnished documents in terms of a registered sale deed along with the reply to the notice issued under section 133(6) of the Act which was not disputed by the Revenue. Accordingly, we find no merits in placing reliance on the bank statement of the assessee s mother particularly when aforesaid evidence is not doubted by the Revenue. Revenue has also not doubted the genuineness of the 7/12 extract furnished by assessee s mother in respect of agricultural land owned by her and the certificate issued by the Gram Panchayat confirming the fact that she is a farmer. Therefore, when sufficient source i.e. receipt pursuant to the Memorandum of Understanding dated 30/01/2009, was furnished by assessee s mother, we find no basis in doubting the payment in cash as a gift to the assessee. Accordingly, the addition made by the AO on this aspect is deleted. Assessee appeal allowed. Addition in respect of gifts received from the mother, wife, and relatives. - A.Y. 2011 12 - HELD THAT - As assessee did not furnish the bank statement of Mr. Bikash Chandra Shee or any other document to substantiate the creditworthiness of the donor. The ITR acknowledgement and gift deeds may prove the genuineness of the transaction and the identity of the donor, however, the creditworthiness of the donor is still not satisfactorily proved by the assessee. Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition. Cash received from mother - Since the relief of Rs. 1,65,000 has already been granted in the year 2010-11, the balance amount of Rs. 5,35,000 can be said to have been paid by the assessee s mother from the aforesaid sum of Rs. 7,00,000 in the year under consideration. Accordingly, the addition to an extent of Rs. 5,35,000 received as a gift in cash from the mother is deleted. Regarding the balance amount of the gift received by the assessee in cash from his mother, we deem it appropriate to grant one more opportunity to the assessee, in the interest of justice, to substantiate its claim before the AO. Gift in cash received from assessee s uncle - As assessee has not submitted any bank account statement for the year under consideration to prove the genuineness of the transaction and the capacity of the donor. Accordingly, the learned CIT(A) dismissed the ground raised by the assessee on this issue. We find that even before us the documents as sought by the lower authorities have not been furnished by the assessee. Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition. Gift in cash from assessee s father-in-law - As pertinent to note that the date of retirement is after the relevant financial year and thus any amount received on the retirement cannot be considered to be the source of gifting cash to the assessee. Further, apart from the aforesaid documents no other document has been placed on record which could prove the creditworthiness of the donor. The assessee has also not brought any evidence on record to controvert the detailed factual findings of the AO which have been upheld by the learned CIT(A). Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition u/s 68 of the Act in respect of gift in cash received from Mr. Suresh Chandra Shee. Gift in cash from assessee s wife - Assessee filed a copy of ITR acknowledgement of the assessee for the assessment year 2011-12 wherein a gross total income of Rs. 2,79,038 has been disclosed - assessee has placed on record invoices of purchase of jewellery by his wife, however the same also does not prove the availability of funds with the assessee s wife at the time of the gift of Rs. 11,95,000 in cash. Apart from the above, the assessee has not placed on record any other document to controvert the findings of the AO and the learned CIT(A). Accordingly, we find no infirmity in the findings of the learned CIT(A) in upholding the addition of Rs. 11,95,000 under section 68 of the Act in respect of gift in cash received from assessee s wife. Assessee submitted that the gifts are received from the mother, wife, and other relatives which are covered under Explanation (e) to section 56(2)(vii) of the Act, and thus the same is not taxable - As per section 68 of the Act the assessee is required to offer an explanation about the nature and source of any sum credited to his books to the satisfaction of the AO, and in this regard, the assessee is not only required to prove the identity of the creditor and genuineness of the transaction but also the creditworthiness of the creditor, which the assessee has failed to prove in case of certain transactions as noted above. Accordingly, mere reliance on Explanation (e) to section 56(2)(vii) of the Act would not absolve the assessee from the onus cast on him u/s 68. Addition u/s 68 of the Act on the sale of ornaments - HELD THAT - From the record, it is evident that apart from M/s Motaba Sons Jewellers, Colaba, Mumbai the assessee has claimed that it has sold the jewellery to Mahavir Jewellers. However, as evident from the record, neither notice under section 133(6) of the Act nor summons u/s 131 were issued to Mahavir Jewellers. Further, the assessee claimed that the aforesaid statement of the proprietor of M/s Motaba Sons Jewellers has been recorded at his back and no opportunity of cross-examination was granted to the assessee. Therefore, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication. The AO is directed to grant the opportunity to cross-examine the proprietor of M/s Motaba Sons Jewellers, Colaba, Mumbai to the assessee. Further, the AO is directed to verify the claim of the assessee in respect of the sale made to Mahavir Jewellers and if required to also issue necessary summons/notice under the Act for complete verification. Appeal by the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Rebuttal to Remand Report
2. Addition on Estimated Additional Income
3. Addition under Section 68 - Hotel Management Business
4. Addition under Section 68 - Agricultural Activity Receipts
5. Addition under Section 68 - Gift from Mother
6. Addition under Section 69 - Capital Contribution in Partnership Firm
7. Addition of Remuneration and Interest from Partnership Firm
8. Addition under Section 68 - Gifts from Relatives
9. Addition under Section 68 - Sale of Ornaments

Summary of Judgment:

Issue 1: Rebuttal to Remand Report
The issue raised in ground no. 1 is general in nature and therefore needs no separate adjudication.

Issue 2: Addition on Estimated Additional Income
Ground no. 2 was not pressed during the hearing and is dismissed as not pressed.

Issue 3: Addition under Section 68 - Hotel Management Business
The assessee was unable to provide sufficient documentary evidence to prove the genuineness of the Hotel Management Business. The AO and CIT(A) found discrepancies in the invoices and lack of fixed assets or rent payments, leading to the addition of Rs. 14,15,620 under section 68. The Tribunal upheld this addition for A.Y. 2010-11. For A.Y. 2011-12, the issue was restored to the AO for de novo adjudication after necessary examination of all facts and documents.

Issue 4: Addition under Section 68 - Agricultural Activity Receipts
The AO found inconsistencies in the agricultural income receipts and doubted the genuineness of the transactions. The CIT(A) upheld the addition of Rs. 12,34,980 for A.Y. 2010-11. The Tribunal restored the issue to the AO for de novo adjudication, directing thorough verification. For A.Y. 2011-12, similar directions were given, restoring the issue to the AO.

Issue 5: Addition under Section 68 - Gift from Mother
The AO and CIT(A) doubted the source of the gift of Rs. 1,65,000 from the assessee's mother due to inconsistencies in her bank statements and signatures. The Tribunal found the AO's rejection based on handwriting mismatch without expert opinion unjustified and deleted the addition. For A.Y. 2011-12, the Tribunal allowed partial relief by deleting Rs. 5,35,000 and remanded the balance for AO's reconsideration.

Issue 6: Addition under Section 69 - Capital Contribution in Partnership Firm
Ground no. 2 for A.Y. 2011-12 was not pressed during the hearing and is dismissed as not pressed.

Issue 7: Addition of Remuneration and Interest from Partnership Firm
Ground no. 3 for A.Y. 2011-12 was not pressed during the hearing and is dismissed as not pressed.

Issue 8: Addition under Section 68 - Gifts from Relatives
The AO and CIT(A) doubted the creditworthiness of the donors for gifts totaling Rs. 40,38,300. The Tribunal upheld the addition for gifts from Mr. Bikash Chandra Shee, Mr. Mihir Kumar Pradhan, Mr. Suresh Chandra Shee, and Smt. Rashmi Sanjib Pradhan due to lack of sufficient evidence proving their creditworthiness. Partial relief was granted for the gift from the mother, remanding the balance for AO's reconsideration.

Issue 9: Addition under Section 68 - Sale of Ornaments
The AO found the sale bill of gold ornaments to M/s Motaba & Sons Jewellers manipulated and the jeweller denied any transaction. The Tribunal restored the issue to the AO for de novo adjudication, directing to allow cross-examination of the jeweller and verify the claim regarding Mahavir Jewellers.

Conclusion:
Both appeals by the assessee are partly allowed for statistical purposes. The Tribunal directed the AO to conduct thorough verification and provide opportunities for the assessee to substantiate claims with proper documentation and cross-examination where necessary.