2024 (11) TMI 318 - AT - Income Tax

Addition u/s 69C and 68 - undisclosed credit card expenditures in foreign currencies - material found during the course of survey proceedings - AO proceeded to make the addition u/s 69C by converting the amount of foreign currency spent by the assessee utilising 1 US Rs. 55 1 UK Pound Rs. 82 and made the addition HELD THAT - AO being the jurisdictional officer to the respective assessee has to make the investigation on receipt of those information s whether these information s are pertained to the assessee and has to form an opinion and reasons for reopening of the assessment. Whereas, in the present case, a survey proceeding was initiated in the case of the assessee itself and not the information passed on by DIT (Inv.) from a third person. The survey conducted in the case of the assessee revealed that assessee was in possession of various credit cards and the information contained in the mobile of those credit cards enabled the assessee to utilize the same wherever he is. Assessee being a resident in India holding various international credit cards of various friends and relatives and the assessee was able to utilize the same wherever he is. When the Investigation Wing asked for details, the assessee was not able to provide the same nor submitted any information during the investigation. The same was forwarded to the AO and AO having jurisdiction over the assessee and after verification of the information available on record, the information forwarded by the Investigation Wing was not reflected anywhere in the information available with the AO - AO has no option but to reopen the assessment to make further investigation. Accordingly, the AO also issued notice u/s 143(2) of the Act to collect the information. In response only, assessee attended the proceedings and submitted the relevant information. Therefore, the submissions of the assessee and relying on the decision of Hon ble Delhi High Court are distinguishable to the facts on record. Accordingly, grounds raised by the assessee are dismissed and also we observed that ld. CIT (A) has elaborately discussed the above points and rightly dismissed the grounds raised by the assessee. Addition u/s 68 and 69C - As observed that assessee was found with the information in his mobile relating to several credit cards in US and UK Pound which belongs to assessee, his friends/relatives including his wife. Since the information relating to these credit cards are in the mobile of the assessee, as the assessee was able to utilize the same without the presence of any of the relatives and friends. Therefore, when the details were called for from the assessee and the assessee was not in a position to explain the same before the DIT (Inv.) and before the Assessing Officer, it clearly indicates that assessee has utilised the funds through these credit cards for his personal use and none of the parties or friends who are the owners of the credit cards never filed any proof/documents or affidavit to claim the same as belong to them. In absence of any material before the AO, the AO has no option but to make the addition in the hands of the assessee. Therefore, we do not see any reason to disturb the findings of the ld. CIT (A). Accordingly, grounds raised by the assessee are dismissed. Unexplained money received through Ananda Heritage Hotels P. Ltd. on a protective basis - Coming to the appeal preferred by the Revenue, we observed that the investment was made in Ananda Heritage Hotels P. Ltd. through M/s. Wilton Investment Ltd. and it is a fact on record that these investments were made through Wilton Investment Ltd. and the transaction is of share application money. Ananda Heritage Hotels P. Ltd. being an independent person accordingly Assessing Officer has made substantive addition in the hands of Ananda Heritage Hotels P. Ltd. and made the addition protectively in the hands of the assessee. We observed that ld. CIT (A) has observed the above facts on record and deleted the same in the hands of the assessee. Therefore, we do not see any reason to disturb the same. Accordingly, the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:

1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Addition under Section 69C and 68 regarding unexplained expenditures incurred through credit cards.
3. Addition of unexplained money received through Ananda Heritage Hotels P. Ltd. on a protective basis.

Detailed Analysis:

1. Reopening of Assessment under Section 147:

The assessee challenged the reopening of the assessment under Section 147, arguing that the reasons to believe were not properly formed and were based on borrowed satisfaction from the Mumbai Income-tax Department. The assessee contended that the Assessing Officer (AO) did not independently verify the information received before reopening the assessment. The CIT (A) rejected the assessee's objections, affirming that the information from the Investigation Wing constituted tangible material justifying the reopening. The Tribunal upheld the CIT (A)'s decision, noting that the survey conducted on the assessee revealed the possession of various credit cards, which warranted further investigation by the AO.

2. Addition under Section 69C and 68:

The AO made additions under Sections 69C and 68 for unexplained expenditures incurred through credit cards found in the assessee's possession. The assessee argued that most of the credit cards did not belong to him and that payments for two cards were made by his NRI wife. The CIT (A) sustained the additions, emphasizing that the assessee failed to provide documentary evidence or produce individuals who could confirm ownership and usage of the credit cards. The Tribunal concurred with the CIT (A), highlighting that the assessee could not substantiate his claims with evidence, and the credit card expenditures were rightly treated as unexplained.

3. Addition of Unexplained Money through Ananda Heritage Hotels P. Ltd.:

The AO made a protective addition for unexplained money received through Ananda Heritage Hotels P. Ltd., owned by the assessee. The CIT (A) deleted this addition, observing that the investment was made through Wilton Investment Ltd. as share application money, and substantive addition was made in the hands of Ananda Heritage Hotels P. Ltd. The Tribunal agreed with the CIT (A), finding no reason to disturb the deletion of the protective addition in the assessee's hands, as the transaction was appropriately addressed in the hands of the company.

Conclusion:

The Tribunal dismissed both the appeals filed by the assessee and the Revenue. It upheld the reopening of the assessment and the additions made under Sections 69C and 68, while agreeing with the CIT (A) on deleting the protective addition related to Ananda Heritage Hotels P. Ltd. The judgment emphasized the importance of substantiating claims with evidence in tax proceedings and the necessity for the AO to rely on tangible material for reopening assessments.