2024 (12) TMI 691 - AT - Income Tax

Addition of deposits and interest thereon - deposit was in the name of the wife - HELD THAT - Assessee read out from the assessment order that admittedly the FDR made with Sri Ram Group of Companies by Smt. B. Subhashri, the wife of assessee and this is accepted by her by filing a letter claiming the receipt of marriage gift and made deposit out of such marriage gift but the AO has added in the hands of the assessee instead of assessing the same in her name. When a query was put to Revenue, he could not controvert the above fact situation that the FDR was in the name of assessee s wife. The assessee in his sworn statement admitted that the FDR is made by his wife out of her own sources i.e., gift received by her at the time of her marriage and it is her money only. Even, assessee s wife claimed the ownership of FDR of Rs. 10 lakhs made with Sri Ram Group of Companies on 17.10.1994 and claimed receipt of marriage gift and made deposits out of such marriage gift. Lack of evidence or proof does not give entitlement to Revenue to make addition in the hands of the assessee as the ownership lies with the wife of the assessee. As revenue could not brought on records any evidence that this amount was invested by assessee out of his own funds despite the fact that income tax department had carried out search on the assessee, this addition, if at all, is to be made in the hands of assessee s wife and not in the hands of the assessee. Decided in favour of assessee. Addition on account of silverware weighing about 33 Kgs - As noted that the assessee before AO and even before search party admitted that the silverware/ silverware articles were presented to his wife by her father and his friends. The assessee s wife also owned up these articles by filing a letter dated 23.09.1997. The assessee has furnished the name of assessee s father-in-law Dr.Vinodhagan but he expired on 19.03.1993. Admittedly, Dr.Vinodhagan s elder son Shri Mahadevan denied the gifted article, but that is of no evidentiary value because he was not party to the gift. Hence, as admitted by assessee s wife Smt. B. Subhashri vide letter dated 23.09.1997 owning up these assets is to be considered as owner of the asset and addition in any case, is to be made in her hands only. Hence, in view of the above, we delete the addition and allow this issue of assessee s appeal. Addition of estimated marriage expenses - As there is no information or incriminating documents available with the Department that how much was the expenditure, AO estimated marriage expenses at Rs. 5 lakhs and considered as unaccounted expenditure for the assessment year 1995-96 falling in the block period. We noted that this is purely an estimate and there is no evidence how much is the expenditure incurred by assessee on marriage expenses. AO simply estimated without any incriminating material or any material that assessee has incurred expenditure of marriage. However, going by the fact that marriage happened and some expenditure might have been incurred for that, we restrict the estimate at 60% what was estimated by AO. Hence, we direct the AO to recompute the income for the block period after estimating the marriage expenses at Rs. 3 lakhs instead of estimated by him at Rs. 5 lakhs. Hence, this issue is partly-allowed. Addition of estimated personal drawings - We noted that only personal expenditure for the year 1995-96 noted by AO i.e., rent of Rs. 15,000/- per month paid by assessee for his rental accommodation. This amount of Rs. 15,000/- for 12 months and for the year 1997-98 upto September for six months at the rate of Rs. 15,000/- per month can be estimated. It means that for 1 years rent at the rate of Rs. 15000/- per month, estimation of addition can be made at Rs. 2,70,000/-. Hence, we direct the AO to recompute the addition on account of personal drawings at Rs. 2,70,000/- as against estimated at Rs. 8,05,000/-. Hence, we partly-allow this issue of assessee s appeal. Addition of advance tax payment - We noted that the assessee has made payment of advance tax of Rs. 10,000/- on 31.03.1995 and advance tax of Rs. 1,20,000/- on 01.08.1996. Admittedly, these evidences are available with the Department and assessee is unable to show source for this advance tax and hence, the AO has rightly added the same and we confirm the same. This issue of assessee s appeal is dismissed. Addition of foreign trip expenses - As assessee during the course of earlier proceedings admitted two trips to be pleasure trips and third one was claimed to be in connection with the business of J Jay TV Pvt. Ltd. Assessee is unable to prove source and even now before us, when queried whether as regards to third trip which claimed to have been in connection with the business of J Jay TV Pvt. Ltd., any evidence is there that this is in relation to business trip of J Jay TV Pvt. Ltd., the assessee could not adduce any evidence and hence, no infirmity in the AO s order making addition in the block assessment. This issue of assessee s appeal is dismissed. Addition of bank deposits - As assessee could not adduce any evidence to explain the source and moreover this bank account was found during the course of search and assessee being a non-filer, this can be treated as incriminating material. Hence, we find no infirmity in the order of AO and the addition made by AO as undisclosed income for assessment year 1993-94 falling in the block period is upheld. This issue of assessee s appeal is dismissed. Addition on account of investment made by assessee in Himalaya Benefit Fund while completing the block assessment - On query from the Bench, assessee could not explain the source of deposit of Rs. 3 lakhs made on 02.03.1994 in Himalaya Benefit Fund Ltd., Tiruchirapalli and it was also not disclosed whether consequential interest for assessment years 1994-95, 1995-96, 1996-97 1997-98 i.e., upto 24.09.1996 in aggregate amounting to Rs. 4,77,529/- is disclosed in the return of income filed or not. Since the assessee failed to explain, even now before us failed to explain the source of deposit, we feel that the AO has rightly treated the income as undisclosed and hence, we confirm the order of AO and this issue of assessee s appeal is dismissed. Additions made based on materials apparently collected from ED-Generally Enforcement Directorat - As in the present case before us, there is no evidence that the assessee has made payment of transponder hire charges abroad, i.e., off the record in US 6,80,000, rupees equivalent to Rs. 2.24 crores. As there is no evidence linking the assessee, we delete the addition and allow this issue of assessee s appeal. However, we clarify here that this addition can be considered in the hands of J Jay TV Pvt. Ltd., in case, there are evidences and in accordance with law. Hence, this addition is deleted and allowed in favour of assessee. Payment towards transponder hire facility and uplinking facility - We noted that these payments are in equivalent to Indian for AY 1995-96 1996-97 i.e., in each of the years. It means that these are the payments made for installation payable as per agreement by J Jay TV Pvt. Ltd., if at all. We feel that this being quarterly installment payable, the same cannot be treated as payment made by assessee individually. Hence, these additions are deleted by allowing this ground. However, we want to clarify that the assessment for assessment year 1995-96 is pending in the case of J Jay TV Pvt. Ltd., for adjudication before the AO. This addition, if at all or any evidence suggests as payment made by J Jay TV Pvt. Ltd., can be considered in the hands of J Jay TV Pvt. Ltd., in accordance with law. Hence, this issue of assessee s appeal is allowed. Purchase of equipment abroad and payment made on behalf of the same - Assessee was not allowed the opportunity to cross examine Shri Ramachandran or to examine the person incharge of Tai Yen Electronics, so that the assessee can establish that he has not made any payment. Actually, even the Revenue admits that these payments are for purchase of equipments for and on behalf of J Jay TV Pvt. Ltd. Even Tai Yen Electronics also issued invoices in the name of J Jay TV Pvt. Ltd., only. Hence, in our view and discussion carried out in earlier issues, we are of the view that the AO while completing block assessment and without any incriminating material just on surmises made this addition. Hence, addition is without any basis and hence, deserves to be deleted. Hence, addition is without any basis and hence, deserves to be deleted. Purchase of Malaysian Ringets - We noted that this issue has not been examined by the AO and no finding is given as to how these bills found from the business premises of J Jay TV Pvt. Ltd., are relatable to assessee. The AO has noted in his assessment order that the bills seized from the residence of assessee are in the name of assessee himself, which fact needs verification. Hence to examine these aspects and for a detailed enquiry, we set aside this issue to the file of the AO and after enquiry may decide the issue afresh as per law. In term of the above, this issue of assessee s appeal is set aside and we direct the AO to re-examine this issue. Addition of purchase of car - Determination of real owner - The dispute regarding ownership remains whether it is in the name of assessee or Shri O. Kasimayan. It is also not clear whether the payment is made by Shri O. Kasimayan and gifted to assessee. Even block assessment order notes that the protective addition under the Gift Tax Act was made in the hands of assessee and assessee has filed appeal against the gift tax order. On query from the Bench neither Senior Standing Counsel nor assessee Counsel could point out what is the status of gift tax proceedings - this issue needs to be reconsidered by the AO afresh after taking into various consideration, who is the owner of the vehicle, whether any gift is given by Dr. Balakrishnan and consider relevant documents, the AO will reframe the assessment. This issue of assessee s appeal is allowed for statistical purposes. Assessment u/s 153C - In the present case, going by the satisfaction note purely, there is no incriminating material found during the course of search in relation to the assessee and hence, we confirm the order of CIT(A) holding the assessment framed u/s. 153C of the Act as bad in law and hence, quashed. Accordingly, we uphold the order of CIT(A) and dismiss this appeal of Revenue.

Summary

Issues Involved:

1. Addition of deposits and interest in the name of assessee's wife as undisclosed income.
2. Addition of silverware as unaccounted investment.
3. Addition of estimated marriage expenses.
4. Addition of estimated personal drawings.
5. Addition of advance tax payment.
6. Addition of foreign trip expenses.
7. Addition of unexplained bank deposits.
8. Addition on account of investment in Himalaya Benefit Fund.
9. Additions based on materials collected from Enforcement Directorate.
10. Addition of purchase of car.
11. Jurisdictional issue regarding the validity of proceedings under section 153C.

Detailed Analysis:

1. Addition of Deposits and Interest:
- The AO added Rs. 10 lakhs as undisclosed income in the name of the assessee's wife, claiming it was not substantiated by evidence found during the search. The Tribunal found that the fixed deposit was in the name of the wife and acknowledged by her as a marriage gift. The addition was deleted as the ownership and source were attributed to the wife, not the assessee.

2. Addition of Silverware:
- Silverware valued at Rs. 2 lakhs was found during the search. The AO added this as unaccounted investment. The Tribunal noted the wife's claim that the silverware was a marriage gift. The addition was deleted as the ownership was attributed to the wife, not the assessee.

3. Addition of Estimated Marriage Expenses:
- The AO estimated marriage expenses at Rs. 5 lakhs without any evidence. The Tribunal found the estimate arbitrary and reduced it to Rs. 3 lakhs, acknowledging that some expenditure might have been incurred.

4. Addition of Estimated Personal Drawings:
- The AO estimated personal drawings at Rs. 8.05 lakhs without incriminating material. The Tribunal reduced this to Rs. 2.7 lakhs, based on the rent paid by the assessee, as there was no evidence of other personal expenditures.

5. Addition of Advance Tax Payment:
- The AO added Rs. 1.3 lakhs as unexplained income due to the inability of the assessee to explain the source of advance tax payments. The Tribunal upheld this addition, as the assessee could not provide a source for the payments.

6. Addition of Foreign Trip Expenses:
- The AO estimated foreign trip expenses at Rs. 5.89 lakhs. The Tribunal upheld the addition as the assessee could not substantiate the claim that one trip was business-related, and no evidence was provided for the expenses.

7. Addition of Unexplained Bank Deposits:
- The AO added Rs. 6.83 lakhs as undisclosed income due to unexplained bank deposits. The Tribunal upheld the addition, as the deposits were found during the search and the assessee could not explain the source.

8. Addition on Account of Investment in Himalaya Benefit Fund:
- The AO added Rs. 4.78 lakhs as undisclosed income due to unexplained investment. The Tribunal upheld the addition, as the assessee failed to explain the source of the investment.

9. Additions Based on Materials Collected from ED:
- Various additions were made based on materials from the Enforcement Directorate. The Tribunal deleted these additions, noting the lack of evidence linking the payments to the assessee individually and suggesting they were related to J Jay TV Pvt. Ltd.

10. Addition of Purchase of Car:
- The AO added Rs. 13.45 lakhs for a car allegedly gifted to the assessee. The Tribunal set aside the issue for further verification, as the ownership and source of the car were disputed.

11. Jurisdictional Issue:
- The CIT(A) quashed the assessment under section 153C for the year 2017-18, as there was no seized material pertaining to the assessee for that year. The Tribunal upheld this decision, confirming the lack of jurisdiction for the assessment year 2017-18.

Conclusion:
The Tribunal allowed some issues in favor of the assessee, particularly where the ownership or source of funds was attributed to the wife or lacked evidence. Several additions were deleted due to insufficient linkage to the assessee, while others were upheld or reduced based on available evidence. The jurisdictional challenge was successful, resulting in the quashing of the assessment for the year 2017-18.