2013 (12) TMI 868 - AT - Income Tax

Disallowance of Gifts on account of personal user of business assets - Various additions made are not justified being outside the purview of s. 153A of the Act Held that - The assessee had already submitted his returns prior to search which had also attained finality - no document or incriminating evidence was found during the course of search which could be legally made a basis for disturbing the already settled issues The documents submitted clearly prove the identify, creditworthiness of the donor and genuineness of the gift - Following Jai Steels (India) vs. Asstt. CIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT - In an assessment under s. 153A, it is not open to the assessee to seek deduction or claim relief not claimed by it in the original assessment which already stands completed before the date of initiation of the search or making of requisition - The gifts already disclosed by the assessee in the returns of income, which have attained finality, cannot be disturbed. Unexplained gifts - Genuineness of Gifts Held that - After considering the proof regarding gifts, they are considered to be genuine gifts - The assessee has produced enough evidence to prove the identity of the donors, their creditworthiness and also the genuinity of the gift transactions - The gifts have been given through cheques and stand confirmed by the donors - The donors have also proved the sources of their respective gifts - No adverse materials was found during the course of search to even suspect the gifts the gifts are otherwise genuine and have already been disclosed by the assessee in the returns filed before the date of search and which have already become final Decided in favour of Assessee. Addition on account of unexplained personal expenses Held that - The disallowance out of expenses claimed on account of personal or non-business user of the vehicles is not justified - The auditor has simply mentioned that some personal use of business assets is not denied by the assessee and the value of the same could not be ascertained by them - ad hoc and baseless additions cannot be encouraged Decided in favour of Assessee. Addition of gold ornaments Held that - The finding of the CIT(A) is not justified being simply ad hoc and without any valid basis - the additions made are deleted. Justifiability of the additions - No unexplained asset(s)/expenditure has found during this search Held that - There is no other unexplained asset or expenditure which can be said to have been found during the search - The additions made are not supported by any unexplained assets or expenditure - On the basis of assets and the expenditure theory the addition so made in the hands of the assessee is apparently uncalled for. Addition of unexplained expenditure on foreign travel Held that - There is no reason as to why the receipts of monies from his parents should not be accepted when even the source thereof has been explained and the proof is enclosed in the papers the entire amount to be treated as explained.

Summary

Issues Involved:
1. Unexplained gifts.
2. Disallowance of personal expenses.
3. Scope of Section 153A.
4. Admission of additional evidence.
5. Unexplained investment in gold ornaments.
6. Unexplained expenditure on foreign travel.

Detailed Analysis:

1. Unexplained Gifts:
Assessment Year 2002-03:
- The assessee received gifts totaling Rs. 1,00,000 from Shri Amit Ramesh Shadija and Smt. Gouri Ramesh Shadija. The AO disallowed these gifts as the assessee failed to produce the donors for examination and could not explain the creditworthiness of the donors. The CIT(A) upheld this addition, noting the modest income of the donors and lack of specific occasion for the gifts.

Assessment Year 2003-04:
- Gifts of Rs. 10 lacs were received from Shri Shoyab Hussain, Shri Lalit Kumar Srimali, and Smt. Jamuna Devi Menaria. The AO and CIT(A) disallowed these gifts due to the lack of bank statements and inability to produce donors for examination. The donors were not related to the assessee, and there was no specific occasion for the gifts.

Assessment Year 2004-05:
- Gifts totaling Rs. 5 lacs were received from Shri Hansmukh Salar and Smt. Premlata Salar. The AO and CIT(A) disallowed these gifts due to the modest income of the donors, lack of specific occasion, and inability to produce the donors for examination.

Assessment Year 2005-06:
- Gifts of Rs. 15 lacs were received from Shri Rajesh Nemichand Agarwal and Shri Naveen Veerchand Gala. The AO disallowed these gifts due to the inability to produce the donors for examination and lack of specific occasion. The CIT(A) upheld this addition.

Tribunal's Decision:
- The Tribunal allowed the appeals, noting that the assessee had produced enough evidence to prove the identity, creditworthiness, and genuineness of the gift transactions. The gifts were given through cheques and confirmed by the donors. No adverse material was found during the search to suspect the gifts.

2. Disallowance of Personal Expenses:
Assessment Years 2002-03 to 2005-06:
- The AO disallowed sums ranging from Rs. 15,000 to Rs. 25,000 out of expenses on account of personal use of business assets. The CIT(A) confirmed these disallowances.

Tribunal's Decision:
- The Tribunal found these disallowances to be ad hoc and baseless, noting that the auditor's comments were general and the AO and CIT(A) did not provide a valid basis for the disallowances. The Tribunal allowed this ground in favor of the assessee.

3. Scope of Section 153A:
All Assessment Years:
- The assessee argued that the additions made were outside the scope of Section 153A as no incriminating material was found during the search. The CIT(A) did not provide relief.

Tribunal's Decision:
- The Tribunal allowed this ground, following the jurisdictional High Court's decision that Section 153A assessments should be based on incriminating material found during the search. The Tribunal deleted the consequential additions.

4. Admission of Additional Evidence:
All Assessment Years:
- The assessee argued that the CIT(A) erred in not admitting additional evidence submitted.

Tribunal's Decision:
- This issue was not seriously argued before the Tribunal and was dismissed.

5. Unexplained Investment in Gold Ornaments:
Assessment Year 2004-05:
- The AO added Rs. 3,96,605 for unexplained purchase of gold ornaments. The CIT(A) reduced this addition to Rs. 1,37,805.

Tribunal's Decision:
- The Tribunal found the CIT(A)'s finding to be ad hoc and without a valid basis. The Tribunal deleted the entire addition.

6. Unexplained Expenditure on Foreign Travel:
Assessment Year 2004-05:
- The AO added Rs. 1,58,000 for unexplained expenditure on foreign travel. The CIT(A) upheld this addition.

Tribunal's Decision:
- The Tribunal found that the receipts of monies from the assessee's parents were explained and supported by evidence. The Tribunal allowed this ground and deleted the addition.

Conclusion:
The Tribunal allowed the appeals in favor of the assessee on the grounds of unexplained gifts, disallowance of personal expenses, and unexplained investment in gold ornaments. The Tribunal also found that the additions made were outside the scope of Section 153A and deleted the consequential additions. The issue regarding admission of additional evidence was dismissed as it was not seriously argued.