2019 (3) TMI 905 - AT - Income Tax

Credit of surrender at the time of search in respect of addition u/s 69 regarding various property - Search on Harsingar Gutkha/Patel group - surrender was made by Shri K. N. Singh Patel for undisclosed income/investment - reference to the Valuation Officer - assessee claim credit for surrnederd was made by Shri K. N. Singh Patel - CIT(A) excluded investment in AY 2002-03 were not covered by the search period - main dispute between the parties is that the declaration of surrender made by Shri K. N. Singh, head of the family should be completely set off against the investments made by the assessee in various years - HELD THAT - it is apparent that at the time of surrender, Shri K. N. Singh had owned up the investments made in the name of various family members including the assessee. There is no dispute regarding identification of property, as undisputedly the properties declared by Shri K. N. Singh in the name of the assessee remained the same. we are of the opinion that the Revenue should have taken a holistic view of the position and total investment in a property during the period under search should have been compared with the total surrender towards that particular property. The assessee in her reply to Assessing Officer, reproduced by us in earlier part of this order, had also confirmed that surrender was made by Shri K. N. Singh Patel on account of construction in various properties and there is no mention of yearwise construction. In the above assessments of Shri K. N. Singh, the Assessing Officer has not made any addition and has accepted the returns filed by him u/s 153A of the Act which means that he has accepted the declaration of surrender made by Shri K. N. Singh in the respective years of surrender. Therefore, keeping in view all the facts and circumstances, we set aside the order of learned CIT(A) on this account and remit the matter back to the office of the Assessing Officer to recalculate the addition, if any, after taking into account the total amount of surrender in various years with respect to the total investments in various properties, irrespective of the year of investment. Assessing Officer should compare the total investment during search period as valued by registered valuer towards various properties. For the purpose of comparison, the construction done before and after the search period has to be ignored. If the difference between such valuation of property in the search period exceeds the surrender amount for that property, the difference has to be assessed as income of the assessee. In view of the above, ground No. 4 in all the appeals relating to assessment year 2003-04 to 2008-09 is allowed for statistical purposes. Addition on account of acquisition of various properties - assessee claim that this addition was to be adjusted against the surrender of Shri K. N. Singh - HELD THAT - We find that the addition made by the Assessing Officer on account of acquisition of various properties as mentioned by him in his order at page No. 20 and the undisclosed investment, sustained by learned CIT(A), cannot be set off by the surrender of Shri K. N. Singh as the surrender was made for construction only. The learned CIT(A) has already allowed appropriate relief therefore, we do not intend to interfere in his findings. - Ground of assessee is dismissed. Addition of house hold expenses - assessee claim that this amount was to be adjusted against the surrender of Shri K. N. Singh - HELD THAT - We further find that Assessing Officer had made a total addition on account of various house hold goods available in the house at the time of search for which no evidence was filed and the total of such assets was was distributed among four members of the family and the share of assessee, was added. We find that learned CIT(A) has rightly upheld the addition by rejecting the contention of the assessee that this amount was to be adjusted against the surrender of Shri K. N. Singh. - Ground of assessee is dismissed.

Summary

Issues Involved:
1. Legality and procedural fairness of the order passed by the Commissioner of Income-tax (Appeals) [CIT(A)].
2. Adequacy of opportunity of being heard provided by CIT(A).
3. Sustaining additions under Section 69 of the Income-tax Act on account of unexplained investments based on the Valuation Officer's report.
4. Granting full benefit of the amount surrendered by Shri K. N. Singh Patel.
5. Relief sought by the appellant in appeal.
6. Additional grounds of appeal raised during the pendency of the appeal.
7. Specific grounds for assessment years 2004-05, 2005-06, and 2009-10.

Issue-wise Detailed Analysis:

1. Legality and Procedural Fairness of the Order Passed by CIT(A):
The appellant argued that the CIT(A) erred in law and facts by passing an order that was illegal, improper, and against the principles of natural justice. The Tribunal noted that the CIT(A) had provided adequate opportunity for the appellant to present their case and had followed the due process of law. Therefore, this ground was rejected.

2. Adequacy of Opportunity of Being Heard Provided by CIT(A):
The appellant contended that they were not given an adequate opportunity to be heard. The Tribunal found that the CIT(A) had indeed provided sufficient opportunities for the appellant to present their case, and thus, this ground was also rejected.

3. Sustaining Additions Under Section 69 of the Income-tax Act on Account of Unexplained Investments Based on the Valuation Officer's Report:
The appellant challenged the additions made under Section 69 based on the Valuation Officer's report, arguing that the report had various infirmities. The Tribunal noted that the CIT(A) had allowed part relief by ignoring the Valuation Report estimates where the difference between the declared value and the valuation report was less than 15%. The Tribunal upheld the CIT(A)'s decision to ignore minor differences in valuation and accepted the appellant's declared values where the differences were minimal.

4. Granting Full Benefit of the Amount Surrendered by Shri K. N. Singh Patel:
The appellant argued that the authorities should have taken a holistic view and considered the entire surrendered amount by Shri K. N. Singh Patel against the investments made by the appellant. The Tribunal found that the CIT(A) had allowed relief where the year of investment and the year of surrender matched but had not allowed set-off where there was a mismatch. The Tribunal directed the Assessing Officer to recalculate the additions by considering the total surrender amount against the total investments in various properties, irrespective of the year of investment.

5. Relief Sought by the Appellant in Appeal:
The appellant sought relief for the additions made by the Assessing Officer. The Tribunal found that the CIT(A) had already provided substantial relief by ignoring minor valuation differences and allowing set-off for the surrendered amount. However, for the remaining additions, the Tribunal directed a recalculation as mentioned in the previous issue.

6. Additional Grounds of Appeal Raised During the Pendency of the Appeal:
The appellant reserved the right to add, amend, alter, or withdraw any ground of appeal during the pendency of the appeal. The Tribunal did not find any new grounds raised that required separate adjudication.

7. Specific Grounds for Assessment Years 2004-05, 2005-06, and 2009-10:

Assessment Year 2004-05:
- The CIT(A) reduced the addition from ?8,06,600/- to ?1,66,600/- by allowing part relief based on withdrawals in the capital account. The Tribunal upheld this decision, rejecting the appellant's contention that the balance should be considered part of the surrender.

Assessment Year 2005-06:
- The CIT(A) confirmed the addition of ?2,86,500/- for the property purchased, as the appellant failed to provide further evidence. The Tribunal upheld this decision.

Assessment Year 2009-10:
- The CIT(A) upheld the addition of ?2.50 lakhs on account of low household expenses, as the appellant did not provide evidence for the source of acquisition of household goods. The Tribunal upheld this decision.

Conclusion:
The appeals for assessment years 2003-04 to 2008-09 were partly allowed for statistical purposes and partly dismissed, while the appeal for assessment year 2009-10 was dismissed. The Tribunal directed the Assessing Officer to recalculate the additions by considering the total surrender amount against the total investments in various properties, irrespective of the year of investment.