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TMI Blog2012 (10) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee failed to furnish any evidence to show that the balance payment was made by the ultimate purchaser and the company has received the commission income. The addition has not made solely on the ground that the assessee purchased and owned these paintings, but it was made on the ground that only part payment has been shown in the invoices, which are in the name of the assessee and therefore, the balance payment was made through hawala route - against assessee. Trader in paintings - For AY 2009-09 find force and merit on the point that some of the paintings belong to the company and written off because of low/commercial value, if the said claim of the assessee is supported by the relevant record. Both AO and CIT(A) have not examined the said factual claim of the assessee and rejected the same on technical grounds that the assessee did not declare the same at the time of search, thus set aside the issue of addition on account of unexplained investment in paintings for the assessment year 2008 – 09 to the record of AO to reconsider it afresh as assessee is at liberty to produce any evidence with regard to the valuation of the paintings - in favour of assessee for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foundation Ltd which has been trading in paintings. The day-to- day running of business of purchase and sale of paintings of the company is carried out by the assessee. There was a search and seizure action on 17/04/2007 at the business premises of M/s Synergy Art foundation and it's directors including the assessee. During the search operation, certain incriminating documentary evidence were found and seized to show the undisclosed income. Consequently, notices under section 143(A) of the Act were issued and the assessee filed return of income in respect of assessment years 2002-03 to 2008-09. The AO completed the assessment under section 153A read with section 143(3) for all the assessment years on 31/11/2009. The AO made certain additions, some of which are common for all the years and some of them are common for couple of years. 2.1 On appeal, the CIT(A) called for a remand report from the Assessing Officer which was submitted on 08/10/2010. After considering the remand report, the CIT(A) granted part relief to the assessee. Aggrieved by the order of CIT(A), the assessee filed these appeals before us. 3 For the assessment year 2002-03, the assessee has raised the following e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed representative of the assessee vide letter dated 4/12/2009 filed in the tapal on 14.12.2009. However, the Assessing Officer surreptitiously completed the assessment on the 30th Nov 2009 without affording any opportunity to the assessee to rebut the presumption and allegation made in the show cause notices. Thus, the ld A.R of the assessee has submitted that the assessment has been completed in a tearing hurry without any regard to the position of the Assessing Officer as an quasi-judicial authority to assess a proper income after giving an appropriate opportunity, the manner in which the assessment was framed is illegal and opposed to fairness and principles of natural Justice. 4.2 On the other hand, the ld DR has submitted that the CIT(A) has called for a remand report from the Assessing Officer and therefore, the assessee was given a proper opportunity. The ld D.R. has further submitted that the Assessing Officer also given sufficient time and opportunity; but the assessee did not file the necessary details. He has relied upon the order of the authorities below. 5 We have considered the rival submissions and carefully perused the orders of the authorities below. Though, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of drawings, did not proceed further to find out as to how much thereof was debited in the books of M/s Synergy Art foundations Ltd to project the entire credit card payment out of context. The ld AR of the assessee has further submitted that the total expenditure through credit card is Rs.. 2,95,168/- and not Rs.. 4,36,555/- as alleged in the assessment order. He has further submitted that out of the total payment of Rs.. 2,95,168/-, a sum of Rs.. 93,376/- represents card payment towards personal drawings such as clothes books and payments to departmental store etc., which would more than suffice for the assessee to explain her status as single individual without encumbrances. He has further pointed out that the assessee had balance out of rental income received from property let out at Chennai to the extent of Rs.. 72,000/- which is duly disclosed in the original return of income filed for the assessment year 2002-03 and this is available for personal drawings also. 9.1 Thus, the learned A.R. of the assessee has submitted that the addition, on account of unexplained personal expenses due to low drawings is unwarranted and made without due regard to the facts on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessee's bank for the assessment year 2002-03, the issue requires a proper verification and examination at the level of Assessing Officer . 10.3 As regards the estimate of personal expenditure at Rs.. 40,000/- to Rs.. 50,000/- per month by the CIT(A) , the assessee is directed to produce the electricity bill and telephone bills for the relevant period before the Assessing Officer in this respect. Accordingly, we set aside this issue for all the assessment years to the record of the Assessing Officer. to consider the details, evidences and the electricity and telephone bills and then decide the issue afresh except for the assessment year 2008-09 for which the addition made by the Assessing Officer. has been deleted by the CIT(A) and revenue has not challenged the same. 11 Next effective ground raised by the assessee for the assessment year 2003-04 as ground number 9 as under: "The ld Commissioner of Income Tax(Appeals) is not justified in treating a sum of Rs. 14,62,500/- as alleged unexplained investment in paintings disregarding the fact of purchases of the said paintings in the books of Synergy Art Foundation Ltd." 11.1 A similar ground has also been raised for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his account. 17 Before us the learned A.R. of the assessee has submitted that as regards the painting purchased in the name of assessee and the addition was made by the Assessing Officer for the assessment year 2003-04 as unexplained investment, these paintings were purchased on behalf of M/s Synergy Art foundation Ltd. Only a part payment was made at the time of the invoice as shown in these invoices and the balance was paid by the prospective buyers. M/s Synergy Art foundation Ltd is a real person dealing with the alleged paintings and received the commission on sale of these paintings which were duly accounted in the books. He has further submitted that the CIT(A) failed to appreciate that the paintings dealt with by Synergy Art foundation are predominantly on consignment basis wherein the company deals with the artist and the prospective buyers at a mark-up referred to as commission in business parlance and the artwork was on behalf of the buyer from the artist. The artist is paid directly by the buyer on an agreed price and the difference in the price between the sale invoice and the price paid to the artist is the commission accruing on the sale. He has further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the artist to the assessee as gifts and therefore, the same cannot be treated as unexplained investment. The authorities below have not appreciated this fact that some of the paintings were received by the assessee as personal gifts. 17.2 On the other hand the learned D.R. has relied upon the orders of Assessing Officer and CIT(A) and submitted that the invoices found during the search clearly show that the paintings were purchased by the assessee and only a token amount was paid at the time of the purchase. The learned D.R. has submitted that without full payment, the ownership of the paintings shall not pass to the buyer. He has referred the conditions as mentioned in the invoices and submitted that the invoice also indicates the Federal Express tracking number, which is normally generated only when the goods are dispatched by the Federal Express. Therefore, it is clear that the payment was made on the date of invoice itself; but only a part payment was shown in the invoice. The assessee has not produced any corroborative evidence to establish that the balance payment was made by the prospective buyer. He has further submitted that the valuation has been done by the panel of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the painting was sold to the appellant as per the address given in the invoice. The address given in the invoice is 'Geeta Mehra, 206, 5th Avenue, New York, USA. According to the conditions mentioned in the sales invoice, the ownership shall not pass to the buyer unless the payment is made in full. The invoice also indicates the Federal Express tracking number which is normally generated only when the goods are dispatched by Federal Express. Therefore, it has to be inferred that the payment was in fact made to Grosvenor Gallery by 08.11.2002 itself, which is the date of invoice. According to the written explanation, the entire amount of 7929 pounds (including freight of 429 pounds) was paid by one Amrita Zaveri. But no corroborative evidence is furnished even during the appeal proceedings, after availing several opportunities. 16. Similarly, the corroborative evidences such as the confirmation of payments by the customers directly to the galleries outside the country are not submitted in respect of other paintings. Given the facts & circumstances of the case, it was also required that the appellant had to corroborate such claims by obtaining not only confirmation letters from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the opportunities given by the CIT(A), the assessee failed to furnish any evidence to show that the balance payment was made by the ultimate purchaser and the company has received the commission income. The addition has not made solely on the ground that the assessee purchased and owned these paintings; but it was made on the ground that only part payment has been shown in the invoices, which are in the name of the assessee and therefore, the balance payment was made through hawala route. 18.2 Even before us, nothing has been produced to show the name and details of the costumers on whose behalf the purchases were allegedly made by the assessee. The assessee has not disputed the purchases of the paintings in question; but has taken a plea that these paintings were purchased on behalf of the prospective buyers and the actual bill is on the company who was received the commission in the transaction. When nothing has been produced to show that the paintings were ultimately sold to such and such person and who has made the balance payment, then we do not find any reason to interfere with the order of CIT(A) for the assessment year 2003 - 04 on this issue. 19 For the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sely related and subjected to the same search and seizure action, then it was not difficult to verify the relevant material fact from the record already seized by the Department. 19.6 As regards the valuation of painting, if some of the paintings are found to be belonging to the company and written off, then the value of the same cannot be more than what was originally shown in the books of accounts of the company. Further, the assessee is at liberty to produce any evidence with regard to the valuation of the paintings. 20 In view of the above facts and circumstances and in the interest of Justice , we set aside the issue of addition on account of unexplained investment in paintings for the assessment year 2008 - 09 to the record of Assessing Officer to reconsider and decide the same afresh in the light of our above observation. 21 For the assessment year 2007 - 08 the assessee has also raised following grounds "8. The ld CIT(A) is not justified in sustaining the addition of Rs. 4 lacs as unexplained sources for purchase of land at Murud without properly construing the availability of funds to the extent of Rs. 5 lacs on sale of paintings and show as part of Rs. 46.15 lakhs in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said payment. 23.1 On the other hand the learned D.R. has relied upon the orders of the lower authorities. 24. We have considered the rival submissions as well as relevant material on record. in view of the new facts brought out by the assessee that the actual consideration paid for purchase of land is Rs. 15 lakh, the issue requires to be considered afresh. We further note that the issue was not properly verified by the authorities below and decided the same summarily. Accordingly, we set aside the issue to the record of the Assessing Officer for deciding the same after considering all the relevant facts and material. 25 Ground number 9 regarding the addition on account of opening capital balance. 25.1 We will also deal with the ground number 2, which is common in all appeals along with this ground of appeal. 25.2 The assessee had filed her original return on 25/10/2007 declaring a total taxable income of Rs. 69,97,189/-, which includes short term capital gain of Rs. 14 lakh from sale of paintings and long term capital gain of Rs. 22,19,815/- from sale of paintings. In response to notice under section 153A, the assessee filed the revised return dated 30/06/2008 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er against the assessee in holding that the assessee has manipulated the record. The learned A.R. of the assessee has submitted that the paintings were purchased by the assessee being an art connoisseur for the past several years and therefore, it is a personal effect, which is not subject to taxation either on purchase or on sale thereof. There is no scope of enquiry on the purchases, which are discarded. The sale proceeds of paintings were received mostly by cheques and representing the assertion to capital account on the liability side of balance sheet and the other being the purchase cost of painting shown under the investment in the asset side of balance sheet. The A.R. has thus submitted that there cannot be any confusion to understand the basic accounting entries one representing the liability side and other assets side. Thus it was contended that there is no case for addition of capital account of Rs. 60.15 lakh as unexplained sale of paintings and therefore, the addition is illegal and imaginary. He has referred section 2 (14) and submitted the paintings fall under the category of personal effects and only from the assessment year 2008-09, the amendment under section 2 (14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the written submission are as under: A copy of ledger accounts as on 31.03.2006 and forming part of seized materials Annexure A page 1 dated 17.04.2007 along with mahazarnama dated 12.11.2009 is enclosed for proof of purchase and payment therefor. Thus no part of the paintings in stock remain outside the accounts and the allegations made out that return were falsified is motivated and consonants. The addition in sum of Rs. 60. 15 lakhs is thus illegal and not sustainable. " 27.1 The assessee claimed to have sold the above paintings in the year under consideration, resulting surplus of Rs. 60.15 lakh. Though, in the original return of income, the assessee offered this amount as short term capital gains and long term capital gain; but subsequently, in the revised return, the assessee withdrawn the capital gain from tax and claimed that the paintings are personal effects and cannot be treated as capital asset under section 2(14) for the year under consideration. From the details of the purchase and sale of the paintings, it is clear that most of the paintings were purchased by the assessee from M/s Synergy Art foundations Ltd., and other paintings were purchased from the indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 which are shown as paintings sold total consideration of Rs.46,15,000/- and classified as Long Term Capital Gains. Further the details of paintings shown as purchased as per the written submission filed in the receipt counter on 19.09.2011 are entirely different from the paintings shown as sold in the reply to the remand report submitted. The appellant is a director of Synergy Art Foundation Ltd. It is shown in the written submissions filed on 19.09.2011 that 21 paintings were purchased from Synergy Art Foundation Ltd. on 13.03.2006. A director of the company is expected to promote the sales of the company rather than conducting trading activities between the company and herself. No explanation has been furnished as to what are the compelling circumstances under which 21 paintings have been shown as purchased by the appellant from Synergy Art Foundation Ltd., in which she is a director. Thus there are several inconsistencies and contradictions in the written submissions filed by the appellant on different dates during the appeal proceedings. Considering the fact that a large amount was stated to have been realized from the sales of paintings, which was Rs.60,15,000/-, and consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2008 - 09 in ground number 1 and 2 as under: 1. The learned Commissioner of Income Tax (Appeals) is not justified in holding that cash found in the locker at HDFC Bank in the sum of Rs.2. 15 lakhs, belonging to MIs. Synergy Art Foundation Limited is un-explained and confirming the additions in this regard. 2. The learned Commissioner of Income Tax (Appeals) failed to notice that the search having taken place at the beginning of the Accounting Year (17th April, 2007), the earlier year's cash withdrawals by the appellant at Rs.3,71,800/- and further withdrawals aggregating to Rs.50,000/- in the month of search, on dates prior to search is available to explain to cash found in the locker aforesaid." 29.1 During the search and seizure operation, a sum of Rs. 2 lakh was found in the bank locker of the assessee with HDFC bank, Worli, Mumbai and the said amount was seized. The AO has held that the assessee did not furnish any satisfactory explanation with regard to the issue of Rs. 2 lakh found and seized. Accordingly, the AO made an addition of Rs. 2 lakh on account of unexplained cash. 29.2 On appeal the CIT(A) has confirmed the addition made by the Assessing Officer on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equate sources of income returned by the appellant's mother year after year. The other contention that the said cash may be attributable to the withdrawals of the appellant herself has not been supported by any statement of the appellant during the search proceedings. Further the overall withdrawals of the appellant have already been considered for granting a relief in respect of the addition made by the A.O on account of low withdrawals. Therefore, in the facts and the circumstances of the case, it is hereby held that Rs.2,00,000/- found & seized during the search & seizure proceedings remained unexplained cash in terms of section 69A of the Act. Accordingly, the addition made on this count is found to be in order." 32 As it is clear from the record that the assessee never took this plea that the locker of HDFC Bank belongs to the company and not to the assessee. Even no record was filed to show this fact. Therefore, this fresh plea cannot be accepted without investigation of facts. Hence, we decline to entertain this same at this stage. In the absence of any material to show the availability of the funds to correlated with the cash found in the locker, we do not find any merit i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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