9911796707
TMI Blog2007 (3) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the learned CIT(A) has again erred in law in deleting the addition of ₹ 20,43,756 on account of foreign remittance received by the assessee, his wife and four daughters. 4. That while giving relief as per ground Nos. 1, 2 and 3 above, the learned CIT(A) failed to appreciate that the daughters were benamidars of the assessee and the unexplained deposits and interest thereon were rightly treated as income of the assessee and assessed accordingly. 5. That on the facts and in the circumstances of the case, the learned CIT(A) has further erred in law in deleting the addition of ₹ 5,78,100 on account of unexplained marriage expenses of the daughters of the assessee. 6. That on the facts and in the circumstances of the case, the learned CIT(A) has further erred in law in deleting the addition of ₹ 7,00,000 on account of unexplained investment and estimated profit in respect of the benami concern of the assessee styled Surjit Sharma Co. 2. The first issue raised by the Department is that the learned CIT(A) has erred in deleting the addition of ₹ 70,33,060 made on account of undisclosed income of the assessee by bringing to tax the depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. The maturity value (sic'date) of the NSCs was 13th March, 1992, i.e., in asst. yr. 1992-93. Annex. A-1, p. 4, i.e., discharge certificate dt. 13th March, 1992 also showed that some other NSCs had been purchased in the name of Miss Meenakshi on 12th March, 1986, when she was a minor and did not have any source of income. The maturity date was again, 13th March, 1992. Thus all the bank accounts of the three daughters were found lying in the possession of the assessee. The bank accounts were attached and the statements of the daughters were recorded. From these statements, the AO inferred that it was the assessee rather than his daughters, who controlled all these accounts, depositing the cash with a view to build up capital in the names of all his daughters. It was also concluded that the cash deposits came from a source over which none of the daughters of the assessee had any control. The AO further observed that the pattern of deposits in these accounts was identical, i.e., during the period 1992 to 1994 foreign remittances had evenly been deposited in all these accounts. In 1996, very frequent and regular cash deposits of amounts ranging from ₹ 10,000 to ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own that the income declared under VDIS was the same. The learned Departmental Representative has then argued that since the search was conducted and income was found as the assessee's income only, in keeping with the decision of the Hon'ble Kerala High Court in the case of P.K. Narayanan vs. CIT (1997) 142 CTR (Ker) 381 : (1998) 229 ITR 596 (Ker), the income has to be assessed in the correct hands, irrespective of the treatment given to it in the returns of income. 6. On the other hand, the learned counsel for the assessee has argued that the bank deposits are not undisclosed income under s. 158BB of the Act; that all the accounts stood disclosed before the search and the income has to be assessed in regular assessment; that nothing was unearthed as a result of search; that then, the affidavits of the assessee's daughters were never rebutted; that while making the addition, the credit entries were never confronted to the assessee; and that, on quantum, the theory of peak credit and telescoping was not applied. 7. Having considered the rival contentions and having perused the material on record, we find that undisputedly, the four daughters of the assessee are ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as noted in the assessment order, it was in the months of May and June, 1997 when returns of income were filed for the first time in the case of three daughters of the assessee. By way of filing these returns, these daughters of the assessee had offered a sizeable portion of the unexplained deposits to tax. The interest income was to be taxed in the hands of the assessee. The statement of the assessee was recorded on 24th April, 1997, when the marriages performed by the assessee were being investigated by the Investigation Wing of the Department. The fourth daughter of the assessee, namely, Sunaina Sharma was adopted vide adoption deed dt. 6th Aug., 1992, by the assessee's uncle. The daughters of the assessee having filed their IT returns, all bank accounts stood disclosed therein. The assessment was completed as a protective assessment in the case of two of the assessee's daughters, whereas the returned incomes of the other two daughters were accepted. Declarations under VDIS were filed by the assessee's daughters and these declarations were accepted by the Department. Notices under s. 142(1) of the Act were issued to three daughters of the assessee, namely, Nisha, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also does not carry any force. It is rejected. 10. Ground No. 3 states that the learned CIT(A) has erred in deleting the addition of ₹ 20,43,756 on account of foreign remittances received by the assessee, his wife and four daughters. In this regard, the AO noticed that the assessee, his wife and daughters had received huge amounts of foreign remittance, amounting to ₹ 22 lacs, during the period September, 1992 to March, 1995. The facts are that some of the drafts/cheques received in respect of foreign remittances were found and seized. The AO observed that a majority of the remittances was received from Shri Gurnam Singh of California, U.S.A. The AO made the addition of ₹ 20,42,153, setting off a sum of ₹ 2 lacs pertaining to M/s Sujeet Sharma Co., which was held to be a benamidar concern of the assessee, where addition of ₹ 2 lacs was separately made. 11. Before the CIT(A), the stand of the assessee was that the AO had failed to consider the details submitted during the assessment proceedings, wherein it has been explained that certain entries of FDRs/local cheques were included under the head 'Foreign remittances'; that the AO had als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had transferred the money to him to be kept in trust, so as to build up a sufficient amount in order to enable him to purchase land at a later date; that this explanation of the assessee was not at all tenable, since, as observed by the AO, in such a case, the assessee would have deposited his money in NRE account, which would have enabled the assessee to build up the reserve fast, since the interest in an NRE account is of higher rate and is also tax-free; that if the money was for capital build up, it would not have been advanced to all the members of the family of the assessee; that these remittances had been invested by the members of the family of the assessee in fixed deposits and the interest therein has been shown as their income in the respective tax returns filed by the daughters of the assessee; that it has come to light from the ledger and cash book of M/s Sujeet Sharma Co., i.e., the benami concern of the assessee, that the amount of ₹ 25,000 had been paid to Shri Naval Seth to arrange gifts of ₹ 2 lacs and from this, it was evident that the assessee had been channalising his unexplained money from a hawala channel; that as such, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was, therefore, added to the income of the assessee. The learned CIT(A) deleted this addition and this has aggrieved the Department. 20. The. learned Departmental Representative has contended before us that the stand of the assessee in this regard has been that no expenses were incurred by him on the marriages of his three daughters and that the expenses were met out of the Shagans, etc., received. The Departmental Representative states that the AO noticed that the marriages took place in Milan Palace, a reputed marriage place and that the AO, accordingly worked out the expenses, referring to the statement of Smt. Sunaina Sharma. It has been argued that the AO's proposition was not disbelieved by the learned CIT(A) but he still gave credit regarding the Shagans, though no evidence has been brought on record with regard to the receipt of such Shagans. 21. On the other hand, the learned counsel for the assessee, supporting the order of the learned CIT(A), has submitted that no incriminating material in this regard was found by the Department during the search and no post-search enquiry can be made without reference to the material found. 22. The stand of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5 stands rejected. 23. Ground No. 6 states that the learned CIT(A) erred in deleting the addition of ₹ 7 lacs on account of unexplained investment and estimated profit in respect of M/s Sujeet Sharma Co., a benami concern of the assessee. 24. In the search action, certain books of account of Shri Sujeet Sharma for the period November, 1987 to March, 1992 were found from the assessee's cupboard in his office. From these books, it was seen that the said concern was running an oil tanker and was in business from 1988 to 1992. The AO observed that page No. 1 of the assessee's ledger revealed the assessee's capital account representing a contribution of ₹ 5,40,000 between November, 1987 to February, 1988 along with loan amount of ₹ 10,000 and ₹ 40,000 in April, 1999 and March, 1992, respectively. The AO observed that the said capital of ₹ 5,40,000 was built by deposit in cash amounting to ₹ 1,51,786 by way of loans of ₹ 1,47,539 and the balance by way of capital of ₹ 2 lacs as NRI gift. The AO concluded that the total unexplained investment was of ₹ 5.90 lacs which was made by the assessee in M/s Sujeet Sharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iends. The AO did not take all this into consideration. The conclusion of the AO that this concern was the benami concern of the assessee, was based on the name of the assessee appearing against the capital account and on the basis that the documents/books were found in his possession along with the details of the expenditure. However, it was not considered that the amounts were contributed by persons other than the assessee and that there was no corresponding debit in the assessee's savings account, due to which, no addition in the capital account remains. Moreover, Shri Sujeet Sharma had already reflected the income from the operation of the tanker by filing returns of income. Statement of Shri Sujeet Sharma was recorded on 29th Aug., 1997. He had confirmed the ownership of the business. He has also admitted having filed income return of his business. The assessee, who vide letter dt. 15th March, 1999, explained that he had nothing to do with this business. Vide letter dt. 17th June, 1999, the assessee filed an affidavit of Shri Sujeet Sharma, confirming that he was the owner of the tanker. Copies of bills, national permit and transportation contract letter from the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Sudesh Sharma, wife of the assessee. Addition confirmed is illegal and bad in law. 2. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of ₹ 1,32,158 on account of deposits of ₹ 1,32,158 during block period in the name of Smt. Sita Rani. Addition confirmed is illegal and bad in law. 3. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of ₹ 40,000 out of addition of ₹ 50,000 on account of household items made by the AO. Addition confirmed is illegal and bad in law. 32. Apropos ground No. 1, the AO observed that a perusal of bank account No. 810 in Bank of Baroda, Dilkusha Market, Jalandhar, which was in the name of the assessee, showed that deposits in cash ranging from ₹ 5,000 to ₹ 10,000 had been made regularly, but these deposits were neither relatable to any of the sources of income of the assessee, nor was there any nexus with the withdrawal made by the assessee from his disclosed bank account. It was found that there was cash deposit entry totalling upto ₹ 1,32,810; that this account had been abruptly closed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the assessee's wife had filed her affidavit in this regard, which had not been rebutted by the AO; that the AO had taken contradictory stands inasmuch as while making addition of the deposits in the savings bank accounts of the assessee's daughters, he had held that the deposits belonged to the assessee, though they were in the names of somebody else and while making the addition in question, it was held that the addition was being made in the hands of the assessee, since the account was in his name; and that no cheques were issued in the names of any third party, as only interest amount was withdrawn and after 1993, no such withdrawal was made. 34. The learned CIT(A) upheld the addition, agreeing with the AO that the assessee had made withdrawals from this account and so maintenance of this account was within his knowledge; that the wife of the assessee having her own bank accounts, it was incomprehensible as to why she would make deposits in the account of the assessee; that there was no direct evidence that deposits were not made by the assessee but by his wife; that the deposits being in an account owned by the assessee, it was his onus to exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d protective assessment itself is an either/or situation. In case the addition is confirmed in one hand, it would automatically stand deleted in the other hand. 38. The next submission of the assessee is that from 1993-94, the assessee's wife started depositing her pin money in this account without the knowledge of the assessee. This, however, has not been believed, since there is no direct evidence of any such deposit of pin money by the assessee's wife. Moreover, it is also a circumstance going against the assessee that undisputedly, the assessee's wife was having more than one bank account in her own name and so, there was no reason why she would have made the deposits of her pin money in the bank account of her husband. 39. The next contention of the assessee has been that the affidavit of the assessee's wife confirming such deposits, which affidavit was filed during the assessment proceedings, was not rebutted by the taxing authorities and so, this affidavit was good evidence, in the face of which, the addition could not have been made. Here, it is seen, that the affidavit in question is merely a self-serving document and it does not further the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wife, daughters-in-law and daughters, had also produced all the evidence required, besides affidavits. In the present case, however, the very bone of contention between the parties is that the self-serving affidavit of his wife has not been accepted as gosple truth, even though had the deposit been made by the assessee's wife, he could have produced direct evidence showing such deposits to have been actually made by her, which was not done. 43. The facts in Vinod Kamra (supra) are also totally different from those of the case in hand. In that case, in the search, jewellery was found in the residential premises and locker held in the joint name of the wife of the assessee and the brother of the said wife, in Allahabad Bank, Srinagar. Besides, jewellery was found on the person of the assessee's wife. The assessee explained the source of investment in gold jewellery as belonging to his wife, which was received by her at the time of marriage from her parents and parents-in-law and also at the time of ceremony of birth of son, etc. It was also submitted that part of jewellery was belonging to the wife of the brother of the assessee. The reason for keeping the jewellery in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,32,158 on account of deposits made during the block period in the name of Smt. Sita Rani. 49. The facts in this regard are that Smt. Sita Rani, wife of late Shri Ram Lubhaya, is the mother-in-law of the assessee. She is a resident of Mohalla Kallowali, Jalandhar. During the search, again, a bank account was found as being in the joint name of Bawa Sharma and Sita Rani. This was account No. 5973 with Bank of Baroda, Dilkusha Market, Jalandhar. Bawa Sharma, also known as Sunaina, is an unmarried daughter of the assessee, stated to have been adopted by the assessee's brother in 1992, vide an adoption deed. The assessee maintained that the deposits in this bank account had been made by Smt. Sita Rani. However, as per the AO, enquiries from the bank revealed that this bank account had been operated by the family members of the assessee, rather than by any of the family members of Smt. Sita Rani, who looked after her and with whom she was living. The AO observed that Smt. Sita Rani was an old lady having no source of income, as had been stated by her in her statement recorded in the presence of her daughter-in-law, who was well educated. The AO observed that pp. 31 and 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the daughters had been added. The assessee further submitted before the CIT(A) that Smt. Sita Rani had opened the account with Bank of Baroda in her individual capacity and since she was suffering from paralysis, she added the name of Bawa Sharma as a precautionary measure; that the deposits in the account of Smt. Sita Rani had no relation with the assessee; that Smt. Sita Rani had declared ₹ 3 lacs in VDIS and her declaration had already been accepted, proving that she was an independent assessee. Confirming the addition made, the learned CIT(A) observed that Smt. Sita Rani had not been found to have any source of income; that the investment made in KDRs had been tried to be explained vis-a-vis the VDIS declaration in the hands of Smt. Sita Rani, but it was not acceptable because under the VDIS declaration, Smt. Sita Rani had declared ₹ 3 lacs pertaining to the asst. yr. 1994-95, as cash, whereas the investment in the KDRs was in the prior period, when Smt. Sita Rani was not found to be having any source of income; that further, she was having her own relatives, but for these KDRs, nominations were in the names of the daughters of the assessee, rather than her own son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aturity value of the KDRs was declared under the VDIS and so, no addition was called for. In this regard, reliance has been placed on Kamal Narayan Jaiswal vs. Dy. CIT (2004) 87 TTJ (Jab) 385. The learned counsel for the assessee has further submitted that the KDRs were made in 1990-91 and no addition could be made in the asst. yr. 1994-95. Lastly, it has been submitted that no addition could be made, since the KDRs stood encashed prior to the search. 52. The learned Departmental Representative, on the other hand, supporting the order passed by the learned CIT(A), has submitted that the learned CIT(A) has fully noted that Smt. Sita Rani was found to have no source of income and that the amount was declared by her under VDIS pertains to the cash in the asst. yr. 1994-95, whereas the investment in question was made during the prior period. 53. With regard to this issue, we find that, as correctly submitted by the learned counsel for the assessee, the material on the basis of which the addition was made, i.e., the photocopies of the KDRs obtained during the course of search, were never confronted to the assessee. It is the first and foremost principle of natural justice, that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout ₹ 5,000 which was wrongly taken as ₹ 25,000 by the AO. 56. The learned CIT(A) while giving a relief of ₹ 10,000 to the assessee, observed as follows : 7.4 On the issue of household items, neither the fact of gift of AC National make by the brothers-in-law was substantiated nor source of purchase of local made AC of ₹ 7,000 was explained. Further, no such plea was taken at the time of search proceedings, I also do not find any merits in the submissions of the appellant that in the list of assets TV booster was noted as receiver of dish antenna, when the inventory of the household items was signed by the appellant. But since the addition of ₹ 25,000 was estimated addition made by the AO and considering the submissions of the learned Authorised Representative that cost of dish antenna is about ₹ 5,000, its cost is taken at ₹ 15,000 with relief of ₹ 10,000 to the appellant against additions of ₹ 50,000 on account of household items. The appellant gets relief of ₹ 10,000. 57. Before us, the assessee has not been able to controvert the observations recorded by the learned CIT(A) to the effect that apropos the N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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