COMMISSIONER OF INCOME TAX
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ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on:18th July, 2012 %
Date of Decision:31st August, 2012
+ ITA 713/2008
COMMISSIONER OF INCOME TAX
.......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus
KEDAR NATH GUPTA
…..Respondent Through: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates. + ITA 948/2008
COMMISSIONER OF INCOME TAX
.......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus
ASHA KEDAR NATH GUPTA
…..Respondent Through: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates. + ITA 892/2008
COMMISSIONER OF INCOME TAX
.......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus
MANI KAKKAR
…..Respondent Through: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates. + ITA 707/2008
COMMISSIONER OF INCOME TAX
.......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus
ROHIT KEDAR NATH GUPTA
…..Respondent Through: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates.
2012:DHC:5366-DB
ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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+ ITA 706/2008
COMMISSIONER OF INCOME TAX
.......Appellant Through: Mr. N. P. Sahni, Sr. Standing Counsel with Mr. Ruchesh Sinha, Advocate. Versus
NITIN KEDAR NATH GUPTA
…..Respondent Through: Mr. Anoop Sharma and Mr. Manu K. Giri, Advocates.
CORAM: MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
Whether Reporters of local papers may be allowed to see the judgment?
To be referred to the Reporters or not?
Whether the judgment should be reported in the Digest?
R.V. EASWAR, J.:
These are five appeals filed by the Commissioner of Income Tax before this Court under Section 260A of the Income Tax Act, 1961, hereinafter referred to as the „Act‟. They relate to the different assessees but since they are all connected, they are disposed of by a common judgment.
Substantial questions of law were framed in the case of Kedarnath Gupta and Mani Kakkar in ITA No.713/2008 and 892/2008 respectively. These are as follows: - Kedarnath Gupta “(1) Whether the Income Tax Appellate Tribunal was right in affirming the order of the Commissioner of Income Tax (Appeals) and deleting the addition of `4,71,05,000/-made by the Assessing Officer towards unexplained investment in KG Farms and Jyoti Farms? (2) Whether the Income Tax Appellate Tribunal was right in confirming deletion of addition of `19,35,769/- on account of undisclosed capital gains on sale of land at Jaipur Highway? 2012:DHC:5366-DB
ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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(3) Whether the Income Tax Appellate Tribunal was right in upholding deletion of addition of `2.30 lacs made by the Assessing Officer on account of unexplained commission paid to the broker in connection with the sale of KG Farms? (4) Whether the order passed by the Income Tax Appellate Tribunal is perverse?” Mani Kakkar
“(1) Whether the Income Tax Appellate Tribunal was correct in deleting addition of `2,27,80,000/- and `2,50,000/- made on account of undisclosed capital gains and undisclosed brokerage paid by the respondent assessee?
(2) Whether the order passed by the Income Tax Appellate Tribunal is perverse?”
In ITA No.948/2008, 707/2008 and 706/2008 (Asha Kedarnath Gupta, Rohit Kedarnath Gupta and Nitin Kedarnath Gupta respectively), no substantial questions of law have been framed because the assessment in these cases were made on protective basis.
The facts giving rise to the present appeals, shorn of irrelevant details, are these. A search was conducted in the premises of one Rajinder Gupta under Section 132 of the Act on 27.08.1998. Rajinder Gupta is the brother of Kedarnath Gupta. In the course of the search several documents were found including originals and photocopies in respect of purchase of farm houses in the name of the sons of Kedarnath Gupta, namely, Nitin Kedarnath Gupta and Rohit Kedarnath Gupta. The documents found also reveal that Kedarnath Gupta had incurred substantial expenditure on the construction/ renovation as well as the maintenance of the farm houses in Jaunpur (KG Farms) and Kishangarh (Jyoti Farms). In the course of the search, a statement was recorded from Rajinder Gupta on oath under Section 132 (4) of the Act. We may refer to the statement in some detail later but suffice here to note that he stated, inter alia, that he was the power of attorney holder of the family of 2012:DHC:5366-DB
ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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Kedarnath Gupta and that Kedarnath Gupta was incurring about `10,000/- to `11,000/- per month on the maintenance of the farm houses and salaries of watchman and gardeners for the last three years till the date of search. He also stated that Kedarnath Gupta had purchased these farm houses with his on-monies and they were registered in the names of his sons.
On the basis of the above, proceedings were initiated under Section 158BD of the Act against Kedarnath Gupta who is the respondent in ITA No.713/2008. He was required to file a return declaring his undisclosed income for the block period consisting of the period from 01.04.1988 to 27.08.1998. Kedarnath Gupta filed the block return declaring “nil” undisclosed income. Since he was stationed in Dubai, he would appear to have appointed one Anil Khatri as his power of attorney to sign the block return. The Assessing Officer appears to have issued a notice under Section 143(2) of the Act to Kedarnath Gupta at his Punjabi Bagh address in New Delhi requiring him to furnish the information regarding the sources of investment in KG Farm and Jyoti Farm, the sources of expenses incurred on the maintenance of the farm houses and also the details of all moveable and immoveable properties purchased and sold by him during the block period along with the capital gains or loss, if any. The bank accounts of Kedarnath Gupta were also called for. In addition, he was required to produce Rajinder Gupta on 15.03.2002 in connection with the sworn statement recorded from him on the date of search where he had referred to the purchase of farm houses by his brother Kedarnath Gupta. There was no response from the Kedarnath Gupta to this.
Thereafter, the Assessing Officer would appear to have invited objections from Rajinder Gupta as to why he should not be treated as the agent of Kedarnath Gupta, who is hereinafter referred to as the “assessee”, under Section 163 of the Act. The basis for this proposal was (a) that Rajinder Gupta was operating the NRO account of the assessee from Citi Bank, New Delhi, (b) he was also involved in the purchase of the farm houses for the assessee in the names of the assessee‟s sons. Rajinder Gupta 2012:DHC:5366-DB
ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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objected to the proposal to appoint him as the agent of the assessee, though he did not rebut the fact that he was power of attorney holder of the assessee and was also authorised to operate the assessee‟s bank account; nor did he deny the allegation that he was involved in the negotiations and payments for the transaction of purchase of the farm houses. These facts, coupled with the fact that Rajinder Gupta himself had admitted in the course of the sworn statement that he had withdrawn the cash found during the search from the assessee‟s bank account, enabled the Assessing Officer to treat Rajinder Gupta as the assessee‟s agent.
The Assessing Officer thereupon proceeded to examine the investment made by the assessee in the purchase of the KG Farms (at Jaunpur) and Jyoti Farm at Kishangarh (Vasant Kunj). He referred to the fact that simultaneously a search was conducted on 27.08.1998 in the business premises of M/s. Pandit Estates, a broker firm which was involved in the transaction as also in the residential premises of Suraj Bhan Sharma who was an operative of Pandit Estates. A statement was recorded from him under Section 132 (4) of the Act in response to which he stated that he is a teacher in a Govt. School and also operates as real estate dealer/ agent from the office of Pandit Estates, Chhattarpur Mandir Mor, Mehrauli along with two of his relatives, namely, Radhey Shyam Sharma and Dharampal Sharma who was also an associate of Pandit Estates. Suraj Bhan Sharma was questioned about the purchase of farm houses for the assessee, which was finalised through him. The relevant portions of the statement are extracted in the assessment order of Kedarnath Gupta but it is not necessary to reproduce the same and we need only refer to the gist thereof: - (a). Suraj Bhan Sharma confirmed that the purchase of the two Farm houses by the assessee was done through him. He confirmed that KG Farms was purchased in May/ June, 1995 for a total consideration of `2.49 crores, out of which `26,00,000/- was paid through cheque and the remaining amount of `2.23 crores was paid in cash. This property was sold to the assessee by one Ashok Kakkar and consisted of 2.5 acres and 3 biswas of farm land having a two 2012:DHC:5366-DB
ITA Nos.713/2008, 948/2008, 892/2008, 707/2008 & 706/2008
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storied house therein with built up area of 5000 Sq. ft. The property was registered showing sale consideration of `26,00,000/- in the office of Sub-
