SMT. KUMAR GOMATHI,,CHENNAI vs. DCIT, CC - 2 (3),, CHENNAI

आदेश / O R D E R PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-19, Chennai, dated 27.09.2019

and pertains to assessment year 2015-16.

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PRAYER

For these grounds and such other grounds that may be urged at the time of hearing, it is most humbly prayed that the Hon'ble Tribunal may be pleased to

(a) Consider the sum of Rs.46,79,055/-, being the gift received by the appellant from her husband as not taxable.

(b) Pass such other orders as this respected authority may deem fit.

grounds and taken a legal ground challenging validity of assessment order

passed by the AO u/s.143(3) r.w.s.153C of the Act, in absence of notice

u/s.153A of the Act. The Ld.Counsel for the assessee contended that legal

ground taken by the assessee is purely a question of law which goes to root

of the matter and thus, the same can be taken at any time of the

proceedings including proceedings before the Tribunal and thus, petition

filed by the assessee may be admitted.

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3.1 The Ld.DR, on the other hand, opposing the petition filed by the

assessee for admission of additional grounds submitted that the assessee

is not a searched person and the assessment has been framed based on

information collected during the course of search in other case and thus,

the AO has rightly proceeded with completion of assessment u/s.153C of

the Act, and thus, there is no merit in legal ground taken by the assessee

challenging validity of assessment proceedings.

3.2 Having heard both the sides and considered petition filed by the

assessee for admission of additional grounds, we find that there is no merit

in legal ground taken by the assessee challenging validity of assessment

proceedings in light of non-issuance of notice u/s.153A of the Act, because,

as per the provisions of Sec.153C of the Act, where the AO satisfied that

material collected during the course of search in other case indicates

undisclosed income of any other person, then the AO shall record his

satisfaction and proceed to issue notice u/s.153C of the Act, to frame

assessment u/s.153C of the Act. In this case, as admitted by the AO

herself, there was a search in the residence of Mr.G. Kumar u/s.132 of the

Act, and during the course of search, certain materials belongs to assessee

was found and seized. The AO of searched person being satisfied with

materials collected during the course of search, handed over those

materials to the AO having jurisdiction over the assessee along with

satisfaction thereon and the AO having jurisdiction, proceeded in

accordance with provisions of Sec.153C of the Act, and completed the

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assessment. In our considered view, there is no lacunae in initiation of

proceedings u/s.153C of the Act, because, as per provisions of Sec.153C of

the Act, the AO has to assess the undisclosed income, if any, of other

person u/s.153C of the Act. Although, the assessee has relied upon the

decision of the ITAT, Bengaluru, Bench ‘B”, in the case of Rajesh Kumar v.

ACIT in light of the decision of the Hon’ble Karnataka High Court in the case

of CIT v. IBC Knowledge Park (P) Ltd., reported in [2016] 385 ITR 346, but

on analysis of said judgment, we find that there was a passing reference

on the issue. However, the issue before the Hon’ble Karnataka High Court

on assessment of undisclosed income in absence of incriminating material

found as a result of search, when the assessments have been

unabated/concluded as on the date of search. Therefore, we are of the

considered view that the case law relied upon by the Counsel for the

assessee, is not applicable to the facts of the present case and thus, the

same is rejected. Therefore, considering the facts and circumstances of

the case and also provisions of Sec.153C of the Act, we are of the

considered view that there is no merit in the petition filed by the assessee

seeking to raise additional grounds on the issue of non-issuance of notice

u/s.153A of the Act. Hence, we reject the petition filed by the assessee for

rising additional grounds of appeal.

Proprietor of M/s.Cholan Technology. A search and seizure operation

u/s.132 of the Act, was conducted on 15.07.2016 in the residence of Shri

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G. Kumar, husband of the assessee. During the course of search, some

loose sheets were found and seized which contains one Sale Deed belongs

to the assessee, Smt. K. Gomathi. During the course of post search

proceedings, summons u/s.131 of the Act, was issued and sworn statement

was recorded from the assessee. In response to the specific question

Nos.7-10, she admitted that source for purchase of property is out of her

past savings, agricultural income and from the savings of her husband

Mr.G.Kumar. She further admitted that investment in purchase of four

properties was not disclosed and also agreed to offer undisclosed income

of Rs.46,79,055/-. Consequent to search, notice u/s.153C of the Act, was

issued. In response to notice, the assessee has filed her return of income

on 30.08.2018 admitting total income of Rs.50,01,810/- which includes

undisclosed income of Rs.46,79,055/- offered during the course of search.

The case has been taken for scrutiny and during the course of assessment

proceedings, the assessee contended that although, she had offered

undisclosed income towards source for purchase of property as

unexplained, but source for purchase of property is out of gift of

Rs.46,75,000/- received from her husband through cash as well as bank.

The AO, however, was not convinced with the explanation furnished by the

assessee and according to the AO, all along the assessee stated that she

could not explain source for purchase of property and further, offered

undisclosed income. However, after a period of two years, she had changed

her arguments and claimed source for purchase of property out of gift

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received from her husband. The AO further noticed that although, the

assessee claims to have received gift from her husband, but on verification

of details, it was noticed that the so-called gift claims to have received from

her husband, is in cash and thus, opined that the assessee has failed to

prove the claim of gift with necessary evidences and thus, rejected the

arguments of the assessee and assessed income as declared by the

assessee amounting to Rs.50,01,810/-.

appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed

detailed written submissions on the issue which has been extracted at Para

Nos.5.1 to 5.11 of the Ld.CIT(A)’s order. The assessee had also taken

support from Circular No.14 (XL-35) of 1955 dated 11.04.1955 issued by

the CBDT and argued that the Officers of the Department must not take

advantage of ignorance of the assessee and should assess the income on

the basis of materials, but not on the basis of admissions of the assessee.

assessee and also taken note of various facts, rejected the arguments of

the assessee and sustained the action of the AO in rejecting the claim of so

called gift received by the assessee from her husband on the ground that

the assessee could not explain source for purchase of property with

necessary evidences. Further, the assessee has accepted the fact that

purchase of four properties is with her business income and past savings,

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and same was not disclosed to Income Tax Department. She further

admitted that additional income of Rs.46,79,055/- for the AY 2015-16.

Therefore, the Ld.CIT(A) opined that the claim of the assessee that she had

received gift from her husband is an afterthought to circumvent additions

made towards source for purchase of property and thus, rejected the

arguments of the assessee and sustained the additions made by the AO.

The relevant findings of the Ld.CIT(A) are as under:

6.1. I have gone through the assessment order, the grounds of appeal and the written submissions made in this regard. Briefly search was carried out at the residence of Sh. S.Ravi on 13/7/2016 and loose sheets pertaining to sale deed belonging to the appellant was also found and seized. The appellant is the proprietor of Cholan Technology and during her statement recorded u/s 131 she stated about 4 immovable properties (out of 19 properties) were not reflected in her books of accounts. She admitted the same as her unaccounted income and offered an amount of Rs.46,79,055/- as her, unaccounted income under the head income from other sources for A.Y 2015-16. Another two residential plots in Ariyalur worth Rs.15,32,455/- were also admitted as not reflected in books of accounts are stated that the surrender of Rs.46,79,055/- included this investment as well. In the original return for the Asstt.year under consideration filed on 3/08/2016 the appellant reported an income of Rs.3,22,750/- only. However, in response to notice u/s.153C dated 09/07/2018 appellant filed return dated 30/08/2018 for Rs.50,01,810/-. In this return the income surrendered was incorporated by the appellant and the assessing officer has assessed that income as such.

6.2. The appellant has herself filed the return in response to notice u/s 153C and incorporated the income surrendered. She surrendered her income when she could not explain the property acquired in her name and the same was not recorded in her books. Having committed twice to the income surrendered the appellant cannot go back with an afterthought scheme that it was gift from her husband. Had it been so it would have been mentioned in the first place? The return of the husband Sh.Ganesan for A.Y 2015-16 that was otherwise due on 31/07/2016 has been filed on 30-10-2018, that is much after the date of search and the husband has not been filing his returns regularly. The gift transaction was not reported in the original return as the properties stated to be purchased from the gift were not reflected in the books of account. It is a clear cut case of afterthought.

6.3. The assessing officer has assessed the income that has been returned by the appellant in response to the notice. In that circumstance how could it be said that the assessing officer erred in considering the gift received by appellant from her husband as taxable. The amounts have been taxed on the basis of seized material confronted to her during the recording of her sworn statement. She could not explain those properties as the same were not reflected in her books and she surrendered that same as unaccounted income from other sources. She filed the return incorporating the same surrendered income in response to notice u/s 153C

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and paid the taxes. In these circumstances how can the assessing officer be faulted with as taxing the gift received from her husband. That was never an issue before the assessing officer when he took up the case for assessment; he has merely accepted the admitted income. 6.4. The grounds of appeal of the appellant in the above context are not admissible. The appeal of the appellant is therefore DISMISSED. 7. The Ld.Counsel for the assessee submitted that the Ld.CIT(A) is erred

in sustaining the addition made towards income admitted and offered by

the assessee towards source for purchase of property without appreciating

the fact that although, there is an admission from the assessee, but there

is no estoppel against law. Because, the law is very clear in as much as

unless authority of law, no taxes can be collected. She further submitted

that no doubt the assessee has admitted undisclosed income towards

source for purchase of property and also filed her return of income in

response to notice u/s.153C of the Act, and paid taxes, but fact remains

that gift received from her husband, is not taxable. Therefore, the assessee

has made a rightful claim before the AO and sought to exclude income

offered towards gift received from her husband. The AO as well as the

Ld.CIT(A) without appreciating the fact simply sustained the additions

made by the AO.

in the residence of Shri S.Ravi on 13.07.2016 and during the course of

search, some loose sheets were found pertaining to the assessee. During

the course of post search, investigation summons were issued to the

assessee and a sworn statement was recorded and in response to a specific

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question, she had admitted that source for purchase of property, was not

explained and further, agreed to offer undisclosed income of

Rs.46,79,055/-. The assessee had also filed her return of income on

30.08.2018, almost two years after the date of search and disclosed

additional income offered during the course of search. However, during the

course of assessment proceedings, after a lapse of more than two years,

took a ‘U’ turn and claimed that she had explainable source for purchase of

property and said source is out of gift of Rs.49,75,000/-, received from her

husband. If you go through the claim of the assessee, out of

Rs.46,79,000/- sum of Rs.39,75,000/- gift was received by cash and the

assessee could not explain the same with necessary evidences including

declaration of cash in hand for the relevant assessment year, wealth tax

returns filed by her husband. The balance amount of Rs.7 lakhs was also

claimed to have been paid through proper banking channel, but no evidence

was filed. Therefore, the AO as well as the Ld.CIT(A) has rightly rejected

the claim of the assessee and their orders should be upheld.

record and gone through orders of the authorities below. Admittedly, during

the course of search on 13.07.2016, a Sale Deed pertains to the assessee

was found and seized in the residence of Shri S.Ravi. It is also an admitted

fact that summons u/s.131 of the Act was issued and a sworn statement

was recorded form the assessee. She was asked to furnish the details of

source for purchase of property and in response, the assessee admitted

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four immovable properties purchased by her are not reflected in the books

of accounts and also she could not satisfactorily explain source for purchase

of said properties. She further admitted that she would offer undisclosed

income of Rs.46,79,055/- towards source for purchase of property. The

assessee had filed return in response to notice issued u/s.153C of the Act

on 30.08.2016 and declared income of Rs.50,01,810/- which includes

undisclosed income of Rs.46,79,055/- offered towards source for purchase

of property. These facts are not undisputed and further, right from the

date of search to the date of filing of return of income, the assessee had

never claimed that she had received gift from her husband. However, only

during the course of assessment proceedings, she claimed that she had

erroneously offered undisclosed income towards purchase of property by

mistaken of law. However, said source was out of gift of Rs.46,75,000/-

received from her husband Mr.G.Kumar.

assessee in light of reasons given by the AO as well as the Ld.CIT(A) to

reject the claim of so called gift received from her husband and we find that

right from the date of search on 15.07.2016 to the date of filing of return

of income in response to notice u/s.153C of the Act on 30.08.2018, the

assessee claimed that source for purchase of property is out of her business

income, agricultural income and savings of her husband. She further

claimed that four properties were not recorded in her regular books of

accounts and also not disclosed in the return of income filed for the relevant

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assessment year. She had also agreed to offer undisclosed income of

Rs.46,79,055/- and further, filed return of income and disclosed

undisclosed income and paid relevant taxes. Therefore, from the above it

is very clear that the assessee had admitted the fact of not disclosing four

properties in her regular books of accounts and also could not explain

source for purchase of four properties with necessary evidences. The

assessee never claimed before the investigation as well as the AO that she

had received gift from her husband. Therefore, the claim of so called gift

from her husband during the course of assessment proceedings, can at best

be treated as afterthought to circumvent the additions made towards

undisclosed income offered during the course of search. Further, though

the assessee claims to have received gift from her husband, but on perusal

of details filed by the assessee, we find that a sum of Rs.39,75,000/- has

been received in cash. The assessee has filed Income Tax Returns and

financial statement for the relevant assessment year and claimed that her

husband has opening cash balance of Rs.24,86,611/-, but she could not file

any evidence to prove that her husband declared said cash balance in

Wealth Tax Return filed for the relevant assessment year, because cash in

hand in excess of Rs.50,000/- is liable for wealth tax. Therefore, the claim

of the assessee that she had received cash gift of Rs.39,75,000/- from her

husband cannot be accepted, because, she could not adduce necessary

evidences. In so far as balance gift of Rs.7 lakhs received through bank,

no evidence including bank statements of the assessee and her husband

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was filed to prove that said gift has been received through bank. Further,

neither the assessee nor her husband filed any evidences during search and

post search proceedings to claim gift paid and received by the parties.

Therefore, we are of the considered view that the arguments of the

assessee, she had received gift from her husband is only an afterthought

that too more than two years from the date of search without any

documentary evidences. Hence, we are of the considered view that the AO

has rightly rejected the arguments of the assessee and accepted income

declared including undisclosed income offered towards source for purchase

of property. The Ld.CIT(A) righty apprised the facts and sustained the

additions made by the AO and thus, we are inclined to uphold the findings

of the Ld.CIT(A) and dismiss appeal of the assessee.