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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI ANIL CHATURVEDI
आदेश /O R D E R PER BHAVNESH SAINI, J.M. This appeal by assessee has been directed against the order of Ld.
CIT(Appeals)-10, New Delhi dated 31.03.2016 for AY 2011-12 on the following grounds : - 1. (i) “That on the facts and circumstances of the case, the CIT(A) was not justified in confirming addition of Rs. 1,73,27,000/- as unexplained deposit in the bank account with Standard Chartered Bank, New Friends Colony, New Delhi.
(ii) That the deposit is represented by sale of paintings and having furnished the confirmation, affidavit along with permanent account number of the purchasers, there is no ground or basis for adverse inference against the assessee.
(iii) That ownership of paintings and genuineness of sale is fully
I.T.A.No.3249/Del/2016 supported and corroborated from evidence furnished on record and adverse inference is merely on the basis of presumption and surmises particularly when part of sale proceedings was duly accepted.
2. That the CIT(A) was also not justified in not accepting the claim of exemption u/s 54F even though the claim was in conformity with provisions of sec. 54F.”
We have heard Ld. Representatives of both the parties through Video Conferencing and perused the material on record.
The facts of the case are that assessee filed return of income declaring income of Rs. 12,20,170/-. AO issued statutory notices for completion of the assessment. The assessee had shown income from consultancy of old cars and income from other sources. The AO was in possession of AIR information with regard to deposit of cash in various bank accounts. The AO called for bank statements from various banks, wherein assessee was maintaining bank accounts. During the course of assessment proceedings, the AO after affording the opportunity to the assessee, asked to explain the source of deposits made in the various bank accounts.
3.1 In respect of bank account no. xxxxxx480 maintained with Union Bank of India, Sundar Nagar Branch, there were total deposits of Rs. 32,10,000/-. The AO asked the assessee to explain with documentary evidences the credit entries of Rs. 25,000/- and Rs. 40,000/- dated 19.03.2011, but the same remained unexplained. The AO, therefore, treated the same as income from undisclosed sources.
I.T.A.No.3249/Del/2016 3.2 In respect of bank account no. xxxxx7646 maintained with Standard Chartered Bank, New Friends Colony, Delhi in the name of M/s G Corporation, there was cash deposit of Rs. 45,000/- apart from other deposits of Rs. 28,77,742/-. The AO asked the assessee to explain the source of cash deposits supported by documentary evidence and also source of other deposits of Rs. 28,77,742/-. But assessee failed to explain the same, therefore, AO made addition of Rs. 29,22,742/- treating these deposits made from undisclosed sources.
3.3 In respect of bank account no. xxxxxx6844 with M/s Standard Chartered Bank, New Friends Colony in the name of assessee, there was cash deposits of Rs. 2,82,87,000/- and other deposits of Rs. 1,63,87,867/-, AO asked the assessee to explain source of the cash deposits. The assessee filed submissions explaining the source of the same. It was explained by the assessee that cash deposits were made from the sale consideration of property no. A-205, New Friends Colony, New Delhi which was sold in the FY 2009-10. It was further explained by assessee that capital gain tax was paid by assessee in AY 2010-11 in respect of this transaction. Considering the reply of assessee, AO asked to furnish complete name, address, PAN and assessment particulars of the buyer of the property, along with confirmation of the buyer and also asked to furnish complete address of the broker through whom the deal was finalized. However, assessee failed to explain the same, the AO, therefore, held that source of the above cash deposits of Rs.
I.T.A.No.3249/Del/2016 2,82,87,000/- remained unexplained, which was treated as income of assessee from undisclosed sources and added to the income of the assessee.
3.4 It was further noted by the AO in respect of the above bank account no. xxxxx6844 that assessee made cash deposits in this bank account. It was noted by the AO from submissions of the assessee that assessee had booked/purchased three apartments of M/s Emaar MGF Construction Pvt. Ltd. towards which assessee was making payment for purchase of the above three flats located at Commonwealth Games Village, New Delhi. The AO asked the assessee to explain with documentary evidence the source of other deposits of Rs. 1,63,87,867/- and was also required to furnish the details of sale/purchase of investments. The AO asked the assessee to furnish copy of ledger account as appearing in the books of account of the entity in respect of which trading account was drawn and was further asked to produce any other evidence/confirmation from the respective entity to substantiate the other transactions. The AO noted that assessee has not filed the complete details, therefore, considering the submission of the assessee and details filed, AO held that out of the total deposits of Rs. 1,63,87,867/-, assessee failed to explain the source of the deposits of Rs. 98,01,587/- which was added to the income of the assessee as income from undisclosed sources.
I.T.A.No.3249/Del/2016 3.5 In respect of bank account no. xxxxx6289 in the name of assessee maintained with Standard Chartered Bank, New Friends Colony, there was cash deposit of Rs. 95,76,576/-. The assessee was asked to explain the source of the above deposits with documentary evidences. The AO considering the explanation of the assessee and evidences on record considered deposit to tune of Rs. 6,61,576/- out of the above deposit as unexplained which was added to the income of the assessee.
3.6 In respect of bank account no. xxxxxx3688 maintained with Standard Charted Bank, Dehradun in the name of assessee, there was cash and other deposits of Rs. 45,89,620/-. Assessee was asked to explain the source of the above deposit. Consequent upon considering the submissions and evidences produced before AO, it was held by AO that an amount of Rs. 1,39,117/- remained unexplained out of the above deposits. Therefore, amount of Rs. 1,39,117/- was treated as unexplained deposits from undisclosed sources which was added to the income of the assessee.
Thus, the AO considered taxable income of assessee at Rs. 4,30,97,190/- by taking the above additions.
The assessee challenged the above additions before Ld. CIT(A) and detailed submissions of the assessee were filed. The assessee also filed an application under Rule 46A of IT Rules for admission of the additional evidences. The same were forwarded by the Ld. CIT(A) to the AO for filing the remand report. The AO submitted the remand report dated
I.T.A.No.3249/Del/2016 20.10.2014 which is reproduced in the appellate order in which the AO has briefly stated that Counsel for assessee was requested to produce all the four persons namely Mohd. Laiq Ahmed, Shri Ishrafil, Shri Parveen Goyal & Shri Rakesh who have purchased painting from assessee for recording their statements and was also asked that all the four persons will bring them the copy of the ITR, audited copy of the Profit & Loss Account and balance sheet. In response to this Shri Nikhil Bansal, CA of Shri Mohd. Laiq Ahmed and Shri Ishrafil appeared and filed power of attorney and copy of ITR of AY 2011-12 under appeal, copy of the bank accounts statement, affidavit and PAN Card. He has submitted that as the parties are travelling, they are not able to appear in person. For Shri Parveen Goyal & Shri Rakesh, Shri Nitin Bansal, CA appeared and filed power of attorney and also filed copy of the bank account statement, affidavit and PAN Card. He has also stated that since parties are travelling, they are not able to appear in person. The AO also noted that copies of the bank account opening form and name of the person to operate the bank accounts were also called u/s 131(6) of the IT Act. But no information has been received. The bank Manager has intimated that said bank accounts are closed and, as such, unable to furnish such information. The AO also submitted para-wise comments on merits and noted that assessee has not submitted any extra proof and also stated in the remand report the only proof submitted by assessee is regarding addition made of Rs. 98,01,587/-. Out of this also Rs. 8 lakhs for which I.T.A.No.3249/Del/2016 assessee has filed confirmation of Shri Sarbeshwar Khal is not accepted as the assessee has failed to submit copy of the account of this party.
The Ld. CIT(A) provided the copy of the remand report to the Counsel for assessee. The Counsel for assessee filed the comments to the remand report which is reproduced in the appellate order. The assessee in the comments against remand report submitted that as regards addition of Rs. 98,01,587/- AO has accepted correctness of his claim and there is also no basis to make any addition of Rs. 8 lakhs. In respect of addition of Rs. 65,000/-, it was submitted that these are two credits of Rs. 25,000/- and Rs. 40,000/- which were received through account payee cheques which were recovery of the old outstanding dues.
Other submissions were also filed to explain that there was no basis to make any addition on merits. In respect of addition of Rs. 2,82,87,000/-, it was submitted that these deposits are relating to sale proceeds of old paintings and all the supporting documents in respect of ownership of the paintings, confirmation of the parties and documentary evidences are filed. All the four persons namely; Mohd. Laiq Ahmed, Shri Ishrafil, Shri Parveen Goyal & Shri Rakesh, their Counsels appeared before AO along with their copy of ITR, bank statements, affidavit and PAN Number and confirmed purchase of the paintings from the assessee. Since parties were travelling, therefore, they could not appear before AO. The assessee, therefore, contended since copy of ITR of two persons were filed but these are the following undisputed facts:
I.T.A.No.3249/Del/2016 i. “There is no dispute that these deposits are relating to sale proceeds of paintings. ii. Fact of ownership of paintings which were sold to the four parties is not in dispute as same is corroborated from order u/s 132(5) dated 13/10/1993, placed in the paper book at page 33- 39. iii. The fact of sale of these paintings is supported from confirmation of the parties, their affidavits and also corroborated from bank statements and permanent account number of purchasers. iv. All the four parties are regular income tax assessees and duly furnished confirmation in support of purchase of paintings. Further, in response to notice u/s 133(6) of the Income Tax Act, 1961 during remand proceedings, Chartered Accountant of the parties also appeared and confirmed the fact of purchase of paintings as per details given in the confirmation and affidavit. v. The source of sale consideration is not in dispute as same is corroborated from bank statements of the parties and Assessing Officer has not made any adverse comments. vi. Further, authenticity of the bank account was duly verified from respective bank.”
The assessee further explained that there were no dispute with regard to genuineness and existence of bank accounts of the purchasers of the painting and parties are permanent assessees and have PAN number, therefore, AO could have verified the identity and genuineness from their assessment records or could have verified the information through their respective AOs. The assessee, therefore, discharged the onus regarding ownership and sale of paintings which is supported by documentary evidences. The AO did not bring any evidence on record to dispute the correctness of the claim of the assessee. The AO has not rebutted the explanation of the assessee.
It may be noted here that Ld. CIT(A) considering the detailed explanation of the assessee and material on record, remand report of the I.T.A.No.3249/Del/2016 AO and rejoinder of the assessee found that nothing adverse has been brought on record by the AO at the appellate stage. The AO has drawn adverse inference merely on the basis of cash deposits. The Ld. CIT(A) admitted the additional evidences filed by assessee and deleted the substantial addition on merits. The Ld. CIT(A) while deleting the substantial addition held that the AO failed to controvert with evidence that the amount deposited in cash in the bank accounts of the assessee was not received from sale of paintings. Unless AO controvert the contents of affidavits filed by assessee before him in the remand proceedings, same cannot be ignored. The Ld. CIT(A), however, confirmed the addition of Rs. 1,73,27,000/- in respect of the sale of paintings to Shri Parveen Goyal and Shri Rakesh. The relevant findings of the Ld. CIT(A) in this regard in paras 4.5.13 to 4.6.13 are reproduced as under:
“4.5.13 The moot question involved with regard to addition of Rs. 2,82,87,000/- made by the AO is concerned, it is pertinent to mention here that AO had made the addition for want of documentary evidence in respect of sale of property but the same could not be provided to him. However, subsequent to the completion of assessment proceedings, it was claimed by the assessee that the above amount deposited in the bank account maintained with Standard Chartered Bank, New Friends Colony, New Delhi relates to consideration received by him from sale of paintings which were personal asset and used for investment in residential house. As far as possession of paintings in question is concerned, the fact is verifiable from documentary evidence provided by the appellant during the course of appellate proceedings. Assessee has provided a copy of order u/s 132(5) of the IT Act, 1961 dated 16.06.1993 subsequent to search operation conducted at the residence of the assessee on 17.11.1993, which clearly established that 9
I.T.A.No.3249/Del/2016 several paintings of renowned artists were seized by the department. The above order also establish the fact that on 16.06.1993 paintings and works of arts were valued by Sh. Anish Farooqi, Director, National Modern Art, New Delhi and in all 75 paintings and 9 pieces of works of arts were valued at Rs. 25,89,000/-. Further from the above order, the names of painters also established which include paintings made by Sh. Ramachandran, Sh. Laxman Pai, Sh. Satish Gujral, Sh. K. Khosa, Sh. Manjeet Bawa and Tanjore paintings made by unknown artists, glass paintings and paintings of other miscellaneous artists. Further perusal of above order u/s 132(5) indicates that an addition of Rs. 22,09,000/- was made in the hands of the assessee as unexplained investment in paintings and works of art. These facts and circumstances of the case establish the fact that the possession of the paintings with the assessee cannot be denied. In the computation of capital gain on sale of paintings, assessee has shown the sale of 84 paintings worth Rs. 2,99,35,000/- against which purchase cost of painting has been claimed as per Panchnama dated 16.06.1993 at Rs. 25,89,000/- and after indexing the purchase cost has been taken at Rs. 75,44,176/-. Further, it is worth mentioning here that AO vide letter no. 54 dt. 26.02.2015 he was specifically asked to give his comments on the above claim of assessee but while submitting his remand report, AO failed to furnish any reply on the above issue controverting the availability of paintings with the assessee which have been claimed to have sold by the assessee during the period relevant to assessment under consideration. It is also a fact that assessee has filed an affidavit dt. 11.05.2015 wherein he confirmed that amount deposited in cash in the bank account in question relates to sale of paintings owned by him in earlier years and he has not sold any property during the year under consideration. However, AO failed to controvert the affidavit filed by the assessee before him in the remand proceedings. In the above backdrop, I am of the considered view that AO failed to bring on record any adverse finding with regard to the claim of the assessee made before him subsequent to the completion of the assessment proceedings and during the appellate proceedings before my Ld. Predecessor and me that assessee has not owned/sold the paintings. Hence, considering the documentary evidences filed by the Ld. AR during the appellate proceedings with regard to the possession of the paintings, confirmations filed by the parties who have purchased the paintings from the assessee, the claim of the I.T.A.No.3249/Del/2016 assessee cannot be denied that he was having possession of paintings, which were sold by him. 4.6.12 In the remand reports, it has been submitted that counsel of Mr. Laiq Ahmed and Mr. Ishrafil filed copies of Income Tax Return. With respect to Sh. Parveen Goyal and Sh. Rakesh, it has submitted that counsel for the assessee filed only copy of bank statement and PAN card only. As per letter dated 10.10.2014 written to the assessee by the Assessing Officer to explain the sale of old paintings in cash, he directed the assessee to file copy of ITRs of all the four persons namely-Mohd. Laiq Ahmed, Mr. Ishrafil, Mr. Parveen Goyal and Mr. Rakesh, but in spite of opportunity provided to the assessee, copies of Income Tax Returns (to demonstrate tax status & capacity) were not filed by the assessee in respect of Mr. Parveen Goyal and Mr. Rakesh. Considering this fact, I disallow the claim of the Ld. AR of the assessee that Mr. Parveen Goyal has purchased paintings from the assessee of Rs. 1,52,80,000/- and Mr. Rakesh purchased paintings worth Rs. 36,95,000/- from the assessee. 4.6.13 However, Ld. AR has filed copies of ITR for AY 2011-12 in respect of Mohd. Laiq Ahmed (Existing a/c no. 290691381240911) and Mr. Ishrafil (Existing a/c no. 234186311140711), the claim of the AR is accepted. Further, Ld. AR has also filed the confirmation, affidavit and bank details in respect of the above named two persons. Perusal of bank details of these persons clearly indicates substantial deposit and withdrawals which further justify their capacity to purchase the paintings in question details of which have also been furnished. Resultantly out of the total addition of Rs. 2,82,87,000/-, appellant gets relief in respect of purchase of paintings by Mohd. Laiq Ahmed of Rs. 76,35,000/- and by Mr. Ishrafil of Rs. 33,25,000/-, totaling to a sum of Rs. 1,09,60,000/-, and balance amount of Rs. 1,73,27,000/- is treated as unexplained.” 8.1 The Ld. CIT(A) also directed the AO to allow the exemption u/s 54F after taking into consideration the submissions of the assessee that part of capital gain was invested after close of the year and after the due date of filing of the return but directed to exclude in relation to the above two persons. The AO was also directed to pass on the necessary
I.T.A.No.3249/Del/2016 information to the concerned AOs of the above four persons who have confirmed that they have purchased paintings from the assessee.
It may also be noted here that as against deletion of the substantial addition by the Ld. CIT(A), Revenue preferred appeal before ITAT ‘C’ Bench in which have been dismissed vide order dated 14.10.2019 on account of low tax effect. The assessee is in appeal on the aforesaid grounds for maintaining the addition of Rs. 1,73,27,000/- in respect of sale of paintings to Shri Parveen Goyal & Shri Rakesh.
Ld. Counsel for assessee reiterated the submissions made before authorities below. He has submitted that on the identical reasons and identical evidences on record Ld. CIT(A) deleted the similar addition to the extent of Rs. 1,09,60,000/- in respect of sale of paintings to Mohd.
Laiq Ahmed and Shri Ishrafil and Departmental appeal has been dismissed in their cases vide order dated 14.10.2019. Copy of the order of the Tribunal is placed on record. He has, therefore, submitted that there was no justification for Ld. CIT(A) to maintain the addition of similar nature in respect of the other two purchasers Shri Parveen Goyal (Rs.
1,52,80,000/-) and Shri Rakesh (Rs. 36,95,000/-) totaling to Rs. 1,89,75,000/-. He has submitted that though the amount of sale consideration is Rs. 1,89,75,000/- but Ld. CIT(A) maintained the addition of Rs.1,73,27,000/- only which itself is wholly unjustified. The initial onus upon the assessee has been discharged. The ownership of the I.T.A.No.3249/Del/2016 paintings with assessee are not in dispute. It is a case of sale of paintings and not cash credit or receipt of share capital. Therefore, addition should not have been made by the authorities below. He has submitted that since PAN of these two persons were also filed. Therefore, this fact could have been verified from the assessment records of both the persons instead of confirming the addition for not filing the copy of the ITR. The non-filing of copy of ITR is no ground to disbelieve the explanation of the assessee. He has relied upon the judgment of the Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 in which it was held as under:
“In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the Income tax asessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise.” 10.1 He has submitted that addition may be deleted and AO may be directed to accept claim of exemption u/s 54F as per law also.
On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that initially assessee explained the source of cash 13
I.T.A.No.3249/Del/2016 deposits to be sale of asset but later on explained it is a case of sale of paintings. Therefore, appeal of the assessee may be dismissed.
We have considered the rival submission and perused the material available on record. It is not in dispute that assessee filed additional evidences at the appellate stage on which remand report from the AO was called for. The Ld. CIT(A) also considered rejoinder of the assessee and ultimately admitted the additional evidences filed by assessee at appellate stage. The Ld. CIT(A) deleted the substantial addition against which Revenue preferred an appeal before the Tribunal but it was dismissed on account of low tax effect vide order dated 14.10.2019.
Thus, there are following undisputed facts available on record: -
1) The deposits related to sale proceeds of paintings;
2) The fact of ownership of paintings with assessee which were sold to four persons is not in dispute, which fact is also verifiable from copy of the order u/s 132(5) of the IT Act which were found during the course of search operation at the residence of the assessee;
3) The assessee proved the fact of sale of these paintings to the four persons which is supported by the confirmations of the parties, their affidavits and bank statements and copy of the PAN number of the purchasers and in two cases copy of the ITR is filed;
4) It is not in dispute that all the four parties who have purchased paintings from the assessee are regular Income tax assessee and duly filed confirmations in support of purchase of the paintings.
I.T.A.No.3249/Del/2016
The Counsel for purchasers also appeared before AO and confirmed the fact of purchase of paintings.
5) The source of sale consideration is not in dispute which is corroborated by bank statements of all the four parties and their bank accounts are duly verifiable and could not be disputed.
12.1 Thus, it is proved on record that assessee sold the paintings held by him to the four parties and AO did not bring any evidence on record to controvert the availability of the paintings with the assessee which have been sold by assessee to the above four parties in assessment year under appeal. The Ld. CIT(A) accepted the similar evidences for accepting sale of paintings to Mohd. Laiq Ahmed and Shri Ishrafil but in respect of Shri Parveen Goyal and Shri Rakesh the claim is not accepted because copy of their ITR is not filed. The Ld. CIT(A) in his findings has directed the AO to pass on necessary information to the concerned AOs of the above four persons who have confirmed that they have purchased paintings from the assessee. Thus, the Ld. CIT(A) accepted that four parties have confirmed purchase of paintings from the assessee. When Ld. CIT(A) called for the remand report from the AO at appellate stage and also directed to pass on information of sale of paintings to the concerned AO, Ld. CIT(A) could have directed the AO or the concerned AOs of the purchaser to verify the copy of the ITR in the cases of two purchasers Shri Parveen Goyal and Shri Rakesh but no steps have been taken in this regard despite both are existing assessees of the Income tax Department. The decision of the I.T.A.No.3249/Del/2016 Hon’ble Supreme Court in the case of Orissa Corporation Pvt. Ltd. (supra) would squarely apply in favour of the assessee. This was the sole reason that no copy of the ITR is filed has taken the Ld. CIT(A) to confirm part addition. Such reason cannot be sustained in law. Further, the total sale consideration in respect of the two parties is of Rs. 1,89,75,000/- on account of receipt of cash against sale of paintings but the Ld. CIT(A) maintained addition of Rs. 1,73,27,000/- only. It would show that even for the differential amount Ld. CIT(A) has accepted that assessee sold the paintings genuinely to these two parties. Therefore, on the same set of documentary evidences when Ld. CIT(A) deleted the substantial addition in respect of two parties for sale of paintings to them, there were no justifiable reason for Ld. CIT(A) to sustain part addition against the assessee. The documentary evidences brought on record and examined by the AO at appellate stage and not controverted by the AO would lead to the conclusion that assessee received the impugned amount on account of sale of paintings from the above two purchasers and the evidences brought on record have not been controverted by the AO through any evidence or material on record. Therefore, for sale of paintings by assessee, strictly the provisions of section 68 may not apply in the case of the assessee. The onus upon assessee to explain the source of the cash deposit in the bank account is duly discharged and, as such, there was no justification to make or sustain even part addition against the assessee. In view of the above discussion, we set aside the I.T.A.No.3249/Del/2016 orders of the authorities below and delete the entire addition. AO is also directed to grant benefit of section 54F to the assessee on account of deletion of this addition as per law.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 02/12/2020.