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Facts
A search and seizure operation was conducted, leading to an assessment order. The assessee's appeal against the CIT(A)'s order was heard. The core issue revolves around an investment in a plot and a claimed gift, which the Assessing Officer (AO) treated as unexplained. The matter has been before the tribunal multiple times, with previous remands for verification.
Held
The Tribunal observed that the assessee failed to provide independent evidence for the gift and its source, despite opportunities. While the donor appeared financially capable, the transaction's verification remained lacking. Consequently, the addition made by the AO on account of unexplained investment was upheld for one year but deleted for the other due to the donor's verifiable financial capacity and cross-verified details.
Key Issues
Whether the addition made by the AO on account of unexplained investment, sourced from a claimed gift, is sustainable in the absence of independent verification of the gift transaction and its source.
Sections Cited
144, 143(2), 250, 153(3), 69, 153A, 80C, 142(1), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “SMC”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: These two appeals by assessee are directed against the order of Ld. CIT (A), Udaipur-2 dated 28.08.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Ys. 2014-15 & 2016-17.
the assessee has raised the following grounds of appeal:
1. 1. That as Assessment Order u/s. 144 of the Act dated 22/06/2021 is time barred u/s. 153(3) of the Act, it is prayed that same be quashed.
2. That on account of non-compliance of notice u/s. 143(2) of the Act dated 20/04/2021 fixing hearing on 23/04/2021 Assessment Order u/s. 144/254(2) of the Act is passed on 22/06/2021. As the order u/s. 144 of the Act is passed after
60 days of the date of hearing for non-compliance to notice dated 20/04/2021, without notice for fresh hearing the assessment order be quashed.
3. That Hon'ble ITAT had remitted matter back to learned AO to verify gift and as while completing the assessment addition have been made u/s. 69 of the Act. It is prayed that the learned AO has exceeded his jurisdiction and therefore Assessment Order be quashed.
4. That while making assessment u/s. 144 of the Act the learned AO is to be taken into account all relevant material in his records. As in appellants' case it is not done by the learned AO while making addition of Rs. 3, 00,000/- it is therefore prayed that the addition of Rs. 3, 00,000/- be deleted.
5. That was all papers/documents in relation to gift of Rs. 3,00,000/- from Smt. Inderjeet Kaur Sahni Bhabhi of the appellant were filed before the learned AO during original assessment proceedings and as gift was not disputed by the learned AO during original assessment proceedings the same be accepted and addition of Rs. 3,00,000/- be deleted.
6. That the appellant craves leave to add, alter, amend, modifies and/or otherwise substitute any of the foregoing grounds as and when required.
the assessee has raised the following grounds of appeal:-
1. That as Assessment Order u/s. 144 of the Act dated 22/06/2021 is time barred u/s. 153(3) of the Act, it is prayed that same be quashed.
2. That on account of non-compliance of notice u/s. 143(2) of the Act dated 20/04/2021 fixing hearing on 23/04/2021 Assessment Order u/s. 144/254(2) of the Act is passed on 22/06/2021. As the order u/s. 144 of the Act is passed after 60 days of the date of hearing for non-compliance to notice dated 20/04/2021, without notice for fresh hearing the assessment order be quashed.
3. That Hon'ble ITAT had remitted matter back to learned AO to verify gift and as while completing the assessment addition have been made u/s. 69 of the Act it is prayed that the learned AO has exceeded his jurisdiction and therefore Assessment Order be quashed.
That while making assessment u/s. 144 of the Act the learned AO is to take into account all relevant material in his records. As in appellants' case it is not done by the learned AO while making addition of Rs. 10, 00,000/- it is therefore prayed that the addition of Rs. 10, 00,000/- be deleted.
5. That was all papers/documents in relation to gift of Rs. 9,50,000/- from Shri Surendra Pal Singh Sahni brother of the appellant were filed before the learned AO during original assessment proceedings and as gift was not disputed by the learned AO during original assessment proceedings the same be accepted and addition of Rs. 10,00,000/- be deleted.
6. That the appellant craves leave to add, alter, amend, modifies and/or otherwise substitute any of the foregoing grounds as and when required.”
2. A search and seizure operation was carried out at the various premises of Bajaj Group, Kota to which the assessee belongs on 30.06.2016. The case of the assessee was also covered under the search and his residential and business premises covered in this search. The assessee derives income from cloth business, interest and rent. Notice u/s. 153A of the Act was issued to the assessee and the assessee filed his return in compliance with the same and declared the income of Rs. 2, 08,110/- (The same figure was declared in the return filed in compliance with section 139 of the Act). The case of the assessee was assessed at a figure of Rs. 5,60,074/- after making addition of Rs. 3 Lacs on account of unexplained investment in plot and disallowance of deduction u/s. 80C of the Act amounting to Rs. 51,960/-. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT (A)-2, Udaipur, who in turn confirmed the order of the AO vide order dated: 28.06.2019. The assessee being further aggrieved with this order of the Ld. CIT (A)-2, Udaipur preferred an appeal before the coordinate bench, Jaipur.
3. The coordinate bench vide its order dated: 23.12.2019 (Para 5 of the Order) “set aside the matter to the record of the AO for proper verification and examination of the claim of the assessee being source of investment and particularly the gift from the family member”, i.e. the limited question before the AO is to verify the source of the investment in the light of the explanation put forward by the assessee. In compliance with the directions of the coordinate bench, the AO issued notice to the assessee u/s. 142(1) of the Act on 28.09.2020 and hearing was fixed on 16.10.2020. Thereafter, notices were further issued vide dated: 15.12.2020, 17.022021 and 20.042021. As the case was getting time barred on 30.06.2021, the case of the assessee was ultimately assessed u/s. 144 r.w.s. 254 of the Act on 22.06.2021 by confirming the addition of Rs. 3 Lacs u/s. 69 of the Act.
4. The assessee being aggrieved with this order of the AO preferred an appeal before Ld. CIT (A)-2, Udaipur, who in turn confirmed the order of the AO. The assessee, being again aggrieved with the order of Ld. CIT (A)-2, Udaipur preferred the present appeal before us. It’s a second round of the whole matter before us [As narrated (supra)]. We have gone through the various orders of the authorities below during the first round as well as second time on the directions of the coordinate bench. We have considered thoroughly the grounds taken by the assessee before us and observed after going through the replies of the AO before the Ld. CIT (A) and the findings of the Ld. CIT (A) also, that ground nos. 1 and 2 raised by the assessee are not sustainable in law based on the facts of the assessee’s matter. The relevant findings of the AO (In remand proceedings) and the findings of the Ld. CIT (A) are reproduced as under:
“5.10 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
In this case an addition of Rs. 3, 00,000/- was made by the AO on account unexplained investment. The CIT (A-2). Udaipur vide his office order dated 28.06.2019, confirmed the addition of Rs. 3, 00,000/- made by the then AO.
The assessee preferred an appeal before the Hon'ble ITAT, Jaipur Bench, Jaipur on 06.09.2019. The Hon'ble ITAT, Jaipur Bench, Jaipur vide his order & 1105/JP/2019 dated 23.12.2019 stated that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified by the authorities below and accordingly the claim of the assessee is required to be verified and examined by the AO. Hence, the issue is set-aside to the record of the AO for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family members.
As per the direction of Hon'ble ITAT, Jaipur Bench, Jaipur, Notice u/s. 142(1) of the I.T. Act, 1961 was issued to the assessee on 28.09.2020 fixing the case of assessee on 16.10.2020. The assessee has not submitted any response to this notice. Thereafter, notices u/s. 142(1) of the I.T. Act, 1961 were issued to the assessee on 15.12.2020, 17.02.2021 and 20.04.2021 but the assessee had failed to produce the reply in support of his claim.
During the hearing the assessee filed an application to inspect the assessment records for A.Y. 2014-15 on 05.06.2020. The assessee was allowed for inspection of records on 08.01.2021 vide this office letter dated 01.01.2021. No one appeared on this date for inspection. The AO passed order u/s. 144 r.w.s. 254 of the I.T. Act, 1961 on 22.06.2021 at an assessed income of Rs. 5,08,110/- The arguments of the appellant are discussed and decided as under- 5.10.1 The Order is passed by the AO within prescribed Time Limit It is argued that as order is passed beyond time limit prescribed under the Act same being time barred needs annulment.
The reply of the appellant was sent to the AO for verification and the AO stated that the Hon'ble ITAT, Rajasthan, Jaipur had passed combined order vide for the A.Y. 2014-15 & Α.Υ. 2016-17 vide their Appeal order Nos. ITA/1104 & 1105/JP/2019 for dated 23.12.2019 with a remark that "the issue is set aside to the record of the AO for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family members."
The order was received in by AO on 17.02.2020. In compliance to appellate order, notice u/s. 142(1) of the Act was issued on 28.09.2020 through ITBA Portal vide DIN & Notice No. ITBA/COM/F/17/2020-21/1028085446(1) dated 28.09.2020. Various notices were issued to the assessee time to time, which are placed on record, but the assessee has not made any compliance to the notices. Accordingly, the assessment orders were passed u/s. 144 r.w.s. 254 of the I.T. Act, 1961 on 22.06.2021 in both the years i.e. A.Y.s 2014-15 & Α.Υ. 2016-17.
The AO further reported that the order passed by the AO on 22.06.2021 is not time barred u/s. 153(3) of the Act. It is stated that vide Gazette Notification No. 10/2021 dated 27.02.2021, the limitation for completion of assessment order was extended till 30.09.2021.
The appellant stated that as per clause (b)(i) of notification wherefrom it is clear that order was to be passed before 30th April 2021. As assessment order is made in our case on 22.06 2021 and therefore the same being time-barred the same be quashed
The appellant has raised the arguments ignoring the fact that as per Notification S.O. 1703 (Ε) (ΝΟ. 38/2021/ F. NO. 370142/35/2020-TPL], dated 27- 4-2021, In exercise of the powers conferred by sub-section (1) of section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act. 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notifications of the Government of India in the Ministry of Finance, (Department of Revenue) No. 93/2020 dated the 31st December, 2020, No. 10/2021 dated the 27th February, 2021 and No. 20/2021 dated the 31st March, 2021, published in the Gazette of India, Extraordinary, Part-II, Section 3, Subsection (ii), vide number S.O. 4805(E), dated the 31st December, 2020, vide number S.O. 966(E) dated the 27th February, 2021 and vide number S.O. 1432(E) dated the 31st March, 2021, respectively (hereinafter referred to as the said notifications), the Central Government for the purpose of sub-section (1) of section 3 of the said Act further extended time limit upto 30th June 2021. In this notification it is stated that the completion of any action, referred to in clause (a) of sub- section (1) of section 3 of the said Act, relates to passing of any order for assessment or reassessment under the Income-tax Act. and the time limit for completion of such action under section 153 or section 153B thereof, expires on the 30th day of April, 2021 due to its extension by the said notifications, such time limit shall further stand extended to the 30th day of June, 2021.
In view of the Notification S.O. 1703 (E) (NO. 38/2021/ F. NO. 370142/35/2020- TPL], DATED 27-4-2021, the order passed by the AO is found to be passed within the prescribed time limit. The arguments of the appellant in this regard are not found to be acceptable.
5.10.2 Reasonable Opportunity of being heard was provided to the assessee
The appellant argued that proper opportunity of being heard was not provided by the AO.
The AO reported that notice u/s. 142(1) of the IT. Act, 1961 was issued to the assessee on 28.09.2020 fixing the case of assessee on 16.10.2020. The assessee has not submitted any response to this notice. Thereafter, notices u/s. 142(1) of the I. T. Act, 1961 were issued to the assessee on 15.12.2020, 17.02.2021 and 20.04.2021 but the assessee failed to produce the reply in support of his claim. On request of the assessee, the assessee was allowed inspection of assessment records for A.Y. 2014-15 by the AO on 08.01.2021. No one appeared on this date for inspection. The assessment order was passed u/s. 144 r.ws 254 of the I.T. Act, 1961 on 22.06.2021.
The appellant argued that it is true that we did not attend notice u/s. 143(2) fixed for 23.04 2021 But is a fact that because of Covid-19 entire Rajasthan was under lockdown in those dates. The learned AD based on non compliance of notice on 23.04.2021 passed order u/s. 144 of the Act on 22.06.2021. There is time gap of more than 2 months. He could have issued another notice but instead of doing so he opted for ex-parte order. We submit Sir it’s not judicial approach.
The argument of the appellant are considered. The appellant has partly tried to explain the reason for non compliance for only 23.04.2021. The appellant has not explained that why no request for adjournment was sent by using e mail on the compliance date of 23.04.2021 or later as the order was passed even after 60 days from the compliance date. The appellant has not explained reasons of non compliance to the other notices dated 28.09.2020 fixing the case of assessee on 16.10.2020 and Notices issued on 15 12.2020 and 17.02.2021. The assessee was allowed inspection of assessment records for A.Y. 2014- 15 by the AO on 08.01.2021 which was not availed by him despite the fact that the request for inspection of records was made by the assessee himself. Therefore, the argument of the assessee with regard to not providing proper opportunity is not found to be acceptable.
While explaining reason for non-compliance on 23.04.2021, the assessee stated that there is time gap of more than 2 months. He could have issued another notice but instead of doing so he opted for ex-parte order. We submit Sir, it’s not judicial approach.
The argument of the appellant are not found to be acceptable. The appellant could have sent an e-mail requesting for adjournment or could have furnished reply in the time gap of two months by an e-mail. Instead of furnishing any such request why the appellant was expecting yet another notice when the AO already issued notices issued on 28.09.2020, 15.12.2020, 17.02.2021 and 20.04.2021. Even after non compliance by the assessee on 23.04.2021, the AO waited for two months and when there was no compliance, order is passed. Providing 4 opportunities of being heard is considered reasonable. The appellant could not explain reasons for non compliance before the AO. On these facts, it can be said that proper opportunity of being heard was provided by the AO.
In view of above discussion, the arguments of the appellant in support of ground no. 1 and ground no. 2 are found to be without any merit.
The ground no. 1 and ground no. 2 are treated as dismissed.
6. Ground Nos. 3 and 4 of appeal are inter-related with the addition of Rs. 3, 00,000/- u/s. 69 of the Act on account of unexplained investment.
6.1 At the time of passing of assessment order u/s. 144 r.w.s. 254 of the Income tax Act, 1961 the AO has briefly stated relevant facts and some of excerpts are reproduced as under- "Unexplained investment: A search & seizure operation u/s. 132(1) of the Act was carried out on 30.06.2016 at the premises of the assessee. During the search action, incriminating documents vide page no. 114 to 131 of Exhibit 31 were found which related to investment of Rs. 3,00,000/- made for purchase of plot at Kanhakunj, Balita, Kota during the F.Y. 2013-14. During the assessment proceeding u/s. 143(3) r.w.s 153A of the Act, the assessee had produced balance sheet for the F.Y. 2013-14 and claimed that this investment was already shown in the Balance sheet. But, the assessee had not submitted any supporting documents to sustain his claim Therefore, the amount of Rs. 3, 00,000/- was added to the total income of the assessee as per the provisions of section 69 of IT Act and the assessment order u/s. 143(3) r.w.s 153A of the Act was passed on 20-12-2018 at assessed income of Rs. 5, 60,070/- The assessee had failed to explain the source of such investment during the search proceedings, post search proceedings, and assessment proceeding u/s. 153A of the Act. Further, during the set-aside proceedings, also the assessee has not provided any documentary evidence for verification, to explain the sources of investment made in the purchase of plot of Rs. 3, 00,000/- during the F.Y. 2013-14.
Considering the above facts the source of investment and particularly the gift from his brother’s wife of Rs. 3, 00,000/- could not be verified due to the non-submission of evidence by the assessee despite providing several opportunities Therefore, the amount of Rs 3.00.000/- is sustained in his total income treated as unexplained investment as per provision of section 69 of IT Act and tax is charged as per provisions of section 115BBE of the IT Act."
6.2 The A/R of the appellant filed written submissions on 05.09.2023 during the appellate proceedings is reproduced as under:
"(ii) That together with ROI incompliance to notice u/s. 153A of the Act appellant had furnished Capital A/c and Balance Sheet. Copy of the same is enclosed vide Annexure-A1 In Capital A/c. gift of Rs. 3,00,000/- from Smt. Inderjeet Kaur (Bhabhi) is appearing. In Balance Sheet Plot at Karihakunj Rs. 3, 00,000/- is also appearing during assessment proceedings u/s. 153A of the Act vide letters dated 26. 12. 2017 and 01 08 2018 (Annexure-A2 and A3). I submit to the Ld. AO in relation to gift from Smt. Inderjeet Kaur. It shall be appropriate to mention at this stage that Smt. Inderjeet Kaur was also subject to proceedings u/s. 153A of the Act with the same AO In her Capital A/c gift of Rs. 300000/- to Tejender Pal Singh is appearing (Annexure-B).
(iii) The ld. AO did not disputed gift however he made addition of Rs. 300000/- u/s. 69 of the Act for plot at Kanha Kunj. Being aggrieved we filed appeal which was dismissed and addition u/s. 69 of the Act sustained. We challenged it before Hon'ble ITAT Jaipur where our stress was that as plot at Kanha Kunj is appearing in our books which were reflecting in Balance Sheet appended with ROI filed u/s. 153A of the Act also addition u/s. 69 of the Act is uncalled for. The Hon'ble ITAT though convinced for our explanation on the plea that whether the lower authorities have examined or not examined gift of Rs. 300000/- sustain the addition and remitted matter back to the Id. AO for examination of gift. The relevant part of the order of Hon'ble ITAT is reproduced as under-
We have considered the rival submissions as well as the relevant material on record. There is no dispute that the original assessment was pending on the date of search dated 30.06. 2016 and Consequently the original assessment got abated Once the assessment was pending and got abated by virtue of search and seizure action under section 132 of the Act, then the AO has to assess the income of the assessee in the proceedings under section 153A of the Act as in the regular assessment proceedings. Therefore, the question of existence of incriminating material in such proceedings is not relevant Rather the AO has to complete the assessment as a regular assessment proceeding and each and every issue arising from the return of income as well as any undisclosed income detected during the course of search would be subject matter of assessment. There is no dispute that the assessee has disclosed the investment of Rs. 3, 00,000/-in the balance sheet as on 31st March, 2014 However, merely showing this investment in the Balance Sheet would not ipso facto explain the source of such investment. The onus is on the assessee to explain the source of investment and, therefore, the issue can be decided only on the merits of the source of investment without any technical hurdle of incriminating material found or seized during the course of search We find that the assessee in his statement of affairs has shown the gift received from the sister-in-law (wife of his brother) of Rs. 3.00.000/- The assessee has fled a declaration of gift in support of such claim. The said gift is between the family members and cannot be verified independently. The existence or actual transaction of gift cannot be verified from any independent source and therefore the claim of gift from the family member of an equal amount is not free from the possibility of preparing a self serving document. Even otherwise, we find that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified by the authorities below and accordingly the said claim of the assessee is required to be verified and examined by the AO. Hence the issue is set aside to the record of the AO for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family member.
Copy of the order of Hon'ble ITAT is also enclosed vide Annexure-C to this letter.
(iv) The Ld. AO, as submitted above, passed order u/s. 144 of the Act on 22.06.2021. Though, the Ld. AO has very fairly mentioned that the Hon'ble Bench has remitted matter back to him to examine gift only, however he again sustained addition u/s. 69 of the Act On 06.12.2021. We filed an application u/s. 154 of the Act (Annexure-D) to him wherein we submitted to him that though because of lockdown in City/State on 23.04 2021 we could not produce papers in relation to gift before him on appointed date but as both Donor and Donee are assessed to tax with him only and as in their files all papers relating to gifts are lying there is no reason to make addition u/s. 69 of the Act. The said application as per provisions of the Income Tax Act was expected to be decided within reasonable time and at the most within 6 months from 31.12.2021, i.e. before 30th June 2022 (see Section154(8), however it is yet pending (v) We have taken certified copies of following papers from Income Tax Files of both Donor and Donee from Department to which we are enclosing
(a) Copy of Capital Account and Balance Sheet of Tejender Pal Singh Sahni (Annexure-A1 above) in Capital Account gift of Rs. 3, 00,000/- from Smt. Inderjeet Kaur is shown. In Balance Sheet plot Rs 300000/- is appearing
(b) Copy of gift deed (Annexure-D1) for gift of Rs. 3, 00,000/- from Smt. Inderjeet Kaur (Bhabhi)
(c) Copy of letter dated 26.12.2017 to Id. AO wherein in Para B Kanhakunj plot purchased in F.Y. 2013-14 for Rs. 3, 00,000/- is shown (Annexure-A2 above). In Para 21 of this letter reference of gift of Rs. 3,00,000/- from Smt. Inderjeet Kaur is also given.
(d) Copy of letter dated 01.08.2018 to ld. AO wherein gift deed of Rs. 3, 00,000/- on 10.11.2013 is attached (Annexure- A3 above).
(e) Copy of Capital Account and Balance Sheet lying in file of Smt. Inderjeet Kaur (Annexure- B above) wherein in Capital Account she has shown gift of Rs. 3,00,000/-on 10.11.2013 to me. You will please also find that she has income of more than 35, 00,000/- (vi) In view of aforesaid papers, in file of Ld. AO wherefrom it is crystal clear that the Ld. AO while framing Assessment Order on 22.06. 2021 had in his possession all evidences in support of gift of Rs 3, 00,000/- received by me from Smt. Inderjeet Kaur Sahni. I therefore request you that as required details asked by Hon'ble ITAT are available addition of Rs. 3,00,000/- made u/s. 69 of the Act is uncalled for and therefore the same be deleted.
(vii) I further submit that as cost of plot is appearing in Balance Sheet which is part of books of Accounts addition u/s. 69 of the Act is uncalled for.
(viii) For the sake of your convenience I am reproducing Section 69 of the Act which reads as under:
Section 69 Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by hem is not in the opinion of the "Assessing] Officer, satisfactory the value of the investments may be deemed to be the income of the assessee of such financial year.
From a plain reading of Section it is crystal clear that Sec. 69 of the Act applies when investment is not recorded in books and also assessee does not have any explanation. In my case investment is appearing in Balance Sheet/Books of Accounts hence addition u/s. 69 is uncalled for.
(ix) Therefore request your honour to please delete addition of Rs. 3, 00,000/- 6.3 In appellate preceding the Ld. AR of the appellant submitted reply. Considering facts of the case, remand report was called from the AO on 06.09.2023 on following point- (i) Please go through the reply of the appellant with regard to the various grounds and furnish your comments on each issue.
6.4. A Remand report submitted by the Addl. Commissioner of Income Tax, Central Range, Udaipur on 16.04.2024. The remand report of AO vide letter No. 948 dated 07.02.2024 is reproduced as under.- "4. Ground of appeal 3 and 4:
G-3: That under the facts and circumstances of the case the Ld. A. O. erred in ignoring gift of Rs. 3, 00,000/- from Smt. Inderjeet Kaur ignoring all evidences available on records. Addition therefore needs deletion G-4 That under the facts and circumstances of the case cost of plot of Rs. 3,00,000/- was appearing in Balance Sheet attached with ROI and therefore it being explained investment the Ld. AO erred in treating it a unexplained investment and making addition of Rs. 3,00,000/- u/s. 69 of the Act. It therefore needs deletion.
On the aforesaid ground of appeal, the assessee had submitted evidences before the appellate proceedings and on this issue, a remand report has been called-for from this office and during the course of re-verification proceedings, the assessee has submitted the necessary documentary evidences in support of his claim regarding gift received from Smt. Inderjeet Kaur Sahni wife of his brother Shri Surendra Pal Singh Sahni. The documentary evidences produced by the assessee have been examined with the assessment record of the assessee, following observations/points have been noticed:-
The assessee has already submitted the documentary evidences in support of gift received from Smt. Inderjeet Kaur Sahni wife of his brother Shri Surendra Pal Singh Sahni during the course of original assessment proceedings vide his letter dated 26.12.2017 & 01.08.2018 (Copy enclosed).
The assessee has submitted the copy of gift deed of Rs. 3,00,000/- received from Smt. Inderjeet Kaur Sahni wife of his brother Shri Surendra Pal Singh Sahni (Copy) enclosed), which had already been submitted by the assessee vide the aforesaid letter during the course of original assessment proceedings.
The assessee has submitted the copy of reply filed by Smt. Inderjeet Kaur Sahni, which was produced by her during the course of assessment proceedings in her case, wherein she had clearly stated that she had given gift of Rs 3, 00,000/- on 10.11.2013 to his husband’s brother Shri Tejender Pal Singh Sahni from her undisclosed cash in hand
which has been offered for taxation in various assessment years. Copy of the same is being enclosed for ready reference.
The reply of the assessee has been perused but not found acceptable, as the assessee has not submitted any additional reply rather than the reply, which has already been submitted by the assessee during the course of original assessment proceedings. The reply had also been examined by the then AO at the time of passing assessment order, but the then AO had not satisfied with the reply of the assessee. Further, during the course of set-aside proceedings, besides given adequate opportunity of being heard to the assessee. He had failed to file any reply in support of his claim that the source of investment in immovable property is made from the gift received from his Bhabhi Smt. Indrajeet Kaur Sahni. Hence, the then AO had rightly made addition of Rs.3.00.000/- on account of unexplained investment and it should be sustained
Report is submitted for your kind perusal & necessary direction."
6.5 Copy of the remand report was provided to the appellant for rejoinder to the remand report vide letter dated 17.04.2024. The appellant furnished reply vide letter dated 01.05.2024. The same is reproduced as under.
That vide our letters dated 01.09 2023, 09.10.2023 and 16.10.2023 as well as Ld. AO's Remand Report dated 07.02.2024 which has been forwarded to us by your office on 17.04 2024 the matter has become quite confusing We are therefore summarizing all together and submit as under GOA 3 and 4 are inter-connected and therefore they are taken together. These grounds of appeal read as under “6 (i)
That under the facts and circumstances of the case the Ld AO erred in ignoring gift of Rs 300000/- from Smt. Inderjeet Kaur ignoring all evidences available on records. Addition therefore needs deletion"
(ii) "That under the facts and circumstances of the case cost of plot Rs. 3,00,000/- was appearing in Balance Sheet attached with ROI and therefore it being explained investment the learned AO erred in treating as unexplained investment and making addition of Rs. 3,00,000/- u/s. 69 of the Act, it therefore needs deletion.”
(iii) As stated above while discussing GOA 1 and 2 above, we have mentioned that Ld. AO had all papers/documents in his records ether in file of Tejender Pal Singh or in file of Smt. Inderjeet Kaur (Donor). Had Ld. AO gone through those papers, he could have not sustained the additions in view of above facts, we avoid repeating aforesaid facts again and request your honour for deletion of the addition.”
6.6 Copy of the remand report was provided to the appellant for rejoinder to the remand report vide letter dated 20.06.2024. The appellant furnished reply vide letter dated 08.07.2024 on 10.07.2024. The same is reproduced as under:
(3) (1) that GOA 3 reads as under -
3. That under the facts and circumstances of the case the Ld. AO erred in ignoring gift of Rs. 3, 00,000/- from Smt. Inderjeet Kaur ignoring all evidences available on records Addition therefore needs deletion.
(i) That relevant part of Assessment Order reads as under- The Hon'ble ITAT vide appeal no. 1104/JP/2019order dated 23 12.2019 set aside the issue for verification of the claim of the assessee being source of investment in purchase of plot and particularly the gift from his brother's wife (Para 1 Page 1 of Assessment Order)
Considering the above facts, the source of investment and particularly the gift from his brother's wife of Rs. 3,00,000/- could not be verified due to the non-submission of evidence by the assessee despite providing several opportunities. Therefore, the amount of Rs. 3, 00,000/- is sustained in his total income treated as unexplained investment as per provision of section 69 of IT Act and tax is charged as per provisions of section 115BBE of the IT Act "(Last Para of Assessment Order)
(iii) That the learned AO had passed ex-parte order and has stated that in accordance to directions of Hon'ble ITAT he was to verify from appellant's brother's wife Smt. Inderjeet Kaur and as because of non submission of evidence by assessee for proof of gift, despite providing sufficient opportunities, he is sustaining addition of Rs 300000 (iv) That as Assessment Order is made u/s. 144 of the Act we feel appropriate to reproduce section 144 which reads as under- 144 Best judgment assessments [(1) If any person- (a) Fails to make the return required (under sub-section (1) of section 139 and has not made a return or a revised return under sub-section (4) or sub-section (5) of that section, or (b) Fails to comply with all the terms of a notice issued under sub-section (1) of section 142 [or fails to comply with a direction issued under sub-section (2-A) of that section, or (c) Having made a return, fails to comply with all the terms of a notice issued under sub-section (2) of section 143 The [Assessing] Officer, after taking into account all relevant material which the [Assessing Officer) has gathered shall, after giving the assessee an opportunity of being heard, make the assessment) of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment [Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of section 142 has been issued prior to the making of an assessment under this section/ (2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year/"
(v) From language of Section 144 it is very clear that while parsing order u/s. 144 of the Act the learned AO has to consider all relevant material which he has gathered. Together with my letter dated 01.09.2023 I have fled certified copies of following papers to you (a) Capital account wherein gift of Rs. 3,00,000/- from Smt. Inderjeet Kaur is appearing (b) Copy of gift deed duly signed by donor, done and witnesses.
(c) Letters dated 26.12.2017 and 01.08.2018 filed during assessment proceeding to learned AO during assessment proceedings. Certified copies from learned AO have been filed to you together with our later dated 01.09. 2023 (B) Besides donor Smt. Inderjeet Kaur is also assessed to tax with same AO and she was also assessed to fax with same AO u/s 153A/143(3). In her cases following papers/documents were with the Ld. AO in her records.
(i) Capital account where in gift of Rs. 3,00,000/- to Shri Tejender Pal Singh is appearing.
(ii) Gift deed duly signed by donor, donee and witnesses.
(iii) Copy of letter dated 26.07.2018 wherein reference of gift of Rs. 3, 00,000/- is appearing Certified copies of these papers/documents are filed to you with letter dated 01.09.2023.
(vi) We may further add that donor Smt. Inderjeet Kaur has rental income of Rs. 21,21,300/- Business income Rs. 1,00,0,415/- and Bank interest income Rs. 4,26,248/- thus totaling to Rs. 35,47,963/- and therefore she had sufficient funds to give gift of Rs. 3,00,000/- Besides books of accounts were also verified by learned AO during assessment proceedings.
(vii) In view of aforesaid facts we submit you Sir that had learned AO verified from papers/documents available with him he could have not made addition of Rs. 3,00,000/-. We therefore request your honour to delete addition of Rs. 3, 00,000/- (4) (1) that GOA 4 reads as under- 4 That under the facts and circumstances of the case cost of plot Rs. 3,00,000/- was appearing in Balance Sheet attached with Rol and therefore it being explained investment the Ld. AO erred in treating it as unexplained investment and making addition of Rs. 3,00,000/- u/s. 69 of the Act. It therefore needs deletion.”
(ii) That as additions have been made u/s. 69 of the Act we reproduce section 69 which reads as under-
Unexplained investments Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not in the opinion of the [Assessing Officer) satisfactory, the value of the investments may be deemed to be the Income of the assessee of such financial year (iii) As appears from title of the section it applies in case of unexplained investments which are not recorded in Books of Accounts. In my case investment of Rs. 3, 00,000/- in Kanhakunj Plot is appearing in my Balance Sheet filed along with return of income u/s. 153A of the Act. Besides it is recorded in books of accounts which is not disputed by learned AO. It is therefore submitted that investment cannot be taxed u/s. 69 of the Act as unexplained investment. We therefore pray that addition of Rs. 3, 00,000/- be deleted.
(5) That we do not press GOA 5.
(6)We further request you to please allow us conference hearing before you decide the appeal.
6.7 The A/R of the appellant filed written submissions on 25.07.2024 vide letter dated 25.07.2024 during the appellate proceedings is reproduced as under:
(1) The learned AO had made addition of Rs. 3, 00,000/- u/s. 69 of the Act, holdings as under- Assessee has failed to explain the source of investment in the search proceedings, in post search proceedings as well as in the present proceedings. Therefore Rs. 3, 00,000/- is added to the total income of the assessee us 69 of the Act as unexplained investment" (Para 5. Page 3 of Assessment Order)
Before making this addition the learned AO did not asked any explanation on it. We did therefore not know that he is making addition of Rs. 3, 00,000/- u/s. 69 of the Act.
(2) During first appeal hearing we filed copies of Capital Account and Balance Sheet to Hon'ble CIT (A) and submitted that as investment of Rs. 3, 00,000/- is appearing in Balance Sheet which was before ld. AO und as Reamed AO has not disputed Capital Account and Balance Sheet addition u/s. 69 of the Act is not sustainable. However, Hon'ble CIT (A) confirmed addition holding as under- "Firstly, the statement of affairs at the yearend does not establish availability of funds on the date of the Investment of Rs 3,00,000/-, Secondly, bare statement of facts, without any supporting documents, by itself does not constitute evidence of source of investment Therefore, it is held that the assessee has failed to explain the source of the investment of Rs. 3,00,000/- Accordingly, the addition of Rs. 3,00,000/ made by the AO u/s. 69 of the Act, is hereby confirmed, income of Rs 3,00,000/- to be taxed u/s. 115BBE of the Act. Ground No. 1 and 2. Of appeal are thus dismissed (Para 6.2. Page 4 of Appeal Order)
(3) During hearing of appeal before Hon'ble ITAT our stress was that when investment was appearing in Balance Sheet which is not disbelieved by the learned AO addition u/s. 69 of the Act cannot be made. However, the submission of learned D/R was that investment is out of fund received in gift and it is not clear from Assessment Order that gift was verified by the learned AO.
(4) The Hon'ble ITAT decided issue holding as under:
There is no dispute that the assessee has disclosed the investment of Rs. 3, 00,000/- in the balance sheet as on 31st March, 2014. However, merely showing this investment in the Balance Sheet would not ipso facto explain the source of such investment The ones is on the assessee to explain the source of investment and therefore, the issue can be decided only on the merits of the source of investment without any technical hurdle of incriminating material found or seized during the course of search. We find that the assessee in his statement of affairs has shown the gift received from the sister-in-law (wife of his brother) of Rs. 3, 00,000/- The assessee has filed a declaration of gift in support of such claim. The said gift is between the family members and cannot be verified independently. The existence or actual transaction of gift cannot be verified from any independent source and. therefore, the claim of gift from the family member of an equal amount is not free from the possibility of preparing a self serving document. Even otherwise, we find that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified by the authorities below and accordingly the said claim of the assessee is required to be verified and examined by the AO Hence the issue is set aside to the record of the AO for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family member" (Page 5 of ITAT Order).
(5) The order was therefore set aside for verification of gift which is very fairly mentioned by learned AO in his order u/s. 144/254 of the Act dated 22. 06. 2021 also.
(6) Sir, now you are to verify the genuineness of gift".
6.8 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
In this case, Hon'ble ITAT decided this issue in the first round of appeal holding as under: - "There is no dispute that the assessee has disclosed the investment of Rs. 3, 00,000/- in the balance sheet as on 31st March, 2014. However, merely showing this investment in the Balance Sheet would not ipso facto explain the source of such investment. The onus is on the assessee to explain the source of investment and, therefore, the issue can be decided only on the merits of the source of investment without any technical hurdle of incriminating material found or seized during the course of search. We find that the assessee in his statement of affairs has shown the gift received from the sister-in-law (wife of his brother) of Rs. 3, 00,000/- The assessee has filed a declaration of gift in support of such claim. The said gift is between the family members and cannot be verified independently. The existence or actual transaction of gift cannot be verified from any independent source and, therefore, the claim of gift from the family member of an equal amount is not free from the possibility of preparing a self serving document. Even otherwise, we find that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified by the authorities below and accordingly the said claim of the assessee is required to be verified and examined by the AO. Hence the issue is set aside to the record of the AO for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family member."
In the assessment order in compliance to the order of the Hon'ble ITAT the AO noted that during the search action, incriminating documents page no. 114 to 131 of Exhibit 31 were found which related to investment of Rs. 3,00,000/- made for purchase of plot at Kanhakunj, Balita, Kota during the F.Y. 2013-14 During the assessment proceeding u/s. 143(3) r.w.s 153A of the Act, the assessee had produced balance sheet for the F.Y. 2013-14 and claimed that this investment was already shown in the Balance sheet. But the assessee had not submitted any supporting documents to sustain his claim. Therefore, the amount of Rs. 3,00,000/- was added to the total income of the assessee as per provision of section 69 of IT Act and the assessment order u/s. 143(3) r.w.s 153A of the Act was passed on 20-12-2018 at assessed income of Rs. 5.60.070/-.
The assessee had failed to explain the source of such investment during the search proceedings, post search proceedings, and assessment proceeding u/s. 153A of the Act. Further, during the set-aside proceedings, also the assessee has not provided any documentary evidence for verification, to explain the sources of investment made in the purchase of plot of Rs. 3, 00,000/- during the F.Y. 2013-14.
Considering the above facts, the source of investment and particularly the gift from his brother's wife of Rs. 3,00,000/- could not be verified due to the non-submission of evidence by the assessee despite providing several opportunities. Therefore, the amount of Rs. 3, 00,000/- is treated as unexplained investment as per provision of section 69 of IT Act and tax is charged as per provisions of section 115BBE of the IT Act.
In the first round of appeal the CIT (A) held in the appellate order that the statement of affairs at the end of year does not establish availability of funds on the date of the investment of Rs. 3,00,000/-. Secondly, bare statement of facts without any supporting documents, by itself does not constitute evidence of source of investment. Therefore, it is held that the assessee has failed to explain the source of the investment of Rs. 3, 00,000/-. Accordingly, the addition of Rs. 3, 00,000/, made by the AO u/s. 69 of the Act, is hereby confirmed, income of Rs. 3, 00,000/- to be taxed u/s. 115BBE of the Act.
The AO further noted that during the set-aside proceedings also the assessee has not provided any documentary evidence for verification, to explain the sources of investment made in the purchase of plot of Rs. 3, 00,000/- during the F.Y. 2013-14 The source of investment and particularly the gift from his brother's wife of Rs. 3, 00,000/- could not be verified due to the non-submission of evidence by the assessee despite providing several opportunities.
Facts of the case are considered. The order was passed by the AO in compliance to the order of Hon'ble ITAT. Hon'ble ITAT had noted that there is no dispute that the assessee has disclosed the investment of Rs. 3, 00,000/- in the balance sheet as on 31st March, 2014. However, merely showing this investment in the Balance Sheet would not ipso facto explain the source of such investment. The onus is on the assessee to explain the source of investment and therefore, the issue can be decided only on the merits of the source of investment without any technical hurdle of incriminating material found or seized during the course of search.
Considering these observations of Hon'ble ITAT, the AO was required to verify source of investment. The appellant remained non compliant before the AO. No reasonable explanation furnished for not making compliance. In the appellate proceedings also, the appellant has not furnished any new evidence which was not available before the AO in the original assessment proceedings completed u/s 153A of the Act. Hence, in the absence of independent evidences, the source of investment remains unexplained.
The appellant argued that the evidences furnished during original assessment proceedings were sufficient evidences to prove the source of investment. It is observed that Hon'ble ITAT has examined the evidences and observed that these evidences are self serving documents. The observations of the Hon'ble ITAT are as under-
“We find that the assessee in his statement of affairs has shown the gift received from the sister-in-law e of his brother) of Rs. 3, 00,000/- The assessee has filed a declaration of gift in support of such claim. The sad gift is between the family members and cannot be verified independently. The existence or actual transaction of gift cannot be verified from any independent source and, therefore, the claim of gift from the family member of an equal amount is not free from the possibility of preparing a self serving document. Even otherwise, we find that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified by the authorities below and accordingly the said claim of the assessee is required to be verified and examined by the AD Hence the issue is set aside to the record of the AQ for proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family member
The claim of gift is between the family members which could not be verified independently by the AO as no independent evidences were furnished in the second round of assessment proceedings. The appellant did not comply to the hearings fixed by the AO. No reasonable cause is explained for non-compliance by the assessee before the AO. In the absence of independent evidences, the existence or actual transaction of gift cannot be verified from any independent source. The gift deed is on plain paper. The gift deed is not notarized.
The amount is claimed as given in cash. However, no independent evidence in support of the cash transaction is furnished. Therefore, the claim of gift from the family member of an equal amount is not free from the possibility of preparing a self serving document. In these circumstances, the AO is found to be correct in holding that the assessee failed to file any reply in support of his claim that the source of investment in immovable property is made from the gift received from his Bhabhi Smt. Indrajeet Kaur Sahni. No independent evidence of cash transaction are furnished. Therefore, the source remains unexplained.
Hon'ble ITAT also directed that the source of fund as claimed by the assessee is gift from wife of the brother has not been verified. In the second round of assessment proceedings, the appellant also did not furnish any evidence with regard to source of funds shown in balance sheet of Smt. Inderjeet Kaur Sahni for AY 2014- 15 furnished before the AO. The appellant has not explained source of funds in the balance sheet of Smt. Inderjeet Kaur Sahni for A.Y. 2014- 15. Even the balance sheet is obtained by the assessee from the AO which was furnished during original assessment proceedings. On perusal of balance sheet it is seen that the capital account and balance sheet are revised. The original capital account and original balance sheet were not furnished. Hence, the revision made is not explained with evidences. Even the original capital account and balance sheet could have been manipulated easily as these are not audited. The balance sheet is not verifiable independently. In the absence of authenticity of figures in the balance sheet, the balance sheet and capital accounts are not reliable. In these facts, the balance sheet and capital account are not found to be sufficient to explain the source of funds. Hence, the claim of the assessee that source of investment is gift from wife of the brother could not be verified by the AO in the absence of verifiable evidences. The transaction of cash in the form of gift is also not found to be verifiable from independent evidences. Therefore the addition made by the AO is found to be justified and upheld.
The appellant also claimed that Smt. Inderjeet Kaur is also assessed to tax with same AO and she was also assessed to tax with same AO u/s. 153A/143(3) of the Act. The argument put forth by the appellant are considered but not found acceptable. The appellant has not furnished evidences to establish that the AO examined the sources of funds as reflected in the balance sheet of Smt. Inderjeet Kaur for the purpose of examining the source of money given to the assessee as gift. Hence, the argument of the assessee in this regard is found to be without any merit. Without prejudice to the above, the transaction of cash from Smt. Inderjeet Kaur is not proved from independent evidences. Hence, it is not proved that the cash as may be available in the balance sheet of Smt. Inderjeet Kaur was made available to the assessee before the date of investment except the unverifiable gift deed which is not reliable. Hence, the source of investment remained unexplained.
Without prejudice to the above, it is also true that the explanation furnished without any independent evidences during assessment proceedings is just an afterthought as no such evidence or explanation was furnished during post search investigation, the assessee had not provided any details regarding sources of this investment. Therefore, it is held that the assessee has failed to explain the source of the investment of Rs. 3, 00,000/-, Accordingly, the addition of Rs. 3, 00,000/, made by the AO u/s. 69 of the Act, is hereby confirmed, income of Rs. 3,00,000/- to be taxed u/s. 115BBE of the Act. The ground no. 3 and 4 of appeal are treated as dismissed.”
5. We agree with the contents of the remand report prepared by the AO and findings of the Ld. CIT (A), consequently the ground nos. 1 and 2 raised by the assessee are found to be untenable and rather frivolous in nature. As far as ground no. 3 is concerned, the merits of the same will be discussed in our order in the later part while dealing with ground no. 4 and 5. But, technically this ground of the assessee is not tenable as the assessment order is framed u/s. 144 of the Act, as the assessee never complied with any of the notices issued by the AO and certainly has to be added back in section 69 of the Act. In view of the above, ground nos. 1, 2 and 3 raised by the assessee are dismissed.
As far as ground nos. 4 and 5 are concerned, it is observed that during the original assessment proceedings, the assessee submitted before the AO that he received a gift of Rs. 3 Lacs from his Bhabhi, Smt. Inderjeet Kaur Sahni (Wife of the assessee’s elder brother) and copy of the Gift Deed was duly enclosed that time itself. We have gone through the copy of P&L account, Interest account, and revised capital account cum balance-sheet filed along with the return filed in response to section 153A of the Act, wherein the assessee duly disclosed the receipt of gift and investment thereon in the property under consideration. We have taken note of the financials of the donor, i.e. his Bhabhi, Smt. Inderjeet Kaur Sahni (Wife of the assessee’s elder brother), wherein the vice versa position of gift was reflected in the revised capital account of the donor.
The income of the Bhabhi, i.e. Smt. Inderjeet Kaur Sahni (Wife of the assessee’s elder brother) is also found to be substantial in contrast to the amount of gift involved. The total income of donors was found to be Rs. 35,47,963/- in addition to the opening balance of Rs. 1,07,60,181/-. The donor is found to be a person of means and very well in the range of creditworthiness to give gift. In our observation there is no doubt on the financial capability of the donor. Now, we are coming back to the question referred to by the coordinate bench in the first round of litigation, i.e. “proper verification and examination of claim of the assessee being source of investment and particularly the gift from the family member”. As all the material relevant to decide the issue referred by the coordinate bench was already on the record before the AO, but he chosen not to work on the same during the original hearing as well as the second round of proceedings, no further opportunity can be given to the Revenue, and the contentions of the assessee are accepted. This view is further fortified with the fact that the donor is also being assessed with the same AO and was also subject to search along with the assessee. In that case facts narrated by the assessee can be easily cross verified and a concrete case either way can be made out, but the same was not done. Hence, ground nos. 4 and 5 raised by the assessee are allowed and the AO is directed to delete the addition of Rs. 3 Lacs made on account of unexplained investment.
(A.Y. 2014-15) is partly allowed with the above observations.
As far as the assessee’s appeal vide (A.Y. 2016-17) is concerned it is observed that other than the name of the donor, amount of the gift received and quantum of the income of the donor, all the issues are identical to (A.Y. 2014-15). We have gone through the relevant facts and figures applicable to this appeal and the result are also identical to what we observed in (A.Y. 2014-15). Resultantly, our findings for (A.Y. 2014-15) are applicable mutatis mutandis to this appeal also.
In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 10thday of January 2025.