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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the ld Assistant Commissioner of Income tax , Circle- 39(1), New Delhi [ The ld AO ] against the order of the ld Commissioner of Income Tax (Appeals) -28, New Delhi [ The ld CIT (A) ] dated 04.03.2013 for Assessment Year [ A.Y.] 2009-10, wherein, following grounds of appeal are raised:- i. That the Ld .CIT (A) erred in deleting the addition made by the AO on account of investment made in one of the aassessee’s companies, namely M s Umkal Healthcare Pvt Ltd not appreciating the fact that the additions were made by the AO on the basis of voluntary surrender statement by Dr.Umesh Gupta in which he had admitted that he had introduced his own income earned through undisclosed sources in the guise of share capital share application money. ii) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO on account of investment made in one of the assessee’s
1. ACIT V Umesh Gupta M/s Umkal Healthcare Pvt Ltd not appreciating the fact that the assessee could not prove the identity, credit worthiness and genuineness of the transactions and hence were voluntarily surrendered at the time of Search proceedings. iii) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO on account of payment in cash made to Ms.Shiv Kumari out of undisclosed sources not appreciating the fact that the assessee admitted and surrendered the above amount paid to Ms. Shiv Kumari in cash. iv) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO on account of undisclosed amount paid to Sh.Ram Durani for purchase of land not appreciating the fact that the assessee had surrendered voluntarily the above amount at the time of Search proceedings. v) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO on account of undisclosed amount paid to Sh.Ram Dulari for purchase of land lot appreciating the fact that in his statement recorded at the time of Search proceedings the assessee had himself admitted on the basis of documents seized during Search action, the entry of the seized document, explained the content of the entry and voluntarily surrendered the above amount. vi) That the Ld .CIT (A) has grossly erred in restricting the addition made by the AO on account of personal element towards usage of telephone, car and traveling expenses to 10% as against 20% disallowed by the AO. vii) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO on account of personal element towards conveyance expenses. viii) That the Ld .CIT (A) has grossly erred in deleting the addition made by the AO summarily accepting the submissions of the assessee and by passing a cryptic, unreasoned, nonspeaking order. ix. That the grounds of appeal are without prejudice to each other.” 2
First, we state the facts of the case, the assessee Dr. Umesh Gupta and Dr. Kalpana Gupta running group of hospital and diagnosis centre in the name of UMKAL GROUP at Gurgaon and Delhi. Dr. Umesh Gupta, the assessee is a cardiologist. For A.Y. 2009-10, he filed his return of income declaring total income of Rs. 5062300/-. On 06.02.2009 a search operation were carried out at the various premises including the places of the assessee and at other addresses survey u/s 133A of the Act was carried out. During the course of search, assessee made a voluntary surrender of Rs. 123 lakhs in his statement-recorded u/s 132(4) of the Act. However, in October 2010, before the ld AO, assessee submitted a letter wherein, he partially retracted his surrender made on 06.02.2009. He revised his surrender wherein, he stated that he surrendered Rs. 11 lakhs introduced in the form of share application money in Umkal Healthcare Pvt. Ltd in name of Ms Anjali verma to avoid any enquiry and further harassment. He further stated that the sums introduced as share capital in Umkal Hospital P Ltd in the name of two companies is also not his undisclosed income but is part of the funds he received on inflation of cost of construction of a hospital. He further surrendered a sum of Rs. 12, 93,823/- based on certain documents. In short, for all the three AYs the history of the surrender is that in the search statement he disclosed that Rs 123 Lakhs is his undisclosed income for three years. In October 2010, he stated that Rs 123 lakhs is not his undisclosed income. He stated that he is constructing one hospital where in he has inflated the cost of construction of the hospital and received cash back from various suppliers and that cash back received on inflation of the cost is used for obtaining share capital in various companies. Therefore, he stated that the „Actual cost‟ of the assets is less than the amount shown in the books and he stated that depreciation to be allowed on “actual cost‟. Therefore, according to him the only depreciation in the case of the companies where the assets are capitalized is to be reduced to that extent and no disclosure is required in his individual case. Consequent to that he stated that Rs. 92.44 lakhs is required to be reduced u/s 43 of the Act from „actual cost‟ of WDV of fixed assets. Giving the effect of the same, he further revised return of income of companies for A.Y. 2009-10 reducing the 3 ACIT V Umesh Gupta depreciation claim. Briefly, he submitted in the retraction letter that (i) he introduced Rs. 20 lacs in the share capital of Umkal Healthcare pvt ltd out of cash back received. Further Rs. 20 lacks and Rs. 28.50 lakhs introduced in the share capital of Umkal Hospital P Ltd in the name of two private limited companies were out of cash back received. He therefore, submitted that at the most, depreciation on the fixed assets constructed required to be reduced and the disclosure amount is not required to be taxed as income of the assessee.
The ld AO disbelieved the above explanation of the assessee and issued a show cause notice rejecting the manner of surrender suggested by the assessee on 19.11.2010. The assessee submitted his reply on 25.11.2010 confirming his retraction. The ld AO rejected the explanation of the assessee for the reason that i. Assessee has made disclosure in his statement of the assessee u/s 132(4) of the Act, ii. explanation of the assessee does not deserve any attention as same is an afterthought, iii. no details were provided by the assessee about the suppliers of construction material who returned cash to the assessee. Consequently, he held that various investments and income is chargeable to tax in various years in the hands of the assessee starting from A.Y. 2007-08 to 2009-10. Consequently, for this year the ld AO charged to tax of sum of Rs. 29.50 lakhs on account of capital introduced in other company on substantive basis in the hands of the assessee and on protective basis in the hands of M/s. Umkal Healthcare Pvt. Ltd where the share capital is raised. The ld AO further charged to tax a sum of Rs. 30 lakhs on account of the seized documents showing payment of the sum to Ms. Ram Dulari on 22.07.2008 for purchase of land. The ld AO stated that vide Q No. 19 of the statement u/s 132(4) of the Act on 06.02.2009, the assessee has confessed it. He further made an addition of Rs. 1293832/- because of various documents seized during the course of search. The ld AO also made disallowance of 1/5th on account of motorcar expenses and other expenses incurred by the assessee considering the same for personal 4 ACIT V Umesh Gupta use. The ld AO further disallowed Rs. 20277/- out of other expenses on conveyance and telephone expenses @1/5th of total expenditure of Rs. 101388/-. Consequently the assessment order u/s 143(3) of the Act was passed on 30.12.2010 at income of Rs 12370010/- .
The assessee aggrieved with the order of the ld AO preferred an appeal before the ld CIT (A). The ld CIT(A) directed the ld AO to delete the addition of Rs. 29.5 lakhs made in the hands of the assessee stating that the additions of Rs. 29.50 lakhs is a double addition because the same has also been added in the hands of the company on protective basis and companies has already reduced the claim of depreciation, so now its duplication of addition as WDV of the fixed assets of the company which constructed the fixed assets has already been reduced therefore, this amounts to double addition. He also deleted the addition of Rs. 12.92 lakhs for the similar reason as it is also covered in the cash back generated by the assessee. With respect to addition of Rs. 30 lakhs on account of appellant assessee advance for purchase of land from Mrs. Ram Dulari, he held that in absence of any cogent and substantive documentary evidence supporting of generation of undisclosed income or investment by the assessee, this addition required to be deleted. He further deleted the various expenses disallowed by the ld AO and restricted the disallowance from 1/5th to 10% of the total expenditure on conveyance etc. Therefore, the appeal of the assessee was partly allowed. The ld AO aggrieved with the order of the ld CIT (A) has preferred this appeal.
The ground No. 1 and 2 of the appeal is with related to addition of Rs. 29.5 lakhs on account of share capital introduced in one of the company of the assessee i.e. M/s. Umkal Healthcare Pvt. Ltd.
The ld Departmental Representative submitted that additions have been made in the hands of the assessee for three Assessment years i.e. for A.Y. 2007-08, 2008–09 and 2009–10. He informed that the appeal of the revenue for A.Y. 2007 – 08 and 2008 the 09 were dismissed by the coordinate bench for low tax effect, despite it being a consolidated order. Therefore, the only appeal that survives is for A.Y. 2009 – 10.
Adverting to the addition of Rs. 29.50 lakhs, ld DR submitted that , assessee disclosed the sum in 132 (4) statement and then created an unsubstantiated story about the lower claim of depreciation without submitting any cash flow statement with names and evidences and date chart of amount of share capital. No details were submitted of the suppliers who repaid cash. Details of shareholders are admittedly bogus. He also refuted that there is a double addition in the hands of the assessee. He extensively referred to the assessment order and relied up on it. He also relied upon plethora of decisions to show that statement retracted is invalid, afterthought and incorrect. He further refereed that documents were found during search and according to the provision of section 132 (4A) and 292C of the act, same are correct for all purposes. Assessee could not substantiate that those documents are incorrect. He submitted that ld CIT (A) did not consider all these facts but merely relied upon submission of the assessee and deleted the addition. He extensively referred to the order of CIT (A), stated that it is not in accordance with the law, and incorrectly deleted the all three additions. He stated that order of AO may be restored.
The learned authorized representative vehemently opposed arguments of the learned departmental representative. He supported the order of the learned commissioner appeals. He submitted that i. Retraction was made after 1 ½ year as there were no proceedings were pending hence assessee did not have any occasion to say so. As soon as the first notice was received by the assessee and after engaging a new tax consultant, the learned assessee revised his disclosure amount. ii. He stated that retraction is not the change of stands but the change of merely the figures. iii. He further stated that the protective addition made in the hands of the assessee has resulted into the triple addition because firstly the company where assets are acquired has already reduced its claim of depreciation in earlier years for which the appeals of already been dismissed of the revenue. It is also reduced in this Ay also.
ACIT V Umesh Gupta iv. Assessee has submitted the complete bills of the cost of assets purchased during the year and cost of construction incurred during the year. He stated that the learned Assessing officer should have enquired from the suppliers independently. v. With respect to the addition of ₹ 30 lakhs on account of sum paid to Ram Dulari , he submitted that above document is a dumb document and no addition can be made in the hands of assessee.
We have carefully considered the rival contention and perused the orders of the lower authorities. The brief facts of the cases that during the course of search at the residence and the business premises of the assessee, he voluntarily surrendered a sum of ₹ 123 lakhs in a statement recorded under section 132 (4) of the act on 6/2/2009. However in the month of October 2010, assessee retracted the total surrender stating that ₹ 29.50 lakhs ( for AY 2009-10) introduced by him in the shape of share capital of a private limited company in name of two companies and one lady, is out of the cash funds available with him which was received back from suppliers and contractors who inflated bills of fixed assets to that extent, in construction of a multispecialty hospital under name of UMKAL healthcare private limited where the total spending of the assessee as stated by him is ₹ 45 crores approximately. A further sum of ₹ 1 2.93 lakhs he submitted that documents is an undated and unidentifiable sum mentioned in the document which was also out of the inflation on the cost of the assets. He further stated that the written down value of the fixed assets on the date of the commissioning of the fixed assets on 1/3/2009 has been replaced by the actual cost from inflated cost and thus the depreciation claim in the return of income for A.Y. 2009 – 10 and A.Y. 2010 – 11 is required to be reduced. He further stated that the income tax return of the private limited company for A.Y. 2009 – 10 is also being revised. It was further stated that there is no tax incidence arising consequent to the above adjustment in the income tax return for A.Y. 2009 – 10 because only the loss in the form of an unabsorbed depreciation are reduced. The learned Assessing officer disbelieves the explanation and retraction of the so-called surrender. The learned AO held that the retraction has been made by the assessee after a 7 ACIT V Umesh Gupta 19 months of search, not supported by the proper evidence. Consequently, for A.Y. 2009 – 10 the learned Assessing officer made addition as per the table of addition placed at page number 19 of the assessment order a sum of ₹ 29.50 lakhs. It is comprising of investment of ₹ 10 lakhs and ₹ 8.5 lakhs and ₹ 11 lakhs claimed to have been made by M/s Bajrang healthcare private limited, Mr fairglow financial services private limited and Mrs. Anjali Verma respectively in M/s Umkal healthcare private limited in financial year 2008 – 09. The addition is on substantive basis in the hands of the assessee and on protective bases in the hands of the company in which the share capital has been introduced. The learned commissioner of income tax appeals accepted the above explanation and deleted the whole addition. She further deleted the addition on accounts of documents found during the course of search for Rs 12.93 Lakhs on this basis. Further, with respect to addition of Rs 30 lakhs on account of advance paid to Ms Ram Dulari she accepted the contention of the assessee that, there is no evidence of earning such a huge unaccounted income and so the addition is based on dumb documents. Therefore this appeal filed by revenue.
It is apparent that appeals of the revenue against the deletion of the addition for A.Y. 2007 – 08 and 2008 – 09 has been dismissed by the coordinate bench on account of low tax effect. However, that does not influence the issues in this appeal.
Admittedly on the date of search 6/2/2009, assessee made disclosure in statement u/s 132 (4) of the act admitting undisclosed income of Rs 123 Lakhs in the hands of the assesses. Later on assessee retracted it on 13/10/2000, i.e. after 1 and ½ years. In fact, the assessee has merely stated by a letter that disclosure is not in the hands of the assessee as income. According to him, it is inflation in cost of assets. Assessee received cash back to the extent of disclosure from suppliers. Hence, hence there is only impact in the reduced depreciation of assets in the hands of the companies where assets are capitalized. Now we deal with each of the issues involved in the appeal.
According to us, the Assessee has retracted the statement made u/s 132 (4) of the act after 19 months of the date of the search, the disclosure is also in the form of letter before the ld AO during assessment proceedings. The contention of the assessee is that as there was no occasion with the assessee to retract the disclosure until the first notice was received is also devoid of merit. At the first instances of the payments of advance tax at least as early as that assessee could have explained the disclosure before the Ao/ ADIT/DDIT/CIT etc. However, assessee did not avail that opportunity. Further, the disclosure retracted by the assessee is also not supported by any evidences. Therefore, we reject the retraction filed by the assessee for this reason, which is not the only reason. Honorable Delhi high court even in case of statements u/s 133A of the act in survey has also held that Where assessee surrendered certain income by way of declaration and withdraws it after two years without any satisfactory explanation, it could not be treated as bona fide and, hence, addition would sustain. _ [Pr. CIT V Avinashh Sethia] [[2017] 81 taxmann.com 476 (Delhi)/ [2017] 248 Taxman 106 (Delhi)/ [2017] 395 ITR 235 (Delhi).
Further page number 16 of the assessment order shows that assessee has failed to substantiate even the retraction made by him. Assessee did not submit that which of the suppliers have inflated the bills and when such suppliers have paid cash back to the assessee. He has not submitted any records or any names of the suppliers and further not produced any information. In absence of any details from assessee, revenue was handicapped in even making any inquiry to verify the claim of the assessee. The conduct of the assessee in not providing this information itself shows that the retraction by the assessee was not at all bonafide. 14. Learned CIT (A) has accepted the version of the assessee that assessee has inflated the cost of construction of the fixed assets, the inflated amount was received by the assessee back in cash, and in turn, it was used by the assessee for depositing in the share capital of the company without verifying any evidence. No reference to any evidence is made by her in appeal order. Therefore the finding of the ld CIT (A) deleting the addition in also perverse.
Further the assessee has stated that cash is utilized for obtaining share capital in the other company, who are even otherwise as per the revised version of the assessee are bogus. Two of them are companies and one is an individual. No details were verified by the ld CIT (A) to ascertain whether the assessee has really inflated the cost of assets and has taken theses accommodation entries. No evidence was filed with respect to the various shareholders.
Further no evidence were shown by the assessee with respect to what is the inflated cost, what is the actual cost and how the money has been received , from whom it is received, how it is utilized, and through whom the accommodation entries with respect to the share capital from two companies were obtained. Even before us, assessee did not produce any such information. 17. In our opinion, the whole story created by the assessee is with respect to avoiding the tax on the income disclosed by him and get it adjusted the same against the depreciation claim of the other companies. 18. Assessee has not submitted any cash flow statement, which can be substantiated by the assessee with actual dates of receipt of cash and introduction of share capital by the various unknown persons. The ld CIT (A) even did not examine how and in what manner, assessee obtained share capital from various persons when apparently they are bogus. 19. The learned commissioner appeals failed to understand that how the addition has been made on substantive basis in the hands of the assessee and protective basis in the hands of the company amounts to double addition. Even the withdrawal of the claim of depreciation is made by assessee and those companies at their own will to force the revenue to believe their story. Hence, it also does not result in to double addition. 20. Learned CIT (A) failed to understand that the assessee has voluntarily surrendered the amount during the course of search and survey carried out at various premises. He stated that the surrender was made under section 132(4) of the act. The disclosure is also not bald. It was backed by the evidences and items of income as well as the amount of investments by the assessee. Hence, it cannot be brushed aside lightly. In view of this, we 10 ACIT V Umesh Gupta Assessing officer, and confirm the addition of Rs. 29.50 lakhs made in the hands-on the assessee on substantive basis on account of the disclosure made during the course of such. Accordingly, ground number one and two of the appeal of the learned Assessing officer are allowed. With respect to the addition of ₹ 1293832/– payment in cash made to Shiv 21. Kumari added u/s 69 of the act by the ld Assessing officer, the learned commissioner also stated that the above sum is already included in the reduction of WDV of the fixed assets purchased/constructed by the assessee. For the similar reasons the learned CIT (A) has deleted the addition of ₹ 1293832 also. Is also not acceptable for the similar reason because it was made based on seized documents which assessee failed to explain during the course of search and during assessment proceedings. It is also not the claim of the assessee that such transaction did not happen. We have also given our detailed reasoning with respect to the modification in disclosure from assessee to depreciation claim in case of companies, it also holds good for this grounds of appeal. Further during the course of search when the above paper when confronted to assessee he voluntarily admitted vide question number 18 of the statement recorded under section 132 (4) of the act that the above sum was paid by assessee for purchase of one property at Gurgaon. For the reasons given by us in confirming the addition in ground number one and two of the appeal of revenue, we also reverse the finding of the learned commissioner appeals and confirm the addition of Rs. 1293832/– on account of cash paid. Accordingly ground no 3 of the appeal is allowed. As per ground no 4 and 5 with respect to the addition of ₹ 30 lakhs based 22. on seized documents during the course of search as per annexure A-1, learned commissioner appeals has deleted the addition holding that the assessee could not have earned the above sum as no documents or substantive and cogent evidence are found supporting generation of undisclosed/unaccounted income of the assessee. We are not in a position to uphold the above finding for the simple reason that assessee himself has confessed that h he is inflating cost of assets, therefore ld CIT (A) could 11