SHALINEE CHOPRA,NEW DELHI vs. ACIT, CIRCLE-54(1), NEW DELHI

That Ld. AO has recorded reasons on the basis of borrowed belief, suspicion, preconceived notions, simply on the basis of information from Investigation wing and was not accompanied by any other material.

That in the facts and circumstances of the case, the Ld. AO recorded his reasons without appreciating and verifying the ITR filed by the Assessee which contained details of long term capital gain from sale of jewelry and the Wealth Tax Assessment record for AY 2012-2013 completed u/s 16(3) of the Wealth Tax Act, 1957.

That where the Id AO made addition of Rs 28,57,000/- applying section 69C of the Act, the Id CIT(A), NFAC in his order dated 29- 12- 2022 was wrong in directing to treat the addition of Rs 28,57,000/- as been made u/s 68 of the Act despite the assessee not maintaining any books of accounts.

That on the facts and in the circumstances of the case the Id CIT(A), NFAC was wrong in confirming the addition of Rs 28,57,000/- and dismissing the appeal filed by the assessee.

That the appellant assessee craves leave of this hon'ble court to add, amend, alter or withdraw any ground at the time of hearing.”

Ground Nos.1 to 4 are legal grounds whereas Ground Nos.7 & 9 are general in nature and Ground Nos. 5 & 6 are on the merits of the addition made. The sole substantive issue in this appeal relates to the addition of INR 28,57,000/- u/s 69C of the Act.

Brief facts are that the assessee had filed her return on 29.08.2012 declaring income of INR 1,04,47,200/- from business and other sources during the year under consideration. The return was processed u/s 143(1) of the Act. Subsequently, upon receipt of information from the Investigation Wing that the assessee is a beneficiary of accommodation entry provided by one Shri Varun Garg, a notice u/s 148 of the Act was issued on 31.03.2019. It was observed by the Ld. Assessing Officer (“Ld.AO”) that Shri Varun Garg had opened a bank account in the name of his entities i.e. M/s. Neha Jewellers & M/s. Nihal Chand Diwan Chand. These entities were found to be paper entities which were used to provide accommodation entries to different parties. The assessee was seen to have received a sum of INR 28,57,000/- from M/s. Neha Jewellers during the year under consideration. Accordingly, assessment was completed after holding that the amount of INR 28,57,000/- was unexplained expenditure u/s 69C of the Act. Total income was assessed at INR 1,33,04,216/- vide order u/s 143(3) r.w.s. 147 of the Act dated 20.12.2019.

Aggrieved with the order of Ld.CIT(A), the assessee is in appeal before us.

Ld.AR pointed out that the assessee had duly declared Long Term Capital Gain (“LTCG”) from sale of old jewellery in her return of income for AY 2012-13. The impugned amount is on account of receipt of sale consideration from this sale of jewellery. Further, it was submitted that the assessee had been regularly filing her wealth tax returns and wealth tax assessment for AY 2012-13 as well as for AY 2011-12 was completed u/s 16(3) of the Wealth Tax Act. In the wealth tax proceedings for AY 2012-13, the sale of jewellery were duly explained and also accepted by the Wealth Tax Officer. In support of this contention, copies of wealth tax returns as well as assessment orders for AYs 2011-12 & 2012-13 u/s 16(3) of the Act have also been filed. Ld.AR pointed out that these facts were brought to the notice of Ld.AO vide letter dated 14.12.2019. However, these were not considered while finalizing the assessment. It was further submitted by the Ld.AR that the addition was made u/s 69C of the Act even though no expenditure had been claimed infact there was receipt of money on sale of old jewellery. Subsequently, Ld.CIT(A) converted the section from 69C to 68 of the Act while confirming the addition made by Ld.AO. However, section 69C of the Act is also not applicable in Shalinee Chopra vs ACIT assessee’s case as no books of accounts were required to be maintained and return was filed on presumptive basis. Accordingly, provision of section 68 of the Act are also not applicable in this case.

Ld. Sr. DR for the Revenue strongly relied on the orders of the lower authorities. He further pointed out that as per field inquiries conducted by the Department at the given address of Sh.Varun Garg, no jewellery shop was found to be existing. Thus, in the absence of any evidence of business run by Shri Varun Garg, it was rightly held by the Ld.AO that accommodation entries were being provided by Shri Varun Garg, of which the assessee was one of the beneficiaries.

We have heard the rival submissions and perused the material placed before us. Admittedly, the assessee had filed her wealth tax return for AY 2011-12 & 2012-13 by due dates and the scrutiny assessments were completed wherein returned wealth was accepted for both the years. Total wealth tax for AY 2011-12 was assessed at INR 2,35,93,188/- and for AY 2012- 13, it was assessed at 1,53,15,000/-, the difference being on account of sale of old jewellery. Thus, the difference in assessed net wealth of these years on account of sale of old jewellery was duly explained and accepted by the Department. The transaction relating to this sale has also been shown in the income tax return for AY 2012-13 under the head ‘Capital Gains’ by declaring long term capital loss of Rs.2,72,252/-.

Evidently, Ld.AO did not look into these records available with the Department either at the time of issue of notice or even during the assessment Shalinee Chopra vs ACIT proceedings. In view of these facts, we hold that there was no justification for re-opening the assessment without taking into account the income tax and wealth tax returns filed by the assessee. Subsequently, even when these details were filed by the assessee during the course of assessment proceedings, no cognizance of these was taken by the Ld.AO. In view of above facts and circumstances, we hold that the addition made by the Ld.AO without considering the assessee’s explanation was bad in law. Accordingly, the addition of INR 28,57,000/- made u/s 69C by the AO and confirmed u/s 68 by Ld.CIT(A) is hereby, deleted.

As the assessee succeeds on merits, rest of the grounds raised by the assessee are rendered academic in nature and hence, are not being adjudicated upon.

In the result, the appeal of the assessee is allowed.