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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals).
The ld. Commissioner of Income Tax (Appeals) accepted that the Assessing Officer has not accepted the submission made by the assessee during the assessment stage and has made the addition arbitrarily. He held that no documentary evidence in this regard has found. He held that no addition can be made solely on the basis of the loose papers. Hence, he held that the assessee’s explanation is acceptable in light of the Hon’ble Apex Court decision in the case of CIT vs. Kalyanasundaram [2007] 294 ITR 49 (SC). Accordingly, he deleted the addition.
Against the above order, the Revenue is in appeal before us.
We have heard the counsel and perused the records. We find that as evident in the material obtained by the Revenue during search and seizure, it was only with reference to the search and seizure material that Smt. Madhu Chopra gave a specific amount to various heads wherein the undisclosed income had been utilized. The addition is not based upon any incriminating material found or searched. Furthermore, the so called retraction is by the mother of the assessee and the Assessing Officer is correct in finding that there is no retraction whatsoever by the assessee. Hence, the ld. Commissioner of Income Tax (Appeals) has totally erred when he has held that the Assessing Officer has made this addition without any evidence or arbitrary.
Furthermore, the ld. Commissioner of Income Tax (Appeals) has himself erred and contradicted himself when he observes that no addition can be made on the basis of the loose papers. Thus, on one hand she is stating that there is no material and on the other hand she is stating that there are materials in the form of loose papers. Hence, the reasoning by the ld. Commissioner of Income Tax (Appeals) is contradictory and is unsustainable. The decision of the Hon’ble Apex Court in the case of Kalyanasundaram (supra) relied upon by the ld. Commissioner of Income Tax (Appeals) is on totally different facts and circumstances. In the said case, where the tribunal’s decision was authored by one of us, the issue related to on money payment in respect of immovable property based on conflicting statement of the seller and certain figures noted in loose sheets. Hence, this decision was rendered in a different context and does not help the case of the assessee. Hence, we set aside the order of the ld. Commissioner of Income Tax (Appeals) and restore that of the Assessing Officer.
In the result, this appeal by the Revenue stands allowed.
Commissioner of Income Tax (Appeals) :
1) Addition of Rs.40 lacs being unaccounted/undisclosed income in the form of Gifts from LVMH Watch and Jewellery India Pvt. Ltd.
2) Addition of Rs.15 lacs on account of unaccounted/undisclosed income in respect of professional remuneration received from Ramee Royal Hotel, Dubai, UAE.
3) Addition of Rs.4,64,000/- made by the Assessing Officer for perquisites given by Ramee Royal Hotel, Dubai, UAE.
4) Addition of Rs.14 lacs for notional rent for penthouse at Flat no. 901 and 904 of Navkaran building.
The assessee has also filed an additional ground in this regard which reads as under:
Additional Ground No 1:- The addition of Rs 16,00,000 made in the assessment order passed u/s 143(3) r.w.Sec 153A for the assessment year 2008-09 in the case of the appellant on account alleged receipt from Ramee Royal Hotel is bad-in-law because the addition is not based on any document or valuable asset belonging to the appellant seized u/s 132 . The documents relied upon in the assessment order were impounded during the survey action u/s 133A. Additional Ground No 2 :- The addition of Rs 4,64,000 made in the assessment order passed u/s 143(3) r.w.Sec 153A for the assessment year 2008-09 in the case of the appellant on account alleged receipt of tickets from Ramee Royal Hotel is bad-in-law because the addition is not based on any document or valuable asset belonging to the appellant seized u/s 132 . The documents relied upon in the assessment order were impounded during the survey action u/s 133A.
On this issue the Assessing Officer noted that on verification of the endorsement agreement entered with LVM-TAG Watches it is noticed that an amount of Rs.1.40 crores receipts has been paid to the assessee. Apart from the above said receipts, the assessee has also been received gift of watch worth Rs.40 lakhs.
In explanation, the assessee has explained that it is gift received for love and affection and respect towards the assessee by the company, therefore, the same cannot be treated as receipt. The Assessing Officer was not convinced. He held as under:
In addition to the above, the company does not have any human touch of love and affection, it is an artificial person and therefore does not have any emotional feeling of love and affection which is the cardinal factors for treating any transaction as gift. So, there is not even a remote possibility to consider this transaction as gift. Therefore, the contention raised by the assessee’s representative is not accepted. Since the above said receipts are received as part and parcel of the endorsement signed by the assessee, the said receipts are treated as perquisites u/s. 28(iv) of the I. T. Act and is taxed accordingly.
Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) observed that the Assessing Officer has rightly taken the gift of watch as perquisite and taxed it correctly u/s. 28(4). He observed that in the written submission, the assessee has accepted the same. However, he noted that the assessee has mentioned that the value of the watch is much less. However, since the assessee has not able to produce any of the evidence in this regard, the ld. Commissioner of Income Tax (Appeals) did not accept the demand of the assessee. Accordingly, he confirmed the addition.
We have heard the counsels and perused the records. The ld. Counsel of the assessee submitted that the assessee has received gift of watch as per the agreement from which the assessee acted as model for its advertisements and promotional activities for an agreed remuneration of Rs.1.4 crores for 2 years. Furthermore, it was submitted that the value of the watch is much less.
Per contra, the ld. Departmental Representative relied upon the orders of the orders of the authorities below. We find that it is clear that the assessee has received watch worth of Rs.40 lacs from the same company and in the same agreement in which she has undertaken advertisements and promotional activities and has received remuneration of Rs.1.4 crores. Hence, the addition as perquisite u/s. 28(4) has no infirmity. Furthermore, the statement of the assessee that the actual value of the watch is much less has rightly been rejected by the ld. Commissioner of Income Tax (Appeals) has no corroboratory evidence in this regard has been produced.
Accordingly, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals) in this regard. Hence, we uphold the same.
Apropos addition in serial nos. 2 & 3:
On this issue, the Assessing Officer made an addition by observing as under:
Regarding addition of Rs.16 lacs:
10 and 2524/Mum/2015 On verification of Annexure A-7 of page nos.65-66 dated 18-06-2007 & 118 dated 04-07-2007 seized during the course of search it is seen that as per page no. 118, the assesses has received professional receipts of Rs.15 lakhs" and Rs.l lakhs through Chand Mishra totaling to Rs, 16 lakhs from Ramee Royal Hotel, Dubai; UAE for stage performing. Accordingly the assesses was asked to submit the details of the same and its accountability in the books of account for the year under consideration. The assessee has not submitted any explanation nor the said receipts have been disclosed in her books of account. As per page no. 118 it is evident that the assessee had attended the above said function and performed the event and received an amount of Rs.16 lakhs from Ramee Roya] Hotel and assessee could not justify the said receipt. Therefore, the same are treated as unaccounted income of the assessee for A.Y.2008-09 and taxed accordingly. Penalty proceedings u/s.271(l)(c) of the I T Act are initiated for furnishing inaccurate particulars of income and thereby concealing the said income
Regarding addition u/s.28(iv): Further as per the letter dated 04-07-2007 seized as Annexure A-7 of page 118, it evident that the assessee Ramee Royal Hotel had paid Air Tickets of Staff, Brother and Sister of Priyanka Chopra which as per page 63 & 64 of Annexure A-7 works out to (Rs.2,36,000 + Rs.2,28,000) Rs. 464000. Therefore, in the absence of any details, this amount of Rs.4,64,000/- is also added u/s.28(iv) of the I T Act and taxed accordingly, penalty proceedings u/s.271{l)(c) of the I T Act are initiated for furnishing inaccurate ^particulars of income and thereby concealing the said income.
Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) confirmed the addition. However, as regards the addition of Rs.16 lacs, he restricted the same to Rs.15 lacs and added Rs.1 lac in the case of Mr. Chand Misra.
Against the above order, the assessee is in appeal before us.
In this regard, we note that the assessee has raised an additional ground wherein it has been argued that this addition is not based upon any incriminating material find that in this case, the assessee has filed original return on 29.09.2008.
Subsequently, this assessment has been done u/s. 153A pursuant to search and seizure.
Now it is the settled law that the Hon'ble jurisdictional High Court decision in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom), order dated 21.04.2015 dehorse any seized material/incriminating material found during search, addition in the case of abated assessments u/s. 153A is not sustainable. We further note that this additional ground has been raised for the first time. It also needs reference to the factual records. Since, it is an important legal ground and goes to the root of the matter, we admit the additional ground and remit the issue to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh in accordance with the ratio from the Hon'ble jurisdictional High Court decision in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), and factual details.
Apropos addition of Rs.14 lacs on account of notional rent:
In this regard, the assessee has also raised additional ground which read as under:
Additional Ground No 3:- The addition of Rs 14,00,000 made in the assessment order passed u/s 143(3) r.w.Sec 153A for the assessment year 2008-09 in the case of the appellant as income from House Property from Flat No 901 & 904 Navkaran Appts is bad-in-law because the addition is not based on any document or valuable asset belonging to the appellant seized u/s 132.
12 and 2524/Mum/2015 It may be mentioned that these are purely legal grounds. All the facts necessary to decide the additional ground of appeal are already on record and no new evidence is required to be brought on record.
23. On this issue, the Assessing Officer made the addition by observing as under: In the return of wealth filed, the assessee had claimed the penthouse at 9th Floor in Navkaran apartments as exempt as an office, being used for the business purpose. However, during the course of search, it was noticed that the flat No.403 was used as office rather than 901. In this regard, statement on oath of one of the assessee's employee Ms. Deepika Prakash was recorded u/s.132(4) of the I.T. Act on 24-01-2011, wherein she stated in reply to Q.5 that; “As per my knowledge the flat was purchased by Ms. Priyanka Chopra in 2008. The flat was since then never utilized for business or residence purpose. Hence the flat is vacant since it was purchased.” On further verification it is noticed that the said penthouse is of two different units and separate agreements are made. Further, as admitted above, the penthouse was not utilized since A.Y.2009-10, however, the assessee is claiming depreciation on the same. In this regard, the assessee was asked to submit the details with supporting documentary evidence that the said penthouse has been used for office purpose and why annual value under the provisions of sec.23(l)(c) should not be determined treating it as income from House Property by disallowing depreciation. In reply to the same the assessee's representative orally stated that the said penthouse is used for keeping the assessee's dresses as godown, however he has not furnished any documentary evidence that it has been utilized for official use. Further, it can be seen that the property under consideration is a penthouse which is located in the residential area. Hence, it cannot be considered as commercial property. Therefore, the annual value of the above said properties has to be determined under the provisions of sec.23(l)(c) and charged under Income from House property. Relying on the case of Smt. Radhadevi Dalmiya Vs. CIT 125 ITR 134 the Tribunal had 'adjudged that a fair return of about 7% on the investment in properties can be taken into account for determining annual rateable value and shall be regarded as just and fair for determining the annual value of the above said properties. Therefore, the annual value of the above said properties is computed as under:
13 and 2524/Mum/2015 S.No Flat No. Investment Annual Rent (7% Value (Rs.) of Investment) 1 Penthouse 901 1,25,00,000 8,75,000 2 Penthouse 904 75,00,000 5,25,000 Total 2,00,00,000 14,00,000 Therefore, deemed rental Income of Rs.14,00,000 is charged on estimate basis and is taxed accordingly. Further, as the property has not been used for any official use, the depreciation claimed on Penthouse and depreciation on furniture & fixture totaling to Rs.21,88,367/- is disallowed and is added to the income of the assessee for the year under consideration.
The ld. Commissioner of Income Tax (Appeals) affirmed the action of the Assessing Officer.
Against this order, the assessee is in appeal before us.
In this regard, the assessee has also raised an additional ground wherein it is urged that addition is not based upon any incriminating material. On the same reasoning, as the previous ground adjudicated by us wherein we have admitted the additional ground and remitted the issue to the file of the Assessing Officer, we similarly admit this ground. The Assessing Officer is directed to consider the issue afresh in accordance with the ratio arising out of the order of the Hon'ble jurisdictional High Court decision in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra).