ITO, NEW DELHI vs. MR. GOKAL CHAND KHANNA, NEW DELHI

Date of hearing: 23.06.2016 Date of Pronouncement: 21.07.2016 ORDER

PER BEENA A. PILLAI, JM:

2 I.T.A.No.1361./Del/2013

2.2 Aggrieved by the assessment order, assessee filed an appeal before Ld. CIT(A) who deleted the additions made by the Assessing Officer. Aggrieved by the order of Ld. CIT(A), the revenue is in appeal before us now.

3 I.T.A.No.1361./Del/2013 3.1 On the contrary, Ld. A.R. submitted that the assessee came to know regarding AIR information received by the Assessing Officer only when he received the assessment order. He submitted that there was no specific query that was raised by the Ld. A.O. in respect of investment in Kotak Mutual Funds for the year under consideration. He referred to the relevant letter which has been placed at page 30 of the Paper Book asking for the AIR information which was subsequently provided, placed at pages 31.-33 of the Paper Book. Ld. A.R. submitted that the mutual funds with Kotak mentioned in AIR information was made by his wife Mrs. Tej Khanna with the assessee as joint holder. The assessee had submitted the books of account statement of Kotak to substantiate the same. Ld. CIT(A) accordingly remanded these documents to the A.O. for his comments. The Assessing Officer in his remand report observed as under: “The Ld. A.O. has observed that in view of the provisions of Rule 46A ‘the assessee is not entitled to produce additional evidence particularly supporting evidences for investments made in mutual funds as per AIR information.”

3.2 Ld. A.R. submitted that during the assessment proceedings, no evidences were called for by the Assessing Officer regarding the information of investment given in AIR which was not provided to the assessee during the assessment proceedings. Ld. A.R. submitted that the 4 I.T.A.No.1361./Del/2013 source of investment in Kotak Securities placed on record for consideration before the Ld. CIT(A) is as under: “Source of investment in Kotak Securities is detailed as under: i) As on December 2003, shares amounting to Rs. 22.43 lacs were invested in HDFC Bank, copy of HDFC Depository Services statement of holding is hereby enclosed for your reference. ii) Subsequently, the same was invested with Kotak Securities vide letter dated 05.11.2004 (copy enclosed) iii) Later on, on 30.05.2005, an investment was made in shares of Fortune Equity Portfolio of Rs. 25.70 lacs (copy of letter dated 30.05.2005 is enclosed). iv) Further, Investment of Rs. 42 lacs was made on 04.09.200" to Incubator Equity Portfolio of Kotak - PMS. v) These funds along with dividend earned reinvested, were used from time to time in the investment in Mutual Funds under consideration.”

3.3 We have perused the material placed on record, orders of authorities below and the arguments advanced by both the parties. It is observed that Ld. CIT(A) has considered the submissions of the assessee regarding the bank statements issued by Kotak Securities vis-à-vis the observations of the A.O. in the assessment order as well as in the remand report. The Ld. CIT(A) observed as under: “It is seen that as on December 2003, the wife of the appellant Smt. Tej Khanna invested Rs.22.43 lacs in HDFC Bank. In this regard the appellant has filed copy of the HDFC Bank depositary services as on 31.03.2003 wherein the portfolio value has been shown at Rs.22,43,193.90. This amount was re-

5 I.T.A.No.1361./Del/2013 invested by Smt. Tej Khanna in Kotak Securities vide letter dated 05.11.2004. The copy of the letter issued by Kotak Securities is placed on record. M/s. Kotak Securities issued a letter on 30.03.2005 wherein they have accepted a cash corpus by cheque of Rs. 25,70,000/-, which was invested in Fortune Equity Portfolio. Further, the wife of the appellant Smt. Tej Khanna re-invested the said amount in Incubator Equity Portfolio of Kotak Securities. The amount of investment was Rs.42,00,000/-. This has been accepted by Kotak Securities vide their letter dated September 2007 issued to Smt. Tej Khanna. This amount along with the dividend was re-invested by Mis Kotak Securities from time to time by the Kotak Securities in various investment schemes. During the year Smt. Tej Khanna further invested Rs.10,00,000/- in Kotak Mutual funds on 19.12.2008 which was made invested from her bank account running with Punjab National Bank. Further, the AIR information received in the case of Gokal Chand Khanna has been tallied with the Kotak Securities Portfolio management System maintained in the name of Tej Khanna wherein appellant is simply a joint name holder. The AIR information shows that amount invested on time to time on different dates. On verification with the PMS Statement it is seen that the investment made by the Kotak Securities on behalf of Smt. Tej Khanna tallied with the AIR information received in the case of appellant. It is seen that during the year Smt. Tej Khanna made fresh investment of Rs.10,00,000/-only and other investments were re-invested out of the investment and dividend of Rs.42,00,000/-made in September 2007. It is seen that total value of the investment as per AIR information comes to Rs.60,13,826/-which includes the amount of Rs.10,00,000/-invested by way of cheque by Smt. Tej Khanna with Kotak Securities on 19.12.2008. The value of investment tallies with the sources of funds i.e. Rs.42,00,000/-invested in September 2007 and Rs. 10,00,000/-during the year from Punjab National Bank, the rest of the amount of Rs. 8,13, 826/- is 6 I.T.A.No.1361./Del/2013 accretion to the funds invested by way of dividends and other benefits accrued to the PMS account. In view of the above, it is held that investment in Kotak Securities PMS account does not belong to the appellant and same pertains to Smt. Tej Khanna wife of the appellant who is separately assessed to tax. Therefore, the addition made by the Assessing Officer of the investments pertaining to Smt. Tej Khanna were not justified and same is deleted.”

3.4 We do not find any infirmity in the above findings by Ld. CIT(A). Accordingly, we dismiss this ground of appeal filed by the Revenue.

4. Ground No.2 is against the deletion of addition made by Assessing Officer in respects of unexplained investment in shares and securities u/s 69 of the Act. Ld. D.R. submitted that the assessee was asked to furnish the statement of his affairs several times to find out the details of investment made during the year and the source of such investment. The assessee filed the statement of wealth as on 31.03.2008 and 31.03.2009 vide letter dated 12.08.2011. Ld. A.O. on perusal of the statement reproduced at page 8 & 9 of Ld. CIT(A)’s order, observed that the value of assets has increased from Rs.91,39,001/- to Rs.1,45,94,598/- without any reduction from Income earned during the year on account of household expenses and the investments made by him in respect of deductions claimed under Chapter VIA. The assessee was asked to explain as to how the value of Assets have increased from opening balance of Rs. 91,39,001/- to the closing balance of Rs.1,45,94,598/-

7 I.T.A.No.1361./Del/2013 especially when the value of all assets in the chart were taken at book value. The assessee was asked to furnish the details of assets as well as the liabilities as on 31-03- 08 and 31-03-09. 4.1 Ld. Assessing Officer made addition on the ground that no details were submitted by the assessee as called for. 4.2 On an appeal before Ld. CIT(A), deleted addition made by Ld. A.O. Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us now. 4.3 Ld. D.R. submitted that the assessee has tried to cover up the unexplained investment in shares made during the year by inflating the value of Shares as on 31.03.2008. Ld. D.R. submitted that the assessee has not furnished required details in-spite of many opportunities given to him from time to time. He submitted that no details of shares held as on 31-03-2008 and 31-03-2009 was submitted to arrive at a conclusion as to which statement of affair is correct. Ld. D.R. submitted that the sources of acquisition of shares to the extent of Rs.57,14,423/- remains unexplained. He ;submitted that in absence of any details filed by the assessee, the statement of affairs filed by the assessee cannot be believed to be correct and the value of addition to shares during the year as per the earlier statement of affairs is treated as unexplained investment in shares. He

8 I.T.A.No.1361./Del/2013 submitted that addition of Rs.57,14,423/- may be sustained. 4.4 On the contrary, Ld. A.R. submitted that the statement of wealth filed by the assessee as on 31.03.2008 and 31.03.2009 vide letter dated 12.08.2011 showing the investment in shares were Rs.58,09,001/- as on 31.03.2009 and was inadvertently shown at Rs.12,19,957/- as on 31.03.2008. He submitted that Rs.12,19,975/- was actually the amount of capital gain for the Assessment Year 2008-09. Ld. A.R. referred to pages 40 to 43 of the Paper Book to substantiate the inadvertent mistake and submitted that the statement of wealth was revised and corrected amounting to Rs.69,34,380/- as on 31.03.2008. Ld. A.R. submitted that all the documents were remanded by the Ld. CIT(A) to Ld. A.O. for verification. However the Assessing Officer has made the addition only on the basis of surmises and conjectures without bringing any material on record which could show that these investments in shares remained unexplained. He submitted that even during remand proceedings, the Assessing Officer did not call for any further details or information regarding the shares held as on 31.03.2008 and 31.03.2009. 4.5 We have perused the material placed on record, orders of authorities below and submissions of both the parties. On going through the statement provided by Kotak Securities placed at pages 42 & 43 of the Paper

9 I.T.A.No.1361./Del/2013 Book, it can be verified that the cost of investment made in shares as on 312.03.2008 is shown at Rs.69,34,380/- instead of Rs.12,19,957/-. In the statement of wealth filed by the assessee on 31.03.2008 and 31.03.2009, the investments were shown at Rs.58,09,001/- as on 31.03.20-09 which was inadvertently shown at Rs.12,19,957/- as on 31.03.2008, an d Rs.12,19,957/- was actually capital gain being shown in the hands of assessee. Ld. A.R. submitted the statement of realized profits by the assessee on investment of shares for the year under consideration. Ld. A.O. held in the assessment order that the assessee has increased the opening balance from Rs.12,19,957/- to Rs.69,34,380/-. From the statement issued by Kotak Securities, it is observed that the value of investment in shares was Rs.69,34,379.75 as on 31.03.2008. These human error / mistake in recording the figures was rectified by the assessee. It has been observed by Ld. CIT(A) that there is no difference in the investment shown in shares as on 31.03.2008 and 3.103.2009. Ld. CIT(A) held as under: “In view of the equity investment statement issued by Kotak Securities, it is held that value of holding costs of shares as on 31.03.2008 was Rs.69,34,379.75 and not Rs.12,19,957/-. As such, there was no unexplained investment in the shares of the assessee. The assessee actually held investment in shares at Rs.69,34,379.75 and same was reflected in his return of income. Hence, the addition made by the Assessing Officer on account of unexplained investment in shares w not justified and same is deleted.”

10 I.T.A.No.1361./Del/2013 4.5 We do not find any infirmity in the findings of Ld. CIT(A) and uphold the same. We, thus dismiss this ground of appeal of Revenue.

5. Ground No.3 is regarding deletion of addition made by Ld. CIT(A) in respect of foreign travel expenditure incurred by the assessee amounting to Rs.5,84,212/- which was held as unexplained expenditure u/s 69C of the Act. 5.1 Ld. D.R. submitted that the assessee could not file any detail regarding the foreign travel along with bills and vouchers in respect of expenses incurred. He submitted that the additions made by the Assessing Officer should be sustained as no documents / records / confirmation / evidences etc. were placed on record to substantiate the foreign tour expenses. 5.2 On the contrary, Ld. A.R. submitted that the assessee had incurred amount of Rs.5,84,212/- towards foreign trip and his wife Mrs. Tej Khanna had paid Rs.5,12,207/- towards foreign expenses. The bills related to the expenditure made by the assessee had been submitted with the Ld. A.O. at the time of assessment proceedings vide letter no. 333 dated 11.05.2012. However the Ld. AO had stated in the assessment order that no document, record, confirmation, evidences etc. was placed on record to substantiate the amount and nature of foreign tour expenses.

11 I.T.A.No.1361./Del/2013 5.3 Ld. A.R. submitted that assessee had submitted all the relevant documents like bank statements, travel bills, proof of travel etc. to the Ld. A.O. at the time of assessment proceedings, which are as under: Towards Amount Rs. Evidence Foreign Rs4,21,966/- Copy of bill enclosed (p[aid to R.R. Exchange Sen & Bros. Pvt. Ltd.) Rs.90,2412/- Copy of bill enclosed (paid to R. R. Sen & Bros Pvt. Ltd.) Travel Rs.72,005/- Proof enclosed (paid to Travel Agent Tickets – Touch of class through PNB 5.4 Ld. A.R. submitted that these details and evidences were remanded to the A.O. for verification. Ld. A.O. rejected the contention of the assessee without verifying these documents. 5.5 It is observed that Ld. A.O. has added Rs.5,84,212/- on account of unexplained expenditure incurred by the assessee on foreign travelling by the assessee along with his family. During the course of assessment proceedings, assessee filed copy of the bank statement along with the bills for purchase of foreign currency and tickets by the assessee (Paper Book pages 44-53). It is claimed by the assessee that he has purchased foreign currency from R.R. Sen & Brothers of Rs.4,21,966/-and Rs. 90,241/-, for which the copy of bill was filed by the assessee along with its submission dated 1l.05.2011. It is seen that purchase of foreign currency has been paid by cheque by the assessee from his bank account running with the Punjab National Bank. It is seen that amount of Rs.4,21,966/-and Rs.90,241/-have been cleared from the 12 I.T.A.No.1361./Del/2013 account of the assessee on 26.03.2009 and 20.03.2009 in the name of R.R. Sen and Brothers. The purchase of travelling tickets of Rs.72,005/-is also paid from Punjab National Bank on 16.04.2008 which is reflected in the statement. It is submitted by the assessee that foreign travel undertaken by the assessee in March 2009 was partly financed by his wife Smt. Tej Khanna and she has withdrawn Rs.5,12,207/-which is also confirmed by the Assessing Officer in the assessment order at para-3 of the order. The ticket expenses of March 2009 tickets were paid by the assessee’s wife from the withdrawals made by her. As far as the ticket of April 2008 it is seen that same has been paid by the assessee from his bank account. 5.5 It is observed that Ld. CIT(A) has deleted the addition as the assessee has explained the expenditure mae. We do not find any infirmity with the findings of Ld. CIT(A) and, therefore, we hold that the expenditure incurred by the assessee stands fully explained. 5.6 In the result, ground No.3 raised by the revenue stands dismissed.