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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
The aforesaid appeals have been filed by the assessee against the separate impugned orders of even date, 17.10.2013 passed by Ld. CIT (Appeals)-XXXI, New Delhi for the quantum of assessment passed u/s.143(3)/153A for the Assessment Years 2007-08 and 2008-09. Since issues involved in both the appeals are common arising out of identical set of facts, therefore, same were heard together and are being disposed of by way of this consolidated order. In the grounds of appeal for the Assessment Year 2007-08, assessee has raised the following grounds:-
“1. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming the addition of Rs. 12,010/- on account of disallowance of expenses for personal use ignoring the fact that the addition has been made in the hands of the assessee for the expenditure which actually relates to the expenses of the business run by the assessee. Thus, order of the learned CIT (A) passed merely on surmises and conjectures should be reversed and addition confirmed by him should be deleted.
2. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming the addition of Rs. 5,00,000/- made by the Learned AO on account of undisclosed investment in committees ignoring the fact that the investment made is duly accounted for. Thus, order of the learned CIT (A) passed merely on surmises and conjectures should be reversed and addition confirmed by him should be deleted.”
At the outset, ld. counsel for the assessee has not pressed ground no.1, therefore, the same is dismissed as not pressed.
Facts in brief are that, search action u/s.132 was carried out on 7th January, 2010 in Gee Ispat group of cases and assessee being part of that group, was roped in within the scope and ambit of Section 153A. During the course of search, a diary was found at the residential premises of the assessee marked as Annexure A-1 which contained certain transactions in respect of investments made in various committees. After taking note of the document which has been incorporated at paragraph 6 of the assessment order, Assessing Officer noted that during the year, assessee has made investment of Rs.5 lacs for making the payment to committee which was not disclosed in the books of account and due lack of any proper explanation by the assessee in this regard, same was added by the AO. Ld. CIT (A) too has confirmed the said addition.
Before us, ld. counsel for the assessee submitted that this issue now stands already covered by the amount offered and settled by the order of Settlement Commission, vide order dated 29.04.2013 passed under 245D(4). The relevant observations of the Settlement Commission in this regard read as under: “40. In his report dated 26.04,2013 (forwarded vide CIT's letter dated 28.04.2013), the AO has referred to page 137 of a Note book marked as Annexure A-1 as per which amounts of Rs.5,00,000/- each stood invested by the applicant on 01.01.2007 and 16.12,2007 but, however, this aggregate amount of Rs. 10,00,000/- is shown as investment on 01.04.2009. Based on these inputs, the AO proposed treatment of Rs. 10,00,000/- in the applicant's hands for AY 2010-11.
The applicant's reaction on the afore-mentioned investment is on the same lines as in the case of investment in property at Rohini, Delhi (para 38). In other words, here again, the applicant has conceded this as undisclosed Investment.
On a bare perusal of the factual position brought by the Assessing Officer, as in para 40, it is seen that the investment, in actuality, related to AYs 2007-08 and 2008-09 which are not subject matter of the present proceedings. Even if the AO's proposal to tax the same in AY 2010-11 is conceded, still this quantum of Rs.10,00,000/- is capable for being subsumed within the additional income adjudicated for AY 2010-11.”
Thus, he submitted that the issue now stands covered from the order of the Settlement Commission.
On the other hand, learned Department Representative strongly relied upon the order of the Assessing Officer and ld. CIT (A).
After hearing the rival submissions and on perusal of the relevant material referred to before us at the time of hearing, we find that the main issue pertains to unexplained investment made in various committees which was found recorded in the seized diary. For the impugned years under appeals i.e. Assessment Years 2007-08 & 2008-09, pages 135 and 137 of seized diary records investment of Rs. 5 lacs on 01.01.2007 and another Rs.5 lac on 16.12.2007. As noted above, the investment aggregating to Rs.10 lac (Rs. 5 lac each) for the Assessment Years 2007-08 and 2008-09 has already been considered by the Settlement Commission and has been admitted to have subsumed within the additional income offered for the Assessment Year 2010-11. Thus, no separate addition for this unexplained investment could have been made. We accordingly, direct the Assessing Officer to verify if the amount of investment of Rs.5 lac is covered in the opening balance of Rs. 1,07,61,930/- as shown in Annexure A-1 on which tax has already been paid as directed by the Settlement Commission. If that is so, then no separate addition should be made. Assessee should be called upon to explain the same. Thus, the appeal of the assessee is partly allowed.
The grounds of appeal
for the Assessment Year 2008-09 read as under:
1. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming the addition of Rs.20,720/- on account of disallowance of expenses for personal use ignoring the fact that the addition has been made in the hands of the assessee for the expenditure which actually relates to the expenses of the business run by the assessee. Thus, order of the learned CIT (A) passed merely on surmises and conjectures should be reversed and addition confirmed by him should be deleted.
2. On the facts and in the circumstances of the case and in law, the Learned CIT (A) erred in confirming the addition of Rs. 27,50,000/- made by the Learned AO and further enhancing the amount by Rs.5,00,000/- on account of undisclosed investment in committees ignoring the fact that the investment made is duly accounted for. Thus, order of the learned CIT (A) passed merely on surmises and conjectures should be reversed and addition confirmed by him should be deleted.
9. At the outset, ground no.1 is not pressed; therefore, the same is dismissed as not pressed.
10. Ground no.2 relates to addition made on account of investment in committees on account of undisclosed income on the basis of page 136 of the seized diary Annexure A-1. The assessee’s case before the Assessing Officer as well as the ld. CIT (A) has been that his committees has been run by M/s. Gee Ispat Pvt. Ltd. and Mr. Krishan Lal Basia and Others; and the Settlement Commission has considered the investment in the committee of the assessee in the other undisclosed income and has settled the same in the Assessment Years 2009-10 & 2010-11. It has been categorically held that the amount settled in respect of these assessment years will cover the investment for this year also.
The ld. CIT (A) has noted that the investment has made in the two committees during the Financial Year 2007-08 which is reproduced hereunder: SS162 Month of Payment Amount paid (Rs.) Amount received (Rs.) December, 2007 4,20,000/- - January, 2008 5,00,000/- - February, 2008 425000/- - March, 2008 4,30,000/- - Total 1,75,000/- -
BASIA Committee
Month of Payment Amount paid (Rs.) Amount received (Rs.) January, 2008 2,05,550/- - February, 2008 2,05,550/- - March, 2008 2,05,550/- - Total 6,16,650/- -
Ld. CIT (A) further enhanced the said addition of Rs.27,50,000/- after observing and holding as under:-
“These payments at Col. 2 are net of dividend earned during the month. The AO has added total amount of payments including the dividend. In the case of first committee (SSI62), the payments have been made for 4 months. The AO has, therefore taken Rs.20 lakhs as paid in respect of this committee including the dividend @ Rs. 5 lacs per month. In respect of BASIA committee, payments have been made only for 3 months and the AO has taken undisclosed payments a Rs. 7.5 Lakhs (Rs.2,50,000/- each) including the dividend from the committees. Thus, the AO has arrived at an addition of Rs. 27,50,000/. However, it is noted that the appellant had received Rs. 40,37,500/- in the months of march which has remained to be taxed. The AR argued that in respect of the said receipt the appellant had already made payment of 4 instalments in the first committee i.e. SSI62.
The submissions of the AR have been considered. It cannot be denied that the appellant made payment of Rs. 4.2 lacs, Rs. 5 lacs and Rs. 4.25 lacs respectively during the months of December, January, February of F.Y. 2007-08 to the committee SSI62 which are outside the books of account. The total comes to Rs.13.45 lacs which is the unexplained investment in the said committee. Further, the appellant has received Rs. 40,37,500/- from the same committee in the month of March, 2008 which again has not been disclosed. Thus Rs.13.45 lacs is liable to be added to the total income as undisclosed investment in the committee and Rs.40,37,500/- as undisclosed receipts from the same committee. It is noted that the payment accounted again the month of March, 2008 (Rs. 4.30 lacs) is not necessary to be included in the undisclosed payments as the same is only a notional entry since the appellant has chosen to take that month’s committee amount from himself. The total addition relating to the committee SSI62 is therefore Rs. 53,82,500/-.
Further the payments in the respect of Basia committee for the month of January, February and March 2008 are also required to be added to the total income as these payments/investments have not been disclosed. The same comes to Rs. 6,16,650/-. Thus the total addition on account of undisclosed investments and receipts relating to the two committees as noted at page No. 136 of the seized diary A-l/ZR-4 for the relevant previous year as above works out to Rs. 59,99,150/- (Rs. 53,82,500 + Rs. 6,16,650/-) as against Rs. 27,50,000/- added by the AO. The income of the assessee is therefore enhanced by Rs. 32,49,150/-.
In the notice of this office dated 29/08/2013 proposing enhancement of the assessed income, it was also proposed to enhanced the income of the appellant by Rs. 5 lacs which is mentioned at page No. 137 of the seized diary (Annexure A- 1/ZR4). However, the date of investment of Rs 5 lacs appearing on page no. 137 of the seized diary, (Annexure A-l/ZR-4) was wrongly mentioned as 1.01.2007 instead of 16/12/2007. During the hearing on 9.09.2013, the AR was requested to show cause why the income should not be enhanced by Rs. 5 lacs being a investment made on 16.12.2007 as recorded at page No. 137 of the said seized diary.
The AR has submitted his arguments which have been considered. It is undeniable fact that Page No. 137 of the seized diary has a heading which clearly says “investment A/c”. Under the same there are two entries for Rs. 5 lacs on 01.01.2007 and 16.12.2007. The AO has added Rs. 5 lacs relating to 01.01.2007 as unexplained investment but omitted to add Rs. 5 lacs of 16.12.2007 for the A.Y. 2008-09. The AR has not given any evidence/explanation to show that this investment was already reflected in the books of accounts of the appellant. Hence, I have no hesitation in adding the same to the total income of the assessee as unexplained investment u/s.69 of the Act. The income of the assessee is accordingly enhanced by further amount of Rs.5 lac under this head.”
After hearing both the parties and on perusal of material referred to before us, we find that Settlement Commission has dealt with the issue of investment in committees in the following manner:- 22. “Rule 9 Report has proposed treatment of applicant's investments in committees as undisclosed income. 23. In reply thereto, the applicant has stated to the effect that "...the applicant has done the entire working on the computer for this diary also and the entire income as computed from this diary has been offered before the Commission as per SOF. No part of the Comities remains undisclosed....” On its part, the Department reiterated its perception. 24. In his further comments, on this issue, in written submissions dated 04.06.2013, the applicant has explained in detail the functional mechanism of these committees where he made investments. According to the applicant, investments therein "are inter-related to the undisclosed business". During the course of hearing on 04.06.2013, a month-wise chart containing break-up of such investments was also furnished. A perusal thereof reveals peak debit balances of Rs.17,56,100/- & Rs,58,24,630/- during the period relevant for AYs 2008-09 & 2010-11 respectively. For the period relevant for AY 2009-10, the Committee account shows peak credit balance of Rs.80,62,450/- The scenario visible from the foregoing para 24 indicates that, at best, Re.58,24,630/- for AY 2010-12, being debit balance in the said account (representing net payment made to the Com mi tee), can be taken to manifest undisclosed character. On the applicant's own version, disclosure in the present Settlement proceedings is sufficient to take care of any such undisclosed income on this score. As we find that the applicant's additional income is in consonance
with his submissions, it is our considered opinion that the undisclosed component gets subsumed within this disclosure. No disturbance is proposed in this regard. (As for debit balance pertaining to AY 2008-09, the said year is not in Settlement before the Commission).
The Assessing Officer has made the addition of Rs.27,50,000 on the basis of page 131 of the seized Annexure A-1. The seized Annexure started from 01.04.2009 and the balance as on 17.03.2009 was Rs.65,74,500/- (debit). The same was part of the opening balance of Rs.1,07,61,930/- as on 01.04.2009. The Assessing Officer took the investment of SSI-62 committee for four months starting from December, 2007. The amount actually invested was Rs.17,75,000/-, whereas the Assessing Officer has added Rs.20 lac considering the gross dividend amounting to Rs.5 lac per month. Similar investment of Basia committee was taken for three months starting from December, 2007. The amount actually invested was Rs.6,16,650/-. However, the Assessing Officer has added the sum of Rs.7.5 lac considering the gross of dividend amounting to Rs.2.5 lac per month and accordingly addition of Rs.27.5 lac was made. Ld. CIT (A) has made the enhancement of Rs.32,49,150/- as per the following calculation:- Amount (Rs.)
Amount actually invested in SSI-62 committee 13,45,000 (420000+500000+425000) F.Y. 2007-08
Amount actually invested in Basia Committee 6,16,650 (205550*3 ) F.Y. 2007-08 Amount received back from SSI-62 Committee 40,37,500 Total 59,99,150 Less: Addition already made by Assessing Officer 27,50,000 Net enhancement 32,49,150 And thereafter he has made further enhancement of Rs.5 lac on the basis of page 137 of seized Annexure A-1.
We find that before the Settlement Commission, the assessee has demonstrated that part of the opening balance of Rs.1,07,61,930/- covers the investments made in the various committees and this has been demonstrated in the trial balance filed before the Settlement Commission. Accordingly, the Assessing Officer is directed to verify, whether the said amount of investment made in the committees are covered by the taxes paid on the opening balance of Rs.1,07,61,930/- and if that is found so, then no separate addition should be made in this year. Accordingly, the appeal of the assessee is partly allowed for statistical purposes.
In the result, both the appeals of the assessee are partly allowed.