ACIT, CEN. CIR-VI, KOLKATA, KOLKATA vs. SMT. USHA AGARWAL, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA [Before Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM]

I.T.A No.142/Kol/2014 Assessment Year: 2010-11 Assistant Commissioner of Income-tax, Vs. Smt. Usha Agarwal Central Circle-VI, Kolkata. (PAN: ACSPA8989N) (Appellant) (Respondent) & C. O. No.16/Kol/2016 In I.T.A No.142/Kol/2014 Assessment Year: 2010-11 Smt. Usha Agarwal Vs. Assistant Commissioner of Income-tax Central Circle-VI, Kolkata. (Cross Objector) (Respondent)

Date of hearing: 31.05.2016 Date of pronouncement: 08.06.2016

For the Revenue: Shri G. Mallikarjuna, CIT, DR For the Assessee/Cross Objector: Shri K. M. Roy, CA

ORDER Per Shri M. Balaganesh, AM:

This appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A), Central-1, Kolkata vide Appeal No. 323/CC-VI/CIT(A)C-1/11-12 dated 01.11.2013. Assessment was framed by DCIT, C.C-VI, Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2010-11 vide his order dated 31.12.2011.

2 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 conducted at several business premises of the assessee group. The AO has noted in the assessment order that Sri Sambhunath Agrawal (key person of the assessee group) filed a disclosure petition dated 14-11-2009 before the DDIT(Inv) thereby admitting undisclosed income of Rs.7 ½ crores in the name of the family members which included surrender of Rs.1 crore in the hands of the assessee for the assessment year 2010-11 by way of "Misc & others". The AO also noted that the statement of undisclosed income placed at schedule-2 of the' disclosure petition was signed by the assessee. However, the assessee did not include the said disclosure of Rs.1 crore in her return for the relevant assessment year 2010-11. The AO required the assessee to explain as to why the disclosure made by Sri Sambhunath Agrawal on her behalf vide disclosure petition dated 14-11- 2009 was not included in her return. It was explained at the assessment stage that the ad-hoc disclosure of Rs.7 ½ crores in the name of the family members was not made voluntarily but under coercion, threat and pressure of the officers authorised to conduct search u/s 132; that no incriminating material representing undisclosed income or undisclosed assets of the assessee was found in the search; and, that the disclosure made at the time of the search was unwarranted and irrelevant as it was not based on any material found in the search. The AO was not impressed with the argument that the disclosure was made under coercion. He was of the opinion that the argument was only an afterthought. The AO also rejected the contention that no incriminating material was found in the search. The AO noted that undisclosed cash deposit in bank account was found in consequence to the search; and, that introduction of unaccounted money in the guise of loan or gift or capital gain was also detected in the cases of the assessee group. The AO concluded that the disclosure of Rs. 1 crore had to be considered as the undisclosed income of the assessee fur the relevant year; and accordingly, made addition of Rs. l crore.

3 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 even otherwise, the declaration made by Sri Sambhunath Agrawal in his statement recorded at the time of the search or subsequently in his disclosure petition was unsubstantiated as it was not based on or corroborated by any material on record. And, above all, no incriminating material representing undisclosed income or undisclosed asset of the assessee was found in the search. In view of the above, the assessee was justified in not including the alleged disclosure of Rs.l crore in her return of income. The Ld AR has argued that the AO has made irrelevant observations for making the addition. For, the AO has mentioned that undisclosed cash deposit in bank account was found in consequence to the search; but then, the same has been considered separately. Secondly, there is no finding of the AO in his assessment order that the cash deposit was unexplained in the hands of the assessee. It was explained at the assessment stage that the ITS data showing cash deposit of Rs.51 lakhs was factually incorrect in as much as the assessee had made cash deposit of Rs.6.50 lakhs only which was duly recorded in the books of account. The AO has not disputed or disproved the contention of the assessee. The AO has made the addition on the ground that he had no time for verifying the contention of the assessee. The AO has also mentioned that introduction of unaccounted money in the guise of loan or gift or capital gain was detected in the cases of the assessee group; but then, the same has been considered separately in the case(s) of the concerned assessees. The issue regarding cash deposit in the bank account or introduction of money in the guise of loan or gift or capital gain is in the way related to the disclosure of Rs.1 crore in the assessment year 2010-11.

4 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 vide its Circular dated 10.3.2003 has clearly instructed that the Learned AO should rely on credible evidence and that the material gathered in search should form the basis for framing the assessment. He further held that specific issues relating to cash deposit in bank account or introduction of undisclosed money in the guise of loan or gift or capital gain, if any , has to be considered separately in the case of the concerned assessees and that it cannot be made the basis for making ad hoc addition of Rs 1 crore in the hands of the assessee. Accordingly he held that the addition of Rs 1 corre made solely on the basis of the disclosure made at the time of search is neither sustainable in law nor on facts.

5.1. With regard to the information obtained in ITS data towards cash deposit in bank to the tune of Rs. 51 lacs, he held that though the assessee had denied the same at the assessment stage and had stated that only Rs 6.50 lacs was deposited in the bank account which is already disclosed in the returns , no separate ground was raised by the assessee contesting such addition. He finally held that the Learned AO had held that cash deposit of Rs 51 lacs in bank account of the assessee has to be treated as unexplained income, however, no separate addition was being made in view of the addition of Rs 1 crore on the basis of the disclosure. As the addition of Rs 1 crore made on the basis of the disclosure has been deleted, the addition of Rs 51 lacs on account of cash deposit in bank account is sustained. In effect, the addition made by the Learned AO was restricted to Rs 51 lacs after granting relief to the assessee to the tune of Rs 49 lacs.

The assessee has also preferred cross objection by raising the following ground: - “That the CITA has erred in sustaining addition of Rs 51 lakh towards deposit of cash in bank account when no such transaction had actually taken place.”

5 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 the fact of non-verification is also mentioned in the orders of the lower authorities. Accordingly he prayed that this fact may kindly be verified by the Learned AO to ascertain the truth and prayed for specific direction to be given in this regard. In response to this, the Learned DR vehemently relied on the order of the Learned AO.

(i) Pullangode Rubber Produce Co. vs State of Kerala and Anr (1973) 91 ITR 18 (SC)

The Hon’ble SC has observed that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect.

(ii) CIT vs Ravindar Kumar Jain (2011) 201 taxman 95 (Jharkhand HC) “6. We have considered the submissions made by the learned counsel for the appellant and perused the reasons given in the orders passed by the CIT(A). 7. It is not in dispute that during the course of search, the assessee first submitted that he has nothing to disclose and therefore first stand of the assessee was that he had no undisclosed income and then the assessee alleged to had stated that he had also undisclosed income of Rs. 7 lakhs. However, the Assessing Officer himself found that out of said amount of Rs. 7 lakhs, the amount which the assessee stated has been deposited in the Bank, was not found in any Bank and amount of Rs. 3 lakhs had already been deleted by the Assessing Officer himself. Therefore, part of alleged admission of assessee was not found correct. Not only this, even from the order passed by the Assessing Officer itself it is apparent that the assessee, in addition to stating that he deposited Rs. 3 lakhs in different Saving Bank Accounts of Oriental Bank of Commerce, he also lent some money to private persons that fact was also found not correct by the Assessing Officer himself. Therefore, the admission made by the assessee before the Assessing Officer during the course of search contained three facts-(i) that he had no undisclosed income, (ii) the

6 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 assessee had undisclosed income of Rs. 7 lakhs, and (iii) that he had invested Rs. 4 lakhs in stock of M/s. Moolchand Jain and Sons in support of which there was no evidence collected by the Assessing Officer and then deposit of Rs. 3 lakhs in the Bank Account which could not have been if his statement as given at the relevant time is deemed correct, because the assessee also stated that he lent some of the amounts to some persons. Therefore relying on only one such statement given by the assessee in these circumstances where out of three two facts were found to be not correct, then in these facts and circumstances, it was the duty of the Assessing Officer to collect more evidence in support of the fact that there was undisclosed income of Rs. 7 lakhs in the hands of the assessee. These reasons had been considered by the CIT(A) as well as by the ITAT and therefore, their findings about the taxable income of the assessee has been given in the facts of the case.

(iii) Kailashben Manoharlal Chokshi vs CIT (2010) 328 ITR 411 (Guj)

“Held, that the statement of the assessee was recorded under section 132(4) of the Act at midnight. In normal circumstances, it was too much to give any credit to the statement recorded at such odd hours. The person would not be in a position to make any correct or conscious disclosure in a statement if such statement was recorded at such odd hours. The assessee had given proper explanation for all the items under which disclosure was sought to be obtained from the assessee. With regard to the investment in house property he had stated that he took the plot in 1964 from the housing society which was constructing the bungalow for which the assessee made contribution from time to time and took possession in 1974 when only one ground floor was constructed. He had been living there and during 1986 to 1988 he had constructed the first floor and had incurred expenses of Rs. 2,03,185.65 and this amount had been withdrawn from the account of the firm which he was a partner. The Departmental Valuer had accepted the cost of construction and there was no reason to make addition of Rs. 4 lakhs on the basis of the disclosure made by the assessee. The Revenue had not brought any evidence to establish that the assessee had in fact incurred Rs. 4 lakhs and that amount was invested out of undisclosed income. The addition on account of gold ornaments could not be sustained since looking into the quantum of holding and the assessee’s explanation this was a normal holding which could be found in any middle class Indian family. The furniture on the ground floor was 15 years old and the assessee had spent Rs. 25,000 for renovation after making withdrawal from the firm’s account. With respect to furniture in the first floor a detailed source of investment of furniture purchased with due confirmation from the party concerned had been filed by the assessee before the Assessing Officer. Since no payment for this additional furniture was made by the assessee till the date of search, no addition could be made on this count. The explanation of the assessee was convincing but not been considered by the authorities below. Merely on the basis of the admission of the assessee the additions could not be made unless and until some corroborative evidence was found in support of such admission. The statement recorded at such odd hours could not be considered to be a voluntary statement, if it was subsequently retracted and necessary evidence was led contrary to such admission. The Tribunal was not justified in making addition of Rs. 6 lakhs.”

(iv) Similar views were expressed by the Hon’ble Courts in the following cases:- CIT vs Chandrakumar Jethmal Kochar reported in (2015) 230 Taxman 78 (Gujarat)

M.Narayanan & Bros vs ACIT reported in (2011) 339 ITR 192 (Mad)

7 ITA No.142/K/2014 & CO No.16/K/2016 Usha Agarwal. AY 2010-11 CIT vs S Khader Khan Sons reported in (2008) 300 ITR 157 (Mad) which was later approved by Hon’ble Supreme Court

Bachittar Singh vs CIT reported in (2010) 328 ITR 400 (P&H)

In view of the aforesaid facts and circumstances and judicial precedents relied upon hereinabove, we hold that the Learned CITA had rightly deleted the addition made in the sum of Rs 1 crore.

8.1. Apropos the alleged cash deposit of Rs 51 lacs made by the assessee in the bank account, we find that the assessee had claimed that no such cash deposits to that extent was made in her bank accounts. We also find that this claim of the assessee was never verified by the Learned AO for want of time which is not disputed by the revenue before us. We find that the Learned AR had fairly agreed for setting aside of this issue to the file of the Learned AO to enable him to make a detailed verification of this factual aspect for which the Learned DR before us agreed for the same. We direct accordingly.

Asstt. Registrar.