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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Joginder Singh, & Shri Sanjay Arora
आदेश / O R D E R Per Bench This bunch of eight appeals is by the Revenue as well as by the assessee, aggrieved by the impugned orders all dated 19/06/2012, of the ld. First Appellate Authority, Mumbai.
First, we shall take up the appeals of the Revenue for Assessment years 2004-05 (ITA No.5413/Mum/2012), 2005-06 (ITA No.5414/Mum/2012), 2006-07 (ITA No.5415/Mum/ 2012), 2007-08 (ITA No.5416/Mum/2012), 2008-09 (ITA No.5417/Mum/2012) and 2009-10 (ITA No.5418/Mum/2012), wherein, at the outset, it was pointed out by the ld. Counsel for the assessee that in the respective appeal, the tax effect involved is below prescribed monetary limit. This factual matrix was consented to be correct by the ld. DR. 2.1. In view of the fact, that the tax effect in the respective appeal is below prescribed monetary limit, as contained in CBDT instruction No.21 of 2015, dated 10/12/2015 (F No.279/Misc./142/2007-IT(PT), applicable with retrospective effect, wherein, the Department was advised/directed by the Board not to file appeal in the cases where the tax effect does not exceed the following monetary limit.:-
Sl. Appeals in Income –tax matters Monetary Limit (in Rs.) No. 1. Before ITAT 10,00,000/- 2. U/s 260 A before Hon’ble High 20,00,000/- Court 3. Before Hon’ble Supreme Court 25,00,000/-
As per the aforesaid instruction/revised monetary limit, the Department is not to file appeal before the Tribunal, wherein, the tax effect is less than Rs.10,00,000/-, consequently, the appeals of the Revenue are not maintainable. Therefore, in view of uncontroverted contention of the ld. DR and the aforementioned Circular no. 21 of 2015, dated 10/12/2015 (F No.279/Misc./142/2007-IT(PT), of CBDT, the appeals of the Revenue are dismissed as not maintainable. Finally, the aforementioned appeals of the Revenue are dismissed as not maintainable.
3. Now, we shall take up the cross appeals for A.Y. 2010-11 (ITA Nos. 5419/Mum/2012 and 5793/Mum/2012). In the appeal of the Revenue, the ground raised
pertains to holding annual letting value (ALV) of the properties, owned by the assessee and not let out during the year whether municipal valuation is to be taken or as per section 23 of the Act. 3.1. During hearing, the crux of arguments advanced by ld. DR, is in support to the assessment order, whereas, the ld. counsel for the assessee contended that identical issue was adjudicated by the Tribunal in the case of the father of the assessee, DCIT vs Shri Jagdish M. Gupta (ITA No.4974 to 4980/Mum/2012), wherein, the matter was set aside to the file of the Assessing Officer. This factual matrix was consented to be correct by the ld. DR. 3.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the aforesaid order for ready reference:- “These 7 appeals by the Revenue and 3 appeals by the assessee are against the orders of the Ld. CIT(A)-41, Mumbai dt. 28.5.2012 pertaining to A.Yrs.2004-05 to 2010-11. Since these appeals were heard together, they are disposed of by this common order for the sake of convenience and brevity. ‘
2. The common grievance of the Revenue in all the appeals read as under: “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in holding Annual Letting Value of properties owned by the assessee cannot be taken into account for computing income from House Property as these property was not let out during the year under consideration, when these properties were not let out voluntarily.”
For our convenience, we are taking the facts of A.Y. 2004-05. During the course of the scrutiny assessment proceedings for the impugned assessment years, the Assessing Officer noticed that though the assessee has shown properties but has not offered annual value of such properties u/s. 23 of the Act. The properties in question are Bungalow at Nasik, Flat No. 602 & 603 of Marigold, Gopal Garage, Shop at Bangur Nagar, Shop No. 101 (Link Road, Malad) and Flat at Jal Padma. The assessee was asked to justify why annual value of properties other than SOP should not be computed in accordance with the provisions of Sec. 23 of the Act. 3.1. The assessee simply stated that since the flats were not let out its annual value should be taken as Rs. Nil. This submission of the assessee was rejected by the AO who was of the firm belief that under the provisions of the Act, a methodology of computation of annual value has been prescribed accordingly a notional market rent, when the property is not actually let out has to be taken as the annual value within the meaning of provisions of Sec. 23(1)(a) of the Act. The AO proceeded by taking 8% of cost of the property and average annual increase in rental value@ 10% per annum and computed the annual rent for A.Y. 2004-05 at Rs. 45,50,786/-.
4. The assessee carried the matter before the Ld. CIT(A) and reiterated its claim that the property were vacant throughout the year and therefore no annual let out value should be taxed. After considering the facts and the submissions of the assessee, the Ld. CIT(A) proceeded by considering various judicial decisions discussed by him in his Appellate order and finally concluded that notional income cannot be taxed because the properties were not let out during the year under consideration. 5. Aggrieved by this, Revenue is before us. 6. The Ld. Departmental Representative strongly contended that the Ld. CIT(A) has proceeded on wrong understanding of the provisions of Sec. 23 therefore the order of the Ld. CIT(A) is erroneous.
The Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities.
We have carefully perused the orders of the authorities below. It is not in dispute that the properties of the assessee were lying vacant. It is also an admitted fact that the assessee has shown Nil annual let out value from these properties. The assessee ought to have shown annual let out value from these properties and offered the same for taxation. We find that the Ld. CIT(A) has considered the judicial decisions in the wrong perceptive of the facts. All the decisions considered by the Ld. CIT(A) relate to charging of notional interest on interest free deposits. This issue is not at all present in the case of the assessee. Undoubtedly, the findings of the Ld. CIT(A) are erroneous. Since the assessee has not disclosed annual let out value of the properties, the ALV needs to be recomputed because the basis taken by the AO for computing the ALV is also erroneous. We, therefore, restore this issue to the files of the AO to be decided afres . The assessee is directed to submit the municipal rateable value of all the properties. The AO is directed to consider the municipal rateable value of the properties and decide the issue as per the provisions of law. This grievance of the Revenue is allowed for statistical purpose.” We note that while deliberating upon the identical issue in the case of close relative, since the assessee has not disclosed the Annual Letting Value of the properties, the ALV needs to be recomputed, because the basis taken by the Assessing Officer for computing the ALV is also erroneous, thus, the assessee was directed to submit the municipal rateable value of the properties in question. The rateable value, one may add, is not binding on the Assessing Officer, and it all depends on the facts of the case, including if the municipal value is extant (refer: CIT vs Moni Kumar Subba (2001) 333 ITR 38 (Del.)(FB)). On the same reasoning, the ld. Assessing Officer is directed to consider the municipal rateable value of the property and decide as per the provision of the law. Thus, this ground of the assessee is allowed for statistical purposes.
Next ground pertains to deleting the addition of Rs.30,66,547/- made u/s 2(22)(e) of the Act holding that no accumulative profit is available to the company to be considered in the hands of Shri Nalin Gupta (present assessee)
as the same has already been considered in the hands of his father, Shri Jagdish Kumar Gupta. 4.1. During hearing, it was brought to our notice that this issue was also sent to the file of the ld. Assessing Officer by the Tribunal. Both the ld. representative consented that on identical lines, this issue may also be sent back. Considering the factual matrix and the contention from both sides, on the same reasoning, this issue is also sent to the file of the ld. Assessing Officer for fresh adjudication.
The next ground pertains to deleting the addition of Rs.8,40,000/- made u/s 69C of the Act on account of unexplained jewellery. The crux of argument advanced by the ld. DR is in support to the addition, whereas, the ld. counsel for the assessee defended the conclusion arrived at in the impugned order by contending that the addition was merely made on the basis of statement of one Shri Kamal Gupta. 5.1. We have considered the rival submissions and perused the material available on record. We have also perused the statement tendered by Shri Kamal Gupta recorded on 26/08/2009. The issue has been discussed by the ld. Assessing Officer at page 22 of the assessment order. During the course of search at the residential premises and lockers, various items of jewellery were found. Statement of Shri Kamal Gupta was recorded, on oath, u/s 132(4) of the Act on 07/09/2009. As per the Assessing Officer, the assessee could not reconciled and explained the excess gold jewellery being 2530.97 gms. The assessee replied to the show cause notice but the same was not accepted on the plea that Shri Kamal Gupta has admitted unexplained investment in the jewellery worth Rs.42 lakh. The family breakup was also given but the Assessing Officer added the amount of Rs.8,40,000/- on substantive basis in the hands of the assessee and proportionately on protective basis in the hands of family members. 5.2. On appeal, before the ld. Commissioner of Income Tax (Appeals), the factual matrix was considered along with complete chart of jewellery, item-wise/value-wise. The jewellery was declared under VDIS and it was duly reconciled. The addition was deleted. The Revenue is in appeal before this Tribunal. 5.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, uncontrovertedly, the jewellery was reconciled and the addition was merely made on the basis of statement extracted from Shri Kamal Gupta. We are in agreement that statement on oath is having a persuasive value but the same has to be linked to the actual jewellery and if not reconciled then addition has to be made. However, in the present appeal, the jewellery was duly reconciled, therefore, the addition made on the basis of statement only cannot survive, thus, we affirm the conclusion arrived at in the impugned order on the issue in hand, consequently, the appeal of the Revenue is partly allowed for statistical purposes.
Now, we shall take up appeal of the assessee ( Rs.70 lakh as undisclosed income, being cash found and seized has been challenged. The crux of argument advanced on behalf of the assessee is that the same cash has been added proportionately which has already been accounted for in the case of firm, by inviting our attention to the order of the Tribunal, in the case of father, wherein, the issue was restored to the file of Assessing Officer for examination. The ld. DR also had no objection, if the matter is identically sent to the file of the Assessing Officer. 6.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal for ready reference. “40. Ground No. 2 relates to the addition of Rs. 80 lakhs as undisclosed income. 40.1. This issue has been considered by the AO at para-7 on page-6 of his order. The AO observed that during the course of search and seizure operation, cash of Rs. 2.44 crores was found. The AO further observed that when it was confronted to the assessee, the assessee offered Rs. 2.20 crores for tax in his hands and in the hands of his two sons. During the course of the assessment proceedings, the assessee claimed that the source of the cash found at the time of search is bogus purchase bills admitted in its case and bogus bills debited in JKIL’s case. This explanation of the assessee did not find favour from the AO and declined to give relief of Rs. 80 lakhs.
The assessee carried the matter before the Ld. CIT(A). Before the Ld. CIT(A), it was contended that the assessee has disclosed a sum of Rs.
2,81,17,112/- being accommodation purchase bill in his proprietorship firm M/s. J. Kumar & Co. and Goldline Advertiser. The cash so found was out of this bogus purchases booked in the books of account. It was further explained that because of voluminous transactions in the seized paper and the complexities involved therein, the assessee has wrongly added Rs. 80,00,000/- in its return of income. The Ld. CIT(A) did not accept this contention of the assessee holding that the assessee should have revised the return of income filed by him in the light of the ratio laid down by the Hon’ble Supreme Court in the case of Goetz (India) Ltd. Vs CIT 284 ITR 323. The Ld. CIT(A) confirmed the assessment order.
Before us, the Ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. It is the say of the Ld. Counsel that the fundamental principle of taxation required the AO to compute the real income and not to take benefit of assessee’s ignorance or mistake. The Ld. Counsel further stated that once the department has accepted that the assessee was engaged in booking bogus purchase bills in his books of account, then the department should have accepted cash in hand which was generated out of the bogus purchases booked.
The Ld. DR strongly supported the findings of the lower authorities.
We have carefully perused the orders of the authorities below. It is not in dispute that not only in assessee’s case but also in the cases of group, there has been bogus purchase bills found booked in the books. It is also not in dispute that the assessee was receiving monies out of the bogus purchase bills. This plea of the assessee cannot be brushed out lightly on the facts of the case and also on the facts of other cases of the group. Once it is admitted that the assessee was indulged in booking bogus purchases then the generation of cash out of such bogus purchase bills cannot be rejected so lightly. We, therefore, restore this issue to the file of the AO. The assessee is directed to substantiate his claim by producing cogent material evidence showing how bogus purchases were booked and when the amount was received back. The AO is directed to verify such details filed by the assessee and decide this issue afresh in the light of the explanation furnished by the assessee after giving reasonable opportunity of being heard. This ground of the assessee is allowed for statistical purpose.” In view of the submissions from both sides and the conclusion arrived at in the order of the Tribunal, since the issue is identical, on the same reasoning/direction, we restore this issue to the file of the ld. Assessing Officer, thus, the ld. Assessing Officer is directed to verify the details filed by the assessee and decide afresh in the light of the explanation furnished by the assessee in accordance with law. The assessee be given opportunity. This ground is allowed for statistical purposes. Finally, (a) The appeals of the Revenue for Assessment years 2004- 05 to 2009-10 are dismissed being the low tax effect. (b) Appeal of the Revenue for Assessment Year 2010-11 is partly allowed for statistical purposes. (c) The cross appeal of the assessee for Assessment year 2010-11 is allowed for statistical purposes. This order was pronounced in the open court in the presence of ld. representative from both sides at the conclusion of the hearing on 17/02/2016.