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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.3269/Del/2009 (ASSESSMENT YEAR 2005-06) Pooja Bhatia ACIT L/H Late Om Prakash Central Circle-17 Bhatia Vs. New Delhi 31/B-8, Rajpura Road Delhi-110 054 PAN-AAOPB 9342E (Appellant) (Respondent) ITA No.6564/Del/2014 (ASSESSMENT YEAR 2007-08) Pooja Bhatia Income Tax Officer L/H Late Om Prakash Ward-29(2) Bhatia Vs. New Delhi 31/B-8, Rajpura Road Delhi-110 054 PAN-AAOPB 9342E (Appellant) (Respondent) ITA No.3270/Del/2009 (ASSESSMENT YEAR 2006-07) Late Om Prakash Bhatia ACIT 606/607, Katra Ishwar Central Circle-17 Bhawan, Khari Baoli Vs. New Delhi New Delhi PAN-AADPB 7746H (Appellant) (Respondent)
Page 1 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. ITA No.6563/Del/2014 (ASSESSMENT YEAR 2007-08) Om Prakash Bhatia & Income Tax Officer Sons (HUF) Ward-29(2) 31-B/8, Rajpura Road Vs. New Delhi New Delhi PAN-AAAHO 2991L (Appellant) (Respondent) ITA No.1555/Del/2009 (ASSESSMENT YEAR 2005-06) ITA No.1556/Del/2009 (ASSESSMENT YEAR 2006-07) Om Prakash Bhatia (HUF) Asst.CIT C/o M/s RRA Taxindia Central Circle-17 D-28, South Extension Vs. New Delhi Part-I New Delhi-110 049 PAN-AAAHO 2991L (Appellant) (Respondent)
Appellant by Dr. Rakesh Gupta and Sh. Somil Agarwal, Advocates Respondent by Ms. Sarita Kumari, CIT-DR
Date of Hearing 17/08/2023 Date of Pronouncement 13/09/2023
ORDER PER M. BALAGANESH AM: All these appeals are filed by the respective assessees for
Assessment Years: 2005-06, 2006-07 and 2007-08.
Page 2 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 2. The issues involved in all these appeals are inter connected
and identical and hence they are taken up together and disposed of
by this common order for the sake of convenience.
Let us take up the appeal of assessee individual and assessee
HUF for the Asst Year 2005-06 first.
The additional ground raised by the assessee HUF for the Asst
Year 2005-06 was stated to be not pressed by the ld. AR at the time
of hearing. The same is reckoned as a statement made from the
Bar and accordingly the same is hereby dismissed as not pressed.
The Original Ground Nos. 1 & 2 raised by the assessee HUF
for the Asst Year 2005-06 was stated to be not pressed by the ld.
AR at the time of hearing. The same is reckoned as a statement
made from the Bar and accordingly the same are hereby dismissed
as not pressed.
The Grounds to be adjudicated would be Ground Nos. 3, 4 5,6 &
7 raised by the assessee HUF for the Asst Year 2005-06. The same
are reproduced hereunder:-
“3. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO without any basis and has further erred in holding that appellant HUF was not in existence as per law and fact and has further erred in holding that entire income declared under
Page 3 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. (HUF) is directed to be included in the case of Sh. Om Prakash Bhatia (Individual) and has further erred in not deciding the appeal on merit.
That in any case and in any view of the matter Ld. CIT (A) has erred in law and on facts in not quashing the impugned assessment order passed by Ld. AO which not sustainable on various legal and factual grounds.
That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not deleting the addition made by Ld. AO of Rs.24,40,930/- on account of low gross profit and has further erred in applying gross profit rate @ 4.5% to the total sales as against gross profit returned.
That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest as per rules.
That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
The grounds raised by the assessee individual for the Asst Year
2005-06 are as under:-
“1. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law & on facts in confirming the action of Ld. A.O. in holding that status of HUF was bogus and further erred in rejecting the status of HUF and further erred in holding that any income declared in the hands of HUF shall be clubbed u/s 64(ii) in the hands of the assessee and has further erred in making addition of Rs.7.64,685/--
That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law & on facts in confirming the action of Ld. A.O. in making addition of Rs.2,80,131/-on account of sale of property by denying the benefit of indexation and by holding that the impugned property was not disclosed by the assessee and as further erred in observing that the sale proceeds of the impugned property should be treated as income of the assessee.
That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. A.O. in charging interest.
Page 4 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” We have heard the rival submissions and perused the 8.
materials available on record. The preliminary issue to be decided
in these appeals is that whether there was a valid HUF that had
come into existence. The assessee pleaded that his HUF had come
into existence in Asst Year 2002-03 and accordingly had obtained
the PAN in the name of HUF as AAAHO2991L. It was submitted
that income tax returns were filed by the HUF regularly. The Karta
of HUF is Om Prakash Bhatia.
8.1. A search and seizure action u/s 132 of the Act was conducted
on the dealers of Hing and Dry Fruits on 12.12.2005 on the
assessee HUF. Along with the said search on HUF, the Karta of
HUF Om Prakash Bhatia was also subjected to search on the same
date in his individual capacity. Hence Om Prakash Bhatia
(Individual) and Om Prakash Bhatia (HUF) both were searched by
the income tax department u/s 132 of the Act on 13.12.2005
through separate search warrants.
Page 5 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 8.2. It would be pertinent to understand the basic facts pertaining to activities carried out by individual and HUF as under:- Individual File
Name Late Om Prakash Bhatia (Individual) PAN AADPB7746H Name of the Concern ‘Pradeep Trading Co. Nature of Business Dealing in Hing and Dry Fruits Status of assessee Individual
Address in which business was carried out 606-607, Katra Ishwar Bhawan, Khari Baoli, Delhi -110006
Registration with Sales Tax department Ward No.27 Sales Tax Registration Number LC/027/110359/0685
Whether registered with Director General of Yes Foreign Trade Whether closure of business intimated Sales Tax Registration was surrendered by Individual file. This has been acknowledged by the Sales tax department which is evident from Page 96 of the Paper Book.
HUF File Name Om Prakash Bhatia (HUF) PAN AAAHO2991L Name of the Concern ‘Pradeep Trading Co. Nature of Business Dealing in Hing and Dry Fruits Status of assessee HUF Address in which business was carried out 251-252, Dina-Ka-Talao, Malka Ganj, Delhi – 110007 Registration with Sales Tax department Ward No.28 LC/68/9000244726/0801 Sales Tax Registration Number
Whether registered with Director General of Yes Foreign Trade Import Export Code (IE Code) Obtained Yes
IEC Number 0501025731 Date of issue 31.07.2001 Bank Account opened in the name of HUF Yes
Page 6 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors.
8.3. Notice u/s 153 A of the Act was issued by the Ld. A.O. on
29.10.2007 for HUF case and on 9.7.2007 for Individual case. Om
Prakash Bhatia expired on 01.06.2012 and is represented by his
wife and legal heir Smt. Pooja Bhatia as per her duly sworn affidavit
placed on record. The ld. AO observed that it is not clear how the
HUF got created in Asst Year 2002-03 and accordingly, he doubted
the existence of HUF itself. Accordingly, the assessment was
completed by the ld. AO u/s 153A of the Act on 28.12.2007 for the
Asst Year 2005-06 in the hands of assessee individual determining
Gross Profit rate @ 4.5.% on sales on Substantive Basis and making
the same addition in the hands of HUF on Protective Basis.
8.4. The ld. CIT(A) observed that there should be ancestral
property for creation of HUF and no evidence has been produced by
the assessee to prove whether the HUF was created out of any
ancestral property. Accordingly, the ld. CIT(A) held that upto Asst
Year 2001-02, the same trading business was carried out by the
assessee in his individual capacity and in Asst Year 2002-03, he
had sought to transfer the same to HUF status. Since HUF status
itself is doubted, he held that the ld. AO was justified in estimating
Page 7 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. the profit substantively in Individual hands and protective in HUF
hands. Aggrieved, both individual as well as the HUF are in appeals
before us.
8.5. At the outset, we find that the income tax department had
conducted search u/s 132 of the Act based on independent search
warrant in the name of HUF on 12.12.2005. We find that individual
file and HUF file have two different PANs. When the search itself
was conducted by the income tax department u/s 132 of the Act
based on independent search warrant, it would not be correct on
the part of the revenue to state that HUF had never come into
existence. We find that the ld. AO had issued notices u/s 153A,
143(2) and 142(1) of the Act to individual and HUF separately which
got served independently. Moreover, the assessment also has been
framed by the ld. AO u/s 153A of the Act in the status of HUF.
Further, we find that the ld. AO had mentioned in the assessment
order of the Individual file that individual has transferred his funds
to the common hotchpot of the HUF and thus AO rejected the
status of HUF but in the same breath, the ld. AO applies the
provisions of section 64(2) of the Act which inherently implies the
Page 8 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. existence of HUF and therefore bringing this inherent contradiction
in the conclusion of the ld. AO.
8.6. We find that the assessee had given enough evidences to
prove that the HUF had already come into existence. It was
submitted that a gift of Rs 11,000/- in cash and Jewellery of Rs
1,08,000/-was received from Mrs Channo Devi Bhatia (eldest sister
of Om Prakash Bhatia) and gift of Rs 11,000/- in cash and
Jewellery of Rs 91,000/- from Mr Pradeep Kurseja, brother in law of
Om Prakash Bhatia. In support of this, the HUF had filed copy of
gift deed before the lower authorities. This total property of Rs
2,21,000/- constituted initial nucleus for creation of Om Prakash
Bhatia (HUF). The Om Prakash Bhatia (HUF) comprises of Om
Prakash Bhatia as Karta, Mrs Pooja Bhatia (Karta’s wife) and three
minor children i.e. Sagar Bhatia, Rahul Bhatia and Deepika Bhatia.
A Wealth Tax Return of HUF was filed for the Asst Year 2003-04 on
28.11.2003 was also furnished before the lower authorities showing
aggregate value of movable properties and declaring taxable net
wealth of Rs 2,27,500/- over and above basic exemption provided
under Wealth Tax Act, 1957 of Rs 15,00,000/-. This Wealth Tax
Return was accepted by the revenue. Further Wealth Tax Page 9 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. assessments were framed on Om Prakash Bhatia (HUF) u/s 16(3) of
the Wealth Tax Act, 1957 on 14.05.2008 for Asst Year 2006-07 and
on 27.06.2008 for Asst Year 2007-08 accepting the returned wealth
of HUF. Further, income tax search assessment was framed u/s
153A of the Act on 28.12.2007 in the hands of Om Prakash Bhatia
(HUF) and amounts received by HUF from Om Prakash Bhatia in
the sum of Rs 34,68,000/- was even added as undisclosed income
of the HUF on substantive basis. The assessee had furnished the
Balance Sheet as on 31.03.2002 of Om Prakash Bhatia (HUF). The
said balance sheet contained a loan receipt of Rs 34,68,000/-. This
represents loan received by HUF from Om Prakash Bhatia
(Individual) by Cheques of Rs 21,60,000/- ; Rs 1,08,000/- and Rs
12,00,000/- and the said cheques were duly deposited in the
Current Account No. 352293 opened with Tamilnadu Mercantile
Bank, Chandni Chowk, Delhi in the name of HUF. These cheques
were issued by Individual from his Punjab & Sind Bank account.
All these evidences were duly submitted by the assessee before the
lower authorities. Infact Om Prakash Bhatia (Individual) even
provided the source of advancing loan to HUF file by stating as
under:- Page 10 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. a) Through sale of Accent Car - Rs 4,00,000 (copy of delivery receipt, cash receipt and Form 29 of Motor Vehicles Act enclosed by assessee) b) Amount received from M/s Om Prakash Rahul Kumar on account of realization of debtors - Rs 22,09,379.61 (Copy of ledger account of Pradeep Trading Co.- Proprietorship concern of Mr Om Prakash Bhatia, Bank statement of M/s Om Prakash Rahul Kumar Showing issue of cheques of Rs 22,05,000/- . Bank statement of Mr Om Prakash Bhatia showing Receipt of cheque from M/s Om Prakash Rahul Kumar , Confirmation from M/s Om Prakash Rahul Kumar and copy of acknowledgement of income tax Return of Om Prakash Rahul Kumar were furnished) c) Amount received from Om Prakash Rahul Kumar as capital withdrawals being Partner in M/s Om Prakash Rahul Kumar - Rs. 9,38,000
(Confirmation of Om Prakash Rahul Kumar confirming Capital withdrawal by issue of cheque of Rs 9,38,000/-, Copy of Om Prakash drawings account in the books of Om Prakash Rahul Kumar, copy of bank statement of Om Prakash Rahul Kumar showing issue of cheque of Rs 9,38,000/- and copy of bank statement of Mr. Om Prakash Bhatia showing receipt of cheque of Rs 9,38,000/-.)
8.7. From the various details as tabulated above in Individual
Name and HUF Name, it is evident that Om Prakash Bhatia had
surrendered the sales tax registration obtained by him in Individual
capacity and had taken fresh sales tax registration in HUF capacity
; addresses where businesses were carried out by Individual and
HUF were totally different ; sales tax jurisdiction is also different for
Individual and HUF ; two different PANs were allotted by the Income
Tax department ; fresh bank account opened in HUF name ; wealth Page 11 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. tax assessments framed in the hands of HUF u/s 16(3) of the Act
for Asst years 2006-07 and 2007-08; income tax assessment in the
hands of HUF was framed for the Asst Year 2002-03 u/s 153A of
the Act on 28.12.2007 , wherein the HUF’s existence was accepted
for the purpose of making addition towards capital contribution of
Rs 34,68,000/- on substantive basis , whereas for the purpose of
gross profit addition of business of dealing in Hing and Dry Fruits,
HUF’s existence was doubted and accordingly gross profit addition
was made on protective basis.
8.8. In this regard, it would be relevant to address the observations
made by the Hon’ble Supreme Court in the case of CIT vs. K
Satyendra Kumar reported in 232 ITR 360 (SC) which is as under:-
The following question of law was referred by the Tribunal to the High Court (see [1983] 140 ITR 840, 842) : "Whether, on the facts and in the circumstances of the case, the status of the assessee was rightly determined as individual for the assessment years 1968-69 and 1969-70?" 4. The High Court relied upon the following proposition (page 843) : "Property may be joint property without having been ancestral. Where the members of a joint family acquire property by or with the assistance of joint funds or by their joint labour or in their joint business or by a gift or a grant made to them as a joint family, such property is the coparcenary property of the persons who have acquired it, whether it is an increment to ancestral property, or whether it has arisen without any nucleus of ancestral property." The High Court took into account the nature of the gift and referred to the arbitration decision. The High Court noted that the decree was ultimately passed in terms of the above. The High Court ultimately observed (page 843) :
Page 12 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. "There is clear evidence that Srimathi K. Shyamalambal, wife of K. Satyanarayana, had funds of her own and with the clear intention of benefiting the family as a whole she provided funds to K. Appa Rao and with the assistance of the money so advanced and keeping the said money as a nucleus, K. Appa Rao did business and also entered into various transactions as a result of which various properties came to be acquired by him either in his name or in the names of others.... At no time K. Appa Rao intended to hold the property, as his own self- acquired property but acting always under the guidance and help of the senior- most member of the family, K, Satyanarayana, he did various transactions which were clearly intended for the benefit of the entire family.'... It is enough that the coparcener concerned disclaims his separate dominion over his self-acquired property. No doubt, the present case is not one where what was initially the separate property of a member, subsequently, got clothed with the character of joint family property either by a declaration or by appropriate conduct on the member's part. For, here is a case where ab initio, at the very moment the property was acquired, it was so acquired as joint family property. Appa Rao was merely the hand which received the funds, but Shyamalambal who provided the funds made it perfectly clear that those funds were to be utilised only for the benefit of the family." 5. The dispute in this case was whether the assessee was liable to be assessed to tax in the status of Hindu undivided family. The properties held by the assessee came from a lady relative. The Tribunal was of the view that since the source of the property was a gift it could not be treated as a joint family property. The High Court pointed out that the donor, Smt. Shyamalambal, wife of K. Satyanarayana, had funds of her own. With a clear intention of benefiting the family as a whole she provided funds to K. Appa Rao. The money in the hands of K. Appa Rao has to be treated as joint family property because Smt. Shyamalambal clearly indicated at the time of making of the gift that the funds were to be utilised only for the benefit of the family. K. Appa Rao, M. Satyendra Kumar and other brothers jointly held the property. The Tribunal (High Court?) from all these facts came to the conclusion that the money received by the assessee was part of the joint family property. The assessee has to be taxed in the status of an individual (HUF?). 6. We do not find any reason to interfere with the findings of the High Court. The appeals are dismissed and no order as to costs.
8.9. In the instant case before us, we find that the ld. CIT(A) had
observed that money should come from ancestral property to create
HUF. But the Hon’ble Supreme Court in the aforesaid case had
held that HUF could be created even by way of gift received from
relative based on the intention of the donor. On perusal of the gift
Page 13 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. deed, it is very clear that both sister and brother in law of Om
Prakash Bhatia had categorically stated that the gift of cash and
Jewellery is being given only to Om Prakash Bhatia (HUF) and not
to Om Prakash Bhatia (Individual) and that the said monies should
have to be utilized only for the welfare of the family of HUF. Even
the names of members of HUF were mentioned in the said gift deed.
Hence the HUF was created based on this initial nuclear corpus
itself.
8.10. All these facts clearly prove that the HUF had validly come
into existence in Asst Year 2002-03 itself and hence there is
absolutely no case for assessing the profits of the business of
Pradeep Trading Co. in the hands of the individual on substantive
basis. On the contrary, the same should be assessed in the hands
of HUF on substantive basis which is already declared by the
assessee. Moreover, there is no case made out by the revenue for
estimating the gross profit at the rate of 4.5% on sales either in the
case of Individual or in the case of HUF. Hence we have no
hesitation in directing the ld. AO to delete the estimated gross profit
additions both in Individual hands and also in HUF hands, both
Page 14 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. substantively and protectively, as the case may be. Accordingly,
the Ground No. 3 raised by the assessee HUF is allowed.
The Ground Nos. 4 and 7 raised by the assessee HUF are general in nature and does not require any specific adjudication.
The Ground No. 5 raised by the assessee HUF regarding
chargeability of interest is consequential in nature in view of our
decision in Ground No. 3 above.
In the result, the appeal of the assessee HUF is partly
allowed for Asst Year 2005-06.
In view of our decision in Ground No. 3 in assessee HUF supra
for Asst Year 2005-06, the Ground No. 1 raised by Om Prakash
Bhatia (Individual) for Asst Year 2005-06 is allowed.
The Ground No. 2 raised by Om Prakash Bhatia (Individual)
for Asst Year 2005-06 is challenging the action of the lower
authorities in not granting the benefit of deduction towards cost of
acquisition of the property together with its indexation.
13.1. We have heard the rival submissions and perused the
materials available on record. During the year under consideration,
Om Prakash Bhatia (Individual) sold plot at Bagdola. The ld. AO
observed that on perusal of assessee’s (individual) income tax and
Page 15 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. wealth tax records do not reflect the property and hence the entire
sale proceeds of the said plot was brought to tax as income from
other sources while completing the assessment. Accordingly, the
benefit of cost together with its indexation in the sum of
Rs.2,80,131/- claimed by the assessee was denied and addition to
that extent was made by the ld. AO. The assessee (individual)
submitted before the ld. CIT(A) that he had purchased a plot at
Bagdola, Dwarka, Delhi on 18.04.1996 for Rs 1,78,000/- which was
sold during the year under consideration. The purchase agreement
was filed before the ld. AO and the same was also disclosed in the
Wealth Tax Returns for the Asst Year 2004-05 wherein a sum of Rs
5,00,000/- was disclosed as net wealth. The ld. CIT(A) however
observed that assessee only filed the photostat copy of the
agreement entered on 18.04.1996 between Smt Kiran Pahwa and
assessee individual, authenticity of which was highly doubtful and
accordingly denied to take cognizance of the same. The ld. CIT(A)
also observed that the copy of net wealth statement relied upon by
the assessee cannot be given much weight in view of the categorical
observation of the ld. AO in respect of verification of earlier Income
Tax and Wealth Tax records. The ld. CIT(A) further proceeded to Page 16 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. state that the property was not even registered in the name of the
assessee and assessee individual had not even obtained a power of
attorney to effect the sale during the year under consideration. No
evidence was furnished for incurrence of expenditure for acquisition
of the said plot and accordingly no benefit of deduction towards cost
of plot and its indexation could be granted to the assessee in
respect of sale of this plot. With these observations, the ld. CIT(A)
upheld the action of the ld. AO.
13.2. Before us, no arguments at all were advanced by the ld.
AR to substantiate the claim of the assessee individual. Hence we
do not deem it fit to interfere with the findings of the ld. CIT(A) in
this regard. Accordingly, the Ground No. 2 raised by the assessee
individual for the Asst Year 2005-06 is dismissed.
The Ground No. 3 raised by the assessee individual for the
Asst Year 2005-06 regarding chargeability of interest is
consequential in nature.
The Ground No. 4 raised by the assessee individual for the
Asst Year 2005-06 is general in nature and does not require any
specific adjudication.
Page 17 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 16. In the result, the appeal of the assessee individual for the
Asst Year 2005-06 is partly allowed.
Let us now take up the appeal of Om Prakash Bhatia
(Individual) and Om Prakash Bhatia (HUF) for the Asst Year 2006-
07.
The Original Ground Nos. 1, 2 & 5 raised by the assessee
HUF for the Asst Year 2006-07 was stated to be not pressed by the
ld. AR at the time of hearing. The same is reckoned as a statement
made from the Bar and accordingly the same are hereby dismissed
as not pressed.
The Ground Nos. 4 and 7 raised by the assessee HUF for the
Asst Year 2006-07 are general in nature and does not require any
specific adjudication.
The Ground No. 3 raised by the assessee HUF for the Asst
Year 2006-07 is identical to Ground No. 3 raised for the Asst Year
2005-06 which had been already adjudicated hereinabove for
assessee HUF. The decision rendered thereon would apply with
equal force for this Asst Year 2006-07.
Page 18 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 21. The Ground No. 6 raised by the assessee HUF for the Asst
Year 2006-07 regarding chargeability of interest is consequential in
nature in view of our decision in Ground No. 3 above for the Asst
Year 2006-07.
In the result, the appeal of the assessee HUF is partly
allowed for Asst Year 2006-07.
The Ground Nos. 1 & 2 raised by Om Prakash Bhatia
(individual) for the Asst Year 2006-07 are identical to Ground No. 1
raised by him for the Asst Year 2005-06 and hence the decision
rendered by us thereon shall apply with equal force for the Asst
Year 2006-07 also.
The Ground No. 3 raised by Om Prakash Bhatia (individual)
for the Asst Year 2006-07 is challenging the Gross Profit addition
made on estimated basis @ 4.5.% of sales.
24.1. We have heard the rival submissions and perused the
materials available on record. We find that the ld. AO had resorted
to estimation of gross profits at the rate of 4.5.% on sales and made
an addition of Rs 7,39,000/- for the Asst Year 2006-07 in the hands
of Om Prakash Bhatia (individual). We find that the ld. CIT(A) had
deleted the addition on the ground that the ld. AO had not rejected Page 19 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. the books of accounts u/s 145(3) of the Act by pointing out certain
defects thereon. We find that similar additions made by the ld. AO
in the case of Om Prakash Bhatia (Individual) for the Asst Years
2004-05 and 2005-06 were deleted by the ld. CIT(A) and further
appeals of revenue before this tribunal were dismissed due to low
tax effect. Further, we find that the assessee had duly furnished
the complete details of sales together with their ledger accounts,
details of domestic purchases made together with their ledger
accounts, ledger account of import purchases made along with
import documents on sample basis, quantity reconciliation of
opening stock, purchases, sales and closing stock on monthwise
basis , details of monthly basis import and local purchases with
quantity before the ld. AO. Details of sundry creditors exceeding
Rs 50,000/- were also furnished before the ld. AO. No defect
whatsoever was found by the ld. AO in the books of accounts and
documents furnished by the assessee. Accordingly, the ld. AO had
not resorted to even reject the books of accounts and book results
of the assessee. Once this is not done, there is absolutely no case
for the ld. AO to estimate the gross profit on sales at 4.5.% .
Page 20 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. Accordingly, the Ground No. 3 raised by Om Prakash Bhatia
(individual) for the Asst Year 2006-07 is allowed.
The Ground No. 4 raised by Om Prakash Bhatia (individual)
for the Asst Year 2006-07 is challenging the addition made in the
sum of Rs 43,61,800/- in respect of income allegedly surrendered
but not offered to tax in the return.
25.1. We have heard the rival submissions and perused the
materials available on record. We find that the ld. AO had observed
that during post search investigations, the assessee [ Om Prakash
Bhatia (individual) ] came forward and surrendered a sum of Rs
60,00,000/- as undisclosed income and paid taxes on the same.
However, while filing the income tax return, the assessee did not
offer any undisclosed income for the Asst Years 2000-01 to 2005-06
and in Asst Year 2006-07, the assessee offered a sum of Rs
16,38,200/- as undisclosed income comprising of (i) investment in
stock of Rs 6,38,200/- and (ii) cash expenses etc of Rs 10,00,000/-.
When questioned, the authorized representative of Om Prakash
Bhatia (individual) explained that surrender of Rs 60 lacs was
mistakenly done and actual undisclosed income was only to the
Page 21 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. extent of Rs 16,38,200/- which was duly included in the taxable
income for the Asst Year 2006-07. The ld. AO however did not agree
to this contention and proceeded to add the differential sum of Rs
43,61,800/- (60,00,000 – 16,38,200) as income surrendered but
not offered by the assessee, while completing the assessment. The
ld. CIT(A), in principle, upheld the action of the ld. AO , but
however, gave credit for the estimated income of Rs 7,39,000/- and
Rs 6,31,225/- and sustained the addition to the extent of Rs
29,91,575/-.
25.2. It is pertinent to note that the surrender of income of Rs 60
lacs was not made at the time of search by Om Prakash Bhatia
(individual) as is evident from the search statement dated
13.12.2005 placed on record. It was only on 24.01.2006 where Om
Prakash Bhatia (individual) was summoned, wherein he made a
surrender of Rs 60 lacs to avoid protracted litigation and to buy
peace of mind. We find that this surrender was however subject to
receiving the photocopies of the documents seized / impounded
from the residence and business premises. Om Prakash Bhatia
(individual) accordingly after verification of the seized and
impounded documents arrived at the actual undisclosed income Page 22 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. only to the extent of Rs 16,38,200/- which was duly offered to tax
as additional income while filing the return for the Asst Year 2006-
It was argued that there was no other material in the form of
any money, bullion, jewellery, investments, incurrence of cash
expenses for personal account, loans given, etc were found at the
time of search. The revenue is harping mainly only on the statement
without bringing on record any corroborative evidence thereon. We
hold that an addition cannot be made merely on the basis of
surrender made, which stood subsequently retracted, when it is not
backed by undisclosed assets or incurrence of expenditure outside
the books. Merely certain seized documents were confronted to Om
Prakash Bhatia (individual) does not mean that there is some
concealed income in the said seized documents. In the instant
case, Om Prakash Bhatia (individual) had after verification of the
seized documents had come forward to retract his statement
partially and offered the actual undisclosed income of Rs
16,38,200/- representing investment in stock and incurrence of
cash expenses. He had not only offered the income but had also
stated the application thereon. Hence Om Prakash Bhatia
(individual) was right in retracting his statement making surrender Page 23 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. of income and offering only Rs.16,38,200/- in the return. Reliance
in this regard is placed on the celebrated decision of Hon’ble
Supreme Court in the case of Pullangode Rubber Produce Co. Ltd
vs. State of Kerala & Anr. reported in 91 ITR 18 (SC) wherein it was
held as under:- 4. There is material on record to show that in respect of the assessment year 1963-64, the year previous to the one with which we are concerned in this case, the Tribunal refused to refer similar questions which the assessee wanted it to refer to the High Court. But, at the instance of the assessee those questions were referred to the High Court as ordered by the High Court and the High Court answered those questions in favour of the assessee. It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. 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. 25.2.1. Similar view was also taken by the Hon’ble Jurisdictional
High Court in the case of S. Arjan Singh vs CWT reported in 175
ITR 91 (Del) .
25.3. In view of the aforesaid observations and respectfully following
the judicial precedents relied upon hereinabove, the Ground No. 4
raised by Om Prakash Bhatia (individual) for the Asst Year 2006-07
is allowed.
The Ground No. 5 raised by Om Prakash Bhatia (Individual)
for the Asst Year 2006-07 regarding chargeability of interest is
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ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. consequential in nature in view of our decision for other grounds
above for the Asst Year 2006-07.
The Ground No. 6 raised by Om Prakash Bhatia (Individual)
for the Asst Year 2006-07 is general in nature and does not require
any specific adjudication.
In the result, the appeal of Om Prakash Bhatia (individual)
for the Asst Year 2006-07 is partly allowed.
Let us now take up the appeal of Om Prakash Bhatia
(Individual) and Om Prakash Bhatia (HUF) for the Assessment Year
2007-08.
The grounds raised by Om Prakash Bhatia (HUF) for the Asst
Year 2007-08 are identical to grounds raised in Asst Year 2005-06
and hence the decision rendered by us hereinabove for Asst Year
2005-06 shall apply with equal force for Asst Year 2007-08 also
except with variance in figures.
In the result, the appeal of the assessee HUF is partly
allowed for Asst Year 2007-08.
The grounds raised by Om Prakash Bhatia (Individual) for the
Asst Year 2007-08 are identical to grounds raised in Asst Year
Page 25 of 27
ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors. 2005-06 and Asst Year 2006-07 and hence the decision rendered by
us hereinabove for Asst Years 2005-06 and 2006-07 shall apply
with equal force for Asst Year 2007-08 also except with variance in
figures.
In the result, the appeal of Om Prakash Bhatia (individual)
is partly allowed for Asst Year 2007-08.
To sum up, all the appeals of Om Prakash Bhatia
(individual) and Om Prakash Bhatia (HUF) are partly allowed.
Order pronounced in the open court on 13th September, 2023.
Sd/- Sd/- (SAKTIJIT DEY) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 13/09/2023 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
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ITA No.3269/Del/2009 & Ors Pooja Bhatia, L/H Late Om Prakash Bhatia vs. ACIT & Ors.
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