Full Text
HIGH COURT OF DELHI
Date of Decision: 19.12.2017
PRINCIPAL COMMISSIONER OF INCOME TAX-18 ..... Appellant
Through: Mr. Zoheb Hossain, Sr. Standing Counsel.
Through: None.
HON'BLE MR. JUSTICE A.K. CHAWLA S.RAVINDRA BHAT, J. (ORAL)
JUDGMENT
1. The question of law sought to be urged by the revenue in its appeal under Section 260A of the Income Tax Act, 1961 is with respect to the alleged error in setting aside the additions made by the Assessing Officer (“AO”) in the course of a search assessment under Section 158BC of the Income Tax Act, 1961.
2. The appellate Commissioner who considered the findings, made essentially upon remand by the ITAT, set aside the addition of `22,25,885/- attributed to the assessee. The AO had held that the additions of the amount which was not hitherto disclosed by the assessee was warranted because he had contributed in the purchase of a Lajpat Nagar property (F-18, Lajpat Nagar-II, New Delhi) by his wife. Further additions were made by the AO.
3. Search operations were conducted upon the assessee on 22.02.1996 leading to block returns. The initial assessments under 2017:DHC:7896-DB Section 158BC were appealed against. Ultimately, the ITAT on 24.11.2003 remitted the matter after its initial decision was set aside by this Court under Section 260 on 21.09.2007. The ITAT after remand remitted certain issues for re-determination to the AO on 19.11.2007. The issues pertained to the following: -
1. Addition of `36,80,855/- on account of investment in property number F-18, Lajpat Nagar-II, New Delhi.
2. Addition of `83,96,785/- by adopting six percent as net profit rate on the undisclosed turnover from these benami concerns estimated by the AO at `13,99,46,424/-.
3. Addition of `70,49,757/- as alleged capital contribution in the benami business units.
4. Income of Maruti Draw.
4. The AO after remand added a total amount of `1,00,95,347/-. The assessee appealed to the CIT (A) with respect to substantially two items i.e. investment in the property and initial capital in the benami units. The ITAT further remitted the matter with respect to the assessment vis-a-vis the property and the amounts added.
5. The CIT (A) restricted the additions to a minimal amount and held as follows: -
6. The CIT (A) also disagreed with the AO and set aside the findings with respect to additions of `70,49,757/-. The ITAT was of the opinion that so far as the additions made on account of payments attributable to the assessee through his wife for an acquisition were concerned, the AO took note of the fact that she was separately assessed to the income tax and yet made the addition in the final decision. As far as the question of addition of `70,49,757/- is concerned, the ITAT endorsed the view of the CIT (A) who applied the rule of consistency - having regard to the orders made in the case of Satish Kumar Chandna, the assessee’s brother and business partner/associates. The findings of the ITAT in this regard are as follows: -
26. In light of the aforesaid binding directions of the Tribunal and, the order of assessment in the case of brother of the appellant, addition made of Rs.70,49,757/- directed to be deleted and is restricted to Rs.12,000/- (as directed by the Tribunal) which too I covered by other addition made of Rs.8,19,905/- and not disputed in this appeal.
27. With prejudice to the above, the assessee is admittedly a whole seller in grey cloths and that, substantial transaction of such turn over are recorded by him in his books, whereas other transactions carried by him in the names of three concerns, for the same business and conducted from the same stocks of supplies have not been recorded. It was never a case of the assessee that the assessee had made any investment for earning an aforesaid income and such investment came to be made out his undisclosed income. It is an admitted fact that, no evidence has been found as a result of search that the assessee had made any such investment, which has been estimated by the AO at Rs.70,49,757/-. It is an admitted fact that, assessee has been carrying on business of supply of grey cloth on wholesale basis. It is again an admitted fact that the part of the supplies made, were unrecorded. It is again an admitted fact, as in evident from the copy of an account that, the supplies were obtained by the assessee on the basis of credit and after the sale proceeds were received by the assessee the amounts payable, were paid by the assessee to the suppliers. In any case, there was substantial sufficient stocks in respect of the stocks dealt by the assessee and were duly recorded in the books of accounts. It was submitted that unless there is an evidence found or is estimate any such an alleged investment, which too is based on no basis. It was also submitted that the entire addition made was based on hypothetical and surmise full consideration based on no valid material and was merely conjectural.
28. Also there is no basis to allege that the assessee had made any investment purportedly as a capital contribution. It is a matter of record that the assessee was supplying the Grey Cloth and was making payment only on the receipt of the sale proceeds and that too at time even much later which is evident from the copy of the bank accounts which shows as soon as the sales were effected, monies were withdrawn either in case or by making the payments by cheque to the suppliers. This is verifiable from the bank statement which is on record.
29. It has been held by the Hon’ble Delhi High Court in its order in the case of CIT v. Pradip Goyal in ITA No.651/2007 dated 20.05.2008 that where no evidence of investment is found in respect of the undisclosed turnover and the assessee has been carrying on the business in an unaccounted manner, no addition of investment can be made. In this case also a search had been conducted where in similar manner, the assessee has in various bank account held in benami names deposited sale proceeds and admitted that such unaccounted turnover in respect of sales amounted to Rs.[8] crore in the block period. He was finally assessed by applying a rate of 1.5% as against 2.[5] adopted by the AO. The AO has made addition on account of undisclosed investment of Rs.10 Lacs, which was reduced by VIT (Appeals) to Rs.[5] lacs and on the basis of theory of peak investment, the Tribunal deleted the addition. On appeal the Hon’ble High Court held that the Tribunal was correct in doing so as there was no evidence found to that the assessee has made any such investment and no addition can be made of any such amount. The Hon’ble Allahabad High Court in the case of CIT v. Ashok Rastogi reported in 100 CTR 204 wherein their Lordships in para 4 have held that no addition can be made unless the assessee is found to have made any investment. Reliance is also placed on the following judicial pronouncements: i) IT(SS)No.6/D/86 Dated 31.07.2002 Nihalsons Jewellers Vs. Dy.CIT. ii) IR (SS) No.87/Del/1997 dated 12.10.2000 M/s Kuwer Fibers (P) Ltd. Vs. Dy.CIT”
7. This Court is of the opinion that the chequered history of the litigation shows unanimity of one aspect: that the assessee’s wife was separately assessed to income. She had declared the acquisition of the property. She was the registered owner. No attempt was made on the part of the revenue to add that income in her hands. Likewise in the case of the other additions, findings are concurrent and rendered after examination and analysis of the material evidence. Having regard to these factual conclusions, the Court is of the opinion that no question of law arises; the appeal is, therefore, dismissed.
S. RAVINDRA BHAT (JUDGE) A.K. CHAWLA (JUDGE) DECEMBER 19, 2017 /vikas/