2016 (1) TMI 1091 - AT - Income Tax

Assessees Prevail in Tax Appeal, Revenue's Claims Dismissed on Multiple Issues

Chaturbhuj T Batra and Other Versus Asstt. Commissioner of Income Tax-Central Circle 18 and 19, Mumbai and Others and Vica-Versa

The Tribunal dismissed the revenue's appeal, ruling in favor of the assessees on various issues including the addition to brokerage income, proforma ... Addition made to the brokerage income - these assesses have received part of brokerage income in cash and did not disclose the same - Held that:- Additions confirmed by the Ld.CIT(A), on estimate basis and telescoping the same is not justified. Addition made on the basis of proforma invoice - Held that:- As already noticed that the Ld CIT(A) has confirmed this addition only on the reasoning that the assessees have suppressed receipts by receiving them by way of cash. In the earlier paragraphs, we have held that the addition made towards suppressed fee receipts are liable to be deleted, since the said view taken by the tax authorities are not supported by any credible material. Thus, the very reasoning on the basis of which this addition was sustained by Ld CIT(A) fails. Under these set of facts, we are of the view that the Ld CIT(A) was not justified in confirming this addition in the hands of the three assessees mentioned above. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the addition made on this issue in the hands of the three assessees Addition in respect of estimated household expenses - Held that:- CIT(A) has accepted the fact that the amounts withdrawn by the assessee and his family members for personal purposes have been wrongly computed by the assessing officer and he has further held that there is no requirement to make any addition. However, he has taken altogether different stand and has expressed the view that the expenses booked as business expenses shall have personal element and accordingly disallowed a sum of ₹ 1.00 lakh on estimated basis. The Ld CIT(A) has not brought on record as to how much expenses was booked by the assessee as business expense, even though the assessing officer has accepted the entire amount of business expenses claimed by the assessee. However, there is some merit in the observations of the Ld CIT(A) that the personal element involved in respect of Vehicle and telephone expenses could not be ruled out. Accordingly, we modify the order of Ld CIT(A) on this issue and sustain the addition to the extent of ₹ 20,000/- and in our view the same would meet the ends of justice. We direct the AO to sustain the addition accordingly Investment in diamond and gold jewellery - Held that:- It is pertinent to note that the bills pertaining to the year 1978 were sought to be verified in the year 2008, i.e., after expiry of about 30 years. It would be difficult for anyone to establish the genuineness of the bill after the expiry of about 30 years. Further offering of jewellery at the time of marriage is an established custom in this country. Hence, there is no reason to suspect the said claim put forth by the assessee. With regard to the claim of the assessee that diamond jewelleries worth ₹ 5.00 lakhs were received on various occasions, we notice that the assessee has failed to furnish the details of functions, festivals, name of donors etc. However, one can note that receiving of gifts at the time of festivals and functions is quite common. Further, the assessees herein have also filed income tax returns over the years. Hence, on a conspectus of the matter, we are of the view that the addition on account of diamond jewellery may be restricted to ₹ 1.50 lakhs and we are of the view that the same would meet the ends of justice. Accordingly, we modify the order of Ld CIT(A) on both the issues referred above and direct the AO to sustain the addition relating to diamond jewellery to ₹ 1.50 lakhs and delete the addition relating to gold jewellery. Issues Involved:1. Addition to brokerage income.2. Addition based on proforma invoices.3. Addition of brokerage income for specific properties.4. Addition towards household expenses.5. Addition towards investment in diamond and gold jewelry.6. Telescoping benefit granted by CIT(A).Issue-wise Detailed Analysis:1. Addition to Brokerage Income:The primary issue was the addition made to the brokerage income by holding that the assessees received part of their brokerage income in cash and did not disclose it. The Assessing Officer (AO) based this addition on certain documents found during a search, interpreting these documents to suggest that the assessees declared only 50% of their brokerage income. The ITAT noted that in similar cases, the Tribunal had found no evidence of cash brokerage income. Consistent with these precedents, the Tribunal held that the AO made the addition without credible material and directed the deletion of the addition towards the cash component of brokerage. Consequently, the telescoping benefit granted by the CIT(A) was vacated, rendering the revenue's appeal infructuous.2. Addition Based on Proforma Invoices:This issue pertained to the addition made based on proforma invoices raised by the assessees on M/s Vinita Estates (P) Ltd. The AO added the amounts stated in these invoices, suspecting that the assessees suppressed their income. Both the assessees and M/s Vinita Estates (P) Ltd denied the transactions. The Tribunal found that the AO did not bring any material to show that the services were rendered or that money changed hands. The Tribunal held that the CIT(A) was not justified in confirming the addition and directed the AO to delete the addition made on this issue.3. Addition of Brokerage Income for Specific Properties:In the case of Shri Chaturbhuj T Batra, the AO made an addition based on a document detailing transactions for properties in Chinar, Rajrishi, Powai, and Kandivali. The AO calculated the brokerage income as 2% of the property value. The CIT(A) gave partial relief but confirmed the addition of Rs. 37,30,690/-. The Tribunal found that the assessee substantiated the claim that certain transactions did not materialize and confirmed the addition to the extent of Rs. 19,67,690/-.4. Addition Towards Household Expenses:For Shri Chaturbhuj T Batra, the AO made an addition for estimated household expenses. The CIT(A) reduced this addition to Rs. 1,00,000/-, considering personal elements in business expenses. The Tribunal modified this to Rs. 20,000/-, finding this amount reasonable. Similar adjustments were made for other assessees.5. Addition Towards Investment in Diamond and Gold Jewelry:In the case of Smt. Varsha Batra, the AO added amounts for unexplained investment in diamond and gold jewelry. The Tribunal noted that jewelry is commonly accumulated over the years in Indian households and found the AO's rejection of the assessee's explanation to be unreasonable. The Tribunal allowed partial relief, confirming the addition of Rs. 1,50,000/- for diamond jewelry and deleting the addition for gold jewelry.6. Telescoping Benefit Granted by CIT(A):The revenue challenged the telescoping benefit given by the CIT(A). Since the Tribunal deleted the addition relating to the cash component of brokerage and sustained the addition for jewelry, the issue of telescoping benefit became moot. Additionally, the Tribunal noted that the tax effect was below Rs. 10,00,000/-, making the revenue's appeal liable for dismissal based on the CBDT circular.Separate Judgments:- The appeal by Shri Karan P Batra was allowed as both common issues were decided in his favor.- The appeal by Shri Chaturbhuj T Batra was partly allowed with specific modifications to the additions.- The appeal by Smt. Varsha Batra was partly allowed with modifications to the jewelry addition.- The appeal by Shri Prem Kumar Batra was partly allowed, with specific modifications to household expenses and other issues dismissed as not pressed.- The appeal by Smt. Nisha Batra was partly allowed, with a reduction in the addition for diamond jewelry.Conclusion:The appeals filed by the revenue were dismissed. The appeals filed by the assessees were either allowed or partly allowed with specific modifications and directions to the AO. The judgment was pronounced on 6th Jan, 2016.