2012 (9) TMI 594 - HC - Income Tax

High Court ruling on benami property & investments in Fair Deal Garments; fixed deposits deleted, cash deposits under review.

THE COMMISSIONER OF INCOME TAX Versus JAI PAL AGGARWAL

The High Court upheld the revenue's contentions regarding the benami property and investment in Fair Deal Garments. The addition on account of fixed ... Addition on account of purchase of property - benami purchase of property in Seelampur - ITAT deleted the addition - Held that:- Tribunal overlooked that though Om Prakash, one of the property dealer filed an affidavit before the AO, Fakir Chand, the seller of property did not respond to the summons issued by the AO. There is no plausible explanation from the assessee why the documents relating to the property were found in his residence if he had nothing to do with it - The documents include the General Power of Attorney and an Agreement to Sell which bore the signature of Fakir Chand, seller. The fact that the name of the buyer was not mentioned in the documents is a fact which goes in favour of the revenue - neither Fakir Chand nor Om Prakash, the property dealer, came forward to claim the documents which is quite unusual if the intention of handing over the documents was only to enable the assessee to consider the proposal for buying the property. The Tribunal also overlooked that the name of the owner of the property was not mentioned in the affidavit of the property dealer - against assessee. Addition on account of FDRs based on dumb documents - ITAT deleted the addition - Held that:- Tribunal saw the seized paper as a “dumb document” which meant that nothing could be understood from it. The document, according to the Tribunal, merely noted a figure of Rs.27,50,000/- without any details whereas details of other fixed deposits made with Karnataka Bank were given including the interest figure. The Tribunal also felt difficulty in gathering the details of fixed deposits for Rs.27,50,000/- from the seized paper; there was no date or signature therein. On these facts the Tribunal has drawn the conclusion that the addition is without any basis - in favour of the assessee. Addition on account of investment in M/s Fair Deal Garments - ITAT deleted the addition - Held that:- The Tribunal has overlooked that the seized papers contained date-wise receipts of amounts from the assessee between 26.11.1993 and 10.2.1994. Sunil Gupta, the assessee‟s nephew had not started any business during this period. He started the business only on 26.12.1994. There was therefore no possibility or reason for him to make any investment in Fair Deal Garment before 26.12.1994. Sunil Gupta was for some time employed with Jai Pal Aggarwal and that was the reason why the documents were found in his possession. The assessee has not denied this. These crucial aspects have been overlooked by the Tribunal while deleting the addition against assessee. Addition on account of cash deposits made by the assessee - ITAT deleted the addition - Held that:- The Tribunal has not given any valid reason for deleting the addition as it has rested its decision on Annexure 3 in which the assessee had supposedly explained the cash deposits. This Annexure is not before thus court therefore, no means of knowing what the explanation is. Moreover, before the Assessing Officer the assessee does not appear to have submitted any explanation - we set aside the finding of the Tribunal and restore the matter to the file of the Assessing Officer, who shall consider the assessee‟s explanation given in Annexure 3 - in favour of revenue by way of remand. Issues Involved:1. Addition of Rs. 2 lakhs on account of benami purchase of property No. 2-70, Seelampur-III, Shahdara.2. Addition of Rs. 27,50,000 on account of investment in fixed deposits.3. Addition of Rs. 7,62,392 on account of investment in M/s Fair Deal Garments.4. Addition of Rs. 16,80,100 on account of cash deposits made in bank accounts.5. Whether the order passed by the ITAT is perverse in law and on merits.Issue-wise Detailed Analysis:1. Addition of Rs. 2 lakhs on account of benami purchase of property No. 2-70, Seelampur-III, Shahdara:The revenue contended that documents seized during the search indicated that the assessee purchased the property from Fakir Chand in September 1987. These documents included a General Power of Attorney, Deed of Will, and Agreement to Sell, all signed by Fakir Chand, but did not mention the purchaser's name or the sale price. The Assessing Officer inferred that the property was purchased benami by the assessee using unaccounted money. The assessee denied ownership, claiming the documents were left with him by a property dealer for verification. The Tribunal found the assessee's denial, supported by affidavits, credible and deleted the addition. However, the High Court found the Tribunal's conclusion difficult to uphold, noting the absence of a plausible explanation for the documents' presence at the assessee's residence and the lack of response from Fakir Chand. The High Court concluded that the possession of property documents is a relevant piece of evidence for benami transactions and inferred undisclosed investment by the assessee. Thus, questions (a) and (b) were answered in favor of the revenue.2. Addition of Rs. 27,50,000 on account of investment in fixed deposits:During the search, a document indicating FDRs worth Rs. 27.50 lakhs was seized. The Assessing Officer found deposits in the assessee's bank account with Karnataka Bank but did not accept the assessee's explanation that these were maturity proceeds of earlier FDRs. The Tribunal examined the seized document and found it to be a 'dumb document' with no correlating details, dates, or signatures. It concluded that the addition was unjustified based on the seized material. The High Court agreed with the Tribunal's inference, finding it reasonable and not perverse. Thus, question (c) was answered in favor of the assessee.3. Addition of Rs. 7,62,392 on account of investment in M/s Fair Deal Garments:Documents seized from the residence of the assessee's sister indicated investments in M/s Fair Deal Garments between 26.11.1993 and 10.2.1994. The assessee claimed the business belonged to his son, who started it only on 26.12.1994. The Assessing Officer added the amount as the assessee's undisclosed income, noting the absence of any business by the son during the investment period. The Tribunal deleted the addition, emphasizing the lack of opportunity for the assessee to cross-examine his sister and her son. The High Court found the Tribunal's view unreasonable, noting the date-wise receipts of amounts from the assessee and the timing of the business start. Thus, question (d) was answered in favor of the revenue.4. Addition of Rs. 16,80,100 on account of cash deposits made in bank accounts:The Assessing Officer found unexplained cash deposits in the assessee's bank account with Karnataka Bank and treated the amount as undisclosed income. The Tribunal deleted the addition, referring to an annexure where the assessee supposedly explained the deposits. The High Court found the Tribunal's reasoning inadequate, as the annexure was not before it and no explanation was provided to the Assessing Officer. The High Court remitted the matter to the Assessing Officer for reconsideration, subject to the assessee's explanation. Thus, question (e) was answered accordingly.5. Whether the order passed by the ITAT is perverse in law and on merits:The High Court answered this general question against the assessee concerning the Seelampur property and Fair Deal Garments' investment. The question was answered in the negative for the fixed deposits and in the affirmative, subject to reconsideration, for the cash deposits. The appeal was disposed of with no order as to costs.Conclusion:The High Court upheld the revenue's contention on the benami property and Fair Deal Garments' investment, found the Tribunal's deletion of the fixed deposit addition reasonable, and remitted the cash deposits issue for reconsideration by the Assessing Officer.