1998 (9) TMI 114 - AT - Income Tax

Seized land deal notings treated as on-money, house construction costs, jewellery and minors' FDRs-most tax additions deleted.

Addition treating seized notings as on-money/premium over registered land consideration was held unsustainable because the seized document was not ... Income from undisclosed sources - addition for balance of FDRs - Power Of Tribunal - Seizure Of Jewellery. Addition - treated as premium paid over and above the cost of plot mentioned in the registered deed for purchase of land - HELD THAT:- The show that the concerned Assessing Officer was in a state of doubt/suspicion with reference to the actual confrontation of the material seized from the residence of Sh. Viyogi to the assessee. Thus, having regard to the decision of Hon'ble Supreme Court in A.K.K. Nambiar's case [1969 (10) TMI 79 - SUPREME COURT] and of Hon'ble Allahabad High Court in Juggi Lal Kamla Pat's case [1962 (2) TMI 127 - ALLAHABAD HIGH COURT] and in the circumstances, we cannot help but give due weightage to the averments made by Id. counsel in the affidavits filed before us, which cannot be legally ignored, in the absence of any counter-affidavit filed from the department. The assessment order is silent about any explanation specifically sought by Assessing Officer from the assessee with reference to such document and source of Rs. 4.83 lakhs and as to whether any explanation was furnished by the assessee and, if furnished, how the explanation was unsatisfactory. We, therefore, find merit in the submission of Id. counsel that the aforesaid documents are open to more than one possibility of interpretation and do not prove conclusively that any premium was given by the assessee or received by Smt. Ajaib Kaur. Here, we may mention the decision of Hon'ble Supreme Court in the case of Shivakami Co. (P.) Ltd. [1986 (3) TMI 2 - SUPREME COURT], wherein it was held that 'unless there is evidence that more than what was stated was received, no higher price can be taken to be the basis for computation of capital gains'. It was also observed that though the legislation in question, i.e. section 12B(2), proviso (i), of Indian Income-tax Act, 1922, was to remedy a social evil and should be read broadly and should be so read that the object is fulfilled, yet the onus of establishing a condition of taxability must be fulfilled by the Revenue. Thus, we feel that in the present case. Assessing Officer has simply jumped to the conclusion that the impugned amount of Rs. 4.83 lakhs is undisclosed investment, without following due course of law. We may also refer to the decision of Hon'ble Patna High Court in the case of Chunnilal Surajmal v. CIT [1985 (8) TMI 39 - PATNA HIGH COURT], where reassessment proceedings were taken in the case of HUF and on inspection of accounts and bank deposits, it was found that the bank deposits were in the name of wife of karta of HUF and that the karta's wife was not asked for explanation regarding the deposits and the bank deposits were included in the income of the HUF. It was held that reassessment were not valid and direction by the Tribunal to investigate bank deposits was not justified. In view of the foregoing, we reject the plea of the revenue to restore the issue to the file of Assessing Officer and delete the impugned addition. Addition with reference to construction of House and charging tax at 60 per cent for assessment year 1995-96 - The explanation given by the assessee is supported by report of the registered valuer. We feel that Assessing Officer has made the impugned addition without discussing the said report or pointing out any defect therein and discrediting the said report. We feel that report of the registered valuer cannot be ignored and that in the absence of any other material it has to be given due weightage and the decision of the Tribunal in Shanti Complex's case [1997 (5) TMI 105 - ITAT PATNA] supports this proposition. It is also observed from assessment order in the case of Smt. Pamela Syal that Assessing Officer has taken cost of construction at Rs. 15,28,585 with reference to covered area of 3751 sq.ft. as against total cost of construction taken in the case of the assessee at Rs. 14,20,725 for covered area of 2223 sq.ft. The cost of construction in the case of the assessee works out to Rs. 639 against Rs. 407 in the case of Smt. Pamela Syal. It is not in dispute that both the houses were constructed simultaneously under the supervision of Sh. A.L. Syal. Thus, we feel that Assessing Officer has made the impugned addition only on the basis of estimates and certain assumptions ignoring the explanation of the assessee as also report of the registered valuer and that there is no sound basis for making the impugned addition. Addition is, therefore, deleted. In view of this position, we do not feel it necessary to adjudicate on the alternative argument taken by Id. counsel for taxing the aforesaid addition in next assessment year at normal rate. We may mention here that under the provisions of new scheme, the block period has to be taken up to the date of search and the entire undisclosed income in the block period is to be taxed @ 60 per cent. Addition on account of jewellery found at the time of search - The Tribunal also took into account the facts like status, customs, gift at the time of marriage, child-birth and held that the entire jewellery in possession of the assessee was well-explained. It is, however, observed from details of jewellery, page 87 of APB, that 794 grams have been shown against the name of the assessee, 206 grams in the name of Ms. Madhurima Syal, daughter, and 110 grams against Master Nikhil Syal, son of the assessee. Having regard to the CBDT instructions, we have, therefore, to examine as to whether possession of 794 grams by the assessee is explained or not. - In her statement, Smt. Neena Syal admitted 350 grams of jewellery, page 33 of APB and jewellery in locker. Jewellery of Rs. 2 lakhs purchased by the assessee in financial year ending on 31-3-1995 is also accepted by Assessing Officer, which is roughly 44 tolas. Thus, when both are taken into account, then gold jewellery of 794 grams is explained. Further, keeping in view the status of the family, age of both the children and other circumstances of the case, we feel that out of remaining jewellery it would be just and fair to allow credit of 120 grams and 50 grams respectively to Ms. Madhurima Syal and Master Nikhil Syal. Thus, on the facts and circumstances of the case, the impugned addition of Rs. 1,03,600 is restricted to the balance of jewellery, i.e. (1110 minus 964) 146 grams @ Rs. 4,600 per 10 grams. Assessing Officer may recompute the addition and allow appropriate relief to the assessee. Income from undisclosed sources. - It is observed that out of total FDRs seized during search, Assessing Officer allowed credit of FDRs in the name of the assessee which is reflected in balance sheet of Sh. A.L. Syal and that in the case of the children Assessing Officer gave credit of two FDRs each in the names of minor children,. The explanation given by the assessee is that investment in FDRs in the name of minor children has been made out of money received by them in their individual capacity on various occasions, like birth day gifts, shaguns, pin money, cash prizes, etc. The assessee further stated that the income from FDRs in the case of minor children has been included in the hands of respective parents w.e.f. assessment year 1993-94. As already held by us in the foregoing part of this order, the provisions of section 69A etc. are required to be complied with while deeming income as undisclosed, while making regular assessment under section 143(3) read with section 158BC. It is observed that Assessing Officer has not rebutted the explanation furnished by the assessee and has proceeded to make an ad hoc addition. We feel that it is customary in Hindu family to give and receive gifts on occasions of birthdays of minor children and it is quite possible to accumulate an amount in 9-10 years on various occasions connected with minor children and that explanation furnished by the assessee is quite reasonable, keeping in view the status of the family and other circumstances. Thus, on the facts and circumstances of the case, we feel that impugned addition is not sustainable. The same is, therefore, deleted. In the result, the appeal is partly allowed. Issues Involved:1. Rate of Tax Applied to Income2. Opportunity to Assessee for Material Collected3. Addition of Rs. 4.83 Lakhs for Land Purchase4. Addition of Rs. 5,46,093 for House Construction5. Addition of Rs. 1,03,600 for Jewellery6. Addition of Rs. 50,000 for FDRsSummary:1. Rate of Tax Applied to Income:The Tribunal did not separately comment on this issue as it was related to other grounds raised by the assessee.2. Opportunity to Assessee for Material Collected:The Tribunal noted that the documents seized from Sh. Vinod Viyogi were not specifically confronted to the assessee. The Tribunal emphasized that the satisfaction of the Assessing Officer (AO) must be objective and backed by evidence. The Tribunal found that the AO failed to comply with the conditions stipulated in section 69 of the Income-tax Act, which are mandatory for assessment under section 143(3) read with section 158BC.3. Addition of Rs. 4.83 Lakhs for Land Purchase:The AO added Rs. 4.83 lakhs as income from undisclosed sources based on a document seized from Sh. Vinod Viyogi's residence. The Tribunal found that the AO did not confront the assessee with this document and failed to provide a satisfactory explanation for the addition. The Tribunal concluded that the AO did not follow the due course of law and deleted the addition of Rs. 4.83 lakhs.4. Addition of Rs. 5,46,093 for House Construction:The AO determined the cost of construction at Rs. 14,20,725 against Rs. 8,74,632 shown by the assessee. The Tribunal observed that the AO did not find any defect in the report of the registered valuer and ignored the explanation given by the assessee. The Tribunal found no sound basis for the addition and deleted Rs. 5,46,093.5. Addition of Rs. 1,03,600 for Jewellery:The AO gave credit for 45 tolas of jewellery and treated the balance of 66 tolas as unexplained. The Tribunal noted that the AO did not rebut the explanation given by the assessee and failed to comply with section 69A. The Tribunal allowed credit for jewellery based on CBDT instructions and restricted the addition to the balance of jewellery, directing the AO to recompute the addition.6. Addition of Rs. 50,000 for FDRs:The AO made an ad hoc addition of Rs. 50,000 for FDRs found during the search. The Tribunal noted that the AO did not rebut the explanation given by the assessee and found the explanation reasonable, considering the status of the family and customary practices. The Tribunal deleted the addition of Rs. 50,000.Conclusion:The appeal was partly allowed, with significant deletions in the additions made by the AO due to non-compliance with legal provisions and lack of evidence.