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AO is right in position to disallow the unexplained cash credit and unexplained investment


Last updated: 10 May 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Briefly stated facts of the case are that the assessee an individual derives income from salary, business income and other sources. The assessee’s business premises as well as residential premises were searched u/s 132 of the Income Tax Act, 1961 (the Act) on 9.9.2004 along with other group cases. The return was filed on 31.10.2005 declaring total income at Rs.3,17,200/-. However, the assessment was completed at an income of Rs.10,86,070/- including the addition of unexplained cash credit Rs.3,88,500/- and unexplained investment in diamond jewellery Rs.3,80,374/-, vide order dated 13.12.2006 passed under section 143(3) read with section 153B(b) of the Act. On appeal, the Ld.CIT(A) dismissed the appeal

Citation :
Mr .Hemraj K.Jethani , 103, Sidhar tha Towers, Kopr i Colony, Thane (E) . PAN: ABDPJ4124G APPELLANT V/s Dy. Commissioner of Income Tax, Central Circle-I, Pawar Indl.Estate, Edulji Road, Cherai, Thane(W). RESPONDENT

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES, ‘H’, MUMBAI

BEFORE SHRI DINESH KUMAR AGARWAL (JM) AND

SHRI B.RAMAKOTAIAH (AM)

ITA No.4630/Mum/2008

(Assessment Year: 2005-06)

Mr .Hemraj K.Jethani ,

103, Sidhar tha Towers,

Kopr i Colony,

Thane (E) .

PAN: ABDPJ4124G

APPELLANT

V/s

Dy. Commissioner of Income Tax,

Central Circle-I,

Pawar Indl.Estate,

Edulji Road,

Cherai, Thane(W).

RESPONDENT

ITA No.4631/Mum/2008

(Assessment Year: 2005-06)

Mr .Bharat Hemraj Jethani ,

103, Sidhar tha Towers,

Kopri Colony,

Thane(E) .

PAN: ABDPJ4125H

APPELLANT

V/s

Dy. Commissioner of Income Tax,

Central Circle-I,

Pawar Indl.Estate,

Edulji Road,

Cherai, Thane(W).

RESPONDENT

ITA No.4632/Mum/2008

(Assessment Year: 2005-06)

Mrs.Darshana Kailash Jethani,

103, Sidhar tha Towers,

Kopri Colony,

Thane(E) .

PAN: ABDPJ4123B

APPELLANT

V/s

Dy. Commissioner of Income Tax,

Central Circle-I,

Pawar Indl.Estate,

Edulji Road,

Cherai, Thane(W).

RESPONDENT

Date of Hearing: 3.4.2012

Date of Pronouncement: 18.4.2012

Assessees by: Shri M.Subramanian

Respondent by: Shri Ajay

O R D E R

PER DINESH KUMAR AGARWAL (JM)

All these appeals by three respective assessees are directed against the separate orders dated 10.4.2008 passed by the ld. CIT(A) for the Assessment Year 2005-06. Since facts are identical and issues involved are common, all these appeals are disposed of by this common order for the sake of convenience.

ITA No.4630/Mum/2008(By Mr .Hemraj K.Jethani)

2. Briefly stated facts of the case are that the assessee an individual derives income from salary, business income and other sources. The assessee’s business premises as well as residential premises were searched u/s 132 of the Income Tax Act, 1961 (the Act) on 9.9.2004 along with other group cases. The return was filed on 31.10.2005 declaring total income at Rs.3,17,200/-. However, the assessment was completed at an income of Rs.10,86,070/- including the addition of unexplained cash credit Rs.3,88,500/- and unexplained investment in diamond jewellery Rs.3,80,374/-, vide order dated 13.12.2006 passed under section 143(3) read with section 153B(b) of the Act. On appeal, the Ld.CIT(A) dismissed the appeal.

3. Being aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us.

4. Ground No.1 is against the validity of the order passed by the AO and Ground No.2 is the general ground.

5. At the time of hearing, the Ld. Counsel for the assessee did not press the above grounds which was not objected to by the Ld.DR.

6. That being so and in the absence of any other supporting materials placed on record by the Ld. Counsel for the assessee, the Ground Nos.1 and 2 taken by the assessee are, therefore, rejected being not pressed.

7. Ground No.3 is against the sustenance of addition of unexplained cash Rs.3,88,500/-.

8. Brief facts of the above issue are that during the course of assessment proceedings, the AO observed that during the course of search, at the residence of assessee, cash of Rs.5,83,350/- was found and out of it cash of Rs.3,88,500/- was found from the bed room of the assessee. On inquiry during the course of search the assessee was unable to give the source except stating that it is a combined cash of family. He also admitted that books of accounts were not up-to-date. However, during the course of assessment proceedings the assessee submitted that the cash of Rs.5,83,350/- from the residence belong to various family members including M/s Bell Computronics, proprietary concern of Shri Bharat Jethani son of the assessee . The assessee further submitted that the cash was kept at the residence for the safety purposes. However, the AO did not accept the assessee’s explanation. According to the AO the assessee has no business relation with M/s Bell Computronics. Further M/s Bell Computronics has bank account, therefore, it cannot be believed that for safety purposes cash was kept at the residence than into bank account. In this view of the matter and keeping in view that the cash book of the family members were not found to be upto- date, the AO treated the cash of Rs.3,88,500/- as unexplained cash and added the same to the income of the assessee. On appeal, the Ld.CIT(A) while aggreeing with the views of the AO confirmed the addition made by the AO.

9. At the time of hearing, the Ld. Counsel for the assessee while referring to the relevant questions and answers to statement of the assessee appearing at pages 34 and 35 of the assessee’s paper book, details of cash balances appearing belonging to various family members appearing at page 75 of the assessee’s paper book, Schedule-“F” of the Audit Report of M/s Bell Computronics for the period ended 31.3.2005 showing amount of cash seized by the department Rs.4,44,061/- appearing at page 125 of the assessee’s paper book submits that in view of the entries recorded in the respective books of account of the family members, the cash found at the time of search may be treated as fully explained and the addition made by the AO and sustained by the Ld.CIT(A) be deleted. The reliance was also placed on the decisions in (a) Amar Natvarlal Shah V/s ACIT (1997) 60 ITD 560(Ahd) and (b) Ms. Aishwarya K.Rai V/s DCIT (2007) 104 ITD 166 (Mum)( TM)

10. On the other hand, the Ld.DR supports the order of the AO and the Ld.CIT(A).

11. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that in the statement recorded at the time of search, the AO specifically asked about the cash of Rs.3,88,500/- vide question No.8 as under :

“Q.No.8: Cash of Rs.3,88,500/- was found from your bedroom. Do you confirm that the same

belongs to you only.

Ans: It is combined cash of family”

We further find that during the course of assessment proceedings the assessee vide letter dated 13.10.2006 has stated as under:

“Regarding seizure of Rs.5,00,000/- I want to state that during the course of search in my statement I stated that this cash belongs to us and our family members. All our family members are income tax payer since last so many years. In every case we are filling balance sheet and paying income tax regularly. I have to married sons and we all three are also filing return in HUF capacity. Whatever cash was found it was accounted and explained and it was …

Details of cash balances

S. No.

Date

Name

cash

Source

Seized

Returned

1

8.9.2004

Bharat Jethani

(M/s Bell

Computers)

4,44,061

As per

books

4,44,061

..

2

8.9.2004

Bharat Jethani

(HUF)

22,669

As per

books

4,540

18,129

3

8.9.2004

Kailash Jethani

54,440

As per

books

54,440

4

8.9.2004

Kailash Jethani

(HUF)

39,837

As per

books

39,837

….

5

8.9.2004

Hemraj K Jethani

(Office)

54,000

As per

books

54,000

6

8.9.2004

Hemraj K Jethani

(HUF)

[[[

11,562

As per

books

11,562

7

8.9.2004

Ritu, Rashi, Rhea

(Minor

Daughters)

10,500

Gift on

birthday &

different

occasions

10,500

6,37,069

5,00,000

1,37,069

We further find that in support the assessee has also filed audit report of M/s Bell Computronics for the assessment year 2005-06 interalia mentioning in Schedule-“F” under the head “Loans and Advances” income tax department Rs.4,44,061/-. Merely because the books of accounts were not found to be up-to-date and the cash balances were not struck off does not mean that the assessee has no explanation about the cash found at the time of search or the explanation submitted by the assessee during the course of assessment proceedings supported by the books of account is not believable particularly when the concerned books of accounts have not been rejected by the AO. In this view of the matter and keeping in view the ratio of decisions relied on by the Ld. Counsel for the assessee, the addition of Rs.3,88,500/- made by the AO and sustained by the Ld. CIT(A) as unexplained cash is deleted. The ground taken by the assessee is, therefore, allowed.

12. Ground No.4 is against the sustenance of addition of Rs.3,80,374/- as unexplained investments in diamond jewellery.

13. The brief facts of the above issue are that during the course of search at the residential premises of the assessee the total jewellery including the gold and diamond jewellery of Rs.28,79,018/- was found. On being asked, the assessee filed a chart showing the details of jewellery owned by the assessee and his family members supported by VDIS certificate, copy of

Wealth tax returns, assessment orders and copy of ‘Will’ of Smt.Lachmi Ukarmal Mangtani. The assessee also relied on CBDT circular. However, the AO accepted the assessee’s explanation partly. In the case of the assessee, the AO observed that the diamond jewellery of the value of Rs.4,20,374/- was found. The description of the diamond jewellery declared under VDIS does not match with the diamond jewellery found at the time of search. Therefore, the AO did not accept the assessee’s explanation that the diamond jewellery was disclosed in VDIS. The AO after taking into account the age of the assessee, past savings, businessetc. considered that the jewellery of the value of Rs.40,000/- as explained and treated the balance investment in diamond

jewellery Rs.3,80,374/- (420374-40000) as unexplained investment out of undisclosed source and added the same to the total income of the assessee. Regarding gold jewellery, the AO treated the same as explained and hence he did not make any addition. On appeal, the Ld.CIT(A) while observing that in the absence of any convincing evidence, confirmed the addition made by the AO.

14. At the time of hearing, the Ld. Counsel for the assessee placed on record the following chart:

JETHANI FAMILY

DIAMOND JHEWELLERY CHART

S. No.

Name of

the person

to whom

diamond

jewellery

belongs

Qty.in GMS/

Carats

Value Rs.

Source of

acquisition

Remarks

Page No.

as per

paper book

1

Nirmal

Hemraj

Jethani

339.800

6,53,340

218.800-

Declared in

VDIS

127.000-

Declared in

Wealth

Tax Return

339.800–Total

Diamond

Jewellery

found and

valued

190.500

gms/crt at

Rs.4,20,374/-

AO has

allowed

jewellery

worth

Rs.40,000/-

79-87

96-97

(Hemraj)

2

Aashna

Bharat

Jethani

90.000

1,73,045

90.00–

Gifts

received

during

marriage

and other

occasions

Diamond

jewellery

found and

valued

309.550

gms/crt at

Rs.4,86,865/-

AO has

allowed

jewellery

worth

Rs.30,000/-

3

Darshna

K

Jethani

270.050

5,19,231

184.100-Will

85.950-

Gift

Received

270.050-Total

Diamond

jewellery

found and

valued

202.150

gms/crt at

Rs.4,38,377/-

65-68

(Darshana)

AO has

allowed

jewellery

worth Rs.NIL.

Total

699.850

13,45,616

Total

Jewellery

allowed by

AO is of

Rs.70,000

In support of the above chart he also refers VDIS certificate of Smt. Nirmala Hemraj along with valuation report, copy of return of income of Smt.Nirmala Hemraj, copy of wealth tax return of Shri Hemraj K.Jethani, copy of wealth tax return of Smt. Nirmala H.Jethani, copy of ‘Will’ of Smt.Lachmi Ukarmal Mangtani and copy of bills of jewellery purchased appearing at pages 79 to 104 of the assessee’s paper book. The reliance was also placed on the decisions cited supra and in DCIT V/s Arjun Dass Kalwani (2006) 101 ITD 337 (Jd). He, therefore submits that the addition made by the AO and sustained by the Ld.CIT(A) be deleted.

15. On the other hand, the Ld.DR while relying on the order of the AO and Ld.CIT(A) further submits that the diamond jewellery declared under VDIS does not match with the diamond jewellery found at the time of search, therefore, the addition made by the AO and sustained by the Ld. CIT(A) be upheld.

16. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the assessee has explained that his wife Smt.Nirmala Hemraj Jethani has disclosed the diamond jewellery 339.800 Grm. valued at Rs.6,53,340/- under VDIS and by filing wealth tax return as mentioned in the table reproduced in paragraph 14 of this order. In support the assessee has filed copy of VDIS disclosure along with the certificate and copy of wealth tax return of Smt. Nirmala Hemraj Jethani. It was not accepted by the AO on the ground that the jewellery disclosed under VDIS does not match with the jewellery found at the time of search. Merely because the jewellery disclosed under VDIS did not match with the jewellery found at the time of search does not mean that the jewellery found at the time of search is unexplained jewellery inasmuch as it is not the case of the Revenue that the jewellery which was disclosed by the assessee’s wife under VDIS and in the return of wealth tax was over and above found at the time of search. Since no other jewellery was found during the course of search and keeping in view that the AO has accepted the gold jewellery in toto and diamond jewellery valued at Rs.40,000/- we are of the view that the addition of the remaining amount of diamond jewellery of Rs.3,80,374/- is not sustainable and accordingly the same is deleted. The ground taken by the assessee is, therefore, allowed.

17. Ground No.5 is against the levy of interest u/s 234A,234B and 234C.

18. After hearing rival parties and perusing the material available on record and in the absence of any plea, we direct the AO to allow consequential relief in respect of levy of interest charged u/s 234A, 234B and 234C of the Act. The ground taken by the assessee is, therefore, partly allowed.

ITA No.4631/Mum/2008 (by Mr.Bharat Hemraj Jethani)

19. Ground No.1 is against the validity of the order passed by the AO and Ground No.2 is the general ground.

20. At the time of hearing, the Ld. Counsel for the assessee did not press the above grounds which was not objected to by the Ld.DR.

21. That being so and in the absence of any other supporting materials placed on record by the ld. Counsel for the assessee, the Ground Nos.1 and 2 taken by the assessee are, therefore, rejected being not pressed.

22. Ground No.3 is against the sustenance of addition of unexplained investments in diamond jewellery Rs.4,86,865/-.

23. The brief facts of the above issue are that the diamond jewellery of the value of Rs.4,86,865/- was found during the course of search. The AO after taking into account the status of the family, past savings and marriage gifts etc. accepted the diamond jewellery of the value of Rs.30,000/- as explained investment by the assessee and treated the balance investment in diamond jewellery Rs.4,56,865/- (486865- 30000) as unexplained investment out of undisclosed sources. On appeal, the Ld. CIT(A) while agreeing with the views of the AO confirmed the addition made by the AO.

24. At the time of hearing, both the parties have agreed that the plea taken by them in the appeal of Shri Hemraj K Jethani (supra) may be considered while deciding the above ground of appeal.

25. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that in the chart reproduced in paragraph 14 of this order it was stated by the Ld. Counsel for the assessee that the wife of the assessee Smt.Aashna B Jethani received 90 Grm. diamond jewellery valued at Rs.1,73,045/- out of 699.850 gr. Jewellery found at the time of search. It was also further explained that the above diamond jewellery was received by her at the time of marriage and other occasions. Considering the totality of the facts and circumstances of the case and keeping in view that the assessee’s wife has received diamond jewellery at the time of her marriage and on other occasions which was not controverted by the Revenue, we are of the view that the addition made by the AO Rs.4,56,865/- and sustained by the Ld.CIT(A) is not sustainable and accordingly the same is deleted. The ground taken by the assessee is, therefore, allowed.

26. Ground No.4 is against the levy of interest u/s 234A,234B and 234C.

27. After hearing rival parties and perusing the material available on record and in the absence of any plea, we direct the AO to allow consequential relief in respect of levy of interest charged u/s 234A, 234B and 234C of the Act. The ground taken by the assessee is, therefore, partly allowed.

ITA No.4632/Mum/2008 (By.Mrs.Darshna K.Jethani)

28. Ground No.1 is against the validity of the order passed b by the AO and Ground No.2 is the general ground.

29. At the time of hearing, the Ld. Counsel for the assessee did not press the above grounds which was not objected to by the Ld.DR.

30. That being so and in the absence of any other supporting materials placed on record by the ld. Counsel for the assessee, the Ground Nos.1 and 2 taken by the assessee are, therefore, rejected being not pressed.

31. Ground No.3 is against the sustenance of addition of diamond and Gold jewellery of Rs.5,61,000/-.

32. Brief facts of the above issue are that the AO observed that the diamond jewellery of Rs.4,38,377/- was found. The assessee has no satisfactory explanation about the nature and source of acquisition of the diamond jewellery. While explaining the source of diamond/gold jewellery, Shri Hemraj explained that part of the jewellery found is by way of will of late Smt. Lachmi Ukarmal Mangtani. The AO further observed that neither will is registered nor it is notarised and the same was not found during the search. Further in the statement the assessee has not stated that part of the jewellery found is by way of will. Thus, according to the AO it is after thought and not reliable and hence the AO treated the diamond jewellery of Rs.4,38,377/- as unexplained investment. Beside this, the AO also treated gold jewellery of Rs.1,22,580/- as unexplained investment out of gold jewellery Rs.6,38,107/- found at the time of search and added the same to the total income of the assessee. Thus the total unexplained jewellery was added at Rs.5,61,000/-. On appeal, the Ld.CIT(A) in the absence of any convincing reasons upheld the addition made by the AO.

33. At the time of hearing the Ld. Counsel for the assessee while referring to the chart filed in the case of Shri Hemraj K.Jethani submits that out of total diamond of jewellery found weighing 699.850 Grm., the jewellery 270.050 belongs to Smt. Darshana K. Jethani. It was further explained by the assessee that 184.100 Grm. was received by way of ‘Will’ (supra), jewellery 85.950 Grm. was received as a gift on different occasions. He further submits that the copy of the will of late Smt. Lachmi Ukarmal Mangtani is appearing at pages 65 to 68 of the assessee’s paper book. He, therefore, submits that the addition made by the AO and sustained by the Ld.

CIT(A) be deleted.

34. On the other hand, the Ld.DR supports the order of the AO and the Ld. CIT(A).

35. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that during the course of assessment proceedings the assessee while explaining the source of jewellery interalia stated that Mrs. Darshana K. Jethani has received jewellery of gold and diamond by way of ‘Will’ of Smt.Lachmi Ukarmal Mangtani, her grandmother. In support, he also placed on record the copy of the said will for verification and also stated that the said will was executed in the presence of Dr.Murli M. Ratnani (PAN- address). It was further stated that the said doctor is a income tax payee and practicing in Thane City itself and ready to visit your office for a statement to prove the genuineness of the said will. It was also stated that the true copy of the will was not found at the time of search as it was lying with the executors of the will. It was, therefore, submitted that the jewellery found at the time of search be treated as explained. However, the AO merely on the ground that neither the will is registered nor it is notarised, the same was not found at the time of search and nothing was stated in the statement recorded u/s 132(4) rejected the plea of the assessee that it is after thought. Since the assessee has filed the copy of the will with an explanation that the same was lying with the executors of the will and the assessee was ready to produce one of the executors i.e. Dr.Murli M. Ratnani, therefore, we are of the view that the AO was not justified in rejecting the valid document of ‘Will’ filed by the assessee without recording any statement of Dr.Murli M.Ratnani. In this view of the matter and keeping in view that the AO has accepted part of the jewellery as explained and no contrary material has been placed on record by the Revenue to show that the part of the explanation given by the assessee was found to be false and untrue, we are of the view that the addition made by the AO and sustained by the Ld.CIT(A) is not sustainable and accordingly the same is deleted.

36. Ground No.4 is against the levy of interest u/s 234A,234B and 234C.

37. After hearing rival parties and perusing the material available on record and in the absence of any plea, we direct the AO to allow consequential relief in respect of levy of interest charged u/s 234A, 234B and 234C of the Act. The ground taken by the assessee is, therefore, partly allowed.

38. In the result, all the appeals are partly allowed.

Order pronounced in the open court on 18th April, 2012.

                                                   Sd/-                                           Sd/-

                                     (B.RAMAKOTAIAH)   (DINESH KUMAR AGARWAL)

                                ACCOUNTANT MEMBER       JUDICIAL MEMBER

Mumbai, 18th April, 2012

SRL:

Copy to:

1. Appellant

2. Respondent

3. CIT Concerned

4. CIT(A) concerned

5. DR concerned Bench

6. Guard file.

True copy

BY ORDER

ASSTT. REGISTRAR,

ITAT, MUMBAI

 

Ayush
Published in Income Tax
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