ASSISTANT COMMISSIONER OF INCOME TAX v. AVINASH CHANDER
[Citation -2007-LL-0302-3]

Citation 2007-LL-0302-3
Appellant Name ASSISTANT COMMISSIONER OF INCOME TAX
Respondent Name AVINASH CHANDER
Court ITAT
Relevant Act Income-tax
Date of Order 02/03/2007
Assessment Year BLOCK PERIOD 1ST APRIL, 1987 TO 21ST JUNE, 1997
Judgment View Judgment
Keyword Tags transportation contract • unexplained expenditure • unexplained investment • appropriate authority • protective assessment • source of investment • capital contribution • post-search enquiry • individual capacity • regular assessment • search proceedings • unaccounted income • undisclosed income • unexplained income • unmarried daughter • income from salary • foreign remittance • government servant • unexplained money • source of income • state government • unexplained cash • block assessment • estimated profit • interest on fdrs
Bot Summary: Apropos ground No. 1, the AO observed that a perusal of bank account No. 810 in Bank of Baroda, Dilkusha Market, Jalandhar, which was in the name of the assessee, showed that deposits in cash ranging from Rs. 5,000 to Rs. 10,000 had been made regularly, but these deposits were neither relatable to any of the sources of income of the assessee, nor was there any nexus with the withdrawal made by the assessee from his disclosed bank account. The assessee explained to the AO that the said account w a s opened by him in 1987 and the balance therein increased balance of interest application; that the amount was withdrawn in 1990; that the wife of the assessee started depositing her pin money and other savings in this account without the knowledge of the assessee; and that since the deposits were made by her, the same was offered for taxation by her in her block assessment return. The learned CIT(A) upheld the addition, agreeing with the AO that the assessee had made withdrawals from this account and so maintenance of this account was within his knowledge; that the wife of the assessee having her own bank accounts, it was incomprehensible as to why she would make deposits in the account of the assessee; that there was no direct evidence that deposits were not made by the assessee but by his wife; that the deposits being in an account owned by the assessee, it was his onus to explain the same; and that this onus was not discharged by the assessee. Apropos the plea that in the absence of rebuttal of the affidavit filed by the assessee s wife, no adverse inference can be drawn therefrom against the assessee, in our considered opinion, it is not so. The assessee further submitted before the CIT(A) that Smt. Sita Rani had opened the account with Bank of Baroda in her individual capacity and since she was suffering from paralysis, she added the name of Bawa Sharma as a precautionary measure; that the deposits in the account of Smt. Sita Rani had no relation with the assessee; that Smt. Sita Rani had declared Rs. 3 lacs in VDIS and her declaration had already been accepted, proving that she was an independent assessee. According to the learned counsel for the assessee, it was possible that Smt. Sita Rani had handed over these KDRs for encashment to the assessee s wife, being her mother, with the intention to keep the KDRs secret from her sons and their family members. The stand of the assessee before the learned CIT(A) was that the AC of National make was gifted by two brothers-in-law of the assessee on the assessee s marriage anniversary in the year 1988 and that the AC of local make was purchased in the year 1996 for Rs. 7,000, out of the savings of the daughter of the assessee.


A.D. JAIN, J.M. ORDER IT(SS)A No. 22/Asr/2002 : This is Department s appeal for block period 1st April, 1987 to 24th June, 1997 against order dt. 28th March, 2002 passed by learned CIT(A), Jalandhar. following grounds of appeal have been raised : "1. That on facts and in circumstances of case, learned CIT(A) has erred in law in deleting addition of Rs. 70,33,060 made on account of undisclosed income of assessee by bringing to tax deposits in saving bank accounts of four daughters of assessee. 2. That on facts and in circumstances of case, learned CIT(A) has further erred in law in deleting addition of Rs. 3,23,118 on account of interest income during block period on bank deposits of four daughters of assessee. 3. That on facts and in circumstances of case, learned CIT(A) has again erred in law in deleting addition of Rs. 20,43,756 on account of foreign remittance received by assessee, his wife and four daughters. 4. That while giving relief as per ground Nos. 1, 2 and 3 above, learned CIT(A) failed to appreciate that daughters were benamidars of assessee and unexplained deposits and interest thereon were rightly treated as income of assessee and assessed accordingly. 5. That on facts and in circumstances of case, learned CIT(A) has further erred in law in deleting addition of Rs. 5,78,100 on account of unexplained marriage expenses of daughters of assessee. 6. That on facts and in circumstances of case, learned CIT(A) has further erred in law in deleting addition of Rs. 7,00,000 on account of unexplained investment and estimated profit in respect of benami concern of assessee styled Surjit Sharma & Co." 2. first issue raised by Department is that learned CIT(A) has erred in deleting addition of Rs. 70,33,060 made on account of undisclosed income of assessee by bringing to tax deposits in savings bank accounts of four daughters of assessee. facts involved are that assessee was working as Superintending Engineer in Municipal Corporation, Jalandhar. search was carried out at his premises on 24th June, 1997. assessee was earning income from salary, interest on FDRs, interest on NSCs. and interest on savings bank accounts. He was having four daughters as follows : Name of Date Date of Date of daughter of birth majority marriage 1. Nisha 26- 25-11- 16-2-1996 Sharma 11-1969 1987 2. 25- 24-12- 13-12- Meenakshi 12-1970 1988 1995 Sharma 3. Sonia 10-1- 9-1- 27-11- Sharma 1973 1991 1996 4. Sunaina 11-9- 10-9- Unmarried Sharma 1977 1995 At time of search, three of assessee s daughters were married, whereas fourth stood adopted by his brother, namely, Shri Naresh Sharma, vide adoption deed dt. 6th Aug., 1992. In response to notice under s. 158BC of Act, assessee filed return of income disclosing undisclosed income of Rs. 56,408 on account of error in calculation of interest on FDRs, interest on NSCs, etc. As against this, block assessment was completed at income of Rs. 1,09,76,407. Among additions made by AO, first was that of Rs. 70,33,060 on account of cheques and cash deposits in savings bank accounts of four daughters of assessee. 3 . As per assessment order, daughters of assessee were not found engaged in any work. However, they were maintaining bank accounts having huge deposits in cash. These bank accounts were found actually not to b e maintained by these daughters of assessee. AO observed that four daughters of assessee were, in fact, his benamidars. This conclusion, according to AO, was supported by material seized during search. This material included Annex. A-1, p. 5, which was discharge certificate dt. 13th March, 1992, showing that NSCs were purchased in name of Miss Sonia on 12th March, 1986, when Sonia was minor and did not have any source of income. maturity value (sic date) of NSCs was 13th March, 1992, i.e., in asst. yr. 1992-93. Annex. A-1, p. 4, i.e., discharge certificate dt. 13th March, 1992 also showed that some other NSCs had been purchased in name of Miss Meenakshi on 12th March, 1986, when she was minor and did not have any source of income. maturity date was again, 13th March, 1992. Thus all bank accounts of three daughters were found lying in possession of assessee. bank accounts were attached and statements of daughters were recorded. From these statements, AO inferred that it was assessee rather than his daughters, who controlled all these accounts, depositing cash with view to build up capital in names of all his daughters. It was also concluded that cash deposits came from source over which none of daughters of assessee had any control. AO further observed that pattern of deposits in these accounts was identical, i.e., during period 1992 to 1994 foreign remittances had evenly been deposited in all these accounts. In 1996, very frequent and regular cash deposits of amounts ranging from Rs. 10,000 to Rs. 25,000 were made in these accounts. Then, from March, 1997, deposits were discontinued and thereafter, all these bank accounts were closed. In May and June, 1997, returns of income in cases of three of daughters were filed for first time. Bank pass books and cheque books of all daughters were found in premises of assessee, even though daughters had been married. 4. From above, AO concluded that entire above deposits were unexplained income in hands of assessee. As such, addition in question was made. learned CIT(A), by virtue of impugned order, having deleted this addition, Department has raised ground of appeal No. 1 before us. 5 . learned Departmental Representative has submitted that learned CIT(A) has gone wrong in deleting ,the addition of Rs. 70,33,060 made by AO. According to learned Departmental Representative, this amount w s clearly proved to be unexplained income of assessee. daughters of assessee were merely benamidars; that bank accounts were opened by Shri Jagjit Singh Kanda, contractor of Municipal Corporation, Jalandhar; that most of deposits were made by one Shri Ramesh, who was stated to be domestic servant; that identity of Shri Ramesh was not disclosed; that daughters of assessee had admittedly no source of income; that only later, it was stated that two of them did have source of income; that about Meenakshi and Sonia Katyal, no details were given regarding their earnings; that bank pass books were found from assessee s residence; that CIT(A) deleted addition saying that daughters had filed returns in which this income stood disclosed and so, it was not undisclosed income; and that all daughters being major, if some income was unexplained, it would be unexplained income in hands of these daughters. learned Departmental Representative has argued that this is not case of simple unexplained deposits and that in search, documents were found and so, facts of present case are distinguishable from that of ordinary case of unexplained deposits. It has further been submitted that learned CIT(A) has taken into consideration that VDIS declaration of daughters was accepted by Department, and that no further relief could be given unless it was shown that income declared under VDIS was same. learned Departmental Representative has then argued that since search was conducted and income was found as assessee s income only, in keeping with decision of Hon ble Kerala High Court in case of P.K. Narayanan vs. CIT (1997) 142 CTR (Ker) 381 : (1998) 229 ITR 596 (Ker), income has to be assessed in correct hands, irrespective of treatment given to it in returns of income. 6. On other hand, learned counsel for assessee has argued that bank deposits are not undisclosed income under s. 158BB of Act; that all bank deposits are not undisclosed income under s. 158BB of Act; that all accounts stood disclosed before search and income has to be assessed in regular assessment; that nothing was unearthed as result of search; that then, affidavits of assessee s daughters were never rebutted; that while making addition, credit entries were never confronted to assessee; and that, on quantum, theory of peak credit and telescoping was not applied. 7. Having considered rival contentions and having perused material on record, we find that undisputedly, four daughters of assessee are independent assessees. They are having their own separate bank accounts containing deposits in question. These deposits have, therefore, to be considered in their hands. theory of these daughters being benamidars of assessee does not carry any weight. AO did not record any finding to t h e effect that daughters were themselves operating savings bank accounts. It is also not case of Department that any blank signed cheques were found in possession of assessee. bank accounts are not joint bank accounts and so, assessee could not have operated them. In fact, theory of daughters of assessee being his benamidars does not at all stand proved. Mere suspicion, howsoever strong, cannot take place of evidence. There is nothing on record to show that accounts were not operated by daughters of assessee. Also, affidavits filed by daughters of assessee have gone entirely unrebutted. Moreover, even though AO himself observed that peak theory was applicable, it was not applied. Too, income assessed on protective basis in hands of assessee was widely different from that assessed on substantive basis in hands of assessee. AO propounded that there was distinct pattern with regard to deposits in all these bank accounts and from this it was concluded that it was assessee and not his daughters who held control over these bank accounts. However, this proposition does not carry case of Department any further. fact remains that accounts in question were declared in returns of income filed by daughters and these deposits were depicted therein. 7.1 It was not disputed by AO that all daughters of assessee were major and that three of them were married at time search took place. AO noted in assessment order that there was certain flow of cash deposits in savings bank accounts of assessee s daughters from September, 1996 to April, 1997. During this period, three of daughters of assessee were major and were married, whereas fourth was major and had been adopted by brother of assessee. Importantly, Department was already in possession of information with regard to savings bank accounts of daughters of assessee having been closed before search took place. Even as noted in assessment order, it was in months of May and June, 1997 when returns of income were filed for first time in case of three daughters of assessee. By way of filing these returns, these daughters of assessee had offered sizeable portion of unexplained deposits to tax. interest income was to be taxed in hands of assessee. statement of assessee was recorded on 24th April, 1997, when marriages performed by assessee were being investigated by Investigation Wing of Department. fourth daughter of assessee, namely, Sunaina Sharma was adopted vide adoption deed dt. 6th Aug., 1992, by assessee s uncle. daughters of assessee having filed their IT returns, all bank accounts stood disclosed therein. assessment was completed as protective assessment in case of two of assessee s daughters, whereas returned incomes of other two daughters were accepted. Declarations under VDIS were filed by t h e assessee s daughters and these declarations were accepted by Department. Notices under s. 142(1) of Act were issued to three daughters of assessee, namely, Nisha, Meenakshi and Sonia, as independent assessees. Notice dt. 5th Jan., 2000 was issued under s. 271A of Act to Nisha. assessment in case of daughters of assessee was completed at returned income of Rs. 27,71,974. In block assessment, however, amount of Rs. 90,56,871 had been included in hands of assessee. In assessments of daughters of assessee, all bank accounts were explained. returned income was accepted. These daughters of assessee filed affidavits confirming that deposits in their savings bank accounts belonged to them only and that their father, assessee, had nothing to do with those deposits. These affidavits were never controverted by Department. Apropos addition made on account of deposits in savings bank accounts, all credit entries of pass books, were added. entries of pass books were never confronted to assessee. On 12th Aug., 1997, FIR has been lodged against assessee, who was in service of State Government at time of search. Special Judge, Jalandhar quashed FIR, since assessee was not found in possession of any disproportionate asset. 7.2 Undisclosed income under s. 158B(b) of Act means income which had not been disclosed or would not have been disclosed. income in present case having been duly disclosed, as discussed, same cannot be treated as undisclosed income of assessee. 7.3 In view of above facts, grievance of Department does not hold much force. order of learned CIT(A) does not require any interference at our hands. Ground No. 1 is, thus, rejected. 8. Ground No. 2 challenges deletion of addition of Rs. 3,23,118 on account of interest income on bank deposits of four daughters of assessee. AO observed that such interest income was to be taxed in hands of assessee, since these deposits were being used to make investments mainly in FDRs. learned CIT(A), however, deleted this addition. 9 . In this regard, we find that as observed by learned CIT(A), interest income was on basis of returns filed by daughters and as such, it could not be treated as undisclosed income of assessee. This income stood already declared by daughters of assessee in their returns of income. Therefore, this ground also does not carry any force. It is rejected. 10. Ground No. 3 states that learned CIT(A) has erred in deleting addition of Rs. 20,43,756 on account of foreign remittances received by assessee, his wife and four daughters. In this regard, AO noticed that assessee, his wife and daughters had received huge amounts of foreign remittance, amounting to Rs. 22 lacs, during period September, 1992 to March, 1995. facts are that some of drafts/cheques received in respect of foreign remittances were found and seized. AO observed that majority o f remittances was received from Shri Gurnam Singh of California, U.S.A. AO made addition of Rs. 20,42,153, setting off sum of Rs. 2 lacs pertaining to M/s Sujeet Sharma & Co., which was held to be benamidar concern of assessee, where addition of Rs. 2 lacs was separately made. 11. Before CIT(A), stand of assessee was that AO had failed to consider details submitted during assessment proceedings, wherein it has been explained that certain entries of FDRs/local cheques were included under head Foreign remittances ; that AO had also not considered affidavits of daughters of assessee, wherein they had stated that deposits in their accounts had no relation with assessee; that AO even did not confront assessee with material on basis of which foreign remittances were calculated; that assessee having filed affidavits of donors making gifts, onus on assessee stood discharged; that gifts received by daughters of assessee could not be added in hands of assessee, daughters being major at time of receipt of gifts; that foreign remittances of Rs. 1,49,802 were received by wife of assessee, in whose case separate block assessment order had been finalised and in that order, no such addition had been made; that apropos foreign remittanees of Rs. 4,51,524 added in name of Nisha Sharma, s u m of Rs. 1,75,000, credited on 16th Oct., 1992, was on account of local cheques received from Shri Sujeet Kumar and Rs. 46,741 and Rs. 29,138 were on account of encashment of FDR; that similarly in case of Meenakshi Sharma, where Rs. 6,20,946 was added in name of foreign remittances, this included cheque of Rs. 21,000 credited on 16th Sept., 1992 received from Shri Onkar Nath Gupta and Rs. 1,75,000 from Shri Sujeet Kumar of Jalandhar; that in name of Smt. Sonia Sharma, amount of Rs. 2,73,520 was added, but amount credited on 28th May, 1994 was, in fact, Rs. 62,378, which was taken at Rs. 64,738 by AO; and that as such, by excluding these entries, foreign remittances calculated at Rs. 20,43,576, in fact, came to Rs. 12,31,398. 12. CIT(A) deleted addition and, therefore, ground No. 3 has been taken by Department before us. 13. Before us, learned Departmental Representative has submitted that during search conducted at premises of assessee, photocopies of some of drafts/cheques received in respect of foreign remittances in question, were found and seized, from which, it was evident that most of foreign remittances had been received from Shri Gurnam Singh of California; USA; that stand taken by assessee was that these remittances were not gifts, but were money kept in trust by said NRI; that Shri Gurnam Singh belonged to assessee s native place and assessee had transferred money to him to be kept in trust, so as to build up sufficient amount in order to enable him to purchase land at later date; that this explanation of assessee w s not at all tenable, since, as observed by AO, in such case, assessee would have deposited his money in NRE account, which would have enabled assessee to build up reserve fast, since interest in NRE account is of higher rate and is also tax-free; that if money was for capital build up, it would not have been advanced to all members of family of assessee; that these remittances had been invested by members of family of assessee in fixed deposits and interest therein has been shown s their income in respective tax returns filed by daughters of assessee; that it has come to light from ledger and cash book of M/s Sujeet Sharma & Co., i.e., benami concern of assessee, that amount of Rs. 25,000 had been paid to Shri Naval Seth to arrange gifts of Rs. 2 lacs and from this, it was evident that assessee had been channalising his unexplained money from hawala channel; that as such, addition made by AO was in accordance with law and it had been wrongly deleted by learned CIT(A). 1 4 . learned counsel for assessee, on other hand, has supported order passed of learned CIT(A) in this regard. 15. In this regard, again, it is seen that bank accounts in which these foreign remittances were deposited, were duly disclosed by daughters of assessee while filing their returns of income before date of search. Further, as correctly maintained by assessee, AO did not take into account submissions made by assessee during block assessment proceedings. remittances were received by daughters of assessee when they were major. affidavits of donors were not considered. Also, local cheques and FDRs stood included in foreign remittances, though they did not belong to this category. While making addition regarding foreign remittances, peak theory and telescopic theory were not applied. All credit remittances, peak theory and telescopic theory were not applied. All credit entries of pass book were added. Entries of pass book were never confronted to assessee. 16. In view of above, learned CIT(A) is found to have correctly deleted addition in question. As such, ground No. 3 stands rejected. 17. Ground No. 4 states that learned CIT(A) has failed to appreciate that four daughters of assessee were his benamidars and unexplained deposits and interest thereon were correctly treated by AO as income of assessee. 18. In view of our findings on ground Nos. 1 to 3 above, this ground of Department holds no force. daughters of assessee have not been proved to be his benamidars at all. Accordingly, ground No. 4 stands rejected. 19. Ground No. 5 challenges deletion of addition of Rs. 5,78,100 on account of unexplained marriage expenses of daughters of assessee. In this regard, AO estimated expenditure in marriages of three of assessee s daughters at Rs. 6 lacs on marriage of each daughter, on basis of statement of Smt. Sunaina Sharma, which was recorded at time of search. AO (concluded that against total unexplained expenditure of Rs. 18 lacs, after considering withdrawals of Rs. 12,21,900, balance amount of Rs. 5,78,100 had been incurred on marriages out of undisclosed income. This amount of Rs. 5,78,100 was, therefore, added to income of assessee. learned CIT(A) deleted this addition and this has aggrieved Department. 20. The. learned Departmental Representative has contended before us that stand of assessee in this regard has been that no expenses were incurred by him on marriages of his three daughters and that expenses were met out of Shagans, etc., received. Departmental Representative states that AO noticed that marriages took place in Milan Palace, reputed marriage place and that AO, accordingly worked out expenses, referring to statement of Smt. Sunaina Sharma. It has been argued that AO s proposition was not disbelieved by learned CIT(A) but he still gave credit regarding Shagans, though no evidence has been brought on record with regard to receipt of such Shagans. 21. On other hand, learned counsel for assessee, supporting order of learned CIT(A), has submitted that no incriminating material in this regard was found by Department during search and no post-search enquiry can be made without reference to material found. 22. stand of assessee in this regard has remained that out of marriages of three daughters, two were love marriages and third one was simple arranged marriage, which was attended by only few relatives and family friends of assessee. Even expenses on food were incurred by maternal uncles and brother and miscellaneous expenses were met out of Shagans; and that AO did not confront assessee with any evidence with regard to such expenditure. AO, it is seen, did not take into consideration submissions made by assessee in assessment proceedings. No evidence was brought on record by AO in shape of video film/album, bills o r alike, to support his findings. Moreover, affidavits of daughters of assessee, admitting two love marriages and one arranged marriage, were not even considered. That AO was not in possession of any material to support findings recorded in assessment order, was confirmed by AO, who t t e n d e d appellate proceedings before learned CIT(A) also. Investigations on marriage expenses were already going on even prior to search. marriage expenses were estimated at Rs. 6 lacs per marriage only on basis of statement of one of daughters of assessee, namely, Sunaina Sharma. Whenever there is estimate, such estimate has to have some basis. In present case, AO estimated number of invitees at 2,000 and expenditure per plate at Rs. 150. No reason or basis for such estimate has been given. Moreover, even addition of Rs. 2 lacs on account of household items including jewellery was made on estimate basis, only on basis of statement of Sunaina Sharma. addition of Rs. 1 lac on other functions was also similarly made. It was also not considered that withdrawals in case Meenakshi Sharma were deposited in another bank account. Apropos credit given for Shagans, details were furnished before AO during assessment proceedings, supported by confirmation. In these facts, in our considered opinion, learned CIT(A) correctly estimated expenditure at Rs. 4.5 lacs on marriage of Meenakshi Sharma in 1995 and Rs. 5 lacs for marriages of two other daughters of assessee in 1996. As such, these findings of learned CIT(A) did not call for any interference at our hands. Accordingly, ground No. 5 stands rejected. 2 3 . Ground No. 6 states that learned CIT(A) erred in deleting addition of Rs. 7 lacs on account of unexplained investment and estimated profit in respect of M/s Sujeet Sharma & Co., benami concern of assessee. 24. In search action, certain books of account of Shri Sujeet Sharma for period November, 1987 to March, 1992 were found from assessee s cupboard in his office. From these books, it was seen that said concern was running oil tanker and was in business from 1988 to 1992. AO observed that page No. 1 of assessee s ledger revealed assessee s capital account representing contribution of Rs. 5,40,000 between November, 1987 to February, 1988 along with loan amount of Rs. 10,000 and Rs. 40,000 in April, 1999 and March, 1992, respectively. AO observed that said capital of Rs. 5,40,000 was built by deposit in cash amounting to Rs. 1,51,786 by way of loans of Rs. 1,47,539 and balance by way of capital of Rs. 2 lacs as NRI gift. AO concluded that total unexplained investment was of Rs. 5.90 lacs which was made by assessee in M/s Sujeet Sharma & Co., as representing his benami concern and along with unexplained investment, further profit of Rs. 1 lac was estimated by AO in four years @ Rs. 25,000 for each year and thus total addition of Rs. 7 lacs was made. 25. deletion of this addition by learned CIT(A) has given rise to ground No. 6. 2 6 . Supporting assessment order in this regard, learned Departmental Representative has argued that during search, books were found in assessee s cupboard relating to Shri Sujeet Sharma. Illegal payments were shown therein. There was no explanation by assessee as to why capital contribution was found shown by assessee. assessee being Government servant, could not run such business. As such, addition made was proper and was wrongly deleted. 27. On other hand, supporting impugned order, learned counsel for assessee has drawn our attention to pp. 180 to 198 of assessee s paper book ("APB", for short). These are affidavits of Shri Sujeet Sharma, contract of Shri Sujeet Sharma with Indian Oil Company, copy of purchase bill of oil tanker, regarding fabrication and supply of L.P.G. Bullet, debit note regarding its preparation on fabrication drawing approval of L.P.G. Bullet, route permit, permission from Department of Explosives, tax clearance certificate, national permit, bill of Ashok Leyland and affidavit of Shri Sujeet Sharma explaining capital of Rs. 5.45 lacs. Attention has also been invited to pp. 171 to 173 of APB, which comprise returns of Shri Sujeet Sharma regarding this business. APB 265 to 273 are copies of pass books of accounts from where money came to Shri Sujeet Sharma. 28. With regard to this issue, it is seen that tanker was in name of Shri Sujeet Singh. It was Shri Sujeet Sharma, who got contract of transport in his name from IOC Delhi, after getting fabrication work completed and after getting approval from Department of Explosives, Nagpur. national permit from Regional Transport Authority, Jalandhar was also obtained by Shri Sujeet Sharma. Shri Sujeet Sharma filed return of income declaring this business. Income-tax clearance certificate was issued on 3rd Aug., 1990. In his affidavit, Shri Sujeet Sharma gave all details of money received from various parties, relatives and close friends. AO did not take all this into consideration. conclusion of AO that this concern was benami concern of assessee, was based on name of assessee appearing against capital account and on basis that documents/books were found in his possession along with details of expenditure. However, it was not considered that amounts were contributed by persons other than assessee and that there was no corresponding debit in assessee s savings account, due to which, no addition in capital account remains. Moreover, Shri Sujeet Sharma had already reflected income from operation of tanker b y filing returns of income. Statement of Shri Sujeet Sharma was recorded on 29th Aug., 1997. He had confirmed ownership of business. He has also admitted having filed income return of his business. assessee, who vide admitted having filed income return of his business. assessee, who vide letter dt. 15th March, 1999, explained that he had nothing to do with this business. Vide letter dt. 17th June, 1999, assessee filed affidavit of Shri Sujeet Sharma, confirming that he was owner of tanker. Copies of bills, national permit and transportation contract letter from Department of Explosives, Nagpur and income-tax clearance certificate were filed. All these documents were in name of Shri Sujeet Sharma. Vide letter dt. 22nd June, 1999, assessee filed another affidavit of Shri Sujeet Sharma wherein he had explained entries with regard to Government account with source and vide copy of IT returns furnished with Department. assessee further explained that entries recorded in alleged capital account had not come from any of savings bank accounts of assessee. Shri Sujeet Sharma further filed copies of bank accounts of relatives from whom tax (sic) had been received and pass books where these cheques stood credited. These documents showed that money had come from accounts of Shri Sujeet Sharma. documents filed were not considered by AO. These documents clearly brought out that it was Shri Sujeet Sharma rather than assessee who was owner. affidavits of Shri Sujeet Sharma were not rebutted by AO. Also, AO nowhere found that entries through cheques in alleged capital account had come from any savings bank account of assessee. books of accounts were not in handwriting of assessee and were not signed. Therefore, no adverse inference could be drawn against assessee. explanation of assessee that wealth discovered belonged to his wife stood substantiated by evidence of assessee s wife, which was not being questioned or rebutted. Therefore, assessee could not be held guilty. 29. In view of above, learned CIT(A) correctly observed that income from operation of tanker could not be treated as income of assessee. addition of Rs. 7 lacs has, therefore, rightly been deleted. Accordingly, ground No. 6 is rejected. 30. In result, IT(SS)A No. 22/Asr/2002 is dismissed. IT(SS)A No. 19/Asr/2004 : 31. This is assessee s appeal for block period 1st April, 1987 to 24th June, 1997 against order dt. 28th March, 2002 passed by learned CIT(A), Jalandhar. following grounds have been taken : "1. That on facts and circumstances of case, learned CIT(A) has grossly erred in confirming addition of Rs. 1,16,310 being deposits during block period in savings bank account No. 810 with Bank of Baroda, whereas this amount has been duly declared in block assessment of Smt. Sudesh Sharma, wife of assessee. Addition confirmed is illegal and bad in law. 2. That on facts and circumstances of case, learned CIT(A) has grossly erred in confirming addition of Rs. 1,32,158 on account of deposits of Rs. 1,32,158 during block period in name of Smt. Sita Rani. Addition confirmed is illegal and bad in law. 3. That on facts and circumstances of case, learned CIT(A) has grossly erred in confirming addition of Rs. 40,000 out of addition of Rs. 50,000 on account of household items made by AO. Addition confirmed is illegal and bad in law." 32. Apropos ground No. 1, AO observed that perusal of bank account No. 810 in Bank of Baroda, Dilkusha Market, Jalandhar, which was in name of assessee, showed that deposits in cash ranging from Rs. 5,000 to Rs. 10,000 had been made regularly, but these deposits were neither relatable to any of sources of income of assessee, nor was there any nexus with withdrawal made by assessee from his disclosed bank account. It was found that there was cash deposit entry totalling upto Rs. 1,32,810; that this account had been abruptly closed at time when enquiries had been initiated in case of assessee. assessee explained to AO that said account w s opened by him in 1987 and balance therein increased balance of interest application; that amount was withdrawn in 1990; that wife of assessee started depositing her pin money and other savings in this account without knowledge of assessee; and that since deposits were made by her, same was offered for taxation by her in her block assessment return. AO, however, disbelieved version of assessee, observing that assessee had himself made withdrawals from this account on 8th March, 1990 and 19th Nov., 1993 and so, this account was in knowledge of assessee; that it was not understood as to why assessee s wife would make deposits in t h e assessee s bank account, when she was herself having her own bank account; that account being in name of assessee, onus was on him to explain it and in absence of proper explanation, addition was to be made to income of assessee only; that cheques presented for withdrawal from this account were not in favour of Smt. Sudesh, i.e., assessee s wife, to whom even deposits were stated to belong and had amount been that of Smt. Sudesh, assessee would have returned amount to her rather than issuing cheques in names of third persons; that assessee was giving this explanation, since he could not, being Government servant, be in possession of unexplained cash deposits in his bank account. In this manner, AO made addition of Rs. 16,310 to income of assessee, as his unexplained income. 33. Before learned CIT(A), assessee submitted that amount deposited in account in question was surrendered by wife of assessee and so, it could not be taxed again in hands of assessee; that t h e account was opened in 1990 and balance in account increased because of interest application; that in 1990 and 1993, amounts of Rs. 1,000 each were withdrawn by assessee and from year 1993-94, assessee s wife started depositing her pin money and other savings in this account without his knowledge and same was offered for taxation in her block return; that assessee did not have any other source of income; that during assessment proceedings, assessee s wife had filed her affidavit in this regard, which had not been rebutted by AO; that AO had taken contradictory stands inasmuch as while making addition of deposits in savings bank accounts of assessee s daughters, he had held that deposits belonged to assessee, though they were in names of somebody else and while making addition in question, it was held that addition was being made in hands of assessee, since account was in his name; and that no cheques were issued in names of any third party, as only interest amount was withdrawn and after 1993, no such withdrawal was made. 34. learned CIT(A) upheld addition, agreeing with AO that 34. learned CIT(A) upheld addition, agreeing with AO that assessee had made withdrawals from this account and so maintenance of this account was within his knowledge; that wife of assessee having her own bank accounts, it was incomprehensible as to why she would make deposits in account of assessee; that there was no direct evidence that deposits were not made by assessee but by his wife; that deposits being in account owned by assessee, it was his onus to explain same; and that this onus was not discharged by assessee. 3 5 . Before us, impugning order of learned CIT(A), learned counsel for assessee has argued that only case made out by Department is that assessee being Government servant, he found it difficult to explain bank account in question and so, he declared it in hands of his wife. It has been argued that addition is illegal, since assessee explained that account was opened in 1987, money was withdrawn in 1990 and that assessee s wife was depositing her pin money, etc. in this bank account from 1993-94. It has been argued that during assessment proceedings, assessee s wife had furnished her affidavit confirming deposits made by her in this account out of her pin money, but this affidavit was not at all considered by taxing authorities. It has been further argued that assessee was having only fixed salary income and no other income, whereas assessee s wife was having rental income and interest income. It has also been argued that once assessee owns asset, ownership of such asset, no addition can be made in hands of person from whose possession asset is required. 3 6 . On other hand, learned Departmental Representative has, relying on order passed by learned CIT(A), stated that CIT(A) has rightly confirmed addition observing that bank account in question was in name of assessee only and that there was no evidence that assessee s wife deposited her pin money in this account and that too, when she herself was having more than one bank account in her name. 37. In this regard, it is seen that assessee has maintained that deposits amounting to Rs. 1,16,310, being deposits in savings bank account in question, had already been declared by assessee s wife in her block assessment. grievance of assessee is that by adding this amount in assessee s hand, double addition had been made. This, however, is not correct. As is evident from assessment order, amount was added on substantive basis in name of assessee whereas in case of block assessment of assessee s wife, addition was made on protective basis. This does not amount to double addition. concept of substantive and protective assessment itself is either/or situation. In case addition is confirmed in one hand, it would automatically stand deleted in other hand. 3 8 . next submission of assessee is that from 1993-94, assessee s wife started depositing her pin money in this account without knowledge of assessee. This, however, has not been believed, since there is no direct evidence of any such deposit of pin money by assessee s wife. Moreover, it is also circumstance going against assessee that undisputedly, assessee s wife was having more than one bank account in her own name and so, there was no reason why she would have made deposits of her pin money in bank account of her husband. 39. next contention of assessee has been that affidavit of assessee s wife confirming such deposits, which affidavit was filed during assessment proceedings, was not rebutted by taxing authorities and so, this affidavit was good evidence, in face of which, addition could not have been made. Here, it is seen, that affidavit in question is merely self-serving document and it does not further case of assessee in absence of any direct evidence of deposits having been made by wife of assessee, as alleged. This affidavit, at best, is secondary evidence, which cannot substitute primary or direct evidence. learned counsel for assessee has placed reliance on following case law. However, it has not been shown as to how these case law are applicable to facts of present case. So much so, not even names of cases have been cited : (1) Mehta Parikh & Co. vs. CIT (1956) 30 ITR 181 (SC); (2) L. Sohan Lal Gupta vs. CIT (1958) 33 ITR 786 (All); (3) Krishan Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P&H); (4) Sri Krishna vs. CIT (1983) 36 CTR (All) 75 : (1983) 142 ITR 618 (All). 40. For proposition that where person owning asset admits to such ownership, no addition can be made in hands of person possessing such assets, following case law have been relied on : (1) Asstt. CIT vs. Karodilal Agrawal (1994) 50 TTJ (Jab) 393; (2) ITO vs. Mathuradas Motichand (1993) 47 TTJ (Ahd) 488; (3) Dy. CIT vs. Vinod Kamra (2006) 102 TTJ (Jd) 152. 4 1 . facts in Karodilal Agrawal (supra) are entirely different. In that case, CIT(A) pointed out that it would be wild imagination to presume that illiterate widow of 70 years could come to rescue of assessee, when she had no relation with assessee. (para 6 of Report). In present case, however, whole case of Department is that assessee being Government servant, could not explain bank deposits in his name and so he chose to state that deposits belonged to his wife. It was his wife, who, by way of affidavit, admitted ownership of deposited amounts. However, there was no direct evidence of such deposits having been made by her. Moreover, taxing authorities have concluded that deposits in fact belonged to assessee, since it was unacceptable that assessee s wife, who was having more then one account in her own name, would make such deposit in account owned by her husband. 42. facts in Mathuradas Motichand (supra) are also at variance with those attending present case. In that case, AO was held not justified in disbelieving part of assessee s explanation, because in that case, assessee, besides explaining that ornaments belonged to his wife, daughters-in-law and daughters, had also produced all evidence required, besides affidavits. In present case, however, very bone of contention between parties is that self-serving affidavit of his wife has not been accepted as gosple truth, even though had deposit been made by assessee s wife, he could have produced direct evidence showing such deposits to have been actually made by her, which was not done. 43. facts in Vinod Kamra (supra) are also totally different from those of case in hand. In that case, in search, jewellery was found in residential premises and locker held in joint name of wife of assessee and brother of said wife, in Allahabad Bank, Srinagar. Besides, jewellery was found on person of assessee s wife. assessee explained source of investment in gold jewellery as belonging to his wife, which was received by her at time of marriage from her parents and parents-in-law and also at time of ceremony of birth of son, etc. It was also submitted that part of jewellery was belonging to wife of brother of assessee. reason for keeping jewellery in locker by wife of brother of assessee s wife was also explained. AO treated part of jewellery as explained and balance was treated as acquired out of undisclosed income of assessee and addition was made. CIT(A) deleted addition after considering that locker was in name of assessee s wife, who was separately assessed to tax and she had stated in her statement that jewellery belonged to her and her Bhabhi, and that her husband had nothing to with her jewellery. It was in these facts that Tribunal upheld order of learned CIT(A). In present case, however, facts are entirely different. Here, it is case where assessee s wife was stated to have made deposits in bank account exclusively owned by her husband, despite fact that she was herself owning, maintaining and operating more than one bank account. In circumstances, it is hard to comprehend as to how decision in Vinod Kamra (supra) would apply. 44. Apropos plea that in absence of rebuttal of affidavit filed by assessee s wife, no adverse inference can be drawn therefrom against assessee, in our considered opinion, it is not so. affidavit in question is, at best, self-serving document, credence whereof is belied by actual attending circumstances of assessee s wife making deposits in account owned exclusively by her husband, and that too without his knowledge, in face of fact that she was herself owning and operating more than one independent bank account in her name. 4 5 . Otherwise too, in such cases, preponderance of probability of human behaviour plays important role and in absence of any evidence to contrary, authorities below have rightly arrived at conclusion that assessee was merely trying to cover up bank account in question as belonging to his wife, since being Government servant, he could not co-relate deposits in question as out of his known sources of income. 46. Therefore also, it cannot be said that addition had been made on basis of mere assumptions and presumptions. 47. In above view of matter, finding no force in same, ground No. 1 raised by assessee is rejected. 48. Coming to ground No. 2, assessee is aggrieved of confirmation of addition of Rs. 1,32,158 on account of deposits made during block period in name of Smt. Sita Rani. 49. facts in this regard are that Smt. Sita Rani, wife of late Shri Ram Lubhaya, is mother-in-law of assessee. She is resident of Mohalla Kallowali, Jalandhar. During search, again, bank account was found as being in joint name of Bawa Sharma and Sita Rani. This was account No. 5973 with Bank of Baroda, Dilkusha Market, Jalandhar. Bawa Sharma, also known as Sunaina, is unmarried daughter of assessee, stated to have been adopted by assessee s brother in 1992, vide adoption deed. assessee maintained that deposits in this bank account had been made by Smt. Sita Rani. However, as per AO, enquiries from bank revealed that this bank account had been operated by family members of assessee, rather than by any of family members of Smt. Sita Rani, who looked after her and with whom she was living. AO observed that Smt. Sita Rani was old lady having no source of income, as had been stated by her in her statement recorded in presence of her daughter-in-law, who was well educated. AO observed that pp. 31 and 32 of Annex. A-4 seized from residence of assessee, were photocopies of Kamdhenu Deposit Receipts ("KDRs", for short), of Rs. 25,000 each. It appeared interesting to AO that these photocopies had been seized from residence of assessee. Interesting, because firstly, it was not understandable as to why these photocopies were lying in assessee s premises and secondly, on this paper, there was also copy of form on which nominations had been done by Smt. Sita Rani. These nominations were in names of daughters of assessee. One KDR was nominated in favour of Meenakshi Sharma and other was in name of Nisha Sharma. date of issue of both KDRs was 16th March, 1990 and both were due on 16th March, 1992, for maturity value of Rs. 30,460 each. On references of these pages, AO observed thumb impression of Smt. Sita Rani, whereas particulars of encashment of these KDRs had not been filled in. From this, AO gathered, that even before encashment of KDRs, thumb impressions of old lady had been obtained and that she being mother-in-law of assessee, was extending her name to facilitate assessee to declare money in his name. Then, these KDRs were noticed to have been reinvested in further KDRs for Rs. 30,460. Nominations continued in names of Nisha and Meenakshi Sharma, aggregating to maturity value as on 16th March, 1993, of Rs. 38,213 each amounting to Rs. 76,426. Two other similar KDRs of Rs. 25,000 each were observed by AO, having maturity value of Rs. 27,866 each, amounting to Rs. 55,732, as on 26th March, 1994. AO observed that Smt. Sita Rani was benamidar of assessee and even assessee s daughters did not have any source of income. entire maturity value of KDRs was added by AO in hands of assessee, total amounting to Rs. 1,32,158, in asst. yr. 1994-95. 50. Before learned CIT(A), assessee contended that AO had never confronted assessee with documents on basis of which addition in question had been made. It was submitted that if KDRs were taken to be belonging to daughters of assessee and ultimately belonging to assessee himself, no addition for encashment therefore could be made, since cash deposits in savings bank accounts of daughters had been added. assessee further submitted before CIT(A) that Smt. Sita Rani had opened account with Bank of Baroda in her individual capacity and since she was suffering from paralysis, she added name of Bawa Sharma as precautionary measure; that deposits in account of Smt. Sita Rani had no relation with assessee; that Smt. Sita Rani had declared Rs. 3 lacs in VDIS and her declaration had already been accepted, proving that she was independent assessee. Confirming addition made, learned CIT(A) observed that Smt. Sita Rani had not been found to have any source of income; that investment made in KDRs had been tried to be explained vis-a- vis VDIS declaration in hands of Smt. Sita Rani, but it was not acceptable because under VDIS declaration, Smt. Sita Rani had declared Rs. 3 lacs pertaining to asst. yr. 1994-95, as cash, whereas investment in KDRs was in prior period, when Smt. Sita Rani was not found to be having any source of income; that further, she was having her own relatives, but for these KDRs, nominations were in names of daughters of assessee, rather than her own sons and daughters; that it was also not acceptable that no addition for encashment of KDRs was required to be made in hands of assessee, proceeds of KDRs having been deposited in accounts of daughters, which were separately added; that in fact, AO had taxed unaccounted income of period in which investment in KDRs was made and it had nothing to do with encashment of KDRs and its subsequent credits in accounts of daughters of assessee. 51. Before us, learned counsel for assessee has submitted that addition is illegal, firstly, because photocopies of documents were never confronted to assessee by either of taxing authorities. In this regard, assessee had placed reliance on following decisions, though no applicability thereof to present case had been made out, inasmuch as not even titles of cases have been cited : (1) C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 199 ITR 530 (SC); (2) Sona Builders vs. Union of India (2001) 170 CTR (SC) 180 : (2001) 251 ITR 197 (SC); (3) Appropriate Authority vs. Vijay Kumar Sharma (2001) 168 CTR (SC) 611 : (2001) 249 ITR 554 (SC). It has been further submitted that only case of Department is recovery of photocopies of KDRs, wherein nominations were in favour of daughter of assessee and based on photocopies of KDRs., Smt. Sita Rani was treated as benamidar of assessee. It has been submitted that observations of AO were merely assumptions and presumptions and that recovery of photocopies of KDRs from residence of assessee does not lead to conclusion that Smt. Sita Rani was benamidar of assessee. According to learned counsel for assessee, it was possible that Smt. Sita Rani had handed over these KDRs for encashment to assessee s wife, being her mother, with intention to keep KDRs secret from her sons and their family members. It has further been contended that Smt. Sita Rani had filed declaration under VDIS for asst. yr. 1994-95, declaring sum of Rs. 3 lacs, which was accepted, which, in turn, meant that she was independent assessee, due to which she could not be treated as benamidar of assessee. It has been further contended that maturity value of KDRs was declared under VDIS and so, no addition was called for. In this regard, reliance has been placed on Kamal Narayan Jaiswal vs. Dy. CIT (2004) 87 TTJ (Jab) 385. learned counsel for assessee has further submitted that KDRs were made in 1990-91 and no addition could be made in asst. yr. 1994-95. Lastly, it has been submitted that no addition could be made, since KDRs stood encashed prior to search. 5 2 . learned Departmental Representative, on other hand, supporting order passed by learned CIT(A), has submitted that learned CIT(A) has fully noted that Smt. Sita Rani was found to have no source of income and that amount was declared by her under VDIS pertains to cash in asst. yr. 1994-95, whereas investment in question was made during prior period. 53. With regard to this issue, we find that, as correctly submitted by learned counsel for assessee, material on basis of which addition was made, i.e., photocopies of KDRs obtained during course of search, were never confronted to assessee. It is first and foremost principle of natural justice, that nobody can be condemned unheard. assessee ought to have been afforded adequate opportunity to rebut evidence set up against him. Therefore, in interest of justice, this issue is remitted to file of AO, to be decided afresh in accordance with law, on remitted to file of AO, to be decided afresh in accordance with law, on affording adequate opportunity to assessee in this regard. 54. last issue involved in this appeal is confirmation of addition of Rs. 40,000 out of addition of Rs. 50,000 made by AO on account of household items. As per assessment order, assessee was confronted with list of inventory of household items prepared at time of search, bearing signature of assessee. AO observed that assessee could not satisfactorily explain following items : (1) A.C. National 1987-88 (2) A.C. local made 1988-89 (3) Dish antenna AO observed that value of two ACs with reference to their year of manufacture, amounting to Rs. 12,000 and Rs. 13,000, respectively, was being added for asst. yrs. 1987-88 and 1988-89 respectively. Apropos dish antenna, AO observed that assessee had been denying existence thereof, whereas factual position was otherwise, i.e., even list of inventory consisted of item "receiver of dish antenna". AO thus concluded that this item had been acknowledged by assessee on date of search, he having signed list of inventory; and that without dish antenna, there was no need to instal receiver of dish antenna. AO, accordingly, made addition of Rs. 25,000 on estimate basis, which included cost of receiver of dish antenna for asst. yr. 1994-95. 55. stand of assessee before learned CIT(A) was that AC of National make was gifted by two brothers-in-law of assessee on assessee s marriage anniversary in year 1988 and that AC of local make was purchased in year 1996 for Rs. 7,000, out of savings of daughter of assessee. Apropos dish antenna, assessee submitted that there was no dish antenna in residential premises of assessee and only booster was installed, and that otherwise too, cost of dish antenna was about Rs. 5,000 which was wrongly taken as Rs. 25,000 by AO. 56. learned CIT(A) while giving relief of Rs. 10,000 to assessee, observed as follows : "7.4 On issue of household items, neither fact of gift of AC National make by brothers-in-law was substantiated nor source of purchase of local made AC of Rs. 7,000 was explained. Further, no such plea was taken at time of search proceedings, I also do not find any merits in submissions of appellant that in list of assets TV booster was noted as receiver of dish antenna, when inventory of household items was signed by appellant. But since addition of Rs. 25,000 was estimated addition made by AO and considering submissions of learned Authorised Representative that cost of dish antenna is about Rs. 5,000, its cost is taken at Rs. 15,000 with relief of Rs. 10,000 to appellant against additions of Rs. 50,000 on account of household items. appellant gets relief of Rs. 10,000." 5 7 . Before us, assessee has not been able to controvert observations recorded by learned CIT(A) to effect that apropos National AC, stand of assessee was not substantiated and apropos local made AC, source of purchase was not explained and further, that no such plea was taken at time of search proceedings. assessee has also not been able to controvert findings with regard to dish antenna, as recorded by learned CIT(A). Moreover, apropos this dish antenna, relief of Rs. 10,000 has already been granted by learned CIT(A) to assessee. In these facts, we do not find any error with order of learned CIT(A), which we hereby sustain. 58. In view of above discussion, appeal of assessee is entitled to be partly accepted as indicated. It is so ordered. 5 9 . In result, IT(SS)A No. 22/Asr/2002, filed by Department is dismissed whereas IT(SS)A No. 19/Asr/2002, appeal of assessee, is partly allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. AVINASH CHANDER
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