IN HIGH COURT OF DELHI AT NEW DELHI R-30 ITA 1/2005 COMMISSIONER OF INCOME TAX Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel. versus CLASSIC MOTORS LTD. Respondent Through: Mr. Manu Monga, Advocate AND R-31 ITA 11/2005 COMMISSIONER OF INCOME TAX Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel versus CLASSIC MOTORS LTD. Respondent Through: Mr. Manu Monga, Advocate CORAM: JUSTICE S. MURALIDHAR JUSTICE CHANDER SHEKHAR ORDER 27.04.2017 1. Revenue has filed these two appeals against common order dated 26th February 2004 passed by Income Tax Appellate Tribunal (ITAT), New Delhi in ITA Nos. 964 and 965/Delhi/2002 for Assessment Years (AYs) 1993-94 and 1994-95 respectively. ITA Nos 1 and 11 of 2005 Page 1 of 5 2. Both appeals were admitted by separate orders dated 18th February 2005. As far as ITA No. 11 of 2005 is concerned, which pertained to AY 1993-94, question of law framed was: "Whether in facts and circumstances of present case, ITAT was correct in law in deleting addition of Rs. 1,22,13,750/- (or such other amount as computed by A.O. Received in cash by assessee) made by Assessing Officer on account of booking of vehicles in bogus names and premium on sale of these vehicles?" 3. question of law framed in ITA No.1 of 2005 pertaining to AY 1994-95 was as under: Whether in facts and circumstances of present case, ITAT was correct in law in deleting addition of Rs.12,33,048/- made on account of booking of vehicles-in bogus/fictitious names?" 4. It must be noted at outset that in both appeals Revenue had urged one more question but only question framed in both appeals pertained to issue of booking vehicles in bogus/fictitious names. 5. Assessee, Maruti car dealer, was subjected to search operation on 9th December 1993 when certain diaries and files were seized. Assessing Officer (AO) found that Assessee had booked vehicles in fictitious names with abbreviations like SMC, BA, ML, CF, SMC TOURS, RI, IM, MA, MM, RB, JBL, NHUF etc. No addresses were given against these bookings in abbreviated names. Particulars of amounts received were also not stated therein. There were cuttings and over-writings on such bookings. For AY 1993-94, AO treated all such bookings as belonging to Assessee and by Assessment Order dated 30th March 1999 held inter alia that: ITA Nos 1 and 11 of 2005 Page 2 of 5 "Thus total unexplained investment in booking of vehicles in fictitious names comes to Rs. 4,35,75,000/-. Apart from foregoing investment in form of booking amounts, assessee has also earned premium @ Rs. 20,000/- per vehicle. This comes to Rs. 52,20,000/-. Accordingly, investment of Rs. 4,35,75,000/- plus premium of Rs. 52,20,000/- amounting in all to Rs. 4,87,95,000/- is taken as assessee's investment from undisclosed sources and income not disclosed to department and accordingly added back to total income of assessee." 6. As far as AY 1994-95 was concerned, initially by order dated 26th March 1997 AO made addition of Rs. 50,65,547 on above account to taxable income of Assessee. said order was set aside by Commissioner of Income Tax (Appeals) [CIT (A)] by order dated 15th May 1998 and matter remanded to AO. During re-assessment, AO by order dated 30th March 2001 made addition only in respect of those bookings where amount had been received in cash. Thus sum of Rs.12,33,048 was added to income of Assessee. 7. Assessee then filed appeals before CIT (A). AS far as AY 1993-94 was concerned, CIT (A) by order dated 4th January 2002 held: "...it cannot be said that all bookings made in abbreviated names belonged to assessee and not to genuine customers. This fact has been accepted by AO in next assessment year. Keeping all these facts in view and considering that enquiries are not possible in all such cases, it is held that 25% of bookings made as calculated by AO on basis of peak should be treated as belonging to assessee and balance 75% bookings should be treated as investment by genuine customers. Similarly, premium to extent of 25% can be taken as belonging to assessee because assessee stage managed these bookings only to get premium on such vehicles at that time. Therefore, additions to extent of 25% in respect of peak bookings as well as premium received therein is confirmed and balance stands deleted. (Relief - 75% of Rs. 4,87,75,000=Rs. 3,65,81,250/-)" ITA Nos 1 and 11 of 2005 Page 3 of 5 8. As far as Assessee's appeal pertaining to AY 1994-95, CIT (A) by separate order of same date observed that addition of Rs. 12,33,048 by AO was most reasonable and, therefore, upheld it. 9. In impugned order ITAT first dealt with ITA 964/Del/2002 filed by Assessee for AY 1993-94 and held: "There is no iota of evidence that assessee has booked car in its name or any premium has been earned by Assessee on sale of car. We have already discussed in detail that without any material or evidence no addition can be made against person in whose hands department wants to make additions. Therefore, for same reasoning we delete this addition also." 10. Following above reasoning, addition made for AY 1994-95 was also deleted by ITAT. 11. Having heard Mr Zoheb Hussein, learned counsel for Revenue Court is not persuaded to hold that ITAT erred in appreciating evidence before it or that its conclusions on that basis. findings have turned purely on facts and view taken was certainly probable one. AO's additions, which were upheld by CIT (A) appeared to have proceeded on surmises and conjectures. As rightly pointed out by ITAT without some cogent and credible material that bookings were in fact made by Assessee for itself, additions ought not to have been made. 12. For aforementioned reasons, questions framed in both appeals are answered in affirmative i.e., in favour of Assessee and against Revenue. ITA Nos 1 and 11 of 2005 Page 4 of 5 13. appeals are accordingly dismissed. S.MURALIDHAR, J CHANDER SHEKHAR, J APRIL 27, 2017 b ITA Nos 1 and 11 of 2005 Page 5 of 5 $ * IN HIGH COURT OF DELHI AT NEW DELHI R-30 + ITA 1/2005 COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel. versus CLASSIC MOTORS LTD. ..... Respondent Through: Mr. Manu Monga, Advocate AND R-31 + ITA 11/2005 COMMISSIONER OF INCOME TAX ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel versus CLASSIC MOTORS LTD. ..... Respondent Through: Mr. Manu Monga, Advocate CORAM: JUSTICE S. MURALIDHAR JUSTICE CHANDER SHEKHAR ORDER % 27.04.2017 1. Revenue has filed these two appeals against common order dated 26th February 2004 passed by Income Tax Appellate Tribunal (ITAT), New Delhi in ITA Nos. 964 and 965/Delhi/2002 for Assessment Years (AYs) 1993-94 and 1994-95 respectively. ITA Nos 1 and 11 of 2005 Page 1 of 5 2. Both appeals were admitted by separate orders dated 18th February 2005. As far as ITA No. 11 of 2005 is concerned, which pertained to AY 1993-94, question of law framed was: "Whether in facts and circumstances of present case, ITAT was correct in law in deleting addition of Rs. 1,22,13,750/- (or such other amount as computed by A.O. Received in cash by assessee) made by Assessing Officer on account of booking of vehicles in bogus names and premium on sale of these vehicles?" 3. question of law framed in ITA No.1 of 2005 pertaining to AY 1994-95 was as under: Whether in facts and circumstances of present case, ITAT was correct in law in deleting addition of Rs.12,33,048/- made on account of booking of vehicles-in bogus/fictitious names?" 4. It must be noted at outset that in both appeals Revenue had urged one more question but only question framed in both appeals pertained to issue of booking vehicles in bogus/fictitious names. 5. Assessee, Maruti car dealer, was subjected to search operation on 9th December 1993 when certain diaries and files were seized. Assessing Officer (AO) found that Assessee had booked vehicles in fictitious names with abbreviations like SMC, BA, ML, CF, SMC TOURS, RI, IM, MA, MM, RB, JBL, NHUF etc. No addresses were given against these bookings in abbreviated names. Particulars of amounts received were also not stated therein. There were cuttings and over-writings on such bookings. For AY 1993-94, AO treated all such bookings as belonging to Assessee and by Assessment Order dated 30th March 1999 held inter alia that: ITA Nos 1 and 11 of 2005 Page 2 of 5 "Thus total unexplained investment in booking of vehicles in fictitious names comes to Rs. 4,35,75,000/-. Apart from foregoing investment in form of booking amounts, assessee has also earned premium @ Rs. 20,000/- per vehicle. This comes to Rs. 52,20,000/-. Accordingly, investment of Rs. 4,35,75,000/- plus premium of Rs. 52,20,000/- amounting in all to Rs. 4,87,95,000/- is taken as assessee's investment from undisclosed sources and income not disclosed to department and accordingly added back to total income of assessee." 6. As far as AY 1994-95 was concerned, initially by order dated 26th March 1997 AO made addition of Rs. 50,65,547 on above account to taxable income of Assessee. said order was set aside by Commissioner of Income Tax (Appeals) [CIT (A)] by order dated 15th May 1998 and matter remanded to AO. During re-assessment, AO by order dated 30th March 2001 made addition only in respect of those bookings where amount had been received in cash. Thus sum of Rs.12,33,048 was added to income of Assessee. 7. Assessee then filed appeals before CIT (A). AS far as AY 1993-94 was concerned, CIT (A) by order dated 4th January 2002 held: "...it cannot be said that all bookings made in abbreviated names belonged to assessee and not to genuine customers. This fact has been accepted by AO in next assessment year. Keeping all these facts in view and considering that enquiries are not possible in all such cases, it is held that 25% of bookings made as calculated by AO on basis of peak should be treated as belonging to assessee and balance 75% bookings should be treated as investment by genuine customers. Similarly, premium to extent of 25% can be taken as belonging to assessee because assessee stage managed these bookings only to get premium on such vehicles at that time. Therefore, additions to extent of 25% in respect of peak bookings as well as premium received therein is confirmed and balance stands deleted. (Relief - 75% of Rs. 4,87,75,000=Rs. 3,65,81,250/-)" ITA Nos 1 and 11 of 2005 Page 3 of 5 8. As far as Assessee's appeal pertaining to AY 1994-95, CIT (A) by separate order of same date observed that addition of Rs. 12,33,048 by AO was most reasonable and, therefore, upheld it. 9. In impugned order ITAT first dealt with ITA 964/Del/2002 filed by Assessee for AY 1993-94 and held: "There is no iota of evidence that assessee has booked car in its name or any premium has been earned by Assessee on sale of car. We have already discussed in detail that without any material or evidence no addition can be made against person in whose hands department wants to make additions. Therefore, for same reasoning we delete this addition also." 10. Following above reasoning, addition made for AY 1994-95 was also deleted by ITAT. 11. Having heard Mr Zoheb Hussein, learned counsel for Revenue Court is not persuaded to hold that ITAT erred in appreciating evidence before it or that its conclusions on that basis. findings have turned purely on facts and view taken was certainly probable one. AO's additions, which were upheld by CIT (A) appeared to have proceeded on surmises and conjectures. As rightly pointed out by ITAT without some cogent and credible material that bookings were in fact made by Assessee for itself, additions ought not to have been made. 12. For aforementioned reasons, questions framed in both appeals are answered in affirmative i.e., in favour of Assessee and against Revenue. ITA Nos 1 and 11 of 2005 Page 4 of 5 13. appeals are accordingly dismissed. S.MURALIDHAR, J CHANDER SHEKHAR, J APRIL 27, 2017 b ITA Nos 1 and 11 of 2005 Page 5 of 5 Commissioner of Income-tax v. Classic Motors Ltd