Punit Beriwal, New Delhi vs Department Of Income Tax

ACIT, Central Circle-2, Vs. Punit Beriwal Room No.323, 3rd Floor, 15/10, Sarvapriya Vihar E-2, Jhandewalan Extn. New Delhi. New Delhi

(PAN ADLPB0195R)

(Appellant) (Respondent)

Date of Hearing : 30.06.2015 Date of Pronouncement : 29.07.2015

Assessee by : Sri Vivek Wadekar, CIT DR Respondent by: Sri Rajesh Arora, CA.

ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

1. This appeal by the Revenue has been directed against the order of the

CIT(A)-III, Delhi dated 14.12.2011 in Appeal No. 491/08-09 for AY 2005-06. ITA No. 1021/Del/2012

2. Ground Nos. 5 & 6 of the Revenue are general in nature, which need at

no adjudication. Remaining grounds of the Revenue for adjudication reads as

under:-

"1. On the facts and in the circumstances of the case, the ClT(A) has erred in law and on facts in deleting the addition of Rs. 15,50,000/- made by the Assessing Officer u/s 69B of the Income tax Act, 1961 on account of unexplained investment.

2. On the facts and in the circumstances of the case, the CIT(A) has erred, in violation of rule 46A of the Income tax Rule, 1962, by not following the decision of Hon,ble Delhi High Court in the case of Manish Build Well Pvt, Ltd, 204 Taxman 106, wherein it was has held by the Hon,ble jurisdictional High Court to give two stage opportunity under rule 46A, i.e. first before admission of additional and second after admission of additional evidences.

3. On the facts and in the circumstances of the case, the ClT(A) has erred in law and on facts in deleting the addition of Rs. 84,274/- made by the Assessing Officer on account of low household withdrawals.

4. On the facts and in the circumstances of the case, the CIT(A) has erred in holding that no addition could be made in absence of incriminating evidence found during search to substantiate the addition."

3. Briefly stated the facts giving rise to this case are that the search and

seizure operation u/s 132 of the Income Tax Act, 1961 (for the short the 'Act')

was carried out in Vipul Group of cases on 01.06.2006 during which the flag

ship of the group M/s Vipul Ltd. and their Directors were also covered. The

said search action was also conducted at the residence of the assessee Shri

Puneet Beriwala at 15/10, Sarvpriya Vihar, New Delhi. Original return of

income in this case was filed on 23.08.2005 declaring income of Rs.16,93,520/.

Subsequently notice u/s 153A of the Act was issued and served on the assessee

2 ITA No. 1021/Del/2012

on 20.03.2007 in response to which return of income declaring income for

Rs.2,81,39,100/- was filed on 26.07.2007. The return was subsequently revised

on 24.12.2008 for taxable income of Rs.2,85,39,100/- which included the

additional amount of Rs.2,62,60,015/- which was surrendered u/s 132(4) of the

Act relatable to AY 2005-06 by the assessee. The assessment u/s 153A r.w.s.

143(3) of the Act was completed on a total taxable income of Rs.3,01,73,370/-.

The AO made addition of Rs.15,50,000/- u/s 69B of the Act on account of

unexplained investment and also made addition of Rs.84,274/- on account of

low household withdrawals. These additions were deleted by the CIT(A) by

passing impugned order. The aggrieved Revenue before this Tribunal with the

grounds mentioned hereinabove.

Ground Nos. 1&2

4. The Ld. Departmental Representative pointed out pages 16,25 & 26 of

the impugned order of the CIT(A) and submitted that the CIT(A) has erred in

violation of rule 46A of the Income tax Rule, 1962 by not following the

decision of the Hon'ble jurisdictional Delhi High Court in the case of CIT Vs.

Manish Build Well Pvt. Ltd. [2011] 16 taxmann.com 27 (Delhi) wherein it was

held that there are two stages all considering and remained of additional

evidence first before admission of additional evidence and second after

admission of additional evidence and Assessing Officer should be given

3 ITA No. 1021/Del/2012

opportunity to comment on the admissibility as well as merits of the additional

evidence on both the stages.

5. Replying to the above, the Ld. assessee's Representative (AR) submitted

that there is no adjudication of additional evidence under rule 46A of the

Income Tax Rules expressly but when there is a details of explanation and

deliberations on the admissibility and consideration of additional evidence then

it would be presume that the application has been considered properly and

additional evidence sought to be admitted has been admitted and considered

after considering the remand report of the AO.

6. On careful consideration of above submission, we are of the view that

for filing additional evidence under rule 46A of the I.T. Rules the appellant

assessee shall not be entitled to produce any evidence whether oral or

documentary evidence produced before him during course of proceeding

before the AO except in four circumstances mentioned in sub Rule 1 of Rule

46A of the Rules.

7. In the present case, the AO decided the issue with following conclusion

and observation:-

"7. The assessee has also surrendered an amount or Rs. 95.00.000/- being advance paid to Bhai Mohan Singh in cash for purchase of property at Prithvi Raj Road. During the course of survey on 19.9.2008 page no.51 to 60 of Annexure A-I, was seized by Party B-2 which related to a property transaction between the assessee and Bhai Manjit Singh, HUF for purchase of property at 4 ITA No. 1021/Del/2012

28-A. Prithvi Raj Road, New Delhi. These documents reveal that payments in cash as well as by cheques amounting to Rs.1,64,50,000/- has been made to Bhai Manjit Singh (HUF) by the assessee which is evident from receipt of Bhai Manjit Singh dated 3.1.2005 (Page No.51 or Annexure A-I).

The assessee was asked to reconcile the payments made for purchase of this property and submit details of source of investment. 7.1 The assessee has submitted that part of the consideration amounting to Rs.54,00,000/- has been made by cheques and an amount of Rs.95,00,000/- has been paid in cash which was surrendered during the course of search on 1.6.2006 and has been offered as additional income during the year. As per seizecl documents, total payment received by Sh. Bhai Manjit Singh amounted to Rs.1,64,50,000/- against which the assessee has shown payment of Rs.1,49.00,000/- only. The assessee has not furnished any explanation in respect of balance payment of Rs.15,50,000/-. Since the assessee has failed to furnish the detail of source of payment the amount of Rs.15,50,000/-- is added as unexplained investment u/s 69B of I.T. Act."

8. From relevant part of the impugned order of the CIT(A), we note that in

the application submitted by the assessee under Rule 46A of the Income Tax

Rules assessee submitted that the same vide letter dated 18.05.2011 and in the

prayer clause it has been mentioned that the assessee was not allowed

opportunity to reconcile the investments as per seized material and reflect in

the state of affairs complied by the assessee, therefore, the additional evidence

may kindly be admitted and considered. The CIT(A) send application along

with additional evidence to the AO for his remand which was submitted vide

letter dated 26.05.2011objecting to the admission of additional evidence and

without making any comment on the merits of the additional evidence. The

5 ITA No. 1021/Del/2012

Assessing Officer also placed rejoinder dated 10.06.2011 before the CIT(A)

and submitted that application under Rule 46A being filed as per provisions of

the Act may please be considered favorably and also submitted detailed

comments on the merits of the additional evidence sought to be admitted by the

assessee. The assessee also placed reply dated 07.12.2011 to the remand report

dated 26.05.2011 and rejoinder dated 10.06.2011 of the AO. From operating

part in para 5 at page 25 of the impugned order on this issue we note that the

CIT(A) granted relief for the assessee with following observations and

conclusion:-

"5. Finding on Ground of Appeal No.1 :-

On a consideration of the finding in the assessment order and the submission of the appellant as well as the remand report of the AO and counter submissions thereon filed by the appellant it is observed that the facts relating to the addition on account of investment U/S 69B for Rs.15,50,000/-, which relates to advances given in cash to one Bhai Mohan Singh( HUF) for purchase of property at Prithvi Raj Road lies in a narrow compass. To briefly recapitulate the facts, initially there had been a search and seizure action u/s 132 in case of the appellant on 01.06.06 when the assessee made a disclosure for Rs. 2,62,60,015/- for assessment year 2005-06 u/s 132(4) of the IT Act. This additional income for Rs. 2,62,60,015/- included the amount of Rs.95 lacs being advance paid in cash to Bhai Manjit Singh for purchase of property at Prithvi Raj Road which consequently was included in the computation and return of income filed by the appellant on 26.07.07 ( revised on 24.12.08). Meanwhile a survey u/s 133A was conducted on the assessee's business premises at Gurgaon on 19.09.08 during which certain documents were found. From page no. 51 of Annexure A-I, in particular it was noted that Bhai Manjit Singh had received an amount of Rs. 1,64,50,000/- in cash as well as by cheque. This document is dated 03.01.05. As the assessee had 6 ITA No. 1021/Del/2012

submitted that the total payment made to Bhai Manjit Singh uptill the end of the financial year was only the Rs. 1,49,00,000/- which comprised of a payment of Rs.54 lacs through several cheques and another Rs.95 lacs in cash and which had been surrendered during the course of search on 01.06.06 therefore considering the difference between the amount reflected in the impounded receipt at page 51 dated 03.01.05 (Rs. 1,64,50,000/-)and the amount as shown having paid to Bhai Manjit Singh ( Rs. 1,49.00.000/) an amount of Rs. 15.50,000/- has been added .as unexplained investment u/s 698 of the IT Act by the AO."

9. In the totality of the facts and circumstances as noted above, we are of

the view that from the operative part in para 7 and 7.1 of the assessment order

as reproduced hereinabove, we note that the AO asked to reconcile the

payments made for purchase of property and details of source of investment

and the assessee try to explain the same on the basis of seized documents but

the AO was not satisfied and he proceeded to make addition in respect of

unexplained amount of Rs.15,50,000/- the Assessing Officer recorded that the

assessee has failed to furnish the details of source of payments. In the light of

observation made by the AO, we are of the view that the Assessing Officer

asked to reconcile the payment made for purchase of property but the AO did

not provide sufficient opportunity to the assessee to adduce evidence relevant

to this issue. In this situation, Clause (d) of sub Rule (1) of Rule 46A of the

Rules provide that where the Assessing Officer has made the order appellate

against without giving sufficient opportunity to the assessee to adduce evidence

relevant to any ground of appeal then the additional evidence can be admitted

and considered. In the present case, the prayer of the assessee for admission of

7 ITA No. 1021/Del/2012

additional evidence falls within the purview of said provision and we have no

hesitation to hold that the additional evidence was rightly admitted during first

appellate proceeding. However, as we have already noted that the CIT(A) has

not expressly made any observation and conclusion for admissibility of

additional evidence but impliedly when the CIT(A) proceeded to consider the

additional evidence it can safely to presume that the additional evidence has

been admitted and considered by the CIT(A) after calling remand on

admissibility and rejoinder on merits and in view of our foregoing discussion

the CIT(A) was correct up to this extent in admitting additional evidence

submitted by the assessee during first appellate proceedings. .

10. Now, when we consider the ratio of the judgment of the Hon'ble

jurisdictional high Court in the case of CIT Vvs. Manish Build Well Pvt. Ltd.

(supra) it is vivid that after admitting the additional evidence the same can only

be considered after allowing the AO to comment on the merits of the additional

evidence and only after considering the remand report on merit the additional

evidence may be considered for adjudication. In the present case, on careful

perusal of the remand report dated 26.05.2011 and rejoinder dated 10.06.2011

of the AO we note that the AO has elaborately objected to the admissibility of

additional evidence and also submitted comments on merits along with no

objection to the admissibility of additional evidence. From operative part of the

order of the CIT(A), we note that the CIT(A) considered additional evidence

8 ITA No. 1021/Del/2012

and granted relief for the assessee by properly following required procedure of

rule 46A of the Rules as per ratio of the decision of Hon'ble jurisdictional

Delhi High Court in the case of CIT Vvs. Manish Build Well Pvt. Ltd. (Supra)

and there is no violation of Rule 46A of the Rules in the impugned order.

11. On careful consideration of above conclusion of the CIT(A) we further

observe that assessee submitted reconciliation of payments made to M/s Bhai

Manjeet Singh (HUF) showing details of payments amounting to

Rs.1,69,00,000/-, confirmed copy of ledger account of the assessee. Sh. Punit

Beriwala in the books of accounts of M/s Entrepreneurs (Calcutta) P. Ltd. as on

31.03.2005 and as on 31.03.2006, confirmed copy of journal entry in the

books of company M/s Entrepreneurs (Calcutta) P. Ltd. dated 19.11.2006 and

set of balance sheets along with schedules as on 31.03.2005 of M/s

Entrepreneurs (Calcutta) P. Ltd. showing balance of M/s Bhai Manjeet Singh

(HUF) amounting to Rs.20,00,000/- which are also available before us from

pages 116 to 137 of assessee's paper book.

12. On valuation of additional evidence which was properly admitted and

considered by the CIT(A) we observe that that from the copy of the bank

account of M/s Entrepreneurs (Calcutta) P. Ltd. it is clear that an amount of

Rs.20 lacs has been paid to Bhai Manjit Singh (HUF) through Cheque no.

871104 on 03.06.2004. From the letter of confirmation issued by M/s

Entrepreneurs (Calcutta) P. Ltd. dated 02.12.2011 it is also clear that the 9 ITA No. 1021/Del/2012

aforesaid amount of Rs.20 lacs lying debited in the account of Bhai Manjit

Singh (HUF) has been subsequently transferred to the account of the assessee

Mr. Punit Beriwala on 19.11.2005. These facts further get supported from the

details of cheque given to Bhai Manjit Singh (HUF) by the assessee as the first

payment of cheque for Rs.10 lacs was given as early as 24.04.2004 from the

Indian Overseas Bank account of the assessee which also make it clear that the

payment from M/s Entrepreneurs (Calcutt) P. Ltd. made to Bhai Manjit Singh

on 03.06.2004 was on behalf of the assessee. Under above noted facts and

circumstances, we are an agreement with the conclusion of the CIT(A) that the

explanation given by the assessee was reasonable and plausible which makes

the total investment made by the assessee for purchase of property situated at

Prithvi Raj Road as on 31.03.2005 at Rs.1,69,00,000/- instead of

Rs.1,49,00,000/- as shown in the statement of affairs, which clearly explained

the source of investment for Rs.15,50,000/-.

13. As the assessee is properly explained that the total payment made to

Bhai Manjit Singh (HUF) up to the end of Financial Year 2004-05 pertaining

to assessment year under consideration 2005-06 only Rs.1,49,00,000/- which

was comprised of payment of Rs.54 lacs several cheques and payment of

Rs.95,00,000/- in cash which had been surrendered by the assessee during the

course of search as 01.06.2006 therefore, the AO made disallowance u/s 69B

of the Act as unexplained investment of Rs.15,50,000/- considering the

10 ITA No. 1021/Del/2012

difference between the amount reflected in the amount receipt dated

03.01.2005. As we have already noted above that the CIT(A) rightly admitted

and considered the additional evidence filed by the assessee and the conclusion

of the First Appellate Authority is as per facts revealed from the additional

evidence. On the basis of foregoing discussion, we are inclined to hold that the

assessee is properly explained the difference of Rs.15,50,000/- made by the

assessee for purchase of property situated at Prithvi Road from Bhai Manjit

Singh (HUF) and therefore, addition made by the AO on account of

unexplained investment u/s 69B of the Act cannot be held as sustainable and

the CIT(A) was right in directing the AO to delete the same. We are unable to

see any infirmity, perversity or any other valid reason to interfere with the

conclusion of the CIT(A) on this issue and therefore, we upheld the same.

Accordingly, Ground nos. 1 & 2 of the Revenue being devoid of merits

deserves to be dismisses and we dismiss the same.

Ground Nos.3 and 4

14. Apropos Ground nos. 3 and 4, Ld. Departmental Representative

submitted that the CIT(A) has erred in law and on facts in deleting the addition

of Rs.84,274/- made by the AO on account of low household withdrawals. The

Ld. CIT(A) has grossly erred in holding that no addition could be made in

absence of incriminating evidence found during search to substantiate the

addition. The Ld. Departmental Representative submitted that the Assessing 11 ITA No. 1021/Del/2012

Officer rightly holding that in view of status and size of the assessee family

expenditure of household/drawings of the assessee can be estimated at

Rs.3,00,000/- per annum and after considering the total contribution made by

the assessee and her wife the balance amount of Rs.84,274/- was rightly treated

as unexplained expenditure u/s 69C of the Act. The Ld. DR submitted that the

CIT(A) without any justified reason deleted the said addition therefore, the

impugned order may be set aside by restoring that the of the AO.

15. Replying to the above, Ld. assessee's Representative (AR) supported the

impugned order and submitted that no addition u/s 153A r.w.s 143(3) can be

made unless there are certain incriminating documents or material found in the

search. The Ld. AR further submitted that no incriminating document or

material for substantiating unaccounted addition on account of low household

withdrawal was found during the search and there was no material to support

the view of the AO that unaccounted expenses were actually incurred. The Ld.

AR finally submitted that for making addition u/s 69C of the Act it is

incumbent upon the AO to bring out this allegation of fact that the assessee

actually incurred unexplained expenses which attract addition u/s 69C of the

Act.

16. On careful consideration of above submission, firstly, we note that the

CIT(A) granted relief for the assessee on the following conclusion and

observation:-

12 ITA No. 1021/Del/2012

"6. Finding on Ground of Appeal No.2 :-

As regards the issue of addition to income made for Rs. 84,274/- on account of low house held withdrawal the appellant's arguments are twofold. Firstly, it has been submitted that apart from the cash drawings of Rs. 1,05,000/- made by the appellant he has also made separate withdrawal for Rs. 35,050/- for school fees and Rs. 78,612/- for LIC premium. Further Smt. Sunita Beriwala has also apart from the cash drawings of Rs. 66,618/- made a separate withdrawal of Rs.1,10,726/- as LIC premium. That thus the consolidated drawings of the assessee and his spouse comes to Rs. 3,96,007/-, which is argued to be reasonable according to the status of the family. It has also been added that there was foreign travel during the 'year and the expenses of local travelling are reimbursed from the companies where assessee is designated as a Director. Also that there are no major ceremonies organized by the assessee for which any extra expenses are required to be incurred. The appellant has also cited section 69C and argued that for making an addition to income under this section the revenue has to prove that the expenditure was actually being incurred. That there has been no material found during the search to support the view of the AO that unaccounted expenses were actually incurred. The other argument of the appellant is that no addition u/s 153A can be made unless there are certain documents, or material found in the search. Reliance in this regard has been placed on the decision in Anil Kumar Bhatia 1 ITR (Trib.) 484 & other cases. On a consideration of the totality of the submission of the appellant and the case laws relied upon and considering the fact that no incriminating evidence for substantiating unaccounted addition during the year has been found dufing the search addition made for Rs.84,274/- on account of low household withdrawal is directed to be deleted."

17. On careful consideration of the conclusion of the AO as well as findings

of the CIT(A), we note that perhaps the AO proceeded to make addition on

account of low household withdrawal/unexplained expenditure u/s 69C of the

Act. Ld. AO estimated the household expenses at Rs.3,00,000/- per annum, but

we are unable to see any basis or cogent reason for this estimation. Ld. CIT(A)

13 ITA No. 1021/Del/2012

observed that as per provision of Section 69C of the Act the onus was on the

AO whether the expenditure estimated by him was actually spent for the

household purposes which he claims to have established but the AO has not

established by way of any incriminating material or documentary evidence that

additional expenditure was actually incurred beyond household withdrawal of

the assessee and her spouse. In this situation, we find that the addition in this

case has been made by the AO on account of low household withdrawals in a

purely arbitrary manner without any basis and incriminating documentary

evidence found during the search supporting the view taken by the AO. Under

these circumstances, we are inclined to hold that the CIT(A) has taken a correct

view that for making an addition u/s 69C of the Act to the income of the

assessee on account of low household withdrawals, the Revenue has to prove

that the expenditure was actually being incurred by the assessee during the

relevant financial period. We also an agreement of the conclusion of the

CIT(A) that no addition in reassessment proceeding u/s 153A r.w.s. 143(3) of

the Act can be made unless there are certain documents or incriminating found

during the course of search substantiating unaccounted expenditure. Hence, we

are unable to see any infirmity, perversity or any other valid reason to interfere

with the impugned order of the CIT(A) on this issue and we upheld the same.

Accordingly, the ground nos. 3 and 4 of the Revenue being devoid of merits

are dismissed.

14 ITA No. 1021/Del/2012

18. In the result, appeal of the Revenue is dismissed.

The decision is pronounced in the open court on 29th July, 2015.

Sd/- Sd/- (J.S. REDDY) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 29th July, 2015. Aks/- Copy forwarded to:

1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi

15