GEETHA MEHRA, CHENNAI v. DCIT CEN CIR 44, MUMBAI

ITA 5021/MUM/2011 | 2006-2007
Pronouncement Date: 31-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 502119914 RSA 2011
Assessee PAN AAGPM9039H
Bench Mumbai
Appeal Number ITA 5021/MUM/2011
Duration Of Justice 1 year(s) 1 month(s) 6 day(s)
Appellant GEETHA MEHRA, CHENNAI
Respondent DCIT CEN CIR 44, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 31-07-2012
Date Of Final Hearing 11-07-2012
Next Hearing Date 11-07-2012
Assessment Year 2006-2007
Appeal Filed On 24-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI VIJAY PAL RAO JM & SHRI RAJENDRA AM ITA NO. 5018/MUM/2011(ASSESSMENT YEAR 2002-03) ITA NO. 5019/MUM/2011(ASSESSMENT YEAR 2004-05) ITA NO. 5020/MUM/2011(ASSESSMENT YEAR 2005-06) ITA NO. 5021/MUM/2011(ASSESSMENT YEAR 2006-07) ITA NO. 360/MUM/2012(ASSESSMENT YEAR 2003-04) ITA NO. 361/MUM/2012(ASSESSMENT YEAR 2007-08) & ITA NO.7759/MUM/2011(ASSESSMENT YEAR 2008-09) MRS GEETHA MEHRA C/O SYNERGY ART FOUNDATION LTD GROUND FLOOR - TANNA HOUSE 11A NATHALAL PARIKH MARG COLABA MUMBAI 400 005 VS THE DY COMMR OF INCOME TAX CEN/CIR 44 MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAGPM 9039H ASSESSEE BY SHRI J PRABHAKAR REVENUE BY SHRI PAVAN VED DT.OF HEARING 11 TH JULY 2012 DT OF PRONOUNCEMENT 31 ST JULY 2012 PER VIJAY PAL RAO JM THESE APPEAL BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF CIT(A) ARISING FROM ASSESSMENT ORDER PASSED UNDER S ECTION 153A READ WITH SECTION 143(3) OF THE I T ACT FOR THE ASSESSMENT YEAR 2002- 03 TO 200809 RESPECTIVELY. 2 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROMOTER DIRECTOR OF M/S SYNERGY ART FOUNDATION LTD WHICH HAS BEEN TRADING I N PAINTINGS. THE DAY-TO- DAY RUNNING OF BUSINESS OF PURCHASE AND SALE OF PAINTIN GS OF THE COMPANY IS CARRIED OUT BY THE ASSESSEE. THERE WAS A SEARCH AND SEIZURE ACT ION ON 17/04/2007 AT THE BUSINESS PREMISES OF M/S SYNERGY ART FOUNDATION AND IT'S DIRECTORS INCLUDING THE MRS GEETHA MEHRA 2 ASSESSEE. DURING THE SEARCH OPERATION CERTAIN INCR IMINATING DOCUMENTARY EVIDENCE WERE FOUND AND SEIZED TO SHOW THE UNDISCLOSED INCOM E. CONSEQUENTLY NOTICES UNDER SECTION 143(A) OF THE ACT WERE ISSUED AND THE ASSESSEE FILED RETURN OF INCOME IN RESPECT OF ASSESSMENT YEARS 200203 TO 2008-09. THE AO COMPLETED THE ASSESSMENT UNDER SECTION 153A READ WITH SECTION 143 (3) FOR ALL THE ASSESSMENT YEARS ON 31/11/2009. THE AO MADE CERTAIN ADDITIONS SOME OF WHICH ARE COMMON FOR ALL THE YEARS AND SOME OF THEM ARE COMMON FOR COUPLE OF YEARS. 2.1 ON APPEAL THE CIT(A) CALLED FOR A REMAND REPOR T FROM THE ASSESSING OFFICER WHICH WAS SUBMITTED ON 08/10/2010. AFTER CONSIDERI NG THE REMAND REPORT THE CIT(A) GRANTED PART RELIEF TO THE ASSESSEE. AGGRIEVED BY T HE ORDER OF CIT(A) THE ASSESSEE FILED THESE APPEALS BEFORE US. 3 FOR THE ASSESSMENT YEAR 2002-03 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONCLUDING THAT REASONABLE OPPORTUNITIES TO SUBSTAN TIATE AND EXPLAIN THE CLARIFICATION SOUGHT DURING ASSESSMENT PROCEEDINGS WE RE AFFORDED TO THE APPELLANT IGNORING THE FACTUAL SUBMISSIONS VIDE POIN T NO: 16 OF STATEMENT OF FACTS FILED BEFORE HIM. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING (VIDE PARA 4) THAT THE APPELLANT IS A TRADER IN PAINT ING WITHOUT BASIS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS.2 LAKHS TOWARD ALLEGED LOW DRAWINGS IN AN ASSESSMENT MADE UNDER SECTION 153 A WITHOUT ANY REFE RENCE TO SEIZED MATERIALS IN THIS REGARD. 3.1 THESE GROUNDS ARE COMMON FOR ALL THE ASSESSMENT YEARS EXCEPT FOR THE ASSESSMENT YEAR 2008-09 IN WHICH THE GROUND NUMBER 3 THOUGH RAISED BY THE ASSESSEE HOWEVER THE ADDITION ON ACCOUNT OF LOW D RAWINGS WAS DELETED BY THE CIT(A). MRS GEETHA MEHRA 3 4 GROUND NUMBER1 IS REGARDING NOT GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE BY THE ASSESSING OFFICER. 4.1 THE LEARNED A.R OF THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE FILED RETURN OF INCOME UNDER SECTION 153A OF THE ACT WHICH WAS TAKE N UP FOR SCRUTINY BY ISSUING THE SUMMONS UNDER SECTION 131 ON 4/11/2009 AND THE ASSE SSEE WAS TO APPEAR ON 11/11/2009. A SHOW CAUSE NOTICE WAS ALSO ISSUED ON 12/11/2009 ASKING FOR VARIOUS DETAILS WITH REFERENCE TO THE SEARCH AND SEIZURE OP ERATIONS TO BE FILED WITHIN 7 DAYS FROM THE DATE OF THE SAID NOTICE I.E. TO SAY BY 19/ 11/2009. THE ASSESSEE WAS COLLECTING THE DETAILS REQUIRED IN RESPECT OF THE 1 ST SHOW CAUSE NOTICE AND MANY OF THE QUERIES WERE RELATING TO THE VARIOUS RECORDS BO TH FROM SEIZED RECORDS AS WELL AS RECORDS IN THE POSSESSION OF ASSESSEE AND FROM OUTS IDE SOURCE. THEREAFTER ANOTHER SHOW CAUSE NOTICE DATED 21/11/2009 WAS ISSUED STATI NG THAT 44 NUMBERS OF PAINTINGS RECEIVED AS GIFTS BY THE ASSESSEE AND VALUED AT RS. 29 14 500/- BY A TEAM OF EXPERT AT THE BEHEST OF THE DEPARTMENT OUGHT TO BE ADDED A S UNEXPLAINED INVESTMENT OF THE ASSESSEE AS WELL AS FOR ADDITION OF JEWELLERY V ALUED AT ` 4 89 895/- ITS SOURCE THEREOF IS NOT PROVED. THE DETAILS AS REQUIRED UN DER SHOW CAUSE NOTICE DATED 20/10/2009 WERE TO BE SUBMITTED BEFORE 26/11/2009. THE LEARNED A.R. OF THE ASSESSEE HAS SUBMITTED THAT WHILE THE DETAILS WERE BEING COLLECTED AND PREPARED AND FINALLY THE AUTHORISED REPRESENTATIVE OF THE AS SESSEE VIDE LETTER DATED 4/12/2009 FILED IN THE TAPAL ON 14.12.2009. HOWEVER THE ASSE SSING OFFICER SURREPTITIOUSLY COMPLETED THE ASSESSMENT ON THE 30TH NOV 2009 WITHO UT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE TO REBUT THE PRESUMPTION AND ALLEGA TION MADE IN THE SHOW CAUSE NOTICES. THUS THE LD A.R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSMENT HAS BEEN COMPLETED IN A TEARING HURRY WITHOUT ANY REGARD TO THE POSITION OF THE ASSESSING OFFICER AS AN QUASI-JUDICIAL AUTHORITY TO ASSESS A PROPER INCOME AFTER GIVING AN MRS GEETHA MEHRA 4 APPROPRIATE OPPORTUNITY THE MANNER IN WHICH THE AS SESSMENT WAS FRAMED IS ILLEGAL AND OPPOSED TO FAIRNESS AND PRINCIPLES OF NATURAL J USTICE. 4.2 ON THE OTHER HAND THE LD DR HAS SUBMITTED THAT THE CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND THERE FORE THE ASSESSEE WAS GIVEN A PROPER OPPORTUNITY. THE LD D.R. HAS FURTHER SUBMITT ED THAT THE ASSESSING OFFICER ALSO GIVEN SUFFICIENT TIME AND OPPORTUNITY; BUT THE ASSE SSEE DID NOT FILE THE NECESSARY DETAILS. HE HAS RELIED UPON THE ORDER OF THE AUTHOR ITIES BELOW. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THOUGH IT APPEARS THAT THE ASSESSING OFFICER ISSUED 3 TO 4 SHOW CAUSE NOTICES ONE AFTER ANOTHER WITHOUT GIVING SUFF ICIENT TIME TO THE ASSESSEE TO FILE THE NECESSARY DETAILS; HOWEVER WHEN THE CIT(A) ISS UED A REMAND ORDER AND THE ASSESSEE WAS GIVEN ANOTHER OPPORTUNITY TO FILE ALL THE DETAILS AND EVIDENCE AS WELL AS DEFEND THE CASE DURING THE REMAND PROCEEDINGS THEN THE SAID GRIEVANCE OF THE ASSESSEE AGAINST THE ASSESSING OFFICER IS NO MORE EXIST. ACCORDINGLY WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE GROUND OF THE ASSESSE E AND THE SAME IS DISMISSED. 6 GROUND NUMBER 2 REGARDING HOLDING THE ASSESSEE AS TRADER IN PAINTINGS. 7 WE WILL DEAL WITH THIS ISSUE ALONG WITH THE ISSUE RAISED BY THE ASSESSEE IN GROUND NUMBER 9 FOR THE ASSESSMENT YEAR 200708 AT THE APPROPRIATE STAGE. 8 GROUND NUMBER 3 REGARDING ADDITION ON ACCOUNT OF LOW DRAWINGS. 8.1 FROM THE BANK STATEMENT OF THE ASSESSEE IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAVE NO CASH WITHDRAWAL E VEN FOR PERSONAL EXPENSES. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAVE NOT SHOWN ANY WITHDRAWALS; THEREFORE HE PROPOSED TO MAKE AN ADDITION OF ` 2 LAKHS FOR THE ASSESSMENT YEAR 2002-03 ` . 2.5 LAKHS FOR THE ASSESSMENT YEAR 200304 ` 3 LAKH FOR ASSESSMENT YEAR MRS GEETHA MEHRA 5 2004-05 ` . 3.5 LAKHS FOR THE ASSESSMENT YEAR 2005-06 ` . 4 LACS FOR THE ASSESSMENT YEAR 200607 ` 4.5 LAKHS FOR THE ASSESSMENT YEAR 2007-08 AND ` . 5 LACS FOR THE ASSESSMENT YEAR 2008-09 UNDER SECTION 69C AS UNEXPLAINED EXPEN DITURE FOR THE RESPECTIVE YEARS ON ACCOUNT OF UNACCOUNTED PERSONAL HOUSEHOLD EXPENS ES. ACCORDINGLY THE ASSESSING OFFICER MADE AN ADDITION OF ` . 2 LAKH FOR THE ASSESSMENT YEAR 2002-03 AND FURTHER INCREMENT OF ` . 50 000/- EACH FOR SUBSEQUENT YEARS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITU RE ON ACCOUNT OF PERSONAL HOUSEHOLD EXPENSES UNDER SECTION 69C. 8.2 ON APPEAL THE CIT(A) HELD THAT THE SOCIAL STA TUS OF THE ASSESSEE INDICATES THAT ` . 40 000/- TO ` 50 000/- PER MONTH IS A REASONABLE PERSONAL EXPENS ES AND ACCORDINGLY SUSTAINED THE ADDITION MADE BY THE ASS ESSING OFFICER. 9 BEFORE US THE LEARNED A.R. OF THE ASSESSEE HAS S UBMITTED THAT THE ASSESSING OFFICER HAS MENTIONED THAT A SUM OF ` . 4 36 555/- SPENT THROUGH CREDIT CARD IS PAID BY SYNERGY ARTS FOUNDATIONS TOWARDS RESTAURANT AND HOTEL BILLS. THE ASSESSING OFFICER HAVING LINKED THE CREDIT CARD PAYMENTS TO THE QUEST ION OF DRAWINGS DID NOT PROCEED FURTHER TO FIND OUT AS TO HOW MUCH THEREOF WAS DEBITED IN THE BOOKS OF M/S SYNERGY ART FOUNDATIONS LTD TO PROJECT THE ENTIRE C REDIT CARD PAYMENT OUT OF CONTEXT. THE LD AR OF THE ASSESSEE HAS FURTHER SUBMITTED THA T THE TOTAL EXPENDITURE THROUGH CREDIT CARD IS ` . 2 95 168/- AND NOT ` . 4 36 555/- AS ALLEGED IN THE ASSESSMENT ORDER. HE HAS FURTHER SUBMITTED THAT OUT OF THE TOTAL PAYM ENT OF ` . 2 95 168/- A SUM OF ` . 93 376/- REPRESENTS CARD PAYMENT TOWARDS PERSONAL DRAWINGS SUCH AS CLOTHES BOOKS AND PAYMENTS TO DEPARTMENTAL STORE ETC. WHIC H WOULD MORE THAN SUFFICE FOR THE ASSESSEE TO EXPLAIN HER STATUS AS SINGLE INDIVI DUAL WITHOUT ENCUMBRANCES. HE HAS FURTHER POINTED OUT THAT THE ASSESSEE HAD BALANCE OUT OF RENTAL INCOME RECEIVED FROM PROPERTY LET OUT AT CHENNAI TO THE EXTENT OF ` . 72 000/- WHICH IS DULY DISCLOSED MRS GEETHA MEHRA 6 IN THE ORIGINAL RETURN OF INCOME FILED FOR THE ASSE SSMENT YEAR 2002-03 AND THIS IS AVAILABLE FOR PERSONAL DRAWINGS ALSO. 9.1 THUS THE LEARNED A.R. OF THE ASSESSEE HAS SUBM ITTED THAT THE ADDITION ON ACCOUNT OF UNEXPLAINED PERSONAL EXPENSES DUE TO LOW DRAWINGS IS UNWARRANTED AND MADE WITHOUT DUE REGARD TO THE FACTS ON RECORD. HE HAS FURTHER SUBMITTED THAT THE ADDITION ON THIS ACCOUNT IS NOT BASED ON ANY SEIZED MATERIAL OR SWORN STATEMENT OR ANY OTHER MATERIAL PURSUANT TO THE SEARCH TO SHOW THAT THE DRAWINGS ES TIMATED IN THE ASSESSMENT IS SUSTAINABLE. HE HAS REFERRED THE DETAILS OF DRAWINGS MADE BY THE ASSESSEE AT PAGE NUMBER 30 TO 35 OF THE PAPER BOOK AND SUBMITTED THAT FOR ALL THE YEARS THE ACTUAL DRAWINGS OF THE ASSESSEE ARE MOR E THAN THE ADDITION MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS. THE LEARNED A .R. HAS ALSO RELIED UPON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M/S ALL CARGO GLOBAL LOGISTICS LTD DCIT DATED 6 JULY 2012 AND SUBMITTED THAT NO ADDITI ON CAN BE MADE UNDER SECTION 153A WITHOUT ANY INCRIMINATING MATER IAL FOUND IN THE COURSE OF SEARCH. 9.2 ON THE OTHER HAND THE LEARNED D.R. HAS RELIED UPON THE DECISION OF HONOURABLE ANDHRA PRADESH HIGH COURT IN CASE OF MR GOPAL LAL BHADRUKA VS DCIT DATED 15/12/2011 AND SUBMITTED THAT THE HONOURABLE HIGH COURT HAS HE LD THAT FOR THE PURPOSE OF SECTION 153A/153C OF THE ACT THE AS SESSING OFFICER CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABL E DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOS ED INCOME OF THE ASSESSEE. 10 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. ON THE LEGAL ISSUE AS RAISED BY THE LEARNED A.R THERE IS NO QUARREL THAT ONLY PENDING ASSESSMENTS ARE ABATED BY THE VIRTUE OF SEC TION 153A AND NOT THE COMPLETED ASSESSMENT. THUS IN THE ASSESSMENT PROCE EDINGS UNDER SECTION 153A THE MRS GEETHA MEHRA 7 ASSESSING OFFICER CAN PROCEED LIKE A REGULAR ASSESS MENT WITH RESPECT TO THE ASSESSMENTS WHICH ARE PENDING. 10.1 AS REGARDS THE COMPLETED ASSESSMENT THE ADDIT ION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE SE ARCH; BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH AND SEIZURE OPERATION. 10.2 IN THE CASE IN HAND IT IS NOT CLEAR FROM THE RECORD AVAILABLE WHETHER THE ORIGINAL ASSESSMENT WAS COMPLETED IN ANY OF THE ASS ESSMENT YEARS UNDER CONSIDERATION. FURTHER IN VIEW OF THE DETAILS OF W ITHDRAWALS FILED BY THE ASSESSEE EXCEPT THE RENTAL RECEIPTS WHICH HAVE ALREADY BEEN CONSIDERED BY THE CIT(A) FOR DELETING THE ADDITION ON ACCOUNT OF CASH DEPOSITED IN THE ASSESSEES BANK FOR THE ASSESSMENT YEAR 2002-03 THE ISSUE REQUIRES A PROPE R VERIFICATION AND EXAMINATION AT THE LEVEL OF ASSESSING OFFICER . 10.3 AS REGARDS THE ESTIMATE OF PERSONAL EXPENDITUR E AT ` . 40 000/- TO ` . 50 000/- PER MONTH BY THE CIT(A) THE ASSESSEE IS DIRECTED TO PRODUCE THE ELECTRICITY BILL AND TELEPHONE BILLS FOR THE RELEVANT PERIOD BEFORE THE ASSESSING OFFICER IN THIS RESPECT. ACCORDINGLY WE SET ASIDE THIS ISSUE FOR ALL THE AS SESSMENT YEARS TO THE RECORD OF THE ASSESSING OFFICER. TO CONSIDER THE DETAILS EVIDENC ES AND THE ELECTRICITY AND TELEPHONE BILLS AND THEN DECIDE THE ISSUE AFRESH EX CEPT FOR THE ASSESSMENT YEAR 200809 FOR WHICH THE ADDITION MADE BY THE ASSESSIN G OFFICER. HAS BEEN DELETED BY THE CIT(A) AND REVENUE HAS NOT CHALLENGED THE SAME . 11 NEXT EFFECTIVE GROUND RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-04 AS GROUND NUMBER 9 AS UNDER: MRS GEETHA MEHRA 8 THE LD COMMISSIONER OF INCOME TAX(APPEALS) IS NOT J USTIFIED IN TREATING A SUM OF ` 14 62 500/- AS ALLEGED UNEXPLAINED INVESTMENT IN P AINTINGS DISREGARDING THE FACT OF PURCHASES OF THE SAID PAINT INGS IN THE BOOKS OF SYNERGY ART FOUNDATION LTD. 11.1 A SIMILAR GROUND HAS ALSO BEEN RAISED FOR THE ASSESSMENT YEAR 200809 AS GROUND NUMBER 4 AS UNDER: THE COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO O BSERVE THAT THERE WERE NO SIZED MATERIALS IN THE POSSESSION OF DEPARTMENT I NDICATING HUGE DRAWINGS FOR PERSONAL USE DE-HORS THE ACTUAL AMOUNT SPENT BY THE ASSESSEE BY CREDIT CARDS AND DRAWINGS THROUGH BANK ACCOUNTS. 11.2 SINCE BOTH THESE GROUNDS ARE COMMON AND RELATI NG TO THE ADDITION TOWARDS UNEXPLAINED INVESTMENT IN PAINTINGS; THEREFORE BOT H THESE GROUNDS ARE CONSIDERED AND DISPOSED OFF TOGETHER. 11.3 DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSE SSMENT YEAR 2003-04 THE ASSESSING OFFICER NOTED THAT AS PER PAGES 24 25 AN D 26 OF ANNEXURE A2 SEIZED FROM THE PREMISES OF SAKSHI GALLERY COLABA THE ASSESSEE HAS PURCHASED PAINTINGS OF JOGEN CHOWDHARY FROM THE GAJAH GALLERY ON 27/10/2 002 FOR US$ 11 000. FURTHER PAINTINGS OF LAXMAN GOUD M F HUSSAIN AND SOMAHT HO RE WERE PURCHASED ON 20/09/2002 FOR US$ 9000 FROM ARTSINDIA.COM & A PA INTING OF F N SOUZA FROM GROSVENOR GALLERY LTD ON 8/11/2002 FOR BRITISH POUN DS 7500. SINCE THE SAID PAYMENTS ARE NOT REFLECTED IN THE BANK STATEMENTS THE ASSES SING OFFICER WAS OF THE VIEW THAT THE SAME HAS BEEN PAID BY HAWALA ROUTE. ACCORDINGLY THE ASSESSING OFFICER MADE AN ADDITION OF ` . 14 62 500/- AS UNEXPLAINED INVESTMENT UNDER SECTI ON 69 FOR ACQUIRING THE PAINTINGS BY TAKING THE CONVERTIB LE RATE OF ` . 45/- FOR A DOLLAR AND ` 75/- FOR GBP. 11.4 ON APPEAL THE CIT(A) AFTER CONSIDERING THE R EMAND REPORT CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER . MRS GEETHA MEHRA 9 11.5 FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SEARCH THE ASSESSEE WAS FOUND IN POSSESSI ON OF 44 PAINTINGS. AS THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE SAID P AINTINGS WERE SEIZED BY THE DEPARTMENT AND WERE GOT VALUED BY A TEAM OF EXPERTS FROM NEHRU ART GALLERY AT ` . 29 14 500/-. THE ASSESSEE CLAIMED TO HAVE RECEIVE D THESE PAINTINGS AS GIFTS. THUS THE ASSESSING OFFICER HELD THAT WHEN THE ASSESSEE C OULD NOT PRODUCE EVIDENCE OF GIFTS HE RESORTED TO CREATE FABRICATED EVIDENCE IN THE FORM OF A BALANCE SHEET REFLECTING HOLDING OF THE PAINTINGS BY HER WHICH W ERE FOUND AND SEIZED AT THE TIME OF SEARCH. ACCORDINGLY THE ASSESSING OFFICER MADE AN ADDITION OF ` 29 14 500/-AS UNEXPLAINED INVESTMENT IN 44 PAINTINGS UNDER SECTIO N 69 OF I T ACT. 11.6 ON APPEAL THE CIT(A) HAS CONFIRMED THE ADDITI ON MADE BY THE AO ON THIS ACCOUNT. 17 BEFORE US THE LEARNED A.R. OF THE ASSESSEE HAS S UBMITTED THAT AS REGARDS THE PAINTING PURCHASED IN THE NAME OF ASSESSEE AND THE ADDITION WAS MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2003-04 A S UNEXPLAINED INVESTMENT THESE PAINTINGS WERE PURCHASED ON BEHALF OF M/S SYNERGY A RT FOUNDATION LTD. ONLY A PART PAYMENT WAS MADE AT THE TIME OF THE INVOICE AS SHOW N IN THESE INVOICES AND THE BALANCE WAS PAID BY THE PROSPECTIVE BUYERS. M/S SY NERGY ART FOUNDATION LTD IS A REAL PERSON DEALING WITH THE ALLEGED PAINTINGS AND RECEIVED THE COMMISSION ON SALE OF THESE PAINTINGS WHICH WERE DULY ACCOUNTED IN THE BOOKS. HE HAS FURTHER SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THA T THE PAINTINGS DEALT WITH BY SYNERGY ART FOUNDATION ARE PREDOMINANTLY ON CONSIGN MENT BASIS WHEREIN THE COMPANY DEALS WITH THE ARTIST AND THE PROSPECTIVE B UYERS AT A MARK-UP REFERRED TO AS COMMISSION IN BUSINESS PARLANCE AND THE ARTWORK WAS ON BEHALF OF THE BUYER FROM THE ARTIST. THE ARTIST IS PAID DIRECTLY BY THE BUY ER ON AN AGREED PRICE AND THE MRS GEETHA MEHRA 10 DIFFERENCE IN THE PRICE BETWEEN THE SALE INVOICE AN D THE PRICE PAID TO THE ARTIST IS THE COMMISSION ACCRUING ON THE SALE. HE HAS FURTHER SUBMITTED THAT THE OWNERSHIP OF THESE ARTWORK NEVER PASSED TO THE COMPANY OR THE AS SESSEE AND THE PAYMENT IS FLOWING OUT OF ACCOUNT OF THE BUYER; THEREFORE THE RE IS NO NECESSITY FOR THE ASSESSEE OR THE COMPANY TO ACCOUNT FOR THE PURCHASE OR SALE SINCE THE PRIZE RECEIVED OR ACCRUED TO THE COMPANY IS ONLY COMMISSION ON CONSIG NMENT OF SALES. HENCE THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ADDITION IS NOT JUSTIFIED. HE HAS REFERRED THE COPY OF INVOICE AT PAGE NUMBER 36 OF THE PAPER BOOK AND SUBMITTED THAT THE INVOICE IS IN THE NAME OF SAKSHI GALLERY ALONG WITH THE NAME OF THE ASSESSEE WHICH SHOWS THAT THE PAINTING WAS DEALT WITH ON BEHALF OF THE COMPANY. 17.1 AS REGARDS THE 44 PAINTINGS FOUND IN THE POSSE SSION OF THE ASSESSEE AT THE TIME OF SEARCH AN ADDITION WAS MADE FOR THE ASSESSMENT YEAR 200809 THE LEARNED A.R. OF THE ASSESSEE HAS SUBMITTED THAT A SUM OF RS. 29 14 500/-IS THE ESTIMATED VALUE OF 44 PAINTINGS FOUND IN THE PREMISES OF THE ASSESSEE . HE HAS FURTHER SUBMITTED THAT THE ALLEGED VALUE PLACED UPON SEVERAL PAINTINGS BY THE ALLEGED EXPERT COMMITTEE WAS NEVER PUT FORWARD TO THE ASSESSEE TO GET AN EXPLANA TION IN THIS REGARD. THE EVIDENCES COLLECTED WERE USED BEHIND THE BACK OF TH E ASSESSEE WITHOUT GIVING AN OPPORTUNITY IN THIS REGARD. HE HAS REFERRED CERTAI N PAINTINGS IN THE LIST OF 44 PAINTINGS AND SUBMITTED THESE ARTWORKS HAVE NO COMMERCIAL VAL UE AS THE WHEREABOUTS OF THE ARTIST IS NOT KNOWN; THEREFORE THE VALUE PLACED BY THE EXPERT COMMITTEE IS HIGHLY EXORBITANT AND ARBITRARY. HE HAS FURTHER SUBMITTED THAT SOME OF THE PAINTINGS ARE ACCOUNTED IN THE BOOKS OF M/S SYNERGY ART FOUNDATIO N AND NO SEPARATE CONSIDERATION IS REQUIRED IN RESPECT OF PAINTINGS B ELONGING TO THE COMPANY. THE LD AR HAS POINTED OUT THAT AS PER THE LIST OF THE PAIN TINGS AND THE VALUATION ASSIGNED BY THE EXPERT COMMITTEE AS WELL AS THE VALUE STATED BY THE ASSESSEE IT IS CLEAR THAT MRS GEETHA MEHRA 11 WHEN THE ASSESSEE HAS ESTIMATED THE VALUE OF THE PA INTINGS AT SERIAL NUMBER 2 AND 8 AT ` . 3500/- THE EXPERT COMMITTEE HAS VALUED THE SAME AT ` 1 LAKH WITHOUT ANY BASIS. SIMILARLY THE LEARNED A.R. OF THE ASSESSEE HAS POINTED OUT THAT FOR EACH AND EVERY PAINTING THE ASSESSEE HAS QUOTED THE PRICE A T THE TIME OF SEARCH ACTION; BUT THE VALUATION MADE BY THE ALLEGED EXPERT COMMITTEE IS MANY TIMES IN COMPARISON TO THE PRICE QUOTED BY THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT SOME OF THE PAINTINGS WERE GIVEN BY THE ARTIST TO THE ASSESSEE AS GIFTS AND THEREFORE THE SAME CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. THE AU THORITIES BELOW HAVE NOT APPRECIATED THIS FACT THAT SOME OF THE PAINTINGS WE RE RECEIVED BY THE ASSESSEE AS PERSONAL GIFTS. 17.2 ON THE OTHER HAND THE LEARNED D.R. HAS RELIED UPON THE ORDERS OF ASSESSING OFFICER AND CIT(A) AND SUBMITTED THAT THE INVOICES FOUND DURING THE SEARCH CLEARLY SHOW THAT THE PAINTINGS WERE PURCHASED BY THE ASSES SEE AND ONLY A TOKEN AMOUNT WAS PAID AT THE TIME OF THE PURCHASE. THE LEARNED D .R. HAS SUBMITTED THAT WITHOUT FULL PAYMENT THE OWNERSHIP OF THE PAINTINGS SHALL NOT PASS TO THE BUYER. HE HAS REFERRED THE CONDITIONS AS MENTIONED IN THE INVOICE S AND SUBMITTED THAT THE INVOICE ALSO INDICATES THE FEDERAL EXPRESS TRACKING NUMBER WHICH IS NORMALLY GENERATED ONLY WHEN THE GOODS ARE DISPATCHED BY THE FEDERAL EXPRES S. THEREFORE IT IS CLEAR THAT THE PAYMENT WAS MADE ON THE DATE OF INVOICE ITSELF; BU T ONLY A PART PAYMENT WAS SHOWN IN THE INVOICE. THE ASSESSEE HAS NOT PRODUCED ANY CORROBORATIVE EVIDENCE TO ESTABLISH THAT THE BALANCE PAYMENT WAS MADE BY THE PROSPECTIVE BUYER. HE HAS FURTHER SUBMITTED THAT THE VALUATION HAS BEEN DONE BY THE PANEL OF EXPERTS FROM NEHRU ART FOUNDATION. 18 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ADDITION FOR THE ASSESSMENT YEAR 2003 04 IS MADE ON THE GROUND THAT MRS GEETHA MEHRA 12 ONLY PART PAYMENT WAS SHOWN TO BE MADE AS PER THE I NVOICES SEIZED DURING THE SEARCH OPERATION AND BALANCE PAYMENT WAS MADE THROU GH HAWALA ROUTE. THE ASSESSEE HAS MAINLY CONTENDED THAT THE BALANCE PAYM ENT WAS MADE BY THE PROSPECTIVE BUYER AND THE COMPANY HAS SHOWN THE TRA NSACTION IN THE BOOKS OF ACCOUNTS. SOME OF THE INVOICES ARE IN THE NAME OF S AKSHI GALLERY ALONG WITH ASSESSEE AND THEREFORE IT CANNOT BE CONCLUDED THAT THOSE PAINTINGS BELONG TO THE ASSESSEE; IF THE SAME ARE SHOWN IN THE BOOKS OF ACC OUNTS OF THE COMPANY M/S SYNERGY ART FOUNDATION. THE CIT(A) DID NOT ACCEPT THE EXPLANATION AND CONTENTION OF THE ASSESSEE ON THE GROUND THAT NO CORROBORATIVE EVIDENCE SHOWING THE PAYMENT MADE BY THE BUYER WAS PRODUCED AND THEREFOR E JOURNAL ENTRIES DEBIT AND CREDIT ENTRIES IN THE LEDGER ACCOUNT ARE SELF-S ERVING ENTRIES. THE CIT(A) HAS ANALYSED AND DISCUSSED THE ISSUE IN PARA 15 AND 16 AS UNDER: 15. I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE THE REASONS STATED BY THE A.O IN THE ASSESSMENT ORDER FOR MAKING AN ADDITIO N OF RS.14 62 500/- U/S.69 OF THE ACT AS WELL AS FURTHER COMMENTS OFFERED IN THE REMAND REPORT. ON THE OTHER HAND THE LD. AR OF THE APPELLANT HAS STRONGLY CONTESTED THE ADDITION IN THE PAPER BOOK SUBMITTED AS WELL AS IN THE REJOINDER FILED AS A RESPONSE TO THE REMAND REPORT. IN THE PAPER BOOK SUBMITTED PHOTO COPIE S OF THE BILLS ISSUED BY THE SELLERS OF THE PAINTINGS ARE FURNISHED. IT IS SEEN THAT THE BILLS ARE ISSUED IN THE NAME OF MS. GEETA MEHRA. THE WRITTEN SUBMISSION MADE BY THE APPELLANT ALONG WITH ENCLOSURES SUCH AS THE LEDGER A CCOUNT COPIES OF THE PERSONS WHO WERE STATED TO HAVE PURCHASED THE PAINT INGS ARE EXAMINED. IT IS SEEN THAT THE WRITTEN SUBMISSIONS AND THE LEDGER AC COUNT COPIES ARE NOT SUPPORTED BY ANY LETTERS OF CONFIRMATIONS OR ANY BANK STATEMENT EXTRACTS OR ANY SUCH CORROBORATIVE EVIDENCES FURNISHED BY THE ALL EGED PURCHASERS OF THE SAID PAINTINGS TO ESTABLISH THAT THE PAYMENTS IN FO REIGN CURRENCY TO THE GALLERIES LOCATED OUTSIDE THE COUNTRY ARE MADE DIRECT LY BY THE SAID CUSTOMERS. AS PER THE INVOICES ISSUED FOR INSTANCE THE INVOICE ISSUED BY GORSVENOR GALLERY LTD. A PAINTING OF F.N. SOUZA BE ARING INVOICE NO.1789 DATED 08.11.2002 THE PAINTING WAS SOLD TO THE APPE LLANT AS PER THE ADDRESS GIVEN IN THE INVOICE. THE ADDRESS GIVEN IN THE INVO ICE IS GEETA MEHRA 206 5TH AVENUE NEW YORK USA. ACCORDING TO THE CONDITION S MENTIONED IN THE SALES INVOICE THE OWNERSHIP SHALL NOT PASS TO THE BUYER UNLESS THE PAYMENT IS MADE IN FULL. THE INVOICE ALSO INDICATES THE FEDERAL EXPRESS TRACKING NUMBER WHICH IS NORMALLY GENERATED ONLY WHEN THE GOODS ARE DISPATCHED BY FEDERAL EXPRESS. THEREFORE IT HAS TO BE INFERRED THAT THE PAY MENT WAS IN FACT MADE TO GROSVENOR GALLERY BY 08.11.2002 ITSELF WHICH IS TH E DATE OF INVOICE. ACCORDING TO THE WRITTEN EXPLANATION THE ENTIRE AMOUNT OF 79 29 POUNDS (INCLUDING MRS GEETHA MEHRA 13 FREIGHT OF 429 POUNDS) WAS PAID BY ONE AMRITA ZAVERI . BUT NO CORROBORATIVE EVIDENCE IS FURNISHED EVEN DURING THE APPEAL PROCEEDI NGS AFTER AVAILING SEVERAL OPPORTUNITIES. 16. SIMILARLY THE CORROBORATIVE EVIDENCES SUCH AS T HE CONFIRMATION OF PAYMENTS BY THE CUSTOMERS DIRECTLY TO THE GALLERIES O UTSIDE THE COUNTRY ARE NOT SUBMITTED IN RESPECT OF OTHER PAINTINGS. GIVEN THE FACTS & CIRCUMSTANCES OF THE CASE IT WAS ALSO REQUIRED THAT THE APPELLAN T HAD TO CORROBORATE SUCH CLAIMS BY OBTAINING NOT ONLY CONFIRMATION LETTERS F ROM THE CUSTOMERS BUT ALSO THE MODE OF PAYMENT AND THE EVIDENCES THEREOF. IT WA S ALSO REQUIRED TO FURNISH THE EVIDENCES AS TO WHOM THE PAINTINGS WERE S OLD I.E. WHETHER TO THE SAKSHI GALLERY OR TO THE APPELLANT OR TO THE CUSTOMERS TO WHOM THE PAYMENTS MADE TO THE GALLERIES LOCATED OUTSIDE THE COUNTRY ARE ATTRIBUTED. IT IS SEEN FROM THE FINAL WRITTEN SUBMISSIONS AND ENCLOSURES FI LED ON 13.10.2011 THAT THE APPELLANT HAS RELIED UPON THE EXTRACTS OF LEDGER ACCO UNTS MAINTAINED IN THE NAME OF CERTAIN CUSTOMERS IN THE BOOKS OF ACCOUNTS OF SYNERGY ART FOUNDATION LTD. IN WHICH THE APPELLANT IS A DIRECT OR. HOWEVER IT IS SEEN FROM THE LEDGER EXTRACTS THAT CERTAIN JOURNAL ENTRIES AND D EBIT NOTES ARE RECORDED TO EXPLAIN THE TRANSACTIONS. THE JOURNAL ENTRIES D EBIT & CREDIT ENTRIES IN THE LEDGER ACCOUNTS OF THE CUSTOMERS ARE REQUIRED TO BE S UPPORTED BY CERTAIN PRIMARY EVIDENCES SUCH AS ANY CONFIRMATION LETTERS O F THE CUSTOMERS ALONG WITH DETAILS OF PAYMENTS MADE THROUGH BANKING CHANNE LS. IN THE ABSENCE OF ANY SUCH EVIDENCES TO SUPPORT THE JOURNAL ENTRIES T HE ONUS THAT THE PAYMENTS IN FOREIGN EXCHANGE WERE DIRECTLY MADE BY THE CUSTOMER S IS NOT DISCHARGED AND SUCH ENTRIES HAVE TO BE TREATED AS SELF-SERVING EN TRIES. ALTHOUGH APPELLANT HAS MADE REFERENCES TO SEIZED MATERIALS SO AS TO EXPLAIN THESE TRANSACTIONS NOTHING HAS BEEN SPECIFICALLY PRODUCE D TO AUTHENTICATE THAT THE ACTUAL PAYMENTS IN FOREIGN EXCHANGE HAVE BEEN M ADE DIRECTLY BY THE CUSTOMERS TO THE GALLERIES OUTSIDE THE COUNTRY. SIN CE THE INVOICES ISSUED BY THE ART GALLERIES IN OTHER COUNTRIES ARE IN THE NAME OF THE APPELLANT IT IS THE APPELLANT WHO HAS TO DISCHARGE THE ONUS OF EXPLAINI NG THE SOURCES OF PAYMENTS. UNLESS THE SOURCES OF PAYMENTS FOR THE PU RCHASE OF THE PAINTINGS IN FOREIGN EXCHANGE IS EXPLAINED IT WOULD BE OF LITTLE CONSEQUENCE TO REFER TO ANY INVENTORY OF PAINTINGS FOUND DURING THE SEARCH & SEIZURE PROCEEDINGS THE OWNERSHIP OF WHICH IS ATTRIBUTED TO SYNERGY ART FOU NDATION LTD. ON A CAREFUL APPRECIATION OF THE FACTS OF THE CASE AND THE CONTEN TIONS OF THE APPELLANT IT IS HEREBY HELD THAT THE SOURCES OF PAYMENTS FOR THE PAINTINGS IN QUESTION HAVE NOT BEEN SATISFACTORILY EXPLAINED BY THE APPELLANT. HAVING REGARD TO THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE ADDITION OF RS.14 62 500/- MADE U/S.69 OF THE ACT IS HEREBY CONFIRMED. 18.1 THUS IT IS CLEAR FROM THE FACTS RECORDED BY T HE CIT(A) THAT DESPITE THE OPPORTUNITIES GIVEN BY THE CIT(A) THE ASSESSEE FA ILED TO FURNISH ANY EVIDENCE TO SHOW THAT THE BALANCE PAYMENT WAS MADE BY THE ULTIM ATE PURCHASER AND THE COMPANY HAS RECEIVED THE COMMISSION INCOME. THE ADD ITION HAS NOT MADE SOLELY ON THE GROUND THAT THE ASSESSEE PURCHASED AND OWNED THESE PAINTINGS; BUT IT WAS MRS GEETHA MEHRA 14 MADE ON THE GROUND THAT ONLY PART PAYMENT HAS BEEN SHOWN IN THE INVOICES WHICH ARE IN THE NAME OF THE ASSESSEE AND THEREFORE THE BALANCE PAYMENT WAS MADE THROUGH HAWALA ROUTE. 18.2 EVEN BEFORE US NOTHING HAS BEEN PRODUCED TO S HOW THE NAME AND DETAILS OF THE COSTUMERS ON WHOSE BEHALF THE PURCHASES WERE AL LEGEDLY MADE BY THE ASSESSEE. THE ASSESSEE HAS NOT DISPUTED THE PURCHA SES OF THE PAINTINGS IN QUESTION; BUT HAS TAKEN A PLEA THAT THESE PAINTINGS WERE PURC HASED ON BEHALF OF THE PROSPECTIVE BUYERS AND THE ACTUAL BILL IS ON THE CO MPANY WHO WAS RECEIVED THE COMMISSION IN THE TRANSACTION. WHEN NOTHING HAS BEE N PRODUCED TO SHOW THAT THE PAINTINGS WERE ULTIMATELY SOLD TO SUCH AND SUCH PER SON AND WHO HAS MADE THE BALANCE PAYMENT THEN WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2003 04 ON THIS I SSUE. 19 FOR THE ASSESSMENT YEAR 2008 09 THE ADDITION WAS MADE WITH REGARD TO THE VALUE OF 44 PAINTINGS FOUND IN THE POSSESSION OF TH E ASSESSEE DURING THE SEARCH. THE ASSESSEE RAISED MAINLY 3 OBJECTIONS VIZ (I) THAT SO ME OF THE PAINTINGS ARE GIVEN BY THE ARTIST TO THE ASSESSEE AS GIFTS (II) THE REST OF T HE PAINTINGS HAVING NO COMMERCIAL VALUE AS THE SAME WERE WRITTEN OFF BY THE COMPANY AS BECO ME OLD AND LOST THE VALUE AND (III) THE VALUATION PLACED UPON THE PAINTINGS BY TH E EXPERT PANEL IS NOT AS PER THE REAL VALUE OF THE PAINTINGS. 19.1 THE CIT(A) HAS TURNED DOWN THE CONTENTION OF THE ASSESSEE REGARDING THE PAINTINGS GIVEN AS GIFT ON THE GROUND THAT NO CORRO BORATIVE EVIDENCE WAS FURNISHED BY THE ASSESSEE IN SUPPORT OF THE CLAIM. AS REGARD S THE CLAIM OF THE ASSESSEE THAT OTHER PAINTINGS BELONG TO THE COMPANY M/S SYNERGY A RT FOUNDATION THE CIT(A) HAS REJECTED THE SAME ON THE GROUND THAT ASSESSEE HAS N OT DISCLOSED THE SAME AT THE TIME OF SEARCH. THE 3 RD OBJECTION REGARDING VALUATION OF THE PAINTING WAS TURNED MRS GEETHA MEHRA 15 DOWN ON THE GROUND THAT VALUE OF PAINTINGS ON ARTWO RK IS A SUBJECT MATTER OF EXPERT OPINION AND VALUE WAS DONE BY THE PANEL OF EXPERTS. 19.2 IT IS PERTINENT TO NOTE THAT IN THE ABSENCE OF ANY MATERIAL TO INDICATE THAT PAINTING WAS GIVEN TO THE ASSESSEE BY THE ARTIST AS GIFTS AND FURTHER IN THE ABSENCE OF ANY DECLARATION BY THE ASSESSEE PRIOR TO THE SEARCH THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. HOWEVER IF THE WORK ITSELF EX HIBITS THAT THE SAID PAINTING WAS DRAWN SPECIFICALLY FOR GIVING GIFTS TO THE ASSESSEE THEN IT CAN BE CONSIDERED APPROPRIATELY. 19.3 WE FIND FORCE AND MERIT ON THE POINT THAT SOME OF THE PAINTINGS BELONG TO THE COMPANY AND WRITTEN OFF BECAUSE OF LOW/COMMERCIAL VALUE IF THE SAID CLAIM OF THE ASSESSEE IS SUPPORTED BY THE RELEVANT RECORD. BOTH ASSESSING OFFICER AND CIT(A) HAVE NOT EXAMINED THE SAID FACTUAL CLAIM OF THE ASS ESSEE AND REJECTED THE SAME ON TECHNICAL GROUNDS THAT THE ASSESSEE DID NOT DECLARE THE SAME AT THE TIME OF SEARCH. 19.4 WE ARE OF THE CONSIDERED OPINION THAT EVEN THE ASSESSEE DID NOT DECLARE THIS FACT DURING THE SEARCH; BUT IF THE ASSESSEE IS ABLE TO DEMONSTRATE THAT THE PAINTINGS ACTUALLY BELONG TO THE COMPANY AND PRODUCE THE SUPP ORTING EVIDENCE THAN AN ADDITION CANNOT BE MADE SOLELY ON THE GROUND THAT T HE SAID FACT WAS NOT DISCLOSED AT THE TIME OF SEARCH. 19.5 IT IS PERTINENT TO NOTE THAT WHEN BOTH ASSESSE E AND THE COMPANY ARE CLOSELY RELATED AND SUBJECTED TO THE SAME SEARCH AND SEIZUR E ACTION THEN IT WAS NOT DIFFICULT TO VERIFY THE RELEVANT MATERIAL FACT FROM THE RECORD ALREADY SEIZED BY THE DEPARTMENT. 19.6 AS REGARDS THE VALUATION OF PAINTING IF SOME OF THE PAINTINGS ARE FOUND TO BE BELONGING TO THE COMPANY AND WRITTEN OFF THEN THE VALUE OF THE SAME CANNOT BE MRS GEETHA MEHRA 16 MORE THAN WHAT WAS ORIGINALLY SHOWN IN THE BOOKS OF ACCOUNTS OF THE COMPANY. FURTHER THE ASSESSEE IS AT LIBERTY TO PRODUCE ANY EVIDENCE WITH REGARD TO THE VALUATION OF THE PAINTINGS. 20 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE WE SET ASIDE THE ISSUE OF ADDITION ON ACCOUNT OF UN EXPLAINED INVESTMENT IN PAINTINGS FOR THE ASSESSMENT YEAR 2008 09 TO THE RECORD OF ASSESSING OFFICER TO RECONSIDER AND DECIDE THE SAME AFRESH IN THE LIGHT OF OUR ABOV E OBSERVATION. 21 FOR THE ASSESSMENT YEAR 2007 08 THE ASSESSEE H AS ALSO RAISED FOLLOWING GROUNDS 8. THE LD CIT(A) IS NOT JUSTIFIED IN SUSTAINING TH E ADDITION OF ` 4 LACS AS UNEXPLAINED SOURCES FOR PURCHASE OF LAND AT MURUD WIT HOUT PROPERLY CONSTRUING THE AVAILABILITY OF FUNDS TO THE EXTENT O F ` 5 LACS ON SALE OF PAINTINGS AND SHOW AS PART OF ` 46.15 LAKHS IN THE STATEMENT OF CAPITAL GAIN FILED ALONG WITH THE RETURN OF INCOME. 9.THE LD COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE SUM OF ` 60.15 LAKHS AS ALLEGED BOGUS OPENING CAPITAL ACCOU NT WITHOUT ANY BASIS. 22 GROUND NUMBER 8 REGARDING THE ADDITION OF ` 4 LAKHS AS UNEXPLAINED SOURCE FOR PURCHASE OF LAND. 22.1 THE ASSESSING OFFICER HAS NOTED THAT AS PER P AGE NUMBER 3 & 4 OF ANNEXURE - 2 SEIZED FROM THE RESIDENCE OF THE ASSESSEE IT IS SEEN THAT THE ASSESSEE HAS PAID ` 3 LAKH ON 15/7/2006 AND A CASH OF ` . 1 LAKH ON 4/05/2006 TO ONE MR NAVJOT ALTAF FOR PURCHASE OF LAND AT SURVE MURUD. THE ASSESSING OFF ICER FURTHER NOTED THAT THE ASSESSEE HAD NO CASH WITHDRAWALS EVEN FOR PERSONAL EXPENSES AND ACCORDINGLY THE ASSESSING OFFICER MADE AN ADDITION OF ` 4 LAKHS AS UNEXPLAINED INVESTMENT. 22.2 ON APPEAL THE ASSESSEE HAS EXPLAINED THAT THE PAYMENT OF ` . 3 LAKH WAS MADE BY WAY OF CHEQUE FROM HDFC BANK AND THE PAYMEN T OF ` . 1 LAKH IN CASH WAS MRS GEETHA MEHRA 17 MADE OUT OF THE SALE PROCEEDS OF PAINTINGS OF ` . 5 LACS ON 12/04/2006. THE CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND NOTED THAT THE ASSESSING OFFICER HAS BROUGHT OUT IN THE ASSESSMENT ORDER THAT IN THE BANK ACCOUNT OF THE ASSESSEE WITH HDFC BANK THE ASSESSEE HAS DEPOSITED CASH OF ` 2.5 LAKH ON 12/05/2006 WHICH FORMS A SOURCE FOR MAKING THE PAYMENT OF ` 3 LAKH BY CHEQUE ON 15/7/2006. ACCORDINGLY THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER . 23 BEFORE US THE LEARNED A.R. OF THE ASSESSEE HAS SUB MITTED THAT THE TOTAL PAYMENT WAS MADE FOR THE PURCHASE OF LAND IS RS. 15 LAKHS AND ONLY RS. 4.50 LAKH WAS SHOWN IN THE SEIZED DOCUMENT. HE HAS FURTHER SUBMIT TED THAT THE TOTAL PURCHASE PRICE OF THE LAND EVEN IN THE SALE DEED IS SHOWN AS RS 6 LAKH WHEREAS THE ACTUAL PAYMENT OF PURCHASE CONSIDERATION WAS RS. 15 LAKH OUT OF WHICH THE ASSESSEE HAS MADE THE PAYMENT OF RS. 9 LAKH THROUGH CHEQUES AND BALANCE IN CASH. HE HAS FURTHER SUBMITTED THAT THE CIT(A) HAS REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DEPOSITED CASH OF RS. 2.5 LAKH ON 12/5/2006 BY IGNORING THE FACT THAT THE ASSESSEE HAD A BANK BALANCE OF RU PEES MORE THAN RS. 42 LAKHS ON THAT DATE. HE HAS FURTHER SUBMITTED THAT WHEN THE S ALE OF PAINTINGS IS NOT DISPUTED THEN THE SALE PROCEEDS OF THESE PAINTINGS OF RS. 5 LAKH WAS ALSO AVAILABLE WITH THE ASSESSEE AS SOURCE OF THE SAID PAYMENT. 23.1 ON THE OTHER HAND THE LEARNED D.R. HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. IN VIEW OF THE NEW FACTS BROUGHT OUT BY TH E ASSESSEE THAT THE ACTUAL CONSIDERATION PAID FOR PURCHASE OF LAND IS RS. 15 L AKH THE ISSUE REQUIRES TO BE CONSIDERED AFRESH. WE FURTHER NOTE THAT THE ISSUE W AS NOT PROPERLY VERIFIED BY THE AUTHORITIES BELOW AND DECIDED THE SAME SUMMARILY. A CCORDINGLY WE SET ASIDE THE MRS GEETHA MEHRA 18 ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR D ECIDING THE SAME AFTER CONSIDERING ALL THE RELEVANT FACTS AND MATERIAL. 25 GROUND NUMBER 9 REGARDING THE ADDITION ON ACCOUN T OF OPENING CAPITAL BALANCE. 25.1 WE WILL ALSO DEAL WITH THE GROUND NUMBER 2 WH ICH IS COMMON IN ALL APPEALS ALONG WITH THIS GROUND OF APPEAL. 25.2 THE ASSESSEE HAD FILED HER ORIGINAL RETURN ON 25/10/2007 DECLARING A TOTAL TAXABLE INCOME OF RS. 69 97 189/- WHICH INCLUDES S HORT TERM CAPITAL GAIN OF RS. 14 LAKH FROM SALE OF PAINTINGS AND LONG TERM CAPITAL G AIN OF RS. 22 19 815/- FROM SALE OF PAINTINGS. IN RESPONSE TO NOTICE UNDER SECTION 153 A THE ASSESSEE FILED THE REVISED RETURN DATED 30/06/2008 WHEREIN THE INCOME DECLARED EARLIER FROM THE SALE OF PAINTINGS WAS WITHDRAWN ON THE GROUND THAT THE DEFI NITION OF CAPITAL GAIN DOES NOT COVER PAINTINGS AS THE SAME IS CONSIDERED AS PERSO NAL EFFECT. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT THE AS SESSEE HAD FILED THE RETURN FOR THE ASSESSMENT YEAR 2005 06 WITH THE IN-CHARGE O F ACIT/DCIT- 7 (2) MUMBAI ALONG WITH BALANCE SHEET WHERE SHE HAS SHOWN THE PAINTIN GS WORTH RS. 29 08 337/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD UP TO THE ASSESSMENT YEAR 2005-06 ALL LONG FILED HER RETURNS AT THE SALARY BRANCH OF CHENNAI DISCLOSING ONLY SALARY AND RENTAL INCOME. EVEN THE SUBSEQUENT RETURNS OF INC OME FOR THE ASSESSMENT YEARS 2007 08 AND 2008-09 WERE ALSO FILED IN THE SAME S ALARY BRANCH AT CHENNAI. THE ASSESSING OFFICER FURTHER NOTED THAT AS PER THE ASS ESSEE'S BANK ACCOUNT NO SUCH SALE PROCEEDS HAVE BEEN CREDITED AND NO DETAILS OF SUCH ALLEGED SALES OF PAINTINGS HAVE BEEN FILED DURING THE COURSE OF ASSESSMENT. HENCE THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CLAIM OF ALLEGED TAX FREE RECEIPTS FR OM PURPORTED SALE OF PAINTINGS IS NOTHING BUT AN EXERCISE TO ARTIFICIALLY INFLATE THE ASSESSEE'S CAPITAL ACCOUNT TO MRS GEETHA MEHRA 19 BALANCE BY INSERTION OF BOGUS FIGURE ON THE ASSETS SIDE REPRESENTING THE VALUE OF PAINTINGS OWNED BY THE ASSESSEE FOUND AND SEIZED AT THE TIME OF SEARCH. ACCORDINGLY THE ASSESSING OFFICER MADE AN ADDITION OF RS. 60 15 000/- AS UNEXPLAINED INCREASE IN THE CAPITAL ACCOUNT. 25.3 ON APPEAL AFTER CONSIDERING THE REMAND REPORT THE CIT(A) HELD THAT THE AO HAS RIGHTLY ASSESSED THE SAID AMOUNT TO TAX AND CON FIRMED THE ADDITION MADE UNDER SECTION 69 OF THE ACT. 26 BEFORE US THE LEARNED AND AR OF THE ASSESSEE HA S SUBMITTED THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 WAS FILED AT MUMBAI ON 23/11/2006 VIDE RECEIPT NUMBER 0720000316 WITH DCIT-7 (2) MUMBAI. HE HAS REFERRED THE COPY OF THE RETURN AND ACKNOWLEDGEMENT STAMP GIVING THE SAID RE CEIPT NUMBER. HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS TRIED TO FABRICATE FALSE EVIDENCE TO SUPPORT HER A FALSE CLAIM BY CLAI MING TO FILE A RETURN FOR ASSESSMENT YEAR 2005-06 AT MUMBAI WHICH WAS FOUND FALSE AND IN CORRECT ON ENQUIRY. BUT THE ASSESSEE FILED A PETITION ON 8/06/2010 TO THE COMMI SSIONER OF INCOME TAX 7 MUMBAI SEEKING THE RELEVANT MATERIAL AND EVIDENCE WHICH W AS USED BY THE ASSESSING OFFICER AGAINST THE ASSESSEE IN HOLDING THAT THE AS SESSEE HAS MANIPULATED THE RECORD. THE LEARNED A.R. OF THE ASSESSEE HAS SUBMIT TED THAT THE PAINTINGS WERE PURCHASED BY THE ASSESSEE BEING AN ART CONNOISSEUR FOR THE PAST SEVERAL YEARS AND THEREFORE IT IS A PERSONAL EFFECT WHICH IS NOT SU BJECT TO TAXATION EITHER ON PURCHASE OR ON SALE THEREOF. THERE IS NO SCOPE OF ENQUIRY ON THE PURCHASES WHICH ARE DISCARDED. THE SALE PROCEEDS OF PAINTINGS WERE REC EIVED MOSTLY BY CHEQUES AND REPRESENTING THE ASSERTION TO CAPITAL ACCOUNT ON TH E LIABILITY SIDE OF BALANCE SHEET AND THE OTHER BEING THE PURCHASE COST OF PAINTING S HOWN UNDER THE INVESTMENT IN THE ASSET SIDE OF BALANCE SHEET. THE A.R. HAS THUS SUBMITTED THAT THERE CANNOT BE MRS GEETHA MEHRA 20 ANY CONFUSION TO UNDERSTAND THE BASIC ACCOUNTING EN TRIES ONE REPRESENTING THE LIABILITY SIDE AND OTHER ASSETS SIDE. THUS IT WAS C ONTENDED THAT THERE IS NO CASE FOR ADDITION OF CAPITAL ACCOUNT OF RS. 60.15 LAKH AS UN EXPLAINED SALE OF PAINTINGS AND THEREFORE THE ADDITION IS ILLEGAL AND IMAGINARY. H E HAS REFERRED SECTION 2 (14) AND SUBMITTED THE PAINTINGS FALL UNDER THE CATEGORY OF PERSONAL EFFECTS AND ONLY FROM THE ASSESSMENT YEAR 2008-09 THE AMENDMENT UNDER SECTIO N 2 (14) HAS BEEN BROUGHT TO BRING THE PAINTINGS UNDER THE CATEGORY OF CAPITAL A SSET. THUS THE LEARNED A.R. HAS SUBMITTED THAT PRIOR TO THE ASSESSMENT YEAR 2008 0 9 THE PAINTINGS CANNOT BE TREATED AS CAPITAL ASSET AS PER THE PROVISIONS OF S ECTION 2 (14) OF THE ACT. 26.1 ON THE OTHER HAND THE LEARNED D.R. HAS SUBMITT ED THAT THE PAINTINGS PURCHASED AND SOLD BY THE ASSESSEE CANNOT BE TREATE D AS PERSONAL EFFECT AS THE SAME WERE NOT ACQUIRED FOR PERSONAL TASTE OR AS HOB BY; BUT FOR BUSINESS. HE HAS RELIED UPON THE ORDERS OF ASSESSING OFFICER AND CIT (A). 27 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. THE CIT(A) SOUGHT A REMAND REPORT FROM THE ASSESSI NG OFFICER WHICH WAS SUBMITTED BY LETTER DATED 5/10/2010. THE ASSESSING OFFICER I N THE REMAND REPORT HAS POINTED OUT THAT THE ASSESSEE HAS NOT EXPLAINED THAT ASSESS EE WAS BUYING AND SELLING PAINTINGS WHY DID SHE NOT FILED ANY BALANCE SHEET BEFORE THE DATE OF SEARCH. THE ASSESSING OFFICER NOTED THAT ONLY AFTER THE SEARCH FORM 17/04/2007 FOR THE FIRST TIME THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN AND SH ORT TERM CAPITAL GAIN IN HER RETURN DATED 25/10/2007. LATER ON SHE FILED REVIS ED RETURN WHEREIN SHE REMOVED THE LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAIN FROM THE SALE OF PAINTINGS. THE MRS GEETHA MEHRA 21 CIT(A) HAS GIVEN THE DETAILS OF PURCHASE AND SALE OF PAINTINGS AS PER THE DETAILS SUBMITTED BY THE ASSESSEE IN THE WRITTEN SUBMISSION S IN PARA 18 OF THE IMPUGNED ORDER AS UNDER: 18. A FURTHER HEARING WAS SPECIFICALLY CONDUCTED ON 13.09.20 11 TO EXAMINE THE ISSUE OF OPENING OF BALANCE OF THE CAPITAL ACCO UNT. THE LD. A.R. OF THE APPELLANT APPEARED AND THE APPEAL WAS HEARD. AS REQUES TED BY THE LD. A.R. DURING THE APPEAL PROCEEDINGS AN ADJOURNMENT W AS GRANTED TO 12.10.20 11 TO FURNISH WRITTEN SUBMISSIONS TO EXPLAIN THE OPENING BALANCE OF THE CAPITAL ACCOUNT ON 19.09.20 11 A WRITTEN SUBM ISSION WAS FILED IN TAPAL WHICH IS TAKEN ON RECORD AND CONSIDERED FOR DECIDING TH E ISSUES. HOWEVER ON THE DATE OF HEARING I.E. 12.10.2011 NONE APPEARED. IN THE WRITTEN SUBMISSIONS FILED IN RECEIPT COUNTER ON 19.09.2011 THE APPELLAN T SUBMITTED THAT THE STOCK OF PAINTINGS AS ON 3 1.03.2006 AGGREGATING TO RS.29 08 337/- REPRESENTED PURCHASES MADE DURING MAY 2005 TO MARCH 2006 AND TH E SAID PAINTINGS WERE ACQUIRED BY PAYMENTS MADE BY CHEQUES FROM APPELLA NTS BANK ACCOUNT WITH HDFC BANK ACCOUNT. THE DETAILS INCLUDE D IN THE WRITTEN SUBMISSION ARE AS UNDER: MRS GEETHA MEHRA 22 A COPY OF LEDGER ACCOUNTS AS ON 31.03.2006 AND FORMI NG PART OF SEIZED MATERIALS ANNEXURE A PAGE 1 DATED 17.04.2007 ALONG W ITH MAHAZARNAMA DATED 12.11.2009 IS ENCLOSED FOR PROOF OF PURCHASE AN D PAYMENT THEREFOR. THUS NO PART OF THE PAINTINGS IN STOCK REMAIN OUTSI DE THE ACCOUNTS AND THE ALLEGATIONS MADE OUT THAT RETURN WERE FALSIFIED IS MO TIVATED AND CONSONANTS. THE ADDITION IN SUM OF RS. 60. 15 LAKHS IS THUS ILL EGAL AND NOT SUSTAINABLE. 27.1 THE ASSESSEE CLAIMED TO HAVE SOLD THE ABOVE PA INTINGS IN THE YEAR UNDER CONSIDERATION RESULTING SURPLUS OF RS. 60.15 LAKH. THOUGH IN THE ORIGINAL RETURN OF INCOME THE ASSESSEE OFFERED THIS AMOUNT AS SHORT T ERM CAPITAL GAINS AND LONG TERM CAPITAL GAIN; BUT SUBSEQUENTLY IN THE REVISED RETU RN THE ASSESSEE WITHDRAWN THE CAPITAL GAIN FROM TAX AND CLAIMED THAT THE PAINTING S ARE PERSONAL EFFECTS AND CANNOT BE TREATED AS CAPITAL ASSET UNDER SECTION 2( 14) FOR THE YEAR UNDER CONSIDERATION. FROM THE DETAILS OF THE PURCHASE AN D SALE OF THE PAINTINGS IT IS CLEAR MRS GEETHA MEHRA 23 THAT MOST OF THE PAINTINGS WERE PURCHASED BY THE AS SESSEE FROM M/S SYNERGY ART FOUNDATIONS LTD. AND OTHER PAINTINGS WERE PURCHASE D FROM THE INDIVIDUAL. WHEN THE PAINTINGS WERE SOLD WITHIN THE PERIOD OF ONE YEAR A ND ONLY FEW WERE SOLD JUST AFTER THE EXPIRY OF ONE YEAR THAN IT CANNOT BE SAID THAT THE ASSESSEE ACQUIRED THESE PAINTINGS FOR PERSONAL USE. THEREFORE FROM THE NAT URE OF TRANSACTIONS AND HAVING REGARD TO THE FACT THAT THE ASSESSEE IS DEALING ALL THE PURCHASE AND SALES ON BEHALF OF THE COMPANY IN RESPECT OF THE PAINTINGS THAN WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LEARNED A.R. THAT THE PAINTINGS C ANNOT BE TREATED AS CAPITAL ASSET BEING A PERSONAL EFFECT. 27.2 EVEN OTHERWISE FROM THE FACTS OF THE CASE IT IS MANIFEST THAT THE ASSESSEE HAS BEEN DEALING IN THE PAINTINGS REGULARLY AND FURTHER WHEN THE ASSESSEE IS WORKING DIRECTOR OF THE COMPANY M/S SYNERGY ART FOUNDATIONS LTD. AND DOING BUSINESS ACTIVELY ON BEHALF OF THE COMPANY THEN FROM THE NA TURE OF THE ACTIVITY IT CANNOT BE SAID THAT THESE PAINTINGS WERE PURCHASED BY THE ASS ESSEE AS PERSONAL EFFECTS. 27.3 AS REGARDS THE ISSUE OF ADDITION OF RS. 60.15 LAKHS ON ACCOUNT OF ADDITION ON CAPITAL WE NOTE THAT THE CIT(A) DID NOT ACCEPT TH E DETAILS AND CLARIFICATION GIVEN BY THE ASSESSEE AND HELD IN PARA 20 AS UNDER: 20. THE FACTS OF THE CASE THE WRITTEN SUBMISSIONS OF THE APPELLANT THE REMAND REPORT SUBMITTED BY THE A.O AND THE REJOINDER F ILED BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS SEEN THAT THE INITIAL WRITTEN SUBMISSIONS FILED DURING THE APPEAL PROCEEDINGS THE APPELLANT D ID NOT OFFER ANY SPECIFIC EXPLANATION AND CORROBORATIVE EVIDENCES WITH REGARD T O THE ALLEGED INVENTORY OF PAINTINGS HELD BY THE APPELLANT. THE O THER CONTENTION OF THE APPELLANT THAT A RETURN OF INCOME WAS REFUSED TO HE RE CEIVED BY DCIT RANGE-.7(2) MUMBAI IS FOUND TO BE IRRELEVANT. IT WA S OPEN TO THE APPELLANT TO FILE THE RETURN OF INCOME ALONG WITH BALANCE SHEET A ND PROFIT & LOSS ACCOUNT AND INVENTORY OF PAINTINGS AT CHENNAI WHERE SHE WAS REGULARLY ASSESSED TO TAX. THE DEPARTMENT WOULD HAVE GOT THE ASSESSMENT RE CORDS AND RETURNS OF INCOME TRANSFERRED TO MUMBAI. IT WAS REQUIRED ON THE P ART OF THE APPELLANT TO SATISFACTORILY EXPLAIN THE SOURCES OF INVESTMENT IN T HE PAINTINGS BY DIRECTLY CORRELATING THE PURCHASES AND THE PAYMENTS MADE. IN THIS CONTEXT IT IS SEEN THAT IN THE WRITTEN REPLY FILED IN RESPONSE TO THE RE MAND REPORT THE APPELLANT MRS GEETHA MEHRA 24 HAS NOT EVEN INDICATED THE PRICE PAID FOR THE PAINTIN GS ALLEGED TO HAVE BEEN ACQUIRED DURING 1983 TO 1990 WHICH ARE SHOWN AS PAIN TINGS SOLD TOTAL CONSIDERATION OF RS.46 15 000/- AND CLASSIFIED AS LO NG TERM CAPITAL GAINS. FURTHER THE DETAILS OF PAINTINGS SHOWN AS PURCHASED A S PER THE WRITTEN SUBMISSION FILED IN THE RECEIPT COUNTER ON 19.09.201 1 ARE ENTIRELY DIFFERENT FROM THE PAINTINGS SHOWN AS SOLD IN THE REPLY TO THE REMA ND REPORT SUBMITTED. THE APPELLANT IS A DIRECTOR OF SYNERGY ART FOUNDATION LT D. IT IS SHOWN IN THE WRITTEN SUBMISSIONS FILED ON 19.09.2011 THAT 21 PAINTINGS W ERE PURCHASED FROM SYNERGY ART FOUNDATION LTD. ON 13.03.2006. A DIRECTOR OF THE COMPANY IS EXPECTED TO PROMOTE THE SALES OF THE COMPANY RATHER THAN CONDUCT ING TRADING ACTIVITIES BETWEEN THE COMPANY AND HERSELF. NO EXPLANATION HAS BEEN FURNISHED AS TO WHAT ARE THE COMPELLING CIRCUMSTANCES UNDER WHICH 21 PAINTINGS HAVE BEEN SHOWN AS PURCHASED BY THE APPELLANT FROM SYNERGY ART FO UNDATION LTD. IN WHICH SHE IS A DIRECTOR. THUS THERE ARE SEVERAL INC ONSISTENCIES AND CONTRADICTIONS IN THE WRITTEN SUBMISSIONS FILED BY T HE APPELLANT ON DIFFERENT DATES DURING THE APPEAL PROCEEDINGS. CONSIDERING THE F ACT THAT A LARGE AMOUNT WAS STATED TO HAVE BEEN REALIZED FROM THE SALE S OF PAINTINGS WHICH WAS RS.60 15 000/- AND CONSIDERING THE FACT THAT OU T OF THE SAID AMOUNT AN AMOUNT OF RS.46 15 000/- WAS CLASSIFIED AS LONG TER M CAPITAL GAINS WHILE FILING THE RETURN OF INCOME THE APPELLANT OUGHT TO HAVE SU BMITTED A CLEAR EXPLANATION AND CORROBORATIVE EVIDENCES DURING THE A SSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 153A OF THE ACT AND OUGHT TO HAVE CONSISTENTLY RELIED UPON THE SAME. IN ADDITION TO FAILURE TO DO SO THE APPEL LANT HAS ALSO NOT SUBMITTED CATEGORICAL EXPLANATION EVEN DURING THE EARLIEST OPP ORTUNITY DURING THE APPEAL PROCEEDINGS. THERE HAVE BEEN SEVERAL INCONSISTE NT AND CONTRADICTORY EXPLANATIONS EVEN DURING THE APPEAL PROCEEDINGS. HAVI NG REGARD TO THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE IT IS HE REBY HELD THAT THE APPELLANT HAS NOT DISCHARGED THE ONUS OF SATISFACTORI LY EXPLAINING THE SOURCES OF ACQUISITION OF THE PAINTINGS WHICH ARE STATED TO HAVE BEEN SOLD AND LONG TERM AS WELL AS SHORT TERM CAPITAL GAINS HAS BEEN REA LIZED. CONSEQUENTLY THE ACCRETION TO THE CAPITAL ACCOUNT ATTRIBUTED TO THE A LLEGED SALES OF PAINTINGS AMOUNTING TO RS.60 15 000/- HAS BEEN RIGHTLY ASSESSE D TO TAX. THE ADDITION IS CONFIRMED U/S.69 OF THE ACT. 27.4 IT IS CLEAR FROM THE ORDER OF CIT(A) THAT THE EXPLANATION OF PURCHASE AND SALE WAS REJECTED WITHOUT EXAMINING THE CORRECTNESS OF T HE SAME. THEREFORE THE ISSUE IS REQUIRED TO BE EXAMINED ON THE POINT OF CORRECTNESS OF THE FACTUAL ASPECT AS CLAIMED BY THE ASSESSEE. 27.5 AS REGARDS THE FILING OF RETURN OF INCOME AT M UMBAI FOR THE ASSESSMENT YEAR 2006-07 WITHOUT GOING INTO THE CONTROVERSY WHETHER THE ASSESSEE HAS PLAYED ANY FRAUDULENT ACT OR NOT IT IS TO BE NOTED THAT SINCE THE RETURN WAS FILED UNDER WRONG JURISDICTION WITHOUT GETTING THE PAN MIGRATED FROM CHENNAI TO MUMBAI. MERELY PRESENTING THE RETURN OF INCOME AT WRONG PLACE OF J URISDICTION WOULD NOT BE TREATED MRS GEETHA MEHRA 25 AS A RETURN OF INCOME PROPERLY FILED; THEREFORE TH E SAID RETURN OF INCOME CANNOT BE TAKEN INTO ACCOUNT. ONCE THE RETURN OF INCOME AS CL AIMED BY THE ASSESSEE FILED AT MUMBAI CANNOT BE TREATED AS A VALID RETURN THEN NO CLAIM BASED ON THE SAID INVALID RETURN CAN BE ACCEPTED IF OTHERWISE NOT SUP PORTED BY THE RELEVANT AND PROPER MATERIAL AND EVIDENCE. 28 IN VIEW OF THE ABOVE DISCUSSION WE SET ASIDE TH E ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH AFTER C ONSIDERING THE FACTS AS CLAIMED BY THE ASSESSEE. 29 THE ASSESSEE HAS RAISED ONE MORE ISSUE FOR THE A SSESSMENT YEAR 2008 09 IN GROUND NUMBER 1 AND 2 AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING THAT CASH FOUND IN THE LOCKER AT HDFC BANK IN THE SUM OF RS.2. 15 LAKHS BELONGING TO MIS. SYNERGY ART FOUNDATION LIMIT ED IS UN-EXPLAINED AND CONFIRMING THE ADDITIONS IN THIS REGARD. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTICE THAT THE SEARCH HAVING TAKEN PLACE AT THE BEGINNING OF THE ACCOUNTING YEAR (17TH APRIL 2007) THE EARLIER YEARS CASH WITHDRAW ALS BY THE APPELLANT AT RS.3 71 800/- AND FURTHER WITHDRAWALS AGGREGATING TO RS.50 000/- IN THE MONTH OF SEARCH ON DATES PRIOR TO SEARCH IS AVAILABLE TO EXPLAIN TO CASH FOUND IN THE LOCKER AFORESAID. 29.1 DURING THE SEARCH AND SEIZURE OPERATION A SUM OF RS. 2 LAKH WAS FOUND IN THE BANK LOCKER OF THE ASSESSEE WITH HDFC BANK WORLI MUMBAI AND THE SAID AMOUNT WAS SEIZED. THE AO HAS HELD THAT THE ASSESSEE DID N OT FURNISH ANY SATISFACTORY EXPLANATION WITH REGARD TO THE ISSUE OF RS. 2 LAKH FOUND AND SEIZED. ACCORDINGLY THE AO MADE AN ADDITION OF RS. 2 LAKH ON ACCOUNT OF UNE XPLAINED CASH. 29.2 ON APPEAL THE CIT(A) HAS CONFIRMED THE ADDITI ON MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. MRS GEETHA MEHRA 2 6 30 WE HAVE HEARD THE LEARNED A.R. AS WELL AS THE LE ARNED D.R. AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LEARNED A.R. O F THE ASSESSEE HAS SUBMITTED THAT THE LOCKER BELONGS TO COMPANY AND THEREFORE NO ADD ITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. HE HAS FURTHER SUBMITTED THA T EVEN OTHERWISE THE SAID AMOUNT OF RS. 2 LAKH WAS OUT OF THE DRAWINGS MADE B Y THE ASSESSEE. THE LEARNED A.R. HAS FURTHER SUBMITTED THAT THE DRAWINGS FROM T HE BANK ACCOUNTS AS WELL AS THE CASH ENTRIES TO THE ASSESSEE BY HER MOTHER TO THE EXTENT OF RS. 40 000 TO RS 60 000 PER MONTH IS MORE THAN SUFFICIENT SOURCE OF THE SAI D AMOUNT OF RS. 2.15 LAKH FOUND IN THE LOCKER. 30.1 ON THE OTHER HAND THE LEARNED D.R. HAS RELIED UPON THE ORDERS OF THE ASSESSING OFFICER AND CIT(A). 31 THE EXPLANATION OF THE ASSESSEE WAS CONSIDERED B Y THE CIT(A) IN PARA 8 OF THE IMPUGNED ORDER AS UNDER: 8. THE NEXT GROUND OF APPEAL PERTAINS TO THE ADDITI ON OF RS 2 00 000/- MADE ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING TH E SEARCH & SEIZURE PROCEEDINGS WHICH WAS SUBJECTED TO SEIZURE. IN THE ASSESSMENT ORDER A.O HAS RECORDED THAT THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE OF A SUM OF RS 2 00 000/- FOUND IN THE BANK LOCKER OF THE APPELL ANT WITH HDFC BANK WORLI. ACCORDING TO THE A0 THE APPELLANT DID NOT FURNISH ANY SATISFACTORY EXPLANATION WITH REGARD TO THE CASH OF RS 2 00 000/- FOUND & SEIZED. IN THE PAPER BOOK SUBMITTED DURING THE APPEAL PROCEEDINGS T HE LEARNED A.R. OF THE APPELLANT HAS STATED THAT THE SEIZURE OF CASH OF RS.2 00 000/- OUT OF THE CASH OF RS.2 15 000/- FOUND IN THE LOCKER OF HDFC B ANK WORLI BRANCH WAS EFFECTED FOR WANT OF PROOF BY WAY OF DOCUMENTARY EVIDE NCE. IT IS FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED THE CASH AVAILABILITY WITH HER IN THE FORM OF DRAWING S FROM THE BANK ACCOUNTS AS WELL AS THE CASH GIVEN TO HER BY HER LATE MOTHER WHICH AMOUNTED TO RS.40 000/- TO RS.60 000/- PER MONTH. HOWEVER THE PAPER BOOK DID NOT PROVIDE A COPY OF ANY LETTER OR WRITTEN SUBMISSION M ADE DURING THE ASSESSMENT PROCEEDINGS. EVEN DURING THE APPEAL PROCEE DINGS THERE ARE NO EVIDENCES SUBMITTED IN SUPPORT OF THE CLAIM THAT T HE APPELLANTS MOTHER WAS GIVING CASH OF RS.40 000/- TO RS.60 000/- PER MONTH TO THE APPELLANT. FURTHER SUCH A CLAIM OF CASH GIFTS GIVEN TO THE APPELLANT B Y HER MOTHER HAS TO BE SUPPORTED BY SOME EVIDENCES OF ADEQUATE SOURCES OF IN COME RETURNED BY THE APPELLANTS MOTHER YEAR AFTER YEAR. THE OTHER CONT ENTION THAT THE SAID CASH MAY BE ATTRIBUTABLE TO THE WITHDRAWALS OF THE A PPELLANT HERSELF HAS NOT MRS GEETHA MEHRA 27 BEEN SUPPORTED BY ANY STATEMENT OF THE APPELLANT DURI NG THE SEARCH PROCEEDINGS. FURTHER THE OVERALL WITHDRAWALS OF THE A PPELLANT HAVE ALREADY BEEN CONSIDERED FOR GRANTING A RELIEF IN RESPECT OF TH E ADDITION MADE BY THE A.O ON ACCOUNT OF LOW WITHDRAWALS. THEREFORE IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE IT IS HEREBY HELD THAT RS .2 00 000/- FOUND & SEIZED DURING THE SEARCH & SEIZURE PROCEEDINGS REMAINED UNEXPL AINED CASH IN TERMS OF SECTION 69A OF THE ACT. ACCORDINGLY THE ADDITION MADE ON THIS COUNT IS FOUND TO BE IN ORDER. 32 AS IT IS CLEAR FROM THE RECORD THAT THE ASSESSEE NEVER TOOK THIS PLEA THAT THE LOCKER OF HDFC BANK BELONGS TO THE COMPANY AND NOT TO THE ASSESSEE. EVEN NO RECORD WAS FILED TO SHOW THIS FACT. THEREFORE THIS FRESH PLEA CANNOT BE ACCEPTED WITHOUT INVESTIGATION OF FACTS. HENCE WE DECLINE T O ENTERTAIN THIS SAME AT THIS STAGE. IN THE ABSENCE OF ANY MATERIAL TO SHOW THE AVAILABI LITY OF THE FUNDS TO CORRELATED WITH THE CASH FOUND IN THE LOCKER WE DO NOT FIND A NY MERIT IN THE GROUNDS OF THE ASSESSEE HENCE THE SAME IS DISMISSED. 33 IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY 2012 SD/ SD/- ( RAJENDRA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 31 ST JULY 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI