9911796707
TMI Blog2012 (10) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... closed income. Consequently, notices under section 143(A) of the Act were issued and the assessee filed return of income in respect of assessment years 2002-03 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 report from the Assessing Officer which was submitted on 08/10/2010. After considering the remand report, the CIT(A) granted part relief to the assessee. Aggrieved by the 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 substantiate and explain the clarification sought during assessment proceedings were afforded to the appellant ignoring the factual submissions vide point 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any regard to the position of the Assessing Officer as an quasi-judicial authority to assess a proper income after giving an appropriate opportunity, the manner in which the assessment was framed is illegal and opposed to fairness and principles of natural Justice. 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 therefore, the assessee was given a proper opportunity. The ld D.R. has further submitted that the Assessing Officer also given sufficient time and opportunity; but the assessee did not file the necessary details. He has relied upon the order of the authorities below. 5 We have considered the rival submissions and carefully 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 sufficient time to the assessee to file the necessary details; however, when the CIT(A) issued 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Rs.. 2,95,168/-, a sum of Rs.. 93,376/- represents card payment towards personal drawings such as clothes books and payments to departmental store etc., which would more than suffice for the assessee to explain her status as single individual 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 Rs.. 72,000/- which is duly disclosed in the original return of income filed for the assessment year 2002-03 and this is available for personal drawings also. 9.1 Thus, the learned A.R. of the assessee has submitted 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 estimated 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 more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside this issue for all the assessment years to the record of the Assessing Officer. to consider the details, evidences and the electricity and telephone bills and then decide the issue afresh except for the assessment year 2008-09 for which the addition made by the Assessing 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: "The ld Commissioner of Income Tax(Appeals) is not justified in treating a sum of Rs. 14,62,500/- as alleged unexplained investment in paintings disregarding the fact of purchases of the said paintings in the books of Synergy Art Foundation Ltd." 11.1 A similar ground has also been raised for the assessment year 2008-09 as ground number 4 as under: "The Commissioner of Income Tax(Appeals) failed to observe that there were no sized materials in the possession of department indicating 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 relating to the addition towards unexplained invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance was paid by the prospective buyers. M/s Synergy 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 that the paintings dealt with by Synergy Art foundation are predominantly on consignment basis wherein the company deals with the artist and the prospective buyers 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 buyer on an agreed price and the difference in the price between the sale invoice and 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 assessee and the payment is flowing out of account of the buyer; therefore, there 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 consignment of sales. Hence, the ld AR of the assessee has submitted that the addition is not justified. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paintings were purchased by the assessee 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 invoices 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 Express. Therefore, it is clear that the payment was made on the date of invoice itself; but 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 only part payment was shown to be made as per the invoices seized during the search operation and balance payment was made through hawala route. The assessee has mainly contended that the balance payment was made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispatched by Federal Express. Therefore, it has to be inferred that the payment was in fact made to Grosvenor Gallery by 08.11.2002 itself, which is the date of invoice. According to the written explanation, the entire amount of 7929 pounds (including freight of 429 pounds) was paid by one Amrita Zaveri. But no corroborative evidence is furnished even during the appeal proceedings, after availing several opportunities. 16. Similarly, the corroborative evidences such as the confirmation of payments by the customers directly to the galleries outside the country are not submitted in respect of other paintings. Given the facts & circumstances of the case, it was also required that the appellant had to corroborate such claims by obtaining not only confirmation letters from the customers but also the mode of payment and the evidences thereof. It was also required to furnish the evidences as to whom the paintings were sold 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 filed on 13.10.2011 that the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and therefore, the balance payment was made through hawala route. 18.2 Even before us, nothing has been produced to show the name and details of the costumers on whose behalf the purchases were allegedly made by the assessee. The assessee has not disputed the purchases of the paintings in question; but has taken a plea that these paintings were purchased on behalf of the prospective buyers and the actual bill is on the company who was received the commission in the transaction. When nothing has been produced to show that the paintings were ultimately sold to such and such person 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 issue. 19 For the assessment year 2008 - 09, the addition was made with regard to the value of 44 paintings found in the possession of the assessee during the search. The assessee raised mainly 3 objections viz (i) that some of the paintings are given by the artist to the assessee as gifts, (ii) the rest of the paintings having no commercial value as the same were written off by the company as become old and lost the value and (iii) the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. 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 unexplained 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 above observation. 21 For the assessment year 2007 - 08 the assessee has also raised following grounds "8. The ld CIT(A) is not justified in sustaining the addition of Rs. 4 lacs as unexplained sources for purchase of land at Murud without properly construing the availability of funds to the extent of Rs. 5 lacs on sale of paintings and show as part of Rs. 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 Rs. 60.15 lakhs as alleged bogus opening capital account without any basis." 22 Ground number 8 regarding the addition of Rs. 4 lakhs as unexplained source for purchase of land. 22.1 The Assessing Officer has noted that as per page number 3 & 4 of Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erly verified by the authorities below and decided the same summarily. Accordingly, we set aside the issue to the record of the Assessing Officer for deciding the same after considering all the relevant facts and material. 25 Ground number 9 regarding the addition on account of opening capital balance. 25.1 We will also deal with the ground number 2, which 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 short term capital gain of Rs. 14 lakh from sale of paintings and long term capital gain of Rs. 22,19,815/- from sale of paintings. In response to notice under section 153A, 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 definition of capital gain does not cover paintings, as the same is considered as personal effect. The assessee contended before the Assessing Officer that the assessee had filed the return for the assessment year 2005 - 06 with the In-charge of ACIT/DCIT- 7 (2) Mumbai along with balance sheet where she has shown the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale proceeds of paintings were received mostly by cheques and representing the assertion to capital account on the liability side of balance sheet and the other being the purchase cost of painting shown under the investment in the asset side of balance sheet. The A.R. has thus submitted that there cannot be any confusion to understand the basic accounting entries one representing the liability side and other assets side. Thus it was contended that there is no case for addition of capital account of Rs. 60.15 lakh as unexplained sale of paintings and therefore, the addition is illegal and imaginary. He 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 section 2 (14) has been brought to bring the paintings under the category of capital asset. Thus, the learned A.R. has submitted that prior to the assessment year 2008- 09, the paintings cannot be treated as capital asset as per the provisions of section 2 (14) of the act. 26.1 On the other hand the learned D.R. has submitted that the paintings purchased and sold by the assessee cannot be treated as personal effect as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The addition in sum of Rs. 60. 15 lakhs is thus illegal and not sustainable. " 27.1 The assessee claimed to have sold the above paintings 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 term capital gains and long term capital gain; but subsequently, in the revised return, the assessee withdrawn the capital gain from tax and claimed that the paintings 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 and sale of the paintings, it is clear that most of the paintings were purchased by the assessee from M/s Synergy Art foundations Ltd., and other paintings were purchased from the individual. When the paintings were sold within the period of one year and 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 nature 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 una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown in the written submissions filed on 19.09.2011 that 21 paintings were 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 conducting 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 Foundation Ltd., in which she is a director. Thus there are several inconsistencies and contradictions in the written submissions filed by the appellant on different dates during the appeal proceedings. Considering the fact that a large amount was stated to have been realized from the sales of paintings, which was Rs.60,15,000/-, and considering the fact that out of the said amount, an amount of Rs.46,15,000/- was classified as long term capital gains while filing the return of income, the appellant ought to have submitted a clear explanation and corroborative evidences during the assessment 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 appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving taken place at the beginning of the Accounting Year (17th April, 2007), the earlier year's cash withdrawals 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 not 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 unexplained cash. 29.2 On appeal the CIT(A) has confirmed the addition made by the Assessing Officer on this account. 30 We have heard the learned A.R. as well as the learned D.R. and considered the relevant material on record. The learned A.R. of the assessee has submitted that the locker belongs to company and therefore, no addition can be made in the hands of the assessee. He has further submitted that even otherwise, the said amount of Rs. 2 lakh was out of the drawings made by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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