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2007 (3) TMI 775 - ITAT AMRITSAR

2007 (3) TMI 775 - ITAT AMRITSAR - [2008] 116 TTJ 102 - IT(SS)A No. 22/Asr/2002 - Dated:- 2-3-2007 - Joginder Pall (Accountant Member) And A. D. Jain (Judicial Member) For the Assessee : Surinder Mahajan For the Revenue : Kuldip Singh ORDER IT(SS)A No. 22/Asr/2002 : This is Department's appeal for the block period 1st April, 1987 to 24th June, 1997 against the order dt. 28th March, 2002 passed by the learned CIT(A), Jalandhar. The following grounds of appeal have been raised : "1. That .....

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sits of the four daughters of the assessee. 3. That on the facts and in the circumstances of the case, the learned CIT(A) has again erred in law in deleting the addition of ₹ 20,43,756 on account of foreign remittance received by the assessee, his wife and four daughters. 4. That while giving relief as per ground Nos. 1, 2 and 3 above, the learned CIT(A) failed to appreciate that the daughters were benamidars of the assessee and the unexplained deposits and interest thereon were rightly tr .....

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of the benami concern of the assessee styled Surjit Sharma & Co." 2. The first issue raised by the Department is that the learned CIT(A) has erred in deleting the addition of ₹ 70,33,060 made on account of undisclosed income of the assessee by bringing to tax the deposits in the savings bank accounts of four daughters of the assessee. The facts involved are that the assessee was working as a Superintending Engineer in Municipal Corporation, Jalandhar. A search was carried out at .....

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see's daughters were married, whereas the fourth stood adopted by his brother, namely, Shri Naresh Sharma, vide adoption deed dt. 6th Aug., 1992. In response to notice under s. 158BC of the Act, the assessee filed a return of income disclosing undisclosed income of ₹ 56,408 on account of error in calculation of interest on FDRs, interest on NSCs, etc. As against this, the block assessment was completed at an income of ₹ 1,09,76,407. Among the additions made by the AO, the first w .....

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onclusion, according to the AO, was supported by the material seized during the search. This material included Annex. A-1, p. 5, which was a discharge certificate dt. 13th March, 1992, showing that the NSCs were purchased in the name of Miss Sonia on 12th March, 1986, when Sonia was a minor and did not have any source of income. The maturity value (sic'date) of the NSCs was 13th March, 1992, i.e., in asst. yr. 1992-93. Annex. A-1, p. 4, i.e., discharge certificate dt. 13th March, 1992 also s .....

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hese accounts, depositing the cash with a view to build up capital in the names of all his daughters. It was also concluded that the cash deposits came from a source over which none of the daughters of the assessee had any control. The AO further observed that the pattern of deposits in these accounts was identical, i.e., during the period 1992 to 1994 foreign remittances had evenly been deposited in all these accounts. In 1996, very frequent and regular cash deposits of amounts ranging from  .....

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ned income in the hands of the assessee. As such, the addition in question was made. The learned CIT(A), by virtue of the impugned order, having deleted this addition, the Department has raised ground of appeal No. 1 before us. 5. The learned Departmental Representative has submitted that the learned CIT(A) has gone wrong in deleting,the addition of ₹ 70,33,060 made by the AO. According to the learned Departmental Representative, this amount was clearly proved to be the unexplained income .....

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enakshi and Sonia Katyal, no details were given regarding their earnings; that bank pass books were found from the assessee's residence; that the CIT(A) deleted the addition saying that the daughters had filed returns in which this income stood disclosed and so, it was not undisclosed income; and that all the daughters being major, if some income was unexplained, it would be unexplained income in the hands of these daughters. The learned Departmental Representative has argued that this is no .....

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ntative has then argued that since the search was conducted and income was found as the assessee's income only, in keeping with the decision of the Hon'ble Kerala High Court in the case of P.K. Narayanan vs. CIT (1997) 142 CTR (Ker) 381 : (1998) 229 ITR 596 (Ker), the income has to be assessed in the correct hands, irrespective of the treatment given to it in the returns of income. 6. On the other hand, the learned counsel for the assessee has argued that the bank deposits are not undisc .....

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having perused the material on record, we find that undisputedly, the four daughters of the assessee are independent assessees. They are having their own separate bank accounts containing the deposits in question. These deposits have, therefore, to be considered in their hands. The theory of these daughters being benamidars of the assessee does not carry any weight. The AO did not record any finding to the effect that the daughters were themselves operating the savings bank accounts. It is also .....

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ts filed by the daughters of the assessee have gone entirely unrebutted. Moreover, even though the AO himself observed that the peak theory was applicable, it was not applied. Too, the income assessed on a protective basis in the hands of the assessee was widely different from that assessed on a substantive basis in the hands of the assessee. The AO propounded that there was a distinct pattern with regard to the deposits in all these bank accounts and from this it was concluded that it was the a .....

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t there was a certain flow of cash deposits in the savings bank accounts of the assessee's daughters from September, 1996 to April, 1997. During this period, three of the daughters of the assessee were major and were married, whereas the fourth was major and had been adopted by a brother of the assessee. Importantly, the Department was already in possession of information with regard to the savings bank accounts of the daughters of the assessee having been closed before the search took place .....

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g investigated by the Investigation Wing of the Department. The fourth daughter of the assessee, namely, Sunaina Sharma was adopted vide adoption deed dt. 6th Aug., 1992, by the assessee's uncle. The daughters of the assessee having filed their IT returns, all bank accounts stood disclosed therein. The assessment was completed as a protective assessment in the case of two of the assessee's daughters, whereas the returned incomes of the other two daughters were accepted. Declarations unde .....

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56,871 had been included in the hands of the assessee. In the assessments of the daughters of the assessee, all bank accounts were explained. The returned income was accepted. These daughters of the assessee filed affidavits confirming that deposits in their savings bank accounts belonged to them only and that their father, the assessee, had nothing to do with those deposits. These affidavits were never controverted by the Department. Apropos the addition made on account of the deposits in the s .....

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would not have been disclosed. The income in the present case having been duly disclosed, as discussed, the same cannot be treated as undisclosed income of the assessee. 7.3 In view of the above facts, the grievance of the Department does not hold much force. The order of the learned CIT(A) does not require any interference at our hands. Ground No. 1 is, thus, rejected. 8. Ground No. 2 challenges the deletion of the addition of ₹ 3,23,118 on account of interest income on the bank deposits .....

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declared by the daughters of the assessee in their returns of income. Therefore, this ground also does not carry any force. It is rejected. 10. Ground No. 3 states that the learned CIT(A) has erred in deleting the addition of ₹ 20,43,756 on account of foreign remittances received by the assessee, his wife and four daughters. In this regard, the AO noticed that the assessee, his wife and daughters had received huge amounts of foreign remittance, amounting to ₹ 22 lacs, during the peri .....

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fore the CIT(A), the stand of the assessee was that the AO had failed to consider the details submitted during the assessment proceedings, wherein it has been explained that certain entries of FDRs/local cheques were included under the head 'Foreign remittances'; that the AO had also not considered the affidavits of the daughters of the assessee, wherein they had stated that the deposits in their accounts had no relation with the assessee; that the AO even did not confront the assessee w .....

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ent order had been finalised and in that order, no such addition had been made; that apropos the foreign remittanees of ₹ 4,51,524 added in the name of Nisha Sharma, a sum of ₹ 1,75,000, credited on 16th Oct., 1992, was on account of local cheques received from Shri Sujeet Kumar and ₹ 46,741 and ₹ 29,138 were on account of encashment of the FDR; that similarly in the case of Meenakshi Sharma, where ₹ 6,20,946 was added in the name of the foreign remittances, this in .....

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CIT(A) deleted the addition and, therefore, ground No. 3 has been taken by the Department before us. 13. Before us, the learned Departmental Representative has submitted that during the search conducted at the premises of the assessee, photocopies of some of the drafts/cheques received in respect of the foreign remittances in question, were found and seized, from which, it was evident that most of the foreign remittances had been received from Shri Gurnam Singh of California; USA; that the stan .....

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NRE account, which would have enabled the assessee to build up the reserve fast, since the interest in an NRE account is of higher rate and is also tax-free; that if the money was for capital build up, it would not have been advanced to all the members of the family of the assessee; that these remittances had been invested by the members of the family of the assessee in fixed deposits and the interest therein has been shown as their income in the respective tax returns filed by the daughters of .....

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d counsel for the assessee, on the other hand, has supported the order passed of the learned CIT(A) in this regard. 15. In this regard, again, it is seen that the bank accounts in which these foreign remittances were deposited, were duly disclosed by the daughters of the assessee while filing their returns of income before the date of search. Further, as correctly maintained by the assessee, the AO did not take into account the submissions made by the assessee during the block assessment proceed .....

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ove, the learned CIT(A) is found to have correctly deleted the addition in question. As such, ground No. 3 stands rejected. 17. Ground No. 4 states that the learned CIT(A) has failed to appreciate that the four daughters of the assessee were his benamidars and the unexplained deposits and the interest thereon were correctly treated by the AO as income of the assessee. 18. In view of our findings on ground Nos. 1 to 3 above, this ground of the Department holds no force. The daughters of the asses .....

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h. The AO (concluded that against total unexplained expenditure of ₹ 18 lacs, after considering the withdrawals of ₹ 12,21,900, the balance amount of ₹ 5,78,100 had been incurred on the marriages out of undisclosed income. This amount of ₹ 5,78,100 was, therefore, added to the income of the assessee. The learned CIT(A) deleted this addition and this has aggrieved the Department. 20. The. learned Departmental Representative has contended before us that the stand of the ass .....

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) but he still gave credit regarding the Shagans, though no evidence has been brought on record with regard to the receipt of such Shagans. 21. On the other hand, the learned counsel for the assessee, supporting the order of the learned CIT(A), has submitted that no incriminating material in this regard was found by the Department during the search and no post-search enquiry can be made without reference to the material found. 22. The stand of the assessee in this regard has remained that out of .....

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assessee in the assessment proceedings. No evidence was brought on record by the AO in the shape of video film/album, bills or alike, to support his findings. Moreover, affidavits of the daughters of the assessee, admitting two love marriages and one arranged marriage, were not even considered. That the AO was not in possession of any material to support the findings recorded in the assessment order, was confirmed by the AO, who attended the appellate proceedings before the learned CIT(A) also. .....

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even the addition of ₹ 2 lacs on account of household items including jewellery was made on an estimate basis, only on the basis of the statement of Sunaina Sharma. The addition of ₹ 1 lac on other functions was also similarly made. It was also not considered that the withdrawals in the case Meenakshi Sharma were deposited in another bank account. Apropos the credit given for Shagans, details were furnished before the AO during the assessment proceedings, supported by confirmation. I .....

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ained investment and estimated profit in respect of M/s Sujeet Sharma & Co., a benami concern of the assessee. 24. In the search action, certain books of account of Shri Sujeet Sharma for the period November, 1987 to March, 1992 were found from the assessee's cupboard in his office. From these books, it was seen that the said concern was running an oil tanker and was in business from 1988 to 1992. The AO observed that page No. 1 of the assessee's ledger revealed the assessee's ca .....

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0 lacs which was made by the assessee in M/s Sujeet Sharma & Co., as representing his benami concern and along with the unexplained investment, a further profit of ₹ 1 lac was estimated by the AO in four years @ ₹ 25,000 for each year and thus the total addition of ₹ 7 lacs was made. 25. The deletion of this addition by the learned CIT(A) has given rise to ground No. 6. 26. Supporting the assessment order in this regard, the learned Departmental Representative has argued th .....

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n to pp. 180 to 198 of the assessee's paper book ("APB", for short). These are affidavits of Shri Sujeet Sharma, the contract of Shri Sujeet Sharma with Indian Oil Company, copy of purchase bill of oil tanker, regarding fabrication and supply of L.P.G. Bullet, debit note regarding its preparation on fabrication drawing approval of L.P.G. Bullet, route permit, permission from Department of Explosives, tax clearance certificate, national permit, bill of Ashok Leyland and affidavit of .....

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fabrication work completed and after getting approval from the Department of Explosives, Nagpur. The national permit from the Regional Transport Authority, Jalandhar was also obtained by Shri Sujeet Sharma. Shri Sujeet Sharma filed the return of income declaring this business. Income-tax clearance certificate was issued on 3rd Aug., 1990. In his affidavit, Shri Sujeet Sharma gave all the details of money received from various parties, relatives and close friends. The AO did not take all this in .....

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the capital account remains. Moreover, Shri Sujeet Sharma had already reflected the income from the operation of the tanker by filing returns of income. Statement of Shri Sujeet Sharma was recorded on 29th Aug., 1997. He had confirmed the ownership of the business. He has also admitted having filed income return of his business. The assessee, who vide letter dt. 15th March, 1999, explained that he had nothing to do with this business. Vide letter dt. 17th June, 1999, the assessee filed an affid .....

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hed with the Department. The assessee further explained that the entries recorded in the alleged capital account had not come from any of the savings bank accounts of the assessee. Shri Sujeet Sharma further filed copies of bank accounts of relatives from whom tax (sic) had been received and the pass books where these cheques stood credited. These documents showed that the money had come from accounts of Shri Sujeet Sharma. The documents filed were not considered by the AO. These documents clear .....

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wealth discovered belonged to his wife stood substantiated by the evidence of the assessee's wife, which was not being questioned or rebutted. Therefore, the assessee could not be held guilty. 29. In view of the above, the learned CIT(A) correctly observed that the income from operation of tanker could not be treated as income of the assessee. The addition of ₹ 7 lacs has, therefore, rightly been deleted. Accordingly, ground No. 6 is rejected. 30. In the result, IT(SS)A No. 22/Asr/2002 .....

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been duly declared in the block assessment of Smt. Sudesh Sharma, wife of the assessee. Addition confirmed is illegal and bad in law. 2. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirming addition of ₹ 1,32,158 on account of deposits of ₹ 1,32,158 during block period in the name of Smt. Sita Rani. Addition confirmed is illegal and bad in law. 3. That on the facts and circumstances of the case, learned CIT(A) has grossly erred in confirmin .....

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of the assessee, nor was there any nexus with the withdrawal made by the assessee from his disclosed bank account. It was found that there was cash deposit entry totalling upto ₹ 1,32,810; that this account had been abruptly closed at the time when enquiries had been initiated in the case of the assessee. The assessee explained to the AO that the said account was opened by him in 1987 and the balance therein increased balance of interest application; that the amount was withdrawn in 1990; .....

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ot understood as to why the assessee's wife would make deposits in the assessee's bank account, when she was herself having her own bank account; that the account being in the name of the assessee, the onus was on him to explain it and in the absence of a proper explanation, addition was to be made to the income of the assessee only; that the cheques presented for withdrawal from this account were not in favour of Smt. Sudesh, i.e., the assessee's wife, to whom even the deposits were .....

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itted that the amount deposited in the account in question was surrendered by the wife of the assessee and so, it could not be taxed again in the hands of the assessee; that the account was opened in 1990 and the balance in the account increased because of interest application; that in 1990 and 1993, amounts of ₹ 1,000 each were withdrawn by the assessee and from the year 1993-94, the assessee's wife started depositing her pin money and other savings in this account without his knowled .....

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ames of somebody else and while making the addition in question, it was held that the addition was being made in the hands of the assessee, since the account was in his name; and that no cheques were issued in the names of any third party, as only interest amount was withdrawn and after 1993, no such withdrawal was made. 34. The learned CIT(A) upheld the addition, agreeing with the AO that the assessee had made withdrawals from this account and so maintenance of this account was within his knowl .....

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as argued that the only case made out by the Department is that the assessee being a Government servant, he found it difficult to explain the bank account in question and so, he declared it in the hands of his wife. It has been argued that the addition is illegal, since the assessee explained that the account was opened in 1987, the money was withdrawn in 1990 and that the assessee's wife was depositing her pin money, etc. in this bank account from 1993-94. It has been argued that during the .....

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n be made in the hands of a person from whose possession the asset is required. 36. On the other hand, the learned Departmental Representative has, relying on the order passed by the learned CIT(A), stated that the CIT(A) has rightly confirmed the addition observing that the bank account in question was in the name of the assessee only and that there was no evidence that the assessee's wife deposited her pin money in this account and that too, when she herself was having more than one bank a .....

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e basis in the name of the assessee whereas in the case of the block assessment of the assessee's wife, the addition was made on a protective basis. This does not amount to a double addition. The concept of substantive and protective assessment itself is an either/or situation. In case the addition is confirmed in one hand, it would automatically stand deleted in the other hand. 38. The next submission of the assessee is that from 1993-94, the assessee's wife started depositing her pin m .....

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e assessee has been that the affidavit of the assessee's wife confirming such deposits, which affidavit was filed during the assessment proceedings, was not rebutted by the taxing authorities and so, this affidavit was good evidence, in the face of which, the addition could not have been made. Here, it is seen, that the affidavit in question is merely a self-serving document and it does not further the case of the assessee in the absence of any direct evidence of the deposits having been mad .....

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6 (All); (3) Krishan Lal Shiv Chand Rai vs. CIT (1973) 88 ITR 293 (P&H); (4) Sri Krishna vs. CIT (1983) 36 CTR (All) 75 : (1983) 142 ITR 618 (All). 40. For the proposition that where a person owning an asset admits to such ownership, no addition can be made in the hands of the person possessing such assets, the following case law have been relied on : (1) Asstt. CIT vs. Karodilal Agrawal (1994) 50 TTJ (Jab) 393; (2) ITO vs. Mathuradas Motichand (1993) 47 TTJ (Ahd) 488; (3) Dy. CIT vs. Vinod .....

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se to state that the deposits belonged to his wife. It was his wife, who, by way of the affidavit, admitted the ownership of the deposited amounts. However, there was no direct evidence of such deposits having been made by her. Moreover, the taxing authorities have concluded that the deposits in fact belonged to the assessee, since it was unacceptable that the assessee's wife, who was having more then one account in her own name, would make such deposit in the account owned by her husband. 4 .....

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ng affidavit of his wife has not been accepted as gosple truth, even though had the deposit been made by the assessee's wife, he could have produced direct evidence showing such deposits to have been actually made by her, which was not done. 43. The facts in Vinod Kamra (supra) are also totally different from those of the case in hand. In that case, in the search, jewellery was found in the residential premises and locker held in the joint name of the wife of the assessee and the brother of .....

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r by the wife of the brother of the assessee's wife was also explained. The AO treated part of the jewellery as explained and the balance was treated as acquired out of undisclosed income of the assessee and an addition was made. The CIT(A) deleted the addition after considering that the locker was in the name of the assessee's wife, who was separately assessed to tax and she had stated in her statement that the jewellery belonged to her and her Bhabhi, and that her husband had nothing t .....

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apply. 44. Apropos the plea that in the absence of rebuttal of the affidavit filed by the assessee's wife, no adverse inference can be drawn therefrom against the assessee, in our considered opinion, it is not so. The affidavit in question is, at best, a self-serving document, the credence whereof is belied by the actual attending circumstances of the assessee's wife making deposits in an account owned exclusively by her husband, and that too without his knowledge, in the face of the fa .....

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tion as out of his known sources of income. 46. Therefore also, it cannot be said that the addition had been made on the basis of mere assumptions and presumptions. 47. In the above view of the matter, finding no force in the same, ground No. 1 raised by the assessee is rejected. 48. Coming to ground No. 2, the assessee is aggrieved of the confirmation of the addition of ₹ 1,32,158 on account of deposits made during the block period in the name of Smt. Sita Rani. 49. The facts in this rega .....

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he assessee maintained that the deposits in this bank account had been made by Smt. Sita Rani. However, as per the AO, enquiries from the bank revealed that this bank account had been operated by the family members of the assessee, rather than by any of the family members of Smt. Sita Rani, who looked after her and with whom she was living. The AO observed that Smt. Sita Rani was an old lady having no source of income, as had been stated by her in her statement recorded in the presence of her da .....

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here was also a copy of form on which nominations had been done by Smt. Sita Rani. These nominations were in the names of the daughters of the assessee. One KDR was nominated in favour of Meenakshi Sharma and other was in the name of Nisha Sharma. The date of issue of both KDRs was 16th March, 1990 and both were due on 16th March, 1992, for the maturity value of ₹ 30,460 each. On the references of these pages, the AO observed the thumb impression of Smt. Sita Rani, whereas the particulars .....

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value as on 16th March, 1993, of ₹ 38,213 each amounting to ₹ 76,426. Two other similar KDRs of ₹ 25,000 each were observed by the AO, having a maturity value of ₹ 27,866 each, amounting to ₹ 55,732, as on 26th March, 1994. The AO observed that Smt. Sita Rani was a benamidar of the assessee and even the assessee's daughters did not have any source of income. The entire maturity value of the KDRs was added by the AO in the hands of the assessee, total amounting .....

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d been added. The assessee further submitted before the CIT(A) that Smt. Sita Rani had opened the account with Bank of Baroda in her individual capacity and since she was suffering from paralysis, she added the name of Bawa Sharma as a precautionary measure; that the deposits in the account of Smt. Sita Rani had no relation with the assessee; that Smt. Sita Rani had declared ₹ 3 lacs in VDIS and her declaration had already been accepted, proving that she was an independent assessee. Confir .....

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aving any source of income; that further, she was having her own relatives, but for these KDRs, nominations were in the names of the daughters of the assessee, rather than her own sons and daughters; that it was also not acceptable that no addition for the encashment of KDRs was required to be made in the hands of the assessee, the proceeds of the KDRs having been deposited in the accounts of the daughters, which were separately added; that in fact, the AO had taxed the unaccounted income of the .....

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cability thereof to the present case had been made out, inasmuch as not even titles of the cases have been cited : (1) C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 199 ITR 530 (SC); (2) Sona Builders vs. Union of India (2001) 170 CTR (SC) 180 : (2001) 251 ITR 197 (SC); (3) Appropriate Authority vs. Vijay Kumar Sharma (2001) 168 CTR (SC) 611 : (2001) 249 ITR 554 (SC). It has been further submitted that the only case of the Department is the recovery .....

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unsel for the assessee, it was possible that Smt. Sita Rani had handed over these KDRs for encashment to the assessee's wife, being her mother, with the intention to keep the KDRs secret from her sons and their family members. It has further been contended that Smt. Sita Rani had filed a declaration under VDIS for the asst. yr. 1994-95, declaring a sum of ₹ 3 lacs, which was accepted, which, in turn, meant that she was an independent assessee, due to which she could not be treated as a .....

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ed prior to the search. 52. The learned Departmental Representative, on the other hand, supporting the order passed by the learned CIT(A), has submitted that the learned CIT(A) has fully noted that Smt. Sita Rani was found to have no source of income and that the amount was declared by her under VDIS pertains to the cash in the asst. yr. 1994-95, whereas the investment in question was made during the prior period. 53. With regard to this issue, we find that, as correctly submitted by the learned .....

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sh in accordance with law, on affording an adequate opportunity to the assessee in this regard. 54. The last issue involved in this appeal is the confirmation of the addition of ₹ 40,000 out of the addition of ₹ 50,000 made by the AO on account of household items. As per the assessment order, the assessee was confronted with the list of inventory of household items prepared at the time of search, bearing the signature of the assessee. The AO observed that the assessee could not satis .....

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ntory consisted of the item "receiver of dish antenna". The AO thus concluded that this item had been acknowledged by the assessee on the date of search, he having signed the list of inventory; and that without dish antenna, there was no need to instal the receiver of dish antenna. The AO, accordingly, made the addition of ₹ 25,000 on estimate basis, which included the cost of receiver of dish antenna for the asst. yr. 1994-95. 55. The stand of the assessee before the learned CIT .....

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77; 5,000 which was wrongly taken as ₹ 25,000 by the AO. 56. The learned CIT(A) while giving a relief of ₹ 10,000 to the assessee, observed as follows : "7.4 On the issue of household items, neither the fact of gift of AC National make by the brothers-in-law was substantiated nor source of purchase of local made AC of ₹ 7,000 was explained. Further, no such plea was taken at the time of search proceedings, I also do not find any merits in the submissions of the appellant t .....

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