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TMI Blog2015 (12) TMI 1735X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,459/- made by the assessing officer on account of unexplained money received by the assessee from Shri Suresh Nanda. 4. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal." The revenue has taken the following grounds of appeal for the assessment year 2007-08 :- "1. The order of the ld. CIT (Appeals) is not correct in law and facts. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that the addition made u/s 153A/143(3) appears to be legally untenable. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law as well as in facts in deleting the addition of Rs. 1,00,00,000/- made by the assessing officer on account of unexplained money received by the assessee from Shri Suresh Nanda. 4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law as well as in facts in deleting the addition of Rs. 53,98,050/- made by the assessing officer on account of unexplained jewellery found with the assessee. 5. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... item wise reconciliation and in view of assessee's own admission that the items seized during the course of search did not match with the items in the valuation report filed with her wealth tax return, the jewellery seized during the course of search was clearly unexplained and accordingly, the AO treated the jewellery worth Rs. 53,98,050/- as unexplained and added to the taxable income of the assessee. The AO completed the assessment u/s 143(3) of the Act by making two additions i.e. amount received from assessee's father, Shri Suresh Nanda to the tune of Rs. 1 crore and unexplained jewellery worth Rs. 53,98,050/- to the income of the assessee. 4. Aggrieved, the assessee went in appeal before the first appellate authority and the CIT (A) allowed the appeal of the assessee. 5. The revenue, being aggrieved, is in appeal for both the years before us. 6. Ground No.1 in both the years is general in nature requiring no adjudication. Ground No.4 in AY 2001-02 and Ground No.5 in AY 2007-08 are also general in nature requiring no adjudication. 7. Ground No.2 in AY 2001-02 is against the decision of the ld. CIT (A) in which he held that the addition made u/s 153A/143(3) appears to be le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings. 5. The appellant had received the funds from her father through account payee cheques. The interest income from her bank account has been disclosed in the original return of income. The bank statement of the appellant from which the computation for income for AY. 2001-02 has been drawn out cannot be said to be a document which has not been disclosed. Hence following the binding decision of the jurisdictional Tribunal, the order and the addition made in assessment u/s 153A/143(3) appears to be legally untenable. Grounds taken on this account are, therefore, allowed." 9. We have heard both the parties and perused the material on record. We find that the Hon'ble jurisdictional High Court in the case of CIT vs. Kabul Chawla in ITA 707, 709 & 713/2014 for AYs 2002-03, 2005-06 and 2006-07 vide judgment dated 28.08.2015 has settled the question before us and the Hon'ble High Court held as under :- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the assessment order which clearly shows that there is no incriminating evidence found during the course of search. Hence, as per the binding decision of the Hon'ble jurisdictional High Court (supra), addition to income cannot be made in respect of items which are originally disclosed in the original assessment proceedings. Therefore we do not find any merits in this ground of appeal of the Revenue, so it is dismissed. 10. The revenue has taken Ground No.2 in the assessment year 2007-08 as under :- "On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that the addition made u/s 153A/143(3) appears to be legally untenable." However we find from the order of the ld. CIT (A) that he has decided this issue against the assessee as under :- "Ground No. 2 challenges the order u/s 153A on the ground that there was no evidence of undisclosed income found during the course of search. This ground has to be decided against the appellant. On the date of search, i.e. 28.02.2007, the return of income for A.Y. 2007-08 had not become due. After the return was filed, notice u/s 143(2) was issued picking the case for further scrutiny. Hence, it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been filing his return of income in India and has declared his income. The Assessing Officer is treating the income of the appellant as unexplained on the ground that the source of foreign income has not been disclosed by Mr. Suresh Nanda in his assessment. For holding this opinion that the funds in the hands of the appellant are to be treated as unexplained, nowhere has the Assessing Officer stated that it is the appellant's own money which has found its way back to the appellant through the account of Mr. Suresh Nanda. It is nobody's case that what has been received by the appellant is her undisclosed money. The identity and the genuineness of the transaction, i.e. money received from an income tax assessee through account pay cheques has remained unchallenged on the part of the A.O. So far as the creditworthiness is concerned, the appellant's father Mr. Suresh Nanda had sufficient money in his bank account on the date he issued cheques to her. The A.O. has not made out any case of cash deposit in his account. The A.R. of the appellant has filed a number of case laws for the proposition that for establishing the creditworthiness of the payer, the source of the sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sub-creditor had creditworthiness to advance the said loan amount. Reliance is also placed on the judgement of the Hon'ble Delhi High Court in the case of CIT v. Diamond Products Ltd 21 DTR 9. In the said case, the creditor confirmed having given a sum of Rs. 23 lacs as loan to the assessee. The source of Rs. 23 lacs in the hands of the creditor was sought to be enquired into by the Assessing Officer. The creditor stated that Rs. 23 lacs had been received in cash from MIs Punjab Tractors towards the repayment of the loan given earlier. According to the Assessing Officer, MIs Punjab Tractors was not traceable and therefore, Rs. 23 lacs was treated as unexplained income u/s 68 of the Act in the hands of the assessee. As per the Hon'ble High Court, the AO was seeking to examine the source of the source which was not traceable. The assessee had been able to establish that the transaction with the creditor was genuine and identity and the creditworthiness of the said creditor was established. Hence, there was no need to enquire into the source of funds of the creditor for the purpose of making an addition u/s 68 of the Act. 9. In the case of the appellant also, the source i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the additions plausible and probable. In these circumstances, it was found, that if the Tribunal was of the opinion that the investment is not genuine, it should not have upheld the order of the CIT(A), and should have set it aside with the direction to allow such amounts, for which the assessee has been able to prove satisfactorily, by giving opportunity of explaining the investment. It was noticed, that the Tribunal itself doubted about the correctness of its own conclusions, thus, this judgment is no authority for the proposition, that source of the source is required to be established by the assessee. Then, so far as judgment in Kishorilaf's case (supra) is concerned, six requirements noticed by this Court read as under: (i) that there is no distinction between the cash credit entry existing in the books of the firm where it is of a partner or of a third party. (ii) that the burden to prove the identity, capacity and genuineness has to be on the assessee. (iii) if the cash credit is not satisfactorily explained the ITO is justified to treat it as income from "undisclosed sources". (iv) the firm has to establish that the amount was actually given by the lender. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to establish source of the source. The appellant's case falls fairly within the facts of the aforesaid judgement. The judgement by the Bombay High Court in the case of Orient Trading Co. 49 ITR 723 is also relevant. As per the said judgement, when the entry has been in the name of a third party and the assessee establishes the identity of the creditor and produces evidence showing that the entries are not fictitious, the initial burden lying on the assessee stands discharged. The burden shifts on the revenue to show that the entries represented assessee's suppressed income. This case also applies to the facts in case of the appellant. The burden is on the Department to show that the appellant's own funds have come back to her from Mr. Suresh Nanda. Hence, the judicial opinion as discussed above also leads to the conclusion that the cash credit received by account payee cheques from her father cannot be assessed as the appellant's undisclosed income. Another argument of the appellant is that the remittances of Mr. Suresh Nanda from his bank account abroad, have been held to be his undisclosed income and have been taxed in India accordingly. Hence, on this count a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough banking channel from his account in Singapore. The controversy as to whether Shri Suresh Nanda is a Non-Resident Indian or not, is no more res integra after the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. Suresh Nanda in ITA 85/2013 & ors. As per the said Judgment dated 25.02.2013 for the AYs 2001-02, 2002-03 and 2003-04 wherein the Hon'ble High Court has held that the Shri Suresh Nanda was not a resident in India in the years in question. The relevant finding of the Hon'ble Court is as under :- "13. In view of the fact that the Tribunal has correctly decided that the respondent/assessee was not a resident in India in the years in question, it is axiomatic that the addition of Rs. 10,51,20,000/- under section 68 would have to be deleted because it was a transfer from the respondent / assessee's foreign account to the domestic account." In view of the above, respectfully following the order of the Hon'ble jurisdictional High Court and going through the finding of the ld. CIT (A), we find that both the amounts added to the income of the assessee cannot be held to be unexplained income of the assessee, since it was a gift from the father who was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her wealth-tax returned along with her mother for AY. 2002-03. The total caratages of diamond in jewellery returned/declared by the appellant and her mother Mrs. Renu Nanda has also been computed as per the reconciliation statement. The appellant's contention that, both, she and her mother, were using their jewellery interchangeably cannot be ignored. The appellant's father Mr. Suresh Nanda has filed a confirmation before the Assessing Officer stating that his family had placed the jewellery in a common pool and used the same interchangeably. It is observed that the total weight of gold declared by the appellant and her mother exceeds the weight of gold found with them on the date of search by 1577.446 grams. Similarly, the total caratages of diamonds declared in the wealth-tax return exceeds the total weight of diamonds found from both the family members by 26.500 cts. Hence the total weight of jewellery declared is in excess of the jewellery found during the course of search. In terms of the value, the value of declared jewellery taking the rate of gold at Rs. 900/- per gram in respect of the family comprising of appellant, Suresh Nanda and Renu Nanda works out to Rs. 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch was deleted. In the case of Rakesh R. Purohit v. ACIT 14 DTR (JP) 414 it was held as under:- "Smt. R has declared 60 tola gold in her WT return. The assessee claimed before the AO by filing an affidavit that Smt. R was living with the assessee and she expired on 8th June, 1998 and the assessee was her only surviving son at the time of her death and her gold jewellery was passed to the assessee on her death. The AO rejected the claim of the assessee on the ground that no narration regarding the description of jewellery has been given in the WT return and the assessee has not filed copy of the will. The AO has no material to rebut the claim of the assessee. The AO has not led any iota of evidence to prove that Smt. R might have given her jewellery to someone else. The jewellery disclosed in past cannot be lost sight in view of non-availability of item-wise tally. Further the claim of the assessee for 4,000 gms. silver items as ancestral is very reasonable. Therefore, in the circumstances and facts of the case, the AO was not justified in making addition on account of the jewellery and silver articles explained by the assessee as belonging to his late mother Smt. R and the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid details before the Assessing Officer along with letter dated 21.12.2009. The assessee has made the reconciliation by identifying the rate of gold and caratage of diamonds in the valuation report filed by her and her mother Mrs. Renu Nanda along with their wealth tax return for AY. 2002-03. Similarly, the weight of gold and caratage of diamonds have been identified from the valuation report prepared by the departmental valuer during the course of search. To the weight of gold and caratage of diamonds identified by the valuation report filed with the wealth tax return, the weight of gold and caratage of diamond as per the purchase invoices after 01.04.2002 have been added. As per the reconciliation, the assessee has included the total weight of gold in grams of the jewellery found during the course of search on 28.02.2007. She has also computed the total caratages of diamonds in respect of the said jewellery found. The assessee has also computed the total weight of gold of jewellery returned in her wealth-tax returned along with her mother for AY. 2002-03. The total caratages of diamond in jewellery returned/declared by the assessee and her mother Mrs. Renu Nanda has also b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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