Coercion Shouldn’t be there to Admit Undisclosed Income, Admissions Should be Backed by Credible Evidence: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that coercion shouldn’t be there to admit undisclosed income, and also that admissions should be backed by credible evidence.

The aforesaid observation was made by the Delhi ITAT when an appeal was preferred before it by the Revenue, as directed against the order of the Commissioner of Income Tax (Appeals)–Kanpur, (CIT(A)), dated 20.09.2021, pertaining to the Assessment Year 2018-19.

The grounds raised by the Revenue in its appeal were that on the facts and circumstances of the case and in law, the CIT(A) had erred in deleting the addition of surrendered income of Rs, 1,00,00,000/- as the surrendered was made by the son of the assessee, voluntarily and after due consultation with the assessee.

The aforesaid being the issue involved, the facts of the case were that the assessee was an individual engaged in the business of purchase and

sale of gold, silver and diamond jewellery in the name & style of M/s. Pushpanjali Jewels.

It so happened that a survey under section 133A of the Income Tax Act 1961, was conducted at her business premises on 30.05.2018. During the course of the survey, the stock got valued by an approved valuer who valued the stock at Rs. 5,57,34,223/- as against the value as per books at

Rs. 4,63,31,680/-.

Also, during the survey, the statement of Shri Himanshu Mittal, Son of the assessee was recorded. And he surrendered an amount of Rs. 1 crore as undisclosed income for the previous year relevant to AY 2018-19.

For AY 2018-19, the assessee had e-filed her return on 31.10.2018, declaring an income of Rs. 23,44,850/-. And the case was selected for scrutiny. Subsequently, statutory notices along with a questionnaire were issued and complied with.

The assessee submitted a written reply and supporting documents before the Assessing Officer (AO), who completed the assessment on a total income of Rs. 1,52,39,610/- including therein, an addition of Rs. 28,94,757/- on account of denial of exemption under section 54F, as claimed by the assessee. An addition of Rs. 1 crore under section 69A of the Income Tax Act was also made, the same being the amount surrendered by Shri Himanshu Mittal, son of the assessee during the course of the survey.

Aggrieved by the same, the assessee appealed before the CIT(A). The CIT(A) applied the provisions of section 54F(1)(b) of the Income Tax Act and computed the exempt value of capital gain at Rs. 14,93,596/- as against the assessee’s claim of Rs. 28,94,757/- by recording his findings.

Further, the CIT(A) deleted the addition of Rs. 1 crore made by the AO on account of the difference in the valuation of stock and excess cash found during the search, as was also supported by the surrender of the said amount by the son of the assessee, by recording his observations in his findings. And, it is being aggrieved by the same, that the Revenue has presently filed the current appeal before the Tribunal.

It was submitted by Shri Kanav Bali, the Sr. DR, on behalf of the Revenue that the assessee had only paid Rs. 9,05,478/- on 21.05.2018, towards the purchase of the new property and that rest of the payment had been made by the outsiders, the modality of which had not been dealt with by the AO.

On the other hand, Shri Somil Agarwal and Shri Deepesh Garg, the Advocates on behalf of the assessee relied on the CIT(A)’s order and submitted that the payment towards the purchase of the new property was made by the husband of the assessee and her son and that nothing had been paid by any outsider.

Hearing the opposing contentions of both sides and thereby perusing the materials available on record, the ITAT Bench observed:

“The assessee brought on record evidence to show that the family members paid the amounts from their respective bank accounts to meet the cost of the new property purchased by the assessee. It may not be out of place to mention that the decision of the Delhi Bench of the Tribunal rendered in Kapil Kumar Agarwal vs. ACIT has been affirmed by the Hon’ble P&H High Court

in Revenue’s appeal in Kapil Kumar Agarwal’s case. In Sunil Sachdeva’s case, the Delhi Bench of the Tribunal also held that section 54F does not require one-to-one co-relation between capital gain arising out of the transfer of long-term capital assets and utilisation thereof for the purchase/construction of residential houses. Therefore, the argument of the Ld. DR and objection of the Ld. AO that sale consideration obtained from the old property has not been utilised by the assessee has no legal basis and cannot be a hindrance to the assessee for claiming exemption under section 54F of the Income Tax Act.”

“AO cannot be of much significance when admittedly the assessee did not declare the surrendered amount in the return filed by her on 31.10.2018, just after a few months of the survey. This is also indicative of the fact that the surrender was not voluntary and with the consent of the assessee”, the Coram of Shamim Yahya, the Accountant Member and Astha Chandra, the Judicial Member added.

Thus, the Delhi ITAT finally held:

“In the result, the appeal of the Revenue is dismissed.”

To Read the full text of the Order CLICK HERE

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