The Commissioner Of Income Tax,Faridabad v. Ms. Ina Puri, Lth-112A, The Laburnum

Income Tax Appeal No.182 of 2014 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. C.M. No.12493-CII of 2014 andIncome Tax Appeal No.182 of 2014Date of Decision: 10.11.2014 The Commissioner of Income Tax,Faridabad ..Appellantversus Ms. Ina Puri, LTH-112A, The Laburnum ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE AMIT RAWAL Present:Mr. Tajender K. Joshi, Advocate,for the appellant. RAJIVE BHALLA, J. -CM No.12493CII of 2014 Prayer in this application is to condone delay of 466 days in refling the appeal. Heard. For reasons stated in the application and arguments advanced by counsel for the appellant, application is allowed anddelay of 466 days in refiling the appeal is condoned. Income Tax Appeal No.182 of 2014 The revenue is, before us, challenging order dated22.6.2012 passed by the Income Tax Appellate Tribunal, Delhi Bench `C', New Delhi (for short “the Tribunal”). Income Tax Appeal No.182 of 2014 (O&M) 2 Counsel for the appellant submits that findingsrecorded by the Tribunal while setting aside orders passed byCIT (Appeals) and Assessing Officer, are perverse, illegal andarbitrary. The Tribunal failed to appreciate that cash foundduring the search, allegedly, belonging to the assessee'sfather-in-law, fell in the year under consideration, i.e.,assessment year 2007-08 and, therefore, has been wronglydeleted. It is further argued that during the search, certainpaintings were found at the residential premises of theassessee. The assessee asserted that these paintings weregifts from different persons, but could not furnish any gift deed.The Assessing Officer, therefore, rightly evaluated the cost ofeach painting and after separately discussing each painting andrelying upon costs assessed on the basis of M/s Delhi ArtGallery Private Limited and other modes, determined a totalcosts at Rs.3,02,88,566/-. Before the CIT (Appeals), theassessee asserted that certain paintings had been gifted to herby her father and father-in-law, respectively and furnisheddeclarations of these gifts. The CIT (Appeals) accepted thesedeclarations, deleted additions with respect to 10 paintings andgranted relief of Rs.29,44,636/-. As regards painting byManjeet Bawa, the CIT (Appeals) held that these paintings, i.e.,item nos.10 to 21 were gifted to the assessee and cannot beconstrued as purchases made outside the books of accounts Income Tax Appeal No.182 of 2014 (O&M) 3 and consequently deleted Rs.2,03,10240/-. The CIT (Appeals)also deleted addition with respect to paintings after acceptingdeclaration of gifts from S. Harsha Vardhan. The addition withrespect to various sculptures was also deleted. The CIT(Appeals) ignored that these declarations were an after thoughtand ignored the detailed evidence brought on record by theAssessing Officer which clearly proves that the paintings werestock-in-trade and that the assessee was earning commissionon sale of the paintings. The department filed an appeal beforethe Tribunal which has been dismissed without considering thatthese paintings are stock-in-trade and not personal gifts. We have heard counsel for the appellant and perusedthe impugned orders. The revenue has framed the following substantialquestions of law:- “ 1.Whether the Hon'ble ITAT is justified in holdingthat the nature of stock in trade, namely, paintings,held by the assessee at the time of search was that ofpersonal gifts on the basis of mere declaration fromfather, father-in-law and the undated and unverifieddeclaration filed in the name of a person who was incoma, and extraneous information from a magazineand a documentary film despite the fact that not onlywas there clear evidence that the assessee was Income Tax Appeal No.182 of 2014 (O&M) 4 The revenue has framed the following substantialquestions of law:- “ 1.Whether the Hon'ble ITAT is justified in holdingthat the nature of stock in trade, namely, paintings,held by the assessee at the time of search was that ofpersonal gifts on the basis of mere declaration fromfather, father-in-law and the undated and unverifieddeclaration filed in the name of a person who was incoma, and extraneous information from a magazineand a documentary film despite the fact that not onlywas there clear evidence that the assessee was Income Tax Appeal No.182 of 2014 (O&M) 4 earning commission on sale of paintings but the Ld.ITAT has also observed the same in their order? IIWhether the Hon'ble ITAT was justified inupholding the order of Ld. CIT (A) in deleting theaddition of Rs.3,00,88,566/- made by the AO, ignoringthe evidence brought on record by the AO in para 11 ofhis order that the assessee was earning commissionon sale of paintings and was in the business ofacquiring holding and selling paintings/art? IIIWhether the Hon'ble ITAT was right in upholdingthe order of Ld. CIT(A) where he had accepted adocumentary film and magazine produced before himas sufficient evidence to hold that assessee's stock-in-trade was actually gifts held by her, ignoring that aperson dealing in art can hold stock-in-trade for longperiods in order to let the value of the stock such asart to get unlocked? IVWhether in law and on facts and in thecircumstances, the order of the Hon'ble ITAT is notperverse in law in deleting the addition of Rs.75,000/-made by the AO on account of unexplained cash foundduring the course of search operation at the residentialpremises of the assessee on the basis of conjecturalstatement rather than on concrete facts because in the Income Tax Appeal No.182 of 2014 (O&M) 5 instant case assessee was not able to prove thesource of cash found with her?” A perusal of the first three so called substantialquestions of law reveal that they pertain to the paintings inquestion and impugn findings recorded by the CIT (Appeals)and the Tribunal accepting that these paintings were gifted to theassessee. A perusal of the order passed by the CIT (Appeals)reveals that the CIT (Appeals) has recorded a finding acceptingthe declaration of gifts by S.Das Gupta (father of the assessee)and S.N.Puri (father-in-law of the assessee) as valid. As regardsthe painting by Manjit Bawa, the CIT (Appeals) held as follows:- “ .........The appellant during the course of search alsostated that the painting were received as gifts. Duringthe course of search no documents have been foundto indicate that the painting were received otherwise.In view of the fact that these items were received asgift from Manjeet Bawa, the question of makingaddition in the hands of the appellant as undisclosedpurchases is factually not correct and legally nottenable. Moreover, the appellant has produced a copyof August,2002 issue of magazine “THE SOCIETYINTERIOR” which shows the house of the appellantand those art works on walls of the house. She hasalso submitted a CD containing a documentary film Income Tax Appeal No.182 of 2014 (O&M) 6 titled “ MEETING MANJEET” released in December,2002 which shows those art works of Manjeet Bawaare fitted on the walls of her house. These go toconfirm that those items were owned by the appellantmuch before the release of the saidmagazine/documentary as a period of about sixmonths is taken to complete the magazine & a periodof more than 18 months is taken to complete thedocumentary for going to censor board. In view of theabove discussions the paintings received as gift fromManjeet Bawa appearing in items no. 10 to 21 cannotbe construed as purchases made outside the books ofaccounts and added as undisclosed income during theyear. Therefore, the addition made on account ofthese painting is directed to be deleted.” titled “ MEETING MANJEET” released in December,2002 which shows those art works of Manjeet Bawaare fitted on the walls of her house. These go toconfirm that those items were owned by the appellantmuch before the release of the saidmagazine/documentary as a period of about sixmonths is taken to complete the magazine & a periodof more than 18 months is taken to complete thedocumentary for going to censor board. In view of theabove discussions the paintings received as gift fromManjeet Bawa appearing in items no. 10 to 21 cannotbe construed as purchases made outside the books ofaccounts and added as undisclosed income during theyear. Therefore, the addition made on account ofthese painting is directed to be deleted.” As regards the other gifts, the assessee producedconfirmation of gift from Shri S. Harsha Vardhan and withrespect to the work appearing in item no.26 acceptedconfirmation by Mr. Himmat Shah regarding its sale toassessee for Rs.2 lacs. The revenue's primary contention before this Courtis that the findings recorded by the Assessing Officer that these paintings are stock-in-trade, is not borne out from the evidence,particularly in the light of confirmation of gifts, filed before the Income Tax Appeal No.182 of 2014 (O&M) 7 CIT (Appeals), duly accepted and regarding which even therevenue is unable to adduce any evidence that theseconfirmations are false or procured. The Tribunal hasconsidered the confirmation of gifts and only thereafter affirmedfindings of fact recorded by the CIT (Appeals). The absence ofany material to indicate that these gifts, duly affirmed byconfirmation letters filed before the CIT (Appeals), were, in anymanner, stock-in-trade to be sold by the assessee, renderssubmissions by counsel for the revenue meaningless, much lesshas any error in appreciating evidence adduced by theassessee, been pointed out. The submissions by counsel for therevenue, therefore, do not give rise to a substantial question oflaw. As regards the 4[th] question, which pertains to thedeletion of Rs.75,000/- made by the Assessing Officer onaccount of unexplained cash, the order passed by the Tribunalreads as follows:- “ ........We find that assessee had submitted thatRs.75,000/- belonged to her father in law Sh. S.N.Puriwho handed over the cash to the assessee and leftKolkata and came to live nearby Faridabad. It hasbeen stated that his declaration that the money wasgiven to keep in safe custody for medical treatment incase of need and till date the amount was kept with Income Tax Appeal No.182 of 2014 (O&M) 8 the assessee unutilized. AO has not believed thisstatement and he made the impugned addition. Ld.CIT(A) on the other hand has found cogency in theassessee's submissions that the amount waspertaining to the assessment year 2008-09 and itcannot be added in assessment year 2007-08.Further, considering the circumstances andbackground of the assessee and employment of herhusband and father-in-law, Ld. CIT (A) opined that thefamily had very handsome income and he was of theopinion that assessee's father-in-law could havesaved Rs.75,000/-. We find considerable merits in theLd. CIT (A) order. Since the amount was found at thetime of search on 17-18/4/2007 the addition couldrightly have been made in assessment year 2008-09.Furthermore, the status and background of theassessee and his family sufficiently proved thatassessee's father in law could have savedRs.75,000/-. In the affidavit, he has confirmed that hehas handed over the cash to the assessee and wasstill lying with her unutilised. In our consideredopinion, order of the Ld. CIT(A) in this regard isreasonable order which does not need anyinterference on our part. Accordingly, we uphold the same.” same.” The CIT (Appeals) having accepted that Rs.75,000/-belongs to the assessee's father, we find no reason to hold thatthis finding is perverse, arbitrary or is not a plausible opinionand, therefore, answer this question against the revenue. The revenue having failed to point out violation of anyprovision of law, much less infraction of any provision of theIncome Tax Act, 1961, the opinion recorded by the CIT (Appeals)and the Tribunal on disputed questions of fact, being legal, validand credible and the so called substantial questions of law,being mere questions of fact, are answered against the revenueand the appeal is dismissed. ( RAJIVE BHALLA ) JUDGE 10.11.2014VK ( AMIT RAWAL ) JUDGE