TaxTMI 
TaxTMI 
2014 (10) TMI 351
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....out on 24-08-2009 at the business and residential premises of the assessee and its group. During the course of search, certain incriminating documents/ loose papers were found and seized. Consequently, the notice u/s 153A of the Act was issued on 15-01-2010 and served on the assessee on 21-10-2010. The assessee furnished his return of income on 31-03-2010 declaring total income of Rs. 8,34,120/-. A detailed enquiry was made by the AO and assessment was completed at a total income of Rs. 1,27,47,305/- on 23-11-2005. For arriving at the above taxable income, the AO has made following additions. 1. Addition on a/c of undisclosed cash advance as discussed Rs. 3,81,500/- 2. Addition on a/c of unexplained investment in house Rs. 1,11,00,000/- 3. Expenses disallowed Rs. 1,50,000/- 4. Interest expenses disallowed Rs. 2,81,685/- Total taxable income Rs. 1,27,47,305/- Rounded off Rs. 1,27,47,300/- 2.2 Aggrieved, the assessee preferred first appeal and th8e ld. CIT(A) has given part relief to the assessee. That is why both the parties are aggrieved before us. 2.3 The assessee has raised following grounds:- ''1. On the facts and in circums....
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....end any of the grounds of appeal either before or at the time of hearing of appeal.'' 2.4 The Revenue has raised following grounds in its appeal. ''1. On the facts and in the circumstances of the case, the ld. CIT(A) , Central, Jaipur has erred in deleting the addition of Rs. 3.50 lacs made on the basis of seized documents (page 1 of Annexure AS Exhibit-1) even though the assessee was not able to prove the entries as expenditure. 2. On the facts and in the circumstances of the case, the ld. CIT(A), Central, Jaipur has erred in deleting the addition of Rs. 48,37,951/- out of total addition of Rs. 1,11,00,000/- made u/s 69C on account of undisclosed investment in the house without giving a finding as to why and how the computation made by the AO was incorrect. 3. On the facts and in the circumstances of the case, the ld. CIT(A), Central, Jaipur has erred in deleting the addition of Rs. 1.50 lacs made on account of personal and unverifiable expenditure without the assessee proving them to be otherwise. 4. The appellant craves the right to amend alter or add to any of the grounds of appeal given above.'' 2.5 We have heard the rival submissions and have carefully perus....
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....er, it is submitted that a loose paper marked as Annexure AS Exhibit-1 page 1 contained certain notings on the basis of which the ld AO has made an addition of Rs. 3,81,500/- by observing that the said entries pertains to the calculation of interest on advance given and as a result of advance of Rs. 3,50,000/- and interest of Rs. 31,500/- totaling to Rs. 3,81,500/- is made. Snap shot of the said page is as under:- 13th April to 13th January, 2009 = 9 months 3500 x 9 = 31,500 (-) 7,000 24,500 Further the observation of the ld. AO at page 2 para 6.2 of his order is as under:- ''.......Firstly the assessee tried to explain above entries as rough working no financial implication, whereas the entry are clear representing interest charged for specific period and in terms of specific amount with omission and two zeros as admitted by the assessee in the statements recorded during search.... From the perusal of the above observation and the snap, it is beyond understanding as to who the addition has been made by the ld. AO. The ld. AO has applied two zeros on the figure written in the loose paper as ''3500'' and has failed to apply the two zeros on the figure written as ''315....
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....upported the findings of the AO and has further demanded that entire amount of Rs. 3.50 lacs instead of Rs. 31,500/- needs to be added in the hands of the assessee. 3.3 After considering the rival submissions vis-a-vis the evidence on record, it is noticed that loose paper marked as Annexure AS Exhibit-1 contains certain notings as discussed above . On the basis of this notings, an addition of Rs. 3,81,500/- has been made by alleging that these entries pertain to the calculation of interest on some advance given and therefore, he has worked out the principal amount of Rs. 3.50 lacs as advance after including interest amount of Rs. 31.500/- and thus he has made addition of Rs. 3,81.500/-. On scrutiny of pages, 2,16 and 17 of Annexure AS-1, it is noticed that the notings on page no. 1 are entirely different from the notings on the former pages. At pages, 2,16 and 17, the details of lockers in which cash amount has been deposited with reference to unaccounted finance business of the assessee is found mentioned. The assessee has also admitted that pages, 2,16 and 17 belonged to them. However, such an analogy cannot be drawn so that page 1 can be treated on the same lines with refere....
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....of the parties, we have found that the AO has proceeded in the wrong direction and has not relied upon DVO's report even after making reference to him and the DVO also made available his report during the assessment proceedings. The AO has also not relied on even the approved valuer's report filed by the assessee. We may although not consider in the manner in which it has been alleged by the ld. AR that the AO has having pre-conceived notion of making addition of Rs. 1.11 crore in this item of income but we cannot approve the action of the AO in the way he has pursued. The submission of the ld. AR is that from the DVO's report which is based on CPWD rates, if a settled reduction on account of local PWD rates, is allowed and on account of self supervision is allowed. No further addition is required to be made. We are in agreement with the ld. AR that local position is well settled regarding adoption of local PWD rates for valuation of the cost of construction etc by the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Hotel Joshi, 242 ITR 478 wherein it has been clearly held that instead of CPWD rates for valuation of properly only local PWD rates should be a....
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....count. The interest receipts are shown at Rs. 4,637/- from bank; Rs., 1,855/- on FDR and Rs. 1,365/- in proprietary concern and thus a net debit of Rs. 2,81,685 has been claimed on account of interest. The AO verified this claim with reference to balance sheet of the assessee and found that assessee had made substantial investment in shares of various private limited companies, partnership firm, shares, PPF etc. and some of them being income which is exempt under the Act. The AO has found that all the interest bearing loans cannot be considered for the purpose of the business activities of the assessee. The assessee has clamored that loans were taken for the business only. The basic nature of the business of the assessee did not require any loans as he is a finance broker who would only charge brokerage. The balance sheet filed by the assessee reveals that he was having investment in shares of various private companies / groups and that investment had not resulted any taxable income against claim of interest . He also found that the assessee had failed to link the receipt of loan and its use for the purposes of business. Therefore, the net debit balance of interest of Rs. 2,18,685/....
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....e bogus and inflated for non-business purposes. Accordingly, we find force in deletion of addition which is supported by the Hon'ble Rajasthan High Court rendered in the case of Jain Steel (India) vs. ACIT, 88 DTR 1 in which it has been held that no addition can be made without supporting evidence only. Thus we cannot allow this ground of appeal of the Department 7.1 The Ground No. 4 of the assessee's appeal is pertaining to charging of interest u/s 234B and 234D. However, no arguments were advanced by the assessee on this issue. We find no infirmity in the order of the ld. CIT(A). Hence, the Ground No. 4 of the assessee is dismissed. 8.1 The Ground No. 5 of the assessee is general in nature which needs no adjudication. ITA Nos. 829/JP/2013- Assessee & 847/JP/2013- Revenue (A.Y.2010-11) 9.1 These are the cross appeals filed against order of the ld. CIT(A), Central, Jaipur dated 17-09-2013. 9.2 The assessee has raised following grounds:- ''1. On the facts and in circumstances of the case the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 61,49,219/- on account of jewellery and silver by overstretching the statements recorded of the assessee a....
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....owance of the loss of Rs. 9,06,470/- under the head "Income from Other Sources" without considering the replies furnished and legal position in the matter and further without in any manner bringing on record any evidence contrary to the submissions made, this being so the entire addition deserves to be deleted. 5. On the facts and in circumstances of the case the Ld. CIT(A) has grossly erred in not suo moto considering the telescoping, recycling and set off of one income from the other which is a legally permissible course in completing the assessee and the same being mandatory to tax the real income in the hands of the appellant assessee. Hence the set off as permissible deserves to be allowed. 6. That the Ld. CIT(A) has grossly erred in upholding the charging of interest u/s 234-A, 234-B, 234-C and 234-D by ignoring the fact that sufficient amounts were lying pending in PD A/c and request for appropriation against tax liability was made without stipulated time, thus no interest be charged to the extent the amount lying deposit in PF A/c. 7. The appellant carves the right to add, delete or amend any of the grounds of appeal either before or at the time of hearing of appea....
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....see's written submission where valuation done as on 25-08-2009 by the search party is enclosed. In the column of gross weight in grams i.e. the column subsequent to column of the description of total weight of the items seized or found. In the subsequent column, net weight approximately is given. The net weight of the jewellery has been shown after reducing the weight of threads, dori (Sarrafa), Chapdi, Plastic bushes, steel wire, wax etc. having zero metal content and nil value. We have found that this observation of the ld. CIT(A) as asserted by the ld. DR supporting the reasons given by both AO and the ld. CIT(A) are not correct. In fact, there is no difference in the jewellery declared and found. The assessee has two sons who are not assessed under Wealth Tax Act and in view of the CBDT instruction dated 11-05-1994, credit has to be given in their hands also. This deduction comes to 200 gms of jewellery being 100 gms for each male members in the Wealth Tax Act filed upto assessment year 2008-09 and search took place on 24-08-2009 which is almost after expiry of 17 months. We are in agreement with the ld. AR that during this period of 17 months, the acquisition of some jewel....
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....ght of silver jewellery is treated as explained and reduced, the balance silver jewellery 22.485 kgs would remain. It was further noticed that wealth tax returns were filed upto 31-03-2008 and search had had taken place on 24-08-2009 i.e. after 17 months of acquisition of silver jewellery and like in gold jewellery the possession of some amount of silver jewellery on various social occasions as we have discussed in the case of the gold is not ruled out. Therefore, remaining 12.585 Kgs of silver articles / jewellery also stand explained and is liable to be deleted. Accordingly, the addition of Rs. 4,49,452/- in silver jewellery and articles cannot survive and is therefore, deleted. Thus the Ground No. 1 of the assessee's appeal is allowed. 11.1 The Ground No. 2 to 2.2 of the assessee's appeal and Ground No. 1 of the departmental appeal are in relation to addition Rs. 14,64,25,495/- which was made by the AO allegedly on the basis of the undisclosed cash advances made by the assessee. This addition has been reduced to Rs. 7.47 crores by the ld. CIT(A). The assessee has challenged this addition as well before us and the Revenue is in appeal against the deleted addition of Rs. 7....
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....rs are marked as Annexure AS-1 pages no. 4 to 6 and 8. It was further argued that certain entries were also found noted on the back side of these papers. This fact is not denied by the AO but the same has not been taken into consideration. When the query was raised to the ld. DR in this regard, he fairly submitted that these were found in torn conditions from the dust bin and were passed as stated above. After considering the state of these papers, we have found that the AO in his order has clearly ignored this contention of the assessee. In this regard, pages 27 at para 7.13 of the assessment order is relevant. We have found from records and submissions of the ld. AR that during course of search, no incriminating documents disclosing the alleged advances made by the assessee to various persons was found or seized. The Revenue found and seized cash lying in the private lockers and the same have already been offered by the assessee as an additional income in the return filed for the year under consideration which also covers with the withdrawal of deposits of cash in these lockers which is supported by pasted papers if they are taken into consideration. It is found that the nature o....
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....ted above, on the entries contained in each individual paper, she has upheld the addition of Rs. 7.74 crores based on the entries found noted at pages 16 and 17 which is cash balances available at a particular point of time in safe deposit vaults. 11.3 The ld. AR has explained pagewise possessin of all the papers seized as under:- ''Seized Pages Annexure AS-1, 4 to 6: As submitted above, in the post search proceedings assessee has explained the nature of transactions recorded in these pages in the statements recorded u/s 131 of the Income Tax Act, 1961 dated 21.11.2009 recorded where, in reply to question No. 25 (APB 102-103) asked to assessee to explain the nature of transactions recorded in the seized papers vide annexure No. AS-1 from the residential premises at D-32, C-Scheme, Jaipur, assessee has categorically stated that the entries contained in the loose papers No. 2, 3, 4, 5, 6, 7, 16 & 17 of the said annexure are the same transactions which have been reproduced at Page No. 8 of the said annexure and excepting Page No. 8 the remaining pages are in the handwriting of the employee of the assessee. The Ld. CIT(A) held that two entries at page 4 i.e. Vivek Rs. 50.00....
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.... he has considered the entries found noted at the left side of the paper as the source / receipt and the entries found noted at the right side of the paper as the application / payment but when the precise calculation was made for the first seven entries at the right side of page 8 of Annexure AS-1, the AO by taking divergent stand for no reasons brought on record has held the amounts mentioned therein as the receipt of interest on the advances given (by ignoring the fact that the right hand side entries are in relation to the payments / application of the funds) which is clearly evident from his own working where he has worked out the principal amount by firstly adding three zeros to the figures appearing in first seven entries (instead of two zeros) and further by extrapolating them for the principal amount by applying interest rate of 12% and held that the assessee has given advances of Rs. 4.00 crores on which interest of Rs. 48.00 lacs was received. The entry-wise working done by the AO is as under:- S. No. of entry Amount mentioned Amount as per assessee Amount taken by AO Principal calculated Addition made 1. 1,080.00 1,08,000.00 10,80,000.00 90,00,000.00 1,00,80....
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....d paper without assigning any reason for doing so. The Ld. CIT(A) has reduced the same to Rs. 67,76,000/- on her whims and fancies without appreciating the true nature of the entries appearing in the said page. In this regard it is submitted that this paper neither reflects that whether the amounts mentioned are receipts or payments and these are the simple memoranda entries made by some staff member for his / her own use without having any financial implication. Thus this paper is nothing but a dumb document. The major discrepancies in the approach taken by the Ld. AO as well as by the Ld. CIT(A) are as under: In the said paper No. 19 of Annexure AS-1 some amounts are appearing below the vehicle Nos. and all these figures are extrapolated by AO by adding two zeros giving impression that these vehicles have value of few lacs each (AO page 17 & 18 entries at Sl. No. 19 to 22) whereas all these vehicles are "two wheelers" having value not more than 40,000/- each. To prove the vehicles as Two Wheelers copies of registration certificate and other documents were submitted before Ld. CIT(A) (APB 16-21) who though accepted the contention of the assessee partly and work out the total....
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.... "P". It is pertinent to mention here that the assessee in its return of income filed for the year under consideration have declared total additional undisclosed income of Rs. 10,00,35,045/- which is the cash found and seized from the aforesaid lockers and available with the assessee at his residence and business premises. The closing balance or the last balance appearing in the said pages i.e. for "P" Rs. 5,67,000/- [5,67,00,000 after adding two zeros] and for "J" Rs. 3,64,000/- [3,64,00,000 after adding two zeros]. A chart containing the day to day inflow and outflow of the funds from the said lockers is reproduced herein below, a perusal of which would reveal that the balance as on the date of search is matching with the cash physically found and seized and included in the additional income disclosed. The aforesaid two tables are further reproduced as page 17 of Annexure AS-1 and are duly merged in the tables narrated below regarding the entries contained in page 16. Attention of your honours is invited to the paper book page 15 wherein it is explained that the entries appearing in page 17 of Annexure A-7 are reproduced at page 16 of Annexure AS-1 and the entries appear....
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....o. 1 of the Revenue's appeal. 12.1 The Ground No. 3 of the assessee's appeal is relating to confirmation of addition of Rs. 3,65,070/- made on account of undisclosed investment in the house. 12.2 The facts apropos to this ground are that the assessee had constructed a house on the property situated at D-32, Subhash Marg, C-Scheme, Jaipur wherein the construction was started in financial year 2006-07 and was completed by March 2009. The break up of the same as under:- Financial Year Amount 2006-07 16,90,597.00 2007-08 1,09,26,483.00 2008-09 1,51,38,280.00 Total 2,77,55,360.00 The case of the assessee is that entire bills and vouchers relating to this construction of the property are maintained and were produced before the AO as well as before DVO who duly considered the same while valuing the property . However, the AO found that some of the bills pertain to assessment year 2010-11 for which payment is not appearing in the books of account of the assessee and therefore, he has made addition of Rs. 3,65,070/- . The AO has given the details in this regard at page no. 4 para 6.1 & 6.2 of the assessment order as under:- S. No. Name ....
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....s available on record. We find that the assessee has claimed payment of interest paid as expenses and the loss under the head 'Income from other Sources' at Rs. 9,06,470/- which is to be adjusted against others heads of income. The assessee is engaged in the finance brokerage activities and the income from such activities is reflected under the head "Income from Business and the interst claimed under the head "Income from other Sources,is of similar nature. Therefore, we are in agreement with the submissions advanced by the ld. AR and the same should have been allowed as business expenditure. Hence, this ground No. 4 of the assessee is allowed. 14.1 The Ground No. 5 of the assessee is pertaining to allowing the benefit of recycling and telescoping of the additions made and upheld. Since we have already dealt with each issue separately and has not sustained any additions out of which the benefit of recycling and telescoping could be given. Hence, this ground of the assessee is dismissed. 15.1 Ground No. 6 of the assessee is pertaining to charging of interest u/s 234A, 234B, 234C and 234D of the Act. 15.2 We have heard both the parties and perused the materials available on ....
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.... impossible to make it more than 18 Ct. gold content in the total weight. In other cases, as per Deduction for impurity etc. (15%) 1176.457 Remarks Net Weight of Jewellery found 6666.591 Remarks It is a deduction Therefore, this Net Weight of jewellery as declared in the W.T. returns of the family for the year ended on 31.03.2008 filed on 31.07.2008 i.e. much before the search 6315.120 Remarks This is to be added by 261.360 gms. legally available as is the net weight which as considered by whenever the is required to the department for is be considered to for valuing the weight jewellery melted convert into available pure gold, 15% jewellery. arriving at the unexplained jewellery, thus by of Document 2 wax, lack, threads, steel wires, plastic bushes all of which have no gold content, however the stones studded are inclusive in this weight for which separate deduction has been given. have been separately valued, thus it is the GROSS WEIGHT of the jewellery items. past practice the j....