TaxTMI 
TaxTMI 
2014 (11) TMI 848
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of purchase and sale of plots and development of colonies, so, to say in one phase it is doing the business in real estate. The assessee-firm purchases large chunks of land, develops them into plots and then sells them. The assessee has also claimed earning of commission income in this melee. For A.Y. 2004-05 it filed its return of income (ROI) on 03.01.2005 declaring NIL income which was processed u/s 143(1) of the Income Tax Act, 1961, the 'Act' for short. Subsequently, on 15.12.2009 and 16.12.2009, a search and seizure action u/s 132 of the Act was carried out at the business premises of the assessee firm and at the residences of the partners. Simultaneously, survey u/s 133A of the Act was also conducted. During this search certain incriminating documents / loose papers and books of accounts were found which were seized. Some documents were seized during survey operation. Consequently, a notice u/s 153A of the Act was issued to this assessee on 14.10.2010. The assessee-firm responded by filing Return of Income [ROI] on 15.03.2011 repeating NIL income as was disclosed in the original return. 2.1 During the course of assessment proceedings computerized books of accounts were ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt craves liberty to addition, amend, alter, modify any of the ground of appeal on or before its hearing before your honour." 2.4 We have heard rival submissions and have carefully perused the entire record. 3. The facts apropos ground No. 1(a) 1(b) are that the assessee-firm has shown unsecured loan totaling to Rs. 24,92,130/- from various persons, the details of which are as under :- S.No. Name of person Amount 1. Sumenesh Vyas 202000 2. Ashok Sharma 252500 3. Jabbar Singh Khinchi 707000 4. Hari Singh Rathore 505000 5. Bhim Singh Rathore 505000 6. Taruna Sharma 90900 7. Rajiv Vyas 111100 8. Leeladhar Khatri 100000 9. MD Sharma HUF 18630 Total Rs. 24,92,130 The A.O. demanded proof of the above loan in terms of Section 68 of the Act, failing which the A.O. has added Rs. 24,92,130/- u/s 68 of the Act. 3.1 In appeal the assessee produced various evidence to prove this unsecured loan. The additional evidence was dealt with in the light of Rule 46A of the I.T. Rules, 1962 and a remand report was called from the A.O. However, the ld. CIT(A) has ign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come of the assessee and that in the case of Shri Ashok Sharma, the creditor, the sale has been made to him and the loan has been adjusted against the sale consideration and has been treated as income. It was stated that the ld. CIT(A) accepted the additional evidence produced before him and sent them to AO who after examining them in detail has submitted his report. In this report he has objected to the admission of the additional evidence but at the same time he has examined them and has verified them. Therefore, according to ld. A.R. the loans stand confirmed and proved by the confirmation of the cash creditors and since these loans have been received through account payee cheques and there being no contrary evidence on record. The ld. AR has placed reliance on many judicial decisions in support of his contention. 3.4 Per contra, ld. CIT(DR) Shri O.P. Meena has contested all the above points raised by ld. AR and has relied heavily on the orders of the authorities below. He has stated that the assessee failed to produce any confirmation or proof of the above loans before A.O. He has stated that ld. CIT(A) has correctly refused to accept the additional evidence under Rule 46A. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....our considered opinion the evidence produced having been examined by the AO during the remand proceedings is sufficient enough to justify consideration thereof and prove the three ingredients of Section 68 of the Act. The following chart depicts the assessee's submission with regard to these cash credits alongwith proof. The evidence(s) submitted by the assessee-firm are listed at pages 17 and 18 of the written submissions furnished by the ld. A.R of the assessee which is as under: Sumesh Vyas 202000 AEJPV 2427 B Amount recd. As advance against sale. Amount already taken as income by including in sale. Details of sale made submitted 2. Ashok Sharma 252500 No. PAN Amount recd. As advance against sale. Amount already taken as income by including in sale. Details of sale made submitted. 3. Jabbar Singh Khinchi 707000 ABOPK9728I J Amount recd by cheques. Confirmation filed to AO. Regular Income Tax Assessee. Accepted in regular returns. 4. Hari Singh Rathore 505000 AFHPR2644P Amount recd by cheques. Confirmation filed to AO. Regular Income Tax Assessee. Accepted in regular returns. 5. Bhim Singh Rathore 505000 NO PAN Amo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... found. In that case, it was held that the assessee was required to prove the credits appearing in the paper/seized material. Therefore, the ratio of this judgment is not at all relevant and the decision has been rendered on entirely different facts. 3.8 Likewise, the judgment in the case of CIT Vs. Ajay Kumar Sharma reported in 259 ITR 240 is again of no help to the Revenue because in that case books of account were found and as per them, the assessee had not offered for taxation the credits shown in the books. In that eventuality, similar decision was taken as was taken in the case of Elegant Homes Pvt. Ltd [supra]. Thus the facts of both these Rajasthan High Court judgments are entirely on different issues and on different footing and are not applicable to the facts of the given case. The decision of Cas Card Finance Ltd of Ahmedabad Bench [supra], a Third Member decision is also having entirely distinguishable facts. In that case, during the course of search, certain incriminating documents were found. Thus this decision is also distinguishable and the ratio rendered in that case will not apply to the facts of the present case. 3.9 Accordingly, in the light of the above d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s well. Accordingly, with similar reasoning we order deletion of this amount as well and allow ground No. 2(a) and 2(b) of assessee's appeal. 5. The ground No. (3) is relating to disallowance of interest of Rs. 27,350/- out of interest paid to lenders. Since we have already accepted the loans as genuine and this interest amount of Rs. 27,350/- was mainly disallowed because the loan was held ingenuine, has to be allowed. Accordingly, we delete this addition of Rs. 27,350/- and allow ground No. 3 of assessee's appeal. 6. Ground No. (4) is regarding charging of interest u/ss 234B and 234B. Since the charging of interest is mandatory, only consequential relief is admissible. Accordingly, we don't allow this ground and dismiss the same. 7. Ground No. (5) has become of academic interest only, as we have not sustained any addition which can be set off against the surrendered income. Hence, this ground is dismissed on that score. 8. Ground No. 6 was not pressed at the time of hearing. Therefore, this ground is also dismissed as not argued. Ground No. (7) is general in nature and does not require any adjudication. 9. In the result the appeal in ITA No. 251/Jodh/2014 for A.Y. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the assessment order passed u/s 143(3) of the Act. This addition included a sum of Rs. 8,86,880/- made u/s 40(i)(a) and of Rs. 38,050/- made on account of various expenses. This addition has been confirmed by the ld. CIT(A) as well as Appellate Tribunal and the appeal of the assessee is stated to be pending before the Hon'ble Jurisdictional High Court. Therefore, we do not interfere in this issue and the A.O has to follow and apply the verdict finally given by the High Court. Till then, we cannot allow the ground No. 2 of assessee's appeal and dismiss the same. 15. In the result, the appeal of the assessee is partly allowed. 16. In revenue's appeal the only effective ground is ground No. 1(i) which relates to deletion of addition of Rs. 10,80,000/- added by the AO u/s 40A(3) of the Act. The facts apropos, this ground are that the assessee made payment of Rs. 54 lakhs to various parties towards the purchase of agricultural land (page 2 para 5 of AO's order). However, even after mentioning, as above, he has invoked the provisions of Section 40A(3) and after disallowing 20% of this payment of Rs. 54 lakhs has added a sum of Rs. 10,80,000/-. 17. Before ld. CIT(A) the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of ld. CIT(A), Jaipur, dated 31.03.2014. The assessee has raised the following grounds in its appeal:- "1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 1,83,869/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A. 2. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in various years and has also further erred in not granting telescoping effect of additions sustained. 3. The interest charged u/s 234B and 234C is bad in law and bad on facts." 20. The revenue has raised the following grounds in its appeal :- i). Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 35,20,000 made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lready surrendered by the appellant in various years and has also further erred in not granting telescoping effect of additions sustained. 3. The interest charged u/s 234B and 234C is bad in law and bad on facts." 25. The revenue has raised following grounds :- i). Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 2,10,00,000 made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made. (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 9,37,675/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding. iii) Whether on the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oper perspective, we have found that the facts in M.D. Sharma's case, supra are mutatis mutandis same to similar. The arguments of both the sides, on merits of this issue are also identical. The ld. CIT(A) has deleted this addition by following para 5.2 of the above said order dated 24.9.2013. The ld. CIT(DR) has also admitted this fact in his written submissions. Because the Department has filed appeal against this order, the Tribunal order does not get effaced until it is reversed or its operation is stayed. Accordingly, there is no merit in this ground of Revenue's appeal and we dismiss the same. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed. ITA NO. 350 AND 255/JODH/2014 (A.Y. 2009-10) 30. These are cross appeals filed against the order of the ld. CIT(A) dated 31.3.2014. 31. The assessee has raised the following grounds: "1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 2,21,203/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A. 2. The Id. CIT(A) has erred in not gr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant had failed to substantiate the exceptional conditions under which the cash payments were made. (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur ha& erred in law and on facts in directing to delete the addition of Rs. 31,44,125/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding. (iii) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the substantive addition of Rs. 94,00,000/- made by the AO on account of unexplained investment in construction of properties, ignoring the fact that this was part of the undisclosed income of the assessee disclosed u/s 132(4) of the I.T. Act, 1961 on the basis of seized documents which was offered for taxation in the hands of the assessee firm. (iv) Whether on the fact and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the substantive addition of Rs. 94,00,000/- made by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of written submissions of the Department filed for A.Y. 2010-11 which reads as under: "During the course of search action, various issues were noticed on the basis of material found and seized and confronted to the various assessees of this group. In response, the main person of the group namely Shri Murlidhar Sharma, who is also a partner in the assessee firm, had admitted unexplained investment/ expenditure/ undisclosed assets in his hands as well as in the hands of the assessee firm . Details of which are mentioned in the Asstt. order. (Para 7, pages 3 to 5). On examination of the records during the assessment proceedings it was noticed that the assessee failed to disclose the surrendered amounts fully in its return of income for various AY's. The surrender made by the assessee during the course of search was on the basis of specific seized documents which pertained to the assessee and seized from their premises. Further, the assessee surrendered the amount voluntarily and under the statement taken on oath and recorded u/s 132(4) which have evidentiary value and binding on the assessee. Further any of the assessees of the group had not filed any retraction at any stage. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or A.Y. 2005-06, 2006-07 & 2010-11 dated 24/09/2013 and the Hon'ble ITAT while deciding the issue of Rs. 35 Lacs added in the hands of Shri M. D. Sharma on account of purchase of building material for construction of residential house had gone through the details of entire addition made by the AO amounting to Rs. 1,29,00,000/-. In view of the said finding of the Hon'ble ITAT reproduced in para 9.1 of his order has held that the addition made by the AO in the hands of the appellant does not survive. He has therefore, directed to delete the addition of Rs. 94 Lacs made in this case. In this connection, it is submitted that the Hon'ble ITAT in its order in the case of Shri M.D. Sharma had directed to delete the substantive addition of Rs. 35 lakhs, made on account of purchase of building material for purchase of residence house in his case for the A.Y. 2010-11. The Hon'ble ITAT has also dismissed the ground No. 2 and 3 taken in the Revenues's appeal in that case regarding addition made on account of undisclosed income of Rs. 94,00,000/- on protective basis and set off of undisclosed income, as decided in the assessee's appeal. The Hon'ble ITAT has observed that from the perusal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ily and under the statement taken on oath and recorded u/s 132(4) which have evidentiary value and hence is binding on him as well as the assessee-firm. Further the assessee had not filed any retraction at any stage. Thus, no case was made for retraction at any stage. (iii) The assessee has failed to offer for taxation the true and correct incomes even the disclosed during the search and failed to specify the manner in which the such income has been derived or to substantiate the manner in which the undisclosed income was derived and investments made out of the said undisclosed incomes, with corroborative evidences. In the statements recorded u/s 132(4), each and every pages were confronted to the assessee and after carefully analysis of facts, better known to the partner and the assessee- firm at that time in full conscious, the partner had offered undisclosed income on account of various head (as stated above) for taxation for various A.Ys. During the course of assessment proceedings, each & every page even each and every entries were again confronted to the assessee vide this office various query letters & assessee was also asked to substantiate his claim with cogent and c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may be termed as perverse. viii) The assessee has failed to honour the voluntary surrender made u/s 132(4) of the I.T. Act, 1961 during search operation which was made on the basis of seized papers, documents, assets etc. Further the assessee has failed to make any valid retraction. Therefore, the surrender made u/s 132(4) was binding on the assessee. Reliance in this regard is placed in the following judgments:- (i) Bhagirath Agarwal V/s CIT (2013) 351 ITR 143 (Delhi) ix) Shri Murlidhar Sharma had surrendered income in respect of unaccounted income of the commission, trading business. A part of the said income must be invested in the assessee's goods i.e. Lands, Plots etc. which were traded and hence it cannot be interpreted that the entire surrendered income was considered for investment in the construction of properties. The Hon'ble ITAT has not considered this aspect, while deciding the issue relating to protective addition in the case of Shri M. D. Sharma. The assessee during the assessment proceedings, or even at the appellate proceedings, has failed to substantiate his claim regarding telescopy of surrendered income with reference to any corroborative evidences ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... extract para, at page 8 of the written submissions filed by the ld. CIT(DR). This para reads as under: "During the assessment proceedings, a reference was made to the Valuation Cell U/s 142A of the Income Tax Act, 1961 for determining the construction of following properties: 1. Commercial complex on plot No. 44, Artisan Colon, Masuria, Jodhpur 2. Farm House at Vaibhav Enclave, Village Pai, Jaisalmer Road, Jodhpur. 3. Residential house at 221-222, Shyam Nagar, Pai Link Road, Jodhpur The Valuation Officer vide his reports dated 28.12.2011 determining the cost of constructions of these properties for A.Y. 2010-11 as under:- 1. Commercial complex on plot No. 44, Artisan Colon, 2. Masuria, Jodhpur Rs. 16184200/- 2. Farm House at Vaibhav Enclave, Village Pal, Jaisalmer Road, Jodhpur. Rs. 11751000/- 3. Residential house at 221-222, Shyam Nagar, Pal Link Road, Jodhpur Rs. 16763800/- From the report of the Valuation Officer, it was conclusively established that cost of construction of the said properties invested by the assessee and Shri M. D. Sharma in the under consideration was Rs. 44699000/-. The assessee has not submitted any details of expenditure incurred on....