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TaxTMI 
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TaxTMI 
2016 (11) TMI 64
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.... sale of the land to the company in the normal course of the business." Grounds in revenue's appeal:- "1. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 6,32,650/- made by the A.O. on account of sale of plot considering as business income. 2. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 20,00,000/- made by the AO on account of investment in Construction of house when the addition is supported by the findings of the DVO. 3. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 1,50,00,000/- made by A.O. on account of advance given to Gulam Farooq Ansari which was accepted by the assessee during the search that this amount was paid out of books. 4. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition of Rs. 20,46,604/- out of Rs. 50,26,604/- made by the A.O. on account of deemed dividend income u/s 2(22)(e) of the I.T. Act and accepting additional evidence without giving opportunity to A.O." 2. Firstly we will take up Revenue's appeal:....
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....as underITA Sr. No. Description of plots Sale Value Purchase Cost Profit 1 Plot No. 293, Shree Ram Vihar 13,01,000 6,68,350 6,32,650 Total 6,32,650 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the addition made by the Assessing Officer by giving the following findings:- "I have considered the assessee's submission and also taken a note of judicial pronouncements relied upon by the AO and appellant. I have also carefully perused the records available before me and factual matrix of the case. I found that the assessee is not showing this plot as "Stock-in-Trade" in the balance sheet. In last balance sheet as on 31-03-2010, this plot is appearing under schedule 6 of the head "Non Depreciable Fixed assets". There is no dispute over the claim of the assessee that this plot was purchased by him in Financial Year 2000-01 and no any improvement or development activity was carried out over this plot with an intention to sale it as business asset. The department has carried out search over the assessee and no document was found to show that the assessee has convert....
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.... the time of acquiring these plots for the purpose of investment. Therefore, we do not find any reason to interfere in the order of Id. CIT(A) which is sustained. Thus the solitary ground of the Revenue is dismissed." After going through rival submissions and findings of Hon'ble ITAT, in assessee's own case and in the case of wife of the assessee Smt. Renu Agarwal, it is seen that though the appellant is engaged in real estate business but no activity was conducted on the plot of land which were later sold off, therefore, the profit on the sale of the plot of land Plot No. 293, Shree Ram Vihar has been correctly shown as long term capital gains. The AO is directed to compute long term capital gains accordingly. 4. Now the revenue's is in appeal before us. The ld. CIT DR has vehemently supported the order of the Assessing Officer. 5. At the outset, the ld AR of the assessee has relied on the order of the ld. CIT(A) and further submitted that the assessee is maintaining the regular and separate books of accounts of the business following mercantile system of accounting. The books of account are audited by Chartered Accountant u/s 44AB of Income-tax Act, 1961. The assesse....
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.... Patel 118 ITR 81 * CIT Vs. Trivedi 172 ITR 95 The issue is covered by decision of Hon'ble ITAT in the case of assessee Ashok Kumar Agarwal in ITA No. 920/JP/2007 dated 21/11/2008 and in case of Renu Agarwal wife of assessee in ITA No 125/JP/2013. The facts of this case are similar to the facts of the assessee's case. In view of above, the assessee prays your honor that addition made by Ld. A.O. is bad in law, unjustifiable and unreasonable deserves to be deleted and kindly upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue. 6. We have heard the rival contentions of both the parties and perused the material available on the record. The Ld CIT(A) has recorded a finding of fact that the assessee has not shown this plot as "Stock-in-Trade" in his balance sheet and no document was found during the course of search to the effect that the assessee has converted this plot into Stock-in-trade. Further, he has stated that on the plot of land which was purchased in Financial Year 2000-01, there is no improvement or development activity which was carried out by the assessee with an intention to sale it as business asset. Nothing has been brought on....
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....s shown Rs. 2,31,09,884/- under civil construction, sanitary & electricity, Rs. 1,13,44,374/- under furniture, Rs. 4,63,534/- under others and Rs. 18,34,744/- under plant and machinery. To order to ascertain the actual value of investment in construction of house, the AO referred the matter to District Valuation Officer (herein referred as DVO) for the valuation of the cost of construction of house. The DVO vide No. DVO/ITD/JPR/IT-10/2012-13/227 dated 06-03-2013, submitted his report wherein the construction cost of above said house was valued at Rs. 3,09,67,958/- as against Rs. 2,31,09,884/- declared by the assessee to the valuation officer. The copy of valuation report was given to the assessee to submit his comments/explanation on the difference arrived at by the DVO. The AR of the assessee vide his letter dated 15.03.2013 beside several technical objection, raised various objection. It was observed that the main dispute was on account of difference in amount shown in furniture head. The contention of the assessee is that in the furniture amount of Rs. 84,91,873/- is against fixed furniture like wooden frames, doors, widows, ward robes & railing etc and Rs. 28,52,501/- is agains....
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....made only in the third year or fourth year after completion of the civil work and not in the first and second year i.e. during the continuation of civil structure of the house. The assessee contended that even if the benefit of Rs. 76,24,944/- being amount invested in first two year on wooden work is allowed as part of construction then the investment as per books comes to Rs. 3,07,34,828/- which is very close to the valuation made by the DVO at Rs. 3,09,67,958/- and therefore, no addition on this Account should be made. However, after considering the valuation report of DVO, reply filed by the assessee, comments of DVO and rejoinder filed by the assessee, the AO observed that cost of loose furniture shown by the assessee is at lower side, therefore to cover up all possible leakage on this account an addition of Rs. 20,00,000/- was made on account of undisclosed expenditure in construction of house furniture in the hands of Sh. Ashok Agarwal. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had deleted the adhoc addition made by the Assessing Officer. 9. Now the revenue is in appeal before us. The ld. CIT DR has ....
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.... detail of expenses under Furniture was submitted as under:- S. No. Name of Assessee FY 08-09 FY 09-10 FY 10-11 FY 11-12 Total 1 Ashok Agarwal 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 Renu Agarwal 6,42,488 39,00,486 23,37,038 0 68,80,012 Total 13,66,931 62,58,013 34,02,750 316680 1,13,44,374 The assessee submitted that the entire amount in first year, second year and part of the amount in third year was against the door frames, window frames, doors, windows false ceiling etc which is part of the construction and part of DVO's valuation at figure Rs. 3,09,67,958/-. The assessee submitted that out of total amount of Rs. 1,13,44,374/-; amount of Rs. 84,91,873/- was against construction and Rs. 28,52,501/- was against loose furniture such as dining table, sofa, beds etc. Therefore the figure against the construction should be taken at Rs. 2,31,09,884/- + 84,91,873, which comes to Rs. 3,16,01,757/- as against cost estimated by DVO Rs. 3,09,67,958/-. e) The complete detail of construction was available in books of accounts of the assessee and the same was duly supported by the supporting bills and vouchers and no defects were pointed ....
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.... items. The assessee has shown the cost of wooden items such as ply, wood, teak wood, fittings, labour charges, etc. in the head Furniture. The assessee has also given the details of the account along with the photocopy of the purchase bills to DVO but the same remained unconsidered by the DVO. The breakup of construction expenses disclosed by the assessee in books vis a vis reconciliation chart is enclosed herewith. The main objection in this regard is that the assessee has shown Rs. 44,64,352/- (Ashok Agarwal) and Rs. 68,80,012/- (Renu Agarwal) totaling to Rs. 1,13,44,364/- under the head Furniture. In this head, the assessee has debited cost against teak wood, ply, fittings, railing, glass, labour charges of carpenter and polishing, ornamental doors etc. Thus, the total amount of Rs. 84,91,873/- were shown by the assessee against the construction under the head "Furniture" for which credit has not been given by the DVO. The chart and vouchers are enclosed herewith. Thus, the investments in construction shown in the books should be taken 2,31,09,884/- +8491873= 3,16,01757/- ii) The DVO has made addition of 2.25% Rs. 6,62,022.86 against External service Connection, The assessee ....
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....,67,01,232.00 viii) The DVO valued the servant room at Rs. 9,33,885/- by taking very high pitched plinth area rate. ix) Further, the assessee is maintaining complete account of construction of house and expenses in construction are supported by vouchers and in most of the cases the payment is also by account payee cheques. The assessee has filed complete details of the construction expenses and vouchers before the DVO. No any defect in the vouchers has been pointed out by you as well as by the DVO. Therefore, the investment in respect to construction of house disclosed by the books of account should be accepted. We are also filing herewith the details of construction expenses and copy of vouchers for your ready reference and record. Further, the reference made by you to DVO for estimation of construction cost of the building is against the settled law. Reliance is placed on the decision of Hon'ble Rajasthan High Court in the case of CIT Vs Hotel Joshi (2000) 108 Taxman 199 (Raj). (x) The rate taken by the DVO are based on PAR CPWD rate. The PAR system either adopted by CPWD or PWD-Rajasthan is not appropriate system for scaling the investment done in the construction ....
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....jasthan High Court in the case of Commissioner of Income Tax Vs. Hotel Joshi (1999) 157 CTR (Raj) 369 : (2000) 242 ITR 478 (Raj) : (2000) 108 Taxman 199 (Raj) held that the question, whether the valuation made by the District Valuation Officer as per the CPWD rates prescribed in the Board's Instruction No. 1671 or the valuation made by the registered valuer as per the rates provided by the PWD of the State Government should be accepted, does not arise. The Tribunal has arrived at the conclusion that the cost based on item wise basis is the proper method to work out the cost. Thus, the question of law sought to be referred, does not arise from the order of the Tribunal. Thus, the cost of construction that has been arrived at by the Tribunal in the instant case is wholly based on relevant considerations and appraisal of material on record. No statable question of law arises from the order of the Tribunal. The Hon'ble Rajasthan High Court has followed the decision of Hotel Joshi in other cases also. Commissioner Of Income Tax Vs. Lakhpat Film Exchange (2002) 173 CTR (Raj) 94 : (2002) 124 Taxman 807 In our case, we have also submitted the Valuation report of the registered valuer v....
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....s built are part of the building. While estimating value of investment in the building these fittings & fixtures, machineries etc. are to be included. For example a residential or a non residential building apart from the building itself has very many fittings & fixture, machineries etc. rooted to the building essential for performance of intended functions such as i) electric distribution boards, ii) circuit breakers, iii) internal electric wirings including switch boards, iv) transformers, v) fans & lights, vi) lightening arrestors, vii) lifts viii) pumps & motors, ix) generators as captive power plant , x) central air conditioning, xi) water supply line including taps, valves etc. xii) bath room and water closet fittings and fixtures, xiii) over head tanks, xiv) house sewer up to municipal sewer line etc. These are to be counted as part of the building. One of the criteria and an important one at that to decide about which fittings & fixtures or machineries are part of the building is to ascertain whether these are rooted to the building in permanent fashion and are integral part of a service or services essential for fulfillment of functions of the building for which it is bu....
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....ses recorded by the assessee in books of accounts from value of construction estimated by the DVO the due credit of fixed furniture expenses and wooden work were not allowed to the assessee. g) On the counter comments of DVO on objections raised by the assessee we submit that the assessee was maintaining only one account under the head "Construction at 10-B Plot" in financial ledger. The head wise details were prepared as per instruction of the DVO and in the specific performa as suggest by him. The assessee segregated the head wise detail from the financial ledger and cost of all wooden work was shown under the head Furniture. This fact can be verified from the bills and vouchers and ledger account of construction that the entire expenses incurred on wooden was segregated under head furniture. h) The assessee had submitted complete details before the DVO, however, he ignored the same. This is relevant to mention here that the complete bills & vouchers of house construction were available with the assessee but on the instruction of the DVO the copies of specific vouchers as desired by the DVO were submitted to him. The payments of most of the expenses were made through account pa....
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....iled to examining the fact that in the chart of head wise construction expenses submitted to him (Copy at PB Page 179) the entire expenses incurred in wooden work was mentioned in the head furniture and due credit of wooden work estimated by his as cost of construction was not given by him. The ld. DVO for comparing the book investment in construction is just relying only on a chart which was not prepared perfectly on the basis of technical parameters/requirements and rejected the all other full proof submission and evidence on surmises and conjectures just to support his high pitch valuation report. j) The DVO mentioned that the investment of Rs. 25,52,501/- towards the loose furniture is at lower side and the AO may ascertain it at his own level. The search party has not inventorised the loose furniture. The DVO has also not given the list of loose furniture vis a vis item wise estimation. Without having item wise list of the loose furniture, how can a person say that the investment shown against the loose furniture is at lower side. What are the loose furnituressofa, dining table, chairs and central table etc. The amount towards these items shown by the assessee is 28,52,501/- ....
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....was prepared on estimation basis and the supporting bills and vouchers/documents/explanation submitted to the DVO were also rejected without examining the same. o) Further, the Assessee's declared cost is supported by the Valuation Report of two different registered valuers copies of which were submitted to AO and the same were also available with DVO (Copy at PB Page 218 to 231 & 232 to 260), but the same was not accepted by the AO as well as DVO without pointed out any defect. The valuation report of Register Valuer Shri Vivek Kulshrestra is detailed report giving item wise valuation for each and every items used in construction. The learned AO as well as DVO completely ignored these reports. The valuation report of the registered valuer should be accepted in view of the decision of Rajasthan High Court in the case of CIT Vs. Hotel Joshi 242 ITR 478. Further since there is huge difference in the rates applied by these two experts the DVO should have substantiated his estimate with actual evidence, which was not done by the DVO. ITAT Jaipur bench has held in the case of Smt. Rekha Devi vs. ACIT 78 Taxman (mg) 30 that when there is huge difference in two reports, the DVO should h....
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....s than 20%:- It is an admitted fact that the valuation of the construction was made on the basis of CPWD rates. C.P.W.D. rates are mostly for metro cities like Delhi, Kolkata, Mumbai & Chennai where construction cost is very high. In Rajasthan construction cost is much cheaper therefore Rajasthan PWD rules are more authentic. In Rajasthan stones, grits, bajari, marble etc are locally available at cheaper rate whereas in metropolitan cities the cost of Stone, grit bajari, marble is higher. Labour in also cheap in Rajasthan as compared to metro cities. All works in Rajasthan are being done as per RAJASTHAN PWD BSR, so Rajasthan PWD Rules should be followed in Rajasthan instead of CPWD Rules. The local factors cannot be brushed aside. Hon'ble Rajasthan High Court and Hon'ble ITAT Jaipur Bench have held in several cases that the cost of construction in Rajasthan should be determined on the basis of Rajasthan PWD Rates as per Raj. BSR. Therefore the addition made on ad hoc basis for the difference which is less than 10% of the cost of construction disclosed by the assessee should be ignored. In view of above the humble assessee prays your honor that addition made by Ld. A.O. is bad i....
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....aims to have maintaining proper bills and vouchers pertaining to the construction expenses of house and this fact has not been controverted by AO in the assessment order. * It is also seen that the AO has not rejected the books of account of the assessee. However, the reference to the DVO was made by the AO u/s 142A of the Act and as per section 142A of the Act; AO may make reference to the valuation officer whether or not he is satisfied about the correctness or completeness of the accounts of assessee. * However, from the assessment order, it is also seen that as the cost of loose furniture shown by the assessee was on lower side, therefore, to order to cover up all possible leakage on this account, the AO made an ad hoc addition of Rs. 20,00,000/- on account of undisclosed expenditure In construction of house/furniture. This shows that the AO has accepted the assessee's contention as regard the credit of the amount shown under the head "Furniture" Rs. 84,91,873/- should be given against the construction cost estimated by DVO. Even otherwise also, investment in sofa, dining table and other loose furniture is always made after completion of civil work and by no stretch of ....
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.... 20% and in such a case difference should be ignored as per the several decisions of Hon'ble ITAT Jaipur Bench in this regard. In the case of Income Tax Officer Vs. Nitesh Maheshwari ITA No. 363/JP/2010; ASST. YR. 2006-07 order dated 28th September, 2010 (2011) 138 TTJ 0116 : (2011) 53 DTR 0413 : (2011) 7 ITR 0645 held as under:- "We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record, we find that learned CIT(A) was justified in directing the AO to allow 20 per cent deduction on account of applicable on CPWD rates instead of PWD rates. This finding has been given by learned CIT(A) following the decisions of Tribunal in cases of Tek Chand vs. ITO (1995) 51 TTJ (JP) 607: (1995) 52 ITD 197 (JP), ITO vs. Agencies Rajasthan (P) Ltd. (2008) 10 DATEDR (JP)(Trib) 217 and Smt. Mamita Rauto vs. ITO (2002) 76 TTJ (Ctk) 455 and many others. We further noted that learned CIT(A) was justified in granting 12 per cent deduction on account of self-supervision. Nothing has been brought on record by the Department that the building was not constructed under selfsupervision but under supervision of outside agencies. Books....
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....on was recorded in the books of respective person/concern of the assessee group. The AO mentioned that at the time of search the assessee has admitted that he has made payment of Rs. 1.5 crores but during the course of assessment proceedings, has shown payment of Rs. 50,00,000/- from Ashok Agarwal, Rs. 70,00,000/- from Renu Agarwal Rs. 6,00,000/- from Ashok Agarwal (HUF), Rs. 7,00,000/- from Ashish Agarwal and Rs. 17,00,000/- from Ashish Buildcon P Ltd. The assessee was asked to explain the same and in reply he submitted that the entry of payment made to Ansari brothers made in cash books of various group persons/concerns of the assessee was made in the name of the assessee as he was the main and key person of the group and was also maintaining the cash balance of entire group, therefore the cash payment to Ansari Brothers was made by him out of cash balance of entire group available with him and thereafter the entry of payment was made in the books of accounts of respective person/concern according to utilization of cash balance of respective persons/concerns. The AO mentioned that the claim that the cash payment to Sh. Gulam Farooq Ansari was made out of cash available from books....
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....ises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. On the basis of sworn statement recoded u/s 132(4) of the Act of Ansari, Authorized Officer recorded assessee's statement on oath u/s 132(4) of the Act where he admitted the payment of Rs. 1.50 Crores to Ansari and surrendered the same as his undisclosed income. Entire crux of the case is based on sworn statement of assessee but the said entry of payment was not found recorded in the regular books of account of the assessee group seized by the department. It is a matter of fact that the seized cash books of the group was showing cash balance of Rs. 1,88,10,450/-. It is also an admitted fact that the cash book was not complete at the time of search as some entries were not entered there. The cash book is a method of recording of inflow and outflow of cash in chronological date of order. Subsequent to the search, the assessee completed the cash book by incorporating all the entries against inflow and outflow of cash. The assessee produced the re-casted cash book before the Auditors, who found no mistake. During the course of assessment proceedings also, the assessee produced t....
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....d books of account which were left in the seized books of accounts Refer PB Pa 112) Vide Letter dated 01/03/2013, recasted cash books of assessee and other persons of the group were also submitted before the AO for verification of entries in re-casted books of accounts with reference to seized cash book and bank statements/vouchers and source of payment of Rs. 1.50 Cr. to Ansari. The AO has not controverted assessee's claim by specifically pointing out the incorporation of new unwarranted entry in the recasted/ completed/audited cash book by the assessee. It is a settled position of Law that after the conduct of search operation U/S 132 of the Act, books of account can be prepared on the basis of bank statement and seized documents and when no defect has been pointed out by the AO in the re- casted books of account, the entries made in the said re-casted books of accounts should be accepted. The ratio laid down by Hon'ble ITAT Jaipur Bench in the case of Shri Tarachand Jain ITSSA No.103/JP/2002 dated. 4.4.2003 (Supra) and Shri Rajendra Kedia (Supra) are squarely applicable here in this case also. Now, the question arises whether merely on the basis of search statement can....
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....oks of account of assessee/family members/group concerns were not complete as on the date of search, therefore the cash payment of Rs. 1,50,00,000/- made to Ansari was not found recorded in regular books of accounts of the assessee found at the time of search. The assessee was under mental pressure therefore during the course of search he surrendered this amount as undisclosed income. However, after examination of books of accounts it was found that the advance given to Ansari brothers has not been recorded in the books of accounts and this mistake resulted the huge cash balance as per the books as on the date of search. The advance of Rs. 1.5 crore was given for purchases of agriculture land on Delhi road. The deal was not materialized and the advance was received back. At the time of completing of books of accounts the transaction was recorded in the books of respective person/concern of the assessee group. d) The Audited Books of account were examined in detail by the ld AO with reference to seized books of account, vouchers, bank statement, copy of registered sale deeds and other seized material. The assessee has also explained to the AO:- (i) Vide letter dated 23/01/2013, a....
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....entire group available with him and thereafter the entry of payment was made in the books of accounts of respective person/concern according to utilization of cash balance of respective persons/concerns. e) For making the addition of this amount the department is relying on two thinks first on the statement of Shri Ashok Agarwal recorded at the time of search and second that the entry of payment to Ansari was not found recorded in the books of accounts at the time of search. Except to this there is no material with department to prove that the payment was made out of undisclosed income of the assessee. The assessee group was having sufficient cash balance as on the date of search which was not physically found to the search party, therefore no addition can be made on this account by presuming that this payment was made out of undisclosed income. f) The para to para comments on the findings given by the AO for making the additions is as under: - i) In Para 8.7(a) the ld. AO held that at the time of search this transaction was admitted by the assessee as made out of books and the same was reiterated in the statement recorded on 12.10.10 at his office. In this regard this is to su....
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....may also be taken into consideration for the purpose of construction of the statute. The Hon'ble Supreme Court in case of Kerala State Industrial Dev. Corporation Ltd., 259 ITR 51 (SC) has also held that Finance Minister's speech before Parliament while introducing bill can be relied on to throw light on object and purpose of provisions. In case of Durgesh Oil Mills, 273 ITR 305 (All.), the Hon'ble Allahabad High Court has held that it is well settled that the circular issued by the Central Board of Direct Taxes is binding on authorities. Therefore, merely on the basis of statement addition cannot be made without demonstrating the documentary evidence in support of the admission in the search statement. Further, it is often argued by the Department that in the confessional statements during the course of search, there is a mention that there was no pressure and the statement was given voluntarily without any threat. In this connection, the Bombay Tribunal in Deepchand & Co. v. Asstt. CIT (1995) [IT Appeal Nos. 1231 to 1234 (Bom.) of 1993, dated 27-7-1994] has observed thus: 'The stereotyped mention at the end of the statement that whatever was stated was true and....
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....surrender was not supported 8 by any corroborative evidence. The affidavit filed in this regard is laid on assessee's paper book pages 129 to 131. This affidavit has carefully been perused. After the affidavit was filed before the assessing authority, he remained silent on the face of it and carried no enquiry thereon to verify the correctness thereof. The assessee was also not cross examined on the point of retraction nor was required to produce any documentary evidence or any other evidence. The assessee was, therefore, entitled to assume that the income tax authorities were satisfied with the affidavit as sufficient on this point. The Hon'ble Allahabad High Court in the case of Sohan Lal Gupta vs. CIT, (1958) 33 ITR 786 (All.), as was also put to the parties during the course of argument, has made elaborate discussion on the evidentiary value of the affidavit. The relevant passage from the aforesaid judgment at page 791 of the report is reproduced as under :- " The most important points on which the Tribunal relied, is that mentioned at No. 2, viz., that, according to the Tribunal, the assessee had not satisfactorily established that the shares had to be sold as the purchase....
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....l and Murari Lal Mittal and there being no material or evidence on record to show that the appellant has carried any business outside the books for sale and purchase of medicines that could give rise to the income to the extent of Rs. 25 lacs, the addition merely on the basis of such statement which stood validly retracted could not have been made. We, therefore, find no factual or legal justification in sustenance of addition by Ld. CIT (A) in this regard." (c) Hon'ble ITAT Jaipur Bench in its recent decision in the case of Shri Pawan Lashkary ITA No 808/JP/2011 has held that income cannot be assessed merely on the basis of statement. (d) Further Reliance is placed on the following decisions:- (i) Hon'ble Apex Court in the case of Pullangode Rubber Produce Co Ltd v/s State of Kerala & Anothers (1973) 91 ITR 18 (SC) has held that admission is an extremely important piece of evidence but it can't be said that it is conclusive. It is upon to the assessee to show that it is incorrect. (ii) Hon'ble Rajasthan High Court in the case of CIT v/s Ashok Kumar Soni 291 ITR 172 (Raj.) has held that admission in statement during search is not conclusive proof of fact and can always be expl....
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....ubmit that the payment to Shri Ansari was made to purchase the lands for farmers at Delhi Road. At the time of payment the land was not finalized, therefore no agreement was made. Further the land was to be purchased directly from farmers through Shri Ansari, therefore the question of execution of agreement with Shri Ansari does not arise. As regard to recording the payment in books of accounts of different persons/concerns of the group instead of a single entry in the books of accounts of the assessee this is to submit that since the payment was made out of utilizing the balance of different persons/concerns, therefore the entry was made in books of accounts of respective persons/concern and upon finalization of transactions the respective transfer/adjustments entry will made in the books of accounts of the respective person/concern. v) In para 8.7(g) the ld. AO held that reliability of books of accounts of all persons is also questionable because than entries have been made subsequent to the search and not during the course of regular business. Admittedly the books of account of assessee /family members/group concerns were not complete as on the date of search because the main a....
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....is order that the books which were completed later on were duly submitted by relevant material to support the income and out-going cash. So he deleted the said addition. With this background, we heard both the parties and perused the material available on record from which it appears that at the time of search books of account were found but the same were incomplete. The assessee later on prepared the books of account, which were duly audited by the Chartered Accountant. The books alongwith the certificates were submitted before the A.O. No defect/mistake was found. The AO has not raised doubt about the genuineness of preparation his books of accounts. Therefore, we do not agree with the observations made by the AO that the books were self-prepared. The CIT (A) has discussed in his order the ratio laid down by the ITAT Jaipur in the case of Rajendra Kumar Kedia vs. DCIT, 22 Tax World 506 where it was observed that the books of account of assessee, which are not properly maintained, can be subsequently prepared and re-casted on the basis of bank statement, vouchers, and other related documents of sales and purchase, then also be relied upon for the purpose of income-tax assessmen....
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..... vi) In para 8.7 (h) the ld. AO held that the assessee is well established businessman who knows very well that any expenditure over Rs. 20,000/- in cash is not known allowable u/s 40A(3) of the Income Tax Act, 1961, therefore he is not expected to make huge cash payment of Rs. 1.5 crores for purchases of land when dealing in land in his business. In this regard this is to submit that it is a technical and legal matter and by adding the probability and possibility on the issue of legal matter a payment recorded in books of accounts cannot be doubted. Further, all the cash payment made in cash for purchases of land cannot be disallowable u/s 40A(3) of Income Tax Act, 1961 and before making the disallowance the extend of banking facilities available, consideration of business expediency and exigencies and other relevant factors are also taken into consideration, therefore the assessee made payments in cash considering and keeping in mind all these factors. (vii) In para 8.7 (i) the ld. AO held that as far as disallowance of 40A(3) of Income Tax Act, 1961 of Rs. 30,54,560/- for AY 2011-12 and Rs. 17,33,000/- for AY 2010-11 is concerned, the books of accounts/cash book for these yea....
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....ts. The addition was made solely on the basis that at the time of search this amount was surrendered as income and not found recorded in regular books of accounts and the department has no positive evidence that this payment was made out of undisclosed income, therefore the addition of Rs. 1.50 crore was rightly deleted by ld CIT(A). Therefore, kindly upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue. 16. We have heard the rival contentions of both the parties and perused the material available on the record. During the course of the first appellant proceedings, the assessee has contended that no incriminating document was found during the search operation showing payment of Rs. 1.50 crore to Ghulam Farooq Ansari. Further, no document was found from assessee's premises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. The crux of the issue is whether based on the statement of the assessee recorded u/s 132(4) of the Act, an addition towards undisclosed income can be made in the hands of the appellant. Both the Revenue as well as the assessee have relied on the decision of the Hon'ble Sup....
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....the date of search. Assessee had produced the re-casted audited cash book after incorporating all entries before the AO. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of Rs. 1,50,00,000/- to Ansari." During the course of the arguments, the Revenue has not brought anything further to our notice and the findings of ld CIT(A) remain uncontroverted before us. The assessee has successfully demonstrated through its explanation and documentation in terms of re-casted books of accounts that the statement made during the course of the search cannot be made the sole basis for making the addition of Rs. 1,50,00,000 in his hands as there was sufficient cash balance in the books of accounts to make the said payment and discharged its onus as laid down by the decision of Hon'ble Supreme Court in case of Pullangode Rubber Produce Co (supra) and Rajasthan High Court in case of Ashok Kumar Soni (supra). We therefore do not find any infirmity in the findings of the ld CIT(A). Accordingly, we uphold the order of the ld. CIT(A) and the appeal of the Revenue in this ground is dismissed. 17. Now we take up common ground in the Reven....
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.... (e) of Income Tax Act is taken for adjudication. The assessee has submitted the ledger account of assessee in the books of the company M/s Ashish Buildcon (P) Ltd (PB pg 282). The entry to entry explanation was also given by the assessee, for which the AO has not made any comments in his remand report. The ledger account of assessee in the books of company is like a current account showing inflow and outflow of money in mixed form for the transactions of advance given or taken from/to the assessee. From the above account, I found that first two payments by the company amounting to Rs. 15,00,000/- and Rs. 6,80,000/- were against the land deal/advance by the company. The third entry is receipt of amount by the company of Rs. 2,00,000/- from the assessee. The fourth entry dated 15/05/2010 is payment of Rs. 10,00,000/- by the company to assessee. Further, Rs. 2,00,000/- was repaid by company to the assessee on 15/04/2010 and balance payment of Rs. 8,00,000/- was towards the advance against the land. At this stage, the total advance by the company to the assessee becomes at Rs. 29,80,000/-. Subsequent to this entry, in all cases, the company received payment from the assessee first a....
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....the case of the appellant. On the basis of the evidence available on record it is seen that no business transaction was undertaken by the company for purchase of the land as claimed by the appellant, and the Ikrarnama was drafted subsequently to evade the provisions of sec. 2(22)(e) of the Act. In view of the facts and circumstances of the case as discussed in detail above and the law applicable to these facts, the addition to the extent of Rs. 29,80,000/- u/s 2(22) (e) of the Act is confirmed. Assessee gets part relief of Rs. 20,46,604/-(being Rs. 50,26,604 - 29,80,000/-). This ground of the assessee stands as partly allowed." 19. Now the assessee as well as the Revenue is in appeals before us. The ld. AR of the assessee has submitted as under:- (a) The similar issue on the same facts and circumstances and in respect to advance from same company has been decided by Hon'ble ITAT in the case of assessee for AY 2010-11 in ITA No 810/JP/2014 order dated 04-03-2016. b) During the course of assessment proceedings the assessee vide letter dated 22.03.2013 (Copy at PB Page 272-281) explained to the ld. AO as under: - "The assessee received money from the company from time to time ....
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....ments on various dates are repayment by the company to the assessee of the amount paid by the assessee to the company on earlier dates. In other words, the assessee paid certain amount to the company on various dates and the company repaid these amounts to the assessee on subsequent dates. Therefore, in any case, the repayment by the company of amount dues to the assessee cannot be deemed as advance or loan to shareholder. The assessee relies on the findings of Ld CIT(A) in this regard. (d) The expression used in first part of section 2(22)(e) is advance or loan. The word advance has not been defined. It ordinarily means payment of cash or transfer of goods for which accounting must be rendered by the recipient at some later date. The transaction of loan involves lending and delivery by one party and receipt by another party of sum money upon express or implied agreement to repay it with or without interest. The phrase "by way of advance or loan" appearing in Section 2(22)(e) of the Act be construed to mean those advances or loans which a share holder enjoys for simply on account of being a person who is the beneficial owner of shares, but if such loan or advance is given to such ....
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....eement not found in search:- The ld CIT appeal held the agreement as unreliable evidence on the ground that it was dated 22.07.2009 but not found during the course of search. In this regard we submit that search party has not prepared inventory for the documents or books of accounts found at the time of search. The search party prepared an inventory only of those documents which it seized. From the inventory prepared by the search party your honor would found so. The assessee is a big colonizer and had thousands of agreement to sale and documents relating to purchase of land, conversion of land and sales of plot. None of these documents are appearing in the inventory prepared by the search party. It is also relevant to mention that the assessee's assessment for the AY 2004-05, 2005-06, 2006-07 and 2007-08 were completed u/s 143(3) of IT Act after detailed scrutiny much before the search and several agreements to sales were filed before the AO during the course of scrutiny assessments, therefore, the existence of these documents cannot be denied. Since these documents were also not included in the inventory prepared by the search party. It is the wisdom of search party which docume....
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....s also relevant to mention here that at that point of time several representations were made by the various Association of the builders and private colonizers for conversion and 90B proceedings of the lands less than 10 Hectares But at that time Private Township Policy was under pronouncement by the Government. The assessee was expecting the relief by the Government for small builders in Private Township Policy which was going to be pronounced very soon but which was also delayed by Government for one or another reasons and later on the Private Township Policy was pronounced vide letter No F.3 (77)UDD/3/20102 JAIPUR, Dated: 28/06/2010. Here also no relief to the small builders was not given and the requirement of minimum land was kept 10 Hectares. Later on 23.08.2012 the assessee filed application under section 90B of land Revenue Act which was rejected by JDA. The copy of application and letter received from JDA is enclosed here with. When final outcome of the efforts came negative, the assessee sold another land to the company duly 90B proceedings completed. " Therefore, in view of the above explanation the amount of Rs. 50,26,604/- cannot be assessed as income of the asses....
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....of land is concerned, the assessee submitted a copy of agreement to sale/Ikarnama dated 6.4.2010 as per which the assessee had agreed to sell 2.602 hectares of agricultural land in Village Bamanwas, Tehsil Viratnagar, Distt Jaipur to M/s Ashish Buildcon Pvt. Ltd. for Rs. 40 lacs. As per the Ikarnama, the assessee was required to get 90B conversion formalities done before 31.3.2011. It was explained by the assessee that he was expecting the new township policy to be announced as was the case with other colonizer/builders and was under a bonafide belief that the JDA would allow the conversion of land. Unfortunately, the land under the sale agreement could not got 90B approval from the JDA and thereafter the agreement was cancelled and amount was refunded to the company. It is noted that both assessee and M/s Ashish Buildcon are engaged in the business of real estate and similar transactions have been undertaken by the assessee with M/s Ashish Buildcon Private limited in the earlier years and subsequent years as well. We are therefore of the view that these are normal business transactions where the money has been advanced by the company for purchase of land and the same cannot be dee....
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....Finally, the assessee's accounts has been squared up. The assessee and company are in real estate business. It is a general practice in the line of business that most of the land are purchased and sold on agreement to sale basis to save the stamp duty and to increase the profit on the transactions. These facts have been accepted by the AO in scrutiny assessment also in number of years. The condition laid down in the section 2(22)(e) are squarely applied in case of the assessee but only issue disputed is whether these advances were loan for business purposes or otherwise. The prima facie copy of accounts in the books of the company shows that assessee had paid much more than amount received from the company. The transactions were regular. The assessee produced the evidence before the lower authorities to justify the transaction as a business transaction on the basis of agreement to sale dated 22.7.2009. There were certain conditions as per this Ikrarnama, which could not be fulfilled by the assessee but it does not mean that assessee's loans and advances are not for business purposes. The ld. A/R of the assessee has explained the reasons for not getting 90B done of agricultural land....