TaxTMI 
TaxTMI 
2017 (9) TMI 1704
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.... this point and also ignoring the logical computation of construction cost by the AO based on findings of fact? (ii) Whether the ITAT order is perverse in deleting the addition on account of disallowance of interest of Rs. 2,81,685/- ignoring that the assessee had claimed the deduction in the profit & loss account of his business concern. In view of the above it is humbly prayed that the Hon'ble Court may please to allow the appeal and quash/set aside the order of the tribunal (Annexure-3) and CIT (A) to the extent it is against revenue with cost throughout?" Appeal no.109/2014 admitted on 12.5.2016 "(i) Whether ITAT order is perverse in deleting the addition of Rs. 14.64 crores on account of undisclosed cash advances stating that the addition was made on presumption and assumptions without there being any corroborative material , ignoring that the addition was based on specific seized documents quoted in the assessment and appellate order which were not rebutted u/s 292C of the IT Act by the assessee? (ii) Whether ITAT order is perverse in deleting the addition of Rs. 61,49,219/- (56,99,767+4,49,452) made on account of unexplained gold jewellery and silver ignoring the fin....
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....dmitted the facts of unaccounted cash advances. On due analysis of the seized papers it is further found and admitted by the assessee that he was omitting two zeors while recording the transactions on papers. Relevant question and answer of his statement dated 21.11.2009 u/s 131 of the IT Act is reproduced below:- 7.4 In reply Q. No.5 of his statement recorded on 21.11.2009 u/s 131 of the IT Act, 1961 he categorically admitted that these papers contained the transactions which are not recorded in his regular books of accounts and surrendered the same for taxation as undisclosed income. 5.2 He further contended that finding which has been arrived by the AO was not appreciated by the CIT(A) and on the contrary while modifying the order of AO, it has observed as under:- "On the above facts the following finding was given: "The peak credit of each lender has been considered for arriving at the peak addition to be made in each year. It is not the case of the assessee that he himself is a lender. In case the assessee has given an admission that the money belonged to him then credits of the lenders should have been merged. The assessee in spite of filing the letter of disclosing ....
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.... search 10810.33 9803.81 7843.048 1176.457 6666.591 6315.120 Remarks Remarks Remarks Remarks Remarks Remarks It is the total weight of the item found valued and inventorized. To clarify it is submitted that these items contained dori,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. This weight is after reducing the factor of dori, wax, lack, threads, steel wires, plastic bushes and stones which have been separately valued, thus it is the GROSS WEIGHT of the jewellery items. The weight in column 2 is required to be reduced to its purity mark to arrive at the net weight of gold content. In case of diamond jewellery, it is impossible to make it more than 18 Ct. gold content in the total weight. In other cases, as perpast practice the jewellery with the assessee is 20 or 22 Ct. Itmay kindly be noted that nojewellery could be made at 24Ct. purity which is an established fact in jewellery making, therefore, taking an average of three i.e. 18, 20, 22 an average of 20% has been applied to reach at the jewellery net weight before considering i....
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....jasthan High Court has clearly spelled out this benefit in the case of Patti Devi vs. ITO 240 ITR 727. The Hon'ble Karnataka High Court and Gujarat High Court have also taken similar view. Therefore, after considering the deduction on account of purity, the CBDT instruction and the value of the precious and semi precious stones jewellery available with the assessee can be treated as explained. Therefore, the addition of Rs. 56,99,767/- made on account of unexplained investment in the acquisition of jewellery is deleted. Thus we allow Ground No. 1 of the assessee to that extent." 5.4 He also pointed out the observations made by the tribunal regarding question no.1 which reads as under:- "11.2 We have head the rival submissions on this issue as well. It was argued by the ld. AR that admission made by the assessee is a result of atmosphere, circumstances and the pressure created and heat generated during the course of search. The search at the residence of the assessee stated at 10.00 AM 24-08-2009 and the admission was made u/s 132(4) of the Act after almost 42 hours in the midnight of 25th and 26th Aug. 2009 when the search was finally concluded. During the course of se....
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....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 of entries contained at pages, 4,5,6 and 8 can be treated as covered by surrendered income as apart from business of finance brokerage in which assessee is engaged, no other source of income has been attributed or found by the AO himself and hence only inference can be drawn is that undisclosed income declared by the assessee can be only out of activity regularly carried on by him i.e. finance, brokerage etc. It was stated that noting on the left hand side of these papers represented the source of funds (receipt side) and right hand side represented the applic....
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..... 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 interest 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." 7. Mr. Jhanwar has contended that in view of the observations made in 11.3 more particularly which reads as under:- 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, CScheme, Jaipur, assessee has categorically sta....
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....rse of appellate proceedings vide letter dated 21.08.2013 (APB 1-5) assessee explained each individual entry of this page but Ld. CIT(A) ignored the same and confirmed the amount of advances worked out at Rs. 5,78,00,000/- by Ld. AO. In this regard it is submitted that the Ld. AO while working out the addition has read the papers in the manner that 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 o....
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....to be hold bad in law. Page No. 19 of Annexure AS-1: An addition of Rs. 2,93,62,350/- was made on the basis of the entries noted in the said paper which are ascribed by the AO at page 17 and 18 of the assessment order wherein he has extrapolated the figures mentioned by adding 2, 3 or 5 zeroes to the figures appearing in the said 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 ent....
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....ed in these papers. Page 16 & 17: With regard to the entries contained in the pages No. 16 & 17 of Annexure AS-1, it is submitted that these pages contained entries of the movement of cash from the private lockers from time to time. The locker in Birani Safe is denotes by "J" and locker at Ganpati Plaza is denoted by "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. Extract of Annexure AS-1 Page 17 Marked as 'P' ....
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....1,75,000 5,76,000.00 24,000 6,00,000.00 40,000 5,60,000.00 60,000 5,00,000.00 50,000 4,50,000.00 55,000 5,05,000.00 6,000 5,11,000.00 25,000 5,36,000.00 73,000 4,63,000.00 28,000 4,35,000.00 20,000 4,55,000.00 25,000 4,30,000.00 59,000 4,89,000.00 28,000 5,17,000.00 50,000 5,67,000.00 5,89,00,000 2,76,00,000 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 appearing at page 16 are appearing at pages 4, 5 and 6 of Annexure AS-1 and entries contained in pages 4, 5 & 6 thus stood merged in page 8 of Annexure AS-1, therefore, it is submitted that the page 8 of Annexure AS-1 contains all the entries as were found noted in other pages i.e. pages 4, 5, 6, 7, 16 & 17 and therefore page 8 is required to be considered for working out the undisclosed income of the asse....
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....s not only from parental side but in-laws side as well at the time of 'Vidai' (farewell) or/and at the time when the daughter-in-law enters the house of her husband. We can also take notice of the fact that thereafter also, she continues to receive some small items by various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly 'Stridhan' of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the said limit as unexplained investment of the person with whom th....
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....all their own and some of the jewellery was lying in custody and control of their mother-in-law and in Indian conditions, it happens that the daughter-in-law keeps her jewellery with her mother-in-law or/and head of the family and takes the same whenever required for some occasion in the family. Even otherwise, the jewellery is personal wearing in nature and the revenue has not placed any material on record to show that the items, which were found, were not personal wearing of the ladies." 9.2 In Commissioner of Income Tax vs. Prafulbhai@ Rohitbhai J. Shah reported in (2013) 33 taxman.com 147 (Gujarat) wherein Gujarat High Court held as under:- 3. When challenged before the Tribunal, it concurred with the findings of the CIT(A) by briefly holding that out of the total disclosure made for the block period by the assessee of Rs. 2.76 crore, the remaining jewellery was covered by the Board's Circular and was already reflected in the books of accounts. We see no reason to entertain this issue as we are convicted by the reasoning given by the CIT(A) at length and also the logic assigned by the Tribunal. In any case, this being predominantly the factual aspect and when has been consid....
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....e Assessing Officer had applied his mind to the facts of the case to ascertain as to whether in fact the assessee had expended more amount towards construction as stated in the valuation report. Reverting to the facts of the present case, the Assessing Officer, except for referring to the profit and loss account, which as noted hereinabove, would not reflect any profit as the assessee had not claimed any profit, and to the balance sheet part of the return of income, the Assessing Officer has made no effort to ascertain as to whether, in fact, the assessee has expended more amount than disclosed in the return of income. In the opinion of this court, while the report of the DVO may form the foundation for reopening the assessment, there must still be some reasons which warrant holding the belief that income chargeable to tax has escaped assessment so as to necessitate issuance of a notice under section 148 of the Act. The facts reveal that the entire basis for reopening the assessment of the petitioner for the year under consideration is the report of the DVO without verification of any facts to support such conclusion. The Assessing Officer has not recorded any satisfaction about th....
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....2A of the Act, it appears that for the purpose of resorting to the provisions of s. 142A of the Act, the AO would first be required to record a satisfaction that the assessee has made investments which are not recorded in the books of account. As a necessary corollary, he would then reject the books of account as not reflecting the correct position and then proceed to make the assessment on the basis of estimation, for which purpose he can resort to the provisions of s. 142A of the Act and make a reference to the Valuation Officer for estimating the value of such investment. Thus, on a plain reading of s. 142A of the Act, it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable. Accordingly, the AO would first be required to reject the books of account before making a reference to the Valuation Officer. The rejection of books of account should precede the reference to the Valuation Officer. As rightly contended by the learned counsel for the assessee, the report of the Valuation Officer cannot form the foundation for rejection of the books of account. 10. In the context of the controversy in issue it ....
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....hange of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessment Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief." 7. Coming back to the plea raised by the counsel for the revenue that Section 142Acame to be introduced at a later point of time and the cases which have been cited above were in the context of earlier provision and in the pre-amended Section 142Ahad no element of rejection of books and therefore since in view of this change of statutory provision, the ratio laid by the aforesaid two decisions ....