TaxTMI 
TaxTMI 
2014 (3) TMI 1213
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....27,69,601-by estimating (the NP rate of 8,25 per cent on the declared turnover as against the trading addition of Rs. 13,42,358 made by the AO by applying NP 8.5 per cent on total turnover of Rs. 10,41,88,767 after allowing deduction of depreciation and interest of Rs. 1,95,075. (iii) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming that there was suppression of investment of Rs. 6,11,16,770 in the land purchased by M/s Kamakshi International. (iv) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 61,11,677 on substantive basis in the hands of the assessee as against addition of Rs. 62,06,000 made by AO in the hands of the assessee on protective basis and in the hands of the firm M/s Kamakshi International on substantive basis under s. 69 of IT Act, 1961, without appreciating the fact that the Department has carried out intensive search over the assessee and no material was found to show that the assessee has made any undisclosed investment in the purchase of the land by the partnership firm M/s Kamakshi international. (v) On ....
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....n reducing the NP rate of 8 per cent without giving proper justification, as against NP rate of 8.5 per cent adopted by the AO for the defects in the maintenance of account mentioned in the assessment order. (ii) On the facts and in the circumstances of the case, the learned CIT(A), Central, Jaipur has erred in excluding the addition of Rs. 1,29,00,000 made under s. 69B and interest thereon Rs. 4,35,110 on account of alleged unaccounted/undisclosed investment from the hands of the assessee ignoring the fact that addition confirmed in her appellate order dt. 16th Aug., 2013 has already been challenged before the Hon'ble Tribunal, by the other assessee Shri Manish Tambi. 2. Now, we are taking the appeals of the assessee and the Revenue for the asst. yr. 2009-10 as under : 3.1 Ground Nos. 1 and 2 of assessee's appeal (ITA No. 867/Jp/2013) are interconnected and related to rejection of books of account and trading addition of Rs. 12,76,960 by estimation on net profit of contract business. And ground No. 1 of Revenue's appeal (ITA No. 881/Jp/2013) is common and relates to reducing the trading addition by Rs. 65,398. 3.2 Briefly stated, the facts of the case....
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....(A). The learned CIT(A) has confirmed the trading addition of Rs. 12,76,960 as against the trading addition made by AO at Rs. 13,42,358 by estimating the NP rate 8.25 per cent as against estimated by AO at 8.5 per cent and declared by the assessee @ 7.02 per cent on total turnover of Rs. 10,41,88,767. However, she did not allow deduction of depreciation and interest of Rs. 1,95,075. 3.3 Aggrieved from the order of learned CIT(A), the assessee as well as Revenue both are in appeal before us on this issue. The assessee objected the order of learned CIT(A) on the addition sustained by her by raising ground Nos. 1 and 2 before us. The Revenue has also objected the addition reduced by learned CIT(A) vide ground No. 1 raised before us. 3.4 The learned Authorised Representative submitted before us that Department has carried out intensive search operations and no incriminating document or material was found to visualize that the assessee has suppressed the contract income during this year. As regards the rejection of the books of account by the lower authorities, the learned Authorised Representative submitted 'that the defects pointed out by the AO are of general in nature and ....
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....ecision of Tribunal Jodhpur Bench, in the case of Haridas Parikh v. ITO [2009] 29 SOT 13 (Jodh.) (URO) and decision of Tribunal Hyderabad Bench, in the case of Vishal Infrastructure Ltd. v. Asstt. CIT [2007] 104 ITD 537/11 SOT 386 . As regards the wages register the learned Authorised Representative submitted that the contract work is is being carried out through labour contractors or causal labours directly hired by the assessee. The payment to labour contractors is verifiable and payment was made after deducting TDS thereon. The assessee is maintaining labour register for labour directly hired by the assessee. The wages register was produced before the AO for examination during the course of assessment. As regards the estimation of the profit, the learned Authorised Representative submitted that the estimation of net profit is at very higher side. The AO estimated the net profit by applying rate of 8.50 per cent and he allowed further deduction on account of depreciation and interest. Therefore, the effective NP rate applied by the AO is 8.31 per cent as against 7.02 per cent shown by the assessee. The learned CIT(A) applied NP rate of 8.25 per cent of contract receipts and no fu....
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....er hand, the learned Departmental Representative relied upon the findings given by AO. The learned Departmental Representative submitted that the learned CIT(A) estimated profit by applying NP rate of 5.25 per cent of contract receipts as against 8.50 per cent applied by the AO. The defects pointed out by the learned AO in the books of account are major defects and on the basis of defective books of account, true profit cannot be calculated. The learned Departmental Representative submitted that the profit estimated by AO is reasonable and the addition made in the order of AO should be sustained. 3.6 We have heard the rival contentions and perused the facts of the case and material on records. We find that books of account of the assessee are defective for the reasons mentioned in the order of the AO and the learned CIT(A) and no cogent explanation in this regard has been brought on record and, therefore, we find no infirmity in the order of learned CIT(A) who has rightly confirmed the action of the AO for invoking the provisions of s. 145(3) of the Aet. As regards the estimation, no comparable case was given by AO and learned CIT(A). Further, we find force in the contention of ....
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....s Kamakshi International for purchase of Plot No. D-81, Ghiya Marg, Bani Park, Jaipur, in which the assessee was partner during the year under consideration. 4.2 Briefly staled, the facts of the case are that the assessee was a partner in the firm M/s Kamakshi International, Jaipur. During the year under consideration the above mentioned firm has purchased a Plot No. D-81, Ghiya Marg, Bani Park, Jaipur, measuring 1,058 sq. yards from M/s Om Builders & Colonizers (P) Ltd. for a consideration of Rs. 1.20 crore vide registered agreement dt. 25th Feb. 2009. The AO opined that the market value of plot Nos. D-112A and D-112B which are in same locality and vicinity is Rs. 70,000 per square yard, therefore the market value of plot No. D-81 which was purchased by M/s Kamakshi International, Jaipur should not he less than this; hence the market value of plot No. D-81 should be Rs, 7,40,60,000 and the balance amount of Rs. 6,20,60,000 was paid to the seller which did not find recorded. The AO has further held that the seller of this plot (D-81) in October, 2007 took the loan of Rs. 1,25,00,000 from ICICI Bank for purchases of this plot and in the valuation report submitted to ICICI Bank th....
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....e the assessee did not offer any plausible explanation while during the course of assessment proceedings the assessee submitted the detailed reply (copy at paper book pp. 63-69) and no contra - material was brought on the record by the AO to disprove the reply of the assessee. The learned Authorised Representative submitted that the AO compared the purchases value of plot No. D-81 from value of plot Nos. D-112A and D-112B but both the properties are at different locations, different uses and the transactions were also carried out in different period. The plot No. D-18 is a residential plot situated on internal small road, while the plot Nos. D-112A and D-112B are commercial plots and situated at main road. The rates of the commercial plots are always very higher to the residential plots and this may also be seen from difference in DLC rates. Further, the firm has purchased the plot at the rates/value which was accepted by the Government authorities for stamp duty purpose. The plot No. D-81 was purchased in asst. yr. 2009-10 while as per notice of AO the transaction of Plot Nos. D-112A and D-112B was made in asst. yr. 2010-11. Therefore, the value of both the properties are not comp....
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....isclosed investment in the property was not in profit-sharing ratio of the partners: therefore, it cannot be presumed that the alleged undisclosed investment will be in profit-sharing ratio of the partners. The learned Authorised Representative further submitted that the Department has carried out search over the assessee and no any incriminating document was found from the possession of the assessee to show undisclosed investment by the assessee in purchase of the impugned plot by the partnership firm. The learned Authorised Representative submitted that the learned CIT(A) sustained the addition in the hands of the assessee on the ground that the firm has no source of income. The learned Authorised Representative submitted that the same theory also applies for this assessee also. The Department has carried out search over the assessee and no secret business was found. The assessee's source of income are partnership firm Vishal Enterprises. The learned AO has examined the assessee's income in this firm and no undisclosed income was found. The other source of assessee's income is Padmawati Constructions. The income of this contract business has been estimated and such es....
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....have paid more than what was actually recorded in his books of account for the simple reason that such an inference could be very subjective and could involve the dangerous consequence of a notional or fictional income being brought to tax contrary to the strict provisions of Art. 265 of the Constitution of India and Entry 82 in List I of the Seventh Schedule thereto which deals with 'taxes on income other than agricultural income'. This was one of the major considerations that weighed with the Supreme Court in K.P. Varghese (supra) in which case the provisions of sub-s. (2) of s. 52 fell for interpretation. It was observed that Parliament cannot choose to tax as income an item which in no rational sense can be regarded as a citizen's income or even receipt. Sec. 52(2) (which now stands omitted) applied to the transferor of property for a consideration that was lesser than the fair market value by 15 per cent or more; in such a case, the AO was conferred the power to adopt the fair market value of the property as the sale price and compute the capital gains accordingly. The Supreme Court held that it was the burden of the AO to prove that there was understatement of con....
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.... not even authorise the adoption of any yardstick to measure the precise extent of understatement. There can therefore be no compromise in the application of the section. It would seem to require the AO even to show the exact extent of understatement of the investment; it does not even give the AO the option of applying any reasonable yardstick to measure the precise extent of understatement of the investment once the fact of understatement is proved. It appears to us that the AO is not only required to prove understatement of the purchase price, but also to show the precise extent of the understatement. There is no authority given by the section to adopt some reasonable yardstick to measure the extent of understatement. But since it may not be possible in all cases to prove the precise or exact amount of undisclosed investment, it is perhaps reasonable to permit the AO to rely on some acceptable basis of ascertaining the market value of the property to assess the undisclosed investment. Whether the basis adopted by the AO is an acceptable one or not may depend on the facts and circumstances of the particular case. That question may however arise only when actual understatement is ....
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....Rs. 65,398. We have decided this ground vide ground Nos. 1 and 2 of the assessee's appeal. In view of our detailed findings in assessee's appeal ITA No. 867/Jp/2013 vide ground Nos. 1 and 2, we dismiss this ground of appeal of the Revenue. 7.1 Ground No. 2 of the appeal filed by the "Revenue is for deletion of the addition of Rs, 66,50,000 made under s. 69B and interest thereon Rs. 7,090 on account of alleged unaccounted/undisclosed investment from the hands of the assessee. Briefly stated, the brief facts of the case are that the AO held that during the course of search over Shri Manish Tambi, a finance broker, some documents marked as Annexs. A-1 to A-4 were seized and the seized documents were analyzed and a ledger of assessee was prepared from the entries reflected in the day book of Shri Manish Tambi. It is seen that the assessee has made undisclosed investment of Rs. 66,50,000 and earned undisclosed interest of Rs. 7,090 in asst. yr. 2009-10. The AO has presumed that the name Vishnu Maharwal as appearing in the seized dairies from Shri Manish Tambi is of the assessee. The AO has held that Shri Manish Tambi has not disclosed the identity of the assessee but since it....
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.... other hand, learned Authorised Representative submitted that first of all this is to be submitted that copies of documents seized from the possession of Shri Manish Tambi on which the entire addition was based were not provided to the assessee for which the assessee has made repeated requests. Even opportunity to check the arithmetic accuracy of assessee's ledger was not given to the assessee. Further, the assessment order is completely silent about the persons who took loan from the assessee through Shri Manish Tambi. It appears that no inquiry was made from these persons. Further, it is prevailing practice of market that Hundi/receipt is written by the persons who take loans and these hundies/receipts are delivered to the persons who give loan. Such types of Hundies/receipts were not found from the possession of the assessee, this shows that the assessee has not made any undisclosed loan through Shri Manish Tambi. Further, no record or ledger of Shri Manish Tambi was found from the possession of the assessee. The seized records (copy of which was given in response to the remand report) show that there was regular transaction of deposits and withdrawals. Without maintaining a....
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.... learned Authorised Representative submitted that all the inquiries or materials if any were gathered behind the back of the assessee, therefore, the same cannot be used against the assessee. If the AO proposes to act on such material as he might have gathered as a result of his private enquiries behind the back of the assessee, he must disclose the substance of all such material, though not the sources thereof [Dal Chand & Sons v. CIT [1944] 12 ITR 458 (Lahore) ] to the assessee and if this is not done, the principles of natural justice stand violated Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 (SC) ; Addl. ITO v. Ponkunnam Traders [1976] 102 ITR 366 (Ker.) ; International Forest Co. v. Commissioner Of Income-Tax, Patiala. [1975] 101 ITR 721 (J&K) ; Sales Tax Officer, Ganjam v. Uttareswari Rice Mills [1973] 89 ITR 6 (SC); Motipur Zamindari Co. (P.) Ltd. v. Agrl ITO [1972] 83 ITR 778 (Pat.); CIT v. East Coast Commercial Co. Ltd. [1967] 63 ITR 449 (SC) ; Harmukhrai Dulichand v. CIT [1928] 3 ITC 198 (Cal.) Further, the entries in the accounts of an assessee are to be believed. The section in the Indian Evidence Act, 1872 that prima facie, seems relevant is s. 34 relat....
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....ept' came in for the consideration of the Courts, including the Apex Court. The assessee has not given any cash loan or cash deposit to any party through Shri Manish Tambi. The learned AO has examined the books of account of the assessee and no nexus of assessee with Shri Manish Tambi was established. The learned AO at p. 5 of order mentioned that the Department has seized A-1 to A-4 from the office/residence of Shri Manish Tambi, which is list of clientele wherein name of assessee is also appearing but the fact remains that the AO has not correlated any entry from the books of account of the assessee with the seized records of Shri Manish Tambi. The learned Authorised Representative further submitted that the onus under s. 69B is on the AO to prove the investment. Therefore, here the onus was on the learned AO to prove by positive evidence that the assessee has invested 66,50,000 through Manish Tambi. In the case of the assessee, the learned AO has not brought any document or material to prove that the assessee has made cash loans through Manish Tambi. The onus of the learned AO cannot stand discharged merely rejecting the explanation of the assessee, or on surmises, pos....
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....neither during the course of search nor during assessment proceedings disclosed the name/identity of the persons/concerns/partners from whom money was received to be invested in the market or given to them when they needed it. The learned AO himself has mentioned in the order that Shri Manish Tambi (the persons in possession of which these documents were seized) did not disclose the name and identity of the assessee then on presumption and assumption, the AO held that the name appearing in the seized documents of Shri Manish Tamabi is same person who is being assessed by him. (ii) The learned AO mentioned in the assessment order that some of such names as appearing in these documents are that of Shri Vishnu Maharwal, Smt. Aruna Sankhala, Kamakshi International and Hotel Neelam, etc. It is presumed that these persons are the same persons who are currently being assessed with him in the search cases of Mahaveer Singh Sankhala Group so when Shri Manish Tambi had not admitted such fact, therefore, the same is against the settled position of law. (iii) In the assessment order the learned AO mentioned that some of the persons whose names were figuring in these impugned ....
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....ds of Sri Manish Tambi and not in the hands of the assessee because (the documents were found and seized from the possession of Shri Manish Tambi. If he did not disclose the name and identity of transacting party the Department have no material/evidence to presume that the entries recorded in the name similar to the name of the assessee belonged to the assessee and last but not the least the Department and Shri Manish Tambi both had admitted that the documents are personal documents of said Shri Manish Tambi. The AO however provided the copies of the seized documents (paper book pp. 120-140) and casting of assessee's ledger account on the basis of documents seized from the possession of Shri Manish Tambi (paper book pp. 118 to 119). (a) The document relied upon in present case was neither speaking one nor incriminating one, but a dumb document. The figure of Rs. 66,50,000 is not arriving from these documents for current year therefore, the addition of Rs. 66,50,000 in the income of the current year purely based on guesswork and the learned AO not been able to provide computation for the working of this figure till date. The figure of 66,50,000 is not arriving from t....
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.... by the AO in remand report, copy of which is enclosed herewith. As per this ledger peak credit amount comes to Rs. 10,090 for asst. yr. 2009-10 (on 12th March, 2009) and Rs. 36,220 (on 28th June, 2009; Rs. 46,310 minus Rs. 10,090 Rs. 36.220) for asst. yr. 2010-11. In the light of abovementioned facts/case law, the learned Authorised Representative submitted that since there was no material with the Department to prove that the assessee made undisclosed investment through Shri Manish Tambi, therefore, no addition could be made under s. 69B on the basis of suspicion, surmises and conjectures. Further, if the Department gathered some material from possession of Shri Manish Tambi which suggested that the assessee made some undisclosed investment then still it could not be used against the assessee until it is proved by documentary evidence that the assessee actually made some undisclosed investment and the entries recorded in the documents found from the possession of Shri Mansih Tambi are correct. 7.5 We have heard the rival contentions, perused the facts and material available before us. We find that the AO has not brought any positive material to show that the assessee has ma....
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....ly these were brought to the notice of his Authorised Representative on 23rd Dec., 2011." The assessee has filed application under RTI Act for the seeking xerox copy of the seized documents. The copy of the order passed under RTI Act passed by the Asstt. CIT Central Circle-I, Jaipur, is placed at paper book p. 79. In paras 4 and 5 of the said order is as under : "4. Vide letter dt. 13th Feb., 2012 the said third party Shri Manish Tambi has specifically objected furnishing of information to the applicant. His objections is reproduced as under : "With reference to your notice, we would like to submit that the information desired by Shri Vishnu Maharwal is personal (in) nature and our business secrets. We do not want to share them with anyone. The information desired by him may also harm and damage us in day-to-day business and safety of family members. Therefore, you are requested not to give any information to Shri Vishnu Maharwal and oblige. 5. In view of the above submission the desired information cannot be given to the applicant as the third party has objected it and also the requisition of information is personal and no interest of public at ....
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.... in view of the aforesaid discussion, submissions made by the learned Authorised Representative and learned Departmental Representative and in the present circumstance and facts of the case, no addition is called for in the hands of this assessee. The AO is not justified in making the addition on this account and ground No. 2 of the appeal filed by the Revenue is dismissed. 8. Ground No. 3 of the Revenue is general in nature and therefore does not require any adjudication. Thus, the appeal filed by the assessee ITA No. 867/Jp/2013 is partly allowed and appeal filed by the Revenue ITA No. 881/Jp/2013 is dismissed. Assessee's appeal for asst. yr. 2010-11 (ITA No. 868/Jp/2013) 9.1 Ground Nos. 1 to 3 of the assessee's appeal ITA No 868/Jp/2013 are regarding rejecting the books of account by applying the provisions of s. 145(3) of IT Act, 1961 and confirming the addition of Rs. 26,35,657 by estimation the profit of proprietorship concern of assessee Padmawati Constructions at Rs. 97,42,020 on the turnover of Rs. 8,42,75,256. And ground No. 1 of Revenue's appeal (ITA No. 882/Jp/2013) is common and relates to reducing the trading addition by estimation of net profi....
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.... the assessee in search statement This working resulted in the estimation of NP of Rs. 97,42,020 on turnover of Rs. 8,42,75,256. The working of learned CIT(A) results in estimation of NP @ 11.55 per cent of the turnover. Thus, she confirmed the trading addition of Rs. 26,35,657. 9.4 Aggrieved by the order of learned CIT(A) the assessee filed appeal before us and raised this issue vide ground Nos. 2 and 3 of his appeal. The Revenue also challenged the order of learned CIT(A) on this issue vide ground No. 1. 9.5 The submissions of learned Authorised Representative and learned mental Representative were same as were for asst. yr. 2009-10. 9.6 We have heard the rival contentions and perused the facts of the case material on records. In support of the estimation of net profit, no any comparable case was given by AO and learned CIT(A). Further, we find force in the contention of the learned Authorised Representative that in search statement the assessee has surrendered Rs, 30,00,000 stating that the cash found by the search party and other items represents his business income. The assessee has shown profit from the contract business Rs. 41,06,363. The assessee has increased this....