TaxTMI 
TaxTMI 
2018 (4) TMI 1969
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....sues are common in nature and hence they were heard together and are being disposed of by this consolidated order. ITA Nos. 501 to 507/Coch/2014 3. The first common ground is with regard to the treatment of agricultural income as non agricultural income. 3.1 The facts of the issue are that there was a search carried out u/s.132 of the I.T. Act and also survey u/s. 133A of the Act at the business premises of the assessee on 05/11/2009. The assessee is engaged in the business of centrifugal latex and manufacture of tread rubber and has been running various concerns alongwith his wife Smt. K.R. Fathima and daughters K.R. Raseena and K.R. Raiza, namely, M/s. Nilambur Traders, M/s. Nilambur Treads P Ltd., M/s. K.A. Treads, M/s. K.A. Reclaims and M/s. K.A. Latex (P) Ltd. The assessee is also engaged in the money lending business. Consequent to search u/s. 132 of the Act, various incriminating material were found and notice u/s. 153A was issued on 05/04/2010. The assessee filed return of income for the assessment years 2004-05 to 2009-10. The Assessing Officer treated the below mentioned amounts out of the agricutural income returned by the assessee as non agricultural income. ....
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....icultural income of Rs. 2,88,000/-. Out of this, the Assessing Officer limited the agricultural income to Rs. 1,50,000/- and treated balance of Rs. 1,38,000/- as non agricultural income. Here also, the assessee had filed the return of income on 19/12/2010 which was beyond the due date of filing of the return of income. As in the earlier year, A.Y. 2004-05, the assessee has not placed any evidence in support of the agricultural income. For similar reasons as in assessment year 2004-05, we confirm the addition for the assessment year 2005-06. This ground of appeal of the assessee is rejected. 5. For the assessment year 2006-07, the assessee filed his return of income on 28/05/2007 declaring agricultural income of Rs. 5,15,000/-. Out of this, the Assessing Officer restricted the agricultural income to Rs. 2 lakhs and treated the balance Rs. 3,15,000/- as non agricultural income. As in earlier years, the assessee has not placed any evidence for earning such agricultural income. For similar reasons as in earlier years, we confirm the addition for the assessment year 2006-07. This ground of appeal of the assessee is rejected. 6. For the assessment year 2007-08, the assessee declare....
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.... is very much necessary for sustaining the addition but for assessment u/s. 153A, there is no such mandate. Thus, this argument of the Ld. AR is rejected for all the assessment years. 11. The next ground in assessment years 2004-05, 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 is with regard to addition towards unexplained credit in the bank accounts of the assessee. The addition made in these assessment years were sustained by the CIT(A) as under: A.Y. Amount (Rs.) 2004-05 13,65,000/- 2006-07 14,67,795/- 2007-08 9,07,185/- 2008-09 18,75,720/- 2009-10 18,29,621/- 2010-11 6,80,000/- 11.1 For the assessment year 2004-05, the assessee has shown in the cash flow statement receipt of DD Rs. 13.65 lakhs for which the assessee has not shown the identity of the person from whom it has been received. Even before us, there were no details of source from which it was received. The assessee could not prove the identity of the creditors or the genuineness of the transactions. Hence, the addition is sustained. This ground of appeal for the assessment year 2004-05 is rejected. 11.2 For the assessment year 2006-07, it was found during the search....
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....arch, it was seen that the bank account maintained by the employee Shri K.C. Thomas, Shri Sathar and Shri K. Jaffar, huge amounts were seen credited in their accounts. In the sworn statement recorded from them, it was stated that the amounts belonged to the assessee which is the profit received from M/s. Tristar Investments. When this was pointed out, the assessee stated that a perusal of bank accounts maintained by Shri Thomas, Shri Sathar and Shri Jaffar would show that there were credits which the said staff members was not able to explain at this distance of time. The assessee stated that these amounts represents proceeds relating to suppression carried out by M/s. K.A Treads and that such amounts have been received back/used for the use of the assessee and the assessee offered these amounts and also requested to take the peak credit of the amounts and applying the GP. However, the assessee could not substantiate the arguments or produce any supporting materials. The assessee has excluded the salary credited in the accounts of the employees. Therefore, the amount of Rs. 18,75,720/- credited in the name of the employees was treated as the income of assessee and added to the tota....
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....ome by operating the bank accounts in the name of the employees and this fact was admitted by the employees in their statement u/s. 132(4) which in itself is an evidence which was further substantiated with cash credits into these bank accounts. The CIT(A) observed that in the absence of the assessee's claims being substantiated with facts that the credit into employee's bank accounts were suppressed sales, the same is the trading profit of the assessee which had never been disclosed. According to the CIT(A) in the instant case, the sum of Rs. 2,49,100/- was credited into the bank account of Shri Jaffar and Rs. 16,26,620/- was credited to the account of two employees, viz., Shri Thomas and Shri Sathar. According to the CIT(A) in the assessment year 2006-07 the cash credited into the bank account of Shri Thomas and Shri Sathar was trading in profit of the assessee which was not disclosed as his income. Accordingly, a sum of Rs. 16,26,620/- was treated as undisclosed trading profit and the addition made by the Assessing Officer was confirmed by the CIT(A). As regards the sum of Rs. 2,49,100/-, since Shri Jaffar had stated that the amount credited as the profit received from Hint Pub,....
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....the factory and office building. The Assessing Officer found that land was purchased at the rate of Rs. 1550 per cent and total cost comes to Rs. 41,34,051/- while as per the cash flow statement the cost of land was shown at Rs. 12,63,773/- The Assessing Officer added the difference of the two to the total income for a sum of Rs. 28,70,278/- by treating it as undisclosed investment in land. 12.2 Before the CIT(A) it was submitted that the said addition was based on the statement of the Manager Shri K.C. Thomas recorded on 5.11.2009 u/s. 132(4) where he deposed that the rate of purchase of land was @ Rs. 1500/- per cent and the total payment was made at Rs. 36,00,000/-. The Ld. AR submitted that the manager retracted his submission in an affidavit dated 12/9/2011. It was submitted that the Assessing Officer had taken the entire land admeasuring 26.6713 acres @ Rs. 1550 per cent However, according to the Ld. AR, the assessee pleaded that the manager who deposed the statement was engaged only in preliminary negotiation of the land purchased and the final settlement was done by the assessee. It was submitted that the land was purchased from different persons and the rate cannot be s....
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....allowed for statistical purpose. 13. The next ground for the assessment year 2006-07 is with regard to investment made in Hint Pub, Bangalore. 13.1 The facts of the case are that during the course of search u/s 132 at the business premises of M/s Nilambur Traders in connection with the search in the assesses's business premises. Document regarding the investment made by the assessee in M/s Tristar Investments and the amount received back were found. Consequently a survey u/s 133A was conducted at M/s Tristar Investments, the details regarding the investment profit and withdrawals were found and the same was impounded (AAA/TI/1). At the time of survey sworn statement of Shri Thornas Perincherry was taken and he deposed that he knew Shri. K.A. Rauf since 2002-03. The dispute regarding the name was cleared at the time of cross examination and re-examination of Shri Thomas Perincherry by the Assessing Officer at the time of search assessment proceedings. Shri. Thomas Perincherry stated that Shri. K.A. Rauf was keen on investing in M/s Tristar investments to bring the Hint Pub therefore, he contributed a sum of Rs. 70,00.000 in cash during the time of setting up of Hint Pub. The d....
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....as Paul-2 was actually the assessee. The total investment made by the assessee in this firm was Rs. 70,00,000/- during the financial year 2005-06 and 2006-07. The details were available in page no. 40, 45 & 48 of item No. CHN14/28. When both the partner of the firm and the employee of the assessee confirmed the investment of the assessee in M/s Tristar Investment(Hint Pub), Bangalore, the denial of investment by the assessee was not acceptable and the assessee had not shown this investment in his cash flow statement therefore the investment made by the assessee during the period relevant to the assessment year 2006-07 was at Rs. 67,00,000/- and the same was added to the total income of the assessee. 13.2 On appeal, the CIT(A) after elaborately going through the assessment order, observed that the assessee got investment in the business of Hint Pub at Bangalore which is run by M/s. Tristar Investments as a shadow partner. According to the CIT(A) not only the investments made by the assessee but the income received from such investment also found credited in the Bank account of Shri Jaffer, the employee of the assessee. Thus the CIT(A) observed that the investment made as well as ....
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....e part is upheld, the addition of the said amount in the hands of this assessee is apparently set aside. According to the Ld. AR even the procedure adopted by the CIT(A) is not in order and the CIT(A) should have decided the appeal filed by the assessee first before disposing off the appeal filed by the Tristar Investments. It was submitted that in the light of the finding in Tristar Investment's appeal, the inclusion of Rs. 70 lakhs for 2006-07 and 2007-08 was liable to be set aside. 13.4 We have heard the rival submissions and perused the material on record. The main contention of the Ld. AR is that there was seized material in page no. 40, 45, 48 referred as CHN-14/28. It also showed that the assessee has contributed toward Tristar Investments, Bangalore based on an agreement which was known to the assessee and Shri Thomas Perinchery only. Further in the sworn statement recorded from the employee of the assessee Shri K. Jaffar, it was stated that "Shri Suraj Rangappa, Shri Paul Tom Suraj and the assessee were the partners of this firm and the profit shared in the ratio 2%, 40% and 35% respectively. Certain documents relating to this firm collected from Bangalore which were av....
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....us for filing objection is very short. Since we had already obtained a valuation report from an independent Valuer who had visited the improvements on 27.10.2010 and it is noticed that there is valuation between the value as fix by the Valuer appointed by us and the Department Valuer, we are required to seek clarification from our Valuer which will require time. In any event, you will notice that the construction was not over as on 31.3.2010 relevant to the assessment year 2010-11 and the inspection by the Department Valuer was much after the close of the Account Year 2009-10. Further, work is still going on, though in a slow manner since as on date we are unable to get Power Allocation and hence it is not necessary to complete the work at this stage. In fact, even when our Valuer carried out his inspection, the work was going-on. We also note that the subsequent to 31.3.2010, the assessee has invested about Rs. 20,00,000/- details are yet to be consolidated for the finishing works at the factory building and office building, bringing the cost of construction of the factory building and office complex to Rs. 1,34,63,115/-. The investment in land, building and mach....
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....od 01/04/2007 to 31/03/2008. 15.3 On appeal, the CIT(A) observed that the assessing officer relied upon the report of the valuation officer dated 30.11.2011, whereby factory and office building at Vazhakad was constructed by the assessee during the period 1.3.2005 to 1.4.2008 at Rs. 1,67,92.000/-. However, the CIT(A) observed that the assessee declared the investment at Rs. 1,14,63,115/- for the asst. years 2005-06 to 2008-09. According to the CIT(A) the dispute on valuation raised by the assessee is mainly on account of the fact that the valuer had taken the value as on 20.07.2011, i.e. as on the date of inspection by the District Valuer and, had considered even those sums spent after the asst. year 2008-09. The CIT(A) noticed that the assessee had also spent a sum of Rs. 20 lakhs which was not taken into account. According to the CIT(A), a statement was placed before the assessing officer, that since the work was yet to be over, the valuation report does not indicate the work done upto 31.3.2010. Hence, the difference between the investment valued by the DVO at Rs. 1,67,92,000/-, and that of shown by the assessee at Rs. 1,14,63,115/- was treated as unexplained investment, and ....
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....ssee, work is not over even now and has been suspended for want of licenses etc. It was submitted that the building was inspected by the District Valuer on 20/07/2011. According to the Ld. AR the CIT(A) found that the assessee had invested additional amount of Rs. 20 lakhs after the inspection by the District Valuer which would show that apparently the work was not completed on 27/01/2010 and on 27/07/2011 while the valuer had observed that the construction was carried out between 2005 to 2008 which apparently cannot be true. Further according to the Ld. AR, the rates adopted by the District Valuer was for completed building and not for incomplete building. It was also submitted that the rates applied was as per CPWD rates whereas being a construction carried out in Kerala, the Kerala PWD rates should have been applied. The Ld. AR submitted that the assessee had produced several bills regarding purchase of materials before the Assessing Officer for which no allowance has been made. The Ld. AR submitted that the assessee got the building valued as on 27/01/2010 for bank purposes when it was valued at Rs. 14885,756/- excluding the cost of land of Rs. 1232,572/-. According the Ld. AR,....
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....alampuzha Steel Rolling Mills at Rs. 5 lakhs. 16.1 The facts of the case are that the Assessing Officer found that as per the seized item No. 111, page 69 siezed from M/s. Nilambur Traders, it is seen that the assessee had invested Rs. 5 lakhs in M/s. Malampuzha Steel Rolling Mills, which was confirmed by Shri Nabeel A.P. by furnishing an affidavit dated 11/02/2010. The assessee has not offered any explanation in this regard. It was also found that in the cash flow statement furnished by the assessee for the period 01/01/2007 to 31/03/2008. Therefore the sum of Rs. 5 lakhs was added to the income as unexplained investment. 16.2 Before the CIT(A) it was claimed that the sum of Rs. 5 lakhs invested in Malampuzha Steel Rolling Mills was returned back by the company and confirmation to this effect was also given by the company but the Assessing Officer had not mentioned this fact. The CIT(A) found that before the Assessing Officer the assessee did not offer any explanation in this regard. According to the CIT(A), in the appellate proceedings also the assessee failed to produce a letter from the company confirming the return of money. In view of this, the CIT(A) rejected the conte....
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.... modality or the break up of the cash received in chronological sequence was produced. Further according to the Assessing Officer no cultivation of mixed crop had been shown. It was also brought to notice that the assessee after purchasing the land, could not get mutation of land done in his favour from the State Revenue Authorities and, in the meantime the entire land was put into dispute because the original land holder sold the same land to other person viz: Dr. Alexander and others of Calicut. Thus, the assessing officer held that the mutation is not in the name of the assessee and hence, the valid ownership of land is not established. The period of lease has been entered into for two years starting from the financial year 2006-07, although a part of the payment for the purchase of land was made in the previous year. In the original return filed for the asst. year 2006-07 on 28.5.2007, the total income was shown at Rs. 99,5007- along with agricultural income of Rs. 1,80,000/-. According to the Assessing Officer, in response to notice u/s 153A dated 5.4.2010, the return of income was filed on 31.8.2010 for the asst. year 2006-07. The agricultural income was shown at Rs. 5,15,000....
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....n of the ld. AR is that the original agreements were required at Maharashtra in connection with civil case - sellers having sold the same property to two parties. Hence, according to the ld. AR original agreements were brought to Calicut and notarized copies obtained and produced. According to the Ld. AR, the Assessing Officer recorded statement from Notary who had attested the copies. It was submitted that this fact was suppressed by the Assessing Officer. The Ld. AR submitted that the AO himself made detailed enquiries regarding the lease and sent notices to the lessees seeking confirmation on the lease. According to the Ld. AR if the agreement is not stamped, it can be impounded but does not invalidate the agreements. According the Ld. AR easement right has been misconstrued since the documents have been executed and registered and possession given as per documents, being not loan, the assessee has no liability to prove credit worthiness of lessees, there was no sub lease and rent being paid in cash was immaterial to decide whether the assessee has received rent. 18.3 The ld. DR submitted that the above income is nothing but an adjustment of figures where the assessee has bro....
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....ect basis at which the difference amount of bills for the purchase of the property was worked out, the addition made by the Assessing Officer was upheld. 23.3 We have heard the rival contentions and perused the record. In this case, though the property was registered for Rs. 61,000/- , there was an agreement to sell the property for a consideration of Rs. 2,84,200/- which was brought on record by the Assessing Officer. Being so, we do not find any infirmity in the order of the CIT(A). Hence, the addition of Rs. 2,23,200/- is sustained. Accordingly, this ground of appeal of the assessee is rejected. 23.4 In the result, the appeals in ITA Nos. 502/Coch/2015 and 505/Coch/2015 are partly allowed for statistical purposes and the appeals in ITA No. 501/Coch/2015, 503/Coch/2015, 504/Coch/2015, 506/Coch/2015 and 507/Coch/2015 are dismissed. ITA Nos. 493,494 & 495/Coch/2015 : Revenue appeals 24. There was a delay of 106 days in filing of the appeals by the Department. The Department has filed condonation petition for condoning the delay in filing the appeals stating administrative reasons. After perusing the condonation petition, we find that there is sufficient cause for condon....
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....tatement under oath dated 10/11/2009. In the light of the above, it was confirmed that the assessee had give loan to Shri U.K. Mohanraj during the previous year relevant to the assessment year 2007-08 and the assessee had not shown the same in the cash flow statement. Therefore, the sum of Rs. 55,00,000/- was added to the total income. Similarly for the assessment year 2008-09, the Assessing Officer has made the addition of Rs. 10745000. For the assessment year 2009-10, the Assessing Officer made the addition of Rs. 64 lakhs. 24.3. From the relevant assessment record of Shri U.K.Mohanraj, the CIT(A) observed that notice u/s. 148 was issued on 8/11/2011 for failure on the part of Shri Mohanraj to file returns of income for the assessment years 2007-08, 200809 and 2009-10. The CIT(A) observed that the intimation regarding the transactions of Shri Mohanraj and Shri K.A. Rauf was referred to the Assessing Officer by the DCIT, Central Circle, Calicut on 5/11/2012 whereas the Assessing Officer had passed order u/s. 144 r.w.s. 147 on 25/03/2013 but without mentioning anything about the loan transactions and the payment of interest between Shri Mohanraj and Shri K.A. Rauf. For the asses....
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....han Raj that payment has been made to the assessee through bank accounts in Karnataka Bank, Vysya Bank and Federal Bank. As per the answer to Question No. 6, in his statement recorded, the Assessing Officer has not verified these facts from his bank accounts. Further, the assessee asked for cross examination of Shri Mohan Raj which was not provided by the Assessing Officer. Thus CIT(A) being co-terminus with the Assessing Officer, should have examined the bank accounts as well as given an opportunity of cross examination of Shri Mohan Raj by the assessee which was not done by him. In our opinion, this issue is remitted to the file of the Assessing Officer to verify the bank accounts and also provide opportunity of cross examination to the assessee and decide thereupon. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration. This ground of appeal of the Revenue for all the assessment years is allowed for statistical purposes. The appeals in ITA Nos. 493, 494 & 495/Coch are allowed for statistical purposes. ITA Nos. 413 to 416/Coch/2016 : Smt.K.R. Raseena ITA Nos. 417 & 418/Coch/2016: Smt. K.R. Raiza ITA Nos. 422 to 427/Coch/2....
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....adjudication. ITA Nos. 413 to 416/Coch/2016 : Smt. K.R. Raseena 26. The first common ground in ITA No. 413 to 416/Coch/2016 is with regard to validity of assessment u/s. 153A r.w.s. 153C of the Act. 26.1 The facts of the case are that a search u/s. 132 of the I.T. Act was conducted at the residential premises of Shri K.A. Rauf, Shri K.C. Thomas, Shri K.A. Rasheed, Shri Elias, Shri Ipe Kovoor, Shri K.M. Ramli and the business premises of M/s. Nilambur Traders, and office of the K.A. Latex (P) Ltd. on 05/11/2009. During the course of search, certain documents and books were seized. According to the ld. AR, there was no incriminating material found in the course of search action u/s. 132 of the Act at the above premises on 05/11/2009. The Ld. DR relied on the orders of the authorities below. 26.2 We have heard the rival submissions and perused the record. Admittedly in this case, there was search in the case of K.A. Treads u/s. 132 of the Act where the assessee is a proprietrix and certain documents were seized. Further in the statement recorded from one of the employees of the assessee namely, Shri K. Jaffar on 5/11/2009, it was stated that there was suppression of sales ....
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....inimum of one year to yield in initial year except paddy. Therefore the income derived from leasing the agricultural land was disallowed as the income was derived by the assessee from unknown source. The same was confirmed by the CIT(A). Similar is the position in all the assessment years, only change in amount. 26.5 Against the assessee is in appeal before us. The contention of the Ld. AR is that the lower authorities did not consider the fact that notary who had attested and notarized the photocopies of these agreements stated that it was actually required in connection with proceedings pending before the authorities and also fact that each of the lessee had admitted lease as well as payment of lease rent. In the light of the above, the authorities below should not have rejected the same. The Ld. DR relied on the orders of the lower authorities. 26.6 We have heard the rival submissions and perused the record. The issue was dealt with in earlier paras wherein we held that it is only a make believe story so as to show the source of income to explain the investments. The facts of this case is also similar and the assessee created self serving documents towards introducing o....
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....come of the assessee. However in the present case, CIT(A) considered only 10% of the GP on the suppressed sales as income of the assessee and he was very liberal. Since the Department is not in appeal before us, there being no option before us, we are inclined to confirm the order of the CIT(A) on this issue. This ground of appeals of the assessee is rejected. 27. The next common ground in ITA Nos. 415 & 416/Coch/2016 is with regard to refusal of the assessing authority to accept the claim of receipt of the assessee of Rs. 11,78,300/- and 5,10,000/- from Shri Ziad in AY 2009-10 and 2010-11. 27.1 The facts of the case are that in the cash flow statement submitted by the assessee at the time of hearing the assessee had shown an inflow of Rs. 5,10,000/- by Ziad through Fathima. No evidence or satisfactory explanation was given by the assessee at the time of hearing. It is pertinent to note that the assessee was proposing to buy a flat at Bangalore and the amount earned by the assessee's husband in abroad was transferred to assessee's in laws' account for the purpose of purchase of flat. But the assessee was utilizing it as source for her investment which is evidenced by the noti....
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.... any infirmity in the issue of notice u/s. 153A r.w.s. 153C of the Act and confirm the same. This ground of appeals of the assessee is dismissed. 28.4 The next common ground in both the appeals is with regard to addition of agricultural income on receipt of lease rent from properties purchased in Maharashtra. 28.5 The facts of the case are that in the cash flow statement, the assessee had shown agricultural income of Rs. 32,62,500/- and the assessee produced a notarized copy of the agreement of lease of agricultural land between the land owners and Shri Ameya Chandrakant patil, Shri Bhima Rao Vital Nikam, shri Vijayakumar Bhimarao Nikam, Shri Vikram Vasanth Shete, Shri Sylendra Pawar, Shri Vasanth Rao Shete. The advocate who notarized the document had admitted that the said document was signed for the purpose of keeping a copy and not for production before any authority and same had no legal validity, being a deed of lease it should be executed in a stamp paper having the required value as per the Stamp Act. This was not accepted by the Assessing Officer for the reasons as stated in para 26.4 of this order. Therefore the income derived from leasing the agricultural land was d....
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....rs passed by the Assessing Officer as valid and legal. 29.3 Against this the assessee is in appeal before us. We have heard the rival submissions and perused the record. As discussed in para 26.2, we do not find any infirmity in the issue of notice u/s. 153A r.w.s. 153C of the Act and confirm the same. This ground of appeals of the assessee for all the years is dismissed. 30. The next ground in both the appeals is with regard to non consideration of agricultural income. 30.1 The facts of the case are that the Assessing Officer found that the agricultural income was not shown in the original returns of income filed. The assessee had not given any supporting evidence for the agricultural income. The assessee had shown this amount to build up cash for future investment. Therefore, the agricultural income shown in the cash statement was disallowed and added to the total income returned, treating it as income earned by the assessee which was not disclosed to the Department. 30.2 On appeal the CIT(A) observed that an income cannot be based on mere presumption that if the assessee owns some agricultural land, the income from agricultural operation arises automatically. In orde....
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....e the Tribunal. The Ld. DR did not object to the condonation petition filed by the assessee. We have considered the argument of the Ld. AR and gone through the condonation petition alongwith the affidavit. We are satisfied about the reasons explained by the assessee. Accordingly, we condone the delay of 77 days and admit the appeal for adjudication. 32.2 The first common ground in these two appeals is with regard to notice issued u/s. 148 of the Act for re-opening of the assessments. These two assessments were re-opened by issuing notice u/s. 148 of the Act. However, the assessee has not agitated this ground before the CIT(A). The assessee has not placed any evidence to show how he was prevented by sufficient reasons in not filing the ground before the CIT(A). Further the assessee has not put up any objections on this issue. Considering these facts, we are inclined to dismiss this ground as not arising out of the order of the lower authorities. 32.3 The next common in ITA No. 420/Coch/2016 is with regard to the finding of the CIT(A) that the assessee has inflated expenditure to the extent of 10% . 32.4 The facts of the case are that the Assessing Officer made the addition ....
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....lowance. The CIT(A) observed that in some of the head of expenditure the claim of expenses were more in the seized paper than those shown in the return of income. The CIT(A) found that the AO has not applied any sound basis to have worked out the disallowable expenditure. However, having regard to the fact that the seized paper suggesting some different set of expenses incurred, the CIT(A) confirmed the addition made by the Assessing Officer. 32.6 Against this the assessee is in appeal before us. The Ld. AR submitted that a perusal of the statement would show that Sri Jaffar had not made any statement that it is normal practice of inflating expenses at the time of finalization of the accounts as indicated by the Assessing Officer and his only statement was with reference to the statement of accounts which have been finalised for the AY 2007-08 - was as follows: "[Ans to Q.4:] ... ... As stated above, I admit that certain expenses were inflated under the head food expenses, repairs and maintenance, accounts. I also admit that the same [the work same is subsequently struck off] expenses are also inflated under the same head in earlier years also." 32.7 The Ld. AR submi....
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..... 17,56,143/- which was not seen in the seized records. Therefore the correct come of the assessee was computed from the net profit seen in the seized materials as under: Net profit Rs.37,55,858 Add: Donation 35,133 Rs. 33,133 Rs.37,90,991 Less: Depreciation Interest on Capital (Smt. Fathima) 17,56,143 1,38,960 Interest on Capital (Shri Rauf) 2,49,270 Rs.21,44,373 During the course of search a paper containing the working of Net Profit of Rs. .37,55,858/- was seized. 33.2 The CIT(A) observed that the findings of the Assessing Officer is based on the seized document and the net profit working was considered on the basis of that seized document. Thus the CIT(A) held that the contentions raised by the assessee that the Assessing Officer did not have any basis for considering the net profit at Rs. 37,55,858/- is not correct. Accordingly the CIT(A) confirmed the findings of the Assessing Officer as no evidence contrary to the findings of the Assessing Officer was produced. 33.3 Against this the assessee is in appeal before us. The Ld. AR....
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....urchase is undervalued which was not supported by any material at all. 34.3 The CIT(A) relied on the findings in the case of K.A. Rauf wherein it has been held as under: "9.3. The crux of the issue is that the assessee made investment in machinery which was bought for M/s K.A. Latex P. Ltd. to be utilized for their business of rubber processing. The appellant has stated that these are second-hand machinery, which have been imported from Malaysia, after completing all the formalities relating to customs duty. The invoice raised by the foreign sellers have been verified by the customs authorities. However, the ADIT(lnv.) referred the matter to the Rubber Board, Joint Director(Engg) for its valuation. The rubber board authorities have valued the machinery at Rs. 1,31,50,000/-, as against the total consideration shown to have been paid for the purchase of second-hand imported machinery by the appellant at Rs. 57,09,248/-. The assessing officer treated the difference amount of Rs. 74,40,752/- as undervaluation on account of the machinery. 9.4. The appellant has submitted that the rubber board is not the appropriate authority with regard to valuation of machinery use....
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....f machinery appears to have certain lacuna so much so that the appellant's plea have not found proper consideration either at the end of the valuation or at the end of the assessment. The import bill suggest that these are second hand machinery, and has been received only after clearance by the customs department, there is no other evidence to substantiate that any sum higher than what have been claimed by the appellant, were passed on to the sellers of the machines. No incriminating paper or any statement of the assessee or his employees are indicative of this fact. The investment in machines is a capital investment and once installed and the unit becomes functional, it is only depreciation, which could be considered in the hands of the assessee. In view of this, there is no justification for holding that an additional sum of Rs. 74,40,752/- has been spent by the assessee on purchasing these machines. Accordingly, the addition made by the assessing officer on account of undisclosed investment in machinery to the extent of Rs. 74,40,752/- is deleted." 34.4 Since the facts of the case are identical, the CIT(A) held that the findings given in the case of K.A. Rauf was applicab....