TaxTMI 
TaxTMI 
2023 (10) TMI 1611
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....s. Neel Harsh Enterprises and M/s. Netra Enterprises. A search under section 132 of the Act was conducted at the premises of the assessee on 9.2.2005, as a consequence, certain cash, jewellery and silver articles, besides some documents were seized. Subsequently, assessment was framed under section 153A(b) of the Act, making addition on various counts to the tune of Rs.17,62,65,010/- assessing the income of the assessee at Rs. 17,75,70,330/-. The matter was carried in appeal before the ld. CIT(A), who partly allowed the assessee's appeal. Aggrieved by which, the assessee and the Revenue have come in appeal before us. 3. We shall first take up the assessee's appeal being ITA No. 2149/Ahd/2008. 4. The grounds of the above appeal read as under: 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by the A.O. of Rs. 489/- for the alleged excess depreciation claimed by the appellant .. 2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of Rs. 20,214/- made by the A.O. @ 20% of the expenses on telephone/ mobile. 3. The learned Commissioner of Income Tax (Appeals....
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....nt of investment estimated by the DVO i) Swaminarayan Farm, SG Highway, Ahd 1,85,894/- 4,17,830/- Difference of Rs.2,31,936/- added to the income of the assessee under section 69B of the Act. ii) Hotel Neelkanth 4,82,349/- 28,49,084/- Difference Rs.23,66,735/-added to the income of the assessee under section 69B of the Act. He pointed out that the Ld. CIT(A) restricted the amount of undisclosed investment to Rs.2,00,599/- in respect of Swaminarayan residence, and Rs.18,25,521/- in respect of Hotel Neelkanth. 8. With respect to the residential house, it was pointed out that the DVO had determined the total value of the property at Rs.1,73,12,146/-, while the assessee had declared total investment in the same upto 31.3.2004 at Rs.77,02,238 -. The AO took the cost of construction, as determined by the DVO and taking this as the basis for 31.3.2004, he determined the cost of construction as at the end of each preceding year, and in the same ratio. Accordingly, the cost of construction as per the valuation report as on 31.3.2004 for the impugned year i.e. Asst.Year 2004-05 was taken at Rs.4,17,830/-, and noting the cost of construction disclosed by th....
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....etermination of cost of construction in the property of the assessee was made to the DVO without rejecting the books of accounts of the assessee; nor distinguish the decision of the Hon'ble Apex Court in the case of Sargam Cinema (supra) laying down the proposition of law that no reference to the DVO could be made without rejecting the books of accounts of the assessee. In view of the same, the decision rendered by the ITAT in the case of brother of the assessee, Shri Sanjay H. Thakkar which was confirmed by the Hon'ble jurisdictional High Court also, applies to the facts of the present case, following which, we hold that the addition made on account of unexplained investment in two properties of the assessee amounting to Rs.20,26,120/-, was not sustainable in law, since it was based on reference made to the DVO, which was illegal and not in accordance with law. In view of our above discussion, ground no.3 raised by the assessee is allowed. 12. In effect, the appeal of the assessee is partly allowed. 13. Now we take up the Revenue's appeal in ITA No.2408/Ahd/008. The ground no.1 reads as under: "1. The CIT(A) has erred In law and on facts in admi....
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....oducing evidence, and therefore, on a holistic consideration, in the interest of justice, he admitted additional evidence, as held in para 6.4 of the CIT(A) as under: 6.4 The submissions of the appellant and the report of the, in respect of the additional evidence filed under Rule 46A of the I.T. Rules, were carefully considered. It is seen that the appellant vide his letter dated 25/11/2006 to the A.O., had pointed out to the difficulty of obtaining bank statement for earlier years, from the bank which was closed and under a liquidator/administrator. The appellant had also stated to the A.O. the difficulties encountered in obtaining information from cash creditors after a lapse of time and the A.O. in his remand report has not ruled out this possibility. Besides the veracity/authenticity of the evidence in form of PAN/copies of return of income of creditors itself is not disputed by the A.O. in his report. Also judging from the time period when evidence was specified and sought by the A.O. to the time when assessment was framed, the evidence/explanation already filed before the A.O., etc., the appellant was constrained from filing all the sought evidence. On a holistic co....
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....ons." 20. The above ground is with regard to the deletion of addition made by the ld. CIT(A) of Rs. 63,06,900/- which was made on account of unexplained credit in the capital account amounting to Rs. 50,86,380/- and unexplained cash credit amounting to Rs. 12,20,520/-. The unexplained investment in capital pertained to the additional capital introduced in the below-mentioned proprietorship concerns of the assessee: i) Hotel Neelkanth Rs.8,03,857/- ii) Hotel Neeltop Rs.7,49,540/- iii) Ghanshyam Builders Rs. 3,291/- iv) Sahajanand Enterprise Rs. 2,000/- v) Devnandan Builders Rs.35,27,692/- Total Rs.50,86,380/- The unexplained credits pertained to the following deposits found in the aforementioned enterprises of the assessee : A) Sahajanand Enterprise i) Bihabhai R. Thakkar Rs.51,770/- ii) N.R. Corporation : Rs.1,00,000/- iii) Chintan Traders Rs.2,68,750/- Total Rs.4,20,520/- B) Ghanshyam Builders: i) Parul B. Chatani Rs.8,00,000/- TOTAL : Rs. 12,20,520/- 21. In the absence of the assessee proving genuineness of the transaction and source of these cash credits in terms of....
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....ideration of the details on record/averments made/legal position obtained thus far. etc., the addition of Rs. Rs. 12,20,520/- made by the A.O. u/s.68, is not justified. It is therefore directed to be deleted. Thus the 3rd ground of appeal is allowed in favour of the appellant. 23. Before us, the ld. DR relied on the order of the AO and while the ld. counsel for the assessee relied on the order of the ld. CIT(A). 24. We have gone through the orders of the authorities below, and we see no reasons to interfere in the order of the ld. CIT(A) deleting the entire addition made on account of capital introduced in various proprietorship concerns of the assessee and other cash credits holding the source of all them to be proved by the assessee. We have noted that the ld. CIT(A) admitted the additional evidences filed by the assessee to prove source of both the capital introduced in various proprietorship concerns of the assessee, as also cash creditors. He noted that the assessee had filed copy of bank statement reflecting introduction of capital in various proprietorship concerns, as coming from the personal accounts of the assessee through bank channels. The AO was unable to refute ....
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....hip concerns: i) Hotel Neelkanth : Rs. 1,35,000/- ii) Hotel Neeltop : Rs.2,83,266/- iii) Dharamdev Hsg. Corpn : Rs. 40,145/- iv) Sahajanand Enterprise : Rs. 26,130/- Rs.4,84,541/- The AO noted, on perusal of the balance sheet of different proprietorship concerns of the assessee that it had advanced interest free loans as under: i) Ghanshyam Builders : Rs.9,40,000/- ii) Devnanddan Builders : Rs.5,73,03,577/- iii) DharmdevHsg. Corpn : : Rs.44,33,933/- iv) Sahajanand Enterprise : Rs. 1,88,28,877/- v) Swaminarayan Enterprise : Rs.6,73,000/- 30. All the above facts emerge from page no.11 to 13 of the AO's order, noting that the assessee has given huge advances, as interest free advances, and at the same time borrowed fund on which interest had been paid, the finding that the AO had failed to establish nexus between interest free fund available with him and interest free advance, as also business purpose of interest free advances. He disallowed entire interest expenditure claimed by the assessee amounting to Rs. 4,84,541/-. The ld. CIT(A) deleted the disallowance, noti....
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.... point of a businessman, The A.O. had not made out the case of the advances given/obtained being for non-business purposes. Reference was made to the decision of Hon'ble Gujarat High Court in case of Voltamp Transformers Pvt. Ltd., (129 ITR 105) to state that the decision of the appellants was guided by business consideration. The utilization of the loan for acquiring vehicles and its use in business was not in doubt and so the decisions cited by the A.O, were not applicable, apart from the fact that the Hon'ble Supreme Court had reversed the decision of the High Court of Punjab & Haryana, in case of Abhishek Industries (286 ITR 1) in case of S.A. Builders reported in 288 ITR 1. Hence, the disallowance was not justified. 9.2. The contentions were carefully considered. It is seen that the appellant bad charged interest as mentioned and also had sufficient interest free capital available for making advances which are seen to be for business purposes. 1 The quantum/factum of his being so itself has not been doubted by the AO. On a holistic consideration, the disallowance of interest was not justified and is deleted and the related ground of appeal is....
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....re considered, as noted by the AO, then also the facts remains that these concerns had availability of interest free funds of Rs.3.47 crores which was sufficient for making interest free advance. 34. All the above facts have remained uncontroverted by the Revenue before us. Further, it is settled that law that where sufficient interest free funds are available, it is to be presumed that the same have been used for making interest free advances for claiming disallowance of interest under section 36(1)(iii) of the Act. The Hon'ble Apex Court has settled this issue in the case of Reliance Industries Ltd. (supra). In view of the above uncontroverted factual finding of the ld. CIT(A) and the legal proposition applied by him, we see no reason to interfere in the order of the ld. CIT(A) deleting the disallowance of interest amounting to Rs. 4,84,51/-. 35. The ground no.3 raised by the Revenue is rejected. 36. Ground No.4 reads as under: "The CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,49,252/- made on account of disallowance of depreciation on vehicles for personal use, without considering the facts that the assessee himself has admitted....
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....owance made in the case of Sanjay H. Thakkar (supra) was deleted by the ITAT, noting that once the motor car formed part of block of assets, depreciation on the same was allowable. In view of the same, we agree with the ld. counsel for the assessee that the issue stands decided in favour of the assessee by the order of the ITAT in the case of Sanjay H. Thakkar. Ground no.4 raised by the Revenue is, therefore, rejected and deletion of disallowance of depreciation on motor car amounting to Rs. 1,49,252/- by the ld. CIT(A) is upheld. 41. Ground Nos.5 & 6, it was pointed out, pertained to the issue of addition made on account of unexplained source of investment in residential house and Hotel Neelkanth by the assessee, which was made by the AO to the tune of Rs.25,98,671/-, but was restricted by the ld. CIT(A) to the tune of Rs. 20,26,120/-. The said ground reads as under: "The CIT(A) has erred in law and on facts in restricting the addition of Rs.25,98,671/- to Rs.20,26,120/- made on account of unexplained investment in residential house and hotel building without considering and appreciating the valuation report of District Valuation Officer. The CIT(A) has err....
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....defect, he rejected the books of accounts of the assessee under 145(3) of the Act, and thereafter adopted a figure of WIP at Rs. 1,52,74,223/-. Accordingly, addition of Rs.41,23,896/- was made to the income of the assessee on account of under-valuation of WIP. The AO further computed net income of the assessee from its business by estimating at 8% on the amount of WIP at Rs.1,52,74,223/- and construction receipt of Rs. 43,26,100/- which worked out to Rs. 15,68,026/-, and noting that the assessee had already disclosed profit of Rs. 1,50,000/-, addition of balance profit of Rs. 14,18,026/- was made to the income of the assessee. Thus total addition on account of undervaluation of WIP and estimation of net profit, to the tune of Rs. 55,41,922/-, was made to the income of the assessee. 46. Before the ld. CIT(A), it was pointed out that the AO had incorrectly read the reporting made in its Trading and Profit & Loss account. It was pointed out to the ld. CIT(A) that against the construction expenses incurred by the assessee of Rs.1.2 crores Rs.1.11 crore pertained to in-complete construction and reflected as WIP; that out of the balance completed construction Rs.5,58,980/- remained in....
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..... CIT(A) that despite going through the entire books of the accounts of the assessee, not a single anomaly was noted by the AO vis-à-vis purchases, expenses and even figure of sales and stock reflected by the assessee. There was no reason absolutely, therefore, rejecting the books of accounts of the assessee, and that too merely on the ground of non-maintenance of stock register. The estimation of GP, therefore was not in accordance with law, we agree with the ld. CIT(A). In any case, we have noted from the submission made by the assessee to the ld. CIT(A) that the assessee had reflected GP to the tune of 17.59% and while the AO applied the GP rate of 8%. On this score also, the entire exercise of the AO was baseless and has been rightly rejected by the ld. CIT(A). The addition made on account of undervaluation of WIP and by estimating the profits of the assessee in its construction business in M/s Sahajanand Enterprise, to the tune of Rs.55,41,922/-, we hold, has been rightly deleted by the ld. CIT(A). Ground No.7 raised by the Revenue is rejected. 50. Ground No.8 & 9: Raised by the Revenue relate to addition made to the income of the assessee on account of alleged in....
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....of Vikas Shah and other third parties, there was no other evidences to treat the investment, as having been made by the assessee. 53. We have heard both the parties and have also gone through orders of the authorities below. As also documents and case laws referred to before us. 54. The case of the ld. DR is that there was sufficient material and evidences to hold the above two investments as relating to the assessee. He pointed out that the documents seized from Vikas Shah coupled with the admission of Shri Vikas Shah in a statement recorded, attributing investments in these lands to the assessee, Shri Umang Thakkar categorically, could not be discarded and were sufficient to treat the investments as having been made by the assessee. In relation to the document marked as Page No.111 of Annexure A-1, relating to investment in land at Vasana, Ahmedabad for Rs.11.86 crores, the ld. DR pointed out from orders of the authority below that the said documents contained entries of different amounts, names, and lands, and Shri Vikas Shah in his statement had explained contents of these documents, as pertaining to land measuring 32,600 sq.yards situated in survey no. 188-189, Vasana, A....
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.... introduced the bank account of these two cooperative housing societies in the Mahila Vikas Co-op. Bank at Vasna. He also pointed out that the AO had noted that funds in the bank accounts of these societies were flowed from one Shri Sanjay Kothari, proprietor of Kothari Finance, and also partner in M/s.Akshar Enterprise. The ld.DR pointed out that all these revealed that the assessee and the associates owned beneficial interest over the impugned land. The ld.DR further drew our attention to the fact that computer print-out of the hard-disc seized from the office of the assessee contained the agreement of the land owners, Shri Akshay and Ajay Patel with Ganesh Housing Corporation, in which the Chairman of both the cooperative housing societies i.e. Shri Minesh and Ajay were confirming party. He pointed out that Shri Minesh had affirmed in his statement recorded under section 131 of having signed this agreement on the instruction of the society, and contents of this agreement i.e. terms of settlement between the land owners and Ganesh Housing Corporation. The details of payments of Rs.25 lakhs made through cheques were corresponding with the entries seized from Vikas Shah in the impu....
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....s where the rough jottings were made on the papers, they were not handwriting of either assessee or any of his employees neither was there were any dates nor the figures indicative of anything . 58. Thereafter, our attention was drawn to another decision of the Hon'ble Gujarat High Court in the case of CIT Vs. AbhalbhaiArjanbhai Jadeja in Tax Appeal No.233 to 235 of 2013 dated 3.4.2013, and it was pointed out therefrom that identical addition made in the said case on account of unexplained investment on the basis of the statement of the same Shri Vikas Shah was untenable on the ground that except for the version of Shri Vikas Shah, there was nothing on record to substantiate the finding of the AO. Our attention as drawn to the finding of the Hon'ble High Court in this case as under: "We have heard learned counsel Shri Desai for the Revenue and also examined the orders of the authorities with his assistance. As could be noticed from the decision of the Tribunal, it has extensively quoted the findings of the CIT [A] and concluded that the sole reliance for such addition on the statement of Vikas Shah was not sustainable. The Tribunal also noted that there is nothi....