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TMI Blog1991 (7) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain developmental activities on the said land at a cost of Rs 6,74,217 in the first accounting period and Rs 86,262 in the second accounting period. For meeting this cost the assessee claimed to have raised loans amounting to Rs 6,50,000 during the accounting period relevant to asst. yr. 1985-86. The details thereof are as below: S1 No. Name Date Amount 1. Shri Basant lal Khandelwal 15.2.84 20,000 2. Shri Ram Manohar Vashist 1.2.84 20,000 3. Smt. Sham Bateru 25.2.84 30,000 4. Shri Prem Chand Jain 14.3.84 30,000 5. Shri Radhey Lal 31.3.84 20,000 6. Shri Naresh Aggarwal 9.4.84 30,000 7. Shri Gian Singh 24.4.84 30,000 8. Smt Nirmal Gupra 28.4.84 20,000 9. Shri Ram Cander Gupta 26.3.84 20,000 10. Shri Jagdesh Rai Verma 505084 20,000 11. Shri Ved Parkash 9.5.84 20,000 12. Shri Jawahar Singh 18.5.84 20,000 13. Smt. Shakuntala Devi 22.5.84 30,000 14. Smt. Bhanti Devi 22.5.84 30,000 15. Smt. Sharda Rani Gupta 5.6.84 30,000 16. Smt. Shanti Devi 31.5.84 25,000 17. Sh, mool Chand Mital 6.6.84 25,000 18. Sh. Parshadi Lal 9.6.84 25,000 19. Sh. Ram Kumar Goel 12.6.84 25,000 20. Sh. Sres Chand Sharma 15.6.84 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 131 by post were received back with the reports that no such person was available. Some other creditors purported to have appeared through counsels and sought adjournment. From6th Oct., 1987the case seems to have been issued a letter dt.6th Oct., 1987to the assessee, copy at page 37 of the departmental paper book, whereby he forwarded a copy of the statement of Prem chand Jain to the assessee and asked the assessee to produce all the creditors in person for examination. He also asked the assessee that the was of the opinion that no expenditure had been incurred and asked the assessee to produce the persons to whom the payments had been made.26th Oct., 1987was fixed for hearing. On that date the assessee by a letter dt.26th Oct., 1987asked that assessee officer to personally see the land for examining the development work. Regarding the cash creditors that assessee stated that it was contacting them and they would be produced. By letter dt.24th Feb., 1988the Assessing Officer again asked the assessee to produce the creditors etc. Fixing3rd March, 1988as the date of hearing. On that date the case was adjourned to15th March, 1988. In between kuldip Tandon, Brij Bala Tohtangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about them as to whether they has ever existed and what were their present whereabouts. 9. He contended that the assessing Officer wrongly discarded the affidavit filed on 12th March, 1988 by relaying on the case of Chowk chand Bala Bux vs. CIT (1961) 41 ITR 465 (Assam) ans that in fact that ruling helps the assessee because there was no cogent reason for discarding the affidavits as the assessee had himself shut the ass out from producing the creditors by closing the case on 15th March, 1988 on which date creditors could not be produced because of Bharat Bandh and by not fixing any other date for the production of th4 creditors. Reliance was placed on CIT vs. Orissa Corpn. Pvt. Ltd (1986) 159 ITR 78 (SC) in which the Tribunal had held that the ass having given the index numbers of the assessee ane having filed confirmation letters the initials onus that lay on the assessee stood discharge. The Hon'ble Supreme Court held that this approach of the Tribunal could not be said to be unreasonable or based on no evidence. In that case also notices issued to the creditors were returned with the endorsement left and no further attempt was made to procure their attendance. Reliance was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued cheques drawn on self which were encashed by one O.P Kedia and one Prem Sharma. Mr. O.P. Kedia was an employee of a sister concern of the assessee namely M/s Suraj Lamp & Industries Pvt. Ltd His statement was recorded on the 12th of March 1990 in the presence of the assessee counsel and he had stated that he had encashed the cheques under instructions from the directors Shri C.L. Chandok and Shri S.K. Chandok and delivered the money to either of them. These two persons are the directors of the assessee as well as well as of the aforesaid sister concern. He also pointed out that an inspector of the department had examined Shri R.K. Singh, the Oath Commissioner, who purposes to have verified the affidavits of the 19 creditors and that the said R.K. Singh had denied having verified the affidavits in question. The learned departmental Representative therefore, stressed that the genuineness of the credits had not been established in this case and the sum of Rs. 6,50,000 was firstly assessed in the assessee's hands. 10. In reply the learned counsel for the assessee contended that Roop Kamal Singh (R.K. Singh Oath Commissioner) was examined at the back of the assessee and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee under there circumstances were ate of the view that in respect of the creditors whose confirmations had been filled on 15th March, 1988, the initial burden that lay on the assessee stood discharged. As regards the revenues contention that the bank records summoned by the Assessing Officer during the penalty show that the alleged creditors maintained very negligible balances and as soon as the assessee issued cheques for alleged repayments and the moneys were deposited in the accounts of the creditors the money was immediately withdrawn in some cases by a person connected with the assessee who claimed to have delivered the money back to the directors of the assessee. We are of the view that this evidence having not been collected during assessment proceedings, could not be used to reinforce the findings arrived at in the assessment proceedings could not be used to reinforce the findings arrived at in the assessment proceedings and further the said circumstances were insufficient to rebut the evidence led by the assessee. As regards the Assessing Officer contention is not tenable. The learned Departmental Representative argument that the signatures on the confirmation letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he confirmation is also not signed by Mool Chand Mital therefore, as regards this loan there is no evidence whatsoever in support. It is not the case of the assessee that it borrowed any money from Brij Moham Mittal. This credit of Rs. 25,000 appearing in the name of Mool Chand Mittal has therefore, not been established ans the disallowance thereof would have to be upheld. 14. As regards Prem Chand Jain the assessee had filed a confirmation but in response to summons under s. 131 a person describing himself as Prem Chand Jain and residing at the address given by the assessee appeared and denied having advanced any money to the assessee. A copy of his statement has been placed by the Revenue at pages 43 to 46 of the paper book. As copy whereof had been as supplied to the assessee through letter dt.6th Oct. 1987served on the assessee on15th Oct. 1987. In spite of this the assessee did not produce this person nor was has affidavit filed when the affidavit of the persons mentioned above were filed. The learned counsel for the assessee contended that the real Prem Chand Jhaion was not traceable and some other person seems to have appeared before the Assessing Officer. There is no mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese appeals i.e. expenditure claimed by the assessee tio have been incurred in respect of the land in question. This is relevant for determining the profit arising from the sale of land in the accounting period relevant to asst. Yr. 1986-87. Regarding the major expenses on the construction of well building levelling of land and compensation paid to alleged jhugi dewllers the Assessing Officer has asked the assessee to produce the persons to whom the payments had been made. In a letter dt.9th Sept., 1987addressed to the assessee a copy of which is at pages 35 and 36 of the revenue paper book the Assessing Officer stated as below. "Spot enquiries made by the Inspector reveal that there is no such boundary marking building construction any development of land no well on the land. Moreover the enquiries also suggest that the land was not occupied by any person to whom you have alleged to have paid compensation of Rs. 2,93,100. You are requested to produce all these persons to whom these expenses have been paid, produce books of account." 18. By letter dt.26th Oct., 1987the assessee asked for inspection of the spot. Thereafter the Assessing Officer inspected the spot and high observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulley had been fixed on the well. There was no boundary wall. Their was no tubewell of other pipes fitted inside. On the basis of these observations the Assessing Officer has concluded that the well was not built by the assessee. 21. No doubt area or uneven land. It is stony land and can only be blasted. He found local people drawing water farm the well ion since beginning. It had not been plastered from inside. It appears in its original for. No pulley had been fixed on the well. There wags no boundary wall. Their was no tubewell of other pipes fitted inside. On the basis of these observations the Assessing Officer has concluded that the well was not built by the assessee. 21. No doubt the contractor was not produced by the assessee but the vouchers produced by the assessee before the authorities below contained full address of the contractor, H. Llahi & Sons, 796, Saket near Anupam Cinema,New Delhi. The Assessing Officer did not depute any Inspector to verify whether such a contractor was there and completed works like digging of well. The well was in physical at the spot. The observation made by the Assessing Officer that the well was reported to be in existence from the "beg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a building on the land in question the assessee has not placed the relevant vouchers in then paper book. Therefore we are of the view that the assessing officer estimate of the cost of the building at Rs. 20,000 should be allowed as a deduction as expenditure incurred in connection with the land in question. 25. The next item of expenditure is a sum of Rs. 20,686 spent on boundary marking the claim is supported by vouchers of purchase of material like cement lime etc. And payment to labours. The assessee had stated taking interest in the land and developing it and we see no reason for disbelieving this expenditure. The assessing officer also has not stated that when he visited the spot there were no boundary marks. He has not specifically discussed this expenditure in the assessment order. In our view therefore the assessee's claim for this expenditure deserves to be accepted. 26. The next item of expenditure is a sum of Rs. 1,46,455 claimed to have been spent on levelling a portion of the land. According to the assessee this expenditure was incurred for filling certain depressions. Trucks loads of Malba (deabris) were, therefore, dumped in those pits or depressions for which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahar Lal 7,500 (11) Ram Pratap 6,950 (12) Rangila Ram 8,800 (13) Tulsi ram 7,900 (14) Roshan Lal 8,500 (15) Pritam Lal 7,500 (16) Jagdish Ram 7,600 (17) ami chand 7,800 (18) lakhi singh 8,300 (19) surja ram 7,850 (20) jinku devi 6,800 (21) Mangla ram 7,800 (22) Dewa Ram 7,500 (23) Ram Swarup 6,900 (24) Jai Dev 7,800 (25) Jodha Ram 7,700 . 1,94,900 All the aforesaid payments were made betweenthe 30th of May, 1984and 30th of June, 1984, i.e., within the accounting period relevant to asst. yr. 1985-86 and tangible evidence of the earlier existence of jhugis at the time of the Assessing Officer's visit could not reasonably the expected. The assessee's inability to produce the persons, to whom the payments were made, was probably because it did not record their erstwhile addresses. However, all the receipts are duly witnessed by one Shri Manga Lal Sharma R/o 1-D/56, N.I.T. Faridabad, who was never contacted by the AO nor was required to be produced. In our view, therefore, so far as payments amounting to Rs. 1,94,900 to the aforesaid persons are concerned, they were satisfactorily established. The balance of the expenditure is not shown to have been pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee made no profit and, according to him, this indicated that the alleged developmental expenditure was bogus. In our view, this impression is not supported by any cogent material. The AO has not collected any evidence to show what was the extent of price rise in the area where the land in question ins situate. The observations of the learned AO in the assessment order for asst. yr. 1985-86 are that the land is situate in an area where there is miles and miles of barren stony land. It is, thus, a land which was not fit for agriculture nor for colonisation. Therefore, it would be improper to assume that the prices of such land would also rise in the same proportion in which the prices of other better placed lands have risen. Further the nature of the development work done by the assessee was of a nature that would not add materially to the value of the land and, therefore, the amount spent could not be expected to be paid back by a buyer by way of rise in the value of land. For example, trespass reduces the value of land and removal of trespassers by payment of compensation merely restores that value. There is no actual addition. Similarly a buyer may think that a masonry well woul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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