TMI Blog2004 (8) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation report in respect of flats of property No. S-484, GK-II,New Delhi, sold to Shri Sattar Malik and Shri Yasin Malik, respectively. 3. That, on the facts and in the circumstances of the case, the Hon ble CIT(A) has erred in confirming the addition of Rs. 14,30,349 being addition made by the learned AO on account of investment in various bank FDRs and interest thereon during the asst. yrs. 1990-91 to 1992-93. 4. That, on the facts and in the circumstances of the case, the Hon ble CIT(A) has erred in confirming the addition of Rs. 15,00,000 for the asst. yr. 1995-96 being made by the learned AO in exchange of property. 5. That, on the facts and in the circumstances of the case, the Hon ble CIT(A) has erred in confirming the addition of Rs. 90,000 made for the asst. yr. 1995-96 on the basis of page No. 24 of Annex. A-28. 6. That, on the facts and in the circumstances of the case, the Hon ble CIT(A) has erred in confirming the addition of Rs. 16,53,000 (11 lakhs + 4 lakhs + 1.53 lakhs) for the asst. yrs. 1999-2000 to 2000-01 made on account of undisclosed cash credit under s. 68 of the Act, interest @ 3 per cent thereon. 7. That, on the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B-42, Panchsheel Enclave,New Delhi, on15th May, 1994at a cost of Rs. 1.55 crores. The area of the flat is stated to be 800 sq. yds. The assessee claims to have incurred a cost of Rs. 1.55 crores in construction of flats on this property. The purchase as well as cost of construction are duly recorded in the regular books of account and the same stand accepted in regular assessment for the asst. yr. 1996-97. The assessee has constructed basement, two flats on ground floor, two flats on first floor, two flats on second floor and two flats on third floor. At the time of the search at the assessee s premises on27th July, 1999only the part of the building was sold as under: Rs. (a)Saleof basement to Mr. Ravinder Nath Sons 50 lakhs (b)Saleof ground floor left side flat to Shri Praveen Khilnani 48 lakhs (c)Saleof ground floor right side flat to Shri Paintal 28.50 lakhs (d)Saleof 2nd floor right side flat to Mr. Amarjeet Singh 45 lakhs (e)Saleof 3rd floor left side flat to Mr. Rakesh Agarwal 9.80 lakhs Total 1,80,80,000 The sale of flats at (a), (b) and (e) above have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l that Rs. 1.22 crores is the sale consideration of this property. Author of this document was also not examined. Person in whose name the cheques were given were also not examined. Since the assessee was a trader, he cannot be expected to sell the property at a price expected by the AO. The prudence of businessman as to how the business is to be conducted cannot be substituted by the opinion of Revenue. Books of account have also not been rejected. The sale has also been recorded in the regular books of account and stood accepted in the regular returns. Due to adverse location of the plot being "Sher Mukha" cannot be valued at a higher price than the actual sale consideration evidenced by record. The valuation report did not consider the adverse factors and was thus showing exhorbitant prices. The assessee denied having received anything more than what was disclosed in the books. Under such circumstances it was contended that the learned CIT(A) has erred in sustaining the addition which also is prayed to be deleted. Likewise there being no document found in respect of second floor flat and party having not been examined, there was no justification in the sustenance of addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts found seized revealed certain jottings and writings and also flat B-1 against Rs. 1.22 crores was written. The AO presumed the sale consideration of Rs. 1.22 crores towards ground floor flat of property No. B-42, Panchsheel Enclave, New Delhi which was sold to Shri Khilnani as against the disclosed sale consideration of Rs. 48 lakhs by the assessee. This sale price was made a basis of estimating the sale price of right side of second floor flat to Mr. Amarjit Singh at Rs. 1.14 crores as against the disclosed sale consideration of Rs. 45 lakhs. The difference in these two values on account of both the flats was treated as undisclosed income of the block period on account of under-statement of sale consideration. The learned CIT(A) however found that the AO has obtained an experts opinion of the Department who valued the ground floor at Rs. 57,36,600 and the second floor flat at Rs. 52,62,600. In the absence of any positive material for receipt of actual sale consideration as assumed by the AO she chose to uphold the sale consideration of left side flat of ground floor at Rs. 57,36,600 and right side flat of second floor at Rs. 52,62,600 and sustained the additions of Rs. 9,36,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substituted by the mere estimation in the scheme of Chapter XIV-B of the Act for treating the same as undisclosed income for the block period of the assessee. We, therefore, do not find any justification in the sustenance of addition by the learned CIT(A) in respect of both these flats as undisclosed income for the block period taken on the basis of valuer s report. The same is therefore directed to be deleted. 9. In ground No. 2(b) of the assessee and in grounds 1 and 2 of Revenue, the dispute relates to the addition in respect of property bearing No. S-484, GK-II,New Delhi. 10. Briefly, the facts are that the assessee constructed this property and cost of construction stood duly disclosed in the regular returns. The assessee has constructed flats at ground floor, 1st, 2nd and 3rd floors with a cost of Rs. 1.18 crores approximately. All these investments have been disclosed in the regular books of account. There is no dispute about the construction or purchase of plot made on24th May, 1995. At the time of search flats at 2nd and 3rd floors were not sold. The assessee has sold two flats constructed at first floor. One flat was sold to Mohd. Sattar Malik at a sale consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale value on the basis of valuation report and sustained addition of Rs. 5.95 lakhs and 7.24 lakhs in respect of flats situated at first floor and likewise, as there were no documents found in search in respect of flats at ground floor, she rejected estimation made by AO at Rs. 1.95 crores, more so when there was no reasonable basis with the AO to estimate the fair market value at Rs. 1.59 crores as against declared value of Rs. 74 lakhs. However, looking into the element of passing unaccounted cash in such transaction of property dealing, she on her own estimated the sale price by enhancing 20 per cent of the amount disclosed by the assessee and sustained addition at Rs. 14.80 lakhs. The Revenue is in appeal in respect of relief given to assessee in respect of reduction in value for first floor as well as ground floor flats while the assessee has appealed against the sustenance of addition on account of first floor flat and has raised the plea during the course on hearing in respect of addition of Rs. 14.80 lakhs in respect of ground floor flats sold which were based on mere estimation by the learned CIT(A) which plea was allowed to be raised. 12. We have heard the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. This stands fortified by the decision of apex Court in the case of Saraswati Industrial Syndicate Ltd. vs. CIT (1999) 152 CTR (SC) 470 : (1999) 237 ITR 1 (SC). The Rajasthan High Court in CIT vs. Rajendra Prasad Gupta (2001) 166 CTR (Raj) 83 : (2001) 248 ITR 350 (Raj) has also held that de hors material, addition cannot be made as undisclosed income. In the overall analysis irresistible view is that the addition of undisclosed income so made de hors material is directed to be deleted. 13. As regards the sustenance of addition in respect of first floor flats on the basis of DVO s report, such reports were the mere opinion. In the absence of any evidence found as a result of search that the assessee has received any amount towards sale consideration over and above the amount recorded in the books or entered in the documents of sale, such a report could not be made a basis for making addition for undisclosed income of the block period of the assessee. The assessee in this case had disclosed the entire sale consideration in his regular books of account. That being so and in the absence of any contrary material being in possession of the Revenue, the difference between the es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could not have been disbelieved. The learned CIT(A), therefore, was justified in deleting the deletion for which no interference is called from the Tribunal. Ground 1 of Revenue, therefore, stands rejected. 16. In assessee s appeal, ground 3 relates to the sustenance of addition of Rs. 14,30,349 which comprised of FDRs of Rs. 11,74,500 in the name of Shri Ram Saroop Dhawan for Rs. 2,99,750, Shri Arvind Kumar for Rs. 2,99,750 and Shri Ajay Kumar for Rs. 1 lakh, Shri Ganeshchand Rs. 2 lakhs and Shri Vinod Kumar Rs. 2.75 lakhs. Besides this, the AO estimated interest earnings of Rs. 2,56,099 for the asst. yrs. 1990-91 to 1992-93 being part of the block period. These additions are made by the AO on the basis of seized Annexs. A-4/23, A-7/43 and 44, copies of which are placed at assessee s paper book at pp. 130 to 133. All these persons were produced before the AO. Their statements were recorded, copies placed at assessee s paper book 136 to 145 including copy of IT return and affidavit of Shri Ajay Kumar in whose name the FDR was there but he was not available at the relevant time for giving the statement. The AO being of the view that all these FDRs have been made on the same dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash for Rs. 15 lakhs, cheque of Rs. 4 lakhs, Rs. 15 lakhs, Saket property Rs. 15 lakhs, registration Rs. 1 lakh and property at Saket Rs. 5.50 lakhs. The aggregate amount of Rs. 73 lakhs is balanced by the two other entries of Rs. 7 lakhs for Sainik Farms and flat of Rs. 66 lakhs. The AO did not find any property at Saket or Sainik Farms in the name of assessee or any of its associates. The AO also did not find any transaction having been done by assessee in respect of any such property. The cheque amount of Rs. 4 lakhs was also not found recorded in the books of the assessee or in any of the bank accounts despite carrying out extensive search at the business premises of the assessee and the residence of the partners. The AO, however, treated the entry of Rs. 15 lakhs of cash as undisclosed income of the assessee by presuming that the amount has been received by the appellant. Six of these entries found written are not related to any transaction of the assessee. The entry of cash of Rs. 15 lakhs also cannot be held to be a transaction carried out by the assessee. The AO did not find as to who is the author of the document so found and seized by the appellant. His conclusion is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s paper book p. 150 reveals certain notings. The AO deciphered figures of 4.5 and 6 as figures in lakhs and treated the aggregate amount thereof for Rs. 15 lakhs as cash credit on which interest was also calculated. Assessee s explanation that these amounts were received as advance towards the sale of third floor property No. B-42, Panchsheel Enclave was not accepted. In the said explanation the assessee also stated that as per proposal in case the flat is not given the assessee had to give interest. This also was not accepted. All the entries of receipts and payments were duly recorded in the regular books of account. During the course of assessment the assessee filed a confirmed copy of accounts from all these persons. The amount of Rs. 4 lakhs stood repaid on28th Feb., 1999. Out of payment of Rs. 11 lakhs the flat was finally sold at an agreed price of Rs. 9.85 lakhs for which a separate agreement was executed and placed on record and the balance of Rs. 1,20,000 was also returned. Confirmation for this also was filed. The assessee thus contended that he has discharged his onus and entries were duly recorded in the books of account. The same could not have been treated as undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts placed at assessee s paper book p. 164. The payment made by the assessee could not be treated as a cash credit as this represented a return of money already received by him. The assessee has discharged the burden that lay upon him. Under such peculiar facts the amount of Rs. 2,50,000 repaid by assessee could not been treated as cash credit and undisclosed income for the block period. The addition made, therefore, is directed to be deleted. 29. Next ground relates to the sustenance of addition of Rs. 3,45,526 made on account of interest on the basis of seized Annexs. A-18/37 and 38, copies placed at assessee s paper book pp. 165 and 166. 30. The AO observed that in the said seized paper calculations of interest have been made. The AO presumed that the assessee has made payment of interest and the basis on which such interest has been calculated are written in these papers. However, he was satisfied about the genuineness of principal amount received and recorded in the books of the assessee for which no addition was made. The AO being of the view that the assessee has paid interest outside the books, he treated the same as undisclosed income for the block period. 31. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, it is evident that the expenditure was incurred in asst. yr. 1992-93 in cash and was duly recorded in the regular books of account as has also been accepted by AO himself at internal p. 8 para 12 of his order. The assessee has regularly been assessed to tax and assessment for that year had also been made. No disallowance was made on this account. No new fact or incriminating documents have come to the notice of the AO. Assessment of undisclosed income under Chapter XIV-B is not for reviewing of the assessments already made. The scope of assessment of undisclosed income is on the basis of documents found and seized which gives rise to undisclosed income. The expenses were incurred in regular course of business for carrying out the business activities of construction of the assessee and income of which has already been brought to tax in earlier years in regular assessments. Under such peculiar facts, the expenditure incurred in cash and claimed and allowed as expenditure in the regular assessment cannot partake the character of undisclosed income by invoking the provisions of s. 40A(3) of the Act. Addition so made, therefore, is directed to be deleted. 36. Ground No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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