TMI Blog1989 (5) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... her debits. The I.T.O. enquired of the assessee about the source of the expenditure of Rs. 6,90,231. The assessee contended that he had borrowed Rs. 3.25 lakhs from his father-in-law Shri Kasirajan but after examining Shri Kasirajan, the I.T.O. was of the view that the father-in-law could not have advanced the amounts. The I.T.O., in the course of the assessment order, had mentioned the fact that the assessee has also in this period constructed a theatre in which the work in progress shown as on 31-3-1985 was Rs. 27.42 lakhs against Rs. 1.98 lakhs on 31-3-1984 showing an increase of investment of Rs. 25.43 lakhs. Under the provisions of sec. 69C, he made an addition of Rs. 6,90,231 in framing the assessment. 3. The Income-tax Officer also made an addition of Rs. 68,170 for interest on borrowings diverted for construction of the theatre, Rs. 23,730 income from sale of empty gunny bags and Rs. 6,831 --- 10% profit on the work done in the name of Manimaran. 4. The assessee appealed. Before the C.I.T. (A), the main ground was against the addition of Rs. 6,90,231. The assessee pressed into service the ratio of the decision of the Tribunal in S.F. Wadia v. ITO [1986] 19 ITD 306 (Ahd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and the materials on records. 5. The basis of apportionment of the above amount of Rs. 1 lakh towards Housing Board Contracts is not warranted on the facts and circumstances of the case and hence the relief allowed in this regard is not justified. 6. The Respondent craves the leave of the Hon'ble Tribunal for modifying, amending and/or raising additional grounds of cross-objection at the time of hearing. " 7. At the hearing before us, the learned counsel submitted that the investment shown in the theatre at Rs. 27.42 lakhs was total investment in the building and this was evidenced by the valuation independently made by the Valuation Officer, a copy of which was not given to him on the plea that it would be supplied if it was to be used against the assessee. Therefore, the full amount of Rs. 6,90,231 will relate only to the Housing Board contracts and the deduction to be allowed by the C.I.T.(A) should have been the full amount. He also submitted that it was possible to link specifically some more items as relating to Housing Board Contracts out of the 15 items which aggregated to Rs. 6,90,231. In view of the contentions adduced by the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' and expenditure relating to disclosed business of rupees 'D', then while under sec. 69C an addition of rupees 'A' would have to be made, a separate deduction would have to be given of rupees 'D' relating to business expenditure incurred but not accounted for. The resultant net addition would be rupees 'A' minus 'D'. Where unaccounted expenditure is rupees 'A' and there is no personal expenditure and no capital expenditure and the whole unexplained expenditure relates to a disclosed business, then 'D' will be equal to 'A' and while rupees 'A' can be added under sec. 69C, an equivalent amount of rupees 'D' would have to be now separately allowed as a deduction. 10A. Coming to the facts of the present case on the aforesaid background and starting with the Annexure to the assessment order and the position as clarified after verification by the I.T.O. and the Remand Reports of the C.I.T.(A), we find the following :---- S.No. Names of Suppliers Amount as per Relating to Date voucher theatre as per Remand Order 1. Ramachandra Clamps Rs. 23,369 2. Syndicate Electricals Rs. 4,800 2000 15.2.85 3. Five Star Supply Rs. 8,005 6200 23.3.85 4. Blue Shine Supply Rs. 4,034 5. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed as a deduction. This argument of the assessee was put by the C.I.T.(A) to the I.T.O. We quote below paragraph 4 of the order of the C.I.T.(A) :---- " I had a discussion with the ITO. He pointed out that during the year the appellant was constructing a theatre called 'Kasi Theatre' and approximately Rs. 25 lakhs was invested in this theatre. He pointed out that the major portion of the expenditure of Rs. 6,90,231 was related to the construction of the theatre and hence, being capital expenditure, the decision of ITAT, Ahmedabad relied by the learned representative will not apply to this case. " It is clear that before the C.I.T.(A), the categorical stand was that a major portion of the expenditure of Rs. 6,90,231 related to the construction of the theatre. Thereafter, we called for the Remand Report and after a complete analysis it has now been stated that only Rs. 12,726 related to the construction of the theatre. The Department in its Cross Objection has also contested the finding of the C.I.T.(A) on the ground that he had no basis for making the apportionment between unaccounted for expenditure which went into the construction of the theatre and the expenses relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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