TMI Blog2014 (10) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... in the wrong direction and has not relied upon DVO’s report even after making reference to him and the DVO also made available his report during the assessment proceedings - local position is well settled regarding adoption of local PWD rates for valuation of the cost of construction etc. as decided in CIT vs. Hotel Joshi [1999 (11) TMI 56 - RAJASTHAN High Court] - instead of CPWD rates for valuation of properly only local PWD rates should be adopted - Otherwise also, for self-supervision, deduction upto 20% is allowable depending upon different circumstances of a case - the assessee has claimed 20% deduction on account of difference in PWD rates as mentioned above and 15% on account of self-supervision - entire addition made by the AO in this account is to be deleted - the addition upheld by the CIT(A) on account of unexplained investment in the construction of house property is to be set aside – Decided in favour of assesse. Claim of interest disallowed – AO was of the view that the interest has not incurred by the assessee for business purposes – Held that:- Assessee contended that that the AO has wrongly appreciated the facts - the expenses were not claimed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating documents disclosing the alleged advances made by the assessee to various persons was found or seized - The Revenue found and seized cash lying in the private lockers and the same have already been offered by the assessee as an additional income in the return filed for the year under consideration which also covers with the withdrawal of deposits of cash in these lockers which is supported by pasted papers if they are taken into consideration - All these funds and the figures appearing are to be comprehended after suffixing two zero and this fact has been clearly admitted by the assessee and is still maintained. Assessee has duly shown the cash found and admitted as his business income from his regular business activities and further having paid tax and explaining the mode and manner of acquisition of such income in his return of income and during the assessment proceedings, the entire addition made on the basis of appreciation of these documents which are mainly on presumption and assumptions without there being any corroborative material on record deserves to be deleted, especially when the AO has neither appreciated the statements of the assessee properly as well as add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in house ₹ 1,11,00,000/- 3. Expenses disallowed ₹ 1,50,000/- 4. Interest expenses disallowed ₹ 2,81,685/- Total taxable income ₹ 1,27,47,305/- Rounded off ₹ 1,27,47,300/- 2.2 Aggrieved, the assessee preferred first appeal and th8e ld. CIT(A) has given part relief to the assessee. That is why both the parties are aggrieved before us. 2.3 The assessee has raised following grounds:- 1. On the facts and in circumstances of the case, the ld. CIT(A) has grossly erred in upholding an addition of ₹ 31,500/- by holding said amount as unexplained expenditure u/s 69C of the I.T. Act, 1961 without appreciating the facts that the amount represented the sum payable to an employee and the drawings of the year was more than sufficient to cover the said expenses. Hence, the addition of ₹ 31,500/- so uphold deserves to be deleted. 2. On the facts and in the circumstances of the case, the ld. CIT(A) has grossly erred in upholding an addition of ₹ 62,62,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur has erred in deleting the addition of ₹ 48,37,951/- out of total addition of ₹ 1,11,00,000/- made u/s 69C on account of undisclosed investment in the house without giving a finding as to why and how the computation made by the AO was incorrect. 3. On the facts and in the circumstances of the case, the ld. CIT(A), Central, Jaipur has erred in deleting the addition of ₹ 1.50 lacs made on account of personal and unverifiable expenditure without the assessee proving them to be otherwise. 4. The appellant craves the right to amend alter or add to any of the grounds of appeal given above. 2.5 We have heard the rival submissions and have carefully perused entire record. We have also gone through the paper book filed by the parties including the written submissions, synopsis of submissions. We have also carefully circumspected the relevant provisions and the precedents applicable to the contentious issues. 3.1 The first ground in assessee's appeal as well as the departmental appeal is common. The facts of this issue are that the AO made an addition of ₹ 3,81,500/- on account of undisclosed cash advance which has been reduced to ₹ 31,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 31,500/- totaling to ₹ 3,81,500/- is made. Snap shot of the said page is as under:- 13th April to 13th January, 2009 = 9 months 3500 x 9 = 31,500 (-) 7,000 24,500 Further the observation of the ld. AO at page 2 para 6.2 of his order is as under:- .Firstly the assessee tried to explain above entries as rough working no financial implication, whereas the entry are clear representing interest charged for specific period and in terms of specific amount with omission and two zeros as admitted by the assessee in the statements recorded during search . From the perusal of the above observation and the snap, it is beyond understanding as to who the addition has been made by the ld. AO. The ld. AO has applied two zeros on the figure written in the loose paper as 3500 and has failed to apply the two zeros on the figure written as 31500 this means the ld. AO has adopted the theory of using two zeros wherever it suits him according to his sweet will and every single entry found noted in the documents seized during the course of search could not be extrapolated by adding the zeros of the choice of department. It is further submitted that the allega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntains certain notings as discussed above . On the basis of this notings, an addition of ₹ 3,81,500/- has been made by alleging that these entries pertain to the calculation of interest on some advance given and therefore, he has worked out the principal amount of ₹ 3.50 lacs as advance after including interest amount of ₹ 31.500/- and thus he has made addition of ₹ 3,81.500/-. On scrutiny of pages, 2,16 and 17 of Annexure AS-1, it is noticed that the notings on page no. 1 are entirely different from the notings on the former pages. At pages, 2,16 and 17, the details of lockers in which cash amount has been deposited with reference to unaccounted finance business of the assessee is found mentioned. The assessee has also admitted that pages, 2,16 and 17 belonged to them. However, such an analogy cannot be drawn so that page 1 can be treated on the same lines with reference to assessee's admission but the facts remains that the assessee has not been able to get these amounts verified with reference to his regular books of account. Accordingly, we do not find any infirmity in the findings of the ld. CIT(A) which deserves to be upheld. Resultantly, we dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved valuer s report filed by the assessee. We may although not consider in the manner in which it has been alleged by the ld. AR that the AO has having pre-conceived notion of making addition of ₹ 1.11 crore in this item of income but we cannot approve the action of the AO in the way he has pursued. The submission of the ld. AR is that from the DVO s report which is based on CPWD rates, if a settled reduction on account of local PWD rates, is allowed and on account of self supervision is allowed. No further addition is required to be made. We are in agreement with the ld. AR that local position is well settled regarding adoption of local PWD rates for valuation of the cost of construction etc by the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Hotel Joshi, 242 ITR 478 wherein it has been clearly held that instead of CPWD rates for valuation of properly only local PWD rates should be adopted. This issue stands settled on various decisions of Hon'ble Delhi High Court and consecutive decisions of various benches of the Tribunal. Otherwise also, for self supervision, deduction upto 20% is allowable depending upon different circumstances of a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rietary concern and thus a net debit of ₹ 2,81,685 has been claimed on account of interest. The AO verified this claim with reference to balance sheet of the assessee and found that assessee had made substantial investment in shares of various private limited companies, partnership firm, shares, PPF etc. and some of them being income which is exempt under the Act. The AO has found that all the interest bearing loans cannot be considered for the purpose of the business activities of the assessee. The assessee has clamored that loans were taken for the business only. The basic nature of the business of the assessee did not require any loans as he is a finance broker who would only charge brokerage. The balance sheet filed by the assessee reveals that he was having investment in shares of various private companies / groups and that investment had not resulted any taxable income against claim of interest . He also found that the assessee had failed to link the receipt of loan and its use for the purposes of business. Therefore, the net debit balance of interest of ₹ 2,18,685/- has been disallowed. 5.6 The ld. CIT(A) has also confirmed the said addition. 5.7 We have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the expenses are not properly vouched and some element of personal usage is also involved in these expenses. In our considered opinion, the action of the AO is not based on any specific logic but based on loose subjective inference the AO has not brought on record any evidence that expenses claimed are bogus and inflated for non-business purposes. Accordingly, we find force in deletion of addition which is supported by the Hon'ble Rajasthan High Court rendered in the case of Jain Steel (India) vs. ACIT, 88 DTR 1 in which it has been held that no addition can be made without supporting evidence only. Thus we cannot allow this ground of appeal of the Department 7.1 The Ground No. 4 of the assessee's appeal is pertaining to charging of interest u/s 234B and 234D. However, no arguments were advanced by the assessee on this issue. We find no infirmity in the order of the ld. CIT(A). Hence, the Ground No. 4 of the assessee is dismissed. 8.1 The Ground No. 5 of the assessee is general in nature which needs no adjudication. ITA Nos. 829/JP/2013- Assessee 847/JP/2013 Revenue (A.Y.2010-11) 9.1 These are the cross appeals filed against order of the ld. CIT(A), C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings and the payment as alleged to be unrecorded is duly appearing in the books of accounts and the payment were made through payees account cheques, this being so the entire addition deserves to be deleted. 4. On the facts and in circumstances of the case the Ld. CIT(A) has grossly erred in sustaining the disallowance of the loss of ₹ 9,06,470/- under the head Income from Other Sources without considering the replies furnished and legal position in the matter and further without in any manner bringing on record any evidence contrary to the submissions made, this being so the entire addition deserves to be deleted. 5. On the facts and in circumstances of the case the Ld. CIT(A) has grossly erred in not suo moto considering the telescoping, recycling and set off of one income from the other which is a legally permissible course in completing the assessee and the same being mandatory to tax the real income in the hands of the appellant assessee. Hence the set off as permissible deserves to be allowed. 6. That the Ld. CIT(A) has grossly erred in upholding the charging of interest u/s 234-A, 234-B, 234-C and 234-D by ignoring the fact that sufficient amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken but while considering the investment some confusion had occurred. The discrepancy in the weight taken is tabulated by the assessee in his written submission at page 2 as under:- It is noticed that a net weight considered for arriving at the impugned addition is, in fact, a gross weight. This fact is clearly visible from pages enclosed at pages no. 19 to 22 of assessee's written submission where valuation done as on 25-08-2009 by the search party is enclosed. In the column of gross weight in grams i.e. the column subsequent to column of the description of total weight of the items seized or found. In the subsequent column, net weight approximately is given. The net weight of the jewellery has been shown after reducing the weight of threads, dori (Sarrafa), Chapdi, Plastic bushes, steel wire, wax etc. having zero metal content and nil value. We have found that this observation of the ld. CIT(A) as asserted by the ld. DR supporting the reasons given by both AO and the ld. CIT(A) are not correct. In fact, there is no difference in the jewellery declared and found. The assessee has two sons who are not assessed under Wealth Tax Act and in view of the CBDT instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.N. Modi Sons HUF Family HUF 16.350 - 69 4. Nirmal Kr Agarwal Self 4.840 508 71 5. Hema Agarwal Spouse 7.300 - 73 Total 48.002 990 This chart has not been controverted by the ld. DR. After considering the same, we have found that 99.10 grms were in possession with the assessee and his family members. The total weight comes to 99.9 kgs. It is found that credit of this silver jewellery was neither given during the course of assessment proceedings nor by the ld. CIT(A). If this weight of silver jewellery is treated as explained and reduced, the balance silver jewellery 22.485 kgs would remain. It was further noticed that wealth tax returns were filed upto 31-03-2008 and search had had taken place on 24-08-2009 i.e. after 17 months of acquisition of silver jewellery and like in gold jewellery the possession of some amount of silver jewellery on various social occasions as we have discussed in the case of the gold is not ruled out. Therefore, remaining 12.585 Kgs of silver articles / jewellery also stand explained and is liable to be deleted. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder:- S. No. Page No. Amount of undisclosed dvances 1 4 1,12,60,000.00 2 5 3,88,03,145.00 3 6 81,00,000.00 4 7 11,00,000.00 5 8 5,78,00,000.00 6 19 2,93,62,350.00 Total 14,64,25,495.00 It was argued before us by the ld. AR that impugned addition is based on loose papers at Serial No. 1 to 3 in the above table via pages 4,5, and 6 which are reconstructed pages pasted on plain paper which were found in the torn out condition and treated by the assessee as deaf and dumb and rough pieces of papers lying in the dustbin kept in the house of the assessee. These papers are marked as Annexure AS-1 pages no. 4 to 6 and 8. It was further argued that certain entries were also found noted on the back side of these papers. This fact is not denied by the AO b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply to Q.No.25, the assessee has stated these facts. The ld. CIT(A) has partly accepted the contention of the assessee. Regarding these entries being repetitive in nature but he has given part relief with reference to matching principle to the extent of ₹ 7,05,86,000/-. The action of the AO and the ld. CIT(A) is depicted in the following chart mentioned at page 8 of the assessee's written submission. Annexure AS-1 Page No. By AO By CIT(A) 4 1,12,60,000.00 53,00,000.00 5 3,88,03,145.00 6,00,000.00 6 81,00,000.00 - 7 11,00,000.00 1,10,000.00 8 5,78,00,000.00 5,78,00,000.00 19 2,93,62,350.00 67,76,000.00 Total 14,64,25,495.00 7,05,86,000.00 It was argued by the ld. DR that total withdrawn from the lockers at ₹ 7.47 crores would be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pto 1/7] and if two zeros as per the practice of the assessee are added, the resultant figure comes to ₹ 1,10,000/-, however AO while dealing with this paper has added three zeros making the figure to ₹ 11,00,000/- (AO Page 31 para 3). The Ld. CIT(A) accepted this contention however has failed to appreciate the fact that the amount of ₹ 1,10,000/- appearing in the name of G Rana in page 7 of Annexure AS-1 is duly appearing at page 8 in Sl. No. 10 left hand side, therefore, no separate addition on this score could be made. Page No. 8: An addition of ₹ 5,78,00,000/- was made by Ld. AO by alleging that the assessee has made unexplained advances which were found recorded on this page. Entry-wise observations of the AO on this seized paper are at page 31 of the assessment order. While making the addition the AO himself was not sure whether he is making addition on account of advance given or advance taken or the payments made or for the payments received and has played blow hot and blow cold. During the course of appellate proceedings vide letter dated 21.08.2013 (APB 1-5) assessee explained each individual entry of this page but Ld. CIT(A) ignored the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded three zeros to the amounts. In case the above calculation is reworked by adding two zeros to the amount of interest appearing in the said paper, the resultant amount of advances comes to ₹ 38,50,000/- and interest of ₹ 4,62,000/- totaling to ₹ 43,12,000/- as against the addition of ₹ 4.00 crores made by Ld. AO and accepted by Ld. CIT(A). It is further submitted that the AO presumed that the assessee has received interest on the amount advanced and thus made the addition on both the counts i.e. the interest as well as principal whereas these entries are appearing in the right side of paper and in no case could be considered as receipt and actually these are the payment made. Even for the arguments sake, if the allegation of the AO is accepted that it is the amount of interest, in such a situation it is the payment of interest on the advances received by the assessee and not the advances given as has been alleged by the AO. To prove the contradictory approach and in addition to above, on the remaining entries appearing at the right side of the paper i.e. Annexure AS-1, Page 8, the AO has added two zeros to the figures appearing against each individua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the remaining figures appearing on the said page, it is submitted as under: 1. For a figure appearing on 17/8 at 862/18, the AO has extrapolated the same as 8,62,000/- and 18,00,000/- [entry No. 25 and 26 of page 18 of assessment order] as against the actual amount of ₹ 862.18. 2. Further a sum of ₹ 7,40,500/- [Sl. No. 24 at page 18] was added which is appearing as the product of 33880 26475 appearing at the bottom of the page without considering the fact that both the amounts of ₹ 33,880/- and 26475/- are being separately added by extrapolating at ₹ 33,88,000/- [Sl. No. 21] and ₹ 26,47,500/- [Sl. No. 23]. 3. Further the total of the table as mentioned in the assessment order at page 18 has been done at ₹ 2,93,62,350/- instead of the correct total of ₹ 2,54,97,300/- thereby making an extra addition of ₹ 38,65,050/- on account of totaling mistake. From the above submission, it is submitted that the AO while completing the assessment order has proceeded in arbitrary manner and as per his sweet will without having based his conclusions on any logical grounds resulting into the huge addition of ₹ 14,64,25,495/- mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to ₹ 1,35,620/- [actual figure 1,35,62,000] and the balance amount of ₹ 9,61,031/- [actual figure 9,61,03,100/-] could at the most be available with the assessee as against which the total excess cash was found at ₹ 10,00,35,045/- which was declared in the return of income filed, therefore, there remained no undisclosed income in the hands of the assessee even after considering all the entries in the seized papers based on which the addition was made in the assessment order. In the circumstances, it is humbly submitted that the entire addition made on incorrect and improper appreciation of the facts and merely on assumption and presumption without having any corroborative material brought on record deserves to be deleted, more particularly when the Ld. AO has neither appreciated the statements of the assessee in its true spirit nor has appreciated the additional income offered by the assessee. 11.4 After considering carefully above explanation and further considering that the assessee has duly shown the cash found and admitted as his business income from his regular business activities and further having paid tax and explaining the mode and manner of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Amitek Securities Pvt. Ltd. 1689 14.04.2009 68,165.00 5 Alpha Infotech System 2009-10/01 10.04.2009 55,120.00 6 JB s 3829 18.04.2009 1,84,149.00 7 JB s 3830 18.04.2009 1,12,001.00 8 JB s 3831 19.04.2009 5,598.00 Total 6,03,473.00 Less: Amount appearing in the books of appellant as per Ld. AO 2,38,403.00 Net amount as per Ld. AO which has not been disclosed by the appellant 3,65,070.00 The explanation of the assessee in this regard is tabulated as under:- S. No. Name of the party Bill No. Date Amount As per books of accounts Date Amount 1 M/s Amitek Securities Pvt. Ltd. [APB-120] 1705 20.04.09 4,362.00 18.03.09 04.05.09 1,00,000.00 [APB-138] 1,70,783.00 [APB-139] 2 M/s Amitek Securities Pvt. Ltd. [APB-121] 1691 14.04.09 83,131.00 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sustained any additions out of which the benefit of recycling and telescoping could be given. Hence, this ground of the assessee is dismissed. 15.1 Ground No. 6 of the assessee is pertaining to charging of interest u/s 234A, 234B, 234C and 234D of the Act. 15.2 We have heard both the parties and perused the materials available on record. Before us, the ld. AR submitted that during the course of search conducted on 24-08-2009, a sum of ₹ 10.00 crores were seized by the Department which was lying in the PD a/c of the Commissioner and assessee has made request for the adjustment of advance tax instalment fallen due after search which were not accepted by the dept and interest was charged u/s 234B and 234C, copy of request letters submitted are also filed in the paper book of the assessee. The ld. AR of the assessee has relied on following decisions. 1. CIT vs. K.K. Marketing, 278 ITR 596 (Del.) 2. Anand Shankar Mittal vs. DCIT 43 TW 1 (ITAT Jaipur ) 3. CIT vs. Pranoy Roy, 222 CTR 6 (SC) 15.3 The ld. DR has supported the orders of the authorities below. 15.4 After considering the submissions of both the sides, we found that the Department is in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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