TMI Blog2015 (7) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 and the assessee approached the Assistant Registrar of ITAT, New Delhi firstly on 28.02.2012 and requested to provide copy of Form No.36 along with grounds of appeal raised by the Revenue. The assessee subsequently filed reminder/applications on 03.10.2013, 22.02.2013 and 05.03.2013 with the same request which was finally redressed on 13.03.2013 when the Assistant Registrar, ITAT, Delhi directed to provide copy of grounds of appeal to the assessee. In pursuance to last application dated 05.03.2013 admittedly assessee filed cross objection on 04.04.2013. In this situation, we are of the view that when the assessee has established that no notice along with copies of Form No.36 and grounds of appeal of the Revenue were served upon the assessee and the assessee could get copies of Form No.36 and grounds of the Revenue after restless efforts only on 13.03.2013 then the time limit prescribed in Section 253(4) of the Act would be reckoned only after receipt of complete notice along with copies of Form No.36 and grounds of appeal of the Revenue which is on 13.03.2013 in the present case. Hence, thus cross objection filed on 04.04.2013 cannot be alleged and held as time barred. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the assessee by ₹ 5,00,000/- which was received by the assessee in the garb of gift in the name of Shri Ashish Jain son of assessee. - Decided against revenue. Undisclosed income - assessee had received a payment of ₹ 5,00,000/- from M/s J.V. Industries Pvt. Ltd - CIT(A) deleted addition - Held that:- The confusion arose before the AO due to incompleteness in the facts and details submitted before the AO which were subsequently explain by way of filing details submission, statement of Bank account and other relevant details during first appellate proceedings. Admittedly, the assessee offered long term capital gain to the extent of ₹ 3,47,817/- on the sale of 10,000 shares of M/s J.V. Industries Pvt. Ltd. which were sold to M/s Nirman Securities Ltd. and the assessee received sale consideration through account payee cheque which was also credited to his saving Bank account. Under above noted facts and circumstances, we are an agreement with the conclusion of the CIT(A) that the assessee satisfactorily explained the source of ₹ 5,00,000/- and its further used for repayment of advance against sale agreement and in this situation addition made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d conclusion. We decline to interfere of the conclusion of the CIT(A) on this issue - Decided against revenue. Rejection of books of accounts - Enhancement of income of the assessee by AO adopting average GP rate of preceding assessment years and in making addition of ₹ 16,96,788/- - CIT(A) deleted the addition - Held that:- No hesitation to hold the Assessing Officer reject the books of account of the assessee without any valid reason and without following due procedure as per provision of the Act and without any justified and cogent basis and the rejection of books of account AO was rightly dismissed by the CIT(A). Turning to the issue of addition of ₹ 16,96,788/- applying difference of GP rate of 4.1% calculated on the basis of average of GP rate of immediately preceding three assessment years, we note that since the rejection of books of account have not been found to be sustainable then the Assessing Officer cannot be held as justified in making the addition by applying difference in GP rate of 4.1% on the basis of average of preceding three years and addition in this regard cannot be held as sustainable and in accordance with law in absence of justified and rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case the Ld CIT(A) has erred in deleting the addition of ₹ 5,00,000/- out of an a thon of ₹ 6,77,000/-- made by the account of under statement of sale consideration of property situated at 9/100, Shastri Gali, Vishwas Nagar, Shahdara, Delhi. 4. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of ₹ 5,00,000/- made by the AO on account of unaccounted source of repayment of advance against sale agreements. 5. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of ₹ 5,00,000/- made by the AO on account unexplained source of repayment of property advance to Shri Vinod Kumar Jain. 6. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of ₹ 3,00,000/- made by the AO on account of unaccounted receipt of cash claimed to have been received from Sh. Sheel Kumar Jain. 7. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting an addition of ₹ 16,96,788/- made by the AO on account oflow GP Ratio. 7.1 The Ld CIT(A) has erred in holding that the books o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except part confirmation of addition of ₹ 1,77,000/- in respect of sale consideration of property bearing No. 9/100, Shastri Gali, Viswas Nagar, Shahdra, Delhi-32. Aggrieved Revenue, before this Tribunal with the Ground as reproduced hereinabove and the assessee has also filed cross objection in regard to part confirmation of addition and dismissal of first appeal by the CIT(A). Ground nos. 2, 2.1 2.2 of the assessee 6. We have heard rival arguments and perused the relevant material placed on record, inter alia assessment year, first appellate order of the CIT(A) and written synopsis of the assessee filed before us. The Ld. Departmental Representative (DR), supporting the action of the AO submitted that the AO was quite justified in making addition in regard to the unexplained money/seized cash of ₹ 25.75 lakh u/s 69A of the Act. The Ld. DR further contended that despite of adequate opportunity were given to the assessee to submit said original receipt, but the same was not submitted during the assessment proceeding. The Ld. DR further contended that in fact Shri Sheel Kumar Jain had not signed any receipt/agreement not even on the date when the money was ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief to the assessee on this issue, therefore, the addition was rightly found to be not sustainable by the CIT(A). 8. On careful consideration of the above submissions at the very outset, we note that the Assessing Officer firstly proceeded to dispute amount of cash seized as unexplained money of the assessee on the basis of that advanced money received on account of sale/purchased of property are always routed through account payee cheque/draft. On this conclusion of the AO, we are an agreement with the finding of the CIT(A) that no law of the land requires intending purchaser to pay the advance money to the seller through account payee cheque only. In this situation, explanation of the assessee cannot be rejected merely on the ground that the advanced amount said to be received by the assessee on account of agreement to sale of property was in cash. On the factum advance received by the assessee of ₹ 12.50 lakh from M/s JMW (India) Pvt. Ltd. we note that there was written agreement of sale between the assessee and the said purchasers M/s JMW (India) Pvt. Ltd. and this fact was confirmed by the Director of the company before the authorities below. Since the property was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contra, the explanation offered by the assessee that the assessee was under genuine and bona fide belief that he shall ask his sister to vacate the property she shall vacate the said property but when his sister came to know that the assessee is going to sale the said property then she had requested to the assessee to sale the said property to her only and keeping in view the relationship of their sister, the assessee could not deny her request and therefore, the agreement to sale was cancelled. The explanation offered by the assessee was wrongly rejected by the AO and the CIT(A) rightly considered the said explanation and we are unable to see any perversity or infirmity or any other valid reason to interfere with the same. The CIT(A) rightly considered the evidence submitted by the assessee to support this fact that the property was possessed by his sister Smt. Pratibha Jain and her residence at 9/89, Shastri Gali, Vishwas Nagar, Shahdara, Delhi. It is pertaining to mention that undisputedly the ration card was issued by the civil supply authorities in March, 1998 which is a self speaking and reliable evidence and proof about the residential status of Smt. Pratibha Jain in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard. Gound No.3 of the Revenue and sole ground of the cross objection of the assessee 12. It would be appropriate to address the legal objection of the Ld. DR that the C.O. No.64/Del/2013 of the assessee is time barred as the assessee received notice of hearing for 05.12.2011 and several notices subsequently, but the cross objections were filed on 04.04.2013, which are time barred in view of provision of Section 253(4) of the Act. The Ld. DR drawn our attention towards appeal and cross objection filed and submitted that the Revenue filed its appeal on 03.10.2011 and the case was fixed for hearing on 05.12.2011 and notice for the said first hearing was served upon the assessee, but the despite of due service of notice the assessee did not file any cross objection within stipulated time period, therefore, the objection filed by the assessee after lapse of prescribed limitation period are time barred and the same may kindly be dismissed. 13. Replying to the above, Ld. counsel of the assessee drawn our attention towards applications of the assessee first dated 28.02.2012, second application dated 03.10.2012, third application dated 22.02.2013 and fourth application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or the assessee, as the case may be, may file cross objection within thirty days of the receipt of the notice against the order of the first appellate authority or any part thereof and such cross objection shall be disposed of by the Tribunal as if it were an appeal filed within prescribed limit as time specified in sub Section (3) or sub Section 3A of Section 253 of the Act. We also note that this enabling provision provides a right to the opposite party against whom appeal have been preferred either by the AO or by the assessee not withstanding that he may not have filed any appeal against such order or any part thereof. 16. The main essence of this provision is that the time limitation of thirty days would be reckoned from the date of receipt of notice enabling the respondent to file memorandum of cross objection against first appellate order or any part thereof. Meaning thereby prescribed time would start when the notice would be served upon the assessee. At this juncture, we are of the considered opinion that in our humble understanding, the notice would not be completed if copies of Form No.36 and grounds of the appellant are not enclosed thereto because without seeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e who in turn had used the money to repay advance was nothing but a still modus operandi to pay adequate consideration for purchase of property by concealing the actual payment of enhanced purchase consideration of ₹ 5,00,000/- as gift. The Ld. DR strenuously contended that the assessee had very cleverly avoided his tax liability on account of capital gain on sale of said property. The DR further contended that the said amount of ₹ 5,00,000/- which was ultimately reached to the assessee from his sister Mrs. Kaushalya Jain, the purchaser of property, in garb of gift is the understatement of sale consideration declared by the assessee and therefore, the same was rightly treated as undisclosed income of the assessee by the AO. 19. The Ld. DR also contended that the assessee shown sale of property No.9/100 Shastri Gali, Vishwas Nagar, Delhi with a consideration of ₹ 8,00,000/- of which long term capital gain was also declared but as per report of Assistant Valuation Officer dated 17.10.2006 the fair market value of the said property was valued at ₹ 9.77 lakh. The Ld. DR further contended that the assessee filed implausible and unsustainable explanation which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer could not brought any evidence or material to support this allegation of understatement of sale consideration by the assessee of ₹ 5,00,000/-, therefore, the impugned order in this regard is correct. The Ld. counsel finally submitted that the addition of ₹ 1.77 lakh upheld by the CIT(A) is not sustainable and the same should be deleted allowing the cross objection of the assessee. 22. Ld. DR also placed rejoinder to the aforesaid submission of the assessee and submitted that the assessee did not produce any evidence before the Assistant Valuation Officer in the form of rent agreement, rent receipt, details of court cases on account of unauthorized occupation, therefore, the assessee could not establish that the property was already pre occupied by the tenant who ultimately purchase the said property and therefore, the assessee got less consideration then the fair market value. The Ld. DR finally submitted that the order of the AO is quite justified and the same should be restored. 23. On careful consideration of above submission, we note that the CIT(A) granted relief for the assessee with the following observations and conclusion:- 7.1 I have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for making addition of ₹ 1,77,000/- (Rs.9,77,000/- - ₹ 8,00,000/-) as undisclosed income. However, the addition has been made to the extent of ₹ 6,77,000/- by treating a gift of ₹ 5,00,000/- as part of sale consideration in respect of the impugned property situated at 9/100, Shastri Gali, Viswas agar, Shahdra, Delhi- 110032. It is also observed that the A.O. has failed to adduce evidence on record in support of understatement of the sale consideration by the assessee in respect of the addition of ₹ 5,00,000/-. However, the estimate made by the Asstt. Valuation Officer has also not been rebutted by the appellant with any explanation or evidence. In view of the aforesaid discussion, the AO is directed to adopt the sale consideration ofthe impugned property at the figure of ₹ 9,77,000/- as estimated by the Asstt. Valuation Officer against the value of ₹ 8,00,000/- shown by the appellant. Hence, the addition of ₹ 1,77,000/- is confirmed and that of ₹ 5,00,000/- is deleted. As a result, ground No. 4 is partly allowed. 24. In view of above and on careful perusal of the relevant part of the assessment order on this issue, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration in respect of impugned property. The CIT(A) observed that AO has failed to adduce cogent evidence and record in support of understatement of sale consideration by the assessee in respect of said addition of ₹ 5,00,000/-. The Ld. counsel of the assessee has placed reliance on the judgments of Hon ble Apex Court in the cases of CIT Vs. George Henderson Co. Ltd. reported in (supra), CIT Vs. Gillanders Arbuthoot Co (Supra), K.P. Varghese Vs. ITO (Supra), CIT Vs. Shivakami Co. (Supra) and CIT Vs. Godawari Corpn. Ltd. (Supra) and ratio of these decisions is that unless there is evidence that more than what was stated in the sale deed, was received no higher price or value can be taken to be the basis for computation of capital gains. In the present case, the CIT(A) rightly noted that Assessing Officer had failed to bring any evidence against the assessee to establish of record that there was understatement of sale consideration by the assessee by ₹ 5,00,000/- which was received by the assessee in the garb of gift in the name of Shri Ashish Jain son of assessee. Accordingly, Ground No.3 of the Revenue and sold ground of cross objection being devoid of merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant, the findings of the Assessing Officer and the facts on record. The findings of the A.O, do not appear to he based on correct appreciation of facts. It was explained on behalf of the appellant during the assessment proceedings that it had sold the shares of M/s J.V. Industries (P) Ltd. to M/s Nirrnan Securities Ltd. and had received the sale consideration of ₹ 5,00,000/- on 18.03.2004 through account payee cheque. On perusal of the bank statement relating to the savings bank account No.38694, it is found that an amount of ₹ 5,00,000/- has been received on 18.03,2004. It is also observed that the appellant has declared long terms capital gain to the extent of ₹ 3,47,817/- on sale of 10000 shares of M/s J.V. Industries (P) Ltd. It was further explained on behalf of the appellant that the repayment of advance was made out of the above receipts of ₹ 5,00,000/- on sale of the aforementioned shares of Mls J.V. Industries (P) Ltd. In view of the facts stated above, it can be fairly concluded that the assessee was able to satisfactorily explain the source of repayment of advance against sale agreement. Hence, it is held that the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was recorded in the books of account of the assessee and assessee had shown long term capital gain of ₹ 3,47,817/- on this transaction which was also offered to tax in the return of income of the assessee for AY 2004-05. 31. In view of above, we are of the considered view that the confusion arose before the AO due to incompleteness in the facts and details submitted before the AO which were subsequently explain by way of filing details submission, statement of Bank account and other relevant details during first appellate proceedings. Admittedly, the assessee offered long term capital gain to the extent of ₹ 3,47,817/- on the sale of 10,000 shares of M/s J.V. Industries Pvt. Ltd. which were sold to M/s Nirman Securities Ltd. and the assessee received sale consideration through account payee cheque which was also credited to his saving Bank account. Under above noted facts and circumstances, we are an agreement with the conclusion of the CIT(A) that the assessee satisfactorily explained the source of ₹ 5,00,000/- and its further used for repayment of advance against sale agreement and in this situation addition made by the AO was rightly deleted by the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in totality of the facts and circumstances and in the light of supporting evidence it was not fair on the part of the AO to presume that the assessee repaid property advance of ₹ 5,00,000/-to Shri Vinod Kumar Jain out of his undisclosed sources. The Ld. counsel vehemently contended that when the assessee submitted entire details and explanation supporting with documentary evidence before the AO and established this fact that Shri Ashish Jan actually received a gift of ₹ 5,00,000/- from Mrs. Kaushalya Jain and this amount was further given as loan by Shri Ashish Jain to the assessee then onus shifted on the Assessing Officer to bring out that entire evidence and transaction of gift was a same transaction and assessee made repayment of advance to Shri Vinod Kumar Jain out of his own income from undisclosed sources. Ld. counsel further pointed out that the Assessing Officer has not made any verification either from the bank account of Shri Ashish Jain, Mrs. Kaushalya Jain and the assessee and from the Assessing Officer of Smt. Kaushalya Jain who was also assessed to income tax. Ld. counsel for the assessee finally contended that the Assessing Officer made addition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rejected by the AO in view of bitter relation between the assessee and Smt. Kaushalya Jain due to dispute about a property of the assessee which was in possession of Smt. Kaushlaya Jain against the willingness of the assessee. 36. At this juncture, firstly, we are of the considered view that when all details about the transaction of gift between Smt. Kaushalya Jain to Shri Ashish Jain and loan from Ashish Jain to the assessee has been explained by way of detailed explanation and supporting relevant evidence such as Bank statement confirmation of the respective party and explaining all facts then onus was obviously shifted to the Assessing Officer to controvert explanation and evidence submitted by the assessee to support his stand. On vigilant reading of the relevant part of the assessment order in this context, we note that the Assessing Officer dealt this issue at Pages 27 to 29 of the assessment order wherein it was held that the explanation of the assessee in this regard is not acceptable and it is inferred that assessee has used his income from undisclosed sources to the extent of ₹ 5,00,000/- for repayment of advance to Shri Vinod Kumar Jain. 37. When we analyze ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the minor son of assessee out of love and affection and with an intention to improve the veracity of relation and to clear all the clouds which spread over the relation between the families of real brother and sister due to property dispute. The facts can be evaluated and analyzed in both the ways either as stated by the Ld. DR or as contended by the Ld. counsel of the assessee but for making addition in this issue the evaluation of relation cannot be held as sole criteria. It is a well settled proposition when on facts two views are possible then the view in favour of the assessee must be given weight and preference. Since we have already held that the Assessing Officer could not brought out any material fact or allegation to create any doubt over the genuineness of transaction of gift and creditworthiness of the donor Smt. Kaushalya Jain, therefore, bitterness of the relation cannot be a sole criteria for making addition in this regard. 39. In our considered view when the amount of gift was routed through banking channels from donor Smt. Kaushalya Jain to donee Shri Ashish Jain which was further advanced as loan to the assessee, then it may also be presumed that the gift w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that whenever the assessee was in need of money an agreement in regard to property no.9/100 Shahdara was executed to raise funds but in fact said agreement were nothing but a device to convert assessee own income from undisclosed source in the funds/capital. The Ld. DR further submitted that the said receipts submitted by the assessee were not signed by the alleged purchasers Shri Sheel Kumar Jain and there were no independent evidence to show that money has been returned by the assessee to Shri Sheel Kumar Jain. The Ld. DR submitted that the assessee miserably failed to discharge his onus to explain the source/creditworthiness/genuineness of the alleged receipt of ₹ 3,00,000/- from Shri Sheel Kumar Jain hence the same was rightly added to the total income of the assessee. 42. Supporting impugned order the Ld. counsel of the assessee replied and took us through operative Para 10 10.1 of the impugned order and submitted that when Shri Sheel Kumar Jain was expired on 02.11.2005 then it was impossible for the assessee to produce him before the Assessing Officer. Ld. counsel contended that the assessee submitted all the relevant document and supporting evidences which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer after detailed deliberations rightly held that the assessee intentionally under declared/understated/suppressed his income in his books of account, therefore, the same were rightly rejected by the AO. The Ld. DR further drawn our attention towards Paragraph (10a) (10d) of the assessment order and submitted that there was substantial decrease in the GP ratio of the assessee in the F.Y. 2003-04 relevant to AY 2004-05 and since the books of account of the assessee do not reflect the true and correct particulars of the income of the assessee then the Assessing Officer was quite justified in making enhancement of income of the assessee by adopting average GP rate of preceding assessment years and in making addition of ₹ 16,96,788/-. The Ld. DR vehemently contended that during the first appellate proceeding the CIT(A) deleted the said addition without any justified reason merely on the ground that the books of accounts and financial results of the assessee cannot be rejected only on the sole basis that particulars expenses claimed by the assessee remain unverified. The Ld. DR submitted that there was a sharp decrease in the GP rate of the assessee in the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e written submission on behalf of the appellant, the findings of the Assessing Officer and the material placed on record. The crux of the matter revolves around rejection of assessee's books of accounts by the Assessing Officer. In the case of Dhakeswari Cotton Mills Ltd. V. CIT (1964) 26 ITR 775 (SC) the Hon ble Supreme Court had decided that once the books of accounts of the assessee are rejected then the profit has to be estimated on the basis of proper material available. However, the A.O. is not entitled to make a pure guess make estimation without reference to any evidence or any material at all. There must be something more than mere suspicion to support such addition. The Hon'ble Supreme Court has reconfirmed the earlier stand in the case or CIT Vs. K.Y. Pilliah Sons (1967) 64 ITR 411 (SC), where it has been decided that any lump sum add back to the trading result if found justified must be done in proper exercise of discretion objectively judiciously on the basis of relevant material. Regarding the' Assessing Officer being not satisfied about the correctness or completeness of the assessee's accounts, the Calcutta High Court's judgment in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All these materials show that the production results as indicated in the books of account could not be disregarded without any clinching adverse evidences. In the instant case there are no such evidences and the appellant has not suppressed any production or sale. It is also not the case of the Assessing Officer that the expenses claimed by the appellant were not verifiable. Even if it is assumed that any particular expense claimed by the assessee remained unverified, the Assessing Officer could have disallowed that particular expense. But, that by itself cannot be a ground for rejection of accounts as a whole. In this context, reliance is placed on the decision of Delhi High Court in CIT vs Paradise Holidays (2010) 195 Taxman 291 (Del): 48 DTR (Del) 349. 11.3 The assessing authority has to look into the substance of the situation and decide the matter in such a manner that neither is put to unreasonable liability nor the assessee is subjected to unreasonable hardship. No doubt it is not only the right but also the duty of the Assessing Officer to consider whether or not the books disclosed the true state of accounts and the correct income can be deduced therefrorn. But thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order, we note that the Assessing Officer proceeded to reject books of account on the basis of his observations in Para 5 to 8 of the assessment order and held that books of account maintained by the assessee or are deficient as they do not reflect the true and correct particulars income of the assessee company. From careful reading of the assessment order, we note that the Assessing Officer had not issued any show cause notice to the assessee showing that he is intended to reject the books of account and financial results therefrom. Undisputed and admittedly the books of account of the assessee were audited by the competent Auditor and the Auditor submitted audit report u/s 44AB of the Act in Form 3CB before the authorities below which was not disputed in any manner by the Assessing Officer. 48. From entire facts and circumstances of the present case, we also note that originally the proceedings were started after raid by the Central Excise Department at the business premises of the assessee wherein cash of ₹ 25.75 lakh was seized and finally Central Excise Department could not make out any case on the basis of seized cash which was subsequently requisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of justified and reasonable basis. 50. We are agree with the view taken by the CIT(A) that the AO has to prove satisfactorily that the books of account are unreliable or incorrect or incomplete before rejection of books of account and financial results of the assessee. We further observe that the Assessing Officer is mot empowered to reject books of account of the assessee only by saying that important transactions are omitted and proper particulars and vouchers and other supportive evidence are not supporting the entries and transactions entered into books of account. We are also agree with the conclusion of the CIT(A) that when audit report is submitted and accounts are placed in support of the return then the accounts should be taken as the basis for framing assessment and they cannot be rejected merely because either complicated or some narration and entries are not verifiable from the other relevant material. In this situation, instead of rejecting books of account and financial results of the assessee Assessing Officer may proceed to make disallowances and additions on that particular issue but rejection of entire books of account and financial results cannot be hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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