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2016 (10) TMI 991 - ITAT DELHI

2016 (10) TMI 991 - ITAT DELHI - TMI - Addition on account of unaccounted receipts on the basis of certain loose papers in the form of chits found and seized during the course of search - Held that:- In the instant case, nothing is brought on record that the assessee in fact received any amount from Sh. Sohanraj Mehta. It is well settled that as per the provisions of Section 292(1) of the Act, the documents found during the course of search may be presumed to be belonging to the person in whose .....

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uthorized and from whose possession or control documents/books of account or diary etc. were found but the presumption regarding correctness of contents of those documents/books of accounts etc. can be raised against the third party only when the documents are speaking one. In the present case, no document was found from the possession of the assessee and a bunch of loose papers which were seized from the premises of third party did not indicate the unrecorded sales made to the assessee. Moreove .....

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he present case, the assessee furnished the documents relating to the land holding which were not doubted by the AO. The assessee entered into an agreement for cultivation of the agricultural land with Sh. Dhirender Bhati and furnished the certificate dated 20.08.2010 from Tehsilpatwari which revealed that vegetables were grown on the assessee’s agricultural land for the past many years. The AO in the present case, did not examine Sh. Dhirender Bhati with whom the assessee entered into an agreem .....

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interest bearing funds were diverted for non-business purposes - Held that:- In the present case, the ld. CIT(A) had given a categorical finding that the assessee advanced the money to those concerns in which he was either a director or a partner and there was business expediency, the said categorical finding of the ld. CIT(A) was not rebutted. We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A). - Share transactions - short term capital gain OR income .....

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ot been touched by the ld. CIT(A). We, therefore, in the absence of the clear facts available on the record, deem it appropriate to set aside this issue back to the file of the AO for fresh adjudication in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - Addition in respect of cash found during the course of search from the premises of the assessee - Held that:- In the present case, it appears that the family members of the assessee had own .....

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the separate orders each dated 30.04.2012 of ld. CIT(A)-XXXI, New Delhi 2. Since the issues involved are common in these appeals which were heard together so these are being disposed off by this consolidated order for the sake of convenience and brevity. 3. At the first instance we will deal with the appeal in ITA No. 3546/Del/2012 for the assessment year 2007-08. Following grounds have been raised in this appeal: 1. The order of the Ld. C1T (A) is not correct in law and facts. 2. On the facts .....

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sessee as income received from undisclosed sources by applying the provisions of section 68 of IT. Act, 1961 without appreciating the fact that the assessee did not furnish the details/evidences in respect of genuineness of the claim of agricultural income. 4. On the facts and in the circumstances of the case, the Ld C1T(A) has erred in deleting the disallowance of interest of ₹ 15,55,670/- made by the Assessing officer under section 36(1)(iii) of I.T. Act, 1961on the ground that the inter .....

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chits found and seized during the course of search. 6. The facts related to this issue in brief are that a search and seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried out on the residential premises of the assessee situated at C-1, Model Town East, Ghaziabad on 20.01.2010. Thereafter, a notice u/s 153A of the Act dated 11.07.2011 was issued to the assessee requiring him to file the return of income. In response, the assessee filed the return .....

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Gutkha products for Karnataka Region. Subsequently, on the next day Sh. Sohanraj Mehta was also covered by the Investigation Wing of Bangaloare and confronted with those incriminating documents. During the search operation, Sh. Sohanraj Mehta accepted that those documents were related to him and were in connection with C&F agency of RMD Group for pan masala and gutkha products. According to the AO, those documents suggested the unaccounted sale of Gutkha by RMD Group through Sh. Sohanraj Meh .....

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e business activities of RMD Gutkha Group relating to production and sale of Gutkha and Pan Masala products. Accordingly, those business groups/parties which included Mukesh Garg Group i.e. the assessee were also covered alongwith RMD Gutkha Group in search operation conducted on 20.01.2010. The AO pointed out that the documents seized by the Investigation Wing of Bangalore included loose papers containing signed chits having details of payments to various parties including the assessee on which .....

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es of rupees and the word packet stands for Lakh of rupees. The AO observed that the associate firms/concerns pertaining to those groups were supplier of Katha mainly to M/s RMD Group and the documents found/seized by the Investigation Wing, Bangalore during the search of Sh. Sohanraj Mehta mentioned name of person pertaining to Garg Group specifically as Mukesh Bhai and Mukesh Bhai Delhi . The AO, therefore, was of the view that those documents/slip/chits pertained to the assessee Sh. Mukesh Ga .....

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8000=00 to Mukesh Bhai 168 Lakhs 7. The AO vide letter dated 19.12.2011 provided copy of documents/details of payments and statement of Sh. Sohanraj Mehta recorded on various dates to the assessee. The AO observed that the assessee received ₹ 8,31,00,000/- from 05.09.2006 to 26.10.2007 and ₹ 5,29,00,000/- from April, 2003 to August, 2006. The AO pointed out that the aforesaid details revealed that the period in respect of all the payments was clearly mentioned, except one payment of .....

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ere part of books for the period under consideration or not. In response, the assessee categorically denied to have made any such transaction for which such amount was received and mentioned that the statement of Sh. Sohanraj Mehta regarding decoding of figures was not also applicable to him since it had no bearing or nexus with the assessee or his business transaction as there was no specific mention regarding the name of the assessee in the statement of Sh. Sohanraj Mehta as to link any paymen .....

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llowing reasons: i. Sh. Rasik Lal, the head of M/s RMD has categorically admitted in statement dated 20/01/2010 that the chits found with Sh. Sohan Raj Mehta during the course of search operation on him on 09.10.2009, have been signed by him. As such M/s RMD has admitted the contents of these chits. ii. Admission by Sh. Rasik Lal Dhariwal and Sh. Prakash Dhariwal regarding the genuineness of the chits as mentioned above, establishes that the transactions as evident from the chits with RMD have b .....

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period, therefore, clear nexus is proven among them. Sh. Sohan Raj Mehta has admitted that he made unaccounted sale of unaccounted production of Gutka manufactured by M/s RMD and on the direction of Sh. Rasik Lal and Parkash Dhariwai, sale proceeds were passed on to various entities/ parties. It will be pertinent to mention here that Sh. Sohan Raj Mehta surrendered as much as ₹ 25 crores in his own case as commission on such unaccounted sale of RMD Gutka. v. In view of the overall facts of .....

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RMD group are the all regular supplier of M/s RMD group or are connected with the business of RMD Group. vii. Sh. Sohan Raj Mehta has categorically decoded the amount mentioned on the chits. Furthermore, on a paper found and seized during the search operation of Sh. Sohan Raj Mehta namely, A/M/08of page 34, Summary of working of unaccounted turnover of M/s DIL (M/s Dhariwal Industries Ltd.) during the period from April '2003 to August' 2006 was mentioned. On the same paper, name of the .....

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admission of Sh. Sohanraj Mehta, C&F agent of RMD Group, having made payments to various parties on behalf of M/s RMD for unaccounted sale made by such parties to M/s RMD Group, made it highly probable that the assessee had received ₹ 4.69 Crores from M/s RMD against unaccounted sales during the year under consideration. He also mentioned that Sh. Sohanraj Mehta with whom such chits had been found was a trustworthy person of the head persons of M/s RMD Group. Therefore, the admission m .....

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the assessee was mentioned but the associated firm/family concern, namely, M/s Yash Pal Narender Kumar was the main supplier of Katha to RMD Group during the period to which those documents and chits pertained. The AO pointed out that the trading results shown by M/s Yash Pal Narnder Kumar for the assessment years 2004-05 to 2008-09 were as under: S. No. A.Y. Sales Gross Profit Stock Ratio of Stock GP Ratio Remar ks 1 2004-05 37193816 1842814 87360 0.23 4.95 2 2005-06 54126742 3667932 1888046 3 .....

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nd stock ratio at 10% on unaccounted sale amounting to ₹ 4.69 crores and worked out for unaccounted income of the assessee as under: Profit Rs.37,52,000/- Unaccounted Investment Rs.46,90,000/- Total of unaccounted income Rs.84,42,000/- Accordingly, the addition of ₹ 84,42,000/- was made. 11. Being aggrieved the assessee carried the matter to the ld. CIT(A) and the submissions made before him are reproduced verbatim as under: 3.2.1 The Question that arises now for consideration is whe .....

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183 (Delhi). It was held that where documents found at the time of the search did not indicate whether figures referred to in the paper reflect quantities of money or to quantities of goods, the same are only dumb documents and therefore, no addition could be made on the basis of such documents. It was held in Neena Syal's case [1999] 70 ITD 62 (Chand) that where a document found during the course of search is open to more than one possibility of interpretation and does not prove conclusivel .....

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or description about different figures noted thereon and the Department having failed to bring on record any material or evidence to corroborate allegation regarding receipt of on money, then the presumption on the basis of the documents could not be raised. 3.2.4 "A document seized from the assessee may not be complete in all respects as businessmen may choose to record minimum details on a document and keep the rest in their memory. It is the duty of the assessing Officer to carry out the .....

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rson to find out the nature of the transaction, the year of the transaction, the ownership of the transaction and quantum thereof." The components which enter into the concept of taxation are first the taxable event which attracts the levy, second, the person on whom the levy is imposed and who is obliged to pay the tax, third, the assessment year in which charge of income tax is levied, fourth, the total income of the previous year and fifth, the rate or rates at which tax is to be imposed .....

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so, the document is only a dumb document. No charge can be levied on the basis of a dumb document. A document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year. Any gap in the various components for the charge of tax must be filled up by the Assessing Officer through investigations and correlations with other material found either during the course of .....

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OME TAX V. SATYAPAL WASSAN [2007] 295 ITR (AT) 352 (Jabalpur). 3.2.5 This view has been echoed by the Mumbai Tribunal in the case of SAIF ALI KHAN MANSURALI VS ASSISTANT COMMISSIONER OF INCOME TAX [2012]13 ITR (Trib) 204 (Mumbai). 12. The ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the AO by observing in paras 3.3 to 3.3.5 of the impugned order which read as under: 3.3 Determination:- I have considered the rival arguments. The whole addition hinges o .....

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is presumption will not be applicable unless corroborated by other evidence. Presumption available under section 132(4A) can be drawn against the person in whose case search is authorized and from whose possession or control books of account, diary or documents are found in the course of search. Presumptions regarding correctness of contents of books of account etc. cannot be raised against the third party. 3.3.1 Presumption under section 132(4A) is only against the person in whose possession th .....

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n figures were found showing the purchase made by the assessee. In Asst CIT v Kishore Lal Balwant Rai [2007] 17 SOT 380 (Chd.), it has been held that though the diary seized enable the revenue to presume that its contents are true, such presumptions is available only against the person to whom it belongs and this is a rebuttable Presumption. Presumption u/s 132(4A) is not available, when the seized papers is recovered from third party and not from the assessee. Sheth Akshay Pushpavadan v Dy. CIT .....

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es. The AO relied only on the entries of the said diary and did not bring on record any corroborative material to prove that such sales were made outside the books. It was held that mere entries in the accounts of a third party were not sufficient to prove that the assessee indulged in such transactions. Asstt. CIT v Prabhat Oil Mills [1995] 52 TTJ (Ahd.) 3.3.3 Mere statement of the third party that property was sold to the assessee for a higher amount than shown, no protective assessment could .....

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ibly be construed as books of account regularly kept in the course of business. Such evidence would, therefore, be outside the purview of Section 34 of the Evidence Act, 1972. Therefore, the revenue would not be justified in resting its case on the loose papers, diary and documents found from third party if such documents contained narrations of transactions with the assessee as decided by the Hon ble Supreme Court in the case of Central Bureau of Investigation Vs. V.C. Shukla (1988) 8 SSC 410 a .....

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(Third Party) had stated these papers as pertaining to the assessee. No presumption could be drawn against the assessee u/s 132(4A) in respect of paper not recovered from him. No addition can be made on the basis of documents found from third party in the absence of corroborative evidence. Therefore, the Assessing Office as well as the commissioner of Income Tax (A) erred in making the addition on the basis of said papers in the hands of assessee. Hence, the entire addition made on the basis of .....

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ome in hands of assessee". c. Additional Commissioner of Income Tax Vs. Miss Lata Mangeshkar (1974) ITR 696 (Mumbai) "It has been held that on appreciation of evidence on record, that entries in the ledger of a firm (third party) did not represent assessee's income from undisclosed sources, was finding of the fact not giving rise to any referable question of law". d. Amarjit Singh Bakshi (HUF) Vs. Assistant Commissioner of Income Tax (2003) 86 ITD 13 (Delhi) "It has been .....

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h document in hands of assessee. 3.3.4 There Lordship in the case of L.K. Advani vs Central Bureau of Investigation on 1 April, 1997 held that I am tempted here to cite a few lines from Murphy on Evidence, page 180 "At common law, an admission made by one party is evidence against the maker of the statement, but not against any other party implicated by it." 3.3.5 When the AO was placing sole reliance on the statement only of Shri Rasik Lal Dhariwal, Shri Prakash Dhariwal, Sohan Raj Me .....

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288 ITR 345, it was held that in absence of witness being made available for cross examination, his statement could not be relied upon to the detriment of the assessee. Tribunal was justified in setting aside block assessment. ii) In the case of CIT Vs. S M Aggarwal 293 ITR 43, it was held that statement made by the assessee's daughter, cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her and even fr .....

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ld. DR strongly supported the order of the AO and reiterated the observation made in assessment order dated 29.12.2011. It was further submitted that the validity of the documents found during the course of search was established in the case of Dhariwal Group and the assessee was supplier of the Katha to Dhariwal Group. Therefore, the payments made to the assessee noted on the documents were in lieu of the purchases made from the assessee. As such the unaccounted sales of the assessee was right .....

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tained in Section 292(1) of the Act states that when the document is found during the course of search u/s 132 of the Act, it may be presumed that the said documents belonged to such person and the contents of such documents are true but it never suggest that the documents belong to another person. It was further submitted that the documents found during the course of search must unmistakably reflect the transaction without having any second interpretation, however, in the present case, the name .....

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f search were the dumb documents and did not reflect any details about the transaction of the assessee and there was no corelation with other material found either during the course of search or on investigation thereafter. The reliance was placed on the following case laws: Ashwani Kumar Vs ITO (1997) 39 ITD 183 (Del) Neena Syal s (1999) 70 ITD 62 (Chdd.) Elite Developers Vs DCIT (2000) 73 ITD 379 (Nag) ACIT Vs Satyapal Wassan (2007) 295 ITR (AT) 352 (Jabalpur) Addl. CIT Vs Miss Lata Mangeshkar .....

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the AO. 16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the AO made the addition on the basis of statement of Sh. Sohanraj Mehta who admitted in his statement that the money was handed over to some persons as per direction of Sh. Rasik Dhariwal and his son Sh. Prakash Dhariwal. However, in those statements nowhere it was stated that any amount was handed over to the asses .....

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ature of Sh. Rasik Dhariwal and his son Sh. Prakash Dhariwal. In the instant case, nothing is brought on record that the assessee in fact received any amount from Sh. Sohanraj Mehta. It is well settled that as per the provisions of Section 292(1) of the Act, the documents found during the course of search may be presumed to be belonging to the person in whose possession those documents were found, however, in the present case no such document was found from the possession of the assessee and in .....

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ss of contents of those documents/books of accounts etc. can be raised against the third party only when the documents are speaking one. In the present case, no document was found from the possession of the assessee and a bunch of loose papers which were seized from the premises of third party did not indicate the unrecorded sales made to the assessee. Moreover, no opportunity was granted by the AO to cross examined Sh. Sohanraj Mehta, on the basis of whose statement the AO presumed that unaccou .....

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come received from undisclosed sources. 18. The facts related to this issue in brief are that during the year under consideration the assessee had shown agricultural income of ₹ 2,88,600/- and claimed the same as exempted. The AO asked the assessee to furnish the details as per the following proforma: 19. In response, the assessee furnished copy of documents/sale deed in respect of holding of land at various places and also furnished a certificate dated 20.08.2010 from Sh. Jagdish Prasad S .....

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ame will be deducted at the time of sale of the crops. It has also been mentioned in the said agreement that Sh. Dhirender Bhati will grow only vegetables and all labour expenses will be borne by him and that Sh. Dhirneder Bhati will pay to the assessee 60% of the actual sale of crops after deducting the expenses as per agreement. The AO after considering the submissions of the assessee observed that mere filing of copy of agreement made on 25.05.2003, did not prove that the agreement was made e .....

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t the assessee failed to produce details of expenses incurred to grow the crops, purchase of seeds, fertilizers, watering, cartage, wages and other necessary expenditure which were necessary to be incurred to cultivate the land and also failed to furnish the evidence in respect of sale of crops in the market. The AO held that the income of ₹ 2,88,600/- was received by the assessee from undisclosed sources and not from agricultural activities. Accordingly, addition of ₹ 2,88,600/- was .....

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re from was agricultural income under Sec 2(1A) of the Act. It would be advantageous to refer to the principle of law culled out by the Apex court in Raja Benoy Kumar Sahas Roy's case [1957] 32 ITR 466 (SC). The Supreme Court defined the scope of the term "agriculture" in the following terms: 'As we have noted above, the primary sense in which the term 'agriculture' is understood is agar- field and cultra- cultivation, i.e., the cultivation of the field, and if the term .....

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der: 3.6 I have considered the order of AO and the submissions made by the AR of the appellant. The appellant entered into an agreement for the cultivation of agricultural lands at Biharipur, Alipur, Khera Kherakera and Siraspur with Sh. Dhirender Bhati on 24.03.2005. The appellant submitted a certificate dated 20.08.2010 from tehsilpatwari that vegetables are grown on the appellant s agricultural lands for the past many years. The AO jumped into the conclusion that no agriculture operation was .....

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result, the appeal on this ground is allowed. 22. Now the department is in appeal. The ld. Counsel for the assessee reiterated the observations made by the AO in paras 23 to 25 of the assessment order dated 29.12.2011 and strongly supported the said order passed by the AO. 23. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order. 24. We have considered the submissions of both the parties a .....

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ne Sh. Dhirender Bhati with whom the assessee entered into an agreement and also did not make any enquiry from Tehsilpatwari Sh. Jagdish Prasad Sharma who issued a certificate stating therein that the vegetables were grown on the agricultural land of the assessee. Therefore, the impugned addition was made by the AO on the basis of presumption only which is not tenable in the eyes of law. In that view of the matter, we are of the view that the ld. CIT(A) righty deleted the addition made by the AO .....

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Credit & Capital Ltd. and M/s Yash Pal Narender Kumar, in which the family members of the assessee were having substantial interest. The AO also observed that the assessee had invested a large amount in the shares of various companies in which he and his family members were having substantial interest. He asked the assessee to furnish justification in respect of interest paid amounting to ₹ 15,55,670/-. He also asked the assessee to explain with evidence that loans taken on which inter .....

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ee had parked the interest bearing funds in the companies (family concerns) from which no income had been received or supposed to be received in future or if received, might have been in the form of dividend, which may be claimed as exempted. The AO held that within the provisions of Section 36(1)(iii) of the Act, interest payment on the funds utilized other than the purpose of business was not deductible as business expenditure. 27. Being aggrieved the assessee carried the matter to the ld. CIT .....

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Delhi) wherein, their Lordships expressed the considered view that whether mutual accommodations by sister concerns, by way of interest free funds, can be said to be commercially expedient or not, is essentially a question of fact, which in the said case was decided in favor of assessee by the Tribunal. It is thus clear that on charging of interest on advances by sister concerns, particularly in the situation where both the concerns having benefits of such mutual accommodation, could indeed be j .....

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ns relied by the AO had been overruled by the decision of the Hon ble Supreme Court in the case of S.A. Builders Vs CIT (2007) 288 ITR 1 wherein it has been held that it was required to be enquired as to whether the interest free loan was given to the sister concern as a measure of commercial expediency and if it was so, interest on borrowed funds was to be allowed. The ld. CIT(A) accordingly deleted the disallowance made by the AO. 29. Now the department is in appeal. The ld. DR strongly suppor .....

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laws: S.A. Builders Vs CIT (2007) 288 ITR 1 (SC) DCIT Vs Monsanto Holdings P. Ltd. (2012) 13 ITR (Trib) 90 (Mum) 31. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the ld. CIT(A) had given a categorical finding that the assessee advanced the money to those concerns in which he was either a director or a partner and there was business expediency, the said categorical finding of the ld. CIT(A) was not re .....

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e grounds. 33. The another issue raised by the department vide Ground No. 4 in ITA No. 3547/Del/2012 relates to the short term capital gain claimed by the assessee which was treated by the AO as income from other sources. 34. The facts related to this issue in brief are that the assessee had shown an income of ₹ 64,996/- under the head Short Term Capital Gain from share trading. The assessee was asked to furnish copy of D-mat account, details of short term capital gains from brokers in res .....

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e most uncertain trade. He further observed that generally broker was used to settle every transaction within a day or two and payments were demanded immediately after every purchase transaction by the broker. The AO observed that in all the group of cases to which the assessee belonged, the circle payments had been made for the share transactions after long gap despite of huge amount of payment was to be paid to broker. The AO observed that the assessee failed to produce broker for further veri .....

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provide supporting evidence that the said share transactions were routed through the D-mat account of the assessee which is necessary to prove the genuineness of the transaction. He, therefore, held that the share transactions as claimed to have undertaken were not genuine and the income earned was from undisclosed sources which had been routed through short term capital gains for the purpose of giving tax at lower rate. 35. Being aggrieved the assessee carried the matter to the ld. CIT(A) and s .....

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and the profit received therefrom was assessable as short term capital gain as shown by the assessee. 36. The assessee also made a reference to Circular No. 4 of 2007 dated June 15, 2007 issued by the CBDT and the reliance was placed on the following case laws: CIT Vs Associated Industrial Development Co. P. Ltd. (1971) 82 ITR 586 (SC) CIT Vs Holck Larsen (1986) 160 ITR 67 (SC) 37. The ld. CIT(A) after considering the submissions of the assessee observed that the assessee had furnished documents .....

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rought any seized material and subsequently investigations to prove that the assessee was indulged in accommodation entries. The ld. CIT(A) pointed out that all the shares need not routed through D-mat account but there were provisions for the transactions in pool account of brokers and the AO had not conducted any enquiry from the said broker. As regards to the gap in the payment interval, the ld. CIT(A) was of the view that it cannot be sufficient evidence to hold that the transactions in shar .....

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ed the impugned order passed by the ld. CIT(A). 40. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee did not produce the broker for verification of genuineness of transaction. However, it is not clear as to whether the AO asked the assessee to produce the broker. It is also not clear as to whether the shares were transferred in D-mat account of the assessee and if .....

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- 11, the issues raised vide Ground Nos. 2, 3, & 4 are similar to the issues involved in ITA Nos. 3546 & 3547/Del/2012. Therefore, our findings given in the former part of this order in the appeals for the assessment years 2007-08 and 2008-09 on the identical issues shall apply mutatis mutandis for these issues raised by the assessee vide Ground Nos. 2, 3 & 4 for this assessment year i.e. 2010-11. 42. The another issue raised by the department vide Ground No. 5 relates to the deletio .....

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as under: 44. The assessee further submitted to the AO that excess cash found during the course of search pertained to other family members also. The AO observed that the assessee failed to bring on record any supporting evidences which could prove that the cash belonged to other family members and that as to why cash belonging to other family members was lying with him. He, therefore, rejected the explanation of the assessee and treated the amount of ₹ 4,40,100/- as unexplained cash and a .....

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