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2016 (11) TMI 64 - ITAT JAIPUR

2016 (11) TMI 64 - ITAT JAIPUR - TMI - Addition on account of sale of plot - CIT(A) has recorded a finding of fact that the assessee has not shown this plot as "Stock-in-Trade" in his balance sheet and no document was found during the course of search to the effect that the assessee has converted this plot into Stock-in-trade - Held that:- The intention of the assessee can be determined through the treatment of the asset in the financial statements as well as the conduct and the actions of the a .....

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2004-05 had decided the issue under consideration in favour of the assessee. - Addition on account of investment in construction of house when the addition is supported by the finding of the DVO - Held that:- AO as well as DVO both failed to list out the items considered as loose furniture found at the time of inspection of the house of the assessee and no valuation of such loose furniture was made by the DVO, therefore there is no justification to made estimated addition on this account ju .....

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vour of the assessee. - Addition on account of advance given to Gulam Farooq Ansari - Held that:- Assessee had produced the re-casted audited cash book after incorporating all entries before the AO. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of ₹ 1,50,00,000/- to Ansari. During the course of the arguments, the Revenue has not brought anything further to our notice and the findings of ld CIT(A) remain uncontrover .....

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TMI 64 - SUPREME Court ) and Rajasthan High Court in case of Ashok Kumar Soni (2006 (7) TMI 162 - RAJASTHAN High Court ). - Decided in favour of the assessee. - Deemed dividend income under section 2(22)(e) - Held that:- The advance given by the company to the assessee is for business purposes towards purchase of land and the same cannot be treated as deemed dividend in the hands of the assessee. Accordingly, we allow the appeal of the assessee - ITA No. 778/JP/2015, ITA No. 847/JP/2015 - D .....

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se and in law the ld. CIT(A) erred in confirming the addition of ₹ 29,80,000/- out of ₹ 50,26,604/- made by the ld. A.O. on account of deemed dividend by applying the provisions of Section 2(22)(e) of the Income Tax Act more so when the payment of M/s Ashish Buildcon Private Ltd. to the assessee was not in the nature of loans and advances but advance against the sale of the land to the company in the normal course of the business. Grounds in revenue s appeal:- 1. Whether on the facts .....

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he CIT (A) was right in deleting the addition of ₹ 1,50,00,000/- made by A.O. on account of advance given to Gulam Farooq Ansari which was accepted by the assessee during the search that this amount was paid out of books. 4. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition of ₹ 20,46,604/- out of ₹ 50,26,604/- made by the A.O. on account of deemed dividend income u/s 2(22)(e) of the I.T. Act and accepting additional evidenc .....

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rm capital gain declared by the assessee, which resulted in the assessment of the profit from sales of properties amounting to ₹ 6,32,650/- as income from business as against long-term capital gain of ₹ 3,33,888/- shown by the assessee. The brief facts and findings of the AO are that during the year the assessee have shown profit and gain from business or profession as a real estate developer. However, in the return of income the assessee has also shown long term capital gains from s .....

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held as an investment. Even Courts have held that a real estate developer cannot distinguish between land held as stock-in-trade and land held as an investment. She relied on decision of Hon ble Supreme Court in the case of Raj Bahadur Kamakaya Narain Singh Vs. CIT (77 ITR 253), Hon ble Bombay High Court in the case of CIT Vs. Principal Officer, Laxmi Surgical Pvt. Ltd. (202 ITR 601). She further relied on decision of Hon ble Supreme Court in the case of Dalhousie investment Trust Co. Ltd. Vs. .....

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Purchase Cost Profit 1 Plot No. 293, Shree Ram Vihar 13,01,000 6,68,350 6,32,650 Total 6,32,650 3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the addition made by the Assessing Officer by giving the following findings:- I have considered the assessee s submission and also taken a note of judicial pronouncements relied upon by the AO and appellant. I have also carefully perused the records available before me and f .....

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rtment has carried out search over the assessee and no document was found to show that the assessee has converted this plot into Stock-in-trade. Hon ble ITAT has decided same issue in the case of assessee himself in AY 2004-05. The relevant portion of the decision of Hon'ble ITAT in the case of assessee for AY 2004-05 is reproduced as under:- "8. The assessee in the present case has submitted the explanation that the asset is held a capital asset throughout and not as a stock in trade. .....

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not brought on record that the capital assets purchased by the assessee during the year 1990-91 and 1999-2000 are not in existence and they altogether are new assets and the sale has been made by making the improvement with a intention to make the profit so that the same can be treated as adventure in the nature of trade. The assets purchased by the assessee remained throughout the period as capital assets and there is nothing on record that the assessee in present case has changed the intention .....

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roduced as under:- "2.5 We have heard the rival contentions and perused the materials available on record. We find from the records that the assessee since inception had disclosed the purchase of lands under the head 'Investment' and the assessee had also disclosed these plots under the same head up to date of sale of plots in the balance sheet. The assessee had also shown certain stocks in land under the head 'Inventories' during the year. It proves that assessee's inte .....

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on the plot of land which were later sold off, therefore, the profit on the sale of the plot of land Plot No. 293, Shree Ram Vihar has been correctly shown as long term capital gains. The AO is directed to compute long term capital gains accordingly. 4. Now the revenue s is in appeal before us. The ld. CIT DR has vehemently supported the order of the Assessing Officer. 5. At the outset, the ld AR of the assessee has relied on the order of the ld. CIT(A) and further submitted that the assessee i .....

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not acquired/purchased with intention to resale but to hold as capital assets and the intention of the assessee is very clear from the period of holding as this plot was purchased in AY 2001-02 and were sold in AY 2011-12. This plot was not the part of any Township/Real estate business and this was absolutely held as capital assets apart from his Real Estate business. The assessee has not converted this plot into stock in trade. Thus, the Ld. A.O. was wrong to treat the above plot as his busines .....

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clear case of capital accretion and not profit derived from an adventure in the nature of trade ii) The Madras High Court in the case of CIT Vs. A. Mohammed Mohideen (1989) 176 ITR 393, held that "an activity is in the nature of an adventure in the nature of trade there must be positive material to prove that the assessee intended to trade in such an activity and in the absence of evidence the sale of immovable property consisting land could give rise only capital accretion. If the land own .....

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tal and would not stamp the transaction with a business character : CIT Vs. PKN 60 ITR 65 (SC) CIT Vs. Gordhan Das Trikambhai Patel 118 ITR 81 CIT Vs. Trivedi 172 ITR 95 The issue is covered by decision of Hon ble ITAT in the case of assessee Ashok Kumar Agarwal in ITA No. 920/JP/2007 dated 21/11/2008 and in case of Renu Agarwal wife of assessee in ITA No 125/JP/2013. The facts of this case are similar to the facts of the assessee s case. In view of above, the assessee prays your honor that addi .....

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he effect that the assessee has converted this plot into Stock-in-trade. Further, he has stated that on the plot of land which was purchased in Financial Year 2000-01, there is no improvement or development activity which was carried out by the assessee with an intention to sale it as business asset. Nothing has been brought on record by the Revenue to controvert the said findings. The intention of the assessee can be determined through the treatment of the asset in the financial statements as w .....

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al in the assessee s own case for the A.Y. 2004-05 had decided the issue under consideration in favour of the assessee. Similarly, in the case of assessee s wife namely Smt. Renu Agarwal in ITA No. 125/JP/2013 order dated 17/07/2015 for the A.Y. 2007-08, the Coordinate Bench has decided this issue in favour of the assessee. Therefore, in light of above discussions and by respectfully following the orders of the Coordinate Bench on this issue, we uphold the order passed by the ld. CIT(A). Accordi .....

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u Agarwal have shown investment on account of construction of house at ₹ 1,94,26,791/- and ₹ 1,73,25,733/- respectively in the F.Y. 2008-09 to 2011-12 relevant to AY 2009-10 to AY 2012-13. Therefore, the cumulative amount shown by the assessee and his wife in the said construction of house was ₹ 3,67,52,526/-. On examination of this Account, the AO observed that the assessee has also debited amount against lift, DG Set, AC and other plant machinery and loose furniture and fitti .....

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nt in construction of house, the AO referred the matter to District Valuation Officer (herein referred as DVO) for the valuation of the cost of construction of house. The DVO vide No. DVO/ITD/JPR/IT-10/2012-13/227 dated 06-03-2013, submitted his report wherein the construction cost of above said house was valued at ₹ 3,09,67,958/- as against ₹ 2,31,09,884/- declared by the assessee to the valuation officer. The copy of valuation report was given to the assessee to submit his comments .....

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e like sofa set, dining fable, chairs etc. In the valuation made by the DVO the cost of Doors, window, wooden frames etc were included in construction cost. The assessee has shown the cost of wooden items such as plywood, teak wood, fittings, labour charges, etc. in the head Furniture but credit of the same has not been given when difference was computed by comparing the figure of valuation with the cost of construction disclosed in the books of assessee and his wife. According to the assessee, .....

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77; 36,50,000/- whereas the assessee purchased the marble for ₹ 10,65,812/- for which bills were produced and payments were through cheques, estimation on account of special sanitary fittings & fixtures and Electrical fittings at ₹ 18,30,000/- each without giving any details of the items and basis of estimation. The assessee objected the valuation of servant room at ₹ 9,33,885/-. Besides this the assessee objected the valuation of construction at CPWD rates. The assessee al .....

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tain at his own level the investment against loose furniture. The AO asked the assessee to give justification of investment shown in fixed furniture and in loose furniture included in the furniture account which appears to be on lower side. In this regard, the assessee contended that in first year and second year the amount under the head furniture was ₹ 76,74,944/-. The investment in sofa, dining table other loose furniture could be made only in the third year or fourth year after complet .....

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nsidering the valuation report of DVO, reply filed by the assessee, comments of DVO and rejoinder filed by the assessee, the AO observed that cost of loose furniture shown by the assessee is at lower side, therefore to cover up all possible leakage on this account an addition of ₹ 20,00,000/- was made on account of undisclosed expenditure in construction of house furniture in the hands of Sh. Ashok Agarwal. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the .....

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was found to the department to show that the assessee made some undisclosed investment in the construction of house. c) The new residence of the assessee has been constructed on two plots. Plot No. 281 is in the name of Smt. Renu Agarwal and plot No. 282 is in the name of Shri Ashok Agarwal. The construction on both the plots was carried out jointly by Shri Ashok Agarwal and Smt. Renu Agarwal. The construction was started in FY 2008-09 and completed in FY 2011-12. The total investment in constr .....

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The copy of ledger account of construction in the books of accounts of Shri Ashok Agarwal and Smt. Renu Agarwal are at PB Page 131-173. During the course of search the department recorded the statement of assessee on 22.09.2010 (Copy at PB Page 3-20) and in reply of question No. 20 of the statement he answered that total investment in the construction up to date of search was made ₹ 3.50 crore against the investment in books of accounts of the assessee was much more, therefore there was n .....

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Furniture . The year wise detail of expenses under Furniture was submitted as under:- S. No. Name of Assessee FY 08-09 FY 09-10 FY 10-11 FY 11-12 Total 1 Ashok Agarwal 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 Renu Agarwal 6,42,488 39,00,486 23,37,038 0 68,80,012 Total 13,66,931 62,58,013 34,02,750 316680 1,13,44,374 The assessee submitted that the entire amount in first year, second year and part of the amount in third year was against the door frames, window frames, doors, windows fals .....

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8377; 3,09,67,958/-. e) The complete detail of construction was available in books of accounts of the assessee and the same was duly supported by the supporting bills and vouchers and no defects were pointed out by the ld. AO in the accounts of the assessee. The learned AO has not justified in referring the property to DVO for estimation of cost without pointing out defect in accounts. The matter was referred to DVO on 15.01.2013 (The copy of letter given to DVO is at PB Page 174). At the stage .....

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Thus the learned AO has not justified in referring the property to DVO for estimation of cost without pointing out defect in accounts. Reliance is placed on following decisions of Rajasthan High Court. A) CIT Vs Lakhpat Film Exchange 173 CTR 94 (Raj) B) CIT Vs Prtapsingh Amrosingh, Rajendra Singh 200 ITR 788 (Raj) C) CIT Vs Hotel Joshi 242 ITR 478 (Raj). Thus the ld. AO was not justified in making the reference to valuation office u/s 142A of Income Tax Act, 1961 for the estimation of cost of c .....

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taling to ₹ 3,16,01757/-. The assessee vide letter dated 15.03.2013 pointed out certain defects in the valuation report which are summarized as under: - i) The DVO made the valuation by applying plinth area rate. In the valuation made by him the cost of Doors, window, wooden frames were included as apparent from Annexure B enclosed with the report. Further the cost of False ceiling, wooden ceiling tiles, wooden flooring, modular kitchen, special ornamental door, wardrobes, Malamine Polish, .....

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iliation chart is enclosed herewith. The main objection in this regard is that the assessee has shown ₹ 44,64,352/- (Ashok Agarwal) and ₹ 68,80,012/- (Renu Agarwal) totaling to ₹ 1,13,44,364/- under the head Furniture. In this head, the assessee has debited cost against teak wood, ply, fittings, railing, glass, labour charges of carpenter and polishing, ornamental doors etc. Thus, the total amount of ₹ 84,91,873/- were shown by the assessee against the construction under .....

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on external electric lines, transformers etc. Therefore, the addition of ₹ 6,62,022/- in cost of construction is without basis. iii) The DVO has increased the basis plinth area rate by 1% against quality assurance, no such quality assurance policy or warranty has been taken by the assessee. The DVO taken basic rate of 94.25 per mt adjusted by index factor 116 it comes to 109.33 per mt for Ground First and second floor and basic rate of 113 per mt (Rs. 131/- adjusted by index factor) for do .....

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sanitary fittings and fixtures estimated at ₹ 18,30,000/- without giving any details of the items and basis of estimation. This is wild estimation. The copy of bills produced before him was completely ignored. Further, the DVO has already added 12% of plinth area rate for sanitary items and further 10% of plinth area rate for good finish, therefore, the further addition should not be made. vi) The cost of special electrical fittings and fixtures have been estimated at ₹ 18,30,000/- .....

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d by the registered valuer. 1 Shri Naveen Kimar Jain Plinth area rate on the basis of Rajasthan BSR (including lifts, plant and machinery AC etc) 2,62,77,124.76 2 Shri Vivek Kulshrestha Item wise cost method based on Raj PWD BSR2012 1,67,01,232.00 viii) The DVO valued the servant room at ₹ 9,33,885/- by taking very high pitched plinth area rate. ix) Further, the assessee is maintaining complete account of construction of house and expenses in construction are supported by vouchers and in m .....

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nce made by you to DVO for estimation of construction cost of the building is against the settled law. Reliance is placed on the decision of Hon ble Rajasthan High Court in the case of CIT Vs Hotel Joshi (2000) 108 Taxman 199 (Raj). (x) The rate taken by the DVO are based on PAR CPWD rate. The PAR system either adopted by CPWD or PWD-Rajasthan is not appropriate system for scaling the investment done in the construction works. The CPWD valuer has adopted the valuation system as Plinth area metho .....

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s are locally available from nearby hills. The bricks are also producing in Jaipur. The cement is local production of Rajasthan. The labour in Rajasthan is very cheap in comparison of Delhi or other metro cities. Like using of Ballies, phanta etc. in shuttering RCC in foundation, beams, columns & slabs, which are the basic structural components, are also of inferior quality & hence lowering the comparative rates in private buildings. Similarly in private buildings, many specifications ar .....

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p; knows the local specifications more, hence the local PWD rates could be taken up easily for scaling the cost of constructions in private fields. We have also prepared valuation report from another register valuer Shri Vivek Kulshestra on the basis of item wise rates. The copy of this report is also enclosed herewith. For proper and most reliable estimation of cost of construction, the item wise valuation is most appropriate method. What has to be done, is that to calculate different parts &am .....

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held that the question, whether the valuation made by the District Valuation Officer as per the CPWD rates prescribed in the Board s Instruction No. 1671 or the valuation made by the registered valuer as per the rates provided by the PWD of the State Government should be accepted, does not arise. The Tribunal has arrived at the conclusion that the cost based on item wise basis is the proper method to work out the cost. Thus, the question of law sought to be referred, does not arise from the ord .....

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tion report of the registered valuer valuing the construction on item wise basis and according to this valuation report the estimated cost of construction comes to ₹ 1,67,01,232.00. Further, even the plinth area rates method is to be adopted, than the rates ought to have been taken at Rajasthan PWD - BSR rate. The CPWD rates are higher approximately 25% over the Rajasthan PWD rates. Therefore, all these factors should be considered and the Rajasthan PWD BSR rates are most appropriate for e .....

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countant period relevant to asst. yr. 1990-91. The Department referred the matter to the Valuation Officer for working out the cost of construction of the property. While valuing, the Departmental Valuation Officer has applied the rate of CPWD for the purpose of valuation. The Tribunal has valued the property adopting the rate of PWD. Hon ble High Court held that Tribunal having applied State PWD rates for working out the cost of construction of the house property in question instead of CPWD rat .....

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is not merely a structure with walls and a roof but also to fulfill certain intended functions for which it is built. To fulfill intended functions various services are integrated in the building which are also part of the building. Fittings & fixtures, appliances, instruments, machineries which are permanently rooted to the building and are essential for providing services required to fulfill functions for which the building is built are part of the building. While estimating value of inves .....

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iii) pumps & motors, ix) generators as captive power plant , x) central air conditioning, xi) water supply line including taps, valves etc. xii) bath room and water closet fittings and fixtures, xiii) over head tanks, xiv) house sewer up to municipal sewer line etc. These are to be counted as part of the building. One of the criteria and an important one at that to decide about which fittings & fixtures or machineries are part of the building is to ascertain whether these are rooted to t .....

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ems are part of the building and which are not. In one case a V.O considered 4.5% towards internal electric installations instead of 12.5% on the plea that cost of fans, electric fittings & fixtures are not debited to the building account by the assessee. This is incorrect approach. The assessee should have been asked to furnish the total expenditure year wise on this count and these should have been included in the year wise declared cost for the purpose of estimating value of investment in .....

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t been valued by the DVO, in spite of the fact, that the assessee has showing investment and furnished the details and vouchers before the DVO. Further, the cost of sanitary fittings and special electrical items has been taken extra even when the PAR rate was increased by 12% for sanitary installation and 12.5% for electric installation. This could have been taken extra, had the PAR was increased by 4.5% of basis PAR. Therefore, the valuation of the property should be made for each and every ite .....

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sis. Further while comparing the figure of construction expenses recorded by the assessee in books of accounts from value of construction estimated by the DVO the due credit of fixed furniture expenses and wooden work were not allowed to the assessee. g) On the counter comments of DVO on objections raised by the assessee we submit that the assessee was maintaining only one account under the head Construction at 10-B Plot in financial ledger. The head wise details were prepared as per instruction .....

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complete bills & vouchers of house construction were available with the assessee but on the instruction of the DVO the copies of specific vouchers as desired by the DVO were submitted to him. The payments of most of the expenses were made through account payee cheques. On most of the vouchers even cheque Nos were also mentioned. Therefore, there was no reason to withholding these vouchers with the assessee and not producing with the DVO. Therefore there was only reason for not submitting the .....

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rs. i) As regard to objection of the DVO on investment in furniture at lower side this is to submit that it is common practice that the loose furniture is always purchased after completion of house. Any prudent person cannot buy sofa, dining table etc. at the construction stage of the house. The year wise investment by the assessee and his wife in the head Furniture was as under:- S. No. Name of Assessee FY 08-09 FY 09-10 FY 10-11 FY 11-12 Total 1 Ashok Agarwal 7,24,443 23,57,527 10,65,712 3,16, .....

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ars, in wooden items cannot be towards the loose furniture except small amount. Under, third year also part of the expenses were toward wardrobes, modular kitchen, railing etc i.e. fixed furniture. Therefore, the credit of ₹ 84,91,873/- claimed by the assessee against fixed furniture included in cost of construction in valuation report should be given against the investment shown by the assessee in fixed wooden items, glass work etc. Thus the finding of the DVO that the assessee is manipul .....

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which was not prepared perfectly on the basis of technical parameters/requirements and rejected the all other full proof submission and evidence on surmises and conjectures just to support his high pitch valuation report. j) The DVO mentioned that the investment of ₹ 25,52,501/- towards the loose furniture is at lower side and the AO may ascertain it at his own level. The search party has not inventorised the loose furniture. The DVO has also not given the list of loose furniture vis a vi .....

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investment. k) The sewerage connection charges are included in Development charges deposited in JDA. The electric line was passing through the House therefore, there was no further cost required to be borne for electric line. The transformer is not installed and this fact may be verified by physical inspection. The DVO added 2.25% merely on assumption and presumption. The assessee has bills for all the cost incurred in electric connection, sewerage connection etc. (which have been included in t .....

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by the Registered Valuer. The Registered valuer has valued the valuation of complete house at ₹ 2,62,77,124.76 by Shri Naveen Kumar Jain and ₹ 1,67,01,232/- by Shri Vivek Kulshresth. The DVO valued marble at ₹ 36,50,000/- whereas the assessee has purchased the marble for ₹ 10,65,812/- which is supported by bill and payments through banking channel. Further the copy of bills was produced to AO during the course of assessment proceedings. The copy of bills of marble was su .....

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377; 18,30,000/- by increasing the basic plinth area rate by 12.5%. The assessee s cost is supported by bills which were completely ignored by him. Thus from the above submission it is clear that the valuation report of the assessee was prepared on estimation basis and the supporting bills and vouchers/documents/explanation submitted to the DVO were also rejected without examining the same. o) Further, the Assessee s declared cost is supported by the Valuation Report of two different registered .....

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epted in view of the decision of Rajasthan High Court in the case of CIT Vs. Hotel Joshi 242 ITR 478. Further since there is huge difference in the rates applied by these two experts the DVO should have substantiated his estimate with actual evidence, which was not done by the DVO. ITAT Jaipur bench has held in the case of Smt. Rekha Devi vs. ACIT 78 Taxman (mg) 30 that when there is huge difference in two reports, the DVO should have substantiated his estimate with actual evidence. Hon ble Raja .....

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is supported by valuation report of the registered valuer. The DVO report is crippling with several serious defects as pointed out above. p) In last para of the assessment order the ld. AO after considering the above submissions of the assessee and accepting the reply of the assessee partially and opined that the cost of loose furniture shown by the assessee is at lower side. Even the DVO has observed that cost of loose furniture shown by the assessee is on lower side, therefore to cover up all .....

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resumptive finding of the DVO which is not supported by any evidence more so when the investment shown by the assessee is duly supported by the bills and vouchers. Thus in view of the above submission this is to submit that the ld. AO was wrong in referring the matter to DVO to estimate the cost of construction of house of the assessee. Further the report prepared by the DVO and finding of the DVO cannot be rely upon as the same is based only on presumption/assumption and given without consideri .....

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hi, Kolkata, Mumbai & Chennai where construction cost is very high. In Rajasthan construction cost is much cheaper therefore Rajasthan PWD rules are more authentic. In Rajasthan stones, grits, bajari, marble etc are locally available at cheaper rate whereas in metropolitan cities the cost of Stone, grit bajari, marble is higher. Labour in also cheap in Rajasthan as compared to metro cities. All works in Rajasthan are being done as per RAJASTHAN PWD BSR, so Rajasthan PWD Rules should be follo .....

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hat addition made by Ld. A.O. is bad in law, unjustifiable and unreasonable deserves to be deleted and kindly to upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue. 11. We have heard the rival contentions of both the parties and perused the material available on the record. The DVO in his comments on the objections raised by the assessee has stated that the investment of ₹ 28,52,501 in loose furniture appears to be on much lower side and the AO may .....

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of house/furniture in the hands of shri Ashok Agarwal. As per the ld AR, before arriving at this conclusion, the ld. AO as well as DVO both failed to list out the items considered as loose furniture found at the time of inspection of the house of the assessee and no valuation of such loose furniture was made by the DVO, therefore there is no justification to made estimated addition on this account just merely on the presumptive finding of the DVO which is not supported by any evidence more so wh .....

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pon by the appellant. I have also carefully perused the records available before me and factual matrix of the case. In this case, a search and seizure operation u/s 132 of the Act was carried out against the assessee. My observations in this regard are as under: * On perusal of assessment order, it is seen that the AO has not brought to notice any incriminating document showing undisclosed investment in construction of house. The assessee claims to have maintaining proper bills and vouchers pert .....

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lso seen that as the cost of loose furniture shown by the assessee was on lower side, therefore, to order to cover up all possible leakage on this account, the AO made an ad hoc addition of ₹ 20,00,000/- on account of undisclosed expenditure In construction of house/furniture. This shows that the AO has accepted the assessee's contention as regard the credit of the amount shown under the head Furniture ₹ 84,91,873/- should be given against the construction cost estimated by DVO. .....

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tion was completed in FY 2010-11. Therefore, the contention of assessee, that in the first year and second year of the construction when the civil work was going on, the expenses towards ply wood and under wooden items were part of construction expenses, can be accepted. * Further, the appellant has contended that the DVO has estimated the marble flooring excessive ignoring the evidence submitted by him. The appellant has submitted that the DVO estimated the cost of marble flooring at the rate o .....

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sic plinth area rate. I inclined to agree with the contention of assessee. The bill of marble purchases cannot be brushed aside merely on suspicion without making an independent inquiry. * The appellant further contended that estimation of cost towards, sewer and external service connection was estimated @ 2.25% of cost and 1% against the quality assurance. These estimations are without basis. I inclined to accept that the cost against sewerage connection, electric connection and water connectio .....

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tion by applying the CPWD rates and difference is less than 20% and in such a case difference should be ignored as per the several decisions of Hon ble ITAT Jaipur Bench in this regard. In the case of Income Tax Officer Vs. Nitesh Maheshwari ITA No. 363/JP/2010; ASST. YR. 2006-07 order dated 28th September, 2010 (2011) 138 TTJ 0116 : (2011) 53 DTR 0413 : (2011) 7 ITR 0645 held as under:- "We have heard rival submissions and considered them carefully. After considering the submissions and pe .....

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that learned CIT(A) was justified in granting 12 per cent deduction on account of self-supervision. Nothing has been brought on record by the Department that the building was not constructed under selfsupervision but under supervision of outside agencies. Books of account have been prepared by assessee and no payment has been shown to be paid or payable to any outside agencies. Merely by stating that building has been constructed in a beautiful manner and without any outside help such building .....

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0,00,000/-. This ground of appeal of the assessee stands allowed. In view of the above facts and circumstances, we uphold the order of the ld. CIT(A) and the ground taken by the Revenue is dismissed. 12. The 3rd ground of the revenue s appeal is against deleting the addition of ₹ 1,50,00,000/- made by the Assessing Officer on account of advance given to Gulam Farooq Ansari. The Assessing Officer has observed that during the course of search proceedings Sh. Ashok Agarwal has admitted in his .....

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on for the same. The assessee in his reply submitted that at the time of search the books of account of assessee/family members/group concerns were not complete as on the date of search, therefore the cash payment of ₹ 1.50 Crores made to Ansari brothers was not found recorded in regular books of accounts of the assessee. He further stated that the assessee was under mental pressure during the course of search surrendered this amount as undisclosed income and that after examination of book .....

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00,000/- from Renu Agarwal ₹ 6,00,000/- from Ashok Agarwal (HUF), ₹ 7,00,000/- from Ashish Agarwal and ₹ 17,00,000/- from Ashish Buildcon P Ltd. The assessee was asked to explain the same and in reply he submitted that the entry of payment made to Ansari brothers made in cash books of various group persons/concerns of the assessee was made in the name of the assessee as he was the main and key person of the group and was also maintaining the cash balance of entire group, theref .....

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n was given by the assessee on various occasions i.e. on the date of search 22/23.09.2010 and even on 12.10.2010 i.e. during revocation of PO at office of the assessee group. The AO held that the entire story is concocted and the assessee has taken shelter of books of account. Otherwise also the reliability of books of account of all persons is also questionable because than entries have been made subsequent to the search and not during the course of regular business. The Assessee is not only re .....

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ake such huge payment in cash for purchase of land. The AO mentioned that all these facts considered together clearly shows that assessee's contention is an afterthought and not reliable and at the same time there is no reason to disregard the statement of assessee given during the course of search and at the time of revocation of P.O. on 12/10/2010 after a gap of 20 days. Accordingly the AO opined that the source of payment of ₹ 1.5 crore to Shri Gulam Farooq Ansari remains unexplaine .....

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f the case. During the course of the appellant proceedings, the assessee has contended that no any incriminating document was found during the search operation showing payment of ₹ 1.50 crore to Ghulam Farooq Ansari (herein referred in brief as Ansari). Further, no document was found from assessee's premises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. On the basis of sworn statement recoded u/s 132(4) of the Act of Ansari, Authori .....

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. It is also an admitted fact that the cash book was not complete at the time of search as some entries were not entered there. The cash book is a method of recording of inflow and outflow of cash in chronological date of order. Subsequent to the search, the assessee completed the cash book by incorporating all the entries against inflow and outflow of cash. The assessee produced the re-casted cash book before the Auditors, who found no mistake. During the course of assessment proceedings also, .....

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pointed out by the AO after examination of audited books of account. The AO has also not rejected the books of account of assessee group. Further, assessee has also reconciled the cash balance as per the seized cash book and audited cash book with vouchers. The reconciled statement can be referred at PB page 402 and reconciled chart showing entry to entry explanation was filed with letter dated 17/03/2015. The cash position of seized cash book vis a vis audited cash book was as under:- Name As .....

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lance available to the group was ₹ 1,88,10,450.64 which became to ₹ 2,11,51,196.64 as the result of incorporating all the entries of cash inflow and outflow. The claim of the assessee is that cash books has to be completed after recording all the unrecorded entries based on bank statements and seized material which was subsequently done by the assessee on the basis of bank statements and other documents found during the course of search operation. Vide letter dated 25/3/2015, AR has .....

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d cash books of assessee and other persons of the group were also submitted before the AO for verification of entries in re-casted books of accounts with reference to seized cash book and bank statements/vouchers and source of payment of ₹ 1.50 Cr. to Ansari. The AO has not controverted assessee's claim by specifically pointing out the incorporation of new unwarranted entry in the recasted/ completed/audited cash book by the assessee. It is a settled position of Law that after the cond .....

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lso. Now, the question arises whether merely on the basis of search statement can addition is made?. The admission once made can certainly be retracted, if the circumstances permit, and it can also be shown to have been made under some mistake or to be otherwise incorrect. But, the onus would be on the maker of that admission. On perusal of assessment order, it is also seen that the AO has not brought any evidence showing generation of undisclosed income of the assessee for utilization in undisc .....

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ver the payment of ₹ 1,50,00,000/- to Ansari. Therefore respectfully following the decisions of Hon'ble ITAT Jaipur bench in the case of Shri Tara Chand Jain (Supra) and Shri Rajendra Kumar Kedia(Supra), I hold that the payment of ₹ 1,50,00,000/- was made out of the cash balance reflected in the cash book of the assessee and other group members and I direct the AO to delete the addition of ₹ 1,50,00,000/-. This ground of the assessee stands as allowed. 14. Now the revenue i .....

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ee to Ansari. The entire addition is based on the search statement, which was retracted by the assessee and no further inquiry was made by ld AO and no examination of the assessee or Mr. Ansari was made. c) During the year under consideration the assessee made payment of ₹ 1,50,00,000/- to Ansari out of cash balance available with entire assessee group and the same was recorded in the books of accounts of the assessee. The copy of account submitted to AO is at PB Page 263-267. The books of .....

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n recorded in the books of accounts and this mistake resulted the huge cash balance as per the books as on the date of search. The advance of ₹ 1.5 crore was given for purchases of agriculture land on Delhi road. The deal was not materialized and the advance was received back. At the time of completing of books of accounts the transaction was recorded in the books of respective person/concern of the assessee group. d) The Audited Books of account were examined in detail by the ld AO with r .....

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e of search. However, the entry for payment was passed in the books of account completed after the search. (ii) Cash balance position as on date of search was explained vide letter dated 23/01/2013. (iii) Books of account were produced along with the letter dated 18/03/2013. (iv) Vide letter dated 01/03/13 the assessee submitted to AO as under:- The cash books of following persons for 01.04.2010 to 22.09.2010 foe verification of cash balance as on the date of search and source of cash payment of .....

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ng the reconciliation of entries in seized books viz a viz audited books of account is at PB pg 657-668. After the examination of the books of account in detail, the ld AO accepted the sales, expenses, and entries in the audited books of account though many of the entries were not in the seized books but in recasted books. The ld AO is blowing hot and cold in same stream. On one side she is accepting all the other entries made in the recasted books of account and on other side she is not accepti .....

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ore the cash payment to Ansari Brothers was made by him out of cash balance of entire group available with him and thereafter the entry of payment was made in the books of accounts of respective person/concern according to utilization of cash balance of respective persons/concerns. e) For making the addition of this amount the department is relying on two thinks first on the statement of Shri Ashok Agarwal recorded at the time of search and second that the entry of payment to Ansari was not foun .....

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r making the additions is as under: - i) In Para 8.7(a) the ld. AO held that at the time of search this transaction was admitted by the assessee as made out of books and the same was reiterated in the statement recorded on 12.10.10 at his office. In this regard this is to submit that at the time of search the assessee was under mental pressure and the books of accounts of the assessee was not complete hence as on the date of search this payment was not recorded in books of accounts of the assess .....

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regard, he submitted as under:- (a) The Board of direct taxes issued instruction to the All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. vide letter F. No. 286/2/2003-IT (Inv) dated 10.03.2003 in regard of confiscatory statement in the course of search and seizer as under: Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & .....

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before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders .....

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nd purpose of provisions. In case of Durgesh Oil Mills, 273 ITR 305 (All.), the Hon'ble Allahabad High Court has held that it is well settled that the circular issued by the Central Board of Direct Taxes is binding on authorities. Therefore, merely on the basis of statement addition cannot be made without demonstrating the documentary evidence in support of the admission in the search statement. Further, it is often argued by the Department that in the confessional statements during the cour .....

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ce, would not mean that the partners agreed for making additions. Putting certain expression at the end of the statement cannot be taken as true in view of the retraction. Retraction can be made only after understanding the correct meaning and consequences of the statement.' (b) The search party took the similar type surrender in the case of M/s Suresh Medical Agency and Shri Radhey Shyam Mittal without having any corroborative material, the ld AO made the addition in these cases merely on t .....

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pellant firm made surrender of income of ₹ 25 lacs on account of income earned from sale and purchase of medicines carried outside the books. The husband of the partner Smt. Sarda Mittal also confirmed the surrender. The appellant, however, had been approaching the authorized officer to provide copy of statement so obtained in proceedings under section 132 of the Act. When these statements were not provided, the appellant vide letter dated 3.10.2008 to the authorized officer, copy placed i .....

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egal obligation to have provided copy thereof to the appellant. It is only on persistent effort of the appellant, the copies of statements were provided only on 13.3.2009. The appellant after understanding the legal implication of such statements made a valid retraction as the surrender was not supported 8 by any corroborative evidence. The affidavit filed in this regard is laid on assessee s paper book pages 129 to 131. This affidavit has carefully been perused. After the affidavit was filed be .....

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58) 33 ITR 786 (All.), as was also put to the parties during the course of argument, has made elaborate discussion on the evidentiary value of the affidavit. The relevant passage from the aforesaid judgment at page 791 of the report is reproduced as under :- The most important points on which the Tribunal relied, is that mentioned at No. 2, viz., that, according to the Tribunal, the assessee had not satisfactorily established that the shares had to be sold as the purchaser of the Jaswant Sugar M .....

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of purchase was that all the shares of Lala Jaswant Rai, his sons and other relatives had to be transferred to the purchaser. The Income-tax Appellate Tribunal rejected this affidavit of the assessee on the mere ground that there was no documentary evidence in corroboration in the form of any correspondence of otherwise on this point. Shri G.S. Pathak contended rightly before us that the Tribunal was not entitled to reject the affidavit on this point on such a ground. After the assessee had fil .....

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9 produce documentary evidence, or, at least he should have been cross examined to find out how far his assertions in the affidavit were correct. (emphasis supplied) The reliance placed by assessee to the judgment by Hon'ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. (supra) and Hon'ble Rajasthan High Court in case of CIT vs. Ashok Kumar Soni (supra) are well placed as the assessee has successfully demonstrated that the admission made during the course of search is not .....

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outside the books for sale and purchase of medicines that could give rise to the income to the extent of ₹ 25 lacs, the addition merely on the basis of such statement which stood validly retracted could not have been made. We, therefore, find no factual or legal justification in sustenance of addition by Ld. CIT (A) in this regard. (c) Hon ble ITAT Jaipur Bench in its recent decision in the case of Shri Pawan Lashkary ITA No 808/JP/2011 has held that income cannot be assessed merely on th .....

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tatement during search is not conclusive proof of fact and can always be explained ii) In Para 8.7 (b) to (d) the ld. AO mentioned that the claim that the cash payment to Ansari was made out of cash available from books of accounts was made for the first time during the assessment proceedings and no such explanation was given by the assessee at the time of search this is to submit that as on the date of search the books of accounts of the assessee were incomplete and the entry of payments made w .....

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ecorded sources and only entry could not be made up to the date of search. iii) In para 8.7 (e) the ld. AO held that the payment of ₹ 1.5 cr. for purchases of land at Delhi road was made by him. However even in the reconstructed books of account of Shri Ashok Agarwal payment of only ₹ 50 lacs has been reflected, thus even the entry in the books of account are contrary to the facts narrated in the statement. In this regard this is to submit that at the time of search the assessee said .....

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rrender of income on behalf of entire group was made by him, therefore it cannot be presumed on the basis of statement of the assessee that the payment of ₹ 1.50 crore was stated to be made by him, therefore the same should be found recorded only in his cash book and not in the cash book of other family members/concerns. iv) In para 8.7 (f) the ld. AO discussed the mode of entry of payment made in the books of accounts regarding payment made to Ansari. In this regard this is to submit that .....

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is is to submit that since the payment was made out of utilizing the balance of different persons/concerns, therefore the entry was made in books of accounts of respective persons/concern and upon finalization of transactions the respective transfer/adjustments entry will made in the books of accounts of the respective person/concern. v) In para 8.7(g) the ld. AO held that reliability of books of accounts of all persons is also questionable because than entries have been made subsequent to the s .....

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arch. However when the books of accounts were completed the entry of payment made to Shri Ansari was made in books of accounts and the ld. AO has not pointed out any specific defect in books of accounts. Further the ld AO has not rejected the books of account of the assessee, therefore there should be no reason to disbelieve the entry of ₹ 1,50,00,000/- on account of cash paid to Shri Ansari for purchases of land more so when the assessee group having sufficient cash balance in their books .....

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. For this purpose, we draw your kind attention towards the decision of Jaipur ITAT wherein Hon ble ITAT bench in ITSSA No.103/JP/2002 dated. 4.4.2003 in the case of Shri Tarachand Jain. In this order, the Hon ble ITAT has observed as under on page 2 para 5: The first grievance of the department is pertaining to the deletion of addition of ₹ 1,20,240/- which was found from the bedroom of Shri Tarachand and his wife Smt. Anita Jain during the course of search. At the time of search, the boo .....

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-prepared books produced after the date of search cannot be relied upon. But the ld. CIT (A) observed in his order that the books which were completed later on were duly submitted by relevant material to support the income and out-going cash. So he deleted the said addition. With this background, we heard both the parties and perused the material available on record from which it appears that at the time of search books of account were found but the same were incomplete. The assessee later on pr .....

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ld 506 where it was observed that the books of account of assessee, which are not properly maintained, can be subsequently prepared and re-casted on the basis of bank statement, vouchers, and other related documents of sales and purchase, then also be relied upon for the purpose of income-tax assessment. In the instant case, the re-casted books of account were properly audited and the same were produced before the AO along with the certificates but the AO did not find any defect or mistake in th .....

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on ble ITAT is fully and squarely applicable to the facts of the assessee s case. Further Hon ble ITAT in another case of Shri Rajendra Kr. Kedia Vs. DCIT, 22 Tax World, 506 have observed that where the books of account are not properly maintained, the same could be subsequently prepared and re-casted on the basis of his bank statement, vouchers and other related documents of sales and purchase which could be relied upon for the purpose of making the income tax assessments. In the same para the .....

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ourse of search as well as during assessment proceedings the department could not prove any single payment which has been made out of books of accounts, therefore there was not a practice of the assessee to make payment outside the books of accounts for purchases of land. Further in some cases due to business requirements looking to the location of land, availability of banking facility on such village and payment in cash on demand of seller etc. the assessee has to made the cash payment. The ld .....

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crores for purchases of land when dealing in land in his business. In this regard this is to submit that it is a technical and legal matter and by adding the probability and possibility on the issue of legal matter a payment recorded in books of accounts cannot be doubted. Further, all the cash payment made in cash for purchases of land cannot be disallowable u/s 40A(3) of Income Tax Act, 1961 and before making the disallowance the extend of banking facilities available, consideration of busines .....

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of accounts are shown in the final books of accounts also. In this regard it is relevant to mention here that:- (i) The ld AO herself has found that the assessee has made cash payment of ₹ 4658640/- in AY 2005-06 and made the addition by applying the provisions of section 40A(3). (ii) from the chart produce in this para it is clear that the assessee was duly showing the cash payments whatever made for making purchases/ expenses in each of the year and the AY 2010-11and AY 2011-12 was not o .....

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during revocation of PO at the group office, he already had time of 20 days since the date of search. He had all opportunity to complete books of accounts and show that the amount was paid out of the balance available in cash book. In this regard this is to submit that the books of account were under seizure, therefore the assessee group could not examine and complete the books of accounts up to 12.10.2010. ix) As regard of finding of the AO in para 8.9 to 8.11 this is to submit that the cases r .....

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hat the payment of ₹ 1.5 crore was made to Shri Ansari out of cash balance available with assessee group in regular books of accounts is in favour of assessee. In view of the above, the assessee prays your honor that the payment of ₹ 1.50 crore to Shri Ansari was made out of cash balance in regular books of accounts. The addition was made solely on the basis that at the time of search this amount was surrendered as income and not found recorded in regular books of accounts and the de .....

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was found during the search operation showing payment of ₹ 1.50 crore to Ghulam Farooq Ansari. Further, no document was found from assessee's premises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. The crux of the issue is whether based on the statement of the assessee recorded u/s 132(4) of the Act, an addition towards undisclosed income can be made in the hands of the appellant. Both the Revenue as well as the assessee have relied .....

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acts. In the instant case, the Revenue has made the addition based on the statement of the assessee and also on the fact that the entry of payment of ₹ 150,00,000 was not found recorded in the cash book/books of accounts at the time of Search. What is therefore relevant to examine is whether the assessee has discharged its onus to the effect that the books of accounts do not disclose the correct state of facts and the statement made during the search was not correct as some entries were no .....

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arch. Subsequent to the search, the assessee completed the cash books incorporating all the inflow and outflow of cash and recasted cash books were produced before the Auditors as well as before the AO and no discrepancies were pointed out by either of them especially in terms of inflating the inflow of cash or by deflating the outflow of cash to cover up the situation of unavailability of disclosed cash. The assessee has also reconciled the cash balance as per the seized cash books and the audi .....

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cash book after incorporating all entries before the AO. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of ₹ 1,50,00,000/- to Ansari. During the course of the arguments, the Revenue has not brought anything further to our notice and the findings of ld CIT(A) remain uncontroverted before us. The assessee has successfully demonstrated through its explanation and documentation in terms of re-casted books of accounts that t .....

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we uphold the order of the ld. CIT(A) and the appeal of the Revenue in this ground is dismissed. 17. Now we take up common ground in the Revenue s appeal as well as the assessee s appeal The 4th ground of the Revenue s appeal is against deletion of addition of ₹ 20,46,604 out of ₹ 50,26,604/- made by the AO on account of deemed dividend income under section 2(22)(e) of the Act and the sole ground of the assessee s appeal is against confirming the addition of ₹ 29,80,000/- out .....

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unt through which day to day transactions were being carried out and the company was having accumulated reserve and surplus to that extent. The AO held that the provisions of deemed dividend are applicable not only to loans and advances but rather to any payment in the nature of loans and advances. In fact, the provisions of section 2(22) (e) of the Act are also applicable to day to day transactions between a company and a share holder. Accordingly, an addition of ₹ 50,26,604/- was made on .....

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factual matrix of the case. From, the above two issues are emerges for adjudications:- (i) whether the re-payments by the company against the amount received by it from the shareholder comes in preview of deemed dividend u/s 2(22){e) of Income Tax Act. (ii) Whether the Advance ₹ 29,80,000/- as normal business advance against the purchase of land or comes in preview of deemed dividend. Now the first issue whether the re-payments by the company against the amount received by it from the sha .....

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ansactions of advance given or taken from/to the assessee. From the above account, I found that first two payments by the company amounting to ₹ 15,00,000/- and ₹ 6,80,000/- were against the land deal/advance by the company. The third entry is receipt of amount by the company of ₹ 2,00,000/- from the assessee. The fourth entry dated 15/05/2010 is payment of ₹ 10,00,000/- by the company to assessee. Further, ₹ 2,00,000/- was repaid by company to the assessee on 15/04 .....

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e assessee by the company is on account of repayment of old advance taken by the company from the assessee which cannot be put under preview of deemed dividend u/s 2(22) (e) of Income Tax Act. Therefore the addition of ₹ 50,26,604 - 29,80,000/- = ₹ 20,46,604/- is unwarranted and unjustified. As regard the second issue whether the advance of ₹ 29,80,000/- by the company to the assessee comes under the preview of deemed divided. The assessee claims that he received this amount ag .....

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011 and if the land is not converted and approved by 31.03.2011, the agreement stands as cancelled. As a director of one of the leading development and construction Company of the city, he was well aware of the situation that the conversion and approval of the land could not be obtained. These clauses were put because some of the money taken by the appellant from the company was refunded subsequently. The Ikrarnama is nothing but an afterthought to justify the loans taken by him from the company .....

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31-IT) I have carefully perused the ordered relied upon and find that the facts adjudicated upon by aforementioned the Hon. Judicial Authorities ate completely distinct from the facts of the case of the appellant. On the basis of the evidence available on record it is seen that no business transaction was undertaken by the company for purchase of the land as claimed by the appellant, and the Ikrarnama was drafted subsequently to evade the provisions of sec. 2(22)(e) of the Act. In view of the f .....

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circumstances and in respect to advance from same company has been decided by Hon ble ITAT in the case of assessee for AY 2010-11 in ITA No 810/JP/2014 order dated 04-03-2016. b) During the course of assessment proceedings the assessee vide letter dated 22.03.2013 (Copy at PB Page 272-281) explained to the ld. AO as under: - The assessee received money from the company from time to time against agreement to sale the land to the company. When the 90B proceedings could not be got from JDA, the agr .....

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the ld. AO that the amount so received from the company was not a loan which was repayable back to the company but the same is received against agreement to sales of land. However, the land could not be sold to the company as the formalities of 90B could not be completed. In support of the claim the copy of sales agreement executed between assessee and company was also submitted to the ld. AO (Copy at PB Page 277-279). It is relevant to mention here that the assessee as well as company M/s Ashi .....

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reement could not be got approved for the purpose of 90B formalities, the agreement was cancelled and amount was refunded to the company. But later on another land was sold to the company by the assessee by executing the registered sale deed on 30.03.2013. (copy placed at PB page 309-316). This supportive evidence was filed before ld CIT(A) to establish that the amount received by the assessee was against the sale of the land was bonafide and this was a genuine and normal business transaction be .....

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ous dates and the company repaid these amounts to the assessee on subsequent dates. Therefore, in any case, the repayment by the company of amount dues to the assessee cannot be deemed as advance or loan to shareholder. The assessee relies on the findings of Ld CIT(A) in this regard. (d) The expression used in first part of section 2(22)(e) is advance or loan. The word advance has not been defined. It ordinarily means payment of cash or transfer of goods for which accounting must be rendered by .....

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h shareholder as a consequence of any further consideration which is beneficial to the company received from a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of Section 2(22) of the Act but not the cases where the loan or advance is given in return to an advantage confirmed upon the company by such shareholder 2013 .....

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nding. The word advance if not found in the company of or in conjunction with the word loan may or may not include the obligation of repayment. If it does, then it would be a loan. The word advance which appears in the company of the word loan could only mean such advance which carries with it an obligation of repayment. Trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of S. 2(22)(e) of the Act .....

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sale deeds are executed when the possession of the land is taken/complete payment to the seller is made. The department is accepting this practice of the assessee in all scrutiny assessments made prior to search as well as assessments framed u/s 153A and therefore no separate treatment could be given for the unregistered agreement to sale in between the assessee and company. g) Agreement not found in search:- The ld CIT appeal held the agreement as unreliable evidence on the ground that it was .....

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plot. None of these documents are appearing in the inventory prepared by the search party. It is also relevant to mention that the assessee s assessment for the AY 2004-05, 2005-06, 2006-07 and 2007-08 were completed u/s 143(3) of IT Act after detailed scrutiny much before the search and several agreements to sales were filed before the AO during the course of scrutiny assessments, therefore, the existence of these documents cannot be denied. Since these documents were also not included in the i .....

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er colonizer/builders were under bonafide belief that the JDA would allow the conversion of the land. The assessee has filed detailed explanation on the same matter in AY 2010-11 before ld CIT(A)/ITAT as under:- During the year under consideration application for conversion of land at Village Ajayrajpura, Teh. Sanganer, under section 90B of land Revenue Act could not be filed by the assessee due to the following reasons: - The assessee entered into agreement with company M/s Ashish Buildcon Pvt. .....

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r draft master plan of JDA the land at Village Ajayrajpura was falling in U2 zone (Unbanisable land). As per rules proposed in the draft master plan the minimum area required for unbanisable land (U2) of integrated residential township was 10 hectare while the land of the assessee was only 1.01667 hectare. After the publishing of Draft Master Plan, the JDA was not accepting the application for 90B proceeding for the land less than 10 Hectares. We are enclosing herewith the relevant page of maste .....

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here that at that point of time several representations were made by the various Association of the builders and private colonizers for conversion and 90B proceedings of the lands less than 10 Hectares But at that time Private Township Policy was under pronouncement by the Government. The assessee was expecting the relief by the Government for small builders in Private Township Policy which was going to be pronounced very soon but which was also delayed by Government for one or another reasons a .....

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nd to the company duly 90B proceedings completed. Therefore, in view of the above explanation the amount of ₹ 50,26,604/- cannot be assessed as income of the assessee u/s 2(22)(e) of Income Tax Act. 20. At the outset, the ld CIT DR has vehemently supported the order of the Assessing Officer. 21. We have heard the rival contentions and pursued the material available on record. An amount of ₹ 50,26,604 has been reflected as an advance given to the assessee in the books of accounts of M .....

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The ld CIT(A) after going through the ledger account of the assessee in the books of M/s Ashish Builcon Private Limited and the explanation given by the assessee in respect of each of the entries has given a clear finding of fact that an amount of ₹ 29,80,000 is towards the advance given by the company to the assessee for purchase of land and ₹ 20,46,604 is on account of repayment of old advance taken by the company from the assessee. No contrary material or explanation has been subm .....

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to the original loan/advance transaction and cannot be seen as an independent transaction of fresh advancement of loan/advance by the company to the shareholder. In the instant case, the ld CIT(A) has given a clear finding that the amount of ₹ 20,46,604 paid by the company is towards repayment of old advances taken by the company from the assessee, in such a situation, the provisions of section 2(22)(e) are clearly not attracted in respect of ₹ 20,46,604. Now coming to amount of S .....

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y the assessee that he was expecting the new township policy to be announced as was the case with other colonizer/builders and was under a bonafide belief that the JDA would allow the conversion of land. Unfortunately, the land under the sale agreement could not got 90B approval from the JDA and thereafter the agreement was cancelled and amount was refunded to the company. It is noted that both assessee and M/s Ashish Buildcon are engaged in the business of real estate and similar transactions h .....

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due to non-fulfillment of specified conditions, the agreement may be cancelled. We do not agree with the contention of the ld CIT(A) that where the agreement to sell is not registered and not found during the search, the authencity of the agreement will be in doubt and the assessee would be precluded in producing the same in support of its contention especially given the fact that there are regular and similar business transactions entered into between the assessee and M/s Ashish Buildcon. Nothi .....

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urt in case of Creative Dyeing and Printing Pvt. Ltd. (supra) supports the case of the assessee. Further, it is noted that in respect of a similar transaction entered between the assessee and M/s Ashish Buildcon in AY 2010-11, the Coordinate Bench has decided in favour of the assessee and the relevant findings are as under: 6. We have heard rival contentions and perused the material on record. On verification of copy of accounts placed at pages 38 to 39 of the Paper Book, it is seen that assesse .....

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9, ₹ 20 lakhs on 10.02.2010 and ₹ 60 lakhs on 10.3.2010 (Rs. 20 lakhs each) and ₹ 13 lakhs on 10.03.2010 and ₹ 1.25 lakhs on 10.3.2010 which show that there are numbers of transactions between the assessee and company. Finally, the assessee s accounts has been squared up. The assessee and company are in real estate business. It is a general practice in the line of business that most of the land are purchased and sold on agreement to sale basis to save the stamp duty and t .....

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