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The ITO, Ward-1 (3) , Jaipur Versus Smt. Anchal Agarwal

2017 (8) TMI 563 - ITAT JAIPUR

Difference in opening capital balance as per the Balance Sheet found during the course of survey at third party premises and balance sheet submitted during the course of assessment proceedings - survey u/s 133A - Held that:- Merely because there were some discrepencies in the balance sheet, it cannot be said that all the entries in the said balance sheet were wrong. Moreso, when the difference relates to opening capital balance which is brought foreward from the previous year. In our view, what .....

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n by the assessee in her books of accounts and which has not been reported. We are accordingly setting aside the matter to the file of the ld CIT(A) to examine the same afresh in light of above discussions and as per law. In the result, the ground of the revenue is allowed for statistical purposes. - Differential amount between amount shown under the head renovation expenses as per Balance Sheet found during survey and Balance Sheet submitted during the assessment proceedings - Held that:- .....

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tion officer. In the result, there is no basis for making addition of ₹ 11,56,671 and the ground of revenue is dismissed. - Undisclosed investment in construction of house property - Held that:- CIT-A correctly held that estimated addition has been made by the AO on the ground that the payments made to beldar, labour etc. have not been shown by the appellant. It is, however, noted that the matter was referred to the valuation cell of the department. The valuation cell has not found any .....

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rought on record to support the position of the Revenue. The AO apprehension might be correct but the same has to be supported by crediable evidence which is clearly absent in the present case. Moreso, the lease agreement and confirmation from M/s Gravita India ltd is on record to support the lease transaction and there is no adverse finding given by the AO in case of M/s Gravita India ltd. In light of the same, we do not see any infirmity in the order of the ld CIT(A) and the same is hereby con .....

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law the Ld. CIT(A) has erred in deleting the addition of ₹ 21,46,179/- made on account of difference in opening capital balance shown in the balance sheet. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of ₹ 11,56,671/- made on account of undisclosed investment in construction of property. 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition .....

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und during the course of survey at third party premises and balance sheet submitted during the course of assessment proceedings. 3. Brief facts of the case are that a survey u/s 133A was carried out on 10.12.2009 at M/s Gravita India Ltd. (a company in which husband of assessee Sh. Rajat Agrawal is director), wherein assessee is one of the shareholder. During the course of survey, certain documents pertaining to assessee were found and impounded, which were considered by Ld. AO while completing .....

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the said deletion. 4. The ld AR submitted that it was submitted before the AO that the printout of Balance Sheet found during survey was incomplete as certain entries were yet to be incorporated. In fact the final Balance Sheet submitted during the course of assessment proceedings was prepared after making all the necessary reconciliation and taken into consideration the adjustments required for finalization of books of account and thus tallying with final report as per Tally software. It was f .....

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f evidences. - No Balance Sheet was annexed with return of income. - No Wealth Tax return was filed by assessee. - Balance Sheet submitted during assessment proceedings was not supported by acceptable evidences. It was further submitted that all the above allegations as pointed out by the ld. AO were duly explained before the ld. CIT(A) with a detailed submission as reproduced by ld. CIT (A) at pages 4 to 8 of the order, who after considering the same on merits has concluded that the Balance She .....

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hough all detailed were submitted before him during the course of assessment proceedings. Further the ld. AO has failed to appreciate the fact the in the same Balance Sheet the amount of opening Profit & Loss at ₹ 26,04,746.94 is appearing and if the same is added to the opening balance of capital at ₹ 19,38,341.94, the resultant balance is more than the capital balance appearing in the final Balance Sheet prepared on the basis of the completed books of accounts. 5. We now refer .....

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the balance sheet filed with the return it was shown at ₹ 39,92,214/-. The difference in the amount of these two balance sheets was accordingly brought to tax by the AO. The AO did not accept the balance sheet filed with the return on the ground that the appellant had failed to furnish any supporting evidence for the opening capital and the books of account are not reliable. 4.1 It is, however, noted that while the documents found in the course of survey are presumed to be true, the presum .....

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. Moreover, as mentioned by the appellant there are patent short comings in the balance sheet found during the course of survey which shows that this balance sheet was only a tentative one. The defects pointed out by the appellant, as mentioned in para 3 of her submission (supra), show that there were glaring and substantive short comings in the Balance Sheet found in the course of survey at the Company s premises. These short comings include omission on both liabilities and assets sides. For ex .....

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serious short comings pointed out by the appellant in the balance sheet, it cannot be said that the Balance Sheet found in the course of survey reflected the correct state of affairs of the appellant and, therefore, it cannot be relied upon for making addition. It is further noted that no other factual defect has been found in the balance sheet furnished by the appellant along with the return. Therefore, the addition of ₹ 21,46179/- which is based only on the difference between the two ba .....

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d out at the premises of M/s Gravita India Ltd and the balance sheet which has been filed during the course of assessment proceedings. In this regard, as we have noted above, the ld AR s contention is that it was submitted before the AO that the printout of Balance Sheet found during survey was incomplete as certain entries were yet to be incorporated. In fact the final Balance Sheet submitted during the course of assessment proceedings was prepared after making all the necessary reconciliation .....

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accepted merely because of holding of assets in lack of evidences, no Balance Sheet was annexed with return of income, no Wealth Tax return was filed by assessee, balance Sheet submitted during assessment proceedings was not supported by acceptable evidences. In our view, these are valid reasons for not accepting the balance sheet filed during the course of assessment proceedings as the same was not supported by any acceptable evidence either in respect of opening capital balances or transaction .....

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ow been produced wherein assets have been shown and there are sufficient evidence that these assets were available with the assessee as on 31.3.2008. There are thus inherent contradiction in the facts and findings of the ld CIT(A). Further, there is no finding that the ld CIT(A) has verified or called for a remand report to verify the opening capital balances with the assets as on 1.4.2008. Thereafter, the ld CIT(A) has discussed other so called glaring and substantive short comings in the Balan .....

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heet was incomplete and certain entries were yet to be incorporated. Typically, accounts are finalised and balance sheet and profit/loss account are prepared and thereafter, the return of income is lodged with the department. In the instant case, the assessee, being an individual and the fact that she is not required under law to maintain books of accounts, some relaxation can be given provided that when she is called upon by the department, she produces her correct state of affairs supported by .....

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en went about comparing the two balance sheets and found differences in the opening balances in the capital account and expenses under the head renovation which is again a ground of dispute dealt in subsequent paragraphs. The ld CIT(A) has given his findings in terms of other glaring differences in the two balance sheets and found the balance sheet found during the course of survey as not a reliable piece of evidence. In our view, what was equally relevant for the ld CIT(A) to examine and to giv .....

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ital account and how the same is supported by corresponding net assets position. Further, we note that the opening capital is ₹ 39,92,214 as reported in the balance sheet submitted during the assessment proceedings which is higher than the capital of ₹ 18,54,035 as per balance sheet found during the course of survey. Therefore, it is to be examined whether any fresh capital has been brought-in by the assessee in her books of accounts and which has not been reported. We are accordingl .....

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9. Brief facts pertaining to this ground of appeal are that assessee and Smt. Shashi Agrawal, her mother-in- law are co-owners of House no.C-137, Dayanand Marg, Tilak Nagar, Jaipur. The said house property, purchased in May 2008, was not having enough space thus renovation and further construction was started in June 2008, for which a total sum of ₹ 54,40,605/- was spent during the previous year, out of which 50% share i.e. 27,30,303/- being related to and were borne by assessee and duly d .....

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mentary evidences in respect of the construction expenses incurred by her. The figures appearing in the Balance Sheet are taken from various ledger accounts. As per these details, the assessee incurred sum of ₹ 54,40,605/- towards the construction / renovation of the house during the financial year 2008-09 and thereafter ₹ 27,20,302.50 being 50% of the total sum so incurred has been debited to Mrs. Shashi Agrawal, mother-in-law and co-owner of the property to the extent of 50%. The l .....

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which is completely independent having no scope of manipulation should be accepted. Further, nothing was brought on record to show that the amount of investment shown in the final Balance Sheet is not correct. In such circumstances, the addition made on the basis of incomplete and incorrect report generated by the accounting software before finalization of the accounts is not justified. In this regard, detailed submissions were made before AO dated 28.11.2011 & 16.12.2011 respectively, stat .....

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e final Balance Sheet shows that after making all entries of construction expenses to the extent of ₹ 54,40,605/-, its 50% being ₹ 27,20,302.50 has been charged to Mrs. Shashi Agrawal, co-owner of the house. Thus, the overall investment of ₹ 54,40,905/- made as per books of account is more than amount of ₹ 38,76,974/- found recorded in the Balance Sheet report found during the course of survey. The observation of the Assessing officer that the sum of ₹ 38,76,973.50 .....

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king the said print out of the Balance Sheet report) can be made as under: Amount outstanding as Loans & Advance (Assets) Rs.2,27,53,680.50 Less: Amount charged to Shashi Agrawal in respect of Purchase of property Rs.2,10,63,810.00 Balance Amount charged in respect of renovation exp. ₹ 16,89,870.50 As explained by the assessee during the course of assessment proceedings, the said Loans & Advances (Assets) shown in the Balance Sheet of the assessee represent the amount debited to Sh .....

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ed that no conclusion should be drawn on the basis of it as it does not give true and fair picture of the states of affairs of the assessee. The final Balance Sheet only gives the true and correct picture as the same is supported with the necessary documentary evidences. Therefore, the AO s observation regarding ownership of the document has got no relevance. In view of the above it was submitted that the addition made by the Assessing officer of ₹ 11,56,671/- on account of investment in r .....

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that the AO has made this addition also on the basis of copy of the balance sheet found in the course of survey proceedings. As mentioned in the preceding paras, the documents found in the course of survey are presumed to be true. It is, however, a rebuttable presumption. As mentioned above, from the details furnished by the appellant various discrepancies have been noticed eg., entries with reference to loan etc. were not reflected in this balance sheet found during the course of survey. These .....

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ses declared by the appellant. There is nothing on record to show that the expenditure declared by the appellant was incorrect or suppressed by her. Hence, the addition made by the AO appears to be unjustified and is, accordingly, deleted. 14. We have heard the rival contentions and perused the material available on record. The subject property is jointly owned by the assessee along with her mother-in law and total expenses of ₹ 54,40,605 have been incurred and 50% thereof have been debite .....

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d the deletion of addition of ₹ 4,00,000/-made by AO on account of undisclosed investment in construction of house property. 16. Brief facts of this case are that during the course of survey, certain documents were found showing various payments aggregating to ₹ 4,00,000/- during the year under consideration on account of labour, material, grid, sand etc. Ld. AO concluded that since the payments were not reflecting in cash book, addition was made. 17. The ld AR invited our attention .....

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the papers are not written in the systematic manner so as to arrive at any conclusion. It was further submitted that the entire construction expenses are subject to valuation by the valuation officer. The valuation officer has agreed with the overall expenditure incurred by the assessee and therefore, the question of understatement of expenditure does not arise. It is thus prayed the order of Ld. CIT(A) may please be upheld on this score. 18. The relevant finding of the ld. CIT(A) is reproduced .....

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some nothings on the paper cannot be justified. 19. We have heard the rival contentions and perused the material available on record and don t find any infirmity in the order of the ld CIT(A). The ground of the revenue is thus dismissed. 20. In ground no. 4, the Revenue has challenged the deletion of addition of ₹ 20,00,000/- made by AO by treating the rental income as income from undisclosed sources. 21. Brief facts pertaining to this ground are that the assessee had let out the House No. .....

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,05,296/- rather made addition of ₹ 20,00,000/- by alleging that the said house property was 30 years old and since assessee has got constructed basement also, the house could not be rented. Further, the AO alleged that the house was let out to Gravita India Ltd., a concern in which husband of assessee is director. 22. The ld AR submitted that the assessee received rent from Gravita India Ltd., and therefore pursuant to assessment of rental income as Income from other sources, case of Grav .....

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ubsidiaries and joint Ventures in the audited Balance Sheet as on 31.03.2009. Further, on the basis of observations of ld. CIT(A) in appellate order that since valuation report was obtained after the construction work was completed, it cannot possibly determine the stages of construction. Hence, the observation of the AO that the building was not in a condition to be used in any manner does not appear to be factually correct , no addition was made by AO in case of Gravita India Ltd. In this scen .....

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e assessee purchased the site, some part of it was already constructed over it including basement, which is evident from sale deed, which describes that there was a house on site and covered area was 2135.75 sq. ft. From June 2008 onwards the said house was given on rent to M/s Gravita India Ltd. for a monthly rental of ₹ 4,00,000/-, which is evidenced by copy of lease agreement and confirmation from the lessee about the use of such building and open land for their business purpose. Thus M .....

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simultaneously a portion of building was let out. In other words, though alterations have been made but the assessee has used the old construction. By mutual understanding, the renovation work was managed in a manner so that there is no interruption in the company s work and vice versa. The Assessing officer has concluded that the entire old house must have been demolished for carrying out the construction at site on the basis of Valuation report furnished by Valuation officer dated 31.10.2011, .....

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assessee has further got it renovated and construction was carried out on open land. Further, it was mentioned that no information could be gathered as to whether the property was let out. A detailed submission along with the additional evidences in the shape of certificate of the architects were also submitted before the ld. CIT(A) which is reproduced at pages 18 to 22 of the appellate order. Ld. CIT(A) after obtaining the remand report from the AO has admitted the additional evidences and afte .....

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om the assessee in this respect. With regard to the inspector report it is submitted that he had made visit in December 2011 when the work has been completed and prima facie without having any technical knowledge nobody could judge what was and how old the earlier construction was existed. It was further submitted that M/s Gravita India Limited is a public limited company and the rent was decided on the basis of use of the property by the company wherein there are other shareholders also who are .....

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a Ltd. as income from other sources and accordingly denying the interest claimed of ₹ 18,05,296/-. It is thus prayed that the order of CIT(A) may please be upheld. 24. The relevant finding of the ld. CIT(A) is reproduced as under:- 12. I have considered submissions of the appellant, reports of the architect as well as Valuation Officer and have also gone through the assessment order. Since, the appellant was not given an opportunity by the AO to rebut the Valuation Officer s report, it is .....

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ot have been ready to be given on rent and, therefore, concluded that the rental receipt shown by the appellant was merely a tax avoidance mechanism. He, accordingly, treated the rental income as income from other sources. 12.1 A perusal of the report of the Valuation Officer shows that it was meant for determination of cost of construction and it did not dwell upon the issue of stages of construction. Moreover, since the report has been obtained after the construction work was completed, it can .....

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not militate against the fact that the building was given on rent. The whole addition, therefore, appears have been made only on the basis of conjectures and surmises and, hence, cannot be sustained. The addition is, accordingly, deleted. 25. We have heard the rival contentions and perused the material available on record. The limited issue under dispute relates to whether the property at C-137, Dayanand Marg, Tilak Nagar, Jaipur was actually let out during the year or not to M/s Gravita India L .....

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