TMI Blog2017 (9) TMI 1704X X X X Extracts X X X X X X X X Extracts X X X X ..... nd facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has dismissed the appeal of the department and partly allowed the appeal of the assessee. 3. This court while admitting the appeals framed following substantial question of law:- Appeal No.108/2014 admitted on 12.5.2016 (I) Whether the ITAT order is perverse in deleting the entire addition of ₹ 1,11,00,000/- on account of unexplained investment in house property, ignoring the statement recorded u/s 132(4) of the assessee surrendering ₹ 1 crore on this point and also ignoring the logical computation of construction cost by the AO based on findings of fact? (ii) Whether the ITAT order is perverse in deleting the addition on account of disallowance of interest of ₹ 2,81,685/- ignoring that the assessee had claimed the deduction in the profit loss account of his business concern. In view of the above it is humbly prayed that the Hon ble Court may please to allow the appeal and quash/set aside the order of the tribunal (Annexure-3) and CIT (A) to the extent it is again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted litigation and to purchase the peace with the understanding that no penalty is levied in the circumstances. We also understand that the offer make would cover the expected income which may be found recorded in the seized papers. However we would wish to submit that the precise appointment of income (with reference to the time period covered under the Act) offered would be possible only after the necessary linking of the papers with each other and also the other papers/documents and records available in this respect. Thanking You Signed by Nirmal Kumar Agarwal and Damodar Das Agarwal 7.3 In post search proceedings the assessee was again examined u/s 131 of the IT Act where also he again admitted the facts of unaccounted cash advances. On due analysis of the seized papers it is further found and admitted by the assessee that he was omitting two zeors while recording the transactions on papers. Relevant question and answer of his statement dated 21.11.2009 u/s 131 of the IT Act is reproduced below:- 7.4 In reply Q. No.5 of his statement recorded on 21.11.2009 u/s 131 of the IT Act, 1961 he categorically admitted that these papers contained the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hearing both the sides, we have found the contention of the assessee regarding taking weight of jewellery during search is not correct inasmuch as in the valuation sheets/ inventory prepared during search and gross weight and net weight of jewellery found were taken but while considering the investment some confusion had occurred. The discrepancy in the weight taken is tabulated by the assessee in his written submission at page 2 as under:- Gross weight as per valuation sheets Net weight as per valuation sheets Conversion to 18/20/22 average 20 Ld. CIT(A). Deduction for impurity etc. (15%) Net Weight of Jewellery found Net Weight of jewellery as declared in the W.T. returns of the family for the year ended on 31.03.2008 filed on 31.07.2008 i.e. much before the search 10810.33 9803.81 7843.048 1176.457 6666.591 6315.120 Remarks Remarks Remarks Remarks Remarks Remarks It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that this observation of the ld. CIT(A) as asserted by the ld. DR supporting the reasons given by both AO and the ld. CIT(A) are not correct. In fact, there is no difference in the jewellery declared and found. The assessee has two sons who are not assessed under Wealth Tax Act and in view of the CBDT instruction dated 11-05- 1994, credit has to be given in their hands also. This deduction comes to 200 gms of jewellery being 100 gms for each male members in the Wealth Tax Act filed upto assessment year 2008-09 and search took place on 24-08-2009 which is almost after expiry of 17 months. We are in agreement with the ld. AR that during this period of 17 months, the acquisition of some jewellery in social ceremonies and other like occasions looking to the family of the assessee is not ruled out. As per CBDT instruction stated above, the other family members also get credit upto 1800 gms as there are two married ladies and two male members. For each married lady, 250 gms and each male members 100 gms credit has to be given. There is some dispute regarding giving credit as per instruction of CBDT in question. However, the Hon'ble Rajasthan High Court has clearly sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at page 33 of assessment order as under:- S.N. Page No. Amount of undisclosed advances 1 4 1,12,60,000.00 2 5 3,88,03,145.00 3 6 81,00,000.00 4 7 11,00,000.00 5 8 5,78,00,000.00 6 19 2,93,62,350.00 Total 14,64,25,495.00 It was argued before us by the ld. AR that impugned addition is based on loose papers at Serial No. 1 to 3 in the above table via pages 4,5, and 6 which are reconstructed pages pasted on plain paper which were found in the torn out condition and treated by the assessee as deaf and dumb and rough pieces of papers lying in the dustbin kept in the house of the assessee. These papers are marked as Annexure AS-1 pages no. 4 to 6 and 8. It was further argued that certain entries were also found noted on the back side of these pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ADIT in the post search enquiries wherein in the reply to Q.No.25, the assessee has stated these facts. The ld. CIT(A) has partly accepted the contention of the assessee. Regarding these entries being repetitive in nature but he has given part relief with reference to matching principle to the extent of ₹ 7,05,86,000/-. The action of the AO and the ld. CIT(A) is depicted in the following chart mentioned at page 8 of the assessee's written submission. Annexure AS-I page No. By AO By CIT(A) 4 1,12,60,000.00 53,00,000.00 5 3,88,03,145.00 6,00,000.00 6 81,00,000.00 - 7 11,00,000.00 1,10,000.00 8 5,78,00,000.00 5,78,00,000.00 19 2,93,62,350.00 67,76,000.00 Total 14,64,25,495.00 7,05,86,000.00 It was argued by the ld. DR that total withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t two entries at page 4 i.e. Vivek ` 50.00 lacs and Richa `3.00 lacs are not appearing at page 8. In this regard attention of Hon ble Bench is invited to chart submitted (APB-6 12) where these entries are reappearing at page 8, therefore, the observations of the Ld. CIT(A) deserves to be hold contrary to the facts and deserves no credence. Page No. 7: Attention of your kind honours is also invited to the statements of the assessee recorded u/s 132(4) on 25.08.2009 wherein in reply to question No. 18 (APB 82) the assessee has categorically admitted that he has omitted two zeros out of the amounts found recorded in the pages found and seized from his residence during the course of search, however, while making the additions AO at his own sweet will and without any basis or reasons has inflated the figures by adding 2, 3, 4 or 5 zeros for arriving at the fanciful figures to make such high pitched additions, e.g. at page No. 7 of Annexure AS-1, the total of the entries made on various dates in the month of June stated at 1100 [total upto 1/7] and if two zeros as per the practice of the assessee are added, the resultant figure comes to ₹ 1,10,000/-, however AO while de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Amount taken by AO Principal calculated Addition made 1. 1,080.00 1,08,000.00 10,80,000.00 90,00,000.00 1,00,80,000.00 2. 960.00 96,000.00 9,60,000.00 80,00,000.00 89,60,000.00 3. 420.00 42,000.00 4,20,000.00 35,00,000.00 39,20,000.00 4. 60.00 6,000.00 60,000.00 5,00,000.00 5,60,000.00 5. 360.00 36,000.00 3,60,000.00 45,00,000.00 48,60,000.00 6. 480.00 48,000.00 4,80,000.00 40,00,000.00 44,80,000.00 7. 1,260.00 1,26,000.00 12,60,000.00 1,05,00,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this regard it is submitted that this paper neither reflects that whether the amounts mentioned are receipts or payments and these are the simple memoranda entries made by some staff member for his / her own use without having any financial implication. Thus this paper is nothing but a dumb document. The major discrepancies in the approach taken by the Ld. AO as well as by the Ld. CIT(A) are as under: In the said paper No. 19 of Annexure AS-1 some amounts are appearing below the vehicle Nos. and all these figures are extrapolated by AO by adding two zeros giving impression that these vehicles have value of few lacs each (AO page 17 18 entries at Sl. No. 19 to 22) whereas all these vehicles are two wheelers having value not more than 40,000/- each. To prove the vehicles as Two Wheelers copies of registration certificate and other documents were submitted before Ld. CIT(A) (APB 16-21) who though accepted the contention of the assessee partly and work out the total advance at ₹ 67,76,000/-. While doing so Ld. CIT(A) has adopted pick and choose method and picked the product calculated at the bottom of the page where from the figure of 33,880/- appearing against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income of ₹ 10,00,35,045/- which is the cash found and seized from the aforesaid lockers and available with the assessee at his residence and business premises. The closing balance or the last balance appearing in the said pages i.e. for P ₹ 5,67,000/- [5,67,00,000 after adding two zeros] and for J ₹ 3,64,000/- [3,64,00,000 after adding two zeros]. A chart containing the day to day inflow and outflow of the funds from the said lockers is reproduced herein below, a perusal of which would reveal that the balance as on the date of search is matching with the cash physically found and seized and included in the additional income disclosed. Extract of Annexure AS-1 Page 17 Marked as 'P' Addition Deduction Balancing 5,60,000.00 5,60,000.00 60,000 5,00,000.00 50,000 4,50,000.00 55,000 5,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,000 2,99,000.00 50,000 2,39,000.00 15,000 2,54,000.00 31,000 2,85,000.00 10,000 2,95,000.00 10,000 2,85,000.00 30,000 3,15,000.00 26,000 2,89,000.00 1,00,000 1,89,000.00 89,000 1,00,000.00 25,000 1,25,000.00 30,000 95,000.00 55,000 1,50,000.00 45,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28,000 4,35,000.00 20,000 4,55,000.00 25,000 4,30,000.00 59,000 4,89,000.00 28,000 5,17,000.00 50,000 5,67,000.00 5,89,00,000 2,76,00,000 Attention of your honours is invited to the paper book page 15 wherein it is explained that the entries appearing in page 17 of Annexure A-7 are reproduced at page 16 of Annexure AS-1 and the entries appearing at page 16 are appearing at pages 4, 5 and 6 of Annexure AS-1 and entries contained in pages 4, 5 6 thus stood merged in page 8 of Annexure AS-1, therefore, it is submitted that the page 8 of Annexure AS-1 contains all the entries as were found noted in other pages i.e. pages 4, 5, 6, 7, 16 17 and therefore page 8 is required to be considered for working ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... daughter-in-law receives gold ornaments jewellery and other goods not only from parental side but in-laws side as well at the time of 'Vidai' (farewell) or/and at the time when the daughter-in-law enters the house of her husband. We can also take notice of the fact that thereafter also, she continues to receive some small items by various other close friends and relatives of both the sides as well as on the auspicious occasion of birth of a child whether male or female and the CBDT, looking to such cutoms prevailing throughout India, in one way or the another, came out with this Circular and we accordingly are of the firm opinion that it should also mean that to the extent of the aforesaid jewellery, found in possession of the varoius persons, even source cannot be questioned. It is certainly 'Stridhan' of the woman and normally no question at least to the said extent can be made. However, if the authorized officers or/and the Assessing Officers, find jewellery beyond the said weight, then certainly they can question the source of acquisation of the jewellery and also in appropriate cases, if no proper explanation has been offered, can treat the jewellery beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of search. All the ladies in the family admitted that the jewellery found were all their own and some of the jewellery was lying in custody and control of their mother-in-law and in Indian conditions, it happens that the daughter-in-law keeps her jewellery with her mother-in-law or/and head of the family and takes the same whenever required for some occasion in the family. Even otherwise, the jewellery is personal wearing in nature and the revenue has not placed any material on record to show that the items, which were found, were not personal wearing of the ladies. 9.2 In Commissioner of Income Tax vs. Prafulbhai@ Rohitbhai J. Shah reported in (2013) 33 taxman.com 147 (Gujarat) wherein Gujarat High Court held as under:- 3. When challenged before the Tribunal, it concurred with the findings of the CIT(A) by briefly holding that out of the total disclosure made for the block period by the assessee of ₹ 2.76 crore, the remaining jewellery was covered by the Board s Circular and was already reflected in the books of accounts. We see no reason to entertain this issue as we are convicted by the reasoning given by the CIT(A) at length and also the logic assigned by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate than that shown by the assessee in its books of account. The reasons recorded did not reflect that the Assessing Officer had applied his mind to the facts of the case to ascertain as to whether in fact the assessee had expended more amount towards construction as stated in the valuation report. Reverting to the facts of the present case, the Assessing Officer, except for referring to the profit and loss account, which as noted hereinabove, would not reflect any profit as the assessee had not claimed any profit, and to the balance sheet part of the return of income, the Assessing Officer has made no effort to ascertain as to whether, in fact, the assessee has expended more amount than disclosed in the return of income. In the opinion of this court, while the report of the DVO may form the foundation for reopening the assessment, there must still be some reasons which warrant holding the belief that income chargeable to tax has escaped assessment so as to necessitate issuance of a notice under section 148 of the Act. The facts reveal that the entire basis for reopening the assessment of the petitioner for the year under consideration is the report of the DVO without verification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the books of account, if any, maintained by him. 9. On a conjoint reading of the provisions of s. 69 and s. 142A of the Act, it appears that for the purpose of resorting to the provisions of s. 142A of the Act, the AO would first be required to record a satisfaction that the assessee has made investments which are not recorded in the books of account. As a necessary corollary, he would then reject the books of account as not reflecting the correct position and then proceed to make the assessment on the basis of estimation, for which purpose he can resort to the provisions of s. 142A of the Act and make a reference to the Valuation Officer for estimating the value of such investment. Thus, on a plain reading of s. 142A of the Act, it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable. Accordingly, the AO would first be required to reject the books of account before making a reference to the Valuation Officer. The rejection of books of account should precede the reference to the Valuation Officer. As rightly contended by the learned counsel for the assessee, the report of the Valuation Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decision has analyzed the concept of change of opinion and relevant extract deserves to be reproduced hereinafter: The concept of change of opinion on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessment Officer can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an inbuilt test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. 7. Coming back to the plea raised by the counsel for the revenue that Section 142Acame to be introduced at a later point of time and the cases which have been cited above were in the context of earlier provision and in the pre-amended Section 142Ahad no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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