TMI Blog2018 (10) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction in the matter. Addition on account of unexplained loan deleted - decided in favour of assessee. Addition on account of income from house property - Held that:- AO has been increasing the rent 10% every year which is not justified, which was even as per Rent Control Act, the rent could be enhanced after three years. In the absence of any justification or reasons, we are of the view that rent should not be enhanced every year by the AO particularly without there being any evidence with the AO. We may not note that in AY 2009-10, AO has made the addition of ₹ 3,77,520/- on account of income from house property for both these properties after allowing statutory deduction. It appears that assessee did not challenge the same computation before the appellate authorities. Therefore, considering the past history of the assessee and the annual rental value decided by the AO in preceding AY 2009-10 at ₹ 3,77,520/- for both the properties, we set aside the orders of the authorities below and direct the AO to adopt the same amount as income from house property in a sum of ₹ 3,77,520/- and make addition accordingly. The addition is, therefore, restricted to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of the written submissions filed by the assessee for admission of the additional evidences under Rule 46A along with the paper book containing additional evidences were sent to the AO for going through the contentions of the assessee, examination of the additional evidences filed and to submit his remand report. The AO submitted the remand report, which is noted in the appellate order in which the AO reported that a sum of ₹ 2,29,73,630/- was found credited in the books of the assessee. Out of this amount, assessee said to have been received loan of ₹ 2,20,75,000/- from M/s Ganpati Fincap Services P. Ltd. and interest of ₹ 8,98,630/- has been credited on account of that loan. It has been established during assessment proceedings of the assessee and assessment proceedings of M/s Ganpati Fincap Services P. Ltd. u/s 153C of the Act, that M/s Ganpati Fincap Services P. Ltd. did not have any real business activity. The material seized from the office premises of Sh. Aseem Kumar Gupta in the form of cash deposit slips, signed cheque books, documents containing details of accommodation entries, letter head/ letter pads of M/s Ganpati Fincap Services P. Ltd., etc. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. The CBDT has issued a circular that no statement be recorded during the course of search under threat or pressure without bringing any material on record. All the statements of Sh. Aseem Kumar Gupta along with other documents seized at his premises have been obtained at the back of the assessee and have never been provided to the assessee. The assessee has never been accorded an opportunity to cross examine Sh. Aseem Kumar Gupta. Therefore, such evidence cannot be relied upon in evidence against the assessee. The assessee relied upon the decision of Delhi High Court in the case of CIT vs. Divine Leasing Finance Ltd. 299 ITR 268 (Del.), decision of Supreme Court in the case of Kishanchand Chelaram vs. CIT 125 ITR 713, decision of Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC), decision of Delhi High Court in the case of CIT vs. Value Capital Services (P). Ltd. 307 ITR 332 (Del.) and others. 5. The Ld. CIT(A) considering the explanation of the assessee and material on record admitted the additional evidences. The Ld. CIT(A) thereafter, proceeded to decide the addition on merits. 6. It is noted by the AO that a sum of ₹ 2,29,73,630/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee reiterated the submissions already made before the authorities below. The written submission of the assessee is incorporated in the appellate order in which the assessee briefly explained that interest on the loan cannot be added. The amount of ₹ 15 lakh was paid by the assessee to the said party during the year under consideration and thus, the balance of the said party in the books of the assessee was ₹ 2,14,73,630/-. The amount was received through proper banking channel and duly deposited in the bank account of the assessee. At the year end i.e. on 31.03.2010, assessee showed that amount under the head unsecured loans on the liability side of the balance sheet in the name of M/s Ganpati Fincap Services P. Ltd. The assessee filed all the documentary evidences in support of the genuine loan received from the said party. The AO gave just three days time to file reply and the documents. Further queries were also raised, which were complied by the assessee. The assessee asked the AO to provide copies of the seized material evidence and the statements. The assessee filed copy of the loan agreement, confirmation of investor company, ledger account of investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is balance sheet to show the shareholding of the investor company was same in earlier year as well as in assessment year under appeal. There is no new fund received by the investor so there is no question of unaccounted amount received by the investor. The investor was summoned and assessee as a director was examined. The investor is an existing assessee and assessed to tax. Source of the loan amount received has been explained. The AO shall have to consider net worth of the investor company which is proved by the assessee for proving the genuine loan. No incriminating material found against the assessee. Interest received is declared as income. PB 158 is balance sheet, loan and advance account in the books of investor company shown in the name of the assessee under the head loans and advances . The discrepancy in the addition has been explained. Substantive addition has been made in the case of Sh. Manoj Kumar also as per assessment order dated 27.12.2011 in his case. Ld. Counsel for the assessee relied upon the same case law as have been relied upon before the authorities below. 10. On the other hand, Ld. DR relied upon the order of the AO and submitted that investor is a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h various documents seized at his premises have been obtained at the back of the assessee and have never been provided to the assessee. Even the assessee has never been accorded an opportunity to cross examine Sh. Aseem Kumar Gupta. The assessee, therefore, pleaded that action of the AO of passing the assessment order is against principle of natural justice and the assessment order passed by the AO is liable to be quashed as nothing was confronted to the assessee at the stage of the assessment proceedings. There is no finding given by the AO on such submissions of the assessee in the remand order passed by the AO. The Ld. CIT(A) has also not dealt with the submissions of the assessee specifically in the appellate order. It is well settled law that any material evidence collected at the back of the assessee and not confronted to the assessee at assessment stage could not be read in evidence against the assessee. We rely upon the decision of the Hon ble Supreme Court in the case of Kishanchand Chelaram vs. CIT 125 ITR 713. The authorities below solely made addition against the assessee because of the material seized during the course of search from Sh. Aseem Kumar Gupta and his state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther paper book. Ld. Counsel for the assessee rightly pointed out that this addition cannot be made on the ground of source of the source as the AO himself has recorded a finding in the case of source of the source i.e. Sh. Manoj Kumar, that the cash deposited belongs to Sh. Manoj Kumar. AO noted in the case of Sh. Manoj Kumar that he had deposited cash in his bank account, therefore, total cash deposit of ₹ 18,81,45,000/- and ₹ 50,93,77,676/- as other deposits. Therefore, one substantive addition is made in the case of Sh. Manoj Kumar, no further addition should be made in the hands of the assessee. Therefore, there were no basis to make the addition against the assessee. In support of above findings, we rely upon the following decisions: i. CIT vs. Fair Investment Ltd., 357 ITR 146 in which it was held that A.O. did not summon investors and did not make efforts. There is no finding that material disclosed was untrustworthy. The Appellate Authorities rightly deleted the addition. ii. Decision of Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 in which it was held as under: If the share application money is received by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. vi. Decision of the Hon ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.No.21073 of 1999, in which it was held as under : We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. vii. Decision of Hon ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under: Dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified. ix. Decision of Hon ble jurisdictional High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held as under: Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ganj, New Delhi and (ii) 323, Patparganj, New Delhi. The AO noted that assessee has not declared rental income in respect of the above properties. Therefore, rental income in respect of these properties should be prima facie taken u/s 23(1)(a) of the Act. The assessee submitted that both these properties are used for business purposes of M/s Kapish Print Pack Pvt. Ltd. and M/s Chawla Packaging Pvt. Ltd. The AO, however, noted that assessee did not have any business income from both these companies. Therefore, rental income from these properties was taken at ₹ 6,22,908/- and after giving deduction u/s 24(a) of the Act, AO made addition of ₹ 4,36,036/-. The Ld. CIT(A) dismissed this ground of appeal of assessee. 14. Ld. Counsel for the assessee pointed out that there is an error in making addition. He has submitted that in AY 2009-10 AO has taken the net annual value of both the properties at ₹ 1,88,760/- each totaling to ₹ 3,77,520/- and by enhancing the same by 10%, has worked out the amount of ₹ 4,15,272/-. The AO, however, in respect of property no. (i) 323 Patparganj, New Delhi has taken it at ₹ 4,15,272/- and also taken fair rent of other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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