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TMI Blog2019 (7) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble High Courts and Apex Court." 3. Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of manufacturing and trading in chemicals and laminations under the name and style of M/s Arihant Industries and M/s Arihant Packaging. He filed his return of income on 30.09.2011 declaring total income of Rs. 16,04,290/-. The AO during the course of assessment proceedings observed that as per the AIR Information the assessee has deposited cash of Rs. 32,22,140/- in the bank account maintained with ICICI Bank. He, therefore, asked the assessee to explain the source of cash so deposited. It was submitted by the assessee that out of the above amount of Rs. 32,22,140/- deposited in ICICI Bank an amount of Rs. 15,39,800/- was deposited by the outstation Debtors. Purchases were made against such sale amounting to Rs. 14,63,984/-. The assessee earned a profit of Rs. 75,816/- which was not shown while filing the return of income and, therefore, the assessee wants to surrender the same. However, the AO was not satisfied with the explanation given by the assessee on the ground that no details of parties to whom the sales were made, no confirmations w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he unaccounted sale of Rs. 32,22,140/- was of Rs. 14,63,984/-. In the letter dated 27/01/2016 the assessee has mentioned that in absence of complete records his unaccounted income should be computed at 8% of the sales as per the provision of the 44AD of the I.T. Act. The contention of the assessee is not tenable. The assessee has been changing his stand from the very beginning as mentioned above. The total turnover of the assessee is more than Rs. 2 crore much beyond the limit prescribed in section 44AD. The so called business of trading in chemicals done by the assessee through ICICI Bank account was totally unaccounted. Assessee never bothered to disclose the business in his return of income. From the conduct of the assessee it is crystal clear that the assessee wanted this business to remain hidden from tax authorities from the very beginning. He never intended to pay tax on this business. It was only after the AO confronted the assessee with AIR information, the assessee admitted having the bank account and having cash transactions therein. It was only when the assessee was cornered by the AO the assessee came up with the explanation that he was doing trading of chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as himself given cash flow statement. The deposits and withdrawals have remained same even after receipt of reply from ICICI Bank. The reply of ICICI Bank made it clear that the cash deposited in ICICI Bank account was not out of earlier cash withdrawal. However, the amount and place of cash of deposits do indicate that these may be sale proceeds of some business carried out by the assessee. It implies that there must be purchases also to enable the assessee to make sales. If the assessee's version of unaccounted purchases of Rs. 14,63,984/- is believed, it will result in unaccounted profit of Rs. 32,22,140 - Rs. 14,63,984 = Rs. 17,58,156/-. In my view the addition on account of unaccounted cash deposits should be restricted to Rs. 17,58,156/-." 5. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. 5.1 The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A). He submitted that before AO and the CIT(A) the assessee explained the amount deposited in the ICICI Bank which is basically out of the receipts of unaccounted sales as well as cash in hand. He submitted that the assessee filed the reconciliation reflecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n him, therefore, the assessee cannot be given the benefit of the peak credit. For the above proposition the Ld. DR relied on various decisions. He, accordingly, submitted that since the CIT(A) has given substantial relief to the assessee for which the Revenue is not in appeal before the Tribunal, therefore, the order of the Ld. CIT(A) should be upheld and the grounds raised by the assessee should be dismissed. 7. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made an addition of Rs. 32,22,140/- being the cash deposited in the ICICI Bank account of the assessee on the ground that assessee could not explain the nature and source of such deposits to his satisfaction. While doing so he rejected the claim of the assessee that out of such deposits an amount of Rs. 15,39,800/- was deposited by the out station debtors and the assessee had made purchases of Rs. 14,63,984/- and has earned an amount of Rs. 75,816/-. We find the Ld. CIT(A) after considering the various submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit along with bills of contractor and ledger account of material suppliers. The AO deputed the Inspector to report on the status of the construction. The Inspector reported that the plot is lying vacant and there is no construction work carried over the said plot. The AO, therefore, confronted the same to the assessee. The assessee replied that the building could not be constructed due to non-sanctioning of the plan although the intention of the assessee were to construct the residential house. The AO rejected the argument of the assessee and held that the assessee has not fulfilled the condition laid down in section 54F. He, therefore, made an addition of Rs. 9,54,544/- to the total income of the assessee. 11. In appeal, the Ld. CIT(A) upheld the action of the AO by observing as under: - "Ground no. 3 : is against disallowance of Rs. 9,54,544/- u/s 54F. As mentioned above the assessee had claimed deduction of Rs. 9,54,544/- out of long term capital gain earned on sale of property at plot no. 95, phase-4, sector 56, HSIIDC, Kundli, Haryana. For claiming deduction u/s 54F the assessee claimed that he purchased residential property at B-B10/28A, TDI city, Kundli, Haryana. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that assessee has not fulfilled the conditions of the said section by not constructing the house property as claimed. We find the CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assessee that as per the provisions of section 54(1) of the I.T. Act, 1961, the assessee is entitled to utilize the long term capital gain for construction of a house property within a period of 3 years and, therefore, addition, if any, can be made only in the AY 2015-16 and no addition can be made in this year. For the above proposition, he relied on the decision of the Kolkata Bench of the Tribunal in the case of Mahesh Pal Arora vs. ITO vide ITA No. 206/Kol/2013 order dated 29.03.2016. However, we do not find any merit in the above argument of the Ld. Counsel for the assessee. We find neither the assessee has constructed the house property during the year as claimed nor deposited the long term capital gain of above amount in the specified capital gain accounts scheme. Therefore, when the assessee has not fulfilled the conditions laid down in section 54F the argument of the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... car insurance, communication expenses, interest on car loan, vehicle running & maintenance expenses and depreciation on car in the facts and circumstances of the case." 20. After hearing both the sides, we find the AO disallowed an amount of Rs. 80,979/- being 20% of the following expenses for want of details and probable personal use: - 1. Car Insurance Rs. 16,054/- 2. Communication Exp. Rs. 57,212/- 3. Interest on car loan Rs. 92,567/- 4. Vehicle running & maintenance Exp. Rs. 45,470/- 5. Depreciation on car Rs. 1,93,590/- Total Rs. 4,04,893/- 21. We find the Ld. CIT(A) upheld the action of the AO for which the assessee is in appeal before the Tribunal. 22. We have heard the rival arguments made by both the sides. It is an admitted fact that the AO disallowed 20% of the above expenses on account of probable personal use on estimate basis, which has been upheld by the CIT(A). In our opinion, the disallowance at 20% of the expenses on ad-hoc basis appears to be on the higher side. We, therefore, restrict the disallowance to 10% of the expenses i.e. Rs. 40,489/- as against Rs. 80,979/- upheld by the CIT(A). The ground raised by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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