TMI Blog2018 (1) TMI 1519X X X X Extracts X X X X X X X X Extracts X X X X ..... have no merit. Since the Revenue fail on this legal issue, all the said grounds raised by the revenue have to be dismissed. Addition on account of Foreign Travel Expenses - CIT-A deleted the addition - CIT(A) gave part relief to the assessee - HELD THAT:- We find the reasoning given by the CIT(A) in his order is a well reasoned one. The amount of ₹ 10,000/- considered by the CIT(A) on account of hotel expenditure, as having sponsored by the insurance company needs no interference. It is also a fact that AO made the addition only on estimation basis. Disallowance of interest expenditure - AO made addition as the amount which was paid by the assessee as interest on his borrowed loans - HELD THAT:- CIT(A) noted since the assessee has only shown total income of ₹ 3,20,000/-, the CIT(A) was of the opinion that only ₹ 2,00,000/- should be considered as working capital and accordingly, computed the interest paid on borrowings at ₹ 13,89,872/- on pro-rata basis which works out to ₹ 1,60,560/-. Thus, ₹ 1,19,818/- is upheld. We find the conclusion given by the CIT(A) after taking into cognizance the capital account and balance sheet of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FDR kept with the UCO Bank was not offered to tax. As examined the computation of total income and it is seen that appellant has offered interest of ₹ 5,807/- as interest on FDR with the UCO Bank. Therefore, estimated addition of ₹ 6,000/- made on this ground stands deleted Disallowance of interest expenditure - HELD THAT:- CIT(A) correctly held that the disallowance of interest is uncalled for considering the assessee s own funds and the jurisdictional High Court judgment in the case of RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] Estimation of net profit @6% - HELD THAT:- Having considered the fact that AO was in possession of the books and there was no material with the AO to disturb the concluded assessment. CIT(A) also examined the letter received from the AO that the assessee produced books of account before him. Further, relying on the judgment of Hon ble Bombay High Court in the case of Murli Agro Products, [ 2010 (10) TMI 1052 - BOMBAY HIGH COURT] . CIT(A) deleted the entire addition. We have already dealt with the same issue while dealing with the issue of violation of Rule 46A of the I.T. Rules, 1962 - Considering reasoned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition on account of interest of purchase of land - addition deleted by the CIT(A) - HELD THAT:- It is evident that the loan is actually squared up by 01-04-2010 relevant to A.Y. 2011-12. No interest is accrued in principle due to the said squaring up of the loan. Notwithstanding the same, assessee has a strong capital base to the tune of ₹ 1.09 crores and the presumption laid down by the jurisdictional High Court in the case of Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] that no funds are utilized for payments towards investment in the land. Considering the above discussion given by the CIT(A) while deleting the addition, we find the order of CIT(A) is a well reasoned one and therefore, it does not call for any interference. - ITA Nos.629 to 634/PUN/2016 - - - Dated:- 17-1-2018 - Shri D. Karunakara Rao, AM And Shri Vikas Awasthy, JM For the Appellant : Shri T. Vijaya B. Reddy For the Respondent : Shri Devendra Kulkarni ORDER PER BENCH : There are six appeals under consideration involving assessment years 2006-07 to 2011-12. All the appeals are filed by the Revenue against the consolidated order of CIT(A)-12, Pune, da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 4,15,841 9,13,070 2008-09 1,53,741 7,02,330 2009-10 11,99,778 26,07,330 2010-11 15,48,638 88,00,180 2011-12 13,25,420 1,62,58,260 5. During the proceedings before us and at the outset, in response to the query from the Bench regarding identification of the said additional evidences which was admitted at the back of the AO or in contravention to Rule 46A of the I.T. Rules, 1962, Ld.DR for the Revenue fairly submitted that the fact of CIT(A) granting relief to the assessee deleting all the additions on merits admitting the additional arguments raised before the CIT(A) for the first time not raised before the assessing authority, amounts to admission of the additional evidences. Therefore, Revenue is in appeal before the Tribunal for adjudication of the issue. 6. In response, Shri Devendra Kulkarni, Ld. AR for the assessee submitted that assessee never filed any evidences per se but only submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O for months, the assessing officer cannot allege that the books of accounts were not furnished by the assessee on this issue of addition of ₹ 4,35,741/-, we find the Ld.CIT(A) granted relief on the basis of the binding judgment of jurisdictional Hon ble High Court. 9. Similar is the case with other additions deleted by the CIT(A). From this point of view, the contravention of the provisions of section 46A of the I.T. Rules, 1962 is not raised on correct facts. Revenue could not demonstrate, atleast one crucial document which goes to the root of the matter admitted by the CIT(A) at the back of the AO and without calling for remand report, if any. Therefore, we are of the view that grounds raised by the Revenue in this appeal have no merit. Since the Revenue fail on this legal issue, all the said grounds raised by the revenue have to be dismissed. However, on merits also, grounds relating to various additions are being dealt in the following paragraphs. 10. Ground No.2 by the revenue relates to deletion of ₹ 10,000/- by the CIT(A) on account of Foreign Travel Expenses. 11. Facts relating to this issue include that during the course of assessment proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A). 14. Relevant facts of this issue are that assessee is a partner in M/s. Chaudhari Automobiles. During the year under consideration, assessee received remuneration of ₹ 72,000/- and interest on capital of ₹ 1,35,394/-. Assessee borrowed some loans from Bank of India and Tapi Society and paid interest of ₹ 2,80,378/- and claimed the same as business expenditure. AO rejecting the explanation given by the assessee made addition of ₹ 2,80,378/- in the hands of assessee. CIT(A) gave part relief to the assessee. Aggrieved with the order of CIT(A) the Revenue is in appeal before us. 15. On hearing both the sides and on going through the orders of the revenue authorities, we find the AO made addition of ₹ 2,80,378/-, the amount which was paid by the assessee as interest on his borrowed loans. Assessee drew the attention of CIT(A) to the balance sheet and the capital account of the assessee and tried to justify the claim of ₹ 2,07,394/- as set off of the interest expenditure against the remuneration and interest on capital derived from the firm. Assessee also tried to explain that he has ₹ 11,22,205/- as cash in hand and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, CIT(A) deleted the addition. Aggrieved with the said order of CIT(A) the Revenue is in appeal before us. 18. We heard both the sides and perused the orders of the Revenue on this issue. On going through the order of CIT(A) on this issue, we find it relevant to extract the relevant operational lines from the finding of the CIT(A) in Para No.7.3 of his order and the same reads as under : 7.3 . . . . .I find merit in the contention of the applicant. It was noted that the AO did not permit personal hearing to the authorized representative of the appellant to explain the transaction on the pretext that appellant could not authorize more than one representatives u/s.288(1) of the Act and on the other hand did not verify the documents of purchase of the property in question and assumed that since property was not appearing in the balance sheet hence it was purchased on the date of valuation itself. No enquiry was conducted with the lending bank or with the valuer of the property. No evidence was found during the search to reach to the conclusion that investment was made during the year under consideration. On the other hand, appellant had satisfactorily demonstrated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee during assessment proceedings, despite being given opportunity? 22. Ground No.1 by the revenue relates to the relief granted by the CIT(A) in connection with the claim relating to Foreign Travel expenses . Relevant facts include that the assessee visited Singapore and Mauritius and claimed expenditure on account of Foreign Travel. AO disallowed the said expenses incurred by the assessee in connection with his travel to Singapore and Mauritius for want of details and the source of funds. Assessee could not demonstrate the same except stating that the expenditure was sponsored by the insurance companies. No details were furnished in support of the same. During the First Appellate Proceedings, assessee furnished copies of the emails sent by John Deere Equipments Pvt. Ltd. Emails were addressed to M/s. Chaudhari Motors in respect of Mauritius tour. Basically, for want of details, CIT(A) deleted the addition of ₹ 79,000/- and confirmed the balance of ₹ 1,73,000/-. 23. During the proceedings before us, Ld. DR for the Revenue relied heavily on the order of the AO. On the other hand, Ld. AR for the assessee drew our attention to the speaking order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - as interest on FDR with the UCO Bank. Therefore, estimated addition of ₹ 6,000/- made on this ground stands deleted. Ground raised by the appellant is allowed. 27. Considering the above, we find the order of CIT(A) is fair and reasonable and does not warrant any interference. Accordingly, Ground No.2 is dismissed. 28. Ground No.3 relates to deletion of addition on account of disallowance of interest expenditure amounting to ₹ 2,39,227/-. Relevant facts include that the assessee claimed the above interest expenditure as business expenditure against the interest and remuneration received from the firm. AO disallowed the claim as per the discussion given in Para 11 of his order. During the First Appellate proceedings of CIT(A), assessee made written submission and the same relevant portion are extracted in Para No.16 of the order of CIT(A). On considering the same, CIT(A) held that the disallowance of interest is uncalled for considering the assessee s own funds and the jurisdictional High Court judgment in the case of Reliance Utilities and Power Ltd. 313 ITR 340. For the sake of completeness of this order, relevant finding of CIT(A) is extracted as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.2. The FDR in question is one and the same. We have upheld the decision of CIT(A) in the said assessment year. Following the same reasoning and considering the commonality of the factual matrix, we delete ground No.1 raised by the Revenue in this year too. 34. Ground No.2 by the Revenue relates to disallowance of interest expenditure of ₹ 2,76,279/-. The facts relating to this ground are identical to the facts discussed in Ground No.3 of the appeal for A.Y. 2007-08. We granted relief to the assessee in that assessment year relying on the ratio of the Reliance Utilities and Power Ltd.(supra). 35. On hearing both the sides, we find this issue as well as the facts are identical to the Ground No.3 of appeal for A.Y. 2007-08. We have upheld the decision of CIT(A). Following the same reasoning, we delete ground No.2 raised by the Revenue in this year too. 36. In the result, appeal of the revenue is dismissed. ITA No.632/PUN/2016 A.Y. 2009-10 37. Grounds raised by the Revenue are as under : 1. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of undisclosed interest in FDR amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the foreign tour expenses amounting to ₹ 3,95,800/- by admitting additional evidence under rule 46A of the I.T. Rules, ignoring the fact that the assessee had not furnished the relevant documents in spite of opportunities given during assessment proceedings and despite being given specific instruction? 2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'disallowance of interest on purchase of land' of ₹ 1,20,000/- without appreciating the fact that the prime purpose for making investment remains unproven even in appellate proceedings before the ld. CIT(A) ? 3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to ₹ 9,000/-? 4.Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'unproved agricultural income' of ₹ 1,06,535/-? 5. Whether on the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm M/s. Choudhari Automobiles which stood at ₹ 46,31,842/- as on 31-03-2010. Investment in the firm is considered for the purpose of business as appellant had offered interest and remuneration of ₹ 5,36,663/- from the firm under the head income from Business and Profession. However, other investments including the investment in the shares of M/s. Choudhari Cars Pvt. Ltd. are treated as personal investment not related to carrying out of business. In this manner, personal investment nor related to business of the appellant at ₹ 42,01,935/- (₹ 88,33,777 ₹ 46,31,842) as against capital of ₹ 55,74,186/-. Hon ble Bombay High Court in the case of Reliance Utility Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment sand at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. Since the capital of appellant is more than the personal investments no disallowance of interest u/s.36(1)(iii) is called for. Addition of ₹ 1,20,000/- is deleted and ground raised by the appellant is hereby partly al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons not based on material gathered during the search or during the course of search assessment are not permitted on view of the findings of Hon ble Bombay High Court in the case of Murli Agro Products (supra). Hence, addition made by the AO on adhoc and estimated basis is deleted and ground raised by the appellant is allowed. 54. From the above, it is evident that the AO made the addition on estimation basis and there was no incriminating material gathered during the course of search. Therefore, we find the order of CIT(A) in deleting the addition is reasonable. Thus, we uphold the order of CIT(A) and the ground No.4 raised by the revenue is dismissed. 55. Ground No.5 raised by the revenue relates to addition of ₹ 6,12,002/- made by the AO adopting the net profit rate of 6% rejecting the assessee s book results. AO claims that the assessee has not produced the books of account before him. The arguments/counter arguments are, similar to the Ground No.2 (Para 40 supra) already adjudicated by us for A.Y. 2009-10. 56. After hearing both the sides, we find this ground is identical to Ground of appeal No.2 raised by the Revenue in A.Y. 2009-10. It is the case of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the addition of ₹ 4,03,573/- made by estimating NP @ 6%, ignoring the fact that the assessee did not produce books of accounts for verification during assessment proceedings, despite being given opportunity? 59. Ground Nos. 1 raised by the revenue is against admitting of the additional evidences by the CIT(A) in violation of Rule 46A of the Income Tax Rules, 1962. 60. On hearing both the sides, we find these grounds are identical to the grounds of appeal raised in ITA No.629/PUN/2016 for A.Y. 2006-07. We have already decided this issue against the revenue holding that CIT(A) has not admitted any additional evidences at the back of the AO. Therefore, on the same reasoning, the above grounds raised by the revenue are dismissed. 61. Ground No.2 raised by the Revenue relates to unrecorded advance receipt of ₹ 1 Crore on account of sale of property to Shri Ashok Vijaykumar Kotecha (M/s. Chaudhari Motors) which was deleted by the CIT(A) admitting additional evidence. 62. Relevant facts include that the assessee sold the land to Shri Anil Vijaykumar Kotecha admeasuring 7725.16 sq. mtrs, situated at Gat No.277/2 at Sakegaon, Taluka Bhusawal, Dist. Jalgao ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These facts have been disclosed by the assessee before the AO u/s.132(4) of the Act. It is the case of the revenue authorities that the assessee could not satisfactorily prove the said transaction and therefore, ₹ 1 crore should be added as income of the assessee as unrecorded advance received against sale of the property, thus prayed for reversing the order of CIT(A). 66. After going through the finding given by the CIT(A) in Para Nos. 54.2 and 54.3 on this issue, we do not find any iota of fault in the reasoning given by the CIT(A) deleting the addition of ₹ 1 crore. While deleting the addition, CIT(A) has considered all aspects; (1) Saudi pawtis dated 11-10- 2010 and 14-10-2010 (2) cancellation document (3) statement given by the assessee u/s.132(4) (4) confirmation of Shri Anil Kotecha cancelling the original transaction in response to the show cause notice issued by the AO. All these documents clearly suggest that the amount of ₹ 1 crore was returned back to Shri Anil Kotecha. Regarding the revenue s allegation that the CIT(A) admitted certain additional evidences, we find that no specific document was specified by the Ld. DR for the Revenue before us whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was less than the stamp duty valuation for the purpose. Merely on the basis of valuation done by the transferee company for the purpose of seeking finance from the bank, sale consideration cannot be assumed in the hands of transferor. There is specific provision u/s.50C of the Act for adopting deemed sale consideration which was not found applicable in this case. Addition made of ₹ 38,82,200/- on the basis of valuation report was not justified and therefore deleted. Ground raised by the appellant is hereby allowed. 70. On hearing both the parties on this issue and perusing the order of CIT(A), we find the above discussion of the CIT(A) reveal that ₹ 68,46,000/- is not the value as per the records of stamp duty authorities. The value of ₹ 68,46,000/- is the figure as per the registered valuer which is created for loan purpose and hence, it has no sanctity under the provisions of section 50C of the Act. It is the finding of CIT(A) that there is no evidence to demonstrate that the assessee received higher consideration than that of ₹ 29,63,800/-. On the facts of this case, we are of the opinion that addition of ₹ 38,82,200/- is unwarranted. Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made of ₹ 3,60,000 is directed and the ground raised by the appellant is hereby allowed. 74. From the above, it is evident that the loan is actually squared up by 01-04-2010 relevant to A.Y. 2011-12. No interest is accrued in principle due to the said squaring up of the loan. Notwithstanding the same, assessee has a strong capital base to the tune of ₹ 1.09 crores and the presumption laid down by the jurisdictional High Court in the case of Reliance Utilities and Power Ltd. (supra) that no funds are utilized for payments towards investment in the land. Considering the above discussion given by the CIT(A) while deleting the addition, we find the order of CIT(A) is a well reasoned one and therefore, it does not call for any interference. 75. Ground of No.5 raised by the Revenue relating to accrual of interest on FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08 vide Ground No.2. We have already decided this issue against the revenue and upheld the decision of CIT(A). Following the same reasoning, we delete ground No.5 raised by the Revenue in this assessment year. 76. Ground No.6 raised by the Revenue relating to unproved agricultural incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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