TMI Blog2008 (5) TMI 739X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the learned CIT(A) erred in not accepting the explanation offered by the assessee that the expenditure of ₹ 50,000/- incurred on the education of daughter, Ms. Shilpa Singh was borne by his father (Grand Father of Ms. Shilpa Singh). Thus, the findings are unjust, unfair and deserve to be quashed. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition ₹ 1,39,087/- out of the total addition of ₹ 2,15,548/- and thereby giving relief of ₹ 76,461/- only for unexplained investment in the construction of house, without accepting the explanation offered by the assessee and without providing proper opportunity of being heard which is unjust, unfair and thus deserves to be deleted. 4. That on the facts and in the circumstances of the case, the charging of interest u/s. 234B of ₹ 73,883/- and u/s. 220(2) of ₹ 24,036/- after appeal effect is unjustified and not lawful. 5. That on the facts and in the circumstances of the case, the initiation of penalty proceedings u/s. 271(1)(c) is not justified. A.Y.: 2004-05: 1. That on the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus deserves to be deleted. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition ₹ 8,320/- being unexplained expenditure on the basis of LPS 3 without accepting the explanation offered by the assessee that this is the dumb document and not related with the assessee. Thus, the addition is unjust, unfair and deserves to be deleted. 4. That on the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition of ₹ 26,500/-, ₹ 4,300/- and ₹ 3,656/- aggregating to ₹ 34,456/- being unexplained expenditure on the basis of LPS 3, without accepting the explanation offered by the assessee that this is the dumb document and not related with the assessee. Thus, the addition is unjust, unfair and deserves to be deleted. 5. That on the facts and in the circumstances of the case, the charging of interest u/s. 234B of ₹ 24,901/-, 234C of ₹ 225/- and u/s. 220(2) of ₹ 9,975/- is unjustified. 6. That on the facts and in the circumstances of the case, the initiation of penalty proceedings u/s. 271(1)(c) is not justified. A.Y. 2006-07: 1. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation offered by the assessee that this is the dumb document and not related with the assessee. Thus, the addition is unjust, unfair and deserves to be deleted. 3. That on the facts and in the circumstances of the case, the charging of interest u/s. 234B of ₹ 7,065/-, 234C of ₹ 617/- and u/s. 220(2) of ₹ 3,638/- is unjustified. 4. That on the facts and in the circumstances of the case, the initiation of penalty proceedings u/s. 271(1)(c) is not justified. A.Y.: 2008-09: 1. That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in not considering that the assessment order passed u/s. 153A r.w.s. 143(3) of the Income Tax Act, 1961 is passed biasedly, in a hurried manner and without appreciating the fact and without considering the explanation offered by the assessee. Thus, the order passed is not a judicious order and thus deserves to be quashed. 2. That on the facts and in the circumstances of the case, the learned CIT(A) erred in sustaining the addition ₹ 1,74,000/- being unexplained investment in purchase of land on substantive basis without accepting the explanation offered by the assessee and withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. That on the facts and in the circumstances of the case, the initiation of penalty proceedings u/s. 271(1)(c) is not justified. SMT. SUDHA SINGH: A.Y. 2006-07: 1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the AO that the notice issued u/s. 153C and the assessment completed u/s. 153C rws 153A is invalid and bad in law because there was no proper basis for issuing the notice u/s. 153C. 2. That on the facts and in the circumstances of the case, the learned CIT(A) erred in not considering the income from craft and painting work shown by the assessee in the regular return filed and disregarding the statement of affairs attached with the returns which is prepared on the basis of income and bank statement comprising all the investment made by the assessee during the year. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of ₹ 34,035/- being unexplained investment in the purchase of shares, without considering the explanation offered by the assessee and without considering the fact that the same was reflected in the statement of affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee at 87, Chanakyapuri, Chunabhatti, Kolar Road, Bhopal, on 31.05.2008. In view of search case, the case was centralized with DCIT-1(1), Bhopal and notice u/s. 153A dated 16.07.2010 were issued to the assessee to file the returns for assessment year 2003-04 to 2008-09. The assessee filed returns as per detail as under:- 3. As regards assessment year 2009-10, the assessee has filed his return on 10.07.2009 u/s. 139 of Income-tax Act, 1961, and it was stated that the return already filed may be treated as the return filed u/s. 139. Subsequently, notices u/s. 143(2) of Income-tax Act, 1961, as also 142(1) were also issued alongwith detail questionnaire and assessments wren completed on 31.12.2010 and income was assessed as under:- 4. In the different assessment years, common grounds are taken by the assessee, therefore, all these appeals were heard together and are now decided by this consolidated order. 5. In the assessment order passed u/s. 153A r.w.s. 143(3) there were various addition out of which the CIT (Appeals) give part relief and in some of the grounds relief was not given. Besides others additions in different years there was a common and major addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision along with the purpose and purport of the said provision. Which is intricately linked with search and requisition u/s. 132 and 132A of the ACT, it is apparent that:- (a) The assessments or reassessment which stand abated in terms of second proviso to section 153A of the Act, the AD acts under his original jurisdiction, for which, assessment have to be made; (b) regarding other cases, the addition to the income has already been assessed, the assessment will be made on the basis of incriminating material and, (c) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made; Page 294 para 29 30 The argument of the Ld. Counsel that the A.O. is also free to disturb, income, expenditure or deduction de hors, the incriminating material, while making assessment u/s. 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Ss. 153A to 153C cannot be interpreted to be a further innings for the AD and/or assessee beyond provisions of Section 139 (return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012. xiv. Shankar R. Jhunjhunwala, Aurangabad vs. ACIT Cen, Circle, Aurangabad ITA No. 225/PN/11 order dated 31st July, 2012. xv. Hiren N. Patel, Mumbai vs. ACIT, CC-10, Mumbai, ITA No. 39 to 41/Mum/2010 order dated 12.10.2012. xvi. Atithi N. Patel, Mumbai vs. ACIT, Cen. Circle-10, Mumbai ITA No. 43/Mum/2010 order dated 22nd August, 2012 xvii. Bhagaram P. Mali vs. ACIT (OSD 1) Central Range-7, Mumbai, ITA Nos. 786 787/Mum/2013. xviii. Ganesh Grains Ltd. vs. DCIT Central Circle-V, Kolkata, ITA No. 176/Kol/2012 order dated 19.04.2013 xix. DCIT, Central Circle-3, Hyderabad vs. Kishore Sons Detergents Pvt. Ltd. ITA No. 18171 to 1820/12 order dated 27/09/2013 xx. Kusum Gupta vs. DCIT, Central Circle-15, New Delhi ITA Nos. 4873/Del/2009 order dated 28.03.2013. xxii. ACIT Central Circle-4, New Delhi Vis PACL India Ltd., ITA No/2637/DEL/2010 order dated 12/07/2013. xxii. M/s. Tarannum Zaar Khan vs. ACIT, CC-43, Mumbai ITA Nos. 5888 to 5890/Mum/2009 order dated 12.07.2013. xxiii. ACIT Central Circle, Agra vs. Vacmet Packaging (India) Pvt. Ltd. ITA No. 405 406/Agra/2012 order dated 14.12.2012 xxiv. Vee Gee Industrial Enterprises New Delhi vs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Tribunal was right in law in cancelling the penalty. The relevant law has remained unchanged. The Madras ruling is merely an exposition of that law and as that ruling is not binding on us, we can ourselves see as to what is the correct legal position. The High Court, in dealing with a reference, is not pinned down to the rulings available or the interpretation in vogue at the time when the Tribunal decided the case and it is the High Court's duty to answer the point of law referred after taking into account all relevant material up-to-date. It is true that the question relating to the constitutional validity of a provision of the Act cannot ordinarily be examined in a reference but the position is different when, as in the instant case, the constitutional validity has already been examined by three High Courts under Art. 226 and one of them has declared the provision to be invalid. In the circumstances of the instant case, it is not possible to decide the reference without going into the question of the constitutional validity. 10. The ld. Authorized Representative also invited our attention to the assessment order itself to show that no incriminating material was refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local rates, self-supervision and for material directly purchased by the assessee. Considering the totality of the facts and circumstances noted above, it would be reasonable and appropriate that instead of deduction of 30% granted by the ld. CIT(A) the deduction to the assessee should be granted at 40% in all. 12. Similarly, in the case of Rajeev Mewara vs. ITO, I.T.A.T., Indore Bench vide its order dated 27th March, 2009, in I.T.A. No. 234/Ind/2007 held that the rate difference between the CPWD and local PWD, deduction of 30% should be allowed and apart from on account of contractors' profit, use of own infrastructure, further deduction of 20 % is to be allowed. 13. In view of the above judicial pronouncements and applying the same to the facts and circumstances of present case, it will be quite reasonable to allow deduction of 25 % on account of rate difference between CPWD and local PWD/self supervision/direct procurement of material at a cheaper rate. After allowing deduction of 25 %, no addition will survive. Accordingly, we direct the Assessing Officer to delete the addition made on account of cost of construction of the house, in different assessment years under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional expenses was first time, asked by the Assessing Officer only on 7.12.2010, and at the same time, it was clarified that same was borne by his father Shri Ram Govind Singh and when the Assessing Officer asked to file the supporting evidence, the assessee has duly filed affidavit of his father, who at the relevant time was aged 74 years. The affidavit filed was duly sworn in the presence of witness and nothing was brought on record by the ld. Assessing Officer to disbelieve the affirmation made in the affidavit. 17. After considering the material and documentary evidence as placed on record, we are of the opinion that expenses on education of daughter was borne by her grand father with whom she was living. When an affidavit is filed by the assessee and it neither cross examined on that point nor he was called upon by the Department to produce any documentary evidence, assessee may assume that income tax authorities are satisfied with the affidavits, a sufficient proof on the point in question, as held in L. Sohanlal Gupta, 33 ITR 786 (Alld). The same proposition is followed by the Jurisdictional High Court in the case of CIT Vs. STI Extrusion (P) Ltd. (2011) 333 ITR 269 and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 132(4) infact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to make declaration of undisclosed income of ₹ 20 lacs. Mere reading of statement of assessee is not the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase of Sarees by wife of assessee Smt. Sudha Singh from Agarwal Sarees addition of ₹ 8,320/- were made and confirmed by ld. CIT(A). It was explained before the ld. Assessing Officer that assessee's wife is a regular income tax payer and before search. She has filed the return of income for the assessment year 2006-07 and 2007-08 on 4.12.2006 and 23.07.2007 respectively by showing the income from craft and painting and the returns for the assessment year 2003-04 to 2005-06 was not filed before the search due to the reason that her income was below taxable limit. The ld. Assessing Officer has not accepted the contention of the assessee by stating that after the assessment year 1996-97 no return of income was filed before the search, thus, same could not accepted. However, the ld. CIT accepted that the return for the assessment year 2006-07 and 2007-08 showing income from craft and painting were filed before the search after verifying the acknowledgement for filing of returns of these years. However, he allowed credit for income from craft and painting work in cash only in respect of income shown in the return filed prior to search and specific withdrawal made from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Craft and Painting work for these years are liable to be allowed. 29. An addition of ₹ 34,456/- was also made on the basis of LPS-3, details of which were as under:- 30. In this regard, it was contended that LPS-3 was an estimate which will be clear from the said loose paper itself. On the said loose paper neither the name of purchaser or seller is given. Moreover on these loose paper no where it is mentioned that it is related to purchase of Gold Article. The fact that it is not related to Gold Article also prove from the fact that in the financial year 2004-05. The rate of gold was ₹ 606/- to ₹ 618/- which can be verified from the rate given in the V.J. Mehta Ready Reckoner. The calculation given on the said loose paper is also not correct which will be clear from the fact that if we multiply 43.100 x 560 the same works out to ₹ 24,136/- instead of ₹ 26,500/- on the said loose paper no where it is mentioned that ₹ 24,500/- is paid and ₹ 2,000/- is outstanding as presumed by the ld. Assessing Officer and ld. CIT(A). Thus, it is nothing but a dump document and the addition is made only on the basis of assumption and presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or daughter from the bank. It was explained before the Ld. Assessing Officer that assessee's wife is a regular Income Tax payer and before search she has filed Return of Income for the assessment year 2006-07 and 2007-08 on 04.12.2006 and 23.07.2007 respectively by showing the Income from Craft and Painting and the Returns for the Assessment Year 2003-04 to 2005-06 was not filed before the search due to the reason that her income was below Taxable Limit and similarly assessee's daughter Ku. Shilpa Singh has also not filed her return of income prior to the search as her income was also below the taxable limit. The Ld. Assessing Officer has not accepted the contention of the assessee by stating that after the assessment year 1996-97 no return of income was filed before the search, thus same could not be accepted, he also doubted the assessee's source of income from painting and assessee's daughter's source of income from Architectural work and thereby refused to accept the Income from painting of assessee's wife and daughter from Architecture work which were received in cash and considered the said income in the Statement of Affairs. 36. It was further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate for the simple reason that they have not made the entries in their books of accounts or their statement are taken by giving a undue pressure. This fact shows that the income from Architectural work shown by Ms. Shilpa Singh in her return of income filed in response to notice u/s. 153A is genuine. As to the contention of the Ld. Assessing Officer and Ld. CIT(A) that the credit for the income from Craft work and Painting in case of Smt. Sudha Singh and Architectural work in case of Ms. Sudha Singh will be allowed only if the return of income is filed before the search. In this regard it is submitted that Smt. Sudha Singh has not filed her return for the assessment year 2003-04 to 2005-06 and Ms. Shilpa Singh for any of year prior to the search for the simple reason that their income was below taxable limit and as per the decision of Jurisdictional High Court in the case of CIT vs. Vimal Khatri 288 ITR 168 and CIT vs. Smt. Maya Chotrani 288 ITR 175 it was held that if income in those assessment years in which the return was not filed before the search below the Taxable limit. The income of that year shall not be treated as undisclosed income. Reliance is also placed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered in the hands of these ladies. We direct accordingly. 44. In the assessment year 2008-09, an addition of ₹ 1,74,000/- was made on account of unexplained investment in purchase of land by assessee's daughter Ms. Shilpa Singh. In this regard it was submitted by Ld. AR that the assessee's daughter Ms. Shilpa Singh purchased Agricultural Land measuring .094 hectares at Gram Kaushalpura for ₹ 1,50,000/- from Shri Saiyed Iftekhar Ali resident of Idgah Hills, Tehsil Hujur, Bhopal on 15.05.2007. 45. It was further submitted that assessee's daughter Ms. Shilpa Singh is regular Income Tax payer and filed her return of income for the assessment year 2008-09 on 16.07.2008 i.e. within statutory time limit and the purchases of said land along with registration expenses is duly appearing in her return of income kindly refer to page 34 to 37. The payment is also made by Ms. Shilpa Singh by her Bank Account. And her assessment was also completed u/s. 143(3)/153C of the I.T. Act. 46. Further contention of ld. Authorized Representative was as under:- The assessee has also informed to his employer that his daughter Ms. Shilpa Singh who is a qualified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is paste by the Ld. A.O. on page 45 to 48 of the Assessment Order. The Ld. A.O. has neither examined to the registering Authority nor to the seller to bring the truth in this regard otherwise the fact regarding that the consideration of only ₹ 1,50,000/- is paid will be clear to the Ld. A.O. during the course of assessment proceedings itself. But as the Ld. A.O. was bank upon to make high peach assessment with the object to create a substantial demand against the assessee he had not examined them. 47. The ld. CIT DR relied on the orders of lower authorities and contended that unexplained investment in purchase of land was found during course of search, therefore, addition of ₹ 1,74,000/- was correctly made by the Assessing Officer, which was confirmed by the ld. CIT(A). 48. We have considered the rival contentions and have gone through the statement recorded during the course of search. We found that from the statement of Sub Registrar and so also witnesses and the affidavit of witnesses it is clear that the assessee's daughter has purchased the Agricultural land for a consideration of ₹ 1,50,000/- which is mentioned in original sale deed suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view above discussion. 51. Reliance was placed by the ld. Authorized Representative on the following judicial pronouncements:- (a) ITO vs. Hanuman Poddar Ors. (2005) 98 TTJ (Asr) 705. In the instant case it was held that addition jottings on loose paper found during survey operation-entries found on loose papers recovered from the premises of the assessee, when the name of any assessee did not appear on these papers and there is no material or evidence on record to corroborate that these entries represent undisclosed income, investment or expenditure of the assessee's Addition deleted. (b) Suresh Vyas vs. Asstt. CIT (2008) 113 TTJ (Jod-Trib) 337. In the instant case it was held that figures written on seized plain paper without any detail or narration could not be treated as undisclosed income of the assessee. 52. We have considered the rival submissions and found from record that LPS-3 indicate purchase of jewellery, which is ladies items and related to assessee's wife Smt. Shilpa Singh and daughter Ms. Shilpa Singh, who are separately assessed u/s. 143(3)/153C. Accordingly, we direct the Assessing Officer to consider the legitimacy of such addition in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed credit for income from craft and painting work in cash only in respect of income shown in the return filed prior to search and specific withdrawal made from the Bank account. 56. It is clear from the above chart that for assessment years 2003-04 to 2005-06, which falls prior to search, the assessee has not filed any return of income, because her income was below taxable limit. Hon'ble Jurisdictional High Court in the case of CIT vs. Vimla Khatri, 288 ITR 168, and in case of Smt. Maya Chotrani, 288 ITR 175, has held that the total income of those assessment years in which the return was not filed before the search on the plea that such income was below taxable limit, the income of that year shall not be treated as undisclosed income. Reliance is also placed on the latest decision of Punjab and Haryana High Court in the case of CIT vs. V.P. Singh, (2013) 357 ITR 681. Respectfully following the proposition laid down by Jurisdictional High Court, we do not find any justification in the action of lower authorities for not giving credit for income of these years. 57. While framing the assessment, the Assessing Officer has made addition on account of unexplained investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,71,000/- and ₹ 50,000/- for the period 1.4.2008 to 3.5.2008. In view of our observation made hereinabove, regarding income earned by the assessee out of art and craft work during earlier years and no return of income was filed because of the reason that income was below taxable limit, the credit for such income cannot be denied in view of the decision of Jurisdictional High Court in the case of Smt. Vimla Khatri (supra) and Smt. Maya Chotrani (supra). It was held by the Jurisdictional High Court that when the income is below taxable limit, the assessee is not obliged to file the return, accordingly, such income cannot be treated as undisclosed income of the assessee. Thus, after giving credit for such income earned during the assessment year 2003-04 to 2009-10, no addition will survive on account of cash of ₹ 2,57,760/- found, in so far as the same is explained out of income earned during these years. The A.O. is, accordingly, directed to delete the same. 61. With regard to painting and craft work income shown in the assessment years 2008-09 and 2009-10, the ld. CIT(A) has doubted the impugned income shown, however, he has stated that the assessee is having some ..... X X X X Extracts X X X X X X X X Extracts X X X X
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