TMI Blog2020 (6) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... . The direction to the Assessing Officer shall include that (i) the Assessing Officer shall comply with the calculation related exercise by passing a modification order in the hands of M.N. Navale (Bigger HUF) in the time barred manner and (ii) after due calculating of the said agricultural income and also after following the direction of the Tribunal (supra), the Assessing Officer shall examine the availability of funds and also examine the correctness of the claim of loans of Rs.10,37,000/- and a sum of Rs.1,50,000/- and also the sources thereof from M.N. Navale (Bigger HUF). The Assessing Officer shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Ownership of the seized papers - Whether seized documents/papers do not belong to the assessee? - HELD THAT:- It is not the case of the Revenue that there was any investigation into these papers. No question is raised/asked while recording the statement of the assessee during the search action in this aspect. Therefore, considering the incompleteness of the proceedings of the Revenue to these papers, in our considered view, the addition made by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nket Bora For the Revenue : Shri S. B. Prasad ORDER PER BENCH : There are 9 appeals filed by M. N. Navale (Individual). Out of them is a Wealth Tax Appeal vide WTA No.05/PUN/2014 for the assessment year 2005-06. All the above captioned 9 appeals pertained to assessment years 1999-2000 to 2006-07. All the above 9 appeals emanate from the respective orders of the Ld. CIT(Appeals). Considering the common issues and their interlacing of facts/issues, all these appeals are clubbed, heard together and are being disposed of by this composite order. Introduction 2. M. N. Navale files the return of income over many assessment years in the capacity of both Individual and Bigger HUF. There was search and seizure action on the assessee. There exists appeals in this Tribunal filed by M. N. Navale Individual and HUF. The core issue in all these appeals relates to the existence of HUF, agricultural income of the HUF/holdings, capacity to earn agricultural income, source of the assets etc. Earlier, the appeal-HUF were heard by the Tribunal and issues are remanded to the Assessing Officer s file with certain directions vide the order of the Tribunal dated 15.11.2019. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Flat without disproving the factual submission of appellant that the said amount was paid by cross cheque and duly reflected in bank statement. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice. Ground-wise Adjudication A.Y. 1999-2000 5. Referring to ground no.1, ld. Counsel for the assessee brought our attention to page 4 and 5 of the Paper Book and submitted that the said addition of Rs.1.83 lakhs is made based on the seized paper, copy of which is placed in the Paper Book. Further, referring to para 8 and 9 of the assessment order made u/s 143(3) r.w.s. 147 of the Act, ld. Counsel mentioned that the said entries were wrongly interpreted for taxing the said amount of Rs.1.83 lakhs in the year under consideration. There is reference to date on the paper and hence, there exists ambiguity on the year of taxation. On the said page, only 1998 is mentioned and no reference to month and date. 6. On hearing both the sides, we find relevant to extract the said para 8 and 9 of the assessment order for A.Y. 1999-2000 and the same are extracted hereunder :- 8. As mentioned in the foregoing paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer interpreted the same as relatable to this assessment year 1999-2000. The Assessing Officer s order is silent on the reasons. These figures could be taken for assessment year 1998-99 too. Thus, there exists an ambiguity. Considering the same, we are of the opinion that interpreting the figures 1998 as relatable to the A.Y. 1999-2000 is not proper. The Assessing Officer and CIT(A) failed to give reasoned order for taxing the entry in this year. The same cannot be taxed in 2000-01 too. Therefore, we are of the opinion such additions are not sustainable. Accordingly, the ground no.1 raised by the assessee is allowed. 8. Referring to ground no.2, ld. Counsel for the assessee mentioned that the said ground is not pressed. After hearing both the sides, the same is dismissed as not pressed. 9. Referring to grounds no.3, 4 and 5, ld. Counsel mentioned that the addition of Rs.10,37,000/- and Rs.1,50,000/- are relatable to the appeal of Sri M.N. Navale (Bigger HUF). In this regard, the ld. Counsel brought our attention to the order of the Tribunal in the case of Maruti Nivrutti Navale (Bigger HUF) vs. ACIT vide ITA No.367/PUN/2017 and others dated 15.11.2019 and submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds no.3 to 5 are allowed for statistical purposes. 12. In the result, the appeal of the assessee in ITA No.701/PUN/2014 for the assessment year 1999-2000 is partly allowed for statistical purposes. ITA No.702/PUN/2014 A.Y. 2000-01 13. The grounds of appeal raised by the assessee in this appeal are as under :- 1) On the facts and in the circumstances of case the CIT(A) has erred in sustaining the addition of Rs 3,90,37,346/- relying on the notings found typed on certain sheets disregarding the valid contention that these loose papers have no evidential value, these are dumb documents and even by going through the details mentioned therein, by any standard it cannot be said that these papers have any relevance to the appellant. 2) On the facts and in the circumstances of case the CIT (A) has erred in sustaining the addition without prejudice to ground no 1 the CIT (A) has erred in not appreciating the alternate condition that if at all any addition is legally warranted it can only be Rs 52,65,627/- that pertains to the Assessment year under consideration and as is evident from working made by Assessing Officer himself. 3) On the facts and in the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the assessee s case. The fact remains that the relevant paper was found in the possession of the assessee and in case the assessee has to disown the same it was obligatory on the part to identify the owner of the said paper which has not been done by the assessee About assessee s contention that the refund of loan or deposit can never be the income of the assessee it is specifically mentioned here that what is being taxed is the amount of interest and not the principal amount which in any case fall beyond the block period. I therefore reject the assessee s explanation and the entire interest of Rs.3,90,37,346/- being the interest on above FDs is brought to tax on receipt basis since the last mentioned date in each of the paper clearly indicate that these FDs have finally been matured in FY 99/00 relevant to assessment year 2000/01. Penalty u/s 271(1)(c) is separately initiated. 16. The CIT(A), as per discussion given in para 3.14 and 3.15 of the order of the CIT(A), confirmed the action of the Assessing Officer. For the sake of completeness, the said para 3.14 and 3.15 of the order of the CIT(A) are extracted hereunder :- 3.14 In this regard, the appellant has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pers or other documents do not constitute books of account . Therefore, principles of presumption do not apply to this word papers . In reply to the same, ld. DR for the Revenue submitted that the said documents fall under the definition of other documents. Therefore, the said principle of presumption u/s 132(4A) of the Act applies to the facts of the present case. 18. During the rebuttal time, ld. AR for the assessee added by saying that in the light of the Hon ble Jurisdictional High Court s judgement in the case of Sheraton Apparels, 123 Taxman 238, ld. Counsel mentioned that loose papers and diaries are not the books of accounts. 19. We have heard both the sides on this limited issue, legal issue and the controversy relate to the ownership of the seized papers. As per the argument of the ld. Counsel for the assessee, the seized documents/papers do not belong to the assessee. In the absence of name of the assessee on the documents, the questions are raised about the belongingness of the papers to the assessee. On these issues, within the meaning of ambit of the presumption, in our considered view, the Revenue has failed to question the assessee during the search proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed satisfactorily without confronting this new reasoning to appellant and at the same time it is grossly incorrect and illegal. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice. 24. The only issue raised in these two grounds relates to the addition of Rs.7,90,000/- received from M. N. Navale (Bigger HUF) as unsecured loan. The Revenue authorities denied this claim of unsecured loan mentioned that M. N. Navale (Bigger HUF) did not exist and, therefore, did not have funds. In this regard, ld. Counsel for the assessee submitted that this issue has to be remanded to the file of the Assessing Officer for fresh adjudication in the light of the order of the Tribunal in the case of M. N. Navale (HUF) (supra). In other words, the arguments of both the parties on these grounds are similar to that of the grounds no.3, 4 and 5 of the appeal in ITA No.701/PUN/2014 for the assessment year 1999-2000. Thus, our decision in grounds no.3, 4 and 5 of the appeal in ITA No.701/PUN/2014 for the assessment year 19992000 shall apply mutatis mutandis to these two grounds no.1 and 2 of this present appeal. Accordingly, the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apers seized during the search and seizure action. Relying on the lease deed placed in the loose papers, the Assessing Officer concluded that the rental value per month of the property of Rs.75,000/- and not Rs.30,000/- as declared by the assessee in the return of income. The Assessing Officer added the difference of monthly rent of Rs.45,000/- totaling to Rs.5,40,000/- in a year. 29. Before us, ld. Counsel for the assessee filed a chart mentioning that the lease deed referred to the STES is not appreciated by the Assessing Officer. The CIT(A) also confirmed the addition made by the Assessing Officer without appreciating all the facts relating to the property. There is no dispute on these facts. The only dispute is with reference to the monthly rent. It is the case of the assessee that at the relevant point of time i.e. A.Y. 2002-03, the property was let out to Sunind Private Limited and the applicability of monthly rent is Rs.30,000/- only. In the subsequent year 2004 onwards, the property is rented to STES with the applicable rent of Rs.75,000/- and this applicable Rs.75,000/- is born out of the records. Therefore, the addition of Rs.5,40,000/- made by the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-05, 2005-06 and 2006-07 as such finding/direction is not within the scope of power of Ld. CIT(A). 33. Grounds no.1 and 2 relate to the addition of Rs.5,26,976/-, the loan received from M. N. Navale (Bigger HUF) as unsecured loan. The Revenue authorities denied this claim of unsecured loan mentioned that M. N. Navale (Bigger HUF) did not exist and, therefore, did not have funds. In this regard, ld. Counsel for the assessee submitted that this issue has to be remanded to the file of the Assessing Officer for fresh adjudication in the light of the order of the Tribunal in the case of M. N. Navale (HUF) (supra). In other words, the arguments of both the parties on these grounds are similar to that of the grounds no.1 and 2 of the appeal in ITA No.704/PUN/2014 for the assessment year 2002-03. Thus, our decision in the grounds no.1 and 2 of the appeal in ITA No.704/PUN/2014 for the assessment year 2002-2003 shall apply mutatis mutandis to these two grounds no.1 and 2 of this present appeal. Accordingly, the grounds no.1 and 2 are allowed for statistical purposes. 34. Ground no.3 relates to the addition of Rs.5,40,000/- on account of difference in rent received relying on noting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT (A) has erred in issuing the notice for enhancement of income in respect of an issue which does not arise from the Assessment Order and overlooking the legal position that the powers of the CIT (A) are confined only to the subject matter of appeal and not beyond that. 5) On the facts and in the circumstances of case and without prejudice to the above ground No 4 the CIT (A) has erred in enhancing the income by Rs7000000/- on the ground that it represents the unexplained investment made in purchase of the property situated at village Charoli overlooking the fact that said property has not been purchased by the appellant at all and further overlooking the clinching evidence filed to the effect that the said property has been actually purchased by the Sinhgad Technical Education Society. 6) On the facts and in the circumstances of case and without prejudice to the above ground No 13 the CIT(A) has erred in relying on notings found recorded on the seized loose paper which have no evidential value and is a dumb document. 7) On the facts and in the circumstances of case and without prejudice to the above Ground No.13 CIT(A) has erred in holding that the unexplained invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and relied heavily on the order of the Assessing Officer. Further, ld. DR mentioned that assessee has high profile living standard and withdrawal of Rs.40,000/- a month itself is not enough considering his life style. 42. In reply, ld. AR for the assessee left the issue to the Bench for deciding the same on the existent of addition as made by the Assessing Officer. 43. On hearing both the sides on this issue, we are of the opinion that there is a withdrawal to the extent of Rs.4,56,005/-. The disputed investment is only Rs.1,51,338/-. Considering the extent of withdrawal available on records, the addition of Rs.1,00,000/- shall be reasonable. We direct the Assessing Officer accordingly. Thus, this ground no.3 is partly allowed. 44. Grounds no.4 to 7 relates to the addition of Rs.70,00,000/- relying on the seized papers. The Assessing Officer incorporated the same and held that the assessee paid cash for purchase of flat. In this regard, ld. Counsel for the assessee brought our attention to the additional ground raised by the assessee in the assessment year 2003-04 vide ITA No.705/PUN/2014 and mentioned that this issue pertains to the said additional ground which may be rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding that the deemed rent of Rs 38,400/- received from Flat at Kumar Parisar belonging to M.N Navale (Bigger HUF) be taken as its income on verifying its ownership and if it is found that the said property does not belong to HUF the rental income be considered as that of appellant. 8) On the facts and in the circumstances of case the CIT (A) has erred in holding that the rent of Rs 38,400/ received from Bunglow at Navsahyadri Society belonging to M. N Navale (Bigger HUF) be taken as its income on verifying its ownership and if it is found that the said property does not belong to HUF the rental income be considered as that of appellant. 9) On the facts and in the circumstances of case the CIT (A) has erred in sustaining the addition of Rs 594000/- in respect of difference of cost paid for acquiring the land at Kusgaon Lonavala, Bunglow at Navsahyadri and NDA property belonging to M. N Navale (Bigger HUF) which claim be examined by Assessing Officer and if found that the said property belongs to Bigger HUF the income should be included as income of said HUF otherwise the income should be considered as that of appellant. 10) On the facts and in the circumstances of case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice. 47. Before us, at the outset, ld. Counsel for the assessee submitted that the ground no.1 and grounds no.5 to 11 relate to the unsecured loans taken from M. N. Navale (Bigger HUF). In spirit, all these grounds are identical/similar to the issues raised by the assessee in their appeals for the assessment years 1999-2000 to 2003-04 vide ITA Nos.701 to 705/PUN/2014. Accordingly, for the stated reasonings, ground no.1 and ground nos.5 to 11 are allowed for statistical purposes. 48. Ground no.2 relates to the addition of Rs.10,50,000/- loans given by the assessee to M/s Srujan Fitness Pvt. Ltd.. At the outset, ld. Counsel for the assessee mentioned that this is a case where the addition is made without examining the contents of the seized papers. It is the case of the assessee that it is not a direct case of giving loan to M. N. Navale (Individual). These papers were taken as security for some loan related issues to be obtained STES. There is some problem with the title of lands acquired by STES to match the acquittal loss in future. This kind of arrangement is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the Hon ble Allahabad High Court s judgement in the case of Radha Devi Dalmia vs. CIT, 125 ITR 134 (All.-HC) and found it appropriate to consider 7% of the investment of Rs.26,75,000/- as deemed rent and accordingly, the addition is sustained at Rs.1,87,250/- as determined by the Assessing Officer. 53. Before us, without going into the merits of the figures, ld. AR for the assessee submitted that it is obviously settled legal proposition that wherever there is Rent Control Act in operation the reliable values determines the deemed fair market value of the rent is ALV of the property and other methods such as percentage of the investment etc cannot be determined. In this regard, ld. Counsel for the assessee filed a written submission and relied on the judgement of the Hon ble Bombay High Court in the case of Smita Ambani, 323 ITR 104 for the proposition. The properties under value should be adopted as deemed rental value as the property is covered by the Rent Control Act. 54. After hearing both the sides, we are of the opinion that the Assessing Officer should be directed to apply the said Jurisdictional High Court s judgment in the case of Smita Ambani (supra) and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the smallness of the figures, we are of the opinion that the ground should be dismissed. We order accordingly. Thus, the ground no.12 is dismissed. 58. Grounds no.13 to 16 relate to the enhancement of income of Rs.55,79,312/- on the ground that it represents the unexplained investments made by the assessee in purchase of a property located at village Charoli. 59. As per the ld. AR for the assessee, this part of addition was attributable to the enhancement of income made by the CIT(A) in the assessment year 2004-05. Grounds no.4, 5, 6, 7 of the appeal in ITA No.1059/PUN/2014 for the assessment year 2004-05 are related to these grounds. 60. After hearing both the sides and considering the identical arguments of both the parties on these grounds which are similar to that of the grounds no.4, 5, 6, 7 of the appeal in ITA No.1059/PUN/2014 for the assessment year 2004-05, our decision in the grounds no.4, 5, 6, 7 of the appeal in ITA No.1059/PUN/2014 for the assessment year 2004-05 shall apply mutatis mutandis to this ground nos.13 to 16 of this present appeal. Accordingly, the grounds no.13 to 16 are allowed for statistical purposes. 61. In the result, the appeal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs 10,15,22,340/- has been duly assessed in the hand of Sinhgad Technical Education Society on substantive basis and despite so, erroneously and illegally confirming it s addition in the hand of the appellant on substantive basis. 7) On the facts and in the circumstances of the case the CIT (A) has erred in sustaining the addition of Rs 7,37,000/- on the ground of unexplained investment in purchase of certain properties and relying on the erroneous information that the cost of those properties is Rs 1,27,67,000/- while the payments supported is only of Rs 1,20,30,000/- and in the process has overlooked the fact that there is no such unexplained investment as the entire cost of Rs 1,27,67,000/- stands supported and reflected in the books of accounts. 8) On the facts and in the circumstances of the case the CIT (A) has erred in not appreciating the fact that the land situated at Kusgaon is purchased by M.N Navale Bigger HUF and has further erred in sustaining the addition of Rs 1,20,000/- which represents the difference in valuation made by approved valuer and cost actually paid overlooking the established practice that the fact that difference being less that 10% it deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TES, ld. Counsel for the assessee filed a copy of the order of Pune Bench of the Tribunal in the case of Sinhgad Technical Education Society vide ITA No.320/PUN/2010 for the assessment year 2006-07 dated 14.12.2016, copy of which is placed on record. Referring to the contents of para 116 of the said order of the Tribunal, ld. Counsel for the assessee brought our attention to the said addition of Rs.10,15,22,340/- and submitted that the allegation of the Revenue about the taxation of collections of donation amounting to Rs.10,15,22,340/- was not approved, the addition was deleted and the ground was allowed in favour of the assessee. The contents of para 116 to 118 of the said order of the Tribunal in the case of Sinhgad Technical Education Society (supra) are relevant in this regard. 67. On hearing both the sides on the fate of this decision in the case of Sinhgad Technical Education Society (supra), we are of the opinion that the contents of the said para 116 to 118 are relevant and for the completeness of this order the same are extracted as under :- 116. We find the Assessing Officer while passing the assessment order in the case of Mr. M.N. Navale has referred to the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions recorded in the seized material. The assessee is duty bound to explain discrepancy, if found, on the basis of seized materials vis-a-vis the books of account. In a seized diary, the assessee had estimated and mentioned the figures for 66 shops at Rs. 2,38,77,000. The assessee had booked 35 shops as on the date of search. Because of the difference in rates as mentioned in the seized paper and the books of account, the Assessing Officer calculated the on-money. The Commissioner (Appeals) and the Tribunal held that on the basis of the loose papers no addition could be made. On appeal : Held, dismissing the appeal, that from the beginning the assessee was stating that the notings appearing in the diary were rough estimates and estimation was made for submission to the bank for obtaining a loan from the bank. The inference of the Assessing Officer that the assessee had received on-money, i.e., the differential amount as shown in the seized diary and the books of account, was merely based on suspicion and surmises and there was no material to support the conclusion of the Assessing Officer that the assessee had in fact received any on-money. The Assessing Officer had no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with set principles of natural justice. Accordingly, the grounds no.5 and 6 are allowed for statistical purposes. 70. In the result, the appeal of the assessee in ITA No.1061/PUN/2014 for the assessment year 2006-07 is partly allowed for statistical purposes. WTA No.05/PUN/2014 A.Y. 2005-06 71. The grounds of appeal raised by the assessee in this appeal are as under :- 1) On the facts and in the circumstances of case the CIT (A) has erred in directing the Assessing Officer that on ascertaining the available funds with M.N Navale (Bigger HUF) to the extent these cover the assets claimed as belonging to HUF, the same should be excluded from the net wealth of appellant The assets claimed as belonging to Bigger HUF are: a. Residential Flat at Flat No. 101, 102 Building No. D,S. No. 59, 1st Floor, at Kumar Parisar Kothrud, Pune - Valued at Rs. 12,05,000/- b. Residential Bungalow at Navsahyadri Soc. Karve Nagar, Pune - Valued at Rs. 52, 76,510/- c. Farm House at NDA Road, Pune - Valued at Rs. 63,30,000/-. d. Flat at Meera Co.Op.-Hsg. Society Oshiwara, Jogeshwari (W) Mumbai - Valued at Rs. 25,51,510/-. The above grounds of appeal may kindly be allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Navale vide WTA Nos.06 07/PN/2014 for the assessment years 2006-07 2007-08 dated 14.01.2016. For the sake of completeness of this order, the contents of para 5 of the said order of the Tribunal dated 14.01.2016 (supra) are extracted hereunder :- 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The existence of the HUF has been accepted by the Co-ordinate Bench of the Tribunal in ITA No. 149/PN/2010 (supra). Therefore, there is no dispute about the existence of HUF any more now. The only issue is, Whether the assets listed hereinabove are to be included in the net wealth of the individual or the HUF. The ld. AR has submitted that all the assets mentioned above are incorporated in the list of assets in the partition decree awarded by the Civil Court, Pandharpur. However, the said partition decree has not been placed before us by either of the sides. The Commissioner of Wealth Tax (Appeals) has remitted the file back to Assessing Officer with the following observations: 16.4 I have given careful consideration to all the relevant facts and the submissions made on behalf of the appellant. Upon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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