9911796707
TMI Blog2018 (4) TMI 1969X X X X Extracts X X X X X X X X Extracts X X X X ..... re heard together and are being disposed of by this consolidated order. ITA Nos. 501 to 507/Coch/2014 3. The first common ground is with regard to the treatment of agricultural income as non agricultural income. 3.1 The facts of the issue are that there was a search carried out u/s.132 of the I.T. Act and also survey u/s. 133A of the Act at the business premises of the assessee on 05/11/2009. The assessee is engaged in the business of centrifugal latex and manufacture of tread rubber and has been running various concerns alongwith his wife Smt. K.R. Fathima and daughters K.R. Raseena and K.R. Raiza, namely, M/s. Nilambur Traders, M/s. Nilambur Treads P Ltd., M/s. K.A. Treads, M/s. K.A. Reclaims and M/s. K.A. Latex (P) Ltd. The assessee is also engaged in the money lending business. Consequent to search u/s. 132 of the Act, various incriminating material were found and notice u/s. 153A was issued on 05/04/2010. The assessee filed return of income for the assessment years 2004-05 to 2009-10. The Assessing Officer treated the below mentioned amounts out of the agricutural income returned by the assessee as non agricultural income. A.Y. Non Agricultural income 2004-05 Rs.1,30,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral income to Rs. 1,50,000/- and treated balance of Rs. 1,38,000/- as non agricultural income. Here also, the assessee had filed the return of income on 19/12/2010 which was beyond the due date of filing of the return of income. As in the earlier year, A.Y. 2004-05, the assessee has not placed any evidence in support of the agricultural income. For similar reasons as in assessment year 2004-05, we confirm the addition for the assessment year 2005-06. This ground of appeal of the assessee is rejected. 5. For the assessment year 2006-07, the assessee filed his return of income on 28/05/2007 declaring agricultural income of Rs. 5,15,000/-. Out of this, the Assessing Officer restricted the agricultural income to Rs. 2 lakhs and treated the balance Rs. 3,15,000/- as non agricultural income. As in earlier years, the assessee has not placed any evidence for earning such agricultural income. For similar reasons as in earlier years, we confirm the addition for the assessment year 2006-07. This ground of appeal of the assessee is rejected. 6. For the assessment year 2007-08, the assessee declared agricultural income at Rs. 5,76,000/-. Since the assessee has not produced any evidence regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, this argument of the Ld. AR is rejected for all the assessment years. 11. The next ground in assessment years 2004-05, 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 is with regard to addition towards unexplained credit in the bank accounts of the assessee. The addition made in these assessment years were sustained by the CIT(A) as under: A.Y. Amount (Rs.) 2004-05 13,65,000/- 2006-07 14,67,795/- 2007-08 9,07,185/- 2008-09 18,75,720/- 2009-10 18,29,621/- 2010-11 6,80,000/- 11.1 For the assessment year 2004-05, the assessee has shown in the cash flow statement receipt of DD Rs. 13.65 lakhs for which the assessee has not shown the identity of the person from whom it has been received. Even before us, there were no details of source from which it was received. The assessee could not prove the identity of the creditors or the genuineness of the transactions. Hence, the addition is sustained. This ground of appeal for the assessment year 2004-05 is rejected. 11.2 For the assessment year 2006-07, it was found during the search that the bank accounts were managed by the employees , Shri K.C. Thomas, Shri Sathar, and Shri K. Jaffer. When it was questioned, it was st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their accounts. In the sworn statement recorded from them, it was stated that the amounts belonged to the assessee which is the profit received from M/s. Tristar Investments. When this was pointed out, the assessee stated that a perusal of bank accounts maintained by Shri Thomas, Shri Sathar and Shri Jaffar would show that there were credits which the said staff members was not able to explain at this distance of time. The assessee stated that these amounts represents proceeds relating to suppression carried out by M/s. K.A Treads and that such amounts have been received back/used for the use of the assessee and the assessee offered these amounts and also requested to take the peak credit of the amounts and applying the GP. However, the assessee could not substantiate the arguments or produce any supporting materials. The assessee has excluded the salary credited in the accounts of the employees. Therefore, the amount of Rs. 18,75,720/- credited in the name of the employees was treated as the income of assessee and added to the total income Shri Thomas 31/03/2008 Rs. 5,20,000/- Shri Sathar 31/03/2008 Rs. 11,06,620/- Shri jaffar 31/03/2008 Rs. 2,49,100/- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese bank accounts. The CIT(A) observed that in the absence of the assessee's claims being substantiated with facts that the credit into employee's bank accounts were suppressed sales, the same is the trading profit of the assessee which had never been disclosed. According to the CIT(A) in the instant case, the sum of Rs. 2,49,100/- was credited into the bank account of Shri Jaffar and Rs. 16,26,620/- was credited to the account of two employees, viz., Shri Thomas and Shri Sathar. According to the CIT(A) in the assessment year 2006-07 the cash credited into the bank account of Shri Thomas and Shri Sathar was trading in profit of the assessee which was not disclosed as his income. Accordingly, a sum of Rs. 16,26,620/- was treated as undisclosed trading profit and the addition made by the Assessing Officer was confirmed by the CIT(A). As regards the sum of Rs. 2,49,100/-, since Shri Jaffar had stated that the amount credited as the profit received from Hint Pub, Bangalore on account of the assessee being a shadow partner with M/s. Tristar Investments, Bangalore, the same was treated as undisclosed income of the assessee. Hence the CIT(A) confirmed the addition made by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73/- The Assessing Officer added the difference of the two to the total income for a sum of Rs. 28,70,278/- by treating it as undisclosed investment in land. 12.2 Before the CIT(A) it was submitted that the said addition was based on the statement of the Manager Shri K.C. Thomas recorded on 5.11.2009 u/s. 132(4) where he deposed that the rate of purchase of land was @ Rs. 1500/- per cent and the total payment was made at Rs. 36,00,000/-. The Ld. AR submitted that the manager retracted his submission in an affidavit dated 12/9/2011. It was submitted that the Assessing Officer had taken the entire land admeasuring 26.6713 acres @ Rs. 1550 per cent However, according to the Ld. AR, the assessee pleaded that the manager who deposed the statement was engaged only in preliminary negotiation of the land purchased and the final settlement was done by the assessee. It was submitted that the land was purchased from different persons and the rate cannot be same for all the purchases. It was submitted that the actual payment was made for Rs. 12,63,773/- and the same should be accepted. The CIT(A) worked out the amount of undisclosed investment at Rs. 23,36,227/- (36,00,000 - 12,63,773) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Nilambur Traders in connection with the search in the assesses's business premises. Document regarding the investment made by the assessee in M/s Tristar Investments and the amount received back were found. Consequently a survey u/s 133A was conducted at M/s Tristar Investments, the details regarding the investment profit and withdrawals were found and the same was impounded (AAA/TI/1). At the time of survey sworn statement of Shri Thornas Perincherry was taken and he deposed that he knew Shri. K.A. Rauf since 2002-03. The dispute regarding the name was cleared at the time of cross examination and re-examination of Shri Thomas Perincherry by the Assessing Officer at the time of search assessment proceedings. Shri. Thomas Perincherry stated that Shri. K.A. Rauf was keen on investing in M/s Tristar investments to bring the Hint Pub therefore, he contributed a sum of Rs. 70,00.000 in cash during the time of setting up of Hint Pub. The documents impounded at the time of survey confirm that Shri. K.A Rauf was eligible for 35% share and balance sheet trading and profit and loss account etc. prepared on the basis of the contribution were also impounded and Shri. Thomas Perincherry ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner of the firm and the employee of the assessee confirmed the investment of the assessee in M/s Tristar Investment(Hint Pub), Bangalore, the denial of investment by the assessee was not acceptable and the assessee had not shown this investment in his cash flow statement therefore the investment made by the assessee during the period relevant to the assessment year 2006-07 was at Rs. 67,00,000/- and the same was added to the total income of the assessee. 13.2 On appeal, the CIT(A) after elaborately going through the assessment order, observed that the assessee got investment in the business of Hint Pub at Bangalore which is run by M/s. Tristar Investments as a shadow partner. According to the CIT(A) not only the investments made by the assessee but the income received from such investment also found credited in the Bank account of Shri Jaffer, the employee of the assessee. Thus the CIT(A) observed that the investment made as well as the income received both were in cash and the income was received out and out and got credited to the bank account of the assessee, maintained in the name of his employee. Hence, the CIT(A) held that the investment of Rs. 67,00,000/- during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first before disposing off the appeal filed by the Tristar Investments. It was submitted that in the light of the finding in Tristar Investment's appeal, the inclusion of Rs. 70 lakhs for 2006-07 and 2007-08 was liable to be set aside. 13.4 We have heard the rival submissions and perused the material on record. The main contention of the Ld. AR is that there was seized material in page no. 40, 45, 48 referred as CHN-14/28. It also showed that the assessee has contributed toward Tristar Investments, Bangalore based on an agreement which was known to the assessee and Shri Thomas Perinchery only. Further in the sworn statement recorded from the employee of the assessee Shri K. Jaffar, it was stated that "Shri Suraj Rangappa, Shri Paul Tom Suraj and the assessee were the partners of this firm and the profit shared in the ratio 2%, 40% and 35% respectively. Certain documents relating to this firm collected from Bangalore which were available in this office were seized by the Department during the course of search marked as CHN-14/28. Certain accounts copied from their office at Bangalore were available in computer. The name shown as Paul-2 was actually the assessee. The total investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department Valuer, we are required to seek clarification from our Valuer which will require time. In any event, you will notice that the construction was not over as on 31.3.2010 relevant to the assessment year 2010-11 and the inspection by the Department Valuer was much after the close of the Account Year 2009-10. Further, work is still going on, though in a slow manner since as on date we are unable to get Power Allocation and hence it is not necessary to complete the work at this stage. In fact, even when our Valuer carried out his inspection, the work was going-on. We also note that the subsequent to 31.3.2010, the assessee has invested about Rs. 20,00,000/- details are yet to be consolidated for the finishing works at the factory building and office building, bringing the cost of construction of the factory building and office complex to Rs. 1,34,63,115/-. The investment in land, building and machineries as on 31.3.2010 is as indicated below: Land Rs. 1263773 Building Rs. 11463115.25 Machineries Rs. 5709248 Total Rs. 28436136 The above funds were raised from the Share-holders / Directors of the company-as share subscription and/or additional Share subscription. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt at Rs. 1,14,63,115/- for the asst. years 2005-06 to 2008-09. According to the CIT(A) the dispute on valuation raised by the assessee is mainly on account of the fact that the valuer had taken the value as on 20.07.2011, i.e. as on the date of inspection by the District Valuer and, had considered even those sums spent after the asst. year 2008-09. The CIT(A) noticed that the assessee had also spent a sum of Rs. 20 lakhs which was not taken into account. According to the CIT(A), a statement was placed before the assessing officer, that since the work was yet to be over, the valuation report does not indicate the work done upto 31.3.2010. Hence, the difference between the investment valued by the DVO at Rs. 1,67,92,000/-, and that of shown by the assessee at Rs. 1,14,63,115/- was treated as unexplained investment, and added a sum of Rs. 53,28,885/- to the total income. The CIT(A) observed that the assessing officer had not given any findings on the points raised by the assessee during the course of assessment proceedings and, had simply concluded that the period of construction was from 1.4.2005 to 31.3.2007, for which expenses incurred by the assessee was considered by the DVO. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted on 27/01/2010 and on 27/07/2011 while the valuer had observed that the construction was carried out between 2005 to 2008 which apparently cannot be true. Further according to the Ld. AR, the rates adopted by the District Valuer was for completed building and not for incomplete building. It was also submitted that the rates applied was as per CPWD rates whereas being a construction carried out in Kerala, the Kerala PWD rates should have been applied. The Ld. AR submitted that the assessee had produced several bills regarding purchase of materials before the Assessing Officer for which no allowance has been made. The Ld. AR submitted that the assessee got the building valued as on 27/01/2010 for bank purposes when it was valued at Rs. 14885,756/- excluding the cost of land of Rs. 1232,572/-. According the Ld. AR, after this inspection and before District Valuer inspected, the assessee had spent a further amount of Rs. 20 lakhs as per cash flow statement. Thus it was submitted that the difference in valuation is only Rs. 14,22,641/- which is quite negligible. Further it was submitted that the CIT(A) specifically found that nowhere has it been mentioned that the construction was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has not offered any explanation in this regard. It was also found that in the cash flow statement furnished by the assessee for the period 01/01/2007 to 31/03/2008. Therefore the sum of Rs. 5 lakhs was added to the income as unexplained investment. 16.2 Before the CIT(A) it was claimed that the sum of Rs. 5 lakhs invested in Malampuzha Steel Rolling Mills was returned back by the company and confirmation to this effect was also given by the company but the Assessing Officer had not mentioned this fact. The CIT(A) found that before the Assessing Officer the assessee did not offer any explanation in this regard. According to the CIT(A), in the appellate proceedings also the assessee failed to produce a letter from the company confirming the return of money. In view of this, the CIT(A) rejected the contentions of the assessee and confirmed the addition made by the Assessing Officer. 16.3 We have heard the rival submissions and perused the record. The assessee has not placed any evidence before us to prove receipt of money from Malampuzha Steel Rolling Mills. Being so, we confirmed the addition. Hence, this ground of appeal is rejected. 17. The next ground for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the original land holder sold the same land to other person viz: Dr. Alexander and others of Calicut. Thus, the assessing officer held that the mutation is not in the name of the assessee and hence, the valid ownership of land is not established. The period of lease has been entered into for two years starting from the financial year 2006-07, although a part of the payment for the purchase of land was made in the previous year. In the original return filed for the asst. year 2006-07 on 28.5.2007, the total income was shown at Rs. 99,5007- along with agricultural income of Rs. 1,80,000/-. According to the Assessing Officer, in response to notice u/s 153A dated 5.4.2010, the return of income was filed on 31.8.2010 for the asst. year 2006-07. The agricultural income was shown at Rs. 5,15,000/-. In view of this fact, for the asst. year 2006-07, the assessee has revised the agricultural income from Rs. 1,80,000/- to Rs. 5,15,000/-. The Assessing Officer noticed that the entire transactions of the assessee happened in cash. The Assessing Officer doubted whether poor farmer of Sanqli district, which is too far off place from Sindhudurga, where the land is situated, would come to cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that this fact was suppressed by the Assessing Officer. The Ld. AR submitted that the AO himself made detailed enquiries regarding the lease and sent notices to the lessees seeking confirmation on the lease. According to the Ld. AR if the agreement is not stamped, it can be impounded but does not invalidate the agreements. According the Ld. AR easement right has been misconstrued since the documents have been executed and registered and possession given as per documents, being not loan, the assessee has no liability to prove credit worthiness of lessees, there was no sub lease and rent being paid in cash was immaterial to decide whether the assessee has received rent. 18.3 The ld. DR submitted that the above income is nothing but an adjustment of figures where the assessee has brought his own cash in the garb of exempted agricultural income and it is only a make believe story. 19. We have heard the rival contentions and perused the material on record. The documents produced by the assessee are in the form of Xerox copies of the lease agreements which is only self-serving and no importance is to be given. In view of the fact brought on record by the Assessing Officer and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer. Being so, we do not find any infirmity in the order of the CIT(A). Hence, the addition of Rs. 2,23,200/- is sustained. Accordingly, this ground of appeal of the assessee is rejected. 23.4 In the result, the appeals in ITA Nos. 502/Coch/2015 and 505/Coch/2015 are partly allowed for statistical purposes and the appeals in ITA No. 501/Coch/2015, 503/Coch/2015, 504/Coch/2015, 506/Coch/2015 and 507/Coch/2015 are dismissed. ITA Nos. 493,494 & 495/Coch/2015 : Revenue appeals 24. There was a delay of 106 days in filing of the appeals by the Department. The Department has filed condonation petition for condoning the delay in filing the appeals stating administrative reasons. After perusing the condonation petition, we find that there is sufficient cause for condoning the delay in filing the appeals. Accordingly, we condone the delay and admit the appeals. 24.1. Revenue has raised the following common grounds: 1. The CIT(A) has overlooked that statement of the witness under oath has evidentiary value. 2. The CIT(A) has overlooked the statement of Mr. Mohanraj which is evidence by seized materials from the premises of M/s. Nilambur Traders. 3. The CIT(A) overlooked that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment year 2009-10, the Assessing Officer made the addition of Rs. 64 lakhs. 24.3. From the relevant assessment record of Shri U.K.Mohanraj, the CIT(A) observed that notice u/s. 148 was issued on 8/11/2011 for failure on the part of Shri Mohanraj to file returns of income for the assessment years 2007-08, 200809 and 2009-10. The CIT(A) observed that the intimation regarding the transactions of Shri Mohanraj and Shri K.A. Rauf was referred to the Assessing Officer by the DCIT, Central Circle, Calicut on 5/11/2012 whereas the Assessing Officer had passed order u/s. 144 r.w.s. 147 on 25/03/2013 but without mentioning anything about the loan transactions and the payment of interest between Shri Mohanraj and Shri K.A. Rauf. For the assessment years 2008-09 and 2009-10, the proceedings u/s. 148 was dropped by observing as follows: "assessee did not file his return of income in response to notice u/s. 148 even after repeated reminders. As the assessee has no known source of income other than sale of immovable property in the previous years, details were called for from SRO to assess income from capital gain and conclude the assessment u/s. 144. No transactions relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank accounts as well as given an opportunity of cross examination of Shri Mohan Raj by the assessee which was not done by him. In our opinion, this issue is remitted to the file of the Assessing Officer to verify the bank accounts and also provide opportunity of cross examination to the assessee and decide thereupon. With this observation, we remit this issue to the file of the Assessing Officer for fresh consideration. This ground of appeal of the Revenue for all the assessment years is allowed for statistical purposes. The appeals in ITA Nos. 493, 494 & 495/Coch are allowed for statistical purposes. ITA Nos. 413 to 416/Coch/2016 : Smt.K.R. Raseena ITA Nos. 417 & 418/Coch/2016: Smt. K.R. Raiza ITA Nos. 422 to 427/Coch/2016 : Smt K.R. Fathima 25. All these appeals filed by the assessees are directed against different orders of the CIT(A)-IV, Kochi for different assessment years. The appeals in ITA Nos. 413 to 416/Coch/2016 and 417 & 418/Coch/2016 and ITA Nos. 422 to 427/Coch/2016 were part heard on 18/04/2018. The assesses were represented by Shri P. Raghunathan, Adv., Ld. Counsel for the assesses and the Revenue was represented by Shri A. Dhanaraj, Sr. DR. 25.1 There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and office of the K.A. Latex (P) Ltd. on 05/11/2009. During the course of search, certain documents and books were seized. According to the ld. AR, there was no incriminating material found in the course of search action u/s. 132 of the Act at the above premises on 05/11/2009. The Ld. DR relied on the orders of the authorities below. 26.2 We have heard the rival submissions and perused the record. Admittedly in this case, there was search in the case of K.A. Treads u/s. 132 of the Act where the assessee is a proprietrix and certain documents were seized. Further in the statement recorded from one of the employees of the assessee namely, Shri K. Jaffar on 5/11/2009, it was stated that there was suppression of sales to the extent of 50% The relevant portion of the statement is reproduced below: "3. As far as K.A. Treads are concerned all the entries are made in the computer from F.Y. 2007-08 onwards and the accounts are finalized for the Financial Year 2007-08 by giving appropriate depreciation etc. But from the year 2008-09, only the entries are made. As far as I know, there are some adjustments will be made in the sales, while entering itself. This may be almost 50% of the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was actually required in connection with proceedings pending before the authorities and also fact that each of the lessee had admitted lease as well as payment of lease rent. In the light of the above, the authorities below should not have rejected the same. The Ld. DR relied on the orders of the lower authorities. 26.6 We have heard the rival submissions and perused the record. The issue was dealt with in earlier paras wherein we held that it is only a make believe story so as to show the source of income to explain the investments. The facts of this case is also similar and the assessee created self serving documents towards introducing own cash in the garb of exempted agricultural income. No credence is to be given to the photocopies of the agreements filed by the assessee. Accordingly, in our opinion, the lower authorities are justified in rejecting the claim of the assessee in this case also. This ground of appeals of the assessee is dismissed. 26.7 The next common ground in ITA Nos. 414, 415 and 416/Coch/2016 is with regard to additions towards suppression of sale of M/s. K.A. Treads. 26.8 The facts of the case are that the search revealed that the assessee had sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- from Shri Ziad in AY 2009-10 and 2010-11. 27.1 The facts of the case are that in the cash flow statement submitted by the assessee at the time of hearing the assessee had shown an inflow of Rs. 5,10,000/- by Ziad through Fathima. No evidence or satisfactory explanation was given by the assessee at the time of hearing. It is pertinent to note that the assessee was proposing to buy a flat at Bangalore and the amount earned by the assessee's husband in abroad was transferred to assessee's in laws' account for the purpose of purchase of flat. But the assessee was utilizing it as source for her investment which is evidenced by the noting made by her in the seized material, CHN/14/Nilambur/14&15. When this was pointed out the assessee had not offered any comments. The assessee also confirmed in the statement taken on 16/12/2011 that the probable cost was estimated to Rs. 68 lakhs and the acquisition was made for Rs. 48.5 lakhs, therefore the same was allowed. 27.2 On appeal, the CIT(A) observed that the assessee had received Rs. 5,10,000/- from her husband Shri Ziad through her mother which means that the assessee's husband sent the money of Rs. 5,10,000/- during the AY 2009-10 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandrakant patil, Shri Bhima Rao Vital Nikam, shri Vijayakumar Bhimarao Nikam, Shri Vikram Vasanth Shete, Shri Sylendra Pawar, Shri Vasanth Rao Shete. The advocate who notarized the document had admitted that the said document was signed for the purpose of keeping a copy and not for production before any authority and same had no legal validity, being a deed of lease it should be executed in a stamp paper having the required value as per the Stamp Act. This was not accepted by the Assessing Officer for the reasons as stated in para 26.4 of this order. Therefore the income derived from leasing the agricultural land was disallowed as the income was derived by the assessee from unknown source. The same was confirmed by the CIT(A). 28.6 Against this, the assessee is in appeal before us. We have heard the rival submissions and perused the record. As discussed in para 26.6, this ground of appeals of the assessee for both the years is dismissed. Thus, the appeals of the assessee for both the years are dismissed. ITA Nos. 422, 423, 424, 425, 426 & 427/Coch/2016 : Smt. K.A. Fathima 29. The first common ground in all these appeals is with regard to validity of assessment u/s. 153A r.w.s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own in the original returns of income filed. The assessee had not given any supporting evidence for the agricultural income. The assessee had shown this amount to build up cash for future investment. Therefore, the agricultural income shown in the cash statement was disallowed and added to the total income returned, treating it as income earned by the assessee which was not disclosed to the Department. 30.2 On appeal the CIT(A) observed that an income cannot be based on mere presumption that if the assessee owns some agricultural land, the income from agricultural operation arises automatically. In order to establish the income from agricultural land, the procedures have been laid out for maintaining the details of receipts and expenses which were to be furnished. In view of this, the CIT(A) confirmed the decision taken by the Assessing Officer. 30.3 We have heard both the parties and perused the record. As discussed in para 26.6, we do not find any infirmity in the order of the CIT(A) and the same is confirmed. This ground of appeals of the assessee in all the appeals is rejected. Thus the appeals of the assessee are dismissed. ITA No. 421/Coch/2016 : Razia Ahammed 31. The fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground before the CIT(A). The assessee has not placed any evidence to show how he was prevented by sufficient reasons in not filing the ground before the CIT(A). Further the assessee has not put up any objections on this issue. Considering these facts, we are inclined to dismiss this ground as not arising out of the order of the lower authorities. 32.3 The next common in ITA No. 420/Coch/2016 is with regard to the finding of the CIT(A) that the assessee has inflated expenditure to the extent of 10% . 32.4 The facts of the case are that the Assessing Officer made the addition on account of inflation of expenditure at 10% of the gross profit for the assessment year 2004-05. The Assessing Officer observed that at the time of search Shri K. Jaffar who was managing the financial matters and accounts of the assessee firm M/s. Nilambur Traders, stated that there is a normal practice of inflating the expenditure at the time of finalization of the accounts. It is evident from the materials seized from the premises of assessee and statement submitted along with the return of income. Description Amount shown (Rs.) Along with return of income Evidence seized 1. Opening sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer and his only statement was with reference to the statement of accounts which have been finalised for the AY 2007-08 - was as follows: "[Ans to Q.4:] ... ... As stated above, I admit that certain expenses were inflated under the head food expenses, repairs and maintenance, accounts. I also admit that the same [the work same is subsequently struck off] expenses are also inflated under the same head in earlier years also." 32.7 The Ld. AR submitted that the Assessing Officer did not offer any opportunity to the assessee for cross examination of Shri Jaffar. In this regard, the Ld. AR submitted that all expenses were properly vouched and/or supported by bills. The Ld. AR submitted that the Assessing Officer should have specified the details of evidences seized and sought explanation from the assessee before such materials were made use of against the assessee. Therefore the Ld. AR submitted that the disallowance of Rs. 4,45,425/ may be set aside. The Ld. DR relied on the orders of the lower authorities. 32.8 We have heard the rival contentions and perused the record. At the time of search, Shri Jaffar, manager of the assessee stated that it was a normal practice of infl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the contentions raised by the assessee that the Assessing Officer did not have any basis for considering the net profit at Rs. 37,55,858/- is not correct. Accordingly the CIT(A) confirmed the findings of the Assessing Officer as no evidence contrary to the findings of the Assessing Officer was produced. 33.3 Against this the assessee is in appeal before us. The Ld. AR submitted that the profit and loss account recovered was not the final statement but only a tentative one and was apparently prepared before the audit of the accounts. The assessee submitted that the return of income was filed based on the accounts maintained by the assessee and the same was audited by a chartered accountant. The Ld. AR submitted that the Assessing Officer should have put the statements specifically to the assessee and offered him an opportunity to reconcile the figures. The Ld. AR submitted that regarding the expenses under four heads being different from and less than the figures furnished in the return of income, the Assessing Officer has not indicated the details of the materials seized. It was submitted that the Assessing Officer should have put those materials specifically to the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been paid for the purchase of second-hand imported machinery by the appellant at Rs. 57,09,248/-. The assessing officer treated the difference amount of Rs. 74,40,752/- as undervaluation on account of the machinery. 9.4. The appellant has submitted that the rubber board is not the appropriate authority with regard to valuation of machinery used in manufacturing units, particularly in respect of imported machinery. The Engineer appears to have carried out the valuation based on prevailing market rate and condition of machinery. However, the report does not contain any details about the prevailing market rate nor does it indicates the age of the machinery. Further, the valuation has not referred to the import bills as well as he has not considered this fact that the said machineries are second-hand machineries. The appellant has further explained that the machineries have been imported after payment of duty on the value of the imported machinery to the customs authorities. In case of pre-used machineries, the value is certified by Chartered Engineer whose certificate is required to accompany the import, and the Customs department acts on such certificates. 9.5. The appellant ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee on purchasing these machines. Accordingly, the addition made by the assessing officer on account of undisclosed investment in machinery to the extent of Rs. 74,40,752/- is deleted." 34.4 Since the facts of the case are identical, the CIT(A) held that the findings given in the case of K.A. Rauf was applicable to the instant case also. Since it was concluded that no incriminating paper or any statement of the assessee or his employee was indicative of the fact of the under valuation of the machinery, the CIT(A) deleted the addition made by the Assessing Officer on account of undisclosed investment in machinery to the extent of Rs. 75,50,000/-. 34.5 We have heard the rival contentions and perused the material on record. The Assessing Officer made addition towards unexplained investment and on the basis of valuation report filed by the DVO. However there was no incriminating material or any statement of the assessee or his employee to indicate the fact of the under valuation of the machinery. In the absence of any incriminating material it is not possible for us to sustain the addition made by the Assessing Officer. In our opinion, the deletion of addition made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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