TIKAM KHANDELWAL, Jaipur V. ACIT, Jaipur

ITA 132/JPR/2011

• Counselvise Citation: 13223114 RSA 2011
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K L MOOLCHANDAN I; R K KHUNTETA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained investment; Business income; Depreciation; Search and seizure; Document seized; Opportunity of being heard; Source of fund; Proportionate interest; Additional evidence; Block assessment; Retraction; Documents seized
• Section: 143(3); 68; 69; 132; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.132/JP/2011 ASSESSMENT YEAR 2008-09 PAN: AKGPK 7401 H SHRI TIKAM KHANDELWAL VS. THE ACIT A-2, RANA PRATAP NAGAR CENTRAL CIRCLE- 1 JHOTWARA, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ITA NO.244/JP/2011 ASSESSMENT YEAR 2008-09 PAN: AKGPK 7401 H THE ACIT VS SHRI TIKAM KHANDELWAL CENTRAL CIRCLE- 1 A-2, RANA PRATAP NAGAR JAIPUR JHOTWARA, JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI K.L. MOOLCHANDANI & SHRI R.K . KHUNTETA DEPARTMENT BY : SHRI SUNIL MATHUR DATE OF HEARING: 2-08-2011 DATE OF PRONOUNCEMENT: 19-08-2011 : ORDER PER N.L. KALRA, AM:- THE ASSESSEE AS WELL AS REVENUE HAVE FILED APPEALS AGAINST THE ORDER OF THE LD. CIT(A)-CENTRAL, JAIPUR DATED 06-01-2010 FOR THE ASSESSMENT YEAR 2008-09. 2 2.1 THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS A S UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 19,25,000/- IN RESPECT OF ALLEGED UNEXPLAINED INVESTMENT IN RESPECT OF THE FOLLOWING PROPERTIES, DISBELIEVING THE INVESTMENT RECORDED IN THE CASH BOOK PRODUCED/ FILED BEFORE THE LOWER AUTHORITIES WHEREIN THE PAYMENTS/INVESTMENT IS DULY RECORDED. S.N. NAME OF PROPERTIES ADDITION MADE BY THE AO ADDITION DELETED BY THE LD. CIT(A) ADDITION SUSTAINED 1. PLOT NO.155-A, BRIJ MANDAL COLONY 30,00,000 24,00,000 6,00,000 2. PLOT NO.333 & 334, GANESH NAGAR VISTAR 2,25,000 0 2,25,000 3. PLOT NO. 27 & 28, MITRA NAGAR 56,00,000 45,00,000 11,00,000 TOTAL 19,25,000 2.2 THE REVENUE VIDE GROUND NO. 3 IS AGGRIEVED AGAI NST GIVING RELIEF OF RS. 69.00 LACS OUT OF TOTAL ADDITION OF RS. 88.25 L ACS MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE A CT. 2.3 THE ASSESSEE BELONGS TO THE GROUP NAMED AS SHAN KAR LAL KHANDELWAL GROUP OF JAIPUR. THE SEARCH OPERATIONS U/S 132 OF T HE ACT WERE CARRIED OUT ON 16 TH NOV. 07 AND 17 TH NOV. 07. DURING THE COURSE OF SEARCH, THIS GROUP ADMITTED TO HAVE ADDITIONAL UNRECORDED INVESTMENT T O THE EXTENT OF RS. 375.20 LACS. THIS GROUP INFORMED THE DEPARTMENT VID E LETTERS DATED 20 TH NO.V 3 2007 AND 21 ST NOV. 2007 THAT THE GROUP NEVER INTENDED TO MAKE TH E HUGE DISCLOSURE OF THE ADDITIONAL INCOME. WHILING FILING THE RETURN OF INCOME IN THIS GROUP, THE ADDITIONAL INCOME TO THE EXTENT OF RS. 223.3 LACS HAS BEEN DISCLOSED IN THE NAME OF SHRI SHANKAR LAL KHANDELWA L , GUMAN KHANDELWAL, SHRI TIKAM KHANDELWAL AND SHRI MOHAN KHANDELWAL. W HILE DECIDING THE APPEAL IN THE CASE OF SHANKAR LAL KHANDELWAL, WE HA VE BRIEFLY STATED THE FACTS RELATING TO RETRACTION OF SURRENDER FROM RS. 375.00 LACS TO RS. 223.33 LACS. HENCE, THE FACTS GIVEN IN THAT CASE ARE NOT B EING REPRODUCED WHILE DECIDING THE APPEAL IN THE CASE OF SHRI TIKAM KHAND ELWAL. 2.4 THE AO NOTICED THAT THE ASSESSEE HAS PURCHASED THE PROPERTY NAMELY 155A, BRIJ MANDAL COLONY FROM SHRI SUSHIL JHALANI F OR RS. 30.00 LACS. THE ASSESSEE MADE THE PAYMENT BY CHEQUE OF RS. 24.00 LA CS AND CASH PAYMENT OF RS. 6.00 LACS ON 06-09-2007. SHRI SUNIL JHALANI HAS BEEN CONSIDERED AS BENAMI PERSON AND OF ASSESSEES BROTHER THAT ALL TR ANSACTION IN THE NAME OF THIS PERSON HAS BEEN OWNED BY SHANKAR LAL KHANDELWA L . SHRI SUNIL JHALANI IS NOT THE PERSON OF MEANS . THE AO THEREFORE, TREA TED THE INVESTMENT OF RS. 30.00 LACS AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 2.5 THE ASSESSEE ALSO PURCHASED THE PROPERTY NO. 27 , MITRA NAGAR FROM SHRI GOPAL SAINI ON 27-04-07 FOR A CONSIDERATION OF RS. 28.00 LACS. A SUM OF RS. 22.50 LACS WAS PAID VIDE CHEQUE DATED 25-04-07 AND PAYMENT OF RS. 5.50 4 LACS WAS GIVEN IN CASH. THE PROPERTY NO. 28, MITRA NAGAT HAS ALSO BEEN PURCHASED FROM SHRI GOPAL SAINI ON 27-04-07 FOR A C ONSIDERATION OF RS. 28.00 LACS AND CONSIDERATION HAS BEEN PAID TO THE EXTENT OF RS. 22.50 LACS BY CHEQUE AND RS. 5.50 LAC BY CASH. SHRI GOPAL SAINI I S NOT A PERSON OF MEANS. SHRI GOPAL SAINI IN HIS STATEMENT ADMITTED THAT HE IS EMPLOYEE AND IS BEING PAID SALARY OF RS. 5,000/- PER MONTH. THUS A SUM OF RS. 56.00 LACS WAS CONSIDERED AS UNDISCLOSED INVESTMENT OF THE ASSESSE E.. 2.6 BEFORE THE LD. CIT(A) LD. AR FILED THE FOLLOWIN G SUBMISSIONS IN RESPECT OF INVESTMENT MADE IN THE PROPERTIES FOR W HICH THE AO HAS HELD THAT INVESTMENTS ARE UNEXPLAINED. THE SUBMISSIONS GIVEN BEFORE THE LD. CIT(A) ARE REPRODUCED FOR READY REFERENCE. A) PLOT NO 155A BRIJ MANDAL COLONY RS. 30,00,000/ -:- S.NO PARTICULARS PAGE NO. 1 COPY OF SALE DEED EXECUTED BY SHRI SUSHIL JHALANI IN FAVOUR OF ASSESSEE IN RESPECT OF PLOT NO 155A BRIJMANDAL COLONY 29 37 2 COPY OF SALE DEED EXECUTED BY SHRI SUBHASH YADAV IN FAVOUR OF SHRI SUSHIL JHALANI IN RESPECT O F OF PLOT NO 155A BRIJMANDAL COLONY ON 24/02/2005 (AY 2005-2006) 38 48 (I) THE PURCHASE FROM BENAMI PERSON DOES NOT IPSO FACTO CONSTITUTE A VALID REASON FOR ADDITION AS UNDISCLOSED INVESTMENT. MERELY THE PURCHASE FROM BENAMI IS NOT SUFFICIENT T O HOLD THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT. THE LD AO MADE THE ADD ITION WITHOUT MAKING PROPER INQUIRY. IT IS AN ADMITTED FACT THAT THE ASS ESSEE MADE THE PAYMENT TO SHRI SUSHIL JHALANI; WHICH IS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 5 THE PURCHASE OF THE PROPERTY IS SUPPORTED BY THE RE GISTERED SALE DEED COPY ENCLOSED AT PB PAGE 29-37. SINCE, THE LD AO CONSIDERED SHRI SUSHIL JHALANI A S BENAMI OF THE ASSESSEE, THE ONLY QUESTION REMAIN TO THE SOURCE OF INVESTMENT IN THE PLOT BY SHRI SUSHIL JHALANI. THIS PLOT WAS PURCHASED BY SHRI SUSHIL JHA LANI FROM SHRI SUBHASH YADAV THROUGH REGISTERED SALE DEED EXECUTED ON 24/02/2005 (AY 2005-06) FOR RS. 15,00,000/-. COPY OF THE SALE DEED IS PLACED AT PB PAGE 38-48 . THEREFORE, NO ADDITION CAN BE MADE IN AY 2008-200 9. (II) WITHOUT PREJUDICE TO THE ABOVE, WE SUBMIT THAT SHRI SUSHIL JHALANI WAS NOT BENAMI OF THE ASSESSEE. THE ASSESSEE HAS NO WHERE A DMITTED THAT SHRI SUSHIL JHALANI IS BENAMI OF THE ASSESSEE. C) PLOT NO 333-334 GANESH NAGAR VISTAR RS. 225000/ - S.NO. PARTICULARS PAGE NO. 1 COPY OF SALE DEED EXECUTED BY SMT ANITA VERMA IN FAVOUR OF ASSESSEE IN RESPECT OF PLOT NO. 333 & 334 GANESH NAGAR VISTAR 49 57 2 COPY OF CASH BOOK OF ASSESSEE 58 67 I) THE LEARNED AO MADE THE ADDITION BY HOLDING THAT TH E ASSESSEE FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN THE PLOT. IN FA CT, THE LD AO MADE THE ADDITION WITHOUT ASKING THE ASSESSEE TO EXPLAIN THE SOURCE OF INVESTMENT. II) THE INVESTMENT IS THE ABOVE PLOT WAS OF RS. 225000/ - THIS INVESTMENT CAN BE VERIFIED FROM THE REGISTERED SALE DEED PLACED AT PB PAGE 49-57. THE INVESTMENT IS RECORDED IN THE CASH BOOK (PB PAGE 59 ). THE ASSESSEE HAD SUFFICIENT CASH BALANCE IN THE BOOKS OF ACCOUNT TO MAKE THE INVESTMENT IN THE ABOVE SAID PLOTS. D) PLOT NO 27-28 MITRA RS. 56,00,000/- S.NO. PARTICULARS PAGE NO. 1 COPY OF SALE DEED EXECUTED BY SHRI GOPAL SAINI IN FAVOUR OF ASSESSEE PLOT NO 28 MITRA NAGAR 68 76 2 COPY OF SALE DEED EXECUTED BY SHRI GOPAL SAINI IN FAVOUR OF ASSESSEE PLOT NO 27 MITRA NAGAR 77 85 (I) THE PURCHASE FROM BENAMI PERSON DOES NOT IPSO FACTO CONSTITUTE A VALID REASON FOR ADDITION AS UNDISCLOSED INVESTMENT. MERELY THE PURCHASE FROM BENAMI IS NOT SUFFICIENT T O HOLD THAT THE ASSESSEE HAS MADE UNEXPLAINED INVESTMENT. THE LD AO MADE THE ADD ITION WITHOUT MAKING 6 PROPER INQUIRY. IT IS AN ADMITTED FACT THAT THE ASS ESSEE MADE THE PAYMENT TO SHRI GOPAL SAINI; WHICH IS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE MAJOR SOURCE OF PAYMENT TO SHRI GOPAL SAINI WAS LOA N OF RS. 45.00 LACS FROM ICICI BANK. THE COPY OF REGISTERED SALE DEED EXECUT ED BY SHRI GOPAL SAINI IS ENCLOSED AT PB PAGE 68-85. SINCE, THE LD AO CONSIDERED SHRI GOPAL SAINI AS B ENAMI OF THE ASSESSEE, THE ONLY QUESTION REMAIN TO THE SOURCE OF INVESTMENT (IF ANY ) IN THE ABOVE SAID PLOTS BY SHRI GOPAL SAINI. SHRI GOPAL SAINI EXECUTED THE SAL E DEED NOT AS OWNER OF THE ABOVE SAID PLOTS BUT ON BEHALF OF THE SHRI DHARMEND RA GUPTA/ SHRI GYANDENDRA GUPTA IN THE CAPACITY OF POWER OF ATTORNEY HOLDER. AS PER THE ABOVE SAID REGISTERED SALE DEED, THE O WNER OF THE PLOT NO. 27 WAS SHRI DHARMENDRA GUPTA (PB PAGE 77-85). THIS PLOT WAS ALL OTTED TO SHRI DHARMENDRA GUPTA BY MITRA GRAH NIRMAN SAHAKARI SAMITI LTD ON 1 5/04/1997 FOR RS. 8593/- (PB PAGE 79). SHRI DHARMENDRA GUPTA EXECUTED A GENE RAL POWER OF ATTORNEY IN FAVOUR OF SHRI GOPAL SANI ON 25/05/2004 (PB PAGE 80 ). SHRI GOPAL SAINI EXECUTED THE SALE DEED IN FAVOUR OF THE ASSESSEE ON BEHALF O F SHRI DHARMENDRA GUPTA AS A POWER OF ATTORNEY HOLDER. THE OWNER OF THE PLOT NO. 28 WAS SHRI GYANENDRA GUPTA THIS PLOT WAS ALLOTTED TO SHRI GYANENDRA GUPTA BY MITRA GRAH NIRMAN SAHAKA RI SAMITI LTD ON 15/04/1997 FOR RS. 8593/- (PB PAGE 70). SHRI GYANEN DRA GUPTA EXECUTED A GENERAL POWER OF ATTORNEY IN FAVOUR OF SHRI GOPAL S ANI ON 25/05/2004 (PB PAGE 71). SHRI GOPAL SAINI EXECUTED THE SALE DEED IN FAV OUR OF THE ASSESSEE ON BEHALF OF SHRI GYANENDRA GUPTA AS A POWER OF ATTORNEY HOLDER. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- I) CIT VS DAYA CHAND JAIN 98 ITR 280 (ALL) HELD THAT THE ONUS IS ON REVENUE TO PROVE THAT THE INVESTMENT WAS MADE BY THE ASSESSEE. III) LAL CHAND AGARWAL VS ACIT 21 TAXWORLD 213;231 ITAT JAIPUR BENCH THE INITIAL BURDEN U/S 69 OF INCOME TAX ACT IS ON D EPARTMENT TO PROVE THE INVESTMENT HAS BEEN MADE BY THE ASSESSEE. (II) WITHOUT PREJUDICE TO THE ABOVE, WE SUBMIT THA T SHRI GOPAL SAINI WAS NOT BENAMI OF THE ASSESSEE. THE ASSESSEE HAS NO WHERE ADMITTED THAT SHRI GOPAL SAINI IS BENAMI OF THE ASSESSEE. E) WITHOUT PREJUDICE TO ABOVE WE SUBMIT THAT BENEFIT OF TELESCOPING, RECYCLING AND ROTATION OF FUNDS. THE LEARNED AO MADE TRADING ADDITION (DISALLOWANCE OF CONSTRUCTION EXPENSES), SUPPRESSION OF SALE IN THE CURRENT YEAR AS WELL AS IN PREVIOUS YEARS. THE TRADING ADDITIONS MADE BY THE AO CONSTITUTES A FUND AND TEL ESCOPING THEREOF SHOULD BE 7 ALLOWED AGAINST THE ADDITION MADE FOR INVESTMENT. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- 1) ANANTHRAM VEERA SINGHAIAH & CO VS CIT [1980] 123 IT R 457 (SC), 2) CIT VS THYARYA MAL BAL CHAND [1987] 165 ITR 453 (RA J). 2.7 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE REDUCED THE ADDITION TO RS. 19.25 AFTER OBSERVING A S UNDER: 3.3 I HAVE CONSIDERED THE ARGUMENT OF THE A.R A ND HAVE PERUSED THE ASSESSMENT ORDER AND RELEVANT RECORD. IT IS SEEN TH AT THE APPELLANT HAS MAINLY CONTENDED THAT SH. SUNIL JHALANI IS NOT THE BENAMI OF THE APPELLANT AND HE HAS NOWHERE ADMITTED THAT SH. SUNIL JHALANI IS THE BENA MI OF THE APPELLANT. IT IS SEEN THAT SH. SHANKAR KHANDELWAL, THE BROTHER OF THE APP ELLANT, HAS ADMITTED SH. SUNIL JHALANI TO BE HIS BENAMI. CONSIDERING THE SAME SITU ATION THE A.O. HAS CONSIDERED SH. SUNIL JHALANI TO BE BENAMI OF THE APPELLANTS GROUP. HOWEVER, IN SUCH SITUATION, THE A.O. WAS NOT AT ALL JUSTIFIED TO MAK E ADDITION OF INVESTMENT IN THE HANDS OF APPELLANT DURING THE YEAR, AS PURCHASE FRO M BENAMI PERSON WILL NOT REQUIRE ANY ACTUAL INVESTMENT BY APPELLANT DURING T HE YEAR. HENCE ON THIS LOGIC OF A.O., THE ENTIRE ADDITION NEEDS TO BE DELETED IN TH E YEAR UNDER CONSIDERATION. 3.3.1 HOWEVER, CONSIDERING THE ARGUMENT OF THE APP ELLANT THAT SUSHIL JHALANI, GOPAL SAINI ETC HAS NOT BEEN ADMITTED TO B E BENAMI OF TIKAM KHANDELWAL AND CONSIDERING THAT GENERALLY ONE PERSON CANNOT BE CONSIDERED TO BE BENAMI FOR SH. SHANKAR KHANDELWAL AS WELL AS APPELLANT SH. TIK AM KHANDELWAL, IT WOULD BE APPROPRIATE FOR THE A.O. TO HAVE EXAMINED THE SOURC E OF PAYMENT FOR PURCHASE OF THE PLOTS AND IF THE SOURCE WAS NOT EXPLAINED, THEN ADDITION SHOULD HAVE BEEN MADE. NOW THIS ISSUE HAS BEEN EXAMINED BY THE UNDER SIGNED. 3.3.2 REGARDING PURCHASE FROM SH. SHUSHIL JHALANI , IT WAS MENTIONED BY THE A.O. HIMSELF THAT OUT OF RS. 30 LAKHS, RS. 24 L AKHS HAS BEEN PAID THROUGH CHEQUE AND RS. 6 LAKHS HAS BEEN PAID IN CASH. THE A .R OF THE APPELLANT HAS FURTHER SUBMITTED THAT RS. 24 LAKH WAS PAID BY TAKING LOAN FROM ICICI BANK FOR WHICH THE 8 COPY OF LETTER/CHART FROM ICICI BANK INDICATING AMO UNT FINANCED, TERMS OF REPAYMENT AND AGREEMENT DATED ETC HAS BEEN FILED BE FORE THE UNDERSIGNED. IT WAS SUBMITTED THAT THESE DETAILS COULD NOT BE HAVE BEEN SUBMITTED BEFORE THE A.O. AS NO SUCH OCCASION AROSE AS A.O. HAS NOT DOUBTED ABOU T THE INVESTMENT IN PURCHASE OF PLOT DURING THE ASSESSMENT PROCEEDINGS AND HAS NOT GIVEN ANY SHOW CAUSE FOR THE SAME. COPY OF THIS DOCUMENT WAS ALSO MADE AVAIL ABLE TO A.O. CONSIDERING THESE FACTS, THE ADDITION OF RS. 24 LAKHS IS DELETE D AND SINCE NO CLEAR CUT EVIDENCE HAS BEEN FILED FOR SOURCE OF CASH PAYMENT OF RS. 6 LAKHS, EXCEPT THE ARGUMENT OF CASH FLOW STATEMENT, WHICH IS QUITE SKETCHY AND NOT SUPPORTED BY CONFIRMATION FROM THE PERSONS FROM WHOM CONTENDED CASH WAS RECEI VED, THE ADDITION TO THE EXTENT OF RS. 6 LAKHS IS HEREBY UPHELD. 3.3.3 AS REGARDS ADDITION OF RS. 2,25,000/- FOR PU RCHASE OF 333-334 GANESH NAGAR VISTAR PLOTS, AS ALREADY MENTIONED ABO VE THAT THE CASH BOOK BEING PREPARED AFTERWARD AND BEING NOT PREPARED IN THE RE GULAR COURSE OF BUSINESS, CANNOT BE RELIED UPON, UNLESS CONFIRMATIONS FROM TH E VARIOUS PERSONS CONTENDED TO HAVE PAID CASH TO THE APPELLANT ARE FURNISHED. ACC ORDINGLY, A.O. WAS JUSTIFIED IN REJECTING THE CLAIM OF AVAILABILITY OF CASH BALANCE AND ACCORDINGLY ADDITION OF RS. 2,25,000/- FOR PURCHASE OF AFORESAID PLOT IS UPHELD . 3.3.4 NOW COMING TO INVESTMENT IN PURCHASE OF PLO T NO. 27-28 MITRA NAGAR FOR RS. 56 LAKHS. THE A.O. HAS ADDED THIS AMO UNT IN THE HANDS OF APPELLANT ONLY ON THE GROUND THAT THE SELLER SH. GOPAL SAINI HAVE BEEN CONSIDERED BENAMI PERSON AND HE IS A MAN OF NO MEANS. THE A.R. OF THE APPELLANT HAS ARGUED THAT FIRSTLY GOPAL SAINI IS NOT THE BENAMI OF THE APPELL ANT AND SECOND GOPAL SAINI HAS EXECUTED THE SALE DEED NOT AS OWNER OF THE ABOVE SA ID PLOTS BUT IS POWER OF ATTORNEY HOLDER OF OWNER SH. DHARMENDRA GUPTA/SH. G YANDNDRA GUPTA. THE A.O. WAS NOT JUSTIFIED IN ADDING THE AMOUNT OF PURCHASE OF PLOT, MERELY BECAUSE THE SAME HAVE BEEN PURCHASED FROM SH. GOPAL SAINI, WHO IS HELD TO BE BENAMI OF SH. SHANKAR KHANDELWAL. ONE HAS TO CONSIDER THE SOURCE OF INVESTMENT. IN THE INSTANT CASE, ASSUMING THAT SH. GOPAL SAINI HAS EXECUTED TH E SALE DEED ON BEHALF OF SH. DHARMENDRA/GYNENDRA GUPTA, AS CONTENDED BY THE APPE LLANT, THEN SOURCE OF FUND FOR APPARENT PURCHASE MADE BY APPELLANT HAS TO BE E XPLAINED BY THE APPELLANT. THE 9 A.O. IN HIS ASSESSMENT ORDER HAS HIMSELF MENTIONED ABOUT THE PAYMENT OF RS. 45 LAKHS ( RS. 22.5 LAKH EACH FOR TWO PLOTS) THROUGH C HEQUE. THE A.R. OF THE APPELLANT SUBMITTED THAT SEPARATE LOAN OF RS. 45 LA KHS WAS TAKEN FROM ICICI BANK AND IN SUPPORT OF THE SAME THE LETTER/STATEMENT OF ICICI BANK WAS SUBMITTED, WHEREIN LOAN AMOUNT OF RS. 45 LAKHS ALONGWITH SANCT IONED DATE BEING 29.3.2007 AND THE AMOUNT OF EMI ETC WAS SHOWN. IT WAS SUBMITT ED THAT THESE DETAILS COULD NOT BE HAVE BEEN SUBMITTED BEFORE THE A.O. AS NO S UCH OCCASION AROSE AS A.O. HAS NOT DOUBTED ABOUT THE INVESTMENT IN PURCHASE O F PLOT DURING THE ASSESSMENT PROCEEDINGS AND HAS NOT GIVEN ANY SHOW CAUSE FOR TH E SAME. THE COPIES OF THESE DETAILS WERE ALSO GIVEN TO THE A.O. FOR HIS COMMENT S BY THE UNDERSIGNED. CONSIDERING THAT THE AMOUNT OF RS. 45 LAKHS WAS GIV EN BY TAKING LOAN FROM ICICI BANK, INVESTMENT IN THE PURCHASE OF PLOT TO THE EXT ENT OF RS. 45 LAKHS IS TO BE TREATED AS EXPLAINED IN ABSENCE OF ANY OTHER ADVERS E MATERIAL ON RECORD. THE ADDITION OF REMAINING AMOUNT OF RS. 11 LAKH IS HERE BY CONFIRMED AS THE SOURCE OF THIS CASH PAYMENT IS HELD TO BE UNEXPLAINED, IN VIE W OF THE DISCUSSION MADE IN THE EARLIER PARA ABOUT THE UNRELIABILITY OF THE CASH BO OK, WHICH HAS BEEN PREPARED NOT IN THE REGULAR COURSE BUT AFTER THE SEARCH OPERATIO N. 3.3.5 IN BRIEF ADDITION OF RS. 19.25 LAKHS IS CON FIRMED IN VIEW OF THE FINDING AND REASONING GIVEN ABOVE AND RS. 69 LAKH IS DELETED. 2.8 BEFORE US, THE LD. AR HAS FILED THE FOLLOWING S UBMISSIONS IN APPEAL, AFTER GOING THROUGH THE EXPLANATION AS FURNISHED BY THE A.R. OF THE APPELLANT, THE LEARNED CIT (A) HAD OBSE RVED (PAGE NO. 9 OF THE APPEAL ORDER) THAT SINCE ONE PAYMENT OF RS.24 LAC WAS MADE BY A CHEQUE AFTER PROCURING A BANK LOAN FOR PURCHASING THE SAID PROPERTY SO THE INVESTMENT TO THAT EXTENT WAS SATISFACTORILY EXPLAINED AND BALANCE AMOUNT OF RS.6 LAC WAS CONFIRMED AS UNDISCLOSED INVESTMENT IN THE SAID PROPERTY (AS DIS CUSSED AT PAGE NO.9 OF THE APPEAL ORDER). WHILE ARRIVING AT SUCH CONCLUSIONS, THE LD CIT (A) DID NOT DWELL UPON THE RELEVANT FACTS AND OTHER ARGUMENTS AND BRU SHED ASIDE THE SAME WITHOUT ANY COGENT REASON. APPARENTLY THE FINDINGS OF THE A UTHORITIES BELOW ON THE POINT ARE PATENTLY INCORRECT AND DEVOID OF MERITS FOR THE FOLLOWING REASONS: 10 (I) IT IS AN ADMITTED FACT THAT SHRI SUSHIL JHALANI WAS ADMITTED AS BENAMI OF SHRI SHANKARLAL KHANDELWAL, AND SUCH CLAIM OF THE APPELL ANT HAD DULY BEEN ACCEPTED BY THE DEPARTMENT. THUS THERE IS NO DISPUT E REGARDING THE STATUS OF SHRI SUSHIL JHALANI. (II) AS PER COPY OF SALE DEED FOUND AND SEIZED DURING TH E COURSE OF SEARCH OPERATION, THE SAID PROPERTY WAS SHOWN PURCHASED BY SHRI JHALANI IN FEB., 2005 FOR RS.15,00,000/- THE INVESTMENT OF RS.15 LAC WAS DULY ACCOUNTED FOR IN THE BOOKS OR CASH FLOW STATEMENT PREPARED IN RES PECT OF THE TRANSACTIONS SHOWN IN THE NAME OF SUSHIL JHALANI WHICH WAS OWNED BY SHRI SHANKARLAL KHANDELWAL. THUS AT ORIGINAL STAGE, THE INVESTMENT OF RS 15 LAC WAS FULLY AND SATISFACTORILY EXPLAINED AS EVIDENCED BY THE SALE D EED AND CASH FLOW STATEMENT. (III) SUBSEQUENTLY IN SEPT.2007, AGAIN THE SALE OF THE SA ID PROPERTY WAS SHOWN IN THE NAME OF SUSHIL JHALANI IN FAVOR OF THE APPELLAN T SHRI TIKAM KHANDELWAL FOR RS. 30 LAC. THIS INSTRUMENT WAS GOT REGISTERED AS A PAPER WORK ONLY TO OBTAIN A BANK LOAN OF RS.24 LAC ON THE SAID PROPERT Y ONLY. THE BANK LOAN SO PROCURED IN THE NAME OF SHRI TIKAM KHANELWAL WAS DU LY SHOWN REMITTED TO SHRI SUSHIL JHALANI THROUGH THEIR CASH FLOW STATEME NTS ONLY. THUS THE BANK LOAN AND THE REMITTANCE THEREOF TO SHRI SUSHIL JHAL ANI HAD BEEN PROPERLY ACCOUNTED FOR. THE SUBSEQUENT SALE BEING PAPER WORK ONLY TO SECURE BANK LOAN WAS IMMATERIAL SO FAR INVESTMENT PART IS CONCE RNED AS THE SAID PROPERTY WAS BEING SHOWN TRANSACTED BY THE BENAMI SHRI JHALA NI ONLY. IN THE CIRCUMSTANCES, THE REMITTANCE AND PAYMENT AS SHOWN SUBSEQUENTLY IN RESPECT OF THE SAID PROPERTY (WHICH WERE ALSO DULY ACCOUNTE D FOR IN THE CASH FLOW STATEMENT OF THE APPELLANTS) WAS IMMATERIAL AND HAD NO FINANCIAL IMPLICATIONS AT ALL. IN VIEW OF THESE FACTS YOUR HONORS WOULD A PPRECIATE THAT THERE WAS NO UNDISCLOSED INVESTMENT AT ALL EITHER AT THE TIME OF ORIGINAL REGISTRY OF THE INSTRUMENT OR AT THE TIME OF SUBSEQUENT REGISTRATIO N ON THE BASIS OF WHICH BANK LOAN WAS OBTAINED. THE AUTHORITIES BELOW HAD HOWEVER FAILED TO APPRECI ATE THESE FACTS AND CONFIRMED ADDITION OF RS.6 LAC WHICH IS FACTUALLY I NCORRECT AND DESERVES TO BE DELETED. (2) 333 & 334, GANESH NAGAR, VISTAR: RS.2,25,000/-: THE PAYMENT FOR PURCHASE OF THE AFORESAID PROPERTIE S WAS DULY SHOWN IN THE BOOKS OF THE APPELLANT. HOWEVER, THE AUTHORITIE S BELOW HAD MADE AND CONFIRMED THIS ADDITION ON THE PLEA THAT THE CASH F LOW STATEMENT AS PRODUCED WAS NOT RELIABLE. AS SUCH THE SOURCES OF SUCH INVESTMEN T REMAINED UN-EXPLAINED AND PROCEEDED TO MAKE AND CONFIRM THE ADDITION ON ACCOU NT OF SUCH INVESTMENT. OBVIOUSLY SUCH CONCLUSIONS ARE BAD IN LAW AND DEVOI D OF MERITS, PARTICULARLY WHEN NO DEFECT OR DEFICIENCY WHAT-SO-EVER COULD BE POINTED OUT TO REJECT SUCH CASH FLOW STATEMENT. IN THE CIRCUMSTANCES, THE ADDI TION SO MADE ON SUCH FLIMSY GROUNDS IS BAD IN LAW AND DESERVES TO BE DELETED. 11 (3) 27-28, MITRA NAGAR: ADDITION OF RS.11 LAC CONF IRMED BY CIT OUT OF TOTAL ADDITION OF RS.56 LAC MADE BY THE AO: THE AO HAD DISCUSSED THIS ADDITION AT PAGE NO. 4 OF THE ASSESSMENT ORDER. HE HAD OPINED THAT THE SAID PROPERTY WAS PURCHASED FRO M ONE SHRI GOPAL SAINI WHO WAS TAKEN TO BE BENEMI OF SHRI SHANKARLAL KHANDELWA L, THE MAIN PERSON OF THE GROUP. THUS THE INVESTMENT IN THE SAID PROPERTY IN BENAMI NAME WAS TAKEN AS UNDISCLOSED INVESTMENT OF APPELLANT ON THE BASIS OF SUCH LONE GROUND AND ADDITION OF RS. 56 LAC WAS MADE. IN APPEAL, AFTER GOING THROUGH THE EXPLANATION AS F URNISHED BY THE A.R. OF THE APPELLANT, THE LEARNED CIT (A) HAD (PAGE NO.10 OF T HE APPEAL ORDER) OBSERVED THAT SINCE ONE PAYMENT OF RS.45 LAC WAS MADE BY A CHEQUE AFTER PROCURING A BANK LOAN FOR PURCHASING THE SAID PROPERTY SO THE INVESTMENT TO THAT EXTENT WAS SATISFACTORILY EXPLAINED AND BALANCE AMOUNT OF RS.11 LAC WAS CONFI RMED AS UNDISCLOSED INVESTMENT IN THE SAID PROPERTY (AS DISCUSSED AT PA GE NO.10 OF THE APPEAL ORDER). WHILE ARRIVING AT SUCH CONCLUSIONS, THE LD. CIT (A) DID NOT DWELL UPON THE RELEVANT FACTS AND OTHER ARGUMENTS AND BRUSHED ASID E THE SAME WITHOUT ANY COGENT REASON. APPARENTLY THE FINDINGS OF THE AUTHORITIES BELOW ON THE POINT ARE PATENTLY INCORRECT AND DEVOID OF MERITS FOR THE FOLLOWING RE ASONS: (I) IT IS AN ADMITTED FACT THAT SHRI GOPAL SAINI WAS AD MITTED AS BENAMI OF SHRI SHANKARLAL KHANDELWAL, AND SUCH CLAIM OF THE APPELL ANT HAD DULY BEEN ACCEPTED BY THE DEPARTMENT. THUS THERE IS NO DISPUT E REGARDING THE STATUS OF SHRI GOPAL SAINI.. (II) THE PROPERTIES UNDER CONSIDERATION WERE SHOWN SOLD BY SHRI GOPAL SAINI TO THE APPELLANT SHRI TIKAM KHANDELWAL FOR RS. 56 LAC. THE ENTIRE INVESTMENT IN THE SAID PROPERTIES WAS ROUTED THROUGH THE CASH BOO K OF THE APPELLANT. RS. 45 LAC WERE PAID BY CHEQUE AFTER SECURING BANK LOAN AN D BALANCE AMOUNT OF RS.11 LAC WERE PAID THROUGH SUCH CASH BOOK (CASH FLOW STA TEMENT). THE LD. CIT (A) HAD ACCEPTED THE PAYMENT MADE BY CHEQUE, BUT NOT WI LLING TO ACCEPT THE CORRECTNESS OF CASH PAYMENT SHOWN IN THE CASH BOOK ON THE PLEA THAT SUCH CASH BOOK WAS NOT RELIABLE. AS DISCUSSED HEREINABOVE, SU CH FINDINGS OF THE LEARNED CIT (A) WERE FACTUALLY INCORRECT AND WERE NOT LEGAL LY MAINTAINABLE PARTICULARLY WHEN NO DEFECT OR DEFICIENCY COULD BE POINTED OUT BY THE CONCERNED AUTHORITIES WHILE REJECTING SUCH CASH BOO K, IN THE CIRCUMSTANCES, THE CIT (A) BELOW HAD FAILED TO APPRECIATE THESE FA CTS IN RIGHT PERSPECTIVE AND CONFIRMED ADDITION OF RS.11 LAC WHICH IS FACTUALLY INCORRECT AND DESERVES TO BE DELETED. 2.9 BEFORE US, THE LD. DR SUBMITTED THAT THE PROPER TIES HAVE BEEN PURCHASED IN THE NAME OF THE PERSONS WHO ARE NOT MA N OF MEANS. FROM THESE 12 PERSONS, THE ASSESSEE HAS SHOWN PURCHASE OF PROPERT IES AS PER SALE CONSIDERATION AVAILABLE IN THE SEIZED DOCUMENTS. TH E ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE SOURCE OF MAKING THE PAYMENTS . HENCE, THE AO WAS JUSTIFIED IN MAKING THE ADDITION OF RS. 88.25 LACS. 2.10 WE HAVE HEARD BOTH THE PARTIES. THE REVENUE IN ITS GROUND OF APPEAL HAS MENTIONED THAT THE LD. CIT(A) HAS ERRED IN REDU CING THE ADDITION BY RS. 69.00 LACS OUT OF TOTAL ADDITION OF RS. 88.25 LACS MADE BY THE AO U/S 68 OF THE I.T. ACT. HOWEVER, THE ADDITION HAS NOT BEEN MA DE U/S 68 OF THE ACT BUT HAS BEEN MADE U/S 69 OF THE ACT. HENCE, IT IS CLEAR THAT GROUND OF APPEAL RAISED BY THE REVENUE IS WRONGLY WORDED. THE PROPE RTY WAS PURCHASED BY SHRI SUSHIL JHALANI IN FEB, 2005 FOR RS. 15.00 LACS . THE INVESTMENT OF RS. 15.00 LACS IS DULY ACCOUNTED IN THE CASH FLOW STATE MENT PREPARED IN RESPECT OF TRANSACTION SHOWN IN THE NAME OF SHRI SUSHIL JH ALANI. THE PROPERTY WAS SHOWN TO HAVE BEEN SOLD IN SEPT. 07 BY SHRI SUSHIL JHALANI IN FAVOUR OF THE ASSESSEE FOR RS. 30.00 LACS. THE CONTENTIONS OF TH E ASSESSEE IS THAT THE INSTRUMENT WAS GOT REGISTERED AS A PAPER WORK TO OB TAIN THE BANK LOAN OF RS. 24.00 LACS. THE BANK LOAN SO PROCURED IN THE NAME O F SHRI TIKAM KHANDELWAL WAS DULY SHOWN REMITTED TO SHRI SUSHIL J HALANI IN HIS CASH FLOW STATEMENT. HENCE, THERE WAS NO ACTUAL CASH FLOW STA TEMENT FROM THE ASSESSEE TO SHRI SUNIL JHALANI. THE CASH BOOK OF SHRI SUSHIL JHALANI SHOWS SUFFICIENT 13 CASH BALANCE IN SEPT. 2007. SINCE THE ASSESSEE HAS NOT ACTUALLY PAID ANY CASH TO SHRI SUSHIL JHALANI, THEREFORE, HE HAS NOT SHOW N THE SUM AS PAID TO SHRI SUSHIL JHALANI IN THE CASH BOOK. THERE HAS BEEN NO UNDISCLOSED INVESTMENT IN THE PROPERTY. THE DOCUMENT WAS GOT PREPARED TO RAIS E LOAN FROM THE BANK. HENCE, THERE IS NO CASE OF MAKING ADDITION OF RS. 6 .00 LACS AS CONFIRMED BY THE LD. CIT(A). THE LD. CIT(A) WAS JUSTIFIED IN DE LETING THE ADDITION OF RS. 24.00 LACS. THUS THERE WAS NO CASE OF MAKING ADDITI ON IN RESPECT OF INVESTMENT IN PROPERTY 155-A, BRIJ MANDAN COLONY. 2.11 IN RESPECT OF PROPERTY IN GANESH NAGAR VISTAR, THE PAYMENTS ARE REFLECTED IN THE CASH FLOW STATEMENT. WHILE DECIDIN G THE APPEAL IN THE CASE OF SHANKAR LAL KHANDELWAL, WE HAD ALREADY HELD THAT TH E ASSESSEE CAN PREPARE THE CASH FLOW STATEMENT TO EXPLAIN THE RECEIPTS AND PAYMENTS IN CASE THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNTS. THE PREPARATION OF CASH FLOW STATEMENT HAS BEEN CONSIDERED APPROPRIATE BY I TAT JAIPUR BENCH AS PER DECISION REFERRED TO IN THE APPELLATE ORDER OF SHANKAR LAL KHANDELWAL. AS ON 19-06-2007, THE PAYMENT OF RS. 2 .25 LACS HAS BEEN SHOWN PAID TO SMT. ANITA VERMA FOR PLOTS IN GANESH NAGAR VISTAAR. HENCE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 2.25 LACS. 2.12 IN RESPECT OF PURCHASE OF PROPERTY NAMELY 27 A ND 28 MITRA NAGAR, IT HAS BEEN EXPLAINED THAT PAYMENT OF RS. 45.00 LACS H AS BEEN GIVEN FOR RAISING 14 THE LOAN FROM THE BANK. BEFORE THE LD. CIT(A), THE ASSESSEE HAS SUBMITTED THE NECESSARY EVIDENCE IN SUPPORT OF LOAN OF RS. 45.00 LACS TAKEN FROM ICICI BANK. THE BALANCE SUM OF RS. 11.00 LACS STANDS PAID IN THE CASH FLOW STATEMENT. A SUM OF RS. 4.00 LACS HAS BEEN PAID ON 21-04-07 AND A SUM OF RS. 7.00 LACS HAS BEEN PAID ON 21-07-07. THESE PAYM ENTS ARE REFLECTED IN THE CASH FLOW STATEMENT IN THE NAME OF SHRI GOPAL SAINI . IN THE CASH FLOW STATEMENT, THE REVENUE HAS NOT BEEN ABLE TO IDENTIF Y ANY SPECIFIC ITEM OF RECEIPT OF CASH TO SHOW THAT SUCH RECEIPTS ARE NOT VERIFIABLE. SINCE THE PAYMENT IS BEING REFLECTED IN THE CASH FLOW STATEME NT, THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 11.00 LACS. HENCE GROUND NO. 1 OF THE ASSESSEE IS ALLOWED WHILE GROUN D NO. 3 OF THE REVENUE IS DISMISSED. 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 46.74 LACS /- IN RESPECT OF FOLLOWING PROPERTIES ON THE BASIS OF PAPER NO. 25/23 MARKED AS ANNEXURE A-25 SEIZED FORM 59, MANSAROVAR COLONY, KALWAR ROAD, JHOTWARA, JAIPUR AND FURTHER ERRED IN REJECTING THE ASSESSEE S CONTENTION THAT THE ABOVE SAID DOCUMENT WAS NOT SEIZED FROM HIS POSSESSION AND SEIZED PAPER IS DUMB, MUTE, AMBIGUOUS, UNSPECIFIC AND ROUGH AND DOES NOT DISCLOSE THE ACTUAL AMOUNT OF THE SALE. 15 S.N. NAME OF PROPERTIES SALES SHOWN IN BOOKS SALES TAKEN ON THE BASIS OF SEIZED PAPER ADDITION 1. 59, SHRI RAM NAGAR 8,25,000 21,00,000 12,75,0 00 2. 31,CHITRAKOOT COLONY 10,51,000 20,00,000 9,49,000 3. 99 & 100 GANESH COLONY 11,50,000 36,00,000 24,50,000 TOTAL 46,74,000 3.2 THE AO NOTICED THAT THE ASSESSEE HAS SOLD THREE PROPERTIES. THE AO ACCORDING TO THE SEIZED PAPER NO. 23 AND 25 OF ANNE XURE A-25, CONCLUDED THAT THE SALE CONSIDERATION IS MORE THAN THE ACTUAL SALE CONSIDERATION SHOWN BY THE ASSESSEE . THE DIFFERENCE BETWEEN THE ACTUAL SALE CONSIDERATION AND THE SALES SHOWN IN THE BOOKS OF ACCOUNTS HAS BEEN A DDED AS UNDISCLOSED INCOME TO THE EXTENT OF RS. 132,15,000/-. 3.3 BEFORE THE LD. CIT(A), THE ASSESSEE HAS MADE T HE FOLLOWING SUBMISSIONS A) PLOT NO 31 CHITRAKOOT COLONY:- (I) THERE IS CALCULATION MISTAKE OF RS.85,41,000/- WHIL E CALCULATING THE DIFFERENCE IN RESPECT OF PLOT NO 31 CHITRAKOOT COLONY, JAIPUR. TH E DIFFERENCE COMES TO RS. (20,00,000/- MINUS 10,51,000) = RS 9,49,000/- AS AGAINST 94,90,000/- TAKEN BY THE AO. HOWEVER, THIS MISTAKE HAS BEEN RECTIFIED BY THE AO HIMSELF BY PASSING ORDER U/S 154 OF INCOME TAX ACT. THE COPY OF ORDER PASSED BY THE AO U/S 154 IS ENCLOSED HEREWITH E-52. (II) FURTHER THE SALES SHOWN AS PER BOOKS WAS TAKEN AT R S. 10,51,000/- WHICH IS IN RESPECT OF PART OF THE SAID PLOT. THE ASSESSEE SOLD THIS PLOT THROUGH TWO REGISTERED SALE DEEDS; ONE WAS EXECUTED ON 13-02-2008 IN FAVO UR OF SHRI SHANTI LAL JAIN FOR RS. 10,51,000/-. THE REMAINING PART OF THE PLOT WAS SOLD BY EXECUTING THE REGISTERED SALE DEED ON 16-02-2008 IN FAVOUR OF SHR I RAJESH BALLABH MISHRA FOR 16 RS. 9,51,000/-. THE SALE FIGURE AGAINST THIS PLOT I N PROFIT & LOSS ACCOUNT IS 20,02,000/- NOT RS. 10,51,000/- AS TAKEN BY THE AO. FURTHER THE SALES OF RS. 3,00,000/- AGAINST PLOT NO 31 CHITRAKOOT NAGAR IS A LSO RECORDED IN THE BOOKS OF SHRI SHANKER KHANDELWAL AY 2004-05 IN RESPECT OF HI S SHARE IN THE PLOT. THUS THE TOTAL SALES RECORDED IN BOOKS AGAINST THIS PLOT COM ES TO RS. 10,51,000+951000/- +3,00,000 =23,02,000/-. THUS, NO DIFFERENCE SHOULD BE CALCULATED ON ACCOUNT OF THIS PLOT. (III) FURTHER, THE AO MADE DOUBLE ADDITION. HE MADE ADDIT ION OF RS. 37.00 LACS IN THE HANDS OF SHRI SHANKER KHANDELWAL (AY 2004-05). THE AO MADE ADDITION OF RS. 9490000-8541000 (RECTIFIED U/S 154) = RS 949000/- I N THE HANDS OF THE ASSESSEE, RESULTING THE TOTAL ADDITION OF RS. 46,49,000/- B) PLOT NO 59 SHRI RAM NAGAR:- I. THE SALES SHOWN AS PER BOOKS WAS TAKEN AT RS. 8,25, 000/- WHICH IS IN RESPECT OF PART OF PLOT. THE ASSESSEE SOLD THIS PLOT THROUGH T WO REGISTERED SALE DEED; ONE EXECUTED ON 16-08-2007 IN FAVOUR OF SHRI PRAMOD KAN WAR FOR RS. 8,25,000/-. THE REMAINING SHARE IN THE PLOT WAS SOLD BY EXECUTING T HE REGISTERED SALE DEED ON 16- 08-2007 IN FAVOUR OF SHRI SURESH LALWANI FOR RS. 24 ,00,000/-. THUS THE TOTAL SALES RECORDED IN BOOKS AGAINST THIS PLOT COMES TO RS. 8, 25,000+24,00,000/- =32,25,000/- AS AGAINST FIGURE OF RS. 21 MENTIONED OVER THE IMPUGNED SEIZED PAPER. THUS, NO DIFFERENCE SHOULD BE CALCULATED ON ACCOU NT OF THIS PLOT. C) PLOT NO 99 & 100 GANESH COLONY (I) THE SALES SHOWN AS PER BOOKS WAS TAKEN AT RS. 1 1,50,000/- WHICH IS IN RESPECT OF PART OF PLOT. THE ASSESSEE SOLD THIS PLOT THROUGH T WO REGISTERED SALE DEED; ONE EXECUTED ON 20-09-2007 IN FAVOUR OF SHRI NAWAL KISH ORE OM PRAKASH FOR RS. 11,50,000/-. THE REMAINING PART OF THE PLOT WAS SOL D BY EXECUTING THE REGISTERED SALE DEED ON 30-05-2008 (AY 2009-2010) IN FAVOUR OF SHRI VIJAY LAXMI KABRA FOR RS. 8,00,000/-. THE FIGURE OF RS. 250850/- IS A PPEARING AS CLOSING STOCK AGAINST THIS PLOT IN THE PROFIT AND LOSS ACCOUNT FO R THE YEAR ENDED ON 31.03.2008 THUS THE TOTAL SALES RECORDED IN BOOKS AGAINST THIS PLOT COMES TO RS. 11,50,000+8,00,000/- =19,50,000/- AS AGAINST RS. 11 50000/- TAKEN BY THE AO. 3.4 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S CONFIRMED THE ENTIRE ADDITION OF RS. 46.74 LACS BECAUSE THE ADDITION WAS RECTIFIED U/S 154 OF THE ACT BY THE AO FROM RS. 1,32,15,000/- TO RS. 46.74 L ACS. 17 5.2 I HAVE CONSIDERED THE SUBMISSION OF LD. A.R AND HAVE PERUSED THE MATERIAL ON RECORD. THE ISSUE OF ADDITION ON ACCOUN T OF SUPPRESSED SALE AS EVIDENT FROM PAGE 23 AND 25 OF ANN.A-25 HAS BEEN DISCUSSED AND AFTER CONSIDERING THE ARGUMENT OF THE APPELLANT, IT HAS BEEN HELD IN THE APPEAL ORDER FOR A.Y 2004-05 AND FURTHER FOR A.Y 2005-06, THAT THESE DOCUMENTS C LEARLY REFLECT THE SALE VALUE OF THE VARIOUS PLOTS HELD BY THE VARIOUS FAMILY MEMBER S OF THE APPELLANT GROUP. FOR THE REASONS DISCUSSED IN DETAIL IN BOTH THE EARLIER ASSESSMENT YEARS APPEAL ORDERS, IN THE PRESENT APPEAL ORDER ALSO, IT IS HELD THAT T HESE TWO DOCUMENTS REFLECTS THE ACTUAL SALE VALUE OF THE VARIOUS PLOTS, AS AGAINST THE APPARENT CONSIDERATION SHOWN BY THE APPELLANT IN ITS PREPARED BOOKS OF ACCOUNTS. 5.2.1 COMING TO THE FACTUAL ISSUE REGARDING PLOT 31, CHITRAKOOT COLONY, THE A.O. HAS ALREADY RECTIFIED MISTAKE OF ADDITION FROM RS. 94,90,000/- TO RS. 9,49,000/-. REGARDING THE BALANCE ADDITION, THE ARG UMENT OF THE A.R OF DOUBLE ADDITION IS HAVING NO FORCE AND IS REJECTED. 5.2.2 REGARDING PLOT NO. 59 SHRI RAM NAGAR PLOT IS CONCERNED, THE ARGUMENT OF THE APPELLANT OF PLOT BEING SOLD TO TWO PERSONS IS PARTLY CORRECT AS IN PAGE 25 OF ANN.A-25, FOLLOWING ADDITIONS CLEARLY IN DICATE THAT RAM NAGAR PLOT WAS HAVING TWO PORTIONS AND EACH OF THE PORTION WAS HAVING SALE VALUE OF RS. 21 LAKHS. RAM NAGAR - 21X2 AS ONLY ONE PORTION OF THE PLOT HAS BEEN SOLD DURIN G THE YEAR SHOWING APPARENT SALE VALUE AT RS. 8.25 LAKHS, THE A.O WAS JUSTIFIED IN TAKING THE ACTUAL SALE VALUE AT RS. 21 LAKHS AGAINST THE APPAR ENT VALUE SHOWN IN SALE DEED AT RS. 8.25 LAKHS IN RESPECT OF THIS PORTION. 5.2.3 REGARDING PLOT NO. 99, 100 IN GANESH COLONY IS CONCERNED; IT IS CLEAR FROM THE NARRATION AVAILABLE ON PAGE 25 OF AN N. A-25 THAT ON TWO PLOTS NAMELY 99 & 100, THREE SEPARATE UNITS WERE CONSTRUC TED AND EACH IS HAVING SALE VALUE OF RS. 18 LAKHS GANESH COLONY = 18X3 18 AS TWO PORTIONS/PLOTS HAVE BEEN SOLD DURING THE YEA R TO SH. NAWAL KISHORE OM PRAKASH AND ACCORDINGLY A.O. WAS JUSTIFI ED IN TAKING ACTUAL SALE VALUE AT RS. 36 LAKHS IN STEAD OF RS. 11.50 LAKHS S HOWN BY THE APPELLANT. 5.2.3 IN BRIEF, ENTIRE ADDITION OF RS. 46,74,000/- , FINALLY REMAINING AFTER ORDER U/S 154 BY THE A.O., IS HEREB Y CONFIRMED. 3.5 BEFORE US, THE LD. AR HAS FILED FOLLOWING SUBMI SSIONS. (A) ON CAREFUL STUDY OF THE PAPER UNDER CONSIDE RATION (PAGE 23-25 OF EX. A-25 WHICH IS PLACED IN THE PAPE R BOOK AT PAGE NO. 21 & 22 ) YOUR HONORS WOULD APPRECIATE THAT THE AFORESAID PAPER IS ACTUALLY A DEAF AND DUMB PAPER F OR THE FOLLOWING REASONS: (I) ON PERUSAL OF THE SAID PAPERS, YOUR HONORS WOUL D NOTE THAT THESE ARE COPIES OF A PRINT OUT OF PRO PERTY A/C GROUP SUMMARY FOR TWO FINANCIAL YEARS I.E. 1 ST APRIL, 2006 TO 31 ST .MARCH, 2007 (PAGE NO.23) & 1 ST APRIL, 2005 TO 31 ST MARCH, 2006. ON THE BLANK SPACE OF THESE SHEETS, THERE IS ROUGH JOTTINGS AND WORKING IN HAND. ON CAREFUL STUDY OF THESE JOTT INGS YOUR HONORS WOULD NOTE THAT THERE IS NO MENTION OF ANY DATE, MONTH OR YEA R, MEASUREMENT OR ANY SIZE OF THE PLOT OR PROPERTY IN HAND WRITTEN JOTTINGS, THERE IS NO MENTION OF THE NATURE OF PROPERTY I.E. WHETHER IT IS A PLOT OR A FLAT, THERE IS NO SPECIFICATION OF THE DIGITS DENOTING THE EXACT AMOUNT OF THE SALE CONSIDERATION AS PER THE LIST OF THE PROPERTIE S SOLD DURING THE YEAR UNDER CONSIDERATION. IT IS NOT UNDER-STOOD FROM WHERE THE AUTHORITIES BELOW COULD DEDUCE THE SHOWN FIGURE S IN LACS , WHEN THERE IS NO SPECIFIC MENTION OF LAC ANY WHERE IN THE HAND-WRITTEN JOTTINGS. IN THE CIRCUMSTANCES, THE AP PELLANT HAD BEEN CORRECTLY PLEADING THAT THESE ARE DEAF AND DUM B PAPERS ONLY CARRYING NO EVIDENTIARY VALUE AS OPINED BY NUM BER OF JUDICIAL AUTHORITIES IN NUMBER OF CASES AS REFERRED TO IN THE WRITTEN SUBMISSION MADE FROM TIME TO TIME (KINDLY R EFER TO PAGE NO. 15 & 16 OF PB). IN VIEW OF THESE FACTS, IT IS ESTABLISHED 19 BEYOND DOUBT THAT THESE PAPERS ARE DEAF AND DUMB PA PERS AS BEING PLEADED BEFORE THE AUTHORITIES BELOW. (II) NOW COMING TO THE CORRECTNESS OF THE CHART AS DRAWN BY THE LD. AO AT PAGE NO. 6 OF THE ASSESSMENT ORDER, T HE FACTS OF ALL SUCH PROPERTIES ARE DISCUSSED ONE BY ONE AS UNDER: (1) 59, SHRI RAM NAGAR: THERE IS NO MENTION OF P LOT NO. 59 ON THE SAID SHEET. AGAIN THERE IS NO MENTION OF 21 ANY-WHERE ON THE SHEET PARTICULARLY AGAINST THE NARRATION OF SHRI RAM NAGAR . IN THE CIRCUMSTANCES, IT IS NOT CLEAR FROM WHERE TH E LD. AO HAD TAKEN FIGURES OF RS.21,00,000/- (APPARENTLY. IN ABSENCE OF SPECIFIC MENTION OF THE PLOT NO. OF A P ARTICULAR SCHEME, THE ACTUAL FIGURES OF SALE CONSIDERATION, NO LOGICAL INFERENCE COULD BE DRAWN ON THE BASIS OF SUCH ROUGH JOTTINGS MENTIONING THE NAME OF SCHEME ONLY. IN THE CIRCU MSTANCES, THE ROUGH JOTTING MENTIONING MERELY THE NAME OF SHR I RAM NAGAR IS IMMATERIAL AND IRRELEVANT CONVEYING NO MEA NING AT ALL. FURTHER THE LEARNED AO HAD ALSO COMMITTED A TACTICA L MISTAKE BY TAKING ONLY ONE PART OF THE SAID PLOT INTO ACCOU NT TO WORK-OUT THE SUPPRESSED SALES OF RS.12,75,000/- IN FACT THE SAID PLOT WAS SUB-DIVIDED IN TWO PARTS AND WERE SOLD THROUGH TWO REGISTERED INSTRUMENTS FOR RS.8,25,000/- & 24.00,000/- RESPECTIVELY TOTALING RS.32,25,000/- AS PER COPIES OF INSTRUMEN TS LYING AT PAGE NO. 23 TO 37 OF THE PB ) THUS SALE CONSIDERATION IN RESPECT OF THE SAID PLOT HAD BEEN SHOWN AT RS.32,25,000/- A S AGAINST RS.21,00,000/- TAKEN BY THE AO. ACCORDINGLY, IT IS NOT A CASE OF SUPPRESSION OF SALES AS CONCLUDED BY THE AUTHORITIE S BELOW. (2) 31, CHITERKOOT COLONY : THERE IS NO MENTION OF PLOT NO.31 . IN ABSENCE OF SPECIFIC MENTION OF THE PLOT NO. O F A PARTICULAR SCHEME, NO FAIR AND DEFINITE AND LOGICAL INFERENCE COULD BE DRAWN ON THE BASIS OF SUCH ROUGH JOTTINGS MENTIONING THE NAME OF THE SCHEME ONLY. IN THE CIRCUMSTANCES , THE ROUGH JOTTING MENTIONING MERELY THE NAME OF CHITRAKOOT IS IMMATERIAL AND IRRELEVANT CONVEYING NO MEANING AT ALL. FURTHER THE LEARNED AO HAD ALSO COMMITTED A TACTICAL MISTAKE BY TAKING ONLY ONE PART OF THE SAID PLOT INTO ACCOU NT TO WORK-OUT THE SUPPRESSED SALES OF RS.9,49,,000/- IN FACT THE SAID PLOT WAS SUB-DIVIDED IN TWO PARTS AND WERE SOLD THROUGH TWO 20 INSTRUMENTS FOR RS.10,51,,000/- & 9,51,000/- RESPEC TIVELY TOTALING RS.20,02,000/- AS PER COPIES OF INSTRUMEN TS LYING AT PAGE NO. 38 TO 60 OF THE PB ) THUS SALE CONSIDERATION IN RESPECT OF THE SAID PLOT HAD BEEN SHOWN AT RS.20,02,,000/- AS AGAINST RS.20,00,000/- TAKEN BY THE AO. ACCORDINGLY, IT IS NOT A CASE OF SUPPRESSION OF SALES AS CONCLUDED BY THE AUTHORITIE S BELOW. (3) 99 & 100 GANESH COLONY: THERE IS NO MENTION OF PLOTS NO.99 & 100. IN ABSENCE OF SPECIFIC MENTION OF THE PLOT NO. OF A PARTICULAR SCHEME, NO DEFINITE AND LOGICAL INFERENCE COULD BE DRAWN ON THE BASIS OF SUCH ROUGH JOTTINGS MENTIONING THE NAME OF THE SCHEME ONLY. IN THIS REGARD, IT MAY BE CLARIFIED THAT IT WAS A SINGLE PLOT BEARING TWO NO. 99 & 100 MEASURING 273.88 SQ. YARDS PURCHASED BY THE APPELLANT IN NOVEMBER, 2006 FOR RS. 3,50,000/- THROUGH REGISTERED DEED AS PER COPY OF DEED SUBMITTED IN THE PAPER BOOK PAGE 61 TO 69 ). THE APPELLANT AFTER CONSTRUCTION WORK HAD SOLD 2/3 RD PORTION OF THE SAID PLOT DURING THE YEAR FOR RS.11,50,000/- AND BALANCE 1/3 RD PORTION WAS LYING IN THE CLOSING STOCKS WHICH WAS SOLD IN M AY, 2008 FOR RS.8,00,000/- THROUGH REGISTERED DEED (AS PER COPY LYING IN PB AT PAGE NO. 70 TO 80). HOWEVER, WHILE WORKING OUT T HE SUPPRESSED SALES OF RS.24,50,000/- THE LD. AO DID N OT TAKE NOTE OF THIS FACT AND TREATED THESE AS TWO PLOTS ON THE BASIS OF TWO NUMBERS OF 99 & 100 AND ACCORDINGLY WORKED OUT SALE CONSIDERATION OF TWO PLOTS AT RS.36 LAC (RS.18 LAC EACH). AGAIN HE DID NOT TAKE NOTE OF SALE IN TWO PARTS FOR RS. 1 1,50,000/- & 8,00,000/- RESPECTIVELY AND PROCEEDED TO WORK-OUT S UPPRESSED SALES OF RS.24,50,000/- ON THE BASIS OF SUCH INCOR RECT FACTS AND FIGURES WHEREAS ON THE BASIS OF CORRECT WORKING, T HERE WOULD WORK OUT NO SUPPRESSED SALES AT ALL AS TOTAL SALE C ONSIDERATION OF BOTH THE PARTS OF THESE PLOTS WOULD WORK OUT AT RS. 19,50,000/- AS AGAINST SALE PROCEEDS TAKEN BY THE AO AT RS.18 LAC PER PLOT. IN VIEW OF ABOVE DISCUSSIONS, IT IS PROVED BEYOND D OUBT THAT THE JOTTINGS AS CONTAINED IN THE AFORESAID EXH IBITS ARE DEAF AND DUMB JOTTINGS AND CARRY NO EVIDENTIARY VALUE. F URTHER ON THE BASIS OF THE FACTS ALSO AS DISCUSSED ABOVE IN RESPECT OF EACH PROPERTY , NO ADDITION IS CALLED FOR. 21 (III) HERE IT WOULD NOT BE OUT OF PLACE TO MENTION THAT AT THE TIME OF SEARCH OPERATIONS ALSO, THE APPELLANT WAS C ONFRONTED WITH THESE PAPERS AND WAS SPECIFICALLY REQUIRED TO EXPLAIN THE NATURE OF THESE JOTTINGS. AT TIME ALSO, THE APPELLA NT HAD EXPLAINED THE NATURE OF SUCH JOTTINGS FOR WHICH THE CONCERNED AUTHORIZED OFFICER FELT SATISFIED AND DID NOT ATTAC H MUCH IMPORTANCE TO SUCH DEAF AND DUMB PAPER AND ACCORDIN GLY DID NOT INSIST FOR ANY DISCLOSURE OF ADDITIONAL INCOME ON T HE BASIS OF THESE EXHIBITS. RELEVANT EXTRACT FROM HIS STATEMENT IS REPRODUCED HERE-UNDER FOR READY REFERENCE: IZU 18 ESA VKIDKS ANNEX. A-17, A-25 O A-28 FN[KK JGK GWA A D`I;K CRK;S FD BLESA FDL RJG DS FOOJ.K NTZ GS A MRRJ % BUESA LS VF/KDRJ PROPERTY DH [KJHN FCDZH LS LACAF/KR DKXTKR GS A ANNEX A-17 , IJ IST LA[;K 23 LS 47 ESA FOFHKUU O;FDR;KSA LS IZKIR DH XBZ JKFK;KSA RFKK FOFHKUU O; FDR;KSA DKS FD;S X;S HKQXRKUKSA DH DETAILS GS A ANNEX. A-25 DS IST LA[;K DS IST LA[;K DS IST LA[;K DS IST LA[;K 23 LS 25 23 LS 25 23 LS 25 23 LS 25 ESA FO ESA FO ESA FO ESA FOFHKUU FHKUUFHKUU FHKUU PROPERTIES DH DH DH DH DETAILS 'KKFEY GS 'KKFEY GS 'KKFEY GS 'KKFEY GS A A A A RFKK BL RFKK BL RFKK BL RFKK BL ANNEX. DS IST LA[;K 1 LS 4 ESA GEKJS }KJK [KJHNS O CSPH X BZ DS IST LA[;K 1 LS 4 ESA GEKJS }KJK [KJHNS O CSPH X BZ DS IST LA[;K 1 LS 4 ESA GEKJS }KJK [KJHNS O CSPH X BZ DS IST LA[;K 1 LS 4 ESA GEKJS }KJK [KJHNS O CSPH X BZ PROPERTIES DH DH DH DH DETAILS FY[KH XBZ GS A FY[KH XBZ GS A FY[KH XBZ GS A FY[KH XBZ GS A A-28 ESA FOFHKUU FINANCIAL TRANSACTIONS FY[KS GQ, GS A ANNEX. A-24 ESA HKH BLH IZDKJ DH PROPERTIES DH DETAILS FY[KH GQBZ GS A HAVING CONSIDERED THE ABOVE FACTS, YOUR HONOR WOULD APPRECIATE THAT THE AUTHORITIES BELOW HAVE MADE AND CONFIRMED THE ADDITION OF RS.46,74,,000/- WITHOUT ANY VALID G ROUND. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, THIS AD DITION IS FURTHER ASSAILED ON THE FOLLOWING LEGAL AND TECHNIC AL GROUNDS: (I) WHILE MAKING SUCH ADDITION, THE LEARNED AO. DID NOT MENTION ANY SECTION OF LAW UNDER WHICH HE WAS MAKING THIS ADDITION. AS PER JUDICIAL DISCIPLINE , THE LD. AO. WAS LEGALLY REQUIRED TO MENTION THE RELEVANT SECTION OF LAW FOR WHICH HE WAS MAKING THE ADDITION. FOR SUCH LAPSE, THE ADDITION SO MADE IS BAD IN LAW AND DESERVES TO THE DELETED IN LIMINE. 22 (II) AGAIN THE AUTHORITIES BELOW SEEM TO BE CONFUSED ABOUT THE EXACT NATURE OF THE ADDITION SOUGHT TO BE MADE/CONFIRMED BY THEM. THEY HAD OPINED THAT THESE ARE SUPPRESSED SALES. IN THAT CASE, ONLY N.P. EARNED ON SUCH SUPPRESSED SALES IS TO BE TAKEN INTO ACCOUNT, WHEREAS THE AUTHORITIES BELOW HAD ADDED THE ENTIRE AMOUNT OF THE SUPPRESSED SALES. THUS THE ADDITION SO MADE IS CONTRARY TO THE PRINCIPLES OF ACCOUNTANCY. IN SUCH CASE THE LOGICAL ADDITION WOULD BE TO THE EXTENT OF N.P. EARNED ON SUCH SUPPRESSED SALES ONLY AND NOT THE ENTIRE SALE CONSIDERATION AS DONE BY THE AUTHORITIES BELOW. 3.6 BEFORE US, THE LD. DR HAS REITERATED THE SAME S UBMISSIONS AS HAS BEEN GIVEN WHILE ARGUING THE APPEAL IN THE CASE OF SHANK AR LAL KHANDELWAL FOR THE ASSESSMENT YEAR 2008-09. 3.7 WE HAVE HEARD BOTH THE PARTIES. PAGE NOS. 23 AN D 25 OF ANNEXURE A- 25 WERE SEIZED FROM THE PREMISES AT MANSAROVAR COLO NY. THE PREMISES IS A SHOWROOM BELONGING TO M/S.GUMAN FURNITURE & SERVICE PVT. LTD. PAGE NOS. 23 AND 25 OF ANNEXURE A-25 WERE SHOWN TO SHRI SHANK AR LAL KHANDELWAL . IN ANSWER TO QUESTION NO. 18 RECORDED ON 17-11-07, SHRI SHANKAR LAL KHANDELWAL STATED THAT THESE PAPERS CONTAIN THE DET AILS OF THE PROPERTIES. THESE PAPERS WERE NOT CONFRONTED TO SHRI TIKAM KHAN DELWAL. THE STATEMENT OF SHRI TIKAM KHANDELWAL WAS RECORDED ON 17-11-07. IN THE STATEMENT, SHRI TIKAM KHANDELWAL STATED THAT HE CONCURS WITH THE ST ATEMENT OF HIS BROTHER SHRI SHANKAR LAL KHANDELWAL. SECTION 292C OF THE AC T REFERS TO THE 23 PRESUMPTION RELATED TO ASSETS AND BOOKS OF ACCOUNTS FOUND AND SEIZED DURING SEARCH PROCEEDINGS. IF THE BOOKS OF ACCOUNTS OR OTH ER DOCUMENTS ARE FOUND IN THE POSSESSION OF A PERSON THEN SUCH BOOKS OF ACCOU NTS SHOULD BE CONSIDERED TO BE BELONGED TO SUCH PERSON. IF THE BOOKS OF ACCO UNTS AND THE DOCUMENTS ARE IN THE HANDWRITING OF ANY PARTICULAR PERSON THE N IT SHOULD REASONABLY BE ASSUMED THAT THESE ARE IN THE HANDWRITING OF A PART ICULAR PERSON. PAGES 23 AND 25 OF ANNEXURE A-25 HAVE NOT BEEN FOUND IN THE POSSESSION AND CONTROL OF SHRI TIKAM KHANDELWAL. IT IS NOT THE CASE OF THE REVENUE THAT HANDWRITING ON THESE PAPERS IS OF SHRI TIKAM KHANDELWAL . IF TH E DOCUMENT IS NOT RECOVERED FROM THE ASSESSEE THEN PRESUMPTION U/S 13 2(4A) (WHICH IS NOW IN SECTION 292(C) OF THE ACT.) IS NOT AVAILABLE IN RES PECT OF THE DOCUMENT AGAINST THE ASSESSEE. HENCE THE ADDITION SHOULD NOT HAVE BEEN MADE ONLY ON THE BASIS OF PAPERS 23 AND 25 OF ANNEXURE A-25. THE WORD RAM NAGAR IS MENTIONED AT TWO PLACES AT PAGE 25 OF ANNEXURE A-25 . THE ASSESSEE SUBMITTED THAT THE PLOT WAS SUBDIVIDED AND THE TOTA L CONSIDERATION WAS AT RS. 32.25 LACS. HENCE, THERE IS NOT CASE OF MAKING ADDI TION OF RS. 12.75 LACS. 3.8 IN RESPECT OF PLOT A-31, CHITRAKOOT COLONY, T HE ACTUAL SALE CONSIDERATION ADOPTED BY THE AO AND THE LD. CIT(A) AT RS. 20.00 LAS AND THE DIFFERENCE OF RS.94.90 LACS HAS BEEN ADDED AS UNDIS CLOSED INCOME. THE ASSESSEE SOLD THIS PROPERTY THROUGH REGISTERED SALE DEED. THE SALE FIGURE IN 24 RESPECT OF THIS PLOT HAS BEEN SHOWN AT RS. 20.02 L ACS AND NOT RS. 10.51 LACS. THE ARGUMENT OF THE LD. AR WAS NOT ACCEPTED BY THE LD. CIT(A) WITHOUT GIVING ANY VALID REASONS. THE WORD CHITRAKOOT COLO NY 31 IS MENTIONED AT PAGE 25 OF ANNEXURE A-25 AND THE NOTING IS AS UNDER . CHITRAKOOT COLONY 1 22 X 2 THERE IS NO MENTION OF FIGURE OF TWO ZERO AGAINST C HITRAKOOT COLONY. THE WORD SOLD IS ALSO NOT BEING MENTIONED. WE THEREFO RE, FEEL THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 9.49 LACS. 3.9 IN RESPECT OF PLOT NO. 99 AND 100 GANESH COLONY , IT HAS BEEN STATED THAT PLOT HAS BEEN SOLD THROUGH TWO REGISTERED SALE DEEDS. ONE PART HAS BEEN SOLD DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMEN T YEAR UNDER CONSIDERATION AND THE BALANCE PART HAS BEEN SOLD SU BSEQUENT TO THE PREVIOUS YEAR. THE PART OF THE PLOT HAS BEEN IN THE CLOSING STOCK AT RS. 2,50,850/-. THUS THE TOTAL SALE CONSIDERATION IS OF RS. 19.5 LA CS. AT PAGE 25 OF ANNEXURE A-25, THE NOTING IS AS UNDER:- GANESH COLONY = 18 X 3 THE WORD SOLD IS NOT BEING MENTIONED. THE REVENUE H AS ALSO NOT COLLECTED ANY EVIDENCE IN RESPECT OF RECEIPT OF EXCESS CONSID ERATION. HENCE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 24.5 LACS. THUS GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 25 4.1 THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 9,75,72/- B Y CONFIRMING THE DISALLOWANCE OUT OF CONSTRUCTION EXPENSES TO THE EX TENT OF 20% AS AGAINST 33.3% DISALLOWED BY THE AO. 4.2 THE REVENUE IN GROUND NO. 1 IS AGGRIEVED AGAINS T ALLOWING RELIEF OF RS. 12,56,811/- BY REDUCING THE DISALLOWANCE OF RS. 9,75,722/- AS AGAINST RS. 22,32,853/-. 4.3 THE AO HAS DISALLOWED THE EXPENSES DEBITED UNDE R THE HEAD CONSTRUCTION AND WIP EXPENSES ON THE GROUND THAT TH E EXPENSES ARE NOT SUPPORTED BY VOUCHERS. THE AO HAS MENTIONED THAT IN TEREST BEARING LOANS HAVE BEEN DIVERTED TO THE SISTER CONCERN WITHOUT CH ARGING INTEREST AND THERE ARE CERTAIN PAYMENTS ON WHICH TAX AT SOURCE HAS NOT BEEN DEDUCTED. HENCE, THE DISALLOWANCE MADE TO 1/3 RD OF THE EXPENSES IS ON ACCOUNT OF UNVERIFIABLE NATURE OF EXPENSES AND NOT ALLOWABLE U/S 36(1)(III ) AND PART OF THE EXPENSES ARE NOT ALLOWABLE U/S 40(A)(IA). 4.4 BEFORE THE LD. CIT(A), THE ASSESSEE FILED THE W RITTEN SUBMISSION WHICH ARE THE SAME AS GIVEN IN THE CASE OF THE ASSESSEE F OR THE ASSESSMENT YEAR 2004-05 AND 2005-06. BESIDES THOSE WRITTEN SUBMISSI ON, FOLLOWING SUBMISSIONS WERE GIVEN. 26 THE APPELLANT HAS NOW FURNISHED THE RECONCILIATIO N OF OPENING STOCK, CONSTRUCTION EXPENSES AND WIP AS BELOW. PARTICULARS AMOUNT AMOUNT OPENING STOCK WIP 213842 WIP EXPENSES 928644 TOTAL (A) 1142486 INCURRED DURING THE YEAR CONSTRUCTION COST 4611660 WIP 2086089 TOTAL (B) 6697749 LESS :- DEBITED AGAINST THE SALE CONSTRUCTION COST 4825503 WIP 53358 TOTAL (C) 4878861 CLOSING STOCK A+B-C 2961374 THE A.R. HAS ARGUED THAT COPY OF TRIAL BALANCE WAS FURNISHED WHICH ARE INCLUDED WIP EXPENSES. THE A.R HAS FURNISHED CONSTRUCTION AND WI P EXPENSES AS E-1 TO E-37. IT WAS ALSO SUBMITTED THAT STOCK OF PLOT WAS VALUED AT COS T AND CONSTRUCTION COST IS CHARGED TO REVENUE ON ESTIMATION. AS REGARDS INTEREST FREE LOA N GIVEN TO THE GROUP CONCERN, THE A.R SUBMITTED THAT THE CAPITAL OF THE APPELLANT WAS RS. 48,43,145/- AND INTEREST FREE LOAN WAS RS. 44,43,365/- AND THIS AMOUNT WAS SUFFICIENT TO G IVE INTEREST FREE ADVANCES TO GROUP CONCERNS. THE A.R. ALSO SUBMITTED THAT THE TOTAL AR EA CONSTRUCTED DURING THE YEAR IS 9000 SQ.FT WHICH GIVES AVERAGE COST OF CONSTRUCTION AT R S. 536 PER SQ.FT. FURTHER, THE INTEREST EXPENSE IS AGAINST THE LOAN T AKEN FROM THE BANK, AND IS VERIFIABLE FROM THE BANK STATEMENT. THE ADDITION MADE IN DIFFERENT WAYS IN DIFFERENT YE ARS . AY TOTAL CONSTRUCTIO N COST INCURRED TOTAL WIP EXPENSES INCURRED TOTAL CONSTRUCTIO N COST IN RESPECT TO THE PROPERTY SOLD WIP COST IN RESPECT TO THE PROPERT Y SOLD AMOUNT DISALLOWED BY AO BASIS OF DISALLOWANCE 2002-03 0 0 0 0 0 0 2003-04 618500 99 618599 618500 99 309250 50% OF CO NSTRUCTION COST IN RESPECT OF PROPERTY SOLD 27 2004-05 1573444 12995 1586439 1573444 12995 786722 50% OF CONSTRUCTION COST IN RESPECT OF PROPERTY SOLD 2005-06 1228300 80248 1308548 1000650 80248 500325 50% OF CONSTRUCTION COST IN RESPECT OF PROPERTY SOLD 2006-07 438925 253489 692414 376472 17403 188236 50 % OF CONSTRUCTION COST IN RESPECT OF PROPERTY SOLD 2007-08 317990 692558 1010548 394250 0 197125 50% O F CONSTRUCTION COST IN RESPECT OF PROPERTY SOLD 2008-09 4611660 2086089 6697749 4825503 53358 22325 83 1/3RD OF TOTAL CONSTRUCTION COST +WIP INCURRED DURING THE YEAR IN RESPECT OF ALL THE PROPERTIES WHETHER SOLD OR UNSOLD. THE LD AO UPTO AY 2007-08 MADE DISALLOWANCE CONSID ERING THE CONSTRUCTION EXPENSES DEBITED TO REVENUE IN RESPECT OF THE PROPE RTY SOLD BUT IN THE AY 2008-09, HE DISALLOWED 1/3 RD OF THE ENTIRE EXPENSES (CONSTRUCTION EXPENSES + WI P) IN RESPECT OF ALL THE PROPERTIES WHETHER SOLD OR UNSOLD. THIS SHOWS THE ARBITRARINESS IN THE ORDER OF THE L D A.O. IN VIEW OF THE ABOVE SUBMISSION, IT WAS STATED THA T THE ADDITION MADE BY THE AO DESERVES TO BE DELETED. 4.5 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S HAS HELD AS UNDER:- 4.3 SUBMISSIONS OF THE APPELLANT ARE SAME AS GIVE N BY HIM IN THE APPEAL FOR A.Y 2004-05 AND A.Y 2005-06. IN VIEW OF THE DETAILED DISCUSSION MADE IN THE APPEAL NO. 583/08-09 IN THE CASE OF APP ELLANT FOR A.Y 2004-05 IN ORDER DATED 25.10.10 WHEREIN VARIOUS OBJECTIONS OF THE A.R. HAVE BEEN CONSIDERED, AND VARIOUS SUMMARY REASONS TAKEN BY A. O. HAS BEEN COMMENTED UPON AND FURTHER REASONS HAVE BEEN GIVEN BY THE UN DERSIGNED AND CONSIDERING THAT FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIM ILAR TO THAT OF A.Y 2004-05, DISALLOWANCE TO THE EXTENT OF 20% IS CONFIRMED ON T HE BASIS OF REASONING GIVEN THEREIN. MOREOVER, THE A.R. HAS RIGHTLY POINTED OUT THAT A.O. WAS NOT JUSTIFIED IN TAKING THE DIFFERENT BASIS FOR DISALLOWANCE DURING THE YEAR AS AGAINST VARIOUS PRECEDING YEARS OF THE SAME APPELLANT, WITHOUT ASSI GNING ANY REASONS FOR SUCH 28 DIFFERENT BASIS OF TOTAL CONSTRUCTION COST AND WIP EXPENSES INSTEAD OF CONSTRUCTION AND WIP EXPENSES DEBITED TO THE REVENUE. IN ORDER T O MAINTAIN CONSISTENCY IN THE CASE OF APPELLANT VIS--VIS EARLIER YEARS, IT WILL BE APPROPRIATE TO UPHELD DISALLOWANCE OF 20% OUT OF CONSTRUCTION COST (RS. 48,25,503/-) AND WIP EXPENSES (RS. 53,358/-) DEBITED TO THE REVENUE, AS HIMSELF DONE BY THE A.O. IN THE CASE OF APPELLANT IN EARLIER YEARS. THUS DISALLOWA NCE OF RS. 9,75,772/- IS UPHELD AND BALANCE IS DELETED. 4.6 IN ORDER TO UNDERSTAND THE ISSUE BEFORE US, IT WILL BE USEFUL TO REPRODUCE THE SUBMISSIONS GIVEN TO THE LD. CIT(A) F OR THE ASSESSMENT YEAR 2004-05. 3.2 SUBMISSIONS OF THE APPELLANT ARE AS FOLLOWS:- 1. THE LD AO MADE THE ADDITION WITHOUT CONSIDERING THE MATERIAL FACTS AVAILABLE BEFORE HIM AND ON THE BASIS OF WRONG FINDINGS OF TH E FACTS:- A) THE ASSESSEE HAS NOT FURNISHED CASH FLOW STATEME NT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT BEFORE THE AO WHICH IS EVIDENT FRO M PAGE 1 OF ASSESSMENT ORDER WHEREIN THE LD AO MENTIONED MERCANTILE AGAINST M ETHOD OF ACCOUNTING AT SR. NO. 8. THE CASH BOOK IS PART OF THE BOOKS OF ACCOUN T. THE COPY OF THE CASH BOOK IS ENCLOSED HEREWITH AS ANNEXURE E 1 TO E-7. B)THE ASSESSEE HAS NOT MENTIONED THE ARE A PURCHASED, AREA CONSTRUCTED AND AREA SOLD THE FINDING OF THE LD AO IS WRONG AND PERVERSE. TH E LD AO HAS REPRODUCED THE REPLY OF ASSESSEE AT PAGE 2 OF ASSESSMENT ORDER WHE REIN THE ASSESSEE HAS CLEARLY MENTIONED THAT HE HAS FILED COPY OF PURCHASE AND SA LE AGREEMENT IN RESPECT OF THE PROPERTIES. HE FURTHER MENTIONED THAT THE AREA OF C ONSTRUCTION IS 5400. SQ FT AND THE CONSTRUCTION COST IS RS. 291/- PER SQ FT. THE LEARN ED AO FAILED TO CONSIDER THE RECORDS AVAILABLE BEFORE HIM AND ON THE BASIS OF VAGUE AND WRONG REASONING, THE ADDITION WAS MADE. C) THE ASSESSEE HAS CLAIMED INTEREST PA ID FOR FUNDS FOR PURCHASE AND CONSTRUCTION BUT NO EVIDENCE HAS BEEN FURNISHED AB OUT THE FUNDS BORROWED. THE ASSESSEE HAS CLAIMED ONLY RS. 12994.60 AS EXPEN SES UNDER THE HEAD WIP. THE COPY OF GROUP SUMMARY IS PLACED AS E-8. THE LEDGER ACCOUNTS AGAINST THE CONSTRUCTION EXPENSES ARE PLACED AT E-9 TO E-18. THE LEDGER ACCOUNTS AGAINST WIP 29 EXPENSES ARE PLACED AT E-19 TO E-22. THE LD AO HIM SELF HAS NOT CONSIDERED THIS ACCOUNT AS PART OF THE DISALLOWANCE. THE BUILDING C ONSTRUCTION EXPENSES WERE OF RS. 1573444.00 AND WIP EXPENSES WERE RS. 12994.60. THE LD AO DISALLOWED 50% AGAINST THE CONSTRUCTION EXPENSES ONLY. D) CASH PAYMENT AGAINST THE PURCHASE OF PROPERTY, CONSTRUCTION AND INTEREST EXPENSES. THE LD AO COMPLETELY FAILED TO APPRECIATE THAT TH E CASH PAYMENT ITSELF DOESNT CONSTITUTE UNVERIFIABLE EXPENSES. THE CONSTRUCTION COST DECLARED BY THE ASSESSEE IS MOST REASONABLE AND CANNOT BE SAID AS INFLATED CONS IDERING THE PWD OR CPWD BSR RATES. 2) BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED HENCE T HE TRADING RESULTS CANNOT BE ESTIMATED. THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT . THE PURCHASES AND SALES OF THE ASSESSEE ARE SUPPORTED BY DOCUMENTS. THE ASSESSEE F OLLOWS MERCANTILE BASIS OF ACCOUNTING. THE LD AO HAS EXAMINED THE BOOKS OF ACC OUNT IN DETAIL AND FOUND NO DEFECT IN THE BOOKS OF ACCOUNT. THE LD AO HAS ALSO NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT AND THE BOOKS OF THE ACCOUNT OF TH E ASSESSEE HAVE NOT BEEN REJECTED. IT IS LAID DOWN IN SECTION 145(1) OF INCOME TAX ACT , 1961, THAT THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE LEGISLATURE USED HERE WORD SHALL WHICH MEANS THAT WHERE THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT, THE PROFIT OF THE BUSINESS CANNOT BE COMPUTED OTHERWISE THAN ON THE BASIS OF BOOKS OF ACCOUNT. RE LIANCE IS PLACED ON THE FOLLOWING DECISIONS:- (I) TOLA RAM DAGA VS CIT (1966) 59 ITR 632 (ASSAM) (II) ST TERESAS OIL MILLS VS STATE OF KERALA (1970) 76 ITR 365 (III)AMITBHAI GUNWANTHBHAI (1981) 129 ITR 573 (GUJ) (IV) ITO VS VIMAL KUMAR JAIN 37 TW 63 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT THE CONSTRUCTION AREA WAS 5400 SQ FT AND THIS AREA IS S UPPORTED BY THE REGISTERED SALE DEED. THE AVERAGE COST OF CONSTRUCTION COMES TO 291 /- PER SQ FT. THE DETAILED CHART SHOWING CONSTRUCTION IN EACH PROPERTY IS ENCLOSED H EREWITH AS E-25. THE LD AO HAS NOT REBUTTED THIS FACT. IF THE DISALLOWANCE MADE BY THE AO IS TAKEN INTO ACCOUNT, THIS WOULD RESULT THE CONSTRUCTION COST @ RS. 145.50 PER SQ FT, WHICH IS NOT POSSIBLE AT ALL. THE PWD BSR RATE AND CPWD RATES ALL ARE ABOUT RS. 4 00/- TO 600/- PER SQ FT. THE LD AO HAS NO MATERIAL TO SHOW THAT THE CONSTRUCTION CO ST DISCLOSED BY THE ASSESSEE IS INFLATED. 4. EVEN IF THE BOOKS OF ACCOUNTS ARE NOT FOUND PROP ER THAN THE PROPER WAY TO ESTIMATE THE PROFIT BY APPLYING PROFIT RATE ON THE GROSS RECEIPTS. IN THE CASE OF THE ASSESSEE, THE SALE IS VERIFIABLE FROM DOCUMENTARY E VIDENCE I.E. REGISTER SALE DEED. 30 5. THE LD AO MADE ADHOC DISALLOWANCE @ 50% WHICH HA S NO BASIS. THE LD AO HAD NOT CITED ANY COMPARABLE CASE TO JUSTIFY THE ADDITI ON MADE BY HIM. THE ESTIMATE OF THE AO IS NOT BASED ON MATERIAL; IT IS WILD ESTIMATE; NOT TENABLE IN THE EYES OF LAW. THE ESTIMATION IS NOT BASED ON ANY COGENT MATERIAL OR E VIDENCE BUT BASED ON SUSPICION, SURMISES, CONJECTURES, AND IMAGINATIONS. IN MAKING AN ASSESSMENT U/S 143(3)/144, THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A PURE GU ESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. T HERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT U/S 143(3) /144. RELIANCE IS PLACE ON :- A) DHAKESHWARI COTTON MILLS LTD. VS. C IT (1954) 26 ITR 775 (SC) B) BADRI & CO. (P) LTD., VS. CIT (1993) 144 ITR 35 2 (KAR), C) OMAR SALAY MOHAMMED SAIT VS. CIT (1959) 37 ITR 151 (SC) D) UMA CHARAN SHAW BROS. VS. CIT (1959) 37 ITR 271 (SC). IN VIEW OF THE ABOVE SUBMISSION, THE ADDITION MADE BY THE AO DESERVES TO BE DELETED. 4.7 THE LD. CIT(A) WHILE DECIDING THE APPEAL FOR TH E ASSESSMENT YEAR 2004-05 HAS HELD AS UNDER:- 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE A.R AND HAVE PERUSED THE ASSESSMENT ORDER AND RELEVANT RECORD. IT IS UNDISPU TED THAT BOOKS OF ACCOUNT WERE NOT MAINTAINED BY THE APPELLANT DURING THE COURSE OF HI S BUSINESS. IT WAS ONLY AFTER THE SEARCH AND SEIZURE OPERATION THAT APPELLANT THROUGH ITS A.R. PREPARED THE MEMORANDUM OF BOOKS OF ACCOUNTS ON THE BASIS OF WHA TEVER DOCUMENTS WERE AVAILABLE AT THAT POINT OF TIME. ACCORDINGLY, IT IS QUITE EVIDENT THAT THE MEMORANDUM BOOKS OF ACCOUNTS NOW PREPARED AFTER THE SEARCH AND SEIZURE OPERATION, BEING NOT PREPARED IN THE REGULAR COURSE OF BUSINESS, CANNOT BE RELIED UPON FULLY AND CAN NOT BE SAID TO BE REGULAR BOOKS OF ACCOUNTS. HENCE THERE B EING NO REGULAR AND PROPER BOOKS OF ACCOUNT, THERE IS NO NECESSITY FOR A.O. TO EXPLI CITLY MENTION ABOUT REJECTION OF BOOKS OF ACCOUNTS. HENCE CONTENTION AT SUB-PARA 2 O F THE A.RS SUBMISSION IS REJECTED. 3.3.1 NOW COMING TO THE CONSTRUCTION EXPENSES DEB ITED BY THE APPELLANT, FROM PERUSAL OF THE CHART FURNISHED BEFORE THE A.O. AS CLAIMED BY THE APPELLANT, AND NOW FURNISHED ALONGWITH WRITTEN SUBMISSION AS E-25, IT IS QUITE CLEAR THAT CONSTRUCTION EXPENSES IN RESPECT OF FIVE PLOTS HAVE BEEN SHOWN A T THE RATE OF RS. 105 PER SQ.FT, RS. 212 PER SQ.FT, RS. 499/- PER SQ.FT ,RS. 423/- PER S Q.FT & RS. 485/- PER SQ.FT, TOTAL AMOUNT OF WHICH COMES TO RS. 15,73,444/-. NO ANY BILLS/VOU CHERS IN SUPPORT OF THESE EXPENSES WERE FURNISHED BEFORE THE A.O. IT IS UNDISPUTED FAC T THAT BILLS AND VOUCHERS FOR CONSTRUCTION EXPENSES AND FOR THAT MATTER ANY OTHER EXPENSES ARE NOT AVAILABLE WITH 31 THE APPELLANT. DURING THE COURSE OF APPELLATE PROC EEDINGS, IT TRANSPIRED THAT THESE EXPENSES HAVE BEEN TAKEN PURELY ON ESTIMATED BASIS. 3.3.2 NOW COMING TO THE REASONABILITY OF ESTIMATIO N, IT IS SEEN THAT COST OF CONSTRUCTION PER SQ.FT TAKEN IN RESPECT OF THESE FI VE PLOTS IS VARYING FROM AS LOW AS RS. 105/- TO AS HIGH AS RS. 499/- PER SQ.FT. THERE IS NO PROPER EXPLANATION FOR SUCH A WIDE VARIATION, EXCEPT THAT THE GENERAL EXPLANATION OF L OW COST HAVING LOWER QUALITY CONSTRUCTION, WITHOUT SPECIFYING THE NUMBER OF ROOM S CONSTRUCTED, CARPET AREA, BUILT- UP AREA, NATURE OF FLOORING I.E SIMPLE PLASTER, KOT A STONE, OR MOSAIC OR MARBLE OR VITRIFIED TILES, NATURE OF ROOF I.E STONES SLABS OR RCC; NATURE OF CEILING I.E PLASTERED OR POP; SINGLE STOREY OR DUPLEX; NUMBER OF TOILETS OR OTHER DETAILS, WHICH CAN JUSTIFY LOWER RATE OF RS. 105/-ON ONE SIDE AND HIGHER RATE OF RS. 499/- ON OTHER SIDE. 3.3.3 SIMILARLY IN A.Y 2005-06 RATE OF CONSTRUCTIO N HAS BEEN SHOWN TO BE VARYING FROM RS. 122/- PER SQ.FT TO RS. 273/- SQ.FT AND FURTHER RS. 360/- PER SQ.FT , WITHOUT ANY BASIS, REASONS OR EXPLANATION FOR THE S AME AND WITHOUT ANY SUPPORTING BILLS, VOUCHERS AND OTHER DETAILS FOR THE SAME AND EVEN WITHOUT ANY SPECIFIC DETAILS OF CONSTRUCTION AS MENTIONED IN ABOVE PARA. THUS THESE COSTS ARE PURELY ON ESTIMATED BASIS, AS MENTIONED IN EARLIER PARA. 3.3.4 IN A.Y 2007-08 THE COST OF CONSTRUCTION ON 3 7, MARUDHAR NAGAR PLOT HAS BEEN TAKEN PURELY ON ESTIMATED BASIS AT RS. 197 /- PER SQ.FT. 3.3.5 IN A.Y 2008-09 THE COST OF CONSTRUCTION OF T HE FIVE DIFFERENT PLOTS SOLD DURING THAT YEAR HAS BEEN SHOWN AS LOW AS RS 336/- PER SQ.FT., THEREAFTER RS. 531/- ,RS, 601/- PER SQ.FT RS. 640/- PER SQ.FT AND AS HIGH AS RS. 654/- PER SQ.FT. AS ALREADY MENTIONED THERE IS NO SUPPORTING BILL AND VOUCHERS FOR CEMENT, BRICKS, IRON, GRIT OR ANY OTHER CONSTRUCTION MATERIAL, NOR THERE ARE ANY BILL S OR VOUCHERS FOR LABOUR EXPENSES . THIS IS THE POSITION FOR ALL THE ASSESSMENT YEARS . 3.4 CONSIDERING THESE FACTS AND CIRCUMSTAN CES OF THE CASE AND THE LEGAL POSITION AS MENTIONED ABOVE, APART FROM THE REASONING GIVEN BY THE A.O. FOR MAKING DISALLOWANCE, IT IS HELD THAT THE A.O. WAS JUSTIFIE D IN MAKING DISALLOWANCE OUT OF CONSTRUCTION EXPENSES. 3.4.1 NOW COMING TO THE QUANTUM OF DISALLOWANCE, I T IS SEEN THAT THE A.O. HAS MADE DISALLOWANCE OF 50% OUT OF THE CONSTRUCTIO N EXPENSES. I PARTLY AGREE WITH THE ARGUMENT OF THE A.R OF THE APPELLANT THAT THE D ISALLOWANCE HAS BEEN MADE ON A VERY HIGHER SIDE. IN A.Y 2004-05, THE AVERAGE COST OF CONSTRUCTION COMES TO RS. 291/- PER SQ.FT AND AFTER CONSIDERING THE DISALLOWANCE MA DE BY THE A.O. THIS WOULD GET REDUCED TO RS. 145.5 PER SQ.FT, WHICH IS QUITE A LO W RATE, AS POINTED OUT BY THE A.R OF THE APPELLANT. THOUGH THE AVERAGE RATE OF COST OF C ONSTRUCTION IN THE INSTANT CASE DOES NOT HAVE ANY MATERIAL MEANING IN VIEW OF THE FACT T HAT RATE OF CONSTRUCTION OF INDIVIDUAL PLOT HAS BEEN VARYING VERY WIDELY, AS ME NTIONED IN EARLIER PARAGRAPHS. 32 3.4.2 ON THE OTHER HAND, IT IS NOTICED BY THE UNDE RSIGNED THAT THE INTEREST FREE ADVANCE TO RELATIVES AS ON 31.3.04 IS RS. 6,08,000/ -, APART FROM INVESTMENT IN SHARE OF ASSOCIATE CONCERN AMOUNTING TO RS. 1,10,000/-. ACCO RDINGLY, INTEREST BEARING SECURED LOAN TO THE AFORESAID EXTENT HAS NOT BEEN UTILIZED FOR THE PURPOSE OF BUSINESS AND DISALLOWANCE OF PROPORTIONATE INTEREST IS CALLED FO R. THE APPELLANT HAS INCLUDED THE INTEREST EXPENSES UNDER THE HEAD DIRECT EXPENSES AL ONGWITH BUILDING CONSTRUCTION EXPENSES. 3.5 CONSIDERING THE VARIOUS OTHER ASPECTS AND TAKI NG INTO ACCOUNT THESE TWO ASPECTS HAVING OPPOSITE EFFECT, IT WILL BE REASONAB LE AND APPROPRIATE TO UPHELD THE DISALLOWANCE TO THE EXTENT OF 20% OF THE CONSTRUCTI ON EXPENSES DURING THE YEAR UNDER CONSIDERATION. 4.8 WE HAVE HEARD BOTH THE PARTIES. THE ISSUE OF D ISALLOWANCE OF CONSTRUCTION AND WIP EXPENSES HAS BEEN CONSIDERED I N THE CASE OF SHANKAR LAL KHANDELWAL . WHILE DECIDING THE ISSUE OF DISALL OWANCE IN THE CASE OF SHANKAR LAL KHANDELWAL, WE HAVE CONSIDERED THE FOLL OWING ASPECTS. 1. THE COST OF CONSTRUCTION PER SQ. FT IN RESPECT OF DIFFERENT PROPERTIES AND IN CASE COST OF CONSTRUCTION PER SQ . FT IS ABNORMAL THEN IT HAS BEEN CONSIDERED FOR ESTIMATIN G THE DISALLOWANCE TO BE CONFIRMED. 2. WE HAVE CONSIDERED THE RATE OF PROFIT SHOWN BY T HE A ON PROPERTIES SOLD. IF THE RATE OF NET PROFIT IS IN VI CINITY FROM 9% TO 12% THEN DISALLOWANCE HAS BEEN MADE AS REASONABLE A ND IN CASE THE NET PROFIT RATE SHOWN IS ABNORMALLY LOW THEN TH AT ASPECT HAS ALSO TO BE CONSIDERED. 4.9 IN THE CASE OF THE ASSESSEE, THE CONSTRUCTION C OST DURING THE YEAR IS REASONABLE. THE NET PROFIT RATE SHOWN IS 12.16%. IT IS TRUE THAT THE LD. CIT(A) WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2004-05 , HAS REFERRED TO 33 ADVANCING OF LOAN OF RS. 6.08 LACS WITHOUT CONSIDER ING THE CAPITAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N. THERE IS NO FINDING BY THE LD. CIT(A) IN RESPECT OF DISALLOWANCE OF INTER EST U/S 36(1)(III) OF THE ACT FOR THE ASSESSMENT YEAR. LOOKING TO THE NET PROFIT RATE SHOWN BY THE ASSESSEE AND CONSIDERING THE FACT THAT IN CASE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) IS CONSIDERED THEN THE NET PROFIT RATE COMES TO 27.47%. WE THEREFORE, FEEL THAT IT WILL BE FAIR AND REASONABLE TO RESTRIC T THE DISALLOWANCE TO 1% ON THE SALE WHICH IS RS. 63,770/-. WE HAVE NOTICED TH AT THE CONSTRUCTION COST IN RESPECT OF THREE PROPERTIES IS VARYING FROM 601/- TO 644/- PER SQ. FT . THUS THE GROUND NO. 3 OF THE ASSESSEE IS PARTLY ALLOWED AND GROUND NO. 1 OF THE REVENUE IS DISMISSED. 5.1 THE 4 TH GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OUT OF TAXI EX PENSES TO THE EXTENT OF 20% AS AGAINST DISALLOWANCE OF 1/3 RD OF TAXI EXPENSES. 5.2 THE REVENUE IN GROUND NO. 2 IS AGGRIEVED AGAINS T REDUCING THE DISALLOWANCE OF TAXI HIRING EXPENSES TO 20% AS AGAI NST 33.33% MADE BY THE AO. 5.3 WE HAVE HEARD BOTH THE PARTIES. THE AO HAS DISA LLOWED 1/3 RD OF THE EXPENSES TO THE EXTENT OF RS. 2,08,504/-. THE RETUR N FOR THE ASSESSMENT YEAR 2008-09 HAS BEEN FILED AFTER THE SEARCH OPERATION A ND THIS IS THE ONLY RETURN. 34 THE AO HAS DISALLOWED DEPRECIATION AFTER PLACING RE LIANCE ON THE DECISION OF ITAT JODHPUR BENCH IN THE CASE OF SUNCITY ALLOYS (P ) LTD. VS. ACIT, CENTRAL CIRCLE- 1 IN ITA NOS.586 TO 588/JU/2008. TH IS CASE IS NOT APPLICABLE AS IT IS NOT A CASE OF MAKING BLOCK ASSESSMENT AND MOREOVER, THIS IS ONLY ASSESSMENT BASED ON THE ORIGINAL RETURN. HENCE, THE RE WAS NO CASE OF MAKING DISALLOWANCE OF DEPRECIATION . THE LD. CIT(A) WAS T HEREFORE, JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF DEPRECIATION. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HA S CONFIRMED THE DISALLOWANCE OUT OF EXPENSES TO THE EXTENT OF RS. 1 ,25,102/-. THE DISALLOWANCE SO MADE BY THE LD. CIT(A) IS CONFIRMED AND THE DEPRECIATION IS HELD TO BE ALLOWED. THUS GROUND NO. 2 OF THE REVENU E AND GROUND NO. 4 OF THE ASSESSEE BOTH ARE DISMISSED. 6.1 THE 5TH GROUND OF APPEAL OF THE ASSESSEE IS THA T THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE CLAIM OF DEPRECIATION . 6.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS NOT PRESSED THIS GROUND. HENCE, THE SAME IS DISMISSED B EING NOT PRESSED. 7.1 THE SIXTH GROUND OF APPEAL OF THE ASSESSEE IS T HAT THE LD. CIT(A) HAS ERRED IN NOT ANNULLING THE ASSESSMENT ORDER AS THE AO HAS NOT PROVIDED PROPER OPPORTUNITY OF BEING HEARD. 35 7.2 WE HAVE HEARD BOTH THE PARTIES. THIS ISSUE HAS BEEN DECIDED BY US IN THE CASE OF SHANKAR LAL KHANDELWAL IN ITA NO. 155/ JP/2011 DATED 12-08- 2011. FOLLOWING THAT ORDER, WE HOLD THAT THE LD. C IT(A) WAS JUSTIFIED IN NOT ANNULLING THE ASSESSMENT ORDER. THUS GROUND NO. 6 O F THE ASSESSEE IS DISMISSED. 8.1 THE 4 TH GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS E RRED IN NOT ADMITTING THE ADDITIONAL EVIDENCE. 8.2 WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT(A) HAS RIGHTLY ADMITTED THE ADDITIONAL EVIDENCE BECAUSE THE ASSESSEE WAS NO T PROVIDE ADEQUATE OPPORTUNITY OF BEING HEARD. HOWEVER, IN ORDER TO DE CIDE THE ISSUE AND TO DETERMINE THE TAX PAYABLE BY THE ASSESSEE, THE LD. CIT(A) WAS JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCES. HENCE GROUND NO . 4 OF THE REVENUE IS DISMISSED. 9.1 THE 5 TH GROUND OF THE REVENUE IS THAT THE LD. CIT(A) HAS E RRED IN DIRECTING THE AO TO GIVE SET OFF FOR UNACCOUNTED/ S UPPRESSED SALE CONSIDERATION AGAINST THE AVAILABILITY OF UNACCOUNT ED MONEY. 9.2 WE HAVE HEARD BOTH THE PARTIES. SINCE NO SUCH S ET OFF IS BEING CLAIMED BY THE ASSESSEE BEFORE US AND THEREFORE, THIS ISSUE IS ACADEMIC AND DOES NOT REQUIRE TO BE ADJUDICATED UPON. 36 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE AS W ELL AS OF THE REVENUE ARE PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19-08 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 19 /08/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI TIKAM KHANDELWAL, JAIPUR 2. THE ACIT, CENTRAL CIRCLE- 1 JAIPUR 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.132/JP /11) A.R, ITAT, JAIPUR