ACIT, New Delhi V. Shri Manish Agarwal, New Delhi

ITA 1595/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58896 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 01-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E DELHI) BEFOR SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 1595(DEL)2011 ASSESSMENT YEAR: 2007-08 ASSTT.COMMISSIONER OF INCOME TAX, SHRI MA NISH AGARWAL, CIRCLE 32(1), NEW DELHI. V. M-1, NDSE-II, NEW DELHI. C.O. NO. 120(DEL)2011 (IN ITA NO. 1595(DEL)2011) ASSESSMENT YEAR: 2007-08 SHRI MANISH AGARWAL, ASST T.COMMISSIONER OF INCOME TAX, M-1, NDSE-II, NEW DELHI. V. CIRCLE 32( 1), NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI R.S. NEGI, SR. DR ASSESSEE BY: SH RI RAJ KUMAR GUPTA, CA ORDER PER A.D. JAIN, J.M. THESE ARE DEPARTMENTS APPEAL AND THE ASSESSEES CR OSS OBJECTIONS FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER D ATED 27.12.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)X XVI, NEW DELHI. 2. THE GROUNDS TAKEN BY THE DEPARTMENT ARE AS FOLLO WS:- ITA 1595 & CO NO. 120 2 1. THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING TH E ADDITION OF ` 10,69,358/- WHEN THE AO HAD TREATED THE PROPERTY IN U.K. AS A PART OF STOCK AFTER OBSERVING THAT THERE WAS CLEAR EVIDENCE WITH REGARD TO THE COMPLETION OF THE REGISTRY IN THE NAME OF THE ASSES SEE DURING THE RELEVANT A.Y. AND THAT THE PROPERTY AT U.K. WAS CON SIDERED TO BE TRANSFERRED AND REGISTERED IN THE NAME OF THE ASSES SEE ON THE VERY DAY THE REGISTRATION PROCESS WAS COMPLETED AS PER THE L AND REGISTRY AUTHORITY IN U.K., A FACT BEING VERIFIED BY THE CER TIFICATE OF COMPLETION OF REGISTRATION ISSUED TO THE ASSESSEE ON 06.07.2006 AND 20.06.2006. 2. THE LD. CIT(A) HAS ERRED IN DELETING ADDITIONS O F ` 25,00,000/- AND ` 8,50,000/- IN SPITE OF THE FACT THAT THE ASSESSEE C OULD NOT ESTABLISH THE GENUINENESS OF THE ADVANCES GIVEN IN THE NAMES OF S H. JARNAIL SINGH AND SMT. SANTOSH FOR THE PURCHASE OF PROPERTY LOCAT ED AT F-30, HAUZ KHAS ENCLAVE, NEW DELHI AND AT MUSSORRIE, RESPECTIV ELY. 3. THE LD. CIT(A) HAS ERRED IN DELETING ADDITIONS OF ` 3 LAKHS AND ` 1.5 LAKHS ON ACCOUNT OF OUTSTANDING LIABILITIES APPEARI NG IN THE NAMES OF M/S. SINGLE AGENCIES AND M/S. MAYA PROPERTIES (P)LT D. IN SPITE OF THE FACT THAT THE ASSESSEE COULD NOT FURNISH THE RELEVA NT CONFIRMATIONS REGARDING THE IDENTITY, GENUINENESS AND CREDIT WORT HINESS OF THE ABOVE PERSONS TO ADVANCE THE ABOVE AMOUNTS. 3. THE CROSS OBJECTIONS RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRED IN LAW AND ON MERITS IN RESTRICTING THE DISALLOWANCE O F ` .2 LAKHS ON AD- HOC BASIS BEING ABOUT 30% OUT OF TOTAL EXPENSES OF ` 6,46,740/- CLAIMED IN PROFIT AND LOSS ACCOUNT AGAINST DELETING THE WHOLE DISALLOWANCE. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, LD. CI T(A) HAS BEEN FULLY JUSTIFIED IN LAW AS WELL AS ON MERITS IN DELETING T HE ADDITION OF ` 10,69,358/- , ` 25,00,000/-, ` 8,50,000/-, ` 3,00,000/- AND ` 1,50,000/- . ITA 1595 & CO NO. 120 3 4. APROPOS GROUND NO.1 RAISED BY THE DEPARTMENT, TH E AO OBSERVED THAT THE ASSESSEE HAD, JOINTLY WITH HIS BROTHER, ONE SHR I NITIN AGGARWAL, HAD PURCHASED TWO FREE-HOLD PLOTS IN VASANT KUNJ (V.K. , FOR SHORT), DELHI, WHICH WERE REGISTERED ON 20.6.2006 AND 27.7.2006, R ESPECTIVELY; AND THAT SINCE THE REGISTRATION HAD COME ABOUT IN THE PREVIO US YEAR RELEVANT TO ASSESSMENT YEAR 2007-08, THE ASSESSEE OUGHT TO HAVE SHOWN THE VALUE OF THE PLOTS IN THE CLOSING STOCK, WHICH HAD NOT BEEN DONE . IT WAS, THEREFORE, THAT THE AO MADE THE ADDITION OF ` 10,69,358/- IN THE CLOSING STOCK. 5. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED TH AT THE FACTS WERE IDENTICAL TO THE CASE OF SHRI NITIN AGGARWAL, THE A SSESSEES BROTHER AND CO- PURCHASER OF THE PROPERTIES, IN WHOSE CASE, A SIMIL AR ADDITION HAD BEEN DELETED; THAT THE INVESTMENT HAD BEEN FULLY DISCLOS ED IN THE BOOKS OF ACCOUNT; THAT THE INVESTMENT IN THE PROPERTY WAS A PERSONAL INVESTMENT AND COULD NOT BE TREATED AS STOCK-IN-TRADE; THAT EVEN IF IT WERE TO BE TREATED AS STOCK-IN- TRADE, FIRST THE PURCHASE HAD TO BE SHOWN IN THE PR OFIT AND LOSS ACCOUNT; AND THAT AS SUCH, THE IMPACT WOULD BE REVENUE NEUTRAL. 6. THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO. WHILE DOING SO, IT WAS OBSERVED THAT THE FACTS OF THE ASSESSEE S CASE WERE IDENTICAL TO THOSE OF THE CASE OF SHRI NITIN AGGARWAL, WHEREIN, VIDE ORDER DATED ITA 1595 & CO NO. 120 4 18.10.2010, SHE [THE CIT(A)] , HAD DELETED THE ADDI TION. THE LD. CIT(A) ALSO OBSERVED THAT THE SOURCE OF INVESTMENT STOOD D ISCLOSED. 7. BEFORE US, THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION CORRECTLY MADE BY THE AO; THA T THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE AO HAD TREATED THE PR OPERTY IN V.K. AS A PART OF STOCK AFTER OBSERVING THAT THERE WAS CLEAR EVIDENCE WITH REGARD TO THE COMPLETION OF THE REGISTRY IN THE NAME OF THE ASSES SEE DURING THE RELEVANT ASSESSMENT YEAR AND THAT THE PROPERTY IN THE V.K. H AD BEEN CONSIDERED TO BE TRANSFERRED AND REGISTERED IN THE NAME OF THE ASSES SEE ON THE VERY SAME DAY AS ON WHICH THE PROCESS OF REGISTRATION WAS COMPLET ED AS PER THE LAND REGISTRY AUTHORITY; THAT THE LD. CIT(A) ERRONEOUSLY FAILED TO FURTHER CONSIDER THAT THIS FACT STOOD VERIFIED BY THE CERTIFICATE OF COMPLETION OF REGISTRAR, ISSUED TO THE ASSESSEE ON 6.7.2006 AND 20.6.2006. 8. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS SUBMITTED IN THIS REGARD THAT IN THE CASE OF SHRI NITIN AGGAR WAL, BROTHER AND CO-OWNER OF THE ASSESSEE, THE TRIBUNAL, VIDE ORDER DATED 28. 3.2011 (COPY PLACED ON RECORD), IN ITA NO.298(DEL)2011, FOR THE ASSESSMENT YEAR 2007-08, HAS DECIDED THIS ISSUE IN FAVOUR OF SHRI NITIN AGGARWAL . IT HAS BEEN SUBMITTED THAT THE FACTS IN BOTH THE CASES BEING IDENTICAL, T HE DECISION OF THE TRIBUNAL ITA 1595 & CO NO. 120 5 (SUPRA) IN THE CASE OF SHRI NITIN AGGARWAL IS SQUAR ELY APPLICABLE IN THE PRESENT CASE. 9. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. THE LD. CIT(A), WHILE DELETING THE ADDITION MADE BY THE AO, RELIED ON HER ORDER DATED 18.10.2010 IN THE CASE OF SHRI NITIN AG GARWAL. THE SAID ORDER OF THE LD. CIT(A) STANDS CONFIRMED BY THE TRIBUNAL VIDE ITS ORDER (SUPRA) DATED 23.3.2011 IN THE CASE OF SHRI NITIN AGGARWAL. THERE IS NO DISPUTE THAT THE FACTS IN BOTH THE CASES, I.E., THE CASE OF THE PRESENT ASSESSEE AND THAT OF HIS BROTHER, THE CO-OWNER, NAMELY, SHRI NITIN AGGAR WAL ARE EXACTLY SIMILAR. THEREFORE, SINCE A SIMILAR ADDITION STANDS DELETED BY THE LD. CIT(A) AND THAT THE ORDER OF THE LD. CIT(A) HAS BEEN CONFIRMED BY T HE TRIBUNAL, FOR PARITY OF FACTS, THE DELETION OF THE ADDITION IN THE PRESENT CASE CALLS FOR NO INTERFERENCE. IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER, THE OBSERVATIONS MADE BY THE TRIBUNAL IN THE CASE OF SHRI NITIN AGGARWAL (SU PRA):- 3. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND W E ARE OF THE VIEW THAT THE ASSESSEE PURCHASED TWO PROPERTIES IN JOINT OWNERSHIP IN U.K. WITH HIS BROT HER, SHRI MANISH AGGARWAL. THE ASSESSEE HAS SHOWN THE SAME IN THE BALANCE SHEET UNDER THE HEAD ADVANCE U .K. LAND. THE PAYMENTS HAVE BEEN MADE BY CHEQUE. THE RE IS NO ALLEGATION THAT PAYMENTS ARE UNEXPLAINED. TH E ASSESSING OFFICERS ONLY CONTENTION WAS THAT IT SHO ULD HAVE BEEN SHOWN IN THE CLOSING STOCK. HOWEVER, THE ITA 1595 & CO NO. 120 6 ASSESSEE CLAIMED THAT THIS WAS A PERSONAL ASSET AND NOT TO FORM THE PART OF THE CLOSING STOCK. IT SHOULD H AVE BEEN SHOWN AS FIXED ASSETS. HOWEVER, THE REGISTERED DOC UMENT WAS NOT RECEIVED BEFORE THE FILING OF THE RETURN OF INCOME. THE FACTS OF THE CASE SHOW THAT THERE WAS NO DISPUT E IN THE SOURCE OF INVESTMENT OF THE PROPERTY. THIS INV ESTMENT WAS ALREADY REFLECTED IN THE BALANCE SHEET. HOWEVE R, IT WAS SHOWN UNDER THE HEAD ADVANCE FOR UK LAND. TH E ASSESSEE HAS CLAIMED IT AS A PERSONAL PROPERTY. IN VIEW OF THAT, IT SHALL NOT FORM PART OF THE STOCK-IN-TRA DE. FURTHER, EVEN IF IT IS TAKEN AS PART OF THE STOCK-I N-TRADE THEN ALSO IT HAS TO BE DEBITED IN THE PURCHASE ACCO UNT WHICH WILL INCREASE THE CORRESPONDING PURCHASES AND NULLIFY THE EFFECT OF ADDITION IN THE CLOSING STOCK . IN VIEW OF THIS, WE FIND NO MERITS IN THE REVENUES APPEAL AND DISMISS THE REVENUES APPEAL. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 10. COMING TO GROUND NO.2, ADVANCE OF ` 25,00,000/- MADE BY THE ASSESSEE TO ONE JARNAIL SINGH AND ADVANCE OF ` 8,50,000/- MADE BY THE ASSESSEE TO ONE SMT.SANTOSH, THE ADVANCES HAVING BE EN MADE FOR PURCHASE OF PROPERTY LOCATED AT F-30, HAUZ KHAS ENCLAVE, NEW DE LHI AND AT MUSSORRIE, RESPECTIVELY, WERE TREATED BY THE AO AS BOGUS ADVAN CES AND THE AO HAD ADDED THESE AMOUNTS TO THE INCOME OF THE ASSESSEE. THE AO HAD OBSERVED THAT AS PER THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2007, APROPOS THE ADVANCE TO SHRI JARNAIL SINGH, THE AMOUNT HAD BEEN SHOWN AS ADVANCE FOR THE PURCHASE OF THE PROPERTY AT HAUZ KHAS ENCLAVE, NEW DELHI; THAT ON EXAMINING THE DETAILS FILED BY THE ASSESSEE, IT HAD COME TO NOTICE THAT AS PER ITA 1595 & CO NO. 120 7 THE SALE DEED PERTAINING TO THE HAUZ KHAS ENCLAVE P ROPERTY, THE SALE TRANSACTION OF ONLY ` 1.25 CRORES HAD BEEN RECORDED; THAT THIS DID NOT IN CLUDE THE ADVANCE OF ` 25,00,000/- SHOWN BY THE ASSESSEE AS HAVING BEEN G IVEN TO JARNAIL SINGH FOR THE SAID PROPERTY; THAT THIS WAS SO, SINCE THE ASSESSEE HAD STATED THAT THE PAYMENT HAD BEEN MADE VIDE CHEQUE D ATED 17.10.2006 FOR ` 25,00,000/- AND THE DETAILS SUBMITTED SHOWED THAT T HE PAYMENT HAD BEEN MADE ON 6.7.2007, FOR ` 20,00,000/-, AS PER P.O. NO. 285741 AND ON 27.7.2007, FOR ` 5,00,000/-, VIDE CHEQUE NO. 090003; THAT THEREFORE, THE AMOUNT SHOWN AS ADVANCE ON 31.3.2007, OSTENSIBLY PA ID VIDE CHEQUE DATED 17.10.2006, HAD NOT BEEN SHOWN IN THE SALE TRANSAC TION. THE AO, AS SUCH, HELD THAT THE AMOUNT SHOWN WAS FICTITIOUS AND UNVE RIFIABLE. IT WAS ALSO OBSERVED THAT EVEN IF THE PAYMENT HAD BEEN CLAIMED AS HAVING BEEN MADE BY CHEQUE DURING F.Y. 2006-07, THE ASSESSEE MUST HAVE RECEIVED BACK THE AMOUNT IN CASH. 11. BY VIRTUE OF THE IMPUGNED ORDER, THE LD . CIT(A) DELETED THE ADDITION REPRESENTING THE ADVANCE OF ` 25,00,000/- MADE BY THE ASSESSEE TO JARNAIL SINGH. SHE OBSERVED THAT THE AO, IN HIS REMAND RE PORT DATED 4.10.2010, HAD ADMITTED THAT THE SOURCE OF THE PAYMENT REMAINED AD MITTED AND UNDISPUTED; THAT NO NEW FACT HAD BEEN BROUGHT ON RECORD BY THE AO; THAT THE ASSESSEE HAD ITA 1595 & CO NO. 120 8 RECOVERED ` 10,00,000/- FROM JARNAIL SINGH AND HAD STOPPED PAYM ENT OF ` 15,00,000/- TO JARNAIL SINGH, SO AS TO SQUARE UP TH E AMOUNT OF ` 25,00,000/- RECEIVED BY JARNAIL SINGH, POWER OF ATTORNEY HOLDER , AS ADVANCE, BUT NOT DISCLOSED TO HIS OTHER CO-VENDORS; THAT ACTUALLY, T HE ASSESSEE HAD NOT PAID ANYTHING OVER AND ABOVE THE AMOUNT MENTIONED IN THE SALE DEED; THAT, AS SUCH, THE ADVANCE SHOWN TO JARNAIL SINGH COULD NOT HAVE BEEN TREATED AS A BOGUS ENTRY; AND THAT THERE WAS NOTHING ON RECORD T O SUPPORT THE AOS CONTENTION THAT THE ASSESSEE MIGHT HAVE RECEIVED BA CK THE AMOUNT FROM JARNAIL SINGH. 12. SO FAR AS REGARDS THE ADVANCE SHOWN BY THE ASSESSEE AS HAVING BEEN GIVEN TO SMT. SANTOSH TOWARDS LAND AT MUSSORRIE, TH E AO OBSERVED THAT DESPITE DUE OPPORTUNITY, THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH THE GENUINENESS OF THE SAID ADVANCE GIVEN FOR THE PURCH ASE OF THE LAND AT MUSSORRIE. IT WAS, THEREFORE, THAT THE AO ADDED TH E AMOUNT OF ` 8.4 LAKHS TO THE INCOME OF THE ASSESSEE. 13. THE LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING THAT THERE WAS NO CASE FOR MAKING ANY ADDITION ON THIS ACCOUNT IN ASSESSMENT YEAR 2007-08; THAT UNDISPUTEDLY, THE PAYMENTS HAD BEEN M ADE BY CHEQUE IN THE ASSESSMENT YEAR 1999-00; THAT THE AMOUNT HAD BEEN S HOWN AS ADVANCE FOR THE FIRST TIME AS ON 31.3.99; THAT AS SUCH, IF THE LOAN HAD TO BE TREATED AS PART ITA 1595 & CO NO. 120 9 OF THE BOGUS PURCHASE, THE DISALLOWANCE COULD HAVE BEEN MADE ONLY IN ASSESSMENT YEAR 1999-00; THAT SINCE THE AMOUNT HAD NOT BEEN SHOWN AS PURCHASE, THERE WAS NO CASE FOR DISALLOWANCE ALSO; THAT THE PAYMENT STOOD DULY DISCLOSED AND WAS FROM THE ASSESSEES BANK ACC OUNT AND STOOD REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT; THAT SO, IT WAS NOT EVEN A CASE OF UNDISCLOSED INVESTMENT; THAT FURTHER, THE AMOUNT WA S NOT A LIABILITY TO AN INVESTMENT APPEARING IN THE ASSETS SIDE OF THE BALA NCE SHEET OF THE ASSESSEE; AND THAT THEREFORE, THE PROVISIONS OF SECTION 41(1) OF THE ACT DID NOT GET ATTRACTED. 14. THE LD. DR HAS CONTENDED THAT THE LEARNED CIT(A ), WHILE WRONGLY DELETING THE ADDITIONS RIGHTLY MADE, HAS FAILED TO CONSIDER THAT THE ASSESSEE REMAINED UNABLE TO ESTABLISH THE GENUINENESS OF THE ADVANCES ALLEGEDLY GIVEN TO JARNAIL SINGH AND SMT. SANTOSH FOR THE PRO PERTIES LOCATED AT HAUZ KHAS ENCLAVE, NEW DELHI AND AT MUSSORRIE, RESPECTIV ELY; THAT IN THE CASE OF JARNAIL SINGH, THE ENTIRE PAYMENT HAD BEEN STATED T O HAVE BEEN MADE VIDE CHEQUE DATED 17.10.2006, WHEREAS ACCORDING TO THE D ETAILS SUBMITTED BEFORE THE AO, ` 20,00,000/- HAD BEEN PAID ON 6.7.2007 AND ` 5,00,000/- HAD BEEN PAID ON 27.7.2007; THAT THE ASSESSEE ALSO COULD NOT DISPROVE THE OBSERVATION OF THE AO THAT THE AMOUNT MUST HAVE BEEN RECEIVED B ACK BY THE ASSESSEE IN CASH; AND THAT APROPOS THE ADVANCE TO SMT. SANTOSH, IT REMAINS UNDISPUTED ITA 1595 & CO NO. 120 10 THAT THE ASSESSEE FAILED TO ESTABLISH THE GENUINENE SS OF THE TRANSACTION, WHICH FACT HAS ESCAPED THE NOTICE OF THE LD. CIT(A). 15. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT SO FAR AS REGARDS THE ADVANCE TO JARNAIL SINGH, JARNAIL SINGH AND FOUR OTHERS WERE OWNERS OF THE PROPERTY AT HAUZ KHAS ENCLAVE, NEW DE LHI, TO THE EXTENT OF 20% SHARE EACH; THAT JARNAIL SINGH WAS THE POWER OF ATTORNEY HOLDER IN RESPECT OF ALL THE OTHER CO-OWNERS; THAT THE PROPER TY WAS REQUIRED TO BE PURCHASED AT ` 1.25 CRORES BY THE ASSESSEE, FOR WHICH, AN ADVANCE OF ` 25,00,000/- HAD BEEN MADE AND THE PAYMENT SHOWN IN THE BALANCE SHEET AS SUCH; THAT THE ADVANCE HAD BEEN MADE ON 17.10.2006, WHEREAS THE EXECUTION OF THE REGISTERED SALE DEED CAME ABOUT ONLY ON 30.7 .2007; THAT THE DETAILS OF PAYMENT OF THE ENTIRE SALE CONSIDERATION OF ` 1.25 CRORES WERE GIVEN IN THE REGISTERED SALE DEED; THAT THE ASSESSEE, AT THE TIM E OF THE PAYMENT OF THE ADVANCE OF ` 25,00,000/-, WAS UNDER THE IMPRESSION THAT THIS AMO UNT WAS TO BE PAID TO ALL THE FIVE CO-OWNERS AT ` 5,00,000/- EACH; THAT SINCE JARNAIL SINGH WAS THE POWER OF ATTORNEY HOLDER ON BEHALF OF ALL THE OTHER FOUR CO- OWNERS ALSO, THE ASSESSEE MADE A SINGLE CHEQUE OF T HE TOTAL AMOUNT OF ` 25,00,000/-; THAT HOWEVER, IN JULY 2007, AT THE TIM E OF THE EXECUTION OF THE ITA 1595 & CO NO. 120 11 SALE DEED, JARNAIL SINGH WANTED FRESH INDEPENDENT C HEQUE OF ` 20,00,000/- AND ` 5,00,000/-, IN THE NAMES OF ALL THE FIVE CO-OWNERS OF THE PROPERTY SEPARATELY; THAT HE NEVER WANTED THE OTHER CO-OWNER S TO BECOME AWARE THAT HE HAD ALREADY RECEIVED THE ENTIRE ADVANCE OF ` 25,00,000/-; THAT JARNAIL SINGH PROMISED THE ASSESSEE TO SEPARATELY RETURN TH E CHEQUE OF ` 25,00,000/- ; THAT THIS NOT HAVING COME ABOUT TILL THE CLOSE O F THE YEAR, THE AMOUNT REMAINED BEING SHOWN AS ADVANCE; THAT JARNAIL SINGH HAD RETURNED ` 10,00,000/- VIDE CHEQUE DATED 5.3.08, AS STOOD REFL ECTED IN THE BANK STATEMENT; THAT THE LD. CIT(A) HAS CORRECTLY TAKEN THIS FACTUAL SCENARIO INTO CONSIDERATION WHILE RIGHTLY DELETING THE ADDITION M ADE. 16. IN THIS REGARD, IT IS SEEN, THAT AS RIGHTLY OBS ERVED BY THE CIT(A), IN THE REMAND REPORT DATED 4.10.2010, THE AO ADMITTED THE SOURCE OF PAYMENT AND DID NOT DISPUTE THE SAME. THE FACT PLAIN AND SIMPLE IS THAT THE ADVANCE MADE BY THE ASSESSEE TO SHRI JARNAIL SINGH, EVEN IF RECEIVED BACK BY THE ASSESSEE AS SUCH, WOULD NOT, UNDER ANY CIRCUMSTANCE , CONSTITUTE INCOME OF THE ASSESSEE, BEING MERELY RECEIPT BACK OF THE ADVA NCE MADE. THE SOURCE OF THE PAYMENT STANDS FULLY DISCLOSED. BESIDES, THE OBSERVATION OF THE AO THAT THE ASSESSEE MIGHT HAVE RECEIVED THE AMOUNT BACK IN CASH, IS A HOLLOW ITA 1595 & CO NO. 120 12 OBSERVATION SANS ANY EVIDENTIARY SUPPORT. THEREF ORE, FINDING NO ERROR THEREWITH, THE ORDER OF THE LD. CIT(A) IN THIS REGA RD IS CONFIRMED. 17. TURNING TO ADVANCE OF ` 8,50,000/- PERTAINING TO SMT. SANTOSH, THE ASSESSEE HAD PAID AN AMOUNT OF ` 8,50,000/- VIDE TWO CHEQUES OF ` 4,25,000/- EACH TO SMT. SANTOSH IN FEBRUARY, 1999. THE LEDGE R ACCOUNT OF THE ASSESSMENT YEAR 1999-00 AND THE BANK STATEMENT HAD BEEN FILED BY THE ASSESSEE ALONG WITH THE LEDGER ACCOUNT OF SMT. SANT OSH. THE AMOUNT HAD BEEN SHOWN AS THE OPENING BALANCE FOR ASSESSMENT YE AR 2007-08. THE AO HAD OBSERVED THAT THE TRANSACTION HAD NOT BEEN PROV ED TO BE GENUINE. THE FACT, HOWEVER, REMAINS THAT THE AMOUNT HAD NOT BEEN PAID DURING THE YEAR, BUT WAS THE OPENING BALANCE FOR THE YEAR. ON THIS ACCOUNT ITSELF, THE ADDITION COULD NOT SUSTAIN. THEN, AGAIN, IT WAS A PAYMEN T AND NOT A RECEIPT. TOO, THE SOURCE OF THE PAYMENT WAS, AGAIN, NOT DISP UTED. FURTHER, THE PURCHASE OF LAND IN MUSSORRIE, FOR WHICH, THE PAYM ENT HAD BEEN MADE, DID NOT COME THROUGH. MOREOVER, CONFIRMATIONS FROM SMT . SANTOSH, BROUGHT ON RECORD BY THE ASSESSEE, HAD NOT BEEN REFUTED BY THE AO. THE CONFIRMATIONS CONTAINED THE PAN OF THE RECIPIENT. THE AMOUNT WA S SHOWN AS HITHERTO OUTSTANDING. THEN, THE PAYMENT HAVING BEEN MADE I N ASSESSMENT YEAR 1999-00, THERE WAS NO OCCASION TO MAKE ADDITION IN ASSESSMENT YEAR 2007- 08. ALSO, THE AMOUNT HAD NOT BEEN SHOWN AS PURCHA SE AND HENCE, NO ITA 1595 & CO NO. 120 13 DISALLOWANCE ON THIS COUNT COULD HAVE BEEN MADE. THE PAYMENT STOOD FULLY DISCLOSED. IT WAS FROM THE ASSESSEES BANK ACCOUNT . IT WAS DULY REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT. NO CASE FOR UNDIS CLOSED INVESTMENT ALSO WAS THERE. THE PAYMENT WAS AN INVESTMENT AND APPE ARED ON THE ASSETS SIDE OF THE BALANCE SHEET, NOT ATTRACTING, AT ALL, THE P ROVISIONS OF SECTION 41(1) OF THE ACT. THE AMOUNT HAD NOT BEEN SHOWN AS A LIABI LITY. THE LD. CIT(A) HAVING CORRECTLY APPRECIATED ALL THESE FACTS AND CI RCUMSTANCES, NO ERROR IN HER ORDER CAN BE FOUND IN THIS REGARD TOO AND THE D EPARTMENTS GROUSE QUA THIS ADVANCE IS ALSO REJECTED. 18. CONCERNING GROUND NO. 3, THE AO MADE ADDITION O F ` 3,00,000/- AND ` 1,50,000/-, TREATING THE OUTSTANDING LIABILITIES AP PEARING IN THE NAMES OF M/S. SINGHAL AGENCIES AND M/S. MAYA PROPERTIES (P)L TD., TO BE FICTITIOUS. THE AO ASKED THE ASSESSEE TO FILE CONFIRMATIONS FRO M THE CREDITORS. THE CONFIRMATIONS FILED BY THE ASSESSEE WERE NOT ACCEPT ED, OBSERVING THAT THE IDENTITY OF THE PERSONS AND THEIR SIGNATURES WERE N OT GENUINE. 19. THE LD. CIT(A) HAVING DELETED THE ADDITIONS, TH E DEPARTMENT HAS RAISED GROUND NO.3. 20. THE LD. DR HAS CONTENDED THAT THE ADDITIONS COR RECTLY MADE BY THE AO HAVE BEEN ERRONEOUSLY DELETED BY THE LD. CIT(A), DISREGARDING THE FACT THAT THE ASSESSEE REMAINED UNABLE TO FILE THE RELEV ANT CONFIRMATIONS ITA 1595 & CO NO. 120 14 REGARDING THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF THE TRANSACTIONS. 21. THE LEARNED COUNSEL FOR THE ASSESSEE, PER CONTR A, HAS SOUGHT TO RELY ON THE IMPUGNED ORDER. 22. HERE, IT IS SEEN, THAT AS PER THE MATERIAL AVAI LABLE ON RECORD, THE ASSESSEE HAD RECEIVED ` 3,00,000/- ON 8.4.2002 FROM SHRI SANDEEP SINGHAL, PROPRIETOR OF M/S. SINGHAL AGENCIES, AS AVAILABLE F ROM THE LEDGER ACCOUNT FOR ASSESSMENT YEAR 2003-04. THE SAID ADVANCE WAS TAKEN FOR THE PROPERTY LOCATED AT B-4, N.D. S.E. PART-I, NEW DELHI. THE ADVANCE WAS SHOWN IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2009-10 AND T HE ASSESSEE WAS NOT SHOWN TO BE PAYING ANY INTEREST THEREON. THE AMOU NT OF ` 1,50,000/- HAD BEEN RECEIVED BY THE ASSESSEE ON 17.7.2000 FROM MPP L, AS PER THE LEDGER ACCOUNT FOR THE ASSESSMENT YEAR 2003-04. THIS ADV ANCE WAS ALSO APPEARING IN THE BALANCE SHEET FOR THE ASSESSMENT YEAR 2009-1 0 AND THE ASSESSEE WAS NOT PAYING INTEREST ON THIS AMOUNT ALSO. THE AMOU NTS HAD NOT BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION, BUT WERE ONLY OPENING BALANCES, HAVING BEEN BROUGHT FORWARD FROM ASSESSMENT YEAR 2003-04, REPRESENTING ADVANCE RECEIVED FOR SALE OF PROPERTY. IT REMAINS UNDISPUT ED THAT THE AMOUNTS WERE STILL OUTSTANDING IN THE BOOKS OF ACCOUNT AS ON 31. 3.2009. THE ONLY REASON FOR THE AO TO MAKE THE ADDITION WAS THAT THE GENUIN ENESS OF THE PARTIES ITA 1595 & CO NO. 120 15 REMAINED UNPROVED BY THE ASSESSEE. THIS, DESPITE THE FACT THAT THE ASSESSEE HAD DULY FURNISHED THE PARTICULARS INCLUDING PANS O F THE CREDITORS AND THE AO DID NOT MAKE ANY FURTHER EFFORT BY WAY OF ENQUIR Y FROM THE CREDITORS. THE PROVISIONS OF SECTION 41(1) OF THE ACT HAVE RIG HTLY BEEN HELD BY THE LD. CIT(A) TO BE INAPPLICABLE AND THE ADDITION HAS RIG HTLY BEEN DELETED. ACCORDINGLY, GROUND NO. 3 IS ALSO REJECTED. 23. CONSEQUENTLY, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. 24. TURNING TO THE CROSS OBJECTIONS FILED BY THE AS SESSEE, THE ASSESSEE HAD CLAIMED EXPENSES OF ` 6,46,740/- IN THE PROFIT AND LOSS ACCOUNT. TH E AO DISALLOWED 30% OF THE SAME, ON AD-HOC BASIS, AMO UNTING TO ` 2,00,000/-. THE LD. CIT(A) INCREASED THE DISALLOWANCE TO ` 5,00,000/-, AGAINST WHICH, THE ASSESSEE HAS FILED THE CROSS OBJECTION. 25. THE LD. CIT(A), IT IS SEEN, WHILE RESTRICTING T HE DISALLOWANCE FROM 50% TO 30%, HAS OBSERVED AS FOLLOWS:- 8.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL AND THE FACTS ON RECORD. ON PERUSAL OF TH E PROFIT AND LOSS ACCOUNT IT IS SEEN THAT THE EXPENDITURE CLAIME D AT ` 6 LAKHS DOES NOT RELATE MERELY TO THE MAINTENANCE AC TIVITY AS OBSERVED BY THE ASSESSING OFFICER BUT ALSO TO THE B USINESS OF TRANSACTING IN PROPERTIES. DURING THE YEAR NO SAL ES HAVE BEEN ACCOUNTED FOR BUT THE EXPENDITURE RELATED TO T HE ACTIVITY IN THE FORM OF REGISTRY CHARGES, STAFF EXPENSES, TE LEPHONE AND CONVEYANCE ETC. HAVE BEEN CLAIMED. AS THE BUSINES S ACTIVITY ITA 1595 & CO NO. 120 16 HAS NOT CEASED, THE EXPENDITURE CLAIMED CANNOT BE D ENIED. HOWEVER, IN THE ABSENCE OF PRODUCTION OF BILLS AND VOUCHERS THE GENUINENESS OF THE EXPENDITURE DOES NOT REMAIN UNQUESTIONABLE. MOREOVER, WHEN THE VARIOUS LEDGER ACCOUNTS DO NOT CONTAIN ANY NARRATION AS TO AGAINST WHICH AC TIVITY THE EXPENDITURE HAS BEEN BOOKED. THE FACT THAT EXPENDITURE HAS NECESSARILY BEEN INCU RRED FOR EARNING THE INCOME OF ` 2 LAKHS AND FOR MAINTENANCE OF THE STOCK-IN-TRADE ETC. CANNOT BE DENIED BUT EVERY ASSE SSEE IS REQUIRED TO ESTABLISH THAT THE EXPENDITURE SO CLAIM ED CAN WITHSTAND THE TEST OF SECTION 37 OF THE INCOME TAX ACT. IF BILLS AND VOUCHERS ARE NOT PRODUCED BEFORE THE ASSESSING OFFICER AS ALSO NOT EVEN DURING APPELLATE PROCEEDINGS, THEN THE PRESUMPTION DOES ARISE THAT THE EXPENDITURE BOOKED MAY EITHER NOT BE GENUINE OR MAY BE PERSONAL IN NATURE OR MAY BE INFLATED. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE OF THE EXPENDITURE IS NEITHER WHIMSICAL NOR UNJUSTIFIED. HOWEVER, THE REASONABLENESS OF THE QUANTUM OF DISALLOWANCE I S A FACTOR THAT HAS TO BE CONSIDERED. THE AO HAS DISALLOWED 50% OF THE EXPENSES CLAIMED. IN MY VIEW TAKING INTO CONSIDERA TION THE 45PAST HISTORY OF THE CASE, THE FACT OF ACTUAL COND UCT OF THE BUSINESS ACTIVITIES NOT BEING DISPUTED, IT WOULD BE REASONABLE TO RESTRICT THE DISALLOWANCE TO ` 2 LAKHS WHICH IS AROUND 30% OF THE EXPENDITURE CLAIMED. THE APPELLANT THEREFO RE GETS RELIEF OF ` 1,23,370/-. 26. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD . CIT(A). UNDISPUTEDLY, THE EXPENDITURE WAS INCURRED FOR EARN ING THE INCOME OF ` 2,00,000/- AND FOR MAINTENANCE OF THE STOCK-IN-TRAD E, ETC. HOWEVER, THE REQUIREMENTS OF SECTION 37 OF THE I.T. ACT, AS OBSE RVED BY THE CIT(A), WERE ITA 1595 & CO NO. 120 17 NOT MET, SINCE THE BILLS AND VOUCHERS WERE NOT PROD UCED. THE LD. CIT(A), HOWEVER, RESTRICTED THE DISALLOWANCE CONSIDERING TH E PAST HISTORY OF THE CASE AND THE FACTUM OF ACTUAL CONDUCT OF THE BUSINESS AC TIVITIES. THE ASSESSEE HAS NOT BEEN ABLE TO BRING ON RECORD ANYTHING TO REBUT THE OBSERVATIONS MADE BY THE LD. CIT(A) AND THEREFORE, THE ESTIMATE MADE BY THE LD. CIT(A) IS FOUND TO BE JUSTIFIED. ACCORDINGLY, THE ORDER OF THE LD. C IT(A) IN THIS REGARD IS UPHELD AND THE CROSS OBJECTION IS REJECTED. 27. IN THE RESULT, THE APPEAL OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2012. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15.03.2012 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT ITA 1595 & CO NO. 120 18 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ASSISTANT REGISTRAR