DCIT, CHENNAI V. AREMKAY, Tirunelveli

ITA 1875/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95984 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 25-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2014
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYALU
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Unexplained investment; Unexplained expenditure; Capital asset; Gift; Business income; Depreciation; Business expenditure; Search and seizure; Cost of acquisition; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' # , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ITA NOS. 1769 TO 1772/MDS/2014 /ASSESSMENT YEARS : 2006-07 TO 2009-10 SHRI N. VISWANATH, L/H OF LATE K.V.NELLAIYAPPAN, PROP: RMKV ENTERPRISES, 176F, TRIVANDRUM ROAD, TIRUNELVELI 627 003. PAN AAJPN8275H ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-IV(1), CHENNAI. ( /RESPONDENT) ./ITA NOS. 1872 & 1873/MDS/2014 /ASSESSMENT YEARS : 2008-09 & 2009-10 THE DEPUTY COMMISSIONER, SHRI N. VISWANATH, OF INCOME-TAX, V. L/H OF LATE K.V. NELLAIYAP PAN, CHENNAI. TIRUNELVELI-627 003. ( /APPELLANT) ( /RESPONDENT) ./ITA NOS. 1773 TO 1776/MDS/2014 /ASSESSMENT YEARS : 2006-07 TO 2009-10 M/S. AREMKAY, 176F, TRIVANDRUM ROAD, TIRUNELVELI-627 003. PAN AAHFA9459J ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-IV(1), CHENNAI. ( /RESPONDENT) - - ITA 1769, 1770/14 ETC. 2 ./ITA NOS. 1875 & 1876/MDS/2014 /ASSESSMENT YEARS : 2008-09 TO 2009-10 THE DEPUTY COMMISSIONER OF INCOME-TAX, CHENNAI. ( /APPELLANT) V. M/S. AREMKAY, TIRUNELVELI. ( /RESPONDENT) ./ITA NOS. 1777 TO 1780/MDS/2014 /ASSESSMENT YEARS : 2006-07 TO 2009-10 M/S. VISWAMS, 176F, TRIVANDRUM ROAD, TIRUNELVELI-627 003. PAN AADFV5601A ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-IV(1), CHENNAI. ( /RESPONDENT) AND ./ITA NOS. 1877 & 1878/MDS/2014 /ASSESSMENT YEARS : 2008-09 & 2009-10 THE DEPUTY COMMISSIONER OF INCOME-TAX, CHENNAI. ( /APPELLANT) V. M/S. VISWAMS, TIRUNELVELI 627 003. ( /RESPONDENT) ASSESSEES BY : SHRI R. VIJAYARAGHA VAN, ADVOCATE DEPARTMENT BY : DR. U. ANJANEYALU, CIT /DATE OF HEARING : 25.06.2015 /DATE OF PRONOUNCEMENT : 28.08.2015 - - ITA 1769, 1770/14 ETC. 3 ' / O R D E R PER BENCH THIS IS A BUNCH OF 18 APPEALS. THE APPEALS RELAT ING TO SAME GROUP OF ASSESSEES ARE DIRECTED AGAINST THE DI FFERENT ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS) F OR THE ASSESSMENT YEARS 2006-07, 2007-08, 2008-09 AND 2009 -10. THE REVENUE HAS ALSO FILED APPEALS RELATING TO SAME GROUP OF ASSESSEES FOR THE ASSESSMENT YEARS 2008-09 AND 2009 -10. SINCE, COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THEY ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE APPEALS IN ITA NOS.1773 TO 1776/MDS/2014 : THE FIRST COMMON ISSUE IN THESE A PPEALS IS WITH REGARD TO CONFIRMING THE ADDITION TO THE CLOSI NG STOCK ADOPTING COST OF GOODS AT THE YEAR END INSTEAD OF A DOPTING COST OR REALIZABLE VALUE FOLLOWED BY THE ASSESSEE. 3. WE CONSIDER THE FACTS AS NARRATED IN THE CASE OF M/S. AREMKAY IN ITA NO.1773/MDS/14 FOR THE ASSESSMENT YEAR 2006- - - ITA 1769, 1770/14 ETC. 4 07. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS ONE OF THE FIRMS IN M/S. RMKV GROUP. CONSEQUENT TO SEARCH AND SEIZURE OPERATIONS U/S.132 OF THE I.T. ACT ON 18.2. 2009 IN THE BUSINESS PREMISES OF M/S. RMKV & SONS, DOCUMENTS PE RTAINING TO ASSESSEES CASE WERE SEIZED AND NOTICE U/S.153A R.W.S. 143C OF THE ACT DATED 23.6.2010 WAS SERVED ON THE ASSESS EE TO FILE A RETURN OF INCOME. IN RESPONSE TO THE NOTICE, THE A SSESSEE FILED A RETURN ON 20.8.2010 ADMITTING TOTAL INCOME OF ` 81,87,761/-. THE AO COMPLETED THE ASSESSMENT AFTER MAKING DISALLOWAN CE OF ` 3,60,638/- MADE TOWARDS VALUATION OF CLOSING STOCK BY OBSERVING AS UNDER : 'PROVISION AT FIXED PERCENTAGE ON THE ACTUAL COST M ADE WHILE VALUING THE CLOSING STOCK: '7. THE SEARCH REVEALED SEIZURE OF DOCUMENT IN THE FORM OF FINANCIAL STATEMENTS AS ANNEXURES TO THE RETURN FIL ED AND THE DETAILS OF CLOSING STOCK AS PER BOOKS OF ACCOUNTS RELEVANT FOR THE ASSESSMENT YEAR 2008-09. IT WAS NO TICED THAT THE CLOSING STOCK REPORTED IN THE RETURN OF IN COME IS LESS AS COMPARED TO THE DETAILS OF CLOSING STOCK AS PER BOOKS OF ACCOUNTS. 7.1 IT IS SEEN FROM THE RETURNS FILED THAT THE METH OD OF CLOSING STOCK VALUATION IS REPORTED TO BE 'AT COST OR REALIZABLE VALUE WHICHEVER IS LOWER AND AS CERTIFIE D BY THE MANAGEMENT.' THIS IS CONFIRMED BY THE OBSERVATION O F THE TAX AUDITOR AS PER FORM 3CD. SERIAL NO.12 OF FORM 3 CD OF TAX AUDIT REPORT CALLS FOR INFORMATION AS UNDER: - - ITA 1769, 1770/14 ETC. 5 (A) METHOD OF VALUATION OF CLOSING STOCK EMPLOYED I N THE PREVIOUS YEAR; (B) DETAILS OF DEVIATION, IF ANY FROM THE METHOD OF VALUATION PRESCRIBED U/S.145A AND THE EFFECT THEREO F ON THE PROFIT OR LOSS. 7.2. 'TAX AUDIT REPORT FILED FOR NONE OF THE ASSESS MENT YEARS REPORTED ANY CHANGE IN THE METHOD OF VALUATION OF C LOSING STOCK. THEREFORE, THE ASSESSEE WAS ASKED TO RECONCI LE THE VARIANCE BETWEEN THE CLOSING STOCK AS PER FINANCIAL ACCOUNT AND THE CLOSING STOCK AS DISCLOSED IN THE RETURN OF INCOME. 7.3 THE ASSESSEE EXPLAINED THAT COMMENCING FROM THE ACCOUNTING YEAR ENDED 31.3.06 RELEVANT TO THE A.Y. 2006-07, THERE HAS BEEN A CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK. THE VALUE OF STOCK AS PER THE FINANC IAL STATEMENTS ENCLOSED ALONG WITH RETURN WAS AFTER DED UCTING THE PROVISION WHICH WAS CALCULATED AT A FIXED PERCE NTAGE ON THE VALUE OF COST AS PER BOOKS. THROUGH THE PROCESS OF AGEING, THE STOCK WAS IDENTIFIED WITH THE RELEVANT YEAR OF PURCHASE AND PROVISION WAS MADE AT INCREASING PERCENTAGES DEPENDING UPON THE YEAR OF PURCHASE. 7.4. THE METHOD OF VALUATION ADOPTED FOR VALUING TH E STOCK IS AS UNDER: PARTICULARS PROVISION PERCENTAGE AY 09-10 PROVISION PERCENTAGE AY 08-09 PROVISION PERCENTAGE AY 07-08 PROVISION PERCENTAGE AY 06-07 PROVISION FOR UNSOLD STOCK OUT OF PURCHASES OF CURRENT YEAR (YO) NIL NIL NIL NIL PROVISION FOR UNSOLD STOCK OUT OF PURCHASES OF ONE YEAR BEFORE CURRENT YEAR (Y1) 25% 50% 25% 50% - - ITA 1769, 1770/14 ETC. 6 PROVISION FOR UNSOLD STOCK OUT OF PURCHASES OF TWO YEARS BEFORE CURRENT YEAR (Y2) 50% 50% 50% 50% PROVISION FOR UNSOLD STOCK OUT OF PURCHASES OF THREE YEARS BEFORE CURRENT YEAR (Y3) ACTUAL COST OR ` .100 WHICHEVER IS LOWER ACTUAL COST OR ` .100 WHICHEVER IS LOWER ACTUAL COST OR ` .100 WHICHEVER IS LOWER 7.5 AS IS EVIDENT FROM THE DATA PRESENTED IN THE T ABLE AS ABOVE, AS THE PROVISION MADE VARIED FROM YEAR TO YE AR, THE ASSESSEE WAS ASKED- TO JUSTIFY AS TO HOW THE STOCKS WERE IDENTIFIED AS EITHER AS 'SLOW MOVING' OR NON- MOVING'; TO JUSTIFY THAT THE PROVISION MADE WHICH IS AT A F IXED PERCENTAGE WOULD REFLECT THE REALIZABLE VALUE OF TH E GOODS UNSOLD; TO JUSTIFY THAT THE PROVISION MADE IS NOT EXCESSIV E; TO SUBSTANTIATE THAT -THE ASSESSEE HAS NOT RESOR TED TO POSTPONING THE TAX LIABILITY THROUGH THE PROCESS OF AD-HOC PROVISION; 7.6 THE PROVISION MADE WAS JUSTIFIED ON THE GROUND THAT THROUGH THE PROCESS OF AGEING, THE STOCKS WERE IDEN TIFIED TO THE YEAR OF PURCHASE AND THEY WERE CLASSIFIED AS EI THER SLOW MOVING OR NON-MOVING AND THE VALUATION WAS DONE BY EFFECTING REDUCTION ON THE BASIS OF FIXED PERCENTAG ES AS POINTED ABOVE. ON THE BASIS OF SAMPLE DATA, THE PRO VISION MADE WAS SOUGHT TO BE JUSTIFIED BY SHOWING THAT THE ACTUAL SALE PRICE REALIZED WHEN SUCH GOODS WERE SOLD IN TH E SUBSEQUENT YEARS WAS LOWER THAN THE COST AND RESULT ING THEREFORE IN A LOSS. - - ITA 1769, 1770/14 ETC. 7 7.7 THE ASSESSEE'S CLAIM HAS BEEN CONSIDERED. THE S AMPLE PRESENTED CANNOT BE CONSIDERED TO BE AN ACCEPTABLE RANDOM SAMPLE TRULY REFLECTING THE UNIVERSE. BESIDE S THE SAID SAMPLE DATA WAS NOT SUBSTANTIATED WITH REFEREN CE TO PURCHASE INVOICE AND SALE INVOICE TO PROVE THE CLAI M. IT IS FOUND THAT THE ASSESSEE STARTED MAKING PROVISION FO R STOCK OUT OF PURCHASES EVEN ONE YEAR BEFORE THE RELEVANT PREVIOUS YEAR. IT IS SEEN THAT MAJOR PORTION OF THE STOCKS I N RESPECT OF WHICH PROVISION IS MADE WERE FOUND SOLD IN THE SUBSEQUENT YEAR. THEREFORE THE CLAIM SUCH STOCKS AR E SLOW MOVING OR NON-MOVING IS NOT CORRECT. IN FACT, THE P ERCENTAGE OF STOCKS OUT OF PURCHASES OF THE EARLIER PREVIOUS YEARS WAS DWINDLING YEAR BY YEAR. THE POLICY OF MAKING PROVIS ION @ 25%, 50% OR 100% (NOTIONAL VALUE OF ` 100 PER ITEM IS ASSIGNED TO KEEP TRACK OF THE ITEMS) IS ADOPTED BY ALL THE FIRMS OF THE GROUP TRADING IN DIFFERENT PRODUCT LIN E LIKE SILK SAREES, READYMADE GARMENTS, SUITING, SHIRTING, MATCHING BLOUSES, HOSIERIES, LINGERIE ETC. WHEN THE PRODUCT RANGE IS SO WIDE, THE PARAMETER (NET OF CERTAIN FIXED PERCEN TAGES) ADOPTED FOR VALUING THE STOCKS CANNOT BE CONSIDERED TO BE TRULY REFLECTIVE OF THE REALIZABLE VALUE. FOR EXAMP LE, THE SILK SAREES, WHICH CONSTITUTE THE MAJOR SEGMENT, ARE CLA IMED TO BE MADE OF PURE ZARI. THE CLAIM THAT THOSE ITEMS WO ULD FETCH ONLY A VALUE OF ` L00 AT THE END OF THREE YEAR PERIOD IS NOT CONVINCING. SINCE THE ASSESSEE FAILED TO SUBSTANTIA TE THAT THE PROVISION MADE IS NOT EXCESSIVE, THE SAME CANNO T BE CONSIDERED TO BE REFLECTING THE REALIZABLE VALUE OF THE GOODS UNSOLD AS AT THE END OF THE RELEVANT PREVIOUS YEAR. ANY PROVISION MADE ON AN ADHOC BASIS IS NOT PERMISSIBLE UNDER THE PROVISIONS OF LAW AND HAS TO BE TREATED AS AN A TTEMPT ON THE PART OF THE ASSESSEE TO POSTPONE THE TAX LIA BILITY FOR THE CURRENT ASSESSMENT YEAR. 7.8 UNDER THESE CIRCUMSTANCES, THEREFORE IT HAS TO BE HELD THAT SUCH A PROVISION WHICH IS ADHOC HAS TO BE ADDE D BACK TO THE REPORTED VALUE OF STOCK AND SUITABLE ADJUSTM ENTS TO THE INCOME RETURNED HAVE TO BE MADE, WITH CORRESPON DING ADJUSTMENTS IN RELATION TO THE TOTAL INCOME TO BE D ETERMINED - - ITA 1769, 1770/14 ETC. 8 FOR THE SUBSEQUENT ASSESSMENT YEARS. THE EFFECT OF SUCH AN EXERCISE - IS REFLECTED IN THIS TABLE HERE UNDER: STOCK AT PROVISION DISALLOWANCE ADJUSTED EFFECT O N COST MADE DISALLOWANCE INCOME A.Y. SUBJEC T T TO PROVISION 2006-07 7,21,276 3,60,638 3,60,638 3,60,638 3,60,638- 2007-08 7,12,289 3,49,841 3,49,841 NIL -10,797 2008-09 18,25,950 9,03,668 9,03,668 5,53,827 5,53,827 2009-10 17,67,100 6,14,025 6,14,025 NIL -2,89,643 7.9. TAKING INTO ACCOUNT THE ABOVE SET OF DATA AND THE ADDITION BY WAY OF ADJUSTMENT TO THE CLOSING STOCK ON ACCOUNT OF NET PROVISION MADE FOR THE CURRENT YEAR IS ` 3,60,638. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(APPEALS). 4. ON APPEAL, AFTER GOING THROUGH THE ASS ESSMENT ORDER, GROUNDS OF APPEAL, AO'S REMAND REPORT AND ASSESSEE' S REJOINDER IN THIS REGARD, THE CIT(APPEALS) OBSERVED THAT DURING THE SEARCH ACTION THE CLOSING STOCK HAS BEEN VALUED WITH THE ASSISTANCE FROM THE STAFF OF THE ASSESSEE FIRM AND LATER THE STOCK INVENTORIES HAVE BEEN VERIFIED BY THE MANAGIN G PARTNER OF THE ASSESSEE FIRM. THE CIT(APPEALS) FURTHER OBS ERVED THAT THE ISSUE OF CLOSING STOCK VALUATION HAS BEEN A SUB JECT MATTER - - ITA 1769, 1770/14 ETC. 9 DURING THE SEARCH AND POST SEARCH PROCEEDINGS. THER EFORE, THE ASSESSEE SHOULD NOT HAVE RAISED THE ISSUE IN AP PEAL, AS IT HAS AGREED FOR THE DIFFERENCES IN CLOSING STOCK VAL UATION AT THE TIME OF SEARCH/POST SEARCH PROCEEDINGS. FURTHER, TH E CIT(APPEALS) OBSERVED THAT THE ASSESSEE HAS RAISED THIS ISSUE AT THE TIME OF SCRUTINY ALSO. ACCORDING TO TH E CIT(APPEALS), THE AO HAS SUCCESSFULLY COUNTERED THE ARGUMENTS OF THE ASSESSEE ADVANCED IN THIS REGARD A ND ARRIVED AT A CONCLUSION IN THE ASSESSMENT ORDER ON THE BASIS OF FINDINGS MADE IN THE SEARCH PROCEEDINGS. THEREFO RE, THE CONTENTIONS OF THE ASSESSEE DESERVE TO BE REJECTED. ACCORDING TO THE CIT(APPEALS), THE AO POINTED OUT I N THE REMAND REPORT THAT THE ISSUE OF VALUATION OF CLOSIN G STOCK IS ALREADY SETTLED AND HENCE NO FURTHER RECONCILIATION IS REQUIRED TO BE MADE. HOWEVER, THE AR HAS MISUNDERSTOOD THAT THE AO HAS APPROVED THE ASSESSEE'S VALUATION OF CLOSING ST OCK, WHICH IS NOT CORRECT. THE CIT(APPEALS) FURTHER OBSERVED THAT THE AO DURING REMAND PROCEEDINGS STATED THAT THE ISSUE OF CLOSING STOCK VALUATION HAS REACHED FINALITY AT THE TIME OF SCRUTINY PROCEEDINGS ITSELF AND HENCE THIS ISSUE DOES NOT RE QUIRE - - ITA 1769, 1770/14 ETC. 10 REVISITING IN THE REMAND PROCEEDINGS. 4.1 FURTHER, THE CIT(APPEALS) OBSERVED THAT WHILE COMPUTING THE STOCK DIFFERENCE THE DEPARTMENT HAS R ELIED ON THE BOOK STOCK AS INDICATED BY THE ASSESSEE IN ITS ACCOUNTS. IF THE SAME IS CLAIMED TO BE INCORRECT, THEN THE ACCOUNTS MAINTAINED BY THE ASSESSEE IN RESPECT OF THE STOCK ARE OPEN TO QUESTION. THEREFORE, THE CIT(APPEALS) AGREED WIT H THE AO'S CONCLUSIONS ARRIVED IN THIS REGARD. FURTHER, T HE AR AT THIS JUNCTURE ASKED FOR COPIES OF THE PHYSICAL STOC K INVENTORIES TAKEN AT THE TIME OF SEARCH. ACCORDING TO THE CIT(APPEALS), THIS ITSELF SHOWS THE DELAYING TACTIC S OF THE ASSESSEE TO KEEP THE SETTLED ISSUE ALIVE FOR LITIGA TING IN FUTURE. ACCORDINGLY, THE CIT(APPEALS) HELD THAT TH E ASSESSEE'S GROUNDS ON THIS ISSUE ARE NOT ENTERTAINE D AND CONFIRMED THE AO'S ACTION IN MAKING THE ADDITION OF ` 3,60,638/- TO THE RETURNED INCOME IN RESPECT OF VAL UATION OF CLOSING STOCK. AGAINST THIS, THE ASSESSEE IS IN AP PEAL BEFORE US. 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. THE ASSESSEE HAS VALUED THE UNSOLD ST OCK BY - - ITA 1769, 1770/14 ETC. 11 DISCOUNTING PURCHASE PRICE AT FIXED PERCENTAGE CONS IDERING THE AGE OF THE STOCK. HOWEVER, THIS METHOD OF REDUCTIO N IS NOT FOLLOWING YEAR BY YEAR. FOR EXAMPLE, AS SEEN FROM THE ABOVE TABLE, IN THE ASSESSMENT YEAR 2009-10, THE ASSESSEE ADOPTED THE REDUCTION OF VALUE OF PURCHASE PRICE AT 25%, WH EN THE STOCK IS ONE YEAR OLD. HOWEVER, FOR THE ASSESSMENT YEAR 2008-09, IT WAS 50%, FOR THE ASSESSMENT YEAR 2007-08 AGAIN 25% AND FOR THE ASSESSMENT YEAR 2006-07, THE SAME WAS 50%. THE RE IS NO EXPLANATION FOR SUCH KIND OF ARBITRARY REDUCTION OF EITHER 25% OR 50%. THERE IS NO CONSISTENCY IN THE METHOD FOLLOWE D BY THE ASSESSEE FOR VALUING THE CLOSING STOCK. THE CLOS ING STOCK IS TO BE VALUED AT MARKET PRICE OR COST WHICHEVER IS LESS AND THAT SHOULD BE CONSISTENT FROM YEAR TO YEAR. THE ASSESS EE IS NOT DISPUTED THAT IT HAS BEEN FOLLOWED THE SAME METHOD. HOWEVER, CONSEQUENT TO SEARCH ACTION, THE ASSESSEE WANTED TO CHANGE THE METHOD OF STOCK VALUATION FOR THE FIRST TIME, WHICH IS NOTHING BUT AN AFTER-THOUGHT SO AS TO REDUCE THE INCOME WHICH C ANNOT BE PERMITTED AT THIS POINT OF TIME. ACCORDINGLY, THIS GROUND IN ALL THESE APPEALS IS REJECTED. 6. THE NEXT GROUND IN ITA NO.1776/MDS/14 IS WITH RE GARD TO - - ITA 1769, 1770/14 ETC. 12 DISALLOWANCE OF LEASE COMMITMENT CHARGES OF ` 15 LAKHS AND DONATIONS OF ` 40,024/-. 7. THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE CL AIMED LEASE COMMITMENT CHARGES FOR VPT PARKING LOT AT ` 15 LAKHS IN THE REVISED RETURN OF INCOME. ACCORDING TO THE AO, THE ASSESSEE HAS FILED RETURN AS FOLLOWS, IN THE ORIGINAL RETURN OF INCOME THOUGH ASSESSEE ADMITTED RETURN OF INCOME AT ` 91,47,663/- . DATE OF FILING OF RETURN TOTAL INCOME ADMITTE D 18.3.2010 ` 76,47,663 27.3.2010 ` 77,22,663 19.4.2010 ` 77,20,348 THE ASSESSEE ADMITTED LOWER INCOME IN THE REVISED R ETURN WHICH WAS MAINLY ON ACCOUNT OF LEASE COMMITMENT CHARGES O F ` 15 LAKHS FOR VPT PARKING LOT AND OFFERED INCOME OF ` 75,000/- BY WAY OF SALE OF OLD NEWSPAPERS, COVERS AND PENDING ACCOUNTING. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE WAS A SKED TO SUBSTANTIATE THE BASIS FOR THE CLAIM OF DEDUCTION B Y WAY OF LEASE COMMITMENT CHARGES AND HOW THE SAME HAS BEEN ACCOUN TED FOR IN THE BOOKS OF ACCOUNTS. THE ASSESSEE REFERRED TO THE NOTE APPENDED TO THE MEMO OF INCOME EXPLAINING THE CLAIM OF ` 15,00,000/- WHICH IS REPRODUCED AS UNDER: - - ITA 1769, 1770/14 ETC. 13 LEASE COMMITMENT CHARGES FOR VPT PARKING LOT AS PE R THE DIRECTIONS OF THE COMMISSIONER OF HR&CE, CHENNAI WA S ORIGINALLY PAID BY THE INDIVIDUALS. (SINCE THE PAYM ENT IS BY INDIVIDUALS, THE SAME WILL NOT ATTRACT TDS PROVISIO NS). THE ABOVE COMMITMENT CHARGES WAS NOT DEBITED IN THE BOO KS OF A/C. OF THE FIRM IN THE F.Y. 2008-09 AND AS SUCH WA S NOT CLAIMED IN THE ORIGINAL RETURN. WHILE FILING THE RE VISED RETURN, THE SAME WAS CLAIMED AS A DEDUCTION. SINCE THE 'BUS INESS EXPEDIENCY EXPENSE' DOES NOT COME UNDER ANY SPECIFI C CLAUSE ATTRACTING TDS THE SAME IS CLAIMED IN THE AD JUSTMENT ACCOUNT. ENTRIES CREDITING THE INDIVIDUALS AND DEBI TING THE LEASE COMMITMENT CHARGES IS BEING MADE IN BOOKS OF F.Y. 2009-10. IF THE A.O INSISTS ON ALLOWING THIS EXPEND ITURE ONLY ON DEDUCTING TDS THE ARGUMENT IS THE ULTIMATE RECIP IENT ARE TRUSTS WHICH DO NOT HAVE ANY INCOME TAX REQUIREMENT . ALTERNATIVELY, WE HAVE TO PRESS FOR THE TREATMENT O F INCOME & CORRESPONDING EXPENDITURE IN THE HANDS OF INDIVIDUA LS AND ADJUST THE RESULTANT TDS ALSO IN THE HANDS OF INDIV IDUALS. 7.1 BEFORE THE AO, THE ASSESSEE FURNISHED ORDER NOS.23000/2008 AND NO.23001/2008 DATED 31.5.08 BY HINDU RELIGIOUS AND CHARITABLE ENDOWMENT (HENCE FORTH MENTIONED AS HR&C E) AND CLAIMED THAT THE DONATIONS OF ` 1,00,00,000 WERE REQUIRED TO BE MADE AS PER THE ABOVE ORDERS AND THEREFORE IT CONSTITUTE S PAYMENTS FOR 'BUSINESS EXPEDIENCY. FURTHER, THE A SSESSEE HAS - - ITA 1769, 1770/14 ETC. 14 SUBMITTED WRITTEN SUBMISSION, WHICH IS COMMON IN RE SPECT OF SIMILAR CLAIMS BY OTHER FIRMS OF THE ASSESSEE GROUP READS AS UNDER: LEASE COMMITMENT CHARGES OUR FIRM HAS BEEN CARRYING ON THE BUSINESS OF TRADI NG IN TEXTILE GOODS AT TIRUNELVELI TOWN SINCE 1926. THE F IRM WHICH WAS STARTED ON A SMALL SCALE WHICH GREW UP WELL THA NKS TO THE GOODWILL AND PATRONAGE ENJOYED FROM THE PUBLIC IN A ND AROUND TIRUNELVELI. OUR SHOP'S NEIGHBOURHOOD USED T O THRONG WITH CROWD DURING THE FESTIVAL SEASON. AS THERE WAS NO PARKING SPACE MANY OF OUR CUSTOMERS WERE PERSUADING US TO MOVE INTO A LARGER SPACE WHEREIN THEY COULD SHOP WI THOUT WORRYING ABOUT PARKING THEIR VEHICLE. WITH THIS IN MIND WE BOUGHT ABOUT 95 CENTS OF LAND TO CONSTRUCT OUR SHOP AFTER ALLOTTING A PORTION FOR TH E PARKING LOT. THANKS TO THE GROWTH OF POPULATION AND CUSTOMER BAS E IN THE YEAR 2006-07 WE REALIZED THAT WE NEED A BIGGER AREA SEPARATELY FOR THE PARKING SPACE. AT THIS JUNCTURE A PIECE OF LAND ADJACENT TO THE LAND WE BOUGHT WAS OFFERED TO US ON TENANCY BASIS. THE CULTIVATOR CUM TENANTS OF THE PR OPERTY AGREED TO TRANSFER THE TENANCY FOR A CONSIDERATION. AS IT WILL BE OF IMMENSE USE TO OUR BUSINESS WE GOT THE TENANC Y RIGHT TRANSFERRED IN OUR NAME. AS THESE LANDS WERE ORIGINALLY DEDICATED TO CERTAIN TEMPLES, WITH A CHARGE ON THE INCOME FOR PERFORMING CERTAIN PUJAS IN A FEW TEMPLES 'HR&CE' INTERVENED AND CONTENDED THAT T HE TRANSFER OF TENANCY IN OUR FAVOUR ARE VOID AS TENAN TS HAVE NO RIGHT TO TRANSFER. THOUGH THE INCOME FROM THESE LAN DS WILL BE APPROXIMATELY 4.5 KOTAS OF PADDY PER YEAR WHICH REN TAL WAS ALSO NOT CEDED TO THESE TEMPLES, SOME MORE DEMANDS WERE RAISED FROM SEVERAL QUARTERS. IN THE MEAN TIME NEWS PAPER MEDIA STARTED GIVING COLOUR TO THIS ACTION. AS WE A RE IN BUSINESS FOR MORE THAN 80 YEARS AND HAD A NAME TO D EFEND, WE WERE AFRAID SUCH FALSE NEWS WILL CAUSE A STIGMA TO OUR - - ITA 1769, 1770/14 ETC. 15 REPUTATION. BECAUSE WE GOT THE TENANCY RIGHT FOR TH IS LAND WE PURCHASED SOME MORE LANDED PROPERTY BEHIND THIS LEA SE LAND THROUGH WHICH GOT THE NECESSARY ACCESS. HR&CE ISSUED THREATENING LETTERS TO NOT ONLY REVOKE THE RIGHT OF TENANCY BUT ALSO DIRE CONSEQUENCES. FINALLY, BEI NG LEFT WITH NO OPTION, WE HAD TO AGREE TO WHATEVER TERMS WE WER E DICTATED. THE HR&CE AGREED, SUBJECT TO OUR COMMITME NT TO CONTRIBUTE TO VARIOUS TEMPLES, TO LEASE THE PROPERT Y ON FRESH TERMS REFIXING THE RENTALS IN ADDITION TO FREE RENT AL DEPOSIT. WE WOULD LIKE TO SUBMIT THAT HAD WE NOT AGREED TO T HEIR TERMS WE WOULD BE THE LOSERS ON SEVERAL COUNTS SUCH AS: (I) OUR CONCERNS WILL BE DEPRIVED OF PARKING SPACE DEFEATING THE VERY PURPOSE FOR WHICH WE WANTED TO SHIFT OUR BUSINESS HOUSE. (II) THE INVESTMENT WE MADE IN SOME MORE LANDED PROPERTY BEHIND THIS LEASED LAND CANNOT BE MADE TO USE OF AS THE ACCESS WAS THROUGH THIS LEASED LAND WHICH WILL BE CUT OFF III) T HE MONEY WE PAID FOR THE TRANSFER OF TENANCY WILL BECOME A WASTE AND NOT TO MENTION THE LEGAL ACTIONS THE HR&CE WERE THREATENING W ITH. AS WE WANTED TO PEACEFULLY RUN THE BUSINESS AND ALS O ENSURE COMFORT TO THE PUBLIC WHO WANTED TO DO SHOPPING IN OUR OUTLETS, WE AGREED AND MADE CONTRIBUTIONS AS DIRECT ED BY THE HR&CE (COPIES OF THE ORDERS NO. 23000 & 23001 DATED 31.05.2008, ARE ENCLOSED HEREWITH) AFTER WHICH THE TENANCY RIGHT WAS TRANSFERRED IN FAVOUR OF RMKV GROUP OF CO NCERNS VIDE LEASE AGREEMENTS DATED 09.06.2008. THE AMOUNT OF EXPENDITURE INCURRED IN THIS CONNECTION IS LEGITIMA TE GENUINE BUSINESS EXPEDIENCY, INCURRED OUT OF BUSINESS EXPEN DITURE AND RIGHTLY CHARGEABLE AS REVENUE EXPENDITURE. IN T HE BOOKS OF MLS RMKV & SONS THIS EXPENDITURE OF ` 30 LAKHS WAS RIGHTLY CHARGED TO THE PROFIT AND LOSS ACCOUNT OTHE R SUCH - - ITA 1769, 1770/14 ETC. 16 EXPENDITURES WERE MISTAKENLY DEBITED TO THE ACCOUNT OF VARIOUS PARTNERS. AS THEY ARE ALSO CHARGEABLE TO O UR VARIOUS GROUP CONCERN AND TO BE BORNE BY THESE CONCERNS WHI CH ALSO ENJOY THE FRUITS OF THIS PAYMENT, IT WAS CLAIMED AS A DEDUCTION IN THE ADJUSTMENT ACCOUNT AND REVISED RETURNS WERE FILED ACCORDINGLY. PLEASE FIND ENCLOSED VARIOUS DOCUMENT S CONNECTED WITH THE ABOVE EXPENDITURE. FROM THE FOREGOING FACTS, IT WILL BE SEEN THAT THE LEASE COMMITMENT CHARGES IS A LEGITIMATE BUSINESS EXPENDI TURE INCURRED OUT OF BUSINESS EXPEDIENCY AND DEDUCTIBLE IN COMPUTING THE BUSINESS INCOME. HENCE WE SUBMIT THA T THE SAME MAY BE CONSIDERED WHILE COMPUTING THE BUSINESS INCOME. WE WILL BE GLAD TO PROVIDE ANY OTHER CLARI FICATIONS IN THIS REGARD, IF NECESSARY. THE AO REJECTED THE CLAIM OF THE ASSESSEE. THE ASS ESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 8. BEFORE THE CIT(APPEALS), THE ASSESSEE CONTENDED THAT THE AO SHOULD HAVE HELD THAT ANY PAYMENT MADE FOR T HE SMOOTH RUNNING OF THE BUSINESS, BEING MADE OUT OF BUSINESS EXPEDIENCY, AS A DEDUCTIBLE EXPENDITURE. THE ASSESSEE FURTHER CONTENDED BEFORE THE CIT(APPEALS) THAT THE AO SHOULD HAVE HEL D THAT THE VERY PURPOSE OF ACQUIRING THE TENANCY RIGHTS IN THE LAND WILL EXCLUSIVELY SERVE THE BUSINESS INTEREST OF RMKV GRO UP OF CONCERNS AND NOT THE INDIVIDUAL PARTNERS, THE COST OF ACQUISITION OF TENANCY RIGHTS ITSELF TO BE TREATED AS AN EXPEN SE INCURRED OUT OF BUSINESS EXPEDIENCY. THIS BEING THE POSITION, T HE PAYMENT TO VARIOUS INSTITUTIONS AS DIRECTED BY THE HR & CE, GO VERNMENT OF - - ITA 1769, 1770/14 ETC. 17 TAMILNADU SHOULD BE HELD AS GENUINE BUSINESS EXPEND ITURE OF THE ASSESSEE. AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE AND OBSERVATIONS OF THE AO, THE CIT(APPEALS) CONFIR MED THE ACTION OF THE AO AND DISMISSED THE GROUND OF APPEA L. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE ALONG WITH OTHER PARTNERS CLAIMED DEDUCTION BY WAY OF LEASE COMMITMENT CHARGE S, WHICH IS AS FOLLOWS : NAME OF THE FIRM AMOUNT M/S BEST CHOICE RS.20 , 00,000 M/S.VISWAMS RS.15,00,000 M/S.AREMKAY RS.15, 00 , 000 M/S.RMKV TEXTILES RS.10, 00,000 M/S.RMKV ENTERPRI SES RS.10, 00,000 M/S RMKY & SONS RS.30, 00,000 TOTAL RS.100, 00,000 THE ASSESSEE CLAIMED THAT THIS EXPENDITURE WAS INCU RRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND IT IS TO BE ALLOWED AS BUSINESS EXPENDITURE. ADMITTEDLY, IN TH IS CASE, THE ASSESSEE HAS NOT INCURRED EXPENDITURE ON ITS OWN. ONE SHRI MAHESH PAID ` 70 LAKHS FROM THE JOINT ACCOUNT ALONG WITH THE OTHERS MAINTAINED IN INDIAN BANK AND BALANCE AMOUNT OF ` 30 LAKHS FROM RMKV & SONS. OUT OF THIS, THE ASSESSEE CLAIMED - - ITA 1769, 1770/14 ETC. 18 EXPENDITURE OF ` 15 LAKHS. 9.1 IT IS SEEN THAT CERTAIN LANDS DEDICATED TO TEM PLES FOR CARRYING OUT CHARITABLE ACTIVITIES BY CERTAIN PHILA NTHROPIC PERSONS WERE GIVEN BY THE TEMPLES IN TURN ON TENANCY BASIS TO SOME PERSONS. THE LEGAL HEIRS ON THE DEATH OF THE SAID PERSONS TRANSFERRED THE TENANCY RIGHTS IN FAVOUR OF SHRI K. MAHESH (INDIVIDUAL), FOR VALUABLE CONSIDERATION OF ` 45,50,000/-. SINCE HR & CE RAISED OBJECTION THAT THE TENANCY RIGHTS CANNO T BE TRANSFERRED, IN ORDER TO SOLVE THE CRISIS AND TO PE RFECT THE TITLE, AS PART OF THE NEGOTIATION, SRI MAHESH CONSENTED TO PA Y TO ` ONE CRORE AS DONATION TO THE ABOVE TEMPLES, WHOSE TENAN CY RIGHTS SRI MAHESH PURCHASED EARLIER, TO MAKE CLEAR THE TITLE O F THE PROPERTY FROM ANY LITIGATION. THEREAFTER, SEPARATE LEASE DE EDS WERE ENTERED INTO. THE LEASE DEED IS FOR A PERIOD OF 3 YEARS AND THE DEMISED PREMISES WERE PERMITTED TO BE USED FOR COMM ERCIAL PURPOSES. THE LEASE WAS SUBJECT TO RENEWAL, IF THE LESSOR AT THE TIME OF EXPIRY OF THE LEASE PERIOD IS OF THE OPINIO N THAT IT IS BENEFICIAL TO DO SO ON ENHANCEMENT OF THE LEASE REN TALS AGREED UPON BY 15%. THE LEASE SHALL BE EXTENDED FOR A PER IOD OF EVERY 3 YEARS THEREAFTER. - - ITA 1769, 1770/14 ETC. 19 9.2 FOLLOWING FACTS ARE RELEVANT FOR CONSIDERATION: AT THE OUTSET IT IS MADE CLEAR THAT THE ASSESSEE D ID NOT INCUR ANY EXPENDITURE ON ITS OWN TO MAKE A CLAIM OF EXPENDITURE DURING THE RELEVANT PREVIOUS YEAR. THER EFORE ITS CLAIM OF ` TEN LAKHS AS LEASE COMMITMENT CHARGES IS FACTUALLY INCORRECT. THE ENTRIES PASSED IN THE SUBS EQUENT ASSESSMENT YEAR HAVE TO BE TREATED AS AN ATTEMPT ON THE PART OF THE ASSESSEE TO STRAIGHTEN THE CLAIM AND TH EREFORE DISMISSED AS AFTERTHOUGHT. SRI MAHESH ONLY OBTAINED THE DEMISED PREMISES FOR VALUABLE CONSIDERATION OF ` 45,50,000 BY GETTING THE TENANCY RIGHTS TRANSFERRED IN HIS NAME FROM THE LEG AL HEIRS OF THE ORIGINAL TENANCY RIGHT HOLDER. THE FUNDS REQ UIRED FOR PAYMENT OF ADMITTED CONSIDERATION FOR TRANSFER OF T ENANCY RIGHTS WAS PAID BY THE PRINCIPAL FIRM, RMKV & SONS WHICH DEBITED THE CURRENT A/C. OF MAHESH TO THE EXT ENT OF - - ITA 1769, 1770/14 ETC. 20 ` 35,00,000 AS AN ADVANCE TO SRI MAHESH AND THE BALAN CE CONSIDERATION WAS PAID BY SRI MAHESH OUT OF HIS OWN FUNDS. THEREFORE SRI. MAHESH IS THE ABSOLUTE OWNER OF THE PROPERTY. TENANCY RIGHTS ARE IMPORTANT RIGHTS ATTACHED TO IM MOVABLE PROPERTY. IT IS BY NOW RECOGNISED THAT TENANCY RIGH T IS A CAPITAL ASSET AND SURRENDER THEREOF AMOUNTS TO TRAN SFER OF CAPITAL ASSET. BOTH GOODWILL AND TENANCY RIGHTS HA VE BEEN BROUGHT WITHIN THE AMBIT OF CHARGE BY AN AMENDMENT TO SECTION 55(2). SINCE THE TITLE TO THE CAPITAL ASSET ACQUIRED BY S RI MAHESH WAS FOUND TO BE DEFECTIVE, THE SAME WAS SOUGHT TO B E CURED THROUGH A PROCESS OF DIALOGUE AND NEGOTIATION WITH HR&CE. IN CONSEQUENCE THEREOF TO REGULARIZE THE TRANSACTI ON OF ACQUISITION OF TENANCY RIGHTS, LUMP SUM AMOUNT OF ` 70,00,000/- WAS PAID BY SRI. MAHESH OUT OF HIS SHAR E OF SALE PROCEEDS RECEIVED ON TRANSFER OF A PROPERTY. ANOTHER SUM OF ` 30,00,000/- WAS PAID BY THE M/S RMKV & SONS BY - - ITA 1769, 1770/14 ETC. 21 TREATING THE SAME AS DONATION AND INCLUDING THE SAM E UNDER THE FOLIO 'DONATION' IN ITS ACCOUNTS. HR & CE PASSED THE ORDER DIRECTING THE EXECUTIVE OFFICER OF THE TEMPLES TO EFFECT LEASE DEEDS IN FAVOUR OF SRI MAHESH ONLY AFTER SRI MAHESH CONSENTED TO MAKE THE DONATIO N OF ` 1,OO,OO,OOO AS ABOVE. THIS IS CLEAR FROM THE ORDER OF THE HR&CE. THE LEASE DEEDS ENTERED THEREAFTER IN WHICH SRI MAHESH IS MENTIONED TO REPRESENT M/S RMKV GROUP DOES NOT ALTE R THE LEGAL TITLE VESTED IN SRI. MAHESH, THE INDIVIDU AL. LEASE OF IMMOVABLE PROPERTY IS A TRANSFER OF THE R IGHT TO ENJOY SUCH PROPERTY MADE FOR A CERTAIN TIME, EXPRES S OR IMPLIED OR IN PERPETUITY IN CONSIDERATION FOR PRICE PAID OR PROMISED TO THE TRANSFEROR WHO ACCEPTS THE TRANSFER ON SUCH TERMS. SUCH LEASE OF THE IMMOVABLE PROPERTY FROM YE AR TO YEAR OR FOR A TERM EXCEEDING ONE YEAR CAN BE MADE O NLY BY A REGISTERED INSTRUMENT. THUS GRANT OF LEASE INVOLV ES TRANSFER OF RIGHTS AND AS THE RIGHTS TRANSFERRED IN FAVOUR OF LESSEE BY THE LESSOR IS A CAPITAL ASSET AND THEREFO RE, THE TRANSACTION CONSTITUTES TRANSFER OF CAPITAL ASSET. HOWEVER THE - - ITA 1769, 1770/14 ETC. 22 MONTHLY OR YEARLY RENT RECEIVED BY THE LESSOR WOULD BE REVENUE INCOME THOUGH THE PRICE OR PREMIUM PAID IN LUMP SUM FOR TRANSFER OF LEASE BESIDES THE RENT WILL NOR MALLY BE A CAPITAL RECEIPT GIVING RISE TO CHARGE OF CAPITAL GA INS AS ENUNCIATED BY THE SUPREME COURT IN DURGA DAS KHANNA REPORTED IN 72 ITR 796. THE SUM OF ` ONE CRORE PAID TOGETHER BY SRI MAHESH AND THE FIRM, RMKV & SONS HAS TO BE TREATED AS A PREMIU M PAID IN LUMP SUM FOR TRANSFER OF LEASE, WHICH IS APART F ROM THE SUBSEQUENT LEASE RENTALS AND TEN MONTHS RENTALS AS ADVANCE ( WHICH IS A COMMON FEATURE) THEREFORE THE SUM OF ` ONE CRORE PAID CAN AT BEST BE TREATED ONLY AS EXPENDITURE INCURRED TO CURE A TITLE TO A CAPITAL ASSET PREMIUM PAID FOR ACQUIRING LEASE RIGHTS DONATION SIMPLICITER 9.3 FURTHER, THOUGH THE ASSESSEE PLEADED THAT THE E XPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS, ABSOLUTE LY NOTHING ON RECORD TO INDICATE THAT THE ASSESSEE DID ACQUIRE AN Y BUSINESS ADVANTAGE OUT OF SUCH EXPENDITURE. WE DO NOT FIND A NY EXPENSES - - ITA 1769, 1770/14 ETC. 23 ALLOWABLE UNDER SEC.37(1) OF THE ACT AND THE ASSESS EE FAILED TO EXPLAIN THAT HOW IT GAINED SOME BUSINESS ADVANTAGE BY INCURRING THAT EXPENDITURE. THEREFORE, WE ARE NOT INCLINED T O UPHOLD THE ARGUMENT OF THE LD. AR AND WE AGREE WITH THE FINDIN G OF THE CIT(APPEALS). 9.4 REGARDING DONATIONS OF ` 40,024/- IS CONCERNED, THE ASSESSEE ALONG WITH OTHER PARTNERS PAID ` 30 LAKHS TO TWO TEMPLES, VIZ., MUTHARAMAN TEMPLE, PALAI AND U & U K ATTALAI, PALAI. THE SHARE OF THE ASSESSEES DONATION OUT OF THESE, IS ` 40,024/- AND IT CANNOT BE ALLOWED, AS THE SAME IS ADDED AND THE CIT(APPEALS) HAS CONFIRMED THE SAME. SINCE, TH E ASSESSEE HAS NOT PAID LEASE COMMITMENT CHARGES, WE REJECT TH IS GROUND. 10. THE NEXT GROUND IS WITH REGARD TO STOCK DISCREP ANCY AT THE TIME OF SEARCH. THIS GROUND IS DISCUSSED INFRA IN ITA NO. 1780/MDS/2014. 10.1 IN THE RESULT, ITA NOS. 1173 TO 1776/MDS/2014 ARE DISMISSED. 11. ITA NOS.1777 TO 1780/MDS/2014 : THE FIRST COMMO N GROUND IN ALL THESE APPEALS IS WITH REGARD TO CONFI RMING THE ADDITION TO THE CLOSING STOCK ADOPTING COST OF GOOD S AT THE YEAR - - ITA 1769, 1770/14 ETC. 24 END INSTEAD OF ADOPTING COST OR REALIZABLE VALUE FO LLOWED BY THE ASSESSEE. 12. THIS ISSUE WAS ALREADY CONSIDERED IN ITA NOS.17 73 TO 1776/MDS/2014. ON THE SAME REASONING, WE DISMISS T HIS GROUND OF APPEAL. 13. THE NEXT GROUND IN ITA NO.1780/MDS/14 IS WITH R EGARD TO DISALLOWANCE OF LEASE COMMITMENT CHARGES OF ` 15 LAKHS AND DONATIONS OF ` 40,024/-. 14. WE HAVE DEALT WITH THIS ISSUE IN ITA NO.1776/MD S/2014. FOR THE REASONS STATED IN PARAGRAPH 9.3 AND 9.4 ABO VE, WE REJECT THIS GROUND OF APPEAL. 15. THE NEXT GROUND IN ITA NO.1780/MDS/2014 IS WITH REGARD TO ADDITION TOWARDS STOCK DISCREPANCY. 16. THE FACTS OF THE CASE ARE THAT DURING THE COURS E OF SEARCH U/S.132 OF THE IT ACT, SEPARATE PHYSICAL INVENTORY OF STOCK FOUND IN THE BUSINESS PREMISES AT CHENNAI AND AT TRIUNELV ELI ON 17.2.2009. THE INVENTORY TAKEN WAS COMPARED WITH T HE STOCK AS PER BOOKS OF ACCOUNTS. THE AO FOUND VARIATIONS IN THE INVENTORY OF THE STOCK FOUND AS PER BOOKS OF ACCOUNTS AND THE PHYSICAL VERIFICATION. - - ITA 1769, 1770/14 ETC. 25 16.1 IN THE LIGHT OF THE ABOVE, THE DEFICIT STOC K OF ` 6,51,650/-, AS ARRIVED AT ON THE DATE OF SEARCH AT CHENNAI AND AS CONFIRMED BY LETTER DATED 10.8.2009, IS TREATED AS UNRECORDED SALES IN THE BOOKS AND BROUGHT TO TAX. SINCE, THE GOODS ARE SOL D AT A PROFIT AND THE GROSS PROFIT MARGIN IS 44.86%, THE VALUE OF UNRECORDED SALES IS DETERMINED AT 144.86% OF THE DEFICIT STOCK QUANTIFIED AS ABOVE. THEREFORE, THE ADDITION CALLED FOR ON THIS SCORE IS ` 9,43,980/-. 16.2 THE CLAIM OF THE ASSESSEE WITH REGARD TO ST OCK FOUND AT TIRUNELVELI WHICH RESULTED IN THE EXCESS STOCK BEIN G DETERMINED AT ` 1,11,827/- IS NOT CONSIDERED ON THE BASIS OF THE U NIFORM STAND TAKEN WITH RESPECT TO THE DISCREPANCY OF STOC K FOUND ON THE DAY OF SEARCH WITH REGARD TO ALL THE CONCERNS TREAT ING THE SUBSEQUENT CLAIMS AS NOT VERIFIABLE. THEREFORE, TH E EXCESS STOCK FOUND AT CHENNAI OF ` 1,05,531/- AND QUANTIFIED ON THE DATE OF SEARCH IS TREATED AS THE UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S.69B AND BROUGHT TO TAX BY THE AO. AGGRIEVED, T HE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 17. BEFORE THE CIT(APPEALS), THE ASSESSEE CONTENDED THAT THE AO FAILED TO APPRECIATE THE FACT THAT IN VIEW O F THE SERIOUS - - ITA 1769, 1770/14 ETC. 26 DEFICIENCIES IN THE STOCK TAKING EXERCISE BY THE SE ARCH PARTY, WHICH HAD RESULTED VARIATIONS BETWEEN PHYSICAL INVE NTORY AS PER THE SEARCH PARTY AND THE BOOK STOCK AS CONFIRMED BY THE ASSESSEE ON THE DATE OF SEARCH, IT IS IMPOSSIBLE TO RECONCILE THE BOOK STOCK WITH INVENTORY DETAILS PROVIDED BY THE S EARCH PARTY. THE ASSESSEE FURTHER CONTENDED BEFORE THE CIT(APPEA LS) THAT THE AO IS NOT JUSTIFIED IN REJECTING THE ARGUMENTS ADVANCED THROUGH STOCK RECONCILIATION PROVIDED BY THE ASSESS EE WHICH HAD ESTABLISHED THAT THE VARIATION WAS LESS THAN 0.6% O F THE TOTAL INVENTORY OF THE ASSESSEE, MERELY FOR THE REASON TH AT IT WAS NOT FURNISHED IMMEDIATELY AFTER THE SEARCH. AFTER CONS IDERING THE OBSERVATIONS AND THE COMMENTS IN THE REMAND REPORT, ASSESSEES CONTENTIONS AND RESPONSE TO THE AOS REM AND REPORT, THE CIT(APPEALS) HELD THAT THE AO HAS ARRIVED AT TH E CONCLUSIONS IN THE ASSESSMENT ORDER AFTER ANALYSING THE FACTS A ND MATERIALS AVAILABLE ON RECORD. THE CIT(APPEALS) HAS NOT ACCE PTED THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT AS T HE STOCK INVENTORY WAS TAKEN WITH THE ASSISTANCE OF THE STAF F OF THE ASSESSEE AND SUBSEQUENTLY THE SAME WAS VERIFIED WIT H THE MANAGING PARTNER OF THE ASSESSEE FIRM. FURTHER, TH E - - ITA 1769, 1770/14 ETC. 27 CIT(APPEALS) OBSERVED THAT THE ASSESSEE IS, AT THIS JUNCTURE, SEEKING FOR THE COMPLETE DETAILS OF DATA REGARDING THE PHYSICAL STOCK WHICH SHOWS THE ASSESSEES DELAYING TACTICS I N KEEPING THE ISSUE PROLONGED. ACCORDINGLY, HE CONFIRMED THE ADD ITION OF ` 9,43,980/- TOWARDS UNRECORDED SALES AND SUSTAINED T HE ADDITION MADE U/S.69B TOWARDS EXCESS STOCK OF ` 1,05,531/-. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORDS THAT THERE WAS DIFFERENCE BETWEEN PHYSICAL CLOSING STOCK AND BOOKS OF ACCOUNT S. THE MANAGING PARTNER, SHRI SHIVA KUMAR ADMITTED THAT TH ERE WAS DEFICIT STOCK OF ` 1,27,64,281/- AS A WHOLE. HE FURTHER ADMITTED THAT THERE WAS AN ERROR IN VALUATION OF STOCK IN TH EIR SYSTEM FOR SOME PRODUCTS AND OFFERED THE DIFFERENCE IN STOCK V ALUE FOR TAXATION AS INCOME IN THE FINANCIAL YEAR RELEVANT T O THE ASSESSMENT YEAR. THE ASSESSEE ADMITTED THE DIFFERE NCE IN STOCK VALUE AT THE TIME OF SEARCH ACTION ON 17.2.2009 IN CHENNAI AND TIRUNELVELI. IT IS ALSO BROUGHT ON RECORD BY THE A O THAT SHRI PONANAND IN HIS STATEMENT ON 19.2.2009 ADMITTED THE EXCESS STOCK FOUND AS COMPARED TO THE STOCK AS PER BOOKS O F ACCOUNT - - ITA 1769, 1770/14 ETC. 28 ON THE DATE OF SEARCH WHICH STOOD AT ` 1,96,21,842/- AND IN ANSWER TO QUESTION NO.10, HE STATED THAT THERE ARE DUPLICATE ENTRIES WHILE TAKING THE STOCK. THE DETAILS OF BOO K STOCK SUBMITTED BY THE ASSESSEE DURING THE COURSE OF SEAR CH OPERATION HAVE BEEN DOUBLE CHECKED AND IT IS CORRECT. SIMILA RLY, THE PHYSICAL STOCK OF GOODS LYING IN VANNARAPETTAI SHOP AND ALSO TOWN SHOP WAS TAKEN WITH THE ACTIVE PARTICIPATION O F THEIR STAFF UNDER THEIR OWN SUPERVISION AND VALUATION THEREOF H AS ALSO BEEN CHECKED, THE SAME IS FOUND TO BE CORRECT. HENCE, S UBJECT TO ANY DUPLICATE ENTRIES OR CHANGE IN THE DATES AS STATED ABOVE, HE ACCEPTED THE VALUE OF EXCESS STOCK FOUND DURING THE COURSE OF SEARCH TO BE OUT OF THEIR UNRECORDED INCOME AND AGR EED TO PAY THE INCOME-TAX DUE ON SUCH INCOME FOR THE YEAR. DU RING THE COURSE OF INVESTIGATION VIDE LETTER DATED 10.8.2009 SUBMITTED TO THE ADIT (INVESTIGATION) BY SRI SHIVA KUMAR, NO SPE CIFIC ARGUMENTS RELATING TO THE FIGURES OF STOCK WERE RAI SED EXCEPT POINTING OUT THAT THE PHYSICAL STOCK AT TIRUNELVELI WAS MENTIONED IN THE TABULATION REFLECTING THE PHYSICAL STOCK FOR THE GROUP AS A WHOLE. THE SAID MISTAKE WAS RECTIFIED BY THE AO WH ILE PASSING THE ORDER. THE AO AFTER CONSIDERING THE ENTIRE FAC TS OF THE CASE, - - ITA 1769, 1770/14 ETC. 29 ADDED ` 9,43,980/- AS DISCREPANCY FOUND IN THE STOCK FOR T HIS ASSESSMENT YEAR AT CHENNAI BRANCH AND DETERMINED AT ` 1,11,827/- AT TIRUNELVELI BRANCH AND THE SAME WAS B ROUGHT TO TAX AS UNRECORDED SALES. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES. WE REJECT THI S GROUND OF APPEAL IN ITA NO. 1780/MDS/2014. SIMILARLY, WE REJ ECT THIS GROUND IN ITA NO.1776/MDS/ 2014 ALSO ON THE SAME RE ASONING. 19. NOW, WE TAKE UP DEPARTMENTAL APPEALS IN ITA NOS . 1875, 1876, 1877 & 1878/MDS/2014. THE FIRST COMMON GROUN D IN THESE APPEALS IS WITH REGARD TO ALLOWING THE CLAIM OF REPAIRS ON HIRED BUILDING AS REVENUE EXPENDITURE THOUGH IT IS CAPITAL EXPENDITURE. 20. THE FACTS OF THE ISSUE AS NARRATED IN ITA NO.1875/MDS/2014 ARE THAT FOR THE YEAR ENDED 31.3.2 008, UNDER THE HEAD REPAIRS AND MAINTENANCE, THE ASSESSEE DE BITED ` 1,44,66,189/- WITH NARRATION REPAIRS AND MACHINERY . DURING THE COURSE OF ASSESSMENT, IT WAS SUBMITTED BEFORE THE AO THAT OUT OF THE ABOVE EXPENDITURE, ` 1,40,04,343/- WAS INCURRED ON ACCOUNT OF THE NEW COMMERCIAL CONSTRUCTED AT VANNARAPETTAI, TI RUNELVELI - - ITA 1769, 1770/14 ETC. 30 DURING THE RELEVANT PREVIOUS YEAR AND TAKEN ON LEAS E BY THE ASSESSEE. WHILE EXAMINING THE BOOKS OF ACCOUNTS, T HE AO FOUND THAT THE ASSESSEE HAD ACCUMULATED EXPENSES UNDER TH E HEAD CAPITAL WORK IN PROGRESS AMOUNTING TO ` 1,40,04,343/- WITH NARRATION REPAIRS BOOKED FROM CAPITAL WORK IN PROG RESS. THE SAID ACCOUNT WAS CLOSED WITH TRANSFER TO REPAIRS ET MAI NTENANCE A/C. WITH NARRATION REPAIRS BOOKED FOR VANNARAPETTAI AS PER FINAL BILL FOR INTERIOR FIT OUT WORKS CARRIED OUT BY PARANKAR KAL E CONSTRUCTION PVT. LTD. THE SUPPORTING INVOICE WAS CALLED FOR. THE INVOICE IS DATED 15.3.2008 AND THE BILL OF QUANTITY (BOQ) ATTACHED D ESCRIBES IN DETAIL THE NATURE OF THE WORK CARRIED OUT WITH THE RATES AGREED. THE AO POINTED OUT THAT THE ABOVE CAPITAL EXPENDITURE B ROUGHT ENDURING BENEFIT TO THE ASSESSEE AND DISALLOWED THE CLAIM OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT(APPEALS). 21. THE ASSESSEE CONTENDED BEFORE THE CIT(APPEA LS) THAT THE ABOVE EXPENDITURE INCURRED DID NOT RESULT IN CREATI ON OF ANY NEW ASSET OR VALUE OF ENDURING NATURE. FURTHER, HE CON TENDED THAT THE SAID EXPENDITURE WAS TOWARDS CURRENT REPAIRS. BE FORE THE CIT(APPEALS), THE ASSESSEE FURTHER CONTENDED THAT THERE EXISTED A BUILDING, WHICH WAS TAKEN ON LEASE, THE ASSESSEE (T HE LESSEE) WAS - - ITA 1769, 1770/14 ETC. 31 ALLOWED TO CARRY OUT SUITABLE MODIFICATION TO SUIT ITS BUSINESS REQUIREMENTS AND THOSE EXPENDITURE CANNOT BE TERMED AS CAPITAL EXPENDITURE. THE CIT(APPEALS) OBSERVED THAT THE A SSESSEE CONSTRUCTED A WARM SHELL INTO A SHOPPING COMPLEX, LEASED FOR A LONGER TIME (20 YEARS). THEREFORE, THE EXPENDITURE SO INCURRED IS CAPITAL IN NATURE, SINCE THE STRUCTURE I.E. A SHOPP ING COMPLEX, IS AN ENDURING ASSET. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING CASE LAW IN THE CASE OF UTTAT BHARAT EXCHANGE LTD. V. CIT (PUNJAB) 55 ITR 550, WHERE IT IS HELD THAT CONSTRUCTION OF TEMPORARY STRUCTURE IN A LEASED (2 YEARS) PROPERTY CAPITAL EXPENDITURE SINCE THE STRUCTURE IS AN ENDURING ASSET. HOWEVER, THE CIT(APPEALS) OBSERVED THAT ON IDENTICAL ISSUE FOR THE ASSESSMENT YEAR 2003-04, CHENNAI BENCH OF THE TRIBUNAL HAS HELD AGAINST THE ORDER U/S.263 PASSED BY THE CIT THAT THE SAID EXPENDITURE IS REVE NUE IN NATURE. FURTHER, THE CIT(APPEALS) OBSERVED THAT IN THIS RE GARD, THE TRIBUNAL HAS FOLLOWED THE DECISION RENDERED BY THE JURISDICT IONAL HIGH COURT IN THE CASE OF HARI VIGNESH MOTORS PVT. LTD. (282 I TR 338). ACCORDINGLY, FOLLOWING THE DECISION OF THE TRIBUNAL , THE CIT(APPEALS) DELETED THE ADDITION OF ` 1,33,04,126/- MADE TO THE RETURNED INCOME. AGAINST THIS, THE REVENUE IS IN A PPEAL BEFORE US. - - ITA 1769, 1770/14 ETC. 32 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUN AL IN ITA NO.1384/MDS/13 DATED 29.5.2016, WHEREIN THE TRIBUNA L HAS HELD AS FOLLOWS : 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN THE BUILDI NG ON LEASEHOLD ON WHICH THE ASSESSEE CARRIED ON INTERIOR WORK AND CLAIMED AS REVENUE EXPENDITURE. THE SAME WAS REJECTED BY THE CIT(A). THE LD. DR CONTENDED THAT T HE ASSESSEE MADE NEW ADDITION THE LEASED BUILDING AND IT IS NOT THE CASE OF RENOVATION OF THE LEASED BUILDING O R IMPROVEMENT OF THE LEASED BUILDING AS IN THE CASE O F JOY ALUKKAS PVT. LTD., CITED SUPRA AS HELD BY THE KERAL A HIGH COURT. FOR SETTLING THE CONTROVERSY, WE HAVE TO GO THROUGH THE EXPLANATION 1 TO SEC. 32(1) OF THE ACT WHICH WA S INSERTED BY THE TAXATION LAWS (AMENDMENT AND MISCELLANEOUS PROVISIONS) ACT, 1986 WITH EFFECT FROM 1.4.1988 WHI CH DEALS WITH THE SITUATION WHERE THE EXPENDITURE HAS BEEN I NCURRED BY THE ASSESSEE ON CONSTRUCTION OF ANY STRUCTURE ON LEASEHOLD PREMISES. THE EXPLANATION 1 IS REPRODUCED HEREWITH BELOW: EXPLANATION 1. WHERE THE BUSINESS OR PROFESSION IS CARRIED ON IN A BUILDING NOT OWNED BY HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF BUSINESS OR PROFESSION ON THE CONSTRUCT ION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATIO N TO, AND BY WAY OF RENOVATION OR EXTENSION OF IMPROVEMENT TO, B UILDING THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A BUILDING OWNED BY THE ASSESS EE. 8. TO FALL WITHIN THE AMBIT OF EXPLANATION 1 QUES TIONS WHICH ARE TO BE ANSWERED ARE: (I) WHETHER THE ASSESSEE IS CARRYING ON BUSINESS OR PROFESSION IN A LEASED BUILDING OR OTHE R - - ITA 1769, 1770/14 ETC. 33 RIGHTS OF OCCUPANCY? (II) WHETHER THE ASSESSEE HAS INCURRED ANY CAPITAL EXPENDITURE FOR THE PURPOSE OF BUSINESS ON THE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO AND BY WAY OF RENOVATION OR EXTENSIO N OR IMPROVEMENT IN THE BUILDING. 9. IF THE ANSWER TO THE AFOREMENTIONED QUESTION S IS IN AFFIRMATIVE, THE ASSESSEE FALLS WITHIN THE PURVIEW OF EXPLANATION 1 TO SEC. 32(1). IN THE INSTANT CASE, I T IS AN ADMITTED FACT THAT THE ASSESSEE HAS TAKEN BUILDING ON LEASE FOR SETTING UP OF BAKERY. IT IS ALSO UNDISPUTED THA T THE ASSESSEE HAS CARRIED ON INTERIOR WORK IN THE LEASED BUILDING. THESE INTERIOR DECORATION WORKS CARRIED OUT BY THE ASSESSEE IF PUT ON TO THE TEST OF EXPLANATION 1 WOULD SHOW THAT THE CONSTRUCTION MADE BY THE ASSESSEE ON THE LEASED OUT PREMISES WOULD AMOUNT TO CAPITAL EXPENDITURE. THE ASSESSEE IN ORDER TO SUPPORT HIS CASE HAS RELIED ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF T VS LEAN LOGISTICS LTD. (SUPRA). IN THE SAID CASE, THE ASSES SEE HAD CONSTRUCTED A BUILDING ON THE LEASED LAND FOR THE B USINESS ADVANTAGE. THE COURT HELD THAT THE ENTIRE COST OF CONSTRUCTION IS ADMISSIBLE AS REVENUE EXPENDITURE. EXPLANATION 1 CATEGORICALLY STATES THAT THE BUSINES S OR PROFESSION IS CARRIED ON IN A LEASED BUILDING AND N OT ON LAND. THE HIGH COURT IN PARA 4.4 OF THE JUDGMENT FURTHER HELD AS UNDER:- 4.4 WHAT CONSTITUTES A CAPITAL EXPENDITURE AND WHA T DOES NOT, TO ATTRACT EXPLN. 1 TO SECTION 32(1) OF T HE ACT DEPENDS UPON THE CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR IN RELATION TO AND BY WAY OF RENOVATION, EXTENSION OR IMPROVEMENT TO THE BUILDIN G WHICH IS PUT UP IN A BUILDING TAKEN ON LEASE BY HIM FOR CARRYING ON HIS BUSINESS AND PROFESSION OF THE ASSESSEE, BUT NOT IN A CASE OF CONSTRUCTION OF ANY STRUCTURE OR DOING ANY WORK OR RELATION TO WHERE SUCH BUILDING IS PUT UP/CONSTRUCTED FOR THE PURPOSE OF BUSINESS OR THE PROFESSION OF THE ASSESSEE IN A - - ITA 1769, 1770/14 ETC. 34 LAND TAKEN ON LEASE BY THE ASSESSEE. 10. THUS IT IS CLEAR THAT THE RATIO LAID DOWN B Y THE MADRAS HIGH COURT IN THE SAID JUDGMENT DOES NOT SUPPORT TH E CASE OF THE ASSESSEE. 11. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN BUILDING ON LEASE AND MADE CERTAIN INTERIOR DECORATION. IT I S THE CASE THAT THE ASSESSE HAS BEAUTIFIED THE LEASED BUILDING . THE HIGH COURT HAS FURTHER HELD IN THE AFORESAID CASE T HAT THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR OF THE LEGISLATIVE INTENT AND EVEN ASSUMING THERE IS A DEFECT OR ANY OMISSION IN THE WORDS USED IN THE LEGISLATURE, THE COURT CANNOT CORRECT OR MAKE UP THE DEFICIENCY, ESPECIALL Y WHEN A LITERAL READING THEREOF PRODUCES AN INTELLIGIBLE RE SULT AN ANY DEPARTURE FROM THE LITERAL RULE WOULD REALLY BE AME NDING THE LAW IN THE GARB OF INTERPRETATION, WHICH IS NOT PER MISSIBLE AND WHICH WOULD BE DESTRUCTIVE OF JUDICIAL DISCIPLINE. 12. THE SUPREME COURT OF INDIA IN THE CASE OF MADRAS AUTO SERVICE (P) LTD., 233 ITR 468 WHILE DEALING WI TH A SIMILAR CONTROVERSY HAS OBSERVED AS UNDER: 5 IN ORDER TO DECIDE WHETHER THIS EXPENDITURE IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE, ONE HAS TO LOOK AT THE EXPENDITURE FROM A COMMERCIAL POINT OF VIEW. WHAT ADVANTAGE DID THE ASSESSEE GET BY CONSTRUCTING A BUILDING WHICH BELONGED TO SOMEBODY ELSE AND SPENDING MONEY FOR SUCH RECONSTRUCTION? THE ASSESSEE GOT A LONG LEASE OF A NEWLY CONSTRUCTE D BUILDING SUITABLE TO ITS OWN BUSINESS AT A VERY CONCESSIONAL RENT. THE EXPENDITURE THEREFORE, WAS MADE IN ORDER TO SECURE A LONG LEASE OF NEW AND MOR E SUITABLE BUSINESS PREMISES AT A LOWER RENT. IN OTHE R WORDS, THE ASSESSEE MADE SUBSTANTIAL SAVINGS IN IN MONTHLY RENT FOR A PERIOD OF 39 YEARS BY EXPENDING THESE AMOUNTS. THE SAVING IN EXPENDITURE WAS A SAVING IN REVENUE EXPENDITURE IN THE FORM OF RENT. WHATEVER SUBSTITUTES FOR REVENUE EXPENDITURE SHOULD NORMALLY BE CONSIDERED AS REVENUE EXPENDITURE. - - ITA 1769, 1770/14 ETC. 35 MOREOVER, ASSESSEE IN THE PRESENT CASE DID NOT GET ANY CAPITAL ASSET BY SPENDING THE SAID AMOUNTS. THE ASSESSEE THEREFORE COULD NOT HAVE CLAIMED ANY DEPRECIATION. LOOKING TO THE NATURE OF THE ADVANTAG E WHICH THE ASSESSEE OBTAINED IN A COMMERCIAL SENSE, THE EXPENDITURE APPEARS TO BE REVENUE EXPENDITURE. 13. THEREAFTER, THE APEX COURT REFERRING TO SEVER AL CASES DECIDED HELD AS UNDER: 11.ALL THESE CASES HAVE LOOKED UPON EXPENDITURE WHICH DID BRING ABOUT SOME KIND OF AN ENDURING BENEFIT TO THE COMPANY AS A REVENUE EXPENDITURE WHEN THE EXPENDITURE DID NOT BRING INTO EXISTENCE ANY CAPITAL ASSET FOR THE COMPANY. THE ASSET WHICH WAS CREATED BELONGED TO SOMEBODY ELSE AND THE COMPANY DERIVED AN ENDURING BUSINESS ADVANTAGE BY EXPENDING THE AMOUNT. IN ALL THESE CASES, THE EXPENSES HAVE BEEN LOOKED UPON AS HAVING BEEN MADE FOR THE PURPOSE OF CONDUCTING THE BUSINESS OF THE ASSESSEE MORE PROFITABLY OR MORE SUCCESSFULLY. IN THE PRESENT CASE ALSO SINCE THE ASSET CREATED BY SPENDING THE SAID AMOUNTS DID NOT BELONG TO THE ASSESSEE BUT THE ASSESSEE GOT THE BUSINESS ADVANTAGE OF USING MODERN PREMISES AT A LOW RENT, THUS SAVING CONSIDERABLE REVENUE EXPENDITURE FOR THE NEXT 39 YEARS, BOTH THE TRIBUNAL AS WELL AS THE HIGH COURT HAVE RIGHTLY COME TO THE CONCLUSION THAT THE EXPENDITURE SHOULD BE LOOKED UPON AS REVENUE EXPENDITURE. 14. FROM THE ABOVE JUDGMENT, WE CAN CONCLUDE THAT IT IS ESSENTIAL THAT THE EXPENDITURE INCURRED ON THE CONS TRUCTION OF ANY STRUCTURE ON THE LEASED PREMISES SHOULD RESULT IN ENDURING BENEFIT. THAT ANY EXPENDITURE INCURRED FOR CIVIL WORK BY A LESSEE IN RESPECT OF THE LEASE PREMISES, WITHOUT ANY FURTHER PROOF CANNOT BE SAID TO BE CAPITAL EXPE NDITURE OR REVENUE EXPENDITURE. IN ORDER TO FIND OUT THE NATU RE OF EXPENDITURE, IT IS NECESSARY TO FIND OUT THE NATURE OF CONSTRUCTION PUT UP, THE PURPOSE OF CONSTRUCTION/RE NOVATION - - ITA 1769, 1770/14 ETC. 36 AND THE USE TO WHICH THE CONSTRUCTION PUT UP AND AL SO IF IT IS A CASE OF REPAIR, REPLACEMENT, ADDITION OR IMPROVEM ENT HAS TO BE GONE INTO. IT IS ONLY ON THE AFORESAID MATER IAL, KEEPING IN MIND THE PRINCIPLES ENUNCIATED IN THE JUDGMENTS BY THE SUPREME COURT AND KEEPING IN MIND SECTION 37 AND SE CTION 32 OF THE ACT, THAT ONE HAS TO DETERMINE WHETHER TH E EXPENDITURE IS REVENUE EXPENDITURE OR CAPITAL EXPEN DITURE. WHAT WOULD APPLY TO CIVIL WORK EQUALLY APPLIES TO E LECTRICAL WORK OR INTERIOR DECORATION. THE ASSESSEE HAD NOT STATED THE NATURE OF CIVIL WORKS CONSTRUCTED, THE NATURE O F INTERIOR DECORATION MADE TO THE LEASEHOLD PREMISES AND ALSO THE NATURE OF ELECTRICAL WORK UNDERTAKEN. IN THE ABSEN CE OF THAT MATERIAL AND WITHOUT PROPER APPLICATION OF MIND, TH E ASSESSING AUTHORITY PROCEEDED ON THE FOOTING THAT T HE EXPENDITURE CONSTITUTED CAPITAL EXPENDITURE. 15. IN VIEW OF THE ABOVE, WE REMIT THE ISSUE I N DISPUTE TO AO TO CONSIDER WHETHER THE EXPENDITURE IS REVENUE O R CAPITAL IN NATURE AND DECIDE AFRESH. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TH E TRIBUNAL, WE REMIT THIS ISSUE TO THE AO FOR FRESH CONSIDERATION. 23. IN THE RESULT, THE APPEALS OF THE REVENUE IN I TA NOS.1875 TO 1878/MDS/2014 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 24. ITA NOS. 1769 TO 1772/MDS/2014 : THE FIRST GROU ND IN ITA NO.1769/MDS/2014 IS WITH REGARD TO VALIDITY OF ASSE SSMENT IN THE ABSENCE OF INCRIMINATING MATERIAL, WHICH IS AN ADDI TIONAL GROUND, WHERE THE ASSESSEE STATED THAT THE ASSESSMENT YEAR UNDER CONSIDERATION (2006-07), WOULD FALL UNDER THE CATEG ORY OF COMPLETED ASSESSMENT I.E. ASSESSMENTS ALREADY COM PLETED - - ITA 1769, 1770/14 ETC. 37 WOULD NOT BE ABATED BY THE PROVISIONS OF SEC.153A O F THE ACT. THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED IN THE C ASE OF COMPLETED ASSESSMENT, THE ADDITION CAN BE MADE TO T HE INCOME ALREADY ASSESSED ONLY ON THE BASIS OF ANY INCRIMINA TING MATERIAL DISCOVERED DURING THE COURSE OF SEARCH. THE CIT(AP PEALS) OUGHT TO HAVE APPRECIATED THE DEPARTMENT DID NOT UNEARTH ANY INCRIMINATING MATERIAL RELATING TO THE YEAR UNDER C ONSIDERATION WARRANTING DISTURBANCE OF THE INCOME ALREADY DETERM INED IN ORDER U/S.143(3) OF THE ACT. 25. THE ASSESSEE FILED A PETITION FOR ADDITIONAL GR OUND STATING THAT THIS IS A LEGAL ISSUE AND FAILED TO RAISE THIS GROUND BEFORE THE LOWER AUTHORITIES. SINCE THE ISSUE IS A LEGAL ONE AND THE ASSESSEE HAS GIVEN REASONABLE EXPLANATION FOR NOT R AISING THE ISSUE BEFORE THE LOWER AUTHORITIES, THIS GROUND IS ADMITTED. 26. IN THIS CASE, THERE WAS A SEARCH U/S.132 OF THE ACT ON 18.2.2009 AND NOTICE U/S.153A WAS ISSUED TO THE ASS ESSEE ON 23.2.2010. ON EARLIER OCCASION, REGULAR ASSESSMENT WAS MADE U/S.143(3) OF THE ACT ON 30.12.2008, WHEREIN AD-HOC ADDITION OF ` 40,000/- WAS MADE ON ACCOUNT OF EXPENDITURE BY WAY OF SUNDRY SUPPLY TO STAFF FOUND TO HAVE BEEN VOUCHED BY SELF- MADE - - ITA 1769, 1770/14 ETC. 38 VOUCHERS. WHILE COMPLETING THE ASSESSMENT, THE FOL LOWING ADDITIONS HAVE BEEN MADE BY THE AO: 1. UNEXPLAINED EXPENDITURE ` 1,84,000/- 2. DEPRECIATION ON COMPUTER SOFTWARE ` 4,608/ 3. PROVISION FOR SLOW MOVING & NON-MOVING STOCKS ` 6 ,23,727/- HOWEVER, WHILE MAKING THE ABOVE ADDITIONS, THE AO H AS NOT ESTABLISHED THAT THERE IS INCRIMINATING MATERIAL DI SCOVERED DURING THE COURSE OF SEARCH. BEING SO, IN OUR OPINION, WH EN THE ORIGINAL ASSESSMENT HAS BEEN COMPLETED U/S.143(3), THE ADDIT ION CAN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND D URING THE COURSE OF SEARCH. ADMITTEDLY, IN THIS CASE, THERE IS NO MENTION OF ANY INCRIMINATING MATERIAL DISCOVERED DURING THE CO URSE OF SEARCH WARRANTING ADDITION, PLACING RELIANCE ON THE ORDER OF THE SPECIAL BENCH IN THE CASE OF CARGO GLOBAL LOGISTICS LTD. VS . DCIT (137 ITD 287), WE ARE INCLINED TO UPHOLD THE ARGUMENT OF THE LD. AR. ACCORDINGLY, THIS GROUND IS ALLOWED. SINCE, WE HAV E ADJUDICATED THE MAIN ISSUE, I.E. ADDITIONAL GROUND IN FAVOUR OF THE ASSESSEE, WE REFRAIN FROM DECIDING THE OTHER ISSUES RAISED BY THE ASSESSEE. ACCORDINGLY, ITA NO.1769/MDS/2014 IS PARTLY ALLOWED . 26. THE COMMON GROUND IN ITA NOS.1770 TO 1772/M DS/2014 IS - - ITA 1769, 1770/14 ETC. 39 WITH REGARD TO CONFIRMING THE ADDITION TO THE CLOSI NG STOCK ADOPTING COST OF GOODS AT THE YEAR END INSTEAD OF A DOPTING COST OR REALIZABLE VALUE FOLLOWED BY THE ASSESSEE. SIMI LAR ISSUE WAS CONSIDERED IN ITA NOS.1773 TO 1776/MDS/2014 IN THE ABOVE PARAGRAPHS AND FOR THE REASONS STATED THEREIN, WE D ISMISS THIS GROUND OF APPEAL IN ITA NOS. 1770 TO 1772/MDS/2014. 27. THE NEXT GROUND IN ITA NO.1770/MDS/2014 IS WITH REGARD TO CONFIRMING THE ADDITION OF ` 2,31,500/- AS UNEXPLAINED EXPENDITURE U/S.69C OF THE ACT. 28. THE FACTS OF THE ISSUE ARE THAT THE AO HAS ESTI MATED THE PROBABLE EXPENDITURE OF THE ASSESSEE AND ON VERIFI CATION, FOUND THAT THE WITHDRAWALS MADE BY THE ASSESSEE TOWARDS EXPENDITURE WERE INSUFFICIENT AND HENCE, THE AO ESTIMATED THE D EFICIENCY OF DRAWINGS AT ` 2,31,500/- THEREBY TREATED THE SAME U/S.69C OF THE ACT. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPE AL BEFORE THE CIT(APPEALS). 29. BEFORE THE CIT(APPEALS), THE ASSESSEE CONTENDED THAT THE AO IS NOT JUSTIFIED IN REJECTING THE CASH BALAN CE SEIZED ON THE DATE OF SEARCH IN THE LIGHT OF THE CASH FLOW STATEM ENT FURNISHED TO HIM TO SUPPORT THE FACT THAT SUCH BALANCE REPRESENT ED THE SURPLUS - - ITA 1769, 1770/14 ETC. 40 OUT OF POOR CASH DRAWINGS OF THE ASSESSEE. THE ASS ESSEE FURTHER CONTENDED THAT IN THE ABSENCE OF ANY MATERI AL EVIDENCE TO THE CONTRARY THE AO SHOULD HAVE ACCEPTED THE FACT T HAT HE WOULD BE IN POSITION TO ESTIMATE THE PERSONAL AND DOMESTI C EXPENSES OF THE ASSESSEE. FURTHER, IT WAS CONTENDED BY THE A SSESSEE BEFORE THE CIT(APPEALS) THAT THE AO IS NOT JUSTIFIE D IN ESCALATING THE PERSONAL AND DOMESTIC EXPENSES @ 15% EVERY YEAR , ACCORDING TO GOVERNMENT STATISTICS WAS BELOW 8% AND INDEXATION FOR CAPITAL GAINS COMPUTATION WAS ABOUT 3%. ACCORD ING TO THE ASSESSEE, THE AO IS NOT JUSTIFIED IN REJECTING THE OPENING CASH BALANCE OF ` 4,80,000/- ON 1/4/2002, IF HE HAS TAKEN A REASONABLE NOTICE OF THE SOCIAL STANDING OF THE ASS ESSEE. IT WAS ALSO CONTENDED BY THE ASSESSEE BEFORE THE CIT(APPEA LS) THAT THE AO SHOULD HAVE GIVEN DUE ALLOWANCE FOR CASH GIF TS RECEIVED BY THE FAMILY MEMBERS FROM FRIENDS AND RELATIVES ON VARIOUS OCCASIONS ALL THROUGH THESE SEVEN ASSESSMENT YEARS, ESPECIALLY IN VIEW OF THE SOCIAL STANDING OF THE FAMILY. HOW EVER, THE CIT(APPEALS) HELD THAT THE AO IS JUSTIFIED IN MAKIN G THE SAID ADDITION OF ` 2,31,500/- AS THE EXPENDITURE PER MONTH SHOWN BY THE ASSESSEE DOES NOT REALISTICALLY REFLECT THE ACT UAL STATE OF - - ITA 1769, 1770/14 ETC. 41 AFFAIRS. ACCORDINGLY, HE DISMISSED THIS GROUND OF APPEAL. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 30. WE HAVE HEARD BOTH THE SIDES AND PERUSED T HE MATERIAL ON RECORD. THIS IS A SEARCH ASSESSMENT. THE AO MADE AN ESTIMATION OF DRAWINGS. WITHOUT ANY INCRIMINATING MATERIAL F OUND DURING THE SEARCH, THE AO CANNOT MAKE ADDITION ON ACCOUNT OF P OOR CASH DRAWINGS OF THE ASSESSEE. IN SUCH CIRCUMSTANCES, I T IS NOT POSSIBLE TO SUSTAIN THE ADDITION MADE BY THE AO AND CONFIRME D BY THE CIT(APPEALS). ACCORDINGLY, THE ADDITION IS DELETED AND THIS GROUND IS ALLOWED. 31. THE NEXT GROUND IN ITA NO.1771/MDS/2014 IS W ITH REGARD TO DISALLOWANCE OF EXPENDITURE TOWARDS REPAIRS OF ` 10,73,710/-. THE LOWER AUTHORITIES DISALLOWED THE CLAIM OF REPAIRS A T ` 10,73,710/- ON THE REASON THAT THE ASSESSEE HAS NOT PRODUCED SUPPO RTING BILLS. THE ASSESSEES CONTENTION IS THAT MOST OF THE PAYME NTS WERE MADE BY CHEQUE OR DRAFT AND THE SAME WAS ACCEPTED BY THE AO DURING THE COURSE OF REMAND PROCEEDINGS. THEREFORE, THE A SSESSEE CONTENDED THAT THE ADDITION TO BE DELETED. 32. AFTER GOING THROUGH THE RECORDS AND THE ORD ERS OF THE LOWER AUTHORITIES, WE FIND THAT THERE IS NO DISCUSSION BY THE CIT(APPEALS) - - ITA 1769, 1770/14 ETC. 42 REGARDING THIS ASPECT. SINCE MAIN ISSUE RELATING T O TREATMENT OF REPAIRS AND RENOVATION OF LEASED BUILDING HAS BEEN REMITTED BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION, THIS IS SUE IS ALSO REMITTED TO THE FILE OF THE AO FOR FRESH CONSIDERATION. THI S GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 33. THE NEXT ISSUE IN ITA NO.1772/MDS/2014 IS W ITH REGARD TO NON-ADJUDICATION OF GROUND RELATING TO CLAIM OF SET OFF OF BROUGHT FORWARD LOSS FOR THE AY 2008-09 OF ` 31,90,716/-. 34. AFTER CONSIDERING THE MATERIAL ON RECORD, W E FIND THAT THIS GROUND WAS RAISED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES, WHICH WAS NOT CONSIDERED BY THE CIT(APPEALS). THER EFORE, WE DIRECT THE AO TO CONSIDER THE SAME AFRESH. ACCORD INGLY, THIS ISSUE IS REMITTED BACK TO THE FILE OF THE AO FOR FRESH CO NSIDERATION, IF IT IS VALID TO BE DECIDED. 35. THE NEXT GROUND IN ITA NO.1772/MDS/14 IS WITH REGARD TO DISALLOWANCE OF LEASE COMMITMENT CHARGES. 36. WE HAVE CONSIDERED SIMILAR ISSUE IN ITA NO.1776/MDS/2014 AND FOR THE REASONS STATED THEREIN , WE DISMISS THIS GROUND OF APPEAL ALSO. 37. THE NEXT GROUND IN ITA NO.1772/MDS/14 IS WITH R EGARD TO - - ITA 1769, 1770/14 ETC. 43 CONFIRMING THE ADDITION ` 21,05,178/- TOWARDS UNRECORDED SALES AND ` 39,43,833/- TOWARDS UNEXPLAINED INVESTMENT. 38. THE FACTS OF THE ISSUE ARE THAT DURING THE COUR SE OF SEARCH U/S.132 OF THE ACT, SEPARATE PHYSICAL INVENTORY OF STOCK FOUND IN THE BUSINESS PREMISES AT CHENNAI AND AT TIRUNELVELI ON 17.2.2009. THE INVENTORY TAKEN WAS COMPARED TO THE STOCK AS PER BOOKS OF ACCOUNTS AND THE DEPARTMENT FOUND VARI ANCE IN THE INVENTORY AS PER BOOKS OF ACCOUNT AND THE PHYSICAL INVENTORY TAKEN. FURTHER, IT WAS FOUND THAT THE VALUE OF INV ENTORY TAKEN AT CHENNAI FOR THE GROUP AS A WHOLE WAS ` 18,87,41,177/-. HOWEVER, IT WAS FOUND THAT THE CLOSING STOCK AS PER BOOKS OF ACCOUNT AS ON 17.2.2009 FOR THE GROUP AS A WHOLE WA S ` 20,15,05,458/-. THUS, THE PHYSICAL INVENTORY OF S TOCK WAS FOUND TO BE LESS AS COMPARED TO THE STOCK AS PER BO OKS OF ACCOUNT TO THE AGGREGATE EXTENT OF ` 1,27,64,281/-. THEREFORE, MANAGING PARTNER WAS EXAMINED AND SWORN STATEMENT W AS RECORDED. THE AGGREGATE DEFICIT STOCK AS ARRIVED AT ON THE DATE OF SEARCH AND AS CONFIRMED BY THE LETTER DATED 10.8 .2009 IS TREATED AS UNRECORDED SALES IN THE BOOKS OF ACCOUNT AND BROUGHT TO TAX BY THE AO. ACCORDINGLY, THE ADDITION CALLE D FOR ON THIS - - ITA 1769, 1770/14 ETC. 44 CORE IS ` 38,22,956/-. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 39. AFTER CONSIDERING THE OBSERVATIONS AND THE COMM ENTS IN THE REMAND REPORT, ASSESSEES CONTENTIONS AND RESPO NSE TO THE AOS REMAND REPORT, THE CIT(APPEALS) HELD THAT THE AO HAS ARRIVED AT THE CONCLUSIONS IN THE ASSESSMENT ORDER AFTER ANALYSING THE FACTS AND MATERIALS AVAILABLE ON RECO RD. THE CIT(APPEALS) HAS NOT ACCEPTED THE CONTENTIONS OF T HE ASSESSEE ON THE GROUND THAT AS THE STOCK INVENTORY WAS TAKEN WITH THE ASSISTANCE OF THE STAFF OF THE ASSESSEE AND SUBSEQU ENTLY THE SAME WAS VERIFIED WITH THE MANAGING PARTNER OF THE ASSESSEE FIRM. FURTHER, HE OBSERVED THAT THE ASSESSEE IS, A T THIS JUNCTURE, SEEKING FOR THE COMPLETE DETAILS OF DATA REGARDING THE PHYSICAL STOCK WHICH SHOWS THE ASSESSEES DELAYING TACTICS I N KEEPING THE ISSUE PROLONGED. ACCORDINGLY, HE CONFIRMED THE ADD ITION OF ` 38,22,956/- TOWARDS UNRECORDED SALES. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 40. SIMILAR ISSUE WAS CONSIDERED IN ITA NO.1780/MDS /2014 IN THE ABOVE PARAGRAPHS. FOR THE REASONS GIVEN IN THA T CASE, WE REJECT THIS GROUND OF APPEAL. - - ITA 1769, 1770/14 ETC. 45 41. THE NEXT GROUND IN ITA NO.1772/MDS/2014 IS WITH REGARD TO CONFIRMING THE ADDITION OF ` 12,47,295/- AS UNEXPLAINED MONEY U/S.69A OF THE ACT. 42. REGARDING THIS ISSUE IS CONCERNED, THE AO OBSER VED AS UNDER: 14. DURING THE COURSE OF SEARCH IN THEIR RESIDENCE AT NO.29B, WATER TANK, SOUTH STREET, C-COLONY, PERUMALPURAM, TIRUNELVELI , CASH OF ` 16,68,610 FOUND WAS INVENTORISED AS PER ANNEXURE KS/CASH/F DATED 18.2.2009. OUT OF THE CAS H FOUND, ` 12.25 LAKHS WAS SEIZED AS PER ANN KS/CASH/S. 14.1 IN ANSWER TO Q.NO.4, WHEN THE ASSESSEE WAS ASK ED TO EXPLAIN THE SOURCE FOR THE CASH FOUND, HE CLAIMED THAT OUT OF THE CASH FOUND, RS.1,47,915 REPRESENTS CASH GIFTS RECEIVED ON THE OCCASION OF HIS SON SRI MANICKAVASAGAM. ANOT HER ` 2,43,600 BELONGED TO HIS DAUGHTER SMT. LAKSHMI AND `2 9,800 BELONGED TO HIS WIFE AND THE BALANCE BELONGED TO HIM. HE ALSO AGREED TO FURNISH THE NECESSARY DETAIL S AFTER VERIFYING THE ACCOUNTS. IN THE COURSE OF ASSESSMENT , TO OPPORTUNITY GIVEN THE WRITTEN RESPONSE IS AS UNDER: DURING THE SEARCH OPERATION CONDUCED AT MY RESIDENCE ON 18/02/09 OUT OF THE CASH OF ` 16.68 LACS, A SUM OF ` 12.25 LACS WAS SEIZED. AT THE TIME OF SEARCH ITSELF THE SEARCHING OFFICIALS WERE INFORMED THAT A SUM OF ` 1,47,915 REPRESENTS GIFTS RECEIVED ON THE OCCASION OF THE MARRIAGE OF MY SON N.MANICKAVASAGAM IN FEB'09 AND ` 2,43,600 BELONGED TO MY DAUGHTER SOWBAGYALAKSHMI WHO HAD COME ON A VISIT FROM US AND ` 29,800 MY WIFE'S DOMESTIC SAVINGS AND THE BALANCE OUT OF SAVINGS FROM MY DRAWINGS FROM VARIOUS CONCERNS AFTER MEETING FAMILY'S MONTHLY DOMESTIC EXPENSES. PURE CASH DRAWINGS OF MY WIFE, MY SON MANICKAVASAGAM AND SELF FROM VARIOUS SOURCES - - ITA 1769, 1770/14 ETC. 46 ARE PROVIDED IN THE ANNEXURE A PERUSAL OF WHICH WOULD SHOW THAT THERE ARE ADEQUATE DRAWINGS TO SUPPORT THE CASH AVAILABLE ON THAT DATE. 14.2 THE EXPLANATION HAS BEEN CONSIDERED. THE CLAIM OF CASH BELONGING TO OTHER PERSONS (WIFE AND DAUGHTER FROM USA) IS CONSIDERED AS THE SAID EXPLANATION HAS BEEN OFFERED ON THE DATE OF SEARCH. THE CLAIM OF CASH GIFTS IS ALSO CON CEDED IN VIEW OF THE PROXIMITY OF THE EVENT WITH THE DATE OF SEARCH. THE BALANCE OF RS12,47,295 IS SOUGHT TO BE EXPLAINED W ITH REFERENCE TO THE ESTIMATE OF FAMILY EXPENDITURE FOR THE AY 2003-04 TO 2009-10 AND THE ASSUMPTION OF IDLE CASH IN HAND OF RS.4,80,OOO. THE CLAIM OF INITIAL CASH IN HAND HAS BEEN REJECTED FOR THE DETAILED REASONS MENTIONED WHILE E XAMINING THE CLAIM OF PURE CASH DRAWINGS TO MEET OUT FAMILY EXPENDITURE. THEREFORE THE EXPLANATION ONCE AGAIN W HICH RESTS ON THE SAME HAS TO BE REJECTED SQUARELY. IN FACT, T HE ENTIRE EXPLANATION BASED ON A TABLE HAS BEEN AN EXERCISE B Y A PROCESS OF BACKWARD WORKING TO ACCOUNT FOR THE VALUABLES FOUND IN THE FORM OF CASH, JEWELLERY AND SILVER AND TO ACCOUNT FOR THE DAY TO DAY EXPENDITURE FOR FAMILY. THEREFORE, THE BALANCE CASH OF ` 12,47,295 IS TREATED AS UNEXPLAINED MONEY U/S 69A OF THE ACT AND ACCORDINGLY BROUGHT TO TAX CORRESPONDING TO THE YEAR IN WHICH THE ASSET SURFAC ED AS A RESULT OF SEARCH.' 43. ON APPEAL, THE CIT(APPEALS) AFTER CONSIDERING T HE OBSERVATIONS OF THE AO AND THE CONTENTIONS OF THE A SSESSEE HELD THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES FOR THE CASH FOUND AT THE RESIDENCE OF THE ASSESSEE WITH ANY COG ENT EVIDENCE BEFORE THE AO DURING THE SCRUTINY PROCEEDINGS, EVEN BEFORE HIM IN THE APPELLATE PROCEEDINGS. THEREFORE, HE CONFIR MED THE ADDITION OF ` 12,47,295/- MADE BY THE AO AND DISMISSED THE - - ITA 1769, 1770/14 ETC. 47 GROUND OF APPEAL. 44. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. THE CONTENTION OF THE ASSESSEE THAT O PENING CASH BALANCE TO BE GIVEN CREDIT AND TO BE RECOMPUTED UNE XPLAINED CASH, ACCORDINGLY. WE FIND MERIT IN THE ARGUMENT O F THE ASSESSEES COUNSEL. THEREFORE, WE DIRECT THE AO TO CONSIDER THE OPENING BALANCE OF THE ASSESSEE AND THEN DECIDE THE EXCESS CASH. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 45. THE NEXT GROUND IN ITA NO.1772/MDS/2014 IS WITH REGARD TO UNEXPLAINED JEWELLERY OF ` 29,92,775/-. AS SEEN FROM THE GROUNDS OF APPEAL BEFORE CIT(APPEALS) AS REPRODUCED BY THE CIT(APPEALS) IN PAGE NO.2 PARAGRAHS 4 TO 8, WE FIND NO PLACE FOR THAT GROUND. HOWEVER, WE FIND UNSIGNED COPY OF GRO UNDS ON OUR RECORDS, WHEREIN THE ASSESSEE RAISED UNEXPLAINED JE WELLERY U/S.69A OF THE ACT. BEING SO, WE ARE NOT IN A POSI TION TO UPHOLD THE ARGUMENT OF THE ASSESSEES COUNSEL. ACCORDING LY, THIS GROUND IS DISMISSED AND ITA NO 1769/MDS/14 IS PARTL Y ALLOWED AND ITA NOS. 1770 TO 1772/MDS/14 PARTLY ALLOWED FOR STATISTICAL PURPOSES. 46. IN ITA NOS.1872 & 1873/MDS/2014, THE COMMON GRO UND - - ITA 1769, 1770/14 ETC. 48 IS WITH REGARD TO THE TREATMENT GIVEN TO THE EXPEND ITURE INCURRED IN THE HIRED PREMISES TOWARDS RENOVATION AS REVENUE EXPENDITURE. THIS ISSUE CAME UP FOR CONSIDERATION IN ITA NOS.1875 TO 1878/MDS/2014, WHEREIN THE ISSUE WAS RE MITTED BACK TO THE FILE OF THE AO FOR RE-CONSIDERATION. A CCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE AO FOR RE-CONSI DERATION AND ITA NOS. 1872 & 1873/MDS/2014 ARE PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 48. IN THE RESULT, THE ASSESSEES APPEALS IN ITA NOS . 1773 TO 1776/MDS/2014, 1777 TO 1780/MDS/2014 ARE DISMISSED, ITA NOS. 1769/MDS/2014 IS PARTLY ALLOWED, 1770 TO 1772/ MDS/2014 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND REV ENUES APPEALS IN ITA NOS. 1872, 1873, 1875 TO 1878/MDS/2014 ARE P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 2 8 TH OF AUGUST, 2015 AT CHENNAI. SD/- SD/- ( !'#$ % ) ( $ & ' ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJAR I) # %: /JUDICIAL MEMBER ' %:/ACCOUNTANT MEMBER '# /CHENNAI, C% /DATED, THE 28 TH AUGUST, 2015. MPO* - - ITA 1769, 1770/14 ETC. 49 %'D EF G'F /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H () /CIT(A) 4. H /CIT 5. FI! J /DR 6. !K L /GF.