Vipul Kumar Jain, Delhi V. ACIT, New Delhi

ITA 1902/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0304 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: P C YADAV ADV SHRI SUMER GARG
• Keywords: Bogus purchase; Business income; Depreciation; Income from undisclosed sources; Peak credit; Set aside
• Section: 44AD; 54F; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 1902/DEL/2016 ASSESSMENT YEAR: 2011-12 VIPUL KUMAR JAIN E-6, 1 ST FLOOR, ASHOK VIHAR, DELHI. PAN NO. ACZPJ8354M VS ACIT CIRCLE 34(1) NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY SHRI P.C. YADAV, ADV. SHRI SUMER GARG, CA REVENUE BY MS. ASHIMA NEB, SR. DR ORDER PER SHRI R K PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28.01.2016 OF THE LD. CIT(APPEALS)-32, NEW DE LHI RELATING TO AY 2011-12. DATE OF HEARING 18.04.2019 DATE OF PRONOUNCEMENT 01.07.2019 2 ITA NO . 1902/DEL/2016 2. GROUNDS OF APPEAL NO. 1 & 2 BY THE ASSESSEE ARE AS UNDER: 1. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN CO NFIRMING AN ADDITION OF RS. 17,58,156/- OUT OF ADDITION OF R S. 32,22,140/- MADE BY AO IN RESPECT OF CASH DEPOSITS IN THE SAVING BANK ACCOUNT WITH ICICI BANK IN THE FACTS AN D CIRCUMSTANCES OF THE CASE. 2. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN RE STRICTING THE RELIEF TO RS. 14,63,984/- AND CONFIRMING AN ADD ITION OF RS. 17,58,156/- OUT OF ADDITION OF RS. 32,22,140/- MADE BY THE AO IN RESPECT OF CASH DEPOSITS IN THE SAVING BANK ACCOUNT WITH ICICI BANK BY WRONG APPRECIATION OF FA CTS AND BY NOT FOLLOWING THE JUDGMENTS OF THE HONBLE H IGH COURTS AND APEX COURT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF MANUFA CTURING AND TRADING IN CHEMICALS AND LAMINATIONS UNDER THE NAME AND STYLE OF M/S ARIHANT INDUSTRIES AND M/S ARIHANT PACKAGING. HE FILED HIS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCO ME OF RS. 16,04,290/-. THE AO DURING THE COURSE OF ASSESSMEN T PROCEEDINGS OBSERVED THAT AS PER THE AIR INFORMATION THE ASSESS EE HAS DEPOSITED CASH OF RS. 32,22,140/- IN THE BANK ACCOU NT MAINTAINED WITH ICICI BANK. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF CASH SO DEPOSITED. IT WAS SUBMITTED BY T HE ASSESSEE THAT OUT OF THE ABOVE AMOUNT OF RS. 32,22,140/- DEPOSITE D IN ICICI BANK AN AMOUNT OF RS. 15,39,800/- WAS DEPOSITED BY THE O UTSTATION DEBTORS. PURCHASES WERE MADE AGAINST SUCH SALE AMO UNTING TO RS. 14,63,984/-. THE ASSESSEE EARNED A PROFIT OF RS. 7 5,816/- WHICH WAS NOT SHOWN WHILE FILING THE RETURN OF INCOME AND , THEREFORE, THE ASSESSEE WANTS TO SURRENDER THE SAME. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E ON THE GROUND 3 ITA NO . 1902/DEL/2016 THAT NO DETAILS OF PARTIES TO WHOM THE SALES WERE M ADE, NO CONFIRMATIONS WITH ADDRESS AND PAN NUMBER OF THE DE BTORS AND NO DETAILS OF THE PARTIES FROM WHOM PURCHASES WERE MAD E ALONG WITH THEIR CONFIRMATION ADDRESS AND PAN ETC. WERE SUBMIT TED. HE, THEREFORE, AGAIN ASKED THE ASSESSEE TO EXPLAIN AS T O WHY THE CLAIM SHOULD NOT BE DISREGARDED AND THE ADDITION OF RS. 3 2,22,140/- SHOULD NOT BE MADE. THE ASSESSEE AGAIN SUBMITTED T HAT THE SALE OF RS. 15,39,800/- WERE MADE TO PARTIES IN CASH AND PU RCHASE OF RS. 14,63,984/- WAS ALSO MADE IN CASH AND HENCE, NO DET AILS OF CREDITORS AND DEBTORS COULD BE GIVEN. HOWEVER, THE AO REJECTED THE ABOVE EXPLANATION OF THE ASSESSEE. HE REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S ZAVERI DIAMONDS VS. CIT, RANGE-1 [2012] 25 TAXMANN.COM 552, WHEREIN IT HAS BEEN HELD THAT TO ESTABLISH THAT SALES HAD BEEN MADE BY THE A SSESSEE AND CASH DEPOSITED IN BANK ACCOUNT WAS IN LIEU OF SALES AND THAT THE ASSESSEE HAD NOT DISCLOSED NAME OF PERSONS TO WHOM SALES HAD BEEN MADE, THE SALES BY ASSESSEE REMAINS UNVERIFIAB LE. THE AO, ACCORDINGLY, MADE AN ADDITION OF RS. 32,22,140/- TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 4. IN APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITION OF RS. 17,58,156/- OUT OF THE TOTAL ADDITION OF RS. 32,22, 140/- BY OBSERVING AS UNDER: - GROUND NO. 1 & 2: THE GROUND NO. 1 & 2 ARE AGAINST ADDITION OF RS. 32,22,140/- BEING THE CASH DEPOSITED IN THE ICICI B ANK ACCOUNT OF THE ASSESSEE. THE SEQUENCE OF EVENTS HA VE BEEN NARRATED IN DETAIL ABOVE. INITIALLY BEFORE TH E AO AND 4 ITA NO . 1902/DEL/2016 DURING THE APPELLATE PROCEEDINGS THE ASSESSEE CLAIM ED THAT OUT OF CASH DEPOSIT OF RS. 32,22,140/-, RS. 15,39,800/- REPRESENTED UNACCOUNTED CASH SALES OF T HE ASSESSEE AGAINST WHICH THE ASSESSEE HAD DONE UNACCOUNTED CASH PURCHASE OF RS. 14,63,984/-. THIS RESULTED IN UNACCOUNTED PROFIT OF RS. 75,816/-. LATER DURING THE APPELLANT PROCEEDINGS THE ASSESSE E CLAIMED THAT OUT OF RS. 32,22,140/-THE UNACCOUNTED SALES WAS OF RS. 19,48,480/-. AGAINST WHICH THE UNACCOUN TED PURCHASE REMAINED RS. 14,63,984/-. WHEN INFORMATION WAS RECEIVED FROM ICICI BANK AND A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE THE ASSESSEE ADMITTED VIDE HIS LETTER DATED 27/01/2016 THAT ENTIRE RS. 32,22,140/- REPRESENTS UNACCOUNTED SALES OF THE ASSESSEE. IN THE LETTER DATED 27/01/2016 THE ASSESSEE HAS NOW CHANGED HIS STAND AS FAR AS PURCHASES ARE CONCERNED. NOW THE ASSESSEE IS NOT CLAIMING THAT H IS UNACCOUNTED PURCHASE AGAINST THE UNACCOUNTED SALE O F RS. 32,22,140/- WAS OF RS. 14,63,984/-. IN THE LETTER DATED 27/01/2016 THE ASSESSEE HAS MENTIONED THAT IN ABSEN CE OF COMPLETE RECORDS HIS UNACCOUNTED INCOME SHOULD B E COMPUTED AT 8% OF THE SALES AS PER THE PROVISION OF THE 44AD OF THE I.T. ACT. THE CONTENTION OF THE ASSESSEE IS NOT TENABLE. TH E ASSESSEE HAS BEEN CHANGING HIS STAND FROM THE VERY BEGINNING AS MENTIONED ABOVE. THE TOTAL TURNOVER OF THE ASSESSEE IS MORE THAN RS . 2 CRORE MUCH BEYOND THE LIMIT PRESCRIBED IN SECTION 4 4AD. THE SO CALLED BUSINESS OF TRADING IN CHEMICALS DON E BY THE ASSESSEE THROUGH ICICI BANK ACCOUNT WAS TOTA LLY UNACCOUNTED. ASSESSEE NEVER BOTHERED TO DISCLOSE T HE BUSINESS IN HIS RETURN OF INCOME. FROM THE CONDUCT OF THE ASSESSEE IT IS CRYSTAL CLEAR THAT THE ASSESSEE WANT ED THIS BUSINESS TO REMAIN HIDDEN FROM TAX AUTHORITIES FROM THE VERY BEGINNING. HE NEVER INTENDED TO PAY TAX ON TH IS BUSINESS. IT WAS ONLY AFTER THE AO CONFRONTED THE ASSESSEE WITH AIR INFORMATION, THE ASSESSEE ADMITTE D HAVING THE BANK ACCOUNT AND HAVING CASH TRANSACTION S 5 ITA NO . 1902/DEL/2016 THEREIN. IT WAS ONLY WHEN THE ASSESSEE WAS CORNERE D BY THE AO THE ASSESSEE CAME UP WITH THE EXPLANATION TH AT HE WAS DOING TRADING OF CHEMICALS WHICH WAS NOT DISCLO SED IN HIS RETURN OF INCOME. TURNOVER OF THIS BUSINESS WA S MORE THAN RS. 32 LACS. NUMBER OF TRANSACTIONS IN THE BA NK STATEMENT CLEARLY SHOWS THAT IT WAS NOT A ONE TIME AFFAIR. THE ASSESSEE IS ALSO NOT NEW TO FINANCIAL WORLD. H E IS CARRYING OUT HIS REGULAR BUSINESS OF CHEMICALS AND LAMINATION SINCE QUITE SOME TIME. HE IS WELL AWARE OF THE INCOME TAX LAWS AND HIS RESPONSIBILITIES AS AN ASSE SSEE. THE ASSESSEE HAS VIOLATED THE INCOME TAX LAWS AND M OST PROBABLY ALSO SALES TAX LAWS KNOWINGLY AND WILLINGL Y. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE HAS ARGUED THAT THE GP RATIO OF UNACCOUNTED SALES SHOUL D BE TAKEN AT 8%. THIS ARGUMENT OF THE ASSESSEE DEFIES LOGIC. THE ASSESSEES REGULAR BUSINESS NAMELY ARIHANT INDUSTRIES AND ARIHANT PACKAGING HAVE GP RATIO OF 1 4.44% AND 8.45%. WHY ANYONE WILL DO A BUSINESS HAVING LE SS PROFIT THAN HIS REGULAR BUSINESS AND WHY SUCH BUSIN ESS BE KEPT SECRET? SECRET, UNACCOUNTED ACTIVITIES ARE UN DER TAKEN ONLY WHEN THE PROFIT IS VERY HIGH AND THE EXP ECTED TAX LIABILITY IS ALSO VERY HIGH. SECONDLY, THE ASS ESSEE HAS NOT GIVEN EVEN ON IOTA OF EVIDENCE TO PROVE THAT HE WAS REALLY ENGAGED IN UNACCOUNTED CHEMICAL TRADING BUSI NESS. SECOND ARGUMENT OF THE ASSESSEE WAS THAT THE AO DID NOT GIVE DEDUCTION FOR RELATED EXPENSES I.E. EX PENSES RELATED TO UNACCOUNTED BUSINESS. THE ASSESSEE WAS CARRYING A REGULAR BUSINESS IN ADDITION TO UNACCOUN TED BUSINESS. ALL THE EXPENSES INCURRED BY THE ASSESSE E FOR CARRYING OUT THE BUSINESS LIKE MAINTAINING AN OFFIC E ETC. WERE CLAIMED AS EXPENSE IN HIS REGULAR BUSINESS. I F THERE WAS ANY OTHER EXPENSE WHICH WAS NOT ALREADY CLAIMED BY THE ASSESSEE IN HIS REGULAR BUSINESS, IT WAS FOR HI M TO GIVEN EVIDENCE OF SUCH EXPENSE AND CLAIM THAT IN AB SENCE OF ANY EVIDENCE THE AO WAS RIGHT IN NOT GIVING ANY DEDUCTION. IT IS RELEVANT TO MENTION HERE THAT THE ASSESSEE H AS INTRODUCED FRESH CAPITAL OF RS. 24,03,868/- IN HIS REGULAR BUSINESS DURING THE YEAR UNDER CONSIDERATION. 6 ITA NO . 1902/DEL/2016 THE ASSESSEE HAS NEVER DISCLOSED THE EXACT NATURE OF HIS UNACCOUNTED SALES AND PURCHASES. HE HAS BEEN T RYING TO SOMEHOW EXPLAIN THE CASH DEPOSITS BY GIVING VAGU E REPLIES. IT WAS ONLY WHEN HE WAS CORNERED FROM ALL DIRECTIONS, HE ADMITTED THAT THE ENTIRE CASH DEPOSI TS OF RS. 32,22,140/- WAS UNACCOUNTED CASH SALES. THE ASSESS EE HAS HIMSELF BEEN CLAIMING THAT HIS UNACCOUNTED CASH PURCHASES WERE OF RS. 14,63,984/-. THE ASSESSEE HA S HIMSELF GIVEN CASH FLOW STATEMENT. THE DEPOSITS AN D WITHDRAWALS HAVE REMAINED SAME EVEN AFTER RECEIPT O F REPLY FROM ICICI BANK. THE REPLY OF ICICI BANK MAD E IT CLEAR THAT THE CASH DEPOSITED IN ICICI BANK ACCOUNT WAS NOT OUT OF EARLIER CASH WITHDRAWAL. HOWEVER, THE A MOUNT AND PLACE OF CASH OF DEPOSITS DO INDICATE THAT THES E MAY BE SALE PROCEEDS OF SOME BUSINESS CARRIED OUT BY TH E ASSESSEE. IT IMPLIES THAT THERE MUST BE PURCHASES ALSO TO ENABLE THE ASSESSEE TO MAKE SALES. IF THE ASSESSEE S VERSION OF UNACCOUNTED PURCHASES OF RS. 14,63,984/- IS BELIEVED, IT WILL RESULT IN UNACCOUNTED PROFIT OF R S. 32,22,140 RS. 14,63,984 = RS. 17,58,156/-. IN MY VIEW THE ADDITION ON ACCOUNT OF UNACCOUNTED CASH DEPOSIT S SHOULD BE RESTRICTED TO RS. 17,58,156/-. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5.1 THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALL ENGED THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT BEFORE AO AND THE CIT(A) THE ASSESSEE EXPLAINED THE AMOUNT DEPOSITED IN THE ICIC I BANK WHICH IS BASICALLY OUT OF THE RECEIPTS OF UNACCOUNTED SAL ES AS WELL AS CASH IN HAND. HE SUBMITTED THAT THE ASSESSEE FILED THE RECONCILIATION REFLECTING THE POSITION OF CASH WITHDRAWALS AND CAS H PURCHASES. REFERRING TO PAGE NO. 62 OF THE PB, THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE BANK ACCOUNT 7 ITA NO . 1902/DEL/2016 MAINTAINED WITH ICICI BANK WHICH SHOWS THAT THERE A RE HUMONGOUS AMOUNT OF CASH WITHDRAWALS. BESIDES THE BANK STATEMENT, THE ASSESSEE HAS ALSO FILED ONE CASH FLO W STATEMENT, COPY OF WHICH IS PLACED AT PAGE 90 OF THE PAPER BOOK WHI CH SHOWS THE TOTAL CASH WITHDRAWALS FROM BANK AND ALSO FROM PROP RIETORSHIP CONCERN. RELYING ON VARIOUS DECISIONS, HE SUBMITTE D THAT WHEN THERE ARE SO MANY DEBIT AND CREDIT ENTRIES IN THE B ANK ACCOUNT THEN THE THEORY OF PEAK CREDIT WILL BE APPLICABLE AND ON LY THE PEAK CREDIT IS TO BE ADDED AND THE ASSESSEE WILL GET THE BENEFI T OF THE DEBIT ENTRIES. REFERRING TO PAGE 65 OF THE PB, WHICH IS THE COPY OF THE BANK ACCOUNT WITH ICICI BANK HE SUBMITTED THAT THE PEAK CREDIT IN THE INSTANT CASE COMES TO RS. 2,38,737/-. REFERRIN G TO PAGE 122 OF THE PB, WHICH SHOWS THE SUMMARY OF CASH FLOW STATEM ENT FOR THE PERIOD 01.04.2010 TO 31.03.2011, HE SUBMITTED THAT THE ASSESSEE HAD SHOWN THE REGULAR PURCHASES AND THE UNACCOUNTED PURCHASES OUT OF CASH WITHDRAWAL. THERE IS NO OTHER EVIDENCE WITH THE REVENUE THAT ASSESSEE HAD UTILIZED THE CASH TO WITH DRAWN FOR ANY OTHER PURPOSES. REFERRING TO PAGE 121 OF THE PB HE SUBMITTED THAT THE TOTAL SALES ARE RS. 35,59,020/-. THEREFORE, CO RRESPONDING PURCHASES ALSO MUST BE ALLOWED TO THE ASSESSEE. HE , ACCORDINGLY, SUBMITTED THAT EITHER PROFIT RATE OF 8% SHOULD BE A DOPTED ON THE UNACCOUNTED SALES OR THE PEAK CREDIT SHOULD BE CONS IDERED. 6. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD SUBMITTED THAT THE DEPOS ITS MADE IN THE BANK ACCOUNT ARE OUT OF DEPOSITS MADE BY OUT ST ATION DEBTORS. 8 ITA NO . 1902/DEL/2016 BUT THE ASSESSEE SUDDENLY CHANGED HIS ARGUMENT BEFO RE THE CIT(A) AND CAME OUT WITH SOME NEW THEORY. HE SUBMITTED TH AT THE ASSESSEE HAS NOT DISCHARGED THE ONUS CAST ON HIM BY PROVIDING THE REQUISITE DETAILS TO SUPPORT HIS CLAIM REGARDING TH E DEPOSITS MADE IN THE BANK ACCOUNT. SO FAR AS THE ARGUMENT OF THE LD . COUNSEL FOR THE ASSESSEE THAT PEAK CREDIT SHOULD BE ALLOWED HE SUBMITTED THAT SOME CIRCUMSTANTIAL EVIDENCES NEED TO BE PRODUCED B Y THE ASSESSEE FOR THE PROPOSITION REGARDING THE PEAK CREDIT. SIN CE, THE ASSESSEE COULD NOT DISCHARGE THE ONUS CAST ON HIM, THEREFORE , THE ASSESSEE CANNOT BE GIVEN THE BENEFIT OF THE PEAK CREDIT. FO R THE ABOVE PROPOSITION THE LD. DR RELIED ON VARIOUS DECISIONS. HE, ACCORDINGLY, SUBMITTED THAT SINCE THE CIT(A) HAS GIVEN SUBSTANTI AL RELIEF TO THE ASSESSEE FOR WHICH THE REVENUE IS NOT IN APPEAL BEF ORE THE TRIBUNAL, THEREFORE, THE ORDER OF THE LD. CIT(A) SHOULD BE UP HELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE MADE AN ADDITION OF RS. 32,22,140/- BEING THE CASH DEPOSITED IN THE ICICI BANK ACCOUNT OF THE ASSESSEE ON THE GR OUND THAT ASSESSEE COULD NOT EXPLAIN THE NATURE AND SOURCE OF SUCH DEPOSITS TO HIS SATISFACTION. WHILE DOING SO HE REJECTED TH E CLAIM OF THE ASSESSEE THAT OUT OF SUCH DEPOSITS AN AMOUNT OF RS. 15,39,800/- WAS DEPOSITED BY THE OUT STATION DEBTORS AND THE AS SESSEE HAD MADE PURCHASES OF RS. 14,63,984/- AND HAS EARNED AN AMOUNT OF 9 ITA NO . 1902/DEL/2016 RS. 75,816/-. WE FIND THE LD. CIT(A) AFTER CONSIDE RING THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE SUSTAINED AN AMOUN T OF RS. 17,58,156/- AND GRANTED RELIEF OF RS. 14,63,984/-, THE DETAILS OF WHICH ARE ALREADY GIVEN IN THE PRECEDING PARAGRAPH. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE ARE HUMONGOUS AMOUNT OF CASH WITHDRAWALS FROM THE BANK ACCOUNT AND, THEREFORE, WHEN THERE ARE LARGE NUMBER OF DEPO SITS AND WITHDRAWALS IN THE BANK ACCOUNT, ONLY THE PEAK BALA NCE SHOULD BE SUSTAINED AND NOT THE ENTIRE AMOUNT OF DEPOSIT. WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE AS SESSEE. A PERUSAL OF THE BANK STATEMENT SHOWS THAT ONLY A PAR T OF THE DEPOSITS AND WITHDRAWALS HAVE BEEN SHOWN IN THE REG ULAR ACCOUNTS AND THE ASSESSEE HAS NOT DISCLOSED THE ENTIRE DEPOS ITS AND WITHDRAWALS. WHEN THERE IS NO EVIDENCE WITH THE RE VENUE THAT THE WITHDRAWALS MADE BY THE ASSESSEE SYSTEMATICALLY FRO M THE BANK ACCOUNT, WHICH ARE NOT SHOWN TO THE REVENUE, HAVE B EEN UTILIZED FOR SOME OTHER PURPOSE OTHER THAN FOR THE UNACCOUNT ED BUSINESS OF THE ASSESSEE, THEREFORE, WE FIND MERIT IN THE ARGUM ENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE SHOULD B E GIVEN THE BENEFIT OF PEAK CREDIT THEORY AND ONLY THE PEAK CRE DIT HAS TO BE SUSTAINED. SINCE, THE ASSESSEE HAS CALCULATED SUCH PEAK CREDIT AT RS. 2,38,737/-, THEREFORE, WE SET ASIDE THE ORDER O F THE LD. CIT(A) AND DIRECT THE AO TO SUSTAIN ONLY THE PEAK CREDIT O F RS. 2,38,737/- SUBJECT TO HIS VERIFICATION. 8. GROUND OF APPEAL NO. 1 & 2 BY THE ASSESSEE ARE A CCORDINGLY PARTLY ALLOWED. 10 ITA NO . 1902/DEL/2016 9. GROUND OF APPEAL NO. 3 READS AS UNDER: - 3. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 9,54,544/- U/S 5 4F OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. FACTS OF THE CASE, IN BRIEF, ARE THAT AO DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS C LAIMED DEDUCTION OF RS. 9,54,544/- U/S 54F OUT OF THE LONG TERM CAPITAL GAIN EARNED ON SALE OF PROPERTY MEASURING 1,012.5 S Q. MT. BEARING PLOT NO. 95 SITUATED AT PHASE-4, SECTOR-56, HSIIDC LIMITED INDUSTRIAL ESTATE, KUNDLI, SONEPAT, HARYANA. ON BE ING ASKED BY THE AO TO FURNISH THE DETAILS OF THE CLAIM OF DEDUC TION UNDER SECTION 54F, THE ASSESSEE SUBMITTED THAT HE HAD PUR CHASED THE PROPERTY AND MADE AN INVESTMENT OF RS. 48,63,120/- TOWARDS THE HOUSE PROPERTY TO CLAIM DEDUCTION U/S 54F. THE ASS ESSEE FURNISHED AN AGREEMENT WITH THE CONTRACTOR FOR CONS TRUCTION OF A RESIDENTIAL UNIT ALONG WITH BILLS OF CONTRACTOR AND LEDGER ACCOUNT OF MATERIAL SUPPLIERS. THE AO DEPUTED THE INSPECTOR T O REPORT ON THE STATUS OF THE CONSTRUCTION. THE INSPECTOR REPORTED THAT THE PLOT IS LYING VACANT AND THERE IS NO CONSTRUCTION WORK CARR IED OVER THE SAID PLOT. THE AO, THEREFORE, CONFRONTED THE SAME TO TH E ASSESSEE. THE ASSESSEE REPLIED THAT THE BUILDING COULD NOT BE CON STRUCTED DUE TO NON-SANCTIONING OF THE PLAN ALTHOUGH THE INTENTION OF THE ASSESSEE WERE TO CONSTRUCT THE RESIDENTIAL HOUSE. THE AO RE JECTED THE ARGUMENT OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITION LAID DOWN IN SECTION 54F. HE, THEREFORE, MADE AN ADDITION OF RS. 9,54,544/- TO THE TOTAL INCOME O F THE ASSESSEE. 11 ITA NO . 1902/DEL/2016 11. IN APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER: - GROUND NO. 3 : IS AGAINST DISALLOWANCE OF RS. 9,5 4,544/- U/S 54F. AS MENTIONED ABOVE THE ASSESSEE HAD CLAIM ED DEDUCTION OF RS. 9,54,544/- OUT OF LONG TERM CAPITA L GAIN EARNED ON SALE OF PROPERTY AT PLOT NO. 95, PHASE-4, SECTOR 56, HSIIDC, KUNDLI, HARYANA. FOR CLAIMING DEDUCTIO N U/S 54F THE ASSESSEE CLAIMED THAT HE PURCHASED RESIDENT IAL PROPERTY AT B-B10/28A, TDI CITY, KUNDLI, HARYANA. THE AO ASKED THE INSPECTOR TO DO A SPOT VERIFICATION. ON VERIFICATION IT WAS FOUND THAT B-B10/28A, TDI CITY, KUNDLI, HARYANA WAS A OPEN PIECE OF LAND WITHOUT ANY CONSTRUCTION. THE AO CONFRONTED THIS INFORMATION W ITH THE ASSESSEE. THE ASSESSEE IN HIS REPLY CLAIMED THAT H IS INTENTION WAS TO CONSTRUCT A RESIDENTIAL HOUSE ON T HIS PIECE OF LAND. HOWEVER, THE ASSESSEE ADMITTED THAT TILL DATE THE HOUSE COULD NOT BE CONSTRUCTED AS THE MAP FOR CONST RUCTION OF THE HOUSE WAS NOT APPROVED BY THE COMPETENT AUTH ORITY. DURING THE APPELLATE PROCEEDINGS THE AIR ADMITTED THAT THE CONSTRUCTION COULD NOT BE CARRIED OUT BY T HE ASSESSEE AS THE MAP WAS NOT SANCTIONED BY THE COMPE TENT AUTHORITY TILL DATE. DEDUCTION U/S 54F IS AVAILABL E WHEN LONG TERM CAPITAL GAIN IS INVESTED IN A RESIDENTIAL PROPERTY WITHIN THE TIME PERIOD SPECIFIED. SINCE THE ASSESS EE HAS NOT INVESTED LONG TERM CAPITAL GAIN IN A RESIDENTIA L PROPERTY THE AO WAS ABSOLUTELY RIGHT IN REJECTING T HE CLAIM OF DEDUCTION U/S 54. THEREFORE, THE GROUND NO. 3 I S REJECTED. 12. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DENIAL OF EXEMPTION, ISSUE WOULD ARISE ONLY AFTER THE COMPLET ION OF 3 YEARS I.E. IN AY 2015-16 AND HENCE, THE CLAIM OF THE ASSE SSEE SHOULD NOT BE DISTURBED IN THIS YEAR. FOR THE ABOVE PROPOSITI ON, HE RELIED ON 12 ITA NO . 1902/DEL/2016 THE DECISION OF THE KOLKATA BENCH OF THE TRIBUNAL I N THE CASE OF MAHESH PAL ARORA VS. ITO VIDE ITA NO. 206/KOL/2013, WHEREIN IT HAS BEEN HELD THAT UN-UTILIZED AMOUNT SHOULD BE TAX ED AFTER THE EXPIRY OF 3 YEARS. HE, ACCORDINGLY, SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) SHOULD B E DELETED. 14. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). HE SUBMITTED THAT ASSESSEE HAD FILE D BOGUS PURCHASE BILLS FOR CLAIMING THE DEDUCTION U/S 54F. FURTHER, THE AMOUNT HAS NOT BEEN DEPOSITED IN THE CAPITAL GAIN ACCOUNT SCHE ME WITH ANY SPECIFIED BANK. THEREFORE, THE LD. CIT(A) IS FULLY JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AO. 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE AO MADE ADDITION OF RS. 9,54,544/- BY REJE CTING THE CLAIM OF DEDUCTION MADE U/S 54F OUT OF THE LONG TERM CAPI TAL GAIN ON SALE OF PROPERTY ON THE GROUND THAT ASSESSEE HAS NOT FUL FILLED THE CONDITIONS OF THE SAID SECTION BY NOT CONSTRUCTING THE HOUSE PROPERTY AS CLAIMED. WE FIND THE CIT(A) UPHELD THE ACTION OF THE AO, THE REASONS OF WHICH HAVE ALREADY BEEN REPRODUC ED IN THE PRECEDING PARAGRAPH. IT IS THE SUBMISSION OF THE L D. COUNSEL FOR THE ASSESSEE THAT AS PER THE PROVISIONS OF SECTION 54(1) OF THE I.T. ACT, 1961, THE ASSESSEE IS ENTITLED TO UTILIZE THE LONG TERM CAPITAL GAIN FOR CONSTRUCTION OF A HOUSE PROPERTY WITHIN A PERIOD OF 3 YEARS AND, THEREFORE, ADDITION, IF ANY, CAN BE MADE ONLY IN THE AY 2015-16 13 ITA NO . 1902/DEL/2016 AND NO ADDITION CAN BE MADE IN THIS YEAR. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE KOLKA TA BENCH OF THE TRIBUNAL IN THE CASE OF MAHESH PAL ARORA VS. ITO VI DE ITA NO. 206/KOL/2013 ORDER DATED 29.03.2016. HOWEVER, WE D O NOT FIND ANY MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE FIND NEITHER THE ASSESSEE HAS CONSTRU CTED THE HOUSE PROPERTY DURING THE YEAR AS CLAIMED NOR DEPOSITED T HE LONG TERM CAPITAL GAIN OF ABOVE AMOUNT IN THE SPECIFIED CAPIT AL GAIN ACCOUNTS SCHEME. THEREFORE, WHEN THE ASSESSEE HAS NOT FULFI LLED THE CONDITIONS LAID DOWN IN SECTION 54F THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME CAN BE TAXED ONLY IN THE AY 2015-16 I.E. AFTER THE EXPIRY OF 3 YEARS IS NOT ACC EPTABLE AS NOT BEING IN ACCORDANCE WITH LAW. THEREFORE, THE ORDER OF THE CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE A SSESSEE ARE DISMISSED. 16. GROUND OF APPEAL NO. 4 READS AS UNDER: 4. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING THE DISALLOWANCE OF RS. 44721/- OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE BY IGNORING RE LEVANT FACTS PLACED ON RECORD IN THE FACTS AND CIRCUMSTANC ES OF THE CASE. THE TOTAL ASSESSED INCOME OF THE ASSESSE E SHOULD HAVE BEEN REDUCED BY LD. CIT(A) BY RS. 19341 7/- AS PER DETAILS VERIFIED BY HIM. 17. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DI SALLOWED AN AMOUNT OF RS. 44,721/- BEING EXCESS DEPRECIATION CL AIMED ON PLANT AND MACHINERY. THE LD. CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER: - 14 ITA NO . 1902/DEL/2016 GROUND NO. 6 & 6: ARE AGAINST EXCESS CLAIM OF DEPRECIATION. THE AO NOTICED THAT THE ASSESSEE HAD SOLD MACHINERY WORTH RS. 209100/- FROM ARIHANT PACKAGING TO ARIHANT INDUSTRIES. THE ASSESSEE HAD CLAIMED DEPRECIATION @ 7.5% IN THE BOOKS OF ARIHANT PACKAGI NG AND ALSO IN THE BOOKS OF ARIHANT INDUSTRIES. THE ASSES SEE ADMITTED DURING THE ASSESSMENT PROCEEDINGS THAT IT WAS A MISTAKE. NO DEPRECIATION COULD BE ALLOWED IN THE B OOKS OF ARIHANT PACKAGING AS THE MACHINERY WAS SOLD ON 26.03.2011. DEPRECIATION @ 7.5% ONLY WAS ALLOWABLE IN THE BOOKS OF ARIHANT INDUSTRIES. THUS, THE AO HAS RIGHTLY DISALLOWED RS. 44721/- OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE. THIS GROUND IS THEREFORE REJECTED. 18. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ONLY AN AMOUNT OF RS. 15,383/- HAS BEEN CLAIMED AS EXCESS DEPRECIATION AND NOT RS. 44,721/- AS HELD BY THE AO AND UPHELD BY THE CIT(A) AND, THEREFORE, THIS MATTER MAY BE SET A SIDE TO THE FILE OF THE AO. IN VIEW OF THE ABOVE SUBMISSION BY THE LD. COUNSEL FOR THE ASSESSEE AND AFTER CONSIDERING THE ARGUMENT OF THE LD. DR, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE RECORDS AND RESTRICT THE DE PRECIATION TO THE ACTUAL AMOUNT OF EXCESS CLAIM. THIS GROUND OF ASSE SSEE IS PARTLY ALLOWED. 19. GROUND OF APPEAL NO. 5 READS AS UNDER: 5. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE AD-HOC ADDITION OF RS. 80979/- BEING DISALLOWANCE @ 1/5 TH OUT OF EXPENSES CLAIMED UNDER THE HEADS OF CAR INSURANCE, COMMUNICATION EXPENSES, INT EREST ON CAR LOAN, VEHICLE RUNNING & MAINTENANCE EXPENSES AND DEPRECIATION ON CAR IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 15 ITA NO . 1902/DEL/2016 20. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DI SALLOWED AN AMOUNT OF RS. 80,979/- BEING 20% OF THE FOLLOWING E XPENSES FOR WANT OF DETAILS AND PROBABLE PERSONAL USE: - 1. CAR INSURANCE RS. 16,054/- 2. COMMUNICATION EXP. RS. 57,212/- 3. INTEREST ON CAR LOAN RS. 92,567/- 4. VEHICLE RUNNING & MAINTENANCE EXP. RS. 45,470/- 5. DEPRECIATION ON CAR RS. 1,93,590/- TOTAL RS. 4,04,893/- 21. WE FIND THE LD. CIT(A) UPHELD THE ACTION OF THE AO FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 22. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. IT IS AN ADMITTED FACT THAT THE AO DISALLOWED 20% OF T HE ABOVE EXPENSES ON ACCOUNT OF PROBABLE PERSONAL USE ON EST IMATE BASIS, WHICH HAS BEEN UPHELD BY THE CIT(A). IN OUR OPINIO N, THE DISALLOWANCE AT 20% OF THE EXPENSES ON AD-HOC BASIS APPEARS TO BE ON THE HIGHER SIDE. WE, THEREFORE, RESTRICT THE DI SALLOWANCE TO 10% OF THE EXPENSES I.E. RS. 40,489/- AS AGAINST RS. 80 ,979/- UPHELD BY THE CIT(A). THE GROUND RAISED BY THE ASSESSEE IS P ARTLY ALLOWED. 23. GROUND OF APPEAL NO. 6 WAS NOT PRESSED BY THE L D. COUNSEL FOR THE ASSESSEE FOR WHICH THE LD. DR HAS NO OBJECTION. ACCORDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. 24. GROUND OF APPEAL NO. 7 BEING GENERAL IN NATURE IS DISMISSED. 16 ITA NO . 1902/DEL/2016 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/07/2019 SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01/07/2019 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 20.06.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.06.2019/ 24.06.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 01.07.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 01.07.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 01.07.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 01.07.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 01.0 7.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 17 ITA NO . 1902/DEL/2016