ITO, New Delhi V. M/s. Kalra Papers Pvt. Ltd., New Delhi

ITA 2297/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6599 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAY VARMA
• Keywords: Unexplained cash credit; Capital asset; Business income; Depreciation; Loose papers; Document seized; Peak credit; Date of conversion; Speculation loss; Valuation report; Documents seized; Capital expenditure
• Section: 133A; 14A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 2297 /DEL/201 4 AY: 20 09 - 10 ITO, WARD 5(1) NEW DELHI VS . M/S KALRA PAPERS PVT.LTD. 20 & 34, RAJA GARDEN NEW DELHI 110 015 PAN:AAACK0705B (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. VIJAY VARMA, CIT - D.R. ASSESSEE BY : NONE. DA TE OF HEARING : 0 5 .07.2018 DATE OF PRONOUNCEMENT : 24. 07.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 31.01.2014 PASSED BY LD.CIT (A) - VIII, NEW DELHI ON THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T(A) ERRED IN DELETING THE ADDITION OF RS. 50,226/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 35 D BEING ROC FEES FOR INCREASING AUTHORIZED CAPITAL, WHICH IS A CAPIT AL EXPENDITURE? ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 2 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T(A) ERRED IN DELETING THE ADDITION OF RS. 2,10,856/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF CAR DEPRECIATION ON PERSONAL CAR OF SH. RAJINDER KALRA ? 3. WHETH ER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T(A) ERRED IN DELETING THE ADDITION OF RS. 79,317/ - (RS. 1,04,317 - MINUS RS. 25,000/ - ) MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 14A R.W RULE 8D WHICH IS FACTUAL IN NATURE? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CI T(A) ERRED IN DELETING THE ADDITION OF RS. 1,59,96,419/ - MADE BY THE AO BEING LOSS ON SHARE TRADING AND TERMED AS SPECULATION LOSS? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN L AW, THE LD. C I T(A) ERRED IN DELETING THE ADDITION OF RS. 1,50,00,000/ - MADE BY THE AO ON DIMINUTION OF VALUE OF PROPERTY AS THE PROPERTIES WERE HELD AS CAPITAL ASSETS AND DURING THE YEAR IT WAS CONVERTED TO STOCK IN TRADE ONLY TO SET OFF THE PROFIT OF PAPE R BUSINESS, THOUGHT IT HAS NOT TREATED IN PROPERTIES NEITHER IN PAST NOR DURING THE YEAR OF CONSIDERATION? 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T(A) ERRED IN DELETING THE ADDITION OF RS. 6,25,31,613/ - (9,25,31,613 - 3, 00,00,000) MADE BY THE AO ON ACCOUNT OF THE TRANSACTIONS CONTAINED IN SLIP PAD MARKED AS AN ANNEXURE A - 18, A - 19, A - 32, A - 33 TREATED AS TRANSACTION MADE OUT OF UNACCOUNTED CASH? 7. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T{A} ERRED IN DELETING THE ADDITION OF RS. 1 0, 82,900/ - MADE BY THE AO ON ACCOUNT OF ANNEXURE A - 2 ? ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 3 8. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T{A} ERRED IN DELETING THE ADDITION OF RS. 61,65,000/ - MADE BY THE AO ON ACCOUNT OF UNE XPLAINED EXPENDITURE? 9. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT{A) ERRED IN DELETING THE ADDITION OF RS. 9, 00,000 / - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDIT? 10. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. C I T{A} ERRED IN DELETING THE ADDITION OF RS. 68,37,283/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE BEING UNEXPLAINED CASH CREDIT BEING TRANSACTION CONTAINED ON PAGE NO. 36 & 37 OF ANNEXURE A - 3 ? 11. WHETHER ON THE FACTS AND CIRCUM STANCES OF THE CASE & IN LAW, THE LD. C I T{A} ERRED IN DELETING THE ADDITION OF RS. 7,18,678/ - MADE BY THE AO ON ACCOUNT OF DISALLOWANCE BEING UNEXPLAINED CASH CREDIT BEING TRANSACTION CONTAINED ON PAGE NO. 84 OF ANNEXURE A - 1 ? 12. THAT THE ORDER OF TH E LD. C I T{A} IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 13. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 14. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORG O ANY GROUND{S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. IT IS OBSERVED THAT PRESENT APPEAL HAS BEEN PENDING DISPOSAL SINCE 2016. FROM THE RECORDS PLACED BEFORE US, WE FIND THAT ON EVERY DATE OF HEARING, NOTICE HAS BEEN ISSUED TO ASSESSEE, HOWEVER, NONE ON BEHALF OF ASSESSEE HAS BEE N PRESENT. IT IS NOT ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 4 POSSIBLE TO KEEP THE APPEAL PENDING FOR INDEFINITE PERIOD OF TIME. IT IS OBSERVED THAT ASSESSEE HAS APPEARED TWICE FOR ADJOURNMENT. THEREFORE, IT CANNOT BE A SITUATION WHERE ASSESSEE IS NOT AWARE OF THIS APPEAL WHICH IS PENDING BEFO RE US. IN OUR CONSIDERED OPINION WE FEEL THAT ASSESSEE IS NOT INTERESTED IN PURSUING THIS APPEAL. WE ARE, THEREFORE, INCLINED TO DISPOSE OF THIS APPEAL , BASED ON THE SUBMISSIONS ADVANCED BY LD.CIT,DR AND ON THE BASIS OF RECORDS PLACED BEFORE US. 2. BRI EF FACTS OF THE CASE ARE AS UNDER . ASSESSEE FILED ITS RETURN OF INCOME ON 31.03.2010 DECLARING TOTAL INCOME OF RS.2,28,05,418/ - . THE CASE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT ) AND STATUTORY NOTICES WERE ISSUED TO ASSESSEE U/S 143( 2) AND 143(1) OF THE ACT. IN RESPONSE TO THE NOTICES , R EPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD.AO AND FURNISHED DETAILS AS CALLED FOR. 2.1. LD.AO OBSERVED THAT ASSESSEE WAS IN THE BUSINESS OF TRADING IN ALL KINDS OF PAPERS. IT WAS ALSO HAVING BUSIN ESS OF SALE AND PURCHASE OF PROPERTIES DURING THE YEAR UNDER CONSIDERATION. 2.2. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 25.11.2008 BY INVESTIGATION WING OF THE DEPARTMENT. DURING THE COURSE OF SURVEY, LARGE NUMBER OF LOOSE PAPERS AND COMPUTERIZED M ATERIALS WERE FOUND , WHICH WAS IMPOUNDED BY INVESTIGATION WING. REPORT WAS PREPARED ON VARIOUS ISSUES IN THE LIGHT OF STATEMENTS OF DIRECTORS RECORDED DURING THE COURSE OF SURVEY AND SUBSEQUENTLY U/S 131 OF THE ACT , WITH REFERENCE TO REGULAR BOOKS OF ASSE SSEE. ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 5 L D.AO IN ASSESSMENT ORDER RECORDED THAT ASSESSEE HAS NOT COMPLIED WITH THE QUERIES AND DETAILS AS CALLED FOR BY LD.AO . LD.AO ALSO OBSERVED DURING SURVEY AND POST SURVEY PROCEEDINGS THAT , ASSESSEE HAS ALSO BEEN CARRYING ON ACTIVITIES SUCH AS LENDI NG OF MONEY AND INVESTMENT IN PROPERTIES WHICH , A SSESSEE WAS NOT RECORDING IN ITS BOOKS OF ACCOUNTS AS WELL AS THE RETURN OF INCOME. IT IS ALSO OBSERVED THAT DURING ASSESSMENT PROCEEDINGS SUM OF RS.5 CRORES HAS BEEN SURRENDERED BY ASSESSEE , BREAK - UP OF WHI CH IS AS UNDER: RS.3 CRORES HAS BEEN SURRENDERED AS INCOME FROM GUTKAS/SLIP PADS AND ALSO AGAINST OTHER NEWS PAPERS; RS.2 CRORES HAS BEEN SURRENDERED IN SHAPE OF INVESTMENT IN PROJECTS AT TDI AT KUNDALI AND OTHERS. BASED UPON MATERIALS AVAILABLE WITH LD. A O FOUND DURING SUR VEY, STATEMENTS RECORDED OF DIRECTORS AND SURRENDER OF INCOME MADE BY ASSESSEE , LD.AO MADE VARIOUS ADDITIONS TOTALING TO RS.10,98,72,864/ - , AND GRANTING DEPRECIATION ETC. COMPUTED TOTAL INCOME AT RS.13, 15,05,840/ - . 3. AGGRIEVED BY THE A DDITIONS MADE BY LD.AO , ASSESSEE PRE FERRED APPEAL BEFORE LD.CIT(A). L D.CIT(A) PARTLY DELETED ADDITIONS. 4. AGGRIEVED BY THE ORDER OF LD.CIT(A) , REVENUE IS IN APPEAL BEFORE US NOW. 5. LD.CIT, D.R. SUBMITTED AS UNDER: GROUND NO. 1 THE ISSUE HAS BEEN DEALT WITH BY THE AO ON PAGE 5 PARA 13 OF THE ASSESSMENT ORDER. THE AO MENTIONS THE SAID AMOUNT AS THE ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 6 ROC FEE PAID WHICH IS A CAPITAL EXPENDITURE AND THE REVENUE RELIES ON THE DECISION OF THE HIGH COURT IN THE CASE OF HINDUSTAN INSECTICIDE LTD. REPORTED IN 250 ITR 338. THE CIT(A) HAS DEALT WITH THE ISSUE ON PAGE 6 WHEREIN HE HAS ALLOWED 1/5 TH OF THE SAID EXPENDITURE WITHOUT GIVING ANY REASONING. THE ORDER OF THE CIT(A) OBSERVING THAT THE ASSESSEE HAD CLAIMED ONLY RS.10,390/ - AND NOT RS.50,226/ - IS SUBJECT TO VE RIFICATION BY THE AO AS THIS FACT IS NOT VERIFIABLE. 5.1. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT,DR ON THE BASIS OF RECORDS PLACED BEFORE US. 5.2. BEFORE LD.CIT(A) ASSESSEE HAS SUBMITTED THAT ROC FEES HAS BEEN INCURRED TOWARDS INCREASE IN AUT HORISED SHARE CAPITAL. HOWEVER, THE SAME HAS NOT BEEN VERIFIED EITHER BY LD.AO OR BY LD. CIT(A) , AS NO DETAILS HAVE BEEN FURNISHED BY ASSESSEE BE FORE AUTHORITIES BELOW. ASSESSEE CLAIM ED BEFORE LD.CIT(A) THAT A SUM OF RS.10,390/ - HAS BEEN CLAIMED AS REV ENUE EXPENDITURE, OUT OF TOTAL EXPENSES OF RS.50,226/ - . UNDISPUTEDLY, ROC EXPENSES INCURRED BY ASSESSEE IS IN RESPECT OF INCREASE IN AUTHORISED SHARE CAPITAL. THIS ISSUE HAS ATTAINED FINALITY WITH THE DECISION OF HON BLE SUPREME COURT IN CASE OF PUNJAB S TATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS. CIT REPORTED IN 225 ITR 792 AND BROOKE BOND INDIA LTD. VS. CIT REPORTED IN 269 ITR 232. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED. 6. GROUND NO.2 THE CORRESPONDING REFERENCE IS ON PAGE 8 PAR A 17 OF THE ASSESSMENT ORDER AND ON PAGE 10 OF THE ORDER OF THE CIT(A). THE ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 7 CIT(A) HAS NOT DEALT WITH THE FACT MENTIONED IN PARA 17.1 ON PAGE 8 OF THE ASSESSMENT ORDER THAT THE DATE OF INVOICE AND DATE OF SHIPMENT OF IMPORTED CAR IS 31.03.2009 AND THEREFOR E, IT COULD NOT HAVE BEEN USED IN THE F.Y.2008 - 09. IT HAS ALSO NOT BEEN EXAMINED WHETHER THE FUNDS FOR PURCHASE OF CAR WERE PAID BY THE COMPANY AND IF YES, DID IT AMOUNT TO PERQUISITE IN THE HANDS OF DIRECTOR. MOREOVER, THE CIT(A) MADE WRONG OBSERVATION ON PAGE 10 OF THE ORDER THAT IN THE CASE OF COMPANIES THE RTO REGISTERS A CAR IN THE NAME OF DIRECTOR NOT IN THE NAME OF COMPANY. 6.1. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT,DR ON THE BASIS OF RECORDS PLACED BEFORE US. 6.2. IT IS OBSERVED THAT LD.CIT(A) HAS WITHOUT VERIFYING ANY DETAILS ALLOWED CLAIM OF ASSESSEE. NO DOUBT THAT ASSESSEE IS ELIGIBLE TO CLAIM OF DEPRECIATION ON VEHICLE , THOUGH PURCHASED IN THE NAME OF DIRECTOR WHICH MUST BE PROVED TO HAVE BEEN USED EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. IN THE PRESENT CASE ASSESSEE HAS NOT PROVIDED ANY LOG BOOK MAINTAINED TO ESTABLISH THAT THE VEHICLE WAS USED DURING THE RELEVANT F.Y. FOR THE PURPOSES OF BUSINESS TO BE ELIGIBLE FOR DEPRECIATION. LD.CIT(A) HAS NOT CALLED FOR/VERIFIED ANY SUCH DETAILS. FURTHER A VERY CATEGORICAL OBSERVATION BY LD.AO REGARDING THE DATE OF PURCHASE OF VEHICLE BEING 31.03.2009 ESTABLISHES THAT VEHICLE COULD NOT HAVE BEEN USED DURING THE RELEVANT F.Y. THIS VERY FACT HAS BEEN IGNORED BY LD.CIT(A). ASSESSEE HA S ALSO NOT PROVED BEFORE LD.CIT(A) THE UTILIZATION OF VEHICLE DURING THE RELEVANT F.Y. FOR JUSTIFYING THE CLAIM OF DEPRECIATION . WE, THEREFORE, REVERSE THE FINDINGS OF LD.CIT(A) WHICH IS NOT BASED UPON THE FACTS OF THE PRESENT CASE. ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 8 ACCORDINGLY THIS GR OUND R AISED BY REVENUE STANDS ALLOWED . 7 . GROUND NO.3 THIS ISSUE HAS BEEN DEALT ON PAGE 10 PARA 18 OF THE ASSESSMENT ORDER. THE ASSESSEE DID HAVE EXEMPT DIVIDEND INCOME. THE CIT(A) HAS DEALT WITH THE ISSUE ON PAGE 14 WHEREIN HE HAS REDUCED THE DISALLOWA NCE TO AN ESTIMATED AMOUNT OF RS.25,000 / - WHICH IS NOT PERMISSIBLE UNDER RULE 8D. THE REVENUE ALSO RELIES ON THE DECISION OF THE APEX COURT IN THE CASE OF MAXAPP INVESTMENT LTD. 91 TAXMANN.COM 154. 7.1. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT, DR ON THE BASIS OF RECORDS PLACED BEFORE US. 7.2. IT IS OBSERVED THAT LD.CIT(A) RESTRICTED DISALLOWANCE U/S 14A R.W. RULE 8D AT RS.25,000/ - WITHOUT ANY BASIS. WE DIRECT LD.AO TO RE - COMPUTE DISALLOWANCE U/S 14A R.W. RULE 8D HAVING REGARD TO VARIOUS DEC ISIONS OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. HOLECIM INDIA P.LTD. (2015) 57 TAXMANN.COM 28 AS WELL AS THE DECISION OF APEX COURT IN THE CASE OF MAXAPP INVESTMENT LTD. (SUPRA). ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED FOR STA TISTICAL PURPOSES. 8 . GROUND NO.4 THIS ISSUE HAS BEEN DEALT BY THE AO ON PAGE 12 PARA 19 OF THE ASSESSMENT ORDER. THE AO HAS INVOKED E XPLANATION TO SEC.73 OF THE ACT . THE CIT(A) HAS DEALT WITH THE ISSUE ON PAGE 17 WHEREIN HE HAS MIXED UP THE PROVISIONS O F SECTION 43(5)(D) REGARDING FUTURES & OPTIONS AND THE DEEMING PROVISION UNDER E XPLANATION TO ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 9 SECTION73(1) AND WRONGLY HELD THAT W.E.F. 2006 - 07 - E XPLANATION TO SECTION 73(1) DOES NOT APPLY, FOR WHICH THERE IS NO LEGAL BASIS. IN FACT E XPLANATION TO SECTI ON 73(1) IS THE DEEMING PROVISION AND OVER RIDES OTHER PROVISIONS OF THE ACT INCLUDING SECTION 43(5)(D). MOREOVER, THE ASSESSEE HAS NOT DEALT ONLY IN FUTURE AND OPTION BUT ALSO IN SHARES. 8.1. WE HAVE PERUSED SUBMISSIONS ADVANCED BY LD.CIT, DR ON THE BASI S OF RECORDS PLACED BEFORE US. FROM THE SUBMISSIONS FILED BY ASSESSEE BEFORE LD.CIT(A) , I T IS OBSERVED THAT ASSESSEE TRIED TO ESTABLISH BEFORE LD.CIT(A) THAT SHARE TRADING WAS BUSINESS ACTIVITY AS PER S.43(5)(D) OF THE ACT. IT HAS BEEN SUBMITTED BY ASSE SSEE BEFORE LD.CIT(A) THAT , IT FULFILS ALL REQUIRED CRITERIA OF S.43(5)(D) OF THE ACT, AND, THEREFORE, PROFIT AND LOSS ACCRUED TO ASSESSEE CANNOT BE CONSIDERED AS SPECULATIVE AS PER EXPLANATION TO S EC .73(1) OF THE ACT. BEFORE LD.AO ASSESSEE SUBMITTED THAT AN ADDITIONAL ACTIVITY OF TRADING IN SHARES HAS BEEN CARRIED OUT BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION AGAINST WHICH A LOSS HAS BEEN INCURRED. THUS, ASSESSEE ADMITS TO THE FACT THAT TRADING IN SHARES WAS UNDERTAKEN BY ASSESSEE DURIN G THE YEAR UNDER CONSIDERATION FOR THE FIRST TIME AND IT HAS BEEN ABLE TO SHOW THAT IT WAS AN INVESTMENT COMPANY. EXPLANATION TO S EC .73 IS ATTRACTED THE MOMENT ANY ASSESSEE DOES NOT FALL WITHIN THE EXCLUDED CATEGORIES STATED THEREIN AND SUCH ASSESSEE SHALL BE DEEMED TO BE CARRYING ON SPECULATION BUSINESS TO THAT EXTENT FOR THE PURPOSES OF S EC .73. THE APPLICATION OF THE SAID EXPLANATION HAS TO BE CONSIDERED AS A WHOLE AND NOT IN PART. THE EXPLANATION HAS THE IMPORT OF TREATING THE TRANSACTION ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 10 OF PURCHASE A ND SALE OF SHARES WHICH OTHERWISE IS NOT OF SPECULATIVE NATURE, DEEMED TO BE A SPECULATION BUSINESS. THEREFORE, TO INTERPRET THAT THE SAID EXPLANATION APPLIES ONLY TO A CASE WHERE THERE IS A SPECULATION BUSINESS IN TERMS OF EXPLANATION 2 TO SEC.28 IS NOT MANDATED BY LAW. THE DEEMING FICTION CONTAINED IN EXPLANATION TO SEC.73 IS IN RELATION TO THE ENTIRE ACTIVITY OF PURCHASE AND SALE OF SHARES WHETHER OR NOT THEY WERE EFFECTED BY ACTUAL DELIVERY. WE THEREFORE, DISAGREE WITH THE OBSERVATIONS OF LD.CIT(A) THAT LOSS ACCRUED TO ASSESSEE COULD BE SET OFF AGAINST OTHER BUSINESS INCOME . ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED. 9 . GROUND NO.5 THE AO HAS DEALT WITH THE ISSUE ON PAGE 13 PARA 22 WHILE THE CIT(A) HAS DEALT WITH THE SAME ON PAGE 29 OF HIS ORDER. AS PER THE AO THE CORRESPONDING PROPERTIES WERE PURCHASED AS INVESTMENT AND WERE BEING SHOWN YEAR AFTER YEAR AS INVESTMENT. THE INTEREST ON BORROWED FUNDS UTILIZED FOR SAID INVESTMENTS WERE APPARENTLY CAPITALIZED (SUBJECT TO VERIFICATION) . DURING THE YEAR THE ASSESSEE CONVERTED THE SAID INVESTMENT INTO STOCK IN TRADE AND THEN VALUED IT AT MARKET VALUE ON THE CLOSING DATE OF THE YEAR. APPARENTLY THE ASSESSEE FURNISHED A VALUATION REPORT AT THE APPELLATE STAGE WHICH IS AN ADDITIONAL EVIDENC E. MOREOVER, ON CONVERSION OF INVESTMENT INTO STOCK - IN - TRADE FIRST CAPITAL GAIN OR CAPITAL LOSS IS TO BE COMPUTED AND ONLY AFTER THAT THE ISSUE OF BUSINESS PROFIT OR BUSINESS LOSS WOULD ARISE. 9.1. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT, DR ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 11 O N THE BASIS OF RECORDS PLACED BEFORE US. ON PERUSAL OF ORDER PASSED BY LD.CIT(A), I T IS OBSERVED THAT LD.CIT(A) HAS NOT TAKEN INTO CONSIDERATION THE MANNER IN WHICH THESE PROPERTIES HAVE BEEN TREATED BY ASSESSEE IN THE PAST. IT IS OBSERVED THAT LD.CIT(A ) HAS NOT CALLED FOR ANY DETAILS REGARDING THE VALUE OF THE PROPERTIES AS ON THE DATE OF CONVERSION IN ORDER TO ASCERTAIN THE ACTUAL LOSS, IF ANY, POST CONVERSION OF THESE PROPERTIES INTO STOCK - IN - TRADE. WE, THEREFORE, DIRECT LD.AO TO CALL FOR RELEVANT D ETAILS FROM ASSESSEE AND VERIFY THE SAME AS PER LAW. ASSESSEE SHALL FURNISH ALL REQUISITE DETAILS OF CONVERSION OF PROPERTIES AS STOCK - IN - TRADE. LD.AO WHILE CONSIDERING THE CLAIM OF ASSESSEE SHALL ALSO TAKE INTO CONSIDERATION THE SURRENDER MADE BY ASSESSE E DURING THE SURVEY PROCEEDINGS. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 10 . GROUND NO.6 LD.CIT DR SUBMITTED AS UNDER: C ORRESPONDING REFERENCE IS IN PARA 24 ON PAGE 15 OF THE ASSESSMENT ORDER. DURING THE COURS E OF SURVEY SMALL SLIP PADS WERE SEIZED WHICH CONTAIN THE DETAILS OF CASH TRANSACTIONS. THE ASSESSEE WAS ASKED TO EXPLAIN THESE TRANSACTIONS. HOWEVER, AT THE TIME OF SURVEY NO EXPLANATION WAS FURNISHED. LATER ON IT WAS CLAIMED THAT THESE TRANSACTIONS ARE O F CIRCULATING NATURE OF UNACCOUNTED MONEY LENDING OPERATIONS FOR CYCLE NOT EXCEEDING 30 DAYS ON WHICH A COMMISSION OF 1.5% IS CHARGED. THE ASSESSEE'S EXPLANATION IS MENTIONED ON PAGE 16 & 17 OF THE ASSESSMENT ORDER. VIDE PARA 24.1 OF THE ORDER, THE AO REJE CTED THE CLAIM OF THE ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 12 ASSESSEE FOR CLAIMING BENEFIT OF PEAK AND ROTATION OF FUNDS. AS PER THE ASSESSMENT ORDER PAGE 19, THE ASSESSEE DID NOT FILE THE WORKING OF PEAK ARRIVED AT RS.L.93 CRS NOR DID IT FURNISH THE DETAILS OF DAILY PAYMENT AND RECEIPTS WITH T HE BALANCE CASH AVAILABLE EVERY DAY. IN PARA 24.2, THE AO ALSO DISCUSSES S O ME INSTANCES WHERE THE CASH TRANSACTIONS WERE IN RESPECT OF SALES. SOME OTHER INSTANCES ARE ALSO DISCUSSED IN THE SAID PARA TO ESTABLISH THAT THERE HAS BEEN NO ROTATION OF FUNDS. SI MILAR ILLUSTRATION HAS BEEN GIVEN IN PARA 24.3, 24.4 & 24.5 AS WELL. AS MENTIONED IN PARA 24.5 CERTAIN TRANSACTIONS COULD NOT BE EXPLAINED AT ALL. IN THIS BACKGROUND THE AO ADDED THE GROSS AMOUNT OF RS.9.25 CRS AND REDUCED THE AMOUNT OF RS.3 CRS SURRENDERE D THEREBY MAKING AN ADDITION OF RS.6.25 CRS. THE CIT(A) HAS GIVEN HIS FINDINGS ON PAGE 41 OF THE ORDER . IN THE PRECEDING PURCHASES THE CIT(A) HAS JUST REDUCED THE EXPLANATION OF THE ASSESSEE AND HIS FINDINGS ARE MORE BRIEF AND CRYPTIC WHEREIN THE ASSESSEE' S EXPLANATION WAS ACCEPTED WITHOUT RECORDING HIS OWN SATISFACTION AS TO HOW HE WAS SATISFIED ABOUT THE CLAIM OF ROTATION OF FUNDS AND WORKING OF PEAK. EVEN THE WORKING OF PEAK HAS NOT BEEN GIVEN IN THE ASSESSMENT ORDER. AFTER ACCEPTING THE ASSESSEE'S VERSI ON CIT(A) G A VE SET OFF OF THE SAME AGAINST THE AMOUNT OF RS.3 CRS DECLARED. IT IS STRANGE THAT IN THE SAME PARA THE CIT(A) HAS ALSO MADE AN OBSERVATION THAT THE ASSESSEE SHOULD HAVE GOT AUDIT DONE OF THE MONEY LENDING BUSINESS AND IT CONCEALED ITS INCOME W HICH MEANS THAT EVEN THE CIT(A) HAD NOT SATISFIED HIMSELF REGARDING THE CORRECTNESS OF PEAK. THEREFORE, THE REVENUE'S APPEAL SHOULD BE ALLOWED. 10.1 . WE HAVE PERUSED SUBMISSIONS ADVANCED BY LD.CIT, DR ON ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 13 THE BASIS OF RECORDS PLACED BEFORE US. ON PERUSA L OF ASSESSMENT ORDER AS WELL AS THE ORDER OF LD.CIT(A), IT IS OBSERVED THAT PEAK OF ALL TRANSACTIONS AMOUNTING TO RS. 1,93,66,043/ - HAS NOT BEEN EXPLAINED BY ASSESSEE TRANSACTION - WISE. L D.AO CATEGORICALLY MENTIONED THAT NO MONEY WAS IN R OTATI ON . IN FACT LD.AO OBSERVES THAT ASSESSEE WAS NOT AT ALL IN MONEY LENDING ACTIVITY , AS HAS BEEN OBSERVED BY LD . CIT(A). MERELY ACCEPTING BALD STATEMENTS OF ASSESSEE WITHOUT ANY SUPPORTIVE EVIDENCES CANNOT BE ACCEPTED . IT IS OBSERVED THAT A SSESSEE HAS NOT B EEN ABLE T O SUBSTANTIATE GENERATION OF CASH , NEITHER DURING ASSESSMENT STAGE NOR BEFORE LD.CIT(A) , BECAUSE OF WHICH SURRENDER WAS MADE DURING SURVEY PROCEEDINGS. WE DIRECT LD.AO TO COMPUTE PEAK OF ENTRIES IN THE SLIP PADS SEIZED CONTAINING DETAILS OF CASH TRANSACTI ONS. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED . 11. GROUND NO.7, 9, 10 & 11 LD.CIT DR SUBMITTED AS UNDER: THESE ADDITIONS ARE BASED ON SEIZED DOCUMENTS AND REFERRED TO IN PARA 25 PAGE 21 (RS.10,82,900), PARA 27.1 PAGE 24 (RS. 9 LAKHS), PA RA 28.1 PAGE 25 (RS.68,37,238) AND PARA 29.1 PAGE 26 (RS.7,18,678) . THE CIT(A) ON PAGE 52 OF THE ORDER HAS APPARENTLY UP HELD THE ADDITION ON MERITS BUT HAS SET OFF THE SAME AGAINST THE DISCLOSURE MADE BY THE ASSESSEE NOTWITHSTANDING THE FACT THAT THE DISC LOSURE OF THE ASSESSEE DID NOT COVER THE CORRESPONDING SEIZED DOCUMENTS AND CANNOT BE SET OFF AGAINST THE SAME FOR THE REASON THAT THE ASSESSEE'S CONTENTION OF THE PEAK THEORY ITSELF WAS REJECTED. ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 14 11.1 . WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT, DR ON THE BASIS OF RECORDS PLACED BEFORE US. IT IS OBSERVED FROM ASSESSMENT ORDER THAT THE PEAK CRE DIT COMPUTED BY ASSESSEE OF RS. 68,37,238/ - BEING TRANSACTION TOTALLING IN ANNEXURE A 3 AT PAGE 36 AND 37 OF THE SEIZED DOCUMENTS INCLUDES RS.7,79,000/ - . LD. AO HAS VERY CATEGORICALLY OBSERVED THAT THE PEAK REFERRED BY ASSESSEE IS IN RESPECT OF THE ENTRIES CONTAINED IN SLIP PADS MARKED AS ANNEXURES A 17 - A 33 AND NOT IN RESPECT OF ANNEXURE A3 CONTAINED AT PAGE 33 AND 36. IT IS ALSO OBSERVED BY LD. AO THAT RS. 3 CRORES SURRENDERED BY ASSESSEE WAS IN RESPECT OF UNACCOUNTED TRANSACTIONS RECORDED IN SLIP PADS ANNEXURE S A 17 - A 33 WHICH COVERS THE ADDITION OF RS.9,25,31,613/ - WHICH HAS ALREADY BEEN TAKEN INTO CONSIDERATION IN PARAGRAPHS 24.6 OF THE ASSESSMENT ORDER . IT IS FURTHER OBSERVED THAT LD. CIT HAS AT THE OUTSET UPHELD ADDITIONS ON MERITS , HOWEVER , HE HAS WRONGLY GIVEN SET OFF OF THE SAID AMOUNT AGAINST THE SURRENDERED INCOME OF RS. 3 CRORE WHICH IS ACTUALLY IN RESPECT OF A DIFFERENT SET OF ANNEXURES. WE THEREFORE DO NOT FIND ANY INFIRMITY IN LD. AO IN MAKING THIS ADDITION AS NOTHING ELSE HAS BEEN SUBMITTED BY ASSESSEE BEFORE LD. CIT (A) WHICH WOULD REQUIRE ANY FURTHER VERIFICATION. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS ALLOWED. 12 . GROUND NO. 8 LD.CIT DR SUBMITTED AS UNDER: THE AO HAS DEALT WITH THE SAME THE CORRESPONDING DISCUSSION IN PARA 26 AND 26.1 ON PAGE 22 & 23 OF THE ASSESSMENT ORDER. THE ASSESSEE CLAIMED THAT THESE ARE OUTSTANDING AMOUNT RECOVERABLE FROM VARIOUS DEBTORS AND PAPERS CON STITUTED A DUMB DOCUMENT. THE CIT(A) ON PAGE 45 & 46 ACCEPTED THIS CONTENTION AND GAVE A ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 15 RELIEF FOR THE REASON THAT THE AO DID INVESTIGATE THE MATTER FURTHER WITH REFERENCE TO THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE CIT(A) IGNORED THE OBSERVATION OF AO IN PARA 26.1 THAT THE TRANSACTIONS ARE NOT REFLECTED IN BOOKS OF ACCOUNTS. IN ANY CASE IF NOT H ING REFLECTED AMOUNT RECEIVABLE FROM DEBTORS, IT SHOULD HAVE MATCHED WITH THE REGULAR BOOKS OF ACCOUNTS FOR WHICH THE ONUS WAS ON THE ASSESSEE AND NOT ON THE AO . IF AT ALL THIS ONUS WAS ON THE AO THEN IT WAS ALSO ON THE CIT(A) IN VIEW OF THE DECISION IN THE CASE OF JANSAMPARK ADVERTISING REPORTED AT 275 ITR 373. 12.1. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD.CIT,DR ON THE BASIS OF RECORDS PLACED BEFORE US. 12.2. ON PERUSAL OF ORDERS PASSED BY THE AUTHORITIES BELOW, IT IS OBSE RVED THAT THE ASSESSEE HAS NOT DISCHARGED ITS ONUS OF PROVING THESE DOCUMENTS TO BE DUMB DOCUMENTS. LD.AO IS DIRECTED TO INVESTIGATE AND ENQUIRE FROM THE BOOKS OF ACCOUNTS OF THE ASS ESSEE REGARDING THE REGULAR CUSTOMER S OF ASSESSEE AND TRANSACTIONS WRITTEN OFF IN RESPECT OF THE SAME. ASSESSEE SHALL ASSIST LD.AO IN ORDER TO VERIFY THE RELEVANT DETAILS BY PROVIDING NECESSARY INFORMATION/PRODUCING EVIDENCES IN SUPPORT OF ITS WRITE - OFF. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2018. SD/ - SD/ - (N.K.BILLAIY A) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 24 TH JULY, 2018 MANGA ITA 2297/DEL/2014 ASSESSMENT YEAR: 2009 - 10 ITO VS. KALR A PAPERS P LTD. 16 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES