ITO, BIKANER V. M/s. Bombay Builder, BIKANER

ITA 260/JODH/2017

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2999 (ITAT-JODHPUR)
• Duration Of Justice: 6 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-01-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 15-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Loose papers; Cost of acquisition; Notional interest; Onus to prove
• Section: 131; 68; 44AD; 11; 43CA; 143(3); 50C; 133A; 133(6); 143(2); 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 260/Jodh/2017 Assessment Year: 2012-13 Income Tax Officer Ward-1(1), Bikaner Aayakar Bhawan, Rani Bazar, Bikaner [PAN: AAKFB 4840 R] (Appellant) Vs. M/s Bombay Builders, C/o Bombay Mall, Near Jhanwar Bus Stand, Sri Dungargarh, Bikaner (Respondent) Appellant by Sh. Amit Kothari, CA Respondent by Ms Nidhi Nair, Sr. DR Date of Hearing 31.01.2024 Date of Pronouncement 15.04.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-Bikaner dated 25/01/2017 [here in after ‘CIT(A)’ ] for assessment year 2012-13 which in turn arise from the order dated 10.04.2015 passed under section 143(3)/147 of the Income Tax Act, by ITO, Ward-1(3), Bikaner. 2. In this appeal, the revenue has raised following grounds: - I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 2 “1. "Whether on the facts an in the circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs. 18,38,500/. made u/s 68 as the assessee has failed to prove the creditworthiness and genuineness of the transaction, especially when the advances were treated as bogus and also ignoring the facts that the addition was based on the statements recorded, the facts established during survey/post survey enquiries that the transactions of the assessee firm were outside the books of accounts and no regular books were found during the course of survey dated 18-09-2013. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 4,41,893/- made on account of suppression of profits by the AO in the basis of statement of one of the purchasers in the course of post survey enquiries, the facts that the transactions were outside the books of account and the loose papers impounded which have been completely ignored by the CIT(A) while deleting the addition without specifying any reasons. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,50,00,000/- made on account of investment outside the books of accounts by the assessee especially when making the addition, reliance was placed on the contents of the diary found during the course of survey which recorded transaction which reveal that purchase price was higher than the prices on which the transaction were got registered. 4. Whether on the facts and in the circumstances of the case, the Ld. CT(A) has erred inn deleting the addition of Rs. 1,36,640/- made on presumptive basis by the Assessing Officer in respect of receipts on the basis of incriminating papers impounded during survey. 5. Whether on the facts and in the circumstances of the case, the Ld. CT(A) has erred in deleting the addition of Rs 6,60,000/- made by the Assessing officer on account of interest on advances given by the assessee to various persons having no business transactions for substantial period out of available surplus fund." 3. Succinctly, the fact as culled out from the records is that the the assessee firm filed e-return of income on 31.03.2013 declaring total income of Rs.23,030/-. The case was selected for scrutiny through CASS and notice u/s 143(2) of the I.T. Act, 1961 was issued on 23.09.2013 which was duly served as per records. The firm submitted I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 3 returns for the A.Y. 2012-13 u/s 44AD of the I.T. Act, 1961 and according to the provisions maintaining books of accounts and audit of the same is not required. 3.1 The survey was conducted at the business premises and it is pertinent to note that the books of accounts were not found at the business premises during the course of survey. However, the computerized books of accounts with bills / vouchers were produced on 19.09.2013 after the survey took place which are just an afterthought. The partnership firm in the name and style of M/s. Bombay Builders, located office at Near Jhanwar Bus Stand, National Highway-11, Sri Dungargarh was formed by virtue of Partnership Deed dated 27.11.2010 which was registered in the office of the Registrar of Firms, Bikaner on 02.12.2010. The business of partnership firm have been commenced from 27th November, 2010 and the details of the partner and their profit / loss sharing ratio is as under : 1. Abdul Khalique 75% 2. Abdul Aziz 12% 3. Mohd. Salim 13% 3.2 The assessee in the return filed on 31.03.2013 for the A.Y. 2012- 13 has declared net profit of Rs.2,30,280/- on the gross receipts of I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 4 Rs.28,78,500/- u/s 44AD. As per Computation of Income the assessee has deducted remuneration to the partners of Rs.2,07,252/- out of the net profit of Rs.2,30,280/- and thus declared taxable income of Rs.23,030/-. The instant case was selected through CASS for examination the issue "large investment in property as compared to total income". Besides, a survey operation u/s 133A of the I.T. Act, 1961 was carried out in this case on 18.09.2013. The certain loose papers, diaries, note books, documents etc. were found and impounded during the course of survey proceedings and statements were recorded which pertains to A.Υ. 2011-12 to A.Y. 2014-15. 3.3 Considering the replies filed, the issues relating expenses of Trading and Profit & Loss Account are not being taken up but this being a survey case and selected through CASS for specific purpose the issues relating to total turnover or having nexus with the turnover and balance sheet are being considered herein as per provisions of the law. 3.4 The assessee has shown advances for Shops of Rs.20,19,500/- as per Balance Sheet as on 31.03.2012. The assessee has submitted the details of advances as under:- Advances on Shops in Bombay Mall I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 5 Name of Buyer Shop No. Amount Ashok Sidhi 2 6,50,000 Bhawani Shankar 7 3,00,000 Gulab Nabi Khokhar 19 63,000 Inder Chander Choudhary 9a, 9b 6,56,500 Mahesh Rajotia 8,17 3,50,000 Total Rs. 20,19,500 From the ledger accounts of the respective persons viz-a-viz Cash Book / Bank account, it is seen that the assessee has received alleged advances for Shops in Bombay Mall as under:- Name of Buyer Ashok Sidhi Rs.5,50,000/- in Cash and Rs.1,00,000/ - through Cheque Bhawani Shankar Received in Cash last year Gulab Nabi Khokhar Sale of Shop Inder Chander Choudhary Rs. 1 Lac last year and Rs.4,56,500/- on 05.07.2011 Mahesh Rajotia Last year Advances on Plots for in Colony No. 1 : The assessee has also shown advances on plots in the Balance Sheet and the break-up of the advances is as under:- Name of Buyer Amount Astha, D/ o Narendra Kumar Jain 1,50,000 Ganesh, S/ o Sawanta Ram Jat 1,80,000 Mohd. Sakil, S/o Mohd. Salim 5,00,000 TOTAL Rs. 8,30,000 From the ledger accounts of the respective persons viz-a-viz Cash Book, it is seen that the assessee has received alleged advances for plots in Colony No. 1 as under:- I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 6 Name of Buyer Astha, D/o Narendra Kumar Jain Rs.1,50,000/- in Cash Ganesh, S/o Sawanta Ram Jat Rs.1,80,000/- in Cash Mohd. Sakil, S/o Mohd. Salim Rs.5,00,000/- in Cash 3.5 Therefore, Summons u/s 131 were issued to Ashok Sidhi, Ganesh, Sahil, Kumari Astha on the addresses as intimated by the assessee but the same returned back by the Postal Authorities unserved being incomplete addresses. A reply on behalf of Ashok Sindhi has been received from his A/R Sh. D.K. Soni, CA on 11.03.2015. On perusal of his bank account it is seen that a withdrawal of Rs.1,00,000/- through cheque was made but no other withdrawal or no sufficient balance is shown in his bank account to prove the cash payment of Rs. 5,50,000/-. Therefore, vide show cause notice u/s 142 dated 06.02.2015, the assessee to required to produce in person to Kumari Astha, D/o Narendra Kumar Jain, Ganesh, S/o Sawanta Ram Jat, Ashok Sidhi, Mohd. Sakil with the proof of their ID, proof of their residential ID, copy of ITR with Computation of Income, Balance Sheet, Capital Account and copy of Bank account so as to prove the advances so received from them. But the A/R of the assessee vide written reply has submitted copy of their account only and thus the assessee failed to produce the above persons with the proof so I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 7 required. Since, the assessee has failed to prove the identity, creditworthiness and genuineness of transaction, the alleged advances has received in cash are not proved. Even otherwise the alleged advances are bogus for the following reasons:- (i) The statements of Sh. Salim Baheliya Urf Mohd. Salim Nazir Qureshi, partner of the firm were recorded on 23.09.2013 who stated that while taking money as advance, or part or full payment in satisfaction in transaction from the purchaser no receipts were issued during the year. (ii) The statements of Sh. Salim Baheliya Urf Mohd. Salim Nazir Qureshi, partner of the firm were also recorded on 18.09.2013 during the course of 42 survey proceedings wherein he stated that लाट बेचने स ब धी हसाब कताब ऊपर ऊपर ह रखा है। Thus, it is obvious that the assessee firm made transactions out of books. (iii) No regular books of accounts were found at the time of survey. The computerized books of accounts have been produced at the time of post survey proceedings. (iv) A perusal of Registered Deeds of the Shops sold by the assessee in subsequent year it is seen that the sale considerations as mentioned in the deeds were paid and received at the time of registration. When the full consideration was given and taken at the time of registration, no question arise to have received alleged advances. In view of the above, the advances shown by the assessee are bogus. Thus, alleged advance of Rs.5,50,000/- from Ashok Sindhi, Rs.4,56,500/- from Inder Chand Choudhary, Rs.1,50,000/- from Kumari Astha, Rs.1,80,000/- from Ganesh and Rs.5,00,000/- from Mohd. Sakil being bogus are added back to the income of the assessee being unexplained credit u/s 68 of the I.T. Act, 1961. Thus, an addition of Rs.18,36,500/- is made under this head. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 8 3.6 The assessee has declared total turnover of Rs. 28,78,500/- in the Trading cum P&L Account. As per details submitted by the assessee, the assessee has made sales of the shop in the Bombay Mall to the following persons as under:- Name of Buyer Shop No. Amount Gulab Nabi Khokhar 19 2,37,000 Julekha Khokhar 6 3,13,000 Savitri Devi 20 4,84,000 Shanti Lal Daga 4,5 7,30,000 Tayssum, W/o Salim 18 2,50,000 Sita Ram, S/ o Jetha Ram 11 2,64,500 Ramesh Kumar & Geeta Devi 3 6,00,000 TOTAL Rs. 28,78,500 It is pertinent to note that the sale consideration as shown by the assessee is not correct. The assessee has been found to suppress the amount of sale by getting registered the documents of sale of Shops to the customer on lower prices than the actual amount of deals which is based on the following facts and circumstances/evidences:- 1. The statement of Smt. Savitri Devi, one of the purchaser of Shop No.20 were recorded on 11.06.2014 who in her statements had admitted that the sale of Shop was made to her about Rs 7,00,000/ 2 A number of loose papers were found and impounded at the time of survey. From the back side of Page No.25 of exhibit B-7 as found and impounded at the time of survey it is seen that the assessee sold a Shop to Mahesh Rajotia on ground floor measuring 204.03 sq. feet @ Rs.8.500/-sq. feet Rs.17,34,255/-. 3. On perusal of Registered Deeds of the above shops it is seen that the Sub- Registrar had valued the documents on higher prices as per details given below:- I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 9 (i) Registered Deed dated 25.01.2012 in the case of Shop No.11 sold to Sita Ram Nai was valued by the Sub-Registrar at Rs * 0.3 ,70,892/- in place of Rs.2,64,500/-. (ii) Registered Deed dated 19.03.2012 in the case of Shop No.3 sold to Ramesh Kumar Rajpurohit and Geeta Devi was valued at Rs.8,40,241/- in place of Rs.6,00,000/-. (iii) Registered Deed dated 21.11.2011 in the case of Shop No. 4 & 5 sold to Shanti Lal Daga was valued at Rs.9,17,000/-in place of Rs * 0.7 ,30,000/ - (iv) Registered Deed dated 02.11.2011 in the case of Shop No. 20 sold to Savitri Devi was valued at Rs.6,59,983/-in place of Rs.4,84,000/-. (v) Registered Deed dated 25.08.2011 in the case of Shop No. 6 sold to Julekha Khokhar was valued at Rs.3,45,645/- in place of Rs.3,13,000/-. (iv) Registered Deed dated 25.08.2011 in the case of Shop No.19 sold to Gulab Nabi Khokhar was valued at Rs.2,60,899/- in place of Rs.2,37,000/-. It is pertinent that the Sub-Registrar appears to have applied the non commercial rates whereas the Shops comes under the category of commercial activities. 3.7 The ld. AO further noted that the statements of Sh. Salim Baheliya Urf Mohd. Salim Nazir Qureshi were also recorded on 18.09.2013 during the course of survey proceedings wherein he stated that लाट बेचने स ब धी हसाब कताब ऊपर ऊपर ह रखा है। Thus, it is obvious that the assessee firm made transactions out of books. The books so produced are manipulated and afterthought. As per Page-6 of Ex. B-8 as found and impounded at the time of survey, the assessee firm received Rs.5,00,000/- on 19.06.2011 from Sita Ram Nai and balance I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 10 Rs.1,00,786/- was to be received for Shop No.11 whereas the sale price of the Shop No.11 sold to Sita Ram Nai has been shown by the assessee at Rs.2,64,500/- .In view of the above, a show cause notice was issued vide notice u/s 142 dated 10.03.2015. The A/R of the assessee in response to the above show cause notice vide written reply dated 13.03.2015 has submitted that "The assessee firm has sold all Shops and Plots on DLC or market rate applicable at the time of sale and provisions of section 50C of the Income Tax Act, 1961 is not applicable to the trader of product and same provision is applicable for capital gain transaction not for the trader etc." The reply of the A/R of the assessee is not satisfactory when the assessee firm itself has stated to have sold the plots on DLC or market rate at the time of sale. As already stated that the assessee has been found to have sold the shops on higher prices which also proves from the statements of its partner Sh. Salim Baheliya Urf Mohd. Salim Qureshi as discussed supra. Therefore, having consistency with the document found during the course of survey the rate of Rs.8,500/- per sq. feet is applied in respect of above Shops as the same are also on the ground floor. In this background the sale value of Shops is worked out as under:- Shop No. Size Value 11 112.50 sq : feet Rs. 9,56,250 3 177.88 sq. feet Rs.15,11,980 I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 11 18 87.42 sq. feet Rs. 7,43,070 4 118.44 sq. feet Rs.10,06,740 5 118.44 sq. feet Rs.10,06,740 20 174.94 sq. feet Rs.14,86,990 6 113.31 sq. feet Rs. 9,63,135 19 85.56 sq. feet Rs. 7,27,260 TOTAL Rs. Rs.84,02,165 Therefore, the sale value of the Shops is taken at Rs.84,02,165/- and thus. addition in sale/turnover is made for an amount of Rs.55,23,665/- (Rs.84,02,165/- minus Rs 28,78,500/-). Since, the assessee has declared net profit u/s 44AD, the additional net profit @ 8% is calculated on the additional sale proceeds of Rs.55,23,665/-which comes to Rs 4,41,893/- which is added back to the income of the assessee. 3.8 It is seen that partner Sh. Mohd. Salim Qureshi made a withdrawal of Rs.12,500/- in each month which appears to be for household expenses. Besides, he also made withdrawal of Rs.10,00,000/- on 02.11.2011. But no interest has been charged on the withdrawals. Therefore, interest @ 12% is charged for 5 month which comes to Rs.50,000/- which is added back to the income of the assessee. 3.9 Survey in this case was carried out on 18.09.2013 and certain loose papers, diaries, notebook and other documents were impounded A I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 12 pocket diary was found and impounded as marked Ex. B-2. On perusal of page no. 9 of the same it is revealed that the assessee purchased the lands for developing colonies on higher prices than the prices on which the deeds were got registered as well as the prices which are recorded in the books of accounts. It is further seen that the during this year assessee firm so as to develop the Bombay Colony No. 1 has purchased lands at Rohi Kasba Sri Dungargarh three kilometers away from the local Ghoomchakar as under:- (1) Khasra No. 1107, 1.90 Hect. from Kanak Kumar Rs.40,00,000/- on 18.11.2011. (2) Khasra No. 1102, 1.90 Hect, from Saroj Devi Puglia, W/o Vimal Kumar Puglia, Rs.40,00,000/- on 17.11.2011. (3) Khasra No. 1104, 1105, 1106 2.28 Hect. from Ratan Lal, Sunita Devi and Kanak Kumar Rs.90,00,000/-on 09.12.2011. From the Registered Deeds it is seen that payments were made through cheques of Bank of Bardoa, Sri Dungargarh as per details mentioned in the deeds itself. When the details of payment made viz-a- viz the bank account, books of accounts were matched it was seen that the assessee made excess payment of Rs.18,00,000/- on 20.04.2011 to Smt. Sunita Devi, Rs.17,00,000/- on 23.04.2011 to Kanak Kumar. The excess payments made to them were received back from them on 21.11.2011. Similarly, from the ledger account it was seen that the assessee made payment of Rs.35,00,000/- and Rs.25,00,000/- on 20.04.2011 and I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 13 22.11.2011 respectively to Vimal Kumar Puglia husband of Smt. Saroj Puglia and received back the sum of Rs.35,00,000/- on 22.11.2011 and thus shown Vimal Kumar Puglia Colony No. 1 in the Balance Sheet under the head ‘Loans & Advances by Rs. 35,00,000/-. Therefore, a show cause was given vide notice u/s 142 dated 10.03.2015. The A/R of the assessee submitted reply dated 13.03.2015. The reply of the assessee is absurd and just to stand without any leg. It is unbelievable that the transactions in lacs of rupees were made by mistake due to mismatch of register owner's of land. Certainly the assessee firm has purchased these lands on higher prices than the prices shown in the Registered Deeds and/or in the books of accounts. 3.10 The information u/s 133(6) was also called for from the sellers but they have only submitted the proof of payment as mentioned in the registered deeds. Therefore, the matter has been referred to the Departmental Valuation Cell to elucidate the correct cost of acquisition of lands and year-wise cost of development of Colony No. 1 u/s 142 r.w.s. 131(1)(d) of the I.T. Act, 1961. This is a time barring case and the undersigned has no time as such the assessment is being completed subject to the report of the D.V.O. However, if, the excess payments I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 14 made by the assessee are considered then the cost of lands so purchased comes as under:- From Sunita, Ratan Lal and Kanak Kumar will be at Rs.1,08,00,000/- being Rs.90,00,000/- value as per deed + Rs.18,00,000/- excess payment to Sunita Devi Duggar. The value of land purchased from Kanak Kumar will be at Rs.57,00,000/- in place of Rs.40,00,000/- including excess payment of Rs.17,00,000/- made to him. The value of land sold to Saroj Devi Puglia will be at Rs.1,00,00,000/- including the payment of Rs.60,00,000/- made to her husband Sh. Vimal Kumar Puglia. Therefore, looking to the value of land of Saroj Devi Puglia measuring 1.99 Hect, which comes to Rs * 0.1, 0 ,00,000/-, the value of land of Kanak Kumar Duggar measuring 1.90 Hect. is also taken at Rs.1,00,00,000/- and to the same propionate the value of land of Ratan Lal, Sunita Devi and Kanak Kumar measuring 2.28 Hect. is taken at Rs * 0.1, 20 ,00,000/- as the all the lands are situated in the said location. Accordingly, the value of land purchased by the assessee comes to Rs.3,20,00,000/-. Therefore, the assessee has invested money of Rs. 1,50,00,000/- in purchase of land for Colony No. 1 from the above persons out of the books. Hence, an addition of Rs. 1,50,00,000/- made for investment made beyond the books of accounts or unexplained investment in purchase of lands. 3.11 During the course of survey incriminating loose papers/documents were found and impounded. A number of opportunities were offered to the assessee firm as well as partners to attend the office of the ld. AO and confront the material so impounded but none of the partners have I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 15 attended. Even Summons u/s 131 were issued to all the partners on 15.02.2015. However, the copies of above impounded documents were forwarded to the assessee vide notice u/s 142 dated 10.03.2015 and to explain the nature of the same and also to explain as to where these transactions were recorded in books of accounts. The assessee's A/R vide in response to the notice u/s 142 dated 10.03.2015 has submitted that the The assessee has explained regarding to loose papers S.No. 23 that ie. calculation of amount of any transaction either to be completed or not and i.e. not relevant to the assessee. The assessee being a real estate broker as well as trader and there are many transaction are discussed and either to be completed or cancelled depend an on the both parties, hence loose paper on which no name or title are printed are not relevant to the assessee, hence same may be exclude from our records." The reply of the A/R of the assessee is not satisfactory. When the assessee's A/R himself admitted that calculation of the amounts pertains to the transactions either to be completed or cancelled then the transactions so made, must be verifiable from the records of the assessee. The transactions recorded on loose papers are date-wise and certainly relates to the transactions of the business. The assessee has not recorded the said transactions which is proved for statement recorded of one partners of the assessee Sh. Salim Baheliya Urf Mohd. Salim Quershi who had already admitted in his statements at the time of survey that लॉट बेचने स ब धी हसाब कताब ऊपर ऊपर ह रखा है। while I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 16 taking money as advance, or part or full payment in satisfaction in transaction from the purchaser no receipts were issued during the year. Thus, these are the receipts of the assessee which have not been recorded in the books of accounts. Therefore, the profit u/s 44AD @ 8% is worked out on such receipts amounting to Rs.1,36,640/- which is added back to the income of the assessee. 3.12 The assessee had given advance of Rs.35,00,000/- on 20.04.2011 to Sh. Vimal Kumar Puglia which was received back on 22.11.2011. The assessee firm again on 22.11.2011 had given advance of Rs.25,00,000/- which was outstanding as on 31.03.2012 from him. The interest on such advances is chargeable @ 12% which the assessee firm has not charged when there is no business transaction from the said person. Hence, interest is charged @ 12% is considered to be charted as calculated here in below :- Rs. 35,00,000/- x 8 x 12 ÷12x100 = Rs. 2,80,000/- Rs. 25,00,000/- x 4 x 12 ÷12x100 = Rs. 1,00,000/- Rs. 3,80,000/- 3.13 Similarly, Rs.18,00,000/- was given to Sunita Devi Duggar on 27.04.2011 which was returned on 21.11.2011 and amount of Rs. 17,00,000/- was given on 23.04.2011 to Kanak Kumar Duggar which I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 17 was returned on 21.11.2011. Thus, interest is charged @ 12% as under:- Rs. 18,00,000/- x 8 x 12 ÷12x100 = Rs. 1,44,000/- Rs. 17,00,000/- x 8 x 12 ÷12x100 = Rs. 1,36,000/- Thus, interest @ 12% on the advances to Vimal Kumar Puglia Sunita Devi Duggar and Kanak Kumar Duggar comes to Rs. 3,80,000/-, Rs. 1,44,000/- and Rs. 1,36,000/- respectively and the same is added back to the income of the assessee. Accordingly, an addition of Rs. 6,60,000/- is made. 4. Aggrieved from the order of AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “I have considered the facts of the case and submissions of the appellant and I find that the AO made the addition of Rs. 18,36,500/- by observing that the assessee failed to establish the capacity of the alleged buyer nor could be establish the genuineness of the transactions. Accordingly, he treated these aforesaid advances as bogus & non genuine and added the same u/s. 68 of the Act. The appellant has contested the action of the AO by stating that burden of proving the capacity of the buyer does not lie upon him, the assessee is not suppose to guide the buyers on how to manage their funds. It was claimed by the appellant that amounts were received as advances against the sale of shops and after construction of the shops, the possessions of the same were handed over to the respective buyers, by this way the assessee discharged his burden of proof. I tend to agree with the appellant's submissions. The appellant by producing copy of sale deed established that it had already handed over or sold the shops to the respective buyers from whom he had received amounts in advance. In the instant case, this fact is most vital fact while deciding the issue in hand. When the amounts received by the appellant are duly entered in the books of accounts as advances received against sale of shops, then only requirement which needs to be I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 18 satisfied is that whether these shops were handed to these aforesaid buyers, which in the instant case is duly satisfied by the appellant by handing over the possession of these shops to respective buyers. It is not the case that these buyers were relatives of the assessee or any money or undue benefit was received back directly or indirectly by the assessee. There may be some adjustments while registering the sale/purchase documents but these adjustments would not render whole transactions as non genuine. Simply because the creditworthiness/capacity of these buyers/persons could not be established before the AO, it cannot be said that the advances received by the assessee were bogus or represents assessee's unaccounted money/income. Had the possession of shops would not have gone to these buyers, then these advances were under tremendous doubt, but by selling / giving possessions to these buyers, the assessee duly established the genuineness of advances received by it. Under these facts and circumstances there is no reason to doubt the genuineness of advances of Rs. 18,36,500/-. Accordingly, it is held that the appellant has duly explained the advances of Rs. 18,36,500/-. Hence, no addition is required to be made on this account, the addition is directed to be deleted. The ground of appeal is allowed. I have considered the facts of the case and submissions of the appellant and I find that the AO made the addition of Rs. 4,41,893/- by observing that the assessee suppressed the amount of sale by getting the documents of sale of shops to the customers registered at lower price than the actual amount of deals. The appellant claimed that sec. 50C is not applicable in its case, being a trader. I tend to agree with the appellant's contention. The provisions of sec. 50C do not apply to transfer of immovable property, held by the transferor as stock-in-trade meaning there by in case of Real estate sector the immovable property is normally kept as stock in trade, hence was not applicable. Though sec. 43C of the Act has been introduced w.e.f. 01-04-2013, the same is applicable from F Y2013-14. Even otherwise also, the AO failed to bring on record any concrete evidence on the basis of which it can be surely stated that the assessee had received more than what has been declared by it. Under these facts and circumstances, it is held that the AO was not justified in making the addition of Rs. 4,41,893/-. Accordingly, the addition of Rs. 4,41,893/- is directed to be deleted. The ground of appeal is allowed. The next ground of appeal is directed against the addition of Rs. 50,000/- being the interest on withdrawals made by the partner. The AO noted that the partner Sh. Mohd. Salim Quershi made a withdrawal of Rs. 12,500/- in each month on account of household expenses. The AO further noted that he also made withdrawal of Rs. 10,00,000/- on 02-11-2011, but no interest was charged on the withdrawals. Accordingly, interest @12% was charged for 5 months, which resulted in addition of Rs. 50,000/-. The appellant has contended that the AO erred in making the addition of Rs. 50,000/- on account of interest to be charged by the firm on debit balance of the partner. It was claimed that during the year under consideration, no interest was either I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 19 paid or received by the firm due to low profit, thus, it was not justified to charge interest on debit balance. I find that the AO worked out the notional interest of Rs. 50,000/- on the debit balance of one the partner Sh. Mohd. Salim Quershi. The assessee cannot be taxed on notional or hypothetical income. The obligation of the AO under the law is to tax the income correctly. In the instant case, interest income which has neither been earned nor accrued, cannot be deemed to be the income of the assessee. Under these facts and circumstances, it is held that the AO was not justified in making addition of Rs. 50,000/-, which is hereby directed to be deleted. The ground raised by the appellant regarding this issue is allowed. The next issue to be decided is regarding the addition of Rs. 11,000/- being unexplained cash deposit in bank. The AO noted that the assessee firm maintained bank account with Bank of Baroda, Sri Dungargarh, which opened on 14-12-2010 with cash deposit of Rs. 11,000/-. This amount was deposited out of cash received from Sh. Bhawani Shanker, Sh. Mohd. Salim and Sh. Mahesh Rajotia, which as per cash book as on 14.12.2010 was Rs. 8,21,000/- . Since the AO considered the cash received from these persons as unexplained, therefore, he treated the deposit of Rs. 11,000/- as unexplained cash deposit. I have already held that the advances received by the assessee were genuine and cash of Rs. 8,21,000/- was available with the assessee as on 14-12-2010, out of which Rs. 11,000/- were deposited in the bank account. Accordingly, it is held that the AO was not justified in treating the deposit of Rs. 11,000/- as unexplained deposit. The addition made on this account is directed to be deleted. The ground of appeal is allowed. The last ground of appeal is directed against the addition of Rs. 52,80,000/- being unexplained investment in purchase of old house. During the course of survey carried out on 18-09-2013, a pocket diary was found and impounded as marked Ex. B-2. On perusal of the same, the AO noted that the assessee purchased an old house. admeasuring 1208 dargaj for total consideration of Rs. 20,00,000/- for construction of Katla. During the course of assessment proceedings, the AO gathered information u/s. 133(6) of the Act from Sub - Registrar, Sri Dungargarh, who informed that the DLC rates of lands situated in the same area are Rs. 2200/- per sq. mtr (land situated at main road) and Rs. 15000/- per sq. mtr for inside. The AO also referred the matter to the DVO to determine the correct value of acquisition of land with old house and year wise cost of construction of Katla. Since the assessment was getting barred by limitation, the AO had to complete the assessment u/s. 143(3) without DVO's report. However, he mentioned that issue is subject to the report of the DVO. Ultimately, the AO adopted the DLC rate at 15000/- per sq. mtr. and worked the cost of land at Rs. 67,80,000/- and the cost of the construction of old house was estimated at Rs. 5,00,000/-. Thus, the value of land with old house as purchased for construction of Katla was estimated at Rs. 72,80,000/- The AO therefore, made an addition of Rs. 52,80,000/- (Rs. 72,80,000/- Rs. 20,00,000/-) treating it unexplained investment. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 20 During the course of appellate proceedings, the appellant filed written submissions wherein it pointed out that DVO has valued the property at Rs. 2198000/- as against Rs. 72,80,000/- determined by the AO and Rs. 20,00,000/- declared by the assessee. It was further claimed that since the assessee is a builder, provisions of sec. 50C is not applicable in its case. I have considered the facts of the case and submissions of the appellant and I find that issue of value of land with old house is settled after the DVO's report. The DVO has valued the property at Rs. 21,98,000/- as against Rs. 72,80,000/- determined by the AO and Rs. 20,00,000/- declared by the assessee. It was claimed by the appellant that since the assessee is a builder, provisions of sec. 50C is not applicable in its case. Under these facts and circumstances, it is held that the no further addition is required to be made as far as issue of valuation of property is concerned. The addition made at Rs. 52,80,000/- is deleted. The ground of appeal is allowed. The next ground of appeal is directed against the addition of Rs. 1,50,00,000/- being unexplained investment in purchase of land for Developing Colony No. 1. During the course of survey, a pocket diary was found and impounded as Ex.B-2. On the page no. 9 of the said diary, certain entries regarding purchase of lands for developing colonies were found recorded. The AO noticed that in the said diary, the purchase price of land was mentioned higher than what has been mentioned in the registered deed and in the books of accounts. The AO further noticed that the assessee had made payments to following persons against the purchase of land situated at Rohi Kasba Sri Dungargarh:- 1. Khasra No. 1107, 1.90 Hect. from Kanak Kumar 40,00,000/- on 18-11-2011 2. Khasra No. 1102, 1.90 Hect. from Saroj Devi Punglia, W/o. Vimal Kumar Puglia, Rs. 40,00,000/-on 17.11.2011 3. Khasra No. 1104, 1105, 1106 2.28 Hect. from Ratan Lal, Sunita Devi and Kanak Kumar Rs. 90,00,000/- Regarding these payments, the AO observed that the assessee made excess payment of Rs. 18,00,000/- on 20.04.2011 to Smt. Suita Devi and Rs. 17,00,000/- on 23.04.2011 to Sh. Kanak Kumar. The excess payments made to them were received back from them on 21.11.2011. Similarly, the AO noticed that the assessee made payment of Rs. 35,00,000/- and Rs. 25,00,000/- on 20.04.2011 and 22.11.2011 respectively to Sh. Vimal Kumar Punglia and received back the sum of Rs. 35,00,000/- on 22.11.2011. The AO issued a show-cause u/s. 142 dated 10-03-2014, the contents of which are reproduced at page no. 11 of the assessment order. In response, the assessee furnished its reply on 13.03.2015. The reply so furnished by the assessee did not find favour with the AO. The AO disbelieved the assessee's explanation that transactions were made by mistake due to mismatch of I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 21 register owner's of land. The AO also called for information u/s. 133(6) but the seller had only submitted the proof of payment as mentioned in the registered deeds. The AO also referred the matter to DVO in order to ascertain the correct value of the land. Further, the AO observed that if the excess payments made by the assessee are considered then the cost of lands so purchased comes to Rs. 1,75,00,000/-. The AO further enhanced the value of the land to Rs. 3,20,00,000/- on the basis of market price of the land. Thus, the AO held that the assessee purchased the land at Rs. 3,20,0000/-, out of which Rs. 1,50,00,000/- was invested out of books of accounts. Accordingly, he made the addition of Rs. 1,50,00,000/- to the total income of the assessee. The appellant has contended that the AO erred in making an addition of Rs. 1,50,00,000/- in the total account simply by assuming that assessee has paid higher price. It was stated the appellant being a partnership firm deals in purchase and sale of assets either in mode of piece of land or shop. During the year under consideration, the appellant had purchased a land for development of colony no. 1 from Sh. Ratan Lal, Smt. Sunita and Sh. Kanaak Kumar vide deed dated 09-12-2011 for Rs. 90,00,000/-, Sh. Kanak Kumar vide deed dared 18-11-2011 for Rs. 40,00,000/- and Smt. Saroj vide deed dated 17-11-2011 for Rs. 40,00,000/-. It was further submitted that the owner of the land for colony no. 1 were four persons and transactions of payment were not made according to their share in land, hence excess payment made earlier was recovered and subsequently the payments were made to them as per their share in lands. It was claimed that no provision of law regarding any presumption of any value applicable in the case of the firm deals in real estate. The appellant has maintained regular books of accounts and the same are subject to audit u/s. 44AB of the Act. The appellant further submitted that the payment to Sh. Vimal Kumar Puglia was done by mistake, who was not a seller of the land but actually a family member of these persons. He accepted Rs. 70,00,000/- from the appellant firm as part of advance, but later on he refunded the amount before execution of sale in favour of the appellant firm. It was claimed that amount advanced to Sh. Vimal Kumar Punglia was properly accounted for in the books of accounts. Thus, it was contended that entire addition made by the AO is baseless and without appreciation of proper facts of the case. It was also contended that the AO without bringing on record any evidence, estimated the cost of the land on the basis of market price. Accordingly. the appellant requested for deletion of addition made by the AO. I have considered the facts of the case and submissions of the appellant and I find that the entire addition of Rs. 1,50,00,000/- is based on estimation of the AO. First of all, the AO held that the appellant firm made excess payments to the aforesaid persons on the basis of diary found and impounded during the course of survey. Secondly, the AO enhanced the value of the land at Rs. 3,20,00,000/- on the basis of market price. I find that the AO while observing that the appellant firm made excess payments to the aforesaid persons did not appreciate the facts of the case/ explanation of the assessee in right perspective. There is no mention in the registered sale deed that the assessee had made excess payment to Sh. Sunita Devi and Sh. Kanak I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 22 Kumar, whatever the excess payments were made in advance were adjusted at the time of execution of sale deed as explained in purchase deed. This fact is duly established from the copy of purchase deed and copy of account of these two parties. As regards excess payment to Sh. Vimal Kumar Pungalia, I find that Sh. Vimal Kumar Puglia was not a seller of the land but actually a family member of these persons. He accepted Rs. 70,00,000/- from the appellant firm as part of advance, but later on he refunded the amount before execution of sale in favour of the appellant firm. In this regard, a proper entry has been passed in the books of accounts. All facts cumulatively established the appellant's claim that since transactions of payment were not made according to their share in land, hence excess payment made earlier was recovered and subsequently the payments were made to them as per their share in lands. The AO has not brought anything contrary to establish that the appellant had paid higher cost instead of what has been recorded in the purchase deed and in the books of accounts. The AO simply on the basis of entries found recorded in the dairy impounded during the course of survey, alleged that the assessee firm had made higher payment against purchase of land. Whereas the appellant firm duly established that entries in the said diary were only adjustment entries of advances given to these persons against the purchase of lands and on the basis of the same it cannot be presumed that the assessee had paid excess payment to these aforesaid persons. Moreover, the AO called for information uls. 133(6) from these persons, who in reply confirmed that they did not receive any excess payments from the appellant firm. There is no iota of evidence on record from which it could be safely stated that appellant firm had made excess payment against the purchase of land to these persons. Thus, the AO's allegation that the appeillant firm made excess payments to the aforesaid persons is not acceptable. As regards the AO's action in enhancing the value of the land at Rs. 3,20,00,000/- on the basis of alleged market price. I find that during the course of appellate proceedings, the AO referred the matter to the DVO for determination of correct value of the land. However, since the matter was getting time barred, the AO determined the value of the land on the basis of alleged market price. I find that the AO while determining the value of the land failed to give any instances of comparable cases. Here it may be noted that the lands were registered at the same rates which are mentioned in the deed. It is not the case here that the Sub Registrar enhanced the value of the land. Further, it is not the case here that the AD after comparing the value of the land in dispute with the other lands situated in the same vicinity, determined the value of the lands at Rs. 3,20,00,000/-. The Hon'ble Supreme Court in the case of DCIT vs. Core Health Care Ld. (2008) 167 Taxman 206 (SC) has held that the cost of either Movable or Immovable asset based on the whole cost paid by the assessee and not on the cost estimated by the AO. In the instant case, estimation of cost of land at Rs. 3,20,00,000/- is based on AO's wild guess. Thus, the AO's action in enhancing the value of the land at Rs. 3,20,00,000/- on the basis of alleged market price is not acceptable. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 23 In view of the above, it is held that the AO was not justified in observing that the appellant firm had paid excess payments against purchase of lands and was further not justified in enhancing the value of land at Rs. 3,20,00,000/-. It is also held that the AO was not justified in observing that the appellant firm invested Rs. 1,50,00,000/- out of its undisclosed sources. Accordingly, the addition made at Rs. 1,50,00,000/- is directed to be deleted. The ground of appeal is allowed. The next ground of appeal is directed against the addition of Rs. 1,36,640/- being profit on receipts as per incriminating loose papers/documents found at the time of survey. The AO noted that during the course of survey, certain loose papers/documents were found wherein entries of advances transactions have been found recorded. The assessee claimed before the AO it had nothing to do no with these loose papers, entries made therein are just calculation of amount of any transaction either to be completed or not. The AO did not accept the assessee's version. The AO observed that the transactions recorded on loose papers were date-wise and certainly relates to the transactions of the assessee's business and the assessee did not record these transactions in its regular books of accounts. Accordingly, the AO applied 8% rate u/s. 44AD, which resulted in addition of Rs. 1,36,640/-. During the course of appellate proceedings, the appellant stated that the AO erred in calculating 8% profit on entries found recorded in loose papers. These entries were nothing but proposal for transactions and these were not completed as records. It was claimed that these facts were brought to the knowledge of the AO, but he did not consider the same. On overall appreciation of the facts, I find that the AO while making the addition of Rs. 1,36,640/- failed to establish that the entries found recorded in the loose papers were actually executed by the assessee. Entries recorded in the loose papers could be the proposal for future transaction, as has been stated by the appellant. Though there is no doubt these transactions relate to assessee's business transaction, still it cannot be said for sure that these transactions had actually materialized during the year under consideration. The AO's observation that while trading money on advance, or part or full payment in satisfaction, no receipts were issued to the purchaser is simply based on his presumption (No concrete theta - 4 B2 documentary evidence has been brought on record by the AO to establish that transactions recorded in these loose papers had actually materialized during the year under consideration. Under these facts and circumstances, there is no justification to treat these receipts as the appellant's business receipts. Hence, the addition made on this account is directed to be deleted. The ground of appeal is allowed The last ground of appeal is directed against the addition of Rs. 6,60,000/- being notional interest charged at 12% on the advances. The AO noted that assessee had given advances to Sh. Vimal Kumar Punglia, Sunita Devi Duggar and Sh. Kanak Kumar Duggar, however, no interest was charged. Accordingly, the AO charged interest @12% on the advances to Sh. Vimal Kumar Puglia, Sunita Devi Duggar and Sh. Kanak Kumar Duggar, which works out to Rs. 3,80,000/-, Rs. 1,44,000/- and Rs. 1,36,000/- respectively. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 24 Hence, an addition of Rs. 6,60,000/- was made to the total income of the assessee. The appellant claimed that these advances were made against purchase of land and on execution of sale these advances were adjusted, therefore, charging of interest on these transactions is not fair. It was further stated that sellers did not incur the cost of land from date of advance to date of execution of sale. On overall appreciation of the facts, I find that these advances were given in due course of business transactions. Hence, it depends on the mutual understanding of both the parties whether interest should be charged or not. In the instant case, both the parties were ready to not to charge or pay interest. Hence, the AO's action in charging interest @12% cannot be said to be valid action. Accordingly, the addition made at Rs 6,60,000/- is directed to be deleted. The ground of appeal is allowed.” 5. Feeling dissatisfied with the finding of the ld. CIT(A) the revenue preferred the present appeal on the grounds as stated here in above in para 2. Apropos to the various grounds the ld. AR of the assessee heavily relied upon the seized material based upon which the ld. AO has after elaborate discussion made the addition which the ld. CIT(A) deleted. As regards the ground of 50C the ld. DR submitted that even provision of 43CA should have been applied by the ld. CIT(A) instead deleting the addition and in respect of the other addition he relied upon the finding recorded in the order of the ld. Assessing Officer. 6. Per contra, the ld. AR of the assessee heavily relied upon the finding of the ld. CIT(A) who has after going to the various aspect of the matter decided the appeal on merits of the case and in accordance with the law and therefore, he supported the order of the ld. CIT(A). I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 25 7. We have heard the rival contentions and perused the material placed on record. The first grounds of appeal raised by the revenue is that the ld. CIT(A) has erred in law in deleting the addition of Rs. 18,36,500/- made u/s. 68 of the Act especially when the advances were treated as bogus and ignoring the fact the addition was based on the statement recorded and is based on survey / post survey enquiries made by the ld. AO. The assessee does not maintain any regular books of account. Thus, based on these merits the revenue challenged the finding of the ld. CIT(A). We noted that the ld. AO made the addition of Rs. 18,36,500/- by observing that the assessee failed to establish the capacity of the alleged buyer nor could be establish the genuineness of the transactions. Accordingly, he treated these aforesaid advances as bogus & non genuine and added the same under the provision of section 68 of the Act. The assessee has challenged the finding of the ld. AO before ld. CIT(A) stating that burden of proving the capacity of the buyer does not lie upon him as the same is on the parties who buys the property, the assessee is not supposed to guide the buyers on how to manage their funds. It was claimed by the assessee that amounts were received as advances against the sale of shops and after construction of the shops, the possessions of the same were handed over to the I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 26 respective buyers too. Therefore, the assessee has discharged the burden lies upon them. In support of this claim the assessee has produced the copy of the sale deed to establish that it had already handed over or sold the shops to the respective buyers from whom he had received amounts in advance. The revenue against that facts has not brought before us any contra facts in this appeal therefore, when the amounts received by the assessee form part of the revenue receipt and the assessee has proved the same by filling the independent evidence saying that the same is entered in the books of accounts as advances received against sale of shops, then only requirement which needs to be satisfied is that whether these shops were handed to these aforesaid buyers, which in the instant case is duly satisfied by the assessee by handing over the possession of these shops to respective buyers. It is not the case that these buyers were relatives of the assessee or any money or undue benefit was received back directly or indirectly by the assessee. The addition cannot be made or sustained simply because the creditworthiness / capacity of these buyers / persons could not be established before the ld. AO, it cannot be said that the advances received by the assessee were bogus or represents assessee's unaccounted money / income. Had the possession of shops would not have been given to these buyers, then these advances may be viewed I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 27 as per the view of the ld. AO. But when the sale has been made to those persons who have advanced the booking money assessee duly established the genuineness of advances received by it and submitted proof of sale to those persons. Based on these set of facts and circumstances there is no reason to doubt the genuineness of advances of Rs. 18,36,500/-. In the light of the this set of facts which has not been disproved by bringing anything contrary by the ld. AO through the ld. DR we do not see any infirmity in the findings of the ld. CIT(A) and therefore, the ground no. 1 raised by the revenue stands dismissed. 7.2 The ground no. 2 raised by the revenue is that the ld. AO made the addition of Rs. 4,41,893/- by observing that the assessee suppressed the amount of sale by getting the documents of sale of shops to the customers registered at lower price than the actual amount of deals. The assessee claimed that the provision of section 50C is not applicable to the facts of the case of the assessee, as they being the trader of property. The provisions of section 50C applies to the capital assets of the assessee and it does not a class of asset transfer of immovable property, held by the transferor as stock-in-trade meaning there by in case of Real estate sector the immovable property is normally kept as stock in trade and the said stock in trade does attract the provision of I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 28 section 50C of the Act. Though on the similar action provision of section 43CA existed but the same has been introduced w.e.f. 01-04-2013, the same is applicable from financial year 2013-14. Even otherwise also, the AO failed to bring on record any concrete evidence based on which it can be surely stated that the assessee had received more than what has been declared by it. Based on these set of facts available on record and the revenue did not controvert the finding of the ld. CIT(A) by placing anything contrary on record we do not see any infirmity in the findings of the ld. CIT(A) and therefore, based on these observations the AO was not justified in making the addition of Rs. 4,41,893/- and the same has rightly deleted by the ld. CIT(A). Based on these set of facts the ground no. 2 raised by the revenue stands dismissed. 7.3 The next ground raised by the revenue is that the addition of Rs. 1,50,00,000/- being unexplained investment in purchase of land for Developing Colony No. 1. During survey, a pocket diary was found and impounded as Exhibit B-2. On the page no. 9 of the said diary, certain entries regarding purchase of lands for developing colonies were found recorded. The AO noticed that in the said diary, the purchase price of land was mentioned higher than what has been mentioned in the registered deed and in the books of accounts. The AO further noticed I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 29 that the assessee had made payments to following persons against the purchase of land situated at Rohi Kasba Sri Dungargarh:- 1. Khasra No. 1107, 1.90 Hect. from Kanak Kumar 40,00,000/- on 18-11-2011 2. Khasra No. 1102, 1.90 Hect. from Saroj Devi Punglia, W/o. Vimal Kumar Puglia, Rs. 40,00,000/-on 17.11.2011 3. Khasra No. 1104, 1105, 1106 2.28 Hect. from Ratan Lal, Sunita Devi and Kanak Kumar Rs. 90,00,000/- Regarding these payments, the AO observed that the assessee made excess payment of Rs. 18,00,000/- on 20.04.2011 to Smt. Suita Devi and Rs. 17,00,000/- on 23.04.2011 to Shri Kanak Kumar. The excess payments made to them were received back from them on 21.11.2011. Similarly, the AO noticed that the assessee made payment of Rs. 35,00,000/- and Rs. 25,00,000/- on 20.04.2011 and 22.11.2011 respectively to Shri Vimal Kumar Punglia and received back the sum of Rs. 35,00,000/- on 22.11.2011. The AO issued a show-cause u/s. 142 dated 10-03-2014, the contents of which are reproduced at page no. 11 of the assessment order. In response, the assessee furnished its reply on 13.03.2015. The reply so furnished by the assessee did not find favour with the AO and thus he disbelieved the assessee's explanation that transactions were made by mistake due to mismatch of register owner's of land. The ld. AO also called for information u/s. 133(6) but the seller had only submitted the proof of payment as mentioned in the I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 30 registered deeds. The ld. AO also referred the matter to DVO in order to ascertain the correct value of the land. Further, the AO observed that if the excess payments made by the assessee are considered then the cost of lands so purchased comes to Rs. 1,75,00,000/-. The AO further enhanced the value of the land to Rs. 3,20,00,000/- based on market price of the land. Thus, the AO held that the assessee purchased the land at Rs. 3,20,0000/-, out of which Rs. 1,50,00,000/- was invested out of books of accounts. Accordingly, he made the addition of Rs. 1,50,00,000/- to the total income of the assessee. Before the ld. CIT(A) the assessee contended that the ld. AO erred in law making an addition of Rs. 1,50,00,000/- in the total account simply by assuming that assessee has paid higher price. It was stated the assessee being a partnership firm dealing in purchase and sale of assets either in mode of piece of land or shop. During the year under consideration, the assessee had purchased a land for development of colony no. 1 from Shri Ratan Lal, Smt. Sunita and Shri Kanaak Kumar vide deed dated 09-12-2011 for Rs. 90,00,000/-, Shri Kanak Kumar vide deed dared 18-11-2011 for Rs. 40,00,000/- and Smt. Saroj vide deed dated 17-11-2011 for Rs. 40,00,000/-. It was further submitted that the owner of the land for colony no. 1 were four persons and transactions of payment were not made according to their share in land, hence excess payment made earlier I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 31 was recovered and subsequently the payments were made to them as per their share in lands. It was claimed that no provision of law regarding any presumption of any value applicable in the case of the firm deals in real estate. The appellant has maintained regular books of accounts and the same are subject to audit u/s. 44AB of the Act. The appellant further submitted that the payment to Shri Vimal Kumar Puglia was done by mistake, who was not a seller of the land but actually a family member of these persons. He accepted Rs. 70,00,000/- from the appellant firm as part of advance, but later on he refunded the amount before execution of sale in favour of the appellant firm. It was claimed that amount advanced to Sh. Vimal Kumar Punglia was properly accounted for in the books of accounts. Thus, it was contended that entire addition made by the AO is without understanding the facts of the case and without appreciation of submission of the assessee. It was also contended that the ld. AO without bringing on record any evidence, estimated the cost of the land on the basis of market price. The fact of the excess payments to the aforesaid persons on the basis of diary found and impounded during the course of survey. Secondly, the AO enhanced the value of the land at Rs. 3,20,00,000/- because of market price. We find that the ld. AO while observing that the assessee firm made excess payments to the aforesaid persons did not appreciate the facts of the case / explanation I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 32 of the assessee in right perspective. There is no mention in the registered sale deed that the assessee had made excess payment to Smt. Sunita Devi and Shri Kanak Kumar, whatever the excess payments were made in advance were adjusted at the time of execution of sale deed as explained in purchase deed. This fact is duly established from the copy of purchase deed and copy of account of these two parties. As regards excess payment to Shri Vimal Kumar Pungalia, we note that Shri Vimal Kumar Puglia was not a seller of the land but actually a family member of these persons. He accepted Rs. 70,00,000/- from the assessee firm as part of advance, but later on he refunded the amount before execution of sale in favour of the assessee firm. In this regard, a proper entry has been passed in the books of accounts. All facts cumulatively established the assessee’s claim that since transactions of payment were not made according to their share in land, hence excess payment made earlier was recovered and subsequently the payments were made to them as per their share in lands. The AO has not brought anything contrary to establish that the appellant had paid higher cost instead of what has been recorded in the purchase deed and in the books of accounts. The AO simply because of entries found recorded in the dairy impounded during the course of survey, alleged that the assessee firm had made higher payment against purchase of land. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 33 Whereas the assessee firm duly established that entries in the said diary were only adjustment entries of advances given to these persons against the purchase of lands and on the basis of the same it cannot be presumed that the assessee had paid excess payment to these persons. Moreover, the AO called for information uls. 133(6) from these persons, who in reply confirmed that they did not receive any excess payments from the appellant firm. There is no iota of evidence on record from which it could be safely presumed that the assessee firm had made excess payment against the purchase of land to these persons. Thus, the AO's allegation that the assessee firm made excess payments to the aforesaid persons is not based on any substantial evidence. As regards the action of the ld. AO in enhancing the value of the land at Rs. 3,20,00,000/- on the basis of alleged market price and he referred the matter to the DVO for determination of correct value of the land. However, since the matter was getting time barred, the ld. AO determined the value of the land based on alleged market price, while doing so ld. AO has not brough on record any instances of comparable cases. The ld. CIT(A) noted that the lands were registered at the same rates which are mentioned in the deed. It is not the case here that the Sub Registrar enhanced the value of the land, which the ld. AO through the ld. DR did not controvert the finding of the ld. CIT(A). Further, it is not I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 34 the case here that the ld. AO after comparing the value of the land in dispute with the other lands situated in the same vicinity, determined the value of the lands at Rs. 3,20,00,000/-. The Hon'ble Supreme Court in the case of DCIT vs. Core Health Care Ld. (2008) 167 Taxman 206 (SC) has held that the cost of either Movable or Immovable asset based on the whole cost paid by the assessee and not on the cost estimated by the AO. In the instant case, estimation of cost of land at Rs. 3,20,00,000/- is based on AO's wild guess. Thus, the AO's action in enhancing the value of the land at Rs. 3,20,00,000/- because of alleged market price is not considered. This finding of the ld. CIT(A) has not been controverted by the ld. AO through the ld. DR even the ld. AO has not updated at the time of hearing of this appeal whether in fact the report of the DVO is received by the ld. AO or not and the status of that action has not been updated at the time hearing of this appeal. Therefore, we do not see any infirmity in the finding of the ld. AO and the addition made has rightly been deleted by the ld. CIT(A). Based on these observation the ground no. 3 raised by the revenue stands dismissed. 7.4 Ground no. 4 raised by the revenue relates to the addition of Rs. 1,36,640/- being profit on receipts as per incriminating loose I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 35 papers/documents found at the time of survey. The AO noted that during the course of survey, certain loose papers/documents were found wherein entries of advances transactions have been found recorded. The assessee claimed before the ld. AO that it had nothing to do no with these loose papers, entries made therein are just calculation of amount of any transaction either to be completed or not. The AO did not accept the assessee's version. The AO observed that the transactions recorded on loose papers were date-wise and certainly relates to the transactions of the assessee's business and the assessee did not record these transactions in its regular books of accounts. Accordingly, the AO applied 8% rate u/s. 44AD, which resulted in addition of Rs. 1,36,640/-. Before the ld. CIT(A) the assessee submitted that the AO erred in calculating 8% profit on entries found recorded in loose papers. These entries were nothing but proposal for transactions and these were not completed as per records. It was claimed that these facts were brought to the knowledge of the ld. AO, but he did not consider the same. On overall appreciation of the facts, the ld. CIT(A) noted that the ld. AO failed to establish that the entries found recorded in the loose papers were actually executed by the assessee. Entries recorded in the loose papers could be the proposal for future transaction, as has been stated by the assessee. Though there is no doubt these transactions relate to I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 36 assessee's business transaction, still it cannot be said for sure that these transactions had materialized during the year under consideration. The AO's observation that while trading money on advance, or part or full payment in satisfaction, no receipts were issued to the purchaser is simply based on his presumption (No concrete theta - 4 B2 documentary evidence has been brought on record by the ld. AO to establish that transactions recorded in these loose papers had materialized during the year under consideration. Under these facts and circumstances, there is no justification to treat these receipts as the assessee’s business receipts and therefore, estimating the profit on it. Based on these observations we do not see any infirmity in the finding so recorded by the ld. CIT(A) and the ground no. 4 raised by the revenue stands dismissed. 7.5 The last ground of appeal is directed against the addition of Rs. 6,60,000/- being notional interest charged at 12% on the advances. The AO noted that assessee had given advances to Shri Vimal Kumar Punglia, Smt. Sunita Devi Duggar and Shri Kanak Kumar Duggar, however, no interest was charged. Accordingly, the AO charged interest @12% on the advances to Shri Vimal Kumar Puglia, Smt. Sunita Devi Duggar and Shri Kanak Kumar Duggar, which works out to Rs. I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 37 3,80,000/-, Rs. 1,44,000/- and Rs. 1,36,000/- respectively. Hence, an addition of Rs. 6,60,000/- was made to the total income of the assessee. The assessee claimed that these advances were made against purchase of land and on execution of sale these advances were adjusted, therefore, charging of interest on these transactions is not fair. It was further stated that sellers did not incur the cost of land from date of advance to date of execution of sale. On overall appreciation of the facts, when these advances were given in due course of business transactions charging of interest on it is not correct and if at all it is charged the same is deductible as cost to the assessee as part of the cost of land and therefore, even on this count it is revenue neutral. Based on these set of facts we see no infirmity in the finding of the ld. CIT(A) and therefore, the ground no. 5 raised by the revenue stands dismissed. 8. In the result, the appeal of the revenue stands dismissed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member I.T.A. No. 260/Jodh/2023 Assessment Year: 2012-13 38 Ganesh Kumar, PS Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order