ACIT, Patiala V. Sh. Vipan Kumar Verma, Rajpura

ITA 376/CHANDI/2012

• Counselvise Citation: 37621514 RSA 2012
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-08-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 29-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Keywords: Unexplained investment; Document seized; Documents seized
• Section: 153A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.343/CHD/2012 ASSESSMENT YEAR : 2003-04 SHRI VIPAN KUMAR VERMA, V ACIT, CENTRAL CIRCLE PROP. M/S VERMA ELECTRONICS, PATIALA. PATIALA ROAD, RAJPURA. PAN: AAMPV-4219J & ITA NO.376/CHD/2012 ASSESSMENT YEAR: 2003-04 ACIT, CENTRAL CIRCLE, V SHRI VIPAN KUMAR VERMA, PATIALA. PROP. M/S VERMA ELECTRONICS, PATIALA ROAD, RAJPURA. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI MANJEET SINGH ASSESSEE BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 08.08.2012 DATE OF PRONOUNCEMENT : 22.08.2012 ORDER PER MEHAR SINGH, AM THESE ARE THE CROSS APPEALS, FILED BY THE ASSESSEE AND THE REVENUE RESPECTIVELY, AGAINST THE ORDER DATED 10.01.2012, PASSED BY THE CIT(A) U/S 250(6) OF THE INCOME- TAX ACT,1961 (IN SHORT 'THE ACT'). BOTH THE APPEALS ARE BEING TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE AND B REVITY. 2. THE ASSESSEE, IN ITA NO. 343/CHD/2012 , HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1.'THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH REGARD TO THE APPLICATION OF SECTION 153C AND THEREBY FINALLY FRAMING THE ASSESSMENT U/S 153A OF THE INCO ME TAX ACT, 1961. 2 2. THAT NOTWITHSTANDING THE GROUND OF APPEAL NO.1 A BOVE, THE WORTHY CIT (A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 11,500 /- OF 1/5 TH OF CAR AND VEHICLE EXPENSES AGAINST ADDITION OF RS. 14,090/- OF 1/4 TH OF CAR AND TELEPHONE EXPENSES MADE BY THE ASSESSING OFFICER. 3. THAT THE WORTHY CIT (A) HAS ERRED IN HOLDING DEE MED RENTAL VALUE OF SHOP NO. 2 RAILWAY ROAD, RAJPURA @ RS. 36,000/- P.M. AS PER PARA 8 (A) OF THE ORDER BY NOT CONSIDERING THE FACT THAT THE SHOP IS BEING USED AS GODOWN FOR THE PURPOSE OF BUSINESS FOR KEEPING WOODEN PACKING AND MISC.ITEMS AND AS AN EVIDENCE, PHOTOGRAPH OF THE SAME HAD FILED. 4. THAT THE WORTHY CIT (A) HAS ERRED IN HOLDING THE DEEMED RENTAL VALUE OF RESIDENTIAL HOUSE AT ISLAMPURE, NEAR RAJPURA BY NOT CONSIDERING THAT THE HOUSE WAS IN DEPLETED CONDITION AND IS NOT IN A POS ITION TO BE LET OUT TO A TENANT AS PER PARA 8 (E) OF THE ORDER AND AS EVIDEN CE HAD FILED PHOTOGRAPH OF THE SAME. 5. THAT THE WORTHY CIT (A) HAS ERRED IN HOLDING DEE MED RENTAL VALUE OF SHOP AT MAIN BAZAR, MOHINDER GANJ, RAJPURA AS PER PARA 8 (F) BY NOT CONSIDERING THE FACT THAT THE SHOP IS BEING USED AS WORKSHOP FO R REPAIRING CERTAIN ELECTRIC ITEMS AND ALSO FILED PHOTOGRAPH OF THE SAM E. 6. THAT THE WORTHY CIT (A) HAS ALSO ERRED IN HOLDIN G DEEMED RENTAL VALUE OF 174 TH SHARE IN HOUSE AT AMBALA BY NOT CONSIDERING THE FAC T THAT PROPERTY IS NOT INHABITABLE CONDITION AND ALSO THERE WAS NO ELECTRI CITY AND WATER CONNECTION. 7. THAT NOTWITHSTANDING THE ABOVE FACTS, THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERING THAT DEEMED RENTAL VALUE ASSESSED BY TH E ASSESSING OFFICER IN RESPECT OF ABOVE SAID PROPERTIES WAS ON THE HIGHER SIDE. 8. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 75,852/- OUT OF ADDITION OF RS. 1,35,882/- MADE BY THE ASSESSING OFFICER BY GIVING RELIEF IN RESPECT OF WITHDRAWALS OF RS. 60,000/- MADE BY THE ASSESSEE'S WIFE BY NOT CONSIDERING THE FACT THAT THE ASSESSING OFFICER HAD ESTIMATED HOUSEHOLD EXPENSES AT ESTIMATION, WHEREAS ASSESSEE HAD FILED DETAIL OF HIS HOUSEHOLD EXPENSES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 9. THAT THE WORTHY CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 6,18,383/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DISCOUNT GIVEN M/S VERMA ELECTRONICS (P) LTD. WITHOUT PIN PO INTING ANY DISCREPANCY IN ANY ITEM BY APPLYING THE PROVISIONS OF SECTION 40A(2)(B ). 9.1 THAT THE WORTHY COMMISSIONER OF INCOME TAX (A PPEALS) HAS ERRED IN NOT/ CONSIDERING THAT PROVISIONS OF SECTION 40A(2)(B) AR E NOT APPLICABLE SINCE THE DISCOUNT WAS ALLOWABLE BECAUSE OF BUSINESS NECESSIT Y AND NOT ON ACCOUNT OF ANY OTHER REASONS. 10. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERIN G THE ADDITION IN AFORESAID PARAS WHICH HAS BEEN MADE AGA INST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY U S HAS NOT BEEN CONSIDERED PROPERLY. 11. THAT THE CIT (A) HAS ALSO ERRED IN NOT CONSIDERING THAT NO REASONABLE OPPORTUNITY WAS AFFORDED TO THE ASSESSEE BY THE ASS ESSING OFFICER DURING ASSESSMENT PROCEEDINGS TO REPRESENT THE CASE. 12. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 3 3. IN GROUND NO.1, APPELLANT CONTENDED THAT CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO WITH REGARD TO THE APPLICATION OF SECTION 153C AND THEREBY FRAMING THE ASSESSMENT U/S 153A OF THE ACT. LD. CIT(A), ON APP RECIATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE, AND AFTER CONSIDERING SEVERAL CASE-LAWS, UPHELD THE FINDINGS OF THE AO, AS IS EVIDENT FROM PARA 29 OF THE APPELLATE ORDER. THE RELEVANT FINDINGS OF THE CIT(A), ARE REPRODUCED HER EUNDER: 29. I HAVE CONSIDERED THE AR'S ARGUMENTS AND REMAN D REPORT OF THE AO. THE PROVISIONS OF SECTION 153A FIRST PROVIS O EXPRESSLY PROVIDE FOR REASSESSMENT OF SIX ASSESSMENTS PRECEDI NG THE YEAR OF SEARCH AND THERE IS NO RESTRICTION IMPOSED IN THE L ANGUAGE OF THE SECTION TO RESTRICT THE AO TO ONLY ISSUES ARISING O UT OF DOCUMENTS/ASSETS FOUND/SEIZED DURING THE .COURSE OF SEARCH OPERATION. ONCE THE SEARCH WARRANT IS EXECUTED IN T HE CASE OF THE ASSESSEE, THE APPLICATION OF SECTION 153A LEADING T O REOPENING OF SIX ASSESSMENT YEARS PRECEDING THE YEAR OF SEARCH B ECOMES AUTOMATIC. THE AO IN SUCH A SITUATION WOULD NOT LIM IT THE FIELD OF ENQUIRY ONLY TO THE SEIZED DOCUMENTS/ASSET AND ANY ISSUE ARISING EVEN OTHERWISE WOULD BE ADJUDICATED. THEREFORE, THE GROUND OF APPEAL ON THIS ISSUE RAISED BY THE APPELLANT IS DIS MISSED. 4. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT PROVISIONS OF THE ACT, INCLUDING THE DECISIONS DISCUSSED BY THE CIT(A), IN THE MATTE R. THE AO, HAS ACTED IN CONSONANCE WITH THE PROVISIONS OF SECT ION 153A OF THE ACT, AS OBSERVED BY THE CIT(A). THEREFORE, THIS GROUND OF APPEAL IS NOT LEGALLY AND FACTUALLY TENABLE. AC CORDINGLY, FINDINGS OF THE CIT(A), ARE UPHELD AND GROUND NO.1 IS DISMISSED. 5. IN GROUND NO.2, THE APPELLANT CONTENDED THAT CIT (A) ERRED IN RESTRICTING ADDITION OF RS.11,500/- OF 1/5 TH OF CAR AND VEHICLE EXPENSES AGAINST ADDITION OF RS.14,090/ - OF 1/4 TH 4 OF CAR AND TELEPHONE EXPENSES MADE BY THE AO. THE APPELLANT STATED THAT THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS AND BEING A SEARCH CASE, SUCH ESTIMATION OF I NCOME IS NOT JUSTIFIED. REVENUE PLACED RELIANCE ON THE ORDE R OF THE CIT(A). 6. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND FOUND THAT THE ADDITION HAS BEEN MA DE BY THE AO, PURELY ON ESTIMATE BASIS, WITHOUT BRINGING ANY COGENT AND CREDIBLE EVIDENCE ON RECORD. HOWEVER, LD. CIT( A) HAS RESTRICTED THE ADDITION TO LOWER PERCENTAGE. IN VIE W OF THE DISCUSSIONS BEFORE THE BENCH, IT WAS FOUND REASONA BLE TO RESTRICT THE ADDITION TO 1/10 TH . ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN GROUND NO.3, THE ASSESSEE CONTENDED THAT CIT( A) ERRED IN HOLDING DEEMED RENTAL VALUE OF SHOP NO.2, RAILWAY ROAD, RAJPURA @ 36,000/- PER MONTH, AS PER PARA 8(A ) OF THE ORDER, BY NOT CONSIDERING THE FACTS THAT SHOP IS BE ING USED AS GODOWN, FOR THE PURPOSE OF BUSINESS FOR KEEPING WOO DEN PACKING AND MISCELLANEOUS ITEMS. 8. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND RELEVANT RECORDS. THE ASSESSEE FIL ED SUBMISSIONS BEFORE THE CIT(A) AS WELL AS BEFORE THE AO, INDICATING THAT THE SAID SHOP NO.2, RAILWAY ROAD, R AJPURA WAS USED AS A GODOWN. IN VIEW OF SUCH AN ASSERTION OF USING THE PREMISES FOR BUSINESS PURPOSE, RENTAL INCOME CA NNOT BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY . THE FINDINGS OF THE CIT(A), IN SUCH A FACT-SITUATION CA NNOT BE UPHELD. THIS GROUND OF THE ASSESSEE IS ALLOWED. 5 9. IN GROUND NO.4, ASSESSEE CONTENDED THAT CIT(A) E RRED IN UPHOLDING THE DEEMED RENTAL VALUE OF THE RESIDENTIA L HOUSE AT ISLAMPURA, NEAR RAJPURA, IGNORING THE FACT THAT HOU SE IS IN A DILAPIDATED CONDITION AND IS NOT FIT FOR USE AS RES IDENCE. THE APPELLANT PLACED RELIANCE ON CERTAIN DECISIONS BEFO RE THE CIT(A), SUCH AS; SHYAM SUNDER BEHL V ADDL. CIT (200 6) 99 TTJ 1147 (ASR-TRIB), MANDEEP JAIN V DCIT )2011) 43 SOT 288 (CHD-TRIB) AND ACIT V DR. AMRIT LAL ADLAKHA (2006) 105 TTJ (ASR-TRIB) 271. HAVING REGARD TO THE FINDINGS OF T HE AO AS WELL AS THAT OF CIT(A), IN THE LIGHT OF SUBMISSIONS FILED BY THE APPELLANT, RENTAL INCOME CANNOT BE ASSESSED IN RESP ECT OF SUCH A HOUSE WHICH IS NOT FIT FOR LIVING FOR HUMAN BEINGS, AS THE HOUSE WAS IN A DILAPIDATED CONDITION AND NO ELE CTRICITY AND WATER CONDITIONS WERE AVAILABLE IN THAT HOUSE. 10. IN VIEW OF THE ABOVE IDENTICAL FACT-SITUATION, IN RESPECT OF GROUND NO.6, THE SAME IS ALLOWED, AS THAT HOUSE IS NOT IN A CONDITION TO BE USED FOR HUMAN BEINGS. 11. IN GROUND NO.5, THE ASSESSEE CONTENDED THAT CIT (A) ERRED IN UPHOLDING THE DEEMED RENTAL VALUE OF SHOP AT MAIN BAZAR, MOHINDER GANJ, RAJPURA, AS PER PARA 8(F) OF THE ASSESSMENT ORDER, BY NOT CONSIDERING THE FACT THAT THE SHOP IS BEING USED AS WORKSHOP FOR REPAIRING CERTAIN ELE CTRONIC ITEMS. THE FINDINGS OF THE CIT(A), ARE CONTAINED I N PARA 8 OF THE APPELLATE ORDER, WHEREBY THE ADDITION MADE BY T HE AO, WAS UPHELD, ON THE GROUND THAT NO EVIDENCE WAS FILE D BY THE ASSESSEE REGARDING USE OF THE PROPERTY FOR BUSINESS PURPOSE. HOWEVER, IN THE COURSE OF ASSESSMENT PROCEEDINGS, A SSESSEE HAS FILED SUCH EVIDENCE AND THE CIT(A) SOUGHT REMAN D REPORT 6 FROM THE AO. LD. CIT(A) OBSERVED THAT PHOTOGRAPHS TAKEN DURING THE CURRENT PERIOD, CANNOT BE SAID TO BE EVI DENCE FOR BUSINESS USE IN THE PAST. SUCH OBSERVATION OF THE CIT(A) REMAINED UNCORROBORATED BY ANY EVIDENCE BROUGHT ON RECORD. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F THE SPECIAL BENCH IN THE CASE OF M/S ALL CARGO GLOBAL L OGISTICS LTD. V DCIT IN ITA NO. 5018 TO 5022 & 5059/M/2010 ASSESSMENT YEAR 2004-05 TO 2009-10 DATED 6.7.2012, TO SUPPORT HIS CONTENTION THAT SAID ADDITION CANNOT BE MADE WITHOUT THERE BEING ANY MATERIAL BROUGHT ON RECORD TO JUSTIFY SAID ADDITION. 12. HAVING REGARD TO THE FACT-SITUATION OF THE CASE , NON- AVAILABILITY OF ANY MATERIAL BEFORE THE AO OR CIT(A ), TO IGNORE THE EVIDENCE FILED BY THE ASSESSEE IN THE MATTER, W E DO NOT CONSIDER IT A FIT CASE FOR UPHOLDING THE ADDITION. THEREFORE, THE ADDITION IS DELETED AND GROUND OF THE ASSESSEE IS ALLOWED. 13. GROUND NO.7 IS GENERAL IN NATURE AND NEED NO SE PARATE ADJUDICATION. 14. IN GROUND NO.8, IT WAS CONTENDED BY THE APPELLA NT THAT ADDITION MADE ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWA LS IS NOT JUSTIFIED. A PERUSAL OF THE RELEVANT RECORD RE VEALS THAT NO MATERIAL OR EVIDENCE HAS BEEN BROUGHT BY THE AO, ON RECORD, TO JUSTIFY THE ESTIMATION MADE IN THE MATTER. HOWE VER, HAVING REGARD TO THE FINDINGS OF THE AO, AND THE EX PLANATION FILED BY THE ASSESSEE, INCLUDING THE FINDINGS OF TH E CIT(A), WE DO NOT FIND ANY MERIT IN MAKING SUCH ESTIMATION, WI THOUT BRINGING PRIMA-FACIE MATERIAL ON RECORD, TO JUSTIFY IMPUGNED 7 ESTIMATION, IN RESPECT OF SUCH A SEARCH CASE. ACCO RDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN GROUND NO. 9 AND 9(I), APPELLANT CONTENDED T HAT CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.6,18, 383/- MADE BY THE AO, ON ACCOUNT OF DISALLOWANCE OF DISCO UNT GIVEN BY M/S VERMA ELECTRONIC (P) LTD., WITHOUT PIN-POINT ING ANY DISCREPANCY IN ANY ITEM BY APPLYING THE PROVISIONS OF SECTION 40A(1)(B) OF THE ACT. THIS GROUND RAISED BY THE AS SESSEE PERTAINS TO AN ADDITION OF RS.6,18,383/- MADE BY TH E AO, ON ACCOUNT OF DISALLOWANCE OF DISCOUNT GIVEN TO M/S VE RMA ELECTRONIC (P) LTD. THE AO FOUND THAT DISCOUNT HAD BEEN DEBITED FOR THE FIRST TIME, EVEN THOUGH ASSESSEE WA S IN THE BUSINESS FOR A LONG TIME. IT WAS FURTHER BROUGHT O N RECORD THAT ASSESSEE AND HIS WIFE, ARE DIRECTORS OF M/S VE RMA ELECTRONIC (P) LTD., I.E. RECIPIENTS OF THE DISCOUN T AND THEREFORE, THE PAYMENT MADE BY THE ASSESSEE WAS COV ERED U/S 40A(2)(B) OF THE ACT. THE FINDING OF THE AO, AS RE PRODUCED BY THE CIT(A), REVEALS THAT THERE IS NO BASIS FOR ALLO WING DISCOUNT TO THE SISTER CONCERN AS THE SALE WAS STAR TED FROM 30.4.2012 AND MADE SALES OF RS.19,80,230/- UPTO 2.5 .2002. HOWEVER, M/S VERMA ELECTRONIC (P) LTD. DID NOT MAKE ANY PAYMENT TO THE ASSESSEE TILL 1.5.2002 AND LATER ON, PAYMENT OF RS.60,000/- ONLY WAS MADE TO THE ASSESSEE. THER EFORE, ABOVE FACTS PROVE THAT THE DISCOUNT ALLOWED TO THE ASSESSEE, NEITHER WAS CASH DISCOUNT, AS THE PAYMENTS WERE NOT MADE WITHIN REASONABLE TIME, NOR IT WAS A TRADE DISCOUNT , AS THE SAME WAS TO BE DEDUCTED FROM THE BILL ITSELF. THE AO, HAS BROUGHT ON RECORD THAT TWO OTHER PARTIES TO WHOM DI SCOUNT 8 HAS BEEN GIVEN AT 0.73% AND TO M/S VERMA ELECTRONIC S PVT. LTD., DISCOUNT HAS BEEN GIVEN AT 12.85%. THE ASSES SEE SUBMITTED THAT IT IS THE PREROGATIVE OF THE ASSESSE E HAVING REGARD TO THE BUSINESS EXIGENCIES. THE CIT(A), CON FIRMED THE IMPUGNED DISALLOWANCE AS PER THE FINDING GIVEN IN P ARA 23 OF HIS ORDER, WHICH IS REPRODUCED HEREUNDER : I HAVE CONSIDERED THE BASIS OF DISALLOWANCE BY THE AO AND ARGUMENTS OF THE AR ON THE ISSUE. THE AO HAS MA DE OUT A VERY GOOD CASE IN HIGHLIGHTING THE FACT OF GI VING DISPROPORTIONATELY HIGH PERCENTAGE OF DISCOUNT TO A PERSON DEFINED U/S 40A(2)(B). THE ASSESSEE MADE SA LES OF RS.8,46,294/- TO UNRELATED PARTIES FOR WHICH DIS COUNT @ .73% OF THE SALES HAD BEEN DEBITED IN THE BOOKS O F ACCOUNT WHEREAS SALES TO M/S VERMA ELECTRONIC (P) L TD. AMOUNTING TO RS.51,06,375/- HAD BEEN MADE ON WHICH DISCOUNT @ 12.84% HAD BEEN DEBITED. THE ASSESSEE H AS NOT BEEN ABLE TO BROUGHT ON RECORD ANY LOGICAL EXPLANATION FOR THE DISPROPORTIONATELY HIGH DISCOUN T GIVEN TO SISTER CONCERN. IT IS ALSO IMPORTANT TO APPRECIA TE THAT THE RETURNED INCOME OF M/S VERMA ELECTRONIC (P) LTD . WAS RS.40,290/- AS AGAINST THE RETURNED INCOME OF THE ASSESSEE AT RS.2,88,000/-. THE MOTIVE TO TRANSFER THE TAXABLE INCOME IN THE GARB OF EXPENSES DEBITED AS DISCOUNT TO SISTER CONCERN IS QUITE APPARENT. THE DISALLOWANCE MADE BY THE AO IS THEREFORE, CONFIRME D. 16. WE HAVE CAREFULLY PERUSED THE DECISION RELIED U PON BY THE ASSESSEE IN THE CASE OF UNITED EXPORT V CIT (20 11) 330 ITR 549 (DEL) AND FOUND THAT THE FACTS OF THE CASE RELIED UPON BY THE ASSESSEE ARE DIFFERENT AND DISTINGUISHABLE A ND HENCE, SAME ARE NOT APPLICABLE TO THE FACT-SITUATION OF TH E PRESENT CASE. THE AO, AS WELL AS THE CIT(A), HAS APPRECIAT ED THE RELEVANT PROVISIONS OF THE ACT, IN THE LIGHT OF REL EVANT MATERIAL BROUGHT ON RECORD BY THE AO. THEREFORE, TH ESE 9 FINDINGS OF THE CIT(A) ARE UPHELD AND GROUND NOS. 9 & 9(I) ARE DISMISSED. 17. GROUND NO. 10 TO 12 ARE GENERAL IN NATURE AND N EED NO SEPARATE ADJUDICATION. ACCORDINGLY, THE SAME ARE D ISMISSED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 19. THE REVENUE, IN ITA NO.376/CHD/2012, HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FAC TS IN DELETING ADDITION OF RS.7,50,000/- MADE ON ACCOUNT OF UNEXPLAINED SHA RE APPLICATION MONEY INTRODUCED INTO THE CAPITAL OF THE COMPANY M/S VERM A ELECTRONICS PVT. LTD. TREATING THE SAME NOT MADE BY THE ASSESSEE BUT BY S OME OTHER PERSONS. 2 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S IN THE DELETING THE ADDITION OF RS.1,90,000/- MADE ON ACCOUNT OF UNEXPL AINED INVESTMENT BY IGNORING THE FACT THAT THIS WAS NOT EXP LAINED DURING THE ASSESSMENT PROCEEDINGS. 3 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACT S IN DELETING ADDITION OF RS.1800/- AND RS.3,88,356/- ON DIFFERENCE IN ACC OUNTS OF M/S VIDEOCON APPLIANCES AND M/S VIDEOCON INTERNATIONAL LTD. AS C OMPARED TO THE ACCOUNTS OF THE ASSESSEE, WHICH ASSESSEE HAD FAILED TO RECON CILE DURING THE ASSESSMENT PROCEEDINGS. 4 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N DELETING ADDITION OF RS.60,000/- MADE ON ACCOUNT OF SALARY TO TECHNIC AL PERSONS FOR WHICH NO JUSTIFICATION WAS FILED BY THE ASSESSEE. 5 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS IN DELETING ADDITION OF RS.60,000/- MADE ON ACCOUNT OF UNEXPLAINED LOAN RECEIVED FROM VIPAN KUMAR (HUF), FOR WHICH NO EXPLANATION WAS GIVEN BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 6 THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL ON OR BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 20. IN GROUND NO.1, REVENUE CONTENDED THAT CIT(A) E RRED BOTH IN LAW AND ON FACTS IN DELETING ADDITION OF RS.7,50,000/- MADE ON ACCOUNT OF UNEXPLAINED SHA RE APPLICATION MONEY INTRODUCED INTO THE CAPITAL OF TH E COMPANY 10 M/S VERMA ELECTRONICS PVT. LTD. TREATING THE SAME N OT MADE BY THE ASSESSEE BUT BY SOME OTHER PERSONS. IN GROU ND NO.2 REVENUE CONTENDED THAT CIT(A) ERRED BOTH IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,90,000/- MADE ON A CCOUNT OF UNEXPLAINED INVESTMENT BY IGNORING THE FACT THAT TH E SAME WAS NOT EXPLAINED BY THE ASSESSEE. 20(I). IN THE COURSE OF PRESENT APPELLATE PROCEEDI NGS, THE REVENUE PLACED RELIANCE ON THE ORDER PASSED BY THE AO, WHEREAS LD. 'AR' SUPPORTED THE FINDINGS OF THE CIT( A). THE AO TREATED AN AMOUNT OF RS.9,40,000/- RECEIVED AS S HARE APPLICATION MONEY IN M/S VERMA ELECTRONICS PVT. LTD ., AS UNEXPLAINED INCOME OF THE ASSESSEE. 20(II) WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISS IONS, FACTS OF THE CASE AND THE RELEVANT RECORD. BEFORE T HE CIT(A), IT WAS SUBMITTED, THAT OUT OF THE IMPUGNED ADDITION , THE SHARES TO THE TUNE OF RS.7,50,000/- BELONG TO MRS. USHA RANI, INDEPENDENT PERSON AND SHARES HAVE BEEN ALLOT TED IN HER NAME, AND AS SUCH, ADDITION CANNOT BE SUSTAINED . IT WAS, FURTHER, ARGUED BY THE APPELLANT THAT THE SHAR E TO THE TUNE OF RS.1,90,000/- BELONG TO THE APPELLANT, NECE SSARY AND REQUISITE PROOF WAS PRODUCED BEFORE THE AO. THUS, TWO PERSONS CONTRIBUTED TOWARDS THE SHARE APPLICATION M ONEY IN THE COMPANY, KNOWN AS M/S VERMA ELECTRONICS PVT. LT D. AS DISCUSSED EARLIER, SMT. USHA RANI IS NRE AND HAPPEN S TO BE REAL SISTER OF THE APPELLANT, CONTRIBUTED TOWARDS S HARE APPLICATION MONEY AN AMOUNT OF RS.7,50,000/-. THE CONFIRMATION HAS BEEN FILED BY HER TO THIS EFFECT. AS REGARDS, CONTRIBUTION OF RS.1,90,000/- BY THE APPELLANT IS C ONCERNED, 11 APPELLANT HAD WITHDRAWN THE AMOUNT FROM HIS LOAN AC COUNT AS OUTSTANDING WITH THE COMPANY M/S VERMA ELECTRONI CS PVT. LTD. AND COPY OF ACCOUNT OF THE LOAN HAS BEEN FILED BY THE APPELLANT. THE FINDINGS OF THE LD. CIT(A), WHEREIN SUCH ADDITION WAS DELETED, ARE REPRODUCED HEREUNDER : 11. I HAVE CONSIDERED THE BASIS OF ADDITION MA DE BY THE AO AND ARGUMENTS OF THE AR ON THE ISSUE. THE TREATMENT OF RS. 7,50,000/- GIVEN BY MRS. USHA RANI AS SHARE APPLICATION MONEY IN VERMA ELECTRONICS (P) LTD. AS ASSESSEE'S INCOME IS ABSOLU TELY ABSURD AS THE ASSESSEE HAS NEITHER MADE THE SHARE APPLICATION NOR IT IS THE CASE OF M/S VERMA ELECTRONICS (P) LTD. SO BY NO STR ETCH OF IMAGINATION SHARE APPLICATION GIVEN BY MRS. USHA RA NI TO M/S VERMA ELECTRONICS (P) LTD. CAN BE TREATED AS ASSESS EE'S INCOME. THE ADDITION MADE BY THE AO IS DELETED. FURTHER AO MADE AN ADDITION OF RS. 1,90,000/- BEING ASSESSEE'S SHARE APPLICATIO N MONEY GIVEN TO M/S VERMA ELECTRONICS (P) LTD.,__FOR WHICH THE ASSE SSEE HAD FILED THE COPY OF ACCOUNT OF LOAN OUTSTANDING IN THE BOOK S OF THE COMPANY I.E. VERMA ELECTRONICS (P) LTD. AND THE SAID AMOUNT HAD BEEN WITHDRAWN TO USE AS SHARE APPLICATION MONEY. THE AO DURING THE COURSE OF REMAND PROCEEDINGS HAS NOT CONTROVERTED T HE FACTUAL SUBMISSIONS OF THE ASSESSEE IN THIS REGARD AND IT B ECOMES CLEAR THAT THE ASSESSEE HAD GIVEN DETAIL EXPLANATION REGARDING THE SOURCE OF SHARE APPLICATION MONEY AND ADDITION MADE BY THE AO IS WITHOUT ANY BASIS. THE ADDITION IS THEREFORE DIRECTED TO BE DELETED. 20(III) AS THE IMPUGNED AMOUNT HAS BEEN CONTRIBUTED BY THE SISTER OF THE ASSESSEE AND THE APPELLANT, AS PE R THE DETAILS FURNISHED ABOVE, AND REQUISITE EVIDENCES HA VE BEEN FIELD BY THEM TO EXPLAIN SUCH SHARE APPLICATION MON EY, FINDINGS OF THE AO ARE NOT BASED ON CREDIBLE EVIDEN CES. THEREFORE, FINDINGS OF THE CIT(A) ARE UPHELD. CONS EQUENTLY, GROUND NOS. 1 & 2 OF THE REVENUE, ARE DISMISSED. 12 21. IN GROUND NO.3, REVENUE CONTENDED THAT CIT( A) ERRED IN DELETING ADDITION OF RS.3,88,356/- ON DIFFERENCE IN ACCOUNTS OF M/S VIDEOCON APPLIANCES AND M/S VIDEOCO N INTERNATIONAL LTD. REVENUE PLACED RELIANCE ON THE ORDER PASSED BY THE AO, WHEREAS LD. 'AR' PLACED RELIANCE ON THE FINDINGS OF THE CIT(A). 21(I) WE HAVE CAREFULLY PERUSED THE RIVAL SUBMIS SIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. BEFORE CIT(A), IT WAS SUBMITTED THAT THE APPELLANT PURCHASES VARIOUS ITEMS FROM VIDEOCON INTERNATIONAL LTD. AND SUCH PURCHASES HAVE BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNT. IT WAS, FURTHER, CONTENDED THAT RECONCILIATION OF STATEMENT WAS SUBMITTED TO THE AO AND THE SAME WAS FILED BEFORE T HE CIT(A), AT PAGE 13 OF THE PAPER BOOK. IT WAS CONTE NDED THAT ALL THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUE A ND DULY ACCOUNTED IN THE BOOKS OF ACCOUNT. LD. CIT(A), ON APPRECIATION OF THE FACTUAL MATRIX OF THE CASE AND EVIDENCES FILED BY THE APPELLANT, DELETED THE IMPUGNED ADDITI ON. RELEVANT FINDINGS OF THE CIT(A) ARE REPRODUCED HERE UNDER : 13. I HAVE CONSIDERED THE BASIS OF ADDITION MA DE BY THE AO AND THE ARGUMENTS OF THE AR ON THE ISSUE. THE RECONCILI ATION OF THE DIFFERENCE BETWEEN THE COPY OF ACCOUNT OF M/S VIDEO CON APPLIANCES AND VIDEOCON INTERNATIONAL IN THE BOOKS OF THE ASSE SSEE HAD BEEN FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT PROCEEDINGS WHICH HAD NOT BEEN CONSIDERED BY THE AO. THIS CLAIM OF THE AR HAS NOT BEEN CONTROVERTED BY THE AO DURING THE REMAND P ROCEEDINGS AND NO DISAGREEMENT REGARDING THE SAME HAS BEEN BROUGHT ON RECORD. THE RECONCILIATION MAKES IT CLEAR THAT THE ALLEGED DIFFERENCE HAS BEEN EXPLAINED. THE ADDITION MADE IS THEREFORE DELE TED. 14. THE GROUND OF APPEAL AT SR. NO. 9 PERTAIN TO AN ADDITION OF RS. 1,35,882/- WHICH HAS BEEN MADE BY THE AO ON THE BASIS OF FOLLOWING OBSERVATIONS:- 13 'IT IS PROVED FROM THE LIST OF VALUABLE ITEMS FOUND FROM THE RESIDENCE OF THE ASSESSEE THAT THE ASSESSEE WAS MAINTAINING HIGH STANDARD OF LIVING AS 3 A.CS WERE FITTED IN THE HOUSE OF THE ASSESSEE AND VARIOUS OTH ER VALUABLE ITEMS WERE ALSO FOUND FROM THE RESIDENCE O F THE ASSESSEE. THE ASSESSEE WAS ENJOYING VERY LAVISH LIFE AND BELONGS TO RICH FAMILY CARRYING ON BUSINESS OF JEWELLERY AND ELECTRONICS KNOWN S M/S VERMA JEWELLE RS, M/S VERMA ELECTRONICS & M/S VERMA ELECTRONICS (P) LTD. DURING THE COURSE OF DISCUSSION IN THE ASSESSM ENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FILE THE COPIES OF THE BILLS OF ELECTRICITY OF RESIDENCE, BU T HE AVOIDED THAT HE DID NOT RETAIN THE BILLS OF ELECTRI CITY. AVERAGELY ONE A.C. CONSUME ELECTRICITY OF RS. 2000 PER MONTH AND RUNS AVERAGELY FIVE MONTHS, WHILE THE ASSESSEE WAS USING THREE A.CS. THE CHILDREN OF THE ASSESSEE WERE ALSO STUDYING IN CONVENT SCHOOLS. THE ASSESSEE SHOWN HOUSEHOLD EXPENSES RS. 81118/- AND PAID TUITION FEE OF CHILDREN RS. 10,OOO/- IN ADDITI ON TO OTHER EXPENSES, THEREFORE, AFTER TAKING INTO CONSIDERATION THE STANDARD OF LIVING OF THE ASSESSE E THE HOUSE HOLD EXPENSES OF THE ASSESSEE ARE ESTIMATED R S ; 2,20,OOO/- PER ANNUM EXCEPT MET BY OTHERS, WHICH AR E VERY REASONABLE AND DIFFERENCE RS. 1,35,882/- (2,20,000-84,118) IS ADDED TO THE INCOME OF THE ASSESSEE. 21(II) HAVING REGARD TO THE FACT-SITUATION OF THE PRESENT CASE AND THE RECONCILIATION STATEMENT FILED BEFORE THE CIT(A) AS WELL AS BEFORE THE AO, WE DO NOT FIND ANY INFIRM ITY IN THE FINDINGS OF THE CIT(A). HENCE, THE SAME ARE UPHELD AND GROUND NO.3 OF THE REVENUE IS DISMISSED. 22. IN GROUND NO.4, REVENUE CONTENDED THAT CIT(A) E RRED IN DELETING THE ADDITION OF RS.60,000/- MADE ON ACCOUN T OF SALARY TO TECHNICAL PERSONS FOR WHICH NO JUSTIFICAT ION WAS FILED. THE APPELLANT SUBMITTED THAT DURING THE YEA R UNDER CONSIDERATION, SALARY TO TECHNICAL PERSONS WAS DEBI TED UNDER THE SEPARATE HEAD. REQUISITE DETAILS OF THE SALARY AND COPY OF ACCOUNT OF SALARY WAS FILED BEFORE THE AO. IT WAS, FURTHER, CONTENDED, THAT, WE ARE DEALING IN ELECTRONIC ITEMS AND FOR PROVIDING SERVICE TO OUR CUSTOMERS, WE HAD ENGAGED TWO TECHNICAL PERSONS WHO WERE ALSO ENGAGED DURING THE EARLIER 14 YEARS. THEREFORE, THE ADDITION MADE BY THE AO, IS N OT JUSTIFIED. THE APPELLANT ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S S.A .BUILDERS 288 ITR 1 (S.C). THE FINDINGS OF THE CIT(A), ARE C ONTAINED IN PARA 18 AND THE SAME ARE REPRODUCED : 18. THE SUBMISSIONS OF THE APPELLANT CLAIMING THAT THE EXPENDITURE ON THE SALARY OF TECHNICAL PERSONS HAD BEEN INCURRED AND DEBITED IN EARLIER YEARS AS WELL WERE SENT TO THE 4AO FOR VERIFICATION AND SAME HAVE NOT BEEN CONTROV ERTED. FURTHER THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER THAT THERE WAS NO NEED FOR EMPLOYING TECHNICAL PERSONS A S THE GOODS SOLD ARE COVERED UNDER GUARANTEE AND TAKEN CARE OF BY THE MANUFACTURER COMPANY IS NOT ACCEPTABLE AS POINTED O UT BY THE AR IN HIS ARGUMENTS. THE NATURE OF GOODS SOLD BY TH E ASSESSEE BEING ELECTRONIC ITEMS HAS TO BE LOOKED AFTER BY PE RSONS WITH TECHNICAL CAPABILITIES AND THE EXPENSES THEREOF ARE FULLY ALLOWABLE. THE OBSERVATION OF THE AO IN THE ASSESSM ENT ORDER THAT NO SUCH EXPENSES HAVE BEEN CLAIMED IN THE EARL IER YEAR IS FACTUALLY INCORRECT. THE ADDITION MADE IS THEREFORE DELETED. 22(I) HAVING REGARD TO THE FINDINGS OF THE CIT(A ) AND NON- AVAILABILITY OF REQUISITE MATERIAL, BEFORE THE AO T O JUSTIFY SUCH ADDITION, IN AN ASSESSMENT, COMPLETED U/S 143( 3) READ WITH SECTION 153A, IS NOT JUSTIFIED. THEREFORE, TH E SAME IS DELETED AND FINDINGS OF THE CIT(A) ARE UPHELD. THI S GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 23. IN GROUND NO.5, REVENUE CONTENDED THAT THE DELE TION OF ADDITION OF RS.60,000/-. MADE ON ACCOUNT OF UNEXPLA INED LOAN, RECEIVED FROM SHRI VIPAN KUMAR (HUF) IS NOT J USTIFIED. BEFORE THE CIT(A), IT WAS SUBMITTED THAT HUF ADVANC ED THE LOAN OF RS.60,000/- AND CONFIRMATION TO THIS EFFECT WAS FILED BEFORE THE AO, INDICATING PAN, WHICH WAS AGAIN FILE D BEFORE THE CIT(A). LD. CIT(A), DELETED THE IMPUGNED ADDIT ION ON THE GROUND THAT THE ASSESSEE HAS DULY DISCHARGED THE ON US, CAST ON HIM U/S 68 OF THE ACT. WE, DO NOT FIND ANY INFI RMITY IN 15 THE FINDINGS OF THE CIT(A) AND THE SAME ARE UPHELD. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 24. GROUND NO. 6 IS GENERAL IN NATURE AND REQUIRES NO SPECIFIC ADJUDICATION. ACCORDINGLY, THE SAME IS DI SMISSED. 25. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 26. RESULTANTLY, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.08.2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 22 ND AUG., 2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH