Appeal Details
Counselvise Citation
392620514 RSA 2008
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 1 month(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
05-01-2012
Assessment Year
1996-1997
Appeal Filed On
01-12-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (SHRI BHAVNESH SAINI, JM AND A.MOHAN ALANKAMONY, AM ) ITA NO.3926/AHD/2008 A. Y.: 1996-97 THE A. C. I. T., CENTRAL CIRCLE 1(2), ROOM NO.305, 3 RD FLOOR, AAYAKAR BHAVAN, ASHARAM ROAD AHMEDABAD VS M/S. RADHE DEVELOPER INDIA LTD., 2 ND FLOOR, SWAGAT BUILDING, C.G. ROAD, AHMEDABAD PA NO. AAACR 9177 L (APPELLANT) (RESPONDENT) DEPARTMENT BY SHRI S. K. GUPTA, CIT DR ASSESSEE BY SHRI S. N. SOPARKAR, AR DATE OF HEARING: 06-01-2012 DATE OF PRONOUNCEMENT: 20-01-2012 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XI, AHMEDABAD D ATED 25-09-2008 FOR ASSESSMENT YEAR 1996-97. 2. THE LEARNED CIT(A) NOTED THE RELEVANT FACTS TO B RIEFLY STATE THE FACTS LEADING TO THE FILING OF THE PRESENT APPELLA TE PROCEEDINGS BEFORE HIM. IT IS NOTED IN THE IMPUGNED ORDER THAT THE ASS ESSEE-COMPANY WAS INCORPORATED ON 3.2.1995 WITH THE OBJECT OF CAR RYING ON BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF LAND. THE RETURN OF INCOME FOR 2 A.Y. 1995-96 WAS FILED BY THE ASSESSEE DECLARING LO SS OF RS.1,31,240/- WHICH WAS ACCEPTED BY THE ASSESSING O FFICER AS PER ASSESSMENT ORDER DATED 6.02.1998. IN THE MEANWHILE A SEARCH U/S. 132 WAS CARRIED OUT ON 14.3.1996 IN THE GROUP CASES OF THE ASSESSEE-COMPANY AND CONSEQUENT TO THE SEARCH, ASSE SSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE-COMPANY WER E INITIATED U/S. 158BC. ASSESSMENT ORDER FOR THE RELEVANT BLOCK PERI OD WAS PASSED ON 31.3.1997 WHEREIN THE UNDISCLOSED INCOME WAS DET ERMINED AS UNDER: ASSESSMENT YEAR 1995-96 RS. 1,31,240 ASSESSMENT YEAR 1996-97 RS.28,30,21,200 3. UNDISCLOSED INCOME DETERMINED BY THE ASSESSING O FFICER FOR A.Y. 1996-97, INTER ALIA, INCLUDED THE FOLLOWIN G: (A) UNACCOUNTED INVESTMENT FOR ACQUIRING DEVELOPMENT RIGHTS IN SHELA LAND RS. 20,55,86,000 (B) AMOUNTS RECEIVED FROM MEMBERS FOR BOOKING OF PLOTS AS PER ANNEXURES A-29 AND A-30 FORMING PART OF THE SEIZED MATERIAL RS. 99,35,200 (C) AMOUNT RECEIVED FROM PARESH CHIMANLAL SHAH IN THE ABSENCE OF CONFIRMATION FROM THE ABOVE PERSON RS. 4,00,000 3 4. THE ASSESSEE FILED APPEAL TO THE ITAT AGAINST TH E BLOCK ASSESSMENT ORDER WHICH CAME TO BE DISPOSED OF BY TH E TRIBUNAL VIDE ORDER DATED 15.01.1999 IN IT(SS)A NO. L03/AHD/1997. REGARDING PRINCIPLES FOR DETERMINING UNDISCLOSED INCOME IN A BLOCK ASSESSMENT, THE HONBLE TRIBUNAL RECORDED THE PRELIMINARY FINDI NG AT PARA 2 OF ITS ORDER, RELEVANT PART OF WHICH IS REPRODUCED BELOW: 'BEFORE GOING INTO THE MERITS OF THE CASE WE MUST F IRST POINT OUT THAT THE SEARCH WAS CONDUCTED ON 14.3.199 6 RELATING TO THE ASST. YEAR 1996-97 AND ENTIRE UNDIS CLOSED INCOME WAS INCLUDED IN THE SAME ASSESSMENT YEAR. IT CANNOT BE DISPUTED THAT THE RETURN OF INCOME WAS NO T DUE WHEN THE SEARCH WAS CONDUCTED. THEREFORE, THE ENTRI ES IN THE BOOKS OF ACCOUNT AS WELL AS OTHER DOCUMENTS FOU ND AT THE TIME OF SEARCH COULD HAVE BEEN PROCEEDED WITH I N REGULAR ASSESSMENT FOR WHICH RETURN WAS NOT DUE AND THERE IS NO MATERIAL BROUGHT INTO THE RECORD TO SHO W THAT THE ASSESSEE WOULD NOT INCLUDE THIS INCOME IN ITS R ETURN FILED AT THE TIME OF REGULAR ASSESSMENT, IN THIS RE SPECT, WE MAY REFER TO PARA 7 OF THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF N. R. PAPER AND B OARD LTD. AND ORS. SPL. C.A. NO. 1148 OF 1998 WHERE IT H AS BEEN STATED 'IT THEREFORE, FOLLOWS THAT THE ASSESSE E HAD ALREADY DISCLOSED OR WOULD HAVE DISCLOSED IS NOT TO BE TREATED AS UNDISCLOSED INCOME.......' 5. IT WOULD ALSO BE RELEVANT FOR THE PURPOSES OF T HE PRESENT APPEAL TO MENTION HERE THAT THE MAIN ADDITION OF RS.20,55,86, 000/- MADE IN THE BLOCK ASSESSMENT WAS BASED ON THE ASSESSING OFFICER 'S FINDING THAT THE ASSESSEE INCURRED ESTIMATED EXPENDITURE OF RS.25,19 ,86,000/- IN ACQUIRING DEVELOPMENT RIGHTS OF SHELA LAND WHEREAS A SUM OF RS.4,55,00,000/- ONLY WAS RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFORE, THE DIFFERENCE REPRESENTED THE ASSESSEE' S UNEXPLAINED OR UNACCOUNTED INVESTMENT. THIS FINDING WAS RECORDED B Y THE ASSESSING 4 OFFICER IN THE BLOCK ASSESSMENT BY REJECTING THE AS SESSEE'S CLAIM THAT DEVELOPMENT RIGHTS DURING THE RELEVANT PERIOD WERE ACQUIRED BY THE ASSESSEE ONLY IN RESPECT OF APPROXIMATELY 7,00,000 SQ. YDS., AND HOLDING THAT THE ASSESSEE MADE INVESTMENT IN ACQUIR ING 11.11 LAC SQ. YDS. OF LAND @ RS.226 PER SQ. YD. THIS ISSUE HAS BE EN CONSIDERED AND DECIDED BY THE TRIBUNAL AT PAGES 11 AND 12 OF ITS O RDER, THE RELEVANT PART OF WHICH IS REPRODUCED BELOW: 'NO EVIDENCE HAS BEEN BROUGHT INTO RECORD TO SHOW T HAT ALL THE SECTORS WERE DELIVERED TO THE ASSESSEE. AT THIS STAGE WE MAY POINT OUT THAT THE AO WAS OF THE OPINION THAT T HE ASSESSEE DID NOT PRODUCE ANY CONFIRMATION LETTER FR OM THE PERSONS TO WHOM PAYMENT WAS MADE BUT AT THE SAME TI ME THE AO HAS FAILED TO BRING ANY MATERIAL ON RECORD T HAT THE ASSESSEE HAD OBTAINED POSSESSION OF ALL THE THREE S ECTORS BEFORE THE DATE OF SEARCH. FURTHER, THE EMPHASIZED PART OF THE ABOVE DOCUMENT CLEARLY SHOWS THAT MOST OF THE PAYMENTS WERE DUE ON THE DATE OF EXECUTION OF THE DOCUMENTS. ONLY RS.8 CRORE FOR SECTOR NO.1 AND RS.7 .15 CRORE FOR SECTOR NO. 2 WERE PAID. AT PAGE 30 PARA 1 2.11 THE AO MENTIONED THAT PAGE 106 OF ANNEXURE-A3 SEIZED FR OM THE RESIDENCE OF ARUN ONLY CONTAINS THE PAYMENT SCH EDULE AND NOT THE EXACT PAYMENT. WE HAVE GONE THROUGH THE DEPOSITION OF ASHISH TAKEN ON 15.3.1996 WHERE HE HA S REPEATEDLY STATED THAT ONLY 7 LACS SQ. YDS. WERE TA KEN POSSESSION OF BY PAYMENT OF RS.8 CRORES AND RS.7.5 CRORES FOR SECTION NO.1 AND SECTOR NO.2 RESPECTIVELY. HE A LSO REITERATED THAT SECTOR NO. 3 WOULD BE TAKEN POSSESS ION OF AFTER 1 AND 2 SECTORS ARE TAKEN POSSESSION OF. TAKING THE TOTALITY OF THE CIRCUMSTANCES, WE ARE OF THE OPINIO N THAT BOTH AS REGARDS THE AREA AS WELL AS THE AMOUNT OF PAYMEN T OF THE RELEVANT TIME DETERMINED BY THE DEPARTMENT HAS NOT BEEN CORRECTLY DETERMINED BY THE AO. HOWEVER, AS WE HAVE DELETED THE ADDITION DEDUCTING THE EXPENDITURE U/S. 37 FROM THE INCOME ESTIMATED U/S. 69C THE ENTIRE ADDITION I S DELETED. 9. A QUESTION MAY ARISE, IF THERE WAS AN ACQUISITI ON OF ANY ASSET WHY THE SAME SHOULD NOT BE ADDED TO COMPU TE 5 THE TAXABLE INCOME OF THE ASSESSEE AS STOCK-IN-TRAD E. THERE IS FALLACY IN THIS QUESTION OR PROPOSITION. T HE AUDITION ITSELF WAS MADE BECAUSE THERE WAS ACQUISIT ION OF STOCK-IN-TRADE AND THE SOURCE OF ACQUISITION WAS UNEXPLAINED. AS A MATTER OF FACT IF THE ASSET HAS T O BE ADDED TO THE INCOME OF THE ASSESSEE FROM UNEXPLAINE D SOURCES THEN THERE WAS NO NECESSITY OF AMENDING SEC . 69C STATING THAT THE UNEXPLAINED EXPENDITURE WOULD NOT BE SET OFF AGAINST THE VALUE OF THE STOCK-IN-TRADE. THEREFORE, THIS PROPOSITION IS FALLACIOUS AND CANNO T BE ACCEPTED. HOWEVER, ANY RECEIPT ARISING OUT OF THE DEVELOPMENT RIGHT IS REQUIRED TO BE ADDED IN FULL, BECAUSE THE ENTIRE SET OFF OF UNEXPLAINED EXPENDITURE HAD B EEN MADE FROM ACQUISITION OF STOCK AND NO ADDITION HAD BEEN SUSTAINED. HOWEVER, IF THE ASSESSEE CAN ESTABLISH T HE GENUINENESS OF THE EXPENDITURE TO THAT EXTENT INCOM E SHOULD BE REDUCED AS NEITHER THE ASSESSEE NOR THE DEPARTMENT HAD SUFFICIENT TIME IN THIS RESPECT BEFO RE PASSING ORDER U/S. 158BC,' 6. WITH REGARD TO THE ADDITIONS OF RS.99,35,200/- AND RS.4,00,000/- THE HONBLE TRIBUNAL HELD THAT THESE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESS EE PRIOR TO THE DATE OF SEARCH AND, THEREFORE, THE SAME CANNOT BE C ONSIDERED TO BE UNDISCLOSED INCOME OF THE ASSESSEE AND THAT THESE I SSUES CAN BE CONSIDERED ON MERIT ONLY IN THE REGULAR ASSESSMENT PROCEEDINGS FOR A.Y. 1996-97. WITH THIS BACKGROUND, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE WERE CONSIDERED AND DECIDED BY THE LEA RNED CIT(A) AND ADDITIONS HAVE BEEN DELETED BY ALLOWING THE APP EAL OF THE ASSESSEE PARTLY. THE REVENUE IS IN APPEAL ON 8 GROU NDS OF APPEALS AGAINST THE ORDER OF THE LEARNED CIT(A) BEFORE THE TRIBUNAL. 7. THE REVENUE ON GROUNDS NO.1 TO 4 CHALLENGED TH E DELETION OF ADDITION OF RS.99,35,200/- ON ACCOUNT OF UNEXPLAINE D CASH CREDITS U/S 6 68 OF THE IT ACT, DELETION OF ADDITION OF RS.4,00,0 00/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND DELETION OF ADDITION OF RS.13,60,00,523/- MADE ON ACCOUNT OF RECEIPTS FROM DEVELOPMENT RIGHTS IN THIS YEAR. IT IS FURTHER STATED THAT THE LEARNED CIT(A) ERRED IN DELETING THE PROTECTIVE ADDITIONS. AS MENTIONED ABOVE THESE ADDITIONS TOTALING TO RS.14,63,35,723/- HAVE BEEN MADE BY THE ASSESSING OFFICER ON PROTECTIVE BASIS. REGARDING AD DITIONS OF RS.99,35,200/- AND RS.4,00,000/- THE ASSESSING OFFI CER AT PARA 7 OF HIS ORDER HAS MENTIONED THAT THE HON'BLE TRIBUNAL W HILE DECIDING THE BLOCK ASSESSMENT APPEAL DELETED THESE ADDITIONS OBS ERVING THAT THE SAME SHOULD BE CONSIDERED IN THE REGULAR ASSESSMENT PROCEEDINGS. WITH REGARD TO THE ADDITION OF RS.13,60,00,523/- TH E ASSESSING OFFICER HAS MENTIONED IN THE SAME PARA THAT THE HON'BLE TRI BUNAL DIRECTED THAT ANY RECEIPTS ARISING ON ACCOUNT OF DEVELOPMENT RIGHTS WERE REQUIRED TO BE ADDED IN FULL. ACCORDINGLY, THE ASSE SSING OFFICER ISSUED SHOW CAUSE NOTICES TO THE ASSESSEE DURING THE COURS E OF THE REGULAR ASSESSMENT PROCEEDINGS CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE AFORESAID ADDITIONS BE NOT MADE ON THE BASI S OF THE DISCUSSION ALREADY GIVEN IN THE BLOCK ASSESSMENT OR DER. THE RELEVANT PORTION FROM THE BLOCK ASSESSMENT ORDER HAS BEEN RE PRODUCED BY THE ASSESSING OFFICER ON PAGES 19 TO 24 OF HIS ORDER. S INCE THIS DISCUSSION FORMS THE VERY BASIS FOR THE ADDITIONS O F RS.99,35,2000/- AND RS.4,00,000/-, IT WOULD BE APPROPRIATE TO RE PRODUCE THE SAME HEREUNDER: 14. IT WAS DETECTED FROM THE LOOSE PAPER FILE ANN EXURE-A 29 & A-30 SEIZED FROM THE OFFICE PREMISES OF THE ASSESSE E WHICH CONTAINS THE ALLOTMENT LETTERS OF RADHE ACRES 2 SCH EMES, THAT 7 ON A NUMBER OF ALLOTMENT LETTERS, THE ADDRESS OF TH E ALLEGED ALLOTMENTS HAS BEEN DELIBERATELY OMITTED. IN OTHER, WORDS, THE ALLEGED ALLOTMENTS HAVE BEEN ISSUED ON RECORD WITHO UT ADDRESS OF THE PERSONS CONCERNED. 15. DURING THE COURSE OF SEARCH, THE STATEMENT OF SHRI ASHISH P. PATEL WAS RECORDED ON 14-03-1996 WHEREIN HE HAS QUESTIONED ABOUT THE NUMBER OF PLOTS BOOKED IN THE NAMES OF SHRI VIRENDRA PATEL, SHRI MUKESH M. PATEL AND SHRI TRILOK B. PATEL ETC. THE RELEVANT PORTION OF THE STATEMENT IS AS UNDER: Q.NO.2 I AM SHOWING YOU ALLOTMENT FORMS (ANN EX. A-30, PAGE NO.37 TO 47) ISSUED UNDER YOUR OWN SIGNATURE F OR ALLOTMENT OF FLATS IN RADHE ACRE' TO THE FOLLOWING PERSONS:- SR.NO . PLOT NO. AREA NAME OF ALLOTEES 1. 414 1000 SQ. YDS TRILOK B. PATEL 2. 412 968 SQ. YDS -DO-. 3. 413 1904 SQ. YDS. -DO- 4. 184 1104 SQ. YDS. NEHA PATEL 5. 183 990 SQ. YDS. -DO- . 6. 182 968 SQ. YDS. -DO- 7. 181 903 SQ. YDS. -DO- 8. 180 2302 SQ. YDS. VIRENDRA PATEL 9. 185 1104 SQ. YDS. -DO- 10. 391 968 SQ. YDS. MUKESH M. PATEL 11. 341 968 SQ. YDS. -DO- 8 PLEASE SEE THE PAPERS AND SAY THAT AT WHAT RATE LAND DEVELOPMENT CONTRIBUTION HAVE BEEN RECEIVED FR OM THE PARTIES? ANS. BY SEEING THESE PAPERS, I CAN DEFINITELY TELL THAT WE ARE COPING TO CHARGE RS.400/- PER SQ. YDS. AS LAND DEVELOPMENT CONTRIBUTION. Q. NO.3 PLEASE GO AGAIN THROUGH THESE PAPERS AND SA Y WHERE YOU HAVE MENTIONED THE RATE FOR LAND DEVELOPMENT CONTRIBUTION? HOWEVER, IN THESE ALLOTMENT LETTERS, TOTAL LAND DEVELOPMENT CONTRIBUT ION IS MENTIONED WHICH COMES TO RS.200 PER SQ. YD. ANS. IN THESE PAPERS WE HAVE NOT MENTIONED ANY RAT E PER SQ. YARD. BUT I AM VERY MUCH SURE, WE ARE GOING TO CHARGE RS.400/- PER SQ. YARDS AS LAND DEVELOPMENT CONTRIBUTION. Q. NO.5 WHETHER YOU HAVE OPENED LEDGER ACCOUNT OF THOSE MEMBERS? ANS. NO. Q. NO. 6 HAVE YOU DEBITED THEIR ACCOUNTS FOR TOTAL CONTRIBUTION AT THE RATE OF RS.400 SQ, YDS. IN THEI R ACCOUNT? ANS. NO. WE HAVE NOT DEBITED FULL CONSIDERATION WH ATEVER AMOUNT IS RECEIVED IS CREDITED IN THE MEMBER ACCOUNT. Q. NO.7 PLEASE GO THROUGH THE PAGE NO. 111 OF ANNEX . A-30 AND EXPLAIN WHO HAS WRITTEN THIS PAGE HAVING DETAIL S OF PLOT ALLOTTED TO PATELS? ANS. THE PERSON SHRI NARESHBHAI B. PATEL WHO HAS C OME FOR BOOKING HAS GIVEN ME THIS LETTER. Q.NO.8 PLEASE GO THROUGH PAGE NO. 115 OF ANN EXU. - A- 30 9 SEIZED FROM YOUR OFFICE AND REPEAT WHAT MENTIONED ON THIS PAGE? ANS. ON THIS PAGE, FOLLOWING DETAILS IS WRITTEN: NARESH PATEL MINAVI 448 - 5000 X 200 1,00,000 NIMESH 467- 5000 X 200 1,00,000 NARESH 181- 750 X 200 1 ,50,000 1750 SQ.YDS X 200 = CHECK RS.3,50,000/- 1750 X 350 CASH RS.6,12,5007- THESE HAND WRITING IS NOT MINE. ONE PORTION OF TH E PAPER IS XEROX INK AND OTHER PORTION IS IN BLUE PEN. . Q.9 WHETHER ANY PLOT HAS BEEN ALLOTTED IN THE NAME OF MINAVI, NIMESH AND NARESH IN THE SCHEME RADHE ACRE? ANS. YES, I HAVE ALLOTTED PLOTS TO SHRI NARESH PA TEL, NIMESH PATEL AND MINAVI PATEL. Q.NO.10 PLEASE GIVE THE NAME AND ADDRESS OF TH E PERSON WHO HAVE BOOKED PLOTS NARRATED IN Q. NO.2 ABOVE? ANS. SHRI NARESH B. PATEL HAS BOOKED THESE PLOTS I N VARIOUS NAMES ADDRESS IS 481/20 SATYAGRAH CHHAVANI, Q.PP. ISRO, SATELLITE ROAD, AHMEDABAD -54 . 15.1 IN VIEW OF THE ABOVE, A NOTICE U/S.131 OF THE IT. ACT WAS ISSUED TO SHRI NARESH B. PATEL. IN RESPONSE THEREOF SHRI NARESH B. PATEL APPEARED ON 17-02-1997 ALONG WITH HIS A.R. AND STATED ON OATH THAT HE HAD BOOKED ONLY 4 PLOTS IN T HE NAME OF FOLLOWING PERSONS. 1. SHRI NARESH PATEL 2. SHRI MINAKSHI PATEL 10 3. SHRI NIMISH PATEL 4. SHRI SHEFALI PATEL. 15.2 HE ALSO FILED THE COPY OF ALLOTMENT LETTERS A ND. COPY OF BANK ACCOUNTS IN RESPECT OF HIS CLAIM. 15.3 IN VIEW OF THE AFORESAID, THE ASSESSES COMPAN Y WAS ASKED TO GIVE COMPLETE ADDRESS ALONG WITH CONFIRMAT ION ACCOUNTS OF THE PERSONS WHO HAVE BOOKED THE PLOTS I N RADHE ACRES 1 AND RADHE ACRES-2, THE ASSESSEE'S ATTENTION WAS AISO DRAWN TO THE STATEMENT OF SHRI NARESH B. PATEL WHER EIN HE STATED THAT ONLY 4 PLOTS WERE BOOKED BY HIM AS AGAI NST 1.1 STATED BY SHRI ABHISH P. PATEL IN HIS STATEMENT U/S . 132(4) REFERRED TO ABOVE. 15.4 THE ASSESSEE VIE LETTER DATED 27 TH MARCH, 1997 STATED AS UNDER: AT THE OUTSET, IT IS SUBMITTED HERE THAT THE RETURN OF INCOME IN QUESTION WAS FILED ON 21-3-1997 IN YOUR GOOD OFF ICE. YOUR HONOUR IS FURTHER REQUESTED TO REFER OUR REPLY DATED 2.1-3-1997 FILED IN YOUR GOOD OFFICE. PARA-1 YOUR HONOUR HAS STATED THAT THE DETAILS OF CHEQUES ISSUED WERE CROSSED OR NOT IS NOT KNOWN. THEREFORE, IT IS PROPSED TO ADD AN AMOUNT BEING CASH INTRODUCED. IN THIS REG ARD, YOU ARE REQUESTED TO REFER ENCLOSURES FILED AS PER PARA 2.5 OF COMPANY'S LETTER DATED 21-3-19.97. IT IS VER IFIABLE FROM THE BANK STATEMENT FILED WITH THE CHEQUES ISSU ED WERE 1 NOT BEARER. THEREFORE, YOU ARE REQUESTED NOT TO TAKE ANY ADVERSE VIEW ON THIS ACCOUNT. AS REGARDS THE BOOKING MADE BY SHRI NARESH B. PATEL WE RELIED ON THE RELEVANT SEIZED PAPERS WHICH ITSELF R EVEALS THAT HOW MUCH AMOUNT WAS COLLECTED FROM SHRI NARESH B. PATEL. NO. OF PLOTS BOOKED, READY THEREOF WHICH BEY OND DOUBT ESTABLISHES THE CORRECTNESS OF OUR STATEMENT AND THE FACT. THEREFORE, YOUR HONOUR IS REQUESTED TO HO LD THAT 11 THE -BOOKING WAS MADE BY HIM AND NOT BY US IN FICTI TIOUS NAMES. IT IS PERTINENT TO MENTION HERE THAT SHRI NA RESH B. PATEL HAS NOT ONLY BOOKED THE PLOTS BUT FROM THE PA PERS ITSELF IT IS ESTABLISHED THAT WE HAVE COLLECTED 3 P REMIUM OF RS.45,95,850/- FROM SHRI NARESH B. PATEL AGAINST TH E BOOKING OF PLOTS. THE TOTALITY OF THE FACTS SHALL N OT HAVE BORNE IN MIND AND NO PARTIAL VIEW BE TAKEN IN THIS REGARD.' 15.5 THE AFORESAID WOULD SHOW THAT THE ASSESSEE HAS DELIBERATELY SKIPPED REPLY TO ONE PART OF THE Q UESTION WHICH WAS IN REFERENCE TO ADDRESS AND CONFIRMATION ACCOUN T OF THE PERSONS WHO HAVE BOOKED PLOTS IN THE ASSESSEE COMPANY. SO FAR AS THE ISSUE OF SHRI NARESH B. PATEL IS CONCERN ED, THE ASSESSEE CLAIMS THAT IT HAS COLLECTED ON MONEY TO T HE TUNE OF RS.45.95 FROM HIM. HOWEVER, THE ASSESSEE HAS NOT CO ME OUT WITH CONVINCING EVIDENCES TO PROVE THE POINT THAT S HRI NARESH B. PATEL IN FACT BOOKED 11 PLOTS AS THE MANAGING DI RECTOR OF THE COMPANY SHRI ASHISH P. PATEL DISCLOSED IN HIS STATE MENT DATED 14.03,1996 REFERRED TO ABOVE. 15.6 A LIST OF ALLEGED MEMBERS IN WHOSE NAMES BOOK INGS ON PLOTS WERE MADE HAS BEEN PREPARED FROM THE ANNEXURE 'A' 29 & 30 SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE THE NAMES, PERSONS IS REFLECTED AS UNDER: PLAGE NO. NAME PLOT NO.I AMOUN (RS.) A-30 1 VIRENDRA A. PATEL 186 1,98,000 2 RITA A PATEL 305 1,93,600 3 RITA A. PATEL 333 1,93,600, 4 AJAY M. PATEL 335 1,93,600 5 AJAY M. PATEL 251 1 ,93,600 6 NIRUTA M. PATEL 241 1,93,600 7 NIRUTA M. PATEL 422 2,00,000 12 8 ANANTA T. PATEL 418 2,06,600, 9 ANANTA T. PATEL 417 2,00,000 10 ANANTA T. PATE! 416 2,00,000 11 ANANTA T. PATEI 415 1,93,600 12 RAJESH PATEL 244 1 ,56,400 13 RAMESH PATEL 250 1,98,000 14 SONAL PATER 377 93,600 15 KUMUD PATEL 389 1 ,93,600 37. TRILOK B. PATEL 414 2,00,000 38 TRILOK B. PATEL 412 1,93,600 39 TRILOK B. PATEL 413 3,00,000 40 NEHA PATEL 184 2,20,000 41 NEHA PATEL 183 1 ,90,000 42 NEHA PATEL 182 1 ,93,600 43 NEHA PATEL 181 1 ,00,600 44 VIRENDRA PATEL 180 4,61,600 45 VIRENDRA PATEL 185 2,28,000 46 MUKESH M. PATEL 381 1 ,93,600 47 MUKESH M. PATEL |341 1,93,600 54 RASIKLAL HIRALAL PATEL 1OO 2,00,000 74 PRAKASH SHANTILAL PANCHAL 15 5,87,000 75 SURENDRABHAI KALIDAS 174 5,93,400 83 NARESH B. PATEL 01 8,78,200 13 48 SACHINBHAI B. AMIN 171/2 2,00,000 49 HITANBHAI AMIN HUF 2,00,000 VASANT M. AMIN 13 9,42,000 107 BHARTIBEN HARISHBHAI PATEL 188 1,96,000 89 JANI MAHESH MANGALALAL 162 1,00,000 JANI MAHESH MANGALALAL 97 RAMANBHAI SOMABHAI PATEL 175 5,93,000 99,35,200 15.7 IN VIEW OF THE FINDINGS GIVING IN THE PRECEDI NG PARAGRAPH, THE AMOUNT APPEARING IN THE BOOKS OF ACCOUNTS OF TH E ASSESSEE AGAINST THE AFORESAID PERSONS WILL BE ADDED IN TERM S OF PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT BEIN G UNEXPLAINED CREDITS IN THE BOOKS OF ACCOUNTS ON THE ASSESSEE COMPANY. AS MOST OF THE BOOKINGS HAVE BEEN DONE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1996-07, THEREFORE, THE AMOUNT WILL BE ADDED IN THE ASSESSMENT YEAR 199 6-97 (ADDITION RS.99,35,200) 16. AS ANALYSIS OF THE SEIZED BOOKS OF ACCOUNTS AN D DOCUMENTS IN THE CASE OF THE ASSESSEE CARRIED OUT A ND IT WAS FOUND THAT A NUMBER OF CASES IT RECEIVED BOOKING AM OUNT IN CASH AND REFUNDED THE SAME THROUGH CHEQUE. IN VIEW OF THIS THE ASSESSEE WAS ASKED TO GIVE CONFIRMATION ACCOUNTS FR OM THE PARTIES WITH WHOM SUCH TRANSACTIONS WERE CARRIED OU T. ' 16.1 IN RESPONSE TO THEREOF THE ASSESSEE VIDE ITS LETTER DATED 25.3.1997 HAS FILED DETAILS IN THIS REGARD, HOWEVER , CONFIRMATION ACCOUNTS FROM THE PERSON HAS NOT BEEN FILED. IN VIE W OF THIS THE CASH AMOUNT OF RS.4,00,000/- ACCEPTED FROM PARESHKU MAR CHIMANLAL SHAH BEING UNEXPLAINED CREDIT BROUGHT IN THE BOOKS 14 OF ACCOUNTS THROUGH CASH, WILL BE ADDED IN THE INCO ME OF THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMEN T YEAR 1996-97 IN TERMS OF THE PROVISIONS OF SECTION 68 OF THE ACT. (ADDITION OF RS.4,00,000/-)' 8. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE BEFORE THE ASSESSING OFFICER DATED 12.2.1999, CONTE NDING THAT THE HON'BLE TRIBUNAL DID NOT GIVE ANY DIRECTIONS THAT T HE AFORESAID TWO ADDITIONS ARE TO BE MADE IN THE REGULAR ASSESSMENT FOR A.Y. 1996-97 AND THAT THE ONLY OBSERVATION MADE BY THE HON'BLE T RIBUNAL WAS THAT THESE AMOUNTS WHICH ARE DULY ACCOUNTED IN THE BOOKS OF ACCOUNT EVEN PRIOR TO THE DATE OF SEARCH COULD BE CONSIDERED DURING THE REGULAR ASSESSMENT PROCEEDINGS. IT WAS, THEREFORE, REQUESTED BY THE ASSESSEE THAT THE BASIS FOR MAKING THESE ADDITIONS SHOULD BE PROVIDED TO THE ASSESSEE. REGARDING PROPOSED ADDITI ON OF RS,4,00,000/- THE ASSESSEE IN THE SAME LETTER MADE THE FOLLOWING SUBMISSIONS WHICH HAVE BEEN REPRODUCED BY THE ASSES SING OFFICER AT PAGE 24 OF HIS ORDER: 'AS REGARDS, PARAGRAPH 3 OF YOUR LETTER DATED 3.2.1 999, WE SUBMITTING HEREWITH THE FOLLOWING AS RECEIVED FROM THE CONCERNED PERSONS:- I) DULY SWORN IN AFFIDAVIT IN ORIGINAL OF SHRI PARE SH CHIMANLAL SHAH, II) XEROX COPIES OF INTIMATIONS U/S.143 (1) (A.) OF THE ACT IN THE CASES OF SHRI PARESH CHIMANLAL SHAH AND PINAKIN CHIMANLAL SHAH FOR A.Y. 96-97. III) XEROX COPY OF SAVING BANK ACCOUNT LEDGER (ACCOUNT NO. 111) WITH SIDDHI CO-OP. BANK LTD., AHMEDABAD OF SHR EE MAHAVIR ASSOCIATES, SHOWING THAT THE REQUIRED 15 WITHDRAWALS WERE MADE FROM THE BANK ACCOUNT FOR MAK ING PAYMENTS FOR BOOKING. ACCORDINGLY THE SAME SHOULD N OT BE ADDED AS INCOME.' 9. THE ASSESSING OFFICER HAS FURTHER MENTIONED AT PARA 7.4(C) OF HIS ORDER THAT CERTAIN LETTERS/AFFIDAVITS WERE RECE IVED IN HIS OFFICE DIRECTLY FROM SOME NON-RESIDENT INDIANS (NRIS). THE ASSESSING OFFICER HAS MENTIONED THAT THESE NRIS WERE NEVER AS KED BY HIS OFFICE TO GIVE ANY EVIDENCE OR REPLY AND, THEREFORE, THE A SSESSEE WAS INFORMED THAT THESE LETTERS CANNOT FORM PART OF THE ASSESSMENT RECORD AND THAT SUCH AFFIDAVITS DIRECTLY RECEIVED MUST BE AUTHENTICATED BY THE ASSESSEE. THE ASSESSING OFFICER HAS FURTHER STATED THAT THE ASSESSEE HAS NOT FILED ANY PROPER REPLY AND ONLY MENTIONED T HAT THE NRIS WERE STAYING ABROAD. THE ASSESSING OFFICER HAS FURTHER M ENTIONED THAT IT IS NOT UNDERSTOOD AS TO WHY THE ASSESSEE DID NOT FILE SUCH AFFIDAVITS DURING THE COURSE OF THE BLOCK ASSESSMENT PROCEEDIN GS. HE HAS FURTHER MENTIONED THAT FILING OF THESE AFFIDAVITS D OES NOT IN ANY WAY AFFECT THE FINDING GIVEN IN THE BLOCK ASSESSMENT OR DER. THE ASSESSING OFFICER, THEREFORE, REPEATED THAT T HE TWO ADDITIONS WHICH WERE MADE IN THE BLOCK ASSESSMENT ORDER BUT D ELETED BY THE TRIBUNAL. FROM THE DISCUSSION REPRODUCED BY THE ASS ESSING OFFICER IN HIS ASSESSMENT ORDER AND EXTRACTED FROM THE BLOCK A SSESSMENT ORDER IT MAY BE SEEN THAT THE MAIN BASIS FOR THE ADDITION OF RS.99,35,200 /- IS THE STATEMENT GIVEN BY SHRI ASHISH PATEL THAT 11 PLOTS WERE BOOKED BY SHRI NARESH B. PATEL IN THE NAMES OF TRILOK B. PATEL, NEHA PAT EL, VIRENDRA PATEL AND MUKESH M PATEL. THE ASSESSING OF FICER ISSUED NOTICE U/S. 131 TO SHRI NARESH B. PATEL IN RESPONSE TO WHICH HE 16 APPEARED BEFORE THE ASSESSING OFFICER AND STATED TH AT HE HAD BOOKED ONLY FOUR PLOTS IN THE FOLLOWING NAMES: (1) NARESH PATEL (2) MINAKSHI PATEL (3) NIMISH PATEL . (4) SHEFALI PATEL 10. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTIMATED THE ASSESSEE REGARDING THE STATEMENT GIVEN BY SHRI NARESH B. PATEL AND THE ASSESSEE FILE D A REPLY DATED 27.3.1997. IN THIS REPLY STATED THAT ALL THE PAYMENTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES. IT WAS ALSO STATED B Y THE ASSESSEE THAT THE BOOKINGS MADE BY SHRI NARESH B. PATEL ARE ESTABLISHED FROM THE RELEVANT SEIZED PAPERS SHOWING THE BOOKINGS MAD E BY HIM AND THE AMOUNTS PAID BY HIM. THE ASSESSING OFFICER DID NOT ACCEPT THESE ARGUMENTS AND HE CONCLUDED THAT AS PER THE D ISCUSSION GIVEN IN THE BLOCK ASSESSMENT ORDER THE ADDITION OF RS.99,35 ,200/- WAS REQUIRED TO BE MADE. HE HAS GIVEN THE DETAILS AT PA GE 23 OF HIS ORDER ON THE BASIS OF THE SEIZED ANNEXURE A-29 AND A-30. IN THESE DETAILS THE NAMES OF THE PERSONS BOOKING THE PLOTS, PLOT NU MBERS AND THE AMOUNTS RECEIVED ARE MENTIONED. WITH REGARD TO THE ADDITION OF RS.4,00,000/- ALSO THE SUBMISSIONS MADE BY THE ASSE SSEE DID NOT FIND ANY FAVOUR WITH THE ASSESSING OFFICER AND ACCO RDINGLY THIS ADDITION WAS ALSO REPEATED. 17 11. DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFO RE THE LEARNED CIT(A), WITH REGARD TO THE ABOVE MENTIONED TWO ADDITIONS, FOLLOWING SUBMISSIONS HAVE BEEN MADE ON BEHALF OF T HE ASSESSEE: '11.2 THE APPELLANT SUBMITS THAT COPY OF INQUIRY LE TTER TO NARESH PATEL OR HIS REPLY IS NOT MADE AVAILABLE TO THE APP ELLANT. HOWEVER, IT IS SUBMITTED THAT NARESH PATEL HAD GIVEN REPLY ABOUT BOOKING OF PLOTS BY HIS FAMILY. HIS REPLY WAS NOT WITH REFERENCE TO ANY INQUIRY ABOUT BOOKING OF 11 PLOTS BY TRILOK PATEL, NEHA PATEL, VIRENDRA PATEL & MUKESH PATEL, IF SUCH SPECI FIC INQUIRY WAS MADE, THE REPLY WOULD BE POSITIVE. IT MAY ALSO BE APPRECIATED THAT IN THE COURSE OF HEARING THE CONFI RMATIONS FROM ABOVE 4 PERSONS FOR BOOKING OF PLOTS BY THEM WERE F ILED VIDE LETTER DATED 15-3-1999 (COPY ENCLOSED), WHICH IS FO RMING PART OF RECEIPT OF RS.99 LAKH. THESE DETAILS ARE IGNORED B Y THE A.O. AS SUCH THERE WAS NO JUSTIFICATION FOR THE A.O. TO PRE SUME THAT THE BOOKING RECEIPT OF RS.99 LAKH WAS UNEXPLAINED CREDI T TO BE CONSIDERED U/S.68 ONLY ON THE GROUND THAT NARESH PA TEL CONFIRMED BOOKING OF ONLY 4 PLOTS BY HIM WHICH WERE BOOKED FOR HIS FAMILY AND NOT FOR OTHER PLOTS 11.3 IN SO FAR AS THE AMOUNT OF RS.4 LAKH IS CONC ERNED, IN PARA 16 ON PAGE 23 OF THE ORDER IT IS STATED BY THE A.O. THAT IN VARIOUS CASES THE BOOKING AMOUNT WAS RECEIVED BY CASH AND REFUNDED THROUGH CHEQUE. THE APPELLANT WAS ASKE D TO FURNISH CONFIRMATION OF ACCOUNT. THE APPELLANT HAD FURNISHED DETAILS IN THIS REGARD. HOWEVER, THE A.O. OBSERVES THAT IN RESPECT OF CASH AMOUNT OF RS.4 LAKH RECEIVED FROM P ARESH CHIMANLAL SHAH, THE CONFIRMATION WAS NOT FILED AND IT IS ADDED TO THE TOTAL INCOME. IN THIS CONNECTION IT MAY BE S TATED THAT NO OPPORTUNITY OF EXPLAINING THIS AMOUNT WAS GIVEN TO THE APPELLANT IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS. THE A.O. HAS SIMPLY REPRODUCED PARAGRAPHS FROM THE BLOCK AS SESSMENT ORDER AND MADE THE ADDITION. IN THIS CONNECTION T HE APPELLANT SUBMITS COPY OF ACCOUNT OF PARESH CHIMARLAL SHAH AN D PINAKIN CHIMANLAL SHAH WHICH IS JOINT ACCOUNT WHEREIN THE A MOUNT RECEIVED FROM THEM WAS CREDITED. ALONG WITH COPY OF RECEIPT ISSUED TO THEM IS ATTACHED. THEY HAD VIDE LETTER DA TED 8-6-1995 18 REQUESTED FOR CANCELLATION OF BOOKING AND ACCORDING LY THE AMOUNT WAS REPAID BY CHEQUE DRAWN ON DENA BANK BEIN G CHEQUE NO.722485 ON 8-6-1995. THIS WAS ACKNOWLEDGE D BY WAY OF RECEIPT ISSUED BY THOSE TWO PERSON. THE APPE LLANT SUBMITS A COPY OF THEIR AFFIDAVITS DULY SWORN IN DA TED 11-2-1999 WHICH WAS ALSO SUBMITTED TO THE A.O. ALONG WITH THE IR COPIES OF ORDER U/S.143(1)(A) FOR A.Y. 1996-97 AND THEIR BANK STATEMENT WHEREFROM THEY HAD WITHDRAWN THE AMOUNT DEPOSITED W ITH THE APPELLANT. THESE DETAILS WERE FILED WITH THE A.O. V IDE LETTER DATED 12-2-1999. THUS THERE IS NO JUSTIFICATION FOR HOLDING THAT THIS AMOUNT WAS UNEXPLAINED RECEIPT AND CASH CREDIT IN THE HANDS OF THE APPELLANT.' 12. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF T HE ASSESSEE IN THE LIGHT OF THE MATERIAL ON RECORD AN D FINDINGS OF THE AO, DELETED ALL THE ADDITIONS. HIS FINDINGS IN APPE LLATE ORDER FROM PARA 15 TO PARA 21 ARE REPRODUCED AS UNDER: 15. I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AND HA VE GONE THROUGH BLOCK ASSESSMENT ORDER, THE TRIBUNAL'S ORDE R AS ALSO THE REASONING GIVEN BY THE ASSESSING OFFICER I N THE ASSESSMENT ORDER WHICH IS BASED ON THE DISCUSSIONS GIVEN IN THE BLOCK ASSESSMENT ORDER. IN MY VIEW, THESE TWO ADDITIONS MADE BY THE ASSESSING OFFICER ARE WITHOUT ANY JUSTI FICATION. THE STATEMENT GIVEN SHRI ASHISH PATEL, AS REPRODUCED BY THE ASSESSING OFFICER IS QUITE CLEAR AND CATEGORICAL. I N REPLY TO QUESTION NO. 2 HE HAS STATED THAT 11 PLOTS WERE BOO KED BY SHRI NARESH B. PATEL IN DIFFERENT NAMES. IN THE STATEMEN T HE HAS GIVEN COMPLETE DETAILS OF THE PLOT NUMBER, THE AREA OF PLOTS AND THE NAMES OF THE PERSONS. HE HAS ALSO INDICATED THE RATE OF RS.400 PER SQ. YD. IN RESPECT OF THESE TRANSACTIONS . !T WAS FURTHER EXPLAINED THAT THE AMOUNTS HAVE BEEN RECEIV ED THROUGH ACCOUNT PAYEE CHEQUES THROUGH NORMAL, BANKING TRANS ACTIONS AND THAT ALL THESE TRANSACTIONS ARE DULY RECORDED I N THE BOOKS OF ACCOUNT EVEN PRIOR TO THE DATE OF SEARCH. IN RESPON SE TO QUESTION NO.10 ASHISH PATEL REITERATED THAT SHRI NA RESH PATEL BOOKED PLOTS IN VARIOUS NAMES AND THE ADDRESS IS 48 1/20, SATYAGRAHA CHHAVNI, OPP. ISRO, SATELLITE ROAD, AHME DABAD 19 54. THE STATEMENT OF SHRI NARESH PATEL RECORDED BY THE ASSESSING OFFICER U/S. 131 WAS NEVER MADE AVAILABLE TO THE ASSESSEE-COMPANY AND NO OPPORTUNITY OF CROSS-EXAMIN ATION WAS ALLOWED. IT IS PERTINENT TO NOTE THAT THE ENTIR E AMOUNT OF RS.99,35,200 HAS BEEN RECEIVED BY THE ASSESSEE COMP ANY THROUGH ACCOUNT PAYEE CHEQUES AGAINST BOOKING OF SP ECIFICALLY NUMBERED PLOTS IN RESPECT OF WHICH ALLOTMENT LETTER S HAVE BEEN ISSUED BY THE ASSESSEE COMPANY AND ALL THIS MATERIA L FORMS PART OF THE SEIZED RECORD. FURTHER WHATEVER AMOUNTS ARE RECEIVED BY THE ASSESSEE AGAINST BOOKING OF PLOT IS IN THE NATURE OF BUSINESS TURNOVER DULY ACCOUNTED IN THE B OOKS OF ACCOUNT. THE ASSESSEE COMPANY HAS ACQUIRED DEVELOPM ENT RIGHTS OF THE SHELA LAND BY VIRTUE OF AGREEMENT WIT H SHANTINAGAR SHELA COOPERATIVE HOUSING SOCIETY LTD. THE ASSESSEE COMPANY IS UNDER CONTRACTUAL OBLIGATION TO DEVELOP THE LAND. THE EXPENDITURE INCURRED IN DEVELOPING THE LAND IS RECOUPED BY RECEIPTS FROM THE BOOKING OF PLOTS. EVENTUALLY THE NET PROFIT OF THE ASSESSEE COMPANY HAS BEEN WORKED OUT AS PER THE TERMS AND CONDITION OF THE AGREEMENT. IN MY VIEW, THERE I S NO BASIS FOR ADDING THE AMOUNT U/S. 08 OF THE INCOME-TAX ACT AND, THEREFORE, THE ADDITION OF RS.99,35,200 IS DELETED. 16. WITH REGARD TO THE ADDITION OF RS.4,00,000 IT IS SEEN THAT COMPLETE DETAILS WERE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. IN THE BLOCK ASSESSMENT ORDER THE ADDITION WAS MADE ON THE SOLE GROUND THAT CONFIRMATION FROM PARESH CHIMANLAL SHAH WAS NOT FILED. HOWEVER, DURING THE C OURSE OF THE REGULAR ASSESSMENT PROCEEDINGS COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER. COPY OF JOINT ACCOUNT OF PARESH CHIMANLAL SHAH AND PINAKIN CHIMANLAL SHAH WAS FILED BEFORE THE ASSESSING OFFICER AL ONG WITH COPY OF RECEIPT ISSUED TO THEM. THE AFORESAID TWO PERSONS PAID THE AMOUNT OF RS.4,0 0,000 BUT VIDE LETTER DATED 8.6.1995 REQUESTED FOR CANCELLATI ON OF BOOKING AND ACCORDINGLY THE BOOKING WAS CANCELLED AND THE A MOUNT OF RS.4,00,000 WAS REPAID BY CHEQUE NO. 722485 DATED 3.6.19095 DRAWN ON DENA BANK. THE ASSESSEE ALSO FIL ED AFFIDAVITS OF THE TWO PERSONS BEFORE THE ASSESSING OFFICER WHEREIN THEY HAVE CONFIRMED THE ABOVE MENTION FACTS . COPY OF THEIR BANK ACCOUNT WAS ALSO FILED FROM WHERE THE AM OUNT OF RS.4,00,000 WAS WITHDRAWN FOR DEPOSITING WITH THE A SSESSEE 20 COMPANY. I HAVE GONE THROUGH THE FACTS AND IN MY VIEW, HAVING REGARD TO THE CONCLUSIVE EVIDENCE SUPPORTING GENUINENESS OF THE TRANSACTION OF RS.4,00,000, THER E IS NO BASIS FOR THE ADDITION, THEREFORE THE SAME IS DELETED. 17. COMING TO THE ADDITION OF RS.13,60,00,523, THE ONLY BASIS PROVIDED BY THE ASSESSING OFFICER FOR THIS ADDITION IS THE OBSERVATION OF THE HON'BLE TRIBUNAL TO THE EFFECT T HAT THE PAYMENT OF ON MONEY FOR ACQUIRING DEVELOPMENT RIGHT S WAS IN THE NATURE OF EXPENDITURE INCURRED FOR ACQUIRING ST OCK-IN-TRADE AND, THEREFORE, THE SAME WILL BE DEDUCTIBLE BY WAY OF EXPENDITURE, EVEN IF ADDITION IS MADE ON THE GROUND THAT SUCH EXPENDITURE WAS NOT REFLECTED IN THE BOOKS OF ACCO UNT AND, THEREFORE, SOURCES THEREOF REMAINED UNEXPLAINED. FOLLOWING FROM THE ABOVE OBSERVATIONS THE HON'BLE TRIBUNAL FU RTHER OBSERVED (AS REPRODUCED SUPRA) THAT ANY RECEIPT ARI SING OUT OF DEVELOPMENT RIGHT IS REQUIRED TO BE ADDED IN FULL B ECAUSE THE ENTIRE EXPENDITURE HAS BEEN SET OFF. IT WAS FURTHE R OBSERVED BY THE HON'BLE TRIBUNAL THAT IF THE ASSESSEE CAN ESTAB LISH THE GENUINENESS OF THE EXPENDITURE, TO THAT EXTENT INCO ME SHOULD BE REDUCED. THE ASSESSING OFFICER AT PARA 7.5(A) OF HIS ORDER HAS REPRODUCED THE ASSESSEES SUBMISSIONS ON THIS I SSUE. THE ASSESSING OFFICER REJECTED THESE SUBMISSIONS WITH T HE FOLLOWING OBSERVATIONS AT PARA 7.5(B) OF HIS ORDER: '7.5(B) IN SO FAR AS THE TAXATION OF BOOKING AM OUNT RECEIVED ON ACCOUNT OF DEVELOPMENT AGREEMENT IS CONCERNED; IT IS FOUND THAT THE SUBMISSION OF THE A SSESSEE IS TOTALLY MISPLACED. IT HAS BEEN CLEARLY HELD BY T HE ITAT THAT ANY RECEIPT ARISING OUT OF DEVELOPMENT AGREEME NT WILL BE TAXED IN TOTO. IN SO FAR AS UNACCOUNTED RECEIPTS ARE CONCERNED, THE SAME HAVE ALREADY BEEN CONSIDERED FO R THE BLOCK PERIOD. THE AMOUNT OF RS.13.68 SHOWN IN T HE BALANCE SHEET AS ON 31-3-96 IS TO BE TAXED AS PER T HE DIRECTION OF ITAT IN REGULAR ASSESSMENT OF A.Y. 96- 97. AS PER THE DIRECTION OF I.T.A.T. ALL RECEIPTS, WHETHER ACCOUNTED OR UNACCOUNTED, WOULD BE TAXABLE IN TOTO. THE I.T.A.T. HAS NOT QUALIFIED THE WORD 'RECEIPTS'. 21 18. FROM THE ABOVE IT IS CLEAR THAT THE ONLY BASIS FOR THE ADDITION IS THE OBSERVATIONS MADE BY THE TRIBUNAL R EPRODUCED ABOVE. ON THIS ISSUE THE FOLLOWING SUBMISSIONS HAVE BEEN MADE BEFORE ME ON BEHALF OF THE APPELLANT: . '11.4 IN SO FAR AS THE AMOUNT OF RS.13,60,00,523/- RECEIVED FROM MEMBERS IS CONCERNED, THE OBSERVATION OF THE A.O. IS THAT AS PER DIRECTIONS OF THE ITAT, IN THE APPEAL AGAINST THE BLOCK ASSESSMENT ORDER, THE ENTIRE SET OFF OF UNEXPLAINED EXPENDITURE HAD BEEN M ADE FROM THE ACQUISITION OF STOCK AND NO ADDITION HAD B EEN SUSTAINED AND IF THE ASSESSEE CAN ESTABLISH GENUINE NESS OF EXPENDITURE THE SAME SHOULD BE REDUCED. THIS OBSERVATION OF THE A.O. ARE TOTALLY UNJUSTIFIED. TH E A.O. HAS FURTHER IN PARA 7.5 STATED THAT WITH REFERENCE TO THE SHOW CAUSE NOTICE REGARDING RECEIPT ARISING O UT OF DEVELOPMENT AGREEMENT SUBMISSIONS OF THE ASSESSEE BEFORE HIM WAS THAT THE OBSERVATION OF THE TRIBUNAL RELATED TO THE DEDUCTION AND SET OFF OF UNEXPLAINED EXPENDITURE GIVEN BY THE ITAT THE SOURCE OF WHICH I S ON MONEY THE RECEIPT THEN IF THE SUBSEQUENT ON MONEY RECEIPT ARE THERE THE SAME SHOULD BE ADDED IN FULL. HOWEVER, IF THE COMPANY INCURS ANY EXPENDITURE AND THE GENUINENESS OF THE SAME IS ESTABLISHED, THEN TO THA T EXTENT THE INCOME WOULD BE REDUCED. THUS THE FINDI NG OF THE TRIBUNAL WAS RELATED TO UNEXPLAINED EXPENDITURE. THE A.O. HAS, HOWEVER, IN PARA 7.5 OBSERVED THAT TH E SUBMISSIONS ARE NOT ACCEPTABLE. IT IS STATED BY HIM THAT THE ITAT HAD HELD THAT ANY RECEIPT ARISING OUT OF DEVELOPMENT AGREEMENT WILL BE TAXED IN TOTO. IN SO FAR AS UNACCOUNTED RECEIPTS ARE CONCERNED THE SAME WERE ALREADY CONSIDERED IN THE BLOCK ASSESSMENT. ACCORDI NG TO HIM THE AMOUNT OF RS.13.60 CRORES SHOWN IN THE BALA NCE SHEET IS TO BE TAXED AS PER THE DIRECTIONS OF THE I TAT. IT IS ALSO OBSERVED BY HIM THAT THE DECISION OF THE ITAT HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND WRIT PETITI ON HAS BEEN FILED BEFORE HIGH COURT AND THE DECISION O F THE 22 ITAT HAS BEEN INTERIM STAY. THUS THIS AMOUNT IS TAX ED BY THE A.O. ON PROTECTIVE BASIS. 11.5 IT MAY BE SEEN THAT THE AMOUNT OF RS.13.60 C RORES HAS BEEN LINKED BY THE A.O. WITH ON MONEY PAYMENT O F RS. 12.80 CRORES TAXED WITH REFERENCE TO SHANTINAGA R SHELA LAND (RADHE ACRE 1 & 2) AS DISCUSSED HEREIN ABOVE. THE APPELLANT MAY POINT OUT THAT THUS THE A. O. HAS GONE BY PRESUMPTION THAT THE ENTIRE AMOUNT OF RS.13 .60 CRORES WAS RECEIVED TOWARDS THE DEVELOPMENT CHARGES OF (RADHE ACRE 1 AD 2) SHANTINAGAR SHELA LAND BUT IN F ACT AS PER THE DETAILS PROVIDED TO THE A.O. THE APPELLANT RECEIVED RS.7,79,89,273/- TOWARDS RADHE ACRE 1 AND 2 SHANTINAGAR I.E. SHELA LAND AND .RS.5,80,11,250/-- TOWARDS THIRTHDHAM SOCIETY. THE APPELLANT IN THIS CONNECTION SUBMITS THAT SO FA R AS THE ORDER OF THE ITAT IS CONCERNED, IT RELATED TO THE D IRECTION OF THE ITAT IN RESPECT OF THE UNACCOUNTED MONEY TRANSACTION TO THE EXTENT OF RS.12.80 CRORES. AS RI GHTLY REPRESENTED BEFORE THE A.O. THE DIRECTIONS IN THE A PPEAL AGAINST THE BLOCK ASSESSMENT ORDER BEFORE THE ITAT WERE RELATING TO ON MONEY RECEIPT, IF ANY, IS OVER AND A BOVE THIS AMOUNT THEN IT WOULD BE TAXED AND IF ANY EXPENDITUR E IS ESTABLISHED OVER AND ABOVE THIS AMOUNT IS ESTABLIS HED IT SHOULD BE DEDUCTED AGAINST SUCH RECEIPT. HOWEVER, S UCH DIRECTIONS COULD NOT BE APPLIED TO THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT. 11.6 THE A.O. HAS FAILED TO APPRECIATE THAT BESID ES THE ON MONEY THE PAYMENT TO THE SOCIETY/LAND OWNERS ALS O INCLUDED THE TRANSACTIONS WHICH ARE DULY ACCOUNTED FOR AND,, THEREFORE, THE RECEIPTS FROM THE MEMBERS AMOU NTING TO RS.13.60 CRORES RELATE TO THE BOOKING AMOUNT REC EIVED ON BEHALF OF THE SOCIETY. THE APPELLANT HAD ENTERED INTO DEVELOPMENT AGREEMENT DATED 16-3-1995 WITH THE SOCIETY, ACCORDING TO WHICH THE APPELLANT HAD TO IN CUR DEVELOPMENT EXPENDITURE, AND FOR THAT THAT THE BILL WAS RAISED OF COURSE INCLUDING THE PROFIT ELEMENT OF 25 % TO THE SOCIETY. THE APPELLANT WAS ENTITLED TO RECOVER FROM THE 23 MEMBERS THE COST OF AMOUNT AS WELL AS DEVELOPMENT CHARGES ON BEHALF OF THE SOCIETY. THUS THE AMOUNTS SO RECOVERED FROM THE MEMBERS WAS TO HE HANDED OVER TO THE SOCIETY. A COPY OF THE DEVELOPMENT AGREEMENT IS ATTACHED WHICH WAS ALREADY FURNISHED BEFORE THE A.O . VIDE LETTER DTD. 16-3-1995. THE APPELLANT MAY SUBMIT THAT THE APPELLANT HAS ALS O MADE PAYMENT AS PER THE BOOKS TO THE SOCIETY TOWARD S LAND AMOUNTING TO RS.4,44,09,495/- WHICH WAS PAID O N DIFFERENT DATES. THIS AMOUNT IS SEPARATELY SHOWN AS DEBIT TO THE ACCOUNT OF SOCIETY. A COPY OF ACCOUNT WAS HA NDED OVER TO THE A.O. VIDE LETTER DATED 24-2-1999. THE APPELLANT HAD ALSO BILLED RS.4,74,13,254/- TO THE S OCIETY TOWARDS DEVELOPMENT CHARGES/EXPENSES AS PER THE BIL L WHICH IS ALSO STANDING TO THE DEBIT OF THE SOCIETY. 11.7 EVEN THE OBSERVATION OF THE A.O. WITH REFERE NCE TO ITAT ARE CONSIDERED, THE SAME WERE IN RESPECT OF RA DHE ACRE 1 & 2 SCHEME AND NOT WITH REFERENCE TO THIRTHD HAM SOCIETY, BOTH ARE DIFFERENT SCHEMES. AS STATED ABOV E THE APPELLANT HA ALREADY MADE PAYMENT OF THE AMOUNT OF RS.4.44 CRORES AND ALSO DEBITED BILL OF RS.4.74 CRO RES TO THE SHELA SOCIETY AND THUS THE PAYMENT MADE TO THE SOCIETY AS PER THE BOOKS IS MORE THAN THE AMOUNT RECEIVED FROM MEMBERS TOWARDS BOOKING. AS SUCH THER E IS NO QUESTION OF TAXING THIS AMOUNT ON THE GROUND THAT IT IS INCOME AND AS PER DIRECTIONS OF THE TRIBUNAL IT IS TAXABLE IN THE HANDS OF THE APPELLANT. 11.8 THUS THE AMOUNT SO PAID TO THE SOCIETY AND THE AMOUNT RECEIVABLE TOWARDS BILL WHICH ARE DEBITED TO SOCIETY ARE REQUIRED TO BE CONSIDERED AGAINST THE A MOUNT OF RS.7.79 CRORES RECEIVED FROM MEMBERS ON BEHALF O F SOCIETY AND THUS THE AMOUNT IS NOT TAXABLE. IN SO F AR AS TIRTHDHAM SOCIETY IS CONCERNED THE BOOKING AMOUNT W AS RECEIVED FROM MEMBERS BUT THE APPELLANT COULD NOT PROCEED FOR THE DEVELOPMENT OF THE SOCIETY AS THE M ATTER WAS SUBJECT TO LITIGATION AND WAS PENDING BEFORE TH E COURT. HOWEVER, AGAINST THIS AMOUNT ALSO THE APPELLANT HAD 24 MADE PAYMENT TO THE PERSONS WHO HAD ORIGINALLY ACQU IRED THE RIGHT FOR DEVELOPMENT OF THAT SOCIETY AS ADVANC E PAYMENT WHICH IS MORE THAN RS.4,68,46,000/- TO BAKE RI FINANCE WHO WERE THE ASSOCIATES OF THE ORIGINAL, DEVELOPERS OF THE SCHEME. THUS THIS AMOUNT IS ALSO NOT THE INCOME OF THE APPELLANT BUT IT IS BOOKING DEPOS IT RECEIVED ON BEHALF OF THE SOCIETY AGAINST WHICH AS STATED ABOVE, THE PAYMENT WAS ALREADY MADE AS PER THE BOOK . AS SUCH IT CANNOT BE TAXED IN THE HANDS OF THE APPE LLANT. 11.9 IT MAY BE NOTED THAT THE BREAK UP OF RS.13.60 CRORES WAS ALREADY SUBMITTED ALONG WITH NAMES AND ADDRESS OF THE PERSONS AND DETAILS OF THE PLOTS FOR WHICH THE AMOUNT WAS RECEIVED. THIS BREAK UP INCLUDED THE AMOUNTS FO R WHICH SEPARATE ADDITION OF RS.99 LAKH HAS BEEN MADE AS ABOVE. THE SAID AMOUNT OF RS.99 LAKH THUS AMOUNTS T O DUPLICATION OF ADDITION IN SO FAR AS IT IS FORMING PART OF RS. 13.60 CRORES AND ALSO SEPARATE ADDITION FOR THE SAME AMOUNT. A CHART EXPLAINING AS TO HOW THIS AMOUNT OF RS.99 LAKH IS FORMING PART OF RS.13.60 CRORES IS SE PARATELY ATTACHED. THIS SHOWS HOW THE A.O. HAS ADDED WITH PREJUDICE AND WITHOUT PROPER VERIFICATION OF FACTS OF THE CASE. HE HAS JUST GONE BY PRESUMPTION WHILE MAKING SUCH ADDITIONS AND THE ADDITIONS MADE ON SUCH PRESUMPTIONS DESERVES TO BE DELETED.' |19. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE R ELEVANT FACTS PERTAINING TO THIS ISSUE AS EMERGING FROM THE RECOR D. I HAVE ALSO GONE THROUGH THE REASONING PROVIDED BY THE ASSESSIN G OFFICER IN HIS ASSESSMENT ORDER IN RESPECT OF THIS ADDITION AND HAVE CONSIDERED THE SUBMISSIONS MADE BEFORE ME ON BEHALF OF THE APPELLANT. FIRST OF ALL, IT MUST BE NOTED THAT THE ENTIRE RECEIPTS AMOUNTING TO RS.13,60,00,523 ARE DULY ACCOUNTED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THESE RECEIPTS ARE IN THE NATURE OF AMOUNTS RECEIVED FROM VARIOUS MEMBERS WHO HAVE BOOKED THE PLOTS. AS EXPLAINED BY THE A.R. OF THE ASSESSEE, THESE RECEIPTS CAN BE SPLIT INTO TWO CATE GORIES I.E. (A) RECEIPTS ATTRIBUTABLE TO THE COST OF LAND AND ( B) RECEIPTS ATTRIBUTABLE TO THE DEVELOPMENT CHARGES, RECEIPTS A T (A) ABOVE ARE COLLECTED BY THE APPELLANT ON BEHALF OF THE CONCERNED 25 SOCIETY AND ARE, THEREFORE, TO BE PASSED ON TO THE SOCIETY AS PER THE AGREEMENT. RECEIPTS AT (B) ABOVE ARE TO BE RETA INED BY THE ASSESSEE TO BE ADJUSTED AGAINST DEVELOPMENT EXPENDI TURE. THUS, WHATEVER AMOUNT IS RECEIVED AND IS ACCOUNTED IN THE BOOKS OF ACCOUNT EVENTUALLY GOES INTO THE COMPUTATION OF TOTAL INCOME AS PER THE TERMS AND CONDITIONS OF THE AGREE MENT ENTERED INTO BY THE ASSESSEE COMPANY WITH THE SHANT INAGAR SHELA OR TIRTHDHAM SOCIETY. IT IS ALSO NOTABLE THAT THE ENTIRE AMOUNT IS SPLIT INTO THE FOLLOWING RECEIPTS: (A) SHANTINAGAR SHELA LAND RS. 7,79,89,273 (B) TIRTHDHAM SOCIETY LAND RS. 5,80,11,250 RS.13,60,00,523 20. THE APPELLANT HAS COMPILED COMPLETE DETAILS OF THE ABOVE PAYMENTS AT PAGES 240 TO 247 OF THE PAPER BOOK FILE D DURING THE COURSE OF THESE PROCEEDINGS. THESE DETAILS WERE ALREADY MADE AVAILABLE TO THE ASSESSING OFFICER. FROM THE A BOVE IT MAY BE SEEN THAT THE NATURE OF RECEIPTS ARE NOT AT ALL ATTRIBUTABLE TO THE ON-MONEY PAID IN RESPECT OF SHELA LAJND. AS MA TTER OF FACT, AS PER THE DETAILS FILED AND MENTIONED IN THE SUPER VISIONS REPRODUCED ABOVE, THE TOTAL RECEIPTS IN RESPECT OF SHELA LAND ARE LESS THAN THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE AND PAYMENTS MADE TO SOCIETY IN RESPECT OF THAT LAN D. FURTHER, AS MENTIONED ABOVE, AS PER THE AGREEMENT ENTERED IN TO WITH SHANTINAGAR SHELA SOCIETY THE ASSESSEE COMPANY IS S UPPOSED TO RAISE A BILL AFTER INCLUDING A PROFIT ELEMENT OF 25% ON THE TOTAL EXPENDITURE INCURRED. THE EXPENDITURE AND THE RECEI PTS ARE ACCOUNTED IN REGULAR THE BOOKS OF ACCOUNT AND AS ME NTIONED ABOVE IN EARLIER PARA ULTIMATELY ALL THESE ACCOUNTI NG ENTRIES ARE BOUND TO GO INTO THE COMPUTATION OF TOTAL INCOME. C ONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES, IN MY VIEW, THE RE IS NO BASIS WHATSOEVER FOR THE ADDITION MADE BY THE ASSESSING O FFICER AND ACCORDINGLY THE ADDITION OF RS.13,60,00,523 IS DELE TED. 21. WHILE ON THIS ISSUE, A SIGNIFICANT FACT WHICH IS TO BE NOTED, IS THAT THE ADDITION OF RS.99,35,200 SEPARATELY MAD E BY THE ASSESSING OFFICER AND ALREADY DEALT WITH AND DELETED ABOVE, IS ALREADY INCLUDED IN THE TOTAL AMOUNT OF RS.13,60,0 0,523/-. IN THIS REGARD THE ASSESSEE FURNISHED ALL THE DETAILS BEFORE THE 26 ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT (A) DURING THE COURSE OF THE APPELLATE PROCEEDINGS. AT PAGE 24 8 OF THE PAPER BOOK THE ASSESSEE HAS COMPILED THE DETAILED B REAK-UP OF THE RECEIPTS OF RS.99,35,200/-. PAGE 249 IS RECO NCILIATION CHART EXPLAINING HOW THE SAID AMOUNT ALREADY FORMS PART OF THE SUM OF RS.13.6 CRORES. ANALYSIS OF THESE DETAILS CL EARLY ESTABLISHES THAT THE RECEIPTS OF RS.99,35,200/- FOR MED PART OF THE OVERALL AMOUNT OF RS13.6 CRORES. THUS TO THIS E XTENT THE ASSESSING OFFICER HAS MADE DOUBLE ADDITION. THIS SH OWS COMPLETE NON-APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER AND NON-APPRECIATION OF THE CORRECT FACTUAL POSITION. BE THAT AS IT MAY, BOTH THE ADDITIONS HAVE BEEN CONSID ERED BY ME ON MERITS AND HAVE BEEN DIRECTED TO BE DELETED. 13. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. HE HAS SUBMITTED THAT SINCE PLOTS HAVE BEEN ALLOTTED TO CO NCERN PERSONS, THEREFORE, THEY CANNOT DENY THE TRANSACTIONS. NO CO NFIRMATIONS ARE FILED. ADDITION IS MADE BY THE AO ON PROTECTIVE BAS IS SUBJECT TO OUTCOME OF THE DECISION OF THE HIGH COURT WHICH WOU LD ULTIMATELY BE CONSIDERED AS SUBSTANTIVE ADDITION. THEREFORE, THE LEARNED CIT(A SHOULD NOT HAVE DELETED ALL T HE THREE ADDITIONS. O N THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE RECEIPTS ARE RECORDED PROPERLY IN THE BOOKS OF ACCOUNTS AND SUBS TANTIAL WERE THROUGH CHEQUES. ALLOTMENTS OF THE PLOTS WERE MADE AND SINCE ASSESSEE IS IN THE BUSINESS OF LAND DEVELOPMENT AND CONSTRUCTION, THEREFORE, THE RECEIPTS WOULD BE THE SALES OF THE A SSESSEE AND AFTER REDUCING THE EXPENDITURE INCOME WOULD BE SHOWN. HE HAS SUBMITTED THAT CASH IS ALREADY OFFERED IN THE BLOCK ASSESSMEN T, THEREFORE, SAME CANNOT BE CONSIDERED IN THE REGULAR ASSESSMENT. THE SALE CONSIDERATION CANNOT BE ADDED U/S 68 OF THE IT ACT. HE HAS SUBMITTED 27 THAT AS REGARDS THE ADDITION OF RS.13,60,00,523/-, THE MATTER WAS CONSIDERED ON MERITS BY THE TRIBUNAL IN IT(SS)A NO. 103/AHD/1997 AND VIDE ORDER DATED 15-01-1999 ADDITION WAS DELETE D ON MERIT. HE HAS REFERRED TO RELEVANT PARAGRAPHS OF THE ORDER (P B-255 TO 261). HE HAS SUBMITTED THAT THE ORDER OF THE TRIBUNAL IS CON FIRMED BY THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO.171/199 9 DATED 01-04- 2009 (PB-276) AND REFERRED TO RELEVANT PARAGRAPHS O F THE ORDER AT PB-298 AND 299. HE HAS, THEREFORE, SUBMITTED THAT T HE SIMILAR ADDITION DELETED BY THE TRIBUNAL AND CONFIRMED BY T HE HONBLE HIGH COURT CANNOT BE AGITATED AGAIN IN THE DEPARTMENTAL APPEAL. HE HAS RELIED UPON ORDER OF ITAT AHMEDABAD C BENCH IN TH E CASE OF VISHAL EXPORTS OVERSEAS LTD. ETC. IN ITA NO.1684/AHD/2004 DATED 07-08- 2009 IN WHICH IT WAS HELD WE FIND THAT WHEN THE ASSESSEE HAS ALREADY OFFERED SALES REALIZATION AS SALES AND SUCH INCOME IS ACCEPTED BY AO TO BE THE INCOME OF THE ASSESSEE FOR RESPECTIVE YEARS, ADDITION OF THE SAME AMOUNT ONCE AGAIN U/S 6 8 OF THE ACT WOULD TANTAMOUNT TO DOUBLE TAXATION OF THE SAME INC OME. HE HAS ALSO RELIED UPON ORDER OF ITAT AHMEDABAD C BE NCH IN THE CASE OF LAXCON STEEL PVT. LTD. IN ITA NO.1112/AHD/2008 D ATED 09-09-2010 IN WHICH IT WAS SIMILARLY HELD THAT IT APPEARS DIFFICULT FOR US TO VISUALIZE AS TO HOW THE CREDIT ON ACCOUNT OF CASH SALES MADE BY THE ASSESSEE COULD SIMULTANEOUSLY BE HELD BY HIM TO BE CASH CREDITS. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT ONCE THE ASSESSEE INCLUDED THE SALE PROCEEDS RECEIVED AS INCOME, FURTHER ADDITION ON ACCOUNT OF CASH CREDIT WOULD AMOUNT TO DOUBLE TAXATION AND AS SUCH THE LEARNED C IT(A) ON PROPER 28 APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTL Y DELETED THE ADDITION. 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERI AL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS IN THE BU SINESS OF LAND DEVELOPMENT AND CONSTRUCTION. ON GROUND NO.1 AND 2, THE LEARNED CIT(A) SPECIFICALLY NOTED THAT SHRI ASHISH PATEL IN HIS STATEMENT STATED THAT PLOTS WERE BOOKED BY SHRI NARESH B PATE L IN DIFFERENT NAMES. IT WAS ALSO EXPLAINED THAT THE AMOUNTS HAVE BEEN RECEIVED THROUGH ACCOUNT PAYEE CHEQUES THROUGH NORMAL BANKIN G TRANSACTIONS AND ALL THE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNTS. THE AMOUNT OF RS.99,35,200/- HAS BEEN RECEIVED BY THE A SSESSEE COMPANY THROUGH ACCOUNT PAYEE CHEQUES AGAINST BOOKI NG OF THE PLOTS FOR WHICH ALLOTMENT LETTERS WERE ISSUED. IT W AS, THEREFORE, FOUND THAT THE AMOUNTS RECEIVED AGAINST THE BOOKING OF TH E PLOTS ARE IN THE NATURE OF BUSINESS TURNOVER ACCOUNTED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE ACQUIRED DEVELOPMENT RIGHTS OF SHELA LAND THROUGH AGREEMENTS WITH SHANTINAGAR SHELA COOPERATIVE HOUSI NG SOCIETY LTD. THE PROFIT IS ALSO WORKED OUT ACCORDINGLY BY I NCURRING THE EXPENDITURE FOR DEVELOPMENT OF THE LAND ON WHICH PL OTS HAVE BEEN BOOKED. AS REGARDS ADDITION OF RS.4,00,000/- IT WAS FOUND THAT COMPLETE DETAILS WERE FILED AND THE AMOUNT IN QUEST ION WAS REPAID TO THE PARTIES THROUGH CHEQUE ON CANCELLATION OF THE B OOKING. THE LEARNED CIT(A) WAS OF THE VIEW THAT THERE IS NO BAS IS FOR ADDING THIS AMOUNTS U/S 68 OF THE IT ACT. AS REGARDS THE ADDITI ON OF RS.13,60,00,523/-, IT WAS FOUND THAT THE ENTIRE REC EIPTS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS FOR BOOKING OF TH E PLOTS WHICH WAS 29 RECEIVED FROM VARIOUS PERSONS. THE RECEIPTS PERTAIN ED TO COST OF THE LAND AND DEVELOPMENT CHARGES. NONE OF THE RECEIPTS WERE FOUND TO BE ATTRIBUTABLE TO ON-MONEY IN RESPECT OF SHELA LAN D OR OTHERS. THE LEARNED CIT(A) FURTHER FOUND THAT THE RECEIPT OF RS .99,35,200/- FORMED PART OF OVERALL AMOUNT OF RS.13.06 CROERS AND AS SU CH IT WAS DOUBLE ADDITION. THE REVENUE IS NOT IN APPEAL AGAINST THIS FINDINGS OF THE LEARNED CIT(A) FOR DOUBLE ADDITION AND EVEN, NO ARG UMENT HAS BEEN MADE IN THIS REGARD DURING THE COURSE OF ARGUMENTS BEFORE US. THUS, THE FINDING OF FACT RECORDED BY THE LEARNED CIT(A) OF DOUBLE ADDITION TO THAT EXTENT REMAINED UNCHALLENGED AND AS SUCH CA NNOT BE INTERFERED AT THIS STAGE. THE OVERALL CONSIDERATION OF THE FACTS AND MATERIAL ON RECORD CLEARLY JUSTIFY THE FINDINGS OF THE LEARNED CIT(A) FOR DELETING THE ENTIRE ADDITION. SINCE THE ASSESSEE RE CORDED THE RECEIPTS IN THE BOOKS OF ACCOUNTS FOR BOOKING OF THE PLOTS W HICH WOULD ULTIMATELY BE TURNOVER/SALES OF THE ASSESSEE WHICH IS NOT DISPUTED BY THE AO, ON WHICH PROFIT IS SHOWN, NO ADDITION COULD BE MADE ON ACCOUNT OF UNEXPLAINED CREDIT U/S 68 OF THE IT ACT. THE FINDING OF THE LEARNED CIT(A) FINDS SUPPORT FROM THE ORDER OF THE TRIBUNAL IN THE CASES OF VISHAL EXPORTS OVERSEAS LTD. AND LAXCON ST EEL PVT. LTD. (SUPRA). FURTHER, IN THE BLOCK ASSESSMENT PROCEEDIN GS THE ISSUE OF SHELA LAND OF SHANTINAGAR SHELA HOUSING COOPERATIVE SOCIETY LTD. REMAINED IN CONSIDERATION BEFORE THE TRIBUNAL AND A DDITION ON MERIT HAS BEEN DELETED. THE FINDINGS OF THE TRIBUNAL ARE ALSO CONFIRMED BY THE HONBLE HIGH COURT AS IS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THEREFORE, THERE IS NO JUSTIFICATION TO R ECONSIDER THE ADDITION IN THE PRESENT APPEAL AGAINST THE ASSESSEE . MERELY BECAUSE THE TRIBUNAL IN THE BLOCK ASSESSMENT ORDER OBSERVED THAT THE SAME 30 ADDITION COULD BE TAKEN UP IN REGULAR ASSESSMENT AS NOTED BY THE AO IN PARA 7 WOULD NOT BE A REASON FOR THE AO TO MAKE THE ADDITION WITHOUT ANY JUST CAUSE. CONSIDERING THE FACTS AND C IRCUMSTANCES OF THE CASE NOTED ABOVE, WE ARE OF THE VIEW LEARNED CI T(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RI GHTLY DELETED ALL THE ADDITIONS. GROUNDS NO.1 TO 4 OF THE REVENUE ARE AC CORDINGLY DISMISSED. 15. ON GROUND NO.5, REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS.2,79,16,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNTS. 16. THIS ISSUE HAS BEEN DEALT WITH EXTENSIVELY BY THE A SSESSING OFFICER AT PARA 6 (PAGES 11 TO 17) OF HIS ORDER. TH E ASSESSING OFFICER FOUND THAT ON VARIOUS DATES DURING THE PREVIOUS YEA R RELEVANT TO A. Y. 1998-97 THE ASSESSEE COMPANY DEPOSITED CASH TOTALIN G TO RS.2,79,16,000/- IN ITS ACCOUNTS WITH DENA BANK AND COOPERATIVE BANK OF AHMEDABAD. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE AFORESAID CASH DEPOSITS A ND THE ASSESSEE COMPANY SUBMITTED THAT THE CASH WAS DEPOSITED FROM OUT OF THE CASH BOOK REGULARLY MAINTAINED BY THE ASSESSEE. IT WAS P OINTED OUT THAT ON THE VARIOUS DATES WHEN THE CASH WAS DEPOSITED IN TH E BANK ACCOUNTS, SUFFICIENT CASH WAS AVAILABLE IN THE CASH BOOK AND THUS ALL THESE TRANSACTIONS ARE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, WHICH SHOW CASH WITHDRA WALS FROM THE BANK ACCOUNTS AS WELL AS CASH DEPOSITS THEREIN. AT PAGES 11 AND 12 OF HIS ORDER THE ASSESSING OFFICER HAS INCORPO RATED DETAILS OF 31 CASH DEPOSITS AND CASH WITHDRAWALS. THE ASSESSING O FFICER ASKED THE ASSESSEE TO EXPLAIN THE NEED FOR ABNORMALLY HIG H CASH WITHDRAWALS. THE ASSESSEE FILED A LETTER DATED 24.2 .1999 MAKING THE FOLLOWING SUBMISSIONS: 'IT IS SUBMITTED THAT THE ASSESSEE COMPANY'S MAIN O BJECT WAS TO CONSTRUCT AND DEVELOP THE VARIOUS LANDS. SOMETIMES IT HAPPENS THAT THE SELLER/THE LAND OWNER OR SOME BROKERS USED TO APPROACH US AT THE OFFICE PREM ISES OF THE COMPANY TO SELL THE LAND. IN THAT CASE, THE PERSON NORMALLY ASKS FOR THE SALES CONSIDERATION TO BE PAI D IN CASH AS PER HIS NEEDS. LIKEWISE, WE ALSO SEARCH FOR SOME OPPORTUNITY TO INVEST IN THE PROPERTIES IF THE D EAL APPEARS FAVOURABLE. FOR THIS PURPOSE, THE ASSESSEE COMPANY KEPT FURTHER CASH BALANCE IN THE REGULAR BO OKS OF ACCOUNT BY MAKING THE WITHDRAWALS. THE SAME WAS UTILIZED AS PER ENTRIES MADE IN BOOKS OF ACCOUNT.' 17. THE ASSESSING OFFICER REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE AS PER THE DETAILED DISCUSSIONS GIVEN BY H IM ON PAGES 12 TO 18 OF HIS ORDER. TO SUM UP, THE ASSESSING OFFICE R PROCEEDED ON THE BASIS OF THE FOLLOWING REASONING: (A) THE SUBMISSIONS MADE BY THE ASSESSEE HAVE B EEN CONSIDERED TAKING INTO ACCOUNT THE NATURE OF BUSINE SS NEEDS OF THE ASSESSEE COMPANY; (B) EVIDENCES WERE FOUND DURING THE COURSE OF S EARCH TO SHOW THAT THE ASSESSEE HAD BEEN MAKING UNACCOUNT ED INVESTMENTS IN ACQUIRING DEVELOPMENT RIGHTS IN LAND S FOR WHICH PAYMENTS WERE MADE IN CASH; (C) INSOFAR AS THE ACCOUNTED TRANSACTIONS ARE CON CERNED, THERE WAS NO NEED TO WITHDRAW SUCH LARGE AMOUNTS IN CASH FROM THE BANK ACCOUNTS; 32 (D) AS PER THE ACCOUNTING PRACTICE OF THE ASSES SEE COMPANY IT DOES NOT PURCHASE ANY LAND BY WAY OF STO CK- IN-TRADE AND/THEREFORE, ANY BUSINESS NEED FOR INCUR RING HUGE EXPENDITURE IN CASH WAS RULED OUT; (E) IF THE ASSESSEE COMPANY WAS USING CASH WITHDRAWALS FROM BANKS FOR THE PURPOSE OF RE-DEPOSITING THE MONEY, SUCH CASH WOULD HAVE BEEN FOUND AT THE T IME OF THE SEARCH. THEREFORE, IT IS INDICATIVE OF THE F ACT THAT THE CASH BALANCE SHOWN IN THE CASH BOOK WAS INFLATED; (F) IF A PARTICULAR AMOUNT IS WITHDRAWN FROM THE BA NK ACCOUNT FOR A SPECIFIC PURPOSE AS CLAIMED BY THE ASSESSEE AND IF THE SAME IS NOT USED AND REMAIN IDL E WITH THE ASSESSEE, THERE IS NO NEED TO MAKE FURTHER CASH WITHDRAWALS. THIS FACT PROVES THAT CASH WITHDRAWALS MADE BY THE ASSESSEE WERE FULLY UTILIZED FOR SOME UNDISC LOSED PURPOSES AND SUCH CASH WOULD NOT BE AVAILABLE FOR R E- DEPOSITING IN THE BANK ACCOUNTS; (G) DURING THE COURSE OF SEARCH EVIDENCE WAS FOUND THAT THE ASSESSEE WAS MAKING PAYMENTS IN CASH FOR ACQUIRING INTEREST IN LAND AND DEVELOPMENT RIGHTS I N THE GROUP CONCERNS. IN THE BLOCK ASSESSMENT AN ADDITION OF RS.20.55 CRORES WAS MADE ON ACCOUNT OF UNACCOUNTED CASH INVESTMENTS IN SHELA LAND. HOWEVER, ON THIS AC COUNT THE ASSESSEE DISCLOSED A SUM OF ONLY RS.12.8 CRORES , (H) DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDIN GS IT WAS FOUND THAT UNACCOUNTED INVESTMENTS WERE MADE IN THE OFFICE PREMISES AND PLOT OF LAND. IT WAS ALSO O BSERVED THAT THE ASSESSEE MADE PAYMENTS OF CRORES OF RUPEES BY CHEQUE TO GANGA CO-OPERATIVE SOCIETY WHICH AMOUNT WAS USED BY THE SAID SOCIETY FOR ACQUIRING INTEREST IN LAL BUNGALOW LAND. EVIDENCES WE, A FOUND TO SHOW THAT UNACCOUNTED PAYMENTS IN CASH WERE MADE DURING THE COURSE OF THESE TRANSACTIONS; (I) SHRI ASHISH PATEL, MANAGING DIRECTOR OF THE ASSESSEE COMPANY WAS FOUND TO HAVE INVESTED IN LAND AT 33 VARIOUS PLACES AND SUCH INVESTMENTS WERE MADE IN CA SH. FURTHER, ASSESSEE COMPANY GAVE ADVANCES TO NILA ASSOCIATES AND PARIKH ASSOCIATES. 18. AFTER EMPHASIZING THE ABOVE MENTIONED POINTS TH E ASSESSING OFFICER MADE THE ADDITION WITH THE FOLLOWING CONCLU DING REMARKS: 'THE POINT TO BE EMPHASIZED HERE FROM DISCUSSION AT (A) TO (I) ABOVE IS THAT THERE HAS BEEN A NUMBER OF INV ESTMENT MADE BY THE ASSESSEE AND ITS MANAGING DIRECTOR DURI NG THE YEAR WHERE HUGE CASH PAYMENTS HAVE BEEN MADE. THE CASH WITHDRAWALS MADE BY THE ASSESSEE, THEREFOR E, HAVE BEEN UTILIZED TOWARDS ACQUIRING SUCH INTEREST OR INCURRING EXPENSE AND NOT FOR DEPOSITING THE SAME I N THE BANK ACCOUNT. 6.8 IN SO FAR AS THE SOURCE OF HUGE DEPOSIT OF CASH PAYMENT IS CONCERNED IT IS FOUND THAT ASSESSEE HAS BEEN COLLECTING ON-MONEY AT THE RATE OF UP TO RS.350 PER SQ, YARD ON SALE OF PLOT IN RADHE ACRE I & II. IT IS CL EAR FROM THE STATEMENT OF SHRI ASNISH P. PATEL WHEREIN HE HA S STATED THAT ON-MONEY OF RS.12.8 CRORE WAS RECEIVED. AS PER THE ASSESSMENT ORDER OF BLOCK PERIOD OF ASSESSE E IT IS SEEN THAT THE ADMITTED RECEIPT OF RS.12.8 CRORE OF ON- MONEY COLLECTED BY THE ASSESSEE WAS NET FOUND TO BE CORRECT. AS AGAINST THE SALE OF 4.7 LACS OF SQ. YAR D STATED BY ASSESSEE'S MANAGING DIRECTOR THE ACTUAL AREA SOL D WAS FOUND TO BE 5.7 LAC SQ. YARD. AS PER PARA 12.3 OF THE BLOCK ASSESSMENT ORDER THIS HAS BEEN ARRIVED AT AFT ER CALCULATION WITH RESPECT TO AREAS OF LAND AS PER AL LOTMENT LETTERS ISSUED BY THE ASSESSEE AND MAP OF THE SCHEM E. THE ON-MONEY COLLECTED FOR THIS AREA COMES TO MUCH MORE THAN THE ON-MONEY COLLECTION OF RS.12.8 CRORE ACCEPTED BY THE ASSESSEE. IT IS EXTREMELY RELEVANT TO APPRECIATE THAT IN THE BLOCK ASSESSMENT THE ON-MONE Y COLLECTION WAS RIOT TAXED AS THE INVESTMENT WAS TAK EN THE BASIS OF ASSESSMENT FOR ASSESSEE. THE POINT TO BE EMPHASIZED IS THAT THE DIFFERENCE IN THE AREA OF SA LES AS 34 ADMITTED AND AS ACTUALLY FOUND HAS NOT BEEN BROUGHT TO TAX IN THE BLOCK ASSESSMENT YEAR. THIS ISSUE OF TAX ING THE DIFFERENTIAL ON-MONEY COLLECTED IN THE REGULAR ASSE SSMENT IS WIDE OPEN. IT IS, THEREFORE, CLEAR THAT CASH DEP OSIT IN THE BANK ACCOUNT REFLECTS THE ON-MONEY COLLECTED ON SAL E OF PLOTS IN RADHE ACRE I & II. AS THIS AMOUNT WAS NOT TAXED IN THE BLOCK ASSESSMENT, THE SAME IS LIABLE TO BE T AXED IN THE REGULAR ASSESSMENT. 6.9 IN VIEW OF THE ABOVE RS.2,79,16,000 IS HERE BY ADDED TO THE INCOME OF ASSESSEE AS UNEXPLAINED CASH DEPOSITS A CORRESPONDING ON-MONEY COLLECTED IN SALE OF PLOTS IN RADHE ACRE I & II'. 19. DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A) THIS ISSUE HAS BEEN ARGUED AT LENGTH BY THE LEARNED COUNSEL FOR THE ASSESSEE AND FOLLOWING SUBMISSIONS HAVE BE EN MADE: '(A) THE BUSINESS NEEDS FOR CASH WITHDRAWALS ARE TO BE CONSIDERED FROM THE VIEW POINT OF THE BUSINESSMAN A ND IT IS NOT TO BE DECIDED BY THE A.O. FOR THE PURPOSE OF MAKING ASSESSMENT. (B) THE ALLEGED CASH INVESTMENT IN THE UNACCOUNTED TRANSACTIONS IN LAND DO NOT JUSTIFY THE ALLEGATION THAT THE DEPOSITS IN THE BANK ACCOUNT OF CASH WAS ALSO REPRESENTING UNACCOUNTED INCOME OF THE APPELLANT, PARTICULARLY WHEN IT IS DULY RECORDED IN BOOKS. THE TWO TRANSACTIONS ARE DIFFERENT AND CAN NOT BE LINKED OR CONFUSED. (C) AS STATED IN (A) ABOVE THE NEED FOR CASH WIT HDRAWALS IS TO BE DETERMINED BY THE BUSINESSMAN AND IT IS NO T PROPER FOR THE A.O. TO STATE THAT THERE WAS NO NEED TO WITHDRAW LARGE CASH AMOUNT FROM THE BANK ACCOUNT. T HE FACT IS THAT THE CASH WITHDRAWN FROM THE BANK IS DU LY REFLECTED IN THE CASH BOOK ARID CASH BALANCE AS PER THE CASH BOOK IS NOT IN DISPUTE, IN THE CIRCUMSTANCES, THERE IS 35 NO JUSTIFICATION FOR SUCH OBSERVATION BY THE A.O. S IMILARLY, THE OBSERVATIONS OF A.O. IN PARA (D) ABOVE ARE ALSO NOT JUSTIFIED. (D) IN SO FAR AS CASH FOUND AT THE TIME OF SEAR CH AS AGAINST THE-CASH BALANCE AS PER CASH BOOK ON THE DA TE OF SEARCH IS CONCERNED, IT MAY BE NOTICED THAT SUCH CA SH BALANCE WAS AS PER CASH BOOK WHICH WAS WRITTEN PRIO R, TO THE DATE OF SEARCH AND NO DEFECT WAS FOUND IN THE C ASH BOOK. THE SEARCH PARTY/DEPARTMENTAL AUTHORITIES EVE N ON MAKING DETAILED ENQUIRY, AND WHILE RECEDING THE STATEMENT OF THE DIRECTOR OF APPELLANT AND OTHER PE RSONS DID NOT QUESTION ABOUT THE DIFFERENCE IN THE PHYSIC AL CASH FOUND AND THE CASH BALANCE AS PER CASH BOOK. THIS I TSELF SHOWS THAT THEY WERE NOT HAVING ANY DOUBT ABOUT THE CASH BALANCE AS PER CASH BOOK AND THE LESSER CASH F OUND AT THE TIME OF SEARCH. (E) IN SO FAR AS THE OBSERVATION OF A.O. IN PARA (F ) ABOVE ARE CONCERNED, THERE IS NO EVIDENCE THA T CASH WITHDRAWN ON A PARTICULAR DATE WAS UTILIZED FOR- AN Y PURPOSE AND WAS NOT AVAILABLE WHICH WAS REFERRED IN THE CASH BALANCE AS PER CASH BOOK. THE SAID OBSERVATIONS ARE MADE ONLY ON PRESUMPTIONS AND DO N OT JUSTIFY THE ASSUMPTION OF THE ASSESSING OFFICER THA T CASH BALANCE WAS NOT AVAILABLE. (F) IT IS SUBMITTED THAT THE ADDITIONAL AMOUNT OF INVESTMENT/INCOME DECLARED AT THE TIME OF SEARCH BY THE APPELLANT IS DIFFERENT AND IT CANNOT BE LINKED WITH THE CASH BALANCE AS PER CASH BOOK. THAT TRANSACTION WAS THAT OF UNACCOUNTED CASH WHEREAS THE CASH BALANCE AS PER CA SH BOOK AND ITS DEPOSIT IN BANK ACCOUNT IS DULY RECORD ED IN THE BOOKS. (G) THE OBSERVATION ABOUT PAYMENT MADE FOR INVEST MENT IN LAND OR PAYMENT TO DIFFERENT ENTITIES IN CASH IS ALSO NOT RELATED TO THE CASH BALANCE AVAILABLE WITH THE APPE LLANT WHICH WAS DEPOSITED IN THE BANK ACCOUNT. THE FACT T HAT THERE WAS ADEQUATE CASH BALANCE AVAILABLE ON THE DA TE OF 36 DEPOSIT IN THE BANK ACCOUNT AND THAT SUCH DEPOSIT I N THE BANK ACCOUNT WAS DULY REFLECTED IN THE CASH BOOK CL EARLY SHOWS THAT THE INVESTMENT REFERRED TO BY THE ASSESS ING OFFICER HAVE NO RELATION WITH THE CASH DEPOSITED IN THE BANK ACCOUNT. BOTH ARE DIFFERENT TRANSACTIONS.' 20. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND MATERIAL ON RECORD DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 26 OF THE APPELLATE ORDER ARE REPR ODUCED AS UNDER: 26. I HAVE CAREFULLY CONSIDERED THE REASONS STATED BY THE ASSESSING OFFICER TO SUBSTANTIATE THE ADDITION AND THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND HAV E ALSO CAREFULLY GONE THROUGH THE RELEVANT FACTS. THERE IS NO DISPUTE THAT THE CASH DEPOSITS ON VARIOUS DATES IN THE BANK ACCOUNTS OF THE ASSESSEE COMPANY ARE DULY ACCOUNTED IN THE REGU LAR BOOKS OF ACCOUNT EVEN PRIOR TO THE DATE OF THE SEARCH. AL L THE CASH DEPOSITS HAVE BEEN MADE FROTH OUT OF THE CASH BALAN CE SUFFICIENTLY AVAILABLE IN THE CASH BOOK ON THE DATE OF BANK DEPOSIT. OBVIOUSLY, THE ASSESSING OFFICER HAS PROCE EDED ENTIRELY ON THE BASIS OF ASSUMPTIONS AND SURMISES. THE FACT THAT WITHDRAWALS WERE MADE FROM THE BANK ACCOUNTS AND DE POSITS WERE MADE IN THE BANK ACCOUNTS IS NOT DISPUTED. SIM ILARLY, THERE IS NO DISPUTE THAT CASH WAS AVAILABLE IN THE CASH BOOK WHICH WAS UTILIZED IN MAKING THE CASH DEPOSITS IN T HE BANK ACCOUNTS. IN MY VIEW, THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE BASIS OF IRRELEVANT CONSIDERATIONS WHICH HAVE FLOWED FROM CE RTAIN ASSUMPTIONS MADE BY HIM. THE ASSESSING OFFICER HAS ASSUMED THAT THE CASH WITHDRAWALS FROM THE BANK ACCOUNTS MU ST HAVE BEEN UTILIZED BY THE ASSESSEE FOR MAKING UNACCOUNTE D PAYMENTS FOR ACQUIRING DEVELOPMENT RIGHTS. IF ANY S UCH FACT IS CONCLUSIVELY ESTABLISHED IN ANY PROCEEDINGS SEPARAT E ADDITION WOULD BE MADE WHICH WOULD BE INDEPENDENTLY SUBJECT TO SCRUTINY BY THE APPELLATE AUTHORITIES. IN THE BLOCK ASSESSMENT THE ASSESSING OFFICER PROCEEDED ON THE BASIS THAT T HE ASSESSEE COMPANY ACQUIRED DEVELOPMENT RIGHTS IN 11.11 LAC SQ YDS. OF 37 LAND. ON THE OTHER HAND, THE HON'BLE TRIBUNAL RECOR DED A FINDING OF FACT THAT THE ASSESSEE HAD ACTUALLY ACQUIRED DEVELOPMENT RIGHTS IN APPROXIMATELY 7 LAC SQ. YDS. OF LAND. HOWEVER, THE FINDING OF THE TRIBUNAL IS SUBJECT MATTER OF WRIT P ETITION FILED BY THE DEPARTMENT BEFORE THE HON'BLE HIGH COURT AND NO THING MORE CAN BE SAID ON THIS ISSUE. THE MOST IMPORTANT FACT IS THAT ALL THE TRANSACTION, EITHER WITHDRAWALS OR DEPOSITS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT REGULARLY MAINTAI NED BY THE ASSESSEE WHICH WERE AVAILABLE EVEN AT THE TIME OF S EARCH. IN MY VIEW, WHEN SUFFICIENT CASH BALANCE IS AVAILABLE IN THE CASH BOOK AND THE BANK DEPOSITS HAVE COME OUT OF SUCH CA SH BALANCES, IT WOULD BE FAR-FETCHED TO ASSUME THAT TH E CASH BALANCE IS INFLATED AND THE SAME WAS ACTUALLY NOT A VAILABLE WITH THE ASSESSEE COMPANY. THE OBSERVATION OF THE ASSESS ING OFFICER THAT AT THE TIME OF SEARCH CASH ACTUALLY FO UND WAS MUCH LESS THAN THE CASH BALANCE REFLECTED IN THE CASH BO OK DOES NOT HAVE MUCH RELEVANCE FOR DECIDING THIS ISSUE. HERE A REFERENCE MAY BE MADE TO THE BLOCK ASSESSMENT ORDER DATED 31. 3.1997 COPY OF WHICH HAS BEEN COMPILED AT PAGES 275 TO 317 OF THE PAPER BOOK. ON PAGE 10 OF THIS ORDER THE ASSESSING OFFICER HAS REFERRED TO LETTERS DATED 21.3.1997, 25.3.1997 AND 27.3.1997 FILED BY THE ASSESSEE. AT THE BOTTOM OF PAGE 10 THE ASSESSING OFFICER HAS QUOTED FROM THE ASSESSEE'S REPLY MENTIO NING THAT DURING THE COURSE OF SEARCH AT THE OFFICE PREMISES CASH OF RS.13,246 AND 12,050 WAS FOUND. THE ASSESSEE EXPLAI NED THAT THE SAID CASH WAS OUT OF THE CASH BALANCE OF RS.3,0 4,879 AVAILABLE WITH THE COMPANY AS PER THE CASH BOOK. IT IS SIGNIFICANT THAT DURING THE COURSE OF THE SEARCH NO QUESTION WAS PUT TO THE MANAGING DIRECTOR OF THE ASSESSEE COMPAN Y REGARDING THE REMAINING CASH. IN MY VIEW, MERELY BE CAUSE DURING THE COURSE OF SEARCH ACTUAL CASH FOUND WAS L ESS THAN THE CASH AVAILABLE AS PER THE CASH BOOK, THERE COUL D BE NO ASSUMPTION THAT THE CASH BALANCE WAS INFLATED. IF T HE DEPARTMENT HAD ANY DOUBT OR SUSPICION, THE ASSESSEE COMPANY COULD HAVE BEEN QUESTIONED OR THE MATTER COULD HAVE BEEN FURTHER INVESTIGATED. THE FACT IS THAT AVAILABILITY OF CASH ON THE DIFFERENT DATES OF CASH DEPOSITS IN THE BANK ACCOUN TS IS ESTABLISHED FROM THE REGULAR BOOKS OF ACCOUNT AND A LL THESE TRANSACTIONS WERE ALREADY RECORDED PRIOR TO THE DAT E OF SEARCH. IN MY VIEW NO SUCH ADDITION CAN BE MADE MERELY ON T HE BASIS 38 OF SOME PRESUMPTIONS. WHEN THE TRANSACTIONS ARE DUL Y RECORDED IN THE BOOKS OF ACCOUNT, THE ONUS IS HEAVY ON THE DEPARTMENT TO LEAD CONCLUSIVE EVIDENCE SO AS TO EST ABLISH THAT THE BANK DEPOSITS DID NOT COME FROM OUT OF THE REGU LAR BOOKS OF ACCOUNT AND THAT SUCH DEPOSITS REPRESENTED ASSESSEE 'S UNDISCLOSED OR UNACCOUNTED INCOME. THE ASSESSING OF FICER HAS COMPLETELY FAILED TO BRING ON RECORD ANY SUCH CONCL USIVE EVIDENCE OR MATERIAL AND THE ADDITION IS ENTIRELY B ASED ON ASSUMPTIONS. THEREFORE, THE ADDITION OF RS.2,79,16, 000 IS DELETED. 21. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT NO EXPLANATION WAS FILED REGARDING CONTINUOUS CASH WITHDRAWALS MADE BY THE ASSESSEE. IT IS, THEREFORE, TO BE PRESU MED THAT CASH IS UTILIZED AND SPENT BY THE ASSESSEE. THERE WAS NO NE ED OF BORROWINGS IF ACTUAL CASH IS GENERATED OUT OF THE WITHDRAWALS SHOWN BY THE ASSESSEE. ASSESSEE FAILED TO SHOW THAT DEPOSITS HAV E GONE FROM THE CASH WITHDRAWN. NO CASH FLOW STATEMENT WAS FILED IN THIS REGARD. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE AMOUNT OF WITHDRAWALS WAS NOT UTILIZED BY THE A SSESSEE ELSEWHERE. IT WAS AVAILABLE TO THE ASSESSEE FOR DEP OSIT. COMPLETE DETAILS ARE RECORDED IN THE REGULAR BOOKS OF ACCOUN TS. SEARCH IS CONDUCTED ON 14-03-1996 I.E. ALMOST AT THE END OF T HE FINANCIAL YEAR AND ALL THE ENTRIES WERE RECORDED IN THE BOOKS OF A CCOUNTS WHICH HAVE NOT BEEN DISPUTED BY THE AO. HE HAS RELIED UPO N THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PIPUS HKUMAR O. DESAI VS CIT, 247 ITR 568 IN WHICH IT WAS HELD AS UNDER: HELD, THAT SINCE THE ASSESSEE HAD GIVEN SUFFICIENT DETAILS WITH REGARD TO THE SOURCES FROM WHICH THE J EWELLERY 39 WAS PURCHASED AND WITH REGARD TO THE CASH INFLOW AN D SINCE THE TRIBUNAL HAD NOT CONSIDERED THE GENUINENE SS OF THE RELEVANT STATEMENTS AND DOCUMENTS PERTAINING TO THE SAME, THE ADDITION OF RS.12,728 TO THE INCOME OF TH E ASSESSEE WAS NOT JUSTIFIED. 22. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERI AL ON RECORD. IT IS NOT IN DISPUTE THAT CASH DEPOSITS ON VARIOUS DATES IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY ARE DULY RECORDED I N THE REGULAR BOOKS OF ACCOUNTS EVEN PRIOR TO THE SEARCH. THE BOO KS OF ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN DISPUTED BY THE AO. ALL THE CASH DEPOSITS WERE FOUND TO HAVE BEEN MADE OUT OF THE CA SH BALANCES AVAILABLE IN THE BOOKS OF ACCOUNTS ON THE DATE OF T HE DEPOSIT IN THE BANK. SINCE THE BOOK ENTRIES ARE NOT IN DISPUTE, TH EREFORE, THERE IS NO NEED TO FILE SEPARATE CASH FLOW STATEMENT AS IS ARG UED BY THE LEARNED DR BECAUSE THE BOOK ENTRIES EXPLAINING THE AVAILABI LITY OF THE CASH WITH THE ASSESSEE COMPANY ON THE DATE OF BANK DEPOS ITS WOULD BE MORE SIGNIFICANT AND RELEVANT AS AGAINST CASH FLOW STATEMENT. THE AO ASSUMED THAT CASH WITHDRAWALS HAVE BEEN UTILIZED BY THE ASSESSEE FOR MAKING UNACCOUNTED PAYMENTS FOR ACQUIRING DEVEL OPMENT RIGHTS, HOWEVER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO SUPPORT HIS FINDINGS. IT, THEREFORE, APPEARS THAT T HE AO MERELY ON ASSUMPTION AND PRESUMPTION OF CERTAIN FACTS MADE TH E ADDITION AGAINST THE ASSESSEE. THE AO SHOULD HAVE CONSIDERED EXPLANATION OF THE ASSESSEE IN THE LIGHT OF THE ENTRIES MADE IN TH E REGULAR BOOKS OF ACCOUNTS EVEN PRIOR TO THE SEARCH AND THE AO SHOULD ALSO APPRECIATE THE NATURE OF BUSINESS OF THE ASSESSEE WHERE AVAILA BILITY OF THE CASH IS REQUIRED FOR BUSINESS PURPOSES. SINCE THE AVAI LABILITY OF THE CASH IN THE REGULAR BOOKS OF ACCOUNTS AND THE BANK DEPOS ITS ARE PROPERLY 40 RECORDED IN THE BOOKS OF ACCOUNTS, THEREFORE, NO AD VERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE. THE HONBLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF SHIVCHARAN DAS VS CIT, 12 6 ITR 263 CONSIDERED THE FACTS THAT IN OCTOBER 1951, THE HUF DECLARED A SUM OF RS.20,000/- UNDER VDIS WHICH WAS ACCEPTED BY THE DE PARTMENT, THEREAFTER THE SAID MONEY WAS KEPT WITH THE WIFE OF THE ASSESSEE FROM 1951 UP TO HER DEATH IN MAY, 1956. AFTER HER D EATH THE AMOUNT WAS DEPOSITED ON 29-10-1956 IN A BANK IN THE NAME O F TWO MARRIED DAUGHTERS OF THE ASSESSEE IN TWO EQUAL SHARES WHO H AD BY THEN ATTAINED MAJORITY. THE ASSESSEE EXPLAINED THAT THE TWO DEPOSITS WERE OUT OF VDIS AMOUNT OF RS.20,000/- BUT THE AO REJECT ED THE EXPLANATION AND ADDED THE SAME AS INCOME FROM UNDIS CLOSED SOURCES. ON APPEAL, AAC HELD THAT SUM COULD BE RELA TED TO THE AMOUNT VOLUNTARILY DISCLOSED EARLIER. ON FURTHER AP PEAL, TRIBUNAL REVERSED THE ORDER OF AAC AND RESTORED THE ORDER OF AO. THE HONBLE HIGH COURT HELD THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE AMOUNT WAS UTILIZED BY THE ASSESSEE FOR THE HUF IN ANY OTHER MANNER THAN THE ONE WHICH WAS REPRESENTED BY THE AS SESSEE, THE ONUS LAY ON THE DEPARTMENT TO SHOW THAT THE EXPLANA TION OFFERED BY THE ASSESSEE SHOULD NOT BE ACCEPTED. CONSIDERING TH E FACTS OF THE CASE NOTED ABOVE IN THE LIGHT OF THE FINDINGS OF TH E LEARNED CIT(A) WE ARE OF THE VIEW THE LEARNED CIT(A) ON PROPER APPREC IATION OF FACTS AND ENTRIES CONTAINED IN THE BOOKS OF ACCOUNTS RIGHTLY DELETED THE ADDITION. THE AO HAS NOT BROUGHT ANY ADVERSE MATERI AL AGAINST THE ASSESSEE ON RECORD TO PROVE THAT THE ASSESSEE UTILI ZED OR SPENT THE AMOUNT OF WITHDRAWAL IN ANY SPECIFIC ITEM. THE FIND INGS OF THE AO ARE BASED ON MERE PRESUMPTION WHICH COULD NOT TAKE PLAC E OF LEGAL PROOF. 41 WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 23. ON GROUND NO. 6, REVENUE CHALLENGED THE DELETIO N OF ADDITION OF RS.13,23,000/- MADE ON ACCOUNT OF UNACCOUNTED INCOM E OF RADHE ACRE I & II SCHEMES. 24. THIS ISSUE HAS BEEN DEALT WITH BY THE ASSESSIN G OFFICER AT PAGES 7 TO 10 OF HIS ORDER. REFERRING TO THE SEIZED ANNEXURE A-30, THE ASSESSING OFFICER HAS STATED THAT THIS FILE CONTAIN S ALLOTMENT LETTERS IN RESPECT OF RADHE ACRES I & II. 28 PLOTS IN RADHE AC RE I WERE BOOKED IN THE NAME OF SHRI SUBHASH SHAH. THE TOTAL AREA OF THESE PLOTS CAME TO 65,221 SQ. YDS AND AS PER THE SEIZED PAPER S CASH OF RS.1,30,44,200/- WAS RECEIVED AGAINST SALE OF THESE PLOTS. A SUM OF RS.30 LACS ONLY WAS FOUND TO BE ACCOUNTED AND THE A FORESAID SUM OF RS.1,30,44,200/- RECEIVED IN CASH WAS NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS MENTIONED THAT T HIS FACT PROVES THAT THE ASSESSEE CHARGED ON-MONEY @ RS.200 PER SP. YD. SIMILAR INSTANCES WERE ALSO NOTED BY THE ASSESSING OFFICER FROM THE SEIZED MATERIAL AND THE STATEMENT OF SHRI ASHISH PATEL, MA NAGING DIRECTOR OF THE COMPANY RECORDED DURING THE COURSE OF SEARCH. O N THIS ACCOUNT THE ASSESSEE COMPANY DECLARED UNDISCLOSED INCOME OF RS.12.8 CRORES. AS MENTIONED ABOVE THE SEARCH WAS CARRIED O UT IN THE CASE OF THE ASSESSEE COMPANY ON 14-03-1996 AND THE AFORE SAID UNDISCLOSED INCOME PERTAINED UP TO 14 TH MARCH, 1996. THE ASSESSING OFFICER HAS MENTIONED IN HIS ORDER THAT DURING THE POST SEARCH PERIOD I.E. 15.3.1996 TO 31.3.1996 THE ASSESSEE COMPANY SO LD PLOTS 42 ADMEASURING 3780 SQ. YDS. THE ASSESSING OFFICER ASS UMED THAT ON THIS SALE THE ASSESSEE COMPANY MUST HAVE CHARGED ON -MONEY @RS.350/- PER SQ. YD. HE THEREFORE ASKED THE ASSESS EE TO EXPLAIN AS TO WHY ON THIS BASIS ADDITION OF RS.13.23 LACS BE N OT MADE. THE ASSESSEE'S REPLY AND THE ASSESSING OFFICER'S CONCLU SION IS REPRODUCED BELOW FROM PAGE 10 OF THE ASSESSING OFFI CER'S ORDER: 'AS REGARDS THE SECOND PROPOSED ADDITION OF RS.13.2 3 LACS WE HAVE TO STATE THAT NEITHER ANY REFERENCE HAS BEE N GIVEN TO THE RELEVANT PART OF THE BLOCK ASSESSMENT ORDER NOR AS TO HOW THE RATE OF RS.550/- (SHOULD HAVE BEE N RS.350/- SQ. YARD) IS PROPOSED TO BE APPLIED. YOU A RE REQUESTED TO FURNISH FULL AND COMPLETE DETAILS OF T HE RELEVANT PORTION 'OF THE BLOCK ASSESSMENT ORDER REL IED UPON BY YOUR HONOUR AND ALSO HOW THE ON-MONEY AMOUN T FOR RS.13.23 LACS HAS BEEEN ARRIVED. ON RECEIPT OF THE SAME WE WILL BE IN POSITION TO CONSIDER THE SANE AN D FURNISH OUR OBJECTIONS IN THIS REGARD.' (F) THE SUBMISSION OF THE ASSESSEE IS CONSIDERED AN D FOUND 'TO BE UNACCEPTABLE. THERE IS OVERWHELMING EVIDENCES TO CONCLUDE THAT ASSESSEE HAS COLLECTING ON- MONEY ON SALE BOOKING OF PLOT IN RADHE ACRE-L & II. THIS HAS BEEN ADMITTED BY ASSESSEE ALSO. THEREFORE, RS.1 3.23 IS HEREBY ADDED AS UNACCOUNTED INCOME ON SALE OF PL OTS IN RADHE ACRES - 1 & 2.' 25. THE ASSESSEE BEFORE THE LEARNED CIT(A) MADE THE FOLLOWING SUBMISSIONS; '10.4 THE APPELLANT IN THIS CONNECTION SUBMITS THAT THE STATEMENT OF ASHISH PATEL OR THE SEIZED MATERIAL RE FERRED TO BY THE A.O. WERE RELATING TO THE PERIOD PRIOR TO 14-3- 1996. IT CANNOT BE APPLIED GENERALLY FOR THE SUBSEQ UENT PERIOD UNLESS THERE IS SUCH EVIDENCE THAT THE APPEL LANT 43 HAD OBTAINED/RECEIVED ANY UNACCOUNTED MONEY AFTER T HE DATE OF SEARCH ALSO. IN THE CIRCUMSTANCES THERE IS NO JUSTIFICATION FOR PRESUMPTION OF RECEIPT OF ON MONE Y ON THE BASIS OF THE SEIZED MATERIAL AND THE STATEMENT BASE D ON SUCH SEIZED MATERIAL WHICH RELATE TO THE PERIOD PRI OR TO THE DATE OF SEARCH. IN SO FAR AS THE SALE OF LAND OF 3730 SQ. YDS. DURI NG THE PERIOD FROM 16-3-1996 TO 31-3-1996 IS CONCERNED, TH E DETAILS OF SALE WERE GIVEN VIDE LETTER DATED 17-2-1 999. COPY OF SUCH DETAILS IS ENCLOSED. IT MAY BE SEEN FROM THE DETAILS THAT THE SALE RATE IS OF RS.400/- PER SQ. YDS. WHICH IS RECEIVED BY CHEQUE. THIS ITSELF SHOWS THAT AFTER THE DATE OF SEARCH IN THE A BSENCE OF ANY PROOF OF RECEIPT OF UNACCOUNTED MONEY TOWARDS S ALE OF LAND AND THE PAYMENT AS ABOVE HAVING BEEN RECEIV ED BY CHEQUE, THERE IS NO REASON FOR PRESUMPTION THAT AFTER THE DATE OF SEARCH THE APPELLANT CONTINUED TO RECEI VE UNACCOUNTED MONEY TOWARDS SALE OF LAND. THE ADDITIO N OF RS.13,23,000/- THUS DESERVES TO BE DELETED.' 26. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND MATERIAL ON RECORD DELETED THE ADDITIO N. HIS FINDINGS IN PARA 29 OF THE APPELLATE ORDER ARE REPRODUCED AS UN DER: 29. I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AS ALSO THE REASONS GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. COMPLE TE DETAILS OF THE SALES OF THE PLOT FROM 15.3.1996 TO 31.3.1996 HAVE BEEN FILED BEFORE ME WHICH ARE PLACE D AT PAGE 91 OF THE PAPER BOOK. FROM THESE DETAILS IT IS SEEN THAT DURING THIS PERIOD THE PLOTS WERE SOLD @ RS.40 0 PER SQ. YD. AND THE ENTIRE PAYMENT HAS BEEN RECEIVED BY CHEQUES DULY ACCOUNTED IN THE BOOKS OF ACCOUNT. IN MY VIEW THE ASSESSING OFFICER HAS MERELY ASSUMED THAT DURING THE POST SEARCH PERIOD ALSO THE ASSESSEE COM PANY INDULGED IN CHARGING ON-MONEY. NO EVIDENCE OR MATER IAL 44 HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SUPPORT SUCH ASSUMPTION. IT IS NOTABLE THAT THE ASS ESSEE COMPANY HAD ADMITTED CHARGING OF ON-MONEY ON SALE O F 28 PLOTS TO SHRI SUBHASH SHAH. AS MENTIONED ABOVE RS.30 LACS IN RESPECT OF THIS SALES WAS ACCOUNTED A ND RS.1,30,44,200 WERE RECEIVED BY CASH. THE TOTAL CONSIDERATION RECEIVED GAVE A RATE OF 246 PER SQ. Y D. AS AGAINST THE RATE OF RS.400 CHARGED BY THE ASSESSEE IN RESPECT OF THE POST SEARCH SALES. IN A RECENT JUDGM ENT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. ANANDKUMAR DIPAKKUMAR (294 ITR 497) HELD THAT IF UNACCOUNTED SALES ARE FOUND IN PRE-SEARCH PERIOD, M ERELY ON THAT BASIS THE ASSESSING OFFICER WILL NOT BE JUSTIFIED IN ASSUMING UNACCOUNTED SALES FOR THE ENTIRE YEAR. IN MY VIEW, THIS BEEN MADE WITHOUT ANY BASIS AND MERELY O N A PRESUMPTION AND, THEREFORE, THE SAME IS DELETED. 27. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT ASSESSEE WAS RECEIVING ON MONEY OUTSIDE THE BO OKS OF ACCOUNTS AND ALSO SURRENDERED AMOUNT IN THE BLOCK ASSESSMENT PERIOD, THEREFORE, THE RATES OF THE PLOT FOR SUBSEQUENT PER IOD CANNOT BE LESSER AS AGAINST THE RATES OF BLOCK PERIOD. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT NO EVIDENCE HA S BEEN BROUGHT ON RECORD TO PROVE ANY ON MONEY RECEIVED BY THE ASSESSEE IN POST SEARCH PERIOD. ADDITION IS MADE ON PRESUMPTION ONLY. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A O MERELY ON THE BASIS OF BLOCK ASSESSMENT ORDER ASSUMED THAT IN THE POST SEARCH PERIOD ALSO ASSESSEE HAS RECEIVED ON MONEY. NO EVID ENCE OR MATERIAL WAS BROUGHT ON RECORD BY THE AO TO SUPPORT HIS ASSUMPTION. MERELY ON THE BASIS OF ASSUMPTION NO SUCH ADDITION COULD BE MADE 45 AGAINST THE ASSESSEE. THIS GROUND HAS NO MERIT AND IS ACCORDINGLY REJECTED. 29. ON GROUND NO.7, REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.56,19,870/- BEING INTEREST EXPENDITURE CLAIMED B Y THE ASSESSEE. THIS ISSUE HAS BEEN DEALT WITH BY THE ASSESSING OFF ICER AT PARA 4 OF HIS ORDER. THE ASSESSING OFFICER HAS STATED THAT TH E ASSESSEE COMPANY MADE SEVERAL INTEREST FREE ADVANCES DURING THE YEAR. AT PAGES 5 AND 6 OF HIS ORDER THE ASSESSING OFFICER HA S GIVEN THREE LISTS OF SUCH INTEREST FREE ADVANCES, TOTALS BEING AS UND ER :- (A) RS. 1,35,36,813 (B) RS. 95,40,095 (C) RS. 1.34,83,168 RS. 3.65.60.076 THE ASSESSEE DURING THE YEAR PAID INTEREST TO BANKS OUT OF WHICH A SUM OF RS.56,19,870/- WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER WITH THE FOLLOWING DISCUSSION AT PAGES 6 & 7 OF HIS ORDER: '(E) IT IS SEEN FROM THE INTEREST ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAS CLAIMED INTEREST DEDUCTION OF RS.5 6,69,557. THE BROAD BREAK-UP THIS CLAIM IS AS UNDER: TO DENA BANK RS. 23,889 TO SANDESH FINANCE RS. 22,11,833 TO CO-OP. BANK OF AHMEDABAD LTD. RS. 26,298 TO OTHER PARTIES RS. 34,08,037 46 ASSESSEE DURING THE YEAR HAS DEVELOPED RADHE ACRE 1 AND 2 AND SOLD VARIOUS PLOTS IN THE SAID SCHEME. ASSES SEE HAD A SHARE CAPITAL OF 10.17 CRORE AS ON 31-3-96 & THE OP ENING SHARE CAPITAL WAS RS. 2 CRORE AS ON 1.4.96. BESIDES ABOV E, ASSESSEE HAD HUGE FUNDS AVAILABLE BY WAY OF AMOUNT RECEIVED IN CASH AS WELL AS BY CHEQUE ON SALE/BOOKING OF PLOTS IN RADHE ACRE-L & II. THE ASSESSEE RECEIVED RS.12.88 CASH CRORE CASH (AS ADMITTED BY ITS MD.) & FURTHER RS.13.6 ARE (AS PER ITS BALA NCE SHEET). THUS ITS TOTAL RECEIPTS FROM RADHE ACRE-L & II WAS AROUND 26 CRORE. UNDER THE CIRCUMSTANCES, THERE WAS ABSOLUT ELY NO BUSINESS NEED INVOLVED IN TAKING FURTHER LOAN. UNDO UBTEDLY, THE SAME HAS BEEN MERELY DIVERTED TO OTHERS FREE OF INT EREST AS DETAILED ABOVE. THE INTEREST ON LOAN CANNOT BE ALLO WED AS DEDUCTION. TAKING LOANS BY THE ASSESSEE AND DIVERTI NG THE SAME TO OTHERS FOR NON-BUSINESS PURPOSE FREE OF INT EREST DOES NOT FALL WITHIN THE PURVIEW OF ASSESSEE'S BUSINESS ACTIVITIES. THEREFORE, THE CLAIM OF THE ASSESSEE REGARDING INTE REST ON BORROWED CAPITAL FOR THE PURPOSE OF BUSINESS IS NOT ALLOWABLE. BARRING INTEREST PAID TO DENA BANK THE REMAINING IN TEREST CLAIM OF THE ASSESSEE STANDS REJECTED. (ADDITION RS.56,19,8707-)' 30. THE ASSESSEE, BEFORE THE LEARNED CIT(A) HAS VEH EMENTLY CHALLENGED THE AFORESAID DISALLOWANCE MADE BY THE A SSESSING OFFICER AND FOLLOWING SUBMISSIONS HAVE BEEN MADE: '8.2 THE APPELLANT SUBMITS THAT IT HAS SHOWN NET INTEREST INCOME OF RS. 1,31;60,095/- AS UNDER: INTEREST RECEIVED RS. 1,88,29,652/- LESS: INTEREST EXPENSES RS. 56.69.557/- RS. 1,31,60,095/- IT WILL BE APPRECIATED THAT AS THE ASSESSEE HAS NET INTEREST INCOME. AS SUCH THERE IS NO NET EXPENSES AND FUNDS ARE USED 47 FOR BUSINESS OR EARNING INCOME. IT IS NOT JUSTIFIED TO ASSUME THAT THE BORROWED FUNDS WERE DIVERTED FOR INTEREST FREE ADVANCE AS ALLEGED BY THE A.O. DETAILS OF INTEREST INCOME AND INTEREST EXPENSES IS ATTACHED. APART FROM THE ABOVE, AS OBSE RVED BY THE A.O. THE APPELLANT IS HAVING HUGE INTEREST FREE FUNDS AT ITS DISPOSAL BY WAY OF SHARE CAPITAL AND BY WAY OF SALE OF PLOTS/BOOKING OF PLOTS ON WHICH NO INTEREST HAS BEE N PAID. THERE IS EVIDENCE WITH THE A.O. THAT ANY BORROWED F UNDS ON WHICH INTEREST HAD BEEN PAID HAS EVER BEEN DIVERTED FOR ALLEGED INTEREST FREE ADVANCES. IN THE ABSENCE OF ANY SUCH NEXUS ESTABLISHED BY THE A.O AND IN PARTICULAR WHEN THE A PPELLANT IS HAVING HUGE FUNDS AVAILABLE WITH IT WHICH IS ACCEPT ED BY THE A.O. HIMSELF, THERE IS NO JUSTIFICATION FOR DISALLO WANCE OF INTEREST IN THE ABOVE MANNER. THIS MAY BE APPRECIATED IN VIE W OF THE FACT THAT THE FINANCE ON WHICH INTEREST IS PAID IS ALWAYS USED FOR THE PURPOSE OF BUSINESS. IT MAY BE APPRECIATED THAT INTEREST FREE FUND AVAILABLE WITH THE APPELLANT IS FAR IN EX CESS OF THE ALLEGED INTEREST FREE ADVANCES. IN THE CIRCUMSTANCE S THERE WAS NO JUSTIFICATION FOR SUCH DISALLOWANCE. THIS MAY BE APPRECIATED IN VIEW OF THE FOLLOWING: (A) IN THE CASE OF HARRISON MALAYALAM LTD. - ITAT COCHIN (19 SOT 363) OBSERVED AS UNDER. 'IN THIS EASE ALSO, THERE IS NO IDENTITY OF THE FUN DS INVESTED BY THE ASSESSEE. MOREOVER, FROM THE RESERV E POSITION, WE FIND THAT THE ASSESSEE IS HAVING SURPL US, FUNDS. WE DO NOT AGREE WITH THE FINDINGS OF THE CLT(A) THAT IF THE ASSESSEE HAS UTILIZED THE SURPLUS FUNDS FOR THE REPAYMENT OF THE LOANS, THEN THAT WOULD HAVE INCREA SED THE PROFIT. IN OUR OPINION, THE ASSESSEE IS THE BES T JUDGE TO DECIDE THE APPLICATION OF ITS FUNDS. MOREOVER, IT I S NOT THE CASE OF THE CIT(A) OR THE ASSESSING OFFICER THAT TH E ASSESSEE HAS MADE SOME BORROWINGS AND INVESTMENT TH E SAME IN TAX FREE BONDS. IN OUR OPINION, THERE IS NO JUSTIFICATION FOR MAKING THE DISALLOWANCE. WE, THER EFORE, DELETE THE ADDITION MADE BY DISALLOWING EXPENDITURE UNDER SECTION 14A AND SET ASIDE THE ORDER OF THE CI T(A) ON THIS ISSUE FOR ALL THE ASSESSMENT YEARS. THE REL EVANT GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED.' 48 (B) TORRENT FINANCIERS VS ACIT 73 TTJ 624, WHERE AHMEDABAD TRIBUNAL HAS HELD AS UNDER: CATCH NOTE' ASSESSEE HAVING ADEQUATE INTEREST-FREE FUNDS-ENTIRE INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE IS TO BE CONSIDERED-LF THE TOTAL INTEREST-FREE ADVANCES INCL UDING DEBIT BALANCE OF PARTNERS OF ASSESSEE-FIRM DO NOT E XCEED THE TOTAL INTEREST-FREE FUNDS AVAILABLE WITH THE AS SESSEE, NO INTEREST IS DISALLOWABLE-LF IT EXCEEDS, PROPORTI ONATE DISALLOWANCE CAN BE MADE. HEADNOTE: THE ENTIRE INTEREST-FREE FUNDS INCLUDE OWNER'S OWN CAPITAL, ACCUMULATED PROFITS AND OTHER INTEREST-FREE CREDITORS AND LOANS, IF TOTAL INTEREST-FREE ADVANCES INCLUDING DEBIT BALANCES OF PARTNERS DO NOT EXCEED THE TOTAL INTERE ST-FREE FUNDS AVAILABLE WITH THE ASSESSEE, NO INTEREST IS DISALLOWABLE ON ACCOUNT OF UTILISATION OF FIND FOR NON- BUSINESS PURPOSES. C) CIT VS. RADICO KHAITAN LIMITED 142 TAXMARI 681, WHERE HONBLE ALLAHABAD HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND HAS HELD AS UNDER: 'THE PRINCIPLE FOR ALLOWING THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED IS THAT THE FOLLOWING T HREE CONDITIONS SHOULD BE FULFILLED.(I) THE CAPITAL MUST HAVE BEEN BORROWED OR TAKEN FOR THE PURPOSE OF BUSINESS OR PROFESSION, (II) THE INTEREST SHOULD HAVE BEEN PAYA BLE (III) IF THE BORROWING IS NOT FOR THE BUSINESS PURPOSE AN D IS FOR PRIVATE PURPOSE OR NOT CONNECTED WITH THE BUSINESS, INTEREST PAID ON SUCH BORROWING CANNOT BE ALLOWED A S A DEDUCTION U/S. 36(1)(III) OF THE ACT.' D) IN DCIT VS. ASSAM INDUSTRIAL DEVELOPMENT CORPORA TION 49 LIMITED 87 TTJ 1067, ITAT, GAUHATI HAS HELD THAT FR OM BALANCE SHEET OF THE ASSESSEE, IT IS OBSERVED THAT THE INTEREST FREE FUND AVAILABLE WITH ASSESSEE WAS MORE THAN RS.63 CRORES. WHICH FAR EXCEEDED THE INTEREST FREE ADVANCE OF RS.51 LAKHS AND THERE BEING NO NEXUS BETWEEN INTEREST BEARING LOANS TAKEN BY THE ASSESSE E AND INTEREST FREE ADVANCES GIVEN BY IT AND THEREFORE A. O. WAS NOT JUSTIFIED IN DISALLOWING INTEREST RELATABLE TO INTEREST FREE ADVANCES. E) THE SUPREME COURT DECISION IN THE CASE OF MUNJAL SALES CORPORATION 298 ITR 298. 8.3 WITHOUT PREJUDICE TO THE ABOVE, IT MAY BE SE EN THAT THE ALLEGED INTEREST FREE ADVANCES REFERRED TO BY THE A .O. ARE REPRESENTING-THE FOLLOWING AMOUNTS: I) LOANS GIVEN DURING THE YEAR RS.1,3 5,36,813/- II) ADVANCES FOR PROPOSED PROJECTS RS. 95 ,40,095/- III) NON INTEREST BEARING ADVANCES/LOANS RS.1,34,8 3,168/- THE APPELLANT SUBMITS THAT THE ABOVE AMOUNTS DO NOT REPRESENT ANY LOAN ADVANCED BY THE APPELLANT BUT IT IS REPRES ENTING PAYMENTS MADE TOWARDS PROJECTS OF THE APPELLANT AND ARE THUS IN THE NATURE OF PAYMENTS FOR BUSINESS AND HENCE TH ERE IS NO JUSTIFICATION FOR HOLDING THAT IT IS REPRESENTING I NTEREST FREE LOANS GIVEN BY THE APPELLANT FOR NON-BUSINESS CONSIDERATI ON. THE DISALLOWANCE MADE ON SUCH GROUNDS, THEREFORE, DESER VES TO BE DELETED. THE PRINCIPLES OF THE DECISION OF THE SUPR EME COURT IN THE CASE OF S.A. BUILDERS 288 ITR 01 WOULD BE APPLI CABLE. AS TO HOW THE ABOVE PAYMENTS ARE NOT REPRESENTING L OANS BUT ARE TOWARDS PROPOSED PROJECT, THE FULL DETAILS WERE GIVEN IN THE COURSE OF ASSESSMENT PROCEEDINGS. THIS MAY BE CONSI DERED IN VIEW OF THE FOLLOWING FACTS. ( A) IN RESPECT OF THE AMOUNT OF RS.1,35,36,813/-, TH E A.O. HAS GIVEN BREAK-UP ON PAGE 5 OF THE ASSESSMENT ORDER. T HE DETAILS FOR WHICH WERE GIVEN VIDE LETTER DATED 12-2 -1999 COPY ENCLOSED TO THE ASSESSING OFFICER. COPY OF THE DETA ILS FILED WITH THE SAID LETTER IN RESPECT OF THE AMOUNT OF RS.135 LAKH IS 50 ENCLOSED. IT MAY BE SEEN THAT THE CONFIRMATION FILE D ALONG WITH COPIES OF ACCOUNT UNDER THIS HEAD CLEARLY SHOW THAT THE PAYMENTS WERE MADE TOWARDS ACQUIRING OF LAND AS ADV ANCE PAYMENT FOR DIFFERENT BLOCKS AND THUS IT REPRESENTE D THE PAYMENTS MADE IN THE COURSE OF BUSINESS. THE DETAIL S ARE AS UNDER: NAME OF THE PERSON AMOUNT (RS.) REMARKS ASHOKKUMAR SAKARCHAND PATEL HUF 5,00,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT. BALDEVBHAI MANGALDAS PATEL 5,20,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT. BHARATBHAI MANGALDAS PATEL 19,45,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT. DHRUVITA ENTERPRISES 34,15,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT CHIRAG M. SHAH 1,45,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT DEEPAK BALDEVBHAI PATEL 15,25,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT 51 HEMABEN BHARATBHAI PATEL 12,05,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT KUMUDCHAN D S. PATEL 21,75,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT .ROHIT S. PATEL HUF 9,60,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT. TARABEN BALDEVBHAI PATEL 8,95,000 PAYMENT TOWARDS LAND OF SHANTINAGAR SHELA SOCIETY FOR WHICH THE DEVELOPMENT WORK WAS ASKED TO THE APPELLANT. GUJARAT POLICE CO- OP. HOUSING SOCIETY 51,813 FOR PROJECT OF TIRTHDHARN SOCIETY. HEMRAJ KAMDAR, & ASSOCITES 2,00,000 ADVANCE PAYMENT OF ARCHITECT FOR SHANTINAGAR SHELA SOCIETY THUS THE ABOVE PAYMENTS ARE MADE TOWARDS PROJECTS A ND IT DOES NOT REPRESENT ANY INTEREST FREE LOANS GIVEN FO R NON- BUSINESS PURPOSE. (B) IN SO FAR AS THE AMOUNT OF RS.95.40 LAKH PAID TO NI LA MEMBERS ASSOCIATION AND SHRI PARIKH ASSOCIATION, DE TAILS CONTAINED IN ASSESSMENT ORDER ITSELF SHOWS THAT THE 52 AMOUNT REPRESENTS PROJECT ADVANCE. AS SUCH IT CANNO T BE CONSIDERED AS INTEREST FREE LOANS. ( C) IN, SO FAR AS THE AMOUNT OF RS. 1,34,18,168/- REFER RED TO ON PAGE 6 OF THE ASSESSMENT ORDER ARE CONSIDERED, T HE APPELLANT HAS TO FIRST OF ALL SUBMIT THAT MAJORITY OF THESE AMOUNTS ATE ALSO COVERED IN THE LIST OF RS.1,35,36, 813/- REFERRED TO IN (A) ABOVE. THUS THERE IS DUPLICATION OF CONSIDERING THIS AMOUNT AS INTEREST TREE ADVANCE IN SO FAR AS THE FOLLOWING AMOUNTS ARE CONCERNED: SR. NO. NAME AMOUNT (RS.) 1. BALDEV.BHAI MANGALDAS PATE! 5,20,000/- 2 TARABEN BALDEVDAS PATEL 21 ,75,000/- 3. ASHOKKUMAR SAKARCHAND PATEL 5,00,000/- 4. BHARATBHAI MANGALDAS PATEL 19,45,000/- 5. CHIRAG M. SHAH 1 ,45,000/- 6. DHRUVITA ENTERPRISE 34,15,0007- 7. DEEPAK BALDEVBHAI PATEL 15,25,000/- 8. HEMABEN BHARATBHAI PATEL 12,05,000/- 9. HEMRAJ KAMDAR & ASSOCIATES 2,00,000/- 10. ROHIT S. PATEL HUF 9.60,000/- IN SO FAR AS THE BALANCE AMOUNT OUT OF THE ABOVE FI GURE OF RS.1,34,83,168/- ARE CONCERNED THE APPELLANT HAS TO SUBMIT THAT IT REPRESENTS ADVANCE PAYMENT TOWARDS EXPENSES OF T HE PROJECTS LIKE LABOUR, MATERIAL, ARCHITECT FEES ETC. AND IT DOES NOT REPRESENT ANY AMOUNT IN THE NATURE OF LOAN. THUS ON THE FACTS ITSELF THE DISALLOWANCE IS TOTALLY UNJUSTIFIED AND UNWARRANTED.' 53 31. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND MATERIAL ON RECORD DELETED THE ADDITION. HIS FI NDINGS IN THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 33. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE RE LEVANT FADS AND THE REASONS GIVEN BY THE ASSESSING OFFICER FOR THE DISALLOWANCE TOGETHER W SUBMISSIONS MADE BEFORE ME ON BEHALF OF THE APPELLANT. AT THE OUTSET, IT MAY B E MENTIONED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE FUNDS BORROWED FROM THE BANKS WERE NOT UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSES. THE ASSESSEE HA S PAID TOTAL INTEREST OF RS.56,69,557/- TO THE BANKS AND IT HAS ALSO EARNED INTEREST INCOME OF RS.1,88,29,652/- . THUS THE ASSESSEE HAS SURPLUS INTEREST INCOME OF RS.1,31,60,095/-. INTEREST EXPENDITURE IS DEDUCT IBLE U/S. 38(1)(III) OF THE INCOME-TAX ACT IF SUCH INTEREST H AS BEEN PAID BY THE ASSESSEE ON FUNDS BORROWED FOR BUSINESS PURPOSES. THE ALLEGATION OF THE ASSESSING OFFICER I S THAT THE ASSESSEE ADVANCED INTEREST FREE LOANS DURING THE YEAR AND FURTHER THE ASSESSEE WAS HAVING SUFFICIENT FUNDS OF ITS OWN WITH THE RESULT THAT THERE WAS NO NECESS ITY TO BORROW FUNDS FROM BANKS. I HAVE CONSIDERED THE FACT S AND IN MY VIEW THE ASSESSING OFFICER WAS WHOLLY UNJUSTI FIED IN DISALLOWING INTEREST TO THE EXTENT OF RS.56,19,870/ -. AS PER THE ASSESSING OFFICER'S OWN VERSION, THE ASSESSEE COMPANY HAD HUGE INTEREST FREE FUNDS OF ITS OWN WHI CH WERE MORE THAN SUFFICIENT TO COYER ANY INTEREST FRE E ADVANCES MADE BY THE ASSESSEE. NO NEXUS HAS BEEN ESTABLISHED BETWEEN THE INTEREST BEARING BORROWED F UNDS AND THE INTEREST FREE ADVANCES. THE ASSESSING OFFIC ER HAS MERELY ASSUMED, WITHOUT ANY BASIS WHATSOEVER, THAT THE FUNDS BORROWED FROM THE BANKS WERE NOT USED FOR BUSINESS PURPOSES. FURTHER, AS EXPLAINED BY THE APP ELLANT IN THE SUBMISSIONS REPRODUCED ABOVE, EVEN THE SO-CA LLED INTEREST FREE ADVANCES HAVE BEEN MADE BY THE ASSESS EE FOR BUSINESS PURPOSES AND THE SURPLUS FUNDS HAVE BE EN 54 INVESTED BY THE ASSESSEE WHICH HAS YIELDED GROSS IN TEREST INCOME OF RS.1,88,29,652/-. THE LEGAL POSITION IS V ERY CLEAR, ON THIS ISSUE AS EXPLAINED BY THE APPELLANT IN THE WRITTEN SUBMISSIONS. I HOLD THAT CONSIDERING THE FA CTS AND THE LEGAL POSITION THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS WITHOUT ANY JUSTIFICATION. ACC ORDINGLY, THE DISALLOWANCE OF RS.66,19,870/- IS DELETED. 32. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT IT IS FOR THE ASSESSEE TO PROVE THAT INTEREST WAS PAID FOR BUSINESS PURPOSES. HE HAS RELIED UPON DECISION OF HONBLE SU PREME COURT IN THE CASE OF S. A. BUILDER LTD., 158 TAXMAN 74 IN WH ICH IT WAS HELD WHETHER EXPENDITURE MAY NOT HAVE BEEN INCURRED UND ER ANY LEGAL OBLIGATION, YET IT IS ALLOWABLE AS A BUSINESS EXPEN DITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. HE HAS ALSO RELIED UPON DECISION OF HONBLE DELHI HIGH COURT IN THE CA SE OF PUNJAB STAINLESS STEEL INDS. , 176 TAXMAN 404 IN WHICH IT WAS HELD THAT IN THE INSTANT CASE, THERE WAS ABSOLUTELY NO FINDING R ECORDED BY THE TRIBUNAL THAT INTEREST FREE ADVANCES WERE MADE BY T HE ASSESSEE TO SISTER CONCERN FOR ITS BUSINESS PURPOSE. THERE WERE NO SUCH FINDINGS BY THE TRIBUNAL EVEN WITH REGARD TO ADVANCES EXTEND ED IN THE PREVIOUS YEARS. IT WAS NOT CASE OF THE ASSESSEE THA T IT HAD SO MUCH SURPLUS CASH AVAILABLE WITH IT AT THE TIME OF EXTEN DING THOSE ADVANCES AND THE SAME COULD HAVE BEEN EXTENDED BY OUT OF THO SE SURPLUS FUNDS AVAILABLE TO IT. ON THE OTHER HAND, THE LEARN ED COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO DETAILED REPLY FILED BEFORE A UTHORITIES BELOW FROM PAGES 94 TO 100 IN WHICH IT WAS BRIEFLY EXPLAI NED THAT ASSESSEE HAS A SHARE CAPITAL OF RS.10.17 CRORES AND THAT NO BORROWED FUNDS 55 HAVE BEEN DIVERTED FOR NON BUSINESS PURPOSE. ADVANCES WERE GIVEN TOWARDS ACQUIRING THE LAND AS ADVANCE MONEY OR PROJ ECT ADVANCES OR TOWARDS EXPENSES OF THE PROJECTS LIKE LABOUR, MATER IAL, ARCHITECT FEES ETC. AND IT DOES NOT REPRESENT ANY AMOUNT IN THE NA TURE OF LOAN. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE DE CISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS REL IANCE UTILITIES AND POWER LTD., 313 ITR 340 WHEREIN IT HAS BEEN HELD, DISMISSING THE APPEAL, THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTIO N WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST-FRE E FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INT EREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN T HIS CASE THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL . THE INTEREST WAS DEDUCTIBLE. HE HAS ALSO RELIED UPON THE UNREPORTED DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS RAGHUVIR SYNTHETICS LTD., TAX APPEAL NO.829 OF 2007 DATED 05-12- 2011 CONFIRMING THE ORDER IN THE CASE OF TORRENT FI NANCIERS LTD. RELIED UPON BY THE LEARNED CIT(A) IN THE APPELLATE ORDER. HE HAS ALSO SUBMITTED THAT AO HAS ALSO FAILED TO NOTE THAT THE ASSESSEE HAS SHOWN NET INTEREST INCOME OF RS.1,31,60,095/- (PB-9 4) AFTER DEDUCTING THE INTEREST EXPENSES OF RS.56,69,557/-. THEREFORE, ADDITION IS ABSOLUTELY UNJUSTIFIED. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTERFE RE WITH THE ORDER OF THE LEARNED CIT(A). THE HONBLE SUPREME COURT IN TH E CASE OF MUNJAL SALES CORPORATION, 298 ITR 298 HELD AS UNDER: 56 HELD ALSO, THAT SINCE THE OPENING BALANCE OF THE PROFITS OF THE ASSESSEE FIRM AS ON APRIL 1, 1994, W AS RS.1.91 CRORES, AND THE PROFITS WERE SUFFICIENT TO COVER THE LOAN GIVEN TO A SISTER CONCERN OF RS. 5 LAKHS ONLY, THE APPELLATE TRIBUNAL OUGHT TO HAVE HELD THAT THE LOAN GIVEN WAS FROM THE ASSESSEES OWN FUNDS. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF T HE FINDINGS OF THE LEARNED CIT(A) IT IS CLEAR THAT ASSESSEE HAS NET SU RPLUS INTEREST INCOME AFTER DEDUCTING THE INTEREST EXPENSES DISALL OWED BY THE AO. THE ASSESSEE COMPANY HAD HUGE INTEREST FREE FUNDS O F ITS OWN WHICH WERE SUFFICIENT TO COVER ANY ALLEGED INTEREST FREE ADVANCES MADE BY THE ASSESSEE. NO NEXUS HAS BEEN PROVED BETWEEN THE INTEREST BEARING BORROWED FUNDS AND INTEREST FREE ADVANCES. THE EXPLANATION OF THE ASSESSEE CLEARLY PROVED THAT FUNDS HAVE BEEN USED FOR THE PURPOSE OF BUSINESS. THE LEARNED CIT(A), THEREFORE, ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTL Y DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE HAS NO MERIT AND IS DISMISSED. 34. ON GROUND NO.8 REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.2,00,000/- ON ACCOUNT OF UNEXPLAINED DEPOSITS IN BANK ACCOUNT. THE LEARNED CIT(A) CONSIDERING THE ISSUE TO BE CONN ECTED WITH DEPOSITS OF CASH IN THE BANK ACCOUNT DELETED THE AD DITION. HIS FINDINGS IN PARA 36 OF THE ORDER ARE REPRODUCED AS UNDER: 36. I HAVE CONSIDERED THE RIVAL STANDS ALONG WITH THE RELEVANT FACTS. THE ONLY BASIS GIVEN BY THE ASSESSI NG OFFICER FOR TREATING BANK DEPOSIT AS UNEXPLAINED IS THAT AT THE TIME OF SEARCH ON 14.3.1996 CASH OF ONLY RS.25, 296 57 WAS FOUND. HE, THEREFORE, ASSUMED THAT THE CASH BAL ANCE REFLECTED IN THE CASH BOOKS WAS INCORRECT AND INFLA TED. THIS ADDITION IS OF THE SAME NATURE AS THE ADDITION OF RS.2,79,16,000 WHICH HAS ALREADY BEEN DEALT WITH AB OVE AND DELETED. THE CASH DEPOSIT OF RS.2,00,000 IS DUL Y ACCOUNTED IN THE BOOKS OF ACCOUNT AND HAS COME OUT OF THE ACCOUNTED CASH BALANCE APPEARING IN THE CASH BO OK' MAINTAINED REGULARLY. THERE BEING NO JUSTIFICATION WHATSOEVER FOR THIS ADDITION, THE SAME IS DELETED. 35. ON CONSIDERATION OF SUBMISSIONS OF PARTIES, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. LEAR NED DR MERELY RELIED UPON THE ORDER OF THE AO. SINCE, THIS ISSUE IS CONNECTED WITH GROUND NO.5 OF THE APPEAL OF THE REVENUE, IN WHICH WE HAVE DISMISSED THE DEPARTMENTAL APPEAL; THIS GROUND OF A PPEAL OF THE REVENUE IS ALSO DISMISSED. 36. NO OTHER POINT IS ARGUED OR PRESSED. 37. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT DEKA/- 58 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD
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