ASHOK KUMAR AGARWAL, Jaipur V. ACIT, Jaipur

ITA 778/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5077 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Not Found
• Assessee Lawyers: Not Found
• Keywords: Capital asset; Business income; Search and seizure; Document seized; Bonafide belief; Additional evidence; Question of law; Cost of acquisition; Corroborative evidences; Valuation report; Deemed dividend; Block assessment; Retraction; Documents seized
• Section: 40A(3); 143(3); 10B; 68; 69; 132

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 778/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2011-12 ASHOK KUMAR AGARWAL, 25, DAYAL NAGAR, GOPAL PURA BYE-PASS, JAIPUR CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAMPA 9472 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 847/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2011-12 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, JAIPUR. CUKE VS. ASHOK KUMAR AGARWAL, 25, DAYAL NAGAR, GOPAL PURA BYE-PASS, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAMPA 9472 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 13/07/2016 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 03/10/2016 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M.: BOTH ARE THE CROSS APPEALS, ONE BY THE ASSESSEE AN D ANOTHER BY THE REVENUE ARISING AGAINST THE ORDER DATED 11/09/2 015 PASSED BY THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 2 LD CIT(A)-4, JAIPUR FOR THE A.Y. 2011-12. THE EFFEC TIVE GROUNDS OF BOTH THE APPEALS ARE AS UNDER:- GROUNDS OF ASSESSEES APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 29,80,000/- OUT OF RS. 50,26,604/- MADE BY THE LD. A.O. ON ACCOUNT OF DEEMED DIVIDEND BY APPLYING THE PROVISIO NS OF SECTION 2(22)(E) OF THE INCOME TAX ACT MORE SO WHEN THE PAYMENT OF M/S ASHISH BUILDCON PRIVATE LTD. TO THE ASSESSEE WAS NOT IN THE NATURE OF LOANS AND ADVANCES BUT ADV ANCE AGAINST THE SALE OF THE LAND TO THE COMPANY IN THE NORMAL COURSE OF THE BUSINESS. GROUNDS IN REVENUES APPEAL:- 1 . WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS.6,32,650/- MADE BY THE A.O. ON ACCOUNT OF SALE O F PLOT CONSIDERING AS BUSINESS INCOME. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF R S. 20,00,000/- MADE BY THE AO ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE WHEN THE ADDITION IS SUPPORTE D BY THE FINDINGS OF THE DVO. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS. 1,50,00,000/- MADE BY A.O. ON ACCOUNT OF ADVANC E GIVEN TO GULAM FAROOQ ANSARI WHICH WAS ACCEPTED BY THE ASSESSEE DURING THE SEARCH THAT THIS AMOUNT WAS PAI D OUT OF BOOKS. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 3 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.20,46,604/- OUT OF RS.50,26,604/- MADE BY THE A. O. ON ACCOUNT OF DEEMED DIVIDEND INCOME U/S 2(22)(E) OF T HE I.T. ACT AND ACCEPTING ADDITIONAL EVIDENCE WITHOUT GIVIN G OPPORTUNITY TO A.O. 2. FIRSTLY WE WILL TAKE UP REVENUES APPEAL: THE 1 ST GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 6,32,650/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF SALE OF PLOT. THE APPELLANT HAS CHALLENGED THE ACTI ON OF THE AO TREATING THE PLOT NO. 293, SHREE RAM VIHAR AS BUSINESS STOCK OF THE ASSESSEE AS AGAINST CAPITAL ASSETS SHOWN BY THE ASSESSEE AND DE TERMINING THE PROFIT FROM SALE OF THIS PLOT AS BUSINESS INCOME AS AGAINS T THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE, WHICH RESULTED IN TH E ASSESSMENT OF THE PROFIT FROM SALES OF PROPERTIES AMOUNTING TO RS. 6, 32,650/- AS INCOME FROM BUSINESS AS AGAINST LONG-TERM CAPITAL GAIN OF RS. 3,33,888/- SHOWN BY THE ASSESSEE. THE BRIEF FACTS AND FINDINGS OF TH E AO ARE THAT DURING THE YEAR THE ASSESSEE HAVE SHOWN PROFIT AND GAIN FR OM BUSINESS OR PROFESSION AS A REAL ESTATE DEVELOPER. HOWEVER, IN THE RETURN OF INCOME THE ASSESSEE HAS ALSO SHOWN LONG TERM CAPITAL GAINS FROM SALE OF PLOTS DETAILS OF WHICH ARE AS UNDER: ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 4 SR. NO ADDRESS OF PLOT PURCHASE PRICE INDEXED COST ADDITION/ IMPROVE MENT INDEXED COST OF ADDITION TOTAL INDEXED COST SALE PRICE CAPITAL GAIN 1 PLOT NO. 293, SHREE RAM VIHAR 27600 48344 640750 918778 967112 1301000 333888 TOTAL 27600 48344 640750 918778 967112 1301000 333888 THE AOS CONTENTION IS THAT THE ASSESSEE IS ONE OF THE LEADING REAL ESTATE DEVELOPERS OF THE CITY AND THERE CAN BE NO DIFFEREN CE IN HIS CASE OF LAND HELD AS STOCK-IN-TRADE AND LAND HELD AS AN INVESTME NT. EVEN COURTS HAVE HELD THAT A REAL ESTATE DEVELOPER CANNOT DISTINGUIS H BETWEEN LAND HELD AS STOCK-IN-TRADE AND LAND HELD AS AN INVESTMENT. S HE RELIED ON DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJ BAHADUR KAMAKAYA NARAIN SINGH VS. CIT (77 ITR 253), HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRINCIPAL OFFICER, LAXMI SURGICAL PVT. LTD. (202 ITR 601). SHE FURTHER RELIED ON DECISION OF HONBLE SUPREME COURT IN THE CASE OF DALHOUSIE INVESTMENT TRUST CO. LTD. VS. CIT (68 ITR 486), AND IN THE CASE OF G. VENKATA SWAMI NAIDU & CO. VS CIT, (35 IT R 594). THE AO ASSESSED THE INCOME WHICH WAS DECLARED BY THE ASSES SEE UNDER THE HEAD CAPITAL GAINS RELATED TO SALE OF PLOT MENTIO NED ABOVE AS INCOME UNDER THE HEAD BUSINESS OR PROFESSION. SINCE THE INCOME WAS ASSESSED UNDER THE HEAD BUSINESS OR PROFESSION OF THE ASSESS EE NO BENEFIT OF INDEXATION WAS GIVEN AND THE INCOME FROM SALE OF PL OTS ASSESSED BY THE AO WAS AS UNDER- ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 5 SR. NO. DESCRIPTION OF PLOTS SALE VALUE PURCHASE COST PROFIT 1 PLOT NO. 293, SHREE RAM VIHAR 13,01,000 6,68,350 6,32,650 TOTAL 6,32,650 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), W HO HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY GIVING TH E FOLLOWING FINDINGS:- I HAVE CONSIDERED THE ASSESSEES SUBMISSION AND AL SO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE AO AND APPELLANT. I HAVE ALSO CAREFULLY PERUSED THE RECORD S AVAILABLE BEFORE ME AND FACTUAL MATRIX OF THE CASE. I FOUND T HAT THE ASSESSEE IS NOT SHOWING THIS PLOT AS 'STOCK-IN-TRAD E' IN THE BALANCE SHEET. IN LAST BALANCE SHEET AS ON 31-03-20 10, THIS PLOT IS APPEARING UNDER SCHEDULE 6 OF THE HEAD NON DEPRECI ABLE FIXED ASSETS. THERE IS NO DISPUTE OVER THE CLAIM OF THE ASSESSEE THAT THIS PLOT WAS PURCHASED BY HIM IN FINANCIAL YEAR 20 00-01 AND NO ANY IMPROVEMENT OR DEVELOPMENT ACTIVITY WAS CARRIED OUT OVER THIS PLOT WITH AN INTENTION TO SALE IT AS BUSINESS ASSET . THE DEPARTMENT HAS CARRIED OUT SEARCH OVER THE ASSESSEE AND NO DOC UMENT WAS FOUND TO SHOW THAT THE ASSESSEE HAS CONVERTED THIS PLOT INTO STOCK-IN-TRADE. HONBLE ITAT HAS DECIDED SAME ISSUE IN THE CASE OF ASSESSEE HIMSELF IN AY 2004-05. THE RELEVANT POR TION OF THE DECISION OF HON'BLE ITAT IN THE CASE OF ASSESSEE FO R AY 2004-05 IS REPRODUCED AS UNDER:- '8. THE ASSESSEE IN THE PRESENT CASE HAS SUBMITTED THE EXPLANATION THAT THE ASSET IS HELD A CAPITAL ASSET THROUGHOUT AND NOT AS A STOCK IN TRADE. IT IS DUTY OF THE DEPA RTMENT TO ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 6 BRING ON RECORD THAT THE ASSESSEE HAS CONVERTED THE CAPITAL ASSET INTO STOCK IN TRADE TO BRING SECTION 45 ( 2 ) INTO PLAY. IT IS WHO ALLEGES HAS TO PROVE IT. IN THE PRESENT CASE , THE DEPARTMENT HAS ALLEGED THAT THE SAID ASSET IS NOT A CAPITAL ASSET BUT IS A STOCK IN TRADE. NOTHING HAS BEEN BRO UGHT ON RECORD BY THE DEPARTMENT IN THIS REGARD TO PROVE TH AT THE ASSESSEE HAS CHANGED THE INTENTION AND HAS CONVERTE D THE CAPITAL ASSET INTO STOCK IN TRADE. THE DEPARTMENT H AS NOT BROUGHT ON RECORD THAT THE CAPITAL ASSETS PURCHASED BY THE ASSESSEE DURING THE YEAR 1990-91 AND 1999 - 2000 ARE NOT IN EXISTENCE AND THEY ALTOGETHER ARE NEW ASSETS AND TH E SALE HAS BEEN MADE BY MAKING THE IMPROVEMENT WITH A INTE NTION TO MAKE THE PROFIT SO THAT THE SAME CAN BE TREATED AS ADVENTURE IN THE NATURE OF TRADE. THE ASSETS PURCHA SED BY THE ASSESSEE REMAINED THROUGHOUT THE PERIOD AS CAPI TAL ASSETS AND THERE IS NOTHING ON RECORD THAT THE ASSE SSEE IN PRESENT CASE HAS CHANGED THE INTENTION TO EARN THE PROFIT IN THE FORM OF STOCK IN TRADE. IN SUCH CIRCUMSTANCES A ND FACTS OF THE CASE, THE AO IS NOT JUSTIFIED IN TREATING TH E SAID TRANSACTION AS STOCK IN TRADE AND WE FIND NO INFIRM ITY IN THE ORDER OF THE LD CIT(A) IN THIS REGARD.' FURTHER, HON'BLE ITAT JAIPUR BENCH HAS DECIDED SIMI LAR ISSUE IN THE CASE OF WIFE OF ASSESSEE SMT. RENU AGARWAL IN I TA NO 125/JP/2013 ORDER DATED 17/07/2015 FOR AY 2007-08. THE RELEVANT PORTION OF THE DECISION OF HON'BLE ITAT IN THIS CASE IS REPRODUCED AS UNDER:- ' 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE REC ORDS THAT THE ASSESSEE SINCE INCEPTION HAD DISCLOSED THE PURC HASE OF LANDS UNDER THE HEAD 'INVESTMENT' AND THE ASSESSEE HAD ALSO DISCLOSED THESE PLOTS UNDER THE SAME HEAD UP T O DATE OF SALE OF PLOTS IN THE BALANCE SHEET. THE ASSESSEE HAD ALSO SHOWN CERTAIN STOCKS IN LAND UNDER THE HEAD 'INVENT ORIES' DURING THE YEAR. IT PROVES THAT ASSESSEE'S INTENTIO N WAS CLEAR AT THE TIME OF ACQUIRING THESE PLOTS FOR THE PURPOSE OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 7 INVESTMENT. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF ID. CIT(A) WHICH IS SUSTA INED. THUS THE SOLITARY GROUND OF THE REVENUE IS DISMISSED.' AFTER GOING THROUGH RIVAL SUBMISSIONS AND FINDINGS OF HON'BLE ITAT, IN ASSESSEE'S OWN CASE AND IN THE CASE OF WIF E OF THE ASSESSEE SMT. RENU AGARWAL, IT IS SEEN THAT THOUGH THE APPELLANT IS ENGAGED IN REAL ESTATE BUSINESS BUT NO ACTIVITY WAS CONDUCTED ON THE PLOT OF LAND WHICH WERE LATER SOLD OFF, THER EFORE, THE PROFIT ON THE SALE OF THE PLOT OF LAND PLOT NO. 293, SHREE RAM VIHAR HAS BEEN CORRECTLY SHOWN AS LONG TERM CAPITAL GAINS. TH E AO IS DIRECTED TO COMPUTE LONG TERM CAPITAL GAINS ACCORDI NGLY. 4. NOW THE REVENUES IS IN APPEAL BEFORE US. THE LD . CIT DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 5. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS REL IED ON THE ORDER OF THE LD. CIT(A) AND FURTHER SUBMITTED THAT THE ASSES SEE IS MAINTAINING THE REGULAR AND SEPARATE BOOKS OF ACCOUNTS OF THE BUSIN ESS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE BOOKS OF ACCOU NT ARE AUDITED BY CHARTERED ACCOUNTANT U/S 44AB OF INCOME-TAX ACT, 19 61. THE ASSESSEE HAS PURCHASED THE PLOT NO. 293, SHRI RAM VIHAR IN T HE FY 2000-01 AS INVESTMENT AND THIS PLOT WAS SOLD DURING THE PERIOD RELEVANT TO THIS ASSESSMENT YEAR 2011-12 AND THE PROFIT FROM THE PLO T WAS SHOWN IN THE RETURN AS CAPITAL GAIN AFTER TAKING BENEFIT OF INDE XATION. THIS PLOT WAS NOT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 8 ACQUIRED/PURCHASED WITH INTENTION TO RESALE BUT TO HOLD AS CAPITAL ASSETS AND THE INTENTION OF THE ASSESSEE IS VERY CLEAR FRO M THE PERIOD OF HOLDING AS THIS PLOT WAS PURCHASED IN AY 2001-02 AND WERE SOLD IN AY 2011-12. THIS PLOT WAS NOT THE PART OF ANY TOWNSHIP/REAL ES TATE BUSINESS AND THIS WAS ABSOLUTELY HELD AS CAPITAL ASSETS APAR T FROM HIS REAL ESTATE BUSINESS. THE ASSESSEE HAS NOT CONVERTED THIS PLOT INTO STOCK IN TRADE. THUS, THE LD. A.O. WAS WRONG TO TREAT THE ABOVE PLO T AS HIS BUSINESS ASSET AND NOT ALLOWING THE INDEXATION. THE ASSESSEE PRAYS YOUR HONOR TO KINDLY CONFIRM THE FINDINGS OF THE LD. CIT(A) IN TR EATING THE PLOT AS CAPITAL ASSET AND NOT BUSINESS ASSET. RELIANCE IS P LACED ON THE FOLLOWING DECISIONS:- I) G. VENKATASWAMY NAIDY & CO. VS. CIT (1959) 35 ITR 594, (SUPREME COURT); IN THIS CASE THE HON'BLE SUPREME COURT OBSERVED THAT IF A PERSON INVESTS MONEY IN LAND INTENDING TO HOLD IT, ENJOYS ITS INCO ME FOR SOME TIME, AND THEN SELLS IT AT A PROFIT, IT W OULD BE A CLEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERIVED FROM AN ADVENTURE IN THE NATURE OF TRADE II) THE MADRAS HIGH COURT IN THE CASE OF CIT VS. A. MOHAMMED MOHIDEEN (1989) 176 ITR 393, HELD THAT 'AN ACTIVITY IS IN THE NATURE OF AN ADVENTURE IN TH E NATURE OF TRADE THERE MUST BE POSITIVE MATERIAL TO PROVE THAT THE ASSESSEE INTENDED TO TRADE IN SUCH A N ACTIVITY AND IN THE ABSENCE OF EVIDENCE THE SALE OF IMMOVABLE PROPERTY CONSISTING LAND COULD GIVE RISE ONLY CAPITAL ACCRETION. IF THE LAND OWNER DEVELOPED THE LAND BY LAYING ROADS, ETC., AND CONVERTED THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 9 AGRICULTURAL LAND INTO HOUSE SITES WITH A VIEW TO G ET BETTER PRICE WILL NOT BE CONSIDERED AS AN ADVENTURE IN THE NATURE OF TRADE TO GIVE ANY BUSINESS PROFIT.' III) IN THE FOLLOWING CASES IT IS HELD THAT : 'WHERE THE PURCHASE OF ANY ARTICLE OR OF ANY CAPITAL INVESTME NT LIKE SHARES, SECURITIES OR LAND IS MADE WITHOUT TH E INTENTION TO RE-SELL AT A PROFIT, A RE-SALE UNDER CHANGED CIRCUMSTANCE WOULD ONLY BE A REALIZATION OF CAPITAL AND WOULD NOT STAMP THE TRANSACTION WITH A BUSINESS CHARACTER : CIT VS. PKN 60 ITR 65 (SC) CIT VS. GORDHAN DAS TRIKAMBHAI PATEL 118 ITR 81 CIT VS. TRIVEDI 172 ITR 95 THE ISSUE IS COVERED BY DECISION OF HONBLE ITAT IN THE CASE OF ASSESSEE ASHOK KUMAR AGARWAL IN ITA NO. 920/JP/2007 DATED 21 /11/2008 AND IN CASE OF RENU AGARWAL WIFE OF ASSESSEE IN ITA NO 125 /JP/2013. THE FACTS OF THIS CASE ARE SIMILAR TO THE FACTS OF THE ASSESSEES CASE. IN VIEW OF ABOVE, THE ASSESSEE PRAYS YOUR HONOR THAT ADDITI ON MADE BY LD. A.O. IS BAD IN LAW, UNJUSTIFIABLE AND UNREASONABLE DESER VES TO BE DELETED AND KINDLY UPHELD THE FINDINGS OF LD CIT(A) IN THIS REG ARD AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE L D CIT(A) HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAS NO T SHOWN THIS PLOT AS 'STOCK-IN-TRADE' IN HIS BALANCE SHEET AND NO DOCUME NT WAS FOUND DURING ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 10 THE COURSE OF SEARCH TO THE EFFECT THAT THE ASSESSE E HAS CONVERTED THIS PLOT INTO STOCK-IN-TRADE. FURTHER, HE HAS STATED TH AT ON THE PLOT OF LAND WHICH WAS PURCHASED IN FINANCIAL YEAR 2000-01, THER E IS NO IMPROVEMENT OR DEVELOPMENT ACTIVITY WHICH WAS CARRI ED OUT BY THE ASSESSEE WITH AN INTENTION TO SALE IT AS BUSINESS A SSET. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE SAID FINDINGS. THE INTENTION OF THE ASSESSEE CAN BE DETERMINED THROUGH THE TREATMENT OF THE ASSET IN THE FINANCIAL STATEMENTS AS WELL AS TH E CONDUCT AND THE ACTIONS OF THE ASSESSEE IN RELATION TO THE ASSET. IN THE INSTANT CASE, THE ASSET HAS BEEN SHOWN AS AN INVESTMENT AND NOT AS ST OCK-IN-TRADE IN THE FINANCIAL STATEMENTS. FURTHER, THERE ARE NO PHYSICA L IMPROVEMENTS/ DEVELOPMENTS WHICH HAS BEEN CARRIED OUT RIGHT FROM THE YEAR OF PURCHASE TO THE YEAR OF SALE. THE INTENTION OF THE ASSESSEE WAS THEREFORE TO HOLD THIS PLOT OF LAND AS AN INVESTMENT AND NOT AS STOCK-IN TRADE. ON SIMILAR FACTS, THE COORDINATE BENCH OF THIS TRIBUNA L IN THE ASSESSEES OWN CASE FOR THE A.Y. 2004-05 HAD DECIDED THE ISSUE UND ER CONSIDERATION IN FAVOUR OF THE ASSESSEE. SIMILARLY, IN THE CASE OF A SSESSEES WIFE NAMELY SMT. RENU AGARWAL IN ITA NO. 125/JP/2013 ORDER DATE D 17/07/2015 FOR THE A.Y. 2007-08, THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, IN LIGHT OF ABOVE DISCU SSIONS AND BY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 11 RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATE BENCH ON THIS ISSUE, WE UPHOLD THE ORDER PASSED BY THE LD. CIT(A). ACCOR DINGLY, GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED. 7. THE 2 ND GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 20,00,000/- MADE BY THE ASSESSING O FFICER ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF HOUSE WHEN THE ADDITI ON IS SUPPORTED BY THE FINDING OF THE DVO. THE ASSESSING OFFICER HAS O BSERVED THAT THE ASSESSEE AND HIS WIFE SMT. RENU AGARWAL GOT CONSTRU CTED A HOUSE OVER PLOT NO. B-281-282, 10B SCHEME, GOPALPURA BYE PASS, JAIPUR. THE ASSESSEE AND HIS WIFE SMT. RENU AGARWAL HAVE SHOWN INVESTMENT ON ACCOUNT OF CONSTRUCTION OF HOUSE AT RS. 1,94,26,791 /- AND RS. 1,73,25,733/- RESPECTIVELY IN THE F.Y. 2008-09 TO 2011-12 RELEVANT TO AY 2009-10 TO AY 2012-13. THEREFORE, THE CUMULATIVE AMOUNT SHOWN BY THE ASSESSEE AND HIS WIFE IN THE SAID CONSTRUCTION OF HOUSE WAS RS. 3,67,52,526/-. ON EXAMINATION OF THIS ACCOUNT, THE AO OBSERVED THA T THE ASSESSEE HAS ALSO DEBITED AMOUNT AGAINST LIFT, DG S ET, AC AND OTHER PLANT MACHINERY AND LOOSE FURNITURE AND FITTINGS UN DER THIS AMOUNT. THE ASSESSEE WAS ASKED TO SEGREGATE AND GIVE COMPLETE B REAK UP. IN COMPLIANCE, ASSESSEE PROVIDED A LEDGER SHOWING HEAD WISE DETAILS OF CONSTRUCTION. FROM THE DETAIL FILED, IT IS OBSERVED THAT, THE ASSESSEE AND ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 12 HIS WIFE HAS SHOWN RS. 2,31,09,884/- UNDER CIVIL CONSTRUCTION, SANITARY & ELECTRICITY, RS. 1,13,44,374/- UNDER FURNITURE, RS. 4,63,534/- UNDER OTHERS AND RS. 18,34,744/- UNDER PLANT AND MACHINERY. TO ORDER TO ASCERTAIN THE ACTUAL VALUE OF INVESTMENT IN CONSTRUCTION OF H OUSE, THE AO REFERRED THE MATTER TO DISTRICT VALUATION OFFICER (HEREIN RE FERRED AS DVO) FOR THE VALUATION OF THE COST OF CONSTRUCTION OF HOUSE. THE DVO VIDE NO. DVO/ITD/JPR/IT-10/2012-13/227 DATED 06-03-2013, SUBMITTED HIS REPORT WHEREIN THE CONSTRUCTION COST OF ABOVE SAID HOUSE WAS VALUED AT RS. 3,09,67,958/- AS AGAINST RS. 2,31,09,884/- DECLARED BY THE ASSESSEE TO THE VALUATION OFFICER. THE COPY OF VALUATION REP ORT WAS GIVEN TO THE ASSESSEE TO SUBMIT HIS COMMENTS/EXPLANATION ON THE DIFFERENCE ARRIVED AT BY THE DVO. THE AR OF THE ASSESSEE VIDE HIS LETT ER DATED 15.03.2013 BESIDE SEVERAL TECHNICAL OBJECTION, RAISED VARIOUS OBJECTION. IT WAS OBSERVED THAT THE MAIN DISPUTE WAS ON ACCOUNT OF DI FFERENCE IN AMOUNT SHOWN IN FURNITURE HEAD. THE CONTENTION OF THE ASSE SSEE IS THAT IN THE FURNITURE AMOUNT OF RS. 84,91,873/- IS AGAINST FIXED FURNITURE LIKE WOODEN FRAMES, DOORS, WIDOWS, WARD ROBES & RAILING ETC AND RS. 28,52,501/- IS AGAINST LOOSE FURNITURE LIKE SOFA SET, DINING FA BLE, CHAIRS ETC. IN THE VALUATION MADE BY THE DVO THE COST OF D OORS, WINDOW, WOODEN FRAMES ETC WERE INCLUDED IN CONSTRUCTION COS T. THE ASSESSEE HAS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 13 SHOWN THE COST OF WOODEN ITEMS SUCH AS PLYWOOD, TEA K WOOD, FITTINGS, LABOUR CHARGES, ETC. IN THE HEAD FURNITURE BUT CRED IT OF THE SAME HAS NOT BEEN GIVEN WHEN DIFFERENCE WAS COMPUTED BY COMPARIN G THE FIGURE OF VALUATION WITH THE COST OF CONSTRUCTION DISCLOSED I N THE BOOKS OF ASSESSEE AND HIS WIFE. ACCORDING TO THE ASSESSEE, THE TOTAL INVESTMENT IN CONSTRUCTION SHOULD BE TAKEN AT RS. 2,31,09,884/- + RS. 84,91,873/- = RS. 3,16,01,757/- FOR THE PURPOSE OF COMPARISON OF COST ESTIMATED BY DVO AT RS. 3,09,67,958/-. AS REGARD THE VALUATION MADE BY THE DVO AT RS. 3,09,67,958/-, THE ASSESSEE OBJECTED FOR ESTIMATION OF COST @ OF 2.25% AMOUNTING TO RS. 6,62,022.86 AGAINST EXTERNAL SERVI CE CONNECTION, @ 1% AGAINST QUALITY ASSURANCE, @ 2.25% AGAINST SEWERAGE, ESTIMATION OF COST OF MARBLE FLOORING AT RS. 36,50,000/- WHEREAS THE ASSESSEE PURCHASED THE MARBLE FOR RS. 1 0,65,812/- FOR WHICH BILLS WERE PRODUCED AND PAYMENTS WERE THROUGH CHEQUES, ESTIMATION ON ACCOUNT OF SPECIAL SANITARY FITTINGS & FIXTURES AND ELECTRICAL FITTINGS AT RS. 18,30,000/- EACH WITHOUT GIVING ANY DETAILS OF THE ITEMS AND BASIS OF ESTIMATION. THE ASSESSEE OBJECTED THE VALUATION OF SERVANT ROOM AT RS. 9,33,885/-. BESIDES THIS THE ASSESSEE OBJECTED THE VALUATION OF CONSTRUCTION AT CPWD RATES. THE ASSESSEE ALSO FILED VALUATION REPORT OF TWO REGISTERED VALUERS NAMELY, SHRI NAVEEN KUMAR JAIN AND SHRI VIVEK ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 14 KULSHRESTHA WHO ESTIMATED THE CONSTRUCTION COST AT RS. 2,62,77,124.76 AND RS. 1,67,01,232/- RESPECTIVELY. THE ASSESSEE ALSO OBJECTED THE REFERENCE TO THE DVO AS HE IS MAINTAINING PROPER BO OKS OF ACCOUNT. THE DVO IN HIS COMMENTS ON THE OBJECTION RAISED BY THE ASSESSEE HAS STATED THAT THE INVESTMENT OF RS. 28,52,501/- ON LOOSE FURNITURE APPEARS TO BE ON MUCH LOWER SIDE AND THE AO MAY ASCERTAIN AT HIS OWN LEVEL THE INVESTMENT AGAINST LOOSE FURNITURE. THE AO ASKED TH E ASSESSEE TO GIVE JUSTIFICATION OF INVESTMENT SHOWN IN FIXED FURNITUR E AND IN LOOSE FURNITURE INCLUDED IN THE FURNITURE ACCOUNT WHICH APPEARS TO BE ON LOWER SIDE. IN THIS REGARD, THE ASSESSEE CONTENDED THAT IN FIRST Y EAR AND SECOND YEAR THE AMOUNT UNDER THE HEAD FURNITURE WAS RS. 76,74,9 44/-. THE INVESTMENT IN SOFA, DINING TABLE OTHER LOOSE FURNIT URE COULD BE MADE ONLY IN THE THIRD YEAR OR FOURTH YEAR AFTER COMPLETION O F THE CIVIL WORK AND NOT IN THE FIRST AND SECOND YEAR I.E. DURING THE CONTIN UATION OF CIVIL STRUCTURE OF THE HOUSE. THE ASSESSEE CONTENDED THAT EVEN IF T HE BENEFIT OF RS. 76,24,944/- BEING AMOUNT INVESTED IN FIRST TWO YEAR ON WOODEN W ORK IS ALLOWED AS PART OF CONSTRUCTION THEN THE INVESTMENT AS PER BOOKS COMES TO RS. 3,07,34,828/- WHICH IS VERY CLOSE TO THE VALUATION MADE BY THE DVO AT RS. 3,09,67,958/- AND THEREFORE, NO ADDITION ON THIS ACCOUNT SHOULD BE MADE. HOWEVER, AFTER CONSIDERING THE VALU ATION REPORT OF DVO, ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 15 REPLY FILED BY THE ASSESSEE, COMMENTS OF DVO AND RE JOINDER FILED BY THE ASSESSEE, THE AO OBSERVED THAT COST OF LOOSE FURNIT URE SHOWN BY THE ASSESSEE IS AT LOWER SIDE, THEREFORE TO COVER UP AL L POSSIBLE LEAKAGE ON THIS ACCOUNT AN ADDITION OF RS. 20,00,000/- WAS MAD E ON ACCOUNT OF UNDISCLOSED EXPENDITURE IN CONSTRUCTION OF HOUSE FU RNITURE IN THE HANDS OF SH. ASHOK AGARWAL. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD DELETED THE ADHOC ADDITION MADE BY THE ASSESSING OFFICER. 9. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. CIT DR HAS STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFIC ER. 10. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SU BMITTED AS UNDER:- A) THE ASSESSEE RELIES ON THE FINDINGS OF LD. CIT(A) A T PG 22-23 OF HIS ORDER. B) THE INCOME TAX DEPARTMENT CARRIED OUT SEARCH OVER T HE ASSESSEE GROUP ON 22.09.2010 AND DURING THE COURSE OF SEARCH NO DOCUMENT/EVIDENCE WAS FOUND TO THE DEPART MENT TO SHOW THAT THE ASSESSEE MADE SOME UNDISCLOSED INVESTMENT IN THE CONSTRUCTION OF HOUSE. C) THE NEW RESIDENCE OF THE ASSESSEE HAS BEEN CONSTRUC TED ON TWO PLOTS. PLOT NO. 281 IS IN THE NAME OF SMT. RENU AGARWAL ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 16 AND PLOT NO. 282 IS IN THE NAME OF SHRI ASHOK AGARW AL. THE CONSTRUCTION ON BOTH THE PLOTS WAS CARRIED OUT JOIN TLY BY SHRI ASHOK AGARWAL AND SMT. RENU AGARWAL. THE CONSTRUCTI ON WAS STARTED IN FY 2008-09 AND COMPLETED IN FY 2011- 12. THE TOTAL INVESTMENT IN CONSTRUCTION OF THE HOUSE H AS BEEN DECLARED BY SHRI ASHOK AGARWAL AND SMT. RENU AGARWA L UP TO THE DATE OF SEARCH WAS AS UNDER: - A) SHRI ASHOK AGARWAL RS. 1,94,26,791/- B) SMT. RENU AGARWAL RS. 1,73,25,733/- TOTAL RS. 3,67,52,526/- THE BIFURCATION OF THE EXPENSES GIVEN BY THE ASSESS EE WAS UNDER:- S. NO PARTICULARS AMOUNT 1 CIVIL CONSTRUCTION, SANITARY AND ELECTRICITY 2,31,09,884 2 FURNITURE 1,13,44,374 3 OTHERS 4,63,534 4 DG SET AC AND OTHER PLANT & MACHINERY 18,34,744 TOTAL 3,67,52,526 THE COPY OF LEDGER ACCOUNT OF CONSTRUCTION IN THE B OOKS OF ACCOUNTS OF SHRI ASHOK AGARWAL AND SMT. RENU AGARWA L ARE AT PB PAGE 131-173. DURING THE COURSE OF SEARCH THE DEPARTMENT RECORDED THE STATEMENT OF ASSESSEE ON 22.09.2010 (COPY AT PB PAGE 3-20) AND IN REPLY OF Q UESTION NO. 20 OF THE STATEMENT HE ANSWERED THAT TOTAL INVE STMENT IN THE CONSTRUCTION UP TO DATE OF SEARCH WAS MADE R S. 3.50 CRORE AGAINST THE INVESTMENT IN BOOKS OF ACCOUNTS O F THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 17 ASSESSEE WAS MUCH MORE, THEREFORE THERE WAS NO MATE RIAL WITH THE DEPARTMENT IN FORM OF ANY DOCUMENTS OR STA TEMENT OF THE ASSESSEE GROUP THAT THE ASSESSEE MADE SOME UNDISCLOSED INVESTMENT IN CONSTRUCTION OF HOUSE. D) THE DVO ESTIMATED THE CONSTRUCTION COST AT RS. 3,09,67,958 (PB PG 186-203) AND COMPARED THIS FIGURE WITH RS. 2,31,09,884/- SHOWN BY THE ASSESSEE FOR CIVIL CONST RUCTION, SANITARY AND ELECTRIC EXPENSES. THE ASSESSEE EXPLAI NED THE LD AO THAT HE AND HIS WIFE HAVE SHOWN RS. 1,13,44,3 74/- UNDER THE HEAD BIFURCATED BY HIM FURNITURE. THE YEAR WISE DETAIL OF EXPENSES UNDER FURNITURE WAS SUBMITT ED AS UNDER:- S. NO. NAME OF ASSESSEE FY 08 - 09 FY 09 - 10 FY 10 - 11 FY 11 - 12 TOTAL 1 ASHOK AGARWAL 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 RENU AGARWAL 6,42,488 39,00,486 23,37,038 0 68,80,012 TOTAL 13,66,931 62,58,013 34,02,750 316 680 1,13,44,374 THE ASSESSEE SUBMITTED THAT THE ENTIRE AMOUNT IN FI RST YEAR, SECOND YEAR AND PART OF THE AMOUNT IN THIRD YEAR WA S AGAINST THE DOOR FRAMES, WINDOW FRAMES, DOORS, WIND OWS FALSE CEILING ETC WHICH IS PART OF THE CONSTRUCTION AND PART OF DVOS VALUATION AT FIGURE RS. 3,09,67,958/-. THE AS SESSEE SUBMITTED THAT OUT OF TOTAL AMOUNT OF RS. 1,13,44,3 74/-; AMOUNT OF RS. 84,91,873/- WAS AGAINST CONSTRUCTION AND RS. 28,52,501/- WAS AGAINST LOOSE FURNITURE SUCH AS DIN ING TABLE, SOFA, BEDS ETC. THEREFORE THE FIGURE AGAINST THE CO NSTRUCTION SHOULD BE TAKEN AT RS. 2,31,09,884/- + 84,91,873, WHICH ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 18 COMES TO RS. 3,16,01,757/- AS AGAINST COST ESTIMATE D BY DVO RS. 3,09,67,958/-. E) THE COMPLETE DETAIL OF CONSTRUCTION WAS AVAILAB LE IN BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SAME WAS DULY SUPPORTED BY THE SUPPORTING BILLS AND VOUCHERS AND NO DEFECTS WERE POINTED OUT BY THE LD. AO IN THE ACCOU NTS OF THE ASSESSEE. THE LEARNED AO HAS NOT JUSTIFIED IN R EFERRING THE PROPERTY TO DVO FOR ESTIMATION OF COST WITHOUT POINTING OUT DEFECT IN ACCOUNTS. THE MATTER WAS REFERRED TO DVO ON 15.01.2013 (THE COPY OF LETTER GIVEN TO DVO IS AT P B PAGE 174). AT THE STAGE OF REFERENCE OF THE PROPERTY TO THE VALUATION CELL, NO ANY DEFECT IN ACCOUNTS WAS POINT ED OUT BY LD ASSESSING OFFICER AND THERE WAS NO MATERIAL WITH AO TO SHOW THAT THE ASSESSEE MADE SOME UNDISCLOSED INVEST MENT IN CONSTRUCTION OF THE ASSESSEE. THE COST OF CONSTR UCTION OF HOUSE IS DULY ACCOUNTED IN BOOKS OF ACCOUNT OF ASSE SSEE AND HIS WIFE SMT. RENU AGARWAL. DAY-TO-DAY CONSTRUC TION ACCOUNT, BILLS AND VOUCHERS WERE MAINTAINED. IN MOS T OF THE CASES, PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. THUS THE LEARNED AO HAS NOT JUSTIFIED IN R EFERRING THE PROPERTY TO DVO FOR ESTIMATION OF COST WITHOUT POINTING OUT DEFECT IN ACCOUNTS. RELIANCE IS PLACED ON FOLLO WING DECISIONS OF RAJASTHAN HIGH COURT. A) CIT VS LAKHPAT FILM EXCHANGE 173 CTR 94 (RAJ) ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 19 B) CIT VS PRTAPSINGH AMROSINGH, RAJENDRA SINGH 200 ITR 788 (RAJ) C) CIT VS HOTEL JOSHI 242 ITR 478 (RAJ). THUS THE LD. AO WAS NOT JUSTIFIED IN MAKING THE REF ERENCE TO VALUATION OFFICE U/S 142A OF INCOME TAX ACT, 1961 F OR THE ESTIMATION OF COST OF CONSTRUCTION MORE SO WHEN THE COST OF CONSTRUCTION WAS VERIFIABLE FROM BOOKS OF ACCOUNTS OF THE ASSESSEE GROUP. F) THE VALUER ESTIMATED THE COST OF CONSTRUCTION R S. 3,09,67,957/-. THE DVO MENTIONED THAT THE ASSESSEE HAS SHOWN CONSTRUCTION COST AT RS. 2,31,09,884/- WHERE AS THE ASSESSEE AND HIS WIFE HAS SHOWN RS. 2,31,09,884/- U NDER THE HEAD CONSTRUCTION AND RS. 84,91,873/- UNDER THE HEAD FURNITURE WHICH INCLUDES THE COST OF WOOD, PLY ETC USED IN DOORS, WINDOWS, FALSE CEILING ETC TOTALING TO RS. 3,16,01757/-. THE ASSESSEE VIDE LETTER DATED 15.03 .2013 POINTED OUT CERTAIN DEFECTS IN THE VALUATION REPORT WHICH ARE SUMMARIZED AS UNDER: - I) THE DVO MADE THE VALUATION BY APPLYING PLINTH AREA RATE. IN THE VALUATION MADE BY HIM THE COST OF DOOR S, WINDOW, WOODEN FRAMES WERE INCLUDED AS APPARENT FROM ANNEXURE B ENCLOSED WITH THE REPORT. FURTHER THE COST OF FALSE CEILING, WOODEN CEILING TILES, WO ODEN FLOORING, MODULAR KITCHEN, SPECIAL ORNAMENTAL DOOR, WARDROBES, MALAMINE POLISH, WOODEN PANELING FOR TV, SS WORK IN WINDOW GRILL RAILING, SS RAILING WITH GL ASS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 20 PANES AT BALCONY WERE TAKEN AS EXTRA ITEMS. THE ASSESSEE HAS SHOWN THE COST OF WOODEN ITEMS SUCH AS PLY, WOOD, TEAK WOOD, FITTINGS, LABOUR CHARGES, ETC . IN THE HEAD FURNITURE. THE ASSESSEE HAS ALSO GIVEN THE DETAILS OF THE ACCOUNT ALONG WITH THE PHOTOCOPY OF THE PURCHASE BILLS TO DVO BUT THE SAME REMAINED UNCONSIDERED BY THE DVO. THE BREAKUP OF CONSTRUCTION EXPENSES DISCLOSED BY THE ASSESSEE IN BOOKS VIS A VIS RECONCILIATION CHART IS ENCLOSED HEREWITH. THE MAIN OBJECTION IN THIS REGARD IS THAT THE ASSESSEE HAS SHOWN RS. 44,64,352/- (ASHOK AGARWAL) AND RS. 68,80,012/- (RENU AGARWAL) TOTALING TO RS. 1,13,44,364/- UNDER THE HEAD FURNITURE. IN THIS HEA D, THE ASSESSEE HAS DEBITED COST AGAINST TEAK WOOD, PL Y, FITTINGS, RAILING, GLASS, LABOUR CHARGES OF CARPENT ER AND POLISHING, ORNAMENTAL DOORS ETC. THUS, THE TOTAL AMOUNT OF RS. 84,91,873/- WERE SHOWN BY THE ASSESSEE AGAINST THE CONSTRUCTION UNDE R THE HEAD FURNITURE FOR WHICH CREDIT HAS NOT BEEN GIVEN BY THE DVO. THE CHART AND VOUCHERS ARE ENCLOSED HEREWITH. THUS, THE INVESTMENTS IN CONSTRUCTION SHOWN IN THE BOOKS SHOULD BE TAKEN 2,31,09,884/- +8491873= 3,16,01757/- II) THE DVO HAS MADE ADDITION OF 2.25% RS. 6,62,022.86 AGAINST EXTERNAL SERVICE CONNECTION, TH E ASSESSEE HAS NOT TAKEN ANY EXTERNAL SERVICE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 21 CONNECTION. EVEN THE DVO HAS NOT EXPLAINED THE NATURE OF EXPENSES. THERE IS NO EXTERNAL WATER CONNECTION, NO ANY ADDITIONAL EXPENSES ON EXTERNAL ELECTRIC LINES, TRANSFORMERS ETC. THEREFORE, THE ADDITION OF RS. 6,62,022/- IN COST OF CONSTRUCTION IS WITHOUT BASIS. III) THE DVO HAS INCREASED THE BASIS PLINTH AREA RATE BY 1% AGAINST QUALITY ASSURANCE, NO SUCH QUALITY ASSURANCE POLICY OR WARRANTY HAS BEEN TAKEN BY THE ASSESSEE. THE DVO TAKEN BASIC RATE OF 94.25 PER MT ADJUSTED BY INDEX FACTOR 116 IT COMES TO 109.33 PER MT FOR GROUND FIRST AND SECOND FLOOR AND BASIC RATE OF 113 PER MT (RS. 131/- ADJUSTED BY INDEX FACTOR) FOR DOUBLE HEIGHT AREA. IV) THE DVO ESTIMATED THE COST OF MARBLE FLOORING AT TH E RATE OF 5000/- PER SQ. MT FOR 730 SQ MT AREA TOTAL RS. 36,50,000/- WITHOUT SEEING THE COPY OF BILL GIVEN TO THE DVO. THE ASSESSEE HAS PURCHASED THE MARBLE FOR RS. 10,65,812/- THEREFORE, THE DVO HAS ESTIMATED TH E COST OF IMPORTED MARBLE AT RS. 36,50,000/- AS AGAIN ST 10,65,812/- . FURTHER, THE DEDUCTION HAS NOT BEEN GIVEN FOR THE COST OF FLOORING ALREADY INCLUDED IN BASIC PLINTH AREA RATE. V) THE COST OF SPECIAL SANITARY FITTINGS AND FIXTURES ESTIMATED AT RS. 18,30,000/- WITHOUT GIVING ANY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 22 DETAILS OF THE ITEMS AND BASIS OF ESTIMATION. THIS IS WILD ESTIMATION. THE COPY OF BILLS PRODUCED BEFORE HIM WAS COMPLETELY IGNORED. FURTHER, THE DVO HAS ALREAD Y ADDED 12% OF PLINTH AREA RATE FOR SANITARY ITEMS AN D FURTHER 10% OF PLINTH AREA RATE FOR GOOD FINISH, THEREFORE, THE FURTHER ADDITION SHOULD NOT BE MADE. VI) THE COST OF SPECIAL ELECTRICAL FITTINGS AND FIXTURE S HAVE BEEN ESTIMATED AT RS. 18,30,000/- WITHOUT GIVING AN Y DETAILS OF THE ITEMS AND BASIS OF ESTIMATION. THIS IS WILD ESTIMATION. THE COPY OF BILLS PRODUCED BEFORE HIM WAS COMPLETELY IGNORED. FURTHER, THE DVO HAS ALREAD Y ADDED 12.5% OF PLINTH AREA RATE FOR SANITARY ITEMS AND FURTHER 10% OF PLINTH AREA RATE FOR GOOD FINISH , THEREFORE, THE FURTHER ADDITION SHOULD NOT BE MADE. VII) WE ARE ENCLOSING THE VALUATION REPORT OF THE FOLLOW ING TWO DIFFERENT REGISTERED VALUERS. S.NO NAME OF VALUER BASIC OF VALUATION VALUE OF CONSTRUCTION ESTIMATED BY THE REGISTERED VALUER. 1 SHRI NAVEEN KIMAR JAIN PLINTH AREA RATE ON THE BASIS OF RAJASTHAN BSR (INCLUDING LIFTS, PLANT AND MACHINERY AC ETC) 2,62,77,124.76 2 SHRI VIVEK KULSHRESTHA ITEM WISE COST METHOD BASED ON RAJ PWD BSR2012 1,67,01,232.00 ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 23 VIII) THE DVO VALUED THE SERVANT ROOM AT RS. 9,33,8 85/- BY TAKING VERY HIGH PITCHED PLINTH AREA RATE. IX) FURTHER, THE ASSESSEE IS MAINTAINING COMPLETE ACCOUNT OF CONSTRUCTION OF HOUSE AND EXPENSES IN CONSTRUCTI ON ARE SUPPORTED BY VOUCHERS AND IN MOST OF THE CASES THE PAYMENT IS ALSO BY ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAS FILED COMPLETE DETAILS OF THE CONSTRUC TION EXPENSES AND VOUCHERS BEFORE THE DVO. NO ANY DEFECT IN THE VOUCHERS HAS BEEN POINTED OUT BY YOU AS WELL AS BY THE DVO. THEREFORE, THE INVESTMENT IN RESPECT TO CONSTRUCTION OF HOUSE DISCLOSED BY THE BOOKS OF ACCOUNT SHOULD BE ACCEPTED. WE ARE ALSO FILING HEREWITH THE DETAILS OF CONSTRUCTION EXPENSE S AND COPY OF VOUCHERS FOR YOUR READY REFERENCE AND RECORD. FURTHER, THE REFERENCE MADE BY YOU TO DVO FOR ESTIMATION OF CONSTRUCTION COST OF THE BUILDING IS AGAINST THE SETTLED LAW. RELIANCE IS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS HOTEL JOSHI (2000) 108 TAXMAN 199 (RAJ). (X) THE RATE TAKEN BY THE DVO ARE BASED ON PAR CP WD RATE. THE PAR SYSTEM EITHER ADOPTED BY CPWD OR PWD-RAJASTHAN IS NOT APPROPRIATE SYSTEM FOR SCALING THE INVESTMENT DONE IN THE CONSTRUCTION WORKS. THE CPWD VALUER HAS ADOPTED THE VALUATION SYSTEM AS PLINTH AREA METHOD PRESCRIBED IN THEIR MANUAL/OFF ICE SYSTEM. THIS SYSTEM IS A GENERALIZED SYSTEM, FOR ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 24 TYPICAL GOVT. BUILDING TYPE STRUCTURE, WHERE THE DEPARTMENT FOLLOWS THE SPECIFICATION VERY MUCH HIGHER, COMPARE TO THE METHODS TAKEN/ADOPTED IN PUBLIC/PRIVATE BUILDINGS. THE LOCAL FACTORS AND PRACTICE HAVE NOT BEEN CONSIDERED IN PAR CPWD RATES. THE SAND (BAJARI), STONE, CEMENT AND OTHER MATERIAL IS LOCALLY AVAILAB LE. THE AVAILABILITY OF SAND (BAJARI) IS FROM BANAS, WH ICH IS ABOUT 80-100 KM FROM JAIPUR. THE STONES ARE LOCALLY AVAILABLE FROM NEARBY HILLS. THE BRICKS ARE ALSO PRODUCING IN JAIPUR. THE CEMENT IS LOCAL PRODUCTION OF RAJASTHAN. THE LABOUR IN RAJASTHAN IS VERY CHEAP IN COMPARISON OF DELHI OR OTHER METRO CITIES. LIKE USI NG OF BALLIES, PHANTA ETC. IN SHUTTERING RCC IN FOUNDA TION, BEAMS, COLUMNS & SLABS, WHICH ARE THE BASIC STRUCTURAL COMPONENTS, ARE ALSO OF INFERIOR QUALITY & HENCE LOWERING THE COMPARATIVE RATES IN PRIVATE BUILDINGS. SIMILARLY IN PRIVATE BUILDINGS, MANY SPECIFICATIONS ARE BEEN TRUNCATED OR CURTAILED OFF, LIKE FOR THE RCC THE CURING MAN CHARGES ARE KEPT APART I N PAR-CPWD, WHERE AS IN PRIVATE CONSTRUCTION IT IS MOSTLY EITHER DONE BY FLOODING, OR BY GUNNY BAGS OR BY SELF SUPERVISION BY OWNER ONLY. THERE ARE MANY SIMILAR INSTANCES, DUE TO WHICH THERE WILL BE THE CONSIDERABLE DIFFERENCE IN PAR-CPWD, & ACTUAL COST. IN SUMMARY, IN PRIVATE CONSTRUCTIONS, OUTER FINISHE S ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 25 ARE MORE IMPORTANT, COMPARE TO THE INTERNAL (STRUCTURAL) WORKS. THE LOCAL PWD IS IN THE FIELD & KNOWS THE LOCAL SPECIFICATIONS MORE, HENCE THE LOCA L PWD RATES COULD BE TAKEN UP EASILY FOR SCALING THE COST OF CONSTRUCTIONS IN PRIVATE FIELDS. WE HAVE AL SO PREPARED VALUATION REPORT FROM ANOTHER REGISTER VAL UER SHRI VIVEK KULSHESTRA ON THE BASIS OF ITEM WISE RAT ES. THE COPY OF THIS REPORT IS ALSO ENCLOSED HEREWITH. FOR PROPER AND MOST RELIABLE ESTIMATION OF COST OF CONSTRUCTION, THE ITEM WISE VALUATION IS MOST APPROPRIATE METHOD. WHAT HAS TO BE DONE, IS THAT TO CALCULATE DIFFERENT PARTS & COMPONENTS SEPARATELY, LIKE EARTHWORK, RCC IN FOUNDATION, PCC, FLOORING, PAINTI NG & ETC.. HENCE TO SCALE THE INVESTMENT OF THE ASSESS EE IN CONSTRUCTION MUST BE BY THE ITEMIZED BASED VALUATION SYSTEM, BY CONSIDERING THE GENERAL PRACTI CE OF THE CONSTRUCTION ADOPTED IN THE PRIVATE BUILDING S NOT BY ANY PLINTH AREA RATE SYSTEM. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HOTEL JOSHI (1999) 157 CTR (RAJ) 369 : (2000) 242 ITR 478 (RAJ) : (2000) 108 TAXMAN 199 (RAJ) HELD THAT THE QUESTION, WHETHER THE VALUATION MADE BY THE DISTRICT VALUATIO N OFFICER AS PER THE CPWD RATES PRESCRIBED IN THE BOARDS INSTRUCTION NO. 1671 OR THE VALUATION MADE BY THE REGISTERED VALUER AS PER THE RATES PROVIDED BY THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 26 PWD OF THE STATE GOVERNMENT SHOULD BE ACCEPTED, DOES NOT ARISE. THE TRIBUNAL HAS ARRIVED AT THE CONCLUSION THAT THE COST BASED ON ITEM WISE BASIS I S THE PROPER METHOD TO WORK OUT THE COST. THUS, THE QUESTION OF LAW SOUGHT TO BE REFERRED, DOES NOT ARI SE FROM THE ORDER OF THE TRIBUNAL. THUS, THE COST OF CONSTRUCTION THAT HAS BEEN ARRIVED AT BY THE TRIBUN AL IN THE INSTANT CASE IS WHOLLY BASED ON RELEVANT CONSIDERATIONS AND APPRAISAL OF MATERIAL ON RECORD. NO STATABLE QUESTION OF LAW ARISES FROM THE ORDER OF T HE TRIBUNAL. THE HONBLE RAJASTHAN HIGH COURT HAS FOLLOWED THE DECISION OF HOTEL JOSHI IN OTHER CASES ALSO. COMMISSIONER OF INCOME TAX VS. LAKHPAT FILM EXCHANGE (2002) 173 CTR (RAJ) 94 : (2002) 124 TAXMAN 807 IN OUR CASE, WE HAVE ALSO SUBMITTED THE VALUATION REPORT OF THE REGISTERED VALUER VALUING THE CONSTRUCTION ON ITEM WISE BASIS AND ACCORDING TO TH IS VALUATION REPORT THE ESTIMATED COST OF CONSTRUCTION COMES TO RS. 1,67,01,232.00. FURTHER, EVEN THE PLINTH AREA RATES METHOD IS TO B E ADOPTED, THAN THE RATES OUGHT TO HAVE BEEN TAKEN AT RAJASTHAN PWD BSR RATE. THE CPWD RATES ARE HIGHER APPROXIMATELY 25% OVER THE RAJASTHAN PWD ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 27 RATES. THEREFORE, ALL THESE FACTORS SHOULD BE CONSIDERED AND THE RAJASTHAN PWD BSR RATES ARE MOST APPROPRIATE FOR ESTIMATION OF CONSTRUCTION COS T IN JAIPUR. HONBLE RAJASTHAN HIGH COURT AND HONBLE ITAT JAIP UR BENCH HAVE HELD IN SEVERAL CASES THAT THE COST OF CONSTRUCTION IN RAJASTHAN SHOULD BE DETERMINED ON THE BASIS OF RAJASTHAN PWD RATES AS PER RAJ. BSR THE RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- (I) COMMISSIONER OF INCOME TAX VS. DINESH TALWAR (2003) 181 CTR (RAJ) 472: (2004) 265 ITR 344 (RAJ), THE ASSESSEE, WHO IS AN INDIVIDUAL, CONSTRUCTED A HOUSE PROPERTY IN MALVIYA NAGAR, JAIPUR DURING THE ACCOUNTANT PERIOD RELEVANT TO ASST. YR. 1990-91. THE DEPARTMENT REFERRED THE MATTER TO THE VALUATION OFFICER FOR WORKING OUT THE COST OF CONSTRUCTION OF THE PROPERTY. WHILE VALUING, THE DEPARTMENTAL VALUATION OFFICER HAS APPLIED THE RATE OF CPWD FOR THE PURPOSE OF VALUATION. THE TRIBUNAL HAS VALUED THE PROPERTY ADOPTING THE RATE OF PWD. HONBLE HIGH COURT HELD THAT TRIBUNAL HAVING APPLIED STATE PWD RATES FOR WORKING OUT THE COST OF CONSTRUCTION OF THE HOUSE PROPERTY IN QUESTION INSTEAD OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 28 CPWD RATES, SAME BEING A FINDING OF FACT, NO INTERFERENCE IS CALLED FOR. XII) FURTHER, THE DVO HAS NOT FOLLOWED INSTRUCTIO N NO 8 OF 2006 ISSUED BY CHIEF ENGINEER (VALUATION), INCOME TAX DEPARTMENT NORTHERN REGION, 3, TOLSTOY MARG: ROHIT HOUSE, NEW DELHI 110001 VIDE LETTER NO.CE(V)/NR/INSTRUCTION 8/06-07/253 DATED: 27.07.06 ADDRESSED TO ALL DVOS ON THE SUBJECT OF ESTIMATION OF VALUE OF INVESTMENT MADE IN CONSTRUCTION OF BUILDING. THE RELEVANT PARA OF THE INSTRUCTION IS REPRODUCED AS UNDER:- A BUILDING IS NOT MERELY A STRUCTURE WITH WALLS AN D A ROOF BUT ALSO TO FULFILL CERTAIN INTENDED FUNCTIONS FOR WHICH IT IS BUILT. TO FULFILL INTENDED FUNCTIONS VA RIOUS SERVICES ARE INTEGRATED IN THE BUILDING WHICH ARE A LSO PART OF THE BUILDING. FITTINGS & FIXTURES, APPLIANC ES, INSTRUMENTS, MACHINERIES WHICH ARE PERMANENTLY ROOTED TO THE BUILDING AND ARE ESSENTIAL FOR PROVID ING SERVICES REQUIRED TO FULFILL FUNCTIONS FOR WHICH TH E BUILDING IS BUILT ARE PART OF THE BUILDING. WHILE ESTIMATING VALUE OF INVESTMENT IN THE BUILDING THES E FITTINGS & FIXTURES, MACHINERIES ETC. ARE TO BE INC LUDED. FOR EXAMPLE A RESIDENTIAL OR A NON RESIDENTIAL BUIL DING APART FROM THE BUILDING ITSELF HAS VERY MANY FITTIN GS & FIXTURE, MACHINERIES ETC. ROOTED TO THE BUILDING ESSENTIAL FOR PERFORMANCE OF INTENDED FUNCTIONS SUC H AS I) ELECTRIC DISTRIBUTION BOARDS, II) CIRCUIT BRE AKERS, III) INTERNAL ELECTRIC WIRINGS INCLUDING SWITCH BOA RDS, IV) ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 29 TRANSFORMERS, V) FANS & LIGHTS, VI) LIGHTENING ARRE STORS, VII) LIFTS VIII) PUMPS & MOTORS, IX) GENERATORS AS CAPTIVE POWER PLANT , X) CENTRAL AIR CONDITIONING, XI) WATER SUPPLY LINE INCLUDING TAPS, VALVES ETC. XII) BATH ROOM AND WATER CLOSET FITTINGS AND FIXTURES, XIII) OVER HEAD TANKS, XIV) HOUSE SEWER UP TO MUNICIPAL SEWER LINE ETC. THESE ARE TO BE COUNTED AS PART OF THE BUILDING. ONE OF THE CRITERIA AND AN IMPORTANT ONE AT THAT TO DECIDE ABOUT WHICH FITTINGS & FIXTURES OR MACHINERIES ARE PART OF THE BUILDING IS TO ASCERTAI N WHETHER THESE ARE ROOTED TO THE BUILDING IN PERMANENT FASHION AND ARE INTEGRAL PART OF A SERVIC E OR SERVICES ESSENTIAL FOR FULFILLMENT OF FUNCTIONS OF THE BUILDING FOR WHICH IT IS BUILT. OBVIOUSLY, SUCH FIT TINGS & FIXTURES OR MACHINERIES ARE NOT MOVABLE WITHOUT INJ URY TO THE BUILDING AND ITS FUNCTIONS. VIEWED IN THIS L IGHT FURNITURE AND FURNISHING ITEMS ARE NOT PART OF THE BUILDING AND SIMILARLY WINDOW TYPE AIR CONDITIONERS AND AIR COOLERS ARE NOT PART OF THE BUILDING. V.O S ARE TO APPLY THEIR MIND TO ASCERTAIN WHICH ITEMS ARE PA RT OF THE BUILDING AND WHICH ARE NOT. IN ONE CASE A V.O CONSIDERED 4.5% TOWARDS INTERNAL ELECTRIC INSTALLATIONS INSTEAD OF 12.5% ON THE PLEA THAT COST OF FANS, ELECTRIC FITTINGS & FIXTURES ARE NOT DEBITED TO THE BUILDING ACCOUNT BY THE ASSESSEE. THIS IS INCORRECT APPROACH. THE ASSESSEE SHOULD HAVE BEEN ASKED TO FURNISH THE TOTAL EXPENDITURE YEAR WISE ON THIS COUNT AND THESE SHOULD HAVE BEEN INCLUDED IN T HE YEAR WISE DECLARED COST FOR THE PURPOSE OF ESTIMATI NG VALUE OF INVESTMENT IN CONSTRUCTION. THESE ELECTRIC AL FITTINGS & FIXTURES ARE PART OF THE BUILDING AND LO GICALLY TO BE DEBITED TO THE BUILDING ACCOUNT. IF FOR ANY REASON THE ASSESSEE FAILS TO INCLUDE THIS TYPE OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 30 EXPENDITURE RELATED TO BUILDING, THE V.O SHOULD AFT ER DUE EXAMINATION OF THE ACCOUNT INCLUDE THIS EXPENDITURE AS PART OF THE INVESTMENT IN THE BUILDI NG AND ACCORDINGLY ESTIMATE THE VALUE OF INVESTMENT. IN THE CASE OF ASSESSEE, THE FIXED PLANT MACHINERY, SUCH AS LIFT, DG SET, AIR CONDITIONERS ETC, HAVE NO T BEEN VALUED BY THE DVO, IN SPITE OF THE FACT, THAT THE ASSESSEE HAS SHOWING INVESTMENT AND FURNISHED THE DETAILS AND VOUCHERS BEFORE THE DVO. FURTHER, THE COST OF SANITARY FITTINGS AND SPECIAL ELECTRICAL IT EMS HAS BEEN TAKEN EXTRA EVEN WHEN THE PAR RATE WAS INCREASED BY 12% FOR SANITARY INSTALLATION AND 12.5 % FOR ELECTRIC INSTALLATION. THIS COULD HAVE BEEN TAK EN EXTRA, HAD THE PAR WAS INCREASED BY 4.5% OF BASIS PAR. THEREFORE, THE VALUATION OF THE PROPERTY SHOULD BE MADE FOR EACH AND EVERY ITEM AND CREDIT OF RS. 3,67,52,526/- SHOULD BE GIVEN AGAINST THE INVESTMEN T DECLARED BY SHRI ASHOK AGARWAL AND SMT RENU AGARWAL. ALONG WITH THE ABOVE SUBMISSION THE ASSESSEE SUBM ITTED THE AMPLE DETAIL AND SUPPORTING VOUCHERS AND EVIDEN CES TO SUPPORT HIS CONTENTION BUT THE SAME WERE REJECTED B Y THE DVO ON SUMMARY MANNER WITHOUT CONSIDERING AND EXAMINING THE SUPPORTING DETAIL/MATERIAL PROVIDED T O HIM. THE LD. DVO SIMPLY RELIED ON HIS HIGH PITCH VALUATI ON REPORT WHICH WAS PREPARED ON ESTIMATION BASIS. FURTHER WHI LE COMPARING THE FIGURE OF CONSTRUCTION EXPENSES RECOR DED BY THE ASSESSEE IN BOOKS OF ACCOUNTS FROM VALUE OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 31 CONSTRUCTION ESTIMATED BY THE DVO THE DUE CREDIT OF FIXED FURNITURE EXPENSES AND WOODEN WORK WERE NOT ALLOWED TO THE ASSESSEE. G) ON THE COUNTER COMMENTS OF DVO ON OBJECTIONS RA ISED BY THE ASSESSEE WE SUBMIT THAT THE ASSESSEE WAS MAINTA INING ONLY ONE ACCOUNT UNDER THE HEAD CONSTRUCTION AT 10 -B PLOT IN FINANCIAL LEDGER. THE HEAD WISE DETAILS WERE PRE PARED AS PER INSTRUCTION OF THE DVO AND IN THE SPECIFIC PERF ORMA AS SUGGEST BY HIM. THE ASSESSEE SEGREGATED THE HEAD WI SE DETAIL FROM THE FINANCIAL LEDGER AND COST OF ALL WO ODEN WORK WAS SHOWN UNDER THE HEAD FURNITURE. THIS FACT CAN B E VERIFIED FROM THE BILLS AND VOUCHERS AND LEDGER ACC OUNT OF CONSTRUCTION THAT THE ENTIRE EXPENSES INCURRED ON W OODEN WAS SEGREGATED UNDER HEAD FURNITURE. H) THE ASSESSEE HAD SUBMITTED COMPLETE DETAILS BEF ORE THE DVO, HOWEVER, HE IGNORED THE SAME. THIS IS RELEVANT TO MENTION HERE THAT THE COMPLETE BILLS & VOUCHERS OF HOUSE CONSTRUCTION WERE AVAILABLE WITH THE ASSESSEE BUT O N THE INSTRUCTION OF THE DVO THE COPIES OF SPECIFIC VOUCH ERS AS DESIRED BY THE DVO WERE SUBMITTED TO HIM. THE PAYME NTS OF MOST OF THE EXPENSES WERE MADE THROUGH ACCOUNT P AYEE CHEQUES. ON MOST OF THE VOUCHERS EVEN CHEQUE NOS WE RE ALSO MENTIONED. THEREFORE, THERE WAS NO REASON TO WITHHOLDING THESE VOUCHERS WITH THE ASSESSEE AND NO T PRODUCING WITH THE DVO. THEREFORE THERE WAS ONLY RE ASON ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 32 FOR NOT SUBMITTING THE ENTIRE VOUCHERS BEFORE DVO B ECAUSE THE DVO REQUIRED ONLY COPIES OF SOME SPECIFIC VOUCH ERS. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSEE SUBMITTED THE COPY OF THE VOUCHERS BEFORE THE AO AND THE AO SENT COPIES OF THOSE VOUCHERS TO DVO, AN D NO ANY SPECIFIC DEFECT IN THE VOUCHERS HAS BEEN POINTE D OUT BY THE DVO, WHICH ALSO PROVED THAT THE DVO WAS REPLYIN G ON THE ESTIMATIONS INSTEAD TO EXERCISING TO WORK OUT T HE REAL EXPENDITURE INCURRED ON CONSTRUCTION FROM THE BILLS AND VOUCHERS. I) AS REGARD TO OBJECTION OF THE DVO ON INVESTMENT IN FURNITURE AT LOWER SIDE THIS IS TO SUBMIT THAT IT IS COMMON P RACTICE THAT THE LOOSE FURNITURE IS ALWAYS PURCHASED AFTER COMPLETION OF HOUSE. ANY PRUDENT PERSON CANNOT BUY SOFA, DINING TABLE ETC. AT THE CONSTRUCTION STAGE OF THE HOUSE. THE YEAR WISE INVESTMENT BY THE ASSESSEE AND HIS WIFE I N THE HEAD FURNITURE WAS AS UNDER:- S. NO. NAME OF ASSESSEE FY 08 - 09 FY 09 - 10 FY 10 - 11 FY 11 - 12 TOTAL 1 ASHOK AGARWAL 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 RENU AGARWAL 6,42,488 39,00,486 23,37,038 0 68,80,012 TOTAL 13,66,931 62,58,013 34,02,750 3,16,680 1,13,44,374 IN FIRST YEAR AND SECOND YEAR OF THE CONSTRUCTION, THE TOTAL EXPENSES UNDER THE HEAD FURNITURE WERE 76,24,944/ -. THE INVESTMENT IN SOFA, DINING TABLE AND OTHER LOOSE FU RNITURE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 33 COULD BE IN THIRD YEAR AND FOURTH YEAR BUT IT CANNO T BE IN FIRST OR SECOND YEAR OF CONSTRUCTION, WHEN THE CIVI L CONSTRUCTION WAS GOING ON. BY ANY STRETCH OF IMAGIN ATION THE EXPENSES IN FIRST TWO YEARS, IN WOODEN ITEMS CA NNOT BE TOWARDS THE LOOSE FURNITURE EXCEPT SMALL AMOUNT. UN DER, THIRD YEAR ALSO PART OF THE EXPENSES WERE TOWARD WA RD- ROBES, MODULAR KITCHEN, RAILING ETC I.E. FIXED FURN ITURE. THEREFORE, THE CREDIT OF RS. 84,91,873/- CLAIMED BY THE ASSESSEE AGAINST FIXED FURNITURE INCLUDED IN COST O F CONSTRUCTION IN VALUATION REPORT SHOULD BE GIVEN AG AINST THE INVESTMENT SHOWN BY THE ASSESSEE IN FIXED WOODEN IT EMS, GLASS WORK ETC. THUS THE FINDING OF THE DVO THAT TH E ASSESSEE IS MANIPULATING THE INVESTMENT IS WITHOUT EXAMINING THE DETAILS SUBMITTED TO IT SUPPORTED WIT H BILLS AND VOUCHERS. THE DVO FAILED TO EXAMINING THE FACT THAT IN THE CHART OF HEAD WISE CONSTRUCTION EXPENSES SUBMIT TED TO HIM (COPY AT PB PAGE 179) THE ENTIRE EXPENSES INCUR RED IN WOODEN WORK WAS MENTIONED IN THE HEAD FURNITURE AND DUE CREDIT OF WOODEN WORK ESTIMATED BY HIS AS COST OF CONSTRUCTION WAS NOT GIVEN BY HIM. THE LD. DVO FOR COMPARING THE BOOK INVESTMENT IN CONSTRUCTION IS JU ST RELYING ONLY ON A CHART WHICH WAS NOT PREPARED PERF ECTLY ON THE BASIS OF TECHNICAL PARAMETERS/REQUIREMENTS AND REJECTED THE ALL OTHER FULL PROOF SUBMISSION AND EVIDENCE ON SURMISES AND CONJECTURES JUST TO SUPPORT HIS HIGH PITCH VALU ATION REPORT. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 34 J) THE DVO MENTIONED THAT THE INVESTMENT OF RS. 25 ,52,501/- TOWARDS THE LOOSE FURNITURE IS AT LOWER SIDE AND TH E AO MAY ASCERTAIN IT AT HIS OWN LEVEL. THE SEARCH PARTY HA S NOT INVENTORISED THE LOOSE FURNITURE. THE DVO HAS ALSO NOT GIVEN THE LIST OF LOOSE FURNITURE VIS A VIS ITEM WISE EST IMATION. WITHOUT HAVING ITEM WISE LIST OF THE LOOSE FURNITUR E, HOW CAN A PERSON SAY THAT THE INVESTMENT SHOWN AGAINST THE LOOSE FURNITURE IS AT LOWER SIDE. WHAT ARE THE LOOSE FURN ITURES- SOFA, DINING TABLE, CHAIRS AND CENTRAL TABLE ETC. T HE AMOUNT TOWARDS THESE ITEMS SHOWN BY THE ASSESSEE IS 28,52, 501/- WHICH IS MUCH HIGHER SIDE. THE ALLEGATION OF INVEST MENT AT LOWER SIDE CANNOT BE MADE MERELY ON SURMISES, CONJE CTURES AND GUESS. UNDER SECTION 69 THE ONUS IS ON DEPARTME NT TO SHOW THE INVESTMENT. K) THE SEWERAGE CONNECTION CHARGES ARE INCLUDED IN DEVELOPMENT CHARGES DEPOSITED IN JDA. THE ELECTRIC LINE WAS PASSING THROUGH THE HOUSE THEREFORE, THERE WAS NO FURTHER COST REQUIRED TO BE BORNE FOR ELECTRIC LINE . THE TRANSFORMER IS NOT INSTALLED AND THIS FACT MAY BE V ERIFIED BY PHYSICAL INSPECTION. THE DVO ADDED 2.25% MERELY ON ASSUMPTION AND PRESUMPTION. THE ASSESSEE HAS BILLS FOR ALL THE COST INCURRED IN ELECTRIC CONNECTION, SEWERAGE CONNECTION ETC. (WHICH HAVE BEEN INCLUDED IN THE CO PY OF VOUCHERS GIVEN TO YOU) L) THE DVO HAS NOT POINTED OUT ANY WARRANTY OR ASS URANCE OF QUALITY TAKEN BY THE ASSESSEE. THE CONSTRUCTION WAS MADE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 35 BY EMPLOYING LOCAL LABOURS AND CONTRACTORS. THE MAT ERIAL WAS PURCHASED BY THE ASSESSEE HIMSELF. THE CONSTRUC TION WAS NOT CARRIED OUT THROUGH THE ESTABLISHED BUILDER THEREFORE, THE ADDITION 1% AGAINST THE QUALITY ASSU RANCE IS ON PRESUMPTION MORE SO WHEN HE HAS ALREADY ADDED 10 % OF PAR FOR GOOD QUALITY. M) THE DVO HAS NOT ACCEPTED THE VALUATION MADE BY THE REGISTERED VALUER. THE REGISTERED VALUER HAS VALUED THE VALUATION OF COMPLETE HOUSE AT RS. 2,62,77,124.76 B Y SHRI NAVEEN KUMAR JAIN AND RS. 1,67,01,232/- BY SHRI VIV EK KULSHRESTH. THE DVO VALUED MARBLE AT RS. 36,50,000/ - WHEREAS THE ASSESSEE HAS PURCHASED THE MARBLE FOR R S. 10,65,812/- WHICH IS SUPPORTED BY BILL AND PAYMENTS THROUGH BANKING CHANNEL. FURTHER THE COPY OF BILLS WAS PRODUCED TO AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE COPY OF BILLS OF MARBLE WAS SUPPLI ED BY THE AO TO DVO WHICH WERE NOT RELIED BY THE DVO ON THE G ROUND THAT THE SAME ARE HIGHLY UNDER INVOICED. THE PAYMEN TS OF THOSE BILLS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES , THEREFORE, IT CANNOT BE PRESUMED THAT THOSE BILLS W ERE UNDER INVOICED. FURTHER IN SUPPORT OF HIS FINDING THE DVO COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE INVOICES SUB MITTED BY THE ASSESSEE WERE UNDER INVOICED. N) THE DVO VALUED THE SPECIAL SANITARY ITEMS AT RS . 18,30,000/- AND SPECIAL ELECTRIC ITEMS AT RS. 18,3 0,000/- ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 36 BY INCREASING THE BASIC PLINTH AREA RATE BY 12.5%. THE ASSESSEES COST IS SUPPORTED BY BILLS WHICH WERE CO MPLETELY IGNORED BY HIM. THUS FROM THE ABOVE SUBMISSION IT IS CLEAR THAT THE VALUATION REPORT OF THE ASSESSEE WAS PREPARED ON ESTIMATION B ASIS AND THE SUPPORTING BILLS AND VOUCHERS/DOCUMENTS/EXPLANATION SUBMITTED TO THE DVO WERE ALSO REJECTED WITHOUT EXAMINING THE SAME. O) FURTHER, THE ASSESSEES DECLARED COST IS SUPPORTED BY THE VALUATION REPORT OF TWO DIFFERENT REGISTERED VALUER S COPIES OF WHICH WERE SUBMITTED TO AO AND THE SAME WERE ALS O AVAILABLE WITH DVO (COPY AT PB PAGE 218 TO 231 & 23 2 TO 260), BUT THE SAME WAS NOT ACCEPTED BY THE AO AS WE LL AS DVO WITHOUT POINTED OUT ANY DEFECT. THE VALUATION R EPORT OF REGISTER VALUER SHRI VIVEK KULSHRESTRA IS DETAILED REPORT GIVING ITEM WISE VALUATION FOR EACH AND EVERY ITEMS USED IN CONSTRUCTION. THE LEARNED AO AS WELL AS DVO COMPLET ELY IGNORED THESE REPORTS. THE VALUATION REPORT OF THE REGISTERED VALUER SHOULD BE ACCEPTED IN VIEW OF THE DECISION O F RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL J OSHI 242 ITR 478. FURTHER SINCE THERE IS HUGE DIFFERENCE IN THE RATES APPLIED BY THESE TWO EXPERTS THE DVO SHOULD HAVE SUBSTANTIATED HIS ESTIMATE WITH ACTUAL EVIDENCE, WH ICH WAS NOT DONE BY THE DVO. ITAT JAIPUR BENCH HAS HELD IN THE CASE OF SMT. REKHA DEVI VS. ACIT 78 TAXMAN (MG) 30 THAT WHEN THERE IS HUGE DIFFERENCE IN TWO REPORTS, THE D VO ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 37 SHOULD HAVE SUBSTANTIATED HIS ESTIMATE WITH ACTUAL EVIDENCE. HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HOTELS JOSHI 242 ITR 478 HAS HELD THAT THE TRIBUNAL HAS JU STIFIED IN HOLDING THAT THE VALUATION MADE BY REGISTERED VALUE R TO BE ADOPTED. IN THIS CASE, THE ASSESSEE MAINTAINED ACCO UNTS FOR THE CONSTRUCTION, SUPPORTED BY VOUCHERS, AND MOST O F THE PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. FURTHER, THERE IS NO ANY STRONG REASON TO DISAGREE WITH THE CONSTRUCTION COST REFLECTED BY THE ACCOUNTS. FURTHE R, THE CONSTRUCTION COST REFLECTED BY BOOKS OF ACCOUNT IS SUPPORTED BY VALUATION REPORT OF THE REGISTERED VALUER. THE D VO REPORT IS CRIPPLING WITH SEVERAL SERIOUS DEFECTS AS POINTE D OUT ABOVE. P) IN LAST PARA OF THE ASSESSMENT ORDER THE LD. AO AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE A ND ACCEPTING THE REPLY OF THE ASSESSEE PARTIALLY AND O PINED THAT THE COST OF LOOSE FURNITURE SHOWN BY THE ASSESSEE I S AT LOWER SIDE. EVEN THE DVO HAS OBSERVED THAT COST OF LOOSE FURNITURE SHOWN BY THE ASSESSEE IS ON LOWER SIDE, THEREFORE T O COVER UP ALL POSSIBLE LEAKAGE ON THIS ACCOUNT AS ADDITION OF RS. 20,00,000/- IS MADE ON ACCOUNT OF UNDISCLOSED EXPEN DITURE IN CONSTRUCTION OF HOUSE/FURNITURE BUT BEFORE ARRIV ING TO THIS CONCLUSION THE LD. AO AS WELL AS DVO BOTH FAILED TO LIST OUT THE ITEMS CONSIDERED AS LOOSE FURNITURE FOUND AT TH E TIME OF INSPECTION OF THE HOUSE OF THE ASSESSEE AND NO VALU ATION OF SUCH LOOSE FURNITURE WAS MADE BY THE DVO, THEREFORE THERE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 38 IS NO JUSTIFICATION TO MADE ESTIMATED ADDITION ON T HIS ACCOUNT JUST MERELY ON THE PRESUMPTIVE FINDING OF T HE DVO WHICH IS NOT SUPPORTED BY ANY EVIDENCE MORE SO WHEN THE INVESTMENT SHOWN BY THE ASSESSEE IS DULY SUPPORTED BY THE BILLS AND VOUCHERS. THUS IN VIEW OF THE ABOVE SUBMISSION THIS IS TO SUB MIT THAT THE LD. AO WAS WRONG IN REFERRING THE MATTER TO DVO TO ESTIMATE THE COST OF CONSTRUCTION OF HOUSE OF THE A SSESSEE. FURTHER THE REPORT PREPARED BY THE DVO AND FINDING OF THE DVO CANNOT BE RELY UPON AS THE SAME IS BASED ONLY O N PRESUMPTION/ASSUMPTION AND GIVEN WITHOUT CONSIDERIN G/ EXAMINING THE SUPPORTING DOCUMENTS/DETAILS SUBMITTE D BY ASSESSEE IN SUPPORT OF CONSTRUCTION EXPENSES. THERE FORE THE ENTIRE ADDITION IS BASED ON ESTIMATION BASIS IGNORI NG THE FACT THAT THE INVESTMENT SHOWN BY THE ASSESSEE IS SUPPOR TED BY BOOKS OF ACCOUNTS, BILLS & VOUCHERS. Q) VALUATION BY DVO ON CPWD RATES AND DIFFERENCE IS LESS THAN 20%:- IT IS AN ADMITTED FACT THAT THE VALUATION OF THE C ONSTRUCTION WAS MADE ON THE BASIS OF CPWD RATES. C.P.W.D. RATES ARE MOSTLY FOR METRO CITIES LIKE DELHI, KOLKATA, MUMBAI & CHENNAI WHERE CONSTRUCTION COST IS VERY HIGH. IN RA JASTHAN CONSTRUCTION COST IS MUCH CHEAPER THEREFORE RAJASTH AN PWD RULES ARE MORE AUTHENTIC. IN RAJASTHAN STONES, GRIT S, BAJARI, MARBLE ETC ARE LOCALLY AVAILABLE AT CHEAPER RATE WH EREAS IN ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 39 METROPOLITAN CITIES THE COST OF STONE, GRIT BAJARI, MARBLE IS HIGHER. LABOUR IN ALSO CHEAP IN RAJASTHAN AS COMPAR ED TO METRO CITIES. ALL WORKS IN RAJASTHAN ARE BEING DONE AS PER RAJASTHAN PWD BSR, SO RAJASTHAN PWD RULES SHOULD BE FOLLOWED IN RAJASTHAN INSTEAD OF CPWD RULES. THE LO CAL FACTORS CANNOT BE BRUSHED ASIDE. HONBLE RAJASTHAN HIGH COURT AND HONBLE ITAT JAIPUR BENCH HAVE HELD IN SE VERAL CASES THAT THE COST OF CONSTRUCTION IN RAJASTHAN SH OULD BE DETERMINED ON THE BASIS OF RAJASTHAN PWD RATES AS P ER RAJ. BSR. THEREFORE THE ADDITION MADE ON AD HOC BASIS FOR THE DIFFERENCE WHICH IS LESS THAN 10% OF THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE SHOULD BE IGNORED. IN VIEW OF ABOVE THE HU MBLE ASSESSEE PRAYS YOUR HONOR THAT ADDITION MADE BY LD. A.O. IS BAD IN LAW, UNJUSTIFIABLE AND UNREASONABLE DESERVES TO BE DELETED AND KINDLY TO UPHELD THE FINDINGS OF LD CIT(A) IN THIS REGARD AND DISMISS THE APPEAL FILED BY THE REVENUE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE D VO IN HIS COMMENTS ON THE OBJECTIONS RAISED BY THE ASSESSEE HAS STATED THAT THE INVESTMENT OF RS 28,52,501 IN LOOSE FURNITURE APPEARS TO BE ON MUCH LOWER SIDE AND THE AO MAY ASCERTAIN AT HIS OWN LEVEL THE INVESTMEN T IN LOOSE FURNITURE. THEREFORE, THE DISPUTES RELATES TO AND IS LIMITED T O THE AMOUNT OF INVESTMENT IN THE LOOSE FURNITURE. THE AO HELD THA T THE COST OF LOOSE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 40 FURNITURE SHOWN BY THE ASSESSEE IS AT LOWER SIDE. E VEN THE DVO HAS OBSERVED THAT COST OF LOOSE FURNITURE SHOWN BY THE ASSESSEE IS ON LOWER SIDE, THEREFORE TO COVER UP ALL POSSIBLE LEAKAGE ON THIS ACCOUNT AS ADDITION OF RS. 20,00,000/- IS MADE ON ACCOUNT OF U NDISCLOSED EXPENDITURE IN CONSTRUCTION OF HOUSE/FURNITURE IN T HE HANDS OF SHRI ASHOK AGARWAL. AS PER THE LD AR, BEFORE ARRIVING AT THIS CONCLUSION, THE LD. AO AS WELL AS DVO BOTH FAILED TO LIST OUT THE ITEMS CO NSIDERED AS LOOSE FURNITURE FOUND AT THE TIME OF INSPECTION OF THE HO USE OF THE ASSESSEE AND NO VALUATION OF SUCH LOOSE FURNITURE WAS MADE B Y THE DVO, THEREFORE THERE IS NO JUSTIFICATION TO MADE ESTIMAT ED ADDITION ON THIS ACCOUNT JUST MERELY ON THE PRESUMPTIVE FINDING OF T HE DVO WHICH IS NOT SUPPORTED BY ANY EVIDENCE MORE SO WHEN THE INVESTME NT SHOWN BY THE ASSESSEE IS DULY SUPPORTED BY THE BILLS AND VOUCHER S. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE MATTER AND OF THE VIEW THAT THE LD CIT(A) HAS ELABORATELY GONE THROUGH THE CONTENTIONS AND HA S RIGHTLY ARRIVED AT THE CONCLUSION THAT THERE IS NO BASIS FOR THE ADHOC ESTIMATION OF RS 20,00,000. HENCE, WE CONFIRM THE FOLLOWING FINDING S OF THE LD CIT(A): 3.2.3 I HAVE DULY CONSIDERED THE ASSESSEES SUBMI SSION AND ALSO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS RELIED UPON BY TH E APPELLANT. I HAVE ALSO CAREFULLY PERUSED THE RECORDS AVAILABLE BEFORE ME AND FACTUAL MATRIX ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 41 OF THE CASE. IN THIS CASE, A SEARCH AND SEIZURE OPE RATION U/S 132 OF THE ACT WAS CARRIED OUT AGAINST THE ASSESSEE. MY OBSERV ATIONS IN THIS REGARD ARE AS UNDER: * ON PERUSAL OF ASSESSMENT ORDER, IT IS SEEN THAT T HE AO HAS NOT BROUGHT TO NOTICE ANY INCRIMINATING DOCUMENT SH OWING UNDISCLOSED INVESTMENT IN CONSTRUCTION OF HOUSE. TH E ASSESSEE CLAIMS TO HAVE MAINTAINING PROPER BILLS AN D VOUCHERS PERTAINING TO THE CONSTRUCTION EXPENSES OF HOUSE AND THIS FACT HAS NOT BEEN CONTROVERTED BY AO IN TH E ASSESSMENT ORDER. * IT IS ALSO SEEN THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, THE REFERENCE TO THE DVO WAS MADE BY THE AO U/S 142A OF THE ACT AND AS PER S ECTION 142A OF THE ACT; AO MAY MAKE REFERENCE TO THE VALUA TION OFFICER WHETHER OR NOT HE IS SATISFIED ABOUT THE CO RRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF ASSESSEE. * HOWEVER, FROM THE ASSESSMENT ORDER, IT IS ALSO SE EN THAT AS THE COST OF LOOSE FURNITURE SHOWN BY THE ASSESSEE W AS ON LOWER SIDE, THEREFORE, TO ORDER TO COVER UP ALL POS SIBLE LEAKAGE ON THIS ACCOUNT, THE AO MADE AN AD HOC ADDI TION OF RS.20,00,000/- ON ACCOUNT OF UNDISCLOSED EXPENDITUR E IN CONSTRUCTION OF HOUSE/FURNITURE. THIS SHOWS THAT TH E AO HAS ACCEPTED THE ASSESSEE'S CONTENTION AS REGARD THE CR EDIT OF THE AMOUNT SHOWN UNDER THE HEAD FURNITURE RS. 84,91,873/- SHOULD BE GIVEN AGAINST THE CONSTRUCTIO N COST ESTIMATED BY DVO. EVEN OTHERWISE ALSO, INVESTMENT I N SOFA, DINING TABLE AND OTHER LOOSE FURNITURE IS ALWAYS MA DE AFTER COMPLETION OF CIVIL WORK AND BY NO STRETCH OF IMAGI NATION, IT CANNOT BE ASSUMED THAT THE EXPENSES IN FIRST TWO YE ARS (WHEN THE CIVIL WORK WAS GOING ON) IN WOODEN ITEMS WERE TOWARDS LOOSE FURNITURE LIKE SOFA ETC. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 42 * THE ASSESSEE AND HIS WIFE SMT. RENU AGRAWAL HAD I NCURRED EXPENDITURE OF RS. 76,24,944/- IN FY 2008-2009 AND FY 2009-10 TOWARDS PLY, WOOD, AND OTHER WOODEN ITEMS WHEREAS THE CONSTRUCTION WAS COMPLETED IN FY 2010-1 1. THEREFORE, THE CONTENTION OF ASSESSEE, THAT IN THE FIRST YEAR AND SECOND YEAR OF THE CONSTRUCTION WHEN THE CIVIL WORK WAS GOING ON, THE EXPENSES TOWARDS PLY WOOD AND UNDER WOODEN ITEMS WERE PART OF CONSTRUCTION EXPENSES, CA N BE ACCEPTED. * FURTHER, THE APPELLANT HAS CONTENDED THAT THE DVO HAS ESTIMATED THE MARBLE FLOORING EXCESSIVE IGNORING TH E EVIDENCE SUBMITTED BY HIM. THE APPELLANT HAS SUBMIT TED THAT THE DVO ESTIMATED THE COST OF MARBLE FLOORING AT THE RATE OF 5000/- PER SQ. MT FOR 730 SQ. MT AREA TOTAL RS. 36,50,000/- MORE SO WHEN THE COPY OF BILL WAS GIVEN TO THE DVO. THE ASSESSEE HAS PURCHASED THE MARBLE FOR RS. 10,65,812/- THE APPELLANT CONTENDED THAT, THE DVO H AS ESTIMATED THE COST OF IMPORTED MARBLE EXCESSIVELY A T RS. 36,50,000/- AS AGAINST ACTUAL COST OF RS. 10,65,812 /-. THE ACTUAL COST IS SUPPORTED BY BILLS. * THE APPELLANT FURTHER CONTENDED THAT THE DEDUCTIO N HAS NOT BEEN GIVEN FOR THE COST OF FLOORING ALREADY INCLUDE D IN BASIC PLINTH AREA RATE. I INCLINED TO AGREE WITH THE CONT ENTION OF ASSESSEE. THE BILL OF MARBLE PURCHASES CANNOT BE BR USHED ASIDE MERELY ON SUSPICION WITHOUT MAKING AN INDEPEN DENT INQUIRY. * THE APPELLANT FURTHER CONTENDED THAT ESTIMATION O F COST TOWARDS, SEWER AND EXTERNAL SERVICE CONNECTION WAS ESTIMATED @ 2.25% OF COST AND 1% AGAINST THE QUALIT Y ASSURANCE. THESE ESTIMATIONS ARE WITHOUT BASIS. I I NCLINED TO ACCEPT THAT THE COST AGAINST SEWERAGE CONNECTION, E LECTRIC CONNECTION AND WATER CONNECTION SHOULD BE ESTIMATED BY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 43 TAKING INTO ACCOUNT THE ACTUAL PAYMENTS MADE BY THE ASSESSEE TO LOCAL AUTHORITIES AND CONCERNED DEPARTM ENT. * FURTHER, THE DVO AS WELL AS AO HELD THAT COST OF LOOSE FURNITURE SHOWN BY THE ASSESSEE IS AT LOWER SIDE BU T NO ITEM TO ITEM LIST OF LOOSE FURNITURE WAS MADE AND COMPAR ISON WAS MADE TO FIND OUT HOW IT IS LOWER SIDE. THE LD AO MA DE THE AD HOC ADDITION OF RS. 20,00,000/- ON SUSPICION BAS IS WHICH CANNOT BE SUSTAINED. * FURTHERMORE, THE DVO HAS VALUED THE CONSTRUCTION BY APPLYING THE CPWD RATES AND DIFFERENCE IS LESS THAN 20% AND IN SUCH A CASE DIFFERENCE SHOULD BE IGNORED AS PER THE SEVERAL DECISIONS OF HONBLE ITAT JAIPUR BENCH IN T HIS REGARD. IN THE CASE OF INCOME TAX OFFICER VS. NITES H MAHESHWARI ITA NO. 363/JP/2010; ASST. YR. 2006-07 O RDER DATED 28 TH SEPTEMBER, 2010 (2011) 138 TTJ 0116 : (2011) 53 DTR 0413 : (2011) 7 ITR 0645 HELD AS UNDER:- 'WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE M CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT LEARNED CIT(A) WAS JUSTIFIED I N DIRECTING THE AO TO ALLOW 20 PER CENT DEDUCTION ON ACCOUNT OF APP LICABLE ON CPWD RATES INSTEAD OF PWD RATES. THIS FINDING HAS B EEN GIVEN BY LEARNED CIT(A) FOLLOWING THE DECISIONS OF TRIBUNAL IN CASES OF TEK CHAND VS. ITO (1995) 51 TTJ (JP) 607: (1995) 52 ITD 197 (JP), ITO VS. AGENCIES RAJASTHAN (P) LTD. ( 2008) 10 DATEDR (JP)(TRIB) 217 AND SMT. MAMITA RAUTO VS. ITO (2002) 76 TTJ (CTK) 455 AND MANY OTHERS. WE FURTHER NOTED THAT LE ARNED CIT(A) WAS JUSTIFIED IN GRANTING 12 PER CENT DEDUCTION ON ACCOUNT OF SELF-SUPERVISION. NOTHING HAS BEEN BROUGHT ON RECOR D BY THE DEPARTMENT THAT THE BUILDING WAS NOT CONSTRUCTED UN DER SELF- SUPERVISION BUT UNDER SUPERVISION OF OUTSIDE AGENCI ES. BOOKS OF ACCOUNT HAVE BEEN PREPARED BY ASSESSEE AND NO PAYME NT HAS BEEN SHOWN TO BE PAID OR PAYABLE TO ANY OUTSIDE AGE NCIES. MERELY BY STATING THAT BUILDING HAS BEEN CONSTRUCTED IN A BEAUTIFUL MANNER AND WITHOUT ANY OUTSIDE HELP SUCH BUILDING ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 44 CANNOT HAVE BEEN CONSTRUCTED CANNOT BE BASIS FOR DR AWING INFERENCE THAT THE BUILDING WAS NOT CONSTRUCTED UND ER SELF- SUPERVISION.' IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSED, IT IS SEEN THAT THE AO IS NOT JUSTIFIED IN MAKING AN ADHOC ADD ITION OF RS. 20,00,000/- WHICH CANNOT BE SUSTAINED IN THE LI GHT OF FACTUAL INCONSISTENCIES MENTIONED ABOVE AND ALSO IN VIEW OF JUDICIAL PRONOUNCEMENT OF HONBLE JURISDICTIONAL HI GH COURT, THEREFORE SAME IS DELETED. ASSESSEE GETS A RELIEF O F RS. 20,00,000/-. THIS GROUND OF APPEAL OF THE ASSESSEE STANDS ALLOWED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE UP HOLD THE ORDER OF THE LD. CIT(A) AND THE GROUND TAKEN BY THE REVENUE IS DISMISSED. 12. THE 3 RD GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 1,50,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADVANCE GIVEN TO GULAM FAROOQ ANSARI. THE ASSESS ING OFFICER HAS OBSERVED THAT DURING THE COURSE OF SEARCH PROCEEDIN GS SH. ASHOK AGARWAL HAS ADMITTED IN HIS STATEMENT RECORDED U/S 132(4) AT THE TIME OF SEARCH ON 22.09.2010 THAT HE HAD MADE PAYMENT TO SH. GULAM FAROOQ ANSARI FOR PURCHASE OF LAND AT DELHI ROAD AM OUNTING TO RS. 1.50 CRORES, WHICH WAS NOT RECORDED IN HIS BOOKS OF ACCO UNT. THE STATEMENT OF SH. ASHOK AGARWAL WAS RECORDED AND REPRODUCED IN ASSESSMENT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 45 ORDER. HOWEVER, AT THE TIME OF FILING OF RETURN THE ASSESSEE HAS NOT INCLUDED THIS INCOME IN THE RETURN OF INCOME FOR TH E RELEVANT YEAR. THE AO ASKED THE ASSESSEE TO GIVE REASON/EXPLANATION FO R THE SAME. THE ASSESSEE IN HIS REPLY SUBMITTED THAT AT THE TIME OF SEARCH THE BOOKS OF ACCOUNT OF ASSESSEE/FAMILY MEMBERS/GROUP CONCERNS W ERE NOT COMPLETE AS ON THE DATE OF SEARCH, THEREFORE THE CASH PAYMEN T OF RS. 1.50 CRORES MADE TO ANSARI BROTHERS WAS NOT FOUND RECORDED IN R EGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE. HE FURTHER STATED THAT TH E ASSESSEE WAS UNDER MENTAL PRESSURE DURING THE COURSE OF SEARCH SURREND ERED THIS AMOUNT AS UNDISCLOSED INCOME AND THAT AFTER EXAMINATION OF BO OKS OF ACCOUNTS IT WAS FOUND THAT THE ADVANCE GIVEN TO ANSARI BROTHERS HAS NOT YET BEEN RECORDED IN THE BOOKS OF ACCOUNTS. AT THE TIME OF C OMPLETING OF BOOKS OF ACCOUNTS THE TRANSACTION WAS RECORDED IN THE BOOKS OF RESPECTIVE PERSON/CONCERN OF THE ASSESSEE GROUP. THE AO MENTIO NED THAT AT THE TIME OF SEARCH THE ASSESSEE HAS ADMITTED THAT HE HA S MADE PAYMENT OF RS. 1.5 CRORES BUT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAS SHOWN PAYMENT OF RS. 50,00,000/- FROM ASHOK AGARWAL , RS. 70,00,000/- FROM RENU AGARWAL RS. 6,00,000/- FROM ASHOK AGARWAL (HUF), RS. 7,00,000/- FROM ASHISH AGARWAL AND RS. 17,00,000/- FROM ASHISH BUILDCON P LTD. THE ASSESSEE WAS ASKED TO EXPLAIN T HE SAME AND IN REPLY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 46 HE SUBMITTED THAT THE ENTRY OF PAYMENT MADE TO ANSA RI BROTHERS MADE IN CASH BOOKS OF VARIOUS GROUP PERSONS/CONCERNS OF THE ASSESSEE WAS MADE IN THE NAME OF THE ASSESSEE AS HE WAS THE MAIN AND KEY PERSON OF THE GROUP AND WAS ALSO MAINTAINING THE CASH BALANCE OF ENTIRE GROUP, THEREFORE THE CASH PAYMENT TO ANSARI BROTHERS WAS M ADE BY HIM OUT OF CASH BALANCE OF ENTIRE GROUP AVAILABLE WITH HIM AND THEREAFTER THE ENTRY OF PAYMENT WAS MADE IN THE BOOKS OF ACCOUNTS OF RES PECTIVE PERSON/CONCERN ACCORDING TO UTILIZATION OF CASH BAL ANCE OF RESPECTIVE PERSONS/CONCERNS. THE AO MENTIONED THAT THE CLAIM T HAT THE CASH PAYMENT TO SH. GULAM FAROOQ ANSARI WAS MADE OUT OF CASH AVAILABLE FROM BOOKS OF ACCOUNT WAS MADE FOR THE FIRST TIME D URING THE ASSESSMENT PROCEEDING AND NO SUCH EXPLANATION WAS G IVEN BY THE ASSESSEE ON VARIOUS OCCASIONS I.E. ON THE DATE OF S EARCH 22/23.09.2010 AND EVEN ON 12.10.2010 I.E. DURING REVOCATION OF PO AT OFFICE OF THE ASSESSEE GROUP. THE AO HELD THAT THE ENTIRE STORY I S CONCOCTED AND THE ASSESSEE HAS TAKEN SHELTER OF BOOKS OF ACCOUNT. OTH ERWISE ALSO THE RELIABILITY OF BOOKS OF ACCOUNT OF ALL PERSONS IS A LSO QUESTIONABLE BECAUSE THAN ENTRIES HAVE BEEN MADE SUBSEQUENT TO THE SEARC H AND NOT DURING THE COURSE OF REGULAR BUSINESS. THE ASSESSEE IS NOT ONLY REQUIRED TO MAKE ENTRIES IN BOOKS OF ACCOUNT DURING THE REGULAR COURSE OF BUSINESS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 47 ON REGULAR BASIS AND ALSO EXPECTED TO DRAW BALANCE AT REGULAR INTERVAL TO LEND RELIABILITY TO THE BOOKS OF ACCOUNT WHICH IN T HIS CASE IS OBVIOUSLY HAS NOT BEEN DONE. FROM THE PERUSAL OF THE BOOKS OF ACC OUNT AND P&L ACCOUNT FOR ALL THE YEARS COVERED BY BLOCK ASSESSME NT NEVER EVER SUCH HUGE PAYMENT IN CASH HAVE BEEN MADE THROUGH BOOKS O F ACCOUNT, SO IT WAS OTHERWISE ALSO NOT A REGULAR PRACTICE OF THE AS SESSEE TO MAKE SUCH HUGE PAYMENT IN CASH FOR PURCHASE OF LAND. THE AO M ENTIONED THAT ALL THESE FACTS CONSIDERED TOGETHER CLEARLY SHOWS THAT ASSESSEE'S CONTENTION IS AN AFTERTHOUGHT AND NOT RELIABLE AND AT THE SAME TIME THERE IS NO REASON TO DISREGARD THE STATEMENT OF ASSESSEE GIVEN DURING THE COURSE OF SEARCH AND AT THE TIME OF REVOCATION OF P.O. ON 12/ 10/2010 AFTER A GAP OF 20 DAYS. ACCORDINGLY THE AO OPINED THAT THE SOUR CE OF PAYMENT OF RS. 1.5 CRORE TO SHRI GULAM FAROOQ ANSARI REMAINS UNEXP LAINED AND SHE ASSESSED THE SAME AS UNDISCLOSED INCOME OF THE YEAR . 13. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD DELETED THE ADDITION SUSTAINED BY OBSERVING AS UNDER:- I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND AL SO TAKEN A NOTE OF JUDICIAL PRONOUNCEMENTS REFERRED BY AO AN D APPELLANT. I HAVE ALSO CAREFULLY PERUSED THE ASSESS MENT ORDER PASSED U/S 153B R.W.S 143(3) OF THE ACT AND ALSO TA KEN A ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 48 NOTE OF FACTUAL MATRIX OF THE CASE. DURING THE COUR SE OF THE APPELLANT PROCEEDINGS, THE ASSESSEE HAS CONTENDED T HAT NO ANY INCRIMINATING DOCUMENT WAS FOUND DURING THE SEA RCH OPERATION SHOWING PAYMENT OF RS. 1.50 CRORE TO GHUL AM FAROOQ ANSARI (HEREIN REFERRED IN BRIEF AS ANSARI). FURTHER, NO DOCUMENT WAS FOUND FROM ASSESSEE'S PREMISES, SHOWIN G GENERATION OF UNDISCLOSED INCOME WHICH COULD BE SAI D AS UTILIZED IN THE PAYMENT TO ANSARI. ON THE BASIS OF SWORN STATEMENT RECODED U/S 132(4) OF THE ACT OF ANSARI, AUTHORIZED OFFICER RECORDED ASSESSEE'S STATEMENT ON OATH U/S 1 32(4) OF THE ACT WHERE HE ADMITTED THE PAYMENT OF RS 1.50 CR ORES TO ANSARI AND SURRENDERED THE SAME AS HIS UNDISCLOSED INCOME. ENTIRE CRUX OF THE CASE IS BASED ON SWORN STATEMENT OF ASSESSEE BUT THE SAID ENTRY OF PAYMENT WAS NOT FOUN D RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASS ESSEE GROUP SEIZED BY THE DEPARTMENT. IT IS A MATTER OF F ACT THAT THE SEIZED CASH BOOKS OF THE GROUP WAS SHOWING CASH BAL ANCE OF RS. 1,88,10,450/-. IT IS ALSO AN ADMITTED FACT THAT THE CASH BOOK WAS NOT COMPLETE AT THE TIME OF SEARCH AS SOME ENTRIES WERE NOT ENTERED THERE. THE CASH BOOK IS A METHOD O F RECORDING OF INFLOW AND OUTFLOW OF CASH IN CHRONOLO GICAL DATE OF ORDER. SUBSEQUENT TO THE SEARCH, THE ASSESSEE CO MPLETED THE CASH BOOK BY INCORPORATING ALL THE ENTRIES AGAI NST INFLOW AND OUTFLOW OF CASH. THE ASSESSEE PRODUCED THE RE-C ASTED CASH BOOK BEFORE THE AUDITORS, WHO FOUND NO MISTAKE . DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO, THE ASSE SSEE PRODUCED THESE AUDITED CASH BOOK WHICH WERE EXAMINE D BY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 49 AO AND NO ANY SPECIFIC INSTANCE OF ANY DISCREPANCIE S WAS BROUGHT TO NOTICE. IT IS ADMITTED FACT THAT THE CAS H PAYMENT OF RS. 1.50 CRORE TO ANSARI WAS RECORDED IN THE AUD ITED BOOKS OF ACCOUNT OF ASSESSEE AND HIS GROUP PERSON/CONCERN S. IN CASE OF UNAVAILABILITY OF DISCLOSED CASH, THE PAYME NT COULD HAVE BEEN RECORDED IN CASH BOOK ONLY BY INFLATING T HE INFLOW OF CASH OR BY DEFLATING THE OUTFLOW OF CASH. NO ANY SUCH INSTANCE WAS POINTED OUT BY THE AO AFTER EXAMINATIO N OF AUDITED BOOKS OF ACCOUNT. THE AO HAS ALSO NOT REJEC TED THE BOOKS OF ACCOUNT OF ASSESSEE GROUP. FURTHER, ASSESS EE HAS ALSO RECONCILED THE CASH BALANCE AS PER THE SEIZED CASH BOOK AND AUDITED CASH BOOK WITH VOUCHERS. THE RECONCILED STATEMENT CAN BE REFERRED AT PB PAGE 402 AND RECONC ILED CHART SHOWING ENTRY TO ENTRY EXPLANATION WAS FILED WITH LETTER DATED 17/03/2015. THE CASH POSITION OF SEIZED CASH BOOK VIS A VIS AUDITED CASH BOOK WAS AS UNDER:- NAME AS PER SEIZED CASH BOOK AS PER AUDITED CASH BOOK DATE AMOUNT DATE AMOUNT ASHOK AGARWAL 03/09/2010 56,47,690.09 03/09/2010 85,82,342.09 RENU AGARWAL 08/09/2010 92,18,620.38 08/09/2010 82,29,062.38 ASHOK AGARWAL HUF 06/08/2010 6,54,841.17 06/08/2010 6,92,341.17 ASHISH AGARWAL 02/04/2010 9,99,820.00 02/04/2010 9,99,820.00 ASHISH BUILDCON PVT. LTD. 06/08/2010 22,89,479.00 06/08/2010 26,47,631.00 TOTAL 1,88,10,450.64 2,11,51,196.64 ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 50 THE ABOVE CHART SHOWS THAT AS PER THE SEIZED CASH B OOK, THE TOTAL CASH BALANCE AVAILABLE TO THE GROUP WAS RS. 1,88,10,450.64 WHICH BECAME TO RS. 2,11,51,196.64 AS THE RESULT OF INCORPORATING ALL THE ENTRIES OF CASH INF LOW AND OUTFLOW. THE CLAIM OF THE ASSESSEE IS THAT CASH BOO KS HAS TO BE COMPLETED AFTER RECORDING ALL THE UNRECORDED ENT RIES BASED ON BANK STATEMENTS AND SEIZED MATERIAL WHICH WAS SUBSEQUENTLY DONE BY THE ASSESSEE ON THE BASIS OF B ANK STATEMENTS AND OTHER DOCUMENTS FOUND DURING THE COU RSE OF SEARCH OPERATION. VIDE LETTER DATED 25/3/2015, AR H AS ALSO SUBMITTED THE REASONS FOR NOT-DISCLOSING RS 1.50 CR ORE (PAYMENT MADE TO ANSARI) AND IN SUPPORT OF THIS, CO PIES OF LETTER DATED 23/01/2013 & 27/03/2013 (REFER PB PG 1 21-122 & 261-162) WERE ALSO SUBMITTED AS SUPPORTING EVIDEN CES. IN THIS REGARD, IT IS CLARIFIED THAT CASH BALANCE POSI TION AS ON DATE OF SEARCH (AFTER DULY INCORPORATING ALL ENTRIES IN THE RE-CASTED BOOKS OF ACCOUNT WHICH WERE LEFT IN THE SEIZED BOOK S OF ACCOUNTS REFER PB PA 112) VIDE LETTER DATED 01/03/2013, RE- CASTED CASH BOOKS OF ASSESSEE AND OTHER PERSONS OF THE GROUP WERE ALSO SUBMITTED BEFORE THE AO FOR VERIFIC ATION OF ENTRIES IN RE-CASTED BOOKS OF ACCOUNTS WITH REFEREN CE TO SEIZED CASH BOOK AND BANK STATEMENTS/VOUCHERS AND S OURCE OF PAYMENT OF RS 1.50 CR. TO ANSARI. THE AO HAS NOT CONTROVERTED ASSESSEE'S CLAIM BY SPECIFICALLY POINT ING OUT THE INCORPORATION OF NEW UNWARRANTED ENTRY IN THE RE- CASTED/COMPLETED/AUDITED CASH BOOK BY THE ASSESSEE. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 51 IT IS A SETTLED POSITION OF LAW THAT AFTER THE COND UCT OF SEARCH OPERATION U/S 132 OF THE ACT, BOOKS OF ACCOUNT CAN BE PREPARED ON THE BASIS OF BANK STATEMENT AND SEIZED DOCUMENTS AND WHEN NO DEFECT HAS BEEN POINTED OUT B Y THE AO IN THE RE- CASTED BOOKS OF ACCOUNT, THE ENTRIES MADE IN THE SAID RE-CASTED BOOKS OF ACCOUNTS SHOULD BE ACCE PTED. THE RATIO LAID DOWN BY HON'BLE ITAT JAIPUR BENCH IN THE CASE OF SHRI TARACHAND JAIN ITSSA NO.103/JP/2002 DATED. 4.4 .2003 (SUPRA) AND SHRI RAJENDRA KEDIA (SUPRA) ARE SQUARELY APPLICABLE HERE IN THIS CASE ALSO. NOW, THE QUESTION ARISES WHETHER MERELY ON THE BASI S OF SEARCH STATEMENT CAN ADDITION IS MADE?. THE ADMISSI ON ONCE MADE CAN CERTAINLY BE RETRACTED, IF THE CIRCUMSTANC ES PERMIT, AND IT CAN ALSO BE SHOWN TO HAVE BEEN MADE UNDER SO ME MISTAKE OR TO BE OTHERWISE INCORRECT. BUT, THE ONUS WOULD BE ON THE MAKER OF THAT ADMISSION. ON PERUSAL OF ASSES SMENT ORDER, IT IS ALSO SEEN THAT THE AO HAS NOT BROUGHT ANY EVIDENCE SHOWING GENERATION OF UNDISCLOSED INCOME O F THE ASSESSEE FOR UTILIZATION IN UNDISCLOSED PAYMENT TO MR. GHULAM FAROOQ ANSARI. THE ASSESSEE HAS SUCCESSFULLY SHOWN THAT THE STATEMENT MADE BEFORE THE SEARCH PARTY WAS NOT CORR ECT AS SOME ENTRIES WERE NOT INCORPORATED IN THE SEIZED CA SH BOOK, THEREFORE, IT CAN BE SAID THAT THE CASH BOOK WAS NO T UPTO DATE AS ON THE DATE OF SEARCH. ASSESSEE PRODUCED THE RE- CASTED AUDITED CASH BOOK (AFTER DULY INCORPORATING ALL ENTRIES) BEFORE THE AO. THERE WERE SUFFICIENT CASH BALANCE AVAILABL E WITH ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 52 ASSESSEE AND HIS FAMILY MEMBERS/GROUP CONCERN TO CO VER THE PAYMENT OF RS. 1,50,00,000/- TO ANSARI. THEREFORE RESPECTFULLY FOLLOWING THE DECISIONS OF HON'BLE ITA T JAIPUR BENCH IN THE CASE OF SHRI TARA CHAND JAIN (SUPRA) A ND SHRI RAJENDRA KUMAR KEDIA(SUPRA), I HOLD THAT THE PAYMEN T OF RS. 1,50,00,000/- WAS MADE OUT OF THE CASH BALANCE REFL ECTED IN THE CASH BOOK OF THE ASSESSEE AND OTHER GROUP MEMBE RS AND I DIRECT THE AO TO DELETE THE ADDITION OF RS. 1,50, 00,000/-. THIS GROUND OF THE ASSESSEE STANDS AS ALLOWED. 14. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. CIT DR. HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 15. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SU BMITTED AS UNDER: A) THE ASSESSEE RELIES ON THE FINDINGS OF LD CIT(A). B) AT THE OUTSET WE SUBMIT THAT THE DEPARTMENT HAS CAR RIED OUT INTENSIVE SEARCH OPERATIONS OVER THE ASSESSEE AND A NSARI GROUP. NO ANY DOCUMENT WAS FOUND EITHER FROM THE POSSESSION OF ASSESSEE OR POSSESSION OF ANSARI GROU P SHOWING THE PAYMENT OF RS. 1,50,00,000/- FROM ASSES SEE TO ANSARI. THE ENTIRE ADDITION IS BASED ON THE SEARCH STATEMENT, WHICH WAS RETRACTED BY THE ASSESSEE AND NO FURTHER INQUIRY WAS MADE BY LD AO AND NO EXAMINATIO N OF THE ASSESSEE OR MR. ANSARI WAS MADE. C) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE MA DE PAYMENT OF RS. 1,50,00,000/- TO ANSARI OUT OF CASH BALANCE AVAILABLE WITH ENTIRE ASSESSEE GROUP AND THE SAME W AS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 53 RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE COPY OF ACCOUNT SUBMITTED TO AO IS AT PB PAGE 263-267. T HE BOOKS OF ACCOUNT OF ASSESSEE/FAMILY MEMBERS/GROUP CONCERNS WERE NOT COMPLETE AS ON THE DATE OF SEARCH , THEREFORE THE CASH PAYMENT OF RS. 1,50,00,000/- MAD E TO ANSARI WAS NOT FOUND RECORDED IN REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE FOUND AT THE TIME OF SEARCH. THE AS SESSEE WAS UNDER MENTAL PRESSURE THEREFORE DURING THE COUR SE OF SEARCH HE SURRENDERED THIS AMOUNT AS UNDISCLOSED IN COME. HOWEVER, AFTER EXAMINATION OF BOOKS OF ACCOUNTS IT WAS FOUND THAT THE ADVANCE GIVEN TO ANSARI BROTHERS HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND THIS MIS TAKE RESULTED THE HUGE CASH BALANCE AS PER THE BOOKS AS ON THE DATE OF SEARCH. THE ADVANCE OF RS. 1.5 CRORE WAS GI VEN FOR PURCHASES OF AGRICULTURE LAND ON DELHI ROAD. THE DE AL WAS NOT MATERIALIZED AND THE ADVANCE WAS RECEIVED BACK. AT THE TIME OF COMPLETING OF BOOKS OF ACCOUNTS THE TRANSAC TION WAS RECORDED IN THE BOOKS OF RESPECTIVE PERSON/CONCERN OF THE ASSESSEE GROUP. D) THE AUDITED BOOKS OF ACCOUNT WERE EXAMINED IN DETAI L BY THE LD AO WITH REFERENCE TO SEIZED BOOKS OF ACCOUNT , VOUCHERS, BANK STATEMENT, COPY OF REGISTERED SALE D EEDS AND OTHER SEIZED MATERIAL. THE ASSESSEE HAS ALSO EX PLAINED TO THE AO:- (I) VIDE LETTER DATED 23/01/2013, AND FURTHER REPLY VIDE LETTER DATED 27/03/2013 THE ASSESSEE EXPLAINED THAT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 54 REASONS FOR NOT SURRENDERING RS. 1,50,00,000/- IN RETURN FILED BY HIM. IT WAS CATEGORICALLY STATED TH AT AT THE TIME OF SEARCH BOOKS OF ACCOUNT WERE NOT COMPLETE AND THE PAYMENT WAS NOT RECORDED IN THE BOOKS FOUND AT THE TIME OF SEARCH. HOWEVER, THE ENTRY FOR PAYMENT WAS PASSED IN THE BOOKS OF ACCOUN T COMPLETED AFTER THE SEARCH. (II) CASH BALANCE POSITION AS ON DATE OF SEARCH WAS EXPLAINED VIDE LETTER DATED 23/01/2013. (III) BOOKS OF ACCOUNT WERE PRODUCED ALONG WITH THE LETTER DATED 18/03/2013. (IV) VIDE LETTER DATED 01/03/13 THE ASSESSEE SUBMIT TED TO AO AS UNDER:- THE CASH BOOKS OF FOLLOWING PERSONS FOR 01.04.2010 TO 22.09.2010 FOE VERIFICATION OF CASH BALANCE AS O N THE DATE OF SEARCH AND SOURCE OF CASH PAYMENT OF RS . 1.50 CRORE MADE TO ANSARI GROUP IS ENCLOSED HEREWIT H. I) ASHOK AGARWAL II) RENU AGARWAL III) ASHOK AGARWAL HUF IV) ASHISH AGARWAL V) ASHISH BUILDCON PVT LTD VI) M/S ARBER TECHNOLOGIES PVT. LTD THEREAFTER, RECONCILIATION OF ENTRIES AS PER SEIZED BOOKS AND AUDITED BOOKS WERE DONE BEFORE LD AO DURING THE COU RSE OF PERSONAL HEARINGS. FOR THIS PURPOSE, VOUCHERS, BANK STATEMENT, COPY OF REGISTERED SALE DEED, COPY OF RE CEIPTS, ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 55 COPY OF AGREEMENTS ETC WERE PRODUCED BEFORE THE AO. THE CHART SHOWING THE RECONCILIATION OF ENTRIES IN SEIZ ED BOOKS VIZ A VIZ AUDITED BOOKS OF ACCOUNT IS AT PB PG 657- 668. AFTER THE EXAMINATION OF THE BOOKS OF ACCOUNT IN DE TAIL, THE LD AO ACCEPTED THE SALES, EXPENSES, AND ENTRIES IN THE AUDITED BOOKS OF ACCOUNT THOUGH MANY OF THE ENTRIES WERE NOT IN THE SEIZED BOOKS BUT IN RECASTED BOOKS. THE LD AO IS BLOWING HOT AND COLD IN SAME STREAM. ON ONE SIDE SH E IS ACCEPTING ALL THE OTHER ENTRIES MADE IN THE RECASTE D BOOKS OF ACCOUNT AND ON OTHER SIDE SHE IS NOT ACCEPTING T HE ENTRY OF PAYMENT TO ANSARI IN RECASTED BOOKS OF ACCOUNT. THEREFORE, THE ENTRY AS REGARD THE PAYMENT OF RS. 1,50,00,000/- RECORDED IN THE AUDITED BOOKS OF ACCO UNT SHOULD ALSO BE ACCEPTED AND NO ADDITION IN THIS REG ARD DESERVES TO BE MADE. D) AS REGARDING TO ENTRY OF PAYMENT MADE TO ANSARI BRO THERS MADE IN CASH BOOKS OF VARIOUS GROUP PERSONS/CONCERN S OF ASSESSEE THIS IS TO SUBMIT THAT ASSESSEE IS MAIN KE Y PERSON OF THE GROUP AND HE IS MAINTAINING THE CASH BALANCE OF ENTIRE GROUP, THEREFORE THE CASH PAYMENT TO ANSARI BROTHERS WAS MADE BY HIM OUT OF CASH BALANCE OF ENTIRE GROUP AVAILABLE WITH HIM AND THEREAFTER THE ENTRY OF PAYM ENT WAS MADE IN THE BOOKS OF ACCOUNTS OF RESPECTIVE PERSON/ CONCERN ACCORDING TO UTILIZATION OF CASH BALANCE OF RESPECT IVE PERSONS/CONCERNS. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 56 E) FOR MAKING THE ADDITION OF THIS AMOUNT THE DEPARTME NT IS RELYING ON TWO THINKS FIRST ON THE STATEMENT OF SHR I ASHOK AGARWAL RECORDED AT THE TIME OF SEARCH AND SECOND T HAT THE ENTRY OF PAYMENT TO ANSARI WAS NOT FOUND RECORDED I N THE BOOKS OF ACCOUNTS AT THE TIME OF SEARCH. EXCEPT TO THIS THERE IS NO MATERIAL WITH DEPARTMENT TO PROVE THAT THE PA YMENT WAS MADE OUT OF UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSEE GROUP WAS HAVING SUFFICIENT CASH BALANCE A S ON THE DATE OF SEARCH WHICH WAS NOT PHYSICALLY FOUND TO TH E SEARCH PARTY, THEREFORE NO ADDITION CAN BE MADE ON THIS AC COUNT BY PRESUMING THAT THIS PAYMENT WAS MADE OUT OF UNDISCL OSED INCOME. F) THE PARA TO PARA COMMENTS ON THE FINDINGS GIVEN BY THE AO FOR MAKING THE ADDITIONS IS AS UNDER: - I) IN PARA 8.7(A) THE LD. AO HELD THAT AT THE TIME OF SEARCH THIS TRANSACTION WAS ADMITTED BY THE ASSESSE E AS MADE OUT OF BOOKS AND THE SAME WAS REITERATED IN THE STATEMENT RECORDED ON 12.10.10 AT HIS OFFICE. I N THIS REGARD THIS IS TO SUBMIT THAT AT THE TIME OF S EARCH THE ASSESSEE WAS UNDER MENTAL PRESSURE AND THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NOT COMPLETE HENCE AS ON THE DATE OF SEARCH THIS PAYMENT WAS NOT RECORDED IN BOOKS OF ACCOUNTS OF THE ASSESSEE THEREFORE DURING THE COURSE OF SEARCH THE SEARCH PA RTY PRESSURIZED THE ASSESSEE TO SURRENDERED THIS AMOUNT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 57 AS UNDISCLOSED INCOME. IT IS WELL SETTLED PRINCIPAL OF LAW THAT NO ADDITION CAN BE MADE ONLY ON THE BASIS OF STATEMENT MORE SO WHEN THERE IS NO SUPPORTING EVIDENCE/CORROBORATIVE MATERIAL WAS WITH DEPARTMENT TO PROVE THAT THE SURRENDER MADE IN THE STATEMENT WAS CORRECT. THE DEPARTMENT HAS NO EVIDENCE/DOCUMENTS WHICH CORROBORATES THE SURRENDER MADE BY THE ASSESSEE IN THE STATEMENT. IN THIS REGARD, HE SUBMITTED AS UNDER:- (A) THE BOARD OF DIRECT TAXES ISSUED INSTRUCTION TO THE ALL CHIEF COMMISSIONERS OF INCOME TAX, (CADRE CONTRA) & ALL DIRECTORS GENERAL OF INCOME TAX INV. VIDE LETTE R F. NO. 286/2/2003-IT (INV) DATED 10.03.2003 IN REGARD OF CONFISCATORY STATEMENT IN THE COURSE OF SEARCH AND SEIZER AS UNDER: INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHERE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH & SEIZURE AND SURVEY OPERATION S. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENTS. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COU RSE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 58 OF SEARCH IT SEIZURES AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDINGS ALSO, ASSESSING OFFICERS SHOULD RELY UP ON THE EVIDENCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMIN G THE RELEVANT ASSESSMENT ORDERS. THE HON'BLE SUPREME COURT IN CASE OF TANNA AND MODI VS. CIT, 292 ITR 209 (SC) HAS HELD THAT A FORTIORI, CLARIFICATORY CIRCULARS ISSUED BY THE CEN TRAL BOARD OF DIRECT TAXES MAY ALSO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF CONSTRUCTION OF TH E STATUTE. THE HON'BLE SUPREME COURT IN CASE OF KERAL A STATE INDUSTRIAL DEV. CORPORATION LTD., 259 ITR 51 (SC) HAS ALSO HELD THAT FINANCE MINISTER'S SPEECH BEFORE PARLIAMENT WHILE INTRODUCING BILL CAN BE REL IED ON TO THROW LIGHT ON OBJECT AND PURPOSE OF PROVISIO NS. IN CASE OF DURGESH OIL MILLS, 273 ITR 305 (ALL.), T HE HON'BLE ALLAHABAD HIGH COURT HAS HELD THAT IT IS WE LL SETTLED THAT THE CIRCULAR ISSUED BY THE CENTRAL BOA RD OF DIRECT TAXES IS BINDING ON AUTHORITIES. THEREFORE, MERELY ON THE BASIS OF STATEMENT ADDITIO N CANNOT BE MADE WITHOUT DEMONSTRATING THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 59 DOCUMENTARY EVIDENCE IN SUPPORT OF THE ADMISSION IN THE SEARCH STATEMENT. FURTHER, IT IS OFTEN ARGUED BY THE DEPARTMENT THAT IN THE CONFESSIONAL STATEMENTS DURING THE COURSE OF SEARCH, THERE IS A MENTION THAT THERE WAS NO PRESSU RE AND THE STATEMENT WAS GIVEN VOLUNTARILY WITHOUT ANY THREAT. IN THIS CONNECTION, THE BOMBAY TRIBUNAL IN DEEPCHAND & CO. V. ASSTT. CIT (1995) [IT APPEAL NOS . 1231 TO 1234 (BOM.) OF 1993, DATED 27-7-1994] HAS OBSERVED THUS: 'THE STEREOTYPED MENTION AT THE END OF THE STATEMEN T THAT WHATEVER WAS STATED WAS TRUE AND TO THE BEST OF THE KNOWLEDGE AND BELIEF AND THE STATEMENT GIVEN WAS VOLUNTARY WITHOUT ANY THREAT, FORCE OR UNDUE INFLUE NCE, WOULD NOT MEAN THAT THE PARTNERS AGREED FOR MAKING ADDITIONS. PUTTING CERTAIN EXPRESSION AT THE END OF THE STATEMENT CANNOT BE TAKEN AS TRUE IN VIEW OF THE RE TRACTION. RETRACTION CAN BE MADE ONLY AFTER UNDERSTANDING THE CORRECT MEANING AND CONSEQUENCES OF THE STATEMENT.' (B) THE SEARCH PARTY TOOK THE SIMILAR TYPE SURRENDER IN THE CASE OF M/S SURESH MEDICAL AGENCY AND SHRI RADHEY SHYAM MITTAL WITHOUT HAVING ANY CORROBORATIVE MATERIAL, THE LD AO MADE THE ADDITION IN THESE CASES MERELY ON THE BASIS OF SEARCH STATEMENT . HONBLE ITAT JAIPUR BENCH HAS DELETED THE ADDITION IN BOTH THE CASES. THE FINDINGS OF HONBLE ITAT IN THE CASE OF M/S SURESH MEDICAL AGENCY ITA 443/JP/2012 (PG 86-91 OF CASE LAWS PAPER BOOK) ARE PRODUCED AS UNDER:- ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 60 6. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIA L ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE ACTION UNDER SECTION 132 WAS CARRIED AT THE ASSESSEES PREMISES ON 27.08.2008 AND IN THE STATEMENT SHRI MURARI LAL MITTAL, ONE OF THE PARTNE RS OF THE APPELLANT FIRM MADE SURRENDER OF INCOME OF RS. 25 LACS ON ACCOUNT OF INCOME EARNED FROM SALE AND PURCHASE OF MEDICINES CARRIED OUTSIDE THE BOOKS. THE HUSBAND OF THE PARTNER SMT. SARDA MITTAL ALSO CONFIRMED THE SURRENDER. THE APPELLANT, HOWEVER, HAD BEEN APPROACHING THE AUTHORIZED OFFICER TO PROVIDE COPY OF STATEMENT SO OBTAINED IN PROCEEDINGS UNDER SECTION 132 OF THE ACT. WHEN THESE STATEMENTS WERE NOT PROVIDED, THE APPELLANT VIDE LETTER DATED 3.10.2008 TO THE AUTHORIZED OFFIC ER, COPY PLACED IN ASSESSEES PAPER BOOK PAGE 203 AND LETTER DATED 18.12.2008 ADDRESSED TO THE ASSESSING AUTHORITY REQUESTED TO PROVIDE COPY OF STATEMENT IN CASE THE SAME WERE TO BE USED AGAINST HIM. TILL SUC H TIME THE COPY OF STATEMENT WAS NOT PROVIDED, ASSESSEE ENTERTAINED A BONAFIDE BELIEF THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE OR CORROBORATIVE EVIDENCE HAVING BEEN FOUND AS A RESULT OF SEARCH, SUCH STATEMENT WOULD NOT BE USED AGAINST HIM. IF SUCH STATEMENTS WERE TO BE USED, TH E DEPARTMENT WAS UNDER LEGAL OBLIGATION TO HAVE PROVIDED COPY THEREOF TO THE APPELLANT. IT IS ONLY ON PERSISTENT EFFORT OF THE APPELLANT, THE COPIES OF STATEMENTS WERE PROVIDED ONLY ON 13.3.2009. THE APPELLANT AFTER UNDERSTANDING THE LEGAL IMPLICATION OF SUCH STATEMENTS MADE A VALID RETRACTION AS THE SURRENDER WAS NOT SUPPORTED 8 BY ANY CORROBORATIVE EVIDENCE. THE AFFIDAVIT FILED IN THIS REGARD IS LAI D ON ASSESSEES PAPER BOOK PAGES 129 TO 131. THIS AFFIDAVIT HAS CAREFULLY BEEN PERUSED. AFTER THE AFFIDAVIT WAS FILED BEFORE THE ASSESSING AUTHORITY, HE REMAINED SILENT ON THE FACE OF IT AND CARRIED NO ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 61 ENQUIRY THEREON TO VERIFY THE CORRECTNESS THEREOF. THE ASSESSEE WAS ALSO NOT CROSS EXAMINED ON THE POINT OF RETRACTION NOR WAS REQUIRED TO PRODUCE ANY DOCUMENTARY EVIDENCE OR ANY OTHER EVIDENCE. THE ASSESSEE WAS, THEREFORE, ENTITLED TO ASSUME THAT TH E INCOME TAX AUTHORITIES WERE SATISFIED WITH THE AFFIDAVIT AS SUFFICIENT ON THIS POINT. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SOHAN LAL GUPTA VS. CIT, (1958) 33 ITR 786 (ALL.), AS WAS ALS O PUT TO THE PARTIES DURING THE COURSE OF ARGUMENT, H AS MADE ELABORATE DISCUSSION ON THE EVIDENTIARY VALUE OF THE AFFIDAVIT. THE RELEVANT PASSAGE FROM THE AFORESAID JUDGMENT AT PAGE 791 OF THE REPORT IS REPRODUCED AS UNDER :- THE MOST IMPORTANT POINTS ON WHICH THE TRIBUNAL RELIED, IS THAT MENTIONED AT NO. 2, VIZ., THAT, ACCORDING TO THE TRIBUNAL, THE ASSESSEE HAD NOT SATISFACTORILY ESTABLISHED THAT TH E SHARES HAD TO BE SOLD AS THE PURCHASER OF THE JASWANT SUGAR MILLS WAS NOT WILLING TO PURCHASE THAT MILL UNLESS THE SHARES IN THE STRAW BOARD MILL S LTD. HELD BY THE FAMILY WERE ALSO TRANSFERRED TO HI M AT THE SAME TIME. ON THIS POINT, THE ONLY MATERIAL AVAILABLE ON THE RECORD IS THE AFFIDAVIT WHICH WAS FILED BY THE ASSESSEE BEFORE THE INCOME-TAX OFFICER . THE ASSESSEE IN HIS AFFIDAVIT, HAD DEFINITELY STATE D THAT THE PURCHASER WANTED TO PURCHASE BOTH THE GOING CONCERNS, THE JASWANT SUGAR MILLS AND THE STRAW BOARD MILLS LTD., TOGETHER AND ONE OF HIS CONDITIONS OF PURCHASE WAS THAT ALL THE SHARES OF LALA JASWANT RAI, HIS SONS AND OTHER RELATIVES HAD TO BE TRANSFERRED TO THE PURCHASER. THE INCOME-TAX APPELLATE TRIBUNAL REJECTED THIS AFFIDAVIT OF THE ASSESSEE ON THE MERE GROUND THAT THERE WAS NO DOCUMENTARY EVIDENCE IN CORROBORATION IN THE FORM OF ANY CORRESPONDENCE OF OTHERWISE ON THIS POINT. SHRI G.S. PATHAK CONTENDED RIGHTLY BEFORE US THAT T HE TRIBUNAL WAS NOT ENTITLED TO REJECT THE AFFIDAVIT O N ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 62 THIS POINT ON SUCH A GROUND. AFTER THE ASSESSEE HAD FILED THE AFFIDAVIT, HE WAS NEITHER CROSS-EXAMINED ON THAT POINT, NOR WAS HE CALLED UPON TO PRODUCE ANY DOCUMENTARY EVIDENCE. CONSEQUENTLY, THE ASSESSEE WAS ENTITLED TO ASSUME THAT THE INCOME-TAX AUTHORITIES WERE SATISFIED WITH THE AFFIDAVIT AS SUFFICIENT PROOF ON THIS POINT. IF IT WAS NOT TO BE ACCEPTED AS A SUFFICIENT PROOF EITHER BY THE INCOME - TAX OFFICER OR BY THE APPELLATE ASSISTANT COMMISSIONER OF INCOME-TAX OR BY THE INCOME TAX APPELLATE TRIBUNAL, THE ASSESSEE SHOULD HAVE BEEN CALLED UPON TO 9 PRODUCE DOCUMENTARY EVIDENCE, OR, AT LEAST HE SHOULD HAVE BEEN CROSS EXAMINED TO FIND OUT HOW FAR HIS ASSERTIONS IN THE AFFIDAVIT WERE CORRECT. (EMPHASIS SUPPLIED) THE RELIANCE PLACED BY ASSESSEE TO THE JUDGMENT BY HON'BLE APEX COURT IN THE CASE OF PULLANGODE RUBBER PRODUCE CO. LTD. (SUPRA) AND HON'BLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. ASHOK KUMAR SONI (SUPRA) ARE WELL PLACED AS THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THAT THE ADMISSION MADE DURING THE COURSE OF SEARCH IS NOT CORRECT. THE INGREDIENT FOR RETRACTION OF STATEMENT MADE DURING THE SEARCH, THEREFORE, STAND DULY SATISFIED AS THE ASSESSEE IS FOUND TO HAVE MADE RETRACTION WITHIN A REASONABLE TIME IMMEDIATELY AFTER THE COPIES OF STATEMENT WERE PROVIDED TO HIM. SINCE THE DOCUMENTS FOUND AS A RESULT OF SEARCH WERE PERTAINING TO THE INCOME OF T HE OTHER TWO PERSONS NAMELY S/SHRI PRAFUL MITTAL AND MURARI LAL MITTAL AND THERE BEING NO MATERIAL OR EVIDENCE ON RECORD TO SHOW THAT THE APPELLANT HAS CARRIED ANY BUSINESS OUTSIDE THE BOOKS FOR SALE AND PURCHASE OF MEDICINES THAT COULD GIVE RISE TO THE INCOME TO THE EXTENT OF RS. 25 LACS, THE ADDITION MERELY ON THE BASIS OF SUCH STATEMENT WHICH STOOD VALIDLY RETRACTED COULD NOT HAVE BEEN MADE. WE, THEREFORE, FIND NO FACTUAL OR LEGAL JUSTIFICATION I N ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 63 SUSTENANCE OF ADDITION BY LD. CIT (A) IN THIS REGARD. (C) HONBLE ITAT JAIPUR BENCH IN ITS RECENT DECISIO N IN THE CASE OF SHRI PAWAN LASHKARY ITA NO 808/JP/2011 HAS HELD THAT INCOME CANNOT BE ASSESSED MERELY ON THE BASIS OF STATEMENT. (D) FURTHER RELIANCE IS PLACED ON THE FOLLOWING DEC ISIONS:- (I) HONBLE APEX COURT IN THE CASE OF PULLANGODE RU BBER PRODUCE CO LTD V/S STATE OF KERALA & ANOTHERS (1973 ) 91 ITR 18 (SC) HAS HELD THAT ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANT BE SAID THAT IT IS CONCLUSIVE. IT IS UPON TO THE ASSES SEE TO SHOW THAT IT IS INCORRECT. (II) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CI T V/S ASHOK KUMAR SONI 291 ITR 172 (RAJ.) HAS HELD THAT ADMISSION IN STATEMENT DURING SEARCH IS NOT CONCLUSIVE PROOF OF FACT AND CAN ALWAYS BE EXPLAINE D II) IN PARA 8.7 (B) TO (D) THE LD. AO MENTIONED THA T THE CLAIM THAT THE CASH PAYMENT TO ANSARI WAS MADE OUT OF CASH AVAILABLE FROM BOOKS OF ACCOUNTS WAS MADE FOR THE FIRST TIME DURING THE ASSESSMENT PROCEEDING S AND NO SUCH EXPLANATION WAS GIVEN BY THE ASSESSEE A T THE TIME OF SEARCH THIS IS TO SUBMIT THAT AS ON THE DATE OF SEARCH THE BOOKS OF ACCOUNTS OF THE ASSESSE E WERE INCOMPLETE AND THE ENTRY OF PAYMENTS MADE WERE NOT RECORDED IN BOOKS OF ACCOUNTS TILL THE DAT E OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 64 SEARCH. THESE BOOKS WERE UNDER SEIZURE OF THE DEPARTMENT AND AFTER THE RECEIPT OF THE PHOTOCOPY O F THE DOCUMENTS, THE ASSESSEE COULD NOT THE FACTUAL POSITION. HOWEVER, THE FACT REMAINS THAT AS ON THE DATE OF SEARCH THE ASSESSEE GROUP WAS HAVING SUFFICIENT CASH BALANCE IN THEIR BOOKS OF ACCOUNTS WHICH WAS NOT PHYSICALLY FOUND TO THE SEARCH PARTY, THEREFORE THE SAME ALSO JUSTIFY THE CONTENTION OF T HE ASSESSEE THAT THE PAYMENT WAS MADE OUT OF RECORDED SOURCES AND ONLY ENTRY COULD NOT BE MADE UP TO THE DATE OF SEARCH. III) IN PARA 8.7 (E) THE LD. AO HELD THAT THE PAYME NT OF RS. 1.5 CR. FOR PURCHASES OF LAND AT DELHI ROAD WAS MADE BY HIM. HOWEVER EVEN IN THE RECONSTRUCTED BOOKS OF ACCOUNT OF SHRI ASHOK AGARWAL PAYMENT OF ONLY RS. 50 LACS HAS BEEN REFLECTED, THUS EVEN THE ENTRY IN THE BOOKS OF ACCOUNT ARE CONTRARY TO THE F ACTS NARRATED IN THE STATEMENT. IN THIS REGARD THIS IS T O SUBMIT THAT AT THE TIME OF SEARCH THE ASSESSEE SAID THAT PAYMENT OF RS. 1.5 CRORE WAS MADE BY HIM BUT I T DOES NOT MEAN THAT THE ENTIRE PAYMENT WAS MADE BY HIM OUT OF HIS OWN CASH BALANCE. THE ASSESSEE IS MAIN KEY PERSON OF THE GROUP AND DAY TO DAY AFFAIRS AND BUSINESS OF THE GROUP IS BEING MANAGED AND CONTROLLED BY HIM. HE IS MAINTAINING THE CASH BALAN CE OF ENTIRE GROUP, THEREFORE THE CASH PAYMENT TO ANSA RI ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 65 WAS MADE BY HIM OUT OF CASH BALANCE OF ENTIRE GROUP AVAILABLE WITH HIM. IT IS RELEVANT TO MENTION HERE THAT AT THE TIME OF SEARCH THE SURRENDER OF INCOME ON BEHALF OF ENTIRE GROUP WAS MADE BY HIM, THEREFORE I T CANNOT BE PRESUMED ON THE BASIS OF STATEMENT OF THE ASSESSEE THAT THE PAYMENT OF RS. 1.50 CRORE WAS STATED TO BE MADE BY HIM, THEREFORE THE SAME SHOULD BE FOUND RECORDED ONLY IN HIS CASH BOOK AND NOT IN THE CASH BOOK OF OTHER FAMILY MEMBERS/CONCERNS. IV) IN PARA 8.7 (F) THE LD. AO DISCUSSED THE MODE O F ENTRY OF PAYMENT MADE IN THE BOOKS OF ACCOUNTS REGARDING PAYMENT MADE TO ANSARI. IN THIS REGARD THIS IS TO SUBMIT THAT THE PAYMENT TO SHRI ANSARI WAS MADE TO PURCHASE THE LANDS FOR FARMERS AT DELHI ROAD. AT TH E TIME OF PAYMENT THE LAND WAS NOT FINALIZED, THEREFO RE NO AGREEMENT WAS MADE. FURTHER THE LAND WAS TO BE PURCHASED DIRECTLY FROM FARMERS THROUGH SHRI ANSARI , THEREFORE THE QUESTION OF EXECUTION OF AGREEMENT WI TH SHRI ANSARI DOES NOT ARISE. AS REGARD TO RECORDING THE PAYMENT IN BOOKS OF ACCOUNTS OF DIFFERENT PERSONS/CONCERNS OF THE GROUP INSTEAD OF A SINGLE ENTRY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE THIS IS TO SUBMIT THAT SINCE THE PAYMENT WAS MADE OUT OF UTILIZING THE BALANCE OF DIFFERENT PERSONS/CONCERNS , THEREFORE THE ENTRY WAS MADE IN BOOKS OF ACCOUNTS O F RESPECTIVE PERSONS/CONCERN AND UPON FINALIZATION OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 66 TRANSACTIONS THE RESPECTIVE TRANSFER/ADJUSTMENTS EN TRY WILL MADE IN THE BOOKS OF ACCOUNTS OF THE RESPECTIV E PERSON/CONCERN. V) IN PARA 8.7(G) THE LD. AO HELD THAT RELIABILITY OF BOOKS OF ACCOUNTS OF ALL PERSONS IS ALSO QUESTIONABLE BECAUSE THAN ENTRIES HAVE BEEN MADE SUBSEQUENT TO THE SEARCH AND NOT DURING THE COURSE OF REGULAR BUSINESS. ADMITTEDLY THE BOOKS OF ACCOUNT OF ASSESS EE /FAMILY MEMBERS/GROUP CONCERNS WERE NOT COMPLETE AS ON THE DATE OF SEARCH BECAUSE THE MAIN ACCOUNTAN T OF THE ASSESSEE GROUP WAS BUSY IN AUDIT WORK OF FY 2009-2010 BEING LAST DATE OF AUDIT WAS ENDING SOON ON 30.09.2010. UNDER THESE CIRCUMSTANCES ENTRY OF VARIOUS TRANSACTIONS EXECUTED BY THE ASSESSEE DURIN G THE CURRENT PERIOD WERE YET TO BE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH. HOWEVER WHEN THE BOOKS OF ACCOUNTS WERE COMPLETED THE ENTRY OF PAYMENT MADE TO SHRI ANSARI WAS MADE IN BOOKS OF ACCOUNTS AND THE LD. AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN BOOKS OF ACCOUNTS. FURTH ER THE LD AO HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEREFORE THERE SHOULD BE NO REASON T O DISBELIEVE THE ENTRY OF RS. 1,50,00,000/- ON ACCOUN T OF CASH PAID TO SHRI ANSARI FOR PURCHASES OF LAND M ORE SO WHEN THE ASSESSEE GROUP HAVING SUFFICIENT CASH BALANCE IN THEIR BOOKS OF ACCOUNTS AND THE SAME WAS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 67 NOT FOUND PHYSICALLY TO THE SEARCH PARTY OR OTHERWI SE USE OF SUCH CASH WAS PROVED BY THE ASSESSING OFFICE R. FURTHER AS PER SETTLED POSITION OF LAW AFTER THE SE ARCH THE BOOKS OF ACCOUNT CAN BE PREPARED ON THE BASIS O F BANK STATEMENT AND SEIZED DOCUMENTS. NO DEFECT WAS POINTED OUT BY THE LD AO IN THE BOOKS OF ACCOUNT THEREFORE, THE ENTRIES MADE IN BOOKS OF ACCOUNTS SHOULD BE ACCEPTED AND NO ADDITION ON ACCOUNT OF UNEXPLAINED CASH PAYMENT MADE TO SHRI ANSARI TO BE MADE. FOR THIS PURPOSE, WE DRAW YOUR KIND ATTENTIO N TOWARDS THE DECISION OF JAIPUR ITAT WHEREIN HONBLE ITAT BENCH IN ITSSA NO.103/JP/2002 DATED. 4.4.2003 IN THE CASE OF SHRI TARACHAND JAIN. IN THIS ORDER, THE HONBLE ITAT HAS OBSERVED AS UNDER ON PAGE 2 PARA 5: THE FIRST GRIEVANCE OF THE DEPARTMENT IS PERTAININ G TO THE DELETION OF ADDITION OF RS.1,20,240/- WHICH WAS FOU ND FROM THE BEDROOM OF SHRI TARACHAND AND HIS WIFE SMT. ANI TA JAIN DURING THE COURSE OF SEARCH. AT THE TIME OF S EARCH, THE BOOKS OF ACCOUNTS WERE NOT COMPLETE AND DAY TO DAY BALANCING OF CASH WAS NOT MADE. IN THE BOOKS OF ACC OUNT, THE CASH BALANCE OF RS.80,291/- IN THE BOOKS OF SHR I TARACHAND; AND RS.51,335/- IN THE BOOKS OF SMT. ANI TA JAIN WERE SHOWN BY THE ASSESSEE AS PER THE EXPLANATION L ETTER DATED 12.1.2001. THUS IN BOTH THE BOOKS OF ACCOUNT THE TOTAL COMES TO RS.1,31,626/-. ACCORDING TO ASSESSEE , THE SAID AMOUNT WAS SUFFICIENT TO MEET THE RECOVERED AM OUNT, BUT THE AO OBSERVED IN HIS ORDER THAT SELF-PREPARED BOOKS PRODUCED AFTER THE DATE OF SEARCH CANNOT BE RELIED UPON. BUT THE LD. CIT (A) OBSERVED IN HIS ORDER THAT THE BOOKS WHICH WERE COMPLETED LATER ON WERE DULY SUBMITTED B Y RELEVANT MATERIAL TO SUPPORT THE INCOME AND OUT-GOI NG ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 68 CASH. SO HE DELETED THE SAID ADDITION. WITH THIS BACKGROUND, WE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD FROM WHICH IT APPEARS THAT AT THE TIME OF SEARCH BOOKS OF ACCOUNT WERE FOUND BUT THE SAME WERE INCOMPLETE. THE ASSESSEE LA TER ON PREPARED THE BOOKS OF ACCOUNT, WHICH WERE DULY AUDI TED BY THE CHARTERED ACCOUNTANT. THE BOOKS ALONGWITH THE CERTIFICATES WERE SUBMITTED BEFORE THE A.O. NO DEFECT/MISTAKE WAS FOUND. THE AO HAS NOT RAISED DOU BT ABOUT THE GENUINENESS OF PREPARATION HIS BOOKS OF ACCOUNTS. THEREFORE, WE DO NOT AGREE WITH THE OBSER VATIONS MADE BY THE AO THAT THE BOOKS WERE SELF-PREPARED. T HE CIT (A) HAS DISCUSSED IN HIS ORDER THE RATIO LAID DOWN BY THE ITAT JAIPUR IN THE CASE OF RAJENDRA KUMAR KEDIA VS. DCIT, 22 TAX WORLD 506 WHERE IT WAS OBSERVED THAT T HE BOOKS OF ACCOUNT OF ASSESSEE, WHICH ARE NOT PROPERL Y MAINTAINED, CAN BE SUBSEQUENTLY PREPARED AND RE-CAS TED ON THE BASIS OF BANK STATEMENT, VOUCHERS, AND OTHER RE LATED DOCUMENTS OF SALES AND PURCHASE, THEN ALSO BE RELIE D UPON FOR THE PURPOSE OF INCOME-TAX ASSESSMENT. IN THE INSTANT CASE, THE RE-CASTED BOOKS OF ACCOUNT WERE PROPERLY AUDITED AND THE SAME WERE PRODUCED BEFORE THE AO ALONG WITH THE CERTIFICATES BUT THE AO DID NOT F IND ANY DEFECT OR MISTAKE IN THE SAID BOOKS OF ACCOUNT. HE HAS NOT BOTHERED TO VERIFY THE ENTRIES WITH THE PRIMARY EVI DENCE I.E. VOUCHERS, BILLS ETC. THEREFORE, WE ACCEPT THE ORDER OF THE CIT (A) WHO HAS RIGHTLY DELETED THE SAID ADDITION. THE ORDER OF THE CIT (A) IS HERE BRIEF FACTS: BY UPHEL D REGARDING DELETION OF ADDITION OF RS.1,20,240/- WHI CH WAS FOUND IN CASH IN THE BEDROOM OF THE ASSESSEE AND HI S WIFE. THE SAID CASH WAS REFLECTED IN THE BOOKS OF ACCOUNT , HENCE THE ADDITION IS UNWARRANTED. THE ABOVE FINDING OF THE HONBLE ITAT IS FULLY AND SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 69 FURTHER HONBLE ITAT IN ANOTHER CASE OF SHRI RAJEND RA KR. KEDIA VS. DCIT, 22 TAX WORLD, 506 HAVE OBSERVED THAT WHERE THE BOOKS OF ACCOUNT ARE NOT PROPERLY MAINTAINED, THE SAME COULD BE SUBSEQUENTLY PREPARED AND RE-CASTED ON THE BASIS OF HIS BANK STATEMENT, VOUCHERS AND OTHER RELATED DOCUMENTS OF SALES AND PURCHASE WHICH COULD BE RELIED UPON FOR THE PURPOSE OF MAKING THE INCOME TAX ASSESSMENTS. IN THE SAME PARA THE LD. AO FURTHER HELD THAT FROM THE PERUSAL OF BOOKS OF ACCOUNTS AND P&L ACCOUNT FOR AL L THE YEARS COVERED BY BLOCK ASSESSMENT NO WHERE SUCH HUGE PAYMENT IN CASH HAVE BEEN MADE THROUGH BOOKS OF ACCOUNT, SO IT WAS OTHERWISE ALSO NOT A REGULAR PRACTICE OF THE ASSESSEE TO MAKE SUCH HUGE PAYMENT IN CASH FOR PURCHASES OF LAND. IN THIS REGA RD THIS IS TO SUBMIT IN PAST WHATEVER PAYMENT MADE BY THE ASSESSEE FOR PURCHASES OF LAND EITHER CASH OR CHEQUE DULY RECORDED IN BOOKS OF ACCOUNTS AND DURIN G THE COURSE OF SEARCH AS WELL AS DURING ASSESSMENT PROCEEDINGS THE DEPARTMENT COULD NOT PROVE ANY SINGLE PAYMENT WHICH HAS BEEN MADE OUT OF BOOKS OF ACCOUNTS, THEREFORE THERE WAS NOT A PRACTICE OF THE ASSESSEE TO MAKE PAYMENT OUTSIDE THE BOOKS OF ACCOUNTS FOR PURCHASES OF LAND. FURTHER IN SOME CAS ES DUE TO BUSINESS REQUIREMENTS LOOKING TO THE LOCATIO N OF LAND, AVAILABILITY OF BANKING FACILITY ON SUCH V ILLAGE AND PAYMENT IN CASH ON DEMAND OF SELLER ETC. THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 70 ASSESSEE HAS TO MADE THE CASH PAYMENT. THE LD AO HERSELF HAS FOUND THAT THE ASSESSEE HAS MADE CASH PAYMENT OF RS. 4658640/- IN AY 2005-06 AND MADE THE ADDITION BY APPLYING THE PROVISIONS OF SECTION 40A(3). THEREFORE THE FINDINGS OF LD AO IS PERVERSE . VI) IN PARA 8.7 (H) THE LD. AO HELD THAT THE ASSESS EE IS WELL ESTABLISHED BUSINESSMAN WHO KNOWS VERY WELL THAT ANY EXPENDITURE OVER RS. 20,000/- IN CASH IS N OT KNOWN ALLOWABLE U/S 40A(3) OF THE INCOME TAX ACT, 1961, THEREFORE HE IS NOT EXPECTED TO MAKE HUGE CAS H PAYMENT OF RS. 1.5 CRORES FOR PURCHASES OF LAND WHE N DEALING IN LAND IN HIS BUSINESS. IN THIS REGARD THI S IS TO SUBMIT THAT IT IS A TECHNICAL AND LEGAL MATTER AND BY ADDING THE PROBABILITY AND POSSIBILITY ON THE ISSUE OF LEGAL MATTER A PAYMENT RECORDED IN BOOKS OF ACCOUNT S CANNOT BE DOUBTED. FURTHER, ALL THE CASH PAYMENT MADE IN CASH FOR PURCHASES OF LAND CANNOT BE DISALLOWABLE U/S 40A(3) OF INCOME TAX ACT, 1961 AND BEFORE MAKING THE DISALLOWANCE THE EXTEND OF BANKIN G FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND EXIGENCIES AND OTHER RELEVANT FACTOR S ARE ALSO TAKEN INTO CONSIDERATION, THEREFORE THE ASSESSEE MADE PAYMENTS IN CASH CONSIDERING AND KEEPING IN MIND ALL THESE FACTORS. (VII) IN PARA 8.7 (I) THE LD. AO HELD THAT AS FAR A S DISALLOWANCE OF 40A(3) OF INCOME TAX ACT, 1961 OF RS. 30,54,560/- FOR AY 2011-12 AND RS. 17,33,000/- ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 71 FOR AY 2010-11 IS CONCERNED, THE BOOKS OF ACCOUNTS/CASH BOOK FOR THESE YEARS WAS SEIZED AT TH E TIME OF SEARCH, THEREFORE, PROBABLY THE PAYMENT IN BOOKS OF ACCOUNTS ARE SHOWN IN THE FINAL BOOKS OF ACCOUNTS ALSO. IN THIS REGARD IT IS RELEVANT TO MEN TION HERE THAT:- (I) THE LD AO HERSELF HAS FOUND THAT THE ASSESSEE HAS MADE CASH PAYMENT OF RS. 4658640/- IN AY 2005-06 AND MADE THE ADDITION BY APPLYING THE PROVISIONS OF SECTION 40A(3). (II) FROM THE CHART PRODUCE IN THIS PARA IT IS CLEAR THAT THE ASSESSEE WAS DULY SHOWING THE CASH PAYMENTS WHATEVER MADE FOR MAKING PURCHASES/ EXPENSES IN EACH OF THE YEAR AND THE AY 2010-11AND AY 2011-12 WAS NOT ONLY THE YEAR WHEREIN THE CASH PAYMENT WAS SHOWN DUE TO THE REASON THAT THE BOOKS OF ACCOUNTS WERE SEIZED BY THE DEPARTMENT. FURTHER IT IS RELEVANT TO MENTION THAT THE INCOME TAX RETURN F OR AY 2010-11 WAS FILED PRIOR TO SEARCH, THEREFORE THE FINDING OF THE LD. AO THAT THE CASH PAYMENTS OF AY 2010-11 WAS SHOWN BECAUSE THAT BOOKS OF ACCOUNTS WERE SEIZED BY THE DEPARTMENT IS BASELESS AND PERVERSE. VIII) IN PARA 8.8 THE LD. AO OPINED THAT WHEN THE STATEMENT OF THE ASSESSEE WAS RECORDED ON ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 72 12.10.2010 DURING REVOCATION OF PO AT THE GROUP OFFICE, HE ALREADY HAD TIME OF 20 DAYS SINCE THE DA TE OF SEARCH. HE HAD ALL OPPORTUNITY TO COMPLETE BOOKS OF ACCOUNTS AND SHOW THAT THE AMOUNT WAS PAID OUT OF THE BALANCE AVAILABLE IN CASH BOOK. IN THIS REGA RD THIS IS TO SUBMIT THAT THE BOOKS OF ACCOUNT WERE UN DER SEIZURE, THEREFORE THE ASSESSEE GROUP COULD NOT EXAMINE AND COMPLETE THE BOOKS OF ACCOUNTS UP TO 12.10.2010. IX) AS REGARD OF FINDING OF THE AO IN PARA 8.9 TO 8.11 THIS IS TO SUBMIT THAT THE CASES RELIED BY AO IN PARA 8. 10 ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BECA USE EXCEPT TO THE STATEMENT OF THE ASSESSEE THERE IS NO OTHER MATERIAL WITH THE DEPARTMENT TO PROVE THAT TH E PAYMENT WAS MADE FROM UNDISCLOSED INCOME. FURTHER AS ON THE DATE OF SEARCH THE ASSESSEE GROUP WAS HAVING SUFFICIENT CASH BALANCE IN BOOKS OF ACCOUNTS WHICH WAS NOT FOUND TO THE SEARCH PARTY AND OTHERWISE USE OF SUCH CASH BALANCE WAS ALSO NOT FIN D BY THE AO/SEARCH PARTY, THEREFORE THE PREPONDERANCE OF PROBABILITY THAT THE PAYMENT OF RS. 1.5 CRORE WA S MADE TO SHRI ANSARI OUT OF CASH BALANCE AVAILABLE W ITH ASSESSEE GROUP IN REGULAR BOOKS OF ACCOUNTS IS IN FAVOUR OF ASSESSEE. IN VIEW OF THE ABOVE, THE ASSESSEE PRAYS YOUR HONOR THAT THE PAYMENT OF RS. 1.50 CRORE TO SHRI ANSARI WAS MADE O UT OF CASH ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 73 BALANCE IN REGULAR BOOKS OF ACCOUNTS. THE ADDITION WAS MADE SOLELY ON THE BASIS THAT AT THE TIME OF SEARCH THIS AMOUNT WAS SURRENDERED AS INCOME AND NOT FOUND RECORDED IN REG ULAR BOOKS OF ACCOUNTS AND THE DEPARTMENT HAS NO POSITIV E EVIDENCE THAT THIS PAYMENT WAS MADE OUT OF UNDISCLOSED INCOM E, THEREFORE THE ADDITION OF RS. 1.50 CRORE WAS RIGHTL Y DELETED BY LD CIT(A). THEREFORE, KINDLY UPHELD THE FINDINGS OF LD CIT(A) IN THIS REGARD AND DISMISS THE APPEAL FILED BY THE REV ENUE. 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. DURIN G THE COURSE OF THE FIRST APPELLANT PROCEEDINGS, THE ASSESSEE HAS CONTE NDED THAT NO INCRIMINATING DOCUMENT WAS FOUND DURING THE SEARCH OPERATION SHOWING PAYMENT OF RS. 1.50 CRORE TO GHULAM FAROOQ ANSARI. FURTHER, NO DOCUMENT WAS FOUND FROM ASSESSEE'S PREMISES, SHOWIN G GENERATION OF UNDISCLOSED INCOME WHICH COULD BE SAID AS UTILIZED IN THE PAYMENT TO ANSARI. THE CRUX OF THE ISSUE IS WHETHER BASED ON T HE STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) OF THE ACT, AN ADDITIO N TOWARDS UNDISCLOSED INCOME CAN BE MADE IN THE HANDS OF THE APPELLANT. BOTH THE REVENUE AS WELL AS THE ASSESSEE HAVE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF PULLANGODE RUBBER PRODUCE CO. LTD VS STATE OF KERALA (91 ITR 18) WHEREIN THE HONBLE SUP REME COURT HAS LAID DOWN THE FOLLOWING PROPOSITION IN LAW: ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 74 AN ADMISSION IS AN EXTREMELY PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSESSEE WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSESSEE SHOUL D BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNTS DONO T DISCLOSE THE CORRECT STATE OF FACTS. IN THE INSTANT CASE, THE REVENUE HAS MADE THE ADDIT ION BASED ON THE STATEMENT OF THE ASSESSEE AND ALSO ON THE FACT THAT THE ENTRY OF PAYMENT OF RS 150,00,000 WAS NOT FOUND RECORDED IN THE CASH BOOK/BOOKS OF ACCOUNTS AT THE TIME OF SEARCH. WHAT IS THEREFORE RELEVANT TO EXAMINE IS WHETHER THE ASSESSEE HAS DIS CHARGED ITS ONUS TO THE EFFECT THAT THE BOOKS OF ACCOUNTS DO NOT DISCLO SE THE CORRECT STATE OF FACTS AND THE STATEMENT MADE DURING THE SEARCH WAS NOT CORRECT AS SOME ENTRIES WERE NOT INCORPORATED IN THE SEIZED CA SH BOOK AND THE CASH BOOK WAS NOT UPTO DATE AS ON THE DATE OF SEARC H. IN THIS REGARD, IT IS NOTED THAT AT THE TIME OF SEARCH, THE SURRENDER OF INCOME ON BEHALF OF THE ENTIRE GROUP WAS MADE BY THE ASSESSEE AND HIS S TATEMENT WERE RECORDED WHERE HE HAS MENTIONED ABOUT IMPUNGED CASH PAYMENT TO MR ANSARI. THE LD CIT(A) HAS STATED THAT THE SEIZED C ASH BOOKS OF THE ASSESSEES GROUP WAS SHOWING CASH BALANCE OF RS 1,8 8,10,450 AND WHICH WERE INCOMPLETE AT THE TIME OF SEARCH. SUBSEQ UENT TO THE SEARCH, ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 75 THE ASSESSEE COMPLETED THE CASH BOOKS INCORPORATING ALL THE INFLOW AND OUTFLOW OF CASH AND RECASTED CASH BOOKS WERE PRODUC ED BEFORE THE AUDITORS AS WELL AS BEFORE THE AO AND NO DISCREPANC IES WERE POINTED OUT BY EITHER OF THEM ESPECIALLY IN TERMS OF INFLATING THE INFLOW OF CASH OR BY DEFLATING THE OUTFLOW OF CASH TO COVER UP THE SITUA TION OF UNAVAILABILITY OF DISCLOSED CASH. THE ASSESSEE HAS ALSO RECONCILED TH E CASH BALANCE AS PER THE SEIZED CASH BOOKS AND THE AUDITED CASH BOOKS AN D THE SAME WAS SUBMITTED TO THE AO WHO HAS NOT CONTROVERTED THE SA ME BY POINTING OUT ANY DISCREPANCIES THEREIN. BASED ON HIS DETAILED E XAMINATION, THE LD CIT(A) HAS HELD IN HIS ORDER THAT THE ASSESSEE HAS SUCCESSFULLY SHOWN THAT THE STATEMENT MADE BEFORE THE SEARCH PARTY WAS NOT CORRECT AS SOME ENTRIES WERE NOT INCORPORATED IN THE SEIZED CA SH BOOK, THEREFORE, IT CAN BE SAID THAT THE CASH BOOK WAS NOT UPTO DATE AS ON THE DATE OF SEARCH. ASSESSEE HAD PRODUCED THE RE-CASTED AUDITED CASH BOOK AFTER INCORPORATING ALL ENTRIES BEFORE THE AO. THERE WERE SUFFICIENT CASH BALANCE AVAILABLE WITH ASSESSEE AND HIS FAMILY MEMB ERS/GROUP CONCERN TO COVER THE PAYMENT OF RS. 1,50,00,000/- TO ANSARI . DURING THE COURSE OF THE ARGUMENTS, THE REVENUE HAS NOT BROUGHT ANYTH ING FURTHER TO OUR NOTICE AND THE FINDINGS OF LD CIT(A) REMAIN UNCONTR OVERTED BEFORE US. THE ASSESSEE HAS SUCCESSFULLY DEMONSTRATED THROUGH ITS EXPLANATION AND ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 76 DOCUMENTATION IN TERMS OF RE-CASTED BOOKS OF ACCOUN TS THAT THE STATEMENT MADE DURING THE COURSE OF THE SEARCH CANN OT BE MADE THE SOLE BASIS FOR MAKING THE ADDITION OF RS 1,50,00,00 0 IN HIS HANDS AS THERE WAS SUFFICIENT CASH BALANCE IN THE BOOKS OF A CCOUNTS TO MAKE THE SAID PAYMENT AND DISCHARGED ITS ONUS AS LAID DOWN B Y THE DECISION OF HONBLE SUPREME COURT IN CASE OF PULLANGODE RUBBER PRODUCE CO (SUPRA) AND RAJASTHAN HIGH COURT IN CASE OF ASHOK KUMAR SON I (SUPRA). WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND THE APPEAL OF THE REVENUE IN THIS GROUND IS DISMISSED. 17. NOW WE TAKE UP COMMON GROUND IN THE REVENUES A PPEAL AS WELL AS THE ASSESSEES APPEAL THE 4 TH GROUND OF THE REVENUES APPEAL IS AGAINST DELETION OF ADDITION OF RS 20,46,604 OUT OF RS. 50,26,604/- MAD E BY THE AO ON ACCOUNT OF DEEMED DIVIDEND INCOME UNDER SECTION 2(2 2)(E) OF THE ACT AND THE SOLE GROUND OF THE ASSESSEES APPEAL IS AGA INST CONFIRMING THE ADDITION OF RS. 29,80,000/- OUT OF THE ABOVE SAID A DDITION ON ACCOUNT OF DEEMED DIVIDEND. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 77 THE ASSESSEE IS A DIRECTOR IN THE COMPANY M/S ASHIS H BUILDCON PVT. LTD. AND DURING THE YEAR, THE ASSESSEE WAS HAVING SHAREH OLDING OF MORE THAN 10% IN THE SAID COMPANY. DURING THE COURSE OF ASSES SMENT PROCEEDINGS OF M/S ASHISH BUILDCON PVT. LTD. FOR THE AY 2011-12 AND ON PERUSAL OF THE ACCOUNTS OF THE ASSESSEE, IT WAS NOTICED THAT T HE COMPANY HAS SHOWN AN AMOUNT OF RS. 5026604/- AS ADVANCE GIVEN T O SH. ASHOK AGARWAL IN THE CURRENT ACCOUNT THROUGH WHICH DAY TO DAY TRANSACTIONS WERE BEING CARRIED OUT AND THE COMPANY WAS HAVING A CCUMULATED RESERVE AND SURPLUS TO THAT EXTENT. THE AO HELD THA T THE PROVISIONS OF DEEMED DIVIDEND ARE APPLICABLE NOT ONLY TO LOANS AN D ADVANCES BUT RATHER TO ANY PAYMENT IN THE NATURE OF LOANS AND ADVANCES. IN FACT, THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT ARE ALSO APPLICABLE TO DAY TO DAY TRANSACTIONS BETWEEN A COMPANY AND A SHARE H OLDER. ACCORDINGLY, AN ADDITION OF RS. 50,26,604/- WAS MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22) (E) OF THE ACT. 18. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 3.4.3 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION , REMAND REPORT OF THE AO AND ALSO TAKEN A NOTE OF JUDICIAL ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 78 PRONOUNCEMENTS REFERRED BY AO AND APPELLANT. I HAVE ALSO CAREFULLY PERUSED THE ASSESSMENT ORDER PASSED U/S 1 53B R.W.S 143(3) OF THE ACT AND ALSO TAKEN A NOTE OF FA CTUAL MATRIX OF THE CASE. FROM, THE ABOVE TWO ISSUES ARE EMERGES FOR ADJUDICATIONS:- (I) WHETHER THE RE-PAYMENTS BY THE COMPANY AGAINST THE AMOUNT RECEIVED BY IT FROM THE SHAREHOLDER COMES IN PREVIEW OF DEEMED DIVIDEND U/S 2(22){E) OF INCOME TAX ACT. (II) WHETHER THE ADVANCE RS. 29,80,000/- AS NORMAL BUSINESS ADVANCE AGAINST THE PURCHASE OF LAND OR COMES IN PREVIEW OF DEEMED DIVIDEND. NOW THE FIRST ISSUE WHETHER THE RE-PAYMENTS BY THE COMPANY AGAINST THE AMOUNT RECEIVED BY IT FROM THE SHAREHOLDER COMES IN PREVIEW OF DEEMED DIVIDEND U/S 2(22) (E) OF INCOME TAX ACT IS TAKEN FOR ADJUDICATI ON. THE ASSESSEE HAS SUBMITTED THE LEDGER ACCOUNT OF ASSESS EE IN THE BOOKS OF THE COMPANY M/S ASHISH BUILDCON (P) LT D (PB PG 282). THE ENTRY TO ENTRY EXPLANATION WAS ALSO GIVEN BY THE ASSESSEE, FOR WHICH THE AO HAS NOT MADE ANY COMMENTS IN HIS REMAND REPORT. THE LEDGER ACCOUNT O F ASSESSEE IN THE BOOKS OF COMPANY IS LIKE A CURRENT ACCOUNT SHOWING INFLOW AND OUTFLOW OF MONEY IN MIXED FORM F OR THE TRANSACTIONS OF ADVANCE GIVEN OR TAKEN FROM/TO THE ASSESSEE. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 79 FROM THE ABOVE ACCOUNT, I FOUND THAT FIRST TWO PAY MENTS BY THE COMPANY AMOUNTING TO RS. 15,00,000/- AND RS. 6,80,000/- WERE AGAINST THE LAND DEAL/ADVANCE BY TH E COMPANY. THE THIRD ENTRY IS RECEIPT OF AMOUNT BY TH E COMPANY OF RS. 2,00,000/- FROM THE ASSESSEE. THE FO URTH ENTRY DATED 15/05/2010 IS PAYMENT OF RS. 10,00,000/ - BY THE COMPANY TO ASSESSEE. FURTHER, RS. 2,00,000/- WA S RE- PAID BY COMPANY TO THE ASSESSEE ON 15/04/2010 AND BALANCE PAYMENT OF RS. 8,00,000/- WAS TOWARDS THE ADVANCE AGAINST THE LAND. AT THIS STAGE, THE TOTAL ADVANCE BY THE COMPANY TO THE ASSESSEE BECOMES AT RS. 29,80,000/-. SUBSEQUENT TO THIS ENTRY, IN ALL CASES , THE COMPANY RECEIVED PAYMENT FROM THE ASSESSEE FIRST AN D THEN REPAID. THEREFORE, IF THE ADVANCE AMOUNT OF RS . 29,80,000/- IS REMOVED FROM THIS CURRENT ACCOUNT, T HERE COMES NO DEBIT BALANCE IN THIS ACCOUNT AT ANY POINT OF TIME. THE SUBSEQUENT ENTRIES OF THE PAYMENT TO THE ASSESSEE BY THE COMPANY IS ON ACCOUNT OF REPAYMENT OF OLD ADVANCE TAKEN BY THE COMPANY FROM THE ASSESSEE WHICH CANNOT BE PUT UNDER PREVIEW OF DEEMED DIVIDEN D U/S 2(22) (E) OF INCOME TAX ACT. THEREFORE THE ADDI TION OF RS. 50,26,604 - 29,80,000/- = RS. 20,46,604/- IS UNWARRANTED AND UNJUSTIFIED. AS REGARD THE SECOND ISSUE WHETHER THE ADVANCE OF R S. 29,80,000/- BY THE COMPANY TO THE ASSESSEE COMES UN DER THE PREVIEW OF DEEMED DIVIDED. THE ASSESSEE CLAIMS THAT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 80 HE RECEIVED THIS AMOUNT AGAINST THE AGREEMENT TO SA LE OF THE LAND AND SINCE THE ASSESSEE COULD NOT FULL FILL THE CONDITION OF THE SALE AGREEMENT, THE DEAL STOOD CAN CELLED AND AMOUNT WAS REFUNDED BACK BY ADJUSTING THE OUTSTANDING IN THE ADVANCE MADE BY THE ASSESSEE TO THE COMPANY. THE COPY OF THE SALE AGREEMENT WAS FILED B Y THE ASSESSEE, WHICH IS PLACED AT PB PG 277-279. THIS AGREEMENT IS DATED 06-04-2010 AND AS PER THE CONDIT ION MENTIONED IN CLAUSE 4, THE ASSESSEE HAD TO GET THE CONVERSION AND APPROVAL OF LAND BY 31.03.2011 AND I F THE LAND IS NOT CONVERTED AND APPROVED BY 31.03.2011, T HE AGREEMENT STANDS AS CANCELLED. AS A DIRECTOR OF ONE OF THE LEADING DEVELOPMENT AN D CONSTRUCTION COMPANY OF THE CITY, HE WAS WELL AWARE OF THE SITUATION THAT THE CONVERSION AND APPROVAL OF T HE LAND COULD NOT BE OBTAINED. THESE CLAUSES WERE PUT BECAU SE SOME OF THE MONEY TAKEN BY THE APPELLANT FROM THE COMPANY WAS REFUNDED SUBSEQUENTLY. THE IKRARNAMA IS NOTHING BUT AN AFTERTHOUGHT TO JUSTIFY THE LOANS TA KEN BY HIM FROM THE COMPANY AS ADVANCE FOR LAND, TO ESCAPE THE DEEMING PROVISIONS OF SEC. 2(22) (E) OF THE ACT. ON THE OTHER HAND, ARS OF THE APPELLANT HAVE RELIE D ON THE FINDING OF HON. DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PRINTING PVT. LTD. ITA NO. 250/ 2009 DATED 22.9.2010 AND THE ORDER OF THE INCOME TAX SETTLEMENT COMMISSION IN THE CASE OF THE M/S CAREER POINT ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 81 INFOSYSTEMS LTD., SH. PRAMOD KUMAR MAHESHWARI, SH. OM PRAKASH MAHESHWARI AND SH. NAVAL KISHORE MAHESHWARI (S.A. NO. RJ/JP51/2011- 12/28 TO 31-IT) I HAVE CAREFULLY PERUSED THE ORDERED RELIED UPON A ND FIND THAT THE FACTS ADJUDICATED UPON BY AFOREMENTIONED T HE HON. JUDICIAL AUTHORITIES ATE COMPLETELY DISTINCT F ROM THE FACTS OF THE CASE OF THE APPELLANT. ON THE BASIS OF THE EVIDENCE AVAILABLE ON RECORD IT IS SEEN THAT NO BUS INESS TRANSACTION WAS UNDERTAKEN BY THE COMPANY FOR PURCH ASE OF THE LAND AS CLAIMED BY THE APPELLANT, AND THE IK RARNAMA WAS DRAFTED SUBSEQUENTLY TO EVADE THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED IN DETAIL ABOVE AND THE LAW APPLICABLE TO THESE FACTS, THE ADDITION TO THE EXTENT OF RS. 29,80,000/ - U/S 2(22) (E) OF THE ACT IS CONFIRMED. ASSESSEE GETS PA RT RELIEF OF RS. 20,46,604/-(BEING RS. 50,26,604 - 29,80,000/ -). THIS GROUND OF THE ASSESSEE STANDS AS PARTLY ALLOWE D. 19. NOW THE ASSESSEE AS WELL AS THE REVENUE IS IN A PPEALS BEFORE US. THE LD. AR OF THE ASSESSEE HAS SUBMITTED AS UNDER:- (A) THE SIMILAR ISSUE ON THE SAME FACTS AND CIRCUMS TANCES AND IN RESPECT TO ADVANCE FROM SAME COMPANY HAS BEEN DECIDED BY HONBLE ITAT IN THE CASE OF ASSESSEE FOR AY 2010-11 IN ITA NO 810/JP/2014 ORDER DATED 04-03-201 6. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 82 B) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DATED 22.03.2013 (COPY AT PB PAGE 272-281) EXPLAINED TO THE LD. AO AS UNDER: - THE ASSESSEE RECEIVED MONEY FROM THE COMPANY FROM TIME TO TIME AGAINST AGREEMENT TO SALE THE LAND TO THE C OMPANY. WHEN THE 90B PROCEEDINGS COULD NOT BE GOT FROM JDA, THE AGREEMENT WAS CANCELLED AND AMOUNT WAS REFUNDED TO THE COMPANY. THE COPY OF AGREEMENT TO SALE IS ENCLOSED HEREWITH. THE ASSESSEE IS REGULAR DEALER IN THE LAN D AND COMPANY IS ALSO DEALER IN THE LAND. THE ADVANCE TRANSACTION IS NORMAL BUSINESS TRANSACTION. THE N ORMAL BUSINESS ADVANCE CANNOT BE TREATED AS DEEMED DIVIDE ND AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS CREATIVE DYEING AND PRINTING PVT LTD ITA NO 250/20 09 DECISION DATED 22/09/2009 (COPY ENCLOSED) THUS THE ASSESSEE EXPLAINED TO THE LD. AO THAT THE AMOUNT SO RECEIVED FROM THE COMPANY WAS NOT A LOAN WHICH W AS REPAYABLE BACK TO THE COMPANY BUT THE SAME IS RECEI VED AGAINST AGREEMENT TO SALES OF LAND. HOWEVER, THE LA ND COULD NOT BE SOLD TO THE COMPANY AS THE FORMALITIES OF 90 B COULD NOT BE COMPLETED. IN SUPPORT OF THE CLAIM THE COPY OF SALES AGREEMENT EXECUTED BETWEEN ASSESSEE AND COMPANY WAS ALSO SUBMITTED TO THE LD. AO (COPY AT PB PAGE 277-2 79). IT IS RELEVANT TO MENTION HERE THAT THE ASSESSEE AS WE LL AS COMPANY M/S ASHISH BUILDCON PVT. LTD BOTH ENGAGED I N THE BUSINESS OF REAL ESTATE AND DURING NORMAL COURSE OF BUSINESS BOTH THE PERSONS ARE RECEIVING ADVANCE FROM CUSTOME RS AND THEREAFTER SELLING THE PLOTS/LANDS TO THEM, THEREFO RE THIS IS GENERAL PRACTICE OF THE TRADE TO FIRST RECEIVED ADV ANCE FROM THE CUSTOMER AND THEREAFTER SALE THE PLOT/LAND TO T HEM. THIS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 83 IS EVIDENT FROM THE BALANCE SHEET & PROFIT AND LOSS ACCOUNT OF M/S ASHISH BUILDCON PVT. LTD. (COPY AT PB PAGE 2 91-308). SINCE THE LAND UNDER THE SALE AGREEMENT COULD NOT B E GOT APPROVED FOR THE PURPOSE OF 90B FORMALITIES, THE AG REEMENT WAS CANCELLED AND AMOUNT WAS REFUNDED TO THE COMPAN Y. BUT LATER ON ANOTHER LAND WAS SOLD TO THE COMPANY B Y THE ASSESSEE BY EXECUTING THE REGISTERED SALE DEED ON 30.03.2013. (COPY PLACED AT PB PAGE 309-316). THIS SUPPORTIVE EVIDENCE WAS FILED BEFORE LD CIT(A) TO E STABLISH THAT THE AMOUNT RECEIVED BY THE ASSESSEE WAS AGAINS T THE SALE OF THE LAND WAS BONAFIDE AND THIS WAS A GENUIN E AND NORMAL BUSINESS TRANSACTION BETWEEN THE ASSESSEE AN D COMPANY. C) THE COPY OF ASSESSEES LEDGER ACCOUNT IN THE BOO KS OF THE COMPANY IS PLACED AT PB PAGE 283-290. THE ASSESSEE EXPLAINED THAT THE INITIAL AMOUNT OF RS. 29,80,000/ - WAS PAID BY THE COMPANY TO ASSESSEE AS ADVANCE AGAINST LAND TRANSACTIONS AND THE BALANCE PAYMENTS ON VARIOUS DA TES ARE REPAYMENT BY THE COMPANY TO THE ASSESSEE OF THE AMO UNT PAID BY THE ASSESSEE TO THE COMPANY ON EARLIER DATE S. IN OTHER WORDS, THE ASSESSEE PAID CERTAIN AMOUNT TO TH E COMPANY ON VARIOUS DATES AND THE COMPANY REPAID THE SE AMOUNTS TO THE ASSESSEE ON SUBSEQUENT DATES. THERE FORE, IN ANY CASE, THE REPAYMENT BY THE COMPANY OF AMOUNT DU ES TO THE ASSESSEE CANNOT BE DEEMED AS ADVANCE OR LOAN TO SHAREHOLDER. THE ASSESSEE RELIES ON THE FINDINGS OF LD CIT(A) IN THIS REGARD. ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 84 (D) THE EXPRESSION USED IN FIRST PART OF SECTION 2( 22)(E) IS ADVANCE OR LOAN. THE WORD ADVANCE HAS NOT BEEN DEFI NED. IT ORDINARILY MEANS PAYMENT OF CASH OR TRANSFER OF GOO DS FOR WHICH ACCOUNTING MUST BE RENDERED BY THE RECIPIENT AT SOME LATER DATE. THE TRANSACTION OF LOAN INVOLVES LENDIN G AND DELIVERY BY ONE PARTY AND RECEIPT BY ANOTHER PARTY OF SUM MONEY UPON EXPRESS OR IMPLIED AGREEMENT TO REPAY IT WITH OR WITHOUT INTEREST. THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING IN SECTION 2(22)(E) OF THE ACT BE CONSTRU ED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHARE HOLDER E NJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES, BUT IF SUCH LOAN OR ADVANCE IS GIV EN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDE RATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM A SHAREHOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CAN NOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22) OF THE ACT BUT NOT THE CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFI RMED UPON THE COMPANY BY SUCH SHAREHOLDER 2013 (9) TMI 4 45 - ITAT AGRA SHRI KRISHAN MURARI LAL AGARWAL VERSUS DE PUTY COMMISSIONER OF INCOME-TAX (PG 1-11 OF CASE LAWS PA PER BOOK). E) THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WI TH THE WORD LOAN. USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES THE POSITIVE ACT OF LENDING, COUPLED WITH ACCEPTANC E BY THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 85 OTHER SIDE OF THE MONEY AS LOAN: IT GENERALLY CARRI ES INTEREST AND THERE IS AN OBLIGATION OF REPAYMENT. ON THE OTH ER HAND, IN ITS WIDEST MEANING THE TERM ADVANCE MAY OR MAY NOT INCLUDE LENDING. THE WORD ADVANCE IF NOT FOUND IN THE COMPANY OF OR IN CONJUNCTION WITH THE WORD LOAN M AY OR MAY NOT INCLUDE THE OBLIGATION OF REPAYMENT. IF IT DOES, THEN IT WOULD BE A LOAN. THE WORD ADVANCE WHICH APPEAR S IN THE COMPANY OF THE WORD LOAN COULD ONLY MEAN SUCH ADV ANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. T RADE ADVANCES WHICH ARE IN THE NATURE OF MONEY TRANSACTE D TO GIVE EFFECT TO A COMMERCIAL TRANSACTION WOULD NOT F ALL WITHIN THE AMBIT OF THE PROVISIONS OF S. 2(22)(E) OF THE A CT. CIT V/S RAJ KUMAR 318 ITR 462 (DEL). F) UNREGISTERED AGREEMENT:- THE AGREEMENT TO SALE CANNOT BE TREATED AS UNRELIAB LE EVIDENCE ON THE GROUND THAT THE AGREEMENT TO SALE I S NOT REGISTERED. IN THIS REGARD, WE SUBMIT THAT IT IS NO RMAL PRACTICE OF THE ASSESSEE. THE ASSESSEE IS PURCHASIN G THE LAND ON THE BASIS OF UNREGISTERED AGREEMENT TO SALE. THI S IS COMMON PRACTICE OF THE TRADE IN JAIPUR THAT ADVANCE AGAINST PURCHASE OF LAND IS GIVEN ON THE BASIS OF UNREGISTE RED AGREEMENT TO SALES AND REGISTERED SALE DEEDS ARE EX ECUTED WHEN THE POSSESSION OF THE LAND IS TAKEN/COMPLETE P AYMENT TO THE SELLER IS MADE. THE DEPARTMENT IS ACCEPTING THIS PRACTICE OF THE ASSESSEE IN ALL SCRUTINY ASSESSMENT S MADE PRIOR TO SEARCH AS WELL AS ASSESSMENTS FRAMED U/S 1 53A AND THEREFORE NO SEPARATE TREATMENT COULD BE GIVEN FOR THE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 86 UNREGISTERED AGREEMENT TO SALE IN BETWEEN THE ASSES SEE AND COMPANY. G) AGREEMENT NOT FOUND IN SEARCH:- THE LD CIT APPEAL HELD THE AGREEMENT AS UNRELIABLE EVIDENCE ON THE GROUND THAT IT WAS DATED 22.07.2009 BUT NOT FOUND DURING THE COURSE OF SEARCH. IN THIS REGARD WE SUBM IT THAT SEARCH PARTY HAS NOT PREPARED INVENTORY FOR THE DOC UMENTS OR BOOKS OF ACCOUNTS FOUND AT THE TIME OF SEARCH. T HE SEARCH PARTY PREPARED AN INVENTORY ONLY OF THOSE DOCUMENTS WHICH IT SEIZED. FROM THE INVENTORY PREPARED BY THE SEARC H PARTY YOUR HONOR WOULD FOUND SO. THE ASSESSEE IS A BIG CO LONIZER AND HAD THOUSANDS OF AGREEMENT TO SALE AND DOCUMENT S RELATING TO PURCHASE OF LAND, CONVERSION OF LAND AN D SALES OF PLOT. NONE OF THESE DOCUMENTS ARE APPEARING IN THE INVENTORY PREPARED BY THE SEARCH PARTY. IT IS ALSO RELEVANT TO MENTION THAT THE ASSESSEES ASSESSMENT FOR THE AY 2 004-05, 2005-06, 2006-07 AND 2007-08 WERE COMPLETED U/S 143 (3) OF IT ACT AFTER DETAILED SCRUTINY MUCH BEFORE THE S EARCH AND SEVERAL AGREEMENTS TO SALES WERE FILED BEFORE THE A O DURING THE COURSE OF SCRUTINY ASSESSMENTS, THEREFORE, THE EXISTENCE OF THESE DOCUMENTS CANNOT BE DENIED. SINCE THESE DOCUMENTS WERE ALSO NOT INCLUDED IN THE INVENTORY P REPARED BY THE SEARCH PARTY. IT IS THE WISDOM OF SEARCH PAR TY WHICH DOCUMENT THEY CHOOSE TO SEIZE AND THE ASSESSEE CANN OT INTERFERE IN THE DECISION OF SEARCH PARTY. H) THE AGREEMENT IS VOID-AB-INITIO AS THE DIRECTOR KNEW THAT THE LAND USED WAS NOT GOING TO BE CONVERTED:- ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 87 IN THIS REGARD THE ASSESSEE HAS SUBMITTED A DETAIL ED EXPLANATION BEFORE LD CIT APPEAL WHICH WAS NOT CONS IDERED BY HIM IN JUDICIAL PERCEPTION. SHRI ASHOK AGARWAL W AS EXPECTING THE NEW TOWNSHIP POLICY AND HUNDREDS OF O THER COLONIZER/BUILDERS WERE UNDER BONAFIDE BELIEF THAT THE JDA WOULD ALLOW THE CONVERSION OF THE LAND. THE ASSESSE E HAS FILED DETAILED EXPLANATION ON THE SAME MATTER IN AY 2010-11 BEFORE LD CIT(A)/ITAT AS UNDER:- DURING THE YEAR UNDER CONSIDERATION APPLICATION FO R CONVERSION OF LAND AT VILLAGE AJAYRAJPURA, TEH. SANGANER, UNDE R SECTION 90B OF LAND REVENUE ACT COULD NOT BE FILED BY THE ASSE SSEE DUE TO THE FOLLOWING REASONS: - THE ASSESSEE ENTERED INTO AGREEMENT WITH COMPANY M/ S ASHISH BUILDCON PVT. LTD ON 22.07.2009. AT THAT POINT OF T IME APPLICATION FOR CONVERSION OF LAND AND FOR 90B PROCEEDINGS FOR LESS THAN 25 ACRE WAS NOT ADMITTING BY THE JDA. NEWS PAPER CUTTI NG IS ENCLOSED HEREWITH WHICH SHOWS THAT MORE THAN 300 CA SES OF SUCH TYPE (HAVING LAND LESS THAN 25 ACRE) WERE PENDING B EFORE JDA AND JDA WAS REJECTING SUCH CASES. FURTHER THE DRAFT MAS TER PLAN OF JAIPUR WAS PUBLISHED BY NOTIFICATION ON 10.11.2009. THE COPY OF NOTIFICATION OF PUBLICATION OF MASTER PLAN IS ENCLO SED HEREWITH. AS PER DRAFT MASTER PLAN OF JDA THE LAND AT VILLAGE AJ AYRAJPURA WAS FALLING IN U2 ZONE (UNBANISABLE LAND). AS PER RULE S PROPOSED IN THE DRAFT MASTER PLAN THE MINIMUM AREA REQUIRED FOR UNBANISABLE LAND (U2) OF INTEGRATED RESIDENTIAL TOWNSHIP WAS 10 HECTARE WHILE THE LAND OF THE ASSESSEE WAS ONLY 1.01667 HECTARE. AFTER THE PUBLISHING OF DRAFT MASTER PLAN, THE JDA WAS NOT AC CEPTING THE APPLICATION FOR 90B PROCEEDING FOR THE LAND LESS TH AN 10 HECTARES. WE ARE ENCLOSING HEREWITH THE RELEVANT PAGE OF MAST ER PLAN WHEREIN THE MINIMUM AREA REQUIRED FOR INTEGRATED RE SIDENTIAL TOWNSHIP IS MENTIONED. THE ASSESSEE WAS UNDER APPREHENSION THAT HIS APPLIC ATION WOULD ALSO BE REJECTED BY JDA THEREFORE INSTEAD OF TAKING A ADVERSE DECISION FROM JDA, IT WAS THOUGHT PROPER TO KEEP TH E APPLICATION IN ABEYANCE TILL THE PRONOUNCEMENT OF PRIVATE TOWNS HIP POLICY WHICH WAS MUCH AWAITED AT THAT TIME JUST LIKE PRONO UNCEMENT OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 88 REGULARIZATION OF PLOTS IN PRATHVIRAJ NAGAR SCHEME NOW A DAYS. IT IS ALSO RELEVANT TO MENTION HERE THAT AT THAT POINT OF TIME SEVERAL REPRESENTATIONS WERE MADE BY THE VARIOUS ASSOCIATIO N OF THE BUILDERS AND PRIVATE COLONIZERS FOR CONVERSION AND 90B PROCEEDINGS OF THE LANDS LESS THAN 10 HECTARES BUT AT THAT TIME PRIVATE TOWNSHIP POLICY WAS UNDER PRONOUNCEMENT BY THE GOVERNMENT. THE ASSESSEE WAS EXPECTING THE RELIEF B Y THE GOVERNMENT FOR SMALL BUILDERS IN PRIVATE TOWNSHIP P OLICY WHICH WAS GOING TO BE PRONOUNCED VERY SOON BUT WHICH WAS ALSO DELAYED BY GOVERNMENT FOR ONE OR ANOTHER REASONS AND LATER ON THE PRIVATE TOWNSHIP POLICY WAS PRONOUNCED VIDE LETTER NO F.3 (77)UDD/3/20102 JAIPUR, DATED: 28/06/2010. HERE AL SO NO RELIEF TO THE SMALL BUILDERS WAS NOT GIVEN AND THE REQUIREMENT OF MINIMUM LAND WAS KEPT 10 HECTARES. LATER ON 23.08.2012 THE ASSESSEE FILED APPLICATION UNDER SECTION 90B OF LAND REVENUE ACT WHICH WAS REJECTED BY JDA. THE COPY OF APPLICATION AND LETTER RECEIVED FROM JDA IS ENCLOSE D HERE WITH. WHEN FINAL OUTCOME OF THE EFFORTS CAME NEGATIVE, TH E ASSESSEE SOLD ANOTHER LAND TO THE COMPANY DULY 90B PROCEEDINGS CO MPLETED. THEREFORE, IN VIEW OF THE ABOVE EXPLANATION THE AMO UNT OF RS. 50,26,604/- CANNOT BE ASSESSED AS INCOME OF THE ASSESSEE U/S 2(22)(E) OF INCOME TAX ACT. 20. AT THE OUTSET, THE LD CIT DR HAS VEHEMENTLY SUP PORTED THE ORDER OF THE ASSESSING OFFICER. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. AN AMOUNT OF RS 50,26,604 HAS BEEN REFLECTED AS AN ADVANCE GIVEN TO THE ASSESSEE IN THE BOOKS OF AC COUNTS OF M/S ASHISH BUILCON PRIVATE LIMITED. THE SAID ADVANCE IS REFLEC TED IN THE CURRENT ACCOUNT OF THE ASSESSEE MAINTAINED WITH M/S ASHISH BUILCON PRIVATE LIMITED THROUGH WHICH VARIOUS TRANSACTIONS OF DEPOS ITS AND WITHDRAWALS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 89 WERE MADE DURING THE YEAR. THE AO HELD THAT THE PRO VISIONS OF DEEMED DIVIDEND ARE APPLICABLE TO DAY-TO-DAY TRANSACTIONS BETWEEN THE COMPANY AND ITS SHAREHOLDERS AND ACCORDINGLY BROUGHT THE WH OLE OF AMOUNT OF RS 50,26,604 TO TAX AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THE LD CIT(A) AFTER GOING THROUGH THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S ASHISH BUILCON PRIVATE LIMITED AND THE EXPLANATION GIVEN BY THE ASSESSEE IN RESPECT OF EACH OF THE ENTRIES HAS GIVEN A CLEAR FINDING OF FACT THAT AN AMOUNT OF RS 29,80,000 IS TOWARDS THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE FOR PURCHASE OF LAND AND RS 20,46,604 IS ON ACCOUNT OF REPAYMENT OF OLD ADVANCE TAKEN BY THE CO MPANY FROM THE ASSESSEE. NO CONTRARY MATERIAL OR EXPLANATION HAS BEEN SUBMITTED BEFORE US TO DISPLACE THE SAID FINDING OF THE LD CI T(A) AND WE SEE NO REASON TO INTERFERE WITH THE SAID FINDING OF FACTS. NOW, COMING TO THE PROVISIONS OF SECTION 2(22)(E) O F THE ACT, IT IS THE LOAN OR ADVANCE GIVEN BY THE COMPANY TO ITS SHAREHO LDER WHICH CAN BE BROUGHT TO TAX AS DEEMED DIVIDEND IN THE HANDS OF T HE SHAREHOLDERS. WHERE THE COMPANY HAS TAKEN ANY LOAN OR ADVANCES FR OM A SHAREHOLDER AND REPAYS THE SAME SUBSEQUENTLY AND A CLEAR NEXUS IS ESTABLISHED, SUCH REPAYMENT RELATES BACK TO THE ORIGINAL LOAN/ADVANCE TRANSACTION AND CANNOT BE SEEN AS AN INDEPENDENT TRANSACTION OF FRE SH ADVANCEMENT OF ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 90 LOAN/ADVANCE BY THE COMPANY TO THE SHAREHOLDER. IN THE INSTANT CASE, THE LD CIT(A) HAS GIVEN A CLEAR FINDING THAT THE AM OUNT OF RS 20,46,604 PAID BY THE COMPANY IS TOWARDS REPAYMENT OF OLD ADV ANCES TAKEN BY THE COMPANY FROM THE ASSESSEE, IN SUCH A SITUATION, THE PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY NOT ATTRACTED IN RESPECT OF RS 20,46,604. NOW COMING TO AMOUNT OF RS 29,80,000 WHICH IS TOWAR DS THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE FOR PURCHASE O F LAND IS CONCERNED, THE ASSESSEE SUBMITTED A COPY OF AGREEMENT TO SALE/ IKARNAMA DATED 6.4.2010 AS PER WHICH THE ASSESSEE HAD AGREED TO SE LL 2.602 HECTARES OF AGRICULTURAL LAND IN VILLAGE BAMANWAS, TEHSIL VIRAT NAGAR, DISTT JAIPUR TO M/S ASHISH BUILDCON PVT. LTD. FOR RS 40 LACS. AS P ER THE IKARNAMA, THE ASSESSEE WAS REQUIRED TO GET 90B CONVERSION FORMALI TIES DONE BEFORE 31.3.2011. IT WAS EXPLAINED BY THE ASSESSEE THAT HE WAS EXPECTING THE NEW TOWNSHIP POLICY TO BE ANNOUNCED AS WAS THE CASE WITH OTHER COLONIZER/BUILDERS AND WAS UNDER A BONAFIDE BELIEF THAT THE JDA WOULD ALLOW THE CONVERSION OF LAND. UNFORTUNATELY, THE L AND UNDER THE SALE AGREEMENT COULD NOT GOT 90B APPROVAL FROM THE JDA A ND THEREAFTER THE AGREEMENT WAS CANCELLED AND AMOUNT WAS REFUNDED TO THE COMPANY. IT IS NOTED THAT BOTH ASSESSEE AND M/S ASHISH BUILDCON ARE ENGAGED IN THE BUSINESS OF REAL ESTATE AND SIMILAR TRANSACTIONS HA VE BEEN UNDERTAKEN BY ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 91 THE ASSESSEE WITH M/S ASHISH BUILDCON PRIVATE LIMIT ED IN THE EARLIER YEARS AND SUBSEQUENT YEARS AS WELL. WE ARE THEREFORE OF THE VIEW THAT THESE ARE NORMAL BUSINESS TRANSACTIONS WHERE THE MONEY HA S BEEN ADVANCED BY THE COMPANY FOR PURCHASE OF LAND AND THE SAME CA NNOT BE DEEMED AS DIVIDEND IN THE HANDS OF THE ASSESSEE. IN SOME CASES, THE SALE TRANSACTION HAS FRUCTIFED BY COMPLYING WITH THE NEC ESSARY CONDITIONS/FORMALITIES IN TERMS OF REGISTERED SALE DEED AND IN SOME CASES, DUE TO NON-FULFILLMENT OF SPECIFIED CONDITIO NS, THE AGREEMENT MAY BE CANCELLED. WE DO NOT AGREE WITH THE CONTENTION OF THE LD CIT(A) THAT WHERE THE AGREEMENT TO SELL IS NOT REGISTERED AND N OT FOUND DURING THE SEARCH, THE AUTHENCITY OF THE AGREEMENT WILL BE IN DOUBT AND THE ASSESSEE WOULD BE PRECLUDED IN PRODUCING THE SAME I N SUPPORT OF ITS CONTENTION ESPECIALLY GIVEN THE FACT THAT THERE ARE REGULAR AND SIMILAR BUSINESS TRANSACTIONS ENTERED INTO BETWEEN THE ASSE SSEE AND M/S ASHISH BUILDCON. NOTHING HAS BEEN BROUGHT ON RECORD TO SU GGEST THAT M/S ASHISH BUILCON PVT LIMITED HAS NEGATED THE EXISTENC E OF THE SAID AGREEMENT. WHAT IS IMPORTANT TO EXAMINE IS THE PUR POSE AT THE POINT OF TIME WHEN THE MONEY WAS ADVANCED BY THE COMPANY. W HERE THE PURPOSE IS TO CARRY OUT A BUSINESS TRANSACTION FOR THE BENEFIT OF THE COMPANY, THE AMOUNT OF ADVANCE WILL BE TREATED AS N ORMAL BUSINESS ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 92 ADVANCE AND CANNOT BE TERMED AS DEEMED DIVIDEND IN THE HANDS OF THE SHAREHOLDERS. THE DECISION OF HONBLE DELHI HIGH C OURT IN CASE OF CREATIVE DYEING AND PRINTING PVT. LTD. (SUPRA) SUPP ORTS THE CASE OF THE ASSESSEE. FURTHER, IT IS NOTED THAT IN RESPECT OF A SIMILAR TRANSACTION ENTERED BETWEEN THE ASSESSEE AND M/S ASHISH BUILDCO N IN AY 2010-11, THE COORDINATE BENCH HAS DECIDED IN FAVOUR OF THE A SSESSEE AND THE RELEVANT FINDINGS ARE AS UNDER: 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ON VERIFICATION OF COPY OF ACCOUNTS PLACED AT PAGES 38 TO 39 OF THE PAPER BOOK, IT IS SEEN THAT ASSESSEE H AD GIVEN MONEY TO THE COMPANY. THE OPENING BALANCE AS ON 1.4 .2009 WAS RS. 1,12,17,000/-. THEREAFTER, HE WITHDREW MONE Y FROM THE COMPANY UPTO 15.7.2009. ON 18.07.2009 THE ASSES SEE AGAIN PAID TO COMPANY RS. 7 LAKHS. THEREAFTER ASSES SEE WITHDREW VARIOUS AMOUNTS FROM THE COMPANY. ON 21.8. 2009 AGAIN HE PAID RS.2 LAKHS TO COMPANY, RS. 9.5 LAKHS ON 28.07.2009, RS. 3 LAKHS ON 13.10.2009, RS 1.25 LAKH S ON 15.10.2009, RS. 5 LAKHS ON 26.10.2009, RS. 5 LAKHS ON 29.10.2009, RS. 20 LAKHS ON 10.02.2010 AND RS. 60 L AKHS ON 10.3.2010 (RS. 20 LAKHS EACH) AND RS.13 LAKHS ON 10 .03.2010 AND RS. 1.25 LAKHS ON 10.3.2010 WHICH SHOW THAT THE RE ARE NUMBERS OF TRANSACTIONS BETWEEN THE ASSESSEE AND CO MPANY. FINALLY, THE ASSESSEES ACCOUNTS HAS BEEN SQUARED U P. THE ASSESSEE AND COMPANY ARE IN REAL ESTATE BUSINESS. I T IS A GENERAL PRACTICE IN THE LINE OF BUSINESS THAT MOST OF THE LAND ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 93 ARE PURCHASED AND SOLD ON AGREEMENT TO SALE BASIS T O SAVE THE STAMP DUTY AND TO INCREASE THE PROFIT ON THE TRANSA CTIONS. THESE FACTS HAVE BEEN ACCEPTED BY THE AO IN SCRUTIN Y ASSESSMENT ALSO IN NUMBER OF YEARS. THE CONDITION L AID DOWN IN THE SECTION 2(22)(E) ARE SQUARELY APPLIED IN CAS E OF THE ASSESSEE BUT ONLY ISSUE DISPUTED IS WHETHER THESE A DVANCES WERE LOAN FOR BUSINESS PURPOSES OR OTHERWISE. THE P RIMA FACIE COPY OF ACCOUNTS IN THE BOOKS OF THE COMPANY SHOWS THAT ASSESSEE HAD PAID MUCH MORE THAN AMOUNT RECEIVED FR OM THE COMPANY. THE TRANSACTIONS WERE REGULAR. THE ASSESSE E PRODUCED THE EVIDENCE BEFORE THE LOWER AUTHORITIES TO JUSTIFY THE TRANSACTION AS A BUSINESS TRANSACTION ON THE BA SIS OF AGREEMENT TO SALE DATED 22.7.2009. THERE WERE CERTA IN CONDITIONS AS PER THIS IKRARNAMA, WHICH COULD NOT B E FULFILLED BY THE ASSESSEE BUT IT DOES NOT MEAN THAT ASSESSEE S LOANS AND ADVANCES ARE NOT FOR BUSINESS PURPOSES. THE LD. A/R OF THE ASSESSEE HAS EXPLAINED THE REASONS FOR NOT GETTING 90B DONE OF AGRICULTURAL LAND AT VILLAGE AJAYRAJPURA, TEHSIL SA NGANER AS DRAFT MASTER PLAN GOT CHANGED BY THE JDA BY DRAFT NOTIFICATION DATED 10.11.2009 WHEREIN IT HAS BEEN D ECIDED BY THE JDA THAT LAND USE UNDER 90B WAS TO BE APPROVED NOT LESS THAN 25 ACRES BUT IN FINAL MASTER PLAN THIS AREA HA S BEEN REDUCED TO 10 HECTARES. THE ASSESSEE FILED APPLICAT ION ON 23.08.2012 UNDER SECTION 90B OF THE LAND REVENUE AC T BEFORE THE JDA WHICH WAS REJECTED BY THE JDA. THE CASE LAW S RELIED ON BY THE LD. A/R ARE SQUARELY APPLICABLE ON THE FA CTS OF THE CASE. THEREFORE, WE HOLD THAT TRANSACTIONS MADE BY THE ASSESSEE AND THE COMPANY ARE FOR BUSINESS PURPOSES AND ARE ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 94 NOT DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE A CT. ACCORDINGLY, WE ALLOW THE ASSESSEES APPEAL AND REV ERSE THE ORDER OF LD. CIT (A). IN LIGHT OF ABOVE, WE ARE OF THE OPINION THAT THE A DVANCE OF RS. 29,80,000 GIVEN BY THE COMPANY TO THE ASSESSEE IS F OR BUSINESS PURPOSES TOWARDS PURCHASE OF LAND AND THE SAME CANN OT BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AN D DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 22. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.10.2016 DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03.10. 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: ITA 778 & 847/JP/2015_ ASHOK KUMAR AGARWAL VS ACIT 95 1. VIHYKFKHZ@ THE APPELLANT- SHRI ASHOK KUMAR AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT/DCIT, CENTRAL CIRCLE-3, JA IPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 778 & 847/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR