Shri Mahesh Ramlabhaya Varma, Ahmedabad V. The ACIT.,Cent.Circle-2(4), Ahmedabad

ITSSA 96/AHD/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2181 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Gift; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Additional evidence; Fair market value; Competent authority; Block assessment; Tax effect; Capital receipt
• Section: 153A; 80IB; 32; 131; 145; 132; 12

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER IT(SS)A NO. 96/AHD/2011 / ASSESSMENT YEAR: 2007-08 & C.O. NOS. 84 & 85/AHD/2011 (IN IT(SS)A NOS. 190 & 191/AHD/2011) / ASSESSMENT YEAR: 2006-07 SHRI MAHESH RAMLABHAYA VARMA 8, HARIOM AVENUE, 31-B, GOVT. SERVANTS SOCIETY, C.G.ROAD, AHMEDABAD .. APPELLANT VS ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. RESPONDE NT & IT(SS)A NOS. 190 & 191/AHD/2011 / ASSESSMENT YEAR: 2006-07 ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI MAHESH RAMLABHAYA VARMA 8, HARIOM AVENUE, 31-B, GOVT. SERVANTS SOCIETY, C.G.ROAD , AHMEDABAD .. RESPONDENT PAN : AAPPV6503N IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 2 - & IT(SS)A NOS. 97 & 98/AHD/2011 / ASSESSMENT YEAR: 2006-07 & 2007-08 & C.O. NOS. 82 & 83/AHD/2011 (IN ITA NOS. 188 & 189/AHD/2011) / ASSESSMENT YEAR: 2006-07 SHRI RAVI RAMLABHAYA VARMA 8, HARIOM AVENUE, 31-B, GOVT. SERVANTS SOCIETY, C.G.ROAD, AHMEDABAD .. APPELLANT VS ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. RESPONDE NT & IT(SS)A NOS. 188 & 189/AHD/2011 / ASSESSMENT YEAR: 2006-07 ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI RAVI RAMLABHAYA VARMA 31-B, GOVT. SERVANT SOCIETY, NR. MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD .. RESPONDENT PAN : AAPPV6505L & IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 3 - IT(SS)A NOS. 192 & 193/AHD/2011 / ASSESSMENT YEAR: 2006-07 ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI RAJNI R. VARMA 31-B, GOVT. SERVANT SOCIETY, NR. MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD .. RESPONDENT & ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI RAJNI R. VARMA (HUF) 31-B, GOVT. SERVANT SOCIETY, NR. MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD .. RESPONDENT & C.O. NOS. 86 & 87/AHD/2011 (IN ITA NOS. 192 & 193/AHD/2011) / ASSESSMENT YEAR: 2006-07 ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI RAJNI R. VARMA 31-B, GOVT. SERVANT SOCIETY, NR. MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD .. RESPONDENT IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 4 - & ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. APPELLANT VS SHRI RAJNI R. VARMA (HUF) 31-B, GOVT. SERVANT SOCIETY, NR. MUNICIPAL MARKET, NAVRANGPURA, AHMEDABAD .. RESPONDENT PAN : AAPPV6502P & IT(SS)A NOS. 194, 195 & 1481/AHD/2011 / ASSESSMENT YEARS: 2006-07, 2007-08 & 2008-09 RALSON INFRASTRUCTURE PVT. LTD. 21, HARIOM AVENUE, 31-B, GOVT. SERVANTS SOCIETY, C.G.ROAD, AHMEDABAD .. APPELLANT VS ACIT, CENTRAL CIRCLE 2 (4), AHMEDABAD .. RESPO NDENT PAN : AACCR8671F ASSESSEE(S) BY : : SHRI S. N. SOPARKAR, URVASHI SHODHAN WITH P. M. MEHTA, AR REVENUE BY : : WRITTEN SUBMISSION , SHRI SANJAY AGRAWAL, CIT.D.R. / DATE OF HEARING 26/05/2016 /DATE OF PRONOUNCEMENT 15/06/2016 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 5 - / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: ALL THESE EIGHTEEN APPEALS (12 APPEALS AND 6 CROSS OBJECTIONS) FILED BY FOUR DIFFERENT ASSESSEES ARE DIRECTED AGAI NST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, AHMEDABAD FOR ALL YEARS. SINCE ALL THESE APPEALS PERTAIN TO FAMILY GROUP, TH EREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN IT(SS)A NO.96/AHD/2011 FOR A.Y. 2007-08 IN C ASE OF SHRI MAHESH R. VARMA, THE ASSESSEE HAS TAKEN FOLLOWING G ROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS.6 ,13,921/- MADE BY THE ASSESSING OFFICER BEING CASH FOUND DURI NG THE COURSE OF SEARCH AT THE RESIDENCE OF THE APPELLANT, INSPITE OF THE FACT THAT THE SAID CASH BELONGED TO RALSON INFRASTRUCTURE PVT. LTD, DULY RECORDED IN THE REGUL AR AUDITED BOOKS OF ACCOUNT OF THE AFORESAID COMPANY IN WHICH THE APPELLANT IS ONE OF THE DIRECTORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.40,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF CASH FOUND DURING THE COURSE OF SEARCH AT THE RESID ENCE OF THE APPELLANT, EVEN THOUGH IT WAS REASONABLY EXPLAI NED BY THE APPELLANT AS ATTRIBUTABLE TO THE PAST SAVINGS O F HIS WIFE, AND HAVING REGARD TO THE ACT THAT THE AFORESAID CAS H WAS NOT SEIZED BY THE DEPARTMENT. 3. IN IT(SS)A NO.190/AHD/2011 FOR A.Y. 2006-07 IN CASE OF SHRI MAHESH R. VARMA, THE REVENUE HAS TAKEN FOLLOWING GR OUNDS OF APPEAL:- IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 6 - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AN D CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS. 29,35,166/- ON ACCOUNT OF LOOSE PAPER NO. 3 OF ANNE XURE- A/1 WHEN SUCH NOTINGS PERTAIN TO THE ASSESSEE ONLY, AND NOT TO THE HUFS. 2. THE ID. CIT(APPEAL) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 10 LACS TOWARDS THE SALE OF BLOCK OF LA ND BEARING SURVEY NO.150 AT THALTEJ, AS THE LAND IS IN THE NAM E OF INDIVIDUALS ONLY, AND NOT IN THE NAME OF HUFS. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REC EIPT OF RS. 2,36,11,000/- FROM SHRI BHAVESH CHANDULAL DID NOT CONSTITUTE THE UNACCOUNTED INCOME. IN PAGE NO. 3 & 4 OF ANNEXURE-A/1, THE DETAILS OF RECEIPTS AND EXPENSES HAVE BEEN WRITTEN DATE WISE. FOR EXAMPLE RS. 50,00,000/- WAS RECEIVED ON 18/08/2005 AGAINST THIS RS. 20,00,000/- WAS GIVEN TO SUKHDEVBH AI AND RS. 25,00,000/- WAS GIVEN TO WAGHAJIBHAI. IT MEANS THE ASSESSEE HAD RECEIVED THE AMOUNT FROM SHRI BHAVESH CHANDULAL WAS UTILIZED FOR INCURRING SUCH EXPENSES. THESE AMOUNTS WERE NOT AVAILABLE WITH THE ASSESSEE TO PAY BACK TO SHRI BHAVESH CHANDULAL. IN OTHER WORDS, THE SOURCE OF AMOUNT PAID BACK TO SHRI BHAVESH CHANDULA L WAS NOT EXPLAINED BY THE ASSESSEE. AS THERE IS NO EVIDE NCE OF PAYING BACK THE AMOUNT TO SHRI BHAVESH CHANDULAL, T HE AMOUNT REPRESENTS UNACCOUNTED INCOME OF THE ASSESSE E. 4. THE CIT(A) HAS ERRED IN HOLDING THAT THE THE LAN D BELONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGA L HEIRS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECU TED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBE RS HAVE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 7 - 4. IN IT(SS)A NO.191/AHD/2011 FOR A.Y. 2006-07 IN CASE OF SHRI MAHESH R. VARMA, THE REVENUE HAS TAKEN FOLLOWING GR OUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL AND DIRECTING TO TREAT THE PROTECTIVE ADDITI ON OF RS. 20,00,000/- TO BE MADE IN SUBSTANTIVE CAPACITY, BY CONCLUDING THAT THE LAND HAVING SURVEY NO. 147 & 15 0 BEEN PURCHASED BY THE FATHER OF THE KARTA OF THE HUF, AC QUIRED THE CHARACTER OF THE HUF PROPERTY IN THE HANDS OF SUCCESSORS WHO INHERITED THE PROPERTIES THROUGH WIL L IN THEIR CAPACITY AS LEGAL HEIRS. 2. THE CIT(A) HAS ERRED IN HOLDING THAT THE LAND BE LONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGAL HEI RS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECUTED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBERS HA VE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. 5. IN C.O. NO.84/AHD/2011 (IN ITA NO.190/AHD/2011) IN CASE OF SHRI MAHESH R. VARMA, THE ASSESSEE HAS TAKEN FOLLOW ING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE REALIZED AND HELD THAT EVEN ACCO RDING TO THE ALLEGATIONS OF THE A.O., THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, EVEN ON THE BASIS OF ASSESSING OFFICER'S THESE ALLEGATIONS, THEY WOULD B E CAPITAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 8 - ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE TREATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVEN UE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALL EGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSE TS HAD TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2 006-07, NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WAS TAXABLE IN A.Y. 2006-07 AND AT ANY RAT E, THE DEPARTMENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING T O TAX THE GROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWING ANY DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 6. IN C.O. NO.85/AHD/2011 (IN ITA NO.191/AHD/2011) IN CASE OF SHRI MAHESH R. VARMA, THE ASSESSEE HAS TAKEN FOLLOW ING GROUNDS. THE CONCISE GROUNDS OF C.O. ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) SHOULD HAVE HELD THAT THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, THEY WOULD BE CAPI TAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE T REATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVENUE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALLEGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSETS HAD TA KEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07, NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WA S TAXABLE IN A.Y. 2006-07 AND AT ANY RATE, THE DEPART MENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING TO TAX THE G ROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWI NG ANY IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 9 - DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE CIT (A) SHOULD HAVE FURTHER REALIZED AND HELD THAT FOR GIVING EFFE CT TO THE POINTS RAISED IN GROUND NO. 1 ABOVE, IN VIEW OF THE GUJARAT HIGH COURT DECISION IN GUJARAT GAS COMPANY LTD. V. CIT (2000) 245 ITR 84 (GUJ.) THERE IS NO BAR AGAINST TH E ASSESSED INCOME GOING BELOW THE RETURNED INCOME IN WHEN THE ASSESSMENTS WERE MADE U/S. 143(3). 3. WITHOUT PREJUDICE TO THE GROUNDS NO. 1 AND 2 AB OVE, THE CIT(A) ERRED IN RECORDING DIRECTION TO THE A.O IN T HE FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORDER DATED 1- 12- 2010. 'TO ASSESS THE SALES PROCEEDS FROM SHRI CHAND RAKANT K. SHAH IN THE HANDS OF RAJNI R. VARMA HUF, MAHESH R. VARMA HUF AND RAVI R. VARMA HUF IN EQUAL PROPORTION . 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) ERRED IN RECORDING AN OBSERVAT ION IN THE FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORD ER DATED 1-12-2010 INDICATING THAT THE A.O. WOULD BE FREE TO INVESTIGATE ACTUAL SALES PROCEEDS OF SURVEY NO. 147 FINALLY SOLD TO CHANDRAKANT K. SHAH. 5. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF APPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE FURTHER HELD THAT EVEN THE RETUR NED FIGURE OF RS. 20.00 LACS WAS NOT TAXABLE IN THE HAN DS OF THE ASSESSEE IN VIEW OF IN VIEW OF SECTION 51 AND ALSO THE FACT THAT THE CIT(A) HIMSELF HAD REPEATEDLY HELD THAT SI NCE SALE TO BHAVESHKUMAR CHANDULAL HAD FINALLY NOT TAKEN PLA CE, EVEN THE FORFEITED AMOUNT OF RS. 60.00 LACS DIVIDED EQUALLY IN 3 HUFS OF 3 BROTHERS NAMELY MAHESH R VARMA, RAJN I R VARMA AND RAVI R VARMA] WAS NOT TAXABLE AT ALL. 7. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, THE DEPARTMENTAL APPEAL DESERVES TO BE DISMISSED IN LIM INE AS NOT MAINTAINABLE BECAUSE IT IS FILED IN CONTRAVENTI ON OF THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 10 - BOARD INSTRUCTION NO. 5 OF 2008 DATED 15-5-2008 WHO SE PARA MARKED 12 SPECIFICALLY STATES THAT IT IS AN IS SUE U/S. 268A[1] AND HENCE, IT IS NOT ONLY BINDING BUT ALSO HAS A STATUTORY BACKING, IN SO FAR AS IN THE CASE OF ASSE SSEE'S HUF TAX EFFECT ATTRIBUTABLE TO THE RELEVANT SUM BEING T AXED ON PROTECTIVE BASIS OR ON SUBSTANTIVE BASIS, WOULD BE NEGLIGIBLE [SAY NIL]. 7. IN IT(SS)A NO.97/AHD/2011 FOR A.Y. 2006-07 IN C ASE OF SHRI RAVI RAMLABHAYA VARMA, THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS.49,97,832/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT CASH OF RS.49,97,832/- FOUND AT THE TIM E OF SEARCH IN THE LOCKER NO.919 OF THE APPELLANT WITH R AJKOT NAGARIK SAHAKARI BANK LTD., MITHAKALI AHMEDABAD, REMAINED UNEXPLAINED, INSPITE OF THE FACT THAT THE SAID CASH BELONGED TO RALSON INFRASTRUCTURE PVT. LTD, DULY RE CORDED IN THE REGULAR AUDITED BOOKS OF ACCOUNT OF THE AFORESA ID COMPANY IN WHICH THE APPELLANT IS ONE OF THE DIRECT ORS. 8. IN IT(SS)A NO.98/AHD/2011 FOR A.Y. 2007-08 IN CA SE OF SHRI RAVI RAMLABHAYA VARMA, THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS.11,04,193/- MADE BY THE ASSESSING OFFICER BEING CASH FOUND AT THE TIME OF SEARCH AT THE RESIDENCE OF THE APPELLANT, INSPITE OF THE FACT THAT THE SAID CASH BELONGED TO RALSON INFRASTRUCTURE PVT. LTD, DULY RECORDED IN THE REGUL AR AUDITED BOOKS OF ACCOUNT OF THE AFORESAID COMPANY IN WHICH THE APPELLANT IS ONE OF THE DIRECTORS. 9. IN IT(SS)A NO.188/AHD/2011 FOR A.Y. 2006-07 IN C ASE OF SHRI RAVI RAMLABHAYA VARMA, THE REVENUE HAS TAKEN FOLLOW ING GROUNDS OF APPEAL:- IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 11 - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AN D CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS. 29,35,166/- ON ACCOUNT OF LOOSE PAPER NO. 3 OF ANNE XURE- A/1 WHEN SUCH NOTINGS PERTAIN TO THE ASSESSEE ONLY, AND NOT TO THE HUFS. 2. THE ID. CIT(APPEAL) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 10 LACS TOWARDS THE SALE OF BLOCK OF LA ND BEARING SURVEY NO.150 AT THALTEJ, AS THE LAND IS IN THE NAM E OF INDIVIDUALS ONLY, AND NOT IN THE NAME OF HUFS. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REC EIPT OF RS. 2,36,11,000/- FROM SHRI BHAVESH CHANDULAL DID NOT CONSTITUTE THE UNACCOUNTED INCOME. IN PAGE NO. 3 & 4 OF ANNEXURE-A/1, THE DETAILS OF RECEIPTS AND EXPENSES HAVE BEEN WRITTEN DATE WISE. FOR EXAMPLE RS. 50,00,000/- WAS RECEIVED ON 18/08/2005 AGAINST THIS RS. 20,00,000/- WAS GIVEN TO SUKHDEVBH AI AND RS. 25,00,000/- WAS GIVEN TO WAGHAJIBHAI. IT MEANS THE ASSESSEE HAD RECEIVED THE AMOUNT FROM SHRI BHAVESH CHANDULAL WAS UTILIZED FOR INCURRING SUCH EXPENSES. THESE AMOUNTS WERE NOT AVAILABLE WITH THE ASSESSEE TO PAY BACK TO SHRI BHAVESH CHANDULAL. IN OTHER WORDS, THE SOURCE OF AMOUNT PAID BACK TO SHRI BHAVESH CHANDULA L WAS NOT EXPLAINED BY THE ASSESSEE. AS THERE IS NO EVIDE NCE OF PAYING BACK THE AMOUNT TO SHRI BHAVESH CHANDULAL, T HE AMOUNT REPRESENTS UNACCOUNTED INCOME OF THE ASSESSE E. 4. THE CIT(A) HAS ERRED IN HOLDING THAT THE THE LAN D BELONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGA L HEIRS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECU TED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBE RS HAVE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 12 - 10. IN IT(SS)A NO.189/AHD/2011 FOR A.Y. 2006-07 IN CASE OF SHRI RAVI RAMLABHAYA VARMA, THE REVENUE HAS TAKEN FOLLOW ING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL AND DIRECTING TO TREAT THE PROTECTIVE ADDITI ON OF RS. 20,00,000/- TO BE MADE IN SUBSTANTIVE CAPACITY, BY CONCLUDING THAT THE LAND HAVING SURVEY NO. 147 & 15 0 BEEN PURCHASED BY THE FATHER OF THE KARTA OF THE HUF, AC QUIRED THE CHARACTER OF THE HUF PROPERTY IN THE HANDS OF SUCCESSORS WHO INHERITED THE PROPERTIES THROUGH WIL L IN THEIR CAPACITY AS LEGAL HEIRS. 2. THE CIT(A) HAS ERRED IN HOLDING THAT THE LAND BE LONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGAL HEI RS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECUTED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBERS HA VE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. 11. IN C.O. NO.82/AHD/2011 (IN ITA NO.188/AHD/2011 ) IN CASE OF SHRI RAVI RAMLABHAYA VARMA, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE REALIZED AND HELD THAT EVEN ACCO RDING TO THE ALLEGATIONS OF THE A.O., THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, EVEN ON THE BASIS OF ASSESSING OFFICER'S THESE ALLEGATIONS, THEY WOULD B E CAPITAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 13 - TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE TREATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVEN UE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALL EGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSE TS HAD TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2 006-07, NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WAS TAXABLE IN A.Y. 2006-07 AND AT ANY RAT E, THE DEPARTMENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING T O TAX THE GROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWING ANY DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN CONFORMING ADDITION OF RS.49,97,832/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT CASH OF RS.49,97,832/- FOUND AT THE TIM E OF SEARCH IN THE LOCKER NO.919 OF THE APPELLANT WITH R AJKOT NAGARIK SAHAKARI BANK LTD, MITHAKHALI AHMEDABAD, REMAINED UNEXPLAINED, INSPITE OF THE FACT THE SAID CASH BELONGED TO RALSON INFRASTRUCTURE PVT. LTD, DULY RE CORDED IN THE REGULAR AUDITED BOOKS OF ACCOUNT OF THE AFORESA ID COMPANY IN WHICH THE APPELLANT IS ONE OF THE DIRECT ORS. 12. IN C.O. NO.83/AHD/2011 (IN ITA NO.189/AHD/2011 ) IN CASE OF SHRI RAVI R. VARMA, THE ASSESSEE HAS TAKEN FOLLOWIN G GROUNDS. THE CONCISE GROUNDS OF C.O. ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) SHOULD HAVE HELD THAT THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, THEY WOULD BE CAPI TAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 14 - ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE T REATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVENUE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALLEGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSETS HAD TA KEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07, NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WA S TAXABLE IN A.Y. 2006-07 AND AT ANY RATE, THE DEPART MENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING TO TAX THE G ROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWI NG ANY DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE CIT (A) SHOULD HAVE FURTHER REALIZED AND HELD THAT FOR GIVING EFFE CT TO THE POINTS RAISED IN GROUND NO. 1 ABOVE, IN VIEW OF THE GUJARAT HIGH COURT DECISION IN GUJARAT GAS COMPANY LTD. V. CIT (2000) 245 ITR 84 (GUJ.) THERE IS NO BAR AGAINST TH E ASSESSED INCOME GOING BELOW THE RETURNED INCOME IN WHEN THE ASSESSMENTS WERE MADE U/S. 143(3). 3. WITHOUT PREJUDICE TO THE GROUNDS NO. 1 AND 2 AB OVE, THE CIT(A) ERRED IN RECORDING DIRECTION TO THE A.O IN T HE FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORDER DATED 1- 12- 2010. 'TO ASSESS THE SALES PROCEEDS FROM SHRI CHAND RAKANT K. SHAH IN THE HANDS OF RAJNI R. VARMA HUF, MAHESH R. VARMA HUF AND RAVI R. VARMA HUF IN EQUAL PROPORTION . 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) ERRED IN RECORDING AN OBSERVAT ION IN THE FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORD ER DATED 1-12-2010 INDICATING THAT THE A.O. WOULD BE FREE TO INVESTIGATE ACTUAL SALES PROCEEDS OF SURVEY NO. 147 FINALLY SOLD TO CHANDRAKANT K. SHAH. 5. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF APPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE FURTHER HELD THAT EVEN THE RETUR NED IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 15 - FIGURE OF RS. 20.00 LACS WAS NOT TAXABLE IN THE HAN DS OF THE ASSESSEE IN VIEW OF IN VIEW OF SECTION 51 AND ALSO THE FACT THAT THE CIT(A) HIMSELF HAD REPEATEDLY HELD THAT SI NCE SALE TO BHAVESHKUMAR CHANDULAL HAD FINALLY NOT TAKEN PLA CE, EVEN THE FORFEITED AMOUNT OF RS. 60.00 LACS DIVIDED EQUALLY IN 3 HUFS OF 3 BROTHERS NAMELY MAHESH R VARMA, RAJN I R VARMA AND RAVI R VARMA] WAS NOT TAXABLE AT ALL. 7. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, THE DEPARTMENTAL APPEAL DESERVES TO BE DISMISSED IN LIM INE AS NOT MAINTAINABLE BECAUSE IT IS FILED IN CONTRAVENTI ON OF THE BOARD INSTRUCTION NO. 5 OF 2008 DATED 15-5-2008 WHO SE PARA MARKED 12 SPECIFICALLY STATES THAT IT IS AN IS SUE U/S. 268A[1] AND HENCE, IT IS NOT ONLY BINDING BUT ALSO HAS A STATUTORY BACKING, IN SO FAR AS IN THE CASE OF ASSE SSEE'S HUF TAX EFFECT ATTRIBUTABLE TO THE RELEVANT SUM BEING T AXED ON PROTECTIVE BASIS OR ON SUBSTANTIVE BASIS, WOULD BE NEGLIGIBLE [SAY NIL]. 13. IN IT(SS)A NO.192/AHD/2011 FOR A.Y. 2006-07 IN CASE OF SHRI RAJNI R. VARMA, THE REVENUE HAS TAKEN FOLLOWING GRO UNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS AN D CIRCUMSTANCES OF THE CASE BY DELETING THE ADDITION OF RS. 29,35,166/- ON ACCOUNT OF LOOSE PAPER NO. 3 OF ANNE XURE- A/1 WHEN SUCH NOTINGS PERTAIN TO THE ASSESSEE ONLY, AND NOT TO THE HUFS. 2. THE ID. CIT(APPEAL) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF 10 LACS TOWARDS THE SALE OF BLOCK OF LA ND BEARING SURVEY NO.150 AT THALTEJ, AS THE LAND IS IN THE NAM E OF INDIVIDUALS ONLY, AND NOT IN THE NAME OF HUFS. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE REC EIPT OF RS. 2,36,11,000/- FROM SHRI BHAVESH CHANDULAL DID NOT CONSTITUTE THE UNACCOUNTED INCOME. IN PAGE NO. 3 & 4 OF ANNEXURE-A/1, THE DETAILS OF RECEIPTS AND EXPENSES HAVE BEEN WRITTEN DATE WISE. FOR EXAMPLE RS. 50,00,000/- WAS RECEIVED ON 18/08/2005 AGAINST THIS RS. 20,00,000/- WAS GIVEN TO SUKHDEVBH AI AND RS. 25,00,000/- WAS GIVEN TO WAGHAJIBHAI. IT MEANS THE ASSESSEE HAD RECEIVED THE AMOUNT FROM SHRI BHAVESH CHANDULAL WAS UTILIZED FOR INCURRING SUCH EXPENSES. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 16 - THESE AMOUNTS WERE NOT AVAILABLE WITH THE ASSESSEE TO PAY BACK TO SHRI BHAVESH CHANDULAL. IN OTHER WORDS, THE SOURCE OF AMOUNT PAID BACK TO SHRI BHAVESH CHANDULA L WAS NOT EXPLAINED BY THE ASSESSEE. AS THERE IS NO EVIDE NCE OF PAYING BACK THE AMOUNT TO SHRI BHAVESH CHANDULAL, T HE AMOUNT REPRESENTS UNACCOUNTED INCOME OF THE ASSESSE E. 4. THE CIT(A) HAS ERRED IN HOLDING THAT THE THE LAN D BELONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGA L HEIRS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECU TED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBE RS HAVE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. 14. IN C.O. NO.86/AHD/2011 (IN ITA NO.192/AHD/2011 ) IN CASE OF SHRI RAJNI R. VARMA, THE ASSESSEE HAS TAKEN FOLLOWI NG GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE REALIZED AND HELD THAT EVEN ACCO RDING TO THE ALLEGATIONS OF THE A.O., THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, EVEN ON THE BASIS OF ASSESSING OFFICER'S THESE ALLEGATIONS, THEY WOULD B E CAPITAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE TREATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVEN UE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALL EGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSE TS HAD TAKEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2 006-07, IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 17 - NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WAS TAXABLE IN A.Y. 2006-07 AND AT ANY RAT E, THE DEPARTMENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING T O TAX THE GROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWING ANY DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 15. IN IT(SS)A NO.193/AHD/2011 FOR A.Y. 2006-07 IN CASE OF SHRI RAJNI R. VARMA (HUF), THE REVENUE HAS TAKEN FOLLOWI NG GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL AND DIRECTING TO TREAT THE PROTECTIVE ADDITI ON OF RS. 20,00,000/- TO BE MADE IN SUBSTANTIVE CAPACITY, BY CONCLUDING THAT THE LAND HAVING SURVEY NO. 147 & 15 0 BEEN PURCHASED BY THE FATHER OF THE KARTA OF THE HUF, AC QUIRED THE CHARACTER OF THE HUF PROPERTY IN THE HANDS OF SUCCESSORS WHO INHERITED THE PROPERTIES THROUGH WIL L IN THEIR CAPACITY AS LEGAL HEIRS. 2. THE CIT(A) HAS ERRED IN HOLDING THAT THE LAND BE LONG TO HUF. THE LAND IN QUESTION WAS INHERITED BY THE LEGAL HEI RS OF THE LATE SHRI RAMLABHAYA VARMA AS PER WILL EXECUTED BY HIM. THERE IS NO EVIDENCE THAT THE INDIVIDUAL MEMBERS HA VE CONTRIBUTED THEIR SHARE IN THE PROPERTY IN THE PORT OF HUF. THE HUF CANNOT LEGALLY INHERIT THE LAND. EVEN THE S ALE RECEIPTS WERE SHOWN IN THE RETURN OF INDIVIDUALS AN D NOT THE HUF. IN VIEW OF THE ABOVE FACTS THE LAND IN QUESTION WAS THE PROPERTY OF SIX INDIVIDUALS AND HENCE THE SALE PROC EEDS ARE THE UNACCOUNTED INCOME OF THE ASSESSEE AND NOT THE INCOME OF HUF. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 18 - 16. IN C.O. NO.87/AHD/2011 (IN ITA NO.193/AHD/2011 ) IN CASE OF SHRI RAJNI R. VARMA, THE ASSESSEE HAS TAKEN FOLLOWI NG GROUNDS. THE CONCISE GROUNDS OF C.O. ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) SHOULD HAVE HELD THAT THE NOTINGS AND JOTTIN GS ON THE SEIZED PAPERS REPRESENTED RECEIPTS OF MONEY IN CONN ECTION WITH THE SALE OF INHERITED PROPERTIES BEING THALTEJ LANDS OF SURVEY NOS. 147 AND 150, OF WHICH SURVEY NO. 147 WA S OWNED BY INDIVIDUALS AND NO. 150 WAS INHERITED AND HENCE OWNED BY RESPECTIVE HUFS. HENCE, THEY WOULD BE CAPI TAL RECEIPTS IN CONNECTION WITH THE SALE OF LONG TERM C APITAL ASSETS WHICH MAY ULTIMATELY WARRANT COMPUTATION OF LONG TERM CAPITAL GAINS AND THOSE RECEIPTS IN CONNECTION WITH THE ALLEGED SALE OF CAPITAL ASSETS PROCEEDS CANNOT BE T REATED AS BUSINESS RECEIPTS OR ANY OTHER CATEGORY OF REVENUE RECEIPTS AND SINCE THE DEPARTMENT ALSO DOES NOT ALLEGE THAT ANY SALE [OR TRANSFER] OF ANY OF THOSE CAPITAL ASSETS HAD TA KEN PLACE IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2006-07, NOTHING OUT OF THOSE ALLEGED SUMS OF THOSE NOTINGS AND JOTTINGS WA S TAXABLE IN A.Y. 2006-07 AND AT ANY RATE, THE DEPART MENT WAS NOT AT ALL JUSTIFIED IN ATTEMPTING TO TAX THE G ROSS AMOUNTS OF THE SAID ALLEGED RECEIPTS WITHOUT ALLOWI NG ANY DEDUCTION TOWARDS THE COST OR FAIR MARKET VALUE OF THOSE CAPITAL ASSETS. 2. WITHOUT PREJUDICE TO GROUND NO. 1 ABOVE, THE CIT (A) SHOULD HAVE FURTHER REALIZED AND HELD THAT FOR GIVING EFFE CT TO THE POINTS RAISED IN GROUND NO. 1 ABOVE, IN VIEW OF THE GUJARAT HIGH COURT DECISION IN GUJARAT GAS COMPANY LTD. V. CIT (2000) 245 ITR 84 (GUJ.) THERE IS NO BAR AGAINST TH E ASSESSED INCOME GOING BELOW THE RETURNED INCOME IN WHEN THE ASSESSMENTS WERE MADE U/S. 143(3). 3. WITHOUT PREJUDICE TO THE GROUNDS NO. 1 AND 2 AB OVE, THE CIT(A) ERRED IN RECORDING DIRECTION TO THE A.O IN T HE FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORDER DATED 1- 12- 2010. 'TO ASSESS THE SALES PROCEEDS FROM SHRI CHAND RAKANT K. SHAH IN THE HANDS OF RAJNI R. VARMA HUF, MAHESH R. VARMA HUF AND RAVI R. VARMA HUF IN EQUAL PROPORTION . 4. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT(A) ERRED IN RECORDING AN OBSERVAT ION IN THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 19 - FIRST HALF OF PAGE 25 OF THE IMPUGNED APPELLATE ORD ER DATED 1-12-2010 INDICATING THAT THE A.O. WOULD BE FREE TO INVESTIGATE ACTUAL SALES PROCEEDS OF SURVEY NO. 147 FINALLY SOLD TO CHANDRAKANT K. SHAH. 5. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF APPEAL, EVEN QUANTIFICATION OF ADDITIONS ADOPTED BY THE A.O. IS NOT CORRECT AND THE CIT(A) SHOULD HAVE UPHELD THE ASSES SEE'S CONTENTIONS IN THIS REGARD THAT THE SUM OF RS. 1,25,00,000/- AS PER TABLE-2 WAS NOT IN CONNECTION WITH THE PROPOSED SALE TO BHAVESHKUMAR CHANDULAL. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) SHOULD HAVE FURTHER HELD THAT EVEN THE RETUR NED FIGURE OF RS. 20.00 LACS WAS NOT TAXABLE IN THE HAN DS OF THE ASSESSEE IN VIEW OF IN VIEW OF SECTION 51 AND ALSO THE FACT THAT THE CIT(A) HIMSELF HAD REPEATEDLY HELD THAT SI NCE SALE TO BHAVESHKUMAR CHANDULAL HAD FINALLY NOT TAKEN PLA CE, EVEN THE FORFEITED AMOUNT OF RS. 60.00 LACS DIVIDED EQUALLY IN 3 HUFS OF 3 BROTHERS NAMELY MAHESH R VARMA, RAJN I R VARMA AND RAVI R VARMA] WAS NOT TAXABLE AT ALL. 7. WITHOUT PREJUDICE TO THE PRECEDING GROUNDS OF A PPEAL, THE DEPARTMENTAL APPEAL DESERVES TO BE DISMISSED IN LIM INE AS NOT MAINTAINABLE BECAUSE IT IS FILED IN CONTRAVENTI ON OF THE BOARD INSTRUCTION NO. 5 OF 2008 DATED 15-5-2008 WHO SE PARA MARKED 12 SPECIFICALLY STATES THAT IT IS AN IS SUE U/S. 268A[1] AND HENCE, IT IS NOT ONLY BINDING BUT ALSO HAS A STATUTORY BACKING, IN SO FAR AS IN THE CASE OF ASSE SSEE'S HUF TAX EFFECT ATTRIBUTABLE TO THE RELEVANT SUM BEING T AXED ON PROTECTIVE BASIS OR ON SUBSTANTIVE BASIS, WOULD BE NEGLIGIBLE [SAY NIL]. 17. IN IT(SS)A NO.194/AHD/2011 FOR A.Y. 2006-07 IN CASE OF RALSON INFRASTRUCTURE PVT. LTD., THE ASSESSEE HAS TAKEN FO LLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER TO THE EFFECT THAT THE CASH FOUND DURING THE COURSE OF SEARCH ON 10TH MAY, 2006 FROM THE RESIDENTIAL PREMISES AND BANK LO CKER OF MR. RAVI VARMA, DIRECTOR OF THE APPELLANT COMPANY D OES IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 20 - NOT BELONG TO THE APPELLANT COMPANY, AS CLAIMED BY MR. RAVI VARMA AND MR. MAHESH VARMA, DIRECTORS OF THE APPELLANT COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE REJECTION UNDER SECTION 145(3) OF THE ACT BY THE ASSESSING OFFICER OF THE REGULAR BOOKS OF ACCOU NT OF THE APPELLANT COMPANY, IN SPITE OF THE FACT THAT SUCH B OOKS WERE STATUTORILY AUDITED AND NO DEFECTS EITHER IN T HE BOOKS OR IN THE METHOD OF ACCOUNTING WERE FOUND. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THA T THE APPELLANT COMPANY IS NOT ENTITLED TO DEDUCTION UNDE R SECTION 801B(10) OF THE INCOME TAX ACT, 1961. 4. PREJUDICE TO GROUND NO. 3, ON THE FACTS AND IN T HE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX APPEALS) ERRED IN DIRECTING THE ASSESSIN G OFFICER TO EXCLUDE INCOME OF RS.13,93,591 EARNED BY THE ASS ESSEE FROM DEVELOPMENT OF THE LAND, FROM THE PROFITS FOR THE PURPOSE OF GRANTING DEDUCTION UNDER SECTION 80IB(10 ) OF THE ACT. 18. IN IT(SS)A NO.195/AHD/2011 FOR A.Y. 2007-08 IN CASE OF RALSON INFRASTRUCTURE PVT. LTD., THE ASSESSEE HAS TAKEN FO LLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER TO THE EFFECT THAT THE CASH FOUND DURING THE COURSE OF SEARCH ON 10TH MAY, 2006 FROM THE RESIDENTIAL PREMISES AND BANK LO CKER OF MR. RAVI VARMA, DIRECTOR OF THE APPELLANT COMPANY D OES NOT BELONG TO THE APPELLANT COMPANY, AS CLAIMED BY MR. RAVI VARMA AND MR. MAHESH VARMA, DIRECTORS OF THE APPELLANT COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 21 - UPHOLDING THE REJECTION UNDER SECTION 145(3) OF THE ACT BY THE ASSESSING OFFICER OF THE REGULAR BOOKS OF ACCOU NT OF THE APPELLANT COMPANY, IN SPITE OF THE FACT THAT SUCH B OOKS WERE STATUTORILY AUDITED AND NO DEFECTS EITHER IN T HE BOOKS OR IN THE METHOD OF ACCOUNTING WERE FOUND. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THA T THE APPELLANT COMPANY IS NOT ENTITLED TO DEDUCTION UNDE R SECTION 80IB(10) OF THE INCOME TAX ACT, 1961. 19. IN ITA NO.1481/AHD/2011 FOR A.Y. 2008-09 IN CA SE OF RALSON INFRASTRUCTURE PVT. LTD., THE ASSESSEE HAS TAKEN FO LLOWING GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE FINDING OF THE ASSESSING OFFICER THA T THE APPELLANT COMPANY IS NOT ENTITLED TO DEDUCTION UNDE R SECTION 80IB(10) OF THE INCOME TAX ACT, 1961. 20. IN CASE OF MAHESH R. VERMA IN IT(SS)A NO.96/AHD /2011 FOLLOWING TWO GROUNDS ARE RAISED BY THE ASSESSEE RE GARDING CASH FOUND IN THE SEARCH CARRIED OUT ON 10.5.2006: I) REGARDING CASH OF RS.6,13,921/-, CASH BELONGING TO RALSON INFRASTRUCTURE PVT. LTD., RECORDED IN THE REGULAR A UDITED BOOKS OF ACCOUNT OF THE AFORESAID COMPANY, IN WHICH THE APPE LLANT IS ONE OF THE DIRECTORS. II) REGARDING CASH OF RS.40,000/-, CASH FOUND DURING THE COURSE OF SEARCH AT THE RESIDENCE OF THE APPELLANT. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 22 - 21. IN A.Y. 2006-07, IN CASE OF RAVI VARMA, CIT(A) ADJUDICATED THE ISSUE IN APPELLATE ORDER DATED 01.12.2010 PASSED IN CASE OF SHRI RAJNI VARMA, RAVI VARMA AND THEIR HUFS FOR A.Y. 200 6-07. AS IDENTICAL ISSUE IS INVOLVED IN CASE OF MAHESH R. VA RMA, THE SAID GROUND WAS DECIDED BY CIT(A) AGAINST ASSESSEE. SAM E WILL BE TAKEN CARE IN FOLLOWING PARAS. 22. BACKGROUND OF SECOND ISSUE IS ADDITION OF RS.29 ,35,166/-AND ADDITION OF RS.10 LACS, IN APPELLATE ORDER DATED 01 .12.2010 PASSED IN CASE BROTHERS OF ASSESSEE SHRI RAJNI VARMA, RAVI VA RMA AND THEIR HUFS, THESE ADDITIONS HAVE BEEN DELETED BY CIT(A) O N THE GROUND THAT THE SURVEY NO.147 AND 150 BELONG TO HUF AND TH AT THE SALE PROCEEDS INCLUDING THE CASH COMPONENT THEREON CAN B E ASSESSED ONLY WHEN THE SALE HAS BEEN MADE TO A PARTICULAR PARTY. SINCE, FACTS OF THE CASE ARE IDENTICAL WITH THE FACTS OF CASE OF HI S BROTHER, ASSESSING OFFICER WAS DIRECTED TO DELETE THE ADDITION OF RS.2 9,35,166/- AND RS.10LACS. THIS WILL BE DISCUSSED PARTY-WISE IN FO LLOWING PARAS. 23. AN ADDITION ON ACCOUNT OF SEIZURE OF CASH OF RS .49,97,832/- IN A.Y. 2006-07 FOUND AND SEIZED FROM THE BANK LOCKER NO. 919 OF SHRI RAVI VARMA, ADDITION OF RS.11,04,493/- AND RS.40,00 0/- IN A.Y. 2007-08 AND ADDITION OF RS.40,000/- AND RS.6,13,921 /- IN CASE OF MAHESH VARMA IN A.Y. 2007-08. ASSESSING OFFICER HA S DISCUSSED AS UNDER: IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 23 - 8. DURING THE COURSE OF SEARCH PROCEEDINGS AT THE RESIDENCE OF ASSESSEE AN AMOUNT OF RS,15,06,200/- WAS FOUND. OUT OF WHICH CASH OF RS.14,50,000/- WAS SEIZED. AMOUNT OF RS 49, 97,832/- WERE FOUND BANK LOCKER NO.919 OF ASSESSE AT RAJKOT NAGRIK SAHAKARI BANK LTD, MITHAKHALI, AHMEDABAD. CASH OF RS.50,000/- WAS FOUND AT LOCKER NO.229 WITH SARDAR VALLABHBHAI PATEL CO.OP. BANK LTD, NEAR LAW GARDEN, ELLIS BRIDG E, AHMEDABAD, WHICH IS JOINTLY OWNED BY SMT. MADHVI R. VARMA ALIAS AMI R. VARMA. THE ASSESSEE WAS ASKED TO EXPLA IN THE SOURCE OF THIS CASH. IN RESPONSE TO THIS, THE ASSES SEE SUBMITTED THAT - 'WITH REFERENCE TO THE CASH SEIZED FROM THE RESIDEN CE OF RAVI R. VARMA OF RS.15,06,200/- THE ASSESSEE SUBMITS THA T IT HAD RECEIVED THE SAID SUM FROM DIFFERENT MEMBERS, O F HARIOM VILLA SCHEME DEVELOPED BY RALSON INFRASTRUCT URE PVT LTD. THE SAID SUM WERE BEING RECEIVED FOR THE PURPO SE OF VARIOUS EXPENSES, SUCH AS STAMP DUTY, REGISTRATION FEE, ADVOCATE FEE, DRAINAGE CHARGE, GEB POWER, ETC. IN T HIS CONNECTION THE ASSESSEE WOULD FURTHER LIKE TO CLARI FY THAT IN THE YEAR 2006 WHEN THE SEARCH OPERATION WAS BEING C ARRIED OUT THERE WAS ONLY ONE SCHEME THAT WAS IN PROGRESS VIS. HARIOM VILLA DEVELOPED BY RALSON INFRASTRUCTURE PVT LTD, ACCORDINGLY, WHATEVER CASH WAS FOUND FROM THE POSSE SSION OF MR. RAVI R. VARMA PERTAIN .TO THE ONLY SCHEME IN BOOKS OF ACCOUNTS OF RALSON INFRASTRUCTURE PVT LTD. THE DOCU MENTARY EVIDENCE WITH REGARD TO THE SUM SO RECEIVED FROM DI FFERENT MEMBERS FOR THE PURPOSE OF MAKING THE ABOVE, EXPEND ITURE. THE SAID FACT WAS EXPLAINED BY MR. RAVI R. VARMA TO THE AUTHORIZED OFFICER IN HIS STATEMENT RECORDED ON 5/6 /2006 VIDE QN.NO.21 OF STATEMENT DATED 10 TH MAY, 2006. 'WITH REFERENCE TO THE CASH FOUND OF RS.49,97,832/- , THE ASSESSEE SUBMITS THAT IT HAD RECEIVED THE SAID SUM FROM DIFFERENT MEMBERS OF HARIOM VILLA SCHEME DEVELOPED BY RALSON INFRASTRUCTURE PVT LTD. THE SAID SUM WERE BE ING RECEIVED FOR THE PURPOSE OF VARIOUS EXPENSES, SUCH AS STAMP DUTY, REGISTRATION FEE, ADVOCATE FEE, DRAINAGE CHAR GE, MAINTENANCE CHARGES, GEB POWER, ETC. .ON RECEIPT OF THE SAME, THE SAME WAS BEING KEPT IN THE BANK LOCKER OF MR. RAVI R. VARMA. THE DOCUMENTARY EVIDENCE WITH REGARD TO THE SUM SO RECEIVED FROM DIFFERENT MEMBERS FOR THE PURPOSE OF MAKING THE ABOVE EXPENDITURE. THE SAID FACT WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 24 - EXPLAINED BY MR. MAHESH R. VARMA TO THE AUTHORIZED OFFICER IN HIS STATEMENT RECORDED ON 5/6/2006 VIDE QN.NO.19 '. 'WITH REFERENCE TO THE CASH FOUND FROM LOCKER NO.22 9 OF SARDAR VALLABBHAI PATEL CO. OPERATIVE BANK LTD THE ANME OF MADHVI R. VARMA AND RAVI R. VARMA OF RS.50,000/-. T HE SAVING WAS MADE ON ACCOUNT OF MONEY RECEIVED, ON VA RIOUS SOCIAL OCCASION SUCH AD BIRTHDAY, ANNIVERSARY AS WE LL AS ON THE OCCASION OF THE BIRTH OF TWO CHILDREN, DEEP R. VARMA AND KUNAL R. VARMA FROM VARIOUS FRIENDS AND RELATIV ES. FURTHER HAVING REGARD TO THE SOCIAL STATUS OF THE A SSESSEE, THE SAID SUM SO RECEIVED AND FOUND IS REASONABLE CONSIDERING THE STANDARD OF LIVING AS WELL AS SOCIA L STATUS OF THE ASSESSEE. ACCORDINGLY, YOUR GOODSELVES IS KINDL Y REQUESTED NOT TO TAKE ADVERSE ACTION CONSIDERING TH E AMOUNT FOUND SINCE THE SAME WAS OUT OF THE MONEY SA VED BY MY WIFE. THE SAID FACT WAS ALSO EXPLAINED DURING THE COURSE OF RECORDING OF STATEMENT BEFORE THE AUTHORI ZED OFFICER ON 22ND MAY 2006 VIDE QUESTION NO. 4. ACCOR DINGLY, YOUR GOODSELVES IS KINDLY REQUESTED NOT TO TAKE ADV ERSE ACTION CONSIDERING THE AMOUNT FOUND SINCE THE SAME WAS OUT OF THE MONEY SAVED BY MY WIFE'. 8.1 THE SUBMISSIONS OF ASSESSES ARE CAREFULLY CONSI DERED. IN SUPPORT OF THIS HE SUBMITTED COPY OF CASH BOOK OF R ALSONS INFRASTRUCTURE PVT LTD FOR THE YEAR 2005-2006 AND 2 006-2007, WHICH SHOWS PAYMENT OF CASH AMOUNTING TO RS.14,50,0 00/- ON 09.05.2006. THE BANK LOCKER NO.229 WITH SARDAR VALL ABHBHAI PATEL CO.OPERATIVE BANK LTD, PRIOR TO DATE OF SEARC H WAS LAST OPERATED ON 22.04.2006. IN VIEW OF THIS, THESE ARE CONSIDERED IN THE ASSESSMENT ORDER OF . 2007-2008 IN THE CASE OF ASSESSES. 8.2 AS REGARDS THE CASH OF RS.49,97,832/-, WHICH IS CLAIMED AS BELONGING TO RALSONS INFRASTRUCTURE PVT LTD, HE HAS SUBMITTED COPY OF CASH BOOK OF RALSONS INFRASTRUCTURE PVT LTD FOR THE YEAR 2006-2007, WHICH SHOWS PAYMENT OF CASH AMOUNTING TO RS.49,97,832/- ON 03.03.2006. IT IS WORTH MENTIONIN G HERE THAT ON THE DATE OF SEARCH I.E. ON 10.05.2006 THE BACK-U P OF HARD- DISK CONTAINING ACCOUNTING DATA WAS SEIZED FROM THE OFFICE PREMISES OF RALSONS INFRASTRUCTURE PVT LTD. THE SCR UTINY OF SEIZED ACCOUNTING DATA SHOWS THAT THERE IS NO DEBIT ENTRY, IN THE CASH BOOK OF THE COMPANY ON 03,03.2006 SHOWING AN AMOUNT OF RS.49,97,832/- WAS GIVEN TO THE ASSESSEE. IN OTHER WORDS, THE COPY OF CASHBOOK FURNISHED BY THE ASSESSEE IN THE C OURSE OF ASSESSMENT PROCEEDINGS IS NOT AT ALL TALLYING WITH THE CASH BOOK IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 25 - OF THE COMPANY AS PER SEIZED HARD DISK DATA. THE AS SESSEE HAS BEEN PROVIDED THE COPY OF SAME BUT NO RECONCILIATIO N OF SAME WITH THE BOOKS OF ACCOUNTS SUBMITTED NOW HAS BEEN M ADE BY ASSESSEE. THE FACT IS ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER OF RALSONS INFRASTRUCTURE PVT LTD FOR THE A.Y .2006-2007 AND 2007-2008 AND THEIR BOOKS OF ACCOUNTS HAVE BEEN REJECTED. 8.3 FROM THE ABOVE, IT APPEARS THAT THE COPY OF CAS H BOOK OF THE COMPANY PRODUCED DURING THE COURSE OF HEARING IS FU DGED TO SUIT HIS REQUIREMENT FOR EXPLAINING SOURCE OF CASH FOUND FROM THE LOCKER, WHICH WAS OPERATED ON LAST DATE OF 03.03.20 06. HAD THE AMOUNT WAS ADVANCED BY THE COMPANY THAN IT WOULD HA VE DEFINITELY FIGURED IN THE ACCOUNTING DATA OF THE CO MPANY SEIZED DURING THE COURSE OF SEARCH FROM THE OFFICE OF ASSE SSEE. THE CONDUCT OF ASSESSEE SHOWS THAT THIS CASH WAS ENTERE D IN THE BOOKS OF ACCOUNTS WHEN THEY WERE CAUGHT IN SEARCH O THERWISE THIS AMOUNT WOULD HAVE GONE UNRECORDED AND UNACCOUN TED FOR. 8.4 THERE IS NO FORCE IN THE ARGUMENT OF ASSESSEE T HAT THE CASH WAS KEPT AT THE LOCKERS AND RESIDENCE OF DIRECTORS FOR SAFE KEEPING. THE SAFEST PLACE FOR THE CASH IS DEPOSITS IN BANK ACCOUNT. THE KEEPING OF CASH IN LOCKER ITSELF IS A QUESTION MARK ON THE FINANCIAL AFFAIRS OF THE ASSESSEE GROUP. THE REFORE, THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS.49 ,97,832/-WAS RECEIVED BY ASSESSEE FROM RALSONS INFRASTRUCTURE PV T LTD ON 03.03.2006 IS NOT ACCEPTED AND IT IS TREATED AS UNE XPLAINED CASH FOUND DURING THE COURSE OF SEARCH FROM THE ASSESSEE . THE AMOUNT OF RS.49,97,832/- IS THEREFORE ADDED TO THE INCOME OF ASSESSEE. THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOM E AND PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT A RE SEPARATELY INITIATED. (ADDITION OF RS.49,97,832/-)' 24. SIMILARLY, THE RELEVANT DISCUSSION IN ASSESSMEN T YEAR 2007-2008 IN RESPECT OF THE CASH FOUND FROM THE RESIDENTIAL P REMISES OF ASSESSEE SHRI RAVI VARMA IS REPRODUCED AS UNDER: 5.2 AS REGARDS THE CASH OF RS.15,06,200/- IS CONCE RNED THE ASSESSEE'S EXPLANATION IS SAME I.E. IT IS BELONGING TO RALSONS INFRASTRUCTURE PVT LTD. IN SUPPORT OF THIS HE AGAIN SUBMITTED THE SAME ARGUMENT, WHICH HAS BEEN DISCUSSED IN THE ORDE R OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 26 - A.Y.2006-2007. THE ASSESSES STATED THAT THE AMOUNT OF RS.14,50,000/- WAS RECEIVED BY HIM FROM RALSONS INF RASTRUCTURE PVT LTD, ON 09.05.2006 FOR SAFE KEEPING IN HOME. TH E COPY OF CASH BOOK OF RALSONS INFRASTRUCTURE PVT LTD FOR THE PERIOD 01.04.2006 TO 10,05.2006 WAS PRODUCED, WHICH SHOWS CASH PAYMENT OF RS.14,50,000/,- ON 09.05.2006. IT IS WOR TH MENTIONING HERE THAT ON THE DATE OF SEARCH I.E. ON 10.05.2006 THE BACK-UP OF HARD-DISK CONTAINING ACCOUNTING DATA WAS SEIZED FROM THE OFFICE PREMISES OF RALSONS INFRASTRUCTURE PVT LTD. THE SCRUTINY OF SEIZED ACCOUNTING DATA SHOWS THAT THERE IS NO DEBIT ENTRY IN THE CASH BOOK OF THE COMPANY ON 09.05.2006 SHOWING AN AMOUNT OF RS.14,50,000/- WAS GIVEN TO THE ASSESSES. IN OTHER WORDS, THE COPY OF CASHBOOK FURNISHED BY THE ASSESS EE IN THE COURSE OF ASSESSMENT PROCEEDINGS IS NOT AT ALL TALL YING WITH THE CASH BOOK OF THE COMPANY AS PER SEIZED HARD DISK DA TA. THE ASSESSEE HAS BEEN PROVIDED THE COPY OF SAME BUT NO RECONCILIATION OF SAME WITH THE BOOKS OF ACCOUNTS S UBMITTED NOW HAS BEEN MADE BY ASSESSEE. THE FACT IS ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER OF RALSONS INFRASTRUCTURE PVT LTD FOR THE A.Y.2006-2007 AND 2007-2008 AND THEIR BOOKS OF ACCO UNTS HAVE BEEN REJECTED. 5.3 FROM THE ABOVE, IT APPEARS THAT THE COPY OF CAS H BOOK OF THE COMPANY PRODUCED DURING THE COURSE OF HEARING IS FU DGED TO SUIT HIS REQUIREMENT FOR EXPLAINING SOURCE OF CASH FOUND FROM THE RESIDENCE ON 10.05.2006 DURING THE COURSE OF SEARCH OPERATION. HAD THE AMOUNT WAS ADVANCED BY THE COMPANY THAN IT WOULD HAVE DEFINITELY FIGURED IN THE ACCOUNTING DATA OF T HE COMPANY SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS AT T HE OFFICE OF ASSESSEE. THE CONDUCT OF ASSESSEE SHOWS, THAT THIS CASH WAS ENTERED IN THE BOOKS OF ACCOUNTS WHEN THEY WERE CAU GHT IN SEARCH OTHERWISE THIS AMOUNT WOULD HAVE GONE UNRECO RDED AND UNACCOUNTED FOR. 5.4 THERE IS NO FORCE IN THE ARGUMENT OF ASSESSEE T HAT THE CASH WAS KEPT AT THE LOCKERS AND RESIDENCE OF DIRECTORS FOR SAFE KEEPING. THE SAFEST PLACE FOR THE CASH IS DEPOSITS IN BANK ACCOUNT. THE KEEPING OF CASH IN LOCKER AND AT HOME ITSELF IS A QUESTION MARK ON THE FINANCIAL AFFAIRS OF THE ASSES SEE GROUP THE ASSESSEE DID NOT SUBMIT ANY EXPLANATION FOR BALANCE CASH OF RS.56,200/- FOUND WITH HIM. THE CASH BALANCE IN THE HANDS OF RALSONS INFRASTRUCTURE PVT LTD AS ON 04.05.2006 HAS BEEN FOUND ENTERED INTO THE ACCOUNTS MAINTAINED ON COMPUTER AN D THE HARD DISK OF WHICH HAS BEEN SEIZED, AS PER WHICH THE CLO SING CASH BALANCE IS RS.3,76,707/-. THE CASH BALANCE IN THE H ANDS OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 27 - ASSESSEE ON 31.03.2006 WAS ONLY RS.2,880/- AS PER T HE BALANCE SHEET SUBMITTED WITH THE RETURN OF INCOME. AT THE M OST AMOUNT OF RS.25,000/- IS ESTIMATED TO BE WITH THE ASSESSEE AS ON DATE OF SEARCH. THEREFORE, THE CASH IN HAND OF ASSESSEE AS ON 10.05.2006 AT THE MOST COULD BE RS.4,01,707/- (RS.3,76,707/- + RS.25,000/- ). THE BALANCE ACCOUNT OF RS.11,04,493/-, IS THEREF ORE, REMAINS UNEXPLAINED AND ADDED TO THE INCOME OF ASSESSEE. TH E ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT. ACT ARE SEPARATELY INITIAT ED. (ADDITION OF RS.11,04,493/-) IN OTHER WORDS, SINCE THE LAST DATE OF OPERATION OF THE LOCKER WAS 3/3/2006, THE CASH FROM THE LOCKER WAS ASSESSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2006-2007 AND CASH FOUND FROM HIS RESIDENCE AT THE TIME OF SEARCH ON 10/5/2006 WAS AS SESSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-2008. 25. SIMILARLY, IN CASE OF MAHESH VARMA, THE SEIZURE OF CASH FROM HIS RESIDENCE AND LOCKER HAS BEEN DISCUSSED BY THE ASSE SSING OFFICER IN ASSESSMENT ORDER AS UNDER: 6. DURING THE COURSE OF SEARCH PROCEEDINGS AT THE RESIDENCE OF ASSESSEE AN AMOUNT OF RS.56,750/- WAS FOUND. AMOUNT OF RS.14,99,000/- WERE FOUND BANK LOCKER NO.907 RAJKOT NAGRIK SAHAKARI BANK LTD, MITHAKHALI, AHMEDABAD. THE ASSES SEE WAS ASKED TO EXPLAIN THE SOURCE OF THIS CASH. IN RESPON SE TO THIS, THE ASSESSEE SUBMITTED THAT 'THE CASH FOUND FROM THE RESIDENCE MAHESH R. VARMA AND SHEETAL M. VARMA OF RS.56,750/- IS ON ACCOUNT OF MO NEY SAVED BY SHEETAL M. VARMA OVER A PERIOD OF TIME. THE SAVI NG WAS MADE ON ACCOUNT OF MONEY RECEIPT ON VARIOUS SOCIAL OCCAS IONS, SUCH AS BIRTHDAY, ANNIVERSARY AS WELL AS ON THE OCCASION OF BIRTH OF TWO CHILDREN FROM VARIOUS FRIENDS AND RELATIVES- FURTHE R HAVING REGARD TO SOCIAL STATUS OF ASSESSEE, THE SAID SUM S O RECEIVED AND FOUND IS REASONABLE CONSIDERING THE STANDARD OF LIV ING AS WELL AS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 28 - SOCIAL STATUS OF THE ASSESSEE. THEREFORE, NO ADVERS E VIEW SHOULD BE TAKEN'. 6.1 REGARDING THE CASH FOUND FROM LOCKER NO.907 OF RS.14,99,000/- THE ASSESSEE SUBMITTED AS UNDER : 'WITH REFERENCE TO THE CASH FOUND FROM LOCKER NO.90 7 OF RS.14,99,000/-, THE ASSESSEE SUBMITS THAT THE CASH FOUND FROM THE SAID LOCKER, BELONGS TO VARIOUS CONCERNS OF THE ASSESSEE AND ITS GROUP. THE BREAK-UP OF CASH FOUND OF RS. 14,99, 000/- IS AS UNDER: SR NAMES AMOUNT (RS.) A HARIOM FINSTOCK LIMITED 121260 B HARIOM ASSOCIATES 284158 C HARIOM SARJAK 146165 D RALSON INFR ASTRUCTURE PVT LIMITED 377207 E MAHESH R. VARMA 166972 F MAHESH R. VARMA, HUF 97355 G SMT. SHITAL M VARMA 69169 H RALSON INFRASTRUCTURE PVT LIMITED 236714 TOTAL. 1499000 THE DOCUMENTARY EVIDENCE IN THIS REGARD IS ENCLOSED . THE SAID FACT WAS EXPLAINED TO THE AUTHORIZED OFFICER IN A S TATEMENT RECORDED BY MR. MAHESH VARMA'. THE SUBMISSIONS OF ASSESSEE ARE CAREFULLY CONSIDERE D. 6.2 AS REGARDS THE CASH OF RS.56,750/- FOUND AT THE RESIDENCE OF ASSESSEE, THE EXPLANATION IS THAT IT IS OUT OF T HE PAST ACCUMULATED SAVINGS OF HIS WIFE FROM THE GIFTS RECE IVED ON VARIOUS SOCIAL OCCASIONS AND IT SHOULD BE ACCEPTED CONSIDER ING THE SOCIAL STATUS OF ASSESSEE. THERE IS NO DOUBT THAT THE ASSE SSEE BELONGS TO GOOD SOCIAL STATUS, THEREFORE, THE RECEIPTS OF GIFT S IS NEVER ONE SIDED BECAUSE AT THE SAME TIME THE ASSESSEE HAS ALS O TO GIVE GIFTS TO RELATIVES AND FRIENDS. THE ASSESSEE BELONGS TO B USINESS FAMILY AND ACCOUNTS OF EACH INDIVIDUAL ARE PREPARED. IN TH E EXPLANATION OF CASH FOUND FROM LOCKER, HE ATTRIBUTES THE CASH A S BELONGING TO HIS WIFE, HIS HUF AND OUT OF HIS CASH BALANCE IN HA ND. THEREFORE, WHATEVER CASH WAS AVAILABLE WITH THE ASSESSEE FAMIL Y THAT HAS BEEN EXPLAINED AS KEPT IN LOCKER. CONSIDERING THE S ITUATION IN TOTALITY, THE AMOUNT OF RS.40,000/- OUT OF THE CASH FOUND OF RS.56,750/- IS CONSIDERED UNEXPLAINED AND ADDED TO THE INCOME OF ASSESSEE. THE ASSESSEE HAS CONCEALED THE PARTICU LARS OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 29 - INCOME AND PENALTY PROCEEDINGS U/S 271 (1)(C) OF TH E I.T. ACT ARE SEPARATELY INITIATED. (ADDITION RS.40,000/-) 6.3 AS REGARDS THE EXPLANATION OF THE ASSESSEE REGA RDING THE CASH FOUND AT LOCKER AMOUNTING TO RS.14,99,000/- IS CONCERNED, THE CASH BOOKS OF M/S HARIOM SARJAK, HATIOM ASSOCIA TES, HARIOM FINSTOCK LTD, RALSONS INFRASTRUCTURE PVT LTD WERE EXAMINED. THE PRINT OUT OF CASH BOOK OF THESE CONCE RNS AS ON 31.03.2006 IN THE COMPUTER HARD DISK SEIZED DURING THE COURSE OF SEARCH WAS ALSO TAKEN INTO CONSIDERATION. IT WAS OBSERVED THAT THERE WAS MINOR VARIATION IN THE AMOUNT OF CASH AVA ILABLE WITH THE FIRMS VIZ. M/S HARIOM SARJAK, HARIOM ASSOCIATES , HARIOM FINSTOCK LTD, AS ON 31.03.2006 WITH THE CASH BALANC ES MENTIONED BY ASSESSEE IN THE RETURN OF INCOME. THE ASSESSEE ATTRIBUTES THE DIFFERENCE DUE TO THE FACT THAT THE AUDIT OF ACCOUNTS WAS NOT DONE AND THE ACCOUNTS WERE INCOMPLETE. CONS IDERING THE ABOVE FACTS, THE CASH ATTRIBUTED TO THESE FIRMS AND INDIVIDUALS IS ACCEPTED. 6.4 AS REGARDS THE CASH OF RS.3,77,207/- AND RS.2,3 6,714/-, WHICH IS ATTRIBUTED AS BELONGING TO RALSONS INFRAST RUCTURE PVT LTD IS CONCERNED, THE ARGUMENT OF ASSESSEE CANNOT BE AC CEPTED. HE HAS SUBMITTED COPY OF CASH BOOK OF RALSONS INFRASTR UCTURE PVT LTD FOR THE YEAR 2006-2007, WHICH SHOWS PAYMENT OF CASH AMOUNTING TO RS.3,77,207/- ON 03.05.2006. IT IS WOR TH MENTIONING HERE THAT ON THE DATE OF SEARCH I.E. ON 10.05.2006 THE BACK-UP OF HARD-DISK CONTAINING ACCOUNTING DATA WAS SEIZED FROM THE OFFICE PREMISES OF RALSONS INFRASTRUCTURE PVT LTD. THE SCRUTINY OF SEIZED ACCOUNTING DATA SHOWS THAT THERE IS NO DEBIT ENTRY IN THE CASH BOOK OF THE COMPANY ON 03.05.2006 SHOWING AN AMOUNT OF RS.3,77,207/- WAS GIVEN TO THE ASSESSEE T HE FACT THAT THE CASH BOOK OF RALSONS INFRASTRUCTURE PVT LTD AS PRODUCED IN SUPPORT OF CONTENTION OF ASSESSEE, IS NOT AT ALL TA LLYING WITH THE CASH BOOK AS PER SEIZED HARD DISK DATA. FROM THE AB OVE, IT APPEARS THAT THE COPY OF CASH BOOK OF THE COMPANY P RODUCED DURING THE COURSE OF HEARING IS FUDGED TO SUIT HIS REQUIREMENT FOR EXPLAINING SOURCE OF CASH FOUND FROM THE LOCKER, WH ICH WAS OPERATED ON LAST DATE OF 03.05.2006, BEFORE THE DAT E OF SEARCH. HAD THE AMOUNT WAS ADVANCED BY THE COMPANY THAN IT WOULD HAVE DEFINITELY FIGURED IN THE ACCOUNTING DATA OF T HE COMPANY SEIZED DURING THE COURSE OF SEARCH FROM THE OFFICE OF ASSESSEE. THE CONDUCT OF ASSESSEE SHOWS THAT THIS CASH WAS EN TERED IN THE BOOKS OF ACCOUNTS WHEN THEY WERE CAUGHT IN SEARCH O THERWISE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 30 - THIS AMOUNT WOULD HAVE GONE UNRECORDED AND UNACCOUN TED FOR. THE ASSESSEE WAS PROVIDED OPPORTUNITY TO RECONCILE THE CASH BOOK OF RALSONS INFRASTRUCTURE PVT LTD, PRODUCED DU RING THE ASSESSMENT PROCEEDINGS WITH THE CASH BOOK AS PER SE IZED DATA, BUT THAT WAS NOT PROVIDED. THE FACT IS ELABORATELY DISCUSSED, IN THE ASSESSMENT ORDER OF RALSONS INFRASTRUCTURE PVT LTD FOR THE A.Y.2006-2007 AND 2007-2008 AND THEIR BOOKS OF ACCO UNTS HAVE BEEN REJECTED. THEREFORE, THE AMOUNT OF RS.3,77,207 /- AS SHOWN TO HAVE BEEN RECEIVED BY ASSESSEE FROM RALSONS INFR ASTRUCTURE PVT LTD ON 03.05.2007 AND ANOTHER AMOUNT OF RS.2,36 ,714/- FOR WHICH NO DATE OF RECEIPT IS GIVEN REMAIN UNEXPLAINE D. THERE IS NO FORCE IN THE ARGUMENT OF ASSESSEE. THE AMOUNT OF RS .6,13,921/- CLAIMED TO HAVE BEEN RECEIVED FROM RALSONS INFRASTR UCTURE PVT. LTD IS THEREFORE ADDED TO THE INCOME OF ASSESSEE. T HE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND . PENAL TY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT ARE SEPAR ATELY INITIATED. (ADDITION OF RS.6,13,921/-) 26. IN APPEALT, THE CONTENTION OF ASSESSEE HAS BEEN THAT THE SAID CASH OF RS.49,97,832/- HAS BEEN RECEIVED BY HIM FRO M THE COMPANY NAMELY RALSON INFRASTRUCTURE PVT. LTD. WAS NOT ACCE PTED BY THE ASSESSING OFFICER. THE CASH FOUND FROM THE RESIDENC E OF SHRI RAVI VARMA WAS ALSO STATED TO BE BELONGING TO RALSON INF RASTRUCTURE PVT LTD. THE CASH FOUND FROM THE RESIDENCE OF SHRI MAHE SH VARMA WAS ALSO STATED TO BE BELONGING TO VARIOUS GROUP CONCER NS OF THE APPELLANTS INCLUDING RALSON INFRASTRUCTURE PVT LTD. IN SUPPORT OF THIS CONTENTION THE LD. AUTHORIZED REPRESENTATIVE ALSO S UBMITTED BEFORE CIT(A) COPIES OF STATEMENT OF SHRI RAVI VARMA, RECO RDED ON 17/5/2006 AT THE TIME OF OPERATION OF THE BANK LOCK ER, STATEMENT OF SHRI RAJNI VARMA RECORDED ON 17/5/2006 AT 3:30 PM, STATEMENT OF SHRI MAHESH VARMA RECORDED ON 5/6/2006 AT 12:30 PM, AND ON IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 31 - 7/6/2006 AT 4:10 PM WHILE OPERATING HIS BANK LOCKER . INTER ALIA STATED THAT SINCE THE CASH BELONGS TO THE COMPANY R ALSON INFRASTRUCTURE PVT LTD, THE ASSESSING OFFICER WAS N OT JUSTIFIED IN TREATING THE CASH OF RS.49,97,832/- AS THE UNACCOUN TED INCOME OF ASSESSEE. THE RELEVANT SUBMISSION OF ASSESSEE ON THIS POINT A RE AS UNDER: 2 'ADDITION ON ACCOUNT OF UNACCOUNTED CASH FOUND F ROM BANK LOCKER NO. 919 --RS. 49,97,832 4.1 DURING THE COURSE OF SEARCH ACTION, THE INCOME TAX DEPARTMENT HAD FOUND AND SEIZED CASH AMOUNTING TO RS. 49,97,832 FROM THE BANK LOCKER NO. 919 MAINTAINED WITH RAJKOT NAGRIK SAHKARI BANK LIMITED, WLITHAKHALI BRANCH, AHMEDABAD. THE APPELLANT AND ITS GROUP RIGHT FROM THE DAY OF SEARCH HAD MAINTAIN ED ITS STAND THAT DURING THE COURSE OF THE SEARCH PERI OD, THE APPELLANT HAD ONLY ONE SCHEME I.E. HARI OM VILL A SCHEME WHICH WAS DEVELOPED BY RALSON INFRASTRUCTURE PVT. LTD. THE CASH FOUND FROM THE BANK LOCKER OF TH E APPELLANT WAS RECEIVED FROM THE MEMBERS OF THE HARI OM VILLA SCHEME, WHICH WAS BEING DEPOSITED IN THE BANK LOCKER OF THE APPELLANT. THE AMOUNT SO RECEIVE D WERE FOR THE PURPOSE OF VARIOUS EXPENSES SUCH AS STAMP DUTY, REGISTRATION FEE, ADVOCATE'S FEE, DRAIN AGE CHARGES, MAINTENANCE CHARGES, GEB POWER, ETC. THE AMOUNT SO RECEIVED .FROM THE MEMBERS WAS DULY CONFIRMED BY THEM RESPECTIVELY. THE DOCUMENTARY EVIDENCE WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAS NOT EVEN ONCE DOUBTED THE GENUINENESS OF OF THE MONEY SO RECEIVED OR THE CONFIRMATION GIVEN BY THE MEMEBRS OF THE HARI OM VILLA SCHEME WITH STATEMENT OF ACCOUNT AND PAN NO. 4.2 THE APPELLANT ALSO SUBMITS THAT AS ON THE DATE OF THE SEARCH THE BOOKS OF ACCOUNTS OF RALSON INFRASTRUC TURE PVT. LIMITED TO WHOM THIS CASH BELONGS, WERE INCOMPLETE AND UN-AUDITED. ACCORDINGLY, TO VIEW THA T IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 32 - THE CASH SO FOUND FROM THE BANK LOCKER HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF RALSON INFRASTRUCTURE PVT. LTD., WOULD NOT BE LOGICAL AND CORRECT, SINCE THE FINALIZATION OF BOOKS OF ACCOUNT DURING THAT PERIOD WAS UNDER PROGRESS. 4.3 MR. MAHESH R. VARMA IN HIS STATEMENT RECORDED ON 5- 6-2006 VIDE QUESTION NO. 19, HAD CONFIRMED THE FACT THAT THE CASH FOUND FROM THE BANK LOCKER AS HAVING BEEN RECEIVED FROM DIFFERENT MEMBERS OF HARI OM VIL LA SCHEME AND IT BELONGS TO RALSON INFRASTRUCTURE PVT. LIMITED. THE EXTRACT OF THE SAID QUESTION AND ANSWE R IS AS UNDER: QUESTION NO. 19 ON 17 - 5 - 2006, BANK LOCKER NO. 919 WITH RAJKOT NAGRIK SAHKARI BANK LIMITED WAS OPENED AND FROM WHICH CASH AMOUNTING TO RS. 49,97,832 (RS. FORTY NINE LACS, NINETY SEVEN THOUSAND, EIGHT HUNDRED AND THIRTY SEVEN ONLY) WAS SEIZED. THE BANK LOCKER IS IN THE NAME OF MR., RAVI R. VARMA. WHO HAD INFORMED THAT THIS MONEY PERTAIN TO THE BUSINESS OF THE ASSESSEES, THE DETAILS OF WHICH WOULD BE GIVEN BY MY BROTHER MR. MAHESH R. VARMA. PLEASE EXPLAIN IF THE MONEY PERTAINS TO THE BUSINESS OF THE GROUP, THEN WHY THE SAID SUM WAS FOUND FROM THE PERSONAL LOCKER? IN WHOSE BOOKS OF ACCOUNTS THE SAME IS ACCOUNTED FOR AND TO WHOM THE SAID MONEY BELONGS? ANSWER - 19 THE MEMBERS OF THE ONGOING HARI OM VILLA SCHEME HAVE GIVEN MONEY FOR MAKING VARIOUS EXPENSES SUCH AS STAMP DUTY, REGISTRATION FEE, ADVOCATE'S FEE, AUDA DRAINAGE CHARGES, GEB POWER, EXTRA WORK FEE AND LEGAL EXPENSES. BECAUSE IT WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 33 - PRACTICALLY DIFFICULT TO OPEN THE BANK LOCKER IN THE NAME OF THE COMPANY AND MR. RAVI R. VARMA BEING THE DIRECTOR OF THE COMPANY THE SAID CASH WAS PUT IN THE SAFE CUSTODY IN THE BANK LOCKER OF MR. RAVI R. VARMA. THE RECEIPT FOR THE EXPENSES SO MADE IS TO BE MADE AND THE BALANCE OF THE INCOME AND EXPENSES WILL BE OFFERED TO INCOME-TAX. 4.4 MR. MAHESH R. VARMA IN HIS STATEMENT RECORDED O N 26-12-2008 BEFORE THE ASSESSING OFFICER HAS ALSO CO NFIRMED THE FACT THAT CASH FOUND FROM THE LOCKER OF MR. RAV I R. VARMA AS WELL AS FROM MR. MAHESH R. VARMA IS DULY REFLECTED IN THE BOOKS OF RALSON INFRASTRUCTURE PVT . LIMITED, THE EXTRACT OF THE SAME IS AS UNDER: QUESTION NO. 2 DURING THE COURSE OF SEARCH PROCEEDINGS IN YOUR GROUP OF CASES INITIATED ON 10- 05-2006 CASH AMOUNTING TO RS. 14,99,000 WAS RECOVERED FROM YOUR LOCKER AT RAJKOT NAGRIK SAHKARI BANK LIMITED. CASH AMOUNTING TO RS. 49,97,832 WAS RECOVERED FROM LOCKER OF YOUR BROTHER SHRI RAVI VARMA. CASH AMOUNTING TO RS. 15,06,200 WAS ALSO FOUND AT THE RESIDENCE OF SHRI RAVI VARMA. MR. RAVI VARMA IN HIS STATEMENT RECORDED BEFORE INVESTIGATION AUTHORITY STATED THAT THE CASH BELONGS TO RAISON INFRASTRUCTURE PVT. LTD., AS A DEPOSIT RECEIVED FROM MEMBERS OF THEIR CURRENT RUNNING PROJECTS. PLEASE EXPLAIN WHERE THE CASH HAS BEEN REFLECTED? ANSWER - 2 THE CASH HAS BEEN REFLECTED IN THE BOOKS OF M/S. RALSON INFRASTRUCTURE PVT. LTD., IN THE ASSESSMENT YEAR 2006-07. QUESTION - 7 THE HARD DISK, OF COMPUTER CONTAINING THE BOOKS OF ACCOUNTS OF M/S. RIPL AND OTHER GROUP CONCERNS WERE SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS. THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 34 - WORKING COPY OF WHICH WAS OPERATED BEFORE YOUR AR. THE BALANCE SHEET,.P&L A/C, CASH BOOK AND TRIAL BALANCE OF RIPL WERE PRINTED OUT AND GIVEN TO YOUR AR. IN THE CASH BOOK THE AMOUNT RECOVERED FROM YOUR BANK LOCKER HAS NOT BEERI REFLECTED NEITHER THE AMOUNT HAS BEEN SHOWN IN THE LEDGER OF ANY MEMBER. PLEASE EXPLAIN HOW THE AMOUNT MAY BE BELONGING TO MEMBERS OF RALSON INFRASTRUCTURE PVT. LIMITED? ANSWER - 7 FOR THIS CASH RECEIPTS WERE AVAILABLE IN THE OFFICE PREMISES. THE BOOKS OF ACCOUNTS REFERRED IN THE QUESTION WERE INCOMPLETE ON THE DATE OF THE SEARCH. WHILE FINALIZING THE BOOKS ALL THESE RECEIPTS WERE ACCOUNTED AND OFFERED AS INCOME OF RIPL. THE LIST OF SUCH MEMBER WITH CONFIRMATION HAS BEEN SUBMITTED IN THE ASSESSMENT PROCEEDINGS. 4.5 RALSON INFRASTRUCTURE PVT. LIMITED, TO WHOM THE CASH BELONGS, WHILE FILING THE RETURN OF INCOME FOR THE PRESENT ASSESSMENT YEAR HAD DULY ACCOUNTED FOR THE CASH SO FOUND FROM THE BANK LOCKER AND CONFIRMED BY THE MEMBERS O F HARI OM VILLA SCHEME IN ITS BOOKS OF ACCOUNTS. YOUR HONO UR WOULD ALSO APPRECIATE THAT THE ASSESSMENT OF RALSON INFRASTRUCTURE PVT. LIMITED IS ALREADY MADE AFTER C ONSIDERING THE CASH SO FOUND AND ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS. THE SAME HAS BEEN CONFIRMED BY THE MEMBER S OF HARIOM VILLA SCHEME. 4.6 THE ASSESSING OFFICER HAD MADE THE ALLEGED ADDI TION OF CASH SO FOUND MERELY ON THE GROUND THAT THE SAME WAS BEI NG PUT IN THE BANK LOCKER OF THE APPELLANT INSTEAD OF DEPO SITING THE SAME IN THE BANK ACCOUNT AND WAS NOT RECORDED IN TH E HARD DISC SO FOUND DURING THE COURSE OF SEARCH. THE ASSE SSING OFFICER IN HIS ORDER HAS NOT -BROUGHT A SINGLE ADVE RSE EVIDENCE AGAINST THE CONFIRMATION PROVIDED BY THE A PPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, APART FROM MAKING CERTAIN ASSUMPTIONS.. THE APPELLANT ALSO STA TES THAT ADDITION COULD NOT BE MADE MERELY BECAUSE CASH WAS FOUND FROM THE BANK LOCKER INSTEAD OF BANK ACCOUNT THE OT HER SURROUNDING AND DOCUMENTARY EVIDENCE IS REQUIRED TO BE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 35 - JUDGED BEFORE ARRIVING AT ANY ADVERSE ACTION. THE A CTION TAKEN BY THE ASSESSING OFFICER ON THIS GROUND ITSEL F INDICATES THAT THE SAME HAS BEEN MADE ON PRESUMPTIO N, ASSUMPTIONS AND SURMISES. THE ADDITION SO MADE BY T HE ASSESSING OFFICER OF RS. 49,97,832 MAY KINDLY BE DE LETED.' 27. REGARDING THE SEIZURE OF CASH FROM HIS RESIDENC E THE SUBMISSION OF ASSESSEE SHRI RAVI VARMA IS AS UNDER: 1.1 WITH REGARD TO AFORESAID ADDITION, IT IS SUBMI TTED THAT CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLAN T, WAS THE CASH RECEIVED FROM THE MEMBERS OF THE HARI OM V ILLA SCHEME. THE AMOUNT SO RECEIVED WERE THE MEMBERS' COLLECTION RECEIVED FOR THE PURPOSE OF VARIOUS EXPE NSES SUCH AS STAMP DUTY, REGISTRATION FEE, ADVOCATE'S FEE, DR AINAGE CHARGES, MAINTENANCE CHARGES, GEB POWER, ETC. FURTH ER, THE APPELLANT DURING THE COURSE OF SEARCH PROCEEDIN G AS WELL AS IN POST SEARCH PROCEEDINGS HAS CATEGORICALLY STA TED THAT, THE CASH FOUND FROM THE RESIDENTIAL PREMISES PERTAI NS TO THE BUSINESS OF THE APPELLANT AND ITS GROUP AND COLLECT ION RECEIVED FROM THE MEMBERS OF THE CURRENT PROJECT. T HE SAID FACT HAS ALSO BEEN RECORDED IN THE STATEMENT OF THE APPELLANT, RECORDED UNDER SECTION 132(4) OF THE ACT ON THE DATE OF SEARCH 10TH MAY, 2006. RELEVANT EXTRACTS OF THE SAME ARE REPRODUCED HEREUNDER FOR YOUR KIND PERUSAL : QUESTION NO. 21 DURING THE COURSE OF SEARCH OPERATION FROM YOUR RESIDENTIAL PREMISES CASH AMOUNTING TO RS. 15,06,200 WAS F OUND VIDE ANNEXURE - CF. PLEASE EXPLAIN THE SAME. ALSO, EXPLAIN AS TO WHY CASH AMOUNTING TO RS. 14,50,000 SHOULD NOT BE SEIZED. ANSWER - 21 WITH REFERENCE TO CASH FOUND, I WOULD LIKE TO SUBMIT THAT THE SAME PERTAINS TO MY BUSINESS AND COLLECTION RECEIVED FROM THE MEMBERS OF THE CURRENT PROJECT. I AM UNABLE TO OBTAIN THE INFORMATION FROM THE OFFICE AS TO WHICH ENTERPRISE THE AMOUNT OF CASH SO FOUND PERTAINS. ACCORDINGLY, I HAVE NO OBJECTION OF MAKING SEIZURE OF CASH OF RS. 14,50,000 AS PER THE REQUIREMENTS OF THE LAW. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 36 - 1.2 THE APPELLANT FURTHER SUBMITS THAT, AFORESAID F ACTS WERE ALSO EXPLAINED TO ASSESSING OFFICER DURING THE COUR SE OF ASSESSMENT PROCEEDINGS WHICH IS ALSO REPRODUCED BY THE ASSESSING OFFICER AT PARA 5 OF THE ASSESSMENT ORDER . THE SAME IS REPRODUCED HEREIN UNDER FOR YOUR READY REFE RENCE: 'WITH REFERENCE TO THE CASH SEIZED FROM THE RESIDEN CE OF RAVI R. VERMA OF RS.15,06,200 THE ASSESSEE SUBMITS THAT IT HAD RECEIVED THE SAID SUM FROM DIFFERENT MEMBERS, OF HA RIOM VILLA SCHEME DEVELOPED BY RALSON INFRASTRUCTURE PVT . LTD. THE SAID SUM WERE BEING RECEIVED FOR THE PURPOSE OF VARIOUS EXPENSES, SUCH AS STAMP DUTY, REGISTRATION FEE, ADV OCATE'S .FEE, DRAINAGE CHARGES, MAINTENANCE CHARGES, GEE PO WER, ETC. IN THIS CONNECTION THE ASSESSEE WOULD FURTHER LIKE TO CLARIFY THAT IN THE YEAR 2006 WHEN THE SEARCH OPERA TION WAS BEING CARRIED OUT THERE WAS ONLY ONE SCHEME THAT WA S IN PROGRESS VIS. HARIOM VILLA DEVELOPED BY RALSON INFRASTRUCTURE PVT. LTD, ACCORDINGLY WHATEVER CASH WAS FOUND FROM THE POSSESSION OF MR. RAVI VERMA PERTAIN ED TO THE ONLY SCHEME IN BOOKS OF ACCOUNTS OF RALSON INFRASTRUCTURE PVT. LTD. THE DOCUMENTARY EVIDENCE W ITH REGARD TO THE SUM SO RECEIVED FROM DIFFERENT MEMBER S FOR THE PURPOSE OF MAKING THE ABOVE EXPENDITURE. THE SA ID FACT WAS EXPLAINED BY MR. RAVI VERMA TO THE AUTHORIZED O FFICER IN HIS STATEMENT RECORDED ON 5/6/2006 VIDE QN. NO. 21 OF THE STATEMENT DATED 10TH MAY, 2006.' 1.3 APART FROM WHAT IS STATED HEREIN ABOVE, IT IS F URTHER SUBMITTED THAT, THE APPELLANT IN HIS STATEMENT RECO RDED U/S 132(4) AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS ALSO STATED SIMILAR FACTS THAT SUCH CASH PERTAINS TO MEMBERS' COLLECTION OF THE PROJECT CARR IED OUT IN RALSON INFRASTRUCTURE PVT LIMITED. HOWEVER THE ASSE SSING OFFICER WITHOUT CONSIDERATION OF SUCH STATEMENT AND WITHOUT WELL APPRECIATION OF THE FACTS OF THE CASE OF THE A PPELLANT HAS MADE THE IMPUGNED ADDITION IN CASE OF APPELLANT. IT IS FURTHER SUBMITTED THAT THE AMOUNT SO RECEIVED FROM VARIOUS MEMBERS WAS ALSO DULY CONFIRMED BY THEM. TH E CONFIRMATIONS RECEIVED .FROM VARIOUS MEMBERS ALONG WITH THEIR PAN NO AND OTHER DOCUMENTARY EVIDENCES WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER HA S NOT EVEN ONCE DOUBTED THE GENUINENESS OF THE MONEY SO IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 37 - RECEIVED OR THE CONFIRMATION GIVEN BY THE MEMBERS O F THE HAD OM VILLA SCHEME. 1.4 THE APPELLANT STATES THAT AS ALREADY EXPLAINED BY THE APPELLANT IN THE STATEMENT OF THE APPELLANT, RECORD ED UNDER SECTION 132(4) OF THE ACT AS WELL AS DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT, WAS THE CASH RECEIVED FROM THE MEMBERS OF THE HARI OM VILLA SCHEME DEVELO PED BY RALSON INFRASTRUCTURE PVT. LTD. FURTHER IT IS PE RTINENT TO NOTE THAT WHILE MAKING THE ADDITION OF.RS.11,04,493 THE ASSESSING OFFICER HAS INDIRECTLY ACCEPTED THE CONTE NTION OF THE APPELLANT THAT THE CASH SO FOUND PERTAINS TO RA ISON INFRASTRUCTURE PVT. LIMITED BY GIVING THE CREDIT OF CLOSING CASH ON HAND AS ON 4-5-2006 OF RAISON INFRASTRUCTUR E PVT. LIMITED AMOUNTING TO RS. 3,76,707. 1.5 APART FROM WHAT IS STATED HEREIN ABOVE, THE APP ELLANT FURTHER SUBMITS THAT THE ASSESSING OFFICER HAD MADE THE ALLEGED ADDITION OF CASH SO FOUND MERELY ON THE GRO UND THAT THE SAME WAS BEING PUT IN THE BANK LOCKER/ HOME OF THE APPELLANT INSTEAD OF DEPOSITING THE SAME IN THE BAN K ACCOUNT. IN THIS REGARD THE APPELLANT AT THE COST O F REPETITION STATES THAT, THE ASSESSING OFFICER IN HIS ORDER HAS NOT BROUGHT A SINGLE ADVERSE EVIDENCE AGAINST THE CONFI RMATION PROVIDED BY THE APPELLANT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, APART FR.OM MAKING CERTAIN ASSUMPTIONS . THE APPELLANT ALSO STATES THAT ADDITION COULD NOT BE MA DE MERELY BECAUSE CASH WAS FOUND FROM THE BANK LOCKER/ HORNE INSTEAD OF BANK ACCOUNT. IT IS FURTHER STATED THAT EVEN AFORESAID AMOUNT HAS BEEN OFFERED AS INCOME IN CASE OF RALSONS INFRASTRUCTURE PVT LIMITED AND WHICH IS NOT DISPUTED BY AO. THE OTHER SURROUNDING AND DOCUMENTA RY EVIDENCE IS REQUIRED TO BE JUDGED BEFORE ARRIVING A T ANY ADVERSE ACTION. THE ACTION TAKEN BY THE ASSESSING O FFICER ON THIS GROUND ITSELF INDICATES THAT THE SAME HAS BEEN MADE ON PRESUMPTION, ASSUMPTIONS AND SURMISES. HENCE THE ADDITION SO MADE/BY THE ASSESSING OFFICER OF RS. 11 ,04,493 DESERVES TO BE DELETED. 1.6 THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS OBSERVED THAT THE SAID CASH WAS THOUGH RECORDED IN THE CASH BOOK PRODUCED BY THE APPELLANT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, WAS NOT RECORDED IN THE BACK UP OF HAR D DISC SO FOUND DURING THE COURSE OF SEARCH AND HENCE THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 38 - EXPLANATION OF THE APPELLANT THAT THE SAID CASH WAS BELONGING TO RAISON INFRASTRUCTURE PVT. LTD. WAS RE JECTED BY THE ASSESSING OFFICER. IN THIS REGARD, THE APPELLAN T SUBMITS THAT, AS ON THE DATE OF THE SEARCH THE BOOKS OF ACC OUNTS OF RAISON INFRASTRUCTURE PVT. LIMITED TO WHOM THIS CAS H BELONGS, WERE INCOMPLETE AND UN-AUDITED. ACCORDINGL Y, TO VIEW THAT THE CASH SO FOUND FROM THE BANK LOCKER/ RESIDENTIAL PREMISES HAS NOT BEEN ACCOUNTED FOR IN. THE BOOKS OF RAISON INFRASTRUCTURE PVT. LTD., WOULD NOT BE LOGICAL AND CORRECT, SINCE THE FINALIZATION OF BOOK S OF ACCOUNT DURING THAT PERIOD WAS UNDER PROGRESS. IT IS FURTHER SUBMITTED THAT THE MEMBERS COLLECTION RECEIVED FROM THE MEMBERS OF THE HARI OM VILLA WHICH WERE YE T TO BE ENTERED IN THE BOOKS OF ACCOUNTS OF THE RAISON INFRASTRUCTURE PVT LTD. AS ON THE DATE OF SEARCH WE RE DULY RECORDED IN THE BOOKS OF ACCOUNTS THEREAFTER. THE A PPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO SU BMITTED THE CASH BOOK OF RAISON INFRASTRUCTURE PVT. LTD. WH ICH WAS INCOMPLETE AS ON THE DATE OF SEARCH AS WELL AS THE RECONCILED CASH BOOK AFTER RECORDING THE AMOUNT OF MEMBERS' COLLECTION TO THE ASSESSING OFFICER. THE APPELLANT SUBMITS RECONCILIATION BETWEEN BOTH THE CASH BOOKS AS ANNEX URE - C, IN VIEW OF WHAT IS STATED HEREIN ABOVE, CASH FOU ND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT WAS PART OF THE TOTAL MEMBERS' COLLECTION OF RS,78,27,000 ( RS. 49, 65,000 IN A.Y. 2005-2006 AND RS. 28,62,000 FOR A.Y. 2006-2007 ) RECORDED IN THE BOOKS OF ACCOUNTS OF RALSON INFRAST RUCTURE PVT. LTD. AND HENCE THE ASSESSING OFFICER HAS GROSS LY ERRED IN TREATING THE CASH SO FOUND AS UNEXPLAINED IN THE HA NDS OF THE APPELLANT WITHOUT APPRECIATING THE RECONCILED C ASH .BOOK SUBMITTED BY THE APPELLANT AFTER DULY RECORDI NG THE MEMBERS' COLLECTION OF HARI OM VILLA, WHICH WERE AL SO DULY CONFIRMED BY THEM. 1.7 FURTHER THE RALSON INFRASTRUCTURE PVT. LIMITED, TO WHOM THE CASH BELONGS, WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 HAD DULY ACCOUNTED FOR THE CASH SO FOUND FROM THE RESIDENTIAL PREMISES AND CONFIRME D BY THE MEMBERS OF HARI OM VILLA SCHEME IN ITS BOOKS OF ACCOUNTS. YOUR HONOUR WOULD ALSO APPRECIATE THAT TH E ASSESSMENT OF RALSON INFRASTRUCTURE PVT. LIMITED IS ALREADY MADE AFTER CONSIDERING THE CASH SO FOUND AND ACCOUN TED FOR IN ITS BOOKS OF ACCOUNTS. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 39 - IN VIEW OF THE ABOVE, THE APPELLANT SUBMITS THAT AS THE CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE 'APPELLA NT WAS THE AMOUNT RECEIVED AS MEMBERS' COLLECTION BELONGIN G TO RALSON INFRASTRUCTURE PVT LTD. AND THE SAID AMOUNT HAS BEEN ENTERED INTO THE BOOKS OF ACCOUNTS OF THE RALS ON INFRASTRUCTURE PVT. LTD AND HAS BEEN DULY CONSIDERE D FOR THE TAXATION PURPOSE IN ITS CASE FOR THE A.Y 2007-08, N O FURTHER ADDITION OF THE SAME CASH WAS REQUIRED TO BE MADE I N CASE OF THE APPELLANT AS SAME .WILL RESULT INTO DOUBLE T AXATION OF SAME AMOUNT IN TWO DIFFERENT ASSESSEE. IN THIS REGA RD THE APPELLANT RELIES ON DECISION OF HO'BIE SUPREME COUR T IN CASE OF LAXMIPANT S1NGHANIA VS. CIT 72 ITR 291 , WHEREIN COURT HAS OBSERVED AS UNDER: FROM THE HEAD NOTES 'IT IS A FUNDAMENTAL RULE OF THE LAW OF TAXATION TH AT, UNLESS OTHERWISE EXPRESSLY PROVIDED, INCOME CANNOT BE TAXE D TWICE. IT IS NOT OPEN TO THE INCOME-TAX OFFICER, IF INCOME HAS ACCRUED TO THE ASSESSEE AND IS LIABLE TO BE INCLUDE D IN THE TOTAL INCOME OF A PARTICULAR YEAR, TO IGNORE THE AC CRUAL AND THEREAFTER TO TAX IT AS INCOME OF ANOTHER YEAR ON T HE BASIS OF RECEIPT.' THUS IN VIEW OF THE FACTS OF THE CASE OF THE APPELL ANT, IT IS SUBMITTED THAT THE ADDITION ' MADE BY THE ASSESSING OFFICER IN CASE OF THE APPELLANT IS COMPLETELY UNJUSTIFIED AND UNCALLED FOR AND HENCE THE SAME MAY KINDLY BE DELETED. 2. ADDITION ON ACCOUNT OF UNEXPLAINED CASH FOUND FR OM THE BANK LOCKER NO.229 OF RS.40,000 (GROUND NO.3) 2.1 DURING THE COURSE OF THE SEARCH ACTION CARRIED OUT UNDER SECTION 132 IN CASE OF APPELLANT, THE INCOME TAX DE PARTMENT HAD FOUND CASH AMOUNTING TO RS. 50,000 FROM THE BAN K LOCKER NO. 229 (INADVERTENTLY MENTIONED AS 919) MAI NTAINED WITH SARDAR VALLABHBHAI CO-OPERATIVE BANK LIMITED I N THE NAME OF THE APPELLANT AND HIS SPOUSE. THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXPLAINED TO T HE ASSESSING OFFICER THAT THE CASH SO FOUND FROM THE B ANK LOCKER WAS OUT OF THE MONEY SAVED BY THE APPELLANT AND ITS FAMILY FROM TIME TO TIME. HOWEVER THE ASSESSING OFF ICER WHILE REJECTING THE SAID CONTENTION OF THE APPELLANT PRES UMED THE AMOUNT OF RS.40,000 OUT OF THE CASH FOUND OF RS.50, 000 TO IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 40 - BE UNEXPLAINED AND ADDED THE SAME TO THE TOTAL INCO ME OF THE APPELLANT. 2.2 WITH REGARD TO AFORESAID ADDITION, IT IS SUBMIT TED THAT CASH FOUND FROM THE BANK LOCKER WAS OUT OF THE MONEY SAV ED BY THE APPELLANT AND ITS FAMILY FROM TIME TO TIME. ALS O, CONSIDERING THE SOCIAL STATUS OF THE ASSESSEE AS WE LL AS OF HIS SPOUSE, HE HAD RECEIVED THE MONEY ON VARIOUS SO CIAL OCCASIONS FROM FRIENDS, RELATIVES AS WELL AS ON THE OCCASIONS OF BIRTHDAYS OF THEIR CHILDREN. FURTHER THE SAID FA CT WAS ALSO EXPLAINED BY THE APPELLANT DURING THE COURSE OF REC ORDING OF THE STATEMENT BEFORE THE AUTHORISED OFFICER ON 22ND MAY, 2006 VIDE QUESTION NO. 4, AS WELL AS TO THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE SUBMISSION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS REPRODUCED HEREIN UNDER FOR YOUR GOO DSELVES KIND PERUSAL: 'THE SAVING WAS MADE ON ACCOUNT OF MONEY RECEIVED, ON VARIOUS SOCIAL OCCASION SUCH AS BIRTHDAY, ANNIVERSA RY AS WELL AS ON THE OCCASION OF THE BIRTH OF TWO CHILDRE N, DEEP R. VARMA AND KUNAL R. VARMA, FROM VARIOUS FRIENDS AND RELATIVES. FURTHER HAVING REGARD TO THE SOCIAL STAT US OF THE ASSESSEE, THE SAID SUM SO RECEIVED AND FOUND.IS REA SONABLE CONSIDERING THE STANDARD OF LIVING AS WELL AS THE S OCIAL STATUS OF THE ASSESSEE. ACCORDINGLY, YOUR GOODSELVE S IS KINDLY REQUESTED NOT TO TAKE ADVERSE ACTION CONSIDE RING THE AMOUNT FOUND SINCE THE SAME WAS OUT OF THE MONEY SA VED BY MY WIFE. THE SAID FACT WAS ALSO EXPLAINED DURING THE COURSE OF RECORDING OF THE STATEMENT BEFORE THE AUT HORISED OFFICER ON 22ND MAY, 2006 VIDE QUESTION NO. 4. ACCORDINGLY, YOUR GOODSELVES IS KINDLY REQUESTED NO T TO TAKE ADVERSE ACTION CONSIDERING THE AMOUNT FOUND SINCE T HE SAME WAS OUT OF THE MONEY SAVED BY MY WIFE' A COPY OF THE ABOVE STATEMENT IS ENCLOSED HEREWITH VIDE ANNEXURE C FOR YOUR GOODSELVES KIND PERUSAL. 2.3 FURTHER THE ASSESSING OFFICER ORDER IN HIS ORDE R HAS HIMSELF ACCEPTED THAT THE CONSIDERING THE SOCIAL STATUS OF THE APPELLANT AND HIS FAMILY A SUM OF RS. 10,000 WAS AC CEPTED AS HAVING BEEN RECEIVED ON VARIOUS OCCASIONS. THUS, ONCE THE ASSESSING OFFICER HAS ACCEPTED THAT THE APPELLA NT AND HIS FAMILY BELONGS TO GOOD SOCIAL STATUS AND HAVE R ECEIVED CERTAIN MONEY AS GIFTS THERE IS NO REASON TO BELIEV E OR DOUBT IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 41 - THAT THE CASH SO FOUND FROM THE BANK LOCKER WAS NOT OUT OF THE MONEY SAVED BY THE APPELLANT AND HIS WIFE OVER A PERIOD OF TIME. THUS, IT IS SUBMITTED THAT THE ADDITION OF RS. 40,000 IS COMPLETELY BASED ON ASSUMPTION, CONJECTURES AND SURMISES, AND HENCE THE SAME NEEDS TO BE DELETED. 28. SIMILARLY, IN RESPECT OF CASH FOUND AND SEIZED FROM THE RESIDENCE OF SHRI MAHESH VARMA, ASSESSEE HAS SUBMITTED FOLLOW ING ARGUMENTS: 1. ADDITION ON ACCOUNT OF UNEXPLAINED CASH OF RS.4 0.000 (GROUND NO.2) 1.1 DURING THE COURSE OF THE SEARCH ACTION CARRIED OUT UNDER SECTION 132 IN CASE OF APPELLANT, THE INCOME TAX DE PARTMENT HAD FOUND CASH AMOUNTING TO RS.56,750 FROM THE RESIDENTIAL PREMISES OF THE APPELLANT. THE APPELLAN T DURING THE COURSE OF ASSESSMENT PROCEEDINGS EXPLAINED TO T HE ASSESSING OFFICER THAT THE CASH SO FOUND FROM THE R ESIDENTIAL PREMISES WAS; OUT OF THE MONEY SAVED BY THE APPELLA NT AND ITS FAMILY FROM TIME TO TIME. HOWEVER THE ASSESSING OFFICER WHILE REJECTING THE SAID CONTENTION OF THE APPELLAN T PRESUMED THE AMOUNT OF RS.40,000 OUT OF THE CASH FO UND OF RS,56,750 TO BE UNEXPLAINED AND ADDED THE SAME TO T HE TOTAL INCOME OF THE APPELLANT. 1.2 WITH REGARD TO AFORESAID ADDITION, IT IS SUBMI TTED THAT CASH FOUND FROM THE BANK LOCKER WAS OUT OF THE MONEY SAV ED BY THE APPELLANT AND ITS FAMILY FROM TIME TO TIME. ALS O, CONSIDERING THE SOCIAL STATUS OF THE ASSESSEE AS WE LL AS OF HIS SPOUSE, HE HAD RECEIVED THE MONEY ON VARIOUS SO CIAL OCCASIONS FROM FRIENDS, RELATIVES AS WELL AS ON THE OCCASIONS OF BIRTHDAYS OF THEIR CHILDREN. FURTHER THE SAID FA CT WAS ALSO EXPLAINED BY THE APPELLANT TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE SUBMISSIO N MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS REPRODUCED HEREIN UNDER FOR YOUR GOODSELVES KIND PE RUSAL: 'THE CASH FOUND FROM THE RESIDENCE OF MAHESH R. VAR MA AND SHEETAL M. VARMA OF RS. 56,750 /S ON ACCOUNT OF MONEY SAVED BY SHEETAL M. VARMA OVER A PERIOD OF TI ME. THE SAVING WAS MADE ON ACCOUNT OF MONEY RECEIPT ON VARI OUS SOCIAL OCCASIONS, SUCH AS BIRTHDAY, ANNIVERSARY AS WELL ON THE OCCASION OF BIRTH OF TWO CHILDREN FROM VARIOUS FRIENDS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 42 - AND RELATIVES. FURTHER, HAVING REGARD TO SOCIAL STA TUS OF ASSESSEE, THE SAID SUM SO RECEIVED AND FOUND IS REA SONABLE CONSIDERING THE STANDARD OF LIVING AS WELL AS SOCIA L STATUS OF THE ASSESSEE. THEREFORE, NO ADVERSE VIEW SHOULD BE TAKEN.' 1.3 FURTHER THE ASSESSING OFFICER ORDER IN HIS ORDE R HAS HIMSELF ACCEPTED THAT THE CONSIDERING THE SOCIAL STATUS OF THE APPELLANT AND HIS FAMILY A SUM OF RS.16,750 WAS ACC EPTED AS HAVING BEEN RECEIVED ON VARIOUS OCCASIONS. THUS, ONCE THE ASSESSING OFFICER HAS ACCEPTED THAT THE APPELLA NT AND HIS FAMILY BELONGS TO GOOD SOCIAL STATUS AND HAVE R ECEIVED CERTAIN MONEY AS GIFTS THERE IS NO REASON TO BELIEV E OR DOUBT THAT THE CASH SO FOUND FROM THE BANK LOCKER WAS NOT OUT OF THE MONEY SAVED BY THE APPELLANT AND HIS WIFE OVER A PERIOD OF TIME. THUS, IT IS SUBMITTED THAT THE ADDITION OF RS. 40,000 IS COMPLETELY BASED ON ASSUMPTION, CONJECTURES AND SURMISES, AND HENCE THE SAME NEEDS TO BE DELETED. 29. THE RELEVANT SUBMISSION OF ASSESSEE IN RESPECT OF CASH FOUND AND SEIZED FROM THE LOCKER OF SHRI MAHESH VARMA IS REPR ODUCED AS UNDER: 2.1 WITH REGARD TO AFORESAID ADDITION, IT IS SUBMI TTED THAT CASH SO FOUND FROM BANK LOCKER OF THE APPELLANT, WAS THE CASH RECEIVED FROM THE MEMBERS OF THE HARI OM VILLA SCHE ME. THE AMOUNT SO RECEIVED WERE THE MEMBERS' COLLECTION RECEIVED FOR THE PURPOSE OF VARIOUS EXPENSES SUCH A S STAMP DUTY; REGISTRATION FEE, ADVOCATE'S FEE, DRAINAGE CH ARGES, MAINTENANCE CHARGES, GEB POWER, ETC. FURTHER, THE APPELLANT DURING THE COURSE OF SEARCH PROCEEDING AS WELL AS IN POST SEARCH PROCEEDINGS HAS CATEGORICALLY STATED THAT, THE CASH FOUND, FROM THE RESIDENTIAL PREMISES PERTAINS TO THE BUSINESS OF THE APPELLANT AND ITS GROUP AND COLLECT ION RECEIVED FROM THE MEMBERS OF THE CURRENT-PROJECT. T HE SAID FACT HAS ALSO BEEN RECORDED IN THE STATEMENT OF THE APPELLANT, RECORDED UNDER SECTION 132(4) OF THE ACT ON 07/06/2006. RELEVANT EXTRACTS OF THE SAME ARE REPRO DUCED HEREUNDER FOR YOUR KIND PERUSAL: QUESTION NO. 3 AS ON DATE CASH AMOUNTING TO RS. 14.99 LAKHS HAS BEEN FOUND FROM BANK LOCKER NO. 907, TO WHOM SAID CASH BELONGS? AND IN WHOSE BOOKS OF ACCOUNT THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 43 - SAME IS RECORDED? PLEASE EXP - LAIN THE SAME. ANSWER - 3 AS EXPLAINED IN ANSWER NO. 2 HEREIN ABOVE, THE CASH BELONGS TO VARIOUS INDIVIDUAL AND OTHER ENTERPRISES. FURTHER, CASH HAS BEEN RECEIVED FROM THE MEMBERS OF THE ONGOING HARI OM VILLA SCHEME, THE DETAILS OF WHICH, WOULD BE SUBMITTED SEPARATELY. THE CASH- BALANCE AND ITS CORRESPONDING NAMES WHICH HAVE BEEN MENTIONED IN ANS - 2 IS AS ON 3-5-2006. THE BALANCE AMOUNT OF RS. 2,65,000 IS RECEIVED FROM THE MEMBERS TOWARDS DOCUMENT EXPENSES, GEB EXPENSES, SHARE CONTRIBUTION, EXTRA WORK, VAT AND LEGAL EXPENSES IS RECEIVED FROM DIFFERENT MEMBERS. A COPY OF THE ABOVE STATEMENT IS ENCLOSED HEREWITH VIDE ANNEXURE - A FOR YOUR GOODSELVES KIND PERUSAL. 2.2 IT IS FURTHER STATED THAT THE APPELLANT IN HIS STATEMENT RECORDED ON 26-12-2008 BEFORE THE ASSESSING OFFICER HAS ALSO CONFIRMED THE FACT THAT CASH FOUND FROM THE LO CKER OF MR. RAVI R. VARMA AS WELL AS FROM MR. MAHESH R. VAR MA IS DULY REFLECTED IN THE BOOKS OF RALSON INFRASTRUCTUR E PVT. LIMITED, THE EXTRACT OF THE SAME IS AS UNDER: QUESTION NO. 2 DURING THE COURSE OF SEARCH PROCEEDINGS IN YOUR GROUP OF CASES INITIATED ON 10-05-2006 CASH AMOUNTING TO RS. 14,99,000 WAS RECOVERED FROM YOUR LOCKER AT RAJKOT NAGRIK SAHKARI BANK LIMITED. CASH AMOUNTING TO RS. 49,97,832 WAS RECOVERED FROM LOCKER OF YOUR BROTHER SHRI RAVI VARMA, CASH AMOUNTING TO RS. 15,06,200 WAS ALSO FOUND AT THE RESIDENCE OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 44 - SHRI RAVI VARMA. MR. RAVI VARMA IN HIS STATEMENT RECORDED BEFORE INVESTIGATION AUTHORITY STATED THAT THE CASH BELONGS TO RALSON INFRASTRUCTURE PVT. LTD., AS A DEPOSIT RECEIVED FROM MEMBERS OF THEIR CURRENT RUNNING PROJECTS. PLEASE EXPLAIN WHERE THE CASH HAS BEEN REFLECTED? ANSWER - 2 THE CASH HAS BEEN REFLECTED IN THE BOOKS OF M/S. RALSON INFRASTRUCTURE PVT. LTD., IN THE ASSESSMENT YEAR 2006-07. QUESTION - 7 THE HARD DISK OF COMPUTER CONTAINING THE BOOKS OF ACCOUNTS OF ;M/S. RIPL AND OTHER GROUP CONCERNS WERE SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS. THE WORKING COPY OF WHICH WAS OPERATED BEFORE YOUR AR: THE BALANCE SHEET, P&L A/C, CASH BOOK AND TRIAL BALANCE OF RIPL WERE PRINTED OUT AND GIVEN TO YOUR AR. IN THE CASH BOOK THE; AMOUNT RECOVERED FROM YOUR BANK LOCKER HAS NOT BEEN REFLECTED NEITHER THE AMOUNT HAS BEEN SHOWN IN THE LEDGER OF ANY MEMBER. PLEASE EXPLAIN HOW THE AMOUNT MAY BE BELONGING TO MEMBERS OF RALSON INFRASTRUCTURE PVT. LIMITED? ANSWER - 3 FOR THIS CASH RECEIPTS WERE AVAILABLE IN THE OFFICE PREMISES. THE BOOKS OF ACCOUNTS REFERRED IN THE QUESTION WERE INCOMPLETE ON THE DATE OF THE SEARCH. WHILE FINALIZING THE BOOKS AIL THESE RECEIPTS WERE ACCOUNTED AND OFFERED AS INCOME OF RIPL. THE LIST OF SUCH MEMBER WITH CONFIRMATION HAS BEEN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 45 - SUBMITTED IN THE ASSESSMENT PROCEEDINGS. A COPY OF THE ABOVE STATEMENT IS ENCLOSED HEREWITH VIDE ANNEXURE - B FOR YOUR GOODSELVES KIND PERUSAL. 2.3 APART FROM WHAT IS STATED HEREIN ABOVE, IT IS F URTHER SUBMITTED THAT, THE APPELLANT IN HIS STATEMENT RECO RDED U/S 132(4) ON 07/06/2006 AS. WELL AS IN HIS STATEMENTS RECORDED ON 26/12/2008 HAS ALSO SATED SIMILAR FACTS , THAT SUCH CASH PERTAINS TO MEMBERS' COLLECTION OF THE PR OJECT. HOWEVER THE ASSESSING OFFICER WITHOUT CONSIDERATION OF SUCH STATEMENT AND WITHOUT WELL APPRECIATION OF THE FACT S OF THE CASE OF THE APPELLANT HAS MADE THE IMPUGNED ADDITIO N IN CASE OF APPELLANT. FURTHER IT IS SUBMITTED THAT THE AMOUNT SO RECEIVED FROM VARIOUS MEMBERS WAS ALSO DULY CONFIRMED BY THEM. TH E CONFIRMATIONS RECEIVED FROM VARIOUS MEMBERS ALONG W ITH THEIR PAN NO AND OTHER DOCUMENTARY EVIDENCES WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT PROCEEDINGS -AND THE ASSESSING OFFICER H AS NOT EVEN ONCE DOUBTED THE GENUINENESS OF THE MONEY SO RECEIVED OR THE CONFIRMATION GIVEN BY THE MEMBERS O F THE HAD OM VILLA SCHEME. AO HAS ACCEPTED MEMBERS COLLEC TION OFFERED TO TAX IN RALSON INFRASTRUCTURE PVT LIMITED . 2.4 THE APPELLANT STATES THAT IT IS PERTINENT TO N OTE THAT WHILE MAKING THE ADDITION OF RS.11,04,493 OUT OF CASH FOU ND OF RS 15,06,200 IN THE CASE OF RAVI R VERMA, THE ASSESSIN G OFFICER HAS INDIRECTLY ACCEPTED THE CONTENTION OF T HE APPELLANT THAT THE CASH SO FOUND PERTAINS TO RALSON INFRASTRUCTURE PVT. LIMITED BY GIVING THE CREDIT OF CLOSING CASH ON HAND AS ON 4-5-2006 OF RALSON INFRASTRUCTUR E PVT. LIMITED AMOUNTING TO RS. 3,76,707 AND THEREBY MAKIN G ADDITION IN THE CASE OF RAVI R. VERMA AT RS 11,04,4 93 AGAINST CASH FOUND OF RS 15,06,200 AS UNDER. NO PARTICULARS AMOUNT (RS.) 1. CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT 15,06,200 LESS: CLOSING CASH ON HAND AS ON 4-5-2006 IN THE CASE 3,76,707 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 46 - OF THE RALSON INFRASTRUCTURE PVT. LIMITED LESS: ESTIMATING AVAILABLE CASH WITH THE RAVI R. VERMA AS ON THE DATE OF SEARCH 25,000 BALANCE 11,04,493 IN VIEW OF THIS IT IS SUBMITTED THAT ONCE IT IS ACC EPTED BY THE SAME ASSESSING OFFICER THAT THE CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT BELONG TO RAL SON INFRASTRUCTURE PVT LTD, THERE IS NO JUSTIFICATION I N REJECTING THE SAID CONTENTION IN CASE OF THE APPELLANT, ESPEC IALLY IN VIEW OF THE STATEMENT OF THE APPELLANT RECORDED, ON 26/12/2008 WHEREBY THE APPELLANT HAS CATEGORICALLY EXPLAINED THAT CASH FOUND FROM HIS BANK LOCKER AS W ELL AS CASH' FOUND FROM THE RESIDENCE AND BANK LOCKER OF H IS BROTHER, SHRI RAVI VERMA, BELONGS TO RALSON INFRAST RUCTURE PVT. LTD. 2.5 FURTHER THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS OBSERVED THAT THE SAID CASH WAS THOUGH RECORDED IN THE CASH BOOK PRODUCED BY THE APPELLANT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, WAS NOT RECORDED IN THE BAC K UP OF HARD DISC SO FOUND DURING THE COURSE OF SEARCH AND HENCE THE EXPLANATION OF THE APPELLANT THAT THE SAID CASH WAS BELONGING TO RALSON INFRASTRUCTURE PVT. LTD. WAS RE JECTED BY THE ASSESSING OFFICER. IN THIS REGARD, THE APPELLAN T SUBMITS THAT, AS ON THE DATE OF THE SEARCH THE BOOKS OF ACC OUNTS OF RALSON INFRASTRUCTURE PVT. LIMITED TO WHOM THIS CAS H BELONGS, WERE INCOMPLETE AND UN-AUDITED. ACCORDINGL Y, TO VIEW THAT THE CASH SO FOUND FROM THE BANK LOCKER/ RESIDENTIAL PREMISES HAS NOT BEEN .ACCOUNTED FOR IN THE BOOKS OF RALSON INFRASTRUCTURE PVT. LTD., WOULD NOT BE LOGICAL AND CORRECT, SINCE THE FINALIZATION OF BOOK S OF ACCOUNT DURING THAT PERIOD WAS UNDER PROGRESS. IT IS FURTHER SUBMITTED THAT THE MEMBERS COLLECTION RECEIVED FROM THE MEMBERS OF THE HART OM VILLA WHICH WERE YE T TO BE ENTERED IN THE BOOKS OF ACCOUNTS OF THE RALSON INFRASTRUCTURE PVT. LTD. AS ON THE DATE OF SEARCH W ERE DULY RECORDED IN THE BOOKS OF ACCOUNTS THEREAFTER. THE A PPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO SU BMITTED THE CASH BOOK OF RALSON INFRASTRUCTURE PVT. LTD. WH ICH WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 47 - INCOMPLETE AS ON THE DATE OF SEARCH AS WELL AS THE RECONCILED CASH BOOK AFTER RECORDING THE AMOUNT OF MEMBERS' COLLECTION TO THE ASSESSING OFFICER. THE APPELLANT SUBMITS RECONCILIATION BETWEEN BOTH THE CASH BOOKS AS ANNEX URE - C. IN VIEW OF WHAT IS STATED HEREIN ABOVE, CASH FOU ND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT WAS PART OF THE TOTAL MEMBERS' COLLECTION OF RS.78,27,000 ( RS. 49, 65,000 IN A.Y. 2005-2006 AND RS. 28,62,000 FOR A.Y. 2006-2007 ) RECORDED IN THE, BOOKS OF ACCOUNTS OF RALSON INFRAS TRUCTURE PVT. LTD. AND HENCE THE ASSESSING OFFICER HAS GROSS LY ERRED IN TREATING THE CASH SO FOUND AS UNEXPLAINED IN THE HA NDS OF THE APPELLANT WITHOUT APPRECIATING THE RECONCILED C ASH BOOK SUBMITTED BY THE APPELLANT AFTER DULY RECORDING THE MEMBERS' COLLECTION OF HARI OM VILLA, WHICH WERE AL SO DULY CONFIRMED BY THEM. 2.6 FURTHER THE RALSON INFRASTRUCTURE PVT. LIMITED, TO WHOM THE CASH BELONGS, WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 HAD DULY ACCOUNTED FOR THE CASH SO FOUND FROM THE RESIDENTIAL PREMISES AND CONFIRME D BY THE MEMBERS OF HARI OM VILLA SCHEME IN ITS BOOKS OF ACCOUNTS. YOUR HONOUR WOULD ALSO APPRECIATE THAT TH E ASSESSMENT OF RALSON INFRASTRUCTURE PVT. LIMITED IS ALREADY MADE AFTER CONSIDERING THE CASH SO FOUND AND ACCOUN TED FOR IN ITS BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE, THE APPELLANT SUBMITS THAT AS THE CASH FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLAN T WAS THE AMOUNT RECEIVED AS MEMBERS' COLLECTION BELONGING TO RAISON INFRASTRUCTURE PVT LTD. AND SAID AMOUNT IS OFFERED TO TAX IN SAID COMPANY AS CASH BELONGS TO SUCH COMPANY. IT IS STATED THAT AFORESAID AMOUNT HAS BEEN ENTERED INTO THE BOO KS OF ACCOUNTS OF THE RALSON INFRASTRUCTURE PVT. LTD AND HAS BEEN DULY CONSIDERED FOR THE TAXATION PURPOSE IN ITS CAS E FOR THE A.Y 2007-08, NO FURTHER ADDITION OF THE SAME CASH W AS REQUIRED TO BE MADE IN CASE OF THE APPELLANT AS SAM E WILL RESULT INTO DOUBLE TAXATION OF SAME AMOUNT IN TWO D IFFERENT ASSESSEE. IN THIS REGARD THE APPELLANT RELIES ON DE CISION OF HO'BLE SUPREME COURT IN CASE OF LAXMIPANT SINGHANIA VS. CIT 72 ITR 291, WHEREIN COURT HAS OBSERVED ASUN DER: FROM THE HEAD NOTES 'IT IS A FUNDAMENTAL RULE OF THE LAW OF TAXATION TH AT, UNLESS OTHERWISE EXPRESSLY PROVIDED, INCOME CANNOT BE TAXE D TWICE. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 48 - IT IS NOT OPEN TO THE INCOME-TAX OFFICER, IF INCOME HAS ACCRUED TO THE ASSESSEE AND IS LIABLE TO BE INCLUDE D IN THE TOTAL INCOME OF A PARTICULAR YEAR, TO IGNORE THE AC CRUAL AND THEREAFTER TO TAX IT AS INCOME OF ANOTHER YEAR ON T HE BASIS OF RECEIPT.' 2.7 APART FROM WHAT IS STATED HEREIN ABOVE, IT MAY BE MENTIONED THAT WHILE MAKING THE ADDITION OF RS. 6,1 3,921 OUT OF THE TOTAL CASH FOUND OF RS.14,99,000 THE ASSESSING OFFICER HAS ACCEPTED THE APPELLANT CONTENTION AS STATED IN HIS STATEMENT THAT PART OF THE CASH BELONGS TO VARIOUS INDIVIDUALS AND ENTERPRISES OF THE GROUP AND REJECTED THE APPELLANT'S CONTENTION T HAT PART OF THE CASH BELONGS TO RALSON INFRASTRUCTURE PVT. LIMITED. THERE IS NO REASON TO DISBELIEVE THE FACT THAT THE CASH SO FOUN D AND HAVING BEEN ACCOUNTED IN THE RAISON'S BOOKS IS RECEIVED TO WARDS THE HARI OM VILLA SCHEME. THE ACTION TAKEN BY THE ASSES SING OFFICER ON THIS GROUND ITSELF INDICATES THAT THE SAME HAS B EEN MADE ON PRESUMPTION, ASSUMPTIONS AND SURMISES. THE ASSESSIN G OFFICER IN HIS ASSESSMENT ORDER HAS NOT BROUGHT A SINGLE EV IDENCE AGAINST WHAT HAS BEEN SUBMITTED BY THE APPELLANT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS APART FROM MAKING CERTAIN ASSUMPTIONS. HENCE THE ADDITION SO MADE BY THE ASSE SSING OFFICER OF RS. 6,13,921 MAY KINDLY BE DELETED. 30. DURING THE COURSE OF APPELLATE PROCEEDINGS, ASS ESSEE FILED A COPY OF CASH BOOK OF RALSON INFRASTRUCTURE PVT. LTD. TO ESTABLISH THAT THE AMOUNT OF RS.49,97,832/- SEIZED FROM THE LOCKER OF RAVI VARMA AND THE CASH FOUND FROM THE RESIDENCE OF SHRI RAVI VARM A AND FROM THE LOCKER AND RESIDENCE OF SHRI MAHESH VARMA REPRESENT ED THE CASH RECEIVED FROM THE MEMBERS. THE COPIES OF CONFIRMAT IONS FROM THE MEMEBRS WAS ALSO FURNISHED FOR THE FIRST TIME AT TH E APPELLATE STAGE. SINCE, THIS WAS AN ADDITIONAL EVIDENCE, ASSESSING O FFICER WAS ASKED TO SUBMIT REMAND REPORT ON THE SUBMISSIONS OF ASSES SEE AND THE GENUINENESS OF CASH BOOK PRODUCED AT THE TIME OF AP PELLATE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 49 - PROCEEDINGS. ASSESSING OFFICER SUBMITTED HIS REMAND REPORT, WHICH FOR THE SAKE CONVENIENCE IS REPRODUCED AS UNDER: 'KINDLY REFER TO YOUR OFFICE LETTER DATED 26.05.201 0 CALLING FOR REMAND REPORT IN THE ABOVE MENTIONED CASES. IN THIS LETTER THE NAME OF CASES WERE WRONGLY MENTIONED AS MAHESH VERM A, HUF AND RAVI VERMA, HUF. 2. THE ASSESSES SHRI MAHESH VERMA & RAVI VERMA BELO NGS TO RALSON GROUP. SEARCH IN THIS GROUP WAS CONDUCTED ON 10.05.2006. M/S RAISON INFRASTRUCTURE PVT. LTD IS F LAGSHIP CONCERN OF THE GROUP. THE ASSESSES ARE DIRECTORS OF THE COMPANY. 3. IN APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED CONFIRMATION FROM THE PARTIES FROM WHOM CASH ADVANCES/PAYMENTS WERE RECEIVED FOR BOOKING OF PROP ERTIES AT HARIORN VILLA SCHEME IN BOPAL. THE COPIES OF CONFIR MATIONS HAD BEEN FORWARDED TO THIS OFFICE. THE REMAND REPORT IS ASKED ON THESE ADDITIONAL EVIDENCES SUBMITTED BY ASSESSEE. 4. DURING THE COURSE OF SEARCH, FOLLOWING CASH WERE FOUND WITH THE ASSESSEES. RAVI VERMA FOUND FROM HIS RESIDENCE - RS. 15,06,200/- FOUND FROM LOCKER NO,919 AT RAJKOT SAHAKARI BANK LTD - RS.49,97,832/- FOUND FROM LOCKER NO.229 AT SARDAR VALLABHBHAI BANK - RS.50,000/- MAHESH VERMA FOUND FROM RESIDENCE - RS. 56,750/- FOUND FROM LOCKER NO.907 AT RAJKOT SAHAKARI BANK LTD - RS. 14,99,000/- THE EXPLANATIONS OF ASSESSEE REGARDING THE SOURCES OF CASH WERE ASKED DURING THE COURSE ASSESSMENT PROCEEDINGS. SH RI RAVI VERMA STATED THAT OUT OF RS.15,06,200/- FOUND FROM HIS RESIDENCE, THE AMOUNT OF RS.14,50,000/- WAS RECEIVE D BY HIM ON 09.05.2006 FROM RALSON INFRASTRUCTURE PVT LTD. AS R EGARD SOURCE OF CASH FOUND FROM LOCKER NO.919 AT RSBL AMOUNTING TO IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 50 - RS.49,97,832/-, IT WAS EXPLAINED THAT THE AMOUNT WA S RECEIVED BY HIM FROM RALSON INFRASTRUCTURE PVT LTD ON 03.03. 2006. SHRI MAHESH. VERMA EXPLAINED THAT OUT OF CASH OF RS.14,99,000/- FOUND IN LOCKER NO.907, RSBL AN AMOU NT OF RS.2,36,714/- + RS.3,77,207/- WAS RECEIVED FROM RAL SON INFRASTRUCTURE PVT LTD. THE ASSESSEE EXPLAINED THAT THE AMOUNT OF RS.3,77,207/- WAS RECEIVED ON 03.05.2006. THE DATE OF RECEIPT OF RS 2,36,714 WAS NOT EXPLAINED BY HIM. THE ASSESSEE EXPLAINED THAT THE CASH WAS RECEIVED B Y THE COMPANY AGAINST BOOKING OF HOUSES IN ITS HARIOM VIL LA SCHEME, WHICH WERE UNDER PROGRESS DURING THE RELEVANT TIME. THE DIRECTORS WERE GIVEN CASH FOR SAFE KEEPING. THE ASS ESSEE SUBMITTED COPY OF CASH BOOK OF RALSON INFRASTRUCTUR E PVT LTD FOR THE PERIOD 01.04.2005 TO THE DATE OF SEARCH IN SUPP ORT OF ITS CONTENTION. THE COPY OF THIS CASH BOOK HAS BEEN SUB MITTED BEFORE YOUR GOODSELF ALSO. 5. THE OFFICE PREMISE OF RALSON INFRASTRUCTURE PVT LTD. WAS ALSO SUBJECTED TO SEARCH PROCEEDINGS SIMULTANEOUSLY ON 1 0.05.2006. DURING THE COURSE OF SEARCH, HARD DISC CONTAINING D ATAS AND BOOKS OF ACCOUNTS OF RALSON INFRASTRUCTURE PVT LTD WERE SEIZED. THE PRINT OUT OF THE CASH BOOKS WERE TAKEN IN THE P RESENCE OF A.R. OF ASSESSEE .DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. THE COPY OF SAME IS ENCLOSED HEREWITH. IT WAS FOUND THAT THE CASH BOOK IN THE HARD DISC SEIZED AND THE CASH BOOK SUBMITTED BY ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEED INGS WERE NOT AT ALL TALLYING. IN THE CASH BOOK SUBMITTED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THERE ARE LARGE NUMBERS OF ENTRIES OF CASH RECEIPTS AGAINST THE SALE OF HOUSES. THE ENTRI ES WERE NOT FOUND IN THE CASH BOOK PRINTED OUT FROM THE SEIZED HARD DISC. THE EXPLANATION OF ASSESSEE WAS ASKED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE STATED THAT TILL THE TIM E OF SEARCH THE AUDIT OF ACCOUNTS WERE NOT DONE HENCE THE ACCOUNTS IN THE CASH BOOK IN COMPUTER WERE NOT COMPLETED. 6. THE EXPLANATION OF THE ASSESSEE ARE NOT CONVINCI NG DUE TO FOLLOWING REASONS: (I) THE COMPARISON OF THESE TWO CASH BOOKS SHOWS TH AT THE DIFFERENCE IS- MAINLY ON ACCOUNT OF ENTRIES REGARDI NG 'CASH AMOUNT RECEIVED AND ITS DISBURSEMENT TO DIRECTORS. THE RECONCILIATION OF THE TWO CASH BOOKS HAS BEEN SUBMI TTED BEFORE YOUR GOODSELF. AS PER THE RECONCILIATION THE ASSESSEE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 51 - SHOWS ADDITION AMOUNT OF RS. 49,65,000/- AS CASH RE CEIVED FROM MEMBERS DURING THE A.Y.2006-07. OUT OF THIS AM OUNT OF RS. 49,97,832/- HAS BEEN SHOWN AS CASH IN THE CU STODY OF RAVI VARMA IN THE SAME YEAR. IN THE NEXT YEAR FR OM 1/4/2006 TO THE DATE OF SEARCH I.E. 10/5/2006 ADDIT IONAL MEMBER COLLECTION OF RS. 28,62,000/- HAS BEEN SHOWN . OUT OF THIS AMOUNT IT IS STATED THAT CASH OF RS. 14,50, 000/- FOUND FROM THE RESIDENCE OF RAVI VARMA AND AMOUNT O F RS. 3,77,207/- FOUND FROM LOCKER OF MAHESH VARMA WERE G IVEN. THE REVISED CLOSING BALANCE AS ON 10/5/2006 AT RS. 11,93,371/- HAS BEEN SHOWN. IN THE CASH BOOK, IN TH E HARD DISC, NO SUCH ENTRIES HAVE BEEN MENTIONED. THE OT HER ENTRIES IN THE TWO CASH BOOKS ARE ALMOST IDENTICAL. THE ASSESSEE IS SHOWING CASH IN HAND OF RS. 11,93,371/- AS ON DATE OF SEARCH I.E. 10/05/2006 BUT NO SUCH CASH WAS FOUND FROM THE PREMISES OF COMPANY. THEREFORE, THE EXPLA NATION OF ASSESSEE REGARDING NON-COMPLETION OF CASH BOOK D UE TO WANT OF AUDIT IS NOT ACCEPTABLE. FROM THE FACT OF CASE, IT IS QUITE CLEAR THAT THE ENTRIES REGARDING RECEIPT OF C ASH AND HANDING OVER OF SAME TO DIRECTORS FOR SAFE-KEEPING ARE AFTER THOUGHT TO ESCAPE THE TAX LIABILITY. (II) IT IS ALSO FOUND THAT IN THE CASH BOOK FOUND I N HARD DISC, THE ASSESSEE IS WITHDRAWING CASH FROM ITS BANK ACCOUNTS REGULARLY TO MEET OUT CASH EXPENSES. HAD THE CASH B EING AT THE DISPOSAL OF ASSESSEE COMPANY, THE SAME SHOULD H AVE BEEN UTILIZED BY IT FOR ITS DAY TO DAY PURPOSE AND NEED OF WITHDRAWING THE CASH FROM BANK WOULD NOT ARISES. (III) IT IS ALSO PERTINENT TO MENTION THAT NO RECEI PTS BOOKS OR ANY OTHER DOCUMENTS EVIDENCING THE RECEIPT OF SUCH CASH BY THE COMPANY HAD BEEN FOUND DURING THE COURSE OF SEARCH. THE SEARCH AND SURVEY WERE CONDUCTED AT THE OFFICE OF C OMPANY, ITS PROJECT OFFICE AND RESIDENTIAL PREMISES OF THE DIRECTORS. HAD THE AMOUNT BEEN THE RECEIPTS OF COMPANY, THE RE CEIPT BOOK FOR THE SAME WOULD HAVE BEEN FOUND. THE NON- AVAILABILITY OF SAME IS STRONG EVIDENCE THAT NO SUC H RECEIPT BOOK EXISTS AND THE AMOUNT WERE NEVER INTENDED TO B E SHOWN IN THE ACCOUNTS OF COMPANY. THE ASSESSEE PREP ARED THE REVISED CASH BOOK OF THE COMPANY ONLY TO EXPLAI N THE SOURCE OF CASH FOUND, WHICH IS NOTHING BUT A AFTER THOUGHT TO ESCAPE THE TAX LIABILITY. (IV) THE COPIES OF STATEMENT U/S. 132(4) AND 131 SU BMITTED WITH THEIR SUBMISSION BEFORE YOUR GOODSELF ARE RECORDED QUIET; IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 52 - AFTER THE DATE OF SEARCH I.E. 10/05/2006. BY THAT T IME THE ASSESSEE HAD ENOUGH TIME TO THOUGHT ABOUT GIVING EXPLANATION AND DRAWING THE FURTHER COURSE OF ACTIO N. (V) THE ISSUE OF SUBMISSION OF REVISED CASH BOOK I S ALSO DISCUSSED IN THE ASSESSMENT ORDER OF RALSON INFRAST RUCTURE PVT. LTD. FOR THE A.Y.2007-08 AND 2006-07. IT HAS B EEN HELD THAT THE CASH FOUND WITH DIRECTORS OF THE COMPANY I S NOT CASH OF THE COMPANY BUT IT WAS INTENDED TO BE SIPHO NED OFF BY THE DIRECTOR FOR THEIR PERSONAL BENEFITS. THE BO OKS OF ACCOUNTS AND CASH BOOK PREPARED IN THIS REGARD ARE HELD TO BE CONCOCTED AND THEREFORE THE BOOKS OF ACCOUNTS OF RALSON INFRASTRUCTURE PVT. LTD., WERE REJECTED U/S.L45(3) OF THE I.TACT. (VI) THE CONFIRMATION OF CASH PAYMENTS BY THE MEMBE RS OF HARIOM VILLA SCHEME SUBMITTED BY ASSESSEE IN APPEAL PROCEEDINGS HAS NO BEARING ON THE FACT OF THESE CAS ES. IF THE TRANSACTIONS ARE NOT REFLECTED IN THE BOOKS OF RECI PIENT THEN IT SHOULD BE CONSIDERED AS HIS UNACCOUNTED INCOME. THE CONFIRMATION OF DONORS DOES NOT ALTER THIS POSITION . 7. IN VIEW OF FACTS STATED ABOVE THE ADDITIONS MADE IN THE ASSESSMENT ORDER MAY PLEASE BE CONFIRMED. YOURS FAITHFULLY, ENCL- AS ABOVE (BRIJ MOHAN SINGH) ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(4), AHMEDABAD.' 31. THE ABOVE MENTIONED REMAND REPORT OF ASSESSING OFFICER WAS FORWARDED BY THE JOINT COMMISSIONER OF INCOME TAX, CENTRAL RANGE - 2, WITH HIS COMMENTS AS UNDER: KINDLY FIND ENCLOSED HEREWITH REMAND REPORT IN THE CASE OF SHRI MAHESH RAMLABHAYA VERMA & SHRI RAVI RAMLABHAYA VERMA FOR A.YS.2006-07 & 2007-08 RECEIVED, FROM ACIT.CC-2 (4), AHMEDABAD VIDE LETTER NO. ACIT/CC.2(4)/REMAND RPT./ 2010-LL DATED 04,06.2010. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 53 - 2. THE ASSESSES ARE DIRECTORS OF M/S. RALSON INFRAS TRUCTURE PVT. LTD. IN THIS GROUP SEARCH U/S. 132 OF THE IT A CT WAS CARRIED OUT ON 10/05/2006. DURING THE COURSE OF SEARCH PROC EEDINGS CASH WAS FOUND AS UNDER: SHRI RAVI VERMA FROM RESIDENCE RS. 15,06,200/- LOCKER NO.919 RAJKOT SAHAKARI BANK - RS.49,97,832 /- LOCKER NO.229SARDARVALLABHBHAI BANK RS. 50,000/ - SHRI MAHESH VERMA FROM RESIDENCE RS. 56,750/- LOCKER NO.907 RAJKOT SAHAKARI BANK RS. 14,99,00 0/- 3. DURING COURSE OF ASSESSMENT PROCEEDINGS SHRI RAV I VERMA AND SHRI MAHESH VERMA EXPLAINED THAT THE CASH FOUND FRO M RESIDENCE AND LOCKER WAS RECEIVED FROM RALSON INFRA STRUCTURE PVT. LTD. THE CASH WAS RECEIVED BY RALSON INFRASTRU CTURE PVT. LTD. AGAINST BOOKING OF HOUSES IN HARIOM VILLA SCHEME. T HE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE ADDITION WAS MADE. 4. THE A.O. IN REMAND REPORT HAS STATED THAT THE EV IDENCES RELY UPON THE ASSESSEE AND THE EXPLANATION OF THE A SSESSEE IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: (I) THE PERUSAL OF THE RECONCILIATION OR CASH BOOK SUBM ITTED BY ASSESSEE SHOWS THAT THE CASH OF RS.49,65,000/- WAS RECEIVED FROM MEMBERS OF THE HOUSING SCHEME DURING THE A.Y. 2006-07. THE CASH OF RS.49,97,832/- WAS SHOWN AS CASH IN THE CUSTODY OF RAVI VARMA IN THE SAME YEAR. FROM 1/4/2006 TO THE DATE OF SEARCH I.E. 10/5/2006 COLLE CTION OF RS.28,62,000/- HAS BEEN SHOWN RECEIVED FROM THE . MEMBERS OF SCHEME. CASH OF RS.14,50,000/- FOUND FRO M THE RESIDENCE OF RAVI VARMA AND CASH OF RS.3,77,207/- F OUND FROM LOCKER OF MAHESH VARMA HAS BEEN STATED TO BE G IVEN TO THEM FOR SAFE CUSTODY OUT OF RS.28,62,000/-. THE RE VISED CLOSING BALANCE AS ON 10/5/2006 IS SHOWN AT RS.L 1,93,371/-. IN THE CASH BOOK AS MAINTAINED IN THE H ARD DISC OF THE COMPUTER, NO SUCH ENTRIES HAVE BEEN MENTIONE D. THE OTHER ENTRIES IN THE TWO CASH BOOKS ARE ALMOST IDEN TICAL. FURTHER, THE EXPLANATION OF ASSESSEE REGARDING NON- COMPLETION OF CASH BOOK DUE TO WANT OF AUDIT IS NOT ACCEPTABLE. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 54 - (II) FROM THE/ENTRIES IN THE CASH BOOK MAINTAINED IN HARD DISC, IT IS SEEN THAT THE ASSESSEE IS WITHDRAWING CASH FR OM ITS BANK ACCOUNTS REGULARLY TO MEET OUT CASH EXPENSES. HAD THE CASH BEING AT THE DISPOSAL OF ASSESSEE COMPANY, THE SAME SHOULD HAVE BEEN UTILIZED BY IT FOR ITS DAY TO DAY PURPOSE AND NEED OF WITHDRAWING THE CASH FROM BANK WOULD NOT ARISES. (III) RECEIPTS BOOKS OR ANY OTHER DOCUMENTS SHOWI NG THE RECEIPT OF SUCH CASH BY THE COMPANY FROM THE MEMBERS WERE N OT FOUND FROM THE PREMISES SUCH AS RESIDENCE, BUSINESS PREMISES OR PROJECT SITE, ETC. DURING THE COURSE OF SEARCH. THE ASSESSEE PREPARED THE REVISED CASH BOOK OF THE COMPANY ONLY TO EXPLAIN THE SOURCE OF CASH FOUND, W HICH IS NOTHING BUT A AFTER THOUGHT TO ESCAPE THE TAX LIABI LITY, (IV) THE EXPLANATION GIVEN AT THE TIME OF RECORDING STATEMENT U/S. 132(4) AND 131 OF THE ACT IS AN AFTER THOUGHT. (V) IN THE ASSESSMENT ORDER OF RALSON INFRASTRUCTU RE PVT. LTD. FOR THE A.Y. 2007-08 AND 2006-07, IT HAS BEEN HELD THAT THE CASH FOUND WITH DIRECTORS OF THE COMPANY IS NOT CAS H OF THE COMPANY BUT IT WAS INTENDED TO BE SIPHONED OFF BY T HE DIRECTOR FOR THEIR PERSONAL BENEFITS. THE BOOKS OF ACCOUNTS AND CASH BOOK PREPARED IN THIS REGARD ARE HELD TO B E CONCOCTED AND THEREFORE THE BOOKS OF ACCOUNTS OF RA LSON INFRASTRUCTURE PVT. LTD., WERE REJECTED U/S. 145(3) OF THE IT ACT. (VI) THE CONFIRMATION OF CASH PAYMENTS BY THE MEM BERS OF HARIOM VILLA SCHEME SUBMITTED BY ASSESSEE IN APPEAL PROCEEDINGS HAS NO BEARING ON THE FACT OF THESE CAS ES. IF THE TRANSACTIONS ARE NOT REFLECTED IN THE BOOKS OF THE RECIPIENT THEN IT SHOULD BE CONSIDERED AS HIS UNACCOUNTED INC OME. THE CONFIRMATION OF DONORS DOES NOT ALTER THIS POSI TION. 5. IN VIEW OF THE ABOVE FACT, THE ADDITION MADE IN THE ASSESSMENT ORDER MAY BE UPHELD. YOURS FAITHFULLY, (DR. JAYANT JHAVERI) JT. COMMISSIONER OF INCOME-TAX ENCL: AS ABOVE CENTRAL RANGE-2, AHMEDABA D IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 55 - 32. A COPY OF THE REMAND REPORT WAS GIVEN TO LD. AU THORIZED REPRESENTATIVE OF ASSESSEE FOR HIS COMMENTS. THE LD . AUTHORIZED REPRESENTATIVE SUBMITTED HIS COMMENTS AS UNDER. REPLY TO REMAND REPORT 1. WE HAVE RECEIVED THE ABOVE REMAND, REPORT ALONGW ITH THE COMMENTS DATED 07.10.2010 OF THE JOINT CIT ON THE S AID REMAND REPORT. THE ISSUE INVOLVED IN THE REMAND REPORT IS ADDITION MADE FOR CASH FOUND FROM THE PREMISES OF THE APPELLANT A ND HIS BROTHER AND ALSO THE BANK LOCKER. THE ADDITIONS MADE ARE AS UNDER: NAME A.Y. 2006-07 A.Y. 2007-08 RAVI VARMA 49,97,832 11,44,493 MAHESH VARMA NIL 6,53,921 PLEASE NOTE THAT THE CASH FOUND AS ABOVE, WAS FOUND FROM THE FOLLOWING PREMISES:- IN THE CASE OF RAVI VARMA PLACE FROM WERE FOUND AMOUNT AMOUNT SEIZED FROM RESIDENCE 15,06,200 14,50,000 FROM LOCKER NO. 919 WITH RAJKOT NAGARIK SAHAKARI BANK 49,97,832 49,97,832 FROM LOCKER NO.229 WITH SARDAR VALLABHBHAI BANK 50,000 40,000 IN THE CASE OF MAHESH VARMA FROM RESIDENCE 56,750 40,000 FROM LOCKER NO. 919 WITH RAJKOT NAGARIK SAHAKARI BANK 14,99,000 2. AT THE TIME OF SEARCH, SHRI MAHESH VARMA WAS OUT OF STATION. HOWEVER, SHRI RAVI VARRNA PRESENT AND IN H IS VARIOUS STATEMENTS INCLUDING PRELIMINARY STATEMENT AND STAT EMENT RECORDED AT THE TIME OF OPERATING BANK LOCKER BY TH E DEPARTMENT, IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 56 - HE HAD SPECIFICALLY EXPLAINED THAT, THE CASH FOUND FROM THE RESIDENTIAL PREMISES THE AMOUNT BELONGS TO THE BUSI NESS CONCERNS, OF THE FAMILY AND IN RESPECT OF THE ON-GO ING PROJECT. PLEASE NOTE THAT, AT THE RELEVANT TIME, THE ONLY PR OJECT IN OPERATION WAS THAT OF RALSON INFRASTRUCTURE PVT. LT D. COPIES OF SUCH STATEMENTS RECORDED AT THE TIME OF SEARCH ARE ENCLOSED, IN HIS STATEMENT RAVI VARMA, RECORDED AT THE TIME OF O PERATING BANK LOCKER ALSO, GAVE SUCH EXPLANATION FOR .CASH IN LOC KER BELONGING TO HIS COMPANY. EVEN RAJANI VARMA, HIS BROTHER WAS ALSO ASKED ABOUT CASH FOUND FROM LOCKER OF RAVI VARMA ON SAME DAY AND .HE ALSO GAVE SAME EXPLANATION. IN THE COURSE OF RECORD ING OF STATEMENT OF SHRI MAHESH VARMA, WHEN HE CAME BACK, HE HAD ALSO EXPLAINED THE SAME POSITION AND ALSO AS TO WHY THE CASH WAS ACCEPTED WHILE BOOKING OF THE UNITS OF PROJECT. IN THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAD FILED COPIES OF CONF IRMATION OF THE RESPECTIVE PERSONS FROM WHOM THE AMOUNT WAS RECEIVE D IN CASH AT THE TIME OF BOOKING OF UNITS OF THE PROJECT BEIN G DEVELOPED BY RALSON INFRASTRUCTURE PVT. LTD. IN THE APPELLATE PR OCEEDINGS, WE HAVE FURNISHED COPIES OF AFFIDAVIT OF THE RESPECTIV E PERSONS AND THEIR PAN ALONGWITH THE RECONCILIATION OF CASH BALA NCE IN THE CASH BOOK OF THE COMPANY AND THE TREATMENT OF CASH FOUND. 3. IN THE BACKGROUND OF THE ABOVE POSITION, REMAND REPORT OF A.O. AND THE COMMENTS OF THE ID. JOINT C1T ARE REQU IRED TO BE CONSIDERED. PARA 1-4 OF THE REMAND REPORT OF THE AS SESSING OFFICER REPRODUCED THE ABOVE FACTS AND, THEREFORE, THE APPELLANT DOES NOT GIVE ANY COMMENT FOR THE SAME. 4. IN SO FAR AS PARA 5 OF THE REMAND REPORT IS CON CERNED, THE ASSESSING OFFICER IS OF THE VIEW THAT DURING THE CO URSE OF SEARCH HARD DISC CONTAINING DATA AND BOOKS OF ACCOUNTS OF THE COMPANY WERE SEIZED AND HE HAS ENCLOSED PRINT OUT OF SUCH C ASH BOOK AND STATED THAT THE CASH BOOK WITH RECONCILIATION SUBMI TTED IN THE ASSESSMENT PROCEEDINGS BY THE APPELLANT DO NOT TALL Y WITH THE ENTRIES IN THE PRINT OUT GIVEN BY HIM FROM THE HARD DISC. THE APPELLANT HAD EXPLAINED BEFORE YOUR HONOUR THIS FACT THAT AT THE TIME OF SEARCH, THE BOOKS OF ACCOUNT OF THE COM PANY, RALSON INFRASTRUCTURE PVT LTD. WERE INCOMPLETE ANDTNOT AUD ITED. THAT ENTRIES OF SUCH RECEIPTS WERE RECORDED IN CASH BOOK WHILE PREPARING WERE ACCORDINGLY, IT WAS NOT CORRECT TO S TATE THAT THE CASH FOUND FROM THE LOCKER/RESIDENTIAL PREMISES HAS NOT BEEN - ACCOUNTED FOR IN THE BOOKS OF RALSON INFRASTRUCTURE PVT. LTD. SINCE, THE FINALIZATION OF THE BOOKS OF ACCOUNT WAS PENDING . THE MEMBERS COLLECTION SO RECEIVED WERE PENDING TO BE E NTERED IN THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 57 - BOOKS OF ACCOUNTS, OF THE COMPANY AS ON THE DATE OF SEARCH WHICH WERE DULY RECORDED THEREAFTER. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAD SUBMITTED THE COPY O FCASH BOOK OF THE COMPANY WHICH WAS INCOMPLETE ON THE DATE OF SEA RCH AND RECONCILIATION OF CASH BOOK AFTER RECORDING THE MEM BERS COLLECTION AS ABOVE, IN VIEW OF THE ABOVE, THIS COM MENTS OF THE ASSESSING OFFICER ARE NOT REASONABLE AND THERE WAS NO REASON TO CONSIDER IT AS UNEXPLAINED CASH. IT MAY BE NOTED TH AT IN THE ASSESSMENT OF RAISON INFRASTRUCTURE PVT. LTD., THE RETURN WAS BASED ON THE CASH BOOK AFTER RECORDING SUCH, RECEIP TS AND ON THAT BASIS THE ASSESSMENT HAS BEEN MADE WHEREIN THE RECEIPTS ARE DULY RECORDED. 5. IN FIRST PARA OF THE REMAND REPORT THE ASSESSIN G OFFICER HAS GIVEN FURTHER COMMENTS STATING THAT THE EXPLANATION OF THE ASSESSEE ARE NOT FOUND TO BE CONVINCING FOR THE F OLLOWING REASONS:- THE ASSESSING OFFICER HAS STATED THAT THE DIFFERENC E IN TWO CASH BOOK IS REPRESENTING MAINLY THE ENTRIES REGARDING C ASH RECEIVED AND ITS CUSTODY WITH THE DIRECTORS AND ITS RECONCIL IATION. HOWEVER, HE HAS STATED THAT IN THE CASH BOOK, AS PE R THE HARD DISC NO SUCH ENTRIES WERE MENTIONED. HE HAS STATED THAT THE APPELLANT HAD SHOWN CASH ON HAND OF RS.11.93 LACS A S ON THE DATE OF SEARCH BUT NO CASH WAS FOUND FROM THE PREMI SES OF THE COMPANY. THEREFORE, THE EXPLANATION REGARDING NON C OMPLETION OF CASH BOOK WAS NOT ACCEPTABLE. HE HAS TO APPRECIATE THAT SUCH CASH BALANCE IS REPRESENTED BY CASH FOUND FROM RESI DENCE/ LOCKERS. 6. IN THE SECOND COMMENT IT IS STATED BY THE ASSESS ING OFFICER THAT ASSESSEE IS WITHDRAWING .CASH FROM THE BANK AC COUNTS REGULARLY TO MEET CASH EXPENSES AND IF THE CASH HAD BEEN AVAILABLE, THE SAME SHOULD HAVE BEEN UTILIZED FOR S UCH PAYMENT AND THERE WAS NO NEED OF WITHDRAWING CASH FROM THE BANK. IN CONNECTION WITH THE ABOVE OBSERVATION OF THE ASS ESSING OFFICER, IT MAY BE NOTED THAT OUT OF THE CASH OF RS.14.99 LA CS FOUND FROM THE RESIDENCE OF RAVI VARMA, THE ASSESSING OFFICER HAS HIMSELF GIVEN CREDIT FOR AMOUNT OF CASH BALANCE AS PER THE CASH BOOK OF DIFFERENT ENTITIES EXCEPT CASH BALANCE OF RALSON IN FRASTRUCTURE PVT. LTD AMOUNTING TO RS.3,77 LACS AND RS.2.33 LACS . THUS, THE ASSESSING OFFICER HAS ACCEPTED THAT THE CASH BELONG ING TO THE BUSINESS CONCERNS WERE LYING WITH FAMILY MEMBERS. T HEREFORE, THERE WAS NO REASON FOR NOT BELIEVING THE FACT ABOU T THE CASH IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 58 - COLLECTED ON BEHALF OF RALSON INFRASTRUCTURE PVT. L TD LYING WITH THE DIRECTORS. AS EXPLAINED EARLIER, BEFORE YOUR HO NOUR, THE CASH WAS COLLECTED FOR SPECIFIC REASON FROM THE MEMBERS SUCH AS PAYMENT OF STAMP DUTY, REGISTRATION FEES, LEGAL FEE S, DRAINAGE CHARGES, MAINTENANCE CHARGES, GEB POWER SUPPLY ETC. FOR THIS PURPOSE, RALSON INFRASTRUCTURE PVT. LTD WILL HAVE T O MAKE PAYMENT IN CASH AND HENCE THE CASH COLLECTED FOR SU CH SPECIFIC4PURPOSE HAS BEEN SEPARATELY, KEPT IN CUSTO DY OF DIRECTORS AND IT IS NOT TO BE UTILIZED FOR ANY OTHE R PURPOSE. ACCORDINGLY, THE COMMENTS OF THE ASSESSING OFFICER THAT THE RALSON INFRASTRUCTURE PVT. LTD NEED NOT WITHDRAW CA SH, IF THEY WERE HAVING CASH IN HAND IS TOTALLY UNJUSTIFIED. 8. THE THIRD-COMMENT OF THE A.O. IS THAT NO RECEIPT BOOKS OR OTHER DOCUMENTS REGARDING RECEIPT OF SUCH CASH BY T HE COMPANY HAD BEEN FOUND IN THE COURSE OF SEARCH. THE NONAVAI LABILITY OF THE SAME IS CONSIDERED BY HIM TO BE AN EVIDENCE TO STAT E THAT THE AMOUNT RECEIVED WERE NEVER INTENDED TO BE SHOWN IN THE BOOKS OF THE COMPANY. HE HAS STATED THAT THE REVISED CASH BO OK OF THE COMPANY IS ONLY TO EXPLAIN THE SOURCE OF CASH FOUND AND IT IS AFTER THOUGHT. AS EXPLAINED IN EARLIER SUBMISSIONS, AT THE TIME OF SEARCH ITSELF, THE DIRECTORS HAD EXPLAINED THAT CAS H FOUND FROM THEM WAS RECEIPTS OF COMPANY AND THAT IT WAS THUS D ULY RECORDED IN CASH BOOK OF THE COMPANY AS EXPLAINED BEFORE YOU R HONOUR. THUS, THE NON-AVAILABILITY OF THE RECEIPT BOOK IS N OT RELEVANT FOR THE ISSUE, PARTICULARLY WHEN AT THE TIME OF SEARCH ITSELF IT WAS EXPLAINED THAT IT WAS RECEIPT FROM MEMBERS OF THE C OMPANY. IN ANY CASE, IN THE CASE OF THE COMPANY THE RETURN WAS FILED BASED ON THE CASH BOOK WHICH RECORDED THE CASH RECEIPTS A S ABOVE AND THE ASSESSMENT IS MADE ON THE BASIS OF SUCH RETURN. THERE IS THUS NO REASON FOR THE COMMENT OF THE A.O. AS ABOVE . 9. IN COMMENT NO.4 THE A.O. HAS STATED ABOUT THE ST ATEMENT U/S.132(4) AND STATED THAT THE SUBMISSIONS OF THE A PPELLANT ARE SILENT ABOUT THE STATEMENT RECORDED ON THE DATE OF SEARCH I.E. 10- 5-2006 AND HE HAS STATED THAT STATEMENTS REFERRED T O BEFORE YOUR HONOUR ARE RECORDED AFTER THE DATE OF SEARCH AND BY THAT TIME THE APPELLANT HAD ENOUGH TIME TO GIVE EXPLANATION. IN THIS CONNECTION, IT IS SUBMITTED THAT AT THE TIM E OF SEARCH SHRI MAHESH VARMA WAS OUT OF STATION. SHRI RAVI VARMA HA D IN HIS STATEMENT DATED 10-5-2006, WHICH WAS THE PRELIMINAR Y STATEMENT, IN REPLY TO QUESTION NO. 7 STATED THAT A T HIS RESIDENCE HE WAS HAVING CASH OF ABOUT RS.14 TO 15 LAKH AND TH EREAFTER IN QUESTION NO.9 HE HAD STATED THAT SUCH CASH BELONGS TO DIFFERENT IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 59 - CONCERNS AND RECEIPTS OF ONGOING SCHEME FOR WHICH T HE AMOUNT WAS RECEIVED BY WAY OF DEPOSIT. THIS EXPLANATION SH OWS THAT HE HAD SPECIFICALLY STATED THAT THE CASH FOUND AT THE RESIDENCE REPRESENTS CASH BALANCE OF DIFFERENT CONCERNS AND A LSO CASH RECEIVED BY WAY OF DEPOSITS FROM THE MEMBERS OF ONG OING SCHEME. IT MAY BE NOTED THAT AT THE TIME OF SEARCH ONLY THE SCHEME WHICH WAS ONGOING WAS THAT OF RALSON INFRASTRUCTURE PVT.L TD. THUS THIS COMMENT OF THE A.O. ARE TOTALLY UNJUSTIFIED 10. THE COMMENT NO.5 IS ALREADY REFERRED TO BY THE EXPLANATION GIVEN EARLIER. 11. AS REGARDS COMMENT NO.6 OF THE ASSESSING OFFICE R, WHEN HE HIMSELF SUBMITTED THAT THE MEMBERS HAVE CONFIRMED T HE PAYMENT OF CASH IN THEIR AFFIDAVITS, IT IS NOT CORRECT TO S AY THAT IT HAS NO BEARING ON THE FACTS. HE COULD HAVE MADE ENQUIRIES WITH THE RESPECTIVE MEMBERS WHOSE NAMES, ADDRESSES AND PAN A RE ALSO SUBMITTED IN THEIR AFFIDAVITS, IT IS NOT CONFIRMATI ON BY THE DONOR OF CASH BUT IT IS CONFIRMATION ABOUT BOOKING AMOUNT GIVEN BY THE RESPECTIVE PERSONS. THEREFORE, COMMENT NO.6 IS TOTA LLY INCORRECT. 12. THE LD. JOINT CIT HAS REPRODUCED THE SAME COMME NTS IN HIS LETTER BEFORE YOUR HONOUR AND, THEREFORE, FURTH ER EXPLANATION IS NOT REQUIRED FOR THE SAME. 33. CIT(A) HAVING CONSIDERED THE SUBMISSIONS OF ASS ESSEE, REMAND REPORT OF ASSESSING OFFICER AND REBUTTAL OF SAME AND ALSO EXAMINED THE CASH BOOKS WHICH WAS GENERATED FROM TH E BACKUP OF THE COMPUTER DATA AT THE TIME OF SEARCH. CIT(A) FO UND RELEVANT TO EXAMINE THE MEMBERS CONTRIBUTIONS RECEIVED BY THE C OMPANY RALSON INFRASTRUCTURE PVT. LTD DURING FINANCIAL YEA R 2005 - 2006 AND FINANCIAL YEAR 2006 - 2007 UP TO THE DATE OF SEARCH . THE DETAILS OF CONTRIBUTIONS SHOWN FROM THE MEMBERS BY RALSON INFR ASTRUCTURE PVT. LTD. IS REPRODUCED AS UNDER: IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 60 - RALSONS INFRASTRUCTURE PVT LTD (DETAILS ON OR BEFORE 10/5/2006) MEMBERS NAME PAN NO. AMOUNT RECEIVED TOTAL SALE CHEQ DATE CASH DATE AMOUNT VALUE HARESH SHANTILAL BOSMIYA ACAPB3904G 100000 20/12/2005 100000 1100000 HAROLD MICHEL FRANK/ JENET H. FRANK AAAPF8253G 50000 26/4/2006 320000 1/5/2006 370000 1450000 MRUGESH M RAJGURU/ MAHESH C. RAJGURU AGNPR3406J 100000 5/4/2006 150000 29/4/2006 250000 1300000 ASHWIN GORDHANBHAI PATEL AGEPP1410F 300000 13/3/2006 100000 4/2/2006 100000 27/2/2006 500000 1000000 UDAY BHARATBHAI PATEL AKSPP7870M 50000 28/2/2006 50000 1300000 ANILKUTT SHUKLA & VINAY KUMAR SUKLA AHHPS5792D 50000 7/12/2005 50000 18/1/2005 50000 24/2/2006 150000 1500000 VARUNKUMAR JITENDRASINGH BKSPS8134A 80000 30/4/2006 80000 1400000 HETAL G. SOLANKI ARPPS4450E 50000 19/10/2005 50000 22/12/2005 95000 28/2/2006 200000 1435000 PUSHPENDRASINH J RATHOD AETPR1539N 200000 31/10/2005 200000 1605000 ASHISH & ARADHANA SHRIVASTAV AOAPS0789N 35000 22/11/2005 50000 15/12/2005 40000 27/1/2006 25000 21/12/2005 150000 1625000 GUNVANTLAL RATILAL & PRAVINA G. PAREKH ADMPP1284E 75000 24/12/2005 75000 5/1/2006 50000 15/2/2006 200000 1325000 RAJESH RATILAL & SHEETAL R. SHARMA ANYPS7080B 75000 28/12/2005 75000 23/1/2006 50000 18/2/2006 200000 1325000 PRAKASH PURSHOTAMDAS SONI ADZPS8275K 50000 20/2/2006 100000 1300000 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 61 - JYOTIBEN OZA AAGPO2473F 50000 29/3/2006 50000 100 0000 HEMANT VAIDHYA AADHV3071K 50000 30/1/2006 50000 28/2/2006 100000 1500000 RAJESH VRAJLAL CHOUHAN AFCPC9230K 50000 16/1/2006 30000 16/2/2006 20000 18/3/2006 100000 1430000 DALSUKHBHAI LALJIBHAI KALSARA AARPK1062B 35000 17/10/2005 35000 7/11/2005 35000 8/12/2005 35000 16/1/2006 35000 21/2/2006 175000 1100000 JITENDRA VILLECHA ACCPV5734C 30000 18/1/2006 20000 23/1/2006 50000 23/2/2006 100000 1450000 K. SAIPRAKASH & SHELA SAIPRAKASH AJOPK68795 35000 15/11/2006 35000 23/12/2005 35000 3/1/2006 45000 25/2/2006 150000 1520000 MEHUL PRAVINCHANDRA MEHTA ACZPM2037Q 135000 12/4/2006 135000 1415000 ASHISH T ACHARYA AFRPA5483R 60000 12/12/2005 55000 17/2/2006 115000 1515000 VINAY KUMAR ROY & NITU ROY AMWPR1087Q 100000 29/7/2005 50000 8/8/2005 150000 1500000 PRITA PILLAI W/O SURESHKUMAR PILLAI ANFPP6605A 75000 3/1/2006 75000 9/2/2006 150000 1315000 MIMIXA ANKITKUMAR DESAI 125000 6/2/2006 125000 1315000 NEHA HARJIVANDAS PANDYA & KINNAR S. DESAI AMTPP7062L 50000 30/12/2005 50000 27/1/2006 50000 24/2/2006 150000 1460000 DIPTI BHAGVATRAY BHATT 50000 20/12/2005 40000 27/4/2006 90000 1360000 ASHISH JITENDRA PANDYA & JULIE ASHISH PANDYA ADMPP3309G 474000 3/4/2006 140000 14/2/2006 50000 6/4/2006 75000 13/4/2006 739000 1425000 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 62 - SHARBIL D KHAMAR AHWPK1944L 80000 28/2/2006 80000 1400000 DR. PRAVIN J. SADRANI & DR. PRATIMA P. SADRANI 50000 27/3/2006 300000 20/4/2006 350000 1200000 JITEN R. BHALGHAMA & ANJALI J. BHALBHAMA AESPB61545 50000 18/2/2006 50000 1550000 KAUSHAL KIRITBHAI PATEL AIAPP5136E 51000 1/4/2006 300000 16/4/2006 351000 1400000 RAMESH KUMAR VITHALBHAI TRIVEDI ADBPT7608M 25000 28/11/2005 25000 24/12/2005 25000 23/1/2006 25000 27/2/2006 100000 1500000 SAMRITI GARG S/O JAIPAL GARG & DIMPAL GARG ADZEG9909L 50000 28/2/2006 50000 1550000 AGLPG5837G JACKSON JASHWANT PATEL ANZPP9920G 50000 29/4/2006 50000 1300000 PRATIMA P. SADRANI & DR. PRAVIN J. SADRANI 50000 27/3/2006 300000 20/4/2006 300000 1200000 VIKASH OMPRAKASH GUPTA AGCOG8556L 35000 28/3/2006 125000 27/4/2006 160000 1560000 MONIKA K. VERMA / KAMALNAYAN A. VERMA AAZPV0686N 100000 15/4/2006 105000 8/5/2006 205000 1430000 GOPAL DAS R. KOTHAI & DIPTI KOTAI 65000 27/2/2006 200000 24/2/2006 58500 27/2/2006 323500 1225000 A.N. RAO 146000 24/4/2006 146000 1430000 NIRAV NANDUBHAI PATEL & NARMADA N. PATEL AOAPP5273N 125000 28/2/2006 125000 1300000 D. N. RAO & UMADEVI 10000 1/5/2006 100000 23/9/2005 50000 28/10/2005 160000 1580000 SHAILESH KUMAR S. DAVE & KHYATI DAVE 82000 5/5/2006 150000 4/5/2006 232000 1600000 MOHADEV AAIPW3491R 250000 17/4/2006 250000 1250000 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 63 - TOLARAM WAGHWANI DR ROHIT ALHPK7679K 75000 9/12/2005 PRADHAN AMARNATH JHA 75000 19/1/2006 50000 21/2/2006 200000 1400000 VINOD R PATEL & DAXA PATEL AEIPP8827L 50000 5/10/2005 APZPP0920Q 30000 3/11/2005 30000 30/12/2005 25000 31/1/2006 135000 1300000 MANISH A SILAJIYA AEJPS5335K 50000 25/2/2006 50000 1275000 PUSHKAR HARIDUTT BHATT 51000 18/4/2006 65000 23/3/2006 50000 8/5/2006 60000 29/4/2006 226000 1430000 DR. RAKESH RANJAN ADNPR2081G 150000 2/3/2006 20000 17/4/2006 170000 1600000 NAVNEET R PANCHAL & MUKTA PANCHAL ABYPP6479K 236250 13/2/2006 200000 9/12/2005 236250 23/3/2006 85000 16/12/2005 810000 1225000 GIRDHARLAL JIVTAJBHAI ADROJA ABXPA4342H 50000 16/9/2005 15000 17/1/2006 65000 1235000 BHOJARAJ DEEPCHAND DASANI & SWATI DASANI 40000 12/1/2006 30000 25/2/2006 70000 1300000 PANKAJBHAI D DESAI 50000 27/2/2006 50000 1360000 7797000 34. ON THE PERUSAL OF THE SEIZED CASH BOOK, IT WAS NOTICED BY CIT(A) THAT THE SAID CASH BOOK HAS BEEN WRITTEN UP TO 4/5/2006. AS PER THIS, THE CLOSING BALANCE CASH AS ON 4/5/2006 A ND 1/5/2006 WAS SHOWN AT RS. RS.3,76,707/- AND RS.3,77,207/- RE SPECTIVELY. AS ON 31/3/2006 THE CLOSING CASH BALANCE WAS SHOWN AT RS.2,06,563/- . CIT(A) OBSERVED THAT THE CASH BALANCE AS PER THIS CASH BOOK AS ON IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 64 - THE DATE OF LAST OPERATION OF THE LOCKER NUMBER 919 FROM WHERE THE SAID CASH OF RS.49,97,832/- WAS SEIZED. AS PER SAID CASH BOOK, THE CLOSING CASH BALANCE AS ON 1/3/2006 WAS SHOWN AT R S.6,41,021/-. THERE WAS NO TRANSACTION OF CASH ON 2/3/2006 AND 3/ 3/2006. ON 4/3/2006, RALSON INFRASTRUCTURE PVT. LTD HAS WITHDR AWN RS.25,000 FROM THE BANK. THE CONTENTION OF THE ASSESSEE THAT THE CASH BOOK WAS INCOMPLETE WAS THEREFORE NOT FOUND TO BE CORREC T. HE OBSERVED THAT TRANSACTIONS UPTO 4/5/2006 HAD BEEN MENTIONED IN THIS CASH BOOK. THE SAID CASH BOOK HAS NOT BEEN WRITTEN FOR F IVE DAYS, THAT IS, FROM 5/5/2006 TO THE DATE OF SEARCH ON 10/5/2006. T HE BENEFIT OF NOT ENTERING THE TRANSACTIONS IN THE CASH BOOK COUL D AT BEST BE GIVEN TO THE APPELLANT ONLY FOR THIS PERIOD, THAT IS, FRO M 5/5/2006 TO 10/5/2006. BEFORE THIS DATE ALL THE TRANSACTIONS OF CASH ARE APPEARING IN THIS CASH BOOK. THEREFORE, CIT(A) DID NOT AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE SEIZED CASH BO OK WHICH HAS BEEN GENERATED FROM THE COMPUTER DATA OF THE APPELL ANT AT THE TIME OF SEARCH WERE INCOMPLETE. BUT THE TRANSACTIONS REF ERRED TO IN THE NEW CASH BOOK PREPARED BY THE APPELLANT AFTER THE D ATE OF SEARCH WAS FOR THE PRIOR PERIOD AS WELL. THE ONLY DIFFEREN CE BETWEEN THE SEIZED CASH BOOK AND THE NEW CASH BOOK PREPARED BY THE APPELLANT AFTER THE DATE OF SEARCH IN THE CASE OF RALSON INFR ASTRUCTURE PVT. LTD WAS THAT OF THE CASH ENTRIES SHOWN IN THE NAME OF T HE VARIOUS MEMBERS OF SCHEME HARIOM VILLA. EXCEPT FOR THIS, THERE WAS NO IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 65 - SIGNIFICANT CHANGE IN THE OLD CASH BOOK WHICH HAS B EEN GENERATED FROM THE BACK UP DATA OF THE HARD DISK TAKEN AT THE TIME OF SEARCH AND THE NEW CASH BOOK PREPARED BY THE APPELLANT AFT ER THE DATE OF SEARCH. CIT(A) OBSERVED THAT THE TRANSACTIONS OF C ASH RECEIPT HAVE BEEN INCORPORATED BY ASSESSEE IN THE CASH BOOK ONLY AFTER THE DATE OF SEARCH. IN OTHER WORDS, THE ENTRY OF CASH RECEIP TS FROM ITS MEMBERS WAS NOT ACCOUNTED FOR IN THE BOOKS OF ASSES SEE OF RALSON INFRASTRUCTURE PVT LTD. EVEN THOUGH THE CONFIRMATIO NS FROM MEMBERS HAD BEEN FILED BY ASSESSEE DURING THE APPEL LATE STAGE, IT DID NOT ESTABLISH THAT THE CASH AMOUNT RECEIVED FRO M THE MEMBERS HAD BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS BY RALSON INFRASTRUCTURE PVT. LTD. IT WAS CLEAR THAT NONE OF THE ENTRY OF CASH RECEIPTS FROM THE MEMBERS WAS ACCOUNTED FOR IN THE BOOKS OF THE COMPANY. ACCORDING TO CIT(A), ASSESSEE HAS RELIED UPON THE STATEMENTS OF SHRI RAVI VERMA RECORDED AT THE TIME OF SEARCH ON 10/5/2006 AND THE STATEMENT OF HIS BROTHER SHRI MAH ESH VARMA RECORDED AT THE TIME OF OPERATION OF THE LOCKER ON 7/6/2006. IT WAS FOUND RELEVANT TO REPRODUCE THE STATEMENT OF SHRI M AHESH VARMA RECORDED AT THE TIME OF OPERATION OF THE LOCKER ON 7/6/2006. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 66 - Q.L GIVE YOUR INTRODUCTION. A.1 MY NAME IS MAHESHBHAI RAMLABHAYA VERMA, AGE- 45 YEARS, RESIDING AT A-101, HARIOM TOWER, LAW GARDEN, PANCHVATI ROAD, AHMEDABAD. EDUCATION:- S.Y.B.COM. I AM CHAIRMAN-CUM-DIRECTOR IN RALSON INFRASTRUCTURE PVT. LTD. FURTHER, 1 AM ALSO THE PROPRIETOR OF A FI RM KNOWN AS SHILPAGYA. RALSON INFRASTRUCTURE PVT, LTD. IS DOING THE BUSINESS OF CONSTRUCTION WHEREAS SHILPAGY A FIRM IS A RETAIL SHOWROOM OF HANDICRAFTS. Q.2 IN YOUR LOCKER NO. 907 OF RAJKOT NAGARIK SAHAK ARI BANK LTD., WHAT HAVE YOU KEPT AND OF WHOSE OWNERSHIP IT BELONGS TO ? A.2 IN LOCKER NO. 907 OF RAJKOT NAGARIK SAHAKARI BA NK LTD., AHMEDABAD, THERE IS A CASH OF ABOUT RS.12.00 LACS. THIS CASH BELONGS TO MY VARIOUS BUSINESSES, T HE DETAILS OF WHICH ARE AS UNDER:- 1] HARIOM FINSTOCK LTD. [MANAGING DIRECTOR] RS. 49,000 /- 2] HAROM ASSOCIATES [PARTNER] - RS. 2,83,000/- 3] HAROM SARJAK [PARTNER] RS. 1,46,000/- 4] RALSON INFRASTRUCTURE PVT. LTD. [DIRECTOR] RS. 3,76,000/- 5] MAHESH VARMA [INDL.] RS. 1,64,000/- 6] MAHESH VARMA [H.U.F.] RS. 97,000/- 7] SRAT. SHITAL MAHESH [BHARATI M.] RS. 69,000/- 8] SHILPAGYA [PROPERTIES.] [APPROXI.] ' RS. 50,000/- ----------------- TOTAL . RS.12,34,000/- THE ABOVE AMOUNT IS CASH BALANCE OF VARIOUS COMPANI ES AND FIRMS AS ON 3-5-2006. Q.3 TODAY ON OPENING YOUR LOCKER NO. 907, CASH OF , RS! 14,99,000/- IS FOUND FROM IT. TO WHOM THIS CASH BELONGS TO AND PLEASE GIVE INFORMATION WHETHER THIS CASH IS SHOWN IN ANY BOOKS OF ACCOUNTS? A.3 THE CASH WHICH AS STATED BY ME IN MY ANSWER TO QUESTION NO-. 2 HEREINABOVE, IS THE CASH RECEIVED F ROM THE MEMBERS OF MY ON-GOING PRESENT SCHEME 'HARIOM VILLA', THE DETAILS OF WHICH I WILL DISCLOSE HEREIN AFTER. THE ABOVE AMOUNT WHICH IS THE CASH BALANCE OF VARIOUS COMPANIES AND FIRMS AS SHOWN IN ANSWER TO QUESTION NO. 2 HEREINABOVE, IS THE CASH BALANCE AS ON 3-5-2005. THE REST OF THE AMOUNT OF RS. 2,65,000/- IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 67 - [RS. TWO LACS SIXTY FIVE THOUSAND ONLY] IS TAKEN BY ME FROM THE MEMBERS OF MY ON-GOING SCHEME, TOWARDS DOCUMENTATION CHARGES, G.E.B. EXPENSES, DRAINAGE CONTRIBUTION, SHARE CONTRIBUTION, EXTRA WORK CHARGE S AND VAT AND LEGAL EXPENSES. RECEIPTS TOWARDS THESE AMOUNTS ARE TO BE PREPARED BY -CREDITING THEM TO TH E RESPECTIVE MEMBERS ON SETTLEMENT OF THEIR ACCOUNTS. Q.4 DO YOU HAVE ANY EVIDENCE IN SUPPORT OF YOUR STA TEMENT THAT YOU HAVE SHOWN THESE AMOUNTS IN YOUR BOOKS OF ACCOUNTS ? AND WHY HAVE YOU KEPT THESE AMOUNTS IN LOCKER ? I A.5 IN SUPPORT OF MY STATEMENT TO THE EFFECT THAT T HESE AMOUNTS ARE OF THE COMPANIES AND FIRMS, I PRODUCE HEREWITH STATEMENTS FROM CASH-BOOK UPTO 3-5-2006. THE CASH BALANCE AS PER THE SAME IS AS UNDER:- RS. 1] RALSON INFRASTRUCTURE P. LTD 3,77,207/- 2] HARIOM SARJAK 1,46,165/- 3] HARIOM ASSOCIATES 4,84,158/- 4] HARIOM FINSTOCK 1,21,260/- 5] MAHESH R. VARMA [INDL.] 1,66,972/- 6] MAHESH R. VARMA [HUF] 97,335/- 7] SHITAL M. VARMA 69,169/- ----------- 12,62,286 OVER AND ABOVE THESE, I WILL LATER ON PRODUCE THE E VIDENCE FOR RS. 60,0007- SHOWN IN THE CASH BOOK OF SHILPAGY A [PROPRIETORY]. SINCE 1 WAS GOING OUTSIDE INDIA, 1 H AD KEPT THESE AMOUNTS IN BANK LOCKER. Q.6 BESIDES THE ABOVE, DO YOU WANT TO SAY ANYTHING ELSE ? A.6 AS PER THE DETAILS GIVEN IN THE ANSWER TO QUES TION NO. 4, I HAVE GIVEN EVIDENCE FROM MY CASH BOOK AND THES E EVIDENCES HAVE BEEN VERIFIED BY YOU AND YOU HAVE RE CEIVED THE STATEMENTS AND THOUGH THIS CASH IS NOW BEING TA LLIED WITH THE CASH BOOK STATEMENTS, AND THOUGH YOU HAD S TATED THAT AFTER SEEING THE EVIDENCES, YOU WILL RELEASE T HE CASH BUT NOW EVEN AFTER SEEING THE EVIDENCE, YOU ARE REFUSIN G TO GIVE BACK THE CASH AND YOU ARE NOT ALLOWING TO ME TO TAL K TO YOUR SUPERIORS AND THOUGH YOU HAD STATED THAT IF I SHOW THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 68 - EVIDENCES, YOU WILL NOT TAKE AWAY THE CASH, BUT INS PITE OF THE SAME, YOU ARE NOT GIVING BACK THE CASH WHICH IS VERY MUCH UNFORTUNATE. HENCE, IT IS MY HUMBLE REQUEST TH AT YOU KINDLY TALK TO YOUR SENIOR SUPERIOR AND KINDLY RETU RN THIS CASH TO ME, BECAUSE I HAVE PRODUCED ENOUGH EVIDENCE FOR THE SAME BUT INSPITE OF THE SAME, YOU ARE TAKING AW AY THIS CASH WITH YOU. HENCE, CONSIDERING THIS REQUEST, KIN DLY RETURN THE CASH TO ME. 35. IN OTHER WORDS, SHRI MAHESH VARMA ALSO CONFIRME D DURING THE COURSE OF HIS STATEMENT THAT THE CASH BALANCE IN TH E BOOKS OF RALSON INFRASTRUCTURE PVT. LTD IS ONLY RS.3,77,207/-. THI S IS THE CASH BALANCE WHICH IS APPEARING ON 3/5/2006 AS PER CASH BOOK GENERATED FROM THE SEIZED BACKUP DATA OF THE HARD DISK. THIS CLEARLY SHOWS THAT THE NEW CASH BOOK OF RALSON INFRASTRUCTURE PVT LTD IS PREPARED BY THE ASSESSEE ONLY TO COVER UP THE EXPLANATION OF CASH F OUND FROM THE RESIDENCE AND THE LOCKERS OF SHRI RAVI VERMA AND MA HESH VARMA. 36. THE STATEMENT OF SHRI RAVI VERMA WAS RECORDED O N THE DATE OF SEARCH ON 10/5/2006. THE RELEVANT PORTION OF HIS ST ATEMENT IS REPRODUCED AS UNDER: Q.7 PRESENTLY IN YOUR HOUSE, THERE IS HOW MUCH CASH AND HOW MUCH JEWELRY? A.7 AS ON TODAY IN MY HOUSE, THERE MIGHT BE A CASH OF ABOUT 14 TO 15 LACS, EXACTLY HOW MUCH, I DO NOT KNOW AND THE RE MIGHT JEWELRY OF ABOUT 5 TOLAS. Q.8 PLEASE GIVE THE DETAILS OF YOU BANK ACCOUNTS. A.8 I HAVE BANK ACCOUNTS IN MY NAME AS BELOW:- 1. ACCOUNT WITH RAJKOT NAGRIK SAHAKARI BANK LTD. 2. DEVELOPMENT CREDIT BANK, NAVRANGPURA BRANCH, AHMEDABAD IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 69 - Q.9 IN REPLY TO QUESTION NO.7 YOU HAVE STATED THAT AS ON TODAY, IN OUR HOUSE THERE MIGHT BE A CASH OF ABOUT 14 TO 1 5 LACS AND GOLD ORNAMENT OF ABOUT 5 TOLAS. HENCE, PLEASE STATE WHOSE CASH IS IT. FURTHER, ALSO STATE WHETHER HAVE YOU PUT CASH OR ORNAMENTS AT ANY OTHER PLACE? PLEASE REPLY IN DETAIL WITH EVIDENCE. A.9 THIS CASH IS OF OUR DIFFERENT FIRMS AND IT CONS ISTS OF DEPOSIT AMOUNT TAKEN FROM THE MEMBERS OF OUT ON-GOING SCHEM ES. WE HAVE NOT PUT OUR CASH AMOUNT AT ANY OTHER PLACE WHEREAS THE ORNAMENTS ARE LYING IN LOCKER AT SARDAR VALLABHBHAI PATEL COOP. BANK LTD. 37. IN OTHER WORDS, SHRI RAVI VERMA HAD STATED AT T HE TIME OF SEARCH THAT THE CASH OF APPROXIMATELY RS. 14 TO 15 LACS WO ULD BE AVAILABLE IN HIS HOUSE WHICH BELONGS TO DIFFERENT FIRMS. NOWH ERE IN THIS STATEMENT HE HAD STATED THAT HE HAS KEPT THE CASH I N THE LOCKER AT SARDAR VALLBHBHAI PATEL COOP. BANK LTD ALSO, WHICH BELONGS TO RALSON INFRASTRUCTURE PVT. LTD.. IN FACT, SHRI RAVI VERMA HAS STATED THAT IN THE LOCKER ONLY ORNAMENTS ARE LYING. ALL OT HER STATEMENTS ARE RECORDED AFTER 10/5/2006, THAT IS, AFTER THE DATE O F SEARCH, THEREFORE, NOT MUCH OF WEIGHTAGE CAN BE GIVEN TO SUCH STATEMEN TS. IN FACT, THE ASSESSING OFFICER HAS GIVEN THE CREDIT OF CASH BAL ANCE AS PER THE BOOKS OF ACCOUNTS OF VARIOUS ENTITIES AS STATED BY HIM IN HIS STATEMENT. 38. ANOTHER IMPORTANT POINT IN THIS CASE IS THAT RA LSON INFRASTRUCTURE PVT LTD. HAD BEEN CLAIMING DEDUCTION UNDER SECTION 80 IB OF THE INCOME-TAX ACT FROM ASSESSMENT YEAR 2006- 2007 ONWARDS. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 70 - IN OTHER WORDS, THE WHOLE INCOME OF RALSON INFRASTR UCTURE PVT. LTD. FROM ITS CONSTRUCTION ACTIVITY HAS BEEN CLAIMED AS DEDUCTION UNDER SECTION 80 IB OF THE INCOME-TAX ACT. HAD THE AMOUNT OF SEIZURE OF CASH FROM THE LOCKERS AND FROM THE RESIDENCE OF THE ASSESSEES BELONGED TO RALSON INFRASTRUCTURE PVT. LTD., THEN THIS AMOUNT WOULD HAVE ALSO BEEN ACCOUNTED FOR IN THE BOOKS OF RALSON INFRASTRUCTURE PVT. LTD, AS IT IS ELIGIBLE FOR DEDUCTION UNDER SEC TION 80 IB OF THE INCOME-TAX ACT. NO PRUDENT BUSINESS PERSON WILL NO T ACCOUNT FOR THE RECEIPT OF CASH IN HIS BOOKS OF ACCOUNTS, IF HE IS OTHERWISE, ELIGIBLE FOR DEDUCTION IN RESPECT OF SUCH RECEIPTS. THEREFORE, C IT(A) AGREED WITH THE ASSESSING OFFICER THAT THE CASH SEIZED FROM THE LOCKER DOES NOT BELONG TO RALSON INFRASTRUCTURE PVT. LTD. 39. ON THE PERUSAL OF THE CHART SHOWING THE RECEIPT OF CHEQUE AND FROM THE MEMBERS BY RALSON INFRASTRUCTURE PVT. LTD, CIT(A) OBSERVED THAT THE CASH AMOUNT HAS BEEN RECEIVED PRIOR TO THE BOOKING OF THE BUNGALOW. IN MOST OF THE CASES, THE CASH RECEIVED FROM THE MEMBERS WAS SHOWN PRIOR TO THE DATE OF CHEQUE RECEIVED FROM THEM. NO MEMBER WOULD PAY CASH AGAINST THE EXPENSES IN THE F ORM OF DOCUMENTATION CHARGES, G.E.B. EXPENSES, DRAINAGE CO NTRIBUTION, SHARE CONTRIBUTION, EXTRA WORK CHARGES AND VAT AND LEGAL EXPENSES ETC. AS MENTIONED IN THEIR CONFIRMATION LETTER UNLE SS THEY HAVE BOOKED A HOUSE BY PAYING SOME CHEQUE AMOUNT TO RALS ON IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 71 - INFRASTRUCTURE PVT LTD. IN FACT, THE ABOVE MENTION ED TYPE OF EXPENSES ARE PAID AT THE TIME OF REGISTRATION IN THE NAME OF THE BUYER AND NOT BEFORE THE BOOKING WAS MADE BY THE BUYER. THEREFORE , CIT(A) WAS NOT INCLINED TO ACCEPT THE STORY OF THE APPELLANT THAT THE SEIZED CASH FROM LOCKER AND RESIDENCE REPRESENT THE CONTRIBUTIONS RE CEIVED FROM THE MEMBERS BY RALSON INFRASTRUCTURE PVT. LTD. 40. IN VIEW OF THE ABOVE MENTIONED FACTS, CIT(A) HE LD THAT THE CASH FOUND FROM THE LOCKERS AND FROM THE RESIDENCE OF T HE ASSESSEES DID NOT BELONG TO RALSON INFRASTRUCTURE PVT. LTD. BUT R EPRESENT THE UNACCOUNTED INCOME OF THE APPELLANTS. THE ADDITION OF RS.49,97,832/- FOUND AND SEIZED FROM THE LOCKER OF SHRI RAVI VERMA IN ASSESSMENT YEAR 2006-07 WAS UPHELD. 41. SIMILARLY, THE ADDITION OF RS.L 1,04,493/- BEIN G UNEXPLAINED CASH FOUND FROM THE RESIDENCE OF SHRI RAVI VARMA STATED TO BE BELONGING TO RALSON INFRASTRUCTURE PVT. LTD WAS HEREBY CONFIRMED . THE ASSESSING OFFICER HAS ALSO MADE ADDITION OF RS.40,000/- OUT O F THE CASH OF RS.50,000/- FOUND FROM THE LOCKER OF SHRI RAVI VARM A AT SARDAR VALLABHBHAI PATEL CO-OPERATIVE BANK LTD. IT WAS STA TED BY ASSESSEE THAT THIS AMOUNT REPRESENTS ACCUMULATED SAVINGS OF HIS WIFE FROM THE GIFTS RECEIVED ON VARIOUS SOCIAL OCCASIONS. HOWEVER THE ASSESSING OFFICER HELD THAT THE RECEIPTS OF GIFT WERE NEVER O NE-SIDED BECAUSE AT THE SAME TIME THE ASSESSEE HAD ALSO TO GIVE GIFTS T O RELATIVES AND IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 72 - FRIENDS. ON THIS GROUND, HE TREATED THE AMOUNT OF R S.L0,000/- ONLY AS EXPLAINED AND MADE ADDITION OF THE BALANCE AMOUNT O F RS.40,000/-. CIT(A) LOOKING AT THE STATUS OF ASSESSEE HELD THAT THE AMOUNT OF RS.50,000/- COULD BE ACCEPTED AS THE PAST SAVINGS O F THE FAMILY OF THE APPELLANT. THE ADDITION OF RS.40,000/- MADE BY THE ASSESSING OFFICER ON THIS GROUND WAS THEREFORE DIRECTED TO BE DELETED . 42. IN THE CASE OF MAHESH VARMA, THE EXPLANATION O F CASH OF RS.14.99 LACS SEIZED FROM HIS LOCKER WAS GIVEN BEFO RE THE ASSESSING OFFICER. AS PER THIS, THE SAID CASH BELONG TO HARIO M FINSTOCK LTD, HARIOM ASSOCIATES, HARIOM SARJAK, MAHESH R VARMA, M AHESH R VARMA HUF, SHEETAL M VARMA AND RALSON INFRASTRUCTUR E PVT. LTD. AS UNDER: NAMES AMOUNT (RS.) HARIOM FINSTOCK LIMITED 121260 HARIOM ASSOCIATES 284158 HARIOM SARJAK 146165 RALSON INFRASTRUCTURE PV T LIMITED 377207 MAHESH R. VARMA 166972 MAHESH R. VARMA, HUF 97355 SMT. SHITAL M VARMA 69169 RALSON INFRASTRUCTURE PVT LIMITED 236774 TOTAL. 1499000 BESIDE THIS, CASH OF RS.56,750/- WAS ALSO FOUND FRO M RESIDENCE. OUT OF THIS, ASSESSING OFFICER TREATED RS.40,000/- AS U NEXPLAINED AND MADE ADDITION THEREOF. ASSESSING OFFICER HAS ACCEP TED THE CASH IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 73 - BALANCE OF ALL THE CONCERNS EXCEPT FOR RALSON INFRA STRUCTURE PVT LTD. ACCORDING TO HIM, THE AMOUNT OF RS.3,77,207/- AND R S.2,36,714/- SHOWN AS RECEIVED FROM RALSON INFRASTRUCTURE PVT. L TD WAS NOT APPEARING IN THE BOOKS OF RALSON INFRASTRUCTURE PVT . LTD AS GIVEN TO THE APPELLANT ON 3/5/2006. FURTHER, THE ASSESSING O FFICER HAD GIVEN THE CREDIT OF RS.3,76,707/- BEING THE CASH BALANCE OF RALSON IFRASTRUCTURE PVT. LTD AS ON 4/5/2006 IN THE HANDS OF RAVI VERMA IN ASSESSMENT YEAR 2007-2008 BY TREATING THE CASH TO T HE EXTENT OF RS.3,76,707/- AS EXPLAINED LEASH IN THE CASE OF RAV I VARMA. OUT OF THE CASH OF RS.15,06,200/- FOUND FROM THE RESIDENCE OF SHRI RAVI VARMA, THE ASSESSING OFFICER MADE ADDITIONS OF CASH OF RS.11,04,493/- AFTER ACCEPTING THE CASH BALANCE OF RS.3,76,707/- OF RALSON INFRASTRUCTURE PVT. LTD AS ON 4/5/2006 AND T HE CREDIT OF RS.25,000/- BEING THE SAVINGS OF SHRI RAVI VARMA, W HO HAD SHOWN CASH BALANCE AS ON 31/3/2006 OF ONLY RS.2,880/-. S INCE THE CREDIT OF CASH BALANCE OF RALSON INFRASTRUCTURE PVT. LTD. AS APPEARING IN THE SEIZED CASH BOOK HAD ALREADY BEEN GIVEN IN THE CASE OF THE BROTHER OF THE ASSESSEE, THE DOUBLE CREDIT OF THE SAME AMOUNT COULD NOT BE AGAIN GIVEN TO THE ASSESSEE, SHRI MAHESH VARMA. IN OTHER WORDS, THE ASSESSING OFFICER HAD GIVEN THE-CREDIT OF THE CASH BALANCES OF THE FIRM AND COMPANIES OF THE ASSESSEE GROUP AS PER RESPECTI VE CASH BOOKS EITHER IN THE HANDS OF THE APPELLANT SHRI RAVI VARM A OR MAHESH VARMA. SIMILARLY, THE ADDITION OF RS.40,000/- MADE ON ACCOUNT OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 74 - CASH FOUND AT THE RESIDENCE OF THE APPELLANT WAS CO NFIRMED ON THE GROUND THAT THE BENEFIT OF THE SAVINGS IN THE FORM OF CASH BALANCE AVAILABLE WITH THE APPELLANT RS.1,66,972/- AND HIS WIFE RS.69,169/- HAS ALREADY BEEN GIVEN WHILE EXPLAINING THE SOURCE OF THE CASH OF RS.14.99 LACS FOUND AND SEIZED FROM HIS LOCKER. IN SHORT, THE ADDITION OF RS.6,13,921/- AND RS.40,000/- MADE ON A CCOUNT OF CASH FOUND FROM THE LOCKER AND THE RESIDENCE RESPECTIVEL Y OF THE APPELLANT SHRI MAHESH VARMA WAS CONFIRMED. 43. IN OTHER WORDS, ALL THE ADDITIONS MADE BY THE A SSESSING OFFICER WERE CONFIRMED EXCEPT FOR THE ADDITION OF RS. 40,00 0 MADE IN THE CASE OF RAVI VERMA IN ASSESSMENT YEAR 2007-2008. IN SHO RT, APPEAL OF SHRI RAVI VERMA FOR ASSESSMENT YEAR 2006-2007 WAS D ISMISSED AND THE APPEAL FOR ASSESSMENT YEAR 2007-2008 WAS PARTLY ALLOWED. THE APPEAL OF SHRI MAHESH VARMA FOR ASSESSMENT YEAR 200 7-2008 WAS DISMISSED. 44. IN IT(SS)A NO.194/AHD/2011 (RALSON INFRASTRUCT URE PVT. LTD.), AS REGARDS THE GROUND NO.1, 5, 6 AND 7 (ISSUE OF VA LIDITY OF ASSESSMENT ORDER), THE SAME HAS BEEN ADJUDICATED BY CIT(A) IN THE APPELLATE ORDER DATED 1/12/2010 PASSED IN THE CASE OF RAJNI VARMA, MAHESH VARMA AND THE THREE HUFS AGAINST THE APPELLA NT. SINCE THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 75 - FACTS OF THIS CASE ARE IDENTICALLY SIMILAR TO THE F ACTS OF THAT CASE, THESE GROUNDS ARE DECIDED AGAINST THE APPELLANT. 45. THE NEXT GROUND OF APPEAL IS REGARDING NOT TREA TING THE CASH FOUND FROM THE LOCKER AND RESIDENTIAL PREMISES OF R AVI VARMA AS BELONGING TO THE APPELLANT. THIS ISSUE HAS ALSO BEE N DISCUSSED BY CIT(A) IN DETAIL IN ITS APPELLATE ORDER DATED 2/12/ 2010 PASSED IN THE CASE OF RAVI VARMA (AY 2006-07 AND 2007 -08) AND MA HESH VARMA (A Y 2007-08) WHEREIN IT HAS BEEN HELD BY HIM THAT THE CASH FOUND FROM THE LOCKER AND RESIDENTIAL PREMISES OF SHRI RAVI VA RMA AND MAHESH VARMA REPRESENT THEIR UNACCOUNTED INCOME AND NOT TH E INCOME OF THE APPELLANT I.E. RALSON INFRASTRUCTURE PVT. LTD. IN OTHER WORDS, THE CASH FOUND IN THE CASE OF RAVI VARMA AND MAHESH VAR MA WAS TREATED AS THEIR UNEXPLAINED INCOME AND NOT THE INCOME OF R ALSON INFRASTRUCTURE PVT. LTD. THIS GROUND WAS ALSO DECID ED AGAINST THE APPELLANT. 46. THE NEXT GROUND OF APPEAL IS REGARDING THE REJE CTION OF THE BOOKS OF. ACCOUNTS UNDER SECTION 145 (3) OF THE INCOME-TA X ACT. IT HAS BEEN HELD BY CIT(A) IN ITS APPELLATE ORDER DATED 1/12/20 10 PASSED IN THE CASE OF RAJNI VARMA, MAHESH VARMA AND THE THREE HUF S THAT THE CASH BOOK PREPARED BY THE APPELLANT AFTER THE DATE OF SEARCH WAS NOT GENUINE BUT THE SAME HAS BEEN PREPARED IN ORDER TO EXPLAIN THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 76 - SEIZED CASH FROM THE LOCKERS AND RESIDENTIAL PREMIS ES OF SHRI RAVI VARMA AND MAHESH VARMA. SINCE THE BOOKS OF ACCOUNTS OF THE APPELLANT HAS BEEN PREPARED ON THE BASIS OF THIS CA SH BOOK, CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN RE JECTING THE SAME UNDER SECTION 145 (3) OF THE INCOME-TAX ACT. 47. IN OTHER WORDS, THE TOTAL CASH SEIZED AT THE TI ME OF SEARCH AMOUNTING TO RS.77,97,000/- HAS BEEN SHOWN AS SALES BY THE APPELLANT IN 3 ASSESSMENT YEARS NAMELY, RS.31.66 LA CS IN ASSESSMENT YEAR 2007-2008, RS.27.31 LACS IN ASSESSM ENT YEAR 2008- 2009 AND RS.19 LACS IN ASSESSMENT YEAR 2009-2010. T HE STAND OF AUTHORIZED REPRESENTATIVE WAS THAT ON THE ONE HAND, THE ASSESSING OFFICER HAS HELD THAT THE SEIZED CASH DOES NOT BELO NG TO RALSON INFRASTRUCTURE PVT. LTD. ON THE OTHER HAND, HE HAS CONSIDERED THE INCOME OF SALES ON ACCOUNT OF SEIZED CASH. IN OTHER WORDS, THE SEIZED CASH HAS BEEN CONSIDERED BY THE ASSESSING OFFICER A S THE INCOME OF NOT ONLY RAVI VARMA AND MAHESH VARMA BUT ALSO OF RA LSON INFRASTRUCTURE PVT. LTD. THEREBY MAKING DOUBLE ADDI TIONS. THIS CONTENTION OF THE AUTHORIZED REPRESENTATIVE WAS FOU ND ACCEPTABLE BY THE CIT(A). SINCE IN THE CASE OF RAVI VARMA AND MA HESH VARMA, CIT(A) HELD THAT THE SEIZED CASH REPRESENT THEIR UN ACCOUNTED INCOME, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAM E IN THE HANDS OF RALSON INFRASTRUCTURE PVT. LTD. FURTHER, IT WAS CO NTENDED BY THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 77 - AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE HAS CLA IMED THE DEDUCTION U/S.80IB ON THE BASIS OF PERCENTAGE COMPL ETION METHOD AND NOT ON THE BASIS OF ACTUAL SLAES OF THE BUNGALO WS. THE WORKING OF THE DEDUCTION U/S.80IB HAS BEEN FURNISHED. FROM THE WORKING, IT WAS OBSERVED THAT ASSESSEE HAS SHOWN INCOME FOR THE PURPOSE OF DEDUCTION U/S.80IB OF THE ACT ON THE BASIS OF PERCE NTAGE COMPLETION METHOD (BY TAKING APPROXIMATELY 12.5% OF THE CLOSIN G WORK IN PROGRESS AT THE END OF EACH FINANCIAL YEAR PLUS THE SALES OF BUNGALOWS AFFECTED DURING THAT YEAR) IN DIFFERENT ASSESSMENT YEARS. 48. FROM THE ABOVE, IT IS SEEN THAT IN ASSESSMENT YEAR 2006-2007 NO BUNGALOW WAS SOLD BY THE APPELLANT. HOWEVER, DURING THE YEAR TOTAL SALES OF RS.13,93,591/- HAS BEEN SHOWN. IF THERE IS NO SALE OF ANY BUNGALOW IN ASSESSMENT YEAR 2006-2007, THEN WHAT DO ES THE AMOUNT OF RS. 13,93,591/- REPRESENT. IN THIS REGARD , THE STAND OF ASSESSEE HAS BEEN THAT IT HAD INCURRED TOTAL EXPEND ITURE OF RS. 12.80 LACS TOWARDS LAND DEVELOPMENT EXPENSES BEING IN THE NATURE OF LAND LEVELLING ON BEHALF OF KARN ASSOCIATION, A NIC FOR WHOM THE APPELLANT WAS STATED TO HAVE DONE DEVELOPMENT WORK. AGAINST T HIS, THE APPELLANT CHARGED RS. 13,93,591/- FROM KARN ASSOCIA TION AS ITS INCOME. IN OTHER WORDS, THE INCOME OF RS.13,93,591/ - REPRESENT THE INCOME ON ACCOUNT OF LAND LEVELLING EXPENSES INCURR ED BY THE APPELLANT ON BEHALF OF KARN ASSOCIATION. IT MAY BE MENTIONED THAT FOR IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 78 - THE PURPOSE OF DEDUCTION UNDER SECTION 80IB, THE AP PELLANT HAS TAKEN THIS INCOME AS ELIGIBLE INCOME. HOWEVER, THIS AMOUN T DOES NOT REPRESENT THE INCOME FROM THE HOUSING PROJECT, THAT IS, THE SALE OF BUNGALOWS. IN OTHER WORDS, THIS AMOUNT IS NOT ELIGI BLE FOR DEDUCTION UNDER SECTION 80IB OF THE INCOME-TAX ACT AND THE SA ME SHOULD HAVE BEEN REDUCED FROM THE TOTAL INCOME FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80 IB OF THE INCOME-TAX ACT. SIMILAR LY, IT WAS NOTICED THAT THE AVERAGE SALE RATE OF BUNGALOW HAS INCREASE D BY 1 50% FROM ASSESSMENT YEAR 2009-2010 TO ASSESSMENT YEAR 2010-1 1. THE AVERAGE SALE RATE OF BUNGALOW IN ASSESSMENT YEAR 20 09-10 IS APPROXIMATELY RS.12.24 LACS WHEREAS IN ASSESSMENT Y EAR 2009-10 IT IS SHOWN AT RS.30.42 LACS. THE ASSESSING OFFICER WA S DIRECTED TO VERIFY WHETHER IN THE SALES SHOWN BY THE APPELLANT, OTHER INCOMES NOT RELATING TO CONSTRUCTION ACTIVITY OF THE APPELLANT WERE INCLUDED OR NOT. HE WAS DIRECTED TO RESTRICT THE CLAIM OF DEDUCTION UNDER SECTION 80IB, IF ALLOWABLE, ONLY IN RESPECT OF THE INCOME FROM HO USING PROJECT OF THE APPELLANT. IF ANY INCOME WHICH IS NOT DERIVED FROM THE HOUSING PROJECT IS ALSO INCLUDED BY. THE APPELLANT IN THE T OTAL SALES, THEN, HE WOULD EXCLUDE SUCH INCOME FOR THE PURPOSE OF DEDUCT ION UNDER SECTION 80 IB OF THE ACT. 49. FURTHER, IT WAS SEEN THAT EVEN THOUGH IN ASSESS MENT YEAR 2009- 2010 AND 2010-2011, 40 UNITS AND 5 UNITS RESPECTIVE LY HAVE BEEN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 79 - SOLD BY THE APPELLANT, STILL LOSS OF RS.35,75,322/- AND RS.3,49,775/- RESPECTIVELY HAS BEEN SHOWN BY FOLLOWING THE METHOD OF PERCENTAGE COMPLETION METHOD. ON THE OTHER HAND, THE PROFIT B EFORE DEPRECIATION AND TAX HAS BEEN SHOWN AT RS.7.72 LACS, RS.58.82 LA CS, RS.51.20 LACS, RS.8.81 LACS AND RS.54.46 LACS RESPECTIVELY F ROM ASSESSMENT YEAR 2006-2007 TO ASSESSMENT YEARS 2010-2011. IN TH E OPINION OF CIT(A), THE METHOD FOLLOWED BY THE APPELLANT DID NO T GIVE THE CORRECT PICTURE OF THE PROFITS BECAUSE ON THE ONE HAND-ON T HE SALE OF 29 BUNGALOWS THE PROFIT IS SHOWN AT MORE THAN RS.51 LA CS IN ASSESSMENT YEAR 2007-2008 AND ASSESSMENT YEAR 2008- 2009, ON THE OTHER HAND, THE PROFIT OF ONLY RS.8.81 LACS WAS SHO WN ON THE SALE OF 40 BUNGALOWS IN ASSESSMENT YEAR 2009-20,10 AND PROF IT OF RS.54.46 LACS WAS SHOWN ON THE SALE OF ONLY FIVE BUNGALOWS I N ASSESSMENT YEAR 2010-2011. FOR THE PURPOSE OF CLAIMING DEDUCT ION UNDER SECTION 80IB, THE APPELLANT HAD SHOWN THE INCOME ON THE BASIS OF SEIZED CASH ONLY IN THAT YEAR IN WHICH THE BUNGALOW HAS BEEN FINALLY SOLD TO THE MEMBER. MOREOVER, AS COULD BE SEEN, TH E NET PROFIT BEFORE TAXATION RATIO TO THE SALES IS VARYING BETWEEN 1.39 % TO 54.1% AS WAS EVIDENT FROM THE BELOW MENTIONED TABLE: A.Y. 2006-07 2007-08 2008-09 2009-10 2010-11 NET PROFIT(BEFORE TAX) RATIO TO SALES 54.1087 16.80098 13.01923 1.394101 34.41047 12.6426492 DEDUCTION U/S. 80 IB (10) ' 754054 5784578 4891975 677045 5235242 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 80 - NET PROFIT AT. 1 2.64% OF SALES 176149.9 4351952 4749480 6138616 1923062 17339259,89 50. THE NET PROFIT RATIO IN A.Y.2006-07 HAD BEEN SH OWN AT 54.10% OF THE SALES. THIS RATIO WAS SHOWN AT 16.80% IN A.Y.20 07-08, AT 13.01% IN ASSESSMENT YEAR 2008-09, 1.39% IN ASSESSMENT YEA R 2009-10 AND 34.41% IN ASSESSMENT YEAR 2010-11 AS AGAINST THE OV ERALL NET PROFIT RATIO OF 12.64%. THERE COULD NOT BE SUCH STEEP VARI ATION, IF THE METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE WAS CORRE CT. IN OTHER WORDS, THE METHOD EMPLOYED BY THE ASSESSEE DID NOT GIVE THE CORRECT PICTURE OF PROFITS. THE ACTION OF ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNTS OF ASSESSEE WAS THEREFORE, HELD J USTIFIED ON THIS GROUND ALSO. IN SHORT, THIS GROUND WAS DECIDED AGA INST ASSESSEE. 51. THE LAST GROUND IN THIS APPEAL BEFORE CIT(A) WA S REGARDING THE DENIAL OF DEDUCTION UNDER SECTION 80 IB (10) OF THE INCOME-TAX ACT. THE RELEVANT DISCUSSION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS REPRODUCED HERE: 6.9 THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB AMOUNTING TO RS.7,54,054/- AS DISCUSSED IN THE ABOV E PARAS MANY DEFECTS AND SHORT COMING HAS BEEN NOTICE D IN THE ACCOUNTS OF THE ASSESSEE WHILE COMPARING IT WIT H THE ACCOUNTS SEIZED DURING THE COURSE OF SEARCH OPERATI ON WHICH ARE IN COMPUTER HARD DISK. THE ACCOUNTS SUBMI TTED BY ASSESSEE HAS BEEN REJECTED U/S 145(3) OF THE I.T . ACT. BUT THE CLAIM OF ASSESSEE OF DEDUCTION U/S. 80IB IS HER EBY DEALT WITH ON TECHNICAL ISSUES OF ALLOWABILITY OF THE CLA IM. FOR THIS PURPOSE, THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAI M OF DEDUCTION U/S 80IB OF THE I.T. ACT ALONG WITH THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 81 - DOCUMENTARY EVIDENCES. IN RESPONSE TO THIS, THE ASS ESSEE SUBMITTED REPLY, THE GIST'S OF WHICH ARE AS UNDER: A) DURING THE YEAR, THE ASSESSEE IS DEVELOPING SCHE ME NAMED 'HARI OM VILLA AT GHUMA, AHMEDABAD B) THE SAID SCHEME IS BEING DEVELOPED ON A LAND BELONGING TO M/S KARN ASSOCIATION BY VIRTUE OF DEVELOPMENT AGREEMENT ENTERED BETWEEN KARN ASSOCIATION AND THE ASSESSEE. IT IS STATED THAT M/S KARN ASSOCIATION HAD TRANSFERRED ALL THE RIGHT OF DEVELOPMENT TO THE ASSESSEE. THE ASSESSEE IS DEVELO PER CUM BUILDER OF THE HOUSING PROJECT IS ENTITLED TO DEDUCTION U/S 80IB(10) OF THE I.T. ACT. C) ALL THE REQUISITE CONDITION HAS BEEN LAID DOWN IN SECTION 80IB HAVE BEEN FULFILLED BY ASSESSEE, AS PE R FOLLOWING CHART: SR. NO. CONDITIONS SPECIFIED FOR DEDUCTION U/S. 80IB FULFILLMENT OF CONDITIONS OF DEDUCTION U/S 80IB 1. DATE OF APPROVAL BY LOCAL AUTHORITY 02.08.2005 APPROVED BY AUDA 2. DATE OF BU PERMISSION RECEIVED NOT APPLICABLE SINCE IT IS SITUATED OUTSIDE AUDA LIMITS. 3. SIZE OF PLOT OF LAND 9,721 SQUA RE MTRS. 4. BUILT - UP AREA OF 1500 SQ. FEET FOR EACH RESIDENTIAL UNIT EACH RESIDENTIAL UNIT IS HAVING BUILT UP AREA OF LESS THAN 1500 SQ. FT. AS PER THE APPROVED SIZE. D) COPY OF FORM NO. 10CCB AND COPY OF APPROVED PLAN ARE ENCLOSED. E) THE LAND BELONGS TO M/S KARN ASSOCIATION, WHICH WAS PROVIDED FUNDS OF RS.10.00 LACS BY THE ASSESSEE COM PANY FOR THE PURCHASE OF LAND. IN THIS BACKGROUND, IT IS STATED THAT KARN ASSOCIATION IS FOR ALL PRACTICAL PURPOSE CONSIDERED AS A SPECIAL PURPOSE VEHICLE. THE NTC HAS TRANSFERR ED DEVELOPMENT RIGHTS TO THE DEVELOPERS RIPL. F) ALL PERMISSION AND APPROVAL WERE OBTAINED BY THE DEVELOPER COMPANY, WHICH ARE AS UNDER: IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 82 - I. THE DEVELOPER FOR THE PURPOSE OF PLANNING AND' EXECUTING THE PROJECT 'HARIOM VILLA' HAS SANCTIONED NECESSARY PLAN, DRAWINGS, MAPS, ETC. II. THE DEVELOPER HAS APPOINTED THE ARCHITECT, ENGI NEERS, LEGAL ADVISOR FOR THE PURPOSE OF IMPLEMENTATION OF PROJECT. III. THE DEVELOPER HAS ACCEPTED MONEY FROM THE PERS ONS ENROLLED IN THE PROJECT. IV. FOR THE PURPOSE OF COMPLETING THE PROJECT, THE DEVELOPER HAS MADE ALL NECESSARY APPLICATION, REPLIES, STATEMENT IN THE GOVERNMENT OFFICES OR THE CONCERNED AUTHORITIES. V. THE COMPLETE RESPONSIBILITY OF THE PLANNING AN D TOTAL CONSTRUCTION IS RESTED WITH DEVELOPER. VI. THE DEVELOPER HAS CREATED COMMON AMEN ITIES AND OTHER INFRASTRUCTURE LIKE ROAD, GARDEN, ELECTRICITY , ETC. G) THE PRICE TO BE CHARGED TO THE CUSTOMER IS SOLEM NLY DETERMINED BY THE ASSESSEE COMPANY AND RESPONSIBILITY OF COLLECTION IS ON IT. H) THE DEVELOPER COMPANY IS RESPONSIBLE FOR ALL THE PROFIT AND LOSS OF THE PROJECT. I) ALL THE UNITS IN THE PROJECT ARE LESS THAN 1,500 SQUARE FEET. J) THE OWNERSHIP OF LAND REST WITH NTC, BUT IT IS NOT A PRE-CONDITION TO CLAIM DEDUCTION U/S80IB(10). K) EVEN OTHERWISE, THE ASSESSEE DEVELOPER BECOMES T HE OWNER OF LAND BY PART PERFORMANCE OF CONTACT OF THE NATURE REFERRED IN SECTION 53A OF TRANSFER OF PROPE RTY ACT. THEREFORE, THE DEDUCTION U/S 80IB(10) SHOULD BE ALL OWABLE TO ASSESSEE'. 6.10 THE SUBMISSIONS OF THE ASSESSEE ARE CAREFULLY CONSIDERED. FROM THE VARIOUS CLAUSES OF AGREEMENT BETWEEN THE A SSESSEE AND KARN ASSOCIATION FOLLOWING FACT EMERGES; IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 83 - THE OWNER OF THE LAND IS WITH KARN ASSOCIATION AN D THE SAME IS NOT WITH THE ASSESSEE COMPANY. THE ASSESSEE COMPANY IS NOT THE OWNER OF THE RESI DENTIAL UNITS CONSTRUCTED ON THIS LAND. THE NAME OF THE ASSESSEE COMPANY IS MENTIONED IN THE PLANS OF PROJECT. ON THE PLAN LAYOUT ALSO THERE IS THE NAME OF THE NTC ONLY AND NO OTHER LAND RECORD, GOVERNMEN T SANCTION, TAX BILLS, ETC IS HAVING THE NAME OF THE ASSESSEE COMPANY. THE APPROVAL OF PROJECT IS GIVEN BY LOCAL AUTHORI TIES TO THE CHAIRMAN OF THE KARN ASSOCIATION AND NOT THE ASSESS EE COMPANY. ONE OF THE MOST IMPORTANT FEATURE OF CLAIMING DED UCTION U/S 8016(10) IS THAT THE AREA OF PLOT OF THE PROJEC T SHOULD BE ONE ACRE. IN THIS CASE, IT WAS OBSERVED THAT THE NT C ALLOTTED LAND TO ITS MEMBERS AND COLLECTED MONEY FROM THEM. BY VIRTUE OF CHARGING LAND COST AT THE INITIAL STAGE T HE MEMBERS BECOMES OWNERS OF LAND. IN THIS SCHEME, THERE ARE 6 3 MEMBERS. IT MEANS THAT THERE ARE 63 OWNERS OF THE L AND. THE ASSESSEE HAS TO ENTER INTO INDIVIDUAL AGREEMENT .WITH EACH MEMBER FOR CONSTRUCTION OF HOUSES/UNITS. THERE FORE, 63 DIFFERENT AGREEMENTS HAVE TO BE EXECUTED BY THE ASSESSEE FOR DEVELOPMENT OF ONE PIECE OF LAND. THIS LEADS TO CONCLUSION THAT THERE ARE 63 PROJECTS IN THIS PIECE OF LAND. THUS, THE ASSESSEE IS NOT DEVELOPING PROJECT ON ONE ACRE, BUT ON A VERY SMALL AREA OF LAND. IT WAS OBSERVED THAT RAW MATERIAL WERE REGULARLY BE ING PURCHASED IN THE NAME OF M/S KARN ASSOCIATION AND ENTERED IN THE ACCOUNTS OF KARN ASSOCIATION. PAYMEN TS TO THE SUPPLIERS WERE ALSO-MADE FROM THE . ACCOUNT OF KARN ASSOCIATION. THE ASSESSEE SUBMITTED THAT THESE ARE DUE TO FACTS THAT THE MATERIAL WAS SUPPLIED AT SITE SO BIL LS WERE RAISED IN THE NAME OF KARN ASSOCIATION AND KARN ASSOCIATION IS REIMBURSED THE SAME. BUT ALL THESE FACTS NEGATE THE CLAIM OF ASSESSEE TH AT ALL THE RAW MATERIAL HAS BEEN PURCHASED, AND PAID, BY THEM. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 84 - THIS SITUATION CAN BE SEEN DIFFERENTLY ALSO. THOU GH, BY VIRTUE OF AGREEMENT BETWEEN THE NTC-AND DEVELOPER T HE MEMBERS ARE BOUND TO CONSTRUCT THEIR HOUSES THROUGH THE DEVELOPER, BUT THERE IS NO CLAUSE THAT MEMBERS ARE BOUND TO CONSTRUCT HOUSES WITHIN THE PERIOD OF FOUR-YEARS , WHICH IS THE TIME LIMIT PRESCRIBED UNDER SECTION 80IB(10). SUPPOSE 50% OF THE MEMBERS DECIDED NOT TO CONSTRUCT THEIR H OUSES THEN THE AREA DEVELOPED WILL BE AGAIN LESS THAN ONE ACRE IN THIS CASE. FOR EACH MEMBER, WHO HAD ENTERED INTO CONSTRUCTIO N AGREEMENT WITH THE DEVELOPER THE STATUS OF DEVELOPE R IS ONLY AS A CONTRACTOR. AS PER THE PROVISIONS OF AGREEMENT BETWEEN NTC AND DEVELOPER, IT IS QUITE CLEAR THAT ALL THE R ELATION BETWEEN THESE TWO ENDS WHEN INDIVIDUAL PIECE OF LAN D IS TRANSFERRED TO MEMBER. THEREAFTER, MEMBERS ARE DI RECTLY DEALING WITH THE DEVELOPER FOR CONSTRUCTION OF THEI R HOUSES. THERE IS NO FORCE IN THE ARGUMENT OF ASSESSEE TH AT LAND BELONG TO KARN ASSOCIATION HAS BEEN PURCHASED WITH THE FUND OF RS.10.00 LACS PROVIDED BY ASSESSEE COMPANY. AS PER THE ACCOUNTS OF KARN ASSOCIATION FOR A.Y.2006-2007, THE LAND CONTRIBUTION FROM MEMBERS IS RS,12,18,500/-, T HE MEMBERS DEPOSITS ARE RS.13,49,500/-, WHEREAS SUNDRY CREDITORS ARE RS.35,80,821/-. THUS, THE ASSESSEE (D EVELOPER) HAS NOT PROVIDED THE COST OF LAND TO THE NTC, AS CL AIMED BY THEM. THERE IS NO FORCE IN THE ARGUMENT OF ASSESSEE SU BMITTED AT PARA (F), ABOVE. AS NO PERMISSION AND APPROVAL FOR THE PROJECT WAS OBTAINED BY ASSESSEE REGARDING THE SANC TIONS AND APPROVAL OF PLAN. THE ASSESSEE COULD NOT SHOW A NY DOCUMENT IN WHICH HE APPLIED, REPLIED OR SUBMITTED STATEMENT IN THE GOVERNMENT AUTHORITIES IN RESPECT OF THIS PROJECT. ALL THESE THINGS ARE IN THE NAME OF KARN ASSOCIATION. THE ASSESSEE'S CLAIM OF DEEMED OWNERSHIP OF LAND BY VIRTUE OF SECTION 53A OF TRANSFER OF PROPERTY ACT IS MISCO NSTRUED. THE ASSESSEE HAS NOT PASSED PART CONSIDERATION FOR PURCHASING THE LAND NEITHER THERE IS ANY AGREEMENT OF SALE. 6.11 THE ABOVE FACTS CLEARLY SHOW THAT THE ASSESSEE COMPANY WAS THE NEITHER OWNER OF LAND NOR THE PERMISSIONS HAVE BEEN ISSUED BY ANY LOCAL AUTHORITIES IN THE NAME OF THE ASSESSE E COMPANY. IN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 85 - FACT THE RAW MATERIALS SO PURCHASED FOR CONSTRUCTIO N OF SOCIETY HAVE BEEN PURCHASED IN THE NAME OF THE SOCIETY AND THE ASSESSEE HAS NOT CARRIED OUT THE WORK OF DEVELOPING AND CONS TRUCTING OF HOUSING PROJECT. THE ASSIGNED WORK TO ASSESSEE COMP ANY AS PER THE TERMS OF DEVELOPMENT CONTRACT, ARE MAINLY OF TH E TYPE OF FACILITATOR, COORDINATOR AND LIAISON WORK FOR VARIO US PURPOSES. 6.12 CONSIDERING THE ABOVE DISCUSSIONS, THE ASSESSE E CANNOT BE TREATED AS DEVELOPER OF PROJECT WITHIN THE PREVIEW OF SECTION 80IB(10). THEREFORE, THE CLAIM OF ASSESSEE OF DEDUC TION U/S 8016(10) AMOUNTING TO RS.7,54,054/- IS HEREBY DISAL LOWED. 52. SIMILARLY IN ASSESSMENT YEAR 2007-2008, THE CLA IM OF THE APPELLANT OF DEDUCTION UNDER SECTION 80IB (10) AMOU NTING TO RS.57,14,587/- WAS DISALLOWED BY THE ASSESSING OFFI CER. AGGRIEVED BY THE ASSESSMENT ORDER, THE APPELLANT HAS FILED TH E FOLLOWING SUBMISSIONS: 2 REGARDING DISALLOWANCE OF DEDUCTION U/S 801B(10) 2.1 THE ASSESSING OFFICER HAS DENIED DEDUCTION-U/S 80IB(10) MAINLY ON FOLLOWING GROUNDS. A) THE APPELLANT IS NOT THE OWNER OF THE LAND. B) THE APPROVAL OF THE PROJECT GRANTED BY THE LOCAL AUTHORITY IS NOT TO THE APPELLANT. C) THE APPELLANT HAS NOT CARRIED OUT ANY DEVELOPMEN T ACTIVITY. D) RAW MATERIAL SO PURCHASES FOR CONSTRUCTION PROJE CT OF NTC HAVE BEEN PURCHASES IN THE NAME OF NTC AND THE APPELLANT HAS NOT CARRIED OUT ANY DEVELOPMENT AND CONSTRUCTION OF THE HOUSING PROJECT. 2.2 WITH REFERENCE TO THE DEDUCTION UNDER SECTION 8 0IB(10) OF THE ACT, THE APPELLANT SUBMITS THAT THE LAND WAS PU RCHASED AS SPECIAL PURPOSE VEHICLE BY KARN ASSOCIATION AND LATER ON, FOR THE PURPOSE OF DEVELOPMENT--AND BUILDING RESIDE NTIAL UNITS, IT HAD TRANSFERRED ALL RIGHTS OF DEVELOPMENT TO THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 86 - ASSESSEE. THE DEVELOPMENT AGREEMENTS MADE BETWEEN T HE NTC AND APPELLANT WAS PRODUCED DURING THE COURSE OF ASSESSMENT, PROCEEDINGS. A PERUSAL OF THE AGREEMENT SHOW THAT THE DEVELOPMENT AS PER LAY OUT PLAN HAS TO BE DONE BY THE APPELLANT AT ITS OWN COST AND RISK. THE APPELLA NT BEING DEVELOPER CUM BUILDER OF THE HOUSING PROJECT IS CLA IMING DEDUCTION U/S 80IB(10). FURTHER, ALT THE REQUISITE CONDITIONS FOR CLAIMING DEDUCTION U/S. 80IB(10) HAVE BEEN FULF ILLED BY ASSESSEE. THE SAME ARE MENTIONED HEREUNDER IN TABL E FORMAT. 2.3 ALL THE REQUISITE CONDITIONS AS LAID DOWN IN SE CTION 801B HAVE BEEN FULFILLED BY THE ASSESSEE. THE SAME IS ME NTIONED HEREUNDER IN THE FOLLOWING CHART: SR. NO. CONDITIONS S PECIFIED FOR DEDUCTION U/S. 80IB FULFILLMENT OF CONDITIONS OF DEDUCTION U/S 80IB 1. DATE OF APPROVAL BY LOCAL AUTHORITY 02/08/2005 & 13/4/2006 APPROVED BY DEPARTMENT OF DISTRICT TOWN PLANNING & VALUATION DEPARTMENT, TA: DASKROI 2. DATE OF BU PERMISSION RECEIVED NOT APPLICABLE SINCE IT IS SITUATED OUTSIDE AUDA LIMITS. 3. SIZE OF PLOT OF LAND 9,721 SQUARE MTRS. & 5106 SQ MTR 4. BUILT - UP AREA OF 1500 SQ. FEET FOR EACH RESIDENTIAL UNIT EACH RESIDENTIAL UNIT IS HAVING BUILT UP AREA OF LESS THAN 1500 SQ. FT. AS PER THE APPROVED SIZE. 2.4 THE COPY OF THE AUDIT REPORT IN FORM NO 10CCB A S WELL AS THE COPY OF THE APPROVED PLAN AND OTHER NECESSARY APPROVALS WAS PRODUCED DURING COURSE OF ASSESSMENT PROCEEDINGS TO ASSESSING OFFICER. AS APPELLANT HAS SATISFIED ALL THE CONDITIONS LAID DOWN UNDER SECTION 80IB (10 ) OF THE ACT, DEDUCTION UNDER SECTION 80IB(10) CANNOT BE DIS ALLOWED. THE APPELLANT STATES THAT THERE IS NO OTHER CONDITI ONS, WHICH IS TO BE COMPLIED BY AN APPELLANT FOR CLAIMING THE DEDUCTION ON PROFITS OF THE HOUSING PROJECTS WHICH HAS ALSO B EEN OBSERVED BY AHMEDABAD TRIBUNAL IN CASE OF RADHE DEVELOPERS VS. ITO AT PARA 27 OF THEIR ORDER. 2.5 KARN ASSOCIATION, BEING A NON-TRADING CORPORAT ION (NTC) WAS FOUND IN ASSESSMENT YEAR 1994-95. THE ASSOCIATI ON HAS ACQUIRED LAND AT VILLAGE GHUMA, AHMEDABAD. IT M AY BE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 87 - NOTED THAT KARN ASSOCIATION, WERE PROVIDED WITH THE FUNDS OF RS 10,00,000 BY THE APPELLANT COMPANY FOR PURCHA SE OF LAND. KARN ASSOCIATION WERE ALSO PROVIDED WITH OTHE R NECESSARY FUNDS, AS AND WHEN REQUIRED, UNDER A SPEC IAL ARRANGEMENT AGREED BY THE DEVELOPER COMPANY. THE DE TAILS OF THE SAME IS MENTIONED ON POINT NO.10 OF THE DEVE LOPMENT AGREEMENT. IN THIS BACKGROUND, IT IS STATED THAT K ARN ASSOCIATION WERE FOR ALL PRACTICAL PURPOSES, CONSID ERED AS A SPECIAL PURPOSE VEHICLE. THE NTC HAS TRANSFERRED T HE FULL DEVELOPMENT RIGHTS TO THE DEVELOPER RALSON INFRASTR UCTURE P LTD. THE TOTAL FINANCE REQUIRED BY THE NTC FOR TH E PURPOSE OF LAND WAS ARRANGED AT THE BEHEST OF THE DEVELOPER COMPANY. 2.6 THE APPELLANT STATES THAT VIDE CLAUSE NO. 1 & 2 AFORESAID DEVELOPMENT AGREEMENT, NTCS HAVE GIVEN RIGHT AND POSSESSION OF SAID LAND TO THE DEVELOPER FOR THE PU RPOSE OF DEVELOPMENT. BY VIRTUE OF THE DEVELOPMENT AGREEMENT , THE APPELLANT HAS OBTAINED THE LAND POSSESSION TOGETHER WITH THE RIGHTS TO DEVELOP AND CONSTRUCT THE PROJECT. AC CORDINGLY, APPELLANT COMPANY HAD BECOME PARTY TO THE AGREEMENT WHILE TRANSFERRING LAND TO THE ULTIMATE CONSUMER. O NE OF THE CONNOTATIONS OF TRANSFER IS TRANSFER OF POSSESSION WHICH IS LAWFUL AND VALID. WITHOUT TAKING POSSESSION OF THE LAND, APPELLANT COMPANY WOULD NOT HAVE BEEN IN POSITION T O DEVELOP AND BUILD THE RESIDENTIAL UNITS AT ALL. 2.7 THERE IS DEFINITELY A DOMINATION OF THE ASSESSE E-DEVELOPER OVER, THE LAND TO THE EXCLUSION OF OTHERS INASMUCH AS POSSESSION OF LAND IS GIVEN TO THE APPELLANT BY THE LAND OWNERS TO CARRY OUT DEVELOPMENT ACTIVITIES OF AFORE SAID PROJECT EVEN ACCORDING TO SECTION 2(47) OF THE INCO ME-TAX ACT READ WITH SECTION 53A OF TRANSFER OF PROPERTY A CT, THE SAID TRANSACTION IS TREATED AS TRANSFER IN RELATION TO CAPITAL ASSET AND APPELLANT BECOMES THE OWNER OF THE LAND APPELLANT WOULD FURTHER STATE THAT ACCORDING TO JUD GMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CHATUR BHUJ DWARKADAS KAPADIA V. CIT (260 ITR 491), ASSIGNING DEVELOPMENT RIGHTS IN A PROPERTY AMOUNTS TO TRANSFE R U/S.2(47) OF THE INCOME-TAX ACT, 1961 AND HENCE BY DEVELOPMENT AGREEMENT , APPELLANT HAS BECOME THE OW NER OF SAID LAND. SECTION 2(47) (V) READ WITH SEC.53A MAKE S THE POSITION VERY CLEAR. THE SAID SECTIONS READ: 'S.2(47) 'TRANSFER', IN RELATION TO A CAPITAL ASSET , INCLUDES,- IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 88 - . (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE P OSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED I N PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN- SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882(4 OF 1882); OR EXPLANATION : FOR THE PURPOSES OF SUB-CLAUSES (V) AND (VI), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA; SEC.53A OF THE TRANSFER OF PROPERTY ACT, 1882 READS AS UNDER: - 53A. 'PART PERFORMANCE. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDER ATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAIN TY AND THE TRANSFEREE HAS, IN PART PERFORMANCE OF THE CONT RACT, TAKEN POSSESSION OF THE PROPERTY OR :ANY PART THERE OF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT AND TH E TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM H IS PART OF THE CONTRACT, THEN NOTWITHSTANDING THAT THE CONTRAC T, THOUGH REQUIRED TO BE REGISTERED, HAS NOT BEEN REGI STERED, OR, WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESC RIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORCE, TH E TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMI NG UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH T HE TRANSFEREE HAS TAKEN OR CONTINUED POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRA CT: PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF.' IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 89 - IT IS SUBMITTED THAT CLAUSE (IIIA) OF SECTION 27 OF THE INCOME- TAX ACT, 1961 IS TRANSFERRED AS OWNER IF HE SATISFI ES THE CONDITIONS OF SECTION 53A OF THE TRANSFER OF PROPER TY ACT, 1882. S. 27 FOR THE PURPOSES OF SECTION 22 TO 26- .. (IIIA) A PERSON WHO IS ALLOWED TO TAKE OR RETAIN PO SSESSION OF ANY BUILDING OR PART THEREOF IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A O F THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882); SHALL B E DEEMED TO BE THE OWNEROF THAT BUILDING OR PART THEREOF.' FROM THE PERUSAL OF THE ABOVE SECTIONS IT IS CLEAR THAT PURSUANT TO THE PART PERFORMANCE OF THE AGREEMENT T O SALE IF THE POSSESSION OF THE PROPERTY IS HANDED OVER, IN T HE EYE OF THE LAW, THE TRANSFEREE SHALL BE HELD TO BE THE OWN ER OF THE PROPERTY. IT IS FURTHER SUBMITTED THAT SEC.2G9UA(D)(II) READ WITH SEC.UA(F)(II) OF THE ACT ALSO MAKE' IT MORE THAN CL EAR THAT WHEN ANY RIGHT IN OR WITH RESPECT TO ANY LAND IS AL TERED BY WAY OF ANY AGREEMENT WHICH HAS THE EFFECT OF TRANSF ERRING OR ENABLING THE ENJOYMENT OF SUCH PROPERTY, SUCH AGREE MENT SHALL BE CONSTRUED AS TRANSFER WITHIN THE MEANING O F THAT SECTION. THE SAID SECTIONS READ: S. 269UA . (D) 'IMMOVABLE PROPERTY' MEANS .. (II) ANY RIGHTS IN OR WITH RESPECT TO ANY LAND OR A NY BUILDING OR A PART OF A BUILDING (WHETHER OR NOT INCLUDING ANY MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THINGS THEREIN) WHICH HAS BEEN CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED, ACCRUING OR ARISING FRO M ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 90 - WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OF WHATEVER NATURE), NOT BEING A TRANSACTION BY WAY OF A SALE, EXCHANGE OR LEASE OF SUCH LAND, BUILDING OR PART OF A BUILDING; .. (F) 'TRANSFER',- (II) IN RELATION TO ANY IMMOVABLE PROPERTY OF THE NATURE REFERRED TO IN SUB-SECTION (II) OF CLAUSE (D ), MEANS THE DOING OF ANYTHING (WHETHER BY WAY OF- ADMITTING AS A MEMBER OF OR BY WAY OF TRANSFER OF SHARES IN A CO-OPERATIVE SOCIETY OR COMPANY . . OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING OR ENABLING TH E ENJOYMENT OF SUCH PROPERTY. ' 2.8 THE APPELLANT FURTHER STATES THAT AS PER PARA 9 OF DEVELOPMENT AGREEMENT, DEVELOPER IS ENTITLED TO SEL L ANY PART OF ITS PROJECT AT ITS OWN AND CAN GIVE POSSESS ION TO THE PROSPECTIVE BUYERS WHICH SHOWS THAT APPELLANT WAS I N FULL POSSESSION OF THE LAND FOR THE DEVELOPMENT OF HOUSI NG PROJECT AND HAS CARRIED OUT ALL THE ACTIVITIES OF A COMPLETE HOUSING PROJECT BY TAKING AIL RISKS ASSOCIATED WITH THIS BUSINESS. HERE, APPELLANT RELIES ON DECISION OF HON 'BLE SUPREME COURT IN CASE OF MYSORE MINERALS LIMITED 23 9 ITR 775 WHEREIN TERM 'OWNED' IN S. 32 HAS BEEN GIVEN A VIDER MEANING, BY HOLDING THAT IF AN APPELLANT WAS IN POS SESSION OF A PROPERTY AND HAD ACQUIRED DOMINION OVER IT TO THE EXCLUSION OF OTHERS, HE WOULD BE ENTITLED DEPRECIAT ION UNDER S 32 IRRESPECTIVE OF THE LEGAL TITLE. IN THE PRESEN T CASE THE DEVELOPMENT AGREEMENT THE UNDERTAKING DEVELOPING AN D BUILDING HOUSING PROJECTS AND CLAIMING DEDUCTION OF PROFITS FROM SUCH HOUSING PROJECTS, THERE IS, DEFINITELY, A DOMINION OF THE DEVELOPER OVER THE LAND TO THE EXCLUSION OF OTHERS INASMUCH AS POSSESSION OF THE LAND IS GIVEN TO THE DEVELOPER BY THE LAND OWNERS TO CARRY OUT THE CONSTRUCTION AC TIVITY OF THE HOUSING PROJECT THE APPELLANT HAS ALSO PASSED O N THE PART CONSIDERATION FOR ACQUIRING THE LAND THROUGH A N 'AGREEMENT TO SALE' AND IN VIEW OF THE PROVISIONS O F S. 2(47) R/W S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882, T HE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 91 - APPELLANT HAS COMPLETELY PERFORMED HIS PART OF THE CONTRACT AND DEVELOPED THE HOUSING PROJECT AND TRANSFERRED T HE BUNGLOW S TO THE BUYERS IN VIEW OF 'DEVELOPMENT AGR EEMENT' HENCE ENTITLED TO DEDUCTION U/S 80IB(10) OF NE ACT. IN VIEW OF THE LEGAL POSITION AS EXPLAINED ABOVE, S UPPORTED BY VARIOUS-JUDICIAL DECISIONS, IT IS STATED THAT AP PELLANT IS THE OWNER OF THE AFORESAID PROPERTY AND DEDUCTION U /S. 80IB CANNOT BE DENIED TO IT. 2.9 WITH REFERENCE TO THE JUSTIFICATION OF DEDUCTIO N UNDER SECTION 80IB(10) ON THE GROUND THAT THE HARIOM VILL A SCHEME IS BEING DEVELOPED AND CONSTRUCTED ON A LAND NOT BELONGING TO THE APPELLANT IT IS SUBMITTED THAT OWN ERSHIP OF LAND BY THE UNDERTAKING IS NOT A PRECONDITION TO CL AIM DEDUCTION U/S- 8018(10) OF THE ACT. IT IS FURTHER S TATED THAT ON PERUSAL OF THE SPEECHES OF HON'BLE FINANCE MINIS TER AT THE TIME OF INTRODUCTION OF PROVISION ENABLING THIS DEDUCTION AND AT THE TIME OF. VARIOUS AMENDMENTS MADE INCLUDI NG THE SPEECH, IT CAN BE APPRECIATED THAT THE CONDITION OF THE OWNERSHIP OF LAND IS NOT INTENDED. EVEN OTHERWISE, HAD THIS BEEN THE INTENTION, THE SAME WOULD HAVE BEEN SPECIF ICALLY MENTIONED IN THE SECTION LIKE OTHER CONDITIONS REFE RRED HEREIN ABOVE RELIANCE IN THIS REGARDS IS PLACED ON THE DECISION OF RADHE DEVELOPERS V. INCOME-TAX OFFICER [2008] 113 TTJ (AHD.) 300, IN WHICH IT HAS BEEN HELD AS THE CONTENTION THAT TO CLAIM DEDUCTION UNDER SECTI ON 80-IB(10), THERE IS A CONDITION PRECEDENT THAT THE APPELLANT MUST BE OWNER OF THE LAND ON WHICH HOUSIN G PROJECT IS TO BE CONSTRUCTED HAS NO FORCE. A PLAIN READING OF SUB-SECTION (10) OF SECTION 80-IB REVEAL S AND MAKES IT EVIDENT THAT THERE MUST BE AN UNDERTAKING DEVELOPING AND BUILDING A HOUSING PROJE CT AS APPROVED BY A LOCAL AUTHORITY. IT DOES NOT HAVE ANY FURTHER CONDITION THAT SUCH DEVELOPMENT AND BUILDIN G OF THE HOUSING PROJECT SHOULD ALSO BE ON A LAND OWN ED BY AN ASSESSEE-UNDERTAKING. THE MERE FACT THAT THE LANDOWNER AND THE UNDERTAKING DEVELOPING AND BUILDING HOUSING PROJECT, ARE TWO DIFFERENT ENTITIE S WOULD NOT MAKE ANY DIFFERENCE. THE DEDUCTION WOULD BE AVAILABLE TO THE PERSON WHO IS DEVELOPING AND BUILDING HOUSING PROJECT AND NOT MERELY TO OWNER THEREOF. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 92 - 2.10 IT MAY ALSO BE KINDLY NOTED THAT SIMILAR ISSUE HAS RECENTLY COME UP AGAIN BEFORE THE ITAT, A BENCH, AHMEDABAD IN THE CASE OF M/S. SHAKTI CORPORATION, BARODA AND VAR IOUS OTHER CASES AND HAS BEEN DECIDED VIDE THE ORDER DAT ED 7.11.2008 IN ITA NO.1503/AHD/2008. THE HONBLE TRI BUNAL HAVE FOLLOWED THE TRIBUNALS DECISION IN THE CASE O F RADHE DEVELOPERS (SUPRA). THE FACTS OF THIS CASE ARE ALS O SIMILAR TO THE FACTS OF THE ASSESSEES CASE. RELEVANT PART OF THE TRIBUNAL ORDER IN THE CASE OF SHAKTI CORPORATION IS REPRODUCED BELOW FROM PAGES 32 AND 33 OF THE ORDER. '........ALL THE RESPONSIBILITIES FOR CARRYING OUT THE CONSTRUCTION, PERMISSION, N.A., N.O.C LEGAL PROCEEDINGS AND THE RESULTS OF THE DEVELOPMENT LIES WITH THE ASSESSES THE FIRST PARTY IS ONLY TO COOPER ATE THE APPELLANT IN VARYING OUT THE DEVELOPMENT AND AL SO TO EXECUTE ME DOCUMENTS WHENEVER IT IS REQUIRED BY THE DEVELOPER. THE APPELLANT HAS ALSO HANDED OVER T HE PHYSICAL POSSESSION LO THE BUILDER FOR CARRYING OUT THE DEVELOPMENT OF THE PROJECT. THE LANDOWNER DOES NOT HAVE ANY RIGHT, INTEREST TITLE IN THE DEVELOPMENT S O CARRIED OUT EXCEPT TO THE EXTENT HE HAS TO RECEIVE THE CONSIDERATION FROM THE ASSESSEE. THE APPELLANT IS ENTITLED TO PUBLICIZE PROJECT, PRINT BROCHURES, ETC . AND CAN SELL THE PROJECT AT ITS OWN RIGHT. ALL THE EXPE NSES HAVE TO BE INCURRED BY THE APPELLANT FOR CARRYING O UT THE CONSTRUCTION ETC. THE LAND OWNER HAS TO DO NOTH ING EXCEPT TO THE EXTENT HE HAS TO RECEIVE CONSIDERATIO N FROM THE ASSESSEE. HIS MOTIVE IS NOT TO DEVELOP, CONSTRUCT OR CARRY ON THE BUSINESS AS A BUILDER OR DEVELOPER. PARTICULARLY, NO RIGHT IN THE LAND REMAI NS WITH THE OWNER. FOR WHOLE PRACTICAL PURPOSE THE APPELLANT ACQUIRED DOMINANT RIGHT OVER THE LAND AND HE CAN DEAL WITH TIE LAND IN THE MANNER IN WHICH HE MAY LIKE THUS, THE TERMS AND CONDITIONS ENTERED INT O, IN OUR OPINION, GIVE ALL DOMINANT CONTROL AND RIGHT S OVER THE LAND TO THE ASSESSEE. THE ASSESSEE, IN OUR OPINION, WILL BE CONSTRUCTING THE BUILDING AT ITS O WN COST AND WILL REMAIN THE OWNER OF THE BUILDING AT I TS OWN WITHOUT ANY INTERFERENCE FROM THE LANDOWNER. TH E LANDOWNER DOES NOT HAVE ANY RIGHT TO SHARE THE BUILDINGS. THE AGREEMENT DOES NOT ENVISAGE THAT THE APPELLANT WILL BE WORKING AS A CONTRACTOR OR AGENT ON BEHALF OF THE LANDOWNER. THE AGREEMENT CANNOT BE REGARDED TO BE1 THE JOINT VENTURE OR COLLABORATION IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 93 - AGREEMENT IT IS, IN .OUR OPINION, THE AGREEMENT FOR THE SALE OF THE LAND FOR A DETERMINED CONSIDERATION UND ER WHICH THE APPELLANT IS ENTITLED TO DEVELOP THE PROJ ECT ON THE SAID LAND AT ITS OWN COST IN THE MANNER IN WHICH HE MAY DECIDE.' THE APPELLANT COMPANY STATES THAT AS IN CASE OF IT, THERE IS NO FIXED REMUNERATION CONTRACT WITH NTC AND NTC HAS BEEN REWARDED FOR LAND COST HENCE BOTH THE CONDITIONS LA ID DOWN IN AFORESAID DECISIONS IS SATISFIED IN CASE OF ASSE SSEE. 2.11 ACCORDINGLY MERELY BECAUSE THE APPELLANT IS NO T OWNER OF LAND ON PAPER, DEDUCTION UNDER SECTION 80IB(10) SHO ULD NOT BE DENIED. THE VIEW TAKEN BY THE ASSESSING OFFICER IN THIS REGARDS MAY KINDLY BE QUASHED. 3.1 WITH REGARDS TO OBSERVATION OF ASSESSING OFFICE R THAT APPELLANT HAS NOT TAKEN THE APPROVAL OF THE HOUSING PROJECT FROM LOCAL AUTHORITY IS ERRONEOUS AS MUCH AS THAT T HE PLAN WAS PREPARED BY THE APPELLANT COMPANY AND THE APP ELLANT WAS INSTRUMENTAL IN GETTING THE APPROVES FROM T HE CONCERNED AUTHORITY. CLAUSE NO 4 OF THE DEVELOPMENT AGREEMENT MAKES THE ABOVE CONTENTIONS VERY CLEAR WH ICH READS AS UNDER '4. THE PLAN OF THE PROJECT IS ALREADY PASSED BY TH E NAGAR AYOJAN AND MULYANKAN DEPART. A'BAD BY ORDER NO N.A. BP/GHUMA/SASCROL/ 2464 DATED : 02-08-2005. IN ANTICIPATION OF THE EXECUTION OF THIS AGREEMENT TH E SAID PLAN WAS PREPARED BY THE DEVELOPER AND ALL THE COST FOR PREPARATION AND APPROVAL OF THE SAME IS INCURRED BY THE DEVELOPER AND THE DEVELOPERS HAS ALREADY COMMENCED THE DEVELOPMENT WORK. THE ASSOCIATION SHALL FULLY CO-OP ERATE'THE DEVELOPER FOR THE SANCTIONS OF THE FURTHER AND ADDI TIONAL PLANS AND SPECIFICATIONS THAT MAY BE PREPARED OR RE VISED FOR THE DEVELOPMENT OF THE SAD PROPERTY BY THE DEVELOPE R AND SHALL FURTHER SIGN AND EXECUTE ALL SUCH APPLICATION S, AFFIDAVITS ETC AS MAYBE REQUIRED.' 3.2 THE APPELLANT COMPANY STATES THAT IN ANTICI PATION OF EXECUTION OF DEVELOPMENT AGREEMENT, PLAN/DESIGN FOR AFORESAID SCHEME WERE PREPARED AND ENTIRE PLANS, DE SIGNS AND MAPS REQUIRED TO CARRY OUT SUCH ACTIVITY WAS DO NE BY APPELLANT DEVELOPER. THE WORK, OF DEVELOPMENT OF T HE WHOLE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 94 - PROJECT HAD COMMENCED AFTER THE APPOINTMENT OF APPE LLANT AND IT WAS THE RESPONSIBILITY OF APPELLANT COMPANY TO OBTAIN RAJJA CHITTHI FROM CONCERNED AUTHORITY. APPELLANT D EVELOPER AT ITS OWN HAD MOVED APPLICATION FOR OBTAINING APPR OVAL TO CONSTRUCT BUNGLOWS . IT IS SUBMITTED, THAT WHILE OB TAINING APPROVAL FROM LOCAL AUTHORITY, THE APPELLANT HAS CA RRIED OUT DAY TO DAY WORK AT CORPORATION. 3.3 THE ASSESSING OFFICER-HAS FAILED TO UNDERSTAND THE-BASIC FACT THAT HAD THE APPELLANT COMPANY WAS NOT INVOLVED IN OBTAINING SUCH APPROVAL, IT WOULD HAVE NOT MADE ANY PAYMENT TO AUTHORITY NOR IT WOULD HAVE PREPARED PLA NS AND NOT CARRIED OUT DAY TO DAY ACTIVITIES WHILE OBTAINI NG SUCH APPROVAL. FURTHER THE AUTHORITY GRANTS THE APPROVAL S TO THE LAND OWNERS AS A MATTER OF PROCEDURE WHICH SHOULD N OT BE VIEWED BY TAKING THAT THE APPELLANT HAS NOT BEEN GR ANTED ANY APPROVAL. 3.4 IT HAS OBVIOUSLY NOT MATTERED TO THE LEARNED AS SESSING OFFICER THAT IT WAS VERY WELL SETTLED THAT PROVISIO NS GRANTING INCENTIVES WERE REQUIRED TO BE INTERPRETED LIBERALL Y AND CERTAINLY NOT HYPER-TECHNICALLY. THE LEARNED ASSESS ING OFFICER HAS ALSO NOT BOTHERED TO CONSIDER, THAT WHA T THE PROVISION ENVISAGED WAS EXEMPTION OF PROFITS DERIVE D FROM THE BUSINESS OF AN UNDERTAKING DEVELOPING AND BUILD ING HOUSING PROJECTS APPROVED BY A LOCAL AUTHORITY; THA T THE PROVISION DID NOT ENVISAGE THAT APPROVAL FROM LOCAL AUTHORITY HAS TO BE TAKEN BY APPELLANT DEVELOPER ONLY. SUBSEC TION (10) REQUIRES THAT THE HOUSING PROJECT SHOULD BE APPROVE D BY A LOCAL AUTHORITY. THERE IS NO REQUIREMENT THAT SUCH APPROVAL MUST BE IN THE NAME OF THE DEVELOPER BUILDER. THE ASSESSING OFFICER HAS IMPORTED SUCH REQUIREMENTS IN THE SECTIONS WHICH ARE NOT THERE AT ALL AND THUS HE HAS ASSUMED THE ROLE OF THE LEGISLATURE. IN VIEW OF WHAT IS STATED HEREIN ABOVE, DEDUCTION U /S 80IB (10) CANNOT BE DENIED ONLY ON THE GROUND THAT IN TH E APPROVAL HAS NOT BEEN OBTAINED EVEN THOUGH APPELLAN T COMPANY HAD BEEN RESPONSIBLE, FROM THE DAY ONE FOR OBTAINING SUCH APPROVAL AND MADE NECESSARY PAYMENT. THE APPELLANT STATES THAT IT WAS NOT A PRACTICE OF AUDA TO ISSUE PERMISSION IN THE NAME OF DEVELOPER BUT WAS GRANTED IN THE NAME OF OWNER OF LAND ON RECORDS HENCE, SUCH APPROV AL WAS ISSUED IN THE NAME OF NTCS. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 95 - 3.5 WITH REGARDS TO OBSERVATION OF ASSESSING OFFICE R THAT APPELLANT COMPANY IS NOT IN THE BUSINESS OF DEVELOP ING AND BUILDING HOUSING PROJECT, APPELLANT STATES THAT ALL THE PERMISSIONS AND APPROVAL WERE OBTAINED BY THE DEVEL OPER COMPANY AND ALL EFFORTS WERE PUT IN BY DEVELOPER CO MPANY WITH ALL ITS RESPONSIBILITIES AND RISK AS DEVELOPER AND WERE ALSO LEGALLY BOUND TO DO SO UNDER THE DEVELOPMENT. A PERUSAL .OF THE AGREEMENT WOULD SHOW THAT DEVELOPME NT AS PER LAY OUT PLAN HAS TO BE DONE BY THE APPELLANT AT ITS OWN COST AND RISK. ALL THE FUNCTIONS OF THE DEVELOPER C OMPANY ARE THAT OF DEVELOPMENT OF THIS PROPERTY AND ARE BR IEFLY DESCRIBED AS UNDER (I) THE DEVELOPER FOR THE PURPOSE OF PLANNING AND EXECUTING THE PROJECT 'HARIOM VILLA' HAS SANCTIONED NECESSARY PLANS, DRAWINGS, SPECIFICATIONS AND MAPS, ETC., AND HAS DONE THE WORK OF PLANNING, CONSTRUCTI ON AND DEVELOPMENT OF THE SAID PROJECT. (II) THE DEVELOPER HAS APPOINTED THE ARCHITECTS, ENGINEERS, LEGAL ADVISORS AND SUCH OTHER PROFESSIONALS NECESSA RY FOR THE PURPOSE OF IMPLEMENTATION OF SUCH PROJECT A ND HAS BORN THE NECESSARY EXPENDITURE. THE DEVELOPER H AS MADE ALL NECESSARY ARRANGEMENTS WITH THE AFORESAID PROFESSIONALS FOR SUCCESSFUL PLANNING, CONSTRUCTION , AND DEVELOPMENT OF THE SAID PROJECT THE APPELLANT H AS INCURRED ALL EXPENDITURE RELATING TO DEVELOPMENT INCLUDING LABOUR COST, MATERIAL CHARGES AND OTHER ANCILLARY COSTS. (III) THE DEVELOPER HAS ACCEPTED MONEY FROM THE PER SONS ENROLLED IN THE PROJECT. (IV) FOR THE PURPOSE OF COMPLETING THE PROJECT, AS PLANNED AND WITHIN STIPULATED PERIOD, DEVELOPER HAS MADE AL L NECESSARY APPLICATIONS, REPLIES, STATEMENTS, WHICH ARE NEEDED, IN THE GOVERNMENT OFFICES OR CONCERNED AUTHORITY ETC. (V) THE COMPLETE RESPONSIBILITY OF THE-PLANNING, AN D THE TOTAL CONSTRUCTION IS RESTED UPON THE DEVELOPER AND DURING THE TIME WHEN THE PROJECT WAS GOING ON, THE COMPLETE RESPONSIBILITY FOR WHATEVER AGREEMENTS EXECUTED UNDER THE PROJECT AND WHATEVER TRANSACTION S IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 96 - TAKEN PLACE WITH THIRD PARTIES, THE SAME WAS RESTED UPON THE DEVELOPER AND THE NTC WAS NOT RESPONSIBLE. (VI) THE ASSESSEE-DEVELOPER HAS CREATED COMMON AM ENITIES AND OTHER INFRASTRUCTURE LIKE ROADS, GARDEN, ELECTR ICITY, WATER, DRAINAGE, ETC., FOR AFORESAID PROJECT AT THE IR OWN COST THUS, APPELLANT HAS CREATED A NEW PRODUCT ON T HE PLOT OF LAND BY PERFORMING AFORESAID DEVELOPMENT WO RK. (VII) IN THIS REGARDS THE APPELLANT WOULD LIKE TO S TATE THAT ALL TAXES, CESS, LEVIED BY THE AUTHORITIES IN RESPECT O F THE SAID PROPERTY IS REQUIRED TO BE BORNE BY THE APPELL ANT COMPANY . (VIII) IN THIS REGARDS THE APPELLANT WOULD LIKE TO STATE THAT RELEVANT MAINTENANCE CHARGES ARE PAID BY THE APPELLANT TILL THE COMPLETION OF DEVELOPMENT. 3.6 APART FROM AFORESAID/APPELLANT COMPANY STATES T HAT IN THE PROCESS OF DEVELOPMENT OF THE AFORESAID PROJECT, IT WAS ENTITLED TO ADVERTISE THE PROJECT BY PAMPHLETS, BRO CHURES, PUBLIC ADVERTISEMENTS IN NEWSPAPERS, MAGAZINES, ETC ., WHICH ALSO SUBSTANTIATE THE CLAIM OF APPELLANT THAT IT WAS RESPONSIBLE FOR SELLING -AFORESAID UNITS CONSTRUCTE D BY IT AND AFORESAID NTCS HAVE NO INTEREST M SUCH TYPE OF ACTI VITIES. 3.7 THE ASSESSEE-DEVELOPER FURTHER SUBMITS THAT THE DEVELOPER I.E. APPELLANT BUILD THE BUNGLOWS AS PER APPROVAL O F THE DEPARTMENT OF DISTRICT TOWN PLANNING & VALUATION DEPARTMENT, TA: DASKROI AND SELL THE BUNGLOW S TO CUSTOMERS. THE PRICE TO BE CHARGED TO CUSTOMERS IS SOLELY DETERMINED BY APPELLANT COMPANY AND RESPONSIBILITY OF COLLECTION IS ON IT. THE APPELLANT WAS RESPONSIBLE TO ENROLL THE MEMBERS OF THE SCHEME, TO RECEIVE MONEY AND FOR THAT PURPOSE TO ENTER INTO AGREEMENT. THE NTCS ARE BOUND TO ENTER THE PERSONS AS MEMBERS AND DECISION TO SELL T HE BUNGLOWS TO CUSTOMER IS ON APPELLANT COMPANY AND NO T OF THE NTCS. THE AFORESAID FACTS CLEARLY PROVES THAT A CTIVE ENGAGEMENT IN THE WORK OF DEVELOPMENT OF PROJECT AN D SALE OF RESIDENTIAL UNIT WAS OF APPELLANT AND NOT OF THE NTCS. IN VIEW OF WHAT IS STATED HEREIN ABOVE THAT APPELLA NT IS NOT WORKING ON REMUNERATION FROM THE LAND OWNERS BUT IS WORKING ITSELF AS A DEVELOPER IN ORDER TO EXPLOIT T HE POTENTIAL OF ITS BUSINESS IN ITS OWN INTEREST AND, THEREFORE, OPTED FOR ALL BUSINESS RISKS ASSOCIATED WITH THE BUSINESS OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 97 - DEVELOPMENT OF REAL ESTATE INCLUDING DEVELOPMENT AN D BUILDING OF HOUSING PROJECTS. THE AFORESAID FACTS CLEARLY PROVE THAT ACTIVE ENGAG EMENT IN THE WORK OF DEVELOPMENT OF PROJECT AND SALE OF RESI DENTIAL UNITS WAS OF APPELLANT AND NOT OF THE NTC. 3.8 WITH REGARDS TO OBSERVATION OF THE ASSESSING OF FICER THAT THERE ARE 63 MEMBERS AND ASSESSEE HAS TO ENTER 63 DIFFERENT AGREEMENTS WHICH LEAD TO CONCLUSION THAT THERE ARE 63 PROJECTS IN THE PIECE OF LAND, APPELLANT SUBMITS THAT OBSERVATION OF AO HAS NO BASIS PARTICULARLY WHEN TH E APPELLANT HAS ENTERED INTO A DEVELOPMENT AGREEMENT WITH THE NTC AND THE DEVELOPMENT WORK HAS BEEN CARRIED O UT AS PER SUCH AGREEMENT. IT IS FURTHER SUBMITTED THAT TH E AREA OF THE PLOT AS PER THE AGREEMENT WITH NTC IS NOT LESS THAN ONE ACRE. APART FROM THIS, AS EXPLAINED EARLIER THE AP PELLANT HAD ENTERED INTO DEVELOPMENT AGREEMENT WITH THE NTC AND ON EXECUTION OF SUCH AGREEMENT THE DEVELOPER HAS ALL T HE RIGHT TO DEVELOP AND SALE THE PROPERTIES TO THE MEMBERS ( BUYERS) AND AGREEMENT IF ANY WITH THE PURCHASER OF THE UNIT REFERRED TO BY AO IS WITH REFERENCE TO SALE OF UNITS/ALLOTME NT OF UNITS AND SUCH AGREEMENTS ARE EXECUTED ONLY AS A PART OF THE DEVELOPMENT ACTIVITY AS PER THE DEVELOPMENT AGREEME NT WITH THE NTC. EVEN SECTION 80IB(10) ENVISAGES THAT SIZE OF THE PLOT OF LAND ON WHICH PROJECT IS DEVELOPED SHOULD B E OF ONE ACRE AND APPELLANT HAS DEVELOPED ONLY ONE SCHEME/PR OJECT ON LAND NAMED AS 'HARI OM VILLA' AND NOT 63 DIFFERE NT PROJECTS AS OBSERVED BY AO. ENTIRE OBSERVATION OF AO IS ON FALLACIOUS AND DISALLOWANCE OF DEDUCTION MADE ON SU CH GROUND SHOULD BE DELETED. 3.9 WITH REFERENCE TO THE OBSERVATION OF THE ASSESS ING OFFICER THAT INITIALLY THE RAW MATERIAL BILLS WERE IN THE N AME OF NTC AND NOT IN THE NAME OF APPELLANT COMPANY, IT IS SUB MITTED THAT INITIALLY AT TIME OF LAUNCHING THE SCHEME, THE SITE ADDRESS OF HARIOM VILLA SCHEME AT GHUMA WAS USED BY RALSONS INFRASTRUCTURE PVT. LTD. FOR RECEIVING ALL THE MATERIALS., CONSEQUENTLY ALL BILLS AND CORRESPOND ENCE WERE MADE BY CREDITORS IN THE NAME OF THE KARN ASSOCIATI ON WHICH WAS AT GHUMA, TILL THE SITE OFFICE OF RALSONS INFRASTRUCTURE PVT LTD WAS CONSTRUCTED. 3.10 FURTHER IT IS STATED THAT INITIALLY KARN ASSOC IATION MADE VERY LIMITED PAYMENTS TOWARDS MATERIAL ON BEHALF, OF THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 98 - DEVELOPER, OUT OF THE ADVANCES RECEIVED FROM RALSON S INFRASTRUCTURE PVT. LTD. IT IS PERTINENT TO NOTE TH AT NO EXPENDITURE IN RELATION TO DEVELOPMENT OF SCHEME WA S DEBITED OR CAPITALISED IN ITS BOOKS OF ACCOUNTS OF KARN ASSOCIATION THE ASSESSEE FURTHER SUBMITS THAT AT MO ST OF THE TIME THERE WAS DEBIT BALANCE OF RALSONS INFRAST RUCTURE PVT. LTD IN ITS BOOKS OF ACCOUNTS, MEANING THEREBY ALL THE EXPENSES INCURRED BY THE KARN ASSOCIATION WERE OUT OF MONEY ADVANCES OR REIMBURSED BY RALSON INFRASTRUCTU RE P. LTD. 3.11 MOREOVER AS PER POINT NO 6 OF THE DEVELOPMENT AGREEMENT IT WAS ALSO AGREED THAT IF FOR ANY REASON FOR E.G. TAX BENEFIT, SPECIAL ITEM ETC THE ASSOCIATION PURCHASES THE MATE RIAL ON BEHALF OF THE DEVELOPER THE SAME SHALL BE REIMBURSE D BY THE DEVELOPER TO THE ASSOCIATION. ACCORDINGLY THE PURCH ASE OF MATERIAL BY THE ASSOCIATION AND ITS SUBSEQUENT REIMBURSEMENT WAS ALSO PURSUANT TO THE DEVELOPMENT AGREEMENT. 3.12 AS REGARDS THE ACCOUNTING TREATMENT OF THE SAM E IT IS SUBMITTED THAT EFFECTIVE EXPENDITURE INCURRED BY RA LSON INFRASTRUCTURE P. LTD. WERE MADE ON MONTHLY BASIS O NLY TO KEEP THE TRACK OF THE EXPENDITURE AND FOR ANY OTHER WISE WISE. FURTHER THE WAY IN WHICH ENTRIES ARE MADE BY AN ASSESSEE IN HIS BOOKS OF ACCOUNT IS NOT DETERMINATI VE OF THE QUESTION WHETHER THE ASSESSEE HAS EARNED ANY PROFIT OR SUFFERED ANY LOSS OR FOR MATTER THE DEVELOPER IS EN TITLED TO, DEDUCTION OR NOT. RELIANCE IN THIS REGARDS IS PLACE S ON THE DECISION OF SUTLEJ COTTON MILLS LTD. VS. CIT 1979 ( 116 ITR 1) (SC). ULTIMATELY ALL THE EXPENSES ARE BORNE BY THE APPELLANT COMPANY. 3.13 THE ASSESSING OFFICER IN HIS ORDER HAS NOT TAK ING ANY ADVERSE ACTION REGARDING THE EXPENDITURE DEBITED TO THE BOOKS OF ACCOUNTS OF THE APPELLANT COMPANY, THEREBY ACCEPTING THE APPELLANT CONTENTION THE SAME WERE IN CURRED FOR THE DEVELOPMENT OF THE HOUSING PROJECT. AS APPELLANT HAS SATISFIED ALL THE CONDITIONS LAID DOWN U/S. 80IB(10) OF THE ACT AND THEREFORE IT IS ENTITLED TO DEDUCTION U/S. 80IB(10) AS CLAIMED IN RETURN OF INCOME. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 99 - 53. CIT(A) HAVING CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE ASSESSMENT ORDER OBASERVED THAT KA RN ASSOCIATION, BEING A NON-TRADING CORPORATION (NTC), WAS FORMED I N ASSESSMENT YEAR 1994-95. THE ASSOCIATION ACQUIRED LAND IN NOV. 2004 AT VILLAGE GHUMA, AHMEDABAD. IN ORDER TO CONSTRUCT RESIDENTIAL BUNGALOWS, APPROVAL WAS SOUGHT BY THE NTC. SUCH APPROVAL WAS G RANTED BY THE DEPARTMENT OF DISTRICT TOWN PLANNING & VALUATION DE PARTMENT. TA: DASKROI ON 2/8/2005. THEREAFTER, A DEVELOPMENT AGRE EMENT WAS SIGNED BETWEEN KARN ASSOCIATION AND RALSON INFRASTR UCTURE PVT. LTD ON 4/10/2005, THE CONTENTS OF WHICH HAVE BEEN DISCU SSED BY THE ASSESSING OFFICER AS WELL AS THE APPELLANTS IN THE WRITTEN SUBMISSIONS. INITIALLY, THERE WERE ONLY SEVEN MEMB ERS M THE NTC WHICH WAS INCREASED, TO 63 AS DISCUSSED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER. THE NUMBER OF MEMBERS FINALLY INCREASED TO 104 AS IS EVIDENT FROM THE CHART SUBMITTED BY THE A PPELLANT. IT WAS STATED ON BEHALF OF SHRI MAHESH VARMA, ONE OF THE D IRECTORS OF THE APPELLANT COMPANY, THAT TOTAL 104 BUNGALOWS WERE CO NSTRUCTED BY THE APPELLANT COMPANY AT GHUMA. OUT OF THIS, 103 BU NGALOWS HAVE BEEN SOLD AND ONE BUNGALOW IS UNSOLD AS ON TODAY I. E. 15/12/2010. THE BUILT UP AREA OF EACH BUNGALOW WAS STATED TO BE LESS THAN 1500 FT. ACCORDING TO THE APPELLANT, ALL THE NECESSARY C ONDITIONS FOR DEDUCTIONS UNDER SECTION 80IB(10) OF THE INCOME-TAX ACT HAS BEEN FULFILLED, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DENYING IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 100 - THE CLAIM OF DEDUCTION UNDER SECTION 80IB TO THE AS SESSEE. THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF DEDUCTI ON UNDER SECTION 80IB ON THE FOLLOWING GROUNDS: THE OWNER OF THE LAND IS WITH KARN ASSOCIATION AN D THE SAME IS NOT WITH THE ASSESSEE COMPANY. THE ASSESSEE COMPANY IS NOT THE OWNER OF THE RESI DENTIAL UNITS CONSTRUCTED ON THIS LAND. THE NAME OF THE ASSESSEE COMPANY IS MENTIONED IN THE PLANS OF PROJECT. ON THE PLAN LAYOUT ALSO THERE IS THE NAME OF THE NTC ONLY AND NO OTHER LAND RECORD. GOVERNMENT SANCTION, TAX BILLS, ETC. IS HAVING THE NAME OF THE ASSESSEE COMPANY. THE APPROVAL OF PROJECT IS GIVEN BY LOCAL AUTHORI TIES TO THE CHAIRMAN OF THE KARN ASSOCIATION AND NOT THE ASSESS EE COMPANY. ONE OF THE MOST IMPORTANT FEATURE FOR CLAIMING DE DUCTION U/S 80IB(10) IS THAT THE AREA OF PLOT OF THE PROJECT SH OULD BE ONE ACRE. IN THIS CASE, IT WAS OBSERVED THAT THE NTC ALLOTTED LAND TO ITS MEMBERS AND COLLECTED MONEY FROM THEM. BY VIRTUE OF CHARGING LAND COST AT THE INITIAL STAGE THE MEMBERS BECOMES OWNERS OF LAND. IN THIS SCHEME, THERE ARE 63 MEMBERS. IT MEA NS THAT THERE ARE 63 OWNERS OF THE LAND. THE ASSESSEE HAS TO ENTE R INTO INDIVIDUAL AGREEMENT WITH EACH MEMBER FOR CONSTRUCT ION OF HOUSES/UNITS. THEREFORE, 63 DIFFERENT AGREEMENTS HA VE TO BE EXECUTED BY THE ASSESSEE FOR DEVELOPMENT OF ONE PI ECE OF LAND. THIS LEADS TO CONCLUSION THAT THERE ARE 63 PROJECTS IN THIS PIECE OF LAND. THUS, THE ASSESSEE IS NOT DEVELOPING PROJECT ON ONE ACRE, BUT ON A VERY SMALL AREA OF KIND. IT WAS OBSERVED THAT RAW MATERIAL WERE REGULARLY BEING PURCHASED IN THE NAME OF M/S KARN ASSOCIATION AND ENTERED IN THE ACCOUNTS OF KARN ASSOCIATION. PAYMENTS TO THE SUPPLIERS WERE ALSO MADE FROM THE ACCOUNT OF KARN ASSOCIATION. THE ASSESSEE SUBMITTED THAT THESE ARE DUE TO FACTS THAT THE MATERIAL WAS S UPPLIED AT SITE SO BILLS WERE RAISED IN THE NAME OF KARN ASSOCIATIO N AND KARN ASSOCIATION IS REIMBURSED THE SAME. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 101 - 54. ACCORDING TO CIT(A), THE OWNERSHIP OF LAND WAS NOT THE RELEVANT CRITERIA FOR THE OF ALLOWABILITY OF THE DEDUCTION U NDER SECTION 80IB AS HELD BY ITAT AHMEDABAD IN THE CASES OF RADHE DEVELO PERS AND SHAKTI CORPORATION. THEREFORE, THE GROUND OF OWNERS HIP ALONE IS NOT RELEVANT FOR THE DENIAL OF DEDUCTION UNDER SECTION 80IB. HOWEVER, ON THE ISSUE OF THE APPROVAL, CIT(A) AGREED WITH THE A SSESSING OFFICER THAT SINCE IN THIS CASE THE PLAN SENT BY KARN ASSOC IATION WAS APPROVED BY THE COMPETENT AUTHORITY ON 2/8/2005, TH AT WAS, MUCH BEFORE THE APPELLANT COMPANY SIGNED DEVELOPMENT AGR EEMENT WITH KARN ASSOCIATION ON 4/10 /2005, IT COULD NOT BE SAI D THAT THE APPELLANT HAD ANY ROLE WHATSOEVER IN PREPARING THE PLAN AND GETTING IT APPROVED FROM THE COMPETENT AUTHORITY. AS PER T HE DECISION OF ITAT, AHMEDABAD M THE CASE OF RADHE DEVELOPERS AND SHAKTI CORPORATION, ONE OF THE CONDITIONS FOR THE ALLOWABI LITY OF DEDUCTION UNDER SECTION 80IB WAS THAT THE PLAN SHOULD HAVE BE EN SUBMITTED BY THE DEVELOPER HIMSELF AND THE APPROVAL FROM THE LOC AL AUTHORITY MUST BE TAKEN BY THE DEVELOPER HIMSELF. IN THIS CASE, T HIS CONDITION WAS NOT SATISFIED BECAUSE, BEFORE THE APPELLANT ENTERED INTO AN AGREEMENT WITH KARN ASSOCIATION, THE NTC HAD ALREADY APPLIED AND GOT THE APPROVAL FROM THE LOCAL AUTHORITY ON 2/8/2005. THE RELIANCE OF THE LD. AUTHORIZED REPRESENTATIVE ON CLAUSE NO. 4 OF THE DE VELOPMENT AGREEMENT, IN OPINION OF CIT(A) , WAS OF NO HELP TO THE ASSESSEE BECAUSE THERE WAS NO EVIDENCE WHICH INDICATES THAT THE PLAN WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 102 - PREPARED BY THE APPELLANT. THE FACT THAT THE APPROV AL WAS RECEIVED BY KARN ASSOCIATION PRIOR TO SIGNING THE DEVELOPMENT A GREEMENT WITH THE APPELLANT AND THERE IS NO EVIDENCE WHICH INDICATES THAT THE APPELLANT HAS HELPED THE NTC IN PREPARING THE PLAN AND GETTIN G THE APPROVAL FROM THE LOCAL AUTHORITY, WAS SUFFICIENT FOR DENIAL OF DEDUCTION UNDER SECTION 80 IB OF THE INCOME-TAX ACT. 55. THE CONTENTION OF ASSESSEE WAS THAT THE ASSESSE E HAS ADVANCED THE MONEY TO THE NTC, KARN ASSOCIATION FOR THE PURP OSE OF PURCHASING THE LAND. THE OBSERVATION OF THE ASSESSI NG OFFICER THAT THE NTC HAS SUFFICIENT FUNDS IN THE FORM OF LAND CO NTRIBUTION OF RS. 12.18 LAKHS, FOUNDER MEMBERS DEPOSIT OF RS.13.49 LA CS AND SUNDRY CREDITORS OF RS.35.80 LACS WAS NOT CORRECT FOR ASSE SSMENT YEAR 2006- 07. IN FACT, THE ASSESSING OFFICER HAS REFERRED TO THE BALANCE SHEET OF THE NTC AS ON 31/3/2006. AS PER THE BLANCE SHEET O F KARN ASSOCIATION, AS ON 31/3/2005, LOAN AND ADVANCES OF RS.13 LACS WAS RECEIVED FROM RALSON INFRASTRUCTURE PVT. LTD. AND R S.12.39 LACS WAS RECEIVED AS FOUNDER MEMBERS DEPOSIT. IT WAS STATED THAT THE LAND IN QUESTION WAS PURCHASED BY THE NTC OUT OF THE FUNDS GIVEN BY THE ASSESSEE. IN SUPPORT OF THIS, THE COPY OF BANK STA TEMENT OF KARN ASSOCIATION WAS FURNISHED BEFORE CIT(A) (WHICH IS R EPRODUCED AT PAGE NO.25 TO 27 OF CIT(A)S ORDER). ON THE PERUSAL OF BANK BOOK, CIT(A) NOTICED THAT THE CHEQUE OF RS.10 LACS WAS RECEIVED BY THE NTC FROM IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 103 - ASSESSEE ON 8/11/2004. OUT OF THIS, RS.5 LAKH WAS PAID AS ADVANCE TOWARDS THE PURCHASE OF LAND ON THE SAME DATE. FUR THER ON 10/11/2004 PAYMENT OF RS.2.20 LACS WAS MADE TOWARDS THE PURCHASE OF LAND. ON THIS DATE, THE NTC RECEIVED D EPOSITS FROM ITS FOUNDER MEMBERS TO THE TUNE OF RS.5.30 LACS. FURTH ER ON 1/12/2004 AND 6/12/2004 RS.5 LACS EACH WERE RECEIVED FROM RAL SON INFRASTRUCTURE PVT. LTD. BY NTC, OUT OF WHICH RS.7 LACS WAS RETURNED BACK TO RALSON INFRASTRUCTURE PCT. LTD. ON 11/12/20 04. FROM 13/12/2004 TO 18/12/2004 DEPOSITS FROM THE FOUNDER MEMBERS TO THE TUNE OF RS.6.90 LACS WAS RECEIVED BY NTC. FROM 1/1/2005 TO 3/1/2005 PAYMENT AGAINST THE PURCHASE OF LAND TO TH E TUNE OF RS.3.38 LACS WAS MADE BY THE NTC AND FINALLY ON 1/3 /2005 THE FINAL PAYMENT OF RS.1.02 LACS WAS MADE TOWARDS THE PURCHA SE OF THE LAND. IN SHORT, AS ON 31/3/2005, THE NTC HAS SHOWN TOTAL FIXED ASSETS OF RS.11.40 LACS AGAINST THE LOANS AND ADVANCES OF RS. 13 LACS RECEIVED FROM RALSON INFRASTRUCTURE PVT. LTD. AND DEPOSITS O F RS.12.39 LACS FROM THE FOUNDER MEMBERS OF THE SOCIETY. IT WAS TH EREFORE FOUND INCORRECT TO STATE THAT THE LAND WAS PURCHASED BY T HE NTC OUT OF THE FUNDS PROVIDED BY RALSON INFRASTRUCTURE PVT. LTD. IN FACT, PART PAYMENT OF THE PURCHASES WAS MADE OUT OF THE DEPOSI TS RECEIVED FROM THE FOUNDER MEMBERS OF THE NTC. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 104 - 56. ANOTHER OBSERVATION OF THE ASSESSING OFFICER W AS THAT THE NTC ALLOTTED THE LAND AMONG THE 63 MEMBERS AND THEN EAC H MEMBER ENTERED INTO AN AGREEMENT WITH THE ASSESSEE FOR THE CONSTRUCTION OF THEIR BUNGALOWS. ACCORDING TO HIM, SINCE THE LAND H AS BEEN DIVIDED AMONG 63 MEMBERS AND EVERY MEMBER HAS ENTERED INTO AN AGREEMENT TO CONSTRUCT A BUNGALOW WITH THE ASSESSEE , THEN IN THAT CASE, THE PRIMARY CONDITION OF LAND AREA BEING MORE THAN ONE ACRE IS NOT SATISFIED. FOR THIS PURPOSE, CIT(A) HAS GONE TH ROUGH THE COPY OF ALLOTMENT AGREEMENT WITH EACH MEMBER AND ALSO THE A GREEMENT OF THE CONSTRUCTION OF BUNGALOW. CIT(A) FOUND THAT, T HE NTC KARN ASSOCIATION HAD ALLOTTED THE LAND AMONGST THE VARIO US MEMBERS OF THE NTC, THE LAND AREA IS VARYING FROM 98 M2 TO 244 .8 SQ. MTR. 57. AFTER THE LAND HAS BEEN ALLOTTED BY THE NTC TO THE MEMBERS, ON THE SAME DATE THE MEMBER HAS ENTERED INTO AN AGREEM ENT WITH THE ASSESSEE FOR THE CONSTRUCTION OF A BUNGALOW IN THAT LAND. THE NTC KARN ASSOCIATION WAS SHOWN AS THE CONFIRMING PARTY IN THE CONSTRUCTION AGREEMENT. ACCORDING TO CIT(A), ONCE THE LAND HAS BEEN ALLOTTED TO THE CONCERNED MEMBERS AND THE CONSIDERA TION OF THE LAND HAS BEEN TAKEN BY THE NTC FROM THE CONCERNED MEMBER S AND THEN, THE INDIVIDUAL MEMBER HAS ENTERED INTO AN AGREEMENT WITH THE ASSESSEE FOR THE CONSTRUCTION OF HIS BUNGALOW, IT C OULD NOT BE SAID THAT THE ASSESSEE ACTED AS A DEVELOPER. FOR THIS P URPOSE, THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 105 - ASSESSEE HAS WORKED MERELY AS A CONTRACTOR. FURTHER THE PRIMARY CONDITION OF THE LAND AREA OF ONE ACRE WAS NOT SATI SFIED IF THE AGREEMENT WITH EACH MEMBER IS CONSIDERED SEPARATELY . 58. FURTHER IT WAS POINTED OUT BY THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND ALSO ADMITTED BY ASSESSEE THAT THE PURCHASES OF SOME RAW MATERIALS HAS BEEN MADE BY KARN ASSOCIA TION AND PAYMENT THEREOF IS ALSO MADE BY KARN ASSOCIATION. IN VIEW OF ABOVE, CIT(A) OBSERVED THAT THE ASSESSING OFFICER WAS JUST IFIED IN DENYING THE DEDUCTION UNDER SECTION 80IB OF THE INCOME-TAX ACT TO THE ASSESSEE. 59. SO, THE MAIN ISSUE BEFORE US IS WHETHER THIS U NACCOUNTED INCOME IN THE HAND OF ASSESSEE BELONGS TO RALSON IN FRASTRUCTURE PVT. LTD. THE SECOND ISSUE IS THAT IN CASE ISSUE IS HEL D IN FAVOUR OF ASSESSEE, THEN WHETHER RALSON INFRASTRUCTURE PVT. L TD. IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) OF THE ACT ON THE SAID AMOUN T. THE CASH AMOUNT OF RS.49,97,832/- WAS SEIZED FROM LOCKER NO. 919 OF SAID RAVI VARMA. THE STAND OF ASSESSEE HAS BEEN THAT THE CAS H FOUND FROM LOCKER NO.919 OF RS.49,97,832 WAS FROM THE DIFFEREN T MEMBERS OF HARIOM VILLA, AS SCHEME DEVELOPED BY RALSON INFRAST RUCTURE PVT. LTD. HE POINTED OUT THAT IN THE STATEMENT RECORDED ON TH E DATE OF SEARCH ON 10.5.2006, IN REPLY TO QUESTION NO.21 OF THE SAI D STATEMENT, ASSESSEE, RAVI VARMA EXPLAINED THAT CASH FOUND OF R S.49,97,832 WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 106 - RECEIVED FROM DIFFERENT MEMBERS OF HARIOM VILLA SCH EME DEVELOPED BY RALSON INFRASTRUCTURE PVT. LTD. THE SAID SUM WERE CLAIMED TO BE RECEIVED FOR THE PURPOSE OF VARIOUS EXPENSES, SUCH AS STAMP DUTY, REGISTRATION FEES, ADVOCATE FEES, DRAINAGE CHARGES, MAINTENANCE CHARGES, GEB POWER CONNECTION, ETC. ON RECEIPT OF T HE SAID AMOUNT THE SAME WAS KEPT IN THE BANK LOCKER OF RAVI VARMA. THE DOCUMENTARY EVIDENCE WITH REGARD TO THE SUM SO RECE IVED FROM DIFFERENT MEMBERS FOR THE PURPOSE OF MAKING ABOVE E XPENDITURE WAS PLACED ON RECORD. SIMILAR FACT WAS ALSO EXPLAINED BY MAHESH R. VARMA IN HIS STATEMENT RECORDED ON 05.06.2006 VIDE QUESTION NO.19. ACCORDING TO HIM ALL BUILDERS ARE REQUIRED TO CARRY OUT SUCH EXPENDITURE WHICH WAS COLLECTED FROM THE MEMBERS OF THE SCHEME EITHER BY CHEQUE OR BY CASH. THE SEARCH WAS CARRIE D OUT ON 10.5.2006 THE BOOKS OF ACCOUNTS WERE NOT COMPLETED ON THAT DATE, AND AS SUCH THE AMOUNT RECEIVED WAS NOT RECORDED ON 10.05.2006 IN THE BOOKS OF ACCOUNT WHICH WAS WRITTEN UPTO 03.03.2 006. THE AMOUNT SO RECEIVED FROM THE MEMBERS WAS DULY CONFIR MED BY THE MEMBERS RESPECTIVELY AND AFFIDAVITS WERE ALSO GIVEN BY ALL CONCERNED MEMBERS WHICH WERE GIVEN TO THE ASSESSING OFFICER A T THE RELEVANT POINT OF TIME. THE ASSESSING OFFICER HAS NOT DOUBT ED THE GENUINENESS OF THE MONEY SO RECEIVED OR CONFIRMATIO NS GIVEN BY THE MEMBERS OF HARIOM VILLA SCHEME WITH STATEMENT OF AC COUNTS AND PAN. FURTHER, MR. MAHESH R. VARMA IN THE STATEMENT RECORDED ON IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 107 - 05.06.2006 TO VARIOUS QUESTIONS IN REGARD TO CASH F OUND FROM THE BANK LOCKERS DISCUSSED ABOVE STATED TO BE FROM THE MEMBERS OF HARIOM VILLA SCHEME CARRIED OUT BY RALSON INFRASTRU CTURE PVT. LTD. AS CONFIRMED BY THEM AS WELL. WE FIND THAT ON THE DA TE OF SEARCH THE BOOKS OF RALSON INFRASTRUCTURE PVT. LTD. TO WHOM TH IS CASH CLAIMED TO BE BELONGING WERE INCOMPLETE AND UNAUDITED AS THE F INALIZATION OF THE BOOKS OF ACCOUNT DURING THIS PERIOD WAS PENDING. I N SIMILAR SITUATION, HON. GUJARAT HIGH COURT IN THE CASE OF P IPUSHKUMAR O. DESAI VS. CIT (2001) 247 ITR 568 (GUJ) SUPPORTED TH E CLAIM OF ASSESSEE BECAUSE ASSESSEE'S EXPLANATION REGARDING T HE CASH RECEIVED FROM THE MEMBERS OF HARIOM VILLA FOR WHICH THE ASSE SSEE HAD GIVEN THE TABLE CONTAINING THE NAME, PAN ALONG WITH DECLARATIONS/AFFIDAVITS, ETC. OF EACH OF THE MEMBER S WHICH IS REPRODUCED BY THE CIT(A) INTER ALIA THE MEMBERS HAV E GIVEN CONFIRMATIONS AND AFFIDAVITS WHICH IS COMPILED BY T HE ASSESSEE IN PAPER BOOK FROM PAGE NOS. 257 TO 573. THE AFORESA ID RATIO OF PIPUSHKUMAR O. DESAI VS. CIT (SUPRA) GIVEN IN SIMIL AR SITUATION, SHOULD NOT HAVE BEEN BRUSH ASIDE BY THE ASSESSING O FFICER AS WELL AS CIT(A) WITHOUT GIVING ANY FINDING ON THE SAME WHICH WERE CLAIMED TO BE MATERIAL SOURCE OF THE CASH RECEIPT IN QUESTION. REGARDING THE ARGUMENT OF LD. DEPARTMENTAL REPRESENTATIVE THAT TH ERE IS NO NEED TO COLLECT CASH FROM THE MEMBERS ON ABOVE ACCOUNTS AS STATED BY ASSESSEE. ACCORDING TO LD. DEPARTMENTAL REPRESENTA TIVE, THERE WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 108 - NO SEPARATE ACCOUNT AND IT WAS A PART OF COMMON FUN DS OF SALE PROCEEDS. PRIOR TO SEARCH, NO CASH WAS FOUND AND CA SH COLLECTION CLAIMED, WAS AFTER THOUGHT. ACCORDING TO DEPARTMENT AL REPRESENTATIVE ONLY SOME MEMBERS HAVE GIVEN CASH ON LY AND NO CHEQUE. ACCORDING TO HIM, CASH CANNOT BE KEPT IN L OCKER FOR LONG PERIOD AND NORMALLY CASH FOUND FROM THE LOCKER WAS NEVER ACCOUNTED IN THE BOOKS OF ACCOUNT. HE POINTED OUT THE SAFEST PLACE FOR THE CASH WAS TO PUT THE SAME IN THE BANK. ACCORDING TO HIM, CASH BOOK PRODUCED WAS FABRICATED TO INCLUDE THE CASH FOUND D URING THE COURSE OF SEARCH. HE POINTED OUT THAT THE CASH BOOK AS WE LL AS DECLARATIONS/AFFIDAVITS FILED BY THE ASSESSEE WERE NOT FILED BEFORE THE ASSESSING OFFICER, BUT WERE FURNISHED ONLY BEFORE T HE CIT(A). IN THIS REGARD, THE STAND OF ASSESSEE HAS BEEN THAT GENUINE NESS OF THE AFFIDAVIT OR DECLARATION CANNOT BE CHALLENGED AT TH IS STAGE. THE CONTENTS OF THE AFFIDAVIT CANNOT BE REJECTED WITHOU T CONFRONTING THE CONTENTS OF THE SAME TO THE DEPONENT. IN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT CASH FOUND FROM CUSTODY OF ASSESSEES AS DISCUSSED ABOVE IS NOTHING BUT INCOME OF RALSON INF RASTRUCTURE PVT. LTD. FROM ON GOING HARIOM VILLA SCHEME KEPT WITH AS SESSEE FOR ABOVE SAID PURPOSES. THIS TAKE CARE OF CASH OF RS.6,13,9 21/- FROM RESIDENCE OF MAHESH VARMA IN A.Y. 2007-08 AND RS.49 ,97,832/- FOUND FROM LOCKER NO.919 WITH RAJKOT NAGRIK SAHKARI BANK LTD. OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 109 - RAVI VARMA FOR A.Y. 2006-07 AND RS.11,04,193/- FOUN D FROM RESIDENCE OF RAVI VARMA FOR A.Y. 2007-08 AS DISCUSS ED ABOVE. 60. REGARDING THE ADDITION OF RS.40,000 OF THE CASH RECEIPT WHICH WERE FOUND FROM RESIDENCE OF MAHESH VARMA CLAIMED T O BE KEPT FOR HOUSEHOLD PURPOSE. THE EXPLANATION GIVEN BY ASSESS EE WAS NOT ACCEPTED BY ASSESSING OFFICER AS WELL AS CIT(A). TAKING ALL FACTS AND CIRCUMSTANCES, THIS ADDITION MADE BY AUTHORITIES BE LOW IS CONFIRMED. 61. NOW COMING TO THE SECOND ISSUE I.E. ISSUE REGAR DING CLAIM OF DEDUCTION U/S.80IB(10) OF HE ACT. THE MAIN ARGUMENT OF THE DEPARTMENT FOR REJECTING THE CLAIM IS AS UNDER:- '* THE OWNERSHIP OF THE LAND IS WITH KARAN ASSOCIAT ION (NTC) AND THE SAME IS NOT WITH THE ASSESSEE COMPANY. * ASSESSEE COMPANY IS NOT THE OWNER OF THE R ESIDENTIAL UNITS CONSTRUCTED ON THIS LAND. * THE NAME OF THE ASSESSEE COMPANY IS MENTIONED IN THE PLANS OF PROJECTS ON THE PLAN LAYOUT, ALSO THERE IS NAME OF NTC ONLY AND NO OTHER LAND RECORD, GOVERNMENT SANCTION/TAX BILL, ETC. IS HAVING THE NAME OF THE A SSESSEE COMPANY. * THE APPROVAL OF THE PROJECT IS GIVEN BY THE LOC AL AUTHORITIES TO THE CHAIRMAN OF KARAN ASSOCIATION(NTC) AND NOT T HE ASSESSEE COMPANY. * ONE OF THE IMPORTANT FIGURE OF CLAIMING DEDUCTION U/S. 80IB(10) IS THAT THE AREA OF PLOT OF THE PROJECT SH OULD BE ONE ACRE. IN THIS CASE, IT WAS OBSERVED THAT NTC ALLOTT ED LAND TO ITS MEMBERS AND COLLECTED MONEY FROM THEM. BY VIRTU E OF CHARGING LAND COST AT THE INITIAL STAGE THE MEMBERS BECOME THE OWNER OF THE LAND. IN THIS SCHEME THERE ARE 63 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 110 - MEMBERS, IT MEANS THAT THERE ARE 63 OWNERS OF THE L AND. THE ASSESSEE HAS TO ENTER INTO INDIVIDUAL AGREEMENT WITH EACH MEMBER FOR CONSTRUCTION OF HOUSE UNIT. THEREFO RE, 63 DIFFERENT AGREEMENTS HAVE TO BE EXECUTED BY THE ASS ESSEE FOR DEVELOPMENT OF ONE PIECE OF LAND. THIS LEADS TO A C ONCLUSION THAT THERE ARE 63 PROJECTS IN THIS PIECE OF LAND. T HUS, THE ASSESSEE IS NOT DEVELOPING PROJECT ON ONE ACRE BUT ON A VERY SMALL ARE OF LAND. * IT WAS OBSERVED THAT RAW-MATERIAL WERE REGULARLY BEING PURCHASED IN THE NAME OF M/S. KARAN ASSOCIATION AND ENTERED INTO ACCOUNTS OF KARAN ASSOCIATION, PAYMENT TO SUPPLIERS ALSO MADE FROM THE ACCOUNTS OF KARAN ASSOCIATION. THE ASSESSEE SUBMITTED THAT THESE ARE DUE TO THE FACT THAT THE MATERIALS WERE SUPPLIED AT THE SI TE THEREFORE BILLS WERE RAISED IN THE NAME OF M/S. KAR AN ASSOCIATION, AND KARAN ASSOCIATION REIMBURSED THE S AME. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF T HE ASSESSEE.' THE CIT(A) HAS CONFIRMED THE SAME. 62. THE STAND OF ASSESSEE HAS BEEN THAT THE ISSUE A T HAND COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF I) JUDGMENT OF HON. GUJARAT HIGH COURT IN THE CASE OF RADHE DEVELOPERS - 17 TAXMANN.COM 156 ALSO REPORTED IN 34 1 ITR 403 (GUJ) COMPILED ON PAGES 12 TO 38 OF THE ORDER O F COMPILATION. II) 2ND DECISION DATED 2.5.2014 OF HON. ITAT AHME DABAD IN THE CASE OF NARAYAN REALTY LTD., VIDE APPEAL NO.2293/AH D/2012 AND 2095/AHD/2013 (ASSESSEE'S APPEAL), AND ITA NO.2944/AHD/2011 AND 2563/AHD/2012(DEPARTMENT'S APPEAL) COMPILED ON PAGES 39 TO 49 OF THE COMPILATI ON ORDER. IN THIS BACKGROUND, LD. AUTHORIZED REPRESENTATIVE S UBMITTED THAT EVERY MEMBER HAVE CONSTRUCTED BUNGLOW THROUGH ASSES SEE RALSON INFRASTRUCTURE PVT. LTD. HE POINTED OUT THAT IN CA SE OF NARAYAN REALTY LTD (SUPRA) THERE IS A REFERENCE TO DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SATSANG DEVELO PERS ( ITA NO. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 111 - 1011, 2498 AND 1221 OF 2012, ORDER DATED 12.11.2013 ) ON THIS ISSUE OF DEDUCTION U/S. 80IB(10) OF THE ACT, WHEREIN ON S IMILAR FACTS AND CIRCUMSTANCES, IT WAS HELD THAT ASSESSEE IS ENTITLE D TO DEDUCTION U/S.80IB(10) OF THE ACT. 63. ON THE ISSUE OF DEDUCTION U/S.80IB(10), THE STA ND OF LD. DEPARTMENTAL REPRESENTATIVE THAT THE DECISIONS OF R ADHE DEVELOPERS (SUPRA) AS WELL AS ITAT DECISION IN NARAYAN REALTY (SUPRA) THE LAND WAS OWNED BY THE DEVELOPERS, PLAN WAS APPROVED PRIO R TO THE DEVELOPMENT AGREEMENT ENTERED INTO BY THE ASSESSEE, PLAN FOR THE PROJECT WAS PREPARED BY KARAN ASSOCIATION AND GOT T HE APPROVAL OF THE PROJECT IN HIS NAME. HE ALSO POINTED OUT THAT T HE AFFIDAVITS FILED BY THE MEMBERS SHOW THAT THE ALLOTMENTS OF LAND WER E ALSO GIVEN BY KARAN ASSOCIATION ONLY. HE ALSO REFERRED TO STATEM ENT OF RAVI R. VARMA ON PAGE 174 AND 175 OF COMPILATION WHEREIN RA VI R. VARMA HAD STATED THAT FOR WORK OF MANAGEMENT SOCIETY IS P AYING COMMISSION @ 20%. HE STATED THAT INDIVIDUAL MEMBER ENTERED INTO AGREEMENT FOR CONSTRUCTION OF BUNGALOWS AND AS SUCH IT SHOWS THAT THE ASSESSEE IS A CONSTRUCTION-CONTRACTOR AND ASSES SEE HAD DEVELOPED THE LAND BY 63 AGREEMENTS FOR EACH BUNGALOW AND AS SUCH NOT COMPLIED WITH THE CONDITION OF ONE ACRE LAND PRESCR IBED IN SECTION 80IB(10) OF THE ACT. LD. D.R. ALSO RAISED THE ISSU E THAT HE WANTED TO FILE CROSS OBJECTION IN THE CASE OF RALSON INFRASTR UCTURE PVT. LTD. AND IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 112 - REFERRED TO PARA 6 AND 6.1 OF CIT(A)'S ORDER WHEREI N CIT(A) HAS DECIDED THE ISSUE REGARDING CASH SEIZED AT THE TIME OF SEARCH AND IN PARA 6.1 THE FINDING OF CIT(A) IN PARA 6.1 WHERE TH E ISSUE OF DOUBLE TAXATION OF CASH SEIZED HAS BEEN DISCUSSED AND THE CIT(A) HAS ACCEPTED ASSESSEE'S CONTENTION AND GAVE THE FINDING THAT 'SINCE IN THE CASE OF RAVI VARMA AND MAHESH VARMA, HE HELD THAT S EIZED CASH REPRESENT THEIR UNACCOUNTED INCOME. SO, ASSESSING O FFICER WAS DIRECTED TO DELETE THE SAME IN THE HANDS OF RALSON INFRASTRUCTURE. ACCORDING TO US, RAISING OF CROSS OBJECTIONS AFTER 5 YEARS IS MISCONCEIVED AND ACCORDING TO HIM CASH SEIZED TO BE CONFIRMED IN THE HANDS OF THE COMPANY AND ADDITION MADE IN THE HANDS OF INDIVIDUAL REQUIRES TO BE DELETED. THE COMPANY HAS ALREADY POI NTED OUT THAT CASH BELONG TO IT, AS ADVANCES WERE RECEIVED IN THE FORM OF CASH FROM THE MEMBERS OF THE COMPANY. SO, THE QUESTION OF RA ISING CROSS OBJECTION AT THIS STAGE IS MISCONCEIVED. WITHOUT PREJUDICE TO ABOVE IN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT CASH REPRESENTS UNACCOUNTED INCOME OF THE RALSON INFRASTRUCTURE PVT . LTD. FOUND WITH INDIVIDUAL MEMBERS MAHESH VARMA AND RAVI VARMA AS D ISCUSSED ABOVE. 64. COMING TO THE MERIT OF 80IB(10), THE MAIN OBJEC TION OF LD. D.R. HAS BEEN THAT IMPORTANT DOCUMENT VIZ. COPY OF MEMOR ANDUM OF UNDERSTANDING DATED 20.11.2014 WAS EXECUTED BETWEEN M/S. KARAN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 113 - ASSOCIATION AND THE ASSESSEE, VIZ. RALSON INFRASTRU CTURE PVT. LTD. WAS NOT TAKEN INTO CONSIDERATION BY THE DEPARTMENT BECA USE THE ASSESSEE CAME INTO PICTURE ONLY AFTER THE PLANS PUT UP FOR A PPROVAL AND DEVELOPMENT AGREEMENT WAS ENTERED INTO SUBSEQUENTLY BY THE ASSESSEE WITH THE SOCIETY. WE FIND THAT PLAN WAS P REPARED BY THE DEVELOPER AND ALL THE COSTS FOR PREPARATION AND APP ROVAL OF THE SAME WAS INCURRED BY THE DEVELOPER. THERE IS NOTHING ON RECORD TO SUGGEST THAT SOCIETY HIMSELF HAS DONE THE SAME. THE STATEM ENT OF FACTS FILED BEFORE THE CIT(A), WHEREIN IT WAS STATED THAT DATE OF APPROVAL OF THE LOCAL AUTHORITY TWO DATES WERE MENTIONED VIZ. 02.08 .2005 AND 13.04.2006 WHICH WERE SUBSEQUENT TO THE DATE OF MOU DATED 20.11.2004. THE SOCIETY WAS THE OWNER OF LAND, THE REFORE, PLANS WERE IN THE NAME OF THE SOCIETY. THE ASSOCIATION I.E. N TC UNDERTOOK TO ENROLL ONLY SUCH MEMBERS AS RECOMMENDED BY THE DEVE LOPER AND ALLOTMENT OF BUNGALOW AND FLATS WILL BE STRICTLY AS PER THE INSTRUCTION OF THE DEVELOPER ONLY I.E. ASSESSEE. THE ASSOCIATI ON COULD NOT ENROLL MEMBER OR GIVE ALLOTMENT OR POSSESSION OF ANY UNIT TO ANY MEMBER DIRECTLY WITHOUT PRIOR PERMISSION OF THE DEVELOPER. THE BILLS FOR BUILDING MATERIAL PURCHASED WERE IN THE NAME OF SOC IETY. IN THIS REGARD, THE STAND OF ASSESSEE HAS BEEN THAT IN THE DEVELOPMENT AGREEMENT PARA 6 ON PAGE 37 OF COMPILATION OF PAPER BOOK, THE OBLIGATION OF THE DEVELOPER I.E. THE DEVELOPER SHAL L PURCHASE ALL THE CONSTRUCTION MATERIAL AND REQUIRED FITTINGS AND SHA LL MAKE THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 114 - PAYMENT TO THE SUPPLIERS. REGARDING FUNDS PROVIDED BY THE MEMBERS, ATTENTION WAS DRAWN TO PAGE 25 AND 26 OF C IT(A)'S ORDER WHEREIN COPY OF BANK STATEMENT OF KARAN ASSOCIATION WAS REPRODUCED BY THE CIT(A). FROM THAT BANK STATEMENT HE POINTED OUT THAT RS.10 LACS WERE PROVIDED BY THE ASSESSEE RALSON INFRASTRU CTURE TO THE NTC FOR PURCHASE OF LAND ON 11.8.2004. THE AMOUNT OF RS.5 LACS GIVEN BY RALSON INFRASTRUCTURE TO NTC ON 12.01.2004 AND ANOT HER RS.5 LACS WERE PROVIDED BY THE ASSESSEE RALSON INFRASTRUCTURE TO NTC ON 12.6.2004 AND THUS, THE FINANCE REQUIRED BY THE SOC IETY/NTC WAS PROVIDED BY THE ASSESSEE DEVELOPER. IN THE STATEME NT OF RAVI VARMA, HE HAS STATED THAT FOR THE WORK OF MANAGEMENT THE S OCIETY SPEND COMMISSION OF 20% AS PER DEVELOPMENT AGREEMENT ALL PROFITS OR LOSS IS OF THE ASSESSEE COMPANY, AND AS SUCH, THE PAYMEN T OF COMMISSION @ 20% AS STATED BY RAVI VARMA WAS REQUIRED TO BE VE RIFIED FROM THE SAME. IT WAS NOT AS REMUNERATION FOR DEVELOPING THE PROPERTY. THE ARGUMENTS RAISED BY THE CIT(A) REGARDING 63 AGREEME NTS ENTERED INTO FOR LAND AREA FOR EACH BUNGALOW AS ALLOTTED BY THE NTC. IN THIS REGARD, WE ARE OF THE VIEW THAT PROJECT AS WHAT HAS TO BE LOOKED INTO WHICH FULFILL ALL CONDITIONS LAID DOWN IN PROVISION OF SECTION 80IB(10) OF THE ACT AS DISCUSSED ABOVE. IN VIEW OF ABOVE, A SSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION TO RALSON INFRASTRU CTURE PVT. LTD. FOR A.Y. U/S.80IB(10) OF THE ACT. THIS TAKE CARE OF AL L YEARS OF INDIVIDUAL ASSESSEES AND RALSON INFRASTRUCTURE PVT. LTD. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 115 - 65. IN THE CASE OF THE THREE HUFS THE ACTION OF THE ASSESSING OFFICER IN TREATING THE INCOME OF RS. 20 LAKH EACH ON PROTE CTIVE BASIS HAS BEEN DISPUTED. BRIEF FACTS OF THE CASE ARE THAT A SEARCH ACTION UNDER SECTION 132 OF THE INCOME-TAX ACT WAS CARRIED OUT I N THE GROUP CASES OF SWAGAT GROUP INCLUDING THE APPELLANT ON 10/5/200 6. THE ASSESSEES, SHRI RAVI R VARMA, RAJNI R VARMA AND MAH ESH R VARMA ARE BROTHERS. DURING THE COURSE OF SEARCH, AT THE R ESIDENTIAL PREMISES OF HARIOM TOWER, LAW GARDEN, AHMEDABAD, CERTAIN LOO SE PAPERS AND DIARIES WERE FOUND AND SEIZED. THESE PAPERS WERE FO UND IN THE CASE OF SHRI MAHESH VARMA WHO IS THE KEY PERSON OF THE GROU P. THE SEIZED DIARY INDICATED CERTAIN ENTRIES IN RESPECT OF THE L AND AT THALTEJ 147 BHAVESH KURRIAR CHANDULAL. AS PER THIS, ALL THE AS SESSEES TOGETHER HAVE RECEIVED TOTAL AMOUNT OF RS.2,36,11,000/-AGAIN ST THE SALE OF THE LAND AT THALTEJ. OUT OF THIS, RS.25 LAKH WAS RECEI VED BY CHEQUE. WHEN CONFRONTED, THE APPELLANTS REPLIED THAT THE LA ND AT THALTEJ WAS INHERITED AND DURING THE YEAR 2005-2006 IT WAS DECI DED TO SELL THE SAME TO ONE MR BHAVESH KUMAR CHANDULAL. CERTAIN AMO UNTS WERE RECEIVED FROM HIM AGAINST THE SALE OF THE PROPERTY. HE WANTED THE PROPERTIES TO BE DEVELOPED IN A PARTICULAR MANNER W HICH COULD NOT BE DONE BY THE APPELLANTS DUE TO THE RESTRICTIONS, THE REFORE, THE PROPERTY WAS NOT SOLD TO HIM. FOR THIS PURPOSE THE AMOUNT O F RS. 60 LACS WAS FORFEITED AND RS.20 LAKH WAS OFFERED FOR TAXATION B Y EACH OF THE HUFS IN THEIR RETURN OF INCOME. HOWEVER, THE AO DID NOT ACCEPT THE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 116 - CONTENTION OF THE APPELLANT AND MADE THE ADDITION O F RS.1,76,11,000/- BEING THE AMOUNT OF RS.2,36,11,000 /- MINUS RS. 25 LAKH RECEIVED BY CHEQUE MINUS RS. 60 LACS DECLAR ED BY THE APPELLANTS. ACCORDING TO ASSESSING OFFICER, THIS A MOUNT OF RS.1,76,11,000/- IS REQUIRED TO BE TAXED EQUALLY IN THE INDIVIDUAL HANDS OF THE FOLLOWING 6 PERSONS: 1. MAHESH R VARMA RS.29,35,166 2. RAVI R VARMA RS.29,35,166 3. RAJNI R VARMA RS.29,35,166 4. MRS. SHEETAL R VARMA RS.29,35,166 5. MRS. MADHVI VARMA RS.29,35,166 6. MRS. SHYAMALI VARMA RS.29,35,166 IN OTHER WORDS, THE ADDITION OF RS.29,35,166/- WAS MADE BY THE ASSESSING OFFICER IN THE HANDS OF EACH OF THE THRE E BROTHERS AND THEIR WIVES ON THE GROUND THAT THE PROPERTY IN QUESTION I S HELD JOINTLY IN THEIR NAMES. ALL THE MEMBERS HAVE CHALLENGED THIS A DDITION. 66. THE AMOUNT OF RS.60 LACS SHOWN AS FORFEITED AGA INST THE SALE OF THE THALTEJ LAND WAS DISTRIBUTED BY THE 3 HUFS OF M AHESH R VARMA, RAVI R VARMA AND RAJNI R VARMA EQUALLY, I.E., RS. 2 0 LACS EACH. THIS INCOME OF RS.20 LAKH WAS SHOWN IN THE RESPECTIVE RE TURNS OF THE HUF. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THAT THE LAND BELONGS TO THE HUFS AND THEREFORE, HELD THAT THE AM OUNT OF RS.60 LACS SHOULD ALSO BE DISTRIBUTED EQUALLY AMONG THE S IX FAMILY MEMBERS AS MENTIONED ABOVE I.E. THREE BROTHERS AND THEIR WIVES IN EQUAL PROPORTION. HE ACCORDINGLY MADE ADDITION OF R S.10 LAKH EACH IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 117 - ON ACCOUNT OF THE SHARE OF INCOME ON ACCOUNT OF FOR FEITURE OF RS.60 LACS AGAINST THE SALE OF THALTEJ LAND. THIS ADDITIO N OF RS.10 LAKH IS ALSO CHALLENGED BY EACH APPELLANT. IN THE HANDS OF THE 3 HUFS AS THE INCOME OF RS.20 LAKHS EACH WAS SHOWN IN THEIR RETUR NS, THE ASSESSING OFFICER ASSESSED THAT INCOME IN THEIR HAN DS ON PROTECTIVE BASIS. SINCE THIS GROUND IS COMMON IN THE CASE OF A LL THE APPELLANTS, FOR THE SAKE OF CONVENIENCE ALL THE APPEALS ARE BEI NG DECIDED BY THIS COMMON ORDER. 67. AS REGARDS GROUND NUMBER ONE, THE ASSESSEE HAD NOT SUBMITTED ANY REASONS AS TO HOW THE ASSESSMENT ORDER PASSED B Y THE ASSESSING OFFICER WAS VOID. IN THE ABSENCE OF ANY ARGUMENTS O R WRITTEN SUBMISSIONS, THE FIRST GROUND OF APPEAL WAS DISMISS ED. IN FACTS AND CIRCUMSTANCES AND IN ABSENCE OF ANY ARGUMENT OR WRI TTEN SUBMISSION, WE UPHOLD THE ORDER OF CIT(A) ON ISSUE. 68. THE SECOND GROUND IS REGARDING THE ADDITION OF RS.29,35,166/- ON THE BASIS OF SEIZED LOOSE PAPER NUMBER-3 OF ANNE XURE A-L AND RS.10 LACS TOWARDS THE SALE OF THE BLOCK OF LAND BE ARING SURVEY NO. 150 AT THALTEJ. THE RELEVANT DISCUSSION OF THE ASSE SSING OFFICER ON THIS POINT IN THE CASE OF MAHESH VARMA IS REPRODUCE D AS UNDER: 'ANNEXURE A-1 (TOPCEF DIARY): 6.1 THIS DIARY WAS SEIZED FROM THE BRIEF-CASE OF SH RI MAHESH VARMA, THE ASSESSEE. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 118 - 6.2 PAGE NO.3 CONTAINS THE ACCOUNTS OF MONEY TRANSA CTION WITH REFERENCE TO LAND AT THALTEJ AND IT IS TITLED AS SU CH. FOR THE SAKE OF CONVENIENCE, IT IS MARKED AS TABLE-1, WHICH IS AS UNDER: TABLE-1 'THALTEJ- 147 BHAVESH KUMAR CHANDULAL' CR. DR. AMOUNT PARTICULARS AMOUNT PARTICULARS 1,51,000 13.08.05 11,000 KANCHI KOTI EDUCATION DONATION 50,00,000 18.08.05 20,00,000 1 8.08.05 SUKHDEVBHAI 45,50,000 26 . 08. 05 25,00,000 18.05.05 VAGHJI 2,99,000 5,00,000 ASHOK JIJAJI 11,11,000 24.10.05 27.10.05 10,00,000 20.08.05 SUKHDEV 1,11,11,000 5,00,000 28.08.05 MUKESHBHAI 25,00,000 CHEQUE FROM 5,00,000 31. 08.05 KIKABHAI 1,36,11,000 5,00,000 MUKESHBHAI 1,34,11,000 25,00,000 26. 08.06 VAGHJIBHAI 20+5 2,00,000 5,00,000 ASHOKBHAI FOR B.NO.29 5,00,000 06.11. 05 VAGHJIBHAI SUNDAY 3,00,000 01.11.05 RAJNI NE DIWALI NO DIVASE 1,00,000 03.11.05 R.N. BANK DEPOSIT 5,00,000 09.11.05 OFFICE CREDIT AGAINST K. G. CHEQUE 15, 00,000 19.09.05 GIVEN BALDE VBHAI FROM KHUSHALBHAI 21-27.09.05 8+2+5=15 1,34,11,000 6.3 THE ACCOUNTS IN THE LOWER SIDE OF PAGE NO.3 WHI CH GOES UPTO PAGE NO.4 IS HAVING DETAILS OF RECEIPT OF RS.1.25 C RORES AND ITS SUBSEQUENT APPLICATION. FOR THE SAKE OF CONVENIENC E, IT IS MARKED AS TABLE-2, WHICH IS REPRODUCED BELOW: TABLE-2 AMOUNT PARTICULARS - AMOUNT PARTICULARS 02/ C.F. BALANCE 15/00 PARESH PANCHYO FROM KAMAL 8.12.05 50/ 07. 12.05 WEDNESDAY BHAVESHBHAI 5/00 PARESR 17.12.5 BAROBAR FROM BHAVESH IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 119 - 15/00 PARESH PANCHIYO TODAY 17. 12.05 25/ 08.12.05 } THURSDAY RECEIVED 30/00 KHUSHALBHAI GHUMA FROM RAVIBHAI 12. 12.05 NO ROJ OFFICE 40/ 12.1 2.05] MONDAY 12.12.05 2/00 M. KHUSHALBHAI FOR GHUMA (HOME) RAVI DTD. 21.12.05 NO ROJ OFFICE. 5/ 14.12.05 } WEDNESDAY } THALTEJ 2/00 TO KHUSHALBHAI GHUMA RAVI OFFICE 25. 1 2. 05 SUNDAY 5/ 17.12.05 } SATURDAY } THALTEL 10/00 TO PARESH AGAINST H. S. CHEQUE 125/00 30.01.06 BHAVESHKUMAR 25/00 BALAJI CORPORATION AGAINST K.G. CHEQUE KAMAL MARVADI 4/00 GIVEN THE GHUMA FROM OFFICE 18.01:06 6.5.1 THE ASSESSEE HAS ACCEPTED THAT THE TRANSACTIO N CONTAIN IN PAGE NO.3 MARKED AS TABLE-1 IN THIS ORDER ARE PERTA INING TO SALE OF LAND AT THALTEJ BELONGS TO ASSESSEE. HE AGREED F OR THE AMOUNT OF RS.60,00,000/- MENTIONED THEREIN ARE FOR THE SAL E OF LAND AT THALTEJ. NOW THE QUESTION IS WHAT THE OTHER AMOUNT REPRESENTS. THE ASSESSEE IS SILENT REGARDING THE NATURE OF OTHE R AMOUNTS EXCEPT ONE CHEQUE AMOUNT. THE ASSESSEE'S EXPLANATIO N THAT OTHER ENTRIES-ARE NOTING AND JOTTINGS MADE-BY OFFICE PERS ONNEL TO KEEP CONTROL OVER CASH INFLOW AND OUTFLOW IS WITHOUT ANY MERIT. FIRST OF ALL, THERE IS NO SINGLE ENTRY OF RS. SIXTY LACS NEI THER THE TOTALING OF TWO OR MORE ENTRIES IN THIS ACCOUNT COMING TO RS .60,00,000/-. IF THE ENTRIES ARE MADE BY EMPLOYEES OF GROUP CONCE RNS THEN THESE ARE MORE RELIABLE BECAUSE NO EMPLOYEE WILL MA KE ANY ACCOUNT IN HAPHAZARD MANNER AND SUBMIT IT TO HIS EM PLOYER. THE IMPORTANCE OF THE DIARY CAN BE IMAGINED FROM THE FA CT THAT IT WAS FOUND IN THE BRIEF-CASE OF SHRI MAHESH VARMA, WHO I S THE KEY PERSON THE GROUP. THE HEADING OF THIS PAGE CLEARLY SHOWS THAT IT BELONGS TO THALTEJ LAND, SURVEY NO. 147 AND THE AMO UNTS ARE RECEIVED FROM BHAVESHKUMAR CHANDULAL. THE ASSESSE E DID NOT DISCLOSE THE IDENTITY AND ADDRESS OF BHAVESHKUMAR C HANDULAL. THEREFORE, THE EXPLANATION OF ASSESSEE THAT ONLY RS .60,00,000/- RECEIVED OUT OF THE TRANSACTION OF LAND AT THALTEJ IS NOT CONVINCING. MOREOVER, ON THE RIGHT HAND SIDE, THER E IS AN EXPLICIT DETAIL WHERE THE FUND WAS GOING OUT. AS PER THIS, A N AMOUNT OF RS. 1,34,11,000/- WAS DISTRIBUTED / PAID BY THE ASS ESSEE AND THE REMAINING BALANCE OF RS.2,00,000/- IS BEING CARRIED FORWARD. AS PER THIS ACCOUNT, THE ASSESSEE RECEIVED AMOUNT OF RS.1,11,11,000/- IN CASH FROM 13.08.2005 TO 27.10.2 005, THEREFORE, THE WHOLE AMOUNT IS TREATED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 120 - 6.5.2 THE LOWER HALF OF PAGE NO.3 AND UPPER SIDE OF PAGE NO.4 (TABLE-2) ARE WRITTEN IN CODED FORM, THEY REFER TO VARIOUS RECEIPTS OF DIFFERENT PERIOD AND ITS APPLICATION. THE RECEIP TS ENTRIES ARE DATED FROM 07.12.2005 TO 30.01.2006. THE ACCOUNTS A PPEARED TO BE IN CONTINUATION OF ACCOUNT IN UPPER PART OF PAGE NO.3, AS THE AMOUNT OF. RS.2,00,000/- IS SHOWN AS CARRY FORWARD BALANCE, WHICH MATCHES WITH THE BALANCE CASH IN HAND AMOUNT IN UPPER PART OF PAGE NO.3. MOREOVER, THE NAME OF BHAVESHKUM AR IS ALSO CLEARLY MENTIONED AGAINST SOME OF THE ENTRIES AS WE LL AS AGAINST THE CONSOLIDATED AMOUNT RECEIVED IN CASH. THEREFORE , IT IS PERTAINING TO LAND TRANSACTION AT THALTEJ. THE RIGH T HAND SIDE IS HAVING THE AMOUNTS GIVEN AND NAME OF PERSONS RECEIV ING THE AMOUNT, THE NAMES ARE PARESH PANCHYO AND KHUSHALBHA I. GHUMA IS ALSO MENTIONED IN SOME OF THE ENTRIES, THE SE NAMES ARE FOUND IN PAGE NO.1 OF THE DIARY REGARDING PAYME NT OF GHUMA LAND, SO IT IS CONCLUSIVELY INFERRED FROM TABLE-1 & TABLE-2 THAT THE AMOUNT RECEIVED FROM SALE OF THALTEJ LAND IS BE ING UTILIZED PARTLY FOR THE PURPOSE OF.PURCHASE OF GHUMA LAND. T HERE IS NO FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE CRED IT SIDE NOTING INDICATES MEMBER COLLECTION OF HARIOM VILLA SCHEME. THE ASSESSEE IS NOT ABLE TO PRODUCE ANY EVIDENCE, WHERE AS ITS DIARY NEITHER GAVE UNBROKEN AND UNINTERRUPTED FORM OF ACC OUNT OF TRANSACTION OF LAND NOR RECORDED IN THE BOOKS. THER EFORE, THE SAME IS TO BE BELIEVED. THE NAME APPEARING IN THE D EBIT SIDE IS THE PERSONS FROM WHOM / THROUGH WHOM THE GHUMA LAND HAS BEEN ACQUIRED. THEREFORE, THE EXPLANATION OF THE AS SESSEE THAT THIS REPRESENTS EXPENSES OF GHUMA LAND IS CORRECT. AS PER TABLE- 2 (LOWER PART OF PAGE NO.3, ANNEXURE A-1) THE TOTAL OF RS.1,25,00,000/- HAS BEEN RECEIVED BY THE ASSESSEE. THEREFORE, THE TOTAL CONSIDERATION RECEIVED OF THIS LAND AS DI SCUSSED ABOVE IS RS.2,36,11,000/- (RS.1,11,11,000/- PLUS RS.1,25,00, 000/-). THE ASSESSEE TRIED TO ATTRIBUTE THE RECEIPTS IN THE TAB LE 2, AS MEMBERS COLLECTION OF HARIOM VILLA, SCHEME AT GHUMA. THE AS SESSEE'S CONTENTION IS NOT TENABLE. AS DISCUSSED ABOVE, TABL E NO.2 IS IN CONTINUATION OF TABLE NO.1. THE CLOSING BALANCE OF RS.2,00,000/- SHOWN IN TABLE NO.1 (RS. 1,36,11,000/- LESS RS.1,34 ,11,000/-) STANDS DULY BROUGHT FORWARD IN TABLE NO. 2 AND THER EFORE THE AMOUNT OF RS.1,25,00,000/- RECEIVED AS PER TABLE NO .2 IS NOTHING BUT AMOUNT RECEIVED ON SALE OF LAND. THE ASSESSEE H AS DECLARED AMOUNT OF RS.60,00,000/- OUT OF THIS CONSIDERATION, THEREFORE, THE BALANCE AMOUNT OF RS.1,76,11,000/- IS REQUIRED TO BE TREATED AS CASH RECEIVED ON SALE OF THALTEJ LAND. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 121 - 6.5.3 IT IS NECESSARY TO MENTION HERE THAT MAHESH VARMA, HUF HAS SHOWN OF RS.20,00,000/- AS OTHER INCOME IN THE A.Y.2006-2007. THE ASSESSEE WAS ASKED TO EXPLAIN TH E NATURE AND SOURCE OF THIS INCOME. IN RESPONSE TO THIS, IT WAS STATED THAT DURING THE YEAR THE LAND AT SURVEY NO. 147 OF THALT EJ VILLAGE WAS AGREED TO BE SOLD. FOR THIS, CONSIDERATION OF RS.60 ,00,000/- WAS RECEIVED. BUT THE DEAL COULD NOT BE FINALIZED DUE T O SANE DISPUTE THEREFORE, THE AMOUNT RECEIVED WAS FORFEITED. THIS AMOUNT WAS SHOWN AS INCOME AMOUNTING TO RS.20,00,000/- EACH IN THE CASE OF THREE HUFS OF ASSESSEE GROUP VIZ. MAHESH VARMA, HUF, RAVI VARMA, HUF AND RAJNI VARMA, HUF. THE RETURN OF INCO ME FOR A.Y.2006-2007 IN THE CASES OF HUFS HAS BEEN SUBMITT ED IN THE MONTH OF DECEMBER, 2008 IN RESPONSE TO NOTICE U/S 1 53C. NO RETURN OF HUFS HAS BEEN SUBMITTED U/S 139. IT WAS O BSERVED THAT THE SAID LAND DOES NOT BELONG TO HUFS OF ASSES SEE FAMILY, BUT IT IS IN THE NAMES OF MAHESH R. VARMA, RAVI R. VARMA, RAJNI R. VARMA AND THEIR SPOUSES. THEREFORE, THE CONSIDER ATION SHOULD HAVE BEEN DECLARED IN INDIVIDUAL CASES AND NOT IN T HE CASES OF HUFS. THIS ARGUMENT FURTHER GET SUPPORT FROM THE FA CT THAT PART OF THE LAND WAS SOLD IN NEXT YEAR, WHICH HAS BEEN D ECLARED IN THE INDIVIDUAL RETURNS OF FAMILY MEMBERS. 6.5.4 IN VIEW OF ABOVE FACTS, THE CASH CONSIDERATI ON OF RS.1,76,11,000/-REQUIRES TO BE TAXED IN THE HANDS O F 1. MAHESH R VARMA RS.29,35,166 2. RAVI R VARMA RS.29,35,166 3. RAJNI R VARMA RS.29,35,166 4. MRS. SHEETAL R VARMA RS.29,35,166 5. MRS. MADHVI VARMA RS.29,35,166 6. MRS. SHYAMALI VARMA RS.29,35,166 ACCORDINGLY AN AMOUNT OF RS.29,35,166/- IS ADDED IN THE HAND OF THE ASSESSEE AS UNACCOUNTED CASH CONSIDERATION RECE IVED ON SALE OF THALTEJ LAND. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE ALSO INITIATED SEPARATELY. (ADDITION OF RS.29,35,166/-)' 69. THE ASSESSEES CONTENTION ON THIS ADDITION IS R EPRODUCED AS UNDER: 'DURING THE COURSE OF THE SEARCH THE DEPARTMENT HAD SEIZED LOOSE PAPER NO. 3 MARKED IN ANNEXURE A-1 FOUND FROM THE P REMISES OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 1 22 - MR. MAHESH R. VERMA. THE LEARNED ASSESSING OFFICER PROCEEDED TO MAKE AN ADDITION OF RS. 39,35,166 FOR THE ALLEGE D NOTINGS AND JOTTINGS MADE IN THE SAID LOOSE PAPER. THE COPY OF THE SAID LOOSE PAPER IS ENCLOSED HEREWITH VIDE ANNEXURE - 1 FOR YO UR READY REFERENCE. 1. ON PERUSAL OF THE SAID LOOSE PAPER NO. 3, IT IS SUBMITTED THAT THE TOP PORTION OF NOTINGS MADE ON LOOSE PAPER PERTAINS TO THE PROPOSED SALE OF LAND AT THALTEJ BEARING SURVEY NO. 147 AND THE BOTTOM PORTION OF THE NOTINGS IS WITH REFERENCE TO THE LAND AT GUMA BEING DEVELOPED BY RALSON INFRASTRUCTURE PVT. LIMITED. WITH REFERENCE TO THE PROPOSED SALE OF LAND AT THAL TEJ, THE APPELLANT SUBMITS AS UNDER: 3.1 THE TOP PORTION OF THE SAID LOOSE PAPER CONTAIN S THE HEADING THALTEJ - 147 BHAVESH KUMAR CHANDULAL. THE NOTINGS FOR WHICH THE SAID LOOSE PAPER NO. 3 WAS FOUND PERTAINS TO TH E BLOCK OF LAND BEARING SURVEY NO. 147 WHICH WAS ACQUIRED BY THE DI FFERENT FAMILY MEMBERS OF THE APPELLANT THROUGH INHERITANCE . ACCORDINGLY, THE SAID LAND BELONGS TO THE HUFS OF M AHESH R: VERMA, RAJNI R. VERMA AND RAVI R. VERMA. THE DOCUME NTARY EVIDENCE BEING THE ENTRY IN THE RECORDS OF RIGHTS ' GRAM NA NAMUNA- FORM NO-6' IN THIS REGARD IS ENCLOSED HEREW ITH VIDE ANNEXURE - NO. 2 TO SUBSTANTIATE THE FACT THAT THE LAND IN QUESTION BELONGS TO THE HUFS IS ENCLOSED HERE WITH FOR YOUR READY REFERENCE. SINCE THE OWNERSHIP OF THE LAND BE LONGS TO THE HUFS OF MAHESH R. VERMA, RAJNI R. VERMA AND RAVI R. VERMA, ANY PROFIT/GAIN ARISING ON THE TRANSFER OF THE SAID LAND, WAS REQUIRED TO BE TAXED IN THE HANDS OF THE HUFS AND N OT IN THE HANDS OF THE INDIVIDUALS AS DONE BY THE ASSESSING O FFICER. ACCORDINGLY THE ENTIRE ADDITION MADE BY THE ASSESSI NG OFFICER IS WITHOUT JURISDICTION AND REQUIRES TO BE QUASHED. 3.2 THE APPELLANT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS ALSO SUBMITTED THE FACT THAT THE LOOSE PAPERS VIS-A -VIS THE NOTINGS WHICH WERE BEING REFERRED BY THE ASSESSING OFFICER MENTIONED A NOTINGS OF RS. 25,00,000 BEING TRANSACTED THROUGH T HE BANKING CHANNEL AND WHICH WAS IN THE NAME OF KISHORE CORPOR ATION. MR. MAHESH VERMA IS A COPARCENER IN KISHORE CORPORATION . THE RECEIPT AND PAYMENT OF THE CHEQUE IN THE NAME OF KI SHORE CORPORATION PROVES THE FACT THAT THE SAID BLOCK OF LAND BELONGS TO THE HUFS AND NOT TO THE APPELLANT. ACCORDINGLY THE NOTINGS FOR THE LAND IN QUESTION IS EXPLAINED TO HAVE BEEN BELO NGING TO THE HUFS AND NOT THE INDIVIDUALS. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 123 - 3.3 IT IS SUBMITTED THAT THE CONTROVERSY REGARDING THE TAXABILITY OF THE INCOME EITHER TO BE TAXED IN THE HANDS OF INDIV IDUALS OR HUFS HAS ARISEN BECAUSE OF THE NON-MENTIONING OF THE SAM E IN THE SAID LOOSE PAPER AS REFERRED BY THE ASSESSING OFFICER. T HE ASSESSING OFFICER HAS COMPLETELY FAILED TO APPRECIATE THE INF ERENCE THAT WAS AVAILABLE IN THE SAID LOOSE PAPER BEING THE ENTRY R ECORDED IN THE BOOKS OF KISHORE CORPORATION - HUF ENTITY, TO ARRIV E AT THE PROPER CONCLUSION RATHER THAN GIVING THE FINDINGS THAT IT BELONGS TO THE APPELLANT ON THE INCORRECT ASSUMPTION, SURMISES AND CONJECTURES. 2. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THAT T HE LAND BEARING SURVEY NO 147 & 150 SITUATED AT THALTEJ WER E RECEIVED BY THE FAMILY MEMBERS OF THE APPELLANT THROUGH INHERIT ANCE. ACCORDINGLY THE SAID LAND BELONGED TO THE HUF OF TH E APPELLANT. SOMEWHERE IN THE MONTH OF AUGUST 2005, THE HUF OF T HE APPELLANT WERE PLANNING TO SELL THESE LAND I.E. SUR VEY NO 147 & 150 AND DURING THIS COURSE, THE AMOUNT RECEIVED BY THE APPELLANT WAS NOTED UNDER THE ACCOUNT OF BHAVESH CH ANDULAL SHAH. THE LAND BEARING SURVEY NO 150 SUBSEQUENTLY W AS BROUGHT UNDER THE LIMITS OF AUDA REGION. THE PURCHASER HAD DEMANDED THE HUF'S OF THE APPELLANT TO CONVERT THE SAID AGRI CULTURAL LAND (BEARING SURVEY NO 150) TO NON-AGRICULTURAL LAND. S INCE IT WAS NOT POSSIBLE TO CONVERT THE SAID AGRICULTURAL LAND INTO NON- AGRICULTURAL LAND OWING TO STATUTORY RESTRICTION, T HE SAID DEAL COULD NOT GO THROUGH AND FAILED TO MATERIALIZED. IT WAS ALSO POINTED OUT TO THE PURCHASER THAT IT WAS NOT THE RE SPONSIBILITY OF THE APPELLANT TO GET SUCH CONVERSION AND THE SAME W AS REQUIRED TO BE DONE BY THE PURCHASING PARTY. CONSEQUENTLY TH E AMOUNT RECEIVED UNDER THE ACCOUNT OFBHAVESH CHANDULAL SHAH WAS LIABLE TO RETURN BACK AS THE DEAL COULD NOT BE FINALISED. THE ASSESSING OFFICER HAS ALSO ACCEPTED THE FACT THAT THIS TRANSA CTION DID NOT MATERIALSE. THE ACTION TAKEN BY THE ASSESSING OFFICER IN TAXING THE SAID AMOUNT IS VOID AND ERRONEOUS, SINCE THE ENTIRE AMOU NT WAS RECEIVED TOWARDS CAPITAL ASSET, THE SAME WAS REQUIR ED TO BE TREATED AS CAPITAL RECEIPT, NOT FALLING UNDER THE A MBIT OF INCOME TAX. HOWEVER, SINCE AT THE TIME OF CANCELLATION OF THE D EAL THE THREE HUFS FORFEITED THE MONEY AND WERE BEING LEFT WITH A CASH OF RS. 60,00,000 WHICH WAS SHOWN EQUALLY IN THE RETURN OF INCOME OF THE HUFS. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 124 - 4.1 THE OBSERVATION OF THE ASSESSING OFFICER THAT T HE AMOUNT OFFERED BY THE HUFS OF RS 60,00,000 IN THEIR RETURN OF INCOME HAD NO BASE WITH THE SAID LOOSE PAPER IS INCORRECT AND ERRONEOUS AS MUCH AS THE FACT WHEN CONSIDERED THAT THE NOTING S IN THE SAID LEDGER ACCOUNT ARE THE INFLOWS .AND OUTFLOWS OF THE CASH, THERE WAS NO SUM OTHER THAN RS. 2,00,000 WHICH COULD BE B ROUGHT UNDER THE TAX SINCE THE TOTAL INFLOWS NOTED IN THE SAID ACCOUNT WAS RS. 1,36,11,000 AND THE TOTAL OUTFLOW WAS RS. 1 ,34,11,000. 4.2 THE FACT THAT THE AMOUNT RECEIVED BY THE APPELL ANT OF RS. 1,36,11,000 COULD NOT BE TAXED IS PROVED BY THE FAC T THE LAND AT SURVEY NO 147 AT THALTEJ WAS SOLD IN SUBSEQUENT ASS ESSMENT YEAR. THIS FACT IS ALSO MENTIONED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER BY ASSUMING THAT THE MONEY HAS BE EN RECEIVED TOWARDS THE SALE OF LAND IS FACTUALLY INCORRECT SIN CE THE SAID LAND WAS SOLD IN SUBSEQUENT ASSESSMENT YEAR TO CHANDRAKA NT K . SHAH. HENCE THE ADDITION MADE BY THE ASSESSING OFFI CER IS WITHOUT EXAMINING THE FACT OF THE CASE AND ARRIVING AT AN FALSE CONCLUSION. 4.3 ONCE THE ASSESSING OFFICER BELIEVES THAT THE AM OUNT WHICH WAS RECEIVED BY THE APPELLANT TOWARDS THE-SALE OF L AND AT THALTEJ, THERE WAS NO POINT IN NOT RECOGNIZING THE FACT THAT THE SAID AMOUNT WAS ALSO PAID BACK ON THE INSTRUCTION OF BHA VESHKUMAR CHANDULAL SHAH NOTED IN THE SAME ACCOUNT AND IN THE SAME LOOSE PAPERS. THE ASSESSING OFFICER CANNOT BE EXPEC TED TO TREAT THAT PART OF THE OTHER PART OF THE LOOSE PAPER WHIC H IS ADVANTAGEOUS TO HIM AND DISREGARD THE OTHER LOOSE P APER WHICH IS NOTED IN THE SAME ACCOUNT. THE SEIZED PAPER HAS TO BE READ AS A WHOLE AND TWO DIFFERENT INTERPRETATIONS ARE NOT P OSSIBLE TO BE GIVEN TO THE VARIOUS FIGURES MENTIONED IN THE SAME DOCUMENT. RELIANCE IN THIS REGARD I'S PLACED, ON THE FOLLOWIN G DECISIONS: (I) DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD.. V S. DCIT 102 ITD 375 (PUNE). IT CANNOT BE READ ONLY TO THE EXTENT IT IS ADVANTAG EOUS TO THE REVENUE AND NOT READ WHEN IT BECOMES DISADVANTAGEOU S TO THE REVENUE. IT IS AN ACCEPTED PRINCIPLE OF INTERPR ETATION OF DOCUMENTS THAT THEY SHOULD BE READ AS A WHOLE, AS P ERSONS OF COMMON PRUDENCE WILL READ THEM. THEY CANNOT BE R EAD IN BITS AND PARTS TO SUIT THE CONVENIENCE OF ONE PARTY OR THE OTHER. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 125 - (II) NEM CHAND DAGA V. ASSISTANT COMMISSIONER OF IN COME-TAX [2005] 1 SOT 515 (DELHI) HELD SECTION 69, READ WITH SECTION 158BC, OF THE INCOME- TAX ACT, 1961 - UNEXPLAINED INVESTMENTS - PURSUANT TO SEARCH AND SEIZURE ACTION, ASSESSING OFFICER COMPLETED BLOCK ASSESSMENT IN ASSESSEE'S CASE, DETERMINING UNDISCLO SED INCOME ON BASIS OF CERTAIN LOOSE SHEETS FOUND AND EXPLANATIONS MADE BY ASSESSEE AND OTHERS INVOLVED - WHETHER ENTRIES FOUND ON LOOSE PAPERS CAN HAVE ANY AUTHENTICITY OR EVIDENTIARY VALUE IN ITSELF - HELD, NO - WHETHER WHERE ASSESSEE .CLAIMED THAT HE DID NOT REC EIVE ANY MONEY AND OPPOSITE PARTY CONCERNED ALSO CONFIRM ED ASSESSEE'S VERSION, ASSESSING OFFICER COULD GIVE AN Y SIGNIFICANCE TO SCRIBBLING IN LOOSE SHEETS - HELD, NO - WHETHER WHEN A MATERIAL SEIZED HAS TO BE RELIED UPO N, ENTIRE CONTENT APPEARING ON IT SHOULD BE CONSIDERED AND DEPARTMENT CANNOT IGNORE SOME OF ENTRIES WHICH DO N OT SUIT IT AND ACCEPT OTHER - HELD, YES WHETHER WHERE AS SESSEE HAD OFFERED AN UNDISCLOSED INCOME UP TO 31-3-1996, WHICH WAS AVAILABLE FOR ROTATION IN UNDISCLOSED ACTIVITIE S, UNDERTAKEN FROM 1-4-1996, IT COULD BE SAID THAT ASSESSEE HAD SUCCESSFULLY EXPLAINED OPENING CAPITAL BALANCE IN SAID UNDISCLOSED BUSINESS ACTIVITIES - HELD, YES - WHETHER IN VIEW OF ABOVE, ADDITION MADE IN AFORESAID CASES HAD TO BE DELETED. - HELD, YES (III) ASSISTANT COMMISSIONER OF INCOME-TAX V. OMPRA KASH & CO.- [2004] 2 SOT 1 (MUM.) HELD '...............WHETHER ASSESSING OFFICER COULD NOT MAKE ADDITIONS TO ASSESSEE'S TOTAL INCOME ON BASIS OF PA PERS SEIZED IN COURSE OF SEARCH BY PICKING UP CERTAIN FI GURES AND IGNORING OTHERS AT HIS OWN CONVENIENCE WITHOUT GIVI NG A REASONABLE OPPORTUNITY TO ASSESSEE -HELD, YES 4.4 MR. MAHESH VERMA IN THE COURSE OF ASSESSMENT PR OCEEDINGS ON 26TH DECEMBER, 2008 CONFIRMED BEFORE THE ASSESSI NG OFFICER IN THE FORM OF STATEMENT THAT THE APPELLANT ALONG W ITH OTHER TWO HUFS HAD EARNED A SUM OF RS. 60,00,000 TOWARDS THE PROPOSED SALE OF LAND AT THALTEJ WHICH NEVER GOT MATERIALIZE D. IN THIS CONNECTION IT IS ALSO SUBMITTED THAT THE ASSESSING OFFICER HAS NOT REBUTTED TO THE STATEMENT RECORDED BEFORE HIM IN TH E COURSE OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 126 - THE ASSESSMENT PROCEEDINGS WHICH WOULD MEAN THAT TH ERE WAS NO IRREGULARITY REGARDING THE EXPLANATION GIVEN AND TH E ASSESSING OFFICER IS DEEMED TO HAVE ACCEPTED THE SAID EXPLANA TION. THE EXTRACT OF THE STATEMENT IS REPRODUCED HEREUNDER: Q/A NO PARTICULARS QUESTION - 9 PAGE NO. 3 OF D IARY ANNEXURE A - 1 SEIZED FROM YOUR RESIDENCE DURING THE COURSE OF SEARCH OPERATION CONTAINS THE DETAILS OF RECEIPTS FROM THE SALE PROCEEDS OF LAND AT THALTEJ TO ONE SHRI BHAVESH CHANDULAL. AS PER THE DETAILS YOU HAVE RECEIVED THE AMOUNT OFRS. 1,36,11,000. IN THE OTHER PART IN THE RIGHT HAND SIDE OF THE PAGE, THERE IS APPLICATION OF THIS MONEY. IN LOWER PORTION OF PAGE 3, THERE IS FURTHER RECEIPT OF AMOUNT OF RS. 1,25,00,000 FROM THE SALE OF THIS LAND. PLEASE EXPLAIN WHERE IN THE BOOKS OF ACCOUNT THE TRANSACTIONS IS REFLECTED. ANSWER - 9 UPPER PORTION OF THE PAGE NO. 3 CONTAINS THE NOTING OF RECEIPT FOR LAND AT THALTEJ, WHICH BELONGS TO THREE HUFS NAMELY, MAHESH, RAJNI AND RAVI AND ALSO RECEIPTS OF THE AMOUNT WHICH WERE EARLIER GIVEN TO OTHERS. OUT OF THE TOTAL AMOUNT OF RS.1,36,11,000 AMOUNT OF RS. 25,00,000 RECEIVED BY CHEQUE AND RECORDED IN THE BOOKS OF KISHORE CORPORATION AS LOAN FROM RAMESHBHAI MEGHJIBHAI PATEL. OUT OF THE REMAINING AMOUNT RS. 60,00,000 WERE RECEIVED TOWARDS AGREED SALE OF THALTEJ LAND FROM BHAVESH CHANDULAL. THE SAID TRANSACTIONS WAS CANCELLED THEREAFTER AND AMOUNT OF RS. 60,00,000 FORFEITED AND OFFERED AS INCOME BY THE THREE HUFS IN THE RETURN.FOR ASSESSMENT YEAR 2006-07. THUS THE TOTAL RECEIPTS ARE FULLY EXPLAINED AS ABOVE. THE'LOWER PORTION OF THE PAGE CONTAINED TO TRANSACTION REGARDING THE SCHEME MAINLY HARI OM VILLA DEVELOPED BY RIPL. THE CREDIT REPRESENTS THE AMOUNT RECEIVED FROM THE MEMBERS OF THIS SCHEME AND DEBIT CONTAINS THE PAYMENT FOR ACQUISITION OF LAND FOR THIS SCHEME. THE CREDIT SIDE BEING THE NATURE OF INCOME, WHEREAS THE DEBIT SIDE REPRESENTS THE EXPENDITURE FOR THE SCHEME. THUS, THERE IS NO INCOME EARNED FROM THIS TRANSACTIONS. THOUGH, IT IS NOT RECORDED IN THE BOOKS OF ACCOUNT AT THE TIME OF SEARCH AND EVEN THEREAFTER BECAUSE OF NON-AVAILABILITY OF SEIZED MATERIAL WHILE FILING THE RETTIRN OF INCOME, THE TRANSACTIONS ARE BELONGING TO LAND AT GHUMA. 5. THUS THE SUMMARY OF THE ARGUMENT IS THAT (A) THE LAND IN QUESTION BELONGS TO THE HUF AND A CCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER IS WITHO UT JURISDICTION; IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 127 - (B) THE ASSESSING OFFICER WHILE MAKING THE ADDITION HAD GIVEN THE CREDIT OF RS, 25,00,000 RECEIVED IN THE HANDS O F KISHORE CORPORATION BEING AN HUF ENTITY AND SIMULTANEOUSLY PROCEEDED TO MAKE AN ADDITION OF RS. 1,11,10,000 (1,36,11,000 - 25,00,000) IN THE HANDS OF THE INDIV IDUAL. THUS ON THE ONE HAND THE ASSESSING OFFICER ACCEPTS THE CONTENTION THAT THE CHEQUE AMOUNT WAS RECEIVED BY T HE HUF AND THE ALLEGED CASH COMPONENT WAS RECEIVED BY THE INDIVIDUALS. THE FINDINGS ITSELF SPEAKS OUT THAT TH E ENTIRE ADDITION WAS MADE BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND AND DESERVES TO BE QUASHED. (C) THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAK ING THE ADDITION ON THE BASIS OF THE AMOUNT RECEIVED WITHOU T CONSIDERING THE FUNDAMENTAL FACT THAT THE SAID AMOU NT WAS ALSO RETURNED BACK ON ACCOUNT OF CANCELLATION OF TRANSACTION. (D) THE ASSESSING OFFICER HAS ALSO FAILED TO APPRE CIATE THE FACT THAT THE LAND IN QUESTION WAS SOLD IN SUBSEQUENT ASSESSMENT YEAR WHICH CONCLUSIVELY PROVES THAT THER E WAS NO SALE IN THE ASSESSMENT YEAR IN A.Y. 2006-07 THER EBY MAKING THE ENTIRE ADDITION FOR SALE OF BLOCK OF LAN D VOID AB INITIO. (E) THE ASSESSING OFFICER HAD ALSO FAILED TO TAKE I NTO CONSIDERATION THE STATEMENT OF MR. MAHESH R. VERMA RECORDED ON OATH IN THE COURSE OF ASSESSMENT PROCEE DINGS IN WHICH HE HAD EXPLAINED THE COMPLETELY FACTS OF T HE MATTER AND ACCORDINGLY THE ENTIRE ADDITION MADE BY THE ASS ESSING OFFICER IS BASED ON ADDITION MADE BY THE ASSESSING OFFICER IS PURELY BASED ON ASSUMPTIONS, SURMISES AND CONJECTUR ES. 6. THE LOWER PORTION OF LOOSE PAPER NO. 3 CONTAINS THE NOTINGS WITH REFERENCE TO THE GUMA LAND DEVELOPED BY RALSON INFRASTRUCTURE PVT. LTD. THE SAID NOTINGS MENTION T HE INFORMATION REGARDING THE RECEIPT AND PAYMENT OF THE PROJECT. T HE APPELLANT WOULD LIKE TO BRING TO YOUR KIND ATTENTION THAT DUR ING THE PERIOD UNDER CONSIDERATION THERE WAS ONLY A SINGLE PROJECT OF THE APPELLANT GROUP WHICH WAS GOING ON AND WAS BEING DE VELOPED BY RALSON INFRASTRUCTURE PVT. LIMITED ON THE SAID GUMA LAND. THERE WERE NO OTHER SCHEMES OR PROJECT BY ANY OTHER ENTER PRISES OF THE APPELLANT OR ITS GROUP. THE SAID FACT WAS ALSO EXPL AINED DURING THE COURSE OF SEARCH/POST SEARCH PROCEEDINGS TO THE AUTHORIZED OFFICERS OF THE DEPARTMENT. THE EXTRACT FROM THE ST ATEMENT IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 128 - RECORDED ON 26-12-2008 OF MR MAHESH R. VERMA IS REP RODUCED HERE UNDER: Q/A NO PARTICULARS QUESTION - 10 THE NOTING IN THIS PAGE IT SEEMS THAT THE TRANSACTION OF LOWER PART IS CONTINUATION OF. UPPER PART AS AMOUNT IS CARRIED FORWARD BELOW. MOREOVER, THERE IS NAME OF BHAVESHBHAI APPEARING IN LOWER PART FROM WHOM PAYMENT OF THALTEJ LAND HAD BEEN RECEIVED AS PER UPPER PART ANSWER - 10 UPPER PART CONTAINS THE TRANSACTION FOR THE THALTEJ LAND AS ON THE TOP OF THE ACCOUNT, THE DESCRIPTION IS MENTIONED AS THALTEJ JAMIN. FROM THIS TRANSACTION THE BALANCE OF RS. 2.00 LACS IS SURPLUS, WHICH IS MENTIONED IN THE LOWER PART OF ACCOUNT UNDER THE HEAD 'GHUMA LAND'. AS MENTIONED ABOVE, THE CREDIT SIDE OF THIS ACCOUNT IS RECEIPT FROM THE MEMBERS FOR THE SAID SCHEME NAMELY HARIOM VILLA: AS THE DEBIT SIDE OF THE SAME ACCOUNT REPRESENTS THE EXPENDITURE FOR THE GHUMA LAND NO INCOME/SURPLUS ARISE TO RIPL 7. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HA S CONSIDERED THE.ENTIRE LOOSE PAPER NO. 3 AS PERTAINI NG TO THE LAND AT THALTEJ BY MERELY CONSIDERING THE FACT THAT THE CLOSING BALANCE MENTIONED ON THE TOP OF LOOSE PAPER NO. 3 IS BROUGH T DOWN AND THEREBY HOLDING THAT THE ENTIRE NOTINGS ON LOOSE PA PER NO. 3 PERTAINS TO THE SALE OF LAND AT THALTEJ WITHOUT GOI NG INTO THE FACTS AND NATURE OF THE LOOSE PAPER. FURTHER, THE ASSESSI NG OFFICER IN HIS ASSESSMENT ORDER HAS NOWHERE REBUTTED THE STATE MENT GIVEN BY MAHESH R. VERMA VISA-VIS THE FACTS OF THE CASE. UNDER SUCH CIRCUMSTANCES THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 1,25,00,000 TOWARDS THE SAID PORTION OF THE LOOSE P APER NO. 3 IS VOID AND REQUIRES TO BE DELETED. 8. WITHOUT PREJUDICE TO THE ABOVE CONTENTION EVEN IF THE OBSERVATION OF THE ASSESSING OFFICER FOR ONCE CONSI DERED THAT THE BOTTOM PART OF THE LOOSE PAPER IS CONTINUATION OF S ALE OF LAND AT THALTEJ THEN UNDER THAT CIRCUMSTANCES ALSO THE ADDI TION OF RS. 1,25,00,000 IS VOID ON THE GROUND THAT (A) ONCE THE ASSESSING OFFICER CONCLUDES THAT THIS PORTION OF LOOSE PAPER IS THE CONTINUATION OF SALE OF LAND AT THALTEJ, THE SAME OUGHT TO HAVE BEEN TAXED IN THE HANDS OF THE H UFS AND NOT IN THE CAPACITY OF THE INDIVIDUALS; (B) THE NOTINGS MADE FOR THAT PORTION OF LOOSE PAPE R ARE THE INFLOWS AND OUTFLOWS OF LAND SOLD AT THALTEJ WHICH ULTIMATELY IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 129 - DID NOT MATERIALIZE AND ACCORDINGLY THE ASSESSING O FFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS 1,25 ,00,000 (C) THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKI NG THE ADDITION ON THE BASIS OF THE AMOUNT RECEIVED WITHOU T CONSIDERING THE FUNDAMENTAL FACT THAT THE SAID AMOU NT WAS ALSO RETURNED BACK ON ACCOUNT OF CANCELLATION OF TRANSACTION. (D) WHEN CONSIDERED THAT THE BOTTOM PART IF CONTIN UATION OF THE UPPER PART, THE ASSESSING OFFICER HAS ALSO FAILED T O APPRECIATE THE FACT THAT THE LAND IN QUESTION WAS SOLD IN SUBSEQUENT ASSESSMENT YEAR WHICH-CONCLUSIVELY PROVE S THAT THERE WAS NO SALE IN THE ASSESSMENT YEAR IN A.Y. 20 06-07 THEREBY MAKING THE ENTIRE ADDITION FOR SALE OF BLOC K OF LAND VOID AB INTIO. 9. CONSIDERING THE ENTIRE FACTS OF THE CASE THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS 39,3 5,166 IN THE CASE OF APPELLANT WHICH COULD BEST BE RS 2,00,000 ( AND TOO ONLY 1/6 TH PART) WHEN CONSIDERED TOTAL INFLOWS AND OUTFLOWS. THE ACTION WAS ALSO JUSTIFIED WHEN CONSIDERED THE SAID BLOCK OF LAND WAS SOLD TO CHANDRAKANT KESHAVJI SHAH IN SUBSEQUENT ASSESSMENT YEAR. LASTLY, THE APPELLANT WOULD ALSO L IKE TO SUBMIT THAT EVEN ON THE BASIS OF THE THEORY OF CIRCULATION OF FUNDS THE SHORTFALL OF FUND AS ON THE PARTICULAR DATE ALSO DO ES NOT EXCEED RS. 60,00,000 WHICH IS OFFERED BY THE HUFS IN THEIR RETURN OF INCOME. 10. ACCORDINGLY THE ENTIRE NOTINGS, AS REFERRED IN LOOSE PAPER NO.3 ARE COVERED BY THE AMOUNT OFFERED IN THE RETUR N OF THE HUFS AND ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER DESERVES TO BE DELETED. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER BE DELETED. 70. DURING THE COURSE OF APPELLATE PROCEEDINGS, AUT HORIZED REPRESENTATIVE WAS ASKED TO STATE ABOUT THE PRESENT STATUS OF THE THALTEJ LAND BEARING SURVEY NUMBER 147 AND 150 AND ALSO THE STATUS OF THE CHEQUE OF RS.25 LAKH RECEIVED BY THE APPELLA NT AGAINST THE SALE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 130 - OF THE SAID LAND. SUCH FURTHER SUBMISSIONS WERE SUB MITTED BY THE ASSESSEE AS UNDER: '1. REGARDING ADDITION OF RS.29.35 LAKH AND OF 10 L AKH 1.1 THE A.O. HAS REFERRED TO PAGE NO.3 OF ANNEXURE A-1 SEIZED FROM MAHESH VARMA AND STATED THAT IT CONTAINS ACCOU NT OF MONEY TRANSACTIONS WITH REFERENCE.TO TALTEJ LAND. H E HAS REPRODUCED THE DETAILS OF SAID PAGE. HE HAS ALSO RE FERRED TO ASSESSEE'S EXPLANATION. IT IS NOTED BY .HIM THAT OU T OF THE TOTAL NOTINGS OF RS.136.11 LAKH, RS.25 LAKH WAS BY CHEQUE AND RECORDED IN THE BOOKS. THE AMOUNT OF RS.60 LAKH WAS RETAINED WHICH WAS FROM THE PROPOSED SALE PROCEEDS OF TALTEJ LAND AND FOR WHICH TRANSACTION WAS NOT MATERIALIZED. IT WAS STAT ED THAT THE AMOUNT OF RS.20 LAKH EACH HAS BEEN SHOWN IN THE CAS ES OF HUF OF THREE BROTHERS I.E. MAHESH VARMA, RAJINI VARMA A ND RAVI VARMA. THE ASSESSEE'S EXPLANATION IS REPRODUCED ON PAGE 3 AND 4 OF THE ASSESSMENT ORDER. THE A.O. HAS FURTHER STA TED THAT THE SECOND PART OF THE SAID LOOSE PAPER (LOWER PART) WA S EXPLAINED TO BE IN RESPECT OF GHUMA LAND WHICH WAS BEING'DEVELOP ED BY THE GROUP COMPANY RALSON INFRASTRUCTURE PVT. LTD. AND I T CONTAINS THE NOTINGS RELATING TO INCOME AND EXPENDITURE OF T HE PROJECT I.E. CREDIT SIDE REPRESENTING COLLECTION RECEIVED AND TH E DEBIT SIDE EXPENDITURE TOWARDS PROJECT OUT OF THE COLLECTION S O RECEIVED. 2. THE APPELLANT SUBMITS THAT THE ADDITION HAS BEEN MADE ON PRESUMPTION BASIS MERELY ON THE BASIS OF A LOOSE PA PER FOUND FROM MAHESHBHAI. THE APPELLANT SUBMITS THAT THE FIS T PART OF THE LOOSE PAPER IS THE ACCOUNT OF TALTEJ LAND (BHAVESH CHANDULAL). THERE WAS A PROPOSED SALE OF LAND AT TALTEJ. AS EXP LAINED TO THE A.O. THE APPELLANT WAS HOLDING LAND AT TALTEJ BEING SURVEY NO.150 AND 147. AS EXPLAINED BEFORE THE A.O., THE APPELLAN T AND HIS THREE BROTHERS IN THEIR CAPACITY AS HUF OF RESPECTI VE BROTHERS HELD LAND AT TALTEJ COMPRISING OF TWO SURVEY NUMBER S BEING SURVEY NO.147 AND SURVEY NO.150. IT WAS DECIDED T O SELL THE ENTIRE LAND OF THESE TWO SURVEY NUMBERS TO BHAVESH CHANDULAL. THE AREA OF LAND WAS AS UNDER: SURVEY NO. SQ. MTR. SQ. YDS. 147 17503 20933.59 150 3237 3871.45 TOTAL 20740 24805.04 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 131 - THE LAND OF SURVEY NUMBER 150 WAS HELD BY FOREFATHE RS UNDER THE GANOTHARA AND WAS RELATING TO NEW TENURE. BHAVESH CHANDULAL WAS NOT MAKING PAYMENT OF THE ENT IRE CONSIDERATION AND WAS INSISTING THAT THE APPELLANT AND HIS THREE BROTHER SHOULD GET THE PLANS FOR BOTH THE SURVEY NU MBERS APPROVED AND GET THE LAND'CONVERTED INTO NA. THE AP PELLANT HAD CLARIFIED THAT THE LAND WAS AGREED TO BE SOLD AS IT IS I.E., AGRICULTURAL LAND. IN FACT AFTER THIS AGREEMENT WIT H BHAVESH CHANDULAL, ADDA PUT UP TP SCHEME AND THAT THEREFORE , PART OF THESE LANDS WAS ALLOCATED TO ZONE 3 AND THAT, THERE FORE, BHAVESH CHANDULAL WAS NOT INTERESTED IN TAKING THE LAND AS IT IS. ULTIMATELY THE DEAL WAS NOT MATERIALIZED AND CANCEL LED, AS THE APPELLANT WAS NOT AT ALL RESPONSIBLE FOR GETTING TH E PERMISSION FOR WHICH BHAVESH CHANDULAL WAS INSISTING. AS A RESULT, THE APPELLANT HAD TO RETURN BA;CK THE AMOUNT RECEIVED F ROM BHAVESH CHANDULAL. THE APPELLANT RETAINED RS.60 LAKH FROM O UT OF THE AMOUNT RECEIVED AS FORFEITURE AND BALANCE WAS PAID BACK. AS STATED ABOVE, THE LAND WAS RECEIVED FROM FOREFAT HERS AND, THEREFORE, IT BELONGED TO THE HUF OF 3 BROTHERS. IN THIS CONNECTION THE APPELLANT HAS ALREADY FURNISHED COPIES OF LAND RECORDS BEING FORM NO.7/12 AND HAKPATRAK BEING NO.6 WHEREIN IT IS RECORDED THAT BOTH THE LANDS WERE HELD BY RAMLABHAYA K. VARM A AND THAT FROM HIS NAME ON HIS DEATH ON 9/3/1997 BY WAY OF IN HERITANCE THE SAME WAS TRANSFERRED TO THE APPELLANT AND HIS B ROTHERS FOR WHICH ENTRY WAS MADE IN THE LAND RECORD FORM NO.6 O N 30-4- 1997. 3. THE A.O. HAS TRIED TO CO-RELATE THE UPPER PORTIO N WITH THE LOWER PART PRESUMING THAT BOTH THE PARTS RELATES SA LE OF TALTEJ LAND. FOR THIS PURPOSE HE HAS GIVEN TWO ARGUMENTS, FIRST IS THAT RS.2 LAKH HAS BEEN CARRIED FORWARD FROM UPPER PORTI ON TO THE LOWER PORTION AND THAT IN THE LOWER PORTION ALSO AG AINST SOME ENTRIES THE NAME IS THAT OF BHAVESHBHAI. HOWEVER, H E HAS FAILED TO APPRECIATE THAT THE AMOUNT OF RS.2 LAKH CANNOT B E CONSIDERED TO BE BASIS FOR SUCH PRESUMPTION PARTICULARLY WHEN HE HAS HIMSELF STATED THAT BOTH THE PORTIONS RELATE TO DIF FERENT PERIOD. FURTHER HE HAS HIMSELF AGREED TO THE EXPLANATION TH AT THE DEBITS ON THE LOWER SIDE MIGHT BE RELATING TO EXPENDITURE FOR AGRICULTURAL GHUMA LAND. ONCE HE AGREES TO THIS PART OF THE APPE LLANT'S EXPLANATION, THERE IS NO REASON FOR NOT AGREEING TO THE OTHER PART OF THE EXPLANATION I.E. THE LOWER PORTION RELATES T O RECEIPTS AND PAYMENT FOR GHUMA LAND WHERE THE PROJECT WAS BEING DEVELOPED BY RALSON INFRASTRUCTURE. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 132 - IT IS ALSO NOT CORRECT TO PRESUME THAT THE LOWER PO RTION CONTAINS NAME OF BHAVESHBHAI AND THAT THEREFORE, IT RELATES TO TALTEJ LAND. THIS MAY BE APPRECIATED IN VIEW OF THE FACT THAT THE NAME IN THE UPPER PORTION IS BHAVESH CHANDULAL SPEC IFICALLY STATED THAT WHEREAS IN THE LOWER PART IT IS BHAVE SHBHAI AND THAT ITSELF SUGGEST THAT A HE IS NOT THE SAME PERSON. IN THE COURSE OF HEARING IT WAS POINTED OUT BY THE APPELLANT THAT CHEQUE AMOUNT OF RS.25 LAKH STATED IN SEIZED P APER IS DEPOSITED IN PROPRIETARY CONCERN OF BIGGER HUF VIZ. KISHORE CORP. BIGGER HUF HAD BEEN FILING THEIR INCOME-TAX RETURN WHERE ALSO KISHORRE CORP. IS SHOWN AS PROPRIETARY CONCERN THIS MAY BE APPRECIATED FROM 1 COPY OF RETURN OF BIGGER HUF. 4. DURING THE COURSE OF HEARING IT WAS POINTED OUT TO YOUR HONOUR THAT THE A.O. HAS REJECTED THE EXPLANATION O F THE APPELLANT THAT THE LAND BELONGS TO HUF FOR THE REAS ON THAT IN THE SUBSEQUENT YEAR WHEN PART OF THE LAND IS SOLD, IT I S SHOWN IN THE RETURN OF INCOME OF INDIVIDUALS AND THAT THEREFORE, HE HAS TAXED THE AMOUNT OF RS.60 LAKH AS OFFERED IN HUF AND FURT HER AMOUNT OF CONSIDERATION PRESUMED BY HIM IN THE HANDS OF SI X PERSONS IN INDIVIDUAL CAPACITY. THE APPELLANT MAY, THEREFORE, POINT OUT THAT IN THE SUBSEQUENT YEAR THE ENTIRE LAND OF SURVEY NUMBER 14 7 AND 150 IS NOT SOLD BUT ONLY A PART OF THE LAND AT SURVEY N UMBER 147 WAS SOLD. THE APPELLANT HAS SOLD 15138 SQ. MTRS. OF LAN D FOR RS,60 LAKH BEING PART SURVEY NUMBER 147 OUT OF THE TOTAL LAND OF SURVEY NUMBER 147 BEING 17503 SQ. MTRS. TO ONE MR. CHANDRA KANT KESHAVJI SHAH (GADA) RESIDING AT OM SURYA APARTMENT , GULBAI TEKRA, AAHMEDABD. FOR READY REFERENCE A COPY OF THE SALE DOCUMENT IS ATTACHED. IN THIS WAY, IT IS SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR CONSIDERING THIS LAND FOR TAXA TION IN THE HANDS OF .INDIVIDUALS AND FURTHER IT IS SUBMITTED THAT ON LY AMOUNT OF FORFEITURE OF RS.60 LAKH COULD BE TAXED IN THE HAND S OF HUFS. 5. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, IT I S SUBMITTED THAT IT IS A FACT THAT THE AMOUNT .AS PER SEIZED PA PER WAS RECEIVED TOWARDS AGREEMENT FOR SALE OF TALTEJ .LAND AND AS T HE LAND IS NOT SOLD TO THE CONCERNED PARTY ON ACCOUNT OF CANCELLAT ION OF DEAL, THE AMOUNT SO RECEIVED CANNOT BE CONSIDERED FOR THE PURPOSE TAXATION AS INCOME AS IT RESULTS INTO CAPITAL RECEI PT AND HENCE IT IS SUBMITTED THAT THERE IS NO REASON FOR TAXING ANY PART OF SUCH AMOUNT RECEIVED.' IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 133 - 71. THE ASSESSEE WAS ASKED TO PROVE THE EXISTENCE O F HUF AND TO PROVE THAT THE LAND AT THALTEJ BELONGED TO HUFS OF THE THREE BROTHERS. THE WRITTEN SUBMISSIONS DTD.23/11/2010 ARE REPRODUC ED AS UNDER: 'ON BEHALF OF THE APPELLANT, DETAILED SUBMISSIONS H AVE BEEN FILED FROM TIME TO TIME. THE APPELLANT WOULD LIKE TO GIVE FURTHER CLARIFICATION AS UNDER. 2. THE QUESTION THAT ARISES IS AS TO EXISTENCE OF B IGGER HUF. IN THIS CONNECTION IT IS SUBMITTED THAT KHANCHAND L. V ARMA HUF HAD THE PROPRIETARY CONCERN OF KISHORE CORPORATION WHEREIN THE AMOUNT WAS RECEIVED AT RS.25 LAKH. THE AMOUNT WAS A RRANGED BY THE SAID PARTY FROM OUT SIDE AND THAT THEREFORE, IT WAS CREDITED IN THE NAME OF THE PERSON WHOSE CHEQUE WAS RECEIVED AN D ULTIMATELY DEAL IS NOT MATERIALIZED AND CANCELLED A S A RESULT AMOUNT IS RETURN (PAYMENT IS GIVEN BACK). THE BIGGER HUF WAS FILING THEIR RETURN OF INCOME FR OM YEAR TO YEAR. COPIES OF THE RETURNS OF A.Y. 2005-06, 2006- 07 AND 2007- 08 ARE FURNISHED. 3. AS STATED EARLIER, THERE WERE TWO PIECES OF LAND , THE FIRST WAS SURVEY NO.147 AND THE SECOND WAS SURVEY NO. 150. TH E SURVEY NO. 150 WAS ORIGINALLY BELONGING TO THE HUF KHANCHA ND L. VARMA AND THAT AFTER HIS DEATH IT CAME TO HUF OF AP PELLANT'S FATHER RAMLABHAYA K VARMA. AFTER DEATH OF SHRI RAML ABHYA K VARMA ON 9-3-1997, THE LAND WAS TRANSFERRED TO HIS LEGAL HEIRS. ACCORDINGLY, THE LAND IS BELONGING TO THE HUF OF TH REE BROTHERS. IT IS SUBMITTED THAT AS EXPLAINED EARLIER THIS LAND BE ING SURVEY NUMBER 150 AFTER TERMINATION OF TRANSACTION WITH BH AVESH CHANDULAL, REMAINED UNSOLD AND THAT, THEREFORE, THE FORFEITED AMOUNT IS CONSIDERED IN THE CASE OF 3 HUFS. LAND BEING SURVEY NO. 147 IS SUBSEQUENTLY SOLD. AS THE LAND AT SURVEY NO.147 WAS ACQUIRED BY APPELLANT'S FATHER AN D IT CAME TO THE 3 BROTHERS ON HIS DEATH, IT WAS CONSIDERED AS P ROPERTY OF 3 BROTHERS IN INDIVIDUAL CAPACITY AND ITS SALE WAS CO NSIDERED FOR TAXATION IN THE RETURNS FILED BY THREE BROTHERS IN INDIVIDUAL CAPACITY .' IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 134 - 72. CIT(A) HAVING CONSIDERED THE SUBMISSION ON BEHA LF OF ASSESSEE, GRANTED RELIEF TO ASSESSEE I.E. ADDITIONS WERE MADE IN THE HAND OF THREE HUF AS CLAIMED AND PROTECTIVE ADDITIONS WERE DELETED FROM INDIVIDUAL HAND. BEFORE US, LD. D.R. SUPPORTED THE ORDER OF ASSESSING OFFICER WHILE LD. AUTHORIZED REPRESENTATIVE SUPPORT ED THE ORDER OF CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFOE CI T(A) . 73. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT THE FIRST QUESTION WHICH ARISES IN THIS C ASE IS WHETHER THE LAND AT THALTEJ BELONGS TO THE INDIVIDUALS OR THEIR HUF THAT IS, MAHESH R VARMA HUF, RAJNI R VARMA HUF AND RAVI R VA RMA HUF. IN ORDER TO KNOW AS TO WHO WAS THE OWNER OF THE THA LTEJ LAND, THE LD. AUTHORIZED REPRESENTATIVE WAS ASKED BY CIT(A) TO FU RNISH THE COPIES OF PURCHASE DEEDS ETC TO ESTABLISH THAT THE SURVEY NUMBER 147 AND 150 ARE INHERITED BY THE APPELLANTS FROM THEIR FORE FATHERS. AFTER EXAMINING THE DETAILS FILED BY THE LD. AUTHORIZED R EPRESENTATIVE. IT IS NOTICED THAT'THE AGRICULTURAL LAND BEARING SURVEY N UMBER 150 WAS PURCHASED BY THE GRANDFATHER SHRI KHANCHAND VARMA B EFORE HIS DEATH IN 1961. SHRI KHANCHAND VARMA HAD THREE SONS NAMELY SHRI RAMLABHAYA K VARMA, ISHWARDAS K VARMA AND SHRI SANT ARAM K VARMA. VIDE RELEASE DEED DATED 28/4/1997, SHRI SANT ARAM K VARMA AND ISHWARDAS K VARMA RELEASED THEIR RIGHTS IN SURV EY NUMBER 150 IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 135 - IN FAVOUR OF THEIR BROTHER SHRI RAMLABHAYA K VARMA. THE RELEVANT ENTRY HAS BEEN MADE IN THE RECORDS ON 30/4/1997. 74. SHRI RAMLABHAYA K VARMA HAD FIVE SONS NAMELY MU KESH R VARMA, MAHESH R VARMA, MAHENDRA R VARMA, RAJNI R VA RMA AND RAVI R VARMA. THE LAND BEARING SURVEY NUMBER 147 AT THALTEJ WAS PURCHASED BY SHRI RAMLABHAYA K VARMA ON 27/10/1988. BEFORE HIS DEATH ON 9/3/1997 A WILL WAS MADE BY HIM WHICH WAS EXECUTED ON 9/1/1997. AS PER THIS WILL, THE MOVABLE AND IMMOVA BLE PROPERTIES OF SHRI RAMLABHAYA K VARMA WAS TO BE GIVEN TO HIS LEGA L HEIRS. THE PROPERTY OF THALTEJ LAND WAS TO BE EQUALLY DISTRIBU TED AMONG HIS FIVE SONS NAMELY MUKESH, MAHESH, MAHENDRA, RAJNI AND RAV I VARMA.VIDE DECLARATION DATED 14/12/2002 SHRI MUKESH R VARM'A, MAHENDRA R VARMA AND MADHU BEN R VARMA DAUGHTER OF RAMLABHAYA K VARMA RELEASED THEIR RIGHTS IN FAVOUR OF MAHESH R VARMA, RAJNI R VARMA AND RAVI R VARMA. THEIR NAMES WERE DELETED FROM THE RECORDS OF THE TALATI ON 1/1/2003 AS PER T HE FORM NUMBER 6 THE STATEMENT OF RIGHTS. THE RIGHTS OF RECORDS IN FORM NUMBER 6 OF SURVEY NUMBER 147 AND 150 WAS PRODUCED BEFORE CIT(A ). THE COPIES OF DECLARATION AND RELEASE DEEDS WERE ALSO FILED BE FORE HIM. IN VIEW OF THE ABOVE FACTS, IT WAS FOUND THAT THE LAND AT THAL TEJ BEARING SURVEY NUMBER 147 AND 150 WAS NEVER PURCHASED BY THE APPEL LANTS BUT WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 136 - INHERITED BY THEM FROM THEIR FATHER SHRI RAMLABHAYA K VARMA AS DISCUSSED ABOVE. 75. IN SUPPORT OF THE EXISTENCE OF HUF, THE COPIES OF ORIGINAL RETURN OF INCOME FOR ASSESSMENT YEAR 2005 - 2006, 2006 - 2 007 AND 2007 - 2008 WAS FILED BY THE AR IN RESPECT OF THE FOLLOWIN G ENTITIES : 1. RAMLABHAYA K VARMA HUF PROPRIETOR OF HARIOM CORPORATION ENGAGED IN THE BUSINESS OF COMMISSION A ND FINANCE. 2. MAHESH R VARMA HUF 3. RAJNI R VARMA HUF AND 4. RAVI R VARMA HUF 5. KHANCHAND LADHARAM HUF PROPRIETOR OF KISHORE CORPORATION FOR ASSESSMENT YEARS 2005-06 FILED ON 31/8/2005 AND ASSESSMENT YEAR 2006-07 FILED ON JULY 2006. FROM THE ABOVE, IT WAS FOUND CLEAR THAT THE HUF OF SHRI MAHESH R VARMA, RAJNI R VARMA AND RAVI R VARMA WERE IN EXIST ENCE. THIS REASONED FINDING OF CIT(A) IS UPHELD BY US. 76. THE NEXT QUESTION AROSE AS TO WHO WAS ASSESSABL E ENTITY IN RESPECT OF THE SALE OF SURVEY NUMBER 147/150. ACCO RDING TO THE ASSESSING OFFICER SINCE THE ABOVE MENTIONED LAND WA S STANDING IN THE NAME OF THE THREE BROTHERS AND THEIR WIVES, THE SAL E PROCEEDS OF THE LAND WAS ASSESSABLE IN THEIR INDIVIDUAL CAPACITY. ANOTHER ARGUMENT OF THE ASSESSING OFFICER WAS THAT THE SALE PROCEEDS OF THE PART OF SAME LAND IN SUBSEQUENT YEARS HAD BEEN SHOWN IN THE RETU RNS OF THE INDIVIDUALS NAMELY THE THREE BROTHERS AND THEIR WIV ES IN EQUAL RATIO. IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 137 - THE ARGUMENT OF AUTHORIZED REPRESENTATIVE WAS THAT SINCE THE LAND BEARING SURVEY NUMBER 147 AND 150 WAS INHERITED LAN D, THE SAME BELONGS TO THE HUF OF MAHESH R VARMA, RAJNI R VARMA AND RAVI R VARMA AND NOT TO THE INDIVIDUALS. AT THE TIME OF AP PELLATE PROCEEDINGS, AUTHORIZED REPRESENTATIVE ADMITTED THA T IT WAS A MISTAKE ON THE PART OF THE ASSESSEES TO SHOW THE SA LE PROCEEDS OF THE LAND IN SUBSEQUENT YEARS IN INDIVIDUAL HANDS AS AGA INST IN THE BANDS OF THE HUF WHICH DOES NOT CHANGE THE LEGAL SITUATIO N ON THE ISSUE THAT LAND IN QUESTION BELONG TO RESPECTIVE HUFS. 77. ONCE THE LAND WAS NOT SOLD TO BHAVESH CHANDULAL , THE PERSON MENTIONED IN THE SEIZED PAPER, COULD THE CASH AMOUN T RECEIVED FROM HIM AGAINST THE SALE OF THE LAND, BE TAXED AS UNACC OUNTED INCOME OF THE SELLER. AS STATED ABOVE, THE PART OF THE THALT EJ LAND WAS AGREED TO BE SOLD TO ONE BHAVESH CHANDULAL. AGAINST THE SALE OF THE LAND SOME AMOUNT WAS RECEIVED FROM BIM. HOWEVER, THE LAND COU LD NOT BE FINALLY SOLD TO HIM BECAUSE HE WANTED THE LAND TO BE DEVELO PED IN A PARTICULAR WAY WHICH WAS NOT POSSIBLE AS PER THE RU LES AND REGULATIONS OF AUDA. THE APPELLANT THEREFORE, FORFE ITED AN AMOUNT OF RS. 60 LACS AND RETURNED THE BALANCE AMOUNT TO HIM. THE AMOUNT OF RS. 60 LACS HAS BEEN SHOWN BY THE THREE HUF OF SHRI MAHESH VARMA, RAJNI VARMA AND RAVI VARMA IN THEIR RETURN O F INCOME IN EQUAL PROPORTION OF RS.20 LACS EACH. THE PORTION O F THE LAND WAS IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 138 - SUBSEQUENTLY SOLD TO CHANDRAKANT K SHAH ON 1/2/2007 , A COPY OF SALE DEED WAS ALSO PRODUCED BEFORE CIT(A) AT FIRST APPELLATE STAGE. IN THIS BACKGROUND, CIT(A) OBSERVED THAT SINCE THE SAL E WAS NOT FINALLY MADE TO SHRI BHAVESH CHANDULAL, THE CASH AMOUNT REC EIVED AGAINST THE SALE OF THE LAND COULD NOT BE TAXED IN THE HAND S OF THE SELLER PARTICULARLY WHEN THE PORTION OF SAME LAND HAS BEEN SOLD TO SOMEBODY ELSE, THAT IS, SHRI CHANDRAKANT K SHAH IN SUBSEQUENT YEAR. THEREFORE, THE AMOUNTS RECEIVED FROM SHRI BHA VESH CHANDULAL AGAINST THE SALE OF THE THALTEJ LAND COULD NOT BE T AXED UNLESS THE LAND HAS BEEN FINALLY SOLD TO HIM. SINCE IN THIS CASE, T HE LAND HAS NOT BEEN SOLD TO SHRI BHAVESH CHANDULAL BUT TO SHRI CHANDRAK ANT K SHAH, THE AMOUNT RECEIVED FROM SHRI BHAVESH CHANDULAL COULD N OT BE TREATED AS UNACCOUNTED INCOME OF THE APPELLANTS. HAD THE AS SESSING OFFICER ESTABLISHED THAT THE PAYMENTS WERE MADE BY SHRI BHA VESH CHANDULAL BUT THE LAND WAS REGISTERED IN THE NAME OF SHRI CHA NDRAKANT K SHAH AT THE INSTRUCTIONS OF SHRI BHAVESH CHANDULAL, THEN ONLY THE AMOUNT RECEIVED FROM HIM COULD HAVE BEEN TAXED IN THE HAND S OF THE SELLERS. IT WAS ADMITTED BY THE ASSESSING OFFICER THAT AN AM OUNT OF RS. 25 LACS WAS RECEIVED BY CHEQUE AGAINST THE SALE OF THA LTEJ LAND. THIS AMOUNT WAS STATED TO HAVE BEEN RECEIVED BY THE BIGG ER HUF NAMELY KISHORE CORPORATION A PROPRIETARY CONCERN OF KHANCH AND VARMA HUF, THE GRANDFATHER OF THE APPELLANTS ON 12/9/2005 , WHICH WAS RETURNED BACK DURING THE PERIOD 22/3/2006 TO 30/3/2 006. FURTHER, IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 139 - 17,503 SQ. MTR. OF LAND OF SURVEY NUMBER 147 HAS BE EN SOLD TO SHRI CHANDRAKANT K SHAH ON 1/2/2007 FOR RS. 60 LACS. AS PER THE SALE DEED, THE CHEQUES OF RS. 10 LACS EACH HAS BEEN PAID TO SHRI RAJNI R VARMA, MAHESH R VARMA, RAVI R VARMA AND THEIR WIVES NAMELY MADHVI VARMA, SHYAMALINA VARMA AND SHEETAL VARMA BY SHRI CHANDRAKANT K SHAH. THE CASE OF THE ASSESSING OFFIC ER WAS THAT SINCE THE SALE PROCEEDS OF THE LAND HAD BEEN EQUALL Y DISTRIBUTED BY THE ABOVE-MENTIONED SIX MEMBERS OF VARMA FAMILY, TH E AMOUNT RECEIVED FROM BHAVESH CHANDULAL WAS ALSO REQUIRED T O BE ASSESSED AMONG THE SAME SIX MEMBERS IN EQUAL PROPORTION. AS HELD ABOVE THAT THE LAND IN QUESTION HAS BEEN INHERITED BY THE HUF OF THREE BROTHERS, THE SALE PROCEEDS OF THE LAND WAS TAXABLE IN THE HANDS OF THEIR HUF AND NOT IN THE INDIVIDUAL CAPACITY. THE A SSESSING OFFICER WAS THEREFORE RIGHTLY DIRECTED TO ASSESS THE SALE P ROCEEDS RECEIVED FROM SHN CHANDRAKANT K SHAH IN THE HANDS OF THE RAJ NI R VARMA HUF, MAHESH R VARNIA HUF AIIDRAYI R VARMA HUF IN EQ UAL PROPORTION. AS THE SALE OF THE LAND COULD NOT BE FI NALLY MADE TO SHRI BHAVESH CHANDULAL, THE AMOUNT RECEIVED FROM HIM COU LD NOT BE TAXED EITHER IN THE HANDS OF HUF OR INDIVIDUALS. HO WEVER, THE ASSESSING OFFICER WAS LEFT FREE TO INVESTIGATE THE ACTUAL SALE PROCEEDS OF SURVEY NUMBER 147 FINALLY SOLD TO CHANDRAKANT K SHAH ON THE BASIS OF THE ENTRIES MADE IN THE SEIZED PAPERS WHIC H INDICATES THE CASH PORTION OF RS.2.36 CRORES OVER AND ABOVE THE C HEQUE AMOUNT OF IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 140 - RS. 25 LACS. HE MIGHT HAVE TAKEN INTO CONSIDERATION THE FACT THAT IN THE LAST QUARTER OF 2005 THE TOTAL SALE CONSIDERATI ON OF SURVEY NUMBER 147 WAS TO THE TUNE OF RS. 2.61 CRORES. THIS REASO NED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE U PHOLD THE SAME. 78. THE NEXT ISSUE IS REGARDING WHETHER THE ENTRIE S MADE IN BOTH THE TABLES IN THE SEIZED PAPER REPRESENT THE AMOUNT REC EIVED FROM BHAVESH CHANDULAL OR THE LOWER TABLE WAS IN RESPECT OF THE TRANSACTIONS IN RESPECT OF ANOTHER LAND AT GHUMA WH ICH WAS DEVELOPED BY THE GROUP COMPANY OF THE APPELLANTS NA MELY RALSON INFRASTRUCTURE PVT LTD. ACCORDING TO THE ASSESSING OFFICER THE TRANSACTIONS IN BOTH THE TABLES WERE IN CONTINUATIO N OF THE SAME LAND DEAL BEARING SURVEY NUMBER- 147 AT THALTEJ. WHEREAS , THE CASE' OF THE APPELLANT WAS THAT THE LOWER TABLE DID NOT REPRESEN T THE TRANSACTIONS OF THALTEJ LAND BUT REPRESENTS THE RECEIPT FROM THE MEMBERS OF HARIOM VILLA AND EXPENDITURES THERE, ON INCURRED BY RALSON INFRASTRUCTURE PVT LTD. ON THE PERUSAL OF THE TRANS ACTIONS, CIT(A) RIGHTLY AGREED WITH THE ASSESSING OFFICER THAT THE TRANSACTIONS MENTIONED IN BOTH THE TABLES ARE IN CONTINUATION. THIS WAS EVIDENT FROM THE FACT THAT THE TABLE NUMBER-1 REFERRED TO B Y THE ASSESSING OFFICER IN THE ASSESSMENT ORDER REPRESENTS REC&IPT OF CASH AND CHEQUE ON THE LEFT SIDE FROM BHAVESH CHANDULAL. IN THE RIGHT HAND SIDE OF THIS TABLE THE APPLICATION OF THE SAID AMOU NTS HAD BEEN IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 141 - MENTIONED UP TO NOVEMBER 2005. IN THE SECOND TABLE' THE FIRST ENTRY OF RUPEES 2 LACS REPRESENTS THE CLOSING BALANCE OF THE FIRST TABLE AND WAS SHOWN AS CARRIED FORWARD BALANCE IN THE SECOND TABL E. IN THE LEFT SIDE OF THE SECOND TABLE, THE NAME OF BHAVESH CHANDULAL WAS APPEARING ALONG WITH THE DATES OF AMOUNT RECEIVED FROM HIM. O N THE RIGHT HAND SIDE OF THIS SECOND TABLE, THE APPLICATION OF MONEY RECEIVED FROM BHAVESH CHANDULAL HAD BEEN MENTIONED FOR THE MONTH OF DECEMBER 2005 AND JANUARY 2006. AGAINST THE TOTAL OF 125 (WH ICH REPRESENTS 1.25 CRORES), THE NAME OF SHRI BHAVESH CHANDULAL WA S APPEARING. THIS MEANS THAT IN THE SECOND TABLE TOTAL AMOUNT OF RS. 1.25 CRORES HAD BEEN RECEIVED FROM BHAVESH CHANDULAL. THEREFOR E, CIT(A) RIGHTLY HELD THAT THE TRANSACTIONS IN FIRST AND SECOND TABL E WERE IN CONTINUATION. IN FACT THE NAME OF GHUMA LAND WAS A PPEARING ON THE RIGHT HAND SIDE OF THIS TABLE WHICH ONLY PROVES THA T THE MONEY RECEIVED FROM BHAVESH CHANDULAL HAS BEEN INVESTED O R UTILISED FOR THE EXPENSES OF GHUMA PROPERTY. IT DID NOT GIVE THE DETAILS OF THE MEMBERS CONTRIBUTIONS OR THE EXPENDITURE IN RESPECT OF HARIOM VILLA WHICH WAS DEVELOPED BY RALSON INFRASTRUCTURE PVT LT D AT GHUMA. 79. IN SUM AND SUBSTANCE, IT WAS HELD THAT THE SURV EY NUMBER 147 AND 150 AT THALTEJ WAS OWNED BY THE HUF OF SHRI RAJ NI VARMA, MAHESH VARMA AND RAVI VERMA AND NOT BY THE SIX INDI VIDUALS AS HELD BY THE AO IN THE ASSESSMENT ORDER. THE SALE PR OCEEDS WERE IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 142 - ACCORDINGLY TAXABLE IN THE HANDS OF RAJNI VARMA HUF , MAHESH VARMA HUF AND RAVI VERMA HUF ON SUBSTANTIVE BASIS. IN FAC T THE APPELLANTS HAVE RIGHTLY SHOWN THE FORFEITURE INCOME OF RS. 60 LACS IN EQUAL PROPORTION IN THE HANDS OF THE THREE HUF, SIN CE THE LAND WAS NOT SOLD TO BHAVESH CHANDULAL, THE CASH RECEIVED FR OM HIM AGAINST THE SALE OF THE LAND COULD NNOT BE TAXED. THE SALE PROCEEDS WAS TAXABLE ONLY WHEN THE LAND WAS FINALLY SOLD TO SHRI CHANDRAKANT K SHAH IN THE HANDS OF THE THREE HUF IN ASSESSMENT YE AR 2007-2008. THE ADDITION OF RS. 29,35,166 MADE ON ACCOUNT OF EN TRY ON THE LOOSE PAPERS AND ADDITION OF RS. 10 LAKH TOWARDS THE SALE OF BLOCK OF LAND BEARING SURVEY NUMBER 150 AT THALTEJ MADE IN THE CA SE OF THE INDIVIDUAL APPELLANTS WAS RIGHTLY DIRECTED TO BE DE LETED. THE FORFEITURE INCOME OF RS. 60 LACS WAS TAXABLE IN THE HANDS OF T HREE HUFS OF RAJNI VARMA HUF, MAHESH VARMA HUF AND RAVI VARMA HU F IN EQUAL PROPORTION OF RS. 20 LACS EACH ON SUBSTANTIVE BASIS. 80. THE NEXT GROUND IS REGARDING GRANTING OF AN OPP ORTUNITY OF BEING HEARD BEFORE GRANTING APPROVAL TO PASS THE ORDER UN DER SECTION 153A READ WITH SECTION 143 (3) OF THE INCOME-TAX ACT. NO WRITTEN SUBMISSIONS OR ARGUMENTS WERE MADE BY THE APPELLANT IN RESPECT OF THIS GROUND. THERE IS NO SPECIFIC PROVISION IN THE ACT WHICH GIVES A RIGHT TO AN ASSESSEE OF BEING HEARD BEFORE GIVING A PPROVAL BY THE JOINT COMMISSIONER OF INCOME TAX/ADDITIONAL COMMISSIONER OF INCOME TAX IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 143 - TO PASS THE ORDER UNDER SECTION 153 A OF THE INCOME TAX ACT. IN VIEW OF THE DECISION OF KAILASH MOUDGIL, SPL BENCH DELHI ITAT 248 ITR 59(AT) THIS GROUND OF THE APPELLANT IS DISMISSED. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 81. IN SHORT, THE INCOME OF RS.20 LAKHS EACH SHOWN BY ASSESSEE HUFS IS DIRECTED TO BE ASSESSED ON SUBSTANTIVE BASI S. IN OTHER WORDS, THE APPEALS OF THE THREE HUFS ALLOWED BY CIT (A) ARE UPHOLD BY US. THE ADDITION OF RS.29,35,166/- MADE ON ACCOUNT OF ENTRY ON THE LOOSE PAPERS AND ADDITION OF RS.10 LAKH TOWARDS THE SALE OF BLOCK OF LAND BEARING SURVEY NUMBER 150 AT THALTEJ MADE IN T HE CASE OF THE INDIVIDUAL APPELLANTS NAMELY, RAJNI VARMA AND MAHES H VARMA WERE RIGHTLY DIRECTED TO BE DELETED IN THESE YEARS. WE U PHOLD THE SAME. 82. IN RESULT, ASSESSEES APPEAL IT(SS)A NO.96/AHD/ 2011 FOR A.Y. 2006-07 IS PARTLY ALLOWED. REVENUES APPEAL IN IT( SS)A NO.190/AHD/2011 FOR A.Y. 2006-07 AND CORRESPONDING C.O. NO.84/AHD/2011 ARE DISMISSED. ASSESSEES APPEAL IN IT(SS)A NO.97/AHD/2011 FOR A.Y. 2006-07 IS ALLOWED. REVENU ES APPEAL IN IT(SS)A NO.188/AHD/2011 AND CORRESPONDING C.O. NO.8 2/AHD/2011 FOR A.Y. 2006-07 ARE DISMISSED. ASSESEES APPEAL I N IT(SS)A NO.98/AHD/2011 FOR A.Y.2007-08 IS ALLOWED. ASSESSE ES APPEALS IT(SS)A NO.194/AHD/2011, 195/AHD/2011 AND ITA IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 144 - NO.1481/AHD/2011 FOR A.Y. 2006-07, 2007-08 AND 2008 -09 RESPECTIVELY ALLOWED. REVENUES APPEAL IN IT(SS)A NO. 189/AHD/2011 AND CORRESPONDING C.O. NO.83/AHD/2011 FOR A.Y. 2006 -07, REVENUES APPEAL IN IT(SS)A NO. 190/AHD/2011 AND CO RRESPONDING C.O. NO.85/AHD/2011 FOR A.Y. 2006-07, REVENUES APP EAL IN IT(SS)A NO. 192/AHD/2011 AND CORRESPONDING C.O. NO.86/AHD/2 011 FOR A.Y. 2006-07 AND REVENUES APPEAL IN IT(SS)A NO. 193/AHD /2011 AND CORRESPONDING C.O. NO.87/AHD/2011 FOR A.Y. 2006-07 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 15 TH JUNE 2016 AT AHMEDABAD. SD/- SD/- SD/- SD/- MANISH BORAD SHAILENDRA KUMAR YADAV (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD; DATED 15/06/2016 ORDER PR ONOUNCED IN THE OPEN COURT. S D/- SD/- A. M J.M. S. K. SINHA ! '! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A), 5. !'# $$ , , %&'' / DR, ITAT, AHMEDABAD 6. #() * / GUARD FILE. # $ / BY ORDER, % / $ &' (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD IT(SS)A NOS. 96/AHD/11 &ORS. & C.O. NOS.84/AHD/11 & ORS. SHRI MAHESH R. VARMA & ORS. AYS 2006-07, 07-08 & 08-09 - 145 - 1. DATE OF DICTATION- 27/5/16 & ON COMPUTER 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE 31.05.16 & 01.06.2016 DICTATING MEMBER..OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.-. .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH FAIR ORDER COMES BACK TO SR. PS/PS 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER