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Income Tax Appellate Tribunal, JAIPUR BENCHES ’B’ JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 827/JP/2018
These are four appeals filed by the assessee against the order of ld. CIT(A)-1, Jaipur dated 18.04.2018, 16.12.2016 & 02.02.2015 for A.Ys 2007-08, 2008-09, 2009-10 & 2010-11 respectively. Since the common issues are involved, all these appeals were heard together and are disposed off by this consolidated order.
The grounds of appeal
raised by the assessee in respective appeals are as under:- : “On the facts and circumstances of the case ld. CIT (Appeals) erred:
1. In upholding the assessment order passed u/s 147/144 of Income Tax Act, 1961 and in not holding the same to be unjust, bad in law and not following provisions of law.
2. In confirming the addition made on account of unexplained investment amounting to Rs. 8,90,968/- u/s 69B of Income Tax Act, 1961, towards house construction for A.Y 2009-10 are erroneous and not as per provisions of law.” : “On the facts and circumstances of the case, ld. CIT (Appeals) erred:
1. In confirming the order passed u/s 147/144 of Income Tax Act, 1961 solely on the basis of survey conduct at the premises of assessee which was conduct in violation of the provisions of section 133A, and objections challenging the 2 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur validity of which were raised before Ld. AO who straightaway proceeded to pass the impugned assessment order by completely ignoring the objections of assessee. Further Ld. CIT grossly erred in upholding the assessment order which deserved to be held bad in law unjust and which deserved to be annulled.
2. In confirming the impugned assessment by solely placing reliance on the so-called material gathered and the statements recorded during the course of survey proceedings by completely ignoring the well established law that the statements recorded during the course of survey have no evidentiary value. Further, the so-called material gathered was also established by assessee as no-reliable and dumb papers, thus the action of Ld. AO in relying upon then deserves to be held bad in law the impugned assessment be quashed.
3. On the facts and in the circumstances of the case, the Ld. CIT (Appeals) has grossly erred in confirming the addition of RS, 32,90,728/- u/s 69B of the Income Tax Act, 1961 solely on the basis of papers found and illegally impounded during the course of survey which did not even pertain to the assessee. Thus, the addition of Rs. 32,90,728/- deserves to be deleted.
4. That, the Ld.CIT (Appeals) has further erred in ignoring facts that the above mentioned papers were merely dumb papers containing rough calculations/entries and did not in any manner indicate any unexplained investment in the construction of hotel. Thus, the addition of Rs. 32,90,728/- deserves to be deleted.
5. That, the Ld. CIT (Appeals) has further erred in not properly appreciating the actual amount of investment in 3 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur construction of hotel which was submitted during the course of assessment proceedings before Ld. AO and the source of such investment has also been explained, however stand ignored by the Ld. AO. Thus, the action of Ld. CIT(Appeals) in confirming impugned addition made by Ld. AO without considering the evidence submitted, deserves to be held bad in law and the addition deserves to be deleted.
6. On the facts and in the circumstances of the case, the Ld. CIT (Appeals) has grossly erred in confirming Ld.AO initiation of penalty u/s 271(10)(c ) which is arbitrary.
7. On the facts and in the circumstances of the case, the Ld. CT (Appeals) has grossly erred in confirming Ld.AO's initiation of penalty u/s 271A which is arbitrary.”
ITA No. 139/JP/2017:
“On the facts and circumstances of the case, Ld. CIT (Appeals) erred:- 1. In confirming the order passed u/s 147/144 of Income Tax Act, 1961 solely on the basis of survey conduct at the premises of assessee which was conduct in violation of the provisions of section 133A, and objections challenging the validity of which were raised before Ld. AO who straightaway proceeded to pass the impugned assessment order by completely ignoring the objections of assessee. Further Ld. CIT grossly erred in upholding the assessment order which deserved to be held bad in law unjust and which deserved to be annulled. Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur
2. In confirming the impugned assessment by solely placing reliance on the so-called material gathered and the statements recorded during the course of survey proceedings by completely ignoring the well established law that the statements recorded during the course of survey have no evidentiary value. Further, the so-called material gathered was also established by assessee as no-reliable and dumb papers, thus the action of Ld. AO in relying upon then deserves to be held bad in law the impugned assessment be quashed.
3. On the facts and in the circumstances of the case, the Ld. CIT (Appeals) has grossly erred in confirming the addition of RS, 79,32,265/- u/s 69B of the Income Tax Act, 1961 solely on the basis of papers found and illegally impounded during the course of survey which did not even pertain to the assessee. Thus, the addition of Rs. 79,32,265/- deserves to be deleted. 4. That, the Ld.CIT (Appeals) has further erred in ignoring facts that the above mentioned papers were merely dumb papers containing rough calculations/entries and did not in any manner indicate any unexplained investment in the construction of hotel. Thus, the addition of Rs. 79,32,265/- deserves to be deleted. 5. That, the Ld. CIT (Appeals) has further erred in not properly appreciating the actual amount of investment in construction of hotel which was submitted during the course of assessment proceedings before Ld. AO and the source of such investment has also been explained, however stand ignored by the Ld. AO. Thus, the action of Ld. CIT(Appeals) in confirming impugned addition made by Ld. AO without considering the evidence submitted, deserves to be held bad in law and the addition deserves to be deleted. 6. On the facts and in the circumstances of the case, the Ld. CIT (Appeals) has grossly erred in confirming Ld.AO initiation of penalty u/s 271(1)(c ) which is arbitrary.
Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur
On the facts and in the circumstances of the case, the Ld. CIT (Appeals) has grossly erred in confirming Ld.AO's initiation of penalty u/s 271A which is arbitrary.”
ITA No. 232/JP/2015:
“On the facts and circumstances of the case ld. CIT(A) has erred -
In upholding the assessment order passed u/s 148/143(3) of Income Tax Act, 1961 and in not holding the same to be unjust, bad in law and not following provisions of law.
2. In upholding the proceedings of survey conducted on 28.7.2010 which are arbitrary, unjust and not following provisions of law and humbly prays the same to be annulled.
3. In confirming the addition made on account of unexplained investment amounting to Rs. 41,25,756/- u/s 69B of Income Tax Act, 1961, towards house construction for AY 2009-10 are erroneous and not as per provisions of law. Ld. Further Ld. CIT (A) erred in not appreciating the evidence submitted before Ld. AO and before himself relating to receipt of loan from Sh. Shankar Jethani amounting to Rs. 25 lacs and disregarding the loan agreement and evidences submitted. Further Ld. CIT (A) erred in not accepting the evidence of cash credit and source of earning income being documents which were impounded during survey and which are part of assessment record and thereby not following provisions of law.
In confirming ld. AO's disregarding the loan document of Sh. Shanker Jethani amounting to Rs. 25 Lacs and statement submitted by assessee giving the amount appearing in assessee's bank account transferred by Sh. Shanker Jethani. Further assessee objects to finding of ld. AO that inflow from operation is Rs.1,66,996/- and not Rs.20 Lacs as suggested by assessee.” 6 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur
At the outset, the ld. AR submitted that he does not wish to press Ground No. 1 in Ground No. 1, 6 & 7 in ITA No. 138/JP/2017, Ground No. 1, 6 & 7 in ITA No. 139/JP/2017 and Ground No. 1 & 2 in ITA No. 232/JP/2015. All these grounds are thus dismissed as not pressed by the ld. AR on behalf of the assessee.
4. In respect of other grounds taken by the assessee in the respective appeals, the ld. AR submitted that all these grounds effectively relates to addition made by the Assessing Officer towards undisclosed investment in construction of Hotel premises u/s 69B of the Act and the position in respective years after getting relief from the ld. CIT(A) is as under:- Particulars A.Y. 2007-08 A.Y. 2008-09 A.Y 2009-10 A.Y. 2010-11 Date of Order 30.09.14 12.03.16 14.03.16 28.03.13 Whether Re- Assessment Re-opened Re-opened Re-opened Regular Undisclosed investments alleged by ld. AO 10,90,968 35,90,728 83,24,265 44,92,752 Less: Investment out of Agriculture income(Accepted by ld. AO) 2,00,000 3,00,000 3,92,000 2,00,000 Addition by ld. AO 8,90,968 32,90,728 79,32,265 42,92,752 Relief by ld. CIT(A) 0 0 0 1,66,906 Addition confirmed by ld. CIT(A) 8,90,968 32,90,728 79,32,265 41,25,846
In this regard, the ld. AR submitted that the assessee has constructed a Hotel ‘Mahal Khandela’ at a pre-existing building 7 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur earlier used for residential purposes and in the first year of operations for the year ended 31.03.2010 relevant to A.Y 2010-11, it has recorded a turnover of Rs. 33,39,927/- and profits arising therefrom have been offered to tax. Subsequently, the survey u/s 133(A) was conducted at Hotel premises on 28.07.2010 wherein certain loose excel sheets were found and impounded containing the details of various expenses/payments made during the construction of the Hotel and also after commencement of Hotel operations. It was submitted that these excel sheet were prepared by a person who was not having much knowledge of the accounting and tax provisions and these excel sheets were also containing several items of drawings, repayment of loan, bank deposits apart from Hotel expenditure and these items cannot be considered as undisclosed investment for construction of Hotel premises. Our reference was drawn to an entry on 12th Nov, 2008 wherein Rs. 48,000/- was shown as deposited in Indian Overseas Bank and it was submitted that the amount so deposited cannot be considered as undisclosed investments. Our reference was drawn to various entries relating to personal drawings amounting to Rs. 2,16,245/- and it was submitted that the said amounts were withdrawn from the bank and therefore, cannot be considered as undisclosed investments. Further, our attention was drawn to repayment of loan taken from PNB amounting to Rs. 11,50,000/- and it was submitted that the said repayment of loan again cannot be considered as undisclosed investment. It was further submitted that there were also mistakes in calculation of amount of undisclosed investments such as advanced to contractors have been included twice and balance of one month carried forward to next month has also been added as undisclosed investment. It was further submitted that in the letter 8 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur dated 20.03.2013 addressed to the Assessing Officer, the assessee has submitted that he had provided complete details of source of investments to DDIT (Inv-II), Jaipur vide his earlier letter dated 18.08.2010, however, the same has not been considered by the Assessing Officer who has made the addition and details thereof are summarized as under:- “3.1 Source of construction of Hotel for different assessment years based on details submitted before DDIT (Inv.) – II vide letter dated 18-8-2010 are as under:-
F.Y. 2006-07 F.Y. 2007-08 F.Y. 2008-09 F.Y. 2009-10 Particulars
A.Y. 2007-08 A.Y. 2008-09 A.Y. 2009-10 A.Y. 2010-11 Remaining alleged investment 8,90,968 20,57,176 72,01,804 29,75,846 (as discussed in pt. 3.1) Source of Investment: Returned Income 1,40,343 1,48,766 4,89,070 1,430 (Para 3.4) Sale of Personal 10,50,000 Effect (Para 3.5) 10,00,000 Loan earlier given to R.G. Saraff 13,75,000 received later (Para 3.6) Loan Taken from PNB & Others 13,80,000 (Para 3.7) Loan from Shanker Jethani 25,00,000 (Para 3.8) Receipts from Operations 20,00,000 (Para 3.9) Surplus remaining in A.Y. 2007-08 2,49,375 utilized in A.Y. 2008-09 Investment out of past savings 2,84,035 0 0 42,82,734 (Para 3.10)
Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur
Total sources 8,90,968 20,57,176 72,01,804 29,75,846 available
It was accordingly submitted that during the course of assessment proceedings, the Assessing officer has not correctly appreciated the nature of the various individual items so reflected in the loose excel sheets. Further, the source of investment submitted before the DDIT (Inv-II), Jaipur have not also been considered. It was accordingly submitted that appropriate relief may be granted to the assessee. Alternatively, it was submitted that the matter may be set aside to the file of the Assessing Officer to examine the matter afresh.
7. Per contra, the ld. DR is heard who has submitted that except for A.Y 2010-11 wherein the assessment has been completed u/s 143(3), for other 3 years, the assessment has been completed u/s 147 read with 144 of the Act. It was submitted by the ld. DR that the assessee has not cared even to represent its matter before the Assessing Officer and sufficient opportunity have already been provided to the assessee by the Assessing Officer. Further, referring to the order of the ld. CIT(A), even at the appellate stage, the appellant has failed to expenditure the source of investment in the Hotel. It was accordingly submitted that sufficient opportunity have already been granted to the assessee by the Assessing Officer as well as by the ld. CIT(A) and where the assessee has failed to provide the suitable explanation regarding nature and source of investment, the addition so made in the respective years should be confirmed. It was further submitted that where the Bench so desire, the matter may be remand back to the file of the Assessing Officer to examine the same afresh. 10 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur
In his rejoinder, the ld. AR submitted that Shri Hanwat Singh, the Karta of assessee HUF was not keeping well for quite some time and he has since expired on 17.04.2014. Given such personal incident in the family and the fact that transition to the other members of the assessee HUF took some time, there is no doubt there is deficiency on the part of the assessee HUF in attending to the assessment proceedings. At the same time, it was submitted that given the various factual inaccuracies as highlighted in the loose excel sheets found during the course of survey and the source of the investment not been rightly appreciated and considered by the Assessing officer, in the interest of justice, the matter may be set aside to the file of the Assessing Officer to examine the matter afresh for all the years under consideration. It was further submitted that the assessee will be diligent in attending to the proceedings before the Assessing officer and will ensure on its part in timely completion of the proceedings.
We have heard the rival contentions and purused the material available on record. We agree with the fact that suitable opportunity have been provided by the Assessing Officer as well as by the ld. CIT(A), at the same time, given fact that the Karta of the assessee HUF who was handling the matters has since expired on 17.04.2014 and being a family run business, the challenges in transition of the business affairs to the next generation and in attending to the various proceedings cannot be ruled out. Further, as highlighted by the ld AR, we find that there are various entries in the loose excel sheets in the form of cash deposits, partner drawings, repayment of loan and entries relating to double counting which prima facie are not in the nature of expenditure on construction of the hotel and 11 Shri Hanwat Singh, Jaipur vs. ITO, Ward- 3 (02), Jaipur thus cannot be considered as unexplained investment u/s 69B of the Act. Further, there are submissions filed by the assessee before DDIT (Inv-II), Jaipur explaining the source of such investment in the hotel which has also not been considered by the Assessing officer. Therefore, in the interest of justice and fair play, we set aside the matter relating to undisclosed investment in construction of Hotel premises u/s 69B of the Act to the file of the Assessing Officer to examine the same afresh as per law without getting influenced by our prima facie observations as noted above. The assessee shall be at liberty to raise all the contentions before the Assessing officer which are raised by the assessee before us and submit necessary information/documentation in support thereof. Needless to say, the Assessing officer shall provide reasonable opportunity to the assessee and the assessee shall appear before the Assessing Officer and provide the necessary information and documentation as so directed by the Assessing officer.
In the result, all the four appeals filed by the assessee are partly allowed for statistical purposes.