M/S A.P.BUILDERS,,PUNE vs. ACIT, CENTRAL CIRCLE,1(1),, PUNE

The cross appeals filed by Revenue and assessee were heard together and are being disposed of by this consolidated order for the sake of convenience.

The Revenue in ITA No.613/PUN/2003 has raised the following grounds of appeal:- 1) In the facts and in the circumstances of the case the CIT(A) erred in accepting the cash flow statement prepared by the assessee and other family concerns as not consisting complete record of all undisclosed transactions. 2) On the facts and in the circumstances of the case the CIT(A) erred in accepting the cash flow statement in the case of the assessee and in treating the amount of Rs.7,40,000/- as income received from other sources by the firm in A.Y. 92-93 when both the partners were studying in college in that respective assessment year.

First of all the learned Departmental Representative for the Revenue withdrew the appeal of the Department vide letter dated 02.02.2015. Hence, the same is dismissed as withdrawn.

Now coming to the appeal of the assessee, the assessee furnished following concise grounds of appeal:-

The assessee has also raised additional grounds of appeal which read as under:- Additional Ground of appeal No.1 sought to be raised It may please be held that an amount of Rs.7,40,000.00 disclosed by the appellant as its undisclosed income in the Block return as Income from Other business [i.e. the profits from land dealings] is an income earned by the appellant firm and has been rightly offered for taxation by the appellant firm and the learned CIT(A) has rightly taxed the same on substantive basis in the hands of the appellant firm. Additional Ground of appeal No.21 sought to be raised It may please be held that an amount of Rs.19,72,000.00 as undisclosed receipts earned by the appellant from its various building projects and as

Ground No.2 raised by the assessee is not pressed. Hence, the same is dismissed as not pressed.

Now coming to the ground of appeal No.3 wherein the assessee is aggrieved by the disallowance made u/s 40A(3) of the Act.

This is a block assessment proceeding completed u/s 158BC(c) for the block period 01.04.1989 to 08.12.1999. The assessee is aggrieved by disallowance of Rs.10,30,500/- for assessment year 1996-97 and Rs.80,000/- for assessment year 1997-98.

The learned Authorised Representative for the assessee before us pointed out that the said disallowance made is outside the scope and purview of Section 40A(3) of the Act. In this regard, he pointed that the cash payment was made to land owners at Katraj. He also pointed out that during the course of search, document was found in which there was cheque entries and other entries, the total amount was Rs.55,52,500/- and 20% of the same was disallowed u/s 40A(3) of the Act. He placed reliance on the decision of ITAT, Pune in the case of ACIT Vs. Rushiraj Builders in ITA No.1802/PN/2005 order dated 13.02.2012 and the decision of ITAT Bangalore in the case of Madhuvana House Building Co-operative Society Vs. ACIT reported in 76 TTJ 948. Thereafter, he pointed to the decision in the case of ACIT Vs. Rushiraj Builders (supra) for the proposition that particulars of documents taking of cheque and cash payment are to be read as a whole.

We have heard the rival contentions and perused the record. The issue raised vide ground of appeal No.3 is with regard to the disallowance made u/s 40A(3) of the Act. The said disallowance has been made for block assessment carried out for block period 01.04.1989 to 08.12.1999. Admittedly, during the course of search, a document was found which had cheque and cash entries. The question which arises is that whether any disallowance can be made u/s 40A(3) of the Act while passing the block assessment order ? The answer to the same is no. The addition which needs to be made u/s 158BC (c) of the Act is the addition on the basis of the documents found during the course of search. Where this was the position as far as Section 158BC(c) assessment was considered and the provisions of Section 40A(3) of the Act are outside the ambit of block assessment, which is the proposition laid down by Pune Bench of the Tribunal in the case of ACIT Vs. Rushiraj Builders (supra). Applying the said proposition to the facts of the case, we hold that there is no merit in making the aforesaid disallowance u/s 40A(3) of the Act and we delete the disallowance of Rs.10,30,500/- for assessment year 1996-97 and Rs.80,000/- for assessment year 1997-98. The ground of appeal No.3 is allowed.

Now coming to the issue raised by ground of appeal No.1 wherein the assessee is aggrieved by the orders of the authorities below in holding that the assessee during the block period had made unexplained investment of Rs.55,52,500/- for the purchase of land at Kataj.

Briefly, in the facts of the case, certain cash payments were made for purchase of Katraj land as per Page 17-18 of the Bundle No.1 totaling to Rs.55,52,500/- in the statement recorded on 10.02.2000 and 11.02.2000. Shri

The learned Authorised Representative for the assessee before us pointed out that the partnership firm was formed on 15.01.1990 and it comprised of Shri Ankul Pingale and Shri Amod S. Purandare, who were both of 20 years of age. He further pointed out that the Assessing Officer in the case of Shri Subash G. Pingale i.e., father of Shri Amod Pingle had made addition of the aforesaid amount in his hands which was deleted on technical grounds as the proceedings under section 158BC(c) failed. The same was confirmed by the Hon’ble Bombay High Court. He also referred to paras 33 and 34 and pointed out that the findings of the Assessing Officer were that the money was invested by Shri Subash G. Pingale. Hence, no addition on merits to be made in the hands of the assessee firm. He also pointed out that the Assessing Officer made addition on account of unexplained investment and also made disallowance u/s 40A(3) of the Act for the entire amount. However, vide order u/s 154 of the Act, the same was reduced to 20%. Another aspect which was raised was that Assessing Officer was asked to summon the witness as per the letters placed at Pages 48 and 49 of the Paper Book 2. However, no summons were issued by the Assessing Officer and no opportunity of hearing was given to cross-examine and therefore no addition to be made in the hands of the assessee. He also placed on record, the copy of the assessment order of Shri Subash G. Pingale for the block period and it was pointed out that the

Learned Departmental Representative for the Revenue on the other hand, pointed out that in this case, the onus was on the assessee to produce the persons. The Department had seized the material which recorded such investment and hence, the addition needs to be upheld.

In the rejoinder, the learned Authorised Representative for the assessee stressed that when the Assessing Officer comes to conclusion that funds were provided by Shri Subash G. Pingale, hence, there is no question of making any addition in the hands of the partnership firm.

We have heard the rival contentions and perused the material on record. The addition of Rs.55,52,500/- has been made in the hands of the partnership firm on the premise that it had made an undisclosed investment for purchase of lands at Katraj. The said addition was made in the block assessment. The case of the assessee on the other hand, is that both the partners were young in age and had no source of income wherein the partnership firm came into existence on 15.01.1990; and also the case of the assessee was that entire funds were provided by Shri Subash G. Pingale. In this regard addition has been made in the hands of Subash G. Pingale on account of undisclosed investment. Once the addition has been made in one of the hands, then there is no question of making same addition in the hands of the partnership firm.

Now coming to the grounds of appeal No.4 which is against the charge of interest u/s 158 BFA(1).

The brief facts relating to the issue are whether the said interest levied for filing the return late for the block period is to be upheld or not ? The said interest has been levied u/s 158 BFA(1) by the Commissioner of Income Tax (Appeals) by way of enhancement on the ground that the return of income for the block period was delayed by the assessee. However, the plea of the assessee before us is that the delay was on the ground that Assessing Officer had not provided the photo copies of the documents. The learned Authorised Representative has pointed out that the issue stands covered by the order of the Pune Bench of the Tribunal in the case of ACIT Vs. Mr. Amod Subhash Pingale in ITA No.609/PN/2003 and CO No.10/PN/2014 order dt.08.07.2016

The last issue raised is against the charging of sur-charge. Search was for the period prior to 01.06.2002 and no surcharge is to be levied in such cases. Such is the proposition laid down by Tribunal in the case of Mr. Amod Subhash Pingale (supra) at Para 8 and following the same, we hold that no surcharge is leviale. The ground of appeal No.5 is allowed.

Now coming to the additional grounds of appeal raised by the assessee which are not pressed by the assessee. The same are dismissed as not pressed. Similarly, the appeal of Revenue is withdrawn by the Department and hence, the same is also dismissed as withdrawn.

In the result, the appeal of the assessee is allowed and the appeal of the Revenue is dismissed as withdrawn.