(SMT.) ANJU SINGH,LUCKNOW vs. ASSTT. COMMISSIONER OF INCOME TAX, LUCKNOW

PER BENCH:

This is a group of seven appeals filed by the assessee against the consolidated order of the ld. CIT(A) dated 30/12/2011. The assessee originally had taken a number of legal grounds along with grounds on merits, however, which were later on simplified and concise/revised grounds of appeals were filed vide letter dated 2/5/2018. All the appeals except appeal in assessment year 2009- 10involve similar issues and these were heard together, therefore, for the sake of convenience, a common and consolidated order is being passed. For the sake of convenience concise/revised grounds of appeal taken by the assessee in assessment year 2003-04 are reproduced below:-

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i. Plot No. 28, 29, 30 &31, Gaura Bagh, Lucknow. ii. Plot No. 37 & 38, Gaura Bagh, Lucknow iii. Plot No. 25 & 26 Gaura Bagh, Lucknow iv. Plot No. 35, 45, 46 & Khasra No.45 situated at Gaurabagh, Kursi Road, Lucknow (1/2 share, other 1/2 share belonging to Shri Mahesh Singh Patel). 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in not giving full benefit of amount surrendered by Shri K. N. Singh Patel,

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ASSESSMENT YEAR 2004-05:

ASSESSMENT YEAR 2005-06:

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In the affidavit, Shri. K. N. Singh Patel owned up the whole surrender of Rs.10 crores and furnished details of assets/investments which were made by him during several years in the name of his family members, namely, Smt. Anju Singh, Shri Mahesh Singh, Smt. Rajni Patel, etc. The Assessing Officer during the assessment proceedings in the case of the assessee, required the assessee to prove and demonstrate the source of funds for making investment in various immoveable assets and in reply the assessee submitted that the plots were purchased by her in various years and construction was done by her father-in-law and the construction cost was duly covered by the declaration of surrender made by her father-in-law Shri. K. N. Singh Patel. The reply of the assessee to this effect as reproduced by the Assessing Officer at page 17 of his order is reproduced below:-

It has further been stated by assessee that construction on both the above plots 25 & 26 was done by father-in-law of assessee Shri K.N. Singh Patel in the financial year 2007-08. The cost of construction has been included by him in the surrendered amount of Rs.90 lacs in that year.

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It has further been stated by assessee that construction on the above plots Nos. 28, 29, 30 and 31 was done by father- in-law of assessee, Shri K.N. Singh Patel in the financial year 2008-09. The cost of construction has been included by him in the surrendered amount of Rs.125 lacs in that year.

It has further been stated by assessee that construction on the above plots 37 and 38 was done by father-in-law of assessee Shri K.N. Singh Patel in the financial year 2002-03. The cost of construction has been included by him in the surrendered amount of Rs.75 lacs in that year.

It has further been stated by assessee that construction on the above plot alongwith other adjoining plots in the name of Shri Mahesh Singh Patel was done by father-in-law of assessee Shri K.N. Singh Patel in the financial years from 1999 to 2002-03 and approximately Rs.22 lacs was the cost of construction which has been borne by Shri K.N. Singh Patel.

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Valuation Report submitted by the Valuation Officer and in those estimated investments declared by the assessee, there were certain differences and, therefore, the Assessing Officer held that the valuation as done by the Valuation Officer will have to be taken into account and, therefore, he added the difference in cost of construction between the cost of construction declared by the assessee and estimated by the Valuation Officer. When the Valuation reports were confronted to the assessee, the assessee submitted that the investment made in assessment year 2002-03 cannot be taken into account, as the same was beyond the period covered under search. However, the Assessing Officer did not accept the contention of the assessee and instead he divided the amount of investment in assessment year 2002-03 into six years and added back the proportionate amount from assessment years 2003-04 to 2008-09. After taking into account all these factors, the Assessing Officer held that the assessee had made total investments in various years as under:- A.Y. Total investment during the year

2003-04 99,77,772/-

2004-05 3,13,331/-

2005-06 71,02,423/-

2006-07 65,25,577/-

2007-08 48,97,496/-

2008-09 53,98,482/-

2009-10 12,65,195/-

Total Rs.3,54,80,276/- 6. The Assessing Officer after noting down the investments made by the assessee on the basis of DVO’s report and other adjustments, allowed the benefit of declaration made by Shri. K. N. Singh Patel during

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the respective assessment years. The respective assessment years for which Shri. K. N. Singh Patel had made surrender in the name of the assessee and as considered by the Assessing Officer are as under:-

(i) In assessment year 2003-04, the Assessing Officer has held the investment to the tune of Rs.99,77,772/-, out of which he allowed the relief on account of surrender made by Shri. K. N. Singh Patel to the extent of Rs.86,00,000/- and, therefore, made a net addition of Rs.13,77,772/-.

(ii) Similarly, in assessment year 2005-06, the Assessing Officer made an addition of Rs.3,13,331/- and did not allow any relief on account of declaration made by Shri. K. N. Singh Patel, as he held that the amount declared by Shri. K. N. Singh Patel in this year was NIL.

(iii) Similar is the finding in assessment year 2005-06 wherein against the investment of Rs.71,02,423/-, the Assessing Officer did not allow any relief on account of surrender made by Shri. K. N. Singh Patel by holding that the amount surrendered by Shri K.N. Singh Patel in this year in the name of Anju Singh was Nil.

(iv) During assessment year 2006-07, again the Assessing Officer did not allow any relief on the same ground.

(v) Same was the position in assessment year 2007-08.

(vi) However, during assessment year 2008-09, the Assessing Officer held that the investment disclosed by the assessee was Rs.53,98,482/- against which Shri. K. N. Singh Patel had surrendered an amount of Rs.90,00,000/-, therefore, he did not make any addition during this year.

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(vii) During the assessment year 2009-10, again the Assessing Officer did not make any addition by holding that the surrender made by Shri. K. N. Singh Patel was more than the amount of investment assessed in the hands of the assessee. During this year against the investment of Rs.12,65,195/-, Shri K. N. Singh Patel had surrendered an amount of Rs.1,25,00,000/-

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The ld. CIT(A) also allowed relief to the assessee by ignoring the Valuation Report estimates as the difference between declared value and valuation report was less than 15%.

ASSESSMENT YEAR 2003-04:

“3.7.3. I have considered the submission made. The assessee was found to have invested in land from May 2001 onwards, and in the properties under reference, investment in land was made in August 1999 in "plot no. 46 by Shri Mahesh Singh Patel and in plots no. 31 and 38 in May 2001 by the appellant. Thus, it cannot be outrightly rejected that 'no construction was made in the earlier years, more so when in respect of all other years, the Assessing Officer has accepted the version of the assessee regarding investment being made, subject to the report of the DVO. The assessee has shown investment in various years and even in the assessment year 2008-09 investment in building at Plot No. 35, 45 & 46, Khasra No, 45, Gaura Bagh, Kursi Road, Lucknow has been shown at Rs.3578200 by the assessee herself. No evidence was apparently found in the course of the search that the construction had not taken place in the earlier years as claimed, but took place in the subsequent years. Even the claim of investment made in all the other years has been accepted by the Assessing Officer subject to variation as per the valuation report. Even the DVO has estimated the value in the years as claimed by the assessee without giving any contrary finding and the Assessing Officer has adopted the value as estimated by the Valuation Officer. Once the Assessing Officer has accepted the value estimated by the Valuation Officer in various years and has also accepted the investment made by the assessee in the years relevant to the assessment years for which the proceedings were pending before him, there does not appear any justification, for not accepting the investment made in the earlier years as no evidence has been brought on record in support of the claim that no investment was made in the assessment years prior to

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assessment year 2003-04 as claimed by the assessee. Thus, spreading over the investment of earlier years by the Assessing Officer in respect of properties being building at Plot No, 35, 45 & 46, Khasra No. 45, Gaura Bagh, Kursi Road, Lucknow and building at plots no. 37 & 38, Gaura Bagh, Kursi Road, Lucknow is not justified and the unexplained investment in various year shall be estimated by considering the valuation as made by the Valuation Officer in the respective years. Further, it has been held in Income-tax Officer v. Ram Nath Aggarwal [2004] 2 SOT 471 (ITAT ASR. Bench) (SMC) that the valuation of an asset is not an exact science. Mathematical calculation 'is not possible. The valuation of the immovable property is also estimated on the basis of the facts and circumstances. Therefore, it could not be said that whatever the Valuation Officer had stated was final word in the matter. The word 'estimate' itself suggests that there is always possibility of some amount of inaccuracy and uncertainty. It was, therefore, obvious that report of the 'Valuation Officer could not be held as true and correct. There is always a room for error or omission. The Commissioner (Appeals) was justified in allowing 10 per cent relief on account of difference of opinion.

Keeping in view the entire facts of the present case, the Commissioner (Appeals) had correctly decided the issue and, therefore, there was no reason to interfere with his order.

In the result, the appeal was to be dismissed.

3.7.4. In the case of Bimla Singh v. CIT [2009] 308 ITR 71/222 CTR (Pat.) 404 during search it was found that the assessee had made huge investment in house property. According to the assessee they had invested a sum of Rs.11,15,000 in construction of the house but according to the report of the valuer, cost of construction was Rs.12,99,700. It was held that in valuation of the house property bona fide difference is bound to occur. In the absence of any statutory provision, no hard and fast rule can be laid down in regard to the percentage of difference which can be ignored. The difference between the assessee and the valuer was less than 15 per cent. Not only this, the construction of the house was spread over a period of 7 years. In the facts of the present case the difference between the plea of the assessee on the issue

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on investment on house property and valuer’s report was so meager that one would assume it to be bona fide difference fit to be ignored.

3.7.5. Hence, as the difference in the revised estimate made by the Valuation Officer and that claimed by the assessee works out to less than 15% in respect of the three buildings, and valuation is only an estimate, therefore, in view of the decisions relied upon by the appellant and those mentioned above, the same shall be ignored for computing the unexplained investment and the investment shown by the assessee in respect of building at Plots No. 28, 29, 30 & 31, Gauri Bagh, Kursi Road, Lucknow (difference of 7.77%) and building at Plots No. 37 & 38, Gaura Bagh, Kursi Road, Lucknow (difference of 8.22%) shall be adopted for various years in place of estimate made by the Assessing Officer. In the years in which the credit can be given for investment made by Shri K. N. Singh Patel, as done by the Assessing Officer, the required credit shall be given. Hence, the investment made by the assessee during various years (in Rs.) is recomputed as under:-

TABLE-A A.Y Investment in value of property at: Total

Plots No. 28,29, Plots No. 37 & Plots No. 25 & investment during the year. 30 & 31 Gaura 38, Gaura Bagh, 26, Gaura Bagh (as shown Kursi Road, Bagh, Kursi by the assessee) Lucknbw (as Road, Lucknow shown by the (as estimated assessee) by the Valuation Officer)

2002-03 5552400 5552400

2003-04 2485258 2485258

2004-05 0

2005-06 2332200 4286242 6618442

2006-07 3543900 2394017 5937917

2007-08 2318200 2113458 4431658

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2008-09 2141300 959090 3100390

2009-10 1174400 0 1174400

2010-11 2606599 260659&

2011-12 0

Total 1,151,0,000 80,37,658 1,23,59,406 2,93,00,465

3.7.6 Similarly, the share of the assessee in the building at Plot No. 35, 45 & 46, Khasra No. 45, Gaura Bagh, Kursi Road, Lucknow is taken as that shown by the assessee himself and assuming 50% share of the appellant as the difference in the estimate of the DVO and the investment shown by the assesses works out to 10.22% and can be ignored:

TABLE-B

A.Y. Total Share of Smt. investment as Anju Singh Patel shown by the assessee

2202-03 1750000 875000

2003-04 2030000 1015000

2004-05 276800 138400

2005-06 258000 129000

2006-07 257000 137500

2007-08 225000 112500

2008-09 3578200 1789100

Total 8393000 4196500

3.7.7 The total investment (in Rs.) in various years accordingly works out as under:-

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TABLE-C

A.Y. investment Investment as Total as per Table- per Table-B investment A during the year

2002-03 5552400 875000 6427400

2003-04 2485258 1015000 3500258

2004-05 0 138400 138400

2005-06 6618442 129000 6747442

2006-07 5937917 137500 6075417

2007-08 4431658 112500 4544158

2008-09 3100390 1789100 4889490

2009-10 1174400 NIL 1174400

For the year under consideration, the total investment is recomputed at Rs.3500258 in place of Rs.9977772 computed by the Assessing Officer and after allowing credit for a sum of Rs.8600000 for the disclosure made by Shri K. N. Singh Patel as done by the Assessing Officer, no addition is liable to be made for the A.Y. 2003-04 resulting into consequential relief of Rs.1377772. Hence, grounds no, 5 and 6 are partly allowed while ground no. 7 is allowed.”

“4.1 Grounds no. 1, 2, 3 and 4 are rejepte4 in view of the findings made in para 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.

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4.2 Grounds no. 5 and 6 are partly allowed in view of the finding in paras,3.7 to 3.7.7 and the addition is reduced to Rs.138400 in place of Rs.313331 made by the Assessing Officer resulting into consequential relief. Ground no. 7 is rejected as no amount had been offered as undisclosed investment by Shri K. N. Singh Patel for the year under consideration as investment made on behalf of the appellant.

4.3 Grounds no. 8 and 9 are against the addition of Rs.806600 made by the Assessing Officer by observing as under:-

The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:-

(i) Plot No. 26 purchased for Rs.1,28,000/- by the way of demand draft and stamp duty amounting to Rs.23,800/-. It has not been made clear as to from which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I. T. Act, 1961.

(ii) Plot No. 28, 29 purchased for Rs.3,03,600/- by the way of demand draft and stamp duty amounting to Rs.47,600/-. It has not been made clear as to from which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid- out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I.T. Act, 1961.

(iii) Plot No. 30 purchased for Rs.1,28,000/- by the way of demand draft and stamp duty amounting to Rs,23,800/-. It has not been made clear as to from which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is,

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therefore, added to his total income u/s 69 of the IT, Act, 1961.

(iv) Plot No. 31 purchased for Rs.1,28,000/- by the way of demand draft ana1 stamp duty amounting to Rs.23,800/-. It has not been made clear as to from "which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s. 69 of the I. T. Act, 1961.

Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs.8,06,600/- which is being added to the total income of the assessee u/s 69 of the LT. Act, 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 are being initiated separately for this default (Addition, Rs.8,06,600/')

4.3.1. During the course of the appeal, the appellant has submitted as under:-

III – Purchase of other properties, aggregating Rs.13,22,860

a). Addition of Rs.8,06,000 in the assessment year 2004-05: A detailed explanation was given vide letter dated 26.08.2010 and the said explanation stands fully supported by the seized material in the form of ledger account of capital account as appearing in the books of Anju Agencies, proprietary concern of the appellant. The said ledger account covers the investment to the extent of Rs.6,40,000 and the balance of Rs.1,66.600 is covered by the disclosure of Rs.3,00,000 as made by Sri K.N. Singh Patel under the head "other unexplained investment /expenditure etc."

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Photocopy of the letter dated 26.08.2010 and copy of ledger of capital account is enclosed at pages 55 to 58 of this submission.

4.3.2 1 have considered the submission made. The appellant has enclosed the copy of capital account! in the ledger of Anju Agencies for A.Y. 2004-05 in which withdrawals of Rs.512000 and Rs.128000 are made on 22.05.2003 and 30.05.2003 for purchase of land vide cheques no. 15397 and 153979 respectively. However, the details of balance amount of Rs.166600 are not mentioned in the statement of Shri K.. N. Singh Patel. Hence, the addition is reduced to Rs.166600 as the appellant has not filed any evidence to explain the source of expenditure incurred and grounds no. 8 and 9 are partly allowed. Ground no. 10 is rejected as the Assessing Officer had allowed adequate opportunity of being heard .to the appellant.

4.4 Grounds no. 11 and 12 are general in nature and do not require any separate adjudication.

4.5 In the result, the appeal for A.Y. 2004-05 is partly allowed.”

“5.1 Grounds no. 1, 2. 3, and 4 are rejected in view of the findings made in paras, 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.

5.2 Grounds no. 5 and 6 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.6747442 in place of Rs.7102423 made by the Assessing Officer resulting into consequential relief. Ground no. 7 is rejected as for the year under consideration, no amount had been offered as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant.

5.3 Grounds No. 8 and 9 are against the addition of Rs.286500 made by the .Assessing Officer by observing as under:-

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“The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:-

(i) Plot No. 418 &420 at Mahona, Bakshi Ka Talab purchased for Rs.2,00,000/- by the way of demand draft and stamp duty amounting to Rs.86,500/-. It has not been made clear as to from which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I. T. Act, 1961.

Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs,2,86,500/- which is being added to the total income of the assessee u/s 69 of the I.T. Act, 1961, Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 are being initiated separately for this default. (Addition Rs.2,86,500/-)

5.3.1 During the course of the appeal, the appellant has submitted as under:

b) Assessment Year 2005-06: The addition of Rs.2,86,500 has been made on account of property purchased on 18.02.2005, The explanation letter dated 26.08.2010 as referred to above also covers fully the said investment. The ACIT has rejected the said explanation merely by saying that name of the bank has not been given whereas the fact remains that the name of the bank i.e. Allahabad Bank has been given in the said explanation. Photocopy of the letter dated 26.08.2010 is placed at pages 59 to 61 of this submission.

5.3.2 No further evidence has been filed in this regard. Hence, both these grounds of appeal are rejected as no evidence has been filed to explain the source of investment in plots and the addition of T286500 made is hereby confirmed.

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5.4 Ground no. 10 is also rejected as the Assessing Officer had provided adequate opportunity of being heard.

5.5 Grounds no. 11 and 12 are general in nature and do not require any separate adjudication.

5.7 In the result, the appeal for A.Y. 2005-06 is partly allowed.”

“6.1 Grounds no, 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.

6.2 Grounds no. 5 and 6 are partly allowed in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.60754I7 in place of Rs.6525577 made by the Assessing Officer resulting into consequential relief. Ground no. 7 is rejected as for the year under consideration, no amount had as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant.

6.3 Grounds No.8 & 9 are general in nature and do not require any separate adjudication. 6.5 In the result, the appeal for A.Y. 2006-07 is partly allowed.”

“7.1 Grounds no. 1, 2. 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.

7.2 Grounds no. 5 and 6 are partly allowed, in view of the finding in paras 3.7 to 3.7.7 and the addition is reduced to Rs.4544158 in place of Rs.4897496 made by the Assessing Officer resulting into consequential relief. Ground no. 7 is rejected as for the year under consideration, no amount had been offered as undisclosed

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investment by Shri K. N. Singh Patel relating to the investment made by the appellant. .

7.3 Grounds no. 8 and 9 are general in nature and do not require any separate adjudication.

7.4 In the result, the appeal for A.Y. 2007-08 is partly allowed.”

“8.1 Grounds no. 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04.

8.2. Grounds no. 5 is partly allowed in view of the finding in paras 3.7 to 3.7.7 and the investment worked out is reduced to Rs.4889490 in place of Rs.5398482 made by the Assessing Officer. The Assessing Officer has not made any addition on account of unexplained investment in construction as a sum of Rs.9000000 had been offered as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant while the total investment during the year worked out to Rs.5398482 as per the Assessing Officer in buildings. The Assessing Officer has also added a sum of Rs.229760 as unexplained investment in purchase of plots. However, in view of the sum of Rs.90000000 offered for tax by Shri K. N. Singh Patel on account of investment made by Smt. Anju Singh, this addition of Rs.229760 is also not warranted as the same along with unexplained investment in construction worked out is less than the total amount of disclosure made and the addition of Rs.229760 is also deleted. However, Ground no. 6 is rejected as no evidence for the withdrawals made during the year from the proprietary concern in this regard has been field in the course of the appeal. Further, Ground no. 7 is also rejected as the Assessing Officer had provided adequate opportunity of being heard.

8.3. Grounds No.8 and 9 are general in nature and do not require any separate adjudication.

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8.4 In the result, the appeal for A.Y. 2008-09 is partly allowed.”

“9.2.2. I have considered the reply and the addition made. As no specific details with regard to the amount considered under section 69C were furnished, therefore, the benefit of the so called surrender made by Shri K.N. Singh Patel cannot be allowed and the addition of Rs.2,50,000/- made is hereby confirmed, as no evidence for the source of acquisition of these household goods was furnished and the assets have been valued at Rs.10,00,000/- and have been equally considered in the hands of all the four family members. Hence, both these grounds of appeal are rejected.

9.3 Ground no. 4 is rejected as the Assessing Officer had provided adequate opportunity to the appellant before making the assessment.

9.4 Grounds no. 5 and 6 (inadvertently mentioned as Grounds no. 8 and 9) are general in nature and do not require any separate adjudication.

9.5 In the result, the appeal for A.Y. 2009-10 is hereby dismissed.”

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as the undisputed fact is that the properties in all the years remained the same and the surrender by K. N. Singh Patel was made against same properties. It was argued that the authorities below should have considered total value of various properties with the surrender amount of Shri K. N. Singh and should not have considered the comparison on year-to-year basis. It was further argued that even if the investment is to be considered year-wise, then in those years where the amount of surrender was more than the investment, the same should have been carried forward for adjustment in the next year. The ld. A.R. of the assessee further argued that in all the years, the ld. CIT(A) has ignored the valuation arrived at by the Valuation Officer by holding that the difference between the declared value and those estimated by the Valuation Officer was less than 15% and the ld. CIT(A) has accepted the valuation declared by the assessee. Therefore, it was argued that when ld. CIT(A) has ignored the valuation reports, the findings of Valuation Officer with respect to year-wise investments should also be ignored. It was further argued that it will amount to double taxation of the same investment declared and surrendered by Shri K. N. Singh as Shri K. N. Singh has already surrendered an amount of Rs.10 crores which represented investment made in the name of various relatives which included the assessee also. It was submitted that in the case of the assessee, Shri K. N. Singh had surrendered an amount of Rs.3,01,00,000/- whereas the value of all the properties as declared by the assessee from assessment year 2003-04 onwards was Rs.2,47,96,758/- and in this respect our attention was invited to a chart showing the value of investment in various properties as declared by the assessee and the amount of surrender made by Shri K. N. Singh in the name of the assessee. Our specific attention was invited to the order of the ld. CIT(A) in assessment year 2003-04 where after analyzing the entire facts, the ld. CIT(A) had reduced the amount of addition to Nil by

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holding that the value of investment in that year was Rs.35,00,258/- whereas Shri K. N. Singh had surrendered Rs.86,00,000/- in this year. It was submitted that while Rs.86,00,000/- as surrendered in assessment year 2003-04 was accepted; whereas set off in the name of the assessee was allowed only to the extent of Rs.35,00,358/- which was highly unjustified.

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made addition on account of low household expenses to the tune of Rs.2.50 lakhs which was not based upon any incriminating material and the addition was made arbitrarily, therefore, it needs to be deleted.

(1) Assessment Year 2003-04 : Rs.86,00,000/- (2) Assessment Year 2008-09 : Rs.90,00,000/-

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(3) Assessment Year 2009-10 : Rs.1,25,00,000/- Total : Rs.3,01,00,000/- 22. We further find that Shri K. N. Singh in the affidavit had affirmed as under:-

“8. That during the course of said search and seizure action, Shri Mahesh Singh Patel elder son of the deponent gave a statement whereby an additional income of Rs. 10 Crores. (Ten crores) was agreed to be disclosed on behalf of various persons. A copy of the said statement dated 19.11.2008 is enclosed and the same has been marked as ANNEXURE – 1 hereto.

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(i) 836761 15/12/2008 25,00,000

(ii) 836763 25/12/2008 25,00,000

(iii) 836762 05/01/2009 25,00,000

(iv) 836764 25/01/2009 25,00,000

which have been drawn on his own Bank Account No. 2410000100132967 at Punjab National Bank, Rakabganj.

(i) The deponent hails from District Kannauj and while living in that area, he had developed strong linkage with the rural class and also with the small time perfumers operating in that region;

(ii) During the course of his association with such class of people, he has been rendering assistance to them in selling their products at "fair price". Although such services were being rendered on humanitarian ground and out of concern for upliftment of the backward class of the society as a whole, without there being any commercial angle involved in the same, the deponent has been occasionally getting gifts in cash and/or in kind from the persons of that starta, out of their sense of gratitude for the deponent;

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(iii) At that stage, he had an opportunity to interact with small time perfumers and on account of such an "interaction" he had developed a very strong sense for processing of herbs, blending, mixing and re-mixing of perfumes and perfumery products and in order to try his luck in this larger field, he shifted to Lucknow in early 1980's and continued the activities that were being carried on by him while at Kannauj, this time in a much wider area and diversified field.

(iv) After he got settled at Lucknow, he continued to assist the inhabitants of his native place in the manner mentioned above and hi lieu number of the persons who felt benefited, both socially as well as economically by the advice and assistance rendered by the deponent.

All these sources taken together constitute the ''manner" in which the deponent got enriched to the extent of the disclosure of Rs.10 Crores (Ten) as made during the course of search that had commenced oh 19.11.2008.

SI. Name. Head of Expenditure/Investment etc. Rs. No.

(i) Anju Singh 75,00,000 Construction & acquisition of Capital Assests At Gaura Bagh, Kursi Road, Lucknow

(ii) Anju Singh & Construction & acquisition of Capital Assests At 22,00,000 Mahesh Singh Gaura Bagh, Kursi Road, Lucknow

(iii) 2,00,000 Other unexplained investment/ Expenditure Etc.

Total 99,00,000

(b) Financial Year 2003-04

SI. Name Head of ExpenditureAnvestment etc. Rs. No.

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(i) Mahesh Singh Construction & acquisition of Capital Assets 70,00,000 at Farm House Chandrika Devi Road

(ii) 3,005000 Other unexplained investments/ Expenditure etc

Total 73,00,000

(c) Financial Year 2004-05

Name Head of Expenditure/Investment etc. Rs. SI. No.

(i) 5,00,000 Other unexplained investments/ Expenditure etc.

Total 5,00,000

(d) Financial Year 2005-06

SI. Name Head of Expenditure/Investment etc. Rs. No

(i) Smt. Rajni Construction & acquisition of Capital Assests 30,00,000 Patel At Gaura Bagh, Kursi Road, Lucknow

(ii) Anju Singh Land at Aadar Khera BKT 3,00,000

Megha Workshop 2,00,000

(iii) Sanatan Cold Loan to Farmers 75,00,000 Storage Ltd.

(iv) 3,00,000 Other unexplained investments/ Expenditure etc.

Total 1,13,00,000

Financial Year 2006-07

SI. Name Head of Expenditure/Investment etc. Rs. No

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(i) Land of Farm House IIM Road 2,00,000 Om Narain Singh

(ii) Pankaj Verma Land at Amrapali Road, Hardoi Road 5,00,000

(iii) 3,00,000 Other unexplained investments/ Expenditure etc.

Total 10,00,000

Financial Year 2007-08

Sl. Name Head of Expenditure/Investment etc. Rs. No. (i) Anju Singh 90,00,000 Construction & acquisition of Capital Assets at Gaura Bagh, Kursi Road, Lucfcnow

(ii) Mahesh Patel & Construction & acquisition of Capital Assets 50,00,000 Anita Singh at Faizabad Road, Lucknow

(iii) 10,00,000 Other unexplained investment/Expenditure etc.

Total 1,50,00,000

Financial Year 2008-09 SI. Name Head of Expenditure/Investment etc. Rs. No

(i) Anju Singh 1,25,00,000 Construction & acquisition of Capital Assets at Gaura Bagh, Kursi Road, Lucknow

(ii) Mahesh Singh 1,75,00,000 Construction & acquisition of Capital Assets at Gaura Bagh, Kursi Road, Lucknow

(iii) Farm House, IIM Road (Land Only) 30,00,000 Om Narain Singh

(iv) PPPL Excess stock 60,00,000

(v) 40,00,000 Baijnath Construction & acquisition of Capital Charitable & Assets Educational Trust

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(vi) Sanatan Construction & acquisition of Capital 25,00,000 Assets Cold Storage Ltd.

(vii) Cash Seiuzed At various places 25,00,000

(viii) Maa Construction of Building 50,00,000 Sharda Buildtech Pvt. Ltd.

(ix) 20,00,000 Other unexplained mvestment/Expenditure etc

5,50,00,000

10,00,00,000

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(i) the statements that is being given in terms of the present sworn statement should be treated as statement given by the deponent under section 132(4) read with explanation 5 to section 271(1)(c).

(ii) the income so disclosed by the deponent should be treated to cover the effect of all such material/ information, in whatever form, that had been found during the course of search/ survey and/or that may be found to be so related later to the said search/survey in *Patel Group* as a whole, that had commenced on 19.11.2008.

(iii) entire income as aforesaid shall be assessed in the hands of the deponent only, without affecting the assessments of any other "business entities" "other entities" "individuals" and or "group of individuals" forming the "Patel Group" etc.

(iv) the additional income so surrendered by the deponent shall be allowed to be accounted for in the books of account and other

relevant records related to the "persons" concerned, in the name of the deponent himself.

(v) all taxes as are payable on such additional shall be borne exclusively by the deponent himself and he himself shall be held liable to pay and discharge 'the same;

(vi) complete waiver from interest if any, found to be payable under any provisions of the "Act" shall be considered sympathetically.

(vii) Immunity from penalty under section 271(1)(c) and/or any other penal provisions under the Act shall be granted not only to the deponent but also to other "persons" forming part of 'Patel Group* as a whole, wherever the additional income and/ or part thereof is accounted for or deemed to have been accounted for/accounted;

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(viii) complete immunity from prosecution and /or other such provisions shall be granted in the case of the deponent and/or other person(s) forming 'Patel Group' who are found/held to be affected by the said disclosures; and

(ix) the conduct of the deponent, the matter of disclosure of income shall be duly reciprocated by the Income-tax Department and neither he himself nor any other person or persons belonging to Patel Group shall be subjected to any harassment and their assessment shall be completed expeditiously;

Assessment year 2003-04 Rs.35,00,258/-

Assessment year 2004-05 Rs.1,38,400/-

Assessment year 2005-06 Rs.67,47,442/-

Assessment year 2006-07 Rs.60,75,417/-

Assessment year 2007-08 Rs.45,44,158/-

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Assessment year 2008-09 Rs.48,89,490/-

Assessment year 2009-10 Nil

Total Rs.2,58,95,165/-

Net addition Assessment Addition Relief allowed Excess surrender year sustained by ld. on account of ignored CIT(A) surrender 2003-04 Rs.35,00,258 Rs.86,00,000/- Nil Rs.50,99,742/- 2004-05 Rs.1,38,400/- Nil Rs.1,38,400/- Nil

2005-06 Rs.67,47,442/- Nil Rs.67,47,442/- Nil

2006-07 Rs.60,75,417/- Rs.60,75,417/- Nil

2007-08 Rs.45,44,158/- Nil Rs.45,44,158/- Nil

2008-09 Rs.48,89,490/- Rs.90,00,000/- Nil Rs.41,10,510/-

2009-10 - Rs.1,25,00,000/- Nil Rs.1,25,00,000/-

Total Rs.2,58,95,165/- Rs.3,01,00,000/- 2,17,10,252/-

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over the amount of investment. In these circumstances, we are of the opinion that the Revenue should have taken a holistic view of the position and total investment in a property during the period under search should have been compared with the total surrender towards that particular property. The assessee in her reply to Assessing Officer, reproduced by us in earlier part of this order, had also confirmed that surrender was made by Shri K. N. Singh Patel on account of construction in various properties and there is no mention of yearwise construction. We further find that in the assessment of Shri K. N. Patel in various years the Assessing Officer himself has completed the assessment after holding that the total surrendered amount has to be compared with total cost of construction estimated by the Valuation Wing. The relevant findings of Assessing Officer in the case of Shri K. N. Patel are reproduced below:-

“Several of the immovable properties owned by the family members of the assessee were referred to the valuation wing of the Department and the estimate of cost of construction was obtained. As a result, the value of investment in almost all the properties has been estimated on the higher side by the valuation wing. The assessees were confronted with the valuation report and their comments and counter comments of the valuation wing were obtained. Thereafter, the final comments of the assessee were once again obtained.

Vide reply dated 30.12.2010, the assessee has submitted as under:

"With reference to the above cied subject and regarding explanation for construction in the following building before 01.04.2002:

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We are here to submit that as the some construction was done before 01.04.2002 as already mentioned in the report submitted by the DVO and in support to which affidavit of the assessee, before your honour is being enclosed at Annexure-A, B and C respectively.

In addition to above we are enclosing the comparison at annexure-D, between the amount surrendered by the assessee in various properties and valuation done by the DVO of Income Tax Department.

Your honour will appreciate that even if no leverage of variation of 15% is considered the amount surrendered is much more than the valuation done by the valuation officer Rs.73,23,639.59 to be precise.

It is hereby requested to considered the above facts before the finalizing the assessment and let us know if any other explanation/clarification is required by your honour in this regard." A reconciliation chart of valuation and surrender has been submitted by the assessee which is as under: 1. Total value as per valuation officer 213,262,452.55 2. Less:Expenses prior to FY 02-03 as -19,914,044.14 per valuation report 3. Less:Expenses incurred after FY08-09 -71,093,822.00 4. Remaining valuation for the period 122,254,586.41 Between FY 02-03 to 08-09 5. Out of above, expenses directly incurred and recorded in the respective books of accounts -By Maa Sharda Buildtech -10,041,204.00 -By Baijnath Charitable Trust -28,372,502.00 -By Mahesh Singh for Megha Bajaj, -13,964,520.00 Faizabad Road ------------------- 6. Amount to be covered under the 69,876,360.41 surrender of K.N. Singh 7. Amount actually surrendered by K.N. -77,200,000.00 singh against construction (as per sheet enclosed) 8. Net difference -7,323,639.59

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Alongwith the above chart, the assessee has furnished details of amount surrendered by Shri K.N. Singh Patel against construction and these are as under:

F.Y. Particulars Amount Amount 2002-03 Construction of Anju Singh 7500000 Construction of Anju Singh & 2200000 9700000 Mahesh Singh 2003-04 Construction of Mahesh Singh 7000000 2005-06 Construction of Rajni Patel 3000000 2007-08 Construction of Anju Singh 9000000 Out of unexplained investment/ 500000 Expenditure for Vikas Nagar Megha Bajaj 5000000 14500000 2008-09 Construction of Anju Singh 12500000 Construction of Mahesh Singh 17500000 Construction of Om Narain Singh 3000000 Construction of Baijnath Charitable 4000000 trust Construction of Maa Sharda 5000000 Buildtech Pvt. Ltd. Out of unexplained investment/ 1000000 Expenditure For Vikas Nagar 43000000 77200000 The above reconciliation submitted by the assessee is not acceptable because the amount was surrendered as a whole against various properties and there is no justification for excluding the cost of construction prior to F.Y. 2002-03. It has already been admitted by the assessee vide letter dated 13.12.2010 that the year wise and property wise details of investment were not known to him at the time of surrender. However, the description of property is also not mentioned in the affidavit and it is not ascertainable as to against property what amount has been surrendered. Therefore, the amount has to be compared with the total cost of construction as estimated by the valuation wing. It is also noteworthy that the valuation officer has estimated only the cost of construction of the properties and the cost of acquisition of land has not been considered by him. Whereas, in the total amount of surrender the cost of acquisition as well as the cost of construction both are included by Shri K.N. Singh Patel. As has been seen above, the total surrendered amount against construction and acquisition of capital assets is Rs.7,72,00,000/- as per the affidavit. The valuation officer has estimated the cost of construction at Rs.21,32,62,452/-. Out of this, the amount incurred after F.Y. 2008-09 is Rs.7,10,93,822/- and the amount

ITA No.390 to 396/LKW/2014 Page 36 of 40

invested by various assessees as per books is Rs.5,23,78,226/-. The balance amount left, therefore, is Rs.8,97,90,404/- and this does not include the cost of acquisition of various properties. Therefore, the actual net difference in the cost of construction as estimated by the valuation wing and as surrendered by Shri K.N. Singh Patel is actually much more than being claimed by the assessee now.

The benefit of surrender made by Shri K.N. Singh Patel is, therefore, being restricted in respective hands only to the extent of surrendered amount which includes the cost of acquisition of assets. The difference in cost of construction that remains after allowing the benefit of surrendered amount is therefore, being added in the respective hands with respect to various properties in various years.

As far as the comments on the three affidavits being submitted now, it will be sufficient to state that no supporting evidences have been enclosed to substantiate the claim made in the affidavits. Therefore, these cannot be taken to be true. In this regard, reference is again drawn towards the case of Sri Krishna Vs CIT, Kanpur & Others reported in 142 ITR 618 (Alld.),. This is a judgment delivered by the jurisdictional High Court and the ratio laid down by this judgment is as under:-

"It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements .on .affidavit. with truthfulness and reliability."

In view of above facts, all the arguments made by the assessee e again disposed off and rejected.

The various details and documents submitted by the counsel of assessee have been examined. After examination of all details and documents, including the seized/impounded documents, the assessment in the case of assessee for this year is completed on total income of Rs.1,00,94,010/-.”

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learned CIT(A) held that no evidence was filed to explain the source of expenditure. Learned A. R., before us, has argued that the balance amount of Rs.1,66,600/- should have been considered as part of surrender made by Shri K. N. Singh. We find that the addition of Rs.8,06,600/- was made by the Assessing Officer on account of acquisition of various properties as mentioned by him in his order at page No. 20 and the undisclosed investment, sustained by learned CIT(A), cannot be set off by the surrender of Shri K. N. Singh as the surrender was made for construction only. The learned CIT(A) has already allowed appropriate relief therefore, we do not intend to interfere in his findings and in view of the above, ground No. 5 in assessment year 2004-05 is dismissed.

ITA No.390 to 396/LKW/2014 Page 39 of 40

was taken at Rs.10,00,000/-. As the amount of Rs.10,00,000/- was distributed among four members of the family and the share of assessee, out of such sum, was Rs.2,50,000/-. We find that learned CIT(A) has rightly upheld the addition by rejecting the contention of the assessee that this amount was to be adjusted against the surrender of Shri K. N. Singh. Therefore, the only ground taken in assessment year 2009-10 is dismissed.

[A. D. JAIN] [T.S. KAPOOR] VICE PRESIDENT ACCOUNTANT MEMBER

DATED:08/03/2019 JJ/Singh Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order

Assistant Registrar

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