THE ACIT, CIRCLE- 1,, RAJKOT-GUJARAT vs. SMT. MANISHABEN N. MASHRU,, RAJKOT-GUJARAT

Out of this bunch, in two appeals viz. ITA No.355 and 386/RJT/2011 Revenue impugned the orders of the ld.CIT(A)-I, Rajkot against cancellation of penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Years 2004-05 and 2005-06. Since in all these appeals/cross- objections, issues and facts are intertwined to each other, we proceed to dispose of all by this common order for the sake of brevity and convenience.

Before adverting the specific grievance of the parties in particular assessment year, we would like to take note of certain basic common facts.

Assessee, Smt.Manisaben N. Mashru is an individual engaged in the business of domestic and international air-tickets booking, incentive tours, hotel reservations and visa formalities under the name and style “M/s.Divya Travels”. A survey under section 133A of the Income Tax Act, 1961 was carried out at the premises of the assessee on

In the above background, the Assessing Officer issued notice under section 148 of the Act on 28.12.2007 which was served upon the assessee on 31.12.2007, requiring the assessee to file revised return. For which the assessee replied that the return filed vide receipt no.011775 on 28.12.2007 be considered. Thereafter, the Assessing Officer issued notices on various dates requiring the assessee to clarify its stand on various issues and to explain the contents of the impounded material. These notices remained unanswered. Since the assessment was getting time barred, and to give another opportunity to the assessee to explain its position, a final notice under section 142(1) and 143(2) was also issued to the assessee, which also remained unattended. According to the Assessing Officer, whatever documents impounded during the survey, copies of which were furnished to the assessee, whenever asked for by the assessee. Despite that the assessee has not turned up for finalization of the assessment. Therefore, based on the material available with the department, the Assessing Officer proceeded to finalise the assessment of the assessee.

First we take appeals and cross-objection for the Asstt.Years 2003-04 to 2005-06. In the case of Smt.Manishaben N. Mashru facts on all vital points are common except variation in the quantum. Therefore, for the facility of reference, we take up facts mainly from the Asstt.Year 2003-04. It is pertinent to observe that during the course of survey certain loose papers and diaries were found. These were inventorised as Annexure A/2, A/3, A/4 and A/8. The ld.AO has compiled details of narrations made in these annexures. He also took into consideration credit entries in these pages and reproduced them on page nos.4 to 11 of the assessment orders. He confronted the assessee to show why these credit entries should not be added as unexplained cash credit of the assessee under section 68 of the Income Tax Act, 1961. According to the AO, the assessee failed to explain source of credit entries and also failed to reconcile entries with other material. Accordingly he treated alleged credit entries as unexplained cash credit of the assessee and made addition of Rs.5,10,28,350/- in the Asstt.Year 2003-04. Similar additions have been made in other two assessment years. On appeal, the ld.CIT(A) has deleted these additions.

The ld.counsel for the assessee during the course of hearing compiled details in tabular form and filed a synopsis exhibiting additions made by the AO; relief granted by the ld.CIT(A) and additions sustained by the ld.CIT(A). Common composition of ground no.1 in the Revenue’s appeals for all these three years has been depicted as under:

This ground in all these three assessment years is inter-connected with ground no.2 taken by the assessee in COs. filed in these assessment years. In other words, additions sustained by the ld.CIT(A) in the above table are being challenged by the assessee. Thus, we take all these grounds together. 9. With the assistance of the ld.representatives, we have gone through the record carefully. It is pertinent to observe that survey was conducted at the premises of the assessee on 18/19.02.2005. A notice under section 148 of the Act was issued on 28.12.2007 and AO has started investigation by issuance of notice under section 143(2) on 15.10.2008 i.e. this was first day of hearing fixed in these assessment years. The AO has passed assessment order on 18.12.2008. He observed that the assessee failed to submit requisite details explaining entries reflected in the seized papers. He also assumed that only cash credited are to be taken into consideration and these to be treated as unexplained cash credit. Before the ld.CIT(A) the assessee has filed details in the shape of additional evidence, and the ld.CIT(A) has called for remand report. As far as admission of additional evidences is concerned, Revenue has not impugned the order of the ld.CIT(A). The stand of the assessee has been reproduced by the ld.CIT(A) in para.4.1, which reads as under:

The ld.AO has submitted his remand report on the explanation of the assessee with regard to each entry in the Annexures considered by him during the course of assessment proceedings. The ld.CIT(A) has reproduced remand report of the AO as well as explanation of the assessee qua entries, thereafter, the ld.CIT(A) has deleted addition by observing as under: (A.Y. 2003-04).

The ld.DR has relied upon the order of the AO whereas the ld.counsel for the assessee relied upon order of the ld.CIT(A) as well as submissions filed by the assessee before the ld.CIT(A).

On due consideration of the above facts, we find that case of the assessee is that the assessee at the relevant time was a member of International Air Transport Association (“IATA” for short). She used to book domestic and international air-ticket for Air India, Kingfisher, Jet Airline and other international airlines. Her turnover was voluminous running into crores of rupees because commission receipts on such sales were nearly Rs.6.90 crores. She has deployed number of employees for booking and taking scores of financial transactions. She has valuable clients who used to book domestic and international air- tickets. Commission from airlines was credited in her account through banking channel. In other words, there was no concept of cash in this line of business. She has been maintaining her regular books of accounts which are duly supported by business related documents and auditors have not pointed out any disqualification to the books of accounts maintained by the assessee. Thus, the stand of the assessee was that in the loose paper certain notings, jottings have been made by the employees with regard to financial happenings of the assessee. These jottings contained certain receivable amounts, payments projection of the business etc. The ld.AO has construed these papers in an erroneous manner. He has simply taken into consideration entries selectively viz. he took into consideration credit entries only. In the remand proceedings, he himself was satisfied with regard to the explanation of the assessee. The assessee has compiled details and submitted before the AO exhibiting discrepancies worked out by the AO in assessment order which were reconciled by him in the remand proceedings and un-reconciled entries have been examined by the ld.CIT(A). We deem it appropriate to take note of these details which read as under:

At this stage, we would like to make a reference to section 68 of the Income Tax Act, which contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year.

Thus, a perusal of the above details would indicate that the AO has committed an error by assuming that these are unexplained cash credits of the assessee.

In the remand proceedings the ld.AO has scaled down the figures of discrepancies. These aspects have been further examined by the ld.CIT(A). This exercise would indicate that in these papers, no unexplained credits were noted by the assessee. These are rough papers kept by employees for their personal reference. Therefore, there cannot be addition u/s.68 of the Income Tax Act. Assessee has explained the nature of transaction in these papers. The gross value of transactions in these papers were more than Rs.5.00 crores, Rs.17.00 crores and Rs.90 lakhs in Asstt.Years 2003-04, 2004-05 and 2005-06 respectively. The discrepancy in terms of percentage of gross value is 0.31%, 2.16% and 0.68% in Asstt.Years 2003-04, 2004-05 and 2005- 06. Thus, in two years discrepancy comes out after reconciliation was

As far as grounds raised in the CO are concerned, we find that the ld.CIT(A) has worked out un-reconciled entries at Rs.1,59,624/-, Rs.38,77,759/- and Rs.61,469/- in the Asstt.Year 2003-04, 2004-05 and 2005-06. As observed earlier that entries in these pages were recorded by various employees for their personal reference, they are related to the business. They can be treated as unrecorded transaction but how they will become taxable on gross basis ? Only element of profit involved in them is to be taxed. In Asstt.Year 2004-05, theld.CIT(A) has confirmed the addition of 42 lacs on an estimation basis. But even for estimation there should be some logic for working out the quantum. The ld.CIT(A) has taken the un-reconciled entries of rs.38,77,759/- for estimation of profit. But this is the gross value of some transaction. Corresponding expenses were also there in those entries. Therefore, gross entries cannot be taken as income of the assessee. Therefore, we modify the direction of the ld.CIT(A). The ld.AO shall calculate the profit at the rate assessee has shown on the basis of regular books in these years and accepted by AO. In other words only element of profit is to be included in the taxable income out of the un-reconciled entries worked out by the ld.CIT(A) and not the gross receipt. The grounds of CO are allowed.

Ground no.2 in Revenue’s appeal for the Asstt.Year 2003-04. In this ground the Revenue has pleaded that the ld.CIT(A) has erred in law and on facts in deleting addition of Rs.36,50,978/- which was added by the AO on ground that the assessee has voluntarily admitted this

Ground no.3, 2, 2 of Revenue’s appeal in the asstt.Year 2003-04, 2004-05 and Asstt.Year 2005-06 respectively.

Brief facts of the case are that the assessee has advanced loan of Rs.7,40,410/-, Rs.1,31,33,329/- and Rs.21,31,627/- in the Asstt.Years 2003-04 to 2005-06 without charging interest. On the other hand, the assessee has borrowed funds from bank and claimed interest expenditure of Rs.4,38,451/-, Rs.7,92,111/- and Rs.9,82,322/- in the Asstt.Years 2003-04 to 2005-06 respectively.

The AO has calculated interest at the rate of 12% which ought to have been charged by the assessee on the interest free advance given by her. Accordingly, he made disallowance.

On appeal, the ld.CIT(A)has deleted disallowance made by the AO on the ground that interest free funds available with the assessee were much more than the interest free advance given by her. The ld.CIT(A) has observed that the assessee had interest fee funds of Rs.2,63,69,501/- in the Asstt.Year 2003-04 and Rs.1,95,9,856/- in Asstt.Year 2004-05 and 2005-06.

On due consideration of the above facts, we do not find any error in the order of the ld.CIT(A) because interest expenditure could be disallowed if interest bearing funds were used by the assessee for the purpose of granting loan without charging interest. The assessee has demonstrated that she has more interest free funds during the year than the interest free advance, and therefore there could not be any

Ground no.4, 4, 3, 5 of Revenue’s appeal in the Asstt.Year 2003- 04, 2004-05, 2005-06 and 2006-07:

After going through the record and the impugned orders of the Revenue authorities, we find that the AO has estimated impugned expenditures for disallowance at 20% for want of necessary supporting materials. However, the ld.CIT(A) after considering the size of business and quantum of transactions carried out by the assessee restricted disallowance to 10% of the total expenses, which we find to be reasonable and justifiable. Therefore, we are not inclined to disturb the order of the ld.CIT(A) on this issue. It is confirmed. The ground taken by both the sides in appeals/cross-objection are rejected.

No other ground is raised in the Asstt.Year 2003-04. We do not find any merit in the appeal of the Revenue. It is dismissed. So far as CO of the assessee in Asstt.Year 2003-04 is concerned, it is partly allowed for statistical purpose.

Now, we take the remaining grounds of appeal raised by the Revenue in the Asstt.Year 2004-05.

Ground no.3: In this ground, Revenue has pleaded that the ld.CIT(A) has erred in deleting addition of Rs.2 lakhs which was added by the AO with the aid of section 68 of the Income Tax Act.

With the assistance of the ld.representatives, we have gone through the record carefully. It emerges out from the record that a sum of Rs. 2 lakhs was appeared against the name of Shri Suryakant Maganlal. But this amount was carried from balance of earlier years. As observed by us, section 68 of the Act contemplates where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year. This amount was not found to be credited in the books of the assessee for the first time, rather, it was a carried forward from earlier year. Explanation of the assessee could be sought in the year in which the amount was for the first time shown as credit balance. Therefore, the ld.CIT(A) has rightly deleted this addition.

Ground no.4: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.2,36,700/- out of total addition made by the AO at Rs.4,71,700/-.

Brief facts of the case are that out of administrative expenses debited by the assessee, the ld.AO has made an adhoc disallowance of Rs.4,71,700/- which is 20% of the total expenses debited by the assessee. On appeal, the ld.CIT(A)has restricted this disallowance to 10% on the ground that the assessee is an individual. She has huge turnover and earned commission income of more than Rs.12 crores.

Ground no.5: In this ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.30,089/-. The assessee has written off the above amount in the books of accounts and claimed it as bad debt. She also alleged that these were expenses which could not be recovered, hence, she has written off them. The AO has disallowed the claim of the assessee on the ground that the assessee failed to demonstrate the efforts made by her for recovery of the outstanding amount. On appeal, the ld.CIT(A) has deleted the disallowance by following judgment of the Hon’ble Supreme Court in the case of TRF Ltd. Vs. Cit, 35 DTR (SC) 156. According to the ld.CIT(A) after 1.4.1989 the assessee was not supposed to bring demonstrative evidence on record to show that debts have actually become bad. It is sufficient if these amounts have been written off in its accounts. After considering the finding of the ld.CIT(A) we do not find any merit in this ground of appeal. It is rejected.

No other ground was raised by the Revenue in Asstt.Year 2004- 05.

Ground No.4 in assessee’s CO for the Asstt.Year 2004-05. It is inter-connected with ground no.3 in assessee’s appeal for the Asstt.Year 2006-07.

Grievance of the assessee is that the ld.AO has erred in making estimated addition of Rs.1,20,000/- in the Asstt.Year 2004-05 and Rs.50,000/- in the Asstt.Year 2006-07 on account of low household withdrawal shown by the assessee.

Brief facts of the case are that Smt.Manishaben N. Mashru has shown withdrawal of Rs.60,000/- in the Asstt.Year 2004-05. Her husband Shri Nilesh Mashru shown withdrawal of Rs.36,000/-. Their HUF withdrew a sum of Rs.12,000/-. Similarly, in the Asstt.Year 2006- 07, they have shown withdrawal of Rs.1,10,000/-. The ld.AO did not find this withdrawal sufficient for meeting household expenditure. Hence, he made addition of Rs.1,20,000/- in the Asstt.Year 2004-05 and Rs.50,000/- for the Asstt.Year 2006-07.

With the assistance of the ld.representatives, we have gone through the record carefully. It is quite difficult to determine household expenditure of any individual. It is a very subjective area. The AO must have considered his local knowledge about the assessee and their status of living in the society. The assessee has been carrying out voluminous business in ticket booking. She has earned commission of crores of rupees. Looking into their background, it appears that they must have living a good life and the AO must have considered that aspect while estimating the household expenses. Two Revenue authorities have exercised their discretion in estimating household expenditure. Therefore, without there being anything on record that such opinion was formed by the Revenue authorities for extraneous reasons, we do not wish to replace those opinions by a third-one, which is also based on estimation. We do not find any merit in these grounds of appeal. They are rejected.

Ground no.2 in assessee’s appeal for the Asstt.Year 2006-07:

On appeal, the ld.CIT(A) has confirmed disallowance. The ld.counsel for the assessee contended that the issue in dispute is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Ahmedabad Stamp Vendors Association Vs. Union of India, 257 ITR 202. He further pointed out that this decision has been upheld by the Hon’ble Supreme Court and the judgment of the Hon’ble Supreme Court has been reported in CIT Vs. Ahmedabad Stamp Vendors Association, 25 taxmann.com 201 (SC). He further relied upon

We have duly considered rival contentions and gone through the record carefully. Admittedly, there is no relationship of principal and agent. In other words, there is no agency between the assessee and the alleged travel agents. Agency has been assumed by the AO with the help of section 194H of the Income Tax Act, 1961. The AO was of the opinion that since the assessee has parted with her volume of commission amongst travel agents, then it should be construed that those agents were acting on behalf of the assessee while booking international air-tickets. We find that the Hon’ble Gujarat High Court has considered almost similar situation in the case of Ahmedabad Stamp Vendors Association (supra). It is pertinent to take note of the following finding of the Hon’ble Gujarat High Court.

In the light of the above interpretation of section 194H if the facts of the present case are looked into then it would reveal that the assessee has just given a trade discount out of commission earned by her from the airlines. She has not appointed any travel agents for acting on her behalf. Thus, there was no relationship of principal and agent. We further find that almost in an identical condition, ITAT Mumbai Bench has considered this issue and observed as under:

In ground no.3, the assessee has challenged addition of Rs.50,000/- on account of low household withdrawals.

We have already considered this issue while taking up appeal for the Asstt.Year 2004-05. We reject this ground of appeal.

Ground No.4: In this ground, grievance of the assessee is that the ld.CIT(A) has erred in retaining disallowance of Rs.40,200/- out of total disallowance made at Rs.51,226/- representing vehicle expenses, travel expenses and depreciation on cars. We have confirmed similar disallowance in the Asstt.Years 2003-04, 2004-05 and 2005-06. Possibility of personal user of telephone, car etc. could not be ruled out, and the ld.CIT(A) has rightly confirmed the disallowance.

In the assessee’s appeal, no other grounds remain to be adjudicated, hence, we treat this appeal as partly allowed.

Now we take up Revenue’s appeal in the Assessment Year 2006-07.

In the first ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of Rs.3 lakhs made by the AO under section 68 of the Act.

Brief facts of the case are that on scrutiny of the accounts, it revealed to the AO that unsecured loan of Rs.3 lakhs was outstanding in the name of Shri Devabhai Rathod. He treated the above unexplained loan as unexplained credit. Accordingly, he made addition of Rs.3 lakhs. Before the ld.CIT(A), it was contended by the assessee this loan was received by her through account payee cheque on 19.10.2005. It was repaid on 25.3.2006 through account payee cheque. Details in the shape of bank statement, ledger account, confirmations were given. The ld.CIT(A) was satisfied that the assessee has fulfilled ingredients of section 68 and deleted addition.

On due consideration of the above facts, we do not see any reasons to interfere in the order of the ld.CIT(A). The assessee has submitted sufficient evidence demonstrating identity of the creditors, genuineness of the transaction and credit-worthiness. She has filed details showing receipt and payment of the amount through banking channel etc. Hence, this ground of appeal is rejected.

Ground No.2. In this ground grievance of the Revenue is that the ld.CIT(A) has deleted addition of Rs.3,18,688/- which was added by the AO by making disallowance of proportionate interest expenditure.

With the help of ld.representatives, we have gone through the record carefully. It emerges out from the record that the assessee has advanced Rs.21,24,587/- to four parties without charging interest. Therefore, the ld.AO has calculated proportionate interest expenditure on such advances and made disallowance. Before the ld.CIT(A) it was contended that the assessee has total interest free funds of

We have already held that the assessee was able to demonstrate that if she has more interest free funds than the advance then on notional basis interest cannot be computed for disallowance. We do not find any error in the order of the ld.CIT(A). This ground is rejected.

Ground no.3: In this ground, grievance of the Revenue is that the ld.CIT(A) has erred in deleting an addition of Rs.1,31,000/-.

Brief facts of the case are that the assessee has obtained a loan from Manojbhai Anantrai and from Shri Anantrai Maganbhai. She has repaid these loans. Creditors have shown interest to the extent of Rs.50,000/- and Rs.81,000/- respectively. The AO assumed that since creditors have shown interest income in their accounts, therefore, the assessee must have paid interest to them without debiting in the books of accounts. He accordingly made addition of Rs.1,31,000/- under section 69C of the Act.

Before the ld.CIT(A) it was contended that the assessee has not paid any interest to both creditors. They might have accounted in their books as receivable, but in fact there was no such payment. The AO has not collected any evidence showing that interest was paid to the creditors. The ld.CIT(A) has accepted this contention of the assessee and deleted addition.

On due consideration of the facts and circumstances, we are of the view that entries in the books of third person could not be given weightage over and above entries in the books of the assessee. The AO ought to have collected more evidence for establishing that the alleged payment was made. He has not recorded statement of the creditors showing that they have received such payment. Therefore, the

Ground no.4: In this ground, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.32,087/-.

Brief facts of the case are that on scrutiny of the details, the ld.AO found that the assessee has claimed TDS of Rs.1,377/- and Rs.421/- from TATA AIG General Insurance Co. But she has no corresponding receipts, therefore, he assumed the corresponding receipt of Rs.32,087/- and made addition. The ld.CIT(A) has deleted the addition by observing that a sum of Rs.22,003/- was reflected under the head “Other commission”. Similarly, commission of Rs.8,798/- was credited in personal account. Aggregate of these two entries comes to Rs.30,800/-. Thus, according to the ld.CIT(A), corresponding receipts have duly been accounted by the assessee.

On due consideration of the finding of the ld.CIT(A), we do not see any reason to interfere into. The ld.CIT(A) has recorded a finding of fact that the assessee has duly credited commission receipts on which TDS deducted by the payer and she has claimed the credit of the TDS. Considering the finding of the ld.CIT(A), we do not find any merit in this ground. It is rejected.

Ground No.5: In this ground of the appeal, grievance of the Revenue is that the ld.CIT(A) has erred in granting relief of Rs.11,026/- out of total addition of Rs.51,226/-.

It is pertinent to observe that the ld.AO has made adhoc disallowance out of the expenses incurred towards telephone, vehicle etc. The ld.CIT(A) has partly confirmed the disallowance and partly deleted. While considering ground of the assessee, whereby the disallowance of Rs.42,200- out of total disallowance of Rs.51,226/- was

In the result, the appeal of the Revenue for the Asstt.Year 2006- 07 is dismissed.

Now we take up Revenue’s appeal, ITA Nos.355 and 386 /RJT/2011 for the Asstt.Year 2004-05 and 2005-06.

In these appeals, grievance of the Revenue is that the ld.CIT(A) has erred in deleting penalty of Rs.13,84,548/- and Rs.13,00,713/- for the Asstt.Years 2004-05 and 2005-06 respectively.

With the assistance of the ld.representatives, we have gone through the record carefully. Facts on all vital points are common in both assessment years. Therefore, for the facility of reference, we take the facts from the Asstt.Year 2004-05.

Brief facts of the case are during the course of survey, certain documents were found viz. Annexure A/1 to A/18. On the strength of narration mentioned in these documents, the ld.AO has worked out unexplained income in shape of unexplained cash credits at Rs.17,92,73,560/-. This was added under section 68 of the Act. The assessee has pointed out to the ld.CIT(A) that the AO has erred in assuming narrations mentioned in these papers as representing cash credit. Remand report was called for by the ld.CIT(A) and ultimately, it was held by the ld.CIT(A) that rough entries having value of Rs.38,77,759/- could not reconciled by the assessee. Thus, the ld.CIT(A) has confirmed addition of Rs.42 lakhs on an estimate basis.

We have duly considered rival contentions and gone through the record. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section.

A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee

In the light of the above, if we examine the facts of the present case, then it would reveal that the income of the assessee has been determined on an estimate basis. By way of present order, we have changed that estimation. We have held that un-reconciled entries be considered only for working out element of profit involved in it. Gross receipt cannot be added. Similarly, we have observed that profit is to be estimated in these assessment years according to the rate of profit disclosed by the assessee on the basis of regular books of accounts. Thus, there cannot be any element of concealment of income. The assessee has explained papers found during the course of survey. As observed in the quantum appeals, discrepancy in explaining these papers was ultimately determined at 2.6% of the gross value of the transaction considered by the AO on the basis of entries in these papers. In other words, the gross value of the transaction was

Now we take up Revenue’s appeal in ITA No.961/RJT/2010 and the CO of the assessee in CO no.37/RJT/2010.

In the first ground of Revenue’s appeal, grievance is that the ld.CIT(A) has erred in deleting addition Rs.16,00,670/- made on account of unexplained advances and probable interest thereon.

Brief facts of the case are that during the assessment proceedings, the AO has assumed on the basis of impounded papers that a sum ofRs.13,56,500/- was advanced to various persons and the same were not recorded. The AO accordingly made addition of this amount along with an amount of Rs.2,44,170/- as interest. It was contended before the ld.CIT(A) that no advance was given to its sister concern, and the amount reflected in the annexure was owned by Smt.Manishaben N. Mashru and while finalizing the assessment of Smt.Mansihaben Mashtru this addition was offered for taxation by way of peak value, and therefore, there cannot be double taxation. Even otherwise, no addition can be made on the basis of rough noting without any corroborative evidence. The ld.CIT(A) considered contentions of the assessee and deleted the impugned addition.

On due consideration of the facts and circumstances, and perusal of orders of the Revenue authorities, we are of the view that the ld.CIT(A) has rightly appreciated facts and circumstances leading to

Next effective ground of appeal of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs.85,00,900/- on account of unexplained investment in shares.

Brief facts of the case are that during the assessment proceedings, the AO noticed increase of share capital of the assessee form Rs.24,99,100/- to Rs.1,10,00,000/-. The AO was not satisfied with the explanation of the assessee, therefore, he made addition of Rs.85,00,900/-. However, the ld.CIT(A) has deleted this addition by observing that the addition was made by the AO on the basis of surmises though investment was reflected in the books of accounts and that the assessee has sufficient funds in the form of bank balance and receivables for making investment of Rs.85,00,900/-.

On due consideration of the facts and circumstances, we are not inclined to interfere in the order of the ld.CIT(A), as the ld.CIT(A) has considered material facts on record and observed that impugned investment was recorded in the books of accounts and that sufficient funds is available with the assessee for making the investment. Though the assessee had submitted books of accounts during the assessment proceedings, the same was not considered at the end of the AO.

In the result appeal of the Revenue for the Asstt.Year 2005-06 in ITA No.961/RJT/2010 is dismissed.

Now coming to the CO of the assessee, bearing No.29/RJT//2010, only issue in this CO is with regard to addition of Rs.72,000/- on account of alleged low household withdraw.

On considering orders of the Revenue authorities, we do not find any justification to take a different view than the one taken by the Revenue authorities on this issue. Looking to the quantum and size of the business carried out by the assessee and life their style both the authorities estimated low household withdrawals. There is nothing on record to show that estimation based on some opinion made by both the authorities below is unjustified, and therefore, we do not wish to replace the estimation of the Revenue authorities with a third estimation. We do not find any merit in this ground of CO. It is dismissed.

In the result CO no.29/RJT/2010 is dismissed.

Now we take Revenue’s appeal in ITA No.966/RJT/2010 for the Asstt.Year 2004-05.

In first two grounds, Revenue is contesting deletion of addition of Rs.33,80,146/- and interest of Rs.6,08,426/- by the ld.CIT(A) on account of unexplained investment/advances.

Brief facts of the case is that during the assessment proceedings, the AO formed an opinion on the basis of impounded papers that a sum of Rs.13,56,500/- was advanced to various persons and the same were

On due consideration of facts and circumstances of the present case, we find that similar issue was raised by the Revenue in its appeal for the Asstt.Year 2005-06 in ITA No.961/RJT/2010, wherein we have upheld the finding of the ld.CIT(A) and dismissed that ground of the Revenue. In the present case also, facts and circumstances are similar except the quantum, and there is nothing on record to force us to take a different view in this case. Therefore, we do not find any force in these two grounds of appeal of the Revenue. They are dismissed. 89. In the third ground, the Revenue challenges deletion of addition of Rs.27.00 lakhs by the ld.CIT(A) on account of disallowance of fictitious liability.

We heard both the parties and perused record and the orders of the Revenue authorities. During the assessment proceedings, on the basis of papers found in the survey proceedings, the AO formed an opinion that the assessee was having credit balance of Rs.8,05,000/- with M/s.Divya Travels, and in the books of the assessee the assessee has shown liability of Rs.18,95,000/-. The AO held the same to be fictitious liability and taxed accordingly. Assessee challenged this addition before the ld.CIT(A) who deleted the addition on the ground that rough papers found from the premises of wife of the assessee were

In the result, appeal of the Revenue in ITA No.966/RJT/2010 is dismissed.

Coming to the CO No.37/RJT/2010 challenging addition of Rs.36,000/- made on account of alleged lower household withdrawals, we find that both the authorities based on some opinion has estimated low household withdrawals by the assessee. Reasoning given by the Revenue authorities viz. size of the business and life style of the assessee for estimating household expenses cannot be said to be baseless or unjustified. The assessee has also not demonstrated before us with some corroborative material that Revenue’s finding requires our interference and a third opinion requires in this behalf. Therefore, we are not inclined to interfere on this issue, this ground of CO is dismissed.

In the result, appeals of the Revenue and Cross Objection of Shri Nailesh M. Mashru are dismissed, whereas appeal and Cross objection of Smt.Manishaben N. Mashru are partly allowed. Order pronounced in the Court on 4th January, 2018 at Ahmedabad.