ACIT, JAIPUR vs. ASHOK KUMAR SANKHLA, JAIPUR

PER BHAGCHAND, AM

The Revenue has filed an appeal against the order of the ld.

CIT(A)-4, Jaipur dated 26-03-2016 for the assessment year 2010-11

raising following grounds of appeal.

‘’1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs. 5,31,050/- made on account of transactions made in real estate business without appreciating the fact that during the year assessee was actually engaged in business of Real Estate. 2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs.5,50,000/- made on account of undisclosed investment without appreciating the fact that this property was not disclosed in the balance sheet. 3. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs.3,56,000/- made on account of undisclosed in the plot at Narayan Vihar without appreciating this property was not disclosed in the balance sheet and not filed any explanation in this regard. 4. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs.6,70,000/- made on account of unexplained cash without appreciating the fact that the assessee has not offered satisfactory explanation with regard to cash found during search proceedings. 5. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition made on unexplained jewellery of Rs.12,49,729/- ignoring the fact that the assessee has not submitted any concrete evidence in support of jewellery found during search proceedings. 6. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was right in deleting the addition of Rs.20,00,000/- made on account of undisclosed investment in construction of property at 1249, Rani Sati Nagar, Jaipur without appreciating the fact that assessee himself surrendered undisclosed investment of Rs. 25,00,000/- against which shown only Rs. 5,00,000/- in the return of income.

2.1 In Ground No. 1, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition of Rs. 5,31,050/- made by the AO on

account of transactions made in real estate business without appreciating

the facts that during the year the assessee was actually engaged in

business of real estate. Bbrief facts of the case are that the assessee

purchased a flat at Tilak Nagar, Jaipur on 6-12-1997 for Rs.4,44,450/-

(PB 72-85). This flat was sold on 19-08-2009 for Rs.9,75,500/- (PB 86-

95). The AO during the course of assessment proceeding observed at

page 4 of his order that assessee's transaction in land was adventure in

nature of trade. It is also noted that the AO had drawn a trading account

of the properties held by the assessee and treated sale of the flat as

business receipt. Accordingly, the AO assessed the difference of

Rs. 5,31,050/- as business income (Rs. 9,75,500 minus Rs. 4,44,450) as

against income from capital gain of Rs. 1,26,882/- declared by the

assessee.

2.2 In the appellate hearing, the assessee has taken a specific ground as

Ground No.1 whereby the action of the AO in holding the various

immovable properties owned by the assessee and those purchased during

the year as ‘adventure in the nature of trade’ was challenged. This ground

was decided by ld. CIT(A) in favour of the assessee as per his finding

given at Para 3.1.3, Pg 12-14 of the order. Thereafter, the ld. CIT(A) with

respect to the sale of flat at Tilak Nagar accepted the claim of the assessee

that gain arising out of disposal of this flat cannot be assessed as business

income and directed the AO to assess the same as long term capital gain

of Rs.1,26,882/-. The relevant observation of the ld. CIT(A) on the issue

in question is as under:- ‘’4.1.3 I have duly considered assessee’s submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee. It is submitted that assessee purchased the flat at Tilak Nagar in Year 1997-98 and since then it was let out , the rental income received has also been duly declared under head “Income from House property” and duly considered by the AO as under:-

AY Rent from flat at Tilak Nagar shown in returns 2004-05 80,628/- 2005-06 87,180/- 2006-07 92,638/- 2007-08 99,582/- 2008-09 113,933/- 2009-10 103,193/-

As the assessee held this flat as investment and sold it after holding for about 12 years. Therefore, in view of these facts, it cannot be presumed that the assessee held this flat as business stock or the investment made in this flat in the year 1997 was with an intention to sale the same to earn profit. Accordingly, the gain arising out of disposal of this investment, cannot be assessed as business income but as capital Gain, accordingly AO is hereby directed to assess the same as Long Term Capital Gain (LTCG) on at Rs. 1,26,882/-[975,500-8,48,618 (Indexed cost)] Assessee’s appeal in Gr No. 2 stands allowed.’’

During the course of hearing, the ld. DR relied on the order of the 2.3

AO.

2.4 On the other hand, the ld.AR of the assessee supported the order of

the ld. CIT(A) for which the ld.AR of the assessee filed the following

written submission ‘’Submission:- 1. At the outset it is submitted that department has not filed any appeal against the finding of CIT(A) where he has held that that assessee has hold various immovable properties as investment and the same is neither an adventure in the nature of trade or the business stock of the assessee. Once this finding is not challenged, the sale of flat under consideration cannot be considered as a business transaction and therefore the ground of the department needs to be dismissed at the threshold. 2. It is submitted that the flat at Tilak Nagar was purchased by assessee in the year 1997-98 and since then it was let out. Rental income received was duly declared under head “Income from House Property” (PB 23-47) and considered by the AO as under:-

Assessment Year Rent from flat at Tilak Nagar shown in returns 2004-05 80,628/- 2005-06 87,180/- 2006-07 92,638/- 2007-08 99,582/- 2008-09 113,933/- 2009-10 103,193/-

2.5 We have heard the rival contentions and perused the materials

available on record. In this case, the AO took the net profit of Rs.

5,31,050/- as business income of the assessee and added the same to his

total income. In first appeal, the ld. CIT(A) observed that the gain arising

out of disposal of this investment cannot be assessed as business income

but as capital gain. Accordingly, the ld. CIT(A) directed the AO to assess the same as Long Term Capital Gain at Rs. 1,26,882/- [Rs. 9,75,500

minus Rs. 8,48,618/- (indexed cost)]. It is also noted that the ld. DR could

not controvert the findings of the ld. CIT(A) on the issue in question. It is

further noted that in search operation, there was no incriminating

document against the assessee which could suggest that the assessee was

indulged in real estate business. In this view of the matter, we find no

reason to interfere with the order of the ld. CIT(A). Thus Ground No. 1 of

the Revenue is dismissed.

3.1 In Ground No. 2, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition of Rs. 5,50,000/- made by the AO on

account of undisclosed investment without appreciating the fact that this

property was not disclosed in the balance sheet. Brief facts of the case are

that the AO during the Assessment Year under consideration observed

that the assessee had sold out its property at Jodhpur for a total sale

consideration of Rs. 5,50,000/-. The said property was purchased by the

assessee in March 1997 for an amount of Rs. 3,00,000/-. The AO noted

that the above property was not appearing in the balance sheet / statement

of affairs of the assessee in the previous years. As such it is evident that

said property was purchased out of undisclosed sources of the assessee.

The AO taking into consideration these facts added the total sale

consideration of Rs. 5,50,000/- in the income of the assessee and thus

made the addition of Rs. 5,50,000/- u/s 69 of the Act.

3.2 In first appeal, the ld. CIT(A) deleted the addition of Rs. 5,50,000/-

by observing as under:-

‘’5.1.3 I have duly considered assessee’s submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee. It is a fact on record that during the year under consideration, assessee sold the property situated at Jodhpur (flat No. 4 Jodhpur Towers, Area 65 Sq. Mtr) for Rs. 5,50,000/-. (Refer PB 105-109) which was earlier purchased on 26.1.1997 for Rs. 3 lacs and after considering registration expenses, the cost of acquisition of this flat comes to Rs. 3,20,010/- (Refer PBP 96-104). It is also submitted that on sale of this flat, assessee declared long term capital loss of Rs. 1,13,103/- in the return (refer PBP 48-43) which is duly disclosed in his return for the year. In view of these facts, sale consideration received by the assessee cannot be added u/s 69 of the Act. AO is hereby directed to treat it as a capital loss at Rs. 1,13,103/- claimed by the assessee in his return of income. Assessee’s appeal in Gr No. 3 stands allowed.’’

3.3 During the course of hearing, the ld. DR supported the order of the

AO.

3.4 On the other hand, the ld.AR supported the order of the ld. CIT(A).

3.5 We have heard the rival contentions and perused the materials

available on record. It is noted that the AO made the addition of Rs. 5.50

lacs on account of sale of property having area of 65 Sq. Meter situated at

Flat No. 4, Jodhpur Towers, Jodhpur. It is also noted that this flat was purchased by the assessee on 26-01-1977 for Rs. 3.00 lacs and after

considering the registration expenses the cost of acquisition of this flat

was Rs.3,20,010/-. On sale of this flat, the assessee declared the long term

capital loss of Rs. 1,13,103/- in the return (PB48-53). Hence, it is

observed that on sale of this flat there is capital loss to the assessee after

indexation which is duly disclosed in the return and such sale amount

cannot be added to the income of the assessee. The ld. CIT(A) after

taking into consideration the facts and circumstances of the case also

observed that the sale consideration received by the assessee cannot be

added u/s 69 of the Act. The ld. CIT(A) thus directed the AO to treat it as

a capital loss at Rs. 1,13,109/- claimed by the assessee in his return of

income. In view of the above facts and circumstances of the case, we

concur with the views of the ld. CIT(A) on the issue in question. Thus

Ground No. 2 of the Revenue is dismissed.

4.1 In Ground No. 3, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition of Rs. 3,56,000/- made by the AO on

account of undisclosed investment in Plot at Narayan Vihar without

appreciating the fact that this property was not disclosed in the balance

sheet and not filed any explanation in this regard. Brief facts of the case are that the AO on perusal of the statement of affairs of the assessee for

the year under considered noted that plot at Naryan Vihar, Jaipur

purchased during the A.Y. 2008-09 for Rs.3.56 lacs was not appearing in

it. The AO also noted that the assessee had not submitted any explanation

in this regard. The AO thus added the amount of Rs. 3.56 lacs to the total

income of the assessee and made the addition.

4.2 In first appeal, the ld. CIT(A) deleted the addition of Rs. 3,56,000/-

by observing as under:-

‘’6.1.3 I have duly considered assessee’s submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee. In the assessment order passed for the year, AO has observed that as the plot of Narayan Vihar, Jaipur is not appearing in the statement of affairs of the assessee, the same has to be added u/s 69 of the Act. It is a fact that the said plot was booked by giving advance of Rs. 3,56,000/- in AY 2008-09 which is appearing in the statement of affairs as at 31.3.2008 (Refer PB Pg 41). and even the AO had considered the same in the trading account prepared by him in AY 2008-09 (Refer pg in the assessment order). It is also submitted that during the year, the said booking was cancelled and the amount was received back vide cheque No. 423039 & 423040 of Rs. 178,000/- each on 5.06.2009, that’s why it is not appearing in the statement of affairs for the year under consideration. This fact is also reflected in the return of income under the head short term capital gain (Refer PB pg 49-50) wherein capital gain on cancellation of booking is declared as nil. All these facts have been ignored by the AO. As per Sec 69 of the Act, AO can make addition where assessee had made investment which is not disclosed, which is not the case here. Accordingly, addition made of Rs. 356,000/- u/s 69 of the Act cannot be sustained hence deleted. Assessee’s appeal in Gr No. 4 stands allowed. ‘’

4.3 During the course of hearing, the ld. DR relied on the order of the

AO.

4.4 On the other hand, the ld.AR of the assessee supported the order of

the ld. CIT(A) for which the ld.AR of the assessee filed the following

written submission. Submission:- ‘’1. The observation of the AO that the plot at Narayan Vihar, Jaipur is not appearing in the statement of affairs of the assessee is incorrect. The plot was booked by giving advance of Rs. 3,56,000/- in A.Y. 2008-09 and it is appearing in the Statement of affairs as at 31-3-2008 (PB 41). Even the Ld. AO has considered the same in the trading account prepared by him in A.Y. 2008-09 as appearing in the assessment order of that year. 2. During the year the booking was cancelled and the amount was received back vide cheque No.423039 & 423040 of Rs.178,000/- each on 5.06.2009 and therefore it is not appearing in the statement of affairs for the year under consideration. This fact is reflected in the return of income under the head short term capital gain (PB 49-50) where in capital gain on cancellation of booking is declared as nil. The same is ignored by the AO. 3. AO has made the addition u/s 69. Addition under this section can be made where assessee makes an investment which is not disclosed. It is not a case of the AO that assessee has made any investment in the said plot in the year under consideration. Therefore addition made under section 69 is uncalled for. In view of the above, the order of CIT(A) be upheld by dismissing the ground of the department.’’

4.5 We have heard the rival contentions and perused the materials

available on record. In this case, the AO observed that the plot at Narayan

Vihar,Jaipur was not appearing in the statement of the affairs of the assessee, therefore, the AO made the addition of Rs. 3.56 lacs to the total

income of the assessee u/s 69 of the Act. In first appeal the ld. CIT(A) has

deleted the addition of Rs. 3.56 lacs made by the AO u/s 69 of the Act by

observing as under:-

6.1.3…As per Sec 69 of the Act, AO can make addition where assessee had made investment which is not disclosed, which is not the case here. Accordingly, addition made of Rs. 356,000/- u/s 69 of the Act cannot be sustained hence deleted. Assessee’s appeal in Gr No. 4 stands allowed. ‘’

It is noted from the records that the plot at Naryan Vihar, Jaipur was

booked by the assessee by giving advance of Rs. 2.56 lacs in A.Y. 2008-

09 and it is appearing in the statement of affairs as at 31-03-2008 (PBP

41). It is also noted that the AO had considered the same in the trading

account prepared by him (Page 6 of assessment order). It is also noted

that the booking of the above plot was cancelled and the amount was

received vide cheque no. 423049 and 423040 of Rs. 1,78,000/- each (i.e.

Rs. 3.56 lacs) on 5-06-2009, therefore, the same is not appearing in the

statement of affairs for the year under consideration. This fact is reflected

in the return of income under the head short term capital gain (PBP 49-

50) wherein the capital gain on cancellation of booking is declared as nil

by the assessee . Taking into consideration the facts and circumstances of the case, it is noted that the ld. CIT(A) is justified in deleting the addition

of Rs. 3.56 lacs made by the AO. Thus Ground No. 3 of the Revenue is

dismissed.

5.1 In Ground No. 4, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition of Rs. 6,70,900/- made by the AO on

account of unexplained cash without appreciating the fact that the

assessee has not offered satisfactory explanation with regard to the cash

found during search proceedings. Brief facts of the case are that the AO

during the course of assessment proceeding required the assessee to

explain the cash amounting to Rs. 12,70,900/- found during the course of

search proceedings carried out on 23-07-2009 at his residential premises.

It is also noted from the assessment order that the assessee during the

course of search proceedings made the surrender of Rs. 6.00 lacs on

account of unexplained cash. The AO noted that the assessee did not

submit any satisfactory explanation before him. Thus the AO made the

addition of Rs. 6,70,900/- u/s 69A of the Act and added the same to his

total income.

5.2 In first appeal, the ld. CIT(A) deleted the addition by observing as

under:- ‘’8.1.3 I have duly considered assessee's submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee. During the course of search operation, cash of Rs. 12,70,900/- was found and inventorised out of which Rs. 12 lacs was seized as per panchnama. It is pertinent to note that the assessee in sworn statement recorded u/s 132(4) in reply to question no. 23 (refer PB pg 10) has stated to be in possession of cash of Rs. 9.60 lacs. Again in reply to question no. 33, (refer PB pg 14) assessee explained the source of cash as amount received on sale of flat at Jodhpur Rs. 7 lacs and balance Rs. 2.60 lacs as personal cash which he generally keeps with him. While filing the return for the year, assessee offered only Rs. 6 lacs as unexplained cash after considering the sale proceeds of Jodhpur flat at Rs. 5.50 lacs and remaining amount as the cash available with his family members. While finalizing the assessment, the AO observed that assessee has not given any satisfactory explanation in respect of cash found, accordingly he made an addition of Rs. 6,70,900/- . Now it is a fact on record that the assessee has sold his flat at Jodhpur on 30-06-2009 for Rs. 5.50 lacs (Refer PBP page 105- 109). This fact was also stated in statement recorded u/s 132(4) of the Act. Therefore, cash found to this extent is fully explained. For remaining Rs. 1,20,900/- it is submitted that it verifiable from the cash balance available as per the cash book of the various family members and the cash balance reflected in the statement of affairs as under:-

Name of person Cash Balance as on PB Page No. 31-03-2008 31-03-2009 Ashok Kumar Sankhla 89,239 7,239 41 & 46 Pratima Sankhla 35,874 7,180 68 & 70 Amrit Raj Sankhla 76,162 76,851 57 Total 2,01,275 91,270

In view of facts and circumstances as discussed above, the balance cash of Rs. 1,20,900/- considering the avaibaility of cash in hands of assessee daughter Mahima Sankhla can be accepted as a reasonable possession in the hand of various family members, therefore, no addition is required to be made on this a/c also.’’

5.3 During the course of hearing, the ld. DR relied on the order of the

AO.

5.4 On the other hand, the ld.AR supported the order of the ld. CIT(A)

for which the ld.AR of the assessee filed the following written

submission.

‘’Submission:- 1. The assessee in course of assessment proceeding vide letter dated 21-12-2011 (PB 54-59) has explained the source of cash of Rs.6,70,900/- as under: (a) Rs.5.50 lacs are from the sale proceeds of flat at Jodhpur on 30- 6-2009. The amount was received in cash and lying with him at the time of search as explained him reply to question No. 33 of statement u/s 132(4) dated 23-7-2009. (b) The balance of Rs.1,20,900/- is the cash available with the various family members. 2. It is a fact on record that the assessee has sold his flat at Jodhpur on 30-6-2009 for Rs.5.50 lacs. (PB 105-109) The AO has made separate addition for the same. This fact is also stated in statement u/s 132(4). Hence, cash found to this extent is fully explained. 3. The balance cash of Rs.1,20,900/- is verifiable from the cash balance available as per the cash book of the various family members and the cash balance reflected in the statement of affairs as under:- Cash Balance as on Name of Person 31-3-2008 31-3-2009 Ashok Kumar Sankhla 89,239/- 7,239/- Pratima Sankhla 35,874/- 7,180/- Amrit Raj Sankhla 76,162/- 76,851/- Total 2,01,275/- 91,270/- Therefore, the cash of Rs.1,20,900/- considering the availability of cash in hands of various family members is fully verifiable. In view of the above, the order of CIT(A) be upheld by dismissing the ground of the department.’’

5.5 We have heard the rival contentions and perused the materials

available on record. In this case, the AO made the addition of

Rs. 7,60,900/- u/s 69A of the Act as the assessee was not able to submit

the satisfactorily explanation before the AO which in first appeal has

been deleted by the ld. CIT(A). It is noted that the assessee had sold at

Jodhpur on 30-06-2009 for Rs. 5.50 lacs (PBP-105-109). This fact is also

stated in the statement recorded u/s 132(4) of the Act. Therefore, the cash

found to this extent is verifiable. For remaining amount of Rs. 1,20,900/-,

the assessee submitted that the same is verifiable from the cash balance

available as per the cash book of the various family members and the cash

balance reflected in the statement of affairs is as under:-

Cash Balance as on Name of Person 31-3-2008 31-3-2009 Ashok Kumar Sankhla 89,239/- 7,239/- Pratima Sankhla 35,874/- 7,180/- Amrit Raj Sankhla 76,162/- 76,851/- Total 2,01,275/- 91,270/- Taking into consideration the above facts and circumstances of the case,

we find no reason to interfere with the order of the ld. CIT(A) on the

issue in question. Thus Ground No. 4 of the Revenue is dismissed.

6.1 In Ground No. 5, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition made by the AO on unexplained jewellery

of Rs. 12,49,729/- ignoring the fact that the assessee has not submitted

any concrete evidence in support of jeweler found during search

proceedings. Brief facts of the case are that during the course of search

proceedings, jewellery amounting to Rs. 33,59,377/- (2366.12 grams)

were found / seized from the various premises of the assessee. During the

course of assessment proceeding, the AO required the assessee to submit

his explanation on the issue for which the assessee submit the explanation

before the AO as under:-

A.1074.71 grams Gift received from Shri Sukh Singh Bhati (father in law of the assessee B.232.82 grams Amounting to Rs. 1,45,000/- purchased vide bill dated 06-06-2003seized vide Annexure A-1 page no. 33 C.154.30 grams Amounting to Rs. 1,07,500/- purchased through various bills during assessment year 2005-06. Bills seized vide Annexure A-1, page no. 36,39,41, 42 & 43 Total: 1461.83 grams As regards the gift, the assessee had submitted a copy of gift deed dated

15-12-1999 duly executed through notary which has been executed by the

AO. As regards the jewellery mentioned at B & C above, additions had

been made by the AO in the relevant Assessment Year which pertains to

the assessee. As regards the remaining jewellery of 904.20 grams, the

assessee had submitted that jewellery weighing to 205.445 grams is

appearing in the balance sheet and the remaining 698.845 grams is

reasonable. The AO did not find the explanation of the assessee

satisfactory and made the addition of Rs. 12,49,729/- relating to jewellery

of 904.29 grams by observing as under:-

‘’ The contention of the assessee in respect of 205.445 grams jewellery has been examined with reference to the record and it is found that no such jewellery is appearing in any of the balance sheet of previous years of the assessee. Therefore, the explanation of the assessee is not acceptable. Further for the remaining 698.845 grams of jewellery, the assessee has failed to submit any concrete evidence that supports his contentions. Therefore, taking into consideration the above facts, jewellery weighing 904.29 grams i.e. amounting to Rs. 12,49,729/- is hereby added to the total income of the assessee u/s 69 of the I.T. Act, 1961 being undisclosed investment of the assessee. The value of jewellery has been taken as per the valuation made during the course of search proceedings.’’

6.2 In first appeal, the ld. CIT(A) deleted the addition by observing as

under:- ‘’9.13. I have duly considered assessee's submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee . Here AO has made addition of Rs. 12,49,729/- in respect of 904.24 grms of jewellery items u/s 69 of the Act (Refer Asstt Order Pg 8- 10). Against this 904.24 gms. assessee has given explanation for (i) 87.555 gms. purchased by Smt. Partima Sankhala (ii) 117.89 gms. purchased on 13-11-2001 & 5-07-2002 (iii) 699.175 gms. received on different occasions and also covered by CBDT Circular No. 1914. It is submitted that jewellery weighing 87.855 gms. purchased by assessee's wife Smt. Pratima Sanakhla for Rs. 71,000/- is duly verifiable from copy of bill, cheque payment and Mrs. Pratima Sankhala’s capital A/c as on 31-03-2007 which AO has failed to appreciate as the amount was debited to her capital a/c. In support, assessee has provided a copy of the same in the paper book submitted (details are available at page 29 & 30 of the ld. CIT(A)’s order as scanned copy). In view of these facts, 87.855 gms. of jewellery is duly verifiable from purchase bill & payment details and capital a/c of Smt. Pratima Sankhla as on 31-03-2007. Hence, the same cannot be added u/s 69 of the Act.

Further, on perusal of bills (PB 152-155) jewellery items 97.26 gms. purchased from M/s. Tanishque (on 13-11- 2001) and M/s. Shree Jee (on 5-07-2002) cannot be added u/s 69 as they were procured in earlier years which falls out of the prior period covered u/s 153A of the Act

Further, assessee's family includes his wife Smt. Pratima Sankhala, a son and a daughter. Therefore, as per CBDT Instruction No. 1916 (F.No.286/63/93/IT(INV.II) dated 11-05-1994, keeping in mind his social status and other social occasions, a reasonable possession in the hands of the assessee will be as under:- Assessee himself 100 gms. Smt. Pratima Sankhala (wife) 500 gms. Unmarried daughter 200 gms. Unmarried son 100 gms. Total 950 gms.

Here AO has added 719.175 gms. jewellery in the hands of assessee as unexplained u/s 69 of the Act. Respectfully following aforementioned decisions, it can be safely presumed that the source to the extent of jewellery as mentioned as per CBDT’s instruction is reasonable and duly explained. Accordingly, no addition on a/c of 719.175 gms. is required u/s 69 of the Act, accordingly deleted.

In view of facts and circumstances of the case as discussed above, addition made of Rs. 12,49,729/-in respect of 904.24 gms. of jewellery items u/s 69 of the Act is hereby deleted. Assessee's appeal stands allowed in Ground No. 7.’’

6.3 During the course of hearing, the ld. DR relied on the order of the

AO.

6.4 On the other hand, the ld.AR of the assessee supported the order of

the ld. CIT(A) for which the ld.AR of the assessee filed following written

submission. ‘’Submission:- 1. The explanation in respect of 904.29 gms of jewellery is as under:

(i) Jewellery of 87.855 gms was purchased by assessees wife Smt Pratima Sankhla from M/s Shree Jee Jewellers on 28.03.2006. Payment of Rs.71,000/- against purchase of this jewellery was made by cheque. This amount is reflected in her capital account for the year ended on 31-3-2007. Copy of bill and capital account is at PB 67 & 151. AO failed to appreciate that jewellery so purchased is not appearing in the balance sheet since it has been debited in the capital account. Thus the source of this jewellery is fully explained.

(ii) Jewellery of 97.26 gms. was purchased prior to the period covered u/s 153A as per details given below:-

Date Purchased from Item Weight (Gms.) Amount (Rs.) 13-11-01 Tanishq Necklace 20.30 26654/- 13-11-01 Tanishq Pendent 1.16 3708/- 5-7-02 Shree Jee Jewellers Gold set 21.70 11392/- 5-7-02 Shree Jee Jewellers Gold set 54.10 28402/- Total 97.26 70156/-

Copy of bills is at PB 152-155. The bills of M/s Tanishq were found in course of search and the bills of Shree Jee Jewellers were furnished in course of assessment proceedings. Since these jewellery were acquired in earlier years, the addition made by the AO in the year under consideration u/s section 69 is not as per law.

(iii) The balance jewellery of 719.175 gms is a reasonable possession of jewellery in the hands of assessee and his family members comprising of assessee himself, his wife Pratima Sankhla, daughter Mahima Sankhla and son Amrit Raj Sankhla. The marriage of assessee took place on 25-6-1982, son was born on 14-9-83 and daughter was born on 10-7-86. Considering the same, the jewellery of 719.175 gms claimed as received on marriage, on birth of children and on other social occasion is reasonable and should be accepted. Reliance in this connection is also placed on the following cases:- (i)Ashok Chaddha Vs ITO [2012] 69 DTR 82 (Del.)

(ii)CIT Vs. Satya Narain Patni 366 ITR 325 (Raj.) (HC)

(iii)Smt. Pati Devi vs. Income Tax Officer & Anr. (1999) 240 ITR 727 (Kar)

(iv)Commissioner of Income tax Vs. Ratan lal Vyaparilal Jain (Guj.) (HC) 339 ITR 351

In view of the above, the order of CIT(A) be upheld by dismissing the ground of the department.’’

6.5 We have heard the rival contentions and perused the materials

available on record. It is noted that the AO made the addition of Rs.

12,49,729/- on the unexplained jewellery weighing 904.29 gms. In first

appeal, the ld. CIT(A) has deleted the addition made by the AO. It is not

imperative to repeat the facts of the case as the ld. CIT(A) has elaborately

discussed the issue hereinabove and we concur with his findings as to the

addition made of Rs. 12,49,729/- relating to jewellery of 904.24 gms.

Thus Ground No. 5 of the Revenue is dismissed.

7.1 In Ground No. 6, the Revenue is aggrieved that the ld. CIT(A) has

erred in deleting the addition of Rs. 20.00 lacs made by the AO on

account of undisclosed investment in construction of property at 1249,

Rani Sati Nagar, Jaipur without appreciating the fact that assessee himself

surrendered undisclosed investment of Rs. 25.00 lacs against which Rs.

5.00 lacs was shown in the return of income. Brief facts of the case are

that the AO made the addition on surrendered amount of Rs. 20.00 lacs

in respect of construction of property at 1249, Rani Sati Nagar, Jaipur

which in first appeal has been deleted by the ld. CIT(A) by observing as

under:- ‘’7.1.3 I have duly considered assessee’s submission and carefully perused the case record. I have also taken a note of factual matrix of the case as well applicable case laws relied upon by the assessee.

During the search operation carried out u/s 132 of the Act, assessee with reference to seized document AB pg 1,2 & 3 has admitted in sworn statement recorded on oath u/s 132(4) of the Act unexplained investment of Rs. 25,00,000/- in construction of house property at Rani Sati Nagar, Jaipur. However, assessee did offer only Rs. 2,30,000/- in AY 2009-10 And Rs. 5,00,000/- in AY 2010-11 on a/c of undisclosed construction cost, in response to notices issued u/s 153A of the Act for the years. Accordingly, AO added Rs. 20,00,000/- on a/c of alleged investment in construction at Plot-1239, Rani Sati Nagar, but it is also a fact that AO has not conducted any fruitful investigation in this regard nor taken any cognizance of the written submission made by the assessee. Smt. Pratima Sankhla, wife of the assessee has purchased plot of land at 1249, Rani Sati Nagar, Jaipur in year 1999 and on this plot, she started construction of house in August 2006 where total construction cost declared by her up to 31.3.2010 is Rs. 36,36,114/- which is evident from her statement of affairs as under:- F.Y. Amount (Rs.) Amount shown PB Pg 2006-07 16,61,740.00 16,61,70 66 2007-08 17,77,375.62 3439114.62 68 2008-09 1,96,999.38 36,36,114 70 Rs. 36,36,114/-

It is also submitted that assessee offered Rs. 2,30,000/- in AY 2009-10 and Rs. 5,00,000/- in AY 2010-11 on account of undisclosed construction. During the course of assessment proceedings, assessee had explained to the AO that the expenditure as per pages 1,2 & 3 of annexure A-30 referred in the statement is only Rs. 1,10,132/-. As per the registered valuer report the cost of construction is Rs. 41,90,825/- whereas the cost of construction declared by his wife Smt Pratima Sankhala and that surrendered by the assessee amount to Rs. 43.66 lacs (36.36 + 7.30). It is also a fact that in course of search operation, no evidence whatsoever has been found from assessee’s premise to suggest cost of construction incurred to be more than Rs. 43.66 Lakhs. Further, AO has also not carried out any investigation to disprove assessee’s contention. In view of these facts, addition made by the seems to be unjustifiable.

In view of facts and circumstances of the case as discussed above and respectfully following Hon’ble Apex Court in case of Pullangone Rubber Produce Co Ltd (Supra), addition made of Rs. 20,00,000/- is hereby deleted. Assessee’s appeal in Gr No. 5 stands allowed. ‘’

7.2 During the course of hearing, the ld. DR supported the order of the

AO.

7.3 On the other hand, the ld.AR of the assessee supported the order of

the ld. CIT(A) for which he has filed the following written submission.

‘’Submission:- 1. It is submitted that Smt. Pratima Sankhla, wife of assessee has purchased plot of land and constructed of house on it. Total expenses incurred by her is Rs.36,36,114/- as mentioned above which is reflected in her balance sheet. Besides this assessee has made contribution of Rs. 7,30,000/- in the construction which he has offered in the return as mentioned above. Thus, the total expenses incurred on construction is Rs.43,66,114/- (36,36,114 +730,000). 2. In search except three pages as mentioned above, no evidence was found to suggest that the expenses incurred was more than that shown by the assessee and his wife. As against this valuation report of registered valuer determining the construction cost of the property at Rs. 41,90,825/- is found in search which was seized at Page 1 to 34 of AB-10 (PB 122-145). This report is dated 29-3-2008 but it includes the cost of ongoing work also. These ongoing works were completed partly in AY 2009-10 and partly in AY 2010-11. Thus, the construction expense declared by the assessee and his wife is more than the cost of construction determined by the registered valuer. 3. The statement given u/s 132(4) is without referring to the books of accounts and other documents and therefore no credence should be given to such statements. Otherwise also documentary evidence found in search has to be given credence over the oral statement. The seized papers contain expenses on construction at Rs.1,10,132/- which is also paid by cheque and shown in books. As against this the valuation report of registered valuer found in search suggest total construction expenses at Rs.41,90,825/- whereas the construction expenses declared by assessee and his wife is Rs.43.66 lacs. No material or evidence is brought by AO to hold that the construction expenses incurred is more than that declared by assessee and his wife. For making addition u/s 69, AO must have positive evidence that assessee has incurred expenditure which is more than that declared in the return. In these circumstances, addition made by the AO is unjustified. 4. It may be noted that the CBDT in instruction No. F. No. 286/2/2003-IT (Inv.) dated 10-3-2006 has advised that while recording the statement during the course of search and seizure and survey operation, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. The AO should rely on the evidences/material gathered during the course of search/survey operation. Therefore, no addition can be made only on the basis of statement without corroborating the same with the documentary evidence. Reliance is further placed on the following case laws:-

(i) The Hon’ble Supreme Court in the case of Pullangone Rubber Produce Company Ltd. V. State of Kerala and Another 91 ITR 18 held that admission is an extremely important piece of evidence but it can’t be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs.

(ii) Surendra Pal Verma Vs. ACIT 89 ITD 129 (Chd)(TM): Confessional statement made during search are often venerable on ground that person giving such statement remain under a great mental stress and strain and in the absence of availability of relevant details, documents and books at the time of giving statement, precise information as to utilization of such income and year of investment cannot be correctly furnished.

(iii) Jugal Kishore Garg Vs. DCIT 34 Taxworld 201 (JP): Addition to total income of an assessee cannot be made simply on the basis of statement of assessee without collecting and brining any corroborative evidence on record. In view of the above, the order of the ld. CIT(A) by upheld by dismissing the ground of the department.’’

7.4 We have heard the rival contentions and perused the materials

available on record. Brief facts of the case are that Smt. Pratima Sankhla, wife of the assessee has purchased plot of land at 1249, Rani Sati Nagar,

Jaipur in year 1999. On this plot, she started construction of house in

August 2006. Total construction cost declared by her up to 31-3-2010 is

Rs.36,36,114/- which is evident from her statement of affairs (PB 63-

71A). Year wise details of investment made by her is as under:-

F.Y. Amount (Rs.) 2006-07 16,61,740.00 2007-08 17,77,375.62 2008-09 1,96,999.38 In statement u/s 132(4) dated 24-7-09, the assessee in reply to question

No. 44 (PB 19), with reference to seized annexure AB pages 1, 2 & 3 (PB

119-121) stated that he has made undisclosed investment of Rs.25 lacs in

the construction for which he made surrender in AY 2010-11.At the time

of filing of return, assessee offered Rs.2,30,000/- in AY 2009-10 and Rs.5

lacs in AY 2010-11 on account of undisclosed construction. In course of

assessment proceedings, it was explained that the expenditure as per

pages 1, 2 & 3 of Annexure A-30 referred in the statement is only

Rs.1,10,132/-. As per the registered valuer report the cost of construction

is Rs.41,90,825/- whereas the cost of construction declared by his wife

and that surrendered by him amounts to Rs.43.66 lacs (36.36+7.30). The

AO however observed that in search assessee made surrender of Rs.25 lacs on account of cost of construction of house in AY 2010-11 whereas

he has offered Rs.5 lacs only in the return for AY 2010-11. He therefore

made addition of Rs.20 lacs u/s 69 of the Act. The ld. CIT(A) has deleted

the addition made by the AO by observing as under:-

‘’7.1.3….. It is also a fact that in course of search operation, no evidence whatsoever has been found from assessee’s premise to suggest cost of construction incurred to be more than Rs. 43.66 Lakhs. Further, AO has also not carried out any investigation to disprove assessee’s contention. In view of these facts, addition made by the seems to be unjustifiable.

In view of facts and circumstances of the case as discussed above and respectfully following Hon’ble Apex Court in case of Pullangone Rubber Produce Co Ltd (Supra), addition made of Rs. 20,00,000/- is hereby deleted. Assessee’s appeal in Gr No. 5 stands allowed. ‘

Taking into consideration the above facts, circumstances of the case and

the case laws relied upon by the ld.AR of the assessee, it is held that the

ld. CIT(A) is justified in deleting the addition of Rs. 20.00 lacs made by

the AO which is confirmed. Thus Ground No. 6 of the Revenue is

dismissed.

8.0 In the result, the appeal filed by the Revenue is dismissed Order pronounced in the open Court on 23 -10-2017. Sd/- Sd/- ¼dqy Hkkjr½ ¼HkkxpUn½ (KUL BHARAT) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 23 /10/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The ACIT, Central Circle1, Jaipur 1. 2. izR;FkhZ@ The Respondent- Shri Ashok Kumar Sankhla, Jaipur vk;dj vk;qDr¼vihy½@ CIT(A). 3. 4. vk;dj vk;qDr@ CIT, विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No.608/JP/2016) 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत