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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’, NEW DELHI
Before: SHRI O.P. KANT & SHRI K.N. CHARY
Date of hearing 11.07.2019 Date of pronouncement 29.07.2019 ORDER PER O.P. KANT, A.M.: The captioned cross-appeals are directed against order dated 18/04/2012 passed by the Ld. Commissioner of Income-tax 2 & 3885/Del/2012 (Appeals), Faridabad [in short ‘the Ld. CIT(A)’] for assessment year 2008-09. 2. The grounds of appeal raised by the Revenue in ITA No. 3885/Del/2012 are reproduced as under:
1. On the facts and in the circumstances of the case, the Ld, CIT(A) has erred on facts and in law in deleting the addition of Rs.11,87,162/- made by the Assessing Officer on account of not declaring the amount of Rs.11,87,162/- as closing stock for the reason that the assessee has not raised any bill on 31.03.2008 showing utilization of the material purchased on 31.03.2008.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.20,25,000/- made by the Assessing Officer on account of income from undisclosed sources as the assessee has filed no explanation regarding the source and genuineness of the amount. The assessee could not prove the source of such cash at the referred locations on the stated dates with sufficient explanation and documentary evidences."
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.26,00,000/- made by the Assessing Officer on account of income from unexplained sources as the assessee has failed to prove source and genuineness of the deposits made in the bank accounts during the assessment proceedings. Further, no confirmation or bank statements of M/s. I.D. Creation and Inder Financial Services was filed by the assessee.
4. On the facts and in the circumstances of the case, the Ld. CTT(A) has erred on facts and in law in deleting the addition of Rs.4,00,000/- made by the Assessing Officer on account of the amount introduced during the year treated as unexplained u/s 68 of the Act as the assessee has nothing filed to prove source and genuineness of this loan amount. Further, in the alleged confirmation it was not mentioned as to the stated loan was given on which date or even in which year and hence, the confirmation appears to have been filed mechanically.
5. On the facts and in the circumstances of the case, the Ld, CIT(A) has erred on facts and in law in deleting the addition of Rs.25,75,000/- made by the Assessing Officer on account of short term capital gain as it was noticed that the assets shown in the balance sheet of M/s Jai Mata Enterprises as on 31.03.2007 and 31.03.2008 were same and in this way no asset was out. If no asset was out during the year, how it could be accepted that the asset was sold out."
3 & 3885/Del/2012 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.28,863/- made by the Assessing Officer on account of difference in receipts which was shown short as the assessee has not filed any confirmation during the course of assessment proceedings.
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.2,68,730/-( 4,00,673 - 1,31,943)made by the Assessing Officer on account of interest not charged on advances given by the assessee.
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred on facts and in law in deleting the addition of Rs.10,79,160/- made by the AO u/s 69C of the Act in view of the fact that the account statements (which was even not confirmed by M/s D.S.Geo Services Pvt. Ltd.), there are certain amounts mentioned like deposit of Rs. 15 lacs by the assessee with this company on 29.10.2007, which was not shown in the copy of account of the assessee in the books of the said company as filed during the course of assessment proceedings.
That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.
The grounds of appeal raised by the assessee in
1. That the learned CIT(A) has erred in law as much as on the facts of the case by upholding the addition of Rs.19,00,768/-on account of cash payment made to labourers from unexplained sources under suspicious and surmises without appreciating the facts and nexus of business needs.
That the learned CIT(A) erred in law as much as on the facts of the case by upholding the addition of Rs.12,65,655/- on account of difference in receipts shown in P&L account when compared with to total receipts in TDS certificate without appreciating that the same amount has been shown as advance on the face of balance sheet itself. 3. That the appellant craves for the permission to add, delete or amend the grounds of appeal
before or at the time of hearing of appeal.
4. Briefly stated facts of the case are that the assessee was engaged in executing contract work in the name of proprietary concern M/s Jai Mata Enterprises. For the year under consideration, the assessee filed return of income on 4 & 3885/Del/2012 30/09/2008, which was processed on 30/03/2010. The case was selected for scrutiny and notice under section 143(2) of the Income Tax Act, 1961 (in short ‘the Act’) was issued and complied with. In the assessment order passed under section 143(3) of the Act on 30/12/2010, the Assessing Officer made various additions and assessed the income at Rs.2,10,36,720/-. Against the additions made, the assessee filed appeal before the Ld. CIT(A). The assessee filed additional evidences before the Ld. CIT(A), which were forwarded to the Assessing Officer for his comment. The Assessing Officer objected to the admissibility of the additional evidence, however also given his comment on the merit of the additions in view of the additional evidences. The Ld. CIT(A) after considering submission of the Assessing Officer in the remand report and submission of the assessee, vide impugned order allowed the appeal partly. Aggrieved both, the Revenue and the assessee are in appeal before the Tribunal raising the grounds as reproduced above.
5. The ground No. 1 of the appeal of the Revenue relates to addition of Rs.11,87,162/- pertaining to stock of raw material. The Assessing Officer observed from the books of accounts of the assessee that he purchased products, namely, KELVEX CPT and Seismics Detonator amounting to Rs.7,96,590/- and Rs.3,90,572/- respectively totaling to Rs.11,87,162/- from M/s Jai Mata Enterprises, Eluru and bills for these purchases were raised on 31/03/2008. The Assessing Officer further observed that, the closing stock shown in the profit and loss account was nil and no utilization of above products was shown by the assessee. According to the Assessing Officer, stock of the products amounting to Rs. 11,87,162/- must have been available 5 & 3885/Del/2012 with the assessee and same should have been included in the closing stock and thus, the assessee has shown his profit short by Rs.11,87,162/-. Before the Ld. CIT(A), the assessee filed copy of challans through which these products were supplied to the assessee on day to day basis from 01/03/2008 to 31/03/2008 and bills were raised on 31.03.2008 in respect of the goods which were used by the assessee. Accordingly, the Ld. CIT(A) concluded that there was no question of any closing stock of these goods as on 31/03/2008 and thus, he deleted the addition. 5.1 Before us, the Ld. DR referred to relevant pages of the order of the Assessing Officer and the order of the Ld. CIT(A) and submitted that Ld. CIT(A) was not justified in deleting the addition on the basis of the submission of the assessee. 5.2 On the contrary, the Ld. counsel of the assessee relied on the order of the Ld. CIT(A). 5.3 We have heard the rival submission and perused the relevant material on record. We find that the learned CIT(A) after considering the remand report of the Assessing Officer on the additional evidence filed, deleted the addition observing as under: “6.2. Ground No. 2 of appeal relates to addition of Rs. 11,87,162/- on account of suppressed closing stock. The assessee purchased explosive and detonators through two bills from M/s. Jai Mata Enterprise, Eluru for Rs.11,87,162/-. The AO has also held that the said stock was not used in business activity as no bills for its utilization were raised. The appellant has filed copies of used challan and bills in the paper book (page 57 to 111 of the paper book). It is revealed that the material was supplied on day to day basis from 01.03.2008 to 31.03.2008 through used challans showing the quantity issued, used and returned on daily basis both in respect of explosives and detonators. The total quantity through the used challans is shown at 8851 kgs in respect of Kelvex CPT and 13387 number in respect of detonators for which two bills were raised. Since, the overwhelming evidences filed in the paper book establish that the entire material was used in the month of March 2008 and the bills were raised on 31.03.2008 for the material 6 ITA No.4082 & 3885/Del/2012 already used, there was no question of having any closing stock on 31.03.2008. I find that the AO has restricted himself to offer comments on some of the irrelevant submissions made by the appellant instead of verifying the actual facts as per the documents submitted in the paper book. The addition of Rs. 11,87,162/- is therefore, deleted and ground No. 2 of appeal is allowed.”
5.4 In our opinion, when the assessee has demonstrated use of the material on the basis of records maintained in the course of day-to-day business, and explained for the amount of bill raised on 31/03/2008 and justified for ‘Nil’ closing stock of those material, the assessee has discharged his onus. Nothing adverse has been brought before us by the Ld. DR. In our opinion, the finding of the Ld. CIT(A) is well reasoned and no interference is required by us in the said finding, accordingly, we uphold the finding of the Ld. CIT(A) . The ground of the appeal is accordingly dismissed.
Ground No. 2 of the appeal relates to addition of Rs.20,25,000/- made by the Assessing Officer on the ground that the assessee could not prove source of the cash at the concerned locations on relevant dates. From the books of accounts of the proprietary concern of assessee, the Assessing Officer observed addition of Rs.27,50,000/- into the capital account assessee. This addition was made by way of Rs.16,00,000/- and Rs.4,25,000/- on 29/08/2007 and 22/10/2007 respectively. The assessee filed copy of drawing account maintained in the proprietary concern for financial year 2006-07, relevant to assessment year 2007-08, wherein an amount of Rs.16,00,000/- was transferred to Sh. Navneet Kumar on 03/04/2006. The Assessing Officer observed that return of said Rs.16,00,000/- by Sh. Navneet Kumar in the year under consideration was not supported by the statement of 7 & 3885/Del/2012 the affairs as on 31/03/2007 and 31/03/2008 filed by the assessee. The Ld. Assessing Officer noted that this amount of Rs.16,00,000/- was not appearing on the asset side of the statement of the affairs as on 31/03/2007, instead, an amount of Rs.5,50,000/- was shown as loan liability in the name of Sh. Navneet Kumar in the statement of the affairs as on 31/03/2007. The Assessing Officer further observed that in the statement of affairs as on 31/03/2008, loan liability in the name of Sh. Navneet Kumar was shown at Rs.21,50,000/-. In view of the Assessing Officer, the amount received during the year are fresh loan and the assessee failed to explain source and genuineness of the capital introduced by the assessee in the business by way of loans and accordingly, made addition of Rs.20,25,000/-. Before the Ld. CIT(A), the assessee filed additional evidences, which were forwarded to the Assessing Officer for his comments. The Ld. CIT(A) provided sufficient opportunity to the learned AO for examining the additional evidences and carrying out necessary enquiries. The Ld. CIT(A) verified the the explanation given by the assessee in respect of addition of Rs.16,00,000/- and Rs.4,25,000/- and thereafter held that no addition can be made under section 68 of the Act in respect of the amounts. 6.1 Before us, Ld. DR submitted that parties from whom said sum has been claimed to be received, were not produced before the Assessing Officer during remand proceeding and thus, the requirement of section 68 were not satisfied by the assessee and thus, the Ld. CIT(A) is not justified in deleting the addition. The Ld. counsel of the assessee, on the other hand, relied on the finding of the Ld. CIT(A).
8 & 3885/Del/2012 6.2 We have heard the rival submissions and perused the relevant material on record. We find that before the Ld. CIT(A), the assessee has explained the said amount of Rs.16,00,000/- and Rs.4,25,000/- from Sh. Navneet Kumar as fresh loan and from M/s. ID Creations as repayment of earlier advance respectively. The Ld. CIT(A) has also examined requirement of section 68 in respect of sums received from both the parties. The finding of the Ld. CIT(A) in respect of some of Rs.16,00,000/- is reproduced as under: “…………..The appellant has filed statement of transactions with Shri Navneet Kumar and other relevant evidences at pages 113 to 118 of the paper book. It is seen that in addition to amount of Rs. 16.00 lacs, the appellant has also given amount of Rs.4,00,000/- to Shri Navneet Kumar on 17.04.2006 debited in the bank account of M/s. Jai Mata Enterprises with ICICI Bank. The appellant, however, received an amount of Rs.25,50,000/- from Shri Navneet Kumar on 15.01.2007 which was credited in the aforesaid bank account with ICICI Bank. Thus, the net amount of Rs.5,50,000/- was outstanding as payable to Shri Navneet Kumar on 31.03.2007, which is clearly shown as payable in the statement of affairs for F.Y.2006-07 marked as Annexure-A to the assessment order. The appellant received sum of Rs. 16,00,000/- as credited in the capital account on 29.08.2007 leading to total amount payable at Rs.21,50,000/- which is shown as payable in the statement of affairs for F.Y. 2007- 08 marked as Annexure-B to the assessment order. The AO has not appreciated this factual position. The appellant’s contention that the amount of Rs. 16,00,000/- was received against the amount already given is not acceptable as the appellant already received this amount on 15.01.2007 included in the amount of Rs.25,50,000/-. Thus, in effect and substance, the amount of Rs. 16,00,000/- shall be treated as fresh loan received from Shri Navneet Kumar. In support of said "transaction, the appellant has filed a confirmation from him, a copy of his passport and copies of connected bank accounts. In the remand report, the AO has submitted that alleged confirmation has been issued by the said person in the name of M/s. Jai Mata Enterprises and the transactions were routed through the bank accounts of this concern, these transactions should have beeh shown in the audited balance sheet of this concern and unless and until the person is produced by the assessee for proper examination, no relief may be granted to the assessee. Pursuant to a search action carried out in the case of assessee, the assessment for A.Y.2006-07 has been made by the ACIT Central Circle-I, Faridabad as per order dated 21.11.2008 and the amount of loan of 9 & 3885/Del/2012 Rs.5,50,000/- outstanding as on 31.03.2007 has been accepted as genuine by the said AO as no adverse inference has been drawn. Thus, the identity, capacity and genuineness of transaction with Shri Navneet Kumar are already established on record. Further, the AO was specifically directed in remand proceedings to conduct inquiry in respect of cash credits but the AO has preferred not to comply with such direction despite having time of about 11 month. When the transaction with Shri Navneen Kumar have been routed through the capital account and duly reflected in personal statement of affairs, there is nothing wrong in accounting and the amount cannot be held to be unexplained merely because the transactions are not routed through or reflected in the balance sheet of M/s. Jai Mata Enterprises. Once evidences are led by the assessee and the AO prefers not to conduct any inquiry despite directions given under rule 46A(4), the AO has impliedly accepted the explanation offered by the appellant. Keeping in view the above facts and legal position, I find no reason to sustain the addition of Rs. 16,00,000/- which is directed to be deleted……….” 6.3 We find that the assessee has reconciled entries in the statement of the affairs as on 31/03/2007 and 31/03/2008 along with the bank’s statement and explained the sum of Rs.16,00,000/-received during the year under consideration as fresh loan. The Ld. CIT(A) has noted that despite sufficient time available for sending remand report, the Assessing Officer did not carry out any enquiry in respect of loan from Sh. Navneet Kumar. The Ld. CIT(A) has observed that no adverse inference was drawn in case of the loan received from Sh. Navneet Kumar in preceding assessment year. 6.4 In respect of addition of Rs.4,25,000/-, the Ld. CIT(A) has noted as under: “As regards addition of Rs.4,25,000/- in the capital account on 22.10.2007, it is evident from the "written submissions against ground No. 4 of appeal that the amount was received from M/s. ID Creations, a partnership firm of Shri Gurbax Singh to whom the sums were advanced by the appellant in F.Y.2006-07 to the extent of Rs. 10,22,140/- through banking channels. The same has been reflected in the books of accounts of M/s. Jai Mata Enterprises for F.Y. 2006-07 i.e. Rs.4,90,951/- in the name of M/s ID Creation in the schedule of loan & advances as per Annexure-C (page No.30 of paper book), and statement of affairs of the assessee for F.Y. 2006- 10 & 3885/Del/2012 07 i.e.Rs.5.31,189/- in the name of M/ s. ID Creation (page 32 of paper book). The amount if Rs.4,25,000/- has been deposited in the bank account of M/s. Jai Mata Enterprises with ICICI Bank on 24.10.2007. Thus, the amount of Rs.4,25,000/- has been received out the money given by the assessee to M/s. ID Creations in F.Y. 2006-07 which is in the nature of repayment to the assessee and cannot be considered for addition u/s 68 of the Act as it does not amount to acceptance of any fresh loan. Considering the above facts and legal position, the addition of Rs.20,25,000/- is deleted and ground No. 3 of appeal is allowed.”
6.5 We find that the assessee has explained the amount of Rs.4,25,000/- as repayment of the earlier loan given to M/s I D Creations. In our opinion, the assessee has discharged his onus and no adverse material has been brought on record by the Assessing Officer in remand proceeding. 6.6 We do not find any infirmity in the finding of the Ld. CIT(A) on the issue in dispute and accordingly we uphold the finding of the Ld. CIT(A) in respect of addition of Rs.16,00,000/- and Rs.4,25,000/-, totaling Rs.20,25,000/-. The ground No. 2 of the appeal is accordingly dismissed.
7. The ground No. 3 of the Revenue’s appeal relates to addition of Rs.26,00,000/- made by the Assessing Officer on account of deposits in bank account not explained by the assessee. The Ld. Assessing Officer observed that sources of following deposits in bank of India saving bank account No. 670310110000390 maintained in the name of the assessee were not explained: Date Name Amount 13.06.2007 I.D. Creating 5,00,000/- 25.10.2007 Inder Financial Services 7,00,000/- 29.10.2007 Inder Financial Services 9,00,000/- 29.12.2007 I.D. Creation 3,00,000/- 25.02.2008 Dinesh Raghuvanshi 2,00,000/- 7.1 Before the Ld. CIT(A), the assessee filed statement of affairs as on 31/03/2007 and 31/03/2008 and explained that said the deposits were mainly out of the money received on return of advances by parties. The Ld. CIT(A) after verifying the submission of the assessee, deleted addition. 7.2 Before us, the ld. DR referred to the comment of the Assessing Officer in remand report and submitted that Ld. CIT(A) has accepted the claim of the assessee without verifying, the identity, creditworthiness and genuineness of the transaction in respect of the credits in the bank account. The Ld. AR on the other hand relied on the finding of the Ld. CIT(A). 7.3 We have heard the rival submissions and perused the relevant material on record. In respect of the credit entries appearing in the bank account, the assessee before the Ld. CIT(A) explained the source of the deposit and reconciled the same with the statement of the affairs as on 31/03/2007 and 31/03/2008 filed with Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under : “6.4. In ground No. 4 of appeal, the appellant has challenged the addition of Rs.26,00,000/- made on account of unexplained deposits in the bank account with Bank of India (S/B A/c No. 670310110000390) in the name of Shri Sanja}' Kumar. On examination of confirmations filed at page 119 to 122 of the paper book, statement of bank accounts with Bank of India and ICICI Bank (page 123 to 127 of the paper book) and statement of affairs (page 31 to 32 of the paper book), there remains no dispute that the appellant advanced funds to Shri Guibax Singh, proprietor of M/s. Inder financial Services and partner of M/s. ID Creations to the tune of Rs.51,97,140/- (41,75,000+10,22,140) . The same have been reflected in the books of accounts of M/s. Jai Mata Enterprises for F.Y. 2006-07 i.e. Rs.4,90,951/- in the name of M/s ID Creation in the schedule of loan & advances as per Annexure-C (page No.30 of paper book), statement of affairs of the assessee for F.Y. 2006- 07 12 & 3885/Del/2012 i.e. Rs. 5,31,189/- in the name of M/s. ID Creation and Rs.41,75,000/- in the name of M/s. Inder Financial Services (page 32 of paper book). Similarly, the amount of Rs.2,00,000/- in the name of Shri Dinesh Raghuvanshi has been shown as receivable in the statement of affairs as on 31.03.2007 produced during the assessment proceedings and enclosed in the paper book at page No.
The said amount has been received back from Shri Dinesh Raghuvanshi and deposited in bank account with Bank of India on 25.08.2007. The confirmation of Shri Dinesh Raghuvanshi in support of repayment of said sum through cheque No. 143487 dated 22.02.2008 drawn on Punjab and Sindh Bank is filed at page 128 of the paper book. The AO has not disputed this factual position. Since the amounts were paid to these persons earlier which are reflected in statement of affairs and bank accounts; and received during the year through banking channels as repayment of loan by them, no amount can be treated as unexplained investment as it was appellant’s own money advanced earlier which has come back. The AO has not carried out any inquiry on this issue despite having knowledge of whereabouts of Gurbax Singh. For the reason discussed above, the addition of Rs.26,00,000/- is deleted and ground No. 4 of appeal is allowed.”
7.4 Before us, the Revenue could not point out any mistake in the reconciliation of the deposit entries with the statement of affairs of the assessee as on 31/03/2007 and 31/03/2008. The Ld. CIT(A) had provided sufficient opportunity to the Assessing Officer during remand proceeding and therefore we do not find it justified to again send the matter back to the Assessing Officer, without any discrepancy in the reconciliation carried out by the Ld. CIT(A). We do not find any error in the finding of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground No. 3 of the appeal of the Revenue is dismissed.
8. The Ground No. 4 of the Revenue’s appeal relates to addition of Rs.4,00,000/-made by the Assessing Officer under section 68 of the Act. The Ld. Assessing Officer observed that from the statement of the affairs as on 31/03/2007 and 31/03/2008 filed by the assessee, a fresh loan of Rs.4,00,000/- was noticed in the 13 & 3885/Del/2012 name of Sh. Narveer Singh’s but neither any confirmation or other documents to prove genuineness of this loan was filed and therefore he held the same as unexplained under section 68 of the Act. Before the Ld. CIT(A), the assessee filed confirmation from Sh Narveer Singh, along with his PAN Card, copy of bank account and other necessary evidence in support thereof. All the documents were forwarded to the Assessing Officer for his comments. After receipt of the remand report from the Assessing Officer and rejoinder of the assessee on the same, the Ld. CIT(A) found the loan as genuine transaction and deleted the addition. 8.1 Before us, the Ld. DR referred to comment given by the Assessing Officer in remand report and submitted that the Ld. CIT(A) deleted addition without carrying out the necessary enquiry on the additional evidences submitted by the assessee. Accordingly, he requested that issue in dispute may be restored back to the file of the Assessing Officer. 8.2 On the contrary, the ld. AR relied on the order of the Ld. CIT(A). 8.3 We have heard the rival submission and perused the relevant material on record. On the additional evidences in respect of the loan amount filed by the assessee, in remand report the Ld. Assessing Officer brought on record that confirmation did not contain date or the year of the loan given in the bank account was and also it was not containing name of the account holder. We find that the Ld. CIT(A) accepted the loan as explained in view of the fact that she Narveer Singh was assessed to tax and paid tax of Rs.1,62,000/-. It is evident that in absence of name of the bank account holder in the copy of bank account provided by the assessee as additional evidence, the genuineness of the 14 & 3885/Del/2012 transaction cannot be ascertained and the therefore, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh in accordance with law after affording adequate opportunity of being heard to the assessee. The ground of the appeal of the Revenue is accordingly allowed for statistical purposes.
9. The ground No. 5 of the Revenue’s appeal relates to addition of Rs.25,75,000/- made by the Assessing Officer on account of short-term capital gain. 9.1 Before the Assessing Officer, the assessee filed detailed of short-term capital gain declared of Rs.14,25,000/-. It was explained by the assessee that flat No. 106, Kirti Group Housing Society, Faridabad was sold for Rs.50,00,000/- during the year under consideration, which was purchased on 19/04/2006 for a sum of Rs.25,75,000/- and further an amount of Rs.10,00,000/- was surrendered in relation to the property at the time of the search on 07/09/2006, as cost of improvement to the flat, which has been assessed in assessment year 2007-08. The Assessing Officer further observed that rebate of Rs.1,50,000 of interest paid on housing loan for self occupied property having flat No. 305, Kirti Cooperative Housing Society, Faridabad was claimed by the assessee. Further, in description of loans and advances given by the assessee, it was submitted that amount of Rs. 25, 75,000/-was appearing as advance against flat No. 305, Kirti cooperative group housing society. 9.2 In view of the amount of Rs.25,75,000/- found by the Assessing Officer against flat No. 106 as well as flat No. 305, the Assessing Officer concluded that the amount of Rs.25,75,000 claimed is cost of acquisition against flat No. 106 was not correct 15 & 3885/Del/2012 and the cost of acquisition of the flat No. 106 was only Rs. 10 lakh declared by the assessee in the course of search action and assessed in assessment year 2007-08, accordingly, he computed the short-term capital gain to Rs.40 lakh and after deducting the short-term capital gain of Rs.14,25,000/- already declared by the assessee, he made addition for the remaining amount of Rs.25,75,000/-. 9.3 Before the Ld. CIT(A), the assessee filed detailes of the transaction of purchase of flat No. 305 and Flat No. 106, in Kirti Cooperative Group Housing Society, Faridabad. The Ld. CIT(A) found the root cause of confusion was wrongly mentioning by the assessee amount of Rs.25,75,000/-as advance against Flat No.
The Ld. CIT(A) found the investment in both the flats is duly explained and accordingly he deleted the addition of the short- term capital gain made by the Assessing Officer. 9.4 Before us, the Ld. DR referred to comment of the Assessing Officer in remand report and submitted that no evidence i.e. purchase agreement or registered sale deed for purchase of the Flat No. 106 was provided by the assessee even during the first appellate proceedings and the Ld. CIT(A) was not justified in accepting the cost of acquisition of the flat No. 106 merely on the basis of the electricity bill of the said property. 9.5 On the contrary, the Ld. AR relied on the finding of the Ld. CIT(A). 9.6 We have heard the rival submission and perused the relevant material on record. We find that before the Ld. CIT(A), the assessee explained source of investment of both the Flat No. 305 and 106 under reference. The source of investment in flat No. 305 was explained by way of loan of Rs. 32 lakhs from bank of 16 & 3885/Del/2012 India, SSI branch, Faridabad and repayment of the said loan was made in installment. The assessee claimed that said rebated/deduction of Rs.1,50,000/- was made against interest paid to the bank on the loan against Flat No.
305. Regarding the source of payment of Rs. 25.75 Lacs for purchase of flat number of 106, the assessee explained that said payment was made through ICICI bank on 19/04/2006. This entry of the payment was duly verified by the Ld. CIT(A). The relevant finding of the Ld. CIT(A) is reproduced as under: “6.6. In ground No. 6 of appeal, the appellant has disputed the decision of the AO in not allowing deduction of Rs.25,75,000/- towards cost of acquisition of flat No. 106 in The Kriti Co-op Group Housing Society Ltd.’ sold during the year and thereby making addition on account of short term capital gain short declared by the appellant. Before dealing with this ground, it is imperative to consider the facts in detail. The assessee has availed loan of Rs.32.00 lacs from Bank of India, SSI Branch, Faridabad as per sanction letter dated 27.03.2007 against equitable mortgage of Flat No. 305 purchased from The Kriti Co-op Group Housing Society Ltd.’ and necessary documents including copy of bank account showing repayment of loan/interest installments were filed before the AO through submissions dated 18.11.2010. Against this flat, the assessee has claimed deduction of Rs. 1,50,000/- towards interest paid to bank. The investment in this flat No.306 is reflected at Rs.25,00,000/- as on 31.03.2007 and at Rs.25,53,000/- as on 31.03.2008 on the asset side in the statement of affairs annexed with the assessment order. Corresponding Bank of India housing loan A/c Kriti is shown at Rs.32,00,000/- and Rs.31,73,912/-, respectively, on 31.03.2007 and 31.03.2008 on the liability side in the same statement of affairs. This flat has been purchased by the assessee on his own account and shown in the personal statement of affairs. Vide para 3 of submissions dated 29.11.2010, the assessee submitted that a flat No. 106 in The Kriti Coop Group Housing Society Ltd. was sold on 23.04.2007 which was purchased on 19.04.2006. The payment of Rs.25.75 lacs for this flat was made through bank account with ICICI Bank wherein this amount was debited on 19.04.2006. Copy of said bank account was field with the submissions dated 29.11.2010. The assessee also filed copy of bank account SB No. 670310110000390 with Bank of India in support of sale consideration received wherein the amounts of Rs.5.00 lacs and Rs.45.00 lacs were credited through cheques on 22.01.2007 and 31.01.2007, respectively and the advance of Rs.50.000 lacs has also been shown as liability in the statement of 17 & 3885/Del/2012 affairs as on 31.03.2007. In the books of accounts of M/s. Jai Mata Enterprise, the assessee has shown investment of Rs.25,75,000/- as opening balance on 01.04.200/ under the head The Kriti CGHS Ltd.’ and a copy of account was filed alongwith submissions dated 29.11.2010. During the course of search on 07.09.2006, the assessee admitted ownership of flat No. 106 in the said society in reply to Q. No. 3 and also admitted unaccounted investment of Rs. 10,00,000/- which investment has been assessed as part of additional income of Rs.1.02 crores surrendered in the order dated 21.11.2008 for A.Y.2007-08. In the balance sheet of M/s. Jai Mata Enterprises, the same investment at Rs.25.75 lacs has been shown in schedule of loans and advances -Annexure-C as on 31.03.2007 which refers to flat No. 106 and also on 31.03.2008. It is on the basis of investment shown in this flat on 31.03.2008 at Rs.25.75 lacs that the Ld. AR of the assessee filed details on 29.11.2010 itself referred to by the AO as under: “M/s the Kriti CGSH Ltd. Rs. 25,75,000/- Advance Flat 305” The mention of ‘Advance Flat 305’ in these details is the root cause of confusion which led the AO to infer that the assessee had nowhere declared any purchase price of Rs.25,75,000/- in respect of flat No. 106 (as it appeared to be for Flat No.306) as claimed in computation of short term capital gain. The short time available for passing the order may be a reason for not appreciating the facts in totality but the AO had enough time in remand proceedings to look into this aspect when it was specifically pointed out in the letter dated 26.04.2011. Yes, retaining this investment in balance sheet on 31.03.2008 is wrong and the appellant could have filed a supplementary audit report by correcting such error. I find it impossible to comprehend that there was no sale of flat No. 106 as contended by the AO in the remand report. Such contention is not only contradictory but goes against the action of the AO wherein he has already accepted the sale consideration of Rs.50.00 lacs and taxed short term capital gain of Rs.40,00,000/-. What is the relevant issue in this matter is the allowability of deduction of cost of acquisition for which there should be no hesitation now having clarified the factual position above. Therefore, no effort of the AO to make most justified addition is apparent from the assessment order. The AO is directed to allow deduction of Rs.25,75,000/- towards the cost of acquisition of flat No. 106 which has been sold out. Ground No. 6 of appeal is allowed.”
9.7 In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same and accordingly, we uphold the same. The ground No. 5 of the appeal of the Revenue is accordingly dismissed.
18 & 3885/Del/2012 10. The ground No. 6 of the appeal of the Revenue and ground No. 2 of the appeal of the assessee relates to addition of Rs.28,863/- allowed to the assessee and addition of Rs.12,65,655/- sustained by the Ld. CIT(A) respectively out of the total addition of Rs.12,92,252/- made by the Assessing Officer for less receipt declared by the assessee. 10.1 During assessment proceeding, the Assessing Officer observed that in the profit and loss account, the assessee had declared total business receipts of Rs.2,97,12,947/-(including service tax of Rs.20,13,979/-) whereas receipt according to the claim of tax deducted at source should have been Rs.3,10,05,199/-. In absence of any reconciliation by the assessee, the Assessing Officer held the difference amount of Rs.12,92,252/-as amount of receipt not declared by the assessee and accordingly, he added the same to the income declared by the assessee. 10.2 On further appeal, before the Ld. CIT(A), the assessee provided detail of the TDS claim against the Rent, interest and contract receipts etc. The Ld. CIT(A) allowed relief to the extent of Rs.28,863/- on the basis of bank certificates issued in respect of the interest, however, he sustained the addition in respect of balance amount of Rs.12,65,655/- holding that no confirmation was filed by the assessee from M/s Geofizya Torun to support the contention that it was in the nature of advance. 10.3 The Ld. DR relied on the order of the Assessing Officer and submitted that entire amount of additions should be sustained, whereas the Ld. AR submitted that no confirmation from M/s Geofizya Torun was asked by either by the Assessing Officer or by the Ld. CIT(A) and, therefore, he could not submit the said 19 & 3885/Del/2012 confirmation. He submitted that if opportunities allowed the assessee willing to submit said certificate and accordingly requested that matter may be restored back to the file of the Assessing Officer. 10.4 We have heard the rival submission and perused the relevant material on record. According to the Assessing Officer, the said party M/s Geofizya Torun was appearing as debtor in the books of account of the assessee and thus the amount of receipt cannot be advance. Before us the assessee claimed that the said party was recorded as debtor in respect of another transaction and transaction of the advance against contract is different. In the interest of the substantial justice, we feel it appropriate to restore the matter the file of the Assessing Officer with the direction to the assessee to furnish necessary confirmation from the said party in respect of the claim of the assessee that said amount of receipt is in the nature of the advance. The assessee shall also file necessary evidence including a copy of financial statements of said party for the year under consideration for verification of the treatment given by the said party of the sum under reference. The Assessing Officer is directed to decide the issue in accordance with law after verification of facts and making necessary enquiries required. The ground No. 6 of the appeal of Revenue and ground No. 2 of the appeal of the assessee are accordingly allowed for statistical purposes.
The ground No. 7 of the appeal of the Revenue relates to addition of Rs.2,68,730/- on account of interest not charged on advances, which has been deleted by the Ld. CIT(A). 11.1 In the assessment order the Assessing Officer made this allowance of interest of Rs.8,99,771/- in para 16 of the order, 20 ITA No.4082 & 3885/Del/2012 which consists of bank interest of Rs.4,00,673/- and interest on vehicle of Rs.4,99,098/-. According to the Assessing Officer, the assessee has diverted borrowed capital funds for giving interest free advances to various parties. The Assessing Officer has made a list of such parties, which is reproduced as under: Name of the party Loan/ advance Date of advance Amount of amount Interest @12% Jat Properties 15,00,000/- 01.04.07 1,80,000/- The Kriti CGSH Ltd. 25,75,000/- 01.04.07 3,09,000/- Inder Financial Service 2,00,000/- 23.07.07 16,500/- Omaxe Condition Ltd. 7,00,000/- 01.04.07 84,000/- Amardeep Singh 4,00,000/- 01.04.07 49,000/- Anil Munjal 21,00,000/- 01.04.07 2,52,000/- Gurubax Singh Batra 3,42,201/- 18.03.08 1,711/- Lalit Mohari Sharma 3,00,000/- 01.04.07 36,000/- Avtar Kukreja 15,50,000/- 22.07.07 1,60,125/- Swami Sudarshan Charya 5,00,000/- 12.06.07 47,500/- Total 1,01,67,201/- Total Rs. 11,35,836/- 11.2 Accordingly, the Ld. Assessing Officer made disallowance of Rs.8,99,777/- to the extent of amount of interest debited in the profit and loss account. 11.3 On further appeal, the Ld. CIT(A) deleted the addition in respect of interest on vehicle Loan of Rs.4,99,098/-, against which the Revenue is not in appeal. The Ld. CIT(A) worked out the interest free funds diverted and interest on the same and accordingly sustained addition of Rs.1,31,943/- out of addition of Rs.4,08,673/- and allowed relief in respect of the balance amount of Rs.2,68,730/-. The Revenue is in appeal in respect of amount of Rs.2,68,730/- deleted. 11.4 Before us, the Ld. DR relied on the order of the Assessing Officer, whereas the learned AR relied on the order of the Ld. CIT(A).
21 & 3885/Del/2012 11.5 We have heard the rival submission and perused the relevant material on record. Before us, the Revenue could not find out any defect in the computation of the interest free advances diverted by the assessee and finding of the Ld. CIT(A) on the issue in dispute. The relevant finding of the Ld. CIT(A) is reproduced as under: “………As regards disallowance of bank interest of Rs.4,00,673/-, the appellant’s contention is that out of total advances of Rs.1,01,67,201/- considered by the AO for the purpose of disallowance of interest, the advances made during the year were only Rs.32,92,201/- against which the interest free funds of Rs.22,00,000/- were available. Thus, the difference of diverted funds was only Rs. 10,51,943/- on which interest @12% works out to Rs. 1,31,943/-. The appellant has further relied upon several judicial rulings. However, the judgments delivered in the relied upon case laws were in the facts where either the interest free funds were advanced prior to getting loan or where the available interest free funds were more than the amounts advanced, or the commercial expediency was involved or rehabilitation package or business relations were involved. The case of appellant is that in the year 2006-07 and 2007-08, the appellant has withdrawn more amounts from his capital account than the profit earned in these years. Hence, no interest free funds are available for extending interest free advances. Considering the interest calculated by the appellant after getting benefit of interest free funds, the disallowance to the extent of Rs. 1,31,943/- is sustained. This ground of appeal is partly allowed.”
11.6 We do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground No. 7 of the appeal of the Revenue is accordingly dismissed.
The Ground No. 8 of the Revenue’s appeal relates to disallowance of Rs.10,79,160/- paid for self-assessment tax. According to the Assessing Officer, this amount was neither appearing in the books of accounts of the proprietary concern, nor in the personal statement of the affairs or bank accounts filed before the Assessing Officer, accordingly, he treated the same as 22 & 3885/Del/2012 paid out of undisclosed sources and made addition under section 69C of the Act. Before the Ld. CIT(A), the assessee explained that said self-assessment tax has been paid from the bank account of a company namely M/s D S Geo Services Private Limited, in which assessee is a director. The assessee explained that he had advanced Rs. 15.00 Lacs to the said company in the year 2007 and the self-assessment tax has been paid by the company against the said outstanding sum. The Ld. CIT(A) verified the additional evidence filed in this reference and admitted the contention of the assessee. The addition was accordingly deleted. 12.1 Before us, the Ld. DR submitted that existence of two separate ledger accounts of the assessee in the company were not disclosed during assessment proceeding. According to him, the explanation of the assessee before the Ld. CIT(A) was only an afterthought and not reliable and the same need to be rejected. 12.2 The learned AR, on the other hand, relied on the finding of the Ld. CIT(A). 12.3 We have heard the rival submissions of the parties on the issue in dispute. We find that before the Ld. CIT(A) the assessee has duly explained transaction of payment of self-assessment tax by M/s. D.S. Geo Services Private Limited and reconciled ledger accounts of assessee (salary account and current account) maintained in the books of the company with the statement of the affairs filed before the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under: “6.10. The issue involved in ground No. 10 relates to the addition of Rs. 10,79,160/- on account of payment of self assessment tax for A.Y.2007-08 from undisclosed sources. The AO has made addition because amount of Rs. 10,79,160/- paid on 28.03.2008 was not reflected in any bank account of the appellant or the accounts with the company where appellant is director. The appellant has filed a 23 & 3885/Del/2012 copy of accounts with M/s. D. S. Geo Services Pvt. Ltd., copy of bank account with Bank of India and copy of bank account of D.S. Geo Services Pvt. Ltd. with Bank of India. Shri Sanjay Kumar advanced funds of Rs. 15.00 lacs from his bank account No.670310110000390 with Bank of India to his company M/s. D. S. Geo Services Pvt. Ltd. on 29.10.2007. The self assessment tax of Rs. 10,79,160/- was paid out of bank account of D. S. Geo Services Pvt. Ltd. on 28.03.2008 through cheque. In the account of D. S. Geo Services Pvt. Ltd. filed alongwith submissions dated 18.11.2010, the payment of self assessment tax was not reflected because the said account of company was in the books of M/s. Jai Mata Enterprises. In the books of D. S. Geo Services Pvt. Ltd., the appellant has maintained two accounts - one for director’s remuneration and other as current account. Alongwith submissions dated 29.11.2010, only the copies of accounts relating directors’ remuneration and separate account of director’s remuneration paid to the appellant were filed. The additional evidence filed at page 179 to 180 of paper book combines transaction of both director’s remuneration and current account of the appellant with the company. This has actually created confusion but if both the current account and remuneration accounts are considered separately, the closing balances of both the accounts tally with the amount of Rs.85,840/- shown in the statement of affairs as on 31.03.2008. In the current account, the amount of Rs. 15.00 lacs has been received on 27.10.2007 from the bank account of appellant with Bank of India against which the appellant has withdrawn Rs.2.00 lacs each on 10.01.2008 and 15.01.2008. Thereafter, the payment of self assessment tax has been made. The appellant has withdrawn Rs. 1,89,000/- out the account for director’s remuneration maintained with the company. Thus, the confusion created from verification of different accounts stands cleared. Consequently, I hold that the appellant has made payment of Rs. 10,79,160/- out of disclosed sources and the addition made by the AO is deleted.”
12.3 Before us, the Revenue could not find out any error in the finding of the Ld. CIT(A). From the finding of the Ld. CIT(A), it is apparent that ledger account of the assessee for receipt of the salary and current account maintained with the company namely M/s D S Geo services private limited have been duly reconciled by the Ld. CIT(A) and source of payment of Rs.10,79,160/-paid as self-assessment tax has been duly explained. In our opinion, there is no error in the finding of the Ld. CIT(A) on the issue in 24 & 3885/Del/2012 dispute and accordingly we uphold the same. The ground No. 8 of the appeal of the Revenue is dismissed.
The ground No. 9 of the appeal of the Revenue, being general in nature, is not required to adjudicate upon and the same is dismissed.
The ground No. 1 of the appeal of the assessee relates to addition of Rs.19,00,768/- on account of cash payments made to labourers, upheld by the Ld. CIT(A). 14.1 Brief facts relating to the issue in dispute are that the assessee was carrying his business activities at Faridabad and three other sites at Gujarat, Tamil Nadu and Andhra Pradesh, where cash payment have been claimed to be made on day-to-day basis for wages to labourers etc. The Assessing Officer observed that the assessee had maintained a single cashbook for all cash payments and no separate site wise cashbooks were maintained. The Assessing Officer also observed that no impress account was maintained by the assessee. The Assessing Officer observed that almost entire cash was withdrawn from the banks at Faridabad, whereas shown to be utilized on the same day at sites located in the state of Tamil Nadu, which according to him was not believable. He further observed that work at sites in the state of the Tamil Nadu were completed on 31/08/2007, whereas the cash payment to the labourers has been shown in the month of January to March 2008 i.e. after a period of 6 months, which is not reliable as no labourer will wait for such a long time particularly when the contractor had finished the work and the labourer had been relived. He further noticed that for engagement of the labour deployment at Tamil Nadu, the assessee entered into agreement with M/s VV Enterprises, proprietor Sh. Virender 25 & 3885/Del/2012 Kumar, resident of Faridabad but instead of making payment for the labour charges to the said party, the payments have been shown directly to the labourers in cash. In view of the observation the learned Assessing Officer made disallowance for following payments in addition to ad hoc disallowance of Rs. 1 lakh for any other cash payment: Date Amount Particulars 25.08.2007 2,05,442/- Labour charges for the period from 22.05.2007 to 31.05.2007 12.01.2008 6,22,840/- Labour charges for the period from 01.06.2007 to 30.06.2007 12.03.2008 6,32,852/- Labour charges for the period from01.07.2007 to 31.07.2007 31.03.2008 6,44,986/- Labour charges for the period from 01.08.2007 to 31.08.2007 Total 21,06,120/- 14.2 The Ld. CIT(A), however, accepted the source of payment of Rs.2,05,442/- and also deleted ad-hoc addition of Rs.1 lakh. 14.3 Before us, the learned AR referred to various pages of the paper book and submitted that personal of the assessee travelled from Faridabad to various sites of the assessee and carried the cash for payment to the labourers. The Ld. AR referred to pages 47 and 50 of the paper book, which are copy of the railway tickets for journey dated 10/03/2008 from Nizamuddin, Delhi to Vijayawada and journey dated 25/08/2007 from New Delhi to Chennai Central. According to the learned AR movement of the cash from Faridabad to various sites of the assessee stands duly explained and therefore the disallowance of Rs.19,00,678/- sustained by the Ld. CIT(A) needs to be deleted. 14.4 The learned DR, on the other hand, relied on the finding of the lower authorities.
26 & 3885/Del/2012 14.5 We have heard the rival submission and perused the relevant material on record. We find that the Ld. CIT(A) sustained the disallowance of Rs.19,00,678/- observing as under: “…..The AO has taken specific instances where the cash could not have been transferred to sites on the same day when it was withdrawn at Faridabad. The appellant has filed tickets in support of carrying cash by travelling on relevant dates but the said evidences are not conclusive. Admittedly, the details of cash payments of Rs. 2,05,442/- made on 25.08.2007 were provided by the appellant but details regarding other three payments of Rs. 6,22,840/-, Rs.6,32,852/ and Rs.6,44,986/- were not provided and no explanation was filed regarding the immediate sources of cash payments totaling to Rs. 19,00,678/-. Admittedly, three latter payments were made in the months of January 86 March, 2008 in respect of labour charges for the months of June, July 8& August, 2007 and the work at the said site had already been completed in August 2007. I agree with the AO that no labourer would wait for such a long time for his payments when the work at site has already been completed. Irrespective of fact whether the cash on 31.08.2008 was withdrawn from BOB at Faridabad or Vijayawada, the circumstances of the case do not warrant to hold that the cash so withdrawn was actually utilized for payment to labourers. Therefore, I bold that the payments to labourers were made after completion of work from unaccounted sources. However, since the appellant has explained the source of payment of Rs.2,05,442/- made before the completion of work, the same can be considered to have been made out of withdrawals from the books. I find that the further ad-hoc addition of Rs. 1,00,000/- made by the AO is not based on actual finding of fact but on presumption only. In view of the above facts and discussion, the addition to the extent of Rs. 19,00,678/- is sustained and balance addition of Rs.3,05,442/- is deleted. Ground No 1 of appeal is partly allowed"
14.6 It is evident that the assessee failed to explain as how the payment to the labourers were made after completion of three- month of the Project in the state of Tamil Nadu. The assessee also could not explain as why the payments have been shown to have paid directly to the labourers despite agreement with the subcontractor for engaging labourers at relevant sites. Merely producing of tickets of rail travel, the assessee cannot substantiate the cash payment to labourers at far away places 27 & 3885/Del/2012 that too after completing of the contract work. In absence of any justification supported by documentary evidence, the contention of the assessee are not acceptable and the Ld. CIT(A) has committed no error in sustaining the disallowance of Rs.19,00,678/-. The ground No. 1 of the appeal of the assessee is accordingly dismissed.
In the result, the appeal of Revenue as well as the appeal of assessee are partly allowed for statistical purposes.
Order is pronounced in the open court on 29th July, 2019.