PRADEEP GARG, AJMER,AJMER vs. ITO 2(1) AJMER , AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 397/JP/2024
fu/kZkj.k o"kZ@Assessment Year : 2010-11
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AGPPG8818D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mahendra Gargieya, Adv. &
Sh. Hemang Gargieya, Adv.
jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing

: 17/04/2025

mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/05/2025

vkns'k@ ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

The present is filed by an assessee-appellant challenging the finding so recorded by the learned National Faceless Appeal Centre, Delhi [ for short CIT(A) ] dated 30/01/2024 confirming the levy of penalty for the assessment year 2010-11. The said order of the ld. CIT(A) arises because the assessee has challenged the levy of penalty order dated 26.03.2018

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Pradeep Garg vs. ITO passed under section 271(1)(c) of the Income Tax Act, 1961 [ for short
“Act”] by ITO, Ward 2(1), Ajmer [ for short AO].
2. In this appeal, the assessee has raised following grounds: -
1. The impugned penalty order u/s 271(1)(c) of the Act dated 26.03.2018 is bad in law and on facts of the case, for want of juri iction and various other reasons and hence the same kindly be quashed.
2. That the impugned SCN issued u/s 274 r.w.s 271(1)(c) of the Act, is quite vague and did not at all specify which limb of S.271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment particulars of income or furnishing of inaccurate particulars of income. The impugned penalty based on such a notice being contrary to the provisions of law & facts kindly be quashed.
3. Rs.1,71,452/-: The ld. CIT(A)/NFAC erred in law as well as on the facts of the case in confirming the order imposing penalty u/s 271(1)(c) of the Act of Rs.
1,71,452/-. The penalty so imposed by the AO & confirmed by the ld.
CIT(A)/NFAC being totally contrary to the provisions of law and facts kindly be deleted in full.

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Act on 28-01-2016 determining total income of Rs. 21,59,025/- by making the following addition:- i
Unexplained investment in construction of boundary wall claimed in sale of Pushkar land

Rs. 2,03,925/- ii
Unexplained investment in construction of boundary wall claimed in sale of land to Smt. Neeta Garg, near Suchna
Kendra, Jaipur Road, Ajmer

Rs. 3,75,917/- iii
Addition u/s. 64(1)(iv) of the Act

Rs. 6,90,920/- iv
Addition/disallowance made u/s. 40A(3)

Rs. 5,40,650/-

On the above addition penalty of Rs. 5,52,009/- was computed. But in the quantum appeal of the assessee ld. CIT(A) deleted the addition mentioned at sr no iii and iv. Considering that aspect of the matter ld. AO revised penalty of Rs. 1,71,452/-. Apropos to the addition sustained the relevant finding from the assessment order is reproduced herein below :
(i) Addition of Rs. 2,03,925/-on account of Unexplained investment in construction of boundary wall claimed in sale of Pushkar land :-
During the course of assessment proceedings from the analysis of Trading a/c of property business it was noticed by the then A.O. that Rs. 2,03,925/- was debited for boundary wall expenses but no evidence of such construction was submitted by the assessee. Assessee could not furnished map of plots converted indicating the area and period of construction was also not clarified by the assessee. Even assessee could not substantiate the withdrawals of availability of fund for construction of boundary wall. Assessee submitted routine reply without any documentary supporting evidence.
Therefore, Rs. 2,03,925/- was added back to the total income of the assessee on a/c of boundary wall expenses.

(ii) Unexplained investment in construction of boundary wall claimed in sale of land to Smt. Neeta Garg, near Suchna Kendra, Jaipur Road, Ajmer:

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In the same way, assessee has debited Rs. 3,75,917/-for boundary wall expenses but no proof of construction was submitted by the A.O. at the time of assessment proceedings. In reply, assessee only stated that to sale the part property to his wife and boundary wall constructed. The reply submitted by the assessee was general and vague. Considering the fact and circumstances of the case, A.O. had to add Rs. 3,75,917/- in total Income of the assessee on a/c of boundary wall expenses.

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6.2 In written submission, assessee has mainly challenged the penalty proceedings on the technical ground that in the assessment order, AO had not specified whether the penalty proceedings were being initiated for furnishing inaccurate particulars of income or the penalty proceedings were initiated for concealment of particulars of income. He has taken the plea that penalty cannot be initiated on both limbs of section 271(1)(c). He has also pointed out that in the original (first) notice u/s. 274 rws 271, issued on 28.01.2016 as well as in the subsequent notice issued on 01.03.2018, AO had not struck off the non applicable limb of section 271(1)(c). As a result, there was no clarity whether the notice was for concealment of particulars of income or for furnishing inaccurate particulars of income. He has filed copies of those notices. For his contention, assessee has relied on judgments of Hon'ble Gujarat High Court and Hon'ble
Supreme Court and Hon'ble Karnataka High Court (as mentioned in his submission dated 18.10.2023, as reproduced in Para No.4 above).

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In the penalty, aggrieved from the order u/s 143(3) of the Act, the assessee preferred an appeal before CIT(A), but did not find his favour. The ld. CIT(A), partly allowed the appeal of the assessee vide order dated 30.07.2021 and the AO revised the penalty amounting to Rs. 1,17,452/- u/s 275(1A)/154 of the Act.
Hence this appeal.
Submission:
1. Legal arguments:
1.1 Assessment and penalty - separate proceedings: It is pertinent to note that the AO has levied the penalty for concealment of income only & only on the basis of findings recorded by the AO in the assessment order. It is a settled principle of law that assessment and penalty proceedings are separate and distinct from each other. Kindly refer Durga Kamal Rice Mills v/s CIT (2004) 265 ITR 25 (Cal.),
CIT & Anr. v/s Anwar Ali (1970) 76 ITR 696 (SC), CIT v/s Ishtiaq Hussain (1998)
232 ITR 673 (All). The AO after reproducing the relevant portion of CIT(A) order for quantum and discussing the provisions u/s 271(1)(c), merely alleged but failed to bring any material whatsoever by making independent inquires to support the finding of concealment of income & furnishing of inaccurate particulars.
The ld. AO simply stated that the assessee was unable to fully satisfy the CIT(A) regarding additions made, leading to only part relief on the additions made by the ld. AO, the findings of the AO in penalty proceedings are reproduced here:
“On being aggrieved by the order, assessee preferred an appeal before the Ld. CIT(A),
Ajmer and the Ld. CIT(A) has partly allowed the appeal of assessee vide his order No.
372/2015-16, dated 27.10.2016 and confirmed the addition of Rs. 2,03,925/- against the Pushkar Land and Rs. 3,75,917/-against the Suchna Kendra Land, Ajmer.
The Ld. CIT (Appeals) in his order stated that either during the course of assessment proceedings or appellate proceedings, the assessee has not been able to furnish any evidence to substantiate his claim that he has incurred any expenditure towards construction of boundary wall on "Pushkar Land" sold by him. Therefore, the disallowance of Rs. 2,03,925/- made by the A.O. is hereby confirmed and also stated in respect of Suchna Kendra land that during the course of assessment proceedings, the assessee has not been able to furnish any evidence to substantiate his claim that he has incurred any expenditure towards construction of boundary wall on “Sunchna Kendra land” sold by him. The additional evidences furnished by the appellant during the course of appellate proceedings are not admitted under Rule 46A, as the appellant has not filed any application for admission of additional evidence under rule circumstances given in Clause (a) to (d) of sub-rule 1 of Rule 46A. Therefore, the disallowance of Rs. 3,75,917/- made by the A.O. is hereby confirmed.

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The Ld. CIT (Appeals) deleted the additions in respect of following issues and noue decided the appeal in favour of assessee”
Addition u/s 64(1)(iv) of the Act
Rs. 6,90,920/-
Addition/disallowance made u/s 40A (3)
Rs. 5,40,650/-

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“ GOA 3 & 4: Rs. 3,75,9179/- Addition u/s 69 on account of Unexplained investment in construction of boundary wall.
Facts: The ld. AO has dealt with this issue at Pg.2 of Pr.3 onwards. The ld. AO ignoring the crucial findings by the Inspector held as under:
“04. After going through the above report and reply submitted by the assessee, it is fact that boundary wall was constructed on the plot situated near Suchna Kendra. However, the following facts have been emerged on further analysis of the reply and documentary evidences available on record-
(i)
As per copy of the sale deed filed with the reply, it is nowhere mentioned in the sale deed or registry that there was any boundary wall constructed on the plot at the time of sale of the plot by the assessee to Smt. Neeta Garg.
(ii)
The assessee had submitted a letter dated 01/11/2009 regarding "Nirman Theka
Karya" purported to be issued by Sh. Kamal Raniwal S/o Late Sh. Ramesh Raniwal,
Kotra, Ajmer for payment of Rs. 2,43,160/- on various dates from 18.08.2009 to 31.10.2009. On going through the payment details mentioned in the said letter, it was found that payment of Rs. 17,000/- was made on 21.09.2010 (during F.Y. 2010-11) which pertains to the A.Y. 2011-12. As mentioned above, the letter purported to be issued by Sh. Kamal Raniwal is dated 01/11/2009 and the payment of Rs. 17,000/- was said to have been made on 21.09.2010, screenshot of letter is reproduced as under:
---------xxx---------xxx---------xxx ---------xxx---------xxx---------
The above entry raises a suspicion on the genuineness of the letter. Therefore, the account made for Nirman Theka Karya" was fabricated one and is suspicious.
(iii)
As per photographs printed on the sale deed, the boundary wall was not appearing in the photographs, this also shows that while registering the documents of sale deed to Smt. Neeta Garg, the boundary wall on the plot situated near Suchna
Kendra, was not even in existence.
“Thus, the expenses incurred on the boundary wall construction, were not properly supported with the documentary evidences, hence, the same were disallowed and added back to the income of the assessee during the assessment proceedings u/s 147/143(3) of the Act. As discussed above, on verification of the facts as per directions given by the Hon'ble ITAT, it has been established that the expenses incurred on the boundary wall construction, are not properly supported with the documentary evidences and the same are not allowable and hereby added to the total income of the assessee for the A.Y. 2010-11.”
Furthermore, ld. CIT(A) erred in drawing wrong conclusion without appreciating the independent evidences and additional evidences, at pg.4 pr. 9 of order concluded the appeal proceedings as under:

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“9. Coming to the facts of the case, it is to be seen that assessee has not refuted the fact that in the photographs printed on transfer deed, there was no boundary wall surrounding the plot and in the transfer deed also there was no mention of existing boundary wall. Against these facts, assessee has filed the hand written letter from person who has claimed that he constructed the boundary wall and received payments on various dated. But all the payments were below Rs. 20,000/- and there was no evidence of any payment through banking channel. Therefore, the CIT(A) had correctly confirmed the addition. Since the so called letter from Kamal Raniwal was filed first time before CIT(A), ITAT remitted the matter to the AO to decide the issue afresh. On examination of the material on record, there is no doubt that the assessee has failed to establish the claim that boundary wall was constructed before the transfer took place and the claimed expenditure of Rs. 3,75,917/- was genuinely incurred. Therefore, AO was justified in treating the amount of Rs. 3,75,917/- as unexplained income of the assessee. Accordingly, the addition of that amount is confirmed.”
Hence this ground.
Submission:
1. Impugned addition completely misconceived and without juri iction: At the outset, it is submitted that a reading of the assessment order and the order of the CIT(A) shows that this addition has been made on account of the unexplained investment made in the construction of the boundary wall. Thus, it is an addition made u/s 69 of the Act, though not mentioned specifically. On the other hand, however, the AO himself has contradicted his stand by doubting the very fact of construction of the boundary wall (at Rs. 2,43,160
+ 60,000 + 22,760 + 46,500 + 3497 other expenses totaling into 3,75,917/-) Therefore, simply accepting the fact and assuming what the AO and CIT(A) has held is correct that there was no boundary wall constructed, there can't be any question of making any investment therein. This is, however, an alternate plea only, assuming what the authorities below have held, is correct. Thus this addition, therefore, deserves to be deleted at this stage itself.
2.1 Sufficient evidences and Inspector Report though available, but ignored:
Alternatively, the short question to be decided is whether the appellant did construct a boundary wall, so as to be allowed the benefit of the cost of construction thereof while computing LTCG. Before the Hon’ble ITAT, additional evidence in the shape of a bill raised by the civil contractor, Shri Kamal Raniwal, was submitted (as was not admitted by the CIT(A)), which, was admitted by the Hon’ble ITAT, and the issue was restored to the file of the AO with certain observations and directions, reproduced here in above. It was also requested before the Hon’ble ITAT that the authorities below may kindly be directed have a physical verification at the site to ascertain the facts. The Hon’ble ITAT directed the directed the AO, to consider the evidences placed in support of construction cost, or else the AO may have a site inspection. The AO rejected the construction bill raised by the contractor, but chose to have a site verification. Pertinently, the Inspector

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2.2 Crucial Independent Evidence ignored: At the outset it is submitted that in compliance to the Hon’ble ITAT order, the ld. AO directed Ward Inspector to submit report w.r.t. boundary wall. On 14.06.2021. The Inspector submitted factual report
(PB11-15) reproduced hereunder:
“2. In pursuance to the above referred order, I personally visited the said site on 14.06.2021. The factual status report in this regard is submitted as under:-
(i) The boundary wall claimed to have been constructed by the above assessee, is still found present on the plot.
(ii) boundary wall is found constructed on all the sides of the plot.”
It can’t be denied that ld. AO for the purpose of bringing correct facts on the surface directed inspector to submit his report on ground reality. Once his report is submitted which supports the claims of made by the assesse, the AO is no body to disregard or reject or ignore such an important factual report, the way AO did in the present case. He even did not whisper a single word if he found anything wrong or any defect in such inspection report of the Inspector. It appears the AO himself had made up his mind to make additions and had even ignored the crucial facts in support of claims made for construction of boundary wall. The AO thus clearly proceeded on a mere suspicion, whims, surmises & conjectures, without having any evidence at all.
2.3.1 The ld. AO, rejected all the evidences merely on suspicion: The fact is not denied that a detailed bill titled as “Nirman Theka Karya” raised by the civil contractor, Shri
Kamal Raniwal, was submitted right before the CIT (A) in the first round and was now available before the AO, but was rejected merely on a silly ground that one of the payment of Rs. 17,000 was made on 21.09.2010, falling in FY 2010-11, AY 11-12 and therefore was held as fabricated and suspicious. A perusal of the bill shows (PB 21) that complete details of payment given to him on different dates, that nature of the construction done and the place, etc., with the dates have been given. It also contained the name and address of the contractor. The ld. AO made no inquiry from the contractor, who could be the best person to throw light on the fact, and in absence, therefore, the evidence available on record shall hold good and can't be ignored.
2.3.2 It is a fact that the AO did not bring any contrary evidence to rebut the said contract and he could not reject the same merely on suspicion. Since this was rejected without giving any opportunity/ confronting the appellant, an affidavit sworn by Shri Kamal
Raniwal dt.15.07.2021(PB 23-24) was filed before the ld. CIT (A) wherein Shri Kamal
Raniwal contractor categorically affirmed having constructed the boundary wall between the period 18.08.2009 to 31.10.2009 and getting the payment. The sworn statement was just to clarify the thing that 17,000/- was actually paid to him on 21.09.2009 and there

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Pradeep Garg vs. ITO was only a clerical mistake committed in the contractor's bill. Thus, the contractor bill together with the clarification through the duly sworn affidavit, both of which, remaining completely uncontroverted, were the evidences binding upon the authority’s bellow.
There was no reason why not to accept these evidences in absence of any contrary evidence brought on record. Further, fact of construction of the boundary wall, the availability and existence thereof found by the Inspector in his factual report cannot be denied and has to be accepted. Kindly refer Mehta Parikh & Co. v. CIT (1956)
30ITR181(SC).
2.3.3 There apart, it is a matter of common knowledge and prevailing practice also that whenever a buyer an immovable property like a plot, a boundary wall is usually get constructed thereon. By the efflux of time, the boundary wall gets damaged, part thereof remains standing and part collapse. Thus this small item of expenditure should not have been given much a hype. May be thus, probable that in the photograph pasted in the sale deed it is not clearly visible. It is also a matter of common knowledge that photocopy quality at the office of the