ACIT, NEW DELHI vs. SH. VINAY KUMAR KURELE, KANPUR

The facts in brief are that the assessee is an individual deriving income from salary as Director of M/s. Gahoi Builwell Ltd. (now V3S Infrastructure Ltd.); share from a partnership firm, M/s. K4U Services, rental income, etc. A search and seizure action u/s.132 was carried out on 19.01.2009 in Kurele Group and also at the residential premises of the assessee. The main dispute in the Revenue’s appeal is with regard to the addition of Rs.88,98,712/- on account of two loose papers found during the course of search at the residential premises of the assessee. The said loose papers numbered as pages 144 and 145 of Annexure A-3, gives the description of receipts and utilization of fund during the year which has been tabulated by the Assessing Officer in the impugned assessment order which can be summarized hereunder:- (i) 51,16,912 For loose paper no. 145/Ann. A-3 solely for the reason that there is excess payment of funds [90,86,912 – 39,70,000] when the availability of funds as reflected in books of account with the assessee is computed; and 37,81,800 For loose paper no. 144/Ann. A-3 by (ii) adding up all the figures mentioned therein [21,58,600 + 14,53,600 + 1,69,600] as unexplained misc. expenses. 88,98,712 Total

The assessee’s contention before the Assessing Officer with regard to the aforesaid loose papers was as under: • “page 145 are the noting of various transactions of assessee, as appearing in various accounts of M/s K4U Services, wherein

assessee is partner and the related ledger accounts in the books of said firm were enclosed; and • page 144 are the noting/summery of various transactions relating to Indrapuram Project of GBL wherein assessee is one of the director and does not relates to the assessee.”

Learned Assessing Officer held that there is an excess payment of funds of Rs.51,16,912/- and Rs.37,81,800/- as unexplained misc. expenses which has been treated by him as unexplained expenditure out of undisclosed sources.

Before the ld. CIT (A), it was submitted that all the transactions recorded in the seized loose paper stood reflected in the books of M/s. K4U services, wherein the assessee was one of the partner which is also evident from the ledger account of the said firm despite that addition has been made in the individual hands of the assessee by the Assessing Officer in the following manner:- Receipts of funds during the year (as per page 2 of assessee order) Rs.39,70,000 Deduct: Utilization of funds during the year (as per page 2-3 of assessment order) Rs.90,86,912 Excess payment of funds Rs.51,16,912 It was submitted that all the transactions mentioned in the seized document were found to be recorded in the books of account in the normal course of business and therefore, no such addition of excess funds could have been made in the individual hands of the assessee. Apart from that, certain clarification with regard to the miscellaneous expenditure was given which were as under:- (i) inclusion of figure of Rs.1,69,600 in the impugned addition is wholly erroneous as the same represents the sum of various expenses 63,000+26,000+1,600+3,000+11,000+20,000+1,000+4,000+25,00 0+15,000) marked. (ii) On a reading of said loose paper, it is evident that there as receipts of Rs.21,58,600 and expenditure of Rs.14,53,600 and balance shown is Rs.7,05,000 whereas the addition has been made by adding up the receipts of Rs.21,58,600 as well as expenditure of Rs.14,53,600 and further adding one stray figure of Rs.1,69,600 in an utmost arbitrary manner without having due regard to the noting/working made on the said loose paper.”

After considering the rival submissions and on perusal of the impugned order and material referred to before us at the time of hearing, we find that in the grounds of appeal, the Revenue has raised that the ld. CIT (A) has erred in directing the Assessing Officer to allow the expenses which has been incurred in cash and are recorded in the books of account without taking into account the provision of Section 40A (3). The said ground raised first of all is completely divorced from the finding given in the impugned orders, because the addition has been made as unexplained expenditure/payment outside books of account for which addition has been made by the Assessing Officer. There is no such disallowance made u/s 40A (3) made by the Assessing Officer which has been claimed by the assessee as an expenditure out of the income disclosed by him. Thus, the very basis on which the ground has been raised is erroneous as application of Section 40A (3) was never a dispute. Be that as it may be, it has been clearly brought on record by the assessee that not only during the course of assessment proceedings but also during the course of appellate proceedings, the entries in the said loose papers were, first of all shown to be belonging to M/s. Gahoi Builwell Ltd., in whose case during scrutiny proceedings, exactly the same documents have been examined and verified and no addition has been made in the case of the said company; and secondly, the contents noted in the loose paper, page no.145 were reflected in the books of K4U. Once these facts are undisputed, ostensibly these additions could not have been made in the hands of the assessee at all. The ld. CIT (A) was thus correct on facts in directing the Assessing Officer to verify these facts and delete the additions. Hence, we do not find any infirmity in the order of the ld. CIT (A) and accordingly, the grounds raised by the Revenue is dismissed.

In the result, the appeal of the Revenue is dismissed.