RAJIV YASHWANT BHALE,,PUNE vs. DEPUTY COMMISSIONER OF INCOME TAX,, PUNE

आदेश आदेश / ORDER आदेश आदेश

PER D. KARUNAKARA RAO, AM :

There are two appeals filed by the Assessee under consideration

involving Assessment Years 2010-11 and 2011-12. They are filed against

separate orders of CIT(A)-11, dated 21-09-2016 and 28-11-2016

respectively.

We shall take up the appeal of the assessee for the A.Y. 2010-11

ITA No.27/PUN/2017 A.Y. 2010-11

“1. The learned CIT(A) erred in law and on facts by upholding the order of the learned AO wherein the income of the appellant had been assessed at Rs. 25,75,51,510/- instead of the returned income of Rs. 21,72,611/-. 2. The learned AO as well as the learned CIT(A) erred in law and on facts by granting deduction of land cost only to the extent of 35% instead of

2 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

the deduction of 65% against the related revenue for sale of land. The IT Authorities ought to have taken a view based on the decision of the Honourable Settlement Commission in respect of this very same aspect. 3. The learned CIT(A) erred in law and on facts in not appreciating that the amount of Rs. 18,06,30,231, being amount paid to Kotak Bank directly by M/s PRIDE group entities was not a taxable revenue of the appellant considering principle of overriding title. 4. The learned CIT(A) erred in law and on facts in not appreciating that Appellant's eligible to claim, partially or fully, loss of loan extended to M/s Pratham Design Innovation Pvt Ltd amounting to Rs. 9,58,78,294 since the said entity has suffered major quantum loss of Rs. 9,75,30,252 as of 31st March 2010 and as such, the loan balance has resulted in business loss.

From the above, it is evident that the assessee is aggrieved with the way

the assessment is done determining the assessed income at Rs.25.76

crores (rounded off) against the returned income of Rs.21,72,611/-

(Ground No.1). AO quantified the taxable income summarily applying

the fixed flat rate of 65% of the sale proceeds of the plots of the land

(Ground No.2). There is argumentative ground relating to the payment of

Rs.18.06 crores paid to Kotak Bank directly by the Pride Group (Ground

No.3). Further, Ground Nos. 4 and 5 relates to the loss on account of

loans given to M/s. Pratham Design Innovation Pvt. Ltd. and M/s

Pratham Motors. Assessee claims loss should be allowed as a business

loss in both these cases.

I. PRELIMINARY ISSUE – CONDONATION OF DELAY OF 16 DAYS

the assessee submitted that there is delay of 16 days in filing the appeal

before the Tribunal. In this regard, Ld. Counsel drew our attention to the

3 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

Affidavit dated 30-12-2016 filed by the assessee and submitted that the

delay is attributable to various problems related to the business of the

assessee, financial condition and attachment of properties etc.

reasonable cause for the assessee in not filing the appeal before the

stipulated time. Therefore, we are of the opinion that the delay of 16

days in filing the appeal is condoned and the appeal is taken up for

adjudication.

II. ON MERITS OF THE ADDITIONS OF GROUNDS OF APPEAL

individual and is engaged in the Property Developers and Builder.

Assessee filed the return of income declaring total income of

Rs.21,72,611/-. During the year under consideration, in continuation of

the business of sale of land, assessee reported the gross receipts of

Rs.34,82,50,154/-. Against the said income, assessee claimed allowable

expenses amounting to Rs.31,65,16,595/-. During the assessment

proceedings, assessee contested the requirement of complying with the

order of the Settlement Commission in this year also considering the

commonality of the facts. In this regard, assessee submitted that

assessee approached the Hon’ble Income Tax Settlement Commission

(ITSC) for the A.Yrs. 2002-03 to 2008-09 and the Commission ordered for

allowing 65% of the sales towards the deduction of expenses on accounts

of land cost, land development cost, land litigation cost, etc. Thus, the

matter became final for those assessment years and the similar

assessments were made for subsequent assessment years with the

exception of the current assessment year 2010-11. However, ignoring

4 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

the above consistency as well as the order of the Settlement Commission,

AO proceeded to estimate the expenditure relatable to the sale proceeds

at 35% of the sales. Accordingly, he made addition of Rs.23,84,14,584/-

as per the contents of Para No.8 of the assessment order. Relevant lines

of the said para are extracted as under:

“8……………… ……………….. In view of the above facts, I estimate the expenditure of the assessee at 35%, i.e. Rs.11,00,35,570/- and allow as deduction. Hence, the amount of Rs.23,84,14,584/- is considered as business income. Initiate penalty proceedings u/s.271(1)(c) of the IT Act, 1961 for furnishing inaccurate particulars of income. Further, it is seen that the assessee has shown interest income of Rs.1,91,36,928/-. The same is taken as income from other sources.”

During the proceedings, there is no issue relating to the claim of

business loss involving M/s. Pratham Design Innovation Pvt. Ltd. and

M/s Pratham Motors (Ground Nos. 4 & 5).

grounds against the decision of the AO in quantifying the expenses at

35% and taking the balance 65% as income of the assessee on account of

sale of lands as well as raised various additional grounds involving the

aforesaid claim of business loss involving M/s. Pratham Design

Innovation Pvt. Ltd. and M/s Pratham Motors. Assessee furnished

written submissions and relied heavily on the order of Settlement

Commission as well as other assessment orders for other years, i.e.

2009-10, 2011-12 and 2012-13.

6.1 Regarding the additional grounds, assessee prayed for admission of

the same and submitted for allowing the business loss involving the

gross loss of Rs.11.97 crores (rounded off)- M/s. Pratham Design

Innovation Pvt. Ltd. and M/s Pratham Motors. CIT(A) considered the

5 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

submissions of the assessee on the issue of allowable deductions on

account of land cost, land development cost, land litigation cost, etc.,

and dismissed the appeal of the assessee. Contents of Para 17 contain

the gist of the conclusion and the same is extracted as under :

“17. Considering the fact that the expenditure allowed on land development by the Settlement Commission was not even 20% of the gross receipts, the AO’s overall estimate of 35% expenditure this appears to be quite generous. As regards the interest claimed even if the same is allowed fully as claimed in the P&L account, the total (20% of gross receipts as land development cost and full interest as claimed) would not cross 35% of the gross receipts. We also have to keep it in mind that the appellant is not a constructor/contractor. His profits are mainly due to the appreciation in the land values because of various permissions/clearances arranged by him and the appreciation in the land value over period of time. In this type of business profits sometimes are many times of the original investment. The AO’s estimate of profit @65% of gross receipts appears to be quite reasonable. The appellant’s ground of appeal No.5 is therefore dismissed.”

6.2 Regarding the additional ground, the CIT(A) called for a remand

report and considered the fact that AO objected to the admission of the

same. CIT(A) proceeded to admit the same as per the discussion given in

Para No.19 of his order in view of various supporting decisions in favour

of the assessee. However, on merits of the claim of loss, the CIT(A)

deliberated more considering the claim of the assessee as a case of claim

of bad debts rather than the business loss allowable u/s.28 of the Act.

However, he touched upon this claim of business loss and held that the

assessee is not a money lender. Relevant discussion is given in Para

Nos. 28 to 39 involving both the concerns, i.e. M/s. Pratham Design

Innovation Pvt. Ltd. and M/s Pratham Motors. Eventually, the appeal of

the assessee was dismissed.

appeal before the Tribunal. The CIT(A) after considering the submissions

of the assessee confirmed the addition made by the AO.

6 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

BEFORE THE TRIBUNAL

are general in nature. Further, Ld. Counsel for the assessee submitted

that he does not wish to press Ground No.3. Accordingly, the said

grounds 1, 6 and 3 are dismissed as general/‘not pressed’, as the case

may be. That leaves Ground Nos. 2, 4 & 5 for specific adjudication.

the order of Settlement Commission and submitted that the Settlement

Commission determined the allowable deduction @65% of the sale

proceeds of land. Further, he filed a chart showing the decision of the

various AOs in matters of the extent of allowable deduction of expenses

since the A.Y. 2002-03 onwards. The chart as summarised by the

assessee is reproduced as under:

AY Land % of Amount of Remarks Rights/Land Profits Profit Taxed Sale Amount 2002-03 50,00,00,000 35% 17,50,00,000 Refer page 50 of to Settlement 2008-09 Commission order dated 01-12-2011 (copy in paper book) 2009-10 1,25,68,350 35% 43,98,923 Refer Page 6 of order u/s.143(3) dated 30-12-2016 (copy enclosed) 34,84,50,154 65% 23,84,14,584/- Refer Page 10 of order 2010-11* u/s.143(3) dated 25-03-2013 2011-12 90,00,000 35% 31,50,000 Refer Para No.10.3, page 22 of the CIT(A) order dated 28-11-2016 (copy enclosed) 2012-13 25,00,000 35% 8,75,000 Refer Page 6 of order u/s.143(3) dated 30-03-2015 (copy enclosed)

7 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

*A.Y. 2010-11 is the only Assessment Year, where the AO deviated from the rule of granting deduction towards expenditure and taxing profits @35%.

9.1 Taking us through the above chart, Ld. Counsel for the assessee

submitted that the issue under consideration vide Ground No.2, is

identical to the one for the A.Yrs. 2002-03 to 2008-09. Elaborating the

same, Ld. Counsel mentioned that the issue stands directly covered by

the Settlement Commission order dated 01-12-2011 (page 50 of the

paper book No.1). Further, referring to the decision of the AOs for the

A.Yrs. 2009-10, 2011-12 and 2012-13, Ld. Counsel for the assessee

submitted that 65% of the sale proceeds was considered as an allowable

deduction in those assessment years. Further, he submitted that same

stands confirmed by the order of CIT(A) in all these 3 years. It is also

mentioned that the facts are common for the A.Yrs. 2010-11 and 2011-

12 and however, the decisions of CIT(A) are divergent in these

assessment years. While the CIT(A) confirms deduction of expenses

@65% of sales for the A.Y. 2011-12, he held 35% should be allowed as

deduction for the A.Y. 2010-11. The reasons mentioned in Para Nos. 15

and 16 of the order of CIT(A). On the reasoning that the commission’s

order of considering the expenditure for land cost is erroneous and the

same should not be followed for the A.Y. 2010-11. He however did not

give the reason for allowing the same for the A.Y. 2011-12. Therefore,

the Department is not in appeal for the A.Yrs. 2009-10, 2011-12 and

2012-13 before the Tribunal. In other words, the Revenue accepted the

decision of CIT(A)/ITSC on this issue of allowing the deduction of

expenses @65% for these years.

9.2 Further, Ld. Counsel submitted that the same relates to the

estimation of profits earned by the assessee on the sale of land. The case

8 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

of the revenue is that the expenditure allowable out of the sale proceeds

should be @35% of sales. In this regard, reference is made to Para No.8

of the AO’s order which is already extracted above.

report from the AO dated 06-06-2018 and fairly submitted that the same

is evident but the view point of the CIT(A) given in Para Nos. 15 and 16 of

his order, i.e. digging up the holes in the order of ITSC qua the

allowability of deduction on account of land cost, land development cost,

litigation cost etc. But it is very weird that on one side the CIT(A) is

allowing deduction of expenses @65% of sales for the A.Y. 2011-12 and

not allowing similar deduction in another A.Y. 2010-11, the year under

consideration. However, Ld. DR fairly submitted that the finding of ITSC

for the A.Y. 2002-03 to 2008-09 are in principle accepted by the Revenue

for the A.Yrs. 2009-10, 2011-12 and 2012-13.

allowable deduction of 65% of sale proceeds of plots of land towards

expenses and taxing the balance of 35% as taxable income of the

assessee. Further, we perused the order of the Settlement Commission

dated 01-12-2011 (page 50 of the paper book No.1) passed u/s.245D (4)

of the Act. We find Para No.11 of the order deals with the various

expenses such as land cost, land development cost, land litigation costs

and other expenditure and considered the arguments of the CIT-DR and

the Commission finally gave a finding in Para No.15 which reads as

under :

“15. To us it appears that no accurate picture emerges out of the books maintained by the appellant. The detailed exercise done by the special auditor, though fairly indicative, has not been able to conclude the matter, and even the department has not fully relied on his conclusions. It seems

9 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

that the cost arrived at by Auditor merely sets an upper limit for the project cost. There is no doubt that the applicant was able to show that the two loans of SSB, on which interest was not allowed by the Auditor, do have nexus with the other three loans which had been favourably considered by the Auditor. But the moot point still remains as to what portion of the loans favourably considered by Auditor was incurred for the purpose of Wakad project? As a matter of fact the plea of CIT (DR) that part of these loans might relate to automobile business cannot be ignored. There is no doubt that large scale development work was done by the applicant on the project site as evident from the photographs produced before us as well as the state of land as depicted in the petition filed by the Deo family with the Government of Maharashtra. There is so much intermingling amongst various transactions of the group members that it is difficult to get a clearer picture. Be it as it may, we are of the opinion that even the revised claim made by the applicant is an inflated one, and has to be scaled down. After discussion, it was unanimously decided that it will be reasonable to apply a proper rate to the turnover of Rs.50 crores to arrive at a fair estimate of income generated by the applicant. The matter was considered by the CIT(DR) who stated that, looking to the facts and circumstances of the case a reasonable profit rate would be 50% which would give net profit of Rs.25 crores. This was strongly objected by the Ld. A.R. of the applicant. According to him, inspite of all the lacunas in the books of account of the applicant, such a high rate should not be applied in a case where project went on for more than 16 years. According to him the aforesaid rate suggested by the CIT(DR) does not take into account several facts that the Department did not recover very many unexplained assets during search, huge expenditure was incurred on litigation; the applicant had to take series of loans from the banks in various names merely to stop earlier loans from becoming NPA and consequent proceeding for recovery and that the loans were raised at a very high rate of interest. We find that if the project expenditure of Rs.41.46 crores is adopted as offered by AR and the other expenses are taken at Rs.1.90 crores as allowed above, the total allowable expenditure will come to Rs.43.36 crores resulting into a net profit of Rs.6.64 crores, i.e. 14%. On the other hand if we start with the project cost as adopted by Spl. Auditor as the upper limit, the total cost will be Rs.31.55 + Rs.1.90 = Rs.33.45 crores giving a profit rate of 33%. Thus a suitable rate in between 13% and 50% has to be adopted. After considering the entirety of the facts, we are of the opinion that it will be in the fitness of the things if a rate of 35% is applied, and the net profit calculated accordingly. As already mentioned, deduction will have to be allowed of an amount equivalent to Rs.55 lacs in respect of B&M construction work.”

11.1 Further, we have also perused the order of CIT(A) on this issue for

the A.Y. 2011-12 and the same reads as under :

“10.2 The explanation furnished by the appellant is therefore accepted and the addition of Rs.90,00,000/- is directed to be deleted. However, it is worth mentioning that the AO has referred to the appellant’s P&L account etc., but the appellant himself has again and again reiterated that he had not maintained proper books of accounts and his explanations of the cash deposits should not be rejected on the ground that the same does not match with the P&L account or balance sheet filed with the return of income. As regards this particular sale of transaction of Rs.9,00,000/- the appellant had submitted as under before the AO in his letter dated 24-03- 2014 :

10 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

“3. Transaction with ABS Properties – Rs.90 Lacs – The said consideration of Rs.90 lacs was received by the assessee from M/s. ABS Properties towards sale of two small plots of land in WAKAD project. The assessee submits copy of the related agreement in this respect and confirms that the said transaction needs to be offered to tax in A.Y. 2011-12. However, the assessee is not having books of accounts and other documents to justify the related costs. As stated earlier, the assessee’s books of accounts are locked in custody of the property already possessed for the cause of M/s. Tata Finance Limited. The assessee submits, the approach assumed by the Honourable Settlement Commission of determining profit @35% of revenue may please be assumed in the present case considering the peculiar difficulties faced at present. Once the records become available, the assessee shall submit the same for necessary.”

10.3 Considering this submission of the appellant I direct the AO to treat an amount of Rs.31,50,000/- as assessee’s income from this transaction. Thus, instead of Rs.90,00,000/-, the addition is restricted to Rs.31,50,000/-.”

11.2 From the above order of the Settlement Commission for the A.Yrs.

2002-03 to 2008-09 as well as the order of CIT(A) for the A.Y. 2011-12,

we find that the Department has been giving a consistent finding to

consider 65% of the sales towards the allowable expenditure on account

of land cost, its development, land litigation etc. and 35% of the sales to

be considered as income of the assessee. CIT(A) & AO did not make out

a case for not following the settled propositions. They have not made out

any case to differ from the settled nature of the issue. Facts are also

identical. Same stock-in-trade, same market, same expenditure account

etc., do not justify the approach of the CIT(A) on this issue of quantifying

the extent of expenditure out of the sale proceeds. The AO/CIT(A)

decision in adopting different figure on adhoc basis is not appreciated.

Therefore, following the “rule of consistency”, we find the order of CIT(A)

in the year under consideration (i.e. A.Y. 2010-11) need to be reversed.

Accordingly, we direct the AO to consider 65% of the sales as

expenditure. Ground No.2 raised by the assessee is allowed.

11 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

involving couple of entities namely (1) Pratham Designs Innovation Pvt.

Ltd. and (2) Pratham Motors. Ld. Counsel for the assessee submitted

that the assessee gave loans to the above two concerns. The said

companies were not doing well financially. Considering the commercial

connection to the assessee’s business, assessee had to give the loans to

the said concerns and the said loans become bad over the period of time.

In the books of account, assessee did not claim these debts as bad debts

in the books of account. In order to claim the same as allowable bad

debts. Assessee however claimed the loss as business loss and also

claimed his status as money lender. Accordingly, there are no debits on

account of bad debts in the profit and loss account of the assessee.

Assessment was accordingly completed having no regard for the said

loss/debts.

raised the ground relating to these debts/business loss by way of raising

additional grounds. Assessee prayed before the CIT(A) for grant of the

same as business loss u/s.28 of the Act (Ground Nos. 4 to 8 in Form

No.35 before the CIT(A) are relevant). CIT(A) called for a remand report in

this regard from the AO. In the said remand report, the AO objected both

the admission of the additional ground as well as for allowing of the

claim. Relevant discussion is given in Para No.26 of the order of CIT(A).

Eventually, regarding the claim of business loss, the CIT(A) had

reservations about the claim of financing business of the assessee and

accordingly, he dismissed the grounds on merits. However, he admitted

the additional grounds. He also observed that when the loans given to

the related concerns became allowable debt the income received from the

12 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

related concerns should also be treated as income being part of the

financing business activity. He also has certain confusion about the

figures and facts. Eventually, the CIT(A) admitted the grounds of appeal

and dismissed the claim on merits.

are undisputedly related to the assessee and its business activities. He

also tried to demonstrate the fact that while granting the loans, the

Banker is aware of the likely use of the same for giving loans to the sister

concerns. Therefore, giving part of the loans to the said concerns, is

within the scope of the granting loans by the bank. He also reiterated

that the assessee is engaged in the financing activities and in support of

the same he relied on the loans given by the assessee to the sister

concerns only. Further, he listed certain issues and made out a case for

remanding the issue to the file of AO for fresh examination and

consideration of the issue of business loss. The issues are listed as

under; (a) CIT(A) did not have clarity on the facts and the figures; (b)

CIT(A) discussed much on the applicability of the provisions of section

37(1)(vii) which is not claimed by the assessee in principle; (c) CIT(A) did

not discuss on the applicability of provisions of section 28 and the

financing business nature of the assessee; (d) In case of business loss,

the requirement of write off in the books of account of the assessee is not

a mandatory condition. Therefore, the CIT(A) should have allowed the

claim of business loss; and (e) CIT(A) unfairly relied on distinguishable

judgment of Karnataka High Court in the case of United Breweries Ltd.

321 ITR 546.

13 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

In view of the above, Ld. Counsel submitted in writing for

remanding the issues to the file of AO.

by the assessee to the said two concerns is never a business loss as the

assessee never engaged in the financing business activities. He also

submitted that the assessee never had the license of financing. He also

noted the fact that the loans were given only to the sister concerns and

never to the third parties for earning the interest income. He also

submitted that the interest income was never declared in the return of

income for any assessment year.

and the paper book filed before us. It is evident that the assessee gave

loans to the sister concerns, (1) M/s.Pratham Designs Innovation Pvt.

Ltd. and (2) Pratham Motors. As per the Ld. Counsel, the same

constitutes money lending activity of the assessee. Therefore, the failure

of the sister concerns to repay the same constitutes “business loss”.

However, there is requirement of facts to know the said status of money

lending activity of the assessee and the same is required to be

examined/verified by the AO. Further, there is a requirement of

analyzing the nature of bank loans granted to the assessee and if the

said sanction order of loan taken by the assessee allows giving loans to

sister concerns. Otherwise, Ld. Counsel for the assessee claims before

us that giving loans is permitted. It is the request of the Ld. Counsel for

the assessee that the issue raised in Ground Nos. 4 and 5 needs to

revisit the file of AO for fresh consideration/examination of the issue and

the decision of the AO.

14 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

Considering the same, we are of the opinion that the request of the

assessee’s counsel is fair and reasonable. AO is required to examine this

issue afresh after granting reasonable opportunity of being heard to the

assessee to demonstrate his point of view. While passing the order, AO

shall consider the objections raised by the Ld. DR as well as the

arguments made by the Ld. Counsel for the assessee before us and pass

a speaking order. Accordingly, Ground Nos. 4 and 5 raised by the

assessee are allowed for statistical purposes.

statistical purposes.

Now we shall take up the appeal of the assessee for A.Y. 2011-12.

ITA No.279/PUN/2017 A.Y. 2011-12

“1. The Ld. CIT-11, Pune erred in law and on facts by making an addition to the extent of Rs.3,39,93,500/- being the alleged peak negative cash balance and thereby failed to grant credit of the available opening available cash balance. 2. The Ld.CIT(A)-11, Pun erred in law and on facts by upholding the addition made by the Ld. AO on account of the various credit card payments amounting to Rs.18,91,959/- made by the appellant as reflecting in the individual transaction statement as available in the record of the IT authorities and thereby failed to appreciate the fact that the said payments have been made through banking channels. 3. The appellant craves leave to add/modify/alter/delete all or any of the grounds of appeal.”

declaring loss of Rs.2.78 crores for the A.Y. 2011-12. In the assessment

proceedings, assessee did not cooperate with the AO. Accordingly, the

AO invoked the provisions of section 144 of the Act and made the

assessment after making addition of Rs.20.89 crores (rounded off) on

15 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

account of cash transaction as discussed in Para No.6 of his order. In

the assessment, the AO analysed the various transactions from the bank

account of HDFC, Fergussion College Road, Pune and held that assessee

deposited huge cash amounting to Rs.20.89 crores on various dates

during the years 2010 and 2011. Calculation is done in Para No.6.1 of

the assessment order. The conclusion of the AO is extracted here as

under :

“6.1 The assessee was requested to furnish complete details of bank account along with evidences for transaction/entries in above bank accounts. The assessee has not cooperated during the assessment proceeding by furnishing the details of source of fund for the said cash deposited in bank account. Hence I have reasons to conclude that these cash deposit have been made by the assessee from his unaccounted income. Therefore provisions of section 69 of the I.T. Act, 1961 are applicable in this case. In view of the above discussion the amount of Rs.20,88,73,959/- is added to the total income of assessee as unexplained cash credits u/s.68 of the I.T. Ac, 1961. The penalty proceedings u/s.271(1)(c) are initiated for concealing the particulars of income.”

The CIT(A) partly allowed the issues raised by the assessee.

CIT(A) called for a remand report from the AO, copy of it is extracted in

Para No.6. 3 and held that it is a fit case for making addition on account

of “peak negative cash balance”. He accordingly, discussed this issue

in Para No.6.4 of his order and held that the peak negative cash balance

which works out to Rs.3,39,93,500/- at the end of May, 2010. Therefore,

the CIT(A) treated the same as unexplained cash balance and confirmed

the same. For the sake of completeness, we proceed to extract the said

finding given by the CIT(A) here as under :

“6.4 I have considered the facts of the case; the AO’s remand report and the appellant’s explanation. It is admitted that the appellant has not maintained regular books of accounts. The appellant was therefore asked at the time of appeal hearing on 15-11-2016 to justify the opening cash

16 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

balance by giving details of the cash withdrawal and deposits during the earlier period. The case was fixed for hearing on 28-11-2016. But inspite of specific instructions, the appellant has not furnished any details to justify the opening cash balance of Rs.2,85,00,000/- as on 1-4-2010. Similarly the appellant has not produced bank statement of the account with Samata Nagrik Bank. The appellant has claimed cash withdrawals of Rs.1,92,00,000/- from this account in the month of April 2010 in the absence of the bank statement credit cannot be given for this withdrawal. If the opening cash balance and the withdrawal from the Samata Nagrik Bank are ignored, there is huge negative cash balance of Rs.3,39,93,500/- in the appellant’s cash flow statement in the months of April and May, 2010. Thus the AO’s comment that the cash flow statement prepared by the appellant is not reliable appears to be correct. Therefore the appellant’s explanation that the above mentioned cash deposits were out of withdrawals from the same bank accounts is not acceptable. The peak negative cash balance of Rs.3,39,93,500/- arising at the end of May, 2010, is therefore treated as unexplained and addition to this extent is confirmed…………”

with Ground No.1 extracted above.

to the paper book and submitted that, apart from others, the item at

Sl.No.7 relates to the cash flow statement from 01-01-2010 to 31-03-

2010 (4th quarter) and submitted that the said cash flow, worked out by

the CIT(A)/AO), is not proper. Pointing out to the mistakes in the cash

flow calculations, Ld. Counsel for the assessee brought our attention to

the Annexure to the order of CIT(A) and submitted that the decision of

CIT(A), in not allowing the opening balance, is not correct. The said

annexure to order, suggests the claim of the opening balance of Rs.2.85

crores. The same was not considered by the CIT(A) as genuine and

excluded the same from zone of consideration for working out the

negative cash balance. In this regard, for furnishing the documents and

evidences in support of the existence of the said opening balance of

Rs.2.85 crores, Ld. Counsel requested for remanding the issue to the file

17 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

of AO. Ld. Counsel is of the view that the CIT(A) entertained the doubts

against the assessee.

24.1 Further, bringing our attention to the paper book filed on 06-04-

2018, Ld. Counsel submitted that the items placed at Sl.No.5.7, 8 and 9

of the paper book that are furnished for the first time before the

Tribunal. Further, Ld. Counsel submitted that they constitute additional

evidences and prayed for admitting the same. However, he also

mentioned that contents of these items of documents will go to the root

of the issue raised in the appeal on calculation of “peak negative cash

balance”.

papers pertains to the daily cash flow statements, bank statements of

HDFC and bank passbook of Janata Sahakari Bank and other credit

card payments etc. We have also considered the written submission for

production of additional evidences and request for admission of the

same. It is the claim of the assessee that the opening balance is genuine

one and he shall demonstrate the same if an opportunity is given before

the AO.

On considering the same and on hearing both the parties, we

proceed to admit the same in the interest of administration of justice.

Considering the principles of natural justice, we find it is required to

remand the issue to the file of AO for fresh examination of the claims

made by the assessee in these documents. Accordingly, Ground No.1

raised by the assessee is allowed for statistical purposes.

considering the smallness of the issue. Accordingly, the said ground is

18 ITA Nos.27 & 279/PUN/2017 Mr. Rajiv Yashwant Bhale

dismissed as ‘not pressed’. Ground No.3 being general in nature is dismissed.

statistical purposes.

statistical purposes.

Order pronounced on 12th day of September, 2018.

Sd/- Sd/- (िवकास अव�थी िवकास अव�थी िवकास अव�थी /VIKAS AWASTHY) (डी िवकास अव�थी डी डी. क�णाकरा राव डी क�णाकरा राव क�णाकरा राव/D. KARUNAKARA RAO) क�णाकरा राव �याियक सद�य �याियक सद�य/JUDICIAL MEMBER लेखा सद�य �याियक सद�य �याियक सद�य लेखा सद�य लेखा सद�य/ACCOUNTANT MEMBER लेखा सद�य

पुणे / Pune; �दनांक / Dated : 12th September, 2018. Satish

आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-11, Pune. 4. The Pr. CIT-10, Pune. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “बी बी बी” ब�च, बी 5. पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.