DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR vs. SHRI SATISH CHAND KATTA, JAIPUR

ORDER PER: DR. S. SEETHALAKSHMI, J.M.

All these above appeals by the different assessees are directed against the separate orders of the CIT(Appeals)-4, Jaipur as per following details:

Asstt. Year Appeal No. Reference to Reference to the order of the ld. the dated of AO date and section under which order of the ld. the order is passed CIT(A) 2012-13 331/JPR/2017 20.03.2017 20.03.2015 u/s 144/153A 2009-10 435/JPR/2018 11.12.2017 31.03.2015 u/s 143(3) r.w.s. 153A 2010-11 436/JPR/2018 01.01.2018 31.03.2015 u/s 143(3) r.w.s. 153A 2011-12 437/JPR/2018 01.12.2017 31.03.2015 u/s 143(3) r.w.s. 153A 2012-13 438/JPR/2018 16.01.2018 31.03.2015 u/s 153A/144 2013-14 439/JPR/2018 16.01.2018 31.03.2015 u/s 142(1)/144 2013-14 440/JPR/2018 01.12.2017 31.03.2015 u/s 144/142(1) 2011-12 145/JPR/2024 13.12.2023 24.12.2018 147 r.w.s. 143(3) 2013-14 151/JPR/2024 20.12.2023 31.03.2015 u/s 144/142(1) 2012-13 467/JPR/2018 01.12.2017 23.03.2015 u/s 144 r.w.s 153A 2013-14 468/JPR/2018 02.02.2018 23.03.2015 u/s 144 r.w. 153B(1)(b) 2008-09 352/JPR/2018 01.01.2018 31.03.2015 u/s 143(3) r.w.s. 153A

2. Since the issues involved are common in all the above appeals and the appeals were heard together, therefore, these are being disposed off by this common order for the sake of convenience and brevity. AY 2012-13

3. This appeal has been filed by the assessee against the order of the CIT(A), Jaipur, dated 03.04.2017, for the AY 2012-13. The appeal arises from order passed under Section 144 r.w.s 153C of the Income-tax Act, 1961. The grounds taken by assessee are set out as under:

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in completing the assessment u/s 144 of Income Tax Act, 1961. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice.

2. (a) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in taxing a sum of Rs. 58,88,857 as long-term capital gain in the hands of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 58,88,857.

(b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO by not referring it to the Valuation Officer and adopting the market value of Rs. 90,06,776 without the said reference to the Valuation Officer. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition being illegal and without following the prescribed procedure of law.

(c) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in applying the provisions of section 50C of the IT

Act 1961, and adopting the sale consideration at Rs. 90,06,776 against the actual sale consideration of Rs.52,00,000. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 52,00,000. 3. The appellant craves her rights to add, amend or alter any of the grounds on or before the hearing.

GROUND NO.1 4. At the time of hearing, the ld. AR of assessee stated at the Bar that he did not wish to press Ground No. 1 as raised in Form 36. Accordingly, Ground No. 1 is dismissed as not pressed.

GROUND NO.2 5. The case of assessee was taken up for scrutiny pursuant to a notice issued under Section 153A of the Income-tax Act, 1961, following a search conducted on the Katta Group on 31.07.2012. The assessee did not file any return of income in response to the notice issued under Section 153A. During the course of the assessment proceedings, the AO noted that assessee had sold an immovable property situated at Plot No. 5, Chandrakala Colony, Jaipur, to Shri Ram Babu Jhalani and Smt. Usha Jhalani, as evident from the seized documents found from the residence of assessee.

6. As per the registered deed, the property was sold by assessee for a consideration of Rs. 52,00,000. However, the AO determined the DLC value of the property at Rs. 90,06,776, as adopted by the Sub-Registrar. Before the AO, assessee submitted that due to the debt burden of her husband, Shri Satish Chandra Katta, the property had to be sold under distress. It was submitted that the property had been mortgaged to a money lender, and as a result, the sale was made for a consideration lower than the DLC value. Assessee also requested the AO to refer the matter for valuation to the Departmental Valuation Officer (DVO) in terms of Section 50C (2) of the Act. However, the AO did not consider assessee's submissions and made an addition of Rs. 38,06,776 to the income of assessee, computing the sale consideration on the basis of the DLC value of the property.

Aggrieved by the addition, assessee preferred an appeal before the CIT(A), Jaipur, who dismissed the appeal. The assessee has now filed the present appeal before us challenging the addition made by the AO and confirmed by the CIT(A).

Alternatively, the ld. AR contended that, despite making a specific request, the matter was not referred to the DVO for valuation of the property under Section 50C (2) of the Act. A written submission was also filed by assessee, which has been reproduced hereunder:

7. However, ld. AO denied the request stating that the case was getting barred by time. Thereafter ld. AO calculated the capital gain by taking the sale consideration as Rs. 90,06,776.

8. Ld. AO should have referred the case to the valuation officer. Even otherwise ld. AO, discharging the quasi-judicial function, was duty bound to refer the matter to the valuation officer u/s 50C(2) based on the claim made by the assessee . Reliance is placed on the Order of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal [2014] 47 taxmann.com 158 (Calcutta) in which it was held that “….For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law….”

9. Hon’ble ITAT Jaipur Bench in the case of Smt. Kamlesh Tiwari, followed the ratio laid down by the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal (Supra) and held that even though the assessee simply challenged the sale consideration on the basis of the Stamp Valuation Authority but had not requested to refer this issue to the Valuation Officer, the Assessing Officer should have referred the matter to the Valuation Officer.

10. Further reliance is also placed on the following judicial pronouncements the extracts of which have been set out for the sake of convenience: - 10.1. Appadurai Vijayaraghavan vs. JCIT [2014] 49 taxmann.com 513 (Madras) “…Head Notes - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value consideration (Reference to Valuation Officer) - Assessment year 2007-08 - Whether where assessee made an objection with regard to adoption of market value under section 50C(1), Assessing Officer should have referred valuation of capital asset to Valuation Officer under section 50C(2) - Held, yes 10.2. Anil Kumar Jain vs. ITO [2013] 34 taxmann.com 258 (Delhi - Trib.) “..Head Notes - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration in certain cases [Reference to Valuation Officer] - Assessment year 2009-10 - Assessee earned short term capital gain on sale of property - Assessee made a claim before Assessing Officer that value adopted or assessed by stamp valuation authority was higher than fair market value - Value adopted by stamp valuation authority had not ever been disputed by assessee in any appeal or revision or otherwise to any other authority or Court as referred to in section 50C(2) - Whether it was incumbent upon Assessing Officer to refer matter for valuation to a Valuation Officer as provided in section 50C(2) - Held, yes..”

8. Per contra, the ld. DR relied on the orders of the lower authorities and argued that the AO was justified in invoking the provisions of Section 50C. It was further submitted that there was no requirement for referring the property for valuation to the DVO under the circumstances of the case.

10. We noted that the assessee raised objections to the invocation of Section 50C during the assessment as well as the appellate proceedings. It was submitted that a request was made before both the lower authorities to refer the matter to the Departmental Valuation Officer (DVO) for determining the fair market value of the property. However, the request was rejected without any valid basis.

11. Further, the ld. AR of the assessee submitted that adequate opportunity was not provided to the assessee during the proceedings to substantiate its case. No reference to the DVO was made, despite the assessee's explicit request.

12. After considering the material on record, it is observed that the assessee was not afforded adequate opportunity to present its case. Furthermore, the rejection of the assessee's request for reference to the DVO was not justified.

13. In light of the above, the case is set aside to the file of the AO, de-novo, for fresh adjudication. The AO is directed to provide the assessee adequate opportunity to adduce necessary evidences/submissions before passing the order in the set aside proceedings.

In view of the above, appeal of the assessee is partly allowed for statistical purpose.

SATISH CHAND KATTA (FOR AY 2009-10 TO AY 2013-14)

14. These appeals have been preferred by the assessee against the orders passed by the CIT(A)-4, Jaipur, for AY 2009-10 to AY 2013-14. All the appeals for the respective years are being decided by us by passing a common order. The grounds taken by the assessee for each of the year are set out as under:

ITA No. 435/JPR/2018 (AY 2009-10)

1.In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the addition made by ld. AO of Rs. 7,00,000 to the total income of the assessee. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 7,00,000. 2. The appellant craves his rights to add, amend or alter any of the grounds on or before the hearing. (AY 2010-11)

1.In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the addition made by ld. AO of Rs. 11,80,000 to the total income of the assessee. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 11,80,000. 2.The appellant craves his rights to add, amend or alter any of the grounds on or before the hearing. (AY 2011-12)

1.(a) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in not providing opportunity of cross examination of the persons whose statements have been used against the assessee and considering the relevant year as search year. The ld. CIT(A) has further erred in confirming the action of the ld. AO in not making available the evidences which have been used against the assessee. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice. (b) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 1,75,00,000 as alleged unexplained income. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 1,75,00,000.

2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 20,00,000 of the alleged unexplained loan and interest thereon. The action of the ld. CIT(A) is illegal, unjustified,

arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 20,00,000. 3.In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 1,16,00,000 to the total income of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 1,16,00,000. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing. (AY 2012-13)

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in not adjudicating Ground 1 before him, regarding the action of the ld. AO in completing the assessment u/s 144 of the Income Tax Act, 1961. The action of CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice. 2.(A) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in taxing a sum of Rs. 55,16,681 as long term capital gain in the hands of the assessee. The action of the CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 55,16,681. (b) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in adopting the market value of Rs. 84,44,842 without the referring the matter to the Valuation Officer. The action of the CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the addition being illegal and without following the prescribed procedure of law. (c) In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in applying the provisions of section 50C of the IT Act 1961, and adopting the sale consideration at Rs. 84,44,842 against the actual sale consideration of Rs.49,00,000. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting the sale consideration at Rs. 49,00,000. 3. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. CIT(A) in adding a sum of Rs. 98,82,400/- to the total income of the assessee . The action of ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 98,82,400.

4. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 25,00,000 to the total income of the assessee. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 25,00,000.

5. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in making a lumpsum addition of Rs. 1,00,00,000 as alleged unexplained cash expenses. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 1,00,00,000.

6. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in making following additions on estimate basis: Particulars Amount (Rs.) Income from Salary 27,00,000 Income from House Property 8,17,320 Income from Other Sources 22,25,471 TOTAL 57,42,791 The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 57,42,791. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.

ITA No. 439/JPR/2018 (AY 2013-14)

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in not adjudicating the Ground No. 1 before him and confirming the action of the ld. AO in completing the assessment u/s 144 of Income Tax Act, 1961. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice.

2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 14,61,00,000 as alleged undisclosed income. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 14,61,00,000.

3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 4,00,000 as alleged undisclosed cash of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 4,00,000.

4. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 43,56,284 as alleged unexplained investment. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 43,56,284.

5. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 7,00,000 to the total income of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 7,00,000.

6. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 66,00,000 to the total income of the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 66,00,000.

7. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 2,67,000 as alleged unexplained cash expenses. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 2,67,000.

8. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 1,20,00,000 as alleged unexplained cash. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 1,20,00,000.

9. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in making following additions on estimate basis: Particulars Amount (Rs.) Income from Salary 27,00,000 Income from House Property 8,17,320 Income from Other Sources 23,00,000 Total 58,17,320

The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said of Rs. 58,17,320. 10. The appellant craves his rights to add, amend or alter any of the grounds on or before the hearing. SATISH CHAND KATTA AND GROUND NO. 1 15. First, we take up the appeals filed by the assessee for the AY 2009-10 and AY 2010-11, ITA No. 435/JPR/2018 and ITA No. 436/JPR/2018 respectively.

“ 1.4 In the case of Central Bureau of Investigation v. V. C. Shukla & Ors. 1998 3 SCC 410 popularly known as Jain Hawala Case where Section 34 of the Evidence Act, 1872 has been explained. In this case it is held that entries in Jain Notebooks held on facts admissible under Section 34, but file containing loose sheets of papers are not ''book" and hence entries therein not admissible under Section 34. Further it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. Entries even if relevant are only corroborative evidence. Independent evidence as to trustworthiness of those entries is necessary to fasten the liability. In view of these facts it was held by the Honourable Supreme Court, that entries made in the Jain Hawala diaries are under Section 34, but truthfulness thereof not proved by any independent evidence. It was also held in this case that "books" ordinarily mean a collection of sheets of paper or other material, blank, written, printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as "book" for they can be easily detached and replaced. The Supreme Court further went on to state that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness fix a liability upon a person. 1.5 The Hon'ble Tribunal in the case of S. P. Goyal v. Dy. CIT (2002) 82 ITD 85 (TM) has held that mere entry on loose sheet of paper not supported by actual cash cannot be considered to be sufficient evidence to treat the same as Cash credits under Sec.

1.10 Cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. The assessee should have been provided with an opportunity of cross examination. Principles of natural justice have an ancient ancestry. 1.11 In the case of Ashwani Gupta [2010] 322 ITR 396 (Delhi), addition was made on the basis of the statement of a third party and seized documents. Neither the seized documents were provided to the assessee nor was any opportunity of cross-examination of the adverse party given. Hon’ble Delhi High Court, following its own judgment in the case of SMC Share Brokers Ltd. [2007] 288 ITR 345 (Delhi) deleted the addition on the ground that there was violation of the principles of natural justice. 1.12 Hon’ble Supreme Court in the case of Andaman Timber Industries (CIVIL APPEAL NO. 4228 OF 2006)held that “…not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected” 1.13 Hon’ble Supreme Court in the case of Sunita Dhadda, vide its order dated 28.03.2018, in SPECIAL LEAVE PETITION (403 ITR 183) upheld the ratio laid down by Hon’ble Rajasthan High Court and also Hon’ble ITAT, Jaipur Bench as below – “Their Lordships ADARSH KUMAR GOEL and ROHINTON FALL NARIMAN Ji.- dismissed the Department's special leave petition against judgment dated July 31, 2017, of the Jaipur Bench of the Rajasthan High Court in D.-B,L_TA. No. 197 of 2012 whereby the High Court held that the Tribunal was justified in deleting the addition of Rs. 4,07,00,000 of "on money" said to have been received with respect to subject land of the assessee holding that the question what was the price of the land at the rel-evant time, was a pure question of fact and that unless it was established on record by the Department, that as a matter of fact, the consideration did pass to the seller from the purchaser, the Department had no right to make any additions, especially since none of the witnesses were examined before the Assessing Officer, and the assessee did not have any opportunity to cross-examine them” [Emphasis Supplied] 1.14 Further, if the ld. AO would have himself examined the brother of the assessee, he would have come to the conclusion that this was nothing but an emotional letter written by the brother to the assessee, without any basis and was nothing but dumb document.”

18. Per contra, the ld. DR relied upon the decision of the lower authorities and submitted that the order of the CIT(A) should be upheld.

20. In light of the above, and in the interest of justice, we set aside the matter for both assessment years, i.e., AY 2009-10 and AY 2010-11, to the file of the AO for fresh adjudication. The AO is directed to provide adequate opportunity to the assessee during such proceedings and consider all evidence and submissions made by the assessee.

In view of the above, appeal of the assessee is allowed for statistical purpose.

SATISH CHAND KATTA for (AY 2011-12)

GROUND NO.1

21. For the AY 2011-12, Ground No. 1 pertains to an addition of Rs. 1,75,00,000 made to the income of the assessee based on the statements recorded from one Shri Kewal Chand Jain, who was also subjected to search proceedings along with assessee. As per the AO, Shri Kewal Chand Jain, during the course of the search conducted on him, admitted in his statement recorded under Section 132(4), and later affirmed in a statement under Section 131, that he had infused funds as share capital into various companies belonging to Shri Satish Chand Katta and that such money had been received by him, in cash, from Shri Satish Chand Katta. Based on this statement, the AO made additions in the hands of the assessee during the assessment proceedings.

22. Before us, it was submitted by the ld. AR that the additions were made solely on the basis of statements recorded from a third party and not on any direct evidence pertaining to assessee. It was further brought to our notice that all funds infused by Shri Kewal Chand Jain into the group companies of Shri Satish Chand Katta were through banking channel. Alternatively, it was contended that, if any addition were to be made, it should have been made in the hands of the respective group companies and not assessee.

23 The ld. DR relied upon the orders of the lower authorities and submitted that the additions have been properly made by the AO and confirmed by the CIT(A). Accordingly, the same should be sustained.

GROUND NO. 2 AND 3

Needless to mention, for all three grounds pertaining to the AY 2011-12, where the case has been set aside to the file of the AO, adequate opportunity should be provided to assessee to make requisite submissions during the set-aside proceedings. Assessee is also directed to cooperate fully during the proceedings.

In view of the above, appeal of the assessee is allowed for statistical purpose.

SATISH CHAND KATTA for (AY 2012-13)

GROUND NO. 1

GROUND NO. 2

19. Ld. AO should have referred the case to the valuation officer. Even otherwise ld. AO, discharging the quasi-judicial function, was duty bound to refer the matter to the valuation officer u/s 50C(2) based on the claim made by the assessee . Reliance is placed on the Order of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal [2014] 47 taxmann.com 158 (Calcutta) in which it was held that “….For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law….”

21.2. Anil Kumar Jain vs. ITO [2013] 34 taxmann.com 258 (Delhi - Trib.)

..Head Notes - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration in certain cases [Reference to Valuation Officer] - Assessment year 2009-10 - Assessee earned short term capital gain on sale of property - Assessee made a claim before Assessing Officer that value adopted or assessed by stamp valuation authority was higher than fair market value - Value adopted by stamp valuation authority had not ever been disputed by assessee in any appeal or revision or otherwise to any other authority or Court as referred to in section 50C(2) - Whether it was incumbent upon Assessing Officer to refer matter for valuation to a Valuation Officer as provided in section 50C(2) - Held, yes..

GROUND NO. 3 33. In relation to Ground No. 3, an addition of Rs. 98,82,400 has been made to the income of the assessee. As per the factual position emerging from the order of the lower authorities and the material before us, at the time of search being conducted a rough paper was found, marked as Page No. 1 of Exhibit 2 to Annexure A. Based on this document, the AO concluded that the assessee had taken a loan on interest amounting to Rs. 98,82,400 for a period of two months and added the same to the income of the assessee.

1. During the course of search on the assessee, a rough paper was found, which was marked as Page No. 1 of Exhibit-2 to Annexure-A [PB : 18].

2. On the basis of such document it was alleged by the ld. AO that the assessee had taken loan on which interest amounting to Rs. 98,82,400 had been paid by the assessee for two months. Accordingly, ld. AO made additions of Rs. 98,82,400 to the income of the assessee. The said additions made by the ld. AO were thereafter sustained by ld. CIT(A)-IV.

3. It is submitted that the document marked as Page No.1 of Exhibit-2 to Annexure-A was nothing but a dumb document. It should not have been relied upon by the lower authorities. In this regard, reliance is placed on the below mentioned judicial pronouncements: 3.1. In Central Bureau of Investigation v. V.C. Shukla (1998) 3 SCC 410, provisions of Section 34 of the Evidence Act, was considered for the purposes of the expression "entries in books of account", "books of account". In this case, which is also known as 'Jain Hawala Diaries case", the Supreme Court came to the conclusion that entries in notebooks are admissible evidence u/s. 34 of the Evidence Act but loose sheets of papers are not "books" and hence entries in loose sheets of papers are not admissible evidence at all. Apex Court came to the conclusion that entries in books of accounts has "probative value" and "corroborative evidence", the Court on the facts came to the conclusion that entries made in Jain Hawala Diaries though admissible u/s. 34, but truthfulness, thereof, was not proved by any independent evidence. 3.2. In Common Causes v. UOI [2017] 394 ITR 220 (SC), it was held that Entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. Entries in books of account are not by themselves sufficient to charge any person with liability,the reason being that a man cannot be allowed to make evidence for himself by what he chooses. A man cannot be allowed to make evidence for himself by what he choose to write in his own books behind the back of the parties.

3.3. In the case of Sahitya Housing (P.) Ltd., certain entries were found in Pen-Drive on the basis of which additions were made. Hon’ble ITAT, Hyderabad Bench held that unsubstantiated material found in the Pen-Drive cannot be considered, in the hands of the assessee, as conclusive evidence, so as to make addition towards unexplained credit. While so holding, it referred to the ratio of decision in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410.

4. Without prejudice to above, the figures as mentioned in the document cannot be considered to be the interest expenses incurred by the assessee.

5. On careful examination of the said document, it can easily be inferred that the right side of the document mentions the loan which had been taken by the assessee from the various lenders.

6. On the left-hand side, top portion, the interest expense has been mentioned on the loan taken. The said transactions can be summarized here under: Rate = 36% Received as Per Broker Interest Loan Amount in Round Figure

65,85,800 2,40,100

Loan Interest Amount Expense 73,05,850 73,82,450 75,000+2,25 98,82,450 0+600=77,85 Interest Expense: 2,40,100+77,850 S.No. Principal Amount Period Interest Expense 1 25,00,000 2 Months 1,50,000 2 5,00,000 1 Month 15,000 3 2,50,000 1 Month 7,500 4 6,50,000 1 Month 19,500 5 1,00,000 1 Month 3,000 6 10,00,000 1 Month 30,000 7 18,800 2 Month 1,100 8 11,50,000 Less than 1 Month 14,000 9 19,100 0 Total 2,40,100 Interest Amount 2,40,100 Interest Amount (from 77,850 Table 2 below) 10 8,00,000 0 Total 73,05,850 11 76,600 Total 73,82,450 12 (from Table 2 below) 25,00,000 77,850 GRAND TOTAL 98,82,450 3,17,950 7. Details of the loan as mentioned in the table and the interest expenses incurred:-

S.No. Principal Amount Period Interest Expense 1 5,00,000 1 Month 15,000 2 2,50,000 1 Month 7,500 3 6,50,000 1 Month 19,500 4 1,00,000 1 Month 3,000 5 10,00,000 1 Month 30,000 Total 25,00,000 75,000 2,250 Other Interest 600 Total Interest 77,850 Table 2

8. Accordingly, as can be seen from above, the assessee, at best can be added, the amount of interest expenses incurred on such loan taken. As can be seen from the table above, the interest expenses incurred on the loan, if at all considered to be taken by the assessee, comes to Rs. 3,17,950. Thus, the addition of Rs. 98,82,400 should be restricted to only Rs. 3,17,950.

9. It is submitted if at all, the allegation of the lower authorities is considered to be true that the assessee had received loan amount and paid interest expenses on such loan amount, then also, the addition should only be restricted to the interest expenses, alleged to have been paid on the loan amount. No addition can be made of the loan amount received, even if received in cash.

11. It is also submitted that if the ld. AO considered the paper to be containing the interest expenses on the loan taken by the assessee, then the ld. AO was duty-bound to examine the concerned broker and also the persons who had allegedly provided loan to the assessee, in cash. In the present case, none of the said persons have been examined by the ld. AO/ld. CIT(A). Only on the basis of such document, the addition cannot be made to the income of the assessee. 12. Further, ld. AO in his order at page 5 has alleged that the assessee had paid interest expenses of Rs. 98,82,400 for two months. If the interest expenses of Rs. 98,82,400 were actually paid by the assessee, then the assessee would have taken a loan amount of Rs. 16.47 Crores. The said figure is nowhere appearing in the documents as considered by the lower authorities. The assessee has never undertaken transactions of such magnitude. Accordingly, ld. AO has simply, without application of mind, made addition to the income of the assessee. 35. It was further submitted that even as per the AO’s own observations, the amount in question represents a loan taken by the assessee. The ld. AR contended that the addition of the entire loan amount to the income of the assessee is erroneous.

Accordingly, we set aside this issue to the file of the AO for de novo consideration. The AO is directed to examine the material on record, consider the submissions made by the assessee, and thereafter make additions, if any, in accordance with the law. The assessee is directed to be provided with adequate opportunity of being heard and is expected to cooperate fully during the such set aside proceedings.

GROUND NO. 4 38. In relation to Ground No. 4, the addition pertains to notings found on Page Nos. 41 of Exhibit 3 to Annexure A, said to have been seized from the factory premises of M/s Siyaram Exports Private Limited. During the hearing before us, the ld. AR submitted that there is no basis for this addition, as the AO has not referred to any specific notings in these documents justifying the addition. The ld. AR also pointed out that the CIT(A) failed to examine the contents of these documents before confirming the addition. Submission filed by the ld. AR of the assessee is as under:-

1. It is submitted that addition of Rs. 25,00,000 was made to the income of the assessee, on the basis of Page No. 41 of Exhibit-3 to Annexure-A said to have been found and seized from the factory premises of M/s Siyaram Exports Private Limited.

2. The entire additions have been made on the basis of such document. However, neither during the course of assessment proceedings nor during the course of appellate proceedings, such document was confronted to the assessee.

3. It was submitted before the lower authorities that the assessee never had such document with him. 39. Per Contra, ld. DR relied upon the order of the lower authorities.

GROUND NO. 5

It is noted that during the assessment proceedings, the assessee was asked to provide submissions in response to these allegations. However, no reply was filed by the assessee. Subsequently, during the appellate proceedings before the CIT(A), submissions were made by the assessee. However, CIT(A) sustained the addition made by the ld. AO.

1. Ld. AO, during the course of assessment proceedings, on the basis of two diaries found at the residence of the assessee, marked as Exhibit-7 & 8, made additions of Rs. 1,00,00,000 to the income of the assessee.

2. It is submitted that the entire additions were based on a lumpsum basis without any proper underlying working done by the lower authorities.

3. It is submitted that the entire transactions which are mentioned in the diaries, marked as Exhibit-7 & 8 were properly recorded in the books of accounts of the group company in which assesse was Director. In this regard, Additional Evidences have already been submitted to the Hon’ble Bench consisting of the ledger accounts of M/s Siyaram Exports Private Limited. 4. In the ledger account, it is clearly visible, that the corresponding entries were mentioned in the diaries. List of the same on sample basis is attached herewith. PB Number Date of Entry Particulars Amount containing extract of Diary 01.11.2011 Imran Ari Embroidery 588 PB-54 02.11.2011 Repair & Maintenance Charges 4,010 PB-54 03.11.2011 Sultan Ji (ADV) 2,000 PB-55 04.11.2011 Paras Dyeing 10,000 PB-55 05.11.2011 Conveyance Expenses 110 PB-55 08.11.2011 Expenses at Sanganer 6,000 PB-56 10.11.2011 S.R. International 20,000 PB-56 15.11.2011 Telecommunication Charges 11,365 PB-58 29.11.2011 Kotak Mahindra Bank Ltd. 65,000 PB-61 10.12.2011 S.R. International 5,000 PB-64 16.12.2011 Thar Exports 18,000 PB-66

09.01.2012 Rushi Art & Craft 1,00,000 PB-72 28.01.2012 Thar Exports 17,000 PB-76 16.02.2012 Accessories-VAT Free 2,500 PB-89 28.02.2012 Telecommunication Charges 10,500 PB-92 07-03-2012 Fee & Subscription 300 PB-93 14-03-2012 SBI CA #30100826019 46,000 PB-94

GROUND NO. 6

1. Ld. AO during the course of assessment proceedings, made addition of Rs. 57,42,791 in totality to the income of the assessee on estimate basis, under different heads of income. Breakup of the same is as under:- 1.1. Income from Salary- Rs. 27,00,000 1.2. Income from House Property- Rs. 8,17,320 1.3. Income from Other Sources- Rs. 22,25,471

2. It is submitted that there is no basis whatsoever through which the present additions were made by the ld. AO to the income of the assessee.

3. The assessee had not earned any such income during the year under consideration. Equating the income of the assessee of previous years to find out the income for the year under consideration is not the correct approach. No notional income can be added to the income of the assessee and tax liability cannot be fastened on the assessee on such notional income.

4. It was submitted before the ld. CIT(A) also that the entire additions were made on estimate basis. However, the ld. CIT(A) also did not consider the submissions of the assessee. 47. Per contra, the ld. DR argued that the additions have been made based on some estimation, though no concrete evidence was available with the AO to substantiate the same.

SATISH CHAND KATTA for (AY 2013-14)

GROUND NO. 1

GROUND NO. 2

Subsequently, in appeal, the assessee submitted that all the additions were made on the basis of deaf and dumb documents. Before us, ld. AR of the assessee submitted that the pages of the seized material (pages 1 to 11) found during the house of Smt.

Sunita Shekhawat were incorrectly relied upon. The ld. AR argued that the additions were made without properly appraising the entire material available on record.

It was further submitted that the entries on the basis of which the additions were made reflected loans that the assessee had taken and projections of the loan amounts which could have been taken by assessee from various persons. According to the ld. AR, these entries, as per the seized material, do not pertain to actual transactions involving assessee. Assessee was facing substantial financial debt, and assessee was contemplating loans from certain individuals, which is why such notes were made by Smt. Sunita Shekhawat, who was working with assessee.

The ld. AR further submitted that, if the documents are properly considered, it cannot be concluded that these amounts pertain to the basis upon which the AO made the additions to the income of assessee. The relevant extracts of the submissions filed by the assessee in relation to Ground No. 1 are set out hereunder:

1. During the course of search conducted on the assessee and the group companies and also at other key associates of the assessee, a diary was found from the premises of Sunita Shekhawat. The said diary was marked as Page No. 1 to 11 of Annexure A-

1. 1.

2. On the basis of such diary, addition of Rs. 14,61,00,000 was made to the income of the assessee. In this regard, reference is drawn towards Paper Book Page No. 133 and 134 [Internal Page No. 9 and 10 of the diary found from the premises of Sunita Shekhawat]. On the basis of such pages, found in the diary, it was alleged by the ld. AO that the assessee had unaccounted income to the extent of Rs. 14,61,00,000. Accordingly, additions of Rs. 14,61,00,000 were made to the income of the assessee.

3. It is submitted that if the entire diary from the start is considered, it is clearly discernible that the diary consisted of the various loans which had been taken by the assessee and the group companies of which assessee was a part.

4. In this regard, screenshot of each of the diaries, and the relevant factual position, as emerging from such diary is set out here under:

Jhawar Building Sale Mortgage d with Rambabu and interest might have to be paid @1% per Interest to be paid 5 Lakhs per INDIA 2.5 Cr lent Installment- Rs. 3.9 lakhs per month

Making payment against it and as of today, there still a balance of Rs. 2.1 Cr to be paid according to boss. A loan of Rs. 2 Cr had been taken from bank by SIYARAM CITY CAB Taken Business Limit from Central Bank of India LOAN TAKEN 2.5 Cr - INDIABULLS 1.25 Cr + 0.75 Cr – Central Bank of India (Business Limit) Total = 4.5 Cr & 435 to 440/JPR/2018 & 352/JPR/2018 & 145 & 151/JPR/2024 Bank Limit Kept in front; we have Land in front of Clarks exhausted Amer at 2 Cr the limit. Valuation Interest of Rs. 2.4 1.2 Cr – Taken from Lakhs as per bank Boss Installment being paid City Cab of Rs. 5 Lakhs per Building month Hotel Raghvish Plots Sold – Bank Loan behind the STRESS SALE channel Against it, SBI has given Limit of 7.25 Cr; 7.2 lakhs SBI Loan – 7.25 Cr debited as monthly installment ASSUMPTION 2.1 Cr Paid to Bank Bank Finance 3.4 Private Fund Kamal Ji bhaisaa From the in-laws Hemchand Jain Total = 13.62 Cr Gold Mortgage with Muthoot Finance Total = 97 Lakhs Loan

5. From the above, it is clearly discernible that the group companies of the assessee were in huge financial debt. This is for the reason that they had taken huge loans from different Financial Institutions, which they were unable to repay.

7. At PB Page 133 [Internal Page 9[,Sunita Shekhawat is simply mentioning the various sources from which the funds would be available which could be utilized for the purpose of repayment of loan.

9. At Serial No. 5 of the entry at Page No. 133 it has been mentioned that 80 lakhs would be taken from Kota people, who happened to be the in-laws of the assessee, Shri Satish Katta. 10. It is submitted that if the ld. AO would have gone through the entire diary entries and would have tried to decipher the factual position as coming out of those entries, he would have definitely come to the conclusion of the assessee was in huge financial trouble. Also, he would have come to the conclusion that, in order to repay the existing loans, the assessee was contemplating to take the loans from different entities/persons, through which the existing loans could be repaid. 11. This can never be considered as an unexplained income of the assessee. On the contrary, this was nothing, but an anticipation or working of the loan which could be arranged by the assessee which was done by Sunita Shekhawat. 12. It is submitted that during the course of search proceedings, the aforementioned diary was confronted to the assessee. The assessee, without having knowledge, under duress, surrendered amount of Rs. 10,00,00,000 as his income. Only on the basis of such surrender additions were made to the income of the assessee. 13. It is a trite law that the department should not try and extract surrender from the assessee through statements. Also, any surrender made without any collaboration should not result into addition being made in the hands of the assessee. 14. What the ld. AO should have done, was to objectively, ascertain each and every entry in the diary, and thereafter resort to making additions to the income of the assessee, if required under the provisions of the Income Tax Act, 1961. 15. On the contrary, the ld. AO has simply made additions by considering certain figures, as stated in the diary, without objectively analyzing the reason for making such diary entries. 16. Also, the ld. Assessing Officer is simply relying on the statements made by the assessee during the course of search without analyzing any of the entries with the actual financial position of the assessee.

GROUND NO. 3

GROUND NO. 4

Upon reviewing the orders of the lower authorities, we observe that the family size of the assessee has not been adequately considered. In the interest of justice, we set aside this ground to the file of the AO to ascertain the family size and circumstances and make additions, if any, accordingly. The AO is also directed to provide the assessee with an adequate opportunity to present their submissions and ensure that any addition is made based on a proper and detailed assessment.

GROUND NO. 5 AND 6

The AO is directed to pass a fresh assessment order after considering all submissions and evidence provided by the assessee.

GROUND NO. 7

GROUND NO. 8

It is noted that during the assessment proceedings, the assessee was asked to provide submissions in response to these allegations. However, no reply was filed by the assessee. Subsequently, during the appellate proceedings before the CIT(A), submissions were made by the assessee. However, CIT(A) sustained the addition made by the ld. AO.

The submissions made by the assessee in this regard are reproduced hereunder:-

1. Ld. AO, during the course of assessment proceedings, on the basis of two diaries found at the residence of the assessee, marked as Exhibit-7 & 8, made additions of Rs. 1,20,00,000 to the income of the assessee.

2. It is submitted that the entire additions were based on a lumpsum basis without any proper underlying working done by the lower authorities.

3. It is submitted that the entire transactions which are mentioned in the diaries, marked as Exhibit-7 & 8 were properly recorded in the books of accounts of the group company in which assesse was Director. In this regard, Additional Evidences have already been submitted to the Hon’ble Bench consisting of the ledger accounts of M/s Siyaram Exports Private Limited. 4. In the ledger account, it is clearly visible, that the corresponding entries were mentioned in the diaries. List of the same on sample basis is attached herewith. PB Number Date of Entry Particulars Amount containing extract of Diary 01.11.2011 Imran Ari Embroidery 588 PB-54 02.11.2011 Repair & Maintenance Charges 4,010 PB-54 03.11.2011 Sultan Ji (ADV) 2,000 PB-55 04.11.2011 Paras Dyeing 10,000 PB-55 05.11.2011 Conveyance Expenses 110 PB-55 08.11.2011 Expenses at Sanganer 6,000 PB-56 10.11.2011 S.R. International 20,000 PB-56

15.11.2011 Telecommunication Charges 11,365 PB-58 29.11.2011 Kotak Mahindra Bank Ltd. 65,000 PB-61 10.12.2011 S.R. International 5,000 PB-64 16.12.2011 Thar Exports 18,000 PB-66 09.01.2012 Rushi Art & Craft 1,00,000 PB-72 28.01.2012 Thar Exports 17,000 PB-76 16.02.2012 Accessories-VAT Free 2,500 PB-89 28.02.2012 Telecommunication Charges 10,500 PB-92 07-03-2012 Fee & Subscription 300 PB-93 14-03-2012 SBI CA #30100826019 46,000 PB-94

GROUND NO. 9

1. Ld. AO during the course of assessment proceedings, made addition of Rs. 58,17,320 in totality to the income of the assessee on estimate basis, under different heads of income. Breakup of the same is as under:- 1.1. Income from Salary- Rs. 27,00,000 1.2. Income from House Property- Rs. 8,17,320 1.3. Income from Other Sources- Rs. 23,00,000 2. It is submitted that there is no basis whatsoever through which the present additions were made by the ld. AO to the income of the assessee.

4. It was submitted before the ld. CIT(A) also that the entire additions were made on estimate basis. However, the ld. CIT(A) also did not consider the submissions of the assessee.

In view of the above, appeals of the assessee is allowed for statistical purpose.

SHANTINATH BUILDCON PRIVATE LIMITED: (AY 2012-13)

68. The appeal has been preferred by assessee company against the order passed by the CIT(A)-4, Jaipur, for AY 2012-13 on 01.12.2017. The grounds taken by the assessee company are set out as under:

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in not adjudicating the legal Ground No. 1 and upholding the action of the ld. AO in completing the assessment u/s 144 of the Income Tax Act, 1961. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice.

2. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in adding a sum of Rs. 96,25,200 as unexplained income on the alleged ground that the assessee company has suppressed the sale consideration by Rs. 96,25,200. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 96,25,200 and accepting the sale consideration at Rs. 1,15,50,240.

3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in disallowing a sum of Rs. 12,16,500 (interest of Rs. 9,81,495 and commission of Rs. 2,31,005) under section 40(a)(ia) of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 12,16,500.

4. The assessee company craves its right to add, amend or alter any of the grounds on or before the hearing. GROUND NO. 1: 69. At the time of hearing before us, it was submitted by the ld. AR of the assessee that Ground No. 1 is not pressed. Accordingly, this ground is dismissed as not pressed.

GROUND NO. 2:

The matter was carried in appeal before the CIT(A), who confirmed the addition. Aggrieved, the assessee company preferred an appeal before us.

The ld. AR emphasized that the only basis for the addition was the agreement to sell found during the search, and no other corroborative evidence was brought on record. It was further argued that the registered sale deed, being the final document, should take precedence over the agreement to sell. It was also submitted that the AO did not conduct any inquiry with the purchasers of the land to corroborate whether the property was sold for the higher amount stated in the agreement or the amount as mentioned in the registered deed. Moreover, there was no indication of any addition made in the hands of the purchasers based on the differential amount, in the hands of purchaser.

The Ld. AR of the assessee, during the course of the hearing before us, filed written submissions, which are reproduced herein below:

22.1. Assessee company has sold land located at 2B Palm Court during the relevant assessment year at a total sale consideration of Rs. 1,15,50,240. Details are as under: Property Name of Date of sale Sale consideration location purchaser deed as per sale deed DLC Value 2B Palm Archana 11.04.2011 1,15,50,240 1,17,31,608

Court Ahuja 22.2. During the course of search proceedings, certain documents were seized from residence of Shri Satish Chandra Katta, who is the key person of this group. 22.3. The ld. AO has found one agreement, the Stamp Paper of which was purchased on 15.03.2011 but the date on the agreement was left blank. 22.4. As per these documents, ld. AO noted that the agreement was executed between the appellant Company and Smt. Archana Ahuja. As per the agreement, the above mentioned property has been sold for total consideration of Rs. 2,11,75,440. 22.5. On the basis of these documents, the ld. AO has made addition of Rs.96,25,200 (2,11,75,440 – 1,15,50,240) as undisclosed income of the assessee Company. 22.6. During A.Y. 2009-10, the appellant Company had purchased land situated at 2B Palm Court, Jagatpura, Jaipur. Details are as under (AO Order Page 3): Date of Property Location Name of Seller Amount (in Rs.) purchase 2B, Palm Court, 31.05.2008 Gaj Singh 40,00,000/- Jagatpura, Jaipur 22.7. The above purchase of land was duly accounted for in the books of accounts of the appellant Company and was shown in the Balance Sheet as on 31.03.2009. 22.8. The sale value as per registered sale deed was duly shown in the books of accounts of the appellant. 22.9. The property situated at 2B, Palm Court was agreed to be sold to Smt. Archana Ahuja for a total sale consideration of Rs. 2,11,75,440. However, the financial position of the group was extremely precarious. The buyer was aware of compulsion for selling the property at the earliest. Buyer took advantage of compelling circumstances and forced the appellant Company to renegotiate the deal. She also pressurized the assessee Company to sale the property at Rs. 1,15,50,240 or else she threatened to cancel the agreement. This property was eventually sold vide registered sale deed dated 11.04.2011 for the agreed consideration of property. 22.10. It is submitted that the lower authorities have not been able to bring to the fore any evidence which could suggest that the assessee Company received more consideration than what was finalized in the registered sale deed. Additions made by the ld. AO were simply on the basis of guess work which remained uncorroborated, which have been upheld by the ld. CIT(A), without any cogent basis. 22.11. Under identical set of facts wherein additions were made on the value specified in the seller and purchaser which was at the higher value as compared to actual sale deed entered by the seller and the purchaser. Hon’ble High Court in the case of CIT vs. HirabenGovindbhai Patel362 ITR 59 [2014] [Guj], upheld the order of the Hon’ble ITAT deleting the additions made by the ld. AO and held that:- “..From the above it can be seen that the entire issue is based on evidence on record, duly considered by CIT (A) as well as the Tribunal to come to a concurrent factual finding. Significant facts were though advanced, such MoU did reflect the sale price of Rs. 14.71 crore, nevertheless, the agreement to sale as well as the sale deed recorded the sale consideration of Rs. 7.35 crore. There was no material to suggest that any sale consideration in excess of the said amount was actually paid. As pointed out by the assessee, the search was carried out only eleven days after the sale and no cash was recovered. More importantly, the CIT (A) as well as the Tribunal both have considered the development and limited use of land to the purchaser. Fifty per cent of the land was likely to be reserved. It was, therefore that the seller agreed to receive reduced rate. Simultaneously, another deed was signed indicating that if by some chance, use of full area of land is available to the purchaser, the entire amount indicated in the MoU would be paid. The Assessing Officer did not have any other evidence barring the MoU to controvert such evidence. No question of law, therefore, arises. With respect to fair market value, CIT [A] as well as the Tribunal relied on the valuation report of the registered valuer. Without any further evidence, the Assessing Officer could not have substituted such amount. In the result, Tax Appeal is dismissed.”

The assessee company contended that the financial condition of the group had deteriorated, and the purchasers took advantage of the situation to re-negotiate the sale price. The final sale consideration was as per the registered sale deed. It was also submitted that no independent inquiry was conducted by the AO to corroborate the facts with the purchasers.

On examining the assessment order, we find that it was passed ex-parte under Section 144 of the Income Tax Act, 1961. Furthermore, no proper inquiry has been conducted by the AO with the purchasers to substantiate the addition. The assessment order does not provide a sufficient basis for the addition, apart from the agreement to sell.

In the interest of justice, we deem it appropriate to set aside this ground of appeal to the file of the AO for conducting a proper inquiry and passing a fresh assessment order after considering all aspects of the transaction. The AO is directed to conduct an independent inquiry with the purchasers and other relevant parties, if required, and thereafter determine the income of the assessee company.

The assessee company should be provided with adequate opportunity to present its case on factual and legal grounds.

Accordingly, Ground No. 2 is allowed for statistical purposes. GROUND NO. 3: 74. During the course of assessment proceedings, it was noted by the AO that the company had incurred certain expenses in the form of interest and commission, amounting to Rs. 12,16,500. On examining these expenses, the AO observed that the assessee company had failed to deduct tax at source (TDS) on the said payments. Consequently, a disallowance of the entire amount was made under Section 40(a)(ia) of the Income Tax Act, 1961. This disallowance was subsequently upheld by the CIT(A) during the first appellate proceedings.

Before us, the ld. AR of the assessee contended that the disallowance, if any, should be restricted to 30% of the sum payable to the non-resident. The ld. AR referred to the amendment introduced in Section 40(a)(ia) by the Finance Act, 2014, effective from 01.04.2015, which limits the disallowance to 30% in cases of non-deduction of TDS, instead of 100% as was previously applicable. The ld. AR argued that the said amendment should be treated as retrospective in nature, providing relief to the assessee.

The Ld. AR of the assessee, during the course of the hearing before us, filed written submissions, which are reproduced herein below:

3.1 “The assessee company had incurred the following expenses on which TDS was deducted. However, TDS was not been deposited in Government A/c:

S.No. Expense Amount (in Rs.) TDS Deducted 98,550 1. Interest 9,85,495 2. Commission 2,31,005 23,310 Total 12,16,500 1,21,650

3.2 During the course of assessment proceedings, the ld. AO disallowed the abovementioned interest expenses under Section 40(a)(ia) on account of non deposition of TDS. (AO Order Page 5) 3.3 The amendment in section 40(a)(ia) made by Finance Act, 2014 w.e.f. 01.04.2015 provides that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against 100% made prior to this amendment. 3.4 The purpose of this amendment was explained in the memorandum as under:- “the disallowance of whole of the amount of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non- deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed. 3.5 The Finance Minister while introducing the amendment in para 207 of the Budget Speech has stated as under: “207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed.” 3.6 From the above it can be noted that the amendment made by FA Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be given retrospective effect. Reliance is placed on the decision of Hon’ble Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33, wherein ithas been held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Therefore even in a case it is held that the disallowance u/s 40(a)(ia) is warranted, same should be restricted to only 30% of the amount of interest paid. 3.7 The above view is also upheld by the, Hon’ble ITAT Jaipur Bench in the case of Rajendra Yadav, (PB :28), vide order dated 29.01.2016, wherein, the Hon’ble Bench has considered that the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015, restricting the disallowance under section 40(a)(ia) to 30% of the amount payable to a resident on which tax has not been deducted, to have a retrospective effect. Relevant extract has been set out here for the sake of convenience: “….Recently in the matter of P.M.S. Diesels 2015 ] 59 taxmann.com 100 (Punjab & Haryana), Hon’ble Punjab & Haryana High Court had elaborately discussed the judgment passed by the Hon’ble Calcutta High Court and Hon’ble Gujarat High Court, Hon’ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub- section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee…”

3.8 The above ratio was followed in the case of Smt. Sonu Khandelwal,ITA No. 597/JP/2013, vide order dated 13.05.2016. 3.9 Ratio laid down by the Hon’ble ITAT Jaipur Bench in the case of Smt. Sonu Khandelwal (Supra) and Rajendra Yadav (Supra), wasfollowed by the Hon’ble ITAT Delhi Bench in the case of Smt. Kanta Yadav, vide order dated 12.05.2017. 3.10 The above legal position was put forth before the ld. CIT(A), in the first appellate proceedings, however, the same was, without any cogent basis, disregarded by the ld. CIT(A). ”

Accordingly, the appeal for Ground No. 3 is allowed for statistical purposes.

SHANTINATH BUILDCON PRIVATE LIMITED:

(AY 2013-14) 77. The appeal has been preferred by assessee company against the order passed by the CIT(A)-4, Jaipur, for AY 2013-14 on 02.02.2018. The grounds taken by the assessee company are set out as under:

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in completing the assessment u/s 144 of the Income Tax Act, 1961. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice.

2. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in making addition of Rs. 3,00,000 of interest on estimate basis to the total income of the assessee. The action of ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 3,00,000.

3. The assessee company craves its right to add, amend or alter any of the grounds on or before the hearing. This appeal pertains to the scrutiny assessment initiated following a search conducted on 31.07.2012 at the premises of the Katta Group, of which the assessee company is a part. Pursuant to the search, for the year under consideration, the case of the assessee company was taken up for scrutiny assessment. During the course of the assessment, it was observed by the AO that the assessee company had not filed its return of income for the year under consideration. Consequently, vide order dated 23.03.2015 passed under Section 144 r.w.s 153B(1)(b) of the Income Tax Act, 1961, an addition of Rs. 3,00,000 was made under the head "Income from Other Sources."

As per the AO, since the assessee company had not filed its return of income for the relevant year, no specific details were available for making any assessment. Consequently, the AO had to draw reference to the assessment for AY 2012-13, i.e., the immediately preceding assessment year, wherein the assessee company had declared income under the head "Income from Other Sources," which had been assessed at Rs. 2,83,524. Taking reference from the immediately preceding year, the AO made an addition of Rs. 3,00,000 for the year under consideration.

Aggrieved by the addition, the assessee company preferred an appeal before the CIT(A)-IV, Jaipur, the appeal of the assessee company was dismissed.

GROUND NO. 1: 78. Ground No. 1 pertains to the passing of the order by the AO under Section 144 of the ITA. At the time of the hearing, the assessee company submitted at the bar that it did not wish to press Ground No. 1. Accordingly, the said ground of appeal is dismissed as not pressed.

GROUND NO. 2:

In the interest of justice, we find it proper to set aside the case to the file of the AO once again to re-adjudicate the matter and determine the income of the assessee company based on the material available on record and also by seeking all requisite information/documents from the assessee company. Accordingly, we set aside the case of the assessee company to the file of the AO for verification of the factual position. Needless to mention, the assessee company shall be given adequate opportunity to present its case and submit all factual documents it wishes to rely upon.

In view of the above, Ground No. 2 is decided in favour of the assessee company for statistical purposes.

The appeal of the assessee company is partly allowed for statistical purposes.

SIYARAM EXPORTS INDIA PVT. LTD. 81. The appeals have been preferred by assessee company against the order passed by the CIT(A)-4, Jaipur, for AY 2011-12 & 2013-14. The appeal for the respective assessment year is being decided by us by passing an order. The grounds taken by the assessee company are set out as under:

(AY 2011-12) 1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in passing the order ex-parte against the assessee company. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire order passed, being against the principles of natural justice.

2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in reopening the assessment under Section 147 of the Income Tax Act, 1961.The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.

3. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in issuing notice under Section 148 of the Income Tax Act, 1961

without obtaining proper sanction under section 151 of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.

4. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in reopening the case of assesse under section 147 instead of making assessment under section 153C. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal and without jurisdiction.

5. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in concluding the assessment under section 144 of Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being illegal, without any basis and contrary to principles of natural justice.

6. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in rejecting the books of accounts by invoking the provisions of section 145(3). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by accepting books of accounts.

7. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in making addition of Rs. 12,65,18,935 under section 69C on account of alleged bogus purchases. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition of Rs. 12,65,18,935.

8. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in making addition amounting to Rs. 12,65,18,935 being alleged bogus purchases of Rs. 12,65,18,935, without discharging his onus of providing copy of the statements of persons and material relied upon by him. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the Principal of natural justice. Relief may please be granted by deleting the entire addition of Rs. 12,65,18,935.

9. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in making addition amounting to Rs. 12,65,18,935 being alleged bogus

purchases of Rs. 12,65,18,935, without providing the opportunity of cross examining the persons, whose statements has been used against the assessee. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the Principal of natural justice. Relief may please be granted by deleting the entire addition of Rs. 12,65,18,935.

10. The assessee company craves its rights to add, amend or alter any of the grounds on or before the hearing. (AY 2013-14)

1. In the facts and circumstances of the case and in law ld. CIT(A) has erred in passing the order ex-parte against the assesseecompany.The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire order passed, being against the principles of natural justice.

2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in, confirming the action of the ld. AO, in imposing penalty of Rs. 21,99,030, under Section 271AAB of the Income Tax Act, 1961 (ITA). The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire penalty of Rs.21,99,030 imposed by the ld. AO and confirmed by the ld. CIT(A).

3. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO, in imposing penalty under Section 271AAB without specifically pointing out in the Show Cause Notice, under which clause i.e. either (a), (b) or (c) of section 271AAB, penalty was proposed. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire penalty orderbeing illegal and void ab initio.

4. The assessee company craves its rights to add, amend or alter any of the grounds on or before the hearing. 82. At the outset of the hearing in the appeal before us, it is noted that the assessee company was ex-parte before both the AO and the CIT(A). During the course of hearing before us, the ld. AR submitted that the assessee company had not been provided sufficient opportunities to present its case on factual and legal aspects before the AO and CIT(A). The ld. DR, on the other hand, supported the orders of the lower authorities.

However, we are of the view that the dispute between the parties should be decided on its merits so that no party’s rights are curtailed without being provided an appropriate opportunity of being heard. Therefore, in the interest of justice, the matter is restored to the file of the AO for fresh adjudication by providing one more opportunity of hearing to the assessee company. The assessee company is directed to cooperate with the proceedings and not to seek adjournments on frivolous grounds.

Accordingly, the appeal of the assessee company is allowed for statistical purposes. Before parting, we make it clear that the decision to restore the matter back does not, in any way, reflect or express an opinion on the merits of the dispute, which shall be decided independently in accordance with the law.

Both appeals of the assessee company are allowed for statistical purposes.

SIYARAM EXPORTS INDIA PRIVATE LIMITED AY 2013-14

The appeal has been preferred by assessee company against the order passed by the CIT(A)-4, Jaipur, for AY 2013-14 on 01.02.2017. The grounds taken by the assessee company are set out as under:

1. In the facts and circumstances of the case and in law the ld. CIT (A) has erred in not adjudicating the Ground No. 1 and upholding the action of the ld. AO in completing the assessment u/s 144 of the Income Tax act, 1961. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order which is passed in gross violation of natural justice.

2. (a) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in disallowing interest of Rs. 28,56,134 for non- deduction of tax at source u/s 40(a)(ia) of the Income Tax Act, 1961. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 28,56,134.

(b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in disallowing various expenses totalling to Rs. 1,77,91,173 for non-deposition of tax deducted at source u/s 40(a)(ia) of the Income Tax Act, 1961. The action of ld. CIT(A)is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said disallowance of Rs. 1,77,91,173.

3. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of ld. AO in making trading addition of Rs. 73,30,114 by applying a G.P. rate of 9% on the alleged short stock of Rs. 8,14,44,604 found during the course of search. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 73,30,114.

GROUND NO. 1: 84. At the time of hearing before us, assessee company submitted at the bar that he did not wish to press Ground No. 1. Accordingly, Ground No. 1 is hereby dismissed as not pressed.

GROUND NO. 2: 85. This ground pertains to disallowance under Section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of tax at source (TDS) on interest expenses of Rs. 28,56,134 paid to a non-banking finance company (NBFC). Additionally, during the year under consideration, the assessee company deducted TDS on expenses of Rs. 1,77,91,173 but failed to deposit the deducted amount within the prescribed time.

During the course of assessment proceedings, the AO disallowed Rs. 28,56,134 under Section 40(a)(ia) due to non-deduction of TDS on interest expenses and also disallowed Rs. 1,77,91,173 under Section 40(a)(ia) as the TDS deducted was not deposited within the stipulated period.

22.12. During the course of assessment proceedings, ld. AO disallowed the following expenses under Section 40(a)(ia) on account of non- deduction of TDS. (AO Order page 3) S.No. Nature of Expenses Amount (Rs.) 1 Indiabulls Credit Services 26,52,674 2 Kotak Mahendra Prime 2,03,460 Total 28,56,134

22.13. During the relevant assessment year, ld. AO disallowed entire expenses on account of non deposition of TDS. Details of expenses disallowed are as under: (AO Order page 4-5) S. No. Head of expenses Amount (in Rs.) 1 Brokerage 43,868 2 Interest 58,94,635 3 Legal & Professional fees 6,03,375 4 Rent 20,64,600 5 Fair & Exhibition (Rent) 6,63,907 6 Screen & Block Exp. 89,975 7 Fair & Exhibition (Contract) 1,20,000 8 Stitching & Fabrication 2,81,345

9 Printing & Dyeing 11,54,080 10 Shipment & Clearing Exp. 6,04,660 11 Designing Work 11,25,000 12 Audit fees 2,00,000 13 Sales Commission 49,45,728 Total 1,77,91,173

22.14. The amendment in section 40(a)(ia) made by Finance Act, 2014 w.e.f. 01.04.2015 provides that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against 100% made prior to this amendment. 22.15. The purpose of this amendment was explained in the memorandum as under:- “the disallowance of whole of the amount of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non- deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed.” 22.16. The Finance Minister while introducing the amendment in para 207 of the Budget Speech has stated as under: “207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed.” 22.17. From the above it can be noted that the amendment made by FA Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be given retrospective effect. Reliance is placed on the decision of Hon’ble Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33, wherein ithas been held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Therefore even in a case it is held that the disallowance u/s 40(a)(ia) is warranted, same should be restricted to only 30% of the amount of interest paid. 22.18. The disallowance may please be restricted to 30% of the total amount i.e. Rs. 8,56,840 (30% of 28,56,134) and Rs. 53,37,352 (30% of 1,77,91,173). 22.19. The above view is also upheld by the, Hon’ble ITAT Jaipur Bench in the case of Rajendra Yadav, vide order dated 29.01.2016, wherein, the Hon’ble Bench has considered that the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015, restricting the disallowance under section 40(a)(ia) to 30% of the amount payable to a resident on which tax has not been deducted, to have a retrospective effect. Relevant extract has been set out here for the sake of convenience: “….Recently in the matter of P.M.S. Diesels 2015 ] 59 taxmann.com 100 (Punjab & Haryana), Hon’ble Punjab & Haryana High Court had elaborately discussed the judgment passed by the Hon’ble Calcutta High Court and Hon’ble Gujarat High Court, Hon’ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub- section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322 by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee…” 22.20. The above ratio was followed in the case of Smt. Sonu Khandelwal,ITA No. 597/JP/2013, vide order dated 13.05.2016. 22.21. Ratio laid down by the Hon’ble ITAT Jaipur Bench in the case of Smt. Sonu Khandelwal (Supra) and Rajendra Yadav (Supra), wasfollowed by the Hon’ble ITAT Delhi Bench in the case of Smt. Kanta Yadav, vide order dated 12.05.2017.

22.22. The above legal position was put forth before the ld. CIT(A), in the first appellate proceedings, however, the same was, without any cogent basis, disregarded by the ld. CIT(A). ” 88. Per contra, ld. DR relied on the order of lower authorities.

In the result, Ground No. 2 is allowed for statistical purposes. GROUND NO. 3: 90. This ground pertains to the addition made under Section 69 of the ITA based on discrepancies in stock valuation during a search conducted under Section 132.

During the search, the physical inventory prepared at the factory premises showed stock valued at Rs. 1,03,82,817 whereas the stock as per the books of accounts stood at Rs. 9,18,27,421 leading to a shortage of Rs. 8,14,44,604. Based on the estimated gross profit (GP) rate of 9%, the AO treated the shortage as unrecorded sales and added Rs. 73,30,114 to the income of the assessee company.

In appeal, the CIT(A) sustained the addition. Before us, the assessee company submitted that during the search proceedings, it was stated that stock lying at the Madrampura factory premises was not considered while calculating physical inventory. This aspect was not considered by the AO. The submissions made by the ld. AR of the assessee before us are set out hereunder:

3.1. During the course of search proceedings u/s 132 of the Income Tax Act, 1961, the physical stock inventory was prepared. The actual physical stock was valued at Rs. 1,03,82,817. However, the stock as per the books (stock register) on the day of search was Rs. 9,18,27,421. 3.2. The ld. AO had made a trading addition of Rs.73,30,114 by applying a G.P. rate of 9% on the short stock of Rs. 8,14,44,604 (9,18,27,421 – 1,03,82,817) 3.3. The assessee keeps stock at its factory located at Chandra kala Colony and Madrampura, Sanganer. 3.4. The ld. AO has considered only the physical stock which was lying at Chandra Kala Colony factory at the time of search. The stock found at Chandra Kala Colony premises at the time of search was Rs. 1,03,82,817. 3.5. The stock on the date of search as per tally software was Rs. 9,18,27,421.The stock lying at Madrampura factory was not considered by the ld. AO in the total physical stock found at the time of search. 3.6. It is humbly submitted that if the ld. AO had considered the physical stock lying at Madrampura Factory then the physical stock would have matched with the stock as per books of accounts. 3.7. Without affecting and without prejudice to above, it is humbly submitted that the closing stock of the assessee Company as per audited books of accounts of the past three years are as under:

S.No. F.Y. Closing Stock (in Rs.) 1 2010-11 8,98,28,055 2 2011-12 8,35,01,985 3 2012-13 8,77,43,283 3.8. The average stock of the three years of the assessee company is Rs. 8,70,24,441. The closing stock of the assessee was accepted by the ld. AO in the previous assessments as no addition for short stock was made by him. 3.9. Thus, it is apparent that the average stock lying with the assessee is around Rs. 8,70,00,000 at any point of time. The ld. AO has grossly erred in taking the physical stock at the time of search as only Rs. 1,03,82,817, without considering the physical stock lying at Madrampura factory. 3.10. Even otherwise, the ld. AO in the assessment order had made addition of Rs. 63.89 Lacs, under the head Income from Business or Profession. Accordingly, the amount of addition had already been estimated by the ld. AO as part of business income of the assessee. Having already made the addition under the head PGBP, no separate additions should be made to the income of the assessee company., otherwise the same would tantamount to additions being twice under the same head of income, i.e. PGBP.

In the result, Ground No. 3 is allowed for statistical purposes. The appeal is partly allowed for statistical purposes Deputy Commissioner of Income Tax,Central circle-3,Jaipur Vs Shri Satish Chandra Katta AY 2008 -2009