ASSISTANT COMMISSIONER OF INCOME-TAX vs. SHRI MAHESH BHAGWAT CHAUDHARY,, JALGAON

आदेश आदेश / ORDER आदेश आदेश

PER BENCH :

There are six appeals under consideration involving assessment years 2006-07 to 2011-12. All the appeals are filed by the Revenue against the consolidated order of CIT(A)-12, Pune, dated 25-01-2016.

“1. Whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing additional evidence under rule 46A whereas the assessee's case is not covered by the exceptions provided under rule 46A of the I.T. Rules.

2 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

admitting of the additional evidences by the CIT(A) in violation of Rule

46A of the Income Tax Rules, 1962.

Piaggio vehicles ( 3w and 4w). There was search and seizure action on the

Chaudhari group of cases on 04-10-2011. Assessments were completed

u/s.143(3) r.w.s. 153A of the Act. AO made various additions in the

assessments and assessed the income for these years as per details given

in the table below :

Assessment Returned Assessed Year income income 2006-07 2,99,429 59,79,140 2007-08 4,15,841 9,13,070 2008-09 1,53,741 7,02,330 2009-10 11,99,778 26,07,330 2010-11 15,48,638 88,00,180 2011-12 13,25,420 1,62,58,260

the query from the Bench regarding identification of the said additional

evidences which was admitted at the back of the AO or in contravention to

Rule 46A of the I.T. Rules, 1962, Ld.DR for the Revenue fairly submitted

3 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

that the fact of CIT(A) granting relief to the assessee deleting all the

additions on merits admitting the “additional arguments” raised before the

CIT(A) for the first time not raised before the assessing authority, amounts

to admission of the additional evidences. Therefore, Revenue is in appeal

before the Tribunal for adjudication of the issue.

submitted that assessee never filed any evidences per se but only

submitted written submissions additionally before the CIT(A) and

therefore, there is no contravention of the provisions of Rule 46A by the

CIT(A). Hence, the order of CIT(A) should be confirmed in toto and dismiss

the grounds of the revenue in this appeal.

additional evidences per se, with reference to Ground No.1 and others, we

find the Ld. AR’s reply appears to be correct. For the sake of example, we

examined the contents of CIT(A) on the issue relating to Ground Nos. 5 to

6 before the CIT(A) and find the production of books of account was the

subject matter qua the submission of additional evidence and furnishing

of a letter which is correspondence between the AO and the assessee. In

our view, calling for a remand report of the said letter emanated from the

office of the AO is not required and it is unwarranted. For the sake of

completeness, relevant lines are extracted here as under :

“35.2 . . . . . .The AO was in possession of audited balance sheet and profit and loss account but did not bring any material on record which was gathered during the search or during the assessment proceedings to discard the audited result of the appellant. As regards production of books of account, the appellant contended that AO had kept books of accounts of group concerns for about 2 months without impounding the same. In support appellant had also filed copy of letter received by the office of AO by which books of accounts were produced before the AO. It was also contended that books of accounts of the appellant were also produced and AO had also not permitted personal presence of the AR of the appellant. The assessment year under consideration was not pending at the time of search and the AO was not justified in rejecting the book result without having any material in hand to disturb the concluded assessment in view of the decision of Hon’ble Bombay High Court in case of Murli Agro Products

4 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

(Supra). Addition made of Rs.4,35,741 is therefore deleted and the grounds raised by the appellant are allowed.”

admitted any additional evidences which requires remanding to the AO’s

file. It is merely a letter evidencing the existence of books of accounts in

the possession of the AO. When the books of accounts are undisputedly

lying with the AO for months, the assessing officer cannot allege that the

books of accounts were not furnished by the assessee on this issue of

addition of Rs.4,35,741/-, we find the Ld.CIT(A) granted relief on the basis

of the binding judgment of jurisdictional Hon’ble High Court.

this point of view, the contravention of the provisions of section 46A of the

I.T. Rules, 1962 is not raised on correct facts. Revenue could not

demonstrate, atleast one crucial document which goes to the root of the

matter admitted by the CIT(A) at the back of the AO and without calling

for remand report, if any. Therefore, we are of the view that grounds

raised by the Revenue in this appeal have no merit. Since the Revenue

fail on this legal issue, all the said grounds raised by the revenue have to

be dismissed.

However, on merits also, grounds relating to various additions are

being dealt in the following paragraphs.

the CIT(A) on account of Foreign Travel Expenses.

assessment proceedings, the AO noted that assessee and his two sons

travelled to Singapore and Australia and incurred Rs.1,66,000/- towards

the same. AO called for relevant information from the assessee to

5 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

support the said expenditure. Appellant contended that the foreign tour

was sponsored by the insurance companies/principle companies.

However, no details were submitted by the assessee before the AO.

Therefore, the AO proceeded to make addition of Rs.1,66,000/- on

estimation basis as unexplained expenditure. During the First Appellate

Proceedings, assessee submitted that the foreign trip was sponsored by

Hero Motorcorp Ltd. and furnished a copy of letter dated 26-09-2005

received from the said company. The copy of letter indicates that the

expenses to be borne by the dealer. In absence of any documentary

evidence towards the expenses incurred on this foreign travel, CIT(A)

confirmed the addition of Rs.1,56,000/-. However, the hotel expenses of

Rs.10,000/- made by the assessee have only been considered by the

CIT(A) as sponsored by Hero Motorcorp Ltd. Thus, the CIT(A) gave part

relief to the assessee. Aggrieved with the said relief of Rs.10,000/-, the

Revenue is in appeal before us. Assessee is not in appeal against the

confirmed addition of Rs.1,56,000/-.

CIT(A) in Para No.5.3 of his order is a well reasoned one. The amount of

Rs.10,000/- considered by the CIT(A) on account of hotel expenditure, as

having sponsored by the insurance company needs no interference. It is

also a fact that AO made the addition only on estimation basis.

Regarding the additional evidence, the Ld. AR for the assessee filed the

following written submissions :

“The Respondent submits that out of the total addition of Rs.1,66,000/- the CIT(A) has upheld addition to the extent of Rs.1,56,000/- and Rs.10,000/- is allowed on the basis of the copy of letter filed by the respondent which was already submitted to the Ld. AO during the assessment proceedings. Therefore, the question of additional evidence under Rule 46A and calling for the Remand Report from the Ld. AO simply did not arise.”

Therefore, the ground raised by the Revenue is dismissed in principle.

6 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

expenditure amounting to Rs.1,60,560/- by the CIT(A).

Chaudhari Automobiles. During the year under consideration, assessee

received remuneration of Rs.72,000/- and interest on capital of

Rs.1,35,394/-. Assessee borrowed some loans from Bank of India and

Tapi Society and paid interest of Rs.2,80,378/- and claimed the same as

business expenditure. AO rejecting the explanation given by the assessee

made addition of Rs.2,80,378/- in the hands of assessee. CIT(A) gave part

relief to the assessee. Aggrieved with the order of CIT(A) the Revenue is in

appeal before us.

revenue authorities, we find the AO made addition of Rs.2,80,378/-, the

amount which was paid by the assessee as interest on his borrowed loans.

Assessee drew the attention of CIT(A) to the balance sheet and the capital

account of the assessee and tried to justify the claim of Rs.2,07,394/- as

set off of the interest expenditure against the remuneration and interest

on capital derived from the firm. Assessee also tried to explain that he

has Rs.11,22,205/- as cash in hand and therefore the interest

expenditure should be allowed as sufficient interest free funds available

with the assessee. The CIT(A) noted since the assessee has only shown

total income of Rs.3,20,000/-, the CIT(A) was of the opinion that only

Rs.2,00,000/- should be considered as working capital and accordingly,

computed the interest paid on borrowings at Rs.13,89,872/- on pro-rata

basis which works out to Rs.1,60,560/-. Thus, Rs.1,19,818/- is upheld.

Regarding the additional evidence, the Ld. AR for the assessee filed the

following written submissions :

7 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

“The Ld.CIT(A) has deleted the said addition on pro-rata basis after taking into consideration the Balance Sheet which was filed before the Ld. AO during the course of assessment proceedings. Since the books of accounts containing the Balance Sheet was duly submitted before the Ld. AO, the question of additional evidence under rule 46A and calling for the Remand Report from the Ld. AO simply did not arise.”

Thus, we find the conclusion given by the CIT(A) after taking into

cognizance the capital account and balance sheet of the assessee is fair

and reasonable and does not call for any interference. As such, we do not

find any violation of provisions of section 46A of the Income Tax Rules,

1962. Ground No.3 raised by the revenue is therefore dismissed.

by the CIT(A) as undisclosed investment in properties.

assessment proceedings in the case of Shri Rajesh Prakash Chaudhari of

the group, the AO noted that loan sanctioned by UCO Bank to Shri Rajesh

P. Chaudhari against the security of land situated at S.No.240/3A/3B/3C

at Sakegaon, standing in the name of the assessee, Shri Bhagwat M.

Chaudhari and Shri Namdev M. Chaudhari. For the purpose of loan, the

valuer has valued the property at Rs.1,87,68,000/- as on 04-02-2006.

AO gave 20% allowance on this assessed value being higher than the

actual investment and the cost price of the property was thus taken at

Rs.1,56,40,000/-. Thus, 1/3rd of the amount works out to

Rs.51,13,333/-. In absence of any details about the investment in the

property, in the balance sheet of the assessee, the AO proceeded to make

addition of Rs.51,13,333/- in the hands of the assessee. In the First

Appellate Proceedings, CIT(A) deleted the addition. Aggrieved with the said

order of CIT(A) the Revenue is in appeal before us.

this issue. On going through the order of CIT(A) on this issue, we find it

8 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

relevant to extract the relevant operational lines from the finding of the

CIT(A) in Para No.7.3 of his order and the same reads as under :

“7.3 . . . . .I find merit in the contention of the applicant. It was noted that the AO did not permit personal hearing to the authorized representative of the appellant to explain the transaction on the pretext that appellant could not authorize more than one representatives u/s.288(1) of the Act and on the other hand did not verify the documents of purchase of the property in question and assumed that since property was not appearing in the balance sheet hence it was purchased on the date of valuation itself. No enquiry was conducted with the lending bank or with the valuer of the property. No evidence was found during the search to reach to the conclusion that investment was made during the year under consideration. On the other hand, appellant had satisfactorily demonstrated that property in question was purchased during FY 1998-99. No addition can be made on presumption and considering the facts of the case, addition made by the AO of Rs.52,12,333 is deleted and ground raised by the Appellant is allowed.”

purchased prior to the period of search and the AO made the addition on

presumption basis. CIT(A) has appreciated the issue in the right

perspective and deleted the addition. Thus, on merits, we find the order of

CIT(A) is fair and reasonable. Regarding the additional evidence, the Ld.

AR for the assessee filed the following written submissions :

“The Respondent submits that he has duly produced the copy of Purchase deed of the said land before the Ld. A.O. during the course of assessment proceedings wherein he has explained that the said land was purchased by the respondent prior to search period. It is apparent from the records that the respondent had purchased the said land prior to the search, hence the addition made by the Ld. AO. is unjustified and the Ld. CIT (A) is justified in deleting the said addition. Since, the purchase deed was produced before the Ld. AO. during the course of assessment proceedings, the question of calling for the remand report simply does not arise. Further I am enclosing herewith the copy of submission filed with the Ld. AO. wherein it is clearly stated that the Purchase deed of the said land was submitted in the paper book.”

Accordingly, Ground No.4 raised by the revenue is dismissed.

ITA No.630/PUN/2016 A.Y. 2007-08

9 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

under :

“1. Whether on the facts and circumstances of the case, whether the Id.CIT(A) was justified in deleting the foreign tour expenses amounting to Rs.79,000/-? 2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to Rs.6,000/-? 3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of' ‘Disallowance of interest expenditure' to the extent of Rs.2,39,227/-, though the entire interest was not substantiated by the assessee during assessment proceedings, despite being given opportunity?

CIT(A) in connection with the claim relating to “Foreign Travel expenses”.

Relevant facts include that the assessee visited Singapore and Mauritius

and claimed expenditure on account of Foreign Travel. AO disallowed the

said expenses incurred by the assessee in connection with his travel to

Singapore and Mauritius for want of details and the source of funds.

Assessee could not demonstrate the same except stating that the

expenditure was sponsored by the insurance companies. No details were

furnished in support of the same. During the First Appellate Proceedings,

assessee furnished copies of the emails sent by John Deere Equipments

Pvt. Ltd. Emails were addressed to M/s. Chaudhari Motors in respect of

Mauritius tour. Basically, for want of details, CIT(A) deleted the addition

of Rs.79,000/- and confirmed the balance of Rs.1,73,000/-.

heavily on the order of the AO. On the other hand, Ld. AR for the assessee

drew our attention to the speaking order of the CIT(A).

relevant lines from the order of CIT(A) and the same reads as under :

10 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

“14. . . . . .As discussed in AY 2006-07 while dealing with similar addition, the sponsor Hero Motors had clearly mentioned that tickets have to be borne by the dealer. The appellant also denied of travelling of their sons to Mauritius and Singapore but did not furnish copy of their passport to support the claim. In the circumstances, the fact of travelling to Singapore and Mauritius has been brought by the AO on the record and for want of further details, he was left with no other option but to estimate the expenditure. However, AO had failed to give credit to the amount of Rs.79,000/- debited the capital account of the appellant. Therefore, addition to the extent of Rs.79,000/- is deleted and balance addition of Rs.1,73,000/- is upheld. Grounds raised by the appellant is partly allowed.”

is taken based on the plausible reasoning which does not call for any

interference. Accordingly, Ground No.1 is dismissed.

Rs.6,000/- on account of undisclosed income from FDR. Relevant facts

include that the assessee had a FDR with UCO Bank amounting to Rs.1

lakh and earned interest. Without realizing the fact that the said income

was already offered to tax, AO estimated the interest accrued on the said

FDR and made addition. During the First Appellate proceedings, assessee

demonstrated vide his letter dated 16-11-2015 the fact of offering of

Rs.6,000/- which formed part of the income returned by the assessee. On

considering the same and examining the facts, the CIT(A) granted relief.

Relevant operational para is extracted as under :

“15.2 I have gone through the assessment order and the submissions filed by the appellant. As discussed earlier, proper opportunity could not be granted to the appellant, and the AO without examining the computation of total income filed by the appellant along with the return of income filed on 08-08-2008 had assumed that interest on FDR kept with the UCO Bank was not offered to tax. I have examined the computation of total income and it is seen that appellant has offered interest of Rs.5,807/- as interest on FDR with the UCO Bank. Therefore, estimated addition of Rs.6,000/- made on this ground stands deleted. Ground raised by the appellant is allowed.

reasonable and does not warrant any interference. Accordingly, Ground

No.2 is dismissed.

11 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

disallowance of interest expenditure amounting to Rs.2,39,227/-.

Relevant facts include that the assessee claimed the above interest

expenditure as business expenditure against the interest and

remuneration received from the firm. AO disallowed the claim as per the

discussion given in Para 11 of his order. During the First Appellate

proceedings of CIT(A), assessee made written submission and the same

relevant portion are extracted in Para No.16 of the order of CIT(A). On

considering the same, CIT(A) held that the disallowance of interest is

uncalled for considering the assessee’s own funds and the jurisdictional

High Court judgment in the case of Reliance Utilities and Power Ltd. 313

ITR 340. For the sake of completeness of this order, relevant finding of

CIT(A) is extracted as under :

“16.2 Total investment in the firms stood at Rs.24,48,730 and apart from that all other investments were personal investments of the appellant in the land, house property and saving bank account. Hon’ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. For the year under consideration, personal investment of the appellant are only Rs.8,54,311/- which are lesser than his own capital of Rs.10,05,620/-. Therefore, it is held that borrowed funds of Rs.16,22,420/- were used for making investment in the partnership firm. The appellant had received interest on the capital from the firm of Rs.2,39,167/- and paid interest of Rs.2,39,227/- on the funds invested in the partnership firm. In these facts disallowance made by the AO was not called for and therefore deleted. Ground raised by the appellant is allowed.”

Reliance Utilities and Power Ltd.(supra) is fair and reasonable. It is not

the case of the revenue that the assessee does not have interest free funds

for investment activity. Considering the above, we find the reasoning

given by the CIT(A) is reasonable.

12 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

ITA No.631/PUN/2016 A.Y. 2008-09

“1. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of ‘undisclosed interest in FDR’ amounting to Rs. 9,000/-. 2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of ‘Disallowance of interest expenditure’ to the extent of Rs. 2,76,279/-, though the entire interest was not substantiated by the assessee during assessment proceedings, despite being given opportunity?

of interest on FDR amounting to Rs.9,000/-.

Ground raised by the revenue in A.Y. 2007-08 raised by the assessee vide

Ground No.2. The FDR in question is one and the same. We have upheld

the decision of CIT(A) in the said assessment year. Following the same

reasoning and considering the commonality of the factual matrix, we

delete ground No.1 raised by the Revenue in this year too.

expenditure of Rs.2,76,279/-. The facts relating to this ground are

identical to the facts discussed in Ground No.3 of the appeal for A.Y.

2007-08. We granted relief to the assessee in that assessment year

relying on the ratio of the Reliance Utilities and Power Ltd.(supra).

identical to the Ground No.3 of appeal for A.Y. 2007-08. We have upheld

the decision of CIT(A). Following the same reasoning, we delete ground

No.2 raised by the Revenue in this year too.

13 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

ITA No.632/PUN/2016 A.Y. 2009-10

“1. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of ‘undisclosed interest in FDR’ amounting to Rs.9,000/-. 2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.4,35,741/- made by estimating NP @ 6%, ignoring the fact that the assessee did not produce books of accounts for verification during assessment proceedings , despite being given opportunity?

FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08 vide

Ground No.2. We have upheld the decision of CIT(A) in the said

assessment year. Following the same reasoning, we delete ground No.1

raised by the Revenue in this year.

the CIT(A) on account of estimation of net profit @6% by the AO.

Rs.2.19 crores (rounded off) with net profit @4.01%. However, the AO

made addition of Rs.4,35,741/- estimating the profits @6% on the ground

that assessee failed to produce the books of account. In the First

Appellate proceedings, assessee contended that books of account were

audited u/s.44AB of the Act. Total turnover of the assessee was Rs.2.19

crores which includes the trading of spares and oil. AO was in possession

of the audited balance sheet and the profit and loss account and could not

find any discrepancy. Having considered the fact that AO was in

possession of the books and there was no material with the AO to disturb

the concluded assessment. CIT(A) also examined the letter received from

the AO that the assessee produced books of account before him. Further,

14 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

relying on the judgment of Hon’ble Bombay High Court in the case of

Murli Agro Products, CIT(A) deleted the entire addition of Rs.4,35,741/- as

per the discussion given in Para No.35.2 of his order. We have already

dealt with the same issue while dealing with the issue of violation of Rule

46A of the I.T. Rules, 1962.

uphold the order of CIT(A). As such, revenue has no reason for making

addition of Rs.4,35,741/-. Accordingly, Ground No.2 raised by the

Revenue is dismissed.

ITA No.633/PUN/2016 A.Y. 2010-11

“1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the foreign tour expenses amounting to Rs.3,95,800/- by admitting additional evidence under rule 46A of the I.T. Rules, ignoring the fact that the assessee had not furnished the relevant documents in spite of opportunities given during assessment proceedings and despite being given specific instruction?

15 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

CIT(A) in connection with the claim relating to Foreign Travel expenses.

Revenue in A.Y. 2007-08. We have upheld the finding given by the CIT(A)

on this issue. It is the case of the assessee that the source of fund for the

Foreign Travel expenses is the company to which the assessee is a dealer

or the other companies. Following the same parity of reasoning, we

concur with the findings given by the CIT(A). Accordingly, Ground No.1

raised by the Revenue is dismissed.

amount of Rs.1,20,000/-paid on loan availed from M/s. Chadhari

Automobiles.

lakhs from M/s. Chaudhari Automobiles on 27-11-2009 for making

investment in land. He paid interest amount of Rs.1,20,000/- on the said

loan. Assessee could not demonstrate before the CIT(A) about the specific

investment except stating that the purchased property was accounted in

the books of account. CIT(A) after perusing the balance sheet of the

assessee and discussing the various investments made by the assessee

came to a conclusion that the investment made is out of interest free

funds available with the assessee. While coming to the conclusion of

deleting the disallowance of interest u/s.36(1)(iii) of the Act, the CIT(A)

relied on the decision of Reliance Utilities and Power Ltd. 313 ITR 340.

For the sake of completeness of this order, we find it relevant to extract

the finding given by the CIT(A) in Para No.44.2 on this issue and the same

is reproduced here as under :

16 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

“44.2 . . . . . .I have perused the balance sheet of he appellant as on 31-03- 2010. Capital of the appellant stood at Rs.55,74,186/- as on 31-03-2010 whereas total investment stood at Rs.88,33,777/- as on 31-03-2010. The increase in the investment was mainly on account of investment in shares of M/s. Choudhari Cars Pvt. Ltd. of Rs.29,63,800/- and further investment in the firm M/s. Choudhari Automobiles which stood at Rs.46,31,842/- as on 31-03-2010. Investment in the firm is considered for the purpose of business as appellant had offered interest and remuneration of Rs.5,36,663/- from the firm under the head income from Business and Profession. However, other investments including the investment in the shares of M/s. Choudhari Cars Pvt. Ltd. are treated as personal investment not related to carrying out of business. In this manner, personal investment nor related to business of the appellant at Rs.42,01,935/- (Rs.88,33,777 – Rs.46,31,842) as against capital of Rs.55,74,186/-. Hon’ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment sand at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. Since the capital of appellant is more than the personal investments no disallowance of interest u/s.36(1)(iii) is called for. Addition of Rs.1,20,000/- is deleted and ground raised by the appellant is hereby partly allowed.”

and therefore, we do not find any reason to reverse the same. Accordingly,

Ground No.2 raised by the revenue is dismissed.

the FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08

raised by the assessee vide Ground No.2. We have upheld the decision of

CIT(A). Following the same reasoning, we delete ground No.3 raised by the

Revenue.

CIT(A) on account of income from other sources amounting to

Rs.1,06,535/- (being 50% of the disclosed agricultural income).

notice u/s.153A of the Act disclosed the gross agricultural income of

Rs.2,13,071/-, net agricultural income of Rs.1,25,556/- after reducing the

expenses of Rs.87,515/-. AO considering the gross sales of Agricultural

produce of Rs.2,13,071/- as net agricultural income and made addition of

Rs.1,06,535/- on estimation basis.

17 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

bill of cotton amounting to Rs.2,13,071/- but the CIT(A) has not admitted

the same as additional evidence. Assessee is not in appeal before us on

this decision of CIT(A). However, the CIT(A) having considered the net

agricultural income of Rs.1,25,556/- as disclosed by the assessee and

since no material was gathered during the course of search eventually

deleted the addition.

given by the CIT(A) in para No.46.2 on this issue and the same reads as

under :

“46.2 . . . . . . . .During the course of appellate proceedings, appellant had produced one sale bill of cotton of Rs.2,13,071/- issued by the Krishi Utpanna Bajar Samitee, Jamner, Dist. Jalgaon on 25-01-2010. Appellant has failed to show as to what prevented him to produce the bills before the AO. Therefore, additional evidence furnished before me is not admitted. However, no material was gathered during the course of search as well as during the course of assessment proceedings to disturb the accepted net agricultural income of Rs.1,25,556/- for the year under consideration. In case of concluded proceedings, additions not based on material gathered during the search or during the course of search assessment are not permitted on view of the findings of Hon’ble Bombay High Court in the case of Murli Agro Products (supra). Hence, addition made by the AO on adhoc and estimated basis is deleted and ground raised by the appellant is allowed.”

estimation basis and there was no incriminating material gathered during

the course of search. Therefore, we find the order of CIT(A) in deleting the

addition is reasonable. Thus, we uphold the order of CIT(A) and the

ground No.4 raised by the revenue is dismissed.

Rs.6,12,002/- made by the AO adopting the net profit rate of 6% rejecting

the assessee’s book results. AO claims that the assessee has not

produced the books of account before him. The arguments/counter

18 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

arguments are, similar to the Ground No.2 (Para 40 supra) already

adjudicated by us for A.Y. 2009-10.

Ground of appeal No.2 raised by the Revenue in A.Y. 2009-10. It is the

case of the assessee that the AO impounded the books and they were lying

with the AO for period of 2 months or more. We have already decided this

issue upholding the order of CIT(A) deleting the addition. Following the

same reasoning, we dismiss the ground raised by the revenue.

ITA No.634/PUN/2016 A.Y. 2011-12

“1. Whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing additional evidence under rule 46A whereas the assessee's case is not covered by the exceptions provided under rule 46A of the I.T. Rules.

19 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

additional evidences by the CIT(A) in violation of Rule 46A of the Income

Tax Rules, 1962.

the grounds of appeal raised in ITA No.629/PUN/2016 for A.Y. 2006-07.

We have already decided this issue against the revenue holding that CIT(A)

has not admitted any additional evidences at the back of the AO.

Therefore, on the same reasoning, the above grounds raised by the

revenue are dismissed.

receipt of Rs.1 Crore on account of sale of property to Shri Ashok

Vijaykumar Kotecha (M/s. Chaudhari Motors) which was deleted by the

CIT(A) admitting additional evidence.

Vijaykumar Kotecha admeasuring 7725.16 sq. mtrs, situated at Gat

No.277/2 at Sakegaon, Taluka Bhusawal, Dist. Jalgaon and received Rs.1

crore against the same. There was survey action at M/s. Chaudhari

Motors and draft copy of Sauda Pawti dated 11-10-2010 was impounded

by the AO. Assessee submitted before the AO that the amount of Rs.1

crore was received from Shri Anil Vijaykumar Kotecha on account of

proposed sale of land. However, the sale transaction could not materialize

and the said amount of Rs.1 crore was returned back to Shri Anil

Vijaykumar Kotecha. As per the assessee, the transaction was duly

reflected in the books of accounts. Copy of Sauda Pawti and the

20 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

cancellation document are on record. Assessee in his statement

u/s.132(4) also stated the abovementioned facts before the revenue

authorities. In response to notice, though Shri Anil Vijaykumar Kotecha

did not attend in person, he submitted the photocopy of Sauda Pawtis

cancelling the original transaction. However, AO proceeded to make

addition of Rs. 1 crore as income of the assessee as the assessee could not

prove the transaction beyond doubt.

pawtis dated 11-10-2010 and 14-10-2010 between the assessee and Shri

Ashok Kotecha, signed by both the parties. CIT(A) also perused the deed

of cancellation of the sauda Pawtis dated 16-02-2011. CIT(A) observed

that Shri Anil Kotecha offered the amount of Rs.1 crore as additional

income and the same was not denied by the AO. Eventually, CIT(A) came

to the conclusion that there is no doubt that amount of Rs.1 crore which

was advanced by the assessee to Shri Anil Kotecha was returned back to

him. There was no material before the CIT(A) to hold otherwise and the

addition of Rs.1 crore in the hands of the assessee was deleted.

before us.

authorities, we find it is the case of the assessee that he sold the land

situated at Gat No.277/2, Sakegaon, Taluka Bhusawal, Dist Jalgaon to

Shri Anil Kotecha for a consideration of Rs.1 crore. Against the said land

deal, Sauda pawti dated 11-10-2010 was entered into by the assessee and

Shri Anil Kotecha. However, the land deal was not materialized and the

amount of Rs.1 crore taken as advance was eventually returned back by

the deed of cancellation/Sauda pawti dated 14-10-2010. These facts have

21 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

been disclosed by the assessee before the AO u/s.132(4) of the Act. It is

the case of the revenue authorities that the assessee could not

satisfactorily prove the said transaction and therefore, Rs.1 crore should

be added as income of the assessee as unrecorded advance received

against sale of the property, thus prayed for reversing the order of CIT(A).

and 54.3 on this issue, we do not find any iota of fault in the reasoning

given by the CIT(A) deleting the addition of Rs.1 crore. While deleting the

addition, CIT(A) has considered all aspects; (1) Saudi pawtis dated 11-10-

2010 and 14-10-2010 (2) cancellation document (3) statement given by

the assessee u/s.132(4) (4) confirmation of Shri Anil Kotecha cancelling

the original transaction in response to the show cause notice issued by

the AO. All these documents clearly suggest that the amount of Rs.1 crore

was returned back to Shri Anil Kotecha. Regarding the revenue’s

allegation that the CIT(A) admitted certain additional evidences, we find

that no specific document was specified by the Ld. DR for the Revenue

before us which constitutes additional evidence. Regarding Sauda Pawti

and the deed of cancellation, we find they exist in the files of the AO.

Therefore, there is no violation of Rule 46A of the Income Tax Rules, 1962

in this regard. Therefore, we do not find any reason to reverse the order of

CIT(A). Thus, Ground No.2 raised by the revenue is dismissed.

the AO on account of short term capital gains.

situated at G.No.16 and 18 at Village Manyarkheda, Taluka and Dist.

Jalgaon for total consideration of Rs.24,22,000/- from Shri Ashwin

Jayantilal Shah and Shri Rajnikant Jayantilal Shah as per Kharadi Khat

22 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

dated 30-11-2009 which was subsequently transferred to M/s. Chaudhari

Cars Pvt. Ltd. On the said land, M/s. Chaudhari Cars Pvt. Ltd.

constructed a show room through bank finance and kept the property

under mortgage. Further, M/s. Chaudhari Cars Pvt. Ltd. issued 2,86,380

shares of Rs. 10/- value against the said transaction. In the process of

collateral security of the land, the registered valuer assessed the value of

the land at Rs.68,46,000/- vide valuation report dated 08-07-2010.

Against the AO’s proposal of considering Rs.68,46,000/- as the value of

land as against the declared value of Rs.29,63,800/-, assessee submitted

that the said figure of Rs.68,46,000/- is relevant for A.Y. 2011-12 and

applicability of provisions of section 50C should not be invoked in the

hands of the assessee but in the case of buyer of the land. Rejecting the

same, AO proceeded to tax the difference, i.e. Rs.68,46,000 –

Rs.29,63,800/- = Rs.38,82,200/- as income of the assessee u/s.50C of

the Act.

Relevant discussion given by the CIT(A) in Para No.55.3 is reproduced

hereunder for the sake of brevity :

“55.3. . . . . I find merit in the contention of the appellant as no evidence was found during the search to reveal that land was purchased by the appellant for consideration different from that mentioned on the registered document. Similarly, no evidence was found to reveal that appellant received consideration apart from shares of value of Rs.29,63,800/- on transfer of land. The AO has also not pointed out that consideration was less than the stamp duty valuation for the purpose. Merely on the basis of valuation done by the transferee company for the purpose of seeking finance from the bank, sale consideration cannot be assumed in the hands of transferor. There is specific provision u/s.50C of the Act for adopting deemed sale consideration which was not found applicable in this case. Addition made of Rs.38,82,200/- on the basis of valuation report was not justified and therefore deleted. Ground raised by the appellant is hereby allowed.”

CIT(A), we find the above discussion of the CIT(A) reveal that

Rs.68,46,000/- is not the value as per the records of stamp duty

23 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

authorities. The value of Rs.68,46,000/- is the figure as per the registered

valuer which is created for loan purpose and hence, it has no sanctity

under the provisions of section 50C of the Act. It is the finding of CIT(A)

that there is no evidence to demonstrate that the assessee received higher

consideration than that of Rs.29,63,800/-. On the facts of this case, we

are of the opinion that addition of Rs.38,82,200/- is unwarranted.

Ground No.3 raised by the revenue is accordingly dismissed.

Rs.3,60,000/- made by the AO on account of interest of purchase of land

and deleted by the CIT(A).

lakhs from M/s. Chaudhari Automobiles for making investment in land.

AO made the addition of Rs.3,60,000/- being the interest on the said loan

for the period of one year @12%. During the First Appellate proceedings,

assessee contended that the said interest is squared up on 01-04-2010

itself and no interest was paid to the company. Further, assessee also

stated the assessee has sufficient funds available and no borrowed funds

are used for non-business purposes. Considering the arguments of the

assessee and perusing the balance sheet of the assessee, the CIT(A) gave

relief to the assessee. Aggrieved by the order of CIT(A) the revenue is in

appeal.

issue, we find it relevant to extract the relevant finding given by the CIT(A)

in Para No.56.2 of this order and the same reads as under :

“55.2 . . . . . . .I have perused the balance sheet of the appellant as on 31- 03-2011 and capital of the appellant stood at Rs.1,08,66,956 whereas investment at Rs.1,26,66,329. Out of this investment, investment in the partnership firm M/s. Chaudhari Automobiles was Rs.81,85,790 and same is considered investment for the purpose of business as appellant had

24 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

disclose d income of Rs.5,46,781 being interest and remuneration from the firm under the head “Business and Profession”. Therefore, investment for non-business purpose stood at Rs.44,69,539/- which is less than appellant’s capital of Rs.1,08,66,956. Hon’ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. In view of the decision the capital of appellant is held to be invested for personal investment and consequently no borrowed funds can be considered to have been used for non-business purpose. Therefore, no disallowance of interest was called for. Addition made of Rs.3,60,000 is directed and the ground raised by the appellant is hereby allowed.”

01-04-2010 relevant to A.Y. 2011-12. No interest is accrued in principle

due to the said squaring up of the loan. Notwithstanding the same,

assessee has a strong capital base to the tune of Rs.1.09 crores and the

presumption laid down by the jurisdictional High Court in the case of

Reliance Utilities and Power Ltd. (supra) that no funds are utilized for

payments towards investment in the land. Considering the above

discussion given by the CIT(A) while deleting the addition, we find the

order of CIT(A) is a well reasoned one and therefore, it does not call for any

interference.

on FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08

vide Ground No.2. We have already decided this issue against the revenue

and upheld the decision of CIT(A). Following the same reasoning, we

delete ground No.5 raised by the Revenue in this assessment year.

agricultural income is identical to the Ground raised by the Revenue in

A.Y. 2010-11 vide Ground No.4. We have already decided this issue

against the revenue while adjudicating Ground No.4 of the revenue.

Following the same reasoning, we delete ground No.6 raised by the

Revenue in this assessment year.

25 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary

profit @6% is identical to Ground of appeal No.2 raised by the Revenue in

A.Y. 2009-10. We have already decided this issue against the revenue

upholding the order of CIT(A) deleting the addition. Following the same

reasoning, we dismiss the ground No.7 raised by the revenue.

Order pronounced in the open court on this 17th day of January,

2018.

Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य

पुणे Pune; �दनांक Dated : 17th January, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत

अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-12, Pune 4. CIT-12, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” 5. Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार

स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune