THE ACIT CENTRAL-3, INDORE vs. JARNALBEER SINGH BHATIA, KHANDWA

आदेश / O R D E R

Per Bench:

This bunch of 11 appeals by assessee and revenue is directed against a consolidated appeal-order dated 30.03.2023 passed by learned Commissioner of Income-tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn

Page 1 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

arises out of a consolidated assessment-order dated 30.12.2019 passed by ACIT (Central)-3, Indore [“AO”] u/s 153A/143(3) of the Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2013-14 to 2018-19.

Assessee’s appeals: IT(SS)A No.19/Ind/2023 – A.Y. 2013-14: 1. That on the facts and in the circumstances of the case, Ld. AO and Ld. CIT(A) has erred in making notional addition in the form of cash loans amounting to Rs. 50,05,000/- as peak of unexplained investment u/s 69 of Income-tax Act, 1961. 2. That on the facts and in the circumstances of the case, Ld. AO and Ld. CIT(A) has erred in making notional addition in the form of interest on cash loans amounting to Rs. 36,000/- as undisclosed interest income.

Page 2 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Page 3 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

ITA No. 226/Ind/2023 – A.Y. 2018-19: 1. That on the facts and in the circumstances of the case, Ld. AO and Ld. CIT(A) has erred in making notional addition in the form of interest on cash loans amounting to Rs. 27,03,934/- as undisclosed interest income.

a) Sufficient opportunity has not been provided to the AO to submit his remand report ;

b) Letter no. 974 dated 07.12.2022 of the Ld. CIT(A), calling for remand report to be submitted on or before 22.12.2022, was itself received by AO through speed post on 26.12.2022?

c) Only application of the assessee for acceptance of additional evidence (5 pages) was attached to the letter of Ld. CIT(A), but the additional evidence proposed to be admitted (i.e. documents, such as copies of ledger accounts of freight expenses, etc.) were not sent/attached?

d) The AO was busy in time barring assessments and an adjournment was sought till 31.01.2023?

e) In another case of Shri Manoj Agarwal, the Ld. CIT(A) wrote twice during/around the same months to prioritize the remand report, which led the AO to focus on the remand report in the case of Shri Manoj Agarwal taking it to be a priority work, in addition to his office and assessment work?

f) Without prejudice to the above, the letter dated 07.12.2022 of the Ld. CIT(A), while directing to “..examine/verify the documents and submit your report…” , did not specifically indicate that inquiry needs to be made in terms of section 250(4) of the Income-tax Act, 1961, and therefore the directions of the Ld. CIT(A) were incomplete?

Page 4 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

a) As per facts on record, noted in the Assessment Order, the lender company was established to be a paper company?

b) In response to commission u/s 131(1)(d), the ACIT, Satna has reported that no company by the name of Vedic Commotrade Pvt. Ltd. is operational at the registered address and the summons issued to the present Director of the said company, i.e. Shri Laxmi Kant Patel elicited no response? c) Without prejudice to the above, the assessee denied during the course of assessment proceedings to have taken such loan?

d) Without prejudice to the above, additional evidence was admitted without giving adequate opportunity to the AO?

c) Without prejudice to the above, there is non-compliance of section 194C(7) of the Income-tax Act by the assessee since the assessee failed to furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within prescribed time as envisaged in section 194C(7)?

d) Without prejudice to the above, provisions of the section 194C(6) and 194C(7) need to be read together and once there is violation of section 194C disallowance u/s 40(a)(ia) is attracted ? IT(SS)A No.25/Ind/2023 – A.Y. 2014-15: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in accepting the additional evidence filed by assessee during appellate proceedings and deciding the case without the remand report of the AO, ignoring that :

a) Sufficient opportunity has not been provided to the AO to submit his remand report;

Page 5 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

b) Letter no. 974 dated 07.12.2022 of the Ld. CIT(A), calling for remand report to be submitted on or before 22.12.2022, was itself received by AO through speed post on 26.12.2022?

c) Only application of the assessee for acceptance of additional evidence (5 pages) was attached to the letter of Ld. CIT(A), but the additional evidence proposed to be admitted (i.e. documents, such as copies of ledger accounts of freight expenses, etc.) were not sent/attached?

d) The AO was busy in time barring assessments and an adjournment was sought till 31.01.2023?

e) In another case of Shri Manoj Agarwal, the Ld. CIT(A) wrote twice during/around the same months to prioritize the remand report, which led the AO to focus on the remand report in the case of Shri Manoj Agarwal taking it to be a priority work, in addition to his office and assessment work? f) Without prejudice to the above, the letter dated 07.12.2022 of the Ld. CIT(A), while directing to “..examine/verify the documents and submit your report…” , did not specifically indicate that inquiry needs to be made in terms of section 250(4) of the Income-tax Act, 1961, and therefore the directions of the Ld. CIT(A) were incomplete?

a) The assessee was liable to deduct TDS on such expenses and has failed to do so?

b) Without prejudice to the above, additional evidence was admitted without giving adequate opportunity to the AO?

c) Without prejudice to the above, there is non-compliance of section 194C(7) of the Income-tax Act, 1961, by the assessee since the assessee failed to furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within prescribed time as envisaged in section 194C(7)?.

d) Without prejudice to the above, provisions of the section 194C(6) and 194C(7) need to be read together, and once there is violation of section 194C(7) disallowance u/s 40(a)(ia) is attracted? IT(SS)A No.26/Ind/2023 – A.Y. 2016-17: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in accepting the additional evidence filed by assessee

Page 6 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

during appellate proceedings and deciding the case without the remand report of the AO, ignoring that :

a) Sufficient opportunity has not been provided to the AO to submit his remand report ;

b) Letter no. 974 dated 07.12.2022 of the Ld. CIT(A), calling for remand report to be submitted on or before 22.12.2022, was itself received by AO through speed post on 26.12.2022 ?

c) Only application of the assessee for acceptance of additional evidence (5 pages) was attached to the letter of Ld. CIT(A), but the additional evidence proposed to be admitted (i.e. documents, such as copies of ledger accounts of freight expenses, etc.) were not sent/attached ?

d) The AO was busy in time barring assessments and an adjournment was sought till 31.01.2023 ? e) In another case of Shri Manoj Agarwal, the Ld. CIT(A) wrote twice during/around the same months to prioritize the remand report, which led the AO to focus on the remand report in the case of Shri Manoj Agarwal taking it to be a priority work, in addition to his office and assessment work ?

f) Without prejudice to the above, the letter dated 07.12.2022 of the Ld. CIT(A), while directing to “..examine/verify the documents and submit your report…” , did not specifically indicate that inquiry needs to be made in terms of section 250(4) of the Income-tax Act, 1961, and therefore the directions of the Ld. CIT(A) were incomplete ?

a) Assessee has not established any nexus between the cash loans of different years ?

b) Assessee has not provided any justification for such relief ?

a) In the case law relied by him Abeeson Hotels P.Ltd., (2004) 191 CTR 263 (M P), the Hon'ble Court has granted relief when DVO’s valuation is within 10% of the assessee’s valuation, while the Ld. CIT(A) has compared his

Page 7 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

own valuation (after deducting all possible reliefs) without the assessee ‘s valuation and, therefore, the relief based on the case law is erroneous ?

b) Even while quoting the DVO’s report on para 3.3.5 of Ld. CIT(A) order regarding the superior structure/specifications of the property under consideration, giving following reliefs is contradictory :-

(i) Relief of Rs. 48,07,238/- (para 3.3.5) ignoring that the ‘furniture and fixtures’ involve completely different items as dealt by Ld. CIT(A) at para 3.4 ?

(ii) Relief given based on use by DVO of CPWD rates, as compared to the lower State PWD rates ?

(iii) Relief given on architect fees and consultancy charges and approval of drawings ?

c) DVO is a specialized agency and, accordingly, an accomplished expert in his area and his recommendations cannot be brushed aside?

a) The assessee was liable to deduct TDS on such expenses and has failed to do so ?

b) Without prejudice to the above, additional evidence was admitted without giving adequate opportunity to the AO ? c) Without prejudice to the above, there is non-compliance of section 194C(7) of the Income-tax Act by the assessee since the assessee failed to furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within prescribed time as envisaged in section 194C(7) ?

d) Without prejudice to the above, provisions of the section 194C(6) and 194C(7) need to be read together and once there is violation of section 194C disallowance u/s 40(a)(ia) is attracted ? 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 25,00,000/- made for unexplained cash credits u/s 68 of IT Act for gifts received from his mother Smt. Manjeet Kaur Bhatia, as source of the gift remained unexplained and the creditworthiness of donor and genuineness of transaction was not established? IT(SS)A No.27/Ind/2023- A.Y. 2017-18:

Page 8 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

a) Sufficient opportunity has not been provided to the AO to submit his remand report ;

b) Letter no. 974 dated 07.12.2022 of the Ld. CIT(A), calling for remand report to be submitted on or before 22.12.2022, was itself received by AO through speed post on 26.12.2022 ?

c) Only application of the assessee for acceptance of additional evidence (5 pages) was attached to the letter of Ld. CIT(A), but the additional evidence proposed to be admitted (i.e. documents, such as copies of ledger accounts of freight expenses, etc.) were not sent/attached ? d) The AO was busy in time barring assessments and an adjournment was sought till 31.01.2023 ?

e) In another case of Shri Manoj Agarwal, the Ld. CIT(A) wrote twice during/around the same months to prioritize the remand report, which led the AO to focus on the remand report in the case of Shri Manoj Agarwal taking it to be a priority work, in addition to his office and assessment work ?

f) Without prejudice to the above, the letter dated 07.12.2022 of the Ld. CIT(A), while directing to “..examine/verify the documents and submit your report…” , did not specifically indicate that inquiry needs to be made in terms of section 250(4) of the Income-tax Act, 1961, and therefore the directions of the Ld. CIT(A) were incomplete ? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition, that was made based on diaries seized during search proceedings u/s 132 of the IT Act, for cash loan advanced of Rs. 1,15,05,695/-, by allowing telescoping for cash loans advanced by the assessee in earlier years, ignoring that : a) Assessee has not established any nexus between the cash loans of different years ?

b) Assessee has not provided any justification for such relief ? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 26,29,149/- made in A.Y. 2017-18 based on report for unexplained investment u/s 69 of the IT Act in construction of house, without appreciating that : a) In the case law relied by him Abeeson Hotels P.Ltd., (2004) 191 CTR 263 (MP), the Hon'ble Court has granted relief when DVO’s valuation is within

Page 9 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

10% of the assessee’s valuation, while the Ld. CIT(A) has compared his own valuation (after deducting all possible reliefs) without the assessee ‘s valuation and, therefore, the relief based on the case law is erroneous ?

b) Even while quoting the DVO’s report on para 3.3.5 of Ld. CIT(A) order regarding the superior structure/specifications of the property under consideration, giving following reliefs is contradictory :-

(i) Relief of Rs. 48,07,238/- (para 3.3.5) ignoring that the ‘furniture and fixtures’ involve completely different items as dealt by Ld. CIT(A) at para 3.4 ?

(ii) Relief given based on use by DVO of CPWD rates, as compared to the lower State PWD rates ?

(iii) Relief given on architect fees and consultancy charges and approval of drawings ?

c) DVO is a specialized agency and, accordingly, an accomplished expert in his area and his recommendations cannot be brushed aside ?

b) Without prejudice to the above, additional evidence was admitted without giving adequate opportunity to the AO ? c) Without prejudice to the above, there is non-compliance of section 194C(7) of the Income-tax Act by the assessee since the assessee failed to furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within prescribed time as envisaged in section 194C(7) ?

d) Without prejudice to the above, provisions of the section 194C(6) and 194C(7) need to be read together and once there is violation of section 194C disallowance u/s 40(a)(ia) is attracted ?

Page 10 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

ITA No. 228/Ind/2023 – A.Y. 2018-19:

b) Letter no. 974 dated 07.12.2022 of the Ld. CIT(A), calling for remand report to be submitted on or before 22.12.2022, was itself received by AO through speed post on 26.12.2022 ?

c) Only application of the assessee for acceptance of additional evidence (5 pages) was attached to the letter of Ld. CIT(A), but the additional evidence proposed to be admitted (i.e. documents, such as copies of ledger accounts of freight expenses, etc.) were not sent/attached ?

d) The AO was busy in time barring assessments and an adjournment was sought till 31.01.2023 ?

e) In another case of Shri Manoj Agarwal, the Ld. CIT(A) wrote twice during/around the same months to prioritize the remand report, which led the AO to focus on the remand report in the case of Shri Manoj Agarwal taking it to be a priority work, in addition to his office and assessment work ?

f) Without prejudice to the above, the letter dated 07.12.2022 of the Ld. CIT(A), while directing to “..examine/verify the documents and submit your report…” , did not specifically indicate that inquiry needs to be made in terms of section 250(4) of the Income-tax Act, 1961, and therefore the directions of the Ld. CIT(A) were incomplete ?

a) assessee has not established any nexus between the cash loans of different years ? b) assessee has not provided any justification for such relief ?

Page 11 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

a) In the case law relied by him Abeeson Hotels P.Ltd., (2004) 191 CTR 263 (MP), the Hon'ble Court has granted relief when DVO’s valuation is within 10% of the assessee’s valuation, while the Ld. CIT(A) has compared his own valuation (after deducting all possible reliefs) without the assessee’s valuation and, therefore, the relief based on the case law is erroneous ?

b) Even while quoting the DVO’s report on para 3.3.5 of Ld. CIT(A) order regarding the superior structure/specifications of the property under consideration, giving following reliefs is contradictory :-

(i) Relief of Rs. 48,07,238/- (para 3.3.5) ignoring that the ‘furniture and fixtures’ involve completely different items as dealt by Ld. CIT(A) at para 3.4 ?

(ii) Relief given based on use by DVO of CPWD rates, as compared to the lower State PWD rates ?

(iii) Relief given on architect fees and consultancy charges and approval of drawings ?

c) DVO is a specialized agency and, accordingly, an accomplished expert in his area and his recommendations cannot be brushed aside

Page 12 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

amounting to Rs. 1,93,63,082/- u/s 40(a)(ia) of Income-tax Act, 1961, for non- deduction of TDS on freight expenses by assessee, ignoring that :

a) The assessee was liable to deduct TDS on such expenses and has failed to do so ?

b) Without prejudice to the above, additional evidence was admitted without giving adequate opportunity to the AO ?

c) Without prejudice to the above, there is non-compliance of section 194C(7) of the Income-tax Act by the assessee since the assessee failed to furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within prescribed time as envisaged in section 194C(7) ?

d) Without prejudice to the above, provisions of the section 194C(6) and 194C(7) need to be read together and once there is violation of section 194C disallowance u/s 40(a)(ia) is attracted ?

No. Issue A.Y. Assessee’s Revenue’s Ground No. Ground No. 1 Unexplained investment in the form of cash loans 2013-14 1,2,3 and notional interest thereon u/s 69 2014-15 1,2 2015-16 1,2 2016-17 1,2,3 2 2017-18 1,3 2 2018-19 1,3 2 2 Unexplained investment in jewellery u/s 69 2017-18 2 3 Unexplained money in lockers u/s 69A 2018-19 2 4 Admission of additional evidences by CIT(A) 2013-14 1 2014-15 1 2016-17 1 2017-18 1 2018-19 1 5 Unexplained cash credit u/s 68 from M/s Vedic 2013-14 2

Page 13 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Commotrade Pvt. Ltd. 6 Disallowance of freight expenses u/s 40(a)(ia) 2013-14 3

2014-15 2 2016-17 4

2017-18 5

2018-19 7 7 Unexplained investment in construction of house 2016-17 3 u/s 69 2017-18 3 2018-19 3

8 Unexplained investment in furniture & fixture 2017-18 4

2018-19 4 9 Unexplained cash credit u/s 68 related to gift from 2016-17 5 Smt. Manjeet Kaur Bhatia 2018-19 6

10 Unexplained cash credit u/s 68 related to gift from 2018-19 5 Smt. Mandeep Kaur Bhatia

We shall proceed to adjudicate these issues one by one in subsequent discussions.

Issue No. 1 – Unexplained investment in cash loans:

AY Additions made by AO Additions upheld by CIT(A) Cash loans Interest income Cash loans Interest income 2013-14 50,05,000 36,000 50,05,000 36,000 2014-15 -- 9,34,191 -- 9,34,191 2015-16 -- 9,67,815 -- 9,67,815 2016-17 3,00,45,585 8,05,695 2,31,02,759 8,05,695

Page 14 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

2017-18 1,15,05,695 42,71,104 -- 42,71,104 2018-19 2,94,28,250 27,03,934 -- 27,03,934

Page 15 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

“3.2.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The Ld. AO has made person wise additions to whom unaccounted cash loan was advanced and undisclosed interest income earned from them. The appellant during assessment proceedings as well as during appellate proceedings has strongly contended that the impunged seized material 'Radiant Deluxe Account Book' inventoried as BS-1 does not belong to him or his family member or any of his business establishment. He further stated that he is usually visited by 150-200 people including people of transport community, labourers which includes labours of Gurukripa Warehouse which is leased out to M/s Ambuja Cement and Venkatesh Mercantile and the seized ledger account i.e. BS-1 may have pertained to them and for which no adverse inference can be drawn on appellant. A similar stand has also been taken by appellant while giving statement under oath u/s 132(4) of the Act. The appellant by taking an alternate plea, during appellate proceedings, stated that the Ld AO has erred in making additions in different assessment years without giving benefit of telescoping. He further stated that the unexplained income of one year which is part of unexplained investment in later part of year and without there being anything contrary on record, it may be treated that the unexplained investment has been made through unexplained income and in such cases the peak theory must be applied. 3.2.3. After considering claim of the appellant and findings of the Ld. AO, I find that the BS-1 found and seized during the course of search pertained to appellant for the reason clearly mentioned by the Ld. AO in para 7.19 of the assessment order. Another documents BS-3 was found and seized during the course of search. The appellant in his statement recorded u/s 132(4) in reply to Q.No 8 admitted that BS-3 belongs to him and contain transactions of freight charges paid for loading and unloading of Ambuja, Orient and Perfect cement. The seized ledger account (BS-3) mentions loan/interest/repayment of loan transaction with M/s Balaji Construction, M/s R.K.V.K, Shri Sunil Gupta, Shri Kiran Bhai, M/s Hindustan Abhikaran, Shri Agniwash Soni, M/s Chadha Tyre and M/s Uttam Seeds. These transactions are fully recorded in seized ledger account BS-1 which has been denied by the appellant to have any relation with. Thus, there is clear nexus between the both ledger accounts. Also, statement of employees of appellant were also recorded on oath wherein they have also confirmed that the loan transaction belongs to appellant. However, the appellant before the Ld. AO have filed an affidavit contradicting the earlier statement which in present sets of facts discussed herein above, is nothing but an afterthought. Therefore, the seized ledger account BS-1 belonged to appellant and so the transactions mentioned therein. 3.2.4. Since, the appellant is the owner of the document BS-1, the moot question arises that whether the entire transactions mentioned therein can be added in the hands of appellant even when there is clear mention of repayment of loan. The ledger account mentions opening loan balance/fresh loan given, interest charged, interest repaid and loan repaid. However, the Ld. AO by applying pick and choose method has only picked opening loan balance, fresh loan given and interest earned by appellant, however, has completely ignored the other transactions viz. loan repayment and interest received. The Ld. AO cannot pick and choose certain transaction on his free will and ignore other key transactions benefiting the appellant. The Ld. AO ought to have considered the repayment transaction before making the impunged addition and should

Page 16 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

have allowed proper set-off or telescoping effect of these transactions. Thus, after considering the nature of transactions appearing in the seized material, telescoping benefit should have been allowed by the Ld. AO.

3.2.5. Furthermore and most importantly the appellant failed to explain the source of cash loan and have also not shown interest income earned thereon while filing return of income. Here, it is worth mentioning that the loans given by appellant have also been repaid subsequently with interest and this fact is apparent from the seized ledger account and was not disputed by the Ld. AO. Since, there are evidence of advancement of loans by appellant for short period of time and the same were repaid with interest subsequently, therefore, making addition of entire loan and interest amount will tantamount to double addition and therefore, the only remedy to give telescopic benefit. As evident from seized diary the cash loans were given for a short period of time which were repaid subsequently and therefore, amounts including interest were available with the appellant which were utilized in providing further cash loans in the same and subsequent years. Thus, it is now abundantly clear that correct unaccounted income can be derived by giving telescopic effect. However, the appellant has taken alternate plea, though not accepted that peak credit theory should be adopted for ascertaining unexplained investment. The appellant has summarized all the transactions in a table and worked out peak credit. The same is reproduced hereunder:

Date (MM/DD/YYYY Ledger DR. Cr. Balance Remarks Total 4/1/2016 Opening 30,045,585 Opening Balance Chadha 4/5/2016 Tyre 50,000 29,995,585 Int Jama Hindustan 4/5/2016 Abhikaran 200,330 29,795,255 Int Jama

4/5/2016 Sunil Gupta 200,000 29,595,255 Int Jama Chadha Int Jama 03.01.16 4/6/2016 Tyre 18,250 29,577,005 To 31.03.2016 Uttam 4/6/2016 Seeds 500,000 30,077,005 Agniwash Int Jama 18.01.16 4/7/2016 Soni 50,000 30,027,005 To 18.03.16

4/8/2016 Knw Oils 2,000,000 28,027,005 Return Int Jama 28.01.16 4/10/2016 Kiran Bhai 30,000 27,997,005 To 28.03.16

4/11/2016 Sunil Gupta 157,000 27,840,005 Int Jama Agniwash 4/16/2016 Soni 10,000 27,830,005 Int Jama Int Jama 21.03 To 4/25/2016 R.K.V.K 37,500 27,792,505 21.04 Shree Surjeet Singh 4/30/2016 Bhatia 57,000 27,735,505 Int Pete Jama Hindustan 5/4/2016 Abhikaran 1,000,000 26,735,505 Cash Jama

5/6/2016 Uttam Seeds 1,000,000 27,735,505

Page 17 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

5/6/2016 Uttam Seeds 1,000,000 28,735,505 Hindustan 5/7/2016 Abhikaran 1,000,000 27,735,505 Cash Jama

5/23/2016 R.K.V.K 37,500 27,698,005 Int Jama

6/6/2016 Uttam Seeds 36,700 27,661,305

6/7/2016 Sunil Gupta 178,000 27,483,305 Int A/c Jama Agniwash Int Jama 18.04 To 6/8/2016 Soni 30,000 27,453,305 18.05 Agniwash Int Jama 18.05 To 6/18/2016 Soni 30,000 27,423,305 18.06

6/22/2016 R.K.V.K 37,500 27,385,805 Int Jama

6/27/2016 R.K.V.K 1,500,000 28,885,805 Cash Naame Hindustan 6/30/2016 Abhikaran 200,000 28,685,805 Int A/c Jama

6/30/2016 Sunil Gupta 200,000 28,485,805 Int & Jama

6/30/2016 Sunil Gupta 1,000,000 27,485,805 Cash Jama

6/30/2016 R.K.V.K 1,000,000 28,485,805 Cash Naame Hindustan 7/1/2016 Abhikaran 78,000 28,407,805 Int A/c Jama Chadha 7/3/2016 Tyre 68,250 28,339,555 Int A/c Jama Hindustan 7/8/2016 Abhikaran 1,000,000 27,339,555 Cash Jama Int A/c Jama 28.03 7/9/2016 Kiran Bhai 45,000 27,294,555 To 28.06.16 Hindustan 7/30/2016 Abhikaran 1,000,000 26,294,555 Cash Jama

8/1/2016 Uttam Seeds 75,000 26,219,555

8/10/2016 R.K.V.K 88,500 26,131,055 Int A/c Jama Agniwash 8/16/2016 Soni 50,000 26,081,055 Int Jama Hindustan 9/6/2016 Abhikaran 1,000,000 25,081,055 Nagdi Jama

9/8/2016 Sunil Gupta 336,000 24,745,055 Int Received

10/1/2016 Uttam Seeds 75,000 24,670,055 Agniwash 10/2/2016 Soni 40,000 24,630,055 Intt A/c Jama Hindustan 10/2/2016 Abhikaran 199,334 24,430,721 Int A/c Jama Chadha Int Jama July To 10/3/2016 Tyre 68,250 24,362,471 Sep

10/4/2016 Kiran Bhai 45,000 24,317,471 Int A/c Jama

Page 18 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

10/4/2016 R.K.V.K 150,000 24,167,471 Int A/c Jama Hindustan 10/10/2016 Abhikaran 250,000 23,917,471 Cash Jama Hindustan 10/12/2016 Abhikaran 250,000 23,667,471 Cash Jama

10/14/2016 R.K.V.K 2,500,000 26,167,471 Cash Naame

12/1/2016 Uttam Seeds 2,600,000 23,567,471

12/7/2016 R.K.V.K 208,750 23,358,721 Int Received Agniwash 12/18/2016 Soni 60,000 23,298,721 Cheque Rs. Hindustan 12/20/2016 Abhikaran 500,000 23,798,721 Cash Naame Hindustan 12/24/2016 Abhikaran 250,000 24,048,721 Cash Naame Hindustan 12/31/2016 Abhikaran 250,000 24,298,721 Cash Naame Hindustan 12/31/2016 Abhikaran 154,420 24,144,301 Int A/c Jama

1/8/2017 R.K.V.K 112,500 24,031,801 Int A/c Jama Chadha Int A/c Jama Sep 1/11/2017 Tyre 68,250 23,963,551 To Dec

1/14/2017 Kiran Bhai 30,000 23,933,551 Int A/c Jama

1/19/2017 Sunil Gupta 336,000 23,597,551 Int Received

2/3/2017 R.K.V.K 112,500 23,485,051 Int A/c Jama Ashok 2/10/2017 Kothari 2,000,000 21,485,051 Int Jama Hindustan 3/1/2017 Abhikaran 900,000 20,585,051 Cash Received

3/1/2017 Uttam Seeds 1,000,000 19,585,051 Hindustan Cash Received Am 3/7/2017 Abhikaran 270,000 19,315,051 + Int

3/8/2017 Sunil Gupta 1,000,000 18,315,051 Cash Received

3/8/2017 R.K.V.K 112,500 18,202,551 Int A/c Jama

3/10/2017 Kiran Bhai 45,000 18,157,551 Int A/c Jama Agniwash 3/11/2017 Soni 60,000 18,097,551 Int A/c Jama

3/16/2017 Sunil Gupta 324,000 17,773,551 Int A/c Jama

4/11/2017 Sunil Gupta 1,500,000 16,273,551 Cash Received

4/11/2017 R.K.V.K 1,500,000 17,773,551 Cash Naame

4/11/2017 R.K.V.K 112,500 17,661,051 Int A/c Jama

Page 19 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Hindustan 4/12/2017 Abhikaran 500,000 18,161,051 Cash Paid Chadha 4/15/2017 Tyre 68,250 18,092,801 Int A/c Jama

5/3/2017 R.K.V.K 5,000,000 13,092,801 Cash Received

5/17/2017 R.K.V.K 127,500 12,965,301 Int A/c Jama

6/12/2017 R.K.V.K 135,000 12,830,301 Int A/c Jama

6/14/2017 R.K.V.K 1,000,000 13,830,301 Cash Naame Hindustan 7/5/2017 Abhikaran 163,166 13,667,135 Int A/c Jama

7/7/2017 R.K.V.K 143,500 13,523,635 Int A/c Jama

7/10/2017 Sunil Gupta 206,250 13,317,385 Int A/c Jama Chadha 7/12/2017 Tyre 68,250 13,249,135 Int A/c Jama Agniwash 7/16/2017 Soni 180,000 13,069,135 Int A/c Jama

7/19/2017 Kiran Bhai 30,000 13,039,135 Int Jama

8/4/2017 Uttam Seeds 2,500,000 15,539,135 Cash Nagdi

8/5/2017 R.K.V.K 155,000 15,384,135 Int A/c Naame

8/19/2017 Kiran Bhai 30,000 15,354,135 Int Jama

9/5/2017 R.K.V.K 1,300,000 14,054,135 Nagdi Jama

9/7/2017 R.K.V.K 800,000 13,254,135 Cash Received

9/8/2017 R.K.V.K 1,400,000 11,854,135 Cash Received

9/8/2017 Uttam Seeds 3,500,000 15,354,135 Cash Paid

9/9/2017 R.K.V.K 1,400,000 13,954,135 Cash Received

9/9/2017 Uttam Seeds 1,500,000 15,454,135 Cash Paid

9/12/2017 R.K.V.K 100,000 15,354,135 Cash Received

9/12/2017 R.K.V.K 91,050 15,263,085 Int Jama

9/18/2017 Sunil Gupta 3,000,000 12,263,085 Nagdi Jama (L Me) Hindustan 9/25/2017 Abhikaran 165,000 12,098,085 Int A/c Jama Hindustan 10/9/2017 Abhikaran 500,000 11,598,085 Cash Received Hindustan 10/18/2017 Abhikaran 1,500,000 10,098,085 Cash Received Hindustan 10/21/2017 Abhikaran 500,000 9,598,085 Cash Received

Page 20 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Chadha 10/23/2017 Tyre 68,250 9,529,835 Int Jama

10/25/2017 R.K.V.K 2,000,000 11,529,835 Cash Paid

10/26/2017 Sunil Gupta 190,000 11,339,835 Received

10/26/2017 Uttam Seeds 107,709 11,232,126 Int Received

10/28/2017 Kiran Bhai 11,232,126 Int A/c Naame Hindustan 10/29/2017 Abhikaran 500,000 10,732,126 Cash Received Hindustan 10/30/2017 Abhikaran 700,000 10,032,126 Cash Received

10/30/2017 R.K.V.K 500,000 10,532,126 Cash Paid

10/31/2017 Kiran Bhai 30,000 10,502,126 Int Received

10/31/2017 R.K.V.K 500,000 11,002,126 Cash Paid Hindustan 11/10/2017 Abhikaran 700,000 10,302,126 Cash Received

11/10/2017 R.K.V.K 800,000 11,102,126 Cash Paid Hindustan 11/11/2017 Abhikaran 300,000 10,802,126 Cash Received

11/11/2017 R.K.V.K 300,000 11,102,126 Cash Paid Hindustan 11/13/2017 Abhikaran 800,000 10,302,126 Cash Received

11/13/2017 R.K.V.K 900,000 11,202,126 Cash Paid Hindustan 11/17/2017 Abhikaran 48,900 11,153,226 Int A/c Jama

12/2/2017 R.K.V.K 3,600,000 14,753,226 Cash Paid

12/8/2017 R.K.V.K 1,400,000 16,153,226 Cash Paid

12/13/2017 Kiran Bhai 30,000 16,123,226 Int A/c Jama

12/20/2017 Sunil Gupta 1,000,000 15,123,226 Received

12/20/2017 R.K.V.K 69,900 15,053,326 Int Received

1/11/2018 R.K.V.K 150,000 14,903,326 Int Jama Int A/c Jama 28.10 1/13/2018 Kiran Bhai 15,000 14,888,326 To 28.11

1/13/2018 Kiran Bhai 500,000 14,388,326 Cash Nagdi Jama

1/14/2018 Sunil Gupta 89,167 14,299,159

The appellant submitted that peak credit comes to Rs. 3,00,77,005/- on 06.04.2016. This amount may be considered as unexplained investment in advancing cash loan and hence, no other addition is required to be made. Above submission has been made by

Page 21 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the appellant subject to its earlier submission, wherein, he denied the ledger BS-1. I do not agree with the view of the appellant. In the facts and circumstances as discussed earlier, quantum of unexplained investment after taking into consideration of undisclosed interest income can only be derived correctly by giving telescopic effect to the income and resultant investment in different assessment years. Considering this discussion, quantum of unexplained investment and undisclosed interest income for the various years is worked out as under:

(i) On perusal of impunged diary and loose papers, as tabulated in para 7.20 of the assessment order, the appellant had made following investment and had earned interest thereon:-

S.No Name of the party AY Cash loan given Interest (opening + fresh) (In earned (In Rs.) Rs.) 1 Balaji Construction 2013-14 2502500 18000 2014-15 450000 2015-16 454450 2016-17 377947 2017-18 377947 2 Ashok Kothari 2013-14 2502500 18000 2014-15 484191 2015-16 513365 2016-17 427748 2017-18 427748 3 Uttam Seeds 2017-18 2500000 186750 2018-19 7500000 388959 4 Chhadha Tyres 2016-17 1368250 2017-18 273000 2018-19 1368250 204750 5 Agniwash Soni 2016-17 2060000 2017-18 330000 2018-19 2060000 270000 6 Hindustan Abhikaran 2016-17 10700335 2017-18 1000000 801754 2018-19 500000 377066 7 Kiran Bhai 2016-17 1030000 2017-18 180000 2018-19 120000 8 Gurukripa Lab 2017-18 1700000 9 Sunil Gupta 2016-17 9357000 2017-18 1374000 2018-19 3000000 485417 10 Keshav Fibre 2018-19 2500000 28292 11 Surjit Singh Bhatia 2016-17 1030000 2017-18 183350 12 Namit Lubricant 2017-18 500000 45000 13 RKVK 2016-17 2500000 2017-18 5000000 897250 2018-19 12500000 829450 14 KNW 2016-17 2000000

(ii) Hence the total investment and interest earned there from is as under:-

Page 22 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

AY Cash loan (opening balance + Interest earned (In Rs.) fresh) (In Rs.) 2013-14 5005000 36000 2014-15 0 934191 2015-16 0 967815 2016-17 30045585 805695 2017-18 11505695 4271104 2018-19 29428250 2703934 (iii) Therefore, after considering the details mentioned in the assessment order, seized material and telescopic effect, the addition of unexplained investment and interest income in each A.Y. is worked out as under:-

A.Y. Principal Interest Availability of Fresh fund Addition Amount (In income Fund at the introduced: of Rs.) earned (In year end (In Addition of Interest Rs.) Rs.) principal earned amount to be (In Rs.) made after telescopic effect (In Rs.)

2013-14 5005000 36000 5041000 5005000 36000 2014-15 0 934191 5975191 0 934191 2015-16 0 967815 6943006 0 967815 2016-17 30045585 805695 30851280 23102579 805695 2017-18 11505695 4271104 35122384 -19345585 4271104 2018-19 29428250 2703934 -5694134 2703934

From the above, it is abundantly clear that the appellant has advanced initial amount of Rs. 50,05,000/- as loan on interest and earned interest income of Rs. 36,000/- in AY 2013-14. Thus, the fund of Rs. 50,41,000/-(Rs.50,05,000 + Rs.36,000) was available with the appellant for lending in AY 2014-15. In AY 2014-15, the appellant earned interest income of Rs. 9,34,191/- and thus, at the year end total fund of Rs. 59,75,191/- (Rs. 50,41,000 + Rs. 9,34,191) was available for the money lending business in AY 2015-16. In AY 2015-16, the appellant earned interest income of Rs. 9,67,815/- and thus, at the year end total fund of Rs. 69,43,006/- (Rs. 59,75,191 + Rs. 9,67,815) was available for the next year. During AY 2016-17, the appellant advanced money amounting to Rs.3,00,45,585/-, out of which amount of Rs. 69,43,006/- pertains to AY 2015-16. Therefore, fresh capital/fund infused in money lending business comes to Rs. 2,31,02,579/- (Rs. 3,00,45,585 - Rs. 69,43,006). In subsequent years, as per the above table, no fresh fund has been introduced by the appellant. The appellant has earned interest income in the above years and quantum of interest earned has been indicated in the table above. Considering above discussion, investment made initially and fresh fund introduced in subsequent years are required to be treated as unexplained investment of the appellant. The interest

Page 23 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

earned in each assessment year is required to be taxed on account of undisclosed interest income. Accordingly, following additions are confirmed:-

AY Peak of unexplained Undisclosed Interest Total Addition (In investment (In Rs.) Income (In Rs.) Rs.) 2013-14 50,05,000/- 36,000/- 50,41,000/- 2014-15 0 9,34,191/- 9,34,191/- 2015-16 0 9,67,815/- 9,67,815/- 2016-17 2,31,02,579/- 8,05,695/- 2,39,08,264/- 2017-18 - 42,71,104/- 42,71,104/- 2018-19 - 27,03,934/- 27,03,934/- Hence, above additions in the respective years as indicated above are confirmed and the appellant gets relief accordingly. 3.2.6. In view of the above discussion and decisions cited, the additions of Rs.50,05,000/- in A.Y.2013-14 and Rs. 2,31,02,579/- in AY 2016-17 on account of unexplained investment u/s 69 is confirmed. Amended provisions of section 115BBE of the Act with effect from 01.04.2017 will not be applicable to the above additions. Pre amended provisions of section 115BBE of the Act shall apply in the above additions. Further, additions of Rs.36,000/- in 2013-14, Rs.9,34,191/- in 2014-15, Rs.9,67,815/- in A.Y.2015-16, Rs.8,05,695/- in A.Y.2016-17, Rs. 42,71,104/- in A.Y. 2017-18 and Rs. 27,03,934/- in A.Y.2018-19 on account of undisclosed interest income are also confirmed. The appellant gets relief accordingly. Therefore, appeal on this ground is partly allowed.”

Thus, the CIT(A) has upheld the action of AO but, however, given quantum- relief to assessee by considering the details compiled by AO in assessment- order, seized material and telescoping effect [Para 3.2.5(iii) of order of CIT(A)].

Page 24 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

by AO in assessment-order was never asked from assessee and it came to assessee’s knowledge only from assessment-order. No opportunity was given to assessee to clarify the corroboration/linkage of BS-1 with BS-3, BS-57 and BS-59. So far as the statements of employees are concerned, Ld. AR submitted that it is true that the assessee’s employees firstly accepted that the diaries belonged to assessee but it is also a fact that subsequently they retracted statements by filing affidavits describing the exercise of coercion and pressure by authorities. During assessment-proceeding also, the AO issued notice u/s 142(1) dated 08.08.2019 asking assessee about BS-1, BS- 3, BS-57 and BS-59 but in the notice, the AO never sought any clarification from assessee about the correlation/linkage of BS-1 with BS-3, BS-57 and BS-59. In show-cause notice dated 15.10.2019 also, the AO sought clarification regarding BS-1 only and yet in subsequent show-cause notice dated 19.12.2019, the AO did not raise any query qua the whole issue leave alone the corroboration/linkage of various diaries. Therefore, the issue of correlation/linkage of various diaries has been considered by AO at the back of assessee without providing any opportunity to assessee. Ld. AR also contended that during post-search investigation or even assessment proceeding, the investigating authorities or AO never interrogated any of the persons to whom the cash loans were alleged to have been given by assessee. In such a situation, Ld. AR contended, the addition made by AO is not sustainable as per various decisions including Andman Timber (SC), Dhakeshwari Cotton (SC), Kishand Chelaram (SC), Pukhraj Soni (MP HC), ACIT Vs. Late Shri Puneet Agarwal (ITAT, Indore).

Page 25 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

correlated the transactions noted in BS-1 with the transactions noted in BS- 3, BS-57 and BS-59 and thereafter made addition. Ld. DR pointed out that even if the assessee has denied BS-1, BS-3 is very well accepted by assessee himself and the AO has found a complete corroboration of transactions noted in BS-1 with BS-3. Therefore, the CIT(A) is very correct in finding, vide Para 3.2.3 of his order, that the seized diary BS-1 belonged to assessee and so also the transactions mentioned therein. Ld. DR went on submitting that the entries noted in the seized diaries contain complete details of the transactions like names of persons, dates on which amounts were given and repayments received, calculation of interest, etc. and some pages of diaries also contain signature of assessee. Therefore, the CIT(A) has rightly approved AO’s action of making addition based on seized documents but, however, the department is against telescoping benefit given by CIT(A) without any cash flow statement to prove telescoping or rotation of funds.

Page 26 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

also drawn us to this very notice in his arguments) and in Para B-2 to B-4 in Part-B of notice, the AO made three lists of documents/loose-papers/ incriminating documents found and seized from various premises and thereafter asked the assessee to explain the transactions appearing in those documents/items and reconcile with the books of account (Page 5-8 of Paper-Book). The list in Para B-3 includes not only BS-1 but also BS-3, BS- 57 and BS-59. Thus, the AO confronted assessee qua BS-3 as well as BS-57 and BS-59. In response, the assessee filed reply dated 06.11.2019 (filed to AO’s office on 08.11.2019) wherein the assessee submitted explanation qua BS-3, BS-57 and BS-59 also but the assessee again confined his submission qua the entries of “Dala charges” recorded in books of account (Page 25-29 of Paper-Book). Thus, the assessee conciously did not make any submission to AO qua other entries of cash loans contained in BS-3, BS-57 and BS-59 which were not recorded in assessee’s books of account. Be that as it may, the ownership and contents of BS-3 to the extent relating to “Dala charges” recorded in books of account stand admitted by assessee in the statements u/s 132(4) as well as reply-letter dated 06.11.2019 to AO. Once the entries of “Dala charges” noted in BS-3 are accepted by assessee as having been recorded in regular books of account, it becomes an undisputable fact that the assessee did own other entries relating to transactions of cash loans noted in the very same diary BS-3. The fact also remains that the AO has made a corroborative analysis of transactions noted in BS-1 with BS-3, BS- 57 and BS-59 in assessment-order. Further, the CIT(A) has adequately dealt the order of AO, the seized material, the statements of assessee, the statements and retraction of assessee’s employees and addressed all contentions raised by assessee. After a careful consideration, the CIT(A) has arrived at a conclusion that the AO has rightly made addition and the assessee only deserved quantum-relief on account of telescoping. We have already re-produced CIT(A)’s order in foregoing para and on perusal, do not find any error, illegality or perversity in the adjudication done by CIT(A).

Page 27 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Therefore, we uphold CIT(A)’s order and the issue raised by both sides is rejected.

Issue No. 2 – Unexplained investment in jewellery:

Issue No. 3 – Unexplained money in lockers:

Page 28 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

“Assessee’s ITA No. 227/Ind/2023 – A.Y.2018-19:

Page 29 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

mentioned that locker No. 302 was last operated on 18.07.2017 but the locker No. 302 is not relevant for this issue as no currency was found therein). The AO observed that in the statements u/s 132(4) also, the assessee insisted that the locker was operated on 20.01.2018 and also stated that only the bank manager can explain their record. Therefore, to verify the contention of assessee, CCTV footage of Bank was analysed from which it was observed that only a small purse was being carried by assessee’s husband who was accompanying the assessee and their entry at bank premise was recorded at 3:36 P.M. Ultimately, the AO concluded that the claim of assessee that she kept cash in lockers can’t be relied as such voluminous amount of cash cannot be kept in a small sized purse and made addition of Rs. 10,24,500/- (50% of Rs. 20,49,000/-) in the hands of assessee as unexplained money u/s 69A read with section 115BBE. Identical addition of Rs. 10,24,500/- (remaining 50%) was made in the hands of assessee’s husband Shri Jarnal Beer Singh Bhatia.

“3.5.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. Fact of this case is that during the course of search cash amounting to Rs. 20,49,000/- was found from two bank lockers. Ld. AO has made addition of Rs.10,24,500/- each in the hands of the appellant and his wife as the it was found unexplained. Submission on this issue of the appellant is same as made in the case of Shri Jarnalbeer Singh Bhatia. I have decided this issue in the case of her husband Shri Jarnalbeer Singh Bhatia in appeal no 10049 to 10054/2019-20 order dated 30.03.2023 and confirmed entire addition. Therefore, the relevant paras of the said order is reproduced hereunder which are also applicable to this case:

“3.5.2 I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the Ld. AO inter alia material brought on record. As a matter of fact during the course of search cash amounting to Rs. 20,49,000/- was found from two bank lockers. Ld. AO has made addition of Rs.10,24,500/- each in the hands of the appellant and his wife. Statement of appellant’s wife Smt. Jatinder Kaur Bhatia was recorded u/s 132(4) of the Act wherein she stated that Smt Mandeep Kaur Bhatia gave her sum of Rs. 21,00,000/- for safe keeping and which was kept in bank locker on 20.01.2018. Further, Smt Mandeep Kaur Bhatia, sister in law of the appellant has filed an affidavit during assessment proceedings and stated that she gave Rs. 19,00,000/- to Smt. Jatinder Kaur Bhatia for safe keeping. She further stated that she had to visit Indore and does not have her own locker and therefore, the said amount was given by her to Smt. Jatinder Kaur Bhatia for safe keeping. For the remaining cash of Rs 1,49,000/-, the appellant submitted that this amount was out of past savings of himself and his wife. The both versions found contradictory to each other. Information regarding operation of locker by the appellant and his wife was called for from the bank. The bank intimated to the Ld AO that the bank locker no. 121 was last operated on 12.07.2017 and locker no. 302 was last operated on 18.07.2017. Smt. Jatinder Kaur Bhatia was intimated about the information received from the bank. In her statement, she stated that that can be explained by bank manager, however, I had operated locker no.113 on 20.01.2018. The Ld. AO, for verification of claim of the appellant, issued summons to bank for providing details of locker operation and CCTV footage of

Page 30 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

locker operation on 20.01.2018. The Ld. AO on perusal of CCTV footage found that the appellant entered bank premises with a small purse which cannot hold such voluminous amount of cash. Here I find that the Ld. AO has made good presumption that the purse carried by appellant would not be able to carry such voluminous cash. Therefore, the Ld AO rejected the claim of the appellant and added Rs. 10,24,500/-, being 50% of Rs. 20,49,000/- to the total income of the appellant u/s 69A of the Act and applied the provisions of section 115BBE of the Act.

3.5.3 The appellant has also brought on record the other aspect of the case as per which during the course of search in the case of M/s Bhatia Auto Services physical cash in hand of Rs. 64,770/-was found and the cash as per books of account was Rs. 17,64,090/-. Shri Mangal Singh Bhatia, partner was required to explain the said difference. He stated that a sum of Rs. 2,00,000/- was sent home for safekeeping and for balance amount his son Shri Arvind Singh Bhatia one of the partner in appellant firm would reply. Shri Arvind Singh Bhatia vide an affidavit has stated that sum of Rs. 15,00,000/- was taken by him during the day for safe keeping and Shri Mangal Singh Bhatia was not aware about the same. It is pertinent to mention that Smt Mandeep Kaur Bhatia is wife of Shri Arvind Singh Bhatia and he gave her Rs. 15,00,000/- for safe keeping. Therefore, total amount of Rs. 17,00,000/- was given to her from cash in hand available with M/s Bhatia Auto Services. Here it is important to mention that the Ld. AO in assessment proceedings in the case of M/s Bhatia Auto Services has accepted the said claim and no adverse finding was made on this account. Further, the appellant has filed copy of cash book of Smt Mandeep Kaur Bhatia for the year under consideration as per which she had cash in hand balance of Rs. 71,29,001/- as on date of search.

3.5.4. Considering the changing stands on the cash found from the locker, themselves establish that the appellant has no suitable explanation regarding source of cash found from the locker. CCTV footage itself proves that his wife gone to bank, but, no such voluminous cash of small denomination was with her. This fact is also confirmed by the correspondences between authorized officer and bank authority. It is pertinent to mention that the search and seizure operation was conducted on the appellant on 23.01.2018. Vide summon dated 20.03.2018, the branch manager was asked to submit certified copies of locker register from 01.10.2017 to 31.01.2018 because, the authorized officer found that Smt. Jatinder Kaur Bhatia, wife of the appellant was allowed to insert her name and signature in locker register and she mentioned locker no. 115 on entry date 20.01.2018 in row of the holder of locker no. 08 which appeared to be intentionally made. The authorized officer also found that every row/column of register was having only one signature and meant for one locker holder, but, in the above particular row/column, signature of Smt. Jatinder Kaur Bhatia was put on with locker owner of locker no. 08. The explanation in this regard was called for from the bank manager. In response to the above summon, the Bank officer submitted that last operation of locker no. 113 was 20.01.2018. It was erroneously written as 115. In the same reply, the bank authority further submitted that the confirmed last operation of locker no. 113 was 20.10.2017. The above information has been

Page 31 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

submitted by the Ld AO vide letter dated 21.10.2022 on the request of undersigned. The reply along-with copy of register and other correspondences are placed on record. On perusal of the copy of locker register of Bank Of India Anand Nagar Branch, Khandwa, I find that row of holder of locker no. 8 has been utilized by holder of locker no. 115. The date is 20.01.2018 and time is 2.20. As per the locker register, next entry has been made on 22.01.2018. Thus, no space after 20.01.2018 was available and for this reason only, there was no option but to allow Smt. Jatinder Kaur Bhatia to insert her name with the holder of locker no.08. It clearly, indicate the back dating. Manipulation in the locker register as well connivance with the bank authorities is also proved from the CCTV Footage as per which Smt. Jatinder Kaur Bhatia had entered in the bank premises at 3.36 PM whereas register shows the time of operation 2.20 PM. On perusal of subsequent clarification submitted by bank authority to the authorized officer in response to summon dated 20.03.2018 and copy of locker register create a strong suspicion on operation of locker no. 113 by Smt. Jatinder Kaur Bhatia. This fact also indicates towards connivance of the bank authority with the appellant group. However, if, the last operation date is 20.01.2018 is treated as correct, then also, one thing is clear that no cash amounting to Rs. 19,00,000/- or Rs. 21,00,000/- was kept on that day in the locker no. 113. Further, on perusal of para 9.1 of the assessment order, cash of Rs. 14,98,000/- only was found from the locker no. 113 which is less than the amount mentioned in the affidavit or in statement u/s.132(4) of the Act. If, the above amount was kept in that locker on 20.01.2018, how, the lesser cash was recovered from that locker. In the facts and circumstances, it is evident that locker no.113 was not operated on 20.01.2018 and hence, no cash was kept on that day. Accordingly, amount found from the lockers remains unexplained. The another plea of the appellant that no adverse view has been taken in the case of M/s. Bhatia Auto Services in whose case shortage of cash was found. It has no bearing in this case. 3.5.6 In view of the above discussion, addition made by the Ld AO amounting to Rs. 10,24,500/-, in the hands of appellant, is confirmed under the provisions of section 69A of the Act. Accordingly, provisions of section 115BBE shall apply on the above income. Therefore, appeal on this ground is dismissed.” 3.5.3. In view of the above discussion, addition made by the Ld AO amounting to Rs. 10,24,500/-, in the hands of appellant, is confirmed. Therefore, appeal on this ground is dismissed. ”

(i) Firstly, he drew us to Q.No. 3, 6 & 7 of statements recorded u/s 132(4) [Page 753 of Paper-Book] and replies made by assessee, which read as under: “��न 3 कृपया बताये �क आपके एवं आपके प�रवार के नाम से लॉकर नं. 302, लॉकर 121 एवं 113 म� कौन-कौन सी बहुमू�य साम�ी, आभूषण एवं कागजात रखे ह� कृपया बताय�ॽ

Page 32 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

उ�तर - मुझे यह नह�ं �यान है �क �कस लॉकर म� �या ह� परंतु जहाँ तक �यान है लॉकर नं. 121 एवं लॉकर नं. 113 म�, मेरे सोने के आभूषण, मेरे छोटे ब�च� के कुछ आभूषण एवं कुल �. 22,00,000/- लगभग नकद� होनी चा�हए िजसम� �. 21,00,000/- मेर� देवरानी �ीमती मनद�प कौर प�त अर�वंद �संह भा�टया, A-26, LIG Colony खंडवा से संबं�धत है । लॉकर नं. 302 म� �या है मुझे कुछ �यान नह�ं है । ” ��न 6: कृपया बताये �क आपक� देवरानी �ीमती मनद�प कौर आपको कभी कोई रा�श/रकम रखने को द� है ॽ उ�तर : इससे पहले उ�ह�ने मुझे 10-20 हजार से �यादा रखने को नह�ं �दया । इस बार वह इंदौर जा रह� थी, इस�लए उ�ह�ने इतनी बड़ी रा�श / रकम रखने को द� है । ��न 7 : कृपया बताये �क आपक� देवरानी �ीमती मनद�प ने आपको �. 21,00,000/- क� रा�श �कस �दनांक को रखने को द� थी ॽ और �कस समय द� थी ॽ और उनके साथ कौन थाॽ उ�तर : �ीमती मनद�प कौर ने �. 21,00,000/- क� रा�श �दनांक 19/01/2018 को शाम 5 से 6 के बीच द� थी वह अपने प�त अर�वंद भा�टया के साथ आयी थी ।” Referring to above, Ld. AR submitted that the assessee instantly stated in the statements u/s 132(4) itself that (i) the approximate currency in locker No. 121 and 113 should be Rs. 22,00,000/- out of which currency of Rs. 21,00,000/- belonged to Smt. Mandeep Kaur Bhatia, (ii) that Smt. Mandeep Kaur Bhatia was going to Indore that is why she gave such a hefty cash for safe keeping, (iii) that Smt. Mandeep Kaur Bhatia gave currency of Rs. 21,00,000/- on 19.01.2018 at about 5-6 PM with her husband Shri Arvind Bhatia. Ld. AR pointed that the actual currency found in lockers was Rs. 20,49,000/- because the assessee made ‘लगभग (i.e. approximate)’ submission to authorities which is clearly discernible from assessee’s reply to Q.No. 3 itself. This is quite possible due to mental pressure during recording of statements. (ii) Then, Ld. AR drew us to a para on Page No. 15 of the order dated 20.03.2023 passed by same CIT(A) in Appeal No. CIT(A)-3/BPL/IT-10032 to 10038/2019-20 of M/s Bhatia Auto Service, a partnership firm of assessee-group, which was also a part of same search (Paper-Book Page No. 938). Referring to same, Ld. AR demonstrated that at the time of search, M/s Bhatia Auto Service was having cash balance of Rs. 17,64,090/- as per books of account but the physical cash balance available was Rs. 64,770/- only. Therefore, when the search authorities confronted Shri Mangal Singh Bhatia, a partner of M/s Bhatia Auto Service, to explain the shortage/ difference, he stated that a sum of Rs. 2,00,000/- was sent to home for safe keeping and for balance amount, another partner Shri Arvind Bhatia would reply. Shri Arvind Bhatia vide an affidavit stated that a sum of Rs. 15,00,000/- was taken by him for safe keeping and Shri Mangal Singh Bhatia was not aware about the same. Thus, a total cash of Rs. 2,00,000 + Rs. 15,00,000 = 17,00,000/- was available with Smt. Mandeep Kaur Bhatia/Shri Arvind Bhatia from M/s Bhatia Auto Service. Ld. AR submitted that this explanation stands accepted by CIT(A) in appeal order of M/s Bhatia Auto Service. That apart, Smt. Mandeep Kaur Bhatia was also having a cash balance of Rs. 71,29,001/- as per her cash-book filed to lower-authorities. Therefore, Smt. Mandeep Kaur Bhatia had sufficient cash from explained sources to give money of Rs. 19,00,000/- to assessee. So far as the remaining cash of Rs. 1,49,000/- is concerned, Ld. AR submitted that the assessee and her husband Shri

Page 33 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Jarnal Beer Singh Bhatia were well off persons declaring high incomes to income-tax department year after year, therefore the miniscule cash balance of Rs. 1,49,000/- held by them should not be doubted.

(iii) Ld. AR next submitted that during first-appeal, the CIT(A) has given adverse conclusion based on the correspondence between Authorised Officer and bank u/s 131 regarding locker operations but those correspondences were never brought to assessee’s knowledge. The assessee has, for the first time, got to know from order of CIT(A) about any such exercise between Authorised Officer and bank. Without prejudice, Ld. AR submitted, the correspondence between Authorised Officer and bank u/s 131 are also not against assessee, they are very much in favour of assessee. To show this, Ld. AR drew us to Page 518 where a summon issued by the Authorised Officer of search directly to the Bank Manager u/s 131(1A) is placed and also to Page No. 517 where the following reply-letter dated 20.03.2018 filed by Bank Manager to Authorised Officer is placed:

(Not reproduced being scanned matter)

Referring to same, Ld. AR pointed that the Bank has clearly informed in Para No. 4 of above letter dated 20.03.2018 to the Authorised Officer that the locker No. 113 was operated on 20.01.2018. Further, the Bank also requested the Authorised Officer to provide time of seven days for detailed report on locker No. 115 erroneously written instead of locker No. 113 in ‘Locker Operations Register’. Thereafter, the bank also made internal enquiry from their staff members and the letters exchanged between Bank Manager and concerned Bank Officer (Page No. 496-497 of Paper-Book) are as follows:

(Not reproduced being scanned matter)

Ld. AR submitted that in these letters, the Senior Manager of bank raised a memo upon Bank officer Mr. Aseem Sandhya seeking explanation about operation of locker No. 113 on 20.01.2018 and in reply, the bank officer informed that locker no. 113 was operated by Mrs. Jatinder Kaur Bhatia (assessee) on 20.01.2018. Ld. AR further submitted that the Locker Operations Register filed at Page No. 498-516 of Paper-Book also contains an entry of locker operation on 20.01.2018. Having showed thus, Ld. AR raised a very strong contention that the letter dated 20.03.2018 was directly filed by bank to the Authorised Officer containing a clear acceptance that the locker No. 113 was operated on 20.01.2018. Further, the letters dated 23.03.2018/26.03.2018 exchanged between Bank Manager-Bank Officer and the ‘Locker Operations Register’ showing operation of locker on 20.01.2018 are the records of Bank of India and not of assessee. Further, they are the records of Bank of India which is not a private party but a nationalised bank. Therefore, the CIT(A) is very much wrong in adversely concluding, without any basis, that the records were manipulated by the connivance of bank authority with assessee-group. Ld. AR submitted that such heighted remarks made by CIT(A) are baseless. He submitted that the bank record was submitted by bank authorities to the authorised officer of department in response to summon u/s 131 dated 20.03.2018 and if the authorised officer/AO/CIT(A) had any doubt on authenticity, they could very well carry out further investigation in the matter from bank instead of blaming assessee.

Page 34 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

amount claimed to have been given by Smt. Mandeep Kaur Bhatia i.e. in statements, the assessee stated that Smt. Mandeep Kaur gave her Rs. 21,00,000/- but before AO the assessee claimed to have kept Rs. 19,00,000/- belonging to Smt. Mandeep Kaur Bhatia in locker.

Page 35 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

14,98,000/-) and maintain addition of Rs. 2,75,500/- (50% of Rs. 5,51,000/-). The assessee succeeds accordingly and partly in her appeal.” 14. Since the very same issue has already been decided by ITAT, Indore in assessee’s wife’s case, the same view shall follow here. Accordingly, we direct the AO to modify assessment-order so as to delete addition of Rs. 7,49,000/- and maintain addition of Rs. 2,75,500/-. The assessee succeeds partly in this issue.

Issue No. 4 – Admission of additional evidences by CIT(A):

Page 36 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

adjudication done by CIT(A) on Issue No. 5 and 6 is against Rule 46A and must be set aside.

“1. That during A.Y. 2014-15 assessee has made payments on account of freight expenses of Rs. 2,56,17,454/- to truck owners without TDS on such payments since the truck owners had furnished their PAN/Form 15G to the assessee and the same are in the possession of assessee (Copies of ledger A/c of Freight Expenses of A.Y. 2014-15 is annexed for your ready reference). It is pertinent to note here that accounts of the assessee were audited for the said year and clause no. 34(a) of 3CD Report clearly demonstrates the same, meaning assessee was in possession of the PAN/Form 15G of the transporters and was not required under law to deduct TDS while making payment of freight to respective transporters. (Copies of audited financial statements for subject A.Y. already provided with reply to questionnaire). …… Assessee with reference to point 1 and 2 above further wishes to bring to your kind notice that regarding production of documents/books of accounts assessee had received letter from ADIT (Inv.)-1, Indore, dated 16.07.2018 in which documents, books of accounts of the assessee were called from A.Y. 2012-13 to 2017-18 on 30.07.2018 at 11.40 a.m. Assessee duly submitted through letter and made available all the documents and books of accounts from A.Y. 2012-13 to 2017-18 before ADIT(Inv .)-1, Indore, on 30.07.2018 at 11.30 a.m. The above documents were bulky ad were brought by assessee in a truck lorry along with 8 labourers from Khandwa to handle the same after spending around Rs. 30,000 on logistics and photocopies but ADIT (Inv.)-1, Indore, over phone. Assessee had then sent detailed complaint in this regard to Hon'ble Chairman CBDT through Speed Post. (Copies of notices, reply and communication between investigation department and assessee alongwith relevant affidavit and compliant to Hon'ble CB Chief is annexed for your ready reference.) Now if your honour again wishes to peruse the copies of PAN/15G of transporters, bills and supporting for expenses on tyre and transit expenses, sale and purchase of trucks for the subject AY to examine already audited freight expenses, transit expenses, tyre expenses and value of trucks, assessee will be pleased to produce the same but needed at least 3-4 days time to collate and present the same. Kindly bring the above said documents/information in your assessment-records in order and oblige.”

Referring to above paras, Ld. AR pointed out that the assessee was having the very same documents, as subsequently produced before CIT(A) by way of additional evidences, in possession even before/during assessment-

Page 37 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

proceedings and those documents were very bulky and brought by assessee in a truck lorry with labourers to the office of Investigating Officer of search [ADIT(Inv)-1, Indore]. Further, the assessee also made a specific request to AO that if the AO again wished to peruse those documents, the assessee would be pleased to produce the same but it would require 3-4 days. Thus, the assessee has not only produced documents before Investigating Officer but also reported willingness in letter dated 23.12.2019 to re-produce before AO if the AO desired to re-examine the same, subject to giving of 3-4 days’ time period. But the AO passed adverse assessment-order on 30.12.2019 against assessee. Therefore, the assessee submitted had to submit those documents to CIT(A) as “additional evidences” in terms of Rule 46A during first-appeal. The CIT(A) accepted assessee’s request and acting thereupon sought remand-report from AO. In response, the AO requested the CIT(A) to allow time upto 31.01.2023 which the CIT(A) allowed as is evident from the fact that CIT(A) passed impugned order lately on 30.03.2023 after waiting for a considerable period; in fact the CIT(A) passed impugned order after giving an additional grace of 2 more months to AO. But the AO was not concerned to file remand-report upto the deadline of 31.01.2023 set up by himself or even upto passing of order by CIT(A) on 30.03.2023. Thus, there was a lapse on the part of AO himself and not on the part of assessee or CIT(A) either during assessment-proceeding or first appellate proceeding. Ld. AR also pointed out that although in its ground, the revenue has taken a plea that the documents were not sent by CIT(A) with the letter seeking remand-report but there is no such whisper qua absence of documents by AO in response-letter filed to CIT(A), the AO only demanded time upto 31.01.2023 which the CIT(A) allowed upto 30.03.2023.

Page 38 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

have allowed time to AO by means of a “speaking order” which has not been done.

“3.6.2 …. As additional evidence, the appellant filed incorporation certificate, audited balance sheet of the lender. The documents filed as an additional evidences are always available in public domain to which the Ld AO has also obtained the same and analyzed the figures of balance sheet and profit and loss account for the period AY 2014-15 to 2017-18, whereas, the loan was taken during AY 2013-14. However, the additional evidences so filed were forwarded to the Ld AO vide letter dated 07.12.2022 for his comments. The Ld AO vide letter dated 26.12.2022 requested for further time till 31.01.2023. However, till date no report has been submitted by the AO.” “3.7.4 …. During the appellate proceedings, the appellant has also filed copies of Form 15G, bills/bilty/RC books, PAN details before me as additional evidences u/r 46A of the Rules. Due to this reason, a copy of which for verification and comments were forwarded to Ld. AO vide letter dated 07.12.2022. The Ld AO vide letter dated 26.12.2022 requested for further time till 31.01.2023. However, till date no report has been submitted by the Ld. AO. In the circumstances, the issue involved here is being decided on merit and as per law.” Since the AO did not file remand report upto 30.03.2023, the CIT(A) himself considered the evidences filed by assessee and decided assessee’s issues on merit taking into account those evidences. Faced with this situation, we do

Page 39 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

not find any error or perversity in the order of CIT(A). Therefore, there is no merit in the issue raised by revenue and the same is hereby rejected.

Issue No. 5 – Unexplained cash credit from M/s Vedic Commotrade Pvt. Ltd.:

(i) Firstly, it is submitted that the assessee did not file documentary evidences relating to impugned loan before AO and it is only during first-appellate proceeding that additional evidences were filed to CIT(A). The CIT(A) admitted additional evidences without giving adequate opportunity to AO. Therefore, the adjudication done by CIT(A) is illegal.

(ii) Secondly, the AO has clearly noted that the ingredients of section 68 were not satisfied. Therefore, the addition made by AO is valid on merit also.

(i) In so far as the admission of additional evidences by CIT(A) is concerned, Ld. AR relied upon his submissions already narrated in foregoing Para while dealing Issue No. 4.

Page 40 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

(ii) With regard to merit of the issue, Ld. AR carried us to following Para 2 of show-cause notice dated 15.10.2019 issued by AO during assessment-proceeding, copy at Page 33 of Paper-Book reading as under:

“2. During the course of search and seizure operation, balance sheet and profit and loss account of the M/s. Vedic Commotrade Private Limited was found. On examination of financial of the companies and other investigations, it is observed that the Unsecured Loan of Rs. 40,60,000/- during F.Y. 2012-13 was given by M/s. Vedic Commotrade Private Limited to Jarnalbeer Singh Bhatia. You are requested to please establish identity and creditworthiness of the aforesaid party and genuineness of transaction. In case of failure in doing so, you are requested to please show cause as to why the amount of Rs. 40,60,000/- should not be treated as your unexplained cash credit and not be added to your total income for A.Y. 2013-14.” Referring to same, Ld. AR submitted that the AO show-caused assessee on the basis of Balance-Sheet of “M/s Vedic Commotrade Pvt. Ltd.” found during search, to explain the loan taken by assessee from that company. But the assessee took loan from “M/s Vaibhav Pipes Pvt. Ltd.” whose name was subsequently changed to “M/s Vedic Commotrade Pvt. Ltd.” and the assessee was not aware of change in name. Therefore, when the AO show-caused assessee to explain the loan taken from “M/s Vedic Commotrade Pvt. Ltd.” even without making any reference to erstwhile name “M/s Vaibhav Pipes Pvt. Ltd.” in above Para 2 of show-cause notice, the assessee denied having any loan taken from “M/s Vedic Commotrade Pvt. Ltd.”. However, it is also a fact that prior to issuance of show-cause notice, the AO also issued a notice dated 08.08.2019 u/s 142(1) and vide Para No. A-20 and A-21 of such notice, copy at Page 4-5 of Paper-Book, the AO asked the assessee to explain all unsecured loans as well as the details of interest paid & received by assessee and in response, the assessee, vide Para No. A-20 & A-21 of reply-letter dated 08.11.2019, copy at Page 17-21 of Paper-Book, submitted complete details of all loans taken and interest paid including the details of “M/s Vaibhav Pipes Pvt. Ltd.” In support of change in name of creditor company

Page 41 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

from “M/s Vaibhav Pipes Pvt. Ltd.” to “M/s Vedic Commotrade Pvt. Ltd.”, the assessee has filed a Certificate of name change dated 03.07.2015 issued by Registrar of Companies, Gwalior at Page 625 of Paper-Book. Ld. AR submitted that it is a simple case of mistaken identity of creditor due to change in name otherwise the assessee had already explained complete details of impugned loan taken from and interest paid to “M/s Vaibhav Pipes Pvt. Ltd.”. Having explained thus, Ld. AR drew us to Page 644-645 of Paper-Book to show one more fact that the assessee had also repaid entire loan as early as by 21.06.2013 with accumulated interest after deduction of TDS, even before the name change of creditor and much prior to the date of search. Ld. AR submitted that the CIT(A) has carefully considered all these facts with reference to the evidences filed before him and thereafter deleted the addition made by AO; the order of CIT(A) is well- reasoned and must be upheld.

“3.6.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The appellant has taken unsecured loan of Rs. 41,00,000/- from M/s Vaibhav Pipes (now known as Vedic Commotrade Pvt Ltd) during FY 2012-13 and paid interest of Rs. 3,60,000/- by deducting TDS @ 10% amounting to Rs. 36,000/-. The Ld AO during assessment proceedings on perusal of balance sheet and profit & loss account statement of the lender company for AYs 2014-15 to 2017-18, also being tabulated in para 8 of the assessment order, observed that the lender company though have shown sales and purchase activities, however, has no creditors through your years. The cash and bank balance are shown very nominal. The company have meager fixed assets. The lender company have shown nominal financial and administrative cost as compared to turnover and reserves & surplus. After making these observations, the ld AO held that the lender company hardly have any genuine business activity. The Ld. AO for further verification issued commissions to ACIT, Satna, who in his report submitted that no company by name of Vedic Commotrade is operational at the registered address. The Ld. AO considering all held that the lender company is only involved in providing bogus accommodation entry in guise of unsecured loan. The appellant was also required by the Ld. AO to establish

Page 42 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

identity and creditworthiness of the lender and genuineness of the transaction. The appellant in reply submitted that he has not taken any loan from M/s Vedic Commotrade Pvt Ltd and therefore, there is no need for recording the same in books of account. The appellant during appellate proceedings has explained that it was at later stage he got to know about change in name of the lender company from M/s Vaibhav Pipes to M/s Vedic Commotrade Pvt Ltd, however, necessary documents regarding the lender M/s Vaibhav Pipes were furnished before the Ld. AO which includes copy of confirmation for the period 01.04.2012 to 31.03.2014 alongwith ITR and bank account of lender. As additional evidence, the appellant filed incorporation certificate, audited balance sheet of the lender. The documents filed as an additional evidences are always available in public domain to which the Ld AO has also obtained the same and analyzed the figures of balance sheet and profit and loss account for the period AY 2014-15 to 2017-18, whereas, the loan was taken during AY 2013-14. However, the additional evidences so filed were forwarded to the Ld AO vide letter dated 07.12.2022 for his comments. The Ld AO vide letter dated 26.12.2022 requested for further time till 31.01.2023. However, till date no report has been submitted by the AO.

3.6.3. After considering evidences on record, I find that the lender company M/s Vaibhav Pipes now known as M/s Vedic Commotrade Pvt Ltd changed its name as on 03.07.2015 and appellant has taken loan during FY 2012-13 which was repaid completely during FY 2013-14. Therefore, the appellant was in no position to be aware of the name change and for that reason he during assessment proceedings denied of taking any loan from M/s Vedic Commotrade Pvt Ltd. Nevertheless, the lender company is having PAN AACCV0700B and is registered with Registrar of Companies, Gwalior under CIN-U25202MP1999PTC013250. The company has registered address at New Lucky Super Market, Shop No 11, Chandidevi Mandir Road, Maihar-485771. The company has also filed confirmation for giving loan of Rs. 41,00,000/- to appellant company which was also filed with the Ld AO. On perusal of balance sheet of the lender company for AY 2013-14 it has been observed that the lender has shown share capital of Rs. 34,99,200/- and reserves and surplus of Rs.6,45,45,985/-. The lender has shown trade payable at Rs. 45,98,187/- and trade receivable at Rs. 16,71,464/- which shows that the Ld AO was not justified in alleging that the lender company has no creditors. Further, on perusal of profit and loss statement as on 31.03.2013 the lender company has shown revenue from operations at Rs. 1,46,67,946/- and other income at Rs. 63,27,508/-. Further, the company has shown expenses towards purchase of stock of Rs.1,50,89,459/-, employees benefit Rs. 4,26,000/-, finance cost Rs. 4,37,500/- and other expenses Rs. 34,05,062/- and has shown profit of Rs. 23,271/-. The lender company has also taken long and short term loan and the same have been advanced to various concerns and from that the lender company has earned interest income of Rs. 62,53,113/- which in AY 2012-13 was at Rs.50,31,671/-. Therefore, lending money on interest seems regular source of income of the lender company. Thus, the lender company have sufficient funds for lending the same to appellant. It is pertinent to reiterate that the Ld AO has compared the balance sheet and P&L A/c for AY 2014-15 to 2017-18, whereas, the loan was taken by the appellant in AY 2013-14. The appellant has also filed copy of bank account statement of the lender company before me as well as the Ld AO. On perusal I find that no cash was deposited prior to advancement of loan to appellant. Here it is important to mention that the appellant has repaid entire loan with interest which have also been offered to tax by the lender company while filing return of income. The appellant has also deducted TDS on interest and the credit of the same has also been taken by the lender company. Most importantly, the Ld. AO has made addition on account of closing loan balance as on 31.03.2013 and without considering the fact that it includes interest of Rs. 3,60,000/-. The appellant has also paid interest of Rs. 84,660/- in AY 2014-15 which have been treated as genuine by the Ld AO. Hence, the Ld. AO in one

Page 43 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

year has treated the loan non-genuine and in other year as genuine which is contradictory. Hence, considering above findings, it cannot be said that the lender company is a bogus accommodation entry provider. Thus, the appellant has discharged its onus enshrined under section 68 of the Act. The appellant during assessment proceedings has submitted all the documents to establish identity and creditworthiness of the lender and genuineness of the transaction. From above discussion, it is evident that the lender company have substantial funds available with it to lend the same to appellant company. The appellant has also filed necessary documents to prove its identity, creditworthiness of these companies and also filed bank statement reflecting the transactions. Further, confirmation filed by the appellant before the Ld AO itself shows that the repayment of the entire amount was completed by 21.06.2013 by paying interest and deducting TDS thereon. In the similar facts and circumstances where the repayment alongwith interest of loan was done, Hon’ble Jurisdictional Bench of Indore ITAT in the case of Pramod Kumar Sethi – ITA No. 382/IND/2014 order dated 06.11.2018 deleted the addition made u/s 68. Relevant para of the said decision is reproduced hereunder: Para 22 – “…………….It is not in dispute that all the loan transactions were through account payee cheques, confirmations were given, creditworthiness were also proved from the balance sheet. Furthermore, all the loans were also repaid by cheques, we, therefore, do not find any merit in the action of Assessing Officer for making any addition in respect of these loan transactions.” 3.6.4. In view of above discussion and decision of jurisdictional ITAT, addition of Rs. 44,60,000/- in AY 2013-14 made by the Ld AO on account of unexplained cash credit u/s 68 of the Act are hereby deleted. Therefore, appeal on this ground is allowed.:”

Page 44 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

additional evidences and also sought remand-report from AO. We have already rejected, while adjudicating Issue No. 4 in earlier part of this order, the revenue’s contention against admission of additional evidences by CIT(A). Regarding merit of the issue, the CIT(A) has vehemently considered all facts relating to impugned loan and the facts considered in CIT(A)’s order are fully supported by the documents filed in Paper-Book. Therefore, the CIT(A) has rightly concluded that the ingredients of section 68 were fully satisfied. Although Ld. DR for revenue dutifully supported the order of AO yet could not point out any mistake or perversity in the adjudication made by CIT(A). Hence, we uphold the order passed by CIT(A) and the issue raised by revenue is therefore rejected.

Issue No. 6 – Disallowance u/s 40(a)(ia):

Page 45 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the basis of such observation in assessment-order yet it is apparent that the AO is harping on section 194C(7)] or during assessment-proceeding. The AO further observed that the assessee only submitted a Ledger A/c of Freight Expenses without evidences. On this basis, the AO made disallowance of varying amounts in different AYs u/s 40(a)(ia).

(i) Firstly, it is submitted that the assessee did not file PANs and declarations of truck owners to the AO during assessment-proceeding; they were submitted to CIT(A) as additional evidences and the CIT(A) admitted additional evidences without giving adequate opportunity to AO. Therefore, the adjudication done by CIT(A) is against Rule 46A and illegal.

(ii) Secondly, it is submitted that mere collection of PANs and declarations by assessee from truck-owners in terms of section 194C(6) was not sufficient, there was another requirement of furnishing those PANs and declarations to the jurisdictional PCIT/AO in terms of section 194C(7). The assessee can get benefit of exemption from TDS u/s 194C(6) only when the requirement of section 194C(7) was also satisfied. Since the assessee has not satisfied the requirement of section 194C(7), therefore he was under obligation to deduct TDS.

Page 46 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

(i) In so far as the admission of additional evidences by CIT(A) is concerned, Ld. AR relied upon his submissions already narrated in foregoing Para while dealing Issue No. 4.

(ii) For revenue’s contention of non-compliance of section 194C(7), Ld. AR relied upon a direct decision of ITAT, Kolkata Bench in ITA No. 1420/KOL/2015, Soma Rani Ghosh Vs. DCIT, order dated 09.09.2016 holding that if the assessee complies with the provisions of section 194C(6), disallowance u/s 40(a)(ia) does not arise for violation of section 194C(7).

“3.7.3. The appellant during appellate proceedings further stated that the truck owners furnished their Form 15G and PAN details and therefore, appellant did not deduct TDS before making freight payments. The appellant submitted that he was in possession of PAN/Form 15G of the transporters and therefore, he was not liable to deduct TDS as per law. Also, the books of account of the appellant were audited and these facts were clearly mentioned in clause 34(a) of Form 3CD. The appellant also stated that these documents and books of accounts were called for by the ADIT(Inv)-I, Indore for verification on 30.07.2018. The appellant in compliance reached before the Ld ADIT(Inv)-I, Indore on the said date and few documents were collected by the Inspector of Income Tax. Further, the Ld AO did not require the appellant to furnish the required documents during assessment proceedings and passed the assessment order after 6 days from the date of filing of submission on this issue. 3.7.4 .During the appellate proceedings, the appellant has also filed copies of Form 15G, bills/bilty/RC books, PAN details before me as additional evidences u/r 46A of the Rules. Due to this reason, a copy of which for verification and comments were forwarded to Ld. AO vide letter dated 07.12.2022. The Ld AO vide letter dated 26.12.2022 requested for further time till 31.01.2023. However, till date no report has been submitted by the Ld. AO. In the circumstances, the issue involved here is being decided on merit and as per law. I have gone through such evidences during the appellate proceedings. PAN/Form-15G were available with the appellant in respect of deductees. The appellant also submitted copies of RC Book and ledger account. The

Page 47 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

required information has been found in the possession of the appellant. I find that Ld. AO has invoked provisions of section 40(a)(ia) of the Act, with effect from 01.04.2015, which for ready reference is reproduced hereunder:-

“Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— (a) in the case of any assessee— (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,— (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 :

Provided that where in respect of any such sum, tax 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 the previous year in which such tax has been paid:

Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso.

Explanation.—For the purposes of this sub-clause,— (A) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub- section (1) of section 9; (B) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;

(ia) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 :

Prior to 01.04.2015 the provisions of section 40(a)(ia) of the Act was stood as under:

“Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work)”

Page 48 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

As per provision of section 40(a)(ia) the person shall be treated as assessee in default when on any interest, royalty, fees for technical services or other sum chargeable under this Act, TDS is either not deducted or after deduction was not paid to government. Then, the 100% prior to 01.04.2015 and 30% w.e.f. 01.04.2015 of the said sum shall be disallowed within the meaning of this section. However, in the case of appellant he before the Ld. AO as well as before me has filed copies of declaration forms filed by the transporters u/s 194C(6) alongwith copies of their PAN. Section 194C mandates deduction of TDS @1% for individual or HUF and @ 2% for other than individual and HUF for payments made in lieu of carrying out any work in pursuance of any contract between contractor and specified person. However, sub-section (6) of section 194C provides exemption from deduction of TDS in the case when a sum is paid or payable to a contractor doing business of plying, hiring or leasing goods carriages and owns ten or less goods carriages and furnishes a declaration to this effect with PAN. In the case of appellant, the contractors have furnished their PAN alongwith declaration u/s 194C(6) which has been placed on record. For ready reference provisions of section 194C and 194C(6) are reproduced hereunder:-

“Payments to contractors. 194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to— (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein.

...(2) to (5)...

(6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum.”

On perusal of the assessment order, I find that the Ld. AO has made disallowance because the appellant had not complied with the provisions of section 194C(7) of the Act which states as under: “(7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorized by it, such particulars, in such form and within such time as may be pre­scribed.”

Since, the appellant has not submitted the details in prescribed format to the income tax authority as per the above provisions, the Ld. AO found the appellant ineligible for not making TDS on payment to transporters. Meaning thereby, provisions of section 194C(6) and 194C(7) have to be read together and benefit of section 194C(6) will be

Page 49 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

available only when the appellant fulfills the conditions laid down in section 194C(7) of the Act, otherwise, provisions of section 40(a)(ia) will be attracted. However, the appellant was in possession of required information as per section 194C(6) of the Act. I have duly considered the above provisions of the Act and find that if an assessee complies with the provisions of section 194C(6) of the Act, disallowance under section 40(a)(ia) will not arise just because of non-compliance of provisions of section 194C(7) of the Act as both provisions are independent to each other and cannot be read together. I find support from the decision of Hon’ble ITAT in the case of Soma Rani Ghosh Vs. DCIT, ITA No.1420/KOL/2015, order dated 09.09.2016. The appellant has also placed above decision in Paper Book. Relevant para of the said decision is reproduced hereunder:

“33. In view of the above and respectfully following the judicial reasoning delineated in the above judgments, we find that if the assessee complies with the provisions of section 194C(6), disallowance under section 40(a)(ia) does not arise just because there is violation of provisions of section 194C(7) of the Act. 34. From our above discussion it follows that,-

i) in the context of Section 194C(1), person undertaking to do the work is the Contractor and the person so engaging the contractor is the contractee;

ii) that by virtue of the Amendment introduced by Finance Act (No.2) 2009, the distinction between a contractor and a sub-contractor has been done away with and Cl. (iii) of Explanation under 194C(7) now clarifies that "contract" shall include sub-contract;

iii) subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 194C(1) in relation to payments to transporters, applies transporter and non-transporter contractees alike;

iv) under Sec. 194C(6), as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required;

v) Sections 194C(6) and Section 194C(7) are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act; and

vi) If the assessee complies with the provisions of Section 194C(6), no disallowance u/s 40(a)(ia) of the Act is permissible, even there is violation of the provisions of Section 194C(7) of the Act.

3.7.5. After considering the above discussion and the evidences on record, I am of the view that the appellant was not required to deduct TDS within the meaning of provisions of section 201(1) r.w.s 40a(ia) of the Act. Hence, the Ld. AO was not justified

Page 50 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

in making disallowance by invoking provisions of section 40(a)(ia) of the Act. Hence, disallowance made by the AO amounting to Rs. 5,10,46,140/- in AY 2013-14, Rs. 2,56,17,454/- in AY 2014-15, Rs. 1,11,85,682/- in AY 2015-16, Rs. 1,52,32,690/- in AY 2016-17, Rs. 1,57,51,980/- in AY 2017-18 and Rs. 1,93,63,082/- in AY 2018-19 are directed to be deleted. Therefore, appeal on this ground is allowed.”

“25. Next ground of disallowance stated by the learned CIT is that Sec. 194C(6) and 194C(7) are to be read together, and if after obtaining PAN from the Transporters, the requisite particulars so obtained from the Transporters are not furnished to the prescribed Authority as provided u/s 194C(7), deduction and for that matter disallowance, u/s 194C and 40(a)(ia) would get attracted. On this aspect, as indicated above a reading of provisions of Section 194C (6), prior to the amendment of by Finance Act, 2015 (w.e.f. 1-06-2015), makes it clear that that during the relevant Assessment year, if the sub-contractors have supplied their PAN to the person making payments in respect of hiring/leasing/of vehicles during the course of his business, then such person making such payment shall not deduct any TDS. It is only by way of subsequent amendment by Finance Act, 2015 (w.e.f. 1-06-2015), the expression "where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with" was substituted in the place of "on furnishing of" thereby introducing the requirement of the declaration to the effect indicated by the amendment. Therefore, under Sec. 194C(6), as it stood prior to the amendment in 2015 in order to get immunity from the obligation of TDS, filing of PAN of the Payee-Transporter alone is sufficient and no confirmation letter as required by the learned CIT is required.

Page 51 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

drawn to the fact that though the Finance Act, (N0.2) 2009 introduced, inter alia, Sec. 194C(6) and 194C(7), similar and analogous provision had been very much in existence under proviso 2 and 3 to Section 194C(3) of the Act. Placing such provisions in juxtaposition in the following chart makes it clear that they are very much analogous and the difference is that only in respect of requirement of a declaration and furnishing the particulars to the to the prescribed income-tax authorities under the provisos 2 and 3 of pre-amended section 194C(3) is being replaced by the Permanent Account Number under present Sections 194C(6) and (7) respectively.

194C prior to Amendment by Finance 194C as Amended by Finance Act, Act, (No.2) 2009) (No.2) 2009

194C(3) No deduction shall be made under sub section (1) or sub-section (2) from – …. … … … … …

Provided that

Provided further that no deduction shall (6) No deduction shall be made from be made under sub-section (2) from the any sum credited or paid or likely to amount of any sum credited or paid or be credited or paid during the previous likely to, be credited or paid during the year to the account of a contractor previous year to the account of the sub- during the course of business of contractor during the course of business plying, hiring or leasing goods of plying, hiring or leasing goods carriages, [where such contractor carriages, on production of a declaration owns ten or less goods carriages at to the person concerned paying or any time during the previous year and crediting such sum, in the prescribed furnishes a declaration to that effect from and verified in the prescribed along with”], his Permanent Account manner and within such time as may be Number, to the person paying or prescribed, if such sub-contractor is an crediting such sum. individual who has not owned more than two goods carriages at any time during the previous year :

Provided also that the person responsible for paying any sum as (7) The person responsible for paying aforesaid to the sub-contractor referred or crediting any sum to the person to in the second proviso shall furnish to referred to in sub-section (6) shall the prescribed income-tax authority or furnish, to the prescribed income-tax the person authorized by it such authority or the person authorized by particulars as may be prescribed in such it, such particulars, in such form and form and within such time as may be within such time as may be prescribed; or] prescribed.

Page 52 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

proceed to examine whether Section 194C(6) and 194C(7) are to be read together to invoke provisions under section 40(a)(ia) of the Act.

"(6) Section 194C, as already noticed, makes provision where for certain payments, liability of the payee to deduct tax at source arises. Therefore, if there is any breach of such requirement, question of applicability of section 40(a)(ia) would arise.

Despite such circumstances existing, sub-section (3) makes exclusion in cases where such liability would not arise. We are concerned with the further proviso to sub- section (3), which provides that no deduction under sub-section (2) shall be made from the amount of any sum credited or paid or likely to be credited or paid to the sub-contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum in the prescribed form and verified it in the prescribed manner within the time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year.

7) The exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub- contractor does not own more than two goods carriages during the entire previous year. The moment, such requirements are fulfilled, the liability of the assessee to deduct tax on the payments made or to be made to such sub- contractors would cease. In fact he would have no authority to make any such deduction.

8) The later portion of sub-section (3) which follow the further proviso is a requirement which would arise at a much later point of time. Such requirement is that the person responsible for paying such sum to the sub-contractor has to furnish such particulars as prescribed. We may notice that under Rule 29D of

Page 53 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the Rules, such declaration has to be made by the end of June of the next accounting year in question.

9) In our view, therefore, once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However, fulfilment of such requirement cannot be linked to the declaration of tax at source. Any such failure therefore cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act.

10) When on the basis of the record it is not disputed that the requirements of further proviso were fulfilled, the assessee was not required to make any deduction at source on the payments made to the sub-contractors. If that be our conclusion, application of section 40(a)(ia) would not arise since, as already noticed, section 40(a)(ia) would apply when there is a requirement of deduction of tax at source and such requirement is either not fulfilled or having deducted tax at source is not deposited within prescribed time".

"Section 40 (a)(ia) and Section 194C(3) of the Act reads thus:

"Section 40(a)(ia) : Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub- section(i) of Section 139".

Section 194C(3): No deduction shall be made under sub-section (1) or sub- section (2) from -

(i) the amount of any sum credited or paid or likely to be credited or paid to the account of or to the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees:

Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-s.(l) or as the case may be sub-s.(2) shall be liable to deduct income-tax under this section:

Page 54 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Provided further that no deduction shall be made under subs. (2) from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the sub-contractor during the course of business of plying hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year.

Provided also that the person responsible for paying any sum as aforesaid to the sub- contractor referred to in the second proviso shall furnish to the prescribed IT authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed: or

(ii) any sum credited or paid before the 1st day of June, 1972; or (iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society. "

Page 55 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

It is noteworthy that the ITAT, Kolkata has followed the decision of Hon’ble Gujrat High Court and Hon’ble Karnataka High Court favouring the assessee. Ld. DR for revenue has not shown any decision of ITAT or High Court against assessee qua this issue. Therefore, in view of decision of ITAT, Kolkata read with the decisions of Hon’ble Gujrat High Court and Karnataka High Court, it can be safely concluded that no disallowance is called for u/s 40(a)(ia) for violation of section 194C(7). Thus, the second contention raised by revenue is also rejected. Being so, we do not find any error or perversity in the order of CIT(A). Therefore the order passed by CIT(A) is upheld and the issue raised by revenue is rejected.

Page 56 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Dal & Oil Mills (2021) 11 ITJ Online 314 (MP); Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 380 ITR 573 and Hon’ble Supreme Court in PCIT Vs. Abhishar Buildwell Pvt. Ltd. (2023) 454 ITR 212, no addition can be made u/s 153A in a non-abated assessment year in absence of incriminating material found during search. In present case, the AO has made impugned disallowance for alleged violation of legal provision of section 194C(7) but without having any incriminating material found during search. Therefore, in the light of legal view taken in these decisions, the disallowance made in three AYs 2013-14, 2014-15 and 2016-17 is legally not sustainable.

Issue No. 7 – Unexplained investment in construction of house:

Page 57 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

207/Ind/2023 order dated 22.08.2024 against revenue and in favour of assessee’s wife. For the sake of immediate reference, we re-produce the relevant paras of order of ITAT:

“Ground No. 3 to 5:

“9. Reference was made to the Departmental Valuation Officer u/s 142(A) of Income-tax Act, 1961, for period ranging from F.Y. 2014-15 to F.Y. 2017-18 in the assessee and her husband’s case w.r.t. Land and Building situated at Plot Nos. 17,18,19, 20; Sector 03, Luv Kush Nagar, Beside Scholar Den School; Deendayalpuram; Khandwa (M.P.). According to the report received from the DVO, difference in valuation of the asset(s) as declared by him and as determined by the DVO stand as follows:

S.No. F.Y. Cost of Cost of Difference investment as investment as Amount (In Rs.) declared by estimated by assessee DVO 1. 2014-15 6,78,976/- 14,90,921/- 8,11,945/- 2. 2015-16 26,72,026.13 57,06,587/- 30,34,561/- 3. 2016-17 48,74,543.02 1,01,32,841/- 52,58,298/- 4. 2017-18 36,24,502.03 73,38,651/- 37,14,149/- Total 1,18,50,047/- 2,46,69,000/- 1,28,18,953/-

In this regard, the assessee was show caused to explain the difference between the cost of investment declared by him and estimated by DVO during the assessment proceedings. In this regard, the assessee submitted the following reply:

That Reference was made to departmental valuation officer (DVO) u/s 142(A) for period ranging from F.Y. 2014-15 to F.Y. 2017-18 in assessee and her husband’s case w.r.t. Land and Building situated at Plot No. 17,18,19,20 at Sector 3, Luv Kush Nagar, Beside Scholar den School, Deendayalpuram, Khandwa (MP) and there is a difference in valuation of the building as declared by the assessee and as determined by the DVO and your honor has asked why difference (half) in amount invested as declared by the assessee and as estimated by DVO should not be treated as unexplained investment (i.e. Rs. 4,05,973/- for F.Y. 2014-15, Rs. 15,17,280/- for F.Y. 2015-16, Rs. 26,29,149 for F.Y. 2016-17 and Rs. 18,57,074/- for F.Y. 2017-

Page 58 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

18).

At the outset we wish to bring to your kind notice that the Valuation Report of Ld. DVO u/s 142(A) was based on estimations and surmises and away from the ground reality due to the fact that Ld. DVO while preparing the report has completely ignored the valuation report of Registered Valuer obtained by the assessee and also have ignored all the bills, vouchers and other relevant documents in support of such report of registered valuer. Ignorance of all these documents can be perceived from the valuation report of DVO dated 22.03.2018 wherein Ld. DVO categorically denied receipt of Registered Valuer Report in point 7.4 of the valuation report. However, assessee vide letter dated 02.02.2018 addressed to Ld. DVO (Duly acknowledged by Ld. DVO) has submitted the registered valuer’s report continued from Page 287 of submissions alongwith annexures, photographs, bills, vouchers and other supporting documents. Moreover fairness of registered valuer report cannot be challenged due to the fact that report or registered valuer was obtained by the lender bank on assessee’s behest and more importantly much before the date of search on 15.07.2017, date of search is 23.01.2018. (Copy of DVO report dated 22.03.2018, copy of questionnaire issued by DVO dated 25.01.2018, copy of assessee’s reply to questionnaire alongwith copy of full submission before Ld. DVO dated 02.02.2018 and affidavit of assessee with reference to acts of Ld. DVO dated 10.04.2018 is annexed as Annexure-4).

Therefore, we request your honour to kindly ignore the report of Ld. DVO which is based on estimation and surmises and rely on the impartial and fair valuation report or registered valuer produced by the assessee and drop any proposed addition in this regard in the best interest of justice to the assessee.

In this regard, it is stated that the assessee-group is habitual of making complaint against almost each officer who happens to handle its case. After search & seizure action, the assessee-group made complaints against various officers of the department. During and after post-search investigations, the assessee-group again made complaints against various officers. They made complaints even against very senior supervisory officers of the department. They made complaints even against lady officers of the department. Instead of raising the issues on prescribed forums, the assessee-group chose to send copy of the complaints to almost all the esteemed and high offices of the country. In the course of the instant assessment proceedings, the assessee- group filed copy of these complaints in reply to various queries. In these complaints, the assessee-group has challenged procedures, working, findings, attitude and intention of the almost every officer it came across. Now on this issue, the assessee-group cannot be accepted and encouraged. If this is allowed, it will be impossible for any department to function. As in the case of any other government department, the Valuation Officer runs and function according to the prescribed set off rules and procedures. Hence, the allegation made by the assessee against the DVO cannot be considered, particularly in view of fact that the assessee group is habitual in making complaints against almost each and every officer who, in the course of his/her lawful duties, handles the case of the assessee-group. Therefore, the assessee’s objections against the DVO’s report are hereby rejected and the findings of the DVO’s report are hereby accepted. Consequently, the year-wise difference in cost of investment as worked out by the DVO is treated as unexplained investments u/s 69 made by the assessee in construction of the house, and half of difference amount for each of the assessment year, are hereby added to the total income of the assessee for respective assessment years, and taxed as per

Page 59 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the provisions of section 115BBE of the Income-tax Act, 1961; the remaining amounts are being added to the total income of the assessee’s husband Shri Jarnalbeer Singh Bhatia simultaneously. I am satisfied that the assessee has furnished inaccurate particulars of his income for A.Y. 2015-16 & A.Y. 2016- 17. Therefore, penalty proceedings u/s 271(1)(c) are hereby initiated in the matter for A.Y. 2015-16 & A.Y. 2016-17. I am also satisfied that the assessee has under-reported his income for A.Y. 2017-18. Therefore, penalty proceedings u/s 270A are hereby initiated in the matter for A.Y. 2017-18. Further, in view of the provisions of section 271AAB of the Act, I am satisfied that penalty proceedings must be initiated for the amount added to the total income of the assessee. Hence, penalty proceedings u/s 271AAB are hereby initiated for A.Y. 2018-19. Addition : Rs. 4,05,973 for A.Y. 2015-16 Addition : Rs. 15,17,280/- for A.Y. 2016-17 Addition : Rs. 26,29,149/- for A.Y. 2017-18 Addition : Rs. 18,57,075/- for A.Y. 2018-19”

“3.3.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. A reference was made by the Ld. AO to DVO to estimating cost of investment in land and building located at Plot No 17 to 20 at Sector-3, Luv Kush Nagar, Besides Scholar Den School, Deen dayal puram, Khandwa (MP). The DVO submitted the desired report and determined excess investment in construction of house as under:

FY Declared by Estimated by DVO (In Difference (In assessee (In Rs.) Rs.) Rs.) 2014-15 678976 1490921 811945 2015-16 2672026 5706587 3034561 2016-17 4875543 10132841 5258298 2017-18 3624502 7338651 3714149 Total 11850047 24669000 12818953

Out of above difference in each year, 50% additions have been made in the hands of the appellant and remaining in the hands of her husbad Shri Jarnalbeer Singh Bhatia. Submission on this issue of the appellant is same as made in the case of Shri Jarnalbeer Singh Bhatia. I have decided this issue in the case of her husband Shri Jarnalbeer Singh Bhatia in appeal no 10049 to 10054/2019-20 order dated 30.03.2023 and found the variation in cost of construction acceptable and deleted the entire additions. Therefore, the relevant paras of the said order is reproduced hereunder which are also applicable to this case:

“3.3.2 I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the Ld. AO inter alia material brought on record. The appellant during appellate proceedings has stated that a reference u/s 142(1) was made by the Ld. AO to DVO to estimating cost of investment in land and building located at Plot No 17 to 20 at Sector-3, Luv Kush Nagar, Besides Scholar Den School, Deen dayal puram, Khandwa (MP). The DVO has submitted the desired report and determined excess investment in construction of house as under:

Page 60 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

FY Declared by Estimated by DVO (In Difference (In assessee (In Rs.) Rs.) Rs.) 2014-15 678976 1490921 811945 2015-16 2672026 5706587 3034561 2016-17 4875543 10132841 5258298 2017-18 3624502 7338651 3714149 Total 11850047 24669000 12818953

The Ld. AO after considering the report of the DVO made addition on account of difference in value declared by appellant in books of account and that determined by the DVO. The appellant further contended that the DVO as well as the Ld. AO did not consider the report of the independent registered valuer which has been obtained by the lender bank (Bank of India, Khandwa) on 15.07.2017 much prior to date of search i.e 23.01.2018. Further, the AO has ignored all bills and vouchers and other documents submitted in support of valuation report. The appellant has also submitted following reasons for the variation between the cost shown by the appellant and the DVO:-

i) That the ld VO should have valued the property by applying the local rate of the cost of construction material and labour rate. The local PWD rates are worked out by taking into consideration these local rates.

ii) Since the cost of construction material (like sand, brick, wood, cement etc) is less in M.P. in comparison to Delhi and similarly cost of labour in Khandwa town of Madhya Pradesh is less then that in Delhi hence usually the DSR (CPWD) rate are higher than MPPWD rate.

iii) That inspite of request of the appellant the detail working of cost of construction has not been given for the reason that the VO has applied DSR (2012) rate at base 100 and has not taken in to consideration the actual cost of material used in the construction and actual labour rates.

iv) That the assessee was C&F and rack handler of Ambuja cement and therefore, received cement bag at Rs. 258/- per bag as compared to market rate of Rs. 300/- per bag.

v) That the appellant had directly purchased steel, sand, gitti and other material directly from the wholesaler through own trucks.

vi) That the appellant had only paid fees of Rs. 1,00,000/- towards drawings and planning's and no site supervision services were availed from architect/engineer and had saved a substantial cost estimated around Rs. 8,50,000/-.

vii) That the DVO has wrongly exceeded constructed area by 64.16 Sqm/690.66 Sq.Ft by considering double heighted both on 1st floor and 2nd floor. However, no such double heighted structure existed.

Page 61 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

viii) That the actual area of construction is 9423 sq.ft, however, as per the DVO the actual area of construction was 10114 sq.ft. also the DVO had applied per sq.ft rate of construction at Rs. 1860/-, however, as per registered VO the same is at Rs. 1300/-, however, the appellant had only incurred Rs. 930/- per sq.ft. ix) That the assessee had incurred cost on civil construction at Rs. 87,74,970/- and toward furniture and fixture at Rs. 29,92,990/- totaling to Rs. 1,17,42,758/-.

3.3.3. I have considered the facts mentioned in the assessment order and the submission of the appellant. The Ld AO has made the addition of Rs. 4,05,973/- in AY 2015-16, Rs. 15,17,280/- in AY 2016-17, Rs. 26,29,149/- in AY 2017-18 and Rs. 18,57,075/- in AY 2018-19 {50% of total difference} on account of unexplained investment in the construction of house. Remaining amount has been added in the hands of his wife Smt. Jatinder Kaur Bhatia. The valuation officer has determined cost of construction at Rs. 2,46,69,000/- whereas, the appellant has shown total cost of construction at Rs. 1,18,50,047/-. The appellant during the assessment proceedings as well as in the appellate proceedings pointed out defects in the valuation report of the valuation officer. The appellant has submitted that valuation has been made on the basis of DSR whereas value of the property should have been estimated by applying local rate of material and labour. Rates of Delhi should not have been applied. Rates of Delhi are much higher than the rates of MPPWD. The appellant has also explained difference in rates adopted by registered valuer and that shown by appellant. The appellant stated that the registered valuer though have adopted state PWD rates however, has included cost of transportation and fees paid to contractors and supervisors which were actually saved by the appellant as a result of transportation business and past supervision experience. I find contentions of the appellant are justified. Valuation should have been made after considering local rate of cost of material & labour and also the business activity and past experience of the appellant and other family members. Regarding applying local or Local PWD rates, Hon’ble Supreme Court in the case of CIT Vs. Sunita Mansingha,(2017) reported in 393 ITR 0121 (SC)/Civil Appeal No.3064 of 2007, judgment dated 29.03.2017 has held that local Public Works Department rates are to be applied and adopted in place of Central Public Works Department rates. Relevant paras of the said decision are reproduced hereunder:

“From the order of the Tribunal we find that the Tribunal has even though held that the reference to the Departmental Valuation Officer in question is not valid, in view of the decision of this Court in the Case of Amiya Bala Paul v. CIT (2003) 262 ITR 407, but it has also held that it is s settled principle of law that in place of Central Public Works Department rates local Public Works Department rates are to be applied and adopted to determine the cost of construction. In view of the fact that Section 142A was inserted by Finance (No.2)Act, 2014 (23 of 2004) w.e.f. 15th November, 1972 and subsequently again substituted by Finance Act, 2010 (14 of 2010) w.e.f. 1st July, 2010 and Finance (No.2) (225 of 2014) w.e.f. 1st October, 2014, as the proviso to sub- section (3) of Section 142A as it existed during the relevant period, reference to the Departmental Valuation Officer can be made because assessment in the present case had not become final and conclusive because the appeal preferred by the Revenue under Section 260A of the Income Tax Act, 1961 was pending before the Rajasthan High Court.

Page 62 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

However, in view of the finding recorded by the Tribunal that the local Public Works Department rates are to be applied and adopted in place of Central Public Works Department rates, we do not find any good ground to interfere in the impugned judgment on this issue on merits. The appeal fails and is dismissed.” 3.3.4. Further, on comparison of two estimated reports i.e. DVO and registered valuer the following is observed:-

Report of DVO Report of Registered valuer (After considering furniture, wood work, stone work, interior and other furnishing items) Particulars Area in Amount Particulars Area Amount Sq.mt in @ 13455 Sq.mt Ground 301.48 Ground floor 307.79 12250000 floor + Gurudwara 17137129 1st floor 258.60 1st floor + 273.04 servant quarter 2nd floor 294.13 2nd floor 273.04 Total @ 854.21 Tower 22.41 20062/- Total 875.43 Double 31.52 710083 heighted @ 22528 Gurudwara 14.49 229811 @ 15860 Servant 39.37 721622 quarters @ 18327 Total area 939.59 18798644 Total area of 875.43 12250000 of civil civil work @ work 13455 Other extra 4807238 Water supply 100000 item arrangement Architect 944235 Compound 368000 fees and wall consultancy charges Local bodies 118029 Pavement 150000 Total 24668147 Total 12868000 estimate estimate

The appellant by explaining difference of 64.16 Sq.mt in total constructed civil area that taken by the DVO and by the registered valuer stated that DVO has taken double heighted tower on both first and second floor. Further, the measurements have been taken manually and have scope of errors. Further, the DVO made addition of Rs. 4807238/- on account of 'other extra items' for which no bifurcation has been given. Furthermore, the DVO has estimated fees of architect and consultancy at Rs. 9,44,235/-, however, the appellant had only paid sum of Rs. 1,00,000/- towards designs and planning and no

Page 63 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

amount was paid towards supervision or architect charges. Nonetheless, the DVO has ignored all the bills, vouchers and details alongwith registered valuer report before estimating the cost of investment. The appellant has also filed copies of bills and vouchers for all the expenditure made towards purchase of raw material before me which are briefly tabulated as under:-

S.No Expenditure towards Amount (In Rs.) 1 Consultation fees (drawings and planning) 100000 2 Iron material 1090488 3 Borewell charges 75000 4 Cement 555809 5 Bricks 389531 6 Gitti 119055 7 Sanitary items 578481 8 Electrical goods 890534 9 POP 459012 10 Flooring 702788 11 Paint 372138 12 Ply and furniture 2702608 13 Garden 70650 14 Labour charges and fees 2310639 15 Electricity bill during construction 167363 16 Sand 88298 17 Local body Taxes 152021 18 Glass work 18561 19 Duties and taxes 166250 20 Bank interest 733532 Total 11742758

Considering, the entire factual position of the case, I do not find any infirmity in the measurement taken by the DVO i.e total area of civil work 939.59 sq.mt, however, the DVO ought to have adopted state PWD rates rather than CPWD rates, therefore, the rates adopted by the registered valuer i.e. Rs. 13455/- per Sq.mt in my considered opinion are correct and prevailing State PWD rates. Thus, the total investment made by the appellant as per state PWD rate is estimated at Rs. 1,26,42,183/- (939.59 x Rs. 13455). Further, an addition as made by the registered valuer on account of water supply arrangement, pavement, compound wall amounting to Rs. 6,18,000/- needed to be made in the said investment. Hence, the total investment in the said property comes at Rs. 1,32,60,183/- (Rs. 1,26,42,183 + Rs. 6,18,000). Further, the registered valuer has not considered the expenditure incurred by the appellant amounting to Rs. 1,00,000/- on account of architect fee and Rs. 1,52,021/- on account of payment made to local body. Considering this, total construction cost comes to Rs. 1,35,12,204/- (Rs. 1,32,60,183+Rs. 1,00,000+Rs. 1,52,021).

3.3.5. Now coming to report of DVO, he has added cost of extra items amounting to Rs. 48,07,238/- for which no bifurcation or details have been furnished in the valuation report. The Ld. AO has also not given any bifurcation or explanation regarding the same and has accepted the impunged investment ipso facto without giving or calling an explanation from the DVO. On perusal of report of the DVO in para 9 of the report the following has been mentioned under the heading 'Comments of the Valuation Officer' :-

Page 64 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

The PUC consists of a residential building with GF, FF and SF with superior specifications such as vitrified tile flooring in complete building, superior type of acrylic printed false ceiling in complete building, wallpapers, marble flooring in staircase steps, 12mm thick glass in staircase railing with stainless steel railing and in balcony, modular kitchen with stainless steel chimney, cupboards in rooms, compound wall with stainless steel gate etc.

I find that a separate addition on account of furniture and fixtures have already been made by the Ld. AO in the hands of appellant. Further, as discussed herein above, the appellant has furnished copies of bills and vouchers of the steel, furniture and other items before the Ld. AO which have totally been ignored by the Ld. AO before making the impunged addition and before accepting the report of the DVO. The appellant has already shown expenditure of Rs. 8,32,803/- on account of electrical accessories and Rs. 27,01,162/- on account of ply and furniture goods. Thus, I find no merit in making the impunged addition again in the hands of appellant. Therefore, the amount of Rs. 48,07,238/- should not be considered in valuation cost.

3.3.6 The Ld. AO on the basis of report of the DVO has also made addition of Rs. 9,44,235/- on account of architect fees and consultancy charges @ 4% of total cost of project and Rs. 1,18,029/- on account of approval of drawings from local bodies @ 0.5% of total cost of project. I find that the impunged addition have been made on sheer guess work and hypothetical basis. The appellant had paid sum of Rs. 1,00,000/- towards drawing and planning charges and have not availed supervision services of an architect which in instant case is not mandatory. Further, appellant had paid sum of Rs. 1,52,021/- to local authorities towards approvals and other taxes. Therefore, the Ld. AO ought to have considered the documentary evidences filed by the appellant before him before making the impunged addition. The Ld. AO itself should have allowed deduction on account of self supervision which have been allowed by various courts between 10 to 12.5%. Some of the judgments’ wherein the rebate of CPWD rates and also rebate on account of self supervision have been allowed are summarized as under:

S.No Reference Citation Rebate allowed for Supervisio CPWD rate n 1 ITO vs Nitesh 138 TTJ 116 (JP) 12% 20% Maheshwari 2 Rajeev Mewara 35 SOT 001 (Indore) 10% 25% 4 Shri Jagmohan (2008) 10 ITJ 187 (Trib- 10% 30% Jaiswal Indore)

6 Nandu Atmaram ITA No.1036 to 1041/ 12.5% 20% Rajput vs. DCIT, PN/2014 dt 05.08.2016 Pune 8 DCIT v. Smt. C.K. [2010] 6 ITR(T) 193 10% 15% Sumathy (Chennai)

However, the appellant is in possession of actual payment on account of architect fee/supervision charges which has been included in the cost of construction, as determined above, determined at Rs. 1,35,12,204/-. Thus, additions amounting to Rs. 9,44,235/- and Rs. 1,18,029/- should not be considered and actual payment of Rs. 1,00,000/- made to architect for

Page 65 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

drawings and Rs. 1,52,021/- made to local authorities for getting approval should only be considered.

3.3.7 In nutshell, the DVO as well as the Ld. AO ought to have applied state PWD rates, considered the bills etc before determining impunged investment. Further, the Ld. AO ought to have considered the documentary evidences filed by appellant during assessment proceedings before making additions on other accounts. Thus, as discussed above, the total investment in impunged property comes at Rs.1,35,12,204/-. The appellant on other hands has shown investment of Rs. 1,18,50,047/-.

3.3.8. The appellant has also claimed that he had saved cost of raw material by 20% by using its own truck and has also saved amount by self supervising the construction. Appellant has also claimed that he has past experience of construction of petrol pumps and warehouses and therefore, at the time of construction of house have saved hefty amount towards material cost/supervision/architect charges. I find the claim of the appellant justified to some extent. It would be justified if, cost saved in purchase of material is considered. But, it cannot be quantified in certain terms. However, as against claim of 20% of such cost, 5% deduction on this account will be reasonable. Considering this, a further deduction of Rs. 6,63,009/- (Rs. 1,32,60,183 x 5%) is allowed. Accordingly, total construction cost is worked out to Rs. 1,28,49,195/- (Rs. 1,35,12,204 – Rs. 6,63,009) as against cost of construction of Rs. 1,18,50,047/- shown by the appellant.

3.3.9. Accordingly, cost of civil construction is worked out Rs. 1,28,49,195/- which is 8.43% more than the cost shown by the appellant. This variation is very nominal and is acceptable in view of various judicial pronouncements. I find decision of Hon’ble MP High Court in the case of Abeeson Hotels Pvt. Ltd., reported in (2004) 191 CTR 263 is relevant here, though it deals with the variation between valuation done by the DVO and the value shown by the assessee, wherein in such circumstances, variation of 10% has been held as acceptable. Relevant paras of the decision of Hon’ble jurisdictional MP High Court are reproduced here under:-

“5. The question in substance that arose before the taxing authorities was in regard to valuation of assessee's properties. It was found that there is some variation between the valuation made by the assessee and what is made by the DVO. So far as assessee's valuation was concerned, it was valued at Rs. 1,41,79,527 whereas the valuation made by DVO was at Rs. 1,58,38,500. In the opinion of Tribunal, 10 per cent difference usually occurs in two valuers and hence, the valuation shown by assessee was accepted. The Revenue has now come up in appeal against this finding.

Page 66 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

In view of above discussion and above decision, the addition made by the Ld AO is not sustainable as the difference in cost of construction is very nominal.

3.3.10. Therefore, addition of Rs. 4,05,973/- in AY 2015-16, Rs. 15,17,280/- in AY 2016-17, Rs. 26,29,149/- in AY 2017-18 and Rs. 18,57,075/- in AY 2018-19 on account of difference in investment in house shown in books of account and estimated by the DVO are deleted. Thus, appeal on this ground is allowed.”

In view of above discussion made in the case of her husband, the addition made by the Ld AO is not sustainable.

3.3.5. Therefore, addition of Rs. 4,05,973/- in AY 2015-16, Rs. 15,17,280/- in AY 2016-17, Rs. 26,29,149/- in AY 2017-18 and Rs. 18,57,075/- in AY 2018-19 on account of difference in investment in house shown in books of account and estimated by the DVO are deleted. Thus, appeal on this ground is allowed.”

(i) The AO, in assessment-order, has not talked on merit of the issue. The AO has unnecessarily talked on unrelated aspects of habits/ attitude of assessee and made addition mechanically on the basis of difference in the cost of investment declared by assessee and value estimated by Departmental Valuation Officer (DVO). On the other hand, the CIT(A) has rightly considered assessee’s submission on merit of the issue and passed a well-reasoned order.

(ii) The AO made reference dated 24.01.2018 to the DVO for determining investment made by assessee in property. Acting thereupon, the DVO issued notice dated 25.01.2018 to assessee (Page 85-86 of Paper-Book). The assessee filed reply dated 02.02.2018 to DVO (Page 77-78 of Paper-Book) and vide Para 17 thereof, the assessee filed a Valuation-Report of Registered Valuer (RV) to DVO. On one hand, the DVO has acknowledged the reply dated 02.02.2018 filed by assessee in Para 3 of his Valuation-Report in the spaced titled “Chronological Statements of Notices sent to the assessee and Replies received” (Page 80 of Paper-Book) but subsequently in Para 7.4 of very same report (Page 81 of Paper-Book), the DVO has made a factually incorrect reporting that the assessee did not file RV’s report. Ld. AR went on explaining that the RV’s report submitted by assessee to DVO (Page 372 of Paper-Book) was directly procured by Bank of India, Khandwa from Shri Abhishek Maheshwari, Chartered Engineer, Registered Valuer, for loan purpose and the report was obtained on 15.07.2017 which is prior to initiation of search. It is further submitted that the assessee also filed complete details of construction in the proforma supplied by DVO (Page 88-89 of Paper-Book). The DVO ignored

Page 67 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

assessee’s submission and made his own estimation on the basis of simple mathematics of Square Meters x Flat rate (Page 82 of Paper-Book). As against this, the RV has, clearly certified in Point No. J of “Declarations” in his report that he has valued construction taking into account the PWD specifications and prevailing cost of construction (Page 372-382 of Paper-Book). The RV’s report is more reliable and credible for the reasons that (i) the report was obtained for bank loan purpose, (ii) the report was obtained by independent bank, (iii) the report was obtained prior to search and (iv) the RV made valuation on the basis of prevailing rates. Ld. AR submitted that all details/documents as considered by CIT(A) were very much available before DVO and AO. There was nothing new before CIT(A) and the CIT(A) has merely analysed and appreciated the documents already available.

(iii) That the CIT(A) has passed a well-reasoned order after vehement analysis of each and every aspect. Therefore, his order presents a correct adjudication of assessee’s issue and must be upheld.

Page 68 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

proceeding to estimate the investment made by assessee in property and having regard to the Report submitted by DVO. It is a further fact that the years involved are AYs 2015-16 and 2016-17 which were in the nature of “completed or unabated assessment years” as the search was conducted on 23.01.2018; the assessee had already filed returns for those years u/s 139(1) on 27.09.2015/30.09.2016; assessments of those years were not pending on the date of search (23.01.2018) and the time-limits for issuance of notices u/s 143(2) had also expired by date of search. Therefore, in such a case, as per decisions by Hon’ble Jurisdictional High Court of Madhya Pradesh in PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP); Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 380 ITR 573 and Hon’ble Supreme Court in PCIT Vs. Abhishar Buildwell Pvt. Ltd. (2023) 454 ITR 212, no addition can be made u/s 153A in a non-abated assessment year in absence of incriminating material found during search. In present case, the AO has made addition in assessments u/s 153A by making a reference to DVO u/s 142A but without having any incriminating material found during search. Therefore, in the light of legal view taken in these decisions, the addition made by AO is legally not sustainable. 21. In view of above, the grounds raised by revenue are meritless and dismissed therefore.” 35. Therefore, we adopt the very same reasoning and conclusion as taken by ITAT, Indore in assessee’s wife’s case. Accordingly, the issue raised by revenue is held to be meritless and rejected.

Issue No. 8 – Unexplained investment in furniture & fixture:

Page 69 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

“3.4.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the Ld. AO inter alia material brought on record. On the basis of LPS-3, the Ld. AO found that the appellant alongwith his wife Smt. Jatinder Kaur Bhatia had incurred unaccounted expenditure of Rs.7,99,177/- in A.Y.2017-18 and Rs.21,90,916/- in A.Y.2018-19 and made addition of 50% of such expenditure in the hands of the appellant and remaining 50% has been made in the hands of his wife. The appellant regarding the said addition has contended

Page 70 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

that various loose papers were found and seized during the course of search and were inventoried as LPS-3 which pertains to quotation, delivery challans and expenditure towards construction of house. The said expenditure relating to furniture and fixture being utilized in residential premises is included in valuation report of the DVO as well as registered valuer. Further, the expenditure is fully recorded in books of accounts. However, a copy of all the necessary bills and voucher regarding furniture and fixtures have already been submitted before the Ld. AO.

3.4.3. The appellant before the Ld. AO as well as before me has filed copies of bills and vouchers for expenditure made on furniture and fixtures which were also found and seized during the course of search proceedings as LPS-3. On perusal I found that the appellant during the FY 2016-17 & 2017-18 has made following expenditure on electrical accessories and goods:-

S.No Name of the seller Bill no/date Description Amount (In Rs.) 1 Jasbhai and Co 38/31.05.2016 Electrical wire 73668 2 Jasbhai and Co 713/03.03.2017 Electrical 3690 accessories 3 Jasbhai and Co 712/03.03.2017 Electrical 6250 accessories 4 Rashmi Electronics 51/03.04.2017 Electrical 12932 goods 5 Rashmi Electronics 1239/30.06.2017 Electrical 21700 goods 6 Rashmi Electronics 1215/30.06.2017 Electrical 26450 goods 7 Rashmi Electronics 945/13.06.2017 Electrical 89990 goods(TV) 8 Rashmi Electronics 940/13.06.2017 Electrical 34500 goods (RO purifier) 9 Rashmi Electronics 702/20.05.2017 Electrical 36900 goods (inverter) 10 Jasbhai and Co 03/14.04.2017 Electrical 52591 accessories 11 Rashmi Electronics 470/02.05.2017 Electrical 308800 goods 12 Jasbhai and Co 89/29.04.2017 Electrical 2620 accessories 13 Jasbhai and Co 64/21.04.2017 Electrical 18442 accessories 14 Jasbhai and Co 59/21.04.2017 Electrical 12445 accessories 15 Jasbhai and Co 67/28.05.2017 Electrical 35232 accessories 16 Jasbhai and Co 66/28.05.2017 Electrical 62599 accessories 17 Jasbhai and Co 228/27.06.2017 Electrical 2902 accessories 18 Jasbhai and Co 227/27.06.2017 Electrical 15738 accessories 19 Jasbhai and Co 20/08.05.2017 Electrical 15354 accessories

Page 71 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Total 832803

The appellant during the FY 2016-17 & 2017-18 has made following expenditure on ply & furniture goods:- S.No Name of the Bill no/date Description Amount seller 1 Rama RW/1617/2343/28.10.2016 Plywood 832706 Woodcraft 2 Sethi plywood 275/07.11.2016 Plywood 15400 and glass house 3 Sethi plywood 398/07.11.2016 Plywood 9663 and glass house 4 Forest Gold 577/27.10.2016 Laminate 52500 sheets 5 Herambh 1570/09.01.2017 Plywood 107600 Enterprises 6 Herambh 1595/13.01.2017 Plywood 36600 Enterprises 7 Herambh 1803/20.02.2017 Plywood 27150 Enterprises 8 Kewalram 293/06.03.2017 Foam and 173440 Krishanlal mattress Peshawari 9 Metro Ply & 655/09.03.2017 DL Sheets 52000 Laminates 10 Herambh 1938/18.03.2017 Plywood 15300 Enterprises 11 Herambh 1973/22.03.2017 Plywood 8775 Enterprises 12 Vintus Home VMS/16-17/08/07.04.2017 Furniture 200931 Solutions 13 Sethi plywood 9/05.04.2017 Plywood 78170 and glass house 14 Sethi plywood 10/05.04.2017 Plywood 56248 and glass house 15 Sethi plywood 23/09.04.2017 Plywood 40899 and glass house 16 Sethi plywood 33/11.04.2017 Plywood 22500 and glass house 17 MP Ply & 45/08.04.2017 Decorative 20800 Veneers ply 18 Surya glass 159/20.04.2017 Furniture 7766 house accessories 19 Surya glass 142/19.04.2017 Furniture 57036 house accessories 20 Vintus Home VMS/16-17/09/07.04.2017 Furniture 490240 Solutions accessories 21 Sunny lights 33/01.05.2017 Jhoomar 22800

Page 72 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

22 Twenty First SLS/SO/17-18/740 Furniture 136521 Centuary 02.05.2017 accessories Techno Products Pvt Ltd 23 Genesis Arts 1018/09.05.2017 Acrylic 16885 cutting 24 Bagana 222/15.05.2017 Hybrid 12060 Agencies boards 25 Bagana 158/02.05.2017 Hybrid 7806 Agencies boards 26 Bagana 159/03.05.2017 Hybrid 7806 Agencies boards 27 Shee Jee 1083/17.05.2017 Locks and 46460 Hardware door handles 28 Avi 437/09.06.2017 Plywood 13100 Enterprises 29 Shibaam 14/22.06.2017 Acrylic 22800 design cutting 30 Variety 432/29.06.2017 Furniture 12000 Harwdware accessories Store 31 SD Glasas & 860/03.06.2017 Glass 100000 Aluminium works Total 2701162

On perusal of evidences on record it is abundantly and evidently clear that the appellant has made expenditure towards furniture and fittings and are fully recorded in books of account and source is found explained. Further, this cost has already been considered in cost of construction of house by the registered valuer. Therefore, the Ld. AO was not justified in ignoring key evidences and facts putforth before him by the appellant during assessment proceedings. Thus, the addition made by the Ld. AO amounting to Rs. 3,99,589/- in AY 2017-18 and Rs. 10,95,458/- in AY 2018-19 are hereby deleted. Therefore, appeal on this ground is allowed.”

Page 73 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the expenditure is recorded in books, the revenue’s endeavour is only to convey that as per Note-3 of Valuation Report, the cost of furniture is not included in valuation. In that view of matter, we do not have any reason or basis to interfere with the clear-cut finding of CIT(A) that the expenditure is recorded in books of accounts and stands explained. Therefore, we uphold the order of CIT(A) and the issue raised by revenue is rejected.

Issue No. 9 – Unexplained cash credit u/s 68 related to gifts received from Smt. Manjeet Kaur Bhatia:

“15.1 From the Audit Report of M/s. Bhatia Transport Service Proprietor Shri Jarnalbeer Singh Bhatia, it is observed that Smt. Manjeet Kaur Bhatia gifted an amount of Rs. 25,00,000/- in F.Y. 2015-16 and Rs. 25,00,000/- in F.Y. 2017-18 to the assessee during F.Y. 2017-18. In this regard, the assessee was show-caused to establish the identity and creditworthiness of the creditor and genuineness of the transaction. In response, the assessee has stated that the source amounts were the payments of freight paid by M/s. Bhatia Transport Service and M/s. Rajbeer Road Lines as per the ledgers attached to Smt. Manjeet Kaur Bhatia. The assessee has also furnished copy of a certificate from the Bank of India, Khandwa, in support of his contention that the amounts were received to Smt. Manjeet Kaur Bhatia from the aforesaid two parties. 15.2 The contention of the assessee cannot be accepted. The bank certificate only says that the amounts were received from the aforesaid parties; but the nature of payments remains unclear. The ledgers furnished by the assessee are only the self- serving documents, and has no independent evidentiary value. Further, the bank statement of Smt. Manjeet Kaur Bhatia of seven years runs in only 3 pages and has very few entries. This establishes that Smt. Manjeet Kaur Bhatia was not in receipt of regular payments of freight. Also, the alleged lumpsum payments of Rs. 25,00,000/- each are not in agreement of the income shown by Smt. Manjeet Kaur Bhatia for respective years. It is, therefore, clear that the assessee has put-forth a cooked up theory, which cannot be substantiated by him. 15.3 From all the above discussion, it is clear as crystal that the money transferred by Smt. Manjeet Kaur Bhatia is unexplained cash credits in the hands of beneficiary

Page 74 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

i.e. M/s. Bhatia Transport Service Proprietor Shri Jarnalbeer Singh Bhatia u/s 68 of the Income-tax Act, 1961 ; hence, the amounts of Rs. 25,00,000/- in A.Y. 2016-17 and Rs. 25,00,000/- in A.Y. 2018-19 are hereby added u/s 68 to the total income of the assessee and is taxed @ 30% for A.Y. 2016-17 & @ 60% for A.Y. 2018-19 as per the provisions of section 115BBE of the Income-tax Act, 1961. Further, I am satisfied that the assessee has furnished inaccurate particulars of his income for A.Y. 2016-17. Therefore, penalty proceedings u/s 271(1)(c) is hereby initiated for A.Y. 2016-17. Also, in view of the provisions of section 271AAB of the Act, I am satisfied that penalty proceedings must be initiated for the amount added to the total income of the assessee. Hence, penalty proceedings u/s 271AAB are hereby initiated for A.Y. 2018- 19.”

“3.8.2 . I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The appellant during assessment proceedings as well as during appellate proceedings has strongly contended that the appellant had received gift sum of Rs. 25,00,000/- each through cheques from his mother Smt. Manjeet Kaur Bhatia in AY 2016-17 & AY 2018-19 vide gift deeds dated 05.01.2016 and 14.08.2017 respectively. The appellant has also claimed that the said amounts had been earned out of freight from M/s Rajbeer Road Lines and M/s Bhatia Transport Service by the donor. In support appellant has filed copies of bank account statements, copies of ledger account of M/s Rajbeer Road Lines and M/s Bhatia Transport Service and balance sheet of the donor.

3.8.3 After considering claim of the appellant and findings of the Ld. AO, I find that the donor has been providing freight services to M/s Rajbeer Road Lines and M/s Bhatia Transport Service. The appellant before Ld. AO as well as before me has filed copies of ledger account of freight in the books of account of M/s Bhatia Transport Service and balance sheet and profit and loss account statement for FY 2015-16, 2016-17 and 2017-18. On perusal of evidences on record, I find that the appellant has shown freight receipts during FY 2015-16 of Rs. 36,92,820/-, during FY 2016-17 of Rs. 4,09,990/- and during FY 2017-18 of Rs. 3,07,640/- from M/s Rajbeer Roadlines and during FY 2016-17 of Rs. 9,50,730/- and during FY 2017-18 of Rs. 12,30,650/- from M/s Bhatia Transport Service. The appellant has also filed copy of ledger account of donor Mrs Manjeet Kaur Bhatia in the books of M/s Bhatia transport Service for AY 2017-18 and for FY 2015-16 in the books of M/s Rajbeer Roadlines. On perusal, it has been observed that the said ledgers mentions details of datewise freight charges with train rack number. The donor as on 01.04.2017 has an opening credit balance of Rs. 30,76,464/- on account of freight receipts (amount receivable) from M/s Bhatia Transport Services out of the said amount sum of Rs. 10,00,000/- was received vide cheque no 46043 and Rs. 15,00,000/- was received vide cheque no 25851 on 14.08.2017 and the same amount was given by her to the appellant as gift. Likewise, the donor as on 01.04.2015 has an opening credit balance of Rs. 15,40,477/- on account of freight receipts (amount receivable) from M/s Rajbeer Roadlines. Further, as on 05.10.2015 the appellant has earned freight income of Rs. 29,45,594/-. Out of total amount receivable sum of Rs. 15,40,477/- was received vide cheque no 31563 and Rs. 9,60,000/- was received vide cheque no 31564 on 05.10.2015 and out of same amount sum of Rs. 25,00,000/- was given by her to the appellant as gift. This factual position have not been considered by the Ld. AO before making impunged addition on substantive basis in the hands of the appellant and on protective basis in the hands of

Page 75 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

the donor smt. Manjeet Kaur Bhatia. The Ld. AO on one hand has simply treated these evidences as self-serving documents and on other hands has accepted returned income of the donor which has been filed on the basis of these documents. Considering the above discussion and material on record, the appellant successfully established the genuineness of gift. The identity and source of income of the donor have been established. Further, the gift has been given out of balances in the bank account of the donor. Thus, the addition on this account is not found sustainable. 3.8.4. In view of the above discussion and evidences on record the Ld. AO was not justified in making addition without considering the merits of documentary evidences putforth by the appellant during assessment proceedings. Thus, the substantive addition made by the Ld. AO amounting to Rs. 25,00,000/- in AY 2016-17 and Rs. 25,00,000/- in AY 2018-19 are hereby deleted. Therefore, appeal on this ground is allowed.” 44. Before us, Ld. DR for revenue advanced the observations made by AO that (i) the assessee claimed to have received impugned gifts from his mother Smt. Manjeet Kaur Bhatia and it is claimed that assessee’s mother was having freight receipts from M/s Bhatia Transport Services and M/s Rajbeer Road Lines. The assessee filed a bank certificate in support of freight receipts but the AO has found that bank certificate did not show the nature of receipts, (ii) that the Ledger A/cs filed by assessee to show freight receipts were treated by AO as self-serving documents, (iii) that even the bank statement of the donor was running in 3 pages only, and (iv) that the gifts given by donor did not commensurate with the income of donor. Taking into account these facts, the AO rightly observed that the assessee has only cooked up a theory of receiving gifts which could not be substantiated and accordingly made addition. Ld. DR submitted that the CIT(A) has wrongly disturbed the findings given by AO and deleted addition, therefore the order of CIT(A) must be set aside on this issue.

Page 76 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

and by utilising those amounts, the impugned gifts were made to assessee. The CIT(A) has noted complete details/figures of receivables, amounts received and gifted to assessee with dates and cheques numbers. Therefore, the CIT(A) has passed a well-reasoned order taking into account correct facts and the order of CIT(A) does not demonstrate any mistake or perversity. Ld. AR prayed to uphold the order of CIT(A).

Page 77 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

Hence, we uphold the order of CIT(A). The issue raised by revenue is therefore rejected.

Issue No. 10 – Unexplained cash credit u/s 68 related to gift received from Smt. Mandeep Kaur Bhatia:

Page 78 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

“3.9.2. I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The appellant during assessment proceedings as well as during appellate proceedings has contended that he had received gift of Rs. 44,00,000/- through RTGS from Smt. Mandeep Kaur Bhatia (donor), wife of elder brother shri Arvind Singh Bhatia in AY 2018-19. The gift has been received after the search vide gift deed dated 31.03.2018. I find that gift was given in following manner: Date Amount (In Rs.) Mode Remarks

Page 79 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

13.03.2018 10,00,000/- RTGS, Bank of India, Cash deposits have 15.03.2018 10,00,000/ Saving Bank Account been made and out 19.03.2018 10,00,000/ No.951920110000359 of balance available, gift was 26.03.2018 14,00,000/ given through RTGS

The appellant has also claimed that the said amounts have been earned by the donor out of interest income and cash in hand as on date of search. In support appellant has filed copies of cash flow statement/details of advance given to various persons/interest earned on advance amount alongwith copies of return of income and computation sheet of the donor. The appellant has also filed details of sales of flats of Pune by the donor in support of the claim that Rs.28,00,000/- was received in cash from the above sale.

3.9.3. After considering claim of the appellant and findings of the Ld. AO, I find that the appellant alongwith her husband Shri Arvind Singh Bhatia has sold following flats in Pune :- Details of property sold Date Sale consideration Flat no 902, A-7, Kumar Primevera, 17.01.2012 4060000 Vadgaon Sheri, Pune Flat no 703, A-7, Kumar Primevera, 28.10.2010 3100000 Vadgaon Sheri, Pune Flat no 503, A-7, Kumar Primevera, 29.07.2010 3100000 Vadgaon Sheri, Pune Flat no 502, A-7, Kumar Primevera, 14.10.2010 3200000 Vadgaon Sheri, Pune

Out of entire consideration, sum of Rs. 28,00,000/- was received in cash to the donor which has been acknowledged by the Ld. AO in para 7.3 of the assessment order of the donor. The fact that the donor sold flats in Pune, is also find place in the assessment order passed u/s.147/144 of the Act for A.Y.2009-10 on 27.07.2016, as submitted in the case of donor, wherein the then AO rejected the claim of deduction u/s.54 of the Act and stated that the money so received was used for some other purposes. The consideration received by donor in cash was given as petty loans of ranging between Rs.15,000/- to Rs.25,000/- to labours working for loading and unloading railway racks and others. I further find that the loans were given for a short period of time and were subsequently repaid with interest. On perusal of details of donor as place on record by the appellant, it is found that the donor during FY 2015-16 gave fresh loan to 105 different people amounting to Rs. 67,28,807/- and has earned interest of Rs. 2,97,100/-. The donor during FY 2016-17 gave fresh loan to 57 different individuals and earned interest of Rs. 5,42,743/-. Out of these loans majority of loans were repaid back. Likewise in FY 2017-18 the donor gave fresh loan to 105 individuals and has earned interest of Rs. 2,04,602/-. The donor has also shown interest income under the head “income from business/profession’. The appellant has also filed copies of cash flow statement and balance sheet for FY 2016-17 and FY 2017-18 of the donor which is being reproduced hereunder:-

Balance Sheet as of 31.03.2017 Liabilities Assets Particulars Amount Particulars Amount Capital account Fixed assets Agricultural income 7500 Land at gram Jalna 156125 Mandeep Kaur Bhatia Land at gram Singot 308475

Page 80 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

7342935.80 Current Assets Loans & advances 5399765 Cash in hand 1485288.90 Bank account 781.90 Total 7350435.80 Total 7350435.80

Cash flow summary 01.04.2016 to 31.03.2017 Inflow Outflow Particulars Amount Particulars Amount Capital account Capital account Agricultural income 7500 Mandeep Kaur Bhatia 173350 Current assets Current assets Loans & advances 1102370 Loans & advances 525150 Indirect income Indirect Expenses Interest income 542524 Other Exp 28800 Salary & wages 108000 Total 1652394 Total 835300

Balance Sheet as of 31.03.2018 Liabilities Assets Particulars Amount Particulars Amount Capital account Fixed assets Agricultural income 7500 Land at gram Jalna 156125 Mandeep Kaur Bhatia 2694451.80 Land at gram Singot 308475 Profit & Loss A/c Current Assets Current period 64088.20 Loans & advances 201185 Cash in hand 2052500.90 Bank account 47754.10 Total 2766040 Total 2766040

Cash flow summary 01.04.2017 to 31.03.2018 Inflow Outflow Particulars Amount Particulars Amount Capital account Capital account Mandeep Kaur Bhatia 72716 Mandeep Kaur Bhatia 321200 Current assets Current assets Loans & advances 5198580 Loans & advances 4400000 Indirect income Indirect Expenses Interest income 205717 Bank charges 4828.80 Other Exp 28800 Salary & wages 108000 Total 5477013 Total 4862828.80

From the above it is evident that the loans and advances were reduced to Rs.2,01,185/- in the year under consideration from Rs.53,99,765/- of immediate preceding year which shows recovery of loans from borrowers. Capital balance amounting to Rs.73,50,435/- of earlier year is reduced to Rs.27,66,040/- in the year under consideration which shows the withdrawal of substantial amount from capital account. The donor during the year under consideration has received sum of Rs.51,98,580/- from borrowers and has also earned interest income in cash of Rs. 2,05,717/-. Therefore, there was sufficient cash in hand with the donor to get the same deposited in her bank account and giving subsequently gift of Rs. 44,00,000/- to the appellant. The evidence filed by appellant were also filed before Ld AO, however, the Ld. AO has treated them as self serving documents. The Ld AO here has failed to point out any defect in the balance sheet and

Page 81 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

cash flow statement furnished by the appellant. Mere making a plain statement without pointing any adversity is of no use, the Ld. AO ought to have made contrary findings which could prove claim of the appellant incorrect, which is completely missing here. The Ld. AO has also alleged that the appellant failed to furnish any evidence substantiating how the cash received in FY 2010-11 travelled upto FY 2017-18. Here, it becomes important to mention that the donor had advanced petty loans to more than 250 different individuals in different years and loans with interest were repaid back to by these individual year after year and thus, the cash received on sale of flats accompanying with interest earned over the years travelled to the year under consideration. Accordingly, source of deposit of cash in the bank account is found explained out of which the donor gifted sum of Rs.44,00,000/- to the appellant, her brother-in-law. Considering the above discussion and material on record, the appellant successfully established the genuineness of gift. The identity and source of income of the donor have been established. Further, the gift has been given out of balances in the bank account of the donor. Thus, the addition on this account is not found sustainable. 3.9.4. In view of the above discussion, the Ld. AO was not justified in not considering evidences filed by the appellant and also in treating the same as self serving. Thus, addition made by the Ld. AO amounting to Rs. 44,00,000/- is deleted. Therefore, appeal on this round is allowed.” 51. Before us, Ld. Representatives of both sides made their respective contentions for and against the addition and drew our attention to the documents filed in Paper-Book. While Ld. DR for revenue strongly supported the order of AO, Ld. AR for assessee supported the action of CIT(A).

Page 82 of 83

Jarnalbeer Singh Bhatia IT(SS)A Nos. 19 to 27/Ind/2023 & ITA No. 226 & 228/Ind/2023- AY 2013-14 to 2018-19

assessee with PAN: AIDPB1588K in the jurisdiction of same AO. Therefore, if the AO had any doubt on genuineness of transaction or with respect to the donor, the AO could very well make enquiries from the donor but there is no such exercise done by AO. The AO has merely acted on probabilities and human behaviour, etc. whereas the CIT(A) has taken into account complete facts, Balance-Sheets and Cash Flow Summaries of the donor and thereafter arrived at a conclusion to accept the genuineness of gift received by assessee from donor. We do not find any reason to make interference with the order passed by CIT(A). Consequently, the order of CIT(A) is upheld and the issue raised by revenue is rejected.

Order pronounced in open court on 18.09.2024

Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Indore िदनांक / Dated : 18.09.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore

Page 83 of 83