SHRI M A KHAN,BHOPAL vs. THE ACIT 3(1), BHOPAL

Feeling aggrieved by a consolidated appeal-order dated 28.11.2014 passed by learned Commissioner of Income-Tax (Appeals)-2, Bhopal [“Ld. CIT(A)”], which in turn arises out of a consolidated assessment-order dated 30.12.2011 passed by learned ACIT-3(1), Bhopal [“Ld. AO”] u/s 153A/ 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2004-05 to 2010-11, the assessee has filed these seven appeals on various grounds set out in the respective Form No. 36 of different years. Page 1 of 39

Heard the Learned Representatives of both sides at length and case- records perused.

Briefly stated the facts are such that assessee was a retired IAS officer having family consisting of (i) M.A. Khan – himself, (ii) Nazhat Parveen Khan – Wife, (iii) Asad Khan – Son, and (iv) Shahbaz Khan – Son. Other relatives are (i) Nadira Baig – mother-in-law and (i) Nilofar Khan – Sister-in-law. A search u/s 132 was conducted upon the assessee on 04.02.2010 wherein certain documents and assets were found/seized in the name of assessee, family members and relatives. Accordingly, the assessments of AY 2004-05 to 2010-11 were made finalized u/s 153A/143(3) after making certain additions. Aggrieved by additions so made in assessment, the assessee went in first-appeal and succeeded partly. Still aggrieved, the assessee has come in these appeals before us.

At the start of hearing, the Ld. AR representing the assessee submitted that the assessee has raised following additional legal ground in all seven appeals:

Since the additional ground is legal in nature and shall be very relevant while adjudicating several issues in subsequent discussion, we first have a detailed discussion on this ground.

Apropos to this ground, Ld. AR submitted that it is a well-settled law that no addition can be made in the proceeding of section 153A in “unabated years” without having any “incriminating material”; such a proposition is decided by Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (2016) 2 ITJ Online 869 (Trib. – Delhi) : (2016) 380 ITR 573 : (2015) 281 CTR 45 : (2015) 234 Taxman 300 and also followed by Hon’ble Jurisdictional High Court of Madhya Pradesh in PCIT Vs. Gahoi Dal & Oil Mills (2021) 11 ITJ Online 314 (MP), 31 & 32 of 2019, order dated 12.07.2019. The relevant paras of the decision of Hon’ble Jurisdictional High Court are reproduced below:

Per contra, Ld. DR representing the revenue expressed a different view. He submitted that there had been a change in the scheme for assessment of search cases from time to time. He submitted that in the case of searches conducted upto 31.05.2003, scheme of “Block-assessment” prescribed under Chapter-XIV-B consisting of section 158B to 158BH was applicable, but in respect of searches conducted after 31.05.2003, a new scheme prescribed u/s 153A to 153D is applicable. Ld. DR would further

We have considered rival submissions of both sides and perused the material held on record including the orders of lower authorities. On a careful consideration, we agree to the contention raised by Ld. AR that in absence of incriminating material no addition could be validly made in the proceeding of section 153A. This proposition has been clearly upheld by Hon’ble Jurisdictional High Court of Madhya Pradesh in Gahoi Dal & Oil Mills (supra), which is a decision binding upon this Bench of ITAT working at Indore. At this stage, we would also like to add that in their later decision in the case of Pr. CIT and ors. Vs. Meeta Gutgutia, Prop. Ferns ‘N’ Patels and Ors. (2017) 395 ITR 526 (Delhi), the Hon’ble Delhi High Court reiterated with approval their observations in Kabul Chawala’s case (this Kabul Chawla was followed by Hon’ble Jurisdictional High Court in Gahoi Dal & Oil Mills) that completed assessments could be interfered with by AO while making assessment u/s 153A only on basis of incriminating material unearthed during course of search. If in relation to any assessment year, no incriminating material was found, no addition or disallowance could be made in relation to that assessment year in exercise of powers u/s 153A and earlier assessment should have to be reiterated. This later decision of Hon’ble Delhi High Court has also been affirmed by Hon’ble Supreme Court by dismissing Revenue’s SLP in PCIT vs. Meeta Gutgutia

During the course of hearing, Learned Representatives of both sides agreed that out of seven assessment-years involved in present appeals, the AY 2004-05 to 2008-09 were “unabated years” and AY 2009-10 to 2010-11 were “abated years”. Therefore, the benefit of additional ground raised by assessee shall be confined to “abated years” i.e. upto AY 2008-09 only and that too qua those issues where additions have been made by Ld. AO without incriminating material. Therefore, in the subsequent discussion, we shall be making a separate mention wherever the benefit of additional ground is available to assessee.

In all seven appeals, first three grounds are worded as below:

That the learned CIT(A) erred in not holding that the assessment order passed by the A.O was without following rule of natural justice and fair play and was therefore a nullity and the same may be declared null and void.

We observe that identical grounds were also raised in first-appeal whereupon the Ld. CIT(A) observed and adjudicated as under:

There are multiple grounds in different years having different serial numbers but many of those grounds involve identical/common issues. Therefore, it would be convenient to make a list of the issues in the following Table:

Now we shall proceed to adjudicate these issues one by one.

During assessment-proceeding, Ld. AO observed that Mr. Asad Khan, son of assessee, was studying MBBS course in Nagpur and Mr. Shahbaz Khan, another son, was studying engineering in Faridabad. Ld. AO collected information of fee-payments u/s 133(6) / 131 directly from Nagpur college and Faridabad College. Thereafter, when the Ld. AO confronted the assessee to explain sources of fee-payments, the assessee filed following details:

During first-appeal, the assessee submitted that the expenses incurred by him have been duly shown in his Capital A/c submitted to AO and the expenses incurred by Smt. Nadira Bag have been confirmed by her in the affidavit filed to DDIT(Inv) and AO. But the Ld. CIT(A) observed that Smt. Nadira Baig was a housewife aged 67 years; she is not an income-tax payer; she is not able to prove her declared source of agricultural and rental income. Ld. CIT(A) further observed that the assessee had incurred major portion of fee in cash but not able to prove source thereof. With these observations, Ld. CIT(A) upheld the addition.

Before proceeding further, we would like to resolve one significant aspect of the Books of account/Cash-book/Cash flow statement/Statement of Affairs (SOA)/Capital A/c submitted by assessee before Ld. AO since this would be very relevant not only in this issue but also while adjudicating many other issues in subsequent paragraphs. Drawing our attention to the Assessment-order as well as Paper-Book Page No. 1 to 32, Ld. AR strongly contested that the assessee has prepared the Books of account/Cash- book/Cash flow statement/Statement of Affairs (SOA)/Capital A/c of all years and produced these documents to Ld. AO during assessment- proceeding. But the Ld. AO disbelieved these statements as “after-thought” for the reasons that (i) at the time of search no such statements were found with the assessee nor they were annexed with the returns of income; and (ii) these statements submitted by assessee included certain transactions of gifts, loans, etc. which were not believable. Ld. AR submitted that the assessee was a salaried employee and not engaged in any kind of business or profession; therefore there was no statutory requirement to maintain books of account or even to prepare the financial statements like Balance- Sheets or even annex the same with returns of income. Ld. AR submitted

Reverting back to the issue, on perusal of the orders of lower authorities and consideration of submissions of learned representatives of both sides, we observe that the AO has directly collected information of fee- payments including the break-up of cash-payment and cheque-payment from respective colleges; therefore the doubt raised by Ld. AO with respect to cheque-payments does not have any worth. Regarding the expenses incurred by Smt. Nadira Bag, we find that the same is clearly proved by the confirmatory-affidavit solemnized by her and filed to DDIT(Inv) and AO, a copy of which is also placed at Page No. 417 to 421 of the Paper-Book. Regarding expenses incurred by assessee, we observe that the same are fully

It is further noteworthy that this addition has been made on the basis of post-search material gathered from assessee/college authorities during assessment-proceeding and there was no incriminating-material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view of above, the entire addition deserves to be deleted.

During assessment-proceeding, Ld. AO collected information from bank which showed that the assessee had received various sums from his employers by way of reimbursement of TA/DA. When the Ld. AO asked the assessee to explain source of expenses incurred for those TA/DA reimbursements, the assessee submitted to have incurred the same through cash-book but the Ld. AO disbelieved cash-book; that is why made a total addition of Rs. 7,82,669/- in different years.

During first-appeal, Ld. CIT(A) allowed credit of Rs. 2,00,855/- being the payments made by assessee through bank a/cs or credit/debit cards and upheld the remaining addition of cash-payments of Rs. 5,81,814/- in various years.

On consideration of the submissions made before us during hearing, we observe that the assessee has made cash-payments which are recorded in books of account. Ld. AR has drawn our attention to Page No. 34 to 40 of the Paper-Book where copies of ledger accounts titled “Travelling Exp.” for all years are filed. Ld. AR contended that the assessee has debited/credited the moneys spent/reimbursements received in these Ledger accounts and Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 the debit entries clearly show that the assessee has spent moneys. Ld. AR submitted that the Ledgers a/cs are running a/cs which get squared up/balanced from time to time because there arises a time-gap in the moneys spent and receipt of reimbursements. The essence of Ld. AR’s submission is that the assessee has spent moneys for the required purpose from own explainable sources and recorded the same in books of account. We find merit in the submission of Ld. AR and accordingly conclude that no adverse view can be taken in this respect.

It is also noteworthy that this addition has been made on the basis of post-search material gathered from assessee/banks during assessment- proceeding and there was no incriminating material found during search qua this addition. In fact, the Ld. CIT(A) has himself observed on Page No. 23 of his order “Even during the course of search operations, extensive post search investigations and assessment proceedings, no incriminating document regarding bogus/fictitious claim of TA/DA, as made by the appellant, has been found or brought on record by the A.O.” Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view of above, the entire addition is deleted.

During assessment proceeding, Ld. AO observed that the assessee had incurred expenses on household items such as cloths, jewellery, shoes, travels, etc. for which the assessee does not have explainable sources. Accordingly, Ld. AO estimated household expenditure at Rs. 12,00,000/- for AY 2010-11 and extrapolated figures of earlier years taking into account 10% inflation rate; thereby made additions in different years.

During first-appeal, Ld. CIT(A) made a tabular working of the “household expenses declared by assessee” and “household expenses

In nutshell, the whole addition has been made on the basis of estimation. On perusal of the order of first-appeal, we observe that the Ld. CIT(A) has himself admitted in Para No. 11.2 of his order that no amount or details of household expenses have been given by AO in assessment-order. Despite such observation, Ld. CIT(A) has upheld the estimation made by AO instead of relying upon the quantum of actual expenses shown by assessee. We observe that the authorities do not have any evidence or basis to rebut the actual expenses declared by assessee, they have simply substituted their own estimation and thereby made addition. In our considered view, when the assessee has supplied the figures of household expenses actually incurred by him, either the authorities should have some cogent basis to rebut the same or otherwise they should accept. In the present case, since there is no basis available to authorities for rebuttal, they ought to have accepted the quantum of expenses declared by assessee. Therefore, the addition made by revenue-authorities on the basis of mere estimation, that too without any basis, is not sustainable.

It is further noteworthy that this addition has been made solely on the basis of estimation by AO during post-search assessment-proceeding and there was no incriminating-material found during search qua this addition.

In view of above, the entire addition is hereby deleted.

During search-proceeding, “Page No. 91 of LPS-3” was seized which contained noting regarding Pacetronik Intentional HDFC Bank A/c. On further enquiries from assessee and other connected persons, it got revealed that the assessee had paid rent of property taken for education of Shahbaz Khan at Faridabad. Similarly, on further enquiries, Ld. AO got information that the assessee has also made rental payments to certain persons of Nagpur in respect of property rented for education of another son Asad Khan. When asked about source, the assessee stated that the rental payments have been reflected in the cash flow statement but the Ld. AO disbelieved the cash flow statement. Ultimately, the AO made a working of rental-payments and thereby resorted to addition as unexplained expenditure.

Ld. CIT(A) upheld the addition made by Ld. AO.

We have test-checked some entries of rental-payments and found the same to have been recorded in the cash-book of assessee filed before Ld. AO. As already discussed, the authorities are not justified in disbelieving the cash-book of assessee. Therefore, we find that the source of rental payment is clearly proved by assessee and no addition is called for on this account.

In view of this, the entire additions are deleted.

During first-appeal, the assessee submitted that he belongs to a reputed family and his mother-in-law Smt. Nadira Baig is a big agriculturist. The assessee also stated that he had filed a copy of the gift-deed dated 21.12.2011 in support of gift transactions and A/c confirmations in support of loan transactions; hence there is no reason to draw adverse conclusions. However, Ld. CIT(A) noted that even if Smt. Nadira Baig was having independent source of income by way of agricultural operations and rental income, still the onus lying on the assessee to furnish all details to prove the transactions was not discharged. Therefore, he upheld additions.

We observe that the assessee has filed gift-deed in support of gift transactions and A/c confirmations in support of loan transactions. Regarding financial capacity of the giver, it is on record that the assessee has filed proofs of ownership of land as well as “P-II” document related to cultivation activity (copies at Page No. 191 to 269 of the Paper-Book). The observations made by Ld. AO that one of the Khasra is not cultivated is true but that does not lead to the conclusion that other khasras were not cultivated. We further observe that Smt. Nadira Baig has filed an affidavit, a copy placed on Page No. 417 of the Paper-Book, making clear averment in Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 Para No. 1 and 4 to the effect that she has agricultural income for last 25 years and also rental income. It is further on record that the regular assessment of Smt. Nadira Baig was made u/s 143(3) vide order dated 30.12.2011 (Paper Book Page No. 187 to 190) wherein agricultural income of Rs. 3,30,000/- and rental income of Rs. 1,17,600/- earned by Nadira Baig was duly scrutinized and accepted by AO himself. Therefore, the financial capacity of Smt. Nadira Baig is undoubtedly accepted. That brings us to conclude that the ingredients required for section 68, namely the identity and creditworthiness of the giver as well as genuineness of transactions is proved. Hence, we agree that no adverse conclusions can be drawn against assessee.

It is further noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding and there was no incriminating-material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view of this, entire additions are hereby deleted.

During assessment-proceeding, Ld. AO observed that the assessee had paid a sum of Rs. 20,000/- by cheque to one Saema Khan. When the AO called information from Saema Khan, she stated in affidavit that the assessee is her uncle and she received a total sum of Rs. 1,00,000/- from assessee. Based thereon, the AO confronted the assessee to which the assessee responded that there was cash component too which was given out of advance received against sale of property at Jabalpur from M/s Rajvir Marketing Pvt. Ltd, Indore. However, the Ld. AO did not accept the submission of assessee and made addition of Rs, 80,000/- [difference of Rs. 1,00,000 and Rs. 20,000] treating the same as unexplained cash-payment.

We have perused the documents placed in Paper-Book. On perusal of Capital A/c for the year ended 31.03.2008 placed at Page No. 29 of the Paper-Book, we observe that the assessee has debited only Rs. 40,000/-. Going further to Page No. 30 of the same Paper-Book, we observe that the assessee has not debited any amount in Capital A/c for the year ended 31.03.2009. Therefore, what appears to us is that the assessee has recorded only Rs. 40,000/- in books of account, which in all probability is the amount of cheque-payment and not cash-payment. Ld. AR is not able to demonstrate where and how Rs. 60,000/- is debited to Capital A/c as claimed by assessee. Therefore, we are in agreement with the finding made by Ld. CIT(A) that the assessee has not been able to demonstrate the source of cash-payment of Rs. 60,000/-. Being so, we uphold the addition of Rs. 60,000/- confirmed by CIT(A). The assessee fails in this issue.

During assessment proceeding, Ld. AO observed that the assessee had taken loans from Smt. Neelofar Naheed, his sister-in-law (wife is wrongly mentioned in assessment-order). When asked to explain the source, the assessee filed A/c confirmation of lender. But, however, the Ld. AO observed that the assessee had failed to prove the creditworthiness of the lender and genuineness of transaction; therefore made addition.

During first-appeal, the assessee submitted that he had taken loans through a/c payee cheques. The assessee has also submitted A/c

This addition has been made in AY 2006-07 and 2008-09 solely on the basis of enquiries made during post-search assessment-proceeding and there was no incriminating material found during search qua this addition. Therefore, as observed in earlier discussion, the additions made on this account are not sustainable. In view of this, the entire addition is hereby deleted.

During assessment proceeding, on verification of Statement of Affairs as on 31.03.2009 and 31.03.2010, Ld. AO observed that the assessee had taken loan from M/s Rajveer Marketing and Investment Ltd., Indore (“Rajveer Ltd”). When the AO asked the assessee to justify the genuineness, identity and creditworthiness, the assessee filed A/c confirmations and other docuemnts. However, Ld. AO observed that mere filing of a/c confirmations does not prove those ingredients. Ld. AO further observed that the company M/s Rajveer Ltd. is not filing its returns, its accounts are not audited and it has no capacity to give loans. Finally, Ld. AO made addition of Rs. 30,01,000/- in AY 2009-10 and Rs. 42,01,000/- in AY 2010- 11.

During appellate proceeding, Ld. CIT(A) agreed with the findings made by Ld. AO but, however, observed that there is a double addition of Rs. 30,01,000/- in both years; hence he granted part-relief and confirmed additions to the extent of Rs. 30,01,000/- in AY 2009-10 and Rs. 12,00,000/- in AY 2010-11.

Before us, Ld. AR made a lengthy submission. Initially, it is submitted that the AO has made a wrong finding that assessee has taken loan from Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 M/s Rajveer Ltd.; in fact the assessee has received an advance against sale of property at Jabalpur. Then, Ld. AR carried us to Page No. 32 of the order of first-appeal where the assessee has clearly mentioned to Ld. CIT(A) “The appellant had submitted before the learned A.O. copy of sale agreement, copy of bank accounts of M/s Rajvir Marketing & Investment Limited, Permanent Accountant Number and an affidavit of the director of the company alongwith confirmation letter from the company.” Thereafter, Ld. AR carried us to Page No. 33 of the same order where the statement of Shri Sanjeev Lunkad, director of M/s Rajveer Ltd. are scanned. Ld. AR pointed out that in reply to Q.No. 2, Shri Sanjeev Lunkad stated that the company is assessed to income-tax and after search in May, 2006 upon company, all records were impounded by Income-tax Department and in spite of direction of Hon’ble High Court, till date he has not received books of account, that is why returns cannot be filed. In reply to Q.No. 3, he stated that the company is a registered NBFC with Reserve Bank of India. In reply to Q.No. 9, he stated that since company was not having old records and the matter was prolonging in High Court due to non-receipt of books of account, the company was not able to file returns and audit was not done. Then Ld. AR carried us to Page No. 51 of the same order where an affidavit solemnized by Shri Sanjeev Lunkad dated 12.08.2010 filed to AO is placed. In Para No. 2 of the said affidavit, it is clearly averred that the company made an advance to Shri M.A. Khan (assessee) for purchase of property vide agreement dated 10.04.2008. Thereafter, in the same para, the source of advance is stated to be various withdrawals made through cheques from Union Bank. In next Para No. 3 it is averred that the agreement could not be executed and it was terminated whereupon the advances were returned by assessee through account payee cheques. Then, the copy of agreement is also placed at Page No. 64 of the same order. Thereafter, Ld. AR carried us to Page No. 67 and 68 of the same order where the A/c confirmations duly signed by company with Income-tax PAN filed to AO are scanned. Lastly, Ld. AR drew attention to the statement given by Shri Aminuddin Shaikh from which the revenue-

Per contra, Ld. DR strongly relied upon the orders of lower authorities and re-iterated the findings made by lower authorities. Ld. DR contended that Shri Sanjeev Lunkad was director of several companies who are involved in providing accommodation entries. Ld. DR submitted that the whole story of advance is made up by assessee with the support of Shri Sanjiv Lunkad but factually there is no such advance received by assessee. Ld. DR strongly urged to uphold the addition made by lower authorities.

We have considered rival contentions of both sides. After a careful consideration, we observe that the Ld. AO has made addition by raising objections on the identity, creditworthiness and genuineness. Regarding identity, we find that the PAN of M/s Rajveer Ltd. is available on record and it is also borne out from record that a search was conducted in past on M/s Rajveer Ltd. and the matter travelled upto High Court for release of books of account. Thus, there cannot be any doubt as far as existence of M/s Rajveer Ltd. is concerned. Regarding creditworthiness, we observe that in the affidavit filed by Sanjeev Lunkad, date-wise withdrawals from Union Bank

Ld. AR submitted that first of all, the AO has made an incorrect finding that the Nilofar Khan has taken a loan, the true fact is such that Neelofar Khan received an advance from Alpine Agrotech Ltd. towards sale of agricultural land. Ld. AR pointed out that this fact is clearly evidenced by affidavit of Shri Sanjeev Lunkad, director of Alpine Agrotech Ltd., a copy

We observe sufficient weightage in the submissions of Ld. AR and find that the source of receipt of Rs. 8,00,000/- stands fully proved by documentary evidence. We further observe that the impugned advance has been taken by Nilofar Khan and not by assessee. We also find that the revenue-authorities do not have any cogent basis to tax this transaction in the hands of assessee except presumption and surmise. Therefore, there is no justification to make addition in the hands of assessee. Hence the same is deleted.

During assessment-proceeding, Ld. AO observed that there were deposits made in the bank accounts of assessee. The Ld. AO has given bank-wise/year-wise consolidated details in assessment-order. Ld. AO observed that the assessee has not been able to give proper explanation; therefore made addition.

During first-appeal, the assessee submitted a detailed reply which is re-produced by Ld. CIT(A) on Page No. 100 to 105 of appeal-order. The assessee submitted break-up of cheque-deposits and cash-deposits in bank account. Finally, Ld. CIT(A) deleted the additions relatable to cheque- deposits but confirmed the additions relatable to cash-deposits as per a re- calculation made on Page No. 105 of appeal-order.

It is also noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding and there was no incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view this, entire addition is hereby deleted.

During assessment proceeding, Ld. AO observed that (i) there were deposits made in the bank accounts of Asad Khan and Shabaz Khan (sons of assessee); and (ii) those sons have also declared tuition/derivate incomes in their returns filed u/s 153A. Regarding bank deposits, Ld. AO observed that the assessee has not been able to give proper explanation. Regarding tuition income declared by sons, the Ld. AO did not accept assessee’s submission that his sons were giving coaching to class 10th students while

During first-appeal, Ld. AO granted part-relief to assessee for cheque- deposits in bank accounts and upheld rest of the additions. The key observations made by Ld. CIT(A) in this respect are as under:

Ld. AR submitted that the deposits in bank accounts as well as tuition/derivate income belonged to sons of assessee, namely Asad Khan and Shahbaj Khan and the assessee is nothing to do with it. Ld. AR pleaded that the revenue-authorities have wrongly presumed these items as belonging to assessee on mere surmise and conjecture just because those persons happened to be assessee’s sons; the authorities do not have any cogent evidence. Ld. AR submitted that the sons have filed their own returns and declared the impugned items in their own hands. Ld. DR could not Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 contradict these submissions except to argue that the Ld. CIT(A) has already given sufficient relief to assessee. After a careful consideration, we find merit in the submissions of assessee. We find that the revenue authorities have not been able to bring any cogent evidence to dislodge the submission of assessee; they have merely treated the items as belonging to assessee on presumption/surmise. Therefore, the additions made by authorities are not sustainable in assessee’s hands.

It is also noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding or on the basis of tuition/derived income declared by sons in their own returns. But there is no incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view of this, entire addition is hereby deleted.

During first-appeal, the assessee made detailed submission which is re-produced by Ld. CIT(A) in Para No. 15.3 of appeal-order. Finally, Ld. CIT(A) upheld the additions by observing and holding thus:

Ld. AR submitted that the additions have been made solely on the basis of third-party statements and that too without giving any opportunity of cross-examination to assessee. Ld. AR submitted that making such a huge addition in the hands of assessee and fastening the assessee with a heavy tax liability is absolutely illegal in as much as no opportunity had been given to assessee. In fact, Ld. CIT(A) has also accepted in this order “True, there has been some lapses on the part of the AO in not allowing the appellant opportunity to cross examine these persons.” Ld. DR could not contradict this submission of Ld. AR. Therefore, in the circumstance, we have no hesitation in concluding that the additions made by Ld. AO are illegal and cannot be sustained in the hands of assessee.

It is also noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding from different sources. But there is no incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view this, entire addition is hereby deleted.

It is also noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding from different sources. But there is no incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view this, entire addition is hereby deleted.

Ld. AR submitted that sufficient proofs of land holding are already placed in the Paper-Book at Page No. 316 to 340, which are ample enough to prove that Nilofar Khan had agricultural income. We find merit in this submission more particularly because the revenue-authorities have not been able to rebut the evidences filed by assessee.

In view of this, entire addition is hereby deleted.

Ld. AR submitted that those gifts have been received by Nilofar; then how can they be treated as income of assessee? We observe that the gifts having been received by Neelofar Khan and not by assessee, can’t be treated as income of assessee by any stretch of imagination. Therefore, the addition made in this respect in the hands of assessee can’t be sustained.

It is also noteworthy that this addition has been made solely on the basis of enquiries made during post-search assessment-proceeding. But there is no incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the additions made in this respect in unabated years upto AY 2008-09 are not sustainable.

In view of this, entire addition is hereby deleted.

Ld. AR initially drew our attention to the Capital A/c forming part of Statement of Affairs as on 31.03.2004 placed at Page No. 25 of the Paper- Book where the opening capital of Rs. 10,50,288/- is appearing. Then, Ld. AR carried us to immediately preceding Page No. 24 of the Paper-Book where the Statement of Affairs as on 31.03.2203 is placed. Referring to the same, Ld. AR argued that the opening balance of Rs. 10,50,288/- is a difference of various assets and liabilities owned/owed by assessee as on 31.03.2003 i.e. prior to AY 2004-05 and therefore no addition can be made in AY 2004-05. We find merit in submission of Ld. AR and hold that no addition can be legally made in AY 2004-05 in respect of opening capital which is basically the outcome of income earned in earlier years.

It is also noteworthy that this addition has been made in AY 2004-05 on the basis of information gathered during the course of post-search assessment proceeding and that too without having any incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the addition made is not sustainable at all.

In view of this, entire addition is hereby deleted.

Ld. AR submitted twin-arguments i.e. (i) firstly it belongs to Nilofar Khan and not to assessee at all; (ii) secondly, the opening capital represents

It is also noteworthy that this addition has been made in AY 2004-05 on the basis of information gathered about Nilofar Khan during the course of post-search assessment proceeding and that too without having any incriminating material found during search qua this addition. Therefore also, as observed in earlier discussion, the addition made is not sustainable at all.

In view this, entire addition is hereby deleted.

During assessment proceeding, Ld. AO observed that the assessee has made cash payment of Rs. 83,147/- to M/s Progressive Tour and Travels (P) Ltd. for various travels. Accordingly, Ld. AO made addition of Rs. 83,147/-.

It is noteworthy that this addition has been made in AY 2008-09 solely on the basis of enquiries made during post-search assessment- proceeding. But there is no incriminating material found during search qua this addition. Therefore, as observed in earlier discussion, the addition made in this respect in unabated AY 2008-09 is not sustainable.

In view this, entire addition is hereby deleted.

Ld. AO observed that Smt. Nazhat Parveen (wife) was joint owner of a property at E-3/91, Arera Colony, Bhopal alongwith Smt. Nadira Baig (mother-in-law), purchased during AY 2008-09 for Rs. 62,17,475/-. When asked about source of investment, Smt. Nazhat Parveen explained that the Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 entire investment was made by Smt. Nadira Baig and due to her old age, Smt. Nazhat was made co-owner. Ld. AO, however, treated the investment as benami investment having been made by assessee out of undisclosed sources and thus made addition of Rs. 62,17,475/-; accordingly made addition substantively in the hands of assessee and protectively in the hands of Nazhat Parveen.

Ld. CIT(A) observed that the impugned property was purchased through registered sale-deed dated 29.07.2007 whereby other co-owners were Smt. Shabanam (daughter of Smt. Nadira Baig), Shri Mohd. Ajan (Grandson of Nadira Baig) and Smt. Vahid Baigum/Smt. Nazhat Parveen. He further observed that the assessment-order of Nadira Baig was finalized u/s 143(3) for AY 2008-09 according to which the entire cost was stated to be paid by Nadira Baig out of her own sources namely (i) Cash of 15,00,000/- received from will of Late Nazeer Malik, (ii) Rs. 40,00,000/- received as advance for sale of agricultural land, and (iii) Rs. 7,17,475/- derived from agricultural/rental income of earlier years. However, ultimately the Ld. CIT(A) did not accept these submissions and upheld addition.

Ld. AR submitted that the CIT(A) has himself observed the factual position as culled out from assessment-order of AY 2008-09 in the case of Nadira Baig passed by department u/s 143(3) whereby the sources of investment in the impugned property have been accepted by the AO. For an immediate reference, Ld. AR drew our attention to Page No. 189 of the Paper-Book where a copy of the impugned assessment-order is filed. Referring to Para No. 4 of the same, Ld. AR demonstrated that the AO has accepted these sources of investment in property, namely (i) Cash of 15,00,000/- received from will of Late Nazeer Malik, (ii) Rs. 40,00,000/- received as advance for sale of agricultural land, and (iii) Rs. 7,17,475/- derived from agricultural/rental income of earlier years. Ld. AR submitted that in such a situation, it is wrong to hold the impugned property as undisclosed investment of assessee.

After careful consideration, we find that certain newer evidences collected by authorities have been placed before us and the status of case under PBPT Act is also not clear. Therefore, at this stage, we think it fit to remand this issue back to Ld. AO who would once against look into all aspects and thereafter come to a definite conclusion. Needless to mention that the AO shall give adequate opportunities of hearing to assessee and pass his order in accordance with law uninfluenced by his earlier decision.

During assessment proceeding, Ld. AO asked Nazhat Parveen to submit details of all bank accounts held by her as also the fund flow statement reflecting all credits and withdrawals in those bank accounts. In response the details called for were submitted. On examination, Ld. AO observed that the fund flow statement has a major inflow by way of salary from Gandhi PG College. Ld. AO recorded statement of Mr. S. Gandhi, key functionary of college and found that Nazhat Parveen was not actually employed in that college. Ld. AO further observed that Nazhat Parveen has also shown large loans but could not prove the creditworthiness and genuineness. Finally, Ld. AO concluded that the account with HDFC Bank in the name of Nazhat Parveen was benami a/c of assessee. Accordingly, Ld. AO made addition of Rs. 26,39,140/- on account unexplained deposits in bank account substantively in the hands of assessee and protectively in the hands of Nazhat Parveen.

Ld. AR drew our attention to the finding made by Ld. AO in Para No. I(1) about Nazhat Parveen which states “Despite various reminders, the assessee was not able to produce proper details in desired form therefore the Late M.A. Khan IT(SS)A No.37 to 42/Ind/2015 & ITANo.105/Ind/2015 Assessment year 2004-05 to 2010-11 possibility cannot be ruled out that the transaction appearing in the said account are outcome of such benami accounts”. Ld. AR submitted that though the impugned bank account was personal a/c of Nazhat Parveen and the transactions made therein related to Nazhat Parveen only, the assessee has been wrongly implicated on mere possibility/presumption basis without any cogent evidence. Ld. DR though relied upon the order of assessment yet could not contradict the submission of Ld. AR. In such a situation, we find weightage in the submission of Ld. AR. Accordingly, the addition made by Ld. AO is deleted.

During search-proceeding, 847.13 grams of gold valuing at Rs. 13,06,548/- and 8,222 grams of silver items valuing at Rs. 1,79,835/- was found in possession of assessee. When the AO confronted the assessee about sources, the assessee submitted that gold jewellery was received at the time of marriage. However, Ld. AO observed that the assessee had not been able to give justifiable details/explanation and thus made addition.

During first-appeal, Ld. CIT(A) observed that the assessee joined State Govt. service on 03.09.1975 and later got IAS cadre in the year 1983 and retired on 31.03.2010. Therefore, considering the long period of service, status in society and CBDT Instruction No. 1916 dated 11.05.1994, Ld. CIT(A) allowed benefit of jewellery upto 500 grams for a married lady and 100 grams per male member; thus totaling to 800 grams. Ultimately, Ld. CIT(A) upheld the addition of Rs. 72,690/- on account of 47.13 grams of jewellery and Rs. 1,79,835/- relatable to silver items; aggregating to Rs. 2,52,525/-.

Ld. AR submitted that (i) the assessee had a very long service and (ii) was placed at high cadre service in Govt.; therefore marginal quantity of gold jewellery of 47.13 grams and silver items of 8,222 grams should be taken as coming from disclosed sources and should be not be viewed adversely.

Ld. DR submitted that the CIT(A) has already given relief in terms of Board Circular and the assessee does not deserve any further relief.

We have considered rival submissions of both sides. After a careful consideration, we agree with the submission of Ld. DR. We find that the appropriate relief has already been allowed to the assessee and there cannot be any further relief in the matter. Hence, the additions as confirmed by Ld. CIT(A) are hereby upheld.

During search-proceeding, physical cash of Rs. 68,300/- was found in possession of assessee. When asked about source, the assessee submitted that the said cash is duly reflected in cash flow statement submitted by him. However, Ld. AO disbelieved the cash flow statement and made addition of Rs. 68,300/-.

During first-appeal, Ld. CIT(A) accepted a cash withdrawal of Rs. 20,000/- by assesee on 01.02.2010 from HDFC Bank A/c as source of physical cash. Accordingly, he granted part-relief of Rs. 20,000/- and upheld remaining addition of Rs. 48,300/-.

Ld. AR submitted twin-reasonings in support of assessee, viz. (i) the physical cash balance of Rs. 68,300/- is fully reflected in the cash flow statement, and (ii) though the Ld. CIT(A) has accepted the source of Rs. 20,000/- as directly linked to cash-withdrawal from bank, it is totally absurd to assume that the assessee, who is a senior IAS officer, would not be having any more cash balance in possession. Ld. AR submitted that looking to the practical life, a cash balance of Rs. 68,300/- is bare minimum and it must be holistically accepted. Taking a judicious view, we find merit

Resultantly, all these appeals of assessee are partly allowed.