DY. C.I.T. CENTRAL CIR.-2(2), NAGPUR vs. SMT. ANJU A. SARAF, NAGPUR

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR

BEFORE SHRISANDEEPGOSAIN, JUDICIAL MEMBER AND SHRIARUNKHODPIA, ACCOUNTANT MEMBER

ITAno.436/Nag./2016 ITAno.437/Nag./2016 (Assessment Year : 2005–06) (Assessment Year : 2006–07) ITAno.511/Nag./2016 ITAno.512/Nag./2016 (Assessment Year : 2008–09) (Assessment Year : 2009–10 ITAno.438/Nag./2016 (Assessment Year : 2010–11)

Dy. Commissioner of Income Tax Central Circle–2(2), Aayakar Bhawan ..………. Appellant Civil Lines, Nagpur 440 001 v/s Smt. Anju Saraf Flat no.C–2, Yogeshwar Ganga ..………. Respondent Apartments, Ramdaspeth, Nagpur 440 012 PAN – AETPS5421E

C.O. no.4/Nag./2017(Arising out of C.O. no.5/Nag./2017 ITAno.436/Nag./2016 (Arising out of ITAno.437/Nag./2016) (Assessment Year : 2005–06) (Assessment Year : 2006–07)

C.O. no.7/Nag./2017(Arising out of C.O. no.8/Nag./2017 ITAno.511/Nag./2016 (Arising out of ITAno.512/Nag./2016) (Assessment Year : 2008–09) (Assessment Year : 2009–10 C.O. no.9/Nag./2017 (Arising out of ITAno.438/Nag./2016) (Assessment Year : 2010–11)

Smt. AnjuSaraf Prop. M/s. Rajlakshmi Minerals ..………. Cross Objector C/o AnjuSaraf, C–2, Yogeshwar Ganga (Original Respondent) Apartments, Ramdaspeth, Nagpur 440 010 PAN – AETPS5421E v/s Asstt. Commissioner of Income Tax ..………. Respondent Central Circle–2(2), AayakarBhawan (Original Appellant) Civil Lines, Nagpur 440 001

2 Smt. AanjuSaraf ITAno.499/Nag./2016 ITAno.498/Nag./2016 (Assessment Year : 2009–10) (Assessment Year : 2007–08)

Smt. Anju Saraf Prop. M/s. Rajlakshmi Minerals C/o AnjuSaraf, C–2, Yogeshwar Ganga ..………. Appellant Apartments, Ramdaspeth, Nagpur 440 010 PAN – AETPS5421E v/s Asstt. Commissioner of Income Tax Central Circle–2(2), Aayakar Bhawan ..………. Respondent Civil Lines, Nagpur 440 001 ` Assessee by :Shri Sudesh Banthia Revenue by :Shri Piyush Kolhe

Date of Hearing – 19.04.2022 Date of Order – 25.07.2022

O R D E R PER BENCH

The captioned appeals have been filed by either parties and cross objection by the assessee. Revenue’s appeals for the assessment year 2005–06, 2006–07, 2010–11 are against learned CIT(A)’s order dated 31st March 2022, Revenue’s appeal for assessment year 2008–09 and 2009–10 are against learned CIT(A)’s order dated 28th June 2016, the assessee has filed cross objections which are against Revenue’s appeals for the assessment year mentioned above. The assessee (Smt. Anju Saraf herein) has also filed separate appeals for the assessment year 2007–08 and 2009–10 which are against the order dated 28.06.2016, passed by the learned CIT(A).

3 Smt. AanjuSaraf 2. Since all the appeals relate to the same assessee involving common issues, except variation in figures, which are based on identical set of facts and circumstances, therefore, as a matter of convenience and brevity these appeals were clubbed and heard together and are being disposed off by way of this consolidated order. We now proceed to deal with issues chronologically raised by both the parties on merits.

4 Smt. AanjuSaraf assessment under section 143(3) r/w section 147 of the Act was passed on 31st December 2009, assessing income at Rs. 10,41,30,497. The Tribunal quashed the order passed under section 147 r/w section 143(3) of the Act. Subsequent to a search which was conducted in RBSSN Group on 24th September 2010, the Assessing Officer issued notice under section 153A of the Act on 12th September 2011, in response to which the assessee filed its return of income on 7th May 2012. Thereafter, the Assessing Officer found from the audited Profit & Loss account that the assessee has incurred expenditure on transportation, handling, restacking and job work charges along with freight and forwarding expenses, compounding loss and sales promotion expenses. The Assessing Officer after taking into facts and circumstances of the case, passed order dated 7th March 2013, under section 143(3) r/w section 153A of the Act, inter–alia, disallowing deduction Rs. 2,49,12,652, claimed by the assessee under section 80IB of the Act. The assessee being aggrieved filed appeal before the first appellate authority.

5 Smt. AanjuSaraf 2007–08, in appeals being ITAno.15, 80 and 6/Nag./2021. The Revenue being aggrieved by the order so passed by the learned CIT(A) in favour of the assessee, is in appeal before the Tribunal. 6. The learned Departmental Representative vehemently argued and relied on the order of the Assessing Officer. It is further stated that the observations and conclusions of the Ld AO as described in para 8 (AY 2006-07) of the order on this issue are elaborately discussed and explained, thus, contentions of the revenue that the assessee is not eligible for deduction u/s 80IB are very correct, lawful and hence order of the Ld CIT(A) on this ground needs to be set aside and AO’s order shall be restored.

6 Smt. AanjuSaraf 8. Before us, the learned Counsel for the assessee submitted that the issue relating to claim made under section 80IB of the Act has been decided by the Tribunal in assessee’s own case for the assessment year 2005–06, 2006–07 and 2007–08 respectively. Therefore, relying upon the order of the learned CIT(A), the learned Counsel prayed that the order of the learned CIT(A) be upheld, wherein the Ld CIT(A) has observed as under:- 7.3 I have perused the assessment order, grounds of appeal and appellant's submission. I find that the claim of deduction u/s 80IB of Rs 1,39,09,067/- was earlier disallowed vide order u/s 143(3) dated 31/12/2008. The claim was enhanced to Rs 4,97,80,842/- by the assessee due to arithmetic error in calculating deduction at 25% of the profit of the eligible business. The AO has disallowed the claim of deduction u/s.80IB of the Act because it was made in the assessment order u/s.143 (3) of the Act dated 31-12-2008. However he stated that since the claim of deduction u/s 80IB has been enhanced he has considered the same separately. The relevant portion is Para 10 of the Assessment order. The learned AR of the appellant placed on record, order of the Hon'ble ITAT in the appellant's own case for the Asstt. Year 2006-07. On perusal of the order of the Hon'ble ITAT in ITA No. 80/Nag/2012 dated 30-11-2015 for the assessment year under consideration, I find that the Hon'ble ITAT has held that the assessee is eligible for deduction u/s.80IB. The AO has not brought on record any reason to deviate and not to follow the order of the Hon'ble ITAT. This is a case wherein proceedings u/s.132 was conducted on 24-9-2010 on the premises of the assessee. There was no material found during the course of search nor any incriminating document was brought on record by the AO to dislodge the deduction claimed u/s.80IB. In such circumstances, I hold that the addition made by the AO is not in accordance with law. 7.4 I also find that the appellant has supported the claim of deduction u/s.80IB by filing an explanation and also producing all the relevant record to justify his claim along with ledger account, bills and vouchers for plant and machinery from AY 2001-02 to AY 2011- 12. The AO has discussed this issue in Para 8 of his order. I have considered the observations of the AO and submissions made by the appellant. On careful perusal

7 Smt. AanjuSaraf of the submissions made by the appellant before the AO, I find that the appellant has placed on record sufficient documentary evidence to establish that the new industrial unit was set up in F.Y.2000-01. The plant & machinery acquired for the industrial unit are all new and the AO has not disputed this fact. I find that substantial investment in plant and machinery was made in F.Y.2000-01 relevant to AY 2001-02 which is supported by books of accounts, bills and invoices etc. The machines like crushers, screening plant & excavators required for contention raised by the AR of the appellant that once the conditions stipulated u/s 80IB have been complied and eligibility stands determined in the initial year deduction cannot be disallowed in the subsequent years. The issue of initial year of the industrial unit was subject to litigation in the case of assessee herself and I find that the claim of the appellant has been duly accepted by the appellate authorities. There being no contrary evidence, I hold that the initial assessment year of the new industrial unit set up is AY 2002-03. 7.5 The appellant has also furnished documentary evidence in support of the claim that the unit is a small scale industry (SSI) for which the SSI Registration has been granted by DIC and which has been submitted before the AO. The learned AO has in Para 1 on Page No 19 of his order stated that the value of old plant & machinery was Rs.75,21,481/- Lacs as on 01/04/2001 & addition of new machinery was Rs. 39,24,183/-Lacs in FY 2001-02 i.e the ratio of old to new plant & machinery was 64:34 and so the conditions mentioned in section 80IB (l)(ii) rw explanation 2 has not been fulfilled. I agree with the contention of the AR of the appellant that value of plant & machinery carried over from one year to another year does not mean that there was a transfer to new business of plant & machinery previously used far any purpose as contemplated by the said provision of section 8018(2). The appellant has placed enough evidence to, show that the industrial unit was set up with new plant & machinery and the appellant has only one industrial unit. The AO in his order on Page 20 has stated that the assessee has not submitted the report of audit in Farm 10CCB far claiming deduction u/s 8018 and has therefore violated the provisions of S.8018 (13) r.w.s.80IA (7) of the Act. I find that the appellant had already submitted separate audit report in Farm 10CCB along with the financial statements of the eligible undertaking with the return of income filed u/s 139. The separate audited financial statements of iron are division (eligible undertaking) & wind power division have been submitted during assessment proceedings also'. I therefore hold that there was no, violation of the provisions of section 80IB of the Act and the appellant has complied with all the conditions stipulated therein.

8 Smt. AanjuSaraf 7.6 The learned AR of the appellant has also' explained & given flaw chart of the manufacturing process and claimed that the assessee is engaged into, the manufacturing and production of various grades of iron ore. The ssessee purchases iron are (ROM) in crude farm an as and where basis from the persons holding mining license. The item extracted from the earth is in the crude farm which cannat be used commercially, This is called Run of Mine (ROM) which contains lat of impurities and metals of interest have to, be extracted from it. The iron ore as finally obtained by assessee after carrying on series of processes such as screening, crushing etc came into existence on account of efforts manual as well as mechanical. The final product is also a commercially different article than it was embedded in the earth. The physical and chemical composition of iron are extracted is also' different and there is substantial value addition to, the crude are. The assessee has also' placed reliance an several judgments including the decisions of Hon'ble Apex Court, I find that the Hon'ble ITAT in assessee's case in ITA Na.114/Nag/2009 dated 24/07/2009 has held that the assessee was engaged in production and tlre activities undertaken by the assessee were similar to, Sesa Goa Ltd and hence the decision of the Apex court is squarely applicable. The Hon'ble ITAT has also' held that the assessee is an SSI unit, production was started prior to, 31/3/2002 and the assessee is eligible far deduction u/s 8018. The cases laws relied an by the A.O. are distinguishable on facts. 7.7 On examination of the facts of the case, documents produced before me, item manufactured the manufacturing process and the explanation of the appellant, I am of the considered opinion that the assessee is engaged in manufacturing and production of various grades of iron are and therefore entitled to, deduction u/s.8018. Further the aforesaid issues have already been decided in favour of the assessee by Hon'ble ITAT Nagpur bench for AY 2005-06 (ITA No 15/2012), AY 2006-07 (ITA No 80/2012), & AY 2007-08 (ITA No 06/2012). Following the aforesaid orders, I hold that the appellant is entitled to deduction u/s.80IB of the Act. The AO is directed to allow the claim of Rs.4,97,80,842/-. This ground of appeal is accordingly allowed. 9. Having carefully considered the rival contentions, perusing the orders of the authorities below and the material placed on record. 10. Regarding claiming of higher amount of deduction u/s 80IB while filing the return in response to notice u/s 153A, it is important to note

9 Smt. AanjuSaraf that the provisions of assessment in the case of search under Section 153A have been inserted by the Finance Act, 2003 w.e.f. 1st June, 2003. These provisions are successor of the special procedure for assessment of search cases under Chapter XIV-B starting with Section 158B. Whereas Chapter XIV-B required the assessment of “undisclosed income” as a result of search, which has been defined in Section 158B(b), Section 153A dealing with assessment in case of search w.e.f. 1st June, 2003 requires the AO to determine “total income” and not “undisclosed income”. Accordingly, the Assessing Officer has to compute the total income of the assessee on the basis of return filed u/s 153A of the act after considering the submissions made during the course of hearing before him, therefore there cannot be any scope for arguing that the assessee has been rendered powerless to even lodge a claim in respect of which deduction was not allowed earlier. Here it is important to note that the total income is not reduced simply on the basis of making a claim. The AO is fully empowered to consider the question of deductibility as per the provisions of the Act. If after going through such claim, he feels that addition is called for, he will obviously eligible to make such addition and vice versa, which the assessing officer has done in the case under reference.

10 Smt. AanjuSaraf 11. Some judicial findings wherein, held that the assessee is entitled to raise a claim of expenses, deduction and carry forward of losses etc. in the return of Income filed u/s 153A of the act:- PCIT V JSW Steel Ltd. [2020] 115 taxmann.com 165 (Bombay) ACIT V Splendor Landbase Limited ( ITA No. 2461/Del/2016) CIT V. B G Shirke Construction Technology ( P) Ltd. (2017) 246 Taxman 300 ( Bombay) ACIT V. V N Deva Doss (2013) 32 Taxmann.com 133 Naresh T Wadhwani V DCIT (2014) 68 SOT 235 ( Pune-Trib) ITO V. Gajraj Constructions (2015) 62 Taxmann.com 18 Malpani Estates V ACIT (2014) 44 Taxmann.com 242 DCIT V. Eversmile Construction Co.(P.) Ltd. [2013] 33 taxmann.com 657 (Mumbai – Trib.) 12. In the present case as the claim for deduction was enhanced by the assessee which was on account of calculation mistake as observed by the Ld. CIT(A) vide his order at para 7.3 (AY 2006-07) mentioning that “The claim was enhanced to Rs. 4,97,80,842/- by the assessee due to arithmetical error in calculating deduction at 25% of the profit of the eligible business.” However, Ld AO has not pointed out any mistake in the enhancement claim or has bring out anything contrary to the claim, except only has pointed out the fact that claim has been enhanced. Ld AO has examined the issue in its entirety and has rejected the claim of assessee for deduction under Sec 80IB. Admittedly, it is an undisputed fact that the enhancement of the deduction claimed in return U/s 139(1) which was increased while filing return in response to notice u/s 153A was on account of arithmetical mistake. Therefore, on perusal of various judicial

11 Smt. AanjuSaraf pronouncements as discussed above, we are of the opinion that the assessee is entitled to such enhancement. 13. With respect to eligibility of the assessee to claim deduction u/s 80IB of the Income Tax Act 1961, we find that the issue for our adjudication is now well settled as the same has been decided in favour of the assessee by the Co–ordinate Bench of the Tribunal, Nagpur Bench, in assessee’s own case in ITA no. 114/Nag./2009 (AY 2004-05) order dated 24th July 2009, ITANo.15/Nag./2012 (AY2005- 06)order dated 30th November 2015, ITAno.06/Nag./2012, for A.Y. 2007–08and ITAno.16/Nag./2012, for A.Y. 2007–08, order dated 4th December 2015, allowing the appeals of assessee and dismissed the Revenue’s appeal there by allowing the claim made by the assessee under section 80IB of the Act observed as under:– “5. Upon careful consideration we find that this Tribunal in assessee’s own case for the assessment year 2004–05 vide order dated 24.07.2009 had held that the assessee was entitled to deduction under section 80IB. The A.O. has not followed the ITAT’s order on the ground that the Department has filed the appeal against the decision before the Hon’ble High Court. Learned CIT(Appeals) has not accepted the ITAT’s decision on the ground that the Tribunal was not properly appraised of the facts. We find that since the facts are identical and in assessee’s own case the Tribunal has decided the issue, judicial discipline mandates that we follow the order of the Tribunal. We further note that the Revenue has already filed appeal before the Hon’ble High Court in Income Tax Appeal No.76 of 2010. In this view of the matter since the Hon’ble jurisdictional High Court has not reversed the decision of ITAT, we follow the order of learned CIT(Appeals) and hold that the assessee is eligible for deduction u/s 80IB.”

12 Smt. AanjuSaraf 14. Facts and circumstances being identical in the present issue, respectfully following the order of the Tribunal rendered in assessee’s own case for the assessment year cited supra, we have no hesitation in upholding the order passed by the learned CIT(A) by dismissing these grounds raised by the Revenue in its. 15. The next issue that we need to decide is, whether or not the learned CIT(A) was justified in deleting the disallowance of additional depreciation on windmill of Rs. 2,74,00,000 and whether or not the learned CIT(A) was correct in granting relief under section 32(1)(iia) of the Act when the same is prospective effective from 1st April 2013. This issue has been raised by the Revenue in its appeal being ITA no.437/Nag./2016 (ground no.6 & 7), Revenue’s appeal being ITAno.438/Nag./2016 (ground no.6& 7) and Revenue’s appeal being ITAno.511/Nag./2016 (ground no.5)

13 Smt. AanjuSaraf relying upon the decision of the Hon’ble Supreme Court in Lucky Minerals Pvt. Ltd., 244 ITR 830 (SC).

14 Smt. AanjuSaraf sister concern’s case in M/s. R.B. Seth, Shriram Narsingdas v/s CIT, vide Income Tax AppealsNo.21& 22 of 2011, order dated 18thJuly 2017 for the assessment year 2006-07 and 2007-08 respectively, observed as under:- “12. In the present case, it is not disputed by the Revenue that the respondent-assessee was engaged in the manufacture/processing of iron ore. Thus the requirements of the Section 32(l)(iia) of the Act are complied with by the respondent- assessee. In spite of being specifically asked, Mr. Parchure, learned counsel appearing for the revenue was not able to distinguish or point out as to why the decisions rendered by the Madras High Court in Hi Tech Arai Ltd. (supra), Kamataka High Court in the Hutti Gold Mines Co. Ltd. (supra) and Gujarat High Court in Diamines and Chemicals Ltd. (supra) should be departed from by us. However, all that Mr. Parchure states is that prior to 2012 the acquisition and instalJfWfi of a plant for generation of power would not be entitled to the benefit of windmills. This does not s appeal to us. in fact the bare reading of the provisions as held by the Madras High Court the only requirement under Section 32(l)(iia) of the Act is that the assessee should be engaged in the business of manufacture or production of article or thing, to claim additional depreciation on installing of plant or machinery on or after the cutoff date i.e. 31.03.2002. The setting up of new plant and or machinery need not have the operational connectivity to the article or thing which has been manufactured by the assessee. The further contention on behalf of the appellant-Revenue is that the respondent -assessee is not in the business of generation of power and, therefore, not entitled to the benefit of additional depreciation. This submission completely overlooks the order of the Assessing Officer which clearly records that the assessee is in the business of wind power energy. This fact is not disputed either by the Commissioner of Income Tax or the Tribunal. Therefore, the question as framed that the windmills have no connection with the business activity of the assessee is factually incorrect. In view of the fact that Madras, Gujarat and Karnataka High Courts have taken a view that additional depreciation on windmills acquired and installed prior to 31.03.2002 is available under Section 32(l)(iia) of the Act. All that is required for allowing additional depreciation is that the assessee must be engaged in the manufacture or production of any article or thing, and such an assessee would on the setting up of a new machinery or plant would be entitled to additional depreciation on the new plant and or machinery under Section 32(l)(iia) of the Act. There is no requirement in Section 32(1) (iia) of the Act

15 Smt. AanjuSaraf that additional depreciation on the new plant or machinery would be available only if the plant or machinery has some nexus/connection with the article or thing being manufactured by the respondent-assessee. To accept the Revenue's contention would require reading words into Section 32(l)(iia) of the Act which is not permissible. 13. Therefore, question no.(I) is answered in the affirmative i.e. in favour of the respondent-assessee and against the appellant- Revenue.”

16 Smt. AanjuSaraf 22. The next issue raised by the Revenue relates to deletion of penalty for overloading of trucks by treating it as compound fee. This issue is raised by the Revenue in its appeal being ITAno.436/Nag./2016(ground no.6)and ITAno.437/Nag./2016 (ground no.8).

17 Smt. AanjuSaraf

“8.2 1 have perused the assessment order, grounds of appeal and appellant's submission. I find that there is a mention in the Tax Audit Report that the expenditure claimed by the assessee Rs.12,382/- being penalty of overloading of trucks. The assessee explained in the assessment proceedings regarding the nature of expenditure and such explanation is reproduced by the AO in Para 9 of his order. On careful perusal of the details of explanation I find that it is a compounding fees charged by the RTO for overloading of trucks. I find merit in the argument of the AR of the appellant that had the overloading being an activity of violation of law, the RTO would never allow such trucks to ply on road. The RTO is invariably levying such compounding fees while allowing the trucks to operate on road and it is not in violation or contravention of any law. The expenditure is incurred to carry out the business activity. The nomenclature used in the Tax Audit Report cannot be the reason for disallowance but the nature of the expenditure is to be seen. The impugned expenditure was earlier subject to examination in the assessment proceedings u/s.!43(3) and there was no disallowance of the expenditure in the order u/s.143(3) earlier. In my considered view, the amount paid to RTO is a compounding fee and therefore the deduction is allowable. After considering the facts of the case and various judicial pronouncements relied upon by the appellant, it is clear that the disallowance made by the AO is not in accordance with law. I direct the AO to delete the addition of Rs 12,382/-. This ground of appeal is accordingly allowed.” 25. Being aggrieved by the order passed by the learned CIT(A), the Revenue is in appeal before the Tribunal.

18 Smt. AanjuSaraf perusal of the tax audit report, it is recorded therein that the expenditure incurred at Rs. 45,442 and Rs. 12,382, which was claimed by the assessee is mentioned as penalty of overloading of trucks. It was the contention of the assessee that this issue was also recorded by the Assessing Officer in his assessment order vide Para–9. We have gone through the order of the learned CIT(A) as well as the order of the Assessing Officer as well as the contentions of the assessee and found that the expenditure incurred by the assessee is a compounding fees charged by the RTO for overloading of trucks which is also mentioned in the audit report. We also find force in the arguments of the assessee’s Ld Counsel that had the overloading being an activity of violation of law, the RTO would never allow such trucks to ply on road. The RTO is invariably levying such compounding fees while allowing the trucks to operate on road and it is not in violation or contravention of any law. We do find justification in learned CIT(A)’s observations that the “…..expenditure is incurred to carry out the business activity. The nomenclature used in the Tax Audit Report cannot be the reason for disallowance but the nature of the expenditure is to be seen. The impugned expenditure was earlier subject to examination in the assessment proceedings u/s.143(3) and there was no disallowance of the expenditure in the order u/s.143(3) earlier”. In view of this, we are of the considered opinion that amount paid to RTO is in the nature of

19 Smt. AanjuSaraf compounding fee, which is necessary for smooth functioning of the business of the assessee and, therefore, the deduction is allowable. After considering the facts of the case and various judicial pronouncements relied upon by the learned Counsel for the assessee, we are of the view that the disallowance made by the Assessing Officer is not in accordance with law. Consequently, we do not find any reason to interfere with the order of the learned CIT (A) on this ground, which we uphold the order of CIT(A). Thus, grounds, ITAno.436/Nag./2016 (ground no.6) and ITAno.437/Nag./2016 (ground no.8), raised by the Revenue are dismissed. 29. The Next issue raised by the revenue is with regard to deletion of addition by CIT(A) of Rs. 15,00,000/- being cash paid for interior works. The ground no 4 of ITA 511/Nag/2016.

20 Smt. AanjuSaraf explain this entry but the assessee has not provided any reply. As the assessee was unable to explain this entry it is presumed by the Ld AO that contents of the document seized are true and therefore an amount of Rs. 15,00,000/- was added to the total income of the assessee as undisclosed income. It is further submitted that the CIT(A) has erred in deleting this addition which was found in the seized material but the same was not reflected in the books of accounts of the assessee. Therefore the addition made by the Ld AO shall be upheld and the order of Ld CIT(A) on this issue deserves to be set aside. 31. Ld AR has given his written submission on this ground reads as under:- 2.0 Ground No 4: The Ld. AO has made addition of Rs 15,00,000/- as cash paid to Edgar DeMello on the basis of seized document reproduced by AO on Page 25 of his order on the ground that the said payment is not reflected in his ledger account. 2.1 The impugned documents (Kindly refer Page No.12-16 of Paper Book) show that the amounts are payable to M/s. Wismaya against the interior work carried out by them and the payments therefore are in relation to M/s. Wismaya only and not that of M/s. Edgar DeMello who is the Architect and has certified the work carried out by M/s. Wismaya. Thus, the payment of Rs. 15 lacs is not made to M/s. Edgar but to M/s. Wismaya as per the certificate of the Architect and confirmation from M/s Wismaya (Kindly refer Page No.17-18 of Paper Book). The AO has on mistaken belief made attempt to correlate the payments shown therein with t e copy of ledger account of M/s. Edgar. The total bill amount mentioned in the seized document has been paid to M/s Wismaya through banking channels and duly accounted in books as reflected in his ledger account (Kindly refer Page No.19-21 of Paper Book). The LO. CIT CA) has therefore rightly deleted the addition of Rs.15,00,000/-.

21 Smt. AanjuSaraf 32. Ld AR also drew attention to the finding of the CIT(A) on para 9.2 of his order which reproduced as under:- 9.2 I have carefully perused the seized document, assessment order and the submissions made before me. I find that the Page No. 15 is part of the seized documents Page No. 14 to 19 of Annexure B-l/24. The AO has held that the impugned documents are in relation to the payments made to M/s. Edgar Demello Architects d that the payment of Rs. 15 lacs is made in cash to Edgar. However, I find that an Architect to supervise and check the interior work being carried out in the flats of assessee at Indira Nagar and at Hospet. M/s. Wismaya are the interior contractors and executing the work at the residence belonging to assessee and her husband Shri Ajay Saraf. The impugned documents are the certificates from the Architects regarding the interior work carried out and the amount paid and due to M/s Wismaya. The AO has made attempt to correlate the payments shown to have been made by cheque mentioned in the statement with the copy of account of M/s Edgar. The AO has himself pointed out that the advance received in cheque is mentioned at Rs.23 lacs in the seized document however, the cheque payments as per ledger account to M/s. Edgar is Rs. 22 lacs. Further, the bill amount is also not matching but the AD held that the transactions are closely matching with the copy of account of M/s. Edgar and therefore concluded that Rs. 15 lacs must have been paid in cash to M/s. Edgar. This finding of the AD is incorrect and contrary to the facts available on record in the seized document and I find that the transactions mentioned in the impugned documents are the amounts payable to M/s. Wismaya against the interior work carried out and the payments therefore are in relation to M/s. Wismaya only and not that of M/s. Edgar who is the Architect and has certified the work carried out by M/s. Wismaya. The AD at Page 26 has also mentioned that this page is part of bill statement from Page No. 15 to 19 which has been duly checked and certified for payment by M/s. Edgar Architects. Thus the payment of Rs. 15 lacs is not made to M/s. Edgar but it's a payment to M/s. Wismaya as per the certificate of the Architect. Now the issue to resolve is whether the payment of Rs. 15 lacs has been accounted in the books of accounts. The assessee has pointed out from the ledger account that Rs.15 lacs has been paid by cheque on 5-4- 2008 to M/s. Wismaya and the impugned entry of Rs. 15 lacs is the same and duly accounted. I find force in the contention of the learned AR as there is no other mention of Rs. 15 lacs by cheque in the impugned statement/certificate of the Architect. I also find that payment of Rs.15 Lacs by cheque No 389777 on 25/6/2009 & Rs. 8 Lacs by chq. no 389807 on 29/1/2010 totaling Rs. 23 Lacs has been made to M/s Wismaya which

22 Smt. AanjuSaraf tallies with the advance received amount in cheque mentioned on Page No 9 of the seized document. Further the balance amount due of Rs. 12,30,351/- mentioned in the seized document has also been paid to M/s Wismaya by cheque no 000150 for Rs. 9) 9,851/- on 16/12/2010 & by chq . no 389913 for Rs. 3,10,500/- on 16/12/2010. Thus I find that the total bill amount mentioned In the seized document has been paid to M/s Wismaya by account payee cheques and duly accounted in books. Therefore I hold that the payment of Rs. 15 lacs to M/s. Wismaya is duly accounted in the books of accounts and the addition by the AO is therefore directed to be deleted. The Ground of appeal is allowed. 33. We have heard the contentions of both the parties, have carefully perused the material available on records and orders of the revenue authorities. We have observed that, this issue was not explained by the assessee during the assessment proceedings before the Ld AO, however ground raised for this disallowance was duly defended by the assessee to the CIT(A) during the appellate proceedings and Ld CIT(A) has discussed the same and decided the same according to the facts of the case. Ld CIT(A) has examined the facts and concluded that “Thus I find that the total bill amount mentioned in the seized document has been paid to M/s Wishmaya by account payee cheque and duly accounted in books.” After this observation of the Ld CIT(A), which is sustainable, there is no scope for any further adjudication on the issue, we therefore do not see any modification necessary in the verdict of the Ld CIT(A) and accordingly refrain ourselves to interfere with this issue. Therefore this ground of the revenue is dismissed.

23 Smt. AanjuSaraf 34. The next issue which we need to decide is, whether or not the learned CIT(A) was correct in deleting the addition of Rs. 27.00 lakh made by the Assessing Officer on account of income from house property. The grounds, raised by the Revenue in its appeal beingITAno.438/Nag./2016 (ground no. 8-10).

24 Smt. AanjuSaraf which is not in the same building or vicinity. Secondly the commercial property is 15998 Sq Ft and so the monthly rent comes to Rs 50 Per Sq. Ft., whereas the residential flat is only 2709 Sq. Ft. and the rental value of the same has been estimated at Rs 3 lacs P.M. which comes to Rs 110/- per sq.ft. Both the residential properties have not been rented and hence annual value has to be determined as per the provisions of section 23(1)(a) i.e at the sum for which it might be reasonably be expected to let from year to year. The annual letting value of the property in question should be determined as per the municipal valuation adopted by the municipal authorities. The annual letting value as per khata Extract of Bangalore Mahanagar Palika dated 01/06/11 submitted by the appellant to AD on 08/03/2013 is Rs 46,687/-(Kindly refer Page No 4 of Paper Book). Thus, the annual value u/s 23(1)(a) for 9 months comes to Rs 35,015/-. After deduction of corporation tax of Rs 12,512/- and deduction u/s 24 not allowed by AD, the taxable income works out to Rs. 15752/-. The Hon'ble ITAT Mumbai Bench in Park Paper Ind (P) Ltd 25 SOT 406, Veena Munganahalli ITA No 251.6 (201.2) & Dr. Balkrishna Naik-1. SOT 01.77 and Ahmedabad Bench in .Jayshri Gautam bhai Desai Vs ITa - 40 CCH 224 held that Municipal valuation should be the annual letting value in case of self-occupied property. " 37. The learned CIT(A) after hearing both the parties has observed as under:- “2. I have carefully considered the submission of the AR of the appellant, Statement of Facts, order of the AO and material on record. The AO found that the assessee has failed to offer annual value as per Section 22 of the Income Tax Act on the property which is other than the self occupied property. I find that the assessee owns two residential properties. During the course of assessment, the AO held that the residential property at Saibaba Temple Road, Hospet is a self occupied property of the assessee on the basis of the Wealth Tax return filed by the assessee. The assessee is not disputing the aforesaid factual position before the AO as well as before me. According to the AO, the property at "Regency Grandeur", Indira Nagar, Bangalore was purchased vide Sale Deed dated 26-6-2009 and therefore held that the annual value of the property u/s.22 shall have to be determined for the period for which the property was occupied. This has been disputed by the assessee by placing on record the evidence relating to the completion of property and its occupancy. I have carefully examined the evidence available on record and find that the property was not fit for habitation on the date of Sale Deed. There were further improvements in the property and it was completed on 30-9-2010. In this regard the counsel for the

25 Smt. AanjuSaraf appellant drew my attention to the seized document at Annexure B-l/24, Page No. 14. This is the certificate dated 12-08-2010 issued by the Architect for the completion of work. It is also available in the seized record that the construction work of kitchen, bathroom, furniture, electric fittings and other interior work was carried out by M/s. Wismaya and they completed the interior work on 9th June, 2010. Thus the claim of the appellant that the property was not fit for habitation on the date of Sale Deed appears to be correct. Considering the architect certificate and in absence of any contrary evidence, the claim of the assessee that the property was occupied on 30-9-2010 is accepted. Considering the facts of the case, I hold that no ALV can be determined in such -circumstances u/s.23(l)(a) of the Income Tax Act for the year under consideration. The addition of Rs.27,00,000/- made by the AO is hereby directed to be deleted. This Ground is therefore allowed.” 38. After considering the facts of the case and various judicial pronouncements relied upon by the learned Counsel for the assessee, we are of the view that the disallowance made by the Assessing Officer is not in accordance with law. Consequently, we do not find any reason to interfere with the order of the learned CIT (A) which we uphold by reversing the order of the Assessing Officer. Tus, this ground of revenue is dismissed

26 Smt. AanjuSaraf

“I have no doubt in my mind that the entire expenditure claimed under the specific four heads discussed above is not fully genuine in the light of the above discussion. In order to be fair to the assessee and since the offer of additional income of Rs. 15 crores has been accepted in the case of M/s RBSSN for AY 2010-11 , the expenses in the case of assessee for this year are also disallowed to the extent of some proportion, which the admitted bogus expenditure of Rs. 15 crores been to the total expenditure under the four specific heads for AY 2010-11. Such a working gives a percentage of 12.26765 %, which, according to the assessee, is the percentage of bogus expenditure for that year. The said percentage is applied to the expenses claimed this year, also taking into consideration all the facts and circumstances of the case. However the assessee has not given any clarification regarding discrepancies in the statement given by Shri Ajay Saraf u/s 132(4) of the on 28-9-2010 (Q.No. 12 and Q.No. 17). Accordingly, an amount of Rs.15,10,00,000/- is taken as total expenses overbooked. Therefore proportionate amount is disallowed , the working of which is as under: In case of M/s RBSSN for the AY 2010-11 the ratio of expenses overbooked to total expenses under the above mentioned heads = 15,10,00,0007 123,08,79,788 = 12.26765 % In the case of assessee for AY 2008-09 the proportionate expenses are:

A.Y 2008-09 Amount Particulars Amount (`) % disallowed Disallowed

TRANSPORTATION 3,29,52,531

FREIGHT & FORWARDING 11,75,342

TOTAL 3,41,27,873 12.26765 4186688.012

Accordingly, an amount of Rs.41,86,688/- is treated as bogus and non-genuine expenditure and added to total income of the assessee. Penalty proceedings u/s 271(l)(c) of the IT Act are initiated separately.”

27 Smt. AanjuSaraf 41. Ld AR on the other hand submitted the observations of Ld CIT(A) from the appellate order, wherein the learned CIT(A) considering the submissions of the assessee and keeping in view the facts and circumstances of the case, confirmed the order of the Assessing Officer by observed as under:– “I have perused the assessment order, grounds of appeal, appellant's submission facts available on record. The AO has discussed the issue in Para 6 of the Assessment -. On careful perusal of the observations of the AO, I find that the AO has discussed the observations of the investigation wing at the time of search. It is quite clear from the finding recorded by the AO in his order that the AO has made proportionate disallowance of expenditure in the case of assessee merely on the basis of declaration made by M/s RBSSN, sister concern of the appellant in AY 2010-11 on account of inflated / overbooked expenditure under four heads. The verification of expenses relates to AY 2010- 11 and not to the year under consideration. Further, the surrender of Rs. 15 Cr. in the statement recorded u/s.!32(4) on 28-9-2010 was by Shri Ajay Saraf and the income so surrendered has been included in the return of income of M/s. RBSSN filed for AY 2010- 11 and tax paid thereon. There is no statement of the assessee confronting any seized material, as regards any surrender or any acceptance regarding inflation in the expenditure. The AO stated that the nature of the business and the nature of expenditure of the assessee being the same as that of M/s RBSSN in every assessment year, therefore on the basis of presumption that the expenditure claimed by assessee also are non–genuine, the addition is made. I am of the considered opinion that the addition cannot be made in such a manner. The onus to prove the genuineness of the expenditure and its reasonability is on the assessee and whether the assessee has discharged such onus in the present case before me needs to be examined. I find that the books of accounts of the assessee are duly audited and no defect has been pointed out by the AO in any such books of accounts which are maintained by the assessee. The assessee has filed the details of expenditure and also produced vouchers and bills with reference to the claim of expenditure. All the expenses relating to transportation, freight and hire charges etc have been substantiated by bills and vouchers which have not been denied by the AO. The assessee has made payments after deducting TDS, where applicable. It is a fact verifiable from records that the appellant has deducted tax at source on payment of Rs. 3,41,21,1727-, out of total expenditure of Rs. 3,41,27,8737-

28 Smt. AanjuSaraf claimed and on balance tax was not deducted, since no tax is required to be deducted thereon u/s 194C. TDS has been deducted on cash payments also. The AO has failed to bring on record any infirmity or discrepancy in the vouchers/bills or any record in relation to the claim of such expenditure. The trading result has also been accepted by the AO. The AO has alleged that there exist irregularities and discrepancies as regards claim of expenditure made by the assessee under different heads and incriminating material was also found during the course of search. The A.O. has however not pointed out or referred to in his order even a single instance of any such discrepancy in the expenditure claimed by assessee. The A.O. has also failed to bring on record any specific incriminating material / evidence found during the course of search in support of his allegations that the expenditure claimed is bogus or overbooked/inflated. In absence of any such finding, I hold that the addition is made merely on conjectures and surmises. The addition on the basis of presumption that the expenses are inflated to reduce the profit cannot be sustained unless the AO brings on record any evidence in support of such presumptions. Suspicion backed by no evidence cannot be a cogent reason. 5.6 The AO has also alleged that there is variation in valuation of closing stocks; there are unaccounted receipts and unrecorded payments and host of other discrepancies found on examination of seized material. The AR in response to this has contended that the AO has not brought on record any such incriminating evidence from the seized material and not shown even a single instance of unrecorded receipt or payment for the relevant financial year. The variation in closing stock as mentioned by him also not gets clarified from the assessment order. On perusal of the assessment order the contention of the AR of the appellant is found correct. There is nothing in the assessment order which shows that the assessee has indulged in suppression of receipts or inflation or deflation of any expenditure, variation in valuation of closing stock. The statement of Mr. Ajay Saraf was also perused by me and I find that the surrender was with reference toAssmt. Year 2010-11 and there was no discussion about the assessee's case in his statement. The surrender of Rs.15 Cr. was made by Mr. Ajay Saraf under peculiar circumstances as submitted by the assessee before the AO as well as before me. Just because a surrender is made by third party in a particular asstt.year cannot be reason to saddle the assessee with the addition to the total income. It is clear that in making the assessment under sub section 3 of Section 143 of the Act, the AO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than mere suspicion in support of any disallowance of expenditure. In this peculiar fact the AO was not justified in estimating the

29 Smt. AanjuSaraf disallowance to be made as apart from general suspicion there is no material or fact on record to hold that the assessee has claimed bogus expenditure or has inflated/overbooked the expenditure to reduce the profit. 5.7 Similar type of addition was made in appellant's own group case M/s R. B. Seth ShriramNarsingdas (A.Y.-2005-06 to AY 2009-10 & AY 2011-12) which was contested before CIT (A) III Nagpur. The counsel for appellant furnished the copy of the appellate order and claimed that the facts of the case of the assessee are similar to the case already decided. I have perused the order of the CIT(A)III Nagpur which is of the group concern which is on same facts and find that the addition of similar nature made in the case of RBSSN has been deleted. Accordingly based on facts of the case, appellants submissions, documents available on record, discussion as above and the judicial pronouncement relied upon by the appellant, I am of the considered opinion that the addition made by A.O. to the tune of ` 41,86,688, is not in accordance with law and hence deleted. This ground of appeal is accordingly allowed.”

30 Smt. AanjuSaraf filed second appeal for this issue only for the assessment year 2007– 08 and 2008–09. The learned Counsel submitted that the learned CIT(A) has rightly deleted the addition made by the Assessing Officer both on legality and on merits by holding that – (a) “the Assessing Officer has failed to being on record any specific incriminating material / evidence found during the course of search in support of his allegations that the expenditure claimed in bogus or overbooked / inflated”; (b) “the disallowance has been made merely on presumption. Similar type of addition made in M/s. RBSSN for A.Y. 2005–06 to A.Y. 2009–10 and A.Y. 2011–12 has been deleted by the Ld. CIT(A) and the department has not contested the same in appeal before the Hon’ble ITAT; and (c) “The assessee has discharged the primary onus and initial burden of proving that all expenses incurred and claimed by her are genuine”. The learned Counsel thus prayed that the order of the learned CIT(A) be upheld.

31 Smt. AanjuSaraf account of inflated / overbooked expenditure under four heads. The verification of expenses relates to AY 2010-11 and not to the year under consideration. The learned CIT(A) has given a very detailed reasoning and reversed the order of the Assessing Officer which are reproduced above. Consequently, in view of the detailed reasoning given by the learned CIT(A) which in our opinion is in accordance with law and we find no infirmity to take a view other than the view taken by the learned CIT(A). Keeping this in view, we uphold the order of the learned CIT (A) by dismissing ground no.6 raised by the Revenue in its appeal being ITAno.511/Nag./2016 and ground no.4, raised by the Revenue in its appeal being ITANo.512/Nag./2016.

32 Smt. AanjuSaraf 1.1 The additions have not been made on the basis of any incriminating evidence found on search. The addition of Rs 50 Lacs has been made on the basis of loose chit written by Mr. Ajay Saraf (spouse of assessee) - inventorised as Annexure B- 1/13 -Page 6, which is reproduced by the AO on Page No 6 of his order and statement of Mr. Ajay Saraf recorded uls 132 as Managing Partner of Mls R B Seth Shriram Narsingdas during the course of search. The assessee has placed the copy of ledger accounts (Kindly refer Page No. 6-11 of Paper Book) from which it is evident that all payments for purchase of flat in Reliance Grandeur to Mls Ashed properties totaling Rs 1,49,68,9871- were made through banking channels without there being any involvement of cash. The Ld. CIT (A) has also on Para No 8.3 of his order accepted that all payments were made by account payee cheques prior to search and duly recorded in books of accounts. Thus, the impugned document cannot be considered as incriminating evidence on the basis of which any addition can be made. The hon'ble ITAT Pune Bench in Kumar & 'Co -ITA No 463/2008 and Sinhgad Technical Education Society Vs. ACIT - 140 TT J 0233 has held that "When the impugned documents merely contain the noting of entries, which are already found place in the books of accounts or subjected to scrutiny of the AO in regular assessment u/s 143(3) of the Act, such document cannot be said to be containing the incriminating information". 1.2 No incriminating evidence was found during the course of search and hence the AO had no jurisdiction to assess uls 153A and hence the order passed is bad in law. The Hon'ble Delhi HC in Pr. CIT v. Lata Jain reported in 3841TR 543 &Pr.CIT V. Meeta Gutgutia Prop. Ferns N Petals- 395 ITR 526 held that in absence of any incriminating material found as a result of search, assumption of jurisdiction was also not in accordance with law. The SLP-1812112018 filed by the department in the case of Smt Meeta Gutgutia has been dismissed by Hon'ble Supreme Court. Further It is a well settled law now that the additions uls 153A in case of unabated assessments can be made only on the basis of any incriminating evidence found during search. The Hon'ble Bombay High Court in Deepak Kumar Agarwal-ITA No 1709,1780 12014 relying on CIT v/s Cont. Warehousing Corporation 3741TR 645 held that no additions can be made in assessments which have become final, if no incriminating material is found during search. 2.0 Ground No 2 to 4: The AO has made addition of Rs 50,00,0001- as cash paid to Mls Ashed Properties for purchase of flat in Regency Grandeur on substantive basis in the hands of the assessee as the property has been purchased in her name and on protective basis in the hands of Mr. Ajay Saraf (Spouse of assessee) as he accepted having paid cash in his statement

33 Smt. AanjuSaraf made uls 132(4). The AO made additions on the basis of undated loose chit written by Mr. Ajay Saraf and statement of Mr. Ajay Saraf made uls 132(4). The Ld. CIT (A) confirmed the said addition merely because Mr. Ajay Saraf had in his statement accepted that cash payment was made and the same was not retracted. 2.1 The facts in brief, are that Mr. Ajay Saraf had discussed and noted the details of proposal for purchase of residential house from Mls Ashed Properties Pvt Ltd. on one loose chit, found during the course of search and reproduced by AO on Page' No 6 of his order. The AO on the basis of loose chit construed that the total consideration was Rs 1,82,92,5001- of which the assessee paid Rs 50,00,0001- in cash at the time of agreement and Rs 6,47,375/- by cheque. However, no such payment was made by cheque and the AO failed to correlate the figures mentioned in the noting with agreement to sell and books of accounts found during search. The amounts mentioned therein were merely rough estimated figures noted while discussion. The AD failed to realize that deals of this magnitude are finalised only after discussion. The assessee after negotiation finalised the deal and entered into two agreements on 27/7/2006; one for purchase of undivided share of land for Rs 48,34,000/- & second for construction thereon for Rs 91,26,8401- with Mls Ashed Properties Pvt Ltd which is not disputed. Thus, the total cost as per agreements found during search is Rs 1,39,60,840/-. The total payments for purchase of said property made through banking channels and duly accounted in the books is Rs.1,49,68,987/-(Kindly refer Page No.6-7 of Paper Book) which is also not disputed. The addition needs to be deleted as: a) The entire consideration for purchase has been paid through banking channels and duly accounted in the books prior to search. The Ld. CIT(A) also accepted this fact in Para 8.3 of his order. Having accepted this fact, the Ld. CIT(A) erred in confirming the addition made by AD. b) The loose chit is unnumbered, undated and the noting made are merely rough jottings which have no evidentiary value. It is mentioned therein that Rs 6,47,375/- paid by cheque but no such payment has been made by cheque. The total consideration as per books and agreement including cash of Rs 50,00,000/- would amount to Rs 1,99,68,987/-which does not tally with the figure of Rs 1,82,92,500/- mentioned in the loose chit. Thus, the figures mentioned in the impugned undated document were mere rough discussion figures. c) The Ld. CIT(A) in Para 8.2 of his order accepted that there is merit in the submission of the assessee that the noting made on

34 Smt. AanjuSaraf the loose paper are merely discussion figures and thus on the face of it this noting is incapable of any interpretation as they do not constitute any coherent recording from which a clear and unambiguous inference relating to unaccounted payment made by the assessee can be unmistakably concluded. Having accepted this fact, the Ld. CIT(A) erred in confirming the addition made by AD. d) Nowhere in loose chit it is mentioned that Rs 50 Lacs was actually paid and that too in cash. The Ld. CIT (A) also in Para 6.2 of his order accepted that the loose chit is undated and the presumption made by AD that cash was paid at the time of agreement is without any sound evidence and there is no corroborative evidence of actual cash outgo during the year under consideration. The additions have been made only on presumption. e) The sale deed has been executed at the value adopted &assessed by the stamp valuation authority as fair market value and hence there cannot be any on money payment as no prudent person would pay more than the market value of property. f) That all payments were made by account payee cheques and duly accounted in books prior to search and hence it is obvious that Mr. Ajay Saraf had on mistaken belief accepted that cash payment of Rs 50 Lacs was made. The initial statement was given in exhaustive conditions. The recording of statement (Kindly refer Page No. 12-20 of Paper Book) started late in night and continued till 1.30AM of next day and he was under tremendous mental & physical pressure because of the continuous ongoing search for 72 hours. There was no occasion to read the statements / verify records at that time. Such statements have no evidentiary value. g) That the AO never tried to investigate the matter or cross verify the payment made with M/s Ashed Properties Pvt Ltd. before adding undisclosed income in the hands of the assessee. The AD has not even brought on record any confirmation from the builder to whom the alleged on-money was paid. I am informed that director of M/s Ashed Properties in his statement before the department at Bangalore has stated that no cash payment has been received for purchase of said property from the assessee. h) The assessee never accepted of any cash payment made by her (Kindly refer Page No.21-22 of Paper Book) and hence the question of her making any retraction does not arise. Even otherwise, the assessee had retracted by not including the said

35 Smt. AanjuSaraf cash payment accepted by Mr. Ajay Saraf as undisclosed income in the return filed by her u/s 153A and hence the AD should have brought corroborative evidence on record to prove the existence of undisclosed income. The Ld. CIT (A) therefore erred in confirming the addition merely because the spouse of assessee had accepted cash payment in his statement, which was not retracted. i) The addition has been made on the basis of statement made by spouse of the assessee and no confirmation of assessee for any such disclosure was obtained. No addition can be made merely on the basis of statement made by third party even if he happens to be the spouse of the assessee. Reliance is placed on following Case Laws: The Hon'ble Gujarat HC in the case of CIT vs. Umang H. Thakkar Tax Appeal No. 1971/2009 dated 18.10.2011 held "The tribunal rightly deleted the additions made on the basis of rough jottings made on loose papers which were not in the handwriting of the assessee and on the basis of statement of third party, even if the person concerned was the father of the assessee". The Hon'ble ITAT, Bangalore Bench in Arun Kumar Bhansali vs. DCIT - {20061 10 SOT 46 (Bang.) held that while computing the undisclosed income of the assessee, AO should take cognizance of such correct income as depicted in the books of account as well as in the seized material and it should not adopt a figure merely as per admission of the assessee. In the assessee's case, no corroborative evidence was found and seized, therefore, the CIT (A) was justified in deleting the addition which was merely based on the statement recorded when the assessee ••• was tired and frustrated on account of continuing search for 28 hours. In view of the above, I most humbly pray before this Hon'ble bench that the order passed may kindly be quashed. Assessee’s Appeal No. 499/NAG/2016 3.0 Ground No 1: The Appellant had filed her original return u/s 139(1) on 30/09/2009 which was duly processed u/s 143(1) of the Act. Search was conducted at the office premises of firm on 24/09/2010. The assessment was therefore not pending as on the date of search. 3.1 The disallowance of deduction u/s 80IB and expenses has not been made on the basis of any incriminating evidence found on search. The addition of Rs 2 crore has been made on the

36 Smt. AanjuSaraf basis of loose chit written by Mr. Ajay Saraf (spouse of assessee)- inventorised as Annexure B- 1/1, which is reproduced by the AD on Page No 2 of his order and statement of Mr. Ajay Saraf recorded u/s132 as Managing Partner of M/s R B Seth Shriram Narsingdas during the course of search. The assessee has placed the copy of the sale deed along with ledger accounts (Kindly refer Page No.9-29 & 30-34 Of Paper Book) from which it is evident that all payments for purchase of flat in Reliance Bliss to M/s Ashed properties totaling Rs 4,14,71,742/- were made through banking channels without there being any involvement of cash. The Ld. CIT (A) has also on Page no 26 of his order accepted that all payments were made by account payee cheques prior to search and duly recorded in books of accounts. Thus, the impugned document cannot be considered as incriminating evidence on the basis of which any addition can be made. The hon'ble ITAT Pune Bench in Kumar & Co -ITA No 463{2008 and Sinhgad Technical Education Society Vs. ACIT-140 TTJ 0233 has held that "When the impugned documents merely contain the noting of entries, which are already found place in the books of accounts or subjected to scrutiny of the AO in regular assessment u/s 143(3) of the Act, such document cannot be said to be containing the incriminating information". 3.2 The addition of Rs. 2 cr. has been made on the basis of undated and unsigned loose chit reproduced by AO on Page No 2 of his order. Section 292C of the Act does raise a presumption against the assessee who has been searched upon that the contents of books of accounts and other documents found from his possession Qr control are true. However, in my humble view the word contents used in this section presupposes that the contents are intelligible, comprehensible and speaking either by itself or in correlation with other material or upon further investigation. Unless such is the case, mere jottings recorded on seized documents which are capable of several/various interpretations, lack evidentiary value and is not sufficient enough to fasten tax liability on the assessee. Moreover, the assessee had discharged its primary onus of explaining the contents of loose papers found during search and as such the presumption stands rebutted. The AO has made the addition merely on the basis of suspicion without bringing on record any corroborative evidence to show that any cash was paid and the same was paid during the year under consideration, hence the impugned document cannot be considered incriminating evidence on the basis of which addition can be made. 3.3 No incriminating evidence was found during the course of search and hence the AD had no jurisdiction to assess u/s 153A

37 Smt. AanjuSaraf and hence the order passed is bad in law. The Hon'ble Delhi HC in Pr. CIT v. Lata .lain reported in 384 ITR 543 & Pr.CIT V. Meeta Gutgutia Prop. Ferns N Petals-395 ITR 526 held that in absence of any incriminating material found as a result of search, assumption of jurisdiction was also not in accordance with law. The SLP- 18121/2018 filed by the department in the case of Smt Meeta Gutgutia has been dismissed by Hon'ble Supreme Court. Further, it is a well settled law now that the additions u/s 153A in case of unabated assessments can be made only on the basis of any incriminating evidence found during search. The Hon'ble Bombay High Court in Deepak Agarwal-ITA No 170912014 relying on CIT V Is Cont. Warehousing CorD [20151 374 ITR 645 held "No addition can be made in respect of an unabated assessment which has become final if no incriminating material is found during search". 4.0 Ground No 2 to 4: The AD has made addition of Rs 2 Cr. as cash paid to M/s Ashed Properties for purchase of flat No B-3 in Regency Bliss Apartments on substantive basis in the hands of the assessee as the property has been purchased in her name and on protective basis in the hands of Mr. Ajay Saraf, spouse of the assessee, as he accepted having paid cash in his statement made u/s 132(4). The AD made additions on the basis of undated loose chit written by Mr. Ajay Saraf and statement of Mr. Ajay Saraf made u/s 132( 4). The Ld. CIT (A) confirmed the said addition on a misconception that the assessee in her statement accepted that cash payment was made and the same was not retracted. 4.1 The facts in brief, are that Mr. Ajay Saraf spouse of assessee had discussed and noted the details of proposal for purchase of residential Flat from M/s Ashed Properties Pvt Ltd. on one loose chit reproduced by AO on Page No 2 of his order. The AO on the basis of loose chit construed that that out of total construction cost of Rs. 3.23 crores mentioned therein, Rs 1.1 cr was paid by cheque and Rs 2 crore in cash. Thus, as per Aa the total cost was Rs 3.89 Crores (Land cost Rs 66 lacs plus Rs 3.23 cr). The assessee after negotiation finalized the deal and entered into two agreements on 14/10/2008; one for purchase of undivided share of land for Rs 66,00,000/- & second for construction thereon for Rs 3,23,31,250/- with M/s Ashed Properties Pvt Ltd. which is not disputed. Thus, the total cost of Rs 3,89,31,250/- is not disputed. The total payments for purchase of said property made through banking channels and duly accounted in the books is Rs 4,14,71,742/- (Kindly refer Page No.30-34 of Paper Book) which is also not disputed. The addition needs to be deleted as:

38 Smt. AanjuSaraf a) The entire consideration for purchase has been paid through banking channels and duly accounted in the books prior to search without any involvement of cash. The Ld. CIT (A) also accepted this fact on Page no 26 of his order. Having accepted this fact, the Ld. CIT(A) erred in confirming the addition made by AO by ignoring the documentary evidence available on record. b) The loose chit is unnumbered, undated and the noting made are merely rough jottings which have no evidentiary value. Nowhere in the impugned document it is mentioned that Rs 2cr was actually paid and that too in cash. The presumption made by AO that cash was paid on 14/10/2008 is without any sound evidence and there is no corroborative evidence of actual cash outgo during the year under consideration. The additions have been made only on presumption. The Ld. Cit (A) also accepted this fact on Page No 25 & 26 of his order. c) The sale deed has been executed at the value adopted and assessed by the stamp valuation authority as fair market value and hence there cannot be any on money payment as no prudent person would pay more than the market value of property. The Ld. CIT(A) also in Page No 26 of his order accepted that the value is comparable with the market value as per stamp Valuation authority. d) That the AO never tried to investigate the matter or cross verify the payment made with Mls Ashed Properties Pvt Ltd. before adding undisclosed income in the hands of the assessee. The AD has not even brought on record any confirmation from the builder to whom the alleged on-money was paid. I am informed that director of M/s Ashed Properties in his statement before the department at Bangalore has stated that no cash payment has been received from the assessee. e) The Ld. CIT (A) as mentioned in Para 6.2 of his order, confirmed the addition ignoring the documentary evidence on record on a misconception that the assessee himself; agreed to the contents of the documents, agreed to have made payment of Rs 2 cr in cash vide statement recorded during search, there was no retraction of statement and she had asked for telescoping benefit' during assessment proceedings. This is factually incorrect as the assessee neither agreed to the contents of the documents nor she accepted having made any cash payment in her statement recorded u/s 132(4) (Kindly refer Page No. 35-36 of Paper Book) and hence any question of her retraction does not arise. In fact, the investigation authorities never believed that any cash payment has been

39 Smt. AanjuSaraf made by the assessee and hence they never posed' any question in this regard to her in statement recorded u/s 132(4). Even the statement of Mr. Ajay Saraf as regards cash payment made, was never put to her nor her confirmation for any such disclosure was obtained. Further the assessee has never asked for telescoping benefit in her submissions made during assessment proceedings. In fact, Mr. Ajay Saraf in his reply to AO (Kindly refer Page No. 37-40 of Paper Book) stated that cash payment accepted by him has been paid by M/s RBSSN and requested for telescoping benefit against Rs 15 cr declared by firm. The AO however did not accept the contention and made addition in the case of assessee. The AO reproduced his submission in this order. f) That all payments were made by account payee cheques and duly accounted in books prior to search and hence it is obvious that r. Ajay Saraf had on mistaken belief accepted that cash payment of Rs 2cr was made. The initial statement was given in exhaustive conditions. The recording of statement (Kindly refer Page No.41-49 of Paper Book) started late in night and continued till 1.30AM of next day and he was under tremendous mental & physical pressure because of the continuous ongoing search. There was no occasion to read the statements I verify records at that time. Such statements have no evidentiary value. g) The assessee never accepted of any cash payment made by her and hence the question of her making any retraction does not arise. Even otherwise, the assessee had retracted by hot including the said cash payment accepted by Mr. Ajay Saraf as undisclosed income in the return filed u/s 153A and hence the AO should have brought some corroborative evidence on record to prove the existence of undisclosed income. g) No addition can be made on the basis of statement made by third party even if he happens to be the spouse of the ssessee. Reliance is placed on following Case Laws: The Hon 'ble Gujarat HC in the case of CIT vs. Umang H. Thakkar Tax Appeal No.1971/2009 dated 18.10.2011 held "The tribunal rightly deleted the additions made on the basis of rough jottings made on loose papers which were not in the handwriting of the assessee and on the basis of statement of third party, even if the person concerned was the father of the assessee".

40 Smt. AanjuSaraf The Hon'ble ITAT, Bangalore Bench in Arun Kumar Bhansali vs. DCIT - [20067 10 SOT 46 (Bang.) held that while computing the undisclosed income of the assessee, AO should take cognizance of such correct income as depicted in the books of account as well as in the seized material and it should not adopt a figure merely as per admission of the assessee. In the assessee's case, no corroborative evidence was found and seized, therefore, the CIT (A) was justified in deleting the addition which was merely based on the statement recorded when the assessee was tired and frustrated on account of continuing search for 28 hours. 48. Ld CITDR on the contrary has relied upon the orders of the authorities below and reiterated the observations from the order of CIT(A) for the respective years, which reads as under:- Para 8.2 & 8.3 of CIT(A)’s order in ITA No.498/NAG/2016 reads as under :- 8.2 I have carefully considered the submission of the AR of the appellant, order of the AO and material on record. During search loose paper was found and inventorised as Page No 5 8- 1/13. The ownership of seized paper reproduced by AO on Page No 6 of his order is not in dispute. The notings made on loose paper are in respect of Regency Grandeur apartment purchased by the appellant. The AO in his order observed that the notings made are in respect of property admeasuring 2710 Sq.Ft purchased at 6750 per sq.ft from Ashed properties and the total consideration was Rs 1,82,92,500/-. The AO on the basis of the dates mentioned on various other pages in Annexure 8-1/13 implied that notings made relates to investment made in property from Ashe~ during the year 2006. The AO on the basis of notings observed that 66,47,375/- wa1 paid at the time of agreement on 27/7/2006. He further held that subsequent noting of Rs.10,00,000/- implies that the amount was paid at the time of agreement and noting 6,47,375/- implies that the amount was paid by cheque. He accordingly concluded that the noting 50,00,000/-Cash' means that the amount was paid in cash at the time of agreement, He further stated that the amount of Rs 4,07,975/- was paid by DD and hence balance amount must also have been paid by DD on the date of agreement. The addition has been made by the AO on the basis of loose paper and the acceptance of cash payment by Mr Ajay Saraf spouse of appellant in his statement made during search. I have carefully seen the seized document which is an undated loose paper written by Mr. Ajay Saraf. The name of builder and area along with consideration of Rs 1,82,92,500/- is mentioned

41 Smt. AanjuSaraf therein. The Ld AR contended that the impugned seized document was the noting of the discussion held while dealing With the builder for purchase of property. He vehemently contended that the amount of Rs 6,47,375/- by cheque mentioned in the document never materialized and the AO has also been unable to find out any such cheque payment. The observation of the AO while dealing with the aforesaid cheque payment on Page No 7 of his order and the conclusion drawn that an amount of Rs.2,39,400/- must have been paid by bp against the agreement is merely a presumption. The Ld. AR argued that the AO in his order has mentioned that the total consideration of the apartment is Rs 1,82,92,500/- and 1ince payment of Rs 1,49,68,987/- has been made by account payee cheques which is reflected in the ledger a/c drawn from books of accounts and so the presumption of the AO that the amount of Rs 50,00,000/- was paid in cash is contrary. The Ld AR drew my attention to the ledger account to show that the appellant had paid only Rs 10,00,000/- on 22/.5/2006 and Rs 4,07,975/- on 26/7/2006 by account payee cheques on / before the agreement . He further stated that the appellant paid Rs 1,10,06,345/- in FY 2007-08, Rs 17,3,027/- in FY 2008-09 and balance of Rs 8,21,640/- in FY 2009-10. The payments were therefore made in installments as per the date schedule of the builder. The AR further contended that there are 23 pages in all and almost all of them are undated, unnumbered and are mere rough notings made by Mr. Ajay Saraf. Secondly as stated by AO dates mentioned therein on some loose papers are from 25/4/2006 to 18/01/2008 and hence the AO is wrong in implying that the payment was made in cash on 27/7/2006, particularly when nowhere in the said loose sheet, it is mentioned that cash has in fact been paid and no date of payment is mentioned therein. The AR vehemently argued that the notings made on the loose paper are merely discussion figures and thus on the face of it these notings are incapable of any interpretation as they do not constitute any coherent recording from which a clear and unambiguous inference relating to unaccounted payment made by the assessee can be unmistakably concluded. Though there is merit in the submission of the assessee but the fact remains that the Mr. Ajay Saraf had agreed to the contents of the documents and also agreed to have paid Rs. 50 Lacs in cash in his statement recorded during the course' of search. 8.3 The agreement was executed by the appellant on 27/7/2006 and the final sale deed has been executed on 26/6/2009. The Ld AR has referred to the schedule of payment and contended that the terms of the agreement were such nature that the payments were to be made from time to time. It was further contended that the entire cost of the flat was

42 Smt. AanjuSaraf paid by cheques on various dates and the Sale Deed was also executed at the value which is also comparable with the market value as per the stamp valuation authority. 1 have perused the ledger account and find that the total: payment of Rs 1,49,68,987/- has been made against the impugned property. I find that all the cheque payments are made before the search and the cost is comparable with the market value as per Stamp Valuation Authority. However the fact remains that the Mr. Ajay Saraf agreed for surrender of Rs. 50 Lacs as unaccounted income in his statement recorded during search. The assessee could have denied at the time of recording of statement that no cash payment is involved. The explanation now offered is an after thought and cannot be considered in view of the fact that the Mr. Ajay Saraf himself agreed of having invested Rs. 50 Lacs in cash. There was no retraction of the statement earlier given at the time of search, either during the search proceedings or in the assessment proceedings. Rather, I find that the AO has noted in Page 8 of the assessment order that the assessee accepted the cash payment in the assessment proceeding and had asked for the telescoping of the aforesaid amount of Rs. 50 Lacs against the surrender of Rs.15.00 Cr. in the Asstt. Year 2010 11. Since the disclosure was made in the subsequent year, the learned AO rightly rejected the contention of the appellant in the assessment proceeding. I have also perused the case laws on which reliance is placed and I find that they are distinguishable on facts in as much as the spouse of assessee has in the instant case agreed the contents of the loose sheet and categorically accepted that cash of Rs. 50 Lacs was paid and not only that he also made disclosure at the time of search. After proper appreciation of the facts, I find that the view taken by the AO is logical and cannot be disturbed. The addition of Rs. 50 Lacs is therefore confirmed. This Ground is hence dismissed. Para 6.2 of CIT(A)’s order in ITA No.499/NAG/2016 reads as under :- 6.2 I have carefully considered the submission of the AR of the appellant, order of the AO and material on record. The addition of Rs. 2 CL is made by AO holding-that the amount is paid in cash for acquisition of property at Regency Bliss Apartment promoted by Ashed Properties Pvt. Ltd. This has been so held by the AO on the basis of loose chit found during the course of search and subsequently acceptance of payment of cash in the statement of Mr. Ajay Saraf recorded during the course of search. I have carefully examined the seized document Annexure B-l/l Page No. 1 which is a loose paper in the handwriting of ML Ajay Saraf The name of the flat scheme is mentioned along with area of flat, terrace and parking

43 Smt. AanjuSaraf purchased by the assessee. Further, I also find that the consideration payable is also mentioned therein. The flat would be ready by 2010 December. Though the impugned document is a loose paper which is undated still it cannot be called as dumb document as the assessee himself has agreed to the contents of the seized document. The learned AR of the appellant vehemently argued that the impugned document is noting of rough estimates noted while discussion with the builder. It was further contended that the date of payment presumed by the AO as 14-10-2008 is without any sound evidence and there is no corroborative evidence of actual cash outgo. The learned AR drew my attention to the copy of ledger account submitted that the payment of Rs.1,10,00,000/- was not made on 14-10-2008 but Rs.10,OO,OOO/- were paid on 20- 03-2008 and Rs. 1,00,00,000/- were paid on 15.5 2008. According to him there was no cash payment on 14-10-2008 and the presumption drawn by the AO is without any evidence. Though this contention of the learned AR may sound to have some merits but the fact remains that the assessee himself agreed to the contents of the documents' as well as also agreed to have paid Rs.2 Cr. in cash vide statement recorded during the course of search. The AO has reproduced the contents of the relevant portion of the statement of Mr. Ajay Saraf on Page 3 of the Assessment order. The assessee was asked to go through the contents of the impugned seized material and explain, to which the assessee confirmed that the property was purchased and that they have paid Rs. 2 Cr. in cash which is unaccounted and also offered the same as additional income. In my considered view, nothing more is required and the conclusion drawn by the AO is logical considering evidence found in search proceeding. I find that the event of payment of Rs. 2 Cr. in cash is categorically mentioned and is also confirmed by the assessee. The learned AR submitted that the statement was given under mistaken belief and furnished before me the copy of ledger account and Sale Deed wherein the transactions of payment of Rs.4,14,71,442/- is recorded by various cheques. It was further contended that the entire cost of the flat was paid by cheques on various dates and the Sale Deed was also executed at the value which is also comparable with the market value as per the stamp valuation authority. I find that all the cheque payments are made before the search and the cost is comparable with the market value as per Stamp Valuation Authority. That being so why the assessee agreed for investment of Rs. 2 Cr. from unaccounted income. The assessee could have denied at the time of recording of statement that no cash payment is involved. The explanation now offered is an afterthought and cannot be considered in view of the fact that the assessee himself agreed of having invested Rs.2 Cr. in cash. There was no retraction of the

44 Smt. AanjuSaraf statement earlier given at the time of search, either during the search proceedings or in the assessment proceedings. Rather, I find that the AO has noted in Page 6 of the assessment order that the assessee accepted the cash payment in the assessment proceeding as well as asked for the telescoping of the aforesaid amount of Rs. 2 Cr. with the surrender of Rs.15.10 Cr. in the Asstt. Year 2010-11. Since the disclosure was made-in the subsequent year, the learned AO rightly rejected the contention of the appellant in the assessment proceeding. I have also perused the case laws on which reliance is placed and I find that they are distinguishable on facts in as much as the assessee has in the instant case agreed the contents of the loose sheet and categorically accepted that cash of Rs. 2 Cr. was paid and not only that he also made disclosure at the time of search. After proper appreciation of the facts, I find that the view taken by the AO is logical and cannot be disturbed. The addition of Rs. 2 Cr. is therefore confirmed. The Ground is dismissed. 49. We have heard the rival contentions, perused the submissions and material placed before us. These two additions made by the Ld AO wherein the assessee has made certain payments to M/s Ashed Properties and Investments Private Limited towards purchase of flat in their Apartments. Copies of Sale deed, ledger account of the seller in the books of assessee, statement of the assessee and her spouse Mr. Ajay Govinddas Saraf recorded u/s 132(4) of the IT Act 1961 during the course of search proceedings u/s 132 produced.

45 Smt. AanjuSaraf the department at Banglore wherein it has been stated that no cash payment has been received for purchase of said property from the assessee. It is also evident from the statement recorded u/s 132(4) of the assessee, she was not confronted with the question that whether any cash payment is made by her to the aforesaid builder. Statements of the assessee recorded u/s 132(4) on 16.11.2010 are scanned here with as under:-

46 Smt. AanjuSaraf

47 Smt. AanjuSaraf ITAno.498/Nag./2016 (ground no. 1-4) and ITAno.499/Nag./2016 (ground no.1-4) decided in favour of the assessee. 52. Since we have upheld the order of the CIT(A) in deleting the additions made by the AO for the respective assessment years under consideration in the respective appeals before us, therefore, the cross objections filed by the assessee against the respective appeals of the revenue, supporting the order of the CIT(A), become infructuous and accordingly the same are dismissed. 53. In the result, all the appeals of the revenue, cross objections of the assessee are dismissed and appeals filed by the assessee are allowed. Order pronounced under Rule 34(4) of I.T.A.T.Rules, 1963 on 25/07/2022 Sd/- Sd/- SSSd/-d/- Sd/- SANDEEP GOSAIN ARUN KHODPIA ACCOUNTANT MEMBER JUDICIAL MEMBER

NAGPUR, DATED: 25/07/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. ue Copy By Order Pradeep J. Chowdhury/PKM Sr. Private Secretary Assistant Registrar ITAT, Nagpur