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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI ANIL CHATURVEDI & SHRI ANUBHAV SHARMA
The assessee has come in appeal against the order dated 04.03.2015passed by the Commissioner of Income Tax (Appeals)-XX, New Delhi (hereinafter referred as “learned First Appellate Authority” or in short “FAA”) in appeal no. 15/2013-14 for the assessment year 2010-11, arising out of assessment order dated 11.03.2013 u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred as the Income-tax Officer Ward-39(3), New Delhi (hereinafter referred in short as “Ld. AO”).
The assessee, an individual, is running a concern in the name and style of M/s Prithvi Sales Corporation and is engaged in the business of acquiring plots, constructing flats on the same as per the permission granted by local authorities and then their sale to the prospective buyers in the area of Ghaziabad. Return declaring income of Rs. 6,89,560/- was filed by the assessee and the case of the assessee was selected for scrutiny to examine the source of expenditure/ investment including information from AIR and to examine the source of cash deposits in the savings bank account.
2.1 During assessment, apart from other additions and adjustments learned AO had made following addition.
2.2 On account of excessive cost of construction incurred for Vaishali plot with covered area of 3097.70 sq. ft. and the cost of construction was shown at Rs. 46,59,713/-. Learned AO felt that cost of Rs. 1504/- per sq. ft. is higher than approximately Rs. 800/- per sq. ft. taken by Sub Registrar, Ghaziabad. The assessee’s response was not found sustainable and after rejecting the books of account of assessee construction cost of Rs. 22,54,805/- was added back to the total income.
2.3 Further, learned AO was not satisfied with the low withdrawals and by taking into consideration the status and responsibilities of the assessee, assets and liabilities and investments, Learned AO believed that assessee should have annual house-hold expenses of Rs. Six lakh and the low withdrawal of Rs. 4,27,145/- was not accepted Accordingly, addition of Rs. 1,72,855/- was made.
2.4 Further, in regard to cash payment for purchase of land/building from one Rakesh Bhatt, learned AO was not satisfied with explanation for making cash payment of Rs. 2,60,000/- and made the addition u/s 40A(3) of the Act.
2.5 Addition of Rs 13,00,000/- lacs on account of unexplained cash deposited in bank was made.
Learned CIT(Appeals) has sustained these additions, while giving benefit to the assessee for certain other additions.
The assessee is in appeal raising following grounds: “
1. That the order of the learned appellate authority is arbitrary and against law and facts of the case.
2. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily against the law and without appreciating the facts/evidence filed Rs. 22,54,805/- on account of excessive cost of construction claimed, even though approved valuer’s report/other evidence was filed in support of the cost of the construction claimed.
3. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily against the law and without appreciating the facts/evidence, confirmed addition of Rs. 1,29,245/- on account of low household withdrawals even though sufficient details/evidence of personal withdrawals of Rs. 11,76,876/- was given against the learned Assessing Officer estimated withdrawal of Rs 6 lacs.
4. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily against the law and without appreciating the facts/evidence of the case, confirmed addition of Rs. 2,80,000/- by invoking Sec.40A(3) of the Act, even though genuineness of the payee/transactions was fully established.
5. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily against the law and without appreciating the facts/evidence of the case, confirmed addition of Rs 13,00,000/- lacs on account of unexplained cash deposited in bank, even though the copies of \ cash book and bank statement showing the sources of cash have been duly produced during assessment and appellate proceedings.
6. That the Ld. Commissioner of Income Tax (Appeals)-XX has wrongly, arbitrarily against the law and without appreciating the facts/evidence of the case, confirmed addition on account of unverifiable expenses debited in Profit and Loss account, even though payment for the majority of the expenses have been made through cross account payee cheques or credit cards and necessary evidence was produced. The details of expenses are given below: Sl. No. Particulars Amount 1. Conveyance and Car Expenses 1,25,864/- 2. Building Repairs 23,700/- 3. Business Promotion 81,388/- 4. General Expenses 42,160/- 5. Entertainment Expenses 38,547/-
That the appellant reserves its right to withdraw, alter, amend, vary and make further additions to grounds of appeal.”
Heard and perused the record.
At the time of hearing, learned AR made an endorsement on the appeal memo for not pressing ground no. 6 accordingly same is disposed not pressed.. The determination of remaining grounds as raised by the assessee is as follows.
7. In regard to Ground no. 2 it can be observed that learned CIT(Appeals) was impressed by the assessee with certain evidences in the form of Government Approved Valuer’s report, certifying the cost of construction at Rs. 1290/- per sq. ft. and the construction cost as per PWD rate at Rs. 1415/- per sq. ft. This was, however, not considered by the learned CIT(Appeals) as no application under Rule 46A of the Income-tax Rules was filed.
7.1. The Bench is of the considered opinion that when powers of learned CIT(Appeals) are co-terminus with that of learned AO and the learned CIT(Appeals) had found some substance in certain evidences produced before it, then it was necessary to examine the same. Thus, the Bench is inclined to restore Ground no. 2 to the file of learned CIT(Appeals) to give an opportunity to the assessee to bring on record the relevant evidence in accordance with law and after
AO, decide the issue afresh. Accordingly, ground no. 2 is allowed for statistical purposes.
In regard to ground no. 3, it can be appreciated that learned AO has primarily taken into account certain factors of assessee’s family structure, need, expenditure and investments to reach the figure of annual house-hold expenditure of at least at Rs. Six lakh. The learned CIT(Appeals) has directed learned AO to reduce Rs. 43,610/- which was also a withdrawal on account of expenses for payment of school fee.
8.1. The Bench is of the considered opinion that learned Tax Authorities have failed to take into consideration assessee’s claim that the assessee was living in house owned by his father who pays electricity bills and other maintenance.
Assessee’s wife is also an income-tax payee who has withdrawn a sum of Rs. Rs. 1,80,000/- out of her capital account. The Bench is of the considered opinion that house-hold expenditure on the basis of low withdrawals for an individual have to be considered in the light of the family as a unit. There is no justification to take the withdrawals of the assessee alone to conclude that the same are on the lower side and presuming expenditure as to what he would be expending on the family as a unit. The addition thus made by the learned AO deserved to be deleted in the whole which ld. CIT(A) has failed to do. Accordingly, ground no. 3 is decided in favour of the assessee.
In regard to ground no. 4, on behalf of the assessee it was submitted that the amount paid in cash is reflected in the sale-deed, a copy of which is placed on the record from page nos. 29 to 40 of the paper book. It can be observed from the sale deed that at page no. 35 there is reference of following payments made by the assessee:
“Rs. 12,00,000/- by Ch. No. 277957 dated 06.11.2009 of HDFC Bank Indirapuram, Ghaziabad.
Rs. 8,00,000/- by Ch. No. 277958 dated 05.11.2009 of HDFC Bank Indirapuram, Ghaziabad
Rs. 5,00,000/- by Ch. No. 372861 dated 11.09.2009 of HDFC Bank Indirapuram, Ghaziabad
Rs. 1,40,000/- by Ch. No. 372863 dated 15.09.2009 of HDFC Bank Indirapuram, Ghaziabad
Rs. 5,00,000/- by Ch. No. 372856 dated 07.09.2009 of HDFC Bank Indirapuram, Ghaziabad
Rs. 2,80,000/- by cash.
9.1. The plea of the assessee before learned Tax Authorities has been that the payment was made on urgent basis to the seller which was new to the assessee and the plot was to be purchased. The assessee has claimed before Ld. AO as 5.4 o the assessment order that Rs. 2,80,000/- were given in cash on 02.06.2009 and cheque dated 07.09.2009 on HDFC Bank of Rs. 5,00,000/- was given as token advance to materialize the deal for purchase of plot.
9.2 The Bench is of the considered view that aforesaid is apparently unsustainable plea as in ledger account of purchase of land and building cash payment was made on 23.9.2009 and not as claimed in para 5.4 on 2.6.2009 as advance. The aforesaid payment schedule shows that before 23.9.2009 assessee had made payments of Rs. 5,00,000/-on 11.09.2009, Rs. 1,40,000/- on 15.09.2009 and Rs. 5,00,000/- on 07.09.2009. So this amount of Rs. 2.80 lacs cannot be one paid in cash as seller was new to the assessee. This shows assessee had opportunity to make payment by banking channels.
9.3 Furthermore, when assessee is not buying the plot/building for the purpose of private needs, but as part of the business activity of raising construction on the plot and selling them, the payment of Rs. 2,80,000/- cash is questionable. There is no force in the contention that as this amount is not shown in the P&L A/c and forms part of the stock, the same cannot be disallowed u/s 40A(3) of the Act. The Bench is of the considered opinion that as this amount forms part of the cost of construction the same is required to be shown in the P&L A/c and justified to be made for business exigency. Thus, the Bench is not inclined to interfere in the finding of tax authorities below. The ground no 4 is decided against the assessee.
In regard to ground no. 5 it can be appreciated that Ld. AO had made addition on the basis that inspite of reasonable show cause notices assessee failed to bring evidence. In appeal assessee claimed that deposits was from the Cash book and out of cash available from earlier withdrawal. Assessee has claimed that deposit of Rs. 8,00,000/- on 20.11.2009 was on account of withdrawals of Rs. 5,00,000/- on 7.11.2009 from HDFC bank A/c no. 05908020000065 and withdrawal of Rs. 4, 00,000/- from same account on 16.11.2009. As with regard to deposit of Rs. 5,00,000/- on 04.03.2010, it was submitted that there was cash withdrawal of Rs 3,00,000/- on 6.11.2009, from same Bank.
10.1 Ld. CIT(Appeals) has made following relevant observations in para 10.1 of it’s order;
“10.1 I have carefully considered the assessment order and submissions thereof. The facts of the case as per assessment order are that as per AIR information, the assessee had deposited cash of Rs.25,25,000/- in Saving Bank Account No.890397 maintained with Oriental Bank of Commerce. Since the entries were not apparent from the bank statement were not apparent, the Assessing Officer asked the assessee to furnish source of cash deposit of Rs. 13,00,000/- in HDFC Bank, OD account No.65 and Rs.25,25,000/- in Oriental Bank of Commerce. The assessee produce the cash book for the period under consideration and claimed that the cash was deposited out of cash in hand. However, the Assessing Officer on reconciliation of the cash book with the bank statement found that the source of cash deposit of Rs.5 lacs made on 04.03.2010 and Rs.8 lacs made on 20.11.2009 were not furnished. Inspite of repeated opportunities the assessee did not file any explanation in regard to the source of the cash deposits made with HDFC Bank. The Assessing Officer therefore made an addition of Rs. 13 lacs. In appeal, the appellant claimed that the amount was out of cash balance available in the cash book from earlier withdrawal made from the bank account. It was claimed that the copy of the cash books and the relevant bank statement were enclosed. However, the cash book enclosed showed opening cash in hand and therefore was no explanation in regard to the source of the cash in hand. The appellant then produced extract of cash book for the period 01.10.2009 to 30.11.2009 and 01.02.2010 to 31.03.2011. However, in the absence of complete books of account the authenticity of the statement and extract produced by the appellant cannot be accepted. Moreover the appellant had produced the cash book before the Assessing Officer wherein the deposits in the bank account were not reflected. The addition made by the Assessing Officer is therefore confirmed.”
10.2 Thus what can be made out of the order of Ld. CIT(A) is that he was supplied factual information but he did not care to verify the same himself or call for a remand report from the Ld. AO. It can be appreciated that Assessee has all the while taken a plea that source of disputed deposits, including on basis of which additions is made, was the Cash Book. Certain deposits stood verified by the Ld. AO from the cash book. On behalf of assessee the Cash book for period 1.4.2009 to 31.3.2010 is placed on record at page no 41-54 of the PB, with relevant entries between 1.11.2009 to 30.11.2009 on page 48 of Pb. In the light of same the observations of Ld. CIT(A) that “However, in the absence of complete books of account the authenticity of the statement and extract produced by the appellant cannot be accepted. Moreover the appellant had produced the cash book before the Assessing Officer wherein the deposits in the bank account were not reflected.”
Are not sustainable. The fact was verifiable at the of Ld. CIT(A) but failed to consider the evidence and plea taken before Ld. CIT(A), that the deposits were from the prior withdrawals. Therefore, the issue deserve to be restored to the files of Ld. CIT(A) to verify the fact of deposits being from the prior withdrawals and benefit the assessee. Ground no 5, is allowed for statistical purposes.
Consequently the appeal of assessee is allowed partly. Order pronounced in open court on 15th May, 2023.