Income Tax Appellate Tribunal - Indore
Kulwant Singh, vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH : INDORE
BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C.SHARMA, AM
PAN NO. : ADDPS8340M
I.T(SS).A.Nos.57 to 63/Ind/2008
A.Y. : 1999-2000 to 2005-06
ACIT, Shri Kulwant Singh,
3(1), vs 10,Rehana Colony,
Bhopal. Bhopal.
Assessee Respondent
PAN NO. : ADDPS8340M
C.O.Nos.40 to 46/Ind/2008
(Arising out of I.T(SS).A.Nos.57 to 63/Ind/2008)
A.Y. : 1999-2000 to 2005-06
Shri Kulwant Singh, ACIT,
10,Rehana Colony, vs 3(1),
Bhopal. Bhopal.
Assessee Respondent
PAN NO. : AHAPK2624D
I.T(SS).A.Nos.230 to 236/Ind/2008
A.Y. : 1999-2000 to 2005-06
ACIT, Smt.Satinder Kaur, 10,
3(1), 10,Rehana Colony,
Bhopal. vs Bhopal.
Assessee Respondent
PAN NO. : AHAPK2624D
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C.O.Nos.131 to 137/Ind/2008
(Arising out of I.T(SS).A.Nos.230 to 236/Ind/2008)
A.Y. : 1999-2000 to 2005-06
Smt.Satinder Kaur, 10, ACIT,
10,Rehana Colony, 3(1),
Bhopal. vs Bhopal.
Assessee Respondent
PAN NO. : AAUPK9812E
I.T(SS).A.Nos.56/Ind/2008
A.Y. : 2005-06
ACIT, Smt. Kulpreet Kaur,
3(1), 10,Rehana Colony,
Bhopal. vs Bhopal.
Assessee Respondent
PAN NO. : AAUPK9812E
C.O.No.37/Ind/2008
(Arising out of I.T(SS).A.No56/Ind/2008)
A.Y. : 2005-06
Smt. Kulpreet Kaur, ACIT,
10,Rehana Colony, 3(1),
Bhopal. vs Bhopal.
Assessee Respondent
Department by : Shri Keshave Saxena,
2
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CIT DR
Assessee by : Shri Manjeet Sachdeva,
Adv.
ORDER
PER R. C. SHARMA, A.M.
These are the appeals filed by the Revenue and cross objections filed by the assessees against the order of the CIT(A) dated 2.1.2008 for the assessment year 1999-2000 to 2005-06 in the matter of order passed by the Assessing Officer u/s 153A/153C of the Income-tax Act, 1961,.
2. As common grounds are involved in all the appeals and all the assessees are members of the same family, the additions were also made with reference to the search carried out at their business and residential premises, all the appeals were heard together and are now being decided by this consolidated order.
3. Rival contentions have been heard and records perused.
4. The facts, in brief, are that the assessee Shri Kulwant Singh is an individual mainly engaged in business of petrol 3
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pump in his proprietorship capacity under the name and style of M/s. Janta Sales and Service. In addition to income from petrol pump, the assessee also derives income from truck plying which was declared on presumptive basis and also agricultural income and income from house property. The assessee was regularly filing return wherein aforesaid income was disclosed in the return of respective years and tax was also paid thereon. A search was undertaken on the business and residential premises of the assessee on 02-11-2004, which was concluded on 04-11-2004. No incriminating material or evidence was found during the course of search or thereafter. Similarly, no undisclosed or disproportionate moveable/immovable assets were found during the course of search or thereafter. However, during the course of search, a sum of Rs.70,00,000/- was surrendered by the assessee, from which he subsequently retracted on 18-11-2004 by filing an affidavit before Investigation Wing, as the same was stated to have been given under utter mental duress, tension and intimidation 4
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stating that the declaration subject to verification of papers, documents, records etc., found during search, and whatever undisclosed income shall be worked out after verification of documents and books of account, the same shall be disclosed in the Return. The assessee was served with notice u/s 153A requiring him to file returns for the assessment years 1999-00 to 2005-06. In response thereto, the assessee disclosed following additional total income on estimated basis, distributed hypothetically in various assessment years of search period to cover any leakage of income, stated to buy piece of mind, as under:
Assess- Original Return filed Return filed in compliance to notice
ment u/s 139(1) u/s 153 A
Business Agricultu Business Agricultur Additional
& other ral &' al lncome Income
income Income other declared
income
(1) (2) (3) (4) (5) (6=4-2)
1999-00 1,62,184 1,00,000 1,82,184 1,00,000 20,000
2000-01 1,66,418 1,00,000 2,16,418 1,00,000 50,000
2001-02 2,08,357 1,00,000 2,36,357 1,00,000 40,000
2002-03 2,13,680 1,00,000 2,53,680 1,00,000 40,000
5
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,
60,000
2003-04 2,50,644 1,00,000 3,10,644 1,00,000
1,00,000
2004-05 1,66,949 1,00,000 2,66,949 1,00,000
2005-06 1,62,184 1,00,000 1,82,184 1,00,000 20,000
"v '
Total additional income declared Rs 3,30,000 As per the assessee, the constraints and conditions under which the returns were filed were incorporated in the common notes enclosed to return for each assessment year. As per the said notes attached with the return filed, the additional income hypothetically estimated and disclosed in the different assessment years, was shown as above. The Assessment for the assessment year 1999-2000 was completed under section 143(3)/153A at the income of Rs.2088591/- after making additions/disallowance as under.- Income as per statement of income Rs. 182184/- Add:-
Unaccounted investment in plot B-3 in the Rs. 122153/- Name of Culprit Kauri Undisclosed income in the head of agriculture Rs. 69000/- Income Undisclosed income-used from SB A/c. of Rs. 633819/- 6
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Janta Transport meant for Truck Expenses Undisclosed Household expenditure Rs. 121153/- Addition on account of Marriage Expenses Rs. 500000/- Undisclosed Income deposited in the account Rs. 108343/- Of Shri Hot hand Undisclosed income deposited in the SB A/c. Rs. 32557/- Of Allahabad Bank Unexplained Deposit in SB A/c. No.3494 in the Rs. 20000/- Name of Shri Harbinder Singh Undisclosed deposit with Smt. Satinder Kaur Rs. 128000/- Addition on account of Gross Profit Rs. 146382/- Addition on account of Evaporation expenses Rs. 40,000/-
Total Income Rs. 2108591 Less : Income declared u/s 153A Rs. 20,000/- Assessed Income Rs. 2088591
Similar additions were made in the assessment years 2000-01 to 2005-06, part of such additions were deleted by the ld. CIT(A) against which revenue is in appeal before us and assessee had also filed cross objections.
5. First addition of Rs.1,22,153/- was made by the Assessing Officer on account of investment in plot No. B-3 in the name of daughter Smt. Kulpreet Kaur. However, this addition was made on protective basis in the hands of the assessee. Substantive addition was made in the hands of Smt. 7
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Kuldeep Kaur. Relevant facts are that Smt. Kuldeep Kaur is daughter of the assessee, who purchased one plot No. B-3, Nehru Nagar, Bhopal, for Rs. 3,07,481/- on 31st March, 1999. It was purchased out of loan of Rs. 2 lakhs received from Shri Kulwant Singh, HUF and balance amount of Rs. 1,07,481/- was out of her vocational income of stitching and embroidery. Investment in the said plot was duly disclosed by Smt. Kuldeep Kaur in her return of income for the relevant assessment year. However, the AO treated Rs. 1,07,481/- as undisclosed income of the assessee Shri Kulwant Singh. However, inadvertently while computing income, the AO has wrongly mentioned amount of Rs. 1,22,253/- in place of Rs. 1,07,481/-. Grievance of the AO was that no evidence was produced by the assessee regarding stitching activities of his daughter having income out of stitching activities. Before the CIT(A), the submission of the ld. Authorized Representative with regard to this addition was as under :-
"It is humbly submitted that the
addition is not called for. Here it is
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significant to bring on record that the AO has also made addition of the same amount of investment of Rs. 1,07,481/- as undisclosed income in the hands of assessee's daughter Smt. Kulpreet Kaur on substantive basis u/s 153C. The addition made in the hands of the assessee Shri Kulwant Singh tantamount to double addition. Without prejudice to this, the daughter of assessee Smt. Kulpreet Kaur has made investment in the said plot out of her own source of income from stitching and embroidery work and she has been filing her return of income since assessment year 1997-98 and has shown the above investment in plot in her return of income. She has been regularly assessed to tax. Wholesome evidence of stitching income of Smt. Kulpreet Kaur was filed in her case in the form of confirmation from some of the 9
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traders for whom she has been doing stitching and embroidery. Smt Kulpreet Kaur chose stitching and embroidery as a carrier and only to pursue the same, she left her further studies and for this purpose she took formal training from a lady running coaching classes for this purpose. Post marriage, Smt. Kulpreet Kaur was living with her parents at Bhopal because her husband was out of country, namely Newzeland, for pursuing his higher studies and was also doing part time job there to meet his educational expenses. She started to live with her husband only from March 2004 when he came back to India. This fact was clearly brought to the notice of the AO by Smt. Kulpreet Kaur in her assessment proceedings simultaneously taken by him. No evidence/material was found during the course of search evidencing that the investment in the said plot was not 10
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assessee's fund, nor the AO brought on record a corroborative evidence/material to support his allegation. Hence the AO has failed in discharging basic requirement of law and, therefore, no addition can be made on the basis of suspicion, probability and surmises. It is needless to add that if the AO wanted to treat investment by his daughter as benami of the assessee, even then the allegation of the AO has no legs to stand because as held in the case of CIT Vs. Daulatram Rawatmal 87 ITR 349 (SC) that it is for the department to prove the same. It was propounded in this case that "Personal presumption, imagination and suspicion has no sanction of law unless some evidence is brought on record to prove beyond doubt that the money belong to someone else and not in the name of a person in whose name it has been kept and deposited." The latest 11
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decisions that followed the above proposition of law are ITO Vs. Sumer Singh Patel (2004) 2 ITJ 22 (Jabalpur ITAT) and B.D. Gupta Vs. DCIT (2004) 32 ITC 351 (Agra ITAT). All these decisions hold with one voice that it is a, settled law that who alleges has to prove.
And since the AO has not proved his allegations, no cognizance can be taken of such unproved allegations in the eyes of law, as per the settled legal position. Unexplained investment- Scope of section 69- ITO is not obliged to treat source of investment as income whenever explanation regarding it is not satisfactory- word "May" in section 69 cannot be interpreted to mean "Shall" CIT vs. Smt. P.K. Noorjahan (1999) 237 ITR 571 (SC). Without further prejudice to above, since the impugned investment in plot has already been added by AO in the hands of the daughter of the assessee Smt. Kulpreet 12
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Kaur u/s 69, on substantive basis, in any case, the same cannot be added again in the hands of the assessee because it will lead to double taxation which is impermissible in law. It may also be noted that the AO has wrongly added Rs. 1,22,153/- on account of investment in plot instead of the purported addition of Rs. 1,07,481/- in the computation part of his order at Pg. 23. In the circumstances, it is pleaded that the addition made by the AO needs to be nullified. "
6. After considering assessee's submission, the ld. CIT(A) deleted the addition after having the following observations :-
"I have considered the observations of the AO and the submissions of the assessee. I am of the opinion that the addition made by 13
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AO was totally unwarranted. This is primarily due to the reason that similar addition has already been made by AO on substantive basis u/s 153C in the hands of assessee's daughter, Smt. Kulpreet Kaur, hence, no addition was warranted in the hands of the assessee because it shall tantamount to double taxation. Even otherwise, the addition was not called for because the same rested on mere conjectures and surmises. For making such addition, the burden was heavy on the AO to prove that the investment in the plot was assessee's fund. But then, nothing of the sort has been brought on record by the AO. Therefore, the addition of Rs. 1,22,153/- (wrongly mentioned as Rs. 1,22,153/- in place of Rs. 1,07,481/- in the computation part of the Order) is deleted. The assessee gets a relief of Rs. 1,22,153/ - and in the 14
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process the appeal is allowed. "
7. We have considered the rival contentions and find from the record that similar addition had been made by the Assessing Officer on substantive basis u/s 153C in the hands of assessee's daughter Kulpreet Kaur. Hence, no addition was warranted in the hands of the assessee, because it will amount to double taxation of the income. Even on merit, we do not find any justification for such addition in the hands of Smt. Kuldeep Kaur in so far as even before the date of search, Smt. Kuldeep Kaur had already filed return of income, wherein investment made in the plot in the respective years vis-à-vis source of income to acquire the same was already disclosed and nothing incriminating was found during course of search to indicate that plot was owned by the assessee or that the money used to acquire the same was given by the assessee. Nowhere the AO has brought any material to conclude that the investment in the plot was from the assessee's funds. Accordingly, we do not find any merit in the addition of Rs. 15
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1,22,153/-, which was wrongly mentioned in place of Rs. 1,07,481/- in the computation part of AO's order.
8. Next issue relates to addition on account of agricultural income at Rs. 69,000/-.
9. In this regard, we found that the assessee declared income of Rs. 1 lakh from agriculture AO treated Rs. 31,000/- as out of agriculture and balance of Rs. 69,000/- as assessee's income from undisclosed sources. By the impugned order, the ld. CIT(A) deleted the addition after observing as under :-
"I have carefully considered the observations of AO and submissions of AR. I find that the addition is unwarranted and was based on pure presumptions, surmises and irrelevant considerations on the part of the AO.
Nothing incriminating was found during the course of search or even thereafter suggesting that the agriculture income, shown by the assessee was non-
genuine or bogus. Even the AO has 16
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accepted agriculture income of Rs. 1,00,000/- in scrutiny assessment
completed u/s 143(3) for A.Y. 2001-02 after due scrutiny and verification. The assessee has showed same income in all the Assessment Years including Assessment Year in hand. There is no change in the circumstances leading to higher/lower estimation of agriculture income by AO or any evidence supporting the action of the AO. In my view, on 15.54 acres of land, the agricultural income shown at Rs.
1,00,000/- is quite reasonable and justified. I also note that the estimation made by AO was quite arbitrary and without any basis considering that for the Assessment Year in hand, he has estimated agriculture income of Rs.
31,000/ - whereas, for the same land 17
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holding, he has estimated agriculture income of Rs. 50,000/- per year from the Assessment Year 2002-03, onwards. In view of the facts, circumstances, explanations of the AR and also judicial decisions on the subject, I am of the opinion that the interference made by the AO in the agricultural income returned by the assessee cannot be sustained. I therefore, delete the addition of Rs. 69,000/- made by AO and the agriculture income is treated at Rs. 1,00,000/- as disclosed by the assessee. The assessee gets a relief of Rs. 69,000/ - and in the process the appeal here also allowed. "
10. We have considered rival contentions and find from record that the assessee was owning 15.54 acres of agricultural land, which was divided into six different fields :- 18
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"Khasara No.396 & 397 Khasara No. 422 Khasara No.1326 Khasara No. 1383 and 1384 Khasara No. 511 & 515 Khasara No. 569 & 570"
11. We found that the assessee was earning agricultural income from the above agricultural land situated at different places and the same was offered in earlier years. In the return of income filed with the Department which were duly accepted by the Department. We found that there was scrutiny assessment for the assessment year 2001-02, wherein after making detailed inquiry, the AO has accepted agricultural income of Rs. 1 lakh declared by the assessee by categorically stating as under :-
"Agricultural Income-During the year under consideration the assessee has shown agriculture income of Rs. 1,00,000/-. It was stated by the assessee that he is having 16 acres of the agricultural land and crops so produced were sold 19
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to the nearby villagers. The assessee was asked to furnish details regarding agricultural income such as receipt of sale of agriculture produce, evidence of ownership of agricultural land, bills and vouchers for verification. The information so called were furnished by assessee and was found correct therefore, the agriculture income as shown by assessee appears to be reasonable and accepted."
12. We also found that the assessee has even furnished before the AO form No. P2-II evidencing agricultural operations on the land owned by the assessee. Certificate of Patwari duly stating that the assessee was doing agricultural operations and earning substantial income per hectare per year was also furnished before the AO. However, during the course of search or even thereafter nothing incriminating was found suggesting that the agricultural income shown by the assessee was non- genuine or bogus. We, therefore, do not find any infirmity in the order of the CIT(A) for accepting agricultural income of Rs. 20
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1 lakh in respect of agricultural land of Rs. 15.54 crores owned by the assessee.
13. Next issues relate to the additions made on account of income used for deposit in the S. B. Account of M/s. Janta Transport, undisclosed house hold expenditure of Rs. 1,21,153/-, marriage expenses Rs. 5 lakhs, amount deposited in the account of Shri Hotchand amounting to Rs. 1,08,343/-, amount deposited in S.B. No. 3494 account of Allahabad Bank, Bairagarh at Rs. 32,557/-, in the name of Shri Harbinder Singh Rs. 20,000/-, deposit with Smt. Satinder Kaur.
14. In this connection, we found that the assessee was deriving income from petrol pump business and also from plying of truck, agricultural income and rental income. The assessee was maintaining regular books of account in respect of its petrol pump business and the same was duly audited, return for each of the years was filed alongwith audited balance sheet. The other income was disclosed by the assessee in the return, but the same were not incorporated in the regular books of account of petrol pump and were, in fact, 21
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utilized in making deposits in various bank account maintained in the name of the assessee and his other relatives. In addition to the regular bank account, the assessee was having account in SBI, Bairagarh and Allahabad Bank, Bairagarh. The income derived from agriculture, rent and from trucks were utilized in making deposit in above mentioned bank account. Since no books of account were required to be maintained in respect of its rental income, agricultural income and the income from truck plying which were offered under presumptive scheme, no regular books of account were maintained by the assessee for the said sources of income. To explain the cash deposit in the bank account in respect of income earned from aforesaid sources, the assessee compiled cash flow statement. In the cash flow statement, the assessee had shown opening cash balance of Rs. 2.50 lakhs as on 1st April, 1996. However, the AO did not accept the same. This opening balance was out of the income earned by the assessee in earlier years out of his agricultural sources, rental income and income from truck plying. Keeping in view the range of income being earned out of aforesaid sources, we do not find 22
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anything wrong in taking the opening cash balance of Rs. 2.50 lakhs in his cash flow statement. The objection of the AO was that on the one hand, the assessee is claiming expenditure on truck plying to have benefit of presumptive taxation u/s 44AE and simultaneously, the same amount was meant for truck expenses have been incorporated in the so called cash book and cash flow statement in order to explain un-accounted deposits in the various bank account. The amount shown as deposit in the cash flow statement was out of truck plying receipt from BPCL and were deposited initially in the S. B. Account No. 0105006175 in S.B.I.Bairagarh in the name of Janta Transport and all the receipts were so checked, hence, there was no unaccounted deposit in the bank. No where the AO had pointed out any instance of deposit, which is not coming out of receipt from BPCL. Further objection of the AO was that since the assessee was claiming income from truck plying on presumptive basis u/s 44AE, then there remains no question of depreciation and it is deemed to be allowed and in such a situation the assessee is not entitled to take cash amount (equivalent to the amount of depreciation) in its cash 23
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flow chart to explain the deposits made into various bank accounts and if the assessee wanted to utilize the depreciation, it should have maintained the proper books of account and shown the actual amount, which may have been either more or less than the presumptive income determined u/s 44AE. We found that as per the cash flow statement, the depreciation was never taken as cash in hand. However, the AO has wrongly understood that depreciation is notional allowance and since depreciation is charged against income, hence to the extent of depreciation, cash out go will be less vis-à-vis taxable income. As per cash flow statement submitted before AO, we found that the assessee was having sufficient overall cash balance available with him with reference to the cash flow statement filed before the AO and the various additions made by the AO on the ground that the assessee did not have sufficient cash balances are not tenable.
15. With regard to the availability cash, the assessee has furnished cash flow statement duly incorporating his income from petrol pump activities, agriculture, rent and truck plying on presumative basis. After verification of the cash flow 24
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statement, the ld. CIT(A) also recorded the finding that no evidence or material was found either during course of search or thereafter suggesting that these incomes were utilized by the assessee elsewhere in making any investment/expenditure other than those expenditure by the assessee in the cash flow statement. The ld. CIT(A) found that these cash income were utilized/rolled over in depositing the same into some of the Bank accounts in the name of the assessee and in some other names and in making some investment and expenditure as explained in the cash flow statement. The AO refused to impart credence to the Memorandum and cash flow statement/cash rotation chart on the contention that it was an after though to explain undisclosed income. There is no dispute to the well settled proposition that the assessee is fully authorized to prepare and submit before the AO the source of investment as asked by the Assessing Officer. Only if the AO found that such sources do not exist, he has all the rights to treat such investment as unexplained. In the instant case, at the time of framing the assessment, the AO asked regarding source of deposit in the Bank account of the assessee and 25
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other family members and some of the investments made by the assessee. To explain the source of these deposits, the assessee prepared a cash flow statement to indicate availability of cash which has been utilized for deposit in various Bank accounts and making investment. With regard to the queries raised by the Assessing Officer, the assessee has fully replied and the ld. CIT(A) has properly dealt with all the queries and observations of the AO, which has been met out by the assessee in the written submissions filed before him. We also found that the income other than from petrol pump available with the assessee and the income representing the impugned cash was duly offered for taxation in respect of assessment year and was accepted by the Department. The ld. CIT(A) also observed that fundamental fact of availability of cash that the assessee out of various streams of income have not been controverted or disproved by the AO, accordingly, this basic fact which goes to the root of the matter coupled with the fact that once the availability of the cash from disclosed sources, is accepted, the other issue of equally importance is utilization of the same. Thus, the assessee has 26
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successfully explained the sources with regard to the deposit of cash in Bank account and in respect of investment asked by the Assessing Officer by way of cash flow statement. Here, it is important to mention that had the AO brought on record any material suggesting that such cash was utilized somewhere else, then it is proper to exclude such cash out of the cash flow statement, however, in the instant case before us, nothing was brought on record by the Assessing Officer to suggest that the available cash was spent or invested somewhere else by the assessee. Since the assessee has been earning huge cash income for agriculture, plot rent, house rent and presumptive income from truck plying since earlier years, the opening cash balance of Rs. 2.50 lakhs as on 1.4.1996 was reasonable, hence, we accept the same as opening cash balance. There was one objection of the AO that the assessee has deposited Rs. 1,65,000/- in the account of M/s. Janta Transport on 23.10.2003 by way of transfer from S. B. A/c No. 12129 pertaining to Shri Avneet Singh whereas in the Bank account of Shri Avneet Singh, it has specifically been mentioned that the above amount is transferred to the S. B. Account of Janta 27
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Transport Account No. 61075. In reply to it, the assessee has submitted that this query was put up in the case of son of the assessee, Shri Avneet Singh and it was explained to the AO that amount of Rs. 1.65 lakhs was not utilized at two places. Actually, aforesaid cheque was self cheques. Entry was made only once. Hence, there was no question of utilization of the same amount twice. The observation of the AO was conjectural only, which is proved from the fact that no addition was made by the Assessing Officer on this account. With regard to the AO's objection regarding amount received from B.P.C.L amounting to Rs. 3,89,535/-, we found that amounts aggregating to Rs. 3,89,535/- was received form BPCL were found to be reimbursement of the expenditure incurred by the assessee for their Bina Refinery as per requirement of BPCL and, hence, the same is not the income of the assessee. Thus, it was found by the ld. CIT(A) that the assessee had sufficient cash/income available with him to explain various deposits(investment) expenditure. This finding of CIT(A) is as per material on record, accordingly, no interference is required therein. However, this cash flow statement has been referred 28
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by the assessee to explain deposit in bank account in all the years under consideration. Accordingly, ground taken by the Revenue with this regard, are dismissed in all the years under consideration.
16. In the assessment year 2000-01, the Revenue is also aggrieved for deletion of addition of Rs. 4,97,350/- on account of investment in the name of Gurudev Singh. In this regard, we found that during the course of search and seizure operation it was found that the assessee had purchased a plot measuring 8700 sq.ft. at One Tree Hill, Bairagarh, on 01.09.1997. In the above plot the major portion i.e. 5700 sq.ft., was in the name of Shri Gurudev Singh, father-in-law of the assessee. It was stated by the assessee that Shri Gurudev Singh is around 80 years old and living at Ludhiana. A Sale Agreement of the above plot @ Rs. 445/- per sq.ft., was also found at the premises of the assessee.
17. In view of the above, the investment made in purchase of above land was treated as undisclosed investment of the assessee and an addition of Rs. 4,93,750/- was made to its income u/s 69 of the Income-tax Act.
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18. By the impugned order, the ld. CIT(A) deleted the addition by observing that simply because the documents of Shri Gurudev Singh, who is father-in-law of the assessee, were found from the residence of the assessee, the same cannot be treated as investment made by the assessee only on the basis of personal doubts, surmises and conjectures of the AO, particularly in view of the fact that no incriminating documents were found during search and brought on record by the Assessing Officer that the investment in the said plot was made by the assessee. It was also observed that even during course of assessment, the assessee has clearly replied that Shri Gurudev Singh is an old regular income tax assessee having agricultural income/pension income and that entire investment in the said property was made by him and not by the assessee. We do not find any reason to interfere in the order of CIT(A) on this ground.
19. Following was the submission of the assessee with regard to the additions on account of house hold expenses, before the ld. CIT(A) :-
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"As can be seen from the discussions dispersed in the entire body of order of the AO, the entire action of the AO impinges upon his mere ipse dixit about the personal expenditure not supported by any material or evidence. Our subsequent discussion shall prove that he has not discharged the heavy burden cast upon him by the provisions of Sec. 69C. It would be seen from the following facts and submissions brought on record that the action of the AO is totally unwarranted in law and on the facts of the case for the reasons set out here-in-below:
First of all, it is humbly submitted that the methodology adopted by the AO to work out so-called unaccounted household expenses was totally wrong, impractical and unwarranted. This is because, for working out household expenses, he has considered only income/cash inflow of the current 31
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financial year whereas, he ought to have understood that withdrawal for household expenses may not necessarily be from current year's cash income only. The same, on the contrary, can, and is also out of opening cash & bank balances and withdrawals from banks, receipt of money from somebody etc., other than current year's income. He miserably failed to understand that while considering availability of funds for household expenses, the total availability of cash with reference to cash flow statement has to be seen and not the sum total of current year's income alone, as wrongly taken by the AO. Thus, since the AO has not pointed out any such deficiency in availability of cash based on the cash flow statement, the peculiar methodology adopted by the AO needs to be rejected in view of the fact that the assessee had sufficient cash available 32
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with him to incur household expenses as per the cash flow statement submitted to the AO. Secondly, without prejudice to above, the household expenses estimated by the AO at Rs. 2,00,000/- was uncalled for due to the following reasons:
(a) No. query at all was put up by the AO to the assessee regarding household expenditure.
(b) Despite extreme step of search, no material was found during search, much less any incriminating material, suggesting inadequacy of household expenditure by the assessee.
(c) No corroborative evidence was brought by AQ to prove that the household expenses incurred by the assessee were more or less at the level alleged by him.
(d) No material was found during the search to show that there was drawing, which was not 33
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recorded by the assessee in the regular books of account.
(e) Further amounts were withdrawn from cash
income out of rent, truck plying on
presumptive basis and agriculture, as shown in the cash flow statement. Other family members also had withdrawals. The same were not considered by AO.
(f) As the house is owned, no rent was
required to be paid.
(g) Grains, vegetables and milk were obtained
from the agricultural land owned by the assessee and his family.
(h) There is common living and messing thereby saving lot of expenditure on electricity, maidservants etc.
(i) No basis was given by the AO for estimating household expenses at such 34
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abnormally higher figure neither any comparative case was brought on record by AO.
(j) Addition was thus made simply on the basis of whims, surmises and conjectures.
(k) Addition was thus made simply on the basis of whims, surmises and conjectures.
(k) The AO has stated that the assessee is a reputed person in the society and maintaining high standard of life. The AO has also stated that the assessee had dog for safety of his house. As per him, assessee is having four air conditioners in his house and house is well decorated and furnished. In this regard, it is submitted that the assessee is a person of ordinary middle class leading a simple life.
He nor any of his family members is member of any club nor holding any post in any social organization or institution nor do they have any pass port. They do not have maid servants and all the work are done by the family members only. As regards air- 35
-: 36: -
conditioners, it is well known that now days the cost of ACs are at par with that of the coolers and the assessee has been very conservative in using the same thereby saving lot of electricity. The AO ignored that the total withdrawals made by family members of the assessee are adequate and are as under :-
1999- 2000- 2001- 2002- 2003- 2004- 2005- 00 01 02 03 04 05 06 Self:
Out of personal e] 18000 43000 18800 18000 218000 348000 175000 c From Janta 24000 24000 24000 40000 50000 58000 90000 Sales, Bairagrh Smt.Satinder Kaur-
wife Out of personal 11000 30000 12000 - 22000 42000 35000 a/c From Janta 30500 - 30000 38000 52000 54000 72000 Sales, Bakania Smt.Harbans Kaur-
mother
Out of personal e] 18000 17000 - - 45000 460000 80000
c
From Janta 12000 9600 - 10000 - - -
Traders
Avneet Singh-son
Out of personal - - - 21700 11000 18000 18000
a/c
TOTAL 113500 123600 84800 127700 398000 980000 470000
It will be of ample importance to observe that the AO has treated household expenditure of Rs. 36
-: 37: -
48,000/- in the past for A.Y.2001-02 in scrutiny assessment u/s 143(3) as adequate. It is note worthy that the assessee had shown withdrawal of Rs.24,000/- as against which addition of Rs.24,000/was made by the AO on account of low withdrawal aggregating it to Rs.48,000/-. There is no change in circumstances relating to withdrawal for the year under consideration as compared to the past and moreover, as already submitted, no material was found during the search to show that there was drawing, which was not recorded by the assessee in the regular books of account. The AR has also relied on the following decisions:
Mahesh Kumar Singhai, Vs. DCIT (2007) 9 ITJ 682 (Indore Tribunal) Narain Singh Bhati s. ACIT, 1991)40TTJ 381 (JP) CIT Vs. C.L. Khatri (2005) 4 ITJ 193 (MP) Ashok Kr. Jain Vs. DCIT, 37
-: 38: -
32 ITC 527 (Indore ITAT) ACIT Vs. Surajbai, (2005) 4 ITJ 524 (Indore ITAT) Ramesh K.Shah Vs. DCIT (2004) 82 TTJ 827 (Bang.) Deenanath Agrawal Vs. ACIT (2004) 82 TTJ 689 (Agra) Abdul Gaffar A.Nadiawala Vs. DCIT (2001) 70 TTJ 462 (Mum.).
Pradeep C.Patel Vs. DCIT, (1997) 58 TTJ 409 (Ahd.) David Dhawan Vs. ACIT (2000) 66 TTJ 188 (Mum.) Jagdish Lal Khurana Vs. DCIT (2004) 87 TTJ 1059 (Asr.)
20. By the impugned order, the ld. CIT(A) deleted the addition after having following observations :-
The submissions of the AR and the findings of the AO have been carefully gone through by me. I am of the considered opinion that the addition made by the AO is unjustified and 38
-: 39: -
unsustainable. First of all, the methodology adopted by the AO to work out unaccounted household expenses was wrong & impractical, as rightly argued by the AR. The AO ought to have considered overall availability of cash with reference to cash flow statement in contrast to only current year income/ cash inflow considered by him. Such approach of the AO is neither practical nor permissible. Further, no material was found during search or brought on record by AO regarding some household expenditure incurred by assessee but not shown to the department. Even the basis of estimation was not given by the AO.
He also ignored the withdrawals made by other family members and total withdrawal made by the assessee, as given in the chart of his written 39
-: 40: -
submission. I also find that for the A.Y. 2001-02, the assessee had shown withdrawal of Rs. 24,000/-, as against which addition of Rs. 24,000/- was made by AO aggregating it to Rs. 48,000/- in the scrutiny assessment u/s 143(2). There is no change in the circumstances leading to higher estimation of household expenses. I, therefore, delete the addition of Rs. 1,21,153/- made by the' AO. The assessee shall get relief of Rs. 1,21,153/- and in the process the appeal of the assessee stands allowed.
21. Rival contentions have been considered. The AO has made addition on account of house hold expenses without pointing out any particular expenses as having been incurred nor any evidence was found during course of search indicating any expenditure having been incurred but not accounted for. The ld. CIT(A) has deleted the addition by observing that the AO has ignored withdrawals made by other family members 40
-: 41: -
and total withdrawals made by the assessee as given in the chart and written submissions. It was also observed that in the assessment year 2001-02, wherein scrutiny assts were framed, the AO has estimated house hold expenses at Rs. 48,000/- and since there is no change in the circumstances leading to higher estimation of house hold expenses, no addition is warranted. Keeping in to view the totality of the facts and circumstances and the standard of living of the assessee, we deem it reasonable to retain the addition to the extent of 25 % on account of lower house hold expenses shown by the assessee. This ground of Revenue's appeal is allowed in part.
22. On the same analogy the ground taken by the Revenue with regard to the deletion of house hold expenses in all the years are confirmed to the extent of 75%, resulting in upholding of addition to the extent of 25 % in all the years under consideration.
23. The AO has also made addition of Rs. 5 lakhs on account of marriage expenses. In the assessment order, the AO observed that expenditure on marriage of second daughter 41
-: 42: -
Smt. Kuldeep Kaur was not accounted for by the assessee, therefore, he estimated Rs. 5 lakhs having been incurred on account of marriage expenses in the assessment year 1999- 2000.
24. In this connection, submission of the assessee before the ld. CIT(A) was as under :-
"In this connection, it is submitted that observations of the AO are wrong and opposed to facts on record for the following reasons:
No such query was put up to the assessee by the AO. Hence there was no question of assessee having said that there were no withdrawals for marriage of second daughter. Even otherwise, the marriage of Kulpreet Kaur was solemnized on 12-12- 1999 falling in next AY 2000-01 and hence no addition could be made in the assessment year in hand. Copy of reply filed before AO of Kulpreet Kaur 42
-: 43: -
evidencing the date of marriage is filed.
Date mentioned on the list of gifts received as below also evidences the date of marriage. Mother of the assessee, Smt. Satinder Kaur, had shown marriage expenses of Rs. 35,000/in her statement of affairs, which was ignored by the AO. Smt Harbans Kaur assessee's mother had also given gold weighing 440.800 Gms on the marriage of Smt. Kulpreet Kaur, daughter of the assessee, along with cash gift of Rs. 5,001/-. For this purpose, an affidavit of Smt. Harbans Kaur was filed before the AO, which too was ignored by him. Various gifts were also received from relatives & friends on the occasion of marriage (copy of list prepared at the time of marriage enclosed herewith). The same were also utilised for payment of marriage expenses which were mostly made after 43
-: 44: -
the marriage. No evidence was recovered during the course of search of thereafter to prove that the assessee has incurred expenditure of Rs. 5 lacs on the marriage of his daughter. No details or evidence whatsoever have been brought on record to justify the estimation of the marriage expenses. The addition was thus not supported by any evidence and was based on imaginations, surmises & conjectures only. The AR relied on the following decisions:
Mahesh Kumar Singhai vs. DCIT (2007) 9 ITJ 682 (Indore Tribunal), Narain Singh Bhati Vs. ACIT (1991) 40 TTJ 381 (JP) CIT Vs. C.L. Khatri (2005) 4 ITJ 193 (MP) Ashok Kr. Jain Vs. DCIT, 32 ITC 527 (Indore ITAT) ACIT Vs. Surajbai, 44
-: 45: -
(2005) 4 ITJ 524 (Indore ITAT) Ramesh K.Shap Vs. DCIT (2004) 82 TTJ 827 (Bang.) Deenanath Agrawal Vs. ACIT (2004) 82 TTJ 689 (Agra) Abdul Gaffar A.Nadiawala Vs.DCIT (2001) 70 TTJ 462 (Mum.) Pradeep C.Patel Vs. DCIT (1997) 58 TTJ 409 (Ahd.) David Dhawan Vs. ACIT (2000) 66 TTJ 188 (Mum.) Jagdish Lal Khurana Vs. DCIT (2004) 87 TTJ 1059 (Asr.)
25. After considering ld. Authorized Representative's submission, the ld. CIT(A) deleted the additions after having the following observations :-
"I have considered the assessee's submissions as well as the findings of AO. In my opinion, the addition was not warranted in this year 45
-: 46: -
because marriage of the daughter of the assessee, Kulpreet Kaur, was solemnized on 12-12-1999 falling in next A.Y. 2000-01 and not in the present A.Y. 1999-00 in hand. Even otherwise, the AO has not considered the marriage expenses shown by the wife of the assessee, Smt. Satinder Kaur and gift given by mother of assessee, Smt. Kulpreet Kaur. He also has not considered gift received from relatives and friends, as brought on record by the assessee. No evidence was recovered .during the course of search or even thereafter to prove that the assessee has incurred expenditure of Rs. 5,00,000/- on the marriage of his daughter. No details, evidence or basis has been given by the AO for his estimation. Under these circumstances, the addition made at Rs. 5,00,000/- cannot be sustained and it has to be deleted; the assessee gets a relief of Rs. 5,00,000/-, and t~ us the appeal 46
-: 47: -
is allowed."
26. We have considered the rival contentions. The AO has made addition of Rs. 5 lakhs by estimating marriage expenses of assessee's daughter. However, nothing was found during course of search nor during post search enquiry to hold that the assessee has incurred expenditure on marriage, which has not been accounted for or source of which was not available. The ld. CIT(A) has found that the AO has not considered the marriage expenses shown by wife of the assessee Smt. Satinder Kaur and gift given by the mother of the assessee Smt. Kulpreet Kaur. These findings of the CIT(A) have not been controverted by brining any positive material on record, we, therefore, do not see any reason to interfere in the findings recorded by the ld. CIT(A).
47
-: 48: -
27. Addition of Rs. 20,000/- made by the Assessing Officer, in respect of the deposit in S. B. account No.3494 was deleted by the ld. CIT(A) after having the following observations :-
"I have gone through the submissions made by AR and observations of the AO. Since Harminder Singh has confirmed to give loan to the assessee and nothing incriminating was recovered during search or proved by the AO that the loan given by Mr. Harminder Singh was assessee's funds, the addition cannot be sustained. The assessee gets a relief of Rs. 20,000/- and as such the appeal is allowed."
28. We have considered the rival contentions and found that the amount of Rs. 20,000/- was deposited on 9.1.1999. The assessee submitted that he has taken loan from Shri Harminder Singh. By recording a finding that Harminder Singh confirmed to give loan of Rs. 20,000/- to the assessee and nothing incriminating was recorded during search nor 48
-: 49: -
approved by the Assessing Officer that the loan given by Shri Harminder Singh from the assessee's funds, the ld. CIT(A) deleted the addition. We do not find any infirmity in the finding recorded by the ld. CIT(A) in so far as Shri Harinder Singh has duly confirmed advancing of loan of Rs. 20,000/- to the assessee.
29. With regard to gross profit addition of 1,46,382/-, contention of the ld. Authorized Representative before the ld. CIT(A) was as under :-
"The books of account could not be produced at the time of survey as it was incomplete and were not written by the accountant who used to come part time. The same were however, produced before the AO along with quantitative tally, as affirmed by him. The AO verified the same and did not point out any mistake or defect therein. The GP shown by assessee vis-a.- vis considered by AO in different years are given in the reply for individual Assessment Years.
That, the assessee maintained a
49
-: 50: -
contemporaneous records of all business
transactions, quantitative details of opening
stock; purchases, sales and closing stock on even daily basis and this fact was duly placed on record during assessment proceedings. The survey was carried out at the Business premises and after the extensive investigation no incriminating material whatsoever was found. It was also submitted by the assessee that the sales rate has been declared by the Ministry of Petroleum from time to time and the assessee is bound to sell the controlled commodity of petroleum according to the rates decided and prescribed by the Ministry and he cannot charge extra rate other than that fixed by the Government and he had to follow the conditions and terms as per guidelines prescribed by the authorities and any violation or contravention of the same in running the outlet may result in termination of dealership. It is further submitted 50
-: 51: -
that the petrol pump has been regularly checked and monitored by Company officials, various Govt. authorities, and food department and the sales tax authorities as petrol/diesel are controlled commodity. Even the revised rates are announced through media and no one can dare charge more than that. The sales tax authorities that are more concerned on sales have admitted the sales as per audited accounts. It is merely conjectural on the part of AO to state in some other assessment year 'that the assesee has been selling Petrol/Diesel out of books or. has been involved ,in adulteration of solvent/ kerosene; it is wholly incorrect and not supported by any evidence on record. No evidence worth the name was recovered during search that the assessee is selling out of books. The so called variation in stock as per meter reading vis-a-vis actual dip was found only in the F.Y 2003-04 (part year) and F.Y 2004-05 51
-: 52: -
and since no such variation was observed in other financial years, no addition is called for on this account in those years. Even the allegations of out of books of sales is not correct because the variation between stock as per meter reading and as per actual clip was well within the permissible norms as explained to AO. In fact, writing of the stock as per actual dip on the stock register was started at company official's oral instructions to our staff only from F.Y. 2003-
04. There was no requirement of doing so in writing from the company. The employees of the assessee are not skilled and are not that literate. Only such employees have been writing dip stock on the stock register. While doing so, they have done so many inadvertent mistakes of writing actual dip stock against earlier day's meter reading and the like, Sometimes they have written wrong quantity of actual dip stock and so on. We filed before the AO amended chart 52
-: 53: -
explaining above clerical mistakes evidencing that:
• Dip stock was wrongly written against earlier day's meter reading.
• Dip stock was wrongly written against later day's meter reading.
• Dip stock written was itself wrong. The above clerical mistakes were verified by the AO and the same were not disputed or disproved by him. In order to make addition, he has kept mum on the same. Stringent Qualitative and quantitative controls exercised by company officials and Food and Civil Supplies Department: The AO's allegations of out of book sales and adulteration in Petrol/Diesel are totally unfounded also for the reason that very stringent and strict qualitative and quantitative controls are exercised by Food and Civil Supplies Department and no adverse action has ever been taken by the 53
-: 54: -
said department against the assessee, as set out here in below. Even the supplier Govt Companies is very strict and carryout checks periodically on surprise basis as regards to quantity and quality. Some of the periodical inspection reports were also submitted before AO with our reply for A.Y.2005-06. The inspection reports clearly evidenced that: • The variations between meter reading and dip stock taken on surprise visit was always well within the permissible limits.
• There was no excess stock found on any of the surprise visits.
• The quality of the products dealt in was always excellent and as per the norms of the company. • Samples taken on surprise basis even meets requirements of quality 2796:2000 certification (a quality certification like ISI and ISO accreditation).
54
-: 55: -
As already submitted before the AO, his allegations are not warranted and are against the facts of the case also for the following reasons: No iota of evidence was found during search suggesting even a single rupee out of book sales or adulteration of solvent/kerosene in Petrol and Diesel. Similarly, no evidence was found regarding any unaccounted purchases of Petrol and Diesel. Neither any evidence was found regarding purchase of solvent or kerosene. The assessee maintains quantitative tally and day-to-day stock register. The books of account are audited. There cannot be variation to the extent suggested because with such huge variation, the dealership would have been terminated long back. We requested the AO that the supplier company, BPCL, may be enquired regarding the quantitative and qualitative standards maintained by the assessee but the same was not done by the AO and the addition was made on whims and fancies only. Now enclosed is copy of 55
-: 56: -
certificate issued by Oil Company evidencing that on surprise verifications at various occasions in different years, no quantitative or qualitative deficiency was ever found. The Physical stock found on the date of survey was well within the permissible norms as explained by us elsewhere in our submissions of various years. No basis of the estimation of GP was given by AO. No comparable case was brought on record by AO. In our trade, nobody can manipulate GP as purchase is from a public sector undertaking and Govt. fixes sale rates. The method of accounting has been consistently followed by us for last several years and has been accepted by the Department and thy books were never disturbed in any of the preceding assessment years. Even in assessment year 2001-02, the scrutiny assessment of the assessee was undertaken u/s 143(3) and books results shown by the assessee involving GP percentage of 1.94% was accepted. The Office of the Oil Company vide its guidelines has confirmed the 56
-: 57: -
variation of normal handling loss which is eligible to the assessee and it should be allowed to the dealers on total receipts. The variation of the applicant was below these guidelines. It is now well established that essential ingredients for rendering the accounts incomplete and unreliable are:
(a) Omission of purchases. I.
(b) Effecting of purchases at inflated prices from sister concerns for extra commercial consideration. '
(c) Omission of investment or expenditure.
(d) Non production of proper particulars and vouchers where the G.P. rate shown in abnormally low.
(e) Unexplained adjustments at critical dates.
(f) Suppression of part of sales.
If any of the above is proved against assessee, it justifies rejection of books of account but in our case no suppression in 57
-: 58: -
sales or inflation in purchases had been detected by the AO. The accounts have been regularly maintained and are duly audited. The AO also has not established against the assessee any omission of investment or expenditure. The purchases and sales also have not been held to be unvouched. No detection of any unexplained adjustments at any critical dates have been found by AO. He has not rejected the books of account and it has not been brought on record by him that income of assessee cannot be properly deduced. Hence such arbitrary estimation made by AO is highly unjustifiable and against the legal standards. The assessee is relying on the following decisions wherein it was held that low profit without any other defect being found in the account books is not a sufficient ground for rejection of accounts. 58
-: 59: -
Moreover, since the AO has not rejected the books of account and has not given clear finding that the true profits could not be ascertained from the method of accounting employed by the assessee, no addition can be sustained. "
30. By the impugned order, the ld. CIT(A) deleted the addition on account of gross profit after having the following observations :-
"I have carefully considered the observations of the AO and so also the submissions of the assessee. I find that the additions made by the AO are not rested on sound footings. Such heavy additions ought to have been supported by concrete and cogent evidence in order to be sustained. But, what I see from the discussions dispersed in the relevant portion of the order on the relevant issue, for this year as well as in subsequent years, the addition has 59
-: 60: -
been made in a very light hearted and casual manner. No doubt, the AO is permitted to make estimations but as per the settled law, the estimation has to be backed by some cogent evidence/material, I find that the addition on account of GP is mainly based on the allegation of the AO that the assessee has been doing mixing or adulteration of solvent/kerosene in diesel/petrol and there was variation between stock as per meter reading noted on the sales register and as per the actual dip (stock on physical verification). It is observed that as regards the allegation of AO that the assessee has been doing adulteration or mixing in diesel and petrol on such huge level, no evidence was found during search or brought on record by AO. No evidence was 'unearthed either during the search or brought on record by AO through post search investigation. The assessee filed various inspection reports of the Oil Company, 60
-: 61: -
on surprise check basis, before AO, in which nowhere it was found that the assessee was flouting qualitative or quantitative norms fixed by Oil Companies. These reports were not taken cognizance by the AO while making high-pitched additions. The assessee requested the AO to call for the report of the Oil Company regarding stringent quantitative and qualitative control exercised, but the AO totally ignored it. The assessee has obtained a Certificate from Oil Company and furnished the same. The said Certificate clearly evidence that no adverse action has ever been taken against the assessee for flouting the qualitative and quantitative norms fixed by the Oil Company. Under these circumstances, the allegation that the assessee has been resorting to adulteration has to be rejected. As regards the contentions of the AO that there was a variation in the stock as per meter reading in the stock register 61
-: 62: -
and as per actual dip (stock on. physical verification), I find that here also the AO has not substantiated his findings. The assessee clearly explained to him that first of all stock as per actual dip, was started to be written on the stock register from financial year 2003-04 onwards on the oral instructions of Company officials, as otherwise, there was no requirement of doing so Illiterate employees of the assessee wrote the stock register and they have done lot of mistakes in writing the same. The assessee filed before the AO the amended and correct chart explaining that whatever variance was pointed out by him was practically not possible and it was only due to inadvertent mistakes of writing actual dip stock against earlier day's meter reading and the like. It was also explained that sometimes, the employees have written wrong quantity of actual dip stock and so on, as 62
-: 63: -
submitted by AR hereinabove. I note that the human mistakes in the amended chart were verified by the AO and the same were not disputed or disproved by him. I find myself in full agreement with these arguments of the AR that with such huge variations, the dealership of the assessee should have been cancelled long back. Naturally, the AO cannot take benefit of such innocent & inadvertent human error, which has been accepted even by the Oil Company and the Food Department, who are more concerned about the qualitative and quantitative aspect of the petrol pump dealers, including the assessee. Moreover, petrol and diesel being controlled commodities, nobody can charge rates more than the fixed rate and hence, there is no scope for addition on account of GP incase of such commodities. I find that the books of account of the assessee are audited. No 63
-: 64: -
evidence was found or brought on record regarding any unaccounted purchase or sale of petrol and diesel. No evidence was found regarding purchase of solvent/kerosene either, despite extreme step of search. The assessee maintains day-to-day stock of products. The Oil Company (a Government Company) has given a clean chit to the assessee regarding qualitative and quantitative aspect of the products dealt in by the assessee. Further, the book results shown by the assessee were duly accepted in scrutiny assessment u/s 143(3) for A.Y. 2001-02. No basis was given by the AO for his estimation of GP nor he brought any comparative cases on record. Under these circumstances, I have no alternative but to delete the addition made by the AO, which sails on his pure surmises and conjectures. The addition of Rs. 1,46,382/- made by the 64
-: 65: -
AO is, therefore, deleted and the assessee gets a relief of Rs. 1,46,382/- and in the process the appeal is allowed."
31. Rival contentions have been heard and records perused. During the course of assessment, the AO made trading addition of Rs. 1,46,382/- in respect of petrol pump business of the assessee. The main allegation of the AO was that the assessee has been doing mixing in diesel and petrol. The ld. CIT(A) observed that no evidence was found either during the course of search nor any material was brought by the Assessing Officer on post search inquiry to indicate that the assessee was doing any adulteration in diesel and petrol thereby earning more profit. It was also observed that the assessee had filed various inspection report of the oil company on surprise check basis, in which nowhere it was found that the assessee was flouting qualitative and quantitative norms fixed by the oil company. We also found that these reports were not taken cognizance by the Assessing Officer while making trading addition. Even we found that the assessee had requested the AO to call for report of the oil company 65
-: 66: -
regarding stringent qualitative and quantitative control exercise, but the AO totally ignored the same. Furthermore, the assessee had obtained the certificate from Oil Company and furnished the same before the AO, which clearly evidenced that no adverse action has been ever taken against the assessee for flouting the qualitative and quantitative norms fixed by the Oil Company. Keeping into view all these factual position, the ld. CIT(A) held that allegation of the AO that the assessee was resorting to adulteration has to be rejected. Even it was found by the CIT(A) that contention of the AO that there was a variation in the stock as per meter reading in the stock register and as per the physical verification, it was found that nothing was brought by the Assessing Officer either during survey or post survey inquiry to substantiate this finding. The ld. CIT(A) found that if any of the allegations put by the Assessing Officer was found correct, the dealership of the assessee should have been cancelled long back. Accordingly, the gross profit addition on these allegations was deleted by the ld. CIT(A). We do not find any reason to interfere in the 66
-: 67: -
findings recorded by the ld. CIT(A) resulting into deletion of trading addition.
32. With regard to the trading addition by invoking provisions of Section 145(3), in terms of our discussion in the assessment year 1999-2000, we delete the trading addition in all the assessment years, in so far as facts and circumstances narrated by the Assessing Officer in all the years under consideration are same. Accordingly, we follow our decision with regard to deletion of trading addition as made in the assessment year 1999-2000.
33. The next issue relates to disallowance out of evaporation of petrol/diesel claimed by the assessee amounting to Rs. 40,000/-.
34. In this regard, observation of the AO was on verification of accounts and audited accounts filed along with the return it was found that assessee has claimed an expenditure in the head of evaporation at Rs.73,821/- which is very high compared to the profit shown by the assessee.
67
-: 68: -
35. By the impugned order, the ld. CIT(A) deleted the addition after having the following observations :-
"I find that this addition has been made by the AO without verifying the facts available on record. As submitted by the AR, he ought to have understood that the evaporation claimed by assessee is well within the norms issued by the Oil Company, regarding permissible limits of evaporation. Moreover, no basis was given by the AO regarding the adhoc addition made by him. In view of this, the addition of Rs. 40,000/- is vacated and the assessee gets a relief of Rs. 40,000/- and the appeal is allowed. "
36. We have considered the rival contentions and found from record that whatever evaporation has been claimed by the assessee, the same were within the norms issued by the Oil Company. We also found that before the AO, the assessee has furnished a letter from the Oil Company. Evaporation 68
-: 69: -
claimed by the assessee was below the permissible limit and norms of the oil company. We also found that quantitative and qualitative details were maintained by the assessee with regard to the purchase, sale and stock of oil as per the requirement of oil company and Food Department without which no petrol pump can run. We found that even the quantitative details were filed before the AO, wherein no defect was found by the AO, accordingly, there was no basis of ad hoc addition of evaporation as given by the Assessing Officer. Thus, we do not find any infirmity in the order of the CIT(A) in deleting the ad hoc disallowance of Rs. 40,000/- on account of evaporation.
37. Similarly, the addition made on account of evaporation expenses in various years are deleted in terms of the finding recorded by the ld. CIT(A) in the respective orders. We have already discussed the issue in the assessment year 1999-2000, accordingly, we confirm the action of the ld. CIT(A) on account of deletion of addition on account of evaporation expenses in all the years under consideration. 69
-: 70: -
A.Y. : 2000-01 :
38. Most of the grounds raised in this year are common. Addition with regard to expenditure incurred and various deposit in the Bank account was deleted by the CIT(A) after having following observations :-
"This issue has been discussed by AO at page 13 para 6.11 of his order. On the basis of my decision imparting credence to the personal cash flow statement made by the assessee in ground No.5 as above, the following additions made by the AO are deleted since these impinge upon only on the so-called shortage of cash available with the assessee as per AO and because the assessee is found to be having overall sufficient cash available with him with reference to the cash flow statement:
Ground of Particular Discussed by AO at Addition by s appeal no. Pg. and para no. AO Rs.
Ground Deposit in S.B. A/ c Pg. 13 Para 6.11 5,54,434/- 70
-: 71: -
No.7 of J anta Transport
Ground Deposit in S.B. A/ c Pg. 14 Para 6.12 2,59,200/-
;.
No. 8 of Janta Transport
Grourld Deposit in S.B. A/ c Pg. 18-19 Para 7.1 80,967/-
No. 11 of Hotchand
Ground Deposit in S.B. A/c Pg. 19-21 Para 7.2 10,000/-
No. 12 No. 3494 of
Allahabad Bank
Total 9,04,601/-
39. We have carefully considered the rival contentions and material placed on record. As observed hereinabove, there was no mistake in the cash flow statement furnished by the assessee with regard to the availability of cash and its deposit in bank account. The ld. CIT(A) had also given detailed finding with regard to each and every entry in the cash flow statement. Nothing was brought on record by the Revenue to controvert these findings. Thus, we do not find any reason to interfere in the order of CIT(A) with regard to availability of cash as per cash flow statement furnished before the AO.
40. Next issue relates to addition on account of capital gains.
41. In this regard, observation of the AO was that in the S. B. Account No. 3494 in Allahabad Bank there are receipts 71
-: 72: -
from Shri Vishal Tamrakar at Rs. 50,000/- & Rs. 1,00,000/ - on 31-01-2000 and 02-03-2000. In this regard it was submitted by the assessee that the above receipts are on account of sale of shop to Shri Vishal Tamrakar during this assessment year and the above receipt was utilized in purchase of shop at K.K.Plaza. As per statement of Shri Govind Tamrakar the above shop was purchased in the name of his wife Smt. Kiran Tamrakar and his son Shri Vishal Tamrakar for Rs. 8,00,000/- and total payment made to the assessee so far was Rs. 3,50,000/-. It was also stated by him that they are having possession of the above shop. As per section 2(47) (v) of the IT Act, allowing of possession of any immovable property is treated as transfer. Since the assessee has given transfer of property, therefore it is treated that transfer is complete in all respects and assessee is liable to pay capital gains tax which is worked out as under: -
72
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Particular Year of Amount.
Purchase value of purchase
F.Y 1997- (date of Rs.1,81,600/-
the shop 98
purchase-
Sales value of the F.Y 1999- Rs.8,00,000/-
shop
Indexed Cost 00
181600 X 389 / Rs.2,13,421/-
Capital Gain 331 Rs.5,86,578/-
(LTCG)
I
.
".... .., ,
Tax payable calculated separately after giving set off of on
unabsorbed capital losses of Rs. 2,08,969/- as claimed in the original return for assessment year 1999-2000.
Thus, long term capital gain is Rs. 5,86,578 - Rs. 2,08,969 =3,77,609 and the LTCG payable is Rs. 3,77,609/- x 20 % = Rs. 75,522/-."
42. By the impugned order, the ld. CIT(A) deleted the addition after having following observations :-
"I have gone through the observations of the AO and the submissions of the AR. I am of the considered view that the addition made by the AO was not warranted on facts available on record. No independent enquiry was conducted by the AO despite strong objection of the assessee that he has not given the possession of the property. Neither any 73
-: 74: -
evidence was recovered during search or corroborated by AO that any such possession was given by the assessee. I also note that despite request of the assessee, the AO has not confronted the statement of the proposed buyer. This vitiates the addition, from the root of it. I fully concur with the contention of the AR that if the buyer had actually purchased the property and taken possession thereof, as claimed by AO, he, must have got it legally transferred in his name because after paying such huge amount, nobody would like to retain the property untransferred. But then, as claimed by the assessee, the property still continues in the name of the assessee even today. This fact also lends impeccable support to the assertions of the assessee and repels the allegation of the AO as unfounded. In view of all this, I have no other alternative but to delete the addition made by the AO treating it 74
-: 75: -
as purely imaginary uncorroborated because AO could not substantiate his action. The addition of Rs. 3,77,609/- is therefore, deleted. The assessee gets a relief of Rs. 3,77,609/ - and thus the appeal is allowed "
43. Aggrieved by the above order, the Revenue is in further appeal before us.
44. We have carefully considered the rival contentions and found that shop measuring 270 sq.ft. at 12, C.R.P. Main Road on 3.7.97. Copy of the registered documents was filed before the AO alongwith reply for assessment year 1999-2000. The assessee had encroached further land aggregating to 1055 sq.ft. The said shop was agreed to be sold to Mr. Vikas Tamrakar for Rs. 8 lakhs. No agreement was executed. The assessee only received Rs. 3.50 lakhs as advance through cheques vide four cheques of Rs. 50,000/-, Rs. 1 lakh, Rs. 1 lakh and Rs. 1 lakh. However, the purchaser wanted the assessee to get entire 1055 sq.ft. registered in its name, but since the assessee was owner of only 270 sq.ft., he declined registration of entire area of 1055 sq.ft. Thus, a dispute arose 75
-: 76: -
between the assessee and the buyer, hence the delay could not be completed. The assessee has also not given possession to the buyer. Under these circumstances, no capital gains arose to the assessee and he also agreed to pay tax as and when the / sale will be completed. The assessee also asked the AO to confirm the facts from buyer by issuing notice u/s 131. Under these facts and circumstances, we do not find any infirmity in the order of the CIT(A) for deleting the addition made by the Assessing Officer on account of long term capital gain amounting to Rs. 3,77,609/-.
45. The addition of Rs. 1,01,500/- has been discussed by the Assessing Officer at page 21 of his order as under :-
"The assessee has shown unsecured loan in the name of following persons:-
S1.N Name of the Amount
o.
l. person
Sh. Ganga Ram 15,000/-
2. Sh. Jairam 15,000/-
3. Dhankani
Sh. Jamuna 16,000/-
4. Prasad
Sh. Matin Khan 18,000/-
5. Sh. Navdeep 18,000/-
6. Singh
Sh. Radhe Shyam 19,500/-
Total 1,01,500/-
76
-: 77: -
It was submitted by the assessee that all the above persons are not cooperating in owning up their respective loans, though they are genuine, hence the same have been treated as his own money the source whereof was available with him out of cash in the personal cash rotation chart. As per the AO, the argument submitted by the assessee cannot be accepted because there was no excess cash available with him as discussed in para 6.1 to 6.13 of the assessment order. On the contrary, assessee was short of funds for his household expenses and an addition of Rs. 86,027/- has already been made for low withdrawals. In view of the above, assessee is not having any additional fund from which above cash credits could have been explained. The argument of the assessee that the above-unsecured loans were genuine but cannot be proved due to non- 77
-: 78: -
cooperation of the creditors but assessee has not furnished any single evidence in this regard even the address of the creditors was not provided. He, therefore, made addition of Rs. 1,01,500/ - to the income of the assessee. In this connection, it was submitted before me that assessee has owned up these loans, as all the loan creditors were not cooperating in confirming and accepting their respective loans, though they are genuine. The same were therefore incorporated in the memorandum cash flow statement prepared by the assessee. The AR further submitted that this addition by AO also impinges on his non- imparting evidence to the personal cash flow statement as discussed and explained by him, in detail, in ground no. 5 of AY 1999-00. It was further argued by AR that since the assessee had sufficient overall cash available with him with reference to cash flow statement/ cash 78
-: 79: -
rotation chart submitted before AO and as explained by him in detail in his reply to ground no. 5 of AY 1999-00, the addition made by the AO be kindly deleted."
46. By the impugned order, the ld. CIT(A) deleted the addition after having the following observations :-
"I have considered the submissions of the AR and the observations of the AO. There is no dispute that these loans have been owned up by the assessee and therefore, were incorporated in the memorandum cash flow statement submitted before AO. As rightly argued by the AR, this addition by AO also impinges on his non-imparting evidence to the personal cash flow statement. As I have imparted credence to the personal cash flow statement and since the assessee had sufficient overall cash available with him with reference to cash flow statement/cash rotation chart submitted before AO, the addition made by the AO 79
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requires to be deleted. Accordingly, I delete the addition of Rs. 1,01,500/- made by the AO. The assessee gets a relief of Rs. 1,01,500/and thus the appeal is allowed. "
47. Rival contentions have been considered in view of our observations as noted above with regard to the cash flow statement submitted by the assessee, the assessee was having sufficient cash available with him. Accordingly, deletion of addition by CIT(A) was justified.
A.Y. : 2001-02 :
48. Addition with regard to deposit in the Bank has been discussed by the Assessing Officer at page 13 of his order :-
"On the basis of my decision imparting credence to the personal cash flow statement made by the assessee in ground No.5 as above, the following additions made by the AO are deleted since these impinge upon only on the so-called shortage of cash available with the assessee as per AO and because the assessee is found to be having 80
-: 81: -
overall sufficient cash available with him with reference to the cash flow statement:
Ground Particulars Discussed by AO Addition
Of appeal no. at
Pg. and para no. by
AORs.
Ground Deposit in S.B A/c of Pg. 13 Para 6.11 8,01,002/-
.
No. 7 Janta Transport
Ground Deposit in S.B. A/c Pg. 14 Para 6.12 1,91,000/-
No.8 No.61075 of Janta .' .,
Transport
Ground Deposit In S.B A/c of Pg. 19 Para 7.1 1,42,325/-
No. 11 Hotchand .
Ground Deposit in S.B. A/c No. Pg. 20 Para 7.2 85,033/-
No. 12 3494 of Allahabad
Bank Total 12,19,360
/-
Thus, the assessee will get relief of Rs. 12,19,360/- and in the process the appeal of the assessee on these grounds is allowed.
49. Rival contentions have been considered. The ld. CIT(A) has deleted the addition by finding availability of cash as per the cash flow statement furnished before the lower authorities. As we have already discussed that there is nothing wrong in the cash flow statement submitted before the lower authorities to indicate the availability of cash for depositing in various Bank accounts, we do not find any infirmity in the order of the 81
-: 82: -
CIT(A) for deleting the above additions on the basis of availability of cash as per personal cash flow statement.
50. Next issue relates to disallowance of commission of Rs. 52,672/-.
51. The allegation of the AO was that no commission expenses were claimed in the earlier assessment years. However, the contention of the assessee was that in order to procure business, the commission was paid to the partners of the vehicles, because of lot of new petrol pumps have come up in the area and it was from the Bank to get the business due to steep competition. The submission of the assessee before the CIT(A) was as under :-
"1. At the time of assessment it was submitted by the assessee that in order to procure business, commission was paid to the driver of the heavy vehicle because lot of petrol pumps have come up and it is difficult to get business due to stiff competition.
2. The dealer cannot charge higher rate on the 82
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declared price of the petroleum rather he can allow commission to the drivers for boosting the sales for better profit. Because of this, the sales during the year have increased income arisen to the earlier ear as under: -
A.Y. 2000-01 A.Y. 2001-02
(Present year)
Sales 1,36,12,950/- 1,89,04,809/-
Sales figure Pg.22 para 8 Page 21-22 Para
mentioned 8
buy AO in
his order at
3. In this case, on the impugned issue of commission, the assessment was originally completed u/s 143(3) after due scrutiny. The AO duly allowed commission expenditure claimed by the assessee in the said assessment. There is a presumption u/s 114(e) of the Indian Evidence Act, 1872 that all judicial and official acts have been regularly performed. Kindly permit us to refer to a recent decision of Delhi High Court Full 83
-: 84: -
Bench in the case of CIT v. Kelvinator India Ltd. (2002) 256 ITR 1 (Del) wherein they have held as under:
"It is well known that a presumption can also be raised to the effect that in terms of clause
(e) of section 114 of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessment Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. Hence it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion."
84
-: 85: -
4. The books of account are audited and no expenses of unverifiable nature have been pointed out by the AO.
5. No evidence was found during search or brought on record by AO that the said expenditure is not genuine. "
52. By the impugned order, the ld. CIT(A) deleted the disallowance after having following observations :-
"The submissions of the AR and the observations of the AO have been perused by me. Though, I broadly agree with the contentions of the AR but feel that it would be in the fitness of the matter if some part of disallowance is sustained instead of disallowing entire commission of Rs. 52,672/-. I accordingly confirm disallowance of Rs. 25,000/-. The assessee therefore get relief of Rs. 27,672/- (52,672 - 25,000) and thus the appeal is partly allowed. " 85
-: 86: -
53. The addition of Rs. 32,063/- was made by the Assessing Officer on account of trading of lubricant, which was not disclosed by the assessee. The ld. CIT(A) deleted the addition by observing that the assessee has already offered additional income of Rs. 40,000/- as his additional income and the same was rightly added by the Assessing Officer as his income. Accordingly, the AO was directed to give set off of Rs. 32,063/- as added by him on account of profit from sale of lubricants. We do not find any infirmity in the direction of the ld. CIT(A).
54. Addition on account of cash deposit in the Bank account was deleted by the ld. CIT(A) after having following observations :-
"The Learned Commissioner of Income Tax (Appeals) observed that:-
" I find that this fundamental fact of availability of cash with the assessee out of the above streams of income have not been controverted or disproved by the AO. This is the basic fact which goes to the root of the 86
-: 87: -
matter coupled with the fact that once the availability of cash from undisclosed sources is accepted, the other issue equally important is utilization of the same. Here also, very heavy legal burden was on the AO, particularly in a case where action u/s. 132 took place, to prove that the money available with the assessee from the cash income earned (other than from petrol pump) and disclosed by him have been utilized elsewhere in some movable/immovable investment and expenditure, which have not been disclosed to the department. But, I find that the AO has failed in proving the money available with the assessee has been utilized elsewhere, other that the destination explained by the assessee. The AO has thus sailed on his bare conjectures and surmises in not giving credence to personal cash flow statement prepared by the assessee without proving anything against the assessee. I also agree that the owner of the money only knows where his money has 87
-: 88: -
gone and none else and once the owner of the money explains in clear terms that his money has gone into so and so avenues and rolled over in such and such fashion, the AO cannot brush aside his explanation simply on his personal whims and caprice without proving anything against him. My view is fortified from the observation of Hon'ble Delhi High Court in the case of CIT vis. Kulwant Rai (2007) 163 Taxman 585, to the affect that the cash flow statement furnished by the assessee cannot be rejected by the AO on suspicion that the assessee must have spent amount for some other purpose because, no material has been relied by the AO to support his view that the entire cash withdrawals must have been spent by the assessee. While imparting credence and reliability to the cash flow statement of various Assessment Years, I have also considered the followings:
i. Since the assessee has been earning huge cash 88
-: 89: -
income from agriculture, plot rent, house rent and presumptive income from truck plying since earlier years , opening cash balance of Rs.2,50,000/- as on 0l.04.1996 was possible and hence, the same is taken as correct. ii. The explanation of the assessee regarding Rs.1,65,000/as given in chart, is found reasonable because, the aforesaid cheque was self cheque.
iii------
IV. Assessee had sufficient cash/income available with him to explain various deposits/investment/expenditures, unless stated by me otherwise at the appropriate places.
v. Since the assessee was not required to maintain regular books of accounts for the aforesaid 89
-: 90: -
streams of income from agriculture, rent and presumptive income, there was no way out to explain the entries/deposit/investments/ expenditures other than making personal memoranda cash flow statement/books of accounts, as resorted to by the assessee. VI. The assessee could also utilize amount equivalent to' deemed depreciation as per the decision of Hon'ble Delhi High Court in the case of Regal Theatre Vs. CIT,(1997)225ITR205. Vll. There was some cash outgo/withdrawal, which ostensibly was not utilized elsewhere by the assessee for some investments/ deposits and the same was shown as withdrawal/household expenses and reduced from cash balance. Thus the same was only residual/adhoc figure and was therefore. Otherwise available with the assessee for utilization in to some other expenses/investment. The inter-head and intra- 90
-: 91: -
head adjustment for utilization of cash income was permissible only to the extent the assessee had overall cash available with him----"
lX. All other explanations of the assessee, as given in the aforesaid chart are found to be correct and acceptable.
Since I have imparted due credence/reliability to the cash flow statement prepared by the assessee, all those additions made by the AO, which impinge upon and revolve around the shortage or availability of cash due to non-imparting credence to the cash flow statement of the assessee, shall get vacated for all the assessment years namely, A.Y. 1999-00 in hand to A.Y.2005-06, unless otherwise expressly stated by me, so long as the assessee has overall cash available with him.-------"
55. In view of our discussion made hereinabove with regard to the cash flow statement furnished by the assessee to 91
-: 92: -
show availability of cash on various occasions and purposes, we find that the ld. CIT(A) has correctly deleted the above addition by giving finding that cash flow statement was correct. We do not see any reason to interfere in the order of CIT(A) for deleting the addition made on account of cash deposited in the bank account.
56. As discussed hereinabove in the assessment year 1999-2000, we do not find any infirmity in the order of CIT(A) for deleting trading addition made by the Assessing Officer on the surmises that the assessee was indulged in mixing of petrol/diesel. Since these are controlled commodities and rates are fixed by the Ministry of Petroleum from time to time and the assessee is bound to sell at the rates so fixed. We also found that variations between the meter reading and dip stock taken on surprised visit was always well within the prescribed limit. Accordingly, no interference is warranted in the order of the CIT(A) for deleting these additions after recording detailed findings.
92
-: 93: -
57. In the assessment year 2004-05, the Revenue is aggrieved for deletion of addition with respect to income on account of unaccounted sales and adulteration in diesel.
58. We have considered the rival contentions and found that the AO has made the addition by observing that there is a difference in the stock as per meter reading recorded in out-let sales register vis-à-vis stock as per dip. The AO also stated that such variation was more than permissible limit of 4.6 % for petrol and 4.4 % for diesel.
59. Following was the submission of the assessee before the CIT(A), with regard to these additions :-
"The allegation of the AO are baseless, uncalled for and are the outcome of his personal presumptions, guess work and probabilities. This is because as regards the difference in the stock as per meter reading vis-à-vis dip stock on physical verification was duly explained to the AO stating that the same happened due to human error alone by less literate product dispensing staff. Only such employees have been writing deep stock on the stock registers and 93
-: 94: -
while doing so they have so many clerical mistakes of writing actual deep stock against earlier days meter reading and the like. Sometimes they have written wrong quantity of actual dip stock and so on. We filed amended chart before AO after making necessary correction explaining above clerical mistakes. In the said chart, the variation between the stock as per reading and as per dip stock was well within the permissible limit of the oil companies. The said chart was duly verified by AO and he did not found any falsity or mistake therein. Kindly also refer our detailed submission in Ground No. 15 of A.Y. 1999-2000.
2. The allegation of AO that the assessee was doing mixing or adulteration was his pure speculation and personal presumptions because if the assessee was doing adulteration on such large scale, as alleged by AO, at least a single paper or evidence of purchase of solvent and kerosene have been recovered, 94
-: 95: -
during the search or even there after. Here it is noteworthy that it is a case of extreme step of search were every nook and corner of the business premises and residence of assessee was searched and after thorough and prolong action of search, even no iota of evidence for purchase of solvent and kerosene even of a single rupee was found; under these circumstances the action of the AO can only be termed as height of arbitrariness, punitiveness and grossly whimsical and nothing else. Such an action of the AO should fall from ground.
3. The AO has made huge addition of Rs.
5763036/- for unaccounted income on account of out of book sales and adulteration as under :-
For Petrol at pump at Janta Rs. 9,06,406/- Sales & Service For Diesel at pump at Janta Rs. 48,56,630/- Sales & Service.
95
-: 96: -
Total Rs. Rs. 57,63,036/-
In case if the assessee has earned such heavy magnitude of income only in one year, the total income should have been in the range of crores on this score alone for seven years of block period , and the total income earned by the assessee should have been much more than that. And as held by Hon'ble Supreme Court, some disproportionate assets should be found by AO before concluding that the assessee has deemed income of so much proportion for the proposition that possibility for earning the alleged income, which is deemed the income of the assessee by AO has to be seen. Movable/immovable assets must represent the income deemed by AO in the form of liquidity with reference to utilization of the alleged income -
Roshan Di Hatti vs. CIT, (`1977)107 ITR 938( S. C.) 96
-: 97: -
4. As regards this allegation of AO that sales outside the books of account and tampering of meter is being done in general by petrol pump owners, it is submitted that this allegation is only hearsay and not based on any evidence.
As already submitted no evidence was recovered regarding purchase of solvent and kerosene, it is settled position of law that assessment proceedings under the Act, being quasi-judicial proceedings, the assessment of any particular year must be based not on mere suspicion, bare guess and probabilities but on legitimate material from which reasonable inference of income having been earned/investment made during the accounting year could be drawn and that the initial burden of finding such material, however, slight, is on the income tax authorities and not on the assessee (Bansidhar Onkarmall v. CIT, (`1953) 23 ITR 353. 361 97
-: 98: -
(Orissa). It is certainly not a "leap in the dark"
. The AO is not entitled to make a guess without evidence [ CIT v. Kameshwar Singh, (1933) 1 ITR 94, 106 ( PC) ; Seth Nathram Munnalal vs. CIT, (1954) 25 ITR 216, 220 (Nag)]. Assessment based on mere conjecture, surmise or suspicion or irrelevant material is unsustainable in law [see, Dhirajlal Girdharilal vs. CIT, (1954) 26 ITR 736 (Hon'ble Supreme Court) ; Dhakeshwari Cotton Mills Ltd vs. CIT, (1954) 26 ITR 775 (SC) ; Lalchand Bhagat Ambica Ram v. CIT, (1959) 37 ITR 288 ( S. C.) Umacharan Shaw & Bros. vs. CIT, (1959) 37 ITR 271 ( S.C.); Omkar Salary Mohd. Sait v.
CIT, (1959) 37 ITR 151 (S.C.).
The jurisdictional High Court of M.P. I CIT vs. Achal Alloys Pvt.Ltd., 218 ITR 46 (MP) had also held that :"Why should every exercise begin with mistrust or no trust ? Law lives on logic and hence any illogicality resting on 98
-: 99: -
suspicions/technical inferences must be spurned."
In the following decision of jurisdictional High Court of M.P., though relates to block assessment, but it applies with equal force to the amended Law, in which, it was held as under :-
"On a perusal of amended and un-amended provisions and CBDT Circular, we are of the considered view that there has been no specific effect as far as this facet is concerned - Emphasis has been given on the fact evidence must have been found during search and only thereafter, the question of gathering any information would arise based on search, inquiry."
CIT vs. Khushalchand Nirmal Kumar,
(2003)183 CGTR 503 (MP).
5. Following recent decisions of Hon'ble
Jurisdictional Tribunal also buttress this view 99
-: 100: -
that even in the amended new law u/s 153A addition has to based on some evidence and not on surmises & conjectures.
Assessment in Search - U/s 153A of the Income-tax Act, 1961, - Law house hold withdrawals - Held - No incriminating material found during course of search - Addition is purely on conjectures - deleted.
Mahesh Kumar Singhal vs. DCIT, (2007) 9 ITJ 682 (Indore).
6. 6. The addition made by the Assessing Officer is based on surmises and guess work and on this point case of Dhakeshwari Cotton Mills vs. CIT, (1954) 26 ITR 775 ( S.C.) may be referred to , in which held :-
"IN making an assessment u/s 23(3) of the Indian Income Tax Act, the ITO is not fettered by the technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted 100
-: 101: -
as evidence in a court of law, but the ITO 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 bare suspicion to support the assessment u/s 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT, Punjab, (1944) 12 ITR 393." (p. 776).
7. In case of Sivan Pillai vs. CIT, 34 ITR 328 and CAG vs. M. G. Cheiran, 117 ITR 371 held - ITO fixed the price of paddy at a rate higher than that fixed under Kerala paddy order - no finding that assessee has sold paddy at higher rate - there could be no presumption in favour of illegality of transaction-possibility of assessee getting higher price would be a 101
-: 102: -
matter of pure conjecture - ITO cannot take cognizance of sale at higher price.
8. In case of there being no evidence found during survey regarding sale of sludge and there being evidence that "sale of sludge" was only used as vehicle to declare additional income as per understanding between the survey officers and the assessee, AO was not justified in making an addition of Rs. 50 lakhs that account for the period subsequent to the date of survey.
ITO VS. Lanyard Foods Ltd., (2007) 112 TTJ (Mum)334.
9. As already submitted, if the assessee was doing mixing or adulteration at such unbelievable scale, his dealership should have been terminated till now we requested the AO to enquire form the oil company regarding quality and quantity of products sold by the assessee, but the same was not done by the 102
-: 103: -
Assessing Officer. Now we have obtained certificates from oil company proving that we maintain qualitative and quantitative controls and despite various surprise checks made by them, no deficiency of the sort was ever found and no action was ever taken your appellant."
60. By the impugned order, the ld. CIT(A) deleted the addition after having following observations :-
"I have considered the submissions of the AR and findings of AO. I find that the addition is made on unproved unilateral allegation of the AO primarily because as per the AO, there was variation in stock as per meter reading recorded in the Retail Outlet Sales Register vis-à-vis stock as per dip (on physical verification ). He also alleged that the appellant was involved in doing adulteration. This issue has been dealt by me in detail while dealing ground no. 5 of A.Y. 1999-2000 because the issue had interconnection, interlacing and bearing on the 103
-: 104: -
issue of gross profit, for which, separate addition has been made by the Assessing Officer. In my decision, ground no. 5 of assessment year 199-- 2000, which is adjudicated by me simultaneously, I have given detailed reasoning as to why the allegations of the AO were incorrect and not supported by any corroborative evidence brought on record. The variation in stock as per Stock Register and as per actual dip on physical verification was explained to the AO by filing amended chart, which contained human error done by the illiterate staff of the appellant. The AO verified this chart and did not find any falsity therein. As regards allegation of AO about the mixing of solvent/kerosene, I have already observed that not even a single rupee purchase of solvent/kerosene was found despite extreme step of search. I have also held that had the assessee doing adulteration on such mass level, as claimed by AO, his dealership would have been terminated long back. But, on the contrary, Oil 104
-: 105: -
Company ( a Government Company ) has given clean chit to the appellant regarding qualitative and quantitative controls exercised by him. Moreover, it cannot be lose sight of that it is a search case and had the assessee been involved in adulteration at such large scale, he must have amassed huge wealth which could have been found either in kind or coil during the course of search. But, nothing of that sort has been found. Under these circumstances, the assessee cannot be burdened with such huge addition simply on the basis of the personal suspicion, guess, surmises and conjectures. He cannot be taxed with such heavy additions solely on the basis of public rumor as illegitimately done by the Assessing Officer. My decision in ground no. 5 of assessment year 1999- 2000 is elaborate on the point. In view of all this, I am of the considered opinion that such addition cannot be sustained and I, therefore, proceed to delete the addition of Rs. 9,06,406/- made in 105
-: 106: -
ground no. 24 and the addition of Rs. 48,56,630/- made in ground no. 25. The appellant gets a relief of Rs. 57,63,036/- ( 9,06,406 + 48,56,630) and these grounds are allowed."
61. We have considered the rival contentions and found that the addition was made by the Assessing Officer on the allegations that there was variation in stock as per meter reading recorded in out let sales register. This issue has been considered by the ld. CIT(A) and by us in the assessment year 1999-2000, while deciding the issue regarding trading addition. Since the issue has inter-action, inter-lacing and bearing on the issue of gross profit, for which separate addition has been made by the Assessing Officer we have followed the same reasoning. We found that the detailed reasoning has been given by the ld. CIT(A), while controverting the finding of the AO with regard to these allegations. The ld. CIT(A) has also recorded a finding that variation in stock as per the stock register and as per actual dip on physical verification was explained by the assessee by filing amended chart, which contained human error done by the illiterate staff 106
-: 107: -
of the assessee. The ld. CIT(A) also found that the AO has verified this amended chart and did not find any falsity therein. With regard to allegations regarding mixing of kerosene in the petrol, the ld. CIT(A) observed that not even a single rupee purchase of kerosene was found despite extreme step taken by the search party. The ld. CIT(A) also observed that it was a search case and had the assessee been involved in adulteration, something could have found either in the search proceedings or on subsequent inquiry. The finding recorded by the ld. CIT(A) at page 14 has not been controverted, we, therefore, do not find any reason to interfere in the same. Accordingly, the ground taken by the Revenue for deletion of addition on account of adulteration in petrol and diesel are dismissed.
62. In the assessment year 2005-06, the Revenue is aggrieved for deletion of addition of Rs. 17,64,996/- on account of excess payment/receipt. In this regard, we found that during the course of survey, the AO found that cash book was written up to 1.4.2004 to 1.11.2004. In this cash book, complete day to day sales and expenditure was recorded and 107
-: 108: -
ledger was also prepared. The AO also found that there are regular deposits in the Bank, which are shown in the cash book. The AO has fully discussed this issue at page nos. 27 to 28 in para 13.
63. By the impugned order, the ld. CIT(A) deleted the addition after having following observations :-
"I have duly considered the findings of AO and submission of the appellant. I have seen the variation in entries, in the incomplete as well as complete books of account. I find that the books of account found during survey were having incomplete entries. For instance, most of the entries for the month of October 2004 made in the complete cash book were not found recorded in the incomplete cash book. Opening cash balance in both the books of account was similar at Rs. 41,216.71 and correct, and the variation was only due to some entries of relevant period, which were not accounted for in the incomplete cash book found during survey. I am, thus, of the considered view that the disallowance made by AO was totally unjustified. First of all, the appellant had 108
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explained the difference, entry by entry, to the AO by producing both the books of account - incomplete as well as complete. But in any case, since both the books of account were either in the custody of the AO or stood produced before him, it was the heavy duty of AO to pin point individual entries, which were not tallying between both the books of account - complete as well as incomplete. If the entries, which were subsequently accounted for in the complete books of account, were not found properly supported by evidence or voucher, only then some addition could have been warranted. On the top of every thing, since the difference in the incomplete and complete books of account stands reconciled and the same is supported by proper entries not controverted by the Assessing Officer, no addition was called for particularly in view of the fact that cash as per complete cash book was found to be positive which has not been disputed by AO. I therefore have no hesitation in deleting the addition made by the Assessing Officer on the basis of such short cut, as adopted by him. The addition of Rs. 109
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17,64,996/- is therefore deleted. The appellant gets a relief of Rs. 17,64,996/- and the appeal stands allowed."
64. We have considered the rival contention and found that books of account found during course of survey was having incomplete entries, which was completed thereafter. The ld. CIT(A) found that variation was only due to the fact that some entries of the relevant period was not accounted for in the incomplete cash book found during survey. The ld. CIT(A) also found that during course of assessment, the assessee has explained the difference, entry by entry by producing both the books of account i.e. complete as well as incomplete. As per CIT(A), if the entries, which were subsequently accounted for in the incomplete books of account, were not found properly supported by the evidence or voucher only then some addition could have been warranted by recording a finding that since difference in incomplete and complete books of account stands reconciled and same was supported by proper entries not controverted by the Assessing Officer, no addition was called for, particularly in view of the fact that cash as per complete cash book was found to be 110
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positive, which has not been disputed by the Assessing Officer. Nothing was brought to our notice to persuade us to interfere in the findings recorded by the ld. CIT(A). We, therefore, do not see any reason to interfere in these findings resulted into deletion of addition made by the Assessing Officer on account of excess payment/receipts.
65. Next issue relates to addition in respect of cash of Rs. 6 lakhs found during survey.
66. The AO has discussed this issue at page 33 & 34 at para 15. by the impugned order, the ld. CIT(A) deleted the addition after having following observations :-
"I have considered the submissions of the AR and the observation of AO. In my opinion, the addition made by AO was erroneous and unsustainable. The observation of the AO that it was not the same money received as advance against sale of plot, which was found at the premises of the assessee, is totally presumptive and conjectural because the search took place on 02-11-2004 and original agreement to sale dated 29.10.2004 was found and seized during the course of search, the said 111
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agreement to sale clearly contained the fact of giving cash advance of Rs. 6,00,000/- to them against the proposed sale of aforesaid plot. The observations of the AO and the submissions of the appellant have been considered by me. In my opinion, the addition is not sustainable. It is not in dispute that during the course of search, an original agreement to sell was found for selling 3,000 sq.ft. of plot registered in the name of wife of the assessee Smt. Satinder Kaur and 5,700 sq.ft. in the name of Shri Gurudev Singh, father-in-law of the assessee. The said agreement to sell was joint for selling both the properties. In the said agreement Rs. 6,00,000/- was shown as having given as advance. This fact has not been disputed or controverted by AO. His assertion was that since the assessee had declared Rs. 6,00,000/- as his undisclosed income included in total declared undisclosed income Rs. 70,00,000/-, the same should have been treated as his undisclosed income. Another limb of his argument was that since out of the total 8,700 sq.ft. of plot agreed to be sold, major area of plot admeasuring 5,700 sq.ft. belong 112
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to Shri Gurudev Singh, father in-law of assessee,the amount of advance received should have gone to Shri Gurudev Singh and not to wife of the assessee Smt. Satinder Kaur. He also stated that in his statement u/s 132(4), the assessee had specifically accepted the amount of Rs. 6,00,000/- as his undisclosed income and he never stated that his wife had received such amount. As regards the surrender of Rs. 6,00,000/- included in total surrender of Rs. 70,00,000/- made by appellant, I find that the appellant has already retracted form the total surrender of Rs. 70,00,000/- on the ground that the same was done under coercion and intimidation and that whatever income will come after verification of papers and documents, the same shall be declared in the return of income. In my opinion, since the surrender was not made or quantified with reference to any documents or evidence, the same has no evidentiary value because even otherwise the same stands retracted later on. Hence this limb of the argument of AO loses its significance. Moreover, I find that a specific query was put to assessee 113
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in the statement recorded u/s 132(4) during the course of search on 04-11-2004 on page 10 regarding the above agreement to sell dated 29.10.2004 and particularly regarding the cash advance of Rs. 6,00,000/- taken by his wife Smt. Satinder Kaur and father in-law Shri Gurudev Singh. In reply to the said query, he categorically explained in loud and clear terms that his wife and father in-law had made an agreement for sale of aforesaid plots to the above named parties for which they have taken cash advance of Rs. 6,00,000/-. Moreover, the appellant stated before AO that both the buyers of the plot viz. Shri Manohar Lal Vaswani and Mr. Naresh Kumar informed him that their statements were recorded by investigation wing and they have confirmed to have given aforesaid cash advance of Rs. 6,00,000/- to his wife and father in-law in pursuance to above agreement. The appellant also requested for the copy of the said statements to be supplied to him but it appears that the same has not been supplied to him. It may also be noted the fact that at the time of search no efforts were made in 114
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this matter by the search party to take the statement of wife of appellant Smt.Satinder Kaur and to examine her about the said deal though she was very much present at the time of search. Further, regarding the argument of AO that since major portion of plot was belonging to Shri Gurudev Singh, father-in-law of the appellant, the advance should have gone to Mr.Gurudev Singh an not to wife of the assessee Smt. Satinder Kaur. In my opinion, this argument of AO is far from being practical and is superfluous. This is because Smt. Satinder Kaur is own daughter of Shri Gurudev Singh and Shri Gurudev Singh was out of station at the relevant point of time, it is quite feasible and practicable that the money would have been kept with Smt. Satinder Kaur. This aspect of the case also needs to be given due importance that the agreement to sale was dated 29.10.2004 and search took place on 02.11.2004 i.e. just 3-4 days back. This fact ostensibly repels the contention of the AO that it was not the same money which was found at the premises of the assessee during the course of search particularly in view 115
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of the fact that the AO has not brought on record any corroborative evidence that the cash advance received by Smt. Satinder Kaur and Shri Gurudev Singh pursuant to sale agreement found during the course of search have been utilized by them elsewhere for some other purposes. For this proposition, I am fortified by the decision of CIT v. Kulwant Rai, (2007) 163 Taxman 585 ( Delhi HC) cited by the appellant. In view of this, I am of the considered opinion that the addition made by AO cannot be sustained because the same is resting solely on his suspicion and surmises not supported by any cogent evidence, and hence I am constrained to delete the same. The appellant gets a relief of Rs. 6,00,000/- and the appeal is allowed."
67. We have considered the rival contention and found that search took place at the assessee's premises on 2.11.2004, wherein original agreement of sale dated 29.10.2004 was found and seized. This agreement clearly contained the fact of giving cash advance of Rs. 6 lakhs to the assessee against the proposed sale of plot. The ld. CIT(A) has 116
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also recorded a finding that during course of search original agreement to sale was found for selling 3,000 sq.ft. of plot registered in the name of wife of assessee, Smt.Satinder Kaur and 5700 sq.ft. in the name of Gurudev Singh, father in-law of the assessee. The agreement so found was joint for selling both the properties. In the said agreement, cash payment of Rs. 6 lakhs was clearly shown as advance. The addition was made by the Assessing Officer merely on the plea that cash found during course of survey was not the same money, which was received as advance against sale of plot. The detailed finding recorded by the ld. CIT(A) at pages 20 & 21 has not been controverted. We, therefore, do not find any reason to interfere in the order of CIT(A) for deleting this addition.
68. Next ground relates to addition in respect of advance of Rs.1.50 lakhs given to Shri Ramesh Sharma.
69. It has been discussed by the Assessing Officer at page 34, para 10 by observing that it is an undisclosed investment for advance given to Shri Ramesh Sharma. The AO has made the addition. By the impugned order, the ld. CIT(A) deleted the same after observing as under :-
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"I find that during the search no money receipts or hundies have been recovered which could support the allegation of the AO that the appellant has given loan to Mr. Ramesh Sharma nor the AO has brought on record any corroborative evidence to support his assertions. Also, even notings of any sort were found suggesting lending of loan to Mr. Ramesh Sharma. The only way out under these circumstances left with the AO was that he should have examined Mr. Ramesh Sharma to unearth the truth; but the same appears to not have been done despite the request of the appellant to summon him u/s 131. As regards, requisite balance not being in the account of Mr. Ramesh Sharma at the relevant point of time, I find it difficult to accept that the same can be a basis to make the impugned addition. This may be relevant for proceedings in some other Act but no definitely under the Income Tax Act. In view of this, I find my self unable to agree with AO because suspicion of the AO however 118
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strong, may not be a basis to sustain the addition so made by him. I am therefore forced to delete the addition. The appellant gets a relief of Rs. 1,50,000/- and the appeal stands allowed."
70. We have considered rival contentions and found that during search. However, a post dated blank cheques dated 6.2.2005 amounting to Rs. 1.50 lakhs signed by Shri Ramesh Sharma was found during search. By observing that same has not been recorded any where in the books of account, the AO made the addition. In this regard, reply of the assessee was that aforesaid cheques was given by Shri Ramesh Sharma as security deposit against further purchase of diesel/petrol.
Even at the time of search, this statement was recorded. No money receipts or hundies were recovered to support the AO's observation that the assessee has given loan to Shri Ramesh Sharma. Even after search, no corroborative material was brought on record to support this allegation of the AO. The AO has also not examined Shri Ramesh Sharma to unearth the truth despite the request of the assessee to issue summon to him u/s 131. In view of this factual position, we do not see 119
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any reason to interfere in the order of ld. CIT(A) for deleting the addition.
71. The other grounds taken by the Revenue in all the other assessment years under consideration are the same, for the reasons discussed by us hereinabove, while dealing with assessment years 1999-2000, 2000-01 and 2001-02, we confirm the action of the CIT(A) except with respect to the addition made on account of house hold expenses and expenditure on commission payment
72. With regard to the cross objection filed by the assessee on account of part of the additions retained by the ld.
CIT(A), we have already discussed this issue while deciding the Revenue's appeal with regard to these additions/disallowances in all the years under consideration. Nothing was brought to our notice by the ld. Authorized Representative to persuade us to deviate from the findings given by the ld. CIT(A) for retaining part additions/disallowances in the respective years. Accordingly, we do not find any merit in the cross objection filed by the assessee. The same are, therefore, dismissed in all the years under consideration.
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73. In the result, the cross objection filed by the assessee in all the years under consideration are dismissed.
I.T(SS).A.Nos.230 to 236/Ind/2008 :
74. These are the appeals filed by the revenue and cross objection by the assessee against the order of the learned Commissioner of Income Tax (Appeals) for the Assessment Years 1999-00 to 2005-06 in the matter of order passed u/s 153C of the Act.
75. The facts in brief are that the assessee is an Individual and is wife of Shri Kulwant Singh, mainly engaged in the business of petrol pump, trading of lubricant oil, truck plying and also having rental and agricultural income. The search action was carried out at the residential premises of husband of the assessee, Shri Kulwant Singh on 2.11.2004 which was completed on 4.11.2004. However, during the course of search proceedings, no money, jewellery or other valuable articles or things or any other material of any kind was found even for worth name. Similarly, no undisclosed or disproportionate movable or immovable assets were found 121
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during the course of search or thereafter. During the course of proceedings before the Assessing Officer the assessee raised objection for the proceedings u/s 153C/153A and asked the question before the A.O. as under :-
"Before proceeding to make assessment u/s 153C/153A, kindly let us know the satisfaction arrived at by your goodself for assumption of jurisdiction u/s 153C of the Act. This may kindly be treated as our fundamental objection against the assumption of jurisdiction in this case, which, we most humbly submit, is bad in law ."
76. The Assessing Officer did not respond to the objection raised by the Assessee and proceeded to make the assessment u/s 153C. The same was submitted before the CIT(A) by the assessee but the learned Commissioner of Income Tax (Appeals) failed to appreciate the ground raised by the assessee.
77. For the assessment year 1999-00 the Assessing Officer completed the assessment u/s 153C wherein various additions were made on account of agricultural income, cash credit, interest expenses, cash credit of Shri Kulwant Singh, 122
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low gross profit, cash deposited in S.B. Account No. 6864 and disallowance of certain expenses.
78. By the impugned order, after giving detailed findings with respect to each and every addition, the learned Commissioner of Income Tax (Appeals) deleted some of the additions/disallowance and the revenue is in further appeal before us and assessee has also filed cross objections.
79. The assessee has also taken a ground before us with regard to legality of assumption of jurisdiction u/s 153C of the Act. It was contended by the ld. Counsel for the assessee that no satisfaction was recorded by the Assessing Officer in case of searched person, Shri Kulwant Singh, to the effect that no document was found during the course of search which indicates undisclosed income of the assessee. He further contended that assumption of power by the Assessing Officer u/s 153C of the Act for framing the assessment is subject to the condition that the Assessing Officer assessing the searched party is satisfied that any document, bullion or jewellery or books of accounts or documents seized from the premises of the searched person pertained to some person 123
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other than the person referred to in section 153A of the Act that the books of accounts or documents or assets so seized were requisitioned shall be handed over by the Assessing Officer of the searched person to the Assessing Officer having jurisdiction over such other person. He further submitted that the opening words of section 153C of the Act speak that not- with-standing anything contained in sections 139, 147, 149, 151 and 153 where the Assessing Officer is "satisfied" that any money, bullion, jewellery or books of accounts or documents seized or requisitioned belong to a person other than the person referred to in section 153S, meaning thereby the Assessing Officer is to record satisfaction to the effect that such documents, etc. have not belonged to the searched person but to some other person referred to in section 153A of the Act. As per the ld. Counsel for the assessee, no such satisfaction was arrived at by the Assessing Officer, therefore, the assumption of jurisdiction u/s 153C of the Act was not justified. For this purpose, he relied upon the decision of the coordinate Bench in the case of Chirchind Hydro Power order dated 29th December, 2010.
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80. On the other hand, contention of ld. CIT DR was that in view of decision of Chhatisgarh High Court reported at 17 ITJ 446, since the AO who has initiated proceedings u/s 153A and 153C is the same , there is no requirement of handing over the material seized by department, therefore, no satisfaction was required to be recorded before assuming jurisdiction u/s 153C of the Income-tax Act, 1961.
81. On the merits of the addition, contention of the ld.
Counsel for the assessee was that the learned Commissioner of Income Tax (Appeals) has given detailed findings with respect to each and every addition made by the Assessing Officer and thereafter deleted the same.
82. On the other hand, the learned CIT DR relied upon the order of the Assessing Officer, in so far as additions were made on merits.
83. We have considered the rival contentions, gone through the orders of the authorities below and find from record that the addition of Rs. 40,000/- was made on account of agricultural income. This ground is the same as dealt with in the case of Shri Kulwant Singh for the assessment year 125
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1999-00. As the facts are the same, we follow the same reasoning and conclusion as arrived at by us in the case of Shri Kulwant Singh.
84. In the result, this ground of the revenue stands dismissed.
85. The next issue relates to deletion of addition of Rs. 2,53,500/- on account of unexplained cash credit. The observation of the Assessing Officer was that the assessee has simply furnished stereo-type confirmation and PAN. Accordingly, he added the amount in the assessee's income.
86. By the impugned order, the learned Commissioner of Income Tax (Appeals) has deleted the addition after having the following observations :-
" The submissions of the AR and the observations of the A.O. have been duly considered by me. In my opinion, the additions made by the A.O. is not called for and hence cannot be sustained. This is because first of all no material was found during search or brought on record by the A.O. thereafter that these 126
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credits are non-genuine or these are the funds of appellant circuitously introduced as cash credit. The appellant filed confirmations of all the creditors, who are regular tax payers bearing PAN. The loan was received through banking channels. Under these circumstances the identity, capacity and genuineness of the loan were proved by the appellant and the initial onus cast on him was fully discharged. Naturally, the appellant cannot be expected to prove the source of source. In this view of the matter, I am of the considered view that the impugned cash credit cannot be added as income of the assessee u/s 68..."
87. We have considered the rival contentions, gone through the orders of the authorities below and find that the assessee has submitted confirmation letters/affidavits, complete address, cheque number and GIR/PAN to prove the genuineness of the cash creditor. The learned Commissioner 127
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of Income Tax (Appeals) deleted the addition after recording detailed findings as above wherein he observed that the assessee has discharged initial onus cast upon him. The finding recorded by the learned Commissioner of Income Tax (Appeals) has not been controverted. We, therefore, do not find any reason to interfere with the same.
88. The next grievance of the revenue relates to deletion of interest expenses in respect of cash credits discussed above. As we have confirmed the action of the learned Commissioner of Income tax (Appeals) in deleting the addition on account of cash credit, we confirm the action of the learned Commissioner of Income tax (Appeals) in deleting the add in respect of interest paid to these parties.
89. The Assessing Officer has made addition of R.1,28,000/- on protective basis on account of cash credit in the name of Janta Transport, a proprietorship of Shri Kulwant Singh. We have already discussed in detail this issue in the case of Shri Kulwant Singh for the assessment year 1999-00. Accordingly, the action of the learned Commissioner of Income tax (Appeals) is confirmed.
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90. The next issue relates to addition on account of gross profit amounting to Rs. 3,99,238/-. The assessee is involved in the same line of business as in the case of Shri Kulwant Singh. We have already discussed in detail the addition made by the Assessing Officer in the case of Shri Kulwant Singh for the assessment year 1999-00. As the facts and circumstances are the same, we follow the same and confirm the action of the learned Commissioner of Income tax (Appeals).
91. In the result, the appeal for the assessment year 1999-00 is dismissed.
A.Y. 2000-01-
92. The additions on account of agricultural income amounting to Rs. 40,000/-, unexplained cash credit of Rs. 1,28,000/-, gross profit addition of Rs. 3,99,238/-, disallowance of expenses on account of evaporation amounting to Rs. 37,992/- are the same as discussed by us in the case of Shri Kulwant Singh for the assessment year 1999.00. We respectfully follow our same reasoning and decision in the case of Shri Kulwant Singh for the assessment year 1999-00 129
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in respect of these grounds and confirm the action of the learned Commissioner of Income tax (Appeals).
93. Similarly, the disallowance of interest on cash credit has already been dealt with in the assessee's case for the assessment year 1999-00. As the facts are the same, we follow our decision in the assessee's own case for the assessment year 1999-00 and confirm the action of the learned Commissioner of Income tax (Appeals) in deleting the disallowance of interest paid on these credits.
94. The addition of Rs. 4,40,000/- on account of unexplained cash credit from Jamuna Prasad and Shri Kulwant Singh Rs. 1,13,940/-has been deleted by the learned Commissioner of Income tax (Appeals) after recording detailed findings. This ground is the same as dealt with in the assessment year 1999-00 in the assessee's own case. Following the same reasoning and conclusion, we confirm the action of the learned Commissioner of Income tax (Appeals). 2001-02
95. The grounds taken by the revenue with regard to agricultural income, interest expenses, unexplained cash 130
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credit, gross profit addition, disallowance of evaporation expenses are the same as discussed in the assessee's own case for the assessment year 1999-00 as well as in the case of Shri Kulwant Singh for the assessment year 1999-00. We follow the same reasoning, proposition and confirm the action of the learned Commissioner of Income tax (Appeals).
96. The ground with regard to unexplained cash credit of Shri Kulwant Singh amounting to Rs.1,40,610/- is the same as dealt with in the assessment year 1999-00 in the case of Shri Kulwant Singh. We follow the same reasoning and confirm the action of the learned Commissioner of Income tax (Appeals).
97. The grounds relating to gross profit addition and disallowance of evaporation expense are the same as discussed by us in the case of Shri Kulwant Singh for the assessment year 1999-00. We follow the same reasoning, proposition and confirm the action of the learned Commissioner of Income tax (Appeals).
98. The next grievance of the revenue relates to addition of Rs. 1,21,000/- on account of purchase of shop in Krishna 131
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Complex for Rs. 1,21,000/-. The Assessing Officer made the addition on the belief that the assessee was not having sufficient cash balance. The learned Commissioner of Income tax (Appeals) deleted the addition by observing that the assessee was having overall availability of cash with her as per the cash flow statement furnished before the Assessing Officer. As discussed in the case of Shri Kulwant Singh for the assessment year 1999-00, following the same reasoning and the findings given by the learned Commissioner of Income tax (Appeals) with respect to the correctness of cash flow statement submitted by the assessee, we do not find any reason to interfere with the order of the learned Commissioner of Income tax (Appeals) in deleting the addition by accepting the cash flow statement submitted by the assessee wherein the assessee has proved the availability of funds on the relevant dates.
99. Similarly, the addition of Rs. 1,40,000/- on account of capital introduced by the assessee in M/s Janta Sales & Services was deleted by the learned Commissioner of Income tax (Appeals) by relying upon the cash flow statement 132
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furnished by the assessee. As the overall cash flow statement indicating availability of cash has been accepted by the learned Commissioner of Income tax (Appeals), which has not been controverted, we do not find any reason to interfere with the order of the learned Commissioner of Income tax (Appeals) for such deletion of addition of Rs.1,40,000/-. A.Ys. 2002-03, 2003-04, 2004-05 and 2005-06:
100. The deletion of addition on account of agricultural income, interest expenses, gross profit addition, disallowance of evaporation expenses, amount deposited as capital, amount deposited in SB account Rs. 6668/- have already been discussed by us in earlier year. As the facts are the same and detailed findings have been given by the learned Commissioner of Income tax (Appeals), we confirm his action.
101. The next ground for the assessment year 2002-03 relates to deleting the disallowance of Rs.20,000/- out of conveyance and general expenses. The learned Commissioner of Income tax (Appeals) has deleted the disallowance by observing that the Assessing Officer has not pointed out any expenditure of unverifiable nature. Just by mentioning that 133
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the assessee has incurred operative and administrative expenditure of Rs. 15,956/- and sales promotion expenses of Rs. 23,906/-, the Assessing Officer on a lump sum basis disallowed Rs. 20,000/- by stating that the genuineness of expenditure cannot be verified. We find that the assessee has furnished all the supporting evidence and the learned Commissioner of Income tax (Appeals) has observed that none of the expenditure was found to be unverifiable by the Assessing Officer and that books of accounts were duly audited and produced before the Assessing Officer which were examined by him. Under these circumstances, we do not find any infirmity in the order of the learned Commissioner of Income tax (Appeals) in deleting the disallowance and confirm the same.
102. The revenue has also challenged the deletion of disallowance of Rs. 10,000/- out of conveyance and general expenses. In this regard, we find that personal element of expenses on conveyance cannot be ruled out, accordingly, there was nothing wrong in the order of the learned AO disallowing a sum of Rs.10,000/- out of such expenses. 134
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103. In the result, both the appeals are allowed in part.
104. In the assessment year 2005-06 the revenue is also aggrieved by the deletion of disallowance of Rs. 35,000/- on account of conveyance and general expenses. By observing that nothing was pointed out by the Assessing Officer as unverifiable expenses, the learned Commissioner of Income tax (Appeals) has deleted the same. Keeping in view personal element in such expenses, we confirm the disallowance to the extent of Rs. 10,000/-.
105. For the assessment year 2005-06 the revenue has also taken the ground with regard to deletion of addition of Rs. 2,67,718/- on account of unaccounted sales and adulteration in diesel. This ground is the same as dealt with in the case of Shri Kulwant Singh for the assessment year 2004-05. Following the same reasoning, we confirm the action of the learned Commissioner of Income tax (Appeals).
106. The addition made on account of deposit in bank account as taken in various years is duly covered by the reasoning given by CIT(A) with regard to correctness of cash flow statement submitted by the assessee before the lower 135
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authorities in the case of Shri Kulwant Singh in the assessment year 1999-00 and also in the case of this assessee. Respectfully following the same, we confirm the action of the learned Commissioner of Income tax (Appeals) in deleting the addition made on account of cash deposited in bank account which was duly explained in the cash flow statement furnished by the assessee.
107. In the result, all the appeals of the revenue in the case of Satinder Kaur are allowed in part, in terms indicated hereinabove.
108. With regard to the cross objection filed by the assessee wherein part of the disallowances/additions retained by the ld. CIT(A) has been challenged, nothing was brought to our notice by the ld. Authorized Representative to persuade us to deviate from the findings given by the ld. CIT(A), we, therefore, do not see any merit in the cross objection filed by the assessee. Accordingly, cross objections in all the years under consideration are dismissed.
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I.T(SS).A.Nos.56/Ind/2008 & C.O.No.37/Ind/2008 :
109. This is an appeal filed by the Revenue and cross objection filed by the assessee against the order of CIT(A) for the assessment year 2005-06.
110. The facts, in brief, are that the assessee is an individual and is daughter of Shri Kulwant Singh. There was a search at the residential premises of the father of the assessee Shri Kulwant Singh on 2.11.2004. Before the AO, the assessee raised objection for proceedings u/s 153C and asked the AO to show satisfaction arrived at for assuming jurisdiction u/s 153C. However, the AO did not respond to the objections raised by the assessee and proceeded to make assessment u/s 153C. The same was submitted before the CIT(A) by the assessee, but he did not appreciate the ground raised by the assessee. Therefore, in the cross objection, the assessee is aggrieved for assumption of jurisdiction u/s 153C.
111. In the course of assessment, the AO has made addition u/s 68 in respect of cash credit by stating that the assessee has not furnished the Bank statement of any persons 137
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and considered the assessee has having failed to prove the genuineness of the credit, capacity of the creditors.
112. By the impugned order, the ld. CIT(A) deleted the addition by observing as under :-
"The submissions of the AR and the observations of the AO have been duly considered by me. In my opinion, the additions made by the Assessing Officer are not called for and hence, cannot be sustained. This is because first of all no material was found during search or brought on record by the Assessing Officer thereafter that these credits are non-genuine or these of the funds circuitously introduced as cash credit. The appellant filed confirmations/affidavits of all the creditors, who are regular tax payers bearing PAN. The loan was received through banking channels. Under these circumstances, the appellant proved the identity, capacity and genuineness of the loan and the initial onus cast on him was fully discharged. The appellant cannot be expected to prove the source of source. In this view of the matter, I am of the considered view that the impugned cash credit cannot be added as income of the assessee u/s 68.--"
113. Against the above order, the Revenue is in further appeal before us.
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114. We have considered the rival contentions and gone through the documents placed in the paper book and found that the assessee has ]discharged its initial onus by furnishing confirmatory letters/affidavits in support of the fact that money belonged to them. In the confirmation letters/affidavits, complete address, cheques numbers GIR/PAN numbers were also mentioned. The ld. CIT(A) has deleted the same by observing that by furnishing all these documents before the AO, the assessee has proved the identity and capacity and genuineness of the loans and, thus, the initial onus cast on him was fully discharged. The ld. CIT(A) further observed that the assessee cannot be expected to prove the source of the source. This finding of CIT(A) is as per material on record and do not require any interference.
115. Addition made on account of low gross profit, evaporation expenses are the same as dealt with in case of Shri Kulwant Singh in the assessment year 1999-2000. Following the same reasoning and conclusion, we confirm the action of the CIT(A) for deleting the addition on account of gross profit and evaporation expenses. 139
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116. With regard to addition on account of conveyance and general expenses amounting to Rs. 30,000/-, which has been deleted by the ld. CIT(A), we find that personal element in such expenses cannot be ruled out. Accordingly, we confirm the addition of Rs. 10,000/- on this account.
117. The AO has also disallowed salary expenses of Rs. 1,41,700/- by stating that salary is excessive and not supported by the evidence. The ld. CIT(A) deleted the same by observing as under :-
"I have perused the AR's submission and findings of the AO. In my opinion, the additions made by the Assessing Officer were unwarranted and uncalled for. The reasons adduced by the Assessing Officer for such disallowance are totally irrelevant and superfluous. He has not pointed out any part of the salary, which was not supported by vouchers. Nor he could bring out a case that the salary paid to any person was exorbitant. Books of account of the assessee are audited and supported by the vouchers. I agree that there is no provision in law in permitting allowance of salary in proportion to sale, as done by the Assessing Officer."
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118. We have considered the rival contentions and found that expenditure on salary was incurred wholly and exclusively for the purpose of business. The ld. CIT(A) has recorded a finding to the fact that the AO has not pointed out any part of the salary, which was not supported by vouchers nor he could bring out a case that the salary paid to any person was exorbitant, even anything was mentioned in the audited accounts by the auditor. Accordingly,, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance.
119. An addition on account of unaccounted sales and adulteration in diesel, is the same as dealt with in the assessment year 2004-05 in the case of Shri Kulwant Singh. Following the same reasoning and conclusion, we confirm the action of the CIT(A) in this regard.
120. In the result, the appeal of the Revenue is allowed in part.
121. In the cross objection, the assessee has basically agreed for confirmation of addition of Rs. 1,15,450/- on account of alleged bogus credit. We found that during the 141
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course of assessment, the AO found that in Schedule-D of Current Liabilities & provisions filing alongwith the Audit Report, the assessee has shown liability of M/s. Janta Traders at Rs. 1,15,450/-. Assessee was asked to furnish copy of account of M/s.Jantak Traders as to how the above credit balance appeared. But assessee did not furnish any detail in this regard. M/s. Janta Traders is proprietary concern Smt. Harbans Kaur in which no books of account are maintained. On verification of bank account No.19007532 Allahabad Hamidia Road of Smt. Harbans Kaur Prop. M/s. Janta Traders filed alongwith the return for the above assessment year, no transfer of amount to Smt. Kulpreet Kaur or M/s. Fill & Fly was found.
122. Contention of the assessee before the lower authorities was that personal cash flow statement was prepared only for memorandum purpose and non inclusion of the above amount of Rs. 1,15,450/- may be due to over sight of the accountant in preparation of the same. In any case, since the assessee had sufficient cash available with her with 142
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reference to cash flow statement, no addition was called for on this account.
123. The ld. CIT(A) has confirmed the addition. We found that the assessee was unable to produce any evidence in support of its claim. We, therefore, do not see any reason to interfere in the addition so made by the Assessing Officer for which assessee could neither substantiate this stand either before the CIT(A) or before the Tribunal.
124. In the result, the appeal of the Revenue is allowed in part where as the Cross objection filed by the assessee is dismissed.
125. In the result, appeal filed by the Revenue in I.T(SS).A.Nos.57 to 63/Ind/2008 are allowed in part, whereas cross objections No. 40 to 46/Ind/2008 filed by the assessee are dismissed. Appeal filed by the Revenue vide I.T.(SS).A.Nos. 230 to 236/Ind/2008 are allowed in part, whereas the cross objections filed by the assessee in C.O.Nos. 131 to 137/Ind/2008 are dismissed. Appeal filed by the Revenue in I.T.(SS).A.No. 56/Ind/2008 is allowed in part whereas cross 143
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objection filed by the assessee is dismissed in terms indicated hereinabove.
This order has been pronounced in the open court on 29th April, 2011.
Sd/- Sd/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 29th April, 2011. CPU* 8184 144