Income Tax Appellate Tribunal - Panji
Assistant Commissioner Of ... vs Shri Mahesh Bhagwat Chaudhary,, ... on 17 January, 2018
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.629 to 634/PUN/2016
िनधा रण वष / Assessment Years : 2006-07 to 2011-12
ACIT, Central Circle-2,
Nashik .... अपीलाथ /Appellant
Vs.
Shri Mahesh Bhagwat Chaudhary,
11, Swed Bindu,
Shanti Nagar, Yawal Road,
Bhusawal, Dist. Jalgaon - 625201
PAN : AAQPC1999N .... यथ / Respondent
अपीलाथ क ओर से / Appellant by : Shri T. Vijaya B. Reddy
थ की ओर से / Respondent by : Shri Devendra Kulkarni
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 11.01.2018 Date of Pronouncement: 17.01.2018
आदेश / ORDER
PER BENCH :
There are six appeals under consideration involving assessment years 2006-07 to 2011-12. All the appeals are filed by the Revenue against the consolidated order of CIT(A)-12, Pune, dated 25-01-2016.
2. Appeal wise adjudication is given in the following paragraphs. First we take the appeal ITA No.629/PUN/2016 for A.Y. 2006-07. Grounds raised by the Revenue are as under :
"1. Whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing additional evidence under rule 46A whereas the assessee's case is not covered by the exceptions provided under rule 46A of the I.T. Rules.2
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
2. Whether on the facts and circumstances of the case and in law, the ld.CIT(A) was justified in deleting the foreign tour expenses amounting to Rs. 10,000/- by admitting additional evidence under rule 46A of the I.T. Rules, ignoring the fact that the assessee had not furnished the relevant documents in spite of opportunities given during assessment proceedings and despite being given specific instruction?
3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'Disallowance of interest expenditure' to the extent of Rs.1,60,560/- by admitting additional evidence under rule 46A of I.T. Rules, though the entire interest was not substantiated by the assessee during assessment proceedings, despite being given opportunity?
4. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.52,13,333/- being undisclosed investment in properties by admitting additional evidence under rule 46A of the I.T. Rules and not appreciating that the assessee had opportunities to submit the necessary evidence during the assessment proceedings?
3. From the above, it is evident that the Revenue is aggrieved against admitting of the additional evidences by the CIT(A) in violation of Rule 46A of the Income Tax Rules, 1962.
4. Briefly stated relevant facts are that the assessee is a dealer in Piaggio vehicles ( 3w and 4w). There was search and seizure action on the Chaudhari group of cases on 04-10-2011. Assessments were completed u/s.143(3) r.w.s. 153A of the Act. AO made various additions in the assessments and assessed the income for these years as per details given in the table below :
Assessment Returned Assessed
Year income income
2006-07 2,99,429 59,79,140
2007-08 4,15,841 9,13,070
2008-09 1,53,741 7,02,330
2009-10 11,99,778 26,07,330
2010-11 15,48,638 88,00,180
2011-12 13,25,420 1,62,58,260
5. During the proceedings before us and at the outset, in response to the query from the Bench regarding identification of the said additional evidences which was admitted at the back of the AO or in contravention to Rule 46A of the I.T. Rules, 1962, Ld.DR for the Revenue fairly submitted 3 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary that the fact of CIT(A) granting relief to the assessee deleting all the additions on merits admitting the "additional arguments" raised before the CIT(A) for the first time not raised before the assessing authority, amounts to admission of the additional evidences. Therefore, Revenue is in appeal before the Tribunal for adjudication of the issue.
6. In response, Shri Devendra Kulkarni, Ld. AR for the assessee submitted that assessee never filed any evidences per se but only submitted written submissions additionally before the CIT(A) and therefore, there is no contravention of the provisions of Rule 46A by the CIT(A). Hence, the order of CIT(A) should be confirmed in toto and dismiss the grounds of the revenue in this appeal.
7. On hearing both the parties on the issue of existence of any additional evidences per se, with reference to Ground No.1 and others, we find the Ld. AR's reply appears to be correct. For the sake of example, we examined the contents of CIT(A) on the issue relating to Ground Nos. 5 to 6 before the CIT(A) and find the production of books of account was the subject matter qua the submission of additional evidence and furnishing of a letter which is correspondence between the AO and the assessee. In our view, calling for a remand report of the said letter emanated from the office of the AO is not required and it is unwarranted. For the sake of completeness, relevant lines are extracted here as under :
"35.2 . . . . . .The AO was in possession of audited balance sheet and profit and loss account but did not bring any material on record which was gathered during the search or during the assessment proceedings to discard the audited result of the appellant. As regards production of books of account, the appellant contended that AO had kept books of accounts of group concerns for about 2 months without impounding the same. In support appellant had also filed copy of letter received by the office of AO by which books of accounts were produced before the AO. It was also contended that books of accounts of the appellant were also produced and AO had also not permitted personal presence of the AR of the appellant. The assessment year under consideration was not pending at the time of search and the AO was not justified in rejecting the book result without having any material in hand to disturb the concluded assessment in view of the decision of Hon'ble Bombay High Court in case of Murli Agro Products 4 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary (Supra). Addition made of Rs.4,35,741 is therefore deleted and the grounds raised by the appellant are allowed."
8. The above paragraph is evident from the fact that the CIT(A) never admitted any additional evidences which requires remanding to the AO's file. It is merely a letter evidencing the existence of books of accounts in the possession of the AO. When the books of accounts are undisputedly lying with the AO for months, the assessing officer cannot allege that the books of accounts were not furnished by the assessee on this issue of addition of Rs.4,35,741/-, we find the Ld.CIT(A) granted relief on the basis of the binding judgment of jurisdictional Hon'ble High Court.
9. Similar is the case with other additions deleted by the CIT(A). From this point of view, the contravention of the provisions of section 46A of the I.T. Rules, 1962 is not raised on correct facts. Revenue could not demonstrate, atleast one crucial document which goes to the root of the matter admitted by the CIT(A) at the back of the AO and without calling for remand report, if any. Therefore, we are of the view that grounds raised by the Revenue in this appeal have no merit. Since the Revenue fail on this legal issue, all the said grounds raised by the revenue have to be dismissed.
However, on merits also, grounds relating to various additions are being dealt in the following paragraphs.
10. Ground No.2 by the revenue relates to deletion of Rs.10,000/- by the CIT(A) on account of Foreign Travel Expenses.
11. Facts relating to this issue include that during the course of assessment proceedings, the AO noted that assessee and his two sons travelled to Singapore and Australia and incurred Rs.1,66,000/- towards the same. AO called for relevant information from the assessee to 5 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary support the said expenditure. Appellant contended that the foreign tour was sponsored by the insurance companies/principle companies. However, no details were submitted by the assessee before the AO. Therefore, the AO proceeded to make addition of Rs.1,66,000/- on estimation basis as unexplained expenditure. During the First Appellate Proceedings, assessee submitted that the foreign trip was sponsored by Hero Motorcorp Ltd. and furnished a copy of letter dated 26-09-2005 received from the said company. The copy of letter indicates that the expenses to be borne by the dealer. In absence of any documentary evidence towards the expenses incurred on this foreign travel, CIT(A) confirmed the addition of Rs.1,56,000/-. However, the hotel expenses of Rs.10,000/- made by the assessee have only been considered by the CIT(A) as sponsored by Hero Motorcorp Ltd. Thus, the CIT(A) gave part relief to the assessee. Aggrieved with the said relief of Rs.10,000/-, the Revenue is in appeal before us. Assessee is not in appeal against the confirmed addition of Rs.1,56,000/-.
12. After hearing both the sides, we find the reasoning given by the CIT(A) in Para No.5.3 of his order is a well reasoned one. The amount of Rs.10,000/- considered by the CIT(A) on account of hotel expenditure, as having sponsored by the insurance company needs no interference. It is also a fact that AO made the addition only on estimation basis. Regarding the additional evidence, the Ld. AR for the assessee filed the following written submissions :
"The Respondent submits that out of the total addition of Rs.1,66,000/- the CIT(A) has upheld addition to the extent of Rs.1,56,000/- and Rs.10,000/- is allowed on the basis of the copy of letter filed by the respondent which was already submitted to the Ld. AO during the assessment proceedings. Therefore, the question of additional evidence under Rule 46A and calling for the Remand Report from the Ld. AO simply did not arise."
Therefore, the ground raised by the Revenue is dismissed in principle. 6
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
13. Ground No.3 by the revenue relates to disallowance of interest expenditure amounting to Rs.1,60,560/- by the CIT(A).
14. Relevant facts of this issue are that assessee is a partner in M/s. Chaudhari Automobiles. During the year under consideration, assessee received remuneration of Rs.72,000/- and interest on capital of Rs.1,35,394/-. Assessee borrowed some loans from Bank of India and Tapi Society and paid interest of Rs.2,80,378/- and claimed the same as business expenditure. AO rejecting the explanation given by the assessee made addition of Rs.2,80,378/- in the hands of assessee. CIT(A) gave part relief to the assessee. Aggrieved with the order of CIT(A) the Revenue is in appeal before us.
15. On hearing both the sides and on going through the orders of the revenue authorities, we find the AO made addition of Rs.2,80,378/-, the amount which was paid by the assessee as interest on his borrowed loans. Assessee drew the attention of CIT(A) to the balance sheet and the capital account of the assessee and tried to justify the claim of Rs.2,07,394/- as set off of the interest expenditure against the remuneration and interest on capital derived from the firm. Assessee also tried to explain that he has Rs.11,22,205/- as cash in hand and therefore the interest expenditure should be allowed as sufficient interest free funds available with the assessee. The CIT(A) noted since the assessee has only shown total income of Rs.3,20,000/-, the CIT(A) was of the opinion that only Rs.2,00,000/- should be considered as working capital and accordingly, computed the interest paid on borrowings at Rs.13,89,872/- on pro-rata basis which works out to Rs.1,60,560/-. Thus, Rs.1,19,818/- is upheld. Regarding the additional evidence, the Ld. AR for the assessee filed the following written submissions :
7
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary "The Ld.CIT(A) has deleted the said addition on pro-rata basis after taking into consideration the Balance Sheet which was filed before the Ld. AO during the course of assessment proceedings. Since the books of accounts containing the Balance Sheet was duly submitted before the Ld. AO, the question of additional evidence under rule 46A and calling for the Remand Report from the Ld. AO simply did not arise."
Thus, we find the conclusion given by the CIT(A) after taking into cognizance the capital account and balance sheet of the assessee is fair and reasonable and does not call for any interference. As such, we do not find any violation of provisions of section 46A of the Income Tax Rules, 1962. Ground No.3 raised by the revenue is therefore dismissed.
16. Ground No.4 by the Revenue relates to deletion of Rs.52,13,333/- by the CIT(A) as undisclosed investment in properties.
17. Briefly stated relevant facts are that during the course of assessment proceedings in the case of Shri Rajesh Prakash Chaudhari of the group, the AO noted that loan sanctioned by UCO Bank to Shri Rajesh P. Chaudhari against the security of land situated at S.No.240/3A/3B/3C at Sakegaon, standing in the name of the assessee, Shri Bhagwat M. Chaudhari and Shri Namdev M. Chaudhari. For the purpose of loan, the valuer has valued the property at Rs.1,87,68,000/- as on 04-02-2006. AO gave 20% allowance on this assessed value being higher than the actual investment and the cost price of the property was thus taken at Rs.1,56,40,000/-. Thus, 1/3rd of the amount works out to Rs.51,13,333/-. In absence of any details about the investment in the property, in the balance sheet of the assessee, the AO proceeded to make addition of Rs.51,13,333/- in the hands of the assessee. In the First Appellate Proceedings, CIT(A) deleted the addition. Aggrieved with the said order of CIT(A) the Revenue is in appeal before us.
18. We heard both the sides and perused the orders of the Revenue on this issue. On going through the order of CIT(A) on this issue, we find it 8 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary relevant to extract the relevant operational lines from the finding of the CIT(A) in Para No.7.3 of his order and the same reads as under :
"7.3 . . . . .I find merit in the contention of the applicant. It was noted that the AO did not permit personal hearing to the authorized representative of the appellant to explain the transaction on the pretext that appellant could not authorize more than one representatives u/s.288(1) of the Act and on the other hand did not verify the documents of purchase of the property in question and assumed that since property was not appearing in the balance sheet hence it was purchased on the date of valuation itself. No enquiry was conducted with the lending bank or with the valuer of the property. No evidence was found during the search to reach to the conclusion that investment was made during the year under consideration. On the other hand, appellant had satisfactorily demonstrated that property in question was purchased during FY 1998-99. No addition can be made on presumption and considering the facts of the case, addition made by the AO of Rs.52,12,333 is deleted and ground raised by the Appellant is allowed."
19. From the above, it is evident that the property in question was purchased prior to the period of search and the AO made the addition on presumption basis. CIT(A) has appreciated the issue in the right perspective and deleted the addition. Thus, on merits, we find the order of CIT(A) is fair and reasonable. Regarding the additional evidence, the Ld. AR for the assessee filed the following written submissions :
"The Respondent submits that he has duly produced the copy of Purchase deed of the said land before the Ld. A.O. during the course of assessment proceedings wherein he has explained that the said land was purchased by the respondent prior to search period. It is apparent from the records that the respondent had purchased the said land prior to the search, hence the addition made by the Ld. AO. is unjustified and the Ld. CIT (A) is justified in deleting the said addition. Since, the purchase deed was produced before the Ld. AO. during the course of assessment proceedings, the question of calling for the remand report simply does not arise. Further I am enclosing herewith the copy of submission filed with the Ld. AO. wherein it is clearly stated that the Purchase deed of the said land was submitted in the paper book."
Accordingly, Ground No.4 raised by the revenue is dismissed.
20. In the result, appeal of the Revenue is dismissed. ITA No.630/PUN/2016
A.Y. 2007-08 9 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
21. Grounds raised by the Revenue in this appeal are extracted as under :
"1. Whether on the facts and circumstances of the case, whether the Id.CIT(A) was justified in deleting the foreign tour expenses amounting to Rs.79,000/-?
2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to Rs.6,000/-?
3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of' 'Disallowance of interest expenditure' to the extent of Rs.2,39,227/-, though the entire interest was not substantiated by the assessee during assessment proceedings, despite being given opportunity?
22. Ground No.1 by the revenue relates to the relief granted by the CIT(A) in connection with the claim relating to "Foreign Travel expenses". Relevant facts include that the assessee visited Singapore and Mauritius and claimed expenditure on account of Foreign Travel. AO disallowed the said expenses incurred by the assessee in connection with his travel to Singapore and Mauritius for want of details and the source of funds. Assessee could not demonstrate the same except stating that the expenditure was sponsored by the insurance companies. No details were furnished in support of the same. During the First Appellate Proceedings, assessee furnished copies of the emails sent by John Deere Equipments Pvt. Ltd. Emails were addressed to M/s. Chaudhari Motors in respect of Mauritius tour. Basically, for want of details, CIT(A) deleted the addition of Rs.79,000/- and confirmed the balance of Rs.1,73,000/-.
23. During the proceedings before us, Ld. DR for the Revenue relied heavily on the order of the AO. On the other hand, Ld. AR for the assessee drew our attention to the speaking order of the CIT(A).
24. On hearing both the parties, we find it is relevant to extract the relevant lines from the order of CIT(A) and the same reads as under : 10
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary "14. . . . . .As discussed in AY 2006-07 while dealing with similar addition, the sponsor Hero Motors had clearly mentioned that tickets have to be borne by the dealer. The appellant also denied of travelling of their sons to Mauritius and Singapore but did not furnish copy of their passport to support the claim. In the circumstances, the fact of travelling to Singapore and Mauritius has been brought by the AO on the record and for want of further details, he was left with no other option but to estimate the expenditure. However, AO had failed to give credit to the amount of Rs.79,000/- debited the capital account of the appellant. Therefore, addition to the extent of Rs.79,000/- is deleted and balance addition of Rs.1,73,000/- is upheld. Grounds raised by the appellant is partly allowed."
25. Considering the above, we are of the view that the decision of CIT(A) is taken based on the plausible reasoning which does not call for any interference. Accordingly, Ground No.1 is dismissed.
26. Ground No.2 relates to deletion of addition of "interest income" of Rs.6,000/- on account of undisclosed income from FDR. Relevant facts include that the assessee had a FDR with UCO Bank amounting to Rs.1 lakh and earned interest. Without realizing the fact that the said income was already offered to tax, AO estimated the interest accrued on the said FDR and made addition. During the First Appellate proceedings, assessee demonstrated vide his letter dated 16-11-2015 the fact of offering of Rs.6,000/- which formed part of the income returned by the assessee. On considering the same and examining the facts, the CIT(A) granted relief. Relevant operational para is extracted as under :
"15.2 I have gone through the assessment order and the submissions filed by the appellant. As discussed earlier, proper opportunity could not be granted to the appellant, and the AO without examining the computation of total income filed by the appellant along with the return of income filed on 08-08-2008 had assumed that interest on FDR kept with the UCO Bank was not offered to tax. I have examined the computation of total income and it is seen that appellant has offered interest of Rs.5,807/- as interest on FDR with the UCO Bank. Therefore, estimated addition of Rs.6,000/- made on this ground stands deleted. Ground raised by the appellant is allowed.
27. Considering the above, we find the order of CIT(A) is fair and reasonable and does not warrant any interference. Accordingly, Ground No.2 is dismissed.
11
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
28. Ground No.3 relates to deletion of addition on account of disallowance of interest expenditure amounting to Rs.2,39,227/-. Relevant facts include that the assessee claimed the above interest expenditure as business expenditure against the interest and remuneration received from the firm. AO disallowed the claim as per the discussion given in Para 11 of his order. During the First Appellate proceedings of CIT(A), assessee made written submission and the same relevant portion are extracted in Para No.16 of the order of CIT(A). On considering the same, CIT(A) held that the disallowance of interest is uncalled for considering the assessee's own funds and the jurisdictional High Court judgment in the case of Reliance Utilities and Power Ltd. 313 ITR 340. For the sake of completeness of this order, relevant finding of CIT(A) is extracted as under :
"16.2 Total investment in the firms stood at Rs.24,48,730 and apart from that all other investments were personal investments of the appellant in the land, house property and saving bank account. Hon'ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. For the year under consideration, personal investment of the appellant are only Rs.8,54,311/- which are lesser than his own capital of Rs.10,05,620/-. Therefore, it is held that borrowed funds of Rs.16,22,420/- were used for making investment in the partnership firm. The appellant had received interest on the capital from the firm of Rs.2,39,167/- and paid interest of Rs.2,39,227/- on the funds invested in the partnership firm. In these facts disallowance made by the AO was not called for and therefore deleted. Ground raised by the appellant is allowed."
29. The finding of the CIT(A) relying on the judgment in the case of Reliance Utilities and Power Ltd.(supra) is fair and reasonable. It is not the case of the revenue that the assessee does not have interest free funds for investment activity. Considering the above, we find the reasoning given by the CIT(A) is reasonable.
30. In the result, appeal of the revenue is dismissed. 12
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary ITA No.631/PUN/2016 A.Y. 2008-09
31. Grounds raised by the Revenue read as under :
"1. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to Rs. 9,000/-.
2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'Disallowance of interest expenditure' to the extent of Rs. 2,76,279/-, though the entire interest was not substantiated by the assessee during assessment proceedings, despite being given opportunity?
32. Ground No. 1 raised by the Revenue relates to addition on account of interest on FDR amounting to Rs.9,000/-.
33. On hearing both the sides, we find this issue is identical to the Ground raised by the revenue in A.Y. 2007-08 raised by the assessee vide Ground No.2. The FDR in question is one and the same. We have upheld the decision of CIT(A) in the said assessment year. Following the same reasoning and considering the commonality of the factual matrix, we delete ground No.1 raised by the Revenue in this year too.
34. Ground No.2 by the Revenue relates to disallowance of interest expenditure of Rs.2,76,279/-. The facts relating to this ground are identical to the facts discussed in Ground No.3 of the appeal for A.Y. 2007-08. We granted relief to the assessee in that assessment year relying on the ratio of the Reliance Utilities and Power Ltd.(supra).
35. On hearing both the sides, we find this issue as well as the facts are identical to the Ground No.3 of appeal for A.Y. 2007-08. We have upheld the decision of CIT(A). Following the same reasoning, we delete ground No.2 raised by the Revenue in this year too.
36. In the result, appeal of the revenue is dismissed. 13
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary ITA No.632/PUN/2016 A.Y. 2009-10
37. Grounds raised by the Revenue are as under :
"1. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to Rs.9,000/-.
2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.4,35,741/- made by estimating NP @ 6%, ignoring the fact that the assessee did not produce books of accounts for verification during assessment proceedings , despite being given opportunity?
38. Ground No. 1 raised by the Revenue relating to interest accrued on FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08 vide Ground No.2. We have upheld the decision of CIT(A) in the said assessment year. Following the same reasoning, we delete ground No.1 raised by the Revenue in this year.
39. Ground No.2 by the Revenue relates to deletion of Rs.4,35,741/-by the CIT(A) on account of estimation of net profit @6% by the AO.
40. Relevant facts include that the assessee shown the turnover of Rs.2.19 crores (rounded off) with net profit @4.01%. However, the AO made addition of Rs.4,35,741/- estimating the profits @6% on the ground that assessee failed to produce the books of account. In the First Appellate proceedings, assessee contended that books of account were audited u/s.44AB of the Act. Total turnover of the assessee was Rs.2.19 crores which includes the trading of spares and oil. AO was in possession of the audited balance sheet and the profit and loss account and could not find any discrepancy. Having considered the fact that AO was in possession of the books and there was no material with the AO to disturb the concluded assessment. CIT(A) also examined the letter received from the AO that the assessee produced books of account before him. Further, 14 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary relying on the judgment of Hon'ble Bombay High Court in the case of Murli Agro Products, CIT(A) deleted the entire addition of Rs.4,35,741/- as per the discussion given in Para No.35.2 of his order. We have already dealt with the same issue while dealing with the issue of violation of Rule 46A of the I.T. Rules, 1962.
41. In view of the above reasoned finding of the CIT(A) on this issue, we uphold the order of CIT(A). As such, revenue has no reason for making addition of Rs.4,35,741/-. Accordingly, Ground No.2 raised by the Revenue is dismissed.
42. In the result, appeal of the revenue is dismissed. ITA No.633/PUN/2016
A.Y. 2010-11
43. Grounds raised by the Revenue are as under :
"1. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the foreign tour expenses amounting to Rs.3,95,800/- by admitting additional evidence under rule 46A of the I.T. Rules, ignoring the fact that the assessee had not furnished the relevant documents in spite of opportunities given during assessment proceedings and despite being given specific instruction?
2. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'disallowance of interest on purchase of land' of Rs.1,20,000/- without appreciating the fact that the prime purpose for making investment remains unproven even in appellate proceedings before the ld. CIT(A) ?
3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'undisclosed interest in FDR' amounting to Rs.9,000/-?
4.Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'unproved agricultural income' of Rs.1,06,535/-?
5. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.6,12,002/- made by estimating NP @ 6%, ignoring the fact that the assessee did not produce books of accounts for verification during assessment proceedings, despite being given opportunity?15
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
44. Ground No.1 by the revenue relates to the relief granted by the CIT(A) in connection with the claim relating to Foreign Travel expenses.
45. We find this ground is identical to the ground No.1 raised by the Revenue in A.Y. 2007-08. We have upheld the finding given by the CIT(A) on this issue. It is the case of the assessee that the source of fund for the Foreign Travel expenses is the company to which the assessee is a dealer or the other companies. Following the same parity of reasoning, we concur with the findings given by the CIT(A). Accordingly, Ground No.1 raised by the Revenue is dismissed.
46. Ground No.2 by the revenue relates to disallowance of interest amount of Rs.1,20,000/-paid on loan availed from M/s. Chadhari Automobiles.
47. Relevant facts on this issue include that assessee took loan of Rs.30 lakhs from M/s. Chaudhari Automobiles on 27-11-2009 for making investment in land. He paid interest amount of Rs.1,20,000/- on the said loan. Assessee could not demonstrate before the CIT(A) about the specific investment except stating that the purchased property was accounted in the books of account. CIT(A) after perusing the balance sheet of the assessee and discussing the various investments made by the assessee came to a conclusion that the investment made is out of interest free funds available with the assessee. While coming to the conclusion of deleting the disallowance of interest u/s.36(1)(iii) of the Act, the CIT(A) relied on the decision of Reliance Utilities and Power Ltd. 313 ITR 340. For the sake of completeness of this order, we find it relevant to extract the finding given by the CIT(A) in Para No.44.2 on this issue and the same is reproduced here as under :
16
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary "44.2 . . . . . .I have perused the balance sheet of he appellant as on 31-03-
2010. Capital of the appellant stood at Rs.55,74,186/- as on 31-03-2010 whereas total investment stood at Rs.88,33,777/- as on 31-03-2010. The increase in the investment was mainly on account of investment in shares of M/s. Choudhari Cars Pvt. Ltd. of Rs.29,63,800/- and further investment in the firm M/s. Choudhari Automobiles which stood at Rs.46,31,842/- as on 31-03-2010. Investment in the firm is considered for the purpose of business as appellant had offered interest and remuneration of Rs.5,36,663/- from the firm under the head income from Business and Profession. However, other investments including the investment in the shares of M/s. Choudhari Cars Pvt. Ltd. are treated as personal investment not related to carrying out of business. In this manner, personal investment nor related to business of the appellant at Rs.42,01,935/- (Rs.88,33,777 - Rs.46,31,842) as against capital of Rs.55,74,186/-. Hon'ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment sand at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. Since the capital of appellant is more than the personal investments no disallowance of interest u/s.36(1)(iii) is called for. Addition of Rs.1,20,000/- is deleted and ground raised by the appellant is hereby partly allowed."
48. The above conclusion drawn by the CIT(A) is found to be reasonable and therefore, we do not find any reason to reverse the same. Accordingly, Ground No.2 raised by the revenue is dismissed.
49. Ground No. 3 raised by the Revenue, i.e. interest income linked to the FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08 raised by the assessee vide Ground No.2. We have upheld the decision of CIT(A). Following the same reasoning, we delete ground No.3 raised by the Revenue.
50. Ground No.4 by the revenue relates to deletion of addition by the CIT(A) on account of income from other sources amounting to Rs.1,06,535/- (being 50% of the disclosed agricultural income).
51. Relevant facts of this issue include that the assessee in response to notice u/s.153A of the Act disclosed the gross agricultural income of Rs.2,13,071/-, net agricultural income of Rs.1,25,556/- after reducing the expenses of Rs.87,515/-. AO considering the gross sales of Agricultural produce of Rs.2,13,071/- as net agricultural income and made addition of Rs.1,06,535/- on estimation basis.
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ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
52. During the First Appellate proceedings, assessee produced one sale bill of cotton amounting to Rs.2,13,071/- but the CIT(A) has not admitted the same as additional evidence. Assessee is not in appeal before us on this decision of CIT(A). However, the CIT(A) having considered the net agricultural income of Rs.1,25,556/- as disclosed by the assessee and since no material was gathered during the course of search eventually deleted the addition.
53. On hearing both the sides, we find it relevant to extract the finding given by the CIT(A) in para No.46.2 on this issue and the same reads as under :
"46.2 . . . . . . . .During the course of appellate proceedings, appellant had produced one sale bill of cotton of Rs.2,13,071/- issued by the Krishi Utpanna Bajar Samitee, Jamner, Dist. Jalgaon on 25-01-2010. Appellant has failed to show as to what prevented him to produce the bills before the AO. Therefore, additional evidence furnished before me is not admitted. However, no material was gathered during the course of search as well as during the course of assessment proceedings to disturb the accepted net agricultural income of Rs.1,25,556/- for the year under consideration. In case of concluded proceedings, additions not based on material gathered during the search or during the course of search assessment are not permitted on view of the findings of Hon'ble Bombay High Court in the case of Murli Agro Products (supra). Hence, addition made by the AO on adhoc and estimated basis is deleted and ground raised by the appellant is allowed."
54. From the above, it is evident that the AO made the addition on estimation basis and there was no incriminating material gathered during the course of search. Therefore, we find the order of CIT(A) in deleting the addition is reasonable. Thus, we uphold the order of CIT(A) and the ground No.4 raised by the revenue is dismissed.
55. Ground No.5 raised by the revenue relates to addition of Rs.6,12,002/- made by the AO adopting the net profit rate of 6% rejecting the assessee's book results. AO claims that the assessee has not produced the books of account before him. The arguments/counter 18 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary arguments are, similar to the Ground No.2 (Para 40 supra) already adjudicated by us for A.Y. 2009-10.
56. After hearing both the sides, we find this ground is identical to Ground of appeal No.2 raised by the Revenue in A.Y. 2009-10. It is the case of the assessee that the AO impounded the books and they were lying with the AO for period of 2 months or more. We have already decided this issue upholding the order of CIT(A) deleting the addition. Following the same reasoning, we dismiss the ground raised by the revenue.
57. In the result, appeal of the Revenue is dismissed. ITA No.634/PUN/2016
A.Y. 2011-12
58. Grounds raised by the Revenue are as under :
"1. Whether on the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing additional evidence under rule 46A whereas the assessee's case is not covered by the exceptions provided under rule 46A of the I.T. Rules.
2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleting the addition made on account of 'unrecorded advance receipts' amounting to Rs.1,00,00,000/-, by admitting additional evidence under rule 46A of the I.T. Rules, ignoring the fact that the assessee had not furnished the relevant documents in spite of opportunities given during assessment proceedings and despite being given specific instruction?
3. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.38,82,200/- made on account of short term capital gains, by ignoring the fact that the valuation of the property was done by recognized financial institution through a valuer for the purpose of granting loan?
4. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'disallowance of interest on purchase of land' of Rs.3,60,000/- without appreciating the fact that the prime purpose for making investment remains unproven even in appellate proceedings before the ld. CIT(A)?
5. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of "undisclosed interest in FDR' amounting to Rs.9,000/-.
6. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition made on account of 'unproved agricultural income' of Rs.1,14,816/-?19
ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
7. Whether on the facts and circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.4,03,573/- made by estimating NP @ 6%, ignoring the fact that the assessee did not produce books of accounts for verification during assessment proceedings, despite being given opportunity?"
59. Ground Nos. 1 raised by the revenue is against admitting of the additional evidences by the CIT(A) in violation of Rule 46A of the Income Tax Rules, 1962.
60. On hearing both the sides, we find these grounds are identical to the grounds of appeal raised in ITA No.629/PUN/2016 for A.Y. 2006-07. We have already decided this issue against the revenue holding that CIT(A) has not admitted any additional evidences at the back of the AO. Therefore, on the same reasoning, the above grounds raised by the revenue are dismissed.
61. Ground No.2 raised by the Revenue relates to unrecorded advance receipt of Rs.1 Crore on account of sale of property to Shri Ashok Vijaykumar Kotecha (M/s. Chaudhari Motors) which was deleted by the CIT(A) admitting additional evidence.
62. Relevant facts include that the assessee sold the land to Shri Anil Vijaykumar Kotecha admeasuring 7725.16 sq. mtrs, situated at Gat No.277/2 at Sakegaon, Taluka Bhusawal, Dist. Jalgaon and received Rs.1 crore against the same. There was survey action at M/s. Chaudhari Motors and draft copy of Sauda Pawti dated 11-10-2010 was impounded by the AO. Assessee submitted before the AO that the amount of Rs.1 crore was received from Shri Anil Vijaykumar Kotecha on account of proposed sale of land. However, the sale transaction could not materialize and the said amount of Rs.1 crore was returned back to Shri Anil Vijaykumar Kotecha. As per the assessee, the transaction was duly reflected in the books of accounts. Copy of Sauda Pawti and the 20 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary cancellation document are on record. Assessee in his statement u/s.132(4) also stated the abovementioned facts before the revenue authorities. In response to notice, though Shri Anil Vijaykumar Kotecha did not attend in person, he submitted the photocopy of Sauda Pawtis cancelling the original transaction. However, AO proceeded to make addition of Rs. 1 crore as income of the assessee as the assessee could not prove the transaction beyond doubt.
63. In the First Appellate proceedings, the CIT(A) perused the sauda pawtis dated 11-10-2010 and 14-10-2010 between the assessee and Shri Ashok Kotecha, signed by both the parties. CIT(A) also perused the deed of cancellation of the sauda Pawtis dated 16-02-2011. CIT(A) observed that Shri Anil Kotecha offered the amount of Rs.1 crore as additional income and the same was not denied by the AO. Eventually, CIT(A) came to the conclusion that there is no doubt that amount of Rs.1 crore which was advanced by the assessee to Shri Anil Kotecha was returned back to him. There was no material before the CIT(A) to hold otherwise and the addition of Rs.1 crore in the hands of the assessee was deleted.
64. Aggrieved with the said order of CIT(A) the revenue is in appeal before us.
65. On hearing both the sides and on perusing the orders of the revenue authorities, we find it is the case of the assessee that he sold the land situated at Gat No.277/2, Sakegaon, Taluka Bhusawal, Dist Jalgaon to Shri Anil Kotecha for a consideration of Rs.1 crore. Against the said land deal, Sauda pawti dated 11-10-2010 was entered into by the assessee and Shri Anil Kotecha. However, the land deal was not materialized and the amount of Rs.1 crore taken as advance was eventually returned back by the deed of cancellation/Sauda pawti dated 14-10-2010. These facts have 21 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary been disclosed by the assessee before the AO u/s.132(4) of the Act. It is the case of the revenue authorities that the assessee could not satisfactorily prove the said transaction and therefore, Rs.1 crore should be added as income of the assessee as unrecorded advance received against sale of the property, thus prayed for reversing the order of CIT(A).
66. After going through the finding given by the CIT(A) in Para Nos. 54.2 and 54.3 on this issue, we do not find any iota of fault in the reasoning given by the CIT(A) deleting the addition of Rs.1 crore. While deleting the addition, CIT(A) has considered all aspects; (1) Saudi pawtis dated 11-10- 2010 and 14-10-2010 (2) cancellation document (3) statement given by the assessee u/s.132(4) (4) confirmation of Shri Anil Kotecha cancelling the original transaction in response to the show cause notice issued by the AO. All these documents clearly suggest that the amount of Rs.1 crore was returned back to Shri Anil Kotecha. Regarding the revenue's allegation that the CIT(A) admitted certain additional evidences, we find that no specific document was specified by the Ld. DR for the Revenue before us which constitutes additional evidence. Regarding Sauda Pawti and the deed of cancellation, we find they exist in the files of the AO. Therefore, there is no violation of Rule 46A of the Income Tax Rules, 1962 in this regard. Therefore, we do not find any reason to reverse the order of CIT(A). Thus, Ground No.2 raised by the revenue is dismissed.
67. Ground No.3 raised by the revenue relates to the addition made by the AO on account of short term capital gains.
68. Relevant facts of this issue include that assessee purchased a land situated at G.No.16 and 18 at Village Manyarkheda, Taluka and Dist. Jalgaon for total consideration of Rs.24,22,000/- from Shri Ashwin Jayantilal Shah and Shri Rajnikant Jayantilal Shah as per Kharadi Khat 22 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary dated 30-11-2009 which was subsequently transferred to M/s. Chaudhari Cars Pvt. Ltd. On the said land, M/s. Chaudhari Cars Pvt. Ltd. constructed a show room through bank finance and kept the property under mortgage. Further, M/s. Chaudhari Cars Pvt. Ltd. issued 2,86,380 shares of Rs. 10/- value against the said transaction. In the process of collateral security of the land, the registered valuer assessed the value of the land at Rs.68,46,000/- vide valuation report dated 08-07-2010. Against the AO's proposal of considering Rs.68,46,000/- as the value of land as against the declared value of Rs.29,63,800/-, assessee submitted that the said figure of Rs.68,46,000/- is relevant for A.Y. 2011-12 and applicability of provisions of section 50C should not be invoked in the hands of the assessee but in the case of buyer of the land. Rejecting the same, AO proceeded to tax the difference, i.e. Rs.68,46,000 - Rs.29,63,800/- = Rs.38,82,200/- as income of the assessee u/s.50C of the Act.
69. In the First Appellate proceedings, the CIT(A) deleted the addition. Relevant discussion given by the CIT(A) in Para No.55.3 is reproduced hereunder for the sake of brevity :
"55.3. . . . . I find merit in the contention of the appellant as no evidence was found during the search to reveal that land was purchased by the appellant for consideration different from that mentioned on the registered document. Similarly, no evidence was found to reveal that appellant received consideration apart from shares of value of Rs.29,63,800/- on transfer of land. The AO has also not pointed out that consideration was less than the stamp duty valuation for the purpose. Merely on the basis of valuation done by the transferee company for the purpose of seeking finance from the bank, sale consideration cannot be assumed in the hands of transferor. There is specific provision u/s.50C of the Act for adopting deemed sale consideration which was not found applicable in this case. Addition made of Rs.38,82,200/- on the basis of valuation report was not justified and therefore deleted. Ground raised by the appellant is hereby allowed."
70. On hearing both the parties on this issue and perusing the order of CIT(A), we find the above discussion of the CIT(A) reveal that Rs.68,46,000/- is not the value as per the records of stamp duty 23 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary authorities. The value of Rs.68,46,000/- is the figure as per the registered valuer which is created for loan purpose and hence, it has no sanctity under the provisions of section 50C of the Act. It is the finding of CIT(A) that there is no evidence to demonstrate that the assessee received higher consideration than that of Rs.29,63,800/-. On the facts of this case, we are of the opinion that addition of Rs.38,82,200/- is unwarranted. Ground No.3 raised by the revenue is accordingly dismissed.
71. Ground No.4 raised by the revenue relates to addition of Rs.3,60,000/- made by the AO on account of interest of purchase of land and deleted by the CIT(A).
72. Facts on this issue are that assessee took unsecured loan of Rs.30 lakhs from M/s. Chaudhari Automobiles for making investment in land. AO made the addition of Rs.3,60,000/- being the interest on the said loan for the period of one year @12%. During the First Appellate proceedings, assessee contended that the said interest is squared up on 01-04-2010 itself and no interest was paid to the company. Further, assessee also stated the assessee has sufficient funds available and no borrowed funds are used for non-business purposes. Considering the arguments of the assessee and perusing the balance sheet of the assessee, the CIT(A) gave relief to the assessee. Aggrieved by the order of CIT(A) the revenue is in appeal.
73. On hearing both the sides and perusing the order of CIT(A) on this issue, we find it relevant to extract the relevant finding given by the CIT(A) in Para No.56.2 of this order and the same reads as under :
"55.2 . . . . . . .I have perused the balance sheet of the appellant as on 31- 03-2011 and capital of the appellant stood at Rs.1,08,66,956 whereas investment at Rs.1,26,66,329. Out of this investment, investment in the partnership firm M/s. Chaudhari Automobiles was Rs.81,85,790 and same is considered investment for the purpose of business as appellant had 24 ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary disclose d income of Rs.5,46,781 being interest and remuneration from the firm under the head "Business and Profession". Therefore, investment for non-business purpose stood at Rs.44,69,539/- which is less than appellant's capital of Rs.1,08,66,956. Hon'ble Bombay High Court in the case of Reliance Utility & Power 313 ITR 340 (Bom.), held that if there be interest free funds available to an assessee sufficient to meet its investment and at the same time the assessee had raised a loan, it can be presumed that the investments were from the interest free funds available. In view of the decision the capital of appellant is held to be invested for personal investment and consequently no borrowed funds can be considered to have been used for non-business purpose. Therefore, no disallowance of interest was called for. Addition made of Rs.3,60,000 is directed and the ground raised by the appellant is hereby allowed."
74. From the above, it is evident that the loan is actually squared up by 01-04-2010 relevant to A.Y. 2011-12. No interest is accrued in principle due to the said squaring up of the loan. Notwithstanding the same, assessee has a strong capital base to the tune of Rs.1.09 crores and the presumption laid down by the jurisdictional High Court in the case of Reliance Utilities and Power Ltd. (supra) that no funds are utilized for payments towards investment in the land. Considering the above discussion given by the CIT(A) while deleting the addition, we find the order of CIT(A) is a well reasoned one and therefore, it does not call for any interference.
75. Ground of No.5 raised by the Revenue relating to accrual of interest on FDR is identical to the Ground raised by the Revenue in A.Y. 2007-08 vide Ground No.2. We have already decided this issue against the revenue and upheld the decision of CIT(A). Following the same reasoning, we delete ground No.5 raised by the Revenue in this assessment year.
76. Ground No.6 raised by the Revenue relating to unproved agricultural income is identical to the Ground raised by the Revenue in A.Y. 2010-11 vide Ground No.4. We have already decided this issue against the revenue while adjudicating Ground No.4 of the revenue. Following the same reasoning, we delete ground No.6 raised by the Revenue in this assessment year.
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ITA No.629 to 634/PUN/2016 Shri Mahesh B. Chaudhary
77. Ground No. 7 raised by the Revenue relating to estimation of net profit @6% is identical to Ground of appeal No.2 raised by the Revenue in A.Y. 2009-10. We have already decided this issue against the revenue upholding the order of CIT(A) deleting the addition. Following the same reasoning, we dismiss the ground No.7 raised by the revenue.
78. In the result, appeal of the Revenue is dismissed.
79. To sum up, all the six appeals filed by the Revenue are dismissed.
Order pronounced in the open court on this 17th day of January, 2018.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 17th January, 2018
सतीश
आदेश क
ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent
3. The CIT(A)-12, Pune
4. CIT-12, Pune
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "B Bench"
Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
स यािपत ित //True Copy//
//True Copy// Senior Private Secretary
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune