Income Tax Appellate Tribunal - Jaipur
Raj Kumar Goyal, Bharatpur vs Acit, Bharatpur on 16 January, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 230/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2011-12
Shri Raj Kumar Goyal, cuke The DCIT,
Prop. M/s Tilakdhari Jewellers, Vs. Circle,
Sarafa Bazar, Bharatpur-321001. Bharatpur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABYPG1374Q
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Shri Rajendra Agarwal (C.A.)
jktLo dh vksj ls@ Revenue by : Shri Varinder Mehta (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 16/11/2017
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 16/01/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 07.01.2016 of CIT (A) for the assessment year 2011-12. The assessee has raised the following ground:-
" On the facts and circumstances of the case, the learned CIT(A) has erred in:-
1. Confirming the addition of Rs. 2,89,47,080/- stating excess stock found during the course of survey proceedings u/s 133A of the I.T. Act, 1961.ITA No. 230/JP/2016
Shri Raj Kumar Goyal Vs.DCIT, Bharatpur
2. Confirming the addition of Rs. 24 lacs made u/s 68 of the I.T. Act.
3. Confirming the disallowance of Rs. 9000/- on a/c of corresponding interest claimed in the P & L A/c on unsecured loans.
4. Confirming the addition of Rs. 4,63,938/- stating excess cash found during the survey proceedings.
5. Confirming the addition of Rs. 2,00,000/- on estimate basis out of total addition of Rs. 2,54,730/- made by the AO on a/c of long term capital gains.
6. Confirming the addition of Rs. 10,750/- on a/c of survey entertainment expenses.
7. Confirming the addition of Rs. 63,000/- on a/c of notional rental income on ship at Kila, Bharatpur.
8. Confirming the disallowances of Rs. 43,390/- on account of cash payments u/s 40A(3) of the IT Act.
The appellant reserves his right to amend, add, alter, change or delete any of the grounds of the appeal, either before or during the course of hearing."
2. Ground No. 1 is regarding the addition of Rs. 2,89,47,080/- on account of excess stock found during the course of survey. A survey u/s 133A of the Act was carried out on 02.02.2011 at the business premises of the assessee. During the course of survey it was found that the books of accounts were written upto 21.01.2011. After taking all the sales & purchases bills found at the business premises a trading account was prepared by the assessee's accountant Shri Balkishan in the present of the assessee which was duly signed and verified by the assessee. In this process a difference in the stock was found to the 2 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur tune of Rs. 2,89,47,080/- and a total value of the jewellery found during the survey at the premises of the assessee was determined by the registered valluer on physical verification at Rs. 3,28,10,696/-. Thus, it was found that 88.2% of the total stock was not accounted in the books of account of the assessee. The summons u/s 131 of the IT Act were issued on 03.02.2011, 14.02.2011 & 18.02.2011 to the assessee to explain excess stock found at the business premises. The assessee did not comply with the summons issued u/s 131 however, subsequently on 18.08.2011 the assessee attended the office of the Assessing Officer and his statements were recorded u/s 131 on oath in which the assessee explained that his entire stock was recorded in the books of account, however, some of the jewellery items belonging to the clients were kept for repair purpose and some other Jewellery items belong to the family members of the assessee. During the assessment proceedings the AO noted that the assessee has shown huge purchases from M/s Rupal Jewellers, immediately prior to the date of survey i.e. 24.01.2011 to 31.01.2011. Accordingly, the AO found that the purchases shown during the 24.01.2011 to 31.01.2011 are not genuine as these are after thought bogus purchases shown by the assessee to cover up the excess stock found during the survey. The AO has given 3 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur comparative details of the purchases in the assessment order and found that the purchases made during this period of one week i.e. on 24.01.2011 to 31.01.2011 are abnormal and substantially high in comparison to the purchases made during the other months of the financial years. Accordingly, the AO made the addition of the said amount of Rs. 2,89,47,080/-. The assessee challenged the action of the AO before the ld. CIT(A). The assessee filed additional evidence before the ld. CIT(A) which was forwarded to the AO for examination and comments. A remand report was submitted by the AO and the ld. CIT(A) after considering the remand report has confirmed the addition made by the AO regarding unaccounted purchases being excess stock found during the course of survey.
3. Before us, ld. AR of the assessee has submitted that the AO examined the books of accounts and supporting bills and vouchers produce during the course of assessment proceedings and no defect was found in the books of account and therefore, the purchase recorded in the books of accounts by the assessee cannot be treated as unexplained investment being excess stock found during the course of survey. He has further submitted that the enquiry was made through the Inspector at the place of M/s Rupal Jewellers and statement of the 4 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur proprietor of Rupal Jewellers was recorded by the Inspector at the back of the assessee. However, the factual position has been confirmed by M/s Rupal Jewellers that the entire transaction was recorded in their books of accounts. The assessee produced the complete details of purchases made from M/s Rupal Jewellers which has been confirmed by the M/s Rupal Jewellers during the enquiry conducted by the Inspector. Therefore, there is no question of any bogus purchases from M/s Rupal Jewellers. The ld. AR has further submitted that in the remand report the Assessing Officer has given no new facts but reiterated the facts already submitted by it in the assessment order. Once the seller of the goods has confirmed these purchases and the sale was also recorded by M/s Rupal Jewellers and then addition made by the ld. CIT(A) is not justified and bad in law. The ld. AR has also referred remand report of the Assessing Officer in pursuant to the directions of this Tribunal and submitted that the department has admitted the fact that the entire sale shown in the bills issued by M/s Rupal Jewellers has been recorded in the books of account as well as part of the turnover for VAT purpose. Thus, the ld. AR has submitted that when the assessee produce the purchase bills which has been confirmed by the supplier and also found duly recorded in the books of account of the supplier then the same 5 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur cannot be treated as bogus purchases. He has pleaded that the addition made by the AO on this account be deleted. The ld. AR has relied upon the decision of the Hon'ble Bombay High Court dated 22.02.2011 in case of CIT vs. M/s Ashish International in ITA No. 4299 of 2009 and submitted that the assessee was not given any opportunity to cross examine the proprietor of M/s Rupal Jewellers whose statement was recorded by the Inspector at the back of the assessee. The ld. AR has also relied upon the decision of Mumbai Tribunal dated 31.01.2017 in case of ACIT vs. Shri Mahesh K. Shah in ITA No. 5194/Mum/2014.
4. On the other hand, ld. CIT has submitted that the assessee has claimed to have made the purchases from M/s Rupal Jewellers from 24.01.2011 to 31.01.2011 whereas the assessee did not produce any such bills during the course of survey conducted on 02.02.2011. Therefore, it is clear that these bills were subsequently obtained by the assessee without any actual purchases made during this period. Further the assessee has not made any payment against these purchases as it was outstanding at the end of the financial year on 31.03.2011. Therefore, these are bogus transactions of providing the bills by M/s Rupal Jewellers to cover up the excess stock found during the survey. The ld. DR has further submitted that the Assessing Officer has 6 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur analyzed the purchases made by the assessee during the year and found that purchase made during this period from 24.1.2011 to 31.01.2011 is exceptionally high and therefore, it is apparent from the facts that these bills are procured by the assessee without any actual purchases. He has relied upon the orders of the authorities below.
5. We have considered the rival submissions as well as relevant material on record. There is no dispute that during the course of survey proceedings an excess stock of Rs. 2,89,47,080/- was found at the business premises of the assessee. The assessee did not furnish any explanation regarding the excess stock found during the course of survey conducted on 02.02.2011. Moreover, the assessee avoided the enquiry conducted by the department despite the represented summons issued u/s 131 of the Act and only on 18.11.2011 the assessee appeared before the AO to explain the excess stock. In his statement the assessee has explained the excess stock being the Jellwery of the clients kept for repair and therefore, even in the statement recorded on 18.04.2011 as well as in the statement recorded during the course of survey proceedings the assessee has explained that about one Kg of Sliver and 250 Grams of Gold belongs to the clients and confirmed the stock as on the date of survey both the silver 7 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur and gold to the extent of 1826.900 grams and 24.029 Kg respectively. The valuation of the stock was not disputed by the assessee as valuer has valued entire stock found at the business premises of the assessee out of which only the stock of Rs. 38,63,616/- was recorded in the books of accounts and balance of Rs. 2,89,47,080/- was not accounted in the books of accounts. Thus, at the time of survey this fact of unaccounted stock was not disputed by the assessee. Even subsequently the assessee has not disputed that the said stock of Rs. 2,89,47,080/- was unaccounted in the books of accounts. Though the books of account were completed upto 21.01.2011 however, the assessee did not even undispute about any purchases 21.01.2011 till the date of survey made after resulting in unaccounted stock found during the survey. Subsequently on 18.08.2011 the statement of the assessee was recorded u/s 131 of the Act the assessee has explained the excess stock found during the survey as some of the stock belonging to the clients which was kept for repair and some other jewllery items belong to the family member. Therefore, the assessee has specifically explained the excess stock in his statement dated 18.08.2011 to answer No. 1 as under:-
8 ITA No. 230/JP/2016
Shri Raj Kumar Goyal Vs.DCIT, Bharatpur eSusa losZ ds nkSjku lEHkkxh; vf/kdkfj;ks ls dgk Fkk fd esjk lkjk LVkWd esjs [kkrksa esa bUnzkt gS blesa ls dqN lkeku xzkgdksa dk tks gekjs fy;s ejEer djus ds fy;s ns tkrs gS mudk j[kk gS] dqN tsoj esjs ?kj ifjokj dk gSA esjs cPps dh losZ ds nl ckn lxkbZ gksuh Fkh rks dqN lkeku ?kj ls ejEer ds fy;s vk;k FkkA eSa bl lkeku ds lHkh lkP; le; vkus ij lsok esa is'k dj nWx w kA ;gh ckr eSus losZ ds nkSjku lHkh vf/kdkfj;ksa ls fuosnu fd;k FkkA esjk dksbZ LVkWd [kkrksa ds vykok ugha gSA Thus it is clear from this statement of the assessee that even on 18.08.2011 the assessee did not state that the difference found in the stock during the survey represents the alleged purchases made from M/s Rupal Jewellers which was claimed by the assessee at the time of assessment proceedings. Even otherwise the details of purchases made during the whole years have been analyzed by the Assessing Officer. As it is clear from the month wise details during the financial year 01.04.2010 to 31.03.2011 monthly purchase of the assessee ranges from lowest Rs. 1,70,000/- to highest Rs. 11.80 lacs of gold and Rs.
19,000/- to Rs. 2,00,000/- of silver. Similarly except in the month of November and January there was no purchase of diamond items. Even the purchases made during the month of January, 2011 is normal except the period from 24.1.2011 to 31.01.2011 which is exceptionally high more than Rs. 2 crores. Prior to the month of January, 2011 the 9 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur stock of the assessee never exceeded Rs. 26,40,156/- which has increased more than Rs. 2 crores during the month of January, 2011. The AO further analyzed that the assessee made total purchase of Rs. 2.78 Crores during the whole year except January while the purchase made during the January, 2011 is Rs. 2,17,79,000/-. Therefore, the assessee has shown his purchases in the month of January, 2011 which is more than 3500% of his average monthly purchases made during the whole year excluding month of January, 2011. We further note that the survey was conducted on 02.02.2011 and it was found that the assessee has completed books of accounts upto 21.1.2011, therefore, only a window of 10 days was available to the assessee from 22.1.2011 to 01.02.2011 to claim purchases to the extent of excess stock found during the course of survey on 02.02.2011. The assessee has accordingly produced the bills of purchases made from M/s Rupal Jewellers from 24.1.2011 to 31.01.2011 to the tune of Rs. 2,28,32,695/-. Undisputedly the assessee has never made any purchases from M/s Rupal Jewellers prior to 24.01.2011 and also not made any purchases after 31.01.2011. It is also not disputed that there is no regular business transactions between the assessee and M/s Rupal Jewellers at any point of time except the alleged transactions of 10 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur purchases made by the assessee during 24.01.2011 to 31.01.2011. It is apparent that post survey action on 02.02.2011 the assessee procured the purchase bills to the tune of Rs. 2,28,32,695/- to cover up the excess stock found at his place amounting to Rs. 2,89,47,080/-. The assessee never uttered a word, about the purchases made from M/s Rupal Jewellers during 24.01.2011 to 31.01.2011but could not be recorded in the books of accounts, either during the statement recorded at the time of survey or even in the statement recorded u/s 131 on 18.08.2011. Therefore, the production of these bills is nothing but the assessee procured the same from M/s Rupal Jewellers which is an afterthought calculated move on the part of the assessee specifically in the facts of the case when there was no purchases by the assessee at any point of time either prior to 24.01.2011 or subsequent to 31.01.2011. Since the assessee was having only a period between 22.01.2011 to 01.02.2011 to claim the purchase as the books of the assessee were found to be completed only upto 21.01.2011 at the time of survey on 02.02.2011. The trading account was prepared at the time of survey by the accounted of the assessee and included all the transactions which was not recorded in the books of accounts upto the date of survey. Therefore, there was no scope of not disclosing the 11 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur alleged huge purchases made from M/s Rupal Jewellers during the survey or post survey enquiry even on 18.08.2011. Therefore, the claim of alleged purchases from M/s Rupal Jewellers is apparently an afterthought manipulated claim based on the bills procured from M/s Rupal Jewellers. The value of the purchases shown during the short period of one week is extremely and exceptionally high that the assessee could not explain the reason for such a high purchases during that period of 7 days from 24.01.2011 to 31.01.2011 when average purchases during the rest of the year is substantially low. Further, there is no regular business transactions with M/s Rupal Jewellers. Accordingly, having regarding to the facts and circumstances of the case that the excess stock of Rs. 2,89,47,080/- was found at the time of survey on 02.02.2011 the assessee even could not have shown the purchase other then the period between 02.01.2011 to 01.02.2011.
6. The assessee produced VAT return of M/s Rupal Jewellers and on examination of the same the Tribunal found that there is discrepancy in the turnover shown by M/s Rupal Jewellers in the VAT return as well as recorded in the books of accounts. Accordingly, the Tribunal directed the AO to conduct the enquiry and file the remand report vide order dated 04.08.2017. In response to that the department has filed the 12 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur remand report dated 21.09.2017 explaining the reasons for discrepancy in the turnover appearing in the sales register and the VAT return was due to the sales returned from one of the parties M/s Raksha Enterprises of Rs.1,15,05.289/-. Accordingly the said issue of discrepancy in the turnover is now reconciled.
7. In view of the facts and circumstances as discussed above we are of the considered opinion that the purchases claimed by the assessee at the time of assessment proceedings is clearly an afterthought and based on manipulated record without any explanation from the assessee as to why the alleged purchases were not explained at the time of survey and even subsequently on 18.08.2011 which is more than 6 months after the survey when the excess stock was found. Further, these are only transactions of purchases made from M/s Rupal Jewellers during the short period of 7 days and the assessee could not have shown the purchases other then the period 22.01.2011 to 01.02.2011 accordingly, we do not find any error or illegality in the orders of the authorities below qua this issue.
8. Ground No. 2 is regarding the addition of Rs. 24 lacs made u/s 68 of the I.T. Act. During the year under consideration the assessee has received unsecured loans amounting to Rs. 43,11,945/- from 18 loan 13 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur creditors. The AO asked the assessee to furnish the details of the depositors such as copy ITR and Bank statement to establish the creditworthiness of the creditors. In response the assessee filed ITR and bank statement of few depositors only. The AO noted from the details filed by the assessee in respect of the 8 loan creditors that creditors were not having creditworthiness in granting these loans to the assessee and therefore, the assessee failed to establish the creditworthiness and genuineness of the transactions. Accordingly, the AO made an addition of Rs. 43,11,945/- as an explained cash creditors. The assessee challenged the action of the AO before the ld. CIT(A). The ld. CIT(A) deleted the addition made by the AO in respect of 7 loan creditors and confirmed the addition in respect of the remaining 11 loan creditors and therefore, the addition made by the AO was sustained by the ld. CIT(A) to the extent of Rs. 24 lacs.
9. Before us, the ld. AR of the assessee has submitted that all the loan creditors are having PAN numbers and gave their confirmation of loans as well as assessed to the Income Tax. The transactions are through banking channel, therefore, the assessee has discharged its onus of proving identity, genuineness of transactions and creditworthiness of the creditors. In support of his contention he has 14 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur relied upon the decision of Hon'ble Jurisdiction High Court in case of Kanhiya Lal Jangid v. ACIT 217 CTR 354. The ld. AR has also relied upon the decision of Hon'ble Supreme Court in case of CIT vs. Lovely Exports P. Ltd 216 CTR 195 and submitted that when the assessee has given the details of the creditors to the AO then the department is free to proceed to reopen their individual assessment in accordance with law but cannot treat the loan amount as unexplained cash credit. The ld. AR has further contended that during the remand proceedings the AO issued summons to all the creditors and examined them. In the remand report the Assessing Officer has made no adverse inference in respect of the creditors to the tune of Rs. 19,11,945/- and remaining creditors in respect of Rs. 24 lacs was stated to be not genuine. The ld. CIT(A) has confirmed the addition of Rs. 24 lacs as it was stated in the remand report without going into merits of the issue that the evidence produced by the assessee proved identity, the genuineness of the transactions and creditworthiness. Hence, the ld. AR has submitted that the disallowance addition made by the ld. CIT(A) is liable to be deleted.
10. On the other hand, ld DR has submitted that the cash creditors shown in the books of accounts are unsecured loans. The AO has examined the details and found that prior to issuing the cheques there 15 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur was a cash deposit in the bank accounts of the loan creditors. Therefore, the creditworthiness of the loan creditors and genuineness of the transactions was not proved by the assessee. He has relied upon the orders of the authorities below.
11. We have considered the rival submissions as well as relevant material on record. The assessee has shown unsecured loan of Rs. 43,11,945/- received during the year under consideration. The details of which are given by the AO in para 4.2 of the assessment order from which it is clear that the assessee took the loan from 18 creditors. The AO asked the assessee to furnish the details and evidences such as ITR and bank statement to establish the creditworthiness and genuineness of the transactions. In response the assessee furnished only partial details of filing the ITR in respect of 5 loan creditors and ITR and bank statement in respect of other 4 loan creditors. Thus the assessee filed the details in respect of total 9 creditors out of which only ITR was filed in respect of 5 and ITR as well as bank statement were filed in respect of 4. The AO noted from the details filed by the assessee that the income declared by these loan creditors was very less and not even Rs. 2,00,000/- in most of the cases. Further the cash was found to be deposited in the bank accounts to the creditors in respect of which the 16 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur assessee filed the bank statement. Accordingly, the AO disallowed the entire amount of unsecured loan of Rs. 43,11,945/-. Before the ld. CIT(A) the assessee furnished the confirmation and other details of the loan creditors which was forwarded to the AO for submission of the remand report. In the remand report the AO accepted the credits to the tune of Rs. 19,11,945/- in respect of 11 creditors, however the AO has stated in the remand report that the credit from the 7 persons total amounting to Rs. 24,00,000/- cannot be accepted as genuine. The ld. CIT(A) in the impugned order has held the assessee was able to discharge the burden to prove the identity and creditworthiness and genuineness of the transactions in respect of 11 creditors from whose unsecured loan of Rs. 19,11,945/- has been raised during the year under consideration.
12. As regards the unsecured loan of Rs. 24,00,000/- from 7 persons the ld. CIT(A) has confirmed the disallowance/ addition made by the AO as the evidence filed by the assessee was full of deficiency and the creditors could not substantiate the transactions. We have gone through the remand report as reproduce by the ld. CIT(A) in the impugned order and found that the loan creditors could not give the explanation about the amount of cash deposited in their bank accounts 17 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur prior to the issuing of cheques of the assessee. Eeven in the statement the loan creditors have failed to produce any evidence in support of the deposit made in the bank account in cash. The Assessing Officer has given the details and facts as recorded during the course of the statement of these loan creditors wherein all these 7 creditors could not give a proper explanation about the cash deposit in their bank account prior to issuing the cheques. The decisions relied upon by ld. AR are not applicable for the facts of the case. When the assessee has shown as many as 18 members advance loan is small amounts but some of them having no source of income. Therefore, in the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A) in sustaining the addition to the extent of Rs. 24,00,000/-.
13. Ground No. 3 is regarding the disallowance of Rs. 9,000/- on account of corresponding interest claimed in respect of unsecured loan. This issue is consequently to the issue raised in Ground No. 2.
14. We have heard the ld. AR as well as ld. DR and considered the relevant material on record. The ld. CIT(A) has granted the corresponding relief to the extent of allowing the claim of loan/ unsecured creditors and sustained the disallowance made by the AO on 18 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur account of the interest on the unsecured loan to the extent of the addition of Rs. 24,00,000/- which was confirmed by the ld. CIT(A). Therefore, the disallowance sustained by the ld. CIT(A) of Rs. 9,000/- towards the interest on the unsecured loan is consequential to the disallowance of unsecured loan creditors. Accordingly sustaining to the addition to the extent of Rs. 24,00,000/- the disallowance of interest which is corresponding and consequential is also confirmed.
15. Ground No. 4 is regarding confirming the addition of Rs. 4,63,938/- on account of excess cash found during the survey proceedings. The survey proceedings u/s 133A of the IT Act were carried out at the business premises of the assessee on 02.02.2011. Apart from the excess stock cash of Rs. 5,29,520/- was also found at the business premises. The cash balance as per the books of the assessee was prepared which was verified by the assessee at Rs. 65,582/-. The assessee in his statement explained the availability of cash to the extent of Rs. 3,29,010/- being part of the amount belongs to father-in-law of his younger son to the extent of Rs. 50,000/- and another Rs. 2,00,000/- was claimed to be received from Shri Ram Prakash Chandosiwala to be handed over to his son. The AO confronted the statement of the assessee to Shri Ram Prakash Chandosiwala by 19 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur issuing summons u/s 131 of the Act who has stated in his statement that the said amount was taken as a loan from the assessee which was return along with interest on the date of survey. Accordingly the AO found that the explanation of the assessee regarding the availability of the cash was not satisfactory as Shri Ram Prakash Chandosiwala has given a different version from the assessee. Accordingly, the AO made an addition of Rs. 4,63,938/-. On appeal the ld. CIT(A) called for a remand report from the AO in respect of the additional evidence filed by the assessee and after considering the remand report the ld. CIT(A) has confirmed the addition made on account of excess cash of Rs. 4,63,938/-.
16. Before us, the ld. AR of the assessee has submitted that the assessee was having opening balance of Rs. 2,90,588 as on 02.02.2011 and also received the amounts on account of sales of ornaments on the same day. Therefore, the cash found during the survey has been reconciled by the assessee as per the cash book. He has further submitted that as per cash book dated 02.02.2011 the entries made in the cash book clearly establish the availability of the cash with the assessee, however, no addition is called on this account. As regards the statement of Shri Ram Prakash Chandosiwala recorded by the AO the 20 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur ld. AR of the assessee has submitted that the AO recorded the statement on the back of the assessee without any knowledge of the assessee and no opportunity of cross examination was given to the assessee. Therefore the denial of claim of the assessee by the AO on the basis of the statement is not justified. He has pleaded the addition made by the AO be deleted.
17. On the other hand, ld. DR has submitted that the cash book as claimed by the assessee was not prepared and availability on the date of survey and therefore, it is an afterthought subsequent entries made by the assessee. The ld. DR has further submitted that the claim of the assessee was found to be false when Shri Ram Prakash Chandosiwala has denied and stated that the said amount of Rs. 2,00,000/- was taken by him from assessee as loan and it was returned to the assessee, therefore the assessee has failed to explain the amount of Rs. 5,00,000/-. He has relied upon the orders of the authorities below.
18. We have considered the rival submissions as well as relevant material on record. The addition was made by the AO due to the excess cash found at the business premises of the assessee during the survey on 02.02.2011. The assessee explain the source of the cash to the extent of Rs. 2,00,000/- as received from one Shri Ram Prakash 21 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur Chandosiwala which was to be handed over to his son as per his instruction. However, when the AO recorded the statement of Shri Ram Prakash Chandosiwala he has stated that this amount of Rs. 2,00,000/- was taken as a loan from the assessee and it was returned by him on 02.02.2011. Thus the statement of Shri Ram Prakash Chandosiwala was not the basis of addition but it was recorded by the AO to verify the claim of the assessee and the basis of the addition still remains the excess cash found at the business premises of the assessee. Accordingly, we do not find any merit and substance in the objection of the assessee that the statement of Shri Ram Prakash Chandosiwala was recorded at the back of the assessee and cannot be it relied upon. It is pertinent to note that it is claim of the assessee that this amount belongs to Shri Ram Prakash Chandosiwala however, he has explained that this amount was taken a loan from the assessee and was repaid, therefore, this amount was found at the business premises of the assessee remained unexplained. Further, the other explanation of the assessee was also without any supporting evidence or substantiated by any facts. The cash book dated 02.02.2011 was undisputedly prepared subsequent to the survey whereas this amount of Rs. 2,00,000/- could have been recorded in the books of accounts when it was stated to be 22 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur taken as loan from the assessee. Accordingly in the facts and circumstances of the case when the explanation of the assessee was not found to be acceptable because of the contradictory facts brought on record by the Assessing Officer and then the burden was again shifty to the assessee to establish its claim regarding source of the cash found at the business premises of the assessee. Hence, we do not find any error or illegality in the orders of the authorities below qua this issue.
19. Ground No. 5 is regarding the addition on account of long term capital gain. The AO noted that during the year under consideration the assessee declared long term capital gain of Rs. 1,04,964/- on sale of property. The assessee claimed deduction of Rs. 4,71,036/- as index cost of immovable property. The AO has further noted as per the agreement to sale dated 11.05.2005 the said plot was purchased by the assessee at the cost of Rs. 1,92,000/- and stamp duty of Rs. 45,000/-. Accordingly the AO denied the claim of the assessee regarding the cost of improvement of Rs. 2,54,730/- incurred during the year under consideration. The AO has further observed that the assessee has not filed any bill/voucher of the purchase of any building material to prove the expenditure incurred by the assessee for improvement of the plot of land. The AO has further noted that the assessee has sold total land of 23 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur measuring 3600 Sq. ft, therefore, the capital gain is required computed in respect of the said area of land out of the total land purchase by the assessee measuring 5750 sq. ft. Accordingly the AO worked out the proportionate cost of acquisition at Rs. 1,48,383/-. The AO adopted the full value consideration of the property in question as per section 50C of the IT Act at Rs. 5,95,200/- and consequently made addition on account of long term capital gain of Rs. 2,77,962/-. After considering the remand report the ld. CIT(A) has accepted the cost of improvement to the extent of Rs. 54,730/- out of total amount of Rs. 2,54,730/-. The ld. CIT(A) has confirmed the addition to the extent of Rs. 2,00,000/- out of total addition of Rs. 2,54,730/-.
20. Before us, the ld. AR of the assessee has submitted that the assessee furnished sufficient evidence in respect of improvement cost incurred by the assessee, however the AO as well as ld. CIT(A) has disallowed the claim of the assessee without considering the evidence filed by the assessee. The ld. CIT(A) has confirmed the addition of Rs. 2,00,000/- purely on adhoc admitted basis without any cogent evidence which is not justified. He has thus pleaded that the addition confirmed by the ld. CIT(A) may be deleted.
24 ITA No. 230/JP/2016
Shri Raj Kumar Goyal Vs.DCIT, Bharatpur 21 On the other hand, ld. DR has relied upon the authorities below and submitted that the assessee has failed to produce any cogent evidence in support of expenditure incurred for improvement of the property.
22. We have considered the rival submissions as well as relevant material on record. We find that the assessee has produced certain hand written receipt on the ordinary papers without any details of the persons to whom the payment was made. Therefore, these alleged receipts cannot be accepted as an evidence to prove the expenditure incurred by the assessee. However if the assessee had actually carried out any construction and other improvement work at the site which can be physically seen and examined then the claim of the assessee cannot be rejected out rightly to the extent of the work which is in existence at the site and can be seen. The assessee has claimed to have incurred the expenditure in filling the land and also in construction of the boundary wall. As far as the expenditure incurred on the land filling in the absence of any evidence the same cannot be accepted. However, the expenditure incurred on construction of boundary wall cannot be rejected as the boundary wall is in physical existence and therefore, the expenditure towards construction of the boundary wall has to be 25 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur allowed. The ld. CIT(A) has disallowed the expenditure of Rs. 2,00,000/- claimed on construction of boundary wall and land holding however, in the absence of all the details and relevant documents, the expenditure on the boundary wall to the extent of Rs. 1,00,000/- is considered as reasonable and proper when no other material and evidence in support of the expenditure is available. Accordingly, we allow the claim of the assessee to the extent of Rs. 1,00,000/- out of disallowance of Rs. 2,00,000/- confirmed by the ld. CIT(A). In the result, ground no. 5 is partly allowed.
23. Ground No. 6 is regarding survey entertainment expenses of Rs. 10,750/-. At the time of hearing the ld. AR of the assessee has stated at bar that the assessee does not pressed this ground of the assessee's appeal and same may be deleted. The ld. DR has raised no objection if this ground of the assessee is dismissed as not pressed. Accordingly, the ground No. 6 of the assessee's appeal is dismissed being not pressed.
24. Ground No. 7 is regarding addition of Rs. 63,000/- on account of notion rental income of shop. The assessee purchased a shop at Kila, Bharatpur on 23.10.2009 of Rs. 7,16,920/- the assessee claimed that the shop was in scraped condition and cannot be used for any business 26 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur and cannot be let out. The Assessing Officer has estimated the notional rent of Rs. 7,500/- per month and made an addition of Rs. 63,000/- u/s 23(1) of the IT Act. The assessee challenged the action of the AO before the ld. CIT(A). The ld. CIT(A) after considering the remand report has confirmed the addition made by the AO on this account.
25. Before us, the ld. AR of the assessee has submitted that when the shop was not in a condition to let out then the action of the AO is not justified. He has further contended that the shop required a substantial renovation work and only after the work was carried out the shop was subsequently let out. He has further contended that during the remand proceedings the assessee furnished the rent agreements of the adjoining shops situated in the locality wherein the rent of Rs. 3800/- to 4200/- per month was paid and agreed between the parties. Therefore, the addition made by the AO is without any basis.
26. On the other hand, ld. DR has relied upon the orders of the authorities below.
27. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has adopted the notional rent at Rs. 7,500/- per month and computed a total rent for the year at Rs. 90,000/-. After allowing the deduction u/s 24(a) of Rs. 27,000/- the AO 27 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur has made addition of Rs. 63,000/- under the head income from house property. We find that when the assessee has purchase this shop in the year 2009 and claimed that without carrying out the renovation worte, the shop could not be used. Therefore, without disputing the fact of removable work and forth with it is not a case of the AO the fact that the assessee had deliberately kept the shop in question vacant and not let out, the addition on account of notional rent income cannot be made. Further, the Assessing Officer has adopted the fair market value of the shop at Rs. 7500/- per month without giving any basis that the shop would have fetch the said rent in case it let out. During the course of remand proceedings the assessee furnished the rental agreement in respect of the adjoining the shops wherein the rent of Rs. 3800/- to 4200/- was agreed between the parties. Thus when the assessee has furnished the comparable rate of rent on which similarly situate shop was let out then the addition made by the AO without giving any basis is not sustainable. Accordingly we set aside this issue to the record of the Assessing Officer to decide the same as per the provisions of section 23(1) (a) of the Act and after conducting a proper inquiry for determining the annual latin on the basis of reasonable expected fair market rent of the shop in question. Further, when the assessee 28 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur claimed that the shop was not in a condition to let out at the time of purchase by the assessee, then the Assessing Officer has to verify this fact and find out whether before letting out any renovation work was done in the shop. Accordingly, the AO is directed to discuss the issue afresh after giving opportunity of hearing to the assessee.
28. Ground No. 8 is regarding the disallowance made u/s 40A(3) of the IT Act. The assessee claimed expenditure towards car repairs and maintenance of Rs. 22,990/- and further amount of Rs. 20,400/- on the repair of car break down. The assessee claimed that the expenditure is genuine and due to exigency and hardship of the assessee the payment was made in cash as the recipient refused to accept the cheque from unknown person. The AO did not accept the explanation of the assessee and made the addition of Rs. 43,390/- which was confirmed by the ld. CIT(A).
29. Before us, the ld. AR of the assessee has reiterated its contention as raised before the authorities below and submitted that the expenditure was in the nature of car repair and maintenance as well as expenditure incurred on break down of car. Therefore, the payment was made in cash in peculiar circumstances when the recipient refused to accept the payment through cheque.
29 ITA No. 230/JP/2016
Shri Raj Kumar Goyal Vs.DCIT, Bharatpur
30. On the other hand, ld. DR has submitted that the expenditure incurred by the assessee is in violation of provisions of Section 40A(3) of the Act and further the case of the assessee falls in the ambit of Rule 6DD of the IT Rules and does not falls in the exception provided under the said Rule. He has relied upon the orders of the authorities below.
31. We have considered the rival submissions as well as relevant material on record. The assessee has claimed expenditure of Rs. 22,990/- incurred on 12.06.2010 towards car repair and maintenance. Since, it is an expenditure towards the regular repair and maintenance, therefore, there is no exigency or emergency which would warrant the payment in cash. Further, in view of the provisions of Section 40A(3) r.w. Rule 6DD of the IT Rules the expenditure incurred in cash is not allowable. The assessee has also claimed Rs. 20,400/- incurred on 07.02.2011 towards the repair of break down of car. Since this expenditure was incurred in a peculiar situation and circumstances under which the assessee was not having any option but to get the work done urgently and hence, in such a situation the assessee was bound the pay in cash. Accordingly, the expenditure incurred to get the breakdown of the car repaired will fall in exceptions as provided under 30 ITA No. 230/JP/2016 Shri Raj Kumar Goyal Vs.DCIT, Bharatpur Rule 6DD of the IT Rules and consequently we restrict the disallowance to the extent of Rs. 22,990/-.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 16/01/2018
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