3

the 'Act' for short. Subsequently, on 15.12.2009 and 16.12.2009, a search and seizure action u/s 132 of the Act was carried out at the business premises of the assessee firm and at the residences of the partners. Simultaneously, survey u/s 133A of the Act was also conducted. During this search certain incriminating documents / loose papers and books of accounts were found which were seized. Some documents were seized during survey operation. Consequently, a notice u/s 153A of the Act was issued to this assessee on 14.10.2010. The assessee-firm responded by filing Return of Income [ROI] on 15.03.2011 repeating NIL income as was disclosed in the original return.

2.1 During the course of assessment proceedings computerized books of accounts were produced by the assessee. The assessee-firm also objected to the initiation of action by issuance of notice u/s 153A of the Act. However, the assessment u/s 153A/143(3) was completed on 28.12.2011 at a total income of Rs. 38,55,980/-. In arriving at the above income, the A.O. has made the following additions :-

(i) Addition of Rs. 24,92,130 u/s 68 as per para 4 of the asstt order

(ii) Addition of Rs. 13,36,500 u/s 68 (as per para 6 of the asstt. order

(iii) Other addition of Rs. 27,350/- as per para 7 of the asstt. order

4

2.3 Aggrieved, the assessee-firm filed first appeal and the ld. CIT(A), Jaipur, vide impugned order dated 31.03.2014, has confirmed all the above three additions. Now, the assessee is further aggrieved and has filed this second appeal by raising the following grounds :-

1. a. The id. CIT(A) has erred in sustaining the addition of Rs. 24,92,130/- u/s 68 in relation to cash credits. The addition so sustained is bad in law and bad on facts and is outside the scope of assessment u/s 153A.

b. The Id. CIT(A) has erred in not admitting the evidences submitted before him, and has erred in rejecting the additional evidence despite the fact that full opportunity was also given to the Id. AO to submit his remand report on the evidences submitted.

2. a. The Id. CIT(A) has erred in sustaining the addition of Rs. 13,36,500/- on account of advances received towards sale of plot. The addition sustained is bad in law and bad on facts and is outside the purview of section 153A.

b. The Id. CIT(A) has erred in not admitting the evidences submitted before him, and has erred in rejecting the additional evidence despite the fact that full opportunity was also given to the Id. AO to submit his remand report on the evidences submitted.

5

3. The Id. CIT(A) has erred in sustaining the disallowance -Out of interest amounting to Rs. 27,350/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the

scope of assessment u/s 153A.

4. The interest charged u/s 234B and 234C is bad in law and bad on facts.

5. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in the various years and has also further erred in not granting telescoping effect of the additions sustained.

6. The appellant prays for suitable costs

7. The appellant craves liberty to addition, amend, alter, modify any of the ground of appeal on or before its hearing before your honour."

2.4 We have heard rival submissions and have carefully perused the entire record.

3. The facts apropos ground No. 1(a) 1(b) are that the assessee-firm has shown unsecured loan totaling to Rs. 24,92,130/- from various persons, the details of which are as under :-

6

S.No. Name of person Amount.

1. Sumenesh Vyas 202000

2 Ashok Sharma 252500

3 Jabbar Singh Khinchi 707000

4 Hari Singh Rathore 505000

5 Bhim Singh Rathore 505000

6 Taruna Sharma 90900

7 Rajiv Vyas 111100

The A.O. demanded proof of the above loan in terms of Section 68 of the Act, failing which the A.O. has added Rs. 24,92,130/- u/s 68 of the Act.

3.1 In appeal the assessee produced various evidence to prove this unsecured loan. The additional evidence was dealt with in the light of Rule 46A of the I.T. Rules, 1962 and a remand report was called from the A.O. However, the ld. CIT(A) has ignored the remand report of the

A.O.

3.2 The assessee took a plea that unsecured loan had been disclosed in the original return filed u/s 139(1) of the Act which had already been processed u/s 143(1) of the Act. In the backdrop of these facts it was argued that since no incriminating evidence was found during search relatable to this item of income and the assessee had disclosed

7

all unsecured loans in its original return how can this very loan be considered while framing assessment order u/s 153A r.w.s. 143(3) of the Act. But this argument of the assessee was rejected by ld. CIT(A) on the premise that u/s 153A, unlike block assessment orders, not only undisclosed income but total income has to be computed.

3.3 Before us both the parties have reiterated their earlier arguments. It was argued by ld. A.R. Shri Kothari that original return of income filed before the date of search had already achieved finality as no action u/s 143(2) or 148 of the Act were initiated and the department is trying to assess under the guise of section 153A of the Act, specifically where no incriminating material [evidence] has been found during the course of search relatable to this item of income. Regarding non-submitting of required details before the AO it was submitted that on account of multiple proceedings which were going on and assessment proceedings for various A.Ys. were initiated that too during the last two months when the assessments were getting barred by limitation, the assessee entertained a bonafide belief that all the loans having been received through banking channels and being fully verifiable, these deposits are likely to be accepted particularly when, in assessee's opinion, assessment had already attained finality. It was argued that evidence produced before the ld. CIT(A) are

8

confirmations given by the parties, alongwith their respective PAN etc. It was stated that most of the information were available in record before the AO itself and in any case, very short time was given to produce such evidence by the AO, therefore, the evidence produced before ld. CIT(A) has to be accepted under Rule 46A. It was also stated that the assessments are not made to test assessee's ability to submit evidence/documents but they are framed to determine the 'total income' earned by the assessee during a particular year. According to him the unsecured loans don't represent income of the assessee and that in the case of Shri Ashok Sharma, the creditor, the sale has been made to him and the loan has been adjusted against the sale consideration and has been treated as income. It was stated that the ld. CIT(A) accepted the additional evidence produced before him and sent them to AO who after examining them in detail has submitted his report. In this report he has objected to the admission of the additional evidence but at the same time he has examined them and has verified them. Therefore, according to ld. A.R. the loans stand confirmed and proved by the confirmation of the cash creditors and since these loans have been received through account payee cheques and there being no contrary evidence on record. The ld. AR has placed reliance on many judicial decisions in support of his contention.

9

3.4 Per contra, ld. CIT(DR) Shri O.P. Meena has contested all the above points raised by ld. AR and has relied heavily on the orders of the authorities below. He has stated that the assessee failed to produce any confirmation or proof of the above loans before A.O. He has stated that ld. CIT(A) has correctly refused to accept the additional evidence under Rule 46A. He has further stated that despite the fact that no incriminating evidence was found relatable to these loans the A.O has to compute 'total income' of the assessee u/s 153A and that processing of income u/s 143(1) does not tantamount to making of an assessment order. He has further stated that when the additional evidence has not been accepted these loans cannot be treated as explained even if the AO has examined and verified them on merits. He has also relied on his written submissions and has also placed reliance of the following decisions:-

1. CIT Vs, Ajay Kumar Sharma 259 ITR 240 [Raj]

2. CIT Vs. Elegant Homes Pvt Ltd 259 ITR 232 (Raj.)

3. Cas Card Finance Ltd. Vs. ACIT84 ITD 1 [Ahd.] [TM]

3.5 After considering rival submissions vis-à-vis the facts of this issue we have found it for a fact that the assessee-firm had already filed its Return of Income, long before the date of search i.e., on 15.12.2009. It is an admitted fact that 'no incriminating material' WAS FOUND

10

during search was found relating to these loans. It is also an undeniable fact that the assessee had disclosed these very unsecured loans in its original ROI filed on 03.01.2005 and that the time for making scrutiny assessment U/S 143(3) by issuing notice u/s 143(2) had already expired for this year and for all other assessment years under consideration except for the A.Ys. 2009-10 and 2010-11. We have found that the A.O. had demanded requisite details at the fag-end of the permissible period for completing the assessment. It is also true that assessment proceedings for many years were undertaken simultaneously by the AO. It is true that on the additional evidence produced under Rule 46A, the ld. CIT(A) has chosen to call the report of the A.O and this action OF HIM amounts to acceptance of these evidence. Preliminarily before the A.O the assessee has explained the reasons for its failure to produce the evidence before the A.O due to the above stated reason. In our opinion this reason is sufficient reason to invoke rule 46A, which ld. CIT(A) has indeed done. However, while passing the order he has rejected these evidence without giving opportunity of being heard on this aspect of the matter. The AO has not found any material thing to report that the identity and creditworthiness of the creditors or that the genuinity of these transactions do not stand proved on record. In our considered opinion

11

the evidence produced having been examined by the AO during the remand proceedings is sufficient enough to justify consideration thereof and prove the three ingredients of Section 68 of the Act. The following chart depicts the assessee's submission with regard to these cash credits alongwith proof. The evidence(s) submitted by the assessee-firm are listed at pages 17 and 18 of the written submissions furnished by the ld. A.R of the assessee which is as under:

7. Rajiv Vyas 111000 No PAN No Confirmation.

12

to A.O

^/

3.6 When, admittedly, no incriminating evidence regarding these cash creditors [unsecured loan] were found during search in addition to what had been already disclosed. There is no dispute regarding the fact that no incriminating evidence was found regarding this item of income. This Bench in the case of Suncity Alloys Limited reported in

124 TTJ [Jd] 674 [APB, pg 10] has clearly held that when the return has been filed and attained finality and nothing incriminating was found during search, no further addition can be made in the assessment order

13

framed u/s 153A of the Act. Similar views have been taken in the following decisions:

1. LMJ International Ltd Vs. DCIT 119 TTJ 214 [Cal]

2. Meghmani Organics Ltd. Vs. Dy. CIT 129 TTJ 255 [Ahd]

3. Anil Kumar Bhatia Vs. ACIT [2010] 1 ITR [Trib] 484 [Del]

4. Anil Khemnani Vs. Dy. CIT ITA Nos. 2855 to 1860/Mum/2008 dated 23.2.2010

5. CIT Vs. Murli Agro Products Ltd. [Trib][Mum] dated 29.10.2010

3.7 On the other hand, the decisions on which the ld. CIT-DR has relied are entirely on different facts. The judgment in the case of CIT Vs. Elegant Homes Pvt. Ltd. 259 ITR 232 [Raj] was a case in which the assessee had not filed ROI prior to search and incriminating evidence regarding undisclosed income was found. In that case, it was held that the assessee was required to prove the credits appearing in the paper/seized material. Therefore, the ratio of this judgment is not at all relevant and the decision has been rendered on entirely different facts.

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3.8 Likewise, the judgment in the case of CIT Vs. Ajay Kumar Sharma reported in 259 ITR 240 is again of no help to the Revenue because in that case books of account were found and as per them, the assessee had not offered for taxation the credits shown in the books. In that eventuality, similar decision was taken as was taken in the case of Elegant Homes Pvt. Ltd [supra]. Thus the facts of both these Rajasthan High Court judgments are entirely on different issues and on different footing and are not applicable to the facts of the given case. The decision of Cas Card Finance Ltd of Ahmedabad Bench [supra], a Third Member decision is also having entirely distinguishable facts. In that case, during the course of search, certain incriminating documents were found. Thus this decision is also distinguishable and the ratio rendered in that case will not apply to the facts of the present case.

3.9 Accordingly, in the light of the above discussion we are of the considered opinion that the addition of Rs. 24,92,130/- is not justified and deserves to be deleted. As a result we order deletion of addition of Rs. 24,92,130/- and allow ground No. 1(a) and 1(b) of assessee's appeal.

15

4. The facts propos ground No. 2(a) and 2(b) of this appeal are that the assessee has shown advances given for purchases of land totaling to Rs. 13,36,500/- in the liability side of the Balance Sheet. The details of these advances are as under:-

The assessee was asked to prove these advances. In the similar

manner, as was done in case of cash creditors the AO made addition of

Rs. 13,36,500/-.

4.1 In first appeal, the ld. CIT(A) called for the remand report of the AO but did not accept the evidences produced under Rule 46A and has confirmed this addition as well.

16

4.2 Before us similar arguments have been repeated by both the parties. Almost similar contention, as raised regarding cash creditors have been raised regarding this addition also.

4.3 After hearing both the sides we have found that no incriminating evidence was found during search regarding these advances. These have already been shown in the original return of income. The assessee produced proof to prove these advances. The AO has sent his remand report after verifying them. It is noticed that the assessee had received advances against sale of property which were adjusted against sale made subsequently. In any case this receipt cannot partake the character of income. The position of advances and subsequent sale made against these advances is revealed at pages 19 and 20 of the written submissions filed by the ld. A.R of the assessee.

4.4 In the above scenario, we have found that this claim of the assessee is quite justified. The impugned addition deserves to be deleted. The decision referred to above in relation to addition made u/s 68 of the Act also applies to greater extent for this issue as well. Accordingly, with similar reasoning we order deletion of this amount as well and allow ground No. 2(a) and 2(b) of assessee's appeal.

17

5. The ground No. (3) is relating to disallowance of interest of Rs. 27,350/- out of interest paid to lenders. Since we have already accepted the loans as genuine and this interest amount of Rs. 27,350/- was mainly disallowed because the loan was held ingenuine, has to be allowed. Accordingly, we delete this addition of Rs. 27,350/- and allow ground No. 3 of assessee's appeal.

6. Ground No. (4) is regarding charging of interest u/ss 234B and 234B. Since the charging of interest is mandatory, only consequential relief is admissible. Accordingly, we don't allow this ground and dismiss the same.

7. Ground No. (5) has become of academic interest only, as we have not sustained any addition which can be set off against the surrendered income. Hence, this ground is dismissed on that score.

8. Ground No. 6 was not pressed at the time of hearing. Therefore, this ground is also dismissed as not argued. Ground No. (7) is general in nature and does not require any adjudication.

9. In the result the appeal in ITA No. 251/Jodh/2014 for A.Y. 2004- 05 is partly allowed.

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ITA No. 347 and 252/Jodh/2014 (A.Y. 2005-06)

10. These are cross appeals filed against the order of ld. CIT(A), Jaipur dated 31.03.2014.

11. The assessee has raised following grounds in its appeal :-

1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 2,94,390/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A.

2. The Id. CIT(A) has erred in sustaining the disallowance of Rs. 8,86,880/- made u/s 40(a)(ia) and Rs. 38,050/- out of expenses on the basis of original assessment. The addition so sustained is bad in law and bad on facts.

3. The interest charged u/s 234B and 234C is bad in law and bad on facts.

4. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in the various years and has also further erred in not granting telescoping effect of the additions sustained.

5. The appellant prays for suitable costs

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6. The appellant craves liberty to addition, amend, alter, modify any of the ground of appeal on or before its hearing before your honour."

12. The revenue has raised the following grounds in its appeal :-

"Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 10,80,000/- made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made."

13. We have heard rival submissions. In assessee's appeal ground No. 1, 3, 4 and 5 are same and similar to the grounds raised in A.Y. 2004-

05. The arguments of both the parties regarding then are also identical. Therefore, with similar reasoning, as given in A.Y. 2004-05, as above, we dispose of them and allow ground No. (1) but dismiss ground Nos. 3, 4 and 5 of assessee's appeal.

20

14. The ground No. 2 of assessee's appeal is regarding sustained addition of Rs. 8,86,880/- made u/s 40(a)(ia) of the Act and Rs. 38,050/- out of expenses on the basis of original assessment. In fact, total addition of Rs. 10,86,632/- was made in the assessment order passed u/s 143(3) of the Act. This addition included a sum of Rs. 8,86,880/- made u/s 40(i)(a) and of Rs. 38,050/- made on account of various expenses. This addition has been confirmed by the ld. CIT(A) as well as Appellate Tribunal and the appeal of the assessee is stated to be pending before the Hon'ble Jurisdictional High Court. Therefore, we do not interfere in this issue and the A.O has to follow and apply the verdict finally given by the High Court. Till then, we cannot allow the ground No. 2 of assessee's appeal and dismiss the same.

15. In the result, the appeal of the assessee is partly allowed.

16. In revenue's appeal the only effective ground is ground No. 1(i) which relates to deletion of addition of Rs. 10,80,000/- added by the AO u/s 40A(3) of the Act. The facts apropos, this ground are that the assessee made payment of Rs. 54 lakhs to various parties towards the purchase of agricultural land (page 2 para 5 of AO's order). However, even after mentioning, as above, he has invoked the provisions of

21

Section 40A(3) and after disallowing 20% of this payment of Rs. 54 lakhs has added a sum of Rs. 10,80,000/-.

17. Before ld. CIT(A) the assessee was successful. The ld. CIT(A) has followed the Tribunal Order in the case of Smt. Jiya Devi, another assessee of this group in which on identical facts the jurisdictional Tribunal has deleted addition so made in her hands. But, the revenue is now aggrieved. The contention of ld. CIT(DR) that the payment was not made against a agricultural land but it was paid for purchasing stock-in-trade. We have considered this submission of ld. CIT(A) and have found that Smt. Jiya's case, the facts are exactly identical. The reason for addition are also exactly the same. However, on similar facts and identical contention of the parties, the Jodhpur Bench of ITAT in ITA nos. 211 and 212/Jodh/203 in the case of Smt. Jiya Devi Sharma (A.Y. 2008-09 and 2009-10) order dated 20.09.2013, has deleted similar addition. The ld. CIT(A) has followed this decision for deleting impugned addition. Before us both the parties have reiterated their earlier arguments. We have gone through para 5.3 of the order of the Tribunal dated 20.9.2013 [supra]. This para 5.3 of the Tribunal order reads as under:

22

"5.3 We have heard rival submissions. Both parties have reiterated their old stand. We have found that the payment to agriculturists were made under circumstances which are excluded under the provisions of Rules. The agricultural land cannot be converted to stock in trade until permission is obtained and the provisions of section 40A(3) of the Act cannot be invoked in this case according to the prevailing law. Principles of section 40A(3) of the Act cannot be invoked in respect of agricultural land. In this regard the decision of the Hon'ble Supreme Court in the case of Gopal Sugar Mills reported at 40 ITR 618, is relevant. Accordingly, we order to delete the impugned deletion of Rs. 4,80,000/- made in this regard and allow ground No. 4 of this appeal."

Thus, we are convinced that the facts of this issue are identical in Jiya Devi Sharma's [group case]. BY respectfully following this order the ld. CIT(A) has taken his decision. How can we deviate from this finding of our own Bench. Accordingly, we do not find any merit in this ground of revenue's appeal and dismiss it.

18. In the result, the appeal of the assessee is partly allowed and that of the revenue is dismissed.

23

ITA No. 253 and 348 /Jodh/2014 (A.Y. 2007-08)

19. These are cross appeals, filed against the order of ld. CIT(A), Jaipur, dated 31.03.2014. The assessee has raised the following grounds in its appeal:-

"1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 1,83,869/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A.

2. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in various years and has also further erred in not granting telescoping effect of additions sustained.

3. The interest charged u/s 234B and 234C is bad in law and bad on facts."

20. The revenue has raised the following grounds in its appeal :-

i). Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 35,20,000 made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land

24

were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made.

(ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)—1, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 13,05,700/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding."

21. We have heard the rival submissions. All the grounds in both the above appeals, except for the ground No. (ii) in revenue's appeal, are identical. Therefore, with similar reasoning as we have given in earlier year we partly allow assessee's appeal and dismiss ground No. (i) of revenue's appeal.

22. The facts apropos ground No. (ii) of Departmental appeal are that the assessee has claimed land development expenses at Khasra No. 374 of Rs. 12,99,400/- and shop construction expenses of Rs. 13,12,000/-. The AO has disallowed 50% of these expenses on ad-hoc, because according to him these expenses are not fully verifiable. In appeal, the ld. CIT(A) has deleted the entire disallowance on the basis of the reasoning given by the Tribunal in the group case of Smt. Jiya

25

Devi Sharma (supra) judgment in which similar additions have been deleted. Before us arguments of the parties remained the same. We have also found that the reason for addition in this group case are identical. The Tribunal has deleted this addition. Therefore, by respectfully following our order in Smt. Jiya Devi's order we confirm the impugned deletion and dismiss ground No. (ii) of revenue's appeal. In all other appeals for A.Ys. 2008-09, 2009-10 and 2010-11 this Ground [Ground No. ii] are exactly identical except for the amounts of disallowance.

23. In the result, the appeal of the assessee is partly allowed and that of the revenue is dismissed.

ITA No. 254 and 349/Jodh/2014 (A.Y. 2008-09)

24. These are cross appeal, filed against the order of ld. CIT(A), Jaipur, dated 31.03.2014. The assessee has raised following grounds:-

"1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 1,99,707/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A.

26

2. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in various years and has also further erred in not granting telescoping effect of additions sustained.

3. The interest charged u/s 234B and 234C is bad in law and bad on facts."

25. The revenue has raised following grounds :-

i). Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 2,10,00,000 made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made.

(ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)—1, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 9,37,675/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding.

iii) Whether on the facts and in the circumstances of the case CIT(A)-i, Jaipur has erred on facts in deleting the addition of Rs.32,00,200/- made by the AO on account of investment

27

treated as unexplained u/s 69 of the I.T. Act, 1961, ignoring the fact that the appellant has consistently failed to furnish any details or any substantiating evidences, in spite of granting of reasonable and sufficient opportunities during the assessment proceeding or even during the appellate proceedings to explain the sources of investment made in the said property"

26. We have heard rival submissions. As is evident from the grounds and also concurred by the parties that except for the ground No. (iii) in revenue's appeal all other grounds in both the appeals are exactly identical to the grounds raised in earlier appeals. Accordingly, we take the same view for these issues as we have taken in earlier years resulting in partly allowance of assessee's appeal and dismissal of Ground No. (i) and (ii) of Revenue's. The ground No (iii) in revenue's appeal for A.Y. 2008-09 is regarding deletion of an addition of Rs. 32,00,200/-

27. The facts of this ground of Revenue's appeal are that the assessee has invested a sum of Rs. 32,00,200/- towards the purchase of a plot of land described as Plot No. 44 in the Artisan Colony for the construction of a office complex. During the assessment proceedings the assessee was requested to explain the source(s) of this investment.

28

Vide questionnaire dated 7.10.2011 when no satisfactory reply was filed by the assessee, the A.O added this amount of Rs. 32,00,200/- in its hand.

28. The ld. CIT(A) has deleted this addition after discussing this issue in paras 8 to 9.1 at pages 8 to 10 of his order. He has observed that the source of this investment stands explained. He has followed the decision of the Appellate Tribunal, Jodhpur Bench, rendered in the group case of Shri M.D. Sharma in ITA No. 213 to 215/JU/2013 dated 24.9.2013. Before us both the parties have reiterated their earlier arguments, both the parties have made their similar arguments as were made before the ld. CIT(A). The ld. CIT[DR] has filed a written submission, which is as per the submission of the A.O. We have gone through these written submissions as well. We have perused the Tribunal order dated 24.9.2013 [supra].

29. After considering the rival submissions the entire gamut of facts in their proper perspective, we have found that the facts in M.D. Sharma's case, supra are mutatis mutandis same to similar. The arguments of both the sides, on merits of this issue are also identical. The ld. CIT(A) has deleted this addition by following para 5.2 of the

29

above said order dated 24.9.2013. The ld. CIT(DR) has also admitted this fact in his written submissions. Because the Department has filed appeal against this order, the Tribunal order does not get effaced until it is reversed or its operation is stayed. Accordingly, there is no merit in this ground of Revenue's appeal and we dismiss the same. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed.

ITA NO. 350 AND 255/JODH/2014 (A.Y. 2009-10)

30. These are cross appeals filed against the order of the ld. CIT(A) dated 31.3.2014.

31. The assessee has raised the following grounds:

"1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 2,21,203/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A.

2. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in various years and has also further erred in not granting

30

telescoping effect of additions sustained.

3. The interest charged u/s 234B and 234C is bad in law and bad on facts."

32. The Revenue has raised the following grounds:

i). Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 2,10,00,000 made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made.

(ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)—1, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 9,37,675/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding. ITA No. 256 AND 351/JODH/2014 (A.Y. 2010-11)

33. These are cross appeals filed against the order of the ld. CIT(A) dated 31.03.2014.

31

34. The assessee has raised the following grounds:

"1. The Id. CIT(A) has erred in sustaining the disallowance out of interest amounting to Rs. 3,65,039/- out of interest payment claimed by the appellant. The addition so sustained is bad in law and bad on facts and outside the scope of assessment u/s 153A.

2. The Id. CIT(A) has erred in not granting telescoping effect of income already surrendered by the appellant in various years and has also further erred in not granting telescoping effect of additions sustained.

3. The interest charged u/s 234B and 234C is bad in law and bad on facts."

35. The revenue has raised the following grounds:

(i) Whether on the facts and circumstances of the case, the Ld. CIT(A)-I, Jaipur has erred in law and on facts in directing to delete the addition of Rs. 65,10,000/- made by the AO on account of disallowance u/s 40A(3) of the I.T. Act, 1961 in respect of purchase of agricultural land ignoring that the land were stock-in-trade of the assessee and also ignoring the fact that the appellant had failed to substantiate the exceptional conditions under which the cash payments were made.

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(ii) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur ha& erred in law and on facts in directing to delete the addition of Rs. 31,44,125/- made by the AO on account of 50% disallowance out of the land development expenses, ignoring the fact that the assessee consistently failed to furnish any evidence despite opportunities given during assessment as well as during appellate proceeding.

(iii) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the substantive addition of Rs. 94,00,000/- made by the AO on account of unexplained investment in construction of properties, ignoring the fact that this was part of the undisclosed income of the assessee disclosed u/s 132(4) of the I.T. Act, 1961 on the basis of seized documents which was offered for taxation in the hands of the assessee firm.

(iv) Whether on the fact and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the substantive addition of Rs. 94,00,000/- made by the AO on account of unexplained investment in construction of properties ignoring the fact that the assessee has consistently failed to furnish any details nor any substantiating evidences such as fund flow statement, sources of investment, bills voucher complete books of accounts etc. in spite of granting reasonable and sufficient opportunities during the

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assessment proceedings or even during the first appellate proceedings to justify the claim regarding genuineness of the expenditure.

(v) Whether on the facts and circumstances of the case, the Ld. CIT(A)-1, Jaipur has erred in law and on facts in directing to delete the protective addition of Rs. 9,51,465/- made by the AO on the basis of difference of cost of construction estimated in the valuation report of three properties and as shown by the assessee, ignoring the fact that the assessee has failed to file any details or evidences regarding construction activities before the A.O or the DVO or even before the ld. CIT(A).

36. We have heard the rival submissions and have carefully perused the relevant material on record. The first ground of assessee's appeal which is regarding claim of interest paid on unsecured loan of Rs. 3,65,039/- has to be allowed as we have already held that the unsecured loan stands explained. Accordingly, Ground No. (1) of assessee's appeal stands allowed. Other grounds are dismissed with similar reasoning as we have given in A.Y. 2004-05 and 2005-06 etc. In the result, the appeal of the assessee is partly allowed.

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37. Ground No. 1 of the Departmental appeal is identical to Ground No. 1 taken in other A.Ys. We have deleted the additions made u/s 40A(3) made in respect of payment made for the purchase of agricultural land. With the same reasoning, we dismiss ground No. (1) of Revenue's appeal.

38. Similar is the position of Ground No. (ii) which relates to 50% disallowance out of the development expenses claimed by the assessee. We have dismissed the common issue, in earlier years. Following our view, we dismiss Ground No. (ii) of A.Y. 2010-11 as well.

39. Ground No. (iii) and (iv) of Departments appeal are in relation to deletion of an addition of Rs. 94,00,000/-. To explain the reasons for addition by the A.O and the reasons for deletion given by the ld. CIT(A), as well as the written submission of the ld. CIT(DR) in this respect, we incorporate para 4 at pages 5 to 8 of written submissions of the Department filed for A.Y. 2010-11 which reads as under:

"During the course of search action, various issues were noticed on the basis of material found and seized and confronted to the various assessees of this group. In response, the main person of the group namely Shri

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Murlidhar Sharma, who is also a partner in the assessee firm, had admitted unexplained investment/ expenditure/ undisclosed assets in his hands as well as in the hands of the assessee firm . Details of which are mentioned in the Asstt. order. (Para 7, pages 3 to 5).

On examination of the records during the assessment proceedings it was noticed that the assessee failed to disclose the surrendered amounts fully in its return of income for various AY's. The surrender made by the assessee during the course of search was on the basis of specific seized documents which pertained to the assessee and seized from their premises. Further, the assessee surrendered the amount voluntarily and under the statement taken on oath and recorded u/s 132(4) which have evidentiary value and binding on the assessee. Further any of the assessees of the group had not filed any retraction at any stage.

The assessee has failed to either offer for taxation the incomes disclosed during the search and failed to specify the manner in which the such income has been derived or to substantiate the manner in which the undisclosed income was derived and to pay the tax in respect of the said undisclosed incomes. Therefore, after granting opportunity, the assessment was finalized. From the discussion made in the assessment order it was concluded fact that the assessee has completely failed to substantiate his claim with corroborative evidence.

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Thus, following transactions/investments remained unexplained and the same i.e. Rs. 1,29,00,000/- were

Out of total additions of Rs. 1,29,00,000/-, additions of Rs.

35 Lacs as per Anx-A-18, on account of building materials for the residence under construction was made on substantive basis in the hands of Shri Murlidhar Sharma and the other additions aggregating to Rs. 94 Lacs brought to tax in the hands of Shri Murlidhar Sharma.

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consisting of Rs. 25 Lacs for construction of farm house, Rs.

4 Lacs as per page No. 2 of A-34, Rs. 30 Lacs as per Anx-A- 33 were made on substantive basis in the hands of M/s Aayshi Builders & Developers and in the hands of Shri Muralidhar Sharma on protective basis. The Ld. CIT(A) has discussed the issue in paras 8 to 9.2(page 9-15) of his appellate order. He has observed that the appeal in the case of Shri M. D. Sharma was decided by the Hon'ble ITAT, Jodhpur Bench vide ITA No. 213 to 215/Jodh./2013 for A.Y. 2005-06, 2006-07 & 2010-11 dated 24/09/2013 and the Hon'ble ITAT while deciding the issue of Rs. 35 Lacs added in the hands of Shri M. D. Sharma on account of purchase of building material for construction of residential house had gone through the details of entire addition made by the AO amounting to Rs. 1,29,00,000/-. In view of the said finding of the Hon'ble ITAT reproduced in para 9.1 of his order has held that the addition made by the AO in the hands of the appellant does not survive. He has therefore, directed to delete the addition of Rs. 94 Lacs made in this case.

In this connection, it is submitted that the Hon'ble ITAT in its order in the case of Shri M.D. Sharma had directed to delete the substantive addition of Rs. 35 lakhs, made on account of purchase of building material for purchase of residence house in his case for the A.Y. 2010-

11. The Hon'ble ITAT has also dismissed the ground No. 2

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and 3 taken in the Revenues's appeal in that case regarding addition made on account of undisclosed income of Rs. 94,00,000/- on protective basis and set off of undisclosed income, as decided in the assessee's appeal. The Hon'ble ITAT has observed that from the perusal of the details it became evidently clear that the assessee had not retracted the surrender. The Hon'ble ITAT has accepted the assessee's contention that surrender of incomes of Rs. 20 Lakhs (A.Y. 2007-08) Rs. 13 Lakhs (A.Y. 2005-06 and A.Y. 2006-07) (8,00,000 + 5,00,000), Rs. 30 lakhs (A.Y. 2008-09) and Rs. 50 Lakhs (A.Y. 2009-10) was made against which the assessee has shown Rs. 35 Lakhs (Construction of house) Rs. 35 Lakhs (Construction of Complex) Rs. 25 Lakhs (farm house) and thus, had only claimed credit of the income available with him on account of various incomes surrendered by him in the various years prior to search. The Hon'ble ITAT has also observed that the assessee produced complete books of accounts, alongwith fund flow statement to indicate the availability of fund to make various investment as shown above. Thus, the assessee has produced certain additional evidences for the first time at the level of the Hon'ble ITAT as the working of fund flow statement, sources of investment etc. were not produced even at the first appellate proceedings.

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The Hon'ble ITAT Jodhpur Bench decision in the case of Shri Murlidhar Sharma in ITA Nos. 213 to 215/Jodh/2013 for the A.Y. 2010-11 dated 24/09/2013 has not been accepted by the Deptt. and a further appeal u/s 260A of the I.T. Act, 1961 has been filed before the Hon'ble Rajasthan High Court on 19/02/2014 which is pending for decision. Therefore, a further appeal was recommended on this ground in this case also.

From the facts discussed by the AO in the assessment order and the findings of the Ld. CIT(A), it appears that decision the Ld. CIT(A) is not acceptable/justified for the following reasons:-

(i) The Hon'ble ITAT Jodhpur Bench decision in the case of Shri Murlidhar Sharma in ITA Nos. 213 to 215/Jodh/2013 for the A.Y. 2010-11 dated 24/09/2013 has not been accepted by the Deptt. and a further appeal u/s 260Aof the I.T. Act, 1961 has been filed before the Hon'ble Rajasthan High Court on 19/02/2014 which is pending for decision.

(ii) The surrender made voluntarily by the main person of the group namely Shri Murlidhar Sharma, who is also a partner in the assessee firm, during the course of search was on the basis of specific seized documents which pertain to the assessees of the group and seized from their premises. Further, the partner of the assessee-: firm had surrendered the amount voluntarily and under the statement taken on

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oath and recorded u/s 132(4) which have evidentiary value and hence is binding on him as well as the assessee-firm. Further the assessee had not filed any retraction at any stage. Thus, no case was made for retraction at any stage.

(iii) The assessee has failed to offer for taxation the true and correct incomes even the disclosed during the search and failed to specify the manner in which the such income has been derived or to substantiate the manner in which the undisclosed income was derived and investments made out of the said undisclosed incomes, with corroborative evidences.

In the statements recorded u/s 132(4), each and every pages were confronted to the assessee and after carefully analysis of facts, better known to the partner and the assessee- firm at that time in full conscious, the partner had offered undisclosed income on account of various head (as stated above) for taxation for various A.Ys. During the course of assessment proceedings, each & every page even each and every entries were again confronted to the assessee vide this office various query letters & assessee was also asked to substantiate his claim with cogent and concrete evidences to prove the claim. But submission of assessee has not found supported with corroborative evidence & found in very casual nature.

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(iv) On going through the statements and other proceedings during the search, it was noticed that the books of accounts have not been maintained on regular basis. During the course of the search operation, the assessee has accepted categorically that he has not maintained his regular books of accounts. He has also accepted that the loose papers note books etc. found during search pertain to his firm's business. No regular books of accounts were found either hard copies or in the computers etc. during search. Thus it is established that the assessee has not maintained his regular books of accounts and the returns of income, wherever filed were filed without proper basis or supporting evidences. Some of such evidences were produced before the Hon'ble ITAT for the first time in the case of Shri M.D. Sharma.

(v) As discussed in the assessment order, the assessee has completely failed to substantiate his claim with corroborative evidence. The primary onus lies upon the assessee to explain each and every entry as well as transactions appearing the entire seized material has not been attempted to be discharged. However, on under oath, the unexplained investment/ expenses/ advances, outside the books of account, which were not regularly maintained and not declared in return of income, were offered for taxation u/s. 132(4) but the assessee has not declared the same in the return filed,

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nor were retracted.

vii) The first appeals in respect of the substantive addition aggregating to Rs. 94 Lakhs made in the case of the firm M/s Ayushi Builders & Developers has been decided now by the Ld. CIT(A). The Hon'ble ITAT's finding in the case of Shri M. D. Sharma that the sustenance of the substantive addition even in the hands of the firm was not correct has been made without considering the facts relating to the pending appeal in the case of the firm and also ignoring the fact that Shri M. D. Sharma the assessee himself had voluntarily made surrender u/s 132(4) during search, as a partner and offered for taxation in the case of the firm only. Thus, the Hon'ble ITAT's finding made in the case of Shri M. D. Sharma on the issue regarding M/s Ayushi Builders and Developers without considering, overall facts of the case, may be termed as perverse.

viii) The assessee has failed to honour the voluntary surrender made u/s 132(4) of the I.T. Act, 1961 during search operation which was made on the basis of seized papers, documents, assets etc. Further the assessee has failed to make any valid retraction. Therefore, the surrender made u/s 132(4) was binding on the assessee. Reliance in this regard is placed in the following judgments:-

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(i) Bhagirath Agarwal V/s CIT (2013) 351 ITR 143 (Delhi)

ix) Shri Murlidhar Sharma had surrendered income in respect of unaccounted income of the commission, trading business. A part of the said income must be invested in the assessee's goods i.e. Lands, Plots etc. which were traded and hence it cannot be interpreted that the entire surrendered income was considered for investment in the construction of properties. The Hon'ble ITAT has not considered this aspect, while deciding the issue relating to protective addition in the case of Shri M. D. Sharma. The assessee during the assessment proceedings, or even at the appellate proceedings, has failed to substantiate his claim regarding telescopy of surrendered income with reference to any corroborative evidences to support his claim of investments.

x) The Hon'ble ITAT's observation in the case of Shri M. D. Sharma that the undisclosed income was earned by the assessee and utilized in the investment in construction and such income does not relate to the firm as the funds were available with the partners and the credit of the same was shown by them towards investment. Therefore, it has held that separate addition cannot be made on such expenditure. The Hon'ble ITAT has made those observations in the case of the firm without considering the facts of the firm, in respect of the appeals which were pending at that time.

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In this connection it is submitted that the Hon'ble ITAT decision on this issue where the addition was made on substantive basis in the case of Shri M. D. Sharma in its common order in ITA No. 213 to 215/Jodh./2013 for the A.Y. 2010-11 has not been accepted by the department and a further appeal u/s 260A of the I. T. Act has been filed before the Hon'ble Rajasthan High court on 19/02/2014 which is pending for decision. The decision regarding filing of appeal u/s 260A of the I. T. Act, 1961 in the case of Shri M. D. Sharma in ITA Nos. 213 to 215/Jodh./2013 for the A.Ys. 2006-07 & 2010-11 was communicated to this office vide the CIT(C), Jaipur office letter no. CIT(C)/Tech./JPR/CSR/2013-14/3203 Dt. 14/02/2014. Therefore, a further appeal to the Hon'ble ITAT on this issue has been filed in this case.

In view of the above, it is submitted that the Ld. CIT(A) has erred in directing to delete the said addition and hence the Hon'ble ITAT may kindly be requested to set-aside the order of the Ld. CIT(A) and uphold the addition made by the AO on this ground as discussed in the assessment order."

Thus it becomes very obvious that this bench has taken a view on this issue as discussed in the written submissions of the Department itself. For keeping the consistency we cannot deviate from our above view which has been taken after considering entire gamut of facts and after

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hearing both the parties. Accordingly, we cannot allow Ground Nos.

(iii) and (iv) of Department's appeal and therefore, dismiss them both.

40. Ground No. (v) is in relation to deletion of addition of Rs. 9,51,465/- made by the A.O on the basis of difference of cost of construction estimated in the valuation report in respect of the properties. For complete detail of this issue, we chose to extract para, at page 8 of the written submissions filed by the ld. CIT(DR). This para reads as under:

"During the assessment proceedings, a reference was made to the Valuation Cell U/s 142A of the Income Tax Act, 1961 for determining the construction of following properties:

1. Commercial complex on plot No. 44, Artisan Colon, Masuria, Jodhpur

2. Farm House at Vaibhav Enclave, Village Pai, Jaisalmer Road, Jodhpur.

3. Residential house at 221-222, Shyam Nagar, Pai Link Road, Jodhpur

The Valuation Officer vide his reports dated 28.12.2011 determining the cost of constructions of these properties for A.Y. 2010-11 as under:-

1. Commercial complex on plot No. 44, Artisan Colon, 2. Masuria, Jodhpur Rs. 16184200/-

2. Farm House at Vaibhav Enclave, Village Pal, Jaisalmer Road, Jodhpur. Rs. 11751000/-

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3. Residential house at 221-222, Shyam Nagar, Pal Link Road, Jodhpur Rs. 16763800/- From the report of the Valuation Officer, it was conclusively established that cost of construction of the said properties invested by the assessee and Shri M. D. Sharma in the under consideration was Rs. 44699000/-. The assessee has not submitted any details of expenditure incurred on construction of properties before the AO, the DVO, whereas in the returns of income filed, he claimed to have invested Rs. 34747535/- for construction of these properties. Thus, there was difference in valuation works out to Rs. 9951465/- and this amount of Rs. 9951465/- was treated as Unexplained Investment U/s 69 of the I.T. Act in respect of the assessee's residence. However, addition of Rs. 9000000/- was made under the head "surrender of income" on account of unexplained investment in construction, therefore, the remaining amount of Rs. 951465/- was added to the total income of Shri Murlidhar Sharma on substantive basis and in the case of the assessee on protective basis.

The Ld. CIT(A) in its order has discussed the issue at para 10 to 11 (pages 15-18) and has observed that the substantive addition made in the hands of Shri M. D. Sharma was deleted by the Hon'ble ITAT in its common order in ITA Nos. 213 to 215/Jodh/2013. Therefore, the Ld. C'IT(A) has held that the addition made on protective basis in the hands of the appellant does not survive and

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accordingly has directed to delete the addition made in this case.

In this connection it is submitted that the Hon'ble ITAT decision on this issue where the addition was made on substantive basis in the case of Shri M. D. Sharma in its common order in ITA No. 213 to 215/Jodh./2013 for the A.Y. 2010-11 has not.bee accepted by the department and a further appeal u/s 260A of the I. T. Act has been filed before the Hon'ble Rajasthan High court on 19/02/2014 which is pending for decision. The decision regarding filing of appeal u/s 260A of the I. T. Act, 1961 in the case of Shri M. D. Sharma in ITA Nos. 213 to 215/Jodh./2013 for the A.Ys. 2006-07 & 2010-11 was communicated to this office vide CIT(C), Jaipur office letter no. CIT(C)/Tech./JPR/CSR/2013-14/3203 Dt. 14/02/2014. Therefore, a further appeal to the Hon'ble ITAT on this issue has been filed in this case.

In view of the above, it is submitted that the Ld. CIT(A) has erred in directing to delete the said addition and hence the Hon'ble ITAT may kindly be requested to set- aside the order of the Ld. CIT(A) and uphold the addition made by the AO on this ground as discussed in the assessment order."

The position of this issue is also similar. The ld. CIT(A) has followed our view taken in the group cases to which this assessee belongs to.

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Hence, we do not find any infirmity in the impugned finding and therefore, dismiss Ground No. (v) of Department's appeal.

41. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed.

42. To sum up, in the result assessee's appeals in:

ITA No. 251/Jodh/2014 (A.Y. 2004-05) stands partly allowed. ITA No. 252/Jodh/2014 (A.Y. 2005-06) stands partly allowed ITA No. 253/Jodh/2014 (A.Y. 2007-08) stands partly allowed ITA No. 254/Jodh/2014 (A.Y. 2008-09) stands partly allowed ITA No. 255/Jodh/2014 (A.Y. 2009-10) stands partly allowed ITA No. 256/Jodh/2014 (A.Y. 2010-11) stands partly allowed Revenue's appeals in:

ITA No. 347/Jodh/2014 (A.Y. 2005-06) stands dismissed ITA No. 348/Jodh/2014 (A.Y. 2007-08) stands dismissed ITA No. 349/Jodh/2014 (A.Y. 2008-09) stands dismissed ITA No. 350/Jodh/2014 (A.Y. 2009-10) stands dismissed ITA No. 351/Jodh/2014 (A.Y. 2010-11) stands dismissed Order pronounced in open court on 14^thAugust 2014. Sd/- Sd/-

(N.K.SAINI) [HARI OM MARATHA]

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 14^thAugust, 2014 VL/-

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Copy to:

1. The Appellant

2. The Respondent

3. The CIT By Order

4. The CIT(A)

5. The DR Senior Private Secretary ITAT, Jodhpur