The ACIT, Circle-3,, Surat v. Shri Natwarlal C.Bhandari, Surat

ITA 2901/AHD/2009 | 1995-1996
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 290120514 RSA 2009
Assessee PAN OWNED9200S
Bench Ahmedabad
Appeal Number ITA 2901/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 16 day(s)
Appellant The ACIT, Circle-3,, Surat
Respondent Shri Natwarlal C.Bhandari, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-07-2011
Date Of Final Hearing 05-07-2011
Next Hearing Date 05-07-2011
Assessment Year 1995-1996
Appeal Filed On 22-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BE NCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON BLE SHRI A. MOHAN ALANKAMONY A.M.) I.T.A. NO. 2901/AHD./2009 : ASSESSMENT YEAR : 1995-1996 A.C.I.T. CIRCLE-3 SURAT VS- SHRI NATWARLAL C. BHANDARI SURAT (APPELLANT) (RESP ONDENT) I.T.A. NO. 2902/AHD./2009 : ASSESSMENT YEAR : 1995-1996 A.C.I.T. CIRCLE-3 SURAT VS- SHRI HASMUKHLAL C. BHANDARI SURAT (APPELLANT) ( RESPONDENT) C.O. NO.287/AHD./2009 : ASSESSMENT YEAR : 1995-1996 (ARISING OUT OF I.T.A. NO. 2901/AHD./2009 ) SHRI NATVARLAL C. BHANDARI SURAT -VS- A.C.I.T. CIRCLE-3 SURAT C.O. NO.288/AHD./2009 : ASSESSMENT YEAR : 1995-1996 (ARISING OUT OF I.T.A. NO. 2902/AHD./2009 ) SHRI HASHMUKHLAL C. BHANDARI SURAT -VS - A.C.I.T. CIRCLE-3 SURAT DEPARTMENT BY : SHRI G.S.SOURYAWAN SHI SR.D.R. ASSESSEE BY : SHRI R.N.VEPARI O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE REVENUE AND TWO CRO SS OBJECTIONS FILED BY TWO DIFFERENT ASSESSEES ARE AGAINST TWO SEPARATE ORDERS OF LD. CIT(A)-II SURAT BOTH DATED 08- 07-2009 FOR THE ASSESSMENT YEAR 1995-1996. IN THESE APPEALS COMMON ISSUES ARE INVOLVED AND THESE WERE ARGUED BY THE COMMON REPRES ENTATIVE THEREFORE THESE ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVEN IENCE. 2. FIRST WE TAKE UP BOTH THE APPEALS OF THE REVENUE . THE FACTS IN BRIEF ARE THAT SHRI HASHMUKHLAL C. BHANDARI AND SHRI NATVARLAL C. BHAND ARI ARE BROTHERS. BOTH THE ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 2 ASSESSEES ALONG WITH FIVE CO-OWNERS OWNED 9200 SQ.M TS OF LAND OUT OF WHICH 500 SQ.MTS WAS CONVERTED INTO STOCK-IN-TRADE IN THE YEAR 1991- 92. THIS LAND WAS DEVELOPED THROUGH M/S. PRASANNA BUILDERS TO WHOM THE ASSESSEE INITIAL LY CLAIMED TO HAVE PAID A SUM OF RS.15 LAKHS AS DEVELOPMENT CHARGES. THE 500 SQ.MTS OF LAND WAS SOLD AND THE CONSIDERATION WAS DISCLOSED AS BUSINESS INCOME. THE BALANCE 8 700 SQ.MTS WAS SOLD OUTRIGHT. THE TOTAL CONSIDERATION AGAINST THE SALE OF 9 200 SQ.MTS OF LADN WAS RS.1 37 50 000/-. THE AO TOOK THE VIEW THAT SINCE T HE ASSESSEE HAD CONVERTED 500 SQ.MTS INTO STOCK-IN-TRADE THE REMAINING LAND WAS ALSO TO BE TREATED AS STOCK-IN-TRADE AND NOT AS A CAPITAL ASSET. THEREFORE THE AO AFTER REDUCING THE PAYMENT OF RS.15 LAKHS MADE TO M/S. PRASANNA BUILDERS WHICH HE TREATED AS EXPEND ITURE ON THE LAND FROM THE TOTAL SALE CONSIDERATION OF RS.1 37 50 000/- HE ARRIVED AT A FIGURE OF RS.1 22 50 000/- AS INCOME EARNED BY ALL THE CO-OWNERS. IN THE CASE OF HASHMUK HLAL C. BHANDARI IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE AO (PARA-7 PAGE-6 ) THE ASSESSEE SUBMITTED THAT THE SUM ACTUALLY PAID TO M/S. PRASANNA BUILDERS WAS RS. 20.52 LAKHS WHICH THEY HAD INCURRED ON BEHALF OF THE CO-OWNERS IN ACCORDANCE WITH THE AGREEMENT ENTERED INTO WITH THEM. THE REMAINING LAND OF 8 700 SQ.MTS HAD BEEN SOLD OU TRIGHT TO 19 PARTIES. THE SALE PROCEEDS OF SUCH LAND HAS BEEN DECLARED AS LONG TER M CAPITAL GAIN (LTCG) WHICH HAD BEEN ACCEPTED IN THE CASES OF FIVE CO-OWNERS SMT. DHANUBEN C. BHANDARI SMT. DEVIBEN BHANDARI SMT. PUSHPABEN BHANDARI SMT. REVABEN BHA NDARI AND SMT. SHANTABEN BHANDARI. THEREFORE THERE WAS NO JUSTIFICATION IN TREATING THE SAME SALE PROCEEDS AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE AND IN HIS BROTHER. 2.1 IN THE CASE OF HASHMUKHLAL C. BHANDARI THE AO REJECTED THE AFORESAID CONTENTION OF THE ASSESSEE OBSERVING THAT THE ASSESSEE AND THE OTHER CO-OWNERS COULD NOT HAVE TREATED AS 500 SQ.MTS STOCK-IN-TRADE WHILE TREATING THE REMAINING PART AS CAPITAL ASSET. THE ENTIRE LAND WAS SOLD TO THE SAME PARTY I.E. M/S. AK SHAR JYOT ORGANISER. THE ASSESSEE HAD BEEN UNABLE TO DISTINGUISH BETWEEN THE NATURE OF TH E BUSINESS INCOME FROM THE CAPITAL GAIN. THE AO FURTHER OBSERVED THAT THE ASSESSEE HA D ACTUALLY PAID THE SUM OF RS.15 LAKHS TO M/S. PRASANNA BUILDERS AND NOT RS.20.52 LAKHS AS CLAIMED. EVEN THOUGH SUCH PAYMENT WAS CLAIMED TO HAVE BEEN MADE FOR THE DEVELOPMENT O F THE 500 SQ.MTS OF LAND YET SINCE THIS LAND WAS ADJACENT AND CONTIGUOUS TO THE REMAIN ING 8 700 SQ.MTS. THE ENTIRE SUM WAS ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 3 TO BE TREATED AS EXPENDITURE INCURRED AGAINST THE T OTAL AREA OF THE LAND. ON THE BASIS OF SUCH FINDINGS AND OBSERVATIONS THE AO WENT ON TO D ETERMINE THE BUSINESS INCOME OF THE ASSESSEE AND THE CO-OWNERS AT RS.1 22 50 000/- OF W HICH THE ASSESSEE'S 30% SHARE WORKED OUT TO RS.36 75 000 WHICH HE TREATED AS THE ASSESSEE'S INCOME FROM BUSINESS WHILE REJECTING THE CLAIM OF CAPITAL GAIN OF RS.18 48 423/-. 2.2 ON IDENTICAL BASIS IN THE CASE OF SHRI NATVARLA L C. BHANDARI ALSO THE AO DETERMINED THE BUSINESS INCOME OF THE ASSESSEE AND SIX CO-OWNERS AT RS.1 22 50 000/- OF WHICH 30% SHARE OF THE ASSESSEE WAS WORKED OUT TO R S.36 75 000/- WHICH THE AO TREATED AS ASSESSEES INCOME FROM BUSINESS WHILE R EJECTING THE CLAIM OF CAPITAL GAIN OF RS.18 48 423/-. 3. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE I N THE CASE OF SHRI HASHMUKHLAL C. BHANDARI CONTENDED THAT IF THE SALE CONSIDERATION WAS TO BE TREATED AS INCOME FROM BUSINESS THEN THE AO OUGHT TO HAVE GIVEN ALLOWANCE FOR THE PURCHASE COST OF SUCH LAND. HOWEVER THERE WAS NO PURCHASE IN THIS CASE AND THE RE WAS NO BUSINESS. IT WAS NOT EVEN AN ADVENTURE IN THE NATURE OF TRADE. THERE WAS NO B ASIS FOR THE AO TO TREAT THE SUM PAID TO M/S. PRASANNA BUILDERS AS RS.15 00 000 WHILE TH E ACTUAL SUM PAID WAS RS.20.52 LAKHS WHICH WAS PAID FOR THE DEVELOPMENT OF ONLY 500 SQ.MTS OF LAND. HAVING ACCEPTED THE SALE CONSIDERATION AS BEING IN THE NA TURE OF LTCG IN THE HANDS OF FIVE CO- OWNERS THERE WAS NO JUSTIFICATION ON THE PART OF T HE AO TO TREAT THE SAME AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE AND HIS BROTHER . THE AO HAD CONVENIENTLY IGNORED THE LINE DEMARCATED BY THE DATE OF CONVERSION OF A PART OF THE CAPITAL ASSET INTO STOCK-IN- TRADE AS LAID DOWN IN SEC.45(2) OF THE IT ACT. IF THE AO'S STAND WAS TO BE ACCEPTED AS CORRECT THEN HE OUGHT TO HAVE BIFURCATED THE SALE PROCEEDS ONE ATTRIBUTABLE TO CAPITAL GAIN WHICH WAS THE DIFFERENCE BETWEEN THE INTRODUCT ION PRICE BEING FAIR MARKET VALUE ON THE DATE OF CONVERSION/INTRODUCTION AND THE COST OF ACQUISITION; THE OTHER ATTRIBUTABLE TO BUSINESS INCOME BEING THE SURPLUS OF ACTUAL REALISA TION OVER THE CONVERSION/INTRODUCTION PRICE. SUCH OMISSION BY THE AO WAS CONTRARY TO THE PROVISIONS OF SEC. 45(2) R.W.S.2(47) OF THE I.T. ACT. ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 4 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE CASE OF SHRI HASHMUKHLAL C. BHANDARI IN THE IMPUGNED ORDER THE LD. CIT(A) DIR ECTED THE AO TO ACCEPT THE LONG-TERM CAPITAL GAIN OF RS.18 48 423/- AND DELETE THE ADDIT ION OF RS.36 75 000/-. IN THE CASE OF SHRI NATVARLAL C. BHANDARI THE LD. CIT(A) ALSO TOO K THE IDENTICAL VIEW AND DIRECTED THE AO TO ACCEPT THE LONG TERM CAPITAL GAIN OF RS.18 48 423/- AND DELETE THE ADDITION OF RS.36 75 000/-. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) IN RESPECT OF THE APPEALS OF BOTH THE BROTHERS THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF T HE REVENUE SHRI G.S.SOURYAWANSHI SR.D.R. APPEARED AND RELYING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER CONTENDED THAT BOTH THE ASSES SEES ALONG WITH FIVE CO-OWNERS GOT THE LAND DEVELOPED THROUGH M/S. PRASANNA BUILDERS. IN T HESE CIRCUMSTANCES THE AO RIGHTLY TOOK THE VIEW THAT ENTIRE LAND MEASURING 9200 SQ.MT S IS STOCK-IN-TRADE AND ENTIRE INCOME IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS AS AGAINST INCOME FROM CAPITAL GAINS DEVELOPED IN RESPECT OF 8 700 SQ.MTS AND BUS INESS INCOME IN RESPECT OF 500 SQ.MTS. HE ACCORDINGLY CONTENDED THAT THE VIEW TAKE N BY THE LD. CIT(A) BE IN THIS REGARD SET ASIDE AND IT MAY BE HELD THAT THE ENTIR E INCOME IN RESPECT OF 9 200 SQ.MTS IS ASSESSABLE AS BUSINESS INCOME. 5. ON THE OTHER HAND SHRI R.N.VEPARI APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDERS OF THE LD. CIT(A). IN ORDER TO EXPLAIN THE CHRONOLOGICAL EVENT THE COUNSEL OF THE ASSESSEE FILED SEPARATE P APER BOOKS IN RESPECT OF BOTH THE ASSESSEES WHICH INTER ALIA CONTAINED THE RETURN OF INCOME FURNISHED BY BOTH THE BROTHERS. THE COUNSEL OF THE ASSESSEE EXPLAINED THA T EACH OF THE BROTHERS WAS HAVING 30% SHARE IN THE LAND IN QUESTION AND REMAINING 40% WAS HELD BY FOUR SISTERS AND MOTHER. THE MOTHER AND SISTERS WERE HAVING 8% SHARE EACH. MOTHER AND SISTERS OF BOTH THE ASSESSEES DECLARED CAPITAL GAIN AND BUSINESS IN COME WHICH WAS ACCEPTED BY THE AO. SUBSEQUENTLY A PROPOSAL UNDER SECTION 263 WAS ALSO MOVED BUT THAT WAS ALSO NOT ACCEPTED. THE COUNSEL OF THE ASSESSEES EXPLAINED TH AT ONLY 500 SQ.MTS OF LAND WAS CONVERTED INTO STOCK-IN-TRADE AND REMAINING 8 700 S Q.MTS. WAS CAPITAL ASSET. ON THIS BASIS ALL OTHER CO-OWNERS IN THEIR RETURN OF INCO ME HAVE DECLARED CAPITAL GAIN AND ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 5 BUSINESS INCOME. FOR COMPUTATION THE LD. COUNSEL O F THE ASSESSEE DREW OUR ATTENTION TO PAGE 35 OF THE PAPER BOOK FILED IN THE CASE OF NAT VARLAL C. BHANDARI. THE COUNSEL OF THE ASSESSEE FURTHER DREW OUR ATTENTION TO PAGE NOS. 25 TO 31 OF THE PAPER BOOK IN THE CASE OF HASHMUKHLAL C. BHANDARI. HE EXPLAINED THAT THIS IS THE ORDER OF THE LD. CIT(A)-I SURAT DATED 24.10.2000 WHEREIN AT PAGE 6 THE LD. CIT(A) IN ORDER TO FACILITATE THE DETAILED INVESTIGATION AS DESIRED BY THE AO SET ASIDE THE ORIGINAL ASSESSMENT. DESPITE BEING SET ASIDE NO ORDER UNDER SECTION 263 WAS MADE IN CASE OF ANY OF THE BROTHERS. ON THIS BASIS HE CONTENDED THAT THE VIEW TAKEN BY THE LD. CIT(A) DIRECTING THE AO TO ACCEPT THE CAPITAL GAIN AND BUSINESS INCOME DECLARED BY BOTH THE BROTH ERS BE UPHELD. 6. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN CASE OF BOTH THE ASSESSEES SISTERS AND MOTHER CAPITAL GAIN ON SALE OF 8 700 SQ.MTS LAND D ECLARED BY BOTH THE ASSESSEES WERE ACCEPTED. FURTHER BUSINESS INCOME DECLARED ON SALE OF 500 SQ.MTS OF LAND WAS ALSO ACCEPTED. IN THE IMPUGNED ORDER THE LD. CIT(A) IN RESPECT OF BOTH THE BROTHERS HELD THAT THERE IS NO JUSTIFICATION IN TREATING THE SALE PROC EEDS OF ENTIRE 9 200 SQ.MTS OF LAND AS ASSESSEES INCOME FROM BUSINESS. HE THEREFORE DIR ECTED THE AO TO ACCEPT LONG TERM CAPITAL GAIN OF RS.18 48 423/- AND DELETED THE ADDI TION OF RS.36 75 000/-. THE REASONING GIVEN BY THE LD. CIT(A) IN THE CASE OF NATVARLAL C. BHANDARI IS CONTAINED IN PARA 23 TO 23.2 OF THE IMPUGNED ORDER. IN THE CASE OF OTHER CO -OWNERS IDENTICAL REASONING HAS BEEN GIVEN. LOOKING TO THE CHRONOLOGICAL EVENT THE VIEW TAKEN BY THE AO IN THE CASE OF BOTH THE BROTHERS SISTERS AND MOTHER IS NOT CORRECT. HE NCE WE ARE OF THE VIEW THAT THE LD. CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN GIVING T HE AFORESAID DIRECTIONS TO THE AO IN RESPECT OF BOTH THE ASSESSEES. WE THEREFORE DECLI NE TO INTERFERE. RESULTANTLY BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 7. NOW WE TAKE UP THE CROSS OBJECTIONS FILED IN THE CASES OF SHRI HASHMUKHLAL C. BHANDARI AND SHRI NATVARLAL C. BHANDARI. 8. GROUND NO.1 IN RESPECT OF BOTH THE CROSS OBJECTI ONS FILED BY TWO ASSESSEES IS COMMON WHICH IS AGAINST SUSTAINING THE ADDITION OF RS.87 042/-. THE FACTS IN BRIEF IN RESPECT OF THIS ADDITION MADE ARE THAT THE ASSESSEE S PREMISES WERE SEARCHED UNDER ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 6 SECTION 132 OF THE I.T. ACT ON 14.12.1994. IN THE C OURSE OF SEARCH SHRI HASHMUKHLAL C. BHANDARI MADE THE PENALTY OF UNACCOUNTED INCOME TOT ALLING TO RS.1 37 50 000/- THE BREAK-UP OF WHICH WAS AS UNDER: PAYMENT TO PRASANNA BUILDERS RS. 16 00 000 INVESTMENT IN RESIDENTIAL HOUSES AND AGRICULTURAL LAND RS. 19 00 000 AMOUNT RECEIVABLE AGAINST THE SALE OF LAND FROM 19 PERSONS RS.1 02 50 000 8.1 IN THE RETURN OF INCOME FILED INVESTMENT IN TH E CONSTRUCTION OF A NEW BUNGALOW WAS SHOWN AT RS.36 73 035. SHARE OF BOTH THE ASSESS EES IS 50% I.E. RS.18 36 517/-. THE AO REFERRED THE VALUATION OF THE BUNGALOW TO THE VA LUATION CELL WHO VALUED THE TOTAL COST OF CONSTRUCTION AT RS.33 68 000/- WHICH WAS LOWER THAN THE INVESTMENT DISCLOSED BY BOTH THE ASSESSEES ACCORDING TO TH E VALUATION OFFICER THE CONSTRUCTION HAD COMMENCED ON JULY 1994 AND HAD BEEN COMPLETED IN SEPTEMBER 1995. IT WAS THUS RECOMMENDED THAT HALF OF THE INVESTMENT SHOULD BE C ONSIDERED IN THE ASSESSMENT YEAR 1995-96 AND THE REMAINING HALF IN THE ASSESSMENT Y EAR 1996-97. THE AO REJECTED THE VALUATION REPORT ON THE GROUND THAT THE VALUATION W AS LESSER THAN THE TOTAL INVESTMENT DISCLOSED BY THE ASSESSEE AND HIS BROTHER . MOST OF THE CONSTRUCTION WAS COMPLETED IN THE FINANCIAL YEAR 1994-95 AND THEREFORE THE ENT IRE INVESTMENT WAS TO BE TAKEN INTO CONSIDERATION IN THE ASSESSMENT YEAR 1995-96. FURT HER THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THE SOURCE OF INVESTMENT IN THE ASSESSMENT YEA R 1996-97. THE AO ALSO REFERRED TO THE SEIZED NOTE BOOK IDENTIFIED AS B-6 WHERE ACCOR DING TO HIM THE DETAILS OF INVESTMENT MADE IN THE CONSTRUCTION OF THE BUNGALOW HAD BEEN R ECORDED (PAGE NOS.3 &4). ACCORDING TO SUCH NOTINGS THE TOTAL INVESTMENT WAS TO THE TU NE OF RS.38 47 118/- WHEREAS THE ASSESSEE AND HIS BROTHER HAS SHOWN THE TOTAL INVEST MENT AT RS.36 73 035/-. ON THIS BASIS HE CONCLUDED THAT INVESTMENT TO THE EXTENT OF RS.1 74 083/- HAD REMAINED UNACCOUNTED. HE THEREFORE TREATED THE SAME AS UNEXPLAINED IN T HE HANDS OF BOTH THE BROTHERS AMOUNTING TO RS.87 042/- EACH. 9. ON APPEAL THE LD. CIT(A) CONFIRMED THE SAME FOR THE DETAILED REASONS GIVEN IN PARA 7.1 OF THE IMPUGNED ORDER WHICH READS AS UNDE R: 7.1 THE AR HAS FURTHER ARGUED THAT SINCE THE VAL UATION MADE BY THE VALUATION CELL WAS LOWER THAN THE INVESTMENT DISCLOSED BY THE ASSESSEE AND HIS BROTHER NO ADDITION COULD BE MADE. SUCH AN ARGUMENT IS SIMPLY NOT ACCEPTABLE. ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 7 THE VERY FACT THAT THE VALUATION WAS MADE BY THE VA LUATION CELL AT A LOWER SUM THAN WHAT HAD BEEN DISCLOSED BY THE A SSESSEE CLEARLY ESTABLISHED THE FACT THAT THE VALUATION WAS EITHER GROSSLY ERRONEOU S OR HIGHLY MOTIVATED AND BIASED. THE AO THEREFORE WAS FULLY JUSTIFIED UNDER THE LAW IN REJECTING THE VALUATION REPORT WHICH IN ANY CASE WAS NOT BINDING ON HIM. ON THE OTHER HAND WHAT THE AO HAD BEFORE HIM WAS THE DETAILS OF INVES TMENTS MADE OR EXPENDITURE INCURRED IN THE CONSTRUCTION OF THE TWIN BUNGALOWS BY THE ASSESSEE AND HIS BROTHER SHRI NATVERLAL BHANDARI. GIVEN SUCH FACTS OF THE CASE I AM OF THE FIRM BELIEF THAT THE AO WAS FULLY JUSTIFIED IN PLAC ING RELIANCE ON THE SEIZED MATERIALS WHICH THE ASSESSEE HAD TOTALLY FAILED TO SATISFACTORILY EXPLAIN. THE ADDITION OF THE SUM OF RS. : 87 042 IN THE HANDS OF THE ASSESSEE BEING HIS SHARE OF THE UNACCOUNTED INVESTMENT IN THE SAID BUNGALOW IS CONFIRMED. 10. AT THE TIME OF HEARING THE COUNSEL OF THE ASSE SSEE POINTED OUT THAT THIS ADDITION IS MADE ON ACCOUNT OF DIFFERENCE OF OPINION IN VALUATI ON. THEREFORE THE SAME BE DELETED. ON THE OTHER HAND THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT(A). WE FIND CONSIDERABLE FORCE IN THE SUBMISSIONS MADE BY THE L D. D.R. THAT THE ADDITION IS NOT MADE DUE TO DIFFERENCE OF OPINION BUT ON THE BASIS OF AC TUAL NOTING IN THE DIARY SEIZED DURING THE COURSE OF SURVEY. WE THEREFORE INCLINE TO UPH OLD THE ORDER OF THE LD. CIT(A). HENCE GROUND NO.1 OF CROSS OBJECTIONS IN RESPECT OF BOTH THE ASSESSEES IS DISMISSED. 11. GROUND NO.2 OF THE CROSS OBJECTION IN THE CASE OF SHRI HASHMUKHLAL C. BHANDARI IS AGAINST THE CONFIRMING ADDITION OF RS.50 000/- M ADE UNDER SECTION 69C OF THE I.T. ACT 1961. 12. BRIEF FACTS RELATING TO THIS ADDITION ARE THAT IN THE ASSESSMENT ORDER THE AO DISALLOWED RS.50 000/- BEING IN THE NATURE OF PENA LTY FOR CONSTRUCTION ON AGRICULTURAL LAND. BECAUSE BEFORE THE AO THE ASSESSEE HAS NOT F URNISHED ANY DETAILS INCLUDING THE SOURCE OF PAYMENT MADE. THE AO ADDED THIS SUM OF RS .50 000/- UNDER SECTION 69C OF THE I.T. ACT 1961. ON APPEAL IN THE IMPUGNED ORDE R THE LD. CIT(A) CONFIRMED THE SAME FOR THE DETAILED REASONS GIVEN IN PARA 10 WHICH RE ADS AS UNDER: 10. THOUGH THE ASSESSES MAY HAVE HAD SUFFICIENT CA SH IN HAND FROM WHICH THE PENALTY OF RS.50 000 WOULD HAVE BEEN PAID YET WHA T WAS OF GREATER IMPORTANCE AND SIGNIFICANCE WAS THAT THE PAYMENT OF RS.50 000 WAS AGAINST THE PENALTY LEVIED BY THE COLLECTOR FOR INFRACTION OR VIOLATION OF A LAW WHICH PROHIBITS THE CONSTRUCTION OF BUILDINGS ON AGRICULTURAL LAND WHI CH IS TO BE USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF AGRICULTURAL ACTIVIT Y ONLY. SINCE THE PENALTY WAS ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 8 LEVIED FOR AN OFFENCE WHICH WAS PROHIBITED BY LAW UNDER THE EXPLANATION TO SEC.37(1) SUCH PAYMENT SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS. CONSEQUENTLY NO DEDUCT ION WAS TO BE ALLOWED OF THE SAID SUM. THE ADDITION OF THE SUM OF RS.50 000 IS T HEREFORE SUSTAINED UNDER THE PROVISIONS OF SEC. 37(1) OF THE ACT R.W. THE EXPLAN ATION BELOW THE SAID SECTION. 13. AT THE TIME OF HEARING THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THIS AMOUNT SHOULD BE ALLOWED UNDER SECTION 37(1) OF THE I.T. A CT AND IT IS NOT HIT BY THE EXPLANATION TO SECTION 37(1) OF THE ACT. ON THE OTHER HAND THE LD. D.R. DREW OUR ATTENTION TO PROVISIONS CONTAINED IN SECTION 69C OF THE I.T. ACT WHICH IS INSERTED BY THE FINANCE ACT (2) 1998 W.E.F. 01.04.1999. HE POINTED OUT THAT AS PER THIS PROVISO THE UNEXPLAINED EXPENDITURE ADDED UNDER SECTION 69C CANNOT BE ALLOW ED AS DEDUCTION UNDER SECTION 37(1) OF THE I.T. ACT 1961. 14. RIVAL SUBMISSIONS WERE CONSIDERED. AS PER PROVI SO TO SECTION 69C THE UNEXPLAINED EXPENDITURE OF RS.50 000/- WHICH WAS A DDED BY THE AO AS ASSESSEES INCOME CANNOT BE ALLOWED AS DEDUCTION UNDER SECTIO N 37(1) OF THE I.T. ACT 1961. WE THEREFORE DECLINE TO INTERFERE. THIS GROUND OF CRO SS-OBJECTION OF THE ASSESSEE IS REJECTED. 15. GROUND NO.3 OF CROSS OBJECTION RAISED BY THE AS SESSEE SHRI HASHMUKHLAL C. BHANDARI IS AGAINST CONFIRMING THE ADDITION OF RS.2 6 400/- IN RESPECT OF HOUSEHOLD EXPENSES. 16. WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE AND HIS ENTIRE FAMILY WITHDREW ONLY RS.69 600/-. THE AO ESTIMATED HOUSEHOLD EXPENDITURE @RS.8 000/- P.M. I.E. RS.96 000/- PER YEAR. AFTER ADJUSTING THE ACTUAL WITHDRAWAL TH E AO ADDED THE DIFFERENTIAL AMOUNT OF RS.26 400/- TO THE INCOME OF THE ASSESSEE. ON APPEA L BEFORE THE LD. CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT TOTAL WITHDRAWAL MAD E BY THE FAMILY IS SUFFICIENT TO MEET THE EXPENSES OF FAMILY OF AGRICULTURISTS. AFTER CON SIDERING THE AFORESAID OBJECTION OF THE ASSESSEE THE LD. CIT(A) HELD THAT THE AO MADE A CO NSERVATIVE ESTIMATE. GIVEN THE STANDARD OF LIVING OF ANY ORDINARY MIDDLE-CLASS FAM ILY AND THE COST OF LIVING IN SURAT THE ESTIMATION MADE BY THE AO WAS VERY MUCH ON THE LOWE R SIDE. AFTER CONSIDERING THE TOTALITY OF THE FACTS WE ARE ALSO CONVINCED THAT T HE VIEW TAKEN BY THE LD. CIT(A) IS FAIR ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 9 AND REASONABLE. WE THEREFORE DECLINE TO INTERFERE . THIS GROUND OF CROSS OBJECTION IS REJECTED. 17. LAST GROUND OF CROSS OBJECTION RAISED BY THE AS SESSEE SHRI HASHMUKHLAL C. BHANDARI IS AGAINST CONFIRMING THE ADDITION OF RS.4 5 372/- BY TREATING AGRICULTURAL INCOME AS NON-AGRICULTURAL INCOME. 18. WE HAVE HEARD BOTH THE SIDES. IN THE ASSESSMENT ORDER THE AO TREATED THE AGRICULTURAL INCOME OF RS.45 372/- AS UNEXPLAINED C ASH CREDIT UNDER SECTION 68 OF THE I.T. ACT 1961. THIS ADDITION WAS MADE ON THE GROUND THA T THE ASSESSEE FAILED TO PROVIDE ANY EVIDENCE OF LAND HOLDING OR SALE OF AGRICULTURAL PR ODUCE. IT IS PERTINENT TO NOTE THAT NEITHER BEFORE THE AO NOR BEFORE THE LD. CIT(A) THE ASSESS EE HAS FURNISHED ANY EVIDENCE OF AGRICULTURAL LAND HOLDING OR SALE OF AGRICULTURAL P RODUCE. ON APPEAL THE LD. CIT(A) CONFIRMED THE SAME. AFTER CONSIDERING THE TOTALITY OF THE FACTS WE ARE ALSO CONVINCED THAT THE VIEW TAKEN BY THE LD. CIT(A) IS FAIR AND REASON ABLE. WE THEREFORE DECLINE TO INTERFERE. THIS GROUND OF CROSS OBJECTION IS ALSO R EJECTED. RESULTANTLY ALL THE GROUNDS TAKEN BY THE ASSESSEE SHRI HASHMUKHLAL C. BHANDARI IN HIS CROSS-OBJECTION ARE REJECTED. 19. GROUND NO.2 OF CROSS OBJECTION RAISED BY THE AS SESSEE SHRI NATVARLAL C. BHANDARI IS AGAINST CONFIRMING THE ADDITION OF RS.10 000/- O N ACCOUNT OF UNEXPLAINED CASH. BRIEF FACTS ARE THAT DURING THE COURSE OF SEARCH A SUM O F RS.10 000/- WAS FOUND FROM THE ASSESSEES PREMISES. THE AO OBSERVED THAT THIS CASH WAS KEPT BY THE ASSESSEE FOR A PERIOD OF 9 YEARS WITHOUT BRINGING IT TO ANY USE. T HEREFORE HE OUT OF THE TOTAL CASH OF RS.14 860/- TREATED A SUM OF RS.10 000/- AS UNEXPL AINED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) CONFIRME D THE SAME BY OBSERVING THAT THE TOTAL CASH RECEIVED IN THE HANDS OF THE ASSESSEE AND HIS BROTHER AS PER THE DETAILS WAS UPTO 02.11.1994 AND THERE WAS NO EVIDENCE TO SHOW THAT T HE CASH FOUND IN THE HOUSE WAS A PART OF THE CASH RECEIVED AGAINST THE SALE OF LAND OR THAT THE SAID SUM HAD ALREADY BEEN DISCLOSED AND BROUGHT TO TAX. ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 10 20. AFTER HEARING BOTH THE SIDES WE ARE OF THE CON SIDERED OPINION THAT THE VIEW TAKEN BY THE LD. CIT(A) IS FAIR AND REASONABLE. THEREFORE WE DECLINE TO INTERFERE. HENCE THIS GROUND OF CROSS OBJECTION IS REJECTED. 21. THE LAST GROUND OF CROSS OBJECTION RAISED BY TH E ASSESSEE SHRI NATVARLAL C. BHANDARI IS AGAINST TREATING AGRICULTURE INCOME OF RS.45 372/- AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAD FAILED TO PROVIDE ANY EVIDENCE OF LAND HOLDING OR THE SALE OF AGRICULTURAL PRODUCE. HENCE THE AO TREATED AGRICULTURE INCOME OF RS.45 372/- AS UNE XPLAINED CASH CREDIT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THERE WAS NO EVIDENCE I N SUPPORT OF AGRICULTURAL INCOME ALLEGEDLY EARNED DURING THE YEAR CONSIDERATION AND THE AO WAS FULLY JUSTIFIED IN TREATING THE SUM OF RS.45 372/- AS UNEXPLAINED CASH CREDIT. 22. AT THE TIME OF HEARING THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDERS OF THE TAX AUTHORITIES AND SUBMITTED THAT THE LD. CIT(A) RIGHT LY CONFIRMED THE ACTION OF THE AO REGARDING THE CLAIM OF AGRICULTURAL INCOME SINCE T HE ASSESSEE HAD FAILED TO PROVIDE ANY EVIDENCE OF LAND HOLDING OR THE SALE OF AGRICULTURA L PRODUCE. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PARTICUL ARS/DETAILS OF AGRICULTURAL INCOME HAD BEEN PROVIDED TO THE AO MUCH EARLIER AND IT WAS NO T POSSIBLE TO FURNISH ANY FURTHER EVIDENCE. THE LD. COUNSEL ALSO SUBMITTED THAT THE A SSESSEE HAD EARNED AGRICULTURAL INCOME WAS ESTABLISHED BY THE CERTIFICATE FROM THE SURAT JILLA SAHAKARI KHARID VEHCHAN SANGH LTD. WHERE THE ASSESSEE HAD SOLD VEGETABLES I N DIFFERENT YEARS. HENCE HE REQUESTED TO SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND ALLOW THE PRAYER OF THE ASSESSEE THAT IT WAS AGRICULTURAL INCOME AND ACCORD INGLY THE ADDITION MAY BE DELETED. 23. WE HAVE HEARD BOTH THE SIDES. THE LD. CIT(A) I N HIS IMPUGNED ORDER HAS MENTIONED THAT THE A.R. HAS CLEARLY ACCEPTED THE IN ABILITY OF THE ASSESSEE TO FURNISH ANY DETAIL OR EVIDENCE OF AGRICULTURAL INCOME EARNED DU RING THE YEAR. HE HAS ONLY RELIED UPON THE DISCLOSURE MADE IN THE EARLIER YEARS INCLUDING THE CERTIFICATE FROM THE COOPERATIVE MARKETING SOCIETY. IT IS PERTINENT TO NOTE THAT DUR ING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SOLD HIS LANDHOLDING AND HENCE IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SUBMIT ITA NOS.2901 & 2902-AHD-09 & C.O.NOS.287 & 288-AHD- 09 11 ANY EVIDENCE IN SUPPORT OF AGRICULTURAL INCOME ALLE GEDLY EARNED DURING THE YEAR UNDER CONSIDERATION. HENCE THE ORDER OF THE LD. CIT(A) I S FAIR AND REASONABLE. THEREFORE WE DECLINE TO INTERFERE. THIS GROUND OF THE CROSS OBJE CTION RAISED BY THE ASSESSEE SHRI NATVARLAL C. BHANDARI IS REJECTED. 24. IN THE RESULT BOTH THE APPEALS FILED BY THE RE VENUE AND THE CROSS OBJECTIONS FILED BY TWO DIFFERENT ASSESSEES ARE DISMISSED. THE ORDER PRONOUNCED IN THE COURT ON 08.07.2011 SD/- SD/- (A. MOHAN ALANKAMONY) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08/07/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AH MEDABAD. TALUKDAR/ SR. P.S.