9911796707
TMI Blog1991 (7) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... land at a cost of Rs 6,74,217 in the first accounting period and Rs 86,262 in the second accounting period. For meeting this cost the assessee claimed to have raised loans amounting to Rs 6,50,000 during the accounting period relevant to asst. yr. 1985-86. The details thereof are as below: S1 No. Name Date Amount 1. Shri Basant lal Khandelwal 15.2.84 20,000 2. Shri Ram Manohar Vashist 1.2.84 20,000 3. Smt. Sham Bateru 25.2.84 30,000 4. Shri Prem Chand Jain 14.3.84 30,000 5. Shri Radhey Lal 31.3.84 20,000 6. Shri Naresh Aggarwal 9.4.84 30,000 7. Shri Gian Singh 24.4.84 30,000 8. Smt Nirmal Gupra 28.4.84 20,000 9. Shri Ram Cander Gupta 26.3.84 20,000 10. Shri Jagdesh Rai Verma 505084 20,000 11. Shri Ved Parkash 9.5.84 20,000 12. Shri Jawahar Singh 18.5.84 20,000 13. Smt. Shakuntala Devi 22.5.84 30,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit arising from the sale of the land in question during the accounting period relevant asst. yr. 1986-87. He determined the profit arising from the sale at Rs 7,39,701(Rs. 10,00,000 minus Rs. 2,60,299), against which he allowed expenses on account of salary amounting to Rs. 3,300 and other expenses amounting to Rs 1250. Thus, for asst. yr. 1986-87 the net income determined was rs 7,35,150. The assessee appealed to CIT(A) but failed and that is how the assessee is now before us in these appeals. 6. Assessment proceedings for asst. yr. 1985-86 had been commenced by the Assessing Officer somewhere before May, 187 when the Assessing Officer summoned certain creditors, out of whom only on Prem Chand Jain appeared and made a statement before the Assessing Officer that he had not advanced any money to the assessee. Summons used to certain creditors under s. 131 by post were received back with the reports that no such person was available. Some other creditors purported to have appeared through counsels and sought adjournment. From6th Oct., 1987the case seems to have been issued a letter dt.6th Oct., 1987to the assessee, copy at page 37 of the departmental paper book, whereby he forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order and therefore, the assessee has produced sufficient evidence to discharge his burden. According to him, Premchand Jain was examined in the absence of the assessee and no opportunity to cross examine him was allowed to the assessee the therefore, his statement could not be used against the assessee. he also pointed out that several creditors, namely, Basant lal. Radhey Shyam, Smt. Nirmal Gupta, Ram Chander Gupta, Jagdish Rai Verma, Ved Prakash, Shakuntlal Devi, Sharda Ranin gupta, shantio Devi and Ram Kumar Gupta has appeared through counsel sought adjournments. They did not appear on the next date and Assessing Officer never issued Simmons to them again to enforce attendance similarly, regarding the persons whose summons were received back with the remark "not available", the Assessing Officer did not depute any inspector to make enquiries about them as to whether they has ever existed and what were their present whereabouts. 9. He contended that the assessing Officer wrongly discarded the affidavit filed on 12th March, 1988 by relaying on the case of Chowk chand Bala Bux vs. CIT (1961) 41 ITR 465 (Assam) ans that in fact that ruling helps the assessee because there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted at source. He contended that the Assessing Officer had repeatedly and specifically asked the assessee to produce the creditors by the assessee continuously avoided production them although the assessee conduct in filing the affidavit of as manyas 19 of them on15th March, 1988. Shows that the creditors were within the assessee reach. He also contended that the fact that the assessee could collected 19 creditors at one place on12th March 1988and get their affidavits sworn by the same Oath Commissioner reflected adversely on the genuineness of the credits. He pointed out that later, i.e. after the assessment proceeding were over and during the course of the penalty proceedings the Assessing Officer summoned some of the cheques issued by the assessee for the payment of the credit in question and they showed that in some cases the creditors had issued cheques drawn on self which were encashed by one O.P Kedia and one Prem Sharma. Mr. O.P. Kedia was an employee of a sister concern of the assessee namely M/s Suraj Lamp Industries Pvt. Ltd His statement was recorded on the 12th of March 1990 in the presence of the assessee counsel and he had stated that he had encashed the cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of advancing the money to the assessee. In response to summons under s. 131 on Prem Chand Jain had appeared and had denied having advanced any money to the assessee. As already stated, the Assessing Officer had denied having advanced any money to the assessee. As already stated the Assessing Officer had duly communicated this fact to the assessee and supplied the assessee a copy of his statement. In spite of this the assessee neither produced him nor filed us affidavit, wen it filed the affidavits of other persons. On11th March 1988on which dare the assessee could not produce them because oof Baharat Bandth. It is not disputed by the revenue that on that date there was Bharat Bandth organised by some political party due to which it was not possible for the assessee to produce the creditors. Patenly thereafter no other opportunity was given to the assessee under there circumstances were ate of the view that in respect of the creditors whose confirmations had been filled on 15th March, 1988, the initial burden that lay on the assessee stood discharged. As regards the revenues contention that the bank records summoned by the Assessing Officer during the penalty show that the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed their identity and existence. In out view therefore, the genuineness of loans from the see 18 persons was satisfactorily established and the amounts appearing to their credit could not be treated as the assessee's income under s. 68 of the Act. 13. One Mool Chand Mittal is claimed to have advanced a sum of Rs. 25,000 to the assessee on6th June, 1984. In respect of this creditor the assessee filed a confirmation that was signed by his son Brij Mohan Mittal. The copy of confirmation is at page 80 of the paper book and gives note as on why the confirmation of account of Mool chand Mittal is signed by Brij Mohan Mittal who advanced money to the assessee on the other hand in his affidavit Brij Mohan Says that he gave as loan of Rs. 25,000 to the assessee ion 6th June 1984. This affidavit therefore, does not speak of any loan by Mooll Chand Mittal and the confirmation is also not signed by Mool Chand Mital therefore, as regards this loan there is no evidence whatsoever in support. It is not the case of the assessee that it borrowed any money from Brij Moham Mittal. This credit of Rs. 25,000 appearing in the name of Mool Chand Mittal has therefore, not been established ans the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd had affirmed the advance of money to the assessee through a Chartered Accountant namely shri Vikram Tandon. Kuldip Tandon is a brother of the said Vikram Tandon, chartered Accountant and from the facts that have been narrated by the Assessing Officer in respect of these creditors we feel that there was no good reason for holding that they did not have the means to advance money to the assessee. We therefore, hold that the geniuses of the credits appearing in the names of these three persons was satisfactorily established. It reasonable doubt. In view of our above discussion the addition of Rs. 6,50,000 in asst. yr. 1985-86 on account of cash credits is hereby reduced to Rs. 1,25,000 in respect of the credits appearing in the names of Prem Chand Jain, Mool Chand Jain, S.K. Mohta and Smt. Krishna Rohtagi. 17. Now we come to the other point involved in these appeals i.e. expenditure claimed by the assessee tio have been incurred in respect of the land in question. This is relevant for determining the profit arising from the sale of land in the accounting period relevant to asst. Yr. 1986-87. Regarding the major expenses on the construction of well building levelling of land and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dug by a contractor, Hahi Sons whose bills and the connected vouchers were produced before the authorities below and copies have been placed in the paper book. The well was found to be in existence at the spot when the Assessing Officer went there. Neither the inspector nor the Assessing Officer seem to have recorded and inspection the learned departmental Representative could not tell us whether any such inspection on the spot. The learned departmental Representative could not tell us whether any such inspection note had been prepared in the assessee order the Assessing Officer has observed that the land in question was near Barkal lake and is a hilly area or uneven land. It is stony land and can only be blasted. He found local people drawing water farm the well ion since beginning. It had not been plastered from inside. It appears in its original for. No pulley had been fixed on the well. There was no boundary wall. Their was no tubewell of other pipes fitted inside. On the basis of these observations the Assessing Officer has concluded that the well was not built by the assessee. 21. No doubt area or uneven land. It is stony land and can only be blasted. He found local peo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of 15 x 20 in dismantled condition without roof. The structure was made of a stone and the assessee informed that it had asbests sheet roof. The assessing Officer estimated that the maximum expenditure p. m the construction could be only Rs. 20,000. However, even the estimated cost of Rs. 20,000 was not allowed as a seduction and no specific reason has been given by the assessing officer. 24. Thus the evidence of the existence of a building was also physically present at the spot. The assessee had already sold the land vide sale deed dt.23rd Jan., 1986and the new owner might have removed the roof. The assessing officer has not mentioned that the structure found at the sport was old and could not be mentioned that the structure found that the spot was old and could not have been raised by the assessee. It is thus established that the assessee did not construct a building on the land in question the assessee has not placed the relevant vouchers in then paper book. Therefore we are of the view that the assessing officer estimate of the cost of the building at Rs. 20,000 should be allowed as a deduction as expenditure incurred in connection with the land in question. 25. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n he visited the spot for local inspection and also because the persons toe whom compensation was paid were not produced. The assessee however produced the internal vouchers and the receipts obtained from the various persons and also filed a certificate from one Shri Amrit Singh Ex Sarpanch of Anandpur supporting the payment of compensation and the expenditure. The ass has placed in the paper book internal vouchers and receipts obtained from the persons to whom payments were made. Accordingly to the papers placed in the paper book following payments were made. Accordingly to the papers placed in the paper book following payments were made: . Rs. (1) Pokar Mal 8,300 (2) Bhoomi Chand 6,900 (3) Jhaku Ram 8,550 (4) Jora Ram 7,800 (5) Smt. Damodari Devi 7,600 (6) Hari Singh 8,000 (7) Dhan Bahadur 8,300 (8) Narain Singh 8,750 (9) Jethu Ram 7,500 (10) Jawahar Lal 7,500 (11) Ram Pratap 6,950 (12) Rangila Ram 8,800 (13) Tulsi ram 7,900 (14) Roshan Lal 8,500 (15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making the advances. On the other hand, there is evidence to show that the amounts raised as loans were utilised soon afterwards for making payments in respect of the development expenditure in respect of the land. It cannot, therefore, be said that the aforesaid amounts were not utilised for the assessee s business and were diverted to the sister concerns. However, since genuineness of some of the credits, as discussed above, has not been established, the assessee s claim will be allowed only in respect of the interest paid on the loans which have been proved. Therefore, the amount of interest allowable shall be recalculated by the AO and allowed as a deduction. 30. The rest of the expenditure claimed by the assessee is of miscellaneous type out of which the AO has allowed Rs. 4,550 and no grievance on that account was made before us. 31. As stated above, the AO has mentioned that the alleged development expenditure was shown merely to reduce the profit from the sale of the land and learned Departmental Representative also contended that it was strange that although the assessee owned the land for about 12 years and there has been substantial rise int he prices of immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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