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TMI Blog2004 (3) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... y No. B-1/100, Ashok Vihar, Phase-II,Delhiand Property No. LU-33 Pitam Pura,Delhi. 2. Briefly the facts of the case are that the assessee is an individual who is being assessed to tax regularly and the regular books of account including the purchase consideration was mentioned. A search and seizure operation in the Jain group of cases including all the four assessees before us was conducted on3rd Sept., 1997. During search and seizure operation, certain incriminating documents relating to all the four assessees were found. Accordingly, the notices under s. 158BC of the Act was issued in all the cases in response to which the return of undisclosed income for the block period 1988-89 to asst. yr. 1998-99 (upto 3rd Sept., 1997) was filed. 3. The assessee filed the return of undisclosed income at Rs. 41.34 lakhs. During search, the documents pertaining to the assessee were found which were inventorised as Annex. A-20. As per the seized documents, the assessee purchased a property No. B-1/100, Ashok Vihar, Phase-II, New Delhi from Smt. Surjit Kaur for a consideration of Rs. 3,90,000 on 28th Sept., 1994. The property was subsequently sold for Rs. 4,25,000 on6th Sept., 1995. When the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d "capital gain". Both the findings of the AO were challenged before the CIT(A) who deleted the addition made by the AO which has been challenged before us. 6. While learned Departmental Representative supported the order of the AO, the learned counsel for the assessee placed heavy reliance on the decision of the learned CIT(A). In the written synopsis placed on record, it was submitted that all the properties stood disclosed in the return of income and all the transactions were entered into in the regular accounts maintained by her. Valuation report could not form a basis for making additions as undisclosed income and the AO himself is not an expert on the subject. Learned counsel also placed reliance on the following cases and the ratios in these cases which have been summarised in nut shell: (a) CIT vs. Ravi Kant Jain (2001) 167 CTR ( Del ) 566 : (2001) 250 ITR 141 ( Del ) Assessment of block period can only be done on the basis of evidence of undisclosed income found as a result of search. (b) CIT vs. Vinod Dhanchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom). The addition on the basis of DVO s report does not fall under the scope of Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. A. Raman Co. (1968) 67 ITR 11 (SC) What could be taxed under the Act is the actual income and the trader is not obliged to make maximum profit. If there is no evidence which shows the profit actually earned was more than the profit declared or there was deeming provision in the Act to bring an artificial income to tax, the AO will not be justified in levying tax on the basis that the assessee could have earned more profit than what he actually earned. 7. The learned counsel also stated that reference to the VO for ascertaining the cost of purchase and the fair market value of the sale consideration was illegal as has been held by the Hon ble Supreme Court in the case of Amiya Bala Paul. The learned counsel also relied on the decisions reported in CIT vs. Late Gulshan Kumar Through LR. (2002) 175 CTR (Del) 416 : (2002) 257 ITR 703 (Del), K.P. Varghese vs. ITO Anr. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC) and CIT vs. Shivakami Co. (P) Ltd. (1986) 52 CTR (SC) 108 : (1986) 159 ITR 71 (SC). The learned counsel also stated that the entire accounts regarding the purchases of the properties and the sale of the properties have been maintained by the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of D.N. Kumani (HUF) vs. Dy. CIT (1999) 65 TTJ (Pat) 504 : (1999) 70 ITD 79 (Pat), the Hyderabad Bench of the Tribunal in the case of Essem Services (P) Ltd. vs. Asstt. CIT (2000) 68 TTJ (Hyd) 103 : (2003) 72 ITD 231 (Hyd), the Indore Bench of the Tribunal in the case of Indore Construction (P) Ltd. vs. Asstt. CIT (2000) 66 TTJ (Ind) 420 : (2000) 71 ITD 128 (Ind), had taken the same view. 10. In view of the facts and legal position as aforesaid, there was no justification in the action of the AO to make addition on account of undisclosed investment or profit on the sale thereof in respect of above two properties. The CIT(A) has rightly appreciated the facts and deleted the addition. 11. Similar issue also arose in the case of Manoj Jain [IT(SS)A No. 106/Del/2002] a group case where the search and seizure operation took place on the same date and similar additions were made on account of purchase and sales of properties. The Tribunal vide its order dt.19th Feb., 2004, held that the addition on account of undisclosed purchase consideration and the sale consideration based on the VO s report was not permissible in block assessment. As no new facts have been br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of immovable properties. These documents were inventorised as Annex.-58 (pp. 2 to 20). These documents indicated purchase of property No. F-1-U/8, Pitam Pura,Delhifrom Smt. Sudesh Jain. This property was purchased on18th Oct., 1996for Rs. 8.50 lakhs and a barsati was constructed on which the investment of Rs. 1,62,707 was incurred. As the AO was not satisfied about the cost of purchase as well as construction, he referred the issue to the VO under s. 131(1)(d) of the Act. The VO estimated the purchase consideration at Rs. 10.97 lakhs and the cost of construction at Rs. 1,50,000. The additions on account of undisclosed income were made on the same method which was adopted by the AO in the case of Smt. Poonam Jain. On appeal, the CIT(A) noted that in order to prove the cost of construction/purchases, the assessee has also filed a valuation report from the registered valuer. The registered valuer has estimated the purchase consideration at Rs. 12.96 lakhs. Though the CIT(A) deletd bulk of the additions made by the AO, he held that the cost of purchases/construction estimated by the VO should be replaced by the cost of purchases/construction as estimated by the registered valuer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .89 lakhs. The AO noted that the original allottee of this plot has paid Rs. 1,05,000 to HUDA and, therefore, purchase of this property at Rs. 30,000 was unbelievable and that too after five years of the allotment. Similarly, property at 1170, Sector 15, Gurgaon and at 919 Sector 14, Gurgaon were purchased and sold. No incriminating documents relating to these properties were found. During assessment proceedings, the AO adopted his own estimation and estimated the cost of purchases/construction. As the AO was not an expert of estimating cost of purchase/construction, the appeal was filed and the CIT(A) deleted the addition which is challenged before us. 26. While challenging the order of the CIT(A), learned Departmental Representative supported the order of the AO, the learned counsel relied on his arguments made in the case of Smt. Poonam Jain in respect of those properties which were referred to the VO for estimating the cost of purchases/construction. The learned counsel in his arguments, inter alia, stated that all these properties have been disclosed to the IT Department much before the date of search and the profit on sale of properties returned by the assessee has been acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f registered valuer as against the value adopted by the AO on the basis of Valuation Officer s report. 30. We have adjudicated this issue in assessee s appeal and in view of our findings therein, the ground of appeal raised by the Revenue is dismissed. 31. In ground No. 3, the Revenue has challenged the deletion of the addition of Rs. 3,52,184 made by the AO on account of undisclosed business income on the sale of immovable properties. 32. We have adjudicated similar ground in the Revenue s appeal in the case of Smt. Poonam Jain. As the facts are the same, keeping in view our findings in the case of Smt. Poonam Jain, we hold that the CIT(A) has rightly deleted the addition by observing that the assessee was not engaged in the business of purchase and sale of immovable properties. The reasoning given by us in that case will equally apply here also. Accordingly, the ground of appeal raised by the Revenue is dismissed. 33. In ground No. 4, the Revenue has challenged the deletion of the addition of Rs. 1,50,000 made by the AO on account of unexplained cash found during the course of search and seizure operation. During search, cash amounting to Rs. 25.50 lakhs was found. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of undisclosed income filed in response to notice under s. 158BC of the Act, the assessee declared the income of Rs. 1,98,000 representing undisclosed investment in all the six properties in the name of Smt. Veena Jain. These properties are as under: (a) 294/B-2/6 Rohini 25.9 sq. mts. (b) 130/G-27/3 Rohini 48 sq. mtrs. (c) 23/D-12/8 Rohini 58.8 sq. mts. (d) 131/G-27-3 Rohini 48 sq. mtrs. (e) 295/B-2/6 Rohini 5.9 sq. mts. (f) 272/C-9/7 Rohini 60 sq. mtrs. 40. As the AO was not satisfied about the purchase consideration declared by the assessee in respect of above six properties, he referred the Property No. 294/B-2/6 Rohini to VO under s. 131(1)(d) of the Act to estimate the purchase consideration of that property. The VO in his report to AO estimated the purchase consideration at Rs. 7523 per sq. mtr. The AO adopted this estimated purchase consideration in respect of above six properties in the name of Mrs. Veena Jain and made the addition accordingly. On appeal, the CIT(A) directed to adopt the purchase consideration on the basis of the registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the assessee s properties were located in Rohini. It was further stated that the size of the plot in Prashant Vihar was 260 sq. mtrs. which was very ideal measurement. The plots owned by the assessee were very small which is proved that there was a plot of about 6 sq. mtrs. As the instances given by the VO was not comparable, no addition under Chapter XIV-B of the Act could be made relying on such valuation report. The CIT(A) has, therefore, rightly deleted the addition. 47. We have considered the rival submissions. We have adjudicated similar issue in the case of Smt. Poonam Jain and Smt. Trishla Jain. Keeping in view our findings therein, we hold that the CIT(A) has rightly allowed relief to the assessee. The ground of appeal raised by the Revenue is, therefore, dismissed. 48. In ground No. 2, the Revenue has challenged the deletion of the addition on account of purchase/sale consideration of property No. HP-63/C-13 Rohini,Delhi. The AO noted that above numbered plot was purchased by the assessee. He observed that another property located at 54/F-18 Section 8, Rohini owned by the assessee s daughter was referred to the VO to estimate the cost of construction. Relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO also noted that the goods worth Rs. 5,61,995 though purchased were not recorded in the books of account. 55. The assessee vide his letter dt.22nd Jan., 1999, stated that the books of account were written up to31st Aug., 1997. It was stated that the value of stock adopted by the authorised officer was based on tag price and no rebate for general discount which ranged between 10 per cent to 20 per cent was allowed. It was also explained that some time the stock was sold at cost price also. The goods worth Rs. 1 lakh were physically present whereas their bills were received later on. It was also stated that the cut pieces and out of fashion/out of season items were sold even at lower than the cost price. The assessee also stated that the value of stock at tag price estimated by the authorised officer also included the element of the g.p. to be earned by the assessee. The assessee claimed that if rebate for the above eventualities was allowed to the assessee, the value of stock found on the date of search will tally to the book stock. The AO considered the submissions of the assessee. He allowed some rebate for above eventualities and worked out excess stock at Rs. 3,29,930. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence to rebut such practice. It is also not in dispute that the bills for period prior to 28th Aug., 1997 were found, thus, the AO s finding that purchases made vide bills dt. prior to 28th Aug., 1997 and not entered in the register up to31st Aug., 1997were not genuine, does not stand to any reason. The addition of Rs. 1,14,480 was, therefore, deleted by the CIT(A). We do not find any infirmity in his findings and uphold the same. 59. As regards the addition of Rs. 2,05,411, we find that at the time of search and seizure operation, the assessee has stated that there were goods worth about Rs. 1,00,000 for which the bills were yet to be received. During assessment proceedings, the assessee furnished the list of purchases party-wise amounting to Rs. 2,05,411. Even the reconciliation of these purchases was filed. We find that even the confirmed copy of accounts from the sellers have been furnished. Unless the Revenue brings on record any evidence contrary to these evidences, it cannot be said that purchases were bogus. The CIT(A) appreciated these facts and deleted the addition. While upholding his findings, we dismiss the ground of appeal raised by the Revenue. 60. In ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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