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TMI Blog2001 (5) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... port." whereas the Revenue in ITSSA No. 13/Jp/2000 has raised the following ground: "The learned CIT(A), Rajasthan-III, Jaipur, has erred on the facts and in the circumstances of the case and in law: (i) in directing to allow 15 per cent deduction for PWD rate and 10 per cent deduction for self-supervision. Both the grounds relate to the valuation of the property, thus the same are disposed of simultaneously. 3. The learned authorised representative submitted that the assessee is a partnership firm comprising of two partners, namely, Shri Sunil Duggar and Smt. Saroj Duggar. A search in this case was carried out on 16th May, 1997, and in response to notice under s. 158BC the return was filed which has been assessed among various additions, by taking unexplained investment in house construction at Rs. 9,82,916. The land in respect of property No. A-8 Saket Colony, was purchased from Jaipur Development Authority at Rs. 12,62,000 in the year 1992 and the construction thereon was carried out by the assessee and completed in March, 1994. The total cost of construction has been disclosed in the balance sheet furnished with the return at Rs. 10,50,000 thereby the total cost of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odwork at Rs. 1,55,000 and the same are recorded as part of cost of construction recorded in the books by taking amounts spent on construction. Similarly, it was contended that paper book pp. 83 to 93 related to the purchase cost of the land and the same are also duly recorded in the books and the AO has himself accepted this position. Furthermore, the papers found at pp. 94 to 114 are bills related to cement, steel, marble, etc. and are part of construction cost which are duly recorded in the books of the assessee maintained in the regular course of business. The learned authorised representative further contends that any statement given by Shri Navrattan Duggar cannot be used against the assessee since that person was not a partner of the firm and if any addition was to be made for the surrender made by him, it has to be looked in his assessment and not in the assessment of the assessee-firm. On merits also the learned authorised representative contends that sustenance of addition is patently wrong and has relied upon the synopsis of the arguments from paper book pp. 4 to 6. 4. On the other hand, learned Departmental Representative contends that books of account were not found a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de withdrawals for the construction of the property in question. It cannot, therefore, conclusively be said that the assessee has not withdrawn the amount for the purpose of making expenditure as found recorded in the loose papers, more particularly in respect of woodwork to the extent of Rs. 1,55,000, nor does the report say that sufficient amount was not withdrawn during the period of incurring of such expenditure by the assessee. Since neither the AO nor the learned Departmental Representative has been able to produce any material on record to show that the loose papers so found reveal incurring of any expenditure outside the books or that the expenditure incurred by the assessee is in fact more than what the assessee has declared in the returns furnished by him, the reference made to the valuation by the Department and adopting the estimation thereof for assessing the undisclosed income was beyond the scope of Chapter XIV-B of the IT Act. The AO is also not found to have rejected the books of account maintained by the assessee, and, therefore, the reliance on the decision of CIT vs. Pratap Singh & Ors., by the learned Departmental Representative does not apply to the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... element in the expenditure so incurred cannot be denied and, therefore, the authorities below were fully justified in making disallowance even in the block assessment proceedings. 10. Rival submissions have been heard in the light of material placed on record and case laws relied upon. There is no material on record which suggest incurring of any expenditure for personal purpose by any of the partners or by the assessee nor any such document was found from which it could be said that the same represented assessee's undisclosed income or property. We, therefore, direct the AO to delete the disallowance of expenses as taken on ground No. 2 by the assessee. 11. Next ground relates to the claim of deduction under s. 80HHC at Rs. 68,506. 12. The learned authorised representative contends that the AO has erred in not allowing the deduction under s. 80HHC of the Act as the audit report dt. 31st May, 1996 as placed at paper book pp. 117 to 126 was furnished to the AO whereas the search took place on 16th May, 1997. The AO himself has examined the auditors, who have confirmed the existence of books of account and, therefore, there was no case of the AO to merely disagree to allow the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-limit under s. 139(4) of the Act in this case has also not expired for furnishing of belated return by the assessee and the accounts are duly audited and accepted by the AO also. We have also perused the provisions of s. 158BB(1) of the Act as contained in Chapter XIV-B thereof which deals with the computation of undisclosed income of the block period. According to this section, the undisclosed income of the block period has to be taken as the aggregate of total income falling within the block period and such an income is to be computed on the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the AO. In this step, the emphasis is on the total income and the same has not been defined under Chapter XIV-B dealing with special procedure for assessment of search cases. For the deduction of word 'total income' as used by the legislation in s. 158BB(1), one has to resort to the definition of the word 'total income' as contained under s. 2(45) of the IT Act, 1961, which reads as under: "s. 2(45)--'total income' means the total amount of income referred to in s. 5, computed in the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been placed on the decision of Nathu Ram Premchand vs. CIT (1963) 49 ITR 561 (All) and also E.M.C. Works (P) Ltd. vs. ITO (1963) 49 ITR 650 (All). 17. On the other hand, the learned Departmental Representative placed strong reliance on the decision rendered by the learned CIT(A). It was vehemently argued that the cash credits appeared in the books of account produced before the AO but the assessee has failed to furnish return of income by due date and also the learned CIT(A) has given a finding that assessee was asked to produce such creditors, which the assessee has failed to produce before the AO. 18. Rival submissions have been heard in the light of material brought on record as well as case laws relied upon by the assessee. It is not the case of the Revenue that the books of account had not been maintained by the assessee in the regular course of business nor do we find from the order of the AO where he had asked the assessee to produce the cash creditors before him for explaining deposits within the meaning of s. 68. No such show-cause notice appears to have been given to the assessee in this case. The learned CIT(A) appears to have jumped to the conclusion without bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf has accepted the gross profit rate 25 per cent of the sales, essentially, therefore, the assessee was eligible for deduction of 25 per cent margin on the estimated value taken by the Departmental Valuer. Besides, the assessee has also relied upon written synopsis filed from pp. 13 to 15 and case laws referred therein. 21. The learned Departmental Representative, on the other hand, contends that the vouchers were not found and the purchases so declared are from unregistered dealers. Labour employed by the assessee is not capable of selling the goods as claimed by the assessee. The assessee merely produced internal vouchers, order-sheet entry dt. 26th July, 1999, relevant to the facts to the case, copy of which has also been produced. The value adopted by the registered valuer is not the market value and the assessee did not raise any question at the time of valuation done by the Departmental Valuer during the course of search. The learned CIT(A) was legally right in adopting the value taken by the registered valuer as unexplained investment in stock and confirming the action of the AO in treating the same as undisclosed income. The assessee is also not entitled for any deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have carefully considered the findings of the authorities below and do not find any justification in excluding the sales of Rs. 1 lac from the total sales made by the assessee on the suspicion that such sales were made only to create stock by the assessee, as this has been done without bringing on record any findings that while making the sale, the assessee has not transferred the title in goods to the person to whom such sales have been made. Accordingly the recasted trading account shall give profit rate of about 2 per cent. Accordingly, we direct the AO to consider the purchase of Rs. 3,36,216 as genuine and reduce the value thereof from the stock determined as unexplained and also reverse the effect of sales of Rs. 1 lac, which has not been considered by him as genuine. The AO has also given a finding that the assessee has made a feeble attempt to justify his claim with the help of a single purchase bill No. 189, dt. 2nd May, 19 (sic) of M/s. Abdul Ghafoor & Sons, Jaipur, but the same was not accepted by him merely because this bill was not found at the time of search from the assessee. Since the AO did not doubt the payment of this bill as well as the purchase was not reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo months as a notice under s. 158BC was issued on 20th July, 1998 which was served on the assessee on 24th July, 1998 and if a time of 45 days is allowed then the return falls due for filing on 7th Sept., 1998. The assessee filed the return on 6th Oct., 1998. Therefore, the delay was only for 29 days. In this light of the matter, it has been claimed that interest under s. 158BFA(1) can be charged only for one month. 25. After hearing the rival submissions and careful consideration of material on record, we restore this issue back to the AO, who shall verify the fact as stated by the assessee and charge the correct interest, after giving a reasonable opportunity of being heard to the assessee. 26. In the Departmental appeal No. 13/Jp/2000, the second ground of appeal is regarding set off of losses of Rs. 10,769. 27. The learned Departmental Representative vehemently contended that the assessee worked for only one and a half month during the relevant previous year in which the search was carried out on him. The sales were only Rs. 22,308 and no purchases have been made by the assessee. The assessee has worked out a loss of Rs. 10,768 and thus such a loss could not have been set o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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