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TMI Blog2015 (11) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the survey u/s 133A. 2. The CIT(A) has erred in law and on facts of the case in deleting the addition made by the A.O. of Rs. 1,00,00,000/- based on statement of Sri Sunil Jhunjhunwala, Secretary of the Institution. He failed to appreciate that the surrendered amount of Rs. One Crores as admitted by the secretary is the undisclosed income of the assessee society which was surveyed. The individuals were not surveyed and therefore, there was no reason for them to make any disclosure. The CIT (A) failed to appreciate that on the basis of impended documents there was sufficient evidence that the society was taking donations at the time of admissions. 3. The CIT(A) has erred in law and on facts in deleting the addition made by the A.O. of Rs. 40,26,460/- u/s 69B of the Income-tax Act, 1961. He failed to appreciate that the said amount is an investment made in acquisition of lands out of undisclosed income by the assessee. The CIT(A) has failed to appreciate that the undisclosed investment of the assessee cannot be explained by the undisclosed income surrendered by third parties, other than the assessee. 4. The CIT(A) has erred in law and on facts in deleting the additions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) on two counts - one is with regard to the validity of reference to the DVO for estimating the cost of construction and the second is with regard to the addition on merit. 4. The ld. CIT(A) has re-examined the issue and held the reference to be valid, as it was made after rejecting the books of account of the assessee. But, so far as the addition on account of unexplained investment in construction of building is concerned, the ld. CIT(A) has noted that at the time of survey, investment in construction of building was shown at Rs. 1,07,47,695/- in the hard disc of the computer and the books of account were also written upto 20.3.2009. But in the final account, the assessee has claimed investment at Rs. 1,63,70,624/-. Therefore, the difference was nominal and the ld. CIT(A) accordingly deleted the addition. The relevant observations of the ld. CIT(A) in this regard are extracted hereunder for the sake of reference:- "5(7)(ii) I find that the AO considered the amount of Rs. 1,07,47,695/- as per the amount of investment recorded in the hard disk of the computed found during the course of survey under section 133A of the Act when the books of accounts were written up to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(v) I am also inclined to agree with the contention of the appellant that while making the valuation the DVO has considered the rates prescribed for the CPWD whereas as per the decision of the jurisdictional High Court in the case of CIT Vs. Raj Kumar, (1990)182 ITR 436 (Allahabad), Hon'ble Rajasthan High court in the case of CIT Vs. Smt. Prem Kumari Murdia, (2008) 296 ITR 508(Raj.) and CIT Vs. Dinesh Talwar, (2004) 265 ITR 344(Raj.), the rates for valuation of property are to be taken as UPPWD rates. The adoption of UPPWD rates will itself reduce the difference in valuation by 15% to 20%. 5(7)(vi) In any case, I find that the disclosed investment in construction of building is Rs. 1,63,70,624/- as against Rs. 1,71,79,700/- valued by the DVO in his report. The actual difference is therefore Rs. 8,09,376/- and not Rs. 64,32,005/- as taken by the AO. Further, the difference of Rs. 8,09,376/- is 4.7% of the investment estimated by the DVO. The Hon'ble ITAT, Lucknow Bench in the case of DCIT V. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/AII/1999 had decided vide order dated 28-2-2003 that, if difference is less than 10% in valuation made by the valuation expert and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of Rs. 8,09,376/- which is only 4.7% of the investment estimated by the DVO. The ld. CIT(A), having relied upon various judicial pronouncements, has rightly deleted the addition, as the benefit of difference upto 10% is to be allowed to the assessee. We accordingly find no infirmity in the order of the ld. CIT(A) on this issue and we confirm the same. 7. Apropos ground No.2, it is noticed that during the course of assessment proceedings, when one Shri. Sunil Jhunjhunwala, Secretary of the society was cornered with the discrepancy in the maintenance of books of account, he surrendered a sum of Rs. 1 crore in the hands of various persons i.e. Ms. Madhu Agarwal, Shri. Shri. Sunil Kumar Jhunjhunwala, Shri. Manas Kumar and Shri. Anil Kumar Jhunjhunwala. But the Assessing Officer has taken the surrendered the amount in the hands of the assessee and accordingly made addition of the same. 8. The assessee preferred an appeal before the ld. CIT(A) with the submission that the surrender was made in the name of the aforesaid persons and these persons have already declared this amount in their respective hands in their return of income and paid tax thereon. But the Assessing Officer had ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary contributions to the surrender of income by Shri Sunil Jhunjhunwala. The voluntary contributions referred by the AO at paragraph 15 and 16 of the assessment order have no reference to the donations from the students. Merely because voluntary contributions have been received by the appellant does not mean that these receipts become admitted evidence of undisclosed income as observed by the AO. The voluntary contributions referred by the AO at paragraph 15 and 16 on page 11 of the assessment order have also no connection with the surrender made by Shri Sunil Jhunjhunwala and in any case these do not relate to the year under consideration. Further, the AO in his remand report has stated that the statement of Shri Sunil Jhunjhunwala as an afterthought and concocted story. I am unable to decipher how it could be so. The statement of Shri Sunil Jhunjhunwala was recorded by the Department and in the statement so recorded Shri Sunil Jhunjhunwala made a voluntary disclosure of undisclosed income of Rs. 1,00,00,000/- jointly on behalf of 4 office bearers of the appellant-society. The disclosure has no reference to the income of the appellant-society. What could have been the afterthough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the lower authorities in the light of the rival submissions, we find that undisputedly Shri Sunil Kumar Jhunjhunwala has made a surrender of Rs. 1 crore on behalf of four office bearers of the assessee-society and respective office bearers have also declared this amount in their individual returns of income. From a careful perusal of the statement of Shri Sunil Kumar Jhunjhunwala appearing at pages 20 to 24 of the compilation of the assessee, we find that in the entire statement he has explained the nature of activities of the assessee-society and its officer bearers. In response to question No.8, Shri Sunil Kumar Jhunjhunwala has surrendered an amount of Rs. 1 crore on behalf of himself and three more office bearers with an assurance that tax thereon would be paid upto 30.3.2009. Since the surrender was made in specific terms on behalf of office bearers, the same cannot be treated on behalf of the assessee. Therefore, we are of the view that the Assessing Officer has wrongly interpreted the surrender statement and treated the surrender of Rs. 1 crore in the hands of the assessee; whereas it was made on behalf of the office bearers. In the light of these facts, we are of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the B/Sheet towards Acquisition of Lands A&B Rs.37,11,540/- Total undisclosed & unaccounted investment Rs.40,26,460/- That from the above charts 19(a) to 149(d) and from the details as reflected on the said sized page no. 68 of annexure B-3 it is clearly evident that during the year under consideration the assessee society has mad e investment to the tune of Rs. 40,26,460/- as detailed in para 19(d), in purchase of the said lands, over and above their disclosed sources out of undisclosed income of the society either from donations taken from the students at the time of their admissions or from other undisclosed sources of income best known to the assessee which is totally against the spirit & object of a charitable society, That the figures as stated in the said page 68 along with the narrations stated therein hence the concealment of the assessee stands proved. That it is a universal accepted fact that in transaction relating to property the consideration is paid in both modes i.e. out of accounted & unaccounted funds, but however there are no documentary evidences to prove it. That however in the instant case there is strong & substantial documentary evidence in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated differently, as the assessee-society is being governed by the office bearers of the society. 15. Having carefully examined the orders of the lower authorities and material available on record in the light of the rival submissions, we find that in the surrender statement, Shri Sunil Kumar Jhunjhunwala who has surrendered a sum of Rs. 1 crore on behalf of himself and other office bearers of the assessee-society, has taken a plea that since the surrender was made in the name of office bearers, the addition of the same cannot be made in the hands of the assessee-society. But now when the Revenue has noticed unexplained investment by the society in purchasing land, the assessee-society wants to take benefit of surrendered amount in the hands of office bearers. Undisputedly, the assessee-society and the office bearers are different assessees. They cannot be treated to be as one, as the addition was made separately in the hands of the office bearers on account of their surrender statement, therefore, the income generated on account of surrender was the income of the individuals and it has no relation with the assesseesociety. It is also an undisputed fact that the assessee-so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational kits. Further she was asked to explain that on what rates the kits, etc. were supplied to the students and what is the purpose of crediting the same in the name of Madhu Agarwal instead of crediting it in the sale account. She remained silent on the part of system of accounting of the said funds and these facts were confronted to Shri. Sunil Jhunjhunwala, Secretary of the society and in response thereto he showed ignorance and stated that he had no knowledge of its accounting in this head. Though he has stated that the Accountant, Shri. Jitendra Singh will return back to work and explain but Shri. Jitendra Singh never appeared before the Assessing Officer, therefore no proper reply was given to the said system of accounting. During the course of assessment proceedings, the assessee was repeatedly asked to explain and justify the said receipts, but no proper reply was furnished before him and the Assessing Officer has observed that the said receipts are also nowhere reflected or accounted for in the books of account nor there were bills, etc. for its utilization for charitable purposes. He accordingly held that the said funds are nothing but unexplained funds in the shape of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to by the ld. CIT(A) while deleting the addition, the same were not confronted to the Assessing Officer for comments. The ld. D.R. has further contended that the ld. CIT(A) has allowed relief to the assessee without confronting all materials to the Assessing Officer, therefore, the matter may be restored to the Assessing Officer for re-examination of the claim of the assessee. 19. The ld. counsel for the assessee, besides placing reliance upon the order of the ld. CIT(A), has submitted that the assessee has furnished complete details before the Assessing Officer during the remand proceedings, therefore, it cannot be said that the books of account and bills and vouchers are not available with the Assessing Officer for verification. 20. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the Assessing Officer has categorically recorded in his order that despite various opportunities, neither Madhu Agarwal nor Shri. Sunil Jhunjhunwala, Secretary of the society has explained these entries. Undisputedly, the credit entry of Rs. 58.65 lakhs was found in the books of account of the assessee, but it is for the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mostly cash payments made to Shri. Sunil Jhunjhunwala, Secretary of the society or to Sunil Sir through the said debit vouchers, on which no particulars are written. The correct amount of the said debit vouchers, etc is almost of Rs. 14,65,480/- and the said debit voucher did not corroborate with the books of account and other financial records. The Assessing Officer accordingly held that the said funds totaling Rs. 14,65,480/- have been utilized for personal use of the office bearers and are not utilized for charitable purposes which is against the spirit and object of the society and he accordingly denied exemption under section 11 of the Act and made addition of the said amount as unaccounted amount spent for personal purposes of the assessee under section 69C of the Act. 23. The assessee preferred an appeal before the ld. CIT(A) with the submission that the said account is in the nature of cash imprest with Shri. Sunil Kumar Jhunjhunwala for making expenses and purchases on behalf of the society. The relevant imprest account was titled as "Suneel Kumar Imprest". It was further contended that out of the imprest account, expenses were incurred for the purpose of the society by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken the figure from Annexure B-1 & B-15 whereas the assessee has shown the figure of Annexure B-1 which was taken into account by the ld. CIT(A). The ld. CIT(A) has not made any reference to the entries appearing in Annexure B-15. Therefore, the order of the ld. CIT(A) is not proper and be reversed and that of the Assessing Officer be restored. 25. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that before the Assessing Officer the assessee has not made any effort to reconcile the statement. No doubt, if any amount is given to Shri. Sunil Kumar Jhunjhunwala in the imprest account, there should be details of its expenditure as to how the imprest amount was exhausted and it is for the assessee to furnish complete details in this regard before the Assessing Officer. But he did not do the same. Before the ld. CIT(A), the assessee tried to furnish some details and the ld. CIT(A) has taken cognizance of Annexure B-1 but he has not made any reference to Annexure B-15. Copy of Annexure B-1 is available at page 2 of the compilation of the assessee, in which total amount given to Shri. Sunil Kumar Jhunjhunwala is Rs. 4,92,83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- "The first objection of the assessee is that the details of AIR,CIB information were not provided to it in order to reconcile with the books of accounts. Thus according to assessee the addition is contrary to the principles of natural justice and has been made without confronting the evidence. This claim of assessee is totally incorrect as evidenced by entries in the order-sheet. On 05.12.2011 the following query was made: "Reason of AIR/ITS transactions confronted to the counsel of the assessee and he was asked to explain the transactions reflected of AIR/ ITS." Subsequently, on 14.12.2011 the following query was made again from the counsel of the assessee- "Again you are requested to explain / reconcile the transactions / payments / receipts reflected in information of CIB/ITS with documentary proof." It is also notice that the assessee has furnished reply to these queries vide reply dated 23.12.2011 which is as under. "All the entries shown in AIR are recorded in the books of accounts and may be verified by you" It is thus established that the assessee was provided with the AIR information and it failed to give a proper reply, as mentioned in the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of these receipts has not been explained and it is also not explained as to how the fee is received throughout the year Moreover, the examination of details reveals that there are cutting and over writings at many places date and amount. All the fee receipts do not contain any signature or acknowledgement. These have all been prepared by the assessee to justify the cash deposit in various bank accounts. There are significant variations in the amounts received from students of the same year / class, which has not been explained. As such the assessee's arguments on this issue do not carry any weight and are liable to be rejected." 28. The reply furnished by the Assessing Officer was also confronted to the assessee and in response thereto, the assessee has stated that there are typographical mistake in the Annexure submitted before the ld. CIT(A) and at page 35 due to typographical mistake, the figure was stated at Rs. 1,23,58,233/- as cash fee received from students. The details of Annexure showing the date and name of the students were also filed before the ld. CIT(A). The ld. CIT(A) re-examined the claim of the assessee and being convinced with the explanations of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts and onus is upon the assessee to explain the source of deposits. Keeping in view the totality of the facts and circumstances of the case, we are of the view that this issue was not properly examined by the ld. CIT(A) in the light of detailed evidence. We, therefore, set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to readjudicate the issue afresh in the light of evidence filed before the ld. CIT(A). We also direct the assessee to place all the relevant evidence in order to explain the source of deposits in the bank. Accordingly the matter is restored to the Assessing Officer after setting aside the order of the ld. CIT(A). 32. Apropos ground No.7, it is noticed that the Assessing Officer has disallowed exemption under section 11 of the Act having made disallowances under different heads and concluded that funds were not utilized for charitable purposes which is against the spirit and objects of the society, while making additions under different heads. The Assessing Officer accordingly treated the surplus as income of the assessee after denying exemption under section 11 of the Act, against which an appeal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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