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TMI Blog2016 (1) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, the explanation of the assessee that they had used some of the building material recovered from the old building while constructing the new building appears to be bonafide -addition made in the hands of both the assessees on account of undisclosed investment in the house property is hereby deleted - decided in favour of assessee. Addition on account of undisclosed investment in purchase of machinery in hands of Rajan Jhiriwal - Held that:- Given the undisputed fact that the assessee had withdrawn a sum of 31,85,751 from its bank account. The explanation of the assessee that besides other expenses, machinery worth only 25,500 was also purchased out of said withdrawal appears reasonable. In light of this, addition of 25,500 is deleted and ground no. 2 is allowed. Levy of interest u/s 234B 19 lacs seized in course of search and deposited in the PD a/c - where there is an advance tax liability and there is a cash which is seized and lying in the PD a/c, would the AO be empowered to adjust the same automatically or would that require a specific authorization from the assessee - Held that:- It would be difficult to say that showing adjustment of seized cash against advance tax liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 97,794/- on account of undisclosed income in 3, Moti Dungri Alwar. The AO has failed to understand the provisions of section 55A alongwith rule 111AA. Hence, addition made on account of undisclosed investments of ₹ 97,794/- is deserved to be deleted. (ii) Under the facts and circumstances of the case order passed u/s 143(3) of the Income Tax Act, 1961 is illegal & bad in law s it is charged the interest u/s 234B & 234C on disclosed income ₹ 19,00,000/- seized during the course of search. ITA No. 73/JP/13 & ITA No. 72/JP/13 Shri Rajan Jhiriwal & Shri Robin Jhiriwal 2. Regarding ground no 1 which is common in both the appeals, relevant facts relevant for issue under consideration are as follows. 2.1 Both the assessees are partner in M/s Rajan Jhiriwal from where they derive income in form of remuneration and share of profit. Both these assessees started construction of house in F.Y. 2007-08 which was continued upto F.Y. 2009-10. The cost of construction amounting to ₹ 1,09,06,256/- was declared and borne by both the assessees equally. The AO referred the determination of cost of construction to the DVO who determined the same at ₹ 1,19, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the cost of construction estimated by DVO on account of difference in the cost on account of CPWD rates instead of local PWD rates which is confirmed by Tribunal, such finding of fact cannot be disturbed by the court. The CIT(A) has also observed that there is variation in the estimate of DVO due to adoption of CPWD rates instead of PWD rated but he has confirmed the addition only because assessee has not taken this argument. It is submitted that once the fact of variation in the estimate of cost made by DVO on account of nonapplication of PWD rates is accepted. CIT(A) ought to have deleted the addition. In view of above, the addition confirmed by CIT(A) be deleted. 2.3 We have heard the rival contentions and pursued the material on record. The AO has made an addition of ₹ 97,794/- on account of undisclosed investment in house No.3, Moti Dungri, Alwar in the hands of both the assessees namely Shri Rajan Jhiriwal and Shri Robin Jhiriwal. The addition is on account of difference in the actual cost of construction as disclosed by the assessee and the cost which is determined by the DVO. As per the assessee, the difference between the actual cost of construction and the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the cost of construction as determined by the assessee and as determined by the DVO is only 9.14% and the construction has spread over a period of 3 years. Further, given that the assessee has purchased the land alongwith building, the explanation of the assessee that they had used some of the building material recovered from the old building while constructing the new building appears to be bonafide. In light of this facts and following the decision of the Hon'ble Patna High Court in case of Bimla Singh (supra), the addition made in the hands of both the assessees on account of undisclosed investment in the house property is hereby deleted. Hence, ground no 1 in both the appeals are allowed. 3. Ground No.2 is specific to ITA No. 73/JP/13 and is regarding addition of ₹ 25,500/- on account of undisclosed investment in purchase of machinery in hands of Rajan Jhiriwal. 3.1 Briefly the relevant are that in search a paper showing purchase of machinery of ₹ 22500/- was found. In assessment proceedings, assessee explained that he purchased the machine in cash from the accumulated cash balance withdrawn to meet the household expenses. The AO, however, held that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the PD a/c against the advance tax liability. Subsequent to passing of assessment order and in response to application filed by assessee under section 154 of the Act, the AO finally adjusted this amount against the outstanding demand raised by him. Being aggrieved, the assessee raised additional ground before ld CIT(A) against charging of interest u/s 234B & 234C. The CIT(A) admitted the additional ground but referring to section 132B and the CBDT instruction dated 13.07.2006 held that seized cash can be adjusted only against the existing liability and since advance tax payment is not an existing liability u/s 132B, the interest levied/s 234B & 234C is correct and decision of ITAT relied upon by the assessee in the case of Anand Shankar Mittal vs. DCIT is not applicable. 4.2 Before us, the Ld AR submitted that the interest u/s 234B & 234C is chargeable when the advance tax is not paid. In the present case, cash of ₹ 19 lacs was seized. The assessee at the time of filing of the return on 21.09.2010 considered the amount of ₹ 19 lacs as advance tax paid on 08.10.2009 and accordingly filed the return. Therefore on amount of ₹ 19 lacs, the levy of interest for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 wherein the AO did not give credit for ₹ 19 lacs of seized cash against the advance tax liability and also levied interest u/s 234B & 234C of the Act. Subsequently, pursuant to rectification application u/s 154 of the I.T. Act, the AO accepted the adjustment of ₹ 19 lacs from PD account towards the tax liability but rejected the claim of the appellant for non-charging of interest u/s 234B and 234C of the Act. The ld. CIT(A) confirmed the levy of interest u/s 234B & 234 C of the Act and held that the advance tax payment cannot be said to be an existing liability within the meaning of "existing liability" defined in section 132B of the Act. In this regard, it would be relevant to note that an explanation no 2 to section 132B of the Act has been inserted by Finance Act 2013 w.e.f. 1st June, 2013 which reads as under: Explnation-2- For the removal doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVU. As it is clear from the amendment, the same has been made effective prospectively w.e.f. 01.06.2013. The Coordinate Bench of ITAT in case of Kanishka Prints Pvt. Ltd. 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orization from the person to adjust the refunds against any other liability. Following the same principle, it would be essential that in respect of the cash seized, which belongs to the assessee, though lying with the department, the assessee authorizes the department to adjust the same against the advance tax liability. In the instant case the assessee has submitted that he has shown the cash seized amounting to ₹ 19 lacs towards advance tax payment in his return of income. Further the assessee has written a letter dated 30.03.2011 requesting for adjustment of cash against advance tax liability. In our view, it would be difficult to say that showing adjustment of seized cash against advance tax liability in the return of income tantamount to an authorization to the AO. Rather, the said disclosure is akin to showing an intent to adjust and such adjustment is possible only on receipt of specific authorization. It is the letter dated 30.03.2011 filed by the assessee with the AO which authorizes the department to adjust the seized cash against advance tax liability. Accordingly, we are of the view that the seized cash of ₹ 19 lacs should be adjusted against the advance ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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