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TMI Blog2019 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... tatus of cash flow in the books of these persons, and how they have owned up the cash in their accounts. He ought to have not disbelieved the version of the assessee without any analysis. We have already set aside two issues to the file of the Assessing Officer for re-adjudication. We deem it appropriate to remit this issue also for re-adjudication. The ld.AO should make an analysis of the treatment given by the alleged creditors about the cash balance found at the time of search in their books, and thereafter form an opinion, whether cash found during the course of search stands explained or not. It is needless to say that observation made by us will not impair or injure the case of the AO and will not cause any prejudice to the defence/explanation of the assessee. - ITA NO. 1069/CHD/2016 - - - Dated:- 6-11-2019 - Shri N.K. Saini, VP And Shri Rajpal Yadav, JM For the Assessee : Shri Vishal Mohan, Adv. For the Revenue : Shri Chandrajit Singh, CIT-DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against the order of ld.CIT(A)-3, Gurgaon dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed as capital gains as returned by the assessee . 3. That in the facts and circumstances of the case the Ld Commissioner of Income Tax ( Appeals) is not justified in upholding the estimating the profit on sale of flats @ 30% of the sales value of ₹ 9,00,000/- and thereby upholding an addition of ₹ 2,70,000/-. 9. The Assessing Officer made the addition of ₹ 2,70,000/- on account of profit on sale of immovable properties. The Assessing Officer noted that the transactions made in land and building, amount spent on construction have not been routed through the trading and Profit Loss Account. No profit was shown by the assessee on account of sale of property. No explanation was also tendered by the assessee in this regard. Since the transactions have not been routed through Profit Loss Account, the trading account in respect of construction and sale of immovable property is cast below by the Assessing Officer and gross profit was taken @ 30%:- F.Y. 2007-08 To By Opening Stock: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. On appeal, the learned CIT (Appeals) upheld the addition for the reasons stated in para 6.1 of the impugned order and, hence the assessee is in appeal before the Tribunal. 12. We have heard the rival submissions and perused the materials available on record. Shri Vishal Mohan, learned counsel for the assessee vehemently argued that the discretion to determine the gross profit rate must necessarily be exercised on the basis of relevant factors. According to him, the Assessing Officer has not considered the past history of the assessee, the nature of assessee's business, prevailing economic conditions vis- - vis the assessee's business. He has also pointed out that the Assessing Officer should have considered the price of raw material, labour, rise in price index from time to time. According to the learned counsel for the assessee, the authorities below have not cited any comparable case while applying the GP rate of 30%, which is arbitrary and without any basis. The learned counsel for the assessee pointed out that the reputed builder of Shimla M/s Rajdeep Builders had returned a profit of 18.22%, which is evident from the copy of Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not barred by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law, but in making the assessment under subs. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under S. 23(3). In this case the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the Departmental Representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, seems to be based on surmises, suspicions and conjectures. It is somewhat surprising that the Tribunal took from the representative of the Department a statement of gross profit r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ips think that the section places the officer in the position of a person whose decision as to amount is final and subject to no appeal, bust whose decision if it can be shown to have been arrived at without an honest exercise of judgment, may be revised or reviewed by the Commissioner under the powers conferred upon that official by section 33. 12. It would also be necessary to refer to another judgment in State of Kerala Vs. C. Velukutty, 1966 ITR Vol. (LX) 239, wherein while dealing with the expression 'best of his judgment', it has been held that the discretion to determine net profit rate vests in the authorities but discretion shall not be arbitrary and should have a reasonable nexus to the available material and the circumstances of the case, followed by reasons that appear to be legal and valid. A reference may also be made to judgment of this Court in ITA No. 478 of 2006 titled as Aggarwal Engineering Co. Vs. Assistant Commissioner of Income Tax, decided on 06.12.2010. The second question of law is answered accordingly. 13. In the above case, there was a dispute regarding application of net profit rate. However, in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer should give a relief to the assessee accordingly. Thus, ground Nos.2 and 3 of the appeal are allowed partly. 6. Since the appeal at the instance of the assessee impugning the above finding has been stated to be admitted by the Hon ble Himachal Pradesh High Court, therefore, in the fitness of things, we deem it appropriate that, let this issue be remitted back to the file of the Assessing Officer for adjudication in accordance with ultimate outcome of the issue after the decision of the Hon ble Himachal Pradesh High Court. It is pertinent to observe that the alleged rate of profit for computation of income for assessment out of sale of property is depended upon the issue, whether the profit from sale of property is to be assessed as a business income or under the head capital gain from investments. In two years, this issue is subject matter of appeal before the Hon ble High Court. Therefore, there is no justification for dealing them specifically in this assessment year. The Assessing Officer has to first determine, whether profit from sale of property is to be assessed as income from business/profession or under the head income from capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith same is unaccounted. Just because surrender has been retracted does not empower the revenue to make unnecessary additions. The abstract of the cash of Shri. Rajesh Popli has already been placed on record. No discrepancy in the same has been pointed out. His brother Shri. Rajesh was owned case as per his books of account of ₹ 3,71,084.77. The sister and brother in law of the assessee had owned the cash of ₹ 3 lakhs and their statement was also recorded during the course of proe3eings under section 132 of the Income Tax Act, 1961. The father in law of the assessee Shri. Vijay Kishan Sharma s cash of ₹ 1,50,000/- was lying in the hosue of the assessee and confirmation in this regard is placed on record for your kind perusal and ready reference. 9. Thereafter, the ld.AO has made reference to the statement of the assessee recorded during the course of survey conducted at the business premises, and ultimately held that out of ₹ 21,46,150/-, a sum of ₹ 8,00,503/- was added in the case of Shri Rajesh Popli and balance amount of ₹ 13,45,647/- remained unexplained which required to be added in the hands of the assessee. Appeal to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect on merit, rather rejected the explanation of the assessee in a cursory manner. The ld.DR, on the other hand, relied upon the orders of the Revenue authorities. He pointed out that the ld.AO has specifically dealt with explanation of the assessee, and he was not satisfied with quality of the evidence produced by the assessee to demonstrate that out of the cash balance of ₹ 13,45,647/-cash of four individuals was available. 12. We have duly considered rival contentions and gone through the record carefully. No doubt, during the course of search, cash was found. Onus was on the assessee to explain the source and nature of the cash. According to the assessee, he has explained the source by pleading that a sum of ₹ 3,71,084/- belongs to Shri Rajesh Popli. ₹ 3,00,000/- belongs to sister and brother-in-laws of the assessee, and ₹ 1,50,000/- belongs to father-in-law, Shri Vijay Kishan Sharma. Assessments of these persons were also with the Assessing Officer. The Assessing Officer ought to have appraised himself status of cash flow in the books of these persons, and how they have owned up the cash in their accounts. He ought to have not disbeli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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