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TMI Blog2018 (1) TMI 1645X X X X Extracts X X X X X X X X Extracts X X X X ..... ome declaring total income of Rs. 30,11,75,820/-. Assessment was completed u/s.143(3) of the Act determining the assessed income at Rs. 36,07,76,280/-. Number of additions were made by the AO and the details in summary are given in page 17 of the assessment order. 3. Aggrieved with the said additions, assessee filed an appeal before the CIT(A)-II, Nashik. At the end of the First Appellate Proceedings, CIT(A) partly allowed the appeal of the assessee. Subsequently, the CIT(A) also found apparent mistake in his order and therefore, he invoked the provisions of section 154 of the Act and rectified his order vide rectification order dated 13-01-2015 after following due process of law and after giving opportunity to the assessee. Aggrieved with the relief granted by the CIT(A), the Revenue is in appeal before us vide ITA No.904/PUN/2013. Further, aggrieved with the additions confirmed by the CIT(A) the Assessee is in appeal vide ITA No.732/PUN/2013. Further, aggrieved with the decision of the CIT(A) in assuming jurisdiction u/s.154 of the Act, the assessee filed another appeal ITA No.447/PUN/2015 requesting for cancelling the said rectification order. We shall now take up the appeal-wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erations, i.e. advances were given during the course of carrying on the business on which no interest was charged. The Ld. AO made the disallowance on account of diversion of funds for non business purposes and also u/s. 36(1)(iii) of the I.T. Act, 1961 and Ld.CIT(A) made the disallowance only u/s.36(1)(iii) which is incorrect and if at all the disallowance was to be made it should have been made u/s.37. The appellant most respectfully submits that the matter cannot be restored to the lower authorities to ascertain the applicability of provisions of section 37 of the I.T. Act, 1961 and reliance is placed on three high court decisions submitted in the case of Bafna Builders and Developers which is simultaneously heard." 7. From the above, it is the submission of the assessee's counsel that the issue may be restored to the file of the AO and the same will be in tune with the decision of the Tribunal in the case of M/s. Bafna Builders and Land Developers - ITA Nos. 706/PUN/2013 and ITA No.162/PUN/2015 & ITA No.902/PUN/2013 order dated 30-10-2017 where Ground No.3 was already remanded to the file of the AO for fresh adjudication as per the discussion given in Para 17 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,000/- made u/s.69B of the Act. Background facts of this issue include that Chhoriya Group was searched u/s.132 of the Act. Search resulted in seizure of a document involving Shri Ratanlal C. Bafna for the A.Y. 2009-10. According to the said document, the assessee purchased Shirdi plots amounting to Rs. 1,13,75,000/-. However, on verification of the records, it was noticed that an amount of Rs. 50 lakhs only was reflected in the books of the assessee. Considering the fact there was settlement of loan between Chhoriya group and Shri Ratanlal C. Bafna. The differential amount of Rs. 63,75,000/- was added in her hands and her husband hands u/s.69B of the Act. In this regard, assessee furnished the following arguments/objections to the decision of the lower authorities : "1. The transaction was a distress sale entered into by the appellant after the search and seizure action on the said group. 2. Mr. Ratanlal C. Bafna in his case has challenged the addition. 3. The addition has been made on presumptions and surmises without giving an opportunity to the appellant to cross examine the author of the document from Chhoriya group. 4. There is no evidence with the department that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed considering the assessee's share of consideration at Rs. 2,67,54,510/- out of Rs. 13.38 crores. After reducing the accounted portion of Rs. 1 crore, the AO proceeded to make addition of the balance amount of Rs. 1,67,54,510/- u/s.50C of the Act (Rs. 2,67,54,510 - Rs. 1,00,00,000/-). 18. During the First Appellate proceedings, the CIT(A) received the said valuation report of the DVO and found the DVO's value is much less than the said figure of Rs. 13.38 crores. Considering the objections raised by the assessee before the CIT(A), the matter was once again referred to the DVO. As per the valuation submitted by the DVO, the property value was conclusively determined at Rs. 6,72,51,553/- against the Sub Registrar's price of Rs. 13.38 crores. Ld.CIT(A) considered the DVO's final report which reiterated the figure of Rs. 6,72,51,553/- and, as per the discussion given in Para No.7.2.2 of his order, the CIT(A) deleted the entire addition made by the AO in the assessment. The said para is relevant and the relevant lines are extracted as under : "7.2.2. . . . . . . . .In view of the legal position and decisions of the various courts, AO was not justified in taking the value asc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph along with cross appeals. 21. In this regard, relating to addition u/s.50C of the Act r.w.s. 154 of the Act, Ld. Counsel for the assessee filed the following written submissions : "1. Though the development agreement was registered on 02-04-2008, in fact the possession of the property was given on 01-08-2007. Refer page Nos. 46 & 47 of paper book filed. During the course of assessment proceedings the appellant filed a reply dt. 20-12-2011 as to why the impugned addition be not made and the said reply has been reproduced by the learned AO. in his impugned assessment order. But the learned AO mechanically made the addition. However both the lower authorities have held that the value of the property as on 02-04-2008 had to be considered for making addition u/s.50C of the I.T. Act, 1961 and accordingly the addition has been made. 2. The plans were submitted to Nashik Municipal Corporation on 28-12-2007. 3. All the works regarding development of lands were immediately started after 01-08-2007. 4. The stamp duty of Rs. 3,94,500.00 was paid on 28-12-2007. But the document could not be executed due to some difficulties. 5. The document was finally executed on 02-04-2008 when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, Ld. AR also identified certain bonafide mistakes occurred in the rectification order passed by the CIT(A) u/s.154 of the Act and submitted that addition, if any, should be restricted to only Rs. 43,27,403/- and not Rs. 34,50,311/-. In this regard, Ld. AR brought our attention to the written submission in Item No.7 extracted in Para 21 above. 24. Per Contra, Ld. DR for the Revenue relied heavily on the orders of the AO and the CIT(A) and submitted that lower authorities have rightly applied the provisions of section 50C of the Act as the asset transferred by the partner does not constitute stock in trade in the hands of the assessee or the firm. Referring to the arguments of the Ld. Counsel for the assessee that the provisions of section 45(3) of the Act overrides the provisions of section 50C of the Act, Ld. DR relied on the decision of the Lucknow Bench of the Tribunal in the case of Carlton Hotel Pvt. Ltd. Vs. ACIT in order dated 14-11-2008. 25. On hearing both the sides, we find the issues raised in Ground No.4/Additional Ground Nos. 4, 5 & 6 requires fresh consideration and comprehensive adjudication by the lower authorities. We find the DVO's report was not available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the partner to the firm constitutes stock in trade or otherwise etc. 26. On hearing both the parties on this issue, in the remand proceedings, we direct the AO to examine all the above referred aspects of the issue and decide the requirement of making addition in the hands of the assessee u/s.50C of the Act. AO shall grant reasonable opportunity of being heard to the assessee in connection with the set principles of natural justice. Accordingly, Ground No. 4 and the additional grounds raised in his chart (Ground Nos. 5 and 6) are admitted and allowed for statistical purposes. 27. Ground 3 raised by the assessee at issue No.7 of his chart was not pressed. Accordingly, the said ground is dismissed as 'not pressed'. 28. Additional ground No.4 raised at issue No.8 of his chart deals with direction given by the CIT(A) to the AO to take follow up action, if any, in accordance with the provisions of section 28(iv) of the Act. CIT(A) noticed that the assessee purchased commercial property from her firm at the rate of sale price/sq.ft., which is lesser than the market rate. According to CIT(A), the difference in the said rate constitutes a taxable benefit u/s.28(iv) of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said purchase transacstion constitutes the transaction of withdrawal of the stock in trade at cost price and the same outside the scope and ambit of provisions of section 28(iv) of the Act. 32. Per Contra, Ld. DR filed the written submissions which read as under : "4. In our case, the AO has taxed it under section 28(iv) i.e. perquisite or benefit accrued to assessee in exercise of doing business. Here, the assessee got shops at concessional rate as she is a 60% partner of the firm. So it is clearly a benefit as per section 28(iv). The AO has spelt out in the detail the benefit accrued to assessee by comparing the sale of shops to other unrelated parties. 5. During the course of hearing, the Ld. AR also took the plea that assessee had given Rs. 5 crores as advance to the firm. However, it was not clear for what purpose the advance was given. As it is clear from the books of accounts of assessee, there are many layers of transactions between the assessee and the firm. For want of clarity, the advance of Rs. 5 crores to firm cannot be linked with the transaction of shops at concessional price. Benefit accrued to the assessee stands undisputed." 33. We heard both the sides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that point of view, we are of the view that the direction given by the CIT(A) does not warrant any amendment. Therefore, the argument of the assessee's counsel extracted above in this regard are relevant when consequential effect if any, is to be given in the course of the proceedings before the AO. Therefore, we are of the opinion that the impugned direction per se is consequential. Therefore, the Additional Ground No.4 of the appeal raised by the assessee is admitted and dismissed. 34. In the result, ITA No.447/PUN/2015 filed by the assessee is dismissed and ITA No.732/PUN/2013 filed by the assessee is partly allowed for statistical purposes. ITA No.904/PUN/2013 A.Y. 2009 - 10 35. Grounds raised by the Revenue are as under : "1. On the facts and circumstances of the case and in law, the Ld. CIT(A)-II, Nashik erred in granting the relief of Rs. 7,87,262/- as against addition made of Rs. 10,87,262/- on account of vehicle expenses and deleted the addition of Rs. 1,00,000/- on account of shop expenses. These additions is made by Assessing Officer after taking into consideration the factual position. 2. On the facts and circumstances of the case, the Ld.CIT(A)-II, Nashik erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family members for purposes more than the business use. In the absence of details, the AO held as under: "5. . . . . . The cost of vehicles and variety of vehicles shown by the assessee clearly shows that these are luxury vehicles and therefore its use by the assessee and by her family members are more than the business use. However, in absence of details for business and personal purposes, the actual use cannot be worked out vehicle wise. Therefore, considering the totality of facts and circumstances of the case, I disallow 50% of expenses including Driver's salary and depreciation for personal use and allow 50% for business use." AO worked out 50% disallowance at Rs. 9,95,788/-. Further, AO also disallowed another amount of Rs. 91,474/- debited to the profit and loss account. 38. CIT(A) granted relief to the tune of Rs. 7,87,262/- as per the discussion given in Para Para No.6.2.2 of his order holding that the disallowance is on the higher side. Relevant discussion is extracted here as under : "6.2.2 . . . . . AO has made 50% disallowance of Rs. 19,91,576/- claimed by the appellant on vehicle expenses, Drivers' salary and depreciation. In my considered view 50% di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply on assumption or theoretical/classroom exercise, can be made. Any addition merely on the basis of theoretical exercise will not stand to the test of the legal scrutiny. In view of the above, I am of the considered opinion that the addition of Rs. 15 lac made by the AO without any corroborative evidence is not justified. The same is deleted." 43. From the above, it is a fact that AO could neither bring any corroborative evidence that the assessee has made bogus payments nor prove the expenses to be untrue. Therefore, we uphold the decision of the CIT(A) on this issue. 44. Ground No.3 raised by the revenue relates to the disallowance of Rs. 2,15,673/- on account of Kavi Sammelan Expenses. Relevant facts include that the AO disallowed the said claim of expenses holding the same as non business expenditure. Assessee holds that the expenditure incurred on Hasya Kavi Sammelan constitutes an advertisement for her business. Considering the fact that the assessee failed to establish the nexus, the AO disallowed the said expenditure, In the First Appellate proceedings, the CIT(A) appreciated the assessee's claim that the same constitutes advertisement expenditure. Further, he elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 49. Ground No.6 by the Revenue relates to relief of Rs. 10,44,440/- on account of disallowance u/s.14A r.w. Rule 8D of the Act. This ground is connected to Ground No.2 of the assessee's appeal in ITA No.732/PUN/2013. We have remanded this issue to the file of AO for fresh adjudication. Consequently, this issue being common in law should also be re-examined by the AO after considering the assessee's claim as well as settled legal propositions on the issue that the disallowance is uncalled for when assessee has excess interest free funds. AO is directed to apply relevant binding judgments on the issue after granting reasonable opportunity of being heard to the assessee. Accordingly, Ground No.6 raised by the revenue is allowed for statistical purposes. 50. Ground No.7 by the revenue pertains to deletion of addition of Rs. 1,67,54,510/- involving the provisions of section 50C of the Act. Infact, this issue shares with the facts relating to Ground No.4 of the assessee's appeal and also the issues raised by the assessee in the appeal ITA No.447/PUN/2015 in connection with the rectification order passed u/s.154 of the Act. 51. As per the discussion given in Para Nos.21 to 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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