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TMI Blog2023 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has made expenditure out of books for purchase of land and construction of the factory thereon. Quantum may differ. 4. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. Judicial decisions considered wherever necessary. 5. Briefly stated, the facts of the case are that body corporate, incorporated on 25.03.2013 with the main object of manufacturing Automated Aerated Concrete Blocks. A.Y 2014-15 is the 1st year after incorporation of the company, though the assessee has not commenced its business during the captioned A.Ys and, therefore, did not earn any revenue from whatever source but was only engaged in the setting up of business by way of purchase of land and construction of factory building thereon with other civil work relating to the installation and acquisition of plant and machinery. The assessee purchased land from different parties for setting up project to manufacture fly ash bricks near NTPC. 6. A search and seizure operation u/s 132 of the Income-tax Act, 1961 [the Act, for short] was conducted on 10.11.2017 at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimate the fair market value of the land and factory building and the DVO submitted his report making the following estimate: Sl. No F.Y. Declared by the Appellant Estimated by Office % of difference On Construction On purchase of land On Construction On purchase of land 1. 2013-14 1468274 9915000 1751171 11029500 11% 2. 2014-15 41401850 - 49378888 - 16% 42870124 9915000 51130059 11029500 10. Surprisingly, in A.Y 2014-15, the Assessing Officer made addition of Rs. 3,92,91,756/- on the basis of summary of expenses in the loose sheets and in A.Y 2015-16, the Assessing Officer adopted the difference of Rs. 79,77,038/- as mentioned by the DVO and made addition as unexplained expenditure within the meaning of section 69 of the Act. 11. When the matter was agitated before the ld. CIT(A), the ld. CIT(A) confirmed addition for A.Y 2014-15 and 2015-16 modified the addition to be in line with the expenses for cash written on the loose sheets and made addition of Rs. 1,72,37,565/-. The entire controversy revolves around the following summary of alleged expenses which is page 91 of the seized material and page 20 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 410 dated 02.03.1998 has held as under: "Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. ... Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to. " " In the present case there is no evidence against the petitioners except the diaries note books and the loose sheet with regard to the alleged payments (vide MR Nos. 68/91. 72/91 and 73/91). The said evidence is of such a nature which cannot be converted into a legal evidence against the petitioners" "Section 34 of the Act reads as under:- " Entries in books of account when relevant - Entries in book of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire but such statements shall not alone be sufficient evidence to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Common Cause & Others Vs. UOI in Civil Writ Petition 505 of 2015 order dated 11.01.2017 has held that loose sheet of papers are wholly irrelevant as such evidence is not admissible u/s 34 of the Act. These transactions mentioned therein have no evidentiary value. 19. If we consider the entire factual matrix relating to the impugned additions apart from the impugned loose sheets, there is no further corroborative evidence suggesting undisclosed investment was available on record. 20. It would be pertinent to understand the fact that A.Y 2014-15 is the first year of incorporation. Therefore, by no stretch of imagination it can be said that the assessee company has brought in its own unaccounted funds for making the unaccounted purchases. Since the business has not even commenced in the subsequent A.Y. i.e. 2015-16 also, the assessee company had no funds on its own, whether accounted or unaccounted from revenue operation. There is nothing on record to suggest that the Assessing Officer has taken any action against the promoters/directors of the assessee company. 21. On similar facts, the Hon'ble High Court of Delhi in the case of Satkar Infrastructure Ltd 145 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n question, the partners contributed capital of Rs. 25,31,8701/-. One of the partners namely Master Shishir Garg introduced Rs. 2,62,0001/- as capital. There appears to be no dispute with regard to the other partners who brought their capital in the firm. The dispute is confined to the capital contribution made by Master Shishir Garg (Shishir Kumar Garg). 16. On the facts and circumstances of this case, we are of the considered opinion that the authorities below have committed error as they have failed to take into account that this was the first year of the business of the assessee firm. The partnership firm was formed on 5.7.1990 and on 7.7.1990 Master Shishir Garg deposited Rs. 1,90,000/- and Rs. 72,000/- as capital money with the Firm through bank clearance of two bank drafts. The accounting period being financial year i.e. ending on 31st of March, 1991, the Firm could not have any income at the time of its formation. The identity of the depositor i.e. Master Shishir Garg was not in issue atany point of time before the Income Tax Authorities. They treated the said deposit by Master Shishir Garg. This being so, if for one reason or the other, they were not satisfied with the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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