IN THE INCOME TAX APPELLATE TRIBUNAL

JODHPUR BENCH, JODHPUR

BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER

AND SHRI N.K.SAINI, ACCOUNTANT MEMBER

ITA No. 365/JU/2009

Assessment Year : 2006-07

The ACIT, Circle, Vs. Shri Mahabir Prasad,

Sriganganagar C/o Ms Suntex India,

Sriganganagar

PAN No. AAQPP7386L

&

C.O. No. 49/Ju/2009

(in ITA No. 365/JU/2009)

Assessment Year : 2006-07

Shri Mahabir Prasad, Vs. The ACIT, Circle,

C/o Ms Suntex India, Sriganganagar

Sriganganagar

(Appellant) (Respondent)

Appellant By : G.R. Konkani

Respondent By : Shri Suresh Ohja

Date of hearing : 23.01.2013

Date of Pronouncement : 11.02.2013

ORDER

PER HARI OM MARATHA, J.M.

The appeal by the Revenue and Cross Objection by the assessee are

directed against the order of learned CIT(A) dated 24.3.2009 pertaining to

assessment year 2006-07.

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2. Briefly stated, the facts of the case are that the assessee derives

income from interest , remuneration and capital gains. For assessment year

2006-07, he filed his return of income on 30.10.2006 disclosing total

income of Rs. 14,14,400/-. The assessee is a partner in the firm M/s Suntex

India. In the income disclosed for the year, the assessee has included Long

Term Capital Gain of Rs. 12,76,288/-. The assessment was completed u/s

143(3) of the Act on 29.12.2008. The Assessing Officer made various

additions against which assessee filed first appeal and the learned CIT(A)

has deleted many additions, therefore, both the parties are now aggrieved.

3. The revenue has raised the following grounds in its appeal .

"On the facts and in the circumstances of the case the Ld. CIT(A) has erred in:-

i) deleting the addition of Rs. 1,90,000/- made by holding that

actually there is no excess of cash but on the other hand as per

chart, though the AO there is shortage of cash and so no addition

can be made by applying the provision of section 69A

ii) deleting the addition of Rs. 1,87,000/- as notional interest on the

cash in hand by hauling that the theory of Income-tax is that only

the real income should be taxed and no notional income can

be taxed.

iii) deleting the addition of Rs. 11,00,000/- + Rs. 2,00,000/- made on

account of section 68 of the IT Act, 1961 by holding that entries

found recorded in the bank are evidenced by the cash in hand

available, hence no addition u/s 68 can be made.

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iv) deleting the addition of Rs. 51430 + 18807 made on account on

non charging of interest from M/s Ganeshgarhia Roller Flour

Mill and M/s Bajaj Tea House by holding that AO could not bring

on record that assessee has received some income from these parties

which is not disclosed in the return nor establish the assessee has

gained any right to receive the interest income.

v) allowing the rebate claimed u/s 54F by holding that the property

was residential at the time of purchase hence the assessee is eligible

for the exemption u/s 54F.

4. The assessee has raised the following grounds in its Cross

Objection:-

1. That the Commissioner of Income Tax rightly deleted the addition

of Rs. 1,90,000/- made by the Income Tax Officer u/s 69 A.

2. That the Commissioner of Income Tax rightly deleted the addition

of Rs.l,87,000/- because in fact the addition were made on

conjunctures and surmises.

3. That the Commissioner of Income Tax rightly deleted the addition of

Rs. 11,00,000/-and Rs.2,00,000/- made under sectiond 68,

because the assessee successfully discharged the burden.

4. That the addition of Rs. 51,430/- and Rs.18807 made on account of

non-charging of interest from Ganesh Garhia Rollar Flour Mill

and Bajaj Tea House because the assessee was having sufficient

money and the interest is allowable as per Section 36 of the Income

Tax Act.

5. That the Commissioner of Income Tax rightly allowed

deduction u/s 54F of the Income Tax Act saying that the property

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was residential which is well proved from the record of the

assessee.

6. That the Commissioner of Income Tax should have allowed the

indexing of the property which was received by way of will

because as provided in the Act. Purchase value of the previous

owner has to be considering for the purpose of Calculation of

capital Gain.

5. We have heard the rival submissions and have carefully perused the

entire records available before us. At the time of hearing, learned ld. AR

Shri Suresh Ojha choose not to press the grounds raised in the Cross

objection. Accordingly, the Cross Objection is dismissed as ‘not pressed.’

6. In the Revenue’s appeal, there are five grounds. Regarding ground

No.(i) to (iv), the learned ld. DR has mainly relied on the reasons given by

the Assessing Officer for making impugned additions. On the contrary, ld.

AR has relied on the findings given for deleting these additions by learned

CIT(A). In respect of ground No. (v) relating to claim u/s 54F, the learned

ld. DR has made further submissions.

7. After hearing both the sides vis-à-vis the submissions of the parties,

we have found that there is no error in the findings of learned CIT(A) in

respect of all these grounds.

8. The brief facts leading to this appeal are that in the year under

consideration, the assessee had withdrawn and deposited several amounts

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from and in the same bank account. The assessee has shown opening cash in

hand of Rs. 2 lakhs and the closing cash in hand of Rs. 12 lakhs. This fact

has not been disputed by the Revenue. But the Assessing Officer has

prepared a cash flow statement and from that he has observed that there is

an excess cash of Rs. 1,90,000/- and therefore, he has added the same by

treating it as assessee’s undisclosed income u/s 69A of the Act. The cash

flow statement prepared by the Assessing Officer which appears at page

No.2 of the Assessing Officer’s order and also at page No.2 his order is as

under:-

Date Cash

received.

Amount

(in Rs.)

Date Cash paid Amount

(in Rs.)

1.4.2005 Op. Bal. 200000/- 5.11.2005 P.N.B. 10000/-

1.8.2005 B.O.R. 400000/ 28.12.2005 P.N.B. 300000/-

13.5.2005 P.N.B. 800000/ 31.12.2005 P.N.B. 100000/-

25.5.2005 P.N.B. 500000/ 9.1.2006 P.N.B. 300000/-

27.5.2005 P.N.B. 500000/ 28.3.2006 P.N.B. 400000/-

16.6.2005 P.N.B. 100000/ 31.3.2006 Cl.Bal. 1200000/-

9. The above cash-flow statement prepared by the Assessing Officer has

been assailed by the assessee by making a submission that it is not a correct

version as per the factual matrix. According to ld. AR, the Assessing

Officer has not considered Rs. 2 lakhs deposited by the assessee with M/s

Suntex India in which he is a partner although he observed this fact in the

assessment order in para 3 at page 3. That an amount of Rs. 10,000/-

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deposited on 5.11.2005 is not out of the cash in hand but is out of the funds

withdrawn from M/s Suntex India. According to him, after considering

both the above amounts there will remain no difference in the cash in hand.

However, ld. DR has contradicted the above submission and has relied on

the cash-flow statement prepared by the Assessing Officer.

10. We have considered and have found this submission of the ld. AR as

correct. Otherwise also, from this very chart, it is revealed that total cash

withdrawn by the assessee comes to Rs. 25 lakhs as against total deposit of

Rs. 11,10,000/-. Even after adding the closing cash in hand, the total

comes to Rs. 23,10,000/-. Thus, there remains no shortage of cash as has

been found by the Assessing Officer. Therefore, we are also of the

considered opinion that this amount cannot be added u/s 69A of the Act and

confirm the deletion made by learned CIT(A) of Rs. 1,90,000/-.

11. As against the addition of Rs. 1,87,500/- made on account of notional

interest on the cash in hands, which remained with the assessee during the

period from 16.6.2005 to 15.12.2005, i t is found that the assessee was

having cash in hand of Rs. 25 lakhs but made a payment of advance for the

purchase of property through cheque and has also made withdrawals of

petty amount for meeting household expenses. The Assessing Officer has

presumed that the interest @ 15% on this amount for the period stated

above should be added on notional basis. The case of the assessee is that

during the year under consideration, the assessee had purchased the house

and for that purchase he had withdrawn from the bank for making the

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payments. The advance was given through cheque for the sake of safety

and not for the fact that cash in hand was not available. The house is stated

to have been purchased for a total consideration of Rs. 42 lakhs and out of

the same a sum of Rs. 10,00,000/- was paid as advance. It was stated that

the cash in hand was kept back because the seller could demand the balance

consideration at any time and to meet that situation cash was desirable to

be kept in hand. Thus, part payment through cheque can not lead a

conclusion that the assessee did not possess cash at that point of t ime.

12. We have found that the submissions of the assessee are correct. The

Assessing Officer has not given logical reasoning or evidence to prove that

the assessee had earned some income which he had not disclosed.

Accordingly, we confirm the deletion of Rs. 1,87,500/- made by the learned

CIT(A).

13. The next issue is regarding the addition of Rs. 11,00,000/- made on

account of deposits in the bank account on different dates by treating them

as unexplained credits u/s 68 of the Act. The Assessing Officer has added

following amounts in assessee’s declared income.

Rs. 300000/- despotised in S.B. A/c with PNB on 28.12.2005

Rs. 100000/- -do- on 31.12.2005

Rs. 300000/- -do- on 19.01.2006

Rs. 400000/- -do- on 28.03.2006

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The learned CIT(A) has found these deposits out of cash available with

him.

14. After hearing both side, we have also found that entries recorded in

the bank are evidenced by cash in hand available with the assessee,

therefore, this amount cannot be added u/s 68 of the Act. Accordingly,

deletion of Rs. 11,00,000/- is justified.

15. Regarding addition of Rs. 2 lakhs deposits with M/s Suntex India,

Sriganganagar in which the assessee is a partner, we have found that this

deposit can very well be out of opening cash in hand. On 1.4.2005, the

assessee had opening cash in hand of Rs. 2 lakhs which was later on

23.4.2005 may have been deposited in the above firm. Therefore, this

addition is also not justified.

16. Lastly, the additions of Rs. 51,430/- and Rs. 18,807/- on account of

non charging of interest from M/s Ganeshgaria Roller Flour Mill and M/s

Bajaj Tea House respectively, are found to be based on no logic and with

the reasoning given these additions cannot be sustained. We have found

that the Assessing Officer has not brought on record any evidence to prove

that the assessee has received some monies from these parties and the same

have not been disclosed in the return of income. Accordingly, these

deletions are also in order.

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17. Regarding claim of rebate u/s 54F of the Act, the facts are that the

assessee had sold a piece of land situated in Panwata Area of Jodhpur. This

land was purchased on 3.3.1989. Half of this land belongs to the assessee

and half to his father. His father expired on 26.11.1990 and the assessee

became full owner of the entire land. Subsequently, this land was sold for

a consideration of Rs. 58,83,570/-. The assessee had invested Rs.

45,48,600/- in the purchase of House No. 20, Pubic Park, Sri

Sriganganagar and claimed rebate u/s 54F of the Act. The assessee also

claimed indexation for the financial year 1988-89 in which the land was

purchased but the Assessing Officer has allowed such indexation from the

year 1991 for the ½ share of the father of the assessee which fell to his

share at his death. But the Assessing Officer denied this claim by

observing that this building is now used for a ‘commercial purpose’ and

also that this property is situated in the market area. Accordingly, he has

found that the purchased property falls in the ‘commercial area’ and sit i t

cannot be treated as a residential house. Contrary to the above, the learned

CIT(A) has found that , as per the registered deed, this property is a

residential property and, therefore, he has reversed Assessing Officer’s

findings to al lowa exemption u/s 54F of the Act.

18. Before us, both part ies have maintained their earlier stand. We have

found that the reasons given by the Assessing Officer for disallowing the

benefit of section 54 are not correct as per law. The assessee had purchased

a residential property. As per settled law, the nature of the property at the

point of time of its purchase has to be considered and not i ts subsequent

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user. Accordingly, we confirm the action of the learned CIT(A) in this

regard also.

19. As a result of our above findings, the appeal of the revenue stands

dismissed.

20. In the result, the appeal of the Revenue and Cross objection of the

assessee are dismissed.

(Order Pronounced in the Open Court on 11.02.2013 )

Sd/- Sd/-

(N.K.SAINI) (HARI OM MARATHA)

ACCOUNTANT MEMBER JUDICIAL MEMER

Dated : February, 2013

Rkk

Copy to:

1. The Appellant

2. The Respondent

3. The CIT

4. The CIT(A)

5. The DR

ASSISTANT REGISTRAR