Addition based on mere statement of assessee recorded u/s. 132(4) not sustainable

ITAT CHANDIGARH BENCH ‘A’

Naresh Kumar Verma

Versus

Assistant Commissioner of Income-tax, Central Circle, Patiala

Ms. Sushma Chowla, JUDICIAL MEMBER
AND MEHAR SINGH, ACCOUNTANT MEMBER

IT Appeal Nos. 802 to 806 & 818 (Chd.) of 2012
[ASSESSMENT YEARS 2002-03 TO 2007-08]

NOVEMBER 27, 2012

ORDER

Per Bench – The present bunch of six appeals filed by the appellant is directed against the order, dated 28.03.2012/10.5.2012 passed by the ld. CIT(A) u/s 250(6) of the Income-tax Act,1961 (in short ‘the Act’). As the appeals involve similar grounds of appeal and issues, the same are being decided by a consolidated order for the sake of convenience and brevity.

2. In ITA No. 802/Chd/2012, the assessee has raised following grounds of appeal :

“1. That the ld CIT (Appeals) has erred in confirming the addition of Rs. 54,000/- on account of certain alleged job work on the basis of statement recorded during the course of search on 7.8.2007.

2. That notwithstanding the above said facts, the year involved being financial year 2001-02, no presumption could be drawn in respect of alleged job work carried out in financial year 2001-02.

3. That the ld CIT (Appeals) has erred in confirming the addition of Rs. 59,193/- on account of household expenses against the addition of Rs. 86,193/- as made by the AO.

4. That notwithstanding the above grounds of appeal, the ld CIT (Appeals) was not justified in upholding additions in the assessment framed u/s 153A since no material was found during search leading to various additions made during the assessment proceedings.

5. That the addition in the aforesaid paras has been made against the facts and circumstances of the case and submissions made by us has not been considered properly.

6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

3. Ld. ‘AR’ stated that all the grounds of appeal in ITA No. 802 to 806 & 818/Chd/2012, for various assessment years are common in nature, except there being variation in figure of addition, made by the AO, on account of alleged job work and house-hold expenses etc. Ld. ‘AR’ filed written submissions, in the form of chart and placed reliance, on the decision dated 22.08.2012 of Chandigarh Bench in ITA No. 343/Chd/2012, for the assessment year 2003-04 and ITA 376/Chd/2012, for the assessment year 2003-04 (in the cross appeals), in the case of Vipan Kumar Verma v. Asstt. CIT Ld. ‘AR’ referred to question No. 4 & 10 of statement dated 7.8.2007, recorded u/s 132(4) of the Act. He, further, vehemently contended that the statement of the assessee appellant was recorded, on 7.8.2007, u/s 132(4) of the Act and in response to question No. 10, appellant nowhere mentioned that he had earned income from job work, in any of the past assessment years. He, further, stated that even in the assessment year, 2008-09, pertaining to the specified previous year, a surrender of Rs. 22 lacs had been made by the appellant, however, no declaration has been made, in respect of job work, as no material was found and seized, in the course of search operations. In response to question No.4 of the said statement, the assessee appellant stated about the nature of his business. Ld. ‘AR’, clearly pointed out that no books of account are maintained by the appellant, hence, there is no question of applicability of the provisions of section 132(4A) of the Act. He, vehemently argued that no addition, what-so-ever, can be made, without the foundation of any material or evidence, brought on record. However, the AO made the impugned addition, on account of job work, purely based on the general and vague deposition made by the assessee, in the course of search operation in response to question No.10. However, the said deposition remained uncorroborated and, hence, no income from such source was declared by the appellant. The AO resorted to estimation of income, without bringing any material on record and acting in an arbitrary manner.

4. Ld. ‘DR’ placed reliance, on the decision of Honorable Punjab & Haryana High Court, in the case of CIT v. Lekh Raj Dhunna [2012] 344 ITR 352 Ld. ‘DR’ also placed reliance on the provisions of section 132(4A) of the Act, to support his contentions, in respect of applicability of the presumptions within the meaning of such provisions of the Act. Ld. ‘DR’ also stated that the appellant has failed to rebut the statement recorded, in the course of search operations, particularly the answer, in response to Q.No. 10.

5. We have heard the rival submissions, and carefully perused and considered the facts of the case, Paper Book filed by the assessee and reliance placed by ld. ‘DR’ on the decision of jurisdictional High Court. The first two grounds of appeal raised by the appellant- assessee are inter-connected. In the first ground of appeal, the appellant contended that CIT (Appeals), erred in confirming the addition of Rs. 54,000/-, made on account of certain alleged job work, based on the statement of the appellant recorded, on 7.8.2007, in the course of search operation u/s 132 of the Act. In Ground No. 2, appellant contended that no presumptions can be raised in respect of alleged job work, for the assessment year 2002-03.

6. A bare perusal of the assessment order, dated 19.12.2009, for the assessment year in question, passed u/s 143(3) read with section 153A of the Act reveals that the AO estimated income of the appellant from the alleged job work and consequently, made an addition of Rs. 54,000/-, to the income of the assessee, treating the same as unaccounted income from job work. The AO, made the impugned addition purely on the foundation of statement of the assessee recorded, on 07.08.2007, in the course of search operations. It would be pertinent to reproduce the relevant text of the question No. 10 and answer thereto, upon which reliance has been placed by the AO, for making the impugned addition :

“Q.NO. 10 “Have you other source of income except salary income, you are drawing from M/s Verma Jewelers ? If so, please give details.

Ans. “I also do job work at the shop from which I earn Rs. 5 to 6,000/- per month.”

In response to question No.4, the assessee merely stated the nature of business undertaken by him. The appellant stated that, “I assisted with my father at the shop for which I get salary of Rs. 10,000/- per month.” The AO, vide Questionnaire dated 31.07.2009, issued to the assessee, sought his explanation as to why income from job work at Rs. 6,000/- per month may not be added to the income, as admitted income Rs. 5,000/- to Rs. 6,000/- per month, in the statement recorded in the course of search operation. The AO, made the impugned addition, purely on the basis of the statement recorded u/s 132(4) of the Act, as is evident from the findings of the AO, reproduced here under:

“A search and seizure operation was conducted on the residential premises No. 94-A, Guru Nanak colony, Rajpura of the assessee on 7-8-2007 and statement on oath of Sh. Naresh Kumar Verma recorded u/s 132(4) of the I.T. Act. Vide question No. 10, the assessee was required other sources of income other than salary from Verma Jewelers. In reply to the question, the assessee admitted that he did job work at the shop and earned Rs. 5000 to 6000 per month but the assessee not shown the said income in his return.

Vide questionnaire dated 31-7-2009, the assessee was show caused as to why income from job work at the shop Rs. 6000/- per month may not be added to the income as he admitted income Rs. 5000 to 6000 per month in his statement recorded during the course of search proceedings at his residence on 7-8-2007 u/s 132(4) of the I.T Act. The show cause notice was properly served, but the assessee filed no reply which prove that he has nothing to say. Since the assessee admitted income from job work Rs. 5000 to 6000 per month during the course of search at his residence on 7-8-2007, but the has not shown income from job work in his return. Therefore, income for the assessment year 2002-03 is estimated Rs. 4500 per month and Rs. 54000/- added to the income of the assessee treating as income from job work not accounted for.”

6. (i) Before CIT (Appeals), the appellant submitted that no business of job work of jewellery was carried out by him, for which requisite place and infrastructure is required. It was contended that the addition is purely founded, on the statement made, in the course of search operation. The assessee also referred to contentions and recommendations of Raja Chelliah Committee to show that mere statement cannot be made the foundation of any addition, in the absence of any material to be brought on record. The instructions of CBDT contained in F.No. 286/203/IT(INV.) dated 11.03.2003 were also quoted, in the matter. The appellant also placed reliance on the decision such as Chief CIT v. Pampathi [2009] 310 ITR 64; Magnetic Intermediates (P.) Ltd. v. ITO [2009] 310 ITR (AT) 237 (Ahd.); CIT v. Ravindra Kumar Jain [2011] 12 taxmann.com 257. In a nut-shell the appellant contended before the CIT (Appeals) that no addition can be made purely on the basis of statement, without its corroboration by way of cogent material. However, ld CIT (Appeals) upheld the addition, as per findings recorded in para 7 of the order dated 28.03.2012. The relevant part of the order is reproduced here under :

“I have considered the basis of addition made by the AO and the arguments of the AR on the issue. It is seen that the AO has relied upon the statement of the appellant made before the authorized officer in response to the general question as to what was his sources of income and/the appellant had very categorically stated to have done job work on regular basis at his shop. In the circumstances the claim of the AR that the AO did not have any material to base his estimation, is without any basis. The appellant has not been able to bring on record any logical reasons to show that statement given during the course of search was in any way out of any fear or compulsion or inducement. It clearly was a voluntary submission of facts as recalled by the appellant at the time of making the statement and there is no reason to disbelieve the authenticity of same. As such the addition made by the AO is confirmed.”

6. (ii) It is mentioned that CIT (Appeals) misread and misquoted the said statement of the appellant, and read the same as “the appellant had categorically stated to have done job work on regular basis at shop”. In this context, a reference maybe made to the above reproduced relevant part of the appellant’s statement. In view of this, findings of the CIT(Appeals), are vitiated, being based on assumed incorrect facts.

7. The reliance placed by ld. ‘DR’ on the decision of the jurisdictional High Court in the case of Lekh Raj Dhunna (supra) is misplaced, founded on misreading of the facts of the case and the relevant provisions of section 132(4) read with section 132(4A) of the Act. A bare perusal of the fact-situation of the present case, as culled out from the relevant records, assessment order and the appellate order of the CIT (Appeals), reveals that the assessee never maintained any books of account. No seized material has been brought on record, to prove that assessee had earned job work, for the past asst. Years, including the asst. Year under reference. Ld. ‘DR’ has failed to demonstrate, as to how the facts and the ratio of the decision of the jurisdictional High Court, relied upon by him is applicable to the facts of the present case. A bare perusal of the fact-situation of the facts and the ratio of the decision relied upon by ld. ‘DR’ reveals that in that case, search was conducted, at the residence of the assessee. It was not in dispute that assessee had made a statement u/s 132(4) of the Act whereby a surrender of Rs. 2 lacs was made. Besides this, the assessee had admitted that he had earned commission on sales which was not disclosed in the return filed by him. Further, during search, certain sales documents were seized which bore the signatures of the assessee as well. These documents depicted total sale of Rs. 4,92,03,005/-. Therefore, in view of provisions of sub-section (4) & (4A) of section 132 of the Act, the AO was found by the jurisdictional High Court, as justified in drawing presumptions against the assessee and making the addition of Rs. 9,00,000/-. The Honorable jurisdictional High Court, further, pointed out that the onus was upon the assessee, to have produced cogent material, to rebut the presumptions, which he had failed to displace. However, in the present case, no such document, pertaining to earning of job work from jewellery was discussed and brought on record by both the AO and CIT(Appeals). Further, no declaration of any amount, on account of job work has been made by the assessee. No documents were brought by ld. ‘DR’, on record showing any such transactions of job work and signatures of the assessee thereon. Therefore, the presumptions as contemplated u/s 132(4)/132(4A) of the Act cannot be conceived in such a fact-situation of the present case. In view of this, the question of applicability of such statutory presumption does not arise. The case law relied upon by the ld. ‘DR’ was based on the foundation of total sales of Rs. 4,92,03,005/- recorded in the documents found in the course of search operation, and a surrender made by the assessee in lieu of such undisclosed sale commissions. In the present case, no such documents and details pertaining to the assessee’s job work, was brought on record by the ld. ‘DR’. Ld. ‘DR’ mechanically placed reliance, on this decision of the jurisdictional High Court. Needless to say that each case depends on its own facts and even close similarity between one and another case is not enough, because even a single significant detail, may alter the entire aspect and complexion of the case. The judicial precedents should be followed, to advance the cause of justice and not to perpetuate injustice. It is pertinent to state here that judicial precedent is an authority for what it actually decides and it is not an authority for any implication, assumption, or inference derived from judgement. Ld. ‘DR’ merely assumed application of the decision of the jurisdictional High Court, without having regard to the core issue that facts and circumstances of the case cited and relied upon are not in paramateria, in any respect vis-à-vis the facts obtaining in the present case. Ld. ‘DR’ placed reliance, on the decision of the said jurisdictional High Court, without discussing, as to how the fact-situation of the present case fits in the fact-situation of the decision, on which reliance is placed. In view of this, decision relied upon by ld. ‘DR’ is not applicable to the fact-situation of the present case.

8. The AO, in the present case made the impugned addition, on the foundation of bare husk of the statement of the appellant, made in the course of search operation, without there being any material for its collaboration. A bare reading of the said deposition of the appellant, reveals that the appellant he has not stated that he earned income from job work during the earlier asst. years, including the asst. year in question. The revenue has failed to demonstrate, by way of any material, brought on record, that the assessee appellant had earned job work, for the asst. year in question.

8. (i) The general rule is that ‘onus of proof’ is always on the party, who asserts a proposition or fact, which is not self-evident. In the present case, the AO presumes and asserts that the appellant has earned income, from job work, therefore, onus lies upon him, to prove the same, by bringing relevant corroborative and credible material, on record, before making the impugned addition. The assessee appellant has not made any surrender, in respect of income from job work and no document has been adduced by the revenue, to support its finding that assessee has earned income from job work, in the past asst. years.

9. It is categorically held by the Honorable Apex Court in a plethora of decisions, that it is a well settled principle of law that revenue cannot decide, an issue, without proper facts and law, supporting its decision. A decision based on mere surmises, guess work or conjectures or irrelevant material and evidence is liable to be quashed. The Honorable Apex Court, in plethora of decisions has often frowned upon the tendency of Assessing Officers, to frame assessment orders or make additions purely on surmises. In the present case, a bare perusal of the finding of the AO and the CIT (Appeals), as reproduced above, clearly reveals that no material has been brought on record, to support the impugned additions. The AO as well as CIT (Appeals), being quasi-judicial authority must not base their findings, on no-material or no-evidence. This is a fundamental rule of justice and established legal proposition that there may be something more than bare suspicion, to support the findings, in the assessment order, as held by the Hon’ble Supreme Court, in the case of Dhirajlal Girdharilal v. CIT [1954] 26 ITR 736; Omar Salay Md. Sait v. CIT [1959] 37 ITR 151 (SC), Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC); Lal Chand Bhagat Ambica v. CIT [1959] 37 ITR 288 (SC). In the present case, AO had not made any enquiry except quoting Question No. 10 and reply thereto. The AO, further, failed, to bring any material on record, even prima-facie to suggest earning of income from job work, by the appellant. Therefore, the AO, being quasi-judicial authority is not competent, to draw inferences in vacuum, without the base of foundational material, evidence and relevant provisions, as has been done, in the present case. The AO is required to act in a judicial manner while framing asst order.

10. It is also a well settled proposition that the AO is not competent, even to make any estimate of income or addition, without the fulcrum of relevant, and credible material, to support such estimation or addition or any findings. The Honorable Supreme Court, in the case of CST v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 has held that no addition can be made without there being any rational and reasonable basis for such addition. It is, further, held that authority, while making the best judgement assessment, should arrive at his conclusions without any bias and on rational basis. The relevant and operative part of the decision is reproduced here under, for the purpose of its proper appreciation:

‘Held that the re-assessments were valid. From the circumstance that the assessee had dealings outside the accounts of the value of Rs. 31,171.28 for 19 days, it was open to the officer to infer that the assessee had large-scale dealings outside the accounts. In such a situation, it was not possible for the officer to find out precisely the turnover suppressed and he could only make an estimate of the suppressed turnover on the basis of the material before him. So long as the estimate made by him was not arbitrary and had a reasonable nexus with the facts discovered, it could not be questioned. It was wrong to hold that the officer must have material before him to prove the exact turnover suppressed.

In estimating any escaped turnover, it is inevitable that there is some guess-work. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not any one else’s. The High Court cannot substitute its best judgment for that of the assessing authority.”

11. Further, both the text and the scheme of the Act, does not contemplate that the AO can make addition without bringing any relevant and cogent material on record. The assessment to be made by the AO u/s 143(3), u/s 147 read with 148, u/s 153A of the Act or under the repealed provisions of section 158BC of the Act, is required to be supported by relevant evidence or material. Under the scheme of Act, the assessee is statutorily required, to support his return of income or contentions, by adducing evidence and the AO is required to make addition, on the basis of relevant material or evidence on record, whether direct or circumstantial. No addition can be made under the scheme of Income-tax Act by the AO, purely on the basis of surmises or conjectures or as a matter policy. In the present case, the appellant declared income in the statement recorded on 30.08.2007 u/s 132(4) of the Act. The declaration of income in the statement, recorded, on 30.08.2007, for the asstt. Year 2008-09 is made as under:

“Statement u/s 132(4) of the I.T. Act, 1961

Statement on oath of Sh. Naresh Kumar Verma S/o Sh. Ram Sarup Verma on 30.08.2007 u/s 132(4) of the Income Act, 1961

I have been administered the oath by Shri K.S. Bains, DDJT(Inv.), Patiala that I shall speak the truth and nothing but the truth. I have further been made aware of the fact that any fake or untrue statement given by me here under shall make me liable to prosecution under the Indian Penal Code and under the Income Tax Act, 1961. Following is being stated by me on oath.

Q. 1 Please identify your self.

Ans: I am Sh. Naresh Kumar Verma S/o. of Sh. Ram Sarup Verma R/o House No. 94A, Guru Nanak Colony, Rajpura.

Q. 2 In your concluding statement recorded during the course of search u/s 132 of the I.T. Act, at your residential House No. 94A, Guru Nanak Colony, Rajpura on 07.08.2007 you had surrendered Rs. 22,00,000/- in your hand for the financial year 2007-08 relevant to Asst. Year 2008-09 in addition to the surrender made by your family members as per detail given below: –

Please give the bifurcation of surrender of Rs. 22 lacs i.e. on what account you have surrendered this amount and how this income has been derived by you ?

Ans. I admit that I have surrender of Rs. 22 lacs for the A.Y. 2008-09 as per detail given below:-

This income of Rs.22 lacs has been derived from business transaction not recorded in the regular books of account.

R.O. & A.C.

Sd/-

30.8.07″

12. It is evident from the above declaration, that no surrender has been made by the appellant in respect of the alleged income from job work.

13. The ld. ‘DR’ carried the Bench through the text of section 132(4) and 132(4A) of the Act, with a view to demonstrating the applicability of statutory presumptions to the facts of the present case. However, the ld. ‘DR’ failed to appreciate that legal rebuttable presumptions u/s 132(4A) of the Act are applicable only to the facts of any case, where threshold statutory conditions of such provisions are satisfied. In the present case, the ld. ‘DR’ sought to apply the statutory presumptions, as contemplated u/s 132(4A) of the Act, to the facts of the present case, without establishing the factum that the appellant was found in possession or control of any books of account, other documents, money, bullion, jewellery or other valuable article or thing etc. In this specific context, it is inconceivable and incomprehensible, as to how the provisions of section 132(4A) of the Act are applicable to the facts of the case, without showing satisfaction of the statutory conditions precedent contained therein.

13. (i) The issue of applicability of legal presumption u/s 132(4A) of the Act needs elaboration. There was controversy on the issue as to whether presumption u/s 132(4A) is applicable only in the situations covered u/s 132 of the Act particularly, with respect to summary assessment as contemplated under erstwhile sub-section (5) of section 132 or it extends to regular assessment also. The Honorable Supreme Court, in the case of P.R. Metrani v. CIT[2006] 287 ITR 209 held the presumption u/s 132(4A) of the Act is not available to authorities while framing regular assessment. The words in sub-section (4A) of section 132 of the Act are “may be presumed”. Therefore, presumptions u/s 132(4A) of the Act are rebuttable presumptions. The ld. ‘DR’ placed reliance on the decision of the Honorable Karnataka High Court in CIT v. P.R. Metrani (HUF)[2001] 251 ITR 244. However, the Honorable Supreme Court in P.R. Metrani’s (supra) reversed the said decision of the Hon’ble Karnataka High Court and approved the decision of the Honorable Allahabad High Court in Pushkar Narain Sarraf v. CIT [1990] 183 ITR 388. Such interpretation placed by the Honorable Apex Court, in this decision, on the applicability of the presumption u/s 132(4A) of the Act led to insertion of section 292C, with retrospective effect from 1.10.1975 i.e. from the inception of sub-section 132(4A) of the Act. Insertion of section 292C of the Act, with retrospective effect makes it clear that presumptions prescribed u/s 132(4A) of the Act would always be available even in regular assessment. Further, addition of the words “In any proceeding under this Act” in section 292C leaves no scope for any confusion on the issue and the legislative intent was made amply clear. The object of making the presumptions available to Income tax authorities, as to the books of account, other documents or assets found during the course of search belonging to the person from whose possession or control, the same have been found, to make the person to own such books of account, other documents or assets, so as to require him, to explain the nature and assets of such material found from his possession. The object is to place the burden, on the assessee, so that he may not be permitted to take the plea without cogent evidence that such material does not belong to him or he does not know how such material has come into his possession or contents thereof are incorrect. Such presumptions are in line with the principle contemplated under Indian Evidence Act. As per section 110 of Indian Evidence Act, 1872, burden of proof, as to the actual ownership of things, lies on the person from whose custody it was found. This is the philosophy and object of insertion of the new section 292C of the Act. In this legislative background, ld. ‘DR’ has failed to show as to how such statutory presumptions are applicable to the facts of the present case. A mere reference to the provisions of section 132(4) read with 132(4A) of the Act, hardly serve any purpose. Therefore, the applicability of the provisions of section 132(4A) read with section 292C of the Act, as sought by the ld. ‘DR’, is not factually and statutorily tenable.

14. In this case, search & seizure operation was conducted, on 07.08.2007 u/s 132 of the Act. In the present case, the assessee appellant has not admitted any concealed income or made any declaration, in respect of the past assessment years, including the asst. Year under reference. Having regard to the above legal and factual discussions and considering the scheme of the Act, pertaining, to the framing regular assessment or re-assessment and assessments in case of search cases, it is evident that no addition can be made by the AO merely on the basis of subjectivity and arbitrariness. The additions or deletions are required to be based on the fundamental facts, relevant and credible material and relevant provisions of the Act.

14. (i) To sum-up the issue of impugned addition, it is evident from the foregoing detailed discussions that the AO acted without material or evidence in making such addition. Similarly, the CIT (Appeals) endorsed the findings of the AO, in a perfunctory manner, disregarding one of the vital facets of the concept of natural justice, embedded in passing the speaking order. The impugned addition has been made by the AO and subsequently upheld by the CIT (Appeals), merely on the basis of presumptions. In framing assessment, re-assessment or asstt. in search cases, as contemplated under the relevant provisions of the Act, the AO is competent to act on what is technically described as “evidence” in the Indian Evidence Act and also under section 142 and 143 of the Act, on “the material gathered” by him. The AO, being quasi-judicial authority, cannot make addition, being expedient, as a matter of policy or on the basis of assumed and non-existent material. The AO adopted such approach in the present case, as no plausible and credible material or evidence has been indicated in the asst. order, while making the impugned addition. In view of this, the asst. order must be speaking order i.e. it must disclose the basis and the corroborative material for making the addition. The addition cannot be based, on bare presumption but on the legitimate material from which a reasonable and natural inference, for making addition flows and the initial burden for finding and bringing such material on record, however slight, is on the revenue authority. The AO is not entitled to make a guess, without evidence, as it would certainly be a leap in the dark. In view of the above legal and factual discussions and having regard to the judicial precedents referred to in this order, we don’t find any substance and merit in the findings of CIT (Appeals), in upholding the impugned addition. Hence, the findings of the CIT (Appeals), in the mater, cannot be upheld. The same are set aside. Thus, first two grounds of appeal, raised by the appellant are allowed.

15. In Ground No. 3, appellant contended that CIT (Appeals) erred in confirming addition of Rs. 59,193/- on account of household expenses against the addition of Rs. 86,193/-, as made by the AO. Ld. ‘AR’ contended that addition has been made by AO and upheld by CIT (Appeals), without there being any material on record to support such addition. It is cardinal principle of justice that no addition can be made without there being fundamental support of corroborative evidence.

16. Ld. ‘DR’ supported findings of lower authorities. The AO noticed that assessee was found to be enjoying a lavish life-style evidenced by luxury items, three ACs, 4 geysers, one Santro Car in his house and assessee did not file copies of bills for electricity. The AO, further, observed that assessee’s children were studying in convent school and having regard to such factors. The AO estimated household expenses at Rs. 1.50 lacs which led to an addition of Rs. 86,193/-. The findings of the CIT (Appeals), on the issue in question are contained in para 10, which are reproduced here under :

“10. I have considered the basis of addition made by the AO and the submissions of the AR on the issue. It is seen that the AO has projected a lavish life style of the appellant on the basis of house hold goods like Air Conditioners/Geysers and ordinary car like santro. The conclusion of the AO based upon this flawed projection is therefore erroneous to that extent. It is also seen that the contribution made by other members of the family to the tune of Rs. 27,000/- has not been taken into consideration. The AO’s estimation of his expenses @ Rs. 15,000/- per month is not on the higher side especially when the expenses on the operation of atleast two air conditioners on daily basis for about a period of 5 to 6 months (Summers) would itself involved expenditure of Rs. 3,000/- per month. The assessee has also not produced any evidence in the form of electricity bills even for the year 2007-08 to prove his claim that the air conditioners were being used for a period of two months. In the circumstances the over all estimation by the AO at Rs. 15,000/- is fair and reasonable, however the contribution by the other members of the family to the tune of Rs. 27,000/- has to be accounted for before working out the addition on issue. As such out of total addition of Rs. 86,193, an amount of 59,193/- is confirmed.

17. Ld. CIT (Appeals) upheld the estimation made by the AO being fair and reasonable. However, contribution made by other members of the family, to the tune of Rs. 27,000/- was considered in the matter, as such out of total addition of Rs. 86,193/-, an amount of Rs. 59,193/- is confirmed.

18. We have heard the rival submissions, facts of the case and the relevant records and found the findings of CIT (Appeals), in the matter, as not suffering from any infirmity. Hence, the ground of appeal is dismissed.

19. Ld. ‘AR’ stated that Ground Nos. 4, 5 & 6 are general in nature. In view of such assertions, these grounds of appeal are dismissed.

20. In the result, appeal of the assessee in ITA No.802/Chd/2012 is partly allowed.

ITA No.803/Chd/2012 (A.Y. 2004-05)

21. The assessee has raised the following grounds of appeal :

“1. That the learned CIT(A) has erred in confirming the addition of Rs. 60,000/- on account of certain alleged job work on the basis of statement recorded during the course of search on 7.8.2007.

2. That notwithstanding the above said facts, the year involved being financial year 2003-04, no presumption could be drawn in respect of alleged job work carried out in financial year 2003-04.

3. That the Ld. CIT (A) has erred in confirming the addition of Rs. 76,500/- on account of household expenses against the addition of Rs. 1,08,000/- as made by the Assessing Officer.

4. That the CIT(A) has also erred in confirming the addition of Rs. 11,435/- on account of alleged unexplained self assessment tax.

5. That notwithstanding the above grounds of appeal, the Ld. CIT (A) was not justified in upholding additions in the assessment framed u/s 153A since no material was found during search leading to various additions made during the assessment proceedings.

6. That the addition in the aforesaid paras has been made against the facts and circumstances of the case and submissions made by us has not been considered properly.

7. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

22. In ground No. 1 & 2, the appellant challenged confirmation of addition by CIT (Appeals), in respect of addition of Rs. 60,000/-, on account of alleged job work, on the basis of statement recorded on 7.8.2007, in the course of search operations. Ld. ‘AR’, in the course of present appellate proceedings stated, as indicated earlier that the submissions filed in ITA 802/Chd/2012 are applicable to all appeals bearing ITA Nos. 803 to 806 & 818/Chd/2012, as the issues involved in these two grounds of appeal, are identical except variation in amount of job work. Therefore, findings of the Bench, recorded in ITA 802/Chd/2012, for the assessment year 2002-03, are also applicable to these grounds of appeal. Accordingly, Grounds of appeal No. 1 & 2 of this appeal are allowed.

23. In Ground No. 3, appellant contended that CIT (Appeals) erred in confirming the addition of Rs. 76,500/- on account of household expenses as against the addition of Rs. 1,08,000/-.

23. (i) We have heard the rival submissions, facts of the case and the relevant records. It is pertinent to reproduce the findings of ld. CIT (Appeals), as contained in para 7 of the order, as under:

“7. I have considered the basis of addition made by the AO and the submissions of the AR on the issue. It is seen that the AO has projected a lavish life style of the appellant on the basis of house hold goods like Air Conditioners/Geysers and ordinary car like santro. The conclusion of the AO based upon this flawed projection is therefore erroneous to that extent. It is also seen that the contribution made by his father to the tune of Rs. 31,500/- has not been taken into consideration. The AO’s estimation of his expenses @ Rs. 12,500/- per month is not on the higher side especially when the expenses on the operation of at least two air conditioners on daily basis for about a period of 5 to 6 months (Summers) would itself involved expenditure of Rs. 2500/- per month. The assessee has also not produced any evidence in the form of electricity bills even for the year 2007-08 to prove his claim that the air conditioners were being used a period of two months. In the circumstances the over all estimation by the AO at Rs. 1,50,000/- is fair and reasonable, however the contribution by the father/wife of the assessee to the tune of Rs. 31,500/- has to be accounted for before working out the addition on this issue. As such out of total of Rs. 1,08,000/- an amount of Rs. 76,500/- is confirmed.”

23. (ii) Having regard to the fact-situation of the issue & findings of the lower authority, as also the relevant records, we don’t find any infirmity in the findings of CIT(Appeals), in the matter, being fair and reasonable. Therefore, the same are upheld and ground of appeal of the assessee is dismissed.

24. Ground No. 4, raised by the assessee is not pressed, hence, the same is dismissed.

25. Ld. ‘AR’ stated that Ground Nos. 5, 6 and 7 are general in nature and need no adjudication. Accordingly, ground Nos. 5, 6 and 7 are dismissed.

26. In the result, appeal No. 803/Chd/2012 is partly allowed.

ITA No. 804/Chd/2012 (A.Y. 2005-06)

27. In this appeal, the assessee has raised following grounds of appeal :

“1. That the learned CIT(A) has erred in confirming the addition of Rs. 60,000/- on account of certain alleged job work on the basis of statement recorded during the course of search on 7.8.2007.

2. That notwithstanding the above said facts, the year involved being financial year 2004-05, no presumption could be drawn in respect of alleged job work carried out in financial year 2004-05.

3. That the ld. CIT (Appeals) has erred in confirming the addition of Rs. 76880/- on account of household expenses against the addition of Rs. 1,30,000/- as made by the AO. (The amount may be read as Rs. 1,06,880/- as pointed out by ld. ‘AR’ ).

4. That the CIT (Appeals) has also erred in confirming the addition of Rs. 82,000/- and Rs. 95,000/- in respect of gift received from brother-in-law and mother respectively.

5. That the CIT(A) has erred in confirming the addition of deposit in the RD account to the tune of Rs. 12,000/-.

6. That notwithstanding the above grounds of appeal, the Ld. CIT(A) was not justified in upholding additions in the assessment framed u/s 153A since no material was found during search leading to various additions made during the assessment proceedings.

7. That the addition in the aforesaid paras has been made against the facts and circumstances of the case and submissions made by us has not been considered properly”

28. In ground No. 1 & 2, the appellant challenged confirmation of addition by the CIT (Appeals) of Rs. 60,000/-, in respect of job work, on the basis of statement recorded on 7.8.2007 in the course of search operations. Ld. ‘AR’, in the course of present appellate proceedings stated, as indicated earlier that the submissions filed in ITA 802/Chd/2012 are applicable to all appeals bearing ITA Nos. 803 to 806 & 818/Chd/2012, as the issues involved, in these two grounds of appeal, are identical except variation in amount of job work. Therefore, findings of the Bench, recorded in ITA 802/Chd/2012 for the assessment year 2002-03 are mutatis-mutandis applicable to these grounds of appeal. Accordingly, Grounds of appeal No. 1 & 2 are allowed.

29. In Ground No.3, appellant contended that CIT(Appeals) erred in confirming the addition of Rs. 76,880/- on account of household expenses as against the addition of Rs. 1,30,000/-.

29. (i) We have heard the rival submissions, perused and considered the facts of the case and the relevant records. It is pertinent to reproduce herewith the findings of ld. CIT (Appeals), as contained in para 7 of the order, as under:

“7. I have considered the basis of addition made by the AO and the submissions of the AR on the issue. It is seen that the AO has projected a lavish life style of the appellant on the basis of house hold goods like Air Conditioners/Geysers and ordinary car like santro. The conclusion of the AO based upon this flawed projection is therefore erroneous to that extent. It is also seen that the contribution made by his father to the tune of Rs. 53,120/- has not been taken into consideration. The AO’s estimation of his expenses @ Rs. 13,333/- per month is not on the higher side especially when the expenses on the operation of at least two air conditioners on daily basis for about a period of 5 to 6 months (Summers) would itself involved expenditure of Rs. 3,000/- per month. The assessee has also not produced any evidence in the form of electricity bills even for the year 2007-08 to prove his claim that the air conditioners were being used a period of ; months. In the circumstances the over all estimation by the AO at Rs. 1,60,000/- is fair and reasonable, however the contribution by the father/wife of the assessee to the tune of Rs. 53,120/- has to be accounted for before working out the addition on this issue. As such out of total addition of Rs. 1,60,000/- an amount of Rs. 1,06,880/- is confirmed.”

29. (ii) Having regard to the fact-situation of the issue and findings of the lower authority, as also the relevant records, we don’t find any infirmity in findings of CIT (Appeals), in the matter, being fair and reasonable. Therefore, the same are upheld and ground of appeal of the assessee is dismissed.

30. Ground No. 4, raised by the assessee is not pressed. Hence, the same is dismissed.

31. Ld. ‘AR’ stated that Ground Nos. 5, 6 and 7 are general in nature and need no adjudication. Accordingly, ground Nos. 5, 6 and 7 are dismissed.

32. In the result, appeal No. 804/Chd/2012 is partly allowed.

ITA No. 805/Chd/2012 (A.Y. 2006-07)

33. In this appeal, ground Nos. 1 & 2 raised by the appellant against the order of the CIT(Appeals) are similar as raised in ITA 804/Chd/2012 i.e. confirmation of addition of Rs. 60,000/- on account of job work. Therefore, our findings given in ITA 802/Chd/2012 on this account, would apply to these two grounds also and accordingly, Ground Nos. 1 & 2 of this appeal are allowed.

34. In ground No. 3, appellant contended that CIT (Appeals) erred in confirming addition of Rs.60,000/-, on account of household expenses against addition of Rs. 88,000/- made by the AO.

34. (i) A perusal of the appellate order dated 10.05.2012 passed by the CIT (Appeals) reveals that no finding on the addition made by the AO in respect of household expenses has been given by the CIT(Appeals). In this context, para No.5, wherein discussion of the household expenses is made, is reproduced here under:

“5. The ground of appeal at Sl. No. 3 and 4 pertains to addition on account of low household withdrawals to the tune of Rs. 88,000/-. The AO in this regard has observed that the assessee was found to be enjoying a lavish life style evidenced by luxury items like three Air Conditioners four Geysers and one Santro Car in his house and the assessee did not file the copies of bills of electricity. It was further observed by the AO that the assessee’s children were studying in convent school and therefore considering the entire scenario the house hold expenses were estimated at Rs. 1,60,000/- except met by others leading to addition of Rs. 88,000/-.”

34. (ii) In para 6, the CIT (Appeals) has reproduced submissions made by the appellant on the issue in question, which is reproduced here under :

“6. During the course of appellate proceedings the AR of the appellant submitted his arguments on the issue as under:-

“The addition is also on the basis of same facts and circumstances and the Assessing Officer has not given the benefit of Rs. 28,000/- withdrawn by the wife of the assessee and the estimation of expense is without any cogent material. We rely on our earlier submissions.”

34. (iii) The CIT (Appeals) has discussed Ground Nos. 3 & 4, pertaining to addition on account of low household withdrawal. However, in para 7, CIT (Appeals) commenced discussion in respect of Ground No. 5 which pertains to the addition on account of rebate for self-supervision to the tune of Rs. 22,018/-. A perusal of the impugned appellate order reveals that CIT (Appeals) has inadvertently omitted to record finding in respect of Ground No. 3 & 4. Therefore, it would be in the fitness of things and to meet ends of justice that the issue be restored to the file of the CIT (Appeals) to record his findings on the issue in question. Accordingly, issue is restored to the file of the CIT (Appeals) for the purpose of recording findings, on the issue and adjudicate the same. The ground of appeal No.3 is allowed for statistical purposes.

35. Ground Nos. 4 & 5 are not pressed by the appellant and accordingly these grounds of appeal are dismissed as not pressed.

36. In Ground No. 6, ld. ‘AR’ contended that CIT (Appeals) erred in disallowing deduction u/s 54, as claimed before the AO, which is against facts and law. Ld. ‘DR’ placed reliance on the order of the CIT (Appeals).

37. We have perused and carefully considered the facts and circumstances and findings of the lower authorities. The findings of the CIT (Appeals) are reproduced here under :

“19. During the course of appellate proceedings the AR of the appellant submitted his arguments on the issue as under:-

The facts and circumstances of making an addition of Rs. 3,57,811/- is on account of deduction U/s 54 of the Act claimed at Rs. 3,57,811/- the brief facts are that the assessee has disclosed capital gain on purchase of plot on 21.3.2003 after the sale of house property on 5.6.2002 and at that time the capital gain of Rs. 3,57,811/- was claimed as exempt since the amount of sale proceeds was to be invested on the construction of the new house. The Assessing Officer sought to disallow such deduction in the share and in this regard, the reply dated 27.11.2009 was submitted in which it was stated that the total sale proceeds were spent and later on amount to the tune of Rs. 4,42,479/- and Rs. 1,50,000/- totaling to Rs. 5,92,000/- was spent and the assessee had shifted in the particular built house and therefore the exemption U/s 54 could not be withdrawn.

ii. The assessee has stated that the map from Municipal Corporation was approved in May 2005 and as per local enquiries made by the Assessing Officer and accordingly he had disallowed the cost of construction.

iii. It is submitted that for construction of house it is not necessary to get the map approved since one can start the house without approval of Map and for that there is risk of penalty and demolition of existing structure. The assessee was continuously going to the Municipal Corporation office and as such initially the Map was got approved and later on it was got approved. There is evidence in the seized record in the shape of bills of construction material for the year 2004 and therefore since as per seized records the construction had started, the Assessing Officer was not justified in mentioning that no construction was carried out. The contention of the Assessing Officer that the assessee has disclosed further investment in the house to the tune of Rs. 16 Lacs in the Assessment Year 2008-2009 cannot not be said to a valid ground for disallowing the deduction, because the assessee may spent the amount from undisclosed sources and which amount was later on surrendered, but that does not mean that the se was not complete.

iv. The AO has referred to local inquiries and it is submitted that no local inquiries have confronted to the assessee and contention of the Assessing Officer deserves to be ignored and on account of deduction claimed U/s 54 as made by the Assessing Officer deserves to be deleted.”

20. I have considered the basis of dis allowance made by the AO and the arguments of AR on the issue. It is apparent that there is no documentary evidence with the assessee to prove that he had spent an amount of Rs. 1,50,000/- on construction in. the year under consideration. As against this the AO has brought on record the report of Municipal Corporation certifying that the plan for construction had not been approved neither any penalty for getting construction done without plan had been initiated or imposed. The AO has further treated the amount received in cash allegedly from relatives as bogus and suitable addition had been made which was confirmed by the undersigned as well. The assesses on the other hand has referred toll evidence ;n the seized record showing construction of house, but this arguments also fails as no such paper has been highlighted. It is also seen that the assessee had surrendered of Rs. 16 lacs in A.Y. 2008-09 on account of unaccounted investment in house construction but has claimed in the submissions before me that the amount had actually been invested earlier. This claim of the appellant can not be accepted as the amount surrendered in a particular year is deemed to have been earned or invested in the same year only. In the circumstances it becomes clear that the assessee has not been able to prove his claim of having constructed the house in the year under consideration, as such the action of the AO in disallowing the deduction u/s 54 is confirmed.

38. On a careful perusal and consideration of the facts and the findings of the CIT (Appeals), it is evident that assessee has failed to comply with the statutory requirement of section 54 of the Act. Therefore, as per the findings recorded by the CIT (Appeals), assessee is not eligible for such claim. Consequently, findings of the CIT (Appeals) are upheld and ground of appeal of the assessee is dismissed.

39. Ground Nos. 7 to 9 are general in nature and do not require separate adjudication. Accordingly, Ground Nos. 7 to 9 are dismissed.

40. In the result, appeal No. 805/Chd/2012 is partly allowed.

ITA No. 806/Chd/2012 (A.Y. 2007-08)

41. In this appeal, the Ground Nos. 1 & 2 raised by the appellant against the order of the CIT (Appeals) dated 10.05.2012, are similar as raised in ITA 802/Chd/2012 i.e. confirmation of addition of Rs. 66,000/- by the CIT (Appeals) on account of job work. Therefore, our findings given in ITA 802/Chd/2012 on this account, would apply to these two grounds also and accordingly, Ground Nos. 1 & 2 of this appeal are allowed.

41. (i) In ground No. 3, appellant contended that CIT (Appeals) erred in confirming addition of Rs. 64,000/- on account of household expenses against addition of Rs. 80,000/- made by the AO. Similar issue has been considered and adjudicated in appeals adjudicated herein before, at the appropriate place. The findings recorded by the CIT (Appeals), are reproduced here under :

“7. I have considered the basis of addition made by the AO and the submissions of the AR on the issue. It is seen that the AO has projected a lavish life style of the appellant on the basis of house hold goods like Air Conditioners/Geysers and ordinary car like santro. The conclusion of the AO based upon this flawed projection is therefore erroneous to that extent. It is also seen that the contribution made by his father to the tune of Rs. 24,000/- has not been taken into consideration. The AO’s estimation of his expenses @ Rs. 1,50,000/- month is not on the higher side especially when the expenses on the operation of at least two air conditioners on daily basis for about a period of 5 to 6 months (summers) would itself involve exp of Rs. 4,000/- per month. The assessee has also not produced any the form of electricity bills even for the year 2007-08 to prove his claim that the air conditioners were being used a period of two months. In the circumstances the over all estimation by the AO at Rs. 12,500/- is fair and reasonable, however the contribution by the father/wife of the assessee to the tune of Rs. 24,000/- has to be accounted for before working out the addition on this issue. As such out of total addition of Rs. 88,000/- an amount of Rs. 64,000/- is confirmed.”

41. (ii) Having regard to the fact-situation of the issue and findings of the lower authority, as also the relevant records, we don’t find any infirmity in the findings of the CIT (Appeals) and accordingly, the same are upheld and this ground of appeal of the appellant is dismissed.

41. (iii) Ground No. 4, raised by the appellant is not pressed and accordingly this ground of appeal is dismissed as not pressed.

42. In Ground No. 5, appellant contended that CIT (Appeals) erred in confirming the addition of Rs. 50,000/- on account of difference in the cost of construction based on the report of departmental Valuation Officer.

42. (i) We have perused and considered the rival submissions and relevant records. The findings of the CIT (Appeals) as recorded in para 18 of his order are reproduced here under :

“18. I have considered the reply submitted by the assessee before the AO wherein the difference in cost of construction has been explained by the assessee. It is seen that the AO has not given any reasons for disbelieving the explanation filed in this regard especially when the assessee had filed evidence of return of income filed by appellant’s wife. It is however seen that the appellant’s wife had declared income only of Rs. 96,000/- out of which certain amount would have been used for personal expenses. Therefore, the entire discrepancy In the construction of house to the tune of Rs. 1,15,872/- does not stand explained. As such addition to the tune of Rs. 50,000/- is confirmed.”

42. (ii) Having regard to the fact-situation of the issue and findings of the lower authority, as also the relevant records, we don’t find any infirmity in the findings of the CIT(Appeals) and accordingly, the same are upheld and this ground of appeal of the appellant is dismissed.

43. Ground Nos. 6, 7 and 8 are general in nature and do not require separate adjudication. Accordingly, Ground Nos. 6 to 8 are dismissed.

44. In the result, appeal No. 806/Chd/2012 is partly allowed.

ITA No. 818/Chd/2012 (A.Y. 2003-04)

45. In this appeal, ground Nos. 1 & 2 raised by the appellant are similar as raised in ITA 802/Chd/2012 i.e. confirmation of addition of Rs. 54,000/-, by the CIT (Appeals) on account of job work. Therefore, our findings given in ITA 802/803/Chd/2012 in the matter, would apply to these two grounds also and accordingly, Ground Nos. 1 & 2 of this appeal are allowed.

45. (i) In ground No. 3, appellant contended that CIT (Appeals) erred in confirming addition of Rs. 64,000/- on account of household expenses against addition of Rs. 88,000/- made by the AO. We have considered the rival submissions and relevant record. The findings of the CIT(Appeals) are reproduced here under :

“7. I have considered the basis of addition made by the AO and the submissions of the AR on the issue. It is seen that the AO has projected a lavish life style of the appellant on the basis of house hold goods like Air Conditioners/Geysers and ordinary car like santro. The conclusion of the AO based upon this flawed projection is therefore erroneous to that extent. It is also seen that the contribution made by his father to the tune of Rs. 24,000/- has not been taken into consideration. The AO’s estimation of his expenses @ Rs. 12,500/- per month is not on the higher side especially when the expenses on the operation of at least two air conditioners on daily basis for about a period of 5 to 6 months (Summers) would itself involved expenditure of Rs. 2000/- per month. The assessee has also not produced any evidence in the form of electricity bills even for the year 2007-08 to prove his claim that the air conditioners were being used for a period of two months. In the circumstances the over all estimation by the AO at Rs. 1,50,000/- is fair and reasonable, however the contribution by the father/wife of the assessee to the tune of Rs. 24,000/- has to be accounted for before working out the addition on this issue. As such out of total addition of Rs. 88,000/- an amount of Rs. 64,000/- is confirmed.”

45. (ii) Having regard to the fact-situation of the issue and findings of the lower authority, as also the relevant records, we don’t find any infirmity in the findings of the CIT (Appeals) and accordingly, the same are upheld and this ground of appeal of the appellant is dismissed.

46. Ground No. 4 raised by the appellant is not pressed by the appellant and accordingly this ground of appeal is dismissed as not pressed.

47. Ground Nos. 5 to 7 are general in nature and do not require separate adjudication. Accordingly, Ground Nos. 5 to 7 are dismissed.

48. In the result, appeal No. 818/Chd/2012 is partly allowed.

49. Resultantly, all the appeals of the assessee are partly allowed.