VIKRAM SINGH YADAV, A.M.: Both are the cross appeals, one by the assessee and another by the Revenue arising against the order dated 11/09/2015 passed by the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 2 ld CIT(A)-4, Jaipur for the A.Y. 2011-12. The effective grounds of both the appeals are as under:- Grounds of assessees appeal:

1. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the addition of Rs. 29,80,000/- out of Rs. 50,26,604/- made by the ld. A.O. on account of deemed dividend by applying the provisions of Section 2(22)(e) of the Income Tax Act more so when the payment of M/s Ashish Buildcon Private Ltd. to the assessee was not in the nature of loans and advances but advance against the sale of the land to the company in the normal course of the business.

Grounds in revenues appeal:-

1. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs.6,32,650/- made by the A.O. on account of sale of plot considering as business income.

2. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 20,00,000/- made by the AO on account of investment in Construction of house when the addition is supported by the findings of the DVO.

3. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 1,50,00,000/- made by A.O. on account of advance given to Gulam Farooq Ansari which was accepted by the assessee during the search that this amount was paid out of books. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 3

4. Whether on the facts and in the circumstances of the case the CIT(A) was right in deleting the addition of Rs.20,46,604/- out of Rs.50,26,604/- made by the A.O. on account of deemed dividend income u/s 2(22)(e) of the I.T. Act and accepting additional evidence without giving opportunity to A.O.

2. Firstly we will take up Revenues appeal: The 1 st ground of the Revenues appeal is against deleting the addition of Rs. 6,32,650/- made by the Assessing Officer on account of sale of plot. The appellant has challenged the action of the AO treating the Plot No. 293, Shree Ram Vihar as business stock of the assessee as against capital assets shown by the assessee and determining the profit from sale of this plot as business income as against the long term capital gain declared by the assessee, which resulted in the assessment of the profit from sales of properties amounting to Rs. 6,32,650/- as income from business as against long-term capital gain of Rs. 3,33,888/- shown by the assessee. The brief facts and findings of the AO are that during the year the assessee have shown profit and gain from business or profession as a real estate developer. However, in the return of income the assessee has also shown long term capital gains from sale of plots details of which are as under: ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 4 Sr. No Address of Plot Purchase Price Indexed Cost Addition/ Improve ment Indexed cost of Addition Total indexed cost Sale Price Capital Gain 1 Plot No. 293, Shree Ram Vihar 27600 48344 640750 918778 967112 1301000 333888 Total 27600 48344 640750 918778 967112 1301000 333888 The AOs contention is that the assessee is one of the leading real estate developers of the city and there can be no difference in his case of land held as stock-in-trade and land held as an investment. Even Courts have held that a real estate developer cannot distinguish between land held as stock-in-trade and land held as an investment. She relied on decision of Honble Supreme Court in the case of Raj Bahadur Kamakaya Narain Singh Vs. CIT (77 ITR 253) , Honble Bombay High Court in the case of CIT Vs. Principal Officer, Laxmi Surgical Pvt. Ltd. (202 ITR 601) . She further relied on decision of Honble Supreme Court in the case of Dalhousie investment Trust Co. Ltd. Vs. CIT (68 ITR 486) , and in the case of G. Venkata Swami Naidu & Co. Vs CIT, (35 ITR 594) . The AO assessed the income which was declared by the assessee under the head capital gains related to sale of plot mentioned above as income under the head business or profession. Since the income was assessed under the head business or profession of the assessee no benefit of indexation was given and the income from sale of plots assessed by the AO was as under- ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 5 Sr. No. Description of plots Sale Value Purchase Cost Profit 1 Plot No. 293, Shree Ram Vihar 13,01,000 6,68,350 6,32,650 Total 6,32,650

3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the addition made by the Assessing Officer by giving the following findings:- I have considered the assessees submission and also taken a note of judicial pronouncements relied upon by the AO and appellant. I have also carefully perused the records available before me and factual matrix of the case. I found that the assessee is not showing this plot as "Stock-in-Trade" in the balance sheet. In last balance sheet as on 31-03-2010, this plot is appearing under schedule 6 of the head Non Depreciable Fixed assets. There is no dispute over the claim of the assessee that this plot was purchased by him in Financial Year 2000-01 and no any improvement or development activity was carried out over this plot with an intention to sale it as business asset. The department has carried out search over the assessee and no document was found to show that the assessee has converted this plot into Stock-in-trade. Honble ITAT has decided same issue in the case of assessee himself in AY 2004-05. The relevant portion of the decision of Honble ITAT in the case of assessee for AY 2004-05 is reproduced as under:- "8. The assessee in the present case has submitted the explanation that the asset is held a capital asset throughout and not as a stock in trade. It is duty of the department to ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 6 bring on record that the assessee has converted the capital asset into stock in trade to bring section 45(2) into play. It is who alleges has to prove it. In the present case, the department has alleged that the said asset is not a capital asset but is a stock in trade. Nothing has been brought on record by the department in this regard to prove that the assessee has changed the intention and has converted the capital asset into stock in trade. The department has not brought on record that the capital assets purchased by the assessee during the year 1990-91 and 1999-2000 are not in existence and they altogether are new assets and the sale has been made by making the improvement with a intention to make the profit so that the same can be treated as adventure in the nature of trade. The assets purchased by the assessee remained throughout the period as capital assets and there is nothing on record that the assessee in present case has changed the intention to earn the profit in the form of stock in trade. In such circumstances and facts of the case, the AO is not justified in treating the said transaction as stock in trade and we find no infirmity in the order of the ld CIT(A) in this regard." Further, Honble ITAT Jaipur Bench has decided similar issue in the case of wife of assessee Smt. Renu Agarwal in ITA No 125/JP/2013 order dated 17/07/2015 for AY 2007-08. The relevant portion of the decision of Honble ITAT in this case is reproduced as under:- "2.5 We have heard the rival contentions and perused the materials available on record. We find from the records that the assessee since inception had disclosed the purchase of lands under the head Investment and the assessee had also disclosed these plots under the same head up to date of sale of plots in the balance sheet. The assessee had also shown certain stocks in land under the head Inventories during the year. It proves that assessees intention was clear at the time of acquiring these plots for the purpose of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 7 investment. Therefore, we do not find any reason to interfere in the order of Id. CIT(A) which is sustained. Thus the solitary ground of the Revenue is dismissed." After going through rival submissions and findings of Honble ITAT, in assessees own case and in the case of wife of the assessee Smt. Renu Agarwal, it is seen that though the appellant is engaged in real estate business but no activity was conducted on the plot of land which were later sold off, therefore, the profit on the sale of the plot of land Plot No. 293, Shree Ram Vihar has been correctly shown as long term capital gains. The AO is directed to compute long term capital gains accordingly.

4. Now the revenues is in appeal before us. The ld. CIT DR has vehemently supported the order of the Assessing Officer.

5. At the outset, the ld AR of the assessee has relied on the order of the ld. CIT(A) and further submitted that the assessee is maintaining the regular and separate books of accounts of the business following mercantile system of accounting. The books of account are audited by Chartered Accountant u/s 44AB of Income-tax Act, 1961. The assessee has purchased the Plot No. 293, Shri Ram Vihar in the FY 2000-01 as investment and this plot was sold during the period relevant to this assessment year 2011-12 and the profit from the plot was shown in the return as capital gain after taking benefit of indexation. This plot was not ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 8 acquired/purchased with intention to resale but to hold as capital assets and the intention of the assessee is very clear from the period of holding as this plot was purchased in AY 2001-02 and were sold in AY 2011-12. This plot was not the part of any Township/Real estate business and this was absolutely held as capital assets apart from his Real Estate business. The assessee has not converted this plot into stock in trade. Thus, the Ld. A.O. was wrong to treat the above plot as his business asset and not allowing the indexation. The assessee prays your honor to kindly confirm the findings of the Ld. CIT(A) in treating the plot as capital asset and not business asset. Reliance is placed on the following decisions:- i) G. Venkataswamy Naidy & Co. Vs. CIT (1959) 35 ITR 594 , (Supreme Court); In this case the Honble Supreme Court observed that if a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade ii) The Madras High Court in the case of CIT Vs. A. Mohammed Mohideen (1989) 176 ITR 393, held that "an activity is in the nature of an adventure in the nature of trade there must be positive material to prove that the assessee intended to trade in such an activity and in the absence of evidence the sale of immovable property consisting land could give rise only capital accretion. If the land owner developed the land by laying roads, etc., and converted the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 9 agricultural land into house sites with a view to get better price will not be considered as an adventure in the nature of trade to give any business profit." iii) In the following cases it is held that : "where the purchase of any article or of any capital investment like shares, securities or land is made without the intention to re-sell at a profit, a re-sale under changed circumstance would only be a realization of capital and would not stamp the transaction with a business character : CIT Vs. PKN 60 ITR 65 (SC) CIT Vs. Gordhan Das Trikambhai Patel 118 ITR 81 CIT Vs. Trivedi 172 ITR 95 The issue is covered by decision of Honble ITAT in the case of assessee Ashok Kumar Agarwal in ITA No. 920/JP/2007 dated 21/11/2008 and in case of Renu Agarwal wife of assessee in ITA No 125/JP/2013. The facts of this case are similar to the facts of the assessees case. In view of above, the assessee prays your honor that addition made by Ld. A.O. is bad in law, unjustifiable and unreasonable deserves to be deleted and kindly upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue.

6. We have heard the rival contentions of both the parties and perused the material available on the record. The Ld CIT(A) has recorded a finding of fact that the assessee has not shown this plot as "Stock-in-Trade" in his balance sheet and no document was found during ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 10 the course of search to the effect that the assessee has converted this plot into Stock-in-trade. Further, he has stated that on the plot of land which was purchased in Financial Year 2000-01, there is no improvement or development activity which was carried out by the assessee with an intention to sale it as business asset. Nothing has been brought on record by the Revenue to controvert the said findings. The intention of the assessee can be determined through the treatment of the asset in the financial statements as well as the conduct and the actions of the assessee in relation to the asset. In the instant case, the asset has been shown as an investment and not as stock-in-trade in the financial statements. Further, there are no physical improvements/ developments which has been carried out right from the year of purchase to the year of sale. The intention of the assessee was therefore to hold this plot of land as an investment and not as stock-in trade. On similar facts, the Coordinate Bench of this Tribunal in the assessees own case for the A.Y. 2004-05 had decided the issue under consideration in favour of the assessee. Similarly, in the case of assessees wife namely Smt. Renu Agarwal in ITA No. 125/JP/2013 order dated 17/07/2015 for the A.Y. 2007-08, the Coordinate Bench has decided this issue in favour of the assessee. Therefore, in light of above discussions and by ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 11 respectfully following the orders of the Coordinate Bench on this issue, we uphold the order passed by the ld. CIT(A). Accordingly, ground No. 1 of the Revenues appeal is dismissed.

7. The 2 nd ground of the Revenues appeal is against deleting the addition of Rs. 20,00,000/- made by the Assessing Officer on account of investment in construction of house when the addition is supported by the finding of the DVO. The Assessing Officer has observed that the assessee and his wife Smt. Renu Agarwal got constructed a house over plot No. B-281-282, 10B Scheme, Gopalpura Bye Pass, Jaipur. The assessee and his wife Smt. Renu Agarwal have shown investment on account of construction of house at Rs. 1,94,26,791/- and Rs. 1,73,25,733/- respectively in the F.Y. 2008-09 to 2011-12 relevant to AY 2009-10 to AY 2012-13. Therefore, the cumulative amount shown by the assessee and his wife in the said construction of house was Rs. 3,67,52,526/-. On examination of this Account, the AO observed that the assessee has also debited amount against lift, DG Set, AC and other plant machinery and loose furniture and fittings under this amount. The assessee was asked to segregate and give complete break up. In compliance, assessee provided a ledger showing head wise details of construction. From the detail filed, it is observed that, the assessee and ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 12 his wife has shown Rs. 2,31,09,884/- under civil construction, sanitary & electricity, Rs. 1,13,44,374/- under furniture, Rs. 4,63,534/- under others and Rs. 18,34,744/- under plant and machinery. To order to ascertain the actual value of investment in construction of house, the AO referred the matter to District Valuation Officer (herein referred as DVO) for the valuation of the cost of construction of house. The DVO vide No. DVO/ITD/JPR/IT-10/2012-13/227 dated 06-03-2013, submitted his report wherein the construction cost of above said house was valued at Rs. 3,09,67,958/- as against Rs. 2,31,09,884/- declared by the assessee to the valuation officer. The copy of valuation report was given to the assessee to submit his comments/explanation on the difference arrived at by the DVO. The AR of the assessee vide his letter dated 15.03.2013 beside several technical objection, raised various objection. It was observed that the main dispute was on account of difference in amount shown in furniture head. The contention of the assessee is that in the furniture amount of Rs. 84,91,873/- is against fixed furniture like wooden frames, doors, widows, ward robes & railing etc and Rs. 28,52,501/- is against loose furniture like sofa set, dining fable, chairs etc. In the valuation made by the DVO the cost of Doors, window, wooden frames etc were included in construction cost. The assessee has ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 13 shown the cost of wooden items such as plywood, teak wood, fittings, labour charges, etc. in the head Furniture but credit of the same has not been given when difference was computed by comparing the figure of valuation with the cost of construction disclosed in the books of assessee and his wife. According to the assessee, the total investment in construction should be taken at Rs. 2,31,09,884/- + Rs. 84,91,873/- = Rs. 3,16,01,757/- for the purpose of comparison of cost estimated by DVO at Rs. 3,09,67,958/-. As regard the valuation made by the DVO at Rs. 3,09,67,958/-, the assessee objected for estimation of cost @ of 2.25% amounting to Rs. 6,62,022.86 against External service Connection, @ 1% against quality assurance, @ 2.25% against sewerage, estimation of cost of marble flooring at Rs. 36,50,000/- whereas the assessee purchased the marble for Rs. 10,65,812/- for which bills were produced and payments were through cheques, estimation on account of special sanitary fittings & fixtures and Electrical fittings at Rs. 18,30,000/- each without giving any details of the items and basis of estimation. The assessee objected the valuation of servant room at Rs. 9,33,885/-. Besides this the assessee objected the valuation of construction at CPWD rates. The assessee also filed valuation report of two registered valuers namely, Shri Naveen Kumar Jain and Shri Vivek ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 14 Kulshrestha who estimated the construction cost at Rs. 2,62,77,124.76 and Rs. 1,67,01,232/- respectively. The assessee also objected the reference to the DVO as he is maintaining proper books of account. The DVO in his comments on the objection raised by the assessee has stated that the investment of Rs. 28,52,501/- on loose furniture appears to be on much lower side and the AO may ascertain at his own level the investment against loose furniture. The AO asked the assessee to give justification of investment shown in fixed furniture and in loose furniture included in the furniture account which appears to be on lower side. In this regard, the assessee contended that in first year and second year the amount under the head furniture was Rs. 76,74,944/-. The investment in sofa, dining table other loose furniture could be made only in the third year or fourth year after completion of the civil work and not in the first and second year i.e. during the continuation of civil structure of the house. The assessee contended that even if the benefit of Rs. 76,24,944/- being amount invested in first two year on wooden work is allowed as part of construction then the investment as per books comes to Rs. 3,07,34,828/- which is very close to the valuation made by the DVO at Rs. 3,09,67,958/- and therefore, no addition on this Account should be made. However, after considering the valuation report of DVO, ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 15 reply filed by the assessee, comments of DVO and rejoinder filed by the assessee, the AO observed that cost of loose furniture shown by the assessee is at lower side, therefore to cover up all possible leakage on this account an addition of Rs. 20,00,000/- was made on account of undisclosed expenditure in construction of house furniture in the hands of Sh. Ashok Agarwal.

8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had deleted the adhoc addition made by the Assessing Officer.

9. Now the revenue is in appeal before us. The ld. CIT DR has strongly relied on the order of the Assessing Officer.

10. At the outset, the ld AR of the assessee has submitted as under:- a) The assessee relies on the findings of ld. CIT(A) at pg 22-23 of his order. b) The Income Tax department carried out search over the assessee group on 22.09.2010 and during the course of search no document/evidence was found to the department to show that the assessee made some undisclosed investment in the construction of house. c) The new residence of the assessee has been constructed on two plots. Plot No. 281 is in the name of Smt. Renu Agarwal ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 16 and plot No. 282 is in the name of Shri Ashok Agarwal. The construction on both the plots was carried out jointly by Shri Ashok Agarwal and Smt. Renu Agarwal. The construction was started in FY 2008-09 and completed in FY 2011-12. The total investment in construction of the house has been declared by Shri Ashok Agarwal and Smt. Renu Agarwal up to the date of search was as under: - a) Shri Ashok Agarwal Rs. 1,94,26,791/- b) Smt. Renu Agarwal Rs. 1,73,25,733/- Total Rs. 3,67,52,526/- The bifurcation of the expenses given by the assessee was under:- S.No Particulars Amount 1 Civil Construction, Sanitary and Electricity 2,31,09,884 2 Furniture 1,13,44,374 3 Others 4,63,534 4 DG Set AC and other Plant & Machinery 18,34,744 Total 3,67,52,526 The copy of ledger account of construction in the books of accounts of Shri Ashok Agarwal and Smt. Renu Agarwal are at PB Page 131-173. During the course of search the department recorded the statement of assessee on

22.09.2010 (Copy at PB Page 3-20) and in reply of question No. 20 of the statement he answered that total investment in the construction up to date of search was made Rs. 3.50 crore against the investment in books of accounts of the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 17 assessee was much more, therefore there was no material with the department in form of any documents or statement of the assessee group that the assessee made some undisclosed investment in construction of house. d) The DVO estimated the construction cost at Rs. 3,09,67,958 (PB pg 186-203) and compared this figure with Rs. 2,31,09,884/- shown by the assessee for civil construction, sanitary and electric expenses. The assessee explained the ld AO that he and his wife have shown Rs. 1,13,44,374/- under the head bifurcated by him Furniture. The year wise detail of expenses under Furniture was submitted as under:- S. No. Name of Assessee FY 08-09 FY 09-10 FY 10-11 FY 11- 12 Total 1 Ashok Agarwal 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 Renu Agarwal 6,42,488 39,00,486 23,37,038 0 68,80,012 Total 13,66,931 62,58,013 34,02,750 316680 1,13,44,374 The assessee submitted that the entire amount in first year, second year and part of the amount in third year was against the door frames, window frames, doors, windows false ceiling etc which is part of the construction and part of DVOs valuation at figure Rs. 3,09,67,958/-. The assessee submitted that out of total amount of Rs. 1,13,44,374/-; amount of Rs. 84,91,873/- was against construction and Rs. 28,52,501/- was against loose furniture such as dining table, sofa, beds etc. Therefore the figure against the construction should be taken at Rs. 2,31,09,884/- + 84,91,873, which ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 18 comes to Rs. 3,16,01,757/- as against cost estimated by DVO Rs. 3,09,67,958/-. e) The complete detail of construction was available in books of accounts of the assessee and the same was duly supported by the supporting bills and vouchers and no defects were pointed out by the ld. AO in the accounts of the assessee. The learned AO has not justified in referring the property to DVO for estimation of cost without pointing out defect in accounts. The matter was referred to DVO on

15.01.2013 (The copy of letter given to DVO is at PB Page 174). At the stage of reference of the property to the valuation cell, no any defect in accounts was pointed out by ld Assessing Officer and there was no material with AO to show that the assessee made some undisclosed investment in construction of the assessee. The cost of construction of house is duly accounted in books of account of assessee and his wife Smt. Renu Agarwal. Day-to-day construction account, bills and vouchers were maintained. In most of the cases, payments were made through account payee cheques. Thus the learned AO has not justified in referring the property to DVO for estimation of cost without pointing out defect in accounts. Reliance is placed on following decisions of Rajasthan High Court. A) CIT Vs Lakhpat Film Exchange 173 CTR 94 (Raj) ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 19 B) CIT Vs Prtapsingh Amrosingh, Rajendra Singh 200 ITR 788 (Raj) C) CIT Vs Hotel Joshi 242 ITR 478 (Raj). Thus the ld. AO was not justified in making the reference to valuation office u/s 142A of Income Tax Act, 1961 for the estimation of cost of construction more so when the cost of construction was verifiable from books of accounts of the assessee group. f) The valuer estimated the cost of construction Rs. 3,09,67,957/-. The DVO mentioned that the assessee has shown construction cost at Rs. 2,31,09,884/- whereas the assessee and his wife has shown Rs. 2,31,09,884/- under the head construction and Rs. 84,91,873/- under the head Furniture which includes the cost of wood, ply etc used in Doors, Windows, False Ceiling etc totaling to Rs. 3,16,01757/-. The assessee vide letter dated 15.03.2013 pointed out certain defects in the valuation report which are summarized as under: - i) The DVO made the valuation by applying plinth area rate. In the valuation made by him the cost of Doors, window, wooden frames were included as apparent from Annexure B enclosed with the report. Further the cost of False ceiling, wooden ceiling tiles, wooden flooring, modular kitchen, special ornamental door, wardrobes, Malamine Polish, wooden paneling for TV, SS work in window grill railing, SS railing with glass ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 20 panes at balcony were taken as extra items. The assessee has shown the cost of wooden items such as ply, wood, teak wood, fittings, labour charges, etc. in the head Furniture. The assessee has also given the details of the account along with the photocopy of the purchase bills to DVO but the same remained unconsidered by the DVO. The breakup of construction expenses disclosed by the assessee in books vis a vis reconciliation chart is enclosed herewith. The main objection in this regard is that the assessee has shown Rs. 44,64,352/- (Ashok Agarwal) and Rs. 68,80,012/- (Renu Agarwal) totaling to Rs. 1,13,44,364/- under the head Furniture. In this head, the assessee has debited cost against teak wood, ply, fittings, railing, glass, labour charges of carpenter and polishing, ornamental doors etc. Thus, the total amount of Rs. 84,91,873/- were shown by the assessee against the construction under the head Furniture for which credit has not been given by the DVO. The chart and vouchers are enclosed herewith. Thus, the investments in construction shown in the books should be taken 2,31,09,884/- +8491873= 3,16,01757/- ii) The DVO has made addition of 2.25% Rs. 6,62,022.86 against External service Connection, The assessee has not taken any external service ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 21 connection. Even the DVO has not explained the nature of expenses. There is no external water connection, no any additional expenses on external electric lines, transformers etc. Therefore, the addition of Rs. 6,62,022/- in cost of construction is without basis. iii) The DVO has increased the basis plinth area rate by 1% against quality assurance, no such quality assurance policy or warranty has been taken by the assessee. The DVO taken basic rate of 94.25 per mt adjusted by index factor 116 it comes to 109.33 per mt for Ground First and second floor and basic rate of 113 per mt (Rs. 131/- adjusted by index factor) for double height area. iv) The DVO estimated the cost of marble flooring at the rate of 5000/- per sq. mt for 730 sq mt area total Rs. 36,50,000/- without seeing the copy of bill given to the DVO. The assessee has purchased the marble for Rs. 10,65,812/- Therefore, the DVO has estimated the cost of imported marble at Rs. 36,50,000/- as against 10,65,812/- . Further, the deduction has not been given for the cost of flooring already included in basic plinth area rate. v) The cost of special sanitary fittings and fixtures estimated at Rs. 18,30,000/- without giving any ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 22 details of the items and basis of estimation. This is wild estimation. The copy of bills produced before him was completely ignored. Further, the DVO has already added 12% of plinth area rate for sanitary items and further 10% of plinth area rate for good finish, therefore, the further addition should not be made. vi) The cost of special electrical fittings and fixtures have been estimated at Rs. 18,30,000/- without giving any details of the items and basis of estimation. This is wild estimation. The copy of bills produced before him was completely ignored. Further, the DVO has already added 12.5% of plinth area rate for sanitary items and further 10% of plinth area rate for good finish, therefore, the further addition should not be made. vii) We are enclosing the valuation report of the following two different registered valuers. S.No Name of Valuer Basic of valuation Value of construction estimated by the registered valuer. 1 Shri Naveen Kimar Jain Plinth area rate on the basis of Rajasthan BSR (including lifts, plant and machinery AC etc) 2,62,77,124.76 2 Shri Vivek Kulshrestha Item wise cost method based on Raj PWD BSR2012 1,67,01,232.00 ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 23 viii) The DVO valued the servant room at Rs. 9,33,885/- by taking very high pitched plinth area rate. ix) Further, the assessee is maintaining complete account of construction of house and expenses in construction are supported by vouchers and in most of the cases the payment is also by account payee cheques. The assessee has filed complete details of the construction expenses and vouchers before the DVO. No any defect in the vouchers has been pointed out by you as well as by the DVO. Therefore, the investment in respect to construction of house disclosed by the books of account should be accepted. We are also filing herewith the details of construction expenses and copy of vouchers for your ready reference and record. Further, the reference made by you to DVO for estimation of construction cost of the building is against the settled law. Reliance is placed on the decision of Honble Rajasthan High Court in the case of CIT Vs Hotel Joshi (2000) 108 Taxman 199 (Raj). (x) The rate taken by the DVO are based on PAR CPWD rate. The PAR system either adopted by CPWD or PWD-Rajasthan is not appropriate system for scaling the investment done in the construction works. The CPWD valuer has adopted the valuation system as Plinth area method prescribed in their manual/office system. This system is a generalized system, for ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 24 typical govt. building type structure, where the department follows the specification very much higher, compare to the methods taken/adopted in public/private buildings. The local factors and practice have not been considered in PAR CPWD rates. The sand (bajari), stone, cement and other material is locally available. The availability of sand (bajari) is from Banas, which is about 80-100 Km from Jaipur. The stones are locally available from nearby hills. The bricks are also producing in Jaipur. The cement is local production of Rajasthan. The labour in Rajasthan is very cheap in comparison of Delhi or other metro cities. Like using of Ballies, phanta etc. in shuttering RCC in foundation, beams, columns & slabs, which are the basic structural components, are also of inferior quality & hence lowering the comparative rates in private buildings. Similarly in private buildings, many specifications are been truncated or curtailed off, like for the RCC the curing man charges are kept apart in PAR-CPWD, where as in private construction it is mostly either done by flooding, or by gunny bags or by self supervision by owner only. There are many similar instances, due to which there will be the considerable difference in PAR-CPWD, & actual cost. In summary, in private constructions, outer finishes ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 25 are more important, compare to the internal (structural) works. The local PWD is in the field & knows the local specifications more, hence the local PWD rates could be taken up easily for scaling the cost of constructions in private fields. We have also prepared valuation report from another register valuer Shri Vivek Kulshestra on the basis of item wise rates. The copy of this report is also enclosed herewith. For proper and most reliable estimation of cost of construction, the item wise valuation is most appropriate method. What has to be done, is that to calculate different parts & components separately, like earthwork, RCC in foundation, PCC, flooring, painting & etc.. Hence to scale the investment of the assessee in construction must be by the itemized based valuation system, by considering the general practice of the construction adopted in the private buildings not by any plinth area rate system. Honble Rajasthan High Court in the case of Commissioner of Income Tax Vs. Hotel Joshi (1999) 157 CTR (Raj) 369 : (2000) 242 ITR 478 (Raj) : (2000) 108 Taxman 199 (Raj) held that the question, whether the valuation made by the District Valuation Officer as per the CPWD rates prescribed in the Boards Instruction No. 1671 or the valuation made by the registered valuer as per the rates provided by the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 26 PWD of the State Government should be accepted, does not arise. The Tribunal has arrived at the conclusion that the cost based on item wise basis is the proper method to work out the cost. Thus, the question of law sought to be referred, does not arise from the order of the Tribunal. Thus, the cost of construction that has been arrived at by the Tribunal in the instant case is wholly based on relevant considerations and appraisal of material on record. No statable question of law arises from the order of the Tribunal. The Honble Rajasthan High Court has followed the decision of Hotel Joshi in other cases also. Commissioner Of Income Tax Vs. Lakhpat Film Exchange (2002) 173 CTR (Raj) 94 : (2002) 124 Taxman 807 In our case, we have also submitted the Valuation report of the registered valuer valuing the construction on item wise basis and according to this valuation report the estimated cost of construction comes to Rs. 1,67,01,232.00. Further, even the plinth area rates method is to be adopted, than the rates ought to have been taken at Rajasthan PWD BSR rate. The CPWD rates are higher approximately 25% over the Rajasthan PWD ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 27 rates. Therefore, all these factors should be considered and the Rajasthan PWD BSR rates are most appropriate for estimation of construction cost in Jaipur. Honble Rajasthan High Court and Honble ITAT Jaipur Bench have held in several cases that the cost of construction in Rajasthan should be determined on the basis of Rajasthan PWD Rates as per Raj. BSR The reliance is placed on the following decisions:- (i) Commissioner of Income Tax Vs. Dinesh Talwar (2003) 181 CTR (Raj) 472 : (2004) 265 ITR 344 (Raj), the assessee, who is an individual, constructed a house property in Malviya Nagar, Jaipur during the accountant period relevant to asst. yr. 1990-91. The Department referred the matter to the Valuation Officer for working out the cost of construction of the property. While valuing, the Departmental Valuation Officer has applied the rate of CPWD for the purpose of valuation. The Tribunal has valued the property adopting the rate of PWD. Honble High Court held that Tribunal having applied State PWD rates for working out the cost of construction of the house property in question instead of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 28 CPWD rates, same being a finding of fact, no interference is called for. xii) Further, the DVO has not followed instruction No 8 of 2006 issued by Chief Engineer (Valuation), Income Tax Department Northern Region, 3, Tolstoy Marg: Rohit House, New Delhi 110001 vide letter No.CE(V)/NR/Instruction 8/06-07/253 Dated:

27.07.06 addressed to all DVOs on the subject of estimation of value of investment made in construction of building. The relevant para of the instruction is reproduced as under:-

A building is not merely a structure with walls and a roof but also to fulfill certain intended functions for which it is built. To fulfill intended functions various services are integrated in the building which are also part of the building. Fittings & fixtures, appliances, instruments, machineries which are permanently rooted to the building and are essential for providing services required to fulfill functions for which the building is built are part of the building. While estimating value of investment in the building these fittings & fixtures, machineries etc. are to be included. For example a residential or a non residential building apart from the building itself has very many fittings & fixture, machineries etc. rooted to the building essential for performance of intended functions such as i) electric distribution boards, ii) circuit breakers, iii) internal electric wirings including switch boards, iv) ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 29 transformers, v) fans & lights, vi) lightening arrestors, vii) lifts viii) pumps & motors, ix) generators as captive power plant , x) central air conditioning, xi) water supply line including taps, valves etc. xii) bath room and water closet fittings and fixtures, xiii) over head tanks, xiv) house sewer up to municipal sewer line etc. These are to be counted as part of the building. One of the criteria and an important one at that to decide about which fittings & fixtures or machineries are part of the building is to ascertain whether these are rooted to the building in permanent fashion and are integral part of a service or services essential for fulfillment of functions of the building for which it is built. Obviously, such fittings & fixtures or machineries are not movable without injury to the building and its functions. Viewed in this light furniture and furnishing items are not part of the building and similarly window type air conditioners and air coolers are not part of the building. V.O s are to apply their mind to ascertain which items are part of the building and which are not. In one case a V.O considered 4.5% towards internal electric installations instead of 12.5% on the plea that cost of fans, electric fittings & fixtures are not debited to the building account by the assessee. This is incorrect approach. The assessee should have been asked to furnish the total expenditure year wise on this count and these should have been included in the year wise declared cost for the purpose of estimating value of investment in construction. These electrical fittings & fixtures are part of the building and logically to be debited to the building account. If for any reason the assessee fails to include this type of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 30 expenditure related to building, the V.O should after due examination of the account include this expenditure as part of the investment in the building and accordingly estimate the value of investment.

In the case of assessee, the fixed plant machinery, such as lift, DG set, Air conditioners etc, have not been valued by the DVO, in spite of the fact, that the assessee has showing investment and furnished the details and vouchers before the DVO. Further, the cost of sanitary fittings and special electrical items has been taken extra even when the PAR rate was increased by 12% for sanitary installation and 12.5% for electric installation. This could have been taken extra, had the PAR was increased by 4.5% of basis PAR. Therefore, the valuation of the property should be made for each and every item and credit of Rs. 3,67,52,526/- should be given against the investment declared by Shri Ashok Agarwal and Smt Renu Agarwal. Along with the above submission the assessee submitted the ample detail and supporting vouchers and evidences to support his contention but the same were rejected by the DVO on summary manner without considering and examining the supporting detail/material provided to him. The ld. DVO simply relied on his high pitch valuation report which was prepared on estimation basis. Further while comparing the figure of construction expenses recorded by the assessee in books of accounts from value of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 31 construction estimated by the DVO the due credit of fixed furniture expenses and wooden work were not allowed to the assessee. g) On the counter comments of DVO on objections raised by the assessee we submit that the assessee was maintaining only one account under the head Construction at 10-B Plot in financial ledger. The head wise details were prepared as per instruction of the DVO and in the specific performa as suggest by him. The assessee segregated the head wise detail from the financial ledger and cost of all wooden work was shown under the head Furniture. This fact can be verified from the bills and vouchers and ledger account of construction that the entire expenses incurred on wooden was segregated under head furniture. h) The assessee had submitted complete details before the DVO, however, he ignored the same. This is relevant to mention here that the complete bills & vouchers of house construction were available with the assessee but on the instruction of the DVO the copies of specific vouchers as desired by the DVO were submitted to him. The payments of most of the expenses were made through account payee cheques. On most of the vouchers even cheque Nos were also mentioned. Therefore, there was no reason to withholding these vouchers with the assessee and not producing with the DVO. Therefore there was only reason ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 32 for not submitting the entire vouchers before DVO because the DVO required only copies of some specific vouchers. Further, during the course of assessment proceedings the assessee submitted the copy of the vouchers before the AO and the AO sent copies of those vouchers to DVO, and no any specific defect in the vouchers has been pointed out by the DVO, which also proved that the DVO was replying on the estimations instead to exercising to work out the real expenditure incurred on construction from the bills and vouchers. i) As regard to objection of the DVO on investment in furniture at lower side this is to submit that it is common practice that the loose furniture is always purchased after completion of house. Any prudent person cannot buy sofa, dining table etc. at the construction stage of the house. The year wise investment by the assessee and his wife in the head Furniture was as under:- S. No. Name of Assessee FY 08-09 FY 09-10 FY 10-11 FY 11-12 Total 1 Ashok Agarwal 7,24,443 23,57,527 10,65,712 3,16,680 44,64,362 2 Renu Agarwal 6,42,488 39,00,486 23,37,038 0 68,80,012 Total 13,66,931 62,58,013 34,02,750 3,16,680 1,13,44,374 In first year and second year of the construction, the total expenses under the head Furniture were 76,24,944/-. The investment in sofa, dining table and other loose furniture ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 33 could be in third year and fourth year but it cannot be in first or second year of construction, when the civil construction was going on. By any stretch of imagination the expenses in first two years, in wooden items cannot be towards the loose furniture except small amount. Under, third year also part of the expenses were toward ward- robes, modular kitchen, railing etc i.e. fixed furniture. Therefore, the credit of Rs. 84,91,873/- claimed by the assessee against fixed furniture included in cost of construction in valuation report should be given against the investment shown by the assessee in fixed wooden items, glass work etc. Thus the finding of the DVO that the assessee is manipulating the investment is without examining the details submitted to it supported with bills and vouchers. The DVO failed to examining the fact that in the chart of head wise construction expenses submitted to him (Copy at PB Page 179) the entire expenses incurred in wooden work was mentioned in the head furniture and due credit of wooden work estimated by his as cost of construction was not given by him. The ld. DVO for comparing the book investment in construction is just relying only on a chart which was not prepared perfectly on the basis of technical parameters/requirements and rejected the all other full proof submission and evidence on surmises and conjectures just to support his high pitch valuation report. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 34 j) The DVO mentioned that the investment of Rs. 25,52,501/- towards the loose furniture is at lower side and the AO may ascertain it at his own level. The search party has not inventorised the loose furniture. The DVO has also not given the list of loose furniture vis a vis item wise estimation. Without having item wise list of the loose furniture, how can a person say that the investment shown against the loose furniture is at lower side. What are the loose furnitures- sofa, dining table, chairs and central table etc. The amount towards these items shown by the assessee is 28,52,501/- which is much higher side. The allegation of investment at lower side cannot be made merely on surmises, conjectures and guess. Under section 69 the onus is on department to show the investment. k) The sewerage connection charges are included in Development charges deposited in JDA. The electric line was passing through the House therefore, there was no further cost required to be borne for electric line. The transformer is not installed and this fact may be verified by physical inspection. The DVO added 2.25% merely on assumption and presumption. The assessee has bills for all the cost incurred in electric connection, sewerage connection etc. (which have been included in the copy of vouchers given to you) l) The DVO has not pointed out any warranty or assurance of quality taken by the assessee. The construction was made ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 35 by employing local labours and contractors. The material was purchased by the assessee himself. The construction was not carried out through the established builder therefore, the addition 1% against the quality assurance is on presumption more so when he has already added 10% of PAR for good quality. m) The DVO has not accepted the valuation made by the Registered Valuer. The Registered valuer has valued the valuation of complete house at Rs. 2,62,77,124.76 by Shri Naveen Kumar Jain and Rs. 1,67,01,232/- by Shri Vivek Kulshresth. The DVO valued marble at Rs. 36,50,000/- whereas the assessee has purchased the marble for Rs. 10,65,812/- which is supported by bill and payments through banking channel. Further the copy of bills was produced to AO during the course of assessment proceedings. The copy of bills of marble was supplied by the AO to DVO which were not relied by the DVO on the ground that the same are highly under invoiced. The payments of those bills were made through account payee cheques, therefore, it cannot be presumed that those bills were under invoiced. Further in support of his finding the DVO could not produce any evidence to prove that the invoices submitted by the assessee were under invoiced. n) The DVO valued the special sanitary items at Rs. 18,30,000/- and Special Electric Items at Rs. 18,30,000/- ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 36 by increasing the basic plinth area rate by 12.5%. The assessees cost is supported by bills which were completely ignored by him. Thus from the above submission it is clear that the valuation report of the assessee was prepared on estimation basis and the supporting bills and vouchers/documents/explanation submitted to the DVO were also rejected without examining the same. o) Further, the Assessees declared cost is supported by the Valuation Report of two different registered valuers copies of which were submitted to AO and the same were also available with DVO (Copy at PB Page 218 to 231 & 232 to 260), but the same was not accepted by the AO as well as DVO without pointed out any defect. The valuation report of Register Valuer Shri Vivek Kulshrestra is detailed report giving item wise valuation for each and every items used in construction. The learned AO as well as DVO completely ignored these reports. The valuation report of the registered valuer should be accepted in view of the decision of Rajasthan High Court in the case of CIT Vs. Hotel Joshi 242 ITR 478. Further since there is huge difference in the rates applied by these two experts the DVO should have substantiated his estimate with actual evidence, which was not done by the DVO. ITAT Jaipur bench has held in the case of Smt. Rekha Devi vs. ACIT 78 Taxman (mg) 30 that when there is huge difference in two reports, the DVO ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 37 should have substantiated his estimate with actual evidence. Honble Rajasthan High Court in the case of CIT Vs Hotels Joshi 242 ITR 478 has held that the Tribunal has justified in holding that the valuation made by Registered Valuer to be adopted. In this case, the assessee maintained accounts for the construction, supported by vouchers, and most of the payments were made through account payee cheques. Further, there is no any strong reason to disagree with the construction cost reflected by the accounts. Further, the construction cost reflected by books of account is supported by valuation report of the registered valuer. The DVO report is crippling with several serious defects as pointed out above. p) In last para of the assessment order the ld. AO after considering the above submissions of the assessee and accepting the reply of the assessee partially and opined that the cost of loose furniture shown by the assessee is at lower side. Even the DVO has observed that cost of loose furniture shown by the assessee is on lower side, therefore to cover up all possible leakage on this account as addition of Rs. 20,00,000/- is made on account of undisclosed expenditure in construction of house/furniture but before arriving to this conclusion the ld. AO as well as DVO both failed to list out the items considered as loose furniture found at the time of inspection of the house of the assessee and no valuation of such loose furniture was made by the DVO, therefore there ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 38 is no justification to made estimated addition on this account just merely on the presumptive finding of the DVO which is not supported by any evidence more so when the investment shown by the assessee is duly supported by the bills and vouchers. Thus in view of the above submission this is to submit that the ld. AO was wrong in referring the matter to DVO to estimate the cost of construction of house of the assessee. Further the report prepared by the DVO and finding of the DVO cannot be rely upon as the same is based only on presumption/assumption and given without considering/ examining the supporting documents/details submitted by assessee in support of construction expenses. Therefore the entire addition is based on estimation basis ignoring the fact that the investment shown by the assessee is supported by books of accounts, bills & vouchers. q) Valuation by DVO on CPWD rates and difference is less than 20%:- It is an admitted fact that the valuation of the construction was made on the basis of CPWD rates. C.P.W.D. rates are mostly for metro cities like Delhi, Kolkata, Mumbai & Chennai where construction cost is very high. In Rajasthan construction cost is much cheaper therefore Rajasthan PWD rules are more authentic. In Rajasthan stones, grits, bajari, marble etc are locally available at cheaper rate whereas in ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 39 metropolitan cities the cost of Stone, grit bajari, marble is higher. Labour in also cheap in Rajasthan as compared to metro cities. All works in Rajasthan are being done as per RAJASTHAN PWD BSR, so Rajasthan PWD Rules should be followed in Rajasthan instead of CPWD Rules. The local factors cannot be brushed aside. Honble Rajasthan High Court and Honble ITAT Jaipur Bench have held in several cases that the cost of construction in Rajasthan should be determined on the basis of Rajasthan PWD Rates as per Raj. BSR. Therefore the addition made on ad hoc basis for the difference which is less than 10% of the cost of construction disclosed by the assessee should be ignored. In view of above the humble assessee prays your honor that addition made by Ld. A.O. is bad in law, unjustifiable and unreasonable deserves to be deleted and kindly to upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue.

11. We have heard the rival contentions of both the parties and perused the material available on the record. The DVO in his comments on the objections raised by the assessee has stated that the investment of Rs 28,52,501 in loose furniture appears to be on much lower side and the AO may ascertain at his own level the investment in loose furniture. Therefore, the disputes relates to and is limited to the amount of investment in the loose furniture. The AO held that the cost of loose ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 40 furniture shown by the assessee is at lower side. Even the DVO has observed that cost of loose furniture shown by the assessee is on lower side, therefore to cover up all possible leakage on this account as addition of Rs. 20,00,000/- is made on account of undisclosed expenditure in construction of house/furniture in the hands of shri Ashok Agarwal. As per the ld AR, before arriving at this conclusion, the ld. AO as well as DVO both failed to list out the items considered as loose furniture found at the time of inspection of the house of the assessee and no valuation of such loose furniture was made by the DVO, therefore there is no justification to made estimated addition on this account just merely on the presumptive finding of the DVO which is not supported by any evidence more so when the investment shown by the assessee is duly supported by the bills and vouchers. We have given a careful consideration to the matter and of the view that the ld CIT(A) has elaborately gone through the contentions and has rightly arrived at the conclusion that there is no basis for the adhoc estimation of Rs 20,00,000. Hence, we confirm the following findings of the ld CIT(A): 3.2.3 I have duly considered the assessees submission and also taken a note of judicial pronouncements relied upon by the appellant. I have also carefully perused the records available before me and factual matrix ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 41 of the case. In this case, a search and seizure operation u/s 132 of the Act was carried out against the assessee. My observations in this regard are as under: * On perusal of assessment order, it is seen that the AO has not brought to notice any incriminating document showing undisclosed investment in construction of house. The assessee claims to have maintaining proper bills and vouchers pertaining to the construction expenses of house and this fact has not been controverted by AO in the assessment order. * It is also seen that the AO has not rejected the books of account of the assessee. However, the reference to the DVO was made by the AO u/s 142A of the Act and as per section 142A of the Act; AO may make reference to the valuation officer whether or not he is satisfied about the correctness or completeness of the accounts of assessee. * However, from the assessment order, it is also seen that as the cost of loose furniture shown by the assessee was on lower side, therefore, to order to cover up all possible leakage on this account, the AO made an ad hoc addition of Rs.20,00,000/- on account of undisclosed expenditure In construction of house/furniture. This shows that the AO has accepted the assessees contention as regard the credit of the amount shown under the head Furniture Rs. 84,91,873/- should be given against the construction cost estimated by DVO. Even otherwise also, investment in sofa, dining table and other loose furniture is always made after completion of civil work and by no stretch of imagination, it cannot be assumed that the expenses in first two years (when the civil work was going on) in wooden items were towards loose furniture like sofa etc. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 42 * The assessee and his wife Smt. Renu Agrawal had incurred expenditure of Rs. 76,24,944/- in FY 2008-2009 and FY 2009-10 towards ply, wood, and other wooden items whereas the construction was completed in FY 2010-11. Therefore, the contention of assessee, that in the first year and second year of the construction when the civil work was going on, the expenses towards ply wood and under wooden items were part of construction expenses, can be accepted. * Further, the appellant has contended that the DVO has estimated the marble flooring excessive ignoring the evidence submitted by him. The appellant has submitted that the DVO estimated the cost of marble flooring at the rate of 5000/- per sq. mt for 730 sq. mt area total Rs. 36,50,000/- more so when the copy of bill was given to the DVO. The assessee has purchased the marble for Rs. 10,65,812/- The appellant contended that, the DVO has estimated the cost of imported marble excessively at Rs. 36,50,000/- as against actual cost of Rs. 10,65,812/-. The actual cost is supported by bills. * The appellant further contended that the deduction has not been given for the cost of flooring already included in basic plinth area rate. I inclined to agree with the contention of assessee. The bill of marble purchases cannot be brushed aside merely on suspicion without making an independent inquiry. * The appellant further contended that estimation of cost towards, sewer and external service connection was estimated @ 2.25% of cost and 1% against the quality assurance. These estimations are without basis. I inclined to accept that the cost against sewerage connection, electric connection and water connection should be estimated by ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 43 taking into account the actual payments made by the assessee to local authorities and concerned department. * Further, the DVO as well as AO held that cost of loose furniture shown by the assessee is at lower side but no item to item list of loose furniture was made and comparison was made to find out how it is lower side. The ld AO made the ad hoc addition of Rs. 20,00,000/- on suspicion basis which cannot be sustained. * Furthermore, the DVO has valued the construction by applying the CPWD rates and difference is less than 20% and in such a case difference should be ignored as per the several decisions of Honble ITAT Jaipur Bench in this regard. In the case of Income Tax Officer Vs. Nitesh Maheshwari ITA No. 363/JP/2010; ASST. YR. 2006-07 order dated 28 th September, 2010 (2011) 138 TTJ 0116 : (2011) 53 DTR 0413 : (2011) 7 ITR 0645 held as under:- "We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record, we find that learned CIT(A) was justified in directing the AO to allow 20 per cent deduction on account of applicable on CPWD rates instead of PWD rates. This finding has been given by learned CIT(A) following the decisions of Tribunal in cases of Tek Chand vs. ITO (1995) 51 TTJ (JP) 607: (1995) 52 ITD 197 (JP), ITO vs. Agencies Rajasthan (P) Ltd. (2008) 10 DATEDR (JP)(Trib) 217 and Smt. Mamita Rauto vs. ITO (2002) 76 TTJ (Ctk) 455 and many others. We further noted that learned CIT(A) was justified in granting 12 per cent deduction on account of self-supervision. Nothing has been brought on record by the Department that the building was not constructed under self- supervision but under supervision of outside agencies. Books of account have been prepared by assessee and no payment has been shown to be paid or payable to any outside agencies. Merely by stating that building has been constructed in a beautiful manner and without any outside help such building ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 44 cannot have been constructed cannot be basis for drawing inference that the building was not constructed under self- supervision." In view of the facts and circumstances discussed, it is seen that the AO is not justified in making an adhoc addition of Rs. 20,00,000/- which cannot be sustained in the light of factual inconsistencies mentioned above and also in view of judicial pronouncement of Honble Jurisdictional High Court, therefore same is deleted. Assessee gets a relief of Rs. 20,00,000/-. This ground of appeal of the assessee stands allowed. In view of the above facts and circumstances, we uphold the order of the ld. CIT(A) and the ground taken by the Revenue is dismissed.

12. The 3 rd ground of the revenues appeal is against deleting the addition of Rs. 1,50,00,000/- made by the Assessing Officer on account of advance given to Gulam Farooq Ansari. The Assessing Officer has observed that during the course of search proceedings Sh. Ashok Agarwal has admitted in his statement recorded u/s 132(4) at the time of search on 22.09.2010 that he had made payment to Sh. Gulam Farooq Ansari for purchase of land at Delhi Road amounting to Rs. 1.50 Crores, which was not recorded in his books of Account. The statement of Sh. Ashok Agarwal was recorded and reproduced in assessment ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 45 order. However, at the time of filing of return the assessee has not included this income in the return of income for the relevant year. The AO asked the assessee to give reason/explanation for the same. The assessee in his reply submitted that at the time of search the books of account of assessee/family members/group concerns were not complete as on the date of search, therefore the cash payment of Rs. 1.50 Crores made to Ansari brothers was not found recorded in regular books of accounts of the assessee. He further stated that the assessee was under mental pressure during the course of search surrendered this amount as undisclosed income and that after examination of books of accounts it was found that the advance given to Ansari brothers has not yet been recorded in the books of accounts. At the time of completing of books of accounts the transaction was recorded in the books of respective person/concern of the assessee group. The AO mentioned that at the time of search the assessee has admitted that he has made payment of Rs. 1.5 crores but during the course of assessment proceedings, has shown payment of Rs. 50,00,000/- from Ashok Agarwal, Rs. 70,00,000/- from Renu Agarwal Rs. 6,00,000/- from Ashok Agarwal (HUF), Rs. 7,00,000/- from Ashish Agarwal and Rs. 17,00,000/- from Ashish Buildcon P Ltd. The assessee was asked to explain the same and in reply ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 46 he submitted that the entry of payment made to Ansari brothers made in cash books of various group persons/concerns of the assessee was made in the name of the assessee as he was the main and key person of the group and was also maintaining the cash balance of entire group, therefore the cash payment to Ansari Brothers was made by him out of cash balance of entire group available with him and thereafter the entry of payment was made in the books of accounts of respective person/concern according to utilization of cash balance of respective persons/concerns. The AO mentioned that the claim that the cash payment to Sh. Gulam Farooq Ansari was made out of cash available from books of Account was made for the first time during the assessment proceeding and no such explanation was given by the assessee on various occasions i.e. on the date of search 22/23.09.2010 and even on 12.10.2010 i.e. during revocation of PO at office of the assessee group. The AO held that the entire story is concocted and the assessee has taken shelter of books of account. Otherwise also the reliability of books of account of all persons is also questionable because than entries have been made subsequent to the search and not during the course of regular business. The Assessee is not only required to make entries in books of account during the regular course of business ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 47 on regular basis and also expected to draw balance at regular interval to lend reliability to the books of Account which in this case is obviously has not been done. From the perusal of the books of account and P&L Account for all the years covered by block assessment never ever such huge payment in cash have been made through books of account, so it was otherwise also not a regular practice of the assessee to make such huge payment in cash for purchase of land. The AO mentioned that all these facts considered together clearly shows that assessees contention is an afterthought and not reliable and at the same time there is no reason to disregard the statement of assessee given during the course of search and at the time of revocation of P.O. on 12/10/2010 after a gap of 20 days. Accordingly the AO opined that the source of payment of Rs.

1.5 crore to Shri Gulam Farooq Ansari remains unexplained and she assessed the same as undisclosed income of the year.

13. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had deleted the addition sustained by observing as under:- I have duly considered assessees submission and also taken a note of judicial pronouncements referred by AO and appellant. I have also carefully perused the assessment order passed u/s 153B r.w.s 143(3) of the Act and also taken a ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 48 note of factual matrix of the case. During the course of the appellant proceedings, the assessee has contended that no any incriminating document was found during the search operation showing payment of Rs. 1.50 crore to Ghulam Farooq Ansari (herein referred in brief as Ansari). Further, no document was found from assessees premises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. On the basis of sworn statement recoded u/s 132(4) of the Act of Ansari, Authorized Officer recorded assessees statement on oath u/s 132(4) of the Act where he admitted the payment of Rs 1.50 Crores to Ansari and surrendered the same as his undisclosed income. Entire crux of the case is based on sworn statement of assessee but the said entry of payment was not found recorded in the regular books of account of the assessee group seized by the department. It is a matter of fact that the seized cash books of the group was showing cash balance of Rs. 1,88,10,450/-. It is also an admitted fact that the cash book was not complete at the time of search as some entries were not entered there. The cash book is a method of recording of inflow and outflow of cash in chronological date of order. Subsequent to the search, the assessee completed the cash book by incorporating all the entries against inflow and outflow of cash. The assessee produced the re-casted cash book before the Auditors, who found no mistake. During the course of assessment proceedings also, the assessee produced these audited cash book which were examined by ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 49 AO and no any specific instance of any discrepancies was brought to notice. It is admitted fact that the cash payment of Rs. 1.50 crore to Ansari was recorded in the audited books of account of assessee and his group person/concerns. In case of unavailability of disclosed cash, the payment could have been recorded in cash book only by inflating the inflow of cash or by deflating the outflow of cash. No any such instance was pointed out by the AO after examination of audited books of account. The AO has also not rejected the books of account of assessee group. Further, assessee has also reconciled the cash balance as per the seized cash book and audited cash book with vouchers. The reconciled statement can be referred at PB page 402 and reconciled chart showing entry to entry explanation was filed with letter dated 17/03/2015. The cash position of seized cash book vis a vis audited cash book was as under:- Name As Per Seized cash book As per Audited cash book Date Amount Date Amount Ashok Agarwal 03/09/2010 56,47,690.09 03/09/2010 85,82,342.09 Renu Agarwal 08/09/2010 92,18,620.38 08/09/2010 82,29,062.38 Ashok Agarwal HUF 06/08/2010 6,54,841.17 06/08/2010 6,92,341.17 Ashish Agarwal 02/04/2010 9,99,820.00 02/04/2010 9,99,820.00 Ashish Buildcon Pvt. Ltd. 06/08/2010 22,89,479.00 06/08/2010 26,47,631.00 Total 1,88,10,450.64 2 ,11,51,196.64 ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 50 The above chart shows that as per the seized cash book, the total cash balance available to the group was Rs. 1,88,10,450.64 which became to Rs. 2,11,51,196.64 as the result of incorporating all the entries of cash inflow and outflow. The claim of the assessee is that cash books has to be completed after recording all the unrecorded entries based on bank statements and seized material which was subsequently done by the assessee on the basis of bank statements and other documents found during the course of search operation. Vide letter dated 25/3/2015, AR has also submitted the reasons for not-disclosing Rs 1.50 Crore (payment made to Ansari) and in support of this, copies of letter dated 23/01/2013 & 27/03/2013 (Refer PB Pg 121-122 & 261-162) were also submitted as supporting evidences. In this regard, it is clarified that cash balance position as on date of search (after duly incorporating all entries in the re-casted books of account which were left in the seized books of accounts Refer PB Pa 112) Vide Letter dated 01/03/2013, re- casted cash books of assessee and other persons of the group were also submitted before the AO for verification of entries in re-casted books of accounts with reference to seized cash book and bank statements/vouchers and source of payment of Rs 1.50 Cr. to Ansari. The AO has not controverted assessees claim by specifically pointing out the incorporation of new unwarranted entry in the re- casted/completed/audited cash book by the assessee. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 51 It is a settled position of Law that after the conduct of search operation U/S 132 of the Act, books of account can be prepared on the basis of bank statement and seized documents and when no defect has been pointed out by the AO in the re- casted books of account, the entries made in the said re-casted books of accounts should be accepted. The ratio laid down by Honble ITAT Jaipur Bench in the case of Shri Tarachand Jain ITSSA No.103/JP/2002 dated. 4.4.2003 (Supra) and Shri Rajendra Kedia (Supra) are squarely applicable here in this case also. Now, the question arises whether merely on the basis of search statement can addition is made. The admission once made can certainly be retracted, if the circumstances permit, and it can also be shown to have been made under some mistake or to be otherwise incorrect. But, the onus would be on the maker of that admission. On perusal of assessment order, it is also seen that the AO has not brought any evidence showing generation of undisclosed income of the assessee for utilization in undisclosed payment to Mr. Ghulam Farooq Ansari. The assessee has successfully shown that the statement made before the search party was not correct as some entries were not incorporated in the seized cash book, therefore, it can be said that the cash book was not upto date as on the date of search. Assessee produced the re-casted audited cash book (after duly incorporating all entries) before the AO. There were sufficient cash balance available with ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 52 assessee and his family members/group concern to cover the payment of Rs. 1,50,00,000/- to Ansari. Therefore respectfully following the decisions of Honble ITAT Jaipur bench in the case of Shri Tara Chand Jain (Supra) and Shri Rajendra Kumar Kedia(Supra), I hold that the payment of Rs. 1,50,00,000/- was made out of the cash balance reflected in the cash book of the assessee and other group members and I direct the AO to delete the addition of Rs. 1,50,00,000/-. This ground of the assessee stands as allowed.

14. Now the revenue is in appeal before us. The ld. CIT DR. has vehemently supported the order of the Assessing Officer.

15. At the outset, the ld AR of the assessee has submitted as under: a) The assessee relies on the findings of ld CIT(A). b) At the outset we submit that the department has carried out intensive search operations over the assessee and Ansari Group. No any document was found either from the possession of assessee or possession of Ansari group showing the payment of Rs. 1,50,00,000/- from Assessee to Ansari. The entire addition is based on the search statement, which was retracted by the assessee and no further inquiry was made by ld AO and no examination of the assessee or Mr. Ansari was made. c) During the year under consideration the assessee made payment of Rs. 1,50,00,000/- to Ansari out of cash balance available with entire assessee group and the same was ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 53 recorded in the books of accounts of the assessee. The copy of account submitted to AO is at PB Page 263-267. The books of account of assessee/family members/group concerns were not complete as on the date of search, therefore the cash payment of Rs. 1,50,00,000/- made to Ansari was not found recorded in regular books of accounts of the assessee found at the time of search. The assessee was under mental pressure therefore during the course of search he surrendered this amount as undisclosed income. However, after examination of books of accounts it was found that the advance given to Ansari brothers has not been recorded in the books of accounts and this mistake resulted the huge cash balance as per the books as on the date of search. The advance of Rs. 1.5 crore was given for purchases of agriculture land on Delhi road. The deal was not materialized and the advance was received back. At the time of completing of books of accounts the transaction was recorded in the books of respective person/concern of the assessee group. d) The Audited Books of account were examined in detail by the ld AO with reference to seized books of account, vouchers, bank statement, copy of registered sale deeds and other seized material. The assessee has also explained to the AO:- (i) Vide letter dated 23/01/2013, and further reply vide letter dated 27/03/2013 the assessee explained that ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 54 reasons for not surrendering Rs. 1,50,00,000/- in return filed by him. It was categorically stated that at the time of search books of account were not complete and the payment was not recorded in the books found at the time of search. However, the entry for payment was passed in the books of account completed after the search. (ii) Cash balance position as on date of search was explained vide letter dated 23/01/2013. (iii) Books of account were produced along with the letter dated 18/03/2013. (iv) Vide letter dated 01/03/13 the assessee submitted to AO as under:- The cash books of following persons for 01.04.2010 to 22.09.2010 foe verification of cash balance as on the date of search and source of cash payment of Rs.

1.50 crore made to Ansari group is enclosed herewith. i) Ashok Agarwal ii) Renu Agarwal iii) Ashok Agarwal HUF iv) Ashish Agarwal v) Ashish Buildcon Pvt Ltd vi) M/s Arber Technologies Pvt. Ltd Thereafter, reconciliation of entries as per seized books and audited books were done before ld AO during the course of personal hearings. For this purpose, vouchers, bank statement, copy of registered sale deed, copy of receipts, ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 55 copy of agreements etc were produced before the AO. The chart showing the reconciliation of entries in seized books viz a viz audited books of account is at PB pg 657-668. After the examination of the books of account in detail, the ld AO accepted the sales, expenses, and entries in the audited books of account though many of the entries were not in the seized books but in recasted books. The ld AO is blowing hot and cold in same stream. On one side she is accepting all the other entries made in the recasted books of account and on other side she is not accepting the entry of payment to Ansari in recasted books of account. Therefore, the entry as regard the payment of Rs. 1,50,00,000/- recorded in the audited books of account should also be accepted and no addition in this regard deserves to be made. d) As regarding to entry of payment made to Ansari brothers made in cash books of various group persons/concerns of assessee this is to submit that assessee is main key person of the group and he is maintaining the cash balance of entire group, therefore the cash payment to Ansari Brothers was made by him out of cash balance of entire group available with him and thereafter the entry of payment was made in the books of accounts of respective person/concern according to utilization of cash balance of respective persons/concerns. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 56 e) For making the addition of this amount the department is relying on two thinks first on the statement of Shri Ashok Agarwal recorded at the time of search and second that the entry of payment to Ansari was not found recorded in the books of accounts at the time of search. Except to this there is no material with department to prove that the payment was made out of undisclosed income of the assessee. The assessee group was having sufficient cash balance as on the date of search which was not physically found to the search party, therefore no addition can be made on this account by presuming that this payment was made out of undisclosed income. f) The para to para comments on the findings given by the AO for making the additions is as under: - i) In Para 8.7(a) the ld. AO held that at the time of search this transaction was admitted by the assessee as made out of books and the same was reiterated in the statement recorded on 12.10.10 at his office. In this regard this is to submit that at the time of search the assessee was under mental pressure and the books of accounts of the assessee was not complete hence as on the date of search this payment was not recorded in books of accounts of the assessee therefore during the course of search the search party pressurized the assessee to surrendered this amount ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 57 as undisclosed income. It is well settled principal of law that no addition can be made only on the basis of statement more so when there is no supporting evidence/corroborative material was with department to prove that the surrender made in the statement was correct. The department has no evidence/documents which corroborates the surrender made by the assessee in the statement. In this regard, he submitted as under:- (a) The Board of direct taxes issued instruction to the All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. vide letter F. No. 286/2/2003-IT (Inv) dated 10.03.2003 in regard of confiscatory statement in the course of search and seizer as under:

Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 58 of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders

. The Honble Supreme Court in case of Tanna And Modi vs. CIT, 292 ITR 209 (SC) has held that a fortiori, clarificatory circulars issued by the Central Board of Direct Taxes may also be taken into consideration for the purpose of construction of the statute. The Honble Supreme Court in case of Kerala State Industrial Dev. Corporation Ltd., 259 ITR 51 (SC) has also held that Finance Ministers speech before Parliament while introducing bill can be relied on to throw light on object and purpose of provisions. In case of Durgesh Oil Mills, 273 ITR 305 (All.), the Honble Allahabad High Court has held that it is well settled that the circular issued by the Central Board of Direct Taxes is binding on authorities. Therefore, merely on the basis of statement addition cannot be made without demonstrating the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 59 documentary evidence in support of the admission in the search statement. Further, it is often argued by the Department that in the confessional statements during the course of search, there is a mention that there was no pressure and the statement was given voluntarily without any threat. In this connection, the Bombay Tribunal in Deepchand & Co. v. Asstt. CIT (1995) [IT Appeal Nos. 1231 to 1234 (Bom.) of 1993, dated 27-7-1994] has observed thus: The stereotyped mention at the end of the statement that whatever was stated was true and to the best of the knowledge and belief and the statement given was voluntary without any threat, force or undue influence, would not mean that the partners agreed for making additions. Putting certain expression at the end of the statement cannot be taken as true in view of the retraction. Retraction can be made only after understanding the correct meaning and consequences of the statement. (b) The search party took the similar type surrender in the case of M/s Suresh Medical Agency and Shri Radhey Shyam Mittal without having any corroborative material, the ld AO made the addition in these cases merely on the basis of search statement. Honble ITAT Jaipur Bench has deleted the addition in both the cases. The findings of Honble ITAT in the case of M/s Suresh Medical Agency ITA 443/JP/2012 (pg 86-91 of case laws Paper Book) are produced as under:- ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 60 6. We have heard parties with reference to material on record and case laws brought to our notice. The action under section 132 was carried at the assessees premises on 27.08.2008 and in the statement Shri Murari Lal Mittal, one of the partners of the appellant firm made surrender of income of Rs. 25 lacs on account of income earned from sale and purchase of medicines carried outside the books. The husband of the partner Smt. Sarda Mittal also confirmed the surrender. The appellant, however, had been approaching the authorized officer to provide copy of statement so obtained in proceedings under section 132 of the Act. When these statements were not provided, the appellant vide letter dated 3.10.2008 to the authorized officer, copy placed in assessees paper book page 203 and letter dated 18.12.2008 addressed to the assessing authority requested to provide copy of statement in case the same were to be used against him. Till such time the copy of statement was not provided, assessee entertained a bonafide belief that in the absence of any documentary evidence or corroborative evidence having been found as a result of search, such statement would not be used against him. If such statements were to be used, the department was under legal obligation to have provided copy thereof to the appellant. It is only on persistent effort of the appellant, the copies of statements were provided only on 13.3.2009. The appellant after understanding the legal implication of such statements made a valid retraction as the surrender was not supported 8 by any corroborative evidence. The affidavit filed in this regard is laid on assessees paper book pages 129 to 131. This affidavit has carefully been perused. After the affidavit was filed before the assessing authority, he remained silent on the face of it and carried no ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 61 enquiry thereon to verify the correctness thereof. The assessee was also not cross examined on the point of retraction nor was required to produce any documentary evidence or any other evidence. The assessee was, therefore, entitled to assume that the income tax authorities were satisfied with the affidavit as sufficient on this point. The Honble Allahabad High Court in the case of Sohan Lal Gupta vs. CIT, (1958) 33 ITR 786 (All.) , as was also put to the parties during the course of argument, has made elaborate discussion on the evidentiary value of the affidavit. The relevant passage from the aforesaid judgment at page 791 of the report is reproduced as under :-

The most important points on which the Tribunal relied, is that mentioned at No. 2, viz., that, according to the Tribunal, the assessee had not satisfactorily established that the shares had to be sold as the purchaser of the Jaswant Sugar Mills was not willing to purchase that mill unless the shares in the Straw Board Mills Ltd. held by the family were also transferred to him at the same time. On this point, the only material available on the record is the affidavit which was filed by the assessee before the Income-tax Officer. The assessee in his affidavit, had definitely stated that the purchaser wanted to purchase both the going concerns, the Jaswant Sugar Mills and the Straw Board Mills Ltd., together and one of his conditions of purchase was that all the shares of Lala Jaswant Rai, his sons and other relatives had to be transferred to the purchaser. The Income-tax Appellate Tribunal rejected this affidavit of the assessee on the mere ground that there was no documentary evidence in corroboration in the form of any correspondence of otherwise on this point. Shri G.S. Pathak contended rightly before us that the Tribunal was not entitled to reject the affidavit on ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 62 this point on such a ground. After the assessee had filed the affidavit, he was neither cross-examined on that point, nor was he called upon to produce any documentary evidence. Consequently, the assessee was entitled to assume that the Income-tax authorities were satisfied with the affidavit as sufficient proof on this point. If it was not to be accepted as a sufficient proof either by the Income- tax Officer or by the Appellate Assistant Commissioner of Income-tax or by the Income tax Appellate Tribunal, the assessee should have been called upon to 9 produce documentary evidence, or, at least he should have been cross examined to find out how far his assertions in the affidavit were correct.

(emphasis supplied) The reliance placed by assessee to the judgment by Honble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. (supra) and Honble Rajasthan High Court in case of CIT vs. Ashok Kumar Soni (supra) are well placed as the assessee has successfully demonstrated that the admission made during the course of search is not correct. The ingredient for retraction of statement made during the search, therefore, stand duly satisfied as the assessee is found to have made retraction within a reasonable time immediately after the copies of statement were provided to him. Since the documents found as a result of search were pertaining to the income of the other two persons namely S/Shri Praful Mittal and Murari Lal Mittal and there being no material or evidence on record to show that the appellant has carried any business outside the books for sale and purchase of medicines that could give rise to the income to the extent of Rs. 25 lacs, the addition merely on the basis of such statement which stood validly retracted could not have been made. We, therefore, find no factual or legal justification in ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 63 sustenance of addition by Ld. CIT (A) in this regard. (c) Honble ITAT Jaipur Bench in its recent decision in the case of Shri Pawan Lashkary ITA No 808/JP/2011 has held that income cannot be assessed merely on the basis of statement. (d) Further Reliance is placed on the following decisions:- (i) Honble Apex Court in the case of Pullangode Rubber Produce Co Ltd v/s State of Kerala & Anothers (1973) 91 ITR 18 (SC) has held that admission is an extremely important piece of evidence but it cant be said that it is conclusive. It is upon to the assessee to show that it is incorrect. (ii) Honble Rajasthan High Court in the case of CIT v/s Ashok Kumar Soni 291 ITR 172 (Raj.) has held that admission in statement during search is not conclusive proof of fact and can always be explained ii) In Para 8.7 (b) to (d) the ld. AO mentioned that the claim that the cash payment to Ansari was made out of cash available from books of accounts was made for the first time during the assessment proceedings and no such explanation was given by the assessee at the time of search this is to submit that as on the date of search the books of accounts of the assessee were incomplete and the entry of payments made were not recorded in books of accounts till the date of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 64 search. These books were under seizure of the department and after the receipt of the photocopy of the documents, the assessee could not the factual position. However, the fact remains that as on the date of search the assessee group was having sufficient cash balance in their books of accounts which was not physically found to the search party, therefore the same also justify the contention of the assessee that the payment was made out of recorded sources and only entry could not be made up to the date of search. iii) In para 8.7 (e) the ld. AO held that the payment of Rs. 1.5 cr. for purchases of land at Delhi road was made by him. However even in the reconstructed books of account of Shri Ashok Agarwal payment of only Rs. 50 lacs has been reflected, thus even the entry in the books of account are contrary to the facts narrated in the statement. In this regard this is to submit that at the time of search the assessee said that payment of Rs. 1.5 crore was made by him but it does not mean that the entire payment was made by him out of his own cash balance. The assessee is main key person of the group and day to day affairs and business of the group is being managed and controlled by him. He is maintaining the cash balance of entire group, therefore the cash payment to Ansari ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 65 was made by him out of cash balance of entire group available with him. It is relevant to mention here that at the time of search the surrender of income on behalf of entire group was made by him, therefore it cannot be presumed on the basis of statement of the assessee that the payment of Rs. 1.50 crore was stated to be made by him, therefore the same should be found recorded only in his cash book and not in the cash book of other family members/concerns. iv) In para 8.7 (f) the ld. AO discussed the mode of entry of payment made in the books of accounts regarding payment made to Ansari. In this regard this is to submit that the payment to Shri Ansari was made to purchase the lands for farmers at Delhi Road. At the time of payment the land was not finalized, therefore no agreement was made. Further the land was to be purchased directly from farmers through Shri Ansari, therefore the question of execution of agreement with Shri Ansari does not arise. As regard to recording the payment in books of accounts of different persons/concerns of the group instead of a single entry in the books of accounts of the assessee this is to submit that since the payment was made out of utilizing the balance of different persons/concerns, therefore the entry was made in books of accounts of respective persons/concern and upon finalization of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 66 transactions the respective transfer/adjustments entry will made in the books of accounts of the respective person/concern. v) In para 8.7(g) the ld. AO held that reliability of books of accounts of all persons is also questionable because than entries have been made subsequent to the search and not during the course of regular business. Admittedly the books of account of assessee /family members/group concerns were not complete as on the date of search because the main accountant of the assessee group was busy in audit work of FY 2009-2010 being last date of audit was ending soon on 30.09.2010. Under these circumstances entry of various transactions executed by the assessee during the current period were yet to be recorded in the regular books of accounts as on the date of search. However when the books of accounts were completed the entry of payment made to Shri Ansari was made in books of accounts and the ld. AO has not pointed out any specific defect in books of accounts. Further the ld AO has not rejected the books of account of the assessee, therefore there should be no reason to disbelieve the entry of Rs. 1,50,00,000/- on account of cash paid to Shri Ansari for purchases of land more so when the assessee group having sufficient cash balance in their books of accounts and the same was ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 67 not found physically to the search party or otherwise use of such cash was proved by the assessing officer. Further as per settled position of law after the search the books of account can be prepared on the basis of bank statement and seized documents. No defect was pointed out by the ld AO in the books of account therefore, the entries made in books of accounts should be accepted and no addition on account of unexplained cash payment made to Shri Ansari to be made. For this purpose, we draw your kind attention towards the decision of Jaipur ITAT wherein Honble ITAT bench in ITSSA No.103/JP/2002 dated. 4.4.2003 in the case of Shri Tarachand Jain. In this order, the Honble ITAT has observed as under on page 2 para 5:

The first grievance of the department is pertaining to the deletion of addition of Rs.1,20,240/- which was found from the bedroom of Shri Tarachand and his wife Smt. Anita Jain during the course of search. At the time of search, the books of accounts were not complete and day to day balancing of cash was not made. In the books of account, the cash balance of Rs.80,291/- in the books of Shri Tarachand; and Rs.51,335/- in the books of Smt. Anita Jain were shown by the assessee as per the explanation letter dated 12.1.2001. Thus in both the books of account the total comes to Rs.1,31,626/-. According to assessee, the said amount was sufficient to meet the recovered amount, but the AO observed in his order that self-prepared books produced after the date of search cannot be relied upon. But the ld. CIT (A) observed in his order that the books which were completed later on were duly submitted by relevant material to support the income and out-going ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 68 cash. So he deleted the said addition. With this background, we heard both the parties and perused the material available on record from which it appears that at the time of search books of account were found but the same were incomplete. The assessee later on prepared the books of account, which were duly audited by the Chartered Accountant. The books alongwith the certificates were submitted before the A.O. No defect/mistake was found. The AO has not raised doubt about the genuineness of preparation his books of accounts. Therefore, we do not agree with the observations made by the AO that the books were self-prepared. The CIT (A) has discussed in his order the ratio laid down by the ITAT Jaipur in the case of Rajendra Kumar Kedia vs. DCIT, 22 Tax World 506 where it was observed that the books of account of assessee, which are not properly maintained, can be subsequently prepared and re-casted on the basis of bank statement, vouchers, and other related documents of sales and purchase, then also be relied upon for the purpose of income-tax assessment. In the instant case, the re-casted books of account were properly audited and the same were produced before the AO along with the certificates but the AO did not find any defect or mistake in the said books of account. He has not bothered to verify the entries with the primary evidence i.e. vouchers, bills etc. Therefore, we accept the order of the CIT (A) who has rightly deleted the said addition. The order of the CIT (A) is here Brief Facts: by upheld regarding deletion of addition of Rs.1,20,240/- which was found in cash in the bedroom of the assessee and his wife. The said cash was reflected in the books of account, hence the addition is unwarranted.

The above finding of the Honble ITAT is fully and squarely applicable to the facts of the assessees case. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 69 Further Honble ITAT in another case of Shri Rajendra Kr. Kedia Vs. DCIT, 22 Tax World, 506 have observed that where the books of account are not properly maintained, the same could be subsequently prepared and re-casted on the basis of his bank statement, vouchers and other related documents of sales and purchase which could be relied upon for the purpose of making the income tax assessments. In the same para the ld. AO further held that from the perusal of books of accounts and P&L account for all the years covered by block assessment no where such huge payment in cash have been made through books of account, so it was otherwise also not a regular practice of the assessee to make such huge payment in cash for purchases of land. In this regard this is to submit in past whatever payment made by the assessee for purchases of land either cash or cheque duly recorded in books of accounts and during the course of search as well as during assessment proceedings the department could not prove any single payment which has been made out of books of accounts, therefore there was not a practice of the assessee to make payment outside the books of accounts for purchases of land. Further in some cases due to business requirements looking to the location of land, availability of banking facility on such village and payment in cash on demand of seller etc. the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 70 assessee has to made the cash payment. The ld AO herself has found that the assessee has made cash payment of Rs. 4658640/- in AY 2005-06 and made the addition by applying the provisions of section 40A(3). Therefore the findings of ld AO is perverse. vi) In para 8.7 (h) the ld. AO held that the assessee is well established businessman who knows very well that any expenditure over Rs. 20,000/- in cash is not known allowable u/s 40A(3) of the Income Tax Act, 1961, therefore he is not expected to make huge cash payment of Rs. 1.5 crores for purchases of land when dealing in land in his business. In this regard this is to submit that it is a technical and legal matter and by adding the probability and possibility on the issue of legal matter a payment recorded in books of accounts cannot be doubted. Further, all the cash payment made in cash for purchases of land cannot be disallowable u/s 40A(3) of Income Tax Act, 1961 and before making the disallowance the extend of banking facilities available, consideration of business expediency and exigencies and other relevant factors are also taken into consideration, therefore the assessee made payments in cash considering and keeping in mind all these factors. (vii) In para 8.7 (i) the ld. AO held that as far as disallowance of 40A(3) of Income Tax Act, 1961 of Rs. 30,54,560/- for AY 2011-12 and Rs. 17,33,000/- ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 71 for AY 2010-11 is concerned, the books of accounts/cash book for these years was seized at the time of search, therefore, probably the payment in books of accounts are shown in the final books of accounts also. In this regard it is relevant to mention here that:- (i) The ld AO herself has found that the assessee has made cash payment of Rs. 4658640/- in AY 2005-06 and made the addition by applying the provisions of section 40A(3). (ii) from the chart produce in this para it is clear that the assessee was duly showing the cash payments whatever made for making purchases/ expenses in each of the year and the AY 2010-11and AY 2011-12 was not only the year wherein the cash payment was shown due to the reason that the books of accounts were seized by the department. Further it is relevant to mention that the Income Tax return for AY 2010-11 was filed prior to search, therefore the finding of the ld. AO that the cash payments of AY 2010-11 was shown because that books of accounts were seized by the department is baseless and perverse. viii) In para 8.8 the ld. AO opined that when the statement of the assessee was recorded on ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 72

12.10.2010 during revocation of PO at the group office, he already had time of 20 days since the date of search. He had all opportunity to complete books of accounts and show that the amount was paid out of the balance available in cash book. In this regard this is to submit that the books of account were under seizure, therefore the assessee group could not examine and complete the books of accounts up to 12.10.2010. ix) As regard of finding of the AO in para 8.9 to 8.11 this is to submit that the cases relied by AO in para 8.10 are not applicable in the case of the assessee because except to the statement of the assessee there is no other material with the department to prove that the payment was made from undisclosed income. Further as on the date of search the assessee group was having sufficient cash balance in books of accounts which was not found to the search party and otherwise use of such cash balance was also not find by the AO/search party, therefore the preponderance of probability that the payment of Rs. 1.5 crore was made to Shri Ansari out of cash balance available with assessee group in regular books of accounts is in favour of assessee. In view of the above, the assessee prays your honor that the payment of Rs. 1.50 crore to Shri Ansari was made out of cash ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 73 balance in regular books of accounts. The addition was made solely on the basis that at the time of search this amount was surrendered as income and not found recorded in regular books of accounts and the department has no positive evidence that this payment was made out of undisclosed income, therefore the addition of Rs. 1.50 crore was rightly deleted by ld CIT(A). Therefore, kindly upheld the findings of ld CIT(A) in this regard and dismiss the appeal filed by the revenue.

16. We have heard the rival contentions of both the parties and perused the material available on the record. During the course of the first appellant proceedings, the assessee has contended that no incriminating document was found during the search operation showing payment of Rs. 1.50 crore to Ghulam Farooq Ansari. Further, no document was found from assessees premises, showing generation of undisclosed income which could be said as utilized in the payment to Ansari. The crux of the issue is whether based on the statement of the assessee recorded u/s 132(4) of the Act, an addition towards undisclosed income can be made in the hands of the appellant. Both the Revenue as well as the assessee have relied on the decision of the Honble Supreme Court in case of Pullangode Rubber Produce Co. Ltd vs State of Kerala (91 ITR 18) wherein the Honble Supreme Court has laid down the following proposition in law: ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 74

An admission is an extremely piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of accounts donot disclose the correct state of facts.

In the instant case, the Revenue has made the addition based on the statement of the assessee and also on the fact that the entry of payment of Rs 150,00,000 was not found recorded in the cash book/books of accounts at the time of Search. What is therefore relevant to examine is whether the assessee has discharged its onus to the effect that the books of accounts do not disclose the correct state of facts and the statement made during the search was not correct as some entries were not incorporated in the seized cash book and the cash book was not upto date as on the date of search. In this regard, it is noted that at the time of search, the surrender of income on behalf of the entire group was made by the assessee and his statement were recorded where he has mentioned about impunged cash payment to Mr Ansari. The ld CIT(A) has stated that the seized cash books of the assessees group was showing cash balance of Rs 1,88,10,450 and which were incomplete at the time of search. Subsequent to the search, ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 75 the assessee completed the cash books incorporating all the inflow and outflow of cash and recasted cash books were produced before the Auditors as well as before the AO and no discrepancies were pointed out by either of them especially in terms of inflating the inflow of cash or by deflating the outflow of cash to cover up the situation of unavailability of disclosed cash. The assessee has also reconciled the cash balance as per the seized cash books and the audited cash books and the same was submitted to the AO who has not controverted the same by pointing out any discrepancies therein. Based on his detailed examination, the ld CIT(A) has held in his order that

the assessee has successfully shown that the statement made before the search party was not correct as some entries were not incorporated in the seized cash book, therefore, it can be said that the cash book was not upto date as on the date of search. Assessee had produced the re-casted audited cash book after incorporating all entries before the AO. There were sufficient cash balance available with assessee and his family members/group concern to cover the payment of Rs. 1,50,00,000/- to Ansari.

During the course of the arguments, the Revenue has not brought anything further to our notice and the findings of ld CIT(A) remain uncontroverted before us. The assessee has successfully demonstrated through its explanation and ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 76 documentation in terms of re-casted books of accounts that the statement made during the course of the search cannot be made the sole basis for making the addition of Rs 1,50,00,000 in his hands as there was sufficient cash balance in the books of accounts to make the said payment and discharged its onus as laid down by the decision of Honble Supreme Court in case of Pullangode Rubber Produce Co (supra) and Rajasthan High Court in case of Ashok Kumar Soni (supra). We therefore do not find any infirmity in the findings of the ld CIT(A). Accordingly, we uphold the order of the ld. CIT(A) and the appeal of the Revenue in this ground is dismissed.

17. Now we take up common ground in the Revenues appeal as well as the assessees appeal The 4 th ground of the Revenues appeal is against deletion of addition of Rs 20,46,604 out of Rs. 50,26,604/- made by the AO on account of deemed dividend income under section 2(22)(e) of the Act and the sole ground of the assessees appeal is against confirming the addition of Rs. 29,80,000/- out of the above said addition on account of deemed dividend. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 77 The assessee is a Director in the company M/s Ashish Buildcon Pvt. Ltd. and during the year, the assessee was having shareholding of more than 10% in the said company. During the course of assessment proceedings of M/s Ashish Buildcon Pvt. Ltd. for the AY 2011-12 and on perusal of the accounts of the assessee, it was noticed that the company has shown an amount of Rs. 5026604/- as advance given to Sh. Ashok Agarwal in the current Account through which day to day transactions were being carried out and the company was having accumulated reserve and surplus to that extent. The AO held that the provisions of deemed dividend are applicable not only to loans and advances but rather to any payment in the nature of loans and advances. In fact, the provisions of section 2(22) (e) of the Act are also applicable to day to day transactions between a company and a share holder. Accordingly, an addition of Rs. 50,26,604/- was made on account of deemed dividend u/s 2(22) (e) of the Act.

18. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld. CIT(A), who had partly allowed the appeal by observing as under:-

3.4.3 I have duly considered assessees submission, remand report of the AO and also taken a note of judicial ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 78 pronouncements referred by AO and appellant. I have also carefully perused the assessment order passed u/s 153B r.w.s 143(3) of the Act and also taken a note of factual matrix of the case. From, the above two issues are emerges for adjudications:- (i) whether the re-payments by the company against the amount received by it from the shareholder comes in preview of deemed dividend u/s 2(22){e) of Income Tax Act. (ii) Whether the Advance Rs. 29,80,000/- as normal business advance against the purchase of land or comes in preview of deemed dividend. Now the first issue whether the re-payments by the company against the amount received by it from the shareholder comes in preview of deemed dividend u/s 2(22) (e) of Income Tax Act is taken for adjudication. The assessee has submitted the ledger account of assessee in the books of the company M/s Ashish Buildcon (P) Ltd (PB pg 282). The entry to entry explanation was also given by the assessee, for which the AO has not made any comments in his remand report. The ledger account of assessee in the books of company is like a current account showing inflow and outflow of money in mixed form for the transactions of advance given or taken from/to the assessee. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 79 From the above account, I found that first two payments by the company amounting to Rs. 15,00,000/- and Rs. 6,80,000/- were against the land deal/advance by the company. The third entry is receipt of amount by the company of Rs. 2,00,000/- from the assessee. The fourth entry dated 15/05/2010 is payment of Rs. 10,00,000/- by the company to assessee. Further, Rs. 2,00,000/- was re- paid by company to the assessee on 15/04/2010 and balance payment of Rs. 8,00,000/- was towards the advance against the land. At this stage, the total advance by the company to the assessee becomes at Rs. 29,80,000/-. Subsequent to this entry, in all cases, the company received payment from the assessee first and then repaid. Therefore, if the advance amount of Rs. 29,80,000/- is removed from this current account, there comes no debit balance in this account at any point of time. The subsequent entries of the payment to the assessee by the company is on account of repayment of old advance taken by the company from the assessee which cannot be put under preview of deemed dividend u/s 2(22) (e) of Income Tax Act. Therefore the addition of Rs. 50,26,604 - 29,80,000/- = Rs. 20,46,604/- is unwarranted and unjustified. As regard the second issue whether the advance of Rs. 29,80,000/- by the company to the assessee comes under the preview of deemed divided. The assessee claims that ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 80 he received this amount against the agreement to sale of the land and since the assessee could not full fill the condition of the sale agreement, the deal stood cancelled and amount was refunded back by adjusting the outstanding in the advance made by the assessee to the company. The copy of the sale agreement was filed by the assessee, which is placed at PB pg 277-279. This agreement is dated 06-04-2010 and as per the condition mentioned in clause 4, the assessee had to get the conversion and approval of land by 31.03.2011 and if the land is not converted and approved by 31.03.2011, the agreement stands as cancelled. As a director of one of the leading development and construction Company of the city, he was well aware of the situation that the conversion and approval of the land could not be obtained. These clauses were put because some of the money taken by the appellant from the company was refunded subsequently. The Ikrarnama is nothing but an afterthought to justify the loans taken by him from the company as advance for land, to escape the deeming provisions of sec. 2(22) (e) of the Act. On the other hand, ARs of the appellant have relied on the finding of Hon. Delhi High Court in the case of CIT vs. Creative Dyeing and Printing Pvt. Ltd. ITA No. 250/2009 dated 22.9.2010 and the order of the Income Tax Settlement Commission in the case of the M/s Career Point ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 81 Infosystems Ltd., Sh. Pramod Kumar Maheshwari, Sh. Om Prakash Maheshwari and Sh. Naval Kishore Maheshwari (S.A. No. RJ/JP51/2011- 12/28 to 31-IT) I have carefully perused the ordered relied upon and find that the facts adjudicated upon by aforementioned the Hon. Judicial Authorities ate completely distinct from the facts of the case of the appellant. On the basis of the evidence available on record it is seen that no business transaction was undertaken by the company for purchase of the land as claimed by the appellant, and the Ikrarnama was drafted subsequently to evade the provisions of sec. 2(22)(e) of the Act. In view of the facts and circumstances of the case as discussed in detail above and the law applicable to these facts, the addition to the extent of Rs. 29,80,000/- u/s 2(22) (e) of the Act is confirmed. Assessee gets part relief of Rs. 20,46,604/-(being Rs. 50,26,604 - 29,80,000/-). This ground of the assessee stands as partly allowed.

19. Now the assessee as well as the Revenue is in appeals before us. The ld. AR of the assessee has submitted as under:- (a) The similar issue on the same facts and circumstances and in respect to advance from same company has been decided by Honble ITAT in the case of assessee for AY 2010-11 in ITA No 810/JP/2014 order dated 04-03-2016. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 82 b) During the course of assessment proceedings the assessee vide letter dated 22.03.2013 (Copy at PB Page 272-281) explained to the ld. AO as under: -

The assessee received money from the company from time to time against agreement to sale the land to the company. When the 90B proceedings could not be got from JDA, the agreement was cancelled and amount was refunded to the Company. The copy of agreement to sale is enclosed herewith. The assessee is regular dealer in the land and company is also dealer in the land. The advance transaction is normal business transaction. The normal business advance cannot be treated as deemed dividend as held by Honble Delhi High Court in the case of CIT Vs Creative Dyeing and Printing Pvt Ltd ITA No 250/2009 decision dated 22/09/2009 (copy enclosed)

Thus the assessee explained to the ld. AO that the amount so received from the company was not a loan which was repayable back to the company but the same is received against agreement to sales of land. However, the land could not be sold to the company as the formalities of 90B could not be completed. In support of the claim the copy of sales agreement executed between assessee and company was also submitted to the ld. AO (Copy at PB Page 277-279). It is relevant to mention here that the assessee as well as company M/s Ashish Buildcon Pvt. Ltd both engaged in the business of real estate and during normal course of business both the persons are receiving advance from customers and thereafter selling the plots/lands to them, therefore this is general practice of the trade to first received advance from the customer and thereafter sale the plot/land to them. This ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 83 is evident from the Balance sheet & Profit and Loss account of M/s Ashish Buildcon Pvt. Ltd. (Copy at PB page 291-308). Since the land under the sale agreement could not be got approved for the purpose of 90B formalities, the agreement was cancelled and amount was refunded to the company. But later on another land was sold to the company by the assessee by executing the registered sale deed on

30.03.2013. (copy placed at PB page 309-316). This supportive evidence was filed before ld CIT(A) to establish that the amount received by the assessee was against the sale of the land was bonafide and this was a genuine and normal business transaction between the assessee and company. c) The copy of assessees ledger account in the books of the company is placed at PB page 283-290. The assessee explained that the initial amount of Rs. 29,80,000/- was paid by the company to assessee as advance against land transactions and the balance payments on various dates are repayment by the company to the assessee of the amount paid by the assessee to the company on earlier dates. In other words, the assessee paid certain amount to the company on various dates and the company repaid these amounts to the assessee on subsequent dates. Therefore, in any case, the repayment by the company of amount dues to the assessee cannot be deemed as advance or loan to shareholder. The assessee relies on the findings of Ld CIT(A) in this regard. ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 84 (d) The expression used in first part of section 2(22)(e) is advance or loan. The word advance has not been defined. It ordinarily means payment of cash or transfer of goods for which accounting must be rendered by the recipient at some later date. The transaction of loan involves lending and delivery by one party and receipt by another party of sum money upon express or implied agreement to repay it with or without interest. The phrase "by way of advance or loan" appearing in Section 2(22)(e) of the Act be construed to mean those advances or loans which a share holder enjoys for simply on account of being a person who is the beneficial owner of shares, but if such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of Section 2(22) of the Act but not the cases where the loan or advance is given in return to an advantage confirmed upon the company by such shareholder 2013 (9) TMI 445 - ITAT AGRA Shri Krishan Murari Lal Agarwal Versus Deputy Commissioner of Income-tax (pg 1-11 of Case Laws Paper Book). e) The word advance has to be read in conjunction with the word loan. Usually attributes of a loan are that it involves the positive act of lending, coupled with acceptance by the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 85 other side of the money as loan: it generally carries interest and there is an obligation of repayment. On the other hand, in its widest meaning the term advance may or may not include lending. The word advance if not found in the company of or in conjunction with the word loan may or may not include the obligation of repayment. If it does, then it would be a loan. The word advance which appears in the company of the word loan could only mean such advance which carries with it an obligation of repayment. Trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of S. 2(22)(e) of the Act. CIT V/s Raj Kumar 318 ITR 462 (Del). f) Unregistered Agreement:- The agreement to sale cannot be treated as unreliable evidence on the ground that the agreement to sale is not registered. In this regard, we submit that it is normal practice of the assessee. The assessee is purchasing the land on the basis of unregistered agreement to sale. This is common practice of the trade in Jaipur that advance against purchase of land is given on the basis of unregistered agreement to sales and registered sale deeds are executed when the possession of the land is taken/complete payment to the seller is made. The department is accepting this practice of the assessee in all scrutiny assessments made prior to search as well as assessments framed u/s 153A and therefore no separate treatment could be given for the ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 86 unregistered agreement to sale in between the assessee and company. g) Agreement not found in search:- The ld CIT appeal held the agreement as unreliable evidence on the ground that it was dated 22.07.2009 but not found during the course of search. In this regard we submit that search party has not prepared inventory for the documents or books of accounts found at the time of search. The search party prepared an inventory only of those documents which it seized. From the inventory prepared by the search party your honor would found so. The assessee is a big colonizer and had thousands of agreement to sale and documents relating to purchase of land, conversion of land and sales of plot. None of these documents are appearing in the inventory prepared by the search party. It is also relevant to mention that the assessees assessment for the AY 2004-05, 2005-06, 2006-07 and 2007-08 were completed u/s 143(3) of IT Act after detailed scrutiny much before the search and several agreements to sales were filed before the AO during the course of scrutiny assessments, therefore, the existence of these documents cannot be denied. Since these documents were also not included in the inventory prepared by the search party. It is the wisdom of search party which document they choose to seize and the assessee cannot interfere in the decision of search party. h) The agreement is void-ab-initio as the director knew that the land used was not going to be converted:- ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 87 In this regard the assessee has submitted a detailed explanation before ld CIT appeal which was not considered by him in judicial perception. Shri Ashok Agarwal was expecting the New Township Policy and hundreds of other colonizer/builders were under bonafide belief that the JDA would allow the conversion of the land. The assessee has filed detailed explanation on the same matter in AY 2010-11 before ld CIT(A)/ITAT as under:- During the year under consideration application for conversion of land at Village Ajayrajpura, Teh. Sanganer, under section 90B of land Revenue Act could not be filed by the assessee due to the following reasons: - The assessee entered into agreement with company M/s Ashish Buildcon Pvt. Ltd on 22.07.2009. At that point of time application for conversion of land and for 90B proceedings for less than 25 acre was not admitting by the JDA. News Paper cutting is enclosed herewith which shows that more than 300 cases of such type (having land less than 25 Acre) were pending before JDA and JDA was rejecting such cases. Further the draft master plan of Jaipur was published by notification on 10.11.2009. The copy of notification of publication of master plan is enclosed herewith. As per draft master plan of JDA the land at Village Ajayrajpura was falling in U2 zone (Unbanisable land). As per rules proposed in the draft master plan the minimum area required for unbanisable land (U2) of integrated residential township was 10 hectare while the land of the assessee was only 1.01667 hectare. After the publishing of Draft Master Plan, the JDA was not accepting the application for 90B proceeding for the land less than 10 Hectares. We are enclosing herewith the relevant page of master plan wherein the minimum area required for integrated residential township is mentioned. The assessee was under apprehension that his application would also be rejected by JDA therefore instead of taking a adverse decision from JDA, it was thought proper to keep the application in abeyance till the pronouncement of Private Township Policy which was much awaited at that time just like pronouncement of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 88 regularization of Plots in Prathviraj Nagar Scheme now a days. It is also relevant to mention here that at that point of time several representations were made by the various Association of the builders and private colonizers for conversion and 90B proceedings of the lands less than 10 Hectares But at that time Private Township Policy was under pronouncement by the Government. The assessee was expecting the relief by the Government for small builders in Private Township Policy which was going to be pronounced very soon but which was also delayed by Government for one or another reasons and later on the Private Township Policy was pronounced vide letter No F.3 (77)UDD/3/20102 JAIPUR, Dated: 28/06/2010. Here also no relief to the small builders was not given and the requirement of minimum land was kept 10 Hectares. Later on 23.08.2012 the assessee filed application under section 90B of land Revenue Act which was rejected by JDA. The copy of application and letter received from JDA is enclosed here with. When final outcome of the efforts came negative, the assessee sold another land to the company duly 90B proceedings completed. Therefore, in view of the above explanation the amount of Rs. 50,26,604/- cannot be assessed as income of the assessee u/s 2(22)(e) of Income Tax Act.

20. At the outset, the ld CIT DR has vehemently supported the order of the Assessing Officer.

21. We have heard the rival contentions and pursued the material available on record. An amount of Rs 50,26,604 has been reflected as an advance given to the assessee in the books of accounts of M/s Ashish Builcon Private limited. The said advance is reflected in the current account of the assessee maintained with M/s Ashish Builcon Private limited through which various transactions of deposits and withdrawals ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 89 were made during the year. The AO held that the provisions of deemed dividend are applicable to day-to-day transactions between the company and its shareholders and accordingly brought the whole of amount of Rs 50,26,604 to tax as deemed dividend in the hands of the assessee. The ld CIT(A) after going through the ledger account of the assessee in the books of M/s Ashish Builcon Private Limited and the explanation given by the assessee in respect of each of the entries has given a clear finding of fact that an amount of Rs 29,80,000 is towards the advance given by the company to the assessee for purchase of land and Rs 20,46,604 is on account of repayment of old advance taken by the company from the assessee. No contrary material or explanation has been submitted before us to displace the said finding of the ld CIT(A) and we see no reason to interfere with the said finding of facts. Now, coming to the provisions of section 2(22)(e) of the Act, it is the loan or advance given by the company to its shareholder which can be brought to tax as deemed dividend in the hands of the shareholders. Where the company has taken any loan or advances from a shareholder and repays the same subsequently and a clear nexus is established, such repayment relates back to the original loan/advance transaction and cannot be seen as an independent transaction of fresh advancement of ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 90 loan/advance by the company to the shareholder. In the instant case, the ld CIT(A) has given a clear finding that the amount of Rs 20,46,604 paid by the company is towards repayment of old advances taken by the company from the assessee, in such a situation, the provisions of section 2(22)(e) are clearly not attracted in respect of Rs 20,46,604. Now coming to amount of Rs 29,80,000 which is towards the advance given by the company to the assessee for purchase of land is concerned, the assessee submitted a copy of agreement to sale/Ikarnama dated

6.4.2010 as per which the assessee had agreed to sell 2.602 hectares of agricultural land in Village Bamanwas, Tehsil Viratnagar, Distt Jaipur to M/s Ashish Buildcon Pvt. Ltd. for Rs 40 lacs. As per the Ikarnama, the assessee was required to get 90B conversion formalities done before

31.3.2011. It was explained by the assessee that he was expecting the new township policy to be announced as was the case with other colonizer/builders and was under a bonafide belief that the JDA would allow the conversion of land. Unfortunately, the land under the sale agreement could not got 90B approval from the JDA and thereafter the agreement was cancelled and amount was refunded to the company. It is noted that both assessee and M/s Ashish Buildcon are engaged in the business of real estate and similar transactions have been undertaken by ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 91 the assessee with M/s Ashish Buildcon Private limited in the earlier years and subsequent years as well. We are therefore of the view that these are normal business transactions where the money has been advanced by the company for purchase of land and the same cannot be deemed as dividend in the hands of the assessee. In some cases, the sale transaction has fructifed by complying with the necessary conditions/formalities in terms of registered sale deed and in some cases, due to non-fulfillment of specified conditions, the agreement may be cancelled. We do not agree with the contention of the ld CIT(A) that where the agreement to sell is not registered and not found during the search, the authencity of the agreement will be in doubt and the assessee would be precluded in producing the same in support of its contention especially given the fact that there are regular and similar business transactions entered into between the assessee and M/s Ashish Buildcon. Nothing has been brought on record to suggest that M/s Ashish Builcon Pvt limited has negated the existence of the said agreement. What is important to examine is the purpose at the point of time when the money was advanced by the company. Where the purpose is to carry out a business transaction for the benefit of the company, the amount of advance will be treated as normal business ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 92 advance and cannot be termed as deemed dividend in the hands of the shareholders. The decision of Honble Delhi High Court in case of Creative Dyeing and Printing Pvt. Ltd. (supra) supports the case of the assessee. Further, it is noted that in respect of a similar transaction entered between the assessee and M/s Ashish Buildcon in AY 2010-11, the Coordinate Bench has decided in favour of the assessee and the relevant findings are as under:

6. We have heard rival contentions and perused the material on record. On verification of copy of accounts placed at pages 38 to 39 of the Paper Book, it is seen that assessee had given money to the company. The opening balance as on 1.4.2009 was Rs. 1,12,17,000/-. Thereafter, he withdrew money from the company upto 15.7.2009. On 18.07.2009 the assessee again paid to company Rs. 7 lakhs. Thereafter assessee withdrew various amounts from the company. On 21.8.2009 again he paid Rs.2 lakhs to company, Rs. 9.5 lakhs on 28.07.2009, Rs. 3 lakhs on 13.10.2009, Rs 1.25 lakhs on 15.10.2009, Rs. 5 lakhs on 26.10.2009, Rs. 5 lakhs on 29.10.2009, Rs. 20 lakhs on 10.02.2010 and Rs. 60 lakhs on

10.3.2010 (Rs. 20 lakhs each) and Rs.13 lakhs on 10.03.2010 and Rs. 1.25 lakhs on 10.3.2010 which show that there are numbers of transactions between the assessee and company. Finally, the assessees accounts has been squared up. The assessee and company are in real estate business. It is a general practice in the line of business that most of the land ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 93 are purchased and sold on agreement to sale basis to save the stamp duty and to increase the profit on the transactions. These facts have been accepted by the AO in scrutiny assessment also in number of years. The condition laid down in the section 2(22)(e) are squarely applied in case of the assessee but only issue disputed is whether these advances were loan for business purposes or otherwise. The prima facie copy of accounts in the books of the company shows that assessee had paid much more than amount received from the company. The transactions were regular. The assessee produced the evidence before the lower authorities to justify the transaction as a business transaction on the basis of agreement to sale dated 22.7.2009. There were certain conditions as per this Ikrarnama, which could not be fulfilled by the assessee but it does not mean that assessees loans and advances are not for business purposes. The ld. A/R of the assessee has explained the reasons for not getting 90B done of agricultural land at village Ajayrajpura, Tehsil Sanganer as Draft Master Plan got changed by the JDA by draft Notification dated 10.11.2009 wherein it has been decided by the JDA that land use under 90B was to be approved not less than 25 acres but in final Master Plan this area has been reduced to 10 hectares. The assessee filed application on

23.08.2012 under section 90B of the Land Revenue Act before the JDA which was rejected by the JDA. The case laws relied on by the ld. A/R are squarely applicable on the facts of the case. Therefore, we hold that transactions made by the assessee and the company are for business purposes and are ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 94 not deemed dividend under section 2(22)(e) of the Act. Accordingly, we allow the assessees appeal and reverse the order of ld. CIT (A).

In light of above, we are of the opinion that the advance of Rs. 29,80,000 given by the company to the assessee is for business purposes towards purchase of land and the same cannot be treated as deemed dividend in the hands of the assessee. Accordingly, we allow the appeal of the assessee and dismiss the appeal of the Revenue on this ground.

22. In the result, appeal of the assessee is allowed and the appeal of the revenue is dismissed. Order pronounced in the open court on 03.10.2016 dqy Hkkjr foe flag ;kno (Kul Bharat) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03.10. 2016 *Ranjan vknsk dh izfrfyfi vxzsfkr@Copy of the order forwarded to: ITA 778 & 847/JP/2015_ Ashok Kumar Agarwal Vs ACIT 95

1. vihykFkhZ@The Appellant- Shri Ashok Kumar Agarwal, Jaipur.

2. izR;FkhZ@ The Respondent- The ACIT/DCIT, Central Circle-3, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 778 & 847/JP/2015) vknskkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar