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 Shyamsunder Rao Gone, Manchiryal, ADILABAD Income Tax Officer, Ward-17(3), HYDERABAD
 Shri Nikhil Agarwal, 9/49, 2nd Floor, Punjabi Bagh West, New Delhi. vs. The Income Tax Officer, Ward-71(2), New Delhi.
 Dharampal Satyapal Ltd, 1711, S. P. Mukherjee Marg, Delhi vs. DCIT, Central Circle-29, New Delhi
 Shri Manik Singh, S/o Dr. Meharban Singh, A-47, Sector 31, NOIDA. vs. Dy.C.I.T., Circle-2, Noida.
 Sushila Khandelwal B-88, First Floor Sarvodaya Enclave, New Delhi 110017 vs. Income Tax Officer Ward – 32 (3) New Delhi
 Shri A.K. Aggarwal, H.No.1711, Sector-9 vs. The ACIT, Circle Karnal. Haryana.
 Sh. Bijender Singh S/o Sh. Nafe Singh VPO Garhi Chajju, Tehsil Samalkha Distt. Panipat vs. Income Tax Officer Ward -1 Panipat
 Shri Devender Kumar S/o Shri Shis Pal Singh H. No. 36, C/o Anamika Memorial Shiksha Niketan, Ganga Enclave, Loni Border, Ghaziabad vs. Income Tax Officer Ward – 1 (2) Ghaziabad
  Baba Bhootnath Trade & Commerce Ltd vs. ITO (ITAT Kolkata)
 Paramount Propbuild Pvt. Ltd., 208, Savita Vihar, Sikka Mansion, LSC, 2nd Floor, Delhi. vs. DCIT, Circle-18, New Delhi.
 Mahendra Kumar Mogha, W-25, Ground Floor, Greater Kailash, Part-I, New Delhi. vs. ITO, Ward-29(2), New Delhi.

Rajkumar B. Agarwal vs. DCIT (ITAT Pune)
February, 04th 2019

 

This batch of six appeals by the three different but connected
assesses, relating to the assessment years 2004-05, 2005-06 &
2006-07, involve some common issues. We are, therefore,
proceeding to dispose them off by this consolidated order for the
sake of convenience.
Rajkumar B. Agarwal – A.Y. 2005-06
2. The first issue raised in this appeal, through Ground Nos.1
and 2, is against the confirmation of addition of Rs.17,10,000/-
and Rs.5 lakhs on account of unexplained jewellery on the basis of
notings made on loose papers.
3. Briefly stated, the facts of the case are that a search action
was taken u/s.132 of the Income-tax Act, 1961 (hereafter also
called as ‘the Act’) in Agarwal/Malu group of cases on
Appellant by Shri Kishor Phadke
Respondent by Shri Sudhendu Das
Date of hearing 03-01-2019
Date of pronouncement 04-01-2019
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
3
20-07-2005. The assessee is a member of the Agarwal group.
During the course of search, certain loose papers were found,
which, inter alia, included page nos. 2 and 3 of the Executive
Diary in Bundle no.3 having notings of investment in jewellery.
Certain price/value was mentioned against some of the items of
jewellery on these pages, while other items had only the
description of jewellery without there being any figure depicting
price/value. Total of the figures mentioned against the items of
jewellery on pages 2 and 3 came at Rs.40,15,263/-. This total is
exclusive of the items of jewellery against which no amount was
given. During the course of investigation, the assessee stated that
the items of jewellery against which no price was written, were not
purchased by him or his family. The total value of jewellery items
on seized page No.2 came at Rs.13,55,263/-, which the assessee
admitted to have purchased from undisclosed sources and equal
sum was offered for taxation. Regarding the entries on page no.3,
the assessee stated that except for last two items, namely, gold
biscuit and one diamond ring, the other items of jewellery were
already disclosed in the Wealth-tax returns and declarations made
under VDIS of self and his family members. The assessee made
certain withdrawals on the occasion of marriage of his son. A sum
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
4
of Rs.9,50,00/- [Rs.7,00,000 (gold biscuit) + Rs.2,50,00 (one
diamond ring)] was claimed to have been spent out of such
withdrawals. The AO accepted the assessee’s contention to this
extent. He, however, made an addition for the remaining amount
invested in jewellery to the tune of Rs. Rs.17,10,000/-
[Rs.40,15,263 minus Rs.23,05,263 (Rs.13,55,263 + Rs.9,50,000)].
Thereafter, the AO proceeded to make addition in respect of items
written on seized page no.3 against which no value was assigned.
He attributed a sum of Rs.5 lakhs to such investments and made an
addition for this sum also. This resulted into a total addition of
Rs.22,10,000/- on account of unexplained investment in jewellery.
The assessee remained unsuccessful before the ld. CIT(A).
Aggrieved thereby, the assessee has approached the Tribunal.
4. We have heard both the sides and perused the relevant
material on record. The authorities below have made additions of
Rs.22.10 lakhs on the basis of certain notings made on page nos. 2
and 3 of the seized documents. The assessee made a claim before
the authorities below, including the AO, that the jewellery which
was unexplained was promptly offered for taxation while the
remaining jewellery was out of declaration made under
VDIS/Wealth-tax returns. It is apparent from page 25 of the
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
5
impugned order that actual total gold, silver and diamond jewellery
found during the course of search was as under :-

i.

Gold Jewellery

8359.00 Grams

ii.

Diamond Jewellery

74.32 Carats

iii.

Silver Jewellery

95.67 kg

4.1 As against that the jewellery in Wealth-tax returns and VDIS
declarations of the assessee along with his family members, as
tabulated on page 24 of the impugned order, is as under :

i.

Gold Jewellery

8304.84 Grams

ii.

Diamond Jewellery

84.37 Carats

iii.

Silver Jewellery

87.68 kg

4.2 The difference between the gold, silver and diamond
jewellery found at the time of search and as per the Wealth tax
returns/VDS has been tabulated on page 25 of the impugned order,
as under :

Gold

Silver

Diamond

 

Found

8359 gms

95.67 kg.

74.32 Carats

Less : Shown in
W.T. & VDIS

8441.63 gms

87.68 kg

84.37

Excess/(Deficit)
found

(82.63) gms

7.99 kg Deficit

(10.05) Carats
Deficit

4.3 The assessee disclosed an additional income of Rs.79,600/-
in his return for the A.Y. 2006-07 in respect of excess silver
jewellery found in the immediately above table and also offered for
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
6
taxation a sum of Rs. 40,515/- in respect of certain gold jewellery,
which position has not been disputed by the ld. DR. A close
scrutiny of the above tables transpires that the total gold jewellery
found at the time of search belonging to the entire family was
8359.00 grams as against which the assessee had already declared
gold jewellery 8304.84 grams in the Wealth-tax returns/VDIS
declarations of self and his family. The differential amount was
also offered for taxation in his return for the A.Y. 2006-07.
Similar is the position qua the diamond and silver jewellery.
Under these circumstances, a question arises as to whether an
addition can be made simply on the ground that the jewellery items
mentioned on page nos. 2 and 3 of seized documents did not tally
with the description of jewellery given in Wealth-tax returns/VDIS
declaration notwithstanding the fact that the total weight of
jewellery is tallying. The Revenue authorities have jettisoned the
assessee’s contention by holding that one-to-one match of the
description of jewellery items is essential to claim credit against
the declarations made in Wealth-tax returns/VDIS. In our
considered opinion, this view point has no legal legs to stand on.
So long as the total gold jewellery in weight found at the time of
search matches with the earlier declarations made by the assessee
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
7
in his Wealth-tax returns and VDIS, there can be no question of
making any addition simply on the ground that the description of
items in the list declared under Wealth-tax returns/VDIS is
different from those actually found. If such is a position, then an
inference has to be drawn that the items initially declared in
Wealth-tax returns/VDIS were converted into the items of
jewellery found at the time of search. A contrary stand can be
taken only if the authorities demonstrate that the jewellery items
given in the Wealth-tax returns/VDIS were over and above the
items of gold jewellery disputed. We are confronted with a
situation in which total jewellery found at the time of search as per
the panchnamas tallies with the gold jewellery declarations by the
assessee and his family members in Wealth-tax returns/VDIS, save
and except the additional income offered by the assessee in his
return for the A.Y. 2006-07. In such a scenario, there can be no
question of making any addition in respect of gold jewellery by
holding that description of items found at the time of search did not
match with the items declared in Wealth-tax returns/VDIS when
there is no overall difference in the weight of jewellery. We,
therefore, order to delete the additions of Rs.17,10,000/- and Rs.5
lakhs. The corresponding grounds are, therefore, allowed.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
8
5. Ground No.3 is against the confirmation of addition of
Rs.17,50,000/- on protective basis.
6. The facts apropos this ground are that the assessee claimed
that out of total marriage expenses, a sum of Rs.17,50,000/- was
borne by Mr. Om Prakash Agarwal, Jalgaon, father of Trupti
Agarwal, the daughter-in-law of the assessee. The AO made an
addition on protective basis for a sum of Rs.17,50,000/- on the
ground that the assessee could not furnish any details/evidence of
said expenses having been incurred by Mr. Om Prakash Agarwal.
The ld. CIT(A) upheld the addition.
7. Having heard both the sides and perused the relevant material
on record, it is seen that the assessee made a claim before the AO
that Mr. Om Prakash Agarwal shared half of marriage expenses.
The Revenue took up the proceedings u/s.153C in the hands of Mr.
Om Prakash Agarwal. In the assessment completed on 30-12-2008
in the hands of Om Prakash Agarwal, a copy of which has been
placed on record, the AO accepted that sum of Rs.17,50,000/- was
withdrawn by Mr. Om Prakash Agarwal from his bank account,
which was given to the assessee as his share of marriage expenses.
Since the explanation of Mr. Om Prakash Agarwal has been
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
9
accepted in his assessment completed u/s.153C, there can be no
rationale in sustaining the addition of Rs.17,50,000/- on protective
basis in the hands of the assessee. We, therefore, order to delete
the addition.
8. The last ground against the confirmation of addition of
Rs.17,800/- was not pressed by the ld. AR, which is hereby
dismissed as not pressed.
9. In the result, the appeal is partly allowed.
Rajkumar B. Agarwal – A.Y. 2006-07
10. The first issue raised in this appeal through Ground nos. 1 to
4 is against the confirmation of addition of Rs.22,77,943/- by
treating sale proceeds received on sale of shares of Prraneta
Industries Limited (hereinafter referred to as ‘PIL’) as `Income
from other sources’.
11. The facts apropos this issue are that the assessee declared
short term capital gain of Rs.22,02,745/- on sale of shares of PIL.
The assessee was requested to substantiate the said claim by
providing various details, such as, name of company, number of
shares, date of purchase, purchase cost per share, total purchase
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
10
cost, date of sale, sale price per share, total sale price etc. The
assessee filed certain details, which have been reproduced on page
19 of the assessment order, claiming that he purchased 15000
shares of PIL on 03-09-2004 which were sold in two trenches of 1
lakh and 50000 shares. It was further explained that 15000 shares
were purchased with face value of Rs.10/- each and later on the
face value of share was split to Re.1/- each and accordingly, the
assessee was allotted 1,50,000 shares in lieu of original 15,000
shares of PIL, which were later on sold and resulted into capital
gain. That is how, the assessee claimed that 15000 shares of PIL
purchased for a sum of Rs.75,197/- were sold for a total
consideration of Rs.22,77,943/- resulting into short term capital
gain of Rs.22,02,745/-. The assessee further stated that the shares
were purchased through broker Vijay Bhagwandas & Company
and sold through another broker, namely, Macy Securities Pvt.
Ltd. Despite the AO’s requirement to furnish Demat account in
entirety, the assessee could furnish the Demat account details of
the shares of PIL only from 29-06-2005 to 30-06-2005 and
04-07-2005 to 07-07-2005. The AO observed that the shares of
PIL dealt in by the assessee were tainted and penny stock inasmuch
as its prices were manipulated. Such a conclusion was fortified
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
11
from the enquiries conducted by Bombay Stock Exchange (BSE)
and Securities Exchange Board of India (SEBI) in respect of the
shares of PIL. The AO further observed that the shares were
purchased through Vijay Bhagwandas & Co., who were suspended
by SEBI for illegal activities in the trading of shares. The AO
further observed that full-fledged enquiries were launched by BSE
and SEBI into the purchase and sale of penny stock which divulged
that the prices of the shares of PIL were also manipulated. In the
absence of any Demat details filed by the assessee, the AO held
that there was no proof of having received the shares of PIL
immediately after the alleged date of purchase. The AO further
observed that the family members of the assessee also claimed to
have earned huge short term capital gain by trading in shares of
PIL during the same period. In this backdrop of facts, he came to
hold that the share prices of PIL were manipulated with an
intention to provide short term tax free capital gain to the persons
like the assessee and also simultaneously providing artificial loss
to certain persons intending to evade tax by setting off the said
artificial loss against other taxable actual profits. He treated the
entire transaction as sham by holding that the short term capital
gain brought into books/accounts was nothing but income of the
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
12
assessee from undisclosed other sources. He, therefore, did not
accept the genuineness of the accommodation entries in respect of
penny stocks of PIL and charged to tax the sale proceeds of
Rs.22,77,943/- as undisclosed income. He further held that no
broker would give accommodation entries to the assessee without
any commission. He estimated commission @ 6% on sale
proceeds of 1,50,000 shares and made a further addition of
Rs.136,677/-. The ld. CIT(A) sustained the addition by relying
inter alia on two orders passed by the Mumbai Bench of the
Tribunal, viz., ITO Vs. Shamin Bharwani ITA No.
4906/Mum/2011 dated 27-03-2015 and Usha Chandresh Shah Vs.
ITO 
ITA No. 6858/Mum/2011 dated 26-09-2014, in both of
which, the additions made under similar circumstances were
confirmed by the Tribunal. The assessee is aggrieved by the
confirmation of addition.
12. We have heard both the sides and gone through the relevant
material on record. It is seen that the assessee claimed to have
earned short term capital gain of Rs.22,02,745/- in respect of sale
of shares of PIL which were purchased for a paltry sum of
Rs.75,197/- and sold for Rs.22,77,943/-. The AO, on verification
of the credentials of PIL and other attending circumstances,
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
13
observed that PIL was included in the list of penny stock
companies in enquiries conducted by BSE and SEBI, whose prices
were manipulated. The ld. AR was requested to place on record
the balance sheet of PIL for verifying the findings of ld. CIT(A) of
a very high P/E ratio of the shares of PIL, whose shares with Re.1/-
face value raised sharply from the bottom level of 0.31 paise to
Rs.21.10 paise with multiple of 300 times. The ld. AR could not
place on record copy of balance sheet of PIL. M/s DSP shares and
Securities Ltd. and M/s Galaxy Broking Ltd. were fined vide SEBI
orders dated 22.9.2012 and 24.09.2-12 for manipulating the prices
of PIL. The broker from whom the assessee allegedly purchased
the shares of PIL, namely, M/s. Vijay Bhagwandas & Company
was visited with penalties vide SEBI orders dated 26-06-2009,
31-08-2009, 26-11-2009 etc. for manipulating the prices of various
shares. They were debarred from acting as a share broker vide
order dt. 24.1.20006 passed by the SEBI. Then the assessee
claimed to have sold the shares of PIL to M/s Macy Securities Pvt.
Ltd. This company was also warned by SEBI vide orders dated
02-05-2011 and 02-06-2011 for manipulating the prices of
different shares. All such details have been incorporated in the
impugned order, which have not been controverted on behalf of the
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
14
assessee. It is further relevant to note that the AO required the
assessee to furnish certain details including Demat account for the
shares of PIL. The assessee miserably failed to place such details
except for transactions from 29-06-2005 to 30-06-2005 and 04-07-
2005 to 07-07-2005. The entire position which thus emerges is that
PIL is a penny stock company, which fact got established from
enquiries conducted by BSE and SEBI. Not only the DSP shares
and Securities Ltd. and Galaxy Broking Ltd. were fined for
manipulating the prices of shares of PIL, even the broker from
whom the assessee allegedly purchased the shares was suspended
and debarred from acting as a broker by SEBI and further the
broker to whom such shares were sold, was also warned by SEBI
for manipulating the prices of different shares during the relevant
period. There is doubt that the assessee completed paper-trail by
producing contract notes for the purchase and sale of shares of PIL.
In our considered opinion, mere furnishing of contract notes etc.
and more specifically when seen in the background of the above
noted facts, does not inspire any confidence and cannot be a
ground to delete an addition, which is otherwise made on the solid
bedrock of detailed enquiries.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
15
13. At this juncture, it will not be out of place to refer to the
judgment of the Hon’ble Supreme Court in CIT vs. Durga Prasad
More (1971) 82 ITR 540 (SC), 
in which the assessee claimed
before the ITO that income of certain property should not be taxed
in his hands as it was a trust property. The ITO rejected the claim
and included the income in the hands of the assessee. The Tribunal
affirmed the decision of the ITO, which was reversed by the
Hon’ble High Court. Reversing the verdict of the Hon’ble High
Court, their Lordships noticed that though the assessee made a
claim that income of the property was not his and produced
conveyance executed in his favour and the deed of settlement
executed by his wife, nearly about a year after the conveyance,
however, when the ITO asked the assessee about the source from
which his wife got the amount, apart from saying that it was
‘sthridhan’ property, he failed to disclose any source from which
his wife could have got the amount for purchasing the premises. In
this backdrop of facts, the Hon’ble Supreme Court held that
although the apparent must be considered as real, but, if there are
reasons to believe that the apparent is not real, as is the case under
consideration as well, then the apparent should be ignored to
unearth the harsh reality.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
16
14. Similar view has been canvassed in Sumati Dayal vs. CIT
(1995) 214 ITR 801 (SC). 
The question for consideration in that
case was whether the assessee purchased winning tickets after the
event. It was observed that in all cases in which a receipt is sought
to be taxed as income, the burden lies on the Department to prove
that it is within the taxing provision and if a receipt is in the nature
of income, the burden of proving that it is not taxable because it
falls within exemption provided by the Act, lies upon the assessee.
But, in view of section 68, where any sum is found credited in the
books of the assessee for any previous year the same may be
charged to income-tax as the income of the assessee of that
previous year if the explanation offered by the assessee about the
nature and source thereof is, in the opinion of the Assessing
Officer, not satisfactory. In deciding the issue against the issue,
their Lordships held that : `Apparent must be considered real until
it is shown that there are reasons to believe that the apparent is not
the real and that the taxing authorities are entitled to look into the
surrounding circumstances to find out the reality and the matter has
to be considered by applying the test of human probabilities’. This
shows that a decision based on the attending circumstances and
human probabilities does not get vitiated if there are compelling
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
17
reasons to reject the frontage of a transaction based on the socalled evidence, which is nothing more than a mere paper work.
15. It is further pertinent to note that it was not only the assessee
who booked short term capital gain on the sale of shares of PIL to
the above extent, but his family members were also not left behind.
They also indulged in the similar paper transactions by allegedly
purchasing and selling shares of PIL from the same brokers and
showing huge amounts of short term capital gains, for which
addition of Rs.18,71,906/- has been made in the hands of his son
Sh. Bharat Rajkumar Agarwal and Rs.20,21,001/- in the hands of
his wife Ameeta Rajkumar Agarwal for the same assessment year,
the appeals of which are being disposed off through this batch of
cases.
16. In view of the factual and legal position discussed above, it is
crystal clear that PIL is a penny stock company and the assessee
obtained only accommodation entries in the garb of short term gain
from transfer of shares of PIL, for which an appropriate addition
has rightly been made and upheld by the authorities below. We,
therefore, countenance the impugned order on this score.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
18
17. Before parting with this issue, we want to record that the ld.
AR has relied on certain decisions in which the additions made on
account of accommodation entries got deleted. In the opposition,
ld. DR has also relied on certain decisions, including those referred
to in the impugned order, in which the addition on account of
accommodation entries got confirmed. We are not separately
referring to those decisions as the factual position prevailing in
such case varies with the facts of the instant case as recorded
above. Even a single slightest variation in the factual matrix of two
apparently similar cases changes the entire complexion of the
decision. As the factual panorama obtaining in the extant case is
different from those relied on by the rival parties, we are, therefore,
desisting from distinguishing such cases separately. These grounds
are, therefore, dismissed.
18. The next ground is against the confirmation of addition of
Rs.1,36,677/- on account of commission paid by the assessee for
arranging deal of sale of shares of PIL.
19. We have hereinabove held that the transactions of purchase
and sale of shares of PIL were only accommodation entries
provided by the brokers. Such accommodation entries are
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
19
obviously provided against certain commission. Considering the
entirety of facts and circumstances of the instant case, we are of the
considered opinion that it would be just and fair if the rate of
commission is restricted to 2% as against 6% upheld in the first
appeal.
20. Ground nos. 7 and 8 are against the confirmation of
disallowance of interest of Rs.23,98,329/- and Rs.4,37,817/-.
21. The facts relating to these grounds are that the assessee
claimed deduction of Rs.23,98,330/- towards interest paid to
Bombay Woolen House and Rs.4,37,817/- to Bansilal Cloth
Market. On perusal of records, the AO observed that the assessee
diverted interest bearing borrowed funds for non-business purposes
without charging any interest, the details of which have been
captured on pages 5 and 6 of the assessment order. The AO
observed that no interest was charged from certain parties. He,
therefore, held that interest @15% should have been charged on
such outstanding balances, which amount was determined at
Rs.81,49,829/-. In the absence of the assessee having charged
interest on such interest free advances, the AO disallowed the
interest paid amounting to Rs.23,98,330/- to Bombay Woollen
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
20
House and Rs.4,37,817/- to Bansilal Cloth Market. The ld. CIT(A)
sustained the additions.
22. We have considered the rival submissions and gone through
the relevant material on record. The AO has drawn a table on
pages 5 and 6 of the assessment order which is reproduced as
under :

Asst.
Year

Name of party

Rate of
Interest

Amount O/s
at the end of
the year

Interest to be
charged but
not charged

2006-07

Ami Sharad Agarwal
(HUF)

15%

3,000.00

112.50

H.N. Balkawde

15%

2,700,000.00

405,000.00

 

Property at Deoghar

15%

4,940,857.00

741,128.50

 

Advance for Sathe
Property

15%

8,151,330.00

1,222,699.50

 

Sun & Hill Financial
Services P.L.

15%

800,000,00

120,000.00

 

Veer Industries

15%

2,100,000.00

315,000.00

 

BRA Textiles Pvt. Ltd.,

15%

29,627.00

4,444.05

 

Western Cements
Products PL.

15%

17,200.00

2,580.00

 

Western India Tools Pvt.
Ltd.

15%

13,000.00

1,950.00

 

Satish Ratilal Shah

15%

8,215,387.00

1,232,308.05

 

Capital Account of R.B.
Agarwal

15%

21,096,207.00

3,164,431.05

 

Sun & Hill Financial
Services P.L. (of Bansilal
Cloth Market)

15%

3,425,276.00

513,791.40

 

Rajendra Sharad
Tambekar (HUF)

15%

2,842,561.00

426,385.15

 

Total

8,148,829.25

 

 

 

23. The case of the AO is that the assessee diverted interest
bearing funds to the persons mentioned in the above table from
whom the interest ought to have been charged. The ld. AR
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
21
contended that the view canvassed by the AO for not charging
interest in respect of the advances given to above persons is partly
correct. He gave some working on pages 1 to 2 of the paper book,
as per which the assessee charged interest in respect of some
advances and no interest was charged from others. Apart from
that, the ld. AR also claimed that some of the advances were given
during the course of business, which were in the nature of sundry
debtors and not advances. Since such details were not before the
authorities below, in our considered opinion, it would be in the
fitness of things if the impugned order on this score is set-aside and
the matter is restored to the file of AO. We order accordingly and
direct him to examine the assessee’s claim of having charged
interest in respect of certain advances included in the table drawn
and thereafter proceed to calculate the amount of interest not
allowable as per law after allowing reasonable opportunity of being
heard to the assessee.

 
24. In the result, the appeal is partly allowed.
Ameeta Rajkumar Agarwal – A.Y. 2006-07
25. The first issue raised in this appeal through Ground nos. 1 to
4 is against the confirmation of addition of Rs.20,21,000/- made by
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
22
the AO by treating sale proceeds received on sale of shares of PIL
as income from other sources.
26. Both sides are in agreement that the facts and circumstances
of these grounds are mutatis mutandis similar to those in the case
of Rajkumar Bansilal Agarwal for the A.Y. 2006-07. Following
the view taken hereinabove, we uphold the addition of
Rs.20,21,000/-.
27. As regards the addition of Rs.1,21,260/-, being, commission
paid by the assessee for arranging purchase and sale of shares of
PIL, we order to restrict such addition to 2% instead of 6%.
28. The only other ground which survives in this appeal is
against confirmation of disallowance of interest of Rs.62,651/- on
the ground that the assessee diverted interest bearing funds for
non-business purposes.
29. The facts of this ground are also admittedly similar to those
of Rajkumar Bansilal Agarwal for the A.Y. 2006-07. Following
the precedent, we direct the AO to carry out investigation in the
terms as stated above.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
23
30. In the result, the appeal is partly allowed for statistical
purposes.
Bharat Rajkumar Agarwal – A.Y. 2004-05 -:
31. The only issue raised in this appeal is against the
confirmation of addition of Rs.4 lakhs made by the AO u/s.68 of
the Act.
32. Succinctly, the facts of the case, are that the assessee claimed
to have received gifts of Rs.4 lakhs from Sharad Raj Mathur
(Rs.1,50,000/-), Rashmi Mathur (Rs.1,50,000/-) and Ravi Vaid
(Rs.1,00,000/-). The AO required the assessee to furnish various
details including the copies of the bank account of the donors
wherefrom the amount of gifts were transferred to the assessee’s
bank account, balance sheet of the donors and other necessary
material. The assessee furnished only gift deeds and failed to
satisfy the AO on the requirements made by the latter. This led to
the addition of Rs.4 lakhs, which came to be confirmed in the first
appeal.
33. After considering the rival submissions and perusing the
relevant material on record, we find that the AO specifically
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
24
required the assessee to furnish certain details including related
donor, donee, occasion of the gift, family size of the donor and
whether any reciprocal gift was made by the assessee, copy of
bank account wherefrom the amount of gift was transferred to the
assessee and balance sheet of the donor. The assessee could not
produce such details before the AO except gift deeds. The position
continued to remain the same before the ld. CIT(A) as well. In the
proceedings before the Tribunal also, the assessee could not
produce any evidence qua the genuineness of the three gifts
allegedly received from Sharad Raj Mathur, Rashmi Mathur and
Ravi Vaid. The requirements made by the AO are still wanting.
Section 68 of the Act provides that : `Where any sum is found
credited in the books78 of an assessee maintained for any previous
year, and the assessee offers no explanation about the nature and
source thereof or the explanation offered by him is not, in the
opinion of the Assessing Officer, satisfactory, the sum so credited
may be charged to income tax as the income of the assessee of that
previous year’. It is thus patent from the language of the provision
that the assessee needs to prove the identity and capacity of the
donor along with the genuineness of transactions. These three
conditions are required to be satisfied simultaneously so as to come
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
25
out of the clutches of section 68 of the Act. We are confronted
with a situation in which the assessee could not lead any evidence
to prove the genuineness of the gifts apart from filing copies of the
gift deeds, despite specific requirements of the AO as noted above.
In other words, the assessee failed to prove the capacity of the
donors and also the genuineness of the transactions, not only
before the authorities below but the Tribunal as well. Under the
given circumstances, we do not find any reason to deviate from the
impugned order.
34. In the result, the appeal is dismissed.
Bharat Rajkumar Agarwal – A.Y. 2006-07 –
35. The first four grounds raised by the assessee are against
confirmation of addition of Rs.18,71,906/- made by the AO by
treating sale proceeds on transfer of shares of PIL as income from
other sources.
36. Both the sides are in agreement that the facts and
circumstances of these grounds are mutatis mutandis similar to
those in the case of Rajkumar Bansilal Agarwal for the A.Y. 2006-
07. Following the view taken hereinabove, we uphold the addition
of Rs.18,71,906/-.
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
26
37. Ground nos. 5 & 6 raised by the assessee are against the
confirmation of addition of Rs.1,112,314/- on account of
commission paid.
38. We have already adjudicated similar ground in the case of
Rajkumar Bansilal Agarwal for the A.Y. 2006-07 and ordered to
restrict such addition to 2% instead of 6% as ordered by the
authorities below. The same view is followed here as well and the
grounds are partly allowed accordingly.
39. Ground No.7 is against the confirmation of addition on
account of excess stock of Rs.2,87,941/- and additional excess
stock of Rs.1,17,466/-.
40. The facts relating to this issue are that the assessee was
subjected to survey at his business premises. Excess stock of
Rs.2,87,941/- was determined, which was calculated by valuing the
stock physically found at Rs.20,18,702/- (after reducing GP @
23.45%) in contrast the value of stock as per books of account
amounting to Rs.17,30,760/-. The AO required the assessee to
explain the status of excess stock. In response, the assessee stated
that higher amount of gross profit was declared, which included the
effect of excess stock found at the time of survey. Since no
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
27
separate disclosure of the excess stock of Rs.2,87,944/- was made
and recorded in the books of account, the AO made an addition of
the above said sum. Apart from that, the AO also made an addition
of Rs.1,17,466/- on the basis of the tag price of the stock found at
the time of survey vis-à-vis physical stock in excess of the cost
price of stock taken at Rs.20,18,702/-. The ld. CIT(A) confirmed
the addition of Rs.2,87,941/- by making a separate discussion.
Though there is no separate discussion on the addition of
Rs.1,17,466/- which is on account of additional excess stock,
impliedly, the ld. CIT(A) also confirmed the same. The assessee is
aggrieved by such an action of the ld. first appellate authority.
41. Having heard both the sides and perused the relevant material
on record, it is seen that stock of Rs.20,18,702/- was found at the
time of survey which figure was calculated by reducing the amount
of gross profit @ 23.45% from the tag price. As against this, the
value of stock as per books of account was only Rs.17,30,760/-.
Since excess stock was found at the time of survey, the addition to
that extent was required to be made. The contention of the
assessee that higher gross profit was declared and such excess
stock was shown in terms of the higher gross profit cannot be
countenanced as the excess stock is required to be separately
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
28
disclosed as income. We, therefore, approve the addition of
Rs.2,87,944/-.
42. As regards the remaining addition of Rs.1,17,466/-, we hold
that the same cannot be sustained because it represents nothing but
difference in the tag price of excess stock as reduced by the cost
price of such excess stock. It goes without saying that an addition
can be made only for the amount of costs incurred on producing
the stock and not the potential profit included in the tag price. We,
therefore, sustain the addition of Rs.2,87,944/- and delete the
addition of Rs.1,17,466/-.
43. In the result, the appeal is partly allowed.
Order pronounced in the Open Court on 04th January, 2019.
Sd/- Sd/-
(PARTHA SARATHI CHAUDHURY) (R.S.SYAL)
JUDICIAL MEMBER VICE PRESIDENT
Pune; Dated : 04th January, 2019

ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
29
/Copy of the Order is forwarded to:
1.  / The Appellant;
2.  / The Respondent;
3. () /
The CIT (Appeals)-13, Pune
4.
5.
The Pr.CIT, Central, Pune
,
, “” / DR ‘B’, ITAT, Pune;
6. / Guard file.
// True copy //
/ BY ORDER,
// True Copy //
Senior Private Secretary
, / ITAT, Pune
ITA Nos.1648 to 1652/PUN/2015
Agarwal Group
30

Date  

1.

Draft dictated on

03-01-2019

Sr.PS

2.

Draft placed before author

04-01-2019

Sr.PS

3.

Draft proposed & placed
before the second member

JM

 

4.

Draft discussed/approved
by Second Member.

JM

 

5.

Approved Draft comes to
the Sr.PS/PS

Sr.PS

 

6.

Kept for pronouncement on

Sr.PS

 

7.

Date of uploading order

Sr.PS

 

8.

File sent to the Bench Clerk

Sr.PS

 

9.

Date on which file goes to
the Head Clerk

 

 

10.

Date on which file goes to
the A.R.

 

 

11.

Date of dispatch of Order.

 

 

*  

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