1. IN THE INCOME TAX APPELLATE TRIBUNAL
JODHPUR BENCH, JODHPUR
BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER
AND SHRI N.K.SAINI, ACCOUNTANT MEMBER
ITA No. 365/JU/2009
Assessment Year : 2006-07
The ACIT, Circle, Vs. Shri Mahabir Prasad,
Sriganganagar C/o Ms Suntex India,
Sriganganagar
PAN No. AAQPP7386L
&
C.O. No. 49/Ju/2009
(in ITA No. 365/JU/2009)
Assessment Year : 2006-07
Shri Mahabir Prasad, Vs. The ACIT, Circle,
C/o Ms Suntex India, Sriganganagar
Sriganganagar
(Appellant) (Respondent)
Appellant By : G.R. Konkani
Respondent By : Shri Suresh Ohja
Date of hearing : 23.01.2013
Date of Pronouncement : 11.02.2013
ORDER
PER HARI OM MARATHA, J.M.
The appeal by the Revenue and Cross Objection by the assessee are
directed against the order of learned CIT(A) dated 24.3.2009 pertaining to
assessment year 2006-07.

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2. Briefly stated, the facts of the case are that the assessee derives
income from interest, remuneration and capital gains. For assessment year
2006-07, he filed his return of income on 30.10.2006 disclosing total
income of Rs. 14,14,400/-. The assessee is a partner in the firm M/s Suntex
India. In the income disclosed for the year, the assessee has included Long
Term Capital Gain of Rs. 12,76,288/-. The assessment was completed u/s
143(3) of the Act on 29.12.2008. The Assessing Officer made various
additions against which assessee filed first appeal and the learned CIT(A)
has deleted many additions, therefore, both the parties are now aggrieved.
3. The revenue has raised the following grounds in its appeal.
"On the facts and in the circumstances of the case the Ld. CIT(A) has erred in:-
i) deleting the addition of Rs. 1,90,000/- made by holding that
actually there is no excess of cash but on the other hand as per
chart, though the AO there is shortage of cash and so no addition
can be made by applying the provision of section 69A
ii) deleting the addition of Rs. 1,87,000/- as notional interest on the
cash in hand by hauling that the theory of Income-tax is that only
the real income should be taxed and no notional income can
be taxed.
iii) deleting the addition of Rs. 11,00,000/- + Rs. 2,00,000/- made on
account of section 68 of the IT Act, 1961 by holding that entries
found recorded in the bank are evidenced by the cash in hand
available, hence no addition u/s 68 can be made.

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iv) deleting the addition of Rs. 51430 + 18807 made on account on
non charging of interest from M/s Ganeshgarhia Roller Flour
Mill and M/s Bajaj Tea House by holding that AO could not bring
on record that assessee has received some income from these parties
which is not disclosed in the return nor establish the assessee has
gained any right to receive the interest income.
v) allowing the rebate claimed u/s 54F by holding that the property
was residential at the time of purchase hence the assessee is eligible
for the exemption u/s 54F.
4. The assessee has raised the following grounds in its Cross
Objection:-
1. That the Commissioner of Income Tax rightly deleted the addition
of Rs. 1,90,000/- made by the Income Tax Officer u/s 69 A.
2. That the Commissioner of Income Tax rightly deleted the addition
of Rs.l,87,000/- because in fact the addition were made on
conjunctures and surmises.
3. That the Commissioner of Income Tax rightly deleted the addition of
Rs. 11,00,000/-and Rs.2,00,000/- made under sectiond 68,
because the assessee successfully discharged the burden.
4. That the addition of Rs. 51,430/- and Rs.18807 made on account of
non-charging of interest from Ganesh Garhia Rollar Flour Mill
and Bajaj Tea House because the assessee was having sufficient
money and the interest is allowable as per Section 36 of the Income
Tax Act.
5. That the Commissioner of Income Tax rightly allowed
deduction u/s 54F of the Income Tax Act saying that the property

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was residential which is well proved from the record of the
assessee.
6. That the Commissioner of Income Tax should have allowed the
indexing of the property which was received by way of will
because as provided in the Act. Purchase value of the previous
owner has to be considering for the purpose of Calculation of
capital Gain.
5. We have heard the rival submissions and have carefully perused the
entire records available before us. At the time of hearing, learned ld. AR
Shri Suresh Ojha choose not to press the grounds raised in the Cross
objection. Accordingly, the Cross Objection is dismissed as ‘not pressed.’
6. In the Revenue’s appeal, there are five grounds. Regarding ground
No.(i) to (iv), the learned ld. DR has mainly relied on the reasons given by
the Assessing Officer for making impugned additions. On the contrary, ld.
AR has relied on the findings given for deleting these additions by learned
CIT(A). In respect of ground No. (v) relating to claim u/s 54F, the learned
ld. DR has made further submissions.
7. After hearing both the sides vis-à-vis the submissions of the parties,
we have found that there is no error in the findings of learned CIT(A) in
respect of all these grounds.
8. The brief facts leading to this appeal are that in the year under
consideration, the assessee had withdrawn and deposited several amounts

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from and in the same bank account. The assessee has shown opening cash in
hand of Rs. 2 lakhs and the closing cash in hand of Rs. 12 lakhs. This fact
has not been disputed by the Revenue. But the Assessing Officer has
prepared a cash flow statement and from that he has observed that there is
an excess cash of Rs. 1,90,000/- and therefore, he has added the same by
treating it as assessee’s undisclosed income u/s 69A of the Act. The cash
flow statement prepared by the Assessing Officer which appears at page
No.2 of the Assessing Officer’s order and also at page No.2 his order is as
under:-
Date Cash
received.
Amount
(in Rs.)
Date Cash paid Amount
(in Rs.)
1.4.2005 Op. Bal. 200000/- 5.11.2005 P.N.B. 10000/-
1.8.2005 B.O.R. 400000/ 28.12.2005 P.N.B. 300000/-
13.5.2005 P.N.B. 800000/ 31.12.2005 P.N.B. 100000/-
25.5.2005 P.N.B. 500000/ 9.1.2006 P.N.B. 300000/-
27.5.2005 P.N.B. 500000/ 28.3.2006 P.N.B. 400000/-
16.6.2005 P.N.B. 100000/ 31.3.2006 Cl.Bal. 1200000/-
9. The above cash-flow statement prepared by the Assessing Officer has
been assailed by the assessee by making a submission that it is not a correct
version as per the factual matrix. According to ld. AR, the Assessing
Officer has not considered Rs. 2 lakhs deposited by the assessee with M/s
Suntex India in which he is a partner although he observed this fact in the
assessment order in para 3 at page 3. That an amount of Rs. 10,000/-

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deposited on 5.11.2005 is not out of the cash in hand but is out of the funds
withdrawn from M/s Suntex India. According to him, after considering
both the above amounts there will remain no difference in the cash in hand.
However, ld. DR has contradicted the above submission and has relied on
the cash-flow statement prepared by the Assessing Officer.
10. We have considered and have found this submission of the ld. AR as
correct. Otherwise also, from this very chart, it is revealed that total cash
withdrawn by the assessee comes to Rs. 25 lakhs as against total deposit of
Rs. 11,10,000/-. Even after adding the closing cash in hand, the total
comes to Rs. 23,10,000/-. Thus, there remains no shortage of cash as has
been found by the Assessing Officer. Therefore, we are also of the
considered opinion that this amount cannot be added u/s 69A of the Act and
confirm the deletion made by learned CIT(A) of Rs. 1,90,000/-.
11. As against the addition of Rs. 1,87,500/- made on account of notional
interest on the cash in hands, which remained with the assessee during the
period from 16.6.2005 to 15.12.2005, it is found that the assessee was
having cash in hand of Rs. 25 lakhs but made a payment of advance for the
purchase of property through cheque and has also made withdrawals of
petty amount for meeting household expenses. The Assessing Officer has
presumed that the interest @ 15% on this amount for the period stated
above should be added on notional basis. The case of the assessee is that
during the year under consideration, the assessee had purchased the house
and for that purchase he had withdrawn from the bank for making the

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payments. The advance was given through cheque for the sake of safety
and not for the fact that cash in hand was not available. The house is stated
to have been purchased for a total consideration of Rs. 42 lakhs and out of
the same a sum of Rs. 10,00,000/- was paid as advance. It was stated that
the cash in hand was kept back because the seller could demand the balance
consideration at any time and to meet that situation cash was desirable to
be kept in hand. Thus, part payment through cheque can not lead a
conclusion that the assessee did not possess cash at that point of time.
12. We have found that the submissions of the assessee are correct. The
Assessing Officer has not given logical reasoning or evidence to prove that
the assessee had earned some income which he had not disclosed.
Accordingly, we confirm the deletion of Rs. 1,87,500/- made by the learned
CIT(A).
13. The next issue is regarding the addition of Rs. 11,00,000/- made on
account of deposits in the bank account on different dates by treating them
as unexplained credits u/s 68 of the Act. The Assessing Officer has added
following amounts in assessee’s declared income.
Rs. 300000/- despotised in S.B. A/c with PNB on 28.12.2005
Rs. 100000/- -do- on 31.12.2005
Rs. 300000/- -do- on 19.01.2006
Rs. 400000/- -do- on 28.03.2006

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The learned CIT(A) has found these deposits out of cash available with
him.
14. After hearing both side, we have also found that entries recorded in
the bank are evidenced by cash in hand available with the assessee,
therefore, this amount cannot be added u/s 68 of the Act. Accordingly,
deletion of Rs. 11,00,000/- is justified.
15. Regarding addition of Rs. 2 lakhs deposits with M/s Suntex India,
Sriganganagar in which the assessee is a partner, we have found that this
deposit can very well be out of opening cash in hand. On 1.4.2005, the
assessee had opening cash in hand of Rs. 2 lakhs which was later on
23.4.2005 may have been deposited in the above firm. Therefore, this
addition is also not justified.
16. Lastly, the additions of Rs. 51,430/- and Rs. 18,807/- on account of
non charging of interest from M/s Ganeshgaria Roller Flour Mill and M/s
Bajaj Tea House respectively, are found to be based on no logic and with
the reasoning given these additions cannot be sustained. We have found
that the Assessing Officer has not brought on record any evidence to prove
that the assessee has received some monies from these parties and the same
have not been disclosed in the return of income. Accordingly, these
deletions are also in order.

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17. Regarding claim of rebate u/s 54F of the Act, the facts are that the
assessee had sold a piece of land situated in Panwata Area of Jodhpur. This
land was purchased on 3.3.1989. Half of this land belongs to the assessee
and half to his father. His father expired on 26.11.1990 and the assessee
became full owner of the entire land. Subsequently, this land was sold for
a consideration of Rs. 58,83,570/-. The assessee had invested Rs.
45,48,600/- in the purchase of House No. 20, Pubic Park, Sri
Sriganganagar and claimed rebate u/s 54F of the Act. The assessee also
claimed indexation for the financial year 1988-89 in which the land was
purchased but the Assessing Officer has allowed such indexation from the
year 1991 for the ½ share of the father of the assessee which fell to his
share at his death. But the Assessing Officer denied this claim by
observing that this building is now used for a ‘commercial purpose’ and
also that this property is situated in the market area. Accordingly, he has
found that the purchased property falls in the ‘commercial area’ and sit it
cannot be treated as a residential house. Contrary to the above, the learned
CIT(A) has found that, as per the registered deed, this property is a
residential property and, therefore, he has reversed Assessing Officer’s
findings to allowa exemption u/s 54F of the Act.
18. Before us, both parties have maintained their earlier stand. We have
found that the reasons given by the Assessing Officer for disallowing the
benefit of section 54 are not correct as per law. The assessee had purchased
a residential property. As per settled law, the nature of the property at the
point of time of its purchase has to be considered and not its subsequent

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user. Accordingly, we confirm the action of the learned CIT(A) in this
regard also.
19. As a result of our above findings, the appeal of the revenue stands
dismissed.
20. In the result, the appeal of the Revenue and Cross objection of the
assessee are dismissed.
(Order Pronounced in the Open Court on 11.02.2013 )
Sd/- Sd/-
(N.K.SAINI) (HARI OM MARATHA)
ACCOUNTANT MEMBER JUDICIAL MEMER
Dated : February, 2013
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
ASSISTANT REGISTRAR