ITO, Wd.-1(3),, Nashik v. Shri Chandrakant Ramchandra Khot,, Nashik

ITA 1216/PUN/2011 | 2008-2009
Pronouncement Date: 27-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 121624514 RSA 2011
Assessee PAN ABWPK9585B
Bench Pune
Appeal Number ITA 1216/PUN/2011
Duration Of Justice 3 year(s) 1 month(s) 29 day(s)
Appellant ITO, Wd.-1(3),, Nashik
Respondent Shri Chandrakant Ramchandra Khot,, Nashik
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2014
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 27-11-2014
Date Of Final Hearing 07-11-2013
Next Hearing Date 07-11-2013
Assessment Year 2008-2009
Appeal Filed On 28-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO . 1 216 /PN/20 1 1 ASSESSMENT YEAR : 200 8 - 0 9 INCOME TAX OFFICER WARD 1(3) NA SHIK VS. SHRI CHANDRAKANT RAMCHANDRA KHOT 14 KALIKA SOCIETY NEAR VIP HOTEL OLD AGRA ROAD NASHIK (APPELLANT) (RESPONDENT) PAN NO. ABWPK9585B REVENUE BY: SHRI P.S. NAIK ASSESSEE BY: SHRI NIKHIL PATHAK DATE OF HEARING : 21 - 1 0 - 2014 DATE OF PRONOUNCEMENT : 27 - 11 - 2014 ORDER PER R.S . PADVEKAR JM : - TH IS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I NASHIK DATED 19 - 07 - 2011 FOR THE A.Y . 200 8 - 09 . THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPE AL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING AUDITED BOOKS OF ACCOUNTS BY APPLYING PROVISIONS OF SECTION 145(1) OF THE ACT. 2. ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED IN NOT APPRECIATING THE FACT THAT IN VIEW OF THE FAILURE OF ASSESSE TO FURNISH SUPPORTING EVIDENCES IN RESPECT OF CASH DEPOSITS AND SOURCES OF INVESTMENTS AUDITED BOOKS OF ACCOUNTS TILL T HE FAG END OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN HOLDING THAT THE ASSESSEE'S BOOKS OF ACCOUNTS ARE NOT CORRECT AND COMPLETE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED BY ACCEPTI NG THE CLARIFICATION SUBMITTED BY THE ASSESSEE REGARDING THE SOURCE OF RS.15 00 000/ - REPRESENTING THE ALLEGED UNEXPLAINED PAYMENT FOR PURCHASING HOTEL IN VIOLATION OF RULE 46A. 2 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NAS IK ERRED BY ACCEPTING THE CLARIFICATION SUBMITTED BY THE ASSESSEE REGARDING THE SOURCE OF THE ALLEGED UNEXPLAINED CASH DEPOSITS INTO BANK A/C TOTALING RS.13 91 296/ - IN VIOLATION OF RULE 46A. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED BY DELETING THE ADDITION OF RS.15 00 000/ - MADE U/S 50C ON ACCOUNT OF DIFFERENCE IN THE ACTUAL SALE CONSIDERATION AND THE MARKET VALUED ARRIVED AT BY THE DEPT. VALUATION OFFICER. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED BY DIRECTING THE ASSESSING OFFICER TO ASK THE DVO TO FILE VALUATION REPORT OF THE PROPERTIES/CAPITAL ASSET AS ON 1/4/81 AND ACCORDINGLY REWORK THE INCOME UNDER THE HEAD CAPITAL GAINS IGNORING THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF GOETZE (INDIA ) LTD. VS. CIT 284 ITR 323 THAT ASSESSE CAN REVISE INCOME ONLY BY FILING A REVISED RETURN OF INCOME. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONORABLE CIT(A) - I NASIK ERRED BY DIRECTING THE ASSESSING OF FICER TO ADOPT THE VALUE OF THE ASSET ARRIVED AT BY THE DVO AS ON 01/02/1998 WHEN THE ASSET WAS CONVERTED INTO STOCK IN TRADE AND REWORK INCOME UNDER THE HEAD CAPITAL GAINS AND BUSINESS INCOME ACCORDINGLY IGNORING THE DECISION ALREADY QUOTED AT GROUND N O. 6. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) - I NASIK REQUIRES TO BE VACATED AND THAT OF THE ASSESSING OFFICER UPHELD/RESTORED. 2. IN GROUND NOS. 1 AND 2 THE REVENUE HAS RAISED THE GRIEVANCE AGAINST THE LD. CIT(A) FO R NOT APPROVING THE ACTION OF THE ASSESSING OFFICER FOR REJECTION OF THE BOOKS OF ACCOUNT U/S. 145 (1) OF THE INCOME - TAX ACT. THE FACTS WHICH REVEALED FROM THE RECORDS ARE AS UNDER. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE A.Y. 2008 - 09 ON 29 - 07 - 200 8 DECLARING TOTAL INCOME OF RS.2 75 86 680/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT OF THE ASSESSEE HAS BEEN COMPLETED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME - TAX ACT DETERMINING 3 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK TOTAL INCOME AT RS.3 52 74 189/ - VIDE ASSE SSMENT ORDER DATED 31 - 12 - 2010. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND SELLING OF PLOTS. THE ASSESSEE WAS ORIGINALLY AN AGRICULTURIST. THE ASSESSEE HAS CONVERTED PART OF HIS AGRICULTURAL LAND IN THE YEAR 1998 INTO BUSINESS ASSET AND HAS DEVELOPED IN THE SAID LAND INTO PLOTS AND HAS SOLD SOME OF THE SAID PLOTS IN THE F.Y. 2007 - 08 RELEVANT TO THE A.Y. 2008 - 09. 3. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS IN THE RETURN OF INCOME IN RESPECT OF THE INCOME DECLARED. HE HAS ALSO POINTED OUT THAT THE ASSESSEE HAS LEFT BLANK MOST OF THE PART OF THE RETURN. HE HAS NOTED THAT EVEN IF THE ASSESSEE HAS CLAIMED THE EXEMPT INCOME BUT HAS NOT FURNISHED ANY INFORMATION IN RESPECT OF COMPUTATION OF PROFI T AND GAIN FROM BUSINESS. THE ASSESSEE HAS ALSO FILED THE TAX AUDIT REPORT ON 27 - 12 - 2010. AS NOTED BY THE ASSESSING OFFICER THAT THE TAX AUDIT REPORT WAS SIGNED ON 20 - 12 - 2010 ONLY. THE ASSESSING OFFICER REFERRED TO THE AUDITOR S REPORT MORE PARTICULARLY ON THE METHOD OF ACCOUNTING. AS OBSERVED BY THE ASSESSING OFFICER THE AUDITOR HAS DESCRIBED THE METHOD OF ACCOUNTING GENERALLY MERCANTILE. HE HAS ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE TOWARDS COMMISSION PAYMENT WHICH DETAILS ARE GIVEN ON PAGE NO. 3 OF THE ASSESSMENT ORDER BUT THE VOUCHERS ARE NOT PROPERLY NUMBERED OR COUNTERSIGNED BY ANYBODY. THE ASSESSEE HAS ALSO PAID AN AMOUNT OF RS.3 62 000/ - IN CASH AND RS.6 82 500/ - BY CHEQUES AS PAYMENTS TOWARDS COMMISSION. THE ASSESSEE HA S NOT DEDUCTED THE TAX AT SOURCE . HE HAS NOTED THAT THE BOOKS OF ACCOUNT AND VOUCHERS ARE NOT PROPERLY PREPARED AND HENCE THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS CANNOT BE ACCEPTED. IN THE OPINION OF THE ASSESSING OFFICER THE BOOKS OF ACCOUNT MA INTAINED BY THE ASSESSEE ARE NOT RELIABLE WHICH ARE NOT MAINTAINED ON REGULAR BASIS. HE ACCORDINGLY REJECTED THE BOOKS ACCOUNT. 4 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 4. IT IS PERTINENT TO NOTE HERE THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BY MAKING CERTAIN ADDITIONS BUT HE HA S TAKEN THE FIGURE S FROM THE RETURN OF INCOME AND PASSED THE ASSESSMENT ORDER U/S. 143(3). THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER FOR REJECTI ON OF THE BOOKS OF ACCOUNT BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS NOT APPROVED THE ACTI ON OF THE ASSESSING OFFICER. THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED FOR REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT. THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 5.3 THE ID. A.R. THEREFORE PLEADED THAT T HE IMPUGNED ADDITION BE DELETED. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER THE RIVAL SUBMISSIONS AND THE POSITION OF LAW ON THE SUBJECT. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE A.O. HAS REJECTED BOOKS OF ACCOUNT S PREPARED AND AUDITED BY THE APPELLANT STATING THAT THE AUDITOR HAS STATED THAT THE APPELLANT HAS FOLLOWED 'GENERALLY MERCANTILE' METHOD OF ACCOUNTING WHICH IS NOT PERMISSIBLE AS THE METHOD OF ACCOUNTING TO BE FOLLOWED BY ANY ASSESSEE IS TO BE EITHER ME RCANTILE OR CASH. IN THIS REGARD THE APPELLANT HAS STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS HE WAS NEVER GIVEN ANY OPPORTUNITY TO FILE HIS EXPLANATION AGAINST THE REASONS FOR REJECTION OF BOOK RESULTS. THE APPELLANT HAS POINTED OUT THAT IN FACT HE HAS FOLLOWED MERCANTILE METHOD OF ACCOUNTING. 5.4 AS THE ASSESSING OFFICER EXAMINES THE ACCOUNTS OF AN ASSESSEE HE HAS TO CONSIDER THE FOLLOWING QUESTIONS: - (1) WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A METHOD OF ACCOUNTING? (2) EVEN IF REGUL AR ADOPTION OF A METHOD OF ACCOUNTING IS THERE WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCED FROM THE METHOD EMPLOYED? (3) WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED? (4) WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE IN THE SENSE TH AT THERE IS NO SIGNIFICANT OMISSION THEREIN: IN THE INSTANT CASE THE APPELLANT HAS REGULARLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSING OFFICER'S FINDING ON ALL THE FOUR QUESTIONS IS IN THE AFFIRMATIVE. THEREFORE ASSESSEE'S 5 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK PROFITS ARE TO B E COMPUTED ON THE BASIS OF HIS ACCOUNTS. IN SUCH A CASE NEITHER THE FIRST PROVISO TO SECTION 145(1) NOR SECTION 145(2) CAN BE INVOKED. 5.5 IT IS SETTLED POSITION OF LAW THAT THERE IS A PRESUMPTION IN FAVOUR OF CORRECTNESS OF THE BOOKS OF ACCOUNT REGULARL Y MAINTAINED IN THE COURSE OF BUSINESS UNLESS THERE ARE STRONG AND SUFFICIENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE. IT IS SEEN THAT THE AO HAS REJECTED THE BOOKS OF ACCOUNT WITHOUT EVEN EXAMINING THEM PROPERLY. IT IS ALSO SEEN THAT THE AO HAS REJEC TED THE BOOKS OF ACCOUNT ONLY ON THE GROUND THAT NO PROVISION AMOUNTING TO RS.6 000/ - IS MADE TOWARDS ACCOUNTING CHARGES PAYABLE. THAT ALONE CANNOT LEAD TO CONCLUSION THAT THE BOOKS ARE NOT RELIABLE OR PROFIT WHICH PROFIT COULD NOT BE DEDUCED. CONSIDERING THE FACTS THAT THE ACCOUNTS ARE REGULARLY MAINTAINED IN THE COURSE OF BUSINESS UNDER THE PROVISIONS OF I.T. ACT AND ARE FREE FROM ANY SERIOUS QUALIFYING REMARKS SHOULD BE TAKEN AS CORRECT UNLESS THERE ARE ANY STRONG AND SUFFICIENT REASONS TO INDICATE THAT THEY ARE UNRELIABLE. THE DEFECT AS POINTED OUT BY THE AO TO JUSTIFY THE REJECTION OF THE BOOKS OF ACCOUNT ARE IN FACT NO DEFECTS. IT IS SETTLED POSITION OF LAW THAT SECTION 145 OF THE I.T. ACT CANNOT BE INVOKED IN A LIGHT HEARTED MANNER. THE AO HAS NOT POI NTED OUT ANY SPECIFIC MISTAKE OR DISCREPANCY IN THE BOOKS OF ACCOUNT AND MERE NON PROVISION OF MEAGER EXPENDITURE CANNOT JUSTIFY RESORT TO REJECTING THE BOOKS AND INVOKING SEC. 145 OF THE ACT. IN VIEW OF THE ABOVE FACTS AND THE POSITION OF LAW IT IS HELD THAT THERE IS NO MERIT IN THE ACTION OF THE AO FOR REJECTING THE BOOK RESULTS. IT IS ALSO FOUND THAT THE SYSTEM OF ACCOUNTING OF WORKING OUT PROFIT BY THE APPELLANT HAS BEEN FOLLOWED CONSISTENTLY AND THERE IS NO JUSTIFICATION TO REJECT THIS SYSTEM BY INVOK ING SECTION 145 OF THE ACT. THIS APPROACH OF THE AO IS INCORRECT AND UNWARRANTED ON THE FACTS OF THE CASE. 5.6 COMING TO THE FACTS OF THE CASE IT IS SEEN THAT THE AUDITOR HAS STATED THE METHOD OF ACCOUNTING FOLLOWED AS 'GENERALLY MERCANTILE' ONLY FOR THE REASON THAT HE HAS NOT PROVIDED FOR EXPENDITURE TOWARDS ACCOUNT WRITING AMOUNTING TO RS.6 000/ - IN THE BOOKS OF ACCOUNTS. THE APPELLANT CLAIMED THAT THE AUDITOR HAS NOT REPORTED THIS FACT IN TAX AUDIT REPORT AS THE AMOUNT OF RS.6 000/ - IS NOT MATERIAL I N VIEW OF PROFIT OF RS. 1 03 09 759/ - AND TURNOVER OF RS.2 09 11 282/ - . T HE APPELLANT FURTHER POINTED OUT THAT THE MAIN PRINCIPLES OF AUDITING AND REPORTING LAYS DOWN THE PRINCIPLE OF 'MATERIALITY'. THE 6 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK A.O. HAS NOT POINTED OUT AS TO HOW THE ACCOUNTING ME THOD FOLLOWED BY THE APPELLANT DID NOT REFLECT THE TRUE AND FAIR PROFIT. THE A.O. HAS NOT POINTED OUT IN RESPECT OF WHICH INCOME OR EXPENDITURE AND TO WHAT EXTENT APPELLANT HAS FOLLOWED CASH SYSTEM OF ACCOUNTING INSTEAD OF MERCANTILE SYSTEM. THE A.O. HAS N OT MADE ANY ENQUIRY WITH THE APPELLANT IN THIS REGARD. THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS WITHOUT POINTING OUT AS TO HOW THE TRUE AND FAIR PROFIT COULD NOT BE DEDUCED AS PER AUDITED BOOKS OF ACCOUNTS AND ONLY ON THE BASIS OF REMARK OF THE AUDIT OR THAT THE APPELLANT HAS FOLLOWED 'GENERALLY MERCANTILE' METHOD OF ACCOUNTING. CONSIDERING THE ABOVE FACTS AND TOTALITY OF THE FACTS OF THE CASE I AM OF THE CONSIDERING VIEW THAT THE FIRST REASON STATED BY THE A.O. FOR REJECTING BOOK RESULT IS NOT JU STIFIED. THE SECOND REASON STATED BY THE A.O. THAT THE AUDIT REPORT WAS SIGNED ON 20/12/2010 IS NOT RELEVANT AND CANNOT BE THE REASON FOR REJECTING THE AUDITED BOOKS OF ACCOUNT. THE THIRD REASON STATED BY THE A.O. THAT THE COMMISSION EXPENSES ARE NOT SUPP ORTED BY PROPER VOUCHERS AND IN RESPECT OF THE SAID PAYMENT NO TAX HAS BEEN DEDUCTED AND PAID BY THE ASSESSEE IS ALSO NOT CORRECT AS THE APPELLANT HAS POINTED OUT THAT SUBSTANTIAL PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUES AND CONFIRMATIONS OF ALL TH E PAYEES ALONGWITH THEIR VOUCHERS HAVE BEEN FILED ON RECORD. FURTHER THE APPELLANT HAS ALSO CORRECTLY POINTED OUT THAT HE IS NOT LIABLE TO DEDUCT TDS ON COMMISSION PAYMENT IN VIEW OF PROVISIONS OF SECTION 194H AND PROVISO TO THE SAID SECTION. THE FOURTH REASON STATED BY THE A.O. THAT THOUGH THE BOOKS OF ACCOUNT OF THE APPELLANT ARE PREPARED ON COMPUTER NO COMPUTER IS APPEARING IN THE BALANCE SHEET IS ALSO FOUND TO BE INCORRECT AS THE APPELLANT HAS PREPARED THE BOOKS OF ACCOUNTS BY ALLOTTING THE SAID WOR K TO PROFESSIONAL ACCOUNTANT. THE FIFTH REASON STATED BY THE A.O. THAT THE APPELLANT HAS NOT AUDITED THE BOOKS AND FILED AUDIT REPORT FOR A.Y. 2007 - 08 EVEN THOUGH SPECIFICALLY ASKED FOR IS ALSO FOUND TO BE INCORRECT AS IN THE SAID YEAR THE APPELLANT WAS N OT LIABLE TO TAX AUDIT AS HIS TURNOVER WAS FAR BELOW RS.40 LACS. IN VIEW OF THE ABOVE FACTS AND DISCUSSION I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN REJECTING AUDITED BOOKS OF ACCOUNTS BY APPLYING PROVISIONS OF SECTION 145(1) OF THE ACT. THIS GROUND OF APPEAL IS ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 7 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ARGUMENT OF THE LD. DR CAN BE SUMMARIZED AS UNDER: A). T HE ASSESSING OFFICER AS PER NOTICE U/S 142(1) DTD. 26/11/2010 AS WELL AS ORDER SHEET NOTING DTD. 26/11/2010 ASKED THE ASSESSEE TO FURNISH THE AUDITED BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION ALONG WITH THE DETAILS OF DEPOSITS IN THE BANK ACCOUNT ALONG WITH NARRATION ESPECIALLY TH E CASH DEPOSITS. HOWEVER TILL 24/12/2010 THE ASSESSEE FAILED TO FURNISH THE AUDITED BALANCE SHEET & PROFIT & LOSS ACCOUNT AND TO EXPLAIN THE SOURCE OF DEPOSITS IN THE BANK ACCOUNT. IT WAS ONLY ON 27/12/2010 THAT THE ASSESSEE SUBMITTED HIS REPLY DTD. 27/12 /2010 ALONG WITH THE AUDIT REPORT CLAIMED TO BE SIGNED BY AUDITOR ON 20/12/2010. IT WAS ONLY ON 31/12/2010 THAT THE WRITE UP ON SOURCE OF BANK DEPOSITS IN JANALAXMI BANK AND SOURCE OF PAYMENT FOR PURCHASE OF HOTEL WAS FILED BY THE ASSESSEE LEAVING NO TIME FOR THE ASSESSING OFFICER TO VERIFY THE SAME. THE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS MENTIONED IN PARA. 3.9 OF ASSESSMENT ORDER SINCE THE ASSESSEE HAD CLAIMED THE METHOD OF ACCOUNTING AS GENERALLY MERCANTILE THE ASSES SEE HAD NOT SUBMITTED THE RELEVANT DETAILS IN THE RETURN OF INCOME FILED BY HIM THE ASSESSEE HAD NOT GOT HIS BOOKS OF ACCOUNT AUDITED WITHIN THE SPECIFIED TIME AND THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT SUPPORTED BY VOUCHERS AND HENCE T HE CORRECTNESS AND COMPLETENESS OF ACCOUNT WERE NOT RELIABLE. B). THE CIT(A) HOWEVER HAS HELD THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE BY STATING INCORRECT REASONS AND THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORT UNITY TO THE ASSESSEE FOR REJECTING BOOK RESULTS. THE CIT(A) HAS STATED THAT THE MAIN REASON FOR MENTIONING THE METHOD OF ACCOUNTS AS GENERALLY MERCANTILE WAS ONLY DUE TO AN ENTRY OF RS. 6 000/ - BEING PROVISION FOR ACCOUNTING EXPENSES. THE CIT(A) STATED TH AT THE TRANSACTION ON WHICH ADDITION AS UNEXPLAINED PAYMENTS/ DEPOSITS WAS MADE BY A.O. WERE RECORDED IN THE BOOKS OF ACCOUNTS THAT THE CONCLUSION OF AO REGARDING COMMISSION EXPENSES WAS NOT CORRECT AND THAT THE FACT THAT THE AUDIT WAS CONDUCTED ONLY ON 2 0/12/2007 IS NOT A RELEVANT ISSUE FOR REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. C). THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE. AS CAN BE SEEN FROM RECORDS DESPITE BEING GIVEN REASONABLE OPPORTUNITY ASSESSEE 8 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK DID NOT SUBMIT THE AUDITED ACCOUNTS BEF ORE THE ASSESSING OFFICER BEFORE 27/12/2011 AND DID NOT SUBMIT THE EVIDENCES SOUGHT FOR BY THE ASSESSING OFFICER BEFORE THIS DATE. FURTHER THE ASSESSEE HAD NOT GIVEN ANY CLARIFICATION REGARDING REASON FOR GIVING THE METHOD OF ACCOUNTING AS GENERALLY MERCA NTILE AND THEREFORE THE ASSESSING OFFICER WAS CORRECT IN REJECTING THE BOOKS OF ACCOUNTS. THE AO CANNOT BE FAULTED FOR NOT GIVING ANY OPPORTUNITY TO THE ASSESSEE BEFORE REJECTING BOOKS OF ACCOUNT SINCE THE AUDITED ACCOUNTS WERE PRESENTED FIRST TIME BEFORE THE ASSESSING OFFICER ON 27/12/2011 ONLY. BEFORE DECIDING ON THIS ISSUE SINCE FRESH FACTS REGARDING REASONS FOR TERMING THE METHOD OF ACCOUNTING AS GENERALLY MERCANTILE WERE PRODUCED BEFORE THE CIT(A) AND THE ASSESSEE HAD SUBMITTED DETAILED EVIDENCES IN SUPPORT OF HIS CLAIM OF SOURCE OF DEPOSITS MADE IN THE BANK ACCOUNT /SOURCE OF INVESTMENT OF THE ASSESSEE WHICH AS MENTIONED ABOVE WERE NOT SUBMITTED BEFORE THE ASSESSING OFFICER THE CIT(A) SHOULD HAVE FORWARDED THESE EVIDENCES TO THE ASSESSING OFFICER FOR EXAMINATION. THERE IS VIOLATION OF RULE 46A AND THEREFORE THE ISSUE IS CONTESTED IN APPEAL. 6. PER CONTRA THE LD. AR SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. HE SUBMITS THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS AND BOOK RESULTS FOR THE REASON THAT IN THE TAX AUDIT REPORT THE AUDITOR HAS MENTIONED METHOD OF ACCOUNTING AS ' G ENERALLY M ERCANTILE' INSTEAD OF EITHER MERCANTILE OR CASH METHOD. HE SUBMITS THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE B EFORE REJECTING BOOK RESULTS TO EXPLAIN WHY THE METHOD IS STATED TO BE ' GENERALLY M ERCANTILE' BY THE AUDITOR. THE AUDITOR NOTED THAT THE BOOKS OF ACCOUNTS WERE PREPARED BY ONE MR. KHAIRNAR TO WHOM THE WORK OF ACCOUNTING HAS BEEN GIVEN WHO APPEARED BEFORE T HE AUDITOR WITH BOOKS AND RECORD AND PROVISION FOR ACCOUNTING EXPENSES OF RS.6 000 / - HAS NOT BEEN MADE IN THE BOOKS OF ACCOUNTS. LD. AR SUBMITS THAT T HE AUDITOR HAS NOTED THAT CONSIDERING THE PROFIT OF RS.1 03 09 759 / - AND TURNOVER OF RS. 2 09 11 282/ - TH E OMISSION TO MAKE PROVISION OF ACCOUNTING EXPENSES OF RS.6 000 / - IS NOT MATERIAL AND HENCE STATED IN THE TAX AUDIT 9 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK REPORT THAT THE METHOD OF ACCOUNTING FOLLOWED IS ' G ENERALLY M ERCANTILE'. IT IS WORTH NOTING HERE THAT THE MAIN PRINCIPLES OF AUDITING AND R EPORTING LAY DOWN THE PRINCIPAL OF 'MATERIALITY'. IT CANNOT BE SAID THAT BY NOT PROVIDING FOR ACCOUNTING CHARGES OF RS.6 000 / - THE PROFIT DECLARED BY THE ASSESSEE AND BOOK S OF ACCOUNT MAINTAINED ARE NOT TRUE AND FAIR. THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO WHY AND HOW CORRECT PROFIT IS NOT DEDUCED FROM THE BOOKS OF ACCOUNTS AND METHOD OF ACCOUNTING OF THE ASSESSEE . 6.1 LD. AR FURTHER ARGUES THAT T HE ASSESSING OFFICER HAS ALSO POINTED OUT IN THE ASSESSMENT ORDER THAT THOUGH THE ASSESSEE HAS MAINTAI NED ACCOUNTS ON COMPUTER USING ACCOUNTING SOFTWARE BUT ANY COMPUTER IS NOT APPEARING IN HIS BALANCE SHEET OF THE ASSESSEE . WHILE STATING ABOVE REASON THE ASSESSING OFFICER IGNORED THE FACT THAT MOST OF THE SMALL BUSINESSMEN WHO CANNOT MAINTAIN BOOKS OF ACC OUNTS ON THEIR OWN OR THROUGH EMPLOYEES ALLOT THE WORK OF WRITING COMPUTERIZED BOOKS USING ACCOUNTING PACKAGE TO PROFESSIONAL A CCOUNTANTS. HENCE THE BOOKS OF ACCOUNTS CAN BE MAINTAINED ON COMPUTER USING ACCOUNTING PACKAGE WITHOUT OWNING COMPUTER AND ACCOU NTING PACKAGE. THE ASSESSING OFFICER HAS ALSO STATED ANOTHER REASON THAT THE ASSESSEE HAS NOT AUDITED ACCOUNTS OF THE PRECEDING YEAR IN THIS REGARD IT IS WORTH NOTING THAT THE TURNOVER OF PLOT SALE IN PRECEDING YEAR WAS BELOW RS.40 LACS AND HENCE NOT LI ABLE TO TAX AUDIT. LD. COUNSEL SUBMITS THAT THE ASSESSING OFFICER HAS CERTAINLY ERRED IN REJECTING AUDITED BOOKS OF ACCOUNTS BY STATING INCORRECT REASONS. IT IS ALSO PERTINENT TO NOTE HERE THAT THE ASSESSING OFFICER HAS NOT ESTIMATED PROFIT OF THE ASSESSE E AT CERTAIN PERCENTAGE OF TURNOVER AFTER REJECTING BOOK RESULTS/BOOKS OF ACCOUNTS. LD. COUNSEL ARGUES THAT THE ASSESSMENT ORDER ITSELF IS VERY VAGUE AND THERE IS NO CLARITY IN THE REASONS BY THE ASSESSING OFFICER. 10 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 7. IT APPEARS THAT THE ASSESSING OFFICE R HAS REJECTED BOOKS OF ACCOUNTS ONLY FOR MAKING ADDITION OF RS.15 00 000 / - IN RESPECT OF PAYMENT FOR HOTEL PURCHASED AND RS.13 91 296/ - ON ACCOUNT OF CASH DEPOSITED IN BANK ENTRIES FOR WHICH HAVE BEEN RECORDED IN BOOKS OF ACCOUNTS AND SOURCE OF THE SAME STOOD EXPLAINED OUT OF SALE PROCEEDS OF PLOTS AND LAND WHICH HAVE BEEN CREDITED IN BOOKS OF ACCOUNTS AND PROFIT OF WHICH HAS BEEN OFFERED TO TAX. WE HAVE PERUSED THE ASSESSMENT ORDER THERE ARE LOT OF MISSING LINKS IN THE ASSESSMENT ORDER. THERE IS NO CLA RITY ON THE REASONS FOR REJECTION OF THE BOOKS OF ACCOUNT. SO FAR AS THE FINDING OF THE LD. CIT(A) IS CONCERNED WE FIND THAT HE HAS DEALT WITH THE ISSUE IN DETAIL. THE ASSESSING OFFICER HAS MADE THE REFERENCE TO THE REMARKS OF THE AUDITORS IN RESPECT OF THE METHOD OF ACCOUNTING AS GENERALLY MERCANTILE. APART FROM THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING WHILE COMING TO THE CONCLUSION THAT WHY THE ASSESSEES BOOKS OF ACCOUNT ARE TO BE REJECTED . TH E ASSESSING OFFICER IS DUTY BOUND TO CONSI DER AND ELABORATE THE FOLLOWING POINTS BEFORE REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT I. W HAT METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE II. A S PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED WHETHER THE CORRECT STATE OF FINA NCIAL AFFAIRS AND THE PROFIT IS SEEN III. W HETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED AND IV. W HETHER THE ACCOUNTS MAINTAINED ARE COMPLETE IN THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN. 8. WE FIND THAT IN THE VERY CRYPTIC REASONING THE ASSESSING OFFICER PROCEEDED TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE . M ANY TIMES EXPENDITURE IS BOOKED BUT THE ASSESSEE MAY NOT BE IN A POSITION TO SATISFY THE ASSESSING OFFICER IN RESPECT OF THE NATURE OF THE SAID EXPENDITURE AS REQUIRED EVIDENCE MAY NOT BE SUFFICIENT. THE ASSESSEE HAS NOT MADE THE PROVISIONS IN RESPECT OF THE ACCOUNTING CHARGES. WE FIND THAT THE ASSESSING OFFICER HAS GIVEN MORE IMPORTANCE TO THE FACT THAT 11 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK THE ASSESSEE IS NOT HAVING ANY COMPUTER . IN OUR OPINION A FACT ALSO CANNOT BE DISCAR DED THAT MANY TIMES THE ASSESSEE MAY ENGAGE PROFESSIONAL ACCOUNTANT INSTEAD OF TAKING THE FULL LIABILITY OF THE EMPLOYEE AND THE A CCOUNTANT MAINTAIN S THE ACCOUNT . IT IS ONE OF THE RECOGNIZED PRACTICE S IN THE BUSINESS OR TRADE. EVEN IF THE ASSESSEE ENGAGE D IN THE LAND DEVELOPMENT AND SELLING OF PLOTS BUT IT APPEARS THAT THE SAID LAND WAS OWNED BY THE ASSESSEE AND IT WAS AGRICULTURAL LAND WHICH WAS UNDER CULTIVATION . E XCEPT SHOWING MINOR DISCREPANCY T HE ASSESSING OFFICER HAS NOT MADE OUT THE CASE FOR REJEC TION OF THE BOOKS OF ACCOUNT BY INVOKING SEC. 145 OF THE ACT. WE ACCORDINGLY CONCUR WITH THE FINDING OF THE LD. CIT(A) THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE ACCORDINGLY DISMISS GROUND NOS. 1 AND 2. 9. THE NEXT ISSUE IS IN RESPECT OF ADDITION OF RS.15 00 000/ - TOWARDS ALLEGED UNEXPLAINED EXPENDITURE FOR PURCHASING HOTEL. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA NO. 8 OF THE ASSESSMENT ORDER . AS NOTED BY THE ASSESSING OFFICE R THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF INVESTMENT OF RS.2 83 81 070/ - IN THE HOTEL PREMISES KNOWS AS RAMA HERITAGE WHICH WAS PURCHASED VIDE SALE DEED DATED 21 - 09 - 2009. THE ASSESSING OFFICER HAS REFERRED TO PAYMENT OF RS.15 LACS WHICH WAS PAID BY DEMAND DRAFT NO. 328069 DATED 01 - 06 - 2007 DRAWN ON STATE BANK OF INDIA BRANCH NASHIK CITY. AS NOTED BY THE ASSESSING OFFICER THERE IS NO WITHDRAWAL OF EQUIVALENT AMOUNT FROM THE SAID BANK ACCOUNT. THE ASSESSEE EXPLAINED THE SOURCE TO THE ASSESSING OFF ICER BY STATING THAT THE SAID DD WAS MAD E OUT OF THE SALE PROCEEDS OF LAND AT S. NO. 265/1 AND PLOTS IN S. NO. 264/1 NASHIK. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE DESCRIBING SAME AS GENERAL AND VAGUE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A). THE LD. CIT(A) DELETED THE ADDITION. THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 12 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE RIVAL SUBMISSIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE SAID INVESTMENT IN HOTEL AMOUNTING TO RS.15 00 000/ - HAS BEEN RECORDED BY THE APPELLANT IN THE AUDITED BOOKS OF ACCOUNT. FURTHER THE SOURCE OF THE SAID INVESTMENT HAS ALSO BEEN SUPPORTED BY THE SALE PROCEEDS OF AGRICULTURAL LAND AM OUNTING TO RS.1.61 CRORES AND SALE PROCEEDS OF PLOTS AMOUNTING TO RS.2 09 11 282/ - DURING THE YEAR UNDER APPEAL AND ALSO BY SUBSTANTIAL SALE PROCEEDS OF PLOTS IN THE EARLIER YEARS. THE A.O. HAS TAXED THE SUBSTANTIAL PROFIT/SURPLUS AMOUNTING TO MORE THAN R S.2.75 CRORES OFFERED TO TAX BY THE APPELLANT HOWEVER HE HAS NOT ACCEPTED THE INVESTMENT MADE BY THE APPELLANT OUT OF THE SAID FUNDS. THE A.O. HAS MADE THE ADDITION IN RESPECT OF INVESTMENT OF RS.15 00 000/ - U/S. 69 OF THE ACT IGNORING THE FACT THAT FO R MAKING SUCH ADDITION U/S. 69 THE FOLLOWING TWO PRE - CONDITIONS ARE TO BE FULFILLED: I) THE INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT; AND II) THE EXPLANATION OFFERED BY THE APPELLANT TOWARDS SOURCE OF INVESTMENT IS NOT SATISFACTORY. IN THE CAS E OF THE APPELLANT THE INVESTMENT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT AND THE SOURCE OF THE INVESTMENT HAS ALSO BEEN SATISFACTORY EXPLAINED. THE A.O. IS THEREFORE NOT JUSTIFIED IN MAKING ADDITION OF RS.15 00 000/ - ON ACCOUNT OF UNEXPLAINED INVEST MENT. THEREFORE GROUND NOS. 2 AND 3 ARE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE LD. CIT(A) HAS HELD THAT THE AMOUNT OF INVESTMENT IN HOTEL HAS BEEN RECORDED BY T HE ASSESSEE IN THE BOOKS OF ACCOUNT AND THE SOURCE OF SAID INVESTMENT HAS ALSO BEEN SUPPORTED BY THE SALE PROCEEDS OF THE AGRICULTURAL LAND AMOUNTING TO RS.1.16 CRORES AND SALE PROCEEDS OF THE PLOT AMOUNTING TO RS. 2 09 11 282/ - DURING THE YEAR. THIS FACT HAS NOT BEEN CONTROVERTED BEFORE US. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AS THE SAID AMOUNT IS DULLY RECORDED IN THE BOOKS OF 13 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK ACCOUNT AND THE ASSESSEE HAS ALSO EXPLAINED THE SOURCE. ACCORDINGLY GROUND NO. 3 IS D ISMISSED. 11. THE NEXT ISSUE IS IN RESPECT OF ADDITION TOWARDS ALLEGED CASH DEPOSITS INTO BANK ACCOUNT TOTALING TO RS.13 91 296/ - . THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA NOS. 7 AND 7.1. THE ASSESSING OFFICER HAS NOTED THAT AS PER THE A IR INFORMATION RECEIVED IN THE CASE OF THE ASSESSEE HE HAS DEPOSITED CASH ON VARIOUS DATES IN HIS BANK ACCOUNTS. THE ASSESSEE WAS PROVIDED WITH A COPY OF THE AIR INFORMATION AND ASSESSING OFFICER ASK ED HIM TO FURNISH THE DETAIL NARRATION S OF DEBIT AND CRE DIT ENTRIES IN THE BANK STATEMENT. AS OBSERVED BY THE ASSESSING OFFICER THE ASSESSEE DID NOT FURNISH ANY DETAILS. AS NOTED BY THE ASSESSING OFFICER AS PER THE AIR INFORMATION THE ASSESSEE HAS DEPOSITED AN AMOUNT OF RS.14 18 730/ - IN CASH WITH JAN LAXMI C O - OPERATIVE BANK LTD. THE ASSESSEE HAS EXPLAINED THE SOURCE WHICH DETAILS ARE GIVEN IN PARA NO. 7.1 EXPLAINING THAT THE SAID AMOUNTS ARE TOWARDS THE SALE PROCEEDS OF THE PLOTS TO THE EXTENT OF RS.14 05 000/ - . THE ASSESSING OFFICER REJECTED THE EXPLANATIO N OF THE ASSESSEE BY STATING THAT THE BANK ACCOUNT DOES NOT APPEAR IN THE BALANCE SHEET OF THE ASSESSEE. H E THEREFORE MADE THE ADDITION OF RS.13 91 296/ - BY OBSERVING THAT NO ADDITION IS BEING MADE ON ACCOUNT OF REMAINING CASH DEPOSITS REPORTED IN THE A IR AS AN AMOUNT OF RS.16 57 382/ - HAS BEEN ADDED ON ACCOUNT OF UNDERSTATEMENT OF PROFIT . HE ACCORDINGLY GAVE TELESCOPING OF THE SAID AMOUNT. 11.1 WE FIND THAT THERE IS NO CLARITY ON THE FACTS IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER REFERRED TO PARA NO. 5 IN WHICH HE HAS MADE THE ADDITION OF RS.16 57 382/ - ON ACCOUNT OF UNDERSTATEMENT OF PROFIT AND SALE OF PLOTS. IT APPEARS THAT AS PER THE AIR REPORT TOTAL DEPOSITS WERE TO THE EXTENT OF RS.28 10 026/ - . A S THE ASSESSING OFFICER HAS MADE AN ADDIT ION TOWARDS UNDERSTATEMENT OF PROFIT TO THE EXTENT OF RS.16 57 382/ - H E ACCORDINGLY TREATED RS.14 18 730/ - AS EXPLAINED 14 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK AND DIFFERENCE TO THE EXTENT OF RS. 13 91 296/ - IS ADDED. WHEN THE ISSUE WAS CARRIED BEFORE THE LD. CIT(A) THE LD. CIT(A) DELETED THE ENTIRE ADDITION ON THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE RIVAL SUBMISSIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT THE SAID DEPOSITS IN JANLAXMI BANK RS.14 18 736/ - AND RAJLAXMI BANK RS.14 01 090/ - HAVE BEEN RECORDED BY THE APPELLANT IN THE AUDITED BOOKS OF ACCOUNT. FURTHER THE SOURCE OF THE SAID DEPOSITS HAVE ALSO BEEN SUPPORTED BY THE SALE PROCEEDS OF AGRICULTURAL LAND AMOUNTING TO RS.1.61 CRORES AN D SALE PROCEEDS OF PLOTS AMOUNTING TO RS.2 09 11 282/ - DURING THE YEAR UNDER APPEAL AND ALSO BY SUBSTANTIAL SALE PROCEEDS OF PLOTS IN THE EARLIER YEARS. THE A.O. HAS TAXED THE SUBSTANTIAL PROFIT / SURPLUS AMOUNTING TO MORE THAN RS. 2.75 CRORES OFFERED TO T AX BY THE APPELLANT HOWEVER HE HAS NOT ACCEPTED THE INVESTMENT MADE BY THE APPELLANT OUT OF THE SAID FUNDS. THE A.O. HAS MADE THE ADDITION IN RESPECT OF DEPOSITS IN BANKS U/S. 69 OF THE ACT IGNORING THE FACT THAT FOR MAKING SUCH ADDITION U/S.69 THE FOLL OWING TWO CONDITIONS ARE TO BE FULFILLED: I) THE INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT; AND II) THE EXPLANATION OFFERED BY THE APPELLANT TOWARDS SOURCE OF INVESTMENT IS NOT SATISFACTORY. IN THE CASE OF THE APPELLANT THE INVESTMENT HAS BEEN RECORD ED IN THE BOOKS OF ACCOUNT AND THE SOURCE OF THE INVESTMENT HAS ALSO BEEN SATISFACTORY EXPLAINED. THE APPELLANT HAS ALSO POINTED OUT SPECIFIC ENTRIES OF RECEIPTS IN RESPECT OF SALE OF LAND AND PLOTS APPEARING IN THE AUDITED CASH BOOK IN SUPPORT OF THE SOUR CE OF DEPOSITS IN JANLAXMI BANK. THE CONTENTION OF THE A.O. THAT NO EVIDENCE HAS BEEN PRODUCED IN SUPPORT OF THE DEPOSITS IN BANK IS FOUND TO BE FACTUALLY INCORRECT. THE CONTENTION OF THE A.O. THAT THE SAID BANK ACCOUNTS HAVE NOT BEEN REFLECTED IN THE BALA NCE SHEET DOES NOT SUPPORT THE ADDITION AS ALL THE TRANSACTIONS IN BOTH THE ABOVE STATED BANKS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND NET BALANCE OF THE BANK ACCOUNT HAS BEEN TRANSFERRED TO CAPITAL ACCOUNT BY THE APPELLANT AS IS EVIDENT FROM THE B OOKS OF ACCOUNT AND AUDITED CAPITAL ACCOUNT APPEARING IN THE TAX AUDIT REPORT. THE A.O. IS THEREFORE NOT JUSTIFIED IN MAKING ADDITION OF RS.13 91 296/ - ON ACCOUNT OF UNEXPLAINED DEPOSITS IN JANALAXMI BANK. THE A.O. IS 15 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK ALSOJXOT JUSTIFIED IN HOLDING THAT O UT OF TOTAL UNEXPLAINED DEPOSITS OF RS.28 10 026/ - IN THE ABOVE MENTIONED TWO BANKS ARE UNEXPLAINED DEPOSITS. THEREFORE GROUND NOS.4 & 5 ARE ALLOWED. 12. WE HAVE HEARD THE PARTIES. IT APPEARS THAT THERE WERE DEPOSITS RS.14 18 736/ - IN JANLAXMI BANK AND RS.14 01 090/ - IN RAJLAXMI BANK WHICH HAVE BEEN RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. IF THE AMOUNTS ARE RECORDED IN THE BOOKS OF ACCOUNT THEN HOW THE ASSESSING OFFICER HAS MADE THE OBSERVATION THAT THE BANK OF ACCOUNT WAS NOT APPEARING IN TH E AUDITED BALANCE SHEET. IN THIS CASE THE ASSESSEE IS IN THE BUSINESS OF DEVELOPMENT OF AGRICULTURE LAND AND SALE OF PLOTS AND HE IS GRADUALLY SELLING HIS AGRICULTURAL LAND WHICH HAS BEEN DEVELOPED AND PLOTS ARE MADE. THE FINDING OF THE LD. CIT(A) HAS NO T BEEN CONTROVERTED BEFORE US. THE LD. AR ALSO POINTED OUT THAT IN THE BALANCE SHEET THE SAID BANK ACCOUNTS ARE APPEARING. IN OUR OPINION THE REASONS GIVEN BY THE ASSESSING OFFICER ARE TOTALLY ERRONEOUS AND CONTRARY TO THE EVIDENCE ON RECORD. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY GROUND NO. 4 IS DISMISSED. 13. THE NEXT ISSUE IS THE ADDITION OF RS.15 00 000/ - MADE ON THE BASIS OF DEPARTMENT VALUATION OFFICER (DVO) REPORT AND THIS ISSUE ARISES FROM GROUND NO. 5. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA NOS. 6 AND 6.1. AS NOTED BY THE ASSESSING OFFICER THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN (LTCG) AT RS.1 89 82 341/ - WHICH INCLUDES CAPITAL GAIN ON SALE OF LAND AT S. NO. 265/1 FOR A CONSIDERATI ON OF RS.1.61 CRORES. THE ASSESSEE HAS DECLARED THE CAPITAL GAIN ON THE SALE OF THE SAID LAND AT RS.1 49 62 298/ - . THE ASSESSING OFFICER HAS REFERRED TO THE VALUATION MADE FOR PAYMENT OF STAMP DUTY IN WHICH IT WAS ADOPTED AT RS.1 87 00 000/ - . THERE IS A MISTAKE IN THE ASSESSMENT ORDER MENTIONED IN THE SALE CONSIDERATION AT RS.1 16 000/ - IN PLACE OF RS.1.61 CRORES. THE MATTER WAS REFERRED TO THE DVO WHO VALUED THE PROPERTY AT RS. 1.76 CRORES . THE ASSESSING OFFICER THEREFORE MADE THE 16 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK ADDITION OF RS.15 LACS WHICH WAS DIFFERENCE BETWEEN THE VALUATION MADE BY THE DVO AND SALE CONSIDERATION SHOWN BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ISSUE IN DETAILS AND THERE IS MORE CLARITY ON THE FACTS PERTAINING TO THE ISSUE . T HE REASONS BEST KNOWN TO THE ASSESSING OFFICER HE HAS NOT DISCUSSED AT ALL THE ENTIRE FACTS ON THE DVOS VALUATION. THE LD. CIT(A) DELETED THE ADDITION BY GIVING THE FOLLOWING REASONS: 10.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE THE ASSESSMENT ORDER AND THE RIVAL CONTENTIONS. THE FIRST CONTENTION OF THE APPELLANT IS THAT THE DVO HAS ERRED IN NOT CONSIDERING EXPENDITURE OF RS.24 00 000/ - TO BE INCURRED BY THE PURCHASER OF THE LAND FOR COMPOUND WALL AROUND THE N ALA IN THE AGRICULTURAL LAND AT S. NO. 264/1. IN THIS REGARD THE DVO HAS ACCEPTED THE FACT ABOUT NALA AND EXPENDITURE OF RS.24 LACS IN RESPECT OF COMPOUND WALL BY THE PURCHASER. THE DVO HOWEVER NOT CONSIDERED THIS EXPENDITURE TO BE INCURRED BY PURCHASE R WHILE ARRIVING AT MARKET VALUE OF THE LAND STATING THAT 'THE EXPENSES TOWARDS RETAINING WALL HUME PIPES LEVELING ETC NEED NOT BE CONSIDERED AS LUMPSUM AMOUNT AS THE DEVELOPER (PURCHASER) WILL AGAIN CLAIM THESE AS EXPENSES IN HIS CAPITAL GAIN CALCULATIO N'. THIS REASONING OF THE DVO IS IRRELEVANT FOR NOT CONSIDERING THE EXPENDITURE TO BE COMPULSORILY INCURRED BY THE PURCHASER OF LAND WHILE ARRIVING AT MARKET VALUE OF THE LAND. THE MARKET VALUE OF THE LAND IS BOUND TO BE REDUCED BY THE SAID AMOUNT OF EXPE NDITURE TO BE INCURRED BY PURCHASER OF LAND CARRYING ON BUSINESS OF LAND DEVELOPER. THEREFORE THE DVO HAS ERRED IN MAKING ABOVE STATED OBSERVATION WHILE VALUING THE LAND AT RS.1 76 00 000/ - . FURTHER IT IS SETTLED LAW THAT THE VALUATION DONE BY THE DVO IS AN ESTIMATE OF THE MARKET VALUE. THE DIFFERENCE IN THE CASE UNDER APPEAL BETWEEN VALUATION OF THE PROPERTY BY DVO AND CONSIDERATION SHOWN BY THE ASSESSEE IS RS.15 00 000/ - WHICH IS 8.52% ONLY. THE HON'BLE ITAT PUNE IN RECENT DECISION IN THE CASE OF RAHUL CONSTRUCTIONS VS. DCIT (2010) 38 DTR 19 PUNE HAS HELD THAT IN THE CASES WHERE DIFFERENCE BETWEEN THE SALE CONSIDERATION OF THE PROPERTY SHOWN BY THE ASSESSEE AND THE FAIR MARKET VALUE DETERMINED BY THE DVO U/S. 50C(2) IS LESS THAN 10% ADDITION U/S. 50C CA NNOT BE JUSTIFIED. 17 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 14. WE HAVE HEARD THE PARTIES. WE FIND THAT THE DIFFERENCE IN THE VALUATION IS L E SS THAN 10% THAT IS BETWEEN THE SALE CONSIDERATION SHOWN BY THE ASSESSE WHICH IS AT RS.1.61 CORES AND VALUATION MADE THE DVO IS RS.1.76 CRORES. THE LD. C IT(A) HAS FOLLOWED THE DECISION OF THE ITAT PUNE IN THE CASE OF RAHUL CONSTRUCTION VS. DCIT 38 DTR 19 WHEREIN IT IS HELD THAT IF THE DIFFERENCE IN THE VALUATION MADE BY THE DVO AND VALUE DECLARED BY THE ASSESSEE IS LESS THAN 10% THEN NO ADDITION IS JUSTIF IED U/S. 50C . A S THIS FACT IS NOT DISPUTED BEFORE US AND ALSO THE LD. CIT(A) HAS FOLLOWED THE DECISION IN THE CASE OF RAHUL CONSTRUCTION (SUPRA) W E DECLINE TO INTERFERE WITH THE FINDING OF THE LD. CIT(A) FOR DELETING THE ADDITION. ACCORDINGLY GROUND NO . 5 IS DISMISSED. 15. SO FAR AS GROUND NOS. 6 AND 7 ARE CONCERNED THE REVENUE HAS RAISED THE SERIOUS OBJECTION ON THE DIRECTIONS GIVEN BY THE LD. CIT(A) TO THE ASSESSING OFFICER FOR CALLING THE VALUATION REPORT FROM THE DVO. ON THIS ISSUE THERE IS NO DI SCUSSION IN THE ASSESSMENT ORDER. F ROM THE FACTS NOTED IN THE ORDER OF LD. CIT(A) IT IS STATED THAT THE ASSESSING OFFICER HAS REFERRED THE LAND AT S. NO. 264/1 AND 265/1 AT VILLAGE - MHASARUL FOR VALUATION BY DVO AS ON 01 - 04 - 1981. IT APPEARS THAT THE DVO HAD ASKED THE ASSESSEE TO FILE THE VALUATION REPORT OF ABOVE LANDS AS ON 01 - 04 - 1981. IT APPEARS THAT THE ASSESSEE PREPARED THE VALUATION REPORT FROM THE GOVT. APPROVED VALUER AND AS PER THE REPORT PREPARED BY THE GOVT. APPROVED VALUER THE VALUE OF THOSE LANDS AS ON 01 - 04 - 1981 WAS SHOWN AS UNDER: PARTICULARS OF LAND VALUE AS ON 1/4/1981 CLAIMED BY THE APPELLANT WHILE COMPUTING CAPITAL GAIN VALUE AS ON 1/4/1981 AS PER THE VALUATION REPORT OF GOVERNMENT APPROVED REGISTERED VALUER S. NO. 264/1 MHASRUL 12 0 0 000 36 67 465 S. NO. 265/1 MHASRUL 2 00 000 13 76 000 18 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK 16. THE DVO DID NOT SUBMIT THE VALUATION REPORT OF THE ABOVE LANDS AS ON 01 - 04 - 1981 BUT INFORMED THE ASSESSING OFFICER BY LETTERS DATED 16 - 11 - 2010 ACCEPTING THE VALUE OF THE LAND DECLARED BY THE ASSESSEE . B EFORE LD. CIT(A) T HE ASSESSEE RAISED THE GROUND THAT THE VALUATION BY THE DVO OF THOSE LANDS AS ON 01 - 04 - 1981 MADE BY THE DVO WAS MUCH MORE AT THE HIGHER SIDE THAN DECLARED BY THE ASSESSEE AND HENCE THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE HIGHER VALUATION AND ACCORDINGLY COMPUTED THE CAPITAL GAINS. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE BY HOLDING THAT THE DVO IS ALSO NOT JUSTIFIED IN SENDING THE LETTER ACCEPTING THE VALUE DECLARED BY THE ASSESSEE AS ON 01 - 04 - 1981 INST EAD OF VALUATION REPORT OF THE SAID LANDS PARTICULARLY IN VIEW OF THE FACT THAT AS PER GOVT. APPROVED REGISTERED VALUERS REPORTS THE VALUES OF LANDS AS ON 01 - 04 - 1981 IS ABOUT 3 TO 6 TIMES MORE THAN THE VALUES INADVERTENTLY DECLARED BY THE ASSESSEE AT LOWE R AMOUNT. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ASK THE DVO TO FILE COPIES OF THE VALUATION REPORTS OF THE LANDS AT S. NO. 264/1 AND 265/1 VALUING THE SAID LANDS ON 01 - 04 - 1981. THE LD. CIT(A) ALSO DIRECTED THE ASSESSING OFFICER TO WORK OUT CAP ITAL GAIN IN RESPECT OF THE SAID LANDS FOR THE YEAR UNDER APPEAL ON THE BASIS OF THE VALUE OF THE LANDS AS ON 01 - 04 - 1981 ARRIVED AT BY THE DVO IN HIS VALUATION REPORT. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. IN OUR OPINION THE DIRECTIONS OF THE LD. CIT(A) CANNOT BE SUSTAINED. IN THE PRESENT CASE THE ASSESSEE DECLARED THE CAPITAL GAIN ON THE SALE OF THE LANDS AT S. NO. 264/1 AND S. NO. 265/1 AT MHASRUL ADOPTING THE VALUE OF THE LAND AT RS.12 LACS AND RS.2 LACS RESPEC TIVELY. IT APPEARS THAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSING OFFICER MADE THE REFERENCE TO THE DVO FOR VERIFYING THE VALUATION ADOPTED BY THE ASSESSEE AS ON 01 - 04 - 1981 AS WELL AS THE GROSS SALE CONSIDERATION DECLARED BY THE ASSESSEE ON THE SALE OF LANDS. IT IS SEEN THAT SO FAR AS THE SALE CONSIDERATION OF THE LAND DECLARED BY THE 19 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK ASSESSEE IS CONCERNED THERE WAS DIFFERENCE OF RS.15 LACS IN THE VALUATION MADE BY THE DVO AND THE SALE CONSIDERATION DECLARED BY THE ASSESSEE. THE ASSESSING OFFICER THEREFORE MADE THE ADDITION OF RS.15 LACS. IN RESPECT OF THE DEDUCTION CLAIMED ADOPTING THE FAIR MARKET VALUE (FMV) OF THE LAND ON 01 - 04 - 1981 THE DVO DID NOT SEND ANY REPORT BUT SEND THE LETTER INFORMING THAT THE FAIR MARKET VALUE DECLARED BY THE ASSESSEE ON 01 - 04 - 1981 AT RS.12 LACS AND RS.2 LACS ARE CORRECT. IT APPEARS THAT WHEN THE VALUATION PROCEEDINGS WERE GOING ON THE ASSESSEE G O T HIS VALUATION DONE FROM THE GOVT. APPROVED VALUER AND LODGE NEW CLAIM WITH THE ASSESSING OFFICER THAT THE FA IR MARKET VALUE OF THOSE LANDS AS ON 01 - 04 - 1981 IS MUCH MORE HIGH ER AND BY MISTAKE THE ASSESSEE TOOK THE SMALLER VALUE. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE AND CONFINED TO THE VALUATION DECLARED BY HIM FOR COMPUTATION OF THE CAPITAL G AIN. 18. NOW THE QUESTION BEFORE US IS WHETHER THE LD. CIT(A) CAN GIVE THE DIRECTIONS TO THE ASSESSING OFFICER TO GET THE VALUATION DONE BY THE DVO WHEN ADMITTEDLY THE DVO HAS GIVEN HIS OPINION IN RESPECT OF THE VALUATION ADOPTED BY THE ASSESSEE FOR CO MPUTATION OF THE CAPITAL GAIN . IN O UR OPINION THE LD. CIT(A) HAS EXCEEDED HIS JURISDICTION AND AUTHORITY BY DIRECTING THE ASSESSING OFFICER TO REFER THE MATTER TO THE DVO FOR ASCERTAINING THE FAIR MARKET VALUE (FMV) OF LAND BEARING S. NO. 264/1 AND 265/1 AT MHASRUL AS ON 01 - 04 - 1981 . WE THEREFORE CANCEL THE DIRECTIONS OF THE LD. CIT(A) TO THE EXTENT THAT THE ASSESSING OFFICER SHOULD ASK THE DVO TO FILE COPIES OF THE VALUATION REPORT OF THE LANDS AT S. NO. 264/1 AND 265/1 VALUING THE SAID LANDS ON 01 - 04 - 1 981. WE ALSO CANCEL THE DIRECTIONS OF THE LD. CIT(A) THAT THE ASSESSING OFFICER SHOULD COMPUTE THE CAPITAL GAIN ON THE BASIS OF THE VALUE OF THE LANDS AS ON 01 - 04 - 1981 ARRIVED AT BY THE DVO IN HIS VALUATION REPORT. AT THE SAME TIME WE FIND THAT THE ASSES SEE HAD ALREADY LODGED A CLAIMED BY FILING THE VALUATION REPORT OF THE GOVT. APPROVED VALUER. WE CONSIDER IT 20 ITA NO . 1216/PN/2011 SHRI CHANDRAKANT RAMCHANDRA KHOT NASHIK APPROPRIATE TO GIVE THE DIRECTION TO THE ASSESSING OFFICER TO CONSIDER THE VALUATION REPORT OF THE APPROVED GOVT. VALUER FILED BY THE ASSESSEE IN RESPECT OF THE FAIR MART VALUE OF AS ON 01 - 04 - 1981 AND ACCORDINGLY DECIDE THE TAXABLE CAPITAL GAIN AS PER THE PROVISIONS OF LAW. WE MAKE IT CLEAR THAT WE ARE NOT EXPRESS ING ANYTHING ON MERIT I N RESPECT OF CORRECTNESS OF THE VALUATION REPORT OBTAINED BY T HE ASSESSEE FROM THE GOVT. APPROVED VALUER. WITH THIS DIRECTION WE ALLOW THE GROUND NOS. 6 AND 7 FOR THE STATISTICAL PURPOSE. GROUND NO. 8 IS GENERAL IN NATURE AND NO JURISDICTION IS REQUIRED. 19. IN THE RESULT THE REVENUES APPEAL IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 27 - 11 - 201 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED : 27 TH NOVEMBER 201 4 RK/PS COPY TO 1 A SSESSEE 2 DEPARTMENT 3 THE CIT(A) - I NASHIK 4 THE CIT - I NASHIK 5 6 THE DR ITAT B BENCH PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE