The ITO, S.K. Ward-2,, Himatnagar v. Dr. Ashok B. Patel,

ITA 2377/AHD/2006 | 2003-2004
Pronouncement Date: 22-01-2010 | Result: Dismissed

Appeal Details

RSA Number 237720514 RSA 2006
Assessee PAN ACAPP1563D
Bench Ahmedabad
Appeal Number ITA 2377/AHD/2006
Duration Of Justice 3 year(s) 2 month(s) 13 day(s)
Appellant The ITO, S.K. Ward-2,, Himatnagar
Respondent Dr. Ashok B. Patel,
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 03-04-2009
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 2003-2004
Appeal Filed On 09-11-2006
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 2377/AHD./2006 ASSESSMENT YEAR : 2003-2004 INCOME TAX OFFICER WARD-2 HIMATNAGAR -VS.- DR. ASHOK B. PATEL SABARKANTHA (PAN : ACAPP 1563 D) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI M.C. PAND IT SR. D.R. RESPONDENT BY : N O N E O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER :- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 22.08.2006 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IX AHMEDABAD FOR THE ASSESSMENT YEAR 2003-04. 2. ON THE DATE OF HEARING NONE WAS PRESENT ON BEHA LF OF THE ASSESSEE. HOWEVER WRITTEN SUBMISSION DATED 15.01.2010 WAS FURNISHED WITH THE REQUEST THAT THE APPEAL OF THE DEPARTMENT BE DECIDED AFTER CONSIDERING THE WRITTEN SUBMISSION FI LED BY THE ASSESSEE. 3. GROUND NO. 1 OF THE APPEAL OF REVENUE READS AS U NDER :- THE LD. C.I.T.(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONSIDERING LOAN OF RS.1 87 000/- AS EXPLAINED IN THE HANDS OF THE ASSESSEE IGNORING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHARGE HIS ONUS AS CAST U/S. 68 OF THE I.T. ACT. 4. THE FACTS RELATING TO CONTROVERSY INVOLVED IN TH IS GROUND OF APPEAL ARE THAT BEFORE THE A.O. IT WAS CLAIMED BY THE ASSESSEE WITH REGARD TO ADDITION OF RS.1 87 000/-THAT THE INVESTMENT WAS MADE BY THE ASSESSEE HUF AND THE HUF CLAIMED TO HAVE RECEIVED THE LOANS FROM THE FOLLOWING FOUR PERSONS :- 1. PATEL VINOD KODARBHAI RS. 50 000/- 2. PATEL LALLUBHAI KASHIRAM RS.1 05 000/- 3. PATEL NARESHBHAI GANDHESBHAI RS. 49 000/- 4. PATEL BHARATBHAI GANESHBHAI RS. 49 000/- 2 THE A.O. ISSUED SUMMONS UNDER SECTION 131 TO VARIOU S FOUR PERSONS BUT NOBODY HAD COMPLIED THE SAME AND ACCORDINGLY THE A.O. MADE AN ADDITION OF RS.1 87 000/-. 5. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) THE ASSESSEE FILED WRITTEN SUBMISSION WHICH WAS FORWARDED TO THE A.O. THE A.O. SUBMITTED THE REPORT WHICH WAS GIVEN TO THE LD. COUNSEL OF THE ASSESSEE FOR COUNTE R COMMENTS. AFTER CONSIDERING THE COUNTER COMMENTS THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) DELETED THE ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 6.4 WHICH READS AS U NDER :- 6.4. I HAVE CONSIDERED THE ISSUE CAREFULLY. FROM A .O.S REPORT ITSELF IT APPEARS THAT THE SAID HUF IS PARTNER IN A FIRM NAME D DOCTOR HOUSE FOR WHICH NOTICE U/S. 148 HAS BEEN ISSUED. THEREFORE I T WILL HAVE TO BE FIRST EXAMINED WHETHER THE HUF WHICH IS NAMED TO BE A PAR TNER IN THAT FIRM IS GENUINE OR NOT. SO FAR AS THIS CASE IS CONCERNED NEITHER ANY DEPOSIT HAS BEEN RECEIVED BY THE ASSESSEE FROM THIS HUF NOR ANY AMOUNT HAS BEEN ADVANCED BY THE HUF TO THE ASSESSEE. HUF IS A SEPARATE ENTITY AND IS ALSO A PARTNER IN THE FAMILY FIRM. THEREFORE TH IS ADDITION CANNOT BE SUSTAINED IN THIS CASE UNLESS IT IS ESTABLISHED IN THE CASE OF DOCTOR HOUSE THAT NO HUF EVER EXISTED. THIS ADDITION IS THEREFOR E DELETED. HOWEVER THE A.O. WILL BE FREE TO TAKE ACTION IF FACTS FOUND BY HIM IN THE CASE OF DOCTOR HOUSE SUGGEST SOME OTHER INFERENCE. WITH THI S REMARK THE ADDITION IS DELETED. AGGRIEVED BY THIS ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING ON BEHALF OF REVENUE SHR I M.C. PANDIT SR. D.R. APPEARED AND CONTENDED THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS AS CAST UNDER SECTION 68 OF THE INCOME TAX ACT. THE HUF FROM WHOM THE ASSESSEE RECEIVED LO AN OF RS.1 87 000/- IS NOT ASSESSED TO TAX. THEREFORE THE ADDITION IS RIGHTLY MADE. 7. HAVING HEARD THE LD. DEPARTMENTAL REPRESENTATIVE WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THE REMAND REPORT THE COMMENTS OF A.O. WERE AS UNDER :- AS REGARDS THE ADDITION OF RS.1 87 000/- IT IS CL AIMED BY THE ASSESSEE THAT THE INVESTMENT IS MADE BY THE HUF. THE HUF HAS CLAIMED TO HAVE RECEIVED THE LOANS FROM THE FOLLOWING 4 PERSONS :- 1. PATEL VINOD KODARBHAI RS. 50 000/- 2. PATEL LALLUBHAI KASHIRAM RS.1 05 000/- 3 3. PATELNARESHBHAI GANDHESBHAI RS. 49 000/- 4. PATEL BHARATBHAI GANESHBHAI RS. 49 000/- IN THIS REGARDS SUMMONS U/S. 131 WERE ISSUED TO ALL THE ABOVE PERSONS BUT NOBODY HAS COMPLIED THE SAME AND ACCORD98NGLY THE S AME IS NOT VERIFIED. IT IS TO MENTION HERE THAT THE HUF IS NOT ASSESSED TO TAX. IT HAS NOT FILED ANY RETURN OF INCOME TILL DATE. THE HUF IS ONE OF T HE PARTNERS/ MEMBER OF THE AOP IN A FIRM NAMELY DOCTOR HOUSE. THE HUF HAS MADE INVESTMENT OF RS.1 87 000/- FOR PURCHASE OF LAND ON WHICH CONS TRUCTION ACTIVITY IS CARRIED OUT BY THE FIRM/ AOP. THE FIRST RETURN OF I NCOME FILED BY THE FIRM/AOP IS OF A.Y. 2003-04 FILED ON 31.3.2005 AND NOTICE U/S. 148 IS ISSUED IN THE CASE OF THE FIRM ON 2.5.06. NOTICE U/ S. 148 IS ALSO ISSUED IN THE CASE OF HUF TO VERIFY THE GENUINENESS OF PAYMEN T OF RS.1 87 000/- CLAIMED TO HAVE BEEN MADE BY THE HUF. HOWEVER TILL DATE NO RETURN OF INCOME IS FILED BY THE HUF. IN VIEW OF THE FACTS ME NTIONED ABOVE AND SINCE THE PERSONS MENTIONED ABOVE TO WHOM THE SUMMO NS HAVE BEEN ISSUED HAVE NOT COMPLIED THE SAME THIS POINT IS V ERIFIABLE. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) THE ASSESSEE IN HIS COUNTER COMMENTS SUBMITTED AS UNDER :- THE A.O. IN HIS REPORT ON PAGE 2 HAS STATED THAT T HE HUF HAS NOT FILED THE RETURN OF INCOME. PERSONS WHO ADVANCED TH E LOAN HAVE NOT APPEARED AND CREATION OF HUF IS DOUBTFUL. IT MAY BE MENTIONED HERE THAT HUF CANNOT BE CREATED BY ANY HINDU BY ACT OF PARTIES. THIS STATUS IS GIVEN TO HI NDU BY BIRTH AND ON HIS MARRIAGE HE CAN BE ASSESSED IN THE STATUS OF HUF IF ANY ASSET IS RECEIVED EITHER FROM HIS ANCESTORS OR GIFT IS GIVEN TO THE H UF. AS THE HUF WAS NOT HAVING TAXABLE INCOME NO RETURN OF INCOME WAS FILE D. THE HUF IS A PARTNER IN DOCTOR HOUSE AND CASE OF DOCTOR HOUSE IS REOPENED U/S. 148. AS NECESSARY ACTION IS INITIATED IN THE CASE OF HUF N OTHING IS REQUIRED TO BE DONE HERE. THE DEPARTMENT WILL BE ABLE TO VERIFY TH E SOURCE3 OF INVESTMENT IN THE CASE OF DOCTOR HOUSE AND ASHOK B. PATEL HUF. 8. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT DISCHARGED HIS ONUS AS CAST UNDER SECTION 68 OF THE INCOME TAX ACT 1961. THE HUF IS A SEPARATE ENTITY AND IS ALSO A PARTNER IN THE FAMILY FIRM. IN THESE CIRCUMSTANCES ADDITION UNDER SECTION 68 CANNOT BE SUSTAINED UNLESS THE A.O. ESTABLISHES THA T NO HUF EVER EXISTED. IN THESE CIRCUMSTANCES THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE ADDITION OF RS.1 87 000/-. WE THEREFORE DECLI NE TO INTERFERE. THIS GROUND OF APPEAL IS REJECTED. 4 9. GROUND NO. 2 OF THE APPEAL READS AS UNDER :- THE LD. C.I.T.(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.4 38 484/- MADE ON ACCO UNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF HOSPI TAL BUILDING. 10. IN THE ASSESSMENT ORDER THE A.O. MADE AN ADDIT ION OF RS.4 38 484/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION OF HOSPITAL BUILDING. THE RELEVANT DISCUSSION IN THE ASSESSMENT ORDER IS AS UNDER :- VIDE THIS OFFICE LETTER DATED 27.02.2006 VIDE POIN T NO. 6 IT WAS POINTED OUT TO THE ASSESSEE THAT ON GOING THROUGH THE BALAN CE SHEET IT WAS SEEN THAT HE HAD SHOWN HOSPITAL BUILDING ACCOUNT AT RS.1 0 97 886/-. THE AREA ON THE FIRST FLOOR ON WHICH THE ASSESSEE HAD GOT CO NSTRUCTION DONE WORKED OUT TO 393.46 SQ.MTR. AS PER COPY OF SALE BI LL PRODUCED BY THE ASSESSEE BEARING NO. 4732 DATED 10.10.02 AS AGAINST THE 1190 SQ.MTR. QUOTED BY MISTAKE IN THE SHOW CAUSE NOTICE. AS PER SHOW CAUSE NOTICE SERVED UPON THE ASSESSEE ON 28.02.2006 HE WAS ASKED TO SHOW CAUSE AS TO WHY TAKING THE MINIMUM RATE OF CONSTRUCTION PER SQ.FT. AT RS.350/-THE VALUE OF YOUR CONSTRUCTION COMES TO RS.14 81 770/- (393.46 SQ.MTR. = 4233.62 SQ.FT. @ 350/- = RS.14 81 770/-) HENCE AS T HERE WAS NO REPLY TO THE ABOVE SHOW CAUSE NOTICE THE DIFFERENCE BETWEEN THE MINIMUM COST OF CONSTRUCTION WORKED OUT AT RS.350/- PER SQ.FT. WHIC H COMES TO RS.14 81 770/- LESS COST OF CONSTRUCTION SHOWN BY T HE ASSESSEE AT RS.9 97 886/- VIZ. RS.4 83 884/- IS BEING ADDED TO THE INCOME RETURNED BY THE ASSESSEE AS THE SAME HAD BEEN UNDER VALUED IN T HE BALANCE SHEET. 11. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) THE ASSESSEE CONTENDED AS UNDER :- RS.10 97 886/- WAS SPENT TOWARDS CONSTRUCTION OF HO SPITAL BUILDING DURING ASSESSMENT YEAR 2003-04 AND FURTHER RS.5 32 941/- WAS SPENT IN ASSESSMENT YEAR 2004-05.TOTAL COST OF CONSTRUCTION COMES TO RS.16 30 827/- AND AFTER DEDUCTING DEPRECIATION 1 6 3 083/- THE CLOSING BALANCE IN THE HOSPITAL BUILDING ACCOUNT AS ON 31.3 .2004 COMES TO RS.14 67 744/-. THE A.O. ESTIMATED COST OF CONSTRUCTION AT RS.14 81 770/- AND AFTER DEDUCTING THE AMOUNT SPENT DURING ASSESSMENT YEAR 2003-04 RS.10 97 886/- THE DIFFERENCE OF RS.4 38 484/- WAS ADDED IN THE RETURNED INCOME. THE A.O. FAILED TO CONSIDER THE EXPENDITURE INCURRED IN THE SUBSEQUENT YEAR. TOTAL COST OF CONSTRUCTION RS.16 3 0 827/- IS MORE THAN RS.14 81 870/- ESTIMATED BY THE A.O. IT IS MORE BY RS.1 49 057/-. AS THE COST OF CONSTRUCTION IS MORE THAN THE COST ESTIMATE D BY THE A.O. THIS ADDITION NEEDS TO BE DELETED. COPY OF HOSPITAL BUIL DING ACCOUNT FOR BOTH THE YEARS IS ENCLOSED HEREWITH. 5 12. IN RESPECT OF THIS ADDITION ALSO THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS) CALLED THE REMAND REPORT. AFTER EXAMINING THE REMAN D REPORT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED THAT A.O.S REPORT ON THIS ISSUE IS QUITE CRYPTIC AND DOES NOT TOUCH THE ISSUE IN QUESTION PROBABLY FOR THE REASON THAT HE HAD ALREADY REJECTED THE RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ASSESSEE. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ACCORDINGLY DELETED THE ADDITION FOR T HE DETAILED REASONS GIVEN IN PARA 7.3 WHICH READS AS UNDER :- 7.3. I HAVE CAREFULLY CONSIDERED THE ISSUE AND I H AVE ALSO GONE THROUGH THE CONSTRUCTION ACCOUNT. CONSTRUCTION WORK WAS UND ERGOING AND FINAL PAYMENTS FOR THE SAME WAS MADE ON 31.3.2004 AND ENT IRE COST OF CONSTRUCTION DISCLOSED IN THE BOOKS UPTO A.Y. 2004- 05 WAS RS.16 30 827/- WHICH IS MORE THAN THE COST WORKED OUT BY THE A.O. THIS ADDITION IS THEREFORE DELETED. IT MAY BE POINTED OUT THAT ASSES SEE HAD FILED COMPLETE DETAILS OF CONSTRUCTION ACCOUNT WHICH WAS ALSO FORW ARDED TO THE A.O. BUT IT APPEARS THAT THIS ISSUE WAS NOT EXAMINED PROPERL Y. THUS THE ADDITION IS DELETED. 13. AT THE TIME OF HEARING THE LD. DEPARTMENTAL RE PRESENTATIVE POINTED OUT THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS NOT FURNISHED T HE REPLY. THEREFORE THE A.O. WAS HAVING NO OPTION BUT TO CALCULATE THE COST OF CONSTRUCTION. T HE A.O. WORKED OUT THE COST OF CONSTRUCTION @ RS.350/- PER SQ.FT. WHICH COMES TO RS.14 81 770/-. SINCE IN THE BALANCE-SHEET THE ASSESSEE HAS SHOWN RS.9 97 886/- THE A.O. RIGHTLY MADE THE ADDI TION OF RS.4 83 884/-. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER DELETED THE ADDITION IGNORING THE FACT THAT BEFORE THE A.O. THE ASSESSEE DID NOT FURN ISH ANY REPLY. 14. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW. IT IS PERTINENT TO NOTE THAT BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) THE ASSESSEE CONTENDED THAT CONSTRUCTION OF HOSPITAL BUILDING WAS DONE DURING A SSESSMENT YEARS 2003-04 AND 2004-05. THE TOTAL AMOUNT SPENT IS MORE THAN WHAT IS ESTIMATED B Y THE A.O. ON THIS BASIS THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CALLED THE REMA ND REPORT FROM A.O. AND DELETED THE ADDITION. THE COST OF CONSTRUCTION IS VERIFIABLE FR OM TWO BALANCE-SHEETS WHICH THE A.O. CONVENIENTLY IGNORED WHILE SENDING THE REMAND REPOR T TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). SINCE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE A.O. NEVER 6 OBJECTED TO THE PLEA OF A.O. THAT THE CONSTRUCTION WAS DONE IN TWO ASSESSMENT YEARS THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS RIGHTLY DEL ETED THE ADDITION. WE THEREFORE DECLINE TO INTERFERE. THIS GROUND OF APPEAL IS ACCORDINGLY REJ ECTED. 15. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. THE ORDER PRONOUNCED IN THE COURT ON 22.01.2010 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 / 01 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE RESPONDENT 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.