ITO, New Delhi v. M/s Sai Saburi Holdings Pvt. Ltd., New Delhi

ITA 2465/DEL/2010 | 2006-2007
Pronouncement Date: 11-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 246520114 RSA 2010
Assessee PAN AAFCS7828G
Bench Delhi
Appeal Number ITA 2465/DEL/2010
Duration Of Justice 9 month(s) 17 day(s)
Appellant ITO, New Delhi
Respondent M/s Sai Saburi Holdings Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 11-03-2011
Date Of Final Hearing 09-03-2011
Next Hearing Date 09-03-2011
Assessment Year 2006-2007
Appeal Filed On 24-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH G BENCH G BENCH G BENCH G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI C.L.SETHI JM AND SHRI BEFORE SHRI C.L.SETHI JM AND SHRI BEFORE SHRI C.L.SETHI JM AND SHRI BEFORE SHRI C.L.SETHI JM AND SHRI K.G.BANSAL K.G.BANSAL K.G.BANSAL K.G.BANSAL AM AM AM AM ITA NO. ITA NO. ITA NO. ITA NO.2465/DEL/2010 2465/DEL/2010 2465/DEL/2010 2465/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006- -- -07 0707 07 INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER WARD WARD WARD WARD- -- -7(2) 7(2) 7(2) 7(2) NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S SAI SABURI HOLDINGS PVT.LTD. M/S SAI SABURI HOLDINGS PVT.LTD. M/S SAI SABURI HOLDINGS PVT.LTD. M/S SAI SABURI HOLDINGS PVT.LTD. 46/6 CO 46/6 CO 46/6 CO 46/6 COMMUNITY CENTRE MMUNITY CENTRE MMUNITY CENTRE MMUNITY CENTRE EAST OF KAILASH EAST OF KAILASH EAST OF KAILASH EAST OF KAILASH NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 065. 110 065. 110 065. 110 065. PAN NO. PAN NO. PAN NO. PAN NO.AAFCS7828G. AAFCS7828G. AAFCS7828G. AAFCS7828G. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.SURJAM MOHANTY DR. RESPONDENT BY : SHRI R.S.SINGHVI CA. ORDER ORDER ORDER ORDER PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI J J J JM : M : M : M : THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 1 1.2.2010 PASSED BY LEARNED COUNSEL FOR THE ASSESSEE IN THE M ATTER OF AN ASSESSMENT MADE U/S 143(3) OF THE INCOME-TAX ACT 1 961 BY THE AO FOR THE AY 2006-07. 2. GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER:- LD.COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.95 00 000/- MADE BY THE AO ON AC COUNT OF INCOME FROM UNEXPLAINED SOURCES U/S 68 OF THE I. T.ACT. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE AO THAT ASSESSEE HAD TRANSFERRED ITS OFFICE PREMISE S FROM TRIBHUWAN COMPLEX TO B-10 SECTOR 61 NOIDA. THE ASSESSEE CO MPANY HAD ENTERED INTO AN AGREEMENT TO SELL WITH SHRI R.K.JAJ OO DIRECTOR TO TRANSFER 250 SQ.MTRS. (APPROX. 2 700 SQ.FT.) OF GRO UND FLOOR APARTMENT EXCLUDING THE LAND RIGHTS AT B-10 SECTOR 61 NOID A FOR A CONSIDERATION OF `40 LAKHS. THE ASSESSEE SUBMITTED A VALUATION R EPORT PREPARED BY ITA-2465/DEL/2010 2 SHRI SURYA PAL GUPTA GOVERNMENT APPROVED AND REGIS TERED VALUER ESTIMATING THE PROBABLE VALUE OF GROUND FLOOR AT `2 2 32 149/-. THE AO REFERRED THE MATTER TO THE DVO. HOWEVER THE DVO I NFORMED THE AO THAT IT WOULD NOT BE POSSIBLE FOR THEM TO ESTIMATE FAIR MARKET VALUE OF GROUND FLOOR OF B-10 SECTOR 61 NOIDA. THE AO TH EREFORE ESTIMATED THE ASSUMED RATE OF `5 000/- PER SQ.FT. BEING THE F AIR MARKET PRICE OF THE PROPERTY SOLD. HE THEREFORE WORKED OUT THE T OTAL VALUE OF `1 35 00 000/-. THE DIFFERENCE OF `95 LAKHS BETWEE N `1 35 00 000/- VALUE ESTIMATED BY THE AO AND `40 00 000/- THE VALU E SHOWN IN THE AGREEMENT WAS TREATED TO BE A DEEMED SALE PRICE AND ADDED THE SAME AS INCOME FROM UNDISCLOSED SOURCES IN THE HANDS OF THE ASSESSEE. 4. ON AN APPEAL CIT(A) DELETED THE ADDITION BY OBS ERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSION OF THE APPELLANT. THERE IS NO DISPUTE T HAT THE SALE WAS MADE BY THE COMPANY TO ITS DIRECTOR ON THE BASIS OF AN AGREEMENT TO SELL WHICH HAS BEEN PLACED ON RE CORD. FURTHER THE VALUATION REPORT OF THE APPROVED VALUE R WAS ALSO FURNISHED IN SUPPORT OF DECLARED VALUE OF CONS IDERATION BY THE APPELLANT. THERE IS NO DISPUTE THAT THE SAL E CONSIDERATION AGREED BETWEEN THE PARTY HAS BEEN COR RECTLY DISCLOSED AND THERE IS NO ALLEGATION OF UNDERHAND TRANSACTIONS. THE ASSESSING OFFICER HAS SEEMINGLY MADE ADDITION ON HYPOTHETICAL AND NOTIONAL BASIS. THE APPELLANTS ARGUMENT IS THAT THE ISSUE UNDER CONSIDERATION IS A CASE OF OUTRIGHT SALE AND AS SUC H CAPITAL GAIN IS REQUIRED TO BE CONSIDERED ON THE BASIS OF F ULL VALUE OF CONSIDERATION AS AGREED BETWEEN THE PARTIES UNLE SS THERE IS A CASE OF UNDERHAND CONSIDERATION. THE CO NCEPT OF FAIR MARKET VALUE IS STATED TO BE NOT RELEVANT. TH E LEGAL POSITION TO THIS EFFECT IS STATED TO BE SUPPORTED F ROM LATEST DECISION OF DELHI HIGH COURT IN THE CASE OF DEV KUM AR JAIN VS. ITO AND ANOTHER 309 ITR 240. CAPITAL GAINS COMPUTATION NO EVIDENCE THAT ASSE SSEE RECEIVED CONSIDERATION IN EXCESS OF THAT SHOWN IN ITA-2465/DEL/2010 3 AGREEMENT TO SELL NO NECESSITY TO COMPUTE FAIR MA RKET VALUE FULL VALUE OF SALE CONSIDERATION TO BE TAKE N INTO ACCOUNT REVENUE SUBSTITUTING ACTUAL. SALE CONSIDERATION IN AGREEMENT TO SELL BY VALUE AR RIVED AT BY DVO NOT JUSTIFIED INCOME TAX ACT 1961 SS. 45 48 55A. THE APPELLANT HAS STATED THAT THE HON'BLE DELHI HIG H COURT HAS MADE REFERENCE TO DECISION OF SUPREME COURT IN THE CASE OF CIT VS. GEORGE HENDERSON AND CO.LTD. 66 ITR 622 (SC). THE LEGAL POSITION TO THIS EFFECT IS ALSO SU PPORTED FROM DECISION OF SUPREME COURT IN THE CASE OF K.P.V ARGHESE VS. ITO 131 ITR 597 AND DECISION OF DELHI HIGH COU RT IN THE CASE OF CIT VS. GULSHAN KUMAR 257 ITR 703. IT IS S ELF EVIDENT THAT IN THE CASE UNDER REFERENCE THERE IS NO EVIDENCE FOR ANY UNDERHAND CONSIDERATION AND AS SUC H ISSUE OF NOTIONAL OR HYPOTHETICAL SALE VALUE IS NOT RELEVANT FOR CONSIDERATION. FURTHER THE ASSESSING OFFICER HAS MADE ONLY VAGUE REFERENCE TO SOME LOCAL ENQUIRY AND INTE RNET RESEARCH BUT NO SUCH MATERIAL OR EVIDENCE HAS BEEN BROUGHT ON RECORD. THE ASSESSING OFFICER HAS NOT E VEN ALLOWED ANY OPPORTUNITY TO THE APPELLANT FOR CLARIF ICATION IF THERE WAS ANY SUCH MATERIAL AVAILABLE WITH HIM WHIC H HE WANTED TO USE AGAINST THE ASSESSEE. VARIOUS JUDGME NTS REFERRED TO ABOVE SUPPORT THE CASE OF THE APPELLANT . THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE FACT TH AT THE DECLARED SALE CONSIDERATION IS LESS THAN THE PREVAI LING CIRCLE RATE AND AS SUCH THERE IS NO SCOPE OF ANY NO TIONAL WORKING OF CAPITAL GAIN IN DISREGARD TO DOCUMENTARY EVIDENCES ON RECORD. IT IS SEEN THAT IN THE CASE UNDER REFERENCE THE SA LE TRANSACTION IS BETWEEN COMPANY AND ITS DIRECTORS ON THE BASIS OF LEGAL DOCUMENTS AND ALSO SUPPORTED FROM RE PORT OF AN APPROVED VALUER. FURTHER THERE IS NO EVIDENCE OR EVEN ANY ALLEGATION OF ANY UNDERHAND CONSIDERATION. THE PROVISIONS OF SEC.68 ARE NOT APPLICABLE AS THERE IS NO CASE OF ANY CREDIT IN THE BOOKS OF ACCOUNTS OR IN THE BA NK ACCOUNT IN THE CONTEXT OF WHICH PROVISIONS OF SEC.6 8 COULD BE APPLIED. IN VIEW OF THE FACTS OF THE CASE AND LEGAL POSITION CONSIDERED ABOVE THERE IS NO FACTUAL OR LEGAL BASI S FOR PRESUMING ANY HYPOTHETICAL SALE PRICE AND ACCORDING LY IMPUGNED ADDITION IS NOT SUSTAINABLE AND SAME IS LI ABLE TO BE DELETED. HELD ACCORDINGLY. ITA-2465/DEL/2010 4 5. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE THE ASSESSEE PRODUCED AN AGREEMENT TO SELL BEFORE THE AO WHICH WAS NOT FOUND TO BE BOGUS OR FAKE. THE CONSIDERATION SHOWN IN THE AGREEMENT WAS ALSO SUPPORTED BY THE VALUATION REPORT OBTAINED FROM APPROVED VALU ER. THE AO HAS NOT POINTED OUT ANY DEFECT IN THIS VALUATION REPORT OF THE APPROVED VALUER. THE AO HAS ALSO NOT BROUGHT ANY MATERIAL O N RECORD TO PROVE AND ESTABLISH THAT THE ASSESSEE HAD RECEIVED ANY MO NEY OVER AND ABOVE THE MONEY MENTIONED IN THE AGREEMENT. THE AO HAS MADE THE ADDITION MERELY BY ESTIMATING THE VALUE OF PROPERTY BY TAKING HIS OWN FIGURE OF `5 000/- PER SQ.FT. WHICH IS ALSO NOT BAS ED ON ANY POSITIVE SUFFICIENT AND COGENT MATERIAL. THE AO HAS NOT MAD E ANY ALLEGATION THAT THERE WAS ANY UNDERHAND TRANSACTION WHICH TOOK PLACE BETWEEN THE ASSESSEE AND HIS DIRECTOR. IT IS THE CASE WHER E AO HAS MADE THE ADDITION MERELY ON HYPOTHETICAL AND NOTIONAL BASIS. THE CIT(A) HAS CONSIDERED THE ISSUE IN ITS RIGHT AND CORRECT PERSP ECTIVE AND THEN DELETED THE ADDITION. THE LEARNED DR IN THE COURSE OF ARGUMENTS HAS NOT BEEN ABLE TO POINT OUT ANY MATERIAL FROM THE AS SESSMENT RECORD TO SHOW AND ESTABLISH THAT THE ASSESSEE HAD ACTUALLY R ECEIVED THE SUM OF `1 35 00 000/- ON ACCOUNT OF SALE OF THE GROUND FLO OR. THE ORDER OF CIT(A) ON THIS ISSUE IS THUS UPHELD AND THIS GROUND RAISED BY THE REVENUE IS REJECTED. 6. GROUND NO.2 IS DIRECTED AGAINST CIT(A)S ORDER I N DELETING THE ADDITION OF `7 04 227/- OUT OF `8 04 227/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CASH CREDITS. 7. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND BY THE AO THAT FOLLOWING CASH WAS DEPOSITED INTO THE ASSESSEE COMPANYS BANK ACCOUNT:- ITA-2465/DEL/2010 5 VIJAYA BANK A/C 600400300006402 4.4.2005 RS.2 81 727/- 3.8.2005 RS.10 000/- 1.8.2005 RS.22 500/- 5.11.2005 RS.3 00 000/- HSBC BANK A/C 125-117267-001 5.9.2005 RS.1 90 000/- 8. IN THE ABSENCE OF ANY CLARIFICATION AND CASH BOO K THE AO TREATED THE ABOVE SUM OF `8 04 227/- AS UNEXPLAINED CASH DE POSIT IN THE BANK ACCOUNT AND ADDED THE SAME TO THE ASSESSEES DIVIDE ND INCOME. 9. ON AN APPEAL LEARNED CIT(A) REDUCED THE ADDITIO N FROM `8 04 227/- TO `1 LAKH ONLY BY GRANTING A RELIEF OF `7 04 227/-. WHILE DOING SO LEARNED CIT(A) HAS RELIED UPON THE ABSTRA CT OF THE CASH BOOK WHICH WAS PRODUCED BEFORE THE LEARNED CIT(A). IT W AS THE CASE OF THE AO THAT CASH BOOK WAS NOT PRODUCED BEFORE HIM. HOW EVER IN PARAGRAPH 2 OF THE ASSESSMENT ORDER THE AO HAS ALS O STATED THAT BOOKS OF ACCOUNT WERE PRODUCED BY THE ASSESSEE AND THE SAME WERE VERIFIED ON TEST CHECK BASIS. CIT(A) FOUND THAT TH ERE WAS A CONTRADICTION IN THE AOS COMMENT. HOWEVER NO CLA RIFICATION WAS OBTAINED BY THE LEARNED CIT(A) FROM THE AO AS TO WH ETHER ACTUAL CASH BOOK WAS VERIFIED AND EXAMINED BY THE AO. SINCE TH ERE IS A CONTRADICTION BETWEEN THE AOS OBSERVATION VIS-A-VI S CIT(A)S FINDING WE FIND IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR HIS VERIFICATION AS TO WHETHER THE CORRESPONDING AMOUNT HAS ACTUALLY BEEN ENTERED INTO THE CASH BOOK. THE ASSESSEE SHALL PRO DUCE THE CASH BOOK BEFORE THE AO WHICH SHALL BE EXAMINED AND VERIFIED BY THE AO. IN CASE IT IS FOUND BY THE AO THAT THE CORRESPONDING AMOUNT HAS BEEN ENTERED INTO THE CASH BOOK AND THE AMOUNT HAS BEEN DEPOSITE D IN THE BANK ACCOUNT IS ALSO REFLECTED IN THE CASH BOOK NO ADDI TION SHALL BE CALLED FOR. WE THEREFORE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR ITA-2465/DEL/2010 6 VERIFICATION OF CASH BOOK AND DECIDE THE ISSUE ACCO RDINGLY. THE AO SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 10. GROUND NO.3 IS DIRECTED AGAINST THE CIT(A)S OR DER IN DELETING ADDITION OF `44 027/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. THE ASSESSEE COMPANY CLAIMED DEPRECI ATION AMOUNTING TO `88 054/-. THE AO RESTRICTED THE SAME TO 50% ON THE GROUND THAT THE GROUND FLOOR OF THE BUILDING WAS SOLD BY THE AS SESSEE COMPANY DURING THE CURRENT YEAR. HOWEVER ON AN APPEAL CI T(A) DELETED THE ADDITION BY OBSERVING THAT THE CLAIM OF DEPRECIATIO N WAS NOT MADE IN RESPECT OF BUILDING BUT MADE IN RESPECT OF PLANT AN D MACHINERIES WHICH WERE CONTINUED TO BE USED BY THE ASSESSEE FOR THE P URPOSE OF BUSINESS. IN THE COURSE OF HEARING OF THIS APPEAL THE LEARNED DR HAS NOT BEEN ABLE TO POINT OUT ANY DEFECT IN THE ORDER OF CIT(A). THE FACTUAL FINDING RECORDED BY THE CIT(A) HAS NOT BEEN CONTROVERTED OR DISPUTED. WE THEREFORE UPHOLD THE ORDER OF CIT(A ) IN DELETING THE ADDITION OF `44 027/- ON ACCOUNT OF DEPRECIATION. THUS THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. 11. GROUND NO.4 IS DIRECTED AGAINST CIT(A)S ORDER IN DELETING THE ADDITION OF `37 939/- OUT OF `1 58 446/- MADE BY TH E AO ON ACCOUNT OF CAPITAL EXPENDITURE ON SHARE CAPITAL. 12. THE WHOLE OF THE EXPENSES OF `1 58 446/- WERE C ONSIDERED TO BE OF CAPITAL IN NATURE BY THE AO. THIS AMOUNT INCLUD ES `37 939/- ON ACCOUNT OF PROFESSIONAL CHARGES PAID FOR THE PURPOS E OF INCOME TAX AND SALES TAX MATTERS. THE CIT(A) THEREFORE DELETED THE ADDITION TO THE EXTENT OF `37 939/- INASMUCH AS THE SAME CANNOT BE CONSIDERED AS RELATING TO SHARE CAPITAL. THE LEARNED DR HAS NOT BEEN ABLE TO DISPUTE THIS FACT. WE THEREFORE UPHOLD THE ORDER OF CIT( A) IN DELETING THE ADDITION TO THE EXTENT OF `37 939/- INASMUCH AS IT WAS INCURRED TOWARDS ITA-2465/DEL/2010 7 PROFESSIONAL FEES FOR LOOKING AFTER INCOME TAX AND SALES TAX MATTERS AND NOT RELATING TO SHARE CAPITAL RAISED BY THE ASS ESSEE. 13. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS TREATED TO BE PARTLY ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 11 TH MARCH 2011. SD/- SD/- (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL (K.G.BANSAL) )) ) (C.L.SETHI (C.L.SETHI (C.L.SETHI (C.L.SETHI) )) ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 11.03.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR ITA-2465/DEL/2010 8