DCIT, Kanpur v. M/s. Yog Builders, Kanpur

ITA 318/LKW/2010 | 2002-2003
Pronouncement Date: 06-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 31823714 RSA 2010
Assessee PAN AAAFY3499D
Bench Lucknow
Appeal Number ITA 318/LKW/2010
Duration Of Justice 7 month(s) 30 day(s)
Appellant DCIT, Kanpur
Respondent M/s. Yog Builders, Kanpur
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 06-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2002-2003
Appeal Filed On 07-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B - BENCH LUCKNOW. BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI ACCOUNTANT MEMBER I.T.A.NOS. 318 319 320 & 321(LKW.)/2010 A.YS. : 2002-03 2003-04 2004-05 AND 2005-06 THE DY.CIT CC-I VS. M/S.YOG BUILDERS KANPUR. 123/1-F KALPI ROAD KANPUR. PAN AAAFY3499D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIVEK MISHRA CIT(D.R.) RESPONDENT BY : SHRI ASHWANI KUMAR C.A. AND SHRI SUDHINDRA JAIN C.A. O R D E R PER H.L.KARWA VICE PRESIDENT THESE FOUR APPEALS BY THE REVENUE INVOLVING COMMO N ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. FIRSTLY WE WILL TAKE UP I.T.A.NO. 318(LKW)/2010 WHEREIN GROUND NO.1 READS AS UNDER : 1. THAT THE CIT(APPEALS) ERRED IN HOLDING WITHOUT ANY BASIS THAT THE INTERIM REPORT OF THE DVO WAS NOT A VALID REPO RT AND THE AO COULD NOT HAVE TAKEN COGNIZANCE OF THE SAME. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132(1) OF THE INCOME-TAX AC T 1961 (IN SHORT THE ACT) WAS CONDUCTED BY THE DEPARTMENT ON 1 ST DECEMBER 2004 AT THE BUSINESS AND RESIDENTIAL PREMISES OF SHRI AMAR NATH GUPTA GROUP OF CASES I.E. AMAR NATH GUPTA M/S. OIL EMPORIUM M/S YOG BU ILDERS AND M/S. YOG 2 INTERNATIONAL PVT. LTD. 123/F-1 KALPI ROAD KANPU R. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF THE ASSESSEE GROUP CERTA IN SEIZED MATERIAL IN FORM OF LOOSE PAPERS WERE FOUND RELATING TO M/S.YO G BUILDERS AND ACCORDINGLY NOTICE DATED 16.10.2006 U/S 153C OF TH E ACT WAS ISSUED AND SERVED ON THE ASSESSEE CALLING UPON THE ASSESSEE TO FILE ITS RETURN OF TOTAL INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE FILED A WRITTEN REPLY DATED 9.11.2006 STATING THEREIN THAT REGULAR RETURN FILED UNDER SECTION 139(1) OF THE ACT MAY BE TREATED IN COMPL IANCE TO NOTICE U/S 153C OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE AO MADE THE ADDITION OF RS.5 34 445 UNDER THE HEADS UNEXPLAINED INVESTMENT IN YOG TOWER CIVIL LINES KANPUR. THE FACTS NOTED BY THE AO IN THIS CONNECTION READ AS UNDER : 09 UNEXPLAINED INVESTMENT IN YOG TOWER CIVIL LINES K ANPUR IN ORDER TO ASCERTAIN THE CORRECT VALUE OF INVESTM ENT IN YOG TOWER A REFERENCE U/S 142A OF THE INCOME-TAX ACT 1961 TO THE DISTRICT VALUATION OFFICER WAS MADE VIDE THIS OFFI CE LETTER DATED 6.8.2007. THEREAFTER THE DISTRICT VALUATION OFFIC ER INCOME-TAX DEPARTMENT KANPUR VIDE HIS REPORT DATED 24.8.2007 HAS VALUED THE COST OF INVESTMENT YEAR-WISE BREAK UP OF COST OF I NVESTMENT IS AS UNDER : 1 FINANCIAL YEAR ASSTT. YEAR DECLARED COST (RS.) ASSESSED COST (RS.) 1 2001-02 2002-03 1650755 21 85 200 2 2002-03 2003-04 17057145 225 79 900 3 2003-04 2004-05 15265721 2 02 08 400 4 2004-05 2005-06 25819000 3 41 78 600 5 2005-06 2006-07 17207 739 2 27 79 300 6 2006-07 2007-08 40 17 728 53 18 600 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE FIRM VIDE THIS OFFICE LETTER DATED 24.08.2007 WAS REQUIR ED TO EXPLAIN THE DIFFERENCE BETWEEN VALUE OF DECLARED INVESTMENT AND ASSESSED 3 INVESTMENT MADE BY THE DISTRICT VALUATION OFFICER A LONG WITH DOCUMENTARY EVIDENCE. IN RESPONSE THE ASSESSEE HAS FILED A WRITTEN REPLY DATED 24.08.2007. PRIMARY OBJECTIONS OF THE A SSESSEE ARE THAT INTERNAL VALUATION REPORT CANNOT BE TAKEN INTO COGN IZANCE THE CHANGES HAVE BEEN TAKEN PLACE IN THE FLATS OCCUPIED BY THE PURCHASERS NO UNDISCLOSED INVESTMENT HAS BEEN FOUND VIS-A-VIS THE BOOKS OF ACCOUNT VALUATION REPORT ON THE BASIS OF INSPECTION IN FY 2 007-08 IS RELEVANT FOR THE ASSTT. YEAR 2008-09. THE REPORT HAS BEEN FI LED BY THE AUTHORITY NOT COMPETENT TO EVALUATE. THE FACT OF THE MATTER THAT IT IS NOT A DETAILED RE PORT CANNOT BE BRUSHED AWAY. THE ONLY POSSIBILITY IN THE MATTER IS THAT AS AND WHEN THE DETAILED REPORT IS RECEIVED IT MAY BE PROVIDED TO THE ASSESSEE. IT WILL BE DONE SO. HOWEVER IT DOES NOT NULLIFY THE C OST OF THE CONSTRUCTION AS ASSESSED BY THE DVO AT RS.7 91 52 1 00/- AS AGAINST COST OF CONSTRUCTION DECLARED BY THE ASSESSEE AT RS .5 97 92 621/- . THE ASSESSEE CONTENTION THAT THE VALUATION ON THE B ASIS OF INSPECTION IN FY 2007-08 IS VALID FOR ASSTT. YEAR 2 008-09 HAS BEEN TAKEN CARE OF BY THE DVO AND HE HAS SEPARATELY ASSE SSED THE COST OF CONSTRUCTION AND THE DECLARED AMOUNT SEPARATELY FOR THE FY 2005-06 AND FY 2006-07. HOWEVER THE DIFFERENCE IN THE ASSE SSED COST AND THE DECLARED AMOUNT HAS TO RELATE TO ALL THE YEARS IN W HICH THE PROPERTY WAS CONSTRUCTED. THE OBJECTIONS RAISED ARE FOR THE SAKE OF OBJECTION ONLY AND CARRY NO SUBSTANCE. AS SUCH THE DIFFERENCE IN THE COST OF INVESTMENT ASSESSED VALUATION REPORT AND THE SUM AS DISCLOSED BY THE ASSESSEE WILL BE ADDED BACK TO THE INCOME OF THE AS SESSEE AS UNEXPLAINED INVESTMENT IN THE RESPECTIVE YEARS. ADDITION RS.5 34 445. 3. AGGRIEVED BY THE ABOVE ADDITION THE ASSESSEE FI LED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A) THE ASSESSEE TOOK THE FOLLOWING LINE OF ARGUMENTS : (I) THAT THE INSPECTION OF THE BUILDING IS DONE IN F.Y.2007- 08 WHEREAS FLATS OF THE SAID BUILDING WERE SOLD MUC H PRIOR TO THE SAID DATE OF INSPECTION BY THE DVO THEREFORE IN THE 4 INTERVENING PERIOD WHAT ADDITION RENOVATION CONS TRUCTION OR CHANGES IN THE SPECIFICATIONS HAVE BEEN DONE BY THE RESPECTIVE FLAT OWNERS ARE NEITHER IN THE KNOWLEDGE OF THE AS SESSEE FIRM NOR IT HAS ANY CONNECTION WITH THE SAME THEREFORE THE INSPECTION IS NOT RELEVANT OR THE INFERENCE DRAWN O N THE BASIS OF INSPECTION OF BUILDING IS NOT RELEVANT FOR ASSE SSMENT YEARS 2002-03 TO 2005-06. (II) THAT THE INTERIM REPORT OF THE DVO RELIED UPON BY T HE AO IS NEITHER RELEVANT NOR CAN BE USED FOR THE PURPOSE OF DETERMINATION OF INCOME. (III) THAT UNLESS A DETAILED VALUATION REPORT AS PER THE PRESCRIBED NORMS AND ON THE PRESCRIBED FORMAT IS PROVIDED TO THE ASSESSEE THE SAME IS MEANING LESS AND CANNOT BE OBJECTED TO OR EXPLAINED WITH REFERENCE TO THE BOOKS OF ACCOUNT A ND OTHER SUPPORTING DOCUMENTS OF THE ASSESSEE FIRM. (IV) THAT SKETCHY CALCULATION PURPORTED TO BE VALUATION REPORT BY THE DVO IS UNTENABLE IN LAW AND ON FACTS AND IS HIGHL Y INCOMPETENT TO GIVE RISE TO ANY VALID PROCEEDINGS U NDER THE ACT. (V) THAT THE BOOKS OF ACCOUNT RELATING TO PRINCIPAL BUS INESS ACTIVITIES I.E. CONSTRUCTION AND DEVELOPMENT OF REA L ESTATE WERE PROPERLY MAINTAINED ON A DAY TO DAY BASIS AND NO IN ADVERTENT INFORMATION RELATING TO ANY FINANCIAL IRREGULARLY WHATSOEVER WAS FOUND IN THE SEARCH OPERATION CONDUCTED ON 1. 12.2004 AT 5 THE BUSINESS AND RESIDENTIAL PREMISES OF THE PARTNE RS OF THE ASSESSEE FIRM. THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED BY THE AO AND FROM THE ASSESSMENT ORDER ALSO IT WILL BE CLEAR THAT THE DIFFERENCE BETWEEN ACTUAL COST OF CONSTRUCTIO N AS PER BOOKS OF ACCOUNT OF THE ASSESSEE FIRM AND ESTIMATE GIVEN IN TERMS OF INTERIM REPORT DATED 24 TH AUGUST 2007 OF THE DVO ALONE HAS BEEN ADDED IN THE INCOME OF THE ASSESSEE FIRM. (VI) THAT THE COST OF CONSTRUCTION WAS FULLY DISCLOSED IN THE BOOKS OF ACCOUNT ON DAY TO DAY BASIS WHICH CONSTITUTED STOCK IN TRADE FOR THE ASSESSEE FIRM HENCE ALSO THE REQUIREMENT FOR MAKING A VALID REFERENCE UNDER LAW WAS NEITHER FULFILLED NOR CORRECTLY INTERPRETED BY THE AO. (VII) THAT THE INTERIM REPORT ON THE BASIS OF WHICH THE ADDITION OF RS.5 34 445 HAS BEEN ARBITRARILY WORKED OUT AND MA DE TO THE INCOME OF THE ASSESSEE IS WHOLLY ILLEGAL BECAUSE A NYTHING LIKE INTERIM REPORT IS NOT KNOWN TO THE LAW AND IS NOT C OGNIZABLE. (VIII) THAT THE MULTI-STORIED RESIDENTIAL COMPLEX C ONSTITUTED STOCK-IN- TRADE AND ITS SALE PRICE STANDS FULLY DOCUMENTED IN WHICH NO DISCREPANCY HAS BEEN FOUND THEREFORE ALSO ANY INC REASE IN ITS COST OF CONSTRUCTION CAN ONLY INCREASE THE DEBIT S IDE OF THE PROFIT & LOSS ACCOUNT TO HAVE THE EFFECT OF REDUC ING THE MARGIN OF PROFIT THUS DESPITE WHATEVER APPROACH HAD BEEN ADOPTED IN THE GARB OF SECTION 142A IT IS NOT ONLY ILLEGAL BUT ALSO INCONSEQUENTIAL. 6 4. THE LD.CIT(A) HAS DECIDED THE ISSUE VIDE PARAS 1 3 AND 14 OF THE IMPUGNED ORDER. THE LD.CIT(A) HAS CATEGORICALLY ST ATED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE NOT BEEN REJECTED BY THE AO FOR THE RELEVANT PERIOD WHICH ALSO CONTAIN THE COST OF CONSTRUCTION /INVESTMENT. HE FURTHER HELD THAT THERE WAS NO ADVERSE MATERIAL AVAILABLE WITH THE AO IN RESPECT OF UNDISCLOSED INVESTMENT IN THE SAID PROJECT EXCEPT FOR THE INTERIM VALUATION REPORT SUBMITTED BY THE DVO. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER : 13. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE ARGUMENTS OF THE APPELLANT AS NOTED ABOVE. THER E IS NO DISPUTE THAT THE REPORT OF DVO BASED ON WHICH ADDITION HAS BEEN MADE BY THE AO IS NOT A DETAILED VALID REPORT AS ALSO NOTED BY AO ON PAGE 4 PARA-3 OF THE ASSESSMENT ORDER. IT IS ALSO ACCEPTED FACT THAT MOST OF THE FLATS WERE SOLD ON THE DATE OF INSPECTION AND SOME RENOVATION CONSTRUCTION REPAIRS (WHATSOEVER) CANNOT BE RULED OUT BY THE OWN ERS OF THE FLATS FOR WHICH APPELLANT CANNOT BE HELD RESPONSIBLE. THIS OBJECTION OF THE APPELLANT HAS NEITHER BEEN ADDRESSED BY AO NOR BY T HE DVO. IT IS ALSO TRUE THAT THE BOOKS OF ACCOUNT OF THE APPELLANT HAV E NOT BEEN REJECTED BY AO FOR THE RELEVANT PERIOD WHICH ALSO CONTAIN TH E COST OF CONSTRUCTION/INVESTMENT. THERE IS NO ADVERSE MATERI AL AVAILABLE WITH THE AO IN RESPECT OF UNDISCLOSED INVESTMENT IN THE SAID PROJECT EXCEPT FOR THE INTERIM VALUATION REPORT WHICH IS REFERRED ABOVE. UNDER THE CIRCUMSTANCES I FIND THAT THE ADDITION MADE BY AO ON THE BASIS OF INCOMPLETE/ SKETCHY VALUATION REPORT WITHOUT FINDIN G ANY DISCREPANCY IN THE BOOKS OF ACCOUNT IN THIS BEHALF IS PRESUMPT IVE AND CONTRARY TO THE LAW. THE AO HAS HIMSELF NOTED THAT 'AS AND WHEN THE DETAILED REPORT IS RECEIVED IT MAY BE PROVIDED TO THE ASSESS EE. IT CLEARLY SHOWS THAT THERE ARE SHORT COMINGS LACUNAS AND DEF ICIENCIES IN THE VALUATION REPORT BASED ON WHICH SUCH ADDITION HAVE BEEN MADE. THE DECISION ARGUED BY APPELLANT REFERRED ABOVE ARE ALS O RELEVANT AND APPLICABLE TO THE FACTS OF C ASE. IT W AS HELD THA T ' UN EX PLAINED INVESTMENT - COST OF CONSTRU C TI ON - AD DITION ON BASIS OF REPORT OF DEPARTMENTAL VALUATION OFFICER - CLAIM FOR SPR E ADING AMOUNT OVER SEVERAL YEARS CAN BE GRANTED ONLY ON PROOF THAT I N VE STMENT WAS MADE IN SEVERAL YEARS - TRIBUNAL REJECTING C LAIM - VALUATI O N OF 7 ASSET - QUESTION OF FACT - NOT TO BE INTERFERED WITH - INCOME - TAX ACT 1 96 1 S. 69B .' [ S AKTI T OURIST HOM E VS. CIT 3 08 IT R (KER . )] . FURTHER IT WAS HELD TH AT ' A S SUMING BUT NOT ACCEPTING THAT SOME UNEXPLAINED INCOM E HAS BEEN I N VESTED I N TH E C ONSTRU C TION THE FACT REMAIN S THAT THE BUSIN ESS O F TH E ASSESSEE C ONSTRUCTION. IF WE ADD ON ACCOUNT OF UNE X PLAINED IN C OM E I N THE IN VES TM ENT THAT WILL G IVE RI S E TO THE COST OF TH E CONSTRUCTION AND THE RE S ULT WILL R E MA I N THE S AM E I .E. 'Z ERO ' . EVEN OTHERWISE ALSO THIS ADDITION HAS BE E N MAD E ON TH E BASI S OF TH E V ALUATION OFFICER ' S REPORT . THEIR LORDSHIPS HA V E B EE N C ONSID E R ED THE IS S U E ' WHETHER REFERENCE CAN BE MADE TO ANY VALUATION OFFI CE R TO FIND O U T THE C O S T ' . TH E IR LORDSHIP HAVE TAKEN THE VIEW IN THE C ASE OF SMT . A MIYA BALA P AUL V. CIT (2003) 262 ITR 407 (SC) THAT REFEREN C E C AN BE MAD E TO TH E VA LU ATION OFFI C ER FOR THE PURPOSE OF SECTION S 55 (A) 13 1 1 3 3(6) 1 4 2(2) A ND NO T FOR THE PURPOS E OF FINDING OUT THE C OST . IN V I E W OF THES E ADMITTED FA C T S WE AN SWER THE QUE S TION IN TH E AFFIRMATIVE I . E. IN FA V OUR OF THE ASS ES S EE AND A G AIN ST THE R EV ENU E' . [CIT V S. STAR B UILDERS 2 94 ITR (GUJ.)] 14 . IN VIEW OF THE FACTS AND FOR THE REASONS NOTED ABOV E I HOLD THAT THE ADDI T IO N MADE B Y AO IS SUFFERING FR O M LACK OF SUFFICIENT AND APPROPRIATE EVIDENCE / MATER IAL FOR THIS PURPOSE WHICH O T HERWISE ALSO CANNOT BE MADE AS PER LAW LAID DOWN I N T HE ABO V E REFERRED DEC I SI ON S. I FIND THAT FOR THE REASONS ENUMERATED ABOVE IN PAR A-12 O F THIS ORDER FROM (A) TO (G) AS ALSO ARGUED B Y THE APPELLANT DESERVE M ERIT . THEREFORE C ONSIDE R ING THE FACTS AND CIRCUMSTANCES OF THE CASE GROUND NO . ( III ) (A ) OF APPEAL I S ALLOWED AND AO IS DIRECTED TO DELETE THE ADDI TI ON OF RS.5 34 445. . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CAS E THE LD.CIT(A) HAS CATEGORICALLY STATED THAT THE REPORT OF THE DVO BASED ON WHICH ADDITION WAS MADE BY THE AO IS NOT A DETAILED REPORT AS AL SO NOTED BY THE AO ON PAGE 4 PARA 3 OF THE ASSESSMENT ORDER. WE FIND SUBS TANCE IN THIS SUBMISSION OF SHRI ASHWANI KUMAR C.A. AND SHRI SUDHINDRA JAIN C.A. LD. COUNSELS FOR THE ASSESSEE THAT THE INTERIM REPORT ON THE BASI S OF WHICH THE ADDITION OF 8 RS.5 34 445 HAS BEEN ARBITRARILY WORKED OUT AND MA DE TO THE INCOME OF THE ASSESSEE IS WHOLLY ILLEGAL BECAUSE ANYTHING LIKE INTERIM REPORT IS NOT KNOWN TO THE LAW AND IS NOT COGNIZABLE. THEREFORE THE LD.CIT(A) HAS CORRECTLY OBSERVED THAT THERE WERE SHORTCOMINGS L ACUNAS AND DEFICIENCIES IN THE VALUATION REPORT BASED ON WHICH IMPUGNED ADDIT ION HAS BEEN MADE. ON THIS SCORE ALONE THE GROUND OF APPEAL OF THE REVENU E DESERVES TO BE REJECTED. EVEN OTHERWISE ALSO; THE ASSESSEE HAS A STRONG CASE IN ITS FAVOUR. IN THIS REGARD WE MAY OBSERVE THAT THE ASSESSEE HAS MAINTA INED REGULAR BOOKS OF ACCOUNT. WE FIND THAT THE COST OF CONSTRUCTION WAS FULLY DISCLOSED IN THE BOOKS OF ACCOUNT ON DAY TO DAY BASIS WHICH CONSTIT UTED STOCK-IN-TRADE FOR THE YEAR UNDER CONSIDERATION. THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE WERE SUBJECT TO AUDIT AND THE AUDITORS HAVE NOT GIVEN ANY ADVERSE REMARKS IN THE AUDIT REPORT. IN THE INSTANT CASE THE AO HAD NOT CARED TO LOOK INTO THE BOOKS OF ACCOUNT REGULARLY MAINTAI NED BY THE ASSESSEE. IN FACT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFEC T/DISCREPANCY IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE REL ATING TO THE COST OF CONSTRUCTION OF THE BUILDING IN QUESTION. IN OUR V IEW THE INTERIM VALUATION REPORT OF THE DVO IS ONLY INFORMATION AND ESTIMATE OF COST OF CONSTRUCTION CARRIED ON BY THE ASSESSEE AND THIS REPORT ALSO SU FFERS FROM MATERIAL DEFECTS AS POINTED OUT BY THE LD. CIT(A) IN PARA 13 OF THE IMPUGNED ORDER. A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THIS BENCH O F THE TRIBUNAL IN THE CASE OF DY.CIT VS. ROHTAS PROJECTS LTD. (2010) 133 TTJ ( LUCKNOW)(UO) 89 AND THE TRIBUNAL HELD (HEAD NOTE) AS UNDER : IT IS TRUE THAT FOR THE PURPOSE OF MAKING ADDITI ON TOWARDS UNEXPLAINED INVESTMENT THE AO WAS UNDER LEGAL OBLI GATION TO VERIFY THE BOOKS AND VOUCHERS MAINTAINED BY THE ASSESSEE I N SUPPORT OF THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE AND AT T HE SAME TIME THE AO SHOULD HAVE POINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT 9 REGULARLY MAINTAINED BY THE ASSESSEE. IT IS SEEN TH AT THE ASSESSEE VIDE ITS LETTER DT. 26TH MARCH 1998 HAS REQUESTED THE A O TO IGNORE THE REPORT OF THE DVO AND PROCEED WITH THE ASSESSMENT O F ACTUAL AMOUNT SPENT DULY SUPPORTED BY VOUCHERS/BILLS AS PER AUDIT ED BOOKS OF ACCOUNT. IT SEEMS THAT THE AO HAD NOT ACCEDED TO TH E REQUEST OF THE ASSESSEE. THE AO HAS MADE THE ADDITION MERELY ON TH E BASIS OF THE VALUATION REPORT BY THE DVO. THE AO DID NOT CARE TO LOOK INTO THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESS EE WHICH WERE DULY SUPPORTED BY BILLS AND VOUCHERS. THERE IS NO D ISPUTE THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE DU LY AUDITED. IN FACT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFEC T/DISCREPANCY IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESS EE RELATING TO THE COST OF CONSTRUCTION OF THE BUILDING IN QUESTION. T HE VALUATION REPORT OF DVO IS ONLY INFORMATION AND ESTIMATE OF COST OF CONSTRUCTION CARRIED ON BY THE ASSESSEE AND THIS REPORT ALSO SUF FERS FROM MATERIAL DEFECTS AS POINTED OUT BY THE CIT(A) IN PARA 9 OF T HE IMPUGNED ORDER. THE REVENUE HAS ALSO NOT POINTED OUT A SINGLE INSTA NCE TO SHOW THAT THE ASSESSEE HAS ACTUALLY INCURRED EXPENDITURE MORE THAN THAT RECORDED IN THE BOOKS OF ACCOUNT. CONSEQUENTLY NO ADDITION I S CALLED FOR.- K.K. SESHAIYER VS. CIT (2001) 166 CTR (MAD) 527 : (2000) 246 ITR 351 (MAD) AND CIT VS. HOTEL JOSHI (1999) 157 CTR (RAJ) 369: (2000) 242 ITR 478 (RAJ) RELIED ON. 5.1 IN OUR VIEW THE DECISION OF THIS BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ROHTAS PROJECTS LTD.(SUPRA) IS SQUARELY APP LICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE ALSO THE AO MADE THE ADD ITION ON THE BASIS OF REPORT OF THE DVO AND DID NOT CARE TO LOOK INTO TH E BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE WHICH WERE D ULY SUPPORTED BY BILLS AND VOUCHERS. IN THAT CASE ALSO THE REVENUE HAS N OT POINTED OUT A SINGLE INSTANCE TO SHOW THAT THE ASSESSEE HAS ACTUALLY INC URRED EXPENDITURE MORE THAN THAT RECORDED IN THE BOOKS OF ACCOUNT. KEEPI NG IN VIEW THOSE FACTS THE TRIBUNAL CONCLUDED THAT THE VALUATION REPORT OF THE DVO IS ONLY INFORMATION AND ESTIMATE OF COST OF CONSTRUCTION CARRIED ON BY THE ASSESSEE; WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF A CCOUNT REGULARLY 10 MAINTAINED BY THE ASSESSEE WHICH ARE DULY AUDITED THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF COST OF CONSTR UCTION MERELY ON THE BASIS OF REPORT OF DVO. WHILE REACHING THE ABOVE CONCLUSI ON THE TRIBUNAL HAS ALSO REFERRED TO THE DECISION OF THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. MEERUT CEMENT CO.(P.) LTD. (2006) 202 CTR (ALL.)_ 506 WHEREIN THE HON'BLE ALLAHABAD HIGH COURT HELD THAT THE REPORT OF THE DVO SUFFERED FROM MATERIAL DEFECTS AND THE REVENUE HAS NOT POINTED OUT A SINGLE INSTANCE OF UNRECORDED EXPENDITURE ADDITION UNDER SECTION 69B MADE ONLY ON THE BASIS OF DVOS REPORT COULD NOT BE SUSTAINED . THE HON'BLE JURISDICTIONAL HIGH COURT ALSO HELD THAT IF THE AS SESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT IN THE REGULAR COURSE OF BUSINESS AND NECESSARY ENTRIES RELATING TO THE EXPENDITURE TOWARDS COST OF CONSTRU CTION ARE ENTERED IN THE BOOKS OF ACCOUNT WHICH ARE OPEN TO VERIFICATION A ND ITS CORRECTNESS IS NOT DOUBTED IT SHOULD BE ACCEPTED. THE HON'BLE HIGH C OURT FURTHER HELD THAT IN CASE OF DOUBT THE ASSESSING AUTHORITY CAN REFER TH E MATTER TO THE VALUATION CELL FOR DETERMINATION OF COST OF CONSTRUCTION AND RELY UPON SUCH REPORT AS AN EVIDENCE BUT IT IS OPEN TO THE ASSESSEE TO CHAL LENGE THE CORRECTNESS OF SUCH VALUATION REPORT AND IN CASE IF IT ESTABLISHES THAT SUCH REPORT IS NOT CORRECT AND RELIABLE EXPENDITURE SHOWN IN THE CONS TRUCTION AS PER THE BOOKS OF ACCOUNT IS LIABLE TO BE ACCEPTED. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE LD.CIT(A) AND THEREFORE WE UPHOLD THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. 6. GROUND NO.2 OF THE APPEAL READS AS UNDER : 2. THAT THE CIT(APPEALS) ERRED IN HOLDING THAT CAS H CREDIT OF RUPEES TEN LAKHS INTRODUCED IN THE GARB OF TRADE AD VANCE WAS GENUINE CREDIT AND THAT THE CREDITWORTHINESS AND THE IDENTI TY OF THE CREDITORS WAS ESTABLISHED ONLY BY FILING COPY OF RETURN OF PR EVIOUS YEAR AND 11 PAN. 7. WHILE MAKING THE ASSESSMENT THE AO MADE THE ADD ITION OF RS.10 LACS OBSERVING AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTIC ES U/S 133(6) DATED 18.07.2007 TO THE ABOVE PARTIES WERE ISSUED R EQUIRING THEM TO FILE COPIES OF THEIR BANK ACCOUNT INCOME-TAX RETUR N ETC. HOWEVER NEITHER ANY PARTY ATTENDED NOR ANY REPLY HAS BEEN R ECEIVED IN THIS OFFICE FROM THESE PARTIES. FURTHER THE ASSESSEE VI DE THIS OFFICE LETTER DATED 3.8.2007 WAS ALSO REQUIRED TO PROVE THE CREDI TWORTHINESS OF THE PARTIES FROM WHOM DEPOSITS WERE TAKEN. IN SUPPORT O F THIS THE ASSESSEE CONTENDED THAT IT HAD RECEIVED A SUM OF RS .5 00 000/- FROM RAJIV SHUKLA AND RS.5 00 000/- FROM ASHISH PANDEY A GAINST BOOKING OF FLATS BUT DUE TO INABILITY OF MAKING FURTHER PAY MENTS BY THE ABOVE PARTIES THE ANSWERING ASSESSEE HAS NO OPTION BUT TO REFUND THE MONEY OF THE SAID PARTIES. IN SUPPORT OF THIS THE ASSESS EE FILED AFFIDAVITS AND ALSO COPIES OF INCOME TAX RETURNS. THE ASSESSEE COU LD GIVE ANY OTHER CONCRETE EVIDENCE IN SUPPORT OF CREDITWORTHINESS OF THESE PARTIES. FURTHER THE COPIES OF RETURN OF INCOME FILED HAVE BEEN PERUSED AND FOUND THESE PERTAIN TO ASSTT. YEAR 2001-02 WITH DEC LARATION OF MEAGER INCOME OF AROUND RS.50 000/-. ALSO NO COMPUTATION O F INCOME WAS FILED ALONG WITH RETURNS OF INCOME AND NO COPIES OF CAPITAL ACCOUNT WERE FILED. NO BANK ACCOUNT OF THE PARITIES HAS BEE N FILED BY THE ASSESSEE. THEREFORE THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED. IN VIEW OF ABOVE IT APPEARS THAT THE DEPOSITORS WE RE NOT AVAILABLE AT THEIR RESPECTIVE ADDRESSES. NONE OF THE DEPOSITORS IS RESIDING AT THE ADDRESS GIVEN BY THE BANK. REGISTERED NOTICES WERE SENT TO CONFIRM THE EXISTENCE OF THE DONORS BUT OF NO USE. IT IS ALSO N OTICED THAT ALL THE DEPOSITORS WERE HAVING ACCOUNTS WITH PEOPLE COOPERA TIVE BANK ARYA NAGAR KANPUR AND FREQUENT TRANSFER OF FUNDS TO EAC H OTHER ACCOUNTS ARE NOTICED. OFTEN CASH WAS DEPOSITED IN THE ONE OF THE DEPOSITOR ACCOUNT WHICH WAS ROUTED TO NUMBER OF OTHER ACCOUNT S AND FROM ONE AMONG THE ACCOUNTS CHEQUES WERE ISSUED TO THE BENE FICIARIES. THE ACCOUNTS WERE INTRODUCED BY SHRI MANOJ SHUKLA IN MO ST OF THE CASES. THE ADDRESS OF THE SHRI MANOJ SHUKLA WAS ALSO FOUND TO BE BOGUS. THE CASH WAS INTRODUCED IN ONE OF THE ACCOUNTS AND THEN ROUTED THE SAME TO THE DIFFERENT ACCOUNTS. 12 THEREFORE IN VIEW OF ABOVE DISCUSSION A SUM OF RS .10 00 000/- IS CONSIDERED AS UNEXPLAINED DEPOSITS AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. (RS.10 00 000) . 8. ON APPEAL THE LD.CIT(A) DELETED THE ADDITION OB SERVING AS UNDER : 9. THE AO HAS FORWARDED THE REPORT IN RESPECT OF U NEXPLAINED ENTRIES FOR WHICH ADDITION OF RS.10 00 000/- WAS MA DE BUT HOWEVER NO COMMENTS HAVE BEEN FURNISHED IN RESPECT OF SAID UNE XPLAINED LOAN STATED TO BE RECEIVED FROM SHRI RAJIV SHUKLA AND SH RI ASHISH PANDEY. IT SEEMS THAT THE ADDITION WAS MADE BY AO FOR WANT OF COPY OF RETURN AND BANK ACCOUNT OF THE LENDER AT THE ASSESSMENT ST AGE. THE AO RELIED ON CERTAIN GENERAL INFORMATION WHICH IS IRRELEVANT TO THE SPECIFIC TRANSACTION OF LOAN OF RS.10 LAKHS BETWEEN THE APPE LLANT AND SHRI RAJIV SHUKLA AND SHRI ASHISH PANDEY. AS PER THE ACC OUNTS AND AS PER THE RECORD THE AMOUNT OF RS.10 LAKHS HAS BEEN RECO RDED AS ADVANCE RECEIVED AGAINST BOOKING OF FLATS FOR WHICH NECESSA RY DOCUMENTS WERE FILED BEFORE AO BUT THE ADDITION HAS BEEN MADE BY A O AS UNEXPLAINED DEPOSIT IN THE HANDS OF THE APPELLANT. THE AO HAS D OUBTED THE CREDITWORTHINESS OF MR. RAJIV SHUKLA AND MR. ASHISH PANDEY BOTH THE DEPOSITORS. HOWEVER IT IS ON RECORD THAT BOTH THES E PERSONS WERE ASSESSED TO TAX AND THEIR PANO. WAS AVAILABLE WITH THE AO. THE ABSENCE OF A CONCLUDING ENQUIRY ON THE POINT OF CRE DITWORTHINESS DOES NOT ESTABLISH OR INDICATE THAT THEY WERE MAN WITHOU T MEANS. IT IS HELD IN THE CASE OF M/S KAMAL MOTORS VS. CIT 131 TAXMAN (RAJ.) THAT 'WHEN THE CASH CREDITOR IS AN INCOME-TAX ASSESSEE IT CANNOT BE SAID THAT HE IS NOT A MAN MEANS ' . IN THIS PARTICULAR CASE THE TRANSACTIONS HAVE TAKEN PLACE THROUGH BANKING CHANN ELS AND THE IDENTITY OF THE PERSONS ALSO REMAINS CONFIRMED. THE REFORE I DO NOT FIND A FIT CASE WHERE SECTION 68 CAN BE APPLICABLE. IT IS SEEN THAT THE APPELLANT HAS FURNISHED DOCUMENTS WHICH SHOW THAT S HRI RAJIV SHUKLA AND SHRI ASHISH PANDEY HAD CONFIRMED THE TRANSACTIO N OF DEPOSIT TO THE APPELLANT THAT HE WAS ASSESSED TO TAX AT THE T IME OF TRANSACTION AND THAT THE SAID TRANSACTION HAS TAKEN PLACE THROU GH BANKING CHANNEL. I FIND THAT THE ADDITION MADE BY AO IS WITHOUT BASI S. THE APPELLANT HAS DISCHARGED ITS ONUS AND DULY EXPLAINED THE DEPO SITS OF RS.10 LAKHS FROM SHRI RAJIV SHUKLA AND ASHISH PANDEY. CONSIDERI NG THE LEGAL POSITION IN THIS BEHALF AS LAID DOWN IN THE DECISIO N IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD. (1986) 159 ITR PAG E 78(SC) THE 13 AO IS DIRECTED TO DELETE THE ADDITION. THUS GROUND NO.(III)(A) OF APPEAL IS ALLOWED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS WELL SETTLED T HAT IN ORDER ;TO DISCHARGE THE ONUS UNDER SECTION 68 OF THE ACT THE ASSESSEE MUST PROVE THE FOLLOWING: (I) THE IDENTITY OF THE CREDITOR (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONE Y AND (III) THE GENUINENESS OF THE TRANSACTION. AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLIS H PRIMA FACIE THE AFORESAID THE ONUS SHIFTS TO THE DEPARTMENT. IN OU R CONSIDERED OPINION THE MERE FURNISHING OF PARTICULARS OR THE MERE FACT OF PAYMENT BY AN ACCOUNT PAYEE CHEQUE OR THE MERE SUBMISSION OF A CONFIRMAT ORY LETTER BY THE CREDITOR IS BY ITSELF NOT ENOUGH TO SHIFT THE ONU S ONTO THE DEPARTMENT ALTHOUGH THESE FACTS MAY ALONGWITH OTHER FACTS BE RELEVANT IN ESTABLISHING THE GENUINENESS OF THE TRANSACTION. SHRI VIVEK MISH RA LD.CIT(DR) POINTED OUT THAT IN THE INSTANT CASE THE ASSESSEE HAS NOT ESTABLISHED CREDITWORTHINESS AND THE IDENTITY OF THE CREDITORS. AT THIS STAGE S HRI ASHWANI KUMAR C.A. AND SHRI SUDHINDRA JAIN C.A. LD. COUNSELS FOR THE ASSESSEE AGREED THAT THE ASSESSEE WILL PRODUCE THE CREDITORS BEFORE THE AO F OR EXAMINATION IF AN OPPORTUNITY IS ALLOWED BY THE TRIBUNAL. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE SET ASIDE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND REMAND THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFT ER EXAMINING THE CREDITORS. IT IS MADE CLEAR THAT THE ASSESSEE IS FREE TO ADDUC E EVIDENCE BEFORE THE AO IN SUPPORT OF ITS CASE. IT IS NEEDLESS TO SAY THAT THE AO WILL GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14 I.T.A.NOS.319 320 AND 321(LKW.)/2010 10. THE EFFECTIVE COMMON GROUND NO.1 RAISED BY TH E REVENUE IN THESE APPEALS READS AS UNDER : 1. THAT THE CIT(APPEALS) ERRED IN HOLDING WITHOUT ANY BASIS THAT THE INTERIM REPORT OF THE DVO WAS NOT A VALID REPO RT AND THE AO COULD NOT HAVE TAKEN COGNIZANCE OF THE SAME. 11. THE FACTS OF THESE YEARS ARE SIMILAR TO THAT O F ASSESSMENT YEAR 2002- 03 EXCEPT THE AMOUNTS OF ADDITION. THE RIVAL SUBMI SSIONS ARE ALSO SIMILAR. IN THAT VIEW OF THE MATTER THE FINDINGS GIVEN IN I.T. A.NO.318(LKW)/2010 IN RESPECT OF GROUND NO.1 SHALL APPLY TO THE COMMON GR OUND RAISED IN I.T.A.NOS.319 320 AND 321(LKW)/2010 WITH EQUAL FOR CE. ACCORDINGLY WE DISMISS I.T.A.NOS.319 320 AND 321(LKW)/2010. 12. IN THE RESULT I.T.A.NO.318(LKW)/2010 IS ALLOWE D PARTLY FOR STATISTICAL PURPOSES AND I.T.A.NOS.319 320 AND 321(LKW) ARE DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 6.1.11. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT JANUARY 6TH 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R. ITAT LUCKNOW. SRIVASTAVA.