The DCIT, Circle-2,, RAJKOT-GUJARAT v. Shri Sevaram Anandram Tirthwani,, RAJKOT-GUJARAT

ITA 334/RJT/2008 | 2005-2006
Pronouncement Date: 23-12-2010 | Result: Dismissed

Appeal Details

RSA Number 33424914 RSA 2008
Assessee PAN AACFK1870E
Bench Rajkot
Appeal Number ITA 334/RJT/2008
Duration Of Justice 2 year(s) 6 month(s) 11 day(s)
Appellant The DCIT, Circle-2,, RAJKOT-GUJARAT
Respondent Shri Sevaram Anandram Tirthwani,, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 23-12-2010
Date Of Final Hearing 20-12-2010
Next Hearing Date 20-12-2010
Assessment Year 2005-2006
Appeal Filed On 11-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 334/RJT/2008 (ASSESSMENT YEAR 2005-06) DCIT CIR.2 VS SHRI SEVARAM ANANDRAM TIRTHWANI RAJKOT PROP ANAND DARSHAN DINWANPARA MAIN ROAD OPP POST OFFICE RAJKOT PAN : AACFK1870E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVINASH KUMAR RESPONDENT BY: SHRI SANJAY SHAH O R D E R A.L. GEHLOT : THIS IS AN APPEAL FILED BY THE REVENU E AGAINST THE ORDER DATED 31- 03-2008 PASSED BY THE CIT(A)-III RAJKOT FOR THE AS SESSMENT YEAR 2005-06. THE FOLLOWING EFFECTIVE GROUNDS ARE RAISED IN THE APPEA L: (I) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINE D INVESTMENT U/AS 69B OF THE ACT OF RS.14 30 938/-. (II) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADDER ON ACCOUNT OF INCOME F ROM HOUSE PROPERTY OF RS.26 880/-. (III) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF UNVERIFIAB LE PURCHASE OF RS.14 032/-. (IV) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS LABO UR CLAIMED OF RS.46 000/-. (V) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS COMM ISSION CLAIMED OF RS.77 140/-. ITA NO.334/RJT/2008 2 (VI) THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION TO GP ON ACCOUNT OF UNVERIFIA BLE SALES OF RS.50 000/-. 2. THE BRIEF FACTS OF GROUND NO.1 ARE THAT THE ASSE SSEE IS ENGAGED IN BUSINESS OF MANUFACTURING OF CHANIYA CHOLI AND CIVI L CONSTRUCTION. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE A REFERENCE U/S 142A TO ESTIMATE THE VALUE OF INVESTMENT MADE BY THE ASSESS EE IN RESPECT OF PURCHASES OF THREE PLOTS. THE ASSESSING OFFICER MADE ADDITIO N U/S 69B OF RS.14 30 938 AS PER VALUATION REPORT AND COST REFLECTED IN THE BOOK S OF ACCOUNT. THE CIT(A) DELETED THE SAID ADDITION BY OBSERVING THAT REFEREN CE WAS INVALID AND THEREFORE THE ADDITION MADE ON AN INVALID REFERENCE DOES NOT SURVIVE. ON MERIT THE CIT(A) NOTED THAT THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE AND PURCHASE OF PLOTS OF LAND HAS BEEN TREATED AS STOCK IN TRADE. THE ASSES SEE HAS DISCLOSED BUSINESS PROFIT ON SALE OF PLOT OF LAND DURING THE YEAR UNDE R CONSIDERATION. THE CIT(A) RELIED UPON A JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS STAR BUILDERS 294 ITR 338 (GUJ) WHEREIN IT WAS HELD THAT THE BASIC ISSUE INVOLVED IN THE REFERENCE IS WHETHER THERE CAN BE A NY ADDITION ON ACCOUNT OF THE VALUATION REPORT OF THE DVO THAT THE ASSESSEE HAS I NVESTED UNEXPLAINED INCOME. ASSUMING BUT NOT ACCEPTING THAT SOME UNEXPLAINED IN COME HAS BEEN INVESTED IN THE CONSTRUCTION THE FACT REMAINS THAT THE BUSINES S OF THE ASSESSEE IS CONSTRUCTION. IF ADDITION IS MADE ON ACCOUNT OF UN EXPLAINED INCOME IN THE INVESTMENT THAT WILL RISE TO THE COST OF THE CONST RUCTION AND THE RESULT WILL REMAIN THE SAME I.E. ZERO. THE CIT(A) ALSO HELD THAT THE VALUE OF PLOT OF LAND MAY DIFFER FROM SITE TO SITE; PLOT TO PLOT DEPENDING UP ON LARGENESS OF AREA DISTANCE OF SITE FROM APPROACH ROAD; NARROW STRIP OF LAND WITH VERY SMALL FRONTAGE ETC. THE CIT(A) FURTHER OBSERVED THAT THE DIFFERENCE IN COST AS ESTIMATED BY THE VALUATION OFFICER AND AS REFLECTED IN BOOKS WAS IN NARROW MAR GIN SAY OVERALL DIFFERENCE IS JUST 13.26%. THE CIT(A) RELIED UPON THE ORDER OF I TAT RAJKOT BENCH IN THE CASE OF SHRI OMKARSINH M JADEJA IN ITA NO.687/RJT/2002 W HEREIN IT HAS BEEN HELD THAT DIFFERENCE OF 20% CANNOT BE CONSIDERED AS VERY HIGH AND DOES NOT JUSTIFY ADDITION AND HENCE DIFFERENCE OF LESS THAN 20% I.E. 13.26% CAN BE IGNORED. THE ITA NO.334/RJT/2008 3 CIT(A) FURTHER HELD THAT THE ASSESSING OFFICER DID NOT DOUBT THE BOOKS RESULTS. THEREFORE ADDITION CANNOT BE MADE MERELY ON THE BA SIS OF VALUATION REPORT. THE ASSESSING OFFICER DID NOT FIND ANY DEFECT IN THE RE GULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEEE. THE CIT(A) HAS RELIED UPON THE ORDER OF THE ITAT RAJKOT BENCH IN THE CASE OF ACIT VS NALANDA HOUSING DEVELOPMENT LTD (2005) 98 TTJ (RAJ) 518 AND ALSO IN THE CASE OF ITO VS M/S ROYAL ENTERPRISES IN ITA NO.282/RAJKOT/2001 286 & 287/RJT/03 HAS HELD THAT NO ADDITION CAN BE MADE ON THE BASIS OF VALUATION REPORT WHICH IS JUST AN ESTIMATE PREPARED BY A TECHNICAL PERSON . OR WITHOUT REJECTING THE BOOKS OF ACCOUNT UNDER SECTION 145. 3. THE LD.DR SUBMITTED THAT EVEN A REFERENCE IS INV ALID THE ASSESSING OFFICER IS EMPOWERED TO USE THE SAID VALUATION REPORT FOR M AKING THE ASSESSMENT. THE LD.DR FURTHER SUBMITTED THAT THE JUDGMENTS RELIED U PON BY THE CIT(A) ARE DISTINGUISHABLE ON FACTS. THE LD.DR RELIED UPON TH E ORDER OF THE ASSESSING OFFICER AND IN SUPPORT HE PLACED RELIANCE ON THE JUDGMENT OF KERALA HIGH COURT IN THE CASE OF CAPRICON SHOPPING COMPLEX VS CIT 264 ITR 64 7 (KER). 4. THE LD.AR ON THE OTHER HAND REITERATED THE SUBM ISSIONS WHICH WERE MADE BEFORE THE CIT(A). HE SUBMITTED THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS HIS OWN GOT VALUED TH E PLOTS FROM GOVERNMENT APPROVED VALUER WHEREIN THE COST HAS BEEN SHOWN LOW ER THAN THE COST DECLARED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED COPIES OF VALUAT ION REPORT ALONGWITH COMPARABLE CHART AND COPIES OF LEDGER ACCOUNT ETC. THE LD.AR ALSO RELIED UPON THE ORDERS OF ITAT ON WHICH THE CIT(A) HAS RELIED U PON. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE DECISIONS CITED. SECTION 142A(1) PROVI DES THAT FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER THIS ACT WHERE THE ESTIM ATE OF VALUE OF INVESTMENT REFERRED TO IN SECTION 69B OF THE ACT IS REQUIRED T O BE MADE THE ASSESSING OFFICER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMA TE OF SUCH VALUE. SECTION 69B ITA NO.334/RJT/2008 4 PROVIDES THAT WHERE IN ANY FINANCIAL YEAR THE ASSES SEE HAS MADE INVESTMENT AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDE D ON MAKING SUCH INVESTMENT EXCEEDS THE AMOUNT RECORDED IN THIS BEHALF IN BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE ASSESSEEE OFFERS NO EXPLANATIO N ABOUT SUCH EXCESS AMOUNT OVER THE E4XPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THE EXCESS AMOUNT M AY BE DEEMED TO BE THE INCOME OF THE ASSESSEE. IF WE READ BOTH THE SECTIO NS TOGETHER I.E. SECTIONS 69B AND 142A WE FIND THAT REFERENCE U/S 142A CAN BE MAD E ONLY WHEN FIRST SATISFY THE CONDITIONS LAID DOWN IN SECTION 69B OF THE ACT. TH E FIRST CONDITION OF THAT SECTION IS THAT THE ASSESSING OFFICER HAS TO RECORD THE FIN DING THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENT EXCEEDS THE AMOUNT RECORD ED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE S ECOND CONDITION IS THAT EVEN AFTER RECORDING THE SATISFACTION THE ASSESSING OFFI CER IS TO ASK THE ASSESSEE NECESSARY EXPLANATION AND IF ASSESSEE HAS FAILED TO EXPLAIN ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY THE ASSESSEE I S NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THEN ONLY THE EXCES S AMOUNT CAN BE ADDED TO THE TOTAL INCOME. ON PERUSAL OF RECORD WE DO NOT FIND THAT THE ASSESSING OFFICER HAS RECORDED THE FINDING THAT THE AMOUNT EXPENDED BY TH E ASSESSEE FOR PURCHASE OF PLOTS WAS EXCESSIVE IN COMPARISON TO THE COST RECOR DED IN THE BOOKS OF ACCOUNT. EVEN IF IT IS PRESUMED THAT SUCH SATISFACTORY FINDI NG IS RECORDED BY THE ASSESSING OFFICER THEN THE ASSESSEE HAS FURNISHED THE NECESS ARY EXPLANATION SUPPORTED BY THE REGISTERED VALUER AND OTHER COMPARATIVE CHART A ND OTHER MATERIALS. THE ASSESSING OFFICER DID NOT POINT OUT ANYTHING AS TO HOW HE WAS NOT SATISFIED WITH THIS EXPLANATION. IN OTHER WORDS THERE IS NO FIND ING FROM THE ASSESSING OFFICER THAT EXPLANATION FURNISHED BY THE ASSESSEE IS NOT S ATISFACTORY. IN THE LIGHT OF ABOVE DISCUSSION WE FIND THAT THE CIT(A) HAS RIGHT LY HELD THAT UNDER THE CIRCUMSTANCES THE REFERENCE U/S 142A MADE BY THE A SSESSING OFFICER IS NOT IN ACCORDANCE WITH LAW. WHEN THE REFERENCE ITSELF IS NOT IN ACCORDANCE WITH LAW THE ADDITION CANNOT BE MADE ON ACCOUNT THIS INVALID REF ERENCE. WE DO NOT AGREE WITH THE CONTENTION OF THE LD.DR THAT AN INVALID REFEREN CE CAN ALSO BE USED AGAINST THE ASSESSEE FOR MAKING ASSESSMENT. THEREFORE THIS CO NTENTION OF THE LD.DR IS ITA NO.334/RJT/2008 5 REJECTED. WE HAVE ALSO NOTICED THAT THE PLOTS OF T HE LAND PURCHASED BY THE ASSESSEE HAVE BEEN TREATED AS STOCK IN TRADE. IT I S ALSO AN ADMITTED FACT THAT THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOU NT. IN THIS REGARD WE ARE OF THE VIEW THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT S UCH ADDITION CANNOT BE MADE. IN VIEW OF THE ABOVE WE DO NOT FIND ANY ERROR IN TH E ORDER OF CIT(A). GROUND NO.(I) OF THE REVENUE FAILS. 6. THE BRIEF FACTS OF THE SECOND GROUND ARE THAT DU RING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ONE OF THE FLATS USED BY THE ASSESSEE FOR SELF OCCUPATION AND IT WAS RENTED ONE. THE VALUATION OFFICER HAS ESTIMATED THE NOTIONAL RENT AT RS.38 400 P.A. THE ASSESSING OFFICER ADOPTED THE SAID VALUE AND CONSIDERING THE DEDUCTION U/S 24 OF THE ACT MADE AN ADDITION OF RS.26 880 UNDER THE HEAD INCOME FROM HOUSE PROPERT Y AS DEEMED TO BE LET OUT. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING O FFICER THAT THE SAID FLAT WAS USED FOR STORING TRADING GOODS. THE ASSESSING OFFI CER MADE THE ADDITION OBSERVING THAT FLAT WAS NOT USED FOR ANY PURPOSE AN D IS LYING VACANT. THE CIT(A) DELETED THE SAID ADDITION ACCEPTING ASSESSEES CONT ENTION THAT THE FLAT WAS USED FOR STORING TRADING GOODS. 7. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES WE FIND THAT THE SAID FLAT WAS KEPT FOR THE PURPOSE OF STORAGE OF TR ADING GOODS USED FOR THE PURPOSE OF BUSINESS. THEREFORE THE DEEMED INCOME CANNOT BE TAKEN FROM THE SAID FLAT AS INCOME FROM HOUSE PROPERTY. WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 8. THE BRIEF FACTS OF THIRD GROUND ARE THAT THE ASS ESSING OFFICER MADE ADDITION OF RS. 14 032 AS THE ASSESSEE DID NOT FURNISH THE P ARTICULARS OF THE SELLER. THE PAYMENTS WERE MADE IN CASH. THE CIT(A) DELETED THE SAID ADDITION OBSERVING THAT THE PURCHASES FROM RAJESH SILK MILLS IS SUPPOR TED BY PROPER DOCUMENT OF TRANSPORTATION OCTROI ETC. THE CASH PAYMENT MADE WAS BELOW RS.20 000. AFTER ITA NO.334/RJT/2008 6 HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 9. THE FOURTH GROUND IS IN RESPECT OF DISALLOWANCE OF LABOUR CHARGES AMOUNTING TO RS.46 000. THE ASSESSING OFFICER MADE ADDITION BECAUSE THE TWO LABOURERS WERE NOT TRACEABLE AND ONE OF THE LABOURE RS HAS DENIED THE TRANSACTION. THE CIT(A) DELETED THE SAID ADDITION OBSERVING THAT THE ASSESSING OFFICER HAS CONSIDERED THE ISSUE ON MERE SUSPICION. THE LABOURERS HAVE NO PERMANENT ADDRESS. THEREFORE NEGATIVE CANNOT BE A SKED TO PROVE. THE LABOUR PAYMENT DULY EVIDENCE BY PAYMENT VOUCHERS. THE ASS ESSEE FURNISHED CONFIRMATION OF THE PAYMENT. AFTER HEARING THE LEA RNED REPRESENTATIVES OF THE PARTIES WE DO NOT FIND ANY ERROR IN THE ORDER OF T HE CIT(A). 10. THE FIFTH GROUND IS IN RESPECT OF ADDITION OF R S. 77 140 ON ACCOUNT OF BOGUS COMMISSION CLAIM. DURING THE ASSESSMENT PROC EEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SOLD PLOTS OF LAND TO SHRI SUMIT KANERIA AND HAS PAID BROKERAGE OF RS.77 140 TO SMT. USHABEN BHI NDORA. THE ASSESSING OFFICER RECORDED THE STATEMENTS OF SHRI SUMIT KANER IA AND SMT. USHABEN BHINDORA AND FORMED AN OPINION THAT THERE WAS NO MI DDLEMAN AND NO BROKERAGE PAYMENT WAS MADE THE CIT(A) DELETED THE SAID ADDI TION OBSERVING THAT THE PAYMENT WAS MADE THROUGH BANKING CHANNEL AND TDS HA S ALSO BEEN DEDUCTED. THE BROKER HAS RAISED THE BILL WHICH IS INCLUSIVE O F SERVICE TAX. THE FACTS HAVE BEEN DEPOSED IN A SWORN AFFIDAVIT AND STATEMENT OF THE BROKER. THERE IS NO EVIDENCE TO SUGGEST THAT THE PAYMENT IN QUESTION WA S REVERTED BACK TO THE ASSESSEE. THE CIT(A) HAS ALSO RECORDED HE FACT THA T THE ASSESSING OFFICER HAS TOOK A FEW PORTION OF THE STATEMENTS AND IGNORED TH E REST TO ACCOMMODATE HIS FINDING. 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES RECORD PERUSED. WE FIND THAT THE FINDING OF CIT(A) IS BASED ON RECO RD. THE LD.AR FILED A COPY OF STATEMENT OF SMT. USHABEN BHINDORA RECORDED U/S 131 DATED 21 ST NOVEMBER ITA NO.334/RJT/2008 7 2007 WHEREIN SHE HAS CLEARLY ADMITTED WHILE REPLYIN G TO THE QUESTION THAT SHE RECEIVED 2% COMMISSION FROM THE ASSESSEE. THE COMM ISSION WAS PAID BY THE ASSESSEE AND NOT BY THE PURCHASER. THEREFORE THE FACTS RECORDED BY THE ASSESSING OFFICER IS NOT RELEVANT THAT THE PURCHASE R DID NOT ENTER INTO THE TRANSACTION THROUGH BROKER. AFTER CONSIDERING THE FACTS OF THE CASE WE DO NOT FIND ERROR IN THE ORDER OF THE CIT(A). 12. THE SIXTH GROUND IS IN RESPECT OF DELETION OF A DDITION ON ACCOUNT OF GROSS PROFIT. THE ASSESSING OFFICER MADE A LUMP SUM ADHO C ADDITION OF RS.50 000 TO PLUG THE LEAKAGE OF REVENUE. THE CIT(A) DELETED TH E SAID ADDITION AFTER NOTING THE FINDING THAT THE ASSESSING OFFICER DID NOT DOUB T THE PURCHASES AND SALE OR TRADING RESULTS. THE ASSESSING OFFICER DID NOT REJ ECT BOOKS OF ACCOUNT. WITHOUT REJECTING BOOKS OF ACCOUNT AN ADHOC ADDITION CANNO T BE MADE. 13. AFTER HEARING THE LEARNED REPRESENTATIVES OF TH E PARTIES WE ARE IN AGREEMENT WITH THE FINDING OF THE CIT(A) THAT WITHO UT REJECTING THE BOOKS OF ACCOUNT THE ASSESSING OFFICER IS NOT EMPOWERED TO MAKE ADHOC ADDITION. THE ORDER OF CIT(A) IS CONFIRMED. 14. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-12-2010. SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 23 RD DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-III RAJKOT BY ORDER 4. THE CIT-II RAJKOT 5. THE DR (TRUE COPY) ASSTT.REGISTRAR ITAT RAJKOT