The ITO, Indore v. Shri Ramesh Vadhwani, Indore

ITA 343/IND/2010 | 1994-1995
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 34322714 RSA 2010
Bench Indore
Appeal Number ITA 343/IND/2010
Duration Of Justice 1 year(s) 6 month(s) 2 day(s)
Appellant The ITO, Indore
Respondent Shri Ramesh Vadhwani, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 30-11-2011
Assessment Year 1994-1995
Appeal Filed On 28-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARM A A.M. PAN NO. : 18-118-PZ1581 I.T.A.NO.343 & 344/IND/2010 A.YS. : 1994-95 & 1995-96 INCOME-TAX OFFICER SHRI RAMESH WADHWANI 3(1) VS 30-31 SADHU NAGAR INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : 18-118-PZ1581 C.O.NOS. 12 & 13/IND/2010 (ARISING OUT OF I.T.A.NOS.343 & 344/IND/2010) A.YS. : 1994-95 & 1995-96 SHRI RAMESH WADHWANI INCOME-TAX OFFICER 30-31 SADHU NAGAR VS 3(1) INDORE. INDORE. CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SHRI ARUN DEWAN SR. DR ASSESSEE BY : SHRI P.N. DIXIT AND SHRI S.S.SHEETAL ADVOCATES DATE OF HEARING : 29.11.2011 DATE OF PRONOUNCEMENT : 30.11.2011 -: 2: - 2 O R D E R PER R. C. SHARMA A.M. THESE ARE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEARS 1994-95 & 1995-96. 2. AS COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE YEARS THE SAME ARE HEARD TOGETHER AND ARE NOW DECI DED BY THIS CONSOLIDATED ORDER. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAG ED IN THE ACTIVITY OF BUILDING CONSTRUCTION AND FINANCING . THERE WAS SEARCH AT THE ASSESSEES BUSINESS PREMISES. DURING COURSE OF SEARCH THE VALUATION OF BUILDING UNDER CONSTRUCTIO N WAS GOT DONE FROM DVO AND DIFFERENCE WAS FOUND IN THE COST DEBITED BY THE ASSESSEE IN ITS REGULAR BOOKS OF ACCOUNT VIS --VIS VALUATION ARRIVED AT BY THE DVO. THE AO MADE ADDITI ON IN RESPECT OF DIFFERENCE IN VALUE. THE SAME WAS CONFI RMED BY THE LD. CIT(A) AND THE ASSESSEE WAS IN APPEAL BEFORE TH E TRIBUNAL. 4. THE TRIBUNAL VIDE ITS ORDER DATED 31.8.2005 RESTORE D THE MATTER BACK TO THE FILE OF CIT(A) FOR DECIDING AFRESH AFTER -: 3: - 3 GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. IN THE SECOND ROUND OF APPEAL THE LD. CIT(A) DELETED THE ADDITIO N AFTER RETAINING 10 % PROFIT ON SUCH DIFFERENCE AFTER HAVI NG THE FOLLOWING OBSERVATIONS :- 4.10.7 IN THIS BACKGROUND THE ALTERNATIVE CONTENTION OF THE APPELLANT DESERVES SERIOUS CONSIDERATION. IT IS NOT IN DISPUTE THAT APPELLANT WAS A CONSTRUCTION CONTRACTOR AND WAS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SALE OF PROPERTIES AND ANY UNEXPLAINED EXPENDITURE INCURRED AS DETERMINED BY DVO WHATEVER BE ITS MERIT WOULD BE LIABLE TO BE CONSIDERED FOR A SIMULTANEOUS AND EQUAL DEDUCTION U/S 37(1) OF THE ACT BEING BUSINESS EXPENDITURE AS PER CLEAR JUDICIAL OPINION AVAILABLE AT THE RELEVANT TIME AS APPLICABLE FOR BOTH THE ASSESSMENT YEARS 1994-95 AND 1995-96 AS HAS BEEN DULY EMPHASIZED IN WRITTEN -: 4: - 4 SUBMISSIONS FILED. THUS IT MAY ALSO BE OBSERVED THAT THE AOS ACTION IN MAKING TOTAL ADDITION FOR UNEXPLAINED EXPENDITURE WOULD BE ALSO NOT SUSTAINABLE KEEPING IN VIEW THE PREVALENT TRADE PRACTICE IN APPELLANTS LINE OF BUSINESS WHERE THE ADVANCES WERE RECEIVED FROM THE BUYERS OF THE PROPERTY AT DIFFERENT STAGES. 4.10.8 THUS THE ONLY ISSUE ON WHICH A VALID ADDITION CAN BE MADE AND SUSTAINED IN THESE CIRCUMSTANCES KEEPING IN VIEW THE DECISION OF HON'BLE M.P.HIGH COURT IN THE CASE OF BALCHAND AJIT KUMAR AND MANMOHAN SADANI (SUPRA) WOULD BE FOR NET PROFIT ADDITION ON SUCH UNACCOUNTED SALE PROCEEDS REALIZED BY THE APPELLANT FROM THE BUYERS OF PROPERTIES. THE AO HAS MADE ADDITION BASED ON DVOS REPORT FOR DIFFERENCE AND THE COST OF CONSTRUCTION -: 5: - 5 DETERMINED BY THE DVO AND REALIZED BY THE APPELLANT AT RS. 25.67 LAKHS. IN THE REMAND REPORT SUBMITTED BY AO IN CONNECTION WITH THE ASSESSMENT YEAR 1994-95 IT HAS BEEN RECOGNIZED THAT 9 OF THE BUYERS HAVE CATEGORICALLY STATED THAT THE FINISHING WORK WAS NOT DONE BY THE APPELLANT AND SUCH BUYERS GOT IT EXECUTED THROUGH OTHER CONTRACTORS. IN THESE CIRCUMSTANCES THERE IS NO ALTERNATIVE BUT TO ARRIVE AT A REASONABLE ESTIMATION FOR SUCH EXCESS PRICE REALIZED AND CONSIDERING THE ADDITION FOR UNEXPLAINED INVESTMENT MADE AS AFORESAID AT RS. 34.26 LAKHS FOR ASSESSMENT YEAR 1994-95 AND RS. 25.68 LAKHS FOR ASSESSMENT YEAR 1995-96 AND TAKING INTO CONSIDERATION THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER AND OTHER CONTENTIONS OF THE APPELLANT. THE SAME IS DIRECTED TO -: 6: - 6 BE TAKEN AT RS. 30 LAKH AND RS. 22 LAKHS FOR 1994-95 AND 1995-96 RESPECTIVELY. 4.10.9 FURTHER PROVISION OF SECTION 44AD CANNOT BE SQUARELY APPLIED TO THE FACTS OF THE APPELLANTS CASE AS THE APPELLANT IS NOT ENGAGED IN EXECUTION OF CIVIL CONTRACT WORK ON BEHALF OF OTHER AGENCIES. ON CONSIDERATION OF MATERIAL ON RECORD NET PROFIT RATE OF 10 % ON THE AFORESAID AMOUNT IS DIRECTED TO BE APPLIED AND THE ADDITION WOULD ACCORDINGLY STAND CONFIRMED TO THE EXTENT OF RS. 2 20 000/- FOR A 1995-96 IN PLACE OF RS. 25 66 794/- ADDED BY AO AND THE APPELLANT SHALL BE ENTITLED TO CONSEQUENTIAL RELIEF. 5. REVENUE IS IN APPEAL BEFORE US AND ASSESSEE HAS ALS O FILED CROSS OBJECTION AGAINST THE SAME. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT BUILDING UNDER CONSTRUCTION CONSTITUTED STOCK IN TRADE OF ASSESSEE. DURING COURSE OF SEARCH VALUATI ON OF -: 7: - 7 BUILDING UNDER CONSTRUCTION WAS UNDERTAKEN BY THE DEPARTMENT AND THE DIFFERENCE IN THE COST OF BUILDI NG DEBITED IN THE BOOKS OF ACCOUNT VIS--VIS VALUATION ARRIVED AT BY THE DVO WAS ADDED IN ASSESSEES INCOME. THE LD. CIT(A) FOUND THAT WHATEVER ADDITIONAL VALUATION HAS BEEN ARRIVED BY DVO THE ASSESSEE MIGHT HAVE INCURRED ON CONSTRUCTION OF BUILDING THE SAME WAS ELIGIBLE FOR DEDUCTION U/S 37(1) AS BU SINESS EXPENDITURE. PROVISO TO SECTION 69C WAS INCORPORATE D IN THE STATUTE BOOK BY FINANCE (NO.2) ACT 1998 W.E.F. AS SESSMENT YEAR 1999-2000 AND SINCE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION WERE 1994-95 AND 1995-96 THE ASSESSE E CANNOT BE DENIED BENEFIT OF DEDUCTION AS BUSINESS EXPENDIT URE IN THE YEARS PRIOR TO ASSESSMENT YEAR 1999-2000. THUS ADD ITION IF ANY WARRANTED U/S 69C WILL BE ALLOWED AS A DEDUCTIO N U/S 37(1). BY FOLLOWING THE DECISIONS OF HON'BLE M.P. H IGH COURT IN THE CASE OF BALCHAND AJIT KUMAR AND 7 ITJ 324 (MP) AND MAN MOHAN SODANI 11 ITJ 5 THE LD. CIT(A) RETAINED THE ADDITION TO THE EXTENT OF NET PROFIT ON SUCH UNACCOUNTED SALE PROCEEDS REALIZED BY THE ASSESSEE FROM THE BUYER OF THE PROP ERTY. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR R ETAINING THE -: 8: - 8 ADDITION TO THE EXTENT OF 10 % PROFIT WHICH THE AS SESSEE CAN REASONABLY EARN ON SUCH REALIZATION OF EXCESS COST ALLEGED TO BE INCURRED ON CONSTRUCTION. 7. IN THE CROSS OBJECTIONS THE ASSESSEE HAD ALLEGED L D. CIT(A)S ACTION IN RETAINING THE ADDITION OF 10 % O F THE PROFIT. IN VIEW OF THE DECISIONS OF THE JURISDICTIONAL HIGH COURT AS DISCUSSED ABOVE WE DO NOT FIND ANY MERIT IN ASSESS EES CONTENTION FOR DELETING THE ADDITION SUSTAINED BY T HE LD. CIT(A) ON ACCOUNT OF PROFIT EARNED ON SUCH EXCESS COST/REA LIZATION. 8. IN THE RESULT BOTH THE APPEALS OF THE REVENUE AND CROSS OBJECTIONS ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH NOVEMBER 2011. CPU* 2930