Shri Praful A.Shah, Surat V. The Dy.CIT.,Cent.Circle-1., Surat

CO 34/AHD/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8187 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained investment; Cost of acquisition; Valuation report
• Section: 143(3); 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER IT(SS)A NO. 649/AHD/2011 ASSESSMENT YEAR :2007-2008 & C.O. NO.34/AHD/2012 ASSESSMENT YEAR :2007-2008 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT SHRI PRAFUL A SHAH GARDEN MILLS COMPOUND, SAHARA GATE, SURAT V/S . V/S. SHRI PRAFUL A SHAH GARDEN MILLS COMPOUND, SAHARA GATE, SURAT THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT PAN NO. AHHPA2727C (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI SHELLEY JINDAL, CIT.D.R. /BY ASSESSEE SHRI J.P. SHAH, A.R. /DATE OF HEARING 10.01.2013 /DATE OF PRONOUNCEMENT 24.01.2013 O R D E R PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE AND C.O. OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF CIT(A )-II, AHMEDABAD, DATED 23.09.2011 FOR ASSESSMENT YEAR 2007-2008. THE REVE NUES APPEAL AND ASSESSEES C.O. WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 2 2. BRIEF FACTS AS CULLED OUT FROM THE ORDER ARE AS UNDER: A SEARCH ACTION U/S 132 WAS CARRIED OUT AT THE BUSI NESS AND RESIDENTIAL PREMISES OF GARDEN GROUP OF CASES ON 12.6.2008. IN VIEW OF THE SEARCH ACTION NOTICE U/S. 153A WAS ISSUED ON 19.11.2008 AN D IN RESPONSE TO WHICH ASSESSEE FURNISHED RETURN OF INCOME ON 15.04.2009 D ECLARING TOTAL INCOME OF RS.1,40,75,159/-. THEREAFTER THE ASSESSMENT WAS FR AMED U/S 143(3) R.W.S. 153A VIDE ORDER DATED 31.12.2010 AND THE INCOME WAS DETERMINED AT RS.1,55,02,410/- BY MAKING ADDITION TO RETURNED INC OME. AGGRIEVED BY THE ACTION OF A.O., THE ASSESSEE CARRIED THE MATTER BEF ORE CIT(A). CIT(A) VIDE ORDER DATED 23.9.2011 PARTLY ALLOWED THE APPEAL. A GGRIEVED BY THE RELIEF GRANTED BY CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. THE EFFECTIVE GROUND READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION MADE OF RS.14,26,250/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PAINTING PURCHASED BY THE ASSESSEE EVEN THOUGH THE AO HAS ESTABLISHED IJN THE BODY OF THE ASSESSMENT ORDER THAT THE SAID INVESTMENT IN PAINTINGS ARE UNE XPLAINED INVESTMENT AND ARE NOT RECORDED IN THE BOOKS OF ACC OUNTS OF THE ASSESSEE. 3. DURING THE COURSE OF SEARCH LARGE NUMBER OF WORK S OF ART WERE FOUND AT THE RESIDENTIAL AND OFFICE PREMISES OF THE ASSESSEE GROUP. THE PAINTINGS WERE GOT VALUED BY MR. YANDE, HEAD OF DEPT., DRAWING AND PAINTING IN J.J. SCHOOL OF ARTS, MUMBAI. THIS LIST OF PAINTINGS IS LISTED IN THE ASSESSMENT ORDER OF A.O. ASSESSEE WAS ASKED TO FURNISH EXPLANATION WITH RESP ECT TO SOURCE OF ACQUISITION OF THE PAINTING. A.O. WAS OF THE VIEW THAT THE EXPLANATION OF THE IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 3 ASSESSEE WAS NOT SATISFACTORY AND THE VALUES SHOWN BY THE ASSESSEE WAS NOT CORRECT. THE A.O., ACCORDINGLY, TREATED THE PAINTI NGS AS UNEXPLAINED VALUABLE ASSET U/S 69B AND ACCORDINGLY MADE ADDITION OF RS.1 4,26,250/-. ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A), AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION BY HOLDING AS UN DER: 5.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANTS A.R. IT IS SEEN THAT THE A DDITION HAS BEEN MADE FOR THE REASON THAT THE PAINTINGS WERE FOUND I N THE COURSE OF SEARCH AT THE PREMISES OF THE APPELLANT AT SURAT AN D MUMBAI AND THAT THE DEPARTMENT TAKEN VALUATION REPORT OF MR. Y ANDE BEING HEAD OF THE DEPARTMENT OF DRAWING AND PAINTING, J.J. SCH OOL OF ART. IT IS NOTICED THAT THE FACT THAT THE PAINTINGS WERE PURCH ASED IN THE YEAR RELEVANT TO A.Y. 2007-08 AND THAT ITS COST IS DULY RECORDED IN THE BOOKS IS NOT IN DISPUTE. HOWEVER, THE A.O. HAS WORK ED OUT UNRECORDED INVESTMENT U/S.69 IN SUCH PAINTINGS FOR WHICH HE HAS TAKEN THE VALUE OF THE RESPECTIVE PAINTINGS AS PER THE VALUATION REPORT OF WHICH WAS TAKEN BY DEPARTMENT IN AUGUST 2 008 AND HAS ADJUSTED AND REDUCED IT AT THE RATE OF 25% PER YEAR FOR DETERMINING THE VALUE FOR THE YEAR UNDER CONSIDERATION AND THER EAFTER GIVEN CREDIT FOR THE COST SHOWN IN THE BOOK IN RESPECT OF SUCH P AINTINGS AND THE DIFFERENCE IS ADDED U/S.69. HE HAS MAINLY RELIED U PON THE VALUATION REPORT OF MR. YANDE STATING THAT HE IS A SPECIALIST AND HEAD OF THE DEPARTMENT OF DRAWING AND PAINTING, J.J, SCHOOL OF ART, MUMBAI. HE HAS RELIED UPON SECTION 69 OF THE I.T. ACT AND STAT ED THAT THE CONDITIONS OF THE SAID SECTION ARE SATISFIED IN THE APPELLANT'S CASE, THAT THE INVESTMENT IN PAINTINGS ARE NOT RECORDED A ND THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY. ON THE OTHER H AND, THE APPELLANT'S A.R. POINTED OUT THAT THE PAINTINGS WER E DULY RECORDED IN THE BOOKS, NO EVIDENCE OF ANY EXTRA PAYMENT OVER AN D ABOVE THE IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 4 COST RECORDED IN THE BOOKS WAS FOUND IN THE COURSE OF SEARCH AND THAT THEREFORE, THERE IS NO JUSTIFICATION FOR HOLDI NG THAT THERE WAS ANY UNACCOUNTED INVESTMENT, IN THE ABSENCE OF ANY EVIDE NCE OF SUCH EXTRA PAYMENT. THE VALUATION MADE IS ALSO NOT APPLI CABLE AS IT IS PERSONAL OPINION OF THE ARTIST AND CANNOT BE CONSID ERED FOR THE PURPOSE OF SECTION 69 OF THE ACT. ON CONSIDERING TH E SUBMISSIONS MADE ON BEHALF OF THE APPELLANT AND THE OBSERVATION OF THE A.O. I AGREE WITH THE SUBMISSION OF THE APPELLANT. THE PAI NTINGS CANNOT BE CONSIDERED TO BE UNEXPLAINED INVESTMENT FOR THE FOL LOWING REASONS: I) THE FACT THAT THE PAINTINGS ARE ACQUIRED DURING THE YEAR AND ALSO RECORDED DURING THE YEAR UNDER CONSIDERATION I S NOT IN DISPUTE. IT IS ALSO NOT IN DISPUTE THAT THE PURCHA SE COST HAS BEEN DULY RECORDED IN THE BOOKS. THE DETAILS OF PUR CHASE OF SUCH PAINTINGS WERE ALREADY AVAILABLE IN THE ACCOUN TS, WHICH WERE FILED ALONGWITH RETURNS OF INCOME FOR RESPECTI VE YEARS EVEN PRIOR TO THE SEARCH. II) THE A.O. HAS NOT POINTED OUT ANY EVIDENCE FOUND DURING THE COURSE OF SEARCH OR IN POST SEARCH ENQUIRY TO SHOW THAT THE APPELLANT HAS MADE ANY PAYMENT FOR THE PAINTINGS IN ADDITION TO WHAT IS RECORDED IN THE BOOKS. IN THE ABSENCE OF ANY SUCH EVIDENCE THERE IS NO JUSTIFICATION FOR MAKING ANY A DDITION FOR INVESTMENT U/S.69. III) THE A.O. HAS ALSO NOT GIVEN ANY BASIS TO ARRIV E AT THE VALUE OF THE PAINTINGS FOR THE YEAR UNDER CONSIDERATION WHIC H IS DETERMINED BY HIM BY ADHOC METHOD OF ADJUSTING THE VALUE DETERMINED BY MR. YANDE IN HIS REPORT BY APPLYING 2 5% DISCOUNT PER YEAR. SUCH ADHOC DETERMINATION OF VAL UE IS NOT AT ALL JUSTIFIED. IV) THE APPELLANT HAS SHOWN THAT THE PURCHASE COST RECORDED IN BOOKS IS SUPPORTED BY BILLS OF THE PERSON FROM WHOM THE PAINTINGS WERE PURCHASED. EVEN THE A.O. HAS NOT MAD E CROSS IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 5 VERIFICATION WITH SUCH PERSONS WHOSE DETAILS WERE A LREADY AVAILABLE IN THE SUBMISSIONS OF THE APPELLANT. V) MR. YANDE IN HIS REPORT OF VALUATION OF PAINTIN GS HAS NOT GIVEN ANY BASIS FOR THE VALUE ARRIVED AT IN AUGUST 2008 B UT IT IS ONLY HIS OPINION ABOUT THE VALUE. SUCH OPINION OF THE V ALUE DOES NOT ESTABLISH THAT THERE IS ACTUAL INVESTMENT IN SU CH PAINTINGS TO THE EXTENT OF THE VALUE ARRIVED AT BY MR. YANDE OR THE ADJUSTED VALUED WORKED OUT BY THE A.O. THE VALUATION OF PAINTING/ ART WORK IS NOT LIKE DET ERMINATION OF VALUE OF ASSETS LIKE BUILDING, LAND, SHARES, COMMOD ITIES WHICH WOULD BE ON THE BASIS OF MARKET VALUE. VI) IT IS ALSO NOTICED THAT OUT OF VARIOUS PAINTIN GS FOUND AT THE TIME OF SEARCH, THE DEPARTMENT HAS ACCEPTED MANY .PAINTI NGS AS EXPLAINED AND CONSIDERED CERTAIN PAINTINGS AS UNEXP LAINED WERE AS DISCUSSED EARLIER MR. YANDE HAS ARRIVED AT HIGHER VALUE THAN THAT SHOWN BY THE ASSESSES IN THE BOOKS. THUS IT IS ACCEPTED FACT THAT THE PAINTINGS ARE DULY REFLECTED IN THE BOOKS. VII) HAVING REGARD TO THE ABOVE POSITION, I HOLD TH AT THE ADDITION MADE FOR UNEXPLAINED INVESTMENT U/S.69 IS NOT JUSTI FIED FOR THE REASON THAT THE INVESTMENT IN SUCH PAINTINGS IS DUL Y RECORDED IN BOOKS AND THAT IT IS NOT ESTABLISHED WITH ANY EV IDENCE TO SHOW THAT THE APPELLANT HAS MADE ANY INVESTMENT IN EXCESS OF WHAT IS RECORDED IN THE BOOKS. ACCORDINGLY, THE AD DITION MADE AT RS.14,26,250/- IS DIRECTED TO BE DELETED. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE REVENUE IS NOW IN APPEAL BEFORE US. IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 6 BEFORE US, THE LD. CIT D.R. SUBMITTED THE PAINTINGS FOUND DURING THE SEARCH WERE VALUED BY A SPECIALIST WHO IS HEAD OF D EPARTMENT (HOD) OF DRAWING AND PAINTING IN J.J. SCHOOL OF ARTS, MUMBAI . THE SPECIALIST HAD OPINED THAT ALL THE WORK OF ART WAS NOT CREATED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE PURCHASE VALUE SHOWN BY THE ASSE SSEE WAS VERY LESS AS COMPARED TO THE VALUE GIVEN IN THE VALUATION REPORT . THERE IS A VAST DIFFERENCE BETWEEN THE COST SHOWN BY THE ASSESSEE AND ITS VALU ATION BY THE SPECIALIST. THE LD. CIT D.R. SUBMITTED THAT CONSIDERING THE VAS T DIFFERENCE IN VALUE, THE AO HAS RIGHTLY GIVEN A REASONABLE ADJUSTMENT OF APP RECIATION AND THUS ARRIVED AT THE VALUE OF UNACCOUNTED INVESTMENT. SINCE THE ASSESSEE HAS FAILED TO SATISFACTORILY EXPLAIN THE SOURCE OF INVESTMENT MAD E IN PAINTINGS, SECTION 69 WAS RIGHTLY INVOKED BY THE A.O. HE, THUS, SUPPORTE D THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT N O INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH WHICH COULD SUGGEST THA T THE ASSESSEE HAS MADE PAYMENT OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE ACCOUNTS. HE SUBMITTED THAT THE VALUE OF PAINTINGS ARE ALREADY R ECORDED IN THE BOOKS OF ACCOUNTS AS IS EVIDENT FROM THE CHART PRODUCED BY T HE AO IN THE ASSESSMENT ORDER AND WHEREIN HE HAS GIVEN CREDIT OF THE AMOUNT PAID BY THE ASSESSEE. HE FURTHER SUBMITTED THAT MR. YANDE, ON WHOSE REPOR T THE A.O. HAS PLACED RELIANCE, IS NOT A REGISTERED VALUER UNDER THE INCO ME TAX ACT. HE FURTHER POINTED TO THE STATEMENT SHOWING EVIDENCE FILED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS PLACED AT PAGE 54 OF THE PAPER BOOK. FROM THE STATEMENT, HE POINTED OUT THAT FOR EACH OF THE PAINTINGS THE ASSESSEE IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 7 HAD FURNISHED THE COPY OF INVOICE, LEDGER ACCOUNT, CASH BOOK EXTRACT ETC. AND THUS IT CANNOT BE SAID THAT THE PAINTINGS WERE UNAC COUNTED. HE, THUS, SUPPORTED THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING THE C OURSE OF SEARCH PAINTINGS WERE FOUND. THE REVENUE GOT THE PAINTINGS VALUED F ROM HOD OF J.J. SCHOOL OF ARTS. BASED ON THE VALUATION, ADDITION WAS MADE U/S.69 IN THE HANDS OF THE ASSESSEE. IT IS A FACT THAT NO INCRIMINATING MATER IAL WAS FOUND DURING THE COURSE OF SEARCH WHICH COULD SUGGEST THAT THE ASSES SEE HAS MADE PAYMENT OVER AND ABOVE THE AMOUNTS MENTIONED IN THE BOOKS O F ACCOUNT. THE ASSESSEES SUBMISSION THAT THE PAINTINGS ARE RECORD ED IN THE BOOKS OF ACCOUNTS COULD NOT BE CONTROVERTED BY THE REVENUE B Y BRINGING ANY CONTRARY MATERIAL ON RECORD. ON THE CONTRARY, IT IS SEEN TH AT THE A.O. WHILE MAKING ADDITION U/S.69 HAS GIVEN CREDIT OF THE AMOUNT APPE ARING IN THE BOOKS OF ACCOUNT. CIT(A) WHILE DELETING THE ADDITION HAS GI VEN A FINDING THAT THE A.O. HAS NOT GIVEN ANY BASIS TO ARRIVE AT THE VALUE OF P AINTINGS AND THAT THE METHOD ADOPTED BY A.O. IN APPLYING 25% DISCOUNT PER YEAR W AS AN ADHOC METHOD WITHOUT ANY BASIS. CIT(A) HAS ALSO OBSERVED THAT T HE VALUER IN HIS VALUATION REPORT HAS NOT GIVEN ANY BASIS FOR ARRIVING AT THE VALUE AND THE VALUE ACCORDING TO THE VALUER IS HIS OPINION. BEFORE US, THE REVEN UE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) BY BRINGING ANY CONTRARY MATERI AL ON RECORD. IN VIEW OF THE TOTALITY OF FACTS, WE ARE OF THE VIEW THAT IN THE P RESENT FACTS NO INTERFERENCE TO IT(SS)A NO. 649/AHD/11 A.Y. 07-08 & C.O. NO. 34 AHD OF 12 PAGE 8 THE ORDER OF CIT(A) IS CALLED FOR AND WE, THUS, UPH OLD HIS ORDER. THUS, THIS GROUND OF REVENUE, IS DISMISSED. 7. SINCE, THE APPEAL OF THE REVENUE IS DISMISSED, W E DO NOT ADJUDICATE THE C.O. OF THE ASSESSEE AND THEREFORE DISMISS IT. 8. IN THE RESULT, THE REVENUES APPEAL AND ASSESSEE S C.O., BOTH ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/01/2013 SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * <