Mrs.Amrinder Kaur, Chandigarh V. The Deputy Commissioner of Income Tax, Chandigarh

ITA 1104/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73421 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Assessee Lawyers: DEEPAK AGGAWAL; BRIJ BHUSHAN SHARMA
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1104/CHD/2013 ASSESSMENT YEAR : 2009-10 MRS. AMRINDER KAUR VS. D.C.I.T. CIRCLE 6(1) 117, PHASE 2 MOHALI MOHALI CHANDIGARH CHANDIGARH ABBPK 3365 N (APPELLANT) (RESPONDENT) APPELLANT BY S/SHRI DEEPAK AGGAWAL & BRIJ BHUSHAN SHARMA RESPONDENT BY: SHRI AMARVEER SINGH DATE OF HEARING 16.1.2014 DATE OF PRONOUNCEMENT 2 7.1.2014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 13. 9.2013 OF THE LD CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMI NG THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING AN EXPENDITURE OF RS. 1,00,000/- UNDER SECTION 40A(3) ON ACCOUNT OF CASH PAYMENT MADE IN E XCESS OF RS. 20000/- TO THE CONTRACTOR, WHEREAS AS PER THE ASSES SEE THE SAID PAYMENT WAS MADE TO THE LABOURERS AT SITE ON BEHALF OF THE CONTRACTOR THAT TOO ON SUNDAY. 2.A) THAT THE LD. CIT(A)IS NOT JUSTIFIED IN CONFIRM ING AN ADDITION OF RS. 24,32,318/- AGAINST AN ADDITION OF RS. 27,32,029/- MADE BY THE ASSESSING OFFICER TOWARDS CLOSING STOCK ON THE BASI S THAT THE AVERAGE PURCHASE PRICE OF THE LAND IS AMOUNTING TO RS. 156 PER SQ. MTR. AND THE CLOSING STOCK IS MEASURING 37219 SQ. MTRS. THEREFO RE THE CLOSING STOCK COMES TO RS. 58,80,602/- WHICH IS RS. 27,32,029/- S HORT AS SHOWN BY THE ASSESSEE, WHEREAS AS PER THE ASSESSEE A LARGE CHUNK OF LAND PURCHASED BY THE ASSESSEE IS PART OF KHUD AND FALLS UNDER THE RIVERBED WHICH IS NOT LIVEABLE, MOREOVER THERE IS NO LOSS TO THE REVE NUE AS IN THE IMMEDIATELY SUCCEEDING YEAR I.E.2010-11 THE WHOLE O F THE LAND EXCEPT THE LAND COMPRISING OF KHUD WAS SOLD OUT BY THE ASS ESSEE AND PROFIT ON THE SAME HAVE ADMITTEDLY BEEN DECLARED. B). THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIR MING THE ACTION OF THE ASSESSING OFFICER IN MAKING A TRADING ADDITION IN C LOSING STOCK OF THE LAND 2 REMAINING AT THE END OF THE YEAR, WITHOUT REJECTING THE BOOK RESULTS OF THE ASSESSEE. C). THAT ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE THE ASSESSEE ALSO DISPUTES THE QUANTUM OF THE ADDITION CONFIRMED BY THE LD. CIT(A). 3.A). THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFI RMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN AD-HOC DISALLOWANCE OF RS. 25,0000/- TOWARDS VARIOUS EXPENDITURES INCLUDING BOARDING, EN TERTAINMENT, MISCELLANEOUS, DIWALI AND TRAVELING EXPENSES FOR MI SSING VOUCHERS/BILLS BY TERMING THE ADDITION AS AGREED WHEREAS AS PER TH E ASSESSEE THE SAID ADDITION WAS NOT EXAMINED TOWARDS ITS COMMERCIAL EX PEDIENCY AND / OR GENUINENESS. B). THAT ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE THE ASSESSEE ALSO DISPUTES THE QUANTUM OF THE ADDITION CONFIRMED BY THE LD. CIT(A). 3 GROUND NO. 1 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICE NOTICED THAT THE ASSESSEE HAS PAID A SUM OF RS. 1 LAKH ON 19.10.2008 IN CASH TO CREDENCE ENGINEERS (P) LTD. THE PAYMENT WAS MADE TOWARDS LAND DEVELOPMENT EXPENSES. ACCORDING TO TH E ASSESSING OFFICER AS PER SEC 40A(3) OF INCOME -TAX ACT, 1961 IF THE PAYMENT IS MADE IN CASH THEN DEDUCTION OF THE S AME IS NOT ALLOWABLE AND ACCORDINGLY DISALLOWED A SUM OF RS. 1 LAKH. 4 ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CON FIRMED BY THE LD. CIT(A). 5 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT PAYMENT WAS MADE ON SUNDAY WHICH WAS A BANK HO LIDAY AND SAME IS EXEMPT UNDER RULE 6DD (J). HE ALSO REL IED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN CASE OF C IT VS. K.K.S.K. LEATHER PROCESSOR P. LTD.. 292 ITR 669. 6 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT RULE 6DD(J) OF INCOME -TAX RULES, 1962 PROVIDES AS UNDER : 6DD - NO DISALLOWANCE UNDER SUB-SECTION (3) OF SEC 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB-SECTI ON (3A) OF SEC 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE T O A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A 3 BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY TH OUSAND RUPEES IN THE CASE AND CIRCUMSTANCES SPECIFIED HERE UNDER. (A) TO (I)..NOT RELEVANT (J) - WHERE THE PAYMENT WAS REQUIRED TO BE MADE ON THE DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUN T OF HOLIDAY OR ON STRIKE. THE ABOVE CLEARLY MAKES IT VERY CLEAR THAT IF THE P AYMENT IS MADE ON A DAY WHICH IS HOLIDAY THEN NO DISALLOWANCE IS CALLED FOR U/S 40A(3). SINCE THE PAYMENT HAS BEEN MADE ON SUNDAY WHICH IS A BANK HOLIDAY AND THEREFORE IN OUR OPINIO N, THE DISALLOWANCE IS NOT CALLED FOR. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 8 GROUND NO. 2 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICE NOTICED THAT THE ASSESSEE HAS SHOWN VALUE OF CLOSING STOCK AT RS. 31,48,572/- AS PER FOLLOWING CHART: TOTAL AREA PURCHAS ED (SQMT) TOTAL COST (RS.) AVG. COST PER SQMT (RS) UNSOL D ARA (SQMT ) VALUE OF UNSOLD AREA (RS) VALUE OF UNSOLD LAND REASONABL E SHOWN IN THE BALANCE SHEET IN RS. DIFFERENCE 105307 16645500 158 37219 5880602 41,48,573 27,32,0 29 ACCORDING TO THE ASSESSING OFFICER SINCE THE ASSESS EE HAS PURCHASED THE LAND AT AN AVERAGE COST OF RS. 158 PE R SQMT THEREFORE THE CLOSING STOCK SHOULD HAVE ALSO BEEN V ALUED AT RS. 158 PER SQMT. ACCORDINGLY TO WHICH THE VALUE OF CL OSING STOCK WOULD BE RS. 58,80,602/- AND ACCORDINGLY A SUM OF R S. 27,32,029/- WAS ADDED TO THE INCOME OF THE ASSESSEE . 9 ON APPEAL BEFORE THE LD. CIT(A) FOLLOWING SUBMISS IONS WERE MADE: 4 THE FACTS PERTAINING TO THE PRESENT CASE ARE THAT THERE WAS A CHUNK OF LAND IN THE AFORESAID 37219 SQ. MTR. WHICH FORMS PA RT OF KHUD WHICH COMES UNDER THE RIVER BED AND CAN NOT USED FOR LIVE LIHOOD, THE NECESSARY CONFIRMATION FROM REVENUE OFFICIALS OF GOVERNMENT O F HIMACHAL PRADESH CONFIRMING THE BALANCE LAND TO BE GAIR MUMKIN / KH UD WAS ALSO PROVIDED TO THE LD. A.O., APPEARING AT PAGE 7-8. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED A CHART BEFORE TH E LD. A.O. SHOWING ALL THE DETAILS OF LAND AND THE METHOD ADOPTED BY T HE ASSESSEE FOR VALUATION OF CLOSING STOCK, APPEARING AT PAGE 9, WH ICH WAS DULY RECOGNIZED BY THE LD. A.O. EXCEPT THE VALUATION OF KHUD. HOWEVER, IT IS ALSO PERTINENT TO MENTION HERE THAT THE WHOLE OF T HE LAND EXCEPT KHUD HAS BEEN SOLD OUT IN THE IMMEDIATELY SUCCEEDING YEA R I.E. A.Y. 2010-11 AND THE NECESSARY VALUATION TAKEN FOR THE SAID KHUD IN THE BALANCE SHEET FOR THE YEAR ENDING ON 31.03.2010 IS APPEARING AT P AGE 10. 10 THE LD. CIT(A) CALLED FOR CERTAIN DETAILS AND NO TICED THAT THERE WAS A DIFFERENCE IN VALUATION GIVEN BY THE AS SESSEE WHICH BEFORE HIM, WAS WORKED OUT AT RS. 55,80,891/- . HE OBSERVED THAT THE ASSESSING OFFICER HAS APPLIED AVE RAGE RATE IN RESPECT OF THE LANDS PURCHASED THROUGH VARIOUS PRO JECTS DIFFERS WHERE SOME OF THE LANDS HAVE BEEN SOLD AND THE VALU E TO BE WORKED OUT AS PER THE SALE PROJECTS DEALS FOR WHICH A CHART WAS GIVEN BEFORE HIM WHICH IS AS UNDER: KHASRA NO. TOTAL AREA AREA SOLD BALANCE AREA RATE/SQ. MTR BALANCE CL.STOCK AMOUNT 3372 1529 1529 0 238.11 0 3374 18836 15666 3170 238.11 754808.7 3375 42722 34560 8162 158.75 1295717.5 3377 14876 9715 5161 164.75 850274.75 3 2560 450 2110 84.9 179139 4 2246 2246 0 139.62 0 6 1692 1692 0 139.62 0 7/1 1636 1636 139.62 228418.32 7/2 2237 2237 152.14 340337.18 8 2811 280 2531 84.9 214881.9 10/2 1612 540 1072 271.82 291391.04 11/2 1701 940 761 271.82 206855.02 13/2 1805 370 1435 271.82 390061.7 16 2768 100 2668 84.9 226513.2 14 1396 1396 84.9 118520.4 15 3844 3844 84.9 326355.6 17 1036 1036 152.14 157617.04 TOTAL 105307 68088 37219 5580891.35 ACCORDINGLY HE REDUCED THE ADDITION TO RS. 55,80,89 0/-. 11 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PU RCHASE 5 AND SALE OF LAND AND THE INCOME HAS BEEN RETUNED UN DER THE HEAD INCOME FROM BUSINESS. IT WAS POINTED OUT TH AT THE ASSESSEE HAD PURCHASED BIG CHUNKS OF LAND WHICH WER E DIVIDED IN SMALLER PLOTS AND WERE SOLD ACCORDINGLY. OUT OF THIS BIG CHUNKS OF LAND SOME PORTIONS WERE USELESS BECAUSE S AME WERE LOCATED IN KHUD WHICH WOULD FETCH MUCH LOWER VALUE. SOME LANDS HAVE ALSO BEEN SOLD AND CLOSING STOCK HAS BEE N VALUED ON THE METHOD OF COST OR MARKET VALUE WHICH IS LOWE R. THEREFORE WHATEVER KHUD LAND WAS REMAINING THAT H AS BEEN VALUED AT A LOWER RATE. IN THIS REGARD HE REFERRED TO THE CHART GIVEN AT PAGE 7 OF THE PAPER BOOK. HE FURTHER CONT ENDED THAT KHUD LAND (MEASURING 16493 SQMT) HAS BEEN VALUED BY THE ASSESSEE @ RS. 13 PER SQMT. 12 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(A). 13 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND SOME FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSES SEE. IF A BUSINESSMAN PURCHASES HUGE CHUNK OF LAND OUT OF WHI CH PRIME PORTION OF THE LAND IS SOLD THEN BALANCE AMOUNT COU LD NOT BE VALUED ON THE AVERAGE RATE BASIS. FOR EXAMPLE IF T HE ASSESSEE PURCHASES 1000 SQMT OF LAND ON THE MAIN ROAD AND IF OUT OF THAT LAND ADJACENT TO MAIN ROAD MEASURING 500 SQMT IS SO LD THEN THE LAND ON THE BACK SIDE WOULD FETCH LOWER RATE AND CL OSING STOCK IS REQUIRED TO BE VALUED AT A CORRESPONDING LOWER R ATE. SIMILARLY IN CASE OF KHUD LAND SAME HAS TO BE VAL UED AT A LOWER RATE. HOWEVER, AT THE SAME TIME RS. 13 PER SQMT ALSO SEEMS TO BE VERY LOW VALUE. THEREFORE IN OUR OPINI ON, A REASONABLE ESTIMATE IS REQUIRED TO BE MADE. IN SOM E KHASRA NUMBERS THE LAND HAS BEEN VALUED AT THE RATE OF RS. 78 TO 254 6 PER SQMT. CONSIDERING THIS FACT WE ARE OF THE OPIN ION THAT IF KHUD LAND IS VALUED AT RS. 75 PER SQMT THE SAME WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO VAL UE 16493 SQMT OF KHUD LAND AT RS. 75 PER SQMT AND ALLOW RE LIEF ACCORDINGLY. 14 GROUND NO. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICE NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF BOARDING, ENTERTAINMENT, MISCELLANEOUS EXPENSES, DI WALI EXPENSES AND TRAVELING EXPENSES TOTALING TO RS. 245 ,342/-. THESE EXPENSES WERE NOT PROPERLY VOUCHED THEREFORE HE MADE A DISALLOWANCE OF RS. 250,000 OUT OF TOTAL EXPENSES . 15 ON APPEAL THE LD. CIT(A) OBSERVED THAT TOTAL EXP ENSES ON ACCOUNT OF BOARDING, ENTERTAINMENT, MISCELLANEOUS E XPENSES, DIWALI EXPENSES AND TRAVELING EXPENSES WERE RS. 117 4250/- OUT OF WHICH VOUCHERS AMOUNTING TO RS. 245,342/- WE RE NOT AVAILABLE. THEREFORE DISALLOWANCE WAS JUSTIFIED. 16 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ADDITION HAS BEEN MADE ON ADHOC BASIS WITH OUT PIN POINTING FOR WHICH ITEMS THE BILLS WERE NOT AVAILA BLE. HE FURTHER SUBMITTED THAT ONLY REASONABLE DISALLOWANCE MAY BE MADE. 17 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A). 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND SOME FORCE IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSES SEE. THE ASSESSING OFFICER HAS NOT POINTED OUT WHICH VOUCHER S WERE NOT AVAILABLE. ADDITION HAS BEEN MADE ON ADHOC BASIS W HICH IS NOT 7 PERMISSIBLE UNDER THE LAW. THERE ARE VARIOUS EXPEN SES FOR WHICH NO VOUCHERS MAY BE AVAILABLE. FOR EXEMPTION FOR LOCAL CONVEYANCE GENERALLY NO VOUCHERS ARE AVAILABLE FROM THREE WHEELERS OR TAXI OR EVEN RIKSHA PULLER. HOWEVER, A T THE SAME TIME IT WAS ADMITTED THAT THESE VOUCHERS WERE NOT P ROPERLY AVAILABLE. THEREFORE CONSIDERING OVER ALL FACTS, WE ARE OF THE OPINION THAT IF AN ADDITION OF RS. 1 LAKHS IS MADE THAT WOULD MEET THE ENDS OF JUSTICE AND ACCORDINGLY WE SET ASI DE THE ORDER OF THE LD. CIT(A) AND REDUCE THE ADDITION OF RS. 2, 50,00 OUT OF UNVOUCHED EXPENSES TO RS. 1 LAKH. 19 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.1.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 .1.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR