DCIT, New Delhi V. Smt. Pratibha Aggarwal, New Delhi

ITA 113/DEL/2010

• Counselvise Citation: 11320114 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-11-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 08-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Valuation report
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `F : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.113/DEL./2010 (ASSESSMENT YEAR : 2002-03) DCIT, CENTRAL CIRCLE 25, VS. SMT. PRATIBHA AGGAR WAL, NEW DELHI. F-170B, WESTERN AVENUE, SAINIK FARM, NEW DELHI. (PAN/GIR NO.AAHPA4205A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJESH MAHNA, ADV. REVENUE BY : SHRI SUDESH GARG, SR.DR ORDER PER K.D. RANJAN: AM THIS APPEAL BY THE REVENUE FOR AY 2002-03 ARISES OUT OF THE ORDER OF THE CIT(A)-I, NEW DELHI. THE GROUNDS OF APPEAL RAISED BY THE REV ENUE ARE REPRODUCED AS UNDER: 1. THE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW A ND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.5,18,2 20/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS CAPITAL GAIN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS.6,09,0 00/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED MONEY P AID FOR THE PURCHASE OF IMMOVABLE PROPERTY. 2. THE FIRST ISSUE RELATES TO DELETING THE ADDITION OF RS.5,18,220/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOGUS CAPITAL GAINS . THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE HAD PURCHASED 10,000 SHARES O F M/S BETSY GROWTH FINANCE LTD. ON 03.04.2000 AND THE SAID FACT WAS DISCLOSED BY THE A SSESSEE IN THEIR RETURN OF INCOME FOR 2 ITA NO.113/DEL./2010 ASSESSMENT YEAR 2001-02. THE SAID RETURN WAS FILED BY THE ASSESSEE IN REGULAR COURSE ON 22.10.2001 U/S 139(1) OF THE ACT. THE DETAILS OF I NVESTMENT IN SHARES WERE DISCLOSED IN THE RETURN OF INCOME. THE ASSESSMENT FOR ASSESSMEN T YEAR 2001-02 WAS COMPLETED BY DCIT, CENTRAL CIRCLE-12, KOLKATA. THE ASSESSEE SOL D THOSE SHARES DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2002-03 FOR RS.5,18,110 /-. THE ASSESSEE MADE A LONG TERM CAPITAL GAIN OF RS.4,97,610/-. THE SAID INCOME WAS DISCLOSED IN THE RETURN OF THE ASSESSEE AT KOLKATA AND THE ASSESSMENT WAS FRAMED BY THE ASS ESSING OFFICER ON 13.3.2004, ACCEPTING THE RETURN FILED BY THE ASSESSEE. THE AS SESSING OFFICER, HOWEVER, ASSESSED THE SUM OF RS.5,18,220/- AS BOGUS CAPITAL GAINS. 3. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THERE WAS A SEARCH U/S 132 OF THE I.T. ACT, 1961 AT THE RESIDENCE OF THE ASSESSEE ON 4.11. 2004. NOTHING INCRIMINATORY MATERIAL WAS FOUND IN THE COURSE OF THE SEARCH IN RESPECT OF THE SAID TRANSACTION. THE ASSESSING OFFICER EXTENSIVELY REFERRED TO THE STATEMENT OF SH RI A.K. GOEL, MANAGING DIRECTOR OF DIWAKAR SECURITIES LTD. TO WHOM THE SAID SHARES HAV E BEEN SOLD BY THE ASSESSEE. THE ASSESSEE CONTENDED THAT THE STATEMENT WAS NOT RECOR DED PURSUANT TO SEARCH AGAINST THE ASSESSEE. THEREFORE, THE SAID STATEMENT COULD NOT BE TREATED AS ANY INCRIMINATORY MATERIAL FOUND AGAINST THE ASSESSEE DURING THE COURSE OF SEA RCH AT THE PREMISES OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT DEMAT STATEMENT MAINTAINED BY THE ASSESSEE WITH HDFC BANK SHOWED THAT THE SAID SHARES WERE DEMATERIALIZED ON 8.8.2001. THE ASSESSEE HAD SOLD THE SAID SHARES THROUGH DIWAKAR SECURITIES LTD. FOR RS. 5,18,110/-. THE SALE CONTRACT NOTE AND BILL OF THE SAID BROKER WERE ALSO PRODUCED BEFORE T HE ASSESSING OFFICER AND WERE AVAILABLE ON RECORD. THE ASSESSEE HAD EXECUTED TRA NSFER DEED IN FAVOUR OF THE SAID SHARE BROKER AND THE SAID SHARES WERE DULY TRANSFERRED TO THE DEMAT ACCOUNT OF DIWAKAR SECURITIES LTD. MAINTAINED WITH STOCK HOLDING CORPO RATION OF INDIA. FURTHER, IT WAS ALSO CONTENDED THAT SHRI A.K. GOEL IN HIS STATEMENT HAD ADMITTED THAT THE SAID SHARES WERE TRANSFERRED FROM THE DEMAT A/C OF THE ASSESSEE TO H IS ACCOUNT. THE INVESTIGATING TEAM HAD ALSO RECORDED STATEMENT OF THE OTHER PERSONS AF TER THE SEARCH. THE SAID PERSONS WERE NOT OFFERED FOR CROSS EXAMINATION OF THE ASSESSEE I N SPITE OF SPECIFIC REQUEST MADE IN THIS BEHALF. THUS, THERE WAS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE ASSESSEE HAD FURTHER ARGUED THAT THE SALE CONSIDERATION OF THE S AID SHARES WAS RECEIVED BY THE ASSESSEE 3 ITA NO.113/DEL./2010 FROM DIWAKAR SECURITIES LTD. BY CHEQUE AND THE SOUR CE WAS, THEREFORE, FULLY EXPLAINED AND THE SAME WAS NOT DISPUTED. IT WAS, THEREFORE, SUBMITTED THAT ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. 4. THE CIT(A) IN VIEW OF ABOVE FACTS DELETED THE AD DITION. 5. BEFORE US, WHEN THE CASE CAME UP FOR HEARING, LD .CIT(DR) SUBMITTED THAT IN IDENTICAL CIRCUMSTANCES IN THE CASE OF SMT. KALAWAT I AGARWAL, ITAT, DELHI BENCH D HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSIN G OFFICER WITH THE DIRECTIONS TO ALLOW CROSS-EXAMINATION OF THE PERSONS BY THE ASSESSEE AN D DECIDE THE ISSUE AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. ON THE OTHER HAND, LD.AR. OF THE ASSESSEE SUBMIT TED THAT THE APPEAL FILED BY THE REVENUE DESERVES TO BE REJECTED. 7. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E ISSUE IS COVERED BY THE DECISION OF ITAT, DELHI BENCH D IN THE CASE OF SMT. KALAWA TI AGARWAL (SUPRA). ITAT WHILE SETTING ASIDE THE MATTER HAS HELD AS UNDER: 7. WE HAVE CONSIDERED THE CONTENTION OF THE LEARN ED DR AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FOUND THAT AFTER SEARCH AT ASSESSEES PREMISES, THE AO EXAMINED THE ASSESSEE AND THE LONG TERM CAPITAL GAIN SHOWN BY HER ON ACCOUNT OF SALE OF SHARES OF M/S. B.T. TECHN ET LTD. WAS QUESTIONED. THE STATEMENTS OF VARIOUS PERSONS WERE RECORDED INCLUDI NG THE DIRECTORS OF M/S. DIWAKAR SECURITIES LTD., WHO HAVE DENIED THE TRANSA CTION HAVING BEEN ENTERED WITH THE ASSESSEE FOR SALE OF SHARES. THE AO HAS RE CORDED A FINDING TO THE EFFECT THAT THE ASSESSEE DID NOT OWN THESE SHARES ON 31.3. 2001 AS PER 'DETAILS OF INVESTMENT IN SHARES AND DEBENTURES AS ON 31.3.2001 AS PER PAGE 11 OF ANNEXURE A-S OF PANCHNAMA DRAWN AT THE RESIDENCE OF THE ASSESSEE AT THE TIME OF SEARCH ON 4.11.2004. BY CONSIDERING THE STATEMENT O F DIRECTOR OR M/S. DIWAKAR SECURITIES LTD. THE AO REACHED TO THE CONCLUSION TH AT SINCE THE SHARES WERE NOT 4 ITA NO.113/DEL./2010 HELD BY THE ASSESSEE AS ON 31.3.2001, THERE DID NOT ARISE ANY OCCASION FOR ITS SALE TO M/S. DIWAKAR SECURITIES LTD. ON 2.8.2002. THE AS SESSEE ASKED FOR THE CROSS EXAMINATION OF THE STATEMENTS OF DIRECTORS OF M/S. DIWAKAR SECURITIES LTD., WHICH ALSO CONSTITUTED SUBSTANTIAL EVIDENCE BEFORE THE AO FOR REACHING TO THE CONCLUSION THAT IT WAS A BOGUS TRANSACTION AND THE ASSESSEE HA D NOT SOLD ANY SHARES. HOWEVER, THE AO HAS DECLINED THE CROSS EXAMINATION BY STATING THAT THE CLAIM OF THE ASSESSEE WAS PUT TO THE VERIFICATION, THEREFORE , IT CANNOT BE SAID THAT THE PERSONS INCLUDING THE DIRECTORS OF M/S. DIWAKAR SEC URITIES LTD., WHOSE STATEMENTS WERE RECORDED BY THE DEPARTMENT ARE THE WITNESSES O F THE DEPARTMENT. HOWEVER, THE CIT(A) HAS JUST ACCEPTED THE ASSESSEE'S CONTENT ION WITHOUT CONTROVERTING THE DETAILED FINDINGS RECORDED BY THE AO VIS-A-VIS THE STATEMENTS OF PERSONS INCLUDING DIRECTORS OF M/S. DIWAKAR SECURITIES LTD. THE CIT(A ) HAS HELD THAT THE AO IS BOUND TO ALLOW CROSS EXAMINATION OF THE SAID WITNES SES AND IN THE ABSENCE OF SAME, THE SAID STATEMENTS CANNOT BE RELIED UPON, AC CORDINGLY ADDITION WAS HELD TO BE NOT JUSTIFIED. THERE IS NO DISPUTE TO THE WELL S ETTLED LEGAL PROPOSITION THAT POWERS OF THE CIT(A) IS CO-TERMINUS WITH THAT OF TH E AO, WHAT THE AO HAS FAILED TO DO THE CIT(A) IS COMPETENT TO DO THE SAME AND HE CA NNOT BRUSH ASIDE THE FINDINGS RECORDED BY THE AO AND THE STATEMENTS OF VARIOUS PE RSONS RECORDED BY DEPARTMENT JUST BY STATING THAT CROSS EXAMINATION W AS NOT ALLOWED TO THE ASSESSEE. IN ALL FAIRNESS THE CIT(A) SHOU1D HAVE ALLOWED THE CROSS EXAMINATION BEFORE DELETING THE ADDITION MADE BY THE AO, AND SHOULD HA VE CONTROVERTED THE FINDINGS RECORDED BY AO BY MENTIONING HIS OBSERVATION AND CO MMENTS THEREON. THE CIT(A) HAS ALSO NOT GIVEN POSITIVE FINDING WITH REG ARD TO HOLDING OF SHARES BY ASSESSEE ON THE DATE OF SALE. IN ALL FAIRNESS AND IN THE INTEREST OF JUSTICE, WE RESTORE THE ENTIRE MATTER BACK TO THE FILE OF THE A SSESSING OFFICER AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW CROSS EXAMINATION OF T HE WITNESSES BY THE ASSESSEE AND TO DECIDE THE ISSUE AFRESH AFTER GIVING DUE OPPORTU NITY TO THE ASSESSEE. WE DIRECT ACCORDINGLY. 8. SINCE ON IDENTICAL ISSUE, ITAT HAS SET ASIDE T HE MATTER TO THE FILE OF THE ASSESSING OFFICER, RESPECTFULLY FOLLOWING THE ORDER OF ITAT, WE RESTORE THE ISSUE TO THE 5 ITA NO.113/DEL./2010 FILE OF THE ASSESSING OFFICER WITH THE SIMILAR DIRE CTIONS AS IN THE CASE OF KALAWATI AGARWAL. THE ASSESSING OFFICER WILL DECIDE THE ISSU E AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 9. THE SECOND ISSUE FOR CONSIDERATION RELATES TO DE LETING THE ADDITION OF RS.6,09,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOU NTED MONEY, PAID FOR PURCHASE OF IMMOVABLE PROPERTIES.THE FACTS OF THE CASE RELATING TO THIS GROUND OF APPEAL ARE THAT THE ASSESSEE HAD PURCHASED SHARE IN RESIDENTIAL PROPE RTY AT F-170B, WESTERN AVENUE, SAINIK FARM, NEW DELHI FOR TOTAL CONSIDERATION OF R S.70 LAKHS AND ASSESSEES SHARE WAS OF RS.35,00,250/-. AS PER RETURN OF INCOME FIL ED FOR SUBSEQUENT YEAR, THE VALUE OF HOUSE PROPERTY WAS SHOWN AT RS.37,57,292/- AND RS.4 2,89,342/- AS ON 31.3.2003 AND 31.3.2004, RESPECTIVELY. THE ASSESSING OFFICER REFE RRED THE MATTER TO THE DISTRICT VALUATION OFFICER TO ESTIMATE THE COST OF INVESTMEN T MADE IN PURCHASE OF HOUSE AND ALSO THE ADDITION/ALTERATION CARRIED OUT SUBSEQUENTLY. THE DISTRICT VALUATION OFFICER DETERMINED THE VALUE AT RS.82,19,200/- AS AGAINST R S.70 LAKHS SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER MADE ADDITION OF RS.6,09,600/ - BEING SHARE OF RS.12,19,200/- OUT OF UNDISCLOSED INCOME. 10. BEFORE THE CIT(A) LD.AR SUBMITTED THAT THERE WA S NO EVIDENCE ON RECORD REGARDING PAYMENT OF ANY MONEY BY THE ASSESSEE TO T HE SELLER OVER AND ABOVE THE DECLARED VALUE IN THE AGREEMENT TO SELL. THERE WERE NO EFFO RTS MADE BY THE REVENUE TO BRING TO TAX THE ALLEGED UNDISCLOSED PAYMENT OF RS.6,09,600/-. THE REPORT OF DVO WAS MERELY AN OPINION AND WOULD NOT BECOME AN EVIDENCE OF ANY UND ISCLOSED INVESTMENT. THE CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE ADDITIO N WAS MADE BASED ON VALUATION REPORT OF THE DEPARTMENTAL VALUER. HE NOTED THAT ONUS WAS ON THE DEPARTMENT TO PROVE THAT THERE WAS UNDISCLOSED INVESTMENT IN THE PROPERTY. NO SUC H EVIDENCE WAS BROUGHT ON RECORD TO JUSTIFY THE ADDITION. THE CIT(A) RELYING ON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS. ITO, 131 I.T.R. 597 AND C IT VS. SHIVAKAMI CO. PVT. LTD., 159 I.T.R. 71 HAS HELD THAT ADDITION MERELY ON ACCOUNT OF VALUATION REPORT COULD NOT BE MADE. 6 ITA NO.113/DEL./2010 11. WE HAVE HEARD BOTH THE PARTIES. ADMITTEDLY, TH ERE IS NO EVIDENCE ON RECORD BROUGHT BY THE ASSESSING OFFICER TO SUGGEST THAT AN Y MONEY OVER AND ABOVE WHAT IS RECORDED IN SALE DEED HAS BEEN PAID BY THE ASSESSEE . THERE IS NO OTHER EVIDENCE OR SURROUNDING CIRCUMSTANCES TO INDICATE THAT THERE WA S UNDER HAND PAYMENT OF MONEY FOR PURCHASE OF THE PROPERTIES. THE ADDITION CANNOT BE MADE MERELY ON THE BASIS OF VALUATION REPORT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A) DELETING THE ADDITION. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON : 16 TH DECEMBER, 2011 . SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 16 TH DECEMBER, 2011 . SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT