Ghatge Patil Industries Ltd., V. Deputy Commissioner of Income-tax,

ITA 1332/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7406 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-09-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Keywords: Unexplained investment; Search and seizure; Valuation report
• Section: 143(3); 153A; 69; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1332 /P U N/20 1 4 / ASSESSMENT YEAR : 20 05 - 06 GHATGE PATIL INDUSTRIES LTD., P.O. UCHAGAON, KOLHAPUR 416005 . / APPELLANT PAN:AAACG6595R VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : S MT. NIRUPAMA KOTRU / DATE OF HEARING : 11 .0 9 .2017 / DATE OF PRONOUNCEMENT: 27 .0 9 .2017 / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF CIT(A) , KOLHAPUR , DATED 14 . 0 3 .201 4 RELATING TO ASSESSMENT YEAR 20 05 - 06 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 153 OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE OR DER OF THE LEARNED CIT(APPEALS) IS BAD IN LAW AND OPPOSED TO THE FACTS. 2 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. 2. THE LEARNED CIT(APPEALS) HAS ERRED IN UPHOLDING ADDITION OF RS.85,988 MADE BY THE DCIT AS DIFFERENCE BETWEEN COST OF CONSTRUCTION AS PER BOOKS AND VALUE AS PER THE VALUATION REPORT OF DVO. HE FAILED TO APPRECIATE THAT ENTIRE COST OF CONSTRUCTION HAS BEEN RECORDED IN THE BOOKS OF ACCO UNT OF THE APPELLANT FROM YEAR TO YEAR, IGNORING THE EXTRACT OF LEDGER OF AUDITED ACCOUNTS PLACED ON THE RECORDS WHICH CONTAINED COMPLETE NARRATION FOR EACH ENTRY DATE - WISE, AND FAILED TO APPRECIATE THAT THE REPORT OF DVO WAS A PERSONAL JUDGMENT DEVOID OF ANY EVIDENCE. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE ADDITION OF RS.85,988/ - BEING THE DIFFERENCE BETWEEN COST OF CONSTRUCTION AS PER BOOKS OF ACCOUNT AND THE VALUE AS PER VALUATION REPORT OF DVO. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GREY IRON CASTINGS, GATE VALUES, ETC. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT ON TOTA L INCOME OF RS.11,31,77,142/ - . THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON ENHANCED INCOME OF RS.11.34 CRORES. SEARCH OF BUSINESS PREMISES OF THE ASSESSEE WAS CARRIED OUT UNDER SECTION 132/133A OF THE ACT ON 11.09.2008 . NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON THE ASSESSEE AND IN RESPONSE THERETO, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.9,57,51,370/ - . IN THE RETURN OF INCOME, THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.14,30,000/ - . THE CASE W AS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER NOTED THAT IN THE COURSE OF STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, MRS. MEGHA PATIL ADMITTED THAT THEY HAD SHIFTED TO UJAWAIWADI BUNGALOW IN THE MONTH OF OCTOBER, 2007 ALONG WITH ALL FAMILY MEMB ERS. THE MANAGING DIRECTOR OF THE COMPANY SHRI KIRAN J. PATIL VIDE QUESTION NO.9 OF HIS STATEMENT DATED 15.09.2008 RECORDED UNDER SECTION 132(4) OF THE ACT WAS ASKED TO GIVE THE DETAILS OF INVESTMENTS MADE BY 3 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. THE COMPANY FOR CONSTRUCTION OF BUNGALOW AND P URCHASE OF PLOT OF LAND. IN REPLY, HE STATED THAT THE PLOT OF LAND WAS PURCHASED IN THE YEAR 1998 AND THE BUNGALOW THEREON WAS CONSTRUCTED IN THE YEAR 2007 - 08. THE COST OF CONSTRUCTION OF BUNGALOW WAS STATED TO BE RS.83,60,568/ - . HE FURTHER STATED THAT THE DETAILS OF INVESTMENTS MADE IN THE CONSTRUCTION OF BUNGALOW AND FOR PURCHASE OF LAND WOULD BE SUBMITTED IN DUE COURSE. HOWEVER, NO SUCH DETAILS WERE FURNISHED BEFORE INVESTIGATING OFFICER. THE ASSESSING OFFICER NOTED THAT THE SAID LAND AND BUNGALOW C ONSTRUCTED THEREON WAS REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2008. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE VALUE DECLARED BY THE ASSESSEE SEEMS TO BE ON LOWER SIDE. THEREFORE, TO ASCERTAIN THE CORRECT INVESTMENT FOR CO NSTRUCTION OF BUNGALOW AND THAT OF INTERIORS AND FURNITURE & FITTINGS, REFERENCE WAS MADE TO THE DISTRICT VALUATION OFFICER (DVO) , MUMBAI BY THE INVESTIGATING OFFICER . THE DVO VIDE REPORT DATED 11.12.2008 SUBMITTED THE VALUATION REPORT AND ESTIMATED THE COST OF CONSTRUCTION OF PROPERTY AT RS.94,84,215/ - . THE ASSESSEE WAS ASKED AS TO WHY THE DIFFERENCE OF RS.11,23,557/ - SHOULD NOT BE ADDED AS UNDISCLOSED INVESTMENT IN THE BUNGALOW FOR ASSESSMENT YEARS 2004 - 05 TO 2009 - 10 UNDER SECTION 69B OF THE ACT. THE ASSESSEE CLAIMED THAT THE RECORDED COST OF CONSTRUCTION OF THE BUILDING WAS ON THE BASIS OF ACTUAL EXPENDITURE INCURRED AND WAS SUPPORTED BY VOUCHERS. FURTHER, IT WAS POINTED OUT THAT THE VALUATION REPORT WAS BY APPLYING THE RATES ON THE DATE OF VALUATION IGNORING THE ACTUAL COST INCURRED OVER A PERIOD OF THREE YEARS. THE ASSESSING OFFICER REJECTING THE PLEA OF ASSESSEE, BIFURCATED THE INVESTMENTS IN THE RESPECTIVE YEARS I.E. FROM ASSESSMENT YEAR 2004 - 05 T O 2008 - 09. THE ASSESSEE FOR ASSESSMENT YEAR 2005 - 06 HAD DECLARED THE INVESTMENTS AT RS.8,18,644/ - BUT THE ESTIMATED INVESTMENTS AS PER THE DVO WAS RS.9,04,632/ - 4 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. AND THE DIFFERENCE OF RS.85,988/ - WAS TREATED AS UNEXPLAINED INVESTMENT OF ASSESSEE UNDER SECT ION 69 OF THE ACT. 5. THE ADDITION MADE BY THE ASSESSING OFFICER WAS UPHELD BY THE CIT(A). 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE YEAR UNDER CONSIDERATION IS THE ASSESSMENT YEAR FOR WHICH THE ASSESSMENT PROCEEDINGS HAVE NOT ABATED. HE FURTHER POINTED OUT THAT NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF COST OF INVESTMENTS IN THE BUNGALOW AND ONLY DURING THE COURSE OF RECORDING OF STATE MENT UNDER SECTION 132(4) OF THE ACT, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY ADMITTED THAT SUM OF RS.83 LAKHS WAS INVESTED IN CONSTRUCTION OF THE BUILDING WHICH WAS DULY RECORDED IN THE BOOKS OF ACCOUNT. HE THUS, POINTED OUT THAT IN THE ABSENCE OF ANY INCRIMINATING DOCUMENTS FOUND, NO ADDITION WHATSOEVER CAN BE MADE IN THE HANDS OF ASSESSEE. HE RELIED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. CONTINENTAL WAREHOUSING CORPORATION (2015) 374 ITR 645 (BOM). HE FURTHER POINTED OUT THAT THE ASSESSING OFFICER HAD REFERRED THE VALUATION OF COST OF CONSTRUCTION OF BUNGALOW, WHERE THE DIFFERENCE BETWEEN THE VALUE DECLARED BY THE ASSESSEE AND THE DVO WAS ONLY RS.11,23,557/ - WHICH HAS BEEN BIFURCATED ON PRORATA BASIS OVER THE VARIOUS Y EARS OF CONSTRUCTION OF BUNGALOW. HE STATED THAT DIFFERENCE WAS HARDLY RS.11 LAKHS BETWEEN TWO VALUATIONS I.E. 13.43%. FURTHER, HE POINTED OUT THAT THE DVO HAD APPLIED THE RATES OF CPWD AND NOT THE RATES OF PWD AND NO DEDUCTION WAS ALLOWED ON ACCOUNT OF SELF SUPERVISION. HE STATED THAT VARIOUS BENCHES OF TRIBUNAL HA VE HELD THAT DIFFERENCE ON ACCOUNT OF 5 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. DIFFERENCE BETWEEN CPWD AND PWD RATES, BENEFIT OF 5% SHOULD BE ALLOWED. HE THUS, STRESSED THAT IN CASE THE SAID DIFFERENCES ARE CREASED OUT, THEN THERE IS NO MERIT IN MAKING ANY ADDITION IN THE HANDS OF ASSESSEE . 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. THE WRITTEN SUBMISSIONS HAVE ALSO BEEN FILED ON EARLIER D ATE BY THE REVENUE, WHEREIN IT HAS BEEN POINTED OUT THAT WHERE THE ASSESSEE HAD MADE DECLARATION OF ADDITIONAL INCOME, THEN THE REGULAR BOOKS OF ACCOUNT MAINTAINED DO NOT SHOW THE TRUE STATE OF AFFAIRS. IT IS FURTHER POINTED OUT THAT THE VOUCHERS IN RESPE CT OF CONSTRUCTION PRIOR TO ASSESSMENT YEAR 2005 - 06 WERE NOT FURNISHED BEFORE THE ASSESSING OFFICER ON THE PLEA THAT THEY WERE BURNT IN FIRE. FURTHER, THE ASSESSEE HAS FAILED TO ESTABLISH ANY MISTAKE IN DVOS REPORT ALTHOUGH THE ASSESSING OFFICER HAD POIN TED OUT THE MISTAKES IN THE VALUATION REPORT. IN THE ABSENCE OF ANY MISTAKES BEING POINTED OUT, HE FURTHER STATED THAT THE REPORT OF DVO BE ADOPTED FOR WORKING OUT THE UNDISCLOSED INVESTMENTS IN THE HANDS OF ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIO NS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS THE ADDITION MADE ON ACCOUNT OF REPORT OF DVO IN RESPECT OF COST OF CONSTRUCTION OF BUNGALOW. BRIEFLY, IN THE FACTS OF THE CASE, SEARCH AND SEIZURE ACTION WAS TAKEN AGAINST THE AS SESSEE COMPANY. THE CHAIRMAN OF ASSESSEE COMPANY IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT CLEARLY ADMITTED THAT HE HAD CONSTRUCTED THE BUNGALOW IN WHICH THEY WERE LIVING AND HAD INVESTED SUM OF RS.83 LAKHS. IN RESPECT OF SAID INVESTMENT AND COST OF CONSTRUCTION OF THE BUILDING, NO ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE BUT THE ASSESSEE DID OFFER ADDITIONAL INCOME OF RS.41,45,890/ - ON 6 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. ACCOUNT OF HIS BUSINESS RELATED TRANSACTIONS AGAINST WHICH, ADDITIONAL INCOME HAS BEEN ACCEPTED AND THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. IN THIS REGARD, WE FIND NO MERIT IN THE STAND OF REVENUE TO STATE THAT THE REGULAR BOOKS OF ACCOUNT DID NOT SHOW THE TRUE STATE OF AFFAIRS. IN ANY CASE, THE ASSESSEE HAD DECLARED THE COST OF CONSTRUCTION OVER A PERIOD OF YEARS. THE ASSESSING OFFICER HOWEVER, REFERRED THE MATTER TO THE DVO TO VALUE THE COST OF CONSTRUCTION. THE ASSESSEE HAD DECLARED THE VALUE AT RS.83,60,568/ - AND THE DVO HAD VALUED THE SAME AT RS.94,84,215/ - . THE DIFFERENCE OF RS.11,23,557/ - HAS BEEN BIFURCATED ON PRORATA BASIS OVER THE PERIOD OF YEARS. 10. THE FIRST ISSUE WHICH ARISES IN THE PRESENT APPEAL IS JURISDICTIONAL ISSUE THAT IN THE CASE OF SEARCH PROCEEDINGS WHERE NO INCRIMINATING DOCUMENTS WERE FOUND, CAN THE ADDITION BE MADE IN RESPECT OF ASSESSMENT PROCEEDINGS, WHICH HAD NOT ABATED. THE SECOND ISSUE WHICH IS ARISING IS THAT WHERE THE DIFFERENCE IN THE VALUATION IS ABOUT APPROXIMATELY OF RS.11 LAKHS WHICH WORKS OUT TO 13.43% AND WHERE THE DVO HAS FAILED TO GIVE THE BENEFIT OF DEDUCTION UNDER SELF SUPERVISION AND HAD ALSO APPLIED CPWD RATES AS AGAINST THE PRESCRIBED RATES OF PWD RATES , CAN ANY ADDITION BE MADE IN THE HANDS OF ASSESSEE. WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD. THE TOTAL ADDITION MADE IN THE INSTANT ASSESSMENT YEAR WAS ONLY RS. 85,988/ - AND DIFFERENCE SHALL STAND REDUCED IN CASE THE RATES OF PWD FOR CONSTRUCTION ARE APPLIED AS AGAINST THE DVO APPLYING THE RATES OF CPWD AND FURTHER, THE ASSESSEE IS ENTITLED TO THE DEDUCTION IN VALUE ON ACCOUNT O F SELF SUPERVISION. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DIFFERENCE BEING ABOUT 13.43%, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN UPHOLDING THE ABOVE ADDITION MADE IN THE HANDS OF ASSESSEE. ACCORDINGLY , WE DELETE THE ADDITION OF RS.85,988/ - . IN VIEW OF OUR 7 ITA NO. 1332 /PUN/20 14 GHATGE PATIL INDUSTRIES LTD. DECIDING THE ISSUE ON MERITS, WE ARE NOT GOING INTO THE JURISDICTIONAL ASPECT OF THE ISSUE RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, WHICH BECOMES ACADEMIC IN NATURE. ACCORDI NGLY, WE HOLD SO. 1 1 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF SEPTEMBER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH SEPTEMBER , 201 7 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) , KOLHAPUR ; 4. / THE C IT - I/II, KOLHAPUR / CIT ( CENTRAL ) , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE