Sri. C. Shankar Reddy, Bangalore V. DCIT, Bangalore

ITA 1491/BANG/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8485 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R REDDY I
• Assessee Lawyers: NARAYANA MURTHY
• Keywords: Gift; Depreciation; Period of limitation; Reasonable cause; Corroborative evidences; Valuation report; Condonation of delay
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ITA NOS. 1490 TO 1492/BANG/2015 ASSESSMENT YEARS : 2011-12 TO 2013-14 SHRI C. SHANKAR REDDY, ADVOCATE, NO. 16, BEHIND KAPALI TALKIES, 6 TH MAIN ROAD, GANDHINAGAR, BANGALORE. PAN: ADFPR 7952L VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1(1), NO. 324, CENTRAL REVENUE BUILDING, QUEENS ROAD, BANGALORE 560 001. APPELLANT RESPONDENT APPELLANT BY : SHRI NARAYANA MURTHY, CA RESPONDENT BY : SHRI G.R. REDDY, CIT(DR-I) DATE OF HEARING : 09.02.2017 DATE OF PRONOUNCEMENT : 08.03.2017 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED A GAINST THE COMPOSITE ORDER DATED 31.08.2015 OF CIT(A) FOR THE ASSESSMENT YEARS 2011-12 TO 2013- 14. SINCE THESE THREE APPEALS ARE ARISING FROM THE ASSESSMENTS FRAMED U/S. 143(3) R.W.S. 153A OF THE IT ACT AND INVOLVE COMMON ISSUES THEREFORE, THESE ITA NOS. 1490 TO 1492/BANG/2015 PAGE 2 OF 20 THREE APPEALS WERE CLUBBED TOGETHER FOR THE PURPOSE OF HEARING AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER. 2. THERE IS A DELAY OF 43 DAYS IN FILING THESE APPEALS BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF DE LAY WHICH IS SUPPORTED BY AN AFFIDAVIT. THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT SINCE THE APPEALS OF THE ASSESSEE FOR THREE YEARS HAVE BEEN DISPOSED OF BY THE CIT(A) BY A COMPOSITE ORDER, THE ASSESSEE APPLIED FOR CERTIFIED COPY OF THE IMPUGNED ORDER TO FILE THREE SEPARATE APPEALS BEFORE THE TRI BUNAL. HE HAS SUBMITTED THAT THE SAID ORDER WAS RECEIVED BY THE ASSESSEE ON 10.09.2015 THROUGH POST AND THEREAFTER THE ASSESSEE APPLIED FOR CERTIFIED C OPY OF THE RESPECTIVE ORDERS PASSED BY THE CIT(A) AS WELL AS BY THE ASSESSING OF FICER. IT TOOK SOMETIME FOR THEM TO MAKE AVAILABLE THE CERTIFIED COPIES AND THEREFORE THE ASSESSEE COULD NOT FILE THESE APPEALS WITHIN A PERIOD OF LIM ITATION AND THERE WAS A DELAY OF 43 DAYS IN FILING THESE APPEALS. THE LD. AR HAS SUBMITTED THE DELAY IN FILING THE APPEALS IS NEITHER DELIBERATE NOR WIL LFUL BUT IT WAS DUE TO THE REASONS BEYOND CONTROL OF THE ASSESSEE. HENCE HE H AS PLEADED THAT THE DELAY OF 43 DAYS IN FILING OF THE APPEAL MAY BE CONDONED. 3. ON THE OTHER HAND THE LD. DR HAS VEHEMENTLY OPPOSED THE CONDONATION OF DELAY AND SUBMITTED THAT THE ASSESSEE CANNOT TAKE P LEA OF OBTAINING THE ITA NOS. 1490 TO 1492/BANG/2015 PAGE 3 OF 20 CERTIFIED COPIES OF THE ORDER WHEN THE ORIGINAL COP Y OF THE ORDER WAS SUPPLIED TO THE ASSESSEE. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE ASSESSEE HAS EXPLAINED THE REASONS FOR THE DELAY IN FILING THE APPEALS IN THE AFFIDAVIT THAT THE APPEAL S OF THE ASSESSEE WERE DISPOSED OF BY THE CIT(A) BY A COMPOSITE ORDER AND THEREFORE THE ASSESSEE APPLIED FOR CERTIFIED COPIES OF THE ORDER PASSED BY THE CIT(A) AS WELL AS THE ASSESSING OFFICER. THIS PROCESS OF TAKING THE CERT IFIED COPY TOOK SOMETIME AND THEREFORE THERE IS A DELAY IN FILING THE APPEAL S. IT IS PERTINENT TO NOTE THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT BY FILIN G THE APPEAL BELATEDLY THE ASSESSEE INTENDED TO ACHIEVE SOME ULTERIOR PURPOSE OR MOTIVE. THEREFORE WHEN THE ASSESSEE WAS NOT GOING TO TAKE ANY BENEFIT BY DELAYING THE FILING OF APPEALS THEN IN THE FACTS AND CIRCUMSTANCES OF T HE CASE THE REASONS EXPLAINED BY THE ASSESSEE AS STATED UNDER SOLEMN OA TH IN THE AFFIDAVIT CANNOT BE DISBELIEVED. HENCE IN THE FACTS AND CIRC UMSTANCES OF THE CASE AS WELL AS IN THE INTEREST OF JUSTICE WE ARE SATISFIED THAT THE ASSESSEE WAS HAVING REASONABLE CAUSE FOR NOT FILING THE APPEAL WITHIN T HE PERIOD OF LIMITATION. HENCE DELAY OF 43 DAYS IN FILING OF APPEAL IS CONDO NED. 5. FOR THE ASSESSMENT YEAR 2011-12 THE ASSESSEE HAS RA ISED THE FOLLOWING REVISED GROUNDS. ITA NOS. 1490 TO 1492/BANG/2015 PAGE 4 OF 20 6. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 7. GROUND NO. 2 IS REGARDING THE ADDITION ON AN ACCOUN T OF INVESTMENT IN HOUSE CONSTRUCTION. ASSESSEE WAS GIFTED THE PROPER TY BY HIS FATHER VIDE DEED DATED 19.05.2010. THE ASSESSING OFFICER NOTED THAT THE HOUSE IS A THREE STOREYED HOUSE WITH A LIFT ON THE NORTHERN SI DE WHICH CONNECTS ALL THREE FLOORS. THE AO IN THE ASSESSMENT PROCEEDINGS REFER RED THE VALUATION OF THE HOUSE PROPERTY TO DISTRICT VALUATION OFFICER(DVO). THE DVO VALUED COST ITA NOS. 1490 TO 1492/BANG/2015 PAGE 5 OF 20 OF THE CONSTRUCTION OF THE BUILDING AT RS. 1,40,72, 700/-. THE AO MADE ADDITION OF RS. 33,93,325 FOR THE ASSESSMENT YEAR 2 011-12 BASED ON THE VALUATION OF THE DVO. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT(A). THE CIT(A) AFTER CONSID ERING THE SOURCES EXPLAINED BY THE ASSESSEE HAS REDUCED THE ADDITION TO RS. 20,40,000/- AS AGAINST 33,93,325/- MADE BY THE ASSESSING OFFICER. 8. BEFORE THE TRIBUNAL THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE DVO HAS VALUED THE COST OF CONSTRUCTION BY APPLYING THE CPWD RATES WHEREAS THE ASSESSEE HAS CLAIMED THAT STATE PWD RATES SHOULD BE APPLIED FOR THE PURPOSE OF VALUATION OF THE COST OF CONSTRUCTION AND FURTHE R 10% REBATE SHALL BE ALLOWED ON ACCOUNT OF PERSONAL SUPERVISION. HE HAS POINTED OUT THAT THE AO HAS ALLOWED ONLY 6% SUPERVISION REBATE INSTEAD OF 1 0% CLAIMED BY THE ASSESSEE. THE LD. AR OF THE ASSESSEE HAS RELIED UP ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS K. JAYAKUMAR, (2013) 216 TAXMANN.COM 0166 AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT THE WORKING OUT THE COST OF CONSTRUCTION ON ST ATE PWD RATE SHOULD BE CONSIDERED. HE HAS ALSO RELIED UPON THE DECISION O F THE CHENNAI BENCH OF THE TRIBUNAL IN CASE OF K. DAMODARASWAMY NAIDU VS A CIT (1997) 59 ITD 0510 AND SUBMITTED THAT THE TRIBUNAL WHILE DEALING WITH THE IDENTICAL ISSUE OF CPWD RATES OR STATE PWD RATES HELD THAT THE VALU ATION SHALL BE COMPUTED FOLLOWING THE STATE PWD RATES. THUS THE LD. AR HAS CONTENTED THAT THE AO ITA NOS. 1490 TO 1492/BANG/2015 PAGE 6 OF 20 MAY BE DIRECTED TO APPLY THE STATE PWD RATES FOR CO MPUTATION OF THE COST OF CONSTRUCTION AND FURTHER ALLOW 10% SUPERVISION REBA TE TO ARRIVE AT COST OF CONSTRUCTION. IN SUPPORT OF THE CLAIM OF 10% THE S ELF SUPERVISION REBATE, HE HAS RELIED UPON THE DECISION OF THE JODHPUR BENCH O F THE TRIBUNAL IN THE CASE OF ITO VS DR. ANAND CHHABRA (2007) 107TTJ 0831. TH E LD. AR HAS ALSO RELIED UPON THE DECISION OF THE CHENNAI BENCH OF TH E TRIBUNAL IN CASE OF DCIT VS SMT. C.K. SUMATHY, (2010) 6 ITR 0193. 9. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE CIT(A) HAS ALREADY ALL OWED THE SUBSTANTIAL RELIEF TO THE ASSESSEE AND THEREFORE NO FURTHER RED UCTION IN THE ADDITION ON ACCOUNT OF INVESTMENT IN COST OF CONSTRUCTION OF HO USE CAN BE ALLOWED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE LIMITED GRIEVANCE OF THE ASSESSEE I N RESPECT OF THIS ISSUE IS APPLICATION OF CPWD RATES OR STATE PWD RATES WHILE COMPUTING THE COST OF CONSTRUCTION. THERE IS NO DISPUTE THAT THE DVO WHI LE COMPUTING THE VALUATION AS PER THE VALUATION REPORT HAS CONSIDERE D THE CPWD RATES DESPITE THE OBJECTIONS RAISED BY THE ASSESSEE. IT IS PERTI NENT TO NOTE THAT THIS ISSUE OF APPLICABILITY OF STATE PWD RATES HAS BEEN CONSIDERE D BY THIS TRIBUNAL IN SERIES OF DECISIONS. THE TRIBUNAL HAS TAKEN A CONS ISTENT VIEW THAT WHEN THE PROPERTY IS SITUATED IN THE STATE PWD JURISDICTION THEN THE STATE PWD RATES ITA NOS. 1490 TO 1492/BANG/2015 PAGE 7 OF 20 SHOULD BE APPLIED TO ASCERTAIN THE COST OF CONSTRUC TION INSTEAD OF CPWD RATES. HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS DINESH TALWAR 265 ITR 344(RAJ) HAS AFFIRMED THE DECISION OF THE TRIBU NAL DIRECTING THE AO TO APPLY STATE PWD RATE WHILE COMPUTING THE COST OF CO NSTRUCTION OF THE BUILDING. SIMILAR VIEW HAS BEEN TAKEN BY THE HONB LE MADRAS HIGH COURT IN CASE OF CIT VS K. JAYAKUMAR(SUPRA). THUS WHEN T HE PROPERTY IN QUESTION COMES UNDER THE STATE PWD JURISDICTION THEN THE STA TE PWD RATES HAS TO BE APPLIED FOR THE PURPOSE OF COMPUTING THE COST OF CO NSTRUCTION ON ESTIMATE BASIS. THE DVOS VALUATION OF COST OF CONSTRUCTION IS ONLY AN ESTIMATED VALUATION BASED ON CPWD RATES. THEREFORE THE AO IS DIRECTED TO APPLY THE STATE PWD RATES FOR ESTIMATING THE COST OF CONSTRUC TION OF THE HOUSE IN QUESTION. 11. AS REGARDS THE SELF SUPERVISION CHARGES REBATE RATE S IS CONCERNED, IT IS NOTED THAT THE TRIBUNAL HAS TAKEN A VIEW THAT THE REBATE ON ACCOUNT OF SELF SUPERVISION OF CONSTRUCTION OF HOUSE SHOULD BE GIVE N AT 10 TO 15% OF THE COST OF CONSTRUCTION. THE AO HAS GIVEN 6% REBATE O N ACCOUNT OF SELF SUPERVISION. HOWEVER, THE ASSESSEE IS DEMANDING 10 % REBATE ON THIS ACCOUNT. THE LD. AR OF THE ASSESSEE HAS RELIED UPO N THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V S SMT. C.K. SUMATHY (SUPRA) WHEREIN 15% DEDUCTION WAS DIRECTED TO BE AL LOWED FOR SELF ITA NOS. 1490 TO 1492/BANG/2015 PAGE 8 OF 20 SUPERVISION. THE JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS DR. ANAND CHHABRA (SUPRA) HAS HELD THAT SUCH SUPERVISIO N REBATE SHALL BE GIVEN RANGING FROM 7% TO 10%. THEREFORE, IN VIEW OF THE VARIOUS DECISIONS OF THE TRIBUNAL ON THIS ISSUE WE DIRECT THE AO TO ALLOW A REBATE OF 10% ON ACCOUNT OF SELF SUPERVISION WHILE COMPUTING THE RATE OF COS T OF CONSTRUCTION. HENCE THIS GROUND OF THE ASSESSEES APPEAL IS PARTLY ALLO WED. 12. GROUND NO. 3 IS REGARDING THE ADDITION ON ACCOUNT O F INTEREST ON FDR INVESTED IN THE EARLIER YEARS. THE AO NOTED AS PER THE SEIZED MATERIAL THE ASSESSEE HAS MADE VARIOUS INVESTMENTS IN FIXED DEPO SITS AND NATIONAL SAVINGS CERTIFICATE ON WHICH THE ASSESSEE EARNED IN TEREST. DURING THE YEAR THE ASSESSEE RECEIVED INTEREST ON FIXED DEPOSITS OF RS. 51,347. ON QUERY THE ASSESSEE SUBMITTED THAT INTEREST ON INVESTMENT IS REFLECTED IN THE RETURN OF INCOME WHEREIN THE INTEREST INCOME WAS SHOWN AT RS. 72,642/-. THUS, THE ASSESSEE CONTENTED BEFORE THE AO THAT THIS AMOUNT O F RS. 51347/- IS PART OF THE INTEREST INCOME OF RS. 72,642/-. THE AO DID NO T ACCEPT THIS EXPLANATION OF THE ASSESSEE AND MADE AN ADDITION OF RS. 51,347/ -. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). HOWEVER, THE CIT(A) HAS NOT ADJUDICATED THIS ISSUE. 13. BEFORE US THE LD. AR OF THE ASSESSEE HAS REFERRED T O THE SCHEDULE 4 TO PROFIT & LOSS ACCOUNT AT PAGE 146 OF THE PAPER BOOK AND SU BMITTED THAT THE TOTAL ITA NOS. 1490 TO 1492/BANG/2015 PAGE 9 OF 20 INTEREST OF RS. 72,642/- IS COMPRISING OF THE INTER EST FROM BANK DEPOSITS IN VARIOUS BRANCHES AND FURTHER THE INTEREST ON NSC HA S BEEN SEPARATELY SHOWN IN SCHEDULE 5. THEREFORE, THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS ALREADY OFFERED THE INTEREST INCOME IN THE RETURN O F INCOME. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDER OF THE A O AND SUBMITTED THAT THE AO HAS VERIFIED THE RECORD AND FOUND THAT THE ASSES SEE HAS NOT OFFERED THE INTEREST OF RS. 51,347/- 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE AO MADE AN ADDITION OF RS. 51,347/- ON ACCOUNT OF INTEREST ON FIXED DEPOSIT AND NATIONAL SAVINGS CERTIFICATE. TH E ASSESSEE CATEGORICALLY STATED BEFORE THE AO THAT THIS AMOUNT OF INTEREST I S ALREADY OFFERED IN THE RETURN OF INCOME AS PART OF THE INTEREST INCOME OF RS. 72,642/- THIS FACT HAS BEEN DULY RECORDED BY THE AO IN PARA 5.3. DESPITE THAT THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE. WE NOTE THAT AS PER SCHEDULE 4 OF PROFIT & LOSS ACCOUNT THE ASSESSEE HAS SHOWN THE IN TEREST FROM BANKS AT RS. 72,642/- AND FURTHER THE INTEREST OF NSC AT RS. 2,641/-. THEREFORE, PRIMA FACIE IT APPEARS THAT THE INTEREST RECEIVED F ROM THE BANK HAS BEEN DULY REFLECTED AS PART OF THE INTEREST INCOME OF RS. 72, 642/-. HOWEVER, SINCE THE CIT(A) HAS NOT ADJUDICATED THIS ISSUE THEREFORE, FO R THE LIMITED PURPOSE OF VERIFICATION OF THIS FACT WE SET ASIDE THIS ISSUE T O THE RECORD OF AO TO VERIFY ITA NOS. 1490 TO 1492/BANG/2015 PAGE 10 OF 20 THE RECORD AND PARTICULARLY SCHEDULE 4 & 5 OF FINAN CIAL STATEMENT OF THE ASSESSEE AND THEN DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. GROUND NO. 4 IS REGARDING DISALLOWANCE OF RS. 24,98 7/- BEING 30% OF THE ADMINISTRATIVE EXPENSES RELATING TO THE PROFESSIONA L INCOME. THE AO NOTED THAT THE ASSESSEE HAS ADMITTED PROFESSIONAL RECEIPT S OF RS. 5,72,356/- AGAINST WHICH EXPENDITURE LIKE PRINTING & STATIONERY, TELEP HONE CHARGES, VEHICLE MAINTENANCE ETC OF RS. 83,339/- WERE DEBITED APART FROM DEPRECIATION OF RS. 39,525/- THE AO ASKED THE ASSESSEE TO SUBSTANTIATE THE EXPENSES INCURRED WITH RESPECT OF EARNING OF PROFESSIONAL INCOME ALON G WITH THE DOCUMENTARY EVIDENCE. IN REPLY THE ASSESSEE STATED THAT HE WAS AN ADVOCATE AND IN FULL TIME EMPLOYMENT IN 2007-08 AND PARALLELLY STARTED P RACTICE IN FINANCIAL YEAR 2008-09. HE HAS FURTHER STATED THAT HE GOT IN TO FULL TIME PRACTICE SINCE FINANCIAL YEAR 2011-12. THE AO NOTED THAT THE ASSE SSEE HAS NOT PROVIDED ANY DOCUMENTARY EVIDENCE TOWARDS ADMINISTRATIVE EXP ENSES OF RS. 83,339/- AS ARE REFLECTED IN INCOME AND EXPENDITURE ACCOUNT. ACCORDINGLY, THE AO HAS MADE ADHOC DISALLOWANCE OF 30% AMOUNTING TO RS. 24,987/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) BUT COULD NOT SUCCEED. SINCE THE ASSESSEE COULD NOT PRODUCE EVID ENCE TO PROVE THE EXPLANATION, THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE AO. ITA NOS. 1490 TO 1492/BANG/2015 PAGE 11 OF 20 16. BEFORE US THE LD. AR HAS SUBMITTED THAT THE ASSESSE E HAS SHOWN THE PROFESSIONAL RECEIPT OF RS. 5,72,356/- AGAINST WHIC H THE ASSESSEE HAS CLAIMED ADMINISTRATIVE EXPENSES OF RS. 83,339/- WHI CH COMES TO 14.5% OF THE PROFESSIONAL RECEIPTS. THUS, THE LD. AR HAS CO NTENTED THAT BY ANY STANDARD THE QUANTUM OF ADMINISTRATION EXPENSES IN RELATION TO THE TOTAL PROFESSIONAL RECEIPTS ARE REASONABLE AND ARE BELOW THE NORMAL CLAIM IN SIMILAR CASES. THE LD. AR HAS EVEN REFERRED THE AM ENDMENT VIDE FINANCE BILL 2016 IN SECTION 44ADA WHICH PROVIDES FOR ESTIM ATING THE INCOME OF AN ASSESSEE ENGAGED IN ANY PROFESSION WHOSE TOTAL GROS S RECEIPT DOES NOT EXCEED RS. 50 LAKHS IN THE PREVIOUS YEAR. THUS, TH E REVENUE CONSIDERED 50% OF THE GROSS RECEIPT OF THE PROFESSION AS REASO NABLE EXPENSES TO BE ALLOWED FOR COMPUTING TAXABLE INCOME FROM PROFESSIO N. THE ASSESSEE HAS CLAIMED THE ADMINISTRATIVE EXPENSES BELOW 15% OF TH E GROSS RECEIPTS AND THEREFORE ADHOC DISALLOWANCE OF 30% IS NOT JUSTIFIE D. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIE S BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS NOT SUBSTANTIATED HIS CLAIM B Y FILING THE SUPPORTING EVIDENCE, THEN THE DISALLOWANCE OF 30% IS JUSTIFIED . ITA NOS. 1490 TO 1492/BANG/2015 PAGE 12 OF 20 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS SHOWN THE PROFESSIONAL RE CEIPTS OF RS. 5,72,356/- AGAINST WHICH THE ASSESSEE HAS CLAIMED ADMINISTRATI VE EXPENSES OF RS. 83,339/- WHICH IS LESS THAN 15% OF THE PROFESSI ONAL RECEIPTS. ONCE THE PROFESSIONAL INCOME AND GROSS RECEIPTS ARE NOT IN D ISPUTE THEN IT IS AN IMPOSSIBLE PROPOSITION THAT THE PROFESSIONAL INCOME SHOULD BE EARNED WITHOUT ANY CORRESPONDING EXPENSES. CONSIDERING TH E QUANTUM OF THE EXPENSES WHICH IS LESS THAN 15% OF THE GROSS RECEIP TS WE FIND THAT THE ADHOC DISALLOWANCE OF 30% IS EXORBITANT AND IS AN EXTREME VIEW. ACCORDINGLY, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE CLAIM OF THE ASSESSEE IS LESS THAN 15% OF THE GROSS PROFESSIONAL RECEIPTS WE RESTRICT THE DISALLOWANCE FOR WANT OF SUPPORTING EVIDENCE TO 10% OF THE EXPENSES INSTEAD OF 30%. ACCORDINGLY, WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE AT 1 0%. 18. FOR THE ASSESSMENT YEAR 2012-13, THE ASSESSEE HAS R AISED THE FOLLOWING REVISED GROUNDS. ITA NOS. 1490 TO 1492/BANG/2015 PAGE 13 OF 20 19. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 20. GROUND NO. 2 IS REGARDING ADDITION ON ACCOUNT OF IN VESTMENT IN CONSTRUCTION OF HOUSE. THIS ISSUE IS COMMON AS FOR THE ASSESSME NT YEAR 2011-12. IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE ASSESSMEN T YEAR 2011-12 THIS ISSUE STANDS DISPOSED OF IN SAME TERMS. 21. GROUND NO. 3 IS REGARDING DISALLOWANCE OF 30% OF AD MINISTRATIVE EXPENSES. THIS ISSUE IS COMMON AS FOR THE ASSESSMENT YEAR 201 1-12. IN VIEW OF OUR ITA NOS. 1490 TO 1492/BANG/2015 PAGE 14 OF 20 FINDING ON THIS ISSUE FOR THE ASSESSMENT YEAR 2011- 12 THIS ISSUE HAS BEEN DISPOSED OF IN SAME TERMS. 22. FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSEE HAS R AISED THE FOLLOWING REVISED GROUNDS. ITA NOS. 1490 TO 1492/BANG/2015 PAGE 15 OF 20 23. GROUND NO. 1 IS GENERAL IN NATURE AND DOES NOT REQU IRE ANY SPECIFIC ADJUDICATION. 24. GROUND NO. 2 IS REGARDING ADDITION ON ACCOUNT OF IN VESTMENT IN CONSTRUCTION OF HOUSE. THIS ISSUE IS COMMON AS FOR THE ASSESSME NT YEAR 2011-12. IN VIEW OF OUR FINDING IN THIS ISSUE FOR THE ASSESSMEN T YEAR 2011-12 THIS ISSUE STANDS DISPOSED OF IN SAME TERMS. 25. GROUND NO. 3 IS REGARDING ADDITION ON ACCOUNT OF UN EXPLAINED GOLD AND SILVER TO THE EXTENT OF RS. 17,71,225/-. DURING TH E COURSE OF SEARCH U/S. 132, GOLD ARTICLES(JEWELLERY) WEIGHING 1072.77 GRAM AND SILVER ARTICLES WEIGHING 773.5 GRAMS WERE FOUND AS INVENTORIES AT B ANK LOCKER BELONGING TO THE ASSESSEE. APART FROM THIS, GOLD JEWELLERY W EIGHING 322 GRAMS WAS ALSO FOUND AT THE RESIDENCE OF THE ASSESSEE. IN TH E ASSESSMENT THE AO MADE AN ADDITION OF RS. 38,63,176/- AS UNEXPLAINED INVES TMENT IN JEWELLERY. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) HAS ALLOWED THE CREDIT FOR 800 GRAMS OF GOLD AND EN TIRE SILVER ARTICLES AS PER THE CBDT CIRCULAR AND CONSEQUENTLY REDUCED THE ADDI TION TO RS. 17,71,225/- AGGRIEVED BY THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION OF RS. 17,71,225/- THE ASSESSEE HAS RAISED THIS ISSUE. 26. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE WIFE OF THE ASSESSEE HAS RECEIVED MOST OF THE JEWELLERY IN QUES TION ON THE OCCASION OF ITA NOS. 1490 TO 1492/BANG/2015 PAGE 16 OF 20 MARRIAGE ON 02.08.1998. THEREFORE, THE RATES OF TH E GOLD AS PREVAILING AT THE TIME OF MARRIAGE SHOULD BE APPLIED FOR VALUING THE JEWELLERY IN QUESTION. THE LD. AR HAS FURTHER SUBMITTED THAT THE FAMILY OF THE ASSESSEE CONSIST OF HIMSELF, HIS WIFE AND TWO SONS BORN IN THE YEAR 200 2 AND 2007. SINCE THE ASSESSEE BELONGS TO REDDY COMMUNITY WHETHER IT IS C USTOMARY TO RECEIVE GIFTS ON OCCASIONS LIKE WEDDING, BIRTHDAY ETC. THE AO HAS WRONGLY ASSUMED THAT THE JEWELLERY WAS ACQUIRED DURING THE FINANCIAL YEAR 2012-13 AND APPLIED THE PREVAILING RATE AT THE TIME OF SEAR CH INSTEAD OF THE RATE PREVAILING WHEN THIS JEWELLERY WAS RECEIVED BY WAY OF GIFTS AT THE TIME OF MARRIAGE AND REMAINING ON THE OCCASION OF THE BIRTH OF HIS SONS. THUS, THE LD. AR HAS CONTENTED THAT THE AO HAS ADOPTED THE RA TE OF GOLD PREVAILING AT THE TIME OF SEARCH INSTEAD OF THE RATE AT THE TIME OF ACQUISITION OF JEWELLERY IN QUESTION AS GIFT. HE HAS REFERRED TO THE DETAIL S OF THE RATE OF GOLD JEWELLERY AT THE RELEVANT POINT OF TIME OF MARRIAGE , BIRTH OF FIRST CHILD AND BIRTH OF SECOND CHILD. THE LD. AR HAS SUBMITTED TH AT THE ASSESSEE HAD EXPLAINED THE OCCASIONS AND TIMES OF JEWELLERY RECE IVED BY THE WIFE OF THE ASSESSEE THEN THE RATES PREVAILING AT THAT POINT OF TIME SHOULD HAVE BEEN APPLIED FOR THE PURPOSE OF ADDITION. 27. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TO OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE JEWELLERY WAS DET ECTED DURING THE SEARCH ITA NOS. 1490 TO 1492/BANG/2015 PAGE 17 OF 20 AND NO RECORD WAS PRODUCED BY THE ASSESSEE REGARDIN G THE ACQUISITION / PURCHASE OF THE JEWELLERY THEN PRESUMPTION IS RAISE D THAT THE JEWELLERY WAS ACQUIRED DURING THE YEAR OF SEARCH AND IT HAS TO BE ASSESSED AS UNDISCLOSED INCOME OF THE ASSESSEE OF THE FINANCIAL YEAR IN WHI CH THE SEARCH WAS CONDUCTED. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE LIMITED ISSUE RAISED BEFORE US BY T HE ASSESSEE IS REGARDING THE RATE OF THE GOLD TO BE APPLIED FOR COMPUTING TH E UNEXPLAINED INCOME ON ACCOUNT OF INVESTMENT IN GOLD. THE GOLD ARTICLES W ERE FOUND IN THE LOCKER OF THE ASSESSEE AS WELL AS AT THE RESIDENCE OF THE ASS ESSEE. AS PER THE DESCRIPTIONS OF THE ARTICLES FOUND DURING THE SEARC H WE NOTE THAT ALL THESE GOLD ITEMS ARE JEWELLERY MEANT FOR WOMEN. THEREFOR E, THE ENTIRE JEWELLERY FOUND DURING THE SEARCH WAS WOMEN JEWELLERY. THE A SSESSEE CLAIMED THAT THE MAJORITY OF THE JEWELLERY WAS RECEIVED BY THE W IFE OF THE ASSESSEE AT THE TIME OF MARRIAGE IN THE YEAR 1998 AND REMAINING WAS RECEIVED ON THE OCCASION OF THE BIRTH OF FIRST SON IN THE YEAR 2002 AND SECOND SON IN THE YEAR 2007. THUS, THE ASSESSEE CLAIMED THAT THE GOLD RAT ES PREVAILING AT THE TIME OF MARRIAGE AS WELL AS AT THE TIME OF THE BIRTH OF THE SONS MAY BE APPLIED FOR THE PURPOSE OF COMPUTING THE INCOME ON THIS ACCOUNT . THE CIT(A) THOUGH ALLOWED THE BENEFIT AS PER THE BOARD CIRCULAR NO. 1 916 DATED 11.05.1994 AND THEREFORE OUT OF THE TOTAL JEWELLERY FOUND DURING T HE SEARCH THE CIT(A) HAS ITA NOS. 1490 TO 1492/BANG/2015 PAGE 18 OF 20 ALLOWED THE CREDIT OF 800 GRAMS OF GOLD AND THE ENT IRE SILVER ARTICLES OF 773.5 GRAMS. IT IS PERTINENT TO NOTE THAT ONCE THE ASSESSEE HAS CLAIMED THAT THE JEWELLERY WAS RECEIVED BY HIS WIFE AT THE TIME OF WEDDING AS WELL AS AT THE OCCASION OF THE BIRTH OF SONS THEN IT BECOMES R ELEVANT TO CONSIDER WHETHER THE JEWELLERY FOUND DURING THE SEARCH WAS O LD JEWELLERY OR IT WAS A NEWLY MADE JEWELLERY. WHEN THE AO HAS NOT GIVEN A FINDING THAT THE JEWELLERY WAS NEWLY MADE JEWELLERY THEN THE JEWELLE RY ITEMS AS PER THE LIST CLEARLY REFLECTS THAT THESE ARE OF ROUTINE JEWELLER Y ITEMS OF WOMEN SOME OF WHICH ARE CONSIDERED AS PART OF ISHTRIDHAN AND ARE PART OF THE JEWELLERY GIFTED TO A WOMEN AT THE TIME OF WEDDING. ACCORDIN GLY, IN THE ABSENCE OF ANY CONTRARY FINDING BY THE AO THAT ALL THE JEWELLE RY ITEMS ARE MANUFACTURED IN THE FINANCIAL YEAR 2012-13, THE EXP LANATION OF THE ASSESSEE IS PLAUSIBLE AND CANNOT BE BRUSHED ASIDE. THEREFOR E, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE ASSESSEE BELONGS TO A REDDY COMMUNITY WHETHER THERE IS A CUSTOM OF GIVING THE JEWELLERY O N THE OCCASION OF WEDDING AS WELL AS OCCASION OF BIRTH OF CHILDREN, W E ARE OF THE CONSIDERED VIEW THAT THE RATE OF GOLD JEWELLERY HAS TO BE APPL IED AS PREVAILING AT THE TIME OF THE MARRIAGE OF THE ASSESSEE AS WELL AS AT THE TIME OF THE BIRTH OF THE SONS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE TH IS ISSUE TO THE RECORD OF THE AO FOR APPLYING THE RATE OF GOLD AS PREVAILING AT THE TIME OF THE WEDDING AS WELL AS BIRTHS OF THE CHILDREN OF THE ASSESSEE B Y CONSIDERING THE ITA NOS. 1490 TO 1492/BANG/2015 PAGE 19 OF 20 PROPORTIONATE AMOUNT OF JEWELLERY ON THE OCCASIONS BEING WEDDING AND BIRTH. 29. GROUND NO. 4 IS REGARDING ADDITION OF RS. 1,00,000/ - BEING CASH FOUND IN THE BANK LOCKER. WE HAVE HEARD THE LD. AR AS WELL AS T HE LD. DR AS WELL AS THE RELEVANT MATERIAL ON RECORD. WHEN THERE IS NO DISP UTE THAT THE CASH WAS FOUND FROM THE LOCKER IT HAS TO BE INCLUDED IN THE INCOME OF THE ASSESSEE IN THE ABSENCE OF ANY EXPLANATION. HOWEVER, THE ASSES SEE IS ENTITLED FOR TELESCOPIC ADJUSTMENT OF THIS AMOUNT AGAINST THE AD DITION OF INCOME IF ANY IN RESPECT OF ASSESSMENT YEAR 2011-12 AND 2012-13. 30. GROUND NO. 5 IS REGARDING DISALLOWANCE OF 30% OF TH E ADMINISTRATIVE EXPENSES RELATING TO THE PROFESSIONAL INCOME. THIS ISSUE IS COMMON AS FOR THE ASSESSMENT YEAR 2011-12. IN VIEW OF OUR FINDIN G IN THIS ISSUE FOR THE ASSESSMENT YEAR 2011-12 THIS ISSUE HAS BEEN DISPOSE D OF IN SAME TERMS. 31. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF MARCH, 2017 SD/- SD/- (S. JAYARAMAN) (VIJAY P AL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 08 TH MARCH, 2017. / MS/ ITA NOS. 1490 TO 1492/BANG/2015 PAGE 20 OF 20 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.