DULI CHAND MALI, Jaipur V. ITO, Jaipur

ITA 176/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5471 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA SINGH JCIT DHK
• Assessee Lawyers: S K SHARMA; MUKESH GUPTA C AS
• Keywords: Capital asset; Business income; Principle of natural justice; Cost of acquisition; Date of conversion; Fair market value
• Section: 54F; 2(14)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 176/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI DULI CHAND MALI, GULLAR DAM, SHIKARPURA ROAD, SANGNEER, JAIPUR CUKE VS. THE INCOME TAX OFFICER, WARD 7(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AHWPM 8416 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.K. SHARMA, & SHRI MUKESH GUPTA (C.AS.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA SINGH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21/12 /2015 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 12/02/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-III, JAIPUR DATED 14.1.2012 WHEREIN THE ASSESSEE HAS TAK EN THE FOLLOWING THREE EFFECTIVE GROUNDS OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN CONFIRMING THE FINDING OF AO WITH REGARD TO COST OF LAND AS ON 01.04.1981 AT RS. 1031/- IGNORING THE OPTION OF ASSESSEE THAT FA IR MARKET VALUE OF LAND FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN, SHO ULD HAVE BEEN TAKEN ON THE DATE OF NOTIFICATION IN OFFICIAL GAZETTE BY WHI CH AGRICULTURE LAND BECAME THE CAPITAL ASSETS WITHIN MEANING OF SECTION 2(14)( III) OF THE I.T. 1961. ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 2 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING CLAIM OF BENEFIT OF SECTION 54F OF THE I.T. ACT, 1961. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 19 LACS MADE BY AO U NDER THE HEAD UNEXPLAINED CASH DEPOSIT IN BANK ACCOUNT. 2. REGARDING GROUND NO.1, THE RELEVANT FACTS AS APP ARENT FROM RECORDS ARE THAT DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 200 9-10, ASSESSEE HAD SOLD AGRICULTURAL LAND SITUATED AT SANGANER FOR A TOTAL CONSIDERATION OF RS.38,00,000/-. SINCE THE LAND WAS WITHIN 8 KMS OF THE MUNICIPAL LI MITS AT THE TIME OF SALE, THE SAME WAS HELD AS A CAPITAL ASSET IN TERMS OF THE PR OVISIONS OF SECTION 2(14)(III) OF THE ACT, LIABLE FOR CAPITAL GAINS TAX. ON THE BAS IS OF REGISTERED SALE DOCUMENT DATED 01.07.1981, MADE AVAILABLE BY THE DIG (STAMPS ), SINCE THE LAND WAS INITIALLY PURCHASED PRIOR TO 1.4.1981, THE AO DETERMINED THE COST OF ACQUISITION OF THE SAID LAND AS ON 01.04.1981 @ RS.97.63 PER BIGHA AND THE INDEXED COST OF ACQUISITION OF RS. 1,031/-AND THE LONG TERM CAPITAL GAINS WAS ACCO RDINGLY COMPUTED AT RS. 37,98,969/-. 2.1 THE LD. AR ARGUED THE MATTER AT LENGTH AND SUBM ITTED THAT THE AO HAS ADOPTED THE COST OF ACQUISITION OF AGRICULTURE LAND AS ON 01.04.1981 AT RS.97.63/- PER BIGHA WITHOUT APPRECIATING THE SITUATION OF LAN D AND CIRCUMSTANCES THAT LAND WAS SOLD ON 20.09.2008. IN CASE CAPITAL GAINS FROM THE SALE OF AGRICULTURAL LAND IS BROUGHT TO TAX, THE ASSESSEE SHOULD HAVE AN OPTION TO SUBSTITUTE ITS COST ON THE DATE FROM WHICH AGRICULTURAL LAND, DUE TO AMENDMENT MADE IN MUNICIPAL CORPORATION AREA, BECAME CAPITAL ASSETS WITHIN THE MEANING OF SEC. 2(14)(III) OF THE INCOME TAX ACT, 1961. IT IS ONLY AFTER NOTIFIC ATION, THE LAND IN QUESTION BECAME THE CAPITAL ASSETS, IN THE HANDS OF THE APPE LLANT/ASSESSEE AND AS SUCH, COST OF ACQUISITION SHOULD BE TAKEN AS FMV ON THE D ATE OF NOTIFICATION AND NOT THE DATE OF 1.04.81 AS APPLIED BY AO. IN SUPPORT, HE P LACED RELIANCE ON FOLLOWING JUDGEMENTS:- CIT VS. BAI SHIRIN BAI K KOOKA (1962) 46 ITR 86 (SC ) CIT VS. HAMTAPURA TE CO. LTD. (1973) 258 (SC) CIT VS. GROZ BOCKERT SABOD LTD. (1979) 89 ITR 258 ( SC) GURJIT SINGH MANSAHIA VS. ITO (1983) 5 ITD 126 (CHD) THE LD AR SUBMITTED THAT THOUGH THE AFORESAID DECIS IONS RELATES TO INTRODUCTION OF CLAUSE III TO SECTION 2(14) YET THESE DECISIONS ARE APPLICABLE IN THE INSTANT CASE ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 3 BECAUSE AFTER EXTENSION OF MUNICIPAL CORPORATION AR EA OF JAIPUR, THE LAND IN QUESTION BECAME THE CAPITAL ASSET AND NOT PRIOR TO THAT. 2.2 THE LD DR SUBMITTED THAT WHERE THE LAND WAS PUR CHASED PRIOR TO 1.4.81, THE AO WAS RIGHT IN SUBSTITUTING THE ACTUAL COST WITH T HE FMV AS ON 1.4.81 AND ACCORDINGLY, THE APPELLANT WAS GIVEN THE DESIRED RE LIEF OF ENHANCED INDEXED COST OF ACQUISITION. FURTHER, HE SUBMITTED THAT THERE I S NO PROVISION IN THE INCOME TAX ACT WHERE THE ACTUAL COST OF AN ASSET CAN BE SUBSTI TUTED FOR FMV WHEN AN ASSET BECOMES A CAPITAL ASSET WITHIN THE MEANING OF SECTI ON 2(14) OF THE ACT 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL ON RECORD. IN ORDER TO DECIDE THE ISSUE UNDER CONSIDERATION, I T WOULD BE RELEVANT TO EXAMINE THE RELEVANT PROVISIONS OF THE ACT WHICH HAVE A BEA RING ON THE MATTER. 3.1 SECTION 45 OF THE ACT PROVIDES FOR LEVY OF INCO ME TAX ON THE PROFITS AND GAINS ARISING FROM, THE TRANSFER OF A CAPITAL ASSET EFFECTED BY THE ASSESSEE IN THE PREVIOUS YEAR. SECTION 48 OF THE ACT DEALS WITH TH E MODE OF COMPUTATION OF INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS AN D PROVIDES THAT THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET, THE EXPENDITURE INCURRED WHOL LY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND THE COST OF ACQUISITION OF T HE ASSET AND THE COST OF ANY IMPROVEMENT THERETO. FURTHER, IT PROVIDES THAT WHE RE LONG TERM CAPITAL GAINS ARISES FROM THE TRANSFER OF A LONG TERM ASSET (AS I N THE INSTANT CASE), COST OF ACQUISITION SHALL BE SUBSTITUTED FOR INDEXED COST O F ACQUISITION WHICH HAS BEEN DEFINED UNDER EXPLANATION (III) TO SECTION 49 AS UN DER: INDEXED COST OF ACQUISITION MEANS AN AMOUNT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST INFLATION I NDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION IN DEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE ASSESSEE OR FOR THE YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 1981, WHICHEVER IS LATER. FURTHER, SECTION 55(2) DEFINES THE EXPRESSION COST OF ACQUISITION SPECIFICALLY FOR THE PURPOSE OF SECTIONS 48 AND 49 IN THE FOLLOWING TERMS: (2) FOR THE PURPOSES OF SECTIONS 48 & 49, COST OF ACQUISITION, IN RELATION TO ANY OTHER CAPITAL ASSET ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 4 (I) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BEFORE THE 1 ST DAY OF APRIL 1981, MEANS THE COST OF ACQUISITION OF THE ASSET TO THE ASSESSEE OR THE FAIR MARKET VALUE OF THE ASSET ON THE 1 ST DAY OF APRIL 1981, AT THE OPTION OF THE ASSESSEE. 3.2 A READING OF THE ABOVE PROVISIONS MAKES IT CLEA R THAT WHAT IS RELEVANT IS THE ACTUAL COST OF ACQUISITION OF THE ASSET IN THE HA NDS OF THE ASSESSEE AND NOT THE FMV ON THE DATE ON WHICH THE ASSET BECAME A CAPITAL ASSET FOR THE PURPOSE OF LEVY OF CAPITAL GAINS TAX. THE ONLY EXCEPTION IS W HERE THE ASSET WAS PURCHASED PRIOR TO 1.4.1981, THE LEGISLATION HAS PROVIDED A S PECIFIC RELAXATION BY VIRTUE OF WHICH THE ACTUAL COST CAN BE SUBSTITUTED FOR FMV PR EVAILING AS ON 1.4.1981. THE SAID RELAXATION CANNOT BE EXTENDED, AS SUGGESTED BY THE LD. AR, TO SITUATIONS WHERE THE FMV ON THE DATE AN ASSET BECOMES A CAPITA L ASSET SHOULD BE CONSIDERED. IN OUR VIEW, THE POSITION WILL REMAIN THE SAME WHETHER THE ASSET WAS A CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) AT THE TIME OF INITIAL PURCHASE OR IT FALLS WITHIN THE DEFINITION OF THE CAPITAL AS SET BECAUSE OF SUBSEQUENT LEGISLATIVE NOTIFICATIONS AS IN THE INSTANT CASE WH ERE DUE TO THE A SPECIFIC NOTIFICATION, THE AGRICULTURE LAND FALLS WITHIN THE SPECIFIED LIMITS OF A MUNICIPALITY AND IT CAME WITHIN THE AMBIT OF A CAPITAL ASSET UND ER SECTION 2(14) OF THE ACT. ACCORDINGLY, ONCE AN ASSET BECOMES CAPITAL ASSET AND IT IS TRANSFERRED THEREAFTER, THE CAPITAL GAINS HAS TO BE COMPUTED IN THE MANNER LAID DOWN IN SECTION 48, AND 55(2) OF THE ACT AS HAS BEEN RIGHTL Y DONE BY THE AO IN THE INSTANT CASE. 3.3 SIMILAR LINE OF ARGUMENTS WAS ADVANCED BY THE C OUNSEL FOR THE APPELLANT IN CASE OF RANCHHODBHAI BHAIJIBHAI PATEL VS. CIT (1971) 81 ITR 446 (GUJ) WHERE THE HONBLE GUJARAT HIGH COURT HAS OBSERVED AS UNDER (AT PAGE 458): THESE WORDS (THE COST OF ACQUISITION OF THE CAPITA L ASSET) EMPHASIS TWO ASPECTS: ONE IS ACQUISITION AND THE OTHER IS COST. THE R EFERENCE CLEARLY IS TO THE POINT OF TIME WHEN THE CAPITAL ASSET IS ACQUIRED AND THE COS T OF SUCH ACQUISITION IS REQUIRED TO BE DEDUCTED FROM THE FULL VALUE OF THE CONSIDERA TION. WHERE THE PROPERTY TRANSFERRED WAS NOT A CAPITAL ASSET AT THE DATE OF ACQUISITION BUT SUBSEQUENTLY BECAME A CAPITAL ASSET AS IN THE PRESENT CASE, IT I S DIFFICULT TO SEE HOW IT CAN BE SAID THAT THE PROPERTY AS A CAPITAL ASSET WAS ACQUI RED BY THE ASSESSEE WHEN IT WAS CONVERTED INTO A CAPITAL ASSET AND HOW IT WOULD BE POSSIBLE IN SUCH A CASE TO DETERMINE THE COST OF ACQUISITION. THERE ARE NO T WO DIFFERENT ACQUISITIONS OF PROPERTY, ONE AS A NON-CAPITAL ASSET AND THE OTHER AS A CAPITAL ASSET. THE PROPERTY IS ACQUIRED BY THE ASSESSEE ONLY ONCE AND MERELY IT S CHARACTER CHANGES IN THE ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 5 SENSE THAT, WHEREAS, ORIGINALLY IT WAS NON-CAPITAL ASSET, IT NOW BECOMES CAPITAL ASSET. IT WOULD INDEED BE DOING VIOLENCE TO THE LA NGUAGE OF SECTION 48, CLAUSE (II), TO READ THE WORDS THE COST OF ACQUISITION OF THE C APITAL ASSET IN THE MANNER SUGGESTED ON BEHALF OF THE ASSESSEE. WE WOULD HAVE TO INTRODUCE AN UNWARRANTED FICTION, NAMELY THAT WHEN THE PROPERTY, WHICH AT TH E DATE OF ACQUISITION WAS NON- CAPITAL ASSET, BECOMES A CAPITAL ASSET, IT IS DEEME D TO BE ACQUIRED BY THE ASSESSEE AS CAPITAL ASSET ON THAT DATE AND, FURTHERMORE, TH OUGH THERE CAN BE NO COST OF SUCH ACQUISITION, THE MARKET VALUE OF THE PROPERTY ON THAT DATE SHOULD BE DEEMED TO BE THE COST OF SUCH ACQUISITION. THERE IS NO WA RRANT FOR IMPOSING SUCH LEGAL FICTION ON THE PLAIN LANGUAGE AT SECTION 48, CLAUSE (II). THE CONTENTION OF THE ASSESSEE ALSO STANDS REFUTED BY THE LANGUAGE OF SECTION 55(2), CLAUSE (I). THE PROPERTY WHICH IS T RANSFERRED COULD BECOME THE PROPERTY OF THE ASSESSEE ONLY AT ONE POINT OF TIME. IT WOULD NOT BECOME THE PROPERTY OF THE ASSESSEE AS A NON-CAPITAL ASSET AT ONE POINT OF TIME AND AS A CAPITAL ASSET AT ANOTHER POINT OF TIME. THE ARGUME NT OF THE ASSESSEE WOULD REQUIRE US TO INTRODUCE A LEGAL FICTION ALSO IN SEC TION 55(2), CLAUSE (I). WE WOULD HAVE TO ASSUME THAT WHEN A PROPERTY WHICH WAS A NON -CAPITAL ASSET BECOMES A CAPITAL SET, IT IS DEEMED TO BECOME THE PROPERTY OF THE ASSESSEE FOR THE PURPOSE OF SECTION 55(2), CLAUSE (I). SUCH A CONSTRUCTION WOU LD DO VIOLENCE TO THE LANGUAGE OF SECTION 55(2) CLAUSE (I) AND WOULD BE CLEARLY IMPER MISSIBLE ON ANY RECOGNIZED CANON OF CONSTRUCTION. THEN AGAIN IT IS APPARENT F ROM SECTIONS 49, 51 AND 55(3) THAT THE WORDS THE COST OF ACQUISITION OF THE CAPI TAL ASSET, THE COST FOR WHICH THE ASSET WAS ACQUIRED, AND THE COST FOR WHICH TH E PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, ARE VARIOUSLY USED BY THE LE GISLATURE TO DENOTE THE SAME IDEA AND THE REFERENCE IS INTENDED TO BE MADE ONLY TO THE COST OF ACQUISITION OF THE PROPERTY REGARDLESS OF THE QUESTION WHETHER IT WAS A CAPITAL ASSET OR A NON-CAPITAL ASSET AT THE DATE OF ACQUISITION. 3.4 SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE MADR AS HIGH COURT IN THE CASE OF M. VENKATESAN VS. CIT 144 ITR 886, KARNATAKA HIG H COURT IN THE CASE OF M. RAMAIAH REDDY 158 ITR 611, KERALA HIGH COURT IN CAS E OF SMT. SUBAIDA BEEVI 160 ITR 557, ALLAHABAD HIGH COURT IN THE CASE OF VISHWA NATH 201 ITR 920, BOMBAY HIGH COURT IN THE CASE OF KESHAVJI KARSONDAS VS. CIT 207 ITR 737. 3.5 NOW, COMING TO THE DECISION OF HONBLE SUPREME COURT IN CASE OF SHRI SHIRINBAI K. KOOKA 46 ITR 86 WHICH THE LD AR HAS DRAWN OUR REFERENCE IN SUPPORT OF HIS CONTENTION. IT IS NOTED THAT THE FACTS ARIS ING IN THAT CASE WERE THAT THE ASSESSEE WHO HELD BY WAY OF INVESTMENT SEVERAL SHAR ES IN COMPANIES COMMENCED ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 6 A BUSINESS IN SHARES CONVERTING THE SHARES INTO STO CK-IN TRADE OF THE BUSINESS, AND SUBSEQUENTLY SOLD THESE SHARES AT A PROFIT. ON THE SE FACTS A QUESTION ARISES WHETHER THE ASSESSEES ASSESSABLE PROFITS ON THE SA LE OF SHARES IS THE DIFFERENCE BETWEEN THE SALE PRICE AND THE COST PRICE OR THE DI FFERENCE BETWEEN THE SALE PRICE AND THE MARKET PRICE PREVAILING ON APRIL 1, 1945. WHILE ANSWERING THIS QUESTION BY A MAJORITY VIEW, THE HONBLE SUPREME COURT HELD ( HEADNOTE): THAT THE ASSESSEES ASSESSABLE PROFIT ON THE SALE OF THESE SHARES WAS THE DIFFERENCE BETWEEN THE SALE PRICE OF THE SHARES AND THE MARKET PRICE OF THE SHARES PREVAILING ON THE DATE WHEN THE SHARES WERE CONVERT ED INTO STOCK-IN TRADE OF THE BUSINESS IN SHARES, AND NOT THE DIFFERENCE BETWEEN THE SALE PRICE AND THE PRICE AT WHICH THE SHARERS WERE ORIGINALLY PURCHASED BY THE ASSESSEE. ALSO, LD AR HAD DRAWN FROM ANOTHER DECISION OF THE HONBLE SUPREME COURT IN CASE OF GROZ-BECKERT SABOO LTD. 116 ITR 125 , WHEREIN THE SUPREME COURT HELD THAT: IT IS NOW WELL SETTLED THAT WHERE AN ASSESSEE CONV ERTS HIS CAPITAL ASSETS INTO STOCK IN TRADE AND STARTS DEALING IN THEM, THE TAXABLE PR OFIT ON THE SALE MUST BE DETERMINED BY DEDUCTING FROM THE SALE PROCEEDS THE MARKET VALUE AT THE DATE OF THEIR CONVERSION INTO STOCK- IN- TRADE (SINCE THIS WOULD BE THE COST TO THE BUSINESS) AND NOT THE ORIGINAL COST TO THE ASSESSEE. ACCORDING TO THE FACTS ARISING IN THE ABOVE SAID TW O DECISIONS OF THE HONBLE SUPREME COURT, THE CAPITAL ASSETS WERE CONVERTED IN TO STOCK IN TRADE AND FOR THE PURPOSE OF COMPUTATION OF BUSINESS INCOME, THE SUPR EME COURT HELD THAT THE TAXABLE PROFIT ON THE SALE MUST BE DETERMINED BY DE DUCTING FROM THE SALE PRICE THE MARKET VALUE AS ON THE DATE OF CONVERSION OF TH E CAPITAL ASSET INTO STOCK IN TRADE. THE FACTS IN THE INSTANT CASE ARE CLEARLY DISTINGUISHABLE. IN THE INSTANT CASE, AGRICULTURAL LAND WAS SOLD AND ITS CHARACTER CHANGED FROM A NON-CAPITAL ASSET TO A CAPITAL ASSET BY VIRTUE OF A STATUTORY NOTIFIC ATION WHEREBY THE AGRICULTURAL LAND CAME WITHIN THE SPECIFIED LIMITS OF A MUNICIPA LITY. THE ISSUE IN THE PRESENT CASE IS ALSO NOT FOR ASCERTAINING THE BUSINESS INCO ME OF THE ASSESSEE. THE ISSUE INVOLVED IN THE PRESENT CASE IS TO ASCERTAIN THE CA PITAL GAINS AS PER THE PROVISIONS CONTAINED IN SECTION 45, 48 AND 55 OF THE ACT. UND ER SUCH CIRCUMSTANCES, IT IS NOT POSSIBLE TO APPLY THE PRINCIPLE LAID DOWN BY THE SU PREME COURT IN THE ABOVE MENTIONED TWO CASES TO THE FACTS OF THE PRESENT CAS E. SIMILARLY, THE OTHER CASES RELIED UPON BY THE LD AR DOESNT SUPPORT AND ADVANC E THE CASE OF THE APPELLANT. ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 7 3.6 IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF T HE CASE AND RELYING ON DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF RA NCHHODBHAI BHAIJIBHAI PATEL, WE ARE NOT INCLINED TO ACCEDE TO THE GROUND TAKEN B Y THE APPELLANT. HENCE, THE SAME IS DISMISSED. 4. REGARDING THE NEXT GROUND NO. 2 WHERE THE APPELL ANT HAS CHALLENGED THE ACTION OF LD. CIT(A) IN NOT CONSIDERING CLAIM OF BE NEFIT OF SECTION 54F OF THE I.T. ACT, 1961, IT IS NOTED FROM PERUSAL OF THE RECORDS THAT THE AO DID NOT ALLOW DEDUCTION CLAIMED U/S 54F OF THE ACT SINCE THE INVE STMENT OF RS. 15,40,000/- WAS NOT SUPPORTED BY ANY WITHDRAWAL FROM THE BANK ACCOUNT TILL THE DUE DATE OF FILING OF THE RETURN OF INCOME. 4.1 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE APPELLANT/ASSESSEE CLAIMED RELIEF OF RS. 15,40,000/ - UNDER SECTION 54F FOR CONSTRUCTION OF HOUSE PROPERTY. THE AO DISALLOWED THE CLAIM ON SUMMARY MANNER ON THE GROUND THAT NO WITHDRAWALS ARE APPEAR ING IN THE BANK ACCOUNT FOR CONSTRUCTION PURPOSES. IT IS SUBMITTED THAT EXISTE NCE OF THE HOUSE PROPERTY CONSTRUCTED BY THE ASSESSEE HAS NOT BEEN DENIED NOR A QUESTION WAS PUT ABOUT THE SOURCE OF INVESTMENT IN COURSE OF ASSESSMENT PR OCEEDINGS. IT WAS SUBMITTED THAT IT IS EVIDENT FROM THE BANK S TATEMENT THAT ASSESSEE MADE WITHDRAWALS OF RS. 15,40,000/- ON 04.09.2010 F OR MAKING PAYMENTS TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE. THE PHOTOCOPY O F APPROVED VALUER IN SUPPORT OF COST OF RESIDENTIAL HOUSE IS PLACED AT P. 9-14 O F PB. IN VIEW OF THE ABOVE FACTS WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE , THE AO HAS MADE THE ADDITION AND CONFIRMING BY CIT(A) ON EX-PARTE BASIS. 4.2 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE, WHERE THE ASSESSEE HAS DEMONSTRATED THE WITHDRAWAL OF RS. 15,40,000/- TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE FROM HIS BANK ACC OUNT AND COST OF CONSTRUCTION BEING SUPPORTED BY THE VALUERS REPORT, THE AO IS D IRECTED TO GIVE NECESSARY RELIEF BY WAY OF DEDUCTION UNDER SECTION 54F OF THE ACT. HENCE, THE GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 5. REGARDING GROUND NO. 3 WHERE THE APPELLANT HAS C HALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 19 LACS MADE BY AO UNDER THE HEAD UNEXPLAINED CASH DEPOSIT IN BANK ACCOUNT, THE AO NO TICED THAT CASH OF RS. 9,50,000/- WAS DEPOSITED ON 03.10.2008 AND ANOTHER CASH OF RS. 9,50,000/- WAS DEPOSITED ON 10.10.2008 IN THE BANK ACCOUNT OF THE ASSESSEE. SINCE THE ASSESSEE ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 8 COULD NOT EXPLAIN THE SOURCE OF THESE CASH DEPOSITS , THE SAME WERE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE. AS PER LD CIT(A), IN THE ABSENCE OF ANY EXPLANATION FILED BY THE ASSESSEE REGARDING THE SOURCE OF AFORESAID CASH DEPOSIT IN HIS BANK AC COUNT, THE SAME WAS RIGHTLY TAXED AS HIS UNDISCLOSED INCOME. THE ADDITION MADE BY AO IS CONFIRMED BY LD. CIT(A). 5.1 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE AO MADE AN ADDITION OF RS. 19,00,000/- ON ACCOUNT OF CASH DEPO SIT OF RS. 9,50,000/- ON 03.10.2010 AND RS. 9,50,000/- ON 10.10.2008 AS UNE XPLAINED CASH DEPOSIT. THE AO MADE THE ADDITION SIMPLY ON THE GROUND THAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF DEPOSIT. IT IS PERTINENT TO NOTE THA T NEITHER THE QUESTION OF DEPOSIT OF CASH WAS MADE IN QUERY LETTER DATED 29.02.2011. THE COMPLIANCE OF QUERY LETTER WAS MADE AND COPY OF SAME IS PLACED IN PAPER BOOK. THE FINAL REPLY OF VARIOUS QUERY LETTER WAS MADE, IT IS EVIDENT FROM T HE ABOVE THAT THE AO NEVER PUT QUESTION ABOUT THE EXPLANATION REGARDING CASH DEPOS ITS IN SUCH CIRCUMSTANCES THE ADDITION WAS MADE WITHOUT AFFORDING THE OPPORTUNITY TO THE ASSESSEE, WHICH IS AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 5.2 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES OF THE CASE, THE MATTER IS SET-ASIDE TO THE FILE OF THE AO TO EXAMIN E THE SAME AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/02/20 16 SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 12/ 02 /2016 ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 9 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SHRI DULI CHAND MALI, JAIPUR 2. THE RESPONDENT- ITO, WARD 7(2), JAIPUR 3. THE CIT(A)-III, JAIPUR 4. THE CIT-III, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 176/JP/13) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO.176/JP/13 SHRI DULI CHAND MALI VS. ITO, WD 7(2), JAIPUR 10 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER