ITO, Meerut V. M/s. Hi- Tech Associates, Meerut

ITA 1805/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6768 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Additional evidence; Fair market value; Valuation report
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO .1805/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 ) ITO, WARD - 1(3), MEERUT VS. HI - TECH ASSOCIATES, SHOP NO.9 TO 14, NEW COMPLEX, GARH ROAD, MEERUT PAN:AAEFH4007L (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. O.P. SAPRA, ADV SH.RAVINDER AGGARWAL, CA RESP ONDENT BY: SH. AMIT JAIN, SR. DR DATE OF HEARING 24/02/2016 DATE OF PRONOUNCEMENT 25 /02/2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1 . TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24.01.2012 OF LD CIT(A), MEERUT FOR THE ASSESSMENT YEAR 2008 - 09 RAISING FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 43,00,000/ - BY HOLDING THAT ADDITION ON THE BASIS OF BROUGHT FORWAR D LIABILITY CANNOT BE MADE WHEREAS HE HIMSELF HAS DIRECTED TO RECOMPUTE THE PROFIT AND OPENING/ CLOSING STOCKS ON THE BASIS OF REVISED COMPUTATION OF LIABILITY BY THE ASSESSEE BEFORE HIM AND HAS THUS GIVEN CONTRADICTORY FINDINGS. 2. WHETHER IN THE FACTS AN D CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ACCEPTING ADDITIONAL EVIDENCES IN THE FORM OF EVEN THE REVISED P&L A/C & BALANCE SHEET AND WORKING OF LIABILITY WITHOUT GIVING ANY COMMENTS ON FULFILLMENT OF FOUR CIRCUM STANCES MENTIONED IN RULE 46A(1) OF IT RULES 1962 AND FURTHER WITHOUT CONFRONTING AND GIVING ANY REASONABLE OPPORTUNITY TO THE A.O. WHICH IS IN THE CLEAR VIOLATION OF RULE 46A OF THE I.T. RULES, 1962 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING OF RS.17,04,221/ - ON A/C OF UNEXPLAINED INVESTMENT IN COMPLEX BY HOLDING THAT A.O. HAS WRONGLY PLACED RELIANCE UPON THE VALUATION REPORT. LD, COMMISSIONER OF INCOME TAX (APPEALS) HAS IGNORED THE FACT THAT THE VALUATION REPORT WAS FILED BY THE ASSESSEE ITSELF AND ASSESSEE FAILED TO EXPLAIN DIFFERENCE OF RS.17,04,221/ - EVEN BEFORE LD. COMMISSIONER OF PAGE 2 OF 4 INCOME TAX (APPEALS) WHO ALSO DID NOT MAKE ANY COMMENTS ON THE SAID DIFFERENCE. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN FACTS IN REDUCING THE DISALLOWANCES OF THE EXPENSES AS CLAIMED BY THE ASSESSEE ON ACCOUNT OF ESTABLISHMENT EXPENSES AND OTHER EXPENSES FROM 40% TO 25% WITHOUT AN Y BASIS AND WITHOUT GIVING ANY COGENT REASON. 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND HAS FILED RETURN OF INCOME ON 30.12.2008 AND ASSESSMENT U/S 143(3) WAS FRAMED ON 27.12.2010. DURING THE ASSESSMENT AN ADDITION OF RS .43 LACS WAS MADE ON ACCOUNT OF PROVISION FOR INCOMPLETE WORK SHOWN OF RS.43 LAC. THIS ISSUE WAS ADJUDGED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHO DELETED ADDITION HOLDING THAT THERE IS NO CONSTRUCTION EXPENSES DURING THE YEAR ADDITION AND IT IS CARRIED FORWARD PROVISION FOR INCOMPLETE WORK FROM PREVIOUS YEAR AND IN SUBSEQUENT YEAR THERE IS REVERSAL OF PROVISION TO THE EXTENT OF RS.25 LACS FOR ASSESSMENT YEAR 2009 - 10. THEREFORE HE DIRECTED THE AO TO REDUCE THE AMOUNT OF PROVISION OF RS.43 LACS TO RS.18 LACS FROM ASSESSMENT YEAR 2007 - 08 AND THEN THE WORK OUT PROFIT AND LOSS ACCOUNT FOR ALL THE YEARS ON THAT BASIS. THEREFORE ACCORDING TO HIM THE PENDING STOCK FOR THE YEAR MAY BE MODIFIED ON THAT BASIS AFTER CONSIDERING THE PROVISION FOR INCOMPLET E WORK OF RS.18 LACS ONLY. THEREFORE HE DIRECTED THE AO TO RECOMPUTE THE PROFIT AND LOSS ACCORDINGLY. AGAINST THIS THE REVENUE IS IN APPEAL. 3 . THE LD DR RELIED UPON THE ORDERS OF AO. THE LD AR OF THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LEARNE D COMMISSIONER OF INCOME - TAX (APPEALS) AND SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS). 4 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION. BEFORE US THE LD DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), WHEREIN HE HAS DIRECTED THE AO TO RECOMPUTED THE PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER REFERENCE AFTER CONSIDERING THE PROVISION OF RS.18 LACS ONLY OUT OF RS.43 LACS. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HELD SO BECA USE OF THE REASON THAT PROVISION OF RS.25 LACS HAS ALREADY BEEN REVERED BY THE ASSESSEE IN THE SUBSEQUENT YEARS. ACCORDING TO THE DIRECTION OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) THE AO WAS REQUIRED TO PAGE 3 OF 4 RECOMPUTE PROFIT AND LOSS OF THE ASSESSEE BAS ED ON THE COMPUTATION SUBMITTED BY ASSESSEE WHICH ARE REPRODUCED AT PAGE5 OF HIS ORDER. HENCE WE AGREE WITH THE ORDER OF CIT A ( ) AND CONFIRM HIS FINDINGS. IN VIEW OF THIS THE GROUND NO.1 IS DISMISSED. 5 . GROUND NO.2 OF THE APPEAL IS AGAINST THE ACCEPTANCE O F ADDITIONAL EVIDENCE WITHOUT GRANTING AN OPPORTUNITY TO THE AO. WE HAVE HEARD THE PARTIES. BEFORE US THE LD. D R COULD NOT POINT OUT ANY EVIDENCE CONSIDERED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHICH WAS NOT BEFORE THE AO. IN VIEW OF THIS WE DISM ISS GROUND NO.2 OF THE APPEAL. 6 . GROUNDS NO .3 OF THE APPEAL IS AGAINST DELETION OF RS. 17,04,221/ - AS UNEXPLAINED INVESTMENT IN A COMPLEX. THE BRIEF FACTS IS THAT DURING THE YEAR NO CONSTRUCTION EXPENSES WERE INCURRED BY THE ASSESSEE AND FOR PURPOSE OF GETTING FINANCE FROM THE BANK A VALUATION REPORT OF FAIR MARKET VALUE OF THE CONSTRUCTION WORK IN PROGRESS WAS SUBMITTED DATED 31.03.2008 . ACCORDING TO THAT VALUATION REPORT THE VALUATION OF CONSTRUCTION OF COMPLEX WAS SHOWN OF RS.69 , 91 , 500/ - AS ON 31 .03.2008. THE OPENING STOCK OF THAT BUILDING WERE SHOWN OF RS.52 , 87 , 279/ - . THEREFORE THERE IS DIFFERENCE OF RS.17,04,221/ - WHICH WAS ADDED BY AO AS UNEXPLAINED INVESTMENTS OF THE ASSESSEE. THIS MATTER WAS CARRIED BEFORE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHO DELETED THE ADDITION. 7 . THE LD. DR SUPPORTED THE ORDER OF THE AO. THE LD AR SUBMITTED THE WRITTEN SUBMISSION MADE BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHICH ARE PRODUCED AT PARA 5 OF LEARNED COMMISSIONER OF INCOME - TAX (APPE ALS)S ORDER MAY BE CONSIDERED . 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND FIND THAT THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS DEALT WITH THIS ISSUE FOR THE REASON THAT THERE IS NO CONSTRUCTION ACTIVITY CARRIED OUT DURING THE YEAR AN D CLOSING STOCK HAS BEEN VALUED ACCORDING TO VALUATION REPORT OBTAINED BY THE ASSESSEE FOR THE PURPOSES OF BANK FINANCE WHICH IS AT FAIR MARKET VALUE AND THEREFORE THE ADDITION OF RS.1704221/ - HAS BEEN MADE BY THE AO WITHOUT UNDERSTANDING THE WHOLE ISSUE. WE UNDERSTAND THAT FAIR MARKET VALUE OF THE WORK IN PROGRESS AND COST OF PAGE 4 OF 4 THE WORK IN PROGRESS ARE TWO DIFFERENT AMOUNTS. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN DELETION OF THIS AMOUNT A S UNEXPLAINED INVESTMENT. 9 . THE GROUNDS NO.4 OF THE REVENUE IS AGAINST REDUCING THE DISALLOWANCE OF EXPENDITURE MADE BY AO AT 40% REDUCED BY LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) TO 25%. THE AO HAD DISALLOWED THIS AMOUNT OF RS.152350 ON THE ALLEGATIO N THAT THESE VOUCHERS WERE SELF MADE INTERNAL VOUCHERS AND IT IS AN AD HOC DISALLOWANCE. ON THIS ISSUE WE HAVE HEARD THE RIVAL PARTIES 10 . WE HAVE CAREFULLY CONSIDERED RIVAL CONTENTION, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS UPHELD THE ORDER OF THE AO FOR MAKING THE DISALLOWANCE ON ADHOC BASIS AND REDUCED THE PERCENTAGE FROM 40% TO 25 % FINDING THAT IT IS EXCESSIVE . WE FEEL THAT ON SELF MADE VOUCHERS BEING INTERNAL IN NATURE MAY NOT BE A REASON FOR DISALLOWING OF ANY EXPENDITURE WITHOUT POINTING OUT INSTANCES. IN VIEW OF THIS LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) JUSTIFY IN REDUCING THE DISALLOWANCE FROM 40% TO 25% ON THE BASIS OF EXCESSIVE DISALLOWANCE. IN VIEW OF THE ABOVE WE CO NFIRM THE FINDING OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) AND DISMISS GROUND NO 4 OF THE APPEAL. 11 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 2 5 /02/2016 . - S D / - - S D / - ( H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 5 /02 / 2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI