J. Upendra Construction Pvt.Ltd., Baroda V. The Dy.CIT.,Circle-4, Ahmedabad

ITA 188/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2073 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-02-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 11-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI
• Assessee Lawyers: M G PATEL
• Keywords: Proportionate interest; Onus to prove
• Section: 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI MAHAVIR SINGH,JM & SHRI A N PAHUJA,AM ITA NO.188/AHD/2008 (ASSESSMENT YEAR:-2003-04) J. UPENDRA CONSTRUCTION PVT. LTD., 3, UTTAKANTH SOCIETY, BEHIND ALKAPURI CLUB, OPP. EXPRESS HOTEL, BARODA. V/S DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, NAVJIVAN TRUST BUILDING, OFF ASHRAM ROAD, AHMEDABAD. PAN: AAACJ 3815 F [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI G S SOURYAWANSHI, DR ASSESSEE BY:- SHRI M.G. PATEL.AR ( )/ ORDER A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 26- 11-2007 OF THE LD. C.I.T.(APPEALS)-VIII, AHMEDABAD FOR THE ASSESSMENT YEAR (AY) 2003-04, RAISES THE FOLLOWING GROUNDS:- 1. THE LD. C.I.T. (APPEALS)VIII, AHMEDABAD HAS ER RED IN LAW AS WELL AS ON FACTS OF THE CASE BY HOLDING THAT PURCHASE OF TREES PLANTATION IS NOT FOR THE PURPOSE OF BUSINESS OF THE APPELLANT AND AC CORDINGLY HAS ERRED IN HOLDING THAT THE ASSESSING OFFICER HAS RIGHTLY DISA LLOWED INTEREST AND HAS DIRECTED THE ASSESSING OFFICER TO REWORK OUT THE DI SALLOWANCE OUT OF INTEREST TO THE EXTENT OF ACTUAL PAYMENT OF RS.30,7 0,000/-. 2. THE LD. C.I.T.(A)-VIII, AHMEDABAD HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.15,90,624/- MADE BY THE ASSESSI NG OFFICER IN RESPECT OF SUPPRESSED SALE VALUE OF THE RESIDENTIAL FLATS. 3. THE APPELLANT PRAYS FOR THE FOLLOWING: I) TO ALLOW INTEREST PAYMENT IN FULL. II) TO DELETE THE ADDITION OF RS.15,90,624/- MADE O N ACCOUNT OF SUPPRESSED SALE. 4. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. I TA NO.188/AHD/2008 2 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, FA CTS, IN BRIEF, AS PER THE RELEVANT ORDERS ARE THAT RETURN OF INCOME DECLARIN G NIL INCOME FILED ON 27-11- 2003 BY THE ASSESSEE, CARRYING ON THE BUSINESS OF ENGINEERS AND CONTRACTORS, AFTER BEING PROCESSED ON 16-1-2004 U/S 143(1) OF T HE INCOME-TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT), WAS SELECTE D FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S. 143(2) ON 29-11-2004. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT THE ASSESSEE PURCHASED 25,000 TEAK TREE PLANTATION AT VILLAGE GO RAJ, TAL VAGHODIYA, DISTRICT BARODA FROM SHRI UPENDRA N. PATEL, A DIRECTOR OF TH E COMPANY ON 12-8-2002 @ RS.1000/- PER TREE. THESE TREES WERE SHOWN AS STOCK IN TRADE WORTH RS.2,50,00,000/- IN THE BOOKS OF THE ASSESSEE. SINC E THE ASSESSEE MERELY PAID AN AMOUNT OF RS.30,70,000/- FOR PURCHASE OF THESE TREES BUT TRANSACTION WAS RECORDED AT RS.2,50,00,000/- IN THE BOOKS WHILE TH E PAYMENTS WERE MADE TO SHRI UPENDRA N. PATEL, HUF AND THE LAND BELONGED TO SHRI UPENDRA N. PATEL AND OTHERS, THE AO DOUBTED THE GENUINENESS OF THE TRANS ACTION AND CONCLUDED THAT THE ASSESSEE NEVER PURCHASED ANY TREE PLANTATION F ROM SHRI UPENDRA N. PATEL. THE AO ALSO FOUND THAT LAND WAS SOLD BY SHRI UPENDR A N. PATEL TO SHRI BHARATSINH UMDEDSINH JADEJA AND SHRI VELJIBHAI RATA NBHAI PATEL ON 10-6-2005. SINCE THE LAND ALONG WITH TREES HAD BEEN SOLD WHILE THE ASSESSEE DID NOT FURNISH ANY DOCUMENT THAT TREES WERE, IN FACT, PURCHASED BY THE ASSESSEE, THE A.O. TREATED THE TRANSACTIONS OF PURCHASE OF TREES AS A SHAM TRANSACTION. IN VIEW THEREOF, PARTICULARLY WHEN THE ASSESSEE WAS NOT EN GAGED IN THE BUSINESS OF INVESTMENT OR MONEY LENDING AND MERE INVESTMENT WAS MADE IN THE TEAK TREES, THE AO WAS OF THE OPINION THAT THE ASSESSEE DIVERT ED INTEREST BEARING FUNDS FOR NON BUSINESS PURPOSE BY MAKING INVESTMENT IN TREE P LANTATION AND ACCORDINGLY, DISALLOWED PROPORTIONATE INTEREST OF RS.35,07,746/ - OUT OF CLAIM OF RS.46,37,366/- ON ACCOUNT INTEREST ON BORROWED FUNDS. 3. ON APPEAL, THE LD. C.I.T.(A) UPHELD THE FINDINGS OF THE AO THAT THE SALE OF TREES PLANTATION WAS NOT FOR THE PURPOSE OF BUSINES S OF THE ASSESSEE COMPANY I TA NO.188/AHD/2008 3 BUT ACCEPTED THE ALTERNATIVE GROUND OF THE ASSESSEE THAT THE DISALLOWANCE OF INTEREST SHOULD BE RESTRICTED TO THE EXTENT OF ACT UAL PAYMENT OF RS.30,70,000/-. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. C.I.T.(A). THE A.R. ON BEHALF OF THE ASSESSEE M ERELY RELIED UPON THE DECISION DATED 18-9-2009 OF THE I.T.A.T. IN THE CASE OF SHRI UPENDRA N. PATEL IN ITA NO.2397/AHD/2008 FOR THE ASSESSMENT YEAR 2003-04 A ND FURTHER CONTENDED THAT THE TRANSACTION HAVING BEEN HELD TO BE GENUINE, THE DISALLOWANCE OF INTEREST WAS NOT JUSTIFIED IN THIS CASE. ON THE OTHER HAND THE L D. D.R. SUPPORTED THE ORDER OF THE A.O. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE ITAT IN THEIR AFORESAID DECISION D ATED 18-9-2009 WHILE ADJUDICATING THE ISSUE AS TO WHETHER OR NOT THE AM OUNT OF RS.2,50,00,000/- WAS UNDISCLOSED INCOME OF SHRI UPENDRA N. PATEL ,CONCLU DED AS UNDER :- 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE OR DER OF THE TAX AUTHORITIES BELOW. THE A.O. IN THIS CASE HAS MADE T HE ADDITION OF RS.2,50,00,000/- AS UNDISCLOSED INCOME OF THE ASSES SEE, WHICH WAS RETURNED AS AGRICULTURAL INCOME. THE ASSESSEE WAS O WNING THE AGRICULTURAL LAND WHICH FACT IS PROVED FROM THE RECORD OF THE PA TWARI FOR AGRICULTURAL LAND. TREE PLANTATION WAS THERE ON THE AGRICULTURA L LAND. THE ASSESSEE WAS ALSO HAVING TREE PLANTATION. THIS FACT IS ALSO PROVED FROM THE COPY OF PATWARI RECORD, COPY OF WHICH IS FILED BEFORE US IN THE PAPER BOOK. THE ASSESSEE HAS SOLD THE TREE PLANTATION TO A COMPANY IN WHICH THE ASSESSEE IS A DIRECTOR. THE PART OF THE PAYMENT TO THE EXTEN T OF RS.30,70,000/- HAS BEEN RECEIVED BY THE ASSESSEE DURING THE YEAR FROM THE SAID PRIVATE LIMITED COMPANY THROUGH HUF THROUGH CHEQUE. SO FAR AS THE RECEIPT OF RS.30,70,000/- IS CONCERNED, THERE IS NO DOUBT ON T HE IDENTITY OF THE PRIVATE LIMITED COMPANY, SOURCE OF THE AMOUNT AND T HE TRANSACTION THAT THE MONEY HAS BEEN GIVEN BY THE PRIVATE LIMITED COM PANY. THE A.O. HAS TREATED THE TRANSACTION FOR THE SALE OF TREE PLANTA TION TO BE A NON-GENUINE TRANSACTION. ALL THE ALLEGATION OF THE A.O. IS THAT THERE IS NO PROOF THAT THE MONEY RECEIVED BY SHRI U. N. PATEL HUF IS THE SAL E CONSIDERATION FOR TREES OR IT IS ANY OTHER TRANSACTION. THIS IS THE SETTLED LAW IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. DAULT RAM RAWATMULL (1973) 87 ITR 349 (SC), IN WHICH IT WAS H ELD THAT APPARENT IS I TA NO.188/AHD/2008 4 REAL. THE LAND HAS BEEN SOLD BY THE ASSESSEE ON 10- 6-2005 TO ONE SHRI BHARATSINH JADEJA I.E. SUBSEQUENT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LAND HAS NOT BEEN SOLD DURING TH E YEAR UNDER CONSIDERATION. SUBSEQUENT SALE OF THE LAND BY THE ASSESSEE TO SHRI BHARATSINH JADEJA, IN OUR OPINION, CANNOT BE REGARD ED TO BE THE CONCLUSIVE EVIDENCE THAT THERE WAS NO TREE PLANTATION ON THE L AND DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE ARE EVI DENCES ON RECORD (PATWARI RECORD) WHICH PROVE THAT THERE WERE TREE P LANTATIONS ON THE LAND DURING THE YEAR UNDER CONSIDERATION. THIS IS NOT T HE ALLEGATION OF THE REVENUE THAT THE ASSESSEE WAS NOT OWNING THE AGRICU LTURAL LAND DURING THE YEAR UNDER CONSIDERATION. THE BURDEN OF PROOF THAT THE ASSESSEE HAS EARNED THE UNDISCLOSED INCOME AT THE GARB OF AGRICU LTURAL LAND, IS ON THE REVENUE. THE REVENUE SHOULD PROVE THAT THE ASSESSE E HAS EARNED THE UNDISCLOSED INCOME BY SHOWING IT AS AGRICULTURAL LA ND. IT IS NOT A CASE WHERE THE FUNDS HAVE BEEN RECEIVED IN CASH AND IDEN TITY OF THE PERSON FROM WHOM THE FUNDS TOWARDS THE SALE OF THE TREES W ERE RECEIVED IS EXISTING. THE IDENTITY OF THE PERSON IS NOT DOUBTED BY THE REVENUE. THE FUNDS HAVE COME FROM THE PRIVATE LIMITED COMPANY IN WHICH THE ASSESSEE IS ALSO A DIRECTOR. THE REVENUE HAS NOT BR OUGHT ANY EVIDENCE ON RECORD BY WHICH IT CAN BE SAID THAT THE REVENUE HAS DISCHARGED ITS ONUS. THE A.O. HAS MERELY RELIED ON THE INQUIRIES C ARRIED OUT BY THE INSPECTOR AFTER THE SALE OF THE LAND BY THE ASSESSE E. THE FUNDS HAVE BEEN RECEIVED BY THE ASSESSEE THROUGH CHEQUES. EVEN NO E VIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE WHICH MAY PROVE TH AT THE EVIDENCE SUBMITTED BY THE ASSESSEE BY WAY OF PATWARI RECORD ARE INCORRECT. WE DO NOT FIND ANY COGENT MATERIAL OR EVIDENCE ON RECORD WHICH MAY PROVE THAT THERE WAS NO TREE PLANTATION ON THE AGRICULTURAL LA ND OWNED BY THE ASSESSEE DURING THE YEAR. THE ADDITION HAS BEEN MA DE MERELY ON ASSUMPTION AND PRESUMPTION. THIS IS THE SETTLED LA W THAT NO ADDITION CAN BE SUSTAINED ON SUSPICION HOWSOEVER STRONG IT MAY B E. WE ACCORDINGLY DELETE THE ADDITION. 5.1. AS IS APPARENT FROM THE AFORESAID FINDINGS , T HE ISSUE BEFORE THE ITAT WAS MERELY IN RESPECT OF GENUINENESS OF TRANSACTION OF SALE OF TEAK TREE PLANTATION AND NOT AS TO WHETHER THE INVESTMENT WAS MADE BY T HE ASSESSEE COMPANY FOR THE PURPOSE OF THEIR BUSINESS OR INTEREST BEARING F UNDS HAD BEEN DIVERTED TOWARDS THE INVESTMENT OF RS.2,50,00,000/-, OF WHICH RS.30, 70,000/- WAS PAID BY THE ASSESSEE TO SHRI UPENDRA N. PATEL. EVEN THOUGH GE NUINENESS OF TRANSACTION HAS BEEN ESTABLISHED, THE LD. A.R. APPEARING BEFOR E US DID NOT DISPUTE THE FINDINGS OF THE LD. C.I.T.(A) THAT PURCHASE OF TREE S PLANTATION BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF THEIR BUSINESS NOR DISPUTED THE FINDINGS OF THE LOWER I TA NO.188/AHD/2008 5 AUTHORITIES THAT INTEREST BEARING FUNDS HAD BEEN DI VERTED FOR NON BUSINESS PURPOSE AND FOR MAKING INVESTMENT IN TREE PLANTATIO N. INSTEAD , THE LD. AR MERELY RELIED UPON AFORESAID DECISION OF THE ITAT. IN THE ABSENCE OF ANY EVIDENCE THAT INVESTMENT WAS MADE BY THE ASSESSEE COMPANY FOR THE BUSINESS PURPOSES OR THAT BORROWED FUNDS HAD NOT BEEN DIVERTED FOR SUCH INVESTMENT , THERE IS NO MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIF FERENT VIEW IN THE MATTER. SINCE THE LD. CIT(A) ACCEPTED THE ALTERNATIVE PLEA OF THE ASSESSEE AND RESTRICTED THE DISALLOWANCE OF INTEREST TO THE EXTENT OF ACTUAL P AYMENT OF RS.30,70,000/- AND THE FINDINGS OF THE LD. CIT(A) HAVE NOT BEEN CONTRO VERTED BEFORE US WITH ANY MATERIAL, WHATSOEVER, WE ARE NOT INCLINED TO INTER FERE WITH HIS FINDINGS . THEREFORE, GROUND NO.1 IN THE APPEAL IS DISMISSED. 6. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.15,90,624/- IN RESPECT OF SUPPRESSED SALE VALUE OF RESIDENTIAL FLATS. THE AO NOTICED THAT ASSESSEE HAD SHOWN SALE AMOUNTING TO RS.3,04,15,898/- ON ACCOUNT OF RESIDENTIAL UNITS. TO A QUERY BY THE AO, THE ASSESSEE FURNISHED DETAILS OF SALE OF 52,200 SQ.FT OF RESIDENTIAL UNITS FOR A CONSIDERATION OF RS.2,93,36 ,310/-, YIELDING AVERAGE RATE OF RS.562/- PER SQ. FT. SINCE THE ASSESSEE WORKED OUT ACTUAL CONSTRUCTION COST @ RS.592.47 PER SQ. FT AND HAD NOT ASSIGNED ANY REASO NS FOR SELLING THE RESIDENTIAL UNITS BELOW THE COST, THE AO ADDED AN AMOUNT OF RS. 15,90,624/- (RS.3,09,26,934 2,93,36,310) ON ACCOUNT OF SUPPRE SSION OF SALE OF RESIDENTIAL FLATS. 7. ON APPEAL, THE LD. C.I.T. (A) UPHELD THE FINDI NGS OF THE AO , THE ASSESSEE HAVING NOT EXPLAINED THE REASONS FOR SELLING THE RE SIDENTIAL UNITS BELOW THE COST. 8. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. C.I.T.(A). THE LD. A.R. ON BEHALF OF THE A SSESSEE SUBMITTED THAT THE COST OF CONSTRUCTION WORKED OUT TO RS.526/- PER SQ. FT. INSTEAD OF RS.592/- ADOPTED BY THE AO AND SUBMITTED A DETAILED WORKING IN SUPPORT , REFLECTING PROFIT OF I TA NO.188/AHD/2008 6 RS.25,07,698/- INSTEAD OF DEFICIT WORKED OUT BY THE AO. ON THE OTHER HAND, THE LD,. D.R. SUPPORTED THE ORDERS OF THE LOWER AUTHOR ITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE FACTS OF THE CASE. SINCE THE DETAILED WORKING OF COST @ RS.526/- PER SQ. FT. HAD NOT BEEN PLACED BEFORE THE LOWER AUTHORITIES AND CONSEQUENT LY , THEY COULD NOT RECORD THEIR FINDINGS ON THAT ASPECT, WE CONSIDER IT FAI R AND APPROPRIATE TO VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE THE MAT TER TO HIS FILE WITH THE DIRECTIONS TO READJUDICATE THE ISSUE IN THE LIG HT OF DETAILED WORKING OF COST SUBMITTED BEFORE US AND THEREAFTER , PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER ALLOWIN G SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. WITH THESE DIRECTI ONS, GROUND NO.2 IS DISPOSED OF. 10. GROUND NO.3 BEING MERE PRAYER, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND NO.4 IN THE APPEAL, BOTH THESE GRO UNDS ARE DISMISSED. 11. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 17-02-2011 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 17-02-2011 COPY OF THE ORDER FORWARDED TO: 1. J. UPENDRA CONSTRUCTION PVT. LTD., 3, UTTAKANTH SOCIETY, BEHIND ALKAPURI CLUB,OPP. EXPRESS HOTEL,BARODA. 2. DCIT, CIRCLE-4,NAVJIVAN TRUST BUILDING, OFF ASH RAM ROAD, AHMEDABAD . 3. CIT CONCERNED 4. CIT(A)-II, SURAT I TA NO.188/AHD/2008 7 5. DR, ITAT, BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD