I.T.O WARD.1(1), BILASPUR(CG) V. M/S KIMS SUPER SPECIALITY HOSPITAL (P) LTD, BILASPUR(CG)

ITA 211/BIL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9110 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P CHOUDHARY
• Assessee Lawyers: R B DOSHI
• Keywords: Deemed to accrue or arise in india; Valuation report
• Section: 143(3); 56(2); 133(6); 68; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.211 /BIL /201 4 ASSESSMENT YEAR : 2010 - 11 ITO, WARD 1(1), BILASPUR VS. KIMS SUPER SPECIALITY HOSPITAL (P) LTD., MAGARPARA, BILASPUR PAN/GIR NO. AACCK 5587 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI R.B.DOSHI, AR REVENUE BY : SHRI O.P.CHOUDHARY, DR DATE OF HEARING : 11 /05 / 2017 DATE OF PRONOUNCEMENT : 12 /05 / 2017 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGA INST THE ORDER OF CIT(A) - BILASPUR , DATED 4.8 .2014 , FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE CIT(A) IS ERRONEOUS AND BAD IN LAW & ON FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.74,95,670/ - MADE BY THE AO ON ACCOUNT OF FICTITIOUS CREDITORS WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN NOT NOTICING THE FACT THAT THE ASSESSEE COMPANY HAS INFLATED THE VALUE OF ITS ASSETS TO CREATE FIC TITIOUS LIABILITY. 2 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, REFERENCE W AS MA) OF THE I.T.A CT, 1961, 1ADE BY THE AO TO THE DVO U/S.131(1)(D) AND NOT UNDER SECTION 142(2 ) OF THE I,T.,ACT, 1961, BUT THE CIT(A) RELYING UPON THE DECISION IN T HE CASE OF SARGAM CINEMA VS CIT, REPORTED IN (2010) 328 ITR 513 (SC) DELETED THE ENTIRE ADDITION WHICH WAS UNJUST. 5. THAT THE LD CIT(A) WAS IN AGREEMENT WITH THE REMAND REPORT SUBMITTED BY THE AO ON 5.6.2014 AS HE HAS NOT CALLED FOR ANY FURTHER REPORT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY , WHOSE MAIN OBJECT IS TO ESTABLISH AND OPERATE SUPER SPECIALITY HOSPITAL. THE COMMERCIAL OPERATION S OF THE ASSESSEE COMPANY HAD NOT COMMENCED DURING THE YEAR UNDER CONSIDERATION . THE ASSESSEE FILED RETURN OF INCOME ON 29.3.2011 SHOWING NIL INCOME. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT AT A TOTAL INCOME OF RS.74,95,671/ - . THE ASSESSING OFFICER OBSERVED FROM THE DOCUMENTS SUBMITTED BY THE ASSESSEE TH AT IT IS FOUND THAT THE ASSESSEE HAD SHOWN RS.92,50,171/ - AS THE INVESTMENT IN THE HOSPITAL ON THE VARIOUS HEAD S AFTER TAKING THE BUILDING ON RENT. THE SAME WAS REFERRED TO THE DVO, JABALPUR FOR PROPER VERIFICATION. THE DVO I N HIS VALUATION REPORT DATED 06 .03.2013 VALUED THE SAME ASSETS AT RS.17,54,500/ - . SO THERE ARISES A NEGATIVE DEVIATION OF RS.74,95,671/ - . THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE SAME WITH EVIDENCE. THE ASSESSING OFFICER OBSERVED THAT T HOUGH THE ASSESSEE COMPANY HAS RAISED ITS OBJECTION REGARDING THE PROCEDURE OF VALUATION , BUT IT COULD NOT CLEAR ITS STAND ON THE ACCOUNT OF INVESTMENT. HE NOTED THAT IT IS 3 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 CLEAR FROM THE BALANCE SHEET OF THE COMPANY THAT THE BALANCE SHEET OF THE COMPANY IS TALLIED. HE INFERRED T HAT , IT MEANS THE ASSESSEE HAS INVESTED THE DIFFERENCE OF RS. 74,95,671/ - IN THE OTHER FORM OF ASSETS WHICH THE COMPANY HAS NOT SHOWN TO THE DEPARTMENT. THEREFORE, RS. 74,95,671/ - HAS BEEN DIVERSIFIED BY THE COMPANY AND IS UNABLE TO ANSWER TO THE DEPARTMENT. T HE DIVERSIFICATION OF RS.74,95,671/ - IS THE INVESTMENT OF THE ASSESSEE AND THE SOURCE IS UNDISCLOSED BY THE ASSESSEE COMPANY AND ONLY HAS BEEN TALLIED BY SHOWING FICTITIOUS CREDITORS ON THE LIABILITY SIDE. HENCE, HE MADE ADDITION OF RS.74,95,671/ - TO THE INCOME OF THE ASSESSEE. 4. BEFORE THE CIT(A), THE ASSESSEE ARGUED THAT THE ASSESSING OFFICER HAS MADE ADDITION CONCLUDING THAT THERE ARE FICTITIOUS CREDITOR. THE ASSESSING OFFICER HAS NOWHERE MENTIONED THE SECTION I.E. PROVISION OF THE ACT UNDER WHICH HE IS MAKING THE ADDITION. THE ASSESSING OFFICER HAD NOT MENTION ED THE SECTION / PROVISION OF THE ACT WHICH EMPOWERS THE ASSESSING OFFICER TO MAKE THE ADDITION BASED ON THE VALUATION REPORT WHICH IS MAKING HIM TO CONCLUDE THAT THERE ARE FICTITIOUS CREDITOR S. THE PROVISIONS OF SECTION 142A CANNOT BE RELIED UPON BY THE ASSESSING OFFICER FOR MAKING ADDITION ON ACCOUNT OF FICTITIOUS CREDITORS WHICH FALLS 1 IN THE DOMAIN OF SECTION 68 OR SECTION 41(1). T HE SCOPE OF SECTION 142 A IS LIMITED TO THE SECTIONS REF ERRED THEREIN I.E. SECTION 69, 69A, 69B AND SECTION 56(2) . THE ASSESSING OFFICERS RELIANCE ON VALUATION REPORT U/S 142A FOR MAKING ADDITION BY HOLDING THAT 4 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 THERE ARE FICTITIOUS CREDITORS IS CLEARLY MISPLACED AND BAD - IN - LAW. FOR THIS PROPOSITION, RELIANCE WAS PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENTS: - (A) COMMISSIONER OF INCOME TAX VS. AAR PEE APARTMENTS PRIVATE LIMITED (2009) 319 ITR 276; (B) COMMISSIONER OF INCOME TAX VS. AMBIENCE HOTELS & RESORTS LIMITED (2012) 83 CCH 021; 4. 1 THE ASSESSEE FURTHER SUBMITTED THAT ASSUMING FOR THE TIME BEING THAT THE ADDITION HAS BEEN RESORTED TO RELYING ON THE PROVISIONS OF SECTION 69 OR 69B, EVEN THEN, THERE WAS ABSOLUTELY NO SCOPE FOR MAKING THE IMPUGNED ADDITION FOR THE REASON THAT BOTH THE SA ID SECTIONS DEAL WITH THE SITUATION WHERE THE ASSESSEE HAS MADE INVESTMENT WHICH ARE EITHER NOT RECORDED IN THE BOOKS OF ACCOUNTS OR THE AMOUNT OF INVESTMENT RECORDED IN THE BOOKS OF ACCOUNTS IS LESS THAN THE AMOUNT OF I NVESTMENT MADE BY THE ASSESSEE. I N T HE INSTANT CASE, THE SITUATION IS JUST THE REVERSE OF THE SITUATION ENVISAGED UNDER THE P ROVISIONS OF SECTION 69 AND 69B. D UE TO THE REASON THAT THE ASSESSEE HAS SHOWN INVESTMENT OF RS.92,50,171/ - IN ITS BOOKS OF ACCOUNT, WHEREAS THE DVO VALUED THE INVESTM ENT AT RS.17,50,171/ - , T HAT IF THE VALUATION OF THE DVO IS ACCEPTED FOR THE TIME BEING, THE DVOS REPORT INDICATED THAT THE ASSESSEE HAS SHOWN MORE INVESTMENT IN ITS BOOKS OF ACCOUNT THAN THAT ESTIMATED BY THE DVO. WHEN THE ASSESSEE HAS SHOWN MORE INVESTME NT IN ITS BOOKS OF ACCOUNT, THERE IS NO QUESTION OF ANY UNRECORDED INVESTMENT AND, THEREFORE, NO ADDITION WAS WARRANTED. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF JODHPUR BENCH OF THE TRIBUNAL IN 5 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 THE CASE OF SMT. SARASWATI DEVI GEHLOT VS ITO, 111 TT J (JD) 408. THE ASSESSEE ALSO SUBMITTED THAT THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE VALUATION REPORT OF THE DVO FOR MAKING ADDITION ON RECORD OF FICTITIOUS CREDITORS BEING OPPOSED TO THE PROVISIONS OF SECTION 142A AND ALSO THE SITUATION ENVIS AGED U/S.69, 69A AND 69B NOT BEING PRESENT IN THE INSTANT CASE, THE ADDITION MADE BY THE ASSESSING OFFICER IS FULLY UNJUSTIFIED. 4.2 IT WAS FURTHER SUBMITTED THAT BEFORE THE ASSESSING OFFICER VIDE POINT NO.21 OF THE REPLY SUBMITTED ON 19.11.2012 THE BREAK - UP OF THE SAID SUM, WHICH IS AS UNDER: SL.NO. PARTICULARS AMOUNT (RS.) 1. BUILDING AND INTERIOR WORK 17,27,741.00 2. CIVIL & INTERIOR WORKS 70,27,245.00 3. LABOUR CHARGES 4,94,660.00 TOTAL 92,49,646.00 4.3 THE ASSESSEE HAD DULY FURNISHED THE LEDGER OF BUILDING AND INTERIOR WORK, CIVIL & INTERIOR WORKS AND LABOUR CHARGES. OU T OF THE AFORESAID SUM OF RS.92,49,646/ - , THE SUBSTANTIAL AMOUNT WAS ON ACCOUNT OF CIVIL & I NTERIOR WORKS OF RS.70,27,245/ - . THE ENTIRE CIVIL AND INTERIOR WORKS OF RS.70,27,245/ - WAS CARRIED OUT BY CIVIL C ONTRACTOR NAMELY M/S S. M. KHAN. THE SAME ASSESSING OFFICER VIDE LETTER DATED 06.12.2012 BEARING NO.1214 6 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 HAD CALLED INFORMATION U/S 133(6) IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS OF M/S S. M . KHAN FOR THE ASSESSMENT YEAR 2010 - 11, I N RESPONS E TO THE SAID LETTER OF THE ASSESSING OFFICER, THE ASSESSEE COMPANY HAD DULY FURNISHED THE LEDGER ACCOUNT OF M/S S. M. KHAN AS APPEARING IN ITS BOOKS. THEREAFTER, THE ASSESSEE HAD AGAIN FURNISHED THE LEDGE R OF M/S S. M. KHA N VIDE POINT N O.3 OF TH E REPLY SUBMITTED ON 04.01.2013. F ROM THE PERUSAL OF SAID LEDGER, IT IS QUITE EVIDENT THAT THE ENTIRE PAYMENT WAS MADE TO M/S S. M. KHAN, CIVIL CONTRACT OR THROUGH PROPER BANKING CHANNEL AND APPLICABLE TDS WAS DULY M ADE AND DEPOSIT ED. T HERE WAS NO AMOUNT OUTST ANDING ON ACCOUNT OF CIVIL WORK. THE SAME ASSESSING OFFICER HAS SCRUTINIZED THE INCOME OF M/S S. M. KHAN AND THE AMOUNT PAID BY THE APPELLANT HAS BEEN ACCEPTED AS INCOME OF M/S S. M. KHAN AND IN SUCH A CASE, THE RE WAS NO REASON FO R THE ASSESSING OFFICER TO DISBELIEVE THE I NVESTMENT SHOWN BY THE ASSESSEE IN ITS BOOKS AND IT WAS UNLAWFUL ON THE PART OF THE ASSESSING OFFICER TO TAKE A CONTRARY V IEW IN THE CASE OF THE ASSESSEE WHEN HE HAS ACCEPTED THE INCOME OF M/S S. M. KHAN AS CORRECT. IT WAS FURTHER SUBMITTED THT THE ASSESSEE HAD DULY FURNISHED THE RUNNING BILLS AND CORR ESPONDENCE BETWEEN THE ASSESSEE AND M/S S. M. KHAN AND A N OTHER COMPONENT OF SAID SUM OF RS. 92,50,171/ - WAS THE LABOUR CHARGES OF RS.4,94,660/ - . THE ASSESSING OFFICER HAD SPECIFICALLY ASKED FOR THE PAN OF MR. CHHOTELAL SURYAVANSHI, LABOUR CONTRACTOR TO WHOM MAJOR AMOUNT OF RS. 4,37, 490/ - WAS PAID BY THE ASSESSEE. THE ASSESSEE HAD DULY MADE TDS 7 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 FROM THE PAYMENTS TO THE SAID LABOUR CONTR ACTOR AND T HE PAYMENTS ARE DULY SUPPORTED BY THE BILLS OF THE SAID LABOUR CONTRACTOR. ON BEING ASKED BY THE ASSESSING OFFICER THE PAN OF THE SAID LABOUR CONTRACTOR W AS SPECIFICALLY FURNISHED VIDE POINT NO. (2) OF TH E REPLY SUBMITTED ON 04/01/2013. N O DISCRE PANCY WAS POINTED OUT BY THE ASSESSING OFFICER IN THE BILLS OF THE SAID LABOUR CONTRACTOR. V ID E REPLY SUBMITTED BEFORE THE ASSESSING OFFICER ON 19 / 11/2012, THE LEDGER OF BUILDING AND INTERIOR WOR K WAS SUBMITTED BY THE ASSESSEE. TH EREAFTER, VIDE REPLY SUBMIT TED ON 2 8/03/2013, THE ASSESSEE HAD SUBMITTED THE COMPLETE DETAILS OF PURCHASES MADE FROM EACH PARTY, NATURE OF GOODS/ITEMS PURCHASED, QUANTITY, RATE , UNIT, NUMBER OF TRIPS, AMOUNT. THE ASSESSEE HAD IN HIS POSSESSION EACH AND EVERY DETAIL IN SUPPORT OF THE INVEST MENT SHOWN. W ITHOUT POINTING OUT ANY DEFECT IN THE DETAILS, THE ASSESSING OFFICER SIMPLY CHOSE TO REFER THE MATTER TO THE DVO. . IT WAS FURTHER SUBMITTED THAT OUT OF TOTAL SUM OF RS.17,27,741/ - , THE MAJOR AMOUNT OF THE EXPENDITURE WAS ON ACCOUNT OF PURCHAS E OF TILES, PLASTIC SHEETS, GYPSUM POWDER FROM MINA KSHI TRADERS I.E. RS.9,04,396/ - . THE ASSESSEE HAD DULY FURNISHED THE NAME AND COMPLETE POSTAL ADDRESS OF SAID PARTY AND ALSO ITS LEDGER VID E REPLY SUBMITTED ON 04/01/2013. THE ENTIRE P AYMENT WAS MADE BY T HE ASSESSEE TO THE SAID PARTY THROUGH PROPER BANKING CHANNEL AND SUPPORTED BY PROPER BILLS. O UT OF THE TO TAL SUM OF RS.17,27,741/ - , THE R EST MAJOR AMOUNT OF THE EXPENDITURE WAS ON ACCOUNT OF PURCHASE OF TMT BAR AND CEMENT FROM RAMESH STEEL I.E. RS.3,58,81 3/ - . THE ASSESSEE HAD DULY 8 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 FURNISHED THE NAME AND COMPLETE POSTAL ADDRESS OF SAID PARTY AND ALSO ITS LEDGER VID E REPLY SUBMITTED ON 04/01/2013. THE ENTIRE P AYMENT WAS MADE BY THE ASSESSEE TO THE SAID PARTY THROUGH PROPER BANKING CHANNE L AND SUPPORTED BY P ROPER BILLS. S IMILARLY, COMPLETE DETAILS OF RAJ KUMAR SAHU AND GOYAL PIPES WERE FURNISHED FROM WHOM PURCHASES OF RS. 1,56,250/ - AND RS.77,800/ - WERE MADE BY THE A SSESSEE. THE ASSESSING OFFICER HAD NOT BROUGHT ANY EXPENDITURE THAT REMAINED UNVERIFIABLE FO R WANT OF BILLS OR VOUCHERS OR THAT THE EXPENSES WERE CAPITALIZED ON THE STRENGTH OF BOGUS BILLS. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION OBSERVING AS UNDER: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, WRITTEN SUBMISSIONS OF THE APPELLANT, REMAND REPORT OF THE A.O AND COUNTER COMMENTS/REJOINDER OF THE APPELLANT ON REMAND REPORT OF THE A.O. THE APPELLANT HAD SUBMITTED WRITTEN SUBMISSION ON 17.06.2013 ALON G WITH PAPER BOOK. I HAVE ALSO CAREFULLY PERUSED THE REPORT OF DEPARTMENTAL VALUATION OFFICER (DVO) DATED 06.03.2013. THE APPELLANT, VIDE LETTER DATED 04.07.2013, HAD SUBMITTED THE COPY OF INCOME TAX RETURN ALONG WITH COMPUTATION OF TOTAL INCOME, COPY OF A UDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR 2009 - 10 AND COPY OF ASSESSMENT ORDER U/S 143(3) DATED 18.03.2013 PASSED BY THE ITO - L(L), BILASUR IN THE CASE OF M/S S. M. KHAN. THE APPELLANT, THROUGH ITS AUTHORIZED REPRESENTATIVE, HAD SUBMITTED THE FOLLO WING LEDGERS ON 29.05.2014 ALONG WITH THE LEDGER OF CONTRACTORS AND SUPPLIERS / SUNDRY CREDITORS ALONG WITH COPY OF BANK STATEMENT IN SUPPORT OF ITS SUBMISSION THAT THE SUBSTANTIAL PAYMENTS WERE MADE THROUGH BANKING CHANNEL. (1) BUILDING AND INTERIOR WORK : RS. 17,27,741.00 (2) CIVIL & INTERIOR WORKS : RS.70,27,245.00 (3) LABOUR CHARGES : RS. 4.94.660.00 TOTAL RS.92,49,646.00 9 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 7.2 THE APPELLANT HAS CONTENDED THAT THE BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUCHERS WERE PRODUCED FOR VERIFICATION BEFORE THE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WERE DULY VERIFIED BY THE A.O, IN THE REMAND REPORT DATED 05.06.2014, THE A.O HAS NOT REBUTTED THE SAID ASSERTION OF THE APPELLANT. FROM THE PERUSAL OF ASSESSMENT ORDER, IT IS SEEN THA T THE A.O HAS STATED THAT THE CASE WAS AUDITED U/S 44AB OF THE ACT, ON THE CONTRARY, THE APPELLANT HAS CLAIMED THAT THE BOOKS OF ACCOUNTS WERE NOT AUDITED U/S 44AB AS THE COMMERCIAL OPERATIONS OF THE APPELLANT HAD NOT COMMENCED TILL THE END OF THE YEAR UND ER CONSIDERATION AND AS SUCH, THE ASSERTION OF THE A.O IS FACTUALLY INCORRECT. I FIND THAT THE A.O HIMSELF HAS STATED IN PARA 2 OF THE ASSESSMENT ORDER THAT THE COMPANY HAD NOT STARTED ITS BUSINESS DURING THE YEAR UNDER CONSIDERATION, IN THIS VIEW OF THE M ATTER. LOOKING TO THE FACTS, I HOLD THAT THE CONTENTION OF THE APPELLANT THAT THE BOOKS OF ACCOUNTS WERE NOT LIABLE T O BE AUDITED U/S 44AB AND NEITHER AUDIT U/S 44AB WAS CARRIED OUT IS CORRECT. 7.3 IT IS SEEN THAT THE A.O HAS COMMENCED PARA 3 OF THE ASS ESSMENT ORDER WITH THE HEADING 'FICTITIOUS CREDITORS', HOWEVER, I FIND THAT NOWHERE IN THE ASSESSMENT ORDER, TH 1 E A.O HAS POINTED OUT EVEN A SINGLE INSTANCE OF FICTITIOUS CREDITOR IN RESPECT OF WHICH THERE WAS FAILURE ON THE PART OF THE APPELLANT TO SATISFACTORILY EXPLAIN THE IDENTITY OR CREDITWORTHINESS OF THE CREDITOR OR GENUINENESS OF THE TRANSACTION. UNDISPUTEDLY, THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED AS PER THE PROVISIONS OF COMPANIES ACT, 1956 AND THE APPELLANT HAS SUBMITTED THE AUD IT REPORT ALONG WITH AUDITED BALANCE SHEET PLACED ON PAGE NO.32 TO 45 OF THE PAPER BOOK. FROM THE PERUSAL OF REPLY SUBMITTED BY THE APPELLANT ON 04.01.2013 BEFORE THE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS, PLACED ON PAGE NO.68 TO 104 OF THE PAPER BOOK, I FIND THAT THE APPELLANT HAD, VIDE REPLY TO POINT NO.5, DID FURNISH THE COPIES OF THE LEDGERS FALLING UNDER THE HEAD CURRENT LIABILITIES AGGREGATING TO RS.2,43,39,632/ - APPEARING IN THE BALANCE SHEET. I ALSO FIND THAT THE APPELLANT DID FURNISH THE NAME OF THE SUNDRY CREDITORS AND HAD ALSO FURNISHED COMPLETE ADDRESS OF THE CREDITORS. I HAVE ALSO PERUSED THE LEDGERS OF SUNDRY CREDITORS AND FIND THAT THE SUBSTANTIAL PAYMENTS WERE MADE BY THE APPELLANT TO THE SAID CREDITORS THROUGH BANKING CHANNEL. ADMI TTEDLY, NO ENQUIRY WAS CONDUCTED BY THE A.O WITH ANY OF THE CREDITOR BEFORE DRAWING INFERENCE THAT THE CREDITORS WERE FICTITIOUS. THE A.O HAS ALSO NOT ELABORATED THE NATURE OF FAILURE ON THE PART OF THE APPELLANT I.E. THE REASON FOR THE INFERENCE DRAWN BY THE A.O, CONVERSELY, WHETHER DISSATISFACTION WAS WITH REGARD 10 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 TO IDENTITY OR CREDITWORTHINESS OF THE CREDITORS OR GENUINENESS OF THE TRANSACTION. MOREOVER, FROM THE PERUSAL OF LEDGERS OF SUNDRY CREDITORS, IT IS SEEN THAT THE SUBSTANTIAL AMOUNT OF LIABILITY OUTSTANDING AND APPEARING UNDER THE HEAD CURRENT LIABILITIES WAS ON ACCOUNT OF MEDICAL EQUIPMENTS AND THE LIABILITY ON ACCOUNT OF BUILDING AND INTERIOR WORKS WAS QUITE MEAGER, WHEREAS, THE DISCUSSION IN THE ASSESSMENT ORDER COUPLED WITH REPORT OF THE DVO R EVOLVES AROUND BUILDING AND INTERIOR WORKS AND CIVIL WORKS. IN VIEW OF THE FORGOING FACTS, I AM CONVINCED THAT THERE IS NO MERIT IN THE FINDING OF THE A.O THAT THERE WERE FICTITIOUS CREDITORS AND THEREFORE, I FIND NO REASON TO UPHOLD THE ADDITION TO TOTAL INCOME ON ACCOUNT OF FICTITIOUS CREDITORS WHICH HAS REMAINED UNSUBSTANTIATED BY THE A.O. 7.4 FROM THE PERUSAL OF THE ASSESSMENT ORDER, I FIND THAT THE A.O HAS NOT INVOKED SECTION H5(3) AND THE A.O HAS NOT POINTED OUT ANY ERROR OR OMISSION IN THE BOOKS OF ACCOUNTS OF THE IT IS THE CASE OF THE A.O THAT THE BOOKS OF ACCOUNTS WERE INCOMPLETE OR THAT THE A.O IS NOT SATISFIED WITH THE CORRECTNESS OF THE ACCOUNTS OF THE APPELLANT. IT IS ALSO NOT THE CASE OF THE A.O THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ARE NO T SUPPORTED BY THE BILLS AND VOUCHERS, CONVERSELY, NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE A.O IN THE ASSESSMENT ORDER. IN THIS BACKDROP, IN MY CONSIDERED VIEW, IT IS IMPLIED THAT THE A.O WAS SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE AC COUNTS OF THE APPELLANT, MORE PARTICULARLY, WHEN THE SAME ARE AUDITED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IN THE CASE OF SARGAM CINEMA VS CIT (2010) 328 ITR 513 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT UNLESS THE BOOKS OF ACCOUNTS ARE REJ ECTED, THE A.O CANNOT MAKE A REFERENCE TO THE VALUATION OFFICER. 7.5 IT IS ALSO SEEN THAT THE CASE OF THE APPELLANT IS FINDING SUPPORT FROM THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT CITED SUPRA. HENCE, I AM CONVINCED THAT THE A.O HAD NO OCCASION TO REFER THE MATTER TO THE DVO, MORE SO, WHET* FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT APPEARS THAT THE A.O HAD REFERRED THE MATTER TO THE DVO WITHOUT RECORDING ANY SATISFACTION IN THIS REGARD AND THE REFERENCE WAS MERELY FOR PROPER VERIF ICATION IN AS MUCH AS THE A.O HAD STATED IN THE ASSESSMEET ORDER THAT ''THE SAME WAS REFERRED TO THE DVO, JABALPUR FOR PROPER VERIFICATION'. FOR THE AFORESAID REASONS, IN MY CONSIDERED VIEW, THE REFERENCE BY THE A.O WAS NOT IN ACCORDANCE WITH THE LAW. HENC E, THE ADDITION DESERVES TO BE DELETED ON THIS COUNT ITSELF. 7.6 IT IS GATHERED THAT THE DVO HAS VALUED THE ASSETS AT RS.17,54,500/ - AS AGAINST RS.92,49,646/ - (WRONGLY TAKEN BY THE A.O AT RS.92,59,171/ - IN THE ASSESSMENT ORDER) APPEARING IN THE AUDITED 11 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 BO OKS OF ACCOUNTS OF THE APPELLANT. THE A.O HAS CONCLUDED THAT THE SAID DIFFERENCE HAS RESULTED INTO NEGATIVE DEVIATION OF RS.74,95,671/ - . FIRSTLY, THE A.O HAS NOT PROPERLY EXPLAINED THE TERMINOLOGY 'NEGATIVE DEVIATION' EMPLOYED BY THE A.O IN THE ASSESSMENT ORDER, HOWEVER, APPRECIATION OF THE FACTS IN AN OBJECTIVE MANNER, IN MY CONSIDERED VIEW, CAN ONLY RESULT INTO AN INFERENCE THAT THE AMOUNT OF INVESTMENT ACTUALLY DISCLOSED BY THE APPELLANT IN ITS AUDITED BOOKS OF ACCOUNTS IS MORE THAN THE VALUE/COST ESTIMA TED BY THE DVO. IN THIS VIEW OF THE MATTER, I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT THAT THERE WAS NO OCCASION TO MAKE ANY ADDITION U/S 69 OR 69B. ALTHOUGH, IT IS SEEN THAT THE A.O HAS NOT MENTIONED ANY SECTION OF THE INCOME TAX ACT UNDER W HICH HE IS MAKING ADDITION, EVEN ASSUMING THAT THE ADDITION HAS BEEN U/S 68 IN VIEW OF USE OF THE TERMS SUCH AS FICTITIOUS CREDITORS, I HOLD THAT THE A.O COULD NOT HAVE RELIED UPON THE REPORT OF THE DVO OBTAINED U/S 142A FOR MAKING ANY ADDITION IN VIEW OF THE PROVISIONS OF SECTION 68 OF THE ACT AS SECTION 142A DOES NOT COVER IN ITS AMBIT THE PROVISIONS OF SECTION 68. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT IN THIS REGARD ARE CERTAINLY PROVIDING STRENGTH TO THE CASE OF THE APPELLANT. IT 1 IS SEEN THAT THE A.O HAS DRAWN AN INFERENCE THAT THE APPELLANT HAS INVESTED THE DIFFERENCE OF RS.74,95,671/ - IN OTHER FORM OF ASSETS WHICH THE COMPANY HAS NOT SHOWN TO THE DEPARTMENT. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND NO LOGIC IN THE CONTENTION OF THE A.O, MORE SO, WHEN THE SOURCE OF INVESTMENT IS DULY GETTING SUBSTANTIATED FROM THE AUDITED BALANCE SHEET OF THE COMPANY. THE A.O HAD EXAMINED THE SOURCE OF ADDITION TO CAPITAL AS WELL AS RESERVES AND ACCEPTED THE GENUINENESS OF ADDITION AS NO ADVERSE INFERENCE HAS BEEN DRAWN IN THE ASSESSMENT ORDER. THE CURRENT LIABILITIES WERE IMPLIEDLY ACCEPTED BY THE A.O AS NO SPECIFIC INSTANCE OF FICTITIOUS CREDITOR HAS BEEN POINTED OUT BY THE A.O IN THE ASSESSMENT ORDER OR IN THE REMAND REPORT. IT IS SEEN THAT THE A.O HIMSELF HAS STATED THAT 'THEREFORE THE AMOUNT OF RS.74,95,671/ - WHICH HAS BEEN INVESTED BY DIVERSIFYING THE FUND IS DEEMED THE INCOME OF THE APPELLANT FROM THE UNDISCLOSED SOURCE'. THE USE OF TERM DEEMED INCOME ITSELF SIGNIFIES THAT THE A.O HAS MADE THE ADDITION BY INVOKING THE DEEMING PROVISION. HOWEVER, THERE IS NO WHISPER OF THE PROVISIONS OF THE ACT UNDER WHICH THE A.O HAS DEEMED THE DIFFERENCE AS INCOME OF THE APPELLANT. 7.6 EVEN AN INDEPENDENT EXAMINATION OF THE CONSTITUENTS OF THE TOTAL INVESTMENT OF RS.92,49,646/ - SHOWN BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS REVEALS THAT THE SAME IS MADE UP OF FOLLOWING COST ELEMENTS: - (1) BUILDING AND INTERIOR WORK RS. 17,2 7,741.00 12 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 (2) CIVIL & INTERIOR WORKS RS.70,27,245.00 (3) LABOUR CHARGES RS. 4.94.660.00 7.7 AS REGARDS CIVIL AND INTERIOR WORKS WHICH ACCOUNTS FOR NEARLY 80% OF THE TOTAL INVESTMENT UNDER CONSIDERATION SHOWN BY THE APPELLANT I.E. RS.70,27,2457 - , IT IS SEEN THAT ENTIRE AMOUNT WAS IN RESPECT OF CIVIL WORK CARRIED OUT BY M/S S. M. KHAN AS IS EMERGING FROM THE LEDGER OF CIVIL WORK AND INTERIOR WORKS AGGREGATING TO RS.70,27,245/ - . ADMITTEDLY, THE SAME COMPLETED THE ASSESSMENT IN THE CASE OF M/S S. M. KHAN VIDE ASSESSMENT ORDER U/S 143(3) DATED 18.03.2013 SUBMITTED BY THE AP PELLANT VIDE LETTER DATED 04.07.2013. I DO FIND CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT THE A.O CANNOT APPLY TWO DIFFERENT YARDSTICKS WHILE DEALING WITH THE SAME MATTER. IN OTHER WORDS, IF THE A.O HAS ACCEPTED THE INCOME OF M/S S. M. KH AN TO BE CORRECT, IN MY CONSIDERED VIEW, THERE WAS NO REASON TO DISBELIEVE THE SAME WHILE FRAMING THE ASSESSMENT IN THE CASE OF THE APPELLANT. HAVING CAREFULLY VERIFIED THE LEDGER OF BUILDING AND INTERIOR WORK, CIVIL AND INTERIOR WORKS AS WELL AS LEDGER OF LABOUR CHARGES, I FIND THAT OUT OF THE TOTAL SUM OF RS.92,49,646/ - , SUBSTANTIAL PAYMENTS WERE MADE BY THE APPELLANT THROUGH BANKING CHANNEL. IT IS NOT THE CASE OF THE A.O THAT THE INFERENCE DRAWN BY THE A.O IS SUPPORTED BY THE RESULTS OF ANY ENQUIRY CONDU CTED BY THE A.O FROM ANY OF THE PARTY WHOSE NAMES AND ADDRESSES WERE PROVIDED BY THE APPELLANT, MORE SO, WHEN THE PERSON NAMELY M/S S.M. KHAN WHO HAS BEEN ASSESSED BY THE SAME A.O IN THE SAME ASSESSMENT YEAR U/S 143(3), TO SUBSTANTIATE HIS CONTENTION OF DI VERSIFICATION OF FUNDS BY THE APPELLANT AND INVESTMENT THEREOF IN SOME OTHER FORM OF ASSETS WHICH HAS NOT BEEN DISCLOSED BY THE APPELLANT. EVEN IN THE REMAND REPORT, THE A.O HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SUBSTANTIATE HIS CONTENTION OF FICTITIOU S CREDITOR OR REFERENCE OF ANY PROVISION OF THE ACT UNDER WHICH THE ADDITION WAS MADE BY THE A.O DEEMING THE DIFFERENCE AS INCOME OF THE APPELLANT. IN THE REMAND REPORT DATED 05.06.2014 , THE A.O HAS NOT REBUTTED ANY OF THE SUBMISSION OF THE APPELLANT. 7.8 I HAVE ALSO CAREFULLY PERUSED THE REVISED INSPECTION NOTICE DATED 19.02.2013 ISSUED BY THE DVO TO THE APPELLANT PLACED IN PAGE NO. 176 AND 177 OF THE PAPER BOOK. I FIND THAT IT BEARS THE RECEIVING I.E., ACKNOWLEDGEMENT FROM HEAD POST OFFICE OF JABALPUR DATED 02.03.2013, THEREFORE, THERE IS CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE APPELLANT THAT IN MY CONSIDERED VIEW, THE SAID REVISED INSPECTION NOTICE WAS ISSUED AFTER THE DATE OF INSPECTION I.E. 28.02.2013 AND THEREFORE, IN MY CONSIDERED VIEW, NO FA ULT CAN BE FOUND ON THE PART OF THE APPELLANT ON ITS INABILITY TO FURNISH THE DESIRED DOCUMENTS TO THE 13 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 DVO OR IN KEEPING THE DOCUMENTS READILY AVAILABLE FOR INSPECTION. I HAVE ALSO CAREFULLY PERUSED THE STATEMENT OF THE DIRECTOR OF THE APPELLANT COMPANY GI VEN BEFORE THE DVO ON 28.02.2013 DURING THE COURSE OF INSPECTION OF THE PROPERTY UNDER QUESTION. FROM THE TENOR OF THE STATEMENT OF THE DIRECTOR NAMELY DR. Y.R. KRISHNA, IT APPEARS THAT THE APPELLANT COMPANY WAS NOT PREPARED FOR THE INSPECTION IN VIEW OF T HE OBJECTIONS RAISED BEFORE THE A.O AND THAT HAD REMAINED UNADDRESSED BY THE A.O. I ALSO FIND THAT WAS EARNED OAT OVER A PERIOD OF THREE YEARS, RATHER, IT IS SEEN THAT THE SAID DIRECTOR HAD GIVEN A THAT IT IS HUMANLY NOT POSSIBLE TO PINPOINT SPECIFIC CONST RUCTION ACTIVITY. IN MY VIEW, IT IS THUS CLEAR THAT THE APPELLANT COMPANY COULD NOT POINT OUT EXHAUSTIVELY THE AND RENOVATION ACTIVITIES AND THUS, BY IMPLICATION, THE DVO APPEARS TO HAVE DRAWN REPORT AND MADE THE COST ESTIMATE ONLY FOR THOSE CONSTRUCTION / RENOVATION ACTIVITIES WHICH WERE POINTED OUT BY THE SAID DIRECTOR ON THE BASIS OF HIS HUMAN MEMORY. UNDER SUCH CIRCU MSTANCES, I AM CONVINCED THAT THE DIFFERENCE BETWEEN ESTIMATION OF COST BY THE DVO AND THAT 1 RECORDED IN THE BOOKS OF ACCOUNTS OF THE APPE LLANT IS BOUND TO TAKE PLACE. UNDER SUCH CIRCUMSTANCES, I AM CONVINCED THAT THE RELIANCE PLACED BY THE A.O ON SUCH A REPORT OF THE DVO ITSELF IS ERRONEOUS AND MISPLACED ON THE BASIS OF WHICH NO LOGICAL INFERENCE CAN BE DRAWN AND THEREFORE, THE ADDITION MAD E BY THE A.O ON THE BASIS OF SUCH VITIATED REPORT CANNOT BE SUSTAINED. 7.9 LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS CITED ABOVE, THE ADHOC ADDITION MADE BY THE A.O CANNOT BE SUSTAINED. HENCE, THE ADDITION IS DELETED. 6. WE H AVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS ON RECORD AND ORDERS OF LOWER AUTHORITIES . IN THE INSTANT CASE, THE ASSESSEE HAS IN ITS BALANCE SHEET SHOWN INVESTMENT IN CONSTRUCTION OF HOSPITAL BUILDING TO THE TUNE OF RS.92,50,171/ - THE ASSESSING OFFICER TO ASCERTAIN ITS COST OF CONSTRUCTION MADE A REFERENCE TO THE DVO. THE DVO IN ITS REPORT OPINED THE COST OF CONSTRUCTION AT RS.17,54,500/ - . FROM THIS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN MORE INVESTMENT IN THE CONSTRUCTION 14 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 OF BUILDING BY RS.74,95,671/ - . THE ASSESSING OFFICER ADDED THE DIFFERENCE AMOUNT TO THE INCOME OF THE ASSESSEE AS INVESTMENT IN ASSETS WHOSE SOURCE COULD NOT BE EXPLAINED BY THE ASSESSEE. 7. ON APPEAL, THE CIT (A) DELETED THE SAID ADDITION. 8. BEFORE US, LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER. 9. WE FIND THAT THE ADDITION OF RS.74 , 95,671/ - ON THE ABOVE FACTS IS CLEARLY UNSUSTAINABLE. IN THE INSTANT CASE, ACCORDING TO THE ASSESSING OFFICER, THE ASS ESSEE HAS SHOWN MORE INVESTMENT IN BUILDING . THUS, AS PER THE ASSESSING OFFICER, THE ASSESSEE HAS ASSETS OF LESSER AMOUNT THAN THE SOURCES AVAILABLE IN THE BOOKS OF ACCOUNT. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY PARTICULAR SOURCE DISCLOSED BY THE ASSESSEE WAS BOGUS OR FICTITIOUS. THUS, THE ASSESSING OFFICER CLEARLY ERRED IN INFERRING THAT THE ASSESSEE CO U LD NOT EXPLAIN THE SOURCE OF ANY INVESTMENT. ON THE ABOVE FACTS, THERE IS NO PROVISION IN THE ACT WHICH EMPOWERS THE ASSESSING OFFICER T O DEEM THE AMOUNT OF LESSER ASSET OR INVESTMENT ALSO AS INCOME OF THE ASSESSEE. WE FIND THAT THE ASSESSING OFFICER COULD NOT POINT OUT ANY SPECIFIC LIABILITY WHICH WAS REFL ECTED IN THE BOOKS OF ACCOUNT WAS FICTITIOUS. BEFORE US ALSO, LD D.R. COULD NOT PO INT OUT WHICH PARTICULAR LIABILITY SHOWN BY THE ASSESSEE WAS FICTITIOUS OR NON - EXISTENT. 15 ITA NO.211/BIL/2014 ASSESSMENT YEAR :2010 - 11 10. FURTHER, WE FIND THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS ERRON EOUS AND UNACCEPTABLE ON MERITS, T HE ISSUE RAISED BY THE REVENUE IN RESPECT OF VALIDITY OF REFERENCE TO THE DVO HAS BECOME INFRUCTUOUS AND ONLY ACADEMIC IN NATURE, WHICH DOES NOT REQUIRE ADJUDICATION IN THE INSTANT CASE. 11. FOR THE REASON, GROUND NO.5 OF THE APPEAL RAISED BY THE REVENUE IS INFRUCTUOUS. THUS, THE DELETION OF THE ADDITION BY THE CIT(A) IS CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED. 12. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCE D IN THE OPEN COURT ON 12 /05 /2017 IN THE PRESENCE OF PARTIES. SD/ - SD/ - (GEORGE GEORGE K ) ( N.S . SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER RAIPUR ; DATED 12 /05 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY 1. THE APPELLANT : ITO, WARD 1(1), BILASPUR 2. THE RESPONDENT :KIMS SUPER SPECIALITY HOSPITAL (P) LTD., MAGARPARA, BILASPUR 3. THE CIT(A) BILASPUR 4. PR.CIT , BILASPUR 5. DR, ITAT, RAIPUR 6. GUARD FILE. //TRUE COPY//