M/s. Priyanka Gems, Surat V. The ACIT., Circle-9, Surat

ITA 2133/AHD/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73017 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2009
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: R B SHAH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Fair market value
• Section: 50C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 2133/AHD/2009 ASSESSMENT YEAR 2006-07 M/S PRIYANKA GEMS 1, TAPOVAN ESTATE, B/H JEEVANDHARA HOTEL, VARACHHA ROAD, SURAT. PAN: AADFP2302H VS ACIT, CIRCLE-9, SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SH. O.P. BATHEJA, SR. D.R. ASSESSEE(S) BY : SH. R.B. SHAH, AR / // / DATE OF HEARING : 05/02/2014 !'# / DATE OF PRONOUNCEMENT : 21/02/2014 $% $% $% $%/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)- V, SURAT DATED 29.06.2009. 2. THE FIRST GROUND OF APPEAL IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A) CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER MAKING ADDITION OF RS 43,28,500/- AS UNDISCLOSED INVESTMENT U/S 69B OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE PURCHASED 4 HALLS HA VING AGGREGATE TOTAL AREA OF 19,645 SQUARE FEET IN MILLENNIUM DIAMOND ES TATE FOR RS 35,29,500/-. THE EFFECTIVE RATE OF PURCHASE WAS RS 179/- PER SQUARE ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 2 - FEET. THE ASSESSING OFFICER WAS OF THE VIEW THAT T HE MARKET RATE IN THE SAID AREA WAS MORE THAN RS 1,500/- TO RS 2,000/- PE R SQUARE FEET AND EVEN CONSTRUCTION COST WAS MORE THAN RS 500/- PER S QUARE FEET AND REQUIRED THE ASSESSEE TO EXPLAIN HOW HE ACQUIRED TH E PROPERTY IN THE HEART OF THE CITY AT A MEAGRE VALUE OF RS 179/- PER SQUARE FEET. THE ASSESSEE EXPLAINED THAT THE CIRCLE RATE WAS LESS TH AN RS 179/- PER SQUARE FEET. THE ASSESSING OFFICER DID NOT ACCEPT THE EXP LANATION OF THE ASSESSEE ON THE GROUND THAT THE CIRCLE RATE WAS NOT THE ONLY CRITERIA FOR VALUATION WHEN EVEN THE CONSTRUCTION COST PER SQUAR E FEET PREVAILING DURING FINANCIAL YEAR 2005-06 WAS BETWEEN RS 400/- AND RS 600/- PER SQUARE FEET. HE THEREFORE ESTIMATED THE PURCHASE V ALUE OF THE PROPERTY AT THE RATE OF RS 400/- PER SQUARE FEET AND MADE AD DITION OF RS 43,28,500/- AS UNDISCLOSED INVESTMENT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER ON THE GROUND THAT CIRCLE RATE HAS TO BE CO NSIDERED WHILE COMPUTING CAPITAL GAINS ON TRANSFER OF CAPITAL ASSE T AND PROVISIONS OF SECTION 50C WERE NOT IN CONFLICT WITH SECTION 69B O F THE ACT. OBSERVING THAT THE ASSESSEE HAD MADE INVESTMENT AND THE ASSES SING OFFICER FOUND THAT THE AMOUNT SPENT ON MAKING SUCH INVESTMENT EXC EEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT, THE EXPLANATION O F THE ASSESSEE WAS NOT FOUND SATISFACTORY BY THE ASSESSING OFFICER. THEREFORE, THE EXCESS AMOUNT WAS DEEMED TO BE THE INCOME OF THE ASSESSEE. 5. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD NOT PURCHASED COMPLETE FLAT BUT HAD PURCHASED HALLS AND THEREFORE, THE CONSTRUCTION COST IN THE CONSTRUCTION OF HALLS WAS LOWER THAN THE CONSTRUCTION OF ENTIRE FLAT. HE FURTHER SUBMITTED THAT NO MATERIAL WAS BROUGHT ON RECORD BY REVENUE TO SHOW THAT THE ASSES SEE HAS PAID ANY ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 3 - AMOUNT MORE THAN WHAT WAS DISCLOSED IN THE REGISTER ED SALE DEED FOR THE PURCHASE OF PROPERTY. HENCE, IT WAS HIS SUBMISSION THAT THE ADDITION MADE CANNOT BE SUSTAINED IN LAW. THE LD. AR OF THE ASSESSEE RELIED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF RICHA NARESH JAIN VS ITO, ITA NO. 3997/AHD/2008 PASSED IN ASSESSMENT YEAR 2005-06 ORDER DATED 13.08.2009 AND SUBMITTED T HAT THE TRIBUNAL IN THAT CASE HAS HELD THAT THE VALUE ON WHICH STAMP DU TY AS CHARGED AT THE TIME OF REGISTRATION OF THE PROPERTY WAS ON THE BAS IS OF DEEMED MARKET VALUE OF THE PROPERTY OR ACTUAL CONSIDERATION WHICH HAS BEEN PAID FOR THE PROPERTY WHICHEVER IS HIGHER AND THAT BY ITSELF DOE S NOT CONCLUSIVELY EVIDENCE THAT THE ASSESSEE ACTUALLY PAID ANY CONSID ERATION MORE THAN THE AMOUNT STATED IN THE REGISTERED DEED. THE LD. AR F URTHER RELIED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI BALKISHAN PODDAR & OTHERS ITA NO. 3412, 34 13 AND 3414/AHD/2008 CONSOLIDATED ORDER DATED 12.06.2009 W HEREIN TRIBUNAL HELD THAT THE ASSESSING OFFICER REFERRED THE MATTER TO THE DVO AND AFTER GETTING THE REPORT OF DVO MADE ADDITION IN RESPECT OF DIFFERENCE IN THE AMOUNT ESTIMATED BY THE DVO AND AS RECORDED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. SECTION 69B PLACES A BURDEN ON T HE ASSESSING OFFICER TO PROVE THAT THE ASSESSEE HAS INVESTED MUC H MORE THAN WHAT IS RECORDED IN BOOKS OF ACCOUNT AND UNLESS THIS BURDEN IS DISCHARGED BY ASSESSING OFFICER, THE QUESTION OF SUBMITTING EXPLA NATION BY ASSESSEE DOES NOT ARISE. FURTHER, IT WAS HELD BY THE TRIBUN AL THAT ESTIMATE WAS ALWAYS AN ESTIMATE WHICH CANNOT TAKE A SHAPE OF ACT UAL INVESTMENT MADE BY THE ASSESSEE AND THEREFORE, NO ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S 69B OF THE ACT BETWEEN T HE VALUE SHOWN IN THE REGISTERED SALE DEED AND THAT ESTIMATED BY THE DVO CAN BE MADE IN THE HANDS OF THE ASSESSEE. ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 4 - 6. THE LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORI TIES AND RELIED ON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. AMAR KUMARI SURANA VS. CIT (1997) 226 ITR 344 (RAJ.) AND SUBMITTED THAT THE HONBLE HIGH COURT IN THAT CASE HAS HELD THAT W HERE THE ASSESSEE OFFERS NO EXPLANATION AS TO WHY THE PLOT WAS SOLD T O HER AT A LESSER RATE, NOTWITHSTANDING THAT THE BURDEN WAS ON THE DEPARTME NT TO SHOW THAT SALE CONSIDERATION WAS NOT CORRECTLY SHOWN, THE ONL Y INFERENCE FROM THE FACTS AND CIRCUMSTANCES OF THE CASE WAS THAT IT WAS NOT SO SHOWN AND NO INTERFERENCE WITH THE ADDITION U/S 69B WAS CALLED F OR. THE LD. DR FURTHER RELIED ON THE DECISION OF THE CHANDIGARH BE NCH OF THE TRIBUNAL IN THE CASE OF MANJIT SINGH VS. DCIT (2013) 30 TAXM ANN.COM 216 (CHD.) WHEREIN IT WAS HELD THAT SALE CONSIDERATION OF AN ASSET RECORDED IN REGISTERED SALE DEED WAS GENERALLY UNDERSTATED A ND HENCE CANNOT BE TAKEN AS THE FAIR MARKET VALUE OF THE ASSET AS ON 0 1.04.1981 AND DETERMINATION OF FAIR MARKET VALUE WOULD INVOLVE AN ELEMENT OF ESTIMATION BASED ON RELEVANT FACTORS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE PURCHASED 4 HALLS AGGREGATING TOT AL AREA OF 19,645 SQUARE FEET FOR RS 35,29,500/- IN MILLENNIUM DIAMON D ESTATE, SURAT. AS PER THE REGISTERED SALE DEED, CONSIDERATION PAID FOR THE PURCHASE OF 4 HALLS WAS RS 35,29,500/- AND THE SAME WAS REGISTERE D BY THE REGISTRAR BY CHARGING STAMP DUTY ON THAT VALUE. THE ASSESSIN G OFFICER OBSERVING THAT THE MARKET RATE IN THE AREA WAS IN THE RANGE O F RS 1,500/- TO RS 2,000/- PER SQUARE FEET AND THAT THE CONSTRUCTION C OST WAS MORE THAN RS 500/- PER SQUARE FEET, ESTIMATED THE VALUE OF PROPE RTY AT THE RATE OF RS 400/- PER SQUARE FEET AND TREATED THE DIFFERENCE AM OUNT OF RS 43,28,500/- AS UNDISCLOSED INVESTMENT OF THE ASSESS EE BY INVOKING THE PROVISIONS OF SECTION 69B OF THE ACT. THE LD. CIT( A) CONFIRMED THE ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 5 - ACTION OF THE ASSESSING OFFICER. THE EXPLANATION O F THE ASSESSEE IS THAT IT PURCHASED 4 HALLS AND NOT THE ENTIRE CONSTRUCTED FLAT AND THEREFORE, THE COST OF CONSTRUCTION IN ITS CASE WAS LOWER. FURTHE R, IT IS THE CONTENTION OF THE ASSESSEE THAT NO MATERIAL HAS BEEN BROUGHT O N RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE ASSESSEE PAID AN Y CONSIDERATION FOR PURCHASE OF THE PROPERTY OVER AND ABOVE THE AMOUNT STATED IN THE REGISTERED SALE DEED AND THEREFORE, THE ADDITION MA DE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE PROPERTY WAS NOT JUST IFIED. HE HAS PLACED RELIANCE ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF RICHA NARESH JAIN VS ITO (SUPRA) AND ACIT V S. SHRI BALKISHAN PODDAR & OTHERS (SUPRA). ON THE OTHER HAND, THE LD . DR HAS SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND HAS PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF SMT. AMAR KUMARI SURANA VS. CIT (SUPRA) AND THE ORDER OF CHAN DIGARH BENCH OF TRIBUNAL IN THE CASE OF MANJIT SINGH VS. DCIT (SUPR A). WE FIND THAT THE ASSESSING OFFICER HAD A DOUBT ON THE BASIS OF PREVA ILING MARKET RATE IN THE AREA WHICH WAS WITHIN THE RANGE OF RS 1,500/- T O RS 2,000/- PER SQUARE FEET AND THAT THE COST OF CONSTRUCTION WAS R S 500/- PER SQUARE FEET, THAT THE CONSIDERATION STATED IN THE REGISTER ED SALE DEED WAS NOT THE REAL CONSIDERATION PAID FOR ACQUIRING THE PROPERTY BY THE ASSESSEE. WE FIND THAT THE ASSESSING OFFICER HAS THEREAFTER NOT BROUGHT ANY MATERIAL ON RECORD BY MAKING FURTHER INQUIRIES TO SHOW THAT THE ASSESSEE ACTUALLY PAID ANY AMOUNT OVER AND ABOVE THE AMOUNT SHOWN IN REGISTERED SALE DEED FOR THE ACQUISITION OF THE PROPERTY. WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF K.P. VERGHESE VS. ITO (1981) 131 ITR 597 (SC) HAS HELD THAT THE ONUS LIES ON THE DEPARTM ENT TO BRING MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS ACTUALLY PA ID ANY AMOUNT MORE THAN THE AMOUNT SHOWN AS APPARENT CONSIDERATION IN THE REGISTERED SALE DEED. IN ABSENCE OF ANY SUCH MATERIAL BROUGHT ON R ECORD, THE DEPARTMENT IS NOT EMPOWERED TO TREAT ANY OTHER AMOU NT AS ACTUAL ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 6 - CONSIDERATION PAID BY THE ASSESSEE FOR ACQUIRING TH E PROPERTY AND MAKE ADDITION ON THAT BASIS. WE, THEREFORE, SET ASIDE T HE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND DELETE THE ADDITION O F RS 43,28,500/-. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN GROUND NO. 2 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS 18,86,103/- AT THE RAT E OF 20% OUT OF SYNTHETIC DIAMOND POWDER EXPENSES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEES EXPE NSE UNDER THE HEAD SYNTHETIC POWDER WAS RS 94,30,515/- WHICH WAS THR EE TIMES THE EXPENDITURE INCURRED IN THE PRECEDING YEAR WHEREAS THE INCREASE IN PRODUCTION OF DIAMOND WAS 25% ONLY. THE ASSESSEE E XPLAINED BEFORE THE ASSESSING OFFICER THAT POWDER WAS ISSUED TO WOR KERS ON PACKET BASIS AND STOCK LYING AT THE PLACE OF WORKERS WAS NOT CON SIDERED FOR THE STOCK AT THE END OF THE YEAR AND THIS METHOD WAS ACCEPTED IN SCRUTINY IN PAST YEARS. THIS EXPLANATION WAS FOUND NOT ACCEPTABLE B Y THE ASSESSING OFFICER AND ACCORDINGLY, THE ASSESSING OFFICER DISA LLOWED 20% OF THE EXPENSES CLAIMED ON ESTIMATE BASIS WHICH WORKED OUT TO RS 18,86,106/-. 10. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 11. BEFORE US, THE LD. AR CONTENDED THAT THE ENTIRE PURCHASE OF SYNTHETIC POWDER WAS SUPPORTED BY BILLS AND VOUCHERS AND NO D EFECT THEREIN COULD BE POINTED OUT BY THE REVENUE AFTER VERIFICATION. HE FURTHER SUBMITTED THAT IN VIEW OF THE CONSISTENT SYSTEM FOLLOWED BY T HE ASSESSEE WHICH WAS ACCEPTED IN THE PAST BY THE DEPARTMENT, THE REV ENUE WAS NOT ITA NO.2133/AHD/2009 M/S PRIYANKA GEMS, SURAT VS. ACIT, CIRCLE-9, SURAT. FOR A.Y. 2006-07 - 7 - JUSTIFIED IN DISALLOWING 20% OF THE EXPENSE. HE AL SO CONTENDED THAT DISALLOWANCE OF 20% OF THE TOTAL EXPENDITURE WAS WI THOUT ANY BASIS. 12. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LOWER AUTHORITIES. 13. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ENTI RE PURCHASE OF SYNTHETIC POWDER WAS SUPPORTED BY BILLS AND VOUCHERS AND NO S PECIFIC DEFECT THEREIN WAS BROUGHT ON RECORD BY THE REVENUE. HOWE VER, WE DO NOT AGREE WITH THE SUBMISSIONS OF THE LD. AR THAT STOCK OF POWER LYING WITH THE JOB WORKERS COULD NOT BE TAKEN INTO CONSIDERATI ON SIMPLY BECAUSE SUCH STOCK WAS NOT TAKEN INTO CONSIDERATION IN THE PAST IN CASE OF THE ASSESSEE. HOWEVER, WE AGREE THAT THE VALUE OF SUCH STOCK AT THE RATE OF 20% OF THE ENTIRE PURCHASE DURING THE YEAR WAS WITH OUT ANY BASIS AND EXCESSIVE. WE FIND THAT THE DETAILS OF SYNTHETIC P OWDER WHICH WAS LYING WITH THE WORKERS COULD NO BE FURNISHED BY THE ASSES SEE BEFORE US ALSO. IN THE CIRCUMSTANCES, CONSIDERING THE ENTIRE FACTS OF THE CASE, IN OUR CONSIDERED VIEW, IT SHALL MEET THE ENDS OF JUSTICE TO ESTIMATE SUCH STOCK AT THE RATE OF 10% OF THE ENTIRE PURCHASES MADE DUR ING THE YEAR. WE, THEREFORE, RESTRICT THE DISALLOWANCE TO RS 9,43,052 /- AND DELETE THE DISALLOWANCE OF RS 9,43,051/-. THUS, THIS GROUND O F APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 21 ST OF FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 21/02/2014 GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA GHANSHYAM MAURYA, SR. P , SR. P , SR. P , SR. P. .. .S SS S. .. .