Dr. (Mrs.) Nargish Paul, Bokaro V. DCIT, Bokaro

ITA 22/RAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0325 (ITAT-RANCHI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ORAON
• Keywords: Value adopted by valuation officer; Valuation report; Notional interest
• Section: 234B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NOS. 20 TO 23/RAN/2015 (ASST. YEARS : 2003-04, 2005-06, 2006-07 & 2007-08) DR. (MRS.) NARGIS PAUL, PROP. ST. PAULS HEALTHWAYS, LAXMI MARKET, SECTOR-4, BOKARO STEEL CITY. VS. DCIT, CIRCLE-3, BOKARO. PAN NO. ADPPP 5134 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.K. PODDAR WITH SHRI M.K. CHOUDHARY ADV. DEPARTMENT BY : SHRI CHOUDHARY ORAON DR DATE OF HEARING : 27/10/2015. DATE OF PRONOUNCEMENT : 27/10/2015. O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE CONSOLIDATED ORDER OF COMMISSIONER OF INCOME TAX (A PPEALS), JAMSHEDPUR, DATED 30/09/2014 FOR THE ASSESSMENT YEA RS 2003-04, 2005-06, 2006-07 & 2007-08. 2. THE COMMON ISSUE INVOLVED IN ALL THE YEARS UNDER CONSIDERATION IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS N OT JUSTIFIED IN CONFIRMING THE ADDITION MADE UNDER SECTION 69 OF TH E ACT FOR DIFFERENCE IN THE COST OF CONSTRUCTION AS ESTIMATED BY THE DEP ARTMENTAL VALUER AND AS DISCLOSED BY THE ASSESSEE AS PER BOOKS OF ACCOUN TS. 2 ITA NOS. 20-23/RAN/2015 3 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE O RDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSIN G OFFICER HAS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HA S SHOWN COST OF CONSTRUCTION OF THE BUILDING AT RS. 34,76,340/- IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE FILED VALUATION REPORT DATED 18/12/200 8 OF THE REGISTERED VALUER, WHO VALUED THE COST OF CONSTRUCTION OF THE BUILDING AT THE FIGURE SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. TH E ASSESSING OFFICER OBTAINED REPORT OF THE DEPARTMENTAL VALUATION OFFIC ER (DVO), WHO SUBMITTED THE REPORT ON 30/03/2007 VALUING THE SAME AT RS. 54,86,000/-. THE ASSESSING OFFICER APPORTIONED THE CONSTRUCTION COST OF THE BUILDING DETERMINED BY THE DVO IN PROPORTIONATE TO THE COST OF THE BUILDING SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCO UNTS DURING THE ASSESSMENT YEARS 2003-04 TO 2007-08. THEREBY, THE ASSESSING OFFICER MADE THE ADDITION OF THE DIFFERENCE AMOUNT OF RS. 1 ,12,660/- IN THE ASSESSMENT YEAR 2005-06, RS.9,10,000/- IN THE ASSES SMENT YEAR 2006- 07, RS. 5,95,000/- IN THE ASSESSMENT YEAR 2003-04 A ND RS. 3,32,000/- IN THE ASSESSMENT YEAR 2007-08. 5. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CO NFIRMED THE ACTION OF THE ASSESSING OFFICER. 6 . BEFORE US, AUTHORIZED REPRESENTATIVE OF THE ASSES SEE BY ASSAILING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) ARGUED AND SUBMITTED THAT WHILE ESTIMATING THE COST OF CONSTRU CTION OF THE BUILDING, THE ASSESSING OFFICER HAS NOT ALLOWED DEDUCTION TO THE ASSESSEE FOR SELF SUPERVISION CHARGES AND THAT THE RATE ADOPTED BY TH E DVO FOR ESTIMATING THE COST OF CONSTRUCTION IS THE CPWD RAT E AND NOT THE PWD RATE. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS A DOCTOR AND BY HER GOOD RELATIONS WITH HER CLIENTS, SHE COULD OBTAIN T HE MATERIALS FOR CONSTRUCTION OF THE BUILDING AT A MUCH REDUCED PRIC E. HE THEREFORE 3 ITA NOS. 20-23/RAN/2015 PRAYED THAT THE ADDITION MADE TO THE INCOME OF THE ASSESSEE UNDER SECTION 69 OF THE ACT UNDER THE HEAD UNDISCLOSED I NVESTMENT IN THE CONSTRUCTION OF THE BUILDING, REQUIRES TO BE DELET ED IN ITS ENTIRETY. 7 . THE DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPOR TED THE ORDERS OF THE LOWER AUTHORITIES. 8 . ON THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJKUMAR REPORTED IN 182 ITR 436 AS ALSO THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. HARCHAND PALACE REPORTED IN 269 ITR 251 HAVE HELD THAT AS PWD RATES HAD NOT BEE N APPLIED THE VALUATION MADE BY THE DVO CANNOT BE CONSIDERED FOR MAKING THE ADDITION. WE FIND THAT THIS BENCH OF THE TRIBUNAL IN THE CASE OF SMT.POONAM DEVI VS. ACIT IN I.T.A.NO. 96/RAN/2013 VIDE ORDER DATED 26/10/2015 IN ASSESSMENT YEAR 2005-06 HAS DELETED T HE ADDITION MADE ON THE BASIS OF DVO REPORT WHICH ADOPTED THE CPWD R ATES AND NOT THE PWD RATES FOR VALUING THE COST OF CONSTRUCTION. TH EREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DELETE THE ADDITION MADE UND ER SECTION 69 OF THE ACT ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE COS T OF CONSTRUCTION OF THE BUILDING OF RS. 1,12,660/- IN THE ASSESSMENT YE AR 2005-06, RS.9,10,000/- IN THE ASSESSMENT YEAR 2006-07, RS. 5 ,95,000/- IN THE ASSESSMENT YEAR 2003-04 AND RS. 3,32,000/- IN THE A SSESSMENT YEAR 2007-08. HENCE, THIS GROUND OF APPEAL OF THE ASSES SEE FOR ALL THE YEARS UNDER CONSIDERATION IS ALLOWED. 9. IN THE ASSESSMENT YEAR 2005-06, THE OTHER GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE COMMISSIONER OF I NCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDIT ION OF RS. 80,880/- AS CONVEYANCE CHARGES PAID TO DR. (MRS.) MEENA LIMAYE @ RS. 6,740/- P.M. BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) O F THE ACT FOR NON- DEDUCTION OF TDS. 4 ITA NOS. 20-23/RAN/2015 10 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR CONVEYANCE ALLOWAN CE OF RS. 80,880/- PAID TO DR. (MRS.) MEENA LIMAYE BY INVOKING THE PRO VISIONS OF SEC.40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS FROM THE SAME UNDER SECTION 194J OF THE ACT. 11 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) C ONFIRMED THE DISALLOWANCE. 12. BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT DR. (MRS.) MEENA LIMAYE IS A JUNIOR DOCTOR, WHO CAME TO THE OFFICE OF THE ASSESSEE AND BY HER DOING SO, THE ASSESSEE GAINED BY GETTING PATIENTS WHO WERE REFERRED TO HER FOR ADVIC E AS SENIOR CONSULTANT. THE ASSESSEE PAID HER TRAVELLING ALLOW ANCE OF RS. 6,740/- P.M. FOR THE SAME. NO OTHER SALARY WAS PAID TO HER AS SHE GOT SEPARATE FEE FROM THE PATIENTS WHO TREATED BY HER. THUS, TH IS WAS NOTHING BUT PAYMENT OF SALARY TO DR. (MRS.) MEENA LIMAYE. HE A RGUED THAT IN THE ASSESSMENT YEAR 2005-06, THE THRESHOLD OF TAX LIMIT WAS RS. 1 LAC AND AS TOTAL PAYMENT MADE DURING THE ENTIRE YEAR WAS RS . 80,880/-, HENCE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS FROM THE SAME UNDER SECTION 192 OF THE ACT. 13. WE FIND THAT THE EXPLANATION OF THE ASSESSEE IS A P LAUSIBLE ONE. DR. (MRS.) MEENA LIMAYE CAME TO THE PREMISES OF THE ASSESSEE AND GAVE CONSULTANCY TO HER PATIENTS AND ALSO REFERRED PATIENTS TO THE ASSESSEE FOR CONSULTATION AS SENIOR DOCTOR. THE AS SESSEE PAID RS.6,740/- P.M. BY WAY OF CONVEYANCE ALLOWANCE TO D R. (MRS.) MEENA LIMAYE, WHICH IS NOTHING BUT A SALARY AND THEREFORE THE ASSESSEE WAS LIABLE TO TDS FROM THE SAME UNDER SECTION 192 OF TH E ACT WHERE THE INCOME OF THE ASSESSEE EXCEEDED TO RS. 1 LAC WHICH WAS THE THRESHOLD LIMIT OF THE TAX. SINCE, PAYMENT MADE DURING THE E NTIRE YEAR WAS 5 ITA NOS. 20-23/RAN/2015 RS.80,880/-, WE FIND NO INFIRMITY IN THE EXPLANATIO N OF THE ASSESSEE THAT IT WAS NOT LIABLE TO DEDUCT TDS FROM THE PAYMENT. HENCE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE ADDITION OF RS. 80,880/- MADE TO THE INCOME OF THE ASSESSEE AND ALL OW THE GROUND OF APPEAL OF THE ASSESSEE. 14. THE OTHER GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN CONFIRMING THE DISALLOWANCE OF INTEREST ON LOANS FOR RS. 61,93 0/- AND RS.56,627/- IN THE ASSESSMENT YEARS 2005-06 & 2006-07 RESPECTIV ELY. 15. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORD ERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS TAKEN LOAN F ROM ICICI BANK LTD. THE ASSESSEE ADVANCED RS. 6,50,000/- TO HER DAUGHTE R DR. MANISHA MADHAI BECK FOR PURCHASE OF MEDICAL EQUIPMENTS. TH US, THE ASSESSING OFFICER HELD THAT THE ASSESSEE DIVERTED BORROWED FU NDS TO HER DAUGHTER DR. MANISHA MADHAI BECK FOR NON-BUSINESS PURPOSES A ND ACCORDINGLY MADE DISALLOWANCE OF RS. 61,930/- IN THE ASSESSMENT YEAR 2005-06 AND RS. 56,627/- IN THE ASSESSMENT YEAR 2006-07 ON ACCO UNT OF INTEREST EXPENDITURE. 16. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CON FIRMED THE ADDITION. 17 BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED DEDUCTI ON FOR ANY EXPENDITURE ON ACCOUNT OF INTEREST IN THE PROFIT & LOSS ACCOUNT, THEREFORE THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 61, 930/- IN THE ASSESSMENT YEAR 2005-06 AND RS. 56,627/- IN THE ASS ESSMENT YEAR 2006-07 MADE BY THE ASSESSING OFFICER WAS NOT JUSTI FIED. 6 ITA NOS. 20-23/RAN/2015 18. ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDERS OF THE LOWER AUTHORITIES. 19. WE FIND THAT THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT CLAIMED ANY DEDUCTION FOR INTEREST EXPENDITURE IN THE PROFI T & LOSS ACCOUNT FILED BY IT WITH THE INCOME-TAX DEPARTMENT IS NOT SUPPORT ED BY ANY MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT IT W ILL BE, IN THE INTEREST OF JUSTICE, TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME AND IF THE ASSESSING OFFI CER FINDS THAT NO INTEREST EXPENDITURE HAS BEEN CLAIMED BY THE ASSESS EE AS DEDUCTION, THEN IN THAT EVENT, NO ADDITION BY DISALLOWING INTE REST EXPENDITURE OF RS.61,930/- FOR THE ASSESSMENT YEAR 2005-06 AND RS. 56,627/- FOR THE ASSESSMENT YEAR 2006-07 IS WARRANTED. WE, THEREFOR E, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMAND THE ISSU E BACK TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH IN TH E LINE OF DISCUSSIONS MADE HEREINABOVE. THUS, GROUND OF APPEAL OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 20. THE NEXT GROUND OF APPEAL OF THE ASSESSEE IS THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIF IED IN CONFIRMING THE ADDITION OF RS. 20,000/- FOR ACCRUAL OF INTERES T ON LOAN GIVEN TO C.H. MADHAI. 21. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORD ERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS GIVEN LOAN O F RS. 2 LAC TO C.H. MADHAI ON WHICH NO INTEREST WAS CHARGED BY THE ASSE SSEE AND THAT INTEREST WAS CHARGED IN THE ASSESSMENT YEAR 2002-03 . THEREFORE, THE ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF I NTEREST INCOME ON ACCRUAL BASIS OF RS. 20,000/- TO THE INCOME OF THE ASSESSEE. 7 ITA NOS. 20-23/RAN/2015 22 ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CON FIRMED THE ACTION OF THE ASSESSING OFFICER. 23 THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUE D BEFORE US THAT THE ASSESSEE ADVANCED MONEY TO C.H. MADHAI WHO IS THE HUSBAND OF THE ASSESSEE. THUS, THE ASSESSEE CANNOT CHARGE INTEREST ON AMOUNT ADVANCED TO HER HUSBAND. THEREFORE, THE ADDITION M ADE ON NOTIONAL INTEREST BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND SHOULD BE DELETED. 24. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER S OF THE LOWER AUTHORITIES. 25 WE FIND THAT THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE HAS ADVANCED LOAN OF RS. 2 LAC TO C.H. MADHAI ON WHICH NO INTEREST WAS CHARGED BY THE ASSESSEE. HE THEREFORE MADE A NOTIO NAL ADDITION OF RS.20,000/- FOR ACCRUAL OF INTEREST INCOME. IN OUR CONSIDERED VIEW, UNDER THE INCOME-TAX ACT, THE ONLY REAL INCOME EARN ED BY THE ASSESSEE WOULD LIABLE TO INCOME TAX AND NO INCOME TAX CAN BE LEVIED ON NOTIONAL INCOME WHICH THE ASSESSEE COULD HAVE EARNED. NO MA TERIAL WAS BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE ACTUALL Y RECEIVED INTEREST INCOME OF RS. 20,000/- ON THE AMOUNT ADVANCED TO C. H. MADHAI. WE, THEREFORE, FIND NO JUSTIFICATION FOR THE ADDITION O F THE SAME MADE TO THE INCOME OF THE ASSESSEE HENCE, WE DELETE THE ADDITIO N AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 26 THE OTHER GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE ADDITION OF RS. 5,000/- OUT OF DAILY ALLOWANCE CLAIMED BY TH E ASSESSEE. 27 AT THE TIME OF HEARING, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THIS GRO UND OF APPEAL. THUS, 8 ITA NOS. 20-23/RAN/2015 THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED FOR WANT OF PROSECUTION. 28 THE OTHER COMMON GROUND OF APPEAL IN ALL THE YEARS UNDER CONSIDERATION IS DIRECTED AGAINST THE ORDER OF COMM ISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE ACTION OF THE ASSES SING OFFICER CHARGING INTEREST UNDER SECTIONS 234A & 234B OF THE ACT. 29 AT THE TIME OF HEARING, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THIS GRO UND OF APPEAL HENCE, THE SAME IS DISMISSED FOR WANT OF PROSECUTION. 30. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING ON TUESDAY, THE 27 TH DAY OF OCTOBER, 2015 AT RANCHI. SD/- SD/- (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27 TH OCTOBER, 2015. VR/- COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR 9 ITA NOS. 20-23/RAN/2015 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 27/10/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28/10/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28/10/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28/10/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28/10/2015 SR.PS 6. DATE OF PRONOUNCEMENT 27/10/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 29/10/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER