The DCITMehsana Circle, Mehsana V. M/s. Shree Riddhi Corporation, Kalol

ITA 2330/AHD/2009

• Counselvise Citation: 233020514 RSA 2009
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 31-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 69

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , . ! !,'# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A. NO.2330/AHD/2009 ( ! & ! & ! & ! & / / / / ASSESSMENT YEAR : 2006-07) THE DCIT MEHSANA CIRCLE MEHSANA ! ! ! ! / VS. M/S.SHREE RIDDHI CORPORATION 32, AMIKUNJ SOCIETY NEAR TECHNICAL SCHOOL, KALOL ' '# ./() ./ PAN/GIR NO. : ABDFS 2322 P ( '* / // / APPELLANT ) .. ( +,'*/ RESPONDENT ) '* - '/ APPELLANT BY : SHRI JAMES KURIAN, SR.D.R. +,'* . - ' / RESPONDENT BY : SHRI GAURAV NAHTA, A.R. !/ . 0#/ // / DATE OF HEARING : 19/03/2012 1 & . 0# / DATE OF PRONOUNCEMENT : 22/5/2012 '2/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF THE LEARNED CIT(APPEALS)-GANDHINAGAR DATED 15.5.2009. G ROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS. 2. GROUND NO.1 READS AS UNDER :- 1. THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.64,93,905/- MADE U/S.69 OF THE I T ACT ON ACCOUN T OF UNDISCLOSED INVESTMENT IN LAND. ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 2 - 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 08.1 2.2008 WERE THAT THE ASSESSEE-FIRM IS IN THE BUSINESS OF CONSTRUCTION AN D DEVELOPMENT OF SHOPS. THE ASSESSEE HAS PURCHASED A LAND FOR A S UM OF RS.55,34,694/- AND THE STAMP DUTY PLUS REGISTRATION EXPENSES WERE INCURRED AT RS.5,50,000/-, THUS TOTALLING TO RS.60,84,694/-. T HE MATTER WAS REFERRED TO THE VALUATION CELL AND THE DVO VIDE REPORT DATED 25.11.2008 HAS ADOPTED THE RATE AT RS.2,500/- PER SQ.METER AS AGAI NST THE RATE DECLARED BY THE ASSESSEE AS PER THE REGISTERED SALE-DEED AT RS. 1,100/- PER SQ.METER. THE DVO HAS THUS VALUED THE PROPERTY AT RS.1,25,78, 600/-. IT WAS CONTESTED BEFORE ASSESSING OFFICER THAT THE JANTRI RATE AS PER THE CERTIFICATE ISSUED BY SUB-REGISTRAR KALOL FOR THE S AID PERIOD WAS RANGING FROM RS.800/- TO RS.1,000/- PER SQ.METER, HOWEVER, AS AGAINST THAT, THE ASSESSEE HAS PAID RS.1,100/- WHICH WAS HIGHER THAN THE JANTRI PRICE. THE DVO HAS ADOPTED RS.2,500/- PER SQ.METER WHICH WAS A N IMAGINARY FIGURE. HOWEVER, SINCE THE DVO HAS GIVEN THE VALUA TION AND THE INSPECTOR WAS DEPUTED WHO HAS ALSO CONFIRMED THE SA ME RATE, THEREFORE, THE ASSESSING OFFICER HAS DETERMINED THE VALUATION AT RS.1,25,78,600/-. THE ASSESSEE HAD SHOWN THE INVESTMENT AT RS.60,84,6 94/-, THEREFORE THE DIFFERENCE BETWEEN THE TWO, I.E. RS.64,93,906/- WAS TAXED AS UNEXPLAINED INVESTMENT U/S.69 OF THE I.T.ACT. 3. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(AP PEALS) WHO HAS APPRECIATED THE FACTS OF THE CASE AS ALSO THE L AW APPLICABLE AND, THEREAFTER DELETED THE ADDITION AS FOLLOWS:- ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 3 - 2.3.1. THE CHART AS PROVIDED BY THE AUTHORISED REPRESENTATIVE ALSO THROWS LIGHT INTO THE INCORRECT DATA USED BY THE D.V.O./A.O. IN TERMS OF LAND AREA. FURTHER, THE JANTRI RATE OR THE RATE ADOPTED BY THE STATE GOVERNMENT FO R LEVYING STAMP DUTY IS AN IMPORTANT INDICATOR WHICH CANNOT B E SIMPLY IGNORED. WHEREAS THE ASSESSING OFFICER HAS NOT MAD E ANY REFERENCE TO THE JANTRI RATE, HE HAS NOT REBUTTED T HE APPELLANTS ASSERTION OF THE SAME BEING RS.800/- PER SQ.MTR. T HE APPELLANT HAS ALSO FORTIFIED IT BY PROVIDING THE CO MPARATIVE INSTANCES WHEREAS THE ASSESSING OFFICER HAS NOT DON E SO. AS FAR AS THE INSPECTORS REPORT IS CONCERNED, THE SAM E IS MEANINGLESS IN THE CONTEXT AS IT IS NOT SUPPORTED B Y ANY REFERENCE, ANY DATA OR ANY INQUIRIES OR ANY LEGAL S ANCTION. IT IS AMAZING HOW THE ASSESSING OFFICER IS READY TO HO LD THE VERBAL AND BLAND STATEMENT OF THE INSPECTOR AGAINST THE OVERWHELMING DOCUMENTARY EVIDENCES OF THE ASSESSEE. 2.3.2. THEREFORE, THE FROM THE ENTIRE DISCUSSION A S ABOVE, IT COMES OUT CLEARLY THAT NEITHER THE ASSESSING OFFICE R NOR THE D.V.O. HAVE BROUGHT OUT ANY CONCRETE DOCUMENTS OR I SSUES ON RECORD TO HOLD THAT THE APPELLANTS DECLARATION OF PURCHASE PRICE IN HIS PURCHASE DEAL IS NOT THE MARKET VALUE OF THE LAND IN QUESTION. 2.3.3. NOTWITHSTANDING THAT EVEN IF THE MARKET VALU E WAS TO DIFFER FROM THE PURCHASE VALUE, THERE IS NO WAY THE DIFFERENCE WOULD DIRECTLY LEAD TO THE ADDITION U/S.69 UNLESS T HE ASSESSING OFFICER HAS IN HIS POSSESSION CERTAIN MATERIAL TO S HOW THAT WHAT HAS BEEN DECLARED BY THE APPELLANT IN ITS DOCU MENTS IS NOT THE CORRECT POSITION AND THE TRANSACTION HAS TA KEN PLACE AT A VALUE DIFFERENT THAN SHOWN IN THE DOCUMENTS. THE PRE- CONDITION IN SECTION 69 IS THAT ASSESSEE SHOULD HA VE MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. AT NO STAGE, ANY SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD TO HOLD THAT THE APPELLANT HAD PAID MORE THAN WHAT IS THE APPARENT CONSIDERATION RECORDED BY THE PURCHASE/CON VEYANCE ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 4 - DEED. AS HAS BEEN REITERATED BY VARIOUS COURTS AND TRIBUNALS, SUCH AN INFORMATION IS A NECESSARY MATER IAL CONDITION TO INVOKE PROVISIONS OF SECTION 142A OR S ECTION 69. 2.3.4. THEREFORE, CONSIDERING ALL FACTS OF THE CASE , THE ADDITION OF RS.64,93,905/- U/S.69 IS UNCALLED FOR AND IS DEL ETED. 4. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.JAMES KURIAN APPEARED AND PLACED RELIANCE ON THE OBSERVATIONS FO THE ASSESSING OFFICER. ON THE OTHER HAND, FROM THE SIDE OF THE A SSESSEE, LD.AR.MR.GAURAV NAHTA HAS PLACED RELIANCE ON THE DE CISION OF HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT REPORTED AT (2010) 328 ITR 513 AND ON THE COMPILATI ON FILED CONTAINING THE COPIES OF THE AGREEMENT EXECUTED AS WELL AS OTHER CORROBORATIVE EVIDENCE ALONG WITH THE FINDING OF TH E LD.CIT(A). 5. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE MATERIAL PLACED BEFORE US. THE BASIS ON WHICH THE DVO HAD SUGGESTED THE HIGHER VALUATION APPEARS TO BE INCORR ECT. THE ADMITTED FACTUAL POSITION IS THAT THE JANTRI RATE O F THE AREA IN QUESTION FOR THE RELEVANT PERIOD WAS LOWER THAN THE STAMP DU TY WHICH WAS PAID BY THE ASSESSEE. THE ASSESSEE HAS PRODUCED TH E COPY OF THE SALE-DEED DULY REGISTERED AND, ACCORDINGLY, RECORDE D THE SALE CONSIDERATION ALONG WITH STAMP DUTY IN ITS BOOKS OF ACCOUNT. AS FAR AS THE POSITION OF ACCOUNTS IS CONCERNED, NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER. UNDER THE TOTALITY OF TH E CIRCUMSTANCES OF ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 5 - THE CASE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF LEARNED CIT(APPEALS), HENCE, WE HEREBY CONFIRM THE DELETION OF ADDITION. THIS GROUND IS HEREBY DISMISSED. 6. GROUND NO.2 READS AS UNDER: - 2. THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING TH E ADDITION OF RS.13,59,504/- ON ACCOUNT OF UNDISCLOSED SALE CONSI DERATION OF LAND. 6.1. THE ASSESSEE HAS SHOWN PURCHASE OF LAND AT R S.39,63,951/- AND THEREUPON DISCLOSED THE WORK-IN-PROGRESS. THE TOTA L WORK-IN-PROGRESS WAS STATED TO BE AT RS.85,73,618/-. THE ASSESSING OFFICERS PRESUMPTION WAS THAT THE ASSESSEE HAD SHOWN RS.60,84,694/- TOWA RDS WORK-IN- PROGRESS, HOWEVER, THE LAND WAS PURCHASED TOTALLING TO RS.47,25,190/-. THEREFORE, THE DIFFERENCE WAS LAND WHICH WAS SOLD D URING THE YEAR. THE REASON GIVEN, THOUGH VERY STRANGE, WAS AS FOLLOWS:- THE ASSESSEE HAS SHOWN RS.60,84,694/- IN THE PURCH ASE ACCOUNT AND THE WORK IN PROGRESS, THE ASSESSEE HAS SHOWN TH E LAND PURCHASED AMOUNTING RS.47,25,190 IN THE WORK IN PRO GRESS. IT MEANS THAT ON WHICH LAND THE CONSTRUCTION HAVE BEEN MADE BY THE ASSESSEE THAT LAND WORTH/COST OF RS.47,25,190/- AND THE DIFFERENCE OF THE LAND COMES TO RS.13,59,504/-. IT MEANS THE ASSESSEE HAS SOLD THE LAND DURING THE YEAR AMOUNTING TO RS.13,59 ,504/- WHICH DOES NOT REFLECT IN THE BALANCE-SHEET OF THE ASSESS EE IN THE ASSETS SIDE. IN THE ASSETS SIDE HE HAS SHOWN ONLY WORK IN PROGRESS WHICH IS CONSISTING LAND VALUE OF RS.47,25,190/-. FROM T HE BALANCE SHEET IT PROVES THAT ASSESSEE HAS SHOWN THE COST OF LAND LOWER THAN THE PURCHASE LAND IT PROVE THAT ASSESSEE HAS SOLD LAND OF RS.13,59,504/- DURING THE YEAR FROM OUT OF BOOKS AN D HE HAS EARNED THIS MONEY. ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 6 - 7. THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(AP PEALS) WHO HAS DELETED THE ADDITION IN THE FOLLOWING MANNER:- 3.3. THE MATTER HAS BEEN GIVEN DUE CONSIDERATION A ND IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT APPRECIATED THE ACCOUNTING ENTRIES MADE BY THE ASSESSEE IN COMING TO HIS CONCL USION. THE APPELLANT APPARENTLY IS FOLLOWING A MIXED SYSTEM OF PROJECT COMPLETION AS WELL AS WORK IN PROGRESS METHOD OF DI SCLOSING ITS RECEIPTS, AS IS EVIDENCED BY THE WORKING AT PAGES 1 35, 136 AND 137 OF THE PAPER-BOOK (PART OF WHICH IS REPRODUCED IN T HE ASSESSMENT ORDER ALSO). IT IS NOT THE CASE OF THE ASSESSING O FFICER THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS NO T ACCEPTABLE. HIS APPREHENSION IS ONLY THAT BY THE METHOD ADOPTED BY THE ASSESSING OFFICER THE LAND AMOUNTING TO RS.13,59,50 4/- HAS VANISHED FROM THE BOOKS OF ACCOUNT AND HENCE STANDS SOLD AND HENCE NEEDS TO BE TAXED. IT IS CLEAR THAT THE SAID VALUE OF RS.13,59,504/- IS DULY INCORPORATED IN THE FIGURE O F RS.37,35,497/- SHOWN AGAINST THE HEADING WORK DONE IN THE ASSESS EES PROFIT & LOSS ACCOUNT, WHICH IN TURN HAS BEEN DERIVED FROM N OTIONALLY BY APPLYING THE RATIO OF TOTAL EXPENDITURE INCURRED TI LL 31/03/2006 TO TOTAL PROJECT EXPENDITURE (24.3242%)TO THE TOTAL RE VENUE OF RS.1,53,57,075/- RECEIVED. THEREFORE, IN THE CONTE XT, THERE APPEARS TO BE NO CASE TO HOLD THAT THE LAND IN QUESTION STO OD SOLD SEPARATELY AND THAT SUCH SALE HAS BEEN BROUGHT TO T AX. ALSO THE ASSESSING OFFICER HAVING MADE THE ESTIMATION OF SAL E AT RS.23,00,000/-, WITHOUT ANY BASIS WENT ON TO REJECT THE BOOKS BUT ADDED ONLY RS.13,59,504/-. THIS CLEARLY IS AN INCO NSISTENT LOGIC AND APPROACH. 3.3.1. HENCE, CONSIDERING ALL THE FACTS, THE ADDITI ON OF RS.13,59,504/- IS DELETED. 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND CONSIDERING THE MATERIAL PLACED ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS WITHOUT ANY COGEN T BASIS. IT APPEARS THAT THE ASSESSING OFFICER HAS PRESUMED THAT THE AP PELLANT HAD SOLD OUT A ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 7 - PORTION OF THE LAND. THAT PRESUMPTION IS WITHOUT A NY BASIS CONSIDERING THE EXPLANATION OFFERED BY THE ASSESSEE; REPRODUCED BELOW:- 2.1. THE LD. ASSESSING OFFICER HAS POINTED OUT DIF FERENCE FROM THE TOTAL COST OF LAND AND COST OF LAND SHOWN AS PA RT OF WIP AT THE YEAR-END. IN THIS REGARD, THE LD.AO HAS REFERRED D ETAILS OF WORK IN PROGRESS FURNISHED BY THE APPELLANT VIDE LETTER DAT ED 21-07-2008 (REFER PG NO.132 TO 136), PART OF THE SAME IS REPRO DUCED ON PG NO.10 OF THE ASSESSMENT ORDER, WHERE OUT OF TOTAL E XPENDITURE OF RS.110,40,366/- A PART OF EXPENSES OF RS.24,66,748/ - ARE REDUCED AND BALANCE OF RS.85,73,618/- IS COMPUTED AS WORK I N PROGRESS (REFER PG NO.136). BELOW TO THE SAID WORKING ON PG NO.136 THERE IS COMPUTATION OF WORK COMPLETED I.E. WORK DONE OF RS. 37,35,497/, WHICH IS FINALLY SHOWN AS PART OF PROFIT & LOSS A/C (REFER PG NO.6), THUS THE REDUCTION OF LAND COST OF RS.13,59,504/- A ND EXPENSES OF RS.11,07,244/- TOTALING TO RS.24,66,748/- ARE VALUE D AS COST OF EXPENSES OF WORK DONE (REFER PG NO.138). 2.2. AS PER ACCOUNTING POLICY THE WORK COMPLETED / WORK DONE OF RS.37,35,497/- SHOWN AS PART OF PROFIT & LOSS A/C, WHICH CONTENTS LAND COST OF RS.1359,504/- AND EXPENSES OF RS.11,07 ,244/- TOTALING TO RS.24,66,748/- AND DIFFERENCE OF BOTH THESE ITEM S IS GROSS PROFIT I.E. RS.12,68,749/-, THUS THE COST OF LAND AS DISPU TED BY THE AO IS PART OF WORK DONE I WORK COMPLETED, AS REFERRED ON PG NO.136, 137, 138AND PG NO.6 OF THE PAPER BOOK. THE SAME IS SHOWN SEPARATELY FROM WORK IN PROGRESS. THUS, THE VALUE OF ALLEGED LAND OF RS.13,59,504/-, TREATED BY THE AO AS UNACCOUNTE D SALES, IS PART OF WORK DONE (I.E. REVENUE SIDE) AND PROPERLY RECOR DED AND SHOWN IN THE PROFIT & LOSS A/C., WHICH IS NOT APPRECIATED BY THE AO. HAD THE AO CALLED FOR THE EXPLANATION, THE SAME MIGHT BE EXPLAINED TO THE AO AND AS THE AC FAILED TO UNDERSTAND THE ACCO UNTING SYSTEMS, HE TAKEN THE DERIVATION HAS SALES OF LAND AS UNACCOUNTED. 8.1. WE FIND NO FALLACY IN THE ABOVE EXPLANATION P RIMARILY BECAUSE OF THE FACT THAT THE ASSESSING OFFICER HAD FAILED TO A PPRECIATE THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. THE ADDITIONS BEING MADE MERELY ON ITA NO. 2330/AHD/2009 DCIT VS. M/S. SHREE RIDDHI CORPORATION ASST.YEAR - 2006-07 - 8 - ASSUMPTION THUS DO NOT SURVIVE. THE REASONING GIVE N BY THE LEARNED CIT(APPEALS) ARE HEREBY CONFIRMED. GROUND RAISED B Y THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. SD/- SD/- ( . ! ! ) ( ) '# ( A. MOHAN ALANKAMONY ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD; DATED 22/ 05 /2012 30..!, .!../ T.C. NAIR, SR. PS '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4& '2 . +4 5'4&/ COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-GANDHINAGAR 5. 49: +! , , / DR, ITAT, AHMEDABAD 6. :;