The ACIT,Valsad Circle, Valsad V. M/s. Rajlaxmi Chambers, Valsad

ITA 2607/AHD/2009

• Counselvise Citation: 260720514 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SETH
• Keywords: Unexplained investment; Deemed to accrue or arise in india
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 2607 / AHD/2009 (ASSESSMENT YEAR 2006-07) ACIT, VALSAD CIRCLE, VALSAD VS. M/S. RAJLAXMI CHAMBERS, NEAR S T DEPOT,. DHARAMPUR, VALSAD PAN/GIR NO. : AAUFR8454K (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI VINOD TANWANI, SR. DR RESPONDENT BY: SHRI SAPNESH SETH, AR DATE OF HEARING: 10.04.2012 DATE OF PRONOUNCEMENT: 20.04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) VALSAD DATED 23.06.2009 FOR THE ASSESSMENT YEAR 200 6-07. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF ON MONEY RECEIVED ON SALE OF SHOP AMOU NTING TO RS.30,15,570/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ABOVE ADDIT ION. 2. THE BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 3, 3.1 AND 3.2 OF HIS ORDER WHICH AR E REPRODUCED BELOW: I.T.A.NO. 2607 /AHD/2009 2 3. IN THE APPEAL FILED BY THE APPELLANT FI RM, TWO GROUNDS HAVE BEEN RAISED AND BOTH THESE GROUNDS ARE RELATED TO A COMMON ISSUE; OF ADDITION OF RS. 30,15,570/-ON ACCOUNT OF DEEMED INCOME U/S. 69B OF THE ACT. 3.1 DURING THE YEAR UNDER APPEAL, A SURVEY ACTION WAS CONDUCTED AT THE OFFICE / BUSINESS PREMISES OF THE APPELLANT FIRM AND A STATEMENT WAS RECORDED U/S. 131 OF THE S.T. ACT OF SHRI RAJENDRASINH PARMAR, ONE OF THE PARTNERS OF THE FIR M, AND AN ADDITIONAL INCOME OF RS. 61,13,205/- WAS DECLARED A T THE TIME OF SURVEY. THE SAID DISCLOSURE COMPRISED OFF ON MONEY INCOME OF RS. 30,97,635/- AND UNEXPLAINED INVESTMENT IN CONSTRUCTION EXPENDITURE OF THE PROJECT O F RS. 30,15,570/-. THE APPELLANT FIRM HAD FILED, ITS RETURN OF INCOME DECLARING ADDITIONAL INCOME OF RS. 38,00,000/-. WHILE PASSING THE ORDER, THE AO MADE AN ADDITION OF RS. 30,15,570/- ON THE GROUN D THAT THE APPELLANT HAD MADE A DISCLOSURE OF THE SAID AMOU NT FOR UNEXPLAINED INVESTMENT MADE BY THE FIRM ON VARIOUS EXPENSES. 3.2 THE AO OBSERVED FROM QUESTION 12 OF THE STATEME NT RECORDED AT THE TIME OF SURVEY THAT THE APPELLANT F IRM HAD DECLARED AN ADDITIONAL AMOUNT OF RS. 61,03,205/- DURING THE COURSE OF SURVEY AND AS PER QUESTION NO 9 OF THE SAID STATEME NT SHRI RAJENDRASINH PARMAR HAD STATED THAT THE APPELLANT F IRM HAD SOLD 3 SHOPS AT RS. 33,00,000/- AND ONE SHOP AT RS. 13,50, 000/- AND AFTER DEDUCTING THE SALE PRICE OF THE SAID SHOPS, THE BAL ANCE AMOUNT WAS RECEIVED AS 'ON MONEY' BY THE APPELLANT FIRM. THE A O ALSO OBSERVED THAT TIE PARTNER IN HIS STATEMENT HAD SPEC IFICALLY MADE A DISCLOSER OF RS. 30,15,570/- FOR UNEXPLAINED INVEST MENT MADE IN THE PROJECT AS PER JOTTING NOTED DOWN IN A POCKET D IARY FOUND AT THE TIME OF SURVEY ACTION. THEREAFTER, THE PARTNER OF T HE FIRM HAD FILED AN AFFIDAVIT DURING ASSESSMENT PROCEEDINGS BEFORE T HE AO STATING THAT THE SAID INVESTMENTS MADE AS PER THE POCKET DI ARY WERE MADE FROM THE DISCLOSED AMOUNT OF RS. 38,00,000/- AS SHO WN IN THE RETURN OF INCOME FILED BY THE APPELLANT FIRM. HOWEV ER, THE AO STATED THAT THE EXPLANATIONS TENDERED BY THE APPELL ANT. FIRM WERE NOT SATISFACTORY AS USE OF THE ON MONEY FOR INVESTM ENTS MADE IN THE PROJECT WAS NOT STATED AT THE TIME OF SURVEY AND TH AT DURING THE ASSESSMENT PROCEEDINGS ALSO, DIRECT NEXUS COULD NOT BE ESTABLISHED AND THAT THE AFFIDAVIT WAS FILED AFTER MORE THAT TW O YEARS DURING THE ASSESSMENT PROCEEDINGS AND HENCE IT HAD NO EVIDENTI AL VALUE AND THAT ALL THIS WAS AN AFTER THOUGHT. THEREFORE, THE AO PROCEEDED TO ADD RS. 30,15,570/- AS DEEMED INCOME U/S. 69B OF TH E ACT. I.T.A.NO. 2607 /AHD/2009 3 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THIS ADDITION AND NOW, T HE REVENUE IS IN APPEAL BEFORE US. 4. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE ALS O SUBMITTED THAT EVEN IF IT IS HELD THAT INVESTMENT IN CONSTRUCTION WAS MADE OUT OF ON MONEY DECLARED BY THE ASSESSEE OF RS.38 LACS, DISAL LOWANCE SHOULD BE MADE U/S 40A(3) BECAUSE SUCH EXPENDITURE WAS INCURR ED IN CASH. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ATARSINGH GURMUKHSINGH VS ITO LUDHIANA AS REPORTED IN 191 ITR 667 AND ALSO ON THE JUDGMENT OF HONBLE GUJARA T HIGH COURT RENDERED IN THE CASE OF CIT VS HYNOUP FOOD AND OIL IND. P. LTD. AS REPORTED IN 290 ITR 702 (GUJ.). HE FURTHER SUBMITT ED THAT THIS COULD NOT BE ESTABLISHED BY THE ASSESSEE THAT THE EXPENDITURE OF RS.30,15,570/- WAS INCURRED OUT OF RECEIPT OF ON MONEY DECLARED BY THE ASSESSEE OF RS.38 LACS. 5. IN REPLY, THE LD. A.R. SUPPORTED THE ORDER OF LD . CIT(A). HE ALSO DREW OUR ATTENTION TO THE STATEMENT RECORDED U/S 13 1, COPY OF WHICH IS AVAILABLE ON PAGES 24-35 OF THE PAPER BOOK. IN PAR TICULAR, OUR ATTENTION WAS DRAWN TO QUESTION 8 AND ITS REPLY WHICH IS AVAI LABLE ON PAGE 27-28 OF THE PAPER BOOK. HE SUBMITTED THE DATES REGARDING S ALE OF FOUR SHOPS FROM WHICH ON MONEY OF RS.38 LACS WAS RECEIVED. HE SUBM ITTED THAT FIRST SUCH AGREEMENT IS DATED 6.9.2005, 2 ND AGREEMENT IS DATED 14.10.2005 AND THE 3 RD AGREEMENT IS DATED 14.11.2005 AND THE LAST AGREEME NT IS DATED 14.07.2006 BUT THE ON MONEY WAS RECEIVED MUCH IN AD VANCE FOR ALL THESE FOUR SHOPS AND THE SAME IS DECLARED AS INCOME DURIN G PRESENT YEAR ITSELF ALTHOUGH ONE AGREEMENT IS IN THE NEXT YEAR. IT IS FURTHER SUBMITTED THAT SURVEY WAS CARRIED OUT ON 9.3.2006 AND THE EXPENDIT URE WAS INCURRED AFTER I.T.A.NO. 2607 /AHD/2009 4 THE RECEIPT OF ON MONEY FROM THE SALE OF THESE FOUR SHOPS AND THEREFORE, NO SEPARATE ADDITION IS CALLED FOR IN RESPECT OF IN CURRING OF THESE EXPENDITURE FOR CONSTRUCTION OF SHOPS. REGARDING T HE SUBMISSION OF THE LD. D.R. THAT DISALLOWANCE SHOULD BE MADE U/.S 40A( 3), IT WAS SUBMITTED THAT DETAILS REGARDING INCURRING OF EXPENDITURE IS AVAILABLE ON PAGES 36-42 OF THE PAPER BOOK AND FROM THE SAME IT CAN BE SEEN THAT THERE IS NO MENTION REGARDING ANY PAYMENT OF MORE THAN RS.20,00 0/- ON A PARTICULAR DATE. HE FURTHER SUBMITTED THAT EVEN IF FOR SUCH B ILLS WHICH ARE FOR MORE THAN RS.20,000/-, CASH PAYMENT ON A PARTICULAR DAY WAS NOT MADE IN EXCESS OF RS.20,000/- TO ONE PERSON AND, THEREFORE, SECTION 40A(3) IS NOT APPLICABLE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGMENTS CITED BY THE LD. D.R. WE FIND THAT THIS ISSUE IN DISPUTE WAS DECIDED BY LD. CIT(A) AS PER PARA 3.11 OF HIS ORDER WHICH IS REPRODUCED BELOW: 3.11 IN THE CASE OF THE APPELLANT FIRM, IT IS SEEN THAT AO COULD NOT BRING ANY EVIDENCE ON RECORD TO ESTABLISH THAT THE INCOME OFFERED IN THE STATEMENT WHICH WAS LATER ON RETRACTED WAS A CTUALLY EARNED BY THE APPELLANT FIRM. ALL THE EVIDENCES SUGGESTED THAT THE APPELLANT FIRM HAD EARNED GROSS ON MONEY OF RS. 38, 00,000/- ONLY OUT OF WHICH EXPENDITURE OF CONSTRUCTION WORK WERE INCURRED AND THERE WAS NO EVIDENCE ON RECORD TO SUGGEST THAT THE INVESTMENT IN EXPENDITURE, TO THE EXTENT OF RS. 30,15,570/- WAS M ADE OUT OF ANY FURTHER ADDITIONAL INCOME ACTUALLY EARNED BY THE AP PELLANT FIRM. - UNDER SUCH CIRCUMSTANCES, FOLLOWING VARIOUS JUDICIA L PRONOUNCEMENTS AND ALSO CONSIDERING THE FACTS OF TH E APPELLANT FIRM, I AM OF THE OPINION THAT THE ADDITION OF RS. 30,15,570/- MADE BY THE AO IS NOT SUPPORTED BY ANY EVIDENCE OF EARNI NG FURTHER ADDITIONAL INCOME BY THE FIRM AND THEREFORE, I DIRE CT THE AO TO DELETE THE ADDITION OF RS. 30,15,570/-. IN THE RESU LT GROUNDS NO 1 AND 2 STAND ALLOWED. I.T.A.NO. 2607 /AHD/2009 5 7. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THERE WAS NO EVIDENCE ON RECORD TO PAY THAT THE INVESTMENT IN EXPENDITURE TO THE EX TENT O RS.30,15,570/- WAS MADE OUT OF ANY FURTHER ADDITIONAL INCOMER ACTU ALLY EARNED BY THE ASSESSEE FIRM. THIS FINDING OF LD. CIT(A) COULD NO T BE CONTROVERTED BY THE LD. D.R. AND HE HAS MAINLY RELIED UPON THE PROV ISIONS OF SECTION 40A(3) AND THE TWO JUDGEMENTS VIZ. ATARSINGH GURMUK HSINGH (SUPRA) AND HYNOUP FOOD AND OIL IND. P. LTD. (SUPRA) CITED BY H IM WHICH ARE REGARDING APPLICABILITY OF SECTION 40A(3). IN THIS REGARD, FIRSTLY, IT HAS TO BE SEEN AS TO WHETHER THE PAYMENTS MADE BY THE ASSE SSEE IN CASH IS MORE THAN RS.20,000/- PER PARTY PER DAY AND SECONDLY, WH ETHER THE ASSESSEE HAS CLAIMED DEDUCTION ON ACCOUNT OF THE SAME. REGARDIN G THIS ASPECT THAT WHETHER ASSESSEE HAS CLAIMED DEDUCTION ON THIS ACCO UNT OR NOT, WE FIND THAT CONSTRUCTION ACCOUNT OF THE ASSESSEE IS SHOWN ON PAGE 49 OF THE PAPER BOOK AND P & L ACCOUNT IS SHOWN ON PAGE 50 OF THE P APER BOOK. THE AMOUNT DEBITED IN THE CONSTRUCTION ACCOUNT FOR PURC HASE OF MATERIAL IS OF RS.24,83,732/- AND IT IS SAME AS PER PURCHASE REGI STER, COPY OF WHICH IS AVAILABLE ON PAGE 43-45 OF THE PAPER BOOK. THE CA SH PURCHASES WERE FOR SMALL AMOUNT NOT EXCEEDING RS.20,000 ON A PARTICULA R DATE. SINCE IT IS SEEN THAT IN ADDITION TO THE EXPENDITURE INCURRED A S PER PURCHASE REGISTER, NO OTHER EXPENDITURE IS CLAIMED IN THE CONSTRUCTION ACCOUNT AND IN THE P & L ACCOUNT AND THERE IS NO EXPENDITURE INCURRED IN CASH ON A PARTICULAR DATE EXCEEDING RS.20,000/- AS PER PURCHASE REGISTER APPEARING ON PAGES 43-45 OF THE PAPER BOOK AND NO EVIDENCE HAS BEEN BR OUGHT ON RECORD BY THE REVENUE TO SHOW THAT ON ANY PARTICULAR DATE, EX PENDITURE OF MORE THAN RS.20,000/- IN CASH WAS INCURRED. HENCE, EVEN IF RS.30.15 LACS WAS INCURRED IN CASH, NOTHING HAS BEEN BROUGHT ON RECOR D BY THE A.O. TO I.T.A.NO. 2607 /AHD/2009 6 ESTABLISH THAT ANY PART OF THIS WAS IN RESPECT OF C ASH EXPENDITURE EXCEEDING RS.20,000/- TO ONE PERSON ON A PARTICULAR DATE AND, THEREFORE, SECTION 40A(3) IS NOT APPLICABLE IN THE FACTS OF TH E PRESENT CASE. SINCE IT IS FOUND THAT SECTION 40A(3) IS NOT APPLICABLE IN T HE FACTS OF THE PRESENT CASE, IN THE ABSENCE OF ANY RECORD THAT NAY PAYMENT IS IN VIOLATION TO SECTION 40A(3), THE JUDGEMENTS CITED BY THE LD. D.R . HAVE NO APPLICABILITY IN THE PRESENT CASE. WE THEREFORE, F IND NO GOOD REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 16/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 20/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.20/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20/4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER.