Sri N Sriramulu, Visakhapatnam V. The ITO, Ward-1(1), Visakhapatnam

ITA 261/VIZ/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2833 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 10-05-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R K SINGH
• Keywords: Principle of natural justice; Fair market value; Set aside
• Section: 133A

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER SL. NO. CASE NO. ASST. YEAR P.A.N. NO. APPELLANTS RESPONDENTS 1 IT A 213/VIZAG/2005 2002 - 03 - ITO WARD - 1(1) VISAKHAPATNAM N. SRI RAMULU, VISAKHAPATNAM 2 ITA 261/VIZAG/2005 2002 - 03 AAUPN 4230 F N. SRI RAMULU, VISAKHAPATNAM ITO WARD - 1(1) VISAKHAPATNAM APPELLANT BY : SHRI R.K. SINGH, DR RESPONDENT BY : SHRI G.V.N. HARI, CA ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER D ATED 11/03/2005 PASSED BY THE LD CIT (A)-I VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2002- 03. 2. THE ISSUES AGITATED BY THE ASSESSEE ARE LISTED O UT BELOW: A) TELESCOPING OF DEFICIT CASH BALANCE OF RS.3.00 LAKH S AGAINST THE EXCESS STOCK. B) DETERMINATION OF FAIR MARKET VALUE AS ON 1.4.87 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. 3. THE ISSUES AGITATED IN THE APPEAL OF THE REVENUE IS WHETHER THE INDEXATION BENEFIT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , IS TO BE WORKED OUT FROM 1.4.1981 OR FROM ASSESSMENT YEAR 1993-94 DURING WHI CH THE ASSESSEE BECAME THE OWNER, THOUGH THE PERSON THROUGH WHOM THE PROPE RTY WAS INHERITED HELD THE SAME PRIOR TO 1.4.81. PAGE 2 OF 5 4. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS THE PROPRIETOR OF M/S MANCHUKONDA JEWELLERS AND IS CARR YING ON RETAIL BUSINESS IN GOLD ORNAMENT AND SILVERWARES. A SURVEY OPERATION U /S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 08.03.2002. DURING THE COURSE OF SURVEY, THE PHYSICAL CASH OF RS.9590/- ON LY WAS FOUND AS AGAINST THE BOOK BALANCE OF RS.3,59,250/-. THUS, THERE WAS A DE FICIT OF CASH BALANCE OF ABOUT RS.3.00 LAKHS. THE REVENUE ALSO NOTICED EXCESS STOC K OF 1330 GRAMS OF GOLD, WHICH WAS VALUED BY THE AO AT RS.5,30,364/-. THE A SSESSEE CLAIMED THAT THE HE GAVE A SUM OF RS.3.00 LAKHS TO A PERSON NAMED SRI K .SATYA RAO FOR PURCHASING GOLD AND ACCORDINGLY SOUGHT FOR TELESCOPING OF THE DEFICIT CASH BALANCE AGAINST THE VALUE OF EXCESS STOCK OF GOLD. HOWEVER THE SAI D PLEA OF THE ASSESSEE WAS REJECTED BY THE AO AS WELL AS THE LD CIT (A). DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD 2373 SQ.YARDS OF S ITE TO A CONCERN NAMED M/S VIJETHA DEVELOPERS. THE ASSESSEE INHERITED THE SAID PROPERTY ON THE DEATH OF HIS WIFE ON 29.8.1993. HIS WIFE YETHIRAJAMMA HAD INHER ITED THE SAME FROM HER FATHER ON HIS DEMISE ON 8.1.1986. HER FATHER HAD O BTAINED THE SAID PROPERTY ON HIS FAMILY PARTITION WHICH TOOK PLACE IN 1959. UND ER THE ACT, THE ASSESSEE HAD AN OPTION TO SUBSTITUTE THE MARKET VALUE AS ON 1.4. 1981 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE ASSESSEE ADOPTED T HE MARKET RATE AS ON 1.4.81 AT RS.500/- PER SQ. YARD. HOWEVER, THE AO ADOPTED THE VALUE AS ON 1.4.1981 AT RS.125/- PER SQ.YARD. SIMILARLY THE ASSESSEE WORKE D OUT CAPITAL GAIN BY ADOPTING INDEXATION BENEFIT FROM 1.4.1981. HOWEVER, THE AO ALLOWED INDEXATION BENEFIT FROM 1993-94 ONLY AS THE ASSESSEE BECAME THE OWNER OF THE PROPERTY IN THAT YEAR ONLY. IN THE APPEAL THE LD CIT (A) ALLOWED IND EXATION BENEFIT FROM 1.4.1981 ONWARDS, BUT APPROVED THE ORDER OF THE AO WITH REGA RD TO THE VALUE OF LAND AS ON 1.4.1981 AT RS.125/- PER SQ. YARD. AGGRIEVED BY THE ORDER OF THE LD CIT (A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE RECORD. BY PLACING RELIANCE ON THE DECISION OF THE HONBLE DEL HI HIGH COURT IN THE CASE OF CIT VS. KULWANT RAI, 2007 (291 ITR 36), LD AR CONTE NDED THAT THE DEFICIT CASH OF PAGE 3 OF 5 RS.3.00 LAKHS FOUND SHOULD BE DEDUCTED FROM THE VA LUE OF EXCESS STOCK AND ACCORDINGLY PLEADED THAT ONLY NET VALUE OF EXCESS S TOCK SHOULD BE ADDED. WE HAVE GONE THROUGH THE SAID CASE LAW. IN THAT CASE THE WITHDRAWALS MADE FROM THE BANK EARLIER TO THE DATE OF THE SEARCH WERE FAR IN EXCESS OF THE CASH FOUND DURING THE COURSE OF THE SEARCH. FURTHER THERE WAS NO MATERIAL TO SUPPORT THE VIEW THAT THE ENTIRE CASH WITHDRAWALS HAVE BEEN SPE NT AWAY. HENCE THE HONBLE HIGH COURT HELD THAT THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF UNEXPLAINED CASH. 5.1 IN OUR VIEW THE FACTS OF THE INSTANT CASE A RE DIFFERENT AND HENCE THE SAID DECISION IS NOT APPLICABLE. IN THE INSTANT CASE, ON THE DATE OF SURVEY ON 8.3.2002, THERE WAS CASH SHORTAGE TO THE TUNE OF AB OUT RS.3.00 LAKHS AND THRE WAS EXCESS STOCK OF GOLD JEWELLERY OF 1330 GRAMS. T HE SUBMISSION OF THE ASSESSEE WAS THAT HE HAD GIVEN AN AMOUNT OF RS.3.00 LAKHS TO A PERSON NAMED SHRI K. SATYA RAO FOR PURCHASING THE GOLD. HOWEVER, DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PROD UCE THE SAID PERSON BEFORE THE AO. THE CONTENTION OF THE ASSESSEE IS THAT HE H AS SUBMITTED A RECEIPT OBTAINED FROM SHRI K. SATYA RAO ON THE DATE OF SURV EY ITSELF. THE PHOTOSTAT COPY OF THE RECEIPT SUBMITTED BY THE ASSESSEE IN TELUGU VERSION IS PLACED AT PAGE 13 OF THE ASSESSEE PAPER BOOK AND THE TRANSLATED COPY IS PLACED AT PAGE 26 OF THE ASSESSEES PAPER BOOK. WE NOTICE THAT SHRI K. SATYA RAO HAS GIVEN A RECEIPT ON 7.3.2002 I.E. A DAY PRIOR TO THE DATE OF SEARCH ACK NOWLEDGING THE RECEIPT OF RS.3.00 LAKHS RECEIVED BY HIM TOWARDS THE SALE OF G OLD JEWELLERY. IN ADDITION, ON 15.03.2002, THE SAID PERSON HAS GIVEN A CERTIFICATE STATING THAT THE GOLD OF 714.300G WORTH OF RS.3.00 LAKHS WERE SOLD TO THE AB OVE MENTIONED PARTY I.E. THE ASSESSEE. AS PER THE SECOND CERTIFICATE, THE DELIV ERY OF GOLD WAS COMPLETED ONLY ON 15.3.2002. HENCE, IN THE ABSENCE OF ANY MATERIA L TO SHOW THAT THE DELIVERY OF 714.300 GRAMS OF GOLD HAD TAKEN PLACE PRIOR TO THE DATE OF SURVEY, WE FIND NO REASON TO ACCEPT THE CLAIM OF THE ASSESSEE. ACCORD INGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. PAGE 4 OF 5 6. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE REL ATES TO THE DETERMINATION OF VALUE AS ON 1.4.1981. THE LD AR SUBMITTED THAT T HE ASSESSEE SUBMITTED A CERTIFIED COPY OF RATE OF THE IMPUGNED PROPERTY AS ON 1.4.1981 OBTAINED FROM THE CONCERNED SUB REGISTRAR BEFORE LD CIT(A). ACCORDING TO THE SAID CERTIFICATE, THE RATE OF THE PROPERTY AS ON 1.4.1981 WAS RS.200/- PE R SQ.YARD. HOWEVER, THE LD CIT (A) HAS CONFIRMED THE RATE OF RS.125/- PER SQ. YARD AS ADOPTED BY THE AO, BY TOTALLY DISREGARDING THE CERTIFICATE CITED ABOVE. 6.1 ON A CAREFUL PERUSAL OF THE ORDER OF THE AO WE NOTICE THAT THE AO HAS ADOPTED THE RATE OF RS.125/- PER SQ. YARD ON THE BA SIS OF CERTAIN CONVEYANCE DEEDS REGISTERED ON 22.1.1981 AND 8.6.1981. HOWEVER , THE ASSESSEE HAS OBTAINED A CERTIFICATE FROM THE CONCERNED SUB REGIS TRAR AND FURNISHED THE SAME TO THE LD CIT(A). SINCE THE SAID CERTIFICATE COMMAN DS MORE VALUE THAN THE CONVEYANCE DEEDS RELIED UPON BY THE AO, IN THE INTE REST OF NATURAL JUSTICE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OF FICER TO DETERMINE THE VALUE AS ON 1.4.1981 BY CONSIDERING THE CERTIFICATE OBTAINED FROM THE SUB REGISTRAR. 7. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE RELA TES TO THE COMPUTATION OF INDEXATION VALUE OF THE PROPERTY. AS STATED EARLIER THE ASSESSEE INHERITED THE PROPERTY DURING THE FINANCIAL YEAR 1993-94 FROM HIS WIFE. THE SAID PROPERTY, HOWEVER, WAS HELD BY THE PREDECESSORS SINCE 1959 ON WARDS I.E. PRIOR TO 1.4.1981. THE CONTROVERSY WITH REGARD TO THE INDEXA TION IN THESE CIRCUMSTANCES HAVE BEEN RESOLVED BY THE SPECIAL BENCH OF ITAT MUM BAI IN THE CASE OF DCIT VS. MANJULA J. SHAH REPORTED IN (2009) (318 ITR (AT) 41 7 (MUMBAI) SB). IN THAT CASE THE SPECIAL BENCH HAS HELD THAT THE INDEXATION BENEFIT IS AVAILABLE FROM 1.4.1981 ONWARDS ON IDENTICAL FACTS. SINCE THE VI EW TAKEN BY THE LD CIT (A) IS IN ACCORDANCE WITH THE VIEW EXPRESSED BY THE SPECIA L BENCH CITED ABOVE, WE UPHOLD THE ORDER OF THE LD CIT (A). PAGE 5 OF 5 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 2.12.2009. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATED 2 ND DECEMBER, 2009. COPY TO 1 THE ITO, WARD-1(1), VISAKHAPATNAM. 2 SHRI N. SRI RAMULU, PROP: MANCHUKONDA JEWELLERS, MAIN ROAD, VISAKHAPATNAM 3 THE CIT VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM