KISHORE G. KANHERE, Nagpur V. D.C.I.T CENTRAL CIR.1(3), Nagpur

ITA 280/NAG/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5403 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR MILIND BHUSARI
• Keywords: Rejection of books of accounts; Search and seizure; Principle of natural justice; Valuation report
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA N O. 280 /NAG. / 2016 ( ASSESSMENT YEAR : 2012 - 13 ) KISHORE G. KANHERE 101, PANDE LAYOUT, NEAR WATER TANK, TRIMURTI NAGAR, NAGPUR - 440 022 PAN ABAPK 7493 G APPELLANT V/S DCIT, CENTRAL CIRCLE 1(3) AAYKAR BHAVAN, NAGPUR - 440 001 .... RESPONDENT A S SESSEE BY : DR. MILIND BHUSARI REVENUE BY : SHRI MUKESH AGRAWAL DATE OF HEARING 09.05.2018 DATE OF ORDER 02.07 .2018 O R D E R PER SHAMIM YAHYA , A .M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3, NAGPUR DATED 21.03.2016 AND PERTAINS TO THE ASSESSMENT YEAR 2012 - 13. 2. THE GROUND S RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT APPEALS HAS ERRED IN CONFIRMING THE ADDITION OF RS. 50,91,044 / - MADE BY THE ASSESSING OFFICER U/S 69 BASED ON VALUATION REPORT WHICH WAS - PREPARED ON SEVERAL ASSUMPTIONS AND AT INFLATED RATES. 2 THAT THE ADDITION OF RS. 50,91,044/ - U/S 69 CONFIRMED BY ID CIT APPEAL IS BAD, NOT WITHIN THE AMBIT OF S. 69 AND VIOLATES PRINCIPLES OF NATURAL JUSTICE. 3 - THAT ON THE.FACTS OF THE CASE THE ADDITION OF RS. 50.91,0447 - CONFIRMED BY ID. CIT APPEAL IS LIABLE TO BE DELETED. 2 ITA NO. 280/NAG./2016 KISHORE G. KANHERE 3. IN THIS CASE, THERE WAS A SEARCH AND SEIZURE PROCEEDING WHICH COVERED THE ASSESSEES FARM HOUSE CALLED ANKIT FARM. THE VALUE OF THE FARM HOUSE IN THE BALANCE SHEET WAS SHOWN AS RS.55,63,436/ - . TAKING INTO CONSIDERATION THE LAVISH CONSTRUCTION OF THE FARM HOUSE THE AUTHORIZED PERSON ENQUIRED ABOUT THE COST OF THE CONSTRUCTION. IN REPLY, THE ASSESSEE MADE THE ADDITIONAL DISCLOSURE OF RS.10 L ACS TO COVER UP THE COST OF THE FARM HOUSE WHICH HAS NOT BEEN DISCLOSED. THE ASSESSING OFFICER MADE A REFERENCE U/S. 142A OF THE ACT TO THE VALUATION OFFICER. THE VALUATION OFFICER VIDE HIS VALUATION REPORT ESTIMATED THE COST OF PROPERTY AT RS.1,27,29,279/ - . THE ASSESSEE WAS ASKED TO EXPLAIN IN THIS REGARD. THE ASSESSEE EXPLAINED THAT THE BOOKS OF ACCOUNTS WERE NOT COMPLETE AND THE TOTAL INVESTMENT IN THE CONSTRUCTION OF FARM HOUSE AS PER THE FINAL BALANCE SHEET AS PER BOOKS COME TO RS.66,68,235/ - AND NOT R S.55,63,436/ - . IT WAS FURTHER SUBMITTED THAT THE VALUATION DONE BY THE VALUATION OFFICER DATED 31.10.2012 IS NOT CORRECT AND THE SAME HAS BEEN DONE AS PER THE PREVALENT MARKET RATE AND NOT AS PER THE RATE THE CONSTRUCTION WAS ORIGINAL LY STARTED. IT WAS FUR THER SUBMITTED THAT THE ASSESSEE IS A CONTRACTOR AND HE IS ABLE TO SAVE THE MONEY ON ACCOUNTS OF THE DEVELOPMENT OF FARM. IT WAS FURTHER MENTIONED THAT THE VALUATION WAS DONE ON 31.10.2012 WHEREAS THE SAME SHOULD HAVE BEEN CONSIDERED ON THE DATE OF SEARCH, I.E., ON 19.11.2007. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED. HE MADE AN ADDITION OF RS.50,91,044/ - BETWEEN THE COST, I.E., RS.66,68,235/ - + RS.10 LACS FURTHER OFFERED AT THE TIME OF SEARCH. 4. IN THE APPELLATE PROCEEDINGS, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBTAINED THE REMAND REPORT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THE ASSESSEES SUBMISSION IN THIS REGARD AS UNDER: 3 ITA NO. 280/NAG./2016 KISHORE G. KANHERE 9. THE MAIN PREMISE OF THE ASSESSEE' S SUBMISSION IS THAT IN THE SCHEME OF THINGS, SECTION 69 PRECEDES SECTION 1 42A. IN THAT CASE SECTION 14 2 A IS TO BE OPERATIVE ONLY WHEN T HE AUTHORITY CONCERNED CONCLUSIVELY ESTABLISHES EXISTENCE OF UNEXPLAINED OR UNDISCLOSED INVESTMENT. THE ASSESSEE HAS FURTHER POINTED OUT THAT THERE SHOULD BE SOMETHING ON RECORD TO SHOW THAT THE ASSESSEE IN THE FIRST PLACE HAS MADE SUCH INVESTMENT OUTSIDE THE BOOKS OR THE INVESTMENT SO MADE BY HIM IS NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS FURTHER ARGUED THAT TO THAT END, REJECTION OF BOOKS OF ACCOUNT S IS A PRE - REQUISITE FOR REFERENCE OF THE PROPERTY FOR VALUATION U/S 142A OF THE I.T. ACT. THE ASSESSEE HAS RELIED ON THE JUDGEMENTS MENTIONED IN PRE - PARAS. IT INCLUDES THE JUDGEMENT OF THE H ON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (328 IT R 513). THE H ON'BLE SUPREME COURT IN THIS JUDGEMENT HAS UPHELD THE ORDER OF HONBLE ITAT IN WHICH THE ITAT HAD HELD THAT THE ASSESSING AUTHORITY CO ULD NOT HAVE REFERRED THE MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. 10. ALL THE OTH ER JUDGEMENTS RELIED UPON BY THE ASSESSEE ALSO HOLD THE VIEW THAT THE AO SHOULD FIRST REJECT THE BOOKS OF ACCOUNT AND THEN REFER THE PROPERTY FOR VALUATION. 5. HE NOTED THAT IN THIS CASE, THE ASSESSEES BOOKS WERE INCOMPLETE AT THE TIME OF SEARCH. HE REF ERRED TO THE ASSESSEES ADMISSION IN THIS REGARD. HENCE, HE MENTIONED THAT IN THESE CIRCUMSTANCES, THE REQUIREMENT OF REJECTION OF BOOKS OF ACCOUNT HAS NO RELEVANCE INTO THE FACT THAT THERE WERE NO BOOKS OF ACCOUNT TO BE REJECTED. HENCE, HE UPHELD THE VALU ATION. AS REGARDS THE ASSESSEES OBJECTION TO THE METHOD OF VALUATION, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) SUBMITTED THAT THE SAME WERE GENERAL AND NO SPECIFIC INSTANCE WAS SUBMITTED. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUDED THAT SIN CE THE ASSESSEE HAD NOT COMPLETED THE BOOKS OF ACCOUNT, THE REJECTION OF BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER IS A PRE - REQUISITE U/S 142A OF THE I.T. ACT , IS NOT RELEVANT . HE PROCEEDED TO UPHELD THE ADDITION IN THIS REGARD. 6. AGAINST THIS ORDER, TH E ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT BEFORE INVOKING SECTION 142A OF THE ACT , THE ASSESSING OFFICER 4 ITA NO. 280/NAG./2016 KISHORE G. KANHERE HAS TO CONCLUSIVELY ESTABLISH THE EXISTENCE OF UND ISCLOSED INVESTMENT IN CONSTRUCTION OF HOUSE U/S.69 OF THE ACT AND THEN ONLY A REFERENCE FOR ESTIMATION OF INVESTMENT CAN BE MADE U/S. 142A. HE SUBMITTED THAT IN THE PRESENT CASE THERE IS NO EVIDENCE AND/OR MATERIAL HAS BEEN FOUND DURING ENTIRE SEARCH, WHICH ESTABLISHES THAT THE ASSESSEE HAS MADE INVESTMENTS IN CONSTRUCTION OF FARM HOUSE THAT ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THERE IS ONLY A PASSING REMA RK IN THE ASSESSMENT ORDER THAT THE CONSTRUCTION OF FARM HOUSE IS LAVISH, WHICH IS GUESSWORK . THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS FARM HOUSE WAS EXISTENCE FOR A LONG TIME AND NO ADDITION HAS BEEN MADE BY THE REVENUE IN THE EARLIER YEARS. IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON FOLLOWING CASE LAWS: A. FAMILY OF SP.S.S.SP SUBRAMANIAN CHETTIAR VS. ITO [2015] 372 ITR 203 (MAD - HC); B. SARGAM CINEMA VS. CIT 328 ITR 513; C. CIT VS. VIJAYKUMAR D. GUPTA [2014] 365 ITR 470 (GUJ HC); D. CIT VS. LUCKNOW PUBLIC EDUCATIONAL SOCIETY [2011] 339 ITR 588 (ALL HC); E. DY. CIT VS. ABHINAV KUMAR MITTAL[2012] 33 CCH 190 (DEL TRIB); F. SUBHASH CHAND CHOPRA VS. ASST. CIT 92 TTJ 1087 (DEL TRIB); G. CIT VS. DEVESH AGRAWAL (2017 - TIOL - 506)(BOM - HC); AND H. CIT V S. SMT. BRINDA ARNEJA (ALL. HC) (2017 - TIOL - 150). 8. UPON CAREFUL CONSIDERATION, WE NOTE THAT IN THIS CASE IN SEARCH PROCEEDINGS , THE ASSESSEES FARM HOUSE WAS COVERED. THIS FARM HOUSE WAS IN EXISTENCE FROM EARLIER PERIOD. DURING THE SEARCH, THE CONSTRUCTI ON IN THE FARM HOUSE WAS SAID TO BE LAVISH. THERE IS NO MATERIAL ON RECORD AS TO WHAT LED TO THE BELIEF THAT THE CONSTRUCTION WAS LAVISH. FURTHERMORE, NO INCRIMINATING MATERIAL IN THIS REGARD HAS BEEN NOTED. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER H AS NO WHERE MENTIONED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THIS REGARD ARE LIABLE TO BE REJECTED FOR MAKING A REFERENCE TO THE VALUATION OFFICER. AS EXPOUNDED BY THE HONBLE APEX COURT IN THE CASE OF SARGAM 5 ITA NO. 280/NAG./2016 KISHORE G. KANHERE CINEMA VS. CIT [2010] 328 ITR 513 (SC), T HE INITIAL BURDEN WAS EXISTED TO PROVE THAT THERE WAS UNDER STATEMENT OR CONCEALMENT OF INCOME. THIS BURDEN HAS TO BE DISCHARGED. HENCE, WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NEVER REJECTED, THE ASSESSING OFFICER WAS NOT EMPOWERED TO REFER THE MAT TER TO THE OFFICER OR RELY ON HIS REPORT. WE FIND THAT THE RATIO FROM THIS HONBLE HIGH COURT DECISION IS SQUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. THERE IS NO WHISPER WHATSOEVER IN THE ASSESSING OFFICERS ORDER THAT HE HAD FORMED ANY INFIRMITY IN THE BOOKS OF ACCOUNTS IN THIS REGARD LEAVE ALONE REJECTION OF THE SAME. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS TRIED TO OVERCOME THIS RATIO FROM THE HONBLE APEX COURT BY MENTIONING THAT SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD NOT BEE N COMPLETED , THERE WAS NO QUESTION OF REJECTION BY THE ASSESSING OFFICER. WE FIND THAT THERE IS NO FINDING OF THE ASSESSING OFFICER THAT BOOKS ARE INCOMPLETE O R THERE IS ANY DEFECT. WE NOTE THAT THIS SUBMISSION OF THE ASSESSEE CAME MUCH LATER AFTER THE ASS ESSING OFFICER HAD REFERRED THE MATTER TO DVO AND OBTAINED THE REPORT. WE FIND THAT IT IS THE SETTLED LAW THAT IT IS THE ASSESSING OFFICER WHO HAS TO DISCHARGE THE INITIAL BURDEN THAT THERE WAS UNDER STATEMENT OR CONCEALMENT OF INCOME. FOR THIS, AS HELD BY THE HONBLE APEX COURT, THE REJECTION OF THE BOOKS OF ACCOUNT IS A SINE - QUA - NON . WE FIND THAT THE ASSESSING OFFICER HAS NOT DISCHARGED THIS BURDEN. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CANNOT CURE THE JURISDICTIONAL DEFECT IN THIS REGARD BY MAKING REFERENCE TO SUBSEQUENT STATEMENTS WHICH IN FACT WAS NEVER THE CASE OF THE ASSESSING OFFICER. IN OUR CONSIDERED OPINION, THIS IS A FATAL MISTAKE AND THE DECISION OF THE HONBLE APEX COURT IS SQUARELY APPLICABLE ON THIS ISSUE. HENCE, IN THE BACKGROUND OF T HE AFORESAID DISCUSSION AND PRECEDENT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. 6 ITA NO. 280/NAG./2016 KISHORE G. KANHERE 9. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 0 2 . 0 7 . 2 0 1 8 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR ; (6) GUARD FILE . // TRUE COPY // BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT, NAGPUR