K.J.Jose, Kannur V. DCIT, Calicut

ITA 296/COCH/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52200 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATISR
• Assessee Lawyers: T M SREEDHARANSR
• Keywords: Unexplained investment; Income from undisclosed sources; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.296/COCH/2010 ASSESSMENT YEAR:2006-07 SHRI K.J.JOSE, KALAPPURAKKAL HOUSE, P.O.PAYYAVOOR,KANNUR-33. PA NO.AJVPJ 7182J VS. THE DY. COMMISSIONER OF INCOME-TAX,CENT.CIRICLE- 2, CALICUT. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI T.M.SREEDHARAN,SR.ADV. RESPONDENT BY SHRI S.R.SENAPATI,SR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: THIS APPEAL BY THE ASSESSEE IS FOR THE ASSESSMENT YEAR 2006-07 BASED UPON THE SEARCH U/S.132 ON 26-2-2007 IN THE CASE OF M/S. PAYYAVOOR CRUSHERS (P) LTD.[PCPL} WHER EIN THE ASSESSEE IS ONE OF THE DIRECTORS. THIS APPEAL IS DI RECTED AGAINST THE ORDER OF THE CIT(APPEALS)-I, KOCHI, DAT ED 29-03- 2010. THE RESIDENCE OF THE ASSESSEE WAS ALSO SEAR CHED AND THE ASSESSMENT IS FRAMED U/S.153A(A) R.W.S.153C OF THE I.T.ACT. 2. THE FIRST ISSUE IS ON THE ALLEGED LOW WITHDRAWAL FOR THE HOUSEHOLD EXPENSES. THIS ISSUE IS RAISED IN GROUN D NO.2. ITA NO. 296/COCH/2010 2 THE LD. CIT(APPEALS) WAS OF THE VIEW THAT THOUGH TH E ASSESSING OFFICER PROPOSED TO MAKE AN ADDITION OF RS.24,000/- ON THIS COUNT, WHILE COMPUTING THE TOT AL INCOME ASSESSING OFFICER DID NOT MAKE THE PROPOSED ADDITIO N. THE ASSESSING OFFICER WAS OF THE VIEW THAT HOUSEHOLD EX PENSES SHOWN BY THE ASSESSEE AT RS.48,000/- PER YEAR WAS L OW CONSIDERING THE SIZE OF THE FAMILY AND THE STANDARD OF LIVING. THEREFORE, HE PROPOSED TO ESTIMATE THE HOUSE HOLD E XPENSES AT RS.72,000/- PER YEAR. IT WAS OBJECTED THROUGH OUT THE PROCEEDINGS THAT IT IS PURELY ON ESTIMATE BASIS. N O DOCUMENT OR OTHER EVIDENCE WAS FOUND AT THE TIME OF SEARCH WARRANTING SUCH A HIGH ESTIMATION FOR HOUSEHOLD EXP ENSES. THEREFORE, IN THE ABSENCE OF ANY SUCH MATERIAL BROU GHT ON RECORD AND THE ASSESSEE WAS STAYING WITH HIS FATHER AND BROTHER JOINTLY, THE WITHDRAWALS MADE BY BOTH OF TH EM HAS ALSO TO BE CONSIDERED. HOWEVER, WHILE COMPUTING T HE TOTAL INCOME, ASSESSING OFFICER FAILED TO ADD THE SAID SU M OF RS.24,000/-. ON APPEAL, THE LD. COUNSEL FOR THE AS SESSEE STATED THAT THIS WAS A FACTUAL MISTAKE AND THE ASSE SSEE HAD NO OBJECTION TO THE SAME SUBJECT TO THE RIGHT OF DI SPUTING THE ESTIMATION. THE LD. CIT(APPEALS) CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF THE ASSESSEE HELD THA T THE PROPOSAL OF THE ASSESSING OFFICER TO MAKE ADDITION OF RS.24,000/-WAS QUITE JUSTIFIED UNDER THE GIVEN SET OF FACTS ITA NO. 296/COCH/2010 3 AND CIRCUMSTANCES OF THE CASE AND ACCORDINGLY DIREC TED THE ASSESSING OFFICER TO ENHANCE THE SAME BY RS.24,000/ - ON ACCOUNT OF LOW WITHDRAWALS FOR HOUSE HOLD EXPENSES. THUS, THE LD. CIT(APPEALS) ENHANCED THE INCOME OF THE ASS ESSEE BY RS.24,000/-. CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE IN ITS ENTIRETY, WE DECLINE TO INTERFERE ON TH E ABOVE FACTUAL FINDINGS OF THE LD. CIT(APPEALS). THUS, T HE ASSESSEE FAILS ON THIS GROUND. 3. THE NEXT ISSUE IS IN RESPECT OF ADDITION OF RS.3 0,000/- BY RESTRICTING THE AGRICULTURAL INCOME TO RS.30,000 /- FROM RS.60,000/- DECLARED BY THE ASSESSEE. AFTER CONS IDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT FILED ANY PROOF EVEN BEFORE US WITH REGARD TO THE AGRICULTURAL INCOME. ACCORDINGLY, THE AUTHORITIES ESTIMATED THE AGRICULTURAL INCOME AT RS.30,000/- AND THE BALA NCE WAS TREATED AS INCOME FROM UNDISCLOSED SOURCES. IN OU R VIEW, THIS HAS BEEN RIGHTLY CONFIRMED BY THE CIT(APPEALS) . EVEN BEFORE US, THE ASSESSEE WAS UNABLE TO FURNISH ANY E VIDENCE WITH REGARD TO THE AGRICULTURAL INCOME. THE BURDE N IS ON THE ASSESSEE TO SUBSTANTIATE THE AGRICULTURAL INCOM E WITH DEFINITE SOURCE OF AGRICULTURAL LAND-HOLDINGS. SI NCE IT IS AN EXEMPTED INCOME, THE BURDEN IS HEAVILY ON THE ASSES SEE TO PROVE THE SOURCE OF AGRICULTURAL INCOME WHICH THE A SSESSEE ITA NO. 296/COCH/2010 4 FAILED EVEN BEFORE US. THEREFORE, WE CONFIRM THE ORDER OF THE AUTHORITIES BELOW ON THIS ISSUE ALSO. 4. COMING TO THE LAST ISSUE OF SUSTENANCE OF ADDITI ON OF RS.10.45 LAKHS BEING UNEXPLAINED INVESTMENT IN HOUS E CONSTRUCTION, WE HAVE HEARD RIVAL SUBMISSIONS AND P ERUSED THE MATERIALS AVAILABLE ON RECORD. THE DEPARTMENT AL VALUATION REPORT WAS NOT AVAILABLE AT THE TIME OF A SSESSMENT PROCEEDINGS. HENCE, THE ASSESSING OFFICER SUPPLIE D THE SAME TO THE ASSESSEE DURING THE REMAND PROCEEDINGS. ASSESSEE FILED VALUATION REPORT OF HIS REGISTERED V ALUER AND THE CIT(APPEALS) CONSIDERED BOTH AFTER GETTING THE REMAND REPORT. THE REVISED VALUATION REPORT OF THE DVO S HOWS THAT THE TOTAL COST WORKS OUT TO RS.76,55,000/-. THE C ONTENTION OF THE ASSESSEE IS THAT THE BROTHER OF THE ASSESSEE WAS A PWD CONTRACTOR. ASSESSEE HIMSELF WAS ASSOCIATED WI TH MANUFACTURE OF JELLY WHICH IS THE MAJOR MATERIAL FO R CONSTRUCTION. ASSESSEES FATHER K.U.JOSEPH WAS RU NNING A SAW MILL AND HAD THE EXPERIENCE IN TIMBER AND RELAT ED ACTIVITIES ON ACCOUNT OF THESE FACTORS, THE DVO WOU LD HAVE GIVEN SUBSTANTIAL REDUCTION IN THE COST OF CONSTRUC TION. THE SECOND OBJECTION OF THE ASSESSEE WOULD BE THAT THE DVO ADOPTED THE CPWD RATES WHICH ARE NOTIFIED BY THE GOVERNMENT FOR THE CONSTRUCTION OF PUBLIC BUILDINGS . THOSE ITA NO. 296/COCH/2010 5 RATES COULD NOT BE APPLIED FOR PRIVATE CONSTRUCTION , THAT TOO IN A REMOTE AREA LIKE OF THE ASSESSEE. THE LD. COUN SEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE COCHIN BENCH IN ITA NO.974/COCH/2008 DATED 20-4-2009 IN THE CASE OF M/S . DELIZA RESIDENCY, OTTUPARA, TRICHUR AND THE DECISIO N OF THE UPASANA HOSPITAL & NURSING HOME(1989) 31 ITD 177. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMISSIONS FOUND THAT THE DVO HIMSELF HAS GIVEN 7.5% REDUCTION TOWAR DS SELF SUPERVISION AND PURCHASE OF MATERIALS. FURTHER, T HE LD. CIT(APPEALS) FOUND THAT THE ADDITION OF RS.40,000/- ON ACCOUNT OF TEAKWOOD JOINER WAS REQUIRED TO BE MADE. SO, THE LD. CIT(APPEALS) ADDED THIS SUM OF RS.40,000/- AND REVISED THE COST OF CONSTRUCTION ADOPTED BY THE DVO AT RS.76.95 LAKHS [76,55,000 +40,000] AS AGAINST RS.6 6.50 LAKHS SHOWN BY THE ASSESSEE. THE UNDISCLOSED INVE STMENT OF THE ASSESSEE IN THE PROPERTY THUS WORKED OUT TO RS.10.45 LAKHS AS AGAINST THE ADDITION OF RS.25 LAKHS MADE B Y THE ASSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE WOULD SUBMIT BE FORE US THAT THE STATE PWD RATES HAVE TO BE ADOPTED THAT TO O AFTER TAKING INTO CONSIDERATION OF THE FACTORS SUCH AS AS SESSEES BROTHER IS A PWD CONTRACTOR, ASSESSEE HIMSELF ASSOC IATED WITH PAYYAVOOR CRUSHERS WHERE JELLY IS PRODUCED AND THAT IT ITA NO. 296/COCH/2010 6 WAS USED AS A MAJOR MATERIAL IN THE CONSTRUCTION OF THE BUILDING SO THAT IT CAN BE USED AT ITS BASE RATE, A SSESSEES FATHER IS HAVING A SAW MILL, HENCE TIMBER ALSO USED ON BASE RATE. THESE FACTORS HAVE TO BE CONSIDERED AND RED UCED THE COST OF CONSTRUCTION. FOR SELF SUPERVISION AND MATE RIALS, THE LD. CIT(APPEALS) HAS ONLY GIVEN 7.5%, THAT IS NOT JUSTIFIED AND IT SHOULD BE REASONABLY MORE. 6. ON THE OTHER HAND, THE SR.D.R. RELIED ON THE OR DER OF THE FIRST APPELLATE AUTHORITY AND SUBMITTED THAT IN PARA.17.1 THE LD. CIT(APPEALS) HAS DISTINGUISHED THE TRIBUNAL S DECISIONS AND ARRIVED AT THE CORRECT CONCLUSION. TH US, THE LD. SR.D.R. URGED US NOT TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(APPEALS) AS HIS FINDINGS ARE BASED ON APPRECIAT ION OF FACTS AND AFFORDING ADEQUATE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE DIFFERENCE COM ES TO RS.10.45 LAKHS AFTER THE ORDER OF THE LD. CIT(APPEA LS). THE LD. CIT(APPEALS) HAS GIVEN 7.5% REDUCTION FOR SELF SUPERVISION AND PURCHASE OF MATERIALS. THIS, IN OU R VIEW IS NOT SUFFICIENT SINCE THE ASSESSEE GOT THE BENEFIT O F ENJOYING HIS BROTHERS SUPPORT, WHO IS A STATE PWD CONTRACTO R, SO ITA NO. 296/COCH/2010 7 THAT HE CAN DEPLOY THE MACHINERIES AND SKILLED PEOP LE AND LABOURERS, ASSESSEE IS ALSO A PARTNER OF A CRUSHER UNIT WHERE JELLY AND STONE DUST ARE VERY MUCH AVAILABLE AT ITS BASE RATE WITHOUT ANY PROFIT MARGIN, ASSESSEES FATHER OWNS A SAW MILL AND THE TIMBER WOULD AVAILABLE AT ITS BASE RATE. CONSIDERING THESE FACTORS MORE WEIGHTAGE SHOULD BE GIVEN FOR SELF SUPERVISION AND PURCHASE OF MATERIALS. A FTER ANALYZING THESE FACTORS, TO MEET THE ENDS OF JUSTIC E, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR LITTL E MORE RELIEF AND ACCORDINGLY WE RESTRICT THE ADDITION TO THE EXT ENT OF RS. 7.5 LAKHS AS AGAINST RS.10.45 LAKHS. TO THIS EXTE NT, THE ASSESSEE GETS RELIEF ON THIS SCORE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 04 TH AUGUST,2011. PM. COPY FORWARDED TO: 1. SHRI K.J.JOSE, KALAPPURAKKAL HOUSE, P.O.PAYYAVOOR, KANNUR.670 633. 2. THE DY. COMMISSIONER OF INCOME-TAX,CENT.CIRICLE-2, CALICUT. 3. CIT(A)-I, KOCHI. 4. COMMISSIONER OF INCOME-TAX (CENTRAL),KOCHI. 5. D.R.