ITO, Coimbatore V. S.F.Akbhar Althaf, Coimbatore

ITA 2965/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96418 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYULU
• Assessee Lawyers: T BANUSEKAR
• Keywords: Unexplained investment; Cost of acquisition; Valuation report
• Section: 143(3); 147; 69; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NOS.2964 & 2965/MDS/2014 ( / ASSESSMENT YEARS: 2007-08 & 2010-11) THE INCOME TAX OFFICER, WARD-2(4), RACE COURSE ROAD, COIMBATORE-641 018. VS. MR.S.F.AKBHAR ALTHAF PROP. S.A.VEGETABLES, SHOP NO.51 TO 53 MGR VEGETABLE WHOLESALE MARKET, MTP ROAD, COIMBATORE - 641 043. PAN:ACBPA4853C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.U.ANJANEYULU, CIT DR /RESPONDENT BY : MR. T.BANUSEKAR, C.A /DATE OF HEARING : 12 TH NOVEMBER, 2015 /DATE OF PRONOUNCEMENT : 27 TH NOVEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THESE TWO APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I , COIMBATORE DATED 19.09.2014 FOR THE ASSESSMENT YEA RS 2007-08 AND 2010-11. SINCE BOTH THESE APPEALS AR E HEARD TOGETHER, THEY ARE DISPOSED OFF BY THIS COMMON OR DER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE IN THE GROUNDS OF APPEAL OF THE R EVENUE FOR THE ASSESSMENT YEAR 2007-08 IS THAT COMMISSIONE R OF 2 ITA NOS.2964 & 2965/MDS/2014 INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT ADDITION ON ACCOUNT OF UNEXPLAINED CAPITAL WAS MAD E ONLY ON THE BASIS OF DIFFERENCE BETWEEN THE BALANCE SHEET I MPOUNDED DURING THE COURSE OF SURVEY AND THE BALANCE SHEET S UBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND THUS ER RED IN DELETING THE ADDITION TO THE EXTENT OF ` 20,00,000/- TREATING IT AS CAPITAL EXPLAINABLE. 3. BRIEF FACTS ARE THAT THE ASSESSEE INDIVIDUAL WHO IS IN THE BUSINESS OF TRADING IN VEGETABLES FILED RETURN OF I NCOME ON 31.07.2007 ADMITTING INCOME OF ` 1,82,092/-. A SURVEY WAS CONDUCTED ON 07.01.2011 IN THE PREMISES OF THE ASSE SSEE. PURSUANT TO SURVEY NOTICE UNDER SECTION 148 WAS ISS UED ON 07.07.2011 AND IN RESPONSE TO THE SAID NOTICE, RETU RN WAS FILED ON 11.08.2011 ADMITTING INCOME OF ` 1,88,357/-. IN THE COURSE OF SURVEY IT WAS NOTICED THAT ASSESSEE ACQUI RED VARIOUS IMMOVABLE PROPERTIES DURING THE FINANCIAL Y EARS 2006- 07 TO 2010-11. THE CASE WAS TAKEN UP FOR SCRUTINY A ND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT DETERMINING THE INCOME OF TH E ASSESSEE AT ` 54,89,607/- WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER MADE ADDITION OF ` 52,01,250/- AS 3 ITA NOS.2964 & 2965/MDS/2014 UNEXPLAINED INVESTMENT IN THE BUSINESS. THIS AMOUN T REPRESENTS DIFFERENCE BETWEEN THE CAPITAL SHOWN IN THE BALANCE SHEET AS IMPOUNDED IN THE COURSE OF SURVEY AND THE BALANCE SHEET PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE CAPITAL OF BUSINESS AS ON 31.03.20 07 AS PREPARED IN THE BALANCE SHEET AND IMPOUNDED WAS SH OWN AS ` 16,79,147/- WHEREAS THE CAPITAL NOTED IN THE CAS H FLOW STATEMENT FILED BY THE ASSESSEE IN THE COURSE OF AS SESSMENT PROCEEDINGS WAS SHOWN AT ` 68,80,398/-. THE DIFFERENCE BETWEEN THESE TWO FIGURES WAS ADDED AS UNEXPLAINED INVESTMENT IN THE BUSINESS WITHOUT APPRECIATING THE SUBMISSIONS OF THE ASSESSEE THAT THE BALANCE SHEET IMPOUNDED IN THE COURSE OF SURVEY IS INCOMPLETE AN D THIS BALANCE SHEET WAS PREPARED ONLY FOR THE PURPOSE OF OBTAINING LOAN FROM THE BANKS FOR PURCHASE OF PROPERTY. THE C ASH FLOW STATEMENT PREPARED AND SUBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS IS THE CORRECT STATEMENT OF AFFAIRS SHOWING COMPLETE TURNOVER ALONG WITH THE CREDITORS AND DEBTORS. HOWEVER, THE ASSESSING OFFICER IGNORING TH E SUBMISSIONS OF THE ASSESSEE ADDED THE DIFFERENCE OF ` 52,01,251/- AS UNEXPLAINED INVESTMENT IN THE BUSINE SS. THE 4 ITA NOS.2964 & 2965/MDS/2014 ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TA X (APPEALS) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE DIRECTING THE ASSESSING OFFICER TO TREAT ` 36,79,147/- AS CAPITAL OF THE BUSINESS AS ON 31.03.2007, THE BALANCE OF ` 32,00,251/- AS UNEXPLAINED INVESTMENT IN THE BUSINESS UNDER SECTIO N 69 OF THE ACT. AGAINST THIS ORDER, THE REVENUE IS IN APPE AL BEFORE US. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN TREATING THE UNEX PLAINED INVESTMENT IN BUSINESS AT ` 52,01,250/- BEING THE DIFFERENCE BETWEEN THE CAPITAL SHOWN IN THE BALANCE SHEET IMPO UNDED IN THE COURSE OF SURVEY AND THE CASH FLOW STATEMENT OF AFFAIRS FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND S UBMITTED THAT THERE IS NO JUSTIFICATION BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN CONSIDERING THE AMOUNT OF ` 20,00,000/- AS CAPITAL IN ADDITION TO THE CAPITAL ALREADY SHOWN IN THE BALANCE SHEET IMPOUNDED IN THE COURSE OF SURVEY. 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT IMPOUNDED BALANCE SHEET IS PREPARED ONLY FOR THE PURPOSE OF O BTAINING 5 ITA NOS.2964 & 2965/MDS/2014 LOAN FROM THE BANKS AND IN THIS BALANCE SHEET NEITH ER CREDITORS NOR DEBTORS WERE SHOWN AND THEREFORE THIS BALANCE SHEET CANNOT BE CONSIDERED AS CORRECT STATE OF AFFA IRS OF THE ASSESSEE . COUNSEL FOR THE ASSESSEE SUBMITS THAT AS SESSEE HAS PREPARED ITS CASH FLOW STATEMENT OF AFFAIRS WI TH REFERENCE TO THE TURNOVER SHOWING ALL THE CREDITORS AND DEBTO RS ETC. AND IN SUCH CIRCUMSTANCES THE ASSESSING OFFICER SHOUL D NOT HAVE BELIEVED THE BALANCE SHEET WHICH WAS IMPOUNDED IN THE COURSE OF SURVEY AS A CORRECT ONE FOR THE PURPOSE O F MAKING ADDITION AS UNEXPLAINED INVESTMENT IN THE BUSINESS. HE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) IN PARTICULARLY ALLOWING THE A PPEAL OF THE ASSESSEE. HE FURTHER SUBMITS THAT NO APPEAL WAS FILED BY THE ASSESSEE IN RESPECT OF THE ADDITION SUSTAINED B Y THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE EXTENT OF ` 32,00,251/- CONSIDERED AS UNEXPLAINED INVESTMENT. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THERE WAS A SURVEY IN THE PREMISES OF THE ASSESSEE ON 07.01.2011 AND IN THE COURSE OF SURVEY BALANCE SHEE T WAS IMPOUNDED, ACCORDING TO WHICH THE CAPITAL OF THE BU SINESS AS ON 31.03.2007 WAS SHOWN AT ` 16,79,147/-. IN THE COURSE OF 6 ITA NOS.2964 & 2965/MDS/2014 ASSESSMENT PROCEEDINGS THE ASSESSEE FILED COMPLETE CASH FLOW AND STATEMENT OF AFFAIRS SHOWING CAPITAL AT ` 68,80,398/- ALONG WITH CREDITORS AND DEBTORS ETC. THE ASSESSING OFFICER CONSIDERED THE IMPOUNDED BALANCE SHEET AS THE CORRE CT ONE AND MADE ADDITION BEING DIFFERENCE BETWEEN THE CAPI TAL AS SHOWN IN THE BALANCE SHEET IMPOUNDED AND THE CASH F LOW FILED IN THE COURSE OF ASSESSMENT AS UNEXPLAINED IN VESTMENT IN BUSINESS. WE ARE UNABLE TO UNDERSTAND AS TO HOW THE ASSESSING OFFICER CAN MAKE ADDITION WHEN THE ASSESS EE HIMSELF HAS SHOWN MORE CAPITAL WITH COMPLETE DETAIL S OF CREDITORS AND DEBTORS. IT IS NOT THE CASE OF THE RE VENUE THAT THE ASSESSEE HAS SHOWN CAPITAL IN THE IMPOUNDED BAL ANCE SHEET AT ` 68,80,398/- AND IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS ` 16,79,147/-. HAD THIS BEEN THE SITUATION THERE WOULD HAVE BEEN SOME JUSTIFICATION FOR THE AS SESSING OFFICER FOR MAKING ADDITION BEING THE DIFFERENCE BE TWEEN THESE TWO FIGURES. ABSOLUTELY, WE DO NOT FIND ANY R EASON FOR MAKING ADDITION TOWARDS UNEXPLAINED INVESTMENT IN T HE BUSINESS. THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO ` 32,00,251/- PARTLY ACCEPTING THE CONTENTIONS OF THE ASSESSEE THAT CAPITAL AS SH OWN IN THE 7 ITA NOS.2964 & 2965/MDS/2014 BALANCE SHEET IMPOUNDED IS NOT THE CORRECT FIGURE A ND IS MUCH MORE THAN THAT. IN THE PROCESS HE HAS CONSIDER ED ` 36,79,147/- AS THE CAPITAL EXPLAINED AND THE BALANC E OF ` 32,00,251/- AS UNEXPLAINED INVESTMENT IN THE BUSINE SS. IN SUCH CIRCUMSTANCES, WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE GROUNDS RAISED BY THE REVENUE ARE RE JECTED. 7. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2010-11 IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN PARTLY DELETING THE A DDITION MADE TOWARDS UNACCOUNTED INVESTMENT UNDER SECTION 6 9B OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE ADDITION OF ` 57,00,000/- AS UNACCOUNTED INVESTMENT UNDER SECTION 69B OF THE ACT. THE ASSESS ING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSESSEE PURCHASED IMMOVABLE PROPERTY OF 25 CENTS OF LAND WI TH 3500 SQ.FT OF UNFINISHED RESIDENTIAL BUILDING AT PODANUR REGISTERED FOR ` 48,00,000/- IN THE STATEMENT RECORDED DURING THE C OURSE OF SURVEY. IT APPEARS THAT ASSESSEE ADMITTED THAT A DDITIONAL AMOUNT OF ` 39,00,000/- WAS PAID AS ON-MONEY. HE ALSO 8 ITA NOS.2964 & 2965/MDS/2014 NOTICED THAT THE ASSESSEE HAD SPENT ` 18,00,000/- ON THE CONSTRUCTION OF BUILDING FROM HIS UNDISCLOSED EARNI NGS. SUBSEQUENTLY ASSESSEE RETRACTED AND STATED THAT THE ACTUAL VALUE OF THE PROPERTY WAS ONLY AROUND ` 62,00,000/-. THE ASSESSING OFFICER REFERRED VALUATION OF BUILDING TO THE VALUATION CELL AND A REPORT WAS OBTAINED WHEREIN TH E PROPERTY CONSISTING OF LAND AND BUILDING WAS VALUED AT ` 61,83,500/-. HOWEVER, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT MADE ADDITION OF ` 57,00,000/- (39,00,000/- + 18,000,000) FOR THE REASON THAT AS THE ASSESSEE HI MSELF HAS STATED THAT MARKET VALUE OF THE PROPERTY BEFORE CON STRUCTION WAS ` 85,00,000/-. ON APPEAL, THE COMMISSIONER OF INCOM E TAX (APPEALS) PARTLY SUSTAINED THE ADDITION HOLDING THAT ASSESSEE HAD SOURCE FOR THE INVESTMENT I.E. FOR MAK ING ON MONEY PAYMENT TO THE EXTENT OF ` 33,00,000/- ONLY AND SUSTAINED THE ADDITION TO THE EXTENT OF ` 6,00,000/- THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER DELETE D THE ADDITION OF ` 18,00,000/- MADE TOWARDS ADDITIONAL COST CONSTRUCTION HOLDING THAT CONSTRUCTION WAS MADE FRO M APRIL,2010 TO NOVEMBER, 2011 WHICH FALLS IN THE SUB SEQUENT ASSESSMENT YEAR AND NOT IN THE ASSESSMENT YEAR UNDE R 9 ITA NOS.2964 & 2965/MDS/2014 CONSIDERATION I.E. 2010-11 AGAINST WHICH THE REVENU E IS IN APPEAL BEFORE US. 8. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 9. COUNSEL FOR THE ASSESSEE STRONGLY PLACES RELIANC E ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S). HE FURTHER SUBMITS THAT ON-MONEY PAID TO THE SELLER BY THE ASSESSEE WAS ALL DRAWN FROM THE BANK AND A CASH FLO W STATEMENT WAS FURNISHED EXPLAINING SOURCE FOR THE O N-MONEY PAYMENT AND THEREFORE, THE COMMISSIONER OF INCOME T AX (APPEALS) IS PERFECTLY JUSTIFIED IN GRANTING RELIEF TO THE ASSESSEE. 10. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT MADE ADDITION OF ` 57,00,000/- AS UNACCOUNTED INVESTMENT. THE SAID ` 57,00,000/- COMPRISES OF ` 39,00,000/- BEING ON- MONEY PAID BY THE ASSESSEE AND ADDITIONAL COST OF CONSTRUCTION OF ` 18,00,000/-. THE ASSESSING OFFICER CALLED FOR VALUATION REPORT FROM VALUATION CELL. THE VALUATION OFFICER 10 ITA NOS.2964 & 2965/MDS/2014 VALUED THE LAND AND BUILDINGS OF THE PROPERTY AT ` 61,83,500/-. HOWEVER, THE ASSESSING OFFICER REJECTED THE VALUATI ON REPORT OF THE VALUATION CELL AND WENT ON MAKING ADDITION O F ` 57,00,000/- BASED ON THE STATEMENT GIVEN BY THE ASS ESSEE IN THE COURSE OF SURVEY, WHICH WAS SUBSEQUENTLY RET RACTED. ON-MONEY OF ` 39,00,000/- WAS PAID FOR TRANSACTION AND THE ADDITIONAL COST OF CONSTRUCTION WAS INCURRED TO THE EXTENT OF ` 18,00,000/- ON THE PROPERTY. IT IS THE CASE OF THE ASSESSEE THAT ON-MONEY OF ` 39,00,000/- WAS PAID OUT OF WITHDRAWALS FROM THE BANK FOR WHICH CASH FLOW STATEMENT WAS SUB MITTED, THEREFORE, SOURCE WAS EXPLAINED AND THUS NO ADDITIO N CAN BE MADE AS UNACCOUNTED INVESTMENT. IN RESPECT OF THE C OST OF CONSTRUCTION, IT WAS THE SUBMISSION OF THE ASSESSEE THAT COST OF CONSTRUCTION WAS MADE FROM APRIL, 2010 TO NOVEMB ER, 2011, THEREFORE ADDITION CANNOT BE MADE AS UNACCOUN TED MONEY FOR THE ASSESSMENT YEAR 2010-11. THIS ISSUE H AS BEEN CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND CONTENTIONS OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) FOUND THAT THE INVESTMENT IS PROPERLY EXPLAINED TO THE EXTENT OF ` 33,00,000/- 11 ITA NOS.2964 & 2965/MDS/2014 OUT OF ` 39,00,000/-. THEREFORE, HE SUSTAINED THE ADDITION TO THE EXTENT OF ` 6,00,000/-. THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OF ` 18,00,000/- FOR THE REASON THAT COST OF CONSTRUCTION WAS INCURRED DURING THE PERIOD APRIL, 2010 TO NOVEMBER, 2011 WHICH DOES NOT FALL DURING T HE ASSESSMENT YEAR 2010-11. WHILE HOLDING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: - 10 . I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE ASSESSING OFFIC ER. AS SEEN FROM THE CASH FLOW STATEMENT FOR THE FINANCIAL YEAR 2009-10, THE APPELLANT HAS WITHDRAWN AN AMOUNT OF R S.15 LAKHS ON 22.12.2009 AND AN AMOUNT OF RS.18 LAKHS ON 29.01.2010 AND AN AMOUNT OF RS.23,20,000/- ON 26.02 .2010 WITH A NARRATION THAT 'AMOUNT UTILIZED FOR HOUSE PR OPERTY PURCHASE'. THE AMOUNT WITHDRAWN FROM THE BUSINESS I N THE MONTH OF DECEMBER AND JANUARY AMOUNTED TO RS.33 LAK HS BY THE ASSESSEE. THE PROPERTY WAS PURCHASED ON 26.02.2010. AS SEEN FROM THE DETAILS FURNISHED BY T HE APPELLANT AN AMOUNT OF RS.25 LAKHS WAS THE HOUSING LOAN AVAILED BY THE ASSESSEE. AS SEEN FROM THE DETAILS, THE REGISTERED VALUE OF THE HOUSE PROPERTY INCLUDING RE GISTRATION CHARGES IS RS.48 LAKHS. THE HOUSING LOAN AVAILED IS RS.25 LAKHS AND THE AMOUNT PAID ON 26.02.2010 IS WITHDRAW N FROM THE BOOKS OF ACCOUNT: RS.23,20,000/- AMOUNTING TO RS.48,20,000/-. THE AMOUNT OF ON-MONEY PAID BY THE ASSESSEE AS CONFIRMED BY THE SELLER OF THE PROPERTY WAS RS.39 LAKHS. THE APPELLANT EXPLAINED THAT THE WITHD RAWALS MADE ON 22.12.2009 (AMOUNT RS.15 LAKHS), 29.01.2010 (RS.18 LAKHS) AMOUNTING TO RS.33 LAKHS WAS PAID TO THE SELLER OF THE PROPERTY BEFORE THE DATE OF REGISTRAT ION. THE ASSESSEE COULD EXPLAIN THAT THE AMOUNT OF RS.33 LAK HS WITHDRAWN FROM THE BOOKS AS PER THE CASH FLOW STATE MENT WAS UTILIZED FOR THE PAYMENT MADE TO THE SELLER OF THE PROPERTY. 11. THE APPELLANT DURING THE COURSE OF THE APPELLATE 12 ITA NOS.2964 & 2965/MDS/2014 PROCEEDINGS SUBMITTED THAT CASH WAS AVAILABLE WITH HIM FROM THE WITHDRAWALS MADE DURING THE YEARS 2007-08 AND 2 008- 09. ACCORDING TO THE SUBMISSIONS MADE BY THE LEARNE D AUTHORIZED REPRESENTATIVE, THE FOLLOWING AMOUNTS WE RE AVAILABLE WITH THE APPELLANT: (I) IN THE ASSESSMENT YEAR 2007-08 : ` 3,40,300 (II)IN THE ASSESSMENT YEAR 2008-09 : ` 4,13,800 (III) IN THE ASSESSMENT YEAR 2009-10 : ` 1,16,300 THE CASH FLOW STATEMENT IN THE EARLIER PERIODS WERE MADE CONSIDERING THE P & L A/C AND BALANCE SHEET FOR THE F.Y 2010-11. THE INVESTMENTS IN THE PROPERTIES MADE DUR ING THE ASSESSMENT YEAR 2008-09 & 2009-10 WERE EXPLAINED BY THE ASSESSEE WITH REFERENCE TO CASH FLOW STATEMENTS FIL ED FOR THE RELEVANT ASSESSMENT YEARS. THE A.R. SUBMITTED THAT SAVINGS FROM THE EARLIER YEARS AVAILABLE IN THE HANDS OF TH E ASSESSEE WAS ` 8,70,400/- . HOWEVER, THIS CANNOT BE CONSIDERED F OR THE PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHASE OF THE PROPERTY. THE APPELLANT, FOR THE ASST. YEAR 2010-11 HAS NOT SHOWN SEPARATE WITHDRAWALS FOR EXPENSES. THESE AMOU NTS HAVE TO BE CONSIDERED AS USED FOR HIS PERSONAL EXPE NSES ONLY. HENCE THE WITHDRAWALS MADE DURING THE YEAR AMOUNTING TO RS.33 LAKHS AS DISCUSSED ABOVE CAN ONL Y BE CONSIDERED FOR THE ON-MONEY PAYMENT MADE BY THE ASSESSEE. HENCE THE DIFFERENCE OF RS.6 LAKHS STANDS UNEXPLAINED. THE ASSESSING OFFICER IN HER ORDER HAS STATED AT PARA 9, 'AS THE SELLER OF THE PROPERTY SHRI JAVED SUHAIL HAS ADMITTED TO HAVING RECEIVED THE SUM OF RS.87 LA KHS FROM THE SALE OF THIS TRANSACTION AND THIS VALUE WA S ADMITTED BY THE ASSESSEE NOT ONLY IN THE SWORN STATEMENT RECORDED DURING THE COURSE OF SURVEY BUT ALSO MENTIONED IN THE LOAN APPLICATION TO THE BANK, IT I S OBVIOUS THAT THE TOTAL VALUE OF THE PROPERTY WAS NO T LESS THAN RS.85,OO,OOO/- AT THE TIME OF PURCHASE AND HE HAS INVESTED ADDITIONAL RS.18,OO,OOO/- FOR CONSTRUCTION TILL THE DATE OF SURVEY. THE VALUE ADOPTED BY THE VALUAT ION OFFICER IS THEREFORE REJECTED AND THE SUM OF RS.57,OO,OOO/- [RS.39,OO,OOO/- + RS.18,OO,OOO/-] IS ADDED BACK AS UNACCOUNTED INVESTMENT U/S 69B', IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STATED AT PARA 6 THAT CASH FLOW STATEMENTS WERE PREPARED TO SUBSTA NTIATE THE CLAIM OF AVAILABILITY OF SUFFICIENT FUNDS FOR T HE INVESTMENT FOR THE ASST. YEAR 2007-08 TO 2009-10. HOWEVER IN T HE CONCLUDING PART OF THE ASSESSMENT ORDER, THE ASSESS ING OFFICER HAS NOT CONSIDERED THE CASH FLOW STATEMENT FILED BY THE AUTHORIZED REPRESENTATIVE. THE ASSESSING OFFICE R HAS MADE ADDITION FOLLOWING THE REPORT OF THE DDIT (LNV .). THE DDIT (INV.) IN HIS REPORT ALSO HAS ASKED THE ASSESS ING OFFICER TO OBTAIN THE CASH FLOW STATEMENT FROM THE ASSESSEE 13 ITA NOS.2964 & 2965/MDS/2014 AND EXAMINE THE SOURCES FOR PURCHASE OF IMMOVABLE PROPERTIES. THE DDIT (INV.) HAS ALSO ASKED THE ASSE SSING OFFICER TO REFER THE RESIDENTIAL BUILDING TO THE VA LUATION CELL FOR ASCERTAINING THE ACTUAL EXPENDITURE INCURRED. 12. AS SEEN FROM THE VALUATION REPORT, THE DISTRICT VAL UATION OFFICER HAS ESTIMATED THE COST OF THE LAND AND THE UNFINISHED BUILDING AT RS.44,48,681/- AND THE COST OF INVESTME NT FOR CONSTRUCTION FROM THE PERIOD APRIL 2010 TO NOVEMBER 2011 AT RS.17,34,800/-. THE TOTAL VALUE WAS ESTIMATED AT RS.61,83,500/-. IN THE DISTRICT VALUATION OFFICER'S REPORT, IT WAS MENTIONED THAT THE COST OF INVESTMENTS FOR CONS TRUCTION FOR THE PERIOD APRIL 2010 TO NOVEMBER 2011 WAS RS.17,34,774/-. IT CLEARLY SAYS THAT THE ADDITIONAL INVESTMENT WAS MADE FROM APRIL 2010 TO NOVEMBER 2011. HOWEVER, THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.18 LAK HS ON ACCOUNT OF ADDITIONAL CONSTRUCTION TILL THE DATE OF SURVEY. AS SEEN FROM THE FACTS THE IMMOVABLE PROPERTY OF 25 CE NTS OF LAND WITH 3500 SQ. FT. OF UNFINISHED RESIDENTIAL BU ILDING WAS PURCHASED ON 26.02.2010. A SURVEY IN THE CASE OF TH E APPELLANT WAS DONE ON 07.01.2011 I.E. NEARLY AFTER 11 MONTHS OF PURCHASE OF THE BUILDING. WHEN THE BUILDI NG ITSELF WAS PURCHASED ON 26.02.2010, THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF CONSTRUCTION TILL T HE DATE OF SURVEY CANNOT BE SUSTAINED. THE ADDITIONAL INVESTME NTS HAS TO BE CONSIDERED FOR THE ASST. YEAR 2011-12 ONLY. A S PER THE DISTRICT VALUATION OFFICER'S REPORT, THE ADDITIONAL COST OF CONSTRUCTION WAS MADE FROM APRIL 2010 TO NOVEMBER 2 011. HENCE THE ADDITION OF RS.18 LAKHS AS UNACCOUNTED INVESTMENT U/S 69B OF THE INCOME TAX ACT, 1961 IS DELETED, THE ADDITION TO THE EXTENT OF RS.6 LAKHS O N ACCOUNT OF UNEXPLAINED INVESTMENTS REGARDING THE ON- MONEY PAYMENT IS CONFIRMED. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 11. ON GOING THROUGH THE ABOVE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) WE DO NOT FIND ANY VALID RE ASON TO INTERFERE WITH THE ABOVE FINDINGS WHICH WERE ALSO N OT REBUTTED WITH EVIDENCES BY THE REVENUE. THUS, WE SUSTAIN TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS RAISED BY THE REVENUE. 14 ITA NOS.2964 & 2965/MDS/2014 12. THE LAST GROUND OF APPEAL OF THE REVENUE FOR TH E ASSESSMENT YEAR 2010-11 IS THAT COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF INFLATION OF EXPENSES TO 20% AS AGAINST 60% DISALLOWED BY THE ASSESSING OFFICER AS UNEXPLAINED EXPENSES CHARGED UNDER RAW GUNNY EXPENSES. 13. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED 60% OF RAW GUNNY EXPENSES AS UNEXPLAINED EXPENSES FOR THE REASON THAT ASSESSEE I N THE SWORN STATEMENT STATED THAT HE CAN PRODUCE ONLY NOT ING IN HIS DAY BOOK AND HE DOES NOT HAVE ANY VOUCHERS FOR HAVING PAID THE SAID AMOUNT AS THE PAYMENTS ARE MADE TO PE OPLE SUCH AS FARMERS, PLUCKERS, LOAD WORKERS ETC. THE A SSESSING OFFICER NOTICED THAT SUCH EXPENSES FOR THE YEARS FR OM 2007- 08 TO 2010-11 ON AN AVERAGE WAS AROUND 40% OF TOTAL EXPENSES CHARGED UNDER RAW GUNNY EXPENSES, THEREFO RE SHE DISALLOWED 60% OF SUCH EXPENSES AS UNEXPLAINED. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) RESTRI CTED THE DISALLOWANCE TO 20% OF EXPENDITURE CLAIMED BY THE A SSESSEE 15 ITA NOS.2964 & 2965/MDS/2014 UNDER THE HEAD RAW GUNNY EXPENSES AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 14. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN DISALLOWING 60% O F RAW GUNNY EXPENSES . 15. COUNSEL FOR THE ASSESSEE SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN RESTRICTING SUCH DISALLOWANCE TO 20%. 16. ON HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE HAS BEEN ELABORATELY CONSIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WITH REFERENCE TO THE AVERMENTS OF TH E ASSESSEE AND CONTENTIONS OF THE ASSESSING OFFICER A ND RESTRICTED SUCH DISALLOWANCE TO 20% OBSERVING AS UN DER:- 16. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND THE ORDER OF THE ASSESSING OFFICER. T HE ASSESSING OFFICER IN HER ORDER AT PARA 9 STATED, 'AS NOTED IN PARA 7(IV) ABOVE REGARDING THE INFLATION OF EXPENSE S, THE ASSESSEE WAS ASKED TO PRODUCE THE EVIDENTIARY MATERIALS IN SUPPORT OF THEIR CLAIM THAT THE EXPENS ES CLASSIFIED UNDER THE HEAD 'RAW GUNNY' INCLUDED THAT OF LOADING COOLY, UNLOADING COOLY, HIRE CHARGES FOR EM PTY TRAYS, GRADING AND PACKING, COMMISSION, TEA AND FOO D, TOLL CHARGES ETC. THE ASSESSEE IN THE SWORN STATEME NT RECORDED ON 29.10.2012 HAS STATED THAT HE CAN ONLY PRODUCE THE NOTINGS IN HIS DAYBOOK AND THAT HE DOES NOT HAVE ANY VOUCHERS FOR HAVING PAID THE SAID AMOUNT 16 ITA NOS.2964 & 2965/MDS/2014 SINCE THE PAYMENTS ARE MADE TO PEOPLE SUCH AS FARME RS, PLUCKERS, LOADING WORKERS ETC. FROM THE BREAK-UP OF EXPENSES SUBMITTED THE EXPENSE INCURRED TOWARDS PURCHASE OF GUNNY BAGS IS ADMITTED AT RS.29,96,427/ -. AND THE AMOUNT OF SUCH EXPENSES FOR THE YEARS FROM 2007-08 TO 2010-11 ON AN AVERAGE IS AROUND 40% OF T HE TOTAL EXPENSES CHARGED UNDER 'RAW GUNNY EXPENSES'. HENCE THE BALANCE OF 60% IS DISALLOWED AS UNEXPLAIN ED EXPENSES AND A SUM OF RS.72,30,870/- IS ADDED TO TH E TAXABLE INCOME'. 17. THE ASSESSING OFFICER HAS ONLY CONSIDERED THE ASSESSEE'S SWORN STATEMENT RECORDED ON 29.10.2012. IT IS CLEAR FROM THE ORDER OF THE ASSESSING OFFICER THAT THE DETAILS WERE RECORDED IN THE DAY BOOK OF THE ASSESSEE. FROM THE COMPUTER TALLY PACKAGE THE APPELLANT FURNISHED THE DETAILS OF RAW GUNNY BAGS EXPENSES. IT INCLUDED UNLOADING C OOLY, LOADING COOLY, EMPTY TRAY HIRE, TEA AND FOOD, GRADI NG, PACKING AND SUPERVISOR CHARGES. THE APPELLANT SUBMITTED THE DETAILS FROM APRIL 2009 TO MARCH 2010. IT IS TRUE THAT THE ASSESSEE DOES NOT HAVE ANY VOUCHERS FOR THE SAID EXPENSES. CONSIDERING THE NATURE OF THE BUSINESS, IT IS ALSO DIFFICULT TO HAVE PROPER VOUCHERS REGARDING LOADING COOLY, UNLOA DING COALY, TEA AND FOOD EXPENSES, TRAY HIRE CHARGES ETC . AS SEEN FROM THE DETAILS FILED BY THE ASSESSEE THE TURNOVER FOR THE ASST. YEAR 2007-08 WAS RS.1.68 CRORES, ASST. YEAR 2 008-09 WAS RS.12.87 CRORES, ASST. YEAR 2009-10 WAS RS.15.9 8 CRORES AND ASST. YEAR 2010-11 IT WAS RS.24.29 CRORE S. AS SEEN FROM THE DETAILS SUBMITTED, THE RAW GUNNY EXPE NSES WAS AT 4.5% AVERAGE OF THE PURCHASE COST INCURRED B Y THE ASSESSEE. OUT OF THE TOTAL EXPENSES INCURRED BY THE APPELLANT FOR THE EARLIER YEARS, THE RAW GUNNY EXPE NDITURE WERE TO THE EXTENT OF 41% AND FOR THE ASST. YEAR 20 10-11 THE RAW GUNNY EXPENSE WAS 38% OF THE TOTAL EXPENSES. 18. COMING TO THE NATURE OF BUSINESS OF THE APPELLANT, THE APPELLANT PURCHASED VEGETABLES FROM FARMERS OF THE NEARBY VILLAGES OF COIMBATORE. THE VEGETABLES PURCHASED FR OM THE FARMERS PLACE IN VILLAGES ARE TRANSPORTED TO THE BU SINESS PREMISES AT COIMBATORE BY LORRIES AND THE VEGETABLE S ARE PACKED IN TRAYS. AS SEEN FROM THE DETAILS FURNISHED THE VEGETABLES ARE PROCURED FROM BANGALORE, MYSORE, TRI CHY, DHARAMAPURI, HOSUR, SALEM, UDUMALPET ETC. AT THE TIME OF PROCURING THE VEGETABLES THEY ARE TO BE PLU CKED, PROPERLY CLEANED, GRADED AND PACKED AND THE APPELLA NT HAS TO INCUR EXPENDITURE FOR ALL THESE ACTIVITIES. IT IS A LSO UNORGANIZED BUSINESS AND THE WASTAGE LOSS IS CONSIDERABLY HIGH CONSIDERING THE PERISHABLE NATURE OF VEGETABLES. AS SEEN FROM THE SUBMISSIONS MADE BY THE APPELLANT, HE HAS NOT C LAIMED WASTAGE LOSS FOR THE ASST. YEAR 2010-11. 17 ITA NOS.2964 & 2965/MDS/2014 19. IN THE EARLIER YEAR, THE ASSESSEE HAS NOT FURNISHED THE BREAK-UP OF THE GUNNY BAG EXPENSES TO THE ASSESSING OFFICER, BECAUSE IT WAS NOT A MATTER OF DISALLOWANCE. AS STA TED BY THE AUTHORIZED REPRESENTATIVE, IN THE EARLIER YEARS ALS O THE BREAK- UP OF THE RAW GUNNY BAG EXPENSES INCLUDES ALL THE E XPENSES OF LOADING, UNLOADING, GRADING, PACKING, SUPERVISOR Y CHARGES, EMPTY TRAY HIRE, AND TEA AND FOOD EXPENSES. FOR EA RLIER YEARS NO BOOKS WERE AVAILABLE. THE PROFIT & LOSS ACCOUNT FOR ASST. YEAR 2007-08, 2008-09, 2009-10 WERE PREPARED BASED ON THE AVAILABLE BOOKS FOR THE ASST. YEAR 2010-11. IT CANN OT BE A CASE, FOR THE TURNOVER OF RS.15.98 CRORES FOR ASST. YEAR 2009- 10, THE GUNNY BAG EXPENSES ARE RS.61,72,626J- AND P URCHASE OF GUNNY BAG FOR YEAR UNDER APPEAL, WHERE THE TURNO VER IS RS.24.29 CRORES WILL BE ONLY RS.29,96,427J-. THE AP PELLANT GROUPED ALL THE RELATED EXPENDITURE OF PROCUREMENT OF VEGETABLES UNDER RAW GUNNY BAG EXPENSES. ASSESSEE H AS NOT CLAIMED THE OTHER EXPENDITURE SEPARATELY IN THE PROFIT & LOSS ACCOUNT. 20. IN THE STATEMENT RECORDED BY THE ASSESSING OFFICER ON 29.10.2012, THE ASSESSEE EXPLAINED THE DETAILED BUS INESS ACTIVITIES IN REPLY TO QUESTION NO.2, AS, 'IN MY BUSINESS, I COLLECT VEGETABLES FROM THE FARMERS DIRECTLY FROM T HE FARM, WHEREIN THE VEGETABLES ARE PLUCKED BY US, THE SE ARE THEN CLEANED AND GRADED ACCORDING TO SIZE AND QUALI TY. THESE ARE THEN PACKED AND LOADED INTO VEHICLES ENGA GED BE ME. UPTO THE STAGE OF LOADING, I INCUR EXPENDITU RE TOWARDS PLUCKING WAGES, REFRESHMENT FOR LABOURERS, PAYMENTS TO SUPERVISOR ETC. THE TRANSPORTATION CHAR GES AND TOLL CHARGES ARE ALSO PAID BY ME. AT THE MARKET PLACE, THESE VEGETABLES ARE UNLOADED AND REPACKED IF NECES SARY AS PER THE REQUIREMENT OF THE CUSTOMERS. THESE ARE THEN LOADED AND SENT TO THE CUSTOMER BUSINESS POINT. IN THIS PROCESS, I INCUR EXPENSES TOWARDS LOADING OF VEGETA BLES AND TRANSPORTING THEM. MEANWHILE IF THERE IS ANY DA MAGE OF VEGETABLES DUE TO NATURAL CALAMITIES OR DELAY IN TRANSPORTATION DUE TO TRAFFIC BLOCK OR BANDH OR STR IKE ETC. THE COST OF SPOILED VEGETABLES ARE BORNE BY ME'. 21. CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT A ND ALSO THE TURNOVER OF THE ASSESSEE FOR THE EARLIER Y EARS AND THE EXPENDITURE CLAIMED BY HIM UNDER THE HEAD 'RAW GUNN Y EXPENSES', THE ASSESSING OFFICER IS DIRECTED TO RES TRICT THE DISALLOWANCE TO 20% OF THE EXPENDITURE CLAIMED BY T HE ASSESSEE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 18 ITA NOS.2964 & 2965/MDS/2014 17. ON GOING THROUGH THE ABOVE ORDER, WE FIND THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS QUITE REASO NABLE IN RESTRICTING THE EXPENSES TO 20% AS THE SAID FINDING S HAVE NOT BEEN REBUTTED BY THE REVENUE WITH ANY EVIDENCE. THE REFORE, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND REJECT THE GROUNDS RAIS ED BY THE REVENUE. 18. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAG ENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 27 TH NOVEMBER, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2.RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .