ITO, SUMERPUR V. M/s. Jeevanraj Achalchand HUF, PALI

ITA 335/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70192 (ITAT-JODHPUR)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: MUKESH AGARWAL
• Keywords: Unexplained investment; Valuation report
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 256/JODH/2013 (A.Y. 2009-10) JEEVAN RAJ ACHAL CHAND HUF VS ITO, C/O. M/S. B.M. AGARWAL & CO., SUMERPUR. SHIVAM, NEAR MAHADEO CHHATRI, AGRASEN BAZAR, BEAWAR PAN NO. AAEHJ4947D ITA NO. 335/JODH/2013 (A.Y. 2009-10) ITO, VS M/S. JEEVANRAJ ACHALCHAND HUF SUMERPUR. PROP. M/S. JEEVANRAJ ACHALCHAND KENPURA ROAD, RANI, PALI. PAN NO. AAEHJ4947D (APPELLANT) (RESPONDENT) ASSESSEE BY : SH.MUKESH AGARWAL DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 10/09/2013. DATE OF PRONOUNCEMENT : 12 /09/2013. O R D E R PER HARI OM MARATHA, J.M. : THESE ARE CROSS APPEALS FOR A.Y. 2009-10 FILED AGA INST THE ORDER OF LD. CIT(A), JODHPUR, DATED 01/03/2013. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-HUF IS THE PROPRIETOR OF M/S. JIVANRAJ ACHAL CHAND, KENPURA RO AD, RANI, A SURVEY PROCEEDING WAS CONDUCTED IN THE CASE OF ONE SHRI FU TARMAL ACHAL CHAND RANI AND DURING THAT SURVEY IT WAS NOTICED THAT SHRI JEE VAN RAJ BEING ITS PARTNER, AS INDIVIDUAL, HAD CONSTRUCTED A COMPLEX AT RANI IN TH E CAPACITY OF KARTA OF HIS HUF WHICH IS A PROPRIETOR OF M/S. JEEVANRAJ ACHAL C HAND, AND MADE SUBSTANTIAL INVESTMENT THEREIN. IN REPLY TO VARIOUS QUESTIONS T HE ASSESSEE REPLIED THAT THE CONSTRUCTION OF THIS PROPERTY WAS STARTED IN THE MO NTH OF OCTOBER, 2007 AND WAS COMPLETED IN THE MONTH OF MAY OF 2010. THE A.O. ALS O QUERIED ABOUT HOST OF OTHER ALLIED QUESTIONS WHICH WERE REPLIED. AFTER CO NSIDERING THE REPLY THE A.O. WANTED THE CONTRACTORS TO BE PRODUCED BEFORE HIM FO R EXAMINATION. ALL THE PAYMENTS TO CONTRACTORS WERE FOUND TO HAVE BEEN MAD E IN CASH. FINALLY, THE A.O. REFERRED THIS MATTER TO THE VALUATION CELL TO ESTIMATE THE COST OF CONSTRUCTION. THE DVO HAS ESTIMATED THE COST OF CON STRUCTION VIDE HIS REPORT DATED 26/08/2011 AT RS. 2,07,82,000/- AS AGAINST RS . 85,89,24/- DISCLOSED BY THE ASSESSEE. THE REPORT OF DVO IS ANNEXED AS ANNEXURE- A WITH THE ASSESSMENT ORDER. THE ESTIMATION OF THIS REPORT DOES NOT INCLU DE THE COST OF THE LAND. AFTER CONFRONTING THIS REPORT TO THE ASSESSEE AND AFTER R EJECTING VALUATION OFFICERS REPORT PRODUCED BY THE ASSESSEE, THE A.O. ESTIMATED THE COST OF CONSTRUCTION AT RS. 93,39,333/- AS AGAINST RS. 38,60,824/- DECLARED BY THE ASSESSEE AND HAS MADE AN ADDITION OF RS. 54,78,509/- TO THE DECLARED INCOME OF RS. 1,39,860/- ON ACCOUNT OF UNEXPLAINED INVESTMENT AND HAS ALSO MADE OTHER ADDITION OF RS. 23,34,824/- U/S 68 AND A SUM OF RS. 48,000/- AFTER DISALLOWING INTEREST OF RS. 48,000/- AND HAS THUS COMPUTED THE ASSESSED INCOME AT RS. 80,01,193/-. 3. THE LD. CIT(A, WHILE DECIDING THE APPEAL OF THE ASSESSEE ESTIMATED THE COST OF CONSTRUCTION AT RS. 67,24,321/- AND HAS RED UCED THE ADDITION MADE ON 3 ACCOUNT OF UNDISCLOSED INVESTMENT TO RS. 28,63,497/ - (RS. 67,24,321/- - RS. 38,60,824/-). THUS, HE HAS GIVEN A PART RELIEF. HE HAS ALLOWED 20% REDUCTION IN THE COST OF CONSTRUCTION AS PER RATES OF LOCAL PWD AS THE DVO HAS ADOPTED THE MARKET RATES AS PER CPWD RATES. THE LD. CIT(A) HAS ALLOWED 10% REDUCTION ON ACCOUNT OF SELF SUPERVISION. THE REVENUE IS OBJECTI NG THE ABOVE RELIEF GRANTED TO THE ASSESSEE, WHEREAS THE ASSESSEE WANTS TO STICK T O HIS EVALUATION OF THE INVESTMENT. 4. WE HAVE HEARD SUBMISSIONS. WE HAVE ALSO TREATED THROUGH THE ENTIRE RECORD AND THE EVIDENCE AVAILABLE. WE ARE OF THE CO NSIDERED OPINION THAT THE DVO HAS TO ADOPT LOCAL PWD RATES AND NOT CENTRAL PW D RATE FOR MAKING ESTIMATIONS OF VALUATION. USUALLY 10% OF THE TOTAL COST OF CONSTRUCTION. SO, THERE IS NOT INFIRMITY IN THIS ACTION OF LD. CIT(A). THE ASSESSEE HAS PRODUCED A VALUATION REPORT AFTER OBTAINING IT FROM THE APPROV ED VALUER. HOWEVER, THE CASE OF THE ASSESSEE IS THAT THIS LAND ON WHICH COMMERCI AL COMPLEX IS MADE, WAS PURCHASED BY THE ASSESSEE IN THE F.Y. 2005-06 AS A BUSINESS ASSET. A COMMERCIAL COMPLEX HAS BEEN CONSTRUCTED THEREON. TH E ASSESSEE HAS MAINTAINED AND KEPT BOOKS OF ACCOUNTS AND ALSO PREPARED CAPITA L ACCOUNT AND BALANCE SHEET OF THE BUSINESS AS WELL AS HIS INDIVIDUAL. COPIES O F BOTH THE DOCUMENTS ARE FOUND ENCLOSED AT PAGE 43 AND 46 OF ASSESSEE PAPER BOOK. THE OBJECTION OF THE ASSESSEE IS THAT NO REFERENCE, U/S 142A OF THE ACT, CAN BE MADE TO THE DVO, IN RESPECT OF BUSINESS STOCK OF A ASSESSEE. WE HAVE NO TICED THAT THE ABOVE FACTS OF THIS CASE HAVE NEITHER BEEN DENIED NOR HAVE BEEN DI SPUTED BY THE DEPARTMENT. WHEN A BUILDING IS A TRADING ASSET ITS COST CANNOT BE SUPPRESSED AS THE DEBIT AND CREDIT OF ANY ADDITION WILL NEUTRALIZED. IN THIS RE GARD THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF C IT VS. POKAR HOTEL (2009) 226 CTR (RAJ) 101, IS RELEVANT, INTER ALIA. WE ALSO FIND FORCE IN THE SUBMISSION OF LD. A.R. THAT THIS PROPERTY WAS TRANSFERRED LONG BACK AND WHEN THE DVO 4 NOTICED IT MUCH WATER HAD FLOWN UNDER THE BRIDGE. T HE PURCHASER HAD CHANGED THE PROFILE OF THIS BUILDING. ACCORDINGLY, IN SUCH CASES NO ADDITION U/S 69B OF THE ACT CAN BE MADE. AS A RESULT THE ENTIRE ADDITIO N HAS TO BE DELETED. OUR THIS FINDING RESULT IN THE DISMISSAL OF REVENUES APPEAL AND ALLOWANCE OF GROUNDS TAKEN AGAINST THE ADDITION U/S 69B ON ACCOUNT OF AL LEGED INVESTMENT MADE ON THE BASIS OF DVOS REPORT. 5. THE FACTS OF THE OTHER GROUND RELATING TO ADDITI ON OF RS. 23,34,824/- U/S 68 OF THE ACT ARE THAT THE ASSESSEE IS ASSESSED TO TAX RIGHT FROM THE A.Y. 2005-06. HE HAD AN OPENING CAPITAL OF RS. 38,39,783/- AS ON 01/04/2008 IN HIS PERUSAL CAPACITY (IN PERSONAL CAPITAL ACCOUNT). IN HIS BUSI NESS CONCERN HE HAD INTRODUCED RS. 23,34,824/- DURING THE RELEVANT PERIOD. THE A.O . HAS ADDED RS. 23,34,824/- U/S 68 OF THE ACT. THE LD. CIT(A) HAS ALSO CONFIRME D THIS ADDITION. THE CASE OF THE ASSESSEE IS THAT THIS ADDITION CANNOT BE MADE A S FROM HIS PERSONAL OPENING CAPITAL HE HAS INTRODUCED CAPITAL IN THE BUSINESS. HE HAD AN OPENING CAPITAL OF RS. 38,39,783/- AS ON 01/04/2008 IN HIS INDIVIDUAL CAPITAL ACCOUNT. OUT OF THIS HE HAS INTRODUCED A CAPITAL OF RS. 23,34,824/- DURI NG THIS YEAR AND ITIS SHOWN IN THE ITR 4 FILED BY THE APPELLANT BY CONSOLIDATING P ERSONAL AND BUSINESS DATA (REFER PAGES 84, 4 AND 5 OF APB). 6. THE ABOVE FACTS ARE NOT DISPUTED BY THE REVENUE. 7. ACCORDINGLY, IN VIEW OF THE UNDISPUTED ABOVE MEN TIONED FACTS ADDITION OF RS. 23,34,824/- CANNOT BE MADE U/S 68 OF THE ACT. W E DRAW SUPPORT FROM THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT & ANOTHERS VS. M.D. PERWEG (2004) 268 ITR 381 (GUJ). THEREFORE , WE ORDER TO DELETE THIS ENTIRE ADDITION MADE U/S 68 OF THE ACT. 5 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH SEPTEMBER, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH , SEPTEMBER, 2013. COPY TO : 1. THE APPELLANT BY ORDER 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR