Asstt. Commissioner of Income tax, Jalandhar V. Smt. Baljit Kaur Sangha Prop., Kapurthala

ITA 348/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5806 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J S BHASIN
• Keywords: Unexplained investment
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.348(ASR)2010 ASSESSMENT YEAR:2005-06 PAN : THE ASSTT.COMMR. OF INCOME-TAX, VS. SMT. BALJIT KAU R SANGHA, RANGE-IV, JALANDHAR. PROP. JST INTERNATIONAL, PATTI KHAS, DISTT. KAPURTHALA. (APPELLANT) (RESPONDENT) DEPARTMENT BY:SH. TARSEM LAL, DR ASSESSEE BY: SH. J.S. BHASIN, ADV. ORDER PER MEHAR SINGH, AM, THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), JALANDHAR, DATED 24.5.2010, PASSED U NDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO I N SHORT THE ACT) FOR THE ASSESSMENT YEAR 2005-06, WHERE THE REVENUE HAS RAIS ED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A), HAS ERRED IN DELETING THE ADDITION OF RS.4, 40,988/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CO NSTRUCTION OF BUILDING. 1A. WHILE DELETING THE ABOVE ADDITION, THE LD. CIT( A) HAS NOT APPRECIATED THIS FACT THAT THE ADDITION HAS BEEN MA DE BY THE A.O. ON THE BASIS OF DIFFERENCE IN THE CONSTRUCTIO N OF THE BUILDING AS VALUED ARE REPORTED BY THE DEPARTMENTAL VALUATION 2 OFFICER AND THE VALUATION AS SHOWN BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A), HAS ERRED IN DELETING THE ADDITION OF RS.4 LACS MADE IN THE TRADING ACCOUNT ON THE SALE OF SCRAP NOT SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT FOR WHICH THE ASSE SSEE COULD NOT FURNISH ANY EXPLANATION TO THE QUERY MADE DURIN G THE COURSE OF THE ASSESSMENT PROCEEDINGS ON THIS ACCOUNT. 3. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BE SET -ASIDE AND THAT OF THE A.O. RESTORED. 4. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AN D DISPOSED OF. 2. GROUND NO.1 & 1A RAISED BY THE REVENUE ARE INTE R-RELATED AND PERTAIN TO THE DELETION OF ADDITION OF RS.4,40,988/- BY THE CIT(A) ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF BUILD ING. THE BRIEF FACTS OF THE CASE, AS CULLED OUT FROM THE RELEVANT RECORDS ARE T HAT THE ASSESSEE IS RUNNING AN EXPORT ORIENTED INDUSTRIAL UNIT IN THE REMOTE A REAS IN THE PATTI KHAS , VILLAGE KALASANGHIAN, DISTT. KAPURTHALA, AND IS ENG AGED IN THE MANUFACTURING AND PRODUCTION OF ACRYLIC BATH TUBS AND ALLIED PRODUCTS. THE ASSESSEE FILED HER RETURN OF INCOME DECLARING I NCOME AT RS.19,50,150/- ON 31.10.2005 AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY B Y ISSUING NOTICE U/S 143(2) OF THE ACT AND THE INCOME WAS ENHANCED TO RS.28,12, 031/- BY THE AO. IN THE COURSE OF PROCEEDINGS, THE AO FOUND THAT THERE WAS AN ADDITION MADE TO BUILDING ACCOUNT AND THE AO CHOSE TO REFER THE MAT TER TO THE DVO IN TERMS OF SECTION 142A OF THE ACT. THE AO SENT HIS REPORT, ESTIMATING THE TOTAL COST AT RS.1,14,86,900 AGAINST THE COST OF RS.99,71,350/ - AS PER BOOKS, ALLEGING A TOTAL DIFFERENCE OF RS.15,15,550/- OVER FIVE YEARS. DURING THE YEAR UNDER APPEAL, THIS DIFFERENCE WAS ALLEGED AT RS.4,40,988 /-. THE AO WITHOUT 3 CONFRONTING THE REPORT OF THE DVO TO THE ASSESSEE M ADE THE ADDITION OF RS.4,40,988/- WITHOUT REJECTING THE BOOKS OF ACCOUN T, BY THE TREATING THE DIFFERENCE IN THE COST OF CONSTRUCTION, AS UNEXPLAI NED INVESTMENT U/S 69 OF THE ACT. ON APPEAL, THE LD. CIT(A), DELETED THE ADD ITION. NOW, AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APP EAL BEFORE US. 3. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HEAVILY RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE SUBMISSI ONS MADE BEFORE HIM. HE FURTHER SUBMITTED THAT THE AO DID NOT REJECT THE BO OKS OF ACCOUNT BEFORE MAKING THE REFERENCE TO THE VALUATION CELL. 5. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR THO UGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED THE FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER DATED 24.05.2010, CLEARLY REVEALS THAT THE LD. CIT(A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, IN GREATER DETAIL, AFTER APPRECIATION OF THE EVIDENCES AND MATERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER IS WELL REASONED AND BASED ON THE COGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVE R, IT WOULD PERTINENT TO REPRODUCE THE RELEVANT PART OF THE DECISION OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 3.1. I HAVE CONSIDERED THE RIVAL CONTENTIONS CAREF ULLY. THE APPELLANTS CONTENTION THAT REFERENCE U/S 142A WAS BAD WITHOUT 4 REJECTING THE BOOKS OF ACCOUNT DOES NOT APPEAR TO B E CORRECT SINCE THE DECISIONS RELIED UPON BY THE LD. AR ARE PRIOR TO TH E INSERTION OF SECTION 142A OF THE ACT BY TH FINANCE (NO.2) 2004. SECTION 142A HAS BEEN INSERTED SPECIFICALLY IN THE ACT FOR THE PURPO SE OF ESTIMATING THE VALUE OF ANY INVESTMENT WITH REFERNCE TO SECTION 69 OR SECTION 69B AND THERE IS NO OTHER CONDITION PRESCRIBED IN THIS SECT ION FOR MAKING SUCH A REFERENCE TO THE VO. HOWEVER, THE APPELLANTS CONTE NTION REGARDING APPLYING STATE PWD RATES FOR ESTIMATING COST OF CON STRUCTION HAS FORCE SINCE LOCAL RATES BETTER REFLECT THE COST OF MATERI AL AND CONSTRUCTION . THE HONBLE JURISDICTIONAL ITAT HAVE, IN THE CASE O F DR. RAMESH KUMAR VS. ITO (SUPRA) , ALLOWED REBATE OF 15% OVER THE CPWD RATES APPLIED BY THE VO TO DETERMINE THE ESTIMATE COST OF CONSTRUCTION BY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HARCHAND PALACE 269 ITR 251 (P&H). NOW, IF 10% DIFFERENCE IN CPWD AND PWD RATES IS APPLIED TO TH VALUATION DONE BY VO, THE ASSESSED VALUED WOULD REDUCE BY RS.11.48 LALCS LEAVING A TOTAL DIFFERENCE OF AROUND RS.3.67 LACS OVER THE DE CLARED INVESTMENT DECLARED BY THE ASSESSEE. AS HELD BY THE HONBLE J URISDICTIONAL TRIBUNAL IN THE CASE OF ITO VS. J.M.P. ENTERPRISES 46 ITD 104 (ASR) (TM) DIFFERENCE OF 10% BETWEEN THE DECLARED INVEST MENT AND THE INVESTMENT ESTIMATED BY VO SHOULD BE IGNORED AS COS T CALCULATED BY VO WAS ONLY AN ESTIMATE AND THERE WAS BOUND TO BE S OME VARIATION IN THE COST ESTIMATED BY VO OVER THE ACTUAL COST. SINC E THE DIFFERENCE IN THE ESTIMATED COST AND ACTUALLY COST IS LESS THAN 4 % AFTER GIVING BENEFIT OF STATE PWD RATES, RESPECTFULLY FOLLOWING THE DECI SION OF HONBLE JURISDICTIONAL ITAT IN THE CASE OF JMP ENTERPRISES (SUPRA) THE ADDITION OF RS.4,40,988/- MADE BY THE AO IN RESPECT OF THE DIFFERENCE PERTAINING TO PRESENT ASSESSMENT YEAR IS DELETED. G ROUND NO. 1 OF APPEAL IS ALLOWED. 5.1. FURTHER, THE CASE OF THE ASSESSEE IS ALSO SUPP ORTED BY THE DECISION OF THE HONBLE SUPREME COURT, IN THE CASE OF SARGAM CI NEMA VS. COMMISSIONER OF INCOME-TAX, (2010) 328 ITR 513(SC), WHEREIN IT HAS BEEN HELD AS UNDER: 5 HELD, THAT THE ASSESSING AUTHORITY COULD NOT REFER THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER IN A CASE WHERE THER E WAS A CATEGORICAL FINDING RECORDED BY THE TRIBUNAL THAT THE BOOKS OF ACCOUNT WERE NEVER REJECTED. 5.6. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FI ND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON P ROPER APPRECIATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY , THIS GROUND APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE NEXT GROUND OF THE APPEAL, THE REVENUE CO NTENDED THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 4 LACS MADE IN THE TRADING ACCOUNT ON THE SALE OF SCRAP NOT SHOWN BY THE ASSES SEE IN THE BOOKS OF ACCOUNT. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, SALE OF SCRAP WAS AFFECTED BY THE AS SESSEE BUT THE SAME WAS NOT SHOWN IN HER RETURN OF INCOME. THE AO OBSERVED THAT THE SALES FOR THE A.Y. 2004-05 WERE AT RS.1,66,83,227/- AND FOR THE Y EAR UNDER REFERENCE, THE SAME WERE AT RS.3,47,07,390/-. THEREFORE, HE MADE A N ADDITION OF RS.4,00,000/- IN THE VALUE OF SCRAP ON ESTIMATED B ASIS. ON APPEAL, THE LD. CIT(A), DELETED THE ADDITION. NOW, AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH. 6.1 THE LD. DR, RELIED ON THE ORDER OF THE ASSESSIN G OFFICE. 6.2. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND , VEHEMENTLY RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR THO UGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED THE FACTS OF THE CASE, EVIDENCE AND 6 MATERIAL PLACED ON RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER DATED 24.05.2010, CLEARLY REVEALS THAT THE LD. CIT(A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, AT LENGTH, AFTER APPRECIATION OF THE E VIDENCES AND MATERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER IS WELL REASONED AND B ASED ON THE COGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVER, I T WOULD PERTINENT TO REPRODUCE THE RELEVANT PART OF THE FINDINGS OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 4.1. THE ASSESSEES APPEAL BEFORE THE HONBLE ITAT FOR THE ASSESSMENT YEAR 2004-05 ON THIS ISSUE HAS BEEN DECI DED IN ITA NO.4619ASR)/2007 DATED 22.12.2008. THE HONBLE HENC E HELD THAT THEY DID NOT FIND JUSTIFICATION IN THE ADDITION MAD E BY THE AO. THEY HELD THAT THE AO HAD MADE THE ADDITION WITHOUT PLAC ING ANY MATERIAL ON RECORD REGARDING SALE OF WASTE MATERIAL. IT WAS HELD THAT ONUS WAS ON THE DEPARTMENT TO PROVE THAT THE SCRAP I.E. ACRY LIC SHEET DID IN FACT HAVE SCRAP VALUE, WHICH WAS NEVER DISCHARGED. IT WA S HELD BY THE HONBLE ITAT THAT NO BASIS WAS FOUND TO EXIST TO MA KE THE ADDITION. THE ADDITION OF RS.1,50,000/- SUSTAINED BY THE CIT( A) WAS DELETED. I THE PRESENT CASE ALSO TH LD. AO HAS SIMPLY RELIED O N THE ASSESSMENT YEAR 2004-05 WITHOUT BRING ON RECORD ANY MATERIAL T O SHOW THAT THE ASSESSEE HAS ACTUALLY SOLD THE SCRAP FOR ANY VALUA BLE CONSIDERATION. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT SCRAP HAD ANY SALE VALUE. HENCE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE HONBLE JURISDICTIONAL ITAT IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2004-05 (SUPRA), THE ADDITION OF RS.4,00,000/- MADE BY THE AO IS DELETED. GROUND NO. 2. OF THE APPEAL IS ALLOWED. 7.1. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT F IND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON P ROPER APPRECIATION OF THE 7 LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY , THIS GROUND APPEAL OF THE REVENUE IS DISMISSED. 8. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE, HENCE, DO NOT NEED ANY ADJUDICATION. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 15TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 15TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SMT. BALJIT KAUR SANGHA 2. THE ACIT, RANGE-IV, JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.