The ITO, Ward-9(2), Ahmedabad V. Shri Harjibhai V. Patel, Ahmedabad

ITA 365/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0946 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N DIVETIA
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.359/AHD/2011 / ASSTT. YEAR: 2007-2008 HARJIBHAI VALJIBHAI PATEL 9/KAILASHDHAM SOCIETY, PART-I INDIA COLONY ROAD BAPUNAGAR, AHMEDABAD. PAN : ABVPP 9560 G VS ITO, WARD - 9(2) AHMEDABAD. ./ ITA.NO.365/AHD/2011 / ASSTT. YEAR: 2007-2008 ITO, WARD - 9(2) AHMEDABAD. VS HARJIBHAI VALJIBHAI PATEL 9/KAILASHDHAM SOCIETY, PART-I INDIA COLONY ROAD BAPUNAGAR, AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVETIA REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 23/06/2016 / DATE OF PRONOUNCEMENT: 04/08/2016 $%/ O R D E R ASSESSEE AND THE REVENUE ARE IN CROSS-APPEALS AGAIN ST THE ORDER OF THE LD.CIT(A)-XV, AHMEDABAD DATED 9.12.2010 PASSED FOR THE ASSTT.YEAR 2007- 08. 2. BEFORE ADVERTING TO THE SPECIFIC GRIEVANCE OF BO TH THE PARTIES, I DEEM IT APPROPRIATE TO MAKE REFERENCE OF CERTAIN BASIC FACT S. THE ASSESSEE AT THE RELEVANT TIME WAS RUNNING A PROPRIETORSHIP CONCERN VIZ. M/S.GHANSYAM CONSTRUCTION. IT HAS FILED ITS RETURN OF INCOME ON 10.9.2007 DECLARING TOTAL ITA NO.359 AND 365/AHD/2011 2 INCOME AT RS.1,10,830/-. EX PARTE ASSESSMENT ORDER WAS PASSED ON 29.12.2009. THE LD.AO HAS DETERMINED TAXABLE INCOM E OF THE ASSESSEE AT RS.45,56,410/-. THE ASSESSMENT HAS BEEN MENTIONED AS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT. BUT PERUSAL OF THE O RDER WOULD INDICATE THAT ASSESSEE FAILED TO GIVE REPLY ON THE ISSUES ASKED B Y THE AO. THE COMPUTATION OF INCOME MADE BY THE AO READS AS UNDER: TOTAL INCOME AS PER RETURN DATED 10/09/2007 RS.1,10,830/- ADD: 1.ADDITION ON ACCOUNT OF COST OF LAND (2811676+96400) RS.29,08,076/- 2.ADDITION U/S.68 (1100000+167500) RS.12,67,500/- 3.DEEMED CONTRACT RECEIPT (AS DISCUSSED ABOVE) RS.2,70,000/- NET TOTAL INCOME RS.45,56,406/- ROUNDED OFF RS.45,56,410/- 3. WITH REGARD TO FIRST ADDITION OF RS.29,08,076/- BOTH THE PARTIES ARE IN APPEAL BEFORE THE TRIBUNAL. GROUND NO.1 TAKEN BY TH E ASSESSEE IS INTERCONNECTED WITH GROUND NO.1 TAKEN BY THE REVENU E. 4. BRIEF FACTS OF THE CASE WITH REGARD TO THIS ISSU E ARE THAT THE ASSESSEE HAS SHOWN VALUE OF LAND IN THE BALANCE SHEET AT RS.46,8 8,324/-. THIS VALUE INCLUDED OPENING STOCK OF RS.27,92,707/- AND PURCHA SES MADE DURING THE YEAR AT RS.19,19,217/-. THE LD.AO ESTIMATED THE VALUE OF THE LAND AT RS.75.00 LAKHS. HE HAS DEDUCTED THE VALUE SHOWN BY THE ASSE SSEE AT R.46,88,324/- AND MADE ADDITION OF DIFFERENCE AT RS.28,11,676. THE A O, THEREAFTER OBSERVED THAT THERE IS DIFFERENCE BETWEEN THE VALUE SHOWN IN THE BALANCE SHEET AND BREAK-UP GIVEN BY THE ASSESSEE. THE BREAK-UP GIVEN BY THE ASSESSEE WAS OPENING STOCK RS.27,92,607/- PURCHASE OF LAND DURING THE YEAR RS.19,19,217/- TOTAL RS.47,84,724/- ITA NO.359 AND 365/AHD/2011 3 WHEREAS IN THE BALANCE SHEET THE VALUE WAS SHOWN A T RS.46,88,324/-. THUS, THERE WAS A DIFFERENCE OF RS.96,400/-. THIS A LSO ADDED TO THE TOTAL INCOME AND THAT IS WHY IN THE COMPUTATION OF INCOME , THE ADDITION HAS BEEN SHOWN AT RS.29,08,076/- INSTEAD OF RS.28,11,676/- ( RS.75,00,000/- MINUS RS.46,88,324). ON APPEAL, THE LD.CIT(A) HAS RECORD ED THE FOLLOWING FINDING ON THIS ISSUE: 5. GROUND NO.2 PERTAINS TO ADDITION ON ACCOUNT OF COST OF LAND OF RS.28,11,676. THE ADDITION HAS BEEN MADE AS PER NARRATION GIVEN I N PARA 3 OF THE ASSESSMENT ORDER. 6. AFTER GOING THROUGH WRITTEN SUBMISSION DATED 27. 10.2010, REMAND REPORT OF THE AO DATED 12.11.2010 AND SUBMISSION OF THE APPELLANT DATED 22.11.2010 FOLLOWING POINTS EMERGE: I. TRADING ACCOUNT OF THE APPELLANT IS AS UNDER: - TRADING ACCOUNT OPENING STOCK : RS.27,92,607 SALES RS. 96 ,400 PURCHASES : RS.19,19,217 CLOSING STOCK RS.4 6,88,324 G.P. : RS. 72,900 RS.47,84,724 RS.47,84,724 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE INFORMED THAT IT MADE PURCHASE OF LAND OF RS. 19,19,217 AND SALE OF LAND OF RS.96,400 DESPITE OPPORTUNITIES GIVEN NO PROOFS OF PURCHASE OR SALE WERE FURNISHED TO THE AO AND THE AO PROCEEDED TO CO MPLETE THE ASSESSMENT U/S.144, ESTIMATING LAND INVESTMENT AT R S.75,00,000 AND MADE THE ADDITION OF RS.29,08,076 WHICH CONSISTS OF [28,11,676 (RS.75,00,000 - CLOSING STOCK OF RS.46,88,324) + RS .96,400]. II. DURING THE COURSE OF APPELLATE PROCEEDINGS IT W AS CONCEDED THAT NO LAND WAS PURCHASED RATHER RS.17,63,672 WAS THE VALU E OF SHARES OF ONE VENUS SIDDHI RESORTS PVT.LTD. WHICH WERE ALLOTTED T O THE APPELLANT FOR PAYMENT MADE THROUGH BANKER'S CHEQUE DATED 27.7.200 5 DRAWN FROM MANEK CHOWK COOPERATIVE BANK LTD., ODHAV BRANCH, AH MEDABAD. BALANCE RS.1,55,545 (RS.19,19,217 - RS.17,63,672)WA S INFORMED AS ITA NO.359 AND 365/AHD/2011 4 LOSS INCURRED ON ADVANCE GIVEN FOR PURCHASE OF LAND . THE ADVANCE WAS INFORMED TO BE OF RS.6,85,545 WHICH WAS INFORMED RE FUNDED BY THE CONCERNED PARTY TO THE EXTENT OF RS.5,25,000 ONLY T HUS RS. 1,55,545 (RS.6,85,545 - RS.5,25,000) WAS EXPENSE / LOSS ON P URCHASE OF LAND. 7. AFTER GOING THROUGH RIVAL SUBMISSIONS IT IS CLEA R THAT PURCHASE OF LAND SHOWN IN THE TRADING ACCOUNT OF RS. 19,19,217 IS A BOGUS ENTRY AS ACCORDING TO THE APPELLANT HIMSELF RS.17,63,672 IS THE INVESTMENT IN SHARES THAT TOO IN FY 2005-06 AND AS THE BUSINESS O F THE APPELLANT HAS BEEN INFORMED TO BE OF DEALING IN LAND AND CONSTRUC TION BY NO STRETCH OF IMAGINATION THIS CAN BE MADE PART OF TRADING ACCOUN T. BANK ACCOUNT TO PROVE PAYMENT BY CHEQUE HAS ALSO NOT BEEN FURNISHED . FURTHER THE POINT MADE BY THE AO IN HIS REMAND REPORT THAT THE SHARES ALLOTTED DO NOT SPECIFY LAND DETAILS AND THEREFORE THE CONTENTI ON OF THE APPELLANT THAT INVESTMENT IN SHARES SHOULD BE TAKEN AS LAND P URCHASE COST IS NOT FOUND TENABLE. FOR LOSS OF RS. 1,55,545 INCURRED ON SOME LAND DEAL NO PROOFS WHATSOEVER WERE FURNISHED BY THE APPELLANT, THEREFORE ADDITION OF RS.19,19,217 OUT OF RS.29,08,076 IS UPHELD U/S.6 9C AS NEITHER SATISFACTORY EXPLANATION NOR PROOFS TOWARDS LAND PU RCHASE HAVE BEEN FURNISHED, THE BALANCE ADDITION OUT OF RS.29,08,076 IS DIRECTED TO BE DELETED AS IT IS BASED ON ESTIMATE ONLY. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO CLARITY IN THE FINDI NG OF THE CIT(A). IT IS NOT DISCERNIBLE AS TO HOW THE LD.CIT(A) HAS ARRIVED AT A FINDING THAT ENTRY SHOWN IN THE TRADING ACCOUNT OF RS.19,19,217/- TOWARDS PU RCHASE OF LAND IS BOGUS. SIMILARLY, THE LD.CIT(A) HAS NOT DRAWN FIRM CONCLUS ION WITH REGARD TO THE ALLEGED PLEA OF INVESTMENT IN SHARES OF RS.17,63,67 2/-. SHORT QUESTION BEFORE THE LD.CIT(A) WAS WHETHER THE LAND SHOWN BY THE ASS ESSEE AT A VALUE OF RS.46,88,324/- IN THE BALANCE SHEET COULD BE ESTIMA TED AT RS.75.00 LAKHS AND THE ADDITION ON SUCH ESTIMATED VALUE OF LAND CAN BE MADE IN THE HANDS OF THE ASSESSEE. THE LAND MUST BE AS STOCK-IN-TRADE WITH THE ASSESSEE. IT IS TO BE VALUED EITHER AT COST OR AT MARKET PRICE. HOW ITS VALUE CAN BE ENHANCED BY WAY OF ESTIMATION, AND THEN THE ADDITION IS TO BE M ADE IN THE INCOME OF THE ASSESSEE. NO SUCH ISSUE HAS BEEN ADDRESSED BY THE LD.CIT(A), AND AN ADDITION TO THAT EXTENT OF RS.19,19,217/- WAS CONFIRMED. TH E LD.CIT(A) HAS TO FIRST ITA NO.359 AND 365/AHD/2011 5 RECORD A FINDING WHETHER THE ADDITION OF RS.29,08,0 76/- AT ALL CAN BE MADE ? IF NOT, THEN, OUGHT TO HAVE FOUND OUT WHETHER THE PURC HASE IN THE LAND SHOWN BY THE ASSESSEE WAS BOGUS, AND IF BOGUS, WHAT TREATMEN T CAN BE GIVEN IN THE VALUE OF THE CLOSING STOCK SHOWN BY THE ASSESSEE, THAT CL OSING STOCK WOULD BECOME OPENING STOCK IN THE NEXT YEAR. THUS, THERE IS NO COMPREHENSIVE ANALYSIS OF THE FACTS, AND THIS IS THE REASON I HAVE FIRST NARR ATED THE FACTS, AND THEN TAKEN UP BOTH THE MATTERS TOGETHER. THE REVENUE IS AGGRI EVED WITH REGARD TO THE DELETION OF ADDITION OF RS.9,88,859/- I.E. DIFFEREN CE BETWEEN RS.29,08,076/- MINUS RS.19,19,217/-. THE FINDING OF THE LD.CIT(A) IS NOT SUSTAINABLE. IT IS SET ASIDE ON THIS ISSUE. 6. THE NEXT TWO ITEMS IN THE COMPUTATION OF INCOME ARE ADDITIONS OF RS.12,67,500/- AND RS.2,70,000/-. THE LD.AO FOUND A LIST OF SUNDRY CREDITORS IN THE BALANCE SHEET. A SUM OF RS.65,00,462/- WAS SHOWN UNDER THE HEAD SUNDRY CREDITORS IN THE BALANCE SHEET. ON VERIFI CATION, IT WAS POINTED OUT THAT A SUM OF RS.5.00 LAKHS WAS RECEIVED FROM GHANS HYAM CORPORATION AND RS.6.00 LAKHS FROM VAIBHAV LAXMI BUILDER. THESE WE RE ADVANCES TOWARDS SALES OF LAND. THE LD.AO DISBELIEVED THIS ADVANCE AND MADE ADDITION OF RS.11.00 LAKHS UNDER SECTION 68 OF THE INCOME TAX A CT. HE ALSO FURTHER MADE ADDITION OF RS.42,500/-, 47,500/- AND RS.77,500/-. THESE AMOUNTS WERE PAYABLE BY THE ASSESSEE TO SHRI UPENDRABHAI AMIN, S HRI NARENDRABHAI AMIN AND SHRI MUKESHBHAI AMIN AGAINST PURCHASE OF LAND. THE AO MADE AN ADDITION OF RS.1,67,500/- UNDER SECTION 68 OF THE A CT. HE FURTHER OBSERVED THAT ASSESSEE HAS SHOWN ADVANCES FROM FOUR PERSONS AGAINST SALE OF LAND. THE AO ESTIMATED GP ON THIS DEEMED SALES AT 25% AND MAD E ADDITION OF RS.2,70,000/- ON APPEAL. THE LD.CIT(A) DELETED THE ADDITION OF RS.11 LAKHS, BUT CONFIRMED THE ADDITION OF RS.1,67,500/-. AS FA R AS AGAINST THE ADDITION OF RS.2,70,000/- MADE BY THE AO ON ACCOUNT OF PROFIT E ARNED ON DEEMED SALE IS ITA NO.359 AND 365/AHD/2011 6 CONCERNED, THE LD.CIT(A) HAS CONFIRMED THE ADDITIO N TO THE EXTENT OF RS.8,10,000/- ON THE GROUND THAT SUCH ADVANCES ARE BOGUS. 7. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. AFTER PERUSAL OF BOTH THE ORDERS , I FIND THAT THE LD.AO HAS MADE ADDITIONS ON THE BASIS OF SOME GUESSWORK, BECA USE IN HIS UNDERSTANDING THE ASSESSEE FAILED TO SUBMIT REQUISITE DETAILS. WI THOUT EXECUTION OF SALE DEED, HOW THE AO CAN ASSUME DEEMED PROFIT ON MERE ADVANCE TAKEN BY THE ASSESSEE. THE LD.CIT(A) CHANGED THE COLOUR OF THIS CONTENTIONS BY OBSERVING THAT THESE ARE BOGUS ADVANCES. BUT THERE IS NO DIS CUSSION QUA THIS OBSERVATION AND THE BASIS FOR ARRIVING AT THIS CONCLUSION. THE FACTUAL COHERENCE IS TOTALLY MISSING IN BOTH THE ORDERS. FACED WITH THIS SITUA TION, I DEEM IT APPROPRIATE TO SET ASIDE BOTH THE ORDERS ON ALL ISSUES, AND RESTOR E ALL THESE ISSUES TO THE FILE OF AO FOR FRESH ADJUDICATION. THE ASSESSEE WILL BE AT LIBERTY TO SUBMIT ANY DETAILS IN RESPECT OF HIS EXPLANATION. 8. THE OBSERVATIONS MADE BY ME WILL NOT IMPAIR OR I NJURE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/ EXPLANATION OF THE ASSESSEE. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 4 TH AUGUST, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 04/08/2016