ACIT, New Delhi V. Sh. Arvind Kumar Modi, New Delhi

ITA 3776/DEL/2010

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6889 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN SENIOR
• Assessee Lawyers: R B MATHUR
• Keywords: Gross profit estimation; Unexplained investment
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3776/DEL./2010 (ASSESSMENT YEAR : 2006-07) ACIT, CIRCLE 25 (1), VS. SHRI ARVIND KUMAR MODI, NEW DELHI. C 183, MAHARANA PRATAP ENCLAVE, PITAMPURA, NEW DELHI. (PAN : AAEPM6098E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.B. MATHUR, CA REVENUE BY : SHRI S.K. JAIN, SENIOR DR DATE OF HEARING : 05.01.2017 DATE OF ORDER : 27.01.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TA X, CIRCLE 25 (1), NEW DELHI (HEREINAFTER REFERRED TO A S THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE TH E IMPUGNED ORDER DATED 31.05.2010, PASSED BY THE COMMISSIONER OF INC OME-TAX (APPEALS)-XXIV, NEW DELHI UNDER SECTION 143(3) OF T HE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSM ENT YEAR 2006-07 ON THE GROUNDS INTER ALIA THAT :- ITA NO.3776/DEL./2010 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN (A) DELETING THE ADDITION OF RS.46,09,209/- ON ACCOUNT OF GROSS PROFIT @ 15%; (B) DELETING THE ADDITION OF RS.9,84,405/- ON ACCOUNT OF BROKERAGE; (C) DELETING THE ADDITION OF RS.4,542/- ON ACCOUNT OF INTEREST OF CAR LOAN; (D) DELETING THE ADDITION OF RS.2,08,78,435/- ON ACCOUNT OF VALUATION OF PROPERTIES; (E) DELETING THE ADDITION OF RS.41,63,527/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN THE PROPERTY LOCATED AT BURARI; (F) NOT ACCEPTING THE AOS DECISION OF REJECTING THE BOOKS OF ASSESSEE U/S 145 OF I.T. ACT. 2. BRIEFLY STATED FACTS OF THIS CASE ARE : ASSESSEE BEING PROPRIETOR OF M/S. A.A. ENTERPRISES IS INTO THE TRA DING OF FABRICS USED BY THE EXPORTERS. ASSESSING OFFICER, BY REJEC TING THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT, ENHANCED THE GROSS PROFIT BY COMPARING THE SAME WITH THE EARLIER YEARS AND MADE AN ADDITION OF RS.46,09,206/- ON ACCOUNT OF GROSS PROFIT; MADE AN ADDITION OF RS.9,84,405/- ON ACCOUNT OF BROKERAGE; MADE AN ADDI TION OF RS.4,542/- ON ACCOUNT OF INTEREST OF CAR LOAN; ADDI TION OF RS.2,08,78,435/- ON ACCOUNT OF VALUATION OF PROPERT Y AND MADE AN ADDITION OF RS.45,63,523/- ON ACCOUNT OF UNDISCLOSE D INVESTMENT IN ITA NO.3776/DEL./2010 3 THE PROPERTY SITUATED AT BURARI AND THEREBY ASSESSE D THE TOTAL INCOME AT RS.3,67,60,770/- U/S 143 (3) OF THE ACT. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS PARTLY ALLOWED THE APPEAL . FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBU NAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.(A) & (F) 5. ASSESSEE DECLARED THE GROSS PROFIT @ 10.67% FOR AY 2006- 07, THE YEAR UNDER ASSESSMENT, AS AGAINST GROSS PRO FIT OF RS.1,28,16,869/- AT 11.08% FOR AY 2005-06. AO TREA TED THE LOW GROSS PROFIT RATE AS SUBSTANTIAL FALL ON THE GROUND THAT THE ASSESSEE HAS BEEN DOING SIMILAR KIND OF TRADING IN HIS HUF C APACITY AND FRAMED THE ASSESSMENT BY ADOPTING GROSS PROFIT RATE OF 15% AND THEREBY MADE AN ADDITION OF RS.46,09,206/-. 6. THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE A SSESSEE HAS RECORDED EACH AND EVERY DETAIL OF ITS SALE IN THE B OOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY IRREGULARITIES AND ILL EGALITIES IN THE BOOKS OF ACCOUNT ADOPTED THE GP RATE ON THE BASIS O F WHIMS AND ITA NO.3776/DEL./2010 4 FANCIES. THE LD. AR FURTHER CONTENDED THAT THE GP RATE OF 15% HAS BEEN ADOPTED BY THE AO BY TAKING INTO CONSIDERATION THE GP RATE OF 15.33% FOR AY 2005-06 IN WHICH THE APPEAL OF THE AS SESSEE HAS BEEN ALLOWED BY THE TRIBUNAL AND THEREAFTER APPEAL FILED BY THE REVENUE HAS BEEN REJECTED. 7. UNDISPUTEDLY, AO WITHOUT RECORDING ANY REASON FO R REJECTION OF THE BOOKS OF ACCOUNT ADOPTED THE GP RATE OF 15% BY TAKING INTO ACCOUNT OF THE GP RATE OF AY 2005-06 WHICH WAS 15.3 3% AND THAT RATE HAS BEEN OVERTURNED BY THE TRIBUNAL AND AGAINS T THE ORDER OF THE TRIBUNAL, REVENUE WENT IN APPEAL BEFORE THE HON BLE DELHI HIGH COURT WHICH WAS DISMISSED VIDE ORDER DATED 23.01.2012 IN ITA 49/2012 IN CASE OF CIT VS. ARVIND KUMAR MODI. 8. IN AY 2005-06, THE ASSESSEE HAS SHOWN GP RATE OF 11.8% WHICH WAS ENHANCED TO 15.33% BY THE AO. THERE IS N OT AN IOTA OF MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE HAS M ADE FICTITIOUS OR WRONG ENTRIES IN THE BOOKS OF ACCOUNT. EVERY PURCH ASE AND SALE MADE BY THE ASSESSEE WAS VERIFIABLE FROM THE STOCK REGISTER BUT THE AO WITHOUT POINTING OUT ANY DISCREPANCY IN ACCOUNTI NG SYSTEM FOLLOWED BY THE ASSESSEE AND WITHOUT POINTING OUT A NY DISCREPANCY IN THE ACCOUNTS, REJECTED THE BOOKS OF ACCOUNT ON T HE BASIS OF THE FACT THAT THE GROSS PROFIT HAS BEEN SUBSTANTIALLY D ECLINED. MERELY BECAUSE OF THE FACT THAT THE FACTS OF THE ASSESSEE S CASE ARE SIMILAR ITA NO.3776/DEL./2010 5 TO THE FACTS OF AY 2005-06 IN WHICH GP RATE WAS ADO PTED BY THE AO AT 15.33%, WHICH HAS BEEN OVERTURNED BY THE TRIB UNAL, THE BOOKS OF ACCOUNT CANNOT BE REJECTED AND GP RATE CAN NOT BE DETERMINED ON THE BASIS OF WHIMS AND FANCIES. SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDING RETURNED BY THE LD. CIT (A) AND GROUND NO.(A) AND (F) ARE DETERMINED AGAINST TH E REVENUE. GROUND NO.(B) 8. AO MADE AN ADDITION OF RS.9,84,405/- ON ACCOUNT OF BROKERAGE WHICH HAS BEEN DELETED BY LD. CIT (A). A GAIN, AO HAS MADE THIS ADDITION BY ADOPTING THE FACTS OF AY 2005 -06. IDENTICAL ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASS ESSEE BY THE ITAT FOR AY 2005-06 WHICH MADE THE BASIS OF THE PRE SENT ASSESSMENT AND THE ORDER OF THE ITAT HAS ALSO BEEN UPHELD BY THE HONBLE DELHI HIGH COURT VIDE ORDER DATED 23.01.201 2 (SUPRA). WHEN THE BASIS OF THE ADDITION MADE BY THE AO FOR A Y 2006-07 HAS NOT WITHSTOOD THE JUDICIAL SCRUTINY, THE PRESEN T ADDITION IS ALSO NOT SUSTAINABLE. MOREOVER, NO SUCH DISALLOWANCE HA S BEEN MADE BY THE REVENUE IN AY 2007-08. SO, LD. CIT (A) HAS PASSED THE REASONED ORDER BY DELETING THE ADDITION OF RS.9,84, 405/-. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE ORDER PA SSED BY LD. CIT (A), THIS GROUND IS ALSO DETERMINED AGAINST THE REV ENUE. ITA NO.3776/DEL./2010 6 GROUND NO.(C) 9. AO HAS MADE DISALLOWANCE OF RS.4,542/- ON ACCOUN T OF INTEREST ON THE CAR LOAN. KEEPING IN VIEW THE SMAL LNESS OF THE AMOUNT AND THE FACT THAT WHEN REGULAR BOOKS OF ACCO UNT HAD BEEN MAINTAINED BY THE ASSESSEE AND AVAILING OF THE CAR LOAN FOR BUSINESS PURPOSES HAVE NOT BEEN DISPUTED, THE INTEREST ON TH E CAR LOAN HAS TO BE ALLOWED AND THERE IS NO ILLEGALITY OR PERVERSITY IN THE ORDER PASSED BY THE LD. CIT (A), HENCE GROUND NO.(C) IS D ETERMINED AGAINST THE REVENUE. GROUND NO.(D) 10. AO MADE AN ADDITION OF RS.2,08,78,435/- ON ACCO UNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY WHICH HAS BE EN DELETED BY THE LD. CIT (A). AO HAS MADE THE ADDITION OF RS.2, 08,78,435/- ON ACCOUNT OF INVESTMENT IN THE PROPERTY BY RELYING U PON THE REPORT FILED BY THE DVO. LD. CIT (A) HAS THRASHED THE ISS UE THREADBARE IN PARA 8 TO 8.7 BY DISCUSSING THAT DVO HAS COMPARED T HE PROPERTY IN QUESTION BY ADOPTING WRONG FAR OF I IN CALCULATING THE VALUE INSTEAD OF THE FAR OF 0.75 APPLICABLE TO BUNGALOW Z ONE. APART FROM THE REPORT OF DVO, THE AO HAS NOT BROUGHT ON R ECORD ANY MATERIAL TO PROVE THE FACT THAT THE ASSESSEE HAS PA ID CONSIDERATION OF THE PROPERTY IN QUESTION OVER AND ABOVE THE SALE CONSIDERATION RECORDED IN THE SALE DEED. ITA NO.3776/DEL./2010 7 11. HONBLE HIGH COURT OF DELHI IN JUDGMENT CITED A S CIT, DELHI-I VS. AGILE PROPERTIES (P) LTD (2014) 45 TA XMANN.COM 512 (DELHI) HELD THAT, MERE RELIANCE UPON THE REPORT OF VALUATION OFFICER EXPRESSING HIS OPINION AS TO TRUE VALUE IS INADEQUATE MATERIAL IS NOT ENOUGH FOR THE AO TO MAKE AN ADDITI ON IN THE ABSENCE OF ANY POSITIVE EVIDENCE ON RECORD. SO, THERE BEING NOT AN IOTA OF EVIDENCE ON RECORD THAT ASSESSEE HAS PAID E XTRA CONSIDERATION THEN RECORDED IN THE SALE DEED, THE A DDITION MADE BY THE AO ON THE BASIS OF REPORT OF DVO IS NOT SUSTAIN ABLE. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE ORDER RE TURNED BY LD. CIT (A), WE HEREBY DETERMINE GROUND NO.(D) AGAINST THE REVENUE. GROUND NO.(E) 12. AO MADE AN ADDITION OF RS.41,63,527/- ON ACCOUN T OF UNDISCLOSED INVESTMENT IN THE PROPERTY LOCATED AT B URARI. UNDISPUTEDLY, THE ASSESSEE HAS PURCHASED THE PROPER TY IN QUESTION AT BURARI VIDE SALE DEED DATED 04.03.2005, COPY OF WHICH IS AVAILABLE ON RECORD. AO REJECTED THE CLAIM OF THE ASSESSEE THAT THIS PROPERTY WAS DISCLOSED EARLIER IN THE RETURN OF INC OME FOR AY 2005- 06 BEING FALSE. AO PROCEEDED TO MAKE THE ADDITION O N ACCOUNT OF INVESTMENT BY THE ASSESSEE MADE FOR PURCHASE OF THE PROPERTY IN QUESTION TO THE TUNE OF RS.41,63,527/- ON THE BASIS OF REPORT OF ITA NO.3776/DEL./2010 8 VALUATION OFFICER. ASSESSEE TOOK THE PLEA THAT THI S PROPERTY WAS PURCHASED AT RS.2,50,000/- AS MENTIONED IN THE SALE DEED. 13. LD. CIT (A) DELETED THE ADDITION, WITHOUT GOING INTO THE MERITS, ON THE SOLE GROUND THAT SINCE THIS PROPERTY WAS PURCHASED ON 04.03.2005, ADDITION THEREOF, IF ANY, CAN ONLY B E MADE IN THE AY 2005-06. KEEPING IN VIEW THE FACTS OF THIS CASE THAT THIS PROPERTY WAS PURCHASED BY THE ASSESSEE VIDE SALE DE ED DATED 04.03.2005, NO ADDITION ON THE BASIS OF THE SAME, I F ANY, CAN BE MADE DURING THE YEAR UNDER ASSESSMENT I.E. 2006-07 AND IF ANY ADDITION IS TO BE MADE, THE SAME CAN ONLY BE MADE I N AY 2005-06 AND THE REVENUE IS AT LIBERTY TO PROCEED ACCORDINGL Y. SO, WE AFFIRM FINDINGS RETURNED BY LD. CIT (A) ON GROUND NO.(E) A ND DETERMINE GROUND NO.(E) AGAINST THE REVENUE. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, FINDI NG NO ILLEGALITY OR PERVERSITY IN THE ORDER RETURNED BY L D. CIT (A), PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF JANUARY, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBE R DATED THE 27 TH DAY OF JANUARY, 2017 TS ITA NO.3776/DEL./2010 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XXIV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.