ACIT, Meerut V. Sh. Mohit Jain, Meerut

ITA 3876/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4126 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 11-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Keywords: Unexplained investment; Gift; Opportunity of being heard; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NOS.906 & 3876/DEL/2009 ASSESSMENT YEARS : 2004-05 & 2005-06 ACIT, CIRCLE-1, MEERUT. VS. MOHIT JAIN, 310, W.K. ROAD, MEERUT. PAN : AAUPJ4986B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI, ADVOCATE REVENUE BY : SHRI G.S. SAHOTA, SR. DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS OF CIT (A) FOR ASSESSMENT YEAR 2004-05 & 2005-06. THE ISSUES ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER. THE SE ARE BEING CONSOLIDATED AND DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENC E. 2. ONE COMMON ISSUE RAISED IS THAT THE CIT (A) ERRE D IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY HOLDING THAT RELIA NCE PLACED BY THE ASSESSING OFFICER ON THE VALUATION REPORT OF DVO IN ESTIMATIN G THE COST OF CONSTRUCTION OF BUILDING WAS NOT JUSTIFIED. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER FOUND THAT THE ASSESEE HAS BORROWED AN AMOUNT OF RS.40 LAC FOR CONSTRUCTION OF COMMERCIAL BUILDING, BUT THE ASSESSEE HAS NOT ATTACHED VALUATI ON REPORT FROM A REGISTERED VALUER. THE ASSESSING OFFICER NOTED THAT PHYSICAL VERIFICATION OF THE PROPERTY BY THE INCOME-TAX INSPECTOR INDICATED THAT THE INVESTM ENT MADE IN THE SAID PROPERTY ITA NO.906/DEL/2009 ITA NO.3876/DEL/2009 2 WAS NOT FULLY DECLARED. THE ASSESSING OFFICER REFE RRED THE MATTER TO THE DVO. THE DVOS ESTIMATE AND THAT DECLARED BY THE ASSESSE E ARE AS UNDER:- COST OF CONSTRUCTION S.NO. FINANCIAL YEAR AS DECLARED BY THE ASSESSEE ESTIMATE MADE BY THE DVO (IT DEPTT.) 1. 2003-04 RS.51,00,000/- RS.85,17,281/- 2. 2004-05 RS.14,00,000/- RS.22,39,683/- 4. THE ASSESSEES VARIOUS OBJECTIONS TO THE DVOS V ALUATION WERE REFERRED TO THE DVO. ON THE BASIS OF DVOS OBSERVATION, THE AS SESSING OFFICER OBSERVED THAT DVO HAS CONSIDERED ALL THE INFORMATION AND DOC UMENTS. THE ASSESSING OFFICER PROCEEDED TO ASSESS THE UNEXPLAINED INVESTM ENT ON THE BASIS OF DIFFERENTIAL AMOUNT OF DVOS VALUATION AND THE AMOU NT SHOWED BY THE ASSESSEE IN THE ACCOUNTS. AGAINST THE ABOVE ORDER THE ASSES SEE APPEALED BEFORE THE LD. CIT (A). LD. CIT (A) OBSERVED THAT THERE WERE VARI OUS FLAWS COMMITTED BY THE DVO IN HIS REPORT. HE HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF SUCH A REPORT IS NOT SUSTAINABLE. LD. CIT (A) FURTHER HELD THAT THE RECORDS DID NOT SHOW THAT THE ASSESSING OFFICER HAD NOTICED ANY DEFECT IN THE BOOKS OF ACCOUNT OR IN THE BILLS OR IN THE VOUCHERS FOR THE COST OF CONSTRUCTION PRODUCED BY THE ASSESSEE. THE BOOKS OF ACCOUNT WER E ALSO PRODUCED BEFORE THE DVO AND THE DVO ALSO HAD NOT GIVEN ANY ADVERSE COMM ENTS IN RESPECT OF BILLS AND VOUCHERS OF THE OF THE MATERIAL USED IN COMPLET ING CONSTRUCTION. LD. CIT (A) REFERRED TO CASE LAWS THAT UNLESS SOME DEFECTS IN ACCOUNT BOOKS ARE FOUND, THE DVOS REPORT IS NOT VALID. 5. FOR ASSESSMENT YEAR 2004-05, LD. CIT (A) PROCEED ED TO CONCLUDE THAT IN HIS OPINION RELIANCE PLACED BY THE ASSESSING OFFICE R ON THE REPORT OF THE DVO AS THE SOLE BASIS FOR MAKING THE IMPUGNED ADDITION TOW ARDS UNEXPLAINED INVESTMENT IN CONSTRUCTION WAS UNJUSTIFIED AND HE ACCORDINGLY DELETED THE SAME. 6. FOR THE ASSESSMENT YEAR 2005-06 LD. CIT (A) REFE RRED TO HIS APPELLATE ORDER FOR THE ASSESSMENT YEAR 2004-05 AND HELD THAT THE ASSESSEE WAS ALSO ENTITLED TO GET RELIEF ON ACCOUNT OF APPLICATION OF PWD RATES, DEDUCTION ON ITA NO.906/DEL/2009 ITA NO.3876/DEL/2009 3 ACCOUNT OF SELF-SUPERVISION AND SELF-PURCHASING OF MATERIALS, ETC. IN THE SAME MANNER AS PER DISCUSSION MADE IN THAT YEAR. LD. CI T (A) DIRECTED THE ASSESSING OFFICER TO REVISE ASSESSMENT ACCORDINGLY. AGAINST THE ABOVE APPELLATE ORDER THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED RECO RDS. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER H AS NOT PROVIDED THE RELIEF TO THE ASSESSEE ON ACCOUNT OF SELF-SUPERVISION CHARGES AND THE COST OF FURNISHING WORK CARRIED OUT BY THE TENANTS IN THE TENANTED POR TION. HE FURTHER CLAIMED THAT CPWD RATES HAD BEEN APPLIED FOR VALUATION AS AGAINS T THE PWD RATES WHICH SHOULD HAVE BEEN ALLOWED. LD. COUNSEL FURTHER SUBM ITTED THAT FINISHING OF THE FIRST FLOOR WAS COMPLETED IN ASSESSMENT YEAR 2007-0 8. LD. COUNSEL CLAIMED THAT IF THE AFORESAID RELIEFS ARE GRANTED TO THE ASSESS EE, THE DIFFERENCE BETWEEN THE BOOK VALUE OF INVESTMENT AND THE RESULTANT FIGURE ( AFTER ALLOWING RELIEF OF DVO) WOULD NOT BE MORE THAN 10%. IN SUCH A SITUATION, H E CLAIMED THAT AS PER RATIO OF DECISION OF AMRITSAR BENCH OF ITAT IN ITO VS. JMP E NTERPRISES 203 ITR (AT) 62 THE DIFFERENCE NEEDS TO BE IGNORED. LD. DEPARTMENT AL REPRESENTATIVE, ON THE OTHER HAND, PLACED RELIANCE UPON THE ORDERS OF THE ASSESSING OFFICER. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND OURSELVES IN AGREEMENT WITH THE CONTENTIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT VALUATION SHOULD BE DONE ON THE BASIS OF PWD RATES INSTEAD OF CPWD RATES. FURTHER, NECESSARY RELIEF ON ACCOUNT O F SELF-SUPERVISION CHARGES ALSO SHOULD BE GIVEN. THE ASSESSEES CLAIM REGARD ING THE FURNISHING WORK CARRIED OUT BY THE TENANTS AND THE FINISHING WORK B EING COMPLETED IN SUBSEQUENT ASSESSMENT YEAR ALSO NEED VERIFICATION. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE MATTER NEEDS TO BE REFERRED TO THE FILES OF ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH IN THE LIGHT O F OUR OBSERVATIONS AS ABOVE. ACCORDINGLY, THE ISSUE STANDS REMITTED TO THE FILES OF ASSESSING OFFICER TO CONSIDER THE SAME AFRESH IN THE LIGHT OF FOREGOING OBSERVATIONS. NEEDLESS TO ADD, THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. ITA NO.906/DEL/2009 ITA NO.3876/DEL/2009 4 9. ANOTHER ISSUE RAISED IN ITA NO.3876/DEL/2009 IS THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.5,00,000/- ON ACCOUNT O F GIFT. 10. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFI CER NOTED THAT FROM THE CAPITAL ACCOUNT FILED BY THE ASSESSEE IT WAS SEEN T HAT KM. AKSHITA JAIN, DAUGHTER OF SHRI MOHIT JAIN HAD SHOWN A GIFT OF RS.5,00,000/ - FROM ONE SHRI SUBHASH BANSAL THROUGH DD. HE OBSERVED THAT THE ASSESSEE C OULD NOT ELABORATE THE OCCASION AND THE RELATION OF THE DONOR TO THE DONEE NOR THE CREDIT WORTHINESS AND GENUINENESS OF THE DONOR WAS ESTABLISHED. HENCE, T HE ASSESSING OFFICER HELD THAT THE GIFT WAS TREATED AS INCOME FROM UNDISCLOSE D SOURCES IN THE HANDS OF MINOR DAUGHTER OF SHRI MOHIT JAIN AND ADDED TO THE INCOME OF THE ASSESSEE. BEFORE THE LD. CIT (A) IT WAS SUBMITTED THAT THE AS SESSING OFFICER HAD MADE THE ADDITION WITHOUT FURTHER INQUIRY. IT WAS CLAIMED T HAT THE ASSESSING OFFICER SHOULD HAVE EXAMINED THE DONOR IF SHE WAS NOT SATISFIED WI TH THE GIFT IN QUESTION. CONSIDERING THE ASSESSEES SUBMISSIONS, LD. CIT (A) HELD THAT IN HIS OPINION, THE ASSESSING OFFICER WAS NOT ABLE TO PROVE THAT HIS TR ANSACTION OF RS.5 LAC WAS FICTITIOUS. HE PROCEEDED TO DELETE THE ADDITION. AGAINST THIS THE REVENUE IS IN APPEAL BEFORE US. 11. IT HAS BEEN URGED BY THE REVENUE THAT THE ASSES SEE HAS FAILED TO PROVE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION AND THE DONOR AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR 292 ITR 552. LD. COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, SUB MITTED THAT NO OPPORTUNITY HAS BEEN PROVIDED TO THE ASSESSEE IN THIS REGARD, H ENCE, HE PRAYED THAT AN OPPORTUNITY MAY BE GRANTED TO THE ASSESSEE TO PROVE THE NECESSARY REQUIREMENT. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT INTEREST OF JUSTICE WILL BE SERVED IF THE MATTER IS REFERRED TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE ISSUE AFRESH AFTER GIVING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THIS ISSUE STANDS REMITTED TO THE FILES OF ASSESSING OFFICER. ITA NO.906/DEL/2009 ITA NO.3876/DEL/2009 5 13. IN THE RESULT, THESE APPEALS FILED BY THE REVEN UE STAND ALLOWED FOR STATISTICAL PURPOSES ONLY. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.04.20 10 UPON CONCLUSION OF HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 21.04.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES