Asstt. CIT Cir.2, Nashik, Nashik V. Shri Ram Bhangatram Sadhwani, Nashik

ITA 396/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3062 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 13-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S SINGH
• Keywords: Unexplained investment; Valuation report
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER SL. NO. ITA NO. A.Y. APPELLANT RESPONDENT 1. 396/PN/07 2003-04 ASSTT. COMMISSIONER OF INCOME-TAX, CIR.2 NASHIK PAN ARHPS4096A SHRI RAM BHAGATRAM SADHWANI, NASHIK 2. 85/PN/09 2003-04 ASSTT. COMMISSIONER OF INCOME-TAX, CIR. 2, NASHIK PAN ARHPS4191E SHRI KISHAN BHAGATRAM SADHWANI, NASHIK APPELLANTS BY : SHRI A S SINGH RESPONDENT BY : SHRI NIKHIL PATHAK ORDER PER G S PANNU, A.M: IN BOTH THE CAPTIONED APPEALS, THE ISSUE INVOLVED I S IDENTICAL AND, THEREFORE, WE FIND IT EXPEDIENT TO PASS A COMMON OR DER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. ITA NO 396/PN/2007 IS AN APPEAL BY REVENUE DIRE CTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, NAS IK DATED 2.1.2007 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 30.3.2006 PASS ED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2003-04. ITA NO 396/PN/07 & 85/PN/09 SHRI RAM B SADHWANI , & KISHAN B SADHWANI, NASHIK 2 3. IN THIS CASE, THE ASSESSEE FILED A RETURN OF INC OME FOR THE ASSESSMENT YEAR 2003-04 ON 28.11.2003 DECLARING A LOSS OF RS 17,93, 220/-. THE RETURN OF INCOME WAS ACCOMPANIED WITH A STATEMENT OF COMPUTATION OF INCOME, AUDIT REPORT ALONG WITH AUDITED STATEMENT OF ACCOUNT AS REQUIRED UNDER SECTION 44AB OF THE ACT, BALANCE SHEET, PROFIT & LOSS ACCOUNT, ETC. RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IN THE ASSESSMENT FINALIZED UNDER SECTION 143(3) OF THE ACT DATED 30.3.2006, TOTAL INCOME WAS DETERMINED AT RS 1,17,06,965/-. THE DISP UTE IN THE PRESENT PROCEEDINGS RELATES TO AN ADDITION OF RS 1,53,92,54 1/- MADE TO THE RETURNED INCOME ON ACCOUNT OF DIFFERENCE BETWEEN THE COST OF CONSTRUCTION OF A BUILDING DECLARED BY THE ASSESSEE, AND AS DETERMINED BY THE DEPARTMENTAL VALUATION OFFICER. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS SIN CE DELETED THE SAID ADDITION, AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US, AT THE TIME OF HEARING, THE LEARNED R EPRESENTATIVE FOR THE RESPONDENT-ASSESSEE SUBMITTED THAT, IN SUPPORT OF T HE CONCLUSION ARRIVED AT BY THE COMMISSIONER OF INCOME-TAX (APPEALS), THE FOLLO WING ALTERNATIVE PLEA HAS BEEN RAISED: THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF BUILDING WAS NOT JUSTIFIED SINCE THE ASSESSEE HAD M AINTAINED PROPER ACCOUNTS AND THE LEARNED A.O HAD NOT POINTED OUT AN Y DEFECTS IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND HENCE, THER E WAS NO REASON TO REFER THE MATTER TO THE DVO FOR VALUATION OF THE PR OPERTY AND ACCORDINGLY, THE ADDITION MADE IS NOT JUSTIFIED. IT WAS ALSO SUBMITTED BY THE PARTIES THAT THE SAID PLEA WAS ADMITTED FOR ADJUDICATION BY OUR PRECEDING BENCH, VIDE ORDER DAT ED 6.5.2009, WHICH IS ON RECORD. ACCORDINGLY, BOTH THE PARTIES ADVANCED ARGU MENTS ON THE AFORESAID PRELIMINARY PLEA RAISED BY THE RESPONDENT-ASSESSEE AND THE MATTER IS BEING ITA NO 396/PN/07 & 85/PN/09 SHRI RAM B SADHWANI , & KISHAN B SADHWANI, NASHIK 3 DISPOSED OF BY ADVERTING TO THE SAID PLEA ONLY, SIN CE THE ISSUE RAISED THEREIN GOES TO THE ROOT OF THE MATTER. 6. THE PLEA OF THE LEARNED REPRESENTATIVE FOR THE ASSESSEE WAS THAT FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA V CIT 328 ITR 513 (SC), THE ASSESSING OFFIC ER COULD NOT HAVE REFERRED THE MATTER FOR VALUATION TO THE DEPARTMENTAL VALUAT ION OFFICER IN THIS CASE, AS THE COST OF CONSTRUCTION HAS BEEN DECLARED BY THE ASSES SEE AS PER THE ACCOUNT BOOKS AND THE SAME HAVENT BEEN REJECTED BEFORE MAK ING A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER. IN THIS CONNECTION, OUR ATTENTION HAS BEEN DRAWN TO THE ASSESSMENT ORDER, WHEREIN IT IS NOTICED THAT THE BOOKS OF ACCOUNT, INCLUDING BILLS, VOUCHERS ETC. WERE EXAMINED BY THE ASSESSING OFFICER AND THERE IS NO ADVERSE OBSERVATION OF THE ASSESSING OFFICER IN THIS REGARD. IT WAS ARGUED THAT HAVING NOT REJECTED THE BOOKS OF ACCOUNT, THE REFERENCE MADE TO THE DEPARTMENTAL VALUATION OFFICER WAS NOT TENABLE AND, THEREFORE, THE IMPUGNED ADDITION BASED ON SUCH A REFERENCE IS NOT TENABLE I N ORDER TO MAKE THE IMPUGNED ADDITION. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE HAS SOUGHT TO CONTEND THAT IN THIS CASE REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER WAS JUSTIFIED BECAUS E THE ASSESSEE DID NOT FILE ANY VALUATION REPORT IN SUPPORT OF THE INVESTMENT M ADE IN THE BUILDING CONSTRUCTED DURING THE YEAR. ACCORDINGLY, HE HAS SO UGHT TO JUSTIFY THE ACTION OF THE ASSESSING OFFICER ON THIS SCORE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. IN THIS CASE, THE ASSESSEE WAS FOUND TO HAVE CONSTRUCTED A BUILDING D URING THE YEAR KNOWN AS BMS SUPER MARKET AND THE TOTAL INVESTMENT TOWARDS THIS CONSTRUCTION WAS DECLARED AT RS 1,41,35,459/- IN THE STATEMENT OF AC COUNTS. THE ASSESSING OFFICER REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION O FFICER TO ASCERTAIN THE COST OF ITA NO 396/PN/07 & 85/PN/09 SHRI RAM B SADHWANI , & KISHAN B SADHWANI, NASHIK 4 CONSTRUCTION. THE DEPARTMENTAL VALUATION OFFICER DE TERMINED THE COST OF CONSTRUCTION AT RS 2,95,28,000/-, AND ACCORDINGLY, THE DIFFERENCE OF RS 1,53,92,541/- BETWEEN THE COST OF CONSTRUCTION AS S HOWN BY THE ASSESSEE IN HIS STATEMENT OF ACCOUNTS AND THAT DETERMINED BY THE DE PARTMENTAL VALUATION OFFICER WAS ADDED TO THE RETURNED INCOME AS UNEXPLAINED INV ESTMENT IN THE COST OF CONSTRUCTION OF THE PROPERTY BMS SUPER MARKET. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSESSEE ASSA ILED THE COST OF CONSTRUCTION DETERMINED BY THE DEPARTMENTAL VALUATI ON OFFICER ON VARIOUS COUNTS. AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE COST OF CONSTRUC TION ADMITTED BY THE ASSESSEE WAS QUITE REASONABLE AND DOES NOT REQUIRE ANY ALTER ATION BASED ON THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER. ACCORDINGLY, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER REGARDING THE DIFFERENCE IN C OST OF CONSTRUCTION. 9. IN SUPPORT OF THE AFORESAID CONCLUSION, ALTERNAT IVE PLEA RAISED BY THE ASSESSEE IS TO THE EFFECT THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED, AND IN THE ABSENCE OF THE SAME, ASSESSING OFFICER COULD NO T HAVE REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER. FACTUALLY SPEAK ING, AN EXAMINATION OF THE ASSESSMENT ORDER REVEALS THAT NO DISCREPANCY OR INF IRMITY IN THE COST OF CONSTRUCTION REFLECTED IN THE BOOKS OF ACCOUNT MAIN TAINED BY THE ASSESSEE HAVE BEEN BROUGHT OUT. IN FACT, IN PARAGRAPH 6 OF THE AS SESSMENT ORDER, VARIOUS DETAILS REGARDING CONSTRUCTION OF IMPUGNED BUILDING HAVE BE EN CALLED FOR BY THE ASSESSING OFFICER, AND WHICH HAS ALSO BEEN STATED T O HAVE BEEN TEST-CHECKED. BOOKS OF ACCOUNT HAVE NOT BEEN FOUND TO BE UNRELIAB LE OR REJECTED AND, THEREFORE, UNDER THESE CIRCUMSTANCES, ASSESSING OFFICER WAS NO T JUSTIFIED IN RESORTING TO REFERRING THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER TO ASCERTAIN THE COST OF CONSTRUCTION OF THE BUILDING. FOLLOWING THE PARITY OF REASONING UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA (SUPRA), IT IS HELD THAT ITA NO 396/PN/07 & 85/PN/09 SHRI RAM B SADHWANI , & KISHAN B SADHWANI, NASHIK 5 WHERE THE ASSESSING OFFICER HAS REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER WITHOUT REJECTING THE BOOKS OF AC COUNT, AND HAS MADE AN ADDITION BASED ON THE DEPARTMENTAL VALUATION OFFICE RS REPORT, SUCH AN ADDITION WOULD BE MISCONCEIVED. HAVING REGARD TO THE FACTUAL MATRIX AS EMERGING FROM THE ORDERS OF THE AUTHORITIES BELOW, IT IS CLEAR THAT T HE AFORESAID PROPOSITION IS CLEARLY ATTRACTED IN THE PRESENT CASE. WE, THEREFORE, AFFIR M THE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN DELETING TH E ADDITION, ALBEIT ON A DIFFERENT GROUND. 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IN ITA NO 396/PN/07 IS DISMISSED. 11. IT WAS A COMMON GROUND BETWEEN THE ARTIES THAT THE FACTS AND CIRCUMSTANCES IN ITA NO 85/PN/09 IN THE CASE OF SHR I KISHAN BHAGATRAM SADHWANI, NASHIK ARE IDENTICAL, THUS OUR DECISION I N ITA NO 396/PN/07 WILL APPLY MUTATIS MUTANDIS TO THIS CASE ALSO AND ACCORDINGLY, APPEAL OF THE REVENUE IN ITA NO 85/PN/09 IS ALSO DISMISSED. 12. RESULTANTLY, BOTH THE CAPTIONED APPEALS BY THE DEPARTMENT ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF DE CEMBER, 2010. (I C SUDHIR) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNTA NT MEMBER PUNE DATED: DECEMBER, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENTS 3) THE CIT (A)I PUNE. 4) THE CIT I PUNE. 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., PUNE. BY ORDER TRUE COPY ASST. REGISTRAR, ITA NO 396/PN/07 & 85/PN/09 SHRI RAM B SADHWANI , & KISHAN B SADHWANI, NASHIK 6 I.T.A.T., PUNE B