M/s. Kulwinder Singh, Jalandhar V. The Addl.Commissioner of Income-tax, Jalandhar

ITA 404/ASR/2011

• Counselvise Citation: 40420914 RSA 2011
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LAXMAN SINGH
• Assessee Lawyers: RAJIV MAKOL
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.404(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN:ADVPS8383E SH. KULWINDER SINGH VS. ADDL. COMMR. OF INCOME-TAX , S/O SH. DARSHAN SINGH, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAJIV MAKOL, CA RESPONDENT BY:SH. LAXMAN SINGH, CIT(DR) DATE OF HEARING: 18/04/2012 DATE OF PRONOUNCEMENT:23/04/2012 ORDER PER BENCH; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 26.05.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: 1. THAT THE ORDER OF THE CIT(A), JALANDHAR IS CONTR ARY TO LAW AND THE FACTS OF THE CASE. 2 2. THAT THE ORDER OF THE CIT(A), JALANDHAR HAS ERRE D BOTH IN LAW AND FACTS IN UPHOLDING AN ADDITION OF RS.19,00,000/ - ON ACCOUNT OF DISALLOWANCE U/S 40A(3) OF I.T. ACT, 1961. 3. THAT THE ORDER OF THE CIT(A), JALANDHAR HAS ERRE D BOTH IN LAW AND FACTS IN UPHOLDING AN ADDITION OF RS.1,92,234/- ON ACCOUNT OF DISALLOWANCE OF DEVELOPMENT EXPENSES. 4. THAT THE ORDER OF THE CIT(A), JALANDHAR HAS ERRE D BOTH IN LAW AND FACTS IN UPHOLDING AN ADDITION OF RS.3,92,872 O N ACCOUNT OF INTEREST PAID FOR LOAN TAKEN FOR BUSINESS. 5. THAT THE ORDER OF THE CIT(A), JALANDHAR HAS ERRE D BOTH IN LAW AND FACTS IN UPHOLDING AN ADDITION OF RS.43,500/- O N ACCOUNT OF AGRICULTURAL INCOME BEING TREATED AS INCOME FROM OT HER SOURCES. 6. THAT THE ASSESSEE REQUEST TO ADD OR AMEND ANY GR OUND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF . 3. IN GROUND NO.1, THE BRIEF FACTS ARE THAT THE IS STATED TO BE A DEALER IN THE SALE AND PURCHASE OF PROPERTY. DURING THE YEAR, THE ASSESSEE PAID A SUM OF RS.19,00,000/- TO MRS. RENU BALA ON 31.08.2007, WHILE THE REST AMOUNT WAS PAID TOWARDS STAMP DUTY ETC. THE PROPERTY WAS R EFLECTED AS STOCK-IN- TRADE IN ASSESSEES BALANCE SHEET. ON SHOW CAUSE GI VEN WHY THE PAYMENT FOR PURCHASE MADE SHOULD NOT BE DISALLOWED UNDER SECTIO N 40A(3). THE ASSESSEE SUBMITTED THAT THE PROPERTY HAS BEEN PURCHASED AS F IXED ASSET WITH AN INTENTION TO BUILD THE ASSESSEES OFFICE COMPLEX O N THE SAME. THE ASSESSEE APPLIED TO THE MUNICIPAL CORPORATION FOR CHANGE OF LAND USE FROM RESIDENTIAL TO COMMERCIAL VIDE RECEIPT NO.3861/MTP DATED 21.09.2007. SINCE THE REQUISITE APPROVAL WAS NOT GRANTED ON T HE GROUND THAT THE PROPERTY DID NOT FULFILL COMMERCIAL GUIDELINES A ND DID NOT CHANGE LAND USE. THE PROPERTY WAS TRANSFERRED TO STOCK-IN -TRADE DURING THE SAME 3 YEAR. IT WAS SUBMITTED THAT THE PROPERTY WAS PURCHA SED AS FIXED ASSET AND THEREFORE, SECTION 40A(3) WAS NOT APPLIED TO THE PA YMENTS MADE FOR ACQUIRING THE PROPERTY. THE A.O. WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE FOR THE REASON THAT THE PROPERTY WAS N OT REFLECTED IN THE SCHEDULE OF FIXED ASSET. ACCORDINGLY, THE AO HELD THAT NONE OF THE CLAUSES OF RULE 6DD OF THE INCOME TAX RULES, 1962 HELPED THE CASE O F THE ASSESSEE. THE AO WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESS EE AND DISALLOWED THE CLAIM UNDER SECTION 40A(3) OF THE ACT. 4. BEFORE THE LD. CIT(A), THERE WAS QUESTION OF IDE NTITY, GENUINENESS AND CREDITWORTHINESS ETC. AND THE ASSESSEE SUBMITTE D THE EXPLANATION WHICH WAS FORWARDED TO THE AO FOR COMMENTS. IT WAS SUBMI TTED BY THE AO THAT THE LETTER SENT TO THE MUNICIPAL CORPORATION HAD BEEN ANNEXED AND IT DID NOT BEAR ANY STAMP OF RECEIPT OF MUNICIPAL CORPORA TION AND NO REJECTION LETTER HAD BEEN FILED BY THE ASSESSEE. THERE IS NO MENTION OF THE SAID PROPERTY IN THE SCHEDULE OF FIXED ASSETS FILED BY T HE ASSESSEE. THE CASE OF GROZ BECKRET SABOO LTD. 116 ITR 125 (SC) CANNOT B E MADE APPLICABLE IN THE PRESENT CASE OF THE ASSESSEE SINCE THE ASSESSEE HAD NOT PROVEN THAT AT THE INITIAL STAGE THE PURCHASE OF THE RESIDENTIAL PROPE RTY AS FIXED ASSET. THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT AND THE CROSS COMMENTS OF THE ASSESSEE UPHELD THE VIEW OF THE A.O. 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD MADE PAYMENT OF RS.19,00,000/- FOR THE PURCHASE OF THE PROPERTY DUR ING THE YEAR IN CASH. THERE IS NO DISPUTE TO THE FACT ALSO THAT THERE ASS ESSEE IS A TRADER IN THE PROPERTY. THE ASSESSEE IN THE PRESENT CASE, HAD SUB MITTED BEFORE THE LD. CIT(A), A COPY OF CONVERSION OF LAND USE DURING THE IMPUGNED YEAR TO TREAT THE SAME AS THE INVESTMENT WHICH WERE CLAIMED TO HA VE BEEN DENIED BY THE MUNICIPAL CORPORATION AND ACCORDINGLY THE PROPERTY WAS TREATED AS STOCK IN TRADE. ON VERIFICATION OF THE SAID LETTER FOR CONVE RSION OF THE LAND USE, IT WAS FOUND THAT THE SAID LETTER DID NOT BEAR STAMP RECEI PT OF THE MUNICIPAL CORPORATION. BEFORE US, THE ASSESSEE FILED THE SAID LETTER AT PB-10, BUT AT THE SAME TIME SAID LETTER WAS WITHDRAWN AND THE DOCUMEN T AT PB-10 WAS NOT PRESSED. THEREFORE, THERE IS NO EVIDENCE ON RECORD THAT THE ASSESSEE HAD ANY INTENTION AS INVESTMENT AT THE TIME OF PURCHASE OF THE PROPERTY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE BEING A TRADER OF THE PROPERTY HAD MADE THE PAYMENTS OF RS.19,00,000/- IN CASH, IS HEL D TO BE A TRADER IN THE PROPERTY. THEREFORE, THE PROVISIONS OF SECTION 40A( 3) ARE CLEARLY ATTRACTED. IN VIEW OF THE ABOVE FINDINGS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. 5 CIT(A), WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THUS, GROUND NO.2 OF THE ASSESSEE IS DISMISSED. 6. AS REGARDS GROUND NO.3, THE ASSESSEE HAS CLAIMED EXPENSES ON DEVELOPMENT CHARGES IN 3 PROPRIETORSHIP CONCERNS. THE EXPENDITURE WAS INCURRED ENTIRELY IN CASH AND WAS SUPPORTED BY SELF MADE VOUCHERS WHICH DID NOT EVEN CONTAIN NAMES AND SIGNATURES OF THE PARTIE S FROM WHOM PURCHASES HAVE BEEN MADE. THE ASSESSEE COULD NOT SUBMIT SATIS FACTORY EXPLANATION TO THE AO., THEREFORE, HE DISALLOWED 20% OF THE SAID E XPENDITURE AS BEING NOT VERIFIABLE FOR WANT FOR SUFFICIENT EVIDENCE. THE LD . CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE EXPENSES CLAIMED BY THE ASSESSEE IS NOT SUPPORT ED BY ANY EVIDENCE AND ONLY BY THE SELF MADE VOUCHERS WHICH DOES NOT CONTA IN THE NAMES AND SIGNATURES OF THE PARTIES FROM WHOM THE PURCHASES H AVE BEEN MADE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INF IRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE A.O. THUS, GROUND NO.3 OF THE ASSESSEE IS DISMISSED. 6 8. AS REGARDS GROUND NO.4, THE BRIEF FACTS ARE THAT THE AO DISALLOWED RS.3,92,872/- SINCE THE ASSESSEE HAD ADVANCED INTER EST FREE ADVANCES FOR NON-BUSINESS PURPOSES EVEN WHILE PAYING INTEREST ON BORROWINGS MADE BY HIM. THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS NOT ACCEPTED AND ACCORDINGLY THE AO DISALLOWED RS.3,92,872/-. THIS A CTION OF THE A.O. WAS CONFIRMED BY THE LD. CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS PER FINDINGS OF THE LD. CIT(A) IN PARA 4.7, THE BALANCE SHEET OF M/S. HARMAN BUILDERS SHOWS NEGATIVE CAPITAL OF RS.15,24 ,714/-. THE PROPRIETORSHIP CONCERN M/S. KAY ESS INTERNATIONAL S HOWS NEGATIVE BALANCES IN THE PROPRIETORS ACCOUNT OF RS.67,10,897/-. THER E IS NOTHING ON RECORD TO SHOW THAT SUM OF RS.1,94,14,459/- INCLUDES THE SUM OF RS. 48 LACS. FROM THE BALANCE SHEET OF THE THREE PROPRIETORSHIP CONCERNS, THE MOST OF THE ADVANCES GIVEN OF RS.1.94 CRORES ARE NOT FOR THE PURPOSES O F THE ASSESSEES OWN BUSINESS OR TO FRIENDS AND RELATIVES. BEFORE US ALS O, NOTHING HAS BEEN PLACED ON RECORD AND NOTHING HAS BEEN POINTED OUT THAT THE ASSESSEE WAS HAVING INTEREST FREE CAPITAL TO ADVANCE INTEREST FREE ADVA NCES AND ALSO NOTHING HAS BEEN BROUGHT ON RECORD FOR THE PURPOSE OF BUSINESS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. 7 CIT(A), WHO HAS RIGHTLY CONFIRMED THE ACTION OF TH E ASSESSING OFFICER. THUS, GROUND NO.4 OF THE ASSESSEE IS DISMISSED. 10. IN GROUND NO.5, THE BRIEF FACTS ARE THAT THE AS SESSEE HAD DECLARED AGRICULTURAL INCOME AT RS.1,93,550/- IN THE RETURN OF INCOME FILED BY HIM. THE ASSESSEE DID NOT FILE ANY EVIDENCE BUT SUBMITT ED DETAILS OF LAND HOLDING ONLY. ACCORDINGLY, THE ASSESSING OFFICER TREATED RS .1,00,000/- AS INCOME FROM OTHER SOURCES. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD NOT APPEALED AGAINST A SIMILAR ADDITION MADE IN THE A SSESSMENT YEAR 2005-06. THE LD. CIT(A) ESTIMATED THE AGRICULTURAL INCOME AT RS.1,50,000/- WHICH WOULD TRANSLATE INTO A YIELD OF APPROXIMATELY RS.30 ,000/- PER ACRE AND ACCORDINGLY ADDITION OF RS.43,550/- WAS UPHELD. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE WAS NO EVIDENCE WITH REGARD TO THE AGRICULTUR AL INCOME SHOWN BY THE ASSESSEE BUT ONLY WITH RESPECT TO THE LAND HOLDING. IN SUCH A SITUATION, ONLY ESTIMATE CAN BE MADE AND AO HAD ACCORDINGLY BY MAKI NG ESTIMATION OF AGRICULTURAL INCOME HAS TREATED RS.1,00,000/- FROM OTHER SOURCES, WHICH ADDITION HAS RIGHTLY BEEN RESTRICTED BY THE LD. CIT (A) TO RS.43,550/- BY TREATING THE AGRICULTURAL INCOME AT RS.1,50,000/-. WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS ACCORDINGLY UPHELD. THUS, GROUND NO.5 OF THE ASSESSEE IS DISMISSED. 8 11. GROUND NOS. 1 & 6 ARE GENERAL IN NATURE, THEREF ORE, THE SAME DO NOT REQUIRE ANY ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.404(ASR)/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD APRIL, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23RD APRIL, 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:SH. KULWINDER SINGH S/O SH.DARSHAN SIN GH, JALANDHAR. 2. THE ADDL. CIT, R-III, JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, ASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.