Teen Murti Products Pvt. Ltd., New Delhi V. ACIT Central circle, Ghaziabad

ITA 4223/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5117 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Value adopted by valuation officer; Capital asset; Fair market value; Valuation report
• Section: 55A; 153; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (E-COURT MODULE) ITA NO. 4223/DEL/2019 : ASSTT. YEAR : 2009-10 TEEN MURTI PRODUCTS PVT. LTD., C/O RAJ KUMAR & ASSOCIATES, CA, L-7A (LGF), SOUTH EXTENSION, PART-II, NEW DELHI VS ACIT, CENTRAL CIRCLE, GHAZIABAD (APPELLANT) (RESPONDENT) PAN NO. A ABCT3359B ASSESSEE BY : SH. RAJ KUMAR, CA REVENUE BY : SH. H.K. CHOUDHARY, CIT DR DATE OF HEARING: 30.09.2020 DATE OF PRONOUNCEMENT: 12.10.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-27, NEW DELHI DATED 07. 03.2019. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, REFERENCE TO DVO FOR ESTIMATING THE COST OF REPAIR AND RENOVATION OF BUILDING IS ABSOLUTELY ILLEGAL AN D UN-CALLED FOR IN LAW AS WELL AS ON MERITS. 1.1 THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH, THE ISSUE OF INVESTMENT IN BUILDING IS BEYOND THE JURISDICTION O F ASSTT. U/S. 153 A AND CONSEQUENTLY THE REFERENCE TO VALUATION CELL IS ALSO UN-CALLED FOR. ITA NO. 4223/DEL/2019 TEEN MURTI PRODUCTS PVT. LTD. 2 1.2 THAT WITHOUT PREJUDICE, THE VALUATION MADE BY THE DVO AT RS.37,50,585/- AGAINST DECLARED IN BOOKS AT RS.34,43,318/- THEREBY IN EXCESS BY RS.3,07,267/- IS ABSOLUTELY UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 1.3 THAT THE LD. AO AGAIN ERRED IN LAW AS WELL AS ON MERITS IN MAKING ADDITION OF RS.3,07,267/- U/S. 69 B FOR ALLEGED UN - EXPLAINED EXPENDITURE IN RENOVATION AND REPAIR OF BUILDING OUT OF TOTAL DIFFERENCE OF RS. 17,46,560/- FOR A.Y.07-08, 08-09 & 09-10 COLLECTIVELY. NO ADDITION AT ALL SHOULD HAVE BEEN MADE. 1.4 THAT WITHOUT PREJUDICE, THE NOMINAL DIFFERENCE OF 7.5% BETWEEN THE VALUATION AS PER DVO REPORT AND AS DECLARED BY THE ASSESSEE AND SINCE THE DVO REPORT IS SIMPLY BASED ON HUMAN ESTIMATIONS, THEREFORE IN THE ABSENCE OF ANY MATERIAL FOUND SHOWING UNACCOUNTED INVESTMENT IN CONSTRUCTION / RENOVATION, THE DVO REPORT SHOULD NOT BE ACTED UPON AND ADDITION OF RS.3,07,267/- SHOULD NOT BE MADE. 3. A SEARCH & SEIZURE OPERATION WAS CONDUCTED ON 09 .10.2009 U/S 132 OF THE INCOME TAX ACT, 1961 IN THE PREMISES OF M/S MANKIND PHARMA LTD. AND ITS ASSOCIATED COMPANIES, R ESIDENTIAL PREMISES OF THE DIRECTORS AND THEIR RELATIVES WERE ALSO COVERED. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153A, THE AO OBSERVED THAT THE ASSESSEE HAS MADE INVESTMENT I N THE BUILDING IN THE YEARS UNDER CONSIDERATION. ACCORDIN GLY, THE AO HAS REFERRED THE MATTER TO DVO VIDE LETTER DATED 17 .10.2011. THE REPORT OF DVO DATED 21.12.2011 MADE AN ESTIMATE OF INVESTMENT AT RS.2,49,06,552/- AS AGAINST RS.2,31,5 9,992/- IN THE BOOKS OF THE ASSESSEE IN DIFFERENT ASSESSMENT Y EARS AS UNDER: ITA NO. 4223/DEL/2019 TEEN MURTI PRODUCTS PVT. LTD. 3 A.Y. VALUE AS PER VALUATION REPORT OF DVO VALUE AS PER BOOKS DIFFERENCE PERCENTAGE (1) (2) (3) (4) 2007 - 08 67,61,858/ - 62,07,891/ - 5,53,967/ - 8.92% 2008 - 09 1,43,94,109/ - 1,35,08,783/ - 8,85,326/ - 6.55% 2009 - 10 37,50,585/ - 34,43,318/ - 3,07,267/ - 8.92% TOTAL 2,49,06,552/ - 2,31,59,992/ - 17,46,560/ - 7.54% 5. ACCORDINGLY, THE AO AFTER GIVING REASONABLE OPPO RTUNITY TO THE ASSESSEE, ADDED THE DIFFERENCE OF AMOUNTS MENTI ONED IN COL. 4 ABOVE IN RESPECTIVE ASSESSMENT YEARS. THE ADDITIO N MADE FOR A.Y. 2009-10 IS AT RS.3,07,267/-. 6. THE LD. CIT (A) CONFIRMED THE ADDITION MADE BY T HE AO. WHILE HOLDING SO, THE LD. CIT (A) OBSERVED AS UNDER : 5.3 THE APPELLANT HAS FURTHER TAKEN THE PLEA THAT THE DIFFERENCE IN VALUATION IS VERY SMALL AND EVEN SECTION 55A(B) ALL OWS REFERENCE TO DVO ONLY IF IN THE OPINION OF AO DIFFERENCE IS MORE THAN 15%. HE CONTENDED THAT THE DIFFERENCE HERE IS ONLY 7.5% AND SHOULD BE IGNORED. IT IS OBSERVED THAT SECTION 55A(B) GIVES A NOTHER PARAMETER OF ABSOLUTE DIFFERENCE OF RS.25,000,/- ALSO. IN THE PRESENT FACTS OF THE CASE THE DIFFERENCE IN INVESTMENT IS MUCH MORE THAN THIS AMOUNT. THEREFORE, THIS PLEA OF THE APPELLANT IS AL SO REJECTED. 7. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 1. THE CO-ORDINATE BENCH OF ITAT DELHI IN THE CASE OF ALOK SWAROOP IN ITA NO. 2191/DEL/2015 HELD THAT THE DIFF ERENCE UPTO 10% WITH REGARD TO DVO REPORT CAN BE IGNORED. 2. THE HONBLE HIGH COURT OF JAMMU & KASHMIR IN THE CA SE OF HONEST GROUP OF HOTELS PVT. LTD. VS CIT (177 CTR 23 2) ITA NO. 4223/DEL/2019 TEEN MURTI PRODUCTS PVT. LTD. 4 HELD THAT 10% OF THE DIFFERENCE OF THE VALUE ESTIMA TED BY THE DVO IS LIABLE TO BE IGNORED. 3. THE HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS PRATAP SINGH, AMRO SINGH, RAJENDRA SINGH 200 ITR 78 8 HELD THAT 10% DIFFERENCE IN THE VALUATION BEING AN ISSUE OF ESTIMATION, CAN BE IGNORED. 4. SECTION 55A(B) READS AS UNDER: SECTION 55A. WITH A VIEW TO ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET FOR THE PURPOSES OF THIS CHAPTER, THE ASSESSING OFFICER MAY REFER THE VALUATION OF CAPITAL ASSET TO A VALUATION OFFICER- (A) (B) .., IF THE ASSESSING OFFICER IS OF OPINION- (I) THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE* OF THE VALUE OF THE ASSET AS SO CLAIMED OR BY MORE THAN SUCH AMOUNT AS MAY BE PRESCRIBED IN THIS BEHALF. *THE PRESCRIBED PERCENTAGE OF VALUE OF ASSET REFERR ED TO IN SECTION 55A(B)(I) IS 15% AMOUNT REFERRED TO IN SECT ION 55A(B)(I). 5. CONDITIONS OF REFERENCE TO VALUATION OFFICER AS PER RULE 111AA READS : RULE 111AA: THE PERCENTAGE OF THE VALUE OF THE ASSET AND THE AMOUNT REFERRED TO IN SUB-CLAUSE (I) OF CLAUSE (B) OF SECTION 55A SHALL, RESPECTIVELY, BE 15% AND RS.25,000/-. ITA NO. 4223/DEL/2019 TEEN MURTI PRODUCTS PVT. LTD. 5 8. THUS, FROM A STRAIGHT READING OF THE PROVISIONS OF THE ACT U/S 55A(B)(I), RULE 111AA, ORDERS OF THE ITAT, JUDG MENTS OF THE HONBLE HIGH COURTS AND KEEPING IN VIEW THE FACT TH AT THE ESTIMATION MADE BY THE DVO DIFFERS ONLY 8.92% WITH THAT OF THE FAIR MARKET VALUE, WHICH IS LESS THAN 15% PRESCRIBE D BY THE PROVISIONS OF THE ACT AND THE LESS THAN 10% AS HELD BY THE VARIOUS JUDICIAL FORUMS, WE HEREBY DIRECT THAT THE ADDITION MADE BY THE AO BE OBLITERATED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/10/2020. SD/- SD/- (BHAVNESH SAINI) (D R. B. R. R. KUMAR) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: 12/10/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR