Asstt. Commissioner of Income Tax, Lucknow V. Shri Ramu Gupta, Lucknow

ITA 43/LKW/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4139 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SINGH SHRI J J MEHROTR
• Keywords: Unexplained investment; Search and seizure; Loose papers; Valuation report; Documents seized
• Section: 142(1); 133A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI. P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI ABY T VARKEY, JUDICIAL MEMBER ITA NO.43/LKW/2015 ASSESSMENT YEAR:2007-08 ASSTT. CIT CENTRAL CIRCLE II LUCKNOW V. SHRI RAMU GUPTA B-35, SECTOR F, ALIGANJ LUCKNOW TAN/PAN:AETPG9505M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI A. K. SINGH, CIT(DR) RESPONDENT BY: SHRI J. J. MEHROTRA, C.A. DATE OF HEARING: 04 07 2016 DATE OF PRONOUNCEMENT: 29 07 2016 O R D E R PER ABY T VARKEY, J.M: THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-III, LUCKNOW DATE D 30.9.2014 FOR THE ASSESSMENT YEAR 2007-08. 2. THE SOLE GROUND RAISED BY THE RE VENUE IS AGAINST THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDI TION OF RS.58,23,238/- MADE UNDER SECTION 69 OF THE INCO ME-TAX ACT, 1961 (HEREINAFT ER REFERRED IN SHORT 'THE ACT') ON ACCOUNT OF UNEXPLAINED INVESTMENT IN I MMOVABLE PROPERTY WITHOUT APPRECIATING THE FACT THAT PRIOR TO REFE RRING THE PROPERTY IN QUESTION TO THE VALUATION OFFICER FO R ESTIMATING THE COST OF INVESTMENT, THE ASSESSING OFFICER HAD REJECTED TH E BOOKS OF ACCOUNT OF THE ASSESSEE :-2-: AND DULY RECORDED REASONS FOR THE SAME ON 27.8.2012 AND ALSO MADE A NOTE SHEET ENTRY ON 27.8.2012. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER AND RETAIL TRADER OF BA KERY ITEMS. THE ASSESSEE HAS FILED THE RETURN DECLARING A TOTAL INCOME OF RS.1,65,595/- PLUS AGRICULTURAL INCOME OF RS.1,89,400/-. THE ASSE SSMENT WAS COMPLETED ON A TOTAL INCOME OF RS.60,83,530/- + RS.94, 700/-. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE AC T WAS CONDUCTED ON 14.9.2010 AT THE COMMERCIAL AND RESIDENTIAL PREM ISES OF SHYAM SWAAD MISTHAN AND MR BROWN BAKERY GROUP BASED AT LU CKNOW. SIMULTANEOUSLY SURVEY PROCEEDINGS UNDER SECTION 133A OF TH E ACT WERE ALSO CARRIED OUT AT MANY PREMISES BELONGING TO TH E ASSESSEE GROUP AND ITS BUSINESS ASSOCIATES. DURING THE COURSE OF SE ARCH, VARIOUS DOCUMENTS IN THE FORM OF BOOKS OF ACCOUNT, LOOSE PAPERS AN D COMPUTERS, ETC WERE SEIZED AND IMPOUNDED. 4. FROM THE DOCUMENTS SEIZED DURING SEARCH PROCEEDINGS REVEALED THAT THE ASSESSEE HAD MADE INVESTMENT IN PURCHASE AND CONSTRUCTION OF IMMOVABLE PROPERTY SITUATED AT SHYAM NAMKEEN AND BAKERS SHOP AT PANDEY TOLA , SECTOR P, ALIGANJ, LU CKNOW. WHEN ASKED TO EXPLAIN VIDE LETTER DATED 13.7.2012, TH E ASSESSEE HAS FURNISHED DETAILED REPLY RELATING TO THE INVESTMENTS MADE IN PURCHASE AND CONSTRUCTION OF PROPERTIES. HOWEVER, THE ASSESSING O FFICER WAS OF THE OPINION THAT SINCE :-3-: THE ASSESSEE COULD NOT FURNISH ANY SUPP ORTIVE BILLS & VOUCHERS FOR COST OF CONSTRUCTION AND COULD NOT PRODUC E VALUATION REPORT OF ANY APPROVED VALUER, ACCORDING TO TH E ASSESSING OFFICER, TH E ASSESSEE COULD NOT BE GIVING CORRECT AND COMPLETE PICTURE OF TOTAL INVESTMENT. HE, THEREFORE, REFERRED THE MATTER TO THE DVO ON 27.8.2012 FOR ESTIMATING THE COST OF INVESTMENT. 5. THEREAFTER THE DVO ESTIMATED THE INVESTMENT IN PURCHASE AND CONSTRUCTION OF THE PROPERTY AT PAND EY TOLA, SECTOR P, ALIGANJ, LUCKNOW AT RS.38,91,200/- AS AGAINS T THE DECLARED COST OF CONSTRUCTION/INVESTMEN T BY THE ASSESSEE AT RS.5,89,600/-. THE ASSESSING OFFICER CONSIDERING THE OWNE RSHIP OF THE PROPERTY IN THE JOINT NAMES OF THE ASSESSEE AND HIS WIFE, SMT. TANUSHREE GUPTA, ADDED 50% OF THE DIFFERENCE AMOUNT ING TO RS.16,50,800/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT. THE DVO ALSO ESTIMATED THE COST OF PROPERTY SITUATED AT B-35, SECT OR P, ALIGANJ AT RS.57,97,229/- AS AGAINST THE DECLARED COST IN CONSTR UCTION/INVESTMENT BY THE ASSESSEE AT RS.16,24,791/-. THE ASSESSING OFFICE R ACCORDINGLY ADDED THE DIFFERENCE AMOUNT OF RS.41,72,438/- TO THE INCO ME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT, THUS TOTALING A DDITION OF RS.58,23,238/-. 6. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE TH E ADDITIONS MADE BY THE ASSESSING OFFICER. :-4-: 7. AGGRIEVED, THE REVENUE IS IN APPE AL BEFORE US AND THE LD. D.R. PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. THE LD. D.R. FURTHER CONTENDED THAT TH E BOOKS OF ACCOUNT OF THE ASSESSEE WAS DULY REJECTED BY THE ASSESSING OFFICER, TH EREFORE, THE RELIANCE PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT, 197 TAXMAN 203 IS NOT APPLICABLE TO THE PRESENT CASE AND THE LD. CIT(A) ERRED IN RELYING ON THE SA ID DECISION OF THE HON'BLE SUPREME COURT TO GIVE RELIEF TO THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE SE T ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 8. THE LD. A.R. OF THE ASSESSEE, ON THE OTHER HAND, PLACED RELIANCE UPON THE ORDER OF THE LD. CI T(A). THE LD. A.R. OF THE ASSESSEE CONTENDED THAT A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER WILL REVEAL THAT THE ASSESSING OFFICER MADE TH E REFERENCE TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT AS STATUTORILY REQUIRED UNDER THE PROVISIONS OF THE ACT, TH EREFORE, THE LD. CIT(A) RI GHTLY RELIED ON THE ORDER OF THE HON'BLE SUPREME COURT IN SARGAM CINEMA VS. CIT (SUPRA). MOREOVER, NO SHOW CAUSE NOTICE WA S ISSUED OR ANY OPPORTUNITY WAS AFFORDED TO THE ASSESSEE BEFORE MAKING REFERENCE TO THE DVO FOR ASCERTAINING THE COST OF INVESTMENT MADE IN THE PROPERTY, AND THEREFORE, HE DOES NOT WANT US TO INTERFER E IN THE ORDER OF THE LD. CIT(A). :-5-: 9. WE HAVE HEARD BOTH THE PARTIE S AND PERUSED THE RECORD. THE CONTENTION OF THE LD. D. R. WAS THAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE ASSESSING OFFICER AND IN SUPPORT OF HIS SUBMISSION THE LD. D.R. HAS FILED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT AS ANNEXURE A , WHICH IS REPRODUCED AS UNDER TO SEE WHETHER THE LD. D. R.S CONTENTION IS CORRECT OR NOT:- M/S SHYAM BAKERS AND NAMKEEN SH OP AT PANDEY TOLA-P ALIGANJ, LUCKNOW, THIS PROPERTY WAS PUR CHASED IN NOVEMBER 2006. TANU SHREE GUPTA AND RAMU GUPTA ARE THE OWNER OF THIS PROPERTY AND PROPERTY SITUATED AT B-35, SECTOR -P, ALIGANJ, LUCKNOW ALSO JOINTLY OWNED BY BOTH OF THE ASSESSEE. VIDE NOTICE U/S 142(1) DATED 13.07.2012 ASSESSEE WAS ASKED TO PRODUCE COMPLETE BILLS AND VOUCHERS FOR JUSTIFICATION OF THE TOTAL INVESTMENT MADE IN THESE PROPERTIES. BUT ASSESSEE COULD NO T PRODUCE SUPPOR TIVE EVIDENCE ON THE BASIS OF WHICH ACTUAL COST OF CONSTRUCTION MAY BE DETERMINED. LOOKING TO THE QUALITY OF CONSTRUCTION WHICH IS OF HIGH QUALITY THE INVESTMENT IN SHOP AND RESIDENTIAL PROPERTY APPEARS TO BE MUCH HIGHER. IN ABSENCE OF THE DETAIL AS ASKED THE SPECIFIC DEFICIENCIES IN THE AC COUNTS COULD NOT BE INVESTIGATED/COMMENTED. HENCE THE ACCOUNT SUBMITTED BY ASSESSEE ARE NOT BE RELIANCE WORTHY AND IT CAN CONSIDERED TH AT ASSESSEE HAS NOT MAINTAINED COMPLETE BOOKS OF ACCOUNTS AS REGARD TO THE CONSTRUCTION ACCOUNT OF THE SUBJECTED PROPERTIES. SO I DO NOT HAVE ANY OTHER OPTION OTHER THAN TAKING VIEW OF EXPERT OF THIS FIELD. SO ESTIMATE MADE BY ASSESSEE IS HERE BY REJECTED IN ABSENCE OF ANY DOCUMENTARY BILLS /VOUCHERS. THEREFORE FOR ASCERT AINING THE ACTUAL COST OF CONSTRUCTION, THE ABOVE PROPERTY IS BEING REFERRED TO THE ASSISTANT VALUATION OFFICER. 10. A BARE READING OF THE AFORESAID RE ASONS RECORDED BY THE ASSESSING OFFICER GOES TO SHOW THAT THE AS SESSING OFFICER HAS NOTED THAT ASSESSEE :-6-: HAS NOT MAINTAINED COMPLETE BOOK S OF ACCOUNTS AS REGARD TO THE CONSTRUCTION ACCOUNT OF THE SUBJECTE D PROPERTIES. SO I DO NOT HAVE ANY OTHER OPTION OTHER THAN TAKING VIEW OF EXPERT OF THIS FI ELD. SO ESTIMATE MADE BY ASSESSEE IS HERE BY REJE CTED IN ABSENCE OF ANY DOCUMENTARY BILLS /VOUCHERS, WHICH CLEARLY SPELLS OUT THAT THE ASSESSING OFFICER IS NOT SATISFIED WITH THAT PART OF THE B OOKS MAINTAINED BY THE ASSESSEE IN RESPECT TO THE CONSTRUCTION ACCOUNT OF THE SUBJECTED PROPERTY WHEREAS IN OUR CONSIDERED OPINION, THIS PARTIAL SATISFACTION DOES NOT FULFILL THE CONDITION PRECEDENT LAID DOWN IN SE CTION 145(3) OF THE ACT AND SO THE AFORESAID REASON GIVEN BY THE AO CANNOT SATISF Y THE REQUIREMENT OF LAW TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER, BEFORE REFERRING THE MATTER TO DVO FO R VALUATION OF THE INVESTMENT IN THE PROPERTY, SHOULD HAVE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THAT TOO AFTER SATISFYING THE CONDITI ONS PRECEDENT AS ENVISAGED UNDER SECTION 145(3) OF THE ACT AND WITHOUT DOING SO, AS FOUND BY US, VITIATES THE REFERENCE MADE BY THE ASSESSING O FFICER TO THE DVO. IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 197, TAXMAN 203 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT THE REFERENCE MADE TO THE VALUATION OFFICER UNDER SECT ION 142A OF THE ACT WITHOU T REJECTING THE BOOKS OF ACCOUNT FOR ASCERTAINING THE COST OF INVE STMENT IS INVALID AND BAD IN LAW. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED TO MAKE REFERENCE TO THE DVO FOR ASCERTAINING THE COST OF INVESTMENT WITHOUT REJE CTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. :-7-: MOREOVER, THIS IS A SEARCH CASE AND IT IS AN UNDISPUTED FACT THAT NO INCRIMINATING MATERIAL WAS FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE. 11. THE HON'BLE DELHI HIGH COURT IN TH E CASE OF CIT VS. KABUL CHAWLA IN ITA NO.707 & 709/2014 CO NSIDERED THE QUESTION AS TO WHETHER ANY ADDITION CAN BE MADE FOR THE ASSE SSMENT YEAR WHICH IS NOT PENDING BEFORE THE ASSESSING OFFI CER ON THE DATE OF SEAR CH AND AFTER CONSIDERING THE FOLLOWING DECISIONS:- 1. MADUGULA VENU V. DIRECTOR OF INCOME TAX [2013] 29 TAXMANN.COM 200 (DELHI) 2. CIT V. CHETAN DAS LACHMAN DA S, ORDER DATED 7TH AUGUST, 2012 IN ITA NO.2021/2010 (DELHI) 3. CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) 4. RANBAXY LABORATORIES LTD. V. CIT[2011] 12 TAXMANN.COM 74 (DEL) 5. M/S. CANARA HOUSING DEVEL OPMENT COMPANY V. THE DCIT (KARN), ORDER DATED 25TH JU LY, 2014 IN ITA NO.38/2014 6. FILATEX INDIA LTD. V. CI T-IV [2014] 49 TAXMANN.COM 465 (DELHI) 7. CIT V. CONTINENTAL WAREHOUS ING CORPORATION (NHAVA SHEVA) LTD. [2015] 58 TAXMANN.COM 78 (BOM) 8. PR. COMMISSIONER OF INCOME TA X V. KURELE PAPER MILLS P. LTD., ORDER DATED 6TH JULY 2015 IN ITA NO. 369 OF 2015 (DELHI) 9. ALL CARGO GLOBAL LOGISTICS LT D. V. DEPUTY COMMISSIONER OF INCOME TAX [2012] 23 TAXMANN.COM 103 (MUM.) (SB) 10. JAI STEEL (INDIA), JODHPUR V. ACIT [2013] 36 TAXMANN.COM 523 (RAJ) :-8-: 11. CIT V. M/S. MURLI AGRO PR ODUCTS LTD., ORDER DATED 29TH OCTOBER, 2010 IN ITA NO.36/2009 (BOMBAY). THE HONBLE HIGH COURT HELD THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND/SEIZED DURING THE COURSE OF SEARCH, NO ADDITION CAN BE MADE ON NON-ABATED/NON-PENDING CASE S BEFORE THE ASSE SSING OFFICER. THE LD. D.R. COULD NOT POINT OUT TH AT ANY INCRIMINATING MATERIAL WAS UNEARTHED DURING SEARCH FOR THE IMPUGNED ASSESSMEN T YEAR UNDER CONSIDERATION OR THAT THE ASSESSMEN T FOR YEAR UNDER CONSIDERATION WAS PENDING BEFORE THE ASSESSING O FFICER ON THE DATE OF SEARCH. 12. SO IN ANY ANGLE WE LOOK INTO THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), SO WE CONFIRM THE IMPUGNED ORDER. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2016. SD/- SD/- [P. K. BANSAL] [ABY T VARKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH JULY, 2016 JJ:1907 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR