ITO, Tuticorin V. Shri P.Hariharan, Tuticorin

ITA 467/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61162 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMATH IRS
• Keywords: Unexplained investment; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE -PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS. 467 & 468/MDS/2010 (ASSESSMENT YEARS: 2006-07 & 2007-08) THE INCOME TAX OFFICER, WARD I(1), TUTICORIN. VS. SHRI P.HARIHARAN, 4/159, THISYANVILAI ROAD, THENIYUR, UDANGUDI. PAN:ABEPH8487E (APPELLANT) (RESPONDENT) APPELLANT BY : DR. YOGESH KAMATH, IRS., JCIT RESPONDENT BY : MS. PU SHYA SITARAMAN SR. COUNSEL, FOR V.S.JAYAKUMAR DATE OF HEARING : 5 TH JUNE ,2012 DATE OF PRONOUNCEMENT : 5 TH JUNE, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT TWO APPEALS I.E. ITA NOS. 467/MDS/2010 & 468/MDS/2010 RELEVANT TO THE ASSESSMENT YEARS 2006 -07 & 2007-08 RESPECTIVELY HAVE BEEN FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE CIT(A)-I, MADURAI DATED 28 .01.2010. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE C OMMON, THEY ARE HEARD TOGETHER AND DISPOSED OF BY THIS COM MON ORDER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A ITA NOS.467 & 468/MDS/2010 2 TRADER IN COCONUT BUSINESS AND SHARE BROKER. THE AS SESSEE IS ALSO HAVING INCOME FROM HOUSE PROPERTY. THE ASSESSE E FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-0 7 ON 23.02.2007 ADMITTING TOTAL INCOME OF ` 1,24,420/- AND AGRICULTURAL INCOME OF ` 72,000/-. THE ASSESSEE CLAIMED REFUND OF ` 7,136/-. THE RETURN OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) AND REFUND WAS ISSUE D TO THE ASSESSEE ON 12.4.2007. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 22.8.2007. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 31.12.2008 MADE ADDITIO NS ON ACCOUNT OF RENTAL INCOME AS WELL AS ADDITION ON ACC OUNT OF UNDISCLOSED INVESTMENT ON CONSTRUCTION OF HOUSE. B EFORE MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED INVESTME NT ON CONSTRUCTION OF HOUSE, THE ASSESSING OFFICER CALLED FOR VALUATION REPORT. SIMILARLY FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICER VIDE ORDER DATED 15.10.2009 MADE ADDITION TO THE TUNE OF ` 5,09,166/- TOWARDS DIFFERENCE IN COST OF ITA NOS.467 & 468/MDS/2010 3 CONSTRUCTION BETWEEN VALUATION ESTIMATED BY DVO AND COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE. 3. THE ASSESSEE AGGRIEVED AGAINST THE RESPECTIVE ASSESSMENT ORDERS PREFERRED TWO SEPARATE APPEALS B EFORE THE CIT(A)-I, MADURAI. THE CIT(A) AFTER TAKING INT O CONSIDERATION THE FACTS OF THE CASE, DOCUMENTS ON RECORD AND SUBMISSIONS MADE BY THE ASSESSEE PARTLY ALLOWED BOT H THE APPEALS OF THE ASSESSEE VIDE SINGLE ORDER DATED 28. 01.2010. 4. NOW, THE REVENUE HAS PREFERRED THESE TWO APPEALS BEFORE THE TRIBUNAL IMPUGNING THE ORDER OF THE CIT( A) ON THE FOLLOWING GROUNDS:- 1. DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS THE INCOME FROM HOUSE PROPERTY. 2. ALLOWING THE COST OF CONSTRUCTION TO THE EXTENT OF ` 7,39,850/- BY HOLDING THAT THE INTERNAL DECORATIO N OF THE BUILDING WAS CARRIED OUT BY THE TENANT AND FURTHER GRANTING RELIEF TOWARDS PURCHASE OF MATERIA LS AND SELF-SUPERVISION @ 15% 5. THE D.R. POINTED OUT THAT THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS SPECIFICALLY STATED THAT VAL UATION REPORT FOR CONSTRUCTION STARTS FROM OCTOBER, 20 04 AND DATE OF COMPLETION AS DECEMBER, 2006. THE ASSESSEE HAS O FFERED ITA NOS.467 & 468/MDS/2010 4 THE COST OF CONSTRUCTION FOR THE ABOVE TWO YEARS ON LY. THE ASSESSEE HAS ALSO NOT PRODUCED YEAR-WISE BREAK UP F OR THE COST OF CONSTRUCTION. IN THE ABSENCE OF THE SAID DE TAILS, THE DIFFERENCE IN COST OF CONSTRUCTION ` 25,41,254/- HAS BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPL AINED INVESTMENT UNDER SECTION 69B OF THE ACT FOR THE ASS ESSMENT YEAR 2006-07. THE D.R. FURTHER SUBMITTED THAT AS RE GARDS RENTAL INCOME IS CONCERNED, THE CLARIFICATION WAS S OUGHT FROM THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ON TH E ISSUE. HOWEVER, NO CLARIFICATION WAS RECEIVED FROM THE ASS ESSEE REGARDING THE DATE OF COMMENCEMENT OF TENANCY. SIMI LARLY, FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSING OFFI CER HAS MADE ADDITION TOWARDS UNEXPLAINED INVESTMENT TO THE TUNE OF ` 5,09,166/- BEING THE COST OF CONSTRUCTION DURING T HE RELEVANT ASSESSMENT YEAR. 6. ON THE OTHER HAND, THE COUNSEL APPEARING ON BEH ALF OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE CIT(A) AND SUBMITTED THAT THE IMPUGNED ORDER IS A W ELL- REASONED AND SPEAKING ORDER. ITA NOS.467 & 468/MDS/2010 5 7. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTIE S AND HAVE PERUSED THE IMPUGNED ORDER. THE RELEVANT EXTRACT OF THE ORDER PASSED BY THE CIT(A) IS REPRODUCED HER EIN BELOW:- (I) THE FINDINGS OF THE CIT(A) ON THE ISSUE OF REN TAL INCOME ARE :- PERUSAL OF THE TDS CERTIFICATE ISSUED BY THE ICICI BANK REVEALS THAT A SUM OF ` 89,392/- WAS PAID TOWARDS RENT BY THE BANK AND ` 9,118/- WAS DEDUCTED TOWARDS TAX. THE TDS CERTIFICATE FILED WITH THE RETURN WAS NOT ACCEPTED BY THE ASSESSING OFFICER BUT HE GAVE CREDIT TO THE TAX DEDUCTED AT SOURCE FOR THE SUM OF ` 9,118/- IN THE TAX WORKING. THE ASSESSING OFFICER FAILED TO READ THE AGREEMENT BETWEEN THE APPELLANT AND THE ICICI BANK COMPLETELY. IT WAS STATED IN PAGE 11 OF THE AGREEMENT THAT THE RENT WILL BECOME PAYABLE BY THE LESSEE ON SITE BECOMING OPERATIONAL AND ON LESSOR COMPLETING ALL OBLIGATIONS MENTIONED HEREUNDER. THE RENT WAS PAID IN CHEQUE/DRAFT. THE ASSESSING OFFICER DID NOT BRING IN ANY EVIDENCE TO PROVE THAT THE APPELLANT RECEIVED ` 1,64,190/- (BEING THE DIFFERENCE BETWEEN RENT RECEIVABLE AND RECEIVED) IN CASH OR OUTSIDE THE BOOKS OF ACCOUNTS. THE ESTIMATED ADDITION WAS MADE WITHOUT READING THE AGREEMENT IN TOTO. IN THE ABSENCE OF CORROBORATIVE EVIDENCE, THE ADDITION CANNOT BE SUSTAINED. THE AMOUNT RECEIVED TOWARDS RENT WAS ONLY ` 89,392/- WHICH WAS ITA NOS.467 & 468/MDS/2010 6 EVIDENT FROM THE TDS CERTIFICATES, FILED WITH THE RETURN. HENCE, I ORDER DELETION OF ` 1,64,190/-. (II) THE FINDINGS OF THE CIT(A) ON THE ISSUE OF COS T OF CONSTRUCTION ARE AS UNDER:- THE APPELLANT MAINTAINED BILLS AND VOUCHERS FOR MOST OF THE EXPENDITURE INCURRED IN CONSTRUCTION. IN THE VALUATION REPORT ITSELF THE VALUATION OFFICE R MENTIONED THAT THE ASSESSEE HAD PRODUCED BILLS AND VOUCHERS TO THE EXTENT OF ` 35 LAKHS. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALSO SUBMITTED THAT THE BUILDING WAS CONSTRUCTED MAINLY TO LET OUT AND HENCE THE QUALITY OF MATERIAL USED WAS NOT OF VERY HIGH QUALITY AND HE PERSONALLY SUPERVISED THE CONSTRUCTION AND TAKEN CARE TO PURCHASE THE MATERIAL IN PERSON. THE APPELLANTS ARGUMENTS SEEM TO BE REASONABLE AND WELL FOUNDED. AFTER CONSIDERING THE ARGUMENT OF THE ASSESSEE, IT IS REASONABLE TO ALLOW 15% RELIEF TOWARDS PURCHASE OF MATERIALS AND SELF- SUPERVISION. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT ALSO PRODUCED LETTERS FROM ICICI BANK, KARVY STOCK BROKING LTD., SANDESH DATA SYSTEM AND CENTRE FOR IT SKILLS RELIGARE, STATING THAT THE Y HAVE CARRIED OUT INTERNAL DECORATIONS TO THE BUILDING IN QUESTION . THE AMOUNT SPENT BY THE TENANTS WAS WORKED OUT AT ` 7,39,850/-. THIS WAS NOT GIVEN CREDIT BY THE ASSESSING OFFICER. IT IS COMMON PRACTICE NOW A DAYS TO DO INTERNAL WORK LIKE DECORATION, FURNISHINGS, ETC. BY THE CORPORATE TENANTS TO IMPROVE THE AMBIENCE OF THE BUILDING. THE ASSESSING OFFICERS ORDER IS SILENT ON THIS ISSUE IN THE ORDERS PASSED U/S.143(3) AS WELL AS 154 OF THE ACT. THE ASSESSING OFFICER DID NOT GIVE ANY FINDING THAT THE AMOUNT WAS NOT SPENT BY THE TENANTS. IN THE CIRCUMSTANCES, THIS AMOUNT HAS TO BE ALLOWED AS DEDUCTION FROM THE COST OF CONSTRUCTION BECAUSE COST OF CONSTRUCTION WAS ITA NOS.467 & 468/MDS/2010 7 ARRIVED AT TAKING INTO CONSIDERATION THE WHOLE BUILDING. WE ARE OF THE CONSIDERED OPINION THAT THE ORDER DAT ED 28.1.2010 PASSED BY THE CIT(A) IS A WELL-REASONED A ND DETAILED ORDER GIVING VALID REASONS FOR PARTLY ALL OWING THE APPEAL OF THE ASSESSEE. THE D.R. ASSAILING THE ORDE R OF THE CIT(A) HAS NOT BEEN ABLE TO CONVINCINGLY POINT OUT ANY INFIRMITY IN THE IMPUGNED ORDER. THE CIT(A) HAS G IVEN DETAILED REASONS ANSWERING THE ISSUES RAISED BY THE REVENUE. WE CONCUR WITH THE FINDINGS OF THE CIT(A). THEREFORE, NO INTERFERENCE IN THE IMPUGNED ORDER IS CALLED FOR. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 5 TH OF JUNE, 2012 AT CHENNAI. SD/- SD/- ( DR. O.K.NARAYANAN ) ( VIKAS AWASTHY ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 5 TH JUNE, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F .