ITO, Ludhiana V. Smt. Surinder Kaur, Ludhiana

ITA 472/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60984 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: AJAY PAUL SINGH
• Keywords: Unexplained investment; Depreciation; Additional evidence; Valuation report
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, VP AND SHRI T.R. SOOD, AM ITA NO. 472/CHD/2011 ASSESSMENT YEAR: 2007-08 I.T.O. WARD 1(3), CHANDIGARH V SMT. SURINDER KAUR PROP. M/S SUKHMANI PACKERS E-384-B, PHASE VI, FOCAL POINT LUDHIANA AJUPK 7933 M (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K. SAINI RESPONDENT BY: SHRI AJAY PAUL SINGH DATE OF HEARING: 09.07.201 2 DATE OF PRONOUNCEMENT: 31 .07.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: 1 THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N ADMITTING THE ADDITIONAL EVIDENCE WITHOUT PASSING SEPARATELY IN W RITING AN ORDER UNDER SUB-RULE 2 OF RULE 46A SPECIFYING THAT THE ASSESSEE WAS PREVENTED BY ANY REASONABLE CONDITIONS AS LAID DOWN IN RULE 46A( 1)(A), (B), (C) OR (D) DURING THE ASSESSMENT PROCEEDINGS. 2. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N ADMITTING THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE BEFOR E HIM DURING THE APPELLATE PROCEEDINGS IGNORING THE FACTS: (I) THAT THE CIRCUMSTANCES EXPLAINED BY THE ASSESSE E DO NOT FALL UNDER CLAUSES (A), (B), (C) AND (D) OF RULE 46 A(1) OF IT RULES, 1961. (II) THAT SUFFICIENT OPPORTUNITIES WERE ALLOWED TO THE ASSESSEE TO FURNISH THE RELEVANT DOCUMENTS AND PRODUCE THE BOOK S OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS, WHICH THE ASSESS EE FAILED TO FURNISH/PRODUCE. 3. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS. 21,77,500/- ON ACCOUNT OF VALUATIO N OF BUILDING UNDER CONSTRUCTION BY SIMPLY RELYING ON THE REPORT OF VAL UER DATED 22.9.2009 WITHOUT GIVING ANY COGENT REASONS AND WHICH WAS NOT PRODUCED BEFORE ASSESSING OFFICER EVEN THOUGH THE ASSESSEE APPEARED BEFORE ASSESSING OFFICER ON 18.11.2009 AND 25.11.2009. 4. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N RESTRICTING THE DISALLOWANCE ON EXPENSES TO 25% OF RS. 3,21,626/- W ITHOUT GIVING ANY COGENT REASONS. 2 5. THAT THE LD. CIT(A) ERRED IN LAW IN DELETING TH E ADDITION OF RS. 14,242/- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F FALL IN GP RATE FROM 11.60% TO 11.23% AS THE ASSESSEE FAILED TO PRO DUCE ANY REASONS FOR ALL IN GP RATE. 2. GROUNDS NO. 1 TO 3 AFTER HEARING BOTH THE PART IES WE FIND THAT DURING ASSESSMENT PROCEEDINGS VARIOUS OPPORTUNITY WERE GRA NTED BUT NOBODY ATTENDED OR ONLY ADJOURNMENTS WERE SOUGHT ON BEHALF OF THE A SSESSEE. IT WAS NOTICED THAT THE ASSESSEE HAS CONSTRUCTED A BUILDING (FACTO RY SHED) ON WHICH A SUM OF RS. 8,07,884/- WAS SHOWN TO HAVE BEEN INVESTED. SI NCE NO EXPLANATION WAS FILED TO JUSTIFY THE INVESTMENT THE ASSESSING OFFIC ER ESTIMATED THE COST OF CONSTRUCTION AT RS. 30.00 LAKHS AND ADDED THE SAME TO RS. 21,92,116/-. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTE D AS UNDER: THUS THE ASSESSING OFFICER HAS NOT SINGLE POINTED OUT AND DEFECTS AND BOUGHT NO MATERIAL ON RECORD AND SIMPLE VALUED THE SAME AT A HUGE VALUE OF RS. 30 LACS COMPLETELY IGNORING THE FACTS THAT THE ASSESSEE HAD PURCHASED THE LAND ON 17.3.2006 AND HAD STARTED THE CONSTRUCTION OF THE BUILDING DURING THE PERIOD 1.4.2006 TO 31.12.2006 A ND THERE AFTER THE FIRM WAS TAKEN OVER BY THE ASSESSEE W.E.F. 1.1.2007 AND AT THAT POINT OF TIME THE OPENING VALUE OF THE BUILDING WAS RS. 7,57,823/ - AND DURING THREE MONTHS TIME FROM (1.1.2007 TO 31.3.2007) ONLY A SUM OF RS. 50.061/- WAS SPEND ON THE CONSTRUCTION OF BUILDING. NO SUCH VER IFICATION WAS MADE BY THE ASSESSING OFFICER AND SIMPLY VALUED THE BUILDIN G AT RS. 30 LACS. THE ASSESSING OFFICER SHOULD HAVE GIVEN HIS REASONS FOR ARRIVING AT A PARTICULAR FIGURE OF INCOME SO THAT THE ASSESSEE CO ULD BE ENABLED TO APPRECIATE THE MENTAL PROCESS LEADING TO THE ASSESS MENT AND THE FIGURES ASSESSED. THE ORDER NEEDS, TO BE A SPEAKING ORDER. THE ASSESSING OFFICER TOOK NO PAINS IN COMPUTING THE INCOME ON TH E BASIS OF THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF A.C.I.T V. SMT. BANDANA ROY ITAT GAU HATI BENCH REPORTED IN (2002) 77 TTJ (GAU) 66 IT WAS HELD THAT WHERE NO SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT AND VOUCHERS MAINTA INED BY THE ASSESSEE COULD BE BROUGHT ON RECORD AND THE REMARK OF THE ASSESSING OFFICER IN THIS RESPECT IS ONLY GENERAL IN NATURE H AVING NO VALUE IN THE EYE OF LAW. FURTHER HELD THAT MERELY ON THE BASIS OF D VO REPORT WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF A CCOUNT AND VOUCHERS MAINTAINED BY THE ASSESSEE WHEREIN THE COST OF CONS TRUCTION WAS RECORDED AND BY SIMPLY REJECTING VALUES REPORT AND THE REPORT OF CHIEF ENGINEER BASED ON STATE PWD, ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT WAS NOT JUSTIFIED. IN THE CASE OF ITO V. COMMON WEALTH SHIPPING AND KN ITTING MILLS (P) LTD ITAT CALCUTTA C BENCH (1980) 10 TTJ (CAL) 415 IT WAS HELD THAT EX PARTE ASSESSMENT COMPUTING TOTAL INCOME OF RS. 5 LA CS NO BASIS FOR ARRIVING AT THIS FIGURE CIT(A) THEREFORE, JUSTIF IED IN SETTING ASIDE THE ASSESSMENT ORDER AND DIRECTING ITO TO RAISE FRESH A SSESSMENT. (COPY OF THE ORDER ENCLOSED) 3 THE DETAILS OF BUILDING UNDER CONSTRUCTION ARE AS U NDER: 1.4.2006 TO 31.12.2006 RS. 7,57,823/- 1.1.2007 TO 31.3.2007 RS. 50,061/- TOTAL AMOUNT SPEND ON BUILDING UNDER CONSTRUCTION COMES TO RS. 8,07,884/-. NO DEPRECIATION HAS BEEN CHARGED ON TH E SAME. A VALUATION REPORT FOR A REGISTERED/APPROVED VALUER S (GOVERNMENT OF INDIA) SUPPORTING THE VALUE OF THE BUILDING CONSTRU CTED IS ALSO BEING ATTACHED. THE SAME HAS BEEN VALUED AT RS. 8,22,500 /-. (COPY OF THE VALUATION ATTACHED) IT IS REQUESTED THAT VALUE OF THE SAME BE TAKEN AT RS. 8,07,884/- INSTEAD OF THE HUGE VALUED TAKEN BY THE ASSESSING OFFICER A T RS. 30 LACS. WE REQUEST YOUR HONOR TO KINDLY ADMIT THERE DOCUMEN TS AS ADDITIONAL EVIDENCE UNDER THE POWER CONFERRED IN YOUR GOOD SEL F UNDER RULE 46A OF THE IT ACT AND DELETE THE ADDITIONS MADE BY THE ASS ESSING OFFICER ON THIS ACCOUNT. 4 .DURING APPELLATE PROCEEDINGS VALUATION REPORT DA TED 22.9.2009 WAS ALSO FURNISHED AND IT WAS POINTED OUT THAT REPORT FROM C OMPETENT VALUER WAS OBTAINED BEFORE THE ASSESSMENT BUT COULD NOT BE FIL ED DURING ASSESSMENT PROCEEDINGS BECAUSE OF THE DIFFICULT LAW AND ORDER SITUATION IN THE CITY. THE LD. CIT(A) ACCEPTED THIS ADDITIONAL EVIDENCE AND FORWAR DED THE SAME TO THE ASSESSING OFFICER TO REBUT THE SAME BUT THE ASSESSI NG OFFICER IN HIS REPORT DID NOT POINT OUT ANY DEFECT. THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSING OFFICER HAS NOT BEEN ABLE TO REBUT THE VALUATION RE PORT, THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO ACCEPT THE VALUATION MADE BY THE VALUER AT RS. 8,22,500/- INSTEAD OF VALUE SHOWN BY THE ASSESSEE A T RS. 8,07,884/-. 5. BEFORE US, THE LD. DR FOR THE REVENUE SUBMITTED THAT THE LD. CIT(A) SHOULD NOT HAVE ACCEPTED THIS ADDITIONAL EVIDENCE WHEN NO COMPLIANCE WAS MADE BEFORE THE ASSESSING OFFICER DESPITE VARIOUS OPPORT UNITY. HE CONTENDED THAT FURNISHING OF THIS VALUATION REPORT WAS IN VIOLATIO N OF RULE 46A. HE ALSO REFERRED TO THE VALUATION REPORT WHICH HAS BEEN FILED AT PAG ES 112 TO 117 OF THE PAPER BOOK AND POINTED OUT VARIOUS DEFECTS. FOR EXAMPLE THE EXTRA ITEMS HAS BEEN TAKEN AT RS. 70,000/- FOR BOUNDARY WALL AND MAIN GA TE, NOTHING HAS BEEN TAKEN FOR ELECTRIC ITEMS, WATER TANK ETC. 6. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT, THEREFORE, THE ISSUE WAS COVERED BY THE DECISION O F HON'BLE SUPREME COURT IN 4 CASE OF SARGAM CINEMA V CIT, 328 ITR 513. MOREOVER THE ASSESSING OFFICER HAS NO RIGHT TO VALUE THE PROPERTY HIMSELF, THEREFO RE, THE APPELLATE ORDER WAS JUSTIFIED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY AN D FIND THAT THOUGH THE ASSESSEE HAS NOT COOPERATED DURING ASSESSMENT PROCE EDINGS AND DID NOT EVEN SUBMIT THE BOOKS OF ACCOUNT BUT SOME DETAILS WERE S UBMITTED. HE FURTHER FOUND THAT CLAUSE (B) OF RULE 46A CLEARLY MAKES AN EXCEPT ION BY PROVIDING THAT IF THE APPELLANT WAS PREVENTED BY A SUFFICIENT CAUSE FOR N OT PRODUCING WHICH WAS CALLED UPON BY THE ASSESSING OFFICER THEN RULE 46A WOULD NOT BE ATTRACTED. BEFORE THE LD. CIT(A) IT WAS CLEARLY STATED THAT VA LUATION REPORT COULD NOT BE FILED BECAUSE OF DISTURBANCES IN THE CITY AND IN OUR OPIN ION, THIS IS A SUFFICIENT CAUSE FOR NOT FILING THE REPORT. IN ANY CASE, THE LD. CI T(A) HAD FORWARDED THIS REPORT TO THE ASSESSING OFFICER FOR HIS COMMENTS. IN CASE OF SARGAM CINEMA V. CIT (SUPRA) IT IS CLEARLY OBSERVED THAT THE MATTER COUL D NOT BE REFERRED TO DVO WITHOUT POINTING OUT DEFECTS IN THE BOOKS OF ACCOUN T IN CASE BEFORE US EVEN IF THE BOOKS WERE NOT PRODUCED AT LEAST THE ASSESSING OFFICER SHOULD HAVE REFERRED TO THE VALUATION OFFICER. EVEN AFTER THAT IT WAS NOT DONE AT ATLEAST AT THE TIME WHEN THE LD. CIT(A) HAD FORWARDED THE REPORT F OR HIS REMAND HE SHOULD HAVE MADE SOME COMMENTS BUT NOTHING WAS DONE THOU GH IT WAS CONTENDED BY THE LD. DR FOR THE REVENUE THAT THERE WAS NO REMAND REPORT AVAILABLE BUT THE LD. CIT(A) HAS GIVEN CLEAR FINDING IN PARA 6.2 THAT REP ORT WAS FORWARDED TO THE ASSESSING OFFICER AND THE ASSESSING OFFICER IN HIS REPORT HAS NOT REBUTTED THE SAME. THEREFORE, IN THESE CIRCUMSTANCES WE ARE CO NSTRAINED TO CONFIRMED THE ORDER OF THE LD. CIT(A). 8. GROUND NO. 4 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED EXPEN SES OF RS. 3,21,626/- . THE ASSESSEE VIDE NOTICE U/S 142(1) WAS CLEARLY INFORME D THAT IF HE FAILS TO PRODUCE THE BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS THEN 4 0% OF THE EXPENSES CLAIMED WOULD BE DISALLOWED. SINCE NOTHING WAS PRO DUCED THE ASSESSING OFFICER MADE AN ADDITION OF RS. 1,28,650/-. 5 9. BEFORE THE LD. CIT(A) IT WAS MAINLY STATED THAT THE DETAILS OF VARIOUS EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT IN RESP ECT OF TELEPHONE EXPENSES, CHARITY AND DONATION, CAR EXPENSES, REBATE AND DISC OUNT, PRINTING AND STATIONERY, LABOUR WELFARE & CARTAGE, ACCOUNTING CH ARGES, TRAVELING EXPENSES, ENTERTAINMENT AND SALARY WERE FURNISHED BEFORE THE ASSESSING OFFICER. IN FACT THE ASSESSING OFFICER HAS TEST CHECKED THE SAME VID E ORDER SHEET ENTRY NO. 4 ON 25.11.2009. FURTHER RELIANCE WAS PLACED ON CERT AIN CASE LAWS. 10. THE LD. CIT(A) AFTER DISCUSSION RESTRICTED THE DISALLOWANCE TO 25%. 11. BEFORE US, THE LD. DR FOR THE REVENUE SUBMITTED THAT SINCE THE ASSESSEE HAD NOT PRODUCED ANYTHING BEFORE THE ASSESSING OFFI CER THEREFORE, DISALLOWANCE WAS JUSTIFIED. 12. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSE SSEE SUBMITTED THAT THE LD. CIT(A) HAS ALREADY RESTRICTED THE DISALLOWANCE TO 2 5% WHICH IS MORE THAN REASONABLE. 13. AFTER HEARING BOTH THE PARTIES WE AGREE WITH TH E SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE THAT THE LD. CIT(A) HAS A LREADY CONFIRMED THE DISALLOWANCE TO 25% OF THE EXPENSES FOR NON PRODUCT ION OF VOUCHERS. THIS DISALLOWANCE IS MOST REASONABLE AND ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A). 14. GROUND NO. 5 DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE BECAME PROPRIETOR OF SUKH MANI PACKERS FROM 1.1.2007. BEFORE DISSOLUTION OF THE FIRM SHE WAS P ARTNER IN THE SAME FIRM. HE FURTHER NOTICED THAT DURING THE PERIOD 1.4.2006 TO 30.12.2006 THE GROSS PROFIT RATE WAS 11.64% BUT FOR THE LATER PERIOD IT FELL TO 11.23%. SINCE THERE WAS NO CHANGE IN THE NATURE OF BUSINESS AND THE ASSESSEE H AD NOT EXPLAINED ANY REASON FOR DECLINING GP RATE DESPITE SPECIFIC NOTIC E U/S 142(1). THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT IN LATER PERIO D ALSO AT 11.64% AND MADE ADDITION OF RS. 14,242/-. 15. BEFORE THE LD. CIT(A) IT WAS MAINLY STATED THAT DIRECT COST HAS INCREASED AND THERE WAS ONLY MARGINAL FALL IN GROSS PROFIT . THE SAME SHOULD HAVE BEEN 6 IGNORED. NO MATERIAL DEFECTS IN TRADING ACCOUNT HA VE BEEN POINTED OUT, THEREFORE, THE ADDITION WAS NOT JUSTIFIED. 16. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVIN G THAT THERE WAS ONLY A SMALL FALL IN GROSS PROFIT AND THE SAME WAS ONLY MARGINAL. 17. BEFORE US, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE APPELLATE ORDER. 18. AFTER HEARING BOTH THE PARTIES WE FIND THAT NO DOUBT THE FALL IN GROSS PROFIT IS ONLY MARGINAL BUT IT HAS TO BE NOTED THAT THE AS SESSEE HAS NOT MADE ANY COMPLIANCE BEFORE THE ASSESSING OFFICER AND THE ASS ESSING OFFICER POINTED OUT SERIOUS DEFECTS IN THE BOOKS. THEREFORE, CONSIDER ING OVERALL CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT TRADING ADDITI ON SHOULD BE MADE AT RS. 10,000/-. ACCORDINGLY WE SET ASIDE THE ORDER OF T HE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO MAKE ADDITION ON ACCOUNT OF L OWER GROSS PROFIT AT RS. 10.00 LAKHS. 19. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ORDER PRONOUNCED ON 31.07.2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 31.07.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 7