Appeal details
Counselvise Citation
[2014] 120 COUNSELVISE.COM (IT) 7162 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-12-2014
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
26-11-2014
Assessment Year
2006-2007
Appeal Filed On
25-02-2014
Judgement Text
, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . , . ! ! ! ! , ' ' ' ' # # # # BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A.NOS.486, 487 AND 488/MDS/2014 ASSESSMENT YEARS :2006-07, 2007-08 & 2008-09 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), CHENNAI 600 034. VS. M/S. K.V. VIJAYARAGHAVAN, DIR: AMIBKA APPALAMS P L, NO.4/OLD NO. 25, DR. NAIR RD, T. NAGAR, CHENNAI 600 017. [PAN : ACLPV6440Q] ( $% $% $% $% /APPELLANT ) ( &'$% &'$% &'$% &'$% / RESPONDENT ) $% ( ) / APPELLANT BY : SHRI S. DAS GUPTA, JCIT &'$% ( ) / RESPONDENT BY : SHRI T.N. SEETHARAMAN, ADVOCATE ( * / DATE OF HEARING : 26.11.2014 +, ( * /DATE OF PRONOUNCEMENT : 12.12.2014 - - - - / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE THREE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) I, CHENNAI, DATED 22.11.2013 RELEVANT TO THE ASSESSMENT YEARS 2 006-07, 2007-08 AND 2008-09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE RETURN AS PROCESSED I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 2 UNDER SECTION 143(1) OF THE INCOME TAX ACT AND THE CASE WAS SELECTED FOR SCRUTINY. SUBSEQUENTLY, A SURVEY WAS CONDUCTED IN T HE PREMISES OF AMBIKA APPALAMS PVT. LTD. UNDER SECTION 133A OF THE ACT ON 07.08.2009, IN WHICH THE ASSESSEE IS THE MANAGING DIRECTOR HOLDING MORE THAN 10% SHARES. DURING THE COURSE OF SURVEY UNDER SECTION 133A, VAR IOUS DOCUMENTS WERE FOUND, WHICH SHOWS THAT THE ASSESSEE HAS INVESTED M ONEY IN THE CONSTRUCTION OF A PROPERTY AT NEW NO. 25 (OLD NO. 1 0), DR. NAIR ROAD, T. NAGAR, CHENNAI. SLIPS WERE FOUND IN THE SURVEY PREM ISES WHICH SHOWED PAYMENT OF CASH FOR PURCHASE OF THE SAID LAND AMOUN TING TO .23 LAKHS. THE DETAILS OF CASH PAID WERE NOT EXPLAINED BY THE ASSE SSEE DURING THE COURSE OF SURVEY. FURTHER, THE ASSESSEE AS ADMITTED ONLY .42,00,000/- TOWARDS THE CONSTRUCTION OF BUILDING IN THE SAID PROPERTY. THE VALUATION OFFICER, AFTER GETTING DETAILS FROM THE ASSESSEE AND AFTER GIVING OPPORTUNITY TO THE ASSESSEE, HAS SENT HIS FINAL REPORT AFTER VALUATION ON 20.12.2010. THE VALUATION OFFICER HAS VALUED THE CONSTRUCTION AT .2,14,08,000/- EXCLUSIVE OF LAND, FURNITURE, ACS AND INTERIOR FURNISHINGS. SUBS EQUENTLY, A NOTICE WAS SENT TO THE ASSESSEE TO SHOW CAUSE WHY THE VALUE OF .2,14,08,000/- SHOULD NOT BE TAKEN TO BE THE VALUE OF THE CONSTRUCTION. IN RE SPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSE E HAS SUBMITTED A LETTER DATED 22.12.2010 GIVING DETAILS OF SOURCE AND APPLI CATION OF FUNDS FOR CONSTRUCTION OF THE SAID BUILDING IN WHICH VARIOUS SOURCES FOR .1,54,87,720/- WAS ONLY LISTED AND THERE ARE NO DOCUMENTARY EVIDEN CE TO EXPLAIN REMAINING I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 3 AMOUNT. THEREFORE, THE ASSESSEES SUBMISSIONS WERE REJECTED ON THE BASIS THAT NO DOCUMENTARY EVIDENCES WERE GIVEN, THE ENTIR E AMOUNT OF .2,14,08,000/- LESS THE AMOUNT ADMITTED .42.00 LAKHS I.E. .1,72,08,000/- WILL BE APPORTIONED TO THE PERIOD OF CONSTRUCTION F ROM SEPT. 2005 TO MAY 2008 [33 MONTHS]. ON THE ABOVE BASIS, FOR 7 MONTHS FROM SEPT. 2005 TO MARCH 2006 FOR THE YEAR 2005-06 RELEVANT TO THE ASS ESSMENT YEAR 2006-07, AN AMOUNT OF .36,50,190/-, WHICH WAS APPORTIONED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT WILL BE TAKE N AS INCOME OF THE ASSESSEE. 3. ON APPEAL, IT WAS SUBMITTED BEFORE THE LD. CIT( A) THAT THE TOTAL COST OF CONSTRUCTION OF THE BUILDING WAS .1,54,87,720/- AND THE VALUE ESTIMATED BY THE DVO IS OF .2,14,08,000/- WAS HIGHLY EXCESSIVE AND SUBMITTED T HAT THE VALUE ADOPTED BY THE ASSESSEE WAS OF .1,54,87,720/- HAS TO BE ACCEPTED. THE LD. CIT(A), WHILE CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO ACCEPT THE SOURCE FOR .1,54,87,720/- BY OBSERVING AS UNDER: 5.2 I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE. I HAVE ALSO GONE THROUGH THE DETAILS SUBMITTED BY THE APPELLANT TO SUBSTANTIATE HIS CLAIM. THE AO HAS GONE BY THE REPORT GIVEN BY DEPARTMENTAL VALUATION OFFICER (DVO) WHEREIN THE VA LUE OF THE BUILDING WAS ARRIVED AT RS.2, 14,08,000/-. THE COST OF THE DECLARED VALUE OF THE PROPERTY OF RS.42 LAKHS WAS ALSO TAKEN FROM THE SAME VALUATION REPORT. THE NET VALUE OF RS.1,72,08,000/- (RS.2,14, 08,000 - RS.42,00,000) WAS ARRIVED AT AND WAS APPORTIONED ON PRO RATA BASIS FOR 33 MONTHS (RS.5,21,454 PER MONTH). AS A RESULT, THE AMOUNT APPORTIONED YEAR-WISE IS WORKED OUT AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 4 A.Y. 2006-07 . 36,50,190 (FOR 7 MONTHS) A.Y. 2007-08 . 62,57,455 (FOR 12 MONTHS) A.Y. 2008-09 . 62,57,455 (FOR 12 MONTHS) A.Y. 2009-10 . 10,42,900 (FOR 2 MONTHS) TOTAL . 1,72,08,000 5.2.1 IT IS PRIMARILY SEEN FROM THE OBJECTIONS RAIS ED BY THE APPELLANT THAT (I) THE AO HAS REFERRED THE VALUATION OF THE P ROPERTY TO THE DVO WITHOUT REJECTING THE BOOKS BEING MAINTAINED BY THE APPELLANT, (II) OPPORTUNITY WAS NOT GIVEN TO EXPLAIN AS PER SECTION 142A(3) OF THE ACT, (III) RATES OF CENTRAL PWD WAS ADOPTED INSTEAD OF S TATE PWD RATES, (IV) BASE YEAR FOR WORKING OF COST OF INDEXATION WAS ALS O QUESTIONED. THE APPELLANT HAS RELIED ON SEVERAL JUDICIAL DECISIONS IN SUPPORT OF HIS CLAIM. 5.2.2 AS NOTICED FROM THE ASSESSMENT ORDER THE REF ERENCE TO DVO WAS MADE BY THE AO SUBSEQUENT TO SURVEY CONDUCTED U/S 1 33A ON 07.08.2009 IN THE CASE OF M/S AMBIKA APPALAM CO P L TD IN WHICH THE APPELLANT IS THE MANAGING DIRECTOR. DURING THE COUR SE OF SURVEY PROCEEDINGS, THE SURVEY PARTY HAS NOTICED SEVERAL S LIPS SHOWING PAYMENT OF CASH FOR PURCHASE OF THE LAND AT DR. NAI R ROAD AMOUNTING TO RS.23 LAKHS AND THE DETAILS OF CASH PAID WAS NOT EXPLAINED BY THE ASSESSEE DURING THE COURSE OF SURVEY. EVEN THOUGH I T WAS NOT CONSPICUOUSLY EVIDENT FROM THE RECORDS THAT THE BOO KS WERE REJECTED BEFORE REFERRING THE PROPERTY FOR VALUATION TO DVO, THE ABOVE FINDINGS MIGHT HAVE PROMPTED THE AO TO DOUBT THE CORRECTNESS OF THE ACCOUNTS MAINTAINED BY THE APPELLANT IN ITS BOOKS OF ACCOUNT . AS SUCH, HE HAS INVOKED THE PROVISIONS U/S 142A OF THE ACT. FROM TH IS PERSPECTIVE, WE CAN FIND A BASE FOR REFERRING THE PROPERTY TO THE D VO FOR HIS OPINION. HOWEVER, THE APPELLANT'S OBJECTION THAT NO OPPORTUN ITY WAS GIVEN U/S 142A(3) AS STATED IN THE WRITTEN SUBMISSIONS DATED 08.02.2013 DOES NOT SEEM TO BE CORRECT. I HAVE NOTICED A LETTER DATED 2 2.12.2010 ISSUED BY THE AO TO THE APPELLANT WHICH IS FORMING PART OF TH E PAPER BOOK ITSELF FILED BY THE LD.AR BEFORE ME, COMMUNICATING THE FIN DINGS OF THE DVO AND SEEKING HIS OBJECTIONS, IF ANY. THEREFORE, THE ARGUMENT OF THE LD.AR ON THIS COUNT CANNOT BE ACCEPTED. WITH REGARD TO ADOPTING OF CENTRAL PWD RATES INSTEA D OF STATE PWD RATES, THE ASSESSEE HAS RELIED ON CERTAIN DECISIONS OF HONBLE JURISDICTIONAL MADRAS HIGH COURT AND ITAT, CHENNAI WHEREIN IT WAS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 5 DECIDED TO BE REASONABLE TO ADOPT, STATE PWD RATES INSTEAD OF CENTRAL PWD DUE TO LOCAL VARIATIONS. 5.2.3 I DO NOT AGREE WITH THE CONTENTION OF THE AP PELLANT. TO VALUE A PROPERTY EITHER UNDER THE INCOME-TAX ACT OR UNDER T HE WEALTH-TAX ACT, THE RECOURSE IS TO REFER TO THE DVO AND HE HAS TO W ORK OUT THE VALUE AS PER THE CPWD RATES. THE OBJECTION OF THE APPELLANT TO ADOPT CPWD RATES FOR A PROPERTY IN A CITY LIKE CHENNAI WHICH I S ONE OF THE METROPOLITAN CITIES ON PAR WITH DELHI, MUMBAI AND K OLKATA, THE OBJECTION IS TENABLE. THE APPELLANT'S REQUEST TO AD OPT STATE PWD RATES INSTEAD OF CENTRAL PWD RATES WOULD HAVE A MEANING H AD THE PROPERTY IN QUESTION IS LOCATED IN ANY OTHER PART OF THE STA TE OF TAMILNADU. FURTHER, THE RATES OF EACH STATE DIFFER FROM OTHERS IN THE COUNTRY AND THEY IN TURN MAY DIFFER FROM, CPWD RATES. IT DOES N OT MEAN THAT THE VALUATION SHOULD NOT BE DONE AS PER CPWD RATES. HOW EVER, WITH REGARD TO ADOPTION OF BASE YEAR FOR WORKING OUT IND EXATION, THE AO IS DIRECTED, TO LOOK INTO THE PLEA MADE BY THE APPELLA NT AS PER THE EXISTING RULES AND REWORK THE VALUE OF THE PROPERTY ACCORDIN GLY. 5.2.4 WITH REGARD TO SOURCES OF THE PROPERTY, THE AO IN HER ASSESSMENT ORDER HAS STATED THAT AGAINST THE DVO'S VALUE OF RS .2,14,08,000/- EXCLUSIVE OF LAND, FURNITURE, FIXTURES, A/CS AND IN TERIOR FURNISHINGS, THE APPELLANT HAS GIVEN THE SOURCES AS RS.1,54,87,720/- WHICH WAS NOT ACCEPTABLE TO THE AO SINCE THE APPELLANT HAS SUBMIT TED ONLY THE LIST OF THE SOURCES BUT NO DOCUMENTARY EVIDENCE WAS GIVEN T O THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD.AR HAS SUBMITTED THE SOURCES TO THE EXTENT OF RS.1,54,87,720/- AS UNDER: BANK OF INDIA TERM LOAN RS. 35,00,000 BANK OF INDIA FURNISHING LOAN RS. 15.00,000 INDIAN OVERSEAS BANK HOUSING LOAN RS. 45,00,00 0 INDIAN OVERSEAS BANK FURNISHING LOAN RS. 50.00 ,000 (THROUGH AMBIKA RETAIL P LTD) LOAN TAKEN FROM AMBIKA APPALAM CO.P. LTD. RS. 9 ,87,720 TOTAL RS.1,54,87,720 WITH REGARD TO EVIDENCE, HE HAS FURNISHED THE BANK ACCOUNT COPIES SHOWING THE LOAN AMOUNT GIVEN BY THE ABOVE BANKS TO WARDS HOUSING LOAN AND FURNISHING LOAN. HOWEVER, THE APPELLANT HA S NOT SUBMITTED EVEN BEFORE ME ANY EVIDENCE WITH REGARD TO LOAN TAK EN FROM M/S. AMBIKA APPALAM CO P. LTD OF RS.9,87,720/-. THEREFORE, THE SOURCES WITH REGARD TO LOANS TAKEN FROM BANKS SHOULD BE ACCEPTED AS GENUINE. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 6 HOWEVER, WITH REGARD TO LOAN FROM AMBIKA APPALAM CO .P.LTD, THE AO IS DIRECTED TO VERIFY THE BOOKS OF ACCOUNT OF THE A BOVE COMPANY AND ACCEPT THE SOURCE, IF FOUND CORRECT. WITH REGARD TO ADOPTION IN THE VALUATION REPORT BY DVO THE DECLARED VALUE OF THE P ROPERTY AT RS.42 LAKHS, THE EXPLANATION GIVEN BY THE APPELLANT THAT THE DVO HAS MISTOOK THE ADVANCE GIVEN TO SUBBURAYULU & CO., OF RS.41,65 ,762/- AS THE DECLARED VALUE, APPEARS TO BE REASONABLE. THEREFORE , THE DECLARED VALUE AS SEEN FROM THE VALUATION REPORT OF RS.42 LA KHS SHOULD BE READ AS RS.1,54,87,720/- SUBJECT TO VERIFICATION WITH REGARD TO LOAN TAKEN F ROM AMBIKA APPALAM CO.P.LTD. WHILE ACCEPTING THE SOURCE AS RS.1,54,87,720/- IF THE COST OF THE PROPERTY AFTER REWORKING AS DIRECTED ABOVE EXCEEDS THE SOURCES, THE SAME SHOULD BE TAKEN AS UNEXPLAINED INVESTMENT AND BROUGHT TO TAX U/S 69 OF THE ACT IN THE YEAR OF COMPLETION. IN CASE, THE VALUE OF THE PROPERTY BECO MES LESS THAN THE SOURCES, NO ADDITION IS CALLED FOR. RELIEF IS GIVEN ACCORDINGLY. 4. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIB UNAL. 5. THE LD. DR HAS ARGUED THAT IN SO FAR AS VALUE A DOPTED BY THE ASSESSEE FOR THE COST OF THE BUILDING OF .1,54,87,720/- IS CONCERNED, THE ASSESSEE HAS NOT FILED ANY DETAILS WITH REGARD TO T HE SOURCE OF INCOME BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS FILED THE S OURCE ONLY BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS NOT OBTAINED ANY REMA ND REPORT FROM THE ASSESSING OFFICER BEFORE DECIDING THE ISSUE. THEREF ORE, IT IS AMOUNTING TO VIOLATION OF RULE 46A OF INCOME TAX RULES AND DETAI LS HAVE TO BE EXAMINED BY THE ASSESSING OFFICER AND FOR THAT PURPOSE, THE ISSUE SHOULD GO BACK TO THE ASSESSING OFFICER FOR EXAMINATION. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT FOR THE LIMITED PURPOSE, HE HAS NO OBJECTION T O SEND THE ISSUE BACK TO THE ASSESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 7 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY I SSUE RAISED BEFORE US FOR CONSIDERATION IS WHETHER THE ASSESSEE HAS SHOWN SOU RCE OF INCOME OF .1,54,87,720/- BEFORE THE ASSESSING OFFICER OR NOT. AFTER CAREFUL CONSIDERATION OF THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSEE HAS ADMITTED THE COST OF CONSTRUCTION OF .1,54,87,720/- AND HAS SHOWN THE SOURCE OF INCOME BEFORE THE LD. CIT(A). HE HAS EXPL AINED THE ENTIRE SOURCE FOR .1,54,87,720/-. THEREFORE, WHILE AGREEING WITH THE ARGUMENTS OF THE LD. DR, AS PER RULE 46A OF INCOME TAX RULES, THE LD. CI T(A) OUGHT TO HAVE CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER AND WITHOUT DOING SO, HE HIMSELF ACCEPTED THE SOURCE OF INCOME FOR .1,54,87,720/-. IN OUR OPINION, FOR THE PURPOSE OF EXAMINATION OF SOURCE, IT NEEDS TO G O BACK TO THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE CONSOLIDATED ORDER PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEARS 2006-07, 2007-08 & 2008-09 AND REMIT THE MATTER BACK TO THE ASSESSING OFFICER TO EXAMINE THE SOURCE OF INCOME FOR .1,54,87,720/-. OUR DIRECTION SHALL AFFECT ON THE D IRECTIONS GIVEN BY THE LD. CIT(A) AT PAGE 7 OF HIS ORDER, EXCEPT AS INDICATED ABOVE. 8. SO FAR AS GROUND NO. 2.4 IS CONCERNED, THE REVE NUE HAS RAISED THAT THE ASSESSEE HAS NOT FURNISHED PROOF FOR THE LOAN T AKEN FROM AMBIKA APPALAM CO. P. LTD. FOR .9,87,720/-, THIS AMOUNT IS INCLUDED IN THE SOURCE OF INCOME OF .1,54,87,720/-. HOWEVER, IT IS NEEDLESS TO SAY THAT WITH REGARD TO I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .48 4848 486 66 6- -- -4 44 488 8888 88/M/ /M/ /M/ /M/1 11 14 44 4 8 THE LOAN TAKEN FROM AMBIKA APPALAM CO. P. LTD. FOR .9,87,720/-, THE ASSESSEE HAS TO EXPLAIN THE SOURCE BEFORE THE ASSES SING OFFICER. IN VIEW OF THE ABOVE, THE APPEALS OF THE REVENUE ARE PARTLY AL LOWED FOR STATISTICAL PURPOSES. SIMILAR ISSUES ON IDENTICAL FACTS HAVE A LSO BEEN RAISED BY THE REVENUE FOR THE ASSESSMENT YEARS 2007-08 AND 2008-0 9 AND ACCORDINGLY, THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEALS OF THE REVENUE FOR T HE ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 12 TH OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 12.12.2014 VM/- - ( &'*./ 0/,* /COPY TO: 1. $% / APPELLANT, 2. &'$% / RESPONDENT, 3. 1 ( ) /CIT(A), 4. 1 /CIT, 5. /2 &'*' /DR & 6. 3! 4 /GF.
Mehul