Ramesh Chandra Pattnaik, Cuttack V. ITO, Cuttack

ITA 516/CTK/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65178 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: S N SAHU
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Fair market value
• Section: 131; 37; 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 516/CTK/2012 / ASSESSMENT YEAR 2009 - 10 RAMESH CHANDRA PATTNAIK, BARDHAWAN COMPOUND, COLLEGE SQUARE, CUTTACK 753 001 PERMANENT ACCOUNT NUMBER: AEBPP 0419 D - - - VE RSUS - INCOME - TAX OFFICER , WARD 2(1), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.N.SAHU, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HE ARING: 27.11.2012 / DATE OF PRONOUNCEMENT: 30.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE FOLLOWING GROUNDS, WHICH READ AS UNDER : 1. THAT THE ORDER OF THE LEARNED CIT(A) IN DISMISSING THE APPEAL OF THE APPELLANT AGAINST ADDITION OF 30,00,000 AS INCOME FROM OTHER SOURCES U/S. 68 OF THE ACT IS ILLEGAL, ARBITRARY, UNCALLED FOR AND AGAINST THE FACTS ON RECORD. 2. THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN TRYING TO MAKE A CASE FOR THE ASSESSING OFFICER WHERE ADMITTEDLY THE ASSESSING OFFICER HAD COMMITTED AN ERROR OF FACT AND LAW. 3. THAT THE CASE LAW CITED BY THE LEARNED CIT(A) IN THE CASE OF NANDALAL JAISWAL & CO. VS. CIT, 232 ITR 540, CIT VS. R.P. KANDASWAMY, 49 I TR 344 (MAD), CIT VS. PUNJAB BONE MILLS, 232 ITR .795 (P&H) ARE DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANT. MORESO, BEFORE UTILIZING THE SAME IN HIS ORDER TO DISMISS THE APPEAL THE CIT(A) SHOULD HAVE BROUGHT TO THE SAME T O THE NOTICE OF THE APPELLANT. 4. THAT HONOURABLE ORISSA HIGH COURT IN THE CASE OF GANGARAM CHAPPALIA HAS CLEARLY DECIDED THAT AN ORDER PASSED WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE IS A NULLITY THEREFORE THE ORDER OF THE LEARNED CIT(A) IS IL LEGAL AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE. I.T.A.NO. 516/CTK/2012 2 5. THAT WHEN AN AFFIDAVIT IS FILED BY THE ASSESSEE IT WAS THE DUTY OF THE CIT(A) TO CROSS EXAMINE AND TO FIND OUT THE VERACITY OF THE STATEMENT. MORE SO THE FIRST APPELLATE AUTHORITY IS AN EXTENSION OF T HE ASSESSING OFFICER. AN UNCONTROVERTED FACTS STATED IN THE AFFIDAVIT MUST INVARIABLY ACCEPTED AS TRUE UNDER FACT AND CIRCUMSTANCES OF THE CASE. 6. AN AFFIDAVIT IS NOT AN ORDINARY STATEMENT. IT IS A STATEMENT ON OATH AND HAS THE STATUS OF EVIDENCE. FALSE AFFIDAVIT EXPOSES A PERSON TO PROSECUTION UNDER CHAPTER OF THE IPC. ESPECIALLY SECTION 193 READ WITH 191 OF THE IPC. SINCE THE AFFIDAVIT REMAINED UNCONTROVERTED IT MUST BE INVARIABLY ACCEPTED AS RELIABLE, IT HAS BEEN HELD BY THE HONOURABLE SUPREME COURT OF INDIA IN THE CASE OF MEHTA PARIKH & CO. VS. CIT, 30 ITR 181. 7. THAT THE CONTENTION MADE ON BEHALF OF THE APPELLANT REGARDING THE APPLICABILITY OF THE SECTION 68, WHEN THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNTS SHOULD HAVE BEEN ACCEPTED BY THE LEARNED CIT(A) IN VIEW OF THE DECISION CITED BEFORE HIM IN THE CASE OF CIT VS. VAICHAND H. GHADARI, 141 ITR 67, BLADIN, 71 ITR 427 (SC). 8. THAT SINCE THE ADDITION WAS MADE BY THE LEARNED AO ON MERE SUSPICION, PRESUMPTION AND SURMISES THE SAME SHOULD NOT HAVE BEEN CONFIRMED IN VIEW OF THE DECISION, CIT VS. RAM NARAIN GOEL, 224 ITR 180 . 9. THAT HAD THE AO CONSIDERED THE 30,00,00 AS A PART OF THE SALE PROCEED OF THE PROPERTY THEN HE COULD HAVE INITIATED PROCEEDING FOR CAPITAL GAIN TAX WHICH HE HAS NOT. TH AT MEANS HE HAS ACCEPTED SALE CONSIDERATION OF THE PROPERTY TO BE TRUE AND CORRECT. HAVING ACCEPTED THE SAME HE IS NOT JUSTIFIED IN MAKING ADDI TION OF 30,00,000 U/S. 68 . THE EXPLANATION THAT SRI. LAXMIDHAR MOHANTY HAD GIVEN ADVANCE OF 30,00,000 FOR CON STRUCTION OF THE BUILDING SHOULD HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW IN VIEW OF THE CONFIRMATION LETTER . 10. THAT THE EXPLANATION OF THE ASSESSEE THAT HE DID NOT CONSTRUCT THE HOUSE DUE TO SOME PERSONAL REASON OF OLD AGE AND ILL HEALTH SHOULD HAVE BEEN ACCEPTED BY THE AUTHORITIES BELOW. 11. THAT THE CONFIRMATION LETTER GIVEN BY THE CREDITOR SRI. LAXMIDHAR MOHANTY SHOULD HAVE BEEN ACCEPTED AS TRUE AND CORRECT. 12. THAT IN THE STATEMENT UNDER SECTION 131 RECORDED BY THE AO SRI. MOHANTY HAS NOT DENI ED PAYMENT OF THE AMOUNT OF 30,00,000 RATHER HE HAS RECONFIRMED IN SAYING THAT HE HAS NOT TAKEN ANY STEPS TO RECOVER THE BALANCE AMOUNT THAT MEANS CONFIRMS THE TRANSACTIONS. 13. THAT THE CASE LAWS CITED BY THE LEARNED CIT(A) IN PARAGRAPH 6.5, 6.6, 6.7 O F HIS ORDER TO CONFIRM THE ADDITION AND I.T.A.NO. 516/CTK/2012 3 DISMISS THE APPEAL IS NOT RELEVANT AND THOSE CASES ARE FACTUALLY DIFFERENT ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. THAT IN ALL FAIRNESS THE APPEAL OF THE APPELLANT SHOULD HAVE BEEN ALLOWED BY THE LEAR NED CIT(A). 14. THAT THE GROUNDS OF APPEAL AND WRITTEN SUBMISSION FILED BEFORE THE CIT(A) MAY PLEASE BE CONSIDERED AS PART OF THE GROUNDS OF APPEAL BEFORE ITAT . 2. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THE BRIEF FACTS T HAT THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF THE CIT(A), CUTTACK CONFIRMING THE ADDITION OF 30,00,000 MADE BY THE ITO, WARD 2, CUTTACK VIDE HIS ORDER DATED 21 - 12 - 2011 U/S. 68 OF THE I.T. ACT, 1961. HE SUBMITTED THAT THE ASSESSEE MADE AN INVE STMENT OF 30,00,000 IN RELIANCE MUTUAL FUND DURING THE FINANCIAL YEAR 2008 - 09 RELEVANT TO THE ASSESSMENT YEAR 2009 - 10. WHILE EXPLAINING THE SOURCE OF INVESTMENT IT WAS STATED BY THE ASSESSEE THAT HE SOLD AN OLD HOUSE TO SRI LAXMI NARAYAN MOHANTY SITUAT ED AT A/89, SAHEED NAGAR, BHUBANESWAR FOR A SALE CONSIDERATION OF 50,00,000. HE RECEIVED AN ADDITIONAL AMOUNT OF 30,00,000 AS ADVANCE BY WAY OF BANK DRAFTS FOR REPAIR, REMODELING AND ADDITIONAL CONSTRUCTION OF THE SAID HOUSE PROPERTY. THERE WAS DIFFIC ULTY IN EVICTING THE TENANTS STAYING IN THE HOUSE SOLD. EVICTION OF TENANT TOOK SOME CONSIDERABLE TIME. THE TENANTS WERE EVICTED BY USE OF LOCAL GUNDAS, MUSCLE POWERS AND POLICE. ALL THESE PROBLEMS TOOK SOME CONSIDERABLE TIME SINCE THE ASSESSEE IS A MAN OF MORE THAN 90 YEARS OF AGE CHANGED HIS MIND AND IN THE MEAN TIME DID NOT LIKE TO TAKE TENSION IN HIS MIND AND DECIDED NOT TO CONSTRUCT THE HOUSE PROPERTY. THE ASSESSEE INSTEAD OF KEEPING THE MONEY I.T.A.NO. 516/CTK/2012 4 WITH HIM INVESTED THE SAME IN RELIANCE MUTUAL FUND AND ULT IMATELY ABANDONED THE IDEA OF UNDERTAKING T HE CIVIL WORKS OF RECONSTRUCTION ETC WHICH REQUIRED CONSTANT SUPERVISION , ON ACCOUNT OF HIS ADVANCED AGE AND TENSION INVOLVED IN EVICTION OF TENANTS IN OCCUPATION . T HE SHORT TERM CAPITAL GAIN ARISING OUT OF THE SA LE OF MUTUAL FUND WAS DISCLOSED IN THE RETURN OF THE ASSESSEE. BEING ADVISED BY HIS COUNSEL , LIKE A CONTRACTOR, THOUGH HE IS NOT A CONTRACTOR , HE HAD SHOWN PROFIT @ 8% ON 30,00,000 AS INCOME FROM CONTRACT RECEIPT, E VEN THOUGH HE HAD NOT CONSTRUCTED THE HOUSE. A CONFIRMATION LETTER FROM SRI LAXMI NARAYAN MOHANTY IN SUPPORT OF PAYMENT OF 30,00,000 WAS FILED BEFORE THE ASSESSING OFFICER . THE DETAILS OF AMOUNTS RECEIVED THR OUGH BANK DRAFTS WERE ALSO STATED TO THE AO. IN COMPLIANCE TO SUMMON U/S. 131 , SRI LAXMI NARAYAN MOHANTY APPEARED AND CONFIRMED THAT HE HAS PAID 30,00,000 BY BANK DRAFT FOR THE PURPOSE STATED TO BE RECONSTRUCTION AND REMODELING OF THE OLD STRUCTURE EXIS TING IN THE LAND. 2.1. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE FACTS FROM THE ABOVE REMAINS THAT SINCE LAXMI NARAYAN MOHANTY HAD PAID 30,00,000 FOR CONSTRUCTION OF HOUSE WHICH THE ASSESSEE COULD NOT CONSTRUCT THOUGH ASSURED EARLIER, SRI LAXMI NARAYAN MOHANTY REMAINED AS CREDITOR TO HIM. THE FACT OF PAYMENT OF 30,00,000 OUT OF WHICH THE ASSESSEE MADE INVESTMENT IN MUTUAL FUND IS NOT IN DISPUTE. THE PRIMARY REQUIREMENT TO DISCHARGE THE ONUS OF PROVING THE SOURCE OF INVESTMENT FROM MONEY R ECEIVED FROM SRI MOHANTY. THE ONUS HAS BEEN DISCHARGED AS THE IDENTITY AND CAPACITY TO GIVE ADVANCE AND THE GENUINENESS WERE ESTABLISHED. SRI LAXMI NARAYAN MOHANTY BEING PRESENT I.T.A.NO. 516/CTK/2012 5 BEFORE THE ASSESSING OFFICER IN COMPLIANCE OF NOTICE ISSUED U/S. 131 HAS ADMI TTED THAT HE HAD PAID THE MONEY FOR HOUSE CONSTRUCTION BUT NEITHER THE ASSESSEE CONSTRUCTED BY HIMSELF OR THROUGH FRIENDS OR RELATIVES AS ASSURED BY HIM DURING THE TIME OF LAND DEAL AND THE PAYMENT OF 30,00,000 REMAINS UNCONTROVERTED. T HEREFORE, THE ASSESSEES SOURCE OF INVESTMENT IN RELIANCE MUTUAL FUND IS ABUNDANTLY ESTABLISHED. SINCE HE HAD PAID THE MONEY BY BANK DRAFT THE GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY CANNOT BE DOUBTED. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID EVERYTHING THAT WAS POSSIBLE ON HIS PART TO BE DONE BY HIM TO SATISFY THE ASSESSING OFFICER THAT THE TRANSACTIONS BEING GENUINE AND WELL PROVED WAS NOT REQUIRED T O BE ADDED U/S. 68 OF THE I.T. ACT. BUT THE ASSESSING AUTHORITIES IGNORING THE ABOVE SUBMISSIONS MADE THE IMPUGNED ADDITION U/S.68. HE FURTHER SUBMITTED I T IS MERELY ON SUSPICION AND SURMISES THAT THE LEARNED AO CAME TO THE CONCLUSION THAT THE EXPLANATION FURNISHED IS NOT ACCEPTABLE AND 30,00,000 BE THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES AND INITIATED PENALTY PROCEEDING U/S. 271(1)(C) WHICH IS ALSO CHALLENGED IN THIS APPEAL. 2.2. THE LEARNED COUNSEL OF THE ASSESSEE S UBMITTED THAT BEFORE THE LEARNED CIT(A) THE ABOVE FACTS WERE STATED , IN DETAIL BY WAY OF WRITTEN SUBMISSION AND AFFIDAVIT WITH SUPPORTING DOCUMENTS LIKE BANK STATEMENT AND EXPLANATION SUBMITTED BEFORE THE ASSESSING OFFICER ENCLOSED HEREWITH IN PAPER BOOK PAGE 8 TO 17A WHICH MAY KINDLY BE TREATED AS PART OF THE WRITTE N SUBMISSION. I.T.A.NO. 516/CTK/2012 6 2.3. HE FURTHER SUBMITTED THAT PROVISIONS OF SE CTION 68 IS APPLICABLE , WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS MAINTAINED BY AN ASSESSEE IN ANY PREVIOUS YEAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY THE ASSESSEE IN THE OPINION OF THE AO IS NOT SATISFACTORY. O N THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE NARRATED ABOVE , THE ADDITION U/S. 68 IS NOT JUSTIFIED BECAUSE THE ASSESSEE DOES NOT MAINTAIN BOOKS OF ACCOUNTS AND HAS FURNISHED SATISFACTORY EXPLANATION REGARDING THE SOURCE OF INVESTMENT IN RELIANCE MUTUAL FUND. THEREFORE, THE ADDITION U/S. 68 IS ILLEGAL. 2.4. THE LEARNED COUNSEL OF THE ASSESSEE CONTINUED HIS ARGUMENTS STATING THAT THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER HOLDING THAT THE ASSESSEE HAD DIFFERENT OPINION AT DIFFERENT TIMES. THIS IS A PREPLANNED STORY MADE BETWEEN ASSESSEE AND LAXMI NARAYAN MOHANTY. IT PROVES THAT THE ENTIRE RECEIPT OF 80,00,000 IS THE SALE CONSIDERATION, THOUGH THE SALE DEED HAS BEEN MADE OUT FOR 50,00,000 FOR GOVT. VALUATION AND THE RECEIPT OF 30,00,000 TREATED AS INCOME FROM OTHER SOURCES AND ADDED TO THE INCOME OF THE ASSESSEE U/S. 68. AS TO THIS THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE CONSIDERATION OF 50,00,000 FOR THE SALE HAS BEEN ACCEPTED BY THE REGISTERING AUTHORITY WHO HAD THE PRIMARY DUTY UNDER THE INDIAN STAMP ACT AND THE INDIAN REGISTRATION ACT TO ENSURE CORRECT VALUATION AND REALIZ ATION OF STAMP DUTY AND REGISTRATION FEES THEREON. THE FACT THAT NO ALLEGATION WAS MADE OF ANY UNDERVALUATION OR FRAUD ON THE EXERCISE OF THE POWER OF THE REGISTERING AUTHORITY RAISES THE PRESUMPTION THAT - I.T.A.NO. 516/CTK/2012 7 (A) THE VALUATION OF THE SUBJECT MATTER TRANSAC TION WAS 50,00,000 (B) THE SALE CONSIDERATION WAS PAID AND ACKNOWLEDGED AS STATED IN THE SALE DEED. BESIDES FURTHER PRESUMPTION THAT THE OFFICIAL ACT OF REGISTERING AUTHORITY IN THIS REGARD IN PERFORMANCE OF ITS PUBLIC DUTY WAS CORRECTLY DONE. SECTION 114(E) OF THE INDIAN EVIDENCE ACT, 1872 RAISES THE PRESUMPTION OF CORRECTNESS OF THE OFFICIAL AND JUDICIAL ACT OF THE PUBLIC SERVANT CONCERNED. THE AFORESAID PRESUMPTIONS HAVE NOT BEEN REBUTTED TO SUSTAIN THE ORDER IMPUGNED HEREIN. HERE IN THE INSTANT CASE THE AS SESSING OFFICER AS WELL AS THE LEARNED CIT(A) HAVE MERELY ACTED ON PROBABILITY VERGING ON SUSPICION THAT AN ADDITIONAL AMOUNT OF 30,00,000 WAS PAID BY THE VENDEE TO THE VENDOR TOWARDS SALE CONSIDERATION AND THE SAME WAS INVESTED IN RELIANCE MUTUAL FUND TO CONCLUDES THAT THE SAME WAS LIABLE TO BE ADDED AS INCOME FROM OTHER SOURCES NEEDS NO ARGUMENT THAT SUSPICION HOWEVER STRONG CAN NOT TAKE THE PLACE OF TRUTH OR LEGAL EVIDENCE. IT IS RELEVANT TO NOTE THAT SECTION 53(C) OF THE I.T. ACT IN THIS REGARD WHICH READS AS UNDER : - SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES (1) WHERE THE CONSIDERATION RECEIVED OR ACCURING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR TH E PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL FOR THE I.T.A.NO. 516/CTK/2012 8 PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISION OF SUB - SECTION (1) WHERE (A) THE ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB - SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER. (B) T HE VALUE SO ADOPTED OR ASSESSED (OR ASSESSABLE) BY THE STAMP VALUATION AUTHORITY UNDER SUB - SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT. THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB - SECTION (2) (3)(4)(5) AND (6 ) OF SECTION 16A, CLAUSE (I) OF SUB - SECTION (1) AND SUB - SECTION (6) AND (7) OF SECTION 23A, SUB - SECTI ON (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH TAX ACT,1957 (27 OF 1957) SHALL WITH NECESSARY MODIFICATION APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB - S ECTION (1) OF SECTION 16A OF THAT ACT. (INSERTED BY THE FINANCE ACT, 2002 W.E.F. 01.04.2003) IF THE LEARNED A.O. DID NOT AGREE , TO THE VALUE SHOWN IN THE REGISTERED SALE DEED, HE SHOULD HAVE RESORTED TO SECTION 50 C OF THE I.T. ACT. I.T.A.NO. 516/CTK/2012 9 THE PRINCIPLE THAT SUSPI CION HOWSOEVER STRONG CANNOT BE A SUBSTITUTE FOR LEGAL TRUTH IS WELL ESTABLISHED. HE CITED CASE LAW VIZ., (A) COMMISSIONER OF INCOME - TAX V. RAM NARAIN GOEL 224 I.T.R. 180 (PUNJAB & HARIYANA). (B) THE SAID DECISION IS BASED ON THE PRINCIPLE DECIDED BY HONOURABLE SUPREME COURT OF INDIA IN PLETHORA OF CASES. (C) IN THE CASE OF VIJAY KUMAR ARORA VS. STATE GOVT. OF NCT OF DELHI IN CRIMINAL APPEAL NO. 125 OF 2009 DT. 13.01.2010 HAS HELD THAT THE LAW RELATING TO CIRCUMSTANTIAL EVIDENCE IS WELL SETTLED. IN DEALING WITH CIRC UMSTANTIAL EVIDENCE, THERE IS ALWAYS A DANGER THAT CONJECTURE OR SUSPICION LINGERING ON MIND MAY TAKE PLACE OF PROOF. SUSPICION, HOWSOEVER, STRONG CANNOT BE ALLOWED TAKE PLACE OF PROOF AND THEREFORE, THE COURT HAS TO BE WATCHFUL AND ENSURE THAT CONJUCTURE AND SUSPICION DO NOT TAKE PLACE OF LEGAL PROOF. THE DOCTRINE OF BENEFIT OF DOUBT APPLIES COURT SHOULD EXCLUDED EACH AND EVERY HYPOTHESIS. (D) IN A RECENT SUPREME COURT JUDGEMENT DECIDED ON 24.8.2012 IN THE CASE OF SUBRAMANIAN SWAMY VS. A. RAJA (2G SPECTRUM CASE) HONOURABLE SUPREME COURT HELD, SRI P. C. AND A.R. SIMILAR VIEW : SUSPICION, HOWEVER STRONG, COULD NOT TAKE PLACE OF LEGAL PROOF (E) SUSPICION HOWSOEVER HIGH CANNOT BE A SUBSTITUTE FOR LEGAL PROOF [(2009) 2 SCC 570 (PARA 23) ROOP SINGH NAGIR VS. PUN JAB NATIONAL BANK. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY LEARNED CIT(A) IS BASED ON MERE SUSPICION AND SURMISES AND NOT ON MATERIALS ON RECORD. I.T.A.NO. 516/CTK/2012 10 2.5. IN SO FAR AS PROBABILITY OF HUMAN CONDUCT ARE CON CERNED THE SAME CAN BE ACTED UPON WHEN THE PROBABILITIES ARE REASONABLE AND STRONG AND ADMIT OF NO ALTERNATIVE. IN THE MATTER OF CIRCUMSTANTIAL EVIDENCE COURTS AND TRIBUNAL ACT ON CIRCUMSTANCES THAT ADMIT NO EXCEPTION. INFERENCE OF PROBABILITY COULD ONLY B E DRAWN FROM PROVED FACT , WHICH IS TOTALLY WANTING IN THE PRESENT CASE. IN THE CASE IN HAND, BOTH THE SELLER AND PURCHASER STATED OF 50,00,000 AS HAVING BEEN PAID AND RECEIVED FOR THE SALE AND THE SAME HAS BEEN ACCEPTED AND ACTED UPON BY THE REGISTERING AUTHORITY WHICH IS A PUBLIC AUTHORITY CHARGED WITH TASK OF PREVENTING LOSS OF REVENUE TO THE STATE BY WAY OF UNDERVALUATION. AS AGAIN ST THE AFORESAID, NO EVIDENCE HAS BEEN ADDUCED FROM WHICH NO INFERENCE COULD BE DRAWN THAT AN ADDITIONAL AMOUNT OF 30,00,000 WAS PAID BY THE VENDEE AND RECEIVED BY THE ASSESSEE THAT AS ESCAPED ASSESSMENT. THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) TO THE CONTRARY RUNS COUNTER TO THE PRESUMPTION OF CORRECTNESS OF OFFICIAL ACT AS STATED ABOVE. THE FINDINGS OF BOTH THE AUTHORITIES BELOW TO THE CONTRARY CANNOT , THEREFORE BE SUSTAINED IN LAW. BOTH THE ASSESSEE AND THE VENDEE HAVE STATE D BEFORE THE ASSESSING OFFICER THAT STAND TAKEN BY THE ASSESSEE IS CORRECT WHICH IS CORROBORATED BY THE DOCUMENTARY EVIDENCE VIZ. THE SALE DEED. (PAGE 38 TO 45 OF THE PAPER BOOK) BOTH ARE CATEGORICALLY DENIED OF ANY PAYMENT OVER AND ABOVE 50,00,000 TOWARDS THE CONSIDERATION. BOTH HAVE EX PLAINED THAT THE FURTHER SUM OF 30,00,000 WAS PAID AND RECEIVED TOWARDS REPAIR AND REMODELING OF AN EXISTING BUILDING ON THE LAND AND THE FAILURE OF THE ASSESSEE TO FULFILL THE TASK UNDERTAKEN. AGAIN I.T.A.NO. 516/CTK/2012 11 THE RE IS NO MATERIAL OR EVIDENCE ON RECORD TO THE CONTRARY. RATHER THE AFFIDAVIT FILED BY THE ASSESSEE IN THIS REGARD HAS GONE UNCONTROVERTED. CONSEQUENTLY THE FACTS STATED IN THE AFFIDAVIT BEING IN CORROBORATION OF THE STAND TAKEN BY THE ASSESSEE, HAS TO BE ACCEPTED AS TRUE AND CORRECT. MERELY FROM THE OMISSION OF THE VENDEE TO TAKES STEPS TO RECOVER 30,00,000 FROM THE ASSESSEE FOR HIS FAILURE TO FULFILL THE OBLIGATION UNDERTAKEN BY HIM AS STATED EARLIER CANNOT LEAD TO A FINDING OF PROBABILITY OF THE SAME TO THE CONTRARY. A HYPOTHESIS CANNOT BE DRAWN THUS MERELY ON THE BASIS OF PROBABILITY OF HUMAN CO NDUCT TO VISIT THE ASSESSEE WITH ADDITIONAL TAX LIABILITY. IN CIVIL LAW THE COURTS AND TRIBUNAL DO NOT ACT ON PROBABILITY ALONE BUT ON A PREPONDERANCE OF PROBABILITIES WHICH IS WANTING IN THE INSTANT CASE FOR WHICH THE ASSESSEE IS ENTITLE TO BENEFIT OF REA SONABLE DOUBT AS PER THE WELL SETTLED PRACTICE AND PROCEDURE APPLIED IN SUCH MATTER. 2.6. IN VIEW OF THE ABOVE, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE IMPUGNED ADDITION OF 30,00,000 MADE BY THE ASSESSING OFFICER U/S.68 AND CONFIRMED BY THE LEARNED CIT(A) DESERVES TO BE DELETED. 3. THE LEARNED DR, ON THE OTHER HAND, OPPOSED THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE INSOFAR AS THE ADDITION HAS BEEN MADE ON A SPECI FIC FINDING BY THE ASSESSING OFFICER WHICH MAY KINDLY BE PERUSED IN THE ASSESSMENT ORDER WHEN EVEN AFTER CONSIDERING THE PROBABILITY OF ASSESSEE RECEIVING 30 LAKHS OVER AND ABOVE THE SALE CONSIDERATION THE ASSESSEE WAS TO UNDERTAKE CONSTRUCTION WHEN THE A SSESSEE SUO MOTU FILED THE RETURN OF INCOME DECLARING 8% OF THE SAID SUM AS INCOME FROM CONTRACTS UNDER THE I.T.A.NO. 516/CTK/2012 12 PROVISIONS OF SECTION 44AD. HAVING FILED THE RETURN INCLUDING THE COMPUTATION OF CAPITAL GAINS ON THE PURCHASE AND REDEMPTION ON THE RELIANCE MUTUAL FUND, THE ASSESSEE COULD NOT SUBSTANTIATE WHETHER THE ASSESSEE HAD EARNED INCOME OR CONVERTED A LIABILITY INTO INCOME THEREFORE IS A CHANGE OF STANCE OF THE ASSESSEE WAS CONSIDERED APPROPRIATELY BY THE LEARNED CIT(A) WHEN HE CHOSE TO CONSIDER THE ASSESSE ES SUBMISSIONS BEFORE HIM BY QUOTING THE JUDICIAL PRONOUNCEMENTS IN THE DECISION WHICH THE LEARNED COUNSEL OF THE ASSESSEE AS OF NOW HAS TRIED TO DISTINGUISH TO DETERMINE WHETHER THE AMOUNT HAD BEEN ADDED U/S.68 OR OTHERWISE. 3.1. ON OUR SPECIFIC QUERY FR OM THE BENCH WHETHER THE RECTIFICATION CARRIED OUT BY THE LEARNED CIT(A) FOR FINDING THE MIS - APPLICABILITY OF THE PROVISIONS OF SECTION 68 HAS BEEN RECTIFIED INSOFAR AS THE ASSESSMENT WILL NOT BE INVALID BY A WRONG NOTING OF A PROVISIONS OF SECTION AS PER THE PROVISIONS OF SECTION 292B, THE LEARNED DR ANSWERED IN THE NEGATIVE. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT A NAME HAS TO BE GIVEN FOR TAXABILITY OF THE AMOUNT U/S.68 WHICH THE LEARNED CIT(A) HAS CONSIDERED A MISNOMER INSOFAR AS THE ASSESSING OFFICER HAS MADE A CATEGORICAL FINDING THAT AFTER TAKING STATEMENT U/S.131 FROM THE LOAN CREDITOR WHICH LOAN CREDIT DID NOT REBUT THE ASSESSEES CONTENTION OF DECLA RING 8% INCOME ON THE SAID AMOUNT. IN OTHER WORDS, THE ASSESSEE WAS TO UNDERTAKE CIVIL CONSTRUCTION OR RENOVATION ON THE PLOT OF LAND AT DI LAPITED BUILDING STANDING THERE ON WHICH THE ASSESSEE SOLD TO THE LOAN CREDITOR. THE ASSESSING I.T.A.NO. 516/CTK/2012 13 OFFICER, THEREFORE, CO NSIDERING THESE FACTS DELETED THE INCOME OF 2,40,000 WHICH THE ASSESSEE HAD DECLARED UNDER THE PROVISIONS OF SECTION 44AD. THE ASSESSEE HAD ALSO DECLARED INCOME ON THE REDEMPTION OF THE RELIENCE MUTUL FUNDS WHICH HE WAS HOLDING AND FURTHER ON THE RECEIPT OF THIS AMOUNT FROM THE LOAN CREDITOR. THE I NCOME BEING SHORT TERM CAPITAL GAIN HAD BEEN DECLARED BY THE ASSESSEE AND ACCEPTED BY THE ASSESSING OFFICER. IN OTHER WORDS, THE UNDISPUTED FACTS AS NARRATED BY THE ASSESSING OFFICER AND REITERATED BY THE LEARNED COUNSEL OF THE ASSESSEE AS OF NOW HAVE NOT BEEN DISPUTED BY THE LEARNED CIT(A). THE LEARNED CIT(A) HAS ONLY CLARIFIED THAT THE AMOUNT CANNOT BE TAXED U/S.68 INSOFAR AS THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITOR STOOD ESTABLISHED BY THE ASSESSING OFFICER HIMSELF. BY DELETI NG THE INCOME RENDERED TO TAX BY THE ASSESSEE, IT WAS THE ASSESSING OFFICERS FINDING THAT THE SUM OF 30 LAKHS ON WHICH THIS INCOME HAD BEEN RETURNED WAS TO BE TAXED U/S.68. IN OTHER WORDS, HAVING PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT(A), WE ARE INCLINED TO FIND THAT BOTH HAVE COME TO THE IRRESISTIBLE CONCLUSION THAT THE AMOUNT COULD NOT BE TAXED EITHER AS A BOGUS LIABILITY OR AS A CASH CREDIT OR FOR THAT MATTER AS CONSIDERATION NOT DISCLOSED TO THE DEPARTMENT U/S.50C FOR THE PURPO SE OF CAPITAL GAINS INSOFAR AS THE STAMP DUTY AUTHORITIES HAVE ACCEPTED THE REGISTRATION IN THE HANDS OF THE BUYER ON THE SUM OF 50 LAKHS ONLY. THE LEARNED COUNSEL OF THE ASSESSEE AS OF NOW POINTED OUT THAT THE SAID CONSIDERATION HAS BEEN CLAIMED EXEMPT BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 54EC. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND I.T.A.NO. 516/CTK/2012 14 CIRCUMSTANCES BROUGHT O N RECORD, WE ARE OF THE CONSIDERED VIEW THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER OR THE LEARNED CIT(A) TO PARTICIPATE IN A CIVIL DISPUTE VIS - - VIS A CONTRACTOR AND THE CONTRAC T EE WHEN THE ADVANCE RECEIVED WAS TO BE REFUNDED FOR NON - EXECUTION OF TH E WORK. FURTHER M ERELY FROM THE OMISSION OF THE VENDEE TO TAKE STEPS TO RECOVER 30,00,000 FROM THE ASSESSEE FOR HIS FAILURE TO FULFILL THE OBLIGATION UNDERTAKEN BY HIM CANNOT LEAD TO A FINDING OF PROBABILITY OF THE SAME ACKNOWLEDGES THE FACT THAT HE WAS NOT TO PAY RS.80 LAKHS FOR THE PURPOSE OF SECTION 50C . A HYPOTHESIS CANNOT BE DR AWN THUS MERELY ON THE BASIS OF PROBABILITY HUMAN CONDUCT TO VISIT THE ASSESSEE WITH ADDITIONAL TAX LIABILITY. LAW IS WELL SETTLED THAT I N CIVIL LAW COURTS AND TRIBUNAL DO NOT ACT ON PROBABILITY ALONE BUT ON A PREPONDERANCE PROBABILITIES WHICH IT WAS SUBMI TTED IS WANTING IN THE CASE FOR WHICH ASSESSEE IS ENTITLE TO BENEFIT OF REASONABLE DOUBT AS PER THE WELL SETTLED PRACTICE AND PROCEDURE APPLIED IN SUCH MATTER S . THE AMOUNT WAS TO BE REFUNDED TO THE ASSESSEE AFTER THE ASSESSMENT OR THEREFOR AS OF NOW AVAIL FOR TAXING UNDER THE IMPUGNED ASSESSMENT YEAR INSOFAR AS THE FACTS AND CIRCUMSTANCES COULD ONLY LEAD TO THE FINDING THAT THIS AMOUNT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AT ANY POINT OF TIME. THE ASSESSEE, ASSUMING BUT NOT ACCEPTING, HAVE BEEN SUBJ ECTED TO TAX ON THIS PURPORTED LIABILITY WOULD NOT HAVE BECOME THE OWNER OF THE SAID SUM JUST BECAUSE WHICH IT HAS BEEN TAXED IN HIS HANDS. WE FIND THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE APPROPRIATE INSOFAR AS ALL INCOMES ARE RECEIPTS BUT A LL RECEIPTS MAY NOT BE INCOME, HAVE BEEN ADJUDICATED UPON BY THE VARIOUS JUDICIAL PRONOUNCEMENTS. IN VIEW OF THE I.T.A.NO. 516/CTK/2012 15 ABOVE, THE IMPUGNED ADDITION OF 30,00,000 MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) CANNOT BE SUSTAINED. THEREFORE, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF 30,00,000 , BY ALLOWING THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 30.11.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : RAMESH CHANDRA PATTNAIK, BARDHAWAN COMPOUND, COLLEGE SQUARE, CUTTACK 753 001 2 / THE RESPONDENT: INCOME - TAX OFFICER , WARD 2(1), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 27.11.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMB ER 29.11.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHIC H THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR S IGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 516/CTK/2012 16