Ramit Kuthiala, Shimla V. ITO, Shimla

ITA 528/CHANDI/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2322 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Income from undisclosed sources; Valuation report
• Section: 44AD; 143(3); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NOS.528 & 529 /CHD/2011 (ASSESSMENT YEARS: 2006-07 & 2007-08) RAMIT KUTHIALA, VS. THE INCOME TAX OFFICER, C/O HAKAM MALL TANI MALL, WARD 1 LOWER BAZAR, SHIMLA. SHIMLA. PAN: ALEPK4441Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VISHAL MOHAN RESPONDENT BY : SHRI N.K. SAINI DR DATE OF HEARING : 16.04.2013 DATE OF PRONOUNCEMENT : 29.04.2013 O R D E R PER SUSHMA CHOWLA, J.M. : THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINS T THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TA X (A), SHIMLA DATED 24.2.2011 RELATING TO ASSESSMENT YEARS 2006-07 AND 2007-08, AGAINST THE ORDER PASSED U/S 143(3) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BOTH THESE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLI DATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.528/CHD/2011 HAS RAISED T HE FOLLOWING GROUND OF APPEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.1210265/- TO THE TAXABLE INCOME OF THE ASSESSEE UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ALLEGED DIFFERENCE IN VALUATION. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD COMPLETED THE CONSTR UCTION OF INDUSTRIAL SHED AT PLOT NO.80-D, EPIP, PHASE-1, BADDI, DISTRIC T SOLAN. THE 2 ASSESSEE HAD SHOWN TOTAL INVESTMENT OF ABOUT RS.20 LACS I.E. RS.7 LACS IN FINANCIAL YEAR 2004-05 AND RS.13 LACS IN FINANCIAL YEAR 2005-06. THE ASSESSING OFFICER REFERRED THE VALUATION OF COST OF INVESTMENT IN THE BUILDING TO THE ASSTT. VALUATION OFFICER WHO ESTIMA TED THE TOTAL COST OF INVESTMENT IN THE SAID BUILDING AT RS.57,21,400/- A S AGAINST RS.20 LACS SHOWN BY THE ASSESSEE. THE COST OF INVESTMENT RELA TABLE TO THE YEAR UNDER CONSIDERATION WAS ESTIMATED AT RS.37,18,910/- AS AGAINST RS.13 LACS SHOWN BY THE ASSESSEE. THE VALUATION REPORT O F DVO WAS CONFRONTED TO THE ASSESSEE AND HE WAS ASKED TO GIVE N HIS COMMENTS. THE COMMENTS OF THE ASSESSEE IN REPLY ARE REPRODUCED AT PAGE 6 OF THE ASSESSMENT ORDER AND FURTHER REPLY AT PAGE 7 OF THE ASSESSMENT ORDER. THE MAIN OBJECTION OF THE ASSESSEE WAS THAT THE DVO HAD APPLIED CPWD RATES, WHEREAS IN THE CASE OF THE ASSESSEE HP PWD R ATES SHOULD BE APPLIED AND ALSO IT WAS POINTED OUT THAT THE ASSESS EE HAD CONSTRUCTED ONLY INDUSTRIAL SHED AND NOT ANY BUILDING. THE ASS ESSING OFFICER VIDE PARA 6.II AT PAGE 7 OF THE ASSESSMENT ORDER NOTED T HE CONTENTIONS OF THE ASSESSEE AND ALSO DIFFERENCE IN CPWD RATES AND HP P WD RATES AND ESTIMATED THE COST OF CONSTRUCTION AT RS.38,61,945/ -, OUT OF WHICH RS.25,10,265/- RELATED TO THE YEAR UNDER APPEAL. T HE ASSESSEE HAD DECLARED THE COST OF CONSTRUCTION AT RS.13 LACS AND DIFFERENCE OF RS.12,10,265/- WAS ADDED UNDER SECTION 69 OF THE AC T. HOWEVER, NO ADDITION WAS MADE IN THE PRECEDING YEAR I.E. ASSESS MENT YEAR 2005-06 ON ACCOUNT OF DIFFERENCE IN THE VALUE OF COST OF CONST RUCTION AT RS.6,51,680/-. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESSING OFFICER. SHRI VISHAL MOHAN APPEARED ON BEHALF OF T HE ASSESSEE AND SHRI N.K.SAINI PUT IN APPEARANCE ON BEHALF OF THE REVENU E AND PUT FORWARD THEIR CONTENTIONS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION T O THE INVESTMENT IN COST OF CONSTRUCTION OF INDUSTRIAL SHED AT BADDI CONSTRU CTED BY THE ASSESSEE DURING THE PRECEDING YEAR AND DURING THE YEAR UNDER APPEAL. THE 3 ASSESSEE HAD SHOWN COST OF CONSTRUCTION AT RS.20 LA CS I.E. RS.7 LACS AS HAVING BEEN INVESTED IN ASSESSMENT YEAR 2005-06 AND RS.13 LACS IN ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER REF ERRED THE MATTER OF VALUATION TO THE DVO WHO ESTIMATED THE TOTAL COST O F CONSTRUCTION OF INDUSTRIAL SHED AT RS.57,21,400/-. HOWEVER, THE AS SESSING OFFICER REDUCED THE SAID COST OF CONSTRUCTION TO RS.38,61,9 45/-. THE COST OF CONSTRUCTION RELATABLE TO ASSESSMENT YEAR 2005-06 W AS ASSESSED AT RS.13,51,680/- AS AGAINST RS.7 LACS SHOWN BY THE AS SESSEE RESULTING IN DIFFERENCE OF RS.6,51,680/- AGAINST WHICH NO ADDITI ON WAS MADE IN THE HANDS OF THE ASSESSEE. FOR THE YEAR UNDER APPEAL T HE COST OF CONSTRUCTION WAS ASSESSED AT RS.25,10,265/- AS AGAINST RS.13 LAC S SHOWN BY THE ASSESSEE RESULTING IN ADDITION OF RS.12,10,265/-. THE CONTENTION OF THE ASSESSEE WAS THAT IT HAD ONLY CONSTRUCTED AN INDUST RIAL SHED AND THE COST OF CONSTRUCTION WAS ON THE LOWER SIDE AND THE RATES APPLIED BY THE DVO WERE OF CPWD RATES, WHEREAS THE ASSESSEE IS GOVERNE D BY HP PWD RATES, WHICH ADMITTEDLY WERE ON THE LOWER SIDE. THE ASSES SING OFFICER HAD ALLOWED CREDIT OF 25% ON THIS ACCOUNT AND FURTHER R EDUCTION BY 10% FOR CONTRACTOR PROFIT RESULTING IN ADDITION OF RS.12,10 ,265/-. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ESTI MATION BEING MADE BY THE ASSESSING OFFICER AND DVO AND ALSO IN VIEW OF T HE VALUATION REPORT FILED BY THE ASSESSEE, WE DEEM IT FIT TO RESTRICT T HE ADDITION TO RS.5 LACS AND DELETE THE BALANCE ADDITION OF RS.7, 10,265/-. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 6. THE ASSESSEE IN ITA NO.529/CHD/2011 HAS RAISED T HE FOLLOWING GROUND OF APPEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.533280/- MADE TO THE TAXABLE INCOME OF THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES UNDER SECTION 69 OF THE INCOME TAX ACT, 1961. 4 7. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER NOTED VARIOUS CREDIT ENTRIES IN T HE BANK ACCOUNT OF THE ASSESSEE WHICH WERE NOT EXPLAINED BY THE ASSESSEE. EVENTUALLY SURRENDER OF RS.3,10,000/- WAS MADE BY THE ASSESSEE TO COVER CASH DEPOSITS AS WELL AS REPAYMENT OF LOAN IN CASH SUBJECT TO NO PENALTY AND PROSECUTION. THE ASSESSING OFFICER FURTHER NOTED ANOTHER CREDIT ENTR Y OF RS.5,33,280/- THROUGH TRANSFER. THE ASSESSEE HAD DECLARED THE SA ID INCOME AS CONTRACT RECEIPTS FROM M/S NATURE HEALTH CARE PHARMA FOR CAR RYING OUT JOB WORK. THE ASSESSEE HAD DECLARED THE INCOME UNDER SECTION 44AD OF THE ACT @ 8% OF TOTAL RECEIPTS OF RS.5,33,280/- AT RS.42,663/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER REQ UISITIONED THE ASSESSEE TO FURNISH EVIDENCE OF THE CONTRACT RECEIP TS INCLUDING CONFIRMATION FROM THE PARTIES. HOWEVER, THE ASSESS EE FURNISHED ONLY CONFIRMATION ON PLAIN PAPER WITHOUT ANY STAMP OF TH E CONCERN OR COMPLETE ADDRESS. THE PLEA OF THE ASSESSEE WAS THA T THE PARTY WAS NOT IN EXISTENCE AT BADDI AT PRESENT AND THE WHEREABOUTS O F THE PARTY WERE NOT KNOWN, HOWEVER, THE AMOUNT WAS RECEIVED THROUGH CHE QUE. THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE MADE AN ADDITION OF RS.5,33,280/- UNDER SECTION 68 OF THE A CT. 8. THE CIT (APPEALS) CONFIRMED THE ORDER OF THE AS SESSING OFFICER. THE ASSESSEE IS IN APPEAL AGAINST THE SAME. THE LE ARNED A.R. FOR THE ASSESSEE DREW OUR ATTENTION TO THE CERTIFICATE ISSU ED BY THE CONCERN AND ALSO POINTED OUT THAT THE AMOUNT WAS RECEIVED BY CH EQUE AND WAS DEPOSITED IN THE BANK ACCOUNT. WHEN CONFRONTED AS TO THE CASH WITHDRAWAL OF RS.5,33,000/- ON THE NEXT DATE OF CRE DIT OF RS.5,33,280/-, THE ASSESSEE PLEADED THAT THE AMOUNT WAS UTILIZED F OR PAYMENT ON ACCOUNT OF VARIOUS EXPENSES. 9. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RE FLECTED CONTRACT RECEIPT OF RS.5,33,280/- IN THE RETURN OF INCOME AN D DECLARED THE INCOME UNDER SECTION 44AD OF THE ACT @8% AT RS.42,663/-. HOWEVER, THE ASSESSEE WAS UNABLE TO FURNISH COMPLETE EVIDENCE IN RELATION TO THE SAID RECEIPT AND IN THE ABSENCE OF THE SAME THE SAID REC EIPT WAS TREATED AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE. IN THE T OTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN DECLARING INCOME UNDER SECTION 44AD OF THE ACT A T RS.42,663/-. HOWEVER, IN ORDER TO MEET THE END OF JUSTICE WE ARE OF THE VIEW THAT CERTAIN EXPENDITURE MUST HAVE BEEN INCURRED BY THE ASSESSEE IN ORDER TO EARN THE SAID INCOME. ACCORDINGLY, WE DIRECT THE A SSESSING OFFICER TO ALLOW DEDUCTION ON ACCOUNT OF EXPENDITURE AT RS.50, 000/- RESULTING IN ADDITION TO RS.4,83,280/-. THE GROUND OF APPEAL RA ISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF APRIL, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 29 TH APRIL, 2013 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 6