ITO, New Delhi V. Sai Samarpan Traders (P) Ltd., New Delhi

ITA 532/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9982 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 25-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARMINDER KUMAR
• Assessee Lawyers: R K SEHGAL
• Keywords: Unexplained investment; Business income; Income from undisclosed sources; Cost of acquisition
• Section: 142(1); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI I.P. BANSAL AND SHRI SHAMIM YAHYA ITA NO. 532(DEL)2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, SAI SAMARPAN TRADERS P. LTD., WARD 7(2), NEW DELHI. V. A-36, KAILASH CO LONY, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ARMINDER KUMAR, DR RESPONDENT BY: SHRI R.K. SEHGAL, C A ORDER PER SHAMIM YAHYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 20.11.200 9 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF ` 60,37,918/- MADE BY THE AO ON ACCOUNT OF PROFIT ON SALE OF AN IMMOVABLE PROPERTY. 3. IN THIS CASE THE AO MADE AN ADDITION OF ` 60,37,918/- INVOKING THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT. THE AO HELD AS FOLLOWS:- ITA 532(DEL)10 2 3. THE ASSESSEE COMPANY IS A BUILDER. ON 29.06.2 004 (DURING ASSTT.YEAR 2005-06) THE ASSESSEE COMPANY HAD PURCHA SED THE ENTIRE 208 SQ.YARDS IMMOVABLE PROPERTY AT E-191 GREATER KA ILASH PART-I, NEW DELHI 110048, FOR A SUM OF ` 25 LAKHS PLUS ` 2 LAKHS STAMP DUTY. THE OPENING WDV OF THIS INVESTMENT AS ON 01.04.2005 WAS ` 39,65,869/- AND FURTHER AN ADDITION OF ` 6,64,491/- TOOK PLACE DURING THE FINANCIAL YEAR 2005-06. DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO THE ASSESSMENT YEAR 2006-07 THE ASSESSE E SEPARATELY SOLD THE BASEMENT, GROUND FLOOR, FIRST FLOOR AND SECOND FLOOR FLATS, EACH MEASURING 1249 FEET, AT E-191 GREATER KAILASH PART I, NEW DELHI- 110048, FOR A TOTAL SALES CONSIDERATION OF ` 58,00,000/-. 4. REFERENCE WAS MADE ON 22.07.2008 TO THE DISTRIC T VALUATION OFFICER, INCOME TAX DEPARTMENT, FOR DETERMINING THE VALUE OF INVESTMENT U/S 142A OF THE I.T. ACT, 1961. VIDE L ETTER NO. VO- III/ND/IT-01/142-A/2008-09/12 DATED 30.09.2008, THE VALUATION OFFICER UNIT-III HAS DETERMINED THE FAIR MARKET VAL UE AS ON 30.06.2005 (DATE OF SALE) AT ` 1,18,08,918/-. VIDE LETTER DATED 10.10.2008 OF THIS OFFICE, THE ASSESSEE COMPANY WAS AFFORDED AN OPPORTUNITY TO FILE OBJECTIONS TO THE VALUATION REP ORT OF THE VALUATION OFFICER UNIT III. THE OBJECTIONS FILED VIDE BY TH E AR LETTER DATED 21.11.2008 HAS BEEN DULY CONSIDERED BUT IT LACKS ME RIT. I AM THEREFORE ADOPTING ` 1,18,08,918/- AS THE SALE PRICE AS ON 30.06.2005. THE PROFIT ON SALE OF THE IMMOVABLE P ROPERTY IS BEING CALCULATED AS UNDER:- SALE PRICE - COST OF ACQUISITION = PROFIT 1,18,08,918 [39,65,869 + 6,64,491] = 71,78,558 ` ` ` ` 60,37,918/- BEING THE DIFFERENCE BETWEEN THE DEEMED PROFIT OF ` 71,78,558/- AND ` 11,40,640/- ORIGINALLY CREDITED AS PROFIT TO THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE COMPANY, IS BEING TREATED AS INCOME FROM UNDISCLOSED SOURCES AS PER PROVISIONS O F SECTION 68 OF THE I.T. ACT, 1961. ITA 532(DEL)10 3 4. UPON THE ASSESSEES APPEAL THE LD. CIT(A) NOTED THAT SECTION 68 WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. HENCE, HE FOUND THAT REFERRING TO THE VALUATION OFFICER WAS ALSO NOT PROPER. HE HELD AS UNDER:- 11. IT WAS ALSO SEEN THAT AS PER SECTION 68 OF TH E I.T. ACT, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESS EE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLA NATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE A SSESSEE OF THAT PREVIOUS YEAR. 12. IT IS SEEN THAT IN CASE OF THE ASSESSEE THERE WERE NO SUCH SUMS CREDITED IN THE BOOKS OF THE ASSESSEE. HENCE, ABOV E ADDITION OF ` 71,78,558/- CANNOT BE MADE BY THE AO U/S 68 OF THE I.T. ACT. FURTHER, AS PER SECTION 142A OF THE I.T. ACT, FOR THE PURPO SES OF MAKING AN ASSESSMENT OR REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 O R SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUE ARTI CLES REFERRED TO IN SECTION 69 OR SECTION 69B IS REQUIRED TO BE MADE, T HE AO MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH V ALUE AND REPORT THE SAME TO HIM. IN THE CASE OF THE ASSESSEE, THE AO HAS MADE ADDITION U/S 68 AND NOT U/S 69 OR SECTION 69B, THEREFORE, TH E REFERENCE TO THE DVO U/S 142(1) SHOULD NOT HAVE BEEN MADE. MOREOVER , THE DVO IN HIS REPORT HAS TAKEN THE VALUATION DATE OF 30.06.05 , WHEREAS THE ASSESSEE HAD PURCHASED THE PROPERTY ON 29.06.04. S ECTION 69 OR SECTION 69B DEAL WITH UNEXPLAINED INVESTMENT OR UND ER DISCLOSURE OF AMOUNT OF INVESTMENT. THERE IS A GAP OF MORE THAN ONE YEAR IN THE TWO VALUATION DATES. THEREFORE, IN ANY CASE, THE AO WAS INCORRECT IN TAKING THE VALUATION OF 30.06.2005. 13. IT IS SEEN THAT THE ASSESSMENT ORDER MAKES IT CLEAR THAT THE ADDITION WAS MADE WITHOUT MEETING OUT THE OBJECTION S OF THE APPELLANT AND MERITS OF THE CASE. THE AO BEFORE SOLELY RELYI NG UPON DVOS REPORT SHOULD HAVE FORWARDED THE OBJECTIONS OF THE APPELLANT TO THE DVO SO THAT IT COULD BE SETTLED BY A TECHNICAL EXPE RT. FURTHER, THE ITA 532(DEL)10 4 ASSESSEE SHOULD HAVE BEEN ASKED TO FURNISH INSTANCE S OF COMPARABLE SALE INSTANCES BEFORE TOTALLY RELYING UPON THE REPO RT OF THE DVO. THE RATES OF LAND AND CONSTRUCTION RATES TAKEN BY THE A SSESSEE DISCUSSED IN EARLIER PARAS SEEMS TO BE REASONABLE, JUSTIFIED AND SUPPORTED BY CLAIMS/EVIDENCES. THE ASSESSEE HAS ALSO CHALLENGE D THE ADDITION ON TECHNICAL GROUNDS UNDER SECTIONS 68,69, 142A AND VA LUATION DATE OF 30.06.2005 TAKEN BY THE DVO. I FEEL THERE IS FORCE IN THESE CONTENTIONS OF THE ASSESSEE ALSO. UNDER SUCH FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION WAS NOT IN ACCORDANCE WI TH THE LAW. THE SAME IS, THEREFORE, HEREBY DELETED. 14. IN THE RESULT, THE APPEAL IS ALLOWED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR RELIED UPON THE ORDER OF THE AO. HE PLEADED THA T THE MATTER MAY BE SET ASIDE TO THE FILE OF THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, ARGUED THAT THE LD. CIT(A) HAS GIVEN JU ST AND PROPER FINDING. SECTION 68 WAS NOT AT ALL APPLICABLE IN THIS CASE I NASMUCH AS IT IS A CASE OF SALE OF PROPERTY. MOREOVER, THE LEARNED COUNSEL FO R THE ASSESSEE WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALSO GIVEN COMPARA TIVE INSTANCE AND HE FURTHER SUBMITTED THAT CIRCLE RATES WERE NOT APPLIC ABLE IN THAT PERIOD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORDS ACCORDINGLY. IN OUR CONSIDERED OPINION, TH E LD. CIT(A) HAS PASSED A REASONABLE ORDER. IT DOES NOT NEED ANY INTERFERENC E ON OUR PART. THE LD. CIT(A) IS ALSO CORRECT THAT REFERENCE TO THE VALUAT ION OFFICER CANNOT BE MADE FOR MAKING ADDITION IN THE CASE OF SALE OF PRO PERTY. AS ESTIMATE BY ITA 532(DEL)10 5 VALUATION OFFICER IS MANDATED FOR ADDITIONS UNDER S ECTIONS 69 & 69A, 69B. IN THIS CASE AO HAS MADE THE ADDITION UNDER SECTION 68. THIS IS APPLICABLE FOR SUM FOUND CREDITED IN THE BOOK. UNDER THE CIRC UMSTANCES WE UPHOLD THE ORDER OF LD. CIT(A). 7. IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.2011. SD/- SD/- (I.P. BANSAL) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.03.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR