Pandurang Waghu Gaikwad, Sangli V. Income-tax Officer,

ITA 558/PUN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0310 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMITRA BANERJI
• Keywords: Unexplained investment
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE SHRI R. P. TOLANI, JM / ITA NO. 558/PUN/2015 ! '#! / ASSESSMENT YEAR : 2009-10 PANDURANG WAGHU GAIKWAD AMIT TIMBER DEPOT, CHANDOLI ROAD, SHIRALA, SANGLI, PIN-415408 PAN : ABIPG7036M . /APPELLANT VS. INCOME TAX OFFICER, WARD -2(1), SANGLI. . / RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / RESPONDENT BY : SMT. SUMITRA BANERJI $ / ORDER PER R. P. TOLANI, JM: THIS IS THE ASSESSEES APPEAL RAISING FOLLOWING GROUNDS THAT LD. CIT(A) ERRED IN LAW AND ON FACTS IN: 1. IN CONFIRMING ADDITION IN RESPECT OF ALLEGED EXCESS CASH OF RS. 250320/-, FOUND DURING COURSE OF SURVEY WHICH WAS LATER RECONCILED BY THE ASSESSEE ON THE BASIS THE BOOKS OF ACCOUNT ARE NOT EVEN REJECTED BY AO. 2. ALLEGED VALUATION OF EXCESS VALUATION OF STOCK OF CE MENT & TILES AMOUNTING RS. 5,50,000/- WITHOUT APPRECIATING THAT THE COMPLETE RECONCILIATION SUMMERY OF THE STOCK DETAILS AS ON SURVEY DATE WAS FURNISHED BEFORE ASSESSING OFFICER. / DATE OF HEARING : 13.12.2016 / DATE OF PRONOUNCEMENT: 19.12.2016 ITA NO. 558/PUN/2015 2 3. CONFIRMING RS. 17,00,000/- ON ACCOUNT OF ALLEGED INVE STMENT IN RESIDENTIAL BUILDING IN AY 2009-10 IGNORING THAT AS PER DVOS REPORT ITSELF THE WAS COMPLETED BETWEEN DECEMBER,2003 TO DECEMBER, 2006 I.E. BEFORE ASSESSMENT YEAR IN QUESTION. 2. BRIEF FACTS ARE THAT ASSESSEES PREMISES WERE SURVEYE D ON 09.02.09 AND IN THE WAKE THEREOF IMPUGNED ASSESSMENT WAS MADE MAKING THE ADDITIONS ON THE BASIS OF SURVEY STATEMENT . D URING THE COURSE OF SURVEY, INCOMPLETE BOOKS OF ACCOUNTS WERE FOUND AND ASSESSEE WAS NOT ABLE TO GIVE PROPER REPLIES IN CONNECTIO N WITH INCOMPLETE ACCOUNTS BOOK. STOCK VALUATION WAS TAKEN AS P ER SURVEY PARTY AND PAPERS RELATING TO CONSTRUCTION OF BUILDING IN PR IOR PERIOD WERE FOUND. IN ABSENCE OF RELEVANT INFORMATION AND COMPLET E BOOKS OF ACCOUNT, ASSESSEE WAS NOT IN A POSITION TO GIVE PERTINEN T REPLIES. TO AVOID THE RIGOROUS QUESTIONS OF THE SURVEY PARTY, THE AS SESSEE AGREED TO DECLARE THE ADDITIONAL INCOME, ALTHOUGH CBDT DOES NOT APP ROVE OF SUCH OFF THE CUFF DISCLOSURE. THEREAFTER THE ASSESSEE RECONCILED THE CORRECT POSITION IN RESPECT OF THE DECLARATION AND FILED AN AFFIDAVIT ON 31.03.2009 I.E WITHIN ONE MONTH OF THE SURVEY AND BEFORE EN D OF THE FINANCIAL YEAR. DEPOSING THAT THE DECLARATION OF INCOME OFFERED DURING SURVEY WAS NOT PROPER AS IT WAS NOT BASED ON PROPER INFORMATION. THE COMPLETE AND CONCERNED DOCUMENTS EXPLAINING HOW DISCLOSUR E OF ADDITION OF INCOME WAS NOT REQUIRED, WAS ALSO NOT SUBMITTED. 3. DURING COURSE OF ASSESSMENT, LD. ASSESSING OFFICER DID N OT CONSIDER THE AFFIDAVIT AT ALL IN PROPER MANNER AND AVERMENT S THEREIN ALONG WITH DETAILS FILED WITH THE ACCOMPANIED DOCUMENTS. LD. ASSESSING OFFICER, HOWEVER MADE THE ADDITION BASED ONLY ON SURVEY S TATEMENT. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL BEFORE LD. CIT(A ) WHO GAVE SOME MINOR RELIEF AND UPHELD THE MAJOR ADDITIONS WHICH ARE AGITATED IN THE GROUND OF APPEAL. ITA NO. 558/PUN/2015 3 4. THE LD. COUNSEL OF THE ASSESSEE APROPOS GROUND NO . 1 CONTENDS THAT IT IS UNDISPUTED THE BOOKS OF ACCOUNT WERE NOT FULLY READY AT THE TIME OF SURVEY, SURVEY DECLARATION WAS GIVEN WITHOUT PROP ER INFORMATION. SUBSEQUENTLY BOOKS OF ACCOUNTS WERE COMPLET ED, PRODUCED DURING ASSESSMENT AND DULY VERIFIED BY THE ASSESSING OFFICE R AND ACCEPTED BY HIM. IT WAS EXPLAINED THAT THE EXCESS CASH WAS NOTHING BUT THE SALE AMOUNT PAID BY THE CUSTOMER SHRI SUNIL BHAGWAN E MANE FOR WHICH SALE BILL WAS NOT YET ISSUED. THE CASH THOUGH IN SUR VEY CASH APPEARED TO BE IN EXCESS WHEREAS, IN FACT, IT WAS AGAINST THE GOODS SOLD TO SHRI MANE. LD. ASSESSING OFFICER NEITHER VERIFIED IT FROM SH RI SUNIL BHAGWANE MANE NOR FROM BOOKS OF ACCOUNTS MAINTAINED ON THIS BEHALF. THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY THE ASSE SSING OFFICER WITHOUT POINTING ANY OBJECTION ON THE SALE TRANSACTION TO SHRI MANE. IN THIS CIRCUMSTANCE, THERE IS NO JUSTIFICATION IN MAKING ADDITION. 5. APROPOS GROUND NO. 2, LD COUNSEL CONTENDS THAT TH ERE WAS NO STOCK AT ALL; EXCESS STOCK WAS INDICATED BY SURVEY PART Y AND ADOPTED BY THE ASSESSING OFFICER. LD. COUNSEL ALSO CONTENDS THAT THE A SSESSEE CLARIFIED THAT AS PER THE QUANTITY OF STOCK IS CONCERNED, T HERE IS NO DIFFERENCE BETWEEN THE SURVEY PARTY AND ASSESSEE. THE D ETAILS OF BILLS, PURCHASE BILLS ETC AND RECONCILIATION THEREOF WERE FILED WITH T HE ASSESSING OFFICER WHICH IS REPRODUCED IN PAGE NO. 6 AND 7 O F HIS ORDER. THE ASSESSEE GAVE COMPLETE RECONCILIATION OF SALE MEMO, PUR CHASE MEMO AND GOODS IN TRANSIT AND EXPLAINED THE VALUATION OF STOCK. 6. LD. ASSESSING OFFICER WITHOUT CONTROVERTING THE FACTUAL SUBMISSION BY THE ASSESSEE SUMMARILY IGNORED THE SAME AND STUCK TO DECLARATION MADE IN THE SURVEY. IT IS HELD BY THE HONBLE SUPREME CO URT OF INDIA IN FIVE JUDGES BENCHES IN THE CASE OF EXCEL INDUS TRIES THAT ITA NO. 558/PUN/2015 4 VALUATION OF CLOSING STOCK AT THE BEST AMOUNTS TO POSTPO NEMENT OF LIABILITY TO THE SUBSEQUENT YEAR, AS CLOSING STOCK OF THIS YE AR IS ALLOWED TO BE TREATED AS OPENING STOCK OF THE SUBSEQUENT YEAR AND ALLOWED DEDUCTION; IT DOES NOT AMOUNT TO ANY TANGIBLE REVENUE LOS S. IN VIEW OF THE ABOVE FACTS AND ORDER OF AUTHORITIES BELOW, TO APPRE CIATE THE ASSESSEES OBJECT AND EXPLANATION FAR VALUATION OF STOCK BEING JUSTIFIED AND THE SUPREME COURT JUDGMENT IN THE CASE OF EXCEL IN DUSTRIES THAT THERE IS NO TANGIBLE REVENUE LOSS AND ADDITION NEEDS TO BE DELETED. 7. APROPOS GROUND NO. 3 REGARDING ADDITION QUA OF RESIDEN TIAL BUILDING, IT IS CONTENDED THAT ASSESSING OFFICER MADE REFERENC E TO THE DVO, A CENTRAL GOVERNMENT AGENCY ON HIS OWN INITIATIVE FOR VALUATION OF THE ALLEGED BUILDING. THE FINDINGS OF THE DVO HAVE BEEN COMMUNICATED TO THE LD. CIT(A) BY REMAND REPORT DATED 2 0.02.2015 AND PLACED ON PAPER BOOK NO. 198 ONWARDS. 8. LD. ASSESSING OFFICER HIMSELF ON THE BASIS OF DVOS REPORT HAS ACCEPTED THESE FACTS IN REMAND REPORT BY FOLLOWING OBSERVATIONS: 5.1. TO EXAMINE THE ISSUE OF ADDITION MADE ON THE ACCO UNT OF UNEXPLAINED INVESTMENT IN RESIDENTIAL PROPERTY AND IN TERIOR DECORATION. THE ASSESSEE WAS ASKED TO PRODUCE THE COMMENCEMENT AND COMPLETION CERTIFICATE FROM THE GRAM PANCHAYAT SHIRALA. ACCORDI NGLY, THE ASSESSEE HAS FURNISHED THE SAME. IT IS SEEN THAT THE CONSTRUCT ION OF THE BUILDING HAS BEEN COMMENCED IN THE YEAR 2002-2003 I.E A.Y. 2003-0 4 AND COMPLETED IN THE YEAR 2006-07 I.E A.Y 2007-08. FURTHER TH E RETURNS OF INCOME FROM THE A.Y. 2OO3-04 TO 2007-08 HAVE BEEN VERIF IED AND IT IS FOUND THAT THE ASSESSEE HAS SHOWN CONSTRUCTION EXPE NSES IN HIS CAPITAL ACCOUNT AS DRAWINGS AS UNDER : A.Y AMOUNT 2003-04 RS. 1,95,000/- 2004-05 RS. 4,10,000/- 2005-06 RS. 4,65,000/- 2006-07 RS. 4,17,200/- 2007-08 RS. 3,67,000/- TOTAL RS. 18,55,000/- FURTHER NO EXPENSES ARE INCURRED AFTER A.Y. 2006-07. ITA NO. 558/PUN/2015 5 9. A PERUSAL OF THE DVOS AND A.O.S REPORT DEMONSTRATE THAT INVESTMENT IN RESIDENTIAL BUILDING WAS COMPLETED BY F.Y. 2007 AND THERE IS NO FURTHER EXPENDITURE AFTER FINANCIAL YEAR 2006-07. 10. IN VIEW OF THESE FACTS, IT IS CONTENDED THAT IN THE YE AR IN QUESTION A.Y. 2009-2010, NO INVESTMENT OR EXPENDITURE WAS MADE BY THE ASSESSEE TOWARDS CONSTRUCTION OF RESIDENTIAL HOUSE IN QUE STION. ACCORDINGLY, THERE IS NO QUESTION OF ADDITION IN THIS BEHALF W HICH DESERVES TO BE DELETED. 11. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IN MY CONSIDERED VIEW THE ASSESSEES ALLEGED E XCESS CASH WAS DULY EXPLAINED IN THE COMPLETED BOOKS OF ACCOUNTS TO THE SATISFACTION OF THE ASSESSING OFFICER AND BOOKS HAVE NOT BEEN REJECTED. THE CASH IN QUESTION, HAS BEEN EXPLAINED FROM CASH BOOK TO HAVE BEEN PROVIDED TO CUSTOMER SHRI SUNIL BHAGWANE MANE AGAINST SALE, HE HAS NE ITHER BEEN QUESTIONED NOR CALLED BY THE ASSESSING OFFICER TO CONTROV ERT THIS FACT. IN THESE FACTS AND CIRCUMSTANCES I SEE NO JUSTIFICATION FOR T HE ADDITION IN THIS BEHALF WHICH STANDS DELETED. 12. APROPOS GROUND NO. 2, I FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL. THE SURVEY PARTY OBTAINED AN OFF THE CUFF DISCLOSUR E OF INCOME FROM ASSESSEE. MORE SO, THE BOOKS OF ACCOUNTS UNDISPUTED LY WERE INCOMPLETE AND ASSESSEE WAS NOT IN A POSITION TO GIVE EXA CT INSTANT REPLIES. BOOKS WERE SUBSEQUENTLY COMPLETED AND ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE WITHIN ONE MONTH AND BEFORE THE END OF FINANCIAL YEAR FILED AN AFFIDAVIT EXPLAINING CORRECT POSITION THAT HIS DISCLOSURE OF ADDITION INCOME WAS NOT JUSTIFIED. THE VALUATION OF STOCK HAS BEEN RECONCILED. HONBLE SUPREME COURT OF INDIA IN THE CASE OF EXCEL INDUSTRIES HELD THAT SUCH TYPE OF ADDITION IN VALUATIO N OF CLOSING ITA NO. 558/PUN/2015 6 STOCK AT THE BEST AMOUNTS TO POSTPONEMENT OF LIABILITY TO THE SUBSEQUENT YEAR, AS CLOSING STOCK OF THIS YEAR IS ALLOWED TO BE TREA TED AS OPENING STOCK OF THE SUBSEQUENT YEAR AND ALLOWED DEDUCT ION; IT DOES NOT AMOUNT TO ANY TANGIBLE REVENUE LOSS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THIS ADDITION IS ALSO DELETED. 13. APROPOS GROUND NO. 3 I.E INVESTMENT IN RESIDENTIAL HOUS E, THERE IS SUFFICIENT EVIDENCE ON RECORD BASED ON DVOS AND A.OS OP INION AND REPORTING THAT NO INVESTMENT WHATSOEVER WAS MADE BY THE ASSESSEE AFTER F.Y 2006-07 AND THUS THERE IS NO INVESTMENT IN THE A.Y.2009-10. CONSEQUENTLY, THERE IS NO JUSTIFICATION IN THE ADDITION APR OPOS GROUND NO. 3 WHICH IS THUS DELETED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.12.2016. SD/- (R. P. TOLANI) / JUDICIAL MEMBER / PUNE ; DATED : 19 TH DECEMBER, 2016 SB $%&'()(# COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ! ! ' # $ / THE CIT (A)-1, KOLHAPUR 4. THE CIT-2, KOLHAPUR. 5. 6. %&' (()* + ! )* + , , - - .. /DR SMC, ITAT, PUNE; '/0 1 GUARD FILE. // TRUE COPY// $ / BY ORDER, (2 )3 / PRIVATE SECRETARY ! )* + / ITAT, PUNE