Smt. Gurmit Kaur, Hoshiarpur V. The Income-tax Officer, Hoshiarpur

ITA 62/ASR/2011

• Counselvise Citation: 6220914 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Opportunity of being heard
• Section: 50C; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.62(ASR)/2011 ASSESSMENT YEAR:2005-06 PAN :ACXPD0749E SMT. GURMIT KAUR VS. THE INCOME TAX OFFICER, D/O S. SHARAN SINGH, DASUYA, PROP. VIDYA DHARI, DISTT. HOSHIARPUR. VPO BUDHIPIND, DASUYA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SANDEEP VIJH, CA RESPONDENT BY:SH. AMRIK CHAND, DR DATE OF HEARING:22/08/2012 DATE OF PRONOUNCEMENT:03/09/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A), JALANDHAR, DATED 14.12.2010 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) HAS ERRED IN ESTIMATING THE G.P. RATE AT 21% AND THEREBY SUSTAINING ADDITION OF RS.1,01,662/- TOWARDS G.P. R ATE. THE EXPLANATION REGARDING THE FALL IN THE G.P. RATE OVE R THE PRECEDING YEAR HAS NOT BEEN APPRECIATED. 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN DISALLOWANCE OF RS.3,1067/- FRO M TRACTOR REPAIRS & DIESEL EXPENSES. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN SUSTAINING DISALLOWANCE OF RS.2 ,000/- CLAIMED UNDER THE HEAD LEGAL EXPENSES. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN SUSTAINING THE COMPUTATION OF L ONG TERM CAPITAL GAINS AT RS.4,68,300/- AS AGAINST RS.1,09,9 72/- SHOWN BY THE APPELLANT. THE EXPLANATION REGARDING THE CALCUL ATION OF CAPITAL GAINS HAS NOT BEEN APPRECIATED. 3. IN GROUND NO.1, THE BRIEF FACTS ARE THAT THE ASS ESSEE IS RUNNING A BRICK KILN AND IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SALE OF BRICKS. THE ASSESSEE HAS DECLARED TOTAL SALES OF RS.39,79,218/- AT GROSS PROFIT OF RS.7,33,974/- AGAINST GROSS PROFIT RATE OF 18.44% A S AGAINST TOTAL SALES OF RS.45.11 LACS AND GP RATE OF 19.01% IN THE IMMEDIAT ELY PRECEDING YEAR. THE ASSESSEE HAD DECLARED GP RATE OF 20.37% IN THE YEAR BEFORE THE PRECEDING YEAR. THE ASSESSEE DID NOT PRODUCE PURCH ASE AND SALE BILLS AND VOUCHERS FOR EXPENSES FOR THE REASONS STATED BY THE ASSESSEE THAT THE ACCOUNTANT WHO HAD MAINTAINED THE BOOKS OF ACCOUNT HAD LEFT THE SERVICE AND ALL THE BOOKS OF ACCOUNT WERE LYING WITH HIM. THE A O, THEREFORE, REJECTED THE BOOKS OF ACCOUNT AND DISALLOWED 50% OF THE EXPE NSES CLAIMED IN THE TRADING ACCOUNT AND MADE THE ADDITION OF RS.6,75,18 3/-. 3 4. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE INVOKING OF PROVISION OF SECTION 145(3) OF THE ACT AND ESTIMATED THE GP RATE AT 21% LEADING TO A GROSS PROFIT OF RS. 8,75,676/- AS AGAINST THE G.P. DECLARED BY THE ASSESSEE AT RS.7,33,974/-, WHI CH RESULTED IN SUSTENANCE OF ADDITION OF RS.1,01,662/-. 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. SANDEEP VI JH, CA, ARGUED THAT FOR THE REASONS MENTIONED BEFORE THE AUTHORITIES BE LOW, THE ASSESSEE COULD NOT PRODUCE BOOKS OF ACCOUNT AND VOUCHERS. AT THE S AME TIME, THE AO HAS TO PROCEED TO MAKE AN ASSESSMENT IN THE MANNER PROVIDE D IN SECTION 144 OF THE ACT, BASED ON THE RELEVANT MATERIAL AVAILABLE WITH HIM. SECTION 144 DOES NOT GIVE UNBRIDLED POWER TO THE AO TO DISALLOW ANY EXP ENDITURE OR FOR ESTIMATING THE INCOME WITHOUT GIVING A REASONABLE BASIS FOR THE SAME. IN THE PRESENT CASE, THE ASSESSMENT MADE BY THE AO IS BAD IN LAW SINCE THE AO HAD DISALLOWED EXPENDITURE @ 50% WITHOUT FOLLOWING ANY BASIS WHATSOEVER. THEREFORE, THE ADDITION SO MADE BE OUT-RIGHTLY REJE CTED. FURTHER, SH. SANDEEP VIJH, APPEARING FOR THE ASSESSEE ARGUED THA T DUE TO FALL IN SALE AND COMPETITION IN THE MARKET AND INCREASE IN COSTS, TH E GP RATE HAS FALLEN WHICH WAS EXPLAINED BEFORE THE AUTHORITIES BELOW WHICH HA S NOT BEEN CONSIDERED. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN ESTIM ATING GP RATE AT 21%. 4 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AS NOT PRODUCED THE BOOKS OF ACCOUNT AND VOUCHERS FOR THE REASONS MENTIONED I N THE ORDERS OF BOTH THE AUTHORITIES BELOW. THE ASSESSEE HAS NOT FILED ANY A PPEAL AGAINST THE APPLICABILITY OF SECTION 145(3) OF THE ACT. AS REG ARDS THE ESTIMATION OF INCOME, THE AO HAS STRAIGHTWAY DISALLOWED 50% OF TH E EXPENSES WITHOUT FOLLOWING ANY BASIS WHATSOEVER. THOUGH SUCH ASSESS MENT WITHOUT ANY BASIS HAS TO BE TREATED AS BAD IN LAW. BUT AT THE SAME TI ME, SINCE THE BOOKS OF ACCOUNT HAVE RIGHTLY BEEN REJECTED BY THE A.O. AND UPHELD BY THE LD. CIT(A), THERE IS EVERY ELEMENT OF LEAKAGE OF REVENUE. THE A SSESSEE HAD DECLARED GP RATE OF 19.01% IN THE PRECEDING YEAR ON THE SALES O F RS.45.11 LACS. THE ASSESSEES SALE HAD DECREASED TO RS.39.79 LACS DURI NG THE YEAR. AS EXPLAINED, DUE TO INCREASE IN THE COST OF THE TRADI NG EXPENSES AND THE COMPETITION, GROSS PROFIT IS BOUND TO FALL. THE LD. CIT(A) IS NOT JUSTIFIED IN ESTIMATING GP AT 21%, IS ALSO WITHOUT ANY BASIS. TH EREFORE, IT WILL BE IN THE INTEREST OF JUSTICE, IF THE GP RATE OF 18.75% IS AP PLIED ON THE TOTAL SALES OF RS.39,79,218/- DECLARED BY THE ASSESSEE. THE A.O. IS DIRECTED TO ACT ACCORDINGLY. THUS, GROUND NO.1 OF THE ASSESSEE IS P ARTLY ALLOWED. 5 8. AS REGARDS GROUND NO.2, THE ASSESSEE DID NOT PRO DUCE VOUCHERS FOR TRACTOR REPAIRS AND DIESEL EXPENSES AMOUNTING TO RS .1,24,266/- AND ACCORDINGLY, THE AO DISALLOWED THE TOTAL EXPENSES A ND ADDED TO THE INCOME OF THE ASSESSEE. 8.1. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE AT 25% OF THE SAME AMOUNTING TO RS.31,067/-. 8.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE D ID NOT PRODUCE VOUCHERS FOR THE EXPENSES CLAIMED, AS MENTIONED IN GROUND NO.1 H EREINABOVE. THE AO DISALLOWED THE TOTAL EXPENDITURE WITHOUT MENTIONIN G ANY REASON IN HIS ORDER WHEREAS THERE IS NO DISPUTE TO THE FACT THAT THE AS SESSEE IS OWNING THE TRACTOR AND HAD BEEN INCURRING EXPENSES ON REPAIRS AND DIES EL EXPENSES IN THE PRECEDING YEAR. THOUGH SUCH ASSESSMENT IS MADE BY THE AO IS BAD IN LAW BUT SINCE THE ASSESSEE COULD NOT PRODUCE VOUCHERS, THERE IS EVERY POSSIBILITY OF LEAKAGE OF REVENUE. THE LD. CIT(A) HAD ALSO ESTI MATED THE DISALLOWANCE AT 25% OF THE EXPENSES CLAIMED WHICH IS ALSO WITHO UT ANY BASIS. THEREFORE, IN ORDER TO MEET BOTH ENDS OF JUSTICE, IT WILL BE F AIR TO SUSTAIN DISALLOWANCE OF 10% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE. THE AO IS DIRECTED TO ACT ACCORDINGLY. THUS, GROUND NO. 2 OF THE ASSESSEE IS PARTLY ALLOWED. 6 9. AS REGARDS GROUND NO.3, THE AO MADE DISALLOWANCE OF RS.2,000/- BEING PAYMENT MADE TO AN ADVOCATE. THE LD. CIT(A) U PHELD THE ORDER OF THE A.O. 9.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THE EXPENDITURE OF RS.2,000/- BEING PAYMENT MADE T O AN ADVOCATE APPEARS TO BE A REASONABLE EXPENDITURE. NO SUCH EXPENDITURE HAS BEEN CLAIMED UNDER ANY OTHER HEAD OF THE PROFIT & LOSS ACCOUNT. NO SUC H CLAIM HAS BEEN BROUGHT ON RECORD BY ANY OF THE AUTHORITIES BELOW, EVEN IN THE ASSESSMENT MADE IN A MANNER UNDER SECTION 144 OF THE ACT, ALL THE FACTS AND CIRCUMSTANCES HAS TO BE TAKEN INTO CONSIDERATION. IN THE PRESENT FACTS A ND CIRCUMSTANCES OF THE CASE, WE FIND EXPENSES TO BE REASONABLE AND THE A.O . IS NOT JUSTIFIED IN DISALLOWING THE SAME. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 10. AS REGARDS GROUND NO.4, THE BRIEF FACTS ARE TH AT THE ASSESSEE HAS SOLD A HOUSE BUILT ON A PLOT OF LAND MEASURING 9 MARLA 2 52 SQ.FT SITUATED AT JASWANT NAGAR, V. GARHA, JALANDHAR, FOR RS.6,50,00 0/-. THE ASSESSEE HAD CLAIMED INDEXATION WITH REGARD TO THE COST AND AS WELL AS IMPROVEMENT ON THE SAID HOUSE. THE SALE CONSIDERATI ON OF CIRCLE RATE HAS BEEN MENTIONED AT RS.7,55,000/-. THE ASSESSEE COULD NOT SUBMIT THE EXPLANATION TO THE SATISFACTION OF THE AO WITH REGA RD TO THE IMPROVEMENT 7 COST AND ACCORDINGLY, THE AO MADE A DISALLOWANCE AN D COMPUTED THE LOG TERM CAPITAL GAINS AT RS.4,68,300/- AS AGAINST RS.1 ,09,772/- CLAIMED BY THE ASSESSEE. 10.1. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A. O. 10.2. SH. SANDEEP VIJH, CA APPEARING FOR THE ASSESS EE ARGUED THAT AS REGARDS THE INDEX COST OF IMPROVEMENT CLAIMED AT RS .2,13,771/-, THE ASSESSEE HAD INCURRED EXPENDITURE IN THE FINANCIAL YEAR 2003 -04 FOR WHICH COPY OF THE LEDGER ACCOUNT WAS SUBMITTED. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED. THEREFORE, THE EXPENDITURE OF RS.2,06,200/ - CANNOT BE DOUBTED. AS REGARDS THE EXPENDITURE OF RS.30,000/- FOR WHICH IN DEXED COST OF IMPROVEMENT OF RS.41,026/- HAD BEEN CLAIMED, THE AS SESSEE COULD NOT PRODUCE VOUCHERS. BUT THE EXPENDITURE HAS ACTUALLY BEEN INCURRED ON THE FOUNDATION AND THE CONSTRUCTION OF THE BOUNDARY WAL L WHICH WAS VERIFIABLE ON THE SPOT AS EXPLAINED TO THE AO. THEREFORE, THE AO IS NOT JUSTIFIED IN NOT CONSIDERING THE SAID COST OF IMPROVEMENT AND THE IN DEXED COST OF IMPROVEMENT. AS REGARDS THE CIRCLE RATE OF RS.7,55, 000/-, THE AO HAS NOT PROVIDED ANY OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE AND THEREFORE, SUCH VALUE OF RS.7,55,000/- CANNOT BE ADOPTED BY THE A.O . 10.3. THE LD. DR, ON THE OTHER HAND, RELIED UPON TH E ORDERS OF BOTH THE AUTHORITIES BELOW. 8 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE H AD CLAIMED AN EXPENDITURE OF RS.2,06,200/- IN THE PRECEDING YEAR WHICH IS REF LECTED IN THE ACCOUNT FOR THE YEAR ENDING 31.03.2004 RELEVANT TO THE ASSESSM ENT YEAR 2004-05. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED. THERE FORE, THE AO CAN NOT DOUBT SUCH EXPENDITURE. 11.1 AS REGARDS THE CONSTRUCTION OF THE BOUNDARY W ALL AND FOUNDATION WHEN THE SAME ARE PHYSICALLY AVAILABLE, THEN SUCH E XPENDITURE HAS ACTUALLY BEEN INCURRED. THEREFORE, THE AO IS NOT JUSTIFIED T O DISALLOW THE EXPENDITURE OF RS.2,06,000/- AND RS.30,000/- AND ACCORDINGLY, I NDEXED COST OF IMPROVEMENT OF RS.2,13,771/- AND RS.41,026/- IS AL LOWABLE AS DISCUSSED HEREINABOVE. THE AO IS DIRECTED TO ALLOW SUCH INDEX ED COST OF IMPROVEMENT WHILE COMPUTING LONG TERM CAPITAL GAIN. 11.2 AS REGARDS THE ADOPTION OF SALE CONSIDERATION AS PER SECTION 50C (1), WHERE IT IS CLEARLY MENTIONED THAT WHERE THE CONSID ERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE AD OPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE O F PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED O R ASSESSED SHALL, FOR THE 9 PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VA LUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. 11.3 IN THE PRESENT CASE, THE CONSIDERATION RECEIVE D BY THE ASSESSEE WAS RS.6,50,000/- WHICH WAS LESS THAN RS.7,55,000/- BEI NG THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHO RITY IS NOT UNDER DISPUTE. THERE IS NO EXPLANATION GIVEN BEFORE THE A O OR THE LD. CIT(A) OR EVEN BEFORE US WITH REGARD TO THE SAID VALUE ADOPTE D BY THE STAMP VALUATION AUTHORITY. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ADOPTE D THE VALUE AT RS.7,55,000/-. THE ASSESSEE GETS RELIEF ACCORDINGLY . THUS, GROUND NO.4 OF THE ASSESSEE IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3RD SEPTEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATES: 3RD SEPTEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SMT. GURMIT KAUR, DASUYA. 2. THE ITO, DASUYA 3. THE CIT(A), JLR. 4. THE CIT, JLR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY 10 BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.