Income Tax Officer, Barabanki V. M/s Sai Educational Society, Barabanki

ITA 631/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100475 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R RASTOGI
• Keywords: Unexplained investment
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.631/LKW/2014 ASSESSMENT YEAR:2010-11 INCOME TAX OFFICER BARABANKI V. M/S SAI EDUCATIONAL SOCIETY SHREE NAGAR CIVIL LINES, BARABANKI TAN/PAN: (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. K. R. RASTOGI, C.A. RESPONDENT BY: SHRI. RAJNISH YADAV, D.R. DATE OF HEARING: 14 10 2015 DATE OF PRONOUNCEMENT: 18 11 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.1,20,98,645/-IGNORING THE FACTS THAT REFERENCE WAS MADE TO DVO AFTER REJECTING THE BOOKS OF ACCOUNT OF ASSESSEE. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS), LUCKNOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CANCELLING THE ESTIMATED COST OF CONSTRUCTION ON FRIVOLOUS GROUNDS. THE REPORT OF AVO IS VERY EXHAUSTIVE & SPEAKING AND ALL THE OBJECTIONS OF ASSESSEE WAS REPLIED IN DETAIL AND AFTER GIVING PROPER OPPORTUNITY AND AFTER SATISFACTION OF THE ASSESSING :- 2 -: OFFICER SAME WAS ACCEPTED AND ACCORDINGLY THE ESTIMATED COST OF CONSTRUCTION REPORTED BY THE AVO WAS ADOPTED. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO CERTAIN GLARING FACTS IN ORDER TO ESTABLISH THAT REFERENCE WAS MADE TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE COPY OF THE PROCEEDINGS RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS INITIATED PROCEEDINGS ON 23.9.2011 BY ISSUING NOTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). THEREAFTER ON DIFFERENT DATES THE LD. COUNSEL FOR THE ASSESSEE APPEARED AND CERTAIN INFORMATION WAS SOUGHT FROM THE ASSESSEE. LATER ON, ON 4.5.2012 NOTICE UNDER SECTION 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED AND HEARING WAS ADJOURNED TO 7.5.2012. AGAIN ON 7.5.2012, THE LD. COUNSEL FOR THE ASSESSEE APPEARED AND FILED REPLY. COPY OF THE ATTENDANCE REGISTER WAS FILED BUT MUSTER ROLL WAS NOT PRODUCED AND THE HEARING WAS ADJOURNED TO 1.6.2012. BEFORE 1.6.2012, THE ASSESSING OFFICER HAS RECORDED IN HIS ORDER SHEET IN THE ABSENCE OF THE ASSESSEE THAT THE ACCOUNTS OF THE ASSESSEE ARE NOT OPEN FOR VERIFICATION AND ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ON THE NEXT DAY ON 9.5.2012 A LETTER WAS SENT TO THE DVO UNDER SECTION 142A OF THE ACT FOR VALUATION OF THE COST OF CONSTRUCTION IN THE PROPERTY. THEREAFTER HEARING TOOK PLACE ON 28.2.2012. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE ASSESSEE HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT, BUT THE ASSESSING OFFICER WITHOUT AFFORDING OPPORTUNITY OF PRODUCING THE BOOKS OF ACCOUNT HAS RECORDED IN THE ORDER SHEET THAT THE BOOKS OF ACCOUNT ARE REJECTED AND REFERENCE WAS MADE TO THE DVO. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT FROM A PERUSAL OF :- 3 -: THIS ORDER SHEET, IT APPEARS THAT THE ASSESSING OFFICER HAS MANIPULATED THE ORDER SHEET FOR MAKING REFERENCE TO THE DVO IN THE ABSENCE OF THE ASSESSEE. THUS, REFERENCE WAS MADE WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, REFERENCE IS NOT VALID IN THE LIGHT OF JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS. CIT, 328 ITR 513 (SC). THUS, NO COGNIZANCE CAN BE TAKEN TO THE DVOS REPORT FOR MAKING ADDITION ON ACCOUNT OF INVESTMENT IN THE COST OF CONSTRUCTION. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE ORDERS OF THE TRIBUNAL IN THE CASES OF ACIT VS. SMT. NIRMAL ARORA, KANPUR IN I.T.A. NO. 537 & 538/LKW/2013 AND INCOME TAX OFFICER-II VS. M/S TRIMURTI GUEST HOUSE, FAIZABAD IN I.T.A. NO. 506/LKW/2012. 3. THE LD. D.R., ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. HE, HOWEVER, SUBMITTED THAT THE ASSESSING OFFICER HAS MADE REFERENCE TO THE DVO AFTER REJECTING THE BOOKS OF ACCOUNT. THEREFORE, REFERENCE IS VALID AND ESTIMATION MADE BY THE ASSESSING OFFICER, ON THE BASIS OF THE DVOS REPORT, DESERVES TO BE SUSTAINED. 4. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE IMPUGNED ISSUE IN DISPUTE IS WITH REGARD TO THE VALIDITY OF REFERENCE TO THE DVO FOR ESTIMATING THE COST OF CONSTRUCTION. PHOTOCOPIES OF THE ORDER SHEETS OF THE ASSESSMENT PROCEEDINGS ARE PLACED ON RECORD AND FOR THE SAKE OF REFERENCE, WE PREFER TO EXTRACT THE PROCEEDINGS OF THE RELEVANT DATE AS UNDER:- 23.9.2011 ISSUED NOTICE UNDER SECTION 143(2) 3.2.2012 ISSUED NOTICE UNDER SECTION 143(2) 22.2.2012 SHRI. SHARD SRIVASTAVA, A.R. ATTENDED. TO SUBMIT :- 4 -: CONSTRUCTION ACCOUNT. ADJOURNED TO 15.3.2012. 15.3.2012 SHRI. SHARAD SRIVASTAVA, A.R. ATTENDED. FILED REPLY. TO SUBMIT DETAILS OF MATERIAL USED IN THE CONSTRUCTION AND AMOUNT SPENT THEREOF. PLEASE PRODUCE MUSTER ROLL. ADJOURNED TO 29.3.2012. 4.5.2012 ISSUE NOTICE UNDER SECTION 142(1) ALONG WITH QUESTIONNAIRE. ADJOURNED TO 7.5.2012. 7.7.2012 SHRI. SHARAT SRIVASTAVA, A.R. & SHRI. VIPIN, ACCOUNTANT ATTENDED. FILED REPLY. MUSTER ROLL WAS NOT RECORDED. COPY OF ATTENDANCE REGISTER FILED. ADJOURNED TO 1.6.2012. 8.5.2012 DURING THE YEAR ASSESSEE HAS SHOWN INVESTMENT OF RS.24,49,488/- IN SCHOOL BUILDING. ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNT AND ALL VOUCHERS MUSTER ROLL. ASSESSEE PAID RS.6,98,500/- FOR LABOUR. HE WAS ASKED TO PRODUCE MUSTER ROLL. BUT HE COULD ONLY PRODUCE ATTENDANCE REGISTER. ASSESSEE FAILED TO PROVIDE NAME OF FATHER OR THE POSTAL ADDRESS AS HE STATED THAT THE LABOUR IS HIRED ON DAILY BASIS. THE PAYMENT TO LABOUR CONSTITUTES ALMOST 30% OF THE TOTAL INVESTMENT DURING THE YEAR AND MADE IN CASH ONLY. THEREFORE PAYMENT TO LABOUR IS NOT OPEN TO VERIFICATION AND IN VIEW OF THESE FACTS IT IS CLEAR THAT CONSTRUCTION ACCOUNT OF THE ASSESSEE IS NOT CORRECT AND TRUE AND CONSIDERING THE SURROUNDING CIRCUMSTANCES IN EH CASE OF CIT VS. DURGA PD. MORE, 82 ITR 540 BOOKS OF ACCOUNT UNDER SECTION 145(3) IS REJECTED. :- 5 -: 9.5.2012 NOTE SENT TO AVO UNDER SECTION 142A 28.8.2012 SHRI. SHARAD SRIVASTAVA, FCA ATTENDED ON BEHALF OF THE ASSESSEE AND REQUESTED FOR ADJOURNMENT. PRODUCE BOOKS OF ACCOUNT ALONG WITH CONSTRUCTION ACCOUNT AS WELL AS ALL DOCUMENTS KEPT BY THE ASSESSEE AND AS REQUIRED EARLIER. CASE ADJOURNED TO 1.10.2012. 5. FROM A PERUSAL OF THE ORDER SHEET, WE FIND THAT EXCEPT ORDER SHEET DATED 8.5.2012, ON WHICH DATE THE BOOKS OF ACCOUNT WERE REJECTED, THE OTHER ORDER SHEET ENTRIES WERE RECORDED BY HAND BY THE ASSESSING OFFICER THAT THEY ALL WERE ALSO SIGNED BY THE AR OF THE ASSESSEE. BUT ORDER SHEET DATED 8.5.2012 WAS A TYPED ORDER SHEET AND DOES NOT BEAR THE SIGNATURE OF THE AR OF THE ASSESSEE. IN ORDER SHEET DATED 7.5.2012, IT WAS RECORDED BY THE ASSESSING OFFICER THAT THE ADVOCATE OF THE ASSESSEE HAS APPEARED AND MUSTER ROLL WAS NOT PRODUCED. COPY OF THE ATTENDANCE REGISTER WAS FILED. HEARING WAS ADJOURNED TO 1.6.2012, BUT THEREAFTER ON 8.5.2012, THE ASSESSING OFFICER HAS PREPARED ORDER SHEET IN A PRINTED FORM AND RECORDED THEREIN THAT PAYMENT TO LABOURS WERE MADE IN CASH AND IS NOT OPEN FOR VERIFICATION. HE ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT. HE FURTHER RECORDED ON 9.5.2012 THAT LETTER WAS SENT TO DVO UNDER SECTION 142A OF THE ACT. THOUGH HEARING WAS ADJOURNED TO 1.6.2012 VIDE ORDER SHEET 7.2.2012, BUT NO HEARING TOOK PLACE ON 1.6.2012. THE ASSESSING OFFICER RECORDED ORDER SHEET ON 8.5.2012 REJECTING THE BOOKS OF ACCOUNT AND THEREAFTER ON 9.5.2012 SENT A REFERENCE TO THE DVO AND THEREAFTER ON 28.8.2012 HEARING TOOK PLACE. 6. FROM A CAREFUL PERUSAL OF THE ORDER SHEETS PREPARED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT APPEARS THAT THE ASSESSING OFFICER HAS MADE MANIPULATION IN THE ORDER :- 6 -: SHEETS, AS THE ORDER SHEET DATED 8.5.2012 AND 9.5.2012 WERE NOT SIGNED BY THE A.R. WHEREAS THE ORDER SHEETS OF OTHER DATES WERE SIGNED BY THE A.R. SUCH TYPE OF MANIPULATION IN THE ORDER SHEET IS NOT EXPECTED FROM THE ASSESSING OFFICER. IF HE WANTS TO REJECT THE BOOKS OF ACCOUNT, HE COULD HAVE REJECTED THE BOOKS OF ACCOUNT AFTER AFFORDING AN OPPORTUNITY TO THE ASSESSEE FOR PRODUCING THE SAME. THERE SHOULD NOT HAVE BEEN ANY NEED TO MAKE ANY MANIPULATION IN THE ORDER SHEET TO JUSTIFY HIS ACT. 7. ON PERUSAL OF THE ORDER SHEET, IT HAS BEEN CLEARLY EMERGED THAT THE ASSESSING OFFICER HAS RECORDED IN THE ORDER SHEET WITH RESPECT TO THE REJECTION OF THE BOOKS OF ACCOUNT IN THE ABSENCE OF THE ASSESSEE WITHOUT AFFORDING OPPORTUNITY OF PRODUCING THE SAME. THEREFORE, REFERENCE TO THE DVO IS NOT VALID IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE APEX COURT SARGAM CINEMA VS. CIT (SUPRA) AND ONCE THE REFERENCE IS NOT VALID, THE REPORT PREPARED BY THE DVO HAS NO LEGAL VALUE AND CANNOT BE RELIED ON FOR MAKING THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY. IN THE LIGHT OF THESE FACTS, WE HAVE CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE LD. CIT(A) HAS ALSO APPRECIATED THESE FACTS BESIDES ADJUDICATING THE ISSUE ON MERIT. SINCE THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, WE FIND NO INFIRMITY THEREIN. ACCORDINGLY WE CONFIRM THE SAME. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH NOVEMBER, 2015 JJ:2710 :- 7 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR