Astt. Commissioner of Income Tax, Lucknow V. Shri Sumit Goel, Lucknow

ITA 65/LKW/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2024 (ITAT-LUCKNOW)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Opportunity of being heard; Fair market value; Valuation report; Deemed dividend; Onus to prove
• Section: 143(3); 6; 69

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, ACCOUNTANT MEMBER ITA NO.65/LKW/2015 ASSESSMENT YEAR 2008-09 SHRI SUMIT GOEL, B-1/66, SECTOR-G, ALIGANJ LUCKNOW PAN AFCPG 5573 K VS ASTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, LUCKNOW (RESPONDENT) (APPELLANT) SMT. ALKA SINGH, DR APPELLANT BY NONE RESPONDENT BY 12/08/2015 DATE OF HEARING 30/10/2015 DATE OF PRONOUNCEMENT O R D E R PER SUDHANSHU SRIVASTAVA, JM. THIS IS REVENUES APPEAL AGAINST ORDER PASSED BY TH E LD. CIT(A)-III, LUCKNOW THROUGH ORDER DATED 17.10.2014 DELETING THE ADDITION OF RS.36,69,000/- MADE U/S 69 OF THE INCOME TAX ACT, 1 961 (FOR SHORT THE ACT) ON ACCOUNT OF UNEXPLAINED INVESTMENT IN IMMO VABLE PROPERTY. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.36,69,000/ - MADE U/S 69 OF THE I.T. ACT 1961 ON ACCOUNT OF UNEXPLAINED INVE STMENT IN IMMOVABLE PROPERTY WITHOUT APPRECIATING THE FACT TH AT PRIOR TO REFERRING THE PROPERTY IN QUESTION OF THE VALUATION OFFICER FOR ESTIMATING THE COST OF INVESTMENT, THE A.O. HAD REJ ECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND DULY RECORDED THE REASONS FOR THE SAME ON 02.11.2012. 2 2. THAT THE APPELLANT CRAVES TO ADD OR AMEND ANY ON E OR MORE OF THE GROUNDS OF THE APPEAL AS STATED ABOVE AS AND WH EN NEED FOR DOING SO MAY ARISE. 2. THE FACTS IN BRIEF BORNE OUT OF FROM THE RECORD ARE AS FOLLOWS: SEARCH OPERATIONS WERE CARRIED OUT ON 11.03.2011 BY THE INCOME TAX DEPARTMENT AND THE ASSESSEE WAS ISSUED NOTICES U/S 153A/143(2) OF THE ACT ASKING HIM TO SUBMIT HIS RETURN OF INCOME. IN RESPO NSE, THE ASSESSEE SUBMITTED THAT THE ORIGINAL RETURN FILED BY HIM ON 29.09.2008 BE TREATED AS RETURN FILED IN RESPONSE TO NOTICES U/S 153A/142(1) . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, REFERENCE WAS MADE TO THE D EPARTMENTAL VALUATION OFFICER (DVO) U/S 142A FOR VALUATION OF PROPERTY PU RCHASED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09. THE ASSESSMENT W AS FRAMED ON A TOTAL INCOME OF RS.45,05,130/- AFTER MAKING ADDITION OF R S.2,21,526/- ON ACCOUNT OF ADVANCE GIVEN AGAINST SALARY BEING CONSIDERED AS DEEMED DIVIDEND AND ADDITION OF RS.36,69,000/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF RESIDENTIAL PROPERTY BASED ON THE VALUATION DONE BY THE DVO U/S 142A OF THE ACT. 3. IT IS SEEN FROM THE RECORDS THAT THE ASSESSEE, AT THE INITIAL STAGE OF ASSESSMENT ITSELF, HAD OBJECTED TO THE REFERENCE BE ING MADE TO THE DVO ON THE GROUND THAT THE PROPERTY WAS NOT CONSTRUCTED BY THE ASSESSEE AND THE TOTAL PURCHASE CONSIDERATION HAD BEEN DULY DISCLOSE D IN THE RETURN OF INCOME. IT IS SEEN THAT THE DVO HAS VALUED THE SAID PROPERTY ON COST OF CONSTRUCTION BASIS BIFURCATING THE COST OF HOUSE I NTO LAND AND BUILDING BY ADOPTING THE RATE OF LAND TO BE RS.18,000/- PER SQ. MTR. AS AGAINST THE CIRCLE RATE NOTIFIED BY THE DM AT RS.8,462/- PER SQ. MTR. THE COST OF CONSTRUCTION ADOPTED BY HIM WAS RS.7,855/- PER SQ. MTR. AND THE VALUATION, THUS, ARRIVED BY THE DVO WAS RS.1,16,69,000/- AS AGAINST RS.80,00 ,000/- DISCLOSED BY THE ASSESSEE. THE RESULTANT DIFFERENCE OF RS.36,69,000/ - WAS TREATED AS 3 UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE AND WAS ADDED TO HIS INCOME U/S 69 OF THE ACT. 4. PERUSAL OF THE ASSESSMENT ORDER DATED 26.03.2013 SHOWS THAT IN PARA 6.1 THE ASSESSEE HAS SUBMITTED HIS OBJECTIONS TO TH E REFERENCE TO THE VALUATION OFFICER WHICH READ AS UNDER:- 6(1). IN RESPONSE TO THIS QUERY COUNSEL OF ASSESSE E SUBMITTED HIS OBJECTION AS UNDER: - WITH REFERENCE TO THE NOTE SHEET ENTRY DATED 18.10. 2012 REQUIRING US TO FURNISH THE BILLS/ VOUCHERS ETC IN RELATION TO C ONSTRUCTION OF THE ABOVE SAID HOUSE PROPERTY, WE WOULD LIKE TO BRING T O YOUR NOTICE THAT THE ABOVE STATED PROPERTY WAS PURCHASED BY THE ASSE SSEE IN JULY 2007 FROM SRI SANTOSH KUMAR KHANNA FOR A TOTAL CONSIDERA TION OF RS. 80.00 LACS (EXCLUDING REGISTRATION & OTHER EXPS). AS CAN BE VERIFIED FROM THE COPY OF SALE DEED BEING ENCLOSED HEREWITH, THIS RES IDENTIAL PROPERTY CONSISTED OF A LAND OF ABOUT 512 SQ MTRS. WITH CONS TRUCTION ON GROUND FLOOR. EVER SINCE THEN, THE ASSESSEE HAS DONE NO CO NSTRUCTION/ MODIFICATION IN THIS PROPERTY EXCEPT FOR THE SOME R OUTINE MAINTENANCE WORK. IT MAY ALSO BE NOTED THAT THIS PROPERTY WAS DIRECTL Y PURCHASED BY THE ASSESSEE IN AY 2008-09 AND THE SAID INVESTMENT WAS DULY DISCLOSED IN THE PERSONAL INCOME TAX RETURN/ CAPITAL ACCOUNT SUB MITTED WITH THE I. T. DEPARTMENT. THE SAME WAS ALSO ACCEPTED BY THE IN COME TAX OFFICER WHILE MAKING AN ASSESSMENT U/S 143(3) FOR THE SAID ASSESSMENT YEAR. WE MAY ALSO LIKE TO SUBMIT THAT PROVISIONS OF SECTI ON 142A WOULD ALSO NOT BE APPLICABLE IN THIS CASE AS SECTION 142A IS A TTRACTED ONLY WHERE THE ASSESSEE IS FOUND TO HAVE MADE INVESTMENT OUTSI DE THE BOOKS OF ACCOUNTS OR WHERE ANY SUCH INVESTMENT MADE BY HIM I S NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT. IN THIS CASE, TH ERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE SUCH INVE STMENT OUTSIDE THE BOOKS OR THE INVESTMENT SO MADE IS NOT FULLY DI SCLOSED IN THE INCOME TAX RETURNS. THEREFORE, IN VIEW OF THE FACT THAT PROPERTY WAS PU RCHASED AS A READYMADE RESIDENTIAL HOUSE AND WAS DULY DISCLOSED IN THE ITRS BY THE ASSESSEE, THE SAME MAY NOT BE REFERRED TO VALUATION U/S 142A. IN VIEW OF THE SUBMISSIONS MADE ABOVE, IT IS RESPEC TFULLY PRAYED THAT YOUR GOODSELF BE PLEASED TO APPRISE AND CONSIDER TH E SUBMISSIONS BY THE ASSESSEE AND IF YOUR GOODSELF HAPPENS TO HOLD A DIFFERENT VIEW ON ANY OF THE ASPECTS OF THE MATTER, THE SAME MAY KIND LY BE SPECIFIED SO AS TO MAKE FURTHER SUBMISSIONS.' 4 5. SIMILAR OBJECTION WAS ALSO RAISED BY THE ASSESSE E ON 20.02.2013 WHICH HAS BEEN REPRODUCED BY THE AO ON PAGES 4 AND 5 OF THE ASSESSMENT ORDER. ANOTHER OBJECTION TO THE REFERENCE TO THE DV O WAS FILED BY THE AO ON 11.03.2011 WHICH IS REPRODUCED ON PAGES 7 AND 8 OF THE ASSESSMENT ORDER. HOWEVER, THE AO COMPLETELY RELYING ON THE REPORT OF THE DVO CALCULATED THE ADDITIONAL INVESTMENT BY THE ASSESSEE AT RS.36,69,0 00/- AND ADDED IT TO THE INCOME OF THE ASSESSEE AS UNACCOUNTED INVESTMENT U/ S 69 OF THE INCOME TAX ACT. 6. DURING THE COURSE OF FIRST APPELLATE PROCEEDING, THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE AO HAS SIMPLY RELIED ON DVOS TECHNICAL EXPERTISE AND HAS NOT ADJUDICATED THE DEFECTS IN TH E VALUATION REPORT AS POINTED OUT BY THE ASSESSEE. THE LD. CIT(A) HAS GIV EN A FINDING THAT THE INVESTMENT IN THE SAID PROPERTY WAS DULY DISCLOSED BY THE ASSESSEE IN THE PERSONAL INCOME TAX RETURN SUBMITTED WITH THE INCOM E TAX DEPARTMENT. THE ASSESSMENT OF THE ASSESSEE FOR AY 2008-09 WAS COMPL ETED U/S 143(3) OF THE ACT ON 20.12.2010 BEFORE THE DATE OF SEARCH I.E . 11.03.2011. IN THIS ASSESSMENT, THE AO HAD ENQUIRED IN DETAIL THE SOURC E OF INVESTMENT IN THE PURCHASE OF PROPERTY AND AFTER CONSIDERING THE FACT S HE HAD MADE A DISALLOWANCE OF RS.2,67,004/- BEING INTEREST PAYABL E TO BARCLAYS BANK AND INDIA BULLS. IT WAS ALSO THE FINDING OF THE LD. CIT (A) THAT IN THE SEARCH ALSO NO OTHER INCRIMINATING MATERIAL WAS FOUND BY THE AS SESSING OFFICER REGARDING THE TRANSACTION/INVESTMENT IN PROPERTY. THE LD. CIT (A) FURTHER OBSERVED THAT THE DVOS REPORT DID NOT SAY THAT THERE WAS AN EXTR A INVESTMENT IN THE PROPERTY OVER AND ABOVE THE DECLARED AMOUNT. HIS RE PORT WAS ONLY AN ESTIMATE OF THE FAIR MARKET VALUE AND NOT AN ESTIMA TE OF INVESTMENT. ACCORDINGLY, SINCE ONLY UNEXPLAINED INVESTMENT COUL D BE ADDED BACK U/S 69 OF THE ACT AND NOT THE FAIR MARKET VALUE, THE ENTIR E ADDITION OF RS.36,69,000/- WAS DELETED BY THE LD. CIT(A). 7. IN THE APPEAL BEFORE US, NONE WAS PRESENT FOR THE ASSESSEE. 5 8. BEFORE US, IT WAS THE PLEA OF THE DEPARTMENT T HAT THE ACCOUNTS SUBMITTED BY THE ASSESSEE WERE NOT RELIABLE AND ALT HOUGH NO BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE, THERE WAS A COMPLETE ABSENCE OF BILLS/VOUCHERS AND THEREFORE THE ACTUAL COST OF CONSTRUCTION COULD NOT BE VERIFIED AND THE MATTER WAS REFERRED TO THE DVO. IT WAS ALSO THE PLEA OF THE DEPARTMENT THAT ON PERUSAL OF THE SEIZED MATERIAL, IT WAS NOTICED THAT CONSTRUCTION/RENOVATION OF IMMOVABLE PROPERTY HAD B EEN DONE BY THE ASSESSEE BUT HE HAS FAILED TO PRODUCE ALL BILLS AND VOUCHERS RELATING TO SUCH RENOVATION/CONSTRUCTION IN THE PROPERTY. 9. IT WILL BE WORTHWHILE REPRODUCE SECTION 142A OF THE ACT (AS IT STOOD AT THE TIME OF THE RELEVANT ASSESSMENT YEAR) , WHICH READS AS UNDER:- 142A (1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF T HE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE A RTICLE REFERRED TO IN SECTION 69A OR SECTION 69B [OR FAIR MARKET VALUE OF ANY PROPERTY REFERRED TO IN SUB-SECTION (2) OF SECTION 56] IS RE QUIRED TO BE MADE, THE ASSESSING OFFICER MAY REQUIRE THE VALUATION OFF ICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HIM. (2) THE VALUATION OFFICER TO WHOM A REFERENCE IS MA DE UNDER SUB- SECTION (1) SHALL, FOR THE PURPOSES OF DEALING WITH SUCH REFERENCE, HAVE ALL THE POWERS THAT HE HAS UNDER SECTION 38A O F THE WEALTH- TAX ACT, 1957 (27 OF 1957). (3) ON RECEIPT OF THE REPORT FROM THE VALUATION OFF ICER, THE ASSESSING OFFICER MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, TAKE INTO ACCOUNT SUCH REPORT IN MAKIN G SUCH ASSESSMENT OR REASSESSMENT. PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RESPECT OF AN ASSESSMENT MADE ON OR BEFORE THE 30TH DAY OF SEPTEMBER, 2004, AND WHERE SUCH ASSESSMENT HAS BECO ME FINAL AND CONCLUSIVE ON OR BEFORE THAT DATE, EXCEPT IN CA SES WHERE A REASSESSMENT IS REQUIRED TO BE MADE IN ACCORDANCE W ITH THE PROVISIONS OF SECTION 153A. 6 10. A PERUSAL OF THE AFORESAID PROVISION SHOWS THAT SECTION 142A OF THE ACT IS ATTRACTED INTER ALIA WHERE THE ASSESSEE IS F OUND TO HAVE MADE AN INVESTMENT OUTSIDE THE BOOKS OF ACCOUNTS OR WHERE A NY SUCH INVESTMENT MADE BY HIM IS NOT DULY DISCLOSED IN THE BOOKS OF A CCOUNT. THE CONDITION PRECEDENT FOR MAKING THE REFERENCE BY INVOKING THE PROVISIONS OF SECTION 142A OF THE ACT IS THAT THERE SHOULD BE SOMETHING O N RECORD TO SHOW THAT THE ASSESSEE IN FIRST PLACE HAS MADE INVESTMENT OUT SIDE THE BOOKS OR THE INVESTMENT SO MADE BY HIM IS NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT. ONCE THIS CONDITION IS FULFILLED, THE QUANTUM OF SU CH INVESTMENT MADE CAN BE ASCERTAINED BY THE ASSESSING OFFICER BY MAKING A RE FERENCE U/S 142A AND THEREAFTER PASSING AN ORDER MAKING ADDITION U/S 69 OR 69B AS THE CASE MAY BE. AS PER THE RECORDS, IT IS SEEN THAT THE RELEVAN T PROPERTY WAS PURCHASED BY THE ASSESSEE FOR RS.80,00,000/- AND THE AMOUNT O F THE SAID CONSIDERATION WAS PAID OUT OF HIS DISCLOSED SOURCES, MAINLY BORRO WINGS FROM BANK AND FINANCIAL INSTITUTION AND IT WAS ACCEPTED BY THE AO DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) FOR THE RELEVANT ASSESSMENT YEAR. IT IS FURTHER SEEN FROM THE RECORDS THAT NO INCRIMINATING MATERIAL REL ATING TO CONSTRUCTION OF PROPERTY WAS FOUND DURING THE SEARCH OPERATION. LD. CIT(A) HAS CATEGORICALLY GIVEN A FINDING THAT NO EVIDENCE WAS FOUND DURING SEARCH TO SUGGEST PAYMENT OVER AND ABOVE THE CONSIDERATION AS DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME IN THE APPEAL BEFO RE US, THE DEPARTMENT HAS NOT BEEN ABLE TO CONTROVERT THIS FINDING. THUS , IN OUR CONSIDERED OPINION, THE DEPARTMENT HAS FAILED TO DISCHARGE THE PRIMARY BURDEN OF PROOF TO PROVE ANY UNDERSTATEMENT OR ANY CONCEALMENT OF I NCOME. IT IS ALSO SEEN THAT THE LEARNED CIT(A) HAS GIVEN A FINDING THAT TH E AO HAS NOT ADJUDICATED THE OBJECTIONS RAISED BY THE ASSESSEE WITH REGARD T O THE DEFECTS IN THE VALUATION REPORT. 11. IN OUR CONSIDERED OPINION, FOR THE PROVISIONS O F SECTION 69 OF THE ACT TO APPLY IT IS NECESSARY THAT THE ASSESSEE SHOULD H AVE MADE INVESTMENTS WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HO WEVER, WHEN NO 7 EVIDENCE, MUCH LESS INCRIMINATING EVIDENCE, WAS FOU ND AS A RESULT OF SEARCH TO SUGGEST THAT THE ASSESSEE HAS MADE ANY PAYMENT O VER AND ABOVE THE CONSIDERATION MENTIONED, NO ADDITION U/S 69 WOULD A RISE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMT. SURAJ DEVI R EPORTED IN 328 ITR 604 (DEL.) HAS HELD THAT THE PRIMARY BURDEN OF PROOF IN SUCH CASES IS ON THE REVENUE AND IT IS ONLY WHEN SUCH BURDEN IS DISCHARG ED THAT IT WOULD BE PERMISSIBLE TO RELY UPON THE VALUATION GIVEN BY THE VALUATION OFFICER. SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LAHAS CONSTRUCTION PVT. LTD. REPORTED IN 357 ITR 671 (DEL ) HAS HELD THAT THE ADDITION SOLELY ON THE BASIS OF VALUATION REPORT WA S NOT PERMISSIBLE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BAJ RANG LAL BANSAL REPORTED IN 335 ITR 572 (DEL) HAS HELD THAT THE PRIMARY BURD EN TO PROVE UNDERSTATEMENT OR CONCEALMENT OF INCOME WAS ON THE REVENUE AND IT WAS ONLY WHEN SUCH BURDEN WAS DISCHARGED THAT IT WOULD BE PERMISSIBLE TO RELY UPON THE VALUATION GIVEN BY THE DVO. WHERE THERE WA S NO EVIDENCE FOUND AS A RESULT OF THE SEARCH TO SUGGEST THAT THE ASSES SEE HAD MADE ANY PAYMENT OVER AND ABOVE THE CONSIDERATION MENTIONED IN THE RETURN NO ADDITION ON THE BASIS OF REPORT OF THE DVO COULD BE MADE. REFERENCE MAY ALSO BE MADE TO THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF K.P. VARGHESE VS. ITO REPORTED IN 131 ITR 597 (SC) WHICH COVERS THE ENTIRE ISSUE. 12. THEREFORE, ON THE FACTS OF THE CASE AND RESPEC TFULLY FOLLOWING THE AFORESAID JUDGMENTS OF THE HONBLE APEX COURT AND T HE DELHI HIGH COURT IT IS OUR CONSIDERED OPINION THAT THE DEPARTMENT HAS FAIL ED TO PROVE UNDERSTATEMENT OR CONCEALMENT OF INCOME VIS-A-VIS P URCHASE OF IMMOVABLE PROPERTY. THE AO HAS SIMPLY RELIED ON THE REPORT OF THE DVO WITHOUT APPLYING HIS MIND TO THE FACTS OF THE CASE AND THE SURROUNDINGS CIRCUMSTANCES. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND UPHOLD THE DELETION OF RS.36,69,000/- AD DED U/S 69 OF THE ACT. 8 13. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (A.K. GARODIA ) (SUDHANSHU S RIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/10/2015 AKS COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4.THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. R EGISTRAR