SH. RAJIV NEHRU, SRINAGAR V. INCOME TAX OFFICER, WARD - 3(2), SRINAGAR

ITA 680/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4964 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 25-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Assessee Lawyers: PADAM BAHL
• Keywords: Unexplained investment; Capital asset; Business income; Depreciation; Cost of acquisition; Fair market value
• Section: 250; 68; 69; 6; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 680/ASR/2017 ASSESSMENT Y EAR: 2006-07 RAJIV NEHRU S/O SH. M.L. NEHRU, GAGRIBAL BOULE WARD, SRINAGAR [PAN: AAUPN 6513D] VS. INCOME TAX OFFICER, WARD-3(2), SRINAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PADAM BAHL, CA RESPONDENT BY: SH. S.S. NEGI, D.R. DATE OF HEARING : 10.5.2019 DATE OF PRONOUNCEMENT: 24.5.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE ARISING OUT OF TH E ORDER BY THE COMMISSIONER OF INCOME TAX (APPEAL), JAMMU (CIT(A) FOR SHORT) DATED 31.3.2017, PARTLY ALLOWING THE ASSESSEES APPEAL CO NTESTING HIS ASSESSMENT UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR THE ASSESSMENT YEAR (AY) 2006-07 VIDE ORDER DATED 22/12/2009. 2. IT MAY BE RELEVANT TO NOTE THE BACKGROUND FACTS OF THE CASE. THE ASSESSEE COMMENCED HIS NEW BUSINESS, STATED TO BE IN INFORMA TION TECHNOLOGY (IT) SERVICES, AT PUNE DURING THE RELEVANT PREVIOUS YEAR I.E., F.Y. 2005-06 AND, ACCORDINGLY, INTRODUCED THE FOLLOWING ASSETS, STATE D TO BE ACQUIRED PRIOR TO 2 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO 31/3/2005, AS HIS CAPITAL IN THE BOOKS OF THE SAID PROPRIETARY BUSINESS AS ON 01/04/2005: S. NO. PARTICULARS AMOUNT (RS.) 1. BUILDING 20,00,000/- 2. FURNITURE 1,04,260/- 3. COMPUTER 1,00,000/- 4. LAPTOP 60,000/- 5. FAX 7,000/- 6. PRINTER 10,000/- 7. CAR SANTRO 3,00,000/- 8. CAR TATA INDIGO 5,00,000/- 9. XEROX MACHINE 30,000/- TOTAL 31,11,260/- AS, HOWEVER, THERE WAS NO REPRESENTATION DURING THE ASSESSMENT PROCEEDINGS, THE ENTIRE OF IT WAS BROUGHT TO TAX AS UNEXPLAINED CRED IT OR, AS THE CASE MAY BE, UNEXPLAINED INVESTMENT IN THE RELEVANT ASSETS. THE ASSESSEE HAVING BEEN ALLOWED PART RELIEF IN FIRST APPEAL, IS IN SECOND APPEAL, R AISING THE FOLLOWING GROUNDS, WHICH SHALL BE TAKEN UP IN SERIATIM: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) JAMMU HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 14,75,000/- IN RESPECT OF INVESTMENT IN BUILDING INTRODUCED IN THE BOOKS OF THE ASSEESSEE A T RS. 21,00,000/- ON 01.04.2005. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) JAMMU HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 3 LAKHS ON ACCOUNT OF INTRODUCTION OF SANTRO CAR AT RS. 3,00,000/- BY THE ASSESSEE IN HIS BOOKS ON 01/04/2005. 3 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) JAMMU HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 4,00,000/- ON ACCOUNT OF INDIGO CAR INTRODUCED BY THE ASSESEE IN HIS BOOKS ON 01/04/200 5. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) JAMMU HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 30,000/- ON ACCOUNT OF ZEROX MACHINE INTRODUCED BY THE ASSESSEE IN HIS BOOKS ON 01/04/20 05. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) JAMMU HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 1,10,143/- APPEARING IN THE BANK ACCOUNT OF THE ASSESSEE ON 31/03/2006. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) JAMMU HAS GROSSLY ERRED IN NOT APPRECIATING THAT ALL THE ABOVE ASSETS WERE PURCHASED BEFORE 31/03/2005 BY THE ASSESSEE AND INTRODUCED IN HIS BO OK FOR THE NEW BUSINESS COMMENCED ON 01/04/2005 AND NO ADDITION COULD BE MA DE FOR THESE ASSETS IN A.Y. 2006-07 AS UNEXPLAINED ASSETS. THE ISSUES ARISING THOUGH, AS SHALL BE PRESENTLY SE EN, WOULD INCLUDE THE CORRECT VALUATION OF THE CAPITAL ASSETS INTRODUCED IN-AS- MUCH AS ANY CREDIT IN EXCESS OF THE SAID VALUE CANNOT BE REGARDED AS GENUINE, AND, CONCOMITANTLY, THE DEPRECIATION ELIGIBLE THEREON, AS WELL AS THE FUNDS AVAILABLE WI TH THE ASSESSEE AS AT THE YEAR-END. THAT IS, BROADLY STATED, THE INCOME RIGHTLY ASSESSA BLE TO TAX UNDER THE ACT IN THE ASSESSEES HANDS FOR THE CURRENT YEAR. 3. GROUNDS 2 & 3 ARE IN RESPECT OF ADDITIONS ON ACC OUNT OF INTRODUCTION OF TWO MOTOR CARS, NAMELY SANTRO AND INDIGO, AT RS. 3,00,0 00/- AND RS. 4,00,000/- RESPECTIVELY. THE FACTS AS WELL THE TREATMENT BEING SIMILAR, THEY ARE TAKEN UP TOGETHER. A SANTRO CAR WAS PURCHASED IN JULY, 1999. COPY OF THE INSURANCE FOR 1999 WAS FURNISHED IN EVIDENCE. THE VALUE OF RS. 3,00,00 0/- WAS, AS STATED, TAKEN ON THE BASIS OF ITS INSURANCE POLICY. AS THE DEPRECIATED VALUE AS ON 31/3/2005 WOULD ONLY BE MUCH LOWER, THE ADDITION WAS CONFIRMED. THE INDI GO CAR WAS PURCHASED IN THE YEAR 2003 FOR RS. 5,00,000/-. ITS WRITTEN DOWN VAL UE (WDV) AS ON 01/4/2005 WOULD 4 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO NOT BE MORE THAN RS. 4,00,000/-, WHICH AMOUNT WAS A CCORDINGLY CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN APPEAL. 4.1 IT IS DIFFICULT TO FATHOM THE RATIONALE ON WHIC H THE ADDITIONS HAVE BEEN CONFIRMED, BOTH ON A DIFFERENT BASIS. IF THE VALUE INTRODUCED AS CAPITAL IS, IN THE OPINION OF THE ASSESSING OFFICER (AO), A REMAND REP ORT FROM WHOM WAS ALSO CALLED FOR BY THE LD. CIT(A), IN EXCESS OF THE FAIR MARKET VALUE (FMV) (OF THE CARS) AS ON 01/4/2005, IT IS THIS EXCESS VALUE WHICH OUGH T TO BE DISREGARDED AS BEING NOT REPRESENTED BY ANY ASSET. THE SAME DOES NOT CALL FO R THE EXCESS AMOUNT, MUCH LESS THE FMV, BEING REGARDED AS INCOME, AS CONFIRMED IN RESPECT OF THE INDIGO CAR. THE ADDITION AT THE FMV OF THE CAPITAL ASSET INTRODUCED , AT WHICH THE AMOUNT THE CAPITAL CAN BE REGARDED AS HAVING BEEN CORRECTLY CREDITED I N ACCOUNTS, COULD ARISE ONLY WHERE THE ASSESSSEE CANNOT EXPLAIN THE SOURCE OF TH E INVESTMENT THEREIN. FURTHER, A CREDIT IN EXCESS OF THE FMV WOULD SURE IMPACT THE D EPRECIATION EXIGIBLE (TO THE ASSESSEE) ON THE SAID ASSET WHICH CAN ONLY BE ON IT S FMV, EVEN AS CONCURRED TO BY THE PARTIES DURING HEARING. FOR EXAMPLE, IF THE FMV OF THE INDIGO CAR IS TAKEN AT RS. 4 LACS, CAPITAL TO THAT EXTENT STANDS ADMITTEDLY IN TRODUCED. THE ASSESSEE, EVEN IF HE THEREFORE DOES NOT REVERSE THE EXCESS CAPITAL (RS. 1 LAC) IN HIS BOOKS, COULD NOT BE ALLOWED INTEREST, OR DEPRECIATION (ON THE CORRESPON DING ASSET/CAR), ON THIS EXCESS AMOUNT. HOW WOULD IT, ONE WONDERS, RESULT IN AN ADDITION FO R RS. 4 LACS, I.E., THE FMV OF THE SAID ASSET ? 4.2 AT THIS POINT IT MAY BE RELEVANT TO DIGRESS TO CLARIFY ANOTHER ASPECT OF THE MATTER, AND WHICH WOULD ALSO MEET THE ASSESSEES GD . 6. IT IS ARGUED THAT AS THE ASSETS WERE, OR TO THE EXTENT ARE, SHOWN TO BE PURC HASED PRIOR TO 01/4/2005, NO ADDITION QUA ANY ASSET FOR THE CURRENT YEAR COULD BE MADE. THE ARGUMENT IS FALLACIOUS. THE ASSET MAY HAVE BEEN ACQUIRED PRIOR TO 01/4/2005. HOWEVER, IT HAS 5 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO BEEN FOUND BY THE REVENUE ONLY ON THE CREDIT TO HIS CAPITAL ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEES BUSINESS, I.E., DURING TH E CURRENT YEAR. THAT THE CREDIT IS QUA AN ASSET ACQUIRED PRIOR TO THE CURRENT YEAR, I.E., THE DATE OF ACQUISITION OF THE ASSET QUA WHICH THE CREDIT STANDS ALLOWED, DOES NOT FALL DUR ING THE CURRENT YEAR, IS IRRELEVANT. THE ADDITION, IT MAY BE APPRECIATED, IS NOT UNDER SECTION 69/69A, BUT UNDER SECTION 68. FURTHER, A CREDIT UNDER SECTION 6 8 IS NOT LIMITED TO A CASH CREDIT, I.E., BY DEFINITION, A CREDIT AGAINST OR UPON INTRO DUCTION OF CASH, WHICH IS THE ONLY ONE FORM IN WHICH A CREDIT MAY MANIFEST. THE CREDIT , IT MAY BE APPARENT, SIGNIFIES A BENEFIT TO THE DEBTOR TO THAT EXTENT, WHICH COULD A SSUME ANY FORM. WHY, ALL IT NEEDS IS TO DISPOSE AN ASSET AND INTRODUCE CASH, OR VICE VERSA, IN THE DEBTORS ACCOUNTS, SO THAT CASH IS OF NO PARTICULAR SIGNIFICANCE. THE A SSET AGAINST WHICH THEREFORE A CREDIT IS ALLOWED, I.E., CASH OR OTHER-THAN-CASH, I S NOT MATERIAL. ALL THAT IS, IS THAT IT HAS TO BE SATISFACTORILY EXPLAINED AS TO ITS NATURE AND SOURCE AS, ELSE, S. 68 SHALL APPLY. THE NOTION OF INCOME UNDER THE ACT, IT WAS E XPLAINED IN CHUHARMAL V. CIT [1989] 172 ITR 250 (SC), WIDE ENOUGH TO INCLUDE ANY THING WHICH COMES IN OR RESULTS IN GAIN. REFERENCE IN THIS REGARD BE ALSO M ADE TO THE DECISIONS BY THE APEX COURT , INTER ALIA , IN A. GOVINDARAJULU MUDALIAR V. CIT [1958] 34 ITR 807 (SC) AND KALE KHAN MOHAMMAD HANIF V. CIT [1963] 50 ITR 1 (SC). BOTH THESE JUDGMENTS PERTAIN TO THE 1922 ACT, I.E., UNDER THE PREVIOUS E NACTMENT, WHEREIN A PROVISION ANALOGOUS TO SECTION 68 WAS NOT ON THE STATUTE BOOK . IT WAS YET EXPLAINED BY THE HONBLE COURT THAT IN THE ABSENCE OF A SATISFACTORY PROOF A MATTER OF FACT, AS TO THE SOURCE OF THE CREDIT IN THE ASSESSEES BOOKS OF ACCOUNT, AN INFERENCE THAT THE SAME REPRESENTS THE ASSESSEES INCOME FROM UNDISCLO SED SOURCES, IS A VALID INFERENCE IN LAW. THE REVENUE IN SUCH A CASE IS NOT REQUIRED TO SPECIFY OR TO PROVE WHAT THAT SOURCE IS, WHICH WOULD ONLY BE IN THE KNO WLEDGE OF THE ASSESSEE. TRUE, THE CREDITS IN THESE CASES WERE IN CASH, BUT AS A R EADING OF THE JUDGMENTS WOULD 6 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO SHOW, THE SAME, I.E., THE FORM OF THE CREDIT, OR WH ATEVER BE ITS NATURE, HAS TO BE EXPLAINED. IN FACT, AS THE READING OF THE DECISION IN KALE KHAN MOHAMMAD HANIF (SUPRA) WOULD SHOW, THE CREDIT BY THE ASSESSEE IN T HE BOOKS OF HIS PROPRIETARY BUSINESS, WAS UNDER THE ACCOUNT HEAD GOLD KHATA A ND GHAR KHATA, AT RS.41,300 AND RS.33,000 RESPECTIVELY (FOR AY 1945-46). REFERE NCE IN THIS REGARD MAY ALSO BE MADE TO THE DECISIONS BY THE TRIBUNAL, AS IN THE CA SE OF ASTT. CIT V. MANINDER SINGH CHEEMA (IN ITA NO. 719/ASR/2013, DATED 31.7.2018), WHICH BEARS ABUNDANT REFERENCE TO JUDICIAL PRECEDENTS. THE QUESTION IN T HAT CASE WAS IF SECTION 68 WOULD APPLY TO A TRANSACTION OF PURCHASE OF GOODS. IT WAS EXPLAINED THAT THE PURCHASE OF GOODS IS ITSELF A DESCRIPTION OF THE NATURE OF THE CREDIT TRANSACTION, WITH THE SUPPLIER OF GOODS ON CREDIT BEING THE SOURCE OF THE CREDIT. 4.3 CONTINUING FURTHER, THE CREDIT IN THE INSTANT C ASE, AS IN KALE KHAN MOHAMMAD HANIF (SUPRA), IS TO THE ASSESSEES OWN ACCOUNT, SO THAT THE OWNERSHIP OF THE CREDIT (BY THE ASSESSEE) IS ADMITTED. WHERE, HOWEVER, THE ASSESSEE IS ABLE TO SATISFACTORILY EXPLAIN THE SOURCE OF THE CREDIT, I. E., THE CAPITAL AVAILABLE WITH HIM IN THE YEAR 1999 OR, AS THE CASE MAY BE, 2003, DEPLOYE D FOR THE PURCHASE OF A CAR IN THE SAID YEAR/S, THE ASSESSEE HAS DISCHARGED THE ON US ON HIM, AND NO ADDITION U/S. 68 COULD BE MADE. THIS IS AS THE ASSESSEE HAS, IN T HAT CASE, EFFECTIVELY REBUTTED THE STATUTORY PRESUMPTION OF THE CREDIT AS REPRESENTING INCOME OR BEING IN THE NATURE OF INCOME. THE RESTRICTION OF THE CAPITAL TO THE FMV ( AS ON 01/4/2005) OF THE ASSET INTRODUCED IS ONLY AS THE EXCESS CAPITAL IS NOT REP RESENTED BY ANY ASSET I.E., IS A SUPERFLUOUS CREDIT. 4.4 IN THE FACTS OF THE INSTANT CASE, THE REVENUE H AS NOT DOUBTED THE SOURCE OF MONEY WITH THE ASSESSEE IN THE YEAR 1999 OR 2003 FO R PURCHASE OF CARS IN THESE YEARS, IN WHICH CASE, WITHOUT DOUBT, ADDITION U/S.6 8 WOULD STAND TO ARISE DURING THE 7 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO CURRENT YEAR. TRUE, IT IS OPEN TO THE ASSESSEE TO S HOW THAT THE RELEVANT ASSET WAS IN FACT ACQUIRED BY HIM DURING A PRECEDING YEAR, SO TH AT THE PRESUMPTION OF S. 69 SHALL NOT APPLY. HOWEVER, AS AFORE-EXPLAINED, AN ADDITION U/S. 68, WHERE THE SOURCE OF THE ACQUISITION IS NOT SATISFACTORILY EXPLAINED, WO ULD STAND TO BE ARISE FOR THE CURRENT YEAR ON THE BASIS OF THE CREDIT IN HIS BOOK S OF ACCOUNT DURING THE SAID YEAR. 4.5 IN THE CIRCUMSTANCES, NO ADDITION QUA THE TWO CARS IS CALLED FOR. THE ASSESSEE SHALL, HOWEVER, BE ALLOWED CREDIT TOWARD THE SANTRO AND INDIGO CARS AT RS. 2 LACS AND RS. 4 LACS RESPECTIVELY, REVERSING THE EXCESS C REDIT (THROUGH CORRESPONDING CREDIT TO THE RELEVANT ASSET) AND, FURTHER, ALLOWED DEPRECIATION ADOPTING THESE VALUES, REGARDED AS THEIR FMV(S) AS ON 01/4/2005, A S THE VALUE INTRODUCED IN BUSINESS. THE REVERSAL IS WARRANTED TO BRING THE AC COUNTS AND THE INCOME-TAX RECORD IN AGREEMENT AND, BESIDES, NEUTRALIZE THE CREDIT TO THE EXTENT NOT REPRESENTED ANY ASSET, BEING NOTIONAL. I DECIDE ACCORDINGLY, AND TH E ASSESSEE GETS PART RELIEF. 5.1 I MAY NEXT ADVERT TO THE GD. 1, WHICH IS QUA THE UNEXPLAINED INVESTMENT IN BUILDING. THE SOURCE OF THE SAID INVESTMENT WAS TRE ATED TO BE THE SALE OF AGRICULTURAL LAND (IN HIS HUF CAPACITY) FOR RS. 20. 61 LACS, PURCHASING A PROPERTY AT PUNE, WHICH COMPRISES THE RELEVANT BUILDING, FOR RS . 21 LACS. AS THE ASSESSEES SHARE IN THE HUF IS 25%, THE LD. CIT(A) ALLOWED THE ASSESSEE RELIEF TO THAT EXTENT, CONFIRMING THE ADDITION FOR THE BALANCE (RS. 14.7 5 LACS) AS UNEXPLAINED INVESTMENT. HOW, ONE WONDERS, COULD THAT BE ? ONCE THE REVENUE ACCEPTS THE SOURCE OF INVESTMENT, EXHIBITED AT RS. 20.61 LACS, THE ADDITION HAS TO BE DELETED FOR THE TOTAL AND NOT A PART THEREOF. IT IS NOBODYS CA SE THAT THE AMOUNT REALIZED ON SALE OF LAND WAS APPROPRIATED BY THE MEMBERS OF THE HUF. IN FACT, THERE IS NO PARTITION OF THE HUF, SO THAT THE INVESTMENT TO THAT EXTENT ( RS. 20.61 LACS) OUGHT TO BE REGARDED AS SOURCED BY WAY OF A LOAN FROM HUF, I.E. , INCLUDING THE AMOUNT DELETED 8 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO BY THE LD. CIT(A) (RS. 5.25 LACS). TOWARD THIS, IT IS TRITE LAW THAT ENTRIES IN THE BOOKS OF ACCOUNT, OR EVEN THE ABSENCE THEREROF, IS NOT DETERMINATIVE. AGAIN, IT MAY WELL BE THAT THE PROPERTY UNDER REFERENCE IS THAT O F THE HUF, THOUGH HELD IN THE NAME OF THE ASSESSEE AS ITS KARTA. IN EITHER CASE, NO CASE FOR ANY ADDITION, GIVEN THAT THE SOURCE OF INVESTMENT IS NOT IN DOUBT AND, RATHER, ACCEPTED, AS SIGNIFIED BY THE PART RELIEF ALLOWED IN APPEAL, IS CALLED FOR. 5.2 CONTINUING FURTHER, NO ISSUE AS REGARDS THE FMV OF THE PROPERTY, ON WHICH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE IN TH E COMPUTATION OF HIS BUSINESS INCOME, APPARENTLY ARISES. THIS IS AS THE PROPERTY IS INTRODUCED IN A SUM WHICH APPROXIMATES ITS COST OF ACQUISITION, WHICH AGAIN APPEARS TO BE IN THE RECENT PAST. IT IS, HOWEVER, NOT CLEAR IF THE SAME INCLUDES LAND A NON-DEPRECIABLE ASSET, AS WELL, AS SURELY A BUILDING CANNOT EXIST WITHOUT LAN D, WHILE THE DETAIL OF ASSETS IN THE ASSESSEES BALANCE-SHEET AS AT THE YEAR-END DOES NO T REFLECT ANY LAND. THAT LAND AND THE STRUCTURE THEREON ARE SEPARATE ASSETS, IS WELL SETTLED ( CIT VS. ALPS THEATRE [1967] 65 ITR 377 (SC); CIT VS. CITIBANK N. A. [2003] 261 ITR 570 (BOM); CIT VS. VIMAL CHAND GOLECHA [1993] 201 ITR 442 (RAJ)). AS IT APPEARS, THE ASSESSEE HAS NOT VALUED THE LAND COMPONENT OF THE PROPERTY SEPARATELY, BUT ACCOUNTED FOR THE SAME COM POSITELY IN HIS BOOKS, UNDER THE ACCOUNT HEAD BUILDING, I.E., INSTEAD OF LAND AND BUILDING. THIS IS CLEARLY IN- APPROPRIATE IN-AS-MUCH AS DEPRECIATION IS NOT ADMIS SIBLE ON LAND. AT THE SAME TIME, IT MAY WELL BE THAT THE ASSESSEE HAS NOT ACQUIRED A NY RIGHTS IN THE LAND UNDERNEATH (THE BUILDING), IN WHICH CASE NO SUCH ADJUSTMENT WO ULD BE REQUIRED. THE AO SHALL VERIFY THE SAME, GIVING DUE OPPORTUNITY TO THE ASSE SSEE. THE VALUE ATTRIBUTABLE TO LAND, WHERE SO, WOULD BE ASCERTAINED, AND DEPRECIAT ION ON BUILDING (AND ITS WDV) ADJUSTED ACCORDINGLY. THE ASSESSEE SHALL PROVIDE TH E RELEVANT DETAILS, COOPERATING IN THE MATTER. 9 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO 6. GROUND NO. 4 IS TOWARDS AN ADDITION ON ACCOUNT O F INTRODUCTION OF A ZEROX MACHINE. THE ASSESSEE BEING ABLE TO DEMONSTRATE THE PURCHASE OF ONLY ONE SUCH MACHINE, COSTING RS. 4,750/-, THE ADDITION TO THE E XTENT OF RS. 25000/-, I.E., AFTER ADJUSTING ITS VALUE, TAKEN AT RS. 5,000, WAS CONFIR MED. THE ADDITION, IT MAY BE CLARIFIED, IS, AS THE ASSESSEE, AS IT APPEARS, OWNS MORE THAN ONE ZEROX MACHINE, ALL OF WHICH STAND INTRODUCED IN HIS BUSINESS, AT AN ES TIMATED VALUE OF RS. 30,000/-. EVEN WHERE NOT SO, THE AMOUNT CREDITED CANNOT BE SA ID TO BE IN RESPECT OF THIS MACHINE, WHOSE FMV AS ON 01/4/2005 WOULD IN FACT BE LOWER THAN RS. 5,000/-, SO THAT, RATHER, THE ENTIRE CREDIT, BEING IN RESPECT O F DIFFERENT MACHINE/S, WOULD STAND TO BE ASSESSED AS INCOME. THE SAME IS RESTRICTED TO RS . 25,000/-, ALLOWING THE ASSESSEE THE BENEFIT OF DOUBT, I.E., REGARDING IT TO BE A CA SE OF INFLATION. NEEDLESS TO ADD, THE DEPRECIATION TO BE ALLOWED WOULD ONLY BE ON THE COS T OF RS. 5,000/-. THE ASSESSEE GETS PART RELIEF. 7.1 THE NEXT AND LAST ADDITION IMPUGNED IS IN RESPE CT OF THE ASSESSEES BANK BALANCE OF RS. 1,10,143/- AS ON 31/3/2006. THE ADDI TION WAS MADE AS THE SAID BALANCE DID NOT APPEAR IN THE ASSESSEES BALANCE-SH EET AS ON 31/03/2006. THE SAME WAS EXPLAINED TO BE IN FACT DULY ACCOUNTED FOR, AND ITS NON-REPRESENTATION IN THE BALANCE-SHEET (AS ON 31/3/2006) DUE TO WRONG DRAWIN G THEREOF, REVISING THE BALANCE-SHEET AS ON 31/03/2006, TABULATED AT PAGES 12 -13 OF THE IMPUGNED ORDER. EVEN AS THE BOOKS OF ACCOUNT, WHEREIN THE SAID BANK ACCOUNT IS STATED TO BE MAINTAINED, HAVE NOT BEEN PRODUCED AT ANY STAGE, WH ICH WOULD PUT PAY ANY CLAIMS TO THE CONTRARY, NO CASE FOR ANY ADDITION IS, IN MY VIEW, MADE OUT. THIS IS AS NO FLAW IN THE REVISED BALANCE-SHEET HAS BEEN POINTED OUT. A WRONG REPRESENTATION COULD NOT BE A GROUND FOR INFERRING INCOME WHICH CO ULD ONLY BE ON SOME SUBSTANTIVE BASIS. IT WOULD BE A DIFFERENT MATTER W HERE THE RELEVANT BANK ACCOUNT 10 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO DOES NOT FIND REFLECTION IN THE ASSESSEES REGULAR ACCOUNTS, OR THE RECEIPTS (AS WELL AS WITHDRAWALS THEREIN) DO NOT FIND REFLECTION IN T HE SAID ACCOUNTS, NONE OF WHICH HAS BEEN POINTED OUT, IN WHICH CASE THE REVISED BAL ANCE-SHEET CAN SURELY BE SAID TO BE NOT A TRUE REPRESENTATION OF THE STATE OF AFFAIR S AS AT THE YEAR-END. IN FACT, AS A COMPARISON OF THE TWO BALANCE-SHEETS, BOTH ON RECOR D, SHOWS, THE EARLIER BALANCE- SHEET, SINCE REVISED, IS MISTAKEN INASMUCH AS THE O PENING CAPITAL IS ADOPTED AT RS. 25.98 LACS, I.E., AS AGAINST RS. 36.11 LACS, WHICH THE LATTER, IS UNARGUABLY THE CORRECT FIGURE, ON THE BASIS OF, AND ADOPTING, WHIC H THE ADDITIONS QUA DIFFERENT ASSETS STAND IN FACT MADE. IT IS THIS DIFFERENCE OF RS. 6,13,641 IN THE TWO BALANCE- SHEETS THAT TRANSFORMS INTO ADDITIONAL ASSETS, IN T HE FORM OF BANK BALANCE (RS.1.10 LACS) AND CASH-IN-HAND (RS. 3.14 LACS), IN THE REVI SED BALANCE-SHEET, OF COURSE AFTER ADJUSTING FOR WITHDRAWALS (PB PGS. 1, 3-5). 7.2 FURTHER, THE ASSESSEE HAS, PER THE SAID BALANCE -SHEETS, I.E., BOTH ORIGINAL AND REVISED, DISCLOSED A PROFIT OF RS. 1,86,940/-, DISC LOSING THE SAME AT HIS INCOME (PB PG. 2). THE CASH SURPLUS, I.E., UPON ADD BACK OF DE PRECIATION IS HIGHER AT RS. 5,65,366. IT IS THIS CASH PROFIT THAT EXPLAINS THE CASH/BANK BALANCE WITH THE ASSESSEE AS AT THE YEAR-END, I.E., WHETHER IN HAND OR IN BAN K. AGAIN, THE BUSINESS INCOME IS TO BE ASSESSED UPON ALLOWING DEPRECIATION IN TERMS OF THIS ORDER, SPECIFYING THE WDV (AS ON 31.3.2006) OF DIFFERENT ASSETS/ASSET CAT EGORIES. LEST IT MAY BE ARGUED THAT THE SAME IS NOT THE SUBJECT MATTER OF APPEAL, IT MAY BE CLARIFIED THAT IT INDEED IS INASMUCH AS THE SAME, AS AFORE-STATED, IS A PART OF THE ASSESSEES EXPLANATION TOWARD THE CASH (EITHER IN HAND OR IN BANK) AVAILAB LE, I.E., AS PER THE BOOKS OF ACCOUNT OF HIS BUSINESS, WHICH INCLUDES THE CASH PR OFIT DISCLOSED THEREBY, AND WHICH INCLUDES THE DEPRECIATION CLAIMED AND ALLOWED . THAT IS, COMPRISES TWO COMPONENTS, VIZ. PROFIT (TAXABLE) AND DEPRECIATION (NON-TAXABLE). BESIDES, THE VALUES AT WHICH THE DIFFERENT ASSETS, INCLUDING LAN D, WHERE SO, ARE TO BE REGARDED AS 11 ITA NO. 680/ASR/2017 (AY 2006-07) RAJIV NEHRU V. ITO PART OF THE ASSESSEES CAPITAL IN HIS BUSINESS, CAN NOT BE INCONSISTENT WITH THE VALUES THEREOF ON WHICH DEPRECIATION WOULD STAND TO BE, WH ERE AND TO THE EXTENT EXIGIBLE, ALLOWED (ALSO REFER PARAS 4.1 & 5.2). THAT IS, THE TWO ISSUES ARE INEXTRICABLY RELATED. IN THIS REGARD IT MAY ALSO BE RELEVANT TO EMPHASIZE THE DICTUM LAID DOWN BY THE APEX COURT IN CIT V. WALCHAND & CO. PVT. LTD . [1967] 65 ITR 381 (SC), THAT THE TRIBUNAL IS TO DETERMINE ALL THE QUESTIONS WHICH AR ISE OUT OF THE SUBJECT MATTER OF THE APPEAL IN LIGHT OF THE EVIDENCE, AND CONSISTENT LY WITH THE JUSTICE OF THE CASE. 8. I DECIDE ACCORDINGLY. 9. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MAY, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 24/5/2019 AG/PS (ON TOUR) COPY OF THE ORDER FORWARDED TO: (1) SH. RAJIV NEHRU S/O SH. M.L. NEHRU, GAGRIBAL BO ULE WARD, SRINAGAR (2) THE RESPONDENT: INCOME TAX OFFICER, WARD-3(2), SRINAGAR (3) THE CIT(APPEALS), J&K, JAMMUAMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER