ITO, BUNDI V. NUWAL TRACTORS, BUNDI

ITA 733/JPR/2010

• Counselvise Citation: 73323114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Valuation report; Commercial expediency

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.733/JP/2010 ASSESSMENT YEAR 2006-07 PAN: AABFN 0123 A THE ITO VS M/S. NUWAL TRACTORS BUNDI MOTOR MARKET, BYE PASS ROAD BUNDI (APPELLANT ) (RESPONDENT) C.O. NO. 63/JP/2010 (ARISING OUT OF ITA NO.733/JP/2010) ASSESSMENT YEAR 2006-07 PAN: AABFN 0123 A M/S. NUWAL TRACTORS VS. THE ITO MOTOR MARKET, BYE PASS ROAD BUNDI BUNDI (APPELLANT ) (RESPONDENT) DEPARTMENT BY : MISS. ROSHANTA MEENA ASSESSEE BY : SHRI B.V. MAHESHWARI ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A), AJMER DATED 15-04-2010 FOR THE ASSESSMENT YEAR 2006 -07. THE ASSESSEE HAS FILED THE CROSS OBJECTION. 2 2.1 THE FIRST GROUND OF THE REVENUE IS THAT THE LD . CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 1,61,041/-. 2.2 THE ASSESSEE IS A DEALER OF TRACTORS AND DERIVE S INCOME FROM TAFE TRACTORS SALES AND SERVICE. THE AO HAS COMPARED THE TRADING RESULTS OF THIS YEAR AS COMPARED TO PRECEDING YEAR AND THE CHART IS AS UNDER:- PARTICULARS A.Y. 2005-06 A.Y. 2006-07 TOTAL SALES GROSS PROFIT G.P.RATE TOTAL SALES GROSS PROFIT G.P.RATE TRACTOR PARTS (TAXABLE) 362960 195124 53.75% (WRONGLY MENTONED BY THE ASSESSEE AT 21%) 390840 83910 21.47% OTHER PARTS 165796 31711 19.13%(WRONGLY MENTIONED BY THE ASSESSEE AT 10.29%) 234517 24126 10.29% BATTERY AMCO 167942 17680 10.53% 67760 (-)14137 FROM THE ABOVE CHART, THE AO NOTICED THAT THERE IS DECLINE IN THE GROSS PROFIT OF TRACTOR PARTS AND OTHER PARTS AND THERE IS LOSS IN THE SALES OF BATTERY. THE AO NOTICED THE FOLLOWING FACTS. 1. NO QUANTITATIVE DETAILS HAS BEEN MAINTAINED IN R ESPECT OF TRACTOR PARTS AND OTHER PARTS. 2. NO STOCK REGISTER HAS BEEN MAINTAINED BY THE ASSESS EE. 3. THE ASSESSEE WAS ASKED TO FURNISH HIS JUSTIFICATION FOR LOSS IN BATTERY ACCOUNT BUT NO SATISFACTORY REPLY W AS GIVEN. THE ASSESSEE ACCORDINGLY WAS ASKED TO FURNISH THE F OLLOWING EXPLANATION FOR SHOWING THE LOW G.P.RATE VIDE LETTER DATED 10 TH DEC. 2008 THE ASSESSEE 3 FILED THE REPLY VIDE LETTER DATED 15 TH DEC. 2008. IN THE REPLY, IT WAS SUBMITTED AS UNDER:- 1. THE FIRM IS MAINTAINING SEPARATE ACCOUNT AND THE ASSESSEE IS NOT CHARGING THE FIXED PROFIT FROM THE CUSTOMERS . 2. THE LOSS IN BATTERY ACCOUNT IS ON ACCOUNT OF LEA KAGE, DISCHARGE AND SUCH DEFECTS ARE REMOVED DURING GUARA NTEE PERIOD. 2.3 ACCORDING TO THE AO, THE ASSESSEE'S EXPLANATION IS GENERAL. THE ASSESSEE HAS NOT FILED ANY SUPPORTING DOCUMENTARY E VIDENCE FOR LOW G.P.RATE AND LOSS CLAIMED IN BATTERY ACCOUNT. THE A O ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE AO APPLIED THE G.P.RATE OF THE PRECEDING YEAR AND ACCORDINGLY MADE THE TRADING ADDITION OF RS. 1,61,041/-. 2.4 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E COMPANY CANNOT ALLOW G.P.RATE TO THE EXTENT OF 50% OR MORE AND THE AO HAS WRONGLY APPLIED THE G.P.RATE OF 53.75% ON TRACTOR PARTS. AN EXAMPLE WAS GIVEN BEFORE THE LD. CIT(A). I SALE OF ONE PART I.E. NUT WAS SOLD AT RS. 24.03 WHILE COST IS RS. 21.64. SIMILAR IS THE POSITION WITH OTH ER ITEMS. WHEN THERE IS NO STOCK REGISTER, THE GROSS PROFIT RATE SHOULD BE ASC ERTAINED FROM PURCHASE AND SALES. THE TURNOVER OF TRACTOR PARTS IS RS. 3.63 LA CS AND THUS THE TURNOVER OF THE PARTS VIS A VIS THE TOTAL TURNOVER IS INSIGNIFI CANT. IT WAS FURTHER EXPLAINED 4 THAT IN SALE OF NEW TRACTOR, SOME PARTS AND THE ACC ESSORIES ARE GIVEN WITHOUT ANY COSTS AS PER SCHEME OF THE COMPANY SOMETIMES, T HE COST OF SUCH PARTS IS REDUCED FROM THE BILL AND SOMETIMES IT IS A PART OF THE BILL OF THE TRACTOR. THE BOOKS HAVE BEEN AUDITED AND THEREFORE, THERE WAS NO REASON FOR THE AO TO HAVE APPLIED THE G.P.RATE. 2.5 THE LD. CIT(A) WAS OF THE OPINION THAT THE AO H AS NOT BROUGHT ON RECORD ANY MATERIAL TO HOLD THAT THE BOOK RESULTS A RE NOT RELIABLE. THE OBSERVATION OF THE AO REGARDING INCORRECT VALUATION OF THE CLOSING STOCK OF SPARE PARTS IS OF GENERAL NATURE. THE LD. CIT(A) HA S REFERRED TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE CI T VS GOTAN LIME KHANIJ UDYOG, 256 ITR 243 AND ALSO REFERRED TO THE DECISIO N OF ITAT JAIPUR BENCH IN THE CASE OF PRASADILAL DEVKINANDAN IN ITA NO. 65 3/JP/2003 FOR THE ASSESSMENT YEAR 1997-98 AND HELD THAT THE AO WAS NO T JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THUS T HE LD. CIT(A) DELETED THE ADDITION. 2.6 WE HAVE HEARD BOTH THE PARTIES. IT IS NOTICED F ROM THE TRADING RESULTS OF THIS YEAR THAT G.P.RATE IS ABNORMALLY LOW AS COM PARED TO PRECEDING YEAR. THERE WAS LOSS IN BATTERY ACCOUNT. THE BUSINESS IS BEING DONE BY THE ASSESSEE AND IT WAS HIS DUTY TO EXPLAIN THE REASONS FOR FALL IN G.P.RATE. IN CASE THE ASSESSEE IS ABLE TO EXPLAIN THE FALL IN G. P.RATE THEN NO ADDITION CAN 5 BE MADE EVEN AFTER REJECTION OF BOOKS OF ACCOUNT. W E HAVE NOTICED THE EXPLANATION GIVEN BEFORE THE AO. BEFORE THE AO, THE ASSESSEE HAS GIVEN GENERAL EXPLANATION. NO DOCUMENTARY EVIDENCE WAS FI LED. BEFORE THE LD. CIT(A), THE ASSESSEE GAVE THE GENERAL EXPLANATION I N RESPECT OF LOW G.P.RATE FOR SPARE PARTS. HOWEVER, IN RESPECT OF OTHER CONTE NTIONS , WE CAN SEE THAT THESE ARE THE ARGUMENTS. THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE DOCUMENTARY EVIDENCE BEFORE THE AO. THE AO WHO HAS TO VERIFY THE ACCOUNTS AND TO RECORD HIS SATISFACTION THAT FALL I N G.P.RATE STANDS EXPLAINED. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE SO METIMES THE BILL FOR PARTS IS PREPARED SEPARATELY AND SOMETIMES IT IS INCLUDED IN THE BILL OF THE TRACTOR. HOWEVER, BEFORE THE AO, NO DOCUMENTARY EVIDENCE WAS FILED. WE ARE NOT AWARE AS TO WHETHER SUCH FACTUAL SITUATION WAS AVAI LABLE IN EARLIER YEAR OR NOT LOOKING TO THE FACTS ON RECORD, WE FEEL THAT THE AS SESSEE FAILED TO EXPLAIN THE FALL IN G.P.RATE BEFORE THE AO. HENCE, UNDER SUCH C IRCUMSTANCES, THE AO WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE G.P.RATE OF PREVIOUS YEAR. THUS THE GRO SS PROFIT ADDITION MADE BY THE AO IS CONFIRMED AND ON THIS ISSUE THE FINDIN G OF THE LD. CIT(A) IS VACATED. 3.1 THE SECOND GROUND OF THE REVENUE IS THAT THE L D. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF SHORTAGE EXPENSES OF R S. 20,527/-. 6 3.2 THE ASSESSEE DEBITED A SUM OF RS. 20,527/- UNDE R THE HEAD OF TRACTOR SHORTAGE EXPENSES. BEFORE THE AO, IT WAS STATED THA T SUCH EXPENSES ARE EXPENSES FOR ANY SHORTAGE ITEMS FOUND AT THE TIME O F DELIVERY OF THE TRACTOR. ONE EXAMPLE WAS GIVEN BEFORE THE AO THAT IN COPY OF G.R,, IT HAS BEEN MENTIONED THAT TYRE WAS IN CUTTING POSITION. HENCE FOR SUCH DEFICIENCY, THE ASSESSEE HAS TO MAKE EXPENSES AT THE TIME OF HANDLI NG OF TRACTOR. THE AO IN HIS ORDER HAS MENTIONED THAT PHOTO COPY OF G.R. FIL ED BY THE ASSESSEE DO NOT JUSTIFY THE CLAIM OF THE EXPENSES AS IT DID NOT IND ICATE THE SHORTAGE CLAIMED IN THE TRACTOR SHORTAGE ACCOUNT. NO SUPPORTING DOCUMEN TARY EVIDENCE WAS FILED. THE AO ACCORDINGLY DISALLOWED A SUM OF RS. 20,527/- . 3.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E AMOUNT DEBITED IN THE BOOKS OF ACCOUNT IS DULY SUPPORTED BY VOUCHERS AND SIGNED BY THE CUSTOMERS. THE LD. CIT(A) WAS OF THE OPINION THAT I N CASE THE AO WAS NOT SATISFIED ABOUT THE GENUINENESS OF THE CLAIM THEN H E SHOULD HAVE MADE ENQUIRY FROM A FEW PARTY AND BROUGHT SPECIFIC MATER IAL ON RECORD. THEREFORE, THE LD. CIT(A) DELETED THE ADDITION OF RS. 20,527/- . 3.4 WE HAVE HEARD BOTH THE PARTIES. IN ORDER TO CLA IM THE EXPENDITURE, THE ONUS IS ON THE ASSESSEE TO SATISFY THE GENUINENESS OF SUCH EXPENDITURE. IN CASE THE ASSESSEE FILES SOME EVIDENCE IN SUPPORT OF ITS CLAIM THEN THE ONUS IS SHIFTED ON THE REVENUE. HENCE, WE DO NOT AGREE THAT THE AO SHOULD HAVE 7 MADE ENQUIRY FROM THE PARTY. IT IS NOTICED FROM THE ORDER OF THE AO THAT SUCH EXPENSES ARE SUPPORTED BY VOUCHERS. ONCE THE EXPENS ES ARE SUPPORTED BY VOUCHERS THEN THERE IS AVAILABLE EVIDENCE WHICH HAS NOT BEEN MENTIONED BY THE AO IN HIS ORDER. HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) BECAUSE HE HAS ALLOWED THE EXPENDITURE ON THE BASIS OF THE VOUCHERS WHICH CONTAINS THE SIGNATURE OF THE CUSTOMERS. 4.1 THE THIRD GROUND OF THE REVENUE IS THAT THE LD . CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 20,005/- OUT OF AC CIDENTAL EXPENSES. 4.2 BEFORE THE AO, THE ASSESSEE FILED THE COPY OF A CCIDENTAL EXPENSES ACCOUNT AND STATED THAT ACCIDENTAL EXPENSES ARE PAI D TO THE EMPLOYEES FOR MEDICAL ASSISTANCE. ACCORDING TO THE AO, SUCH EXPEN SES ARE SUPPORTED BY SELF MADE VOUCHERS. THE AO FURTHER REQUIRED THE ASS ESSEE TO SHOW THAT THE EMPLOYEES HAVE MET WITH ACCIDENTS. THE ASSESSEE FIL ED THE REPLY AND STATED THAT ALL THE EXPENSES HAVE BEEN INCURRED ON MEDICAL TREATMENT OF THE EMPLOYEES INJURED DURING THE ACCIDENT IN DUTY TIME NO SUPPORTING DOCUMENTARY EVIDENCE WAS FILED. THE AO ACCORDINGLY DISALLOWED A SUM OF RS. 20,005/-. 4.3 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E PERSON DEPLOYED IN THE FIRM USED TO GO TO SITES BY MOTORCYCLE FOR CUST OMER CARE AS WELL AS BUSINESS PROMOTION ETC AND WHEN THE EMPLOYEE MEETS WITH AN ACCIDENT AT THE 8 TIME OF DUTY, THEN IT IS THE RESPONSIBILITY OF THE EMPLOYER TO COMPENSATE OR ALLOW HIM MEDICAL RELIEF. SUCH EXPENSES ARE SUPPORT ED BY VOUCHERS.. THE LD. CIT(A) HAS DELETED THE ADDITION ON THE GROUND THAT THE AO SHOULD HAVE MADE ENQUIRY BEFORE MAKING THE DISALLOWANCE 4.4 WE HAVE HEARD BOTH THE PARTIES. THE AO IN HIS O RDER HAS MENTIONED THAT THE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHE RS. THE ASSESSEE HAS GIVEN THE EXPLANATION AND THE EXPLANATION CANNOT BE CONSIDERED AS UNREASONABLE. IT IS NOT THE CASE OF THE REVENUE THA T SUCH VOUCHERS DO NOT CONTAIN THE SIGNATURE OF THE RECIPIENTS. WE THEREFO RE, FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 20,00 5/-. 5.1 THE FOURTH GROUND OF THE REVENUE IS THAT THE L D. CIT(A) HAS ERRED IN ADDITION OF RS. 10,11,448/- MADE U/S 69B AS UNEXPLA INED INVESTMENT IN CONSTRUCTION OF PROPERTY. 5.2 THE ASSESSEE CONSTRUCTED A SHOWROOM AND IN ORDE R TO ASCERTAIN THE COST OF CONSTRUCTION, THE AO REFERRED THE VALUATION TO VALUATION CELL U/S 142A OF THE ACT. THE VALUATION OFFICER DETERMINED THE CO ST AT RS. 19.18 LACS AS AGAINST RS. 6,95,764/- DECLARED BY THE ASSESSEE. TH E REPORT OF THE VALUATION OFFICER WAS GIVEN TO THE ASSESSEE FOR SUBMITTING TH E OBJECTION. THE ASSESSEE VIDE LETTER DATED 10TH NOV. 2008 RAISED THE FOLLOWI NG TECHNICAL OBJECTIONS. 9 1. THE VALUATION OFFICER HAS TAKEN THE PLINTH AREA AT 346.54 SQ. MTR AS AGAINST PLINTH AREA OF 281.33 SQ. MTR. P ERHAPS THE VALUATION OFFICER HAS INCLUDED THE PROJECTION IN TH E PLINTH AREA. 2. THE VALUATION OFFICER HAS DETERMINED THE PLINTH AREA RATE AT RS. 6443/- PER SQ. MTR AS PER CPWD RATES, THE P LINTH AREA RATE AFTER INCLUDING THE COST OF ELECTRICAL FITTING S COMES TO RS. 3570/- PER SQ. MTR 3. THE VALUATION OFFICER HAS REDUCED THE AREA OF 17 3.27 SQ. MTR ON ACCOUNT OF MOSAIC FLOORING AND C.C. FLOORING 4. THE VALUATION OFFICER HAS INCLUDED 1% TOWARDS PA YMENT TO ARCHITECT WHILE ONE OF THE PARTNER OF THE FIRM I S CIVIL ENGINEER AND NO PAYMENT HAS BEEN GIVEN TO ANY ARCHI TECT. 5. THE VALUATION OFFICER HAS NOT GIVEN DEDUCTION O N ACCOUNT OF SELF SUPERVISION CHARGES. 6. THE VALUATION OFFICER HAS DEDUCTION OF 15% FOR H ALL TYPE STRUCTURE AND NO JOINERY WORK WHILE THE DEDUCTION S HOULD HAVE BEEN 35%. 7. THE VALUATION OFFICER HAS ADOPTED CPWD RATES WHI LE HE SHOULD HAVE ADOPTED PWD RATES THE AO REFERRED THE OBJECTION OF THE ASSESSEE TO T HE VALUATION OFFICER AND THE VALUATION OFFICER HAS NOT ACCEPTED ANY OBJECTIO N. HOWEVER, THE AO HAS 10 GIVEN DEDUCTION OF SELF SUPERVISION CHARGES AT 10%. THE AO HAS NOT GIVEN DEDUCTION ON ACCOUNT OF DIFFERENCE BETWEEN CPWD AND PWD RATES. THEAO ACCORDINGLY ADDED A SUM OF RS. 10,11,448/- TO THE R ETURNED INCOME OF THE ASSESSEE U/S 69B OF THE ACT. 5.3 BEFORE THE LD. CIT(A) , THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNT. THE ASSESSEE H AS MAINTAINED EACH AND EVERY VOUCHERS IN RESPECT OF CONSTRUCTION OF THE SH OWROOM. THE CONSTRUCTION WAS OF POOR NATURE AND THEREFORE, THE STANDARD AREA RATE OF CONSTRUCTION OF CPWD SHOULD NOT HAVE BEEN APPLIED. IN THE CASE OF H OTEL, THE DVO HAS GIVEN DEDUCTION IN RESPECT OF PROJECTION WHILE VALU ATION OFFICER HAS NOT GIVEN DEDUCTION ON ACCOUNT OF PROJECTION. THE PROJECTION HAS BEEN INCLUDED IN THE PLINTH AREA. THE ASSESSEE HAS FILED A VALUATION REP ORT FROM SHRI MEHTA WHO HAS VALUED THE COST OF CONSTRUCTION ON THE BASIS OF DETAILED COST ANALYSIS. THE LD. CIT(A) HAS DELETED THE ADDITION AFTER REFERRING TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HO TEL JOSHI, 242 ITR 478. 5.4 WE HAVE HEARD BOTH THE PARTIES. THE VALUATION R EPORT PREPARED BY THE VALUATION OFFICER IS AVAILABLE AT PAGES 75 TO 87 OF THE PAPER BOOK. AT PAGE 87 OF THE PAPER BOOK, THE VALUATION OFFICER HAS WORKED OUT THE COST INDEX OF JULY, 2006 AS UNDER:- JUNE 1999 148 JULY, 2004 196 11 COST OF INDEX ON JULY 2006 = 196+ (196 148) X 24 = 214.58 62 SAY: 250 THE AO WAS REQUIRED TO ASCERTAIN THE COST OF CONSTR UCTION DURING THE FINANCIAL YEAR 2005-06. HENCE, THE COST OF CONSTRUC TION SHOULD HAVE BEEN TAKEN FOR A MONTH WHICH FALLS IN FINANCIAL YEAR 200 5-06 AS CONSTRUCTION HAS BEEN COMPLETED BEFORE 31-03-2006. THE VALUATION OFF ICER HAS WRONGLY ADOPTED THE COST OF INDEX OF 250. THE VALUATION OFF ICER HAS ADOPTED THE PA RATE BUT NO BASIS HAS BEEN GIVEN FOR ADOPTING SUCH PA RATE. THE ASSESSEE FILED THE OBJECTIONS BEFORE THE AO AND THESE OBJECT IONS WERE SENT TO THE VALUATION OFFICER. THE VALUATION OFFICER HAS NOT AC CEPTED ANY OBJECTIONS IN RESPECT OF DETAILED COST ANALYSIS. THE VALUATION OF FICER HAS MENTIONED THAT THE DETAILS ADOPTED BY THE REGISTERED VALUER FOR WO RKING OUT THE DETAILED COST ANALYSIS WERE ASKED BY THE OFFICE BUT THESE DETAILS WERE NOT GIVEN. THEREFORE, DETAILED ESTIMATION WAS NOT POSSIBLE. WHEN THE VALU ATION OFFICER IS BEING GIVEN DETAILED ANALYSIS THEN THE VALUATION OFFICER IS REQUIRED TO VERIFY THESE DETAILS. THE DRAWINGS AND DESIGNS GIVEN IN THE DETA ILED ANALYSIS WERE AVAILABLE. SUCH DETAILS WERE NOT GIVEN TO THE VALUA TION OFFICER AND IT CANNOT BE MADE A GROUND FOR NOT ACCEPTING THE DETAILED COS T ANALYSIS. 12 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS SMT. PREM KUMARI MURDIYA,296 ITR 508 HELD THAT DEDUCTION OF 2 0% FROM THE COST OF CONSTRUCTION ESTIMATED BY THE DVO AFTER APPLYING PW D RATES IS IN ACCORDANCE WITH THE DECISION OF HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS DINESH TALWAR , 265 ITR 344. THE ITA T JAIPUR BENCH IS CONSIDERING THE REBATE OF 20% WHILE ESTIMATING THE COST OF CONSTRUCTION BY PWD AS AGAINST CPWD RATES ADOPTED BY THE VALUATION OFFICER OF THE DEPARTMENT. REFERENCE IS MADE TO THE ORDER OF THE T RIBUNAL IN THE CASE OF ITO VS SHRI NITIN AGARWAL (ITA NO. 1080/JP/2010 FOR THE ASSESSMENT YEAR 2007-08 DATED 6-05-2011) AND ITO VS TARA CHAND PAT NI (ITA NO.1249/JP/2010 FOR THE ASSESSMENT YEAR 2006-07 DAT ED 11-02-2011). 5.5 THE PAPER BOOK ALSO CONTAINS THE VALUATION REPO RT FROM THE APPROVED VALUER SHRI SWAMI NATH MEHTA AND SHRI PYUSH KUMAR G OYAL. THE VALUATION REPORT OF SHRI SWAMI NATH MEHTA IS AVAILABLE AT PAG ES 40 TO 54 OF THE PAPER BOOK . THE VALUATION REPORT IS BASED ON DETAILED COST ANAL YSIS AND AFTER GIVING SELF SUPERVISION CHARGES, THE VALUATION HAS BEEN DE TERMINED AT RS. 6.94 LACS THE VALUATION REPORT OF SHRI PYUSH KUMAR GOYAL IS A VAILABLE AT PAGES 56 TO 67 OF THE PAPER BOOK. THE VALUATION REPORT OF SHRI PYUSH KUMR GOYAL SHOWS ESTIMATED COST OF CONSTRUCTION AT RS. 7,76,500/- A FTER GIVING REBATE OF 10% FOR SELF SUPERVISION PROVISION AND GIVING REBATE OF 15% FOR HALL TYPE 13 CONSTRUCTION. SHRI PYUSH KUMR GOYAL HAS ADOPTED THE PA RATE WHILE VALUATION REPORT OF SHRI SWAMI NATH MEHTA IS BASED ON DETAILED COST ANALYSIS. WHEN SUCH DETAILED COST ANALYSIS WAS GIVE N TO THE VALUATION OFFICER THEN HE HAS NOT FOUND ANY FAULT IN SUCH VALUATION R EPORT. THE DETAILED COST ANALYSIS IS BASED ON THE COST OF EACH AND EVERY ITE M AFTER GIVING THE DETAILS AND HAVING THE MAP OF THE CONSTRUCTION. WE THEREFOR E, FEEL THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION WHEN THE ASSES SEE HAS FILED THE DETAILED COST ANALYSIS. IT IS NOT THE CASE OF THE REVENUE TH AT THE COST INCLUDED IN THE DETAILED COST ANALYSIS IS NOT BASED ON THE MARKET R ATE AVAILABLE AT THAT RELEVANT TIME. HENCE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. 5.6 BEFORE US, THE LD. AR HAS RELIED UPON THE DECIS ION OF HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS CIT, 328 ITR 513 . THIS DECISION IS AGAINST THE ORDER OF HON'BLE UTTRANCHAL HIGH COURT DATED 15-03-07. IN THIS DECISION THE HON'BLE APEX COURT HAS NOT CONSIDERED THE APPLICABILITY OF SECTION 142A OF THE ACT. SECTION 142A HAS BEEN INSE RTED BY THE FINANCE ACT OF 2004 WITH RETROSPECTIVE EFFECT FROM. 15-11-1972. THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS BHAWAN I SHANKAR VYAS, 311 ITR 8 VIDE ITS ORDER DATED 18-11-08 HELD THAT THE A O IS NOT REQUIRED TO REJECT THE BOOKS OF ACCOUNT ON THE REPORT OF THE VALUER U/ S 142A OF THE ACT. HOWEVER, SINCE WE ARE CONFIRMING THE ACTION OF THE LD. CIT(A) FOR ALLOWING 14 THE RELIEF, THEREFORE, WE DO NOT FEEL NECESSARY TO RECORD THE FINDING THAT NO REJECTION OF BOOKS OF ACCOUNT WAS REQUIRED BEFORE R EFERRING THE VALUATION TO THE VALUATION CELL. HOWEVER, IN THE INSTANT, CASE T HE AO HAS REJECTED THE BOOKS OF ACCOUNT AND INVOKED THE PROVISIONS OF SECT ION 145(3) OF THE ACT AND WE HAVE ALREADY UPHELD THE REJECTION OF BOOKS O F ACCOUNT. 6.1 THE FIFTH GROUND OF THE REVENUE IS THAT THE L D. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 59,847/- OUT OF I NTEREST. 6.2 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS NOTICED THAT THE ASSESSEE HAS NOT CHARGED THE INTEREST FROM 11 PARTI ES. THE ASSESSEE HAS DEBITED THE INTEREST OF RS. 18,33,241/-. THE AO HA S REFERRED TO THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD. , 156 TAXMAN 257 WHERE IT HAS BEEN HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION OF INTEREST ON THE BORROWINGS TO THE EXTENT THOSE ARE DIVERTED TO THE SISTER CONCERNS. THE AO A CCORDINGLY DISALLOWED THE INTEREST OF RS. 59,847/-. 6.3 THE LD. CIT(A) HAS DELETED THE INTEREST BY OBSE RVING THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE T HAT I NTEREST BEARING LOANS WERE DIVERTED. 6.4 WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE APE X COURT IN THE CASE OF S.A, BUILDERS VS CIT 288 ITR 1 HELD THAT ONE HAS TO SEE THE COMMERCIAL 15 EXPEDIENCY IN RESPECT OF THE LOANS AND ADVANCES. HO WEVER, IN THE INSTANT CASE, WE ARE NOT AWARE OF THE NON-INTEREST BEARING ADVANCES OR NON-INTEREST BEARING FUNDS OF THE PARTNERS. THE COMMERCIAL EXPED IENCY HAS NOT BEEN ESTABLISHED EITHER BEFORE THE AO OR BEFORE THE LD. CIT(A). THE LOANS AND ADVANCES ARE NOT TRADE DEBTORS. HENCE, IN VIEW OF T HE DECISION OF HON'BLE APEX COURT IN THE CASE OF S.A. BUILDERS VS CIT, (SU PRA), THE INTEREST CAN BE DISALLOWED BECAUSE THE COMMERCIAL EXPEDIENCY OF ADV ANCING OF LOAN HAS NOT BEEN ESTABLISHED AND IT HAS ALSO NOT BEEN ESTABLISH ED THAT NON-INTEREST CAPITAL FUNDS OF THE PARTNERS OR NON-INTEREST ADVANCES WERE SUFFICIENT TO MAKE SUCH NON-INTEREST LOANS AND ADVANCES. HENCE, THE ADDITIO N OF RS. 59,847/- AS MADE BY THE AO IS UPHELD AND THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS REVERSED. 7.1 IN THE C.O., THE ASSESSEE IS AGGRIEVED AGAINST CONFIRMING OF ADDITION OF RS. 1,54,100/- U/S 68 OF THE ACT. 7.2 THE AO DURING THE COURSE OF ASSESSMENT PROCEEDI NGS NOTICED THAT CREDIT OF RS. 172,100/- IN THE NAME OF SHRI HEERA L AL ON ACCOUNT OF PURCHASE OF OLD TRACTOR ON 23-09-05. SHRI HEERA LAL WAS SOLD THE NEW TRACTOR ON 22- 11-05 FOR RS. 3,74,110/-. A SUM OF RS. 2.20 LACS WA S RECEIVED AS CHEQUE FROM THE BANK OF BARODA WHICH REPRESENTED THE LOAN TAKEN BY SHRI HEERA LAL AND A SUM OF RS. 1,54,110/- WAS CREDITED AS CASH TH OUGH THERE WAS PAYMENT OUTSTANDING AGAINST THE OLD TRACTOR TO THE EXTENT O F RS. 1,72,100/-. THEREFORE, 16 IT WAS QUITE ABNORMAL TO HAVE RECEIVED THE CASH OF RS. 1,54,110/-FROM SHRI HEERA LAL AT THE TIME OF SALE OF NEW TRACTOR. THE A SSESSEE WAS ASKED TO EXPLAIN THE CIRCUMSTANCES AS TO WHY SHRI HEERA LAL PAID A SUM OF RS. 1,54,110/- WHILE A SUM OF RS. 1,72,110/- WAS ALREAD Y RECEIVABLE BY HIM FROM THE ASSESSEE. THE ASSESSEE CONTENDED THAT SHRI HEER A LAL HAS MADE PAYMENT IN CASH AND THE ENTRY HAS BEEN RECORDED IN THE CASH BOOK. THE ASSESSEE ALSO FILED A LETTER, IN RESPONSE TO SHOW CAUSE NOTICE IS SUED BY THE AO, IN WHICH IT WAS STATED THAT THE ASSESSEE HAS NOT BEEN ABLE TO C ONTACT SHRI HEERA LAL IN SPITE OF THEIR BEST EFFORTS. SHRI HEERA LAL WAS NOT PRODUCED FOR EXAMINATION. THE AO ACCORDINGLY ADDED A SUM OF RS. 1,54,100/-. 7.3 BEFORE THE LD. CIT(A), THE ASSESSEE HAS RELIED UPON THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNT. IT WAS FURTHER CO NTENDED THAT SHRI HEERA LAL IS A MAN OF MEANS BECAUSE HE HAS PURCHASED THE TRACTOR. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE GE NUINENESS OF THE ENTIRE TRANSACTION. 7.4 WE HAVE HEARD BOTH THE PARTIES. IT IS SEEN THAT SHRI HEERA LAL WAS NOT PRODUCED BEFORE THE AO FOR EXAMINATION. THUS NO EVI DENCE WAS FILED BY THE ASSESSEE BEFORE THE AO. IT IS AN ACCEPTED PROPOSITI ON OF LAW THAT HUMAN PROBABILITY CAN BE CONSIDERED FOR EVALUATING THE EV IDENCE. SHRI HEERA LAL 17 SOLD THE TRACTOR TO THE ASSESSEE AND THE AMOUNT REM AINED WITH THE ASSESSEE. AT THE TIME OF PURCHASE OF NEW TRACTOR, A PRUDENT P ERSON WILL ASK FOR ADJUSTMENT OF SUCH AMOUNT RECEIVABLE BY HIM. THERE SHOULD BE SOME SUFFICIENT AND REASONABLE GROUND OF NOT ASKING THE ADJUSTMENT AND SUCH FACT WAS TO BE ESTABLISHED BY THE ASSESSEE. WE THEREFORE , FEEL THAT THE LD. CIT(A) WAS JUSTIFIED INN CONFIRMING THE ADDITION OF RS. 1, 54,110/- 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED AND THE C.O. OF THE ASSESSEE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26-08 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 26/08/2011 *MISHRA COPY FORWARDED TO :- 1. THE ITO, BUNDI 2. M/S. NUWAL TRACTORS, MOTOR MARKET, BUNDI 3. THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5. THE LD.DR 6. THE GUARD FILE (ITA NO.733/JP /10) A.R, ITAT, JAIPUR 18 19