Ajay Sehgal, Chandigarh V. ACIT, Chandigarh

ITA 826/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5087 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 05-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Unexplained investment; Fair market value; Valuation report
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 826/CHD/2016 ASSESSMENT YEAR: 2009-10 SH. AJAY SEHGAL, VS. THE ACIT, CIRCLE 4(1), C/O SH. MUKESH GUPTA, CA CHANDIGARH CHANDIGARH PAN NO. AOIPS8684J (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AJAY JAIN DEPARTMENT BY : SH. S.K. MITTAL DATE OF HEARING : 23.03.2017 DATE OF PRONOUNCEMENT : 19.06.2017 ORDER PER ANNAPURNA GUPTA, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-2, CHANDIGARH DATED 05.05.2016. 2. GROUND NO.1, 2 AND 3 RAISED BY THE ASSESSEE ARE ON THE SAME ISSUE AND ARE INTERLINKED. THE SAME ARE THEREFORE BEING T AKEN UP TOGETHER FOR ADJUDICATION. THE GROUNDS RAISED ARE AS UNDER:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS WRONGLY CONFIRMED THE ACTION OF 2 ASSESSING OFFICER WHO HAS WRONGLY TAKEN THE PURCHASE CONSIDERATION AT RS 61.66 LAKHS (1/3 RD OF TOTAL OF RS 1.85 CRORE) IN PLACE OF ACTUAL CONSIDERATION OF RS 56.66 LAKHS (1/3 RD OF TOTAL OF RS. 1.70 CRORE) ON THE BASIS OF VALUATION REPORT OF VALUATION OFFICER. 2. THE LEARNED CIT(A) HAS WRONGLY UPHELD THE INVESTMENT IN PROPERTY ON THE BASIS OF VALUATION REPORT OF DVO IN THE CIRCUMSTANCES WHEN THE ACTUAL PURCHASE CONSIDERATION IS MORE THAN THE VALUE FIXED BY AUTHORITY FOR THE PURPOSE OF STAMP VALUATION & THERE IS NO MATERIAL ON RECORD TO PROVE THAT THE APPELLANT HAS PAID OVER AND ABOVE THE VALUE SHOWN IN REGISTERED DEED. THERE IS NO PROVISION IN THE ACT TO ADOPT THE VALUE INTIMATED BY DVO IN PRESENT CIRCUMSTANCES PARTICULARLY WHEN THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY ASSESSING OFFICER. 3. THAT THE LEARNED CIT (A) HAS WRONGLY UPHELD THE ADDITION OF RS 5 LAKHS & FAILED TO APPRECIATE THE F ACT THAT THE DIFFERENCE BETWEEN THE VALUE GIVEN BY DVO & ACTUAL PURCHASE CONSIDERATION IS LESS THAN 10% & THE VALUATION REPORT SUFFERED FROM VARIOUS TECHNICAL & APPARENT DEFECTS. 3. IN THE ABOVE GROUNDS, THE ASSESSEE HAS CHALLENGE D THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ADDITION MADE ON ACCOUN T OF INVESTMENT MADE IN A PROPERTY OVER AND ABOVE THE ACTUAL PURCHASE CO NSIDERATION SHOWN, AMOUNTING TO RS. 5 LACS. IN GROUND NO.1, THE ASSESS EE HAS CHALLENGED THE ADDITIONS SO MADE. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADOPTION OF THE VALUE OF THE SAID PROPERTY AS DETER MINED BY THE DISTRICT 3 VALUATION OFFICER FOR DETERMINING THE ACTUAL AMOUNT OF INVESTMENT MADE IN THE SAME. IN GROUND NO. 3, THE ASSESSEE HAS CONTEND ED THAT SINCE THE DIFFERENCE BETWEEN THE PURCHASE CONSIDERATION OF TH E SAID PROPERTY AND THE VALUATION GIVEN BY THE DISTRICT VALUATION OFFICER ( DVO) WAS LESS THAN 10%, NO ADDITION WAS WARRANTED. 4. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE A SSESSEE IS A DEALER IN GOLD AND DIAMOND. A SURVEY U/S 133A OF THE INCOME-T AX ACT, 1961 (IN SHORT 'THE ACT') WAS CONDUCTED BY THE DDIT (INVESTI GATION) ON 10.12.2008 AT THE PREMISES OF THE ASSESSEE. THEREAFTER ,DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PURCHASED A PROPERTY BEING SCO NO. 157-158, SECTOR 37-C, CHAN DIGARH ALONG WITH HIS TWO BROTHERS ,FOR A TOTAL CONSIDERATION OF RS. 1,7 0,00,000/- AND THE SHARE OF THE ASSESSEE IN THE PROPERTY WAS ONE-THIRD. THE AO REFERRED THE VALUATION OF THE PROPERTY TO THE DVO TO ASCERTAIN T HE FAIR MARKET VALUE OF THE PROPERTY, WHO DETERMINED THE VALUE AT RS. 1,85, 00,000/- AS ON 1.4.2008. ADOPTING THE SAID VALUE, THE ASSESSING OFFICER HELD THE DIFFERENCE BETWEEN THE SAME AND THAT SHOWN BY THE ASSESSEE, TO THE EXT ENT OF ASSESSEES SHARE THEREIN AMOUNTING TO RS. 5 LACS, AS UNEXPLAINED INV ESTMENT AND MADE ADDITION OF THE SAME IN THE HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT (A) WHERE THE ASSESSEE CONTESTED THE ADDITION MADE, CHALLENGING THE REFERE NCE MADE TO THE DVO STATING THAT IT WAS MADE MERELY ON THE BASIS OF SUS PICION AND FURTHER POINTING OUT SEVERAL DISCREPANCIES IN METHOD ADOPT ED BY THE VALUATION OFFICER WHILE VALUING THE PROPERTY. THE LD.CIT(A) , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, UPHELD THE REFERENCE M ADE TO THE DVO BY 4 STATING THAT THE SAME WAS MADE US 142A OF THE ACT B ASED ON INFORMATION / FINDINGS DURING SURVEY THAT THE APPELLANT HAD ENTER ED INTO THE TRANSACTIONS WHEREIN THE VALUE OF THE PROPERTY HAD BEEN UNDERVA LUED. THE LD. CIT(A) ALSO HELD THAT THE ASSESSING OFFICER HAD RIGHTLY A DOPTED THE VALUE OF THE PROPERTY AS PER THE VALUATION OF THE VALUATION OFFI CER. THEREFORE, THE ADDITION MADE OF RS. 5 LACS BASED ON THE VALUATION OF THE DVO WAS UPHELD BY THE LD. CIT(A). AGGRIEVED BY THE SAME, THE ASSESSEE HAS RAISED THE ABOVE GROUNDS BEFORE US. 5. DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE RAISED SEVERAL CONTENTIONS AGAINST THE ADDITIONS SO MADE. THE LD. COUNSEL FOR THE ASSESSEE ALSO FILED A BRIEF GIST OF THE ARGUMENTS M ADE BEFORE US IN WRITING WHICH ARE REPRODUCED HERE-IN-UNDER:- ADDITION OF RS. 5 LAKHS ON ACCOUNT OF INVESTMENT I N PURCHASE OF BUILT UP SCO ON BASIS OF REPORT OF VALU ATION OFFICER IS NOT PERMISSIBLE ON THE FOLLOWING REASONS :- 1. NO EVIDENCE OR MATERIAL AVAILABLE ON RECORD & OPINION OF VALUATION OFFICER WOULD NOT BE ADEQUATE MATERIAL FOR AO TO CONSTITUTE EVIDENCE IN ABSENCE OF POSITIVE EVIDENCE. CIT VS. AGILE PROPERTIES PVT LTD. 107 DTR 201 (DELHI). 2. BOOKS OF ACCOUNTS HAS BEEN ACCEPTED AND THEREFORE IN VIEW OF SUPREME COURT DECISION IN CASE SARGAM CINEMA VS. CIT 328 ITR 513. NO REFERENCE U/S 142-A CAN BE MADE. THIS VIEW HAS BEEN ACCEPTED BY JURISDICTIONAL PUNJAB & HARYANA HIGH COURT VS. NIRPAL SINGH, CIT-2, JALANDHAR, ITA NO. 522 OF 2009. 5 3. THE VALUATION DIFFERENCE IS LESS THAN 10% AND IN VIEW OF JURISDICTIONAL CHANDIGARH ITAT BENCH DECISION IN CASE OF ACIT SANGRUR VS. M/S STANDARD COMBINES PVT. LTD. ITA NO. 912 OF 2010. THE CIT (A) -2 CHANDIGARH HAS ACCEPTED THE SALE CONSIDERATION IN CASE OF SELLER OF THE PROPERTY M/S GS SHEKHON HUF APPEAL NO. 691/2011-12 (PB 50-54). 4. VALUER REPORT IS DEFECTIVE HE HAS ARBITRARILY TAKEN INCREASE IN VALUE @ 20% PER YEAR AND WRONGLY ADDED 12% FOR PRIME LOCATION. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND GONE THROUGH THE DOCUMENTS RE FERRED TO BEFORE US. 8. THE FACTS WHICH ARE NOT IN DISPUTE IS THAT THE S AID PROPERTY, BEING SCO NO. 157-158, SECTOR 37-C, CHANDIGARH WAS PURCHA SED BY THE ASSESSEE ALONG WITH HIS TWO BROTHERS FOR A TOTAL CONSIDERATI ON OF RS. 1,70,00,000/- AND HIS SHARE IN THE IMPUGNED PROPERTY WAS 1/3 RD . THE DVO, ON A REFERENCE MADE U/S 142A, VALUED THE SAID PROPERTY A T RS. 1,85,00,000/-. THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN REJECTED. THE ASSESSING OFFICER ADOPTED THE VALUATION BY THE DIST RICT VALUATION OFFICER, AS THE CONSIDERATION PAID AND T HE SHARE OF THE ASSESSEE IN THE DIFFERENCE AMOUNT OF RS. 15 LAKHS, BEING RS. 5 LACS 6 WAS ADDED IN THE HANDS OF THE ASSESSEE AS INVESTMEN TS MADE OUT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE FIRST CONTENTION / ARGUMENT RAISED BY THE LD. C OUNSEL FOR THE ASSESSEE AGAINST THE SAID ADDITION WAS THAT THE REFERENCE MA DE TO THE DVO U/S 142A OF THE ACT WAS BAD SINCE THE BOOKS OF ACCOUNT HAD N OT BEEN REJECTED BEFORE MAKING A REFERENCE. THE LD. COUNSEL FOR THE ASSESSE E RELIED UPON THE DECISION OF THE APEX COURT IN THE CASE OF SARGAM CI NEMA VS. ITO 328 ITR 513(SC) AND THE DECISION OF THE HON'BLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF NIRPAL SINGH VS. CIT IN ITA NO. 522 OF 2009 (O&M) DATED 16.9.2013 IN THIS REGARD. THE LD. DR RELIED ON THE ORDER OF THE CIT(A) ON THIS ACCOUNT. 9. WE FIND MERIT IN THIS CONTENTION RAISED BY THE L D. COUNSEL FOR THE ASSESSEE. SECTION 142A OF THE ACT , WHICH CONFERS P OWERS ON THE AOS TO MAKE REFERENCE TO DVOS FOR ESTIMATING THE VALUE OF ANY ASSET OR PROPERTY AND AS PER WHICH REFERENCE IN THE PRESENT CASE HAS BEEN MADE, AS IT STOOD FOR THE RELEVANT PREVIOUS YEAR, WAS INTERPRETED BY THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA(SUPRA) AND THE J URISDICTIONAL HIGH COURT IN THE CASE OF NIRPAL SINGH(SUPRA), AND IT H AS BEEN CATEGORICALLY HELD THAT NO REFERENCE COULD HAVE BEEN MADE TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT AND RELIANCE PLACED ON THE REP ORT OF THE DVO IN SUCH CIRCUMSTANCES WAS MISCONCEIVED. THE HON'BLE JURISDI CTIONAL HIGH COURT IN THE CASE OF NIRPAL SINGH (SUPRA) HAS HELD AS U NDER:- 5. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE FIND MERIT IN THE SUBMISSION MADE BY LEARNED COUNSE L FOR THE ASSESSEE. 7 6. IT WAS NOT DISPUTED BY THE LEARNED COUNSEL FOR THE REVENUE THAT THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE WERE NEVER REJECTED. THE APEX COURT IN SARGAM CINEMA'S CASE (SUPRA) HELD THAT THE ASSESSING AUTHORITY COULD NOT HAVE REFERRED THE MATTER TO THE DVO WHEN THERE WAS NO REJECTION OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT WAS OBSERVED AS UNDER:- IN THE PRESENT CASE, WE FIND THAT THE TRIBUNAL DECIDED THE MATTER RIGHTLY IN FAVOUR OF THE ASSESSEE INASMUCH AS THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSING AUTHORITY COULD NOT HAVE REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER (DVO) WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. IN THE PRESENT CASE, A CATEGORICAL FINDING IS RECORDED BY THE TRIBUNAL THAT THE BOOKS WERE NEVER REJECTED. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE HIGH COURT. IN THE CIRCUMSTANCES, RELIANCE PLACED ON THE REPORT OF THE DVO WAS MISCONCEIVED. SIMILAR VIEW WAS TAKEN IN CHOHAN RESORTS, GOODLUCK AUTOMOBILES (P) LIMITED AND LUCKNOW PUBLIC EDUCATIO NAL SOCIETY'S CASES (SUPRA). 7. IN VIEW OF THE ABOVE, THE SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE. ACCORDINGLY, THE APPEAL IS ALLOWED. 10. THE FACTS OF THE PRESENT CASE DEMONSTRATE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE AFORESAID DECISIONS OF THE APEX COURT AND THE JURISDICTIONAL HIGH COURT, SINCE THE REFERENCE TO 8 THE DVO IN THE PRESENT CASE WAS MADE WITHOUT REJECT ING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT IS PERTINENT TO POINT OUT THAT IT WAS ONLY BY VI RTUE OF AMENDMENT BROUGHT ABOUT BY THE FINANCE ACT 2014 W.E.F. 1.4.2014, THAT SUB SECTION (2) WAS ADDED TO SECTION 142A, DOING AWAY WITH THE REQUIREM ENT OF REJECTION OF BOOKS OF ACCOUNT BEFORE MAKING A REFERENCE TO THE D VO. THE AMENDED PROVISIONS HAVING BEEN BROUGHT ON THE STATUTE W.E.F . FROM 1.10.2014, THE SAME IS NOT APPLICABLE IN THE PRESENT CASE AND THE PROVISIONS WHICH EXISTED FOR THE RELEVANT PREVIOUS YEAR HAVING BEEN INTERPRE TED BY THE APEX COURT AND THE JURISDICTIONAL HIGH COURT IN THE ABOVE ST ATED MANNER, WE HOLD THAT THE REFERENCE MADE TO THE DVO IN THE PRESENT C ASE WAS MISCONCEIVED. NO ADDITION THEREFORE COULD HAVE BEEN MADE, BY RELY ING UPON THE REPORT OF THE DVO. FOR THIS REASON ALONE, WE DELETE THE ADDIT ION MADE IN THE PRESENT CASE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PLOT OF RS. 5 LACS. 11. THE ASSESSEE FURTHER CONTENDED THAT THE DIFFERE NCE IN VALUATION OF THE PROPERTY AS DETERMINED BY THE DVO AND THE ACTUAL PU RCHASE CONSIDERATION PAID, WAS LESS THAN 10%. THE LD. COUNSEL FOR THE AS SESSEE POINTED OUT THAT WHILE THE SAID PROPERTY WAS PURCHASED FOR RS. 1,70, 00,000/-, THE DVO HAD VALUED IT AT RS. 1,85,00,000/-. THE DIFFERENCE THUS AMOUNTED TO RS. 15 LAKHS WHICH WAS LESS THAN 10% OF THE PURCHASE CONSI DERATION ACTUALLY PAID. THE LD. COUNSEL STATED THAT IN SUCH CIRCUMSTANCES W HERE THE DIFFERENCE WAS NEGLIGIBLE, NO ADDITION ON ACCOUNT OF UNEXPLAINED I NVESTMENT WAS WARRANTED. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF ACIT, SANGRUR VS. M/S STANDARD COMBINES PVT.LTD. IN ITA NO. 912/CHD/2010 AND C.O. NO. 32/CHD/2010 9 DATED 11.4.2012 IN THIS REGARD. THE LD. DR RELIED ON THE ORDER OF THE CIT(A). 12. WE ARE IN AGREEMENT WITH THE LD. COUNSEL FOR TH E ASSESSEE ON THIS COUNT ALSO. UNDENIABLY, THE DIFFERENCE IN THE VALUA TION OF THE DVO AND THE ACTUAL PURCHASE CONSIDERATION IS NOT MATERIAL, BEIN G LESS THAN 10% OF THE PURCHASED CONSIDERATION ACTUALLY PAID, AS POINTED O UT BY THE LD. COUNSEL FOR THE ASSESSEE. THE ITAT CHANDIGARH BENCH IN THE CASE OF ACIT, SANGRUR VS. M/S STANDARD COMBINES PVT. LTD.(SUPRA), HAS HEL D THAT VALUATION BY DVOS BEING BASED ON ESTIMATES ONLY, THERE ARE BOUN D TO BE DIFFERENCES BETWEEN THE VALUE ADOPTED BY THE DVO AND THE ACTUAL PURCHASE CONSIDERATION. AND IF SUCH DIFFERENCES ARE LESS THA N 15% THEY CAN BE SAID TO BE BONAFIDE DIFFERENCES, BEING TOO MEAGER, AND C AN THEREFORE BE IGNORED FOR THE PURPOSE OF ADDITION. THE RELEVANT FINDINGS OF THE ITAT AT PARAS 12 & 13 OF THE ORDER IS AS UNDER:- 12. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 4,05,759/- ON ACCOUNT OF DIFFERENCE IN INVESTMENT IN BUILDING AS SHOWN BY THE ASSESSEE AND AS DETERMINED BY THE DVO. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSERVING THAT THE COURTS HAVE HELD DIFFERENCE UPTO 10% TO 15% HAVE TO BE IGNORED AND NO ADDITION IS CALLED FOR. THE CIT(A) OBSERVED THAT ACTUAL EXPENDITURE BASED ON PROPER VOUCHERS AMOUNTING TO RS. 1,11,68,000/- HAS BEEN DEBITED IN THE BOOKS OF ACCOUNT IN THE YEAR UNDER CONSIDERATION FOR BUILDIN G AT BARNALA AGAINST WHICH THE DVO HAS MADE VALUATION AT RS. 1,15,73,759/-, A DIFFERENCE OF 3.5 % ONLY. SIMILARLY, THE INVESTMENT IN BUILDING AT SHAHPUR UNIT, BADDI AS PER BOOKS OF ASSESSEE IS RS. 10 62,23,884/- AGAINST VALUATION BY DVO AT RS. 60,18,292/-. ACCORDING TO CIT(A), THE CONSOLIDATED DIFFERENCE OF RS. 2,00,367/- ON CONSOLIDATED INVESTMENT AS SHOWN BY ASSESSEE AT RS. 1,93,91,684/ - AND AS DETERMINED BY DVO AT RS. 1,75,92,051/- IS HARDLY 1.14% OF THE VALUATION MADE. THE CIT(A) TOOK THE VIEW THAT DIFFERENCE UP TO 10% TO 15% HAVE TO BE IGNORED AND NO ADDITION IS CALLED FOR. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FINDINGS GIVEN BY CIT(A) ON THIS ISSUE IS TENABLE I N VIEW OF THE DECISION OF HON'BLE PATNA HIGH COURT IN THE CASE OF BIMLA SINGH V CIT (MISC. APPEAL NO. 46/2002, DATE OF DECISION 22.10.2008) (2009) 1 SET 102, WHEREIN IT HAS BEEN HELD AS UNDER:- IN VALUATION OF PROPERTY, BONAFIDE DIFFERENCE IS BOUND TO OCCUR. DETERMINATION OF VALUE OF PROPERTY BY A VALUER IS GENERALLY A MATTER OF ESTIMATE BASED ON SOME EXTENT ON GUESS AND DESPITE UTMOST BONAFIDE, THE ESTIMATION OF THE VALUE OF THE HOUSE IS BOUND TO VARY. DIFFERENCE BETWEEN THE COST OF CONSTRUCTION ESTIMATED BY THE DEPARTMENT VALUER AND THE COST DISCLOSED BY THE ASSESSEE IS BEING LESS THAN 15%, THE SAID DIFFERENCE IS SO MEAGER THAT ONE CAN ASSUME IT TO BE BONAFIDE DIFFERENCE, FIT TO BE IGNORED FOR THE PURPOSE OF ADDITION. NO OTHER CONTRARY DECISION OF ANY COURT WAS BROUGHT TO OUR NOTICE BY THE LD. DR. RESPECTFULLY FOLLOWIN G THE JUDGMENT OF THE HON'BLE PATNA HIGH COURT IN THE CASE OF BIMLA SINGH V CIT (SUPRA), WE UPHOLD THE ORDER OF CIT(A) AND DISMISS GROUND NO.2 OF THE APPEAL. 11 13. IN VIEW OF THE SAME, SINCE THE DIFFERENCE IN TH E PRESENT CASE HAS BEEN FOUND TO BE LESS THAN 10|%, IT AS A BONAFIDE D IFFERENCE AND CAN BE IGNORED FOR THE PURPOSE OF MAKING ADDITION. THE ADD ITION MADE IN THE PRESENT CASE IS, THEREFORE, LIABLE TO BE DELETED FO R THIS REASON ALSO. 14. THE LD. COUNSEL FOR THE ASSESSEE RAISED OTHER C ONTENTIONS ALSO AGAINST THE ADDITION MADE BUT SINCE WE HAVE ALREADY DELETED THE ADDITION ON ACCOUNT OF TWO CONTENTIONS RAISED BEFORE US AS A BOVE, WE DO NOT DEEM IT NECESSARY TO DEAL WITH THE OTHER CONTENTIONS ,WHICH WOULD MERELY BE AN ACADEMIC EXERCISE. IN VIEW OF THE ABOVE, GROUND NOS. 1, 2 AND 3 OF TH E ASSESSEE ARE ALLOWED. 15. GROUND NOS. 4 & 5 RAISED BY THE ASSESSEE ARE IN TERLINKED AND ARE ON THE SAME ISSUE AND, THEREFORE, ARE BEING DEALT TOGE THER. THE SAID GROUNDS READ AS UNDER:- 4. THAT THE ID CIT(A) HAS WRONGLY SUSTAINED ADDITION OF RS. 14,30,535/- ON ACCOUNT OF REVISED VALUATION OF STOCK IN TRADE BY THE VALUER DURING THE COURSE O F ASSESSMENT PROCEEDINGS & HE FAILED TO CONSIDER THE ACTUAL AVERAGE LABOUR CHARGES PAID BY APPELLANT & ALSO FAILED TO CONSIDER THE FACT THAT THE APPELLANT HAS CONSISTENTLY FOLLOWED THE WEIGHTE D AVERAGE COST FOR THE VALUATION OF STOCK & WHEREAS THE VALUER HAS VALUED THE ENTIRE STOCK INCLUDING EXCESS STOCK AT MARKET PRICE AS ON DATE OF SURVEY. THE LD CIT (A) & ASSESSING OFFICER FAILED TO ADDRESS THE DEFECT IN VALUATION REPORT POINTED OUT 12 BY APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. WITHOUT PREJUDICE TO GROUND NO 4, THAT THE CIT{ A) HAS WRONGLY UPHELD THE ACTION OF ASSESSING OFFICER WHO HAS ADDED 5% TOWARDS LABOUR CHARGES WHILE DETERMINING THE MARKET PRICE OF STOCK IN TRADE AS O N DATE OF SURVEY BUT FAILED TO GIVE RELIEF OF SUCH LABOUR CHARGES AGAINST THE SALES RECORDED BY APPELLANT AFTER DATE OF SURVEY. 16. IN THE SAID GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ADDITION MADE ON ACCOUNT O F REVISED UPWARD VALUATION OF STOCK IN TRADE, FOUND DURING THE COURS E OF SURVEY. 17. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT DURING THE COURSE OF SURVEY THE INVENTORY OF STOCK FOUND VIS A VIS THE S TOCK AS PER THE BOOKS OF ACCOUNTS WERE TALLIED AND A DISCREPANCY OF RS.1,15, 86,000/- FOUND.THE SAME WAS SURRENDERED BY THE ASSESSEE AND DISCLOSED IN HIS RETURN OF INCOME. THEREAFTER, DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND FROM THE SURVEY FOLDER THAT THE STOCK INVENT ORY OF THE DIFFERENT ITEMS OF GOLD ORNAMENTS LYING AT THE BUSINESS PREM ISES OF THE ASSESSEE ON THE DATE OF SURVEY WAS VALUED BY THE DISTRICT VALUE R AT RS.2,86,10,712/-, WITHOUT INCLUDING MAKING CHARGES OF THE GOLD ORNAME NTS. THE FACT OF THE NON INCLUSION OF MAKING CHARGES WAS CONFIRMED BY RE CORDING THE STATEMENT OF THE REGISTERED VALUER DURING THE COURSE OF ASSES SMENT PROCEEDINGS. THE ASSESSEE WAS THEREAFTER GIVEN AN OPPORTUNITY TO DEM ONSTRATE AS TO WHY ADDITION ON ACCOUNT OF SAME SHOULD NOT BE MADE. THE DETAILED REPLY IN THIS REGARD WAS FILED BY THE ASSESSEE WHICH IS REPRODUCE D AT PARA 2.4 OF THE 13 ASSESSMENT ORDER. THE ASSESSING OFFICER REJECTED TH E CONTENTION RAISED BY THE ASSESSEE AND THEREAFTER, ADOPTING A RATE OF 5% OF THE VALUE OF GOLD AS MAKING CHARGES, WORKED OUT THE ADDITION ON ACCOUN T OF THE SAME TO BE RS. 14,30,535/-. THE SAME WAS, THEREFORE, ADDED TO THE VALUE OF STOCK AND ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE. 18. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO UPHELD THE ORDER OF THE ASSESSING OFFICER. 19. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RAI SED SEVERAL CONTENTIONS / ARGUMENTS AGAINST THE SAID ADDITION AND FILED A B RIEF GIST OF THE ARGUMENTS SO MADE, WHICH ARE AS UNDER:- THE ASSESSING OFFICER HAD WRONGLY ENHANCED THE MAR KET VALUE OF ENTIRE STOCK AT THE TIME OF SURVEY BY 5% (RS.143 0535/- ) AND IS NOT JUSTIFIED FOR THE FOLLOWING REASONS:- 1. THE VALUER AT THE TIME OF SURVEY VALUED THE TOTAL STOCK FOUND INCLUDING THE BOOK STOCK AT THE PREVAIL ING MARKET PRICE AS ON DATE OF SURVEY IGNORING THE FACT THAT VALUE OF BOOK STOCK SHOULD BE TAKEN AS PER BOO KS & ONLY THE EXCESS STOCK CAN BE VALUED AT REALIZABLE VALUE. 2. THE BOOK VALUE OF BOOK STOCK OF ORNAMENTS MADE IN GOLD (OF 22CT & 18CT) WAS RS. 11130582/- BUT WRONGLY VALUED AT RS.12478179/- BY TAKING THE MARKET VALUE OF GOLD AS ON DATE OF SURVEY & THUS ALREADY THERE WAS EXCESS VALUATION OF RS.1347597/-. 3. THE AO HAS IGNORED THE VITAL FACT THAT THE STOCKS C AN BE VALUED AT LOWER OF COST OR NET REALIZABLE VALUE AS 14 PER METHOD OF VALUATION ADOPTED BY APPELLANT BUT ENTIRE STOCK WAS VALUED AT MARKET PRICE & FURTHER ENHANCED BY 5% ON ACCOUNT OF LABOUR CHARGES. 4. THE VALUE OF BOOK STOCK OF RS 17024912/- AS ON DATE OF SURVEY INCLUDES THE MATERIAL & LABOUR AS ASSESSE E HAD MOSTLY PURCHASED BOUGHT OUT ORNAMENTS & WHATEVER THE LABOUR CHARGES WERE PAID ON SELF MADE ORNAMENTS WERE INCLUDED IN THE COST THEREOF AND INCLUDED IN VALUE OF RS.17024912/-. 5. THE ASSESSEE HAS BEEN VALUING HIS INVENTORY AT LOWE R OF COST OR NET REALIZABLE VALUE SINCE INCEPTION & I T IS IMPORTANT TO NOTE THAT NO ONE CAN IMAGINE THAT AT T HE TIME OF REALIZATION COST OF LABOUR CAN BE RECOVERED WHEREAS IT CAN BE RECOVERED AT THE TIME OF SALE ONL Y TO CUSTOMERS IN ORDINARY COURSE OF BUSINESS. 6. IF THE ARGUMENT OF AO IS ACCEPTED I.E ENTIRE STOCK IS TO BE VALUED AT MARKET RATE + LABOUR CHARGES THEN INDIRECTLY HE HAS TAKEN SALE VALUE OF ALL STOCK WHI CH SHALL BE SOLD IN FUTURE & IN THAT CASE NO GROSS PRO FIT WILL BE THERE AND ONLY PRICE VARIATION WILL BE ACCOUNTED AT THE TIME OF SALE. THUS PRACTICALLY HE HAS IGNORED THE COST OF STOCK AND HAD TAXED THE FUTURE PROFIT WHICH IS YET TO BE EARNED. 7. THE AO HAS TAKEN 5% LABOUR CHARGES ON ENTIRE STOCK & FOR ARGUMENT SAKE HE CAN TAKEN MARKET VALUE OF EXCESS STOCK AND ADD 5% LABOUR CHARGES THEREON WHICH COMES TO RS.579300/- (5% OF RS.11586000/-) THOUGH THE ACTUAL LABOUR CHARGES INCURRED WERE 325815.00 ONLY WHEREAS THE VALUER & ASSESSING OFFICER HAD ALREADY TAKEN EXCESS VALUATION OF RS.1347597/- & THEREFORE THERE IS NO FURTHER SCOPE OF 15 ADDITION ON THIS ISSUE. 8. AO HAS ACCEPTED THE VALUE OF CLOSING STOCK AS ON 31 - 03-2009. HE IGNORED THAT THE SALE POST SURVEY WAS R S 12056541/- & THE APPELLANT HAS REALIZED PROFIT ON THIS SALE. IF COST (OPENING STOCK) IS INCREASED AFT ER SURVEY THEN GROSS PROFIT SHALL BE DECREASED TO THE EXTENT OF INCREASE IN OPENING STOCK ON ACCOUNT OF LABOUR CHARGES. 20. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORD ER OF THE CIT(A). 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS REFERRED TO BEFORE US. THE FACTS RELEVANT FOR ADJUDICATING THE ISSUE BEFORE US AND WHICH ARE NOT DISPUTED ARE JEWELLERY FOUND ON THE DATE OF SURVEY WAS VALUED AT RS.2,86,10,712/-.THE SAME IS EVIDENT FROM THE VALUATION REPORT AT PAGE N O.56 &57 IN THE PAPER BOOK FILED BY THE ASSESSEE.THE STOCK OF JEWELLERY AS PER BOOKS OF THE ASSESSEE AMOUNTED TO RS.1,70,24,912/-.THE EXCESS ST OCK FOUND OF RS.1,15,86,000/- WAS SURRENDERED BY THE ASSESSEE . THE ONLY ISSUE BEFORE US PERTAINS TO ADDITION MADE BY REVISING THE VALUE OF JEWELLERY FOUND BY INCLUDING THEREIN MAKING CHARGES @ 5% OF THE VALUE OF JEWELLERY. THE FIRST ARGUMENT RAISED BY THE LD. COUNSEL FOR T HE ASSESSEE WAS THAT THE DIFFERENCE IN VALUATION OF STOCK BY THE VALUER ON T HE DATE OF SURVEY AND THAT IN THE BOOKS OF ACCOUNTS, WHICH AMOUNTED TO RS . 1,15,86,000/-, HAD BEEN SURRENDERED BY THE ASSESSEE TO BUY PEACE OF MI ND. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE STATEMENT RECORDED DURING SURVEY, MORE 16 SPECIFICALLY TO QUESTION NO. 14 PUT TO HIM AND HIS REPLY TO THE SAID QUESTION MAKING THE AFORESAID SURRENDER PLACED AT PAPER BOOK PAGE NO.32. THE LD. COUNSEL THEREAFTER STATED THAT THE DIFFERENCE IN ST OCK WHICH HAD BEEN WORKED OUT WAS INCORRECT SINCE THE STOCK OF GOLD OR NAMENTS FOUND ON THE DATE OF SURVEY HAD BEEN VALUED APPLYING THE MARKET VALUE OF GOLD ON THAT DATE WHEREAS ONLY THE EXCESS STOCK FOUND SHOULD HAV E BEEN SO VALUED. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON ACCO UNT OF THIS METHOD OF VALUATION ADOPTED BY THE VALUATION OFFICER, THE VAL UATION HAD BEEN WORKED OUT AT A HIGHER FIGURE OF RS. 13,47,597/-. A COPY O F THE VALUATION OF INVENTORY DONE AT THE TIME OF SURVEY WAS PLACED BE FORE US AT PAPER BOOK PAGES 55 TO 57 AND CALCULATION OF THE EXCESS VALUAT ION DONE BY THE REGISTERED VALUER ON ACCOUNT OF VALUING THE ENTIRE GOLD ORNAMENTS FOUND AT THE MARKET RATE ON THE DATE OF SURVEY WAS ALSO PLAC ED AT PAPER BOOK PAGE NO. 87. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE , CONTENDED THAT THE ASSESSEE HAD ALREADY MADE EXCESS SURRENDER TO THE T UNE OF RS. 13,47,597/-. LD COUNSEL FOR THE ASSESSEE THEREAFTER CONTENDED TH AT LABOUR CHARGES IF ANY COULD HAVE BEEN ADDED ONLY TO THE VALUE OF EXCESS S TOCK FOUND DURING SURVEY SINCE THE STOCK AS PER BOOKS ALREADY INCLUDE D THE SAME. LD COUNSEL POINTED OUT THAT THE LABOUR CHARGES SO WORKED OUT T O RS 5,79,300/-(5% OF 1,15,86,000/-),AND THE ASSESSEE HAVING ALREADY MADE EXCESS SURRENDER OF RS.13,47,597/-THERE WAS NO OCCASION TO MAKE ANY FU RTHER ADDITION. 22. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORD ERS OF THE CIT(A) AND CONTENDED THAT MAKING CHARGES HAVING NOT BEEN INCLU DED IN THE VALUE OF JEWELLERY FOUND DURING SURVEY, THE ADDITION MADE HA D BEEN RIGHTLY UPHELD BY THE LD. CIT(A). 17 23. WE FIND MERIT IN THE CONTENTIONS OF THE LD. CO UNSEL FOR THE ASSESSEE. IT IS NOT DENIED THAT THE ENTIRE JEWELLERY ON THE D ATE OF SURVEY WAS VALUED BY THE REGISTERED VALUER AT THE PREVAILING MARKET RATE OF GOLD ON THAT DATE. THE REGISTERED VALUER HAS CONFIRMED THIS FACT IN HI S STATEMENT RECORDED DURING ASSESSMENT PROCEEDINGS WHICH IS REPRODUCED I N THE ASSESSMENT ORDER. AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FO R THE ASSESSEE, THE STOCK ALREADY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE WAS NOT REQUIRED TO BE VALUED AT THE MARKET PRICE AND IT WAS ONLY TH E DIFFERENCE OF STOCK OR THE EXCESS STOCK FOUND AT THE ASSESSEE PREMISES WHI CH COULD BE VALUED AT THE MARKET PRICE. THE LD. COUNSEL FOR THE ASSESSEE FILED THE WORKING OF THE OVER VALUATION DONE BY THE VALUATION OFFICER WHICH WE FIND HAS NOT BEEN CONTROVERTED BY THE LD. DR. THE ASSESSEE HAVING SU RRENDERED THE ENTIRE DIFFERENCE OF STOCK WORKED OUT UNDOUBTEDLY HAS MADE EXCESS SURRENDER TO THE EXTENT OF RS.13,47,597/- ALSO WE AGREE WITH THE CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE THAT THE LABOUR CHARGES COULD HAVE BEEN ADDED TO THE VAL UE OF EXCESS STOCK FOUND ONLY. WE FIND THAT THE ASSESSEE HAS ALL ALONG CONTENDED THAT THE VALUE OF STOCK AS PER BOOKS INCLUDED LABOUR CHARGES AND THIS FACT HAS NOT BEEN CONTROVERTED BY THE REVENUE. THERE IS NO FINDI NG THAT THE VALUATION OF STOCKS AS PER BOOKS DID NOT INCLUDE LABOUR CHARGES. IN FACT THERE IS NO WHISPER ON THE METHOD OF VALUATION ADOPTED BY THE A SSESSEE AS PER ITS BOOKS OF ACCOUNTS. IN SUCH CIRCUMSTANCES, THE ADDIT ION ON ACCOUNT OF LABOUR CHARGES IN ANY CASE WOULD HAVE AMOUNTED TO R S.5,79,300/- (BEING 5%OF THE EXCESS STOCK FOUND OF RS.1,15,86,000/-)AS PER THE METHOD ADOPTED BY THE AO AND THE ASSESSEE HAVING ALREADY MADE EXCE SS SURRENDER OF 18 RS.13,47,597/- ,AS HELD ABOVE,WE FIND NO REASON TO MAKE ANY ADDITION ON ACCOUNT OF LABOUR CHARGES. MOREOVER, UNDENIABLY, THE ASSESSEE HAD MADE SURREN DER ON ACCOUNT OF THE DIFFERENCE IN STOCK OF JEWELLERY, TO BUY PEACE OF M IND, WHICH IS EVIDENT FROM THE REPLY TO THE QUESTION POSED BEFORE HIM AN D REPRODUCED AT PAPER BOOK PAGE NO.32 AS UNDER;- Q.NO. 14 DURING THE COURSE OF SURVEY INVENTORY OF STOCK HAS BEEN PREPARED BY THE REGISTERED VALUER SHRI ARUN TALWAR SCO 112, SECTOR 17-C, CHANDIGARH IN YOUR PRESENCE. AS PER THE STOCK INVENTORY PREPARED THE VALUE OF STOCK AS ON TODAY COMES TO RS. TWO CRORE 86 LAC 10 THOUSAND 712. (2,86,10,712/-) WHEREAS, AS PER TRADING ACCOUNT PREPARED BY YOU ON TODAY, THE VALUE OF CLOSING STOC K AS PER BOOKS OF ACCOUNT IS RS. 1,70,24,910/- (ONE CRORE SEVENTY LAC TWENTY FOUR THOUSAND NINE HUNDRED TEN ONLY). THUS THERE IS A EXCESS STOCK OF RS. 1,15,85,802/-. PLEASE EXPLAIN THE DIFFERENCE. ANS: I HEREBY OFFER ADDITIONAL INCOME OF RS. 1,15,86,000/- IN ADDITION TO MY REGULAR INCOME ON ACCOUNT OF EXCESS STOCK FOUND AT OUR BUSINESS PREMISES DURING THE COURSE OF SURVEY U/S 133A OF THE I.T. ACT, 1961. THIS OFFER OF ADDITIONAL INCOME OF RS. 1,15,86,000/- IS TO BUY PEACE OF MIND AND ALSO TO AVOID LITIGATION WITH DEPARTMENT AND SUBJEC T TO NO PENAL ACTION UNDER THE INCOME TAX ACT. THE OFFER IS VOLUNTARILY AND WITHOUT ANY UNDER PRESSURE . I FURTHER UNDERTAKEN THAT I WILL NOT CONTEST THIS OFFER OF ADDITIONAL INCOME OF RS. 1,15,86,000/- BEFORE ANY APPELLATE AUTHORITY. 19 24. THE ASSESSEE HAVING SURRENDERED WHATEVER DIFFER ENCE WAS POINTED OUT TO HIM JUST TO BUY PEACE OF MIND, WITHOUT ADMITTING THAT THE DIFFERENCE WAS TRUE AND CORRECT, NO ADDITION COULD HAVE BEEN MADE ON ACCOUNT OF NON INCLUSION OF LABOUR CHARGES ESPECIALLY WHEN IT WAS CLEARLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE SURRENDER IN ANY CASE MADE WAS EXCESSIVE AND COVERED THE AMOUNT SOUGHT TO BE ADD ED ON ACCOUNT OF LABOUR CHARGES. IN VIEW OF THE SAME, WE DELETE THE ADDITION MADE O N ACCOUNT OF INCLUSION OF LABOUR CHARGES TO THE VALUE OF STOCK OF JEWELLER Y AMOUNTING TO RS. 14,30,535/-. 25. THE LD. COUNSEL FOR THE ASSESSEE RAISED OTHER CONTENTION ALSO AGAINST THE ADDITION MADE BUT SINCE WE HAVE ALREADY HELD TH E ADDITION TO BE DELETED ON ACCOUNT OF TWO CONTENTIONS RAISED BEFORE US AS A BOVE, WE DO NOT DEEM IT NECESSARY TO DEAL WITH THE OTHER CONTENTIONS SINCE IT WOULD MERELY BE AN ACADEMIC EXERCISE. IN VIEW OF THE ABOVE, GROUND NOS . 4 AND 5 OF THE ASSESSEES APPEAL ARE ALLOWED. 26. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2017 SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH JUNE, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 20