Shri Manob Aditya, L/R of Late Biman Kr. Aditya, Kolkata V. ITO, Ward - 50(4), Kolkata, Kolkata

ITA 846/KOL/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4669 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KRUEEL J
• Assessee Lawyers: SAUMITRA CHOUDHURY
• Keywords: Source of fund; Onus to prove
• Section: 143(3); 133(6); 147; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.846/KOL/2010 ASSESSMENT YEARS:2006-07 SHRI MANOB ADITYA 182, JESSORE ROAD, KOLKATA-700 074 [ PAN NO.ACJPA 1822 D ] / V/S . ITO WARD-50(4), 54/1 RAFI AHMED KIDWAI ROAD, KOLKATA-700 016 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SAUMITRA CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI RAJAT KUMAR KRUEEL, JCIT-DR /DATE OF HEARING 30-06-2016 /DATE OF PRONOUNCEMENT 10-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 28.01.2010. ASSE SSMENT WAS FRAMED BY ITO WARD-50(4), KOLKATA U/S 143(3) R.W.S 145(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.1 2.2008 FOR ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BY THE ASSESSEE OUT OF WHICH GROUND NO. 1 WAS NOT PRESSED AND, THEREFORE, THE SA ME IS DISMISSED AS NOT PRESSED. GROUND NO.5 IS OF GENERAL NATURE AND DOES NOT REQUI RE SEPARATE ADJUDICATION. 3. THE OTHER GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE AS UNDER:- 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) WAS WRONG IN CONFORMING THE ADDITION OF RS.11,99,525 TO TOTAL IN COME BEING ESTIMATED SALE OF PRICES OF THE SPACES OF THE BUILDING CONSTRUCTED AN D SOLD BY THE DECEASED ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 2 DURING HIS LIFE TIME, WITHOUT TAKING INTO CONSIDERA TION THE ARGUMENTS PLACED BEFORE HIM AND EVIDENCE ADDUCED BY THE APPELLANT. 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.18,79,155 TO TOTAL INCOME IN THE IMPUGNED ASSESSMENT ORDER AS AN ESTIMATED INCOME OF SALE PR OCEED OF A GODOWN, WITHOUT APPLICATION OF HIS MIND TO THE FACTS OF THE CASE AD ARGUMENTS PLACED BEFORE HIM. 4. FOR THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW IN SUSTAINING THE ADDITION OF RS.46,00,000 (FORTY-SIX LAKHS) WITHOUT TAKING INTO CONSIDERATION OF THE FACTS THAT THE LEARNED ASSESSI NG OFFICER MADE AN ADDITION OF RS.46,00,000 AS INVESTMENT IN THE NON-EXISTENT P ARTNERSHIP BUSINESS PARTLY UPON IRRELEVANT AND PARTLY UPON RELEVANT MATERIAL. SHRI SAUMITRA CHOUDHURY, LD. AUTHORIZED REPRESENTAT IVE APPEARED ON BEHALF OF ASSESSEE AND SHRI RAJAT KUMAR KUREEL, LD. DEPARTMEN TAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 4. ISSUE NO.2 RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE OF 11,99,525/- ON ACCOUNT OF ESTIMATING SALE PRICE FO R THE BUILDING SPACE. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT IN TH E INSTANT CASE HAS BEEN FRAMED BY AO ON THE LEGAL REPRESENTATIVES OF THE ASSESSEE. TH E ASSESSEE WAS ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION AND RENTAL OF THE PROPERTIES. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE LEGAL REPRESEN TATIVE DECLARING TOTAL INCOME OF 1,87,053/- ON 31.03.2007. THEREAFTER THE CASE WAS T AKEN UP FOR SCRUTINY AND ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED ON 11.07. 2007. THERE WAS ALSO SURVEY CONDUCTED ON 28.07.2006 U/S 133 OF THE ACT ON THE B USINESS PREMISES OF ASSESSEE. THE STATEMENT OF DECEASED ASSESSEE WAS ALSO RECORDED AN D CERTAIN DOCUMENTS WERE IMPOUNDED U/S 133 OF THE ACT. 5.1 THE ASSESSEE DURING THE YEAR HAS SHOWN SALES OF TOTAL AREA 9596.26 SQ.FT @ 750/- PER SQ.FT. AT A TOTAL SALE VALUE OF 71,97,195/-. IT WAS OBSERVED FROM THE DOCUMENTS IMPOUNDED DURING THE SURVEY PROCEEDING TH AT AS PER CONVEYANCE DEED ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 3 MARKED BKA/8 THE SALE PRICE WAS AT RS.900 PER SQ.FT IN THE WESTERN SIDE AND RS.815/- PER SQ.FT FOR THE EASTERN SIDE. HOWEVER, ASSESSEE HAS SHOWN SALE VALUE @ 750/- PER SQ.FT. THEREFORE, AO DURING THE ASSESSMENT PROCEEDI NGS OBSERVED THE DIFFERENCE IN THE SALE PRICE OF THE FLATS BETWEEN THE DOCUMENTS IMPOU NDED AND SHOWN IN THE INCOME TAX RETURN. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE LEGAL REPRESENTATIVE OF ASSESSEE. IN COMPLIANCE TO THE NOTICE, THE ASSESSEE SUBMITTED THAT ALL SALES WERE MADE THROUGH THE BROKER AND COMMISSION AT THE AVERAGE RA TE OF 10% TO 15% WAS TO BE MADE WHICH WAS ADJUSTED AGAINST THE SALE PRICE OF THE FL ATS. THE ACCOUNTANT OF ASSESSEE INSTEAD OF SHOWING THE COMMISSION EXPENSE AGAINST T HE SALE OF FLATS INDEPENDENTLY HAS ADJUSTED THE COMMISSION AMOUNT WITH THE AMOUNT OF S ALE OF THE FLATS BY MISTAKE. HOWEVER, THE AO DISREGARDED THE PLEA OF ASSESSEE ON THE GROUND THAT THE COMMISSION EXPENSE @ 10% TO 15% IS ON THE HIGHER SIDE AS EVEN THE ICIC HOME FINANCE GIVEN THE COMMISSION ONLY @ 2%. BESIDES THE ABOVE THE AO ALSO OBSERVED THAT AND GROSS PROFIT AND NET PROFIT SHOWN BY ASSESSEE IS 7% AND 2 % RESPECTIVELY. IN THIS SCENARIO HOW A BUSINESSMAN CAN OFFER A COMMISSION @ 10% TO 1 5% OF THE SALES AMOUNT. THE AO ALSO FURTHER OBSERVED THAT EVEN IT IS PRESUMED T HAT THE COMMISSION EXPENSE HAD BEEN INCURRED @ 15% EVEN THEN IT IS NOT ALLOWED ON ACCOUNT OF THE VIOLATION OF THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. IN VIEW OF THE ABOVE, AO HAS TAKEN THE SALE PRICE BY APPLYING AVERAGE RATE OF WESTERN AND EASTE RN SIDE WHICH ARE COMING FOR 875/- PER SQ. FT. (900 + 850)/2. ACCORDINGLY, TREAT ED THE SUM OF 11,99,525/-( 9596.26 * RS. 125) AS SUPPRESSED SALE AND ADDED TO THE TOTA L INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THAT AO DID NOT PRODUCE ANY CORROBORATIV E EVIDENCE TO PROVE THAT THE FLATS WERE SOLD AT A PRICE MORE THAN THE PRICE DISCLOSED BY ASSESSEE IN HIS RETURNED INCOME AND ALL THE SALE PROCEEDS ARE DULY SUPPORTED BY AGR EEMENT. HOWEVER, LD. CIT(A) DISREGARDED THE CLAIM OF ASSESSEE AND UPHELD THE AC TION OF AO BY OBSERVING AS UNDER:- IN FACT, DURING THE ASSESSMENT PROCEEDINGS, SH MAN OB ADITYA, LEGAL HEIR OF THE ASSESSEE DID NOT DENY OR DISPUTE THE FIGURE OF RS.950/- PER SQ.FT. AND OF RS.850/- PER SQ.FT. AS MENTIONED IN THE SAID AGREEM ENT. WHAT HE ONLY CLAIMED WAS THAT THE SAID RATE WAS LOADED WITH 10% TO 15% O N ACCOUNT OF BROKERAGE WHICH WAS TO BE DEDUCTED FROM THE SALE PRICE. HOWEV ER, HE COULD NOT ADDUCE ANY EVIDENCE OF ANY SUCH BROKERAGE PAID. FURTHER, T HE CLAIM OF 10% TO 15% OF ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 4 BROKERAGE IN CASE OF REAL ESTATE TRANSACTIONS IS AP PARENTLY UNREASONABLE AND ABNORMAL AS CLAIMED OF SUCH BROKERAGE UNREALISTICAL LY EXCESSIVE. IT IS AGAIN A MATTER OF COMMON KNOWLEDGE THAT IN THE REAL ESTATE BUSINESS THE RATE OF BROKERAGE GENERALLY RANGES IN BETWEEN 1% TO 3% OF T HE SALE PRICE. THE LEGAL HEIR OF THE ASSESSEE HAS NOT BEEN ABLE TO PUT FORWA RD ANY REASON OR EXPLANATION TO JUSTIFY THE CLAIM OF SUCH HIGH PERCENTAGE OF BRO KERAGE. IT IS A SETTLED PRINCIPLE THAT APPARENT SHALL BE TR EATED AS REAL UNLESS AND UNTIL PROVED OTHERWISE. FURTHER, THE ONUS IS UPON THE ASS ESSEE TO PRIMA-FACIE PROVE HIS CLAIM AND NOT FOR THE DEPARTMENT TO DISPROVE HI S CLAIM. IN THE INSTANT CASE, THE ASSESSEE (THE LEGAL HEIR) HAS FAILED TO ESTABLI SH HIS CLAIM WITH THE HELP OF ANY REASONABLE AND COGENT EVIDENCE. IN THE LIGHT OF THE ABOVE DISCUSSION, IN MY OPINION, THE CLAIM OF THE ASSESSEE CAN ONLY BE TERM ED AS FANCIFUL AND DEVOID OF ANY MERIT. THEREFORE, IN THE LIGHT OF THE ABOVE DIS CUSSION, THE ADDITION OF RS.11,99,525/- MADE BY THE AO IS CONFIRMED AND THES E GROUNDS OF APPEAL ARE DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 7. BEFORE US LD. AR FILED PAPER BOOK CONTAINING WRI TTEN SUBMISSIONS, WHICH IS RUNNING PAGES FROM 1 TO 88. THE LD. AR DREW OUR ATT ENTION ON PAGE 24 OF THE PAPER BOOK WHERE THE DETAILS OF THE PARTIES TO WHOM THE F LATS WERE SOLD WAS PLACED. LD AR FURTHER SUBMITTED THE RATE OF EACH FLAT WAS RANGING FROM @ 60.73 PER SQ. FT. TO 1538 PER SQ. FT. THE ALLEGATION OF AO THAT THE FLATS WER E SOLD FOR 850/- PER SQ. FT. AND 950/- PER SQ. FT. IS BASELESS. LD. AR STATED THAT A BOVE RATE WERE MENTIONED IN THE ADVERTISEMENT FOR THE SALE OF FLATS BUT IN ACTUALIT Y THE RATE OF FLATS WERE SOLD AT DIFFERENT RATE. IN THIS REGARD IT WAS PLEADED THAT THE LISTS OF PARTIES ALONG WITH THE ADDRESSES WITH THE AREA AND RATE PER SQ. FT WAS FURNISHED TO THE L OWER AUTHORITIES BUT NONE OF THEM HAS VERIFIED THE SAME BY ISSUING A NOTICE U/S. 133(6) O F THE ACT. THE AO HAS JUST APPLIED THE AVERAGE RATE ON HIS PREMISE AND CONJUNCTURE. HE PRAYED FOR THE DELETION OF AFORESAID AMOUNT. ON THE OTHER HAND, LD. DR SUBMITTED THAT AO HAS MAD E THE ADDITION ON THE BASIS OF CONVEYANCE DEED WHICH WAS IMPOUNDED DURING THE SURV EY PROCEEDINGS U/S 133 OF THE ACT. HE ALSO SUBMITTED THAT THE COMMISSION EXPENSES WERE OBSERVED BY AO AT A HIGHER RATE. LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 5 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT AO FOUND THE DIFFERENCE IN THE SALE PRICE OF THE FLATS AND ACCORDINGLY ADDED THE DIFFERENCE AMOUNT AS UNDISCLOSED INCOME OF ASSESSEE. THE AO IN HIS ASSESSMENT ORDER HAS ALSO RECORDED THAT SALE WAS MADE TO ONE SRI ARIMDAM PAL RESIDENT OF LABPUR BUS STAND, P.O. LABOUR, DIST. BARBHAM, WHEREIN THE FOLLOWING FACTS WAS RECORDED A T PAGE-3 OF ASSESSMENT ORDER, WHICH REPRODUCED BELOW:- AND WHEREAS THE UNDER STRICTLY FOLLOWING THE PRINC IPLES AS MENTIONED ABOVE, ADVERTISED / DECLARED IN THE MARKET FOR SALE OF THE FLATS SPECIALLY, DECLARING TOO THE RATES OF THE RESIDENTIAL FLATS AS FOLLOWS:- WESTERN SIDE FLATS @ RS.900/- (RUPEES NINE HUNDRE D ONLY) PEER SQ.F.T EASTERN SIDE FLATS @ 850/- (RUPEES EIGHT HUNDRED F IFTY ONLY) PER SQ.FT HOWEVER, BEFORE US LD. AR SUBMITTED THAT THERE WAS NO PARTY WITH THE ABOVE NAMED OF SRI ARIMDAM PAL AND HOW THE SAID PARTY HAS BEEN IDENTIFIED BY AO WAS BEYOND THE UNDERSTANDING. THE LD. AR HAS SUBMITTED PARTY-WISE DETAILS ALONG WITH THEIR RESPECTIVE ADDRESS, AREA OF FLATS PURCHASED BY THEM . THE FACT IS THAT ASSESSEE WAS EXPIRED ON 28.04.2006 AND THE RETURN WAS FILED BY H IS LEGAL HEIRS. WE FIND FROM THE FACTS THAT AO SHOULD HAVE ISSUED NOTICE U/S 133(6) OF THE ACT FOR CONFIRMING THE SALE PRICE OF FLATS AS HE WAS IN POSSESSION OF ALL THE D ETAILS OF THE PARTIES. WE FURTHER FIND THAT AO HAS TAKEN THE SALE PRICE WHICH WAS PUBLISHE D IN THE ADVERTISEMENT BY ASSESSEE. THE LD. DR HAS FAILED TO BRING ANYTHING CONTRARY TO THE ARGUMENT ADVANCED BY LD. AR. IN VIEW OF THE ABOVE, WE ARE OF THE OPIN ION THAT AO FAILED TO BRING ANY FACTUAL FACTS FOR BRINGING OUT THE ACTUAL SALE PRIC E OF THE FLATS. IN THE INSTANT CASE, THERE WAS NO NEED AT ALL TO APPLY THE AVERAGE RATE OF THE SALE PRICE OF THE FLATS AND AO SHOULD HAVE EXERCISED HIS POWER U/S 133(6) OF THE ACT FOR CONFIRMING THE SALE PRICE OF THE FLATS. WE FIND THAT IN THE INSTANT CASE, AO NEITHER ISSUED ANY NOTICE TO THE PARTIES NOR TO THE REGISTRATION AUTHORITY FOR CONFIRMING THE SA LE PRICE OF THE FLATS SOLD BY ASSESSEE. IN THE ABSENCE OF ANY FACTUAL EVIDENCE, WE ARE INCL INED TO REVERSE THE ORDER OF AUTHORITIES BELOW AND GROUND RAISED BY ASSESSEE IS ALLOWED. AO IS DIRECTED ACCORDINGLY. ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 6 9. NEXT ISSUE NO. 3 RAISE BY ASSESSEE IS AS REGARDS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY SUSTAINING THE DISAL LOWANCE OF 18,70,155/- ON ACCOUNT OF ESTIMATED INCOME OF SALE PROCEED OF GOD OWN. 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE IMPOUNDED DOCUMENTS BKA/08 AT PAGE 339 THAT THE CON VEYANCE AGREEMENT WAS SIGNED WITH A PERSON, SHRI SHIV PARAKASH MOHTA WHIC H CLEARLY SHOWS THAT THE GODOWN MEASURING 534.33 SQ.FT FOR @ 3500/- PER SQ.FT. WAS SOLD BY ASSESSEE. THE SALE PR ICE OF THE GODOWN WAS ADJUSTED WITH THE AMOUNT OF LOAN, VA LUE OF BUILDING MATERIALS SUPPLIED BY SHRI SHIV PARAKASH MOHTA IN ADDITION TO THE CASH SETTLEMENT FOR THE DIFFERENCE AMOUNT. HOWEVER, THE SALE AMOUNT WAS NOT SHOWN BY ASSESSEE IN HIS RETURNED INCOME. ACCORDINGLY, AO SOUGHT CLARIFICATI ON FROM ASSESSEE. IN COMPLIANCE TO NOTICE, ASSESSEE SUBMITTED THAT THE AGREEMENT WA S DULY EXECUTED WITH SHRI MOHTA BUT SALE WAS NOT COMPLETED AND ACCORDINGLY CONVEYAN CE DEED WAS NOT REGISTERED. THEREFORE, THE SALE AMOUNT WAS NOT SHOWN IN THE BOO KS OF ACCOUNT OF ASSESSEE. HOWEVER, AO DISREGARDED THE CLAIM AND ADDED THE SAI D SUM OF 18,70,155/- TO THE TOTAL INCOME OF ASSESSEE. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFORMED THE ACTION OF AO BY OBSERVING AS UNDER:- THE AO HAS CLEARLY MENTIONED THIS FACT IN THE ASSE SSMENT ORDER THAT THE SAID DEED IS A SIGNED ONE. THE NARRATION IN THE SAID AGR EEMENT CLEARLY STATES THAT THE VENDOR DELIVERED THE POSSESSION OF THE SAID PROPERT Y TO THE PURCHASER ON THE SIGNING OF THAT DEED AND THE PURCHASER WAS BEING PA ID HIS DUES ON THAT DATE THROUGH ADJUSTMENTS MENTIONED IN THAT DOCUMENT. IN THE LIGHT OF THE FACTS STATED ABOVE THE ADDITION MADE BY THE AO IS JUSTIFIED, THE REFORE, THE ADDITION OF RS.18,70,155/- IS CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 12. BEFORE US LD. AR DREW OUR ATTENTION ON PAGES 44 TO 53 OF THE PAPER BOOK AND SUBMITTED THAT SALE WAS NOT COMPLETED AND IT WAS JU ST AGREEMENT FOR SAID GODOWN. THE ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 7 ASSESSEE FURTHER SUBMITTED THAT ASSESSEE DID NOT RE COVER FULL CONSIDERATION AGAINST THE SALE OF SAID GODOWN AND NO POSSESSION WAS DELIVERED BY ASSESSEE DUE TO NON-PAYMENT OF FULL CONSIDERATION. THE LD. AR ALSO SUBMITTED TH AT AS PER THE ACCOUNTING CONVENTION OF THE ASSESSEE, THE SALE IS RECOGNIZED IN THE BOOK S OF THE ASSESSEE ONCE THE REGISTRY OF THE PROPERTY IS DONE. THE LD. AR ALSO SUBMITTED THE LETTER FROM MR. SHIV PRAKASH MOHTA TO JUSTIFY THE PROPERTY IN THE QUESTION WAS N OT DELIVERED. ON THE OTHER HAND, LD. DR SUBMITTED THAT AGREEMENT TO SALE UNDER IT ACT IS TREATED AS SALE OF PROPERTY THEREFORE, IT SHOULD HAVE BEEN SHO WN IN THE BOOKS OF ACCOUNT OF ASSESSEE. LD DR VEHEMENTLY SUPPORTED THE ORDER OF A UTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE, WE FIND THAT TH E AO MADE THE ADDITION OF 18,70,155/- ON ACCOUNT OF UNDISCLOSED INCOME OF TH E SALE OF GODOWN TO SHRI SHIV PRAKASH MOHTA OF A SPACE MEASURING 534.33 SQ.FT WHI CH WAS ALSO CONFIRMED BY THE LD. CIT(A). THE ADDITION WAS CONFIRMED BY THE LOWER AUTHORITIES BY OBSERVING THAT THE AGREEMENT WAS EXECUTED AND THE GODOWN DULY HAND ED OVER TO BUYER. IT WAS ALSO OBSERVED THAT SIGNIFICANT AMOUNT FOR SALE OF GODOWN WAS ADJUSTED TO THE LOAN AMOUNT AND BUILDING MATERIAL SUPPLIED BY SHRI MOHTA. HOWEV ER BEFORE US THE LD. AR SUBMITTED THAT THE POSSESSION OF THE GODOWN WAS NOT HANDED OVER TO THE BUYER. IN SUPPORT OF HIS CLAIM HE HAS FILED A CONFIRMATION LE TTER FROM THE BUYER WHICH IS PLACED ON RECORD. WE ALSO FIND THAT THE SAME FACT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE AO WITH REGARD TO THE HANDING OVER THE POSSESSI ON OF THE GODOWN. BUT THE AO HAS NOT CONSIDERED THE SAME AND MADE THE ADDITION ON TH E BASIS OF THE AGREEMENTS. IN OUR CONSIDERED VIEW THE AO SHOULD HAVE CONFIRMED THE TR ANSACTION BY ISSUING A NOTICE UNDER SECTION 133(6) OF THE ACT BEFORE MAKING ANY A DDITION. IT IS ALSO IMPORTANT TO NOTE THAT THE TRANSACTION WAS SETTLED BETWEEN THE A SSESSEE AND THE PARTY BY WAY OF ADJUSTING THE MAJOR AMOUNT WITH THE BUILDING MATERI AL SUPPLIED. IT IS UNDISPUTED THAT IN THE INSTANT CASE THE ASSESSMENT WAS FRAMED ON THE L EGAL HEIR OF THE DECEASED ASSESSEE. SO IT WOULD HAVE BEEN BIT DIFFICULT TO COLLECT THE REQUIRED INFORMATION FOR THE ASSESSMENT PURPOSE FROM THE LEGAL HEIR. THEREFORE I T WAS IMPERATIVE TO COLLECT THE REQUISITE INFORMATION FROM THE THIRD PARTY SOURCE W HICH THE AO FAILED TO DO SO. ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 8 WE ALSO FIND THAT THE AR HAS ALSO DISPUTED THE ADDI TION ON THE BASIS OF ACCOUNTING POLICY OF THE ASSESSEE FOR RECOGNIZING THE INCOME F ROM THE SALE OF THE PROPERTY I.E. INCOME IS RECOGNIZED IN THE BOOKS OF THE ASSESSEE O NCE THE REGISTRY OF THE PROPERTY IS COMPLETED. THE LD. DR HAS NOT BROUGHT ANYTHING TO C ONTROVERT THE ARGUMENTS OF THE LD. AR. IN THIS CONNECTION WE OBSERVE THAT THE ACCOUNT ING CONVENTION HAS BEEN FOLLOWED ON YEAR TO YEAR BASIS. WE ALSO FIND ICAI HAS ISSUED AN ACCOUNTING STANDARD 7 FOR RECOGNISING THE INCOME OF THE ASSESSEE WHICH REQUIR ES TO BE FOLLOWED ON YEAR TO YEAR BASIS. ON SIMILAR FACTS & CIRCUMSTANCES THE IDENTIC AL ISSUE WAS DECIDED BY THIS CO- ORDINATE BENCH IN FAVOUR OF ASSESSEE IN ITA NO. 1943-1944/KOL/2014 DATED 13.04.2016 FOR THE AYS 2003-04 & 2004-05 AND RELEVA NT EXTRACT IS REPRODUCED BELOW:- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE5RIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE LEA RNED AR. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE THEY ARE NO T REITERATED HEREIN FOR THE SAKE OF BREVITY. WE FIND THAT THE ASSESSEE HAS BEEN CONSISTENTLY RECOGNIZING REVENUE BASED ON PERCENTAGE OF COMPLETION OF WORK I N ACCORDANCE WITH THE AS7 ISSUED BY ICAIA. THE FOLLOWING CHART SUBMITTED BY T HE ASSESSEE WOULD CLEARLY EXPLAIN THE SCENARIO:- RUPAYAN UDYOG ITA NOS. 1943 & 1944/K/2014 ASST. YEAR SALES (RS) ADVANCE (RS) WORK-IN-PROGRESS (RS) 2001-02 21,56,600.00 81,63,120.00 77,57,8 96.00 2002-03 72,39,370.00 1,50,98,255.00 1,19,28,939. 00 2003-04 1,02,51,125.00 1,34,11,791.00 1,08,10,361.0 0 2004-05 1,05,74,033.00 1,53,43,975.00 1,19,51,978.0 0 2005-06 3,13,07,200.00 4,62,136.00 3,51,8 00.00 FROM THE CHART, IT COULD BE SEEN THAT THE ADVANCES RECEIVED FROM CUSTOMERS AS ON 3211.3.204 (ASST YEAR 2004-05) AMOUNTING TO RS.1 ,53,43,975/- HAD BEEN REDUCED TO RS.4,62,136/- AS ON 31.3.2005 AND SIMILA RLY THE SALES AS ON 31.3.2004 AMOUNTING TO RS.1,05,74,033/- HAS BEEN IN CREASED SUBSTANTIALLY TO RS.3,13,07,200/- AS ON 31.3.2005. THIS GOES TO PROV E THAT THE ADVANCES RECEIVED FROM CUSTOMERS HAS BEEN CONVERTED INTO SALES YEAR O N YEAR DEPENDING UPON THE PERCENTAGE OF COMPLETION OF WORK BY THE ASSESSEE. W E ALSO FIND FORM PAGE 85 OF THE PAPER BOOK CONTAINING SCRUTINY ASSESSMENT ORDER U/S. 1143(3) OF THE ACT FOR ASST YEAR 2005-06 DATED 31.12.2007 AND A RE-ASSESSM ENT ORDER FOR ASST YEAR 2005-06 FRAMED U/S. 143(3) READ WITH SECTION 147 OF THE ACT ON 28.12.2010 ENCLOSED IN PAGE 88 OF PAPER BOOK, THAT THE REVENUE RECOGNITION METHOD ADOPTED AND DECLARED BY THE ASSESSEE HAS BEEN ACCEP TED BY THE LEARNED AO AND NO ADDITION WAS MADE ON THAT ACCOUNT. WE FIND T HAT THE LEARNED CIT(A) ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 9 WITHOUT ANY BASIS AND IGNORED THE ACCOUNTS OF THE A SSESSEE AND RESORTED TO MAKE ESTIMATION OF PERCENTAGE OF WORK COMPLETED AND ERRONEOUSLY CONCLUDED THAT THE ENTIRE ADVANCES HAVE TO BE TREATED AS INCO ME IN THE ASST YEARS 2003-04 AND 2004-05. WE ARE CONVINCED WITH THE MANNER OF RE VENUE RECOGNITION BY THE ASSESSEE. HENCE THE ADDITIONS MADE BY THE LEARNED A O IN THIS REGARD AND HAVE NO HESITATION IN DELETING THE ADDITIONS MADE THEREO N. ACCORDINGLY THE GROUNDS 1 TO 3 RAISED BY THE ASSESSEE IN THIS REGARD ARE AL LOWED. TAKING A CONSISTENT VIEW IN THE ABOVE CITED ORDER O F THIS CO-ORDINATE BENCH, WE FIND THAT THE TRANSACTIONS FOR THE SALE OF AFORESAID GOD OWN HAD NOT BEEN COMPLETED AS THE POSSESSION WAS NOT HANDED OVER AND AS PER THE CONSI STENT ACCOUNTING POLICY OF THE ASSESSEE. HENCE, WE ARE INCLINED TO REVERSE THE ORD ER OF AUTHORITIES BELOW. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 14. NEXT ISSUE NO.4 RAISED BY ASSESSEE IN THIS APPE AL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY SUSTAINING THE DISAL LOWANCE OF 46 LAKH ON ACCOUNT OF INVESTMENT IN THE PARTNERSHIP FIRM. 15. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED FROM THE IMPOUNDED DOCUMENTS BKA/3 CONSISTING OF PARTNERSHIP DEED FOR THE BUSINESS UNDER THE NAME AND STYLE OF PRESIDENCY POLYCLINIC AND DIAGNOSTICS WHICH WAS EXECUTED ON 22.02.2006 AND WAS DULY REGISTERED WITH APPROPRI ATE AUTHORITY. THE AO OBSERVED FROM POINT 10 OF THE PARTNERSHIP DEED THAT ASSESSEE HAS MADE AN INVESTMENT OF 46 LAKH. ACCORDINGLY, AO SOUGHT CLARIFICATION FROM THE LEGAL REPRESENTATIVE OF ASSESSEE BY ISSUING SHOW CAUSE NOTICE. IN COMPLIANCE THERETO (LEGAL REPRESENTATIVE) SUBMITTED THAT THE PARTNERSHIP DEED WAS FORM WITH A VIEW TO T AKE LOAN FROM BANK AND SAID AMOUNT OF INVESTMENT WAS SHOWN IN THE DEED OF PARTN ERSHIP AS PER ADVICE OF CONCERNED BANK. THIS INVESTMENT WAS REQUIRED BY ASS ESSEE IN THE FORM OF CONTRIBUTION OF THE TOTAL PROJECT COST. THE ASSESSEE FURTHER SUB MITTED THAT THERE WAS NO INVESTMENT OF ANY KIND MADE IN THE DEED OF PARTNERSHIP FOR THE PURPOSE OF AFORESAID BUSINESS. HOWEVER, AO DISREGARDED THE CLAIM OF ASSESSEE BY OB SERVING THAT LIST OF INVENTORY WAS MADE AT THE TIME OF SURVEY. AS PER THE INVENTOR Y LIST MARKED BKA/7 HAS SHOWN LOT OF MACHINES WHICH WERE AVAILABLE WITH THE ASSES SEE. A PATIENT REGISTER WAS ALSO ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 10 FOUND IMPOUNDED AT THE TIME OF SURVEY MARKED AS BKA -3 AT PAGES 50 TO 60 OF THE PAPER BOOK. THE AO ALSO OBSERVED THAT THERE WAS A C ERTAIN CORRESPONDENCE BETWEEN THE MUNICIPAL CORPORATION AND ASSESSEE WITH REGARD TO CERTAIN MEDICAL SERVICES. IN VIEW OF THE ABOVE, AO OPINED THAT THERE WAS A BUSIN ESS OF POLYCLINIC OF ASSESSEE AND ACCORDINGLY AN INVESTMENT OF 46 LAKH HAS BEEN MADE WHICH WAS DISALLOWED AND ADDE D TO THE TOTAL INCOME OF ASSESSEE AS UNEXPLAINED INVE STMENT U/S. 69 OF THE ACT. 16. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHERE AS ASSESSEE SUBMITTED THAT INVESTMENT OF 46 LAKH WAS SUPERFICIAL FIGURE AND HIS FATHER (DEC EASED ASSESSEE) HAD NO SOURCE OF FUND FOR MAKING INVESTME NT IN THE AFORESAID PROPOSED BUSINESS AND OTHER PARTNER OF THE SAID FIRM HAS SUB MITTED SWORN AFFIDAVIT AND DECLARED THAT ONLY A SUM OF 2.5 LAKH WAS SPENT FOR THE PURPOSE OF MEDICAL EQUI PMENT. AT THE TIME OF SURVEY NO STATEMENT U/S. 133A(3)(III) OF TH E ACT WAS RECORDED AT THE TIME OF SURVEY AND THERE IS NO OTHER EVIDENCE WHICH SHOWS T HAT INVESTMENT HAD BEEN MADE IN THE FIRM FOR RS.46 LAKHS. THE ASSESSEE FURTHER SUBM ITTED THAT THE ABOVE FIGURE WAS SHOWN IN THE DEED OF PARTNERSHIP JUST FOR THE SOLE PURPOSE OF SANCTIONING LOAN FROM BANK. A PROJECT REPORT WAS PREPARED FOR 46 LAKH FOR THE PURPOSE OF SANCTIONING LOAN ONLY. HOWEVER, LD. CIT(A) DISREGARDED THE CLAIM OF ASSESSEE AND UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE R I FIND THE CLAIM OF THE AR TO BE UNACCEPTABLE. THER E IS EVIDENCE FOUND IN THE FORM OF DULY EXECUTED PARTNERSHIP DEED DULY REGISTE RED WITH THE SUB-REGISTRAR AT DUM DUM, 24-PARGANAS (NORTH). THE PARTNERSHIP DE ED CLEARLY SPELLS OUT IN PARA 10 OF THE SAID DEED THAT THE ASSESSEE, LATE SH BIMAN KUMAR ADITYA, HAD ALREADY INVESTED RS.46 LAKHS IN THE PROPOSED BUSINE SS. IT IS A SETTLED PRINCIPLE THAT THE APPARENT IS REAL UNLESS PROVED OTHERWISE. THE LEGAL HEIR OF THE ASSESSEE OR THE AR HAVE NOT BEEN ABLE TO BRING ANYT HING ON RECORD TO PROVE THAT CONTENTS OF THE SAID PARTNERSHIP DEED WERE NOT TRUE AND CORRECT. IN THE ABSENCE OF ANY SUCH EVIDENCE, SUCH DOCUMENT FOUND D URING THE COURSE OF SURVEY HAS TO BE TAKEN ON ITS FACE VALUE AND IS TO BE CONSIDERED AS CORRECT AND TRUE. THE ONUS TO PROVE THAT THE CONTENTS OF THE SA ID DOCUMENT WERE NOT TRUE, LIES UPON THE LEGAL HEIR OF THE ASSESSEE WHICH HE H AS NOT BEEN ABLE TO DISCHARGE. IN THE LIGHT OF THE ABOVE DISCUSSION, I DO NOT FIND ANY FORCE IN THE CLAIM OF LEGAL HEIR OF THE ASSESSEE THAT NO INVESTMENT OF RS.46,00 ,000/- HAD BEEN MADE BY THE ASSESSEE IN THE BUSINESS OF THAT FIRM. THEREFORE, T HE ADDITION OF RS.46,00,000/ MADE BY THE AO IS CONFIRMED. ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 11 BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME SECOND APPEAL BEFORE US. 17. BEFORE US LD AR SUBMITTED THAT ASSESSEE PARTNE RSHIP FIRM WAS MADE TO RUN THE PATHOLOGY LAB UNDER THE NAME & STYLE OF M/S PRESIDE NCY POLYCLINIC AND DIAGNOSTICS AT THE PREMISES OF ASSESSEE AS PER THE AGREEMENT WITH NORTH EAST DIAGNOSTICS WHO WAS ACTING AS THE LICENSEE. THIS LICENSEE AT ITS OWN C OST WAS TO MAKE INVESTMENT IN THE MACHINERIES EQUIPMENTS AND FURNITURE REQUIRED FOR R UNNING THE SAID BUSINESS OF PATHOLOGY LAB. THE INVENTORY FOUND AT THE TIME OF S URVEY FOR THE MACHINES ARE ACTUALLY BELONGING TO M/S NORTH DIAGNOSTICS CENTRE. THE ASSE SSEE IN THOSE EQUIPMENTS HAVE INVESTED ONLY UP TO 2.25 LAKHS AND ASSESSEE IN SUPPORT OF ITS CLAIM HA S SUBMITTED THE COPY OF AGREEMENT WITH NORTH EAST DIAGNOSTIC. THE L D. AR ALSO SUBMITTED THE CERTIFICATE OF REGISTRATION IN THE NAME OF NORTH EA ST DIAGNOSTICS AT THE PREMISES OF ASSESSEE AND THE CORRESPONDENCE WITH THE MUNICIPAL CORPORATION WAS MADE WITH REGARD TO REGISTRATION OF PATHOLOGY LAB. LD. AR FUR THER SUBMITTED THAT THE EXPLANATION GIVEN TO AO WAS NOT AFTER-THOUGHT BECAUSE THE AGREE MENT WAS MADE BETWEEN ASSESSEE AND NORTH EAST DIAGNOSTIC ON 05.04.2005. FINALLY LD . AR PRAYED FOR DELETION OF THE ADDITION MADE BY AUTHORITIES BELOW. ON THE OTHER HAND, LD DR RELIED ON THE DEED OF PART NERSHIP IMPOUNDED AT THE TIME OF SURVEY AND VEHEMENTLY RELIED ON THE ORDER OF AUTHOR ITIES BELOW. 18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT AO IN THE INSTANT CASE HAS MADE THE AD DITION OF 46 LAKH ON THE BASIS OF PARTNERSHIP DEED AND THE EQUIPMENTS FOUND AT THE PR EMISES OF ASSESSEE AT THE TIME OF SURVEY. THE AO ALSO FOUND THE PATIENT REGISTER AT T HE TIME OF SURVEY AND SOME CORRESPONDENCES WITH THE MUNICIPAL CORPORATION SUBS EQUENTLY. THE LD. CIT(A) CONFIRMED THE ADDITION. WE FIND THAT THE EQUIPMENTS WERE FOUND BY THE SURVEY TEAM AND THIS FACT IS NOT IN DISPUTE, HOWEVER WHAT WAS T HE VALUE OF THE EQUIPMENTS HAVE NOT BEEN DETERMINED BY LOWER AUTHORITIES. IN OUR VIEW, BEFORE MAKING THE ADDITION IT WAS THE DUTY OF ASSESSING OFFICER TO DETERMINE THE VALU E OF MACHINERIES ON SCIENTIFIC BASIS. THE VALUATION OF THOSE MACHINERIES SHOULD HAVE BEEN MADE ON THE BASIS OF PURCHASE INVOICE OR BY THE REGISTERED VALUER. THE ARGUMENT M ADE BY LD. AR THAT EQUIPMENTS ITA NO.846/KOL/2010 A.Y.2 006-07 SH MANOB ADITYA V. ITO WD-50( 4) KOL. PAGE 12 WERE SUPPLIED BY THE NORTH EAST DIAGNOSTIC CENTRE A ND IN SUPPORT OF HIS CLAIM. HE HAS SUBMITTED THE AGREEMENT BETWEEN ASSESSEE AND THE NO RTH EAST DIAGNOSTIC CENTRE. FURTHER, LD. DR HAS NOT BROUGHT ANYTHING CONTRARY T O THE ARGUMENT OF THE LD. AR PLACED BEFORE US. CONSIDERING THE FACTS AND CIRCUMS TANCES IN TOTALITY, WE FIND THAT THE ADDITION WAS PREDOMINANTLY WAS BASED ON THE IMPOUN DED DEED OF PARTNERSHIP. HOWEVER WE FIND THAT NO SOURCE OF INVESTMENT IN THE DEED OF PARTNERSHIP HAS BEEN BROUGHT ON RECORD BY THE AO. IN OUR CONSIDERED VIEW A DOCUMENT CAN BE THE MERE BASIS OF ADDITION IN THE INSTANT CASE. THE LD. AR H AS SUITABLY CLARIFIED THE SOURCE OF EQUIPMENT BY PRODUCING THE COPY OF THE AGREEMENT WI TH THE NORTH EAST DIAGNOSTIC CENTRE. ACCORDINGLY WE REVERSE THE ORDER OF AUTHORI TIES BELOW AND GROUND RAISED BY ASSESSEE IS ALLOWED. AO IS DIRECTED ACCORDINGLY. 19. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 10/08/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 10/08/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SHRI MANOB ADITYA, 182, JESSORE ROAD, KO LKATA-700 074 2. /RESPONDENT-ITO WARD-50(4), 54/1 RAFI ADHEMD KIDWAI ROAD, KOLKATA-16 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,