The ACIT, Central Circle-1, Surat V. Shri Manubhai Jivrajbhai Balar, Surat

ITSSA 276/AHD/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0285 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Unexplained expenditure; Fair market value; Valuation report; Reason to believe
• Section: 69C; 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI , A.M. & SHRI KUL BHARAT, J.M ) I. T (SS) .A. NO S . 276 & 277 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2006 - 07) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, SURAT V/S SHRI MANUBHAI JIVRAJBHAI BALAR, 4, UTKANTH APTT, NR. NEW CIVIL COURT, ATHWALINES, SURAT PAN NO. ACEPB9974C (APPELLANT) (RESPONDENT) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1, SURAT V/S SHRI CHANDRIKABEN M BALAR, , 4, UTKANTH APTT, NR. NEW CIVIL COURT, ATHWALINES, SURAT PA N NO. ACEPB9973F (APPELLANT) (RESPOND ENT) APPELLANT BY : SHRI SUBHASH BAINS, CIT/DR RESPONDENT BY : SHRI J.P. SHAH, A.R. ( )/ ORDER DATE OF HEARING : 12 - 09 - 2014 DATE OF PRONOUNCEMENT : 25 - 09 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 2 APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A) - II, AHMEDABAD DATED 03.01.2011 FOR A.Y. 2006 - 07. 2. BEFORE US, BOTH THE PARTIES SUBMITTED THAT T HOUGH THE APPEALS RELATE TO 2 DIFFERENT ASSESSEES BUT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR EXCEPT FOR THE AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 2 BOTH THE APPEALS AND THER EFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. WE THERE F ORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE. WE THUS PROCEED WITH THE FACTS IN IT(SS)A. NOS. 276/AHD/2011. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS AN INDIVIDUAL STATED TO BE DERIVING IN COME BY CLEAVING OF DIAMONDS ON JOB WORK BASIS AND IS ALSO A PARTNER IN M/S BALAR EXPORTS AND M/S. BALAR C ORPORATION. A SEARCH ACTION U/S 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS AS WELL A S R ESIDENTIAL PREMISES OF DOKANIA G ROUP (BALAR SUB - GROUP) OF CASES ON 14.02.2008. IN VIEW OF THE SEARCH , A NOTICE U/S 153A OF THE ACT WAS ISSUED ON 24.09.20 08 AND SERVED ON THE ASSESSEE I N RESPONSE TO WHICH ASSESSEE FILED HIS RETURN OF INCOME ON 22.10.20 08 DECLARING TOTAL INCOME OF RS. 1, 70,826/ - . THE CASE WAS TAKEN UP FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 153A OF THE ACT VIDE ORDER DATED 30.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 16,04,270/ - . AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 3.01.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: - (I) ON THE FACT S AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION AT RS. 13,50,000 MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR THE RENOVATION OF FLATS ON THE BASIS OF THE VALUATION REPORT. (II) ON THE FACTS AND CIRCU MSTANCE OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN LAW AND IN FACTS IN HOLDING THAT ADDITION CANNOT BE MADE ,WHEN NO CORROBORATIVE EVIDENCE WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH IGNORING THE ASSESSEE'S ADMISSION DURING THE COURSE OF ASSESSME NT THAT THE VALUATION WAS DONE FOR THE PURPOSE OF OBTAIN LOAN FROM SBI BY MORTGAGING THE FLAT AS IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 3 COLLATERAL SECURITY AND ALSO THE MEASUREMENT AND THE DETAILS MENTIONED IN THE VALUATION REPORT ARE THE SAME WHAT THE ASSESSEE HAD CLAIMED. (III) ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN NOT APPRECIATING THE RATIO LAID DOWN IN THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF SUMATI DA Y AL VS CIT 214 ITR 801, AND CIT VS DURGA PRASAD MORE (1971) 82ITR 54(SC) WHEREIN THE APEX COURT HAS OBSERVED THAT THE APPARENT MUST BE CONSIDERED THE REAL UNTIL IT IS SHOWN THAT THERE WAS REASON TO BELIEVE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK IN TO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALIT Y AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS PRAYED THAT THE ORDER OF THE LD CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. BEFORE U S, THE LD. D.R. SUBMITTED THAT THOUGH VARIOUS GROUNDS HAVE BEEN RAISED BUT ISSUE IS ONLY WITH RESPECT TO DELETING THE ADDITION OF RS. 13,50,000/ - MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR RENOVATION OF FLATS. 6. DURING THE COURSE OF SURVEY PROCEE DINGS AT THE PREMISES OF BALAR E XPORTS SOME PAPERS WERE IMPOUNDED WHICH RELATED TO THE VALUATION REPORT O F THE PROPERTY OF TH E ASSESSEE WHEREIN IT WAS MENTIONED THAT RENOVATION WORK OF RS. 13,50,000/ - HAS BEEN DONE. A.O NOTICED THAT THOUGH ASSESSEE HAD SHOWN THE ASSET IN THE BALANCE SHEET BUT HAS NOT SHOWN ANY EXPENSES ON ACCOUNT OF RENOVATION OF THE PROPERTY AS REFLECTED FROM THE SEIZED VALUATION REPORT. THE ASSESSEE WAS THEREFORE ASKED TO FURNISH THE EXPLANATION AS TO WHY ADDITION ON ACCOUNT OF RENOVATION U/S 69C NOT BE MADE. ASSESSEE INTERALIA SUBMITTED THAT THE VALUATION REPORT WAS AN UNSIGNED REPORT WHICH WAS TO BE SUBMITTED TO THE BANK AS THE FLAT OF THE ASSESSEE WAS OFFERED AS COLLATERAL SECURITY FOR THE BA NK FACILITIES GRANTED TO BALAR E XPORTS. IT WAS FUR THER SUBMITTED THAT THE FLAT WAS P URCHASED IN 1993 AND NO EXPENSE ON RENOVATION HAS BEEN DONE . THE SUBMISSION OF THE ASSESSEE WAS N OT FOUND ACCEPTABLE TO THE A.O IN VIEW IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 4 OF THE FACT THAT THE VALUATION REPORT WAS FROM GOVERNMENT RECOGNIZED VALUER AND WAS SE IZED DURING THE SURVEY OPERATION, A.O WAS FURTHER OF THE VIEW ASSES S EE HAD FAILED TO EXPLAIN THE SOURCE OF RENOVATION EXPENSES INCURRED ON THE FLAT AND NO RENOVATION EXPENSES INCURRED ON THE FLAT WAS SHOWN BY THE ASSESSEE. A.O THEREFORE CONCLUDED THAT ASS ESSEE HAS INCURRED EXPENDITURE ON RENOVATION OF HIS FLATS AND HAS FAILED TO EXPLAIN THE SOURCE OF RENOVATION AND ACCORDINGLY MADE ADDITION U/S 69C OF RS. 13,50,000/ - . AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER: - 5.1 THERE WAS A SEARCH U/S. 132 OF THE ACT IN THE ASSESSEE S PREMISES ON 14.02.2008. FURTHER, DURING THE COURSE OF SURVEY PROCEEDINGS AT THE PREMISES OF M/S. BALAR EXPORT S, SOME PAPERS PAGE NO. 118 TO 125 OF BF - 45 WERE IMPOUNDED WHICH WERE RELATED TO THE VALUATION REPORT OF THE PROPERTY DATED 08.08.2005 FOR FLAT NO. 4, 5 TH FLOOR, UTHKANTH APARTMENT OWNED BY THE ASSESSEE, IN WHICH IT WAS MENTIONED THAT THE RENOVATION WORK H AD BEEN DONE FOR RS. 13,50,000/ - . THE ASSESSING OFFICER HAS MADE THE ADDITION ON THIS BASIS ON THE GROUND THAT THE ASSESSEE HAS CARRIED OUT THE RENOVATION WORK WHICH IS EVIDENT FROM THE VALUATION REPORT AND HAS NOT SHOWN THE EXPENSES IN THE BOOKS AND H AS NOT EXPLAINED THE SOURCE AFTER MAKING THE DISCUSSION IN DETAIL IN THE ASSESSMENT ORDER. 5.2 THE APPELLANT HAS SUBMITTED THAT THE FLAT WAS OFFERED AS COLLATERAL SECURITY TO THE STATE BANK OF INDIA AGAINST THE BANK FACILITY GRANTED BY THE BANK TO M/S. BAL AR EXPORTS WHEREIN THE APPELLANT IS A PARTNER. FOR THIS, BANK REQUIRED THE SUBMISSION OF VALUATION REPORT FOR WHICH MR. GOHEL WAS APPOINTED AS A VALUER. MR. GOHEL PREPARED THE REPORT BUT DUE TO INACCURACIES/MISTAKES IN THE REPORT, DID NOT SIGN THE REPORT. HENCE, FROM UNSIGNED AND UNSUBSTANTIATED VALUATION REPORT, NO ADDITION IS CALLED FOR. FURTHER, NO VALUATION WAS DONE THEREAFTER AS BANK DID NOT PRESS FOR THE SAME. IT WAS ALSO SUBMITTED THAT IN THE BOOKS OF ACCOUNTS OF THE APPELLANT, TOTAL RENOVATION EXPEN DITURE HAS BEEN MADE FOR RS.7,96,275/ - IN DIFFERENT YEARS DEBITED TILL DATE WHICH IS APPARENT FROM THE BALANCE SHEET NO OTHER RENOVATION WORK WAS DONE FOR RS.13,50,000/ - . THE ASSESSING OFFICER CANNOT MAKE THE ADDITION WITHOUT REJECTING THE BOOKS OF ACCOUNT S MERELY ON THE BASIS OF UNSIGNED VALUATION REPORT WHICH WAS NOTHING BUT OPINION OF THE VALUER WHICH HE DID NOT SIGNED. NO OTHER EVIDENCE REGARDING INCURRING THE RENOVATION EXPENSES WAS FOUND DURING THE SEARCH HENCE, NO ADDITION CAN BE MADE. FOR THIS, RELI ANCE WAS PLACED ON VARIOUS DECISIONS. 7. AGGRIEVED BY THE ORDER OF LD CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 5 8. BEFORE US, LD D.R. TOOK US THROUGH THE ORDER OF A.O AND POINTED TO THE OBSERVATIONS OF A.O. HE FURTHER SUBMITTED THAT THE VALUATION REPORT WA S FOUND AND SEIZED AND FURTHER TH E VALUATION REPORT IS NOT A DUMB DOCUMENT AS DETAILS ARE GIVEN ABOUT THE INTERIOR WORK AND VARIOUS FACILITIES IN THE FLAT. HE THEREFORE SUBMITTED THAT THE ENTIRE VALUATION REPORT CANNOT BE DISCARDED IN TOTO BUT IT MAY BE CONSIDERED FOR MAKING ESTIMATION OF ADDITION . L.D. A.R. ON THE OTHER HAND SUBMITTED THAT THE VALUATION REPORT WAS NOT FOUND DURI NG THE COURSE OF SEARCH AT THE A SSESSE E S PREMISES BUT WAS FOUND DURING THE COURSE OF SURVEY OF THIRD PARTY NAMELY BALAR E XPORTS. HE FURTHER SUBMITTED THAT THE VALUATION REPORT WAS FOR THE PURPOSE OF DETERMINING THE FAIR MARKET VALUE FOR THE FINANCIAL ASSISTANCE GIVE N BY THE BANK WHICH WAS ALSO STATED IN THE VALUATION REPORT AND POINTED TO THE RELEVANT PAGE WHICH WAS PLACED AT PAGE 22 OF THE PAPER BOOK . THE LD A.R. FURTHER SUBMITTED THAT THE VALUATION REPORT WAS AN UNSIGNED REPORT AND CANNOT BE CONSIDERED FOR MAKING ADDITION IN THE CASE OF ASSESSEE MORE SO WHEN THE ASSESSMENT WAS BEING FRAMED U/S 153A. LD A.R. FURTHER SUBMI TTED THAT FOR THE PURPOSE OF ADDITION U/S 69C THE ACTUAL EXPENDITURE WAS REQUIRED TO BE ADDED AND NOT THE ESTIMATED EXPENSES. LD A.R. FURTHER SUBMITTED THAT ASSESSEE HAD INCURRED TOTAL RENOVATION EXPENSES OF 7 , 96,275 / - IN DIFFERENT YEARS IN THE PAST AND TH E SAME WAS REFLECTED IN THE BALANCE SHEET OF THE RESPECTIVE YEARS. HE FURTHER SUBMITTED THAT THE VALUER WAS NOT QUESTIONED WITH RESPECT TO THE VALUATION REPORT. HE FURTHER PLACED RELIANCE ON THE DECISION CHENNAI TRIBUNAL IN THE CASE OF M.M. FINANCERS ( P ) . LTD. VS. DCIT (2007) 107 TTJ CHENNAI 200 AND THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAYABEN SORATHIA TAX APPEAL NO. 914/A/2012 ORDER DATED 2.07 .2013. HE THUS SUPPORTED THE ORDER OF CIT(A). IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 6 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACTS THAT SEARCH ACTION HAD TAKEN PLACE U/S 132 OF THE ACT AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE. THE IMPUGNED VALUATION REPORT WAS NOT FOUND DURING THE COURSE OF SEARCH OF THE ASSESSE S PREMISES BUT WAS FOUND DURING THE COURSE OF SURVEY PROCEE DINGS AT THE PREMISES OF BALAR E XPORTS. IT IS ALSO A FACT THAT THE VALUATION REPORT THAT WAS FOUND AT THE TIME OF SURVEY IS AN UNSIGNED REPORT. FURTHER NO MATERIAL HAS BEEN PLACED BY REVENUE TO DEMO NSTRATE THAT THE VA L UER WAS SUMMONED BY THE A.O TO DETERMINE THE VERACITY OF THE VALUATION REPORT. WE FUR THER FIND THAT THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF VALUATION REPORT AND NO OTHER EVIDENCE REGARDING INCURRING OF RENOVATION EXPENSES WAS FOU ND DURING THE COURSE OF SEARCH. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). IN VIEW OF THESE FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT ( A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. IT(SS)A NO. 277/AHD/2011 FOR A.Y. 2006 - 07. 11. BEFORE US, SINCE BOTH THE PARTIES HAVE SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS IDENTICAL TO THAT OF SHRI MANUBHAI JIVRAJBHAI BALAR , WE THEREFORE FOR THE SIMILAR REASONS STATED HERE INABOVE WHILE DECIDING THE APPEAL IN THE CASE OF SHRI MANUBHAI JIVRAJBHAI BALAR IN ITA NO. 276/AHD/2011 , AND FOR SIMILAR REASONS , ALSO DISMISS THE GROUNDS OF REVENUE IN THE PRESENT APPEAL . THUS THE APPEAL OF REVENUE IS DISMISSED. IT (SS) A NO S. 276 & 277/AHD/2011 . A.Y. 2006 - 07 7 12. IN THE RESULT, THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 09 - 201 4 . SD/ - SD/ - (KUL BHARAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD