Nirpal Singh Prop. M/s Aujla Filling Station, Kapurthala V. Commissioner of Income Tax-2, Jalandhar

ITA/522/2009

AI Insights

The case revolves around an appeal by Nirpal Singh, the proprietor of M/s Aujla Filling Station, against the order of the Income Tax Appellate Tribunal, which sustained an addition of \\u20b95,79,586 as unexplained investment under Section 69 of the Income Tax Act, 1961. The dispute originated from the Assessing Officer's referral of the assessee's investment in construction to the DVO without rejecting the books of account, which were duly maintained and supported by purchase bills and expense vouchers. The High Court examined whether the Tribunal erred in law and on facts by upholding the addition based on the DVO's report, despite the books not being rejected.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 674652 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 16-09-2013
• Assessment Year: misc
• Other Referred Cases: Sargam Cinema v. Commissioner of Income Tax, CIT v. Chohan Resorts, Goodluck Automobiles (P) Limited v. Assistant Commissioner of Income Tax, CIT v. Lucknow Public Educational Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VIVEK SETHI
• Assessee Lawyers: RAVISH SOOD
• Keywords: Books of account; Departmental Valuation Officer; Scrutiny assessment; Unexplained investment; Valuation
• Section: 143(3); 143(2); 69; 260A; 142A

Judgement Text

"ITA No.522 of 2009 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.522 of 2009 (O&M) Date of decision:16.9.2013 Nirpal Singh Prop. M/s Aujla Filling Station, Kapurthala ...Appellant Versus Commissioner of Income Tax-2, Jalandhar ...Respondent CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE JASPAL SINGH Present: Mr. Ravish Sood, Advocate for the appellant. Mr. Vivek Sethi, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 28.11.2008, Annexure A.4, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.405 (ASR)/2008, for the assessment year 2005-06, claiming following substantial questions of law:- 1. Whether the Tribunal had misdirected itself in law and on facts of the case, by failing to appreciate that the AO without rejecting the Books of accounts wherein the investment towards construction of the Petrol Pump stood duly recorded, nor referring to any material/evidence/information on the basis of which it could be said that the investment reflected by the assessee was understated or suppressed, had therein erred in making a reference to the AVO by invoking the provisions of section 142A? 2. Whether the Tribunal is right in law and facts of the case in Singh Gurbax 2013.09.24 14:36 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.522 of 2009 (O&M) 2 making an addition of ` 5,79,586/- in the hands of the assessee appellant on the basis of the report of the AVO, as an unexplained investment under section 69 of the Income Tax Act, 1961? 3. Whether the Tribunal is right in law and facts of the case in sustaining the entire addition of ` 5,79,586/- so made by the AO in the hands of the assessee appellant in the Assessment year 2005-06? 2. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The appellant is an individual. He is running a petrol pump under the name and style of M/s Aujla Filling Station at Village, Daburji, Kartarpur road, Kapurthala. During the year under consideration, the assessee filed his income tax return declaring an income of ` 1,28,010/- . The case of the appellant was picked up for scrutiny under Section 143(2) of the Act. The appellant had made investment towards the construction of the aforesaid Petrol pump which stood recorded by him in his books of account under the head 'Building account', 'Plant and Machinery account' and 'Furniture and Fixture account' duly supported by purchase bills/expenses vouchers etc. The Assessing Officer referred the valuation of the said investment to the Assistant Valuation Officer, Income Tax Department, Jalandhar. The Assistant Valuation Officer vide his report dated 21.11.2007 estimated the valuation of the Petrol pump building on the basis of which the Assessing Officer made an addition of an amount of ` 5,84,586/- and thereafter framed assessment under Section 143(3) of the Act at an amount of `27,16,399/- vide order dated 19.12.2007, Annexure A.1. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 27.3.2008, Annexure A.2, the CIT(A) allowed the appeal. Not satisfied with the order, the revenue filed appeal before the Singh Gurbax 2013.09.24 14:36 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.522 of 2009 (O&M) 3 Tribunal. Vide order dated 28.11.2008, Annexure A.4 partly allowed the appeal whereby addition of ` 5,79,586/- made by the Assessing Officer as unexplained investment under Section 69 of the Act was sustained. Hence the present appeal by the assessee. 3. Learned counsel for the assessee submitted that the assessee was maintaining books of account with respect to the cost of construction and the Assessing Officer inspite of the same, without rejecting the books of account, had referred the matter to the Departmental Valuation Officer (DVO). It was urged that in view of judgment of the Apex Court in Sargam Cinema v. Commissioner of Income Tax, (2010) 328 ITR 513, this Court in CIT v. Chohan Resorts, (2012) 253 CTR (P&H) 106, Gujarat High Court in Goodluck Automobiles (P) Limited v. Assistant Commissioner of Income Tax, (2012) 254 CTR (Guj) 1 and Allahabad High Court in CIT v. Lucknow Public Educational Society, (2011) 339 ITR 588 (All), the action in referring the matter to the DVO was bad. 4. On the other hand, learned counsel for the revenue supported the order passed by the Tribunal. 5. After hearing learned counsel for the parties, we find merit in the submission made by learned counsel for the assessee. 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 Singh Gurbax 2013.09.24 14:36 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.522 of 2009 (O&M) 4 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 Educational Society's cases (supra). 7. In view of the above, the substantial questions of law are answered in favour of the assessee and against the revenue. Accordingly, the appeal is allowed. (Ajay Kumar Mittal) Judge September 16, 2013 (Jaspal Singh) 'gs' Judge Singh Gurbax 2013.09.24 14:36 I attest to the accuracy and integrity of this document High Court Chandigarh "