TaxTMI 
TaxTMI 
2004 (1) TMI 308
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....ssessees. Thereafter, assessment proceedings, were taken up by the Assessing Officer. The Assessing Officer referred the above-mentioned properties to the DVO for ascertaining the cost of construction. The facts placed on record show that when the properties were referred to the valuation cell of the department, the DVO had allowed several opportunities to the assessees to furnish details of cost of construction along with the bills and vouchers. No such details were submitted. The assessees had also not maintained complete record of cost of construction of the properties in the books of account. No reports of the registered valuers were also submitted before the DVO. The DVO submitted the valuation reports determining the, cost of construction of the above-mentioned properties. The position of investment disclosed, cost of construction determined by the Assessing Officer on the basis of report of the DVO is shown in the chart on page 3 of the assessment order and page 2 of the CIT(A)'s order as under: ------------------------------------------------------------------------- Sr. Description Total &....
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....; 4-90 to 12-92 24,31,200 C. SCO No.10,Sec. 11, 9,18,500 -do- 24,27,900 Panchkula --------- ----------- 28,49,150 67,00,000 -------------....
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....; 80,000 1,73,363 93,363 Panchkula B. SCO No.9, Sec. 11 2,81,500 6,32,724 3,51,224 C. SCO No.10,Sec. 11, 2,00,000 5,29,149 3,29,149 Panchkula --------- --------- --------- 5,61,500 13,35,236 ....
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....ent for contingencies and miscellaneous in cost of construction. The DVO explained that such provision was made to cover the cost of detailed drawing, deployment of Chowkidar to take care of material at site, expenditure incurred on site visits by the proprietors and other hidden items. Taking into account these facts, the CIT(A) held that there was no justification for allowing any deduction on this account. However, accepting the contentions of the assessees in regard to internal electrification, the CIT(A) allowed some relief and accepted the estimate of the registered valuer. The CIT(A) also allowed a relief of Rs. 10,000 for cost of sanitary fittings in the basement. The submissions of the assessees that DVO had worked out the cost by taking quantity of steel at the rate of Rs.112 kg./cu.m. as against Rs. 72 kg./cu.m did not find favour with the CIT(A) on the ground that the cost taken by the DVO was correct because the properties in question were load bearing. Thus, after taking into account the various submissions of the assessees, the CIT(A) allowed further relief aggregating to 16 per cent from the revised cost of construction and determined the unexplained investment in t....
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....he cost, the CIT(A) ought to have adopted the same. He further submitted that the DVO had wrongly added a sum of Rs. 27,500 on account of cost of partition wall. He further submitted that some benefit was required to be given to the assessees as the assessees are dealers in building materials (supplier of plywood, glass and steel) and being in the same trade obtained material at discount. He further submitted that both Shri Surinder Pal Verma and Smt. Neelam Verma had disclosed an amount of Rs. 2.50 lakhs and Rs. 1 lakh respectively under section 132(4) to cover part of the cost of construction. He submitted that credit for the same was also required to be allowed while considering the total investments made by all the co-owners. 6. The learned D.R., Smt. Geet Mala, on the other hand, heavily relied on the orders of authorities below. She submitted that DVO had allowed a number of opportunities to the assessees to submit details of cost of construction along with the bills and vouchers. These were not filed. The assessees had not maintained complete bills and vouchers for cost of construction. She submitted that even the reports of the registered valuers were not submitted befor....
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....aised. He also directed to take measurement of the disputed items in the presence of registered valuer. After complying with the directions, the DVO resubmitted his report, whereby cost was reduced to 67 per cent of the original cost. Thereafter, the various objections raised by the assessees against the revised valuation report were considered by the CIT(A) who allowed further relief to the extent of 16 per cent of the cost determined by the DVO. The CIT(A) has finally determined the cost of construction of the three properties in question as under: -------------------------------------------------------------------- Name of At pages Total Area Total cost Rate the of the as per per sq. ft. Property Paper &n....
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....have not maintained complete records of cost of construction and no bills and vouchers have also been furnished. 7.1 Even otherwise, we find that the specific objections raised by the assessees are without any merit, which is clear from the following facts: (i) The assessees have contended that the DVO wrongly added Rs. 27,500 on account of cost of partition wall. This contention is not correct in view of the observations of the Assessing Officer in the assessment order. Therefore, the claim made is incorrect. (ii) The claim of the assessees that quantity of steel taken by the DVO at the rate of 112 kg./cu.m. was excessive is not correct in view of the reasons given by the CIT(A) in sub-para (iv) at page 8 that for load bearing norms, minimum requirement was 110 kg./cu.m. as per engineering norms. We agree with the finding of the CIT(A) that nobody would compromise with the security of the buildings by using lesser quantity of steel. (iii) The assessees' claim that the DVO has taken the value of two shutters instead of one is also not correct. As per item No.14 of the DVO's report on page 88 of the paper book, the description given is Hollock wood shutter measuring 25.2....
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.... investment in the properties. Moreover, we find that Shri Surinder Pal Verma had declared an amount of Rs. 2,50,000 under section 132(4) to cover part of the unexplained investment in the properties and also to explain discrepancies in the closing stock. Thus, it is not correct that he had declared entire amount of Rs. 2.50 lakhs to cover unexplained investment in the properties. In any case, he is entitled to claim set off of the amount declared under section 132(4) against his own share in the unexplained investment and not against the share of other co-owners. As regards Smt. Neelam Verma, she too had declared an amount of Rs. 1 lakh partly to cover her share of unexplained investment in the properties and partly to cover unexplained investment in jewellery. Learned CIT(A) has already adjusted an amount of Rs. 85,146 being her share in the unexplained investment in her own case. This leaves a surplus of Rs. 14,854 (1,00,000 - 85,146). As mentioned in subsequent paragraph 9, at the most, she could claim credit for the same for explaining her own share in unexplained investment in the properties for the other assessment years. 9. From the facts discussed above, it is obvious t....
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....required as per books to the extent of Rs. 51,48,024. The Assessing Officer thereby made an addition of Rs. 5,12,416 (51,48,024-46,35,608) as unexplained investment. II. Aggrieved, the assessee impugned the addition in appeal before the CIT(A), who disagreed with the finding given by the Assessing Officer that there was discrepancy in stock to the extent of Rs. 5,12,416 and the amount be treated as unexplained investment. She observed that the stock actually found at the time of search being less than the stock which should have been available as per books, the discrepancy in the stock was not liable to be added as unexplained investment. However, she was of the opinion that the assessee has not been able to explain the difference in stock to the extent of Rs. 2,93,759. The reasons given by the CIT(A) in para 3.3 of her order are as under: "3.3 I have carefully considered the submissions made before me and also made reference to the assessment records. It is observed that stock inventory during the course of search operations was prepared in the presence of the appellant and comments were also called for regarding the discrepancies. Whereas explanation regarding the two bills....
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.... order to support his submission, the learned Counsel drew our attention to a certificate issued by the Sales tax Department that the vehicle crossed the barrier at Ramgarh on 10-12-1990 at about 9/10 P.M. The learned Counsel drew our attention to a copy of letter from Bakelite Hylam Ltd. confirming that goods sent to the assessee vide challan No. 6658 dated 4-12-1990 and challan No. 6672 dated 6-12-1990 were dispatched to the assessee on 11-12-1990 and the truck took 7-8 days to reach Chandigarh and, therefore, goods were not available at the time of search. The challans were sent much in advance. While drawing the inventory of the stock, the search party wrongly included these goods having already been received. The learned Counsel also drew our attention to purchase account where the goods in respect of these bills were accounted for on the subsequent dates on 19-1-1991. It was submitted that the Assessing Officer while rejecting the explanation of the assessee relating to alleged discrepancies in stock had merely observed that stock inventory was prepared at the time of search after physical verification and all bills and goods received were taken into account at the time of se....
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....n our attention to the relevant entries in the purchase account, which show that goods received under these bills were credited to the purchase account on 19-1-1991. If the goods had been received on the subsequent date and credited to the purchase account on the subsequent date, the effect of entries made on 19-1-1991 requires to be examined to see the possible addition liable to be made on this account. It is, therefore, necessary to examine whether the claim of the assessee that items covered by these bills were included on the basis of advance copies of challans/confirmations or on the basis of regular bills showing the receipt of, the same before the date of search. In case the assessee is able to furnish necessary supporting evidence in the form of clearance from the octroi or any other evidence which could prove that the contention of the assessee is correct, no addition would be liable to be made on this account. However, in case the assessee fails to prove its claim and the receipt of the goods is duly reflected in the stock register, then the addition liable to be made would be equal to the sale proceeds i.e. cost price and resultant profit earned thereon. However, we wis....
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....ed. This ground of appeal is partly allowed. 17. We shall now take up the case of Smt. Chander Kanta Verma (I.T.A No.600/Chandi/95). In this case, the main ground pertains to addition of Rs. 85,146 representing unexplained investment in construction of properties. This issue has been thoroughly discussed above and addition is confirmed. This ground is, therefore, dismissed. 18. In the next ground of appeal, the assessee has challenged the addition of Rs. 6,000 made on account of low household expenses. The Assessing Officer made an addition of Rs. 12,000 for unexplained household expenses which was reduced to Rs. 6,000. Before us, it was reiterated that assessee's husband had filed return of more than Rs. 2 lakhs and was meeting household expenses of the family. The assessee did not spend anything on personal or household expenses. We find force in the above submissions. There is no material on record to show that the assessee made any expenditure on household and personal expenses. The addition made is directed to be deleted. This ground of appeal is allowed. 19. The assessee has further challenged the disallowance of collection charges amounting to Rs. 4,800 claimed unde....
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....n the impugned assessment order and is as under: - ------------------------------------------------------------------------- Sr. Description Total Period of Cost of No. of properties inves- constr- constr- tment uction uction shown in determined ....
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....bsp; --------- ----------- 28,49,150 67,00,000 ------------------------------------------------------------------------- 3. On the basis of above figures estimated investment for the period 1-4-1990 to 31-3-1991 were worked out and undisclosed investments were taken at Rs. 7,73,736 as per the chart below;- (Rs.) --------------------------------------------------------------------- Sr. Description&....
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....; --------- --------- --------- 5,61,500 13,35,236 7,73,736 --------------------------------------------------------------------- 3.1 The Assessing Officer vide his letter dated 31-1-1994, asked the assessees, co-sharers as to why difference of Rs. 7,73,736 be not added in the 8 hands as undisclosed investment. Thus, in the above show-cause notice, the Assessing Officer gave benefit of Rs. 2,50,000 and Rs. 1 lakh disclosed/surrendered by Sh. Surinder Pal Verma and Smt. Neelam Verma during the course of search in their statements under section 132(4) of the Income-tax Act. 4. The Assessing Officer has also made reference to the reply furnished by the assessee at page 4 of the assessment order in the case of Sh. Surinder Pal Verma. The Assessing Officer had ....
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..... This was in spite of fact that in the statement recorded under section 132(4) of the Income-tax Act, Sh. Surinder Pal Verma and Smt. Neelam Verma clearly intended to cover investment in properties besides covering other discrepancies. 7. The assessees challenged above additions in appeal and through their representatives filed objections to the proposed valuation suggested by the D.V.O. and pointed to the wide variations in D.V.O.'s report and reports of their registered valuer. The learned Commissioner of Income-tax (Appeals) on facts and circumstances of the case considered it necessary to get the revaluation of properties carried through the D.V.O. Accordingly, the revised report was submitted by the D.V.O. According to this report, the value of S.C.O. No.1 was taken at Rs. 13,87,200 against Rs. 18,40,900 earlier suggested by the D.V.O. It was agreed between the parties that the value of S.C.O. Nos. 9 and 10 would be reduced and taken on the basis of value worked out for S.C.O. No.1. Accordingly, value of S.C.O. Nos. 9 & 10 was proportionately worked out and reduced for determining the unexplained investments by the co-sharers. 8. After the receipt of revised report from....
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.... 225% B.W. Foundary/ 467% 400% Superstructure ------------------------------------------------------------ 10. The above given items are only illustrative. The total difference worked out by the assessees as per their objections filed before the learned Commissioner of Income-tax (Appeals) is more than Rs. 2 lakhs. The working is available on pages 96 & 97 of the Paper Book. 11. The learned Commissioner of Income-tax (Appeals) did not allow any relief to the assessees on account of higher premium applied by the D.V.O. We are of the view that premium applied by the D.V.O. is certainly on higher side and the assessees are entitled to some benefit on this account. 12. The next major objection raised on behalf of the assessees to the valuation of the D.V.O. pertain to the quantity of steel taken by the D.V.O. It was stated to be highly excessive. The quantity of steel was taken at the rate of 112 kg. per cubic metre as against 72 kg. taken by the r....
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....ng on proportionate basis. Therefore, the addition in respect of properties i.e., S.C.O. Nos.9 and 1O was without any basis. 16. It was further submitted that no detail of measurements taken by the D.V.O. were furnished to the assessee, yet additions were wrongly made on account of measurements. The assessees further submitted that construction was started in the year 1987 when majority of investments were made. The D.V.O. inspected the site only in the year 1995. This time lag led to higher working of the cost of construction by the D.V.O. It was further submitted that some benefit was required to be given as the assessees, are dealers in building material (supplier of plywood, glass and steel) and being in same trade obtained material at discount. This contention is not without substance. 17. After Considering of objections of the assessee, relevant material on record, order of learned Commissioner of Income-tax (Appeals) and reports of the D.V.O. and registered valuer of the assessee and above discussion, I am inclined to allow some more relief to the assessees. The learned Commissioner of Income-tax (Appeals) reduced estimated value of S.C.O.No.1 from Rs. 13,87,200 to Rs.....
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....on met by the tenants. 67,866 ---------- Cost of construction of SCO 11,71,614 No.1, Sec.11, Panchkula ---------- 18. As recorded by the learned Commissioner of Income-tax (Appeals), the revaluation of S.C.O. No.1 was done by the D.V.O. and it was agreed that the value of S.C.O. Nos.9 & 10 would be worked out on proportionate basis on the valuation taken for S.C.O. No.1. In this manner, the value of S.C.O. Nos.9 and 10 was taken on the basis of agreement between the parties. It is too late in the day on the part of the assessee to contend that the value of S.C.O. Nos.....
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....). The learned Commissioner of Income-tax (Appeals) noted that some construction was carried by the tenants and not by the assessee. The learned Commissioner of Income-tax (Appeals) deducted value of above construction. Besides, allowing deduction of 10 per cent for self supervision as is done in almost all other cases, no other relief was allowed except rebate of Rs. 10,000 for all the objections. Some of the objections were not considered at all. There is no rebuttal to the claim put forward by the assessees in the written objections. So the question which is required to be determined, in my view, is whether in the light of objections raised by the assessees and in the above circumstances, some further relief for various reasons noted above should be allowed. I am inclined to allow some more relief for reasons and discussion noted earlier. I estimate the value of construction in the above background and allow relief as under. This way, the value of construction is taken as under :- -------------------------------------------------------- S.C.O. Cost of Construct- Cost of 5% relief No. ion as....
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....erma and Smt. Neelam Verma who admittedly made surrender of Rs. 2,50,000 and Rs. 1 lakh respectively. It is a clear case of double addition. 22. On appeal, the learned Commissioner of Income-tax (Appeals) confirmed addition of Rs. 1 lakh with the following observations: "3.1 In this case a disclosure of Rs. 1 lakh was made in the year under consideration on account of unexplained investment in construction of properties. The Assessing Officer observed that the amount of Rs. 1 lakh was surrendered, Rs. 50,000 in assessment year 1990-91 and Rs. 50,000 during the assessment year 1991-92 towards discrepancies found and value of jewellery. It is also mentioned in the assessment order that the assessee confirmed this fact during the recording of her statement on 11-12-1990. Therefore no credit was allowed of the surrendered amount of Rs. 1 lakh and addition of Rs. 1,40,467 was made. The issue regarding extent of unexplained investment in construction of properties stands already discussed vide my order of date in Appeal No. 74/P-27/94-95 in the case of another co-owner of the property, namely Smt. Manjit Verma for the assessment year 1991-92, wherein unexplained investment has been....
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....hese observations, as well as reasons given by the Assessing Officer in the assessment order, it is held that the Assessing Officer was not justified in not considering this amount of Rs. 3,50,000 as available for construction in the showroom." 23. Sh. Mukhi, learned counsel for the assessee vehemently contended that Rs. 3,50,000 surrendered towards investment for construction should have been considered while determining whether if there was any unexplained investment. The relevant question that was to be determined was as to what was the total investment made by the co-owners in the construction of the buildings. Only in case any un-explained investment was found, the same could be assessed in the hands of co-sharers as per their shares in the properties. The Revenue has treated the construction of 3 S.C.Os. by 8 co-owners as one unit. Therefore, the investment and unexplained investment if any, has to be taken at one place. He also argued that there would be anomaly of Rs. 3,50,000 admittedly contributed by the co-sharers towards investment is not taken into account for purposes of total investment. As per admitted position, the investment has been made by all co-sharers. How....
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....ysically marked share of construction, the total value of construction was required to be determined first to find disclosed and undisclosed investment 26. The next important provision to be considered is section 69 of the Income-tax Act which says that where in any financial year the assessee has made investment, which is not recorded in the books of account and the assessee offers no explanation about the "nature and source of investment" to the satisfaction of the Assessing Officer, the investment may be treated as deemed income of the assessee of the financial year. It is evident from above section that before any investment is treated as deemed income, the assessee has to be allowed an opportunity to explain "nature and source of investment." 26.1 I may also refer to section 132(4) of the Income-tax Act under which a person authorized to carry on search and seizure, may examine any person who is found in possession and control of any books of account, documents, money, bullion, jewellery or other valuable articles or things. As per Circulars and Instructions of the CBDT, the authorized person carrying on the search is required to ask the person subjected to the search wh....
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....arned counsel for the assessee had vehemently argued that no addition was made in other assessment years involved in the construction and, therefore, no addition should be made in the year under appeal. The learned Departmental Representative, on the other hand, held that proceedings for other years have been re-opened to make addition of unexplained investment which fact was stoutly challenged by the assessee. No dear evidence of what has happened in other assessment years on the question of investment in building is available on record. In the above circumstances and for reasons discussed below, I am of the view that the Tribunal is competent to issue directions only for assessment year 1991-92 and not for any other assessment year. 30. In this connection, I may refer to decision of Hon'ble Supreme Court in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 wherein their Lordships have observed as under: - "The decision of an Income-tax Officer given in a particular year did not operate as res judicata in the matter of assessment of the subsequent years. The jurisdiction of the Tribunals in the hierarchy created by the Act was no higher than that of the Income-tax O....
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....co-owners can be rejected relating to "nature and source of investment" in the construction of the building. It can certainly not be rejected on flimsy and unsound reasons given by the Revenue authorities. The amount has been surrendered and taxes paid thereon to cover investment and, therefore, there is no question of treating as unexplained investment merely because in the statement under section 132(4), these persons had stated that the surrender made was to cover investment in construction and discrepancies in jewellery and stock also. In the, above circumstances and on account of clear evidence and stand of Sh. Surinder Pal Verma and Smt. Neelam Verma in their returns, Rs. 3,50,000 added during the course of assessment had to be treated as explained investment. It could not be treated as unexplained investment. Having exercised the choice if any discrepancy was found in jewellery or in stock, the Revenue authorities were/are fully justified in making addition for those discrepancies as income or gains liable to be charged to tax. 31.2 In the light of above discussion, I am of considered opinion that credit for Rs. 3,50,000 has to be given and above investment cannot be trea....
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....ks of which was received on 11-12-1990 and was still to be unloaded from trucks. On 12-12-1990 stock was revalued as per annexure 'P' at Rs. 45,74,098 including two bills for Rs. 44,628 and Rs. 87,748 as certain discrepancies were pointed out by the assessee. Against this the value of stock has been worked out at Rs. 51,48,024 by preparing trading account as on 11-12-1990 as per annexure 'P' of Panchnama dated 11-12-1990. The assessee was asked to reconcile the discrepancy in the valuations of stock. Vide his written submission dated 22-3-1994, the assessee has reconciled the discrepancies by adding the following 5 bills as under: - Value of stocks as per annexure: 'P' dated 12-12-1990 excluding 2 bills for Rs. 44,628 and Rs. 87,748 : Rs.44,41,722 Add: Addition of bills. (Rs.) (Rs.) 1. 44,628 &nb....
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....value of stock works out to Rs. 45,03,230 + Rs. 44,628 + Rs. 87,748 = Rs. 46,35,608. The assessee has further added these bills amounting to Rs. 47,889, Rs. 1,65,065 + Rs. 81,805. According to the assessee, these are added because bills were not accounted for earlier. While preparing the trading account as on 11-12-1990, these bills have rightly been taken into consideration as these have not been included while preparing the trading account on 11-12-1990. While preparing the physical inventory, the value of the stock has been taken into account as the goods were already received and lying in the premises of the assessee. In case the goods were not received up to the date of search, these bills cannot found place while preparing trading account on 11-12-1990. In view of these facts, difference in value of stock amounting to Rs. 5,12,416 is added to the income of the assessee being unexplained investment in stock" 32.1 Though not absolutely dear, yet addition of Rs. 5,12,416 appears to be addition made on account of some discrepancies in the two statements, one prepared with reference to purchases shown in books and found in bills etc. and other representing value of stock which ....
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....1,64,584 (i.e. Rs. 2,50,000-85,416) towards the discrepancy in the stocks. In my opinion, this amount of Rs. 1,64,584 would cover income arising on account of sales relatable to discrepancy in the stocks. In this view of the matter, the addition on this account only to the extent of Rs. 1,64,584 is confirmed having been surrendered by the appellant himself and relief to the extent of Rs. 3,47,832 (i.e. Rs. 5,12,416-1,64,584) on this account. This ground of appeal is therefore, partly allowed." 34. The assessee is aggrieved and has brought the issue in appeal. Sh. Mukhi, the learned counsel for the assessee contended that there was no discrepancy in stock. The alleged discrepancy was based on miscalculations and as goods in respect of the following bills were not received, but on the basis of vouchers were taken into account in working out the stock: - 1. Rs. 47,889 2. Rs. 1,65,065 3. Rs. 81,805 34.1 The claim in respect of other two bills of value of Rs. 44,628 and Rs. 87,748 earlier added in working of stock at search was subsequently accepted by the Revenue. Vouchers of goods referred to above were received in advance and accordingly taken into account. Goods perta....
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....mmissioner of Income-tax (Appeals) that the stock found recorded in the books of account is more than the stock actually found at the time of search. Therefore, some goods have been held to be sold outside the books of account. The profit on goods sold of value of Rs. 2,93,759 has been taken at high figure of Rs. 1,64,584. In my view, there is absolutely no justification for assuming so much of profit. In fact, there is no justification to sustain any addition discussed in the following paragraph. 37. At this stage, I would like to refer to the primary evidence as to how position of stock was taken by the authorised officer at the time of search. This is available in annexure-'P' prepared at the time of search which is reproduced below:- "Trading A/c of T.L. Verma.& Co. Prop. Sh. S.P. Verma prepared at the time of search under section 132 of the Income-tax Act on 11-12-1998. Tax Paid A/c &n....
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....bsp; Closing stock 42,58,209 G.P. rate @ 5.90% As in earlier yr. 2,01,201 --------- --------- 76,68,397 76,68,397 --------- --------- &nb....
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....; 42,58,209 10% goods 4,62,680 Actl. goods recd. from Elite Traders vide bill No. 53 dated 10-12-1994 44,628 ---------- 47,65,517  ....
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....p; In regard of challan dated 24-11-1990, products limited vide which 405 sheets of walls proof commercial ply were received. It was stated in the statement that Bill of this was not yet recd. While the goods have been received. But now I have gone through the records, the bill was received on 24-11-1990 itself and was attached in the purchase accounts." 38. Having regard to the order of learned Commissioner of Income-tax (Appeals), it is now clear that the alleged discrepancy is on account of the following three purchases allegedly claimed in the purchase account when no corresponding goods of these purchases were actually found at the time of search. The following 3 purchases are disputed: - 1. Rs. 47,889 2. Rs. 1,65,065 3. Rs. 81,805 38.1 The first two are purchases from M/s. Sharda Plywood Inds. Ltd. and the third purchase of Rs. 81,805 is from Bakelite Hylam. The later company has specifically certified as per certificate at page 50 of the Paper Book that the goods of Challan Nos.6658 and 6672 were dispatched by them from their factory at Hyderabad only on 11-12-1990. There is no question of above goods reaching Chandigarh by the time the search took pl....
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....e is admittedly 5 per cent to 6 per cent. There is no dispute of that huge investment of several lakhs admittedly made is fully explained by the assessee. Even the finding of the learned Commissioner of Income-tax (Appeals) that it is not a case of any unexplained investment, has attained finality. In such circumstances and without any material, merely on assumption and presumption, the addition cannot be held to be justified. I, therefore, delete the addition made for the alleged discrepancies. 39.1 On issues other than discussed above, I agree with the order proposed by the learned Accountant Member. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT On account of difference between the Members hearing the appeals, the following questions are referred to the Hon'ble President, ITAT for appropriate action under the above referred to provision: "1. Whether on the facts and in the circumstances of the case, there is justification to allow further relief of Rs. 66,761 in estimating the cost of construction of S.C.Os. at Panchkula in assessment year 1991-92? 2. Whether on the facts and in the circumstances of the case, there is justification to allow relief of Rs. 3,5....
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.... 3. The aforesaid appeals were accordingly heard on 5-1-2004. 4. S/Sh. P.C. Jain and Pankaj Jain, the learned Advocates represented the assessees. Smt. Geet Mala and Sh. A.P. Kackria, the learned Sr. Departmental Representatives represented the department. 5, The learned counsels appearing for the assessees submitted that the learned Vice President has rightly granted a further relief of Rs. 66,671 in estimating the cost of construction of three shop-cum-office (S.C.O.) at Panchkula in assessment year 1991-92. The learned counsel submitted that the Assessing Officer had referred the matter relating to determination of cost of construction to the D.V.O. The D.V.O. originally valued the property of three S.C.Os. at Rs. 67 lakhs as against the total investment shown in the construction by all the eight co-owners to the tune of Rs. 28,99,150. Out of the total cost of construction, the D.V.O. estimated the cost of construction of these three S.C.Os. at Rs. 13,35,236 pertaining to assessment year 1991-92, the year under consideration, as against investment shown by the co-owners amounting to Rs. 5,61,500 including the amount of Rs. 2,50,000 and Rs. 1 lakh disclosed/surrendered b....
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....ly supported by various documentary evidence submitted before the learned Departmental Authorities. The learned counsel invited my attention to para 9 of the order in which it was pointed out that the rate of premium applied by the D.V.O. in relation to various items contained in his valuation report was substantially higher than the premium applied by registered valuer. He pointed out that the item-wise difference on account of application of higher premium was submitted in a detailed chart placed at pages 96 to 99 of the compilation. The total difference on account of this one factor was more than Rs. 2 lakhs. The fact stated in paras 9 and 10 of the order proposed by the learned Vice President is fully supported by such comprehensive details placed at pages 96 to 99 before the learned Departmental Authorities as well as before the Tribunal. Likewise as regards the next major objection relating to quantity of steel taken by the D.V.O. as compared to the quantity estimated by the Registered Valuer, an expert opinion was also submitted before the learned Departmental Authorities, which supports the estimate of the Registered Valuer. It was also pointed out before the learned Depart....
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....d cost of construction should be deleted but as the scope of powers of Third Member is limited to chose one of the two dissenting views, he will not urge for deletion of the total addition made in the declared cost of construction. But the aforesaid judgment of Hon'ble Supreme Court fully supports the further relief of 5% granted by the learned Vice President. The learned counsel also placed reliance on judgment of Hon'ble Rajasthan High Court in CIT v. Pratapsingh Amrosingh Rejendra Singh & Deepak Kumar [1993] 200 ITR 788 to support his contention. 7. As regards the next point of difference mentioned in paras 2 and 3 of questions referred under section 255(4), the learned counsel submitted that Sh. Surinder Pal Verma surrendered a sum of Rs. 2,50,000 in his statement recorded under section 132(4) and also in the return of income furnished by him. Likewise, Smt. Neelam Verma had also surrendered a sum of Rs. 1 lakh in her statement under section 132(4) as well as in the return of income furnished by her for assessment year 1991-92. The aggregate amount of Rs. 3,50,000 was surrendered by these co-owners out of 8 co-owners, towards cost of construction of these three S.C.Os. Such ....
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....to addition of Rs. 1,64,584 for alleged discrepancy in the stock found during the search. The learned counsel contended that the Commissioner of Income-tax (Appeals) has held that the difference in stock to the extent of Rs. 2,93,759 has not been satisfactorily explained by the assessee. The aforesaid sum consists of the following items noted in annexure 'P' of Panchnama dated 11-12-1990 prepared at the time of search: - Rs. Goods recd. from M/s Sharda Plywood vide Bill No.267, dt. 30-11-1990. But yet to be posted in purchase A/c. 47,889 (Advice No.246) -do- of Sharda Plywood Ind. 1,65,065 Bakelite Hylam Ltd. Chall. Nos. 6658 & 6672 Dated 4-12-1990 & 6-12-1990 81,805 -------- &n....
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....is reproduced below: "This is certified that truck No. AMK 3764 carrying plywood from Assam to Panchkula had crossed S.T.C.B., Ramgarh on 10-12-1990 between 9 to 10 P.M. and stand entered in non-taxable register of this barrier. The goods had been declared at first entry barrier of Haryana State and the form ST 38 was submitted there." 12. He also brought to my notice certificate issued by Bakelite Hylam Limited, placed at page 50 of the Paper Book which is reproduced below: - "This is to certify that material dispatched from our factory premises at Hyderabad for Chandigarh and its surroundings reach within a period of 7 to 8 days through trucks. This is further certified that goods in r/o advance challan No.6658 dated 4-12-1990 and challan No.6672 dated 6-12-1990, sent to M/s. T.L. Verma & Co., Panchkula were dispatched to them on 11-12-1990 after receiving the same from our factory at Hyderabad. The challans are sent to the party in advance in confirmation of their order." 13. The truck No. AMK 3764 carrying plywood from Assam to Panchkula represents the purchase price of material purchased by the assessee from M/s. Sharda Plywood Industries, Assam for Rs. 47,889 and ....
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....ngly supported the order proposed by the learned Accountant Member in this regard also. 14. Smt. Geet Mala, the learned Sr. Departmental Representative strongly supported the order proposed by the learned Accountant Member and also relied upon the elaborate reasons recorded in the orders of the learned Departmental Authorities. She drew my attention to para 5 of the order passed by the Commissioner of Income-tax (Appeals) in the case of Smt. Manjit Verma. It has been observed by the learned Commissioner of Income-tax (Appeals) that the counsel of the appellant, as well as Registered Valuer raised no objection regarding measurement, rates applied etc. Thereafter, the Commissioner of Income-tax (Appeals) has considered other objections raised by the assessee in relation to the revised Valuation Report submitted by the D.V.O. She contended that the learned Commissioner of Income-tax (Appeals) has adopted a detailed procedure relating to determination of fair estimate of the cost of construction. He asked the D.V.O. to submit a revised Valuation Report after taking into consideration the report of the Registered Valuer and after inspecting the property once again in the presence of ....
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....the physical inventory of stock prepared during search, in spite of the fact that these bills were specifically included for determining the stock as per books of account maintained by the assessee. The explanation given by the assessee is, therefore an after thought and has rightly been rejected by the learned Commissioner of Income-tax (Appeals). She submitted that she has no choice after dissenting orders have been proposed by the two learned Members except to support the order of the learned Accountant Member to set aside the matter back to the Commissioner of Income-tax (Appeals). She however, submitted that it is a strong case where addition confirmed by the Commissioner of Income-tax (Appeals) ought to have been upheld by the Tribunal. 17. In rejoinder, the learned counsel appearing for the assessee submitted that the Commissioner of Income-tax (Appeals) in assessment year 1990-91 has quashed the proceedings initiated under section 148 and no action was taken by the Assessing Officer for assessment year 1989-90. Thus the declared cost of construction made in preceding year has been accepted by the Department. It was also submitted by the learned counsel that in a case whe....
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....osed sales relatable to discrepancy in the stock. The Commissioner of Income-tax (Appeals) specifically mentioned that both these additions sustained by him aggregating to Rs. 2,50,000 are covered by the amount of income surrendered by Shri Surinder Pal Verma to the tune of Rs. 2,50,000 in his return of income. Thus, the two additions partly confirmed by the Commissioner of Income-tax (Appeals) were held to be covered by the disclosure of income of Rs. 2,50,000 made by the assessee in the return of income. The Revenue has accepted such order of the Commissioner of Income-tax (Appeals). The net effect of the order of the Commissioner of Income-tax (Appeals) accepted by the Revenue is that both the additions so made by the Assessing Officer have been deleted by the Commissioner of Income-tax (Appeals) as the part additions sustained by him are fully covered by the amount of Rs. 2,50,000 shown by the assessee himself in the return of income. The Assessing Officer is, therefore, only required to include the said sum of Rs. 2,50,000 while computing taxable income of the assessee, as was declared by the assessee in the return of income. No addition beyond what was declared by the assesse....
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....ice President for estimating the cost of construction of S.C.Os at Panchkula in the year under consideration, namely in assessment year 1991-92. It is true that the learned Commissioner of Income-tax (Appeals) has adopted a detailed procedure in order to arrive at a fair and reasonable estimate of cost of construction. He has required the D.V.O. to submit a revised report after taking into consideration the report of the Registered Valuer and after inspection of the property once again, in the presence of the Registered Valuer. The revised report submitted by the D.V.O. itself shows that the original valuation made by him was extremely arbitrary and excessive. The revised report so submitted by the D.V.O. has resulted in reduction of estimate of cost of construction to 66.34% of the cost of construction as per first report. The Commissioner of Income-tax (Appeals) thereafter has granted relief in respect of self supervision @ 10% and relief on account of service charges to the tune of Rs. 10,000. The Commissioner of Income-tax (Appeals) has also accepted assessee's contention that part of the cost of construction to the tune of Rs. 67,866 was met by the tenants. The learned Commiss....
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....the report of the D.V.O. and the Registered Valuer. The learned Commissioner of Income-tax (Appeals) has not given any relief in relation to the major items of differences indicated in the said chart which relate to the cost of steel reinforcement, the percentage of premium applied by the D.V.O. at substantially higher figure in relation to number of items shown in the chart at pages 96 to 98 lying in ITA No. 601/Chandi/95 as compared to the premium rate applied by the Registered Valuer. The matter relating to estimation of the cost of construction is guesswork. The Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 at page 615 has observed as under: - "The object of imposing the condition of difference of 15% or more between the fair market value of the capital asset and the consideration declared in respect of the transfer clearly is to save the assessee from the rigour of sub-section (2) in marginal cases where difference in subjective valuation by different individuals may result in an apparent disparity between the fair market value and the declared consideration. It is a well-known fact borne out by practical experience that the determination of f....
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....e said amount of Rs. 2,50,000 offered during the search. In the statement recorded during search, it was clearly indicated that this surrender of Rs. 2,50,000 is being made for investment in the construction of S.C.Os and for difference in stock, if any. It should be appreciated that the statement during search was made without the assistance of his accounts or relevant records and details for his ready information, The assessee is clearly entitled to modify or clarify the manner of its utilization after necessary verification of the relevant facts from his accounts and other relevant records. Similarly, Smt. Neelam Verma had declared an aggregate amount of Rs. 1 lakh in her statement recorded during the search. It is true that she had originally disclosed an income Rs. 50,000 in each of the two years, namely, assessment years 1990-91 and 1991-91. She however, modified her statement while filing the return of income for assessment year 1991-92 and stated that the surrender of amount of Rs. 1 lakh relates to assessment year 1991-92 and the same has been utilized in construction of the three S.C.Os in the year under consideration. She has not retracted from her statement recorded dur....
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....s. 3,50,000 offered for tax by Shri Surinder Pal Verma and Smt. Neelam Verma should be adjusted against the cost of construction of three S.C.Os incurred in assessment year 1991-92 and only the balance amount of Rs. 2,64,408 should be treated as unexplained investment, which should be added in the hands of the remaining six co-owners (other than Shri Surinder Pal Verma and Smt. Neelam Verma). After giving a very deep and thoughtful consideration to the entire relevant facts, I am of the considered opinion that the view taken by the learned Vice President is more appropriate, reasonable and justified. I am, therefore, inclined to agree with the learned Vice President in relation to this point also. 26. Now, I will consider the last point of difference relating to addition of Rs. 1,64,584 for alleged discrepancies in the stock found in search. This addition relates to the case of Shri Surinder Pal Verma. I have already stated here-in-before that while confirming the addition of Rs. 1,64,584 in the case of Shri Surinder Pal Verma, the learned Commissioner of Income-tax (Appeals) had observed that this amount will be covered by income of Rs. 2,50,000 surrendered by him in the return....
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.... goods were dispatched from Hyderabad on 11-12-1990. Therefore, the question of their inclusion in the physical inventory of stock does not arise. The Assessing Officer has not brought any material on record in rebuttal of the aforesaid submission made on behalf of the assessee. 28. It is well settled law that the powers of remand should be used sparingly and only in cases where the Tribunal, after examination of material already placed on record by way of evidence, takes a view that it is not possible for it to make a just order without the assistance of further evidence. In the present case a period of more than 12 years has passed. The assessee furnished documentary evidence in support of the explanation given for reconciling the difference in the stock. Such an explanation has been disbelieved by the learned Departmental Authorities. The learned Vice President has given elaborate reasons while accepting the correctness of the aforesaid explanation. In view of the aforesaid facts and circumstances, I am of the considered opinion that it will not be just and appropriate to restore back the issue to the Commissioner of Income-tax (Appeals) after a gap of more than 12 years. It ....