TaxTMI 
TaxTMI 
2019 (3) TMI 905
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....roper and against the principles of natural justice. 2. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in passing the order without giving adequate opportunity of being heard. 3. The Ld. Commissioner of Income-tax (Appeals)has erred in law and on facts in sustaining the addition u/s 69 of Income-tax Act on account of unexplained investment in the following properties on the basis of report Ld. Valuation Officer, which itself suffers from various infirmities: i. Plot No. 28, 29, 30 &31, Gaura Bagh, Lucknow. ii. Plot No. 37 & 38, Gaura Bagh, Lucknow iii. Plot No. 25 & 26 Gaura Bagh, Lucknow iv. Plot No. 35, 45, 46 & Khasra No.45 situated at Gaurabagh, Kursi Road, Lucknow (1/2 share, other 1/2 share belonging to Shri Mahesh Singh Patel). 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in not giving full benefit of amount surrendered by Shri K. N. Singh Patel, 5. The Ld. Commissioner of Income-tax (Appeals) has erred in law and on facts in not granting relief sought by the appellant in appeal. 6. The appellant craves leave to add, amend, alter or withdraw any ground of appeal or raise any new ground of appeal d....
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....trate the source of funds for making investment in various immoveable assets and in reply the assessee submitted that the plots were purchased by her in various years and construction was done by her father-in-law and the construction cost was duly covered by the declaration of surrender made by her father-in-law Shri. K. N. Singh Patel. The reply of the assessee to this effect as reproduced by the Assessing Officer at page 17 of his order is reproduced below:- 1. Plot No. 25 at Gaurabagh, Kursi Road, Lucknow. Purchased on 03.07.2007 for Rs. 2,29,760/- in cash. 2. Plot No. 26 at Gaurabagh, Kursi Road, Lucknow. Purchased on 02.06.2003 for Rs. 1,51,800/- vide demand draft no. 181040 dated 30.05,2003 for Rs. 1,28,000/- and balance in cash. It has further been stated by assessee that construction on both the above plots 25 & 26 was done by father-in-law of assessee Shri K.N. Singh Patel in the financial year 2007-08. The cost of construction has been included by him in the surrendered amount of Rs. 90 lacs in that year. 3. Plot No, 28-29 at Gaurabagh, Kursi Road, Lucknow. Purchased on 30.05.2003 for Rs. 3,03,600/- vide demand draft no. 181010 dated 24.05.2003 for Rs. 2,56,000....
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....ed to the assessee, the assessee submitted that the investment made in assessment year 2002-03 cannot be taken into account, as the same was beyond the period covered under search. However, the Assessing Officer did not accept the contention of the assessee and instead he divided the amount of investment in assessment year 2002-03 into six years and added back the proportionate amount from assessment years 2003-04 to 2008-09. After taking into account all these factors, the Assessing Officer held that the assessee had made total investments in various years as under:- A.Y. Total investment during the year 2003-04 99,77,772/- 2004-05 3,13,331/- 2005-06 71,02,423/- 2006-07 65,25,577/- 2007-08 48,97,496/- 2008-09 53,98,482/- 2009-10 12,65,195/- Total Rs.3,54,80,276/- 6. The Assessing Officer after noting down the investments made by the assessee on the basis of DVO's report and other adjustments, allowed the benefit of declaration made by Shri. K. N. Singh Patel during the respective assessment years. The respective assessment years for which Shri. K. N. Singh Patel had made surrender in the name of the assessee and as considered by the Assessing Officer are as unde....
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....c view of the issue and should have considered the entire surrender amount with respect to the declaration made by Shri K. N. Singh in the case of assessee irrespective of difference in years. 8. On appeal before the ld. CIT(A), the ld. CIT(A) deleted part additions made by the Assessing Officer which were made by the Assessing Officer in various six years starting from assessment year 2003-04 and which was based on the investments made before assessment year 2002-03 by holding that the investment made before assessment year 2002-03 were not covered by the search period and, therefore, the action of the Assessing Officer in dividing the investment of assessment year 2002-03 into six parts and allocating the same to six assessment years was not justified and, therefore, he deleted the same. The ld. CIT(A) also allowed relief to the assessee by ignoring the Valuation Report estimates as the difference between declared value and valuation report was less than 15%. 9. For the sake of convenience, the year-wise findings of the ld. CIT(A) are reproduced below:- ASSESSMENT YEAR 2003-04: "3.7.3. I have considered the submission made. The assessee was found to have invested in land f....
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....#39;is not possible. The valuation of the immovable property is also estimated on the basis of the facts and circumstances. Therefore, it could not be said that whatever the Valuation Officer had stated was final word in the matter. The word 'estimate' itself suggests that there is always possibility of some amount of inaccuracy and uncertainty. It was, therefore, obvious that report of the 'Valuation Officer could not be held as true and correct. There is always a room for error or omission. The Commissioner (Appeals) was justified in allowing 10 per cent relief on account of difference of opinion. Keeping in view the entire facts of the present case, the Commissioner (Appeals) had correctly decided the issue and, therefore, there was no reason to interfere with his order. In the result, the appeal was to be dismissed. 3.7.4. In the case of Bimla Singh v. CIT [2009] 308 ITR 71/222 CTR (Pat.) 404 during search it was found that the assessee had made huge investment in house property. According to the assessee they had invested a sum of Rs. 11,15,000 in construction of the house but according to the report of the valuer, cost of construction was Rs. 12,99,700. It....
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....9,406 2,93,00,465 3.7.6 Similarly, the share of the assessee in the building at Plot No. 35, 45 & 46, Khasra No. 45, Gaura Bagh, Kursi Road, Lucknow is taken as that shown by the assessee himself and assuming 50% share of the appellant as the difference in the estimate of the DVO and the investment shown by the assesses works out to 10.22% and can be ignored: TABLE-B A.Y. Total investment as shown by the assessee Share of Smt. Anju Singh Patel 2202-03 1750000 875000 2003-04 2030000 1015000 2004-05 276800 138400 2005-06 258000 129000 2006-07 257000 137500 2007-08 225000 112500 2008-09 3578200 1789100 Total 8393000 4196500 3.7.7 The total investment (in Rs.) in various years accordingly works out as under:- TABLE-C A.Y. investment as per Table-A Investment as per Table-B Total investment during the year 2002-03 5552400 875000 6427400 2003-04 2485258 1015000 3500258 2004-05 0 138400 138400 2005-06 6618442 129000 6747442 2006-07 5937917 137500 6075417 2007-08 4431658 112500 4544158 2008-09 3100390 1789100 4889490 2009-10 1174400 NIL 1174400 For the year under consideration....
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....awn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the IT, Act, 1961. (iv) Plot No. 31 purchased for Rs. 1,28,000/- by the way of demand draft ana1 stamp duty amounting to Rs. 23,800/-. It has not been made clear as to from "which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s. 69 of the I. T. Act, 1961. Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs. 8,06,600/- which is being added to the total income of the assessee u/s 69 of the LT. Act, 1961. Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 are being initiated separately for this default (Addition, Rs. 8,06,600/') 4.3.1. During the course of the appeal, the appellant has submitted as under:- III - Purchase of other pr....
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....ration, no amount had been offered as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant. 5.3 Grounds No. 8 and 9 are against the addition of Rs. 286500 made by the .Assessing Officer by observing as under:- "The position of undisclosed investment in respect of above referred properties with regard to cost of acquisition is as under:- (i) Plot No. 418 &420 at Mahona, Bakshi Ka Talab purchased for Rs. 2,00,000/- by the way of demand draft and stamp duty amounting to Rs. 86,500/-. It has not been made clear as to from which bank account this amount has been withdrawn. In the available bank accounts, no such entry is seen. This amount has, therefore, been paid out of the undisclosed income of the assessee and is, therefore, added to his total income u/s 69 of the I. T. Act, 1961. Therefore, the total undisclosed investment in respect of cost of acquisition of properties is Rs,2,86,500/- which is being added to the total income of the assessee u/s 69 of the I.T. Act, 1961, Satisfaction is recorded that the assessee has furnished inaccurate particulars of his income and, therefore, penalty proceedings u/s 271(1)(c) of the I.T. Act, ....
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....on is reduced to Rs. 4544158 in place of Rs. 4897496 made by the Assessing Officer resulting into consequential relief. Ground no. 7 is rejected as for the year under consideration, no amount had been offered as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant. . 7.3 Grounds no. 8 and 9 are general in nature and do not require any separate adjudication. 7.4 In the result, the appeal for A.Y. 2007-08 is partly allowed." 14. In assessment year 2008-09, the ld. CIT(A) allowed part relief by holding as under:- "8.1 Grounds no. 1, 2, 3 and 4 are rejected in view of the findings made in paras 3.3, 3.4.1, 3.5 and 3.6 in respect of these grounds of appeal in the appeal for A.Y. 2003-04. 8.2. Grounds no. 5 is partly allowed in view of the finding in paras 3.7 to 3.7.7 and the investment worked out is reduced to Rs. 4889490 in place of Rs. 5398482 made by the Assessing Officer. The Assessing Officer has not made any addition on account of unexplained investment in construction as a sum of Rs. 9000000 had been offered as undisclosed investment by Shri K. N. Singh Patel relating to the investment made by the appellant while the total in....
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....he authorities below had made additions where the investments made by the assessee was more than the amount declared by Shri K. N. Singh in that particular year. The ld. A.R. of the assessee submitted that this action of the authorities below is not justified at all, as the undisputed fact is that the properties in all the years remained the same and the surrender by K. N. Singh Patel was made against same properties. It was argued that the authorities below should have considered total value of various properties with the surrender amount of Shri K. N. Singh and should not have considered the comparison on year-to-year basis. It was further argued that even if the investment is to be considered year-wise, then in those years where the amount of surrender was more than the investment, the same should have been carried forward for adjustment in the next year. The ld. A.R. of the assessee further argued that in all the years, the ld. CIT(A) has ignored the valuation arrived at by the Valuation Officer by holding that the difference between the declared value and those estimated by the Valuation Officer was less than 15% and the ld. CIT(A) has accepted the valuation declared by the as....
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..../8/2010 which the Assessing Officer has rejected merely by saying that the name of the bank has not been given; whereas the name of the bank i.e. Allahabad Bank was mentioned in the said letter. The ld. A.R. of the assessee submitted that though investment was covered by explanation in letter dated 26/8/2010, but still addition can be set off against the surrender of Shri K. N. Singh. 19. Arguing the only ground No.5 of appeal in assessment year 2009- 10, the ld. A.R. of the assessee submitted that the Assessing Officer had made addition on account of low household expenses to the tune of Rs. 2.50 lakhs which was not based upon any incriminating material and the addition was made arbitrarily, therefore, it needs to be deleted. 20. The ld. D.R., on the other hand, placed reliance on the orders of the ld. CIT(A) and submitted that ld. CIT(A) has allowed substantial relief to the assessee wherever the year of investment and year of surrender was same. It was submitted that investment made by assessee in earlier years cannot be covered by surrender of Shri K. N. Singh in succeeding years. 21. We have heard the rival parties and have gone through the material placed on record. We fin....
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....that the deponent himself has been instrumental in setting up various "business entities" and/or creating various "source of income" acquisition of capital assets etc, and he himself has been playing a pivotal role in running and managing such "business entities'/'source of income" and "investments" appearing in the names of various business and other entities, "individuals", "groups of individuals", and in keeping with letter and spirit of the statements referred to in paras 8, 9 & 10 hereinfore, the deponent himself has owned the said disclosure of income of Rs. 10 Crores (Ten Crores) and he undertakes and agrees to pay taxes as are payable with reference to the same. 12. That, in this respect, it is clarified that pursuance of the said undertaking, the deponent himself had already arranged for payment of taxes aggregating Rs. 1 Crores, through four separate cheques, as per particulars given below:- Sl. No. Cheque No. Date Amount (Rs.) (i) 836761 15/12/2008 25,00,000 (ii) 836763 25/12/2008 25,00,000 (iii) 836762 05/01/2009 25,00,000 (iv) 836764 25/01/2009 25,00,000 which have been drawn on his own Bank Account No. 2410000100132967 at Punjab National Ba....
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....ruction & acquisition of Capital Assests At Gaura Bagh, Kursi Road, Lucknow 75,00,000 (ii) Anju Singh & Mahesh Singh Construction & acquisition of Capital Assests At Gaura Bagh, Kursi Road, Lucknow 22,00,000 (iii) Other unexplained investment/ Expenditure Etc. 2,00,000 Total 99,00,000 (b) Financial Year 2003-04 SI. No. Name Head of ExpenditureAnvestment etc. Rs. (i) Mahesh Singh Construction & acquisition of Capital Assets at Farm House Chandrika Devi Road 70,00,000 (ii) Other unexplained investments/ Expenditure etc 3,005000 Total 73,00,000 (c) Financial Year 2004-05 SI. No. Name Head of Expenditure/Investment etc. Rs. (i) Other unexplained investments/ Expenditure etc. 5,00,000 Total 5,00,000 (d) Financial Year 2005-06 SI. No Name Head of Expenditure/Investment etc. Rs. (i) Smt. Rajni Patel Construction & acquisition of Capital Assests At Gaura Bagh, Kursi Road, Lucknow 30,00,000 (ii) Anju Singh Land at Aadar Khera BKT 3,00,000 Megha Workshop 2,00,000 (iii) Sanatan Cold Storage Ltd. Loan to Farmers 75,00,000 (iv) Oth....
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....epartment, the deponent has been advised to surrender the same as additional income for being taxed solely in his hands, irrespective of the names in which the investment/expenditure etc stands/incurred. 18. That the disclosure is being made by the deponent in a bonafide manner and with a view to extend all the cooperation to the Income Tax Department, so as to avoid litigation and to buy mental peace for the deponent himself and his family members, and for the sake of expeditious completion of assessment and/or other related proceedings. 19. That the additional income as aforesaid, has been surrendered on the stipulations that: - (i) the statements that is being given in terms of the present sworn statement should be treated as statement given by the deponent under section 132(4) read with explanation 5 to section 271(1)(c). (ii) the income so disclosed by the deponent should be treated to cover the effect of all such material/ information, in whatever form, that had been found during the course of search/ survey and/or that may be found to be so related later to the said search/survey in *Patel Group* as a whole, that had commenced on 19.11.2008. (iii) entire income as ....
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....sessee, the amount of addition, as sustained by the ld. CIT(A) is as follows:- Assessment year 2003-04 Rs.35,00,258/- Assessment year 2004-05 Rs.1,38,400/- Assessment year 2005-06 Rs.67,47,442/- Assessment year 2006-07 Rs.60,75,417/- Assessment year 2007-08 Rs.45,44,158/- Assessment year 2008-09 Rs.48,89,490/- Assessment year 2009-10 Nil Total Rs.2,58,95,165/- 24. Against the above year-wise sustained addition, the ld. CIT(A) allowed relief to the assessee on account of his surrender in various years and upheld the addition for balance while he ignored the excess surrender during some years. The working of such addition is as per table below:- Assessment year Addition sustained by ld. CIT(A) Relief allowed on account of surrender Net addition Excess surrender ignored 2003-04 Rs.35,00,258 Rs.86,00,000/- Nil Rs.50,99,742/- 2004-05 Rs.1,38,400/- Nil Rs.1,38,400/- Nil 2005-06 Rs.67,47,442/- Nil Rs.67,47,442/- Nil 2006-07 Rs.60,75,417/- Rs.60,75,417/- Nil 2007-08 Rs.45,44,158/- Nil Rs.45,44,158/- Nil 2008-09 Rs.48,89,490/- Rs.90,00,000/- Nil Rs.41,10,510/- 2009-10 - Rs.1,25,00,000/- Nil Rs.1,25,00,000/- Total Rs.2,58,95,1....
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....construction was done before 01.04.2002 as already mentioned in the report submitted by the DVO and in support to which affidavit of the assessee, before your honour is being enclosed at Annexure-A, B and C respectively. In addition to above we are enclosing the comparison at annexure-D, between the amount surrendered by the assessee in various properties and valuation done by the DVO of Income Tax Department. Your honour will appreciate that even if no leverage of variation of 15% is considered the amount surrendered is much more than the valuation done by the valuation officer Rs. 73,23,639.59 to be precise. It is hereby requested to considered the above facts before the finalizing the assessment and let us know if any other explanation/clarification is required by your honour in this regard." A reconciliation chart of valuation and surrender has been submitted by the assessee which is as under: 1. Total value as per valuation officer 213,262,452.55 2. Less:Expenses prior to FY 02-03 as per valuation report -19,914,044.14 3. Less:Expenses incurred after FY08-09 -71,093,822.00 4. Remaining valuation for the period Between FY 02-03 to 08-09 122,254,586.41....
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....tion of the properties and the cost of acquisition of land has not been considered by him. Whereas, in the total amount of surrender the cost of acquisition as well as the cost of construction both are included by Shri K.N. Singh Patel. As has been seen above, the total surrendered amount against construction and acquisition of capital assets is Rs. 7,72,00,000/- as per the affidavit. The valuation officer has estimated the cost of construction at Rs. 21,32,62,452/-. Out of this, the amount incurred after F.Y. 2008-09 is Rs. 7,10,93,822/- and the amount invested by various assessees as per books is Rs. 5,23,78,226/-. The balance amount left, therefore, is Rs. 8,97,90,404/- and this does not include the cost of acquisition of various properties. Therefore, the actual net difference in the cost of construction as estimated by the valuation wing and as surrendered by Shri K.N. Singh Patel is actually much more than being claimed by the assessee now. The benefit of surrender made by Shri K.N. Singh Patel is, therefore, being restricted in respective hands only to the extent of surrendered amount which includes the cost of acquisition of assets. The difference in cost of const....
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....n this case, we deem it appropriate that Assessing Officer should consider Valuation Officer's valuation of various properties irrespective of year of investment. While doing so, the Assessing Officer should compare the total investment during search period as valued by registered valuer towards various properties. For the purpose of comparison, the construction done before and after the search period has to be ignored. If the difference between such valuation of property in the search period exceeds the surrender amount for that property, the difference has to be assessed as income of the assessee. In view of the above, ground No. 4 in all the appeals relating to assessment year 2003-04 to 2008-09 is allowed for statistical purposes. 27. Now coming to ground No. 5 in assessment year 2004-05, we find that Assessing Officer had made addition of Rs. 8,06,600/- which the learned CIT(A) has reduced to Rs. 1,66,600/-. The learned CIT(A) has allowed part relief by holding that the assessee had made withdrawals of Rs. 5,12,000/- and Rs. 1,08,000/- for purchase of land vide two different cheques. The balance of Rs. 1,66,600/- has been upheld and learned CIT(A) held that no evidence was fi....