Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax,, vs Shri Namdeo Narayan Chaudhary,, ... on 6 April, 2018
आयकर अपीलीय अिधकरण,
अिधकरण पुणे यायपीठ "बी
बी"
बी पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी डी.
डी क णाकरा राव , लेखा सद य
एवं ी िवकास अव थी,
अव थी याियक सद य के सम
BEFORE SHRI D.KARUNAKARA RAO, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.1266 & 1267/PUN/2016
िनधा रण वष / Assessment Years : 2006-07 & 2008-09
DCIT, Central Circle-2,
Nashik .... अपीलाथ /Appellant
Vs.
Shri Namdeo Narayan Chaudhary,
11, Swed Bindu, Shanti Nagar,
Yawal Road, Bhusawal,
Jalgaon - 425 201
PAN : AAQPC1997C .... यथ / Respondent
Appellant by : Smt. Nirupama Kotru, CIT-DR
Respondent by : Shri Nikhil Pathak
सुनवाई क तारीख / घोषणा क तारीख /
Date of Hearing : 02.04.2018 Date of Pronouncement: 06.04.2018
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
There are two appeals filed by the Revenue under consideration against the combined order of CIT(A)-12, Pune, dated 15-03-2016 for the Assessment Years 2006-07 & 2008-09.
2. We shall first take up the appeal of the Revenue for the A.Y. 2006-07.
ITA No.1266/PUN/2016
A.Y. 2006-07
3. Grounds raised by the Revenue are extracted here as under :
"i. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the addition of Rs.52,13,333/- on account of undisclosed investment in property ignoring the fact that the assessee failed to furnish the required documents.2
ii. On the facts and in the circumstances of the case, whether the Ld.CIT(A) is justified in restricting the addition of Rs.17,95,192/- to the tune of Rs.2,47,612/- ignoring the fact that the assessee failed to substantiate the interest expenditure as claimed in the P&L A/c.
iii. On the facts and in the circumstances of the case, whether the Ld.CIT(A) is justified in deleting the addition of Rs.5,00,000/- which was added on account of LTCG as the assessee failed to justify the taxation of profit on sale of capital assets.
iv. Any other ground that may be urged at the time of hearing."
Ground-wise adjudication is given in the following paragraphs.
4. Ground No.1 by the Revenue relates to deletion of addition of Rs.52,13,333/- made by the AO on account of undisclosed investment in the property.
5. Briefly stated relevant facts include that the assessee is an individual. There was search and seizure action u/s.132 of the Act in the Chadhary group of cases, Bhusawal on 04-10-2011. Assessee was also covered in the said search. During the course of assessment proceedings in the case of Shri Rajesh Prakash Chaudhary of the group, the AO noted that loan sanctioned by UCO Bank to Shri Rajesh P. Chaudhary against the security of land situated at S.No.240/3A/3B/3C at Sakegaon, standing in the names of the assessee, Shri Bhagwat N. Chaudhary and Shri Shri Mahesh B. Chaudhary. For the purpose of loan, the valuer of the Bank valued the property at Rs.1,87,68,000/- as on 04-02-2006. In the assessment, AO gave 20% allowance on this assessed value being higher than the actual investment and the cost price of the property was thus taken at Rs.1,56,40,000/-. Thus, 1/3rd of the amount works out to Rs.51,13,333/-. In absence of any details about the investment in the property, in the balance sheet of the assessee, the AO proceeded to make addition of Rs.51,13,333/- in the hands of the assessee. Similar addition was made in the hands of other 3 co-owners too. In the First Appellate Proceedings, CIT(A) deleted the said addition. Aggrieved with the said order of CIT(A) the Revenue is in appeal before us raising the issue vide Ground No.1.
6. On hearing both the sides and on perusing the orders of the Revenue, we find the same issue has been dealt with by the Tribunal in the appeal filed by Mr. Mahesh B. Chaudhary - ITA No.629 to 634/PUN/2016, dated 17-01-2018 and dismissed the appeal filed by the Revenue. We find the facts and the issue involved in the case of Mr. Mahesh B. Chaudhary and the property in question is one and the same. Further, on the same valuation report, 1/3rd amount was added on presumptive basis by the AO in the hands of the assessee too. CIT(A) also appreciated the fact that the property in question was purchased during FY 1999-2000 and was in the name of the HUF and further, the Revenue has no evidence that any amount was invested by the assessee in the said property. Thus, the CIT(A) has rightly deleted the addition. For the sake of convenience, the finding given by the Tribunal in the case of Mr. Mahesh B. Chaudhary (supra) is reproduced hereunder for the sake of completeness of the order :
"18. We heard both the sides and perused the orders of the Revenue on this issue. On going through the order of CIT(A) on this issue, we find it relevant to extract the relevant operational lines from the finding of the CIT(A) in Para No.7.3 of his order and the same reads as under :
"7.3 . . . . .I find merit in the contention of the applicant. It was noted that the AO did not permit personal hearing to the authorized representative of the appellant to explain the transaction on the pretext that appellant could not authorize more than one representatives u/s.288(1) of the Act and on the other hand did not verify the documents of purchase of the property in question and assumed that since property was not appearing in the balance sheet hence it was purchased on the date of valuation itself. No enquiry was conducted with the lending bank or with the valuer of the property. No evidence was found during the search to reach to the conclusion that investment was made during the year under consideration. On the other hand, appellant had satisfactorily demonstrated that property in question was purchased during FY 1998-99. No addition can be made on presumption and considering the facts of the case, addition made 4 by the AO of Rs.52,12,333 is deleted and ground raised by the Appellant is allowed."
19. From the above, it is evident that the property in question was purchased prior to the period of search and the AO made the addition on presumption basis. CIT(A) has appreciated the issue in the right perspective and deleted the addition. Thus, on merits, we find the order of CIT(A) is fair and reasonable. Regarding the additional evidence, the Ld. AR for the assessee filed the following written submissions :
"The Respondent submits that he has duly produced the copy of Purchase deed of the said land before the Ld. A.O. during the course of assessment proceedings wherein he has explained that the said land was purchased by the respondent prior to search period. It is apparent from the records that the respondent had purchased the said land prior to the search, hence the addition made by the Ld. AO. is unjustified and the Ld. CIT (A) is justified in deleting the said addition. Since, the purchase deed was produced before the Ld. AO. during the course of assessment proceedings, the question of calling for the remand report simply does not arise. Further I am enclosing herewith the copy of submission filed with the Ld. AO. wherein it is clearly stated that the Purchase deed of the said land was submitted in the paper book."
Accordingly, Ground No.4 raised by the revenue is dismissed." In view of the above, it is crystal clear that the issue stands covered in favour of the assessee and against the Revenue. Accordingly, Ground No.1 raised by the Revenue is dismissed.
7. Ground No.2 by the Revenue deletion of interest expenditure by the CIT(A) amounting to Rs.15,47,580/-. Briefly stated relevant facts include that the assessee claimed an amount of Rs.17,95,192/- as interest received from the partnership firm at Rs.2,47,612/-. Assessee could not substantiate his claim and therefore, the AO made addition of Rs.17,95,192/-. However, during the First Appellate proceedings, assessee furnished additional evidences. The additional evidences were forwarded to the AO for his comments. The AO after examining the said additional evidences reasoned that assessee has not furnished details of bank, summary of each loan to corroborate that funds were utilized for earning income from partnership firm and thus disallowed the same in 5 the hands of the assessee. CIT(A) after analyzing the computation of total income, capital account of M/s. B.N. Chaudhary and Sneus Hydel where the assessee is a partner. From the details furnished by the assessee, CIT(A) found that assessee has shown loss to the extent of Rs.15,47,580 under the head "income from other sources' and claimed Rs.2,47,612/- as expenditure being interest earned and has accepted the contention of the assessee that he paid interest on borrowed fund. Eventually, the CIT(A) gave relief of Rs.15,47,580/- and confirmed the addition of Rs.2,47,612/-.
8. We heard both the sides and perused the orders of the AO/CIT(A) on this issue. On perusing the finding of the CIT(A) given in Para No.8.3, we find it appropriate to reproduce the said finding for the sake of completeness :
"8.3 In view of the fact that proper opportunity was not given to the appellant and the document goes to the root of the matter, in the interest of substantive justice, additional evidence submitted by the appellant is admitted for adjudication. Primary contention of the appellant is that in the statement of total income, claim of interest expenditure was not made to the extent of Rs.17,95,192 but same claimed only to the extent of interest earned from the partnership firm and on bank account totaling to Rs.2,47,612. In support, computation of total income and other particulars were furnished. Copy of capital account of the appellant in the firm M/s.B.N. Chaudhary and Sneus Hydel in which he was partner was also furnished. ...............
...............................
...............................
From the details submitted it is apparent that appellant has worked out loss under the head "income from Other Sources" to the extent of Rs.15,47,580 after setting off interest income from partnership firm and saving bank account. In the computation of total income loss of Rs.15,47,580 computed under the head "income from other sources" was taken at NIL. In this manner contention of the appellant is right that he had paid interest on borrowed funds to the extent of Rs.17,95,192 but claimed expenditure only to the extent of Rs.2,47,612 being interest earned. In light of these facts, allowability of interest expenditure to the extent of Rs.2,47,612 needs to be examined. Appellant has not maintained regular books of account and from the ledger account of the books of the firm it has been claimed that loan taken by the appellant was invested in the firm to the extent of Rs.20,13,779/-. The appellant had earned interest of Rs.2,47,062/- on the investment in the firm and of Rs.550 from the bank savings and against which interest expenses of Rs.2,47,612. Appellant has furnished copies of loan statements taken 6 from various co-operative credit societies. However, no details were furnished to show nexus between the funds borrowed and its investment in the partnership firm or in the saving bank account. In the circumstances, set off of interest claimed against the interest income of Rs.2,47,612 cannot be allowed. Addition to the extent of Rs.2,47,612 is upheld and the appellant gets relief of Rs.15,47,580. Ground raised by the appellant is partly allowed."
9. From the above, it is undisputed that the assessee never debited the sum of Rs.15,47,580/- to the profit and loss account for claim of deduction. CIT(A) rightly observed the same. We find the CIT(A) has appreciated the facts in the right perspective and gave relief of Rs.15,47,580/-. Therefore, the said finding given by the CIT(A) is fair and reasonable and does not call for any interference. Accordingly, Ground No.2 raised by the Revenue is dismissed.
10. Ground No.3 by the Revenue relates to deletion of Rs.5,00,000/- on account of long term capital gains. Relevant facts include that during the year under consideration assessee sold a property for a consideration of Rs.15 lakhs and the interest amount worked out to be 1/3rd ( i.e.Rs.5,00,000/-) of the sale proceeds. Since the same was not offered to taxation by the assessee the AO proceeded to make addition of Rs.5,00,000/- in the hands of the assessee. Before the CIT(A) the assessee submitted that the property infact belonged to Shri Roopchand Chaudhary and was sold to Mr. Sanjay M. Patil. Assessee produced the relevant sale deed of the property and other details before the CIT(A). Considering the submission of the assessee and the relevant additional evidences thereof the CIT(A) deletion the addition of Rs.5,00,000/- in the hands of the assessee.
11. We heard both the sides on this issue. We find the CIT(A) as per the discussion given in Para No.9.5 has deleted the addition from the hands of the assessee by observing as under :
7
"9.5 In view of the fact that proper opportunity was not given to the appellant and the document goes to the root of the matter, in the interest of substantive justice, additional evidence submitted by the appellant is admitted for adjudication. Brief facts are that during the course of assessment proceedings in case of Shri Prakash N. Choudhary, copy of purchase deed dated 29.-11-2007 was perused by the AO and he noted that at S.No.344 was sold to Dr. Sudhir Vasudeo Narkhede and Dr. Nayana Sudhir Narkhee for sum of Rs.21 lakhs. The property was claimed to be ancestral property "Milkat Patrikecha Utara was found enclosed along with the purchase deed dated 29-11-2007. According to "Milkar Patrikecha Utara" land admeasuring 284 sq.mt. was sold to Shri Sanjay Murlidhar Patil and Smt. Tanuja (wrongly typed as Tanya in the assessment order) Sanjay Patil for Rs.15 lakhs on 21-12- 2005. According to AO, the appellant and other family members did not disclose capital gain on sale of land on 21-12-2005. Thereafter the AO added appellant's 1/3rd share of Rs.5 lakhs as long term capital gains. During the course of appellate proceedings it was submitted that land was ancestral property and part of the land sold to Sanjay Patil and Tanuja Patil was under the ownership of Roopchand Yeshwant Choudhary which was other branch of Choudhary family. Part of land which was in the possession of the family members of appellant group and sold on 29-11-2007 and which pertained to A.Y. 2008-09. These facts were found supported from the "Milkat Patrikecha Utara" where plot No.344 admeasuring 568 sq.mt was divided into two parts of 284 sq.mt. each. One part was given to Roopchand Yeshwant Choudhary who sold the same on 21-12-2005 to Mr. Sanjay Murlidhar Patil and Tanuja Sanjay Patil. ..................................... ..................................
..................................
The AO by mistake considered both the plots being owned by the appellant along with other family members. These facts were forwarded to the AO for his comments and in his submission AO did not object to the correctness of the facts. In view of the facts that appellant was not having any rights on the piece of land sold for consideration of Rs.15 lakhs, therefore, there was no justification of adding any gains in the hands of the appellant. Addition made by the AO of Rs.5 lakhs is deleted and ground raised by the appellant is allowed."
12. From the above, it is evident that the CIT(A) after considering the additional evidences produced by the assessee has decided the issue in favour of the assessee. On going through the facts and the order of CIT(A) we do not find any reason to reverse the order of CIT(A). Thus, Ground No.3 raised by the Revenue is dismissed.
13. In the result, appeal of the Revenue is dismissed.
Now we shall take up the appeal of the Revenue for A.Y. 2008-09. 8 ITA No.1267/PUN/2016
A.Y. 2008-09
14. Grounds raised by the Revenue are as under :
"1. On the facts and in the circumstances of the case, whether the Ld.CIT(A) is justified in restricting the addition of Rs.11,39,807/- to the tune of Rs.3,24,969/- ignoring the fact that the assessee failed to substantiate the interest expenditure as claimed in the P&L A/c.
2. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the addition of Rs.47,50,000/- on account of undisclosed investment in property ignoring the fact that the assessee failed to furnish the required documents."
15. Ground No.1 by the Revenue relates to deletion of interest expenditure of Rs.11,39,807/- by the CIT(A).
16. On hearing both the sides and after going through the orders of the AO and the CIT(A), we find the facts and issue are identical to Ground No.2 of the appeal raised by the Revenue for A.Y. 2006-07. We have already decided the issue in favour of the assessee and against the Revenue and dismissed the said ground. On facts, this amount was never debited to the profit and loss account of the assessee. Therefore, following the same reasoning, this ground by the Revenue is dismissed.
17. Ground No.2 by the Revenue relates to addition of Rs.47,50,000/- on account of undisclosed investment in the property.
18. Relevant facts include that during the assessment proceedings AO noted that loan was sanctioned by UCO Bank, Bhusawal Branch to M/s. BNC Power Projects Ltd. Three Properties jointly owned by the assessee and other two members of Chaudhary group were kept as collateral security for taking the loan. These properties were valued by the Bank before granting the loan. Based on the valuation report of the valuer, the value of three properties was worked out to Rs.2.71 Crores. AO proceeded to make the difference as addition. The assessee did not 9 reflect the same in the balance sheet and other two members. However, AO allowed 20% of the said value being higher than the actual investment and worked out the cost of properties at Rs.1,42,50,000/- and disallowed the assessee's share 1/3rd out of the same. In the First Appellate proceedings, CIT(A) deleted the said addition holding that the investments were made prior to the search. As such, the AO did not make any enquiry with the lending bank or with the valuer of the property. Alternatively, no contrary evidence was found in the search that the assessee made investment during the impugned assessment year. While doing so, CIT(A) also appreciated the fact that the assessee was not the owner of any of the properties under consideration in his individual capacity.
19. On hearing both the sides on this issue and on going through the facts of the case and the order of the Revenue, we find in principle this ground is identical to the ground No.1 raised by the Revenue for A.Y. 2006-07. We have confirmed the order of CIT(A) and dismissed the ground raised by the Revenue. Since the facts, issue, arguments of the parties are identical, we decide this ground against the Revenue. Accordingly, the Ground No.2 raised by the Revenue is dismissed.
20. In the result, appeal of the Revenue is dismissed.
21. To sum up, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on this 06th day of April, 2018.
Sd/- Sd/-
(VIKAS AWASTHY) (D. KARUNAKARA RAO)
याियक सद य /JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
पुणे Pune; दनांक Dated : 06th April, 2018
सतीश
10
आदेश क
ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent
3. The CIT(A)-12, Pune
4. CIT-12, Pune
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "B Bench" Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER,स
स यािपत ित //True Copy//
//True Copy// Senior Private Secretary
आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune