Income Tax Appellate Tribunal - Panji
Ito, Jaipur vs Smt. Anchal Agarwal, Jaipur on 3 August, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.73/JP/14
fu/kZkj.k o"kZ@Assessment Year : 2009-10
The ITO,Ward-1(3), Jaipur. cuke Smt. Anchal Agarwal,
Vs. C-137, Dayanand Marg,
Tilak Nagar, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAXPA6313R
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@Revenue by : Smt. Neena Jeph
fu/kZkfjrhdh vksj ls@Assessee by : Shri Manish Agarwal
lquokbZ dh rkjh[k@Date of Hearing : 19/06/2017
?kks"k.kk dh rkjh[k@Date of Pronouncement: 03/08/2017.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the Revenue against the order of ld. CIT(A)-I, Jaipur dated 20.11.2013 for A.Y. 2009-10. The grounds of appeal taken by the Revenue are as under:-
"1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 21,46,179/- made on account of difference in opening capital balance shown in the balance sheet.
2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.11,56,671/- made on account of undisclosed investment in construction of property.ITA No. 73/JP/14
ITO Vs. Smt. Anchal Agarwal,Jaipur
3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 4,00,000/- made on account of undisclosed investment in construction of house property.
4. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 20,00,000 made on account of income from undisclosed sources."
2. In ground no. 1 of revenue's appeal, the Revenue has challenged the deletion of addition of Rs.21,46,179/- made by AO on account of difference in opening capital balance as per the Balance Sheet found during the course of survey at third party premises and balance sheet submitted during the course of assessment proceedings.
3. Brief facts of the case are that a survey u/s 133A was carried out on 10.12.2009 at M/s Gravita India Ltd. (a company in which husband of assessee Sh. Rajat Agrawal is director), wherein assessee is one of the shareholder. During the course of survey, certain documents pertaining to assessee were found and impounded, which were considered by Ld. AO while completing assessment. Documents found during survey inter alia included print out of "Balance Sheet" report of tally software, in which the opening balance of capital account was appearing at Rs.18,54,035/-. However, as per final Balance Sheet furnished during the course of assessment proceedings, opening balance of capital was Rs.39,92,214/-. Therefore, the AO made addition of differential amount of Rs 21,46,179 which has been deleted by the ld CIT(A) and now the Revenue is in appeal against the said deletion.
4. The ld AR submitted that it was submitted before the AO that the printout of Balance Sheet found during survey was incomplete as certain entries were yet to be incorporated. In fact the final Balance Sheet submitted during the course of assessment proceedings was prepared after making all the necessary reconciliation and taken into consideration the adjustments 2 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur required for finalization of books of account and thus tallying with final report as per Tally software. It was further submitted that all the items of Balance Sheet were duly supported by information available on record, bank accounts and vouchers etc., however the same was not considered by AO and addition of Rs.21,46,179/-was made primarily alleging that:
- Since assessee could not furnish any records relating to her income from fashion/ apparel designing, books of accounts furnished by assessee were not accepted.
- Opening balance could not be accepted merely because of holding of assets in lack of evidences.
- No Balance Sheet was annexed with return of income.
- No Wealth Tax return was filed by assessee.
- Balance Sheet submitted during assessment proceedings was not supported by acceptable evidences.
It was further submitted that all the above allegations as pointed out by the ld. AO were duly explained before the ld. CIT(A) with a detailed submission as reproduced by ld. CIT (A) at pages 4 to 8 of the order, who after considering the same on merits has concluded that the Balance Sheet found during the course of survey was based on the incomplete records and assessee has duly demonstrated it with the help of the evidences and other material therefore no addition could be made.
It was further submitted that it is an established law that the assessee is entitled to complete the books of accounts found incomplete during the course of survey and the errors and omissions pointed out by the assessee during the course of assessment proceedings were remained un-rebutted by ld. AO though all detailed were submitted before him during the course of assessment proceedings. Further the ld. AO has failed to appreciate the fact 3 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur the in the same Balance Sheet the amount of opening Profit & Loss at Rs. 26,04,746.94 is appearing and if the same is added to the opening balance of capital at Rs. 19,38,341.94, the resultant balance is more than the capital balance appearing in the final Balance Sheet prepared on the basis of the completed books of accounts.
5. We now refer to the relevant finding of the ld. CIT(A) which are under challenge. The same are reproduced as under:-
"4. I have considered submissions made by the appellant and have also gone through the assessment order. It is noticed that the addition has been made by the AO primarily on the ground that in the course of survey carried out at the premises of M/s Gravita India Ltd. on 10/12/2009, a copy of balance sheet was found in which the capital as on 31/03/2009 was shown at Rs. 18,54,035/- while in the balance sheet filed with the return it was shown at Rs. 39,92,214/-. The difference in the amount of these two balance sheets was accordingly brought to tax by the AO. The AO did not accept the balance sheet filed with the return on the ground that the appellant had failed to furnish any supporting evidence for the opening capital and the books of account are not reliable.
4.1 It is, however, noted that while the documents found in the course of survey are presumed to be true, the presumption is a rebuttable one. It was so held by the Hon'ble Kolkata Tribunal in the case of Nirmal Fashions ( 25 SOT 387) and also by the jurisdictional High Court (124 ITR 111) with reference to sec. 132(4A).
In the present case a balance sheet pertaining to the appellant was found in the course of survey carried out on M/s Gravita India Ltd. It is further noted that the balance sheet furnished by the appellant along with the return shows that the opening account is matched by the available assets. Moreover, as mentioned by the appellant there are patent short comings in the balance sheet found during the course of survey which shows that this balance sheet was only a tentative one. The defects pointed out by the appellant, as mentioned in para 3 of her submission (supra), show that there were glaring and substantive short comings in the Balance Sheet found in the course of survey at the 4 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur Company's premises. These short comings include omission on both liabilities and assets sides. For example, there is a negative balance under the head loan (liability) against HDFC Bank while as per bank statement, the outstanding balance as on 31.03.2009 is Rs. 19.09 lakhs. The correct loan liability of IDBI Bank is also not reflected. All these defects need not be repeated here but are too glaring to be ignored. These discrepancies were also brought to the notice of the AO vide letter dated 28.02.2011, but these discrepancies pointed out by the appellant remain un-rebutted. In view of the serious short comings pointed out by the appellant in the balance sheet, it cannot be said that the Balance Sheet found in the course of survey reflected the correct state of affairs of the appellant and, therefore, it cannot be relied upon for making addition. It is further noted that no other factual defect has been found in the balance sheet furnished by the appellant along with the return. Therefore, the addition of Rs. 21,46179/- which is based only on the difference between the two balance sheets appears to be without any basis and is, accordingly, deleted.
6. The ld DR is heard who has vehemently argued the matter and relied on the order of the AO.
7. We have heard the rival contentions and perused the material available on record. The addition under consideration relates to difference in the opening balance in the capital account as on 1.4.2008 amounting to Rs 21,46,179. The difference has arisen on account of balance sheet recovered during the course of survey carried out at the premises of M/s Gravita India Ltd and the balance sheet which has been filed during the course of assessment proceedings.
In this regard, as we have noted above, the ld AR's contention is that it was submitted before the AO that the printout of Balance Sheet found during survey was incomplete as certain entries were yet to be incorporated. In fact the final Balance Sheet submitted during the course of assessment proceedings was prepared after making all the necessary reconciliation and 5 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur taken into consideration the adjustments required for finalization of books of account and thus tallying with final report as per Tally software. It was further submitted that all the items of Balance Sheet were duly supported by information available on record, bank accounts and vouchers etc., however the same was not considered by AO. The AO didn't accept the assessee's contention on account of various reasons. The reasons which merit attention are as follows: opening balance could not be accepted merely because of holding of assets in lack of evidences, no Balance Sheet was annexed with return of income, no Wealth Tax return was filed by assessee, balance Sheet submitted during assessment proceedings was not supported by acceptable evidences. In our view, these are valid reasons for not accepting the balance sheet filed during the course of assessment proceedings as the same was not supported by any acceptable evidence either in respect of opening capital balances or transactions undertaken during the year. Now, let's examine the findings of the ld CIT(A). Firstly, the ld CIT(A) states that "It is further noted that the balance sheet furnished by the appellant along with the return shows that the opening account is matched by the available assets." In this regard, the AO has stated that no balance sheet has been filed with the return of income and infact, the assessee in her submissions before the ld CIT(A) in para 4(d) states that the balance sheet as at 31.3.2008 has now been produced wherein assets have been shown and there are sufficient evidence that these assets were available with the assessee as on 31.3.2008." There are thus inherent contradiction in the facts and findings of the ld CIT(A). Further, there is no finding that the ld CIT(A) has verified or called for a remand report to verify the opening capital balances with the assets as on 1.4.2008.
Thereafter, the ld CIT(A) has discussed other so called glaring and substantive short comings in the Balance Sheet found in the course of survey at the 6 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur Company's premises and held that the Balance Sheet found in the course of survey reflected the correct state of affairs of the appellant and, therefore, it cannot be relied upon for making addition. In this regard, our observations are as follows. Firstly, it is relevant to note that assessee has filed her return of income on 31.7.2009, thereafter the survey was carried out on 10.12.2009 and even by that time, as per assessee's version, her balance sheet was incomplete and certain entries were yet to be incorporated. Typically, accounts are finalised and balance sheet and profit/loss account are prepared and thereafter, the return of income is lodged with the department. In the instant case, the assessee, being an individual and the fact that she is not required under law to maintain books of accounts, some relaxation can be given provided that when she is called upon by the department, she produces her correct state of affairs supported by books of accounts and financial statements. Therefore, in the instant case, what is relevant to examine is whether the balance sheet found during the course of survey was showing correct state of affairs of the assessee or not. As per the assessee, the said balance sheet was incomplete and doesn't show the correct state of affairs and after carrying out the necessary entries, a final balance sheet was filed during the course of assessment proceedings. Here, it is relevant to note that the AO then went about comparing the two balance sheets and found differences in the opening balances in the capital account and expenses under the head renovation which is again a ground of dispute dealt in subsequent paragraphs. The ld CIT(A) has given his findings in terms of other glaring differences in the two balance sheets and found the balance sheet found during the course of survey as not a reliable piece of evidence. In our view, what was equally relevant for the ld CIT(A) to examine and to give a finding relating to difference in the opening balance in the capital account as the same is the subject matter of disallowance. Merely because there were some discrepencies in the balance sheet, it cannot be said that all the entries in the 7 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur said balance sheet were wrong. Moreso, when the difference relates to opening capital balance which is brought foreward from the previous year. In our view, what was relevant to examine is the previous year balance sheet and the closing balance in the capital account and how the same is supported by corresponding net assets position. Further, we note that the opening capital is Rs 39,92,214 as reported in the balance sheet submitted during the assessment proceedings which is higher than the capital of Rs 18,54,035 as per balance sheet found during the course of survey. Therefore, it is to be examined whether any fresh capital has been brought-in by the assessee in her books of accounts and which has not been reported. We are accordingly setting aside the matter to the file of the ld CIT(A) to examine the same afresh in light of above discussions and as per law. In the result, the ground of the revenue is allowed for statistical purposes.
8. In ground no. 2, the Revenue has challenged the deletion of addition of Rs.11,56,671/- made by AO, being differential amount between amount shown under the head renovation expenses as per Balance Sheet found during survey and Balance Sheet submitted during the assessment proceedings.
9. Brief facts pertaining to this ground of appeal are that assessee and Smt. Shashi Agrawal, her mother-in- law are co-owners of House no.C-137, Dayanand Marg, Tilak Nagar, Jaipur. The said house property, purchased in May 2008, was not having enough space thus renovation and further construction was started in June 2008, for which a total sum of Rs.54,40,605/- was spent during the previous year, out of which 50% share i.e. 27,30,303/- being related to and were borne by assessee and duly disclosed as investment in construction of house property in final Balance Sheet. Since, the Balance Sheet found during survey reflected investment on account of construction at Rs.38,76,974/-, addition was made for differential 8 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur amount by alleging that accounts found during survey can be incomplete but not incorrect. The ld. CIT(A) had deleted the addition, hence the present appeal before us.
10. The ld AR submitted that the assessee was maintaining complete details alongwith supporting documentary evidences in respect of the construction expenses incurred by her. The figures appearing in the Balance Sheet are taken from various ledger accounts. As per these details, the assessee incurred sum of Rs.54,40,605/- towards the construction / renovation of the house during the financial year 2008-09 and thereafter Rs.27,20,302.50 being 50% of the total sum so incurred has been debited to Mrs. Shashi Agrawal, mother-in-law and co-owner of the property to the extent of 50%. The ledger account of Mrs. Shashi Agrawal is at APB 150.
11. It was further submitted that for estimation of construction expenses, Ld. AO referred the matter to the Valuation Cell. The valuation officer also gave report without any deviation from the amount of expenditure shown as per the final Balance Sheet. Accordingly, the figures of construction expenses shown in the final Balance Sheet are duly backed by bills, vouchers, payment details etc. and further supported by report of Valuation Officer, which is completely independent having no scope of manipulation should be accepted. Further, nothing was brought on record to show that the amount of investment shown in the final Balance Sheet is not correct. In such circumstances, the addition made on the basis of incomplete and incorrect report generated by the accounting software before finalization of the accounts is not justified.
In this regard, detailed submissions were made before AO dated 28.11.2011 & 16.12.2011 respectively, stating that the Balance Sheet found was incorrect and incomplete, accordingly no addition should be made on this basis. For the reason of corrections of various entries as well as punching of new entries 9 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur after the stage of taking out the said print out, there is no trail or reconciliation between the balance of investment in renovation account as per the said Balance Sheet and as per the final Balance Sheet. However, perusal of detailed ledger accounts, overall balances of which are appearing in the final Balance Sheet shows that after making all entries of construction expenses to the extent of Rs.54,40,605/-, its 50% being Rs.27,20,302.50 has been charged to Mrs. Shashi Agrawal, co-owner of the house. Thus, the overall investment of Rs.54,40,905/- made as per books of account is more than amount of Rs.38,76,974/- found recorded in the Balance Sheet report found during the course of survey.
The observation of the Assessing officer that the sum of Rs. 38,76,973.50 is after deducting the share of the co-owner is without any basis. In absence of complete trail of entries corrected/further entries passed, it is impossible to state whether any amount stood already charged and if charged, how much amount stood charged in the accounts on the date the said printout was taken.
12. Without prejudice to our submissions that no cognizance can be given to the said Balance Sheet, an estimate of the amount that would have already charged to Mrs. Shashi Agrawal (till taking the said print out of the Balance Sheet report) can be made as under:
Amount outstanding as Loans & Advance (Assets) Rs.2,27,53,680.50 Less: Amount charged to Shashi Agrawal in respect of Purchase of property Rs.2,10,63,810.00 Balance Amount charged in respect of renovation exp. Rs. 16,89,870.50 As explained by the assessee during the course of assessment proceedings, the said Loans & Advances (Assets) shown in the Balance Sheet of the 10 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur assessee represent the amount debited to Shashi Agrawal in respect of the 50% portion of the property.
As per the above working, only Rs.16.89 lacs was charged to Shashi Agrawal as against the total amount of Rs.27.20 lacs chargeable which is a reason of difference in the amount of investment as per the two Balance Sheets.
Further, the Balance Sheet found during survey was print out from the incomplete records which were subject to many correction/new entries to be passed. The assessee never disowned the same but always contended that no conclusion should be drawn on the basis of it as it does not give true and fair picture of the states of affairs of the assessee. The final Balance Sheet only gives the true and correct picture as the same is supported with the necessary documentary evidences. Therefore, the AO's observation regarding ownership of the document has got no relevance.
In view of the above it was submitted that the addition made by the Assessing officer of Rs.11,56,671/- on account of investment in renovation from undisclosed sources being the differential amount of one shown under the head renovation of C-137 as per 'Balance Sheet' report of accounting software found during the course of survey proceedings at M/s Gravita India Ltd. and amount shown as Renovation of C-137 in the final Balance Sheet submitted by the assessee has righty been deleted by ld. CIT(A).
13. The relevant findings of the ld. CIT(A) which is reproduced is as under:-
"6. I have considered facts of the case. It is noticed that the AO has made this addition also on the basis of copy of the balance sheet found in the course of survey proceedings. As mentioned in the preceding paras, the documents found in the course of survey are presumed to be true. It is, however, a rebuttable presumption. As mentioned above, from the details furnished by the appellant various discrepancies have been noticed eg., entries with reference to loan etc. were not reflected in this balance sheet found during the course of survey. These 11 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur discrepancies were also reported by the appellant to the AO vide letter dated 28.02.2011. The AO has, however, failed to rebut these explanations given by the appellant. In view of various discrepancies, the balance sheet found in the course of survey proceedings cannot be considered as reflecting true and correct picture of the appellant's affairs. It is also noticed that the valuation of this property was referred to the Valuation Cell which did not find any difference with the amount of expenses declared by the appellant. There is nothing on record to show that the expenditure declared by the appellant was incorrect or suppressed by her. Hence, the addition made by the AO appears to be unjustified and is, accordingly, deleted."
14. We have heard the rival contentions and perused the material available on record. The subject property is jointly owned by the assessee along with her mother-in law and total expenses of Rs 54,40,605 have been incurred and 50% thereof have been debited to her mother-in law account. The expenses are supported by bills and vouchers and related payment details. The matter relating to estimation of construction expenses was also referred to the valuation officer and there is no deviation that has been brought on record in terms of expenses incurred and estimated by the valuation officer. In the result, there is no basis for making addition of Rs 11,56,671 and the ground of revenue is dismissed.
15. In ground no. 3, the Revenue has challenged the deletion of addition of Rs.4,00,000/-made by AO on account of undisclosed investment in construction of house property.
16. Brief facts of this case are that during the course of survey, certain documents were found showing various payments aggregating to Rs.4,00,000/- during the year under consideration on account of labour, material, grid, sand etc. Ld. AO concluded that since the payments were not reflecting in cash book, addition was made.
12 ITA No. 73/JP/14ITO Vs. Smt. Anchal Agarwal,Jaipur
17. The ld AR invited our attention to pages 1-6 of annexure A-6 found during the course of survey at M/s Gravita India Ltd. on perusal of which, it is evident that these papers depict certain expenditures incurred by the contractor on various dates. The assessee has made a total payment of Rs.3,76,500/- during the year to the contractor as per the summary expenses sheet. The papers so found are the details maintained by the contractor and the same do not represent the payments made by the assessee to the contractor. Further the papers are not written in the systematic manner so as to arrive at any conclusion.
It was further submitted that the entire construction expenses are subject to valuation by the valuation officer. The valuation officer has agreed with the overall expenditure incurred by the assessee and therefore, the question of understatement of expenditure does not arise. It is thus prayed the order of Ld. CIT(A) may please be upheld on this score.
18. The relevant finding of the ld. CIT(A) is reproduced as under:-
"8. I have considered facts of the case. It is noted that an estimated addition of Rs. 4,00,000/- has been made by the AO on the ground that the payments made to beldar, labour etc. have not been shown by the appellant. It is, however, noted that the matter was referred to the valuation cell of the department. The valuation cell has not found any major discrepancy in the expenses declared by the appellant for construction of the house. Hence, the addition made only on the basis of some nothings on the paper cannot be justified."
19. We have heard the rival contentions and perused the material available on record and don't find any infirmity in the order of the ld CIT(A). The ground of the revenue is thus dismissed.
20. In ground no. 4, the Revenue has challenged the deletion of addition of Rs.20,00,000/- made by AO by treating the rental income as income from undisclosed sources.
13 ITA No. 73/JP/14ITO Vs. Smt. Anchal Agarwal,Jaipur
21. Brief facts pertaining to this ground are that the assessee had let out the House No. C-137, Dayanand Marg, (in which assessee hold 50% ownership) alongwith open land to M/s Gravita India Ltd. from June, 2008 for a monthly rent of Rs.4,00,000/-. Accordingly, a sum of Rs.20,00,000/- was allocable to assessee for the year under consideration. Out of this rental income, after claiming deduction u/s 24(a) @ 30%, i.e. Rs.6,00,000/- and u/s 24(b) amounting to Rs.18,05,296/-, loss of Rs.4,05,296/-was declared. However, Ld. AO did not allow the loss of Rs.4,05,296/- rather made addition of Rs.20,00,000/- by alleging that the said house property was 30 years old and since assessee has got constructed basement also, the house could not be rented. Further, the AO alleged that the house was let out to Gravita India Ltd., a concern in which husband of assessee is director.
22. The ld AR submitted that the assessee received rent from Gravita India Ltd., and therefore pursuant to assessment of rental income as Income from other sources, case of Gravita India Ltd. was reopened to disallow the rent expense. In assessment proceedings of Gravita India, it was submitted that the premises was used for training to employees of overseas companies being subsidiaries of Gravita India and thus payments made to assessee were recovered back from those overseas companies. It was further stated that the rent of Rs.20,00,000/- was claimed as expense in profit & loss a/c rather was shown under head Loans & Advances as "Amount Recoverable from subsidiaries and joint Ventures" in the audited Balance Sheet as on 31.03.2009. Further, on the basis of observations of ld. CIT(A) in appellate order that "since valuation report was obtained after the construction work was completed, it cannot possibly determine the stages of construction. Hence, the observation of the AO that the building was not in a condition to be used in any manner does not appear to be factually correct", no addition was made by AO in case of Gravita India Ltd.
14 ITA No. 73/JP/14ITO Vs. Smt. Anchal Agarwal,Jaipur In this scenario, since no expense whatsoever was claimed by Gravita India Ltd. in respect to payment made to assessee of Rs.20,00,000/-, hence the fact that husband of assessee is director in Gravita India Ltd. makes no difference as no benefit has been passed on to that company.
23. It was further submitted that the assessee and Mrs. Shashi Agrawal had jointly purchased the house C-137, Dayanand Marg, Tilak Nagar, Jaipur in May 2008 vide registered sale deed dated. It is to be noted here that when the assessee purchased the site, some part of it was already constructed over it including basement, which is evident from sale deed, which describes that there was a house on site and covered area was 2135.75 sq. ft.
From June 2008 onwards the said house was given on rent to M/s Gravita India Ltd. for a monthly rental of Rs.4,00,000/-, which is evidenced by copy of lease agreement and confirmation from the lessee about the use of such building and open land for their business purpose. Thus M/s Gravita India Ltd. used the superstructure as well as the open land available on the plot for the purpose of their storage, assembling and packing of plant as well as training of such processes to the employees recruited for overseas centres where the company is going to set up the said plants. The places being very close (about 400 to 500 meters) to the corporate office of the company, it was very convenient for it to take up these activities. Though the renovation work was being carried on, simultaneously a portion of building was let out. In other words, though alterations have been made but the assessee has used the old construction. By mutual understanding, the renovation work was managed in a manner so that there is no interruption in the company's work and vice versa.
The Assessing officer has concluded that the entire old house must have been demolished for carrying out the construction at site on the basis of Valuation report furnished by Valuation officer dated 31.10.2011, relevant extracts of 15 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur which are reproduced at page 3 of assessment order. As per the report, the assessee has got constructed Basement and three floors and Barsati , Guard room as well. However, it is nowhere mentioned that construction was carried out after demolishing old construction. Also, the ld. AO during the course of assessment proceedings deputed the Ward Inspector who in his report dated 09.12.2011 has stated that there was old construction of approximately 2000 sq. ft. in the plot and assessee has further got it renovated and construction was carried out on open land. Further, it was mentioned that no information could be gathered as to whether the property was let out.
A detailed submission along with the additional evidences in the shape of certificate of the architects were also submitted before the ld. CIT(A) which is reproduced at pages 18 to 22 of the appellate order. Ld. CIT(A) after obtaining the remand report from the AO has admitted the additional evidences and after properly appreciating the facts that valuation officer has also not made any adverse observations about non user of the property during the period of construction deleted the additions so made.
In this scenario, it is amply clear that the allegations of ld. AO are purely on the basis of his assumption that there was no basement at the time the house was purchased. This presumption of the assessing officer is without any basis or material on record and neither any specific question was asked from the assessee in this respect. With regard to the inspector report it is submitted that he had made visit in December 2011 when the work has been completed and prima facie without having any technical knowledge nobody could judge what was and how old the earlier construction was existed.
It was further submitted that M/s Gravita India Limited is a public limited company and the rent was decided on the basis of use of the property by the company wherein there are other shareholders also who are not related to assessee in any manner. It is also pertinent to mention here that the assessee 16 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur has received rent from M/s Gravita India Limited which has been paid income in accordance with lease agreement. In such circumstances, the assessing officer has no jurisdiction to consider the rent so received as income from other sources under any of the provisions of law.
In view of above, the assessing officer was not justified in treating the amount of Rs.20,00,000/- received from Gravita India Ltd. as income from other sources and accordingly denying the interest claimed of Rs.18,05,296/-. It is thus prayed that the order of CIT(A) may please be upheld.
24. The relevant finding of the ld. CIT(A) is reproduced as under:-
"12. I have considered submissions of the appellant, reports of the architect as well as Valuation Officer and have also gone through the assessment order. Since, the appellant was not given an opportunity by the AO to rebut the Valuation Officer's report, it is clear that the appellant was prevented by sufficient cause from producing the architect's report. The additional evidence in the form of the Architect report is, therefore, admitted. It is seen that the claim of the appellant was that the building was constructed in stages and while one portion was being constructed the other was being used for purposes of business such as godown and training purposes. The AO did not accept this contention of the appellant on the ground that the building could not have been ready to be given on rent and, therefore, concluded that the rental receipt shown by the appellant was merely a tax avoidance mechanism. He, accordingly, treated the rental income as income from other sources.
12.1 A perusal of the report of the Valuation Officer shows that it was meant for determination of cost of construction and it did not dwell upon the issue of stages of construction. Moreover, since the report has been obtained after the construction work was completed, it cannot possibly determine the stages of construction. Hence, the observation of the AO that the building was not in a condition to be used in any manner does not appear to be factually correct. The appellant's claim is that the premises were used only for store keeping etc. and training purposes. Hence, the time taken and expenditure incurred for 17 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur furnishing etc. is not relevant in this case. Moreover, the fact that the building was given to a company whose director was the appellant's husband does not militate against the fact that the building was given on rent. The whole addition, therefore, appears have been made only on the basis of conjectures and surmises and, hence, cannot be sustained. The addition is, accordingly, deleted."
25. We have heard the rival contentions and perused the material available on record. The limited issue under dispute relates to whether the property at C-137, Dayanand Marg, Tilak Nagar, Jaipur was actually let out during the year or not to M/s Gravita India Ltd. Consequently, the amount of Rs 20 lacs so received by the assessee is income under the house property or income from undisclosed sources. The case of the Revenue is that the construction of the building on the said plot of land was 30 years old and there was no basis to carry out fresh construction on the said piece of land without demolishing the existing structure. The case of the assessee is that the construction was carried out in phases and the existing structure was kept intact in the first phase of construction to be used by the tenant M/s Gravita India Ltd and after March 2009, the existing structure was demolished to construct the remaining part of the proposed structure. In support, the assessee has submitted the architect report along with site plan and the methodology for carrying out the construction work during the appellate proceedings which was confronted to the AO by the ld CIT(A). The detail contents of the architect report was reproduced in the CIT(A) order and not been reproduced for sake of brevity. The architect report supports the position of the assessee and remains un- rebutted before us. The valuation report didn't dwell upon the stages of construction as pointed out by the ld CIT(A). No other independent evidence has been brought on record to support the position of the Revenue. The AO apprehension might be correct but the same has to be supported by crediable evidence which is clearly absent in the present case. Moreso, the lease agreement and confirmation from M/s Gravita India ltd is on record to support 18 ITA No. 73/JP/14 ITO Vs. Smt. Anchal Agarwal,Jaipur the lease transaction and there is no adverse finding given by the AO in case of M/s Gravita India ltd. In light of the same, we do not see any infirmity in the order of the ld CIT(A) and the same is hereby confirmed. Hence, the ground of the revenue is dismissed.
In the result, the appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 03/08/2017.
Sd/- Sd/-
¼dqy Hkkjr ½ ¼foØe flag ;kno½
(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Jaipur
Dated:- 03/08/2017
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- ITO,Ward-1(3), Jaipur.
2. izR;FkhZ@ The Respondent- Smt. Anchal Agarwal, C-137, Dayanand Marg, Tilak Nagar, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@ Guard File (ITA No.73/JP/2014) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.19