Income Tax Appellate Tribunal - Ahmedabad
Hashmukh B.Patel, Navsari vs Income Tax Officer,Ward-2,, Navsari on 21 March, 2017
ITA No.1299/Ahd/2013 Assessment Year: 2008-09 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, "SMC", AHMEDABAD [Coram: Pramod Kumar AM] ITA No.1299/Ahd/2013 Assessment Year: 2008-09 Hasmukh B. Patel ......................Appellant 4/875, M/s. Bikhabhai Bhajiawala & Sons, Patva Sheri, Mota Bazar, Navsari.
[PAN: ADWPP 1685 M] Vs. Income Tax Officer, Ward (2), Navsari. .................Respondent Appearances by:
Mehul Shah, for the appellant Madhusudan, for the respondent Date of concluding the hearing: 22.12.2016 Date of pronouncing the order: 21.03.2017 O R D E R
1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 31st December, 2012, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2008-09.
2. In the first ground of appeal, the grievance raised by the assessee is as follo ws :-
"1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs.4,83,000/- under section 69B of the Act as undisclosed investment.ITA No.1299/Ahd/2013
Assessment Year: 2008-09 Page 2 of 5
3. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the relev ant previous year the assessee acquired two immovable properties of Rs.10,60,000/- and Rs.9,51,000/- respectively. The Assessing Officer was of the view that, considering locality of the properties and area of property, value shown by the assessee is very low as compared to prevalent market rate. He referred the matter to the valuation officer who assessed the value of these properties at Rs.13,71,000/- and Rs.11,23,000/- respectively. The Assessing Officer was of the view that "it is very well known that on-money always passes in the dealing of real estate" and that such on-money is not accounted for in the books of account. On these facts, the Assessing Officer proceeded to make addition under section 69B of the Act in respect of difference of value stated by the assessee in the books of account vis-a-v is the valuation as per the DVO. Aggriev ed, assessee carried the matter in appeal before the learned CIT(A) but without any success. The learned CIT(A) noted that the valuation difference was 29% in respect of first property and 18% in respect of second property and the valuation was done on the basis of fair criteria. It was also noted that so far as the circle rates are concerned, these are based location of the property. The Assessing Officer was thus quite right in rejecting the circle rate and proceeding on DVO's valuation. Addition was thus confirmed. Aggrieved by which the assessee is in appal before me.
4. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
5. I find that only basis on which the impugned addition made is difference between value stated by the assessee and the value as per the DVO's report. In a situation in which there is no evidence of any cash payment indicating ITA No.1299/Ahd/2013 Assessment Year: 2008-09 Page 3 of 5 payment of any money other than what has been specified by the assessee, it is wholly unreasonable to ma ke addition under section 69B of the Act only on the basis that the value of property was more than the value of purchase. As a matter of fact, the stand taken by the authorities below is wholly unsustainable in law in as much as even when it is established that the property purchased has higher market value than the value on which it purchased, such finding cannot be basis for making addition for undisclosed inv estment. In any case, the issue is squarely covered in favour of the assessee by the judgement of Hon'ble jurisdictional High Court in the case of CIT vs. Berry Plastics (P.) Ltd. (35 taxmann.com 296) wherein their Lordships hav e held that an addition under section 69B cannot be made on the basis of DVO's report. I, therefore, deem it fit and proper to delete the impugned addition. Assessee gets the relief accordingly.
6. Ground no.1 is thus allowed.
7. In ground no.2, the assessee has raised the following grievance
"2. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of Rs.41,507/- on account of interest income."
8. During the course of assessment proceedings, it was noted that the assessee had claimed interest expenses of Rs.2,40,990/- on unsecured loan obtained from various persons and had also given interest free advance of Rs.67,000/-. The Assessing Officer further noted that the loans obtained by the assessee and advances given by the assessee were close relatives in the sense that if the assessee had not given interest free advances, the assessee could have reduced his interest outgoing. On this basis the Assessing Officer proceed to compute the interest which in the opinion of the Assessing Officer ITA No.1299/Ahd/2013 Assessment Year: 2008-09 Page 4 of 5 the assessee ought to have earned from interest free loan given to Shri Riddi Enterprise Navsari. Accordingly an addition of Rs.41,507/- was made. Aggriev ed, the assessee carried the matter in appeal before the learned CIT(A) but without any success. The learned CIT(A) noted that the addition of Rs.41,507/- was based on concession granted by the assessee and cannot therefore be challenged. The assessee not satisfied and is in appeal before me.
9. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.
10. I find that in the present case assessee has sufficient interest free adv ance available to him. The capital account alone shown that Rs.42,98,534/- were available to the assessee as interest free capital. In this view of the matter, the adv ance granted by the assessee cannot be said to be out of borrowed fund and disallowance on interest cannot be made for this reason. As for addition having been made on account of income from interest which the assessee ought to have earned, it is only elementary that the income tax is levied on the income actually earned and not on the income the assessee should have hypothetically earned in ideal situation. Therefore the assessee has fully justified in his plea against the impugned disallo wance addition. As for the stand taken by the learned CIT(A) that it is a case of agreed addition, I find no material to support the same. In any way, there cannot be estoppels against statute and the rights of the assessee to seek remedy against an addition which was a greed to by him under bona fide belief of it's correctness or pressure, he did not press the same at an earlier stage. I, therefore, deem it fit and proper to delete the addition.
11. Ground no.2 is thus allowed.
ITA No.1299/Ahd/2013
Assessment Year: 2008-09 Page 5 of 5
12. In Ground no.3 the assessee has raised the following grounds :-
"3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs.30,000/- on account of low house-hold withdrawals."
13. When this ground came up for hearing, after some discussions, learned counsel for the assessee stated that he does not wish to pursue the above griev ance in view of smallness of the amount. This ground is, therefore, dismissed as not pressed.
14. Ground no.3 is thus dismissed.
15. In the result, appeal is partly allowed. Pronounced in the open Court on this 21st day of March, 2017.
Sd/-
Pramod Kumar
(Accountant Member)
Dated: the 21 st day of March, 2017.
PBN/*
Copies to: (1) The appellant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad