Kamal Kishore Chandak v. Income-tax Officer

Hari Om Maratha, Judicial Member. - These are cross-appeals which are filed against the order of the CIT(A) dated 5th June, 2003 for assessment year 1999-2000.

2. The facts of the case are that the assessee filed his return of income on 27th March, 2000 declaring an income of Rs. 1,67,580 income from house property and from interest besides agricultural income of Rs. 3,30,000. A survey under section 133A was carried out on 29th Oct., 1998 in the case of this assessee. As a result of survey, various additions were made when the case was picked up for scrutiny. We will discuss more relevant facts while dealing with each and every ground of appeals.

ITA No. 368/2003; Assessment year 1999-2000

3. This is an appeal of the assessee in which five grounds have been taken. Ground Nos. 4 and 5 do not require any adjudication; therefore, the same are hereby dismissed.

4. Ground No. 1 relates to confirmation of an addition of Rs. 2,39,609 made on account of investment done in the construction of shops at village Khinvsar.

5. During the course of survey, the assessee had surrendered an amount of Rs. 8,00,000 on account of investment made in the immovable properties while making his statement which was recorded on 9th Nov., 1998 and also deposited advance tax accordingly. But the assessee did not include surrendered amount in his return of income. The assessee was required to file valuation report of the shops situated at bus stand, Khinvsar. The assessee filed this report dated 18th January, 2002 given by one Shri Onkarnath Khanna, Jodhpur according to which the cost of construction of these shops was estimated at Rs. 2,39,609. But the assessee showed cost of these ships at Rs. 1,25,000 including Rs. 1,00,000 being cost of the land. In his statement of affairs filed along with the return of income, the assessee explained the difference between costs of construction shown by him. The assessee claimed that he had sold an agricultural land along with tubewell situated at Osian Road, Khinvsar for Rs. 3,10,000, on 23rd April, 1998 and the sale proceeds were applied in the construction of these shops to the extent of Rs. 2,30,000 and the remaining sum of Rs. 80,000 was spent in the construction of other property during the financial year 1998-99 relevant to assessment year under consideration. The Assessing Officer disbelieved the above contention of the assessee being a belated version. The assessee did not maintain books of account, however, he had filed statement of affairs in the shape of balance sheet showing figures of previous years also. He also filed details of interest, rent, capital account along with return of income. The learned CIT(A) also confirmed the finding of the learned Assessing Officer but accepted the claim of the assessee that he had sold the agricultural land for Rs. 3,10,000 on 23rd April, 1998 but did not accept the claim that the sale proceeds were utilized in the construction of these shops. The reasons for which was that the assessee, neither during survey nor in his statement recorded on 9th Nov., 1998, work such a stand.

6. We have heard the rival submissions and perused the evidence on record.

7. We agree with the learned CIT(A) that the assessee had received sale consideration of Rs. 3,10,000 on 23rd April, 1998, which is a date prior to or during the impugned investment was made in the construction of shops in question. This fact stands proved by the registered documents, which cannot be antedated or postdated. The Department could not controvert this fact. It is true that the assessee took this stand at very belated stage. The assessee himself showed the cost of land and the construction at Rs. 1,25,000 which included the cost of land Rs. 1,00,000 in the statement of affairs. At the fag end, the assessee claimed that the sale consideration of Rs. 3,10,000 received on 23rd April, 1998 was also used towards the construction of these shops to a greater extent. The assessee made a surrender and retracted the same but also paid advance tax on the surrendered amount of Rs. 8,00,000, which was surrendered on account of investment in various properties. The clear fact which emerges from the above controversy is that the assessee had made a surrender and had paid advance tax, but later retracted and took the plea that Rs. 2,30,000 out of Rs. 3,10,000 were spent in the construction of these shops. The fact of sale of agricultural land for Rs. 3,10,000 has been accepted by the learned CIT(A) and the Department is not in appeal against this finding. Now, the question arises as to what happened to the sale proceeds of Rs. 3,10,000, thereafter. The assessee has not claimed the amount to have been spent somewhere else and the revenue has also not established this fact. Therefore, when there are two possibilities which come out of a given set of facts, one which is in the favour of the assessee, has to be accepted and the only fact that the assessee made this claim at the very fag end of the assessment proceedings, would not be rejected entirely although it has to be deeply scrutinized. Be that as it may, as we have stated above, the version which suits the assessee has to be accepted in the absence of any contrary proof on record. Moreover, the assessee had filed an affidavit before the learned Assessing Officer which was ignored being not properly raised but this affidavit filed before the Assessing Officer clearly spelt out the claim of the assessee. This fact goes to support the case of the assessee to some extent. We are of the considered opinion that even though the claim of use of sale proceeds was taken at a later point of time, yet this has a great evidentiary value. The factum of sale stand established and there is no evidence that this amount was used somewhere else therefore, this explanation has to be considered in the correct perspective without simply ignoring it to be an afterthought. Hence, we accept this ground of appeal taken by the assessee and delete the impugned addition, by holding that the assessee has properly explained the investment in the shops out of disclosed income.

8. The second ground of appeal relates to addition of Rs. 80,000 made in respect of investment in the construction of property at Dakota Ka Bas, Village Khinvsar.

9. The assessee had himself declared that out of his sale proceeds of agricultural land sold along with tubewell at Rs. 3,10,000, the assessee had spent Rs. 80,000 towards the construction of the property situated at Dakota Ka Bas, Village Khinvsar. Since, the learned CIT(A) has accepted the sale of the property for an amount of Rs. 3,10,000 and the assessee had himself declared this expenditure in this property and there being no other evidence to the contrary in the possession of the Department, in view of our above findings where we have accepted an expenditure of Rs. 2,31,000 out of Rs. 3,10,000 towards the shops, we have to accept this claim of the assessee as well. Therefore, we order to delete the amount of Rs. 80,000 from the hands of the assessee.

10. Ground No. 3 relates to disallowance of Rs. 1,00,000 out of the claim of the assessee for agricultural income of Rs. 3,30,000. The Assessing Officer disallowed Rs. 1,50,000 out of the total claim made by the assessee. The learned CIT(A) further restricted the disallowance to Rs. 1,00,000.

11. We have heard the rival submissions and perused the evidence on record.

12. The assessee is the owner of the agricultural land whose details are available in the paper book and the same were filed before the Assessing Officer. The assessee has submitted the complete details of agricultural holding along with the activities carried out by him during the relevant period and the same were duly supported by the revenue records and the certificate issued by the agricultural office. In our opinion when the revenue had itself accepted the factum of agricultural income, the same cannot be reduced only on whims in the absence of any concrete evidence on record to reach a particular conclusion. The assessee had also filed evidences in support of agricultural income, copies of which are also filed before us. The averments of the affidavit filed in support of the agricultural income remained uncontroverted throughout. In view of these facts, we are of the considered opinion that the Assessing Officer was not justified in making additions by rejecting a part of the agricultural income simply on the basis of non-availability of sale vouchers because an agriculturist is not required to maintain any books of account. Copies of Girdawari are on record, which prove that crops were grown on the land belonging to the assessee. The statement of the assessee that he provided irrigation facility to his neighbours on cash payment also in a way, supports the case of the assessee as from this fact it is proved that the assessee had enough irrigation facility to grow crops. The assessee has also filed a certificate of Assistant Agricultural Officer wherein the average production of particular crop in the area in which agricultural land of the assessee are situated have been given. These facts also support the version of the assessee. The sum total of the above discussion is that the assessee has been able to establish his case and the Department has not been able to rebut the same. Therefore, this ad hoc addition cannot survive and hence we order to delete the addition of Rs. 1,00,000.

13. In the result, the appeal of the assessee is partly allowed.

ITA No. 338/Jd./2003 (1999-2000).

14. This is an appeal of revenue in which two grounds of appeal have been taken, which are extracted herein below :

"(i)Deleted the entire addition of Rs. 6,70,935 made on account of understatement of purchase consideration for house at Jodhpur.

(ii)Deleted Rs. 50,000 out of addition of Rs. 1,50,000 made on account of treating agricultural income from undisclosed sources."

15. Ground No. 1 relates to deletion of an addition of Rs. 6,70,935 made on account of understatement of purchase consideration for the house situated at Jodhpur.

16. The Assessing Officer made this addition on the basis of valuation done by sub-registrar for stamp duty purposes. The State Government has fixed the rate of different assessment years for the purpose of stamp duty collection. The assessee purchased the house property in the financial year 1997-98, which relates to assessment year 1998-99 whereas the Assessing Officer made the addition in the year 1999-2000. According to section 50C, which was introduced w.e.f. 1st April, 2003 by Finance Act, 2002, a capital gain is to be levied on the seller for difference of amount given in the registered deed and the valuation taken for stamp purposes. The Assessing Officer, however, made the impugned addition which was deleted by the learned CIT(A).

17. We have heard the rival submissions. The undeniable fact of this issue is that the Assessing Officer made an addition of Rs. 6,70,935 being 50 per cent of the alleged understated investment of Rs. 13,41,870 which was worked out on the basis of value determined by the registration authority. The Assessing Officer has not gathered any evidence to establish that the assessee had actually understated the investment and the burden is on the revenue to prove that real investment as shown by the assessee is understated and he cannot rely merely on the fair market value. No addition under section 69B of the Act for this reason only can be thus made. Moreover, this is a settled law that on the basis of stamp duty valuation no addition can be made as this has not been held to be good parameter to determine the real cost of a particular property which was the subject-matter of a sale deed for registration purposes. Therefore, we do not find infirmity in the findings of the learned CIT(A) and hence the same stands confirmed. Thus, this ground of appeal cannot be allowed.

18. Ground No. 2 relates to deletion of Rs. 50,000 out of Rs. 1,50,000 made on account of treating the agricultural income as from undisclosed sources.

19. Since, we have already decided this issue while dealing the appeal of the assessee and in consonance of our finding that the ad hoc disallowance cannot be sustained, this ground of appeal has to be dismissed.

20. In the result, the appeal of the assessee is allowed and that of the Department is dismissed.