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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: Appeal by the assessee is directed against order of the CIT(A)-1, Indore dated 27.10.2015 pertaining to the
[ Hari Prasad Choukse, Indore] assessment year 2011-12. The assessee has raised following grounds of appeal:
1. “The Ld. CIT(A) has erred in confirming the addition of Rs.86,90,000/- being deduction claimed u/s 54F.
The Ld. CIT(A) has erred in confirming the addition of Rs.1,60,010/- being enhancement in business income. 3. The appellant craves leave to add or amend any of the said ground of appeal
.”
2. The facts giving rise to the present appeal are that case of the assessee was selected for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 6.2.2014. While framing the assessment, the A.O. observed that assessee had sold 3 pieces of agricultural lands for Rs.1.20 crores and computed long term capital gain as at Rs. Nil by claiming that he purchased 3 pieces of agricultural lands for Rs.33,93,445/- and invested Rs.86,90,000/- in construction of new residential property within 3 subsequent years and claimed deduction u/s 54F of the Act. The assessing officer rejected the claim of [ Hari Prasad Choukse, Indore] deduction u/s 54F of the Act. The A.O. further made addition in respect of estimation of profit from manufacturing of bricks of Rs.1,60,000/-. Aggrieved against this, the assessee preferred an appeal before the CIT(A), who after considering the submissions, dismissed the appeal. Now the assessee is in present appeal.
3. Ground No.1 of the assessee’s appeal is against rejection of his claim made u/s 54F of the Act amounting to Rs.86,90,000/- for construction of a new asset. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. The submissions of the assessee are reproduced as under:
[ Hari Prasad Choukse, Indore] [ Hari Prasad Choukse, Indore] [ Hari Prasad Choukse, Indore] [ Hari Prasad Choukse, Indore] [ Hari Prasad Choukse, Indore] [ Hari Prasad Choukse, Indore]
During the present proceedings, the assessee has also filed an application under rule 29 of the Income Tax Appellate Rules, 1963 for estimation of additional evidence.
Ld. Counsel for the assessee reiterated the submissions as made in the application. The contents of the application are reproduced as under:
“In the present case the appellant had sold three agricultural lands for Rs.1,20,00,000/- in F.Y. 2010-11 and reinvested the part of sale proceed in purchase of three agricultural land for Rs.33,93,445/- thus claiming exemption u/s 54B. Further Rs.86,90,000/- were invested in constructed of new residential house. The residential house was constructed in plot owned by appellant’s wife Smt. Kiran Choukse at 439, Clerk Colony, Indore. The assessment was completed u/s 143(3) on 10.12.2010 at total income of Rs.90,95,480/-. The Ld. A.O. denied the exemption u/s 54F on the ground that the cash was utilized for construction of house in name of his wife was not eligible u/s 54F. The denial of exemption u/s 54F by Ld. A.O. was further appealed to Ld. CIT(A). This order was confirmed by Ld. CIT(A). However, without discussing the basis on which the Ld. A.O. made disallowance, the Ld. CIT(A), took his own reasons for disallowance. The assessee was not given any opportunity to submit the documentary evidences for the new findings given by Ld. CIT(A) for disallowing the claim. The same have been received now, which is enclosed as under: a) Electricity Bills – PB 29 b) Property tax receipts – PB 30 – 31 c) Inaugural Photographs of House PB 39 – 41 d) Affidavit from assessee.
[ Hari Prasad Choukse, Indore] It is most humbly prayed, that the above documents may be admitted in the interest of justice as 1. The appellant had no opportunity to submit these documents earlier. 2. The document (A) & (B) further are government records of Electricity Corporation and Municipal Corporation, and would not require any inquiry in this regard. 3. The document (D) above is just an affirmation of what has been stated earlier.” 5. Ld. D.R. opposed these submissions and submitted that at such a belated stage, additional evidences should not be admitted. Ld. D.R. also submitted that it was incumbent upon the assessee to prove that he has constructed a new asset, out of the sale consideration of the capital asset. It was further contended that the sale consideration was utilised for construction of the new asset in the name of the assessee wife which would not qualify for deduction u/s 54F of the Act.
We have heard the rival contentions, perused the materials available on record and gone through the orders of the authorities below. We find that the evidences
[ Hari Prasad Choukse, Indore] furnished are electricity bills, property tax receipts, inaugural photograph of house and the affidavit from the assessee. Considering the totality of the facts, these evidence goes to the root of the issue, and are material evidence to prove the construction of a new asset. We therefore, admit the same and set aside the orders of the authorities below on this issue and remit the issue of allowability of deduction u/s 54F of the Act to the A.O. The A.O. would decide the issue after considering the evidences placed on record in accordance with law. This ground of the assessee’s appeal is allowed for statistical purposes.
Ground No.2 is in respect of addition made by the A.O. towards enhancement of business income. Ld. Counsel for the assessee reiterated the submissions as made in the synopsis. The assessee has been engaged in the business of manufacturing of bricks and declared profit at Rs.1,39,990/-. The A.O. however estimated the same to [ Hari Prasad Choukse, Indore] Rs.3 lakhs and added the difference of Rs.1,60,010/- to the income of the assessee. The Ld. CIT(A) confirmed the addition. Ld. Counsel submitted that the addition is purely made on the basis of estimation. There was no material before the A.O. to make estimation at Rs.3 lakhs.
Ld. D.R. opposed these submissions. Ld. D.R. stated that the assessee was required to prove receipts from business by furnishing proper accounts. In the absence of the accounts, the assessing authority would be left with no other alternative but to estimate the income. It is contended that the estimation is reasonable looking to the nature of the business carried out by the assessee.
We have heard the parties. We find that the A.O. has not stated as to what is the basis of enhancement of the gross profit. Why he has estimated net profit at Rs.3 lakhs.
The A.O. ought to have made enquiries from the similarly situated assessees who are in the same line of business. 12
[ Hari Prasad Choukse, Indore] The assessing officer observed that the assessee did not disclose the gross receipts. However, the Ld. CIT(A) in para 7.1 of his order has decided the issue as under:
7.1 From the above it is seen that the addition is made by the A.O. as appellant has not maintained any books of accounts and has shown the income on estimated basis. The appellant has contended that the business was seasonal in nature and as per P&L account filed sale proceed were at Rs.729700/- and the profit was Rs.139990/-. Considering the fact that no P&L account has been produced and no basis has been given by the appellant for estimation of gross receipts and the profit thereon the estimation made by the AO is upheld which is based on the figures given in the Income Tax Return by the appellant as stated in the assessment order. In view of the above this ground of the appellant is also dismissed.
Ld. CIT(A) affirmed the view of the A.O. without making any independent enquiry. The law is well settled where the A.O. makes best judgement by estimating the profit. He is required to make independent enquiries, if he is not satisfied with the profit declared by the assessee from the similarly situated assessees. In the present case, the sales as declared by the assessee were of Rs.7,29,700/- The A.O. has made addition purely on the basis that gross receipts are not declared. However, the assessee has [ Hari Prasad Choukse, Indore] declared the gross profit. We find that the Ld. CIT(A) in his order has stated a figure of Rs.7,29,700/- as the sale proceeds which could be taken as gross receipts. Therefore, the very foundation of making estimation is not correct.
Hence, we cannot confirm this adhoc and casual approach of the assessing authority, he is therefore hereby directed to delete the addition. This ground of the assessee’s appeal is allowed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order was pronounced in the open court on 24.07.2019.