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Income Tax Appellate Tribunal, “GUWAHATI” BENCH, GUWAHATI
PER Bench, The captioned appeal filed by the Revenue, pertaining to assessment years 2013- 14, is directed against the order passed by the Commissioner of Income Tax(Appeals) [in short ‘CIT(A)’], Jorhat, which in turn arises out of the assessment order passed by the Assessing Officer (AO) under section 153A/143 (3) of the Income Tax, Act 1961 (hereinafter referred to as the ‘Act’), dated 28.03.2016.
M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
Ground of Appeal filed by the Revenue are as follows: -
“1.On the facts and circumstances of the case, the Ld. CIT(A), Jorhat erred in Law as well as in facts in deleting the addition to the tune of Rs. 17,32,595/- without appreciating the provisions of section 69C. 2.On the facts and circumstances of the case, the Ld. CIT(A), Jorhat erred in Law as well as in facts in deleting the addition of Rs. 1,44,69,286/- relating to under-valuation of investment in building without appreciating the facts of the case. 3.Any other ground or grounds that may be raised at the time of hearing.”
Ground No.1 relates to the deletion of addition of Rs. 17,32,595/- without appreciating the provisions of sections 69C of the Act.
Brief facts qua the issue are that the assessee has filed its return of income under section 139(1) of the Act, on 18.03.2014, declaring total income to the tune of Rs. 2,01,74,220/-. The AO noticed that during the post search proceedings, a seized document marked as PS-22 (Pg. No. 9 to 20) showing Business Promotional expenses of Udipta Energy Equipment Pvt. Ltd, reflected an amount of Rs. 18,57,595/-, was not for the purpose of business. AO noted that Statement of Dhandev Mahanta (A/R of M/s UEEPL) on 10.03.2014 u/s 131 of I.T. Act, 1961, explained the nature of business promotion expenses, which is reproduced below for ready reference:
"Q.No.8. Please explain year wise promotional expenses along with documentary evidence for the F. Y. 2007-08 to 2012-13. Ans- We have awarded contract only after qualified as L-I Bidder through Tender. During that Tender process we had to incurred a considerable amount at Different state right from the purchase of tender till got the Letter of Award. And also for smooth running of business operation of the company, we had to incur a nominal amount towards business development. All the expenditure has been made on interest of the company. And accordingly we hereby produce the vouchers in respect of business promotion expenses for the F. Y2007-08 to 2012-13 for your verification and satisfaction please ".
M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
Having gone through the statement the AO noted that most of the expenditure claimed by assessee was not related to business promotion and the assessee could produce proper bills/vouchers and could not furnish proper explanation to substantiate the claim debited in the Profit & Loss account. Therefore, AO disallowed the amount of Rs.17,32,595/(18,57,595-1,25,000 suo moto disallowed by assessee).
Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT(A), who has deleted the addition made by the AO. Aggrieved, by the order of the ld CIT(A), the Revenue is in appeal before us.
The learned DR for the Revenue has primarily reiterated the stand taken by the AO which we have already noted in our earlier Para and the same is not being repeated for the sake of brevity. On the other hand, the learned Counsel for the assessee relied on the submissions made before lower authorities.
We have heard both the parties and perused the material available on record, we note that during the assessment proceeding the AO observed that most of the expenditure claimed was not related to business promotion, hence, the AO disallowed the assessee's claim towards business promotional expenses of Rs. 17,32,595/- observing that the assessee could not explain and could not produce proper bills/vouchers and accordingly he added back to the total income of the assessee treating the same as unexplained expenditure u/s. 69C of the I.T. Act, 1961.
We note that the ld Counsel for the assessee in his submission stated that the action of the learned Assessment Officer is wrong in invoking the provision of section 69C of the Income Tax Act, 1961 where he added back Rs. 17,32,595/- to the total income of the assessee. The said amount has been claimed by the assessee as business expenditure. The ld Counsel has contended that the provisions of the section 69C relates to the source of the expenditure which is
M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
unexplained, and that it is a deeming provision and not about whether the expenditure incurred relates to business or not. We note that the Expenditure of Rs. 17,32,595/- on account of business are either made by cash or cheque which are duly reflected in the cash book and bank book of the assessee. The vouchers for each and every expenditure has been produced before the Id AO. All the expenditure has been laid out or expended wholly and exclusively for the purpose of business of the Company. The assessing officer failed to bring on record any cogent evidence to prove that expenditure claimed by the assessee are bogus. Moreover, the AO did not find any mistake or irregularity in the bills and vouchers produced by the assessee for business promotion expenses. Therefore, we note that the addition of Rs. 17,32,595/- made by AO to the total income of the assessee is unjustified. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is, therefore upheld and the ground of appeal of the Revenue is dismissed.
8.. Ground No. 2 raised by the Revenue relates to deletion of addition of Rs. 1,44,69,286/- relating to under valuation of investment in building.
Brief facts qua the issue are that AO noticed that during the post search proceedings, impounded document marked as PS-25 (Pa. No. 23 to 37) is a valuation document of ‘Hansraj Bhawan' which is the office premise of M/s UEEPL at A.T. Road, Sivasagar, Assam, the said valuation report showed the value of the property at Rs. 5,52,45,000/- as on 09.01.2013, whereas, the Balance Sheet schedule ‘land & building' of the assessee reflected an amount of Rs. 3,45,43,503/-. The assessee was asked to explain the difference with documentary evidence vide questionnaire dated 09.10.2015. Statement of Shri Dhondev Mahanta (Chief Manager Finance of M/s UEEPL) taken u/s 133A of l.T.Act,1961 on 20.12.2013 in the office premise of M/s UEEPL at A.T. Road, Station Chariali (Hansraj Bhawan), Sibasagar, Assam. The said statement is reproduced below:
M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
"Q.No.33 Please go through page no.23 to 37 of page -25 wherein valuation report as on 09.01.2013 where the value of the property valued at Rs. 5,52,45,000/- as present market value whereas per your balance sheet Schedule-II, 2.9 land and building have been shown at Rs. 3,45,43,503/-. Please explain the difference. Ans- As per valuation date 9/1/13 full sale value of the building shown at Rs. 4,69,58,250/- and our actual investment upto 31/03/2013 against land Rs. 71,71,82,000/- and investment in building was Rs. 2,53,06,964/- total comes to Rs. 3,24,88,964/-. Difference of Rs. 1,44,69,286/- is due to valuation made by valuer as per current market price on the basis of CPWD Schedule. 10. During the assessment proceeding, the assessee also submitted further written submission, vide letter dated 11.02.2016, which is reproduced below:
"a. The Total investment showing the building is Rs. 3,64,66,602/- and not Rs. 3,45,43,502/-. Details of which is as follows: Particulars Amount (Rs.) Freehold land 71,82,000/- Expenditure on construction of building 2,53,06,964/- Expenditure on Furniture & Fixture 39,77,638/- Total 3,64,66,602/- b. That, we have purchased the land in Station Chariali Sivsagar for a sum of Rs. 25,75,200/-. (Twenty five lacs Seventy Five Thousand two Hundred), copy of which is enclosed. The Government value of the land as on that date Rs. 35,94,000/- (Thrity five lacs ninety four thousand), on the basis of which we have paid stamp duty and registration fees at Rs. 1,80,000/-. Copy of Government Valuation report enclosed as annexure. c. So for as the building is concerned, construction of building started in the year 20.08.2010. The copy of building construction permission enclosed as annexure. It can be seen from the valuation report that the valuation report is dated 22.01.2013 which is after two years, five month of construction of the building. Valuation report itself mentions in the Pg. No. 7 that (we have added an escalation 20 % on the CPWD schedule of rate for 2010-11 in view of escalation in price of material and labour since 2010-11). Now it is clear from the above statement that 20% has been increased to derive at the market value as on date of the valuation. Further, the building has been constructed under the supervision of company and no contract has been given. Therefore, the cost of construction will be less than what is stated in the CPWD rates as the CPWD schedule of the rates include the profit margin of the contractor which is around 15%. If we make the calculation taking into effect the below mentioned figures,, we will find the following. Sr. No. Particulars Amount (Rs.) 1. Building value (as per valuation 3,83,67,022/ report)
M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
20% towards price escalation 63,64,500 3. 15% towards profit of contract 50,00,000 Building value as per our books (1-2-3) 2,69,72,522 The value shown by us is Rs.2,53,06,964 which tallies with the valuation report." The ld AO after going through the reply of the assessee noted that no proper evidences were produced by assessee for the escalation price of material and labour @20% and no documentary evidences produced that it was constructed under the supervision of the company, therefore the difference of Rs. 1,44,69,286/- was added back to the total income of the assessee.
Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT(A), who has deleted the addition made by the AO. Aggrieved, by the order of the CIT(A), Revenue is in appeal before us.
The learned DR for the Revenue has primarily reiterated the stand taken by the AO which we have already noted in our earlier Para and the same is not being repeated for the sake of brevity. On the other hand, the learned Counsel for the assessee relied on the submissions made before lower authorities.
We have heard both the parties and perused the material available on record, we note that the assessee got valuation of the house by a valuer on the current market rate (the building was constructed much earlier) where the value categorically writes that he had done valuation for bank purposes taking 20% enhanced value because it was done on current market price. But the issue is that originally when the house was build quite some time back, its original cost was much less. The 'assessee' has submitted the valuation report of the original cost of the house by a registered valuer which comes to Rs.2,62,88,077/- which is shown in the books of account. The registered value come here at Rs. 25,75,200/- .Therefore, what has been done at market price cannot be taken as true value originally at the time of construction. Here the AO should have understood the difference between original value and market value of the house. The registered
7 M/s Udipta Energy & Equipment Pvt. Ltd. ITA No. 45/GAU/2017
valuer report is therefore accepted by AO is unjustified and therefore, we are of the view that ld CIT(A) has rightly deleted the addition made by AO. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition. His order on this addition is, therefore upheld and the ground of appeal of the Revenue is dismissed. 14. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 10-07-2019. Sd/- Sd/- (एस.एस. गोदारा/ S.S. GODARA) (एवंडॉए.एल. सैनी/ DR. A.L. SAINI) (Û�ȡǓ�� �è�/ JUDICIAL MEMBER) (लेखा �è�/ ACCOUNTANT MEMBER) �Ǖ�ȡ¡ ȡ�ȣ, Ǒ��ȡȲ�/ Guwahati, Dated: 10-07-2019 Ǖ�ȣ�सरकार, व.Ǔ��Ȣ ͬ��/ Sudip Sarkar, Sr.PS आदेश�ȧĤǓ�ͧ�ͪ�\ Ē ȯͪ��/Copy of the Order forwarded to : 1. \ �Ȣ�ȡ�ȸ/ The Assessee 2. Ĥ×��ȸ/ The Respondent. 3. आयकर] �ǕÈ�(अपील) / The CIT(A) 4. आयकर] �ǕÈ�/ CIT 5. ͪ��ȡ�Ȣ�ĤǓ�Ǔ�ͬ�, आयकर\ �Ȣ�ȣ�\ ͬ����, �Ǖ�ȡ¡ ȡ�ȣ/ DR, ITAT, Guwahati 6. �ȡ�[फाईल/ Guard file.
आदेशानुसार/ BY ORDER, ×�ȡͪ��ĤǓ�//True Copy// व.Ǔ��Ȣ ͬ��/ Sr. Private Secretary (on Tour) आयकर\ �Ȣ�ȣ�\ ͬ����, �Ǖ�ȡ¡ ȡ�ȣ/ ITAT, Guwahati