MAKARAND SAKHARAM KULKARNI,PUNE vs. INCOME-TAX OFFICER, WARD - 2(1), PUNE

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ITA 1939/PUN/2018Status: DisposedITAT Pune30 April 2019AY 2014-155 pages
AI SummaryRemanded

What did the Tribunal hold?

The tribunal held that the assessee was not given a proper opportunity to present their case regarding the valuation report. Therefore, the matter was restored to the CIT(A) for a fresh decision on merits.

What were the facts?

The assessee purchased an immovable property for Rs. 1,90,32,000, but declared a much lower income. The Assessing Officer (AO) added the difference between the market value and the consideration paid as income. The CIT(A) granted partial relief, but the assessee appealed.

What were the issues?

Whether the assessee was denied a fair opportunity to be heard on the valuation report, and if the matter should be remanded for proper adjudication.

Which sections of the Income-tax Act were involved?

Section 56(2)(vii)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI ANIL CHATURVEDI, AM & SHRI PARTHA SARATHI CHAUDHURY, JM

For Appellant: Shri S.G. Naik &, Shri Anoop Naik
For Respondent: Shri M.K. Verma
Hearing: 09.04.2019Pronounced: 30.04.2019

PER ANIL CHATURVEDI, AM :

1.

This appeal filed by assessee is emanating out of order of Commissioner of Income-Tax (A) – 3, Pune dated 14.08.2018 for A.Y. 2014-15. 2. The relevant facts as culled out from the material on record are as under :-

Assessee is an individual and is stated to be deriving income from salary and other sources. Assessee electronically filed his return of income for A.Y. 2014-15 on 31.07.2014 declaring total income at Rs.2,48,612/-. The return of income was initially processed u/s 143(1) of the Act. The case was selected under CASS for scrutiny.

Notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. Thereafter assessment was framed u/s 143(3) of the Act

vide order dt.27.12.2016 determining the total income at Rs.41,80,610/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.14.08.2018 (in appeal

No.PN/CIT(A)-3/Ward-2(1), Pn/314/2016-17) granted substantial

relief to the assessee. Aggrieved by the order of Ld.CIT(A), assessee

is now before us and has raised the following grounds :

“1. The learned CIT (A) erred in confirming the addition of Rs. 35,26,000/- on the ground that,

(i) The Valuation Report dt. 29/05/2018 was received from the A.O.

(ii) And thereafter notices for the hearing was sent on 10/07/2017 and 06/08/2018. However, notices was returned back i.e. was not received by the assessee.

(iii) And order was passed on 14/08/2018. 2. Without prejudice to the above grounds, the Assessee submits that,

(i) Assessee is a Real Brother of Mr. Deepak Sakharam Kulkarni (alias DSK).

(ii) Assessee's office was situated at "DSK House" , 1187/60, J.M.Road, Shivajinagar, Pune - 411005. The aforesaid address belongs to "DSK Group" of companies.

3.

That, DSK Group of Companies failed to returned Fixed Deposit amounts to Fixed Deposit Holders, therefore the office was raided and sealed by Police Authorities, Economic Offence Wing (EOW) Pune under Maharashtra Protection of Interest of Depositor Act.

4.

That, after the above raid, Staff members of DSK Group left the employment and office was completely closed and even today office is closed.

5.

That, after enquiry by Pune police, Mr. D.S.Kulkarni and his family members are in magistrate custody and presently are in jail at Pune. So also, the Assessee is also on oral bail as per order of the Hon. Dist. Court Pune.

6.

From the order of Hon. CIT it is seen that, notices of the hearing was sent on 1010712017 and 06/08/2018 on the address "DSK House, 1187/60, J.M.Road, Shivajinagar, Pune - 411005. And it is further stated in the order of Hon. CIT that, "the envelop returned back with the remark" "Addressee left without instruction" and no intimation of change of address was given.

Thus, it is clear from the facts that, since office was sealed notices were returned back and not served on the Assessee.

7.

Thus it is submitted that, notices of Hon. CIT Appeals were never served on the Assessee and only after phone calls received by Assessee's Authorized Representative for recovery of the tax dues, Assessee came to know that order in Appeal by Hon. CIT-3 Pune was passed.

8.

The Assessee suo motu appeared in the CIT (Appeal) - 3 Pune office and Assessee received the order on 25.10.2018 personally.

9.

Without prejudice to above grounds, Assessee further submit that as per Section 142A(4) of the Income Tax Act, 1961, Valuation Officer has not given proper opportunity being heard and directly valuation report dated 29/05/2018 was submitted to ITO Office, Ward 2(1), Pune.

10.

The learned CIT(A) failed to appreciate the fact that, Valuation Report was directly forwarded by ITO Ward 2(1), Pune dated 25/06/2018 to CIT (A) without giving proper opportunity of being heard to the Assessee.

11.

It is submitted that, Learned CIT (A) could have remanded back the case to concerned ITO on the issue of valuation report of property and its objection with hearing.

12.

Therefore, it is prayed that, case be remanded back and proper opportunity on the point of valuation report may kindly given to the Assessee.”

3.

Before us, at the outset, Ld.A.R. submitted that though assessee

has raised various grounds but the sole controversy is with respect to the addition of Rs.39,32,000/- being the difference in Market Value as valued by the Stamp Duty Authority and the actual consideration paid

by the assessee.

4.

During the course of assessment proceedings, AO noticed that assessee had purchased an immovable property for a consideration of Rs.1,90,32,000/- which was not reflected in the return of income filed

by the assessee. Further according to AO the investment in property

was large as compared to total income declared for the year under consideration at Rs.2,48,612/-. AO also noticed that Stamp Duty

Authorities had ascertained the market value of the aforesaid property

at Rs.1,90,32,000/-. The assessee was therefore asked to explain the source of investment in property and why the difference in value

(Rs.1,90,32,000/- - Rs.1,51,000/-) not be treated as his income u/s 56(2)(vii)(b) of the Act. The submissions made by the assessee were not found acceptable to AO. AO accordingly added the difference of Rs.39,32,000/- as income from other sources as per provision of Section56(2)(vii)(b) of the Act. Aggrieved by the order of AO, assessee

carried the matter before Ld.CIT(A), who granted partial relief to the assessee by directing the addition be restricted to Rs.35,26,000/-.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before

us.

5.

Before us, Ld.A.R. at the outset submitted that Ld.CIT(A) has passed order based on the report of DVO and that assessee was not allowed any opportunity to furnish his stand on the DVO report. He

further prayed that if given a chance, assessee undertakes to appear

before the authorities and furnish all the required details and his

objections with respect to the valuation report and prayed to set aside

the assessment order. Ld.D.R. on the other hand supported the order

of AO and objected to Ld.A.R.’s prayer for 2nd innings.

6.

We have heard the rival submissions and perused the material

on record. The issue in the present ground is with respect to addition

of Rs.39,32,000/- being the difference in market value and the actual

consideration paid by the assessee. It is an undisputed fact that after receipt of report of Valuer, despite service of notice of hearing

on various occasions, none attended before the AO and that Ld.CIT(A) passed order based on the DVO Report. However,

considering the fact that Ld.A.R. has given an assurance that assessee will co-operate and appear before lower authorities and in view of the well settled principle of natural justice that sufficient

opportunity of hearing should be afforded to the parties and no party

should be condemned unheard, we are of the view that one more

opportunity be granted to the assessee to present his case. We

therefore restore the matter back to the file of Ld.CIT(A) to decide the issue on merits in accordance with law. Needless to state that Ld.CIT(A) shall grant adequate opportunity of hearing to both the parties. Assessee is also directed to promptly furnish all the details called for by the lower authorities. In view of our decision to restore

the issue to Ld.CIT(A), we are not adjudicating on merits the grounds of the appeal raised by the assessee. Thus, the grounds of assessee are allowed for statistical purposes.

7.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced on 30th day of April, 2019. (PARTHA SARATHI CHAUDHURY) (ANIL CHATURVEDI) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER

पुणे Pune; "दनांक Dated : 30th April, 2019. Yamini

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to :

1.

अपीलाथ" / The Appellant

2.

""यथ" / The Respondent

3.

CIT(A)-3, Pune.

4.

Pr. CIT-2, Pune. 5 "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, “एक सद"य” / DR, ITAT, “SMC” Pune; 6. गाड" फाईल / Guard file.

आदेशानुसार/ BY ORDER

//// व"र"ठ "नजी स"चव / Sr. Private Secretary आयकर अपील"य अ"धकरण ,पुणे / ITAT, Pune.

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