SMT.K.B.SONY,COCHIN vs. THE DCIT, COCHIN

Per BENCH:

These appeals are relating to different assesses arising out of different orders

of the CIT(A)-IV Kochi/CIT for different assessment years wherein certain issues

are common in nature, hence they were heard together and are being disposed

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 of by this common order for the sake of convenience. The Revenue has also

filed appeal in ITA No. 374/Coch/2015.

ITA No. 383 to 386/Coch/2015 : Shri P.V. Sreenijin

towards unexplained investment in purchase of land at Alangad village at

Rs.4,03,600/-.

2.1 The facts of the case are that the assessee, being an advocate, had

purchased land from Shri K.R. Ramesh Kumar and Smt. Sarasakumari 20 cents

of land in Survey No. 176/15 at Alangad Village and 114.75 cents of land in

Survey No. 176/17, 16 dated 07/03/2007 respectively. The value shown in the

document was Rs.3,10,000/-. But it was admitted by sellers that the actual

consideration was more than that in the document. The extra amount was paid

by the assessee by clearing the liability of the sellers with SBT, Varapuzha

Branch and the entire consideration was paid in cash. The Assessing Officer

conducted enquiries from the said bank and the statement of closing of the

liability was obtained. The Assessing Officer found that the liability of Palazhy

Distributors amounting to Rs.6,33,600/- was closed and the consideration of

Rs.4,03,600/- was the investment of the assessee and the same was treated as

unexplained investment of the assessee u/s. 69 of the I.T. Act. On appeal, the

CIT(A) confirmed the addition made by the Assessing Officer.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 2.2 Against this, the assessee is in appeal before us. The Ld. AR submitted that

the assessee has not deposited any money in the vendor’s Bank account and if

there was any deposit in the Bank account of the vendor, it cannot be presumed

that the assessee has deposited the same unless there is movement of funds

from the assessee’s account or payment of on-money for this transaction.

Further it was submitted that as per I.T. Rule 114B(j), every person shall quote

his PAN in all documents when deposit of cash aggregating to Rs.50,000/- or

more is made to a banking company to which Banking Regulation Act, 1949

applies. The assessee has neither remitted any money nor furnished his PAN to

the Bank. Unless the Assessing Officer has brought on record the assessee’s PAN

for depositing the said amount in the vendor’s Bank account, it cannot be

considered that such amount was deposited by the assessee. It was further

submitted that in the cross examination it was admitted by the vendor, namely,

Shri K.R. Ramesh Kumar that there was no proof that the assessee had remitted

the money and had also not given authorization or letter to the Bank requesting

the Bank to permit the assessee to remit the money into his firm’s account. It

was submitted that the registration authorities registered the sale deed without

allegation of understatement of sale value and unless there is proof that there

was understatement of sale value or payment of on-money, the Assessing Officer

cannot presume that there was undervaluation of the properties purchased by

the assessee. The Ld. AR further submitted that even the seller has not shown

additional consideration received from the sale of the said land in his income tax

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 return and this fact was admitted by Shri K.R. Ramesh Kumar in the cross

examination. Further it was submitted that in similar situations, the land

transactions within a year in the locality showed the going rate at Rs. 985 per

cent.. For this purpose, he referred to Sale Deed No. 367/2006 executed on

17/01/2006 for sale of 81 cents and 250 sq. links of wet land by Smt. D.

Sarasakumari and Shri A. Raveendran Nair. While the assessee has shown

Rs.2300 per cent, the sale deed showed the payment of Rs.3,10,000/- for 134.75

cents and this being a wet land, that should be cheaper than dry land as it could

only be used for agricultural purposes.

2.3 The Ld. AR relied on the following judgments:

(i) DCIT vs. K. Najimunnisa & K. Sajida in ITA Nos. 794&795/HYD/2010 dated 24/08/2012 (ITAT, Hyderabad Bench) (ii) CIT vs. Satinder Kumar (2001) 250 ITR 485 (P&H (iii) CIT vs. Smt. K.C. Agnes (2003) 263 ITR 354 (Ker) (iv) CIT vs. P.V. Kalyanasundaram (2006) 282 ITR 259 (Mad) (v) CIT vs. P.V. Kalyanasundaram (2007) 294 ITR 49 (SC) (vi) CIT vs. Chandni Buchar (2010) 323 ITR 510 (P&H) (vii) Paramjit Singh vs. ITO (2010) 323 ITR 588 (P&H) (viii)Rajdeep Builders vs. ACIT in ITA No.666/CHD/2010 dated 27/04/2012 (ITAT Chandigarh Bench)

2.4 On the other hand, the Ld. DR submitted that the claim of the assessee was

based on general observations. The Ld. DR submitted that while the Assessing

Officer relied upon the specific instances of the sale transaction by Shri Ramesh

Kumar where he had accepted having received the actual consideration, which

included clearing off his liability with the Bank as well as the cash received over

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 and above that sum. Further it was submitted that the statement of the seller

was verified by the Assessing Officer with the Bank and the same was found to

be true. Moreover, the assessee was allowed an opportunity to cross examine

the seller, Shri Ramesh Kumar wherein he confirmed having received the actual

consideration more than the documented consideration for the said land

transaction. In view of this, it was submitted that the Assessing Officer was right

in taking the decision in making the addition of Rs.4,03,600/-.

2.5 We have heard the rival contentions and perused the record. Undisputedly,

in the present case, the registered sale deed of the property measuring 114.75

cents at Alangad Village purchased from Smt. D. Sarasakumari vide Document

No. 1553/07 dated 3/3/2007 shows sale consideration of Rs.2,30,000/- and

another property of 20 cents of land in Alangad village purchased from Shri K.R.

Ramesh Kumar vide Document No. 1552/07 dated 3/3/2007 shows sale

consideration of Rs.80,000/-. Thus the total registered value of both the

properties is Rs.3,10,000/-. Further in the sworn statement recorded u/s. 131 of

the Act from Shri K.R. Ramesh Kumar, it was stated that the assessee had

remitted a sum of Rs. 6,33,600/- in SBT, Varapuzha to clear off his voting right

on the land and paid Rs.80,000/- by cash to him. Hence, the Assessing Officer

presumed that there was an on-money payment of Rs.4,03,600/- over and above

the sale value mentioned in the sale deed. Apart from the allegation from the

Assessing Officer that the assessee had paid the amount into the vendor’s Bank

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 account to clear off his liabilities with the Bank, there was no other evidence

brought on record by the Assessing Officer to substantiate the payment of on-

money for this transaction. The vendor, Shri K.R. Ramesh Kumar stated in his

statement recorded u/s. 131 that he himself had not disclosed the alleged sale

consideration in his return of income. Being so, we cannot give any credit to the

sworn statement recorded from Shri K.R. Ramesh Kumar. Further, there is no

allegation of any extra payment by the registration authorities in respect of these

two properties. Therefore in the absence of any corroborative evidence to the

contrary, the value mentioned in the sale deed is to be treated as correct sale

consideration. Further, as held by the Madras High Court in the case of CIT vs.

P.V. Kalyanasundaram (2006) (282 ITR 259) and confirmed by the Supreme

Court in the case of CIT vs. P.V. Kalyanasundaram (2007) (294 ITR 49), third

party statement cannot be considered as evidence so as to confirm the addition

in the hands of the assessee unless there is corroborative material. In view of

this, we are of the opinion that the addition made towards alleged

understatement of sale value is not warranted.

2.6 In this case, there is no evidence available on record that the assessee has

paid on-money, on the basis of which the Assessing Officer has quantified the

on-money payment, he cannot make the impugned addition. The evidence

brought on record is having no direct link to suggest that the amount deposited

in the vendor’s Bank account was by the present assessee towards payment of

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 on-money and merely on the basis of the fact that the vendor had accepted the

payment of on-money, no addition is to be made. In our opinion, as held by the

Madras High Court in the case of CIT vs. Kalyanasundaram (supra), the burden

of proof in this kind of transaction was that of the Revenue. The same view was

taken by the Supreme Court in the case of K.P. Varghese vs. ITO (131 ITR 597).

The question in the present appeal is squarely covered by the decision of the

Kerala High Court in the case of CIT vs. Smt. K.C. Agnes & Others (2003) 262

ITR 354, wherein the High Court held that when a document shows fixed price,

there will be a presumption that, that is correct price agreed upon by the parties.

It is not necessary that the price stated in the agreement will be the price shown

in the sale deed. Sometimes, it may be higher and sometimes it may be lower.

Sometimes, intentionally a lesser value may be shown in the sale deed. Even if it

is assumed to be so, unless it is proved that the agreement was acted upon and

unless the amount stated in the agreement was paid for sale, the court cannot

come to the conclusion that the price mentioned in the sale deed is not correct.

In this case, appeal of the Revenue was dismissed. It is seen that the High

Court has gone a step ahead and even considered the existence of both the

agreement to sell and the sale deed and upheld the validity and sanctity of the

sale deed. In the present case, since the Assessing Officer has failed to prove

the payment of on-money by bringing on any direct evidence, we are not in a

position to sustain the addition. Hence, we delete the addition of Rs. 4,03,600/-.

Thus, this ground of appeal of the assessee is allowed.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 3. Ground No. 2 is with regard to disallowance of entire expenditure claimed

against professional receipts as a result of changing head of income from

business or profession to income from other sources.

3.1 The facts of the case are that during the year, the assessee had received an

amount of Rs.1,00,000/- per month between the period from July 2006 to June,

2009 from M/s. Rosy Blue (India) Pvt. Ltd. and Rs.50,000/- from Aerena Gold

Souk International. The Assessing Officer found that the nature of receipts from

M/s. Rosy Blue (India) Pvt. Ltd., which was claimed as professional receipts in

the books of the assessee, were actually not in the nature of professional

receipts because the entire amount was received without providing any

professional services. Accordingly, the receipt was treated as income from other

sources and thus, as per section 57 the expenses claimed against income from

profession and debited to P&L account was disallowed. The Assessing Officer

disallowed the expenditure on the basis of the sworn statement recorded u/s.

131 of the Act of Shri Russel Mehta, M.D. of M/s. Rosy Blue (India) Pvt. Ltd.

which was engaged in diamond merchandise and based in Bombay, that no

meaningful services were rendered by the assessee and as such, the payments

were made not for any professional services rendered. As per the statement of

M.D. of M/s. Rosy Blue (India) Pvt. Ltd., the Assessing Officer found that

assessee had not rendered any services to the said company, not only in Kerala

but anywhere in India. Accordingly, he considered the receipts from M/s. Rosy

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 Blue (India) Pvt. Ltd. as income from other sources. Consequently, he

disallowed the expenditure as incurred to earn this income.

3.3 Against this the assessee is in appeal before us. The Ld. AR submitted that

the assessee was engaged in legal consultancy on retainer-ship basis with M/s.

Rosy Blue (India) Pvt. Ltd. by virtue of an agreement with them and had

returned such income under the head income from business or profession. The

Ld. AR submitted that the receipt of payment from the company was as per the

agreement, and the company while making the payment had deducted tax u/s.

194J and had issued Form 16A. According to the Ld. AR, the company did not

seek any advice or entrusted any assignment, hence no service was provided,

but that does not change the character of the agreement and nature of payment.

The assessee received the fee as per the contract and he is supposed to make

himself available whenever the company asks for, which is also part of the

service. Further, the Ld. AR submitted that in such a situation, the assessee’s

income cannot be treated as income from other sources because they have to

maintain an office and necessary set up for being a qualified advocate.

According to the Ld. AR, the major expenses claimed was interest on loan and

depreciation along with other establishment costs.

3.4 On the other hand, the Ld. DR submitted that the assessee and his wife

Smt. K.B. Sony were engaged by M/s. Rosy Blue (India) Pvt. Ltd. on retainer-ship

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 basis and on monthly payment basis. The Ld. DR submitted that no services for

the whole period of engagement from July, 2006 to June, 2009 were availed for

legal consultancy by M/s. Rosy Blue (India) Pvt. Ltd. neither they had any

business interest in the State of Kerala. In such a situation, the Ld. DR submitted

that the assessee should have produced the details of bills raised on their client

for the services rendered for them, but no such details of bills raised or the

vouchers for related expenses were maintained or produced before the Assessing

Officer or during the appellate proceedings. Moreover, according to the Ld. DR,

no professional receipts were shown over and above the amount of fees received

on account of retainer-hip. Hence, it was submitted that since the assessee

could not produce the details related to the services rendered to the clients, the

Assessing Officer had rightly treated the professional receipts as income from

other sources which was confirmed by the CIT(A).

3.5 We have heard the rival contentions and perused the record. Admittedly, in

this case, the assessee entered into an agreement on 01/07/2006 as a retainer

to advise M/s. Rosy Blue (India) Pvt. Ltd. on legal matters. As per this

agreement, the assessee was paid by M/s. Rosy Blue (India) Pvt. Ltd. at the rate

of Rs. 1 lakh each per month. The Assessing Officer has not doubted this

agreement. The only contention of the Assessing Officer is that the assessee has

not rendered services to M/s. Rosy Blue (India) Pvt. Ltd. The assessee has also

not disputed this fact. The payment has been made to the assessee on the basis

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 of valid agreement. Even if it is assumed that no service was rendered, unless it

is proved that the agreement was not acted upon, we cannot come to the

conclusion that this agreement is only a make believe story or self serving

document. The Assessing Officer in the present case has not doubted the

agreement. Being so, the Assessing Officer is precluded from changing the head

of income from profession to the head of income from other sources. Further,

in our opinion, for allowing the expenditure, the assessee has to fulfil the

following conditions:

i) The expenditure should not be of nature of capital expenditure.

ii) It should not be a personal expenditure.

iii) The expenditure must be laid out or expended wholly and exclusively for the purpose of business or profession of the assessee.

3.6 Now we will examine whether the assessee has fulfilled the above

requirements. We have carefully gone through the provisions of section 30 to 36

of the I.T. Act. Section 30 relates to the allowability of payment like rent, rates,

taxes, repairs and insurance for the premises used for the purpose of business or

profession. Section 31 relates to allowability of repairs and insurance in respect

of machinery, plant and furniture used for the purpose of business. Similarly,

section 32 relates to allowability of depreciation on assets used in business. In

the same way, while section 32A relates to investment allowance, section 32AB

relates to investment deposit account. Section 32AC deals with investment in

new plant or machinery. Section 32AD deals with investment in new plant or

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 machinery in notified backward areas in certain States. Section 33 deals with

development rebate, while section 33A deals with development allowance.

Similarly, section 33AB deals with tea development account, coffee development,

rubber development account, as against section 33ABA which relates to site

restoration fund. Similarly, 33AC deals with reserves for shipping business.

Section 33B relates to rehabilitation allowance and section 34 deals with

conditions for depreciation allowance and development rebate. Section 34A

deals with restriction on unabsorbed depreciation and unabsorbed investment

allowance for limited period in case of certain domestic companies. Section 35

deals with expenditure on scientific research, section 35A deals with expenditure

on acquisition of patent right or copy right. Section 35AB deals with expenditure

on know-how. Section 35ABB deals with expenditure for obtaining licence to

operate telecommunication services. Section 35AC deals with expenditure on

eligible project. Section 35AD deals with deduction in respect of expenditure on

specified business. Section 35B deals with export market development

allowance. Section 35C deals with agricultural development allowance. Section

35CC deals with rural development allowance. Section 35CCA deals with

expenditure by way of payment to association and institutions for carrying out

rural development programmes. Section 35CCB deals with expenditure by way

of payment to associations and institutions for carrying out programmes of

conservation of natural resources. Section 35D deals with amortization of certain

preliminary expenses and 35DD deals with amortization of expenditure in case of

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 amalgamation or de-merger. Section 35DDA deals with amortization of

expenditure incurred under voluntary retirement scheme. Section 35E deals with

deduction for expenditure on prospecting etc. for certain minerals. Section 36

deals with other deduction in respect of premium paid, interest etc.

3.7 In the present case, there is no allegation by the Assessing Officer that the

sassessee has not incurred any expenditure. The only allegation is that the

assessee has not rendered any services to M/s. Rosy Blue (India) Pvt. Ltd. In

our opinion when there is a valid agreement to render the services as a retainer

and the assessee being an advocate, maintains office for the purpose of his

profession, the Assessing Officer is not justified in disallowing the expenditure on

the reason of non rendering of services to a particular client. In our opinion

when the assessee made himself ready to be available to the client and the client

has not availed his services as a retainer, we do not find fault with the assessee

so as to disallow the expenditure incurred by the assessee. In our opinion, the

Assessing Officer did not allow the expenditure only on the presumption that the

assessee has not rendered the services though the assessee has kept himself

ready to render the services. In AY 2009-10 and 2010-11, there is no such

disallowance. In view of this, we are not in agreement with the findings of the

lower authorities. We direct the Assessing Officer to allow the above expenditure

incurred by the assessee. Hence, this ground of appeal is allowed.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 4. The next ground, Ground No. 3 is with regard to deposit of Rs. 2 lakhs in the

assessee’s Bank account.

4.1 Though the assessee has taken the plea that it has received the amount

from relatives, he failed to furnish the confirmation letter from the related

parties. Hence, it was considered as the income of the assessee by the

Assessing Officer.

4.2 Against this, the assessee is in appeal before us. The Ld. AR submitted that

the said amount of Rs. 2 lakhs was credited in the assessee’s savings account

with ICICI Bank Ltd., Edapally Branch on 19/10/2006 as follows:

a. Rs. 1,00,000/- was credited on 19/10/2006 under Reference No.215151 from Syndicate Bank, Kochi.

b. Rs.1,00,000/- was credited on 19/10/2006 under Reference No.32105 from SBT, Kochi.

According to the Ld. AR, these amounts were loans from relatives and were

utilized to make payments to M/s. Empire Builders towards office building. Since

these amounts have been credited to assessee’s Bank account by transfer from

other bank accounts, it was not correct in law to treat it as unexplained credit.

4.3 The CIT(A) observed that the assessee has, other than showing that the

amount of Rs. 1 lakh each, credited in the assessee S.B. account with ICICI Bank

Ltd., Edapally Branch on 19/10/2006, has not furnished any other evidence to

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 establish either the identity of the person or the creditworthiness or the

particulars like PAN Number or IT return filed. In view of this, CIT(A) upheld the

addition made by the Assessing Officer on this count.

4.4 We have heard the rival contentions and perused the record. Before us

also, the assessee was not able to prove the identity as well as the

creditworthiness of the creditors. Hence, we do not find any infirmity in the

finding of the CIT(A) and confirm it. This ground of appeal of the assessee is

rejected.

relatives of Rs.7,50,000/-.

5.1 The facts of the case are that the Assessing Officer found that in the cash

flow statement, apart from Rs.2,50,000/- which represents the opening balance,

another amount of Rs.5,00,000/- was received as cash gift from the relatives.

Apart from the withdrawals from the bank account Rs.3,23,500/- everything was

received as gift. The Assessing Officer noticed that the assessee did not have

any details to prove the source of the gift. Hence, the AO treated the

unexplained cash gifts from the relatives as unexplained income of the assessee.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 5.2 On appeal, the CIT(A) observed that the veracity of the total amount of

Rs.7,50,000/- consisting of Rs.2,50,000/- as opening cash balance in the cash

flow statement, could not be established by the assessee. The CIT(A) further

observed that no details were submitted by the assessee with regard to the

amount of Rs.5,00,000/- as cash gifts received from relatives. The CIT(A) found

that the assessee failed to establish the identity of the person by way of

particulars of IT return etc. Hence, the CIT(A) upheld the addition made by the

Assessing Officer as unexplained income of the assessee.

5.3 Against this, the assessee is in appeal before us. The Ld. AR submittd that

the assessee and his wife returned from London in March 2006 with an intention

to set up practice in Law in Cochin. It was submitted that the relatives of the

assessee and his wife gifted some money for the purpose and in addition to the

gifts received, they had cash balance with them brought in foreign currency of

1000 pounds and exchanged for Indian currency at the airport. The ld. AR

submitted that it was clearly mentioned in the cash flow statement that cash

gifts were received from relatives at the time of opening of the office. Hence, it

was submitted that the addition of Rs.7,50,000/- as unexplained income may be

deleted.

5.4 On the other hand, the ld. DR relied on the orders of the lower authorities.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 5.5 We have heard the rival contentions and perused the record. In the cash

flow statement, there was an amount of Rs.2.5 lakhs which is the opening

balance and this credit was not emanating in the assessment year under

consideration. As it is carried forward from earlier assessment years, it cannot be

considered as unexplained credit in the assessment year under consideration.

Hence, to that extent, the addition cannot be made in this assessment year.

However, the balance Rs.5 lakhs represents the cash gifts received by the

assessee in the assessment year under consideration for which the assessee has

not given any details to prove the identity of the party from whom it was

received. Further, the genuineness of the transactions is not established. Hence,

we have no hesitation in confirming the addition to the extent of Rs.5 lakhs

which is fresh entry in the assessment year under consideration. Accordingly,

this ground of appeal of the assessee is partly allowed. Thus, the appeal of the

assessee in ITA No. 383/Coch/2015 is partly allowed.

ITA No. 384/Coch/2015

purchase of property at Varapuzha at Rs.4,82,500/-.

6.1 The facts of the case are that the assessee had purchased land admeasuring

36.1 cents in Varapuzha from Shri Linjo Joseph on 08/04/2008 at a documented

price of Rs.7,27,000/-. Mr. Linjo Joseph on oath had admitted to have received

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 Rs.16,92,000/- in cash for this transaction. On the assessee’s request the

Assessing Officer allowed cross examination of Shri Linjo Joseph and, he has

confirmed his earlier statement. The Assessing Officer rejected the explanation of

the assessee that Shri Linjo Joseph was not able to produce any documentary

evidence and accordingly, 50% of this land value was added in the hands of the

assessee as unexplained investment of the assessee at Rs.8,46,000/- u/s. 69 of

the Act, while the remaining 50% was considered in the hands of the assessee’s

wife.

6.3 On appeal, the CIT(A) observed that the statement given under oath is an

admissible evidence and further, the assessee was allowed opportunity to cross

examine Shri Linjo Joseph who has maintained the same stand in his recorded

statement. As such, the evidentiary value of this statement cannot be denied.

As regards the payment of Rs.7,27,000/-, the CIT(A) observed that the same is

to be deducted from the full consideration of Rs.16,92,000/-. According to the

CIT(A), the assessee had paid only Rs.9,65,000/- only, as over and above the

documented consideration. Hence, the CIT(A) treated the unexplained

investment only up to the extent of Rs.4,82,500/- each, in the hands of the

assessee as well as his wife. Accordingly, the CIT(A) modified the addition to

this extent.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 6.4 Against this the assessee is in appeal before us. The Ld. AR submitted that

the Assessing Officer made this addition only on the basis of statement made by

the seller, Shri Linjo Joseph during the cross examination that he had filed the

return of income but no proof was furnished on request to make this addition,

while the assessee had produced the original documents. The Ld. AR submitted

that the land was not subjected to valuation and argued that the value as per

the registered valuer could only be adopted. The Ld. AR submitted that a sum of

Rs.7,27,000/- was shown in the books of his wife as cost of the land and

therefore, this has to be deducted to arrive at the unexplained investment.

6.4.1 We have heard the rival contentions and perused the record. As

discussed in the appeal in ITA No. 383/Coch/2015 for the assessment year 2007-

08 in para nos. 2.5 and 2.6, we are inclined to delete the addition on the same

lines. Hence, this ground of appeal of the assessee is allowed.

6.5 The next ground, Ground No.2 is with regard to sustenance of addition

towards investment in properties at Annamanada at Rs. 50 lakhs..

6.6 The facts of the case are that the assessee had purchased land admeasuring

279.52 cents of land at Annamanada on 13/11/2008 at a consideration of

Rs.14,00,000/- from the seller, Shri K.A.M. Iqbal Mather. However, it was

noticed by the Assessing Officer that Shri Mather in his sworn statement stated

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 that the actual consideration was Rs.1,14,00,000/- and the entire amount was

paid in cash and not recorded in the books of account.

6.7 On appeal, the CIT(A) observed that Rs. 14,00,000/- was paid by the

assessee and his wife and the same deserves to be reduced from the total

consideration of Rs.1,14,00,000/- However, for the balance amount of

Rs.1,00,00,000/-, the CIT(A) held that the same is to be treated as the amount

paid in cash towards investment in land for which the Assessing Officer had

relied on the sworn statement of Shri K.A.M. Iqbal Mather. The CIT(A) observed

that in most of the cases, the sellers have admitted to have received the amount

of consideration in the sworn statement and later on, filed return of income,

showing the same amount. In such a situation, the CIT(A) concluded that the

evidentiary value of the sworn statement of the seller cannot be disputed by the

assessee on subjective arguments. In view of this, the CIT(A) held that excess

consideration, after considering the actual cost of Rs.14 lakhs shown by the

assessee and his wife was Rs.1 crore out of which 50% of the sum was treated

in the hands of the assessee. Accordingly, the CIT(A) upheld the addition to the

extent of Rs. 50 lakhs, being consideration paid in cash for the purchase of the

land as unexplained investment of the assessee.

6.8 Against this, the assessee is in appeal before us. The Ld. AR submitted

that by simply relying on the statement of Shri K.A.M. Iqbal Mather, the

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 Assessing Officer had taken the cost of land as Rs.1,14,00,000/- and had added

the said amount u/s. 69 of the Act. The Ld. AR submitted that Shri K.A.M. Iqbal

Mather did not present himself for cross examination before the Assessing

Officer. The Ld. AR submitted that the DVO valued the land. The value

disclosed by the assessee for the land was Rs.89,34,000/-. The Ld. AR

submitted that for arriving at the above figure, the DVO had taken values of 5

properties varying from Rs.5,709/- to Rs.1,93,543/- per cent as shown below and

averaged it. It was submitted that the DVO did not consider the nature of land,

road proximity, whether with house or not etc. It was submitted that the land

valued at Rs.1,93,543/- per cent and the valued at Rs.99,310/- per cent are with

houses and having PWD roads on one side. Thus the cost of 279.52 comes to

Rs.29,10,642 per cent.

Document No. Land Value Extent of land 1142/07 Rs.1000/- per cent 100 cents 3311/06 Rs.18,571/- per cent 36 cents 1755/08 Rs.1,93,543/- per cent 12.91 cents Small plot with house and asphalted roads 129/08 Rs.5,079/- per cent 31.5 cents 1716/09 Rs.99,310/- per cent 7.25 cents Small plot with house and asphalted roads.

The Ld. AR submitted that the value of Rs.14,00,000/- as per registered

document was recorded in the assessee’s books of account. Therefore, it was

pleaded that the addition may be deleted. The Ld. AR relied on the judgment of

the High Court of Karnataka in the case of S.S. Jyothi Prakash vs. Addl. CIT 22

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 (2016) 71 taxmann.com 127 wherein it was held that mere report of DVO cannot

form the sole basis to make addition. On the other hand, the Ld. DR relied on

the orders of the lower authorities.

6.9 We have heard the rival submissions and perused the record. The

Assessing Officer while arriving at the fair market value of the impugned land,

considered the average value of six properties mention in the earlier para. In

our opinion, the property bearing Document No. 1755/08 is a small plot with

asphalted roads. This property is in a better position and the value of this

property cannot be compared with the value of the impugned property of the

assessee. Further, the property in Document No. 1985/109 mentioned earlier, is

a small plot with house and asphalted roads. This property also cannot be

compared with the impugned property of the assessee. Being so, these two

properties are to be taken out from comparison. The remaining four properties

are to be considered to arrive at the fair market value of the property. For this

purpose, we remit this issue to the file of the Assessing Officer to re-calculate the

value of the assessee’s property on the basis of average value of the property in

Document Nos. 1142/07, 3311/06, 129/08 and 1716/09. Thus, this ground of

appeal of the assessee is partly allowed for statistical purposes. Hence, the

appeal of the assessee in ITA No. 384/Coch/2015 is partly allowed for statistical

purposes.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 ITA No. 385/Coch/2015

investment in purchase of land at Keethi Nagar at Rs. 91,50,000/-.

7.1 The facts of the case are that the assessee had purchased land admeasuring

29.6 cents of land in Keerthi Nagar from Dr. K.K. Dandapani vide Document No.

1220/09 dated 05/06/2009 for a sum of Rs.30,00,000/-. However, it was noticed

that Shri Dandapani in the sworn statement stated that the total consideration of

land received was Rs.213 lakhs and the amount was received in cash. Shri

Dandapani was cross examined by the Assessing Officer and he had taken the

same stand as it was recorded in the sworn statement in respect of the total sale

consideration received at Rs.213 lakhs as against the documented sale

consideration at Rs.30 lakhs. Accordingly, the Assessing Officer added 50% of

the land value in the hands of the assessee as unexplained investment u/s. 69 of

the Act.

7.2 The CIT(A) observed that even after the opportunity of cross examination,

the seller had continued with the same stand. The CIT(A) found that the Shri

Dandapani had already filed the return of income on 20/1/2014 wherein the

computation of capital gains, the sale consideration was shown as Rs.2.13

crores. According to the CIT(A) in a case where there is a sworn statement of

the seller that the actual consideration received on sale of land is at Rs.2.13

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 crores which been shown in his return of income, it is established beyond doubt

that the actual sale consideration was at Rs.213 lakhs which is over and above

the amount of documented sale consideration of Rs.30 lakhs. According to the

CIT(A), even the notice received from the District Collector for suppression of

stamp duty indicated that the documented value is not the true value.

Therefore, the CIT(A) held the inference derived by the AO as correct and

proper. However, since the AO had made addition of Rs.1,06,50,000/- without

deducting the documented sale consideration of Rs.30 lakhs, which was paid by

the assessee and his wife as cost of acquisition, the CIT(A) allowed deduction of

Rs.15 lakhs each in the hands of the assessee and his wife. Thus the CIT(A)

restricted the addition made by the Assessing Officer to Rs.91,50,000/-.

7.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that

by simply relying on the sworn statement of Dr. K.K. Dandapani, the Assessing

Officer had taken the cost of land at Rs.2,13,00,000/- and added the said

amount as unexplained investment u/s. 69 of the Act. The Ld. AR submitted that

no evidence other than the sworn statement made by the Shri Dandapani was

adduced from Shri Dandapani at the time of cross examination by the Assessing

Officer and he stated that he had not received any notice from the Income Tax

Department. The Ld. AR submitted that the Department’s stand that the

assessee and his wife had paid Rs.2.13 crores for buying 29.6 cents of land from

Shri Dandapani which is at the rate of Rs.7.5 lakhs per cent is incorrect.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 According to him, the transaction was for Rs. 1 lakh per cent. It was submitted

that the assessee had received a notice in Form II and a reference in Form 1A

from District Collector that the assessee had undervalued the property for

registration and issued notice to the assessee stating that the value of property

was Rs. 1.5 lakhs and not Rs.1 lakh. The Ld. AR submitted that the sale of land

was on 4.4.2008 and consideration was for Rs.4,97,000/- at the rate of

Rs.82,68d2/- per cent. Moreover, it was submitted that the land was not

subjected to valuation by DVO, only the building under construction was

subjected to valuation. The Ld. AR further submitted that the amount of

Rs.30,00,000/- as per registered document was recorded in the assessee’s and

his wife’s books of account at Rs.15,00,000/- each towards cost of acquisition.

Hence, it was pleaded that the value as per registered document should be

adopted and accordingly, the addition may be deleted.

7.4 The Ld. DR relied on the orders of the lower authorities.

7.5 We have heard the rival submissions and perused the record. As discussed

in the appeal of the assessee in ITA No. 383/Coch/2015 in para nos. 2.5 and 2.6

of this order, we are inclined to delete the addition on the reason that the

addition is based on the statement of Dr. K.K. Dandapani who is the seller of the

property and the statement is not supported by any independent corroborative

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 material. Hence, this ground of appeal of the assessee is allowed. The appeal

of the assessee in ITA No. 385/Coch/2015 is allowed.

investment in construction of building at Annamanada at Rs.26,33,926/-.

8.1 The facts of the case are that the assessee had purchased land at

Annamanada. The land was surveyed by Remote sensing data of satellite which

gave a clear indication that in November 2009, construction of a new building

was already started and in progress. This land and building was valued by the

DVO and vide his valuation report, the construction investment in that building

was of Rs.67,89,000/- as on 27/03/2013. It was found that the assessee had

not obtained building permit from the local authority and hence, the Assessing

Officer held that by November 2009, 50% construction was already completed.

Accordingly, the Assessing Officer treated the amount as unexplained investment

made by the assessee.

8.2 The CIT(A) observed that 50% construction was already completed by

November, 2009. The DVO had valued the construction cost at Rs.67,89,000/-.

According to the CIT(A) the entire construction was in a single storey house with

tiles. According to the CIT(A), the value shown as on 31/03/2010 was

Rs.7,60,574/- and as on 31/03/2011 was Rs.33,94,868/-. According to the

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 CIT(A), the assessee had raised objections which contained issues like the

construction cost per sq. meter for the building front portion is taken @

Rs.13,422 per sq. mtr. While as the cost of construction for front portion of

Keerthi Nagar building is taken at Rs.10,250 per sq. mtr. The second objection of

the assessee, according to the CIT(A) was that the valuer had taken 15% extra

on main building front and had further added extra for services like plumbing

and sanitary and electrification. The CIT(A) observed that the DVO is a technical

wing and competent to evaluate the cost of construction which is based on their

own parameters and the assessee cannot claim that the two properties at two

different places should have the same rate for the front construction. The

CIT(A) observed that so far as the rate for front portion of the two buildings are

concerned, the same cannot be one and if there is any difference, the assessee

cannot have a claim that why the two rates were not considered as the same.

In view of this, the CIT(A) justified the valuation of the DVO. But as regards the

addition, since the assessee had already shown the construction value of

Rs.7,60,574/- as on 31/03/2010, the CIT(A) restricted the same to

Rs.26,33,926/- (33,94,000 – 7,60,574).

8.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that

the addition made by the Assessing Officer was without considering that

Rs.7,60,574/- was spent by the assessee (3,24,526/-) and his wife (4,36,046/-)

as per their books of account till 31/03/2010. The assessee raised following

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 objections regarding the valuation of building at Annamanada before the

Assessing Officer:

i) In the valuation report, in Annexure 1, rate per sq.mtr for construction of main building front portion (156 sq. mtr.) is taken @ Rs.13,422 per sq. mtr. This is high pitched when it is compared with the rate per square meter for front portion of Keerthi Nagar building which is taken at Rs.10,250 per sq. mtr. Moreover rear portion of Annamanada building (55.87 sq. mtr.) is valued at Rs.13,422 sq. mtr. while bed rooms, family living, store etc. at Keerthi Nagar are valued @ Rs.9,965 per sq. mtr. Annamanada building is in Kadukutty Panchayat in Trichur District while Keerthi Nagar building is in Cochin Corporation. Excessive value taken by valuer thus is Rs.6,72,051/-.

(ii) Even after valuing the main building Front and Rear of 219.05 sq. mtr. (156 + 55,875 @ Rs.13422 per sq. mtr. Valuer has again added extra Rs.2400/- per sq. mtr. for flooring area of 211.87 sq. mtr. is rs.5,08,488/-. Again he has added 15% extra on main building front and rear cost amounting to 4,42,013/-,which is unheard of. Thus he has added Rs.9,49,501/- (506488 + 441013/-) nah kd was 7.2 written submissions.

(iii) Valuer has also added extra for service viz plumbing and sanitary and electrification which is usually included in the per sq. mtr. rate. He has thus added Rs.9,81,914/- towards this.

(iv) In addition, valuer has also added Rs.10,29,220/- to extra items out of which 90% is usually get included in per sq. mtr. rate.

Thus it was submitted that the building valuation was high pitched and excessive

and was against normal standards. If this excess addition of Rs.36,32,686/-

(6,72,051/- + 9,49,501 + 9,81,914 + 10,29,220) is removed from

Rs.67,89,000/- value will come to Rs.31,56,313/-. As per books of account

assessee had spent Rs.19,93,050/- (excluding land cost) till 31.3.2011.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 8.4. The Ld. DR relied on the orders of the authorities below.

8.5 We have heard the rival contentions and perused the record. The assessee

had constructed a residential building at Annamanada which construction was

spread over 33 months from 1.4.2009 t0 31.12.2011. The total cost incurred by

the assessee upto 31/03/2011 was RS.3795868/- and upto 31/03/2010 was

Rs.7,60,574/-. The Assessing Officer without rejecting the books of account,

referred the matter to the DVO for estimating the cost of construction who has

given the report, estimating the cost of construction at Rs.67,89,000/-. The sole

basis for addition was the DVO report. Before referring the matter to the DVO for

valuation, it is incumbent upon the Assessing Officer to reject the books of

account by noticing the defects in the books maintained by the assessee. In this

case, there is no rejection of books of accounts by the Assessing Officer. Hence,

in our opinion, referring the matter to the DVO for valuation of the property itself

is bad in law. Even otherwise, the Assessing Officer has no other evidence than

the DVO report. In our opinion, the DVO report cannot be the only basis for

making the addition. More so, the DVO has applied Central PWD rates. When

the property is situated in a mofussil area, the State PWD rates have to be

applied. We place reliance on the judgment of the Madras High Court in the

case of CIT vs. Raja Varadarajan (89 CCH 207). Hence, this ground of appeal of

the assessee is allowed. Thus, the appeal of the assessee in ITA No.

385/Coch/2015 is allowed.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

ITA No. 386/Coch/2015

in the name of the assessee’s mother at Rs. 47 lakhs.

9.1 The facts of the case are that 3.5 cents of land adjacent to 30 cents of land

owned by the assessee at Keerthi Nagar, Kochi was purchased from Sri k.V.

Sohan in the name of the assessee’s mother, Smt. Vasu. The Assessing Officer

noticed that the registered sale document showed the consideration at Rs.15

lakhs and Rs. 5 lakhs was shown to be given by the assessee to his mother for

purchasing this land. However, Shri Sohan, the seller when examined on oath

on 29/12/2010, admitted to have received Rs. 62 lakhs as sale consideration and

the entire amount of Rs. 62 lakhs was received in cash. The Assessing Officer

noticed that the assessee had utilized the sale consideration for purchase of

property at Alungal and Thallassery and also for renovating the house at Alungal

and Thalassery. Thus, the Assessing Officer treated the entire consideration paid

by the assessee as undisclosed investment of the assessee and assessed u/s. 69

of I.T. Act. As the document was registered in the name of assessee’s mother,

the assessment would be made in her name on substantive basis and

protectively made in the case of the assessee. The Rs. 5 lakhs show in the cash

flow statement was reduced from total consideration of Rs. 62 lakhs.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

9.2 The CIT(A) observed that the assessee’s mother had never been an

assessee and had never filed the IT return. Further, it was noticed that she did

not have any independent source of income. The CIT(A) observed that it is only

the assessee who stand as the key person in the purchase of land and

suppression of the actual sale consideration can only be considered in the hands

of the assessee. According to the CIT(A), Shri K.V. Sohan had already deposed

that the deal of the land was made between the assessee and the seller and he

received Rs.62 lakhs. However, the CIT(A) observed that the assessee had

shown only Rs. 15 lakhs as the purchase consideration. Hence the entire

consideration of Rs. 15 lakhs paid as per the documented deed was deducted

from Rs. 62 lakhs while considering the quantum of unexplained investment

substantively in the hands of the assessee. Accordingly, the CIT(A) held that the

unexplained investment to the tune of Rs.62 lakhs – Rs. 15 lakhs, i.e. Rs. 47

lakhs was made substantively in the hands of the assessee.

9.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that

the assessee had paid Rs. 5 lakhs to his mother as gift for the purchase of 3.5

cents of land at Keerthi Nagar from Shri K.V. Sohan for Rs.15,00,000/- and was

reflected in his drawings. the drawings. The Ld. AR submitted that the assessee

had produced a copy of the assessment order of K.V. Sohan for the assessment

year 2011-12 dated 20/11/2013 wherein the sales consideration for the said land

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 of 3.5 cents was shown in the order as only Rs.15,00,000/-. The Ld. AR

submitted that the assessee should not be assessed protectively and assessment

may be made on his mother and his mother had paid Rs.15,00,000/- and got the

sale deed registered.

9.4 The Ld. DR relied on the orders of the lower authorities.

9.5 We have heard the rival contentions and perused the record. The addition is

made only on the basis of the statement of the seller, Shri K.V. Sohan. As we

have already discussed n ITA No. 383/Coch/2015 for the assessment year 2007-

08 in para nos. 2.5 and 2.6 of this order, the third party statement cannot be

relied upon without any corroborative material. Hence, this ground of appeal of

the assessee is allowed.

received from Shri C.P. Prakash as unexplained credits.

10.1 The facts are that during the year under consideration, the assessee and his

wife had received the following credits in the book of account. The assessee on

enquiry submitted that the same were received in the ICICI bank account and

taken to the books:

Adv P.V. Sreenijin Rs.4,50,000/- on 07/12/2010 Adv. K.B. Sony Rs.4,50,000/- on 07/12/2010

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 Adv. P.V. Sreenijin Rs.4,50,000/- on 07/12/2010

The assessee submitted that the same is personal loan received from a friend

Shri C.P. Prakash who is in abroad. The assessee was asked to prove the identity

of the person, creditworthiness of the person and the genuineness of the

transaction. The assessee had only given the name and address of the person.

Even after repeated requests, the assessee was not able to establish the identity,

creditworthiness and the genuineness of the transactions. Hence, the amount

received from Shri C.P. Prakash was treated as unexplained credits and assessed

u/s. 68 of the Act.

10.2 The CIT(A) observed that no confirmation letter regarding the credits as

interest free personal loans was filed by the assessee. Merely because the

amount was credited to the assessee’s bank account, the assessee cannot

discharge his onus to establish the identity, creditworthiness and genuineness of

the credits. Even before the CIT(A), the assessee failed to provide any evidence

to have justified the genuineness of the credits. Accordingly, the CIT(A)

confirmed the addition made by the Assessing Officer u/s. 68 of the Act.

10.3 We have heard the rival submissions and perused the record. In the

present case, the assessee has only furnished the name and address of the

lender and stated that the lender, Shri C.P. Prakash who is abroad, has given the

amount through banking channel. In our opinion, the assessee has not

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 established the identity of the creditor, the capacity to advance the loan and the

genuineness of the transaction. When these ingredients are not established,

then the onus shifts to the Department. In such cases, the Assessing Officer is

entitled to probe further into the matter and cause enquiry with regard to the

material available to him to come to the conclusion and unbiased finding as to

the genuineness of the transactions, though they should not reject without

sufficient reasons. In the present case, on appreciation of the material facts on

record, the lower authorities came to the conclusion that the assessee‘s

explanation regarding the credit could not be accepted and we cannot disturb

such finding as the assessee has not brought any fresh material on record before

us. More so, mere furnishing of name and address of the lender would not

amount to sufficient discharge of the burden placed upon the assessee u/s. 68 of

the Act. This is because u/s. 68 of the Act, the assessee has to prove all the

ingredients as mentioned earlier. When the identity of the creditor and the

creditworthiness of the credits were not established, addition u/s. 68 of the Act is

justified. This ground of appeal of the assessee is rejected.

income as undisclosed income.

11.1 The facts are that assessee claimed Rs.2,45,198/- as agricultural income.

The Assessing Officer relied on Part-IV of the Finance Act which elaborates the

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 rule for computation of net agricultural income. The relevant rules are

reproduced below:

Agricultural income of the nature referred to in sub-clause (b) and sub clause(c) of clause (1A) of section 2 of the income Tax Act other than derived from any building required as a dwelling house by the receiver of the rent or revenue of the cultivator or the receiver of rent-in-kind to in the said sub-clause (c) shall be computed as if it were income chargeable income tax under the head ‘Profits and gains of business or profession’ and the provisions of Section 30, 31, 32, 36, 37, 38, 40, 40A (other than sub-section (3) and (4) thereof) 41, 43, 43A, 43B and 43C of the Income Tax Act shall so far as may be, apply accordingly.

Rule 6. Where the result of the computation for previous year in respect of any source of agricultural income is a loss, such loss shall be set off against the income of the assessee, if any, for that previous year from any source of agricultural income.

Rule 7. Any sum payable by the assessee on account of any tax levied by the State Government on the agricultural income shall be deducted in computing the agricultural income.

Rule 11. For the purpose of computing the net agricultural income of the assessee, the Assessing Officer shall have the same powers as he has under the Income Tax Act for the purpose of assessment of the total income.

According to the Assessing Officer as per the Finance Act assessee has to

maintain the complete books of account, including the balance sheet, P&L a/c

with all schedules and with complete evidence and net profit or the net loss shall

be computed as in the case of business or profession. As the assessee had not

kept any books of account for the agricultural operations and no evidence was

produced for the income and expenditure, the Assessing Officer held that the

said income cannot be taken as received from agriculture and the same was

treated as undisclosed income of the assessee.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

11.2 The CIT(A) upheld the addition made by the Assessing Officer for want of

any evidence supporting the income and expenditure.

11.3 Against this, the assessee is in appeal before us. The ld. AR submitted

that separate books for agricultural income is not required for small holdings as

per Kerala Agricultural income Tax Act. The assessee had shown total

agricultural receipts and expenses in his books of account which was produced

before the Assessing Officer. written submissions.

11.4 The Ld. DR relied on the order of the lower authorities.

11.5 We have heard the rival submissions and perused the record. In the

present case, the Assessing Officer has not doubted the owning of the

agricultural land measuring 279 cents and the income from the same was shown

by the assessee in his books of account. The contention of the Ld. AR is that no

separate books of account are kept for agricultural income. In our opinion, a

small farmer like the present assessee cannot be expected to maintain separate

accounts for agricultural income as stated by the Assessing Officer. Since the

Assessing Officer has not doubted the owning of the agricultural land and raising

of crops, it is appropriate to estimate the income from such agricultural activities

at Rs.1,50,000/- as against Rs.2,45,198/-. Accordingly, this ground of appeal of

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 the assessee is partly allowed. Hence, the appeal of the assessee in ITA No.

386/Coch/2015 is partly allowed.

ITA No. 374/Coch/2015 : Revenue’s Áppeal

12.1 After hearing both the parties, we are of the opinion that since we have

allowed the appeal of the assessee in ITA No. 384/Coch/2015 in Ground No. 2

for the assessment year 2009-10 on the same issue, this ground raised by the

Revenue has become infructuous and is dismissed as infructuous. Hence, the

appeal of the Revenue in ITA No. 374/Coch/2015 is dismissed.

ITA Nos. 322 to 324/Coch/2015

the CIT passed u/s. 263 of the I.T. Act for the assessment years 2008-09, 2009-

10 and 2010-11.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 ITA No. 322/Coch/2015

13.1 The CIT(A) had set aside the assessment order dated 31/03/2013 for the

assessment year 2008-09 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) As per information available with the Department, it is seen that the assessee has purchased a land measuring 136 cents at Varapuzha during the financial year relevant to the AY 2008-09 and substantial amount was spent for the development of land. A perusal of the records shows that the AO had not examined the expenses incurred for development of the land.

ii) It is further noticed that personal expenditure, drawings etc. has not been examined by the Assessing Officer.

iii) For earning professional income of Rs.17,95,000/- expenses claimed is Rs.8,22,455/-. The Assessing Officer disallowed only Rs.49,736/- which is not reasonable.

iv) The expenses incurred for Dubai trip in the case of the family members was omitted to be included in the assessment.

In the meantime, the assessee filed a writ petition before the High Court of

Kerala challenging the notice issued u/s. 263 of the I.T. Act. Since there was no

stay of proceedings before the CIT by the High Court, the CIT after hearing the

assessee, passed the order u/s. 263 of the Act by observing that the Assessing

Officer has not considered the issue raised by him in the notice as stated in the

earlier para and set aside the assessment order dated 31/03/2013 as it was

found to be erroneous in so far as it was prejudicial to the interest of the

Revenue and directed the Assessing Officer to pass fresh assessment order after

proper verification and examination of relevant facts in accordance with law.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 13.2 Against this, the assessee is in appeal before us. The Ld. AR submitted

that the assessee has not purchased any land measuring 136 cents at Varapuzha

during the financial year relevant to the assessment year 2008-09. As such the

issue of development expenditure incurred for the land does not arise. The Ld.

AR drew our attention to the Document Nos. 1552/2007 and 1553/2007 dated

07/03/2007 for the financial year 2006-07 relevant to the AY 2007-08 towards

purchase of 134.75 cents of land at Alangad village which is placed at PB pg.

nos. 2-14 filed before us. He also submitted that the assessee purchased

another land measuring 36.1 cents of land at Varapuzha on 08/04/2008 for the

financial year 2008-09 relevant to the assessment year 2009-10 vide Document

No. 2221 dated 08/04/2008, the English translation of which is placed at PB pg.

nos. 20-23. This incurring of development expenditure on the land does not

arise in this assessment year. Further, regarding the enquiry of personal

expenditure, it was submitted before us that the assessee had filed the balance

sheet for the period ending 31/03/2008 before the Assessing Officer and it

cannot be questioned by the CIT u/s. 263 that there was no enquiry by the

Assessing Officer. It was further submitted that the assessee also filed the details

of drawings before the Assessing Officer. Regarding foreign travel, the Ld. AR

submitted that the Assessing Officer made the addition of Rs.60,000/- after due

verification and this was disputed by the assessee who went in appeal before the

CIT(A) and the CIT(A) deleted the addition. Now the CIT cannot take up the

issue which was the subject matter of appeal before the CIT(A). The Ld. AR

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 referred to section 263(1) and Explanation (c) of the I.T. Act. Further, it was

submitted that the assessee incurred an expenditure of Rs.8,22,455/- towards

earning of professional income and out of this, the assessee himself disallowed

Rs.49,736/-. According to the Ld. AR, the reasonability of allowability of

expenditure cannot be questioned without possession of any material in his

hands to suggest disallowance of the same. According to him, the direction

given by him was only a surmise and conjuncture and not based on any material

in his hands. The finding of the CIT is only on the reason that he was not

satisfied with the conclusion reached by the Assessing Officer by passing the

impugned assessment order. The Ld. AR also relied on the following judgments:

i) CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom)

ii) Malabar Industrial Co. Ltd. vs. ClT (2000) 243 ITR 83(SC)

13.3 The Ld. DR relied on the order of the CIT.

13.4 We have heard the rival submissions and perused the record. Para 9 In

the present case, the assessment order was completed u/s, 143(3) of the Act

after due enquiries and after being satisfied with the explanations and

information given by the assessee, the Assessing Officer has taken one possible

view on the issue before him. The only allegation of the CIT is that the Assessing

Officer should have made further enquiries rather than accepting the

explanations given by the assessee. Therefore, it cannot be stated that it is a

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 case of “lack of enquiry”. Further, the order of the CIT is also liable to be set

aside for the simple reason that the CIT raised the issue with regard to incurring

of development expenditure on the land at Varapuzha. As seen from the

argument of the Ld. AR, the land at Varapuzha was purchased on 08/04/2008

relevant to the assessment year 2009-10. Another land in Alangad village was

purchased on 07/03/2007 in the financial year 2006-07 relevant to the

assessment year 2007-08. This fact is also fortified by the finding of the

Assessing Officer in the giving effect order to the order passed u/s. 263 of the

Act by the CIT. The Assessing Officer has mentioned in the order passed u/s.

143(3) r.w.s. 147 r.w.s. 263 of the Act dated 31/03/2016 as under

“The land development works at Varapuzha are seen related to AY 2010- 11 and will be assessed therein.”

13.5 Further, no new material has been brought on record by CIT to suggest

that the assessment order is erroneous in so far as it is prejudicial to the interest

of the Revenue. Therefore, the jurisdiction u/s. 263 of the Act cannot be

assumed. The Assessing Officer, after duly considering the explanations and

information placed before him by the assessee and on being satisfied with the

said explanation, chose not to make any further enquiry. Endless enquiry is not

possible and it is for the Assessing Officer to decide when to end the enquiry.

The CIT cannot transgress the jurisdiction u/s. 263 of the Act by stating that no

proper enquiry was made by the Assessing Officer. Since there was no material

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 brought on record to suggest the disallowance of various expenditure, the CIT is

not justified in exercising his power u/s. 263 of the I.T. Act. Further, the issue

considered by the CIT with regard to foreign travel expenditure was the subject

matter of appeal before the CIT(A) and in view of section 263(1) and Explanation

(c) of the I.T. Act, the CIT cannot invoke the jurisdiction u/s. 263 of the Act.

Regarding drawings also, all the material relating to the issue was available with

the Assessing Officer and he has taken one possible view and in that view, the

CIT cannot interfere with. It cannot be said that the Assessing Officer has taken

the view in vacuum and it is a judicial view. The Assessing Officer being a quasi-

judicial authority, has taken one possible view. The CIT has not agreed with that

view, he wants to substitute his view without bringing in any new material to

suggest disallowance of expenditure. In these circumstances, we are of the view

that since the Assessing Officer has taken a judicial view consciously based on

proper enquiry and appreciation of the relevant facts and legal aspects of the

case, the judicial view taken by the Assessing Officer placed the matter outside

the purview of sec. 263 of the Act. The CIT has not shown what kind of enquiry

is to be made by the Assessing Officer so as to make the disallowance. Further,

the loss of revenue as a consequence of the order by the Assessing Officer

cannot be treated as erroneous or prejudicial to the interests of the Revenue so

as to invoke the provisions of sec. 263 by the CIT. In our opinion, the CIT

cannot assume jurisdiction u/s. 263 when the Assessing Officer has taken one

possible view after considering the material available on record. Accordingly, we

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 quash the order of the CIT passed u/s. 263 of the I.T. Act. Hence, the appeal of

the assessee in ITA No. 322/Coch/2015 is allowed.

ITA No. 323/Coch/2015

assessment year 2009-10 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) As per information available with the Department, it is seen that the assessee has purchased a land at two places namely Varapuzha and Annamanada and has constructed buildings after developing the land and that substantial amount was spent for the development of the land and filling with earth and gravel etc. A perusal of the records shows that the AO had not examined the expenditure for the land filling and development of the land at both places viz. Varapuzha and Annamanada.

ii) Further, it is noticed that expenditure in respect of professional receipts from Rosy Blue and Amity Projects which has been earned without rendering meaningful service is not an allowable expenditure which had not been disallowed in the assessment. The personal expenditure and drawings had not been examined by the Assessing Officer.

14.1 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para nos.

13.4 and 13.5 of this order, we are inclined to quash the order of the CIT passed

u/s. 263 of the Act. Hence, the appeal of the assessee in ITA No. 323/Coch/2015

is allowed.

ITA No. 324/Coch/2015

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 15. The CIT(A) had set aside the assessment order dated 31/03/2013 for the

assessment year 2010-11 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) A perusal of the records shows that the Assessing Officer had not estimated the expenditure for land filling at two properties namely Annamanada property and Keerthynagar property and also not verified details of bank loans availed for construction of building at these properties.

ii) In respect of the tournament conducted by the Football Club, the quantum of expenditure such as Coach’s salary, rent for the ground, expenses for travelling, food, etc. incurred by the assessee for sponsoring the tournament and its source had not been verified.

iii) Personal expenditure in respect of visit with family to Malaysia for 4 days and Maldives had not been examined.

iv) Agricultural income of Rs.2,00,000/- had not been considered in the computation of income.

13.4 and 13.5 of this order, we are inclined to quash the order of the CIT passed

u/s. 263 of the Act. Hence, the appeal of the assessee in ITA No.

324/Coch/2015 is allowed.

ITA No. 319 to 321/Coch/2015 :Smt K.B. Sony

the CIT passed u/s. 263 of the I.T. Act for the assessment years 2008-09, 2009-

10 and 2010-11.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 ITA No. 319/Coch/2015

16.1 The CIT(A) had set aside the assessment order dated 31/03/2013 for the

assessment year 2008-09 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) A perusal of the records and information available with the Department, it is seen that substantial renovation work was undertaken in Flat No. 5 at Travancore Residency, Edapally owned by the assessee which is combined with Flat No. 4 owned by the assessee’s father during the period 2007-08. The records shows that the cost of renovation and alteration of flat at Travancore Residency had not been examined by the Assessing Officer.

ii) It is further noticed that personal expenditure, drawings etc. had not been examined by the Assessing Officer. In the assessment of assessee’s spouse though it was mentioned that the expenditure regarding travel to Dubai would be treated separately in assessee’s hands, this aspect had not been considered in the assessment.

16.2 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para nos.

13.4 and 13.5 of this order, we are inclined to quash the order of the CIT passed

u/s. 263 of the Act. Hence, the appeal of the assessee in ITA No. 319/Coch/2015

is allowed.

ITA No. 320/Coch/2015

assessment year 2009-10 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) A perusal of the records and information available with the Department, it is seen that assessee had purchased a property at Varapuzha and that substantial amount was spent for the development of the land. The

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 records shows that Assessing Officer had not estimated the undisclosed expenditure on land filling at Varapuzha.

ii) Further it is noticed that expenditure in respect of professional receipts from Rosy Blue and Amity Projects which has been earned without rendering meaningful service is not an allowable expenditure which had not been disallowed in the assessment. Further, personal expenditure and drawings had not been examined by the Assessing Officer.

17.1 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para nos.

13.4 and 13.5 of this order, we are inclined to quash the order of the CIT passed

u/s. 263 of the Act. Hence, the appeal of the assessee in ITA No. 320/Coch/2015

is allowed.

ITA No. 321/Coch/2015

assessment year 2010-11 which was passed u/s. 143(3) r.w.s 148 of the Act by

issuing notice u/s. 263 of the Act to the assessee by observing as follows:

i) A perusal of the records and information available with the Department, it is seen that the Assessing Officer had not estimated the undisclosed expenditure of land filling at Varapuzha.

ii) Personal expenditure in respect of visit to Malaysia for 4 days and visit to Maldives with family had not been examined.

18.1. As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para nos.

13.4 and 13.5 of this order, we are inclined to quash the order of the CIT passed

u/s. 263 of the Act. Hence, the appeal of the assessee in ITA No. 321/Coch/2015

is allowed.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

ITA Nos. 387 to 390/Coch/2015 : Smt. K.B. Sony

unexplained investment in purchase of flat at Travancore Residency for Rs. 4

lakhs.

19.1 The facts of the case are that the Smt. K.B. Sony purchased a flat at

Travancore Residency on 12/03/2007 from Shri Martin Jose for which the

documented value was shown at Rs.6,81,050/- However, the seller Shri Martin

Jose in his sworn statement recorded on 1/7/2011 had admitted that the actual

consideration received by him was Rs.10,89,051/-. However, the seller Shri

Martin Jose in his sworn statement recorded on 01/07/2011 had admitted that

the actual consideration received by him was Rs.10,89,051/-.

The assessee was provided an opportunity to cross examine the seller Shri

Martin Jose on 27/02/2013 and during the cross examination, he consistently

maintained that the actual consideration received was Rs. 10 lakhs and not Rs. 6

lakhs. Based on the evidence taken from the seller for having received the

actual consideration in cash, over and above the amount shown in the deed for

registration, the Assessing Officer treated the sum of Rs. 4 lakhs as unexplained

investment u/s. 69C and added to the total income of the assessee.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 19.2 On appeal, the CIT(A) observed that the assessee had argued that the

statement given by Shri Martin Jose should not be treated as an evidence for

taking the inference that excess unaccounted money was passed on to the seller

for the purchase of the flat in Travancore Residency. According to the CIT(A),

Shri Martin Jose in his reply stated that he had not received any notice from the

Income Tax Department regarding whether he had shown Rs.10 lakhs as sale

consideration in his income tax return for assessment year 2007-08, he had

replied that he had shown Rs.6 lakhs only in his return of income. The assessee

raised the question that why proceedings against Shri Martin Jose were not

initiated. The CIT(A) found from the records called from the Assessing Officer

that the assessment in the case of Martin Jose was completed u/s. 143(3) dated

6.1.2015 in which the statement of income showed the computation for long

term capital gain, were the sale consideration was shown at a sum of Rs.10

lakhs. This fact clearly established that Martin Jose stood consistently with the

same stand during the cross examination by the assessee and the same amount

of consideration of Rs. 10 lakhs was found in the computation of income and

based on that assessment was completed u/s. 143(3) of the Act. Hence the

CIT(A) observed that the evidentiary value of the statement of the seller, i.e. Shri

Martin Jose could be accepted and upheld the addition made by the Assessing

Officer u/s. 69C for the amount of surplus money paid for a sum of Rs. 4 lakhs

for the purchase of the flat.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 19.3 Against this, the assessee is in appeal before us. The Ld. AR submitted

that the sworn statement of Shri Martin Jose should not be treated as evidence

for making the addition of Rs. 4 lakhs as unexplained investment in the purchase

of flat in Travancore Residency. The Ld. AR submitted that in the cross

examination, Shri Martin Jose had stated that he had not received any notice

from the Income Tax Department and in reply to the question whether he had

shown Rs.10 lakhs in his return of income, he replied that he had shown only Rs.

6 lakhs in his return of income. In view of this, the Ld. AR submitted that the

addition of Rs.4 lakhs may be deleted. The Ld. AR relied on the judgments as in

the case of Shri P.V. Sreenijin for the assessment year 2007-08.

19.4 We have heard the rival submissions and perused the record. As

discussed in ITA No. 383/Coch/2015 in para nos. 2.4 and 2.5 of this order for the

assessment year 2007-08 in the case of Shri P.V. Sreenijin, the Assessing Officer

made the addition only on the basis of statement of Shri Martin Jose recorded

u/s. 131 of the act on 01/07/2011. Since there is no corroborative material to

suggest on-money payment over and above the registered value and the

addition is based only on the third party statement, we are inclined to delete the

same. Hence, this ground of appeal is allowed.

expenditure claimed against professional receipts as a result of changing head of

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 income from business or profession to head of income from other sources. A

similar issue was considered in the case of Shri P.V. Sreenijin in ITA No.

383/Coch/2015 in para nos. 3.5 to 3.7 of this order for the assessment year

2007-08. As discussed in her husband’s case, the Assessing Officer in the

present case has also not doubted the agreement entered with M/s. Rosy Blue

(India) Pvt. Ltd. Being so, the Assessing Officer is precluded from changing the

head of income from profession to the head of income from other sources. We

direct the Assessing Officer to allow the above expenditure incurred by the

assessee. Hence, this ground of appeal of the assessee is allowed.

by M/s. Rosy Blue (India) Pvt. Ltd.

21.1 The facts of the case are that the assessee was provided a car in 2009 vide

clause 2.3 of the Consultancy Agreement with M/s. Rosy Blue (India) Pvt. Ltd.

The ambassador car was registered in the name of the assessee and the

purchase consideration of Rs.5,46,872/- was paid by the company by demand

draft. The Assessing Officer held that the assessee had not rendered any service

to the said company and therefore, the amount provided by the company to buy

the car which was subsequently registered in her name, is to be treated as

receipt under income from other sources and the entire value of the car was

assessed as income of the assessee.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

21.2 On appeal, the CIT(A) observed that the payment for buying car by M/s.

Rosy Blue (India) Pvt. Ltd. has been made without having rendered any services.

Hence, the CIT(A) held that the purchase consideration of the car should be

treated as direct benefit to the assessee which is taxable u/s. 56 of the Act.

Accordingly, the CIT(A) upheld the addition made by the Assessing Officer on

this count.

21.3 The Ld AR submitted that after the expiry of the consultancy agreement

on 30/06/2009, the assessee had sold the car on 26/08/2009 for Rs.2,90,000/-

The Ld. AR submitted that the assessee had asked the company whether she can

adjust the amount towards retainership fee and on 31/05/2011, the company

asked the assessee to send the sale proceeds to them. Consequently, the

assessee’s husband Shri P.V. Sreenijin sent a cheque for Rs.2,90,000/- from his

ICICI Bank Account No. 626401511572 to M/s. Rosy Blue (India) Pvt. Ltd. It

was submitted that since the cost of the car was paid by the company and sale

proceeds of the car was taken by the company, the addition of Rs.5,48,513/-

made in the hands of the assessee, may be deleted.

21.4 The Ld. DR relied on the order of the lower authorities.

21.5 We have heard the rival contentions and perused the record. In this case

the payment towards purchase of car was paid by M/s. Rosy Blue (India) Pvt.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 Ltd., though the registration was in the name of the assessee as per the valid

agreement. On the basis of the agreement dated 30/06/2009, the assessee sold

the car at Rs.2,90,000/- and the amount was repaid to M/s. Rose Blue India Pvt.

Ltd. This fact was not at all disputed by the lower authorities. According to the

Ld. DR, it is only a make believe arrangement. To say like this, the Department

has no material in its possession. It is only a surmise and conjecture. By any

stretch of imagination, it cannot be presumed that the assessee has routed her

own money through M/s. Rosy Blue India Pvt. Ltd. In such circumstances, we

are inclined to delete the addition. Hence, this ground of appeal of the assessee

is allowed. Thus, the appeal of the assessee in ITA No. 387/coch/2015 is

allowed.

ITA No. 388/Coch/2015

of land at Varapuzha at Rs.4,82,500/- .

22.1 The facts of the case are that the assessee alongwith her husband had

purchased the land at Varappuzha as per document No. 2221/08 dated

8/04/2008 from Mr. Linjo Joseph and others for Rs.7,27,000/-. The Assessing

Officer had taken the sale consideration at Rs.16,92,000/- by relying on the

sworn statement of the seller Shri Linjo Joseph. 50% of the sale consideration

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 was treated in the hands of the assessee and 50% in the hands of her husband

Shri P.V. Sreenijin.

22.2 We have heard the rival submissions and perused the record. A similar

issue was considered by us in her husband’s case in ITA No. 384/Coch/2015 in

para nos. 2.4 and 2.5 of this order for the assessment year 2009-10. Hence, we

are inclined to delete the addition made by the Assessing Officer and confirmed

by the CIT(A) for similar reasons. This ground of appeal of the assessee is

allowed. Thus, the appeal of the assessee in ITA No.388/Coch/2015 is allowed.

ITA No. 389/Coch/2015

Rs.9.5 lakhs with regard to investment in purchase of land at Keerthi Nagar,

Kaloor. A similar issue was considered in assessee’s husband’s case in ITA No.

385/Coch/2015 for the assessment year 2010-11 in para no. 7.5 of this order,

wherein we have observed that addition cannot be made only on the basis of

third part statement by placing reliance on the finding in para nos. 2.5 and 2.6 of

this order in ITA No. 383/Coch/2015 we deleted the addition. Accordingly, the

addition is deleted for this assessment year also. Hence, this ground of appeal

of the assessee is allowed. Thus, the appeal of the assessee in ITA No.

389/Coch/2015 is allowed.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 ITA No. 390/Coch/2015

motor car at Rs.2,22,644/-.

24.1 The facts of the case are that during the year the assessee had purchased

a car and claimed depreciation at 50%. The assessee was requested to submit

the explanation why the depreciation shall not be restricted to 15% as per the

rule. The assessee has submitted the explanation as follows:-

"As per the Income Tax Rules, 1962 provide depreciation @ 50% for new commercial vehicle which is acquired on or after the first day of January, 2009 but before the first day of October, 2009 and is put to use before the first day of October, 2009 for the purpose of business or profession. Commercial vehicle includes light motor vehicle also. I have bought Corolla Altis on 4-9- 2009 and used it before first day of October 2009 for the purpose of my profession. So I claimed depreciation @ 50%."

According to the Assessing Officer, 50% depreciation is available only for the

commercial vehicles. The commercial vehicles are different from the personal

vehicles which are meant for personal use. The State Government charges

higher taxes on commercial vehicles and the Registration Certificate itself

indicate whether the vehicle is registered as commercial vehicle or personal

vehicle. The commercial vehicles include public utility vehicles and goods

carriages whether it is in heavy vehicle category or light motor vehicle category.

But the vehicle registered as non-commercial vehicle cannot be considered as

commercial vehicle and the depreciation of 50% is not allowed for such vehicles.

The assessee had submitted that the vehicle Corolla Altis is not registered as a

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 taxi carrier. Therefore, it was clear that the assessee is not eligible for 50%

depreciation and the excess depreciation claimed by the assessee was disallowed

by the Assessing Officer and added to the total income of the assessee.

24.2. On appeal, the CIT(A) observed that the assessee’s claim for depreciation

on motor car, as per Note No. 6 to the Rules in Appendix-l, the word commercial

vehicle has been defined u/s 2(21) of the Motor Vehicle Act which includes light

motor vehicles meant for transport vehicle or omni bus. The contention raised by

the appellant for the claim of depreciation on the motor car is not correct

because the car Corolla Altis would not come in the purview of the commercial

vehicle which is meant to be transport vehicle or omni bus. Further, only because

the unladen weight of Corolla Altis is 1160kg, which is within the weight

prescribed in the definition for the light motor vehicle, which is included in the

category of commercial vehicle, does not suffice the conditions for the assessee's

car to be categorized under light motor vehicle within the definition of the word

commercial vehicle. In view of this, the claim for depreciation is found to be not

a valid claim. Thus, the CIT(A) upheld the disallowance made by the assessing

officer.

24.3 The Ld. AR submitted that in the assessment order, the Assessing Officer

had made an addition of 2,22,644/- to the total income by holding that the

assessee is not eligible for 50% depreciation on motor car and the excess

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 depreciation claimed by the assessee was disallowed. The assessee had

submitted as per the Income Tax Rules, 1962, in the Table to New Appendix 1,

in Part -A relating to TANGIBLE ASSETS under heading III MACHINERY AND

PLANT, in item (3), in sub-item (via) provides depreciation @ 50% for 'New

Commercial Vehicle which is acquired on or after the 1st day of January, 2009

but before the 1st day of October, 2009 and is put to use before the 1st day of

October, 2009 for the purpose of business or profession'. Commercial vehicle

includes light motor vehicle also. It was submitted that the assessee had bought

Corolla Altis on 4-9-09 and used it before 1st day of October 2009 for the

purpose of my profession . So heclaimed depreciation @ 50%. Therefore, it was

clear that the assessee is entitled for depreciation @ 50% which was given as an

incentive for a short period between 01/01/2009 to 01/04/2009 but the period

was later on extended up to 01/10/2009. The Ld. AR submitted that the vehicle

purchased by the assessee fulfills all the conditions prescribed in the Income Tax

Act and the related Motor Vehicle Act and falls within the definition of

Commercial Vehicle. According to the Ld. AR, the Act has nowhere prescribed

that a commercial vehicle should be a vehicle which is used for the purpose of

hire. It only prescribes that the vehicle should be used for the purpose of

business or profession. The Ld. AR submitted that the assessee is, therefore,

entitled for the depreciation @50%. Hence it was prayed to drop the

disallowance of excess depreciation claimed of Rs. 2,22 644/-.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 24.3.1 The Ld. AR submitted that the Assessing Officer's objection was that

registration certificate itself indicate whether the vehicle is registered as

commercial vehicle or personal vehicle. He was of the opinion that vehicle

registered as non-commercial vehicle cannot be considered as commercial

vehicle and depreciation @ 50% is not allowed for such vehicle. The A.O. has

taken the meaning of commercial vehicle in common parlance and has held that

commercial vehicle is distinct and different from private vehicle and the vehicle

used by the appellant is a private vehicle. It was submitted that as per Note No.

6 to the Rules in Appendix-1, the word commercial vehicle has been defined to

include Light Motor Vehicle as defined by Motor Vehicle Act, 1988. Further,

section 2(21) of the Motor Vehicle Act define the word Light Motor Vehicle as -

"Light Motor Vehicle means transport vehicle or omnibus. The gross vehicle weight of either of which or a Motor Car or a Tractor or road roller, the unladen weight of any of which does not exceed 7500 Kg."

According to the Ld. AR, the unladen weight of Corolla Altis is 1160 Kg. The Ld.

AR submitted that in point No. 5, A.O has disallowed the entire expenditure of

Rs. 8,56,853/-, which included depreciation on Motor Car at Rs.3,18,064.50.

Again A.O disallowed excess depreciation of Rs.2,22,644/- which was included

in Rs.3,18,064.50. Hence, addition of Rs. 2,22,644/- may be deleted.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 24.4 The Ld AR submitted that in exercise of the powers conferred by section 295 of the Income tax Act, 1961 (43 of 1961) the CBDT made the following

rules further to amend the Income-tax Rules, 1962, namely:- “1. (1) these rules may be called the Income tax (Third Amendment)

Rules, 2009. (2) they shall come into force on the 1st day of April, 2009.

In the Income tax rules, 1962, in the Table to New Appendix I, in part-A relating to Tangible assets, under the heading III. Machinery and PLANT, in

item(3), after sub-item (vi) and entries relating thereto, the following shall be inserted, namely:-

“via) New commercial vehicle which is acquired on or after the 1st January, 2009 but before the 1st day of April, 2009 and is put to use before the 1st day of April 2009 for the purposes of business or profession.”

24.5 We have heard the rival submissions and perused the record. It was

submitted that the assessee is entitled for higher depreciation at 50% on the car in view of the Income Tax(Third amendment) Rules, 2009 wherein new commercial vehicle which is acquired on or after 1st October, 2009 for the purpose of business or profession of the assessee is entitled for higher depreciation of 50% which is as follows: “(via) New commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of October 2009 and is put to use

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 before the 1st day of October 2009 for the purposes of business or profession.”

The period of acquisition of commercial vehicle on or after 1st June, 2009 or on

or before October, 2009 was amended as per the amended provisions with effect

from 1.4.2009. Being so, commercial vehicle purchased upto October, 2009 is

entitled for higher depreciation. Hence, we direct the Assessing Officer to grant

depreciation at the rate of 50% on the commercial vehicle acquired by the

assessee. Thus, this ground of appeal of the assessee is allowed.

24.6 The next issue is with regard to addition made towards loan received from

C.P. Prakash for Rs. 4,50,000/-. The assessee received loan from Shri C.P.

Prakash on 02/12/2010 vide Cheque No. 392458 drawn for Rs.4,50,000/-. Shri

C.P. Prakash was an NRI working in Dubai. His address was only given to the

Assessing Officer. However, the assessee was not able to substantiate the

identity and capacity of the lender. The addition was sustained by the CIT(A).

Against this, the assessee is in appeal before us.

24.7 The Ld AR submitted that the assessee received money from Shri C.P.

Prakash vide Cheque No. 392458/- drawn on State Bank of Travancore. Shri

C.P. Prakash is an NRI, working in Dubai. The assessee furnished the address of

Shri C.P. Prakash. The contention of the Ld. DR is that the assessee has not

able to prove the ingredients of section 68 of the I.T. Act.

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015

24.8 We have heard the rival submissions and perused the record. As

discussed in the appeal of the assessee in ITA No. 386/Coch/2015 in para no.

10.3 of this order, the addition is sustained as the assessee has not proved all

the ingredients of section 68 of the I.T. Act. This ground of appeal of the

assessee is rejected. Thus, the appeal of the assessee in ITA No.390/Coch/2015

is partly allowed.

i) The appeal of the assessee in ITA No. 383/Coch/2015 is partly allowed. ii) The appeal of the assessee in ITA No. 384/Coch/2015 is partly allowed for statistical purposes. iii) The appeal of the assessee in ITA No. 385/Coch/2015 is allowed. iv) The appeal of the assessee in ITA No.386/Coch/2015 is partly allowed. v) The appeal of the Revenue in ITA No. 374/Coch/2015 is dismissed. vi) The appeals of the assessee in ITA Nos. 319 to 324/Coch/2015 are allowed.

vii) The appeal of the assessee in ITA No. 387/Coch/2015 is allowed. viii) The appeal of the assessee in ITA No. 388/Coch/2015 is allowed. ix) The appeal of the assessee in ITA No. 389/Coch/2015 is allowed. x) The appeal of the assessee in ITA No.390/Coch/2015 is partly allowed.

Order pronounced in the open Court on this 31st May, 2018.

sd/- sd/- ( GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Dated: 31st May, 2018 GJ Copy to:

I.T.A. Nos. 383 -386, 322-324, 319-321 &, 387-390/C/2015 1. Shri P.V. Sreenijin, Keerthanam, Keerthi Nagar, Elamakkara, Kochi-682 026. 2. Smt. K.B. Sony, Keerthanam, Keerthi Nagar, Elamakkara, Kochi-682 026. 3. The Deputy Commissioner of Income Tax, Central Circle-1, Ernakulam. 4. The Commissioner of Income-tax(Appeals)-IV, Kochi

(ASSISTANT REGISTRAR) I.T.A.T., Cochin