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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI R.S. SYAL
(Appellant) (Respondent) Assessee by : Shri R.R. Singla, CA Deptt. By : Shri Amrit Lal, Sr.DR Date of Hearing : 05.06.2017 Date of Pronouncement: 06.06.2017 ORDER
This appeal by the assessee is directed against the order passed by the CIT(A) on 17.03.2016 in relation to Assessment Year 2008-09.
The first issue raised in this appeal is against the confirmation of addition of Rs.5,15,578/- made by the Assessing Officer on the basis of report of Valuation Officer. The facts apropos this issue are that the assessee filed return declaring income of Rs.1,03,890/- and also claiming agricultural income at Rs.8,18,430/-. The case was subsequently reopened by means of notice u/s 148 on the premise that a survey u/s 133A was carried out at the business premises of the assessee on 28.03.2012 and certain impounded documents revealed that the assessee, along with his wife Smt. Nirmala Devi, had purchased land measuring 43 Kanals 2 marlas on which a hotel was constructed. The Assessing Officer referred the matter of determination of the value of construction of this hotel/banquet to the DVO. As per the DVO’s report dated July, 2013, the assessee spent a sum of Rs.5,15,578/-on construction of this hotel during the year under consideration, that is Financial year 2007-08. The Assessing Officer made an addition of Rs.5,15,578/-, which came to be sustained in the first appeal.
The assessee is aggrieved against this addition.
I have heard the rival submissions and perused the relevant material on record. The Assessing Officer has made an addition of Rs.5,15,578/- on the basis of the report of DVO which indicated that the assessee has spent this much amount on construction of hotel/banquet during the year. It can be seen from the Valuation report itself that the assessee declared an investment of Rs.4,92,380/- in the previous year relevant to the assessment year under consideration. The total investment spreading over five years declared by the assessee, as mentioned in the Valuation Report, stands at Rs.3,65,47,888/- as against the estimate made by the DVO for a total sum of Rs.3,97,48,433/-. The Assessing Officer has noted this fact in his order for the assessment year 2011-12, whose copy has been placed on record.
Para 3 of such order discusses about the total investment made by the assessee and the estimate made by the DVO at Rs.3.97 crore divided in five years from financial year 2007-08 to 2011-12. No addition has been made on this count by specifically mentioning in the order: ‘No addition is called for on this point.’ Thus it is apparent that the AO has accepted the genuineness of investment made in the construction. I fail to see any reason for sustaining any addition in the year under consideration as the DVO’s report is dated July, 2013 and the DVO has recorded that the assessee has declared investment of Rs.4.92 lac against his estimate of cost of construction at Rs.5.15 lac for the year, which is less than 10%. The Hon'ble J & K High Court in Honest Group of Hotel (P) Ltd. vs. CIT (2002) 177 CTR J&K) 232, has held that difference upto 10% in the DVO’s report and the amount shown by the assessee is liable to be ignored. In the facts of the instant case, it is seen that the overall difference between the investment declared by the assessee at Rs.3.65 crore and as estimated by the DVO at Rs.3.97 crore is less than 10% of the DVO’s estimate. As such, no addition is called for. I order for the deletion of addition.
The second issue raised in this appeal is against the confirmation of addition of Rs.4,40,865/-, being investment made in some agricultural land.
The facts relating to this ground are that the assessee purchased an agricultural land for a sum of Rs.8,84,000/-. The source of such investment was explained as receipt of agricultural income along with past savings.
The assessee claimed that he sold agricultural produce to the tune of Rs.13,84,295/- and, after incurring 41% as expenses, net agricultural income was shown at Rs.8,18,430/-. In support of the receipt of Rs.13.84 lac, the assessee furnished copies of Form J. The Assessing Officer observed that these J forms were issued from different places ranging from Narnad, Hisar, Anaj Mandi, Jind to New Anaj Mandi, Pillukhera (Jind).
Belying the truthfulness of the Forms No. J, the Assessing Officer estimated agricultural produce to be not more than Rs.5,75,000/-. After allowing deduction at the rate of 41% towards expenditure and further allowing some relief, total agricultural income was computed at Rs.3,29,250/-. Giving credit of Rs.1,03,885/- also, being the income shown by the assessee in the return as also contributing towards the investment made by the assessee in agricultural land, the Assessing Officer made an addition of Rs.4,40,865/- [Rs.8,84,000/- minus Rs.4,43,135 (Rs.3,39,250 plus Rs.1,03,885)]. The ld. CIT(A) confirmed the addition.
After considering the rival submissions and perusing the relevant material on record, I find that the Assessing Officer has simply rejected the assessee’s claim of having earned agricultural income of Rs.8.18 lac, which was duly backed by evidence in the form of Forms No. J. Rejecting the veracity of Forms No. J, the Assessing Officer proceeded to estimate agricultural income in a whimsical manner at Rs.3,29,250/-. No effort whatsoever was made to examine the commission agents, who issued Form Nos. J. Under such circumstances, the view point canvassed by the Assessing Officer in not admitting the agricultural income at the stated level, duly backed by uncontroverted Forms No. J, cannot be countenanced.
If the Assessing Officer was not satisfied with the veracity of Forms No. J, it was for him to make investigation and prove that such forms were fictitious or not genuinely obtained by the assessee. In the absence of any exercise having been done, I cannot uphold the sustenance of addition made by the ld. CIT(A) on such unfounded basis.