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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI L.P. SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘F’ NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 777/Del./2012 Asstt. Year : 2007-08 A.C.I.T., Circle 32(1), vs. Sh. Rajesh Arora, New Delhi. Malcha Marg, New Delhi (PAN: AACPA 4090Q) (Appellant) (Respondent) Appellant by : Sh. V.R. Sonbhadra, Sr. DR Respondent by : Sh. G.N. Gupta, Advocate Date of hearing : 29.06.2016 Date of pronouncement : 28.07.2016 ORDER Per L.P. Sahu, Accountant Member: This appeal is filed by the Revenue against the order of ld. CIT(A)-III, New Delhi dated 13.12.2011 for the assessment year 2007-08 on the following grounds :
"Whether ld.CIT(A) was justified in the deleting addition of Rs.2,98,00,000/- made by the A.O. U/s 68 of I.T. Act in the name of M/s Kavset Exports, Mrs. Kiran Kapoor, Sh. Sunil Kumar, Sh. Sanjay Kumar, Sh. Pawan Singh & Sh. Pravir Arora when the assessee could not discharge his onus to furnish details during the course of assessment proceedings. 2. Whether the Id.CIT(A) was justified in admitting additional evidences in the form statement of repayment of loans in violation of Rule 46A which was not available to the A.O. for examination and subsequently deleting addition of Rs.2,98,00,000/- made by the A.O. U/s 68 of I.T. Act.
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Whether Id.CIT(A) was justified in deleting addition of Rs.236000/- on a/c of rental income when the AO has rightly assessed the rental income of one property @ Rs.15,000/- per month which was very reasonable considering the location of the properties. 4. Whether ld. CIT(A) was justified in the deleting addition of Rs,4,20,000/- on a/c of notional rent in respect of farm house at village Arthala, Tehsil-Dadri, Distt. Ghaziabad looking to location & area of the property and the living facilities available therein.”
The assessee was engaged in the real estate business and letting out of house properties. The brief facts relating to ground Nos. 1 & 2 challenging the deletion of addition of Rs. 2.98 crores u/s. 68 of the IT Act, 1961, are that the assessee has taken loan from Kavaset Exports of Rs.1.40 crores, Kiran Kapoor Rs.5 lacs, Pravir Arora Rs.3 lacs and Sunil Kumar & Sanjay Kr. Rs.1.50 crores, totaling to Rs.2,98,00,000/-. During the course of scrutiny proceedings, the Assessing Officer issued questionnaire regarding details of loans taken. The assessee submitted the details, but in respect of some creditors no complete details were submitted. The Assessing Officer was not satisfied with the details so furnished and added the aforesaid cash credits of Rs.2,98,00,000/- u/s. 68 of the Act stating that the assessee failed to prove the identity & creditworthiness of the creditors and genuineness of the transaction. Aggrieved by the order of the Assessing Officer, the assessee carried the matter before the first appellate authority, where the assessee submitted the additional evidences. The said evidences were sent to the AO for his
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comments vide letter No. F.No. CIT(Appeals)-III/2011-12/167 dated 08.08.2011 with direction to furnish the remand report upto 30.08.2011. The AO submitted the objections by letter No. ACIT/CIR-32(1)/Remand Report/Shri Rajesh Arora/2007-08/485 dated 06.09.2011. Again the CIT(A) wrote a letter No. (Appeals)-III/11-12/243 dated 28.10.2011. The AO gave its reply vide letter No. ACIT/CIR-32(1)/ 2011-12/737 dated 23.11.2011. In the remand report, the AO has vehemently objected the admission of additional evidences. The assessee was given ample opportunity, but he did not discharge the primary liability as per section 68 of the Act. After considering the remand report, the ld. CIT(A) deleted the addition as per para 6 to 6.6 of the impugned order. Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before the ITAT.
The ld. DR, relying on the order of Assessing Officer submitted that in the remand report, the AO has suggested the CIT(A) for issuing direction u/s. 250(4) of the Act to carry out the verification of fresh unsecured loans accepted by the assessee, but the ld.CIT(A) has not given any such directions. In the case of Kavaset Export, only the confirmation has been filed. Creditworthiness & identity of the lender and genuineness of the transaction has not been examined. The CIT(A) has relied on the payments made in the subsequent period by the assessee which is not proved. In respect of Sunil
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Kumar Sanjay Kumar, only the confirmations have been filed. In the confirmation, the PAN quoted is of Daryo Singh who has signed the confirmation as a proprietor of Shri Ganesh Estate and Construction, placed at paper book page 140. At page 287 of the of the paper book, there is a letter regarding dispatch of two pay orders dated 30.05.2006 of Rs.75,00,000/- each for booking of property which is written on the letter head of Sri Ganesh Estate & Construction Pvt. Ltd. and this letter of a Private Limited company has been signed by same Daryo Singh in the capacity of proprietor. It was also submitted by the ld. DR that as per this letter the amount is stated to have been paid by pay orders which attracts the provisions of section 269SS of the IT Act also. He also invited our attention on page No. 289 which is bank statement where two pay orders/bankers cheques have been issued for Rs.75,00,000/- each on 30.05.2006. Again the ld. DR invited our attention to paper book page 359, which is letter written on the letter head of Sri Ganesh Estate & Construction Pvt. Ltd., and has been signed by Sanjay Kumar as authorized signatory, but the PAN Number quoted below the signature is AACPA4090Q, which is the PAN of the present assessee. It was submitted that all these ambiguities pointed out above clearly go to raise a finger of doubt on the evidences so furnished by assessee and accepted by the ld. CIT(A). It was also submitted that on verification from MCA site, no such company was found existing. Therefore, in the complete lack of enquiry by the ld. CIT(A), the
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matter may be sent back to the AO for fresh examination as per provisions of section 68 of the Act. The ld. DR also invited our attention to paper book pages 354 to 358 where in the books of accounts of Rajesh Arora, the ledger account has been opened in the name of Sunil Kumar & Sanjay Kumar from F.Y. 2007-08 to 2010-11 and from 01.04.2011 to 18.10.2011, the ledger account has been opened in the name of Ganesh Estate and Construction (Thr. Sunil Kumar & Sanja). Who is the actual lender, whether Daryo Singh or Sunil Kumar Sanjay Kumar also needs thorough examination and verification. In respect of Kiran Kapoor, only a hand written confirmation has been submitted which is at Paper book page 228. No identity, creditworthiness of the creditor and genuineness of transaction has been proved and the ld. CIT(A) has relied on the payments made to the creditors after deducting TDS in subsequent years. In respect of Rs.3,00,000/- taken from Pravir Arora, the assessee’s stand before the CIT(A) was that this was against the sale of property. The agreement to sale placed at Paper book page 233 does not contain the signature of any witness nor it is registered nor notorized. The ld. DR relied on the decisions of Hon’ble Delhi High Court in the case of CIT vs. M/s. Jan Sampark Advertiseing & Marketing P. Ltd., 375 ITR 375(Del.) and CIT vs. Manish Build Well P. Ltd., 245 CTR 397 (Del.).
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The ld. AR of the assessee, on the other hand, submitted that the Assessing Officer has issued only one questionnaire on 05.11.2009 placed at PB page 241 to 243. The assessee has submitted replies on 17.11.2009, 24.11.2009 & finally on 10.12.2009. Against the submissions of the AR, the Assessing Officer has not raised any question to doubt the assessee’s submissions. Had the AO any doubt on the submissions of assessee, he should have informed the assessee. He pointed out that in para 4 of the assessment order, the AO has mentioned that “no income tax particulars, bank statement, confirmations or even the address have been submitted in respect of these persons”, whereas all the details were submitted before the AO as is evident from the paper book produced before the Bench. The case laws cited by the ld. DR are not applicable in the present case. All the transactions had been made through banking channel. Therefore, genuineness of the transaction stands proved. Acknowledgements of ITR and bank statements were also filed. Therefore, primary onus has been discharged by the assessee. In the remand proceedings, if the Assessing Officer had any doubt on the identity or creditworthiness of the creditors, he could verify the same, but he did not do so, meaning thereby he has accepted the additional evidences filed before the CIT(A). He relied upon the order of the ld. CIT(A).
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We have heard the rival submissions of both the parties at length and have gone through the entire material available on record before us and we find that the matter under consideration needs proper enquiry and thorough verification at the stage of Assessing Officer. It is notable that the assessment order speaks that no evidences such as income-tax particulars, confirmations, bank statements, addresses of the creditors were submitted before the AO, whereas the stand of the assessee is that all the requisite details and evidences were furnished before the AO, but no verification was made by AO. It is also born out on record that the assessee had furnished additional evidences before the ld. CIT(A) and the CIT(A) sought the remand report from AO vide letter dated 08.08.11 requiring him to send his comments upto 30.08.2011. The ld. AR of the assessee has not been able to place any material on record to belie the ambiguities pointed out by the ld. DR on the evidences placed on the paper book, as noted above. It is pertinent to note that the assessee is said to have received the amount from Sri Sunil Kumar & Sanjay Kumar, but the confirmation placed in the paper book has been signed by Daryo Singh on the letter had of Sri Ganesh Estate and Construction. Not only this, Sri Daryo Singh has again signed a subsequent letter in the capacity of proprietor of the private limited company named Sri Ganesh Estate and Construction Pvt. Ltd., with respect to the impugned transaction, which is not possible. Another ambiguity which is apparent on letter dated 21.10.2011
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placed at page 359 of the paper book, is that this letter is written on the letter head of Sri Ganesh Estate & Construction Pvt. Ltd. and is signed by Sanjay Kumar in the capacity of authorized signatory, but the PAN of assessee has been mentioned below the signature. All these discrepancies found in the evidences filed, in our considered opinion, are suffice to create doubt on their authenticity. The ld. CIT(A) appears to have deleted the addition without examining these evidences in right perspective, which need thorough enquiry and proper verification from the actual lenders/creditors. Such enquiries are also needed with respect to other creditors before concluding the issue regarding addition u/s. 68 of the Act. It is pertinent to note that the ld. CIT(A) has also coterminous powers equal to Assessing Officer as contemplated u/s. 250(4) of the Act, but the same have not been judiciously exercised before deciding the issue in favour of the assessee . We, therefore, deem it expedient in the interest of justice, to restore the entire issue to the file of Assessing for deciding the same afresh after making proper investigation in the matter with reference to the evidences filed by assessee and in terms of provisions of section 68 of the IT Act. Needless to say, the assessee shall be given reasonable opportunity of being heard. Grounds Nos. 1 & 2 are accordingly allowed for statistical purposes.
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The brief facts relating to ground No. 3 are that the assessee owned two flats at C-22 Safdarjang Development Area, North Delhi which was let out to M/s. Avinesh Property Services for Rs.8000/- per month each but the property was let out for the period 01.04.2006 to 15.05.2006. The property was sealed by Dy. Director of DDA which is evident from letter issued by Dy. Director (CL) DDA, Commercial Land Branch vide letter No. F. 1 (681)/07/HC/Legal/1551 dated 04.04.2008 placed at paper book page 275. In the computation of income, the assessee has shown annual rental value u/s. 23 at Rs.12000/- for each property. The Assessing Officer concluded that this property is reasonably to be let out for Rs.15,000/- per month on the basis of website 99acres.com & makkan.com and also relied on the let out properties of neighborhood. The Assessing officer also allowed standard deduction of 30% and added the remaining amount of Rs.2,36,000/- as income from house property. The assessee carried the matter before the ld. CIT(A) who deleted the addition on the ground that these two properties were not let out for whole year. The tenancy ran only from 01.04.2006 to 15.05.2006. Therefore, no actual rent was received by the appellant.
The ld. DR relied on the order of the Assessing Officer whereas the ld. AR of the assessee relied on the order of ld. CIT(A).
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Having considered the rival submissions and gone through the orders of the authorities below, we find no infirmity in the order of the ld. CIT(A). The ld. DR could not rebut the findings of the CIT(A) that the tenancy ran only for a short period, i.e., 01.04.2006 to 15.05.2006 and the property was not let out for the whole year. It is also proved on record that the property was sealed by DDA on 08.08.2006. In view of this, and in absence of any contrary material to disturb the income from house property declared by assessee in its return of income, we do not find any justification to disturb the findings reached by the ld. CIT(A) in the impugned order on this count. Accordingly, this ground of appeal of the revenue is dismissed.
The facts relevant to ground No. 4 are that the assessee owned a farm house in one acre situated at Village Arthala Teh. Dadri, Distt. Ghaziabad(UP). The farm contained boundary wall and a room for gardener. The room is used by the gardener as his residence. Vegetable and flowers are grown in the farm house. The AO presumed that this property might fetch Rs.50,000/- per month and added a sum of Rs.4,20,000/- as notional income after allowing statutory deduction of 30% u/s. 24(a) of the Act. The assessee carried the matter to the ld. CIT(A) where the assessee filed additional evidences which were sent for comments of AO, who sent his objection before the ld. CIT(A) on 06.09.2011. The ld. CIT(A) directed the assessee to furnish recent
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photographs of the farm house and deleted the addition stating that these photographs corroborate the contention of the assessee that the farm house property consists of only one room in which the gardener lives and hence, it cannot be said that the assessee would have derived any income from farm house property taxable in the hands of assessee in view of provisions of section 2(1A) of the Act. Aggrieved by the order of CIT(A) the Revenue is in appeal before ITAT.
The ld. DR relied on the order of the Assessing Officer whereas the ld. AR of the assessee supported the order of the ld. CIT(A).
We have heard the submissions of both the parties on this issue and we find no infirmity in the conclusions reached by the ld. CIT(A) on this count. It is notable that the ld. Assessing Officer has made this addition without examining the area of farm house, situation thereof and constructed area in the farm house. As per assessee, the farm house consists of only one small room for the gardener employed for growing vegetables and flowers. The ld. CIT(A) after verifying the contention of the assessee from the photographs of farm house, appears to have rightly deleted the addition. The ld. AO had made the addition only on the presumption that most of the farm houses are used for marriage functions, but has failed to consider the constructed area in the
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farm land. Moreover, there is no rebuttal from the side of Revenue against alternative contention of the assessee that even if any income could be said to be derived from the building, it would have to be considered as agricultural income and will be exempt under the provisions of section 2(1A) of the Act in view of Explanation 2 to this section. In the totality of facts and circumstances, we do not find any infirmity in the impugned order on this issue. Accordingly, this ground of appeal of the Revenue is dismissed.
In the result, the appeal of the Revenue is partly allowed for statistical purposes. Order pronounced in the open court on 28.07.16. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated :28.07.2016 *aks/- Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi