ITO, WD-2(2), SILIGURI, SILIGURI vs. M/S RIVERVIEW VANIJYA PRIVATE LTD., SILIGURI

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals), Jalpaiguri dated 26.03.2014. Assessment was framed by ITO Ward-2(2), Siliguri u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.03.2013 for assessment year 2010-11.

At the outset it was noticed that the Revenue has neither appeared before us nor moved any adjournment petition. In such situation, we decided to proceed to adjudicate the matter after hearing Shri Subash Agarwal, Ld. Advocate appeared on behalf of assessee.

The facts in brief are that the assessee is a Private Limited Company and engaged in business of real estate / sale of flats. During the year, assessee has received share capital of ₹2.50 crores from eight subscribers. During the course of assessment proceedings, AO verified the said transactions by issuing notice u/s. 133(6) of the Act to the subscribers of the shares. However, out of total eight subscribers, only three subscribers confirmed the transactions and remaining five subscribers failed to furnish the response to the notice issued u/s. 133(6) of the Act. The necessary details of said five subscribers who have not furnished the reply in response to u/s. 133(6) of the Act are as under:- 1 M/s Nishu Leasing and Finance Pvt. Ltd. Kolkata 75,00,000 2 M/s Rajesh Fiscal Services Pvt.Ltd. Kolkata 30,00,000 3 M/s Abhiruchi Vision Pvt. Ltd., Kolkata 5,00,000 4 M/s Sai Baba Finvest Pvt.Ltd. Kolkata 15,00,000 5 M/s PCJ Finvest Pvt.Ltd. Kolkata 10,00,000 Accordingly, the AO called upon the assessee to furnish the necessary details in support of the aforesaid transactions. The assessee failed to reply to AO satisfactorily. Accordingly, AO treated the share capital as discussed above as unexplained cash credit and made the addition of ₹ 1.35 crores as unexplained cash credit u/s 68 of the Act.

Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that all the details of the subscribers of shares have been furnished with the Registrar of Companies and these subscribers have shown investment in their income tax returns. The assessee A.Y. 2010-11 ITO Wd-2(2) SLG Vs. M/s Riverview Vanijya Pvt. Ltd. Page 3 in support of his claim filed the copies of the same to the ld. CIT(A). After considering the submission of assessee, Ld. CIT(A) deleted the addition made by AO having reliance in the case of Dataware Pvt. Ltd. vs. CIT in GA No. 2856 of 2011 dated 21.09.2011 whereby the Hon'ble jurisdictional High Court decided the issue in favour of assessee. Being aggrieved by this order of Ld. CIT(A), Revenue is in appeal before us.

Before us Ld. AR for the assessee relied on the order of Ld. CIT(A).

We have heard Ld. AR of the assessee and perused and carefully considered the materials on record including the judicial pronouncements cited and placed reliance upon. The issue in the instant case relates to the relief given to assessee by Ld. CIT(A) on the basis of additional evidence without giving the opportunity of cross-examination to the AO. At the outset, we find that the Ld.AR fairly agreed that the relief has been given on the basis of additional evidence which were admitted in contravention to the provision of Rule 46A of the IT Rules. In view of the above, we restore this issue to the file of AO for fresh adjudication in accordance with law. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.

Next issue raised by Revenue in ground No.3 is that Ld. CIT(A) erred in disregarding the valuation made by the Departmental Valuation Officer (DVO).

The assessee, in the year under consideration has shown the cost of construction of its building at ₹4,44,67,343/- whereas the DVO has valued the same for ₹4,51,26,275/-. As a result the AO observed a difference of ₹ 6,58,932/- in the cost of construction between value as declared by assessee and DVO. On question by the AO for the aforesaid difference, the assessee failed to provide any satisfactory reply. Accordingly, AO opined that undisclosed investment of ₹6,58,932/- has been made in cost of construction which was disallowed and added to the total income of assessee. A.Y. 2010-11 ITO Wd-2(2) SLG Vs. M/s Riverview Vanijya Pvt. Ltd. Page 4 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Before Ld. CIT(A) assessee submitted that valuation made by DVO is only on estimate basis and cannot be considered as unexplained investment in the cost of the construction of building. Accordingly after considering the submission of the assessee, the Ld. CIT(A) delete the addition made by AO. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 11. Ld. AR before us relied on the order of Ld. CIT(A).

We have heard Ld. AR and perused the materials available on record. In the instant case the difference between the valuation adopted by the Stamp Valuation Authority and value declared by the assessee is less than 10%. In such circumstances we find that the Co-ordinate Bench of Pune Tribunal in in the case of Rahul Construction vs. DCIT (2010) 38 DTR (Pune Trib.) has held as under:- “We find that the Pune Bench of the Tribunal in the case of Asst. CIT vs. Harpeet Hotels (P) Lt. vide ITA No.s 1156-1160/Pn/2000 and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu Jayghosh Appasaheb, vide ITA No. 441/Pn/2004 for the asst. yr. 1992-93 and relied on by the learned counsel for the assessee following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd., vs. CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AO cannot be sustained.