ACIT, NEW DELHI vs. SH. SATISH MAHESHWARI, DELHI

The ground of appeal and cross objection are as under:- ( )

1. “The Ld. Commissioner of Income-tax(Appeals) erred in deleting the addition of Rs.76,00,000/- made on account of income from undisclosed sources u/s 68 of the Income-tax Act, by admitting the additional evidence in contraventions of the provision of Rule 46A of the Income-tax Rules.

The assessee is an individual engaged in business of trading in scrap/waste of ferrous & non-ferrous metals. During the year the assessee has total turnover of Rs.51,22,88,000/- with gross profit of Rs.48,78,000/- with a GP rate of 0.95% as against gross turnover of Rs. 31,54,83,000/-with a gross profit of Rs.24,79,000/- with a GP rate of 0.78% during the preceding year. The assessee claimed an amount of Rs.57,340/- account of petrol expenses, an amount of Rs.38,396/- on account of interest on car loan, an amount of Rs. 60,000/- on account of driver’s salary, an amount of Rs.35,891/- on account of car insurance and an amount of Rs.1,19,011/- on account of car depreciation. Total expenses under these heads amounted to Rs.3,10,638/-. The Assessing Officer observed that since the assessee is not maintaining any log book and as the personal use of car cannot be ruled out he disallowed an amount of Rs.62,128/- i.e. 1/5th of the total expenses by adding the same to the total income of the assessee. The assessee also claimed an amount of Rs. 1,40,933/- under the head telephone expenses. The Assessing Officer observed that since use of telephone for personal purpose cannot be ruled out & as the calls are not verifiable, and disallowed an amount of Rs.28,186/- i.e 1/5th of Rs.1,40,933/- by adding the same to the total income of the assessee.

The Assessing Officer further observed from the details submitted by the assessee that the assessee had taken loan during the year from various persons. However, in respect of following three persons requisite evidence as to genuineness & creditworthiness was not furnished.

During the year under consideration the assessee sold a plot measuring 1008 sq. yards situated at Khasra No. 19/25, Swami Shardhanand Colony, Village, Samaipur for a consideration of Rs.3,50,000/- on 3,50,000/- on 13/10/2005. The Assessing Officer asked the Assessee to justify the consideration of sale of said land at a very low price. Vide its letter dated 14/11/2008 assessee submitted that the plot was situated at Delhi waste dump yard and near Ganda Nala & Jhugees. In a comparable case where the property was sold on 10/2/2006 situated at Khasra No. 5/6 Village Samaipur, Delhi of 1000 sq. yards which was referred to Valuation Cell, the District Valuation Officer vide his valuation report dated 24/11/2008 had applied the rate of 3599/- per sq. meter. Since the property in hand is located in the same Village the assessee was confronted by the Assessing Officer with the above rate according to which the fair market value of the property comes to Rs.30,33,196/- (842.78 @ Rs.3599 as 1 sq. yard= 0.8361 sq. meter). This fact was recorded in the order sheet entry dated 29/12/2008 and the assessee submitted the justification for his sale consideration vide his letter dated 14/11/2008. Therefore, the Assessing Officer held that since the property in the same Village to which the above quoted valuation report refers i.e. Samaipur, and taken as such value of Rs.30,33,196/- for calculating proper capita gain instead of RS.3,50,000/-. The Assessing Officer observed that the Assessee deliberately entered into sale transaction at lower value in order to evade tax.

Aggrieved by the additions, the assessee filed appeal before the CIT(A). The CIT(A) held that the additional evidence filed by the assessee was admitted as the conditions laid down in Rule 46A were satisfied. On merit the CIT(A) for the issue related to capital gain has reduced the addition to Rs. 34,377/- (Rs.3,84,377 – Rs.3,50,000) made by the Assessing Officer. The CIT(A) held that the Assessing Officer in his remand report had not sent a copy of the valuation report relied upon by him. The CIT(A) further held that the A.O. also failed to rebut the assessee’s argument that DVO’s valuation report relied upon by the AO was not relevant to this case because it was in respect of some other property, in a different area. Thus, the CIT(A) took the sale consideration at Rs. 3,84,377/- which was the value taken by the Naib Tehsildar whereas the assessee has shown the sale consideration to be Rs.3,50,000/-.

The Ld. DR submitted that the CIT(A) has not properly applied the Rule 46A of the Income Tax Rules and has not verified the conditions laid down therein, but simplicitor admitted the evidence. The Ld. DR further submitted despite giving more than 3 opportunities to the assessee on various opinions, the assessee has not submitted any evidence before the Assessing Officer. In the remand report, the Assessing Officer gave comment that additional evidence is not proper on merit. The same was ignored by the CIT(A). As relates to capital gain i.e. Ground No. 2, the Ld. DR submitted that the calculation of the Fair Market Value by the CIT(A) was not justified and there is no reason given in the order.

The Ld. AR submitted that the Assessing Officer was given an opportunity of giving remand repot before the CIT(A) related to additional evidence. The same was availed and it is pertinent to note that the Assessing Officer was also of the view that these documents are crucial evidence. As related to capital gain, the CIT (A) was wrong in assuming the sale consideration at the fair value determined by Naib Tahsildar at Rs. 3,84,377/- as against the actual sale consideration amounting to Rs. 3,50,000/-.

We have heard both the parties and perused the relevant records. The Ld. DR submitted that despite giving more than 3 opportunities to the assessee on various opinions, the assessee has not submitted any evidence before the Assessing Officer. But at the same time the Assessee also pointed out before the CIT(A) that at the time of Assessment Proceedings most of the documentary evidence was tendered, but the crucial evidence such as name, address, PAN was not available which was later on furnished by the Assessee. In fact, the Assessee also made request vide letter dated 17.12.2008 to the Assessing Officer to take necessary action u/s 131 of the Act, but AO instead of taking cognizance of the same passed the Assessment Order. The CIT (A) while allowing the admitting the additional evidence has given a categorical finding that the same is admitted as per the conditions laid down in Rule 46A. The Assessing Officer also noted in his Remand Report that these evidences are important/crucial evidences regarding the claim of the assessee. Thus, CIT(A) rightly allowed the additional evidence as per Rule 46A. Thus, Ground No. 1 of the Revenue’s appeal is dismissed.

In respect of Capital gain, the Assessing Officer in his remand report had not sent a copy of the valuation report relied upon by him. The CIT(A) has given finding that the Assessing Officer failed to rebut the assessee’s argument that DVO’s valuation report relied upon by the Assessing Officer was not relevant to this case because it was in respect of some other property, in a different area. But, the quantification of the sale consideration and the addition how the same has been arrived at by the CIT(A) was not specified in the order. Therefore, the same needs to be looked into and verified by the Assessing Officer. Thus, the issue related to capital gain is remanded back to the Assessing Officer. Needless to say the assessee be given hearing.

In result, appeal of the Revenue and cross objection of the assessee are partly allowed for statistical purpose.