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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
These appeals filed by the Revenue are directed against the various orders of the Commissioner of Income Tax (Appeals), Tiruchirappalli. block assessment year 1988-89 to 1998-99.
Dr. S. Moharana, the Ld. Departmental Representative, submitted that the first issue arises for consideration is with regard to addition of `12,00,300/- towards undisclosed investment in the money lending business. According to the Ld. D.R., during the course of survey operation, the revenue authorities found that the assessee has made advances to the extent of `67,38,155/- on 30.11.1997 to various persons. The assessee clarified that the above said sum of `67,38,155/- was the outstanding amount in his money lending business. The assessee also explained to the authorities that out of `67,38,155/-, a sum of ` 50,02,000/- was the principal amount invested by the assessee. The balance of `17,36,155/- was the interest received by the assessee from money lending business.
During the course of assessment proceedings, it was explained before the Assessing Officer that a sum of `50,02,000/- represented the total advances made by the assessee as on 30.11.1997 to various persons and `17,36,155/- recorded in the books of account represented the recovery made upto 30.11.1997.
On verification of seized material, the Assessing Officer found that and the total outstanding was `23,52,000/-. The Ld. D.R. further submitted that the interest element to the extent of `4,41,700/- was deducted in advance and embedded in the total loans advanced to various persons. The Assessing Officer verified and allowed the claim of the assessee. The Assessing Officer determined the outstanding amount as on the date of search as `19,10,300/-.
However, the CIT(Appeals) allowed the claim of the assessee on the basis of the balance sheet and deleted the addition made by the Assessing Officer to the extent of `12,00,300/-.
On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the Assessing Officer found that the advances outstanding as per seized material on the date of search was `12,00,000/-. According to the Ld.counsel, the outstanding amount was quantified as per balance sheet is `19,10,300/-.
Therefore, no addition was warranted to the money lending business. It is not known how the addition of `12,00,300/- was made by the Assessing Officer. Therefore, the CIT(Appeals) deleted the addition subsequent to his decision with regard to bad debts. perused the relevant material on record. A bare reading of the assessment order shows that the Assessing Officer accepted the computation made by the assessee with regard to the outstanding amount at `23,52,000/- as per the transaction found in the seized material. The Assessing Officer also determined the outstanding amount as per the transaction entered in the seized material at `19,10,300/-. It is not known whether the outstanding amount on the date of search was `23,52,000/- or `19,10,300/-. The CIT(Appeals) without any discussion simply deleted the addition on the basis of the so called balance sheet said to be provided by the assessee. Since the facts are not clear from the orders of the lower authorities, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue with regard to unexplained investment in the money lending business is remitted back to the file of the Assessing Officer. The Assessing Officer shall examine the issue afresh in the light of the provisions of Section 158BB of the Income-tax Act, 1961 (in short 'the Act') and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee. It is made clear that the Assessing Officer shall refer to the material found during the course to the material found during the search operation and thereafter determine the unexplained investment in the money lending business.
The next issue arises for consideration is with regard to the claim of the assessee towards bad debts to the extent of `16,60,000/-.
Dr. S. Moharana, the Ld. Departmental Representative, submitted that the assessee claimed bad debts to the extent of `16,60,000/- out of the total outstanding loan which was determined by the Assessing Officer at `19,10,300/-. According to the Ld. D.R., the loan was not written off in the books. In response to the Question No.5, during the course of examination, the assessee explained that no bad debts existed in respect of the outstanding loan. The CIT(Appeals), however, found that individual debtor accounts need not be written off. The seized material also did not disclose the entry of bad debts. However, CIT(Appeals) found that no such entry as bad debts is found in the seized material.
Therefore, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer. assessee, submitted that the seized material has to be taken in toto.
The seized material shows the outstanding amount as on the date of search, in the money lending business and it also shows the bad debts. The CIT(Appeals), after referring to the seized material in which the profits were written, allowed the claim of the assessee to the extent of `16,60,000/-. Therefore, according to the Ld.counsel, the CIT(Appeals) has rightly deleted the addition.
We have considered the rival submissions on either side and perused the relevant material on record. Admittedly, the assessee has not maintained any books of account. Only during the course of search operation, certain materials were found which disclosed the investment made in the money lending business. The assessee claims that the seized material found during the course of search operation referred to an entry of bad debts. However, the Revenue disputed the same. The Ld. D.R. clarified that no such reference was there in the seized material regarding bad debts. Furthermore, the details of money lent to the individuals are not available and with whom the assessee written off the loan amount as bad debts is also not available. In the absence of such details, this Tribunal is of the considered opinion that the issue has to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities The Assessing Officer shall consider the issue afresh and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee.
The next issue arises for consideration is with regard to unaccounted investment in the money lending business to the extent of `29,37,400/-.
Dr. S. Moharana, the Ld. Departmental Representative, pointed out that during the course of search operation, a pocket diary was found and seized. As per this pocket diary, the assessee found to have invested a sum of `29,37,400/- in money lending business. On examination of one Shri C. Subramanian, who is son of the assessee, clarified that he is looking after the business of the assessee and the diary was hand written of his father. However, the CIT(Appeals) deleted the addition on the ground that the money lending business is belonging to the assessee’s son Shri Subramanian. According to the Ld. D.R., in the absence of any material and in the light of the admission of the assessee’s son that the money lending business is belonging to his father, the CIT(Appeals) is not justified in deleting the addition.
On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that Shri Subramanian, son of the assessee, filed his return of income disclosing profit in the money lending business. The Assessing Officer accepted the return filed by the assessee and assessed the income with regard to the very same investment. When the Assessing Officer accepted the return of the assessee’s son, according to the Ld.counsel, there cannot be any addition in the hands of the assessee. Therefore, the CIT(Appeals) has rightly deleted the addition.
We have considered the rival submissions on either side and perused the relevant material on record. It is not in dispute that a pocket diary was found during the course of search operation, which disclosed the assessee’s investment in the money lending business.
The issue now arises for consideration is whether the investment of `29,37,400/- in the money lending business, belongs to the assessee or his son. The Revenue claims that the money lending business belongs to the assessee. However, the assessee claims that the investment was disclosed in the return filed by the assessee’s son. The details of such assessment made in the assessee’s son are not available on record. The sworn statement recorded from Shri Subramanian shows that the diary was written that the documents are relating to Vijaya Finance and other finance of his family. He, according to the Ld. D.R., admitted that the money lending business belonged to him. In those circumstances, this Tribunal is of the considered opinion that the matter needs to be reconsidered after considering the assessment made in the hands of Shri Subramanian, the assessee’s son. Accordingly, we set aside the orders of the lower authorities and the issue of investment of `29,37,400/- is remitted back to the file of the Assessing Officer for reconsideration in the light of the material available on record, after considering the assessment made in the hands of Shri Subramanian after giving reasonable opportunity to the assessee.
The next ground of appeal is with regard to investment to the extent of `15,54,035/- in the construction of house at Arantangi.
16. Dr. S. Moharana, the Ld. Departmental Representative, submitted that during the course of search operation, undisclosed investment in the construction of a building at Aranthangi was found. Therefore, to ascertain the actual investment, the matter was referred to Departmental Valuation Officer. After receiving the valuation report from the DVO, the Assessing Officer determined the undisclosed income in the cost of construction to the extent of the ground that there was no seized material. In fact, there was seized material, which was referred by the Assessing Officer in the assessment order.
17. On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that there was no seized material with regard to undisclosed investment in the construction of house found during the search operation. On a query from the Bench – when the Assessing Officer referred seized material, more particularly, VSR/B&D/S-4, how the CIT(Appeals) came to a conclusion that there was no seized material? The Ld.counsel submitted that in such a case, what is to be added is the valuation on the basis of State PWD rates. In this case, according to the Ld.counsel, the valuation made by the V.O. was based on the Central PWD rates. If the valuation was made on the basis of State PWD rates, the addition made by the Assessing Officer would reduce considerably.
18. We have considered the rival submissions on either side and perused the relevant material on record. The seized material found during the search operation which was marked as VSR/B&D/S-4 shows the cost of construction from 03.07.96 to 1.12.97 at `23,48,748/-. However, the cost of construction admitted by the respectively. Therefore, it may not be right to say that there was no seized material. The Assessing Officer referred the matter to the Valuation Officer and assessed the undisclosed investment to the extent of `15,13,165/- as undisclosed income. Now the contention of the assessee before this Tribunal is that the valuation has to be made only on the State PWD rates. We find much force in the contention of the assessee. State PWD rates have to be preferred when compared to the Central PWD rates. State PWD rates are prepared as per the local condition prevailing in the particular State.
Therefore, this Tribunal is of the considered opinion that the valuation of the building has to be made only on the basis of State PWD rates. Accordingly, we set aside the orders of the lower authorities and the issue of cost of construction with regard to Aranthangi building is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh after estimating the cost on the basis of State PWD rates in the year the building was constructed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee. investment made in the construction of building at Karaikudi to the extent of `5,09,186/-. As discussed above in the case of building constructed at Aranthangi, here also the State PWD rates have to be adopted. Accordingly, the issue with regard to construction of house at Karaikudi is also remitted back to the Assessing Officer.
The Assessing Officer shall re-examine the issue after estimating the cost on the basis of State PWD rates in the year the building was constructed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.
Now coming to other appeals, viz. & 1208/Mds/2011, the only issue arises for consideration is with regard to cost of construction.
We have heard the Ld. D.R. and the Ld.counsel for the assessee. The main contention of the assessee before this Tribunal is that the valuation has to be made only on the basis of State PWD rates, whereas, the Assessing Officer made the valuation as per the Central PWD rates. We find some force in the contention of the assessee. Accordingly, we set aside the orders of the lower authorities and the issue of cost of construction with 13 & 1208/Mds/11 I.T.(SS) A. No.6/Mds/11 regard to Aranthangi building is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh after estimating the cost on the basis of State PWD rates in the year the building was constructed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.
In the result, all the three appeals of the Revenue are allowed for statistical purposes.
Order pronounced on 15th May, 2015 at Chennai.