M/s Victoria Foods Pvt Ltd, Delhi v. DCIT, New Delhi

ITA 383/DEL/2009 | 2005-2006
Pronouncement Date: 26-02-2010 | Result: Allowed

Appeal Details

RSA Number 38320114 RSA 2009
Assessee PAN APRIL2004U
Bench Delhi
Appeal Number ITA 383/DEL/2009
Duration Of Justice 1 year(s) 23 day(s)
Appellant M/s Victoria Foods Pvt Ltd, Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 26-02-2010
Date Of Final Hearing 09-12-2009
Next Hearing Date 09-12-2009
Assessment Year 2005-2006
Appeal Filed On 02-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA VICE PRESIDENT AND SHRI RAJPAL YADAV JUDICIAL MEMEBR I.T.A NO. 383/DEL/09 ASSTT. YEAR 2005-06 VICTORIA FOODS PVT. LTD. B-32 LAWRENCE ROAD INDUSTRIAL AREA DELHI. VS. DCIT CENTRAL CIRCLE 8 NEW DELHI. (APPELLANT) (RESPONDENT) I.T.A NO. 1440/DEL/2009 ASSTT. YEAR 2005-06 ACIT VS. VICTORIA FOODS PVT. LTD. CENTRAL CIRCLE-8 B-32 LAWRENCE ROAD IN DL. AREA NEW DELHI. NEW DE LHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI HIREN MEHTA & SANJEEV KWATRA RESPONDENT BY: SHRI MOHSIN DR ORDER PER RAJPAL YADAV JM: THE REVENUE AND THE ASSESSEE ARE IN CROSS APPEALS AGAINST THE ORDER OF LD. CIT(A) DATED 16 TH JANUARY 2009 PASSED FOR ASSTT. YEAR 2005-06. ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 2 2. FIRST WE TAKE THE APPEAL OF THE REVENUE. THE REV ENUE HAS TAKEN THREE GROUNDS OF APPEAL BUT THEY ARE INTERCONNECTED WITH ONE ISSUE. THE GROUNDS TAKEN BY THE REVENUE READ AS UNDER :- 1. ON THE FACTS & AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3 06 28 234/- MADE ON ACCOUNT OF BOGUS ADDITIONS TO FIXED ASSETS WHEN THE SO CALLED PARTIES FROM WHOM THE SAME WERE CLAIMED T O HAVE BEEN PURCHASED ARE NON EXISTENT. 2. THAT THE LD. CIT (A) HAS ERRED IN DELETING THE A DDITION OF RS. 25 00 000/- MADE ON ACCOUNT OF CONSUMABLE GAS WEL DING ETC. PERTAINING TO BOGUS ADDITION TO FIXED ASSETS. 3. THAT THE LD. CIT(A) HAS ERRED IN ALLOWING ADDITI ON OF RS. 76 57 058/- OUT OF DEPRECIATION AND RS. 19 58 456/ - OUT OF INTEREST CLAIMED BY THE ASSESSEE IN RESPECT OF BOGU S ADDITION TO FIXED ASSETS. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY RUNNING A FLOUR MILL WHERE IT IS PRODUCING WHEAT FLOUR CHOK AR SUJI MAIDA ETC. IT IS ALSO TRADING IN THESE ITEMS. IT HAS FILED ITS RETUR N OF INCOME ON 28.10.2005 DECLARING A LOSS OF RS.4237018/-. THE RETURN WAS PR OCESSED U/S 143(1) ON 31 ST MARCH 2007. THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY ASSTT. AND NOTICE U/S 143 (2) WAS ISSUED A ND SERVED UPON THE ASSESSEE ON 3 RD JULY 2006. ON SCRUTINY OF THE BOOKS OF ACCOUNTS I T REVEALED TO THE AO THAT ASSESSEE HAS SHOWN ADDITION TO FIXED ASSETS AMOUNTING TO RS. 4 94 94 852/-. ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 3 4. IN ORDER TO PROBE THE ADDITION MADE BY THE ASSES SEE TO THE FIXED ASSETS HE DIRECTED THE ASSESSEE TO FILE DETAILS OF ADDITIONS MADE TO THE FIXED ASSETS AND THE SOURCE OF INVESTMENT FOR THE A DDITIONS MADE. IN RESPONSE TO THE QUERY OF AO ASSESSEE FILED THE LETT ER DATED 19 TH JULY 2007 AND SUPPORTING BILLS AND VOUCHERS OF VARIOUS A SSETS PURCHASED DURING THE YEAR. WITH REGARD TO THE SOURCE OF INVES TMENT IT WAS POINTED OUT BY THE ASSESSEE THAT FOR PROCURING NEW ASSETS T HE COMPANY HAD OBTAINED A TERM LOAN AT RS. 4.94 CRORES FROM STATE BANK OF MYSORE NAYA BAZAR DELHI. ON AN ANALYSIS OF THE DETAILS SU BMITTED BY THE ASSESSEE AO CARVED OUT THE NAME OF THREE ALLEGED SU PPLIER FROM WHOM ASSESSEE HAD PURCHASED VARIOUS TYPES OF STEEL SHEET S MACHINERY AND ELECTRICAL INSTALLATIONS. THESE SUPPLIERS ARE 1. M/S. MAHAVIR STEEL A 47 NARAINA INDUSTRIAL AREA NEW DELHI. 2. M/S. GUPTA MACHINERY 56/B BADLI INDUSTRIAL ARE A PHASE I DELHI. 3. M/S. TECHNO TECH SALES AGENCIES 13943 NAVRANG M ARKET SHRADHANAND MARG DELHI. 5. THE AO HAS RAISED AN APPREHENSION ABOUT THE GENU INENESS OF BILLS AND VOUCHERS ISSUED BY THESE THREE CONCERNS ON THE GROUND THAT THE BILLS DO NOT BEAR TELEPHONE NUMBER AND ALSO DO NOT INDICA TE LCHARGING OF SALES TAX ETC.. IN THE OPINION OF AO IT IS DIFFICUL T TO ASCERTAIN HOW ASSESSEE HAD PLACED AN ORDER ON SUCH CONCERNS WHO A RE NOT HAVING ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 4 TELEPHONE NUMBER. HE DEPUTED THE INCOME TAX INSPECT OR SHRI R.S. PAWAR TO CARRY OUT SUPPORT INSPECTION. THE INSPECTO R WAS REQUIRED TO COLLECT THE INFORMATION WITH REGARD TO NATURE OF TR ANSACTION ENTERED BY THESE CONCERNS WITH THE ASSESSEE DURING THE PERIOD 1 ST APRIL 2004 UPTO 1 ST MARCH 2005 HE WAS REQUIRED TO COLLECT MONTHWISE D ETAILS OF ITEMS / GOODS SOLD BY THESE CONCERNS TO M/S. VICTORIA FOOD S PRIVATE LTD. COPY OF ACCOUNT OF M/S. VICTORIA FOODS PVT. LTD. IN THE BOOKS OF THESE THREE CONCERNS FOR THE PERIOD 1 ST APRIL 2004 UPTO 31 ST MARCH 2005 AND DETAILS OF THEIR INCOME TAX RETURNS / PAN NUMBER . ACCORDING TO THE AO THE INSPECTOR REPORTED THAT THESE CONCERNS ARE NOT EXISTING ON THE GIVEN ADDRESS. THE AO HAS REPRODUCED THE REPORT OF THE IN SPECTOR ON PAGE 3 AND THEREAFTER DISBELIEVED THE PURCHASES MADE FROM THESE THREE CONCERNS. THESE THREE CONCERNS ALLEGED TO HAVE SUPP LIED GOODS FOR EXPANSION OF THE CAPITAL ASSETS OF THE ASSESSEE TO THE EXTENT OF RS. 30628234/-. AO HELD THAT TO THIS EXTENT ALLEGED ADD ITION TO THE FIXED ASSETS IS BOGUS AND HE MADE AN ADDITION OF RS. 3062 8234/-. HE FURTHER HELD THAT DEPRECIATION @ 25% CLAIMED BY THE ASSESSE E ON THESE BOGUS ASSETS DESERVES TO BE DISALLOWED HENCE HE WORKED O UT AN AMOUNT OF RS. 7657058/- ALLEGED TO HAVE BEEN CLAIMED BY THE A SSESSEE AS DEPRECIATION ON THESE BOGUS ASSETS AND ACCORDINGLY MADE AN ADDITION. SIMILARLY AO HAS OBSERVED THAT SINCE ASSESSEE AVAI LED THE TERM LOAN OF ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 5 RS. 4.94 CRORE THE INTEREST PAID ON THIS TERM LOAN TO THE EXTENT REBUTABLE TO THESE BOGUS ASSETS DESERVES TO BE DISA LLOWED. HE FOUND THAT ASSESSEE HAS PAID TOTAL INTEREST OF RS. 315877 5/- ON THE TERM LOAN AND THE INTEREST ALLOCABLE TOWARDS SUCH BOGUS CAPIT AL ADDITION HAS BEEN WORKED OUT AT RS. 1958427/-. HE MADE THE ADDITION O F THIS AMOUNT ALSO. SIMILARLY AO WAS OF THE OPINION THAT FOR ERECTING T HE CAPITAL ASSETS TO THIS MAGNITUDE ASSESSEE MUST HAVE CLAIM BOGUS EXPENSES O N ACCOUNT OF CONSUMABLES GAS WELDING ETC. HE WORKED OUT THE EXP ENSES OF RS. 25 LACS ALLEGED TO HAVE BEEN CLAIMED BY THE ASSESSEE O N THIS BOGUS CAPITAL ERECTION. HE ADDED THIS AMOUNT OF 25 LACS ALSO IN T HE TOTAL INCOME OF THE ASSESSEE. 6. DISSATISFIED WITH THE ADDITIONS ASSESSEE CARRIED THE DISPUTE IN APPEAL BEFORE LD. CIT(A) AND CONTENDED THAT IT HAS BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS AS REQUIRED BY THE LAW. I TS ACCOUNTS HAVE DULY BEEN AUDITED AS PER SECTION 44AB OF THE INCOME TAX ACT. THE ADDITIONS TO FIXED ASSETS ARE DULY BEING SHOWN IN THE AUDITED ACCOUNTS. THE EXPANSION WAS CARRIED OUT DURING THE F.Y. 2004-05. THERE WAS SUBSTANTIAL INCREASE IN ELECTRICITY LOAD AS WELL AS POWER CHARGES PAID BY ASSESSEE. THERE IS SOME SUBSTANTIAL INCREASE IN THE PRODUCTION CAPACITY AS WELL AS SALES MADE BY THE ASSESSEE. THE EXPANSIO N WAS CARRIED OUT AFTER AVAILING TERM LOAN FACILITY FROM THE BANK OF MYSORE VIDE ITS LETTER ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 6 DATED 27.12.2007 BROUGHT ALL THE DETAILS IN RESPEC T OF THESE ITEMS TO HIS NOTICE. THE COPY OF THE LETTER HAS BEEN PLACED ON P AGE 37 44 OF THE PAPER BOOK FILED BEFORE US AND THE DETAILS IN RESPE CT OF ELECTRIC LOAD PRODUCTION CAPACISTY SALES TERM LOAN AND POWER C HARGES SUBMITTED BY THE ASSESSEE BEFORE THE AO READ AS UNDER :- S.NO. PARTICULARS 2003-04 2004-05 2005-06 1. ELECTRIC LOAD 632 KVA 1 500 KVA 1 500 KVA 2. LOAN FROM BANK NIL 4 9 400 000/- 42 738 173 (TERM LOAN) 3. PRODUCTION CAPACITY 100 TONNES 400 TONNE S 400 TONNES 4. SALES 413 882 081/- 516 082 100/- 861 792 586/- 5. POWER CHARGES 10 991 647/- 14 19 0 553/- 19 316 800/- 7. THESE DETAILS WERE BROUGHT TO THE NOTICE OF LD. CIT(A). THE ASSESSEE FURTHER SUBMITTED BEFORE THE LD. CIT(A) TH AT AO HAS DOUBTED THE GENUINENESS OF THREE PARTIES. IT WAS POINTED OU T THAT AT THE RELEVANT POINT OF TIME THESE PARTIES WERE FUNCTIONING FROM T HE PREMISES SHOWN IN THE BILLS WHEN GOODS WERE PURCHASED BY THE ASSESSEE . THE ASSESSEE HAD PURCHASED STEEL SHEETS CHANNELS GIRDERS AND P LATES ETC. FROM THEM AND THESE WERE UTILILSED IN FABRICATING T HE PLANT. THE PLANT IS IN EXISTENCE. IT WAS BROUGHT TO THE NOTICE OF AO THAT IT CAN BE PHYSICALLY VERIFIED AT THE PREMISES OF THE ASSESSEE BY DEPUTIN G ITS INSPECTOR IN THIS REGARD. IT WAS ALSO CONTENDED THAT SOME OF THE PAYM ENT TO THESE PARTIES ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 7 WERE DIRECTLY MADE BY THE BANK ITSELF. THEREFORE ON THE BASIS OF THE ALLEGED REPORT OF INSPECTOR THE DETAILS MAINTAINED BY THE ASSESSEE CANNOT BE DOUBTED. THE ASSESSEE HAS SPECIFICALLY CO NTENDED THAT THE DOUBT RAISED BY THE AO IN RESPECT OF THREE CONCERNS WERE SITUATED DIAGONALLY AT DIFFERENT DIRECTIONS AND INSPECTOR PO SSIBLE CANNOT VISIT ALL THE THREE PLACES IN ONE DAY. APART FROM MAKING THE ABOVE FACTUAL SUBMISSION IT WAS CONTENDED THAT NO ADDITION U/S 69 CAN BE MADE HOLDING THAT ADDITION TO FIXED ASSETS IS BOGUS. THE ASSESSEE WHILE MAKING REFERENCE TO SECTION 69 OF THE ACT BEFORE LD . CIT(A) CONTENDED THAT FROM BARE PERUSAL OF THE SECTION IT WOULD BE ABUNDANTLY CLEAR THAT THE SAID SECTION ONLY APPLIES TO ANY ALLEGED INVEST MENT MADE BY THE ASSESSEE WHICH IS NOT RECORDED IN THE BOOKS OF ACCO UNTS. THEREFORE AT THE THRESHOLD FIRST AND FOREMOST REQUIREMENT TO MAK E SECTION 69 APPLICABLE THERE SHOULD BE A FACTUAL FINDING THAT A SSETS / INVESTMENT ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. WHEREAS IN A DIRECT CONTRADICTION TO THE ABOVE PROPOSITION AO IN THE ASSTT. ORDER HIM SELF ADMITS THAT A TOTAL ADDITION OF RS. 49494852/- HAS BEEN MADE DURING THE ASSTT. YEAR UNDER APPEAL. THE AO HAS NOT RECORDED ANY FINDING THAT FI XED ASSETS ARE NOT RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS ALSO PLACED ON RECORD BEFORE THE LD. CIT(A) THE DETAILS OF PAYMENT S MADE TO THESE CONCERNS BY THE ASSESSEE AS WELL AS BY THE BANK DIR ECTLY. IT WAS POINTED ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 8 OUT THAT OUT OF THE MAJOR PAYMENT OF RS. 28128234/- DOUBTED BY THE AO A SUM OF RS. 1 55 44 589/- HAS BEEN PAID BY ISSUANC E OF PAY ORDER DIRECTLY AT THE END OF THE BANK TO THE CONCERNED SU PPLIERS. IT WAS ALSO SUBMITTED THAT AS REGARDS THE FUNDS PROVIDED BY THE BANK IT CAN BE PRESUMED WITHOUT ANY DOUBT THAT THE BANK WILL NOT F INANCE SUCH HUGE LOAN WITHOUT CORROBORATIVE EVIDENCE BEING PRODUCED BEFORE THE BANK. THE BANK USED TO REGULARLY KEEP A WATCH ON THE ASSE TS INSTALLED AT THE PREMISES BY ITS FINANCE. 8. LD. CIT(A) HAS CONSIDERED ALL THESE MATERIAL AND DELETED THE ADDITION BY OBSERVING AS UNDER:- AFTER CONSIDERING THE FACTS OF THE CASE I FIND TH E ACTION OF THE AO. IN RESORTING TO THE ADDITION OF RS. 3 06 28 274/- T OWARDS BOGUS PURCHASE OF ASSETS IS SNOT JUSTIFIED UNDER ANY CIRC UMSTANCES. THERE IS NO PROVISION IN THE LAW TO CONTEMPLATE SUC H ADDITION OF THE VALUE OF FIXED ASSETS ON ACCOUNT OF BOGUS CLAIM. IT IS NOT THE CASE OF THE AO THAT THE INVESTMENT MADE ON THIS ADDITION TO FIXED ASSETS IS UNEXPLAINED. THERE IS BANK CREDIT SANCTIONED AND DISBURSED FOR THE PURPOSE OF ACQUIRING ADDITIONAL PLANT AND MACHI NERY AND OTHER ASSETS DURING THE YEAR UNDER CONSIDERATION. IN FACT SOME OF THE LOAN AMOUNT WAS DIRECTLY PAID TO VARIOUS ENTITIES W HO SUPPLIED MACHINERY AND STEEL ETC. TO THE ASSESSEE COMPANY. H ENCE IT CANNOT BE ASSESSED EITHER UNDER UNEXPLAINED INVESTM ENT OF THE ASSESSEE ON THESE ADDITIONS TO FIXED CAPITAL AS WEL L. HENCE THE ACTION OF THE AO DESERVES TO BE REVERSED AS FAR AS ADDITION OF RS. 3 06 28 274/- IS CONCERNED. EVEN OTHERWISE ALSO THE ADDITION DESERVES TO BE DELETED IN VIEW OF THE FACT THAT A S EPARATE ADDITION MADE UNDER THE HEAD UNEXPLAINED INVESTMENT IN RES PECT OF DIFFERENCE OF VALUE BETWEEN COST OF PROJECT AS CER TIFIED BY AN INDEPENDENT AGENCY FURNISHED TO THE BANK AND THE V ALUE DECLARED IN THE BOOKS OF ACCOUNTS. BOTH VIEWS CANNOT BE POSS IBLE AT THE SAME TIME. ON ONE HAND ADDITION TO FIXED ASSETS TRE ATED AS BOGUS ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 9 AND ON OTHER THERE IS UNEXPLAINED INVESTMENT IN THE FIXED ASSETS. BOTH THESE OPINIONS CANNOT COEXIST TOGETHER ONE SAM E FACTS. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE SAME. CONSEQUENTLY HE DELETED THE DISALLOWANCE OF DEPRECI ATION INTEREST COMPONENT AND ALSO DELETED THE ADDITION MADE AN EST IMATED BASIS IN RESPECT OF CONSUMABLES. 9. LD. DR WHILE IMPUGNING THE ORDER OF LD. CIT(A) R ELIED UPON THE ORDER OF AO. HE POINTED OUT THAT ASSESSEE MIGHT HAV E MADE EXPANSION OF ITS PLANT BUT IT FAILED TO PROVE THE PURCHASES MADE BY IT AND THUS AO HAS RIGHTLY DISALLOWED THE EXPENSES INCURRED FOR TH E PURCHASE OF MATERIAL IN RESPECT OF EXPANSION OF THE CAPITAL ASSETS. 10. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND REITERATED HIS CONTENTION AS WERE RAISED BEFORE THE LD. CIT(A). HE APPRISED US WITH THE TABLE EXTRACTED SUPRA EXHIBITING THE ENHANCEMENT OF ELECTRIC LOADS POWER CHARGES ETC. HE ALSO PLACED ON RECORD THE COP IES OF THE PHOTOGRAPHS DEMONSTRATING THE EXPANSION. THESE PHOT OGRAPHS ARE PLACED ON PAGES NO. 271 UPTO 305 OF THE PAPER BOOK. ON THE STRENGTH OF THE DETAILS FILED BEFORE THE AO AS WELL AS BEFORE L D. CIT(A) LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT ASSESSEE IS ABLE TO DEMONSTRATE THE EXISTENCE OF FIXED ASSETS AT THE PREMISES. ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 10 11. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE IN ORDER TO DEMO NSTRATE THAT IT HAS MADE ADDITION TO FIXED ASSET CONTENDED THAT SUCH AS SETS HAVE DULY BEEN REFLECTED IN THE AUDITED ACCOUNTS. THEY ARE EXISTIN G AT THE PREMISES. IT INVITED THE AO TO VERIFY IT PHYSICALLY OR DEPUTE AN INSPECTOR AS DISCERNABLE FROM THE LETTER DATED 27.12.2003. APART FROM THE ABOVE STAND OF ASSESSEE IT PRODUCED LEDGER ACCOUNT OF THR EE PARTIES WHOSE EXPENSES HAVE BEEN DOUBTED BY THE AO. IT PRODUCED H OW ITS PRODUCTION HAS BEEN INCREASED FROM 100 TONES TO 400 TONES AND SALES HAVE BEEN GONE FROM RS. 41 CRORE TO RS. 86 CRORE IN ASSTT. YA ER 2005-06. ON THE OTHER HAND THE MATERIAL POSSESSED BY THE AO FOR DOU BTING THE CLAIM OF ASSESSEE IS ONLY THE REPORT OF INSPECTOR WHO REPO RTED THAT THESE PARTIES WERE AVAILABLE NOT ON THE GIVEN ADDRESS. THE AO SOU GHT TO MAKE ADDITION U/S 69 OF THE INCOME TAX ACT ON ACCOUNT OF UNEXPLAINED INVESTMENT. THUS IF WE WEIGH THE CIRCUMSTANCES AND MATERIAL PLACED ON RECORD BY THE ASSESSEE AND THE MATERIAL POSSESSED B Y THE AO THEN SCALE WOULD TILT IN FAVOUR OF THE ASSESSEE. WHENEVE R AN EXPLANATION OR DEFENCE OF AN ASSESSEE BASED ON NUMBER OF FACTS SUP PORTED BY EVIDENCE AND CIRCUMSTANCES REQUIRED CONSIDERATION WHETHER THE EXPLANATION IS SOUND OR NOT MUST BE DETERMINED NOT BY CONSIDERING THE WEIGHT TO BE ATTACHED TO EACH SINGLE FACT IN ISOLAT ION BUT BY ASSESSING ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 11 THE CUMULATIVE EFFECT OF ALL THE FACTS IN THEIR SET TING AS A WHOLE. THE AO HAS TOTALLY IGNORED THE OTHER ASPECTS I.E. ENHANCED PRODUCTION CAPACITY ENHANCED POWER CHARGES ENHANCED ELECTRIC LOAD AND THE TERM LOAN OBTAINED BY ASSESSEE FOR EXPANSION PURPOSE. THE PAY MENTS MADE BY THE BANK DIRECTLY TO THE SUPPLIER OF MORE THAN 1.55 CRORE OUT OF THE MAJOR PORTION OF DOUBTED PAYMENT OF RS. 2 81 28 234/-. HE SIMPLY DISBELIEVED THE VERSION OF ASSESSEE ON THE BASIS OF INSPECTORS REPORT WHICH IS NOT SUBSTANTIATED. THE INSPECTOR HAS NOT RECORDED THE S TATEMENT OF THE NEIGHBOURER OR COLLECTED ANY MATERIAL. THIS RELATES TO FACTUAL ASPECT OF THE CONTROVERSY. EVEN LEGALLY ADDITION IS NOT SUSTA INABLE. THE LD. FIRST APPELLATE AUTHORITY HAS OBSERVED THAT THERE IS NO P ROVISION IN THE LAW TO CONTEMPLATE SUCH ADDITION OF THE VALUE OF FIXED ASS ETS ON ACCOUNT OF BOGUS CLAIM. THE ASSESSEE HAS NOT CLAIMED DEDUCTION OF EXPENSES ON ACCOUNT OF PURCHASES MADE BY IT WHICH CAN BE DISALL OWED BY HOLDING BOGUS CLAIM. HERE THE ASSESSEE HAS BEEN ACCOUNTING THE ASSETS IN ITS ACCOUNTS. THESE ARE DULY RECORDED IN THE BOOKS THEN HOW ADDITION U/S 69 CAN BE MADE. SECTION 69 READ AS UNDER:- 69. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FO UND TO BE THE OWNER OF ANY MONEY BULLION JEWELLERY OR OTHER VA LUABLE ARTICLE AND SUCH MONEY BULLION JEWELLERY OR VALUABLE ARTIC LE IS NOT RECORDED IN THE BOOKS OF ACCOUNT IF ANY MAINTAINE D BY HIM FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLAN ATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXP LANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE ASSESS ING OFFICER ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 12 SATISFACTORY THE VALUE OF THE INVESTMENTS MAY DEEM ED TO BE THE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. 12. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T IN ORDER TO ATTRACT APPLICABILITY OF THIS SECTION THERE SHOULD BE MATER IAL INDICATING THE OWNERSHIP OF ASSESSEE OVER ANY MONEY BULLION JEWEL LERY OR VALUABLE AND THE VALUES OF SUCH ARTICLE IS NOT RECORDED IN T HE BOOKS OF ACCOUNTS IF ANY MAINTAINED BY THE ASSESSEE OR HE FAILED TO EXPL AIN THE SOURCE OF INCOME IN ACQUIRING SUCH VALUABLE ARTICLE. THUS IN THE PRESENT CASE THE AO WAS REQUIRED TO FIRST ESTABLISH THAT ASSETS / IN VESTMENTS AS NOT RECORDED IN THE BOOKS OF ACCOUNT WHEREAS THE AO WH ILE DEALING WITH THE OTHER ISSUE HIMSELF HAS HELD THAT ASSETS OF RS. 494 94852/- ARE EXISTING. TAKING INTO CONSIDERATION ALL THESE DETAILS WE DO N OT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE. THEY ARE REJECTED AND CONSEQUENTLY THE APPEAL FILED BY THE REVENUE IS DISMISSED. 13. NOW WE TAKE THE APPEAL OF ASSESSEE I.E. ITA NO. 383/D/2009. THE SOLITARY ISSUE IN THIS APPEAL IS WHETHER ADDITION O N ACCOUNT OF DIFFERENCE BETWEEN DECLARED VALUE OF FIXED ASSETS AND ESTIMATE D VALUE WORKED OUT BY A SURVEYOR SUBMITTED TO THE BANK FOR SANCTION OF TERM LOAN CAN BE MADE IN THE INCOME OF AN ASSESSEE. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE WAS INTERESTED IN EXPANSION OF ITS PLANTS CAPACITY FOR ENHANCING ITS PRODUCTION. IT HAS CARRIED OUT AN EXP ANSION PROGRAMME ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 13 DURING THE YEAR AND MADE AN ADDITION OF RS. 4.94 C RORE TO FIXED ASSETS. THE ASSESSEE HAD AVAILED A TERM LOAN FACILITY OF RS . 5 CRORE FROM STATE BANK OF MYSORE NAYA BAZAR NEW DELHI FOR ITS EXPAN SION OF PLANT. IN ORDER TO AVAIL THE TERM LOAN ASSESSEE WAS REQUIRED TO SATISFY CERTAIN CONDITIONS POSTULATED BY THE BANK. ONE OF THE CONDI TIONS WAS TO SUBMIT A CERTIFICATE FROM A TECHNICAL PERSON EXHIBITING THE ESTIMATED COST OF THE PROJECT ACCORDINGLY ASSESSEE HAS SUBMITTED A CERTI FICATE FROM M/S. MAGNET CONSORIUM ON 15 TH MARCH 2005 CERTIFYING THE VALUE OF EXPENDITURE REQUIRED TO BE INCURRED ON THE EXPANSIO N PROJECT AT RS. 762 LACS. ACCORDING TO THE AO THE BANK AFTER CONSIDERIN G THE PHYSIBILITY OF THE PROJECT REPORT AND MARGIN MONEY REQUIRED TO BE CONT RIBUTED BY THE PROMOTERS SATISFIED ITSELF TO SANCTION THE TERM LOA N OF RS. 5 CRORE. THE AO CALLED FOR THE DETAILS FROM THE BANK WHO FORWARD ED A COPY OF THE ABOVE REFERRED CERTIFICATE DATED 13.3.2005 ACCORDIN G TO WHICH THE ESTIMATED COST OF EXPANSION WAS SHOWN TO BE 762.76 LACS. ON THE BASIS OF THIS CERTIFICATE AO ARRIVED AT A CONCLUSION THAT THE AMOUNT OF EXPENDITURE ON EXPANSION WAS 762.76 LACS IN THE CER TIFICATE AS COMPARED TO THE VALUE OF FIXED ASSETS ADDITION OF R S. 494.94 LACS SHOWN IN THE BALANCE SHEET. THE DIFFERENCE WORKED OUT AT RS. 267.81 LACS HAS BEEN TREATED BY THE AO AS UNEXPLAINED INVESTMENT BY THE ASSESSEE. HE MADE THE ADDITION OF THIS AMOUNT. ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 14 14. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELI EF TO THE ASSESSEE. THE LD. FIRST APPELLATE AUTHORITY WHILE CONFIRMING THE ADDITION HAD ASSIGNED THE REASON THAT THE BANK IS A GOVT. UNDERT AKING IT CANNOT SANCTION A LOAN OF SUCH MAGNITUDE WITHOUT EXAMINING ALL POSSIBLE FACTORS WHICH ARE NECESSARY FOR EFFICIENT FUNCTIONING OF TH E UNIT AFTER EXPANSION PROGRAMME UNDERTAKEN BY THE ASSESSEE AND SECURITY O F THE LOAN. ACCORDING TO THE LD. CIT(A) THE LOAN WAS NOT SANCTI ONED ON THE BASIS OF CERTIFICATE FROM AN AGENCY OR A PROJECT REPORT OF T HE ASSESSEE COMPANY BUT THE BANK OFFICIAL MUST HAVE UNDERTAKEN PHYSICAL INSPECTION OF THE UNIT. THEY MUST HAVE CARRIED OUT THOROUGH EXAMINATI ON OF VARIOUS ASSETS FOR SANCTIONING OF LOAN. THE OTHER REASON ASSIGNED BY THE LD. CIT(A) IS THAT IF THE ADDITION TO THE FIXED ASSETS BY VIRTUE OF SUCH EXPANSION PROGRAMME IS ONLY TO THE EXTENT OF 4.94 CRORE AS AD MITTED BY THE ASSESSEE IN THE BALANCE SHEET THEN THE BANK UNDER N O OBLIGATION TO SANCTION THE FULL AMOUNT OF RS. 5 CRORES TO MEET TH E REQUIREMENTS OF THE ASSESSEE COMPANY. IT IS THE BASIC REQUIREMENT OF AN Y BANK LOAN TO ASK FOR MARGIN MONEY CONTRIBUTION FROM THE BENEFICIARY OF LOAN BECAUSE THE STAKE OF BENEFICIARY IS VERY IMPORT IN ANY LOAN PRO CESS. THE BENEFICIARY FOR ITS MARGIN MONEY WOULD NOT ALLOW THE PROJECT TO FAIL. OTHERWISE THE PROJECT MAY BECOME UN-VIABLE DUE TO INDIFFERENT AT TITUDE OF THE PERSON AND THE INTEREST OF BANK WOULD BE JEOPARDIZED. THE LD. FIRST APPELLATE ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 15 AUTHORITY FURTHER OBSERVED THAT ASSESSEE CANNOT CHE AT THE BANK BY FURNISHING THE FUGDGED FIGURES OF VALUE OF ASSETS I N ORDER TO OBTAIN HIGHER LOAN AMOUNT WITHOUT ITS STAKE. THUS LD. FIRST APPEL LATE AUTHORITY HAS HELD THAT TOTAL INVESTMENT IN THE EXPANSION PROJECT MUST BE OF RS. 762 LACS. HE CONFIRMED THE ADDITION OF RS. 26787147/- R EPRESENTING DIFFERENCE BETWEEN THE VALUE CERTIFIED AND THE ONE DISCLOSED IN THE BALANCE SHEET AS UNEXPLAINED INVESTMENT IN THE FIXE D ASSETS. 15. LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING TH E ORDERS OF REVENUE AUTHORITY BELOW SUBMITTED THAT ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED. THE ASSE SSEE IS A RUNNING CONCERN HAVING PRODUCTION CAPACITY OF 100 TONNES IN ASSTT. YEAR 2004-05. THIS HAS BEEN ENHANCED TO 400 TONNES IN ASSTT. YEAR 2005-06. THE TERM LOAN WAS NOT SANCTIONED MERELY ON THE BASIS OF ESTI MATED PROJECT REPORT BUT ITS EXISTING ASSETS WERE ALSO TAKEN INTO CONSID ERATION BY THE BANK OFFICIALS. THE CERTIFICATE OF THE VALUER IN SUPPORT OF THE EXPANSION PROJECT IS ONLY A ROUGH WORKING ESTIMATE FOR THE REQUIREMEN T OF CAPITAL. HE POINTED OUT THAT THERE ARE SPECIFIC DIFFERENCE BETW EEN THE ACTUAL EXPENDITURE AND THE ESTIMATED BY M/S. MAGNET CONSOR IUM IN ITS CERTIFICATE. LD. COUNSEL FOR THE ASSESSEE POINTED O UT THAT THE DETAILS MENTIONED IN THE CERTIFICATE HAS BEEN ANNEXED TO TH E ORDER OF THE ASSTT. ORDER. HE POINTED OUT THAT IN THIS CERTIFICATE THE VALUER HAS TAKEN VALUE OF ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 16 GENERATOR AT RS. 50 LACS WHEREAS AS PER THE BILL IN THE BALANCE SHEET IT IS ONLY 23 20 350/-. THE ASSESSEE HAS ASKED THE AO TO VERIFY THIS ASPECT. AT THE PREMISES OF THE ASSESSEE. IT HAS ONLY INSTAL LED ONE GENERATOR SET FOR THE PURPOSE OF EXPANSION. HE FURTHER POINTED OU T THAT IN THE REPORT COST OF ELECTRIC CONNECTION INCLUDING SECURITY DEPO SIT WITH THE DVB VALUER HAS SHOWN A SUM OF RS. 50 77 000/- WHEREAS THE ACTU AL AMOUNT INCURRED BY THE ASSESSEE IS RS. 21 54 750/-. HE POINTED OUT THAT THESE TWO ITEMS MAKE A DIFFERENCE OF MORE THAN 50 LACS. SIMILAR ARE THE VARIATIONS BETWEEN THE ACTUAL EXPENSES VIS A VIS ESTIMATED ONE BY THE VALUER. HE FURTHER CONTENDED THAT ADDITION SOLELY ON THE BASIS OF THIS CERTIFICATE CANNOT MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT BY THE ASSESSEE. THIS DOCUMENT CANNOT BE WEIGHED OVER AND ABOVE THE DETAILS OF ACTUAL EXPENDITURE MAINTAINED BY THE ASSESSEE AND REFLECTE D IN THE BALANCE SHEET. THIS DOCUMENT IS ONLY AN OPINION OF AN EXPER T DEMONSTRATING THE REQUIREMENT OF EXPENDITURE FOR AN EXPANSION. SUCH T YPE OF ESTIMATION WOULD ALWAYS BE DEPENDING UPON THE PERSON WHO IS PR EPARING A PROJECT REPORT. HE FURTHER CONTENDED THAT SECTION 69 69A 69B AND 69C ARE DEEMING SECTIONS WHICH ENABLE AN AO TO MAKE A NOTIO NAL ADDITION TOWARDS UNEXPLAINED INVESTMENT / EXPENDITURE. HOWEV ER ANY ACTION WARRANTING ATTRACTION OF SUCH DEEMING PROVISION HAS TO BE BASED UPON COGENT AND RELIABLE MATERIAL. IT IS FOR THE AO TO C ONCLUSIVELY ESTABLISH THE ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 17 UNDISCLOSED INVESTMENT ON THE BASIS OF DOCUMENTARY EVIDENCE. SIMPLY AN ASSESSEE HAS SUBMITTED A VALUATION CERTIFICATE T O THE BANK FOR THE SPECIFIC PURPOSE OF THE BANK WOULD NOT BY ITSELF GO AD AN AUTHORITY TO SAY THAT ASSESSEE HAS MADE UNEXPLAINED INVESTMENT. FOR BUTTERACING HIS POINT HE RELIED UPON THE FOLLOWING DECISION:- 1. CIT VS. N. SWAMY (MADRAS HIGH COURT) 241 ITR 363 (MAD) 2. CIT VS. RELAXO FOOTWEAR (RAJASTHAN HIGH COURT)25 9 ITR 744 (RAJ.) 3. CIT MEERUT VS. KHAN & SIROHI STEEL ROLLING 152 TAXMAN 224 (ALL.) MILLS (HIGH COURT OF ALLAHABAD) 4. CIT VS. PREM SINGH & CO. (DELHI HIGH COURT) 1 63 ITR 434 (DEL.) 5. DR. T.A. QUERESHI VS. CIT (SUPREME COURT OF 287 ITR 547 (SC) INDIA 6. OMEGA ESTATES VS. INCOME TAX OFFICER WARD 106 ITD 427 (CHENNAI) VII (2) 7. NARESH BEHAL VS. INCOME TAX OFFICER (TTAT 4 1 ITD 298 DELHI BENCH D) 8. BIGJOS STORES (P.) LTD. VS. ASSTT. CIT (ITAT 106 TAXMAN 127 (ITAT) DELHI BENCH B) (DEL.) 9. D.R. INTERNATIONAL PVT. LTD. (DELHI HIGH COURT) ITA NO.389/2009 (DEL. H/C) APART FROM ABOVE ASSESSEE HAS PLACED A LARGE NUMBER OF OTHER DECISIONS IN THE COMPILATION WHICH ARE ON THE SAME LINE. ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 18 16. LD. DR ON THE OTHER HAND RELIED UPON THE FINDIN G OF LD. CIT (A). HE POINTED OUT THAT LD. CIT (A) HAS UPHELD THE ADDITIO N BY ASSIGNING APPROPRIATE REASONS. IT IS PRACTICALLY NOT PROBABLE THAT A BANK WOULD FINANCE 100% EXPANSION OF ANY PROJECT. THERE MUST B E SOME CONTRIBUTION FROM THE PROMOTERS AND THEREFORE ON TH E BASIS OF CERTIFICATE OF AN EXPERT AO HAS WORKED OUT THE CONTRIBUTION SUP POSED TO HAVE BEEN MADE BY THE PROMOTERS IN THE EXPANSION OF THE PROJE CT WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE IN THE BOOKS. 17. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. DURING THE COURSE OF ASSTT. P ROCEEDINGS IT REVEALED TO THE AO THAT ASSESSEE HAD SHOWN ADDITION TO THE F IXED CAPITAL ASSET BY A SUM OF RS. 4.94 CRORES. ON INVESTIGATION HE FOUND THAT IN ORDER TO MEET THE REQUIREMENT OF FUNDS FOR EXPANSION ASSESSEE HAS OBTAINED A TERM LOAN OF RS. 5 CRORE FROM STATE BANK OF MYSORE. THE AO HAS CALLED FOR AN INFORMATION STRAIGHT AWAY FROM THE BANK AND IT REVE ALED TO HIM THAT IN ORDER TO AVAIL THE TERM LOAN ASSESSEE HAS SUBMITTED A PROJECT REPORT. IN SUPPORT OF THE PROJECT REPORT HE SUBMITTED A CERTIF ICATE FROM A VALOUR NAMELY MAGNET CONSORIUM EXHIBITING THE PROBABLE EX PENDITURE OF RS. 7 62 76 000/-. THE AO TOOK THE CERTIFICATE AS A GOSPE L TRUTH AND ARRIVED AT A CONCLUSION THAT ASSESSEE HAS MADE EXPANSION OF RS . 762 LACS BUT ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 19 DISCLOSED IN THE BALANCE SHEET AT RS. 4.94 CRORE ON LY. LD. CIT(A) WHILE CONFIRMING THE ACTION OF AO HAS ASSIGNED PERIPHERAL REASONS THAT BANK IS A GOVT. UNDERTAKING. IT WOULD SANCTION THE TERM LOA N AFTER CONSIDERING THE FEASIBILITY OF THE PROJECT REPORT AND MARGIN MO NEY CONTRIBUTED BY THE PROMOTERS. THE BANK CANNOT SANCTION A LOAN OF SUCH MAGNITUDE WITHOUT EXAMINING ALL POSSIBLE FACTORS WHICH ARE NECESSARY FOR EFFICIENT FUNCTIONING OF THE UNIT AFTER EXPANSION PROGRAMME U NDERTAKEN BY THE ASSESSEE COMPANY AND SECURITY OF THE LOAN. LD. CIT (A) FURTHER CONCLUDED THAT WHY BANK EMPHASISED FOR CONTRIBUTION FROM THE PROMOTERS IS THAT ONCE MARGIN MONEY CONTRIBUTED BY THE LOAN BENEFICIARY THEN HE WOULD TAKE CARE OF HIS STAKES ALSO THAT WOU LD WORK AS A SECURITY AND SAFETY OF THE BANK FINANCE ALSO. ON DUE CONSIDE RATION OF THESE REASONING AND THE BELIEF HARBOURED BY BOTH THE AUTH ORITIES VIS A VIS THE REQUIREMENT OF INCOME TAX FOR CHARGING ANY INCOME A N ASSESSEE TO TAX WE ARE OF THE VIEW THAT IT IS THE AO WHO HAS TO PRO VE THAT AN ASSESSEE IS HAVING INCOME CHARGEABLE TO TAX. 18. THE ASSESSEE IS A PRIVATE LTD. COMPANY MAINTAIN ING PROPER BOOKS OF ACCOUNTS. ITS ACCOUNTS ARE STATUTORILY REQUIRED TO BE AUDITED U/S 44 AB OF THE ACT. IT HAS GOT ITS ACCOUNT DULY AUDITED AND SUBMITTED ALONG WITH THE RETURN. THE AO IS SUPPOSED TO COMPUTE THE INCOM E OF THE ASSESSEE ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 20 AS PER SECTION 145 OF THE INCOME TAX ACT. SECTION 1 45 PROVIDES THE MECHANISM HOW TO COMPUTE THE INCOME OF THE ASSESSEE . ACCORDING TO SUB CLAUSE (I) THE INCOME CHARGEABLE UNDER THE HEA D PROFITS AND GAINS OF THE BUSINESS OR PROFESSIONS OR INCOME FROM OTHER SOURCES SHALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTAN CY EMPLOYED BY AN ASSESSEE REGULARLY SUBJECT TO THE SUB-SECTION (2 ) OF SECTION 145 OF THE ACT. SUB-SECTION (2) PROVIDES THAT THE CENTRAL GOVE RNMENT MAY NOTIFY IN THE OFFICIAL GAZETTE FROM TIME TO TIME THE ACCOUNTI NG STANDARD REQUIRED TO BE FOLLOWED BY ANY CLASS OF ASSESSEE IN RESPECT OF ANY CLASS OF INCOME. THUS IT INDICATES THAT INCOME HAS TO BE CO MPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTANCY FOLLOWED BY AN ASSESSEE. I.E. CASH OR MERCANTILE. SUCH METHOD HAS TO BE FOLL OWED KEEPING IN VIEW THE ACCOUNTING STANDARD NOTIFIED BY THE CENTRAL GOV ERNMENT FROM TIME TO TIME. SUB-CLAUSE (3) PROVIDES A SITUATION I.E. IF THE ASSESSING OFFICER IS UNABLE TO DEDUCE THE TRUE INCOME ON THE BASIS OF ME THOD OF ACCOUNTANCY FOLLOWED BY AN ASSESSEE THEN HE CAN REJ ECT THE BOOK RESULTS AND ASSESS THE INCOME ACCORDING TO HIS ESTI MATE OR ACCORDING TO HIS BEST JUDGMENT. THE ASSESSING OFFICER IN THAT CA SE IS REQUIRED TO POINT OUT THE DEFECTS IN THE ACCOUNTS OF ASSESSEE AND REQ UIRE TO SEEK EXPLANATION OF THE ASSESSEE QUA THOSE DEFECTS. IF T HE ASSESSEE FAILED TO EXPLAIN THE DEFECTS THEN ON THE BASIS OF THE BOOK R ESULTS INCOME CANNOT ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 21 BE DETERMINED AND ASSESSING OFFICER WOULD COMPUTE T HE INCOME ACCORDING TO HIS ESTIMATION KEEPING IN VIEW THE GUI DING FACTOR FOR ESTIMATING SUCH INCOME. 19. THE AO IN THE ASTTT. PROCEEDINGS DID NOT FIND A SINGLE DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE HAS NOT OBSER VED THAT TRUE INCOME CANNOT BE DEDUCTED FROM THE ACCOUNTS OF ASSE SSEE. THE ONLY EVIDENCE RELIED UPON BY THE AO FOR HARBOURING A BEL IEF OF UNEXPLAINED INVESTMENT BY THE ASSESSEE IN THE EXPANSION OF ITS PROJECT IS THE CERTIFICATE SUBMITTED BY THE ASSESSEE TO THE BANK D EMONSTRATING THE EXPENSES REQUIRED FOR EXPANSION. IN OUR OPINION THI S CERTIFICATE IS MERE AN OPINION OF AN EXPERT IT CANNOT BE CONSIDERED A C ONCLUSIVE EVIDENCE EXHIBITING THE UNEXPLAINED INVESTMENT BY THE ASSESS EE. APART FROM THE ABOVE THE ASSESSEE HAS DEMONSTRATED AS TO HOW THIS CERTIFICATE IS GIVING APPROXIMATE VALUE OF ALL THE ITEMS. LD. COUNSEL FOR THE ASSESSEE WHILE TAKING US THROUGH THE CERTIFICAT E APPENDED WITH THE ASSTT. ORDER POINTED OUT THAT ALL THE FIGURES MENTI ONED IN THE CERTIFICATE BY THE CHARTERED ENGINEER ARE IN ROUND FIGURES WHICH DO INDICATE THAT THESE FIGURES ARE BASED UPON APPROXIMATE VALUE. HE SPECIF ICALLY POINTED OUT THAT IN THE CERTIFICATE THE VALUER HAS WORKED OUT T HE TOTAL VALUE OF THE ASSETS AT RS. 7 62 76 000/-. IN THIS LETTER HE TOOK GENERATOR 2 X 550 KV AT ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 22 RS. 50 LACS. THE VALUER GAVE BIFURCATION OF EACH IT EM AND ATTACHED SUCH DETAILS IN AN ANNEXURE WITH THE CERTIFICATE IN THE ANNEXURE AT SERIAL NO. 97 ON PAGE 7 HE HIMSELF TAKEN ONE GENERATOR SET OF 500 KV AT RS. 22 97 320/-. SIMILARLY AT SERIAL NO. 6 IN THE CERTI FICATE HE MAKE A MENTION OF RS.50 77 000/- IN RESPECT OF ELECTRICITY CONNECT ION INCLUDING SECURITY TO DVB WHEREAS AT SL. NO. 102 THE VALUER HAS MENTIONED ELECTRICITY CONNECTION AT RS. 24 24 283/-. LD. COUNSEL AT TH E TIME OF HEARING FURTHER POINTED OUT DISCREPANCY BETWEEN COST OF SEV ERAL WORK MENTIONED AT SL. NO. 1 IN THE CERTIFICATE VIS A VIS IN TH E DETAILS AT SL. NO. 127 OF THE ANNEXURE. AT SL. NO. 127 CIVIL WORK COMPLETED HA S BEEN SHOWN AT RS. 9 56 925/- WHICH RELATES TO LABOUR CHARGES WHEREAS IN THE CERTIFICATE AT SL. NO. 1 A SUM OF RS. 1.35 LAC HAS BEEN SHOWN. THU S THIS CERTIFICATE SUBMITTED TO THE BANK WAS FOR THE PURPOSE OF AVAILI NG A TERM LOAN. IT CANNOT BE A SUBSTITUTE FOR THE BOOKS OF ACCOUNTS MA INTAINED BY THE ASSESSEE IT CAN BE A CORROBORATIVE PIECE OF EVIDENC E FOR DISBELIEVING THE BOOKS OF ASSESSEE OR IT CAN BE USED AS AN INFOR MATION FOR STARTING THE INVESTIGATION BUT SOLELY ON THE BASIS OF THIS C ERTIFICATE IT CANNOT BE HELD THAT ASSESSEE IS HAVING CAPITAL ASSET OF RS. 7 62 LACS AND IT HAS SHOWN ONLY 4.94 LACS IN THE BOOKS. IT IS NOT NECESS ARY TO RECAPITULATE AND RECITE ALL THE CASE LAWS RELIED UPON BY THE LD. COU NSEL FOR THE ASSESSEE AT THE TIME OF HEARING BUT IT IS SUFFICE TO SAY THA T THE CORE OF ALL THE ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 23 DECISIONS OF THE HONBLE HIGH COURT AS WELL AS OF I TAT IS THAT ONLY ON THE BASIS OF DECLARATION MADE TO THE BANK IN RESPECT OF STOCK STATEMENT ADDITION CANNOT BE MADE. IN THE CASE OF CIT VS. N. SWAMI 241 ITR 363 SUPRA THE ASSESSEE HAD SHOWN EXCESS STOCK HYPOTHETI C WITH THE BANK HAS BEEN SHOWN MORE THAN THE VALUE SHOWN IN THE BOO KS OF ACCOUNTS. THE AO THOUGHT THAT THE FIGURES RELATING TO THE VAL UE OF STOCK IN THE BOOKS COULD NOT BE REGARDED AS THE CORRECT VALUE OF THE STOCK AS THE ASSESSEE HAS GIVEN A DECLARATION TO THE BANK WHILE OBTAINING OVERDRAFT FACILITIES. THE DIFFERENCE BETWEEN THE VALUE AS REC ORDED IN THE BANK AND THAT FOUND IN THE DECLARATION TO THE BANK HAS BEEN TREATED AS INCOME FROM UNDISCLOSED SOURCES. THE AO HAS RELIED UPON TH E EARLIER DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF COI MBATTORE SPINNING AND WEAVING CO. LTD. V. CIT 95 ITR 375 WHEREIN THE HONBLE MADRAS HIGH COURT HAS OBSERVED THAT THE ALLEGED PRACTICE SAID TO BE FOLLOWED BY THE BUSINESS HOUSES OF DECLARING LARGE NUMBER OF ST OCK TO THE BANK FOR THE PURPOSE OF GETTING HIGHER LOANS OR OVERDRAFT FA CILITIES HAS NEITHER BEEN SHOWN TO EXIST NOR RECOGNISED IN COMMERCIAL CI RCLES OR BY COURTS AND EVEN ASSUMING THAT SUCH A PRACTICE EXISTS TH E TRIBUNAL IS NOT EXPECTED TO TAKE JUDICIAL NOTICE OF SUCH SUBSTANDAR D MORALITY ON THE PART OF THE ASSESSEE SO AS TO ENABLE THEM TO GO BACK ON THEIR OWN SOWRN STATEMENT GIVEN TO THE BANKS SO AS TO THE STOCKS HE LD OR HYPOTHECATED ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 24 BY THEM IN THE BANKS. THE HONBLE MADRAS HIGH COURT IN THE LATEST DECISION HAS CONSIDERED THIS EARLIER DECISION ALSO AND HELD THAT ASSESSEES INCOME IS TO BE ASSESSED BY INCOME TAX O FFICER ON THE BASIS OF THE MATERIAL WHICH IS REQUIRED TO BE CONSIDERED FOR THE PURPOSE OF ASSTT. AND ORDINARILY NOT ON THE BASIS OF THE STATE MENT WHICH THE ASSESSEE MAY HAVE GIVEN TO A THIRD PARTY EVEN IF I T BE A BANK. MERE FACT THAT ASSESSEE HAD MADE SUCH A STATEMENT BY ITSELF C ANNOT BE TREATED AS HAVING RESULTED IN AN IRREBUTTABLE PRESUMPTION AGAI NST THE ASSESSEE. THE BURDEN OF SHOWING THAT THE ASSESSEE HAD UNDISCL OSED INCOME IS ON THE REVENUE THAT BURDEN CANNOT BE SAID TO BE DISCHA RGED BY MERE REFERRING TO THE STATEMENT GIVEN BY THE ASSESSEE TO A THIRD PARTY IN CONNECTION WITH A TRANSACTION WHICH WAS NOT DIRECTL Y RELATED TO THE ASSTT. AND MAKING THAT THE SOLE FOUNDATION FOR FIND ING THAT THE ASSESSEE HAD DELIBERATELY SUPPRESSED ITS INCOME. SIMILAR IS THE VIEW EXPRESSED BY HONBLE RAJASTHAN HIGH COURT IN THE CASE OF RELAXO FOOTWEAR AND IN OTHER ORDERS OF THE TRIBUNAL REFERRED SUPRA. THUS O N AN ANALYSIS OF ALL THESE FACTS WE ARE OF THE OPINION THAT CERTIFICATE OF THE CHARTERED ENGINEER ESTIMATED THE PROBABLE COST OF THE PROJECT SUBMITTED BY THE ASSESSEE TO THE BANK FOR AVAILING TERM LOAN CANNOT BE HELD AS SUFFICIENT EVIDENCE EXHIBITING UNEXPLAINED INVESTMENT BY THE ASSESSEE FOR THE EXPANSION OF ITS PROJECT. THIS CERTIFICATE WAS GIVE N FOR ALTOGETHER DIFFERENT ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 25 PURPOSE. THE BANK HAS NOT GIVEN THE LOAN ON THE BA SIS OF THIS CERTIFICATE ALONE RATHER IT CONSIDERED THE OTHER ASPECTS ALSO I .E. EXISTING PLANT OF ASSESSEE WHICH HAS A CAPACITY OF 40 TONNES PRODUCTI ON ETC. THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT CANNOT BE MADE ON SURMISES AND CONJUNCTURES SHOWN BY THE LD. REVENUE AUTHORITIES R ATHER AO IS SUPPOSED TO LAY HIS HANDS ON A CONCRETE MATERIAL IN DICATING THE UNEXPLAINED INVESTMENT BY THE ASSESSEE. WE ALLOW TH IS GROUND OF APPEAL AND DELETE THE ADDITION. 20. IN THE RESULT APPEAL OF THE REVENUE IS DISM ISSED AND THAT OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.2.2010. [G.E.VEERABHADRAPPA] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT ITA NOS383 1440 /DEL/09 ASSTT. YEAR 2005-06 26 TRUE COPY BY ORDER DEPUTY REGISTRA R ITAT