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TMI Blog2014 (11) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case the honorable CIT(A)-I, Nasik erred by accepting the clarification submitted by the assessee regarding the source of Rs. 15,00,000/- representing the alleged unexplained payment for purchasing hotel, in violation of Rule 46A. 4. On the facts and in the circumstances of the case the honorable CIT(A)-I, Nasik erred by accepting the clarification submitted by the assessee regarding the source of the alleged unexplained cash deposits into Bank a/c totaling Rs. 13,91,296/-, in violation of Rule 46A. 5. On the facts and in the circumstances of the case the honorable CIT(A)-I, Nasik erred by deleting the addition of Rs. 15,00,000/- made u/s. 50C on account of difference in the actual sale consideration and the market valued arrived at by the Dept. Valuation Officer. 6. On the facts and in the circumstances of the case the honorable CIT(A)-I, Nasik erred by directing the Assessing Officer to ask the DVO to file Valuation Report of the properties/capital asset as on 1/4/81 and accordingly rework the income under the head capital gains, ignoring the decision of the hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT 284 ITR 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the assessee has claimed the expenditure towards commission payment which details are given on Page No. 3 of the assessment order but the vouchers are not properly numbered or countersigned by anybody. The assessee has also paid an amount of Rs. 3,62,000/- in cash and Rs. 6,82,500/- by cheques as payments towards commission. The assessee has not deducted the tax at source. He has noted that the books of account and vouchers are not properly prepared and hence the correctness and completeness of the accounts cannot be accepted. In the opinion of the Assessing Officer the books of account maintained by the assessee are not reliable which are not maintained on regular basis. He, accordingly, rejected the books account. 4. It is pertinent to note here that the Assessing Officer has completed the assessment by making certain additions but he has taken the figures from the return of income and passed the assessment order u/s. 143(3). The assessee challenged the action of the Assessing Officer for rejection of the books of account before the Ld. CIT(A) and the Ld. CIT(A) has not approved the action of the Assessing Officer. The Ld. CIT(A) held that the Assessing Officer was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that the books are not reliable or profit which profit could not be deduced. Considering the facts that the accounts are regularly maintained in the course of business under the provisions of I.T. Act and are free from any serious qualifying remarks should be taken as correct unless there are any strong and sufficient reasons to indicate that they are unreliable. The defect as pointed out by the A.O. to justify the rejection of the books of account are in fact no defects. It is settled position of law that Section 145 of the I.T. Act cannot be invoked in a light hearted manner. The A.O. has not pointed out any specific mistake or discrepancy in the books of account and mere non provision of meager expenditure cannot justify resort to rejecting the books and invoking Sec. 145 of the Act. In view of the above facts and the position of law, it is held that there is no merit in the action of the A.O. for rejecting the book results. It is also found that the system of accounting of working out profit by the appellant has been followed consistently and there is no justification to reject this system by invoking section 145 of the Act. This approach of the A.O. is incorrect and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o found to be incorrect, as the appellant has prepared the books of accounts by allotting the said work to professional accountant. The fifth reason stated by the A.O. that the appellant has not audited the books and filed audit report for A.Y. 2007-08 even though specifically asked for is also found to be incorrect, as in the said year the appellant was not liable to tax audit, as his turnover was far below Rs. 40 lacs. In view of the above facts and discussion, I am of the considered view that the A.O. is not justified in rejecting audited books of accounts by applying provisions of section 145(1) of the Act. This ground of appeal is allowed." Now, the Revenue is in appeal before us. 5. We have heard the rival submissions of the parties and perused the record. The argument of the Ld. DR can be summarized as under: a). The Assessing Officer, as per notice u/s. 142(1) dtd. 26/11/2010, as well as, order sheet noting dtd. 26/11/2010, asked the assessee to furnish the audited balance sheet for the year under consideration along with the details of deposits in the bank account along with narration, especially the cash deposits. However, till 24/12/2010 the assessee failed to furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore rejecting books of account since the audited accounts were presented first time before the Assessing Officer on 27/12/2011 only. Before deciding on this issue, since fresh facts regarding reasons for terming the method of accounting as generally mercantile were produced before the CIT(A), and the assessee had submitted detailed evidences in support of his claim of source of deposits made in the bank account/source of investment of the assessee, which as mentioned above were not submitted before the Assessing Officer, the CIT(A) should have forwarded these evidences to the Assessing Officer for examination. There is violation of Rule 46A and, therefore, the issue is contested in appeal. 6. Per contra, the Ld. AR supported the orders of the Assessing Officer. He submits that the Assessing Officer has rejected the books of accounts and book results for the reason that in the tax audit report the auditor has mentioned method of accounting as "Generally Mercantile" instead of either mercantile or cash method. He submits that the Assessing Officer has not given any opportunity to the assessee before rejecting book results to explain why the method is stated to be "Generally Mercant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarity in the reasons by the Assessing Officer. 7. It appears that the Assessing Officer has rejected books of accounts only for making addition of Rs. 15,00,000/- in respect of payment for hotel purchased and Rs. 13,91,296/- on account of cash deposited in bank, entries for which have been recorded in books of accounts and source of the same stood explained out of sale proceeds of plots and land which have been credited in books of accounts and profit of which has been offered to tax. We have perused the assessment order there are lot of missing links in the assessment order. There is no clarity on the reasons for rejection of the books of account. So far as the finding of the Ld. CIT(A) is concerned, we find that he has dealt with the issue in detail. The Assessing Officer has made the reference to the remarks of the auditors in respect of the method of accounting as "Generally Mercantile". Apart from that the Assessing Officer has not discussed anything while coming to the conclusion that why the assessee's books of account are to be rejected. The Assessing Officer is duty bound to consider and elaborate the following points before rejecting the books of account u/s. 145( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d bank account. The assessee explained the source to the Assessing Officer by stating that the said DD was made out of the sale proceeds of land at S. No. 265/1 and plots in S. No. 264/1, Nashik. The Assessing Officer rejected the explanation of the assessee describing same as general and vague. The assessee challenged the addition before the Ld. CIT(A). The Ld. CIT(A) deleted the addition. The reasons given by the Ld. CIT(A) are as under: 6.2 I have carefully considered the facts of the case, the assessment order and the rival submissions. On perusal of the same, it has been noticed that the said investment in hotel amounting to Rs. 15,00,000/- has been recorded by the appellant in the audited books of account. Further, the source of the said investment has also been supported by the sale proceeds of agricultural land amounting to Rs. 1.61 crores and sale proceeds of plots amounting to Rs. 2,09,11,282/- during the year under appeal and also by substantial sale proceeds of plots in the earlier years. The A.O. has taxed the substantial profit/surplus amounting to more than Rs. 2.75 crores offered to tax by the appellant, however, he has not accepted the investment made by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the explanation of the assessee by stating that the bank account does not appear in the balance sheet of the assessee. He, therefore, made the addition of Rs. 13,91,296/- by observing that no addition is being made on account of remaining cash deposits reported in the AIR as an amount of Rs. 16,57,382/- has been added on account of understatement of profit. He, accordingly, gave telescoping of the said amount. 11.1 We find that there is no clarity on the facts in the assessment order. The Assessing Officer referred to Para No. 5 in which he has made the addition of Rs. 16,57,382/- on account of understatement of profit and sale of plots. It appears that as per the AIR report total deposits were to the extent of Rs. 28,10,026/-. As the Assessing Officer has made an addition towards understatement of profit to the extent of Rs. 16,57,382/-, he, accordingly, treated Rs. 14,18,730/- as explained and difference to the extent of Rs. 13,91,296/- is added. When the issue was carried before the Ld. CIT(A) the Ld. CIT(A) deleted the entire addition on the reasons given by the Ld. CIT(A) are as under: 7.3 I have carefully considered the facts of the case, the assessment order and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Janlaxmi Bank and Rs. 14,01,090/- in Rajlaxmi Bank which have been recorded by the assessee in the books of account. If the amounts are recorded in the books of account then how the Assessing Officer has made the observation that the bank of account was not appearing in the audited balance sheet. In this case the assessee is in the business of development of agriculture land and sale of plots and he is gradually selling his agricultural land which has been developed and plots are made. The finding of the Ld. CIT(A) has not been controverted before us. The Ld. AR also pointed out that in the balance sheet the said bank accounts are appearing. In our opinion the reasons given by the Assessing Officer are totally erroneous and contrary to the evidence on record. We find no reason to interfere with the order of the Ld. CIT(A). Accordingly, Ground No. 4 is dismissed. 13. The next issue is the addition of Rs. 15,00,000/- made on the basis of Department Valuation Officer (DVO) report and this issue arises from Ground No. 5. The Assessing Officer has discussed this issue in Para Nos. 6 and 6.1. As noted by the Assessing Officer the assessee has shown Long Term Capital Gain (LTCG) at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an estimate of the market value. The difference in the case under appeal between valuation of the property by DVO and consideration shown by the assessee is Rs. 15,00,000/- which is 8.52% only. The Hon'ble ITAT, Pune in recent decision in the case of Rahul Constructions vs. DCIT (2010) 38 DTR 19 Pune has held that in the cases where difference between the sale consideration of the property shown by the assessee and the fair market value determined by the DVO u/s. 50C(2) is less than 10% addition u/s. 50C cannot be justified. 14. We have heard the parties. We find that the difference in the valuation is less than 10% that is between the sale consideration shown by the assessee which is at Rs. 1.61 cores and valuation made the DVO is Rs. 1.76 crores. The Ld. CIT(A) has followed the decision of the ITAT, Pune in the case of Rahul Construction vs. DCIT 38 DTR 19 wherein it is held that if the difference in the valuation made by the DVO and value declared by the assessee is less than 10% then no addition is justified u/s. 50C. As this fact is not disputed before us and also the Ld. CIT(A) has followed the decision in the case of Rahul Construction (supra), we decline to interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in in respect of the said lands for the year under appeal on the basis of the value of the lands as on 01-04-1981 arrived at by the DVO in his valuation report. 17. We have heard the rival submissions of the parties and perused the record. In our opinion the directions of the Ld. CIT(A) cannot be sustained. In the present case the assessee declared the capital gain on the sale of the lands at S. No. 264/1 and S. No. 265/1 at Mhasrul adopting the value of the land at Rs. 12 Lacs and Rs. 2 Lacs respectively. It appears that during the course of assessment proceeding the Assessing Officer made the reference to the DVO for verifying the valuation adopted by the assessee as on 01-04-1981 as well as the gross sale consideration declared by the assessee on the sale of lands. It is seen that so far as the sale consideration of the land declared by the assessee is concerned, there was difference of Rs. 15 Lacs in the valuation made by the DVO and the sale consideration declared by the assessee. The Assessing Officer, therefore, made the addition of Rs. 15 Lacs. In respect of the deduction claimed adopting the fair market value (FMV) of the land on 01-04-1981, the DVO did not send any repor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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