2017 (6) TMI 1081 - AT - Income Tax

Addition on the basis of report of Valuation Officer - Held that - No reason for sustaining any addition in the year under consideration as the DVO s report is dated July, 2013 and the DVO has recorded that the assessee has declared investment of ₹ 4.92 lac against his estimate of cost of construction at ₹ 5.15 lac for the year, which is less than 10%. The Hon ble J & K High Court in Honest Group of Hotel (P) Ltd. vs. CIT (2001 (11) TMI 1016 - HIGH COURT OF JAMMU & KASHMIR) has held that difference upto 10% in the DVO s report and the amount shown by the assessee is liable to be ignored. In the facts of the instant case, it is seen that the overall difference between the investment declared by the assessee at ₹ 3.65 crore and as estimated by the DVO at ₹ 3.97 crore is less than 10% of the DVO s estimate. As such, no addition is called for. Thus order for the deletion of addition. - Decided in favour of assessee. Addition being investment made in some agricultural land - Held that - AO has simply rejected the assessee s claim of having earned agricultural income of ₹ 8.18 lac, which was duly backed by evidence in the form of Forms No. J. Rejecting the veracity of Forms No. J, the Assessing Officer proceeded to estimate agricultural income in a whimsical manner at ₹ 3,29,250/-. No effort whatsoever was made to examine the commission agents, who issued Form Nos. J. Under such circumstances, the view point canvassed by the Assessing Officer in not admitting the agricultural income at the stated level, duly backed by uncontroverted Forms No. J, cannot be countenanced. If the Assessing Officer was not satisfied with the veracity of Forms No. J, it was for him to make investigation and prove that such forms were fictitious or not genuinely obtained by the assessee. In the absence of any exercise having been done, cannot uphold the sustenance of addition made by the ld. CIT(A) on such unfounded basis.- Decided in favour of assessee.

Summary

Issues:
1. Addition of ?5,15,578 based on Valuation Officer's report.
2. Addition of ?4,40,865 as investment in agricultural land.

Analysis:

Issue 1: Addition of ?5,15,578 based on Valuation Officer's report
The Assessing Officer made an addition of ?5,15,578 based on the report of the Valuation Officer regarding the construction of a hotel by the assessee. The Valuation Officer's report indicated that the assessee had spent this amount on construction during the relevant financial year. However, the assessee had declared an investment of ?4,92,380 in the previous year, and the total investment declared over five years was ?3,65,47,888, as per the Valuation Report. The Assessing Officer had accepted the genuineness of the investment in the construction in a previous assessment year. The Tribunal noted that the difference between the investment declared by the assessee and the estimate by the DVO was less than 10%, which is considered acceptable as per legal precedents. Therefore, the Tribunal ordered the deletion of the addition of ?5,15,578.

Issue 2: Addition of ?4,40,865 as investment in agricultural land
The second issue involved the addition of ?4,40,865 as investment in agricultural land by the Assessing Officer. The assessee had explained the source of investment as agricultural income and past savings. The Assessing Officer, however, rejected the assessee's claim of earning ?8.18 lakh as agricultural income, which was supported by evidence in the form of Forms No. J. Instead, the Assessing Officer estimated the agricultural income at ?3,29,250 without investigating the veracity of the Forms No. J or examining the commission agents who issued them. The Tribunal held that without proper investigation to prove the Forms were fictitious, the rejection of the agricultural income claim was unfounded. Therefore, the Tribunal allowed the appeal filed by the assessee, resulting in the deletion of the addition of ?4,40,865.

In conclusion, the Tribunal ruled in favor of the assessee on both issues, ordering the deletion of the additions made by the Assessing Officer based on insufficient grounds and lack of proper investigation.