Expenditure is allowable even if Assessee has not rendered services but is retained by client

When there was a valid agreement to render services as a retainer and assessee being an advocate maintained office for purpose of profession, AO was not, therefore, justified in disallowing expenditure on reason of non-rendering of services to a particular client.

Assessee had received certain amount per month between period from July 2006 to June, 2009 from M/s. R Pvt. Ltd. and also from AG International. AO found that nature of receipts from M/s. R Pvt. Ltd., which was claimed as professional receipts in books of assessee, were actually not in nature of professional receipts because entire amount was received without providing any professional services. Accordingly, receipt was treated as income from other sources and thus, as per section 57 expenses claimed against income from profession and debited to P&L account was disallowed. Held: When assessee made himself ready to be available to client and client had not availed of his services as a retainer, there was no fault with assessee so as to disallow expenditure incurred by assessee. AO did not allow expenditure only on the presumption that assessee had not rendered services though the assessee had kept himself ready to render services. In assessment year 2009-10 and 2010-11, there was no such disallowance. In view of this, Tribunal was not in agreement with findings of lower authorities. AO was directed to allow expenditure incurred by assessee.

Decision: In assessee’s favour.

IN THE ITAT, COCHIN BENCH

CHANDRA POOJARI, AM & GEORGE GEORGE K., JM

P.V. Sreenijin & Anr. v. Dy. CIT & Vice Versa

ITA Nos. 383 to 386/Coch/2015, 374/Coch/2015, 322 to 324/Coch/2015, 319 to 321/Coch/2015 & 387 to 390/Coch/2015

31 May, 2018

Assessee by: Sudhir Abraham, CA

Revenue by: A. Dhanaraj, Sr. DR

Per Bench

These appeals are relating to different assesses arising out of different orders of the Commissioner (Appeals)-IV Kochi/CIT for different assessment years wherein certain issues are common in nature, hence they were heard together and are being disposed of by this common order for the sake of convenience. The Revenue has also filed appeal in ITA No. 374/Coch/2015.

ITA No. 383 to 386/Coch/2015 : Shri P.V. Sreenijin

2. The first ground in ITA No. 383/Coch/2015 is with regard to addition made towards unexplained investment in purchase of land at Alangad village at Rs. 4,03,600.

2.1 The facts of the case are that the assessee, being an advocate, had purchased land from Shri K.R. Ramesh Kumar and Smt. Sarasakumari 20 cents of land in Survey No. 176/15 at Alangad Village and 114.75 cents of land in Survey No. 176/17, 16 dated 7-3-2007 respectively. The value shown in the document was Rs. 3,10,000. But it was admitted by sellers that the actual consideration was more than that in the document. The extra amount was paid by the assessee by clearing the liability of the sellers with SBT, Varapuzha Branch and the entire consideration was paid in cash. The assessing officer conducted enquiries from the said bank and the statement of closing of the liability was obtained. The assessing officer found that the liability of Palazhy Distributors amounting to Rs. 6,33,600 was closed and the consideration of Rs. 4,03,600 was the investment of the assessee and the same was treated as unexplained investment of the assessee under section 69 of the Income Tax Act. On appeal, the Commissioner (Appeals) confirmed the addition made by the assessing officer.

2.2 Against this, the assessee is in appeal before us. The learned AR submitted that the assessee has not deposited any money in the vendor’s Bank account and if there was any deposit in the Bank account of the vendor, it cannot be presumed that the assessee has deposited the same unless there is movement of funds from the assessee’s account or payment of on-money for this transaction. Further it was submitted that as per Income Tax Rule 114B(j), every person shall quote his PAN in all documents when deposit of cash aggregating to Rs. 50,000 or more is made to a banking company to which Banking Regulation Act, 1949 applies. The assessee has neither remitted any money nor furnished his PAN to the Bank. Unless the assessing officer has brought on record the assessee’s PAN for depositing the said amount in the vendor’s Bank account, it cannot be considered that such amount was deposited by the assessee. It was further submitted that in the cross examination it was admitted by the vendor, namely, Shri K.R. Ramesh Kumar that there was no proof that the assessee had remitted the money and had also not given authorization or letter to the Bank requesting the Bank to permit the assessee to remit the money into his firm’s account. It was submitted that the registration authorities registered the sale deed without allegation of understatement of sale value and unless there is proof that there was understatement of sale value or payment of on-money, the assessing officer cannot presume that there was undervaluation of the properties purchased by the assessee. The learned AR further submitted that even the seller has not shown additional consideration received from the sale of the said land in his income tax return and this fact was admitted by Shri K.R. Ramesh Kumar in the cross examination. Further it was submitted that in similar situations, the land transactions within a year in the locality showed the going rate at Rs. 985 per cent.. For this purpose, he referred to Sale Deed No. 367/2006 executed on 17-1-2006 for sale of 81 cents and 250 sq. links of wet land by Smt. D. Sarasakumari and Shri A. Raveendran Nair. While the assessee has shown Rs. 2300 per cent, the sale deed showed the payment of Rs. 3,10,000 for 134.75 cents and this being a wet land, that should be cheaper than dry land as it could only be used for agricultural purposes.

2.3 The learned AR relied on the following judgments:

(i) DCIT v. K. Najimunnisa & K. Sajida [ITA No. 794 &795 /Hyd/2010, dt. 24-8-2012] (ITAT, Hyderabad Bench)

(ii) CIT v. Satinder Kumar (2001) 250 ITR 485 (P&H)

(iii) CIT v. Smt. K.C. Agnes (2003) 263 ITR 354 (Ker)

(iv) CIT v. P.V. Kalyanasundaram (2006) 282 ITR 259 (Mad)

(v) CIT v. P.V. Kalyanasundaram (2007) 294 ITR 49 (SC)

(vi) CIT v. Chandni Buchar (2010) 323 ITR 510 (P&H)

(vii) Paramjit Singh v. ITO (2010) 323 ITR 588 (P&H)

(viii) Rajdeep Builders v. ACIT [ITA No.666 (Chd) of 2010, dt. 27-4-2012] (ITAT Chandigarh Bench)

2.4 On the other hand, the learned DR submitted that the claim of the assessee was based on general observations. The learned DR submitted that while the assessing officer relied upon the specific instances of the sale transaction by Shri Ramesh Kumar where he had accepted having received the actual consideration, which included clearing off his liability with the Bank as well as the cash received over and above that sum. Further it was submitted that the statement of the seller was verified by the assessing officer with the Bank and the same was found to be true. Moreover, the assessee was allowed an opportunity to cross examine the seller, Shri Ramesh Kumar wherein he confirmed having received the actual consideration more than the documented consideration for the said land transaction. In view of this, it was submitted that the assessing officer was right in taking the decision in making the addition of Rs. 4,03,600.

2.5 We have heard the rival contentions and perused the record. Undisputedly, in the present case, the registered sale deed of the property measuring 114.75 cents at Alangad Village purchased from Smt. D. Sarasakumari vide Document No. 1553/07 dated 3-3-2007 shows sale consideration of Rs. 2,30,000 and another property of 20 cents of land in Alangad village purchased from Shri K.R. Ramesh Kumar vide Document No. 1552/07 dated 3-3-2007 shows sale consideration of Rs. 80,000. Thus the total registered value of both the properties is Rs. 3,10,000. Further in the sworn statement recorded under section 131 of the Act from Shri K.R. Ramesh Kumar, it was stated that the assessee had remitted a sum of Rs. 6,33,600 in SBT, Varapuzha to clear off his voting right on the land and paid Rs. 80,000 by cash to him. Hence, the assessing officer presumed that there was an on-money payment of Rs. 4,03,600 over and above the sale value mentioned in the sale deed. Apart from the allegation from the assessing officer that the assessee had paid the amount into the vendor’s Bank account to clear off his liabilities with the Bank, there was no other evidence brought on record by the assessing officer to substantiate the payment of on- money for this transaction. The vendor, Shri K.R. Ramesh Kumar stated in his statement recorded under section 131 that he himself had not disclosed the alleged sale consideration in his return of income. Being so, we cannot give any credit to the sworn statement recorded from Shri K.R. Ramesh Kumar. Further, there is no allegation of any extra payment by the registration authorities in respect of these two properties. Therefore in the absence of any corroborative evidence to the contrary, the value mentioned in the sale deed is to be treated as correct sale consideration. Further, as held by the Madras High Court in the case of CIT v. P.V. Kalyanasundaram (2006) 282 ITR 259 (Mad) and confirmed by the Supreme Court in the case of CIT v. P.V. Kalyanasundaram (2007) 294 ITR 49 (SC), third party statement cannot be considered as evidence so as to confirm the addition in the hands of the assessee unless there is corroborative material. In view of this, we are of the opinion that the addition made towards alleged understatement of sale value is not warranted.

2.6 In this case, there is no evidence available on record that the assessee has paid on-money, on the basis of which the assessing officer has quantified the on-money payment, he cannot make the impugned addition. The evidence brought on record is having no direct link to suggest that the amount deposited in the vendor’s Bank account was by the present assessee towards payment of on-money and merely on the basis of the fact that the vendor had accepted the payment of on-money, no addition is to be made. In our opinion, as held by the Madras High Court in the case of CIT v. Kalyanasundaram (supra), the burden of proof in this kind of transaction was that of the Revenue. The same view was taken by the Supreme Court in the case of K.P. Varghese v. ITO (1981) 131 ITR 597 (SC). The question in the present appeal is squarely covered by the decision of the Kerala High Court in the case of CIT v. Smt. K.C. Agnes & Ors. (2003) 262 ITR 354 (Ker), wherein the High Court held that when a document shows fixed price, there will be a presumption that, that is correct price agreed upon by the parties. It is not necessary that the price stated in the agreement will be the price shown in the sale deed. Sometimes, it may be higher and sometimes it may be lower. Sometimes, intentionally a lesser value may be shown in the sale deed. Even if it is assumed to be so, unless it is proved that the agreement was acted upon and unless the amount stated in the agreement was paid for sale, the court cannot come to the conclusion that the price mentioned in the sale deed is not correct. In this case, appeal of the Revenue was dismissed. It is seen that the High Court has gone a step ahead and even considered the existence of both the agreement to sell and the sale deed and upheld the validity and sanctity of the sale deed. In the present case, since the assessing officer has failed to prove the payment of on-money by bringing on any direct evidence, we are not in a position to sustain the addition. Hence, we delete the addition of Rs. 4,03,600. Thus, this ground of appeal of the assessee is allowed.

3. Ground No. 2 is with regard to disallowance of entire expenditure claimed against professional receipts as a result of changing head of income from business or profession to income from other sources.

3.1 The facts of the case are that during the year, the assessee had received an amount of Rs. 1,00,000 per month between the period from July 2006 to June, 2009 from M/s. Rosy Blue (India) Pvt. Ltd. and Rs. 50,000 from Aerena Gold Souk International. The assessing officer found that the nature of receipts from M/s. Rosy Blue (India) Pvt. Ltd., which was claimed as professional receipts in the books of the assessee, were actually not in the nature of professional receipts because the entire amount was received without providing any professional services. Accordingly, the receipt was treated as income from other sources and thus, as per section 57 the expenses claimed against income from profession and debited to P&L account was disallowed. The assessing officer disallowed the expenditure on the basis of the sworn statement recorded under section 131 of the Act of Shri Russel Mehta, M.D. of M/s. Rosy Blue (India) Pvt. Ltd. which was engaged in diamond merchandise and based in Bombay, that no meaningful services were rendered by the assessee and as such, the payments were made not for any professional services rendered. As per the statement of M.D. of M/s. Rosy Blue (India) Pvt. Ltd., the assessing officer found that assessee had not rendered any services to the said company, not only in Kerala but anywhere in India. Accordingly, he considered the receipts from M/s. Rosy Blue (India) Pvt. Ltd. as income from other sources. Consequently, he disallowed the expenditure as incurred to earn this income.

3.3 Against this the assessee is in appeal before us. The learned AR submitted that the assessee was engaged in legal consultancy on retainer-ship basis with M/s. Rosy Blue (India) Pvt. Ltd. by virtue of an agreement with them and had returned such income under the head income from business or profession. The learned AR submitted that the receipt of payment from the company was as per the agreement, and the company while making the payment had deducted tax under section 194J and had issued Form 16A. According to the learned AR, the company did not seek any advice or entrusted any assignment, hence no service was provided, but that does not change the character of the agreement and nature of payment. The assessee received the fee as per the contract and he is supposed to make himself available whenever the company asks for, which is also part of the service. Further, the learned AR submitted that in such a situation, the assessee’s income cannot be treated as income from other sources because they have to maintain an office and necessary set up for being a qualified advocate. According to the learned AR, the major expenses claimed was interest on loan and depreciation along with other establishment costs.

3.4 On the other hand, the learned DR submitted that the assessee and his wife Smt. K.B. Sony were engaged by M/s. Rosy Blue (India) Pvt. Ltd. on retainer-ship basis and on monthly payment basis. The learned DR submitted that no services for the whole period of engagement from July, 2006 to June, 2009 were availed for legal consultancy by M/s. Rosy Blue (India) Pvt. Ltd. neither they had any business interest in the State of Kerala. In such a situation, the learned DR submitted that the assessee should have produced the details of bills raised on their client for the services rendered for them, but no such details of bills raised or the vouchers for related expenses were maintained or produced before the assessing officer or during the appellate proceedings. Moreover, according to the learned DR, no professional receipts were shown over and above the amount of fees received on account of retainer-hip. Hence, it was submitted that since the assessee could not produce the details related to the services rendered to the clients, the assessing officer had rightly treated the professional receipts as income from other sources which was confirmed by the Commissioner (Appeals).

3.5 We have heard the rival contentions and perused the record. Admittedly, in this case, the assessee entered into an agreement on 1-7-2006 as a retainer to advise M/s. Rosy Blue (India) Pvt. Ltd. on legal matters. As per this agreement, the assessee was paid by M/s. Rosy Blue (India) Pvt. Ltd. at the rate of Rs. 1 lakh each per month. The assessing officer has not doubted this agreement. The only contention of the assessing officer is that the assessee has not rendered services to M/s. Rosy Blue (India) Pvt. Ltd. The assessee has also not disputed this fact. The payment has been made to the assessee on the basis of valid agreement. Even if it is assumed that no service was rendered, unless it is proved that the agreement was not acted upon, we cannot come to the conclusion that this agreement is only a make believe story or self serving document. The assessing officer in the present case has not doubted the agreement. Being so, the assessing officer is precluded from changing the head of income from profession to the head of income from other sources. Further, in our opinion, for allowing the expenditure, the assessee has to fulfil the following conditions:

(i) The expenditure should not be of nature of capital expenditure.

(ii) It should not be a personal expenditure.

(iii) The expenditure must be laid out or expended wholly and exclusively for the purpose of business or profession of the assessee.

3.6 Now we will examine whether the assessee has fulfilled the above requirements. We have carefully gone through the provisions of section 30 to 36 of the Income Tax Act. Section 30 relates to the allowability of payment like rent, rates, taxes, repairs and insurance for the premises used for the purpose of business or profession. Section 31 relates to allowability of repairs and insurance in respect of machinery, plant and furniture used for the purpose of business. Similarly, section 32 relates to allowability of depreciation on assets used in business. In the same way, while section 32A relates to investment allowance, section 32AB relates to investment deposit account. Section 32AC deals with investment in new plant or machinery. Section 32AD deals with investment in new plant or machinery in notified backward areas in certain States. Section 33 deals with development rebate, while section 33A deals with development allowance. Similarly, section 33AB deals with tea development account, coffee development, rubber development account, as against section 33ABA which relates to site restoration fund. Similarly, 33AC deals with reserves for shipping business. Section 33B relates to rehabilitation allowance and section 34 deals with conditions for depreciation allowance and development rebate. Section 34A deals with restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies. Section 35 deals with expenditure on scientific research, section 35A deals with expenditure on acquisition of patent right or copy right. Section 35AB deals with expenditure on know-how. Section 35ABB deals with expenditure for obtaining licence to operate telecommunication services. Section 35AC deals with expenditure on eligible project. Section 35AD deals with deduction in respect of expenditure on specified business. Section 35B deals with export market development allowance. Section 35C deals with agricultural development allowance. Section 35CC deals with rural development allowance. Section 35CCA deals with expenditure by way of payment to association and institutions for carrying out rural development programmes. Section 35CCB deals with expenditure by way of payment to associations and institutions for carrying out programmes of conservation of natural resources. Section 35D deals with amortization of certain preliminary expenses and 35DD deals with amortization of expenditure in case of amalgamation or de-merger. Section 35DDA deals with amortization of expenditure incurred under voluntary retirement scheme. Section 35E deals with deduction for expenditure on prospecting etc. for certain minerals. Section 36 deals with other deduction in respect of premium paid, interest etc.

3.7 In the present case, there is no allegation by the assessing officer that the assessee has not incurred any expenditure. The only allegation is that the assessee has not rendered any services to M/s. Rosy Blue (India) Pvt. Ltd. In our opinion when there is a valid agreement to render the services as a retainer and the assessee being an advocate, maintains office for the purpose of his profession, the assessing officer is not justified in disallowing the expenditure on the reason of non rendering of services to a particular client. In our opinion when the assessee made himself ready to be available to the client and the client has not availed his services as a retainer, we do not find fault with the assessee so as to disallow the expenditure incurred by the assessee. In our opinion, the assessing officer did not allow the expenditure only on the presumption that the assessee has not rendered the services though the assessee has kept himself ready to render the services. In assessment year 2009-10 and 2010-11, there is no such disallowance. In view of this, we are not in agreement with the findings of the lower authorities. We direct the assessing officer to allow the above expenditure incurred by the assessee. Hence, this ground of appeal is allowed.

4. The next ground, Ground No. 3 is with regard to deposit of Rs. 2 lakhs in the assessee’s Bank account.

4.1 Though the assessee has taken the plea that it has received the amount from relatives, he failed to furnish the confirmation letter from the related parties. Hence, it was considered as the income of the assessee by the assessing officer.

4.2 Against this, the assessee is in appeal before us. The learned AR submitted that the said amount of Rs. 2 lakhs was credited in the assessee’s savings account with ICICI Bank Ltd., Edapally Branch on 19-10-2006 as follows:

a. Rs. 1,00,000 was credited on 19-10-2006 under Reference No.215151 from Syndicate Bank, Kochi.

b. Rs. 1,00,000 was credited on 19-10-2006 under Reference No.32105 from SBT, Kochi.

According to the learned AR, these amounts were loans from relatives and were utilized to make payments to M/s. Empire Builders towards office building. Since these amounts have been credited to assessee’s Bank account by transfer from other bank accounts, it was not correct in law to treat it as unexplained credit.

4.3 The Commissioner (Appeals) observed that the assessee has, other than showing that the amount of Rs. 1 lakh each, credited in the assessee S.B. account with ICICI Bank Ltd., Edapally Branch on 19-10-2006, has not furnished any other evidence to establish either the identity of the person or the creditworthiness or the particulars like PAN Number or IT return filed. In view of this, Commissioner (Appeals) upheld the addition made by the assessing officer on this count.

4.4 We have heard the rival contentions and perused the record. Before us also, the assessee was not able to prove the identity as well as the creditworthiness of the creditors. Hence, we do not find any infirmity in the finding of the Commissioner (Appeals) and confirm it. This ground of appeal of the assessee is rejected.

5. The next ground, Ground No. 4 is with regard to cash gifts received from relatives of Rs. 7,50,000.

5.1 The facts of the case are that the assessing officer found that in the cash flow statement, apart from Rs. 2,50,000 which represents the opening balance, another amount of Rs. 5,00,000 was received as cash gift from the relatives. Apart from the withdrawals from the bank account Rs. 3,23,500 everything was received as gift. The assessing officer noticed that the assessee did not have any details to prove the source of the gift. Hence, the assessing officer treated the unexplained cash gifts from the relatives as unexplained income of the assessee.

5.2 On appeal, the Commissioner (Appeals) observed that the veracity of the total amount of Rs. 7,50,000 consisting of Rs. 2,50,000 as opening cash balance in the cash flow statement, could not be established by the assessee. The Commissioner (Appeals) further observed that no details were submitted by the assessee with regard to the amount of Rs. 5,00,000 as cash gifts received from relatives. The Commissioner (Appeals) found that the assessee failed to establish the identity of the person by way of particulars of IT return etc. Hence, the Commissioner (Appeals) upheld the addition made by the assessing officer as unexplained income of the assessee.

5.3 Against this, the assessee is in appeal before us. The learned AR submitted that the assessee and his wife returned from London in March 2006 with an intention to set up practice in Law in Cochin. It was submitted that the relatives of the assessee and his wife gifted some money for the purpose and in addition to the gifts received, they had cash balance with them brought in foreign currency of 1000 pounds and exchanged for Indian currency at the airport. The learned AR submitted that it was clearly mentioned in the cash flow statement that cash gifts were received from relatives at the time of opening of the office. Hence, it was submitted that the addition of Rs. 7,50,000 as unexplained income may be deleted.

5.4 On the other hand, the learned DR relied on the orders of the lower authorities.

5.5 We have heard the rival contentions and perused the record. In the cash flow statement, there was an amount of Rs. 2.5 lakhs which is the opening balance and this credit was not emanating in the assessment year under consideration. As it is carried forward from earlier assessment years, it cannot be considered as unexplained credit in the assessment year under consideration. Hence, to that extent, the addition cannot be made in this assessment year. However, the balance Rs. 5 lakhs represents the cash gifts received by the assessee in the assessment year under consideration for which the assessee has not given any details to prove the identity of the party from whom it was received. Further, the genuineness of the transactions is not established. Hence, we have no hesitation in confirming the addition to the extent of Rs. 5 lakhs which is fresh entry in the assessment year under consideration. Accordingly, this ground of appeal of the assessee is partly allowed. Thus, the appeal of the assessee in ITA No. 383/Coch/2015 is partly allowed.

ITA No. 384/Coch/2015

6. The first ground, Ground No. 1 is with regard to addition of investment in purchase of property at Varapuzha at Rs. 4,82,500.

6.1 The facts of the case are that the assessee had purchased land admeasuring 36.1 cents in Varapuzha from Shri Linjo Joseph on 08/04/2008 at a documented price of Rs. 7,27,000. Mr. Linjo Joseph on oath had admitted to have received Rs. 16,92,000 in cash for this transaction. On the assessee’s request the assessing officer allowed cross examination of Shri Linjo Joseph and, he has confirmed his earlier statement. The assessing officer rejected the explanation of the assessee that Shri Linjo Joseph was not able to produce any documentary evidence and accordingly, 50% of this land value was added in the hands of the assessee as unexplained investment of the assessee at Rs. 8,46,000 under section 69 of the Act, while the remaining 50% was considered in the hands of the assessee’s wife.

6.3 On appeal, the Commissioner (Appeals) observed that the statement given under oath is an admissible evidence and further, the assessee was allowed opportunity to cross examine Shri Linjo Joseph who has maintained the same stand in his recorded statement. As such, the evidentiary value of this statement cannot be denied. As regards the payment of Rs. 7,27,000, the Commissioner (Appeals) observed that the same is to be deducted from the full consideration of Rs. 16,92,000. According to the Commissioner (Appeals), the assessee had paid only Rs. 9,65,000 only, as over and above the documented consideration. Hence, the Commissioner (Appeals) treated the unexplained investment only up to the extent of Rs. 4,82,500 each, in the hands of the assessee as well as his wife. Accordingly, the Commissioner (Appeals) modified the addition to this extent.

6.4 Against this the assessee is in appeal before us. The learned AR submitted that the assessing officer made this addition only on the basis of statement made by the seller, Shri Linjo Joseph during the cross examination that he had filed the return of income but no proof was furnished on request to make this addition, while the assessee had produced the original documents. The learned AR submitted that the land was not subjected to valuation and argued that the value as per the registered valuer could only be adopted. The learned AR submitted that a sum of Rs. 7,27,000 was shown in the books of his wife as cost of the land and therefore, this has to be deducted to arrive at the unexplained investment.

6.4.1 We have heard the rival contentions and perused the record. As discussed in the appeal in ITA No. 383/Coch/2015 for the assessment year 2007-08 in para nos. 2.5 and 2.6, we are inclined to delete the addition on the same lines. Hence, this ground of appeal of the assessee is allowed.

6.5 The next ground, Ground No.2 is with regard to sustenance of addition towards investment in properties at Annamanada at Rs. 50 lakhs..

6.6 The facts of the case are that the assessee had purchased land admeasuring 279.52 cents of land at Annamanada on 13-11-2008 at a consideration of Rs. 14,00,000 from the seller, Shri K.A.M. Iqbal Mather. However, it was noticed by the assessing officer that Shri Mather in his sworn statement stated that the actual consideration was Rs. 1,14,00,000 and the entire amount was paid in cash and not recorded in the books of account.

6.7 On appeal, the Commissioner (Appeals) observed that Rs. 14,00,000 was paid by the assessee and his wife and the same deserves to be reduced from the total consideration of Rs. 1,14,00,000 However, for the balance amount of Rs. 1,00,00,000, the Commissioner (Appeals) held that the same is to be treated as the amount paid in cash towards investment in land for which the assessing officer had relied on the sworn statement of Shri K.A.M. Iqbal Mather. The Commissioner (Appeals) observed that in most of the cases, the sellers have admitted to have received the amount of consideration in the sworn statement and later on, filed return of income, showing the same amount. In such a situation, the Commissioner (Appeals) concluded that the evidentiary value of the sworn statement of the seller cannot be disputed by the assessee on subjective arguments. In view of this, the Commissioner (Appeals) held that excess consideration, after considering the actual cost of Rs. 14 lakhs shown by the assessee and his wife was Rs. 1 crore out of which 50% of the sum was treated in the hands of the assessee. Accordingly, the Commissioner (Appeals) upheld the addition to the extent of Rs. 50 lakhs, being consideration paid in cash for the purchase of the land as unexplained investment of the assessee.

6.8 Against this, the assessee is in appeal before us. The learned AR submitted that by simply relying on the statement of Shri K.A.M. Iqbal Mather, the assessing officer had taken the cost of land as Rs. 1,14,00,000 and had added the said amount under section 69 of the Act. The learned AR submitted that Shri K.A.M. Iqbal Mather did not present himself for cross examination before the assessing officer. The learned AR submitted that the DVO valued the land. The value disclosed by the assessee for the land was Rs. 89,34,000. The learned AR submitted that for arriving at the above figure, the DVO had taken values of 5 properties varying from Rs. 5,709 to Rs. 1,93,543 per cent as shown below and averaged it. It was submitted that the DVO did not consider the nature of land, road proximity, whether with house or not etc. It was submitted that the land valued at Rs. 1,93,543 per cent and the valued at Rs. 99,310 per cent are with houses and having PWD roads on one side. Thus the cost of 279.52 comes to Rs. 29,10,642 per cent.

The learned AR submitted that the value of Rs. 14,00,000 as per registered document was recorded in the assessee’s books of account. Therefore, it was pleaded that the addition may be deleted. The learned AR relied on the judgment of the High Court of Karnataka in the case of S.S. Jyothi Prakash v. Addl. CIT (2016) 240 Taxman 741 (Karn) wherein it was held that mere report of DVO cannot form the sole basis to make addition. On the other hand, the learned DR relied on the orders of the lower authorities.

6.9 We have heard the rival submissions and perused the record. The assessing officer while arriving at the fair market value of the impugned land, considered the average value of six properties mention in the earlier para. In our opinion, the property bearing Document No. 1755/08 is a small plot with asphalted roads. This property is in a better position and the value of this property cannot be compared with the value of the impugned property of the assessee. Further, the property in Document No. 1985/109 mentioned earlier, is a small plot with house and asphalted roads. This property also cannot be compared with the impugned property of the assessee. Being so, these two properties are to be taken out from comparison. The remaining four properties are to be considered to arrive at the fair market value of the property. For this purpose, we remit this issue to the file of the assessing officer to re-calculate the value of the assessee’s property on the basis of average value of the property in Document Nos. 1142/07, 3311/06, 129/08 and 1716/09. Thus, this ground of appeal of the assessee is partly allowed for statistical purposes. Hence, the appeal of the assessee in ITA No. 384/Coch/2015 is partly allowed for statistical purposes.

ITA No. 385/Coch/2015

7. The first ground, Ground No. 1 is with regard to addition of unexplained investment in purchase of land at Keethi Nagar at Rs. 91,50,000.

7.1 The facts of the case are that the assessee had purchased land admeasuring 29.6 cents of land in Keerthi Nagar from Dr. K.K. Dandapani vide Document No. 1220/09 dated 5-6-2009 for a sum of Rs. 30,00,000. However, it was noticed that Shri Dandapani in the sworn statement stated that the total consideration of land received was Rs. 213 lakhs and the amount was received in cash. Shri Dandapani was cross examined by the assessing officer and he had taken the same stand as it was recorded in the sworn statement in respect of the total sale consideration received at Rs. 213 lakhs as against the documented sale consideration at Rs. 30 lakhs. Accordingly, the assessing officer added 50% of the land value in the hands of the assessee as unexplained investment under section 69 of the Act.

7.2 The Commissioner (Appeals) observed that even after the opportunity of cross examination, the seller had continued with the same stand. The Commissioner (Appeals) found that the Shri Dandapani had already filed the return of income on 20-1-2014 wherein the computation of capital gains, the sale consideration was shown as Rs. 2.13 crores. According to the Commissioner (Appeals) in a case where there is a sworn statement of the seller that the actual consideration received on sale of land is at Rs. 2.13 crores which been shown in his return of income, it is established beyond doubt that the actual sale consideration was at Rs. 213 lakhs which is over and above the amount of documented sale consideration of Rs. 30 lakhs. According to the Commissioner (Appeals), even the notice received from the District Collector for suppression of stamp duty indicated that the documented value is not the true value. Therefore, the Commissioner (Appeals) held the inference derived by the assessing officer as correct and proper. However, since the assessing officer had made addition of Rs. 1,06,50,000 without deducting the documented sale consideration of Rs. 30 lakhs, which was paid by the assessee and his wife as cost of acquisition, the Commissioner (Appeals) allowed deduction of Rs. 15 lakhs each in the hands of the assessee and his wife. Thus the Commissioner (Appeals) restricted the addition made by the assessing officer to Rs. 91,50,000.

7.3 Against this, the assessee is in appeal before us. The learned AR submitted that by simply relying on the sworn statement of Dr. K.K. Dandapani, the assessing officer had taken the cost of land at Rs. 2,13,00,000 and added the said amount as unexplained investment under section 69 of the Act. The learned AR submitted that no evidence other than the sworn statement made by the Shri Dandapani was adduced from Shri Dandapani at the time of cross examination by the assessing officer and he stated that he had not received any notice from the Income Tax Department. The learned AR submitted that the Department’s stand that the assessee and his wife had paid Rs. 2.13 crores for buying 29.6 cents of land from Shri Dandapani which is at the rate of Rs. 7.5 lakhs per cent is incorrect. According to him, the transaction was for Rs. 1 lakh per cent. It was submitted that the assessee had received a notice in Form II and a reference in Form 1A from District Collector that the assessee had undervalued the property for registration and issued notice to the assessee stating that the value of property was Rs. 1.5 lakhs and not Rs. 1 lakh. The learned AR submitted that the sale of land was on 4.4.2008 and consideration was for Rs. 4,97,000 at the rate of Rs. 82,68d2 per cent. Moreover, it was submitted that the land was not subjected to valuation by DVO, only the building under construction was subjected to valuation. The learned AR further submitted that the amount of Rs. 30,00,000 as per registered document was recorded in the assessee’s and his wife’s books of account at Rs. 15,00,000 each towards cost of acquisition. Hence, it was pleaded that the value as per registered document should be adopted and accordingly, the addition may be deleted.

7.4 The learned DR relied on the orders of the lower authorities.

7.5 We have heard the rival submissions and perused the record. As discussed in the appeal of the assessee in ITA No. 383/Coch/2015 in para nos. 2.5 and 2.6 of this order, we are inclined to delete the addition on the reason that the addition is based on the statement of Dr. K.K. Dandapani who is the seller of the property and the statement is not supported by any independent corroborative material. Hence, this ground of appeal of the assessee is allowed. The appeal of the assessee in ITA No. 385/Coch/2015 is allowed.

8. The next ground, Ground No. 2 is with regard to addition of unexplained investment in construction of building at Annamanada at Rs. 26,33,926.

8.1 The facts of the case are that the assessee had purchased land at Annamanada. The land was surveyed by Remote sensing data of satellite which gave a clear indication that in November 2009, construction of a new building was already started and in progress. This land and building was valued by the DVO and vide his valuation report, the construction investment in that building was of Rs. 67,89,000 as on 27/03/2013. It was found that the assessee had not obtained building permit from the local authority and hence, the assessing officer held that by November 2009, 50% construction was already completed. Accordingly, the assessing officer treated the amount as unexplained investment made by the assessee.

8.2 The Commissioner (Appeals) observed that 50% construction was already completed by November, 2009. The DVO had valued the construction cost at Rs. 67,89,000. According to the Commissioner (Appeals) the entire construction was in a single storey house with tiles. According to the Commissioner (Appeals), the value shown as on 31-3-2010 was Rs. 7,60,574 and as on 31/03/2011 was Rs. 33,94,868. According to the Commissioner (Appeals), the assessee had raised objections which contained issues like the construction cost per sq. meter for the building front portion is taken @ Rs. 13,422 per sq. mtr. While as the cost of construction for front portion of Keerthi Nagar building is taken at Rs. 10,250 per sq. mtr. The second objection of the assessee, according to the Commissioner (Appeals) was that the valuer had taken 15% extra on main building front and had further added extra for services like plumbing and sanitary and electrification. The Commissioner (Appeals) observed that the DVO is a technical wing and competent to evaluate the cost of construction which is based on their own parameters and the assessee cannot claim that the two properties at two different places should have the same rate for the front construction. The Commissioner (Appeals) observed that so far as the rate for front portion of the two buildings are concerned, the same cannot be one and if there is any difference, the assessee cannot have a claim that why the two rates were not considered as the same. In view of this, the Commissioner (Appeals) justified the valuation of the DVO. But as regards the addition, since the assessee had already shown the construction value of Rs. 7,60,574 as on 31-3-2010, the Commissioner (Appeals) restricted the same to Rs. 26,33,926 (33,94,000-7,60,574).

8.3 Against this, the assessee is in appeal before us. The learned AR submitted that the addition made by the assessing officer was without considering that Rs. 7,60,574 was spent by the assessee (3,24,526) and his wife (4,36,046) as per their books of account till 31-3-2010. The assessee raised following objections regarding the valuation of building at Annamanada before the assessing officer:

(i) In the valuation report, in Annexure 1, rate per sq.mtr for construction of main building front portion (156 sq. mtr.) is taken @ Rs. 13,422 per sq. mtr. This is high pitched when it is compared with the rate per square meter for front portion of Keerthi Nagar building which is taken at Rs. 10,250 per sq. mtr. Moreover rear portion of Annamanada building (55.87 sq. mtr.) is valued at Rs. 13,422 sq. mtr. while bed rooms, family living, store etc. at Keerthi Nagar are valued @ Rs. 9,965 per sq. mtr. Annamanada building is in Kadukutty Panchayat in Trichur District while Keerthi Nagar building is in Cochin Corporation. Excessive value taken by valuer thus is Rs. 6,72,051.

(ii) Even after valuing the main building Front and Rear of 219.05 sq. mtr. (156 + 55,875 @ Rs. 13422 per sq. mtr. Valuer has again added extra Rs. 2400 per sq. mtr. for flooring area of 211.87 sq. mtr. is Rs. 5,08,488. Again he has added 15% extra on main building front and rear cost amounting to 4,42,013 ,which is unheard of. Thus he has added Rs. 9,49,501 (506488 + 441013 ) nah kd was 7.2 written submissions.

(iii) Valuer has also added extra for service viz. plumbing and sanitary and electrification which is usually included in the per sq. mtr. rate. He has thus added Rs. 9,81,914 towards this.

(iv) In addition, valuer has also added Rs. 10,29,220 to extra items out of which 90% is usually get included in per sq. mtr. rate.

Thus it was submitted that the building valuation was high pitched and excessive and was against normal standards. If this excess addition of Rs. 36,32,686 (6,72,051 + 9,49,501 + 9,81,914 + 10,29,220) is removed from Rs. 67,89,000 value will come to Rs. 31,56,313. As per books of account assessee had spent Rs. 19,93,050 (excluding land cost) till 31-3-2011.

8.4. The learned DR relied on the orders of the authorities below.

8.5 We have heard the rival contentions and perused the record. The assessee had constructed a residential building at Annamanada which construction was spread over 33 months from 1-4-2009 t0 31-12-2011. The total cost incurred by the assessee upto 31-3-2011 was Rs. 3795868 and upto 31-3-2010 was Rs. 7,60,574. The assessing officer without rejecting the books of account, referred the matter to the DVO for estimating the cost of construction who has given the report, estimating the cost of construction at Rs. 67,89,000. The sole basis for addition was the DVO report. Before referring the matter to the DVO for valuation, it is incumbent upon the assessing officer to reject the books of account by noticing the defects in the books maintained by the assessee. In this case, there is no rejection of books of accounts by the assessing officer. Hence, in our opinion, referring the matter to the DVO for valuation of the property itself is bad in law. Even otherwise, the assessing officer has no other evidence than the DVO report. In our opinion, the DVO report cannot be the only basis for making the addition. More so, the DVO has applied Central PWD rates. When the property is situated in a mofussil area, the State PWD rates have to be applied. We place reliance on the judgment of the Madras High Court in the case of CIT v. Raja Varadarajan (1997) 224 ITR 9 (Mad). Hence, this ground of appeal of the assessee is allowed. Thus, the appeal of the assessee in ITA No. 385/Coch/2015 is allowed.

ITA No. 386/Coch/2015

9. The first ground is with regard to unexplained investment in purchase of land in the name of the assessee’s mother at Rs. 47 lakhs.

9.1 The facts of the case are that 3.5 cents of land adjacent to 30 cents of land owned by the assessee at Keerthi Nagar, Kochi was purchased from Sri K.V. Sohan in the name of the assessee’s mother, Smt. Vasu. The assessing officer noticed that the registered sale document showed the consideration at Rs. 15 lakhs and Rs. 5 lakhs was shown to be given by the assessee to his mother for purchasing this land. However, Shri Sohan, the seller when examined on oath on 29-12-2010, admitted to have received Rs. 62 lakhs as sale consideration and the entire amount of Rs. 62 lakhs was received in cash. The assessing officer noticed that the assessee had utilized the sale consideration for purchase of property at Alungal and Thallassery and also for renovating the house at Alungal and Thalassery. Thus, the assessing officer treated the entire consideration paid by the assessee as undisclosed investment of the assessee and assessed under section 69 of Income Tax Act. As the document was registered in the name of assessee’s mother, the assessment would be made in her name on substantive basis and protectively made in the case of the assessee. The Rs. 5 lakhs show in the cash flow statement was reduced from total consideration of Rs. 62 lakhs.

9.2 The Commissioner (Appeals) observed that the assessee’s mother had never been an assessee and had never filed the IT return. Further, it was noticed that she did not have any independent source of income. The Commissioner (Appeals) observed that it is only the assessee who stand as the key person in the purchase of land and suppression of the actual sale consideration can only be considered in the hands of the assessee. According to the Commissioner (Appeals), Shri K.V. Sohan had already deposed that the deal of the land was made between the assessee and the seller and he received Rs. 62 lakhs. However, the Commissioner (Appeals) observed that the assessee had shown only Rs. 15 lakhs as the purchase consideration. Hence the entire consideration of Rs. 15 lakhs paid as per the documented deed was deducted from Rs. 62 lakhs while considering the quantum of unexplained investment substantively in the hands of the assessee. Accordingly, the Commissioner (Appeals) held that the unexplained investment to the tune of Rs. 62 lakhs-Rs. 15 lakhs, i.e. Rs. 47 lakhs was made substantively in the hands of the assessee.

9.3 Against this, the assessee is in appeal before us. The learned AR submitted that the assessee had paid Rs. 5 lakhs to his mother as gift for the purchase of 3.5 cents of land at Keerthi Nagar from Shri K.V. Sohan for Rs. 15,00,000 and was reflected in his drawings. the drawings. The learned AR submitted that the assessee had produced a copy of the assessment order of K.V. Sohan for the assessment year 2011-12 dated 20-11-2013 wherein the sales consideration for the said land of 3.5 cents was shown in the order as only Rs. 15,00,000. The learned AR submitted that the assessee should not be assessed protectively and assessment may be made on his mother and his mother had paid Rs. 15,00,000 and got the sale deed registered.

9.4 The learned DR relied on the orders of the lower authorities.

9.5 We have heard the rival contentions and perused the record. The addition is made only on the basis of the statement of the seller, Shri K.V. Sohan. As we have already discussed in ITA No. 383/Coch/2015 for the assessment year 2007-08 in para nos. 2.5 and 2.6 of this order, the third party statement cannot be relied upon without any corroborative material. Hence, this ground of appeal of the assessee is allowed.

10. The next ground, Ground No. 2 is with regard to addition of Rs. 9 lakhs received from Shri C.P. Prakash as unexplained credits.

10.1 The facts are that during the year under consideration, the assessee and his wife had received the following credits in the book of account. The assessee on enquiry submitted that the same were received in the ICICI bank account and taken to the books:

Adv P.V. Sreenijin Rs. 4,50,000 on 7-12-2010

Adv. K.B. Sony Rs. 4,50,000 on 7-12-2010

Adv. P.V. Sreenijin Rs. 4,50,000 on 7-12-2010

The assessee submitted that the same is personal loan received from a friend Shri C.P. Prakash who is in abroad. The assessee was asked to prove the identity of the person, creditworthiness of the person and the genuineness of the transaction. The assessee had only given the name and address of the person. Even after repeated requests, the assessee was not able to establish the identity, creditworthiness and the genuineness of the transactions. Hence, the amount received from Shri C.P. Prakash was treated as unexplained credits and assessed under section 68 of the Act.

10.2 The Commissioner (Appeals) observed that no confirmation letter regarding the credits as interest free personal loans was filed by the assessee. Merely because the amount was credited to the assessee’s bank account, the assessee cannot discharge his onus to establish the identity, creditworthiness and genuineness of the credits. Even before the Commissioner (Appeals), the assessee failed to provide any evidence to have justified the genuineness of the credits. Accordingly, the Commissioner (Appeals) confirmed the addition made by the assessing officer under section 68 of the Act.

10.3 We have heard the rival submissions and perused the record. In the present case, the assessee has only furnished the name and address of the lender and stated that the lender, Shri C.P. Prakash who is abroad, has given the amount through banking channel. In our opinion, the assessee has not established the identity of the creditor, the capacity to advance the loan and the genuineness of the transaction. When these ingredients are not established, then the onus shifts to the Department. In such cases, the assessing officer is entitled to probe further into the matter and cause enquiry with regard to the material available to him to come to the conclusion and unbiased finding as to the genuineness of the transactions, though they should not reject without sufficient reasons. In the present case, on appreciation of the material facts on record, the lower authorities came to the conclusion that the assessee‘s explanation regarding the credit could not be accepted and we cannot disturb such finding as the assessee has not brought any fresh material on record before us. More so, mere furnishing of name and address of the lender would not amount to sufficient discharge of the burden placed upon the assessee under section 68 of the Act. This is because under section 68 of the Act, the assessee has to prove all the ingredients as mentioned earlier. When the identity of the creditor and the creditworthiness of the credits were not established, addition under section 68 of the Act is justified. This ground of appeal of the assessee is rejected.

11. The next ground is with regard to addition of Rs. 2,45,198 as agricultural income as undisclosed income.

11.1 The facts are that assessee claimed Rs. 2,45,198 as agricultural income. The assessing officer relied on Part-IV of the Finance Act which elaborates the rule for computation of net agricultural income. The relevant rules are reproduced below:

Agricultural income of the nature referred to in sub-clause (b) and sub clause(c) of clause (1A) of section 2 of the income Tax Act other than derived from any building required as a dwelling house by the receiver of the rent or revenue of the cultivator or the receiver of rent-in-kind to in the said sub-clause (c) shall be computed as if it were income chargeable income tax under the head ‘Profits and gains of business or profession’ and the provisions of section 30, 31, 32, 36, 37, 38, 40, 40A (other than sub-section (3) and (4) thereof) 41, 43, 43A, 43B and 43C of the Income Tax Act shall so far as may be, apply accordingly.

Rule 6. Where the result of the computation for previous year in respect of any source of agricultural income is a loss, such loss shall be set off against the income of the assessee, if any, for that previous year from any source of agricultural income.

Rule 7. Any sum payable by the assessee on account of any tax levied by the State Government on the agricultural income shall be deducted in computing the agricultural income.

Rule 11. For the purpose of computing the net agricultural income of the assessee, the assessing officer shall have the same powers as he has under the Income Tax Act for the purpose of assessment of the total income.

According to the assessing officer as per the Finance Act assessee has to maintain the complete books of account, including the balance sheet, P&L a/c with all schedules and with complete evidence and net profit or the net loss shall be computed as in the case of business or profession. As the assessee had not kept any books of account for the agricultural operations and no evidence was produced for the income and expenditure, the assessing officer held that the said income cannot be taken as received from agriculture and the same was treated as undisclosed income of the assessee.

11.2 The Commissioner (Appeals) upheld the addition made by the assessing officer for want of any evidence supporting the income and expenditure.

11.3 Against this, the assessee is in appeal before us. The learned AR submitted that separate books for agricultural income is not required for small holdings as per Kerala Agricultural income Tax Act. The assessee had shown total agricultural receipts and expenses in his books of account which was produced before the assessing officer. written submissions.

11.4 The learned DR relied on the order of the lower authorities.

11.5 We have heard the rival submissions and perused the record. In the present case, the assessing officer has not doubted the owning of the agricultural land measuring 279 cents and the income from the same was shown by the assessee in his books of account. The contention of the learned AR is that no separate books of account are kept for agricultural income. In our opinion, a small farmer like the present assessee cannot be expected to maintain separate accounts for agricultural income as stated by the assessing officer. Since the assessing officer has not doubted the owning of the agricultural land and raising of crops, it is appropriate to estimate the income from such agricultural activities at Rs. 1,50,000 as against Rs. 2,45,198. Accordingly, this ground of appeal of the assessee is partly allowed. Hence, the appeal of the assessee in ITA No. 386/Coch/2015 is partly allowed.

ITA No. 374/Coch/2015 : Revenue’s Áppeal

12. The Revenue has raised the following grounds of appeal:

1. In view of the facts and circumstances of the case, the learned Commissioner (Appeals) erred in reducing the addition of R.1,14,00,000 on account of purchase of land at Annamanada to Rs. 50,00,000.

2. As the reduction was made on the ground that only 50% of Rs. 1,00,00,000 (Actual consideration-Document value) is to be assessed in the hands of the assessee. The learned Commissioner (Appeals) ought to have considered that the land was purchased only in the name of the assessee (not jointly with his wife, Smt. K.B. Sony). So the entire amount of Rs. 1 crore is the share of Shri P.V. Sreenijin and it should be assessed in his name.

12.1 After hearing both the parties, we are of the opinion that since we have allowed the appeal of the assessee in ITA No. 384/Coch/2015 in Ground No. 2 for the assessment year 2009-10 on the same issue, this ground raised by the Revenue has become infructuous and is dismissed as infructuous. Hence, the appeal of the Revenue in ITA No. 374/Coch/2015 is dismissed.

ITA Nos. 322 to 324/Coch/2015

13. These appeals filed by the assessee are emanating from different orders of the Commissioner passed under section 263 of the Income Tax Act for the assessment years 2008-09, 2009- 10 and 2010-11.

ITA No. 322/Coch/2015

13.1 The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2008-09 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) As per information available with the Department, it is seen that the assessee has purchased a land measuring 136 cents at Varapuzha during the financial year relevant to the assessment year 2008-09 and substantial amount was spent for the development of land. A perusal of the records shows that the assessing officer had not examined the expenses incurred for development of the land.

(ii) It is further noticed that personal expenditure, drawings etc. has not been examined by the assessing officer.

(iii) For earning professional income of Rs. 17,95,000 expenses claimed is Rs. 8,22,455. The assessing officer disallowed only Rs. 49,736 which is not reasonable.

(iv) The expenses incurred for Dubai trip in the case of the family members was omitted to be included in the assessment.

In the meantime, the assessee filed a writ petition before the High Court of Kerala challenging the notice issued under section 263 of the Income Tax Act. Since there was no stay of proceedings before the Commissioner by the High Court, the Commissioner after hearing the assessee, passed the order under section 263 of the Act by observing that the assessing officer has not considered the issue raised by him in the notice as stated in the earlier para and set aside the assessment order dated 31-3-2013 as it was found to be erroneous in so far as it was prejudicial to the interest of the Revenue and directed the assessing officer to pass fresh assessment order after proper verification and examination of relevant facts in accordance with law.

13.2 Against this, the assessee is in appeal before us. The learned AR submitted that the assessee has not purchased any land measuring 136 cents at Varapuzha during the financial year relevant to the assessment year 2008-09. As such the issue of development expenditure incurred for the land does not arise. The learned AR drew our attention to the Document Nos. 1552/2007 and 1553/2007 dated 7-3-2007 for the financial year 2006-07 relevant to the assessment year 2007-08 towards purchase of 134.75 cents of land at Alangad village which is placed at PB pg. Nos. 2-14 filed before us. He also submitted that the assessee purchased another land measuring 36.1 cents of land at Varapuzha on 8-4-2008 for the financial year 2008-09 relevant to the assessment year 2009-10 vide Document No. 2221 dated 8-4-2008, the English translation of which is placed at PB pg. nos. 20-23. This incurring of development expenditure on the land does not arise in this assessment year. Further, regarding the enquiry of personal expenditure, it was submitted before us that the assessee had filed the balance sheet for the period ending 31/03/2008 before the assessing officer and it cannot be questioned by the Commissioner under section 263 that there was no enquiry by the assessing officer. It was further submitted that the assessee also filed the details of drawings before the assessing officer. Regarding foreign travel, the learned AR submitted that the assessing officer made the addition of Rs. 60,000 after due verification and this was disputed by the assessee who went in appeal before the Commissioner (Appeals) and the Commissioner (Appeals) deleted the addition. Now the Commissioner cannot take up the issue which was the subject matter of appeal before the Commissioner (Appeals). The learned AR referred to section 263(1) and Explanation (c) of the Income Tax Act. Further, it was submitted that the assessee incurred an expenditure of Rs. 8,22,455 towards earning of professional income and out of this, the assessee himself disallowed Rs. 49,736. According to the learned AR, the reasonability of allowability of expenditure cannot be questioned without possession of any material in his hands to suggest disallowance of the same. According to him, the direction given by him was only a surmise and conjuncture and not based on any material in his hands. The finding of the Commissioner is only on the reason that he was not satisfied with the conclusion reached by the assessing officer by passing the impugned assessment order. The learned AR also relied on the following judgments:

(i) CIT v. Gabriel India Ltd. (1993) 203 ITR 108 (Bom)

(ii) Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83(SC)

13.3 The learned DR relied on the order of the Commissioner.

13.4 We have heard the rival submissions and perused the record. Para 9 In the present case, the assessment order was completed under section, 143(3) of the Act after due enquiries and after being satisfied with the explanations and information given by the assessee, the assessing officer has taken one possible view on the issue before him. The only allegation of the Commissioner is that the assessing officer should have made further enquiries rather than accepting the explanations given by the assessee. Therefore, it cannot be stated that it is a case of “lack of enquiry”. Further, the order of the Commissioner is also liable to be set aside for the simple reason that the Commissioner raised the issue with regard to incurring of development expenditure on the land at Varapuzha. As seen from the argument of the learned AR, the land at Varapuzha was purchased on 8-4-2008 relevant to the assessment year 2009-10. Another land in Alangad village was purchased on 7-3-2007 in the financial year 2006-07 relevant to the assessment year 2007-08. This fact is also fortified by the finding of the assessing officer in the giving effect order to the order passed under section 263 of the Act by the Commissioner. The assessing officer has mentioned in the order passed under section 143(3) read with section 147 read with section 263 of the Act dated 31-3-2016 as under

“The land development works at Varapuzha are seen related to assessment year 2010- 11 and will be assessed therein.”

13.5 Further, no new material has been brought on record by Commissioner to suggest that the assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue. Therefore, the jurisdiction under section 263 of the Act cannot be assumed. The assessing officer, after duly considering the explanations and information placed before him by the assessee and on being satisfied with the said explanation, chose not to make any further enquiry. Endless enquiry is not possible and it is for the assessing officer to decide when to end the enquiry. The Commissioner cannot transgress the jurisdiction under section 263 of the Act by stating that no proper enquiry was made by the assessing officer. Since there was no material brought on record to suggest the disallowance of various expenditure, the Commissioner is not justified in exercising his power under section 263 of the Income Tax Act. Further, the issue considered by the Commissioner with regard to foreign travel expenditure was the subject matter of appeal before the Commissioner (Appeals) and in view of section 263(1) and Explanation (c) of the Income Tax Act, the Commissioner cannot invoke the jurisdiction under section 263 of the Act. Regarding drawings also, all the material relating to the issue was available with the assessing officer and he has taken one possible view and in that view, the Commissioner cannot interfere with. It cannot be said that the assessing officer has taken the view in vacuum and it is a judicial view. The assessing officer being a quasi- judicial authority, has taken one possible view. The Commissioner has not agreed with that view, he wants to substitute his view without bringing in any new material to suggest disallowance of expenditure. In these circumstances, we are of the view that since the assessing officer has taken a judicial view consciously based on proper enquiry and appreciation of the relevant facts and legal aspects of the case, the judicial view taken by the assessing officer placed the matter outside the purview of section 263 of the Act. The Commissioner has not shown what kind of enquiry is to be made by the assessing officer so as to make the disallowance. Further, the loss of revenue as a consequence of the order by the assessing officer cannot be treated as erroneous or prejudicial to the interests of the Revenue so as to invoke the provisions of section 263 by the Commissioner. In our opinion, the Commissioner cannot assume jurisdiction under section 263 when the assessing officer has taken one possible view after considering the material available on record. Accordingly, we quash the order of the Commissioner passed under section 263 of the Income Tax Act. Hence, the appeal of the assessee in ITA No. 322/Coch/2015 is allowed.

ITA No. 323/Coch/2015

14. The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2009-10 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) As per information available with the Department, it is seen that the assessee has purchased a land at two places namely Varapuzha and Annamanada and has constructed buildings after developing the land and that substantial amount was spent for the development of the land and filling with earth and gravel etc. A perusal of the records shows that the assessing officer had not examined the expenditure for the land filling and development of the land at both places viz. Varapuzha and Annamanada.

(ii) Further, it is noticed that expenditure in respect of professional receipts from Rosy Blue and Amity Projects which has been earned without rendering meaningful service is not an allowable expenditure which had not been disallowed in the assessment. The personal expenditure and drawings had not been examined by the assessing officer.

14.1 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para Nos. 13.4 and 13.5 of this order, we are inclined to quash the order of the Commissioner passed under section 263 of the Act. Hence, the appeal of the assessee in ITA No. 323/Coch/2015 is allowed.

ITA No. 324/Coch/2015

15. The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2010-11 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) A perusal of the records shows that the assessing officer had not estimated the expenditure for land filling at two properties namely Annamanada property and Keerthynagar property and also not verified details of bank loans availed for construction of building at these properties.

(ii) In respect of the tournament conducted by the Football Club, the quantum of expenditure such as Coach’s salary, rent for the ground, expenses for travelling, food, etc. incurred by the assessee for sponsoring the tournament and its source had not been verified.

(iii) Personal expenditure in respect of visit with family to Malaysia for 4 days and Maldives had not been examined.

(iv) Agricultural income of Rs. 2,00,000 had not been considered in the computation of income.

15. As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para Nos. 13.4 and 13.5 of this order, we are inclined to quash the order of the Commissioner passed under section 263 of the Act. Hence, the appeal of the assessee in ITA No. 324/Coch/2015 is allowed.

ITA No. 319 to 321/Coch/2015 :Smt K.B. Sony

16. These appeals filed by the assessee are emanating from different orders of the Commissioner passed under section 263 of the Income Tax Act for the assessment years 2008-09, 2009- 10 and 2010-11.

ITA No. 319/Coch/2015

16.1 The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2008-09 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) A perusal of the records and information available with the Department, it is seen that substantial renovation work was undertaken in Flat No. 5 at Travancore Residency, Edapally owned by the assessee which is combined with Flat No. 4 owned by the assessee’s father during the period 2007-08. The records shows that the cost of renovation and alteration of flat at Travancore Residency had not been examined by the assessing officer.

(ii) It is further noticed that personal expenditure, drawings etc. had not been examined by the assessing officer. In the assessment of assessee’s spouse though it was mentioned that the expenditure regarding travel to Dubai would be treated separately in assessee’s hands, this aspect had not been considered in the assessment.

16.2 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para Nos. 13.4 and 13.5 of this order, we are inclined to quash the order of the Commissioner passed under section 263 of the Act. Hence, the appeal of the assessee in ITA No. 319/Coch/2015 is allowed.

ITA No. 320/Coch/2015

17. The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2009-10 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) A perusal of the records and information available with the Department, it is seen that assessee had purchased a property at Varapuzha and that substantial amount was spent for the development of the land. The records shows that assessing officer had not estimated the undisclosed expenditure on land filling at Varapuzha.

(ii) Further it is noticed that expenditure in respect of professional receipts from Rosy Blue and Amity Projects which has been earned without rendering meaningful service is not an allowable expenditure which had not been disallowed in the assessment. Further, personal expenditure and drawings had not been examined by the assessing officer.

17.1 As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para nos. 13.4 and 13.5 of this order, we are inclined to quash the order of the Commissioner passed under section 263 of the Act. Hence, the appeal of the assessee in ITA No. 320/Coch/2015 is allowed.

ITA No. 321/Coch/2015

18. The Commissioner (Appeals) had set aside the assessment order dated 31-3-2013 for the assessment year 2010-11 which was passed under section 143(3) read with section 148 of the Act by issuing notice under section 263 of the Act to the assessee by observing as follows:

(i) A perusal of the records and information available with the Department, it is seen that the assessing officer had not estimated the undisclosed expenditure of land filling at Varapuzha.

(ii) Personal expenditure in respect of visit to Malaysia for 4 days and visit to Maldives with family had not been examined.

18.1. As discussed in the earlier appeal in ITA No. 322/Coch/2015 in para Nos. 13.4 and 13.5 of this order, we are inclined to quash the order of the Commissioner passed under section 263 of the Act. Hence, the appeal of the assessee in ITA No. 321/Coch/2015 is allowed.

ITA Nos. 387 to 390/Coch/2015 : Smt. K.B. Sony

19. The first ground, Ground No. 1 in ITA No. 387/Coch/2015 is with regard to unexplained investment in purchase of flat at Travancore Residency for Rs. 4 lakhs.

19.1 The facts of the case are that the Smt. K.B. Sony purchased a flat at Travancore Residency on 12-3-2007 from Shri Martin Jose for which the documented value was shown at Rs. 6,81,050 However, the seller Shri Martin Jose in his sworn statement recorded on 1-7-2011 had admitted that the actual consideration received by him was Rs. 10,89,051. However, the seller Shri Martin Jose in his sworn statement recorded on 1-7-2011 had admitted that the actual consideration received by him was Rs. 10,89,051. The assessee was provided an opportunity to cross examine the seller Shri Martin Jose on 27-2-2013 and during the cross examination, he consistently maintained that the actual consideration received was Rs. 10 lakhs and not Rs. 6 lakhs. Based on the evidence taken from the seller for having received the actual consideration in cash, over and above the amount shown in the deed for registration, the assessing officer treated the sum of Rs. 4 lakhs as unexplained investment under section 69C and added to the total income of the assessee.

19.2 On appeal, the Commissioner (Appeals) observed that the assessee had argued that the statement given by Shri Martin Jose should not be treated as an evidence for taking the inference that excess unaccounted money was passed on to the seller for the purchase of the flat in Travancore Residency. According to the Commissioner (Appeals), Shri Martin Jose in his reply stated that he had not received any notice from the Income Tax Department regarding whether he had shown Rs. 10 lakhs as sale consideration in his income tax return for assessment year 2007-08, he had replied that he had shown Rs. 6 lakhs only in his return of income. The assessee raised the question that why proceedings against Shri Martin Jose were not initiated. The Commissioner (Appeals) found from the records called from the assessing officer that the assessment in the case of Martin Jose was completed under section 143(3) dated 6-1-2015 in which the statement of income showed the computation for long-term capital gain, were the sale consideration was shown at a sum of Rs. 10 lakhs. This fact clearly established that Martin Jose stood consistently with the same stand during the cross examination by the assessee and the same amount of consideration of Rs. 10 lakhs was found in the computation of income and based on that assessment was completed under section 143(3) of the Act. Hence the Commissioner (Appeals) observed that the evidentiary value of the statement of the seller, i.e. Shri Martin Jose could be accepted and upheld the addition made by the assessing officer under section 69C for the amount of surplus money paid for a sum of Rs. 4 lakhs for the purchase of the flat.

19.3 Against this, the assessee is in appeal before us. The learned AR submitted that the sworn statement of Shri Martin Jose should not be treated as evidence for making the addition of Rs. 4 lakhs as unexplained investment in the purchase of flat in Travancore Residency. The learned AR submitted that in the cross examination, Shri Martin Jose had stated that he had not received any notice from the Income Tax Department and in reply to the question whether he had shown Rs. 10 lakhs in his return of income, he replied that he had shown only Rs. 6 lakhs in his return of income. In view of this, the learned AR submitted that the addition of Rs. 4 lakhs may be deleted. The learned AR relied on the judgments as in the case of Shri P.V. Sreenijin for the assessment year 2007-08.

19.4 We have heard the rival submissions and perused the record. As discussed in ITA No. 383/Coch/2015 in para nos. 2.4 and 2.5 of this order for the assessment year 2007-08 in the case of Shri P.V. Sreenijin, the assessing officer made the addition only on the basis of statement of Shri Martin Jose recorded under section 131 of the act on 1-7-2011. Since there is no corroborative material to suggest on-money payment over and above the registered value and the addition is based only on the third party statement, we are inclined to delete the same. Hence, this ground of appeal is allowed.

20. The next ground, Ground No. 2 is with regard to disallowance of expenditure claimed against professional receipts as a result of changing head of income from business or profession to head of income from other sources. A similar issue was considered in the case of Shri P.V. Sreenijin in [ITA No. 383/Coch/2015] in para nos. 3.5 to 3.7 of this order for the assessment year 2007-08. As discussed in her husband’s case, the assessing officer in the present case has also not doubted the agreement entered with M/s. Rosy Blue (India) Pvt. Ltd. Being so, the assessing officer is precluded from changing the head of income from profession to the head of income from other sources. We direct the assessing officer to allow the above expenditure incurred by the assessee. Hence, this ground of appeal of the assessee is allowed.

21. The next ground, Ground No. 3 is with regard to value of motor car provided by M/s. Rosy Blue (India) Pvt. Ltd.

21.1 The facts of the case are that the assessee was provided a car in 2009 vide clause 2.3 of the Consultancy Agreement with M/s. Rosy Blue (India) Pvt. Ltd. The ambassador car was registered in the name of the assessee and the purchase consideration of Rs. 5,46,872 was paid by the company by demand draft. The assessing officer held that the assessee had not rendered any service to the said company and therefore, the amount provided by the company to buy the car which was subsequently registered in her name, is to be treated as receipt under income from other sources and the entire value of the car was assessed as income of the assessee.

21.2 On appeal, the Commissioner (Appeals) observed that the payment for buying car by M/s. Rosy Blue (India) Pvt. Ltd. has been made without having rendered any services. Hence, the Commissioner (Appeals) held that the purchase consideration of the car should be treated as direct benefit to the assessee which is taxable under section 56 of the Act. Accordingly, the Commissioner (Appeals) upheld the addition made by the assessing officer on this count.

21.3 The learned AR submitted that after the expiry of the consultancy agreement on 30-6-2009, the assessee had sold the car on 26-8-2009 for Rs. 2,90,000 The learned AR submitted that the assessee had asked the company whether she can adjust the amount towards retainership fee and on 31-5-2011, the company asked the assessee to send the sale proceeds to them. Consequently, the assessee’s husband Shri P.V. Sreenijin sent a cheque for Rs. 2,90,000 from his ICICI Bank Account No. 626401511572 to M/s. Rosy Blue (India) Pvt. Ltd. It was submitted that since the cost of the car was paid by the company and sale proceeds of the car was taken by the company, the addition of Rs. 5,48,513 made in the hands of the assessee, may be deleted.

21.4 The learned DR relied on the order of the lower authorities.

21.5 We have heard the rival contentions and perused the record. In this case the payment towards purchase of car was paid by M/s. Rosy Blue (India) Pvt. Ltd., though the registration was in the name of the assessee as per the valid agreement. On the basis of the agreement dated 30-6-2009, the assessee sold the car at Rs. 2,90,000 and the amount was repaid to M/s. Rose Blue India Pvt. Ltd. This fact was not at all disputed by the lower authorities. According to the learned DR, it is only a make believe arrangement. To say like this, the Department has no material in its possession. It is only a surmise and conjecture. By any stretch of imagination, it cannot be presumed that the assessee has routed her own money through M/s. Rosy Blue India Pvt. Ltd. In such circumstances, we are inclined to delete the addition. Hence, this ground of appeal of the assessee is allowed. Thus, the appeal of the assessee in ITA No. 387/coch/2015 is allowed.

ITA No. 388/Coch/2015

22. The Ground No. 1 is with regard to unexplained investment in the purchase of land at Varapuzha at Rs. 4,82,500.

22.1 The facts of the case are that the assessee alongwith her husband had purchased the land at Varappuzha as per document No. 2221/08 dated 8-4-2008 from Mr. Linjo Joseph and others for Rs. 7,27,000. The assessing officer had taken the sale consideration at Rs. 16,92,000 by relying on the sworn statement of the seller Shri Linjo Joseph. 50% of the sale consideration was treated in the hands of the assessee and 50% in the hands of her husband Shri P.V. Sreenijin.

22.2 We have heard the rival submissions and perused the record. A similar issue was considered by us in her husband’s case in ITA No. 384/Coch/2015 in para nos. 2.4 and 2.5 of this order for the assessment year 2009-10. Hence, we are inclined to delete the addition made by the assessing officer and confirmed by the Commissioner (Appeals) for similar reasons. This ground of appeal of the assessee is allowed. Thus, the appeal of the assessee in ITA No.388/Coch/2015 is allowed.

ITA No. 389/Coch/2015

23. Ground No. 1 in this appeal is with regard to sustenance of addition of Rs. 9.5 lakhs with regard to investment in purchase of land at Keerthi Nagar, Kaloor. A similar issue was considered in assessee’s husband’s case in ITA No. 385/Coch/2015 for the assessment year 2010-11 in para No. 7.5 of this order, wherein we have observed that addition cannot be made only on the basis of third part statement by placing reliance on the finding in para nos. 2.5 and 2.6 of this order in ITA No. 383/Coch/2015 we deleted the addition. Accordingly, the addition is deleted for this assessment year also. Hence, this ground of appeal of the assessee is allowed. Thus, the appeal of the assessee in ITA No. 389/Coch/2015 is allowed.

ITA No. 390/Coch/2015

24. The ground in this appeal is with regard to disallowance of depreciation on motor car at Rs. 2,22,644.

24.1 The facts of the case are that during the year the assessee had purchased a car and claimed depreciation at 50%. The assessee was requested to submit the explanation why the depreciation shall not be restricted to 15% as per the rule. The assessee has submitted the explanation as follows:–

“As per the Income Tax Rules, 1962 provide depreciation @ 50% for new commercial vehicle which is acquired on or after the first day of January, 2009 but before the first day of October, 2009 and is put to use before the first day of October, 2009 for the purpose of business or profession. Commercial vehicle includes light motor vehicle also. I have bought Corolla Altis on 4-9- 2009 and used it before first day of October 2009 for the purpose of my profession. So I claimed depreciation @ 50%.”

According to the assessing officer, 50% depreciation is available only for the commercial vehicles. The commercial vehicles are different from the personal vehicles which are meant for personal use. The State Government charges higher taxes on commercial vehicles and the Registration Certificate itself indicate whether the vehicle is registered as commercial vehicle or personal vehicle. The commercial vehicles include public utility vehicles and goods carriages whether it is in heavy vehicle category or light motor vehicle category. But the vehicle registered as non-commercial vehicle cannot be considered as commercial vehicle and the depreciation of 50% is not allowed for such vehicles. The assessee had submitted that the vehicle Corolla Altis is not registered as a taxi carrier. Therefore, it was clear that the assessee is not eligible for 50% depreciation and the excess depreciation claimed by the assessee was disallowed by the assessing officer and added to the total income of the assessee.

24.2. On appeal, the Commissioner (Appeals) observed that the assessee’s claim for depreciation on motor car, as per Note No. 6 to the Rules in Appendix-l, the word commercial vehicle has been defined under section 2(21) of the Motor Vehicle Act which includes light motor vehicles meant for transport vehicle or omni bus. The contention raised by the appellant for the claim of depreciation on the motor car is not correct because the car Corolla Altis would not come in the purview of the commercial vehicle which is meant to be transport vehicle or omni bus. Further, only because the unladen weight of Corolla Altis is 1160kg, which is within the weight prescribed in the definition for the light motor vehicle, which is included in the category of commercial vehicle, does not suffice the conditions for the assessee’s car to be categorized under light motor vehicle within the definition of the word commercial vehicle. In view of this, the claim for depreciation is found to be not a valid claim. Thus, the Commissioner (Appeals) upheld the disallowance made by the assessing officer.

24.3 The learned AR submitted that in the assessment order, the assessing officer had made an addition of 2,22,644 to the total income by holding that the assessee is not eligible for 50% depreciation on motor car and the excess depreciation claimed by the assessee was disallowed. The assessee had submitted as per the Income Tax Rules, 1962, in the Table to New Appendix 1, in Part -A relating to TANGIBLE ASSETS under heading III MACHINERY AND PLANT, in item (3), in sub-item (via) provides depreciation @ 50% for ‘New Commercial Vehicle which is acquired on or after the 1st day of January, 2009 but before the 1-10-2009 and is put to use before the 1-10-2009 for the purpose of business or profession’. Commercial vehicle includes light motor vehicle also. It was submitted that the assessee had bought Corolla Altis on 4-9-09 and used it before 1st day of October 2009 for the purpose of my profession. So heclaimed depreciation @ 50%. Therefore, it was clear that the assessee is entitled for depreciation @ 50% which was given as an incentive for a short period between 1-1-2009 to 01/04/2009 but the period was later on extended up to 1-10-2009. The learned AR submitted that the vehicle purchased by the assessee fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the definition of Commercial Vehicle. According to the learned AR, the Act has nowhere prescribed that a commercial vehicle should be a vehicle which is used for the purpose of hire. It only prescribes that the vehicle should be used for the purpose of business or profession. The learned AR submitted that the assessee is, therefore, entitled for the depreciation @50%. Hence it was prayed to drop the disallowance of excess depreciation claimed of Rs. 2,22 644.

24.3.1 The learned AR submitted that the assessing officer ‘s objection was that registration certificate itself indicate whether the vehicle is registered as commercial vehicle or personal vehicle. He was of the opinion that vehicle registered as non-commercial vehicle cannot be considered as commercial vehicle and depreciation @ 50% is not allowed for such vehicle. The assessing officer has taken the meaning of commercial vehicle in common parlance and has held that commercial vehicle is distinct and different from private vehicle and the vehicle used by the appellant is a private vehicle. It was submitted that as per Note No. 6 to the Rules in Appendix-1, the word commercial vehicle has been defined to include Light Motor Vehicle as defined by Motor Vehicle Act, 1988. Further, section 2(21) of the Motor Vehicle Act define the word Light Motor Vehicle as–

“Light Motor Vehicle means transport vehicle or omnibus. The gross vehicle weight of either of which or a Motor Car or a Tractor or road roller, the unladen weight of any of which does not exceed 7500 Kg.”

According to the learned AR, the unladen weight of Corolla Altis is 1160 Kg. The learned AR submitted that in point No. 5, assessing officer has disallowed the entire expenditure of Rs. 8,56,853 , which included depreciation on Motor Car at Rs. 3,18,064.50. Again assessing officer disallowed excess depreciation of Rs. 2,22,644 which was included in Rs. 3,18,064.50. Hence, addition of Rs. 2,22,644 may be deleted.

24.4 The learned AR submitted that in exercise of the powers conferred by section 295 of the Income tax Act, 1961 (43 of 1961) the CBDT made the following rules further to amend the Income-tax Rules, 1962, namely:–

“1. (1) these rules may be called the Income tax (Third Amendment) Rules, 2009.

(2) they shall come into force on the 1-4-2009.

In the Income tax rules, 1962, in the Table to New Appendix I, in part-A relating to Tangible assets, under the heading III. Machinery and PLANT, in item (3), after sub-item (vi) and entries relating thereto, the following shall be inserted, namely:–

“(via) New commercial vehicle which is acquired on or after the 1-1-2009 but before the 1-4-2009 and is put to use before the 1-4-2009 for the purposes of business or profession.”

24.5 We have heard the rival submissions and perused the record. It was submitted that the assessee is entitled for higher depreciation at 50% on the car in view of the Income Tax (Third amendment) Rules, 2009 wherein new commercial vehicle which is acquired on or after 1-10-2009 for the purpose of business or profession of the assessee is entitled for higher depreciation of 50% which is as follows:

“(via) New commercial vehicle which is acquired on or after the 1-1-2009 but before the 1-10-2009 and is put to use before the 1-10-2009 for the purposes of business or profession.”

The period of acquisition of commercial vehicle on or after 1-6-2009 or on or before October, 2009 was amended as per the amended provisions with effect from 1-4-2009. Being so, commercial vehicle purchased upto October, 2009 is entitled for higher depreciation. Hence, we direct the assessing officer to grant depreciation at the rate of 50% on the commercial vehicle acquired by the assessee. Thus, this ground of appeal of the assessee is allowed.

24.6 The next issue is with regard to addition made towards loan received from C.P. Prakash for Rs. 4,50,000. The assessee received loan from Shri C.P. Prakash on 2-12-2010 vide Cheque No. 392458 drawn for Rs. 4,50,000. Shri C.P. Prakash was an NRI working in Dubai. His address was only given to the assessing officer. However, the assessee was not able to substantiate the identity and capacity of the lender. The addition was sustained by the Commissioner (Appeals). Against this, the assessee is in appeal before us.

24.7 The learned AR submitted that the assessee received money from Shri C.P. Prakash vide Cheque No. 392458 drawn on State Bank of Travancore. Shri C.P. Prakash is an NRI, working in Dubai. The assessee furnished the address of Shri C.P. Prakash. The contention of the learned DR is that the assessee has not able to prove the ingredients of section 68 of the Income Tax Act.

24.8 We have heard the rival submissions and perused the record. As discussed in the appeal of the assessee in ITA No. 386/Coch/2015 in para No. 10.3 of this order, the addition is sustained as the assessee has not proved all the ingredients of section 68 of the Income Tax Act. This ground of appeal of the assessee is rejected. Thus, the appeal of the assessee in ITA No.390/Coch/2015 is partly allowed.

25. In the result,

(i) The appeal of the assessee in ITA No. 383/Coch/2015 is partly allowed.

(ii) The appeal of the assessee in ITA No. 384/Coch/2015 is partly allowed for statistical purposes.

(iii) The appeal of the assessee in ITA No. 385/Coch/2015 is allowed.

(iv) The appeal of the assessee in ITA No.386/Coch/2015 is partly allowed.

(v) The appeal of the Revenue in ITA No. 374/Coch/2015 is dismissed.

(vi) The appeals of the assessee in ITA Nos. 319 to 324/Coch/2015 are allowed.

(vii) The appeal of the assessee in ITA No. 387/Coch/2015 is allowed.

(viii) The appeal of the assessee in ITA No. 388/Coch/2015 is allowed.

(ix) The appeal of the assessee in ITA No. 389/Coch/2015 is allowed.

(x) The appeal of the assessee in ITA No.390/Coch/2015 is partly allowed.

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