Siva City Centre Private Limited, Guntur V. The Deputy Commissioner of Income Tax, Central Circle-2, , Guntur,

CO 77/VIZ/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1663 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 10-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D.K.SONOWAL
• Keywords: Unexplained cash credit; Unexplained investment; Value adopted by valuation officer; Capital asset; Period of limitation; Question of law; Valuation report; Validity of assessment; Time period of passing order
• Section: 68; 69; 6; 132; 144; 143(3); 153A; 201; 13; 22; 153C; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I .T.A.NO. 247/VIZ/2019 AND 248/VIZ/2019 ( / A . Y S : 2015 - 16 & 2016 - 17 RESPECTIVELY) DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 2 GUNTUR VS. M/S SIVA CITY CENTRE PVT. LTD. 7 TH LANE, CHANDRAMOULI NAGAR RING ROAD, GUNTUR [PAN : AAUCS6304E] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NO.76/VIZ/2019 AND 77/VIZ/2019 (ARISING OUT OF I.T.A.NO.247/VIZ/2019 AND 248/VIZ/2019) ( / A . Y S : 2015 - 16 & 2016 - 17 RESPECTIVELY) M/S SIVA CITY CENTRE PVT. LTD. 7 TH LANE, CHANDRAMOULI NAGAR RING ROAD, GUNTUR [PAN : AAUCS6304E] VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 2 GUNTUR ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : S HRI D.K.SONOWAL, CIT DR / ASSESSEE BY : SHRI G.V.N.HARI, AR / DATE OF HEARING : 08 . 08. 201 9 / DATE OF PRONOUNCEMENT : 06 .09. 201 9 2 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 3, VISAKHAPATNAM DATED 24.01.2019 FOR THE ASSESSMENT YEAR (A.Y.)2015 - 16 AND 2016 - 17 AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE. SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AS UNDER. 2. THE REVENUE HAS FILE D APPEAL IN FORM NO.36 ORIGINALLY AND SUBSEQUENTLY FILED REVISED FORM IN THE CORRECT FORMAT WHICH IS APPLICABLE AS PER THE AMENDED RULES. 3. A SEARCH U/S 132 WAS CONDUCTED ON 21.12.2015 IN THE GROUP CASES OF SRI ALLA SIVA REDDY, GUNTUR. DURING THE COURS E OF SEARCH, CERTAIN INCRIMINATING MATERIAL WAS AVAILABLE IN THE PREMISES OF THE SEARCHED PERSON, THEREFORE, THE ASSESSING OFFICER (AO) HAS ISSUED THE NOTICE U/S 153C OF THE ACT AND COMPLETED THE ASSESSMENT U/S143(3) R.W.S. 153C VIDE ORDER DATED 27.09.2018 . 3 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR 4. FOR THE A.Y. 2015 - 16, THE REVENUE HAS FILED AS MANY AS FIVE GROUNDS OF APPEAL. WE EXTRACT THE GROUNDS RAISED BY THE DEPARTMENT FOR THE SAKE OF CLARITY AND CONVENIENCE AS UNDER : 1 . THE ORDER OF THE LD . CIT(A) IS ERRONEOUS BOTH ON THE FACTS AND IN LAW. 2A. THE LD . CIT(A) OUGHT NOT HAVE CONCLUDED THAT ALLOTMENT OF SHARES BY WAY OF CONVERSION CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 6 8. 2B. THE LD.CIT(A) IS NOT CORRECT IN DELETING THE ADDITION MADE SINCE AS PER THE AMENDED PROVISIONS OF SEC8 OF THE ACT THROUGH FINANCE ACT, 2012, (PROVISO TO SEC. 68 OF I. T.ACT) THE NATURE AND SOURCE OF ANY SUM CREDITED AS SHARE CAPITAL IN THE BOOKS OF ACCOUNT OF A CLOSELY HELD COMPANY SHALL BE TREATED AS EXPLAINED ONLY IF THE SOURCES OF FUNDS ARE ALSO EXPLAINED BY TH E RECIPIENT ASSESSEE COMPANY IN THE HANDS OF THE RESIDENT SHARE HOLDER. IN THE INSTANT CASE, THE ASSESSEE - COMPANY COULD NOT EXPLAIN THE SOURCES TO THE INVESTMENT MADE BY CO - OWNERS OF L AND/DIRECTORS TO THE EXTENT OF RS2,38,17,377/ - . 2C. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE COMPANY IS A PVT. LTD COMPANY AND ISSUED SHARES TO ITS SHAREHOLDERS DURING THE YEAR UNDER CONSIDERATION, EVEN THOUGH THE INVESTMENT IN LAND AND BUILDING WAS EARLIER, THE SAID ASSETS WERE TRANSFERRED TO THE ASS ESSEE COMPANY IN LIEU OF SHARES ALLOTTED IN THE YEAR OF INCORPORATION I.E. ON 30 . 5 . 2014. HENCE, THE ASSESSEE COMPANY NEEDS TO EXPLAIN THE SOURCES FOR THE INVESTMENT IN THE HANDS OF THE SHAREHOLDERS. DESPITE OPPORTUNITIES PROVIDED. 5 OF THE DIRECTORS NEITH ER APPEARED NOR CONFIRMED THE SOURCE OF INVESTMENT OF RS.2,38,17,377/ - , 2D. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT IN THE PRESENT 4 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR CASE, THE CO - OWNERS OF THE LAND JOINTLY INVESTED IN THE PURCHASE OF LAND AND CONSTRUCTION THEREON AND TRANSFERRED TO THE ASSESSEE - COMPANY IN LIEU OF ISSUE OF SHARES SO THERE IS NEXUS BETWEEN INVESTMENT IN THE ASSETS AND TRANSFER OF ASSETS IN LIEU OF ALLOTMENT OF SHARES. 3A. THE LD CIT(A) IS NOT CORRECT IN HOLDING THAT THE ACTION OF THE AO RELYING ON THE VALUATION REPORT RECEIVED AFTER 6 MONTHS FROM THE END OF THE MONTH IN WHICH REFERENCE WAS MADE TO THE DVO, SINCE THE TIME HAS ELAPSED TO THE DVO FOR SUBMITTING REPORT. THE CI T ( A) OUGHT TO HAVE APPRECIATED THAT THE AO WILL GET FURTHER TIME OF 6 MONTHS FROM THE DATE OF RECEIPT OF VALUATION REPORT IF THE PROVISIONS OF SEC 142A(7) AND EXPLANATION 1(V) TO SECTION 153A ARE READ HARMONIOUSLY. THE VALUATION REPORT HAS BEEN RECEIVED B Y THE AO WITHIN THE TIME AVAILABLE TO HIM FOR COMPLETING THE ASSESSMENT. 3B. THE C I T(A) OUGHT TO HAVE APPRECIATED THAT THE TIME LIMIT OF 6 MONTHS IS ONLY AN OUTER LIMIT PRESCRIBED BY THE STATUTE FOR SUBMITTING, THE REPORT AND THAT THE SAID PROVISION DOES N OT DISQUALIFY THE CONTENTS OF THE VALUATION REPORT, IF RECEIVED BEYOND THAT DATE AND THEREFORE, THE FINDING OF THE CIT(A) IS NOT CORRECT IN TREATING THE DVO'S VALUATION REPORT AS NON - EST. 3C. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AO HAS NOT FULL Y RELIED UPON THE DVO'S VALUATION REPORT, BUT TAKEN IT AS A GUIDANCE DOCUMENT, COPY OF WHICH WAS SENT TO THE ASSESSEE OBJECTIONS WERE CALLED FOR AND CONSIDERED BY THE AO IN THE ASSESSMENT ORDER. THE FINDING OF THE C I T(A) THAT THE VALUATION REPORT IS NON - ES T AND THE ACTION OF THE AO THEREON CANNOT BE UPHELD IS CONTRARY TO THE LAW. 3D. THE LD.CIT(A) OUGHT NOT TO HAVE ALLOWED FURTHER ALLOWANCE OF 7.5% SELF - SUPERVISION SINCE THE DVO HAS ALREADY ALLOWED 7.5% ON ACCOUNT OF SELF - SUPERVISION. 5 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR 3E. THE LD.CIT(A) OUGH T NOT TO HAVE ALLOWED FURTHER DEDUCTION OF 15% ON ACCOUNT OF RATE DIFFERENCE BETWEEN CPWD AND STATE PWD AS THE DVO HAS ALREADY TAKEN INTO CONSIDERATION THE RATES PREVAILING IN THE GUNTUR MARKET DURING THE PERIOD OF CONSTRUCTION ON THE BASIS OF BILLS SUBMIT TED BY THE ASSESSEE - COMPANY TO THE DEPARTMENTAL VALUATION OFFICER. 4. THE LD.CIT (A) HELD IN HIS PARA NO.5.2.1 THAT THE REPORT SUBMITTED BY THE DVO IS NON - EST DUE TO NON SUBMISSION OF REPORT BY THE DVO WITHIN DUE DATE PRESCRIBED IN THE I.T.ACT, 1961. FURTHER, IN HIS PARA NO.5.2.2, THE LD.CIT(A) DIRECTED THE AO TO GIVE FURTHER ALLOWANCE OF 7.5% ON ACCOUNT OF SELF - SUPERVISION AND FURTHER DEDUCTION OF 15% ON ACCOUNT OF RATE DIFFERENCE BETWEEN CPWD AND STATE PWD. HENCE, THE LD.CIT(A)'S DECISION IN PARA NO. 5.2.1 AND 5.2.2 OF HIS ORDER ARE SELF CONTRADICTORY, IN THE SENSE THAT WHEN THE VALUATION OFFICERS ORDER ITSELF WAS HELD TO BE NON - EST, THEN THERE IS NO QUESTION OF RELYING ON IT AND GIVING FURTHER ON IT AND GIVING FURTHER DEDUCTIONS FROM THE AMOUNT DEPART MENT VALUER HAS QUANTIFIED . 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. GROUND NO.1 AND 5 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 6. GROUND NO. 2B TO 2D ARE RELATED TO THE ADDITION OF RS.2,38,17,377/ - REPRESENTING THE SHARE CAPITAL OF THE COMPANY WHICH WAS TREATED AS UNEXPLAINED INVESTMENTS BY THE AO. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE CO OWNERS OF THE BUILDING CO NSISTING OF ALLA SIVA REDDY AND 14 OTHERS, THE FAMILY OF ALLA SIVA REDDY AND THE PARTNERSHIP FIRM 6 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR M/S SIVA CONSTRUCTIONS HAVE INVESTED A SUM OF RS.9,07,94,000/ - IN PURCHASE OF LAND AND CONSTRUCTION OF THE BUILDING. THE TOTAL INVESTMENT IN PURCHASE OF LAND WAS RS.5,32,20,060/ - AND THE INVESTMENT IN CONSTRUCTION WAS RS.3,75,74,608/ - TOTALING TO RS.9,07,94,668/ - . OUT OF THE TOTAL EXPENDITURE OF RS.9,07,94,668/ - , CO - OWNERS CONSISTING OF ALL SIVA REDDY AND 14 OTHERS HAVE INVESTED THE SUM OF RS.8,34,19,668/ - A ND THE BALANCE AMOUNT OF RS.73,75,000/ - WAS INVESTED BY FAMILY OF ALLA SIVA REDDY AND PARTNERSHIP FIRM, M/S SIVA CONSTRUCTIONS. THE DETAILS OF INVESTMENT OF RS.8,34,19,668/ - RELATING TO 15 CO - OWNERS AND THE INVESTMENT MADE BY THE FAMILY OF ALLA SIVA REDDY AND THE PARTNERSHIP FIRM, M/S SIVA CONSTRUCTIONS AS PER PAGE NO.4 OF THE ASSESSMENT ORDER IS AS UNDER : SL. NO. NAME OF THE DIRECTOR INVESTMENT IN LAND - 1 (F.Y.2010 - 11 INVESTMENT IN LAND - 2 (F.Y.2012 - 13 INVESTMENT IN CONSTRUCTION (F.Y.2013 - 14 INVESTMENT IN CO NSTRUCTION (F.Y.2014 - 15 TOTAL INVESTMENT A.Y.2011 - 12 A.Y.2013 - 14 A.Y.2014 - 15 A.Y.2015 - 16 1. ALLA RAJYA LAKSHMI 4703335 2346923 2923614 600432 10574304 2. ALLA SIDDHARTHA 4703335 2346923 0 824742 7875000 3. ALLA SIVA REDDY 4703335 2346923 6366561 1428234 14845053 4. ALLA NAGARJUNA 4703335 2346923 3353158 600444 11003850 5. CHADELLA MANIDEEP 1317075 657356 200000 30569 2205000 6. K.KIRAN KUMAR 1128950 563493 0 197557 1890000 7. POTTI VENKATESWARLU 1881450 938948 0 329602 3150000 8. SAKALA SUJATHA 2257700 1126678 1586386 0 4970764 9. S.VENKATESWARA RAO 2445825 1220546 1718584 599943 5984898 10. T.V.S.RAMESH BABU 2257700 1126678 395622 0 3780000 11. TIRUVEEDULA DILEEP 2257700 1126678 1608872 198317 5191567 12. TIRUVEEDULA PRADEEP 2445825 1220546 1700000 0 5366371 13. Y.SRINIVASA RAO 940825 469626 660364 0 2070815 14. Y.SUBRAHMANYAM 940825 469626 660364 0 2070815 15. YV SUBBA RAO 940825 469626 660364 370416 2441231 TOTAL 37628030 18777493 21833889 5180256 83419668 7 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR SL.NO. NAME OF THE PERSON F.Y.2013 - 14 (IN RS.) F.Y.2014 - 15 (IN RS.) TOTAL (IN RS.) 1. ALLA RAJYA LAKSHMI 0 5,00,000 5,00,000 2. ALLA SIDDHARTHA 0 5,00,000 5,00,000 3. ALLA SIVA REDDY 14,87,500 5,00,000 19,87,500 4. ALLA NAGARJUNA REDDY 14,87,500 5,00,000 19,87,500 5. M/S SIVA CONSTRUCTIONS 0 24,00,000 24,00,000 6. TOTAL 23,75,000 44,00,000 73,75,000 6.1 THE CO - OWNERS ALONG WITH FAMILY MEMBERS OF ALLA SIVA REDDY AND THE PARTNERSHIP FIRM HAVE PROMOTED THE COMPANY BY NAME SIVA CITY CENTRE PRIVATE LTD. (IN SHORT COMPANY) AND TRANSFERRED THE LAND AND BUILDING TO THE COMPANY. IN LIEU OF THE TRANSFER OF LAND A ND BUILDING UNDER CONSTRUCTION WORTH RS.8.34 CRORE, THE COMPANY HAS PAID THE SUM OF RS.2.04 CRORES TO SOME OF THE DIRECTORS AND ISSUED SHARES WORTH RS.6.30 CRORES FOR THE REMAINING CONSIDERATION IN PROPORTION TO THE RESPECTIVE SHARES AS PER THE DETAILS AVA ILABLE IN PAGE NO.5 OF THE ASSESSMENT ORDER WHICH READS AS UNDER : SL.NO. NAME OF THE DIRECTOR TOTAL INVESTMENT RE - PAYMENT OF INVESTMENT SHARES 1. ALLA RAJYA LAKSHMI 10574304 ( - )26,99,304 78,75,000 2. ALLA SIDDHARTHA 7875000 0 78,75,000 3. ALLA SIVA REDDY 14845053 ( - )69,70,053 78,75,000 4. ALLA NAGARJUNA 11003850 ( - )31,28,850 78,75,000 5. CHADELLA MANIDEEP 2205000 0 22,05,000 6. K.KIRAN KUMAR 1890000 0 18,90,000 7. POTTI VENKATESWARLU 3150000 0 31,50,000 8. SAKALA SUJATHA 4970764 0 37,80,000 9. S.VENKATESWARA RAO 5984898 ( - )30,80,662 40,95,000 10. T.V.S.RAMESH BABU 3780000 0 37,80,000 11. TIRUVEEDULA DILEEP 5191567 0 37,80,000 12. TIRUVEEDULA PRADEEP 5366371 ( - )26,82,938 40,95,000 13. Y.SRINIVASA RAO 2070815 0 15,75,000 8 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR 14. Y.SUBRAHMANYAM 2070815 0 15,75,000 15. YV SUBBA RAO 2441231 ( - )18,57,861 15,75,000 TOTAL 83419668 ( - )204,19,668 630,00,000 6.2. SINCE THE COMPANY IS CLOSELY HELD COMPANY AND THE ASSESSEE COMPANY HAS TO EXPLAIN THE SOURCE OF RS.8.34 CRORES INVESTED BY THE DIRECTORS IN ACQUIRING THE LAND AND CONSTRUCTION, THE AO CALLED FOR THE DETAILS AND IN RESPONSE TO WHICH THE ASSESSEE HAS FURNISH ED THE REQUIRED INFORMATION ALONG WITH THE COPIES OF RETURNS FILED AND ANNEXURES SUCH AS COMPUTATION STATEMENTS AND STATEMENTS OF AFFAIRS IN ALL CASES EXCEPT CHADELLA MANIDEEP AND TVS RAMESH BABU. THE AO HAS GIVEN FINDING THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF RS.73.75 LAKHS INVESTED BY THE FAMILY MEMBERS OF ALLA SIVA REDDY AND THE PARTNERSHIP FIRM AND ALL THE RETURNS OF ALLA SIVA REDDY AND FAMILY WERE FILED BEFORE CONDUCTING THE SEARCH U/S 139(1). IN RESPECT OF INVESTMENTS OF MANIDEEP FOR RS. 22,05,000/ - AND SRI T.V.S.RAMESH FOR RS.37,88,000/ - , THE AO TREATED THE INVESTMENT AS UNEXPLAINED AND MADE THE ADDITION U/S 68 OF THE ACT. THE AO HAS ISSUED LETTER TO THE ASSESSEE COMPANY REQUESTING TO PRODUCE 11 D IRECTORS INCLUDING CHADELLA MANIDEEP AND TVS RAMESH BABU TO EXAMINE THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. OUT OF THE 11 DIRECTORS REQUESTED TO BE PRODUCED , THE ASSESSEE FAILED TO PRODUCE 9 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR SRI P.VENKATESWAR LU, SMT.SAKALA SUJATHA, SRI DILEEP TIRIVEEHULA AND SRI SUBRAHMANYAM YAKKALA FOR EXAMINATION. THEREFORE, THE AO MADE INVESTMENT OF FOLLOWING INVESTORS AGGREGATING TO RS.2,38,17,377/ - AS UNEXPLAINED INVESTMENT U/S 68 OF THE ACT AS PER THE DETAILS GIVEN BELO W : SL. NAME INVESTMENT (RS.) I. SRI P.VENKATESWARLU 31,50,000 II. SMT.SAKALA SUJATHA 49,70,764 III. SRI DILEEP TIRIVEEHULA 51,91,567 IV. SRI SUBRAHMANYAM YAKKALA 20,70,815 V. SRI VENKATA SUBBA RAO YAKKALA 24,41,231 VI. SRI CHEDELLA MANIDEEP 22,05,000 VII. SRI T.V.S.RAMESH BABU 37,88,000 7. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO OBSERVING THAT THE CO - OWNERS HAVE MADE THE INVESTMENT IN CONSTRUCTION OF THE BUILDING FROM FINANCIAL YEAR 2010 - 11 TO 2014 - 15 WHICH IS RELEVANT PERIOD FOR THE ASST. YEAR UNDER CONSIDERATION. THE LD.CIT(A) FURTHER OBSERVED THAT T HE INVESTMENTS MADE BY ALL THE CO - OWNERS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION WAS ONLY RS.51,80,256/ - WHICH IS RELEVANT FOR THE IMPUGNED ASSESSMENT YE AR . THE YEAR - WISE BREAKUP OF THE INVESTMENTS MADE BY THE CO - OWNERS WAS FURNISHED BY THE LD.CIT(A) IN PARA NO.4.1 OF PAGE NO.4 WHICH READS AS UNDER : 10 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR (I) YEAR WISE BREAK - UP OF INVESTMENTS MADE BY CO - OWNERS. SL.NO. NAME OF THE DIRECTOR INVESTMENT IN LAND - 1 (F.Y.2010 - 11 INVESTMENT IN LAND - 2 (F.Y.2012 - 13 INVESTMENT IN CONSTRUCTIO N (F.Y.2013 - 14 INVESTMENT IN CONSTRUCTION (F.Y.2014 - 15 TOTAL INVESTMENT A.Y.2011 - 12 A.Y.2013 - 14 A.Y.2014 - 15 A.Y.2015 - 16 1. ALLA RAJYA LAKSHMI 4703335 2346923 2923614 600432 10574304 2. ALLA SIDDHARTHA 4703335 2346923 0 824742 7875000 3. ALLA SIVA REDDY 4703335 2346923 6366561 1428234 14845053 4. ALLA NAGARJUNA 4703335 2346923 3353158 600444 11003850 5. CHADELLA MANIDEEP 1317075 657356 200000 30569 2205000 6. K.KIRAN KUMAR 1128950 563493 0 197557 1890000 7. POTTI VENKATESWARLU 1881450 938948 0 329602 3150000 8. SAKALA SUJATHA 2257700 1126678 1586386 0 4970764 9. S.VENKATESWARA RAO 2445825 1220546 1718584 599943 5984898 10. T.V.S.RAMESH BABU 2257700 1126678 395622 0 3780000 11. TIRUVEEDULA DILEEP 2257700 1126678 1608872 198317 5191567 12. TIRUVEEDULA PRADEEP 2445825 1220546 1700000 0 5366371 13. Y.SRINIVASA RAO 940825 469626 660364 0 2070815 14. Y.SUBRAHMANYAM 940825 469626 660364 0 2070815 15. YV SUBBA RAO 940825 469626 660364 370416 2441231 TOTAL 37628030 18777493 21833889 5180256 83419668 (II) YEAR - WISE BREAK UP OF INVESTMENTS MADE BY ALLA SIVA REDDY & FAMILY MEMBERS : SL.NO. NAME OF THE PERSON F.Y.2013 - 14 (IN RS.) F.Y.2014 - 15 (IN RS.) TOTAL (IN RS.) 1. ALLA RAJYA LAKSHMI 0 5,00,000 5,00,000 2. ALLA SIDDHARTHA 0 5,00,000 5,00,000 3. ALLA SIVA REDDY 14,87,500 5,00,000 19,87,500 4. ALLA NAGARJUNA REDDY 14,87,500 5,00,000 19,87,500 5. M/S SIVA CONSTRUCTIONS 0 24,00,000 24,00,000 6. TOTAL 23,75,000 44,00,000 73,75,000 7.1. THE DETAILS OF REPAYMENT MADE BY THE COMPANY AND THE ALLOTMENT OF SHARES IN LIEU OF THE TRANSFER OF LAND AND BUILDING WAS ALSO FURNISHED IN PAGE NO.5 OF THE ORDER OF THE LD.CIT(A) AS UNDER : 11 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR SL.NO. NAME OF THE DIRECTOR TOTAL INVESTMENT RE - PAYMENT OF INVESTMENT SHARES 1. ALLA RAJYA LAKSHMI 10574304 ( - )26,99,304 78,75,000 2. ALLA SIDDHARTHA 7875000 0 78,75,000 3. ALLA SIVA REDDY 14845053 ( - )69,70,053 78,75,000 4. ALLA NAGARJUNA 11003850 ( - )31,28,850 78,75,000 5. CHADELLA MANIDEEP 2205000 0 22,05,000 6. K.KIRAN KUMAR 1890000 0 18,90,000 7. POTTI VENKATESWARLU 3150000 0 31,50,000 8. SAKALA SUJATHA 4970764 0 37,80,000 9. S.VENKATESWARA RAO 5984898 ( - )30,80,662 40,95,000 10. T.V.S.RAMESH BABU 3780000 0 37,80,000 11. TIRUVEEDULA DILEEP 5191567 0 37,80,000 12. TIRUVEEDULA PRADEEP 5366371 ( - )26,82,938 40,95,000 13. Y.SRINIVASA RAO 2070815 0 15,75,000 14. Y.SUBRAHMANYAM 2070815 0 15,75,000 15. YV SUBBA RAO 2441231 ( - )18,57,861 15,75,000 TOTAL 83419668 ( - )204,19,668 630,00,000 7.2. THE LD.CIT(A) OBSERVED THAT THE INVESTMENT OF CO - OWNERS WAS TRANSFERRED TO THE ASSESSEE COMPANY IN LIEU OF WHICH THE COMPANY HAD ALLOTTED THE SHARES AND THERE WAS NO INFUSION OF CASH INTO THE ASSESSEE COMPANY. SINCE THE ASSESSEE HAD ALLOTTED THE SHARES IN LIEU OF COST OF LAND AND THE AMOUNT WAS ALREADY SPENT ON CONSTRUCTION, THERE IS NO CASH TRANSACTION INVOLVED IN ALLOTMENT OF SHARES AND THE ALLOTMENT OF SHARES BY THE WAY OF CONVERSION CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE LD .CIT(A) RELIED ON THE DECISION OF V.R.GLOBAL ENERGY OF HONBLE MADRAS HIGH COURT (2018) 407 ITR 0145 (MAD). ACCORDINGLY, THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO AND ALLOWED THE APPEAL OF THE ASSESSEE. 12 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR 8. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE HAS FILED APPEALS FOR THE A.Y.2015 - 16 AND 2016 - 17 AND THE ASSESSEE FILED THE CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A). 9. DURING THE APPEAL HEARING, THE LD.DR RELIED ON THE ORDERS OF THE AO AND THE LD.AR RELIED ON THE ORDERS OF THE LD.CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. PRECISELY, THE ISSUE IS RELATED TO THE SOURCES FOR SHARE CAPITAL OF RS.6,30,00,000/ - ALLOTTED BY THE COMPANY TO THE CO OWNERS CONSISTING OF ALLA RAJYALAKSHMI AN D 14 OTHERS. AS PER THE MATERIAL AVAILABLE, THE PROMOTERS HAVE CONSTRUCTED THE BUILDING DURING THE FINANCIAL YEAR 2010 - 11 TO 2014 - 15. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THE DETAILS BEFORE THE AO AND ALSO PRODUCED THE DIRECTORS BEFORE THE AO EXCEPT 4 DIRECTORS I.E. P.VENKATESWARLU AND 3 OTHERS AS PER THE DETAILS FURNISHED. THEREFORE, IN A NUT SHELL, THE ASSESS EE COMPANY HAS PRODUCED ALL THE DIRECTORS EXCEPT 4 MENTIONED IN THE ASSESSMENT ORDER AND FURNISHED THE DETAILS OF INVESTMENT AS WELL AS THE INCOME TAX ASSESSMENT DETAILS OF THE DIRECTORS WHICH CLEARLY ESTABLISHES THAT THE CO - OWNERS HAVE INVESTED THE AMOUNT S FOR ACQUIRING THE LAND AND CONSTRUCTION OF THE 13 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR BUILDING AND THE SAME WAS EXPLAINED IN THE HANDS OF THE DIRECTORS OF THE COMPANY. THE DIRECTORS HAVE FILED THE RETURNS OF INCOME AND EXPLAINED THE SOURCES FOR ACQUIRING THE LAND AND CONSTRUCTION OF THE BUIL DING IN THEIR INDIVIDUAL RETURNS. THE SAID LAND AND BUILDING WAS CONSTRUCTED IN THE EARLIER YEARS AND TRANSFERRED TO THE ASSESSEE COMPANY. IN LIEU OF THE TRANSFER OF LAND AND BUILDING, THE ASSESSEE COMPANY HAS SETTLED THE CONSIDERATION PARTLY IN THE FORM OF CASH AND PARTLY IN THE FORM OF KIND I.E. BY TRANSFER OF SHARES. THEREFORE, THERE IS NO INFUSION OF CASH IN THE COMPANY FOR WHICH THE SOURCE REQUIRED TO BE EXPLAINED. THE LAND AND BUILDING WAS RECEIVED FROM THE PROMOTERS OF THE COMPANY AND SETTLED THE DUES PAYABLE TO THE DIRECTORS IN THE FORM OF CASH AND ALLOTMENT OF SHARES. THE SOURCE FOR THE INVESTMENT IN LAND AND CONSTRUCTION OF THE BUILDING WAS EXPLAINED IN THE INDIVIDUAL HANDS OF THE DIRECTORS WHICH WAS ASSESSED TO TAX IN THEIR INDIVIDUAL HANDS. THEREFORE, THERE IS NO CASE FOR EXPLANATION OF THE SOURCE AGAIN IN THE HANDS OF THE COMPANY. THE COMPANY HAS NOT MADE ALLOTMENT OF SHARES FROM THE UNEXPLAINED SOURCES. THERE WAS NO CREDIT IN THE COMPANY WHICH REMAINED UNEXPLAINED. THE ISSUE REGARDING TH E SETTLEMENT OF PRE EXISTING LIABILITY WAS CONSIDERED BY HONBLE MADRAS HIGH 14 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR COURT IN THE CASE OF V.R.GLOBAL ENERGY (P) LTD. VS. ITO, WHEREIN THE HONBLE MADRAS HIGH COURT HELD AS UNDER : 24. THE QUESTION OF WHETHER THE LEARNED TRIBUNAL ERRED IN CONFIRMIN G THE VALUATION OF SHARES ALLOTTED IN SETTLEMENT OF THE PRE - EXISTING LIABILITY TAXABLE AS UNEXPLAINED CASH CREDIT, DOES NOT INVOLVE ANY QUESTION OF LAW, FAR LESS ANY SUBSTANTIAL QUESTION OF LAW. 10 .1 . WHILE SUPPORTING THE ORDER OF THE AO, THE LD.DR ARGUE D THAT THE CREDIT WORTHINESS OF THE DIRECTORS WAS NOT ESTABLISHED AND THE BURDEN IS ON THE ASSESSEE TO PROVE THE SOURCES AND RESPONDING TO THE ARGUMENT OF THE LD.AR , THE LD.DR SUBMITTED THAT THERE WA S NO PRE EXISTING LIABILITY IN THIS CASE , HENCE, THE CASE LAW RELIED UPON BY THE LD.CIT(A) IS NOT APPLICABLE. THERE IS NO DISPUTE THAT THE CO - OWNERS HAVE ACQUIRED THE LAND AND CONSTRUCTED THE BUILDING WHICH WAS TRANSFERRED TO THE COMPANY. ON TRANSFER OF THE LAND AND BUILDING, THE COMPANY IS OBLIGED TO MAKE THE PAYMENT TOWARDS THE COST OF LAND AND BUILDING TO THE OWNERS. THE COMPANY IS PERMITTED TO MAKE THE PAYMENT EITHER IN CASH OR IN KIND. THE COMPANY PREFERRED TO MAKE THE PAYMENT PARTLY IN CASH AND PARTLY IN KIND I.E. ALLOTMENT OF SHARE S . THUS T HE TRANSFER OF LAND ALONG WITH THE CONS TRUCTION OF THE BUILDING CREATED LIABILITY ON THE PART OF THE COMPANY TO MAKE THE PAYMENT OF CONSIDERATION IN LIEU OF TRANSFER LAND AND BUILDING. 15 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR THE SAME H A S TAKEN THE CHARACTER OF THE PRE - EXISTING LIABILITY , H ENCE, THE ARGUMENT OF THE LD.DR IS UNTENABLE. 10.2. SECTION 68 ALLOWS THE ASSESSING OFFICER TO MAKE THE ADDITION OF UNEXPLAINED CASH CREDIT. AS PER SECTION 68, THE SUM SHOULD BE CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SOURCE OF WHICH REMAINED UNEXPLAINED. IN THE INSTANT CASE, LAND AND BUILDING WAS CONSTRUCTED BY THE CO - OWNERS AND THE SAME WAS TRANSFERRED. THUS, THERE IS NO CREDIT FOR WHICH THE SOURCE WAS REMAINED UNEXPLAINED . S INCE THE ASSESSEE HAS FURNISHED ALL THE DETAILS OF THE C O - OWNERS WITH CONFIRMATION LETTERS, INCOME TAX ASSESSMENT PARTICULARS AND PRODUCED ALL THE DIRECTORS EXCEPT 4 MENTIONED IN THE ASSESSMENT ORDER, THE BURDEN OF THE ASSESSEE GOT DISCHARGED AND SHIFTED TO THE AO. THE AO HAS NOT CONDUCTED THE ENQUIRIES, DID N OT GIVE ANY FINDING THAT THE COMPANY INFUSED CASH CREDITS IN THE BOOKS AND MADE THE INVESTMENTS FROM UNEXPLAINED SOURCES . IN THE INSTANT CASE, SINCE ALL THE PROMOTER DIRECTORS / CO - OWNERS ARE ASSESSED TO TAX, EXPLAINED THE SOURCES FOR INVESTMENT IN LAND A ND BUILDING IN THEIR HANDS, THERE IS NO CASE FOR MAKING ADDITION U/S 68 OF THE ACT IN THE HANDS OF THE COMPANY AND IF AT ALL ANY UNEXPLAINED INVESTMENT REMAINED, THE SAME REQUIRED TO BE EXAMINED IN THE HANDS OF INDIVIDUAL SHARE HOLDERS / CO - OWNERS IN THE RESPECTIVE 16 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR ASSESSMENT YEARS OF INVESTMENT . THUS T HE CASE LAW RELIED UPON BY THE LD.CIT(A) IS SQUARELY APPLICABLE IN THIS CASE. HENCE, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS GROUND. 11 . THE NEXT ISSUE IN THIS AP PEAL IN GROUND NO.3A TO 3C IS RELATED TO THE VALIDITY OF VALUATION REPORT AND THE ASSESSMENT MADE BY THE AO ON THE BASIS OF THE REPORT OF DEPARTMENTAL VALUATION OFFICER (DVO). DURING THE ASSESSMENT PROCEEDINGS, IT IS OBSERVED THAT THE AO REFERRED THE COST OF CONSTRUCTION OF THE BUILDING TO THE DVO ON 12.09.2017 AND THE DVO HAS SUBMITTED THE REPORT ON 30.05.2018 DETERMINING THE COST OF CONSTRUCTION AT RS.19,84,03,000/ - . COPY OF THE VALUATION REPORT WAS FURNISHED TO THE ASSESSEE AND THE ASSESSEE WAS ASKED T O EXPLAIN WHY THE DIFFERENCE AMOUNT IN THE COST OF CONSTRUCTION SHOULD NOT BE BROUGHT TO TAX U/S 69 OF THE ACT AS UNEXPLAINED INVESTMENT. IN RESPONSE TO THE NOTICE ISSUED BY THE AO, THE ASSESSEE FILED OBJECTION STATING THAT THE DVO REQUIRED TO SUBMIT THE REPORT WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE REFERENCE WAS MADE AND IN THE INSTANT CASE, THE DVO HAD SUBMITTED THE REPORT ON 30.05.2015 WHICH IS BEYOND THE LIMITATION PERIOD PROVIDED IN THE ACT, THUS ARGUED THAT THE REPORT WAS TIME BARR ED AND THE SAME REQUIRED TO BE TREATED AS INVALID AND THE AO IS NOT PERMITTED TO MAKE THE ADDITIONS ON THE BASIS OF 17 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR INVALID VALUATION REPORT. THE ASSESSEE FURTHER STATED THAT THE COST OF CONSTRUCTION DECLARED WAS RS.16,62,70,878/ - BEFORE THE DVO WHICH TH E DVO HAD ENDORSED IN HIS REPORT AND REQUESTED TO ALLOW THE REBATE FOR RATE DIFFERENCE @20%, 15% FOR SELF SUPERVISION AND 5% FOR COST REDUCTION ON AVAILING BANK LOAN. THE AO REJECTED THE OBJECTIONS OF THE ASSESSEE AND JUSTIFIED THE TIME LIMIT AVAILABLE F OR COMPLETION OF ASSESSMENT STATING THAT THE ASSESSMENT ORDER IS PASSED WITHIN PERMISSIBLE TIME LIMIT ALLOWED UNDER THE ACT. THE AO ALSO REJECTED THE REQUEST OF THE ASSESSEE TO ALLOW THE REBATE FOR RATE DIFFERENCE, SELF SUPERVISION A N D COST REDUCTION FOR AVAILING THE BANK LOAN STATING THAT THE DVO HA D ALREADY CONSIDERED THE SAME IN THE VALUATION REPORT. THE AO WORKED OUT THE YEAR - WISE COST OF CONSTRUCTION ACCOUNTED IN THE BOOKS OF ACCOUNTS IN PARA NO.7.5 OF THE ASSESSMENT ORDER WHICH READS AS UNDER : S.N O. FINANCIAL YEAR COST OF CONSTRUCTION AS PER THE DVO (RS.) COST OF CONSTRUCTION AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE (RS.) DIFFERENCE (RS.) 1. 2012 - 13 38,01,059 31,85,463 6,15,596 2. 2013 - 14 321,75,119 269,64,236 52,10,883 3. 2014 - 15 409,62,680 295,92,573 113,70,107 4. TOTAL TILL THE DATE OF 769,38,858 597,42,272 171,96,586 18 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR INCORPORATION 5. 2015 - 16 556,28,379 4,23,04,671 133,23,708 6. 2016 - 17 612,00,089 4,79,33,765 132,66,324 7. 2017 - 18 46,35,674 39,49,707 6,85,967 8 TOTAL 19,84,03,000 15,39,30,415 444,72,585 1 1 .1. THE AO WORKED OUT THE DIFFERENCE IN COST OF CONSTRUCTION AT RS.4,44,72,585/ - FROM 2012 - 13 TO 2017 - 18 I.E. FROM THE COMMENCEMENT OF CONSTRUCTION OF THE BUILDING TILL THE COMPLETION OF BUILDING AND AT RS.1,71,96,586/ - (I.E FI NANCIAL YEAR 2012 - 13 TO 2014 - 15) AND BROUGHT TO TAX THE SUM OF RS.1,71,96,586/ - FOR THE IMPUGNED ASSESSMENT YEAR. 1 2 .2. THIS ISSUE OF UNEXPLAINED INVESTMENT IN COST OF CONSTRUCTION IS INVOLVED FOR THE A.Y. 2015 - 16 AND 2016 - 17. THE AO MADE THE ADDITION O F RS.1,33,23,708/ - FOR THE A.Y.2016 - 17. 1 2 . AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO HOLDING THAT THE AO IS NOT PERMITTED TO MAKE THE ADDITION ON THE BASIS OF VALUATIO N REPORT WHICH BARRED BY LIMITATION. ON MERITS, THE LD.CIT(A) DIRECTED THE AO TO ALLOW THE RATE DIFFERENCE OF 15% OF CPWD RATES, LOCAL RATES AND ALSO DIRECTED THE AO TO ALLOW 15% REDUCTION ON ACCOUNT OF SELF SUPERVISION INSTEAD OF 7.5% ALLOWED BY THE DVO . 19 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR 1 3 . AGAINST THE ORDER OF THE LD.CIT(A), THE REVENUE FILED APPEAL AND THE ASSESSEE FILED CROSS OBJECTION SUPPORTING THE ORDER OF THE LD.CIT(A). THE LD.DR RELIED ON THE ORDERS OF THE AO AND THE LD.AR RELIED ON THE ORDERS OF THE LD.CIT(A). 1 4 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE AO REFERRED THE COST OF CONSTRUCTION TO D VO ON 12.09.2017 AND THE DVO HAS SUBMITTED THE REPORT ON 14.06.2018. THE TIME LIMIT AVAILABLE FOR THE DVO TO SUBMIT THE R EPORT IS SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE REFERENCE IS MADE, WHICH GOT EXPIRED ON 31.03.2017 AND CLEARLY ESTABLISHES THAT THE DVO HA S SUBMITTED THE REPORT BEYOND THE TIME LIMIT AVAILABLE IN THE ACT. THE LD.CIT(A) HELD THAT THE REPORT SUBM ITTED BY THE DVO IS NON - EST IN LAW AND HAS NO VALUE IN THE EYES OF THE LAW. ACCORDINGLY DELETED THE ADDITION MADE BY THE AO. FOR THE SAKE OF CLARITY AND CONVENIENCE, WE EXTRACT PARA NO.5.2.1 OF THE LD.CIT(A) WHICH READS AS UNDER : 5.2.1. THE FIRST ISSUE RAISED BY THE APPELLANT IS THAT THE REPORT OF DVO SHOULD HAVE BEEN SUBMITTED BY DVO WITHIN 6 MONTHS FROM THE END OF THE MONTH IN WHICH REFERENCE IS MADE BY THE ASSESSING OFFICER. THE REFERENCE WAS MADE BY THE ASSESSING OFFICER ON 12.09.2017 AND THE REPORT OF DVO SHOULD HAVE BEEN SUBMITTED BY 31.03.2018. THE REPORT WAS SUBMITTED BY DVO ON 30.05.2018. THE ISSUE WAS RAISED BY THE APPELLANT BEFORE THE ASSESSING OFFICER ALSO. THE ASSESSING OFFICER DISCUSSED THE ISSUE IN THE ORDER AT PARE 7.3 OF THE ORDER. THE A SSESSING OFFICER INSTEAD OF DISCUSSING THE ISSUE RAISED BY THE APPELLANT 20 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR CONCLUDED THAT THE ORDER PASSED BY THE ASSESSING OFFICE IS NOT BARRED BY THE LIMITATION. THE ISSUE RAISED BY THE APPELLANT REGARDING VALIDITY OF DVO REPORT WHICH IS SUBMITTED BEYOND T HE TIME ALLOWED IS NOT ADJUDICATED. THE AMENDED PROVISION OF SEC. 142A IS AS UNDER: 'THE VALUATION OFFICER SHALL SEND A COPY OF THE REPORT OF THE ESTIMATE MADE UNDER SUB - SECTION (4) OR SUB - SECTION (5), AS THE CASE MAY BE, TO THE ASSESSING OFFICER AND THE A SSESSEE, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH A REFERENCE IS MADE UNDER SUB - SECTION (1).' THE PROVISION STIPULATES THAT THE DVO SHALL SUBMIT REPORT WITHIN 6 MONTHS, EVEN IF THE ASSESSEE DOES NOT CO - OPERATE. THE DVO IS SUPPOSED TO GIVE BEST JUDGEMENT REPORT. IN THIS CASE THE BASIC FACT IS THAT REPORT WAS SOUGHT IS SEPTEMBER, 2017 AND REPORT WAS RECEIVED IN MAY, 2018 ARE NOT DISPUTED. IT IS MENTIONED BY THE ASSESSING OFFICER IN THE ORDER ITSELF. THAT BEING THE CASE, THE REPORT OF DVO IS CLEARLY NOT SUBMITTED WITHIN THE STIPULATED TIME. THE REPORT SUBMITTED BY DVO IS NON - EST AND WILL HAVE NO VALUE IN THE EYES OF LAW. THE SAME CANNOT BE RELIED UPON/CONSIDERED ASSESSING OFFICER TO FRAME THE ORDER. ACCORDINGLY, THE ACTION OF ASSESSING OFFICER IN RELYING ON THE REPORT CANNOT BE UPHELD. CONSEQUENTLY, THE ADDITION DE BASED SOLELY ON THE ABOVE REPORT IS DELETED. THE GROUNDS RAISED AT 9 TO 11 ARE TREATED AS ALLOWED. 1 4 .1. THERE IS NO DISPUTE THAT THE REPORT WAS SUBMITTED BELATEDLY BY THE D VO. AS PER SECTION 142A, THE DVO REQUIRED TO SUBMIT THE REPORT WITHIN A PERIOD OF SIX MONTHS. EVEN IF THE ASSESSEE IS NOT COOPERATIVE, THE DVO IS PERMITTED TO MAKE THE BEST JUDGMENT ESTIMATION AND SUBMIT THE REPORT AS PER THE PROVISIONS OF THE ACT. THE A CT HAS CONSIDERED THE EVENTUALITY OF NON COOPERATION OF THE ASSESSEE AND GIVEN POWERS TO THE DVO TO SUBMIT THE REPORT ON BEST JUDGEMENT. HENCE THE DVO IS NOT PERMITTED TO TAKE SHELTER UNDER NON COOPERATION AND TO SUBMIT THE REPORT BELATEDLY. THE ACT DID N OT GIVE ANY EXTENSION OF TIME LIMIT FOR SUBMISSION OF THE REPORT BEYOND THE TIME LIMIT ALLOWED IN THE ACT. THEREFORE, IT IS OBLIGATORY ON THE PART OF THE 21 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR DVO TO SUBMIT THE REPORT WITHIN TIME PERMISSIBLE IN THE ACT. IF THE DVO DOES NOT SUBMIT THE REPORT W ITHIN THE TIME LIMIT PERMISSIBLE IN THE ACT, THE AO IS ALSO PERMITTED TO MAKE BEST JUDGEMENT ASSESSMENT U/S 144 OF THE ACT. THOUGH THE ASSESSEE RAISED OBJECTION BEFORE THE AO, THE AO IGNORED THE OBJECTION RAISED BY THE ASSESSEE AND DISCUSSED THE ISSUE OF TIME LIMIT AVAILABLE FOR COMPLETION OF ASSESSMENT AND JUSTIFIED THE ASSESSMENT WITHOUT CONSIDERING THE ACTUAL OBJECTION RAISED BY THE ASSESSEE. SINCE THERE IS NO EXTENSION OF TIME FOR SUBMISSION OF REPORT IS ALLOWED UNDER THE ACT AND NO CONCESSION WAS MADE AVAILABLE TO THE DVO FOR NON COOPERATION OF THE ASSESSEE, THE REPORT SUBMITTED BY THE DVO BEYOND THE TIME LIMIT IS INVALID AND IS TO BE TREATED AS NON - EST. THE LD.CIT(A) RIGHTLY HELD THAT THE REPORT OF THE DVO CANNOT BE RELIED UPON OR CONSIDERED BY THE AO TO FRAME THE ASSESSMENT U/S 143(3) . IN THE GROUNDS OF APPEAL, THOUGH THE DEPARTMENT CONTENDED THAT AO HAS NOT FULLY RELIED UPON THE DVO'S VALUATION REPORT AND TAKEN AS A GUIDANCE , IT IS FOUND FROM THE ORDER OF THE AO THAT THE ASSESSMENT WAS FRAMED ON TH E BASIS OF THE DVOS REPORT. THIS FACT IS EVIDENCED FROM PARA NO 7.5 OF THE ORDER OF THE AO. FOR THE SAKE OF CLARITY WE EXTRACT PARA NO.7.5 OF THE ORDER OF THE AO WHICH READS AS UNDER: 22 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR S.NO. FINANCIAL YEAR COST OF CONSTRUCTION AS PER THE DVO (RS.) COST OF CONSTRUCTION AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE (RS.) DIFFERENCE (RS.) 1. 2012 - 13 38,01,059 31,85,463 6,15,596 2. 2013 - 14 321,75,119 269,64,236 52,10,883 3. 2014 - 15 409,62,680 295,92,573 113,70,107 4. TOTAL TILL THE DATE OF INCORPORATION 769,38,858 597,42,272 171,96,586 5. 2015 - 16 556,28,379 4,23,04,671 133,23,708 6. 2016 - 17 612,00,089 4,79,33,765 132,66,324 7. 2017 - 18 46,35,674 39,49,707 6,85,967 8 TOTAL 19,84,03,000 15,39,30,415 444,72,585 FROM PLAIN READING OF THE ASSESSMENT ORDER IT EVIDENCED THAT THE AO HAS MADE THE ADDITION PURELY RELYING ON THE DVOS REPORT. SINCE THE REPORT OF THE DVO IS NON - EST THE ASSESSMENT MADE ON THE BASIS OF INVALID REPORT IS UNSUSTAINABLE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 1 5 . THE NEXT ISSUE RAISED BY THE DEPARTMENT IN GROUND NO.3D TO 4 ARE RELATED TO ALLOWANCE GRANTED Y THE LD.CIT(A) ON ACCOUNT OF SELF - SUPERVISION AND THE RATE DIFFERENCE. THE OBJECTION OF THE DEPARTMENT IS THAT THE LD.CIT(A) HAS TAKEN INCONSISTENT STAND WITH REGARD TO VALIDITY OF THE REPORT 23 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR AND THE CONCESSIONS GRANTED TO THE ASSESSEE ON THE SAME REPORT RELATING TO RATE DIFFERENCE AND SELF SUPERVISION. THE DEPARTMENT IS OF THE VIEW THAT THE LD.CIT(A) , HAVING HELD THAT THE VALUATION REPORT IS NON - EST, THERE IS NO REASON FOR GIVING FURTHER DEDUCTIONS ON THE ESTIMATION OF VALUATION MADE BY THE DVO. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT ONCE THE LD.CIT(A) TREATS THE REPORT AS NON - EST , THERE IS NO REASON FOR ALLOWING DEDUCTIONS OF THE RATE DIFFERENCE AND THE SELF SUPERVISION AND THE ACTION OF THE LD.CIT(A) IS CONTRARY. 1 6 . ON THE OTHER HAND, THE LD.AR ARGUED THAT THE LD.CIT(A) HAS DECIDED THE ISSUE BOTH ON TECHNICAL GROUNDS AS WELL AS ON MERITS, HENCE, THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). 1 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED THE ORDER OF THE AO ON VALIDITY OF THE DVO S REPORT AS WELL AS REQUESTED FOR DEDUCTIONS WITH REGARD TO CPWD RATES FOR SELF SUPERVISION AND ALSO REDUCTION ON BANK LOANS AS ALTERNATE GROUNDS WITHOUT CONCEDING THE VALIDITY OF THE ASSESSMENT. THE LD.CIT(A) IS BOUND TO DISPOSE OFF ALL THE GROUNDS RAI SED BY THE ASSESSEE. THUS , THE LD.CIT(A) RIGHTLY ADJUDICATED THE GROUNDS RAISED BY THE ASSESSEE 24 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR BOTH ON VALIDITY OF ASSESSMENT MADE ON INVALID VALUATION REPORT AND ALSO ON REBATES REQUESTED BY THE ASSESSEE . THUS WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) I N ADJUDICATING THE ALTERNATE GROUNDS. IN THIS REGARD , WE CONFINE OURSELVES IN HOLDING THAT THE LD.CIT(A) IS RIGHT IN ADJUDICAT ING THE ALTERNATE GROUNDS , B UT WE ARE NOT GOING INTO MERITS OF THE ORDER OF THE LD.CIT(A) W ITH REGARD TO ALLOWANCES GRANTED BY THE LD.CIT(A) IN RESPECT OF REBATE FOR RATE DIFFERENCES, SAVINGS FOR SELF SUPERVISION ETC. AND THE SAID ISSUES ARE KEPT OPEN . 18. SINCE WE HAVE HELD THAT THE ADDITIONS MADE ON THE BASIS OF INVALID REPORT ARE UNSUSTAINA BLE , WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEALS OF THE REVENUE. THEREFORE, WE CONSIDER IT IS NOT NECESSARY TO ADJUDICATE THE GROUNDS RAISED BY THE REVENUE WITH REGARD TO ALLOWANCES GRANTED BY THE LD.CIT(A) IN RESPECT OF RATE DIFFERENCES A ND SELF SUPERVISION . 19. SINCE WE HAVE DISMISSED THE APPEALS OF THE REVENUE THE ASSESSEES CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A) BECOMES INFRUCTUOUS, HENCE DISMISSED. 20. IN THE RESULT, APPEALS OF THE REVENUE AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 25 I.T.A. NO .247/VIZ/2019 AND 248/VIZ/2019 AND CO NOS.76/VIZ/2019 AND 77/VIZ/2019, A.Y.2015 - 16 AND 2016 - 17 M/S SIVA CITY CENTRE PVT. LTD. GUNTUR ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH SEPTEMBER, 2019. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 06 .09.2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - M/S SIVA CITY CENTRE PVT. LTD., 7 TH LANE, CHANDRAMOULI NAGAR, RING ROAD, GUNTUR 2. / THE REVENUE - DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2, GUNTUR 3. THE PR. COMMISSIONER OF INCOME TAX (CENTRAL), VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 , VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM