C.R.Selvaraj, Salem V. ITO, Namakkal

ITA 100/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90394 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-04-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: T S LAKSHMIVENKATARAMAN
• Keywords: Rejection of books of accounts; Capital asset converted into stock in trade; Value adopted by valuation officer; Corroborative evidences; Valuation report; Onus to prove
• Section: 142(1); 131; 69; 145; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.100/MDS/2015 ( / ASSESSMENT YEAR : 2011-2012) SHRI. C.R. SELVARAJ, NSR MALL, D.NO.195, SALEM ROAD, NAMAKKAL TOWN, NAMAKKAL DIST 637 001. [PAN: BSJPS 7393N] ( %& /APPELLANT) VS THE INCOME TAX OFFICER, WARD I (1), NAMAKKAL. ( !'%& /RESPONDENT) / APPELLANT BY : SHRI. T.S. LAKSHMI VENKATARAMAN, C.A., / RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. /DATE OF HEARING : 16.04.2015 /DATE OF PRONOUNCEMENT : 22.05.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL FILED BY ASSESSEE IS DIRE CTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM, DA TED 14.11.2014 FOR THE ASSESSMENT YEAR 2011-12. I.T.A.NO.100/MDS/2015. :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 01. THE ORDER OF THE LEARNED CIT(A) SALEM DATED 14.11.2014 IN ITA NO.263/2013-14 IS OPPOSED TO TH E FACTS OF THE CASE AND IS NOT LEGALLY MAINTAINABL E. 02. THE LEARNED CIT(A) IS NOT JUSTIFIED IN GIVING D IRECTION TO THE ASSESSING OFFICER TO ADOPT STATE PWD RATES IN T HE PLACE OF CPWD RATES AS ADOPTED BY THE VALUATION OFF ICER IN ESTIMATING THE COST OF CONSTRUCTION OF THE ASSES SEES COMMERCIAL COMPLEX AT NAMAKKAL. 03. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF A CCOUNTS FOR HIS CONSTRUCTION ACTIVITY. THE ASSESSING OFFIC ER IN PAGE 4 OF THE ASSESSMENT ORDER HAS REJECTED THE BOO KS OF ACCOUNTS ON THE GROUND THAT THE SAME WERE PREPARED NOW ONLY WITH AVAILABLE BILLS AND MOST OF THE BILLS/VOUCHERS IS SUPPORTED BY SELF MADE DOCUMENTS. THE ASSESSING OFFICER WHILE REJECTING THE BOOKS OF ACCO UNTS SHOULD PINPOINT SPECIFIC DEFECTS IN THE BOOKS OF AC COUNTS AND ON GENERAL OBSERVATION AS ABOVE REJECTION OF BO OKS IS NOT LEGALLY SUSTAINABLE. 04. THE ASSESSEE PRODUCED QUANTITATIVE DETAILS FOR THE CONSTRUCTION ACTIVITY BEFORE THE ASSESSING OFFICER WHICH HAS NOT BEEN REJECTED OR FOUND TO BE FALSE. IN VIEW OF THIS THE ADDITION TOWARDS COST OF CONSTRUCTION NEED TO B E DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL, DERIVES INCOME FROM RENTAL INCOME AND LORRY TRANSPO RT BUSINESS CARRIED OUT IN THE NAME OF C.R. TRANSPORT & N.S.R. TRANSPOR TS. HE HAD FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-1 2 ON 06.03.2012, ADMITTING AN INCOME OF H4,49,100/- AND THE SAME WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT ON 09.03.2012. LAT ER THE CASE WAS SELECTED FOR SCRUTINY. ON PERUSAL OF THE RETURN O F INCOME, IT WAS FOUND THAT THE ASSESSEE HAS ADMITTED COST OF CONSTRUCTION OF H1,55,74,158/- AND RENTAL INCOME OF H63,889/- FROM JAYASURYA DEPAR TMENTAL STORE PVT. I.T.A.NO.100/MDS/2015. :- 3 -: LTD. (FORMERLY KNOWN AS SHRI KANNAN DEPARTMENTAL ST ORES). FURTHER, IT WAS OBSERVED BY ASSESSING OFFICER THAT THE VALUE OF THE BUILDING ADMITTED BY THE ASSESSEE IS VERY LOW ON COMPARED WI TH THE BUILDING STRUCTURE WHICH IS LOCATED AT 196, SALEM MAIN ROAD, NAMAKKAL IN THE NAME OF N.S.R. MALL. 3.1 THE BUILDING COMPRISES OF 5 FLOORS (BASEMENT + GROUND+ 3). THIS INCOME TAX INSPECTOR WAS DEPUTED BY ASSESSING OFFICER TO VISIT THE ASSESSEE'S BUILDING TO VERIFY THE PROBABLE COST OF CONSTRUCTION. THE INSPECTOR VISITED THE ASSESSEE'S BUILDING AND SUBMI TTED HIS REPORT ON 10.07.2013. AS PER HIS REPORT, THE ASSESSEE HAS CON STRUCTED COMMERCIAL BUILDING AT NO.196, SALEM ROAD, NSR MALL , NAMAKKAL DURING THE FINANCIAL YEAR 2009-2010 AND THE BUILDI NG COMPRISES OF BASEMENT FLOOR, GROUND FLOOR & THREE FLOORS. THE TO TAL CONSTRUCTED AREA ABOUT 50,000 SQ.FT. FURTHER HE REPORTED THAT THE PR OBABLE COST OF CONSTRUCTION OF COMMERCIAL BUILDING IS ABOUT 900 PE R SQ.FT I.E. THE TOTAL COST OF CONSTRUCTION IS ABOUT H.4,50,00,000/- (50,0 00/- X 900). 3.2 CONSEQUENTLY, THE ASSESSEE HAS FILED A LETTER D ATED 19.07.2013 WHEREIN IT WAS STATED THAT HE HAS STARTED TO CONSTRUCT COMMERCIAL SHOPPING COMPLEX AT SALEM ROAD, NAMAKKAL DURING THE PERIOD OF APRIL'2009 AND IT WAS COMPLETED DURING THE PERIOD S EPTEMBER'2010. THEN THE RENTAL INCOME WAS ARRIVED BY WAY OF LETTING OUT TO KANNAN I.T.A.NO.100/MDS/2015. :- 4 -: DEPARTMENTAL STORES PVT LTD' AND GIVEN BREAK-UP DETAILS FOR THE COST OF CONSTRUCTION OF BUILDING IS AS UNDER:- A.Y. 2010-11 : H1,18,85,976/- A.Y. 2011-12 : H 32,35,800/- ------------------- TOTAL : H1,51,21,776/- ------------------- THE ASSESSEE HAS NOT PRODUCED ANY BOOKS OF ACCOUNT, BILLS/VOUCHERS FOR COST OF CONSTRUCTION OF BUILDING SO FAR 19.07.2 013. IN THE ABSENCE OF THE BOOKS OF ACCOUNTS, IT WAS PRESUMED BY AO THAT T HE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS AND BILLS/VOUC HERS FOR COST OF CONSTRUCTION OF BUILDING. THEREFORE TO VERIFY THE A CTUAL COST OF CONSTRUCTION, THE BUILDING WAS REFERRED TO THE DIST RICT VALUATION OFFICER, CHENNAI ON 25.07.2013 AS PER THE PROVISIONS OF SEC. 142A OF THE I.T.ACT. 3.3 FURTHER NOTICE U/S 142(1) OF THE I.T.ACT WAS ISSUED BY ASSESSING OFFICER ON 18.09.2013 AND POSTED FOR HEARING ON 04. 10.2013. IN RESPONSE TO THE NOTICE, THE ASSESSEE'S AUTHORIZED R EPRESENTATIVE SHRI. T. BALASUBRAMANIAM, ITP APPEARED ON 03.10.2013 WITH POWER OF ATTORNEY ALONG WITH CASH FLOW STATEMENT, STATEMENT OF AFFAIRS, CAPITAL ACCOUNT AND NAME & ADDRESS OF THE SUNDRY CREDITORS ARE PRODUCED. ON THIS DAY, HE HAS NOT PRODUCED ANY EVIDENCES FOR MAI NTAINING THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS FOR COST OF CONSTRUCT ION OF BUILDING I.T.A.NO.100/MDS/2015. :- 5 -: ADMITTED BY THE ASSESSEE. FURTHER HE WAS ASKED TO P RODUCE THE SOURCE FOR THE CASH DEPOSITS BY THE ASSESSEE AT TMB AND KO TAK MAHINDRA BANK LTD AND THE CASE WAS ADJOURN TO 14.10.2013. 3.4 IN THE MEAN-TIME, THE VALUATION REPORT FROM THE DISTRICT VALUATION OFFICER, CHENNAI RECEIVED BY ASSESSING OFFICER ON 01.01.2014. AS PER THE DVO REPORT THE COST OF CONSTRUCTION WAS WORKED OUT AT H 6,55,43,700/- AND AFTER DEDUCTING THE COST OF THE W ORK CARRIED OUT BY THE TENANT, THE COST OF CONSTRUCTION DETERMINED BY THE DVO WORKS OUT TO H 5,70,06,100/-. THE COST OF CONSTRUCTION DETERM INED BY THE VALUATION CELL WORKS OUT TO APPROXIMATELY H1,068 PE R SQ. FT. 3.5 THE ASSESSEE'S REPRESENTATIVE HAS APPEARED BE FORE ASSESSING OFFICER ON 02.01.2014 AND COPY OF THE VALUATION REP ORT WAS SERVED ON THE REPRESENTATIVE, ASKED TO FILE HIS COMMENTS ON T HE SAME. ALSO HE WAS ASKED TO PRODUCE THE COPY OF BUILDING PLAN, BUI LDING APPROVAL, COPY OF LAND DEED AND SUPPORTING EVIDENCES FOR COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE I.E. BREAKUP DETAILS OF CO ST/QUANTITY COMPONENT-WISE AND CASE WAS ADJOURN TO 09.01.2014. THE ASSESSEE'S REPRESENTATIVE HAD APPEARED BEFORE ASSESSING OFFICE R ON 21.01.2014 AND STATED THAT THE ASSESSEE WAS MAINTAINED THE BOO KS OF ACCOUNTS AND BILLS/VOUCHERS FOR COST OF CONSTRUCTION HOWEVER , HE HAS NOT I.T.A.NO.100/MDS/2015. :- 6 -: PRODUCED OF THE SAME. FURTHER, HE FILED REPLY ALONG WITH COPY OF LOAN STATEMENT, SOURCE FOR CASH DEPOSITS, COPY OF LAND D EED AND BREAKUP DETAILS THE COST/QUANTITY COMPONENT-WISE WHICH IS A S UNDER:- ITEM COST (H.) QUANTITY CEMENT 22,77,250 10756 BANS STEEL 37,39,671 137.06 TONE BLUE METAL 6,05,200 436 UNITS BRICKS 4,99,400 170250 NO'S LABOUR 43,93,925 - SAND 5,92,780 454 UNITS ELECTRICAL FITTINGS 2,21,402 -- GRILL ITEMS 1,48,380 --- GLASS 72,340 --- LIFT 9,30,000 --- FRONT ELEVATION 8,64,500 -- PAINT . 65,155 --- SUNDRY BUILDING ITEMS 4,97,896 -- SUNDRIES 2,13,608 - TOTAL 1,51,21,776 IT WAS ADMITTED FACTS THAT THE ASSESSEE HAD UNDERTA KEN CONSTRUCTION OF ONLY THE SKELETAL SUPERSTRUCTURE OF THE BUILDING AN D THE INTERIOR WORK ENTIRELY WAS DONE BY THE TENANT (FLOORING TILES, AI R CONDITIONING, WOOD PARTITIONS, FALSE CEILING, ELECTRICAL WIRING, INTER NAL PAINTING, GENSET INSTALLATION), THE COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE HARDLY I.T.A.NO.100/MDS/2015. :- 7 -: WORKED OUT TO H 280 PER SQ. FT. WHICH WAS TOO LOW A S COMPARED TO THE MARKET RATE. ADDITIONALLY, THE SCOPE OF WORK CARRIE D OUT BY THE TENANT WAS ALSO INDEPENDENTLY ASCERTAINED ALONG WITH THE C OST OF SUCH ADDITIONAL WORK. AN ANALYSIS OF THE DETAILS BY ASSE SSING OFFICER AS FURNISHED BY THE ASSESSEE REVEALED THAT THE LABOUR COMPONENT IS SHOWN AS H. 43,93,925/- WHICH HARDLY WORKS OUT TO H . 82/- PER SQ. FT. WHICH IS FAR LESS THAN THE THEN PREVAILING MARKET R ATE OF CLOSE TO H. 200/- PER SQ. FT. ACCORDING TO ASSESSING OFFICER, I T WAS QUITE OBVIOUS THAT THE ASSESSEE HAS UNDERSTATED HIS INVESTMENT IN THE BUILDING. 3.6 AFTER PROVIDING A COPY OF THE VALUATION REP ORT BY ASSESSING OFFICER , THE ASSESSEE'S REPRESENTATIVE FILED A LET TER DATED 03.02.2014 ALONG WITH OBJECTION TO THE DVO REPORT, DATE-WISE Q UANTITY-WISE MATERIALS PURCHASES FOR CONSTRUCTION OF BUILDING, B OOKS OF ACCOUNTS AND BILLS/VOUCHERS ARE PRODUCED. THE ASSESSEE HAS RAISE D FOLLOWING OBJECTIONS IS AS UNDER; 1)THE ASSESSEE CLAIMED THAT HE HAS FURNISHED VOUCHE RS TO THE EXTENT OF H. 1,42,67,3331- WHICH IS ALMOST THE ENTIRE VOUCHERS AS OPPOSED TO THE STATEMENT IN THE REPORT THAT HE HAD FURNISHED ONLY PART VOUCHERS 2). THE DVO DID NOT ASK FOR QUANTITY PARTICULARS FROM THE ASSES SEE 3). ADOPTION OF CPWD RATES AS AGAINST STATE PWD RATES THAT TOO SUITABLY REWORKED OVER THE PERIOD OF CONSTRUCTION A S AGAINST THE 2011 CPWO RATE ADOPTED BY THE DVO. I.T.A.NO.100/MDS/2015. :- 8 -: 4). ADOPTION OF ARCHITECTS FEE AT 2% OF THE COST WH EN HE HAD NOT AVAILED THE SERVICES OF ONE. 5). THE COST OF CONSTRUCTION IN RESPECT OF THE WORK DONE BY THE TENANT (H. 85,37,600) IS MERELY ADOPTED AS PER DETA ILS FURNISHED TO THE ASSESSING OFFICER AND DEDUCTED FROM THE TOTA L COST WITHOUT INDEPENDENT VERIFICATION OF THE BILLS AND VOUCHERS 6). REFERENCE TO THE VALUATION OFFICER IS MADE BY T HE ASSESSEES REPRESENTATIVE WITHOUT REJECTING THE BOOKS OF ACCOU NTS. 3.7 BOOKS OF ACCOUNTS FOR COST OF CONSTRUCTION PROD UCED BY THE ASSESSEE'S REPRESENTATIVE VERIFIED BY THE ASSESSING OFFICER. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE HAS NOT MAINTAIN ED THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS PROPERLY. IT WAS OBSERVE D BY ASSESSING OFFICER THAT THE BOOKS OF ACCOUNTS ARE PREPARED AT THE TIME OF ASSESSMENT ONLY WITH THE AVAILABLE BILLS AND MOST O F THE EXPENSES ARE SUPPORTED WITH SELF MADE BILLS/VOUCHERS. HENCE THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS PRODUCED COST OF CONSTRUCTION BU ILDING ARE REJECTED BY ASSESSING OFFICER. FURTHER, THE ASSESSING OFFIC ER OBSERVED AS FOLLOWS:- 1). WHILE THE ASSESSEE CLAIMS THAT ALMOST ALL VOUCH ERS ARE PRODUCED, IT IS TO BE STATED THAT THE VOUCHERS ARE AVAILABLE IN RESPECT OF PURCHASE OF STEEL, CEMENT, BLUE METAL TO SOME EXTENT ALL THE OTHER VOUCHERS ARE ALL SELF MADE AND IT IS NOT CORROBORATED. 2). SINCE IT IS NOT PROVED THAT THE ASSESSEE ENGAGE D THE SERVICES OF AN ARCHITECT, IT IS FELT THAT TO THIS EXTENT REL IEF CAN BE GIVEN, WHICH WOULD AMOUNT TO H. 6,47,465/- (THE DVO HAS ES TIMATED THE ARCHITECT FEE AT 1 % ONLY AS AGAINST 2% MENTIONED BY THE ASSESSEE IN HIS LETTER. I.T.A.NO.100/MDS/2015. :- 9 -: 3). IT IS PERTINENT TO MENTION HERE THAT THE ASSESS EE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNTS. THE ACCOUNTS PURPORTEDLY MAINTAINED FOR THE CONSTRUCTION (CONSTRUCTION A/C) BY ITSELF WOULD NOT QUALIFY AS BOOKS OF ACCOUNTS PER SE AND THE QUESTION OF MAKING A REFERENCE TO THE VALUATION CELL ONLY AF TER REJECTING THE BOOKS OF ACCOUNTS DOES NOT ARISE IN THIS CASE A S WAS HELD IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 197 TAXMANN203 (SC) QUOTED BY THE ASSESSEE . 3.8 THE ASSESSEE WAS THEN EXAMINED UNDER OATH U/S 1 31 BY ASSESSING OFFICER ON 27.02.2014 TO QUESTION AND VERIFY THE V ARIOUS ASPECTS OF THE CONSTRUCTION OF THE BUILDING. THE ASSESSEE HAS STATED THAT THE CONSTRUCTION WORK WAS CARRIED OUT BY HIM PERSONALLY UNDER THE DIRECT SUPERVISION OF HIS FATHER SHRI. C. RANGASAMY (REPLY TO Q. NO. 8) 3.9 IN SUPPORT OF THE COST ADMITTED BY ASSESSEE H IS ACCOUNTS, THE ASSESSEE ALSO FILED ANOTHER VALUATION REPORT DATED 18.01.2014 OF SHRI. R. SUNDARRAJ, A REGISTERED VALUER AS PER WHICH THE COST OF CONSTRUCTION IS WORKED OUT AT H. 1,62,36,000/-.THE ASSESSEE HAS SOUGHT TO EXPLAIN THE DIFFERENCE OF H. 11,14,224/- IN THE COST AS PER THIS REPORT AS COMPARED WITH HIS ACCOUNTS, AS THE LOW WEIGHTAGE GI VEN TO THE SELF- SUPERVISION DONE BY HIM BY THE REGISTERED VALUER (1 0%). 3.10 ACCORDING TO ASSESSING OFFICER THE REGISTERED VALUER HAS GIVEN THE BREAK- UP OF THE MATERIAL USAGE BY THE ASSESSEE AND CERTAIN GLARING INCONSISTENCIES ARE NOTED IN THIS VALUATION REPORT. THE REGISTERED VALUER HAS NOT PROVIDED FOR THE SAND USE D WHEREAS THE I.T.A.NO.100/MDS/2015. :- 10 -: ASSESSEE STATED THAT 454 UNITS OF SAND WERE USED. A LSO THE REGISTERED VALUER HAS GIVEN THE PERIOD OF COMMENCEMENT AND COM PLETION OF BUILDING FROM APRIL'2009 TO MARCH'2010 HOWEVER THE ASSESSEE STATED THAT THE PERIOD OF COMMENCEMENT AND COMPLETION OF B UILDING FROM APRIL'2009 TO SEPTEMBER'2010. THERE IS ALSO A DIFFERENCE IN THE CONSTRUCTED AREA WHICH IS SHOWN AT 53,331 SQ.FT IN THE APPROVED VALUER'S REPORT AS AGAINST AN AREA OF 57,347 SQ.FT MENTIONED IN THE DVO'S REPORT. THUS, HE REJECTED THE VALUATION REPOR T FROM REGISTERED VALUER. 3.11 ACCORDINGLY, THE ASSESSING OFFICER MADE AN A DDITION OF H89,63,245/- TOWARDS COST OF CONSTRUCTION FOR THE A SSESSMENT YEAR 2011-12. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) PLAC ING RELIANCE ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI. RAYA R. GOVINDARAJAN IN ITA NO.255/2014, DATED 22.0 7.2014 OBSERVED THAT THE ASSESSING OFFICER IS JUSTIFIED IN ADOPTING THE VALUE AS FOR THE CPWD RATES AND CONFIRMED THE ADDITION. AGAINST TH IS, THE ASSESSEE PREFERRED AN APPEAL BEFORE US. I.T.A.NO.100/MDS/2015. :- 11 -: 5. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT TH E ASSESSING OFFICER IS NOT JUSTIFIED IN REFERRING THE CASE TO D ISTRICT VALUATION OFFICER FOR DETERMINING THE COST OF CONSTRUCTION OF THE BUI LDING. HE ALSO SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON THE REASON THAT EXPENDITURES ARE SU PPORTED BY SELF MADE VOUCHERS. ACCORDING TO THE LD. AUTHORISED REP RESENTATIVE IT CANNOT BE A REASON TO REJECT THE BOOKS OF ACCOUNTS UNLESS HE PINPOINT SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS. FURTHER, HE SUBMITTED THE WRITTEN SUBMISSIONS AS FOLLOWS:- (I) SKELTON STRUCTURE ONLY PROVIDED TO TENANT AFTE R COMPLETING PLASTERING. (II) FLOORING, GRANITE TO STEPS, FALSE CEILINGS, L UXURY LIGHT FITTINGS AND FURNITURE FITTINGS ALL ARE BORNE BY THE TENANT KANNAN DEPARTMENTAL STORES. (III) STATE PWD RATES FOR DETERMINING THE COST O F CONSTRUCTION IN WHICH THERE ARE A,B,C,D AND D1 IS THE CLASSIFICATIO N AVAILABLE DEPENDING UPON THE NATURE OF CONSTRUCTION. I.T.A.NO.100/MDS/2015. :- 12 -: (IV) THIS SKELTON BUILDING ONLY COMES UNDER 01 CL ASSIFICATION. THE FOLLOWING RATES ARE APPLICABLE TO ADOPT IN VALUATIO N OF COST. TYPE A H. 3850/ SQ. METER TYPE B H. 3135/ SQ.METER TYPE C H. 2420/ SQ.METER TYPE D H. 2475/ SQ.METER TYPE D1 H. 2590/ SQ.METER. IF THE D1 TYPE OF CONSTRUCTION IS ADOPTED, THE VALU E WORKS ONLY AT H. 1,48,16,071/-. (V) USED ONLY HOLLOW BRICKS IN CONSTRUCTION, NO WOOD IS PROVIDED IN THE BUILDING, NO WINDOW IS PROVIDED. (VI) THE SITE IN WHICH THE BUILDING IS COME UP, P REVIOUSLY IT WAS RICEMILL DRYING YARD. IT WAS 12 FT DEPTH FROM THE G ROUND. HENCE THERE WAS NO EXPENSES TOWARDS EARTHWORK. (VII) NO ENGINEERS WAS ENGAGED IN CONSTRUCTION AN D MORE SPECIFICALLY ARCHITECT WAS NOT ENGAGED. (VIII) THE CONSTRUCTION OF THE COMPLEX WAS DONE DURING THE YEARS ENDED 31.3.2010 AND 31.3.2011 IN WHICH YEARS THE CEMENT, BRICKS, STEELS AND LABOUR MANSION WERE VERY VERY CH EAP WHEN TO COMPARE TO THE PRESENT RATE. I.T.A.NO.100/MDS/2015. :- 13 -: (IX) THERE IS NO INDICATION IN THE DVO REPORT UN DER WHICH CLASSIFICATION HE DONE IN THE VALUATION. 6. THE ASSESSEE RELIED ON THE DECISION OF THE DE LHI HIGHCOURT DATED 19.2.15 IN THE CASE OF CIT VS NISHI MEHRA & OTHERS. A COPY OF THE ABOVE DECISION IS KEPT ON RECORD. THE MAIN F INDINGS IN THE ABOVE DECISION ARE AS UNDER: A. THE PRIMARY BURDEN TO PROVE UNDER STATEMENTOR C ONCEALMENT OF INCOME IS ON THE REVENUE AND IT IS ONLY WHEN SUC H BURDEN IS DISCHARGED IT WOULD BE PERMISSIBLE TO RELY UPON THE VALUATION GIVEN BY THE DVO. B. AN ADDITION TO WARDS UNDER ESTIMATE OF COST OF CONSTRUCTION CANNOT BE MADE SOLELY ON THE BASIS OF REPORT OF THE DVO. IN VIEW OF THE FINDINGS OF THE DELHI HIGH COUR T THE ADDITION MADE TOWARDS UNDER ESTIMATE OF COST OF CONSTRUCTION NEEDS TO BE DELETED. C. FURTHER RELIANCE IS PLACED ON THE ORDER OF ITAT, LUCKNOW BENCH 'A' DATED 16/10/14 IN THE CASE OF DCIT VS. SATISH COLD STORAGE (36 ITR (TRIBUNAL) 435 (LUCKNOW) AND SARGAM I.T.A.NO.100/MDS/2015. :- 14 -: CINEMA VS. CIT 328 ITR 513 (SC). D. IN THE COURSE OF PROCEEDINGS BEFORE CIT(A) SALEM, THE ASSESSEE FILED DETAILS OF COST OF CONSTRUCTION AS P ER STATE PWD RATES ACCORDING TO WHICH THE COST OF CONSTRUCTION C OMES TO H. 1,48;16,071/-. E. THE DIRECTIONS OF CIT(A) TO THE ASSESSING OFFI CER IS TO ADOPT THE VALUES AS PER THE STATE PWD RATES AND NOT TO AD OPT CPWD RATES AS TAKEN BY THE VALUATION OFFICER. F. A COPY OF WORKING GIVEN TO CIT (A) ARRIVIN G AT A COST OF CONSTRUCTION AT H. 1,48,16;071 AS PER PWD RATES WAS GIVEN TO THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS PASSED A REVISION ORDER DATED 07.01.15 TO GIVE EFFECT TO THE ORDER OF CIT(A} AND HE HAS GIVEN A RELIEF OF H. 3390,280/-. THE BASIS FOR ARRIVING FOR AT THE ABOVE FIGURE IS NOT AVAILABLE IN THE REVISION O RDER. NO OPPORTUNITY WAS GIVEN BY THE ASSESSING OFFICER TO T HE ASSESSEE BEFORE PASSING THE ORDER DT 07.01.15. G. AS COULD BE SEEN FROM PAGE NUMBER 4 OF THE ASSESSMENT ORDER, THE BOOKS OF ACCOUNTS FOR THE COST OF CONSTR UCTION HAVE BEEN PRODUCED BY THE ASSESSEE. THE ASSESSING OFFICE R HAS I.T.A.NO.100/MDS/2015. :- 15 -: SUMMARILY REJECTED THE SAME WITHOUT PINPOINTING ANY SPECIFIC DEFECTS IN ACCOUNTS WHICH IS NOT IN ACCORDANCE WITH THE DECISION OF THE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS C IT ( 2011 ) 197 TAXMAN 203. IN THE REPORT OF DISTRICT VALUATION OFFICER A SUM OF H85,37,600/- WAS GIVEN AS DEDUCTION TOWARDS INVE STMENT MADE BY THE TENANT NAMELY KANNAN DEPARTMENTAL STORE. THE DVO HAS WORKED OUT THE FIGURES EN THE BASIS OF THE CPWD RAT ES AND HAS DEDUCTED THE INVESTMENT OF H. 85,37,600/- MADE BY TENANT AND HAS ARRIVED AT COSI OF CONSTRUCTION BY ASSESSEE. TH E ABOVE METHOD OF WORKING OUT THE COST OF CONSTRUCTION FOR THE ASSESSEE IS NOT CORRECT SINCE THE AMOUNT SPENT BY THE TENANT IS MUCH MORE THAN THE ABOVE FIGURE OF H. 85,37,600/- . A COPY OF DVO'S REPORT IS ENCLOSED. H. HE FURNISHED A COPY OF APPROVED VALUER REPOR T GIVEN BY ASSESSE IS ENCLOSED ACCORDING TO WHICH THE COST IS H.1,62,36,000/-. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT ASSESSEES BOOKS OF ACCOUNTS ARE NOT RELIABLE. HENCE, REFERENCE WAS MADE TO DVO TO DETERMINE THE COST OF CONSTRUCTION OF BUILDING SITUATED AT SALEM MAIN ROAD, NAMAKKAL. FUR THER, HE I.T.A.NO.100/MDS/2015. :- 16 -: SUBMITTED THAT MOST OF THE EXPENDITURES ARE SUPPORT ED BY SELF MADE VOUCHERS. HENCE, THE BOOKS OF ACCOUNTS ARE REJECTE D. 8. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATERIAL ON RECORD. IN THIS CASE THE ASSESSEE ADMITTED COST OF CONSTRUC TION OF H1,55,74,158/- LOCATED AT 196, SALEM MAIN ROAD, NAM AKKAL IN THE NAME OF N.S.R. MALL. ACCORDING TO THE ASSESSING OF FICER THE COST ADMITTED BY ASSESSEE IS VERY LOW ON COMPARING WITH THE BUILDING STRUCTURE. THE BUILDING COMPRISED OF BASEMENT/GROU ND FLOOR + 3 FLOORS (5 FLOORS). HE HAD DEPUTED AN INSPECTOR TO VISIT A ND SUBMIT A REPORT. THE INSPECTOR SUBMITTED HIS REPORT ON 10.07.2013. ACCORDING TO HIM THE COST OF CONSTRUCTION IS ABOUT H4,50,00,000/-. V IDE HIS LETTER DATED 19.07.2013, THE ASSESSEE OBJECTED THE VALUATION REP ORT BY THE INSPECTOR. THE DEPARTMENT VIDE LETTER DATED 25.07. 2013, REFERRED THE MATTER TO THE DISTRICT VALUATION OFFICER, CHENNAI A S PER THE PROVISIONS OF SEC. 142A OF THE INCOME TAX ACT. FURTHER HE IS SUED NOTICE TO THE ASSESSEE ON 18.09.2013 AND THE CASE WAS POSTED FOR HEARING ON 04.10.2013 BY ASSESSING OFFICER. THE ASSESSEES RE PRESENTATIVE APPEARED BEFORE THE ASSESSING OFFICER ON 03.10.2013 ALONG WITH CASH FLOW STATEMENT, STATEMENT OF AFFAIRS, CAPITAL ACCOU NT AND NAME AND ADDRESS OF THE SUNDRY CREDITORS. THE ASSESSEE AT TH AT POINT OF TIME NOT I.T.A.NO.100/MDS/2015. :- 17 -: PRODUCED BOOKS OF ACCOUNTS. LATER THE CASE WAS ADJO URNED TO 14.10.2013 BY ASSESSING OFFICER. IN MEANTIME, THE DISTRICT VALUATION OFFICER, CHENNAI GAVE A VALUATION REPORT ON 01.01.2 014. HE DETERMINED THE COST OF CONSTRUCTION AT H5,70,06,100 /-. THE ASSESSEES REPRESENTATIVE APPEARED BEFORE THE ASSESSING OFFICE R ON 02.01.2014 AND ASSESSING OFFICER GAVE A COPY OF THE VALUATION REPORT TO HIM AND ASSESSING OFFICER CALLED FOR COPY OF BUILDING PLAN, BUILDING APPROVAL, COPY OF LAND DEED AND SUPPORTING EVIDENCES FOR COST OF CONSTRUCTION WITH BREAK UP. THE ASSESSEES REPRESENTATIVE APPEAR ED ON 21.01.2014 BEFORE THE ASSESSING OFFICER AND STATED THAT ASSES SEE MAINTAINED BOOKS OF ACCOUNTS AND BILLS/VOUCHERS FOR THE CONSTR UCTION. HOWEVER, HE HAS NOT PRODUCED THE SAME. LATER, THE ASSESSEE P RODUCED THE BOOKS OF ACCOUNTS FOR COST OF CONSTRUCTION PRODUCE D BY THE ASSESSEE'S REPRESENTATIVE VERIFIED BY THE ASSESSING OFFICER. A CCORDING TO ASSESSING OFFICER, THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS PROPERLY. IT WAS OBSERVED BY ASSESSI NG OFFICER THAT THE BOOKS OF ACCOUNTS ARE PREPARED AT THE TIME OF ASSES SMENT ONLY WITH THE AVAILABLE BILLS AND MOST OF THE EXPENSES ARE SU PPORTED WITH SELF MADE BILLS/VOUCHERS. HENCE THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS PRODUCED COST OF CONSTRUCTION BUILDING ARE REJECTED BY ASSESSING OFFICER. FURTHER, THE ASSESSING OFFICER OBSERVED A S FOLLOWS:- I.T.A.NO.100/MDS/2015. :- 18 -: 1). WHILE THE ASSESSEE CLAIMS THAT ALMOST ALL VOUCH ERS ARE PRODUCED, IT IS TO BE STATED THAT THE VOUCHERS ARE AVAILABLE IN RESPECT OF PURCHASE OF STEEL, CEMENT, BLUE METAL TO SOME EXTENT ALL THE OTHER VOUCHERS ARE ALL SELF MAD E AND IT IS NOT CORROBORATED. 2). SINCE IT IS NOT PROVED THAT THE ASSESSEE ENGAGE D THE SERVICES OF AN ARCHITECT, IT IS FELT THAT TO THIS E XTENT RELIEF CAN BE GIVEN, WHICH WOULD AMOUNT TO H. 6,47,465/- ( THE DVO HAS ESTIMATED THE ARCHITECT FEE AT 1 % ONLY AS AGAINST 2% MENTIONED BY THE ASSESSEE IN HIS LETTER. 3). IT IS PERTINENT TO MENTION HERE THAT THE ASSESS EE HAS NOT MAINTAINED REGULAR BOOKS OF ACCOUNTS. THE ACCOU NTS PURPORTEDLY MAINTAINED FOR THE CONSTRUCTION (CONSTR UCTION A/C) BY ITSELF WOULD NOT QUALIFY AS BOOKS OF ACCOUNTS PER SE AND THE QUESTION OF MAKING A REFERENCE TO THE VALUATION CELL ONLY AFTER REJECTING THE BOOKS OF AC COUNTS DOES NOT ARISE IN THIS CASE AS WAS HELD IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 197 TAXMANN203 (SC) QUOTED BY THE ASSESSEE . THE ASSESSEE WAS THEN EXAMINED UNDER OATH U/S 131 BY ASSESSING OFFICER ON 27.02.2014 TO QUESTION AND VERIFY THE V ARIOUS ASPECTS OF THE CONSTRUCTION OF THE BUILDING. THE ASSESSEE HAS STATED THAT THE CONSTRUCTION WORK WAS CARRIED OUT BY HIM PERSONALLY UNDER THE DIRECT SUPERVISION OF HIS FATHER SHRI. C. RANGASAMY (REPLY TO Q. NO. 8). ACCORDING TO ASSESSING OFFICER THE REGISTERED VALUE R HAS GIVEN THE BREAK- UP OF THE MATERIAL USAGE BY THE ASSESSEE AND CERTAIN GLARING INCONSISTENCIES ARE NOTED IN THIS VALUATION REPORT. THE REGISTERED VALUER HAS NOT PROVIDED FOR THE SAND USED WHEREAS T HE ASSESSEE STATED THAT 454 UNITS OF SAND WERE USED. ALSO THE R EGISTERED VALUER HAS GIVEN THE PERIOD OF COMMENCEMENT AND COMPLETION OF BUILDING I.T.A.NO.100/MDS/2015. :- 19 -: FROM APRIL'2009 TO MARCH'2010 HOWEVER THE ASSESSEE STATED THAT THE PERIOD OF COMMENCEMENT AND COMPLETION OF BUILDING F ROM APRIL'2009 TO SEPTEMBER'2010. THERE IS ALSO A DIFFERENCE IN THE CONSTRUCTED AREA WHICH IS SHOWN AT 53,331 SQ.FT IN THE APPROVED VALU ER'S REPORT AS AGAINST AN AREA OF 57,347 SQ.FT MENTIONED IN THE DV O'S REPORT. THUS, HE REJECTED THE VALUATION REPORT FROM REGISTERED VA LUER. 9. AS SEEN FROM THE ABOVE, THE ASSESSEE HAS PRODUCE D THE BOOKS OF ACCOUNTS BEFORE THE ASSESSING OFFICER. THE ASSES SING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS ON THE REASON THAT T HE BOOKS OF ACCOUNTS WERE PREPARED BY ASSESSEE AT THE STAGE OF ASSESSMENT AND MOST OF THE EXPENSES ARE SUPPORTED BY SELF MADE BIL LS/VOUCHEH. HENCE, THE BOOKS OF ACCOUNTS AND BILLS/VOUCHERS AGA INST THE CONSTRUCTION WERE REJECTED AND REFERENCE WAS MADE T O DVO U/S.142A OF THE ACT. 10. THE SECTION 142A READS AS FOLLOWS:- 142A (1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF T HE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OF SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERR ED TO IN SECTION 69A OR I.T.A.NO.100/MDS/2015. :- 20 -: SECTION 69B IS REQUIRED TO BE MADE, THE ASSESSING O FFICER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH V ALUE AND REPORT THE SAME TO HIM. 11. UNDER THE PROVISION OF SECTION 142A(1), THE ASSESSING OFFICER COULD REFER THE MATTER TO DVO FOR ASCERTAINING THE COST OF CONSTRUCTION WHEN THE PROCEEDING IS PENDING BEFORE HIM. HOWEVER, BEFORE REFERRING TO THE DVO THE ASSESSING OFFICER S HALL REJECT THE BOOKS OF ACCOUNTS. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THERE IS NO REFERENCE TO ANY MATERIAL /EVIDENCE/ INFORMAT ION ON THE BASIS OF WHICH IT COULD BE SAID THAT THE COST OF CONSTRUCTIO N WAS SHOWN BY ASSESSEE WAS UNDERSTAND OR ANYTHING ABOVE WHAT WAS DISCLOSED BY ASSESSEE IN THE BOOKS OF ACCOUNTS. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAD PRODUCED BOOKS OF ACCOU NTS TO THE ASSESSING OFFICER, THE ASSESSING OFFICER REJECTED T HE BOOKS OF ACCOUNTS WITH REFERENCE TO THE COST OF CONSTRUCTIO N ON THE REASON THAT EXPENDITURE ARE SUPPORTED BY SELF MADE VOUCHER S/BILLS. WE NOTICED THAT EVEN BEFORE VERIFYING THE BOOKS OF ACC OUNTS MAINTAINED BY THE ASSESSEE AND WITHOUT PINPOINTING ANY DEFECT IN THE BOOKS OF ACCOUNTS REGARDING COST OF CONSTRUCTION REFERENCE W AS MADE TO THE DVO FOR VALUATION. AS SEEN FROM THE ASSESSMENT ORD ER AND NARRATED I.T.A.NO.100/MDS/2015. :- 21 -: IN THE EARLIER PARA OF THIS ORDER, THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND PRODUCED THE SAME BEFORE THE ASSESSING OFFICER. ACCORDING TO THE ASSESSING OFFICER BOOKS OF ACCOUNT S WAS PREPARED AT THE TIME OF ASSESSMENT ONLY. VARIOUS EXPENDITURES ARE SUPPORTED BY SELF MADE VOUCHERS. BUT THE ASSESSING OFFICER HAS N OT FOUND OUT ANY DEFECT IN THE BOOKS/RECORDS/BILLS/ETC. WITHOUT CAU SING ANY DEFECTS IN BOOKS REGULARLY MAINTAINED AND WITHOUT REJECTING TH E BOOKS U/S.145 OF THE ACT, THERE IS NO REASON TO REFER THE MATTER TO D.VO ON THE PRESUMPTION THAT THE COST /INVESTMENT IN CONSTRUCTI ON IS LOW. THE ASSESSING OFFICER COULD REJECT THE BOOKS OF ACCOUNT S IN THE FOLLOWING POSSIBLE THREE SITUATION. (A) NON-COMPLIANCE WITH METHOD OF ACCOUNTING IN A CONSISTENT MANNER. (B) NON-COMPLIANCE WITH ACCOUNTING STANDARDS PRESCRIBED UNDER SECTION 145 OF THE INCOME TAX ACT. (C) ACCOUNTS WERE MAINTAINED BY AN ASSESSEE, WHICH WERE INCOMPLETE AND INCORRECT. SECTION 145 GIVES THE POWER TO REJECT THE BOOKS RES ULTS AND ESTIMATE THE INCOME IN CERTAIN CIRCUMSTANCES. AS THE ASSESS ING OFFICER EXAMINES THE ACCOUNTS OF AN ASSESSEE, HE HAS TO CON SIDER THE FOLLOWING QUESTIONS:- 1. WHETHER THE ASSESSEE HAS REGULARLY EMPLOYED A METHOD OF ACCOUNTING. I.T.A.NO.100/MDS/2015. :- 22 -: 2. EVEN IF REGULAR ADOPTION OF A METHOD OF ACCOUNTING IS THERE, WHETHER THE ANNUAL PROFITS CAN PROPERLY BE DEDUCTED FROM METHOD EMPLOYED; 3. WHETHER THE ACCOUNTS ARE CORRECTLY MAINTAINED; AND 4. WHETHER THE ACCOUNTS MAINTAINED ARE COMPLETE IN TH E SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN . IF THE ANSWERS TO ALL THE ABOVE FOUR QUESTIONS ARE IN AFFIRMATIVE, THEN ASSESSEES PROFITS ARE TO BE COMP UTED ON THE BASIS OF HIS ACCOUNTS. IN SUCH CASE, NEITHER TH E FIRST PROVISO TO SECTION 145(1) NOR SECTION 145(2) CAN BE INVOKED. IN THE FINDINGS ON QUESTION NOS.1, 3 AND 4 ARE IN AFFIRMATIVE, BUT FINDING IN QUESTION NO.2 IS NEGATI VE, FIRST PROVISO TO SECTION 145(1) COMES IN AND COMPUTATION HAS TO BE MADE ON SUCH BASIS AND IN SUCH MANNER AS ASSESSING OFFICER, MAY DETERMINE. IF THE FINDINGS ON QUESTION NO.1, 3 OR 4 IS IN NEG ATIVE SECTION 145(2) APPLIES AND ASSESSING OFFICER, MAY M AKE A BEST JUDGMENT IN MANNER PROVIDED FOR IN SECTION 144 . IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE AS SESSING OFFICER WAS NOT IN DISPUTE WITH THE METHOD OF ACCOUNTING FOLLOW ED BY THE ASSESSEE OR COMPLIANCE WITH THE ACCOUNTING STANDARDS PRESCRI BED UNDER THE INCOME TAX ACT. THE ONLY DISPUTE, WHICH MADE HIM I NVOKE SECTION 142A WAS THE ASSUMPTION THAT THE ASSESSEES EXPENDI TURE WERE SUPPORTED BY SELF MADE VOUCHERS. HOWEVER, HE COULD NOT SUBSTANTIATE ANYTHING TO PROVE THAT ITS ACCOUNTS WERE INCOMPLETE AND INCORRECT. I.T.A.NO.100/MDS/2015. :- 23 -: 12. IN OUR OPINION, THE ASSESSING OFFICER PREJU DGED THE ISSUE AS COST OF CONSTRUCTION DECLARED BY ASSESSEE IS VERY LOW AS ON THAT REASON HE REFERRED THE VALUATION OF CONSTRUCTION TO DVO WHICH CLEARLY SHOW THAT THERE IS NO PROPER APPRECIATION OF THE FACTS OF THE CASE. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNTS, BILLS/VOUCHERS SHOWING COST OF CONSTRUCTION. ACCOR DING TO ASSESSING OFFICER CERTAIN EXPENDITURE OF THE ASSESSEE WERE SU PPORTED BY SELF MADE VOUCHERS. THE ASSESSEE ALSO PRODUCED DETAILS O F LOAN AVAILED/SOURCE FOR CASH DEPOSITS, COPY OF LAND DEED AND BREAK UP DETAILS ON COST OF CONSTRUCTION. THE ASSESSING OFF ICER ALSO AGREED THAT THE ASSESSEE HAD UNDERTAKEN CONSTRUCTION OF SKELET AL SUPERSTRUCTURE OF THE BUILDING AND INTERIOR WORK OF THE BUILDING WAS ENTIRELY DONE BY THE TENANT (FLOORING TILES, AIR CONDITIONING, WOOD PARTITIONS, FALSE CEILING, ELECTRICAL WIRING, INTERNAL PAINTING, GENS ET INSTALLATION). HOWEVER, THE ASSESSING OFFICER HAS NOT READY TO ACC EPT THE SAME ON THE REASON THAT CERTAIN EXPENDITURE WERE SELF MADE VOUCHERS. IN OUR OPINION, IN THIS LINE OF BUSINESS ACTIVITY OF CIVIL CONSTRUCTION, CERTAIN ITEMS OF EXPENDITURE TO A SMALL AND REASONABLE EXTE NT MAY NOT BE SUPPORTED WITH PROPER EXTERNAL EVIDENCE I.E. CERTAI N LABOUR PAYMENTS AND PURCHASE OF MATERIALS SUCH AS BRICKS, SAND ETC. , UNDOUBTEDLY, SUCH ITEMS WOULD BE WELL WITHIN THE ACCEPTABLE LIMITS OF REASONABLENESS. I.T.A.NO.100/MDS/2015. :- 24 -: ANYHOW, SUCH ITEMS OF EXPENDITURE WOULD BE WELL SUP PORTED BY SELF MADE VOUCHERS. IT BE APPRECIATED THAT SUCH TYPE OF EXPENDITURE WOULD BE ACCEPTABLE AT THE THRESHOLD ON THE BASIS OF REAS ONABLENESS. IT IS IMPERATIVE TO INCUR SUCH EXPENDITURE AND THE SAME C ANNOT BE DISPUTED BY THE ASSESSING AUTHORITIES. TEST OF REASONABLENE SS HAS BEEN WIDELY ACCEPTED IN VARIOUS JUDICIAL PRONOUNCEMENTS FOR ALL OWABILITY OF SUCH EXPENDITURE IN THE HANDS OF ASSESSEE. THE LEARNED ASSESSING OFFICER IGNORING THIS BASIC APPROACH OF JUDICIOUS EVALUATIO N PROJECTED THE SAME ISSUE AS A WARRANTING REASON FOR REJECTION OF BOOK RESULTS. IN SUCH A SCENARIO, IF THE LEARNED ASSESSING OFFICER IS IN DI SPUTE WITH ANY PARTICULAR ITEM OF EXPENDITURE AS UNVERIFIABLE, THE SAME ITEM SHOULD HAVE BEEN CONSIDERED AS SPECIFIC ADDITION IN ASSESS MENT. THE GENERAL COMMENT OF THE ASSESSING OFFICER CLEARLY DEMONSTRAT ES THAT HE COULD NOT QUANTIFY ANY SPECIFIC EXPENDITURE AS UNVERIFIAB LE WHICH WARRANTS FOR REFERENCE TO THE DVO. INACTION ON THE PART OF A SSESSING OFFICER TO SPECIFICALLY QUANTIFY UNVERIFIABLE EXPENDITURE FOR A SPECIFIC ADDITION IN THE ASSESSMENT CANNOT EMPOWER SUCH AN ASSESSING OFF ICER TO RESORT TO REJECTION OF BOOK RESULTS SO AS TO INVOKE THE PROVI SIONS OF SECTION 142A OR 145. THIS PARTICULAR REASON RELIED UPON BY THE A SSESSING OFFICER FOR REJECTING THE BOOKS IS LEGALLY UNSUSTAINABLE AS THE SAME IS NOT ESTABLISHING ANY INCOMPLETENESS OR INCORRECTNESS OF I.T.A.NO.100/MDS/2015. :- 25 -: ASSESSEES ACCOUNTS RATHER THAN HE IS PREOCCUPIED W ITH A VIEW THAT THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE IS V ERY LOW . JUDICIAL PRECEDENCE IS CATEGORICALLY IN FAVOUR OF AN ASSESSE E IN THIS CONTEXT BY HOLDING THAT SUCH ACTIONS OF ASSESSING OFFICERS WER E HELD TO BE LEGALLY UNTENABLE. ABSENCE OF VOUCHERS OR THE SUPPORTING EV IDENCE IN RESPECT OF A PARTICULAR ITEM OF EXPENDITURE CANNOT BY ITSEL F EMPOWER AN ASSESSING OFFICER TO INVOKE PROVISION OF SECTION 14 2A OR 145 OF THE ACT IN REJECTING THE BOOKS OF ACCOUNT. IN OUR OPINION, REJECTION OF BOOKS CANNOT BE RESTORED TO SIMPLY ON THE BASIS OF ABSENC E OF SOME VOUCHERS AND FAILURE TO PRODUCE THE SAME BY THE ASSESSEE. IN OTHER WORDS, ANY SUCH SITUATION SHOULD ONLY WARRANT A SPECIFIC ADDIT ION BY THE ASSESSING OFFICER IF HE COMES TO A CONCLUSION THAT SUCH EXPEN DITURE HAD NOT BEEN INCURRED OR NOT VERIFIABLE. INSTEAD OF ADOPTING THI S ACCEPTED APPROACH IF AN ASSESSING OFFICER RESORTS TO A CONVENIENT APP ROACH OF REJECTING THE BOOKS IN TOTAL BEFORE EXAMINING THE SAME AND RE FERRING THE MATTER TO DVO AND SUCH ACTION WOULD BE ILLEGAL AGAINST THE TENETS OF LAW. IN OUR OPINION, ON ACCOUNT OF MERE ABSENCE OF VOUCHERS TO SUBSTANTIATE ENTRIES FOR THE ACCOUNTS, ACCOUNT IN TOTAL CANNOT B E REJECTED. IN THIS SCENARIO A VERY GENERAL FINDING MADE BY THE ASSESSI NG OFFICER WITHOUT ANY SPECIFIC FOCUS ON ANY PARTICULAR ITEM OF EXPEND ITURE, ENTIRE ACCOUNTS CANNOT BE REJECTED UNDER SECTION 145(3). A CTION OF THE I.T.A.NO.100/MDS/2015. :- 26 -: ASSESSING OFFICER CLEARLY DEMONSTRATES THAT HE COUL D NOT GATHER ANY DETAILS OR FIND ANY IRREGULARITY IN MAINTENANCE OF THE BOOKS SO AS TO JUSTIFY REJECTION OF BOOKS IN TOTO. IT WAS ALSO EST ABLISHED BEYOND DOUBT THAT ASSESSING OFFICER COULD NOT QUANTIFY ANY SPECI FIC AMOUNT OF EXPENDITURE FOR DISALLOWANCE. ABSENCE OF SOME OF TH E VOUCHERS OR SELF MADE VOUCHERS WAS PROJECTED AS A REASON FOR REJECTI ON OF BOOKS. IF AT ALL THERE WAS ANY LAPSE ON THE PART OF THE ASSESSEE IN RESPECT OF MAINTAINING VOUCHERS OF A PARTICULAR ITEM OF EXPEND ITURE, THE SAME MAY WARRANT, AT THE MOST A SPECIFIC ADDITION AND NO THING BEYOND THAT. A MINOR IRREGULARITY CANNOT BE BLOWN OUT OF PROPORT ION TO RESORT A CONVENIENT APPROACH OF THE REJECTION OF THE BOOK RE SULTS SO AS TO REFER THE MATTER TO DVO. IN VIEW OF THE SAME, THE REASONI NG OFFERED BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS AS LEGALL Y UNSUSTAINABLE PROPOSITION. EVEN ON THIS ISSUE, THE LEARNED ASSES SING OFFICER WOULD HAVE RESORTED TO A MORE SPECIFIC APPROACH OF IDENTI FYING SUCH EXPENDITURE, WHICH ARE NOT ACCEPTABLE AND ARE ON TH E HIGHER SIDE FOR DISALLOWANCE INSTEAD OF REJECTING BOOK RESULTS IN T OTO. COURTS HAVE REPEATEDLY HELD THAT REASONABLENESS OF THE EXPENDIT URE SHOULD BE JUDGED FROM THE VIEW POINT OF THE BUSINESS CARRIED ON BY THE ASSESSEE AND NOT FROM THE VIEW POINT OF THE REVENUE AUTHORIT IES. I.T.A.NO.100/MDS/2015. :- 27 -: 13. THUS IN OUR OPINION, IN THIS CASE THE ASSESS EE MAINTAINED BOOKS OF ACCOUNTS AND DULY FURNISHED BEFORE THE ASSESSING OFFICER AND HE HAS NOT APPRECIATED THE SAME AND ONLY ON PRESUMPTION TH AT COST OF CONSTRUCTION WAS VERY LOW, HE REFERRED THE MATTER T O DVO WITHOUT PROPERLY REJECTING THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IN OUR OPINION, REFERENCE TO DVO U/S.142A(3) OF THE ACT COULD BE MADE WHEN BOOKS OF ACCOUNTS ARE REJECTED BY PINPOINTING DEFECT THEREIN. IN OTHER WORDS, IF THE BOOKS OF ACCOUNTS ARE FOUND TO BE CORRECT AND COMPLETE IN ALL RESPECT AND NO DEFECT IS POINTED OU T THEREIN AND THE COST OF CONSTRUCTION OF BUILDING IS RECORDED THEREI N, ADDITION REFERRED U/S.142A (2) IS NOT APPROPRIATE. ACCORDINGLY, WE A RE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE WHEN THE ASSESSING OF FICER HAS NOT REJECTED THE BOOKS OF ACCOUNT BY PIN POINTING ANY D EFECTS IN THE BOOKS OF ACCOUNT REFERENCE TO THE DVO IS NOT VALID AND, T HEREFORE, DVOS REPORT COULD NOT BE UTILIZED FOR FRAMING ASSESSMENT EVEN IF SUCH A REPORT IS CONSIDERED TO BE OBTAINED U/S.142A OF THE ACT. SINCE REFERENCE TO DVO BEING HELD AS INVALID, THE ASSESSM ENT THEREAFTER BASED ON THAT DVO REPORT ALSO BE INVALID. THIS VIE W OF OUR IS FORTIFIED BY FOLLOWING PRECEDENTS:- (I) DCIT VS. SATISH COLD STORAGE 36 ITR (TRIBUNAL) 435 (LUCKNOW) WHEREIN HELD THAT ASSESSING OFFICER COULD NOT I.T.A.NO.100/MDS/2015. :- 28 -: REFER THE MATTER TO DVO WITHOUT BOOKS OF ACCOUNT BE ING REJECTED. (II) SARGAM CINEMA VS. CIT (328 ITR 513)(SC) WHEREI N HELD THAT REFERENCE TO DVO WAS MADE WITHOUT REJECTING TH E BOOKS OF ACCOUNT, THE REFERENCE TO THE D.V.O. ITSE LF IS BAD IN LAW. ACCORDINGLY, WE ARE INCLINED TO ALLOW THE APPEAL OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.100/MDS/2015 IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 22ND DAY OF M AY, 2015, AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:22.05.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.100/MDS/2015. :- 29 -: