ACIT, Nanded V. Dr. Vishwas Madhukar Kulkarni, Latur

ITA 1018/PUN/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56384 (ITAT-PUNE)
• Duration Of Justice: 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: L S C HANDRASEKAR HEARD ON; M RANADE
• Keywords: Unexplained investment; Valuation report
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER I.T.A. NO. 1018 & 1019/PN/2011 (ASSTT. YEAR : 2007-08 & 2008-09) ASST. COMMISSIONER OF INCOME TAX, APPELLANT CIR. 3, NANDED V. DR. VISHWAS MADHUKAR KULKARNI RESPONDENT MAMTA UROLOGY CENTRE, MITRA NAGAR LATUR- 413 531 PAN : ACHPK1829L APPELLANT BY :MS. ANN KAPTHUAMA RESPONDENT BY :S/ SHRI M. RANADE & L.S. C HANDRASEKAR HEARD ON : 06/8 /2012 PRONOUNCED ON : 29/8/2012 ORDER PER R.S. PADVEKAR, JM THESE TWO APPEALS ARE FILED BY THE REVENUE CHALLEN GING THE IMPUGNED ORDERS OF THE CIT(A), AURANGABAD DATED 30/ 5/2011 FOR THE A.Y. 2007-08 AND 2008-09. 2. THE SOLITARY ISSUE WHICH IS COMMON IN BOTH THE A PPEALS IS WHETHER THE LD CIT(A) JUSTIFIED IN DELETING THE ADDITION MA DE BY THE A.O ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE HOSPITAL BUILDING AT RS.26,64,450/- AND RS,. 25,99,138/- IN THE A.Y. 200 7-08 AND 2008-09 RESPECTIVELY, WHICH WAS BASED ON VALUATION REPORT O F THE DVO, SOLAPUR. 3. THE FACTS REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE FILED THE RETURN OF INCOME FOR BOTH THE A.YS., DECLARING THE INCOME OF RS.15,77,856/- FOR THE A.Y. 2007-08 AND RS.20,20,0 30/- FOR THE A.Y. 2008-09. BOTH THE RETURNS FILED BY THE ASSESSEE WA S SELECTED FOR SCRUTINY AND ASSESSMENTS ARE COMPLETED U/S. 143(3) OF THE AC T. THE ASSESSEE IS A MEDICAL PRACTITIONER AND RUNS HOSPITAL IN THE NAME AND STYLE AS MAMTA UROLOGY CENTRE AT LATUR. THE HIS MAIN SOURCE OF I NCOME IS FROM THE MEDICAL PROFESSION AS OBSERVED BY THE A.O. ITA NOS. 1018 & 1019/PN/2011 DR.VISHWAS MADHUKAR KULKARNI A.YS. 2007-08& 2008-09 PAGE OF 4 2 4. SO FAR AS THE ISSUE OF THE ADDITION TO THE HOSPI TAL BUILDING IS CONCERNED, THE A.O HAS OBSERVED THAT IN THE A.Y. 20 07-08, THE ASSESSEE HAS DISCLOSED THE ADDITION TO THE CONSTRUCTION OF HOSPITAL BUILDING OF RS. 63,14,728/- AND A TOTAL COST OF CONSTRUCTION HAS B EEN SHOWN AT RS. 67,06,266/-. THE A.O. MADE THE REFERENCE U/S. 142A OF THE ACT TO THE VALUATION OFFICER, SOLAPUR, FOR DETERMINING THE COS T OF CONSTRUCTION. THE DVO, SOLAPUR, VIDE HIS REPORT DT. 28 OCTOBER 2009 E STIMATED THE COST OF CONSTRUCTION OF THE HOSPITAL & OTHER INVESTMENT AN D COST OF FURNITURE ETC., AT RS. 2,29,01,000/-. THE A.O FURNISHED THE COPY O F THE VALUATION REPORT TO THE ASSESSEE FOR HIS OBJECTION AND COMMENT. THE ASSESSEE RESISTED THE VALUATION MADE BY THE DVO. THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE A.O WAS ADDITIONAL CONSTRUCTION OF THE E XISTING PORTION OF THE HOSPITAL BUILDING STARTED IN THE YEAR 2006. THE AS SESSEE ALSO CONTENDED THAT THE DETAILED ACCOUNT ON DAY TO DAY BASIS IN RE SPECT OF THE CONSTRUCTION EXPENDITURE IS MAINTAINED. THE ASSESS EE CONTENDED THAT THE DVOS REPORT IS NOT CORRECT AS THE DETAILED EXPENDI TURE ACCOUNT SUBMITTED BY THE ASSESSEE TO THE DVO WAS NOT CONSIDERED. THE A.O. REJECTED ALL CONTENTIONS OF THE ASSESSEE. THE A.O. HAS OBSERVED THAT THE DVO HAS SPECIFICALLY DISCUSSED THE REASONS FOR ADOPTING THE PLINTH AREA RATES IN HIS REPORT AS PER THE CBDT INSTRUCTION NO. 319/26/85/WT DT. 6.12.1986 AND REVISED INSTRUCTION NO. 319/16/92/WT DT. 12 DECEMB ER 1998. THE A.O HAS OBSERVED THAT THE DVO HAS ALREADY CONSIDERED TH E ESCALATION IN COST AT 15% AND ALSO GAVE DEDUCTION AT 10% TOWARDS THE SELF SUPERVISION. THE DVO DID GIVE THE BENEFIT OF SELF SUPERVISION AS THE CONSTRUCTION WAS CARRIED OUT BY DIFFERENT CONTRACTOR. IN SUM AND SU BSTANCE, THE A.O SUPPORTED VALUATION MADE BY THE DVO. IN RESPECT OF THE DETAILS OF THE EXPENDITURE AS MAINTAINED BY THE ASSESSEE AND SUBMI TTED TO THE DVO, THE A.O WAS OF THE OPINION THAT THE SAME WAS CORREC T. AT THE SAME TIME, THE A.O FOUND THAT THE EXPENDITURE RECORDED IN THE BOOKS OF ACCOUNT IN RESPECT OF THE FURNITURE WAS LESSER THAN ACTUAL MAD E. THERE WERE OTHER ITEMS LIKE HOSPITAL CURTAIN ETC. IN RESPECT OF WHIC H SOME EXPENDITURE WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE A.O PART LY ACCEPTED THE CONTENTION OF THE ASSESSEE IN RESPECT OF THE ESTIMA TION OF INVESTMENT TO THE EXTENT OF RS. 34,63,037/-. THE A.O ALSO MADE C ERTAIN CORRECTIONS WHICH WERE NOTICED IN THE CALCULATION AND FINALLY T HE A.O. DETERMINED ALLEGED UNDISCLOSED INVESTMENT IN THE CONSTRUCTION AT RS.52,63,588/- IN THE A.Y. 2007-08. THE A.O ASKED THE ASSESSEE TO SU BMIT THE BIFURCATION OF UNEXPLAINED INVESTMENT DETERMINED BY HIM OF RS. 52,63,588/-. THE ITA NOS. 1018 & 1019/PN/2011 DR.VISHWAS MADHUKAR KULKARNI A.YS. 2007-08& 2008-09 PAGE OF 4 3 A.O. THEREFORE TREATED RS.26,64,450/- OUT OF RS.52, 63,588/- AS RELATING TO THE A.Y. 2007-08 AND MADE THE ADDITION. IN THE A.Y . 2008-09, BALANCE UNEXPLAINED INVESTMENT AS DETERMINED BY THE A.O TO THE EXTENT OF RS.25,99,138/- WAS ADDED TO THE TOTAL INCOME U/S. 6 9 OF THE ACT. 5. THE ASSESSEE CHALLENGED THE ADDITIONS IN BOTH THE A.YS. BEFORE THE LD CIT(A). THOUGH THE LD CIT(A) GAVE THE PART RELIEF AFTER CONSIDERING THE ISSUE ON MERIT IN BOTH THE A.YS. TO THE ASSESSEE, BUT FINALLY DELETED THE ADDITIONS AT ENTIRETY IN BOTH T HE A.YS. BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F SARGAM CINEMA, 328 ITR 513. THE OPERATIVE PART OF THE FINDING OF THE LD CIT(A) IS AS UNDER : 4.3.3. HOWEVER, AS REGARDS THE CLAIM OF THE APPELL ANT THAT THE REFERENCE MADE BY THE AO WITHOUT POINTING OUT ANY D EFECTS IN THE BOOKS OF ACCOUNTS IS INVALID IN LAW, IT IS OBSERVED THAT IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS MAINTAINED D AY-TO-DAY RECORD IN RESPECT OF CONSTRUCTION OF THE HOSPITAL B UILDING. ON PERUSAL OF THE ASSESSMENT ORDER OF THE A.O., IT IS OBSERVED THAT NO SPECIFIC IRREGULARITIES ARE POINTED OUT IN THE BOOK S OF ACCOUNTS OR RECORD OF HOSPITAL BUILDING CONSTRUCTION AND BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED. UNDER SUCH CIRCUMSTANCES, THE R EFERENCE MADE BY THE AO FOR VALUATION OF HOSPITAL BUILDING U/S 1 42A OF THE I.T. ACT, 1961 IS BAD IN LAW. IN THIS CONTEXT, THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (2010) 328 ITR 513 HAS BEEN RELIED UPON, WHEREIN IT HAS BEEN H ELD THAT THE ASSESSING OFFICER CANNOT REFER THE VALUATION TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. HAVING REGARD TO THE ABOVE FACTS, THE RELIANCE PLACED BY THE AO ON THE DVOS REPORT IS MISPLACED. CONSIDERING THE ABOVE FACTS, THE ADDITION MADE BY T HE AO BY RELYING ON THE REPORT OF THE DVO IS UNLAWFUL. IN THE LIGHT OF ABOVE FACTS AND PARTICULARLY FOLLOWING THE DECISION OF TH E HONBLE SUPREME COURT, THE ADDITION MADE OF RS.26,64,450/- IN A.Y.2 007-2008 AND RS.25,99,138/- IN A.Y. 2007-2008 IS DELETED. GROUN D NO.1 OF A.Y.2007-2008 AND GROUND NO.2 OF A.Y. 2008-2009 ARE ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US IN BOTH THE A.YS. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . WE FIND THAT THE A.O HAS NOT REJECTED THE BOOKS OF ACCOUNT OF TH E ASSESSEE. WE ITA NOS. 1018 & 1019/PN/2011 DR.VISHWAS MADHUKAR KULKARNI A.YS. 2007-08& 2008-09 PAGE OF 4 4 FURTHER FIND THAT, IN FACT, THE A.O HAS GIVEN RELI EF TO THE ASSESSEE ACCEPTING THE CORRECTNESS IN RESPECT OF THE ACCOUNT S MAINTAINED TOWARDS EXPENDITURE ON THE ADDITIONAL CONSTRUCTION. IN THE CASE OF SARGAM CINEMA (SUPRA), THE HONBLE SUPREME COURT HAS HELD THAT THE AO CANNOT REFER THE MATTER TO THE DVO WITHOUT THE BOOKS OF A CCOUNT BEING REJECTED. IN THIS CASE IT IS NOT DISPUTED THAT ASSESSEES BOO KS OF ACCOUNTS ARE NOT REJECTED BY THE A.O. THE LD CIT(A) HAS FOLLOWED THE RATIO DECIDENDI OF THE SAID DECISION. WE FIND NO INFIRMITY IN THE ORDER O F THE LD CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH AUGU ST 2012. SD/- SD/- (R.K. PANDA) ACCOUNTANT MEMBER (R.S. PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 29TH AUGUST, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT-, AURANGABAD 4. THE CIT(A), AURANGABAD 5. THE D.R. ITAT A BENCH, PUNE 6. GUARD FILE /-TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE