V.Kanniyan Asari, Salem V. ITO, Salem

ITA 1137/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96065 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-08-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 14-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUGARI
• Assessee Lawyers: SRIDHAR
• Keywords: Depreciation; Principle of natural justice; Valuation report
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , ! ' , # $% & [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO. 1137/MDS/2015 / ASSESSMENT YEAR : 1997-1998 V. KANNIYAN ASARI, YETTAPUR ROAD, PUTHIRAGOUNDANPALAYAM P.O. ATTUR (TALUK) SALEM DISTRCT 636 108. VS. THE INCOME TAX OFFICER, WARD II(3), GANDHI ROAD, SALEM 636 007. [PAN AKVPK2100L ] ( '( / APPELLANT) ( )*'( /RESPONDENT) / APPELLANT BY : SHRI. SRIDHAR, ADVOCATE /RESPONDENT BY : DR. MILIND MADHUKAR BHUGARI, CIT. / DATE OF HEARING : 27-08-2015 / DATE OF PRONOUNCEMENT : 04-09-2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM DA TED 27.02.2015 FOR THE ASSESSMENT YEAR 1997-1998. ITA NO.1137/MDS/2015 :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) SALEM DATED 27.02.2015 IN ITA NO.8/2010-2011 CONFIRMING THE ASSESSING OFFICER NON ADOPTION OF STATE PWD RATES IS HIGHLY OBJECTIONABLE AND AGAINST THE FACTS OF THE CASE AND NATURAL JUSTICE. (2) THE ASSESSEE HAS RAISED DETAILED GROUNDS BEFORE COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 2.1 TO 2.11 DISPUTING THE ADOPTION OF A DIFFERENT RATE OTHER THAN THE STATE PWD RATES WORKING GIVEN TO HIM. (3) DURING THE YEARS ENDED 31.03.2006, THE ASSESSEE ADDED CERTAIN TOILET BLOCK, EXISTING KITCHEN, CONVERTED AS SERVANT QUARTERS AT GROUND FLOOR WITH SIX ROOMS IN THE GROUND FLOOR AND SIX ROOMS IN THE FIRST FLOOR AND A RAMP PROVIDED AT THE REAR SIDE OF THE MANDAPAM FOR THE 3 RD FLOOR AS CORRECT WHERE DONE SUBSEQUENT TO ASSESSMENT YEAR 1997-98 IS AGAINST THE FACTS OF THE CASE AND NATURAL JUSTICE. THE ABOVE ADDITIONAL CONSTRUCTION TO THE KALYANA MANDAPAM TO SUIT THE REQUIREMENT OF THE CUSTOMERS WAS DONE AFTER OPENING OF THE KALYANA MANDAPAM ON 19.05.1996 AND HENCE THE SAID THE COST INVOLVED IN THE ADDITIONAL CONSTRUCTION CANNOT BE INCLUDED FOR VALUATION PURPOSE OF ASSESSMENT YEAR IN QUESTION (97-98 ASSESSMENT YEAR). THE VALUE OF THE ABOVE ADDITIONAL CONSTRUCTION DONE DURING THE YEAR 31.03.2006 AMOUNTS TO H5,54,263/-. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS COME TO A PECULIAR CONCLUSION THAT THE ASSESSEE HAS OBTAINED SUBSTANTIAL RELIEF BY EARLIER ORDERS AND HENCE HIS PLEA THAT THE VALUATIO N SHOULD BE DONE, AS PER HIS DIRECTION AND REQUIREMENTS CANNOT BE ACCEPTED IS NOT FACTUALLY CORRECT. (4) THE ASSESSEE HAS REQUESTED FOR ADJUSTMENT OF THE REFUND OF THE TAX PAID FOR THE EARLIER ASSESSMENT YEAR 1996-97, TOWARDS TAX ARREARS OF 97-98 WHEN ITA NO.1137/MDS/2015 :- 3 -: THE ASSESSMENT WAS RE-DONE U/S.143(3) READ WITH U/S.263 OF THE ACT WHICH HAS NOT BEEN COMPLIED WITH WHICH MAY BE DIRECTED TO BE GIVEN CREDIT. (5) IF THE CREDIT IS GIVEN FOR THE TAX FOR THE ASSESMEN T YEAR CHARGING OF 234A, 234B INTEREST WILL BE SUBSTANTIALLY REDUCED, FOR WHICH ALSO DIRECTION MAY KINDLY BE GIVEN FOR THE REASONS STATED ABOVE AND FURTHER GROUNDS AND EVIDENCES TO BE ADDUCED AT THE TIME OF HEARING THE RELIEF SOUGHT FOR MAY KINDLY BE GRANTED. 3. THE FACTS OF THE CASE ARE THAT IN RESPONSE TO NOTI CE U/S.148, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASS ESSMENT YEAR 1997- 98 ON 21/03/2001 DECLARING A TOTAL INCOME OF H32,60 0/- AND AN AGRICULTURAL INCOME OF H1,25,000/-. THE ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S.147 ON 25/03/2002 TREATING THE AGR ICULTURAL INCOME OF H1,00,000/- AS INCOME FROM OTHER SOURCE AND DETERMI NING TOTAL INCOME AT H2,56,000/- WITH AN AGRICULTURAL INCOME AT H.25, 000/-. AGAINST THE ABOVE ASSESSMENT ORDER THE ASSESSEE HAD FILED AN AP PEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL) AND THE COMMISSI ONER OF INCOME-TAX (APPEALS) PASSED AN ORDER VIDE ITA NO.274,275,276 & 277/02-03, DATED 2/12/2004, FIXING THE PROPERTY INC OME AND INCOME FROM PROFESSION. 3.1. AGGRIEVED THE ORDER OF THE CIT(A), THE DEPARTMENT H AD ALSO PREFERRED AN APPEAL BEFORE THE ITAT AND THE ITAT PA SSED THE ITA NO.1137/MDS/2015 :- 4 -: APPELLATE ORDER VIDE ITA NO. 483 TO 486/MDS/2005, D ATED 30.12.2005 DIRECTING THE ASSESSING OFFICER TO DETER MINE THE INCOME FROM KALYANA MANDAPAM AFTER VERIFICATION OF THE EXPENSES, CLAIM OF INTEREST AND DEPRECIATION AND ALSO TO DETE RMINE ANNUAL VALUE OF THE HOUSE PROPERTY. THE ASSESSMENT WAS COM PLETED U/S.143(3) R.W.S.253 ON 28.12.2006 WITH VARIOUS DIS ALLOWANCES ALONG WITH ADDITION OF DIFFERENCE IN COST OF CONSTR UCTION BY ADOPTING THE VALUATION REPORT. ON FURTHER APPEAL, CIT(A) VIDE ORDER IN ITA NO.242/06-07, DATED 18/11/2008, HAD DI RECTED TO RECOMPUTE THE VALUATION AS PER STATE PWD RATES AND TO TREAT THE DIFFERENCE IN VALUATION AS UNEXPLAINED COST OF CONS TRUCTION AND ALSO DIRECTED TO ALLOW DEPRECIATION ON THE REVISED AMOUN T OF COST OF BUILDING AS PER THE STATE PWD RATES. WHILE GIVING E FFECT TO THE ORDER OF CIT(A) , THE COST OF CONSTRUCTION WAS ARRI VED AT ON THE BASIS OF STATE PWD RATE WITHOUT FOLLOWING THE ITEMS AS ENUMERATED IN THE VALUATION REPORT WHICH HAS RESULTED IN 'UNDE R ASSESSMENT' AND ALSO FAILED TO RESTRICT THE DEPRECIATION TO THE REVISED FIGURE OF COST OF THE ASSET. THE COMMISSIONER OF INCOME-TAX V IDE ORDER U/S.263 DATED 15.06.2009 HAS DIRECTED THE ASSESSING OFFICER TO FRAME THE FRESH ORDER STRICTLY FOLLOWING THE DIRECT IONS OF THE LD., CIT(A). WHEN THIS CASE WAS POSTED FOR BEARING, THE ASSESSEE'S ITA NO.1137/MDS/2015 :- 5 -: AUTHORIZED REPRESENTATIVE FILED A LETTER DATED 03/0 3/2010, ENCLOSING THE OBJECTION ALREADY RAISED BEFORE THE C OMMISSIONER OF INCOME-TAX BY LETTER DATED 19/05/2009. THE SAID OBJ ECTIONS WERE ALREADY CONSIDERED BY CIT VIDE ORDER U/S.263. IN TH E MEANTIME, ON APPEAL BY THE DEPARTMENT THE ITAT PASSED AN ORDER V IDE I.T.A. NO.127/MDS/2009, DATED 27/11/2009 CONFIRMING THE OR DER OF CIT(A) FOR ADOPTING THE STATE PWD RATE AND FOR ALLO WING DEPRECIATION ON THE ARRIVED COST OF ASSET. FURTHER ASSESSEE'S AUTHORIZED REPRESENTATIVE HAS CLAIMED 10% OF SELF-S UPERVISION FOR THE CONSTRUCTION OF THE BUILDING. AS THE SAID DEDU CTION WAS NOT CONSIDERED BY DVO, THE SAME IS NOT ALLOWED. FURTHER,HE COMPUTED COST OF CONSTRUCTION AT H20,67,466/-, WHICH INCLUD ES SERVICE COST ON WATER SUPPLY, SANITARY INSTALLATIONS, INTERNAL ELEC TRIFICATION AND ELECTRICITY SERVICE CONNECTIONS TOTALING TO H1,83,0 77/-. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE ARG UED THAT THE FOLLOWING TIMES TO BE EXCLUDED FROM COST OF CON STRUCTION DETERMINED BY THE ASSESSING OFFICER AS THESE ITEMS ARE ALREADY INCLUDED IN COST DETERMINED BY ADOPTING STATE PWD RATES. 1 ACTUAL COST WATER SUPPLY AND SANITARY INSTALLATIONS (H61,758- H18,527/-) H 43,231/- 2 INTERNAL ELECTRIFICATION @7.5% ON (1.1+1.2) H13,98,231/- H1,04,867/- ITA NO.1137/MDS/2015 :- 6 -: ELECTRIFICATION FOR OTHER ROOM AT 4% ON (5,24,970/-) H 20,997/- 3 ELECTRICAL SERVICE CONNECTION @10% H 13,982/- ----------------- H1,83,077/- ----------------- 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. THE COST OF CONSTRUCTION DETERMINED ON THE BASIS OF STATE PWD RATE. THIS PLINTH AREA RATES FOR BUILDING INC LUSIVE OF PROVISION FOR INTERNAL WATER SUPPLY AT 7.5%, SANITARY INSTALLATIO NS AT 7.5% AND FOR INTERNAL ELECTRIFICATION AT 10% AND THIS WAS SUPPOR TED BY CERTIFICATE FROM THE ELECTRICAL ENGINEER, PWD, SALEM, DATED 25. 08.2015. IN VIEW OF THIS, WE ARE INCLINED TO ALLOW THE GROUND TAKEN BY THE ASSESSEE. 7. THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE PLEA DED FOR SELF SUPERVISING CHARGES, BUT WE FIND THAT THERE IS NO EVIDENCE FOR THE ASSESSEE HIMSELF CARRYING ON THE CONSTRUCTION OF T HE WORK WITHOUT HIRING OUTSIDE PARTIES. BEING SO, WE ARE NOT IN AG REEMENT WITH THE ARGUMENT OF THE ASSESSEE COUNSEL. THIS GROUND OF T HE ASSESSEE IS DISMISSED. ITA NO.1137/MDS/2015 :- 7 -: 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 4TH DAY OF SEPTEM BER, 2015, AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ' ) (CHANDRA POOJARI) # / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:04.09.2015 KV %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 3. ' +',! / CIT(A) 5. )-.' / / DR 2. / RESPONDENT 4. ' + / CIT 6. .0'1 / GF