Dr. C.N.Selvaraja, CHENNAI V. ACIT, Madurai

ITA 1176/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64692 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Unexplained investment; Search and seizure; Reasonable cause; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO. 1175 & 1176/MDS/2012 ASST. YEAR : 2004-05 & 2005-06 DR. C.N. SELVARAJA, 5/3, IV CROSS STREET,LOGIAH COLONY, SALIGRAMAM, CHENNAI 600 093. PAN : ANWPS4290D. (APPELLANT) V. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE I, CHENNAI. (RESPONDENT) ITA NO.1389/MDS/2012 ASST. YEAR : 2005-06 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE I, CHENNAI. (APPELLANT) V. DR. C.N. SELVARAJA, 5/3, IV CROSS STREET,LOGIAH COLONY, SALIGRAMAM, CHENNAI 600 093. PAN : ANWPS4290D (RESPONDENT) ASSESSEE BY : MR. K. BALASUBRAMANIAN, ADVOCATE DEPARTMENT BY MR. SHAJI P. JACOB, ADDL.CIT DATE OF HEARING : 08 NOV 2012 DATE OF PRONOUNCEMENT : 21 DEC 201 2 ITA 1175,1176 & 1389/M/12 2 O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : THESE APPEALS ARE FILED BY THE ASSESSE FOR THE AS ST. YEARS 2004-05 & 2005-06 AND THE DEPARTMENT FOR THE ASST. YEAR 2005-06 RESPECTIVELY AGAINST THE COMMON ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS)-II (I/C.), MADURAI DATED 30.3. 2012 IN ITA NOS.393 & 394/2008-09. THESE APPEALS ARE DISPOSED O F BY THIS COMMON CONSOLIDATED ORDER FOR THE SAKE OF CONVENIEN CE SINCE ISSUES INVOLVED ARE COMMON. 2. ITA NO.1175/MDS/2012 A.Y : 2004-05 : THE ONLY ISSUE IN THE GROUNDS OF APPEAL OF THE AS SESSEE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION OF F1.05 LAKHS MADE IN T HE HANDS OF THE ASSESSEE. ITA 1175,1176 & 1389/M/12 3 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON MEDICAL PROFESSION IN ALTERN ATIVE SYSTEM OF MEDICINES, AYURVEDA AND SIDDHA. SEARCH OPERATIONS UNDER SEC.132 OF THE I.T. ACT WERE CONDUCTED IN THE CASE OF THE A SSESSEE AT CHENNAI AND BOOTHAPANDI ON 06.8.2004. CONSEQUENT TO SEARCH , ASSESSING OFFICER INITIATED PROCEEDINGS UNDER SEC.153A OF THE ACT AND IN RESPONSE, THE ASSESSEE FILED RETURN OF INCOME. ASS ESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITION S FOR THE ASST. YEAR 2004-05 UNDER CONSIDERATION. LATER COMMISSIONE R OF INCOME TAX PASSED ORDER UNDER SEC.263 DATED 31.1.2008 AND DIRECTED THE ASSESSING OFFICER TO COMPLETE ASSESSMENT AFRESH AS SEIZED MATERIAL WITH REFERENCE TO FD OF F.1 LAKH AND INTEREST OF F. 5000/- THEREON APPEARING IN THE NAME OF ASSESSEES WIFE SMT. BEMIL A VIMALA BAI WAS NOT CONSIDERED AT THE TIME OF ASSESSMENT MADE UNDER SEC.143(3) READ WITH SEC.153A OF THE ACT. THE ASSESSING OFFI CER WHILE COMPLETING THE ASSESSMENT UNDER SEC.143(3)/153A R.W .S.263, MADE ADDITION OF F.1.05 LAKHS IN THE HANDS OF THE ASSESS EE REPRESENTING THE AMOUNT OF FIXED DEPOSIT WHICH IS IN THE NAME OF MRS. BEMILA ITA 1175,1176 & 1389/M/12 4 VIMALA BAI, THE WIFE OF THE ASSESSEE. THE ASSESSIN G OFFICER MADE THIS ADDITION BASED ON THE STATEMENT OF MRS. BEMILA VIMALA BAI THAT SHE HAS NO SOURCE OF INCOME. ON APPEAL, THE COMMIS SIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION BASED O N THE SWORN STATEMENT OF MRS. BEMILA VIMALA BAI THAT INVESTMENT S WERE MADE OUT OF EARNINGS OF HER HUSBAND AND SHE HAS NO INDEPENDE NT SOURCE OF INCOME. 4. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE F D BELONGS TO THE WIFE OF THE ASSESSE, MRS. BEMILA VIM ALA BAI. HE SUBMITS THAT MRS. BEMILA VIMALA BAI IS AN INCOME-T AX ASSESSEE. SHE HAS ALSO FILED WEALTH-TAX RETURNS SHOWING HER SOURC E OF INCOME. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT MRS. BEMILA V IMALA BAI ADMITTED THE FD IN HER RETURN OF INCOME AND THIS IS ALSO EVIDENCED FROM THE NOTE TO THE ASSESSMENT ORDER DATED 31.12. 2008 PASSED UNDER SEC.143(3)/153A OF THE ACT WHEREIN THE ASSESS ING OFFICER HIMSELF STATED THAT PLEASE SEE PARA 7 OF LETTER DA TED 14.6.2006. BANK FD IS ADMITTED IN THE CASE OF MRS. BEMILA VIMA LA BAI. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE MRS. BEMILA VIMALA BAI ITA 1175,1176 & 1389/M/12 5 HAS ADMITTED THAT THIS FD IS HER INCOME THE ASSESSI NG OFFICER DID NOT ASSESS THIS FD IN THE HANDS OF THE ASSESSEE WHILE C OMPLETING THE ASSESSMENT UNDER SEC.143(3)/153A OF THE ACT. THE COUNSEL FOR THE ASSESSEE REQUESTS FOR DELETION OF THE ADDITION MADE IN THE HANDS OF THE ASSESSEE. 5. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH SIDES, AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE GRIEVANCE OF THE ASSESSEE IS THAT THE FD OF F. 1 LAKH ALONG WITH INTEREST OF F. 5000/- BELONGS TO HIS WIFE AND THE SAME IS ADMITTED BY HER AND THIS FACT WAS ALSO NOTE D BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U NDER SEC.143(3)/153A OF THE ACT IN THE CASE OF THE ASSES SEE AND, THEREFORE, NO ADDITION WAS MADE AT THE TIME OF COMP LETION OF ASSESSMENT . THE ADDITION WAS MADE CONSEQUENT TO T HE ORDER OF THE CIT UNDER SEC.263 OF THE ACT. WE SEE THAT THE ASS ESSING OFFICER NOTED THAT THIS FD HAD BEEN ADMITTED IN THE HANDS OF THE ASSESSEES ITA 1175,1176 & 1389/M/12 6 WIFE, MRS. BEMILA VIMALA BAI. ADDITIONS SEEMS TO HAVE BEEN MADE BASED ON THE STATEMENT OF MRS. BEMILA VIMALA BAI TH AT SHE HAS NO SOURCE OF INCOME. IN ANY CASE, SINCE THE INCOME WA S ALREADY ADMITTED BY HER, THERE IS NO NEED FOR FURTHER ADDIT ION IN THE HANDS OF THE ASSESSEE. IN THE CIRCUMSTANCES, WE DELETE THE ADDITION MADE IN THE HANDS OF THE ASSESSEE. 7. ITA NO.1176/MDS/2012 A.Y : 2005-06 : THE ONLY GRIEVANCE OF THE ASSESSEE IN ITS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN S USTAINING THE ADDITION TO THE EXTENT OF F.28,41,025/- OUT OF ADDI TION OF F.4024,450/- MADE BY THE ASSESSING OFFICER TOWARDS DEFICIENCY IN THE COST OF CONSTRUCTION OF THREE PROPERTIES. 8. DURING THE COURSE OF SEARCH IT WAS GATHERED BY THE DEPARTMENT THAT THE ASSESSEE HAD UNDERTAKEN CONSTRU CTION OF THREE PROPERTIES, ONE AT MGR NAGAR, CHENNAI , ONE AT NSR COMPLEX, RAJAKRISHNAPURAM AND THE THIRD ONE AT BOOTHAPANDI. THE ASSESSING OFFICER IN ORDER TO ASCERTAINED PROBABLE COST OF CO NSTRUCTION OF THE ITA 1175,1176 & 1389/M/12 7 ABOVE PROPERTIES, REFERRED THE VALUATION OF THE ABO VE PROPERTIES TO THE VALUATION CELL OF THE INCOME-TAX DEPARTMENT, CH ENNAI AND OBTAINED VALUATION REPORTS. VALUATION REPORTS WERE FORWARDED TO THE ASSESSEE FOR HIS OBJECTIONS, IF ANY. IN REPLY, THE ASSESSEE FILED A LETTER DATED 14.11.2006 CONTENDING THAT VALUES ADOP TED BY THE VALUATION OFFICER OF THE VALUATION CELL ARE TOO HIG H. THE ASSESSEE FURTHER CONTENDED THAT HE SAVED THE COST OF CONSTRU CTION CONSIDERABLY DUE TO THE FOLLOWING REASONS :- A) FOR THE CONSTRUCTION OF MGR NAGAR, CHENNAI PROPERTY THE MATERIALS WERE PURCHASED DIRECTLY AND CONSTRUCTION WAS UNDERTAKEN UNDER DIRECT SUPERVISION. B) CONSTRUCTION OF RAJAKRISHNAPURAM PROPERTY AND BOOTHAPANDI PROPERTY WERE UNDERTAKEN ON LABOUR CONTRACT BASIS AND THE BUILDING MATERIALS WERE PURCHASED DIRECTLY. FURTHER, RIVER SAND AND BRICKS FROM COUNTRY KILNS ARE AVAILABLE AT RELATIVELY CHEAPER PRICES AND THAT THE COST OF LABOUR IN THESE RURAL AREAS ARE RELATIVELY CHEAP. ITA 1175,1176 & 1389/M/12 8 9. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING THE DIFFERENCE IN COST OF CONSTRUCTION OF THESE THREE PROPERTIES AT F.40,24,450/-. WHILE ARRIVING AT THE DIFFERENCE OF COST OF CONSTRUCTION, ASSESSING OFFICER ALLOWED 10% TOWA RDS REDUCTION IN COST AS ESTIMATED BY THE VALUATION OFFICER. ON APP EAL, THE COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS T HE PROPERTY AT MGR NAGAR, CHENNAI WAS CONCERNED, HELD THAT THE ASS ESSEE CONSTRUCTED THE SAID PROPERTY BEFORE 31.3.2004 AND, THEREFORE, NO ADDITION TOWARDS DIFFERENCE IN COST OF CONSTRUCTION IS REQUIRED TO BE MADE IN THE ASST. YEAR 2004-05. THE COMMISSIONER O F INCOME TAX (APPEALS) ON EXAMINATION OF BALANCE SHEET OF THE A SSESSEE FOR THE ASST. YEAR 2005-06 OBSERVED THAT THERE IS NO INCREA SE IN COST OF CONSTRUCTION DURING THE FINANCIAL YEAR 2004-05 RELE VANT TO THE ASST. YEAR 2005-06 AND, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF F.7,67,800/- BEING THE DIFFERENCE O F COST OF CONSTRUCTION IN RESPECT OF MGR NAGAR, CHENNAI PROPE RTY. ITA 1175,1176 & 1389/M/12 9 10. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOW ED 15% REDUCTION TOWARDS DIFFERENCE IN RATES ADOPTED BY T HE VALUATION OFFICER AS AGAINST 10% ALLOWED BY THE ASSESSING OFF ICER. THE VALUATION OFFICER ESTIMATED THE COST CONSTRUCTION O F THE PROPERTIES, IN QUESTION, APPLYING CPWD RATES INSTEAD OF STATE PWD RATES. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED 15% DIFFERENCE IN RATES ADOPTED BY THE VALUATION OFFICE R. THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT GRANT ANY DEDUCTION TOWARDS SELF-SUPERVISION. THE COMMISSIONER OF INCO ME TAX (APPEALS) ARRIVED AT THE DIFFERENCE IN COST OF CONS TRUCTION IN RESPECT OF NSR COMPLEX RAJAKRISHNAPURAM AND BOOTHAPANDI RES IDENCE AT F.12,56,900/- AND F.15,84,125/- RESPECTIVELY AND DIRECTED THE ASSESSING OFFICER TO ADOPT THE SAME. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN SUSTAINING THE DIFFERENCE IN COST OF C ONSTRUCTION OF THE SAID TWO PROPERTIES AT F.28,41,025/-. ITA 1175,1176 & 1389/M/12 10 11. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE RE WAS NO SEIZED MATERIAL WITH REGARD TO THE TWO PROPERTIES V IZ., NSR COMPLEX, RAJAKRISHNAPURAM, AND BOOTHAPANDI RESIDENCE TO PROV E THAT THE ASSESSEE HAD SPENT MORE MONEY THAN THAT RECORDED IN THE BALANCE SHEET. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT REFERENCE TO SEIZED MATERIALS BY THE LOWER AUTHORITIES IS ONLY W ITH REFERENCE TO THE PROPERTY AT CHENNAI AND NOT WITH REFERENCE TO THE O THER TWO PROPERTIES. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE ABSENCE OF ANY SEIZED MATERIAL SUGGESTING THAT THE ASSESSEE HAD SPENT MORE MONEY THAN WHAT WAS RECORDED IN THE BALA NCE SHEET, NO ADDITION CAN BE MADE UNDER SEC.69B OF THE ACT, TREA TING THE DIFFERENCE IN COST OF CONSTRUCTION AS UNEXPLAINED I NVESTMENT. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE C OMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE ALLOWED 20% TOWARD S DIFFERENCE IN RATES ADOPTED BY THE VALUATION OFFICER INSTEAD O F 15%. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. PREM KUMARI MUDRIA V. ACI T (303 ITR 128). THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT T HERE IS NO ITA 1175,1176 & 1389/M/12 11 JUSTIFICATION IN NOT ALLOWING REDUCTION FOR SELF-SU PERVISION AS THE ASSESSEE HIMSELF SUPERVISED THE CONSTRUCTION WORK O F THE PROPERTY. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT GENERALL Y 10% IS ALLOWED TOWARDS SELF-SUPERVISION AND, THEREFORE, REQUESTED THAT REDUCTION OF 10% TOWARDS SELF-SUPERVISION BE ALLOWED. THE COUN SEL FOR THE ASSESSEE FURTHER SUBMITS THAT CONSTRUCTION OF THESE PROPERTIES HAVE BEEN CARRIED OUT IN THE YEARS ENDED 31.3.2004 AND 3 1.3.2005 AND, THEREFORE, THE ENTIRE ADDITION CANNOT BE MADE IN TH E ASST. YEAR 2005- 06 ALONE. HE PLACED RELIANCE ON THE DECISION OF AM RITSAR BENCH OF THE ITAT IN THE CASE OF DR.RAMESH KUMAR ANAND V. IT O IN ITA NO.56(ASR) OF 2011 DATED 9.3.2007 AND SUBMITTED THA T THE DIFFERENCE IN COST OF CONSTRUCTION, IF ANY, SHOULD BE SPREAD OVER TO THE ASST. YEARS 2004-05 AND 2005-06 IN THE LIGHT OF THE DECISION OF AMRITSAR BENCH. 12. THE COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT CASH CREDITS ASSESSED IN THE ASST. YEARS 2001-02 AND 04- 05 AT F.9.50 LAKHS, F.17 LAKHS AND RENTAL INCOME OF F.9 LAKHS A SSESSED IN ASST. YEAR 2005-06, AGGREGATING TO F.35.50 LAKHS WAS AVA ILABLE FOR ITA 1175,1176 & 1389/M/12 12 MEETING THE ALLEGED DIFFERENCE IN COST OF CONSTRUCT ION. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT NONE OF THE LOANS WER E REPAID. THE ABOVE FUND WAS NOT UTILIZED BY THE ASSESSEE FOR ANY OTHER PURPOSE AND NO OTHER ADDITIONS HAVE BEEN MADE AND AS SUCH F UND WAS FULLY AVAILABLE FOR SETTING OFF AGAINST ADDITIONS MADE TO WARDS DEFICIENCY IN COST OF CONSTRUCTION. THEREFORE, THE COUNSEL FOR THE ASSESSEE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO TELESCOPE AND ALLOW THE CREDITS AGAINST DEFICIENCY IN COST OF CONSTRUCTION. 13. NO OTHER ISSUE HAS BEEN ARGUED BY THE COUNSEL FOR THE ASSESSEE THOUGH RAISED IN THE GROUNDS OF APPEAL FIL ED ALONG WITH FORM 36. 14. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 15. HEARD BOTH SIDES, PERUSED THE MATERIAL AVAILAB LE ON RECORD. WE ARE NOT INCLINED TO ACCEPT THE CONTEN TION OF THE ASSESSEE THAT IN THE ABSENCE OF ANY SEIZED MATERIAL SUGGESTING THAT ITA 1175,1176 & 1389/M/12 13 THE ASSESSEE HAD INCURRED COST OF CONSTRUCTION MO RE THAN WHAT WAS DISCLOSED IN THE BALANCE SHEET, NO ADDITION CAN BE MADE TOWARDS UNEXPLAINED INVESTMENT IN COST OF CONSTRUCTION. TH E HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BHADRUK A V. DCIT IN ITTA NO.367 OF 2011 BY ORDER DATED 15.12.2001 HELD AS UNDER :- 17. BY VIRTUE OF SECTION 158BI OF THE ACT, THE VAR IOUS PROVISIONS OF CHAPTER XIV-B OF THE ACT ARE MADE INAPPLICABLE TO PROCEEDINGS UNDER SECTIONS 153A/153 C OF THE ACT. THE EFFECT OF THIS IS THAT WHILE THE PROV ISIONS OF CHAPTER XIV-B OF THE ACT LIMIT THE INQUIRY BY THE A SSESSING OFFICER TO THOSE MATERIALS FOUND DURING THE SEARCH AND SEIZURE OPERATION, NO SUCH LIMITATION IS FOUND INSO FAR AS SECTIONS 153A/153C OF THE ACT ARE CONCERNED. THERE FORE, IT FOLLOWS THAT FOR THE PURPOSES OF SECTIONS 153A/1 53C OF THE ACT THE ASSESSING OFFICER CAN TAKE INTO CONSIDE RATION MATERIAL OTHER THAN WHAT WAS AVAILABLE DURING THE S EARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF T HE UNDISCLOSED INCOME OF THE ASSESSEE. ITA 1175,1176 & 1389/M/12 14 18. AT THIS STAGE, WE MAY MENTION THAT LEARNED COUN SEL FOR THE ASSESSEES RELIED UPON MANISH MAHESHWARI V. ASST . COMMISSIONER OF INCOME TAX (2007) 289 ITR 341 = (2007-TIOL-24-SC-IT) FOR THE PURPOSES OF INTERPRETI NG SECTION 158BB OF THE ACT. WE HAVE GONE THROUGH THE DECISION CITED BY LEARNED COUNSEL AND FIND THAT IT DOES NOT SUPPORT HIS CASE FOR THE SIMPLE REASON THAT THE PRO VISIONS CHAPTER XIV-B OF THE ACT ARE NOT APPLICABLE TO PROCEEDINGS UNDER SECTIONS 153A/153C OF THE ACT. CONSEQUENTLY, THE PRINCIPLES OF SECTION 158BB OF TH E ACT CANNOT BE IMPORTED FOR THE PURPOSES OF INTERPRETING SECTION 153A/153C OF THE ACT. THE VIEW EXPRESSED BY THE SUPREME COURT IN MANISH MAHESHWARI HAS NO APPLICATI ON TO THE PRESENT CASE. THEREFORE, AS HELD BY THE HON'BLE ANDHRA PRADESH HI GH COURT IN THE CASE OF GOPAL LAL BHADUKA V. DCIT (SUPRA), ADDITION S CAN BE MADE BASED ON THE MATERIALS OTHER THAN THOSE AVAILABLE D URING THE SEARCH & SEIZURE OPERATIONS WHILE COMPLETING THE ASSESSMEN TS UNDER THE PROVISIONS OF SECTION 153A/153C OF THE ACT. ITA 1175,1176 & 1389/M/12 15 16. THE ASSESSING OFFICER HAS SIMPLY GONE BY THE VALUATION REPORT OF THE VALUATION OFFICER OF THE VALUATION CE LL OF THE I.T. DEPARTMENT AND REDUCED 10% OF THE ESTIMATED VALUE BY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THAT HE IS IN A POS ITION TO EFFECT CONSIDERABLE SAVINGS ON ACCOUNT DIRECT PURCHASE OF BUILDING MATERIALS, CHEAP LABOUR AND SELF-SUPERVISION. THE ASSESSING OFFICER HAS NOT CONSIDERED SEPARATE REDUCTION IN DIFFERENCE IN RATES ADOPTED BY THE VALUATION OFFICER, IE., CPWD RATES AND STATE PWD RATES. THE ASSESSING OFFICER ALSO DID NOT CONSIDER SEPARATE RE DUCTION FOR SELF- SUPERVISION. HOWEVER, HE HAS GRANTED AN OVER-ALL R EDUCTION OF 10% AND ARRIVED AT THE DIFFERENCE IN COST OF CONSTRUCTI ON AT F.40,24,450/- FOR ALL THE THREE PROPERTIES. THE COMMISSIONER OF INCOME TAX (APPEALS), ON APPEAL, DELETED THE COST OF CONSTRUCT ION OF F.6,68,125/- IN RESPECT OF CHENNAI PROPERTY HOLDING THAT THERE I S NO INCREASE IN THE COST OF CONSTRUCTION IN RESPECT OF THIS PROPERTY DU RING THE ASST. YEAR 2005-06 WHICH IS UNDER APPEAL. THE COMMISSIONER OF INCOME TAX (APPEALS) RIGHTLY DELETED THE ADDITION OF F.6,68,12 5/- IN RESPECT OF CHENNAI PROPERTY SINCE NO CONSTRUCTION WAS CARRIED ON BY THE ITA 1175,1176 & 1389/M/12 16 ASSESSEE DURING THIS ASST. YEAR. WE SUSTAIN THE CO MMISSIONER OF INCOME TAX (APPEALS) ORDER IN DELETING THE ADDITION IN RESPECT OF CHENNAI PROPERTY. 17. THE COMMISSIONER OF INCOME TAX (APPEALS) ALLO WED 15% TOWARDS DIFFERENCE IN RATES APPLIED BY THE VALUATIO N OFFICER IE., CPWD RATES INSTEAD OF STATE PWD RATES, RELYING ON THE DE CISION OF AMRITSAR BENCH OF THE ITAT IN THE CASE OF DR. RAMESH KUMAR A NAND V. ACIT (SUPRA) WHEREIN THE TRIBUNAL OBSERVED AS UNDER :- WHERE VALUATION OFFICER ESTIMATED COST OF PROPERTY IN QUESTION BY APPLYING CPWD RATES INSTEAD OF LOCAL PW D RATES, WHICH RATES SHOULD HAVE BEEN APPLIED, COST ESTIMATED BEING EXCESSIVE, RELIEF AT 15% OF COST ESTIMATED BY VALUATION OFFICER WAS TO BE GIVEN. SUBMISSION OF THE ASSESSEE WAS THAT AT LEAST 20% SH OULD HAVE BEEN ALLOWED TOWARDS DIFFERENCE IN RATES BETWEEN CPWD RA TES AND STATE PWD RATES, ESPECIALLY WHEN THE PROPERTIES CONSTRUCT ED ARE AT PLACES LIKE RAJAKRISHNAPURAM AND BOOTHAPANDI. IN THE DECI SION RELIED ON BY THE ASSESSEE OF THE RAJASTHAN HIGH COURT IN THE CAS E OF SMT. PREM ITA 1175,1176 & 1389/M/12 17 KUMARI MUDRIA V. ACIT (SUPRA), THE HON'BLE HIGH COU RT AFFIRMED THE DECISION OF THE TRIBUNAL AND THE COMMISSIONER OF IN COME TAX (APPEALS) IN ALLOWING 20% REDUCTION TOWARDS DIFFERE NCE IN THE RATES ADOPTED BY THE VALUATION OFFICER. THE VALUATION OF FICER ADOPTED CPWD RATES INSTEAD OF STATE PWD RATES. THE TRIBUNA L AS WELL AS COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE CPWD RATES HAVE TO BE SCALED DOWN BY 20% TO MATCH THE STATE PW D RATES SO AS TO ASCERTAIN THE CORRECT VALUATION OF THE PROPERTY. THIS HAS BEEN AFFIRMED BY THE HIGH COURT. FOLLOWING THE DECISION OF THE RAJASTHAN HIGH COURT (SUPRA) WE DIRECT THE ASSESSING OFFICER TO ALLOW 20% REDUCTION TOWARDS DIFFERENCE IN RATE ADOPTED BY THE VALUATION OFFICER AS AGAINST 15% ALLOWED BY THE COMMISSIONER OF INCOM E TAX (APPEALS) . 18. THE COMMISSIONER OF INCOME TAX (APPEALS) DID N OT ALLOW A SEPARATE REDUCTION TOWARDS SELF-SUPERVISION. IN OUR OPINION, SINCE THE ASSESSEE HAS CONSTRUCTED THE PROPERTY UNDER HIS DIRECT SUPERVISION, A REASONABLE PERCENTAGE OF ALLOWANCE S HOULD BE ALLOWED AS REDUCTION TOWARDS SELF-SUPERVISION AND ACCORDING LY, WE FEEL THAT ITA 1175,1176 & 1389/M/12 18 5% TOWARDS THIS ELEMENT WOULD MEET THE ENDS OF JUST ICE. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW 5% TOWARDS SELF-SUPERVISION. 19. WITH REGARD TO THE SUBMISSION OF THE ASSESSEE THAT THE COST OF CONSTRUCTION WAS INCURRED DURING THE ASST. YEARS 2004-05 AND 2005-06 AND, THEREFORE, THE ENTIRE ADDITION CANNOT BE MADE IN THE ASST. YEAR 2005-06, WE AGREE WITH THE ASSESSEE THAT IF THE COST OF CONSTRUCTION HAS BEEN INCURRED IN TWO YEARS IT HAS TO BE SPREAD OVER. SINCE THIS ASPECT WAS NOT AT ALL CONSIDERED BY THE LOWER AUTHORITIES WE DIRECT THE ASSESSING OFFICER TO EXAMINE THIS ASP ECT AND IF THE CONSTRUCTION WAS CARRIED OUT IN TWO ASST. YEARS, TH E DIFFERENCE, IF ANY, TOWARDS COST OF CONSTRUCTION HAS TO BE SPREAD OVER TO THE ASST. YEAR 2004-05 AND 2005-06. 20. WITH REGARD TO THE CONTENTION OF THE COUNSEL F OR THE ASSESSEE THAT THE CREDITS ASSESSED IN THE ASST. YEA RS 2001-02 & 2004-05 AND RENTAL INCOME FOR THE ASST. YEAR 2005-0 6 ARE AVAILABLE FOR SET OFF AGAINST ADDITIONS MADE TOWARDS COST OF CONSTRUCTION SINCE THE ABOVE FUNDS WERE NOT UTILIZED FOR ANY OTHER PUR POSE AND NONE OF ITA 1175,1176 & 1389/M/12 19 THE LOANS WERE REPAID, WE FIND FORCE IN THE SUBMISS ION OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSEE COULD NOT PROVE GENUINENESS OF CREDITS AND THE RENTAL ADVANCE RECEIVED. THIS IS ALL THE MORE CLEAR THAT THE CREDITS AND RENTAL ADVANCE INTRODUCED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE REPRESENTS THE INCOME OF THE ASSESSEE HIMSELF. THE REFORE, SUCH INCOME CAN BE CONSIDERED AS AVAILABLE FOR UTILIZING TOWARDS CONSTRUCTION OF THE PROPERTIES. UNDER THE CIRCUMST ANCES, WE DIRECT THE ASSESSING OFFICER TO EXAMINE THIS ASPECT BY TEL ESCOPING AND GIVE APPROPRIATE RELIEF TO THE ASSESSEE. 21. IN THE RESULT, APPEAL OF THE ASSESSEE FOR THE ASST. YEAR 2004-05 IS ALLOWED AND FOR THE ASST. YEAR 2005-06 I S PARTLY ALLOWED. 22. ITA NO.1389/MDS/2012 A.Y ; 2005-06 : THIS APPEAL WAS FILED BY THE DEPARTMENT LATE BY 3 DAYS. THE DEPARTMENT, HOWEVER, FILED AN AFFIDAVIT DATED 0 6.7.2012, PLEADING FOR CONDONING THE DELAY OF 3 DAYS IN FILIN G THIS APPEAL. WE HAVE CAREFULLY GONE THROUGH THE AFFIDAVIT AND WE AR E SATISFIED THAT ITA 1175,1176 & 1389/M/12 20 THE DELAY IN FILING THIS APPEAL WAS NEITHER WILLFUL NOR WANTON AND SUFFICIENT REASONABLE CAUSE EXISTS FOR THE DELAY IN FILING THE APPEAL. ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APP EAL. 23. THE FIRST ISSUE IN THE GROUNDS OF APPEAL OF TH E REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING ADDITION OF F.85,000/- MADE BY THE ASSESSING OFFICE R RELATING TO CASH SEIZED FROM THE RESIDENCE OF THE ASSESSEE. 24. THE ASSESSING OFFICER WHILE COMPLETING THE ASS ESSMENT UNDER SEC.143(3) READ WITH SEC.263 OF THE ACT, MADE ADDITION OF F.85,000/- ON THE GROUND THAT THE SAID AMOUNT WAS N OT CONSIDERED ORIGINALLY WHILE COMPLETING ASSESSMENT. THE COMMIS SIONER OF INCOME TAX (APPEALS) DELETED THE SAID ADDITION BASE D ON THE THEN ASSESSING OFFICERS NOTE DATED 14.2.2006. THE SAID NOTE OF THE THEN ASSESSING OFFICER READS AS UNDER :- THE CASH FOUND AT CHENNAI WAS F.62,150/- AND AT BOOTHAPANDY F.3,150/-. CONSIDERING THE LEVEL OF ASSESSEES AND MRS.DEVIKAS PRACTICE AT CHENNAI, NO PORTION IS CONSIDERED AS UNACCOUNTED. ITA 1175,1176 & 1389/M/12 21 THEREFORE, IN VIEW OF THE ABOVE OBSERVATION OF THE THEN ASSESSING OFFICER, THE COMMISSIONER OF INCOME TAX (APPEALS) H ELD THAT THE ADDITION IS UNWARRANTED. 25. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. THE COUNSEL FOR THE ASSESS EE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 26. WE HAVE HEARD BOTH SIDES, GONE THROUGH THE ORD ER OF THE LOWER AUTHORITIES. THE COMMISSIONER OF INCOME TAX (APPEALS) BASED ON THE NOTE OF THE THEN ASSESSING OFFICER DATED 14. 10.2006, DELETED THE ADDITION OF F.85,000/-. THEREFORE, WE FIND NO ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELE TING THE SAID ADDITION. WE REJECT THE GROUNDS RAISED BY THE REVE NUE. ITA 1175,1176 & 1389/M/12 22 27. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION OF F.5 LAKHS RELATING TO FD IN THE NAME OF ASSESSEES MINOR DAUGHTER. 28. THE COMMISSIONER OF INCOME TAX (APPEALS) DELET ED THE SAID ADDITION ON THE GROUND THAT THE SAID FD IS ADM ITTED IN THE HANDS OF DR. S. DEVIKA. THE COMMISSIONER OF INCOME TAX ( APPEALS), WHILE DELETING THE SAID ADDITION HELD AS UNDER :- ANOTHER SUM OF F.5,00,000/- WAS ADDED BEING DEPOSI T IN ASSESSEES DAUGHTERS NAME, MISS SHEEBA BAI. ASSES SING OFFICER IN HIS ORDER DT. 31.12.2008 HAD NOT DISCUSS ED WHETHER THIS DEPOSIT OF F.5,00,000/- WAS DIFFERENT FROM FD OF F.6,08,354/- ALREADY ASSESSED BY HIM. IN THE ABSENCE OF DETAILS LIKE DATE OF DEPOSIT AND NATURE OF DEPOSIT, DEPOSIT CERTIFICATE NO. ETC., IN THE ASSES SMENT ORDER, ADDITION OF F.5,00,000/- CAN NOT BE SUSTAINE D. ON PERUSAL OF IT RECORDS FOR ASST. YEAR 2005-06, IT IS OBSERVED THAT IN THE NOTE ENCLOSED WITH ORIGINAL ASSESSMENT ORDER DT. 14.12.2006, THE THEN ASSESSING OFFICER HAD OBSERVED THUS : ITA 1175,1176 & 1389/M/12 23 PLEASE SEE PARA 7 OF LETTER DT.14.6.2006. THE BANK FD OF F.5 LAKHS IS ADMITTED IN THE HANDS OF DR. S. DEVIKA. AS CAN BE SEEN FROM THE ABOVE, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BASED ON THE NOTE EN CLOSED TO THE ASSESSMENT ORDER THAT THE SAID FD WAS ALREADY ADMI TTED IN DEVIKAS CASE AND NO ADDITION IS REQUIRED TO BE MADE IN THE HANDS OF THE ASSESSEE. THEREFORE, WE FIND NO ERROR IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E SAID ADDITION. HENCE, THE GROUNDS OF THE REVENUE ON THIS ISSUE ARE REJECTED. 29. THE NEXT ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING 15% REDUCTION TOWARDS DIFFERENCE IN CPWD RATES AND STATE PWD RATES AS AGAINST OVERALL 10% REDUCTION ALLOWED BY T HE ASSESSING OFFICER. ITA 1175,1176 & 1389/M/12 24 30. FOR THE REASONS STATED BY US IN PARA 18 ABOVE, WE REJECT THIS GROUND OF THE REVENUE. 31. THE LAST ISSUE IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS AS UNDER :- THE LEARNED CIT(A) OUGHT TO HAVE ENHANCED THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 AT LEAST BY F.6,68,122/-. SINCE THE APPEAL WAS PENDING BEFORE H IM AND HE HAS OBSERVED THAT THE CONSTRUCTION IS NOT RELEVANT FOR THE ASSESSMENT YEAR 2005-06 AND THAT T HE ASSESSEE HAS CONSTRUCTED THE PROPERTY AT MGR NAGAR DURING JUNE 2003 TO MARCH 2004. THE REVENUE HAS RAISED THE ABOVE GROUND REQUIRING T HIS TRIBUNAL TO DIRECT THE COMMISSIONER OF INCOME TAX (APPEALS) TO ENHANCE THE ASSESSMENT FOR THE ASST. YEAR 2004-05 BY F6,68,122/ -. THIS TRIBUNAL HAS NO POWER TO ENHANCE THE ASSESSMENT OR TO GIVE A DIRECTION TO THE COMMISSIONER OF INCOME TAX (APPEALS) OR ASSESSING O FFICER TO ENHANCE THE ASSESSMENT. IN THE CIRCUMSTANCES, WE DISMISS THIS ITA 1175,1176 & 1389/M/12 25 GROUND OF REVENUE ON THIS ISSUE. NO OTHER ISSUE HA S BEEN ARGUED BEFORE US BY THE DEPARTMENTAL REPRESENTATIVE. 32. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED 33. ORDER PRONOUNCED ON FRIDAY, THE 21 ST OF DECEMBER 2012, AT CHENNAI. SD/- SD/- ( DR. O.K. NARAYANAN) (CHALLA NAGENDR A PRASAD) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED : 21 ST DECEMBER 2012. JLS. COPY TO:- (1) APPELLANT (2) RESPONDENT (3) CIT-(A), CHENNAI (4) C.I.T., CHENNAI, (5) (5) D.R. (6) GUARD FILE