Dr. P.Annavaram, Kakinada V. THE ITO, WARD - 2, Kakinada

ITA 131/VIZ/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9717 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SATYANADHAM
• Keywords: Rejection of books of accounts; Unexplained investment; Value adopted by valuation officer; Valuation report
• Section: 143(3); 142(1); 133A; 147

Judgement Text

ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.131/VIZAG/2014 ( / ASSESSMENT YEAR: 2008-09) DR. P. ANNAVARAM, KAKINADA VS. ITO, WARD - 2, KAKINADA [PAN: AGBPD0839M ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI T. SATYANADHAM, DR / DATE OF HEARING : 08.11.2016 / DATE OF PRONOUNCEMENT : 25.11.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A), VISAKHAPATNAM DATED 14.2.2014 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2008-09. ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, A PRACTICING DOCTOR FILED HIS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 2008-09 ON 3.3.2009 DECLARING TOTAL INCOME OF ` 1,05,590/-, BESIDES AGRICULTURAL INCOME OF ` 2,76,700/-. A SURVEY U/S 133A OF THE ACT, WAS CON DUCTED IN THE PREMISES OF M/S. RAMYA HOSPITALS OF WHICH THE A SSESSEE AND HIS WIFE DR. D. PRABHAVATI ARE PARTNERS. DURING THE CO URSE OF SURVEY, CERTAIN DOCUMENTS WERE FOUND INDICATES THAT INCOME CHARGEAB LE TO TAX HAS BEEN ESCAPED ASSESSMENT AND ACCORDINGLY, A NOTICE U/S 14 7 OF THE ACT WAS ISSUED CALLING UPON THE ASSESSEE TO FILE A RETURN O F INCOME. SINCE, THE ASSESSEE FAILED TO FILE THE RETURN OF INCOME, A NOT ICE U/S 142(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') ALONG WITH A QUESTIONNAIRE DATED 4.11.2011 WAS ISSUED TO THE ASS ESSEE CALLING FOR VARIOUS DETAILS. SINCE, THE ASSESSEE FAILED TO APP EAR, FURTHER NOTICES WERE ISSUED TO FURNISH THE DETAILS REQUIRED FOR COM PLETING ASSESSMENT, BUT THE ASSESSEE NEITHER APPEARED BEFORE THE A.O. N OR FILED ANY DETAILS TO COMPLETE THE ASSESSMENT. THEREAFTER, THE A.O. I SSUED FINAL NOTICE ON 14.12.2011 TO FURNISH THE INFORMATION. IN RESPONSE TO NOTICE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FURNISHED CERTAIN INFORMATION. THE ASSESSMENT WAS FINALLY CO MPLETED U/S 143(3) R.W.S. 147 OF THE ACT BY DETERMINING TOTAL INCOME O F ` 79,06,440/- INTER- ALIA MAKING ADDITIONS TOWARDS PURCHASE OF AGRICULTU RAL LAND, EXCESS ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 3 AGRICULTURAL INCOME, LOW WITHDRAWALS FOR DOMESTIC E XPENSES AND UNEXPLAINED INVESTMENT IN CONSTRUCTION OF RAMYA RES IDENCY. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THOUGH, THE ASSESSEE AGI TATED ALL THE ADDITIONS MADE BY THE A.O. BEFORE THE CIT(A), THE A .R. FOR THE ASSESSEE, NOT PRESSED THE GROUNDS RAISED CONTESTING ADDITIONS MADE TOWARDS PURCHASE OF AGRICULTURAL LAND, EXCESS AGRICULTURAL INCOME AND INSUFFICIENT PERSONAL DRAWINGS, HOWEVER, THE ASSESSEE HAS CONTES TED THE ISSUE OF ADDITIONS TOWARDS UNEXPLAINED INVESTMENT IN CONSTRU CTION OF BUILDING. THE CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIO NS OF THE ASSESSEE CONFIRMED ADDITIONS MADE BY THE A.O. TOWARDS UNEXPL AINED INVESTMENT IN COST OF CONSTRUCTION OF BUILDING. THE CIT(A) HE LD THAT THE ASSESSEE FAILS TO FILE ANY EVIDENCES TO PROVE THAT THE COST OF CONSTRUCTION DETERMINED BY THE DVO IS INCORRECT. IN THE ABSENCE OF ANY DETAILS TO SUBSTANTIATE THE COST OF CONSTRUCTION CLAIMED BY TH E ASSESSEE, THE VALUE DETERMINED BY THE DVO PREVAILS. WITH THESE OBSERVAT IONS, CONFIRMED THE ADDITIONS AND DISMISSED APPEALS FILED BY THE AS SESSEE. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS OF ` 68,54,630/- MADE U/S 69B OF ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 4 THE ACT, TOWARDS ALLEGED UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDING. THE A.R. FURTHER SUBMITTED THAT THE CIT( A) OUGHT TO HAVE HELD THAT THE REFERENCE MADE TO DVO WITHOUT REJECTION OF BOOKS OF ACCOUNTS IS INVALID AND CONSEQUENTIALLY NO ADDITION COULD HA VE BEEN MADE ON THE BASIS OF VALUATION REPORT ISSUED CONSEQUENT TO SUCH INVALID REFERENCE. THE A.R. FURTHER SUBMITTED THAT THE CIT(A) FAILED T O APPRECIATE THE FACT THAT THE ASSESSEE HAS CONSTRUCTED BUILDING ON ITS O WN AND ALSO THE DVO HAS ADOPTED CPWD RATES WHICH IS QUITE HIGHER THAN T HE COST OF CONSTRUCTION. THE CIT(A) OUGHT TO HAVE ALLOWED A D ISCOUNT OF 20% TOWARDS DIFFERENCE BETWEEN CPWD RATES AND LOCAL RAT ES AND A FURTHER DEDUCTION OF 10% TOWARDS REBATE FOR SELF-SUPERVISIO N. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE CIT(A) OR DER. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE HAS CONSTRUCTED BUILDING IN THE NAME AND STYLE OF M/S. RAMYA RESIDENCY AND S HOWN COST OF CONSTRUCTION AT ` 31,16,387/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN THE A.O. CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS FOR COST OF CONSTRUCTION, THE ASSESSEE FAIL S TO FURNISH NECESSARY DETAILS TO SUBSTANTIATE COST OF CONSTRUCTION. IN T HE ABSENCE OF NECESSARY ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 5 DETAILS, THE A.O. REFERRED THE MATTER TO THE VALUAT ION OFFICER FOR DETERMINING THE COST OF CONSTRUCTION OF BUILDING. T HE DVO, VIDE ITS REPORT DATED 16.11.2011 ARRIVED AT ESTIMATED COST OF CONST RUCTION AT ` 99,71,000/- ON THE BASIS OF PLINTH AREA RATES APPLI CABLE TO THE PERIOD OF CONSTRUCTION AND ITS LOCATION. THE A.O. AFTER CALL ING FOR OBJECTIONS FROM THE ASSESSEE, ADOPTED COST OF CONSTRUCTION DETERMIN ED BY THE DVO AND WORKED OUT DIFFERENCE OF ` 68,54,613/- AND BROUGHT TO TAX AS UNEXPLAINED INVESTMENT U/S 69B OF THE ACT. 6. THE ASSESSEE CLAIMS THAT THE VALUATION ARRIVED B Y THE DVO IS CORRECT, AS THE DVO HAS ADOPTED CPWD RATES ON THE TO TAL PLINTH AREA TO DETERMINE THE COST OF CONSTRUCTION, WHEREAS THE ASS ESSEE HAS CONSTRUCTED BUILDING ON ITS OWN BECAUSE OF WHICH TH E COST OF CONSTRUCTION IS MUCH LESSER THAN THE COST DETERMINE D BY THE DVO. THE ASSESSEE FURTHER CONTENDED THAT THE A.O. ERRED IN R EFERRING TO THE VALUATION OFFICER FOR DETERMINATION OF COST OF BUIL DING WITHOUT REJECTION OF BOOKS OF ACCOUNTS AND ALSO WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS. WE DO NOT FIND ANY MERITS IN TH E ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS INSPITE OF REPEATED CALL NOTICES, THE A SSESSEE FAILED TO FURNISH ANY DETAILS BEFORE THE A.O. TO JUSTIFY THE COST OF CONSTRUCTION OF ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 6 THE BUILDING. THEREFORE, THE ASSESSEE CANNOT CLAIM THAT THE A.O. HAS NOT FOLLOWED THE DUE PROCEDURE TO REFER THE VALUATION T O THE DVO. 7. COMING TO THE COST OF CONSTRUCTION DETERMINED BY THE DVO. THE DVO HAS DETERMINED COST OF CONSTRUCTION OF ` 99,71,000/- ON THE BASIS OF PLINTH AREA RATES APPLICABLE TO THE PERIOD OF CO NSTRUCTION AND ITS LOCATION. WHEN THE DVO REPORT WAS CONFRONTED TO THE ASSESSEE, THE ASSESSEE FAILED TO CONTRADICT THE FINDINGS OF THE D VO BY FILING ANY EVIDENCES. THEREFORE, WE ARE OF THE VIEW THAT THE VALUE DETERMINED BY THE DVO BASED ON THE PLINTH AREA OF THE BUILDING CA NNOT BE CONTESTED AT THIS STAGE. HOWEVER, WE FIND THAT WHILE VALUING TH E BUILDING, THE DVO HS NOT ALLOWED ANY MARGIN TOWARDS SELF-SUPERVISION AND DIFFERENCE BETWEEN CPWD AND LOCAL RATES. THE ASSESSEES CONTENTION IS THAT THERE IS A DIFFERENCE BETWEEN CPWD RATES AND STATE PWD RATES, THEREFORE, APPLYING CPWD RATES FOR VALUATION OF BUILDING IS IN CORRECT. THE ASSESSEE FURTHER CONTENDED THAT HE HIMSELF CONSTRUCTED BUILD ING, AND HENCE, THE COST OF CONSTRUCTION WOULD BE SUBSTANTIALLY LESS WH EN COMPARED TO CPWD RATES. HAVING HEARD BOTH THE SIDES, WE FIND FO RCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT CPWD R ATES ARE PRESCRIBED FOR CONSTRUCTION OF BUILDINGS FOR THE CE NTRAL GOVERNMENT PROJECTS BY TAKING INTO ACCOUNT THE STANDARD QUALIT Y OF CONSTRUCTION. ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 7 THOUGH, CPWD RATES ARE BASIS FOR VALUATION OF COST OF CONSTRUCTION, SUITABLE MARGIN SHOULD BE ALLOWED TOWARDS COST OF M ATERIALS AND OTHER CHARGES WHEN THE BUILDING WAS CONSTRUCTED BY THE AS SESSEE ON ITS OWN. IN THE INSTANT CASE, AS CAN BE SEEN FROM THE FACTS, THE ASSESSEE HAS CONSTRUCTED THE BUILDING ON ITS OWN. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) SHOULD HAVE ALLOWED DISCOUNT TOWARDS DIF FERENCE BETWEEN CPWD RATES AND STATE PWD RATES AND ALSO REBATE TOWAR DS SELF- SUPERVISION CHARGES. 8. THE ASSESSEE RELIED UPON THE DECISION OF COORDIN ATE BENCH OF THIS TRIBUNAL, IN THE CASE OF K. SATISH IN ITA NO.49/VIZ AG/2013 DATED 4.12.2015 AND SUBMITTED THAT UNDER SIMILAR CIRCUMST ANCES, THE COORDINATE BENCH HAS ALLOWED 15% DISCOUNT TOWARDS R ATE DIFFERENCES AND FURTHER 10% REBATE TOWARDS SELF-SUPERVISION CHA RGES. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF SRI K. SATISH (SUPRA) HAS CONSIDERED SIMILAR ISSUE AND ALLOWED 15% DEDUCT IONS TOWARDS VARIATION BETWEEN CPWD RATES AND STATE PWD RATES AND A FURTHER DEDUCTION OF 10% TOWARDS SELF-SUPERVISION CHARGES F ROM THE VALUE ARRIVED BY THE DVO. THE RELEVANT PORTION OF THE OR DER IS EXTRACTED BELOW: ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 8 11. CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, WE ARE OF THE OPINION, THAT THE ASSESSEE IS ENTITLED FOR 15% DEDU CTION TOWARDS RATE VARIATION BETWEEN CPWD AND STATE PWD AND A FURTHER 10% DEDUCTION TOWARDS SELF-SUPERVISION CHARGES FROM THE VALUE ARR IVED BY THE DVO APPLYING THE CPWD RATES. THE CIT(A), AFTER CONSIDE RING THE FACTS THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND BILLS FOR CONSTRUCTION, SCALED DOWN THE ADDITION TO RS.7,25,000/-. WE DO NO T FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A). THEREFORE, W E INCLINED TO UPHELD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR 15% DEDUCTION TOW ARDS VARIATION BETWEEN CPWD RATES AND STATE PWD RATES AND A FURTHER 10% DEDUCTION TOWARDS SELF-SUPERVISION CHARGES. THEREFORE, WE DI RECT THE A.O. TO ALLOW 15% TOWARDS RATE DIFFERENCE AND 10% TOWARDS REBATE FOR SELF- SUPERVISION CHARGES TO ARRIVE AT A COST OF CONSTRUC TION OF BUILDING. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 TH NOV16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 25.11.2016 VG/SPS ITA NO.131/VIZAG/2014 DR. P. ANNAVARAM, KAKINADA 9 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT DR. P. ANNAVARAM, C/O RAMAYA HOS PITAL, ELWIN PETA, GANDHI NAGAR, KAKINADA. 2. / THE RESPONDENT THE ITO, WARD-2, KAKINADA 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM