Shri Ashok D. Chandarana, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 1334/RJT/2010

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0203 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 16-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Unexplained investment; Valuation report
• Section: 69

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT . .. . . . . . , , , , . .. . . . . . , , , , % % % % BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVAST AVA, AM ITA NO. 1334/RJT/2010 / ASSESSMENT YEAR 2003-04 SHRI ASHOK D CHANDARANA V. INCOME TAX OFFICER KAILASH DHAM WARD 5(2), RAJKOT 3-11, GAYATRI NAGAR, RAJKOT PAN: ABAPC3643B ASSESSEE BY: SHRI J C RANPURA REVENUE BY: SHRI AVINASH KUMAR DATE OF HEARING: 17.7.2012 DATE OF PRONOUNCEMENT: 14.9.2012 / // / ORDER . .. . . . . . /D. K. SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 17.9.2010, ON THE FOLLOWING GROUNDS: 1.0 THE GROUND OF APPEAL MENTIONED HEREUNDER IS WI THOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LD. CIT(A) IV, RAJKOT ERRED ON FACTS AS AL SO IN LAW IN CONFIRMING THE ADDITION MADE U/S 69B OF THE INCOME TAX ACT, 1961 T O THE EXTENT OF RS.2,55,280/- OUT OF TOTAL ADDITION OF RS.3,81,000/ - ON THE ALLEGED GROUND THAT THE APPELLANT HAS UNDERSTATED THE INVESTMENT IN THE CONSTRUCTION OF HOTEL PROPERTY. 2. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF TRADING IN LADIES GARMENTS IN THE NAME AND STYLE OF M/S JAMKU. IN THE YEAR UNDER APPEAL, HE HAD CONSTRUCTED A BUILDING FOR RUNNING HOTEL BUSINE SS. HE DECLARED THE COST OF CONSTRUCTION AT RS.28,77,000/-. THE AO DID NOT ACCE PT THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. HE THEREFORE SOUGHT OPINI ON OF THE DEPARTMENTAL VALUER AND THEREFORE REFERRED THE MATTER TO HIM. THE DVO D ETERMINED THE COST OF CONSTRUCTION AT RS.38,86,638/- OVER A PERIOD OF THR EE YEARS. THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE A ND THE ONE DETERMINED BY THE 2 ITA NO. 401/RJT/2011 DVO WAS SPREAD OVER THREE YEARS AS A RESULT OF WHIC H A SUM OF RS.3,81,000/- WAS FOUND TO BE RELATABLE TO THE YEAR UNDER APPEAL AND CONSEQUENTLY THE SAME WAS ADDED BY THE AO AS UNEXPLAINED INVESTMENT. 3. AGGRIEVED BY THE ADDITION MADE BY THE AO, THE AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) UPON WHICH THE LD. CIT( A) CONFIRMED THE ADDITION TO THE EXTENT OF RS. 2,55,280/- OUT OF RS.3,81,000/- MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, THE LD. AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN VALUATION MADE BY THE DVO AND THE ONE SHOWN BY THE ASSESSEE IS MERE 19.6% WHICH IS WELL B ELOW 20% AND THEREFORE SHOULD HAVE BEEN IGNORED BY THE CIT(A). HIS SECOND SUBMISSION WAS THAT THE AO HAD REFERRED THE MATTER TO THE DVO WITHOUT REJECTIN G THE BOOKS OF ACCOUNT AND THEREFORE HIS REFERENCE TO THE DVO WAS WITHOUT JURI SDICTION. HIS THIRD SUBMISSION WAS THAT THE DIFFERENCE IN VALUATION WAS ON ACCOUNT OF ADOPTION OF CPWD RATES BY THE DVO WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE HAD PROCURED THE MATERIALS LOCALLY AT MUCH LOWER RATES THAN THOSE ADOPTED BY T HE DVO. HIS FOURTH SUBMISSION WAS THAT THE SIMILAR ADDITION MADE BY THE AO WAS DE LETED BY THE CIT(A) IN ASSESSMENT YEARS 2002-03 AND 2004-05 AND THEREFORE THE CIT(A) OUGHT TO HAVE DELETED THE IMPUGNED ADDITION ALSO FOLLOWING THE OR DER OF HIS PREDECESSOR. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR RELIED ON TH E DECISIONS IN (I) DR.SURYA MANI DWEDI V/S ACIT (132 TTJ (LUCKNOW)240, (II) ITO V/S NILESH MAHESHWARI 7 ITR (TRIB) 645, (III) CIT V/S SMT.SURAJ DEVI 328 ITR 60 4 (DEL), (IV) ITO V/S SHRI RUCHI BUILDERS AND DEVELOPERS IN ITA NO.1679/RJT/2005 (AY -2002-03) DATED 18.5.2007 AND (V) SHRI OMPRAKASH M JADEJA V/S ACIT IN ITA NO. 687/RAJ/2002 (AY-1994-95) DATED 30.5.2005. 5. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS INCLUDING THE DECISIONS CITED BY THE PARTIES AS ALS O THOSE CITED BY THE LD. CIT(A) IN HIS APPELLATE ORDER. THE LD. CIT(A) HAS CONFIRMED T HE IMPUGNED ADDITION WITH THE FOLLOWING OBSERVATIONS:. 3 ITA NO. 401/RJT/2011 4.4 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY TH E ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT I FIN D FORCE IN THE SUBMISSIONS OF THE AR OF THE APPELLANT GENERALLY, A VALUATION R EPORT IS BASED ON VARIOUS ESTIMATES, AND APPARENTLY, THERE WOULD BE A DIFFERE NCE IN ESTIMATES MADE BY TWO DIFFERENT VALUERS. NOW AN IMPORTANT QUESTION AR ISES AS TO HOW MUCH DIFFERENCE IS THERE IN THE VALUATION MADE BY THE DV O AND THE VALUATION MADE BY THE GOVERNMENT APPROVED VALUER. IN THE INSTANT C ASE, THERE IS A DIFFERENCE OF ONLY 19.67%. MOREOVER, AS RIGHTLY POINTED OUT BY THE AR OF THE APPELLANT, THE VALUATION REPORT IS JUST AN OPINION IN THE FORM OF AN ESTIMATE FOR THE COST OF CONSTRUCTION AND SUCH AN OPINION CANNOT OVERRIDE TH E FACTUAL ASPECTS OF THE CASE. THE VALUE OF CONSTRUCTION DEPENDS UPON THE MA TERIAL USED, LOCATION AND THE QUALITY OF CONSTRUCTION. HOWEVER, AFTER EXA MINATION OF THE VALUATION REPORT SUBMITTED BY THE APPELLANT AND THE REPORT OF THE DVO, SOME DEVIATION HAS BEEN NOTICED, WHICH DESERVES TO BE TAKEN INTO C ONSIDERATION TO ARRIVE AT THE TRUE COST OF CONSTRUCTION. IT IS NOTICED THAT T HE DVO HAS TAKEN THE VALUE OF PVC TANK AT RS.8000/-, WHICH APPEARS TO BE ON HIGHE R SIDE. THE VALUE OF PVC TANK SHOWN IN THE VALUATION REPORT SUBMITTED BY THE APPELLANT APPEARS TO BE REASONABLE, AND THEREFORE, THE DEDUCTION OF R S.3500/- IS GIVEN OUT OF THE DIFFERENCE OF RS.3,81,000/-. SIMILARLY, IT IS N OTICED THAT THE DVO HAS GIVEN DEDUCTION OF 5% ONLY FOR SUPERVISION CHARGES, WHICH IS NORMALLY AT 10%, AND ACCORDINGLY, THE APPELLANT IS ALLOWED DEDUCTION AT 10% FOR SUPERVISION CHARGES. THUS, THE APPELLANT GETS DEDUCTION OF RS.9 4,009/- OUT OF THE DIFFERENCE OF RS.3,81,000/-. SIMILARLY, IT IS FOUND THAT THE APPELLANT HAS PAID PLANNING FEE OF RS.6300/-, WHICH IS ACTUAL PAYMENT, WHEREAS THE DVO HAS ADDED RS.34511/- AT 1%, WHICH IS PURELY AN ESTIMATE . ACCORDINGLY, THE ADDITION FOR PLANNING FEE IS TAKEN AT RS.6300/- ONL Y, AND THUS, THE APPELLANT GETS A RELIEF OF RS.28,211/-. IN NET, THE APPELLANT IS ALLOWED TOTAL DEDUCTION OF RS.1,25,720/- (RS.3500 + 94009 + RS.28211). AFTER A LLOWING ALL ABOVE DEDUCTIONS, STILL THERE REMAINS THE DIFFERENCE OF R S 2,55.280/- (RS.381000 - RS 125720), THE ABOVE DIFFERENCE IS CONFIRMED. THE ASSESSEE GETS A RELIEF OF RS 1,25,720/- OUT OF THE ADDITION OF RS,3,81,000/-. THIS GROUND OF APPEAL IS 4 ITA NO. 401/RJT/2011 PARTLY ALLOWED. 7. ON THE FACTS OF THE CASE, WE ARE SATISFIED THAT THE ASSESSEE HAS NOT FULLY RECORDED THE INVESTMENTS MADE BY HIM IN THE CONSTRU CTION OF BUILDING. IT IS FOR THIS REASON THAT THE IMPUGNED ADDITION HAS BEEN CONFIRME D. IN THE ABSENCE OF SATISFACTORY EXPLANATION REGARDING THE NATURE AND S OURCE OF UNEXPLAINED INVESTMENT TO THE EXTENT NOT RECORDED IN THE BOOKS, THE IMPUGN ED DIFFERENCE IN INVESTMENT IS LIABLE TO BE TAXED AS UNEXPLAINED INVESTMENT U/S 69 B. FOR ITS APPLICABILITY, SECTION 69B DOES NOT REQUIRE REJECTION OF BOOKS. ONCE THE A SSESSEE IS FOUND TO HAVE MADE INVESTMENTS, WHICH ARE NOT RECORDED IN THE BOOKS AT ALL OR NOT FULLY RECORDED IN THE BOOKS, THE AO, IN THAT SITUATION, CAN TAX SUCH INVE STMENTS IF THE ASSESSEE FAILS TO SATISFACTORILY EXPLAIN THE NATURE AND SOURCE THEREO F. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY SECTION 69B. 8. THE ASSESSEE HAS SHOWN THE COST OF CONSTRUCTION AT RS.28,77,000/-, WHICH HAS NOT BEEN ACCEPTED EITHER BY THE AO OR BY THE LD .CIT(A). IT IS TRUE THAT THE DETERMINATION OF COST OF CONSTRUCTION INVOLVES ESTI MATION AND THAT IT MAY NOT THEREFORE ALWAYS BE MATHEMATICALLY ACCURATE. TAKING INTO ACCOUNT THE FACTUAL MATRIX OF THE CASE AND THE SUBMISSIONS MADE ON BEHALF OF T HE ASSESSEE, IT IS CONSIDERED TO BE JUST AND REASONABLE TO CONFIRM THE ADDITION TO T HE EXTENT OF RS.1,25,000/- AS AGAINST RS.2,55,280/- CONFIRMED BY THE CIT(A). WE O RDER ACCORDINGLY. 9. IN VIEW OF THE FOREGOING, THE APPEAL FILED BY TH E ASSESSEE IS PARTLY ALLOWED. * , 14-09-2012 * ORDER PRONOUNCED ON 14-09-2012 SD SD ( .. / T. K. SHARMA) ( .. / D. K. SRIVASTAVA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /RAJKOT: ,/ DATE 14-09-2012 SRL/- 5 ITA NO. 401/RJT/2011 * ** * /0 /0 /0 /0 10 10 10 10 / COPY OF ORDER FORWARDED TO:- 1. 4 / APPELLANT-. 2. /64 / RESPONDENT-. 3. : / CONCERNED CIT 4. :- / CIT (A). 5. 0 /, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , TRUE COPY SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT 1 :