M/s. Shubham Construction, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(1), JUNAGADH

ITA 1349/RJT/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7350 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 1993-1994
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Keywords: Unexplained expenditure
• Section: 69C; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH SMC, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) I.T.A. NO. 1349/RJT/2010 - AY 1993-94 I.T.A. NO. 1350/RJT/2010 - AY 1994-95 I.T.A. NO. 1351/RJT/2010 - AY 1996-97 M/S SHUBHAM CONSTRUCTION VS ITO, WD.1(1) C/O KALPESH DOSHI & CO, CAS JUNAGADH 411, COSMO COMPLEX MAHILA COLLEGE CIRCLE RAJKOT 360 001 PAN : AAUPN5914C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KALPESH DOSHI RESPONDENT BY: SHRI JAI RAJ KUMAR O R D E R THESE ARE APPEALS BY THE ASSESSEE AND THEY ARISE O UT OF THE SEPARATE ORDERS OF CIT(A)-IV, RAJKOT, BOTH DATED 14 -10-2010 FOR THE ASSESSMENT YEARS 1993-94, 1994-95 & 1995-96. 2. THE ASSESSEE RAISED COMMON GROUND IN ALL THE APP EALS. FOR THE SAKE OF CONVENIENCE, GROUND OF APPEAL FOR ASSESSMEN T YEAR 1996-97 IS REPRODUCED BELOW: 1. THAT THE LEARNED CIT(A) HAS WRONGLY REJECTED TH E RECTIFICATION U/S 154 OF THE I.T. ACT. 2. THAT, THE LEARNED CIT(A) HAS ASSESSED ADDITIONAL INCOME OF RS./27,480/- U/S 69C BUT AT THE SAME TIME , THE LEARNED CIT(A) HAS NOT ALLOWED THE DEDUCTION F EXPENDITURE U/S 37 OF THE I.T. ACT AS DIRECTED BY H ONBLE ITAT. ITA NO.1349, 1350 & 1351//RJT/2010 2 3. THAT, THE FINDINGS OF THE LEARNED CIT(A) ARE NOT JUSTIFIED AND BAD IN LAW. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONST RUCTION AND SALE OF BUILDINGS. THE ASSESSING OFFICER REFERRED THE MATT ER TO THE VALUATION OFFICER FOR THE PURPOSE OF VALUATION OF THE PROPERTY. THE ASSESSING OFFICER MADE ADDITION OF THE DIFFERENCE BETWEEN THE VALUE SHOWN BY THE ASSESSEE AND THAT DETERMINED BY THE DVO IN ALL THESE YEARS. THE CIT(A) HELD THAT STANDARD PLINTH METHOD IS APPLICABLE ONLY TO THE GO VERNMENT AGENCY AND NOT TO THE PRIVATE AGENCY AND ALLOWED THE GROUNDS I N FAVOUR OF THE ASSESSEE. THE DEPARTMENT PREFERRED APPEAL BEFORE T HE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER DATED 20 TH SEPTEMBER, 2005 IN ITAS NO.427 TO 430(RJT)/2004 OBSERVED THAT THE ASSESSING OFFICER H AS RELIED UPON THE DVOS REPORT WHICH IS CONCLUSIVE EVIDENCE WHILE MAKI NG THE ADDITION IN RESPECT OF THE DIFFERENCE BETWEEN THE COST RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE VALUE ARRIVED AT BY THE DVO RATHER THAN TREATING THE DVS REPORT AS MARK OF GUIDANCE. THERE FORE, THE ITAT SUSTAINED THE ADDITION TO THE EXTENT OF 10% OF COST OF CONSTRUCTION SHOWN IN THE BOOKS OF ACCOUNT AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. ON PAGE 20 OF THE ORDER, THE ITAT HAS DIRECTED, AS EXT RACTED BY THE CIT(A) ON PAGE 4 OF HIS ORDER, AS UNDER: NECESSARY DEDUCTION U/S 69C CAN BE ALLOWED WHILE W ORKING OUT PROFIT UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION IN RESPECT OF SUCH PROFIT. THE ASSESSING OFFICER, WHILE GIVING EFFECT TO THE O RDER OF THE ITAT DID NOT ALLOW THE DEDUCTION U/S 37 OF THE ACT. THE ASSESSE E MOVED RECTIFICATION APPLICATION BEFORE THE ASSESSING OFFICER WHICH WAS REJECTED. THE CIT(A) ALSO DID NOT ALLOW THE DEDUCTION U/S 37 OF THE ACT BY OBSERVING AS UNDER: ITA NO.1349, 1350 & 1351//RJT/2010 3 3.7 IN THE INSTANT CASE, THE HONBLE ITAT HAS, IN ITS ORDER DTD 20/9/2005 IN THE APPELLANTS CASE, STATED THAT NECESSARY DEDUCTION UNDER SECTION 69C CAN BE ALLOWED WHILE WO RKING OUT PROFIT UNDER THE HEAD INCOME FROM BUSINESS AND PRO FESSION IN RESPECT OF SUCH PROFIT. IT INDICATES THAT IF THE A.O. IS NOT SATISFIED WITH THE REASONABLENESS OR GENUINENESS OF THE CLAIM OF DEDUCTION, HE CAN DENY SUCH DEDUCTION AFTER DUE VERIFICATION. AFTER VERIFICATION OF THE RECORDS, T HE ASSESSING OFFICER, IN HIS ORDER U/S 154 OF THE ACT, DATED 3/3 /2006, VIEWED THAT THE HONBLE ITAT DID NOT DIRECT THE A.O. TO AL LOW ANY DEDUCTION U/S 37 OF THE ACT, AND THEREFORE, HELD TH AT THE CONTENTION PUT FORTH BY THE ASSESSEE IS FOUND TO BE INCORRECT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION, I HOLD THAT THE A.O. WAS CORRECT IN HIS ACTION, THEREBY REJECTING THE RECTIFICATION PETITIONS FILED BY THE ASSESSEE FOR THE ABOVE-MENTIONED ASSESSMENT YEARS. 4. THE LD.AR SUBMITTED THAT THE PROVISO TO SECTION 69C IS INSERTED BY THE FINANCE (NO.2) ACT, 1998 WITH EFFECT FROM 01-04 -1999. THE CASES UNDER CONSIDERATION ARE BEFORE THE INSERTION OF THE PROVISO TO SECTION 69C OF THE ACT. THE LD.AR FURTHER SUBMITTED THAT SUCH EXPENDITURE IS ALLOWABLE U/S 37 OF THE ACT IN VIEW OF THE JUDGMENT OF THE JU RISDICTIONAL HIGH COURT IN THE CASE OF CIT VS STAR BUILDERS 294 ITR 338 (GUJ) WHEREIN, ON IDENTICAL CIRCUMSTANCES, THE EXPENDITURES WERE ALLOWED U/S 37 OF THE ACT. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF CIT(A). 5. I HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. THE ITAT, IN ITS ORDER IN ITA NOS 427 TO 430(RJT)/2004 ORDER DATED 20 TH SEPTEMBER, 2005 HAS CLEARLY HELD THAT THE ADDITION TO THE EXTENT OF 10% OF THE COST OF CONSTRUCTION SHOWN IN THE BOO KS OF ACCOUNT IS SUSTAINED SUBJECT TO NECESSARY DEDUCTION 69C CAN BE ALLOWED WHILE WORKING OUT PROFIT UNDER THE HEAD INCOME FROM BUSI NESS OR PROFESSION. THOUGH SECTION 37 WAS NOT MENTIONED, BUT FOR THE PU RPOSE OF CALCULATION OF INCOME FROM BUSINESS OR PROFESSION EXPENDITURES U/S 37 IS ALLOWABLE. THE ITA NO.1349, 1350 & 1351//RJT/2010 4 ORDER OF THE ASSESSING OFFICER AND CIT(A) ARE CONTR ARY TO THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS STAR BUILDERS. THEREFORE, ADDITION MADE BY AO IS NOT SUSTAINABLE. I, THEREFO RE, DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 37 OF THE ACT AS CLAIMED BY THE ASSESSEE AS PER THE DECISION OF THE JURISDICTIONAL HIGH COUR T CITED SUPRA AND ADDITION MAD3E BY THE AO IS ACCORDINGLY DELETED. 5. IN THE RESULT, ALL THE THREE APPEALS FILED BY TH E ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11-02-2011. SD/- (A.L. GEHLOT) ACCOUNTANT MEMBER RAJKOT, DT : 11 TH FEBRUARY, 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV, RAJKOT 4. THE CIT-III, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT