DCIT, V. M/s. Hotel paradise,

ITA 14/JAB/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82718 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHUKLA
• Assessee Lawyers: SANJAY SETH; SANJAY BAJPAI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NOS.13 & 14/JAB/2013 ASSESSMENT YEARS: 2006-07 & 2007-08 DY. COMMISSIONER OF INCOME TAX, VS. M/S HOTEL PARAD ISE, CIRCLE SAGAR. MAKRONIYA, SAGAR (M.P.). (PAN: AADFH 2622 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABHISHEK SHUKLA RESPONDENT BY : SHRI SANJAY SETH & SANJAY BAJPAI DATE OF HEARING : 25.09.2014 DATE OF PRONOUNCEMENT : 26.09.2014 ORDER PER PRAMOD KUMAR, ACCOUNTANT MEMBER: THESE TWO APPEALS PERTAIN TO THE SAME ASSESSEE, INV OLVE A COMMON ISSUE ARISING OUT OF SAME FACTS AND ARE DIRECTED AGAINST A CONSOLIDATED ORDER DATED 28 TH FEBRUARY, 2012 PASSED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE IN COME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. AS A MATTER OF CONVENIENCE, THEREFORE, WE WILL TAKE UP THESE TWO APPEALS TOGETHER. 2 ITA NOS.13 & 14/JAB/2013 A.YS. 2006-07 & 2007-08 2. COMMON GRIEVANCE, RAISED BY THE ASSESSING OFFICE R FOR BOTH OF THESE ASSESSMENT YEARS, IS AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES, LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN NOT ALLOWING THE DVO A P ERSONAL HEARING. 2. THE APPELLANT RESERVES THE RIGHT TO ADD OR AMEND ANY GROUNDS OF APPEAL. 3. TO ADJUDICATE ON THIS ISSUE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS WITH RESPECT TO ADDITIONS OF FIXED ASSETS, ON THE BASIS OF DISTRICT VALUATION OFFICERS REPORT. WHEN THE MATT ER WAS CARRIED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THESE ADDITIONS WERE DELETED. WHILE DOING SO, LD. COMMISSIONER OF INCOME TAX (APP EALS) OBSERVED AS FOLLOWS:- 9. GROUND NO.3 AGITATES REJECTION OF BOOKS OF ACCO UNTS; THE COUNSEL HAS SUBMITTED THAT THE APPELLANT MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH ARE AUDITED. THIS FACT HAS NOT BEEN REFUTED BY THE AO WHO HAS NOT POINTED OUT A SINGLE DEFECT IN THE BOOK S OF ACCOUNTS OF THE APPELLANT FOR THE A.YR. 06-07. APART FROM STATING THAT THE ASSESSEE HAD NOT MAINTAINED PROPER BILLS OF EXPENSES TOWARDS FIXED ASSETS AND HENCE IT WAS EVIDENT AT THE ASSESSEE HAD NOT MAINTA INED ITS BOOKS OF ACCOUNTS AS PER SECTION 145, THEREFORE WERE REJECTE D. NO DETAILS REGARDING THE NON-MAINTENANCE OF EXPENSES EXCEPT FO R THE DIFFERENCE IN VALUATION OF THE HOTEL BUILDING HAS BEEN CITED B Y THE AO. THE AO HAS CURSORILY REJECTED AUDITED BOOKS OF ACCOUNTS. THE ACTION OF THE ASSESSING OFFICER BEING UNJUSTIFIED, HENCE, THIS GR OUND IS ALLOWED. 3 ITA NOS.13 & 14/JAB/2013 A.YS. 2006-07 & 2007-08 10. REGARDING THE ADDITION OF THE COST OF CONSTRUC TION, I TEND TO AGREE WITH THE SUBMISSIONS OF THE COUNSEL. THE DVO, IN HIS REPORT HAS ALLOWED 5% FOR SELF-SUPERVISION. THIS SHOULD HAVE B EEN ALLOWED AT 15%. THE DVO HAS NOT MADE ANY COMMENT REGARDING AS TO WHY HE WAS ALLOWING ONLY 5% ON ACCOUNT OF SELF-SUPERVISION . THE HON'BLE ITAT BENCH, JABALPUR HAS PERMITTED ALLOWANCE OF REB ATE TO THE EXTENT OF 15%. 11. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A PPELLANT INCLUDING THE DECISIONS MADE BY THE APPELLATE AUTHO RITY AND THE CASE LAWS CITED TO BUTTRESS HIS STAND. THE HON'BLE AUTHO RITIES HAVE CONSIDERED THE FACT THAT THE MATERIALS PURCHASED BY THE APPELLANT AND LABOUR PAYMENTS MADE DIRECTLY. SINCE A SIMILAR SITU ATION EXISTS IN THE CASE OF THE APPELLANT, THEREFORE, THE APPELLANT IS ENTITLED TO 15% REBATE ON ACCOUNT OF SELF-SUPERVISION. THE DVO HAS ALSO NOT CLARIFIED WHETHER THE ESTIMATION OF 5% INCLUDES THE ELEMENTS TOWARDS CONSTRUCTION PROFIT OR PERCENTAGE OF PROFIT AND AS TO WHY SUCH REBATE WAS RESTRICTED TO 5% ONLY WHEN SELF-SUPERVISION IS NOT DENIED. 12. THE COUNSEL SUBMITTED THAT THERE IS A DIFFEREN CE OF RATE OF 20 TO 30% BETWEEN THE CPWD RATES AND THE PWD RATES I TEND TO AGREE WITH THE SAME. IN FACT THE HON'BLE ITAT, JABALPUR BENCH IN ITS ITA NO. 282, 283 AND 284/JAB/2000 HAS UPHELD THE DECISION OF THE CIT (A) TO ALLOW DEDUCTION AT 25% ON ACCOUNT OF THE DIFFERENCE IN CP WD RATES AND LOCAL MARKET RATES. THOUGH THE REPORT OF THE DVO HA S NOT MENTIONED THE BASIS FOR ESTIMATING THE COST BUT GENERALLY IT IS WORKED OUT BY APPLYING THE CPWD RATES. HOWEVER, THESE RATES ARE APPLICABLE TO THE CONSTRUCTION CARRIED OUT IN A CLASS CITIES AND NOT TO THE CONSTRUCTION CARRIED OUT IN C CLASS CITY SAGAR FOR THE REASON TH AT TRANSPORTATION COST IN A CLASS CITY IS COMPARATIVELY HIGH AND ALSO THE PURCHASE RATES OF VARIOUS TYPES OF MATERIALS USED. IF ALL THESE F ACTORS ARE CONSIDERED THAN THE ESTIMATED DESERVES TO BE REDUCED BY AT LEA ST 20% AND IF IT IS SO DONE THAN THE DIFFERENCE IN THE COST ESTIMATED B Y THE DVO AND THE COST RECORDED IN THE BOOKS OF ACCOUNTS WOULD COME T O LESS THAN 10% WHICH IS WITHIN THE MARGIN OF ERROR IN ESTIMATING T HE COST, WHICH NEEDS TO BE IGNORED. IF THE REBATE FOR SELF-SUPERVISION I S CONSIDERED, THIS WILL BE FURTHER REDUCED. PLACING RELIANCE ON THE DECISI ON OF J&K HIGH COURT IN THE CASE OF HONEST GROUP OF HOTELS 177 CTR 232, AND ON THE 4 ITA NOS.13 & 14/JAB/2013 A.YS. 2006-07 & 2007-08 DECISION OF ITAT BENCH, INDORE IN THE CASE OF T.M. THANEWALE 26 ITC 292 THE ADDITION MADE ON ACCOUNT OF EXCESS COST OF CONSTRUCTION OF RS.38,68,269/- FOR A.YR. 06-07 AND RS.18,85,131/- F OR A. YR. 07-08 ARE HEREBY DELETED. THUS, GROUND OF APPEAL NOS.4, 6 & 7 OF A.YR. 06-07 AND 4, 5 FOR A. YR. 07-08 ARE ALLOWED. 4. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND IS IN APPE AL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLIC ABLE LEGAL POSITION. 6. WE FIND THAT IT IS NOT EVEN IN DISPUTE THAT THE ASSESSING OFFICER WAS GIVEN DUE OPPORTUNITY OF HEARING BY COMMISSIONER OF INCOM E TAX (APPEALS) AND EVEN A REMAND REPORT WAS ALSO CALLED FROM HIM. THE OPPORT UNITY OF PERSONAL HEARING TO THE DVO WAS NEITHER REQUESTED BY THE ASSESSING OFFI CER, OR IS NECESSARY UNDER THE SCHEME OF SECTION 251 OF THE ACT. IN THESE CIRCUMS TANCES, THERE ARE NO LEGALLY SUSTAINABLE MERITS IN GRIEVANCE RAISED BEFORE US. IN ANY CASE, THERE IS NO GRIEVANCE AGAINST THE STAND TAKEN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON MERITS, NOR ANY INFIRMITIES ARE POINTED OUT IN THE SAME. I N VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE U NABLE TO UPHOLD GRIEVANCES RAISED BEFORE US. THESE GRIEVANCES ACCORDINGLY, REJECTED. 5 ITA NOS.13 & 14/JAB/2013 A.YS. 2006-07 & 2007-08 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 26 TH DAY OF SEPTEMBER, 2014. SD/- SD/- (C.M. GARG) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 26 TH SEPTEMBER, 2014 PBN/* COPY OF THE ORDER FORWARDED TO :- 1) APPELLANT 2) RESPONDENT 3) CIT (APPEALS) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, JABALPUR BENCH, JABALPUR 6) GUARD FILE. BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, JABALPUR