Dommalapati Narendra Radhakrishna,Madanapalli, Hyderabad V. ITO, Ward-1, Madanapalli, Hyderabad

ITA 1490/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2227 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 07-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained investment; Value adopted by valuation officer; Valuation report
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1490 /HYD/201 6 ASSESSMENT YEAR: 2011 - 2012 DOMMALAPATI NARENDRA RADHAKRISHNA. MADANAPALLI [PAN: AGYPD 0226 B ] VS INCOME TAX OFFICER, WARD - 1, MADANAPALLY. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 28 - 12 - 2017 DATE OF PRONOUNCEMENT : 28 - 1 2 - 2017 O R D E R THIS APPEAL IS BY ASSESSEE AGAINST THE ORDER OF LD. CIT(A), TIRUPATI DATED 31.08.2016 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY CONFIRMING THE UNEXPLAINED INVESTMENT IS NOT CORRECT EITHER IN LAW OR ON FACT AND IN BOTH. 2. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACT THAT FOR SELF SUPERVISION 15% IS TO BE DEDUCTED FROM THE GROSS VALUATION OF THE BUILDING. 3. THE LEARNED FIR ST APPELLATE AUTHORITY IS NOT JUSTIFIED IN CONFIRMING THE UNEXPLAINED INVESTMENT OF RS. 38,92,086/ - MADE BY THE ASSESSING OFFICER. 4. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED IN NOT GRANTING APPROPRIATE DEDUCTIONS FROM THE VALUATION MADE BY T HE VALUATION OFFICER. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT ASSESSEE, WHO IS AN INDIVIDUAL, CONSTRUCTED HOUSE PROPERTY AND LET OUT THE SAME TO SHRI CHAITANYA E - TECHNO SCHOOL ADMEASURING AROUND 25000 SQFT. IN THIS 2 CASE, SURVEY OPERATIO N U/S 133A WAS CONDUCTED ON 17.03.2011 TO ASCERTAIN THE COST OF THE CONSTRUCTION AND SOURCES OF FUNDS. IN RESPONSE TO NOTICES U/S 142(1), THE ASSESSEE FILED BELATED RETURN OF INCOME FOR THE A.Y. 2011 - 12 ON 18.11.2013. AS PER THE A.O., DURING THE POST ENQ UIRIES THE COST OF CONSTRUCTION OF SCHOOL BUILDING BELONGING TO THE ASSESSEE WAS REFERRED TO THE VALUATION CELL. THE VALUATION OFFICER - 1, HYDERABAD VALUED THE COST OF CONSTRUCTION OF BUILDING AT RS. 2,30,92,000/ - VIDE VALUATION REPORT DATED 25.07.2012. A CCORDINGLY , THE DIFFERENCE BETWEEN COST OF CONSTRUCTION OF BUILDING ADMITTED BY THE ASSESSEE IN HIS RETURN OF INCOME AND COST DETERMINED BY THE VALUATION OFFICER IS TREATED AS UNEXPLAINED INVESTMENT IN THE BUILDING CONSTRUCTION AND THE ASSESSMENT WAS COM PLETED BY MAKING THE ADDITION OF RS. 38,92,086/ - . 4. BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT A.O. IS NOT JUSTIFIED IN NOT GIVING APPROPRIATE REDUCTION TOWARDS PERSONAL SUPERVISION AND TOWARDS DIFFERENCE BETWEEN CPWD RATES AND STATE PWD RATES AND REL IED ON THE FOLLOWING CASES: - 1. SRI KRISHNA VENTURES PVT LTD., HYD (AAFCS2713Q) VS. ITO, FOR THE AYS 2001 - 02 TO 2005 - 06 IN ITA NOS. 781 TO 785/HYD/200 9, DATED 08.02.2013. 2. M/S. THATIPALLI RESIDENCY, KHAMMAM VS. DCIT (AABCN0947R) FOR THE A.Y. 2007 - 08 IN ITA NO.585/HYD/2011, DATED 08.06.2012. 3. DR. G. PREMALATHA VS. DY. CIT, 2015 TAXPUB (DT) 0834 (HYD - TRIB). 4. SMT. SALMA A. MEHDI VS. ITO, ITAT, VISAKHAPATNAM. 4.1. LD. CIT(A) HOWEVER AFTER ELABORATELY DISCUSSING THE DVO REPORT, REJECTED THE CONTENTIONS B Y DISTINGUISHING THE CASES AND RELYING ON ANOTHER COORDINATE BENCH DECISION IN THE CASE OF SMT. BHAGYALAXMI VS. ACIT (ITA NO.280/HYD/08, DATED 07.08.2009 OF ITAT, HYDERABAD). HENCE THE PRESENT APPEAL. 4.2. LD COUNSEL REFERRING TO THE DVO REPORT SUBMITTED THAT ASSESSEE HAS CONSTRUCTED THE BUILDING UNDER HIS SELF - SUPERVISION AND IN A PLACE LIKE MADANAPALLY AND RELYING ON VARIOUS COORDINATE BENCH DECISIONS, 3 THE SELF - SUPERVISION REDUCTION SHOULD HAVE BEEN GIVEN AT 15% AS AGAINST 7.5% ALLOWED BY DVO. COMING T O THE REDUCTION OF RATES, IT WAS THE SUBMISSION THAT ASSESSEE HAS USED ORDINARY MATERIAL IN THE CONSTRUCTION WHICH IN FACT WAS ACKNOWLEDGED BY THE DVO AND REFERRED TO THE PARA 3.6 OF SPECIFICATIONS. THEN LD COUNSEL REFERRED TO PARA 5.1 OF THE DVO REPORT T O SUBMIT THAT THE DVO ADOPTED CPWD RATES AS APPROVED BY CBDT AND HAS REJECTED THE LOCAL PWD RATES CANNOT BE APPLIED. IT WAS THE SUBMISSION THAT THE CLAIMS ARE ALLOWABLE ON THE BASIS OF FOLLOWING JUDGMENTS. 1. SALAM A. MEHDI VS. ITO (ITA NOS. 697 & 698/HY D/93, DATED 26.06.1994); 2. SMT. PREM KUMARI MUDRIA VS. ACIT [2008] 166 TAXMAN 1 (RAJ.); 3. DCIT VS. M/S. THATIPALLI RESIDENCY (ITA NO.585/HYD/2011, DATED 08.06.2012 OF ITAT, HYDERABAD) AND 4. ITO VS. SHRI M. LAXMAN REDDY (ITA NO.915/HYD/2015, DATED 30.12 .2016 OF ITAT, HYDERABAD) HE ALSO REFERRED TO THE OBSERVATION S OF THE ITAT IN THE CASE OF VINODKUMAR AGARWAL VS. ACIT (257 ITR 65) THAT THE DVO IS BOUND TO ADOPT THE PWD RATES, AS SO MANY JUDGMENTS WERE GIVEN ON THAT ISSUE BY HIGHER AUTHORITIES. 6. LD DR RELIED ON THE ORDER OF THE LD. CIT(A) AND REFERRED TO DVO REPORT. 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DVO REPORT PLACED ON RECORD AND THE CASE LAW RELIED. IT IS NOTICED THAT A.O. HAS CONDUCTED A SURVEY U/S 133A ON 17.03.2011 AND REFERRED TO DVO. EVEN THOUGH IT WAS THE CONTENTION OF ITO THAT NO YEAR - WISE CONSTRUCTION DETAILS WERE GIVEN, THE TOTAL ADMITTED C OST WAS TAKEN AT RS. 1,91,99,914/ - , OUT OF WHICH AS PER DVO REPORT RS. 59.19 LAKHS WAS INVESTED IN FY 2009 - 10 RELEVANT FOR A. Y. 2010 - 11. BUT THE A.O. CHOOSE TO ADD THE ENTIRE AMOUNT OF DIFFERENCE IN A.Y. 2011 - 12 WHICH IS NOT 4 CORRECT. HE SHOULD HAVE CONSIDERED PROPORTIONATE AMOUNT ONLY IN THE YEAR UNDER CONSIDERATION. 7.1. NOW WITH REFERENCE TO THE CLAIMS, THE DVO HIMSELF HA S GIVEN REDUCTION OF 7.5% DUE TO SELF - SUPERVISION. IT IS NOT DENIED THAT ASSESSEE HAS CONSTRUCTED UNDER HIS SUPERVISION IN A PLACE LIKE MADANAPALLY. EVEN IN THE CASE OF M/S. KRISHNA VENTURES LTD (SUPRA) WHERE LARGE AREA WAS CONSTRUCTED BY EMPLOYING SUPER VISORY PERSONNEL, THE ITAT HAS GIVEN REDUCTION AT 10%. CONSIDERING THAT THE ASSESSEE HAS CONSTRUCTION WITHOUT EMPLOYING ANY SUPERVISORY PERSONNEL, IT IS ALL THE MORE DESERVING THAT REDUCTION AT 15% SHOULD BE GIVEN TO ASSESSEE THOUGH SELF - SUPERVISION. THE REFORE, THE BALANCE OF 7.5% IS TO BE GRANTED TO ASSESSEE. ORDERED ACCORDINGLY. 7.2. THE NEXT ISSUE FOR CONSIDERATION IS THE RATES ADOPTED. IT IS TRUE THAT DVO ADOPTED CPWD RATES AND COORDINATE BENCHES ARE ACCEPTING THAT THERE ARE VARIATIONS IN RATES WHE N COMPARED TO LOCAL PWD RATES. EVEN DVO ACKNOWLEDGED THAT, BUT RELIES ON CPWD RATES. CONSIDERING THE FINDING IN THE DECISIONS RELIED ON, I DIRECT THE A.O. TO CONSIDER THE REDUCTION OF VALUATION BY 15% DUE TO RATE DIFFERENCE. 8. A.O. IS DIRECTED TO REWORK OUT THE DIFFERENCE, IF ANY, BY ALLOWING FOR THE 7.5% VALUATION TOWARDS SELF - SUPERVISION AND 15% REDUCTION TOWARDS RATE DIFFERENCE. THE GROUNDS ARE ALLOWED ACCORDINGLY. 9. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DEC EMBER, 2017 . SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED: 28 TH DECEMBER , 2017 5 OKK, SR.PS COPY TO 1. SHRI NARENDRA RADHAKRISHNA DOMMALAPATI C/O CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST NO.1, ASHOKNAGAR, HYDERABAD - 500020. 2. ITO, WARD - 1, 15 - 15 - 9, G K REDDY COMPLES, CTM ROAD, MADANAPALLE - 517325. 3. CIT(A) - TIRUPATI. 4. PR. CIT, TIRUPATI. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE