Raghuvanshi Motors Pvt.Ltd., Navsari V. The Dy.CIT.,Navsari Circle, Navsari

ITA 1548/AHD/2010

• Counselvise Citation: 154820514 RSA 2010
• Duration Of Justice: 3 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N DIVETIA A R
• Keywords: Corroborative evidences; Valuation report
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ! ! ! ITA NO. 1548/AHD/2010 ASSESSMENT YEAR : 2005-06 RAGHUVANSHI MOTORS PVT. LTD. NEAR GRID, KABILPORE, NAVSARI V/S . DY. COMMISSIONER OF INCOME TAX NAVSARI CIRCLE, NAVSARI PAN NO. AA C C R 7269R (APPELLANT) .. (RESPONDENT) '# $ % /BY APPELLANT SHRI S. N. DIVETIA, A.R. &''# $ % /BY RESPONDENT SHRI R. K. DHANESTA, SR. D.R. () $ /DATE OF HEARING 28.11.2013 *+, $ /DATE OF PRONOUNCEMENT 10.01.2014 O R D E R PER : SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF CIT(A)- VALSAD, DATED 19.11.2009 AND THE SUBSTANTIVE GROUND RAISED BEFORE US, IS REPRODUCED AS UNDER: 1. THE HONBLE CIT (APPEAL) VALSAD ERRED IN CONFI RMING ADDITION OF RS.16,92,221/- MADE BY DY.CIT, NAVSARI, RELYING ONL Y THE VALUATION REPORT OBTAINED BY THE LAO. WITHOUT LOOKING THE AC TUAL FACTS AND THE CIRCUMSTANCES OF THE CASE, THEREFORE, APPELLANT PRAYS FOR GRANTING RELIEF BY PASSING APPROPRIATE ORDER FOR DE LETING THE ADDITION CONFIRMED BY CIT (APPEALS) VALSAD.. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S.143(3) DATED 18.12.2007 WERE THAT THE AS SESSEE COMPANY IS AN ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 2 AUTHORIZED DEALER OF HONDA MOTOR CYCLES & SCOOTERS. IT WAS NOTED BY THE A.O. THAT AS PER ONE OF THE SCHEDULE OF THE BALANCE SHEET, IT WAS FOUND THAT THE ASSESSEE HAD MADE ADDITION IN THE FIXED ASSETS TO THE TUNE OF RS.69,38,489/-. ON EXAMINING THE DETAILS, IT WAS F OUND THAT THE ASSESSEE HAD MADE ADDITION IN THE BUILDING AND AS PER BOOKS OF A CCOUNT THE COST OF INVESTMENT IN THE SAID BUILDING WAS STATED TO BE RS .45,48,779/-. AS FAR AS THE OTHER ADDITIONS SUCH AS ELECTRIC INSTALLATION, FURN ITURE AND FIXTURE, THERE WAS NO CONTROVERSY. THE A.O. HAD REFERRED THE MATTER TO T HE DISTRICT VALUATION OFFICER, VALUATION CELL, AHMADABAD. THE DVO VIDE A VALUATIO N REPORT DATED 06.12.2007 DETERMINED THE VALUE OF THE BUILDING AT RS.62,41,000/- AS AGAINST THE DISCLOSED VALUE OF THE BUILDING BY THE ASSESSEE AT RS.45,48779/-. AS PER A.O., THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION IN RESPECT OF THE REPORT OF THE DVO, HENCE, THE DIFFERENCE IN THE VALUATION OF RS.16,92,221/- WAS TAXED IN THE HANDS OF THE ASSESSEE BY INVOKING THE PROVISION S OF SECTION 69 OF THE IT ACT. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFOR E THE FIRST APPELLATE AUTHORITY. 3. BEFORE THE CIT(A), THE ASSESSEE HAD OBJECTED THE SAID ADDITION BY RAISING TWO ISSUES. THE FIRST ISSUE WAS THAT THE A .O. COULD NOT REFER THE MATTER TO THE DVO WITHOUT IDENTIFYING ANY DEFECT IN THE BO OKS OF ACCOUNT. THE SECOND OBJECTION WAS THAT THE DVO HAD WRONGLY ADOPTED THE CPWD RATES BY IGNORING THE SUPPORTING BILLS AND VOUCHERS OF THE BUILDING M ATERIAL DULY MAINTAINED BY THE ASSESSEE AND THEREFORE, THE VALUATION WAS MADE MERELY ON AN ESTIMATION. THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE CIT( A) IS REPRODUCED HEREINBELOW: ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 3 5.2 THE LD. A.R. OF THE APPELLANT SUBMITTED THAT T HE ASSESSEE HAS MAINTAINED THE COMPLETE SET OF BOOKS OF ACCOUNTS WH ICH WERE PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSM ENT PROCEED. HE ALSO REFERRED TO THE REFERENCE MADE BY THE AO TO THE DISTRICT VALUATION OFFICER DATED O7.11.2006 AND SUBMI TTED THAT THE AO ISSUED A QUESTIONNAIRE ON 09.07.2007 FROM WH ICH IT CAN BE REVEALED THAT THE AO HAS PREDETERMINED TO THE MATTE R. FURTHER THE ID. AR CONTENDED THAT THE AO CAN NOT REFER THE MATT ER TO THE DVO WITHOUT IDENTIFYING ANY DEFECTS TO THE BOOKS OF ACC OUNTS AND THEREFORE REFERENCE MADE BY THE AO TO THE DVO ITSEL F IS ILLEGAL INVALID AND BAD-IN-LAW. HE RELIED UPON THE DECISION IN THE CASE OF DINESH K. SHAH V/S. DCIT (2005) 92 TTJ 109 AND BAL DEO COLD STORAGE AND ICE FACTORY (2004) 1 STO 45. HE FURTHE R SUBMITTED THAT THE VALUATION OF PROPERTY IS MERE AN ESTIMATE MADE BY THE DVO AND THE DIFFERENCE BETWEEN THE VALUATION MADE BY TH E DVO AND THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE IS B ELOW 15%, THE SAME MUST BE IGNORED. HE FURTHER CONTENDED THAT DVO ADOPTED THE METHOD OF CPWD PLINTH AREA RATE AND HAS IGNORED THE ACTUAL COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE BASED UPO N SUPPORTING DOCUMENTS LIKE BILLS, VOUCHERS ETC. MAINTAINED BY T HE ASSESSEE. HE CHALLENGED THE METHOD OF CPWD RATES APPLIED BY THE DVO AND REQUESTED TO IGNORE THE REPORT OF THE DVO RELYING U PON THE DECISION OF ITO V/S. PRAKASH CHAND SONI 2005 94 TTJ 631 (IND ORE), CIT V/S. HARCHAND PALACE 2004 269 ITE, CIT V/S. RAJ KUMAR (1 990) 182 ITR 486, SMT PREM KUMARI MUDRIA V/S. ACIT (2007) 211 CT R 500. HE FURTHER CONTENDED WITH THE RATE VARIES ITEMS ADOPTE D BY THE DVO VIS-A-VIS THE RATE AS PER THE ACTUAL BILLS ACCOUNTE D FOR BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT. THE DETAILS OF TH E SAME AS UNDER :- SR. NO. DESCRIPTION RATE AS PER BILL RATE TAKEN IN VALUATION REPORT 1 MARBLE PER SQ. METER RS. 325/- (PAGE NO. 35 & 36) RS. 845/- 2 GRENITE PER SQ. METER RS. 595/- (PAGE NO. 36) RS. 854/- 3 SINTEX TANKS (2 PIECES) RS.8,800/- (PAGE NO.37) RS. 16,000/- ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 4 4 KOTA STONE PER SQ. METER RS. 167/- (PAGE NO. 38) RS. 595/- 5 A. C. 5 PIECES RS. 75,000/- RS.1,00,000/- 3(I). THE LD. CIT(A) PASSED A CRYPTIC JUDGMENT AS U NDER: 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR OF THE APPELLANT AS WELL AS OBSERVATIONS MADE BY THE AO IN HIS ASSESSMENT ORDER. DURING THE APPELLATE PROCEEDING THE LD. AR MADE TWO GROUNDS OF OBJECTION ONE THE REFERENCE MADE BY THE AO IS UNLAW FUL AND TWO THE VALUATION MADE BY THE DVO WAS EXCESS. BEFORE ME THE LD. AR DID NOT FURNISH ANY DOCUMENTARY EVIDENCES TO SUPPORT ITS CA USE. THE COST OF CONSTRUCTION OF A BUILDING CAN BE ARRIVED AT MORE A CCURATELY BY USING TECHNOLOGY AND NEW METHODS OF VALUATION. THE APPELL ANT COULD HAVE GOT THE BUILDING VALUED BY AN INDEPENDENT CERTIFIED ARC HITECT/ VALUER TO AUGMENT THE CASE. THE APPELLANT EVEN DID NOT PRODUC E THE COST CERTIFICATE FRON THE SUPERVISING ARCHITECT. IN THIS CIRCUMSTANC ES I UPHELD THE ACTION OF THE AO BECAUSE NO OTHER MATERIALS SUBMITTED TO CONT ROVERT THE FINDING OF THE AO. THUS THIS GROUND OF APPEAL IS DISMISSED. 4. FROM THE SIDE OF THE APPELLANT, LD. A.R., MR. S. N. DIVETIA APPEARED. THE FIRST PLANK OF ARGUMENT IS THAT THE A.O. HAD NO T FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT AND ALSO NOT REJECTED THE BOOKS OF ACCOUNT. THEREFORE, THE REFERENCE TO THE DVO WAS BAD IN LAW. IN SUPPORT OF THIS ARGUMENT LD. A.R. HAS PLACED RELIANCE ON SARGAM CINEMA VS. CIT, [2010] 328 ITR 513 (SC) AND GOODLUCK AUTOMOBILES (P) LTD. VS. ACIT [2012] 78 DT R (GUJ) 104. 4(I). ON MERITS, LD. A.R. HAS PLEADED THAT THE ACCO UNTS OF THE ASSESSEE WERE DULY AUDITED U/S. 44AB OF IT ACT. THE COMPLETE DET AILS IN RESPECT OF BUILDING CONSTRUCTION HAVE BEEN MAINTAINED BY THE ASSESSEE, ALSO DULY SUPPORTED BY THE EVIDENCE, SUCH AS BILLS AND VOUCHERS. FURTHER, THE ASSESSEE HAD OBTAINED A VALUATION REPORT FROM A REGISTERED VALUER, NAMELY SHRI DHARMENDRA SHAH, REPORT DATED 20 TH JULY, 2004. LD. A.R. HAS STATED THAT SAID REPORT WAS DULY ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 5 SUBMITTED BEFORE THE CIT(A) VIDE A WRITTEN SUBMISSI ON DATED 11.08.2009. HE HAS ALSO ARGUED THAT THE VALUE DECLARED BY THE ASSE SSEE FOR BUILDING AS PER BOOKS WAS AT RS.45,48,779/-. THE ASSESSEE HAS FURT HER DISCLOSED VALUE OF THE AC AT RS.75,000/-. THEREFORE, THE TOTAL VALUE FOR THE BUILDING WAS RS.46,23,779/-. AS AGAINST THAT THE DVO HAD ESTIMA TED THE VALUE OF THE BUILDING AT RS.62,41,000/-. THE DIFFERENCE BETWEEN THE TWO WAS ONLY RS.16,17,221/-. THE SAID NOMINAL DIFFERENCE WAS ME RELY BECAUSE OF THE REASON THAT THE DVO HAD ESTIMATED THE VALUE BY ADOP TING CPWD RATES. HE HAS PLACED RELIANCE ON THE DESCRIPTION OF THE BUILD ING MATERIAL PURCHASED, ACCORDING TO WHICH THE PURCHASE PRICE WAS MUCH LOWE R THAN THE VALUATION TAKEN BY THE DVO. HE HAS ALSO PLEADED THAT IF THE BENEFIT OF SELF SUPERVISION IS GRANTED THEN THE VALUE AS ADOPTED BY THE ASSESSE E IN THE BOOKS OF ACCOUNT IS NOT MORE THAN 15% DIFFERENCE. HE HAS THEREFORE, PLEADED THAT THE ADDITION SHOULD BE QUASHED. 4(I). FROM THE SIDE OF REVENUE, LD. SR. D.R., MR. R .K. DHANESTA APPEARED AND ARGUED THAT THE ASSESSEE HAS NOT OFFERED ANY CO MMENT AT THE TIME OF ASSESSMENT PROCEEDING, THEREFORE, LOST THE RIGHT TO OBJECT THE DVOS REPORT. HE HAS ALSO ARGUED THAT DVO IS AN INDEPENDENT AUTHO RITY; THEREFORE, HIS REPORT IS MORE AUTHENTIC BEING GIVEN BY A TECHNICAL PERSON . HE HAS PLEADED THAT ON MERITS, THE ASSESSEE HAD NO SPECIFIC EVIDENCE IN SU PPORT, HENCE, MERE ARGUMENT WITHOUT SUPPORTING EVIDENCE HAS NO LEGAL S ANCTITY IN THE EYES OF LAW. THE RELIANCE WAS PLACED ON THE DECISION OF CIT VS. CALCUTTA AGENCY LTD. 19 ITR 191 (SC). HE HAS ALSO CONTESTED THAT THE DIFFERENCE BETWEEN T HE TWO VALUATIONS WAS MORE THAN 31%, THEREFORE, IT WAS WRO NG ON THE PART OF THE ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 6 ASSESSEE TO CLAIM THAT THE DIFFERENCE BEING LESS TH AN 15%, HENCE TO BE IGNORED. HE HAS CONCLUDED THAT NO SUCH REPORT IN S UPPORT WAS GIVEN TO CIT(A), HENCE THERE WAS NO REFERENCE IN THE ORDER O F THE CIT(A), SO THE SAID CLAIM MAY ALSO BE REJECTED. 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE PERUSED THE MATERIAL PLACED BEFORE US. BECAUSE OF THE FOLLOWIN G TWO REASONS, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF THE A.R. THAT THE I MPUGNED ADDITION WAS WRONGLY MADE IN THE HANDS OF THE ASSESSEE. OUR FIR ST OBSERVATION IS THAT THE REVENUE DEPARTMENT HAS NOT ESTABLISHED THAT BEFORE REFERRING THE VALUATION TO THE DVO, THE A.O. HAD FOUND DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND SO REJECTED THE BOOKS OF ACCOUNT. THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA (SUPRA) AND THE HONBLE JURIS DICTIONAL HIGH COURT IN CASE OF GOODLUCK AUTOMOBILES (SUPRA) HAVE HELD IN A N UNEQUIVOCAL TERMS THAT PRIOR TO MAKING THE REFERENCE TO THE VALUATION OFFI CER, THE A.O. HAD TO ASCERTAIN AS TO WHETHER THERE WAS THE DEFECT IN THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE. IT WAS HELD THAT THE A. O. CANNOT REFER THE MATTER TO THE DVO WHEN THE BOOKS OF ACCOUNTS HAVE NOT BEEN RE JECTED. PLACING RELIANCE ON THESE TWO DECISIONS, ESPECIALLY, WHEN THE REVENU E HAS NOT PLACED ON RECORD ANY SUCH ORDER OF REJECTION OF BOOKS OF ACCO UNT, WE, HEREBY, HOLD THAT SUCH REFERENCE WAS NOT IN LINE WITH THE ORDER OF TH E HONBLE SUPREME COURT. 5(I). WE HAVE TO DECIDE THE ISSUE ON MERITS AS WELL BECAUSE THE A.O. HAS ESTIMATED THE VALUE OF THE PROPERTY IN QUESTION AT RS.62,41,000/- ON THE BASIS OF DVOS INFORMATION. NOW THE SITUATION IS THAT WH ETHER AN ESTIMATION IS TO BE PREFERRED THAN THE ACTUALS. WE HAVE REPRODUCED THE RATES OF THE BUILDING ITA NO. 1548/AHD/2010, A.Y. 05-06 PAGE 7 MATERIAL AS PER THE ABOVE PARAGRAPHS AND HAVE NOTED THAT THE DVO HAD MERELY APPLIED THE CPWD RATES WITHOUT VERIFYING THE ACTUAL RATES AS PER THE MARKET CONDITION OF THE AREA. IN THIS REGARD, THE ASSESSEE HAS PLACED RELIANCE ON A DECISION OF RESPECTED ITAT, INDORE BENCH, PRON OUNCED IN CASE OF ITO VS. PRAKASH CHAND SONI [2005] 94 TTJ 631(INDORE) . NATURALLY, THE DVO BEING A TECHNICAL PERSON SHOULD HAVE ASSESSED THE PROPERTY IN QUESTION AFTER CONSIDERING ALL SUCH ANGLES AND THEREUPON SHOULD HA VE ARRIVED AT A FAIR VALUATION. ON THIS GROUND AS WELL, WE FIND FORCE I N THE CONTENTIONS OF THE ASSESSEE, HENCE, THE VALUE AS DECLARED BY THE ASSES SEE IN THE BOOKS OF ACCOUNT HAVING BEEN DULY SUPPORTED BY THE BILLS AND VOUCHERS, APPEARS TO BE CORRECT, WHICH WAS ARBITRARILY DISTURBED BY THE A.O . RESULTANTLY, GROUND IS HEREBY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10.01.2014 SD/- SD/- (T.R. MEENA) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA - - - - $ $$ $ &. &. &. &. /., /., /., /., / COPY OF ORDER FORWARDED TO:- 1. '# / APPELLANT 2. &''# / RESPONDENT 3. 33 4 / CONCERNED CIT 4. 4- / CIT (A) 5. .89 &( , , / DR, ITAT, AHMEDABAD 6. 9;< => / GUARD FILE. BY ORDER/ - , ?/ 3A , !