ITO., Ward- 1, Mahabubnagar V. M/s Sri Sai Educational Society (Prathiba Junior College), Mahabubnagar

ITA 1618/HYD/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8947 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained investment; Value adopted by valuation officer
• Section: 69C; 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1617/HYD/14 : ASSESSMENT YEAR 2007 - 08 ITA NO.1618/HYD/14 : ASSESSMENT YEAR 2010 - 11 INCOME TAX OFFICER WARD 1, MAHABUBNAGAR V/S. M/S. SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR (PAN AAFAS 6773 C) (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI RAJAT MITRA DR RESPONDENT BY : SHRI MOHD. AFZAL, AR DATE OF HEARING 5.3.2015 DATE OF PRONOUNCEMENT 11.3.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : TH ESE TWO APPEALS PREFERRED BY THE REV ENUE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) V, HYDERABAD, BOTH DATE D 30.5.2014 FOR ASSESSMENT YEAR 2007 - 08 AND 2010 - 11 INVOLVE A COMMON ISSUE AND THE SAME, THER E FORE, HAVE BEEN H E ARD TOGETHER AND ARE B E IN G DISPOSED OF BY A SINGLE CONSOLIDATED ORDER, 2. THE SOLITARY COMMON ISSUE INVOLVED IN TH E SE A PPEALS RELATE TO THE DELETION BY TH E LEARNED CIT(A) OF THE ADDI T ION S OF RS .13,74,290 AND RS.12,96,500 M A DE BY THE ASSESSING OFFICER T O TH E TOTAL INCOME O F T H E ASSESSEE O N AC C OUNT OF UN E XPL A IN E D IN V ESTMENT ALLEGEDLY MADE IN TH E CON S TRUC T ION OF THE COLLEGE BUIL D IN G , FOR ASSESSMENT YEAR S 2007 - 08 AND 2010 - 11 RESPECTIVELY. I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 2 3. THE ASSESSEE IN THE P RE SEN T C A S E IS A SOCIETY, WHICH IS ENGAGED IN THE BU S I N ESS OF IMPARTING INTERMEDIATE EDUCATION THROUGH PRATHIBHA JUNIOR COLL E GE AND HIGHER EDUCATION, B .ED THROUGH SRI S AI C OLLEGE OF E D UCA T ION. SINCE NO RETURNS OF INCOME WERE B E IN G REGULARLY FIL E D BY THE ASSESSEE , A SURVEY UN D ER S.133A WAS CARRIED OUT IN THI S CASE ON 24.11.2010. SUBSEQ UE N T TO TH E SURVEY, THE ASSESSEE SOCIETY FIL E D ITS RE T U R NS OF INC O M E IN T ER ALIA FOR BOTH TH E YEARS UN D ER CON S I D ERATION DECLARING A LOSS OF R S .10,080 FOR ASSESSMENT YEAR 2007 - 08 AND INCOME OF R S .8,0 8 ,640 F OR ASSESSMENT YEAR 2010 - 11. AS FOUND D URIN G TH E COURSE OF SUR V EY, THE CON S TRU CT ION OF C OL L EGE BUI L DIN G AT NAGASALA, JADHCERLA W A S DONE BY TH E ASSESSEE . IN THE RETURNS OF IN C O M E FIL E D FOR ASSESSMENT YEARS 2007 - 08 TO 2012 - 13, THE COST OF SAID CONSTRUCTION WAS DISCLOSED BY THE ASSESSEE AS UNDER - ASSESSMENT YEAR COST OF CONSTRUCTION RS. 2008 - 09 21,21,248 2008 - 09 13,15,551 2009 - 10 22,78,772 2010 - 11 20,01,650 2011 - 12 . 2012 - 13 34,00,000 TOTAL 1,11,17,221 DURIN G TH E COUR S E OF ASSESSMENT PROCEEDINGS, A VALUAT I ON REPORT OF TH E R E G I STERED VALUER WAS ALSO SUBMITTED BY TH E ASSESSEE IN SUPPORT OF COST OF CON S TRUC T ION SHOWN IN THE BOOKS OF AC C OU NT . A REFEREN C E HOWE VER , WAS MADE BY THE ASSESSING OFFICER TO THE DEP A RTMENTAL V A LUATION OFFI C ER, HYDERABAD TO ASCERTAIN THE CORRECT COST OF CON S TRUC T ION. IN TH E REPORT DATED 8.2.2013 SUBMI T TED TO THE ASSESSING OFFICER, THE COST OF CONST R UC T ION OF TH E COLLEGE BUILDING OF I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 3 THE ASSESSEE SOCIETY WAS ESTIMATED BY THE D VO AT RS.173 . 29 L AKHS. TH E ASSESSEE, THER E FORE , WAS CALLED UPON BY THE ASSESSING OFFICER TO EXPLAIN WHY THE DIFFERENCE OF R S .72,02,277 SHOULD NOT B E TREATED AS ITS UN E XPL A IN E D INVESTMENT MADE IN TH E CON ST RUC T ION OF THE COLLEGE BUIL D IN G DURING THE REL E VANT YEARS, INCLU D ING BOTH THE YEARS UN D ER CON S IDERA TION. IN REPLY , VARIOUS OBJ EC TION S W E RE RAISED BY THE ASSESSEE TO THE VALUATION MADE BY THE DVO AS PER HIS REPORT. THE ASSESSING OFFICER , HO W EVER , FOUND THE SAID OBJ E CTION S TO BE UNSUSTAINABLE AND OV E R R ULING TH E SAME, HE TREATED THE D IFFER E NCE OF R S .72 ,02,277 AS UN E XPL A IN E D IN VE STMENT OF TH E ASSESSEE MADE IN TH E CON S TRUC T ION OF TH E COLLEGE BUILDING. TH E SAID AMOUNT AC C OR D INGLY WAS AD D ED BY HIM TO THE TOT A L INCOM E OF THE ASSESSEE IN TH E RATIO O F INVESTMENTS MADE BY TH E ASSESSEE IN TH E RELE V ANT YEAR S AS U N D ER - ASSESSMENT YEAR INVESTMENT MADE BY THE ASSESSEE RS. % OF INVEST - MENT YEAR - WISE BREAK UP OF UNEXPLAINED INVESTMENT OF RS.72,02,779 200 7 - 0 8 21,21,248 19.08% 13,74.290 2008 - 09 13,15,551 11.83% 8,52,089 2009 - 10 22,78,772 20.49% 14,75,850 2010 - 11 20,01,650 18.00% 12,96,500 201 2 - 1 3 34,00,000 30.58% 22,04,050 TOTAL 1,11,17,221 72,02,779 THE ADDITIONS OF RS.13,74,290 AND RS.12,95,500 WERE THUS MADE TO THE TOTAL IN C OM E O F TH E ASSESSEE FOR ASSESSMENT YEARS 2007 - 08 AN D 2010 - 11 RESPECTIVELY ON A C COUNT OF UN E XPLAIN E D INVESTMENTS MADE IN TH E CON S TRUC T ION OF THE COLLEGE BUI L DIN G , IN TH E ASSESSMENT S COMPLETED UN D ER S.143(3) READ WITH S.147 , VIDE ORDERS DATED 31.3.2013. I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 4 4. AGAINST THE ORDERS PASSED BY THE ASSESSING OFFICER UN D ER S.143(3) READ WITH S.147 FOR BOTH THE YEARS UN D ER CON S I DE RATION, APP E ALS W E RE PREFERRED BY TH E ASSESSEE BEFORE THE LEARNED CIT(A) AND AFTER CO N SI D ERING THE SUBMI S SION S MADE BY THE ASSESSEE AS WELL AS THE M A TERIAL AV A IL A BLE ON RECORD, THE LEARNED CIT(A) DELETED THE ADDIT I ONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UN E XPLAIN E D INVESTMENTS ALL E GEDLY MADE BY THE ASSESSEE IN THE CO N ST R UC T ION OF COLLEGE BUIL D IN G FOR BOTH TH E Y E ARS UN D ER CON S ID E RATION FOR TH E FOLLOWING IDENTICAL REASONS GI V EN IN HI S I MPUGN E D ORDER S - 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORDER. I FULLY AGREE WITH THE SUBMISSIONS OF THE APPELLANT BOTH ON FACTS AND LAW. THE A.O. IS NOT JUSTIFIED IN REFERRING THE VALUATION OF CONSTRUCTION OF THE BUILDING FOR THE F OLLOWING REASONS: ( I ) A SURVEY U/S 133A WAS CONDUCTED IN THIS CASE AND SOME MATERIAL WAS IMPOUNDED. DURING THE ASST. PROCEEDINGS, THE ASSESSEE PRODUCED BOOKS OF ACCOUNT AND OTHER DOCUMENTS AND EXPENDITURE VOUCHERS FOR VERIFICATION, WHICH WAS VERIFIED BY THE AO WITH REFERENCE TO THE MATERIAL IMPOUNDED. THE AO HAD NOT FOUND ANY .MATERIAL CONTRADICTING THE STATEMENTS PROVIDED ALONGWITH THE RETURNS OF INCOM E. ( II ) THE A.O. WITHOUT REJECTING THE BOOKS OF ACCOUNTS OR POINTING OUT ANY DEFECTS IN THE BOOKS OR IN THE INVESTMENT ACCOUNT REFERRED THE MATTER TO THE VALUATION CELL FOR ESTIMATING THE CONSTRUCTION VALUE OF THE PROPERTY. ( III ) THE ASSESSEE MADE AGGREGATE INVE STMENT OF RS.1,11,17,221 DURING THE A.YS 2007 - 08 TO 2012 - 13 AND TH E VALUATION OFFICER ESTIMATED THE SAME AT RS.1,83,20,000 AND TH E A O ADDED THE DIFFERENCE OF RS .72,02,779 SPREA D ING OVER A.YS 2007 - 08 TO A.Y. 2007 - 08 TO A.Y. 2012 - 13, SOLELY RELYING UPON TH E REPORT OF THE DEP A RTMENTAL VALUER, IN TH E AB S EN C E OF ANY CORROBORATIVE MATERIAL FOUN D/ BROUGHT ON RECORD. ( IV ) I AGREE WITH THE SUBMISSIONS OF THE APPELLANT MENTIONED IN PARA.5.2 (SUB - PARAS 3 & 4) OF THIS I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 5 ORDER REGARDING ITS OBJECTIONS IN RESPECT OF VALUATION OF THE PROPERTY BY THE VALUATION OFFICER AND SUPPORTING THE JUSTIFIABILITY OF THE COST OF CONSTRUCTION AND HOLD THAT THE A.O. WAS NOT JUSTIFIED IN NOT CONSIDERING THE SAME, WHICH ARE REASONABLE AND ACCEPTABLE. 5.4 ON LEGAL FRONT, I ALSO FULLY AGREE WITH THE SUBMISSIONS OF THE APPELLANT IN PARA.5.2 (SUB - PARA 5) OF THIS ORDER. IN THIS CASE, THE A.O. HAD NOT BROUGHT OUT ANY CORROBORATIVE MATERIAL TO DISPROVE THE INVESTMENT SHOWN IN THE CONSTRUCTION OF THE BUILDING AS P ER THE BOOKS OF ACCOUNT AND DID NOT REJECT THE BOOKS OF ACCOUNT. ( I ) IN THE CASE OF SARGAM CINEMA VS. CIT SUPRA, THE APEX COURT HELD THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT, THE MATTER OF VALUATION IN RESPECT OF INVESTMENT CANNOT BE REFERRED TO THE VALU ATION OFFICER. ( II ) IN THE CASE OF CIT VS. AAAR PEE APARTMENTS 319 ITR 276 THE HONBLE DELHI HIGH COURT HELD THAT WHERE THERE IS NO EVIDENCE TO DISBELIEVE THE EXPENDITURE SHOWN BY THE ASSESSEE, REFERENCE TO VALUATION OFFICER WOULD BE INVALID AND SO WOULD BE THE ASSESSMENT ORDER. IT WAS ALSO HELD AS TH ERE IS NO REFERENCE TO SECTION 69C IN SECTION 142A OF TH E A C T, WHICH RELATES TO UNEXPLAINED EXP THE ASSESSING OFFICER DOES NOT HAVE POWER TO REFER TO TH E EXP ENDITURE INCURRED IN A CON S TRUCTION PROJ E CTS TO TH E VALUATION OFFICER. ( III ) IN TH E CA S E OF CIT VS. NAVEEN GERA, THE DELHI HIGH COURT HELD T HAT THE ADDITION M A DE ON TH E BASIS OF VALUATION R EPO R T OF TH E VA LU A TION OFFI C ER CANNOT B E S U STAIN E D IN TH E AB S ENCE OF ANY ADVERSE MATERIAL FOUND IN TH E C OU R SE OF SEARCH. I N THE CASE OF THE APPELLANT, THE A.O. HAD NOT BROUGHT OUT ANY ADVERSE MATERIAL FOUND DURING THE COURSE OF SURVEY NOR POINTED OUT ANY DISCREPANCIES IN THE BOOKS OF THE ACCOUNT. 5.5 IN VIEW OF MY OBSERVATIONS IN PARA.SA, I HOLD THAT THE ABOVE CASE - LAWS ARE SQUARELY APPLICABLE TO THE FACTS OF THE A PPELLANT AND THE A.O. WAS NOT I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 6 JUSTIFIED IN REFERRING THE MATTER TO VALUATION OFFICER AND ADOPTING THE SAME, WITHOUT REJECTING BOOKS OF ACCOUNT OR POINTING OUT ANY DISCREPANCIES IN THE BOOKS OF ACCOUNT. HENCE, I DELETE THE ADDITION OF RS.13,74,290 PERTAININ G TO THE ASST. YEAR UNDER CONSIDERATION. AGGRIEVED BY THE ORDERS OF THE DISALLOWED CIT(A), R E VEN U E HAS PREF E R R ED THESE APPEALS B E FORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE COST INCURRED BY TH E ASSESSEE ON CON S TRUC T ION OF C OLL E GE BUILDING AT NAGASALA, JADCHARLA WAS DULY REFLECTED IN ITS BOOKS OF ACCOUNT REGULARLY MAI N TAINED FOR THE RELEVA NT YEARS INCLUDING THE YEARS U N DER CON S I D E R ATION. A P ER U S AL OF TH E ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER , HO WE VER , SHOWS THAT NEITHER ANY SPECIFIC OR M A TERIAL DEFECT HAS BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS O F ACCOUNT MAIN T AINED BY THE ASSESSEE OR IN THE BILLS/VOUCH E RS MAINTAINED IN SUPPO R T OF CONSTRUCTION COST, NOR HAS HE REJECTED THE BOOK S OF ACCOUN T OF THE ASSESSEE, AND THIS PO SI TION IS NOT DISPUTED EVEN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AT THE TIME OF H E ARING B E FORE US. 6. IN THE CA S E OF ITO V/S. VIJETHA EDUCATIONAL SO C I E TY ( 118 ITD 382 ), CITED BY THE LEARNED COUN S EL FOR TH E ASSESSEE, LUCKNOW B EN C H OF THI S TRIBUNAL HAS H E L D THAT WH E RE ASSESSING OFFICER FOUN D NO DEFECT IN THE BOOKS O F AC C OUNT, REFERENCE TO DVO COULD NO T BE MADE TO FIND OUT TH E CON S TR UCTION OF BUILDING INCURRED BY TH E ASSESSEE AND TH E SAID REPO R T, EVEN THOUGH OBTAINED COULD NOT BE UTILI S ED FOR ASSESSMENT OR RE - ASSESSMENT . IN THE C A S E BEFORE THE LUCKNOW B ENCH, THE ASSESSEE HAD MAINTAINED PROPER BOOKS OF AC C OUN T , WHICH WERE DULY SUPPORTED BY VOUCH E RS. N O DEFECTS IN TH E SAID BOOK S OF A C COUN T OR VOUCH E RS WERE HO W EVER , PO IN TED OUT BY I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 7 T HE ASSESSING OFFICER NOR THE BOOKS OF AC C OUN T W E RE SPECIFICALLY REJ E CTED BY HIM. I N TH E SE FACTS AND CIRCUMSTANCES OF THAT CA S E, IT WAS H E LD BY TH E COORDINATE BENCH OF THIS TRIBUNAL THAT THE V ALUATION REPO R T COULD BE TAKEN INTO CON S I D ERATION ONLY WHEN TH E BOOKS OF AC C OUN T W E RE FOUND TO B E NOT RELIABLE. IN THE CASE OF SARGAM CINEMA (SUPRA) , THE TRIBUNAL HAD COME TO THE CONCLUSION THAT THE ASSESSING A UTHORITY COULD NO T R E F E R THE MATTER OF VALUATION T O T H E DVO, WITHOUT THE BOOK S OF ACCOUNT BEING REJECTED. KEEPING IN VIEW A CATEGORICAL FIN D ING RECORDED BY TH E TRIBUNAL THAT THE BOOK S WERE NEVER REJECTED BY THE ASSESSING OFFICER, THE HON'BLE SUPREME COUR T HELD THAT RELIANCE COULD NO T BE PLACED ON THE R EP ORT OF TH E DVO FOR ALLEGING ANY UNEXPLAINED INVESTMENT IN TH E H A NDS OF THE ASSESSEE . KEEPING IN VI E W THE RATIO LAID DOWN IN TH E SE JU D I C I A L PRONOUNCEMENTS AND HAVING REGARD TO TH E FACTS OF THE PRESENT CASE , IN C LU D IN G THE FA C T THAT THE BOOKS OF AC C OUNT DISCLOSING THE COST OF CON S TRUC T ION OF COLLEGE BUILDING, WERE NEVER REJECTED BY THE ASSESSING OFFICER, WE FIND OURSELVES IN AGR E EMENT WITH THE LEARNED CIT(A) THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO FOR ESTIMATING THE CO S T OF CON S T R U CT ION ITSELF WAS NO T VALID AND TH E ADDITION S M A DE ON THE BASIS OF TH E SAID REPORT FOR BOTH THE Y E ARS UN D ER CON S ID E RATION ARE NO T SU S TAINABLE. WE TH E R E FORE, UPHOLD TH E IMPU G N E D O R DERS OF THE LEARNED CIT(A) DELETI NG THE ADDIT I ON S MADE BY TH E ASSESSING OFFICER ON AC C OUN T O F UN E XPL A IN E D INVESTMENTS, ALL E GE D LY MADE BY THE ASSESSING OFFICER IN TH E CONSTRUCTION OF TH E COLL E GE BU I LDING FOR BOTH THE YEARS UNDER CONSIDERATION, AND DISMISS THESE APPEALS OF THE REVENUE. I TA NO. 1617 - 1618/H YD/20 14 SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), MAHABOOBNAHAGAR 8 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 11 TH MARCH, 2015 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER D T/ - 11 TH MARCH, 201 5 COPY FORWARDED TO: 1. M/S. SRI SAI EDUCATIONAL SOCIETY, (PRETHIBHA JUNIOR COLLEGE), 130/18 SANIA COMPLEX OPP. GOVERNMENT HOSPITAL, MAHABOOBNAHAGAR 2 . INCOME TAX OFFICER WARD 1 , MAHABUBNAGAR 3. COMMISSIONER OF INCOME - TAX(APPEALS) V HYDERABAD 4. COMMISSIONER OF INCOME - TAX IV, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S