Shree Bankey Bihari Educational Society, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 1697/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3609 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Keywords: Unexplained investment; Valuation report; Set aside
• Section: 133A; 12AA; 201; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1697/DEL/2010 (ASSESSMENT YEAR : 2005-06) SHREE BANKEY BIHARI EDUCATIONAL SOCIETY (REGD.), VS . ADDL.CIT, RANGE 2, N.H. 24, NEAR MASURI CANAL, NEW DELHI. DASNA MAURI, GHAZIABAD 201 302 (U.P.) (PAN : AADTS4243G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAMOD KUMAR, CA REVENUE BY : SHRI B. KISHORE, DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT (APPEALS)- GHAZIABAD DATED 19.1.2010 FOR THE ASSESSMENT YEAR 2 005-06. THE GROUNDS OF APPEAL READ AS UNDER : 1. THAT THE CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.3,09,030/- BEING 50% OF DIFFERENCE IN THE COST OF CONSTRUCTION OF BUILDING AS DECLARED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT A ND IN THE VALUE OF CONSTRUCTION ESTIMATED BY THE DVO. 2. THAT THE APPELLANT POINTED OUT VARIOUS ARITHMETI C ERRORS IN DVO'S VALUATION REPORT AS WELL AS INSTANCES WHERE T HE DVO HAS APPLIED ITEM WISE RATES FOR CONSTRUCTION WHICH ARE HIGHER THAN THE ACTUAL PRICES SUPPORTED BY THE PURCHASE BILLS A CCOUNTED FOR IN THE BOOKS OF THE APPELLANT AND ALSO FILED A STAT EMENT SHOWING THAT AFTER CORRECTION OF ERRORS IN THE VALUATION RE PORT, DIFFERENCE IN THE ESTIMATED VALUE OF BUILDING CONSTRUCTION WOU LD BE 0.99 ITA NO.1697/DEL/2010 2 LACS ONLY WHICH WERE NOT GIVEN ANY CONSIDERATION BY THE CIT (A). 3. THAT THE CIT (A) HAS ERRED ON FACTS AND IN LAW I N UPHOLDING THAT THE PROVISIONS OF SECTION 11 AND 12 CAN NOT BE APPLICABLE FOR UNEXPLAINED INVESTMENT OF RS.3,09,03 0/- AND ACCORDINGLY CONFIRMED THE ACTION OF THE ASSESSING O FFICER. 4. THAT THE CIT (A) HAS ERRED IN NOT DISPOSING OFF THE FIRST GROUND OF APPEAL TAKEN BEFORE HIM WHICH STATED THAT THE A.O. HAS ERRED ON FACTS AND IN LAW IN REFERRING TO DVO F OR VALUATION OF THE BUILDING CONSTRUCTED BY THE SOCIETY SPECIALL Y IN VIEW OF THE FATS THAT THE SOCIETY HAS MAINTAINED COMPLETE B OOKS OF ACCOUNT AND BILLS AND VOUCHERS FOR CONSTRUCTION OF THE BUILDING. 5. THAT THE CIT (A) HAS ERRED IN NOT PASSING A SPEA KING ORDER AND NOT GIVING REASONS FOR REJECTING VARIOUS CONTENTIONS RAISED BY THE APPELLANT BEFORE HIM. 6. THAT THE CIT (A) HAS ERRED IN NOT FOLLOWING VARI OUS JUDGMENTS RELIED UPON BY THE APPELLANT. 2. IN THE APPEAL, THE ISSUE IS RELATED TO THE ADDIT ION ON ACCOUNT OF UNEXPLAINED INVESTMENT BEING 50% OF THE DIFFERENCE IN THE COST OF CONSTRUCTION OF BUILDING AS DECLARED IN THE BOOKS O F ACCOUNT AND MAINTAINED BY THE ASSESSEE AND VALUATION ESTIMATED BY THE DVO. 3. LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE IS A CHARITABLE SOCIETY REGISTERED UNDER THE SOCIETY REGISTRATION A CT, 1861 W.E.F. 18.10.2001. THE SOCIETY HAS BEEN GRANTED REGISTRAT ION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 ON 14.6.2002 BY THE CIT , GHAZIABAD. THE ITA NO.1697/DEL/2010 3 SOCIETY IS ALSO APPROVED U/S 80G. THE MAIN OBJECTS OF THE SOCIETY IS ADVANCEMENT OF EDUCATION, MEDICAL RELIEF FOR GENERA L PUBLIC AND TO OPEN AND RUN AND MANAGE SCHOOLS, COLLEGES AND EDUCATIONAL IN STITUTIONS FOR SPREAD OF ALL TYPE OF EDUCATION AND TO OPEN RUN AND MANAGE ME DICAL CENTERS, HOSPITAL, MEDICAL CAMPS, ETC. TO PROVIDE MEDICAL RELIEF FOR G ENERAL PUBLIC ON CHARITABLE BASIS. THE SOCIETY HAS SET UP A COLLEGE IN VILLAGE NEAR DASNA MASURI TO IMPART DENTAL EDUCATION FOR 100 STUDENTS. THE COLL EGE IS APPROVED BY DENTAL COUNCIL OF INDIA, NEW DELHI AND IS AFFILIATED WITH CHAUDHARY CHARAN SINGH UNIVERSITY, MEERUT. THE SOCIETY IS ALSO RUNNING OP D UNIT, WHICH IS PROVIDING MEDICAL FACILITIES. A SURVEY U/S 133A WA S CONDUCTED ON 10.8.2006 AT THE PREMISES OF THE ASSESSEE. WHILE P LEADING ON BEHALF OF THE ASSESSEE, LEARNED AR SUBMITTED THAT NO INCRIMINATIN G DOCUMENTS WERE FOUND DURING THE SURVEY, THE CASH IN HAND TALLIED WITH TH E BOOKS OF ACCOUNT AND NO UNACCOUNTED ASSETS WERE FOUND. THE SOCIETY WAS CAR RYING ON THE CONSTRUCTION OF BUILDING FOR COLLEGE SINCE FINANCIA L YEAR 2001-02 AND IT WAS GOING ON TILL THE DATE OF SURVEY ALSO. THE ASSESSI NG OFFICER REFERRED THE VALUATION U/S 142A OF THE INCOME-TAX ACT TO THE VAL UATION OFFICER FOR ESTIMATING THE INVESTMENT IN THE CONSTRUCTION OF TH E BUILDING. THE DVO VALUED THE PROPERTY FOR THE PERIOD FROM FINANCIAL Y EAR 2001-02 TO AUGUST 2007 AT RS.13,64,19,755/- AS AGAINST THE INVESTMENT DECLARED IN THE BOOKS OF ITA NO.1697/DEL/2010 4 ACCOUNT OF RS.13,17,28,000/-. HE PLEADED THAT THER E WAS A DIFFERENCE OF ONLY 3.43% FOR A PERIOD OF SIX YEARS. HE SUBMITTED THAT THE CONSTRUCTION WORK WAS CONTINUOUSLY GOING ON AT THE TIME OF SURVEY ALS O AND CONTINUED THEREAFTER. THE ASSESSEE SUBMITTED THE DETAILS OF THE INVESTMENT IN THE BUILDING UNDER CONSTRUCTION ALONG WITH THE PURCHASE BILLS AND VOUCHERS. THE ASSESSEE ALSO PRODUCED COMPLETE BOOKS OF ACCOUNT BE FORE THE ASSESSING OFFICER. NO DEFECT WAS DETECTED IN THE BOOKS OF AC COUNT. FOR THE YEAR UNDER CONSIDERATION, THE DIFFERENCE IN ESTIMATE WAS RS.6, 18,065/- ONLY, THE ASSESSING OFFICER MADE ADDITION OF 50% THEREOF. TH US, THE DIFFERENCE IN ESTIMATION OF THE INVESTMENT COMES ONLY AT AROUND 3 .43%. HE SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE RESPECTFULLY ACCEPTED THE INVESTMENT AS PER THE BOOKS OF ACCOUNT AS MINOR DIFFERENCES AR ISE IN THE ESTIMATION MADE BY THE DVO ON ACCOUNT OF VARIOUS FACTORS. HE SUBMI TTED THAT IN THE VARIOUS CASE LAWS, IT HAS BEEN DECIDED THAT MINOR VARIATION IN THE VALUATION SHOULD BE IGNORED. HE ALSO SUBMITTED THAT THERE WAS MANY DEF ICIENCIES, ERRORS AND CONTRADICTIONS IN THE VALUATION REPORT ITSELF WHICH CAN BE SUMMARIZED AS UNDER :- A. 'THE DVO HAS APPLIED CPWD PA RATES FOR ESTIMATIN G THE CONSTRUCTION VALUE. THE BUILDING IS SITUATED IN UP AND THE UPPWD APPROVED RATES SHOULD BE CONSIDERED FOR ESTIMATION OF CONSTRUCTION VALUE. ITA NO.1697/DEL/2010 5 B. THE DVO HAS APPLIED CPWD PA RATES FOR RCC FRAMED BUILDINGS OF 6 STORIES. THE COLLEGE BUILDING CONSTR UCTED IS ONLY 4 STORY. THE COST OF FDN FOR 4 STORY BUILDING WILL BE LESS THAN COST OF FDN FOR A 6 STORY BUILDING, THERE FORE, DVO SHOULD HAVE GIVEN DEDUCTION FOR 2 STORY LESS CONSTRUCTED. C. THE CI/WCI ADJUSTMENT METHOD ADOPTED BY THE DVO FOR ARRIVING THE CONSTRUCTION RATE IS ERRATIC AS WEIGHT AGES FOR DIFFERENT MATERIALS/LABOUR VARY YEARWISE IN CPWD CI . SIMILARLY WEIGHTAGE ADOPTED FOR RCC AND BRICK STRUC TURE IS ERRATIC. D. THE DVO HAS ADDED HORTICULTURE WORK AND PLANTATI ON IN THE VALUATION OF BUILDING WHICH IS NOT CONSIDERED P ART OF BUILDING. THE ASSESSEE HAS CLAIMED EXPENSES ON HORTICULTURE UNDER THE GARDENING EXPENSES. DURING T HE YEAR UNDER CONSIDERATION A SUM OF RS.13479/- WAS INCURRED AS CAN BE VERIFIED FROM THE INCOME & EXPENDITURE A/C FOR THE YEAR. E. THE DVO IN HIS REPORT ON PAGE NO.13 HAS COMPUTED WCI AT 221.91. HOWEVER, HE ROUNDED OFF THIS TO 222 AND APPLIED THIS TO WORK OUT ADJUSTED PAR ON PAGE 7, S. NO.8 COL NO. 3, 4, 5, AND 6. THE DVO HAS ERRED IN ROUNDI NG OFF TO HIGHER SIDE. THIS HAS RESULTED IN A HIGHER RATE OF APPROX. RS.2.5 PER SQ. METER AND THE TOTAL VALUE CO MPUTED BY THE DVO IS HIGHER BY RS.60 TO 70 THOUSAND WHEN THESE RATE HAVE BEEN APPLIED ON PAGE 8 AND 9 . F. THE DVO HAS COMPUTED COST OF EXTRA ITEMS VIDE PA RA H ON PAGE 9 AND PARA I ON PAGE 10. THE DVO HAS NEITHE R GIVEN BASIS OF THE RATES ADOPTED FOR THESE ITEMS NO R HAS STATED ON WHAT BASIS AND FOR WHICH YEAR THESE RATES PREVAIL. PLEASE NOTE THAT THE CONSTRUCTION PERIOD O F THE BUILDINGS AND VALUATION SPREAD MORE THAN ONE YEAR I N OUR CASE. THE RATES ADOPTED BY THE DVO ARE BASELESS AND ARE ON VERY HIGHER SIDE. YOUR KIND ATTENTION IS INVITED TO THE COPIES OF EXPENSE VOUCHERS & BILLS OF MATERIAL PURC HASE BEING PRODUCED HEREWITH. YOU ATTENTION IS ALSO INVI TED TO ITA NO.1697/DEL/2010 6 THE FOLLOWING DISCREPANCIES IN THE ESTIMATES MADE B Y THE DVO : I. THE DVO HAS APPLIED RATE OF 363.46 PER SQM FOR KOTA STONE FLOORING FOR FLOORING OF 7876.88 SQM FLOOR. (REFER PAGE 9, PARA H ITEM L(B)). AS PER THE COPY OF KOTA STONE BILL ENCLOSED HEREWITH, YOU WILL NOTE THAT THE KOTA STONE WAS PURCHASED FOR RS.140/- PER SQM. APPROX. II. THE DVO HAS APPLIED RATE OF 326.57 PER SQM FOR PVC FLOORING FOR FLOORING OF 280.52 SQM FLOOR. (REFER PAGE 9, PARA H ITEM L(C)). AS PER THE COPY O F PVC FLOORING BILL ENCLOSED HEREWITH, YOU WILL NOTE THAT THE PVC FLOORING WAS PURCHASED FOR RS.85/- PER SQM. APPROX. III. THE DVO HAS APPLIED RATE OF RS.200 AND RS.210 PER KG FOR ALUMINIUM WORK 8405.2 AND 3763.86 KG. (REFER PAGE 9, PARA H ITEM 2). AS PER THE COPY OF ALUMINIUM PURCHASE BILL ENCLOSED HEREWITH, YOU WILL NOTE THAT THE ALUMINIUM WAS PURCHASED FOR RS.115/- & RS.132 PER KG. APPROX. IV. THE DVO HAS APPLIED RATE OF 703.11 PER SQM FOR GLAZING WORK FOR 1164.24 SQM. (REFER PAGE 9, PARA H ITEM 3). AS PER THE COPY OF BILL ENCLOSED HEREWITH, YOU WILL NOTE THAT THE GLASS WAS PURCHASED FOR RS.325/- PER SQM. APPROX. V. THE DVO HAS APPLIED RATE OF RS.50000/- PER TUBE WELL BORING FOR 4 NOS. (REFER PAGE NO. 10 PARA I 13 ). AS PER THE COPY OF BILL ENCLOSED HEREWITH, YOU WILL NOTE THAT THE SUBMERSIBLE PUMP WAS PURCHASED FOR RS.14600/- AND AFTER OTHER EXPENSES THE TUBE WELL BORING COST WAS RS.35000/- APPROX. G. SIMILARLY, THE ESTIMATION OF COST OF OTHER ITEMS AS MADE BY THE DVO IN HIS VALUATION REPORT ARE ON HIGHER SI DE AND ERRONEOUS. THIS HAS RESULTED IN HIGHER ESTIMATION O F THE ITA NO.1697/DEL/2010 7 COST OF CONSTRUCTION OF THE BUILDING BY THE DVO. IF THE DIFFERENCES AS DISCUSSED ABOVE ARE CONSIDERED IN TH E ESTIMATION MADE BY THE DVO THE TOTAL COST OF CONSTRUCTION AS ESTIMATED IN THE REPORT WOULD BE LO WER THAN THE VALUE DECLARED BY THE ASSESSEE. H. THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCO UNTS IN RESPECT OF THE INVESTMENT MADE IN THE CONSTRUCTION OF THE BUILDING. THE EXPENSES ARE FULLY SUPPORTED BY VOUCHERS/BILLS AND FULL DETAILS ARE ALSO MENTIONED IN RESPECT OF EACH ITEM IN THE BOOKS. THE ASSESSEE HAS DISCLOSED INVESTMENT OF RS.1,72,90 ,330/-, WHEREAS THE DVO HAS ESTIMATED INVESTMENT OF RS.1,79 ,08,065/- THUS THERE IS A TOTAL DIFFERENCE OF RS.6,18,065/- W HICH IS 3.45% ONLY. THE DVO HAS NOT CONSIDERED THE INVESTMENT OF RS.1,58,480/ UNDER-THE-HEAD ELECTRIC INSTALLATION W HICH IS ALSO PAID OF THE BUILDING CONSTRUCTION AND HORTICULTURE EXPENSES UNDER THE HEAD GARDENING EXPENSES OF RS.13,479/-. A FTER CONSIDERING THESE ITEMS, THE DIFFERENCE FOR THE YEA R WORKS OUT TO RS.4,46,106/- WHICH IS 2.49% ONLY. IF ALL THE DIFFERENCES IN THE RATES ADOPTED BY THE DVO AND DISCUSSED IN PARAS ABOVE ARE CONSIDERED THE VALUE E STIMATED BY THE DVO WOULD BE LOWER THAN THE INVESTMENT DECLARED BY THE ASSESSEE. 4. THE ASSESSING OFFICER HIMSELF OBSERVED THAT THE DIFFERENCE STATED BY THE ASSESSEE CANNOT BE TOTALLY IGNORED AND AFTER CO NSIDERATION, HE ADDED ONLY 50% OF THE DIFFERENCE IN THE ESTIMATION OF THE INVE STMENT. HE FURTHER SUBMITTED THAT DVO HAS ONLY ESTIMATED THE AMOUNT OF INVESTMENT AND IT CANNOT BE FULLY PROVED; IT IS AN ADVISORY REPORT IN NATURE AND ASSESSEE SHOULD NOT BE PENALIZED WHEN HE IS KEEPING HIS BOOKS OF AC COUNT AND MAINTAINING PROPER VOUCHERS. WITHOUT ANY SPECIFIC DEFECT IN TH E BOOKS OF ACCOUNT THE ITA NO.1697/DEL/2010 8 ESTIMATE MADE BY THE DVO SHOULD NOT BE ACCEPTED WHE RE VARIATION IS VERY SMALL. THE PROVISIONS OF SECTION 142A ALSO SHOW T HAT THE ASSESSING OFFICER MAY TAKE INTO ACCOUNT SUCH REPORT. HOWEVER, IN ASS ESSEES CASE, THE VARIATION IS VERY MINOR. THE ASSESSING OFFICER SHO ULD HAVE ACCEPTED THE INVESTMENT AS PER THE BOOKS OF ACCOUNT OF THE ASSES SEE, WHICH IS CORRECT AND ACCURATE. THE ASSESSING OFFICER SHOULD NOT HAVE DE STABILIZED THE CORRECT AND ACCURATE FIGURES AS PER THE BOOKS OF ACCOUNT ON THE BASIS OF THE DVO VALUATION AND THAT TOO WHEN THERE IS A MINOR DIFFER ENCE. HE ALSO RELIED ON THE FOLLOWING DECISIONS :- (I) CIT VS. HOTEL JOSHI (RAJ.) 108 TAXMAN 199 (II) CIT VS. PRATAPSING AMROSINGH RAJENDRA SINGH & DEEPAK KUMAR 200 ITR 788 (III) WESTERN ESTATES 209 ITR 343 (CAL.) (IV) PRAHLAD INDUSTRIES 52 TTJ 345 (DELHI)(AT) (V) HOTEL HILLTOP 83 TAXMAN 355 (JP)(AT) 5. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES BELOW. 6. AFTER HEARING BOTH THE SIDES AND GOING THROUGH T HE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE IS REGULARLY M AINTAINING THE CONSTRUCTION ACCOUNT IN ITS BOOKS OF ACCOUNT AND THESE BOOKS ARE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. ASSESSEE IS ALSO MAINTAINING SU PPORTING VOUCHERS. THE ASSESSING OFFICER HAD NOT PINPOINTED ANY DEFECT IN THE BOOKS OF ACCOUNT PRODUCED BEFORE HIM. THE DIFFERENCE IN THE VALUATI ON IS MINOR. THE ITA NO.1697/DEL/2010 9 ASSESSING OFFICER HIMSELF HAS ACCEPTED THE 50% ON A CCOUNT OF THE VARIOUS DISCREPANCIES POINTED OUT IN THE ESTIMATES MADE BY THE DVO, LIKE, ADOPTING CPWD RATE INSTEAD OF UPPWD AND ESTIMATING THE COST OF RCC FRAME FOR SIX STORIES RATHER THAN FOUR STORIES. SIMILARLY ASSES SEE ALSO PINPOINTED OTHER DEFECTS IN THE VALUATIONS. THUS, THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR ESTIMATING THE INVESTMENT IN CONSTRUCTION WHEN THE BOOKS OF ACCOUNT ARE PROPERLY MAINTAINED. THE VARIATION IN VALUATION IS MINOR. THE MINOR VARIATIONS ALSO TAKE PLACE ON ACCOUNT OF THE LOCAL CONDITIONS, LIKE, LOCAL AVAILABILITY OF SUPPLY OF RAW MATERIAL AND AVAILABI LITY OF CHEAP LABOUR. CONSIDERING ALL THESE FACTS AND TOTALITY OF THE CIR CUMSTANCES OF THE CASE, WE FIND NO JUSTIFICATION IN MAKING THE ADDITION ON THE MINOR VARIATION OF THE ESTIMATION ON THE BASIS OF THE VALUATION REPORT OF THE DVO. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES BELOW AND DIRECT TO DELETE THE ADDITION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THE 25 TH DAY OF JUNE 2009. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 25 TH DAY OF JUNE, 2010 TS ITA NO.1697/DEL/2010 10 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. CIT(A), FARIDABAD. 5. DR, ITAT. ASSTT.REGISTRAR ITAT, NEW DELHI.