Malik Educational Society, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 1698/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3737 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND SENIOR
• Keywords: Unexplained investment; Charitable institution; Valuation report; Set aside
• Section: 133A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NOS.1698 & 1699/DEL/2010 (ASSESSMENT YEARS : 2005-06 & 2006-07) M/S. MALIK EDUCATIONAL SOCIETY, VS. ADDL. CIT, RAN GE 1, III-A-41, NEHRU NAGAR, NEW DELHI. GHAZIABAD 201 302. (PAN : AAATM3509N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAMOD KUMAR, ADVOCATE REVENUE BY : SHRI N.K. CHAND, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : ITA NOS.1698/DEL/2010 AND 1699/DEL/2010 ARE THE APP EALS FILED BY THE ASSESSEE ARISING OUT OF THE ORDER OF CIT (APPEALS), GHAZIABAD DATED 19.1.2010 AND 22.1.2010 FOR THE ASSESSMENT YEARS 2005-06 AND 2006 -07. 2. IN BOTH THE APPEALS, THE GROUNDS OF APPEAL ARE S IMILAR EXCEPT THE DIFFERENCE IN THE FIGURES AND THE SAME READ AS UNDER : 1. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ADDITION (RS.59,564/- IN ITA NO.1698/DEL/2010 A ND RS.34,590/- IN ITA NO.1699/DEL/2010) BEING 50% OF DIFFERENCE IN THE COST OF CONSTRUCTION OF BUILDING AS DECLARED IN THE BOOKS O F ACCOUNTS MAINTAINED BY THE APPELLANT AND IN THE VALUE OF CON STRUCTION ESTIMATED BY THE DVO. ITA NOS.1698 & 1699/DEL/2010 2 2. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THAT THE PROVISIONS OF SECTION 11 AND 12 CAN NOT BE APPLICABLE FOR UNEXPLAINED INVESTMENT OF RS.59,564/- AND ACCORDING CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 3. THAT THE CIT(A) HAS ERRED IN NOT DISPOSING OFF T HE FIRST GROUND OF APPEAL TAKEN BEFORE HIM WHICH STATED THAT THE A. O. HAS ERRED ON FACTS AND IN LAW IN REFERRING TO DVO FOR VALUATION OF THE BUILDING CONSTRUCTED BY THE SOCIETY SPECIALLY IN VIEW OF THE FATS THAT THE SOCIETY HAS MAINTAINED COMPLETE BOOKS OF ACCOUNT AN D BILLS AND VOUCHERS FOR CONSTRUCTION OF THE BUILDING. 4. THAT THE CIT (A) HAS ERRED IN NOT PASSING A SPEA KING ORDER AND NOT GIVING REASONS FOR REJECTING VARIOUS CONTEN TIONS RAISED BY THE APPELLANT BEFORE HIM. 5. THAT THE CIT (A) HAS ERRED IN NOT FOLLOWING VARI OUS JUDGMENTS RELIED UPON BY THE APPELLANT. 3. IN BOTH THE APPEALS, THE ISSUE IS RELATED TO THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT BEING 50% OF THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION AS DECLARED IN THE BOOKS OF ACCOUNT BY THE ASSESSEE AND THE VALUE ESTIMATED BY THE DVO. 4. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LE ARNED AR SUBMITTED THAT THE SOCIETY IS A REGISTERED CHARITABLE SOCIETY AND HAS BEEN GRANTED REGISTRATION U/S 12AA OF THE INCOME-TAX ACT SINCE 9.12.1994 BY THE C IT, GHAZIABAD. THE MAIN OBJECT OF THE SOCIETY IS ADVANCEMENT OF EDUCATION F OR POOR CLASS AND GENERAL PUBLIC AND TO OPEN AND RUN AND MANAGE SCHOOLS, COLLEGES AN D EDUCATIONAL INSTITUTIONS TO SPREAD ALL TYPE OF EDUCATION. FOR THE ASSESSMENT Y EAR 2005-06, THE ASSESSEE SUBMITTED THE RETURN OF INCOME DECLARING NIL INCOME ALONG WITH THE AUDITED ACCOUNTS. A SURVEY U/S 133A WAS CONDUCTED IN THE ASSESSEE'S PREMISES. DURING ITA NOS.1698 & 1699/DEL/2010 3 THE SURVEY, NO INCRIMINATING DOCUMENTS WERE FOUND. THE CASH IN HAND WAS FOUND TALLIED AS PER THE BOOKS OF ACCOUNT. NO UNACCOUNTE D ASSETS WERE DETECTED BY THE SURVEY. THE ASSESSEE WAS CONSTRUCTING A COLLEGE BU ILDING SINCE ASSESSMENT YEAR 2002-03 AND AT THE TIME OF SURVEY ALSO, THE WORK WA S GOING ON. THE ASSESSING OFFICER REFERRED U/S 142A OF THE INCOME-TAX ACT TO THE VALUATION OFFICER. THE TOTAL INVESTMENT DECLARED BY THE ASSESSEE FOR THE PERIOD FROM FINANCIAL YEAR 2002-03 TO 11.7.2007 AT RS.1,18,04,547/-. THE VALUER ESTIMATE D THE VALUE AT RS.1,28,93,554/-. THUS, THERE WAS A DIFFERENCE OF RS.10,89,007/- WHIC H COMES ONLY 8.45% OF THE INVESTMENT DECLARED IN THE BOOKS OF ACCOUNT. FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED THE INVESTMENT AT RS.13,62,000/- AND DVO ESTIMATED THE SAME AT RS.14,81,128/-. THUS, THERE WAS A DIFFERENCE OF RS .1,19,128/-. THE ASSESSEE IS MAINTAINING COMPLETE BOOKS OF ACCOUNT, BILLS AND VO UCHERS AND NO DEFECT WAS DETECTED BY THE ASSESSING OFFICER WHEN THE SAME WER E PRODUCED BEFORE HIM. ASSESSING OFFICER ACCEPTED PARTLY THE CONTENTION OF THE ASSESSEE UP TO 50% OF THE DIFFERENCE AND ADDED ONLY 50% OF THE AMOUNT OF DIFF ERENCE BETWEEN INVESTMENT DECLARED IN BOOKS AND VALUATION REPORT. THUS, THE ASSESSING OFFICER HIMSELF HAS NOT COMPLETELY BELIEVED THE VALUATION REPORT OF THE DVO. HE FURTHER SUBMITTED THAT THE DVO HAS VALUED THE INVESTMENT BY TAKING TH E CPWD PA RATES WHEREAS THE UPPWD RATES SHOULD HAVE BEEN ADOPTED FOR THE VA LUATION PURPOSE AS THE BUILDING IS SITUATED IN UP. THE VALUATION OFFICER ADOPTED THE CPWD PA RATES FOR RCC FRAMED FOR 6 STORIES WHILE THE COLLEGE BUILDING HAS BEEN CONSTRUCTED ONLY OF 4 STORIES. THEREFORE, THE COST OF STRUCTURE FOR 4 ST ORIES BUILDING SHALL BE DEFINITELY ITA NOS.1698 & 1699/DEL/2010 4 LESS THAN 6 STORIES BUILDING. THE DVO HAS ALSO ADD ED THE VALUE OF HORTICULTURE WORK AND PLANTATION WHILE VALUING THE BUILDING WHER EAS THE ASSESSEE HAS DEBITED THE SAME UNDER THE GARDENING EXPENSES AND THE AR FO R THE ASSESSEE VEHEMENTLY PLEADED THAT THE VALUATION REPORT BY THE DVO IS NOT BASED ON THE CORRECT FACTS OF THE CASE. SINCE NO DEFECT WAS DETECTED IN THE BOOK S OF ACCOUNT DURING THE SURVEY AS WELL AS DURING THE ASSESSMENT PROCEEDINGS, THERE FORE, THERE WAS NO REASON FOR REFERENCE TO DVO AND DEVIATE FROM THE INVESTMENT SH OWN IN THE BOOKS OF ACCOUNT. HE FURTHER SUBMITTED THAT THE REPORT OF THE DVO IS ADVISORY IN NATURE AND THE ASSESSING OFFICER SHOULD CORRELATE THE CONTENTS OF THE REPORT WITH THE FACTS AND CIRCUMSTANCES OF THE CASE TO ARRIVE AT A LOGICAL CO NCLUSION THAT THE DIFFERENCE IS REPRESENTING THE UNACCOUNTED INVESTMENT OR IT IS ON LY ON ACCOUNT OF SOME MISTAKES IN THE VALUATION PROCESS. THE ASSESSING OFFICER HA S MADE VARIOUS UNNECESSARY REMARKS ON THE BASIS OF CONJECTURES AND SURMISES IN HIS ORDER. SUCH REMARKS ARE COMPLETELY PERVERSED AND BASED ON PRESUMPTIONS AND ASSUMPTIONS. THESE ARE NOT BASED ON EVIDENCE ON RECORD. HE FINALLY SUBMITTED THAT IF IT IS ASSUMED THAT THE EXCESS MONEY WAS CONTRIBUTED BY THE MEMBERS OF THE SOCIETY, EVEN THAN THE TAXABLE INCOME WOULD BE NIL AS THE AMOUNT HAS BEEN UTILIZED FOR THE CHARITABLE PURPOSES AS PER THE PROVISIONS OF SECTION 11 AND 12 OF THE INCOME-TAX ACT. HE FURTHER 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 ITA NOS.1698 & 1699/DEL/2010 5 (III) WESTERN ESTATES 209 ITR 343 (CAL.) 5. LEARNED DR RELIED ON THE ORDERS OF THE LOWER AUT HORITIES BELOW. 6. AFTER HEARING BOTH THE SIDES AND GOING THROUGH T HE FACTS OF THE CASE, WE HOLD THAT THE INVESTMENT DECLARED BY THE ASSESSEE I N THE BOOKS OF ACCOUNT WAS RS.1,18,04,547/- FOR A PERIOD FROM FINANCIAL YEAR 2 002-03 TO 11.7.2007. THE INVESTMENT FOR THE YEAR DECLARED IN BOOKS WAS RS.13 ,62,000/-. THE DVO ESTIMATED IT AT RS.14,81,128/-. THUS, THE DIFFEREN CE WAS OF RS.1,19,128/-. THUS, THE DIFFERENCE ON THE BASIS OF VALUATION IN TERMS O F PERCENTAGE WAS 8.45%. THE CONSTRUCTION WORK WAS ALSO IN PROGRESS ON THE DATE OF SURVEY, I.E. 11.7.2007. THE BUILDING IS LOCATED IN UP. THE ASSESSEE WAS MAINT AINING BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHERS FOR THE CONSTRUCTION OF BUI LDING. THE SAME WERE PRODUCED BEFORE ASSESSING OFFICER. NO DEFECTS WERE DETECTED IN THE BOOKS OF ACCOUNT DURING THE SURVEY OPERATION AS WELL AS DURING THE ASSESSME NT PROCEEDINGS. THE VALUER HAS ADOPTED THE CPWD PA RATES FOR RCC FRAME FOR 6 STORI ES WHILE THE ASSESSEE CONSTRUCTED ONLY 4 STORIES BUILDING AND THE SAME IS LOCATED IN UP. THE VALUATION OFFICER HAS ESTIMATED THE SAME COST TOWARDS HORTICU LTURE WHILE VALUING THE INVESTMENT IN BUILDING WHILE THE ASSESSEE DEBITED S UCH EXPENSES UNDER DIFFERENT HEAD GARDENING EXPENSES. THE ASSESSING OFFICER H IMSELF HAS PARTLY ACCEPTED THE MISTAKES IN VALUATION REPORT BY MAKING ADDITION OF 50% OF THE DIFFERENCE. KEEPING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE AND EQUITY, WE FIND THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA WHERE THE VALUATION BASED ON CPWD RATES SHOULD BE ACCEPTED IN TOTO IGNORING THE ITA NOS.1698 & 1699/DEL/2010 6 LOCAL/SPECIFIC FACTORS. THE ASSESSEE IS MAINTAININ G PROPER BOOKS OF ACCOUNT IN RESPECT OF INVESTMENT IN THE CONSTRUCTION OF THE BU ILDING, NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER AND NO DISCREPANCY WAS DET ECTED DURING THE SURVEY. THE VALUATION WAS REFERRED WITHOUT DETECTING ANY DISCRE PANCY IN THE BOOKS OF ACCOUNT. IN SUCH A SITUATION, THE MINOR DEVIATION BASED ON T HE VALUATION REPORT WILL NOT JUSTIFY THE ADDITION. THEREFORE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT TO DELETE THE ADDITION. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE 18 TH DAY OF JUNE 2009. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 18 TH DAY OF JUNE, 2009 TS COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. CIT(A), GHAZIABAD. 5. DR, ITAT. ASSTT.REGISTRAR ITAT, NEW DELHI.