Income Tax Officer , Barabanki V. M/s Awasiya Shiv Ram Singh Educational Society, Barabanki

ITA 176/LKW/2013

• Counselvise Citation: 17623714 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K DEY
• Assessee Lawyers: YOGESH AGARWAL
• Keywords: Unexplained cash credit; Unexplained investment; Value adopted by valuation officer; Income from undisclosed sources; Charitable institution; Opportunity of being heard; Maximum Marginal Rate; Source of fund; Additional evidence; Valuation report
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.176/LKW/2013 ASSESSMENT YEAR:2009-10 INCOME TAX OFFICER BARABANKI V. M/S AWASIYA SHIV RAM SINGH EDUCATIONAL SOCIETY VILL PATHARI, JAIDPUR ROAD BARABANKI TAN/PAN:AAVAA4989L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. P. K. DEY, D.R. RESPONDENT BY: SHRI. YOGESH AGARWAL, ADVOCATE DATE OF HEARING: 03 12 2014 DATE OF PRONOUNCEMENT: 08 01 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN DELETING THE ADDITION OF RS.7,65,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT. THE LD. CIT(A) HAS PLACED HIS RELIANCE ON DECISION GIVEN IN DIT(EXEM.) VS RANUAQ EDUCATION FOUNDATION WITHOUT APPRECIATING THE FACTS THAT IN THE INSTANT CASE EXEMPTION U/S 10(23C)(IIIAD) WAS DENIED TO THE ASSESSEE. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY ASSESSING OFFICER OF RS.53,91,660/- AS INCOME FROM UNDISCLOSED SOURCES U/S 69B ON THE BASIS OF DVO REPORT. THE CIT (A) HAS FAILED TO APPRECIATE THE FACT THAT THE :- 2 -: REPORT OF THE DVO WAS OBTAINED U/S 142A AFTER DULY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE HAS THEREFORE FAILED TO FOLLOW THE DECISION IN SHASHI JAIN VS. I.T.O., 228 ITR 147 (ALLD.). 3. THE CIT (A) HAS ERRED ON FACTS OF THIS CASE, IN HOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 10(23C)(IIIAD) OF THE I.T. ACT. THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACTS DISCUSSED BY THE A.O. THAT THE ASSESSEE COULD NOT BE CONSIDERED AS EXISTING SOLELY FOR EDUCATIONAL PURPOSES. RELIANCE IS PLACED ON FOLLOWING DECISIONS- A) CIT VS. QUEENS EDUCATIONAL TRUST (2009) 319 ITR 160 (UTTARAKHAND) B) MCD VS. CHILDRENS BOOK TRUST (1992) 3 SCC 390 2. APROPOS GROUND NO.1, IT IS NOTICED THAT DURING THE COURSE OF HEARING, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS SHOWN RECEIPT OF RS.8.15 LAKHS FROM MEMBERS AS BUILDING FUND. WHEN THE ASSESSEE WAS ASKED TO FURNISH EVIDENCE WITH REGARD TO THE SOURCE OF INCOME OF VARIOUS MEMBERS ALONG WITH COPIES OF REVENUE RECORD, THE ASSESSEE HAS FILED EVIDENCE WITH REGARD TO THE CONTRIBUTION MADE BY SHRI. SHIV RAM SINGH. FOR OTHERS, DETAILED EVIDENCE WERE NOT FILED AND IN THE ABSENCE OF EVIDENCE, THE ASSESSING OFFICER TREATED THE RECEIPTS OF RS.7.65 LAKHS RECEIVED FROM REMAINING SIX PERSONS AS UNEXPLAINED CASH CREDIT AND MADE ADDITION OF THE SAME UNDER SECTION 68 OF THE ACT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT MOST OF THE PERSONS WHO HAVE CONTRIBUTED THE AFORESAID AMOUNT OF RS.8.15 LAKHS WERE MEMBERS OF THE ASSESSEE-SOCIETY. THE ASSESSING OFFICER HAS IGNORED THE CONTENTIONS OF THE ASSESSEE. THE LD. CIT(A) VIDE ORDER SHEET ENTRY DATED 23.1.2013 ASKED THE ASSESSEE TO FILE :- 3 -: DETAILS OF PAN AND OTHER RELEVANT DETAILS OF CASH CREDITORS. THE ASSESSEE HAS FILED DETAILS ALONG WITH WRITTEN SUBMISSIONS. THE LD. CIT(A) HAS EXAMINED THE DETAILS AND IN THE LIGHT OF THE CONFIRMATION LETTERS AND THE DOCUMENTARY EVIDENCE WITH REGARD TO THE LAND HOLDINGS AND THE LD. CIT(A), BEING CONVINCED WITH THE SOURCE OF CONTRIBUTIONS OF THE VARIOUS PERSONS, HAS DELETED THE ADDITION MADE UNDER SECTION 68 OF THE ACT. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) IN THIS REGARD ARE EXTRACTED HEREUNDER:- 5(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO CALLED FOR AND EXAMINED THE RECORDS OF ASSESSMENT PROCEEDINGS. THE AO ACCEPTED CASH CREDIT OF RS. 50,000/- IN THE NAME OF SHRI SHIV RAM SINGH. IN VIEW OF THE DETAILS CALLED FOR VIDE ORDER SHEET ENTRY DATED 23.01.2013, THE APPELLANT HAS FILED CONFIRMATION LETTERS AND OTHER DETAILS M RESPECT OF OTHER CREDITORS OF RS. 7,65,000/- AS UNDER - S. NO. NAME AMOUNT DETAILS FILED 1. SMT. AMITA YADAV 50,000/- CONFIRMATION LETTER, PAN CARD, VOTERS ID CARD, COPY OF INCOME TAX RETURN. 2. SMT. POONAM YADAV 40,000/- CONFIRMATION LETTER, PAN CARD, COPY OF INCOME TAX RETURN. 3. SMT. SHANTI DEVI 60,000/- CONFIRMATION LETTER, RATION CARD, VOTERS ID CARD, COPY OF KHASRA AND KHATAUNI 4. SMT. SHIV PATI DEVI 25,000/- CONFIRMATION LETTER, VOTERS ID CARD, COPY OF INCOME TAX RETURN, COPY OF KHASRA AND KHATAUNI 5. SHRI ANIL KUMAR YADAV 40,000/- CONFIRMATION LETTER 6. SHRI ASHUMAN SINGH 75,000/- CONFIRMATION LETTER, COPY OF INCOME TAX RETURN. :- 4 -: 7. SHRI KALLU RAWAT 65,000/- CONFIRMATION LETTER. 8. SHRI KRISHNA 30,000/- CONFIRMATION LETTER. 9. SHRI RAJESH SINGH 25,000/- CONFIRMATION LETTER, COPY OF INCOME TAX RETURN. 10. SHRI RAM KUMAR 30,000/- CONFIRMATION LETTER. 11. SHRI RAM MILAN YADAV 75,000/- CONFIRMATION LETTER, PAN CARD, VOTERS ID CARD, COPY OF INCOME TAX RETURN, COPY OF KHASRA AND KHATAUNI 12. SHRI RAM SUMAN 80,000/- CONFIRMATION LETTER, COPY OF KHASRA AND KHATAUNI 13. SHRI RAM SUMIRAN 90,000/- CONFIRMATION LETTER, COPY OF KHASRA AND KHATAUNI 14. SHRI VINOD KUMAR 60,000/- CONFIRMATION LETTER, VOTERS ID CARD, COPY OF KHASRA AND KHATAUNI 5(5)(I) I FIND FROM THE DETAILS FILED ABOVE THAT THE PERSONS HAVE CONFIRMED HAVING GIVEN MONEY AS DONATION TO THE APPELLANT-SOCIETY. THE DONEES HAVE ACCEPTED GIVING THE MONEY AND THEIR CONFIRMATIONS FILED ESTABLISHES THE IDENTITY, CREDIT-WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. MOREOVER, THE APPELLANT IS RUNNING A EDUCATIONAL INSTITUTION AND ITS RECEIPTS ARE RS. 39,80,576/-. THE APPELLANT IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS. RAUNAQ EDUCATION FOUNDATION, 294 ITR 76 (DEL.), LAID DOWN THAT - 'THE WORDS 'DERIVED FROM' (OR SOME OTHER SIMILAR WORDS) DO NOT OCCUR IN SECTION 10(22) OF THE INCOME- TAX ACT, 1961, AND, THEREFORE, THE WORD 'INCOME' AS OCCURRING IN SECTION 10(22) CANNOT BE GIVEN A RESTRICTIVE MEANING AND MUST BE GIVEN ITS NATURAL MEANING OR THE MEANING ASCRIBED TO IT IN SECTION 2(24). HENCE, AN ASSESSEE WHO IS ENTITLED TO EXEMPTION UNDER SECTION 10(22) CAN CLAIM THE BENEFIT :- 5 -: THEREOF FOR THE PURPOSE OF INCOME DEEMED TO BE CHARGEABLE TO TAX UNDER SECTION 68.' 5(5)(II) SIMILARLY A REFERENCE MAY ALSO BE MADE TO THE DECISION OF HON'BLE ITAT, AGRA IN THE CASE OF SWAMI ATMDEV GOPALANAND SHIKSHA... VS DEPARTMENT OF INCOME TAX ON 21 SEPTEMBER, 2012 IN ITA NO. 74 & 218/AGRA/2011 WHEREIN IT WAS LAID DOWN THAT - THIS PROVISION CONTAINED IN SECTION 10(22) HAS BEEN RE- ENACTED IN SECTION 10(23C) IN DIFFERENT FORMS, I.E., '(IIIAB), (IIIAD) AND (VI)' OF SECTION 10(23C). THE LANGUAGE OF BOTH THE PROVISIONS ARE, THEREFORE, SIMILAR EXCEPT WHERE THE FUNDS HAVE BEEN FINANCED BY THE GOVERNMENT OR WHERE ANNUAL RECEIPTS DO NOT EXCEED THE PRESCRIBED LIMIT OR WHERE ANNUAL RECEIPTS EXCEEDED THE PRESCRIBED LIMIT, THE APPROVAL OF PRESCRIBED AUTHORITY IS REQUIRED. SINCE THE LANGUAGE OF SECTION 10(22) AND 10(23C) ARE SIMILAR AND ADDITIONS HAVE BEEN MADE U/S. 68 OF THE IT ACT, WOULD PROVE THAT THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED BY MAKING CERTAIN ADDITIONS. WHEN THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S. 10(23C), THE ASSESSEE CAN CLAIM THE BENEFIT THEREOF FOR THE PURPOSE OF INCOME DEEMED TO BE CHARGEABLE TO TAX U/S. 68 OF THE IT ACT. WE RELY UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. RAUNAQ EDUCATION FOUNDATION, 294 ITR 76 (DEL.), IN WHICH IT WAS HELD - 'THE WORDS 'DERIVED FROM' (OR SOME OTHER SIMILAR WORDS) DO NOT OCCUR IN SECTION 10(22) OF THE INCOME- TAX ACT, 1961, AND, THEREFORE, THE WORD 'INCOME' AS OCCURRING IN SECTION 10(22) CANNOT BE GIVEN A RESTRICTIVE MEANING AND MUST BE GIVEN ITS NATURAL MEANING OR THE MEANING ASCRIBED TO IT IN SECTION 2(24). HENCE, AN ASSESSEE WHO IS ENTITLED TO EXEMPTION UNDER SECTION 10(22) CAN CLAIM THE BENEFIT :- 6 -: THEREOF FOR THE PURPOSE OF INCOME DEEMED TO BE CHARGEABLE TO TAX UNDER SECTION 68.' CONSIDERING THE ABOVE DISCUSSION AND THE DECISION OF HON'BLE DELHI HIGH COURT, IT IS CLEAR THAT WHEN THE ASSESSEE IS ENTITLED FOR EXEMPTION OF INCOME U/S. 10(23C) OF THE IT ACT, THE ADDITION MADE U/S. 68 WOULD A/SO BE COVERED BY THE SAME EXEMPTION AND ACCORDINGLY, THE APPEALS OF THE REVENUE WOULD NOT BE MAINTAINABLE IN THE PRESENT FORM. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF ID. CIT(A) IN ALLOWING THE APPEAL OF THE ASSESSEE. IN VIEW OF THE ABOVE, THERE IS NO NEED TO DECIDE THE ADDITIONS ON MERITS BECAUSE IT WOULD BE ACADEMIC IN NATURE. 5(6) RELYING ON THE DECISIONS CITED SUPRA, THE ADDITION OF RS.7,65,000/- MADE BY THE AO UNDER SECTION 68 OF THE ACT IS DELETED GIVING EQUIVALENT RELIEF TO THE APPELLANT. THE GROUNDS OF APPEAL ARE ALLOWED. 4. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS AFFORDED SUFFICIENT OPPORTUNITY TO PRODUCE THE CONFIRMATION LETTERS AND THE REVENUE RECORD IN ORDER TO PROVE THE CREDITWORTHINESS OF THE CONTRIBUTORS, BUT THE ASSESSEE COULD NOT FILE THE SAME. THE ADDITIONAL EVIDENCE WAS FILED BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS ACCEPTED THE SAME WITHOUT CONFRONTING THE ADDITIONAL EVIDENCE TO THE ASSESSING OFFICER, THEREFORE, THERE IS A GROSS VIOLATION OF THE PROVISIONS OF RULE 46A OF THE INCOME-TAX RULES. THE LD. D.R. HAS FURTHER CONTENDED THAT IN THE INTEREST OF JUSTICE, THE MATTER MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR RE-ADJUDICATION OF THE ISSUE. :- 7 -: 5. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT BEFORE THE ASSESSING OFFICER ASSESSEE HAS FILED COPIES OF KHATONI OF SOME OF THE PERSONS AND SOUGHT TIME TO FILE COPY OF KHATONI AND CONFIRMATION LETTERS OF THE REMAINING PERSONS, BUT TIME WAS NOT GRANTED BY THE ASSESSING OFFICER. 6. DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HAS ASKED THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 23.1.2013 TO FILE THE DETAILS OF PAN AND OTHER RELEVANT DETAILS OF THE CASH CREDITORS. ONCE THE REQUISITE INFORMATION WERE FURNISHED BEFORE THE LD. CIT(A) ON HIS DEMAND, THERE IS NO VIOLATION OF THE PROVISIONS OF RULE 46A OF THE RULES IF THE LD. CIT(A) DOES NOT CONFRONT THAT EVIDENCE TO THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE CONTRIBUTED AMOUNT WAS BETWEEN RS.25,000/- TO RS.75,000/- AND THIS AMOUNT WOULD BE AVAILABLE WITH ALL THE PERSONS WHO WERE HAVING SUFFICIENT LAND HOLDINGS. THEREFORE, CREDITWORTHINESS OF THE CONTRIBUTORS CANNOT BE DOUBTED. 7. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED ON RECORD, WE FIND THAT UNDISPUTEDLY BEFORE THE ASSESSING OFFICER COMPLETE DETAILS WERE NOT FILED AND THE ASSESSING OFFICER HAS MADE ADDITION OF RS.7.65 LAKHS UNDER SECTION 68 OF THE ACT. BUT WHEN THE MATTER ARRIVED BEFORE THE LD. CIT(A), THE LD. CIT(A) HAS ASKED THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 23.1.2013 TO FILE DETAILS OF PAN AND OTHER RELEVANT DETAILS OF THE CASH CREDITORS. CONSEQUENT THERETO COMPLETE DETAILS INCLUDING THE COPY OF INCOME-TAX RETURN, COPY OF PAN, COPY OF KHASRA & KHATAONI, ID CARD, ETC. WERE FILED BEFORE THE LD. CIT(A) WHICH WERE PROPERLY EXAMINED BY HIM BEFORE ACCEPTING THE GENUINENESS OF THE CONTRIBUTION MADE BY THE 14 PERSONS. 8. SO FAR AS VIOLATION OF PROVISIONS OF RULE 46A IS CONCERNED, WE FIND THAT AS PER RULE 46A WHERE ASSESSEE FILES SOME ADDITIONAL EVIDENCE, THE SAME :- 8 -: CANNOT BE ADMITTED WITHOUT CONFRONTING OR AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSING OFFICER. BUT WHEREVER AS PER RULE 46A SUB-RULE (4) THE FIRST APPELLATE AUTHORITY CAN ASK THE ASSESSEE TO PRODUCE ANY DOCUMENT WHICH HE FEELS FIT AND PROPER, THE APPELLATE AUTHORITY IS NOT REQUIRED TO CONFRONT THE SAME TO THE ASSESSING OFFICER. FOR THE SAKE OF REFERENCE, WE EXTRACT RULE 46A AS UNDER:- 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE (DEPUTY COMMISSIONER (APPEALS)) OR AS THE CASE MAY BE, THE COMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE [ASSESSING OFFICER] EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY:- (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO ADMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED ; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED TO PRODUCE BY THE [ASSESSING OFFICER]; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE [ASSESSING OFFICER]; OR (D) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (3) THE [DY. COMMISSIONER (APPEALS)] [OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [ASSESSING OFFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY :- 9 -: (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITNESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271. 9. UNDISPUTEDLY, THE LD. CIT(A) IS ALSO ARMED WITH CO-TERMINUS POWERS OF THAT OF THE ASSESSING OFFICER AND HE IS WELL WITHIN HIS POWER TO DIRECT THE ASSESSEE TO FILE ANY EVIDENCE WHICH HE DEEMS FIT AND PROPER AND TO EXAMINE THE SAME. WHILE EXAMINING THE SAME, THE LD. CIT(A) IS NOT REQUIRED TO CALL COMMENTS OF THE ASSESSING OFFICER IN THAT REGARD. THEREFORE, IN THE INSTANT CASE, WHERE THE EVIDENCE WAS FILED BY THE ASSESSEE PURSUANT TO THE DIRECTION OF THE LD. CIT(A), THE LD. CIT(A) WAS NOT UNDER ANY OBLIGATION TO CONFRONT THE SAME TO THE ASSESSING OFFICER. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN ADMITTING THE EVIDENCE FILED ON HIS DIRECTION. WE HAVE ALSO CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) AND WE FIND THAT THE CONTRIBUTION MADE BY THE VARIOUS PERSONS WERE FROM RS.25,000/- TO RS.90,000/- FOR WHICH CONFIRMATIONS, COPY OF PAN CARD, VOTER ID CARD, ETC WERE FILED. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ADJUDICATED THE ISSUE. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS CONFIRMED IN THIS REGARD. :- 10 -: 10. APROPOS GROUND NO.2, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS.53,91,660/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF CONSTRUCTION OF BUILDING AS PER VALUATION REPORT OF THE DVO AND AS DISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. WHILE MAKING THE ADDITION, THE ASSESSING OFFICER HAS FOLLOWED THE DVOS REPORT IN WHICH DVO HAS ESTIMATED THE TOTAL COST OF INVESTMENT AT RS.204.58 LAKHS FOR THE CONSTRUCTION PERIOD APRIL, 2008 TO 14.10.2011 (THE DATE OF INSPECTION). AGAINST THE VALUATION MADE BY THE DVO, ASSESSEE HAS FILED OBJECTIONS BEFORE THE ASSESSING OFFICER STATING THEREIN THAT WHILE ESTIMATING THE COST OF CONSTRUCTION, THE DVO HAS NOT AFFORDED PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE METHOD OF VALUATION OF COST OF CONSTRUCTION WAS ALSO OBJECTED BY THE ASSESSEE ON DIFFERENT POINTS I.E. (1) THE DVO HAS ADOPTED CPWD RATES INSTEAD OF UPPWD RATES (2) VALUATION OF PLINTH AREA RATE BASIS (3) DESCRIPTION OF BUILDING (4) COST INDEX (5) QUALITY OF CONSTRUCTION, ETC. THE OBJECTIONS WAS SENT TO THE VALUATION CELL FOR THEIR COMMENTS AND AFTER OBTAINING COMMENTS OF THE DVO, THE ASSESSING OFFICER HAS OUTRIGHTLY REJECTED THE OBJECTIONS OF THE ASSESSEE AND ACCEPTED THE VALUATION MADE BY THE ASSESSING OFFICER MADE ADDITION OF RS.53,91,660/- BEING THE DIFFERENCE OF COST OF INVESTMENT ESTIMATED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR AT RS.62,47,575/- (-) ACTUAL INVESTMENT SHOWN BY THE ASSESSEE AT RS.8,56,015/-. 11. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT WHILE ESTIMATING THE COST OF CONSTRUCTION, THE DVO HAS NOT TAKEN INTO ACCOUNT THE QUALITY OF CONSTRUCTION AND THE LOCALITY IN WHICH CONSTRUCTION WAS MADE. THE WRITTEN SUBMISSIONS WERE FILED BEFORE THE LD. CIT(A) WHICH WAS EXTRACTED IN HIS ORDER IN PARA 6(3). FOR THE SAKE OF REFERENCE, WE EXTRACT THE SAME AS UNDER:- DUE AND SUFFICIENT OPPORTUNITY WAS NOT AFFORDED TO THE APPELLANT SOCIETY TO HAVE ITS SAY OR MAKE COMMENTS UPON THE SAME AND EVEN :- 11 -: THE COMMENTS MADE BY THE OSSESSEE WERE NOT TAKEN INTO CONSIDERATION BY THE DVO AND AO ON FLIMSY GROUNDS. IN FRAMING THE PRESENT ORDER THE LD. A.O. WAS NOT AT ALL JUSTIFIED IN BLINDLY ADOPTING THE VALUATION MADE BY THE DVO AS THE APPELLANT HAD SUBMITTED THE OBJECTIONS TO THE SAID REPORT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF AND WHICH SUCH OBJECTIONS WERE SUMMARILY DISMISSED WITHOUT CONFRONTING THE APPELLANT OR GIVING AN OPPORTUNITY TO REBUT. THE DIFFERENCE IN RESPECT OF CPWD AND UPPWD RATES IS REQUIRED TO ADDRESSED. IN THIS RESPECT IT IS MOST HUMBLY SUBMITTED THAT WHILE MAKING THE REPORT/COMMENTS THE APP. VALUER HAS ALSO VALUED THE SAME AS PER CPWD RATES WHICH IS NOT CORRECT. AS HELD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR REPORTED IN 182 ITR 436 THE VALUATION SHOULD BE DONE AS PER THE PWD RATES AND NOT CPWD RATES. ONCE THIS DEDUCTION IS ACCOUNTED FOR THE VALUATION SO GIVEN BY THE APPROVED VALUER AT RS.1,48,66,741/- BEFORE ALLOWING DEDUCTION FOR SELF SUPERVISION SHALL BE REDUCED BY FURTHER RS.37,16,685/-. MOREOVER THE DEDUCTION ALLOWED FOR SELF SUPERVISION IS ALSO ON THE LOWER SIDE ESPECIALLY CONSIDERING THE FACT THAT THE SCHOOL IS LOCATED IN A VILLAGE WHERE THE COST OF RAW MATERIAL IS VERY LESS. WHILE COMPUTING THE COST DISCLOSED BY THE ASSESSEE THE ID. DVO AND THE LD. AO HAVE NOT TAKEN INTO CONSIDERATION THE COST SO INCURRED IN A.Y.2011-12 OF RS.35,74,303.30 WHICH HAS DULY BEEN DISCLOSED BY THE ASSESSEE IN ITS BALANCE SHEET FILED FOR THE RELEVANT YEAR AND WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER AT THE ASSESSMENT STAGE ITSELF. MOREOVER THE LD. VO IN HIS REPORT HAS STATED THAT THE DEMAND FOR AN INDEPENDENT VALUER IS CHILDISH WHICH SHOWS THE IMMATURE ATTITUDE OF THE LD. VO. WHILE PREPARING THE REPORT THE DVO HAS VALUED THE ENTIRE STRUCTURE AS RCC WHEREAS THE ROOFS OF GROUND FLOOR AND FIRST FLOOR OF THE THREE STORIED BUILDING ARE RB (REINFORCED BRICK) AND NOT RCC. THIS FACT IS QUIET EVIDENT EVEN TODAY AND VISIBLE TO THE NAKED EYE AND CAN BE :- 12 -: DISTINGUISHED EVEN BY A CHILD. AS PER QUERY NO.2 YOUR HONOUR HAS REQUIRED THE PROOF THAT STRUCTURE IS RB AND NOT RCC. IN THIS RESPECT THE COPY OF THE APPROVED VALUERS REPORT IS BEING ATTACHED HEREWITH AND FURTHER THE PHOTOGRAPHS OF THE ROOF AND THE WALLS IS BEING SUBMITTED HEREWITH WHICH IN ITSELF CLEARLY SHOWS THAT THE STRUCTURE IS NOT RCC BUT RB. WHILE MAKING THE REPORT THE ID. DVO HAS TAKEN THE COST OF ONLY TWO YEARS I.E. A.Y.2009-10 OF RS.8,56,015/- AND IN A.Y.2010-11 RS.19,47,037/- TOTALING RS.28,03,052/-. IN THESE TWO YEARS ALSO THE COST SO DISCLOSED BY THE ASSESSEE SOCIETY IS RS.28,67,052/- DUE TO NON CONSIDERATION OF RS.64,000/- INCURRED ON WATER PUMP ETC. THIS FACT WAS ALSO BROUGHT TO THE KNOWLEDGE OF THE LD. AO DURING ASSESSMENT PROCEEDINGS AND HAS BEEN DISCUSSED BY THE LD. AO IN THE ASSESSMENT ORDER AT PAGE 13 PARA 5.6. DESPITE THIS THE LD. AO IN MECHANICAL MANNER PROCEEDED WITH THE ASSESSMENT WITHOUT GIVING ANY BENEFIT OF THIS AMOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS BROUGHT TO THE KNOWLEDGE OF THE LD. AO THAT THREE CLASS ROOMS WERE SPONSORED BY INDIVIDUALS IN MEMORY OF THEIR RELATIVES. . THE CONFIRMATION LETTERS OF THESE INDIVIDUALS IS ALSO ATTACHED HEREWITH. THE INTENTION LETTER TO CONSTRUCT THESE CLASSES, THEIR ID PROOF, KHASRA AND KHATAUNI TO PROVE THEIR SOURCE OF INCOME HAVE ALL BEEN ATTACHED TO PROVE THE SAME. MOREOVER THE STONES WHEREIN THE NAMES OF THE DONORS AS WELL AS OF THE INAUGURATION CEREMONY ARE BEING ATTACHED HEREWITH. MOREOVER AS PER THE DECISION OF THE AHMEDABAD TRIBUNAL IN THE CASE OF RAJHANS BUILDERS VS. DEPUTY CIT REPORTED IN 41 SOT 331 THE DIFFERENCE UPTO 20% SHOULD BE IGNORED AS THE VALUATION IS ONLY AN ESTIMATION AND THUS CANNOT BE SUBSTITUTED WITH THE ACTUAL FIGURES. 12. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT FEW CLASSROOMS WERE SPONSORED BY THE INDIVIDUALS IN THE MEMORY OF THEIR RELATIVES. CONFIRMATION LETTERS, ID PROOF AND INTENTION :- 13 -: LETTER FOR CONSTRUCTION OF THESE CLASSROOMS WERE ALSO FILED. THE LD. CIT(A) RE-EXAMINED THE ENTIRE ISSUE IN THE LIGHT OF THE OBJECTIONS AND EVIDENCE FILED BEFORE HIM AND BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 6(4)(I) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO CALLED FOR AND EXAMINED THE RECORDS OF ASSESSMENT PROCEEDINGS. THE AO REFERRED THE MATTER REGARDING THE COST OF CONSTRUCTION OF BUILDING OF THE APPELLANT-SOCIETY TO THE DVO UNDER SECTION 142A OF THE ACT. THE DVO VIDE ITS REPORT DATED 31.10.2011 VALUED THE BUILDING AS UNDER- FINANCIAL YEAR DECLARED COST (IN RS.) ESTIMATED COST (IN RS.) 2008-09 8,56,015/- 62,47,575/- 2009-10 19,47,037/- 1,42,10,562/- TOTAL 28,03,052/- 2,04,58,237/- 6(4)(II) THE DVO ESTIMATED THE COST OF CONSTRUCTION OF THE BUILDING AT RS. 2,0438,237/- AS AGAINST DECLARED COST AS PER BOOKS OF ACCOUNTS AT RS. 28,03,052/-. THE APPELLANT RAISED CERTAIN SIGNIFICANT OBJECTIONS AT THE STAGE OF THE ASSESSMENT PROCEEDINGS, SOME OF THE OBJECTIONS RAISED GO INTO THE ROOT OF THE ESTIMATION MADE BY THE DVO. THE AO RELIED SOLELY ON THE COMMENTS OF THE DVO ON THE OBJECTIONS AND SUMMARILY REJECTED THE SAME WITHOUT APPLYING HIS OWN MIND TO THE VALIDITY OF THE OBJECTIONS RAISED. I WILL THEREFORE EXAMINE THE OBJECTIONS AND THEIR VALIDITY HEREIN UNDER. FOR THE SAKE OF CONVENIENCE THE ANALYSIS WILL BE MADE BY ME ON THE COST OF CONSTRUCTION AS A WHOLE RATHER THAN ON YEARLY BASIS. 6(5)(I) THE FIRST OBJECTION THAT NEEDS TO BE CONSIDERED IS THE ACTUAL COST OF CONSTRUCTION AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE :- 14 -: ASSESSEE CLAIMED BEFORE THE AO AS MENTIONED AT PARAGRAPH 5.6 OF THE ASSESSMENT ORDER THAT COST OF PUMP AS DISCLOSED IN BOOKS OF ACCOUNTS OF RS. 64,000/- SHOULD BE CONSIDERED AS PART OF THE COST OF CONSTRUCTION. THE AO REJECTED THE CLAIM OF THE ASSESSEE OBSERVING AT PARAGRAPH 5.6 OF THE ASSESSMENT ORDER THAT SINCE THE VALUATION HAS BEEN COMPLETED BY THE DVO NO MODIFICATION IN THE INVESTMENT MADE BY THE ASSESSEE CAN BE ACCEPTED AT THIS STAGE. FURTHER, THE ASSESSEE ALSO FILED A LETTER DATED 19.12.2011 IN WHICH THE COST OF CONSTRUCTION RECORDED IN BOOKS OF ACCOUNTS RELEVANT TO SUBSEQUENT ASSESSMENT YEARS WAS CLAIMED. THE AO SIMPLY IGNORED THE LETTER DATED 19.12.2011 OF THE ASSESSEE WITHOUT ASSIGNING ANY REASONS FOR NOT ACCEPTING THE COST OF CONSTRUCTION REPORTED IN BOOKS OF ACCOUNTS FOR SUBSEQUENT YEARS. THE DETAILS ARE AS UNDER - COST OF CONSTRUCTION AS MENTIONED BY THE ASSESSING OFFICER : RS. 28,03,052/- COST OF PUMP : RS. 64,000/- INVESTMENT RECORDED IN BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 2010-2011 RELEVANT TO ASSESSMENT YEAR 2011-2012 : RS. 36,74,303/- INVESTMENT RECORDED IN BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 2011-2012 RELEVANT TO ASSESSMENT YEAR 2012-2013 UPTO 30.09.2011 : RS. 13,97,010/- INVESTMENT RECORDED IN BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 2011-2012 RELEVANT TO ASSESSMENT YEAR 2012-2013 AFTER 30.09.2011 : RS. 1,42.380/- RS. 79,80.745/- 6(5)(II) THE APPELLANT HAS FILED COPIES OF BALANCE SHEET RELEVANT TO SUBSEQUENT ASSESSMENT YEARS TO SHOW THAT THE TOTAL COST OF CONSTRUCTION RECORDED IN BOOKS OF ACCOUNTS IS RS. 79,80,745/-. I FIND THAT THE ASSESSEE HAD MADE BOTH THE CLAIMS AS REGARDS THE COST OF PUMP AND COST INCURRED IN SUBSEQUENT YEARS IN ITS LETTER DATED 19.12.2011 FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS SIMPLY IGNORED THE CLAIM WITHOUT ASSIGNING ANY VALID REASONS. I FIND THAT ONCE THE INVESTMENT IS RECORDED IN THE BOOKS OF :- 15 -: ACCOUNTS, DUE WEIGHTAGE NEEDS TO BE GIVEN THERETO. IN VIEW THEREOF THE COST OF CONSTRUCTION OF THE BUILDING AS RECORDED IN THE BOOKS OF ACCOUNTS HAS TO BE TAKEN AT RS. 79,80,745/- AS AGAINST RS. 28,03,0527- TAKEN BY THE AO. 6(6)(I) THE NEXT ISSUE IN CONSIDERATION IS THE CLAIM OF THE APPELLANT THAT A FEW ROOMS WERE CONSTRUCTED BY THE DONORS OUT OF THEIR OWN FUNDS. THE APPELLANT CLAIMS THAT THREE CLASS ROOMS WERE SPONSORED BY INDIVIDUALS IN MEMORY OF THEIR RELATIVES. THE DETAILS ARE AS UNDER NAME OF SPONSOR AMOUNT 1. SHRI. LAXMI NARAIN YADAV RS.2,44,000/- 2. SHRI. SHIVKUMAR YADAV RS.2,40,000/- 3. SHRI. SURESH KUMAR YADAV RS.2,50,000/- 6(6)(II) AS AN EVIDENCE THE ASSESSEE ALSO FILED LETTERS OF THE ABOVE THREE SPONSORS BEFORE THE AO. THE AO AS MENTIONED AT PARAGRAPH 5.6 OF THE ASSESSMENT ORDER REFUSED TO CONSIDER THE INVESTMENT OF RS. 7,34,000/- AS ABOVE OBSERVING THAT THESE LETTERS FILED AT THIS STAGE WITHOUT ANY MEANING IN THE ASSESSMENT PROCEEDINGS IS HEREBY REJECTED. VIDE ORDER SHEET ENTRY DATED 23.01.2013, THE APPELLANT WAS REQUIRED TO FILE EVIDENCES REGARDING THE SPONSORSHIP OF ROOMS. THE APPELLANT HAS FILED EVIDENCE IN THE FORM OF PHOTOGRAPHS SHOWING THAT THAT ALL THESE CLASS ROOMS BEAR THE INAUGURATION STONE DEPICTING THE NAMES OF THE PERSONS WHO SPONSORED THE CONSTRUCTION. THE CONFIRMATION LETTERS OF THESE INDIVIDUALS HAVE ALSO BEEN FILED. THE APPELLANT HAS ALSO FILED THE INTENTION LETTER TO CONSTRUCT THESE CLASSES, THEIR ID PROOF AND KHASRA AND KHATAUNI TO PROVE THEIR SOURCE OF INCOME. 6(6)(III) THE EVIDENCES FILED SHOW THAT AN AMOUNT OF RS. 7,34,000/- WAS SPENT IN CONSTRUCTION OF BUILDING WHICH WAS DONATED BY THE THREE INDIVIDUALS OUT OF THEIR OWN SOURCES OF INCOME. THIS COST OF CONSTRUCTION IS EVIDENTLY NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS THE AMOUNT WAS NOT SPENT BY IT THOUGH THE CONSTRUCTION GOT MADE BY THE THREE PERSONS AFORESAID IS PART OF THE BUILDING VALUED :- 16 -: BY THE DVO. IN VIEW OF ABOVE I FIND THAT THE COST OF CONSTRUCTION OF RS. 7,34,000/- IS TO BE REDUCED AS THE AMOUNT HAS BEEN SPENT BY THE SPONSORS. 6(7)(I) THE NEXT CLAIM WHICH NEEDS TO BE SPECIFICALLY EXAMINED GOES INTO THE VERY ROOT OF THE ESTIMATION MADE BY THE DVO. SOME OF THE OBJECTIONS RAISED BY THE ASSESSEE ON THE VALUATION REPORT AS REPRODUCED BY THE AO IN THE ASSESSMENT ORDER ARE AS UNDER - IN THE VALUATION REPORT THE DVO HAS VALUED THE ENTIRE STRUCTURE AS RCC WHEREAS THE ROOFS OF GROUND FLOOR AND FIRST FLOOR OF THE THREE STORIED BUILDING ARE RB (REINFORCED BRICK) AND NOT RCC AS CLAIMED BY THE ASSESSEE. IN THE VALUATION REPORT THE DVO HAS ADOPTED COST INDEX OF 326.227 OVER 01.01.1992 RATES WHEREAS THE RATES OF ALL MATERIALS DO NOT VARY IN THE SAME PROPORTION AND MARBLE STONE FLOORING, CERAMIC TILE WORK ETC. SHOULD BE WORKED OUT ON THE BASIS OF MARKET RATES PREVAILING AT THE TIME OF CONSTRUCTION AND NOT BY INDEXING OVER THE SCHEDULE OF RATES. IN THE VALUATION REPORT OF THE DVO COST OF ELECTRIFICATION OF THE BUILDING AS PER CPWD, INCLUDES USE OF M.S. CONDUITS, BUT IN THIS BUILDING PVC CONDUIT HAS BEEN USED IN PLACE OF M.S. CONDUIT, AS SUCH THERE HAS BEEN LESSER CONSTRUCTION COST ON THIS ACCOUNT. OTHER OBJECTIONS RAISED INCLUDE OBJECTIONS ON PLINTH AREA RATES, ROOF TREATMENT COSTS, COST OF ALUMINUM WORK, COST OF RCC PROJECTIONS, COST OF COLLAPSIBLE SHUTTERS, CHEAP LABOUR, ARCHITECTURAL FEATURES ETC. 6(7)(II) IN VIEW OF THE ABOVE OBJECTIONS THE APPELLANT CLAIMED THAT A REPORT OF REGISTERED VALUER SHOULD ALSO BE CONSIDERED. HOWEVER, THE AO WHILE RELYING ON THE COMMENTS OF THE DVO ON ABOVE OBJECTIONS DID NOT APPLY HIS OWN MIND. THE DVO ON THE OTHER HAND MENTIONS IN HIS COMMENTS THAT 'THE VALUATION REPORT IS METHODOLOGICAL, PRAGMATIC AND JUDICIOUS AND IS CENT-PER CENT RELIABLE. THE REPORT IS NOT BIASED :- 17 -: AND FOLLOWS SETTLED NORMS. THE DEMAND OF INDEPENDENT VALUER IS CHILDISH. 6(7){II) VIDE ORDER SHEET ENTRY DATED 23.01.2013 THE APPELLANT WAS REQUIRED TO FILE EVIDENCES TO SHOW THAT THE ROOFS OF GROUND FLOOR AND FIRST FLOOR OF THE THREE STORIED BUILDING WERE RB (REINFORCED BRICK) AND NOT RCC AS VALUED BY THE DVO. THE APPELLANT HAS FILED PHOTOGRAPHS OF THE ROOF AND THE WALLS WHICH CLEARLY SHOW THAT THE STRUCTURE IS NOT RCC BUT RB. VIDE ORDER SHEET ENTRY DATED 23.01.2013 THE APPELLANT WAS ALSO REQUIRED TO FILE VALUATION REPORT OF THE REGISTERED VALUER, WHICH WAS SOUGHT TO BE FILED BEFORE THE AO AND WHICH WAS REJECTED AS CHILDISH. THE APPELLANT HAS FILED A COPY OF THE VALUATION REPORT OF THE REGISTERED VALUER SHRI K. CHANDRA WHICH AFTER CONSIDERING THE VARIOUS FACTUAL DISCREPANCIES IN VALUATION REPORT OF THE DVO ESTIMATES THE COST OF CONSTRUCTION AT RS. 1,27,85,000/- AS AGAINST COST ESTIMATED BY THE DVO AT RS. 2,04,58,237/-. THE DIFFERENCE IN THE TWO REPORTS IS NOT THE CONTROVERSY REGARDING CPWD RATES AND PWD RATES AS BOTH THE REPORTS ARE BASED ON CPWD RATES BUT THE REPORT OF THE REGISTERED VALUER TAKES INTO ACCOUNTS THE VARIOUS FACTUAL DISCREPANCIES LIKE RBC AND RCC ETC FOR WHICH OBJECTIONS WERE RAISED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 6(7)(III) NOW THE ISSUE IS WHETHER THE REPORT OF THE REGISTERED VALUER CAN BE SUBSTITUTED FOR THE VALUATION REPORT SUBMITTED BY THE DVO WHICH I FIND IS IN ANY CASE FULL OF FACTUAL DISCREPANCIES ONE SUCH BEING THE VALUATION HAVING BEEN MADE FOR RCC WHEN PHOTOGRAPHS FILED SHOW THAT THE ROOMS ARE WITHOUT PLASTER AND ARE RBC ROOFS. I AM OF THE CONSIDERED VIEW THAT THE REPORT OF THE REGISTERED VALUER DOES TAKE INTO ACCOUNT THE VARIOUS FACTORS SUCH AS CHEAPER LABOUR IN RURAL AREAS OF BARABANKI WHERE THE BUILDING IS LOCATED, THE DIFFERENCES IN VALUATION OF PORCH CANOPY ROOF TREATMENT, ALUMINUM WORK RCC PROJECTIONS AND THE MAIN OBJECTION WITH REGARD TO RBC ROOF AS AGAINST VALUATION BEING DONE FOR RCC ROOF. THE POINT THAT ALSO NEEDS TO BE CONSIDERED IS THAT BOTH REPORTS ADOPT CPWD RATES FOR VALUATION. :- 18 -: 6(7)(IV) A REFERENCE MAY BE MADE TO THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DINA NATH V. CED [1970] 77 ITR 193 THAT THE VALUATION REPORT OF THE DVO WAS NOT BINDING. ON REFERRING TO THE DECISION I FIND IN THAT CASE THE VALUATION HAD BEEN MADE BY A REGISTERED VALUER ON BEHALF OF THE ASSESSEE AND IT WAS HELD THAT THE REPORT WAS BOTH INACCURATE AND UNRELIABLE. IN THESE CIRCUMSTANCES, IT WAS HELD THAT IT COULD BE REJECTED. SIMILARLY, APPLYING THE RATIO OF THE CASE TO THE FACTS OF THE PRESENT CASE, I FIND THAT ME- DVO HAS COMMITTED CERTAIN ERRORS IN VALUATION AND HAS NOT BEEN ABLE TO DEAL WITH THE OBJECTIONS ON MERIT. ON THE CONTRARY THE DVO HAS MERELY REJECTED THE OBJECTIONS THE ASSESSEE BY MAKING SWEEPING CLAIMS. IN VIEW THEREOF I AM OF THE CONSIDERED VIEW THAT REPORT OF REGISTERED VALUER BE ACCEPTED AND THE COST OF CONSTRUCTION IS TO BE TAKEN AT RS. 1,66,21,500/-, WHICH IS THE AVERAGE OF THE COST OF CONSTRUCTION OF RS. 2,04,58,237/- AS PER DVO AND COST ESTIMATED BY REGISTERED VALUER AT RS.1,27,85,000/-. RELIANCE IS PLACED ON THE DECISION OF HON'BLE ITAT, AHMADABAD IN THE CASE OF BHAGWATI CATERERS PVT. LTD. VS DEPARTMENT OF INCOME TAX ON 19 MARCH, 2010 IN ITA NO. 1446 TO 1448(AHD)/2007. 6(8)THE REMAINING ISSUES RAISED BY THE APPELLANT RELATE TO APPLICATION OF PWD RATES AS AGAINST CPWD RATES TAKEN BY THE DVO, THE CLAIM OF MINOR DIFFERENCES IN VALUATION HAVE TO BE IGNORED. I FIND THAT THE CONTENTION OF THE APPELLANT THAT THE DVO HAS NOT ALLOWED DEDUCTION FOR BUILDER EFFORT AND ARCHITECTURAL FEATURES IN THE TOTAL VALUATION DESERVES CONSIDERATION AS AN ALLOWANCE OF 10% FOR SELF SUPERVISION IS GENERALLY ALLOWED. FURTHER, THE RATES ADOPTED BY THE DVO ARE CPWD RATES WHEREAS AS PER DECISIONS IN THE CASE OF CIT VS RAJ KUMAR, (1990)182 ITR 436 (ALLAHABAD); CIT VS SMT. PREM KUMARI MURDIA, (2008)296 ITR 508(RAJ.) CIT VS DINESH TALWAR, (2004)265 ITR 344(RAJ.), THE RATES TO BE CONSIDERED ARE UPPWD RATES. THE DIFFERENCE IN THE CPWD RATES AND UPPWD RATES IS OF THE ORDER OF 25% AS DISCUSSED BY HON'BLE I TAT, LUCKNOW BENCH IN THE CASE OF SOCIETY FOR THE ADVANCEMENT OF ENVIRONMENT SCIENCES VS ADDL. CIT, RANGE-11, LUCKNOW IN ITA NO. 537/LUC/09 DATED 23.02.2010. FURTHER SINCE THE COST DETERMINED BY :- 19 -: THE DVO IS ESTIMATION, A MINOR DIFFERENCE OF 10% TO 15% IS USUALLY IGNORED AS LAID DOWN IN THE CASE OF ITO VS. SMT. PRAMILA AGARWAL REPORTED IN (2004) 88 TTJ (LUCK) 91 AND CIT VS. ABESSON HOTELS (P) LTD. REPORTED IN (2004)191 CTR (MP) 263. 6(9) THE COST OF CONSTRUCTION RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS RS. 79,80,745/- AND IF THE COST OF CONSTRUCTION OF SPONSORED ROOMS IS TAKEN INTO CONSIDERATION, THE COST RECORDED IS RS. 87,14,745/-. I HAVE DISCUSSED ABOVE THAT THE VALUATION REPORT OF THE DVO HAS CERTAIN DISCREPANCIES AND THE OBJECTIONS RAISED BY THE APPELLANT THEREON HAVE NOT BEEN ADDRESSED. WEIGHTAGE HAS ALSO TO BE ALLOWED FOR THE DIFFERENCE IN CPWD RATES AND PWD RATES AND DEDUCTIONS HAVE ALSO TO BE ALLOWED FOR SELF SUPERVISIONS AND MINOR DIFFERENCES IN VALUATIONS WHICH ARE NECESSARILY ESTIMATES. THE DVO HAS VALUED THE COST OF CONSTRUCTION OF THE BUILDING AT RS. 2,04,58,237/- WHILE THE REGISTERED VALUER AFTER TAKING INTO ACCOUNT THE SPECIFICATIONS AND STRUCTURAL OBJECTIONS ESTIMATED THE COST OF CONSTRUCTION AT RS. 1,27,85,000/-. THE AVERAGE VALUATION AS DISCUSSED BY ME IN PARAGRAPHS ABOVE IS RS, 1,66,21,500/-. NOW IF THE ALLOWANCE OF 45% IS ALLOWED FOR VARIOUS FACTORS AS ABOVE, THE COST OF CONSTRUCTION WILL BE RS. 83,10,750/-. AS PER THE REPORT OF THE DVO, THE TOTAL ESTIMATED COST OF RS. 2,04,58,237/- HAS BEEN ALLOCATED TO THE YEAR UNDER CONSIDERATION IN THE SAME RATIO AS THE COST OF CONSTRUCTION HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS. THE COST OF CONSTRUCTION RECORDED IN THE BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION IS RS. S.56,015/- AS COMPARED TO TOTAL COST OF CONSTRUCTION RECORDED IN BOOKS OF ACCOUNTS AT RS. T9 80,745/- AS DISCUSSED IN PARAGRAPHS SUPRA. THE RATIO OF COST INCURRED TO COST FOR THE YEAR UNDER CONSIDERATION IS 10.73%. IN THE SAME RATIO, THE AVERAGE COST OF INVESTMENT AFTER ALLOWING DEDUCTIONS AS DISCUSSED ABOVE OF RS. 83,10,750/- AS ALLOCATED TO THE YEAR UNDER CONSIDERATION SHALL WORK OUT TO RS. 8,91,411/-. THE DIFFERENCE IN VALUATION AS COMPARED TO COST RECORDED IN BOOKS OF ACCOUNTS WILL THEREFORE WORK OUT TO RS. 35,396/-, WHICH IS NEGLIGIBLE IN COMPARISON TO THE TOTAL ESTIMATION AND IS LIABLE TO BE IGNORED. IN VIEW OF THE DISCUSSIONS ABOVE THE ADDITION OF RS. :- 20 -: 53,91,660/- MADE BY THE AO RELYING SOLELY ON THE REPORT OF THE DVO IS DELETED GIVING RELIEF TO THE APPELLANT. 13. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ORDER OF THE ASSESSING OFFICER WITH THE SUBMISSION THAT THE ASSESSING OFFICER HAS SIMPLY RECORDED THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE HIM AND THE COMMENTS MADE BY THE DVO AND THEREAFTER IN ONE PARA HE MADE ADDITION HAVING RELIED UPON THE DVOS REPORT. WHEN THE OBJECTION WAS RAISED BY THE ASSESSEE TO THE COMMENTS OF THE DVO & THE DVOS REPORT, THE ASSESSING OFFICER SHOULD HAVE DEALT WITH THE OBJECTIONS RAISED BY THE ASSESSEE BUT HE DID NOT MAKE ANY EFFORT TO DO SO. HE HAS SIMPLY RELIED UPON THE DVOS REPORT AND MADE THE ADDITION. WHEREAS THE LD. CIT(A) HAS ADJUDICATED THE OBJECTIONS IN THE LIGHT OF DVOS REPORT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THIS SCHOOL BUILDING WAS CONSTRUCTED IN INTERIOR AREA AND THE QUALITY OF CONSTRUCTION WAS NOT AS WAS SUGGESTED BY THE DVO. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO VARIOUS PHOTOGRAPHS OF THE CLASSROOMS AND BUILDING IN ORDER TO SHOW THAT EVEN THE CLASSROOMS WERE NOT PLASTERED AND ONLY BRICK FLOORING WAS THERE. FROM THESE PHOTOGRAPHS, THE QUALITY OF CONSTRUCTION CAN BE ASCERTAINED. THE PHOTOGRAPHS ARE AVAILABLE AT PAGES 29 TO 39 OF THE COMPILATION OF THE ASSESSEE. HE HAS FILED PHOTOGRAPHS, CONFIRMATIONS OF THE DONORS WHO CONSTRUCTED THE ROOMS. NAME PLATES OF THE DONORS WERE ALSO FIXED IN FRONT OF THE RESPECTIVE ROOM. THE LD. CIT(A) HAS TAKEN INTO ACCOUNT ALL THESE ASPECTS WHILE ADJUDICATING THE ISSUE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THE DVO HAS ADOPTED CPWD RATES AGAINST UPPWD RATES PREVAILING IN THE STATE. BESIDES, HE HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE LD. CIT(A). :- 21 -: 14. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER DID NOT ADJUDICATE THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE DVOS REPORT. HE HAS SIMPLY REPRODUCED THE OBJECTIONS RAISED BY THE ASSESSEE AND COMMENTS MADE BY THE DVO. IN ONE SMALL PARA, HE HAS MADE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE BUILDING HAVING RELIED UPON THE REPORT OF THE DVO. FOR THE SAKE OF REFERENCE, WE EXTRACT THE OBSERVATIONS OF THE ASSESSING OFFICER RECORDED IN PARA 5.7 OF HIS ORDER:- 5.7 IN VIEW OF THE REPLY OF THE VO IT IS CLEAR THAT INVESTMENT OF RS.8,56,015/- SHOWN BY THE ASSESSE IS INCORRECT AND HE ACTUALLY MADE INVESTMENT OF RS.62,47,675/-. THEREFORE DIFFERENCE OF RS.53,91,660/- (62,47,675/- - 8,56,015/-) IS MADE BY ASSESSEE FROM OTHER THAN CHARITABLE ACTIVITIES AND IS TREATED AS UNEXPLAINED INVESTMENT U/S 69B OF I.T. ACT,1961 AND ADDED IN THE INCOME OF THE ASSESSEE. TAX SHALL BE CHARGED AT MAXIMUM MARGINAL RATE UNDER THE PROVISION OF SECTION 167B OF THE IT. ACT, 1961. ON THE BASIS OF THESE FINDINGS, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT. ACT, 1961 IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. ADDITION : RS. 53,91,660/- 15. WHEREAS THE LD. CIT(A) HAS EXAMINED EACH AND EVERY OBJECTIONS RAISED BY THE ASSESSEE AND ADJUDICATED THE SAME IN THE LIGHT OF EVIDENCE PLACED BEFORE HIM. WE HAVE ALSO CAREFULLY EXAMINED PHOTOGRAPHS AND THE EVIDENCE FILED BEFORE US WITH REGARD TO THE QUALITY OF CONSTRUCTIONS OF THE BUILDING AND ROOMS CONSTRUCTED BY CERTAIN DONORS AND IT IS QUITE EVIDENT FROM THE PHOTOGRAPHS THAT THE QUALITY OF CONSTRUCTION WAS NOT AS SUGGESTED BY THE DVO IN HIS REPORT WHICH IS AVAILABLE ON RECORD. MOST OF THE WALLS ARE NOT EVEN PLASTERED AND THE FLOORS ARE ALSO MADE OF BRICKS. WE HAVE ALSO :- 22 -: CAREFULLY EXAMINED THE FINDINGS OF THE LD. CIT(A) IN THIS REGARD AND WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS EXAMINED EACH AND EVERY ASPECT AND QUALITY OF CONSTRUCTION AND AFTER GIVING CREDIT OF SELF-SUPERVISION CHARGES, ETC., THE LD. CIT(A) DID NOT FIND MUCH DIFFERENCE IN THE VALUATION DECLARED BY THE ASSESSEE AND ESTIMATED BY THE DVO. THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A) DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WE CONFIRM THE SAME. 16. APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSING OFFICER HAS DENIED EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT HAVING NOTED THAT THE DOMINANT OBJECT OF THE ASSESSEE-TRUST IS NOT CHARITABLE IN NATURE, BUT PROFIT MAKING AND HE ACCORDINGLY MADE AN ADDITION OF THE SURPLUS OF RS.39,153/- SHOWN BY THE ASSESSEE. 17. IN APPEAL, THE LD. CIT(A) HAS RE-EXAMINED THE ISSUE AND WAS OF THE VIEW THAT THE ASSESSEE-TRUST IS RUNNING AN EDUCATIONAL INSTITUTION WHOSE RECEIPTS ARE RS.39,80,576/- AND THERE IS A SURPLUS OF ONLY RS.39,153/-. THE LD. CIT(A) HAS FURTHER OBSERVED THAT THERE IS NO FINDING OF THE ASSESSING OFFICER WITH REGARD TO ANY PERSONAL PROFIT OF THE MEMBERS OF THE TRUST AND THE SURPLUS OF RS.39,153/- WHICH IS ABOUT 1% OF THE RECEIPTS CANNOT LEAD TO A REASONABLE CONCLUSION AS TO THE INSTITUTION IS BEING RUN FOR THE PURPOSE OF PROFIT. HE ACCORDINGLY HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C(IIIAD) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER:- 7(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO CALLED FOR AND EXAMINED THE RECORDS OF ASSESSMENT PROCEEDINGS. I FIND THAT THE AO HAS RELIED UPON THE DECISIONS OF HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS QUEENS EDUCATIONAL TRUST (2009) 319 ITR 160 WHEREIN RELYING ON THE APEX COURT JUDGMENT IN THE CASE OF MCD VS CHILDRENS BOOK TRUST :- 23 -: (1992) 3 SCC 390 IT HAS BEEN HELD THAT NO EXEMPTION UNDER SECTION 10(23C) OF THE ACT IS ELIGIBLE TO EDUCATIONAL INSTITUTE IF IT EARNS HUGE PROFITS AND NOT RECEIVING ANY GOVERNMENT GRANT. THE ISSUE THEREFORE NEEDS EXAMINATION IN LIGHT OF PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT WHICH LAY DOWN AS UNDER - (ILIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGREGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED; OR 7(5) IN THE IMPUGNED CASE THE APPELLANT IS RUNNING AN EDUCATIONAL INSTITUTION WHOSE RECEIPTS ARE RS. 39,80,576/- AND THERE IS SURPLUS OF ONLY RS. 39,153/-. THERE IS NO FINDING OF THE AO AS REGARDS ANY PERSONAL PROFITS OF THE MEMBERS OF THE SOCIETY AND THE SURPLUS OF RS. 39,153/- WHICH IS ABOUT 1% OF THE RECEIPTS CANNOT LEAD TO A REASONABLE CONCLUSION AS TO THE INSTITUTION BEING RUN FOR THE PURPOSE OF PROFIT. IT IS TO BE NOTED THAT THE BOMBAY HIGH COURT IN VANITA VISHRAM TRUST V. CHIEF COMMISSIONER OF INCOME-TAX AND ANOTHER [2010] 327 ITR 121 (BOM.) DISTINGUISHED THE DECISION OF HON'BLE UTTARAKHAND HIGH COURT IN QUEENS EDUCATION SOCIETY; 319 ITR 160 AND CONSIDERED VARIOUS DECISIONS LIKE ADITANAR EDUCATIONAL INSTITUTION V. ADD). CIT; 224 ITR 310 (SC), PINEGROVE INTERNATIONAL CHARITABLE TRUST; 327 ITR 73 (P&H), AND HELD THAT PETITIONER WILL BE ENTITLED TO SUCCEED BY ENLIGHTENING ON THE SCOPE OF SECTION 10(23C) OF THE ACT WHEREIN INVESTMENT OF SURPLUS FROM ACTIVITIES APPLIED FOR EDUCATIONAL PURPOSES, REJECTION OF APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT WAS HELD TO BE NOT VALID. THE DECISION IN THE CASE OF QUEENS' EDUCATIONAL SOCIETY (SUPRA) HAS ALSO BEEN DISTINGUISHED BY HON'BLE HIMACHAL PRADESH HIGH COURT IN MAA SARASWATI TRUST V. UNION OF INDIA [2010] 194 TAXMAN 84 (HP) AND HON'BLE PUNJAB AND HARYANA HIGH COURT IN PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UNION OF INDIA AND OTHERS [2010] 327 1TR 73 (P&H). IT HAS BEEN HELD IN THE :- 24 -: CASES SUPRA THAT MERELY BECAUSE AN EDUCATIONAL INSTITUTION ACCUMULATES INCOME, IT DOES NOT GO OUT OF CONSIDERATION OF SECTION 10(23C)(VI) OF THE ACT. IT GOES OUT ONLY IF APPLICATION OF INCOME IS FOR PURPOSES OTHER THAN EDUCATION. IF ACCUMULATION OF SURPLUS BY ASSESSEE, AN EDUCATIONAL TRUST, IS WITHIN PARAMETERS OF SECTION, IT WILL BE ENTITLED TO BENEFIT OF SECTION 10(23C)(VI) OF THE ACT. RESPECTFULLY FOLLOWING THE DECISIONS SUPRA, THE AO IS DIRECTED TO ALLOW EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT TO THE APPELLANT. 18. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. BESIDES PLACING RELIANCE ON THE ORDER OF THE ASSESSING OFFICER, NO ARGUMENT WAS RAISED AS TO HOW THE ASSESSEE IS ENGAGED IN PROFIT MAKING ACTIVITIES. IN THE ABSENCE OF ANY SPECIFIC ASSERTION, IT CANNOT BE HELD THAT THE ASSESSEE WAS ENGAGED IN PROFIT MAKING ACTIVITIES IN THE LIGHT OF THE FACT THAT THE ASSESSEE- TRUST IS RUNNING AN EDUCATIONAL INSTITUTION AND THE ACTIVITIES WERE NEVER DOUBTED BY THE ASSESSING OFFICER. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT THE ASSESSEE-TRUST IS CHARITABLE INSTITUTION AND IS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE ACT. ACCORDINGLY WE CONFIRM HIS ORDER ON THIS ISSUE. 19. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH JANUARY, 2015 JJ:1712 :- 25 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR