ACIT, Trichy V. M/s. T.N.Nandagopal & Sons, Karur

ITA 177/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4874 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Rejection of books of accounts; Unexplained investment; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 177, 178 & 179/MDS/2011 ASSESSMENT YEARS : 2002-03, 2003-04 & 2004-05 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, RANGE-II, TRICHY. V. M/S. T.N. NANDAGOPAL & SONS, OLD NO. 384, NEW NO. 885, JAWAHAR BAZAAR, KARUR-1. (PAN : AAAFT3509K) (APPELLANT) (RESPONDENT) A N D C.O. NOS. 38, 39 & 40/MDS/2011 (IN ITA NOS. 177,178 & 179/MDS/2011) ASSESSMENT YEARS : 2002-203, 2003-04 & 2004-05 M/S. T.N. NANDAGOPAL & SONS, V. THE ASS T. COMMISSIONER OF OLD NO. 384, NEW NO. 885, INCOME-TAX, CIRC LE-II, RANGE-II, JAWAHAR BAZAAR, KARUR-1. KARUR. (CROSS OBJECTOR) (RESPAONDENT) DEPARTMENT BY : SHRI P.B. SEKARAN ASSESSEE BY : SHRI T.N. SEETHARAMAN O R D E R PER BENCH: ITA NOS. 177, 178 & 179/MDS/2011 ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS), TRICHY IN IT A NOS. 300 TO 302/09-10 DATED I.T.A. NOS. 177-179 & CO 38-40/MDS/2011 2 30-11-2010 FOR THE ASSESSMENT YEARS 2002-03, 2003-0 4 AND 2004-05 RESPECTIVELY. C.O. NOS. 38, 39 & 40/MDS/2011 ARE CROSS OBJECTIONS FILED BY THE ASSESSEE IN THE REVENUES APPEALS IN ITA NOS. 177 TO 179/MDS/2011 RESPECTIVELY. 2. SHRI P.B. SEKARAN, LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI T.N. SEETHARAMAN, ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEE. 3. AT THE TIME OF HEARING THE LEARNED AUTHORISED RE PRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE DID NOT WISH TO PRESS THE CROSS O BJECTIONS FILED BY THE ASSESSEE IN CO NOS. 38 TO 40/MDS/2011. CONSEQUENTLY, THE CR OSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. 4. IN THE REVENUES APPEAL, ONLY ONE ISSUE IS INVOL VED WHICH IS AGAINST THE ACTION OF THE LEARNED CIT(A) IN DELETING THE ADDITI ON REPRESENTING THE UNACCOUNTED INVESTMENT IN THE COST OF CONSTRUCTION OF THE BUILD ING, MADE BY THE ASSESSING OFFICER FOR EACH OF THE RELEVANT ASSESSMENT YEARS. IT WAS SUBMITTED BY THE LEARNED DR THAT THERE WAS A SURVEY IN THE PREMISES OF THE ASSESSEE ON 06-10- 2005 IN THE NEW SHOW ROOM CONSTRUCTED BY THE ASSESS EE. IT WAS THE SUBMISSION THAT THE VALUATION OF THE COST OF CONSTRUCTION IN R ESPECT OF THE NEW SHOW ROOM WAS REFERRED TO THE DISTRICT VALUATION OFFICER (DV O FOR SHORT) ON 19-03-2007 AND THE DVO HAD ESTIMATED THE COST OF CONSTRUCTION AT ` 1,05,74,000/- VIDE HIS VALUATION REPORT. THE ASSESSEE HAD DISCLOSED THE C OST OF CONSTRUCTION IN RESPECT OF THE SHOW ROOM AT ` 56,05,222/-. THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION AS ADMITTED BY THE ASSESSEE AND AS EST IMATED BY THE DVO HAD BEEN I.T.A. NOS. 177-179 & CO 38-40/MDS/2011 3 TREATED AS THE UNEXPLAINED INVESTMENT IN THE BUILDI NG BY THE ASSESSING OFFICER AND ADDED FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 IN PROPORTION TO THE ADMITTED COST OF CONSTRUCTING DURING THE RELEVA NT THREE ASSESSMENT YEARS. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD ACCE PTED THE CLAIM OF THE ASSESSEE THAT THE COST INDEX WAS 165.1 AS AGAINST 2 82.75 WRONGLY ADOPTED BY THE DVO AND HAD ALSO GRANTED THE ASSESSEE A DEDUCTION O F 10% FOR CONVERTING THE COST OF CONSTRUCTION FROM THE CPWD RATES TO PWD RAT ES. IT WAS THE FURTHER SUBMISSION THAT 7.5% DEDUCTION TOWARDS SELF-SUPERVI SION HAD BEEN GRANTED. CONSEQUENTLY, THE COST OF CONSTRUCTION HAD BEEN EST IMATED AT ` 59,15,561 AND THE DIFFERENCE BETWEEN THE COST DECLARED BY THE ASSESSE E AND AS ESTIMATED WAS REDUCED TO ` 6,53,866/-. IT WAS THE SUBMISSION THAT THE LEARNE D CIT(A) OUGHT TO HAVE APPRECIATED THAT THE CPWD RATES WERE LIABLE TO BE APPLIED EVEN THOUGH THE BUILDING WAS SITUATED AT KARUR. HE VEHEMENTLY SUPP ORTED THE ORDER OF THE ASSESSING OFFICER. 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO THE DVOS REPORT IN PARA 5.3 WHEREIN THE DVO HAD MENTIO NED THAT THE PERIOD OF CONSTRUCTION WAS APRIL, 2006 TO MARCH, 2007 FOR THE PURPOSE OF APPLYING THE SPECIFIC COST INDEX OF 282.75. IT WAS THE SUBMISSI ON THAT IN THE COURSE OF SURVEY THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD BEEN IMPO UNDED AND THE ASSESSEE HAD DISCLOSED THE COST OF CONSTRUCTION IN REGARD TO THE SAID PROPERTY BETWEEN MARCH, 2001 TO APRIL, 2003. IT WAS THE FURTHER SUBMISSION THAT IN PARA 4.1.1 OF THE DVOS I.T.A. NOS. 177-179 & CO 38-40/MDS/2011 4 REPORT, THE DVO HAS MENTIONED THAT ACCOUNTS METHOD CAN BE ADOPTED ONLY IF PROPER BOOKS OF ACCOUNTS WERE MAINTAINED DULY SUPPO RTED BY VOUCHERS AND THAT THE ASSESSEE HAD NOT SUBMITTED THE BOOKS OF ACCOUNT S. IT WAS THE SUBMISSION THAT A PERUSAL OF THE ASSESSMENT ORDER IN PAGE 2 CL EARLY SHOWED THAT THE BOOKS AND ACCOUNTS AND OTHER DOCUMENTS HAD BEEN IMPOUNDED DURING THE COURSE OF SURVEY. IT WAS THE SUBMISSION THAT THE ASSESSING O FFICER HAD NOT REJECTED THE BOOKS OF ACCOUNTS AND CONSEQUENTLY THE ESTIMATION B Y THE ASSESSING OFFICER WAS NOT PERMISSIBLE. IT WAS THE SUBMISSION THAT THE LE ARNED CIT(A) HAD DELETED THE ADDITION BY GIVING THE BENEFIT OF STATE PWD RATES A S AGAINST THE CPWD RATES. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A ). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE DVOS REPORT CLEARLY SHOWS THAT THE BOOKS OF ACCOUNTS WHICH HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY HAD NOT BEEN SENT TO THE DVO. THI S HAS RESULTED IN THE DVOS VALUATION ITSELF GOING HAYWIRE INSOFAR AS THE DVO H AS ADOPTED THE PERIOD OF CONSTRUCTION AS APRIL, 2006 TO MARCH, 2007. CONSEQ UENTLY, THE SPECIFIC COST OF INDEX HAD BEEN TAKEN AT 282.75 AS AGAINST THE INDEX APPLICABLE FOR THE PERIODS 01-04-2001, 01-04-2002, 01-04-2003 AND 01-04-2004. FURTHER IT IS NOTICED THAT CPWD RATES WOULD NOT BE APPLIED TO PLACES LIKE KARU R AND THAT LOCAL PWD RATES THAT ARE SUPPOSED TO BE APPLIED. THE DVO HAS ALS O IN HIS REPORT IN PARA 5 ACCEPTED THAT THE PLINTH AREA RATES PREPARED BY THE TAMILNADU STATE PWD AND ALSO BY THE GOVT. OF INDIA ARE AVAILABLE. ONCE THE PWD RATES ARE AVAILABLE AND I.T.A. NOS. 177-179 & CO 38-40/MDS/2011 5 THE AREA FALLS WITHIN THE PWD RATE, THEN OBVIOUSLY IT IS THE PWD RATE THAT SHOULD BE APPLIED AND NOT THE CPWD RATE. IT IS NOTICED TH AT THE LEARNED CIT(A) HAS ALSO GRANTED RELIEF TO THE ASSESSEE BY ESTIMATING THE DI SCOUNT OF 10% FROM THE CPWD RATES TO ARRIVE AT THE PWD RATES AND HAS ALSO GIVEN 7.5% TOWARDS SELF- SUPERVISION. A PERUSAL OF THE DVOS REPORT CLEARLY SHOWS THAT THE DISCOUNT FOR SELF-SUPERVISION HAS NOT BEEN GRANTED. IT IS ALSO NOTICED THAT THE ASSESSEE HAS MAINTAINED ITS BOOKS OF ACCOUNTS IN REGARD TO THE C OST OF CONSTRUCTION AND THIS HAS BEEN IMPOUNDED IN THE COURSE OF SURVEY. THESE ACCO UNTS HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER WHILE ADOPTING THE ESTIMAT E ARRIVED AT BY THE DVO. IT IS NOTICED THAT THE ASSESSING OFFICER HAS BLINDLY ADOP TED THE VALUATION OF THE DVO WHICH HAS BEEN MADE FOR THE PERIOD APRIL, 2006 TO M ARCH, 2007, I.E. IN RELATION TO THE ASSESSMENT YEAR 2007-08 AND HAS APPORTIONED THI S ESTIMATED COST FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05 ON THE BASIS OF THE ADMITTED COST OF CONSTRUCTION. THIS IS PATENTLY WRONG. A COST OF C ONSTRUCTION CANNOT BE ESTIMATED FOR THE ASSESSMENT YEAR 2007-08 BY APPLYING THE RAT E APPLICABLE TO THE ASSESSMENT YEAR 2007-08 TO MAKE AN ADDITION FOR THE ASSESSMENT YEARS 2002-03 TO 2004-05. FURTHER AS THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED, NO ADDITION CAN BE MADE IN REGARD TO THE COST OF CONSTRUCTION I N VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA V. CIT, REPORTED IN 328 ITR 513. HOWEVER, AS THIS IS AN APPEAL BY THE REVENUE AND THE ASSESSEE HAS NOT APPEALED FOR FURTHER REDUCTION IN THE COST OF CONST RUCTION ESTIMATED, INSOFAR AS THE I.T.A. NOS. 177-179 & CO 38-40/MDS/2011 6 CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE BEEN WI THDRAWN, THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IN REDUCING THE ESTIMA TED COST OF CONSTRUCTION STANDS CONFIRMED. IN THE CIRCUMSTANCES, THE APPEALS OF TH E REVENUE ARE DISMISSED. 7. IN THE RESULT, THE APPEALS OF THE REVENUE AND TH E CROSS OBJECTIONS OF THE ASSESSEE STAND DISMISSED. 8. THE ORDER WAS PRONOUNCED IN THE COURT ON 21-06-2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 21 ST JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE