S.K. THERMOFORMERS, Alwar V. ITO, Alwar

ITA 180/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2049 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 02-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK
• Keywords: Unexplained investment; Valuation report
• Section: 69; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 180/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 M/S. S.K. THERMOFORMERS HARSOLI ROAD, KHAIRTHAL ALWAR CUKE VS. THE ITO WARD- 7(5) ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ACDFS 4620 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SMT. POONAM RAI, DCIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21/08/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 4/10/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A), ALWAR DATED 03-02-2017 FOR THE ASSESSMENT YEAR 2013-14 RAISING THEREIN FOLLOWING GROUND:- THAT THE AO HAS ERRED IN LAW AS WELL AS ON FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING AN ADDITION OF RS. 26,75,105/- B EING THE DIFFERENCE IN THE VALUATION OF FACTORY BUILDING AS VALUED BY THE DVO AND AS PER BOOKS OF ACCOUNTS AND LD. CIT(A) HAS ERRED IN SUSTAINING A S UM OF RS.9,18,505/- OUT OF THE SAME, PARTICULARLY WHEN THE BOOKS OF ACCOUNTS H AVE BEEN ACCEPTED BY THE AO AND THIS SUSTAINING OF ADDITION OF RS. 9,18,505/ - IS AGAINST THE DECISION OF THE JURISDICTIONAL HIGH COURT DECISION AS GIVEN IN CASE OF CIT VS. PRATAP SINGH AMRO SINGH RAJENDRA SINGH AND DEEPAK KUMAR 200 ITR 788 (RAJ.) ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 2 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURING OF DISPOSABLE ITEMS IN TH E NAME AND STYLE AS M/S. S.K. THERMOFORMERS. THE ASSESSEE FILED ITS RET URN OF INCOME ON 19-09-2013 DECLARING NIL INCOME. THE SURVEY WAS CON DUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 03-01-2013. TH E AO DURING THE ASSESSMENT PROCEEDING OBSERVED THAT DURING THE YEAR THE ASSESSEE CONSTRUCTED A FACTORY BUILDING. THE COST OF THE BUI LDING AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE IS RS. 32,29,595/-. THE AO HAS REFERRED THE DETERMINATION OF THE COST OF THE CONSTRUCTION OF TH E FACTORY BUILDING TO THE DVO WHO VIDE HIS REPORT DATED 7-01-2016 DETERMINED THE COST OF THE BUILDING ADOPTING CPWD RATES AT RS. 59,04,700/-. WH EN CONFRONTED WITH THIS REPORT, THE ASSESSEE FILED THE VALUATION REPOR T BY REGISTERED VALUER WHO ESTIMATED THE COST OF CONSTRUCTION ADOPTING STA TE PWD RATES AT RS. 36,21,811/-. THE AO BEING NOT SATISFIED WITH TH E SAME MADE THE ADDITION OF RS. 26,75,105/- (RS. 59,04,700 MINUS RS . 32,29,595) BEING THE DIFFERENCE BETWEEN THE CONSTRUCTION COST RECORDED A S PER BOOKS OF ACCOUNT AND THAT ESTIMATED BY THE DVO. ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 3 2.2 IN FIRST APPEAL, THE LD. CIT(A) HAS SUSTAINED T HE ADDITION OF RS. 9,18,505/- BY OBSERVING THAT THE AO HAS REFERRE D THE DETERMINATION COST OF THE CONSTRUCTION OF FACTORY BUILDING TO TH E DVO U/S 142A OF THE ACT. THE LD. CIT(A) ACCEPTED THAT FOR THE PURPOSE O F VALUATION OF THE PROPERTY THE RATES PROVIDED BY THE STATE PWD HAVE T O BE APPLIED. THEREAFTER HE WORKED OUT THE COST OF CONSTRUCTION B Y APPLYING RAJASTHAN PWD RATES AT RS. 41,48,108/- AS WORKED OUT AT PAGES 9 TO 11 OF HIS ORDER. THE RELEVANT OBSERVATION OF THE LD. CIT(A)S ORDER AT PARA 11 IS REPRODUCED AS UNDER:- IN VIEW OF THE FACTS MENTIONED IN THE ABOVE MENTI ONED CHART, IT IS MY CONSIDERED VIEW THAT EVEN IF APPLYING THE RAJ ASTHAN PWD RATE, THE VALUATION COMES TO RS. 41,48,100/- AS PER CALCU LATION MADE IN THE CHART ABOVE, AFTER DISALLOWING 15% DEDUCTION APPLIE D BY THE REGISTERED VALUER. THE APPELLANT HAS DECLARED THE COST OF CONS TRUCTION AT RS. 32,29,595/-.THEREFORE, THE ADDITION ON ACCOUNT OF T HE DIFFERENCE OF RS. 9,18,505/- IS SUSTAINED. ACCORDINGLY, THE APPELLANT S GROUND OF APPEAL ON THIS ISSUE IS PARTLY ALLOWED. 2.3 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE PRAYED THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 9,18,505/- FOR WHICH THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. 1. AT THE OUTSET IT IS SUBMITTED THAT AS PER THE REPORT OF DVO, THE REFERENCE IS MADE TO HIM BY THE AO U/S 131(1)(D) OF THE ACT (PB 14A). THIS SECTION DOES NOT EMPOWER THE AO TO MAKE THE REFEREN CE TO THE DVO TO ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 4 DETERMINE THE COST OF CONSTRUCTION OF THE PROPERTY. THEREFORE, THE REFERENCE ITSELF IS ILLEGAL AND BAD IN LAW AND ON THAT BASIS NO ADDITION CAN BE MADE. 2. THE LD. CIT(A) HAS STATED THAT THE REFERENCE IS MADE BY THE AO TO THE DVO U/S 142A OF THE ACT. AS PER THIS SECTION, AS EX ISTING FOR THE AY UNDER CONSIDERATION, THE AO FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF VALUE OF ANY INVESTMENT REFERR ED TO U/S 69/69B IS REQUIRED TO BE MADE, HE MAY REQUIRE THE DVO TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HIM. THEREFORE, THE AO HAS TO ARRIVE AT A FINDING, BEFORE MAKING A REFERENCE U/S 142A, THAT AN ESTIMATE OF THE VALUE O F INVESTMENT U/S 69/69B IS REQUIRED. AS PER SECTION 69/69B, IT HAS TO BE FOUND BY THE AO THAT THE ASSESSEE HAS MADE INVESTMENT WHICH ARE NOT RECORDED IN THE B OOKS OF ACCOUNTS MAINTAINED BY HIM OR THE AMOUNT EXPENDED ON MAKING SUCH INVEST MENT EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNTS. IN THE PRESENT C ASE, ASSESSEE HAS FILED THE COPY OF LEDGER ACCOUNT OF BUILDING (PB 12-13) ALONG WITH THE BILLS AND VOUCHERS. THE AO HAS NEITHER FOUND ANY DEFECT IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE ASSESSEE NOR FOUND ANY DISCREPANCY IN THE BUILDING ACCOUNT. EVEN IN SURVEY, NO EVIDENCE OF ANY UNRECORDED EXPENDITURE O CONSTRUCTI ON OF BUILDING WAS FOUND. THEREFORE, NO REFERENCE U/S 142A CAN BE VALIDLY MAD E AND THE VALUATION REPORT OBTAINED ON THE BASIS OF SUCH ILLEGAL REFERENCE CAN BE USED AGAINST THE ASSESSEE. RELIANCE IN THIS CONNECTION IS PLACED THE FOLLOWING CASES: ME & MUMMY HOSPITAL VS. ACIT & ORS (2014) 107 DTR 0 209 (GUJ) THE VALUERS REPORT U/S 142A OF THE ACT WAS FOR THE PURPOSE OF ESTIMATING VALUE OF SUCH INVESTMENT REFERRED TO IN SECTION 69 OR SEC TION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERR ED TO IN SECTION 69A OR SECTION 69B OF THE ACT. UNLESS, THEREFORE, THERE WAS PRIMA FACIE APPLICATION OF SECTIONS 69, 69A AND 69B OF THE ACT, REFERENCE TO THE VALUER IS SIMPLY NOT PERMISSIBLE. IT IS ONLY WHEN THERE IS SOME MATERIAL BEFORE THE ASSESSI NG OFFICER TO HOLD THAT IN CASE OF AN ASSESSEE FALLS UNDER SECTIONS 69, 69A AND 69B AS THE CASE MAY BE, THAT HE CAN, TO ESTIMATE THE VALUE OF SUCH UNEXPLAINED INVE STMENT OR EXPENDITURE IN BULLION, JEWELLERY ETC., CALL FOR THE REPORT OF THE VALUER. INITIAL STARTING POINT FOR TRIGGERING A REFERENCE TO THE VALUER, THEREFORE, HA S TO BE INVOCATION OF SECTIONS 69,69A OR 69B OF THE ACT. IT IS ONLY WHEN ANY OF TH ESE PROVISIONS COME INTO PLAY THAT THE ASSESSING OFFICER CAN RESORT TO SECTION 14 2A FOR ESTIMATING THE VALUE OF SUCH INVESTMENT OR EXPENDITURE. SEQUENCE CANNOT BE PUT IN THE REVERSE. IN OTHER WORDS, THE ASSESSING OFFICER WOULD HAVE NO AUTHORIT Y TO CALL FOR THE REPORT OF THE VALUER UNDER SECTION 142A TO JUDGE WHETHER THERE HA S BEEN ANY UNEXPLAINED INVESTMENT OR EXPENDITURE AS REFERRED TO IN SECTION S 69, 69A AND 69B OF THE ACT. IT WOULD ONLY AMOUNT TO FISHING INQUIRY AND NOT INV ESTIGATION UNDER SECTION 142A OF THE ACT. IT WAS OPINED THAT, THE SCHEME OF THE P ROVISIONS WHEN READ ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 5 HARMONIOUSLY WOULD LEAD TO A SITUATION WHERE IN CAS E THE ASSESSING OFFICER, DURING THE PENDENCY OF ASSESSMENT OR REASSESSMENT, IS OF THE OPINION THAT SECTIONS 69, 69A AND 69B OF THE ACT CAN BE INVOKED; IN ORDER TO ESTIMATE SUCH UNEXPLAINED INVESTMENT OR EXPENDITURE IN ACQUISITIO N OF BULLION, JEWELLERY OR VALUABLE ARTICLE, HE CAN RESORT TO VALUATION BY THE VALUATION OFFICER IN TERMS OF SUB-SECTION (1) OF SECTION 142A OF THE ACT. IN THE PRESENT CASE, NO SUCH MATERIAL EMERGES FROM THE RECORD. TO THE CONTRARY, NEITHER F ROM THE ORDER OF REFERENCE NOR FROM ANY OTHER MATERIAL, THE RESPONDENT COULD POINT OUT THAT THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SECTIONS 69,69A OR 69 B OF THE ACT AND IN THE PROCESS DESIRED TO OBTAIN THE ESTIMATE OF UNEXPLAIN ED INVESTMENT OR EXPENDITURE AND FOR WHICH PURPOSE DVOS REPORT WAS CALLED. HE S IMPLY GAVE NO REASONS IN THE ORDER. NO INDEPENDENT REASONS, EITHER FLOWING F ROM THE FILE OR EVEN IN THE FORM OF AN AFFIDAVIT ASSUMING THE SAME WOULD BE PER MISSIBLE, ARE BROUGHT TO OUR NOTICE. THUS QUITE APART FROM THE PETITIONERS GRIE VANCE THAT THE ASSESSING OFFICER MERELY ACTED UNDER THE DIRECTIVES OF THE SUPERIOR A ND DID NOT, ON HIS OWN APPLICATION OF MIND, DESIRE TO CALL FOR THE REPORT, IN ABSENCE OF ANY VALID REASONS FOR MAKING A REFERENCE, IT WAS OPINED THAT, THE ORD ER MUST FAIL. IMPUGNED ORDER DATED 30.3.2005 WAS QUASHED. THE PETITION WAS ALLOW ED. ANAND BANWARILAL ADHUKIA VS. DCIT (2017) 148 DTR 26 2 (GUJ.) UNLESS THERE IS PRIMA FACIE APPLICATION OF SECTION 69, REFERENCE TO THE VALUER U/S 142A IS SIMPLY NOT PERMISSIBLE. IT IS ONLY WHEN THE RE IS SOME MATERIAL BEFORE THE AO TO HOLD THAT THE CASE OF AN ASSESSEE FALLS U/S 6 9, AS THE CASE MAYBE, THAT HE CAN, TO ESTIMATE THE VALUE OF SUCH UNEXPLAINED INVE STMENT OR EXPENDITURE IN BULLION, JEWELLERY, ETC. AND CAN CALL FOR THE REPOR T OF THE VALUER. INITIAL STARTING POINT FOR TRIGGERING A REFERENCE TO THE VALUER, THE REFORE, HAS TO BE INVOCATION OF SECTION 69 AND THEREFORE, UNLESS AND UNTIL SUCH CON TINGENCIES ARE REFLECTING ON RECORD, REFERENCE U/S 142A CANNOT BE RESORTED TO. T HE AO HAD NO COGENT MATERIAL AVAILABLE TO SATISFY HIMSELF ABOUT THE REQUIREMENT OF SECTION 69 AND THEREFORE, IN ABSENCE OF IT, THE REFERENCE COULD NOT HAVE BEEN MA DE U/S 142A. 3. ON MERIT, THE FACT THAT THE COST OF CONSTRUCTION DETERMINED BY THE DVO IS INCORRECT, UNREASONABLE AND EXCESSIVE HAS BEEN A CCEPTED BY THE LD. CIT(A). STILL, HE HAS DEVISED HIS OWN METHOD AS TABULATED A T PARA 5.3.3 OF HIS ORDER, TO WORK OUT THE COST OF CONSTRUCTION AT RAJASTHAN PWD RATES AT RS. 41,48,100/-. THE LD. CIT(A) IS NOT AN EXPERT / AUTHORITY TO CARRY O UT THE VALUATION AND THEREFORE, NO COGNIZANCE SHOULD BE TAKEN OF THE COST OF CONSTR UCTION DETERMINED BY HIM BY IGNORING THE REPORT OF THE REGISTERED VALUER WHO DE TERMINED IT AT RS.36,21,811/-. FURTHER, THE DIFFERENCE BETWEEN THE COST OF CONSTRU CTION DETERMINED BY THE REGISTERED VALUER AND THAT RECORDED IN THE BOOKS OF ACCOUNTS IS RS. 3,92,219/- WHICH IS 10.83%. THE COST DETERMINED BY THE REGISTE RED VALUER IS ONLY ESTIMATION AND THEREFORE SUCH DIFFERENCE IN ESTIMATION IS TO B E IGNORED AS HELD BY HONBLE ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 6 PATNA HIGH COURT IN CASE OF BIMLA SINGH VS. CIT 308 ITR 71 WHERE IT WAS HELD THAT THE DIFFERENCE BETWEEN THE COST OF CONSTR UCTION DECLARED BY THE ASSESSEE AND THAT ESTIMATED BY THE VALUER BEING LESS THAN 15 %, THE SAME IS TO BE IGNORED. IN VIEW OF ABOVE, THE ADDITION CONFIRMED BY LD. CIT (A) BE DIRECTED TO BE DELETED. 2.4 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LD. CIT(A). 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, IT IS NOTED THAT THE AO MADE THE ADDITION OF RS. 26,75,105/- (RS. 59,04,700 [VALUATION DONE B Y THE DVO] MINUS RS. 32,29,595 [VALUATION AS PER BOOKS OF ACCOUNT] ) BEING THE DIFFERENCE BETWEEN THE CONSTRUCTION COST RECORDED AS PER BOOKS OF ACCOUNT AND THAT ESTIMATED BY THE DVO. THE LD. CIT(A) IN FIRST APPE AL HAS SUSTAINED THE ADDITION OF RS.9,18,505/- BY OBSERVING AS UNDER:- . IT IS MY CONSIDERED VIEW THAT EVEN IF APPLYING THE RAJASTHAN PWD RATE, THE VALUATION COMES TO RS. 41,48,100/- AS PER CALCULATION MADE IN THE CHART ABOVE, AFTER DISALLOWING 15% DEDUCTION APPLIE D BY THE REGISTERED VALUER. THE APPELLANT HAS DECLARED THE COST OF CONSTRUCTION AT RS. 32,29,595/- .THEREFORE, THE ADDITION ON ACCOUNT OF THE DIFFEREN CE OF RS. 9,18,505/- IS SUSTAINED. ACCORDINGLY, THE APPELLANTS GROUND OF A PPEAL ON THIS ISSUE IS PARTLY ALLOWED. TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE AS SESSEE AND THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN QUESTION. THE LD. CIT(A) FAIRLY ITA NO.180/JP/2017 M/S. S.K. THERMOFORMERS VS I TO, WARD- 1(5), JAIPUR 7 ACCEPTED THE VALUE AT RS. 41,48,100/- WHICH ALSO CO MES AS PER CALCULATION BY APPLYING THE RAJASTHAN PWD RATES. THE APPROACH O F ESTIMATION BY THE LD. CIT(A) IS FAIR AND JUST. I FIND NO REASON TO IN TERFERE WITH HIS ORDER AS THE LD. CIT(A) HAD RIGHTLY HELD THAT FOR THE PURPO SE OF VALUATION OF PROPERTY, STATE PWD RATES HAVE TO BE APPLIED TO THE PLINTH AREA OF CONSTRUCTION FOR EACH FLOOR AS GIVEN BY THE DVO IN THE REPORT. THUS THE SOLITARY GROUND OF THE ASSESSEE IS DISMISSED. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 /10 /2017 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 4 /10/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. S.K. THERMOFORMES, ALWAR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 1 (5), ALWAR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 180/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR