Rohini Hotel (Madras) Pvt. Ltd., CHENNAI V. ACIT Corporate Circle 5(4), CHENNAI

ITA 1841/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4700 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 30-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: R S BALAJI
• Keywords: Unexplained investment; Business income; Depreciation; Loose papers; Opportunity of being heard; Principle of natural justice; Corroborative evidences; Valuation report

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , ' BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.1627 & 1687/CHNY/2017 /ASSESSMENT YEARS: 2006-07 & 2007-08 THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-5(2), CHENNAI. VS. M/S.ROHINI HOTEL (MADRAS)- PVT. LTD., 43, SARANGAPANI STREET, T. NAGAR, CHENNAI-17. [PAN: AABCR 1694 M ] ( ) /APPELLANT) ( *+) /RESPONDENT) ./ ITA NOS.1841 & 1842/CHNY/2018 /ASSESSMENT YEARS: 2005-06 & 2008-09 M/S.ROHINI HOTEL (MADRAS) PVT. LTD., 43, SARANGAPANI STREET, T. NAGAR, CHENNAI-17. VS. THE ASST. COMMISSIONER OF- INCOME TAX, COMPANY CIRCLE-5(4), CHENNAI. [PAN: AABCR 1694 M ] ( ) /APPELLANT) ( *+) /RESPONDENT) DEPARTMENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT ASSESSEE BY : MR. R.S.BALAJI, ADV. - /DATE OF HEARING : 01.08.2019 - /DATE OF PRONOUNCEMENT : 01.08.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER: ITA NOS.1627 & 1687/CHNY/2017 ARE THE APPEALS FILE D BY THE REVENUE AND ITA NOS.1841 & 1842/CHNY/2018 ARE THE A PPEALS FILED BY ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 2 -: THE ASSESSEE AGAINST THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI, IN ITA NOS.60, 61, 62 & 63/2013- 14/CIT(A)-3 DATED 31.03.2017 FOR THE AYS 2006-07, 2 007-08, 2005-06 & 2008-09 RESPECTIVELY. 2. SHRI R.CLEMENT RAMESH KUMAR, ADDL.CIT, REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R.S.BALAJI, ADV., REPRESENTED ON BEHALF OF THE ASSESSEE. 3. THE APPEALS FILED BY THE ASSESSEE ARE TIME BARRED BY 355 DAYS, FOR WHICH, THE ASSESSEE HAS FILED THE NECESSARY AFFIDAV IT FOR CONDONATION OF DELAY, WHEREIN, IT HAS BEEN SUBMITTED THAT THE DELA Y WAS ON ACCOUNT OF CHANGE OF AUDITOR OF THE ASSESSEE AS THE AUDITOR AT THAT TIME 80 YEARS OLD AND SUFFERING FROM MULTIPLE ILLNESSES. IT WAS A FU RTHER SUBMISSION THAT AS THE ASSESSEES COUNSEL FALLEN SICK, THE ASSESSEE HA D TO GET THE SEIZED MATERIAL FROM THE AO AGAIN AND ALSO ON ACCOUNT OF T HE DAMAGE TO THE COMPUTER SYSTEMS OF THE ASSESSEE. THE AFFIDAVIT FI LED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE NOR AS THE REVENUE HAS B EEN ABLE TO PRODUCE ANY GROUND AGAINST THE SAID AFFIDAVIT FILED, CONSEQ UENTLY, THE DELAY IN FILING OF THE ASSESSEES APPEALS STAND CONDONED AND THE AP PEALS ARE DISPOSED OFF ON MERITS. 4. IT WAS SUBMITTED BY THE LD.AR THAT THERE WAS A SURV EY ON THE PREMISES OF THE ASSESSEE ON 27.02.2008, CERTAIN INC RIMINATING MATERIAL HAVE BEEN FOUND IN THE COURSE OF SURVEY. ON THE BAS IS OF SURVEY, THE ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 3 -: ASSESSMENTS HAD BEEN COMPLETED, WHEREIN, SUBSTANTIA L ADDITIONS HAD BEEN MADE REPRESENTING THE INVESTMENTS IN THE HOTEL BUIL DING WHICH IS ASSESSED AS UNEXPLAINED INVESTMENTS. IT WAS A SUBMISSION TH AT IN COURSE OF THE APPEAL BEFORE THE LD.CIT(A), EVIDENCES HAD BEEN PRO DUCED TO SHOW THAT CERTAIN TERM LOANS FROM ITDC AND TFCI HAD NOT BEEN TAKEN INTO CONSIDERATION THOUGH EVIDENCES WERE AVAILABLE. IT WAS A FURTHER SUBMISSION THAT CERTAIN SUNDRY CREDITORS/PAYABLES H AD ALSO NOT BEEN CONSIDERED THOUGH SUBSTANTIATED. IT WAS A SUBMISSI ON THAT CONSEQUENTLY, THE LD.CIT(A) HAD CONSIDERED VARIOUS EVIDENCES AS E XTRACTED, THE ADDITION MADE IN TABLE-A AT PAGE NO.4 OF HIS ORDER HAD RE-WO RKED THE ADDITIONS AT PAGE NO.5 OF HIS ORDER AT PAGE NO.4 IN TABLE-B. IT WAS A SUBMISSION THAT CONSEQUENTLY, IT WAS FOUND FOR THE AY 2005-06, THER E WAS A SHORTFALL REPRESENTING UNEXPLAINED INVESTMENT TO THE EXTENT O F RS.34,90,817/-. IT WAS A SUBMISSION THAT IN RESPECT OF THE SAME, THE L D.CIT(A) HAD CONFIRMED THE ADDITION. SIMILARLY, FOR THE AY 2006 -07, IT WAS FOUND THAT THERE WAS SURPLUS FUNDS AVAILABLE FOR INVESTMENTS T O THE EXTENT OF RS.22,21,613/- AND CONSEQUENTLY, HE HAD DELETED THE ADDITION MADE BY THE AO. FOR THE AY 2006-07, THE LD.CIT(A) CONSIDER ED THE ADDITION MADE FOR THE AY 2005-06 AS ALSO THE SURPLUS AVAILABLE FO R THE AY 2006-07 AND TELESCOPED THE SAME WHEN CONSIDERING THE ADDITION F OR THE AY 2007-08 AND CONSEQUENTLY, AS THERE WAS ADEQUATE FUNDS ON AC COUNT OF THE TELESCOPE DELETED THE ADDITION FOR THE AY 2007-08. FOR THE AY 2009-10, AGAIN, IT WAS FOUND THAT THERE WAS A SHORTFALL OF R S.72,38,948/-, FOR WHICH, THE ASSESSEE WAS NOT ABLE TO GIVE ANY EXPLANATION A ND CONSEQUENTLY, HE ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 4 -: CONFIRMED THE ADDITION TO THE EXTENT OF RS.72,38,94 8/-. IT WAS A FURTHER SUBMISSION THAT THERE WAS AN ISSUE OF PRE-OPERATIVE EXPENSES WHICH HAD BEEN RAISED BY THE ASSESSEE BEFORE THE LD.CIT(A). THE LD.CIT(A) HAD RESTRICTED THE DISALLOWANCE IN RESPECT OF PRE-OPERA TIVE EXPENSES @ 20%. IT WAS A SUBMISSION THAT THE ASSESSEE IS ON APPEAL FOR THE AY 2005-06 & 2008-09, WHICH ARE THE AYS, IN RESPECT OF WHICH, TH E LD.CIT(A) HAS CONFIRMED THE ADDITION. THE REVENUE IS ON APPEAL F OR THE AYS 2006-07 & 2007-08 BEING THE AYS, IN RESPECT OF WHICH, THE LD. CIT(A) HAS DELETED THE ADDITION. IT WAS A SUBMISSION THAT THE ASSESSEE HA S RAISED GROUND NO.5 IN RESPECT OF THE ISSUE OF THE PRE-OPERATIVE EXPENSES. IT WAS A SUBMISSION THAT THE ASSESSEE DID NOT WISH TO PRESS THE GROUND IN RESPECT OF THE DISALLOWANCE @20% OF THE PRE-OPERATIVE EXPENSES AND HAS ALSO SIGNED TO THAT EFFECT. IN RESPECT OF THE UNEXPLAINED INVESTM ENTS, THE LD.AR PLACED BEFORE US A COPY OF THE STATEMENT OF RECONCILIATION . IT WAS A SUBMISSION THAT NO ADDITION WAS LIABLE TO BE MADE IN RESPECT O F THE INVESTMENTS IN SO FAR AS THE TOTAL INVESTMENTS STAND FULLY EXPLAINED. THE SAME ARE AS FOLLOWS: D) ASSESSMENT YEAR 2008-09 S.NO. DESCRIPTION INVESTMENT AS PER SEIZED INVESTMENT AS PER B/S ASSESSMENT YEAR 2008-09 DIFFERENCE AS PER ASSESSMENT ORDER 1 2 3 4 1 LAND AND SITE 34.15 34.15 34.15 - 2 BUILDING UNDER CONSTRU0CTION 1,568.40 1767.71 1767.71 199.31 3 PLANT 0AND MACHINERY ETC 352.12 382.57 492.53 140.41 4 PRE-OPERATIVE SURVEY POWER 178.50 1160.3 0 178.50 5 PRELIMINARY 999.28 0 0 999.28 ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 5 -: AND 6 T.V. SOUND 518.00 0 0 518.00 7 BUILDING MATERIALS 472.50 - - 472.50 8 CURRENT ASSETS - 192.96 - 104.32 104.32 4,122.95 3,537.69 2,398.71 172.52 LESS: LIABILITIES DEDUCTED AS PER BALANCE SHEET: A) TERM LOAN JTDC 89.80 B) TERM LOAN TFCI 50.00 C) SUNDRY CREDITORS 18.13 D) LOANS 7.32 ------- 165.25 --------- 7.27 ---------- GROUNDS : 1) LESS OF INVESTMENTS THEN SURVEYS INVESTMENTS ADDE D CREDIT AND DISALLOWED IN CIT(A) TAKEN AS UNDISCLOSED INCOME BY A.O AND CIT (A) CONFIR MED. 2 (D) 1) THE GROUNDS OF 2(A) AS PER 2005-2006 HOLD G OODS. 2) AS PER GROUNDS (2) (A) HOLDS GOOD. AS PER A.O ORDER IN PAGE 4 IN IMPOUNDED INSTRUMENTS. S.NO. PARTICULARS BALANCE REQUIRED 31.03.2008 IN LAKHS 1 BUILDING UNDER CONSTRUCTION 472.50 2 TV, SOUNDS ETC 518.00 3 PRELIMINARY & PRE-OPERATIVE SALARY, POWER 178.50 TOTAL 1169.00 THE RS.1169.00 LAKHS INVESTMENT IS ONLY 'DEMA ND OF AMOUNT FOR THE ABOVE WORK' AND THIS IS NOT TAKEN AS WORK FOR THE INVE STMENTS IN THE IMPOUNDED SEARCH ASSET. THUS RS.1169 LAKHS TO BE DELETED FROM THE V ALUE OF ORDER IN TOTAL INVESTMENT. S.NO PARTICULARS AMOUNT IN LAKHS 1 TOTAL PROJECT AS PER ASSESSMENT ORDER.2008-2009 4123.95 2 DELETION ON ACCOUNT OF BALANCE OF MATERIALS REVISED SUPRA 1169.00 3 REVISED TOTAL PROJECT COST AS PER IMPOUNDED 2954.95 IN B/S 2008 TOTAL ASSETS COME RS.3537.42 LAKHS (BEFO RE DEPRECIATION) AS PER ASSESSMENT ORDER IMPOUNDED COMES RS.2954.95 LAKHS AS PER REVIS ED. IN SEARCH INVESTMENTS IS LESSER THAN AUDITED B/S THE ADDITION OF RS.72,38,948 IS TO BE DROPPED. 3. (A) TABLE SHOWING OF PRE-OPERATIVE EXPENSES AT 20% S.NO. PARTICULARS 2005-06 2006-07 2007-08 2008-09 1 PRE-OPERATIVE EXPENSES DISALLOWED AT 40% (BY ASSESSING OFFICER) 2,752,338 3,872,240 2,383,655 2,361,150 2 PRE-OPERATIVE EXPENSES 20% 1,376,164 19,36,120 1,91,120 11,80,575 ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 6 -: ALL EXPENDITURE AND AUDITED AND SUPPORTED BY VOUCHE RS. THE A.O AND CIT(A) OUGHT NOT TO HAVE DISALLOWED 20% AN ESTIMATE IN PRE-OPERATIVE EX PENSES. 3 (B) DISALLOWING PRE-OPERATIVE EXPENSES OF RS.23,60 ,150/- THE LEARNED OFFICER MADE DOUBLE DISALLOWANCE OF PRE -OPERATIVE EXPENSES OF RS.10,29,63,412/-@40% FOR 2007-08 AND 2008-2009 ASS ESSMENT YEARS COPIES OF EARLIER YEARS ORDERS ARE ENCLOSED. (ENCL............) THUS D ISALLOWANCE OF RS.23,61,150/- IN PRE- OPERATIVE EXPENSES IS UN WARRANTED AND TO BE DROPPE D 4. THE LEARNED OFFICER HAS NOT GIVEN DEDUCTION OF D EPRECIATION AS PER IT ACT AMOUNTING TO RS.1,86, 93,063/- FROM THE ACTUAL INCOME OF RS.56,2 3,125/-RETURNED BY THE APPELLANT. 5. THE LEARNED A.O FAILED TO CONSIDER FIR RETURN OF LOST OF RECORDS DUE TO FIRE. PRAYER (A) TO DISALLOW ADDITION OF CASH CREDIT IN EACH ASSE SSMENT YEARS AS PER SUBMISSION. (B) TO DISALLOW ADDITION OF 20% PRE-OPERATIVE EXPENS ES EVERY YEAR. (C)TO DISALLOW COMPLETELY 20% ON PRE OPERAT IVE EXPENSES IN 2008, 2009 ASSESSMENT YEAR SINCE IT IS DOUBLE ADDITION AS PER GROUNDS. (D) TO ALLOW DEPRECIATION CLAIMED AS PER RETURN. PLACE: DATE: APPELLANT 6) LEGAL GROUNDS AND RULINGS LOOSE SHEETS AND ESTIMATES FOUND ON SURVEY SHOULD N OT BE TAKEN FOR INCOME A) THE ASSESSING OFFICER AND THE COMMISSIONER OF INCO ME TAX APPEALS HAS COMPLETED THE ASSESSMENT WITHOUT GIVING COPIES OF THE IMPOUNDED M ATERIALS TO THE ASSESSEE. THE OFFICER HAS RECORDED THAT CERTAIN INCRIMINATING MATERIALS W ERE COME ACROSS DURING THE SURVEY ON 27/2/2008. SHE HAD NOT RECORDED IN HER ORDER WHAT WHE RE THE CONTENTS OF THE CERTAIN INCRIMINATING MATERIALS AND HOW SHE HAPPENED TO BEL IEVE THAT THERE HAD BEEN ESCAPEMENT OF INCOME TO AN EXTENT OF RS. 10,70,89,000. COPY AP PLIED TO AO FOR COPY'S OF INCRIMINATING MATERIALS ( ENCLOSED PAGE-7) ACCORDING TO THE INCRIMINATING MATERIALS THE INVEST MENT IN THE HOTEL HAD BEEN RS.24,30,70,000 DISCLOSED. BUT THE INVESTMENT ADMIT TED IN THE RETURN HAD BEEN RS.13,59,81,000 HAD BEEN LESSER DISCLOSED YEAR WISE AS FULLY AS PER NOTICE DATED 15-01- 2012. THE DIFFERENCE OF RS. 10,70,80,000 SHIFT FULL Y IN INVESTMENTS NOTICED BETWEEN THE INCRIMINATING MATERIALS AND THE RETURN OF INCOME CA N BE BELIEVED TO BE TRUE ONLY WHEN THE OFFICE HAD COLLECTED CORROBORATIVE MATERIALS THAT TH E INCRIMINATING MATERIALS SEIZED ON THE DATE OF SURVEY HAD BEEN TRUE AND AUTHENTIC. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOM E TAX APPEALS HAD REFERRED THE VALUATION OF THE HOTEL TO THE DEPARTMENTAL VALUER A ND THE DEPARTMENTAL VALUER HAD VALUED THE EXPENDITURE AT RS.15,4343,21,000. HAVING REFERR ED THE VALUATION TO THE DEPARTMENTAL VALUER THE ASSESSING OFFICER IS DUTY BOUND TO ADOPT THE VALUER'S FIGURES ONLY. FURTHER THE HAVING REFERRED THE CASE TO THE DEPARTMENTAL VALUE AND WHEN THE VALUATION REPORT DID NOT MEET THE ASSESSING OFFICER AND THE COMMISSIONER OF I NCOME TAX APPEAL'S EXPECTATIONS THE OFFICER CANNOT IGNORE THE SAME AND RELY UPON THE IN CRIMINATING MATERIALS THE VERACITY OF WHICH IS IN DOUBT. (ENCL PAGE 45) ACCORDING TO THE ASSESSEE THE INCRIMINATING MATERIA LS HAD BEEN ONLY SOME ROUGH ESTIMATES ON LOOSE PAPERS. THE ENTRIES IN THE LOOSE PAPERS WE RE NOT IN THE HANDWRITING OF THE ASSESSEE. THERE HAD BEEN NOTHING IN THE LOOSE PAPER S THAT THEY CONTAINED THE REAL EXPENDITURE ON THE INVESTMENT IN THE HOTEL. WHEN TH ERE ARE NO OTHER CONTEMPORARY RECORDS TO BOLSTER THE RELIABILITY OF THE LOOSE SHEETS AND WHEN THE ASSESSEE HAS NOT ADMITTED THE CORRECTNESS OF THE LOOSE SHEETS ITS THE DUTY OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX APPEALS OFFICER TO PRODUCE OTHER EXTE RNAL MATERIALS TO THE FACT THAT THE CONTENTS OF THE LOOSE SHEETS ARE RELIABLE. THE LOOS E SHEETS ARE DUMB DOCUMENTS AND IN THE ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 7 -: ABSENCE OF ANY INDEPENDENT CORROBORATION FROM THE A SSESSING OFFICER'S SIDE THEY CANNOT BE ACTED UPON. THE ASSESSMENT HAD BEEN MADE WITHOUT FO LLOWING THE PRINCIPLES OF NATURAL JUSTICE. SINCE THE ASSESSMENT HAD BEEN MADE KEEPING THE ASSESSEE IN DARK WITH REGARD TO THE CERTAIN INCRIMINATING MATERIALS AND WITHOUT GIV ING A COPY OF THE DEPARTMENTAL VALUER'S REPORT THE ASSESSMENT MADE IS ONE BEHIND THE BACK O F THE ASSESSEE. SINCE THE COMMISSIONER OF INCOME TAX IS RESTRAINED FROM SETTI NG ASIDE THE ASSESSMENT THE ASSESSMENT DESERVES TO BE ANNULLED BY THE COMMISSIO NER OF INCOME TAX. S.NO. FINANCIAL YEAR DETAILS AS PER NOTICES DT 15-01-2012 FINANCIAL YEAR AS PER IMPOUNDED MATERIALS 1 2004-05 TOTAL INVESTMENTS 13,59,81,897 24,30,70,0 00 2 2005-06 TOTAL INVESTMENTS 13,87,76,585 24,40,32,0 00 3 2006-07 TOTAL INVESTMENTS 18,77,75,916 29,54,95,0 00 4 2007-08 TOTAL INVESTMENTS 21,84,43,928 41,23,95,0 00 DIFFERENCE BETWEEN NOTICE AND IMPOUNDED MATERIALS S.NO FINANCIAL YEAR DIFFERENCE BETWEEN NOTICE AND I MPOUNDED MATERIALS 1 2004-05 RS.10,70,88,103 2 2005-06 RS.10,52,55,415 3 2006-07 RS.10,77,19,084 4 2007-08 RS.19,39,51,072 THE FOLLOWING CASE LAWS THROW LIGHT ON THE PROCEDUR E TO BE FOLLOWED FOR ACTING UPON THE LOOSE SHEETS OR ESTIMATES THAT HAD BEEN FOUND DURIN G SURVEY OR SEARCH. 1. DHAKESWARI COTTON MILLS LTD VS CIT 26 ITR 775 2. KISHINCHAND CHELLARAM VS CIT (1980) 125 ITR 713(S C) 3. AMAR NATWARALAL SHAW VS ACIT (1967) 60 ITD 560(AH D) 4. LASHWANI KUMAR VS ITO (1991) 39 ITD 183 ITAT (DELH I) 5. ACIT VS SHALLESH S SHAW (1997) 63 ITD 153(BOM) 6. CIT VS DAYA CHAND VAIDYA (1975) 98 ITR 280(A11) 7. ITO VS CHIMBARESWARA RAO (1986) 15 ITD 471(HYD TRI B) SUBMISSION ON FACTS ON LEGAL FOR VALUATION REPORTS AND CERTIFYING ACCOUNTING BOOKS ASSESSMENT YEAR 2005-2006 TO 2008-2009 B) NOTWITHSTANDING THE MAIN SUBMISSION ON VIOLATION OF PRINCIPLES OF NATURAL JUSTICE THE FOLLOWING SUBMISSIONS ARE MADE ON THE FACTS THAT WE RE NOT PROPERLY APPRECIATED BY THE ASSESSING OFFICER. THE HOTEL HAD BEEN UNDER CONSTRUCTION FROM 2000 ONW ARDS. COMMERCIAL ACTIVITIES STARTED ONLY FROM THE ASSESSMENT YEAR 2008-2009. THERE HAD BEEN THEREFORE NO BUSINESS INCOME. NO BOOKS OF ACCOUNTS HAD BEEN PRODUCED AND NONE OF THE BOOKS HAD BEEN EXAMINED. WITH REGARD TO THE PRODUCTIONS OF ACCOUNTS RELATING TO T HE CONSTRUCTION OF THE HOTEL THE BILLS, VOUCHERS AND OTHER RECORDS WERE LOST IN A RIOT IN T HE HOTEL. AN FIR ISSUED BY THE POLICE DEPARTMENT ABOUT THE COMPLAINT MADE TO THEM ABOUT T HE LOSS OF RECORDS RELATING TO THE CONSTRUCTION HAD BEEN FILED BEFORE THE ASSESSING OFF ICER AND COMMISSIONER OF INCOME TAX APPEALS. AN AFFIDAVIT ALSO HAD BEEN FILED. THE ASSE SSEE IS PUNISHABLE UNDER THE INDIAN PENAL CODE WHERE FALSE AFFIDAVITS ARE MADE. SINCE THERE I S ADEQUATE SAFE GUARD FOR THE DEPARTMENT REGARDING FALSE AFFIDAVIT THE CONSTRUCTI ONS ACCOUNT OF THE HOTEL OUGHT TO HAVE BEEN ACCEPTED BY THE OFFICER. THE ASSESSING OFFICER D ID NOT APPLY HER MIND AT ALL THE FIR COPY AND THE AFFIDAVIT. (ENCL: PAGE 74 TO 79) THE ADDITIONS THAT HAD BEEN MADE IN THE ASSESSMENT HAD BEEN ON THE BASIC OF THE ROUGH ESTIMATE THAT WAS FOUND DURING THE SURVEY. THE ASSE SSING OFFICER HAD REFERRED THE VALUATION OF THE HOTEL TO THE DEPARTMENTAL VALUE AND THE VALU ER HAD ALSO GIVEN HIS VALUATION REPORT. ACCORDING TO THE VALUER THE COST OF THE HOTEL PROJE CT HAD BEEN ONLY RS.15,43,21,000. THE ASSESSING OFFICER IS DUTY BOUND TO RELY ONLY UPON TH E VALUATION DONE BY THE VALUATION CELL AND NOT UPON THE ROUGH ESTIMATE IMPOUNDED DURING TH E SURVEY. ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 8 -: THE COST OF CONSTRUCTION AS PER BOOKS EXCLUDING LAN D LANES RS.15,43,21,000 AS ON 1-04- 2007. THERE IS EXCESS ONLY IN COST OF BUILDING OF R S.73,75,600 MORE THAN VALUATION CERTIFICATE (16,16,96,000 - 15,43,21,000) PLANT AND MACHINERY CONSIST OF RS.1,89,26,037, WHICH INCLUDES AC, GENERATOR, MACHINERY ETC., TOTAL PRE OPERATE EXPENSES IS RS.3,06,76,157 CERTIFIED AND ALLOCATED TO FIXED ASSETS AS PER AS O N 31.03.2008. (ENCL PAGE 52). THIS PLANT AND MACHINERY COST RS.1,89,26,037 AND PR E-OPERATIVE EXPENSES RS.3,06,96,157 ARE NOT TAKES IN ARRIVING DIFFERENCE OF INVESTMENTS RS.4,96,02,194 IS 2007-2008. | THE ASSESSING OFFICER HAD NOT GIVEN ANY REASONS FOR REJECTING THE DEPARTMENTAL VALUATION OF RS.15,43,21,000. THE DIFFERENCE OF RS.8,87,49,000 B ETWEEN THE VALUE AS PER THE ROUGH ESTIMATES FOUND DURING THE SURVEY AND THE DEPARTMEN TAL VALUATION REPORT REPRESENTS OVER ESTIMATION OF THE EXPENSES. THERE HAD BEEN NO CORRO BORATIVE EVIDENCES EITHER DURING THE SURVEY OR AFTER WARES THAT THE OVER STATED SUM OF R S.8,87,49,000 HAD BEEN REALLY INCURRED BY THE COMPANY. THE EXPENSES ADMITTED BY THE ASSESSEE UP TO THE DAT E OF SURVEY AS PER THE RETURN OF INCOME HAD BEEN RS.13,59,81,000. THERE IS A DIFFERE NCE OF RS.1,83,40,000 BETWEEN THE VALUE AS PER THE DEPARTMENTAL VALUATION AND AS PER ADMISSION MADE BY THE ASSESSEE. THIS DIFFERENCE WORKS OUT TO 13.48% OF THE ADMITTED COST OF RS. 13,59,81,000. THE VALUATION DONE BY THE VALUATION CELL ALSO SUFFE RS FROM HUMAN SUCCEPTIBILITES OF COMMITTING ERRORS OF OMISSION AND COMMISSION. THE C OURTS HAD THEREFORE HELD IN THE FOLLOWING CASE THAT WHERE THE DIFFERENCE BETWEEN TH E VALUATION ADMITTED AND THE VALUATION DONE BY THE VALUER IS NOT MORE THAN 15% OF THE ADMI TTED COST THE DIFFERENCE SHOULD BE IGNORED AND THERE IS NO CASE FOR ASSESSMENT OF ANY UNDISCLOSED INVESTMENT. 1. HONEST GROUP OF HOTELS (P) LTD VS CIT (20002) 123 TAXMAN 464(J.K) 2. AMIR CHAND VS ACIT (2002) 124 TAXMAN 162 (ITAT CH D) FURTHER THE ASSESSEE HAD BEEN MAINTAINING ACCOUNTS FOR THE CONSTRUCTIONS MADE BY THEM IN THE HOTEL PROJECT ON AN YEAR WISE BASIS AND SUCH CO NSTRUCTION ACCOUNTS HAS BEEN AUDITED BY QUALIFIED CHARTERED ACCOUNTANT. (ENCL: PAGE 83 & 84 ) THE ASSESSING OFFICER HAD NOT REJECTED THE CONSTRUCT ION ACCOUNTS AS FILED BY THE AUDITOR POINTING OUT ANY SPECIFIC DEFECTS. WHEN THE ASSESSI NG OFFICER NOT REJECTED THE CONSTRUCTION ACCOUNTS AS FILED BY THE AUDITOR QUOTING HER REASON S FOR SUCH REJECTION EVEN THE VALUATION REPORT OF THE DEPARTMENTAL VALUES DOES NOT DESERVE TO BE ACTED UPON. THE FOLLOWING CASE LAWS ARE RELEVANT IN THIS REGARD, 1. SAYAR ENGINEERING (P) LTD VS ITO (1992) 43 TTJ23(JP ) AT 2. NISHANT HOUSING DEVELOPMENT (P) LTD VS ACIT (1995 ) 52 ITD 103 (PATNA) (AT) 3. PATIL ENTERPRISE VS ACIT (1995) 53 TTJ 279 (BANG) (AT) 4. ITO VS PITAMBAR INDUSTRIES (P) LTD (1992) 42 ITD 37 3 (DELHI) AT 5. ITO VS DREAM LAND ENTERPRISE (1995) 81 TAXMAN 143 (AND) (AT) 6. SMT.REKHA DEVI VS ACIT (1995) 78 TAXMAN 143 30(JP ) ATTENTION IS ALSO INVITED TO THE DECISION OF ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS DAYA CHAND JAIN VAIDYA WHERE IT HAS BEEN HELD THAT ONUS IS UPON THE DEPARTMENT TO PROVE THAT HIGHER INVESTMENT WAS MADE BY THE ASSESSEE. THE ROU GH ESTIMATE BEING A DUMB DOCUMENT WITHOUT ANY AUTHENTICITY ATTACHED TO IT AND BEING N OT SUPPORTED BY ANY OTHER EXTRANEOUS CORROBORATIVE EVIDENCES OF HIGHER INVESTMENT AT ALL THE ADDITIONS MADE RELYING UPON THE ROUGH ESTIMATE MAY HAVE TO BE DELETED BY THE COMMIS SIONER OF INCOME (TAX APPEALS) AS NOT SUSTAINABLE UNDER LAW. LEAVING THE ADDITIONS THAT WERE MADE ON THE BASIS O F ROUGH ESTIMATE FOUND DURING THE SURVEY AS NOT SUSTAINABLE THERE ARE NO OTHER DISPUT ED ADDITIONS AND HENCE THE RETURNS OF INCOME AS FILED BY THE ASSESSES DESERVE TO ACCEPT. PLACE: DATE: APPELLANT ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 9 -: IT WAS A PRAYER THAT THE ISSUES MAY BE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AND THE ASSESSEE WOULD BE ABLE TO RECONCILE THE ALLEGED SHORTFALL INVESTMENT WHICH HAS RESULTED IN THE ADDI TION. 5. IN REPLY, THE LD.DR SUBMITTED THAT THE ASSESSEE HA S PRODUCED RECONCILIATION STATEMENT FOR THE FIRST TIME BEFORE THE TRIBUNAL AND THE SAME WAS LIABLE TO BE LOOKED INTO BY THE AO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 7. A PERUSAL OF THE PAGE NOS.6-13 OF THE PAPER BOOK F ILED BY THE ASSESSEE SHOWS THAT THE ASSESSEE HAS FILED CERTAIN RECONCILIATION STATEMENTS IN RESPECT OF THE SHORTFALL OF INVESTMEN TS U/S.68 ADDED BY THE AO. THE SAME ARE SCANNED AND MADE A PART OF THIS OR DER. AS THESE ADDITIONS WERE NOT PRODUCED BEFORE THE AO OR THE LD .CIT(A), IN THE INTEREST OF NATURAL JUSTICE, THE ISSUES IN THESE AP PEALS ARE RESTORED TO THE FILE OF THE AO FOR RE-ADJUDICATION AFTER GRANTING T HE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. HERE, WE MUST MENTION THAT AS THE LD.CIT(A) HAS ACCEPTED THE EXPLANATION AND HAS GIVEN THE BENE FIT OF TELESCOPE FOR THE AY, IN RESPECT OF WHICH, THE REVENUE IS ON APPE AL, IT WOULD NOT BE APPROPRIATE TO RESTORE ONLY THOSE APPEALS WHERE THE ASSESSEE IS ON APPEAL ON ACCOUNT OF THE ADDITION BEING CONFIRMED BY THE L D.CIT(A). IN THESE CIRCUMSTANCES, AS THE INVESTMENT IN THE HOTEL BUILD ING IN ITS ENTIRETY IS UNDER CONSIDERATION, ALL THE ISSUES IN THE TWO APPE ALS FILED BY THE REVENUE AND IN THE TWO APPEALS FILED BY THE ASSESSEE ARE RE STORED TO THE FILE OF THE ITA NOS.1627 & 1687/CHNY/2017 & ITA NOS.1841 & 1842/CHNY/2018 :- 10 -: AO FOR RE-ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEALS FILED BY THE REVENUE A ND THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 01 ST AUGUST, 2019 IN CHENNAI. SD/- SD/- ( ) ( INTURI RAMA RAO ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 2 /DATED: 01 ST AUGUST, 2019. TLN - *34 54 /COPY TO: 1. ) /APPELLANT 4. 6 /CIT 2. *+) /RESPONDENT 5. 4 * /DR 3. 6 ( ) /CIT(A) 6. /GF