SHRI NANAKRAM HAJARIMAL PARASWANT, Aurangabad V. ACIT, CIR 2, Aurangabad

ITA 206/PUN/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49929 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 27-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY SINGH SR
• Keywords: Deemed to accrue or arise in india; Valuation report
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMB ER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ITA NO. 206/PN/2006 (ASSTT. YEAR : 2002-03) NANAKRAM HAJARIMAL PARASWANI APPELLANT PROP . M/S. ANAND TRADING CO., TILAK PATH, AURGANGABAD DIST. AURANGABAD 431 001 PAN : NOT AVAILABLE VS. ACIT, CIRCLE-2 RESPONDENT AURANGABAD ITA NO. 167/PN /2006 (ASSTT. YEAR : 2002-03) ACIT, CIRCLE-2 RESPONDENT JEEVAN SUMAN L.I.C. BLDG. 2 ND FLOOR, N-5, CIDCO,AURANGABAD VS. NANAKRAM HAJARIMAL PARASWANI APPELLANT PROP. M/S. ANAND TRADING CO., TILAK PATH, AURGANGABAD DIST. AURANGABAD 431 001 PAN : NOT AVAILABLE ASSESSEE BY : MS. DEEPA KHARE DEPARTMENT BY : SHRI SANJAY SINGH SR AR ORDER PER D. KARUNAKARA RAO AM THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE A ND REVENUE AGAINST THE ORDER OF CIT(A) DATED 20.11.2005. 2 2. THE GROUNDS RAISED BY ASSESSEE READ AS UNDER : 1. UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-II, AURANGABAD ERRED IN CONFORMING THE ADDITION MADE BY THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, AURANGABAD ON ACCOUNT OF DIFFERENCE IN VALUATION OF BUILDING TO THE EXTENT OF RS.1242447/- ON THE BASIS OF DEPARTMENTAL VALUER. 3. THE GROUNDS RAISED BY REVENUE READ AS UNDER : I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A)-II, ABAD HAS ERRED IN ALLOWING THE DEDUCTION OF RS.4,58,611/ - FOR THE EXTRA SERVICES LIKE MSEB LINE SERVICES AND ELECTRIC WIRING, NOT PR OVIDED BY THE ASSESSEE ACCEPTING THE ASSESSEES CONTENTION. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A)-II, ABAD HAS FURTHER ERRED IN ALLOWING THE DEDUCTION AT RS.3 ,15,968/- I.E. @8.5% IN ADDITION TO THE DEDUCTION GIVEN @ 25.5% BY THE D.V. O. FOR INCOMPLETE WORK, SUCH AS FLOORING, DOORS AND WINDOWS, PARTITION WAL LS, INTERIOR PAINTINGS AND EXTRA FACILITIES. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A)-II, ABAD HAS NOT PRODUCED THE MATERIAL FOR VALUATION TO THE D.V.O. SUCH AS BILLS AND VOUCHERS OF MATERIAL AND LABOUR PAYMENTS, STRUCTUR AL ARCHITECTURAL DRAWINGS, DETAILS OF MEASUREMENT ETC. HE ALSO NOT PRODUCED T HE CONSTRUCTION ACCOUNT. THEREFORE, THE VALUATION OF FOR COST OF CONSTRUCTIO N IS WORKED OUT ON BASIS OF THE PLINTH AREA RATE METHOD WITH APPLICABLE COST IN DEX OF THE PLACE. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE D.V.O HAS MENTIONED IN HIS VALUATION REPORT THAT THE VALUATIO N OF THE BUILDING DOES NOT INCLUDE THE COST OF FLOORING, DOORS AND WINDOWS, PA RTITION WALLS, TOILETS, MOVABLE FURNITURE AND FIXTURES. THE DVO HAS GIVEN DEDUCTION @ 25.5% FOR THE ABOVE EXTRA AMENITIES. 4. FROM THE ABOVE, IT IS EVIDENT THAT ISSUES RAISE D BY BOTH THE PARTIES RELATE TO THE VALUATION OF THE COMMERCIAL PROPERTY CONSTRUCTE D BY THE ASSESSEE AND OTHERS. CONSIDERING THE COMMONALITY OF THE ISSUES, BOTH THE SE APPEALS ARE CLUBBED AND BEING ADJUDICATED AS ABOVE. 5. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE IS A PROPRIETOR OF M/S. ANAND TRADING CO AND THE TOTAL INCOME OF THE ASSESS EE WAS ASSESSED U/S. 143(3) OF THE ACT AT RS. 26,63,896/- AS AGAINST THE RETURNED INCOME OF RS.6,46,866/-. THE ASSESSEE CONSTRUCTED A BUILDING AT TILAK PATH, AURA NGABAD. THE IMPUGNED CONSTRUCTION WAS CARRIED OUT BETWEEN APRIL, 2000 TO NOV. 2001 AND THE TOTAL COST OF 3 CONSTRUCTION AS PER THE ASSESSEES BOOKS WAS RS.17, 00,250/-. THE AO REFERRED THE MATTER TO THE DVO, WHO DETERMINED THE COST OF CONST RUCTION AT RS.37,17,276/-. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE DID NOT MAINTAIN ANY CONSTRUCTION DETAILS OF YEAR-WISE CONSUMPTION OF CONSTRUCTION MATERIAL. EVEN DURING THE VALUATION PROCEEDINGS AL SO, THE ASSESSEE DID NOT PRODUCE ANY STRUCTURAL DRAWINGS, ARCHITECTURES DRAWINGS, D ETAILS OF FOUNDATIONS, DETAILS OF MEASUREMENTS, BILLS, VOUCHERS OF MATERIAL AND LABOU R AND OTHER RELEVANT INFORMATION. THEREFORE, CONSIDERING THE VALUATION DONE BY THE DV O, THE AO ASSESSED THE COST OF CONSTRUCTION AT RS. 37,17,276/- AS AGAINST THE ASSE SSEE FIGURE OF RS. 17,00,250/-. ACCORDINGLY, HE TREATED THE DIFFERENCE OF RS.20,17, 026/- (RS. 37,17,276 - RS. 17,00,250) AS DEEMED INCOME OF THE ASSESSEE U/S. 69 OF THE ACT. THIS AMOUNT INCLUDES THE SUM OF RS 4,58,611/- ON ACCOUNT OF EXT RA SERVICES LIKE MSEB LINE SERVICES, ELECTRIC WIRING ETC. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE ASSESSEE FILED THE WRITTEN SUBMISSION. THE MAIN CO NTENTIONS OF ASSESSEE WERE,- THE DVO HAS VALUED THE SAID PROPERTIES BY ADOPTING THE CPWD RATES AND METHOD OF PLINTH AREA METHOD. AS THE PROPERTY IS S ITUATED AT AURANGABAD, THE STATE PWD RATE SHOULD HAVE BEEN APPLIED. (2)THE BASIC PLINTH AREA RATE ADOPTED BY THE DVO IS RS.6730/- WHEREAS THE ASSESSEES VALUER HAS TAKEN THE RATE AT RS.4389/- W HICH IS REASONABLE ACCORDING TO THE ASSESSEE. (3) THE ASSESSEE HAS STATED THAT THE APPELLANT HAS NOT PROVIDED FLOORING, DOORS AND WINDOWS AND ALSO PARTITION WALLS, INTERNA L PAINTING AND EXTRA FACILITIES. FOR THIS UNFINISHED WORK, THE ASSESSEE S VALUER HS PROVIDED 55% OF THE TOTAL COST WHEREAS THE DVO HAS PROVIDED 25.5%. THE ESTIMATE OF EXTRA SERVICES HAS BEEN TAKEN AT RS.4,58,611/- BY THE DVO , THOUGH THE APPELLANT HAS NOT PROVIDED MSEB SERVICE LINES AND THE ELECTRI CAL WIRING. THEREFORE THIS AMOUNT OF RS.4,58,611/- WILL NOT COUNT FOR THE COST OF CONSTRUCTION AS FAR AS THE ASSESSEE IS CONCERED. (4) THE ADDITION OF BUILDING EFFORTS OF RS.72 888/- IS NOT PROPER AS THE BUILDING IS CONSTRUCTED UNDER OUR SUPERVISION. (5) THE DEPARTMENTAL VALUER HAS NOT GIVEN DEDUCTION FO R THE PROFIT MARGIN OF CONTRACTOR AS THE SAME IS ALWAYS INCLUDED IN THE RATES PRESCRIBED BY PWD DEPARTMENTS. OUR VALUER HAS DEDUCTED 10% AS CONTRA CTORS PROFITS FROM THE TOTAL COST OF CONSTRUCTION. THE DEDUCTION FROM THE COST HAS TO BE GIVEN FOR THE CONTRACTORS PROFIT. 4 7. ON CONSIDERING THE ABOVE SUBMISSIONS OF T HE ASSESSEE AS WELL AS THE FACTS OF THE CASE, CIT(A) EXAMINED THE AVAILABLE DOCUMENT S AND THE ASSESSMENT ORDER AND THE FOLLOWING ARE HIS FINDINGS. THEY ARE: (1) THIS IS A FACT THAT THE ASSESSEE SUBMITTED ONLY THE VALUATION REPORT BY THE VALUER FOR THE COST OF CONSTRUCTION. NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR DURING THE COU RSE OF VALUATION PROCEEDINGS THE ASSESSEE HAS SUBMITTED ANY CONSTRUC TION ACCOUNT, CONSUMPTION OF CONSTRUCTION MATERIAL, STRUCTURAL DR AWING, ARCHITECTURES DRAWING, DETAILS OF FOUNDATION, DETAILS OF MEASURE MENTS, BILLS, VOUCHERS OF MATERIAL AND LABOUR AND OTHER RELEVANT INFORMATION. (2) THIS IS ALSO A FACT THAT THE SHOPS HAVE BEEN HA NDED OVER BY THE ASSESSEE WITHOUT FLOORING, DOORS AND WINDOWS, PARTI TION WALLS, INTERNAL PAINTINGS AND WITHOUT ANY EXTRA FACILITIES. (3) THIS IS ALSO A FACT THAT EXTRA SERVICES HAVE NOT BEEN PROVIDED BY THE ASSESSEE FOR WHICH THE DVO HAS CALCULATED R S. 4,58,611/-. (4) THE DVO HAS TAKEN THE RATES AS PER PAR AS ON 1.1.92 AND HAS ADJUSTED THE SAME AS PER THE COST INDEX OF AURANGAB AD. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE RATES TAKEN BY THE DVO ARE IN RELATION TO THE METROPOLITAN AND NO APPLICABLE TO A URANGABAD IS NOT ACCEPTABLE. CONSIDERING THE ABOVE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) GAVE THE FOLLOWING RELIEF. (1) AS DISCUSSED ABOVE, SINCE THE RATE APPLIED BY THE DVO IS AFTER TAKING INTO CONSIDERATION THE COST INDEX OF AURANGABAD, NO INTERFERENCE IS CALL FOR IN RESPECT OF THE BASIS RATE APPLIED BY THE DVO. (2) I FOUND MERITS IN THE ARGUMENT OF ASSESSEE THAT AS THE ASSESSEE HAS NOT PROVIDED EXTRA SERVICES LIKE MSEB LINE SERVIC ES AND ELECTRICAL WIRING, THE COST OF CONSTRUCTION OF THE BUILDING WILL BE REDUC ED TO THAT EXTENT WHICH HAS BEEN CALCULATED BY THE DVO AT RS.4,58,611/-. (3) AS FAR AS THE CONTENTION OF THE ASSESSEE THAT IN UNFINISHED WORK DEDUCTION HAS BEEN GIVEN BY THE ASSESSEES VALUER A T 55%, WHEREAS THE DVO HAS GIVEN DEDUCTION AT 25.5%. I OBSERVED THAT THE FOLLOWING WORK HAS NOT BEEN DONE BY THE ASSESSEE: FLOORING, DOORS AND WINDOWS, PARTITION WALLS INTE RIOR PAINTINGS AND EXTRA FACILITIES. 5 AS PER THE INFORMATION SUBMITTED BY THE ASSESSEE, F OR THE PLINTH AREA RATES BY THE PWD DEPT. THE COST OF DIFFERENT PARTS OR PERCEN TAGE EXCLUDING THE SANITARY WORK ETC., HAS BEEN MENTIONED AS UNDER : (I) FLOORING 6% (II) DOORS & WINDOWS 16% (III) PLASTERING & PAINTING 10% (IV) COLOURING 2% 34% THUS THE CIT(A) GAVE THE PART RELIEF TO THE ASSESS EE IE. AGAINST THE 25.5% EXCESS DEDUCTION. TO SUMMARIZE, ASSESSEE GOT RELIEF OF R S. 7,74,575/- OUT OF THE DVO COST RS. 37,17,276/- , RS 7,74,579/- CONSISTS OF TWO S EGMENTS IN RESPECT OF EXTRA SERVICES AND UNCOMPLETED WORKINGS I.E. RS.4,58,601 AND RS 3,15,967 RESPECTIVELY. 8. THEREFORE, THE COST OF CONSTRUCTION AS PER THE B OOKS IS RS.17,00,250/-. COST OF CONSTRUCTION AS PER DVO IS RS.37,17,276/-. A.O MADE ADDITION AMOUNTING TO RS.20,17,026/-. AT FIRST APPELLATE STAGE, CIT(A) GAVE RELIEF TO THE EXTENT OF RS.7,74,579/- (.4,58,601 AND RS 3,15,967). THEREBY , THE CIT(A) CONFIRMED THE ADDITION OF RS.12,42,447/-. AGGRIEVED WITH THE CON FIRMATION OF THE ADDITION AMOUNTING TO RS.12,42,447/- THE ASSESSEE IS IN APPE AL. ON THE OTHER HAND, AGGRIEVED WITH THE RELIEF AMOUNTING TO RS.7,74,579/ -, THE REVENUE IS IN APPEAL. 9. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FO R THE ASSESSEE STATED THAT THERE ARE DECISIONS OF THIS TRIBUNAL FOR THE PROPOS ITION THAT THE ASSESSEE IS ENTITLED TO 15% DISCOUNT IN VIEW OF THE RATE DIFFERENCES BET WEEN THE CPW RATES AND ACTUAL. 10% DISCOUNT NEEDS TO BE GIVEN TOWARDS THE SELF SUP ERVISION. FOR THIS PURPOSE, THE COUNSEL SUBMITTED THE FOLLOWING WORKING : VALUATION AS PER DVOS REPORT 37,1 7,276/- LESS: 15% ON ACCOUNT OF RATE DIFFERENCE 5,57,59 2/- ---------------- 31,59,684/- LESS: 10% ON ACCOUNT OF SELF SUPERVISION 3,15,968/- ------------------ 29,43,716/- LESS: DEDUCTIONS ALLOWED BY CIT(A) FOR EXTRA SERVICES 4,58,611/- FOR UNCOMPLETE WORK 3,15,968/- 7,74,579/- ------------ - ------------------ 6 21,69,137/- ========= SHARE OF THE APPELLANT @ 50% 10,84,568/- COST OF CONSTRUCTION DISCLOSED BY THE APPELLANT 9,00,250/- 6. FURTHER, WITHOUT PREJUDICE, LD COUNSEL ARGUED TH AT THE PROPERTY IN QUESTION IS OWNED BY TWO PARTIES, THEREFORE, THE ASSESSEE IS ENTITLED FOR CHARGEABILITY IF ANY TO THE EXTENT OF ONLY 50% OF THE INVESTMENT. THEREFOR E, THE A.O IS ERRED IN CONSIDERING THE WHOLE DIFFERENCE OF INVESTMENT IN THE HANDS OF THE ASSESSEE ERRONEOUSLY. ON THE OTHER HAND, THE D.R. FOR THE REVENUE MENTIONED THAT THE SAID DECISION OF THE TRIBUNAL, IS INAPPLICABLE TO THE FACTS OF THIS CASE . FURTHER, THE LD D.R. ARGUED STATING THAT THE LD COUNSEL IS RAISING A NEW ISSUE BEFORE T HE TRIBUNAL THAT THE 50% OF THE INVESTMENT SHOULD BE REDUCED FROM THE CONSIDERATION OF ADDITION IN THE HANDS OF THE ASSESSEE. TAKING US THROUGH THE ORDERS O THE LOWER AUTHORITIES, LD D.R. FOR THE REVENUE STATED THAT THIS ADDITIONAL GROUND BEING RA ISED BEFORE THE TRIBUNAL SHOULD NOT BE ENTERTAINED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AND THE SUBMISSIONS MADE BY LD COUNSEL BEFORE THE LOWER AUTHORITIES AS WELL. WE FIND THERE ARE TWO ISSUES IN THESE TWO APPEALS I.E. (I ) PERTAINING TO THE CONFIRMING OF ADDITION OF RS.12,42,447/- AND THE OTHER ONE BY REV ENUE RELATES THE RELIEF GRANTED BY THE CIT(A) AMOUNTING TO RS.7,74,579/-. THESE IS SUES ARE ADJUDICATED IN THE FOLLOWING PARAGRAPHS. A. CONFIRMING OF ADDITION OF RS.12,42,447/- RAISED BY THE ASSESSEE: 8. APPLICABILITY OF THE DECISION OF THIS BENCH IN T HE CASE OF HARPREET HOTELS PVT. LTD. (SUPRA) ASSUMES IMPORTANCE. IN OUR VIEW, PRIMA FACIE, THIS DECISION OF OURS ESSENTIALLY ADVOCATES FOR GRANT OF DISCOUNT @ OF 15 % ON ACCOUNT OF RATE DIFFERENCE (RS 5,57,592/-)AND ALSO FOR GRANT OF DISCOUNT @ OF 10% ON ACCOUNT OF SELF SUPERVISION (RS 3,15,968/-). HOWEVER, THERE IS NEED FOR EXAMINING THE FACTS CLOSELY. THEREFORE, IN OUR OPINION, THE MATTER HAS TO BE SET ASIDE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH AFTER CONSIDERING THE APP LICABLE RATES I.E. PAR AND THE CPW RATES APPLIED BY THE DVO. A.O IS DIRECTED TO GRANT REASONABLE OPPORTUNITY OF BEING 7 HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AFRESH I N THE LIGHT OF THE BINDING DECISIONS IN THIS REGARD. ACCORDINGLY, THIS ISSUE IS SET ASIDE. B. RELIEF OF RS. 7,74,579/- 9. FROM THE PRECEDINGS PARAGRAPHS, IT IS DECIPHERAB LE THAT THE CIT(A) GRANTED RELIEF OUT OF THE FIGURE DETERMINED BY THE DVO AND IT WORK S OUT TO RS 7,74,579. THIS RELIEF HAS TWO COMPONENTS AND THEY ARE: (I) ALLO WING THE DEDUCTION AT RS. 3,15,968 /- I.E. @8.5% IN ADDITION TO THE DEDUCTION GIVEN @ 25.5% BY THE D.V.O. FOR INCOMPLETE WORK , SUCH AS FLOORING, DOORS AND WINDOWS, PARTITION W ALLS, INTERIOR PAINTINGS AND EXTRA FACILITIES. (II) ALLOW ING THE DEDUCTION OF RS. 4,58,611 /- FOR THE EXTRA SERVICES LIKE MSEB LINE SERVICES AND ELECTRIC WIRING, NOT P ROVIDED BY THE ASSESSEE ACCEPTING THE ASSESSEES CONTENTION. REGA RDING THIS RELIEF RELATING TO THE RELIEF OF RS. 7,74,579/-, IN OUR OPINION, THE ORDE R OF CIT(A) IS FAIR AND GIVEN THE REASONS AS TO HOW THE DVO ENTERTAINED THE WRONG PRE SUMPTION WITH REGARD TO THE EXTRA SERVICES AND OTHERS. WE AGREE WITH THE SAME. THEREFORE, WE FIND THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE ON TH IS RELIEF ISSUE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD ARE DISMISSED . 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH JULY 2011 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER (D. KARUNAKARA RAO) ACCOUNTANT MEMBER PUNE: DATED: 13TH JULY, 2011 US COPY OF THE ORDER IS FORWARDED TO : 8 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I/II, KOLHAPUR /CIT (CENTRAL), PUNE 4. THE CIT(A)- KOLHAPUR 4. THE D.R. ITAT, B BENCH, PUNE 5. GUARD FILE BY ORDER