S.M. Azeez Sons, Channapatna V. ITO, Mandya

ITA 221/BANG/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5527 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Unexplained investment; Source of fund; Valuation report; Revised return
• Section: 143(3); 133A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI N.BARATHVAJA SANKAR, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO.221(BANG.)/2011 (ASSESSMENT YEAR : 2007-2008) S.M.AZEEZ & SONS, NO.1580/A, AZEEZ SONS COMPLEX, SATHANOOR ROAD, SHAH RICE MIL CIRCLE, CHANNAPATNA. APPELLANT VS THE INCOME-TAX OFFICER, WARD-3 MANDYA. RESPONDENT APPELLANT BY : SHRI H.N.KHINCHA, CA RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CIT O R D E R PER SMT P. MADHAVI DEVI, JM ; THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), MYSORE DATED 31-01-2011FOR THE ASSES SMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED AS MANY AS SEVEN GROUND S OF APPEAL CHALLENGING THE RELIABILITY OF THE VALUATION REPORT OF THE DISTRICT VALUATION OFFICER AND ALSO THE ADDITION MA DE BY THE AO OF RS.26,82,673/- AS UNEXPLAINED INVESTMENT BY RELY ING UPON ITA.NO.221(B)/11 2 THE REPORT OF THE DISTRICT VALUATION OFFICER. THE GROUND OF APPEAL NO.4 RELATING TO RELIABILITY OF VALUATION RE PORT OF THE DISTRICT VALUATION OFFICER IS DISMISSED AS NOT PRES SED, AS THE LEARNED COUNSEL FOR THE ASSESSEE CONCEDED AT THE TI ME OF HEARING THAT THE ASSESSEE IS NOT INTERESTED IN PRES SING THIS GROUND OF APPEAL. 3. AS REGARDS THE OTHER GROUNDS OF APPEAL, THE BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM WHICH FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 DECLARING TOTAL INCOME OF RS.38,850/-. THERE WAS A SURVEY U/S 133A OF THE ACT ON 23-03-2007 AND DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE HAS CONSTRUC TED A SHOPPING COMPLEX AT CHANNAPATNA, WHICH HAD BEEN COM PLETED DURING THE YEAR 31-03-2007. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, VARIOUS DETAILS RELATING TO CONSTRUCTION OF THE SHOPPING COMPLEX WAS CALLED FOR AND IT WAS OBSERVED FROM THE BALANCE SHEET ENCLOSED TO THE RET URN OF INCOME THAT THE ASSESSEE HAS DECLARED A SUM OF RS.80,00,723/- AS INVESTMENT IN THE CONSTRUCTION OF A COMMERCIAL COMPLEX AND A SUM OF RS.4,56,166/- AS IN TEREST ITA.NO.221(B)/11 3 PAID TO KSFC. THE AO THEREAFTER, REFERRED THE MATTE R TO THE DEPARTMENTAL VALUATION OFFICER TO ASCERTAIN THE COR RECT COST OF CONSTRUCTION OF THE COMMERCIAL COMPLEX. THE DEPART MENTAL VALUATION OFFICER VIDE HIS REPORT DATED 05-12-2008 ESTIMATED THE COST OF CONSTRUCTION AT RS.99,52,000/- WHICH DOES NOT INCLUDE I) THE VALUE OF LAND, 2) FURNITURE AND FITTINGS, 3 ) INTEREST ON BORROWED CAPITAL, IF ANY, AND 4) WORKS REPORTEDLY D ONE LATER TILL THE DATE OF VALUATION. ON 03-12-2008, THE ASSESSEE FILED A REVISED RETURN DECLARING A TOTAL INCOME OF RS.38,85 0/, WHICH IS THE SAME, AS IN THE ORIGINAL RETURN OF INCOME FILED DISCLOSING THE ADDITIONAL CAPITAL OF THE PARTNERS AND THE ASSE SSEE HAS ALSO ENCLOSED THE SAME SET OF STATEMENTS TO THE REV ISED RETURN OF INCOME, AS HAS BEEN ENCLOSED TO THE ORIGINAL RET URN. THE ASSESSEES OBJECTIONS REGARDING THE VALUE ESTIMATED BY THE DEPARTMENTAL VALUATION OFFICER WAS CALLED FOR. THE MANAGING PARTNER OF THE ASSESSEE FIRM STATED THAT THE VALUAT ION SHOWN BY THE DEPARTMENTAL VALUATION OFFICER IS ON THE HIG HER SIDE AND HE FILED A COPY OF THE ESTIMATE OF THE COST OF CONS TRUCTION MADE BY THE KSFC FOR SANCTION OF LOAN AND ALSO LEDGER EX TRACTS OF ITA.NO.221(B)/11 4 THE FIRM TO SHOW THE SOURCE OF FUNDS FOR CONSTRUCTI ON OF THE COMMERCIAL COMPLEX. ACCORDING TO THIS LETTER THE BU ILDING COST WAS AT RS.72,69,327/- AND THE COST OF CONSTRUCTION OF A HOUSE WAS RS.7,31,389/- WHICH IS TOTALED AT RS.80,00,723/ -. THE AO HOWEVER, WAS NOT CONVINCED WITH THE ASSESSEES SUBM ISSIONS AND HELD THAT THE COST OF CONSTRUCTION OF THE COMME RCIAL COMPLEX SHOWN BY THE ASSESSEE AT RS.72,69,327/- WAS NOT SUPPORTED BY ANY DOCUMENTARY PROOF AND THE COST AS DETERMINED BY THE DEPARTMENTAL VALUATION OFFICER AT RS.99,52,414/- IS ACCURATE, REASONABLE AND BASED O N CORRECT METHOD OF VALUATION. HE THUS, ADDED THE DIFFERENCE OF RS.26,82,673/- TO THE INCOME DECLARED BY THE ASSESS EE AS UNEXPLAINED INVESTMENTS. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) WHO CONFIRMED THE ORDER OF AO AND THE ASSESS EE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H.N. KHINCHA WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSES SEE BEFORE THE AUTHORITIES BELOW SUBMITTED THAT THE COST OF CONSTR UCTION VALUED BY THE DEPARTMENTAL VALUATION OFFICER WAS EXCESSIVE BE CAUSE, HE ADOPTED THE CPWD PRICES, WHILE THE BUILDING CONSTRU CTED WAS AT ITA.NO.221(B)/11 5 CHANNAPATNA, A SMALL TOWN IN KARNATAKA WHERE THE PR ICES TO BE ADOPTED ARE AS PER THE STATE PWD RATES. FOR THIS P REPOSITION, HE RELIED UPON THE FOLLOWING DECISIONS, 1. CIT VS SMT PREM KUMARI MURDIA (2008) 296 ITR 508( RAJ.) HIGH COURT OF RAJASTHAN , WHEREIN THE HONBLE HIGH COURT HELD THAT TO UPHOLD THE FINDING OF CIT(A) THAT APPROPRIATE RA TE TO BE TAKEN INTO CONSIDERATION WOULD HAVE BEEN PWD RATES AND NOT THE CPWD RATES. 2. SHRI S. BANGARAPPA VS DCIT REPORTED 155 TAXMAN 84(BANG.) , WHEREIN IT HAS BEEN HELD THAT IT IS WELL SETTLED PRINCIPLE THAT LOCAL RATES MUST BE PREFERRED TO CPWD RATES WH ILE EVALUATING THE COST OF CONSTRUCTION BECAUSE THE CPWD RATES ARE GENERALLY HIGHER AND BASED ON RATES PREVAILING IN DELHI AND I N A SMALL PLACE LIKE SHIMOGA, THE COST OF CONSTRUCTION WILL BE MUCH LOWER THAN THE CPWD RATES, APPROVED BY THE BOARD. 3. SHRI H.K.ABDUL JABBAR VS DCIT IN ITA NO.1213(B)/20 08 4. LATE S.KOTI RAO VS ITO IN ITA NO.503(B)2001 AND 5. ITO VS B.N.VENKATASUBBAIAH IN ITA NO.61(B)/199 8 & 816 & 817(B)/1998 , WHEREIN THE ABOVE PRINCIPLE HAS BEEN REITERATED. 6. THE LEARNED DR HOWEVER, STRONGLY OBJECTED TO TH E ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE A ND SUBMITTED THAT THE DEPARTMENTAL VALUATION OFFICER HAS GIVEN A FAIR OPPORTUNITY ITA.NO.221(B)/11 6 OF HEARING TO THE ASSESSEE AND THEREAFTER, ONLY HAS VALUED THE COST OF CONSTRUCTION AND THEREFORE, THE ASSESSEE IS NOW PRECLUDED FROM TAKING THIS GROUND BEFORE THE TRIBUNAL AT THIS STAG E. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE DISPUTE IS WITH REGARD TO ESTIMATION OF THE COST OF CONSTRUCTION OF THE COMME RCIAL COMPLEX BUILDING AT CHANNAPATNA WHICH IS A SMALL TOWN IN TH E STATE OF KARNATAKA. IT IS ALLEGED THAT THE DEPARTMENTAL VAL UATION OFFICER HAS VALUED THE COST OF CONSTRUCTION OF THE BUILDING AT THE CPWD RATES, WHILE THE ASSESSEE SEEKS TO VALUE THE COST OF CONST RUCTION AS PER STATE PWD RATES. THOUGH, THE ASSESSEE HAS NOT RAIS ED THIS ISSUE BEFORE THE AUTHORITIES BELOW, HE IS ALWAYS AT LIBER TY TO RAISE AN ISSUE BEFORE THE HIGHER AUTHORITIES, AS LONG AS THE FACTS ARE ALREADY ON RECORD, AS HELD BY THE HONBLE APEX COURT IN THE CA SE OF NTPC. THE QUESTION BEFORE US IS WHETHER THE STATE PWD RATES O R CPWD RATES ARE TO BE APPLIED FOR VALUING THE COST OF CONSTRUCT ION ? ALL THE MATERIAL FACTS ARE ALREADY ON RECORD. IN SUCH A CA SE, WE ARE INCLINED TO FOLLOW THE DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND HOLD THAT IN A SMALL TOWN LIKE CHANNAP ATNA THE COST OF CONSTRUCTION IS TO BE ESTIMATED BY ADOPTING STAT E PWD RATES AND NOT CPWD RATES. IN VIEW OF THE SAME, WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE ISSUE TO THE FILE OF THE AO TO VALUE THE COST OF ITA.NO.221(B)/11 7 CONSTRUCTION OF THE COMMERCIAL COMPLEX, AS PER STAT E PWD RATES PREVAILING AT THE RELEVANT POINT OF TIME. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE SD/- SD/- (N. BARATHVAJA SANKAR) (SMT. P. MADHAVI D EVI) VICE PRESIDENT JUD ICIAL MEMBER PLACE: BANGALORE DATED: 30-06-2011. AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR, ITAT, BANGALORE