Nalanda Resorts, Kasargode V. CIT, Kannur

ITA 225/COCH/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61358 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: PREETHA S NAIR
• Keywords: Depreciation; Valuation report; Assessment record
• Section: 263

Judgement Text

1 ITA NO.225/COCH/2009 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 225/COCH/2009 (ASSESSMENT YEAR 2005-06) NALANDA RESORTS VS ITO, WD.1 N.H. 17 JN. NILESHWAR KASARGOD KASARGOD DIST PAN : AACFN2323D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PREETHA S NAIR RESPONDENT BY : SHRI S.R. SENAPATI DATE OF HEARING : 27-03-2012 DATE OF PRONOUNCEMENT : 03-04-2012 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED BY THE ORDER DATED 19-02-2009 PASS ED BY THE ADMINISTRATIVE COMMISSIONER FOR THE ASSESSMENT YEAR 2005-06, THE A SSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. 2. SMT. PREETHA S NAIR, THE LD.COUNSEL FOR THE ASSE ESSEE SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO REFER THE MATTER WITH REGARD TO THE COST OF CONSTRUCTION TO THE VALUATION CELL. ON SUCH REFERENCE BY THE ASSESSING OFFICER, THE VALUATION OFFICER ESTIMATED THE COST OF CONSTRUCTION. ACCORDING TO THE LD.COUNSEL, THE DIFFERENCE BETWEEN THE VALUE DI SCLOSED BY THE ASSESSEE AND THE VALUE DETERMINED BY THE VALUATION OFFICER IS ONLY 6 % WHICH IS QUITE INSIGNIFICANT. THEREFORE, ACCORDING TO THE LD.COUNSEL, THE ORDER O F THE ASSESSING OFFICER IS NEITHER 2 ITA NO.225/COCH/2009 ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. ACCORDING TO THE LD.COUNSEL, THE ADMINISTRATIVE COMMISSIONER HAS NO JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ENTIRE DETAILS OF COST OF CONSTRUCTION WERE ALREADY FURNISHED BEFORE THE ASSESSING OFFICER. THEREFORE, EXERCISE OF POWER U/S 263 IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI S.R. SENAPATI, THE LD.DR S UBMITTED THAT THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE ASSESSING OFFICER GRANT ED DEPRECIATION IN RESPECT OF A WHOLE BUILDING AT THE RATE WHICH IS APPLICABLE TO P LANT. ACCORDING TO THE LD.REPRESENTATIVE, THE HOTEL BUILDING IS ENTITLED F OR DEPRECIATION ONLY AS A BUILDING AND NOT AS A PLANT. AT THE TIME OF ASSESSMENT, THE ASS ESSING OFFICER REJECTED THE BOOK RESULT BY DISCARDING THE LOSS RETURN FILED BY THE ASSESSEE . THE ASSSSEE HAD ALSO AGREED FOR DISCARDING THE LOSS RETURN FILED BY THE ASSESSEE AF TER REJECTING THE BOOK RESULT AND THE ASSESSMENT WAS FINALIZED AS PROPOSED BY THE ASSESSI NG OFFICER. ONCE THE BOOK RESULT WAS NOT ACCEPTED BY THE ASSESSING OFFICER, THEN HE OUGHT TO HAVE ESTIMATED THE COST OF CONSTRUCTION AFTER MAKING REFERENCE TO THE VALUATIO N CELL. THIS WAS NOT DONE. THEREFORE, THE ADMINISTRATIVE COMMISSIONER DIRECTED THE ASSESS ING OFFICER TO REFER THE COST OF CONSTRUCTION TO THE VALUATION CELL. AS SUCH, THE O RDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY INVOKED HIS JURISDICTION U /S 263 OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ON EXAMINATION OF TH E ASSESSMENT RECORDS, THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE ASSESSIN G OFFICER ALLOWED DEPRECIATION ON THE HOTEL BUILDING AT THE RATE APPLICABLE TO PLANT. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE HOTEL BUILDING IS ENTITLED FOR DEPRECIATION ONL Y AT THE RATE APPLICABLE TO BUILDING. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSING OFFICER, AFT ER REJECTING THE BOOK RESULT, HAS DISCARDED THE LOSS RETURN FILED BY THE ASSESSEE WHI CH WAS ALSO ACCEPTED BY THE ASSESSEE. THE ASSESSEE AGREED FOR ESTIMATION OF PROFIT AS PRO POSED BY THE ASSESSING OFFICER. WHEN 3 ITA NO.225/COCH/2009 THE ASSESSING OFFICER REJECTED THE BOOK RESULT, THE COST OF CONSTRUCTION WOULD HAVE TO BE ESTIMATED AS FOUND BY THE COMMISSIONER. IN FACT, A FTER THE DIRECTION OF THE COMMISSIONER, THE COST OF CONSTRUCTION WAS REFERRED TO THE VALUATION CELL AND THE VALUATION CELL HAS ALSO ESTIMATED THE COST OF CONST RUCTION AND FILED THE VALUATION REPORT BEFORE THE ASSESSING OFFICER. THE COPY OF THE VALU ATION REPORT FILED BY THE VALUATION OFFICER IS FILED BY THE ASSESSEE BEFORE THIS TRIBUN AL. THE CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL IS THAT THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE AND THE ESTIMATE BY THE VALUATION CELL IS ONLY 6% AND THEREFORE IT IS NEGLIGIBLE. THIS TRIBUNAL IS OF THE OPINION THAT T HE VALUATION REPORT FILED BY THE VALUATION OFFICER HAS TO BE EXAMINED BY THE ASSESSING OFFICER AT THE FIRST INSTANCE. THEREFORE, GOING TO THE MERIT OF THE VALUATION REPORT AT THIS STAGE MAY NOT BE PROPER. SUFFICE TO SAY THAT GRANT OF DEPRECIATION TO THE HOTEL BUILDING AT THE RATE APPLICABLE TO PLANT AND NON REFERENCE OF THE COST OF CONSTRUCTION TO THE VALUAT ION CELL WHEN THE BOOK RESULTS ARE NOT ACCEPTED IS AN ERROR WITHIN THE MEANING OF SECTION 263 OF THE ACT AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THIS TRIBUNAL IS OF THE OPINION THAT THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY EXERCISED H IS JURISDICTION U/S 263 OF THE INCOME-TAX ACT. WE DO NOT FIND ANY INFIRMITY IN EX ERCISE OF SUCH POWER BY THE ADMINISTRATIVE COMMISSIONER. ACCORDINGLY HIS ORDER IS UPHELD. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF APRIL, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 03 RD APRIL, 2012 PK/- 4 ITA NO.225/COCH/2009 COPY TO: 1. NALANDA RESORTS, N.J. 127 JN, NILESHWAR, KASARGOD D IST 2. ITO, WD.1, KASARGOD 3. THE COMMISSIONER OF INCOME-TAX, KANNUR 4. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH