ITO, Ward-1, Mahaboobnagar, Mahabubnagar V. Sri Vishnu Constructions, Mahaboobnagar, Mahabubnagar

ITA 231/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5876 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 02-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2015
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Unexplained expenditure; Additional evidence; Fair market value
• Section: 69C; 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 230/HYD/15 2008-09 INCOME TAX OFFICER, WARD-1, MAHABOOBNAGAR M/S. SRI VISHNU CONSTRUCTIONS MAHABOOB NAGAR DIST. [PAN: ABKFS0755M] 231/HYD/15 2010-11 232/HYD/15 2011-12 C.O. NO. ASST. YEAR CROSS-OBJECTOR RESPONDENT 69/HYD/16 (IN ITA NO. 230/HYD/15) 2008-09 M/S. SRI VISHNU CONSTRUCTIONS MAHABOOB NAGAR DIST. [PAN: ABKFS0755M] INCOME TAX OFFICER, WARD-1, MAHABOOBNAGAR 70/HYD/16 (IN ITA NO. 231/HYD/15) 2010-11 71/HYD/16 (IN ITA NO. 232/HYD/15) 2011-12 FOR REVENUE : SHRI K.J. RAO, DR FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR DATE OF HEARING : 16-12-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER BENCH : THESE ARE APPEALS BY REVENUE AND CROSS-OBJECTIONS BY ASSESSEE AGAINST THE ORDER(S) OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, DATED 19-12-2014 FOR THE AY S. 2008-09, 2010-11 & 2011-12. LD.CIT(A) HAS PASSED A COMMON O RDER FOR ALL THE THREE IMPUGNED ASSESSMENT YEARS AS THE ISSUE IS COM MON. M/S. SRI VISHNU CONSTRUCTIONS :- 2 -: 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A FIRM ENG AGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL FLATS AT MAHABOOB NAGAR. ASSESSEE FILED NIL RETURN FOR AY. 2008-09, RS. 3,23,610/- FOR AY. 2010-11 AND RS. 5,40,854/- FOR AY. 2011-12. A SURVEY U/S. 133A OF THE INCOME TAX ACT [ACT] WAS CONDUCTED ON 26-08- 2009 WHEN THE PROJECT, VISHNU CASTLE WAS BEING CON STRUCTED AND AS PER THE STATEMENT OF THE PARTNER, ONLY 60% OF THE WORK WAS COMPLETED AS ON THAT DATE. THIS PROJECT WAS TAKEN UP ON A DEVELOPMENT AND OUT OF THE 35 FLATS BEING CONSTRUCTED, AS SESSEES SHARE WAS 22 FLATS. ASSESSMENT FOR AY.2008-09 WAS RE OPENED AND AY. 2009-10 WAS NOT REOPENED. AYS.2010-11 AND 2011- 12 WERE SCRUTINY ASSESSMENTS POST SURVEY PERIOD. ASSESSING OF FICER (AO) HAS REFERRED THE COST OF BUILDING BEING CONSTRUCTED TO VALUATION CELL U/S. 142A FOR THE PURPOSE OF ASCERTAINING THE UN EXPLAINED EXPENDITURE TO BE TAXED U/S. 69C. HE HAS OBTAINED THE R EPORT WHEREIN THE VALUATION OFFICER HAS ESTIMATED THE VALUE A T RS. 4,02,80,000/- AFTER PROVIDING 6% REBATE FOR SELF-SUPERVISION. AO HAS GIVEN A SHOW CAUSE LETTER TO ASSESSEE. ASSESSEE SUBMITTED THAT IT HAS INVESTED THE AMOUNTS IN RESPECTIVE YEARS AS PER THE BOOKS OF ACCOUNT AS UNDER: AY. RS. 2008-09 36,54,929 2009-10 1,07,48,021 2010-11 1,14,22,128 2011-12 1,08,08,442 2.1. IT WAS SUBMITTED THAT IF REBATE OF 12.5% IS ALLOW ED AS PER THE JUDICIAL PRONOUNCEMENTS, THERE WILL BE NO DIFF ERENCE OF M/S. SRI VISHNU CONSTRUCTIONS :- 3 -: VALUATION AND HENCE, ASSESSEES EXPENDITURE SHOWN I N THE BOOKS OF ACCOUNT SHOULD BE ACCEPTED. AO HOWEVER, DID NOT AGRE E AND HAS CONSIDERED THE EXCESS INVESTMENT AT RS. 74,51,511/-, PROPORTIONATELY MADE ADDITION AS UNDER: AY. RS. 2008-09 8,29,353 2010-11 23,65,855 2011-12 19,92,534 2.2. IN ARRIVING AT THE ABOVE FIGURES, HE HAS REWORK ED OUT THE EXPENDITURE CLAIMED BY ASSESSEE IN AY. 2009-10 WH ICH WAS NOT PART OF THE SCRUTINY ASSESSMENT. IN THAT YEAR, ASSESSEE CLAIMED EXPENDITURE OF RS. 1,07,48,021/- WHEREAS AO CONSIDER ED ONLY RS. 99,75,305/-. IN ADDITION, IN AY. 2011-12, THE AMOUN T ADMITTED WAS RS. 1,08,08,442/-, WHEREAS AO CONSIDERED ONLY R S. 87,75,050/-. BY ADOPTING THE ABOVE FIGURES, THE PERC ENTAGE OF EXPENDITURE OUT OF TOTAL AMOUNT OF RS. 3,28,28,489/- ARR IVED AT BY HIM WAS CONSIDERED AND DIFFERENCE BETWEEN THE ABOVE AMOUNT AND THE VALUE ARRIVED AT BY THE VALUATION OFFICER WAS CONSI DERED AS UNEXPLAINED EXPENDITURE AND BROUGHT TO TAX IN IMPUGN ED THREE ASSESSMENT YEARS. 3. BEFORE THE LD.CIT(A), ASSESSEE CONTESTED THAT THERE IS NO UNEXPLAINED EXPENDITURE IN THE BOOKS OF ACCOUNT. IT WA S SUBMITTED THAT A REFERENCE U/S. 142A CANNOT BE MADE FOR ARRIVIN G AT THE UNEXPLAINED EXPENDITURE, AS THE SAID PROVISION IS AP PLICABLE ONLY FOR ASCERTAINING THE VALUE OF AN ARTICLE OR INVESTMEN T IN AN ASSET BUT NOT AN EXPENDITURE. IT RELIED ON VARIOUS CASE LA W. APART FROM M/S. SRI VISHNU CONSTRUCTIONS :- 4 -: THAT, IT WAS ALSO CONTENDED THAT AO HAS NOT REJECTED THE BO OKS OF ACCOUNT, THEREFORE, REFERENCE TO VALUATION CELL WITHOU T REJECTING THE BOOKS OF ACCOUNT IS NOT CORRECT. ANOTHER CONTENTION RA ISED WAS THAT THE REBATE WAS TO BE ALLOWED AT 12.5% AS AGAINST 6% ALLOWED BY THE VALUATION OFFICER AND IF THAT IS TAKEN INTO CO NSIDERATION, THERE WILL BE NO VARIATION. IT WAS ALSO CONTENDED THAT THE BUILDINGS BEING CONSTRUCTED WAS IN MAHABOOB NAGAR AND ADOPTION O F CPWD RATES FOR HYDERABAD IS NOT CORRECT AND GAVE DIFFERENC E OF VALUATION OF SAND, CEMENT, MATERIAL AND LABOUR TO JUSTIFY THAT AS SESSEES EXPENDITURE RECORDED IN THE BOOKS IS CORRECT. 4. LD.CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTION THAT A REFERENCE CANNOT BE MADE. EVEN THOUGH HE HAS NOT GIV EN ANY REASONS WHY HE IS APPROVING THE REFERENCE, HE HAS SI MPLY STATED THAT AO HAS CLEARLY BROUGHT OUT THAT THE APPELLANT WAS NOT MAINTAINING PROPER BOOKS AND THERE WAS NO PROPER EVID ENCE FOR EXPENDITURE INCURRED. HENCE, REFERENCE MADE BY AO TO THE VALUATION OFFICER FOR DETERMINING OF COST OF CONSTRUCT ION CANNOT FOUND FAULT WITH. HE HAS NOT COUNTERED THE LEGAL OBJE CTION THAT A REFERENCE U/S. 142A CANNOT BE MADE FOR ASCERTAINING U NEXPLAINED EXPENDITURE U/S. 69C. HOWEVER, WITH REFERENCE TO THE A RGUMENT OF REBATE, HE HAS REJECTED THE CLAIM AT 12.5% BUT ALLOWED REBATE AT 7.5%. WITH REFERENCE TO THE ARGUMENT THAT RATES OF CPWD ARE HIGHER AND ADOPTION OF PWD RATES ARE CORRECT, LD.CIT(A ) ACCEPTED THE CONTENTION AND FOLLOWED THE PRINCIPLES LAID DOWN BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF C.S. DANIEL VS. DCI T 220 TAXMAN 336 (KERALA) AND DR. ANAND CHHABRA [107 TTJ 831] (JODHPUR). ACCORDINGLY, HE HAS REWORKED OUT THE RATES AND DIFFERENCE IN COST OF CONSTRUCTION TO THE EXTENT OF RS. 43,40,170/- M/S. SRI VISHNU CONSTRUCTIONS :- 5 -: WAS REDUCED. CONSEQUENTLY, HE REVISED THE COST OF CON STRUCTION TO RS. 3,53,34,682/- AND THE BALANCE WAS DELETED PROPOR TIONATELY FOR THE YEARS UNDER CONSIDERATION. 5. ONE MORE ISSUE ARISING IN AY. 2011-12 WAS WITH REFERENCE TO ADDITION OF AN AMOUNT OF RS. 12,63,875/- STATED TO BE CLOSING STOCK OF UN-SOLD FLATS AS ON 31-03-2011. AO HAS NOTED THAT THE CLOSING WORK IN PROGRESS SHOWN AT RS. 57,40,000/- DOES NOT INCLUDE VALUE OF THREE UN-SOLD FLATS IN THE ABOVE PRO JECT AND BY MAKING SOME RECONCILIATION FIGURES ON HIS OWN, ARRIV ED AT THE UNEXPLAINED VALUE AT RS. 12,63,875/-. LD.CIT(A) AF TER CONSIDERING THE SUBMISSIONS OF ASSESSEE THAT THOSE FLATS WERE ALREAD Y SOLD AND THE VALUE WAS OFFERED AS ON 31-03-2011 AND THE WORK IN PROGRESS SHOWN IN THE BOOKS PERTAINING TO NEW PROJECT CALLED BH AGEERATHA COLONY WHICH HAS NO BEARING AT ALL FOR THE VISHNU CA STLE BEING CONSIDERED BY THE AO. LD.CIT(A) AFTER EXAMINING THE DOCUMENTS PLACED ON RECORD ACCEPTED THAT THE FLATS WERE SOLD AS O N 31-03- 2011, WHEREAS REGISTRATION HAS TAKEN PLACE SUBSEQUENTL Y. HE DELETED THE ADDITION SO MADE VIDE PARA 8.2 OF THE ORD ER. REVENUE IS AGGRIEVED ON THE ABOVE TWO ISSUES IN THREE ASSESSMENT YEARS. ASSESSEE PREFERRED CROSS-OBJECTIONS ON THE PART OF THE AMOUNT BEING CONFIRMED BY THE CIT(A), MAINLY CONTESTING THAT THE REFERENCE U/S. 142A IS NOT CORRECT. 6. LD. DR REITERATING THE SUBMISSIONS OF THE AO SUBMI TTED THAT CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE AO EITH ER TO EXAMINE THE SUBMISSIONS WHILE ACCEPTING THE PWD RATES AND ACCEPTING THE THREE FLATS AS SOLD DURING THE YEAR. IT W AS MAINLY THE M/S. SRI VISHNU CONSTRUCTIONS :- 6 -: CONTENTION OF REVENUE THAT AO WAS NOT GIVEN AN OPPORTUNI TY WHILE GIVING RELIEF TO ASSESSEE. 7. LD. COUNSEL SUBMITTED THAT NO NEW EVIDENCE HAS BEEN FURNISHED BEFORE THE CIT(A) AND HE HAS ONLY APPRECIA TED THE FACTS BROUGHT ON RECORD. ACCORDINGLY, THE QUESTION OF ADMI SSION OF ADDITIONAL EVIDENCE AND NOT GIVING OPPORTUNITY BY THE AO DOES NOT ARISE, AS CONTENDED BY THE REVENUE IN ITS GROUNDS. WI TH REFERENCE TO DELETION OF ADDITION MADE ON UN-SOLD FLATS ALSO, IT WAS SUBMITTED THAT THE AO CAME TO THE AVAILABILITY OF UN-SOLD FLATS ON THE BASIS OF THE SUBSEQUENT REGISTRATION, IT WAS SUBMITTED TAHT THESE F LATS WERE SOLD AND THE PROJECT WAS COMPLETED BY 31-03-2011. DU E TO VARIOUS REASONS, THE REGISTRATION WAS TAKEN SUBSEQUENTLY WHICH S HOULD NOT BE CONSIDERED AS AVAILABLE ON THE DATE OF CLOSING OF THE ACCOUNTS FOR AY. 2011-12. IT WAS SUBMITTED THAT THE ADDITION WAS MADE O N PRESUMPTIONS, WHICH THE LD.CIT(A) HAS EXAMINED AND GA VE A FINDINGS THAT THE THERE WERE NO UN-SOLD FLATS AS ON 31- 03-2011. WITH REFERENCE TO ASSESSEES CROSS-OBJECTIONS, IT WAS S UBMITTED THAT REFERENCE U/S. 142A WOULD ARISE ONLY FOR ESTIMATING TH E VALUE INCLUDING THE FAIR MARKET VALUE OF ANY ASSET, PROPERTY OR INVESTMENT. THUS, THE AO COULD HAVE REFERRED U/S. 142 A ONLY FOR PROVISIONS OF SECTION 69 AND 69B, BUT NOT FOR 69C. AS AO MADE A SPECIFIC ADDITION U/S. 69C WHICH DEALS WITH UNEXPLA INED EXPENDITURE, REFERENCE CANNOT BE MADE AT ALL. ON A Q UERY, WHETHER AO HAS GIVEN CREDIT OF THE ADDITIONAL EXPENDITURE MADE BY THE AO IN VARIOUS ASSESSMENT YEARS AS COST, WHEN THE APARTMEN TS WERE SOLD, LD. COUNSEL SUBMITTED THAT IF THE ADDITION WAS MADE U/S. 69C, SUCH EXPENDITURE CANNOT BE CLAIMED AS A DEDUCTIO N IN VIEW OF THE PROVISO TO SECTION 69C. SINCE AO INVOKED SECTION 69C ALONE M/S. SRI VISHNU CONSTRUCTIONS :- 7 -: AND HAS NOT GIVEN BENEFIT OF ENHANCED COST FROM THE S ALE PRICE, THE REFERENCE PER SE U/S. 142A IS BAD IN LAW. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS OF THE AUTHORITIES. FIRST OF ALL, WE ARE UN ABLE TO UNDERSTAND HOW THE AO COULD REDUCE THE DECLARED VALUE IN AY. 2009-10, WHEN THAT YEAR WAS NOT TAKEN UP FOR SCRUTINY. THERE WERE INVESTMENTS IN AY. 2009-10 WHICH WERE REDUCED BY THE AO IN THE ORDER, IN OUR VIEW ARBITRARILY. THIS REDUCTION HAS A BEARING IN COMPUTATION IN IMPUGNED YEARS. 9. COMING TO AY. 2011-12 ALSO, AO HAS REDUCED THE EXPENDITURE WHEN ASSESSEE SUBMITS THAT BOOKS OF ACCOUN T ARE MAINTAINED. BE THAT AS IT MAY, WE DO NOT FIND ANY REAS ON TO INTERFERE WITH THE ORDER OF THE CIT(A) FOR THE SIMPLE RE ASON THAT HE HAS CONSIDERED THE REBATE APPROPRIATELY AND ENHANCED THE REBATE FROM 6% GIVEN BY THE VALUATION OFFICER TO 7.5% AS AGAI NST 12.5% REQUESTED BY ASSESSEE. MOREOVER, HE ALSO EXAMINED THE ADOPTION OF RATES OF CPWD VS. PWD AND FOLLOWING THE PRINCIPLES L AID DOWN ON THIS SUBJECT BY VARIOUS JUDICIAL AUTHORITIES, HE HAS C ORRECTLY ADOPTED THE PWD RATES ONLY TO THE EXTENT OF SAND, METAL AND LABOUR, WHEREAS THE CEMENT RATE WAS NOT ADOPTED ON THE REASON THAT IT WAS SAME IN ALL THE PLACES. HIS DETAILED ORDER IN PARA 6.3.2 IS AS UNDER: 6.3.2 THE NEXT CONTENTION RAISED BY THE APPELLANT IS THAT THE VALUATION IS DONE AS PER THE RATES ADOPTED BY CPWD FOR VALUATION WHICH IS GENERALLY APPLICABLE FOR METROS AND BIG CITIES W HEREAS THE ASSESSEE HAS CONSTRUCTED THE PROJECT AT MAHABUBNAGAR, A RURAL DI STRICT HEAD QUARTER. THE RATES OF STATE PWD WOULD BE MORE APPROPRIATE FO R ADOPTION FOR THE PURPOSE OF VALUATION. THIS IS AS HELD BY VARIOUS JU DICIAL AUTHORITIES, WHICH IS BINDING. THE CONTENTION OF THE ASSESSEE IS CONSI DERED. IT IS A FACT THAT M/S. SRI VISHNU CONSTRUCTIONS :- 8 -: CONSTRUCTION COST VARIES FROM CITIES TO TOWNS AND T HE ASSESSEE'S, PROJECT IS IN A TOWN. THE SUBMISSION MADE REGARDING THE RATES OF SAND, METAL, LABOUR AND CEMENT MADE BY THE ASSESSEE SHOW THAT TH ERE IS HUGE VARIATION IN THE RATES AS ADOPTED BY CPWD WITH THOS E OF STATE PWD. FURTHER, A PROPOSITION IS LAID DOWN BY JUDICIAL DEC ISIONS THAT 'LOCAL PWD RATES SHOULD BE RELIED UPON RATHER THAN CENTRAL PWD RATES IN ORDER TO ARRIVE AT VALUATION OF CONSTRUCTION OF PROPERTY'(C. S.DANIEL VS.DCLT - 220 TAXMAN 336 (KERALA) AND ITO VS. DR. ANAND CHHABRA - 107 TTJ 831(JODHPUR). FOLLOWING THE PROPOSITION LAID DOWN I N THE ABOVE CASES, IT HAS TO BE HELD THAT THE LOCAL PWD RATES ARE TO BE R ELIED UPON RATHER THAN THE CPWD RATES. HOWEVER, FROM THE SUBMISSION IT IS SEEN THAT THE CEMENT RATE (PER BAG) IS CLAIMED TO BE RS. 250 AS AGAINST RS 457 ADOPTED BY THE VALUER. THERE CAN NOT BE DIFFERENCE IN THE RATE OF CEMENT AS THE SAME IS OPEN MARKET ITEM AND THE SAME IS TO BE TAKEN AT CPW D RATE ITSELF. THE LOCAL PWD RATES FOR SAND, METAL AND LABOUR ARE TO B E TAKEN INTO ACCOUNT FOR VALUATION AS THEY DEPEND PURELY ON LOCAL FACTOR S AND THE DIFFERENCE ATTRIBUTABLE TO THE SAME MAY BE DELETED. THE DIFFER ENCE IN COST OF CONSTRUCTION TO THE EXTENT OF RS. 43,40,170/- IS RE DUCED. THE RELIEF ALLOWED IS TO BE APPORTIONED IN THE RATIO ADOPTED BY AO FOR VARIOUS ASSESSMENT YEARS. THUS, THE COST OF CONSTRUCTION AS ESTIMATED IS OF RS. 25,06,193/- MORE THAN THE VALUE SHOWN BY THE ASSESSEE AND ACCOR DINGLY ARRIVED AT RS.3,53,34,682/- AND THE BALANCE IS TO BE DELETED P ROPORTIONATELY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 9.1. IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN RE VENUE CONTENTIONS. 10. COMING TO THE ISSUE OF INVOKING RULE 46A I.E., ADMISSION OF ADDITIONAL EVIDENCE, IT IS TO BE PLACED ON RECORD THAT WHEN APPEAL WAS PREFERRED BY REVENUE, THIS GROUND WA S NOT RAISED AT ALL IN GROUND NOS. 1 TO 9 AS APPROVED BY THE THEN C IT. SUBSEQUENTLY, REVENUE FILED REVISED FORM 36 WITH REVI SED GROUNDS WHEREIN ONLY THREE GROUNDS WERE RAISED. OUT OF WHIC H, GROUND NO. 1 CONTAINS THIS VIOLATION ON RULE 46A AS AN ISSUE. S INCE THERE IS NO VIOLATION OF ANY PROVISIONS OF RULE 46A, AS NO A DDITIONAL EVIDENCE WAS ADMITTED AND ADOPTION OF DIFFERENT RATES ON THE VALUATION OFFICERS REPORT CANNOT BE CONSIDERED AS A DDITIONAL EVIDENCE, WE DO NOT FIND ANY MERIT IN THE CONTENTION O F REVENUE. M/S. SRI VISHNU CONSTRUCTIONS :- 9 -: THUS, THE GROUND RAISED ON VIOLATION OF RULE 46A IN AYS. 2008-09 & 2009-10 DOES NOT SURVIVE. 11. COMING TO THE TREATMENT GIVEN TO UN-SOLD FLATS, THIS ISSUE SHOULD ARISE ONLY IN AY. 2011-12, WHEREAS THE REVENUE HAS RAISED THE GROUND NO. 2 IN AYS. 2008-09 AND 2010-11 AS WELL. THIS INDICATES THAT THERE IS NO APPLICATION OF MIND AT TH E TIME OF EVEN GIVING REVISED GROUNDS AND ALL THE GROUNDS ARE RAISED COMMONLY FOR ALL THE YEARS. THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE ARE AS UNDER: 8.2 THE FACTUAL POSITION AS BROUGHT OUT IN THE ASS ESSMENT ORDER, SUBMISSIONS OF THE ASSESSEE DURING THE APPELLATE PR OCEEDINGS AND THE DOCUMENTS ON RECORD ARE PERUSED. THE AO HAS SEEN FR OM THE SALE DOCUMENTS OF FLATS THAT 3 FLATS (305,407 & 503) WER E REGISTERED AFTER 31- 03-2011 AND ASSUMED THAT THE SAME ARE PART OF THE C LOSING WORK IN PROGRESS. BUT IS SEEN THAT THE FLATS WERE ALREADY H ANDED OVER AS MENTIONED IN THE DOCUMENT ITSELF AND THE SALE HAS B EEN DULY ACCOUNTED FOR. THE C1OSING WORK IN PROGRESS OF RS. 57,40,000/ - RELATE TO THE NEXT PROJECT UNDERTAKEN BY THE ASSESSEE I.E., 'BHAGEERAT HA COLONY', THE EXPENDITURE TOWARDS WHICH IS DEBITED TO P&L ACCOUNT DURING THE YEAR ALSO. IN VIEW OF THE ABOVE, NO' ADDITION IS WARRANT ED ON ACCOUNT OF 'DISALLOWANCE OF LAND COST'. ACCORDINGLY, THE SAME IS DELETED. 11.1. AS LD.CIT(A) HAS GIVEN FACTUAL FINDING AND ON EXAMINATION OF ASSESSEES RECORDS AND DOCUMENTS WHICH ARE ALREADY PLACED BEFORE THE AO, WE DO NOT FIND ANY MERI T IN REVENUE CONTENTIONS. MOREOVER, WE ARE ALSO UNABLE TO UNDERSTAN D ON WHAT BASIS THE AO ARRIVES AT CLOSING STOCK OF RS. 70,03,8 75/- WHEN ASSESSEE CLEARLY SUBMITTED THAT THE PROJECT VISHNU CASTL E WAS COMPLETED AND THE CLOSING STOCK PERTAINS TO BHAGEERAT HA COLONY. THEREFORE, RE-ESTIMATING THE VALUE OF UN-SOLD FLATS I N HIS OWN WAY AND ARRIVEING AT SO CALLED CLOSING WORK IN PROGRESS AND MAKEING AN ADDITION ON THE REASON THAT ASSESSEE HAS NOT DISCLOSE D THE VALUE OF M/S. SRI VISHNU CONSTRUCTIONS :- 10 -: UN-SOLD FLATS, WHEN ASSESSEE SUBMITS THAT THE FLATS WER E SOLD AND THE SALE PROCEEDS WERE ALREADY ACCOUNTED FOR, IS NOT B ASED ON ANY EVIDENCE. THERE IS NO MERIT IN THE GROUNDS RAISED BY THE REVENUE. ACCORDINGLY, THEY ARE DISMISSED. 11.2. COMING TO THE CROSS-OBJECTIONS FILED BY ASSESS EE, ASSESSEE DID RAISE VALID OBJECTION WITH REFERENCE TO SECTION 142A. IF THE ADDITION MADE BY THE AO IS CONSIDERED AS AN ADDITIO N U/S. 69C, THE CONSEQUENCE OF WHICH IS THAT SUCH EXPENDITURE CANNOT BE CLAIMED AS A REDUCTION IN SALE PRICE AT THE TIME OF ARR IVING THE PROFITS ON THE PROJECT. THEN, THE REFERENCE TO VALUATIO N CELL U/S. 142A BECOMES BAD IN LAW. IF THE ADDITION IS CONSID ERED AS AN ADDITION U/S. 69B, I.E., UNEXPLAINED INVESTMENT IN AN ASSET, THEN, ASSESSEE WOULD BE ENTITLED FOR THE CONSEQUENTIAL BENEFI T OF COST OF CONSTRUCTION. ASSESSEE IS IN THE BUSINESS OF CONSTRU CTION AND WHATEVER IS THE COST OF CONSTRUCTION DETERMINED BY THE A O SHOULD BE ALLOWED AS DEDUCTION WHILE ARRIVING ADDITIONAL PR OFITS OF THE PROJECTS. THE CIT(A) HAS CONFIRMED COST OF CONSTRUCTIO N AT RS. 3,53,34,682/- IN HIS ORDER. SINCE ASSESSEE ADMITTED COST WAS MORE THAN THE COST SO ARRIVED AT BY LD. CIT(A), THERE IS NO NEED TO MAKE ANY ADDITION. ONLY IN THE EVENT OF DISTURBANCE TO ASSESS EES COST OF CONSTRUCTION MADE BY AO, THEN ASSESSEE WOULD BE ENTITLED FOR CONSEQUENTIAL RELIEF FROM THE SALE PRICE, BEING COST OF PROJECT, CONSIDERING THE ADDITION UNDER 69B. EITHER WAY THE ACTIO N OF AO CANNOT BE JUSTIFIED ON FACTS. 12. IT IS TO BE PLACED ON RECORD THAT REVENUE HAS NOT FOLLOWED THE BOARD MEMBERS INSTRUCTIONS/DO LETTER NO. 279/M- 88/2014-ITJ DT. 3 RD JULY, 2015. IN THAT, MEMBER, CBDT HAS M/S. SRI VISHNU CONSTRUCTIONS :- 11 -: BROUGHT THE INSTANCES OF ITAT AND HIGH COURTS PASSING ADVERSE COMMENTS IN VARIOUS CASES, DUE TO NON EXERCISE OF DUE DILIGENCE AND CAUTION WHILE GRANTING AUTHORIZATION FOR FILING O F APPEALS. THE INSTRUCTIONS OF BOARD MEMBER ARE AS UNDER: 2.1. THE APATHY OF THE DEPARTMENT OFFICERS IS EVID ENT IN ANOTHER SHOCKING INCIDENT WHERE IN A SENSITIVE SEARCH CASE, APPEAL WAS FILED BY THE DEPARTMENT IN HIGH COURT. THE REGISTRY POINTED OUT CERTAIN DEFECTS IN FILING OF APPEAL AND THE COURT GRANTED TIME TO REMO VE THE DEFECTS. THIS RELATES TO THE YEAR 2009. FROM 2009 TILL 2014, NO FOLLOW-UP ACTION WAS TAKEN AND THE CASE WAS DISMISSED DUE TO DEFAULT ON PART OF THE DEPARTMENT INCURRING PROCEDURAL DEFECTS. THE DEPART MENT FILED A MA PRAYING FOR RESTORATION OF THE MAIN APPEAL AND SUBS EQUENTLY A REVIEW PETITION WHICH WERE DISMISSED BY THE COURT. WHEN T HE MATTER TRAVELLED TO THE SUPREME COURT, THE APEX COURT HAS TAKEN A SERIO US VIEW AND DIRECTED THAT DEPARTMENT ASCERTAIN AND FIX RESPONSIBILITY OF THE INDIVIDUAL/(S) GUILTY OF INACTION AND FOR TAKING APPROPRIATE ACTION AGAIN ST THEM FOR SUCH INACTION. THIS DEFAULT WAS COMPOUNDED BY THE FACT THAT THE SLP WAS FILED AFTER A DELAY OF 240 DAYS. 2.2. NEEDLESS TO SAY THAT THE COURTS ARE TAKING A S TERN AND INCLEMENT VIEW AS FAR AS DEPARTMENTS ACTIONS IN LI TIGATION MATTER IS CONCERNED. 3. FURTHER, BESIDES FINANCIAL COSTS, LITIGATION ALS O ENTAILS TARNISHING THE IMAGE OF THE DEPARTMENT AND STRAININ G ITS RESOURCES. THE SIGNIFICANCE OF FILING APPEAL AND PURSUING LITIGATI ON ONLY IN DESERVING CASES CANNOT BE OVER-EMPHASIZED, MORE SO IN THE BACKDROP OF THE FACT THAT DEPARTMENT IS FACING SHORTAGE OF OFFICERS AT ALL LE VELS. IT IS IMPERATIVE THAT THE AVAILABLE RESOURCES ARE OPTIMALLY UTILISED TO O BTAIN MAXIMUM BENEFIT OUT OF LITIGATION. 12.1. THE ABOVE INSTRUCTION OF THE CBDT HAS HIGHLIGHTE D IN THIS ORDER ONLY TO POINT OUT THAT THE REVENUE HAS TAKEN P AINS TO FILE REVISED FORM 36 WITH REVISED GROUNDS AND DESPITE THA T DUE DILIGENCE HAS NOT BEEN TAKEN WHILE FILING THE GROUND S. WHEN THERE IS NO VIOLATION OF RULE 46A AND NO GROUND WAS RAISE D IN THE ORIGINAL APPEALS, IN THE REVISED GROUNDS SUCH ISSUE WAS TAKEN UP. IN ADDITION TO THAT, AS ALREADY POINTED OUT ABOVE, THE ISSUE OF CLOSING M/S. SRI VISHNU CONSTRUCTIONS :- 12 -: STOCK OF UN-SOLD FLATS HAS ARISEN ONLY IN AY. 2011-12 . HOWEVER, GROUND NO. 2 RAISED COMMONLY IN ALL THE ASSESSMENT YE ARS I.E., AYS. 2008-09 AND 2010-11 ALSO. THIS SHOWS NON-APPL ICATION OF MIND BY THE SENIOR OFFICERS WHILE GRANTING APPROVAL F OR SECOND APPEAL ON THE REVISED GROUNDS. WE ONLY WISH THAT THE DEPARTMENTAL OFFICERS WILL TAKE THE INSTRUCTIONS OF THE C BDT SERIOUSLY AND APPLY THEIR DUE DILIGENCE AND CAUTION WHILE APPROVING THE SECOND APPEALS AND RAISE PROPER GROUND S IN SUCH APPEALS. 13. WITH THESE DIRECTIONS, THE APPEALS OF REVENUE AS WELL AS THE CROSS-OBJECTIONS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 30 TH DECEMBER, 2016 TNMM M/S. SRI VISHNU CONSTRUCTIONS :- 13 -: COPY TO : 1. THE INCOME TAX OFFICER, WARD-I, MAHABOOBNAGAR. 2. M/S. SRI VISHNU CONSTRUCTIONS, MAHABOOBNAGAR DIS T., C/O. A.V. RAGHU RAM, ADVOCATE, 610, BABUKHAN ESTATES, BA SHEER BAGH, HYDERABAD. 3. THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDE RABAD. 4. THE COMMISSIONER OF INCOME TAX-IV, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.