THE ITO, Vijayawada V. M/s KSR Anjaneyulu & Sons, Vijayawada

ITA 232/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9855 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Value adopted by valuation officer; Valuation report
• Section: 142(1); 69

Judgement Text

ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.232/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) ITO, WARD - 2(3), VIJAYAWADA VS. M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA [PAN: AAKFK3748F ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI, DR / RESPONDENT BY : SHRI RAMESH BABU, AR / DATE OF HEARING : 19.09.2016 / DATE OF PRONOUNCEMENT : 22.09.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A), VIJAYAWADA DATED 30.3.2015 AND IT PERTAINS TO THE ASSESSMENT YEAR 2011-12. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RUNNING HOTEL AND RESTAU RANT, FILED ITS RETURN ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 2 OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 27.10. 2011 DECLARING NIL TOTAL INCOME. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). SUBSE QUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTI CES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND PRODUCED BOOKS OF ACCOUNTS, BILLS & VOUCHERS AND OT HER RELEVANT INFORMATION CALLED FOR. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CONSTRUCTED A HOTEL BUILDING AND INVESTED AN AMOUNT OF ` 2,03,87,853/-. TO ASCERTAIN THE CORRECTNESS OF THE EXPENDITURE INCURRED TOWARDS CONSTRUCTION OF HO TEL BUILDING, THE A.O. ASKED THE ASSESSEE TO FURNISH BILLS & VOUCHERS IN S UPPORT OF EXPENDITURE INCURRED TOWARDS CONSTRUCTION OF BUILDING. SINCE T HE ASSESSEE COULD NOT FURNISH BILLS & VOUCHERS IN RESPECT OF CONSTRUCTION OF BUILDING, THE A.O. REFERRED THE VALUATION OF BUILDING TO THE VALUATION OFFICER, VALUATION CELL, HYDERABAD U/S 142A OF THE ACT. THE VALUATION OFFIC ER VIDE HIS REPORT DATED 28.3.2014, HAS VALUED THE BUILDING AND ARRIVE D AT A COST OF ` 8,03,38,000/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER FORWARDED COPY OF VALUATION REPOR T AND ASKED THE ASSESSEE TO FURNISH HIS OBJECTIONS, IF ANY. ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 3 4. IN RESPONSE TO NOTICES, THE ASSESSEE VIDE HIS LE TTER DATED 30.3.2014 SUBMITTED THAT REFERENCE TO VALUATION OFF ICER FOR VALUATION OF BUILDING WHEN THE BUILDING CONSTRUCTION IS NOT COMP LETED IS NOT CORRECT. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS STARTED CONSTRUCTION OF BUILDING IN THE YEAR 2011 AND COMPLETED DURING THE FINANCIAL YEAR 2011- 12. THEREFORE, WHEN THE BUILDING CONSTRUCTION IS I N PROGRESS, IT IS NOT POSSIBLE TO ASCERTAIN THE CORRECT AMOUNT INCURRED F OR CONSTRUCTION OF BUILDING, THEREFORE, THE VALUATION ARRIVED BY THE V ALUATION OFFICER IS NOT CORRECT AND IT CANNOT BE CONSIDERED. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AN D OTHER BILLS & VOUCHERS IN SUPPORT OF THE CONSTRUCTIONS, AS PER TH E BOOKS OF ACCOUNTS IT HAS SPENT AN AMOUNT OF ` 2,03,87,853/- UP TO THE END OF THE FINANCIAL YEAR 2010-11 AND A FURTHER AMOUNT OF ` 1,01,08,598/- HAS BEEN PAID TO VARIOUS VENDORS TOWARDS SUPPLY OF MATERIALS AND ALS O ADVANCE FOR CONSTRUCTION WORK. IF YOU TAKE INTO ACCOUNT ADVANC E PAID FOR SUPPLIERS, THE TOTAL AMOUNT SPENT FOR CONSTRUCTION WORKS OUT T O ` 3,20,44,882/-, WHICH IS MORE THAN VALUE DETERMINED BY DVO. 5. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE, HELD THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE AMOUNT INCURRED TOWARDS CONSTRUCTION OF BUILDING WITH NECESSARY BILLS & VOU CHERS. THE DISTRICT VALUATION OFFICER HAS VALUED THE BUILDING AND ACCOR DING TO HIS VALUATION ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 4 REPORT, THE TOTAL AMOUNT SPENT FOR CONSTRUCTION OF BUILDING IS AT ` 8,03,38,000/-. THE ASSESSEE HAS SPENT AN AMOUNT OF ` 5,69,63,339/- UP TO THE END OF FINANCIAL YEAR 2011-12, WHICH IS LESS THAN THE VALUATION ARRIVED BY THE DVO. WITH THESE OBSERVATIONS, ARRIVE D AT A DIFFERENCE OF ` 2,33,74,611/- AND DISTRIBUTED THE DIFFERENCE AMOUN T PROPORTIONATELY FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13 ACCORDI NG TO THE INVESTMENT MADE BY THE FIRM AS PER ITS BOOKS OF ACC OUNTS AND DETERMINED AN AMOUNT OF ` 83,66,069/- FOR THE ASSESSMENT YEAR 2011- 12 AND BROUGHT TO TAX. 6. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS ERRED IN REFERENCE TO VALUATION O FFICER WHEN BUILDING CONSTRUCTION IS IN PROGRESS. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. WAS ERRED IN TAKING AN AMOUNT OF ` 2,03,87,853/-, IGNORING FURTHER AMOUNT OF ` 1,01,08,598/- SPENT BY THE ASSESSEE TOWARDS ADVANC E PAYMENT FOR PURCHASE OF MATERIALS AND CONSTRUCTION WORK. IF, ADVANCE IS CONSIDERED, THE TOTAL AMOUNT WORKS OUT TO ` 3,20,44,882/- WHICH IS MORE THAN THE VALUE DETERMINED BY THE DVO OF ` 2,87,53,922/-, THEREFORE, THE A.O. WAS NOT CORRECT IN MAKING ADDIT IONS OF ` 83,66,070/- THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF TH E ASSESSEE, HELD THAT ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 5 THE ASSESSEE HAS INVESTED AN AMOUNT OF ` 3,20,44,882/- INCLUDING ADVANCES GIVEN TO SUPPLIERS TOWARDS PURCHASE OF CAP ITAL GOODS WHICH IS MORE THAN THE AMOUNT DETERMINED BY THE A.O. BASED O N THE VALUATION REPORT OF ` 2,87,53,922/-. SINCE THE COST OF CONSTRUCTION DEC LARED BY THE ASSESSEE IS HIGHER THAN THE COST OF CONSTRUCTIO N DETERMINED BY THE A.O., THE ADDITIONS MADE BY THE A.O. OF ` 83,66,070/- IS WITHOUT ANY BASIS. WITH THESE OBSERVATIONS, DIRECTED THE A.O. T O DELETE ADDITIONS OF ` 83,66,070/- MADE TOWARDS DIFFERENCE IN COST OF CON STRUCTION OF HOTEL BUILDING. AGGRIEVED BY THE CIT(A) ORDER, THE REVEN UE IS IN APPEAL BEFORE US. 7. THE LD. D.R. SUBMITTED THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ADVANCES PAID FOR PURCHASE OF RAW MATERIALS AND CONSTRUCTION WORKS FORM PART OF THE EXPENDITURE RELATED TO CONSTRUCTIO N AND CONSTRUCTION TO BE DETERMINED, BOTH WORK IN PROGRESS AND ADVANCES H AVE TO BE TAKEN INTO ACCOUNT IS ERRONEOUS ON FACTS AND IN CIRCUMSTA NCES OF THE CASE, AS DVO HAS ESTIMATED VALUE OF THE HOTEL BUILDING INCLU DING THE VALUE OF LAND, FURNITURE AND OTHER CAPITAL ITEMS. THE D.R. FURTHER SUBMITTED THAT THE CIT(A) HAS NOT TAKEN INTO COGNIZANCE OF THE FAC T THAT THE SUM OF THE ITEMS AGAINST THE ADVANCE PAID FOR PURCHASE OF CAPI TAL GOODS HAVE NOT FORMED PART OF THE VALUATION REPORT OF DVO. IT WAS FURTHER SUBMITTED THAT THE CIT(A) OUGHT TO HAVE CONSIDERED BALANCE SH EET FOR THE YEAR ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 6 2012-13 WHICH EVIDENCED THAT THE TOTAL COST OF CONS TRUCTION OF HOTEL BUILDING IS SHOWN AT ` 5,69,63,339/-, WHEREAS THE DVO HAS ESTIMATED COST OF CONSTRUCTION AT ` 8,03,38,000/-. THUS, THERE IS A CLEAR DIFFERENCE BETWEEN AMOUNT INCURRED BY THE ASSESSEE AND THE VAL UE ARRIVED BY THE DVO, THEREFORE, THE A.O. HAS RIGHTLY MADE ADDITIONS AND HIS ORDER SHOULD BE UPHELD. 8. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE CIT(A) ORDER. THE A.R. FURTHER SUBMI TTED THAT THE A.O. WAS COMPLETELY ERRED IN REFERENCE TO VALUATION OFFI CER WHEN THE BUILDING CONSTRUCTION IS INCOMPLETE. THE A.R. FURTHER SUBMI TTED THAT THE ASSESSEE HAS COMPLETED CONSTRUCTION IN THE FINANCIAL YEAR 20 11-12 AND AS PER THE BOOKS OF ACCOUNTS THE TOTAL AMOUNT INCURRED TOWARDS CONSTRUCTION OF BUILDING IS AT ` 7,25,38,719/-, AS AGAINST THIS THE DVO HAS VALUED BUILDING AS PER THE REVISED ESTIMATION OF DISTRICT VALUATION OFFICER AT ` 7,96,30,000/-. THE ASSESSING OFFICER, AT THE TIME OF ASSESSMENT FOR ASSESSMENT YEAR 2012-13, HAS RECORDED THESE FACTS A ND AS PER HIS ASSESSMENT ORDER, HE HAD WORKED OUT A DIFFERENCE OF ` 70,91,281/- IN THE COST OF CONSTRUCTION AND MADE ADDITIONS U/S 69 C OF THE ACT. ONCE, THE A.O. HIMSELF HAS DETERMINED FINAL DIFFERENCE OF ` 70,91,281/-, ADDITIONS OF ` 83,66,069/- FOR THE ASSESSMENT YEAR 2011-12 IS AMO UNT TO DOUBLE ADDITIONS AND WITHOUT ANY BASIS. THE A.R . FURTHER SUBMITTED ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 7 THAT THE A.O. WAS ERRED IN NOT TAKING THE ADVANCES GIVEN TO SUPPLIERS TOWARDS PURCHASE OF MATERIALS WHILE ARRIVING AT A D IFFERENCE OF ` 86,66,070/-, IF YOU TAKE THE ADVANCES GIVEN AND WOR K IN PROGRESS TO THE AMOUNT SPENT TOWARDS BUILDING, THE TOTAL AMOUNT WOR KS OUT TO ` 3,20,44,882/- WHICH IS MORE THAN THE AMOUNT DETERMI NED BY THE A.O. OF ` 2,87,53,922/- BASED ON THE DVO REPORT, THEREFORE, THERE IS NO REASON FOR ADDITIONS MADE BY THE A.O. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE A.O. MADE AN ADDITION OF ` 83,66,070/- TOWARDS DIFFERENCE IN COST OF CONSTRUCTION OF HOTEL BUILDING. THE A.O. DETERMINED DIFFERENCE OF ` 83,66,070/- BASED ON THE DVO REPORT AND AMOUNT SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUN TS. ACCORDING TO THE A.O., THE ASSESSEE HAS SPENT AMOUNT OF ` 5,69,63,339/- UP TO THE END OF THE FINANCIAL YEAR 2011-12, WHEREAS THE DVO HAS VALUED THE BUILDING AT ` 8,03,38,000/-, THUS, THERE IS A DIFFERENCE OF ` 2,33,74,611/- IN THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE WHICH HE HAD PROPORTIONATELY APPORTIONED TO ASSESSMENT YE AR 2011-12 & 2012-13 ACCORDING TO THE INVESTMENT MADE BY THE ASS ESSEE. IT IS THE CONTENTION OF THE ASSESSEE THAT THE A.O. WAS ERRED IN REFERENCE TO VALUATION OFFICER WHEN THE BUILDING WORK IS IN PROG RESS AND WHICH IS INCOMPLETE. THE ASSESSEE FURTHER CONTENDED THAT WH ILE QUANTIFYING THE ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 8 COST OF CONSTRUCTION AS PER THE BOOKS OF ACCOUNTS, THE A.O. HAS IGNORED AN AMOUNT OF ` 1,01,08,598/- SPENT BY THE ASSESSEE TOWARDS ADVANC E PAYMENT TO SUPPLIERS FOR CONSTRUCTION OF BUILDING. IF THE SAID AMOUNT IS TAKEN INTO ACCOUNT, THEN THE TOTAL AMOUNT SPENT FOR CONSTRUCTION OF BUILDING UP TO THE END OF FINANCIAL YEAR 2010-11 WO RKS OUT TO ` 3,20,44,822/- WHICH IS MORE THAN THE AMOUNT DETERMI NED BY THE A.O. OF ` 2,87,53,922/-. 10. HAVING HEARD BOTH THE SIDES, WE FIND FORCE IN T HE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS REFERRED THE VALUATION OF BUILDING WHEN THE BUILDING WORK IS INCOMPLETE. WE FURTHER OBSERVED THAT THE A.O. HAS ARRIVED AT A DIFFERENCE OF ` 83,66,070/- WITHOUT TAKING INTO COGNIZANCE OF ADVANCE PAYMENT MADE BY THE ASSE SSEE TOWARDS PURCHASE OF RAW MATERIALS. IF YOU CONSIDERED ADVAN CE INCURRED BY THE ASSESSEE, THE TOTAL AMOUNT SPENT TOWARDS CONSTRUCTI ON OF BUILDING UP TO THE END OF FINANCIAL YEAR 2010-11 WORKS OUT TO ` 3,20,44,882/-, WHICH IS MORE THAN THE AMOUNT QUANTIFIED BY THE A.O. BASED O N THE VALUATION REPORT. WE FURTHER OBSERVED THAT THE ASSESSING OFFI CER, AT THE TIME OF COMPLETION OF ASSESSMENT OF ASSESSMENT YEAR 2012-13 , HAS DETERMINED DIFFERENCE OF COST OF CONSTRUCTION OF ` 70,91,281/-, BASED ON THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND REVISED ESTIMATION OF COST OF CONSTRUCTION DONE BY DISTRICT VALUATION OFFICER. WHEN THE A.O. HIMSELF ITA NO.232/VIZAG/2015 M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 9 HAS ARRIVED AT A FINAL DIFFERENCE OF ` 70,91,281/- BASED ON THE REVISED VALUATION REPORT OF DVO, THEN THERE IS NO REASON FO R THE A.O. TO MAKE ADDITIONS OF ` 83,66,070/- FOR THE ASSESSMENT YEAR 2011-12. THE C IT(A) AFTER CONSIDERING RELEVANT FACTS HAS RIGHTLY DELETE D ADDITIONS MADE BY THE A.O. WE DO NOT SEE ANY INFIRMITY OR ERROR IN TH E ORDER OF THE CIT(A) AND HENCE, WE INCLINED TO UPHOLD THE ORDER OF CIT(A ) AND DISMISS THE APPEAL FILED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND SEPT16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 22.09.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-2(3), VIJAYAWADA 2. / THE RESPONDENT M/S. K.S.R. ANJANEYULU & SONS, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM