SHRI SHRI BRIJ MOHAN NARANG, BILASPUR(CG) V. THE INCOME TAX OFFICER, WARD-1(1),BILASPUR, BILASPUR(CG)

ITA 24/BIL/2017

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1741 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RICHA KHATRI
• Keywords: Valuation report
• Section: 142(1); 133A; 69B; 143(2)

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 24/BIL/2017 Ǔनधा[रण वष[ / Assessment Year : 2011-12 Shri Brijmohan Narang, 29/114, Nariyal Kothi, Dayalband (C.G) PAN : ABYPN6542M .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer- 1(1), Bilaspur ......Ĥ×यथȸ / Respondent Assessee by : Smt. Richa Khatri Revenue by : Sh. G. N. Singh स ु नवाई कȧ तारȣख / Date of Hearing : 01.06.2022 घोषणा कȧ तारȣख / Date of Pronouncement : 03.06.2022 आदेश / ORDER 2 ITA No. 24/BIL/2017 A.Y.2011-12 PER RATHOD KAMLESH JAYANTBHAI, AM: This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeal), Bilaspur ( CG ) [ Here in after referred as Ld. CIT(A) ] for the assessment year 2011-12 dated 21.03.2016 which in turn arises from the order passed by the assessing officer under Sec.143(3)/147 of the Income tax Act, 1961 (in short 'the Act') by the Income Tax Officer, 1(1) Bilaspur (CG) dated 27.03.2014. 2. The hearing of the appeal was concluded through audio-visual medium on account of Government guidelines on account of prevalent situation of Covid-19 Pandemic, both the parties have placed their written as well as oral arguments during this online hearing process. 3. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That the Learned CIT(Appeals) failed to appreciate the fact that there being no provision in the Act authorising the survey team to obtain estimated report of the registered valuer, placing reliance on such report was contrary to law particularly when reference to DVO was held by the same Learned CIT(Appeals) as contrary to law 3 ITA No. 24/BIL/2017 A.Y.2011-12 2. Since the Learned CIT(Appeals) had categorically held that reference to the DVO without rejecting the books of account was contrary to law, his placing reliance on the estimated report of the registered valuer without first detecting any suppression in investment recorded in the books of account and ultimately sustaining addition of Rs 1290089 (1214500 +75589) again based on pure estimations of the Learned CIT(Appeals), are contrary to facts and law 3 That the Learned CIT (Appeals) erred both on facts and in law in sustaining estimated addition of Rs 1290089 without bringing any corroborative evidence on record to substantiate such estimation and without giving justification for ignoring the investment recorded in the books of account 4 That the learned CIT (A) erred in law and on facts that reference to DVO without rejecting books of accounts was proper. 5. The appellant craves leave to add and/or alter, amend or withdraw any ground's before or at the time of hearing of this appeal.” 4. The fact as culled out from the records that the assessee has filed his return of income for the assessment year 2011-12 on 19.12.2011 declaring total income of Rs. 7,29,440/-. The case was selected for scrutiny through compulsory scrutiny selection. Accordingly, notices u/s 143(2) and 142(1) along with questionnaire were issued in this case. A survey u/s 133A of the Income Tax Act, 1961 in this case was conducted on 03/03/2011. 4 ITA No. 24/BIL/2017 A.Y.2011-12 4.1 During the course of survey proceedings, the assessee given the statement that he had been investing in the construction of Plaza from the F.Y 2008-09. The assessee has shown investment in the construction of the commercial building named as C.G. Plaza, Telephone Exchange Road, Bilaspur in the current year at Rs. 47,30,361/-. The Assessing Officer has referred the same to the DVO for the valuation of the investment made by the assessee in the said property. The DVO, Jabalpur in his report estimated the total investment in the current year at Rs. 1,00,31,350/-. The Assessing Officer has derived difference of Rs. 53,00,989/-. 4.2 The assessee was asked to explain the same with evidence. The assessee vide letter dated 27/03/2014 has raised his objection and stated that the DVO has calculated the value on basis of the rate prescribed by the CPWD which are generally higher and based on the rates prevailing in Delhi and other cosmopolitan cities and could not be applied for construction in small towns where the cost construction could be much lower than the CPWD rates approved by the Board. 5 ITA No. 24/BIL/2017 A.Y.2011-12 5. The Assessing Officer found an opinion that burden placed before the assessee is not discharged by him and not accepted the explanation furnished relying on the decision of the Hon’ble Supreme Court in case of CIT vs. Musaddi Ram Bharose 165 ITR 14 (SC). 6. The Assessing Officer has further observed that the assessee was intimated about the DVO’s report and assessee has not raised any objection before the DVO. Therefore, valuation made by the DVO cannot be challenged by the assessee at the stage hence valuation made by the DVO is correct. The Assessing Officer relying on DVO’s report added a sum of Rs. 53,00,989/- as the investment made from the undisclosed source and is being added to the income of the assessee u/s 69B of the IT. Act. 7. Aggrieved from the order of the Assessing Officer, the assessee has filed an appeal before ld. CIT(A) and the assessee has submitted that there were measure errors in the parameters adopted by the DVO in the estimating the cost of construction which were highlighted to the 6 ITA No. 24/BIL/2017 A.Y.2011-12 Assessing Officer and the contentions raised by the assessee before the ld. CIT(A) are as under:- “I. The DVO has prepared the report as per Sq. M area construction without considering the quality of construction and finishing cost. The Sq.m.area construction method is approximate valuation method and for accurate valuation once should considered the detailed quantities valuation method taking into consideration quantity of material, cost of material and cost of labour. II. The DVO has not given any basis or breakup of the rates adopted by him. He has even not given any reason for not considering the value as shown in the books of accounts. Whereas the registered valuer has considered the detailed analysis of material quantities and adopted the market rate as on date of construction which is the correct method of valuation. III. The DVO had taken the rates of contraction higher than the Central Valuation Board. The rates of Central Valuation Board rates are for contraction on column system structure/ RCC slab/Marble and for best quality construction. Hence, any addition made on the basis of DVO's report is unlawful and opposed to facts. The DVD has added 2% of value for supervision charges. The fact was explained to him that Mr. B.M. Narang himself is an engineer and supervision was done by him only. No outside person was involved in the supervision and no payment is made for the supervision of the building Mr.B.M. Narang, one of the owner of C.G. Plaza in Civil Engineer and having 40 years experience of civil construction field. IV. The DVO ignored the fact that the material was procured directly from the manufacturer, which resulted in cost saving. The fact was also explained to and recorded by the survey team. V. The sand is procured from the river Arpa, which is merely 6 km distance from the site, hence the cost of sand is very less. 7 ITA No. 24/BIL/2017 A.Y.2011-12 VI. There are many steel plants near to the city of Bilaspur, therefore transportation cost was much lower as compared to metro & other cities. VII. The DVO has not considered the actual consumption of material, which is the most authentic basis for arriving the cost, instead of plinth area calculation method. VIII. The value taken as per the valuation report by the registered valuer and submitted to the AO was on the basis of purchase rates and these purchase rates were cross checked by our registered valuer with market price. IX. Granite was directly procured from Orissa State on truck load basis. This saved the cost a lot. X. The valuation made by the registered valuer is arrived at total Rs. 134.93 lakhs, which is almost equal to the total cost of Rs. 136.35 lakhs shown in the books of accounts. The assessee’s share at Rs. 67.47 (of registered valuer) and Rs. 68.18 as per books of accounts.” 8. Ongoing through the submission of the assessee, the ld. CIT(A) has reduced the addition form Rs. 53,00,989/- to Rs. 12,14,500/-. The relevant finding of the ld. CIT(A) in this regard is as under:- “Decision- Since the factual position has already been discussed as above in Ground No. 2 I am of considered opinion that the AO was not justified in making addition on account of investment made by assessee and estimated by the DVO and also non-appreciation of facts available before him. As per DVO’s report, the total cost of construction comes to Rs. 5,79,64,044/- and @ 7.5% he had allowed Rs. 43,47,303/- for contractor profit. Keeping in view of Hon’ble Apex Court decision for 10% net profit it should be 10% amounting to Rs. 57,96,404/- in place of Rs. 43,47,303/- made by the DVO, thus, Rs. 8 ITA No. 24/BIL/2017 A.Y.2011-12 14,49,100/- has to be added for contractors profit for the whole building. In the valuation made by the registered valuer because the registered valuer has not given the breakup of Rs. 2,77,00,000/- in his computation and there is no mention in his report for any deduction for the contractor’s profit. Thus, 50% of Rs. 14,49,100/- had remained to be added in the valuation of registered valuer. The self supervision charges amounting to Rs. 12,00,481/- even through there is no direct investment but the quality of construction has increase substantially. Thus, this Rs. 12,00,481 should be added in the valuation made by the registered valuer for the reasons cited above because he has not given any weightage for self supervision and fallen prayed to the argument of the assessee that he served the Government for 40 years. Thus, (Rs. 57,96,404 + 12,00,481/- total Rs. 69,96,885/- rounded off Rs. 70,00,000/-) for the whole building should be appropriated for the purpose of addition. 50% of this amount comes to Rs. 35,00,000/- should have been added by the AO in the estimation made by the registered valuer for all three years altogether. Since 34.7% construction was completed for the instant year, same is to be appropriated, same percentage should be applied for making addition in the value of the registered valuer which comes to Rs. 12,14,500/-. This amount in my considered view deserves to be confirmed and balance addition made by the AO is deleted.” 9. All the grounds raised by the assessee in this appeal are related to the addition made by the Assessing Officer and partly sustained by the ld. CIT(A) is in relation to alleged difference between the investment shown in the books and valuation made by the DVO which has been reduced by the ld. CIT(A) and aggrieved from the said order the assessee has referred this appeal challenging the action of the ld CIT(A) on the grounds raised by the assessee. 9 ITA No. 24/BIL/2017 A.Y.2011-12 10. Per contra the learned departmental representative has also confirmed that the ld. CIT(A) has tried to comment on the report of the technical excerpts. As regards the chance to be given he has stated that the assessee was given chance to give the details and appear before the DVO but has not objected on the contention of the assessee to restore the matter back to the file of the assessing officer. 11. We have heard at length both the parties and have persuaded the submission and orders of the lower authorities. It has been vehemently argued by the ld. AR appearing on behalf of the assessee that the valuation has been made by the competent wing of the department who are the engineers capable to estimate the investment made in the building. The said officers have not considered the various contentions raised by the assessee which ought to have been considered looking the analysis of the report. In the first appeal, instead ld. CIT(A) asking for a comment of the Assessing Officer or DVO made his own findings and analysis on the report of the export and sustained an addition of Rs. 12,14,500/-. The ld. AR objected and submitted that even the ld. CIT(A) not being technical person has erred in sustaining 10 ITA No. 24/BIL/2017 A.Y.2011-12 the balance addition and all the contentions raised by the assessee has not been dealt with. Thus, even the action of the ld. CIT(A) is not satisfactory since the contentions raised before the Assessing Officer or the DVO has not been considered even by the CIT(A) fully. The objections of the assessee that the findings of the ld. CIT(A) on the technical issue is also not correct. Therefore, looking to the peculiar facts figures and contentions raised in respect of the DVO’s report. It is in the fair interest of the justice to restored the matter back to the file of the Assessing Officer to give a fair chance to the assessee to raise their contentions in respect of the estimation made by the DVO. The Assessing Officer make this exercise in time bound manner from the DVO and decide this issues in accordance with the law after affording opportunity to the assessee with this direction, the appeal of the assessee is allowed for statistical purposes. 12. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 03 rd June, 2022. 11 ITA No. 24/BIL/2017 A.Y.2011-12 Sd/- Sd/- RAVISH SOOD RATHOD KAMLESH JAYANTBHAI JUDICIAL MEMBER ACCOUNTANT MEMBER रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 03 rd June, 2022 Ganesh Kumar आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, Ǔनजी सͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 12 ITA No. 24/BIL/2017 A.Y.2011-12 Date 1 Draft dictated on Sr.PS/PS 2 Draft placed before author Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order