The ACIT,Vapi Circle, Vapi V. M/s. Jalaram Developers, SILVASSA

ITA 2697/AHD/2010

• Counselvise Citation: 269720514 RSA 2010
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: S D CHHEDA
• Keywords: Opportunity of being heard; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2697/AHD/2010 ASSESSMENT YEAR :2007-08 ASSISTANT COMMISSIONER OF INCOME TAX VAPI CIRCLE, VAPI V/S . M/S. JALARAM DEVELOPERS 70, DEEP COMPLEX, HAVELI FALIA, SILVASSA- DADRA NAGAR HAVILI (U.T.) PAN NO. AA DFJ0257D (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI J. P. JHANGID, SR. D.R. /BY RESPONDENT SHRI S. D. CHHEDA, A.R. /DATE OF HEARING 0 4 .0 7 .201 3 /DATE OF PRONOUNCEMENT 14.08.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A), VALSAD, DATED 25.06.2010 FOR ASSESSMENT YEAR 2007- 08. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE DISALLOWANCE MADE U/S. 69B AMOUNTING TO RS.10,09,199/- AND LD. CIT(A) ALLO WED THE DEDUCTION U/S. 80IB(10). 2. THE ASSESSEE COMPANY IS ENGAGED IN THE DEVELOPME NT AND CONSTRUCTION OF HOUSING PROJECT IN THE NAME AND STY LE OF M/S. JALARAM COMPLEX, NAROLI, SILVASSA. AS PER FORM NO. 10CCB F ILE WITH ROI, ASSESSEE HAD OBTAINED CONSTRUCTION PERMISSION OF LOCAL AUTHO RITY ON 08.09.2004. SUBSEQUENTLY, THE REVISED PERMISSION WAS OBTAINED O N 29.12.2006. THE ASSESSEE HAD STARTED THE CONSTRUCTION OF HOUSING PR OJECT IN THE YEAR 2005-06 ITA NO. 2697/AHD/2010 A.Y. 07-08 PAGE 2 RELEVANT TO A.Y. 2006-07. SIZE OF PLOT HAS BEEN SH OWN AT 14500 SQ. MTR., WHICH COMES TO 3.62 ACRE. THE BUILT UP AREA OF EAC H UNIT HAS BEEN CLAIMED LESS THAN 1,500 SQ. FT. THE PROJECT OF THE ASSESSE E HAD BEEN COMPLETED BEFORE 31.03.2009. THE ASSESSEE HAD CLAIMED ITS EN TIRE PROFIT OF HOUSING PROJECT AS DEDUCTION U/S. 80IB(10) AMOUNTING TO RS. 54,58,648/-. THE A.O. OBSERVED THAT THE ASSESSEE HAD SHOWN VERY HIGH RATE ON PROFIT ON WHICH THE DEDUCTION CLAIMED U/S.80IB(10). THE A.O. GAVE REAS ONABLE OPPORTUNITY OF BEING HEARD, WHICH WAS REPLIED BY THE ASSESSEE AND CONSIDERED BY THE A.O., BUT, LD. A.O. HAD NOT FOUND ACCEPTABLE BECAUSE OF F OLLOWING REASONS: 1. THE PROFITS SHOWN BY THE ASSESSEE ARE SUCH THAT , IT IS ESSENTIAL TO VERIFY THEM BEING VERY HIGH. 2. THE QUANTITY OF MATERIAL USED AND INFRASTRUCTUR E PROVIDED IS REASONABLY GOOD AND HENCE LOGICALLY REQUIRES COST T O BE HIGH IN COMPARISON TO WHAT HAS BEEN SHOWN BY THE ASSESSE E. 3. THE COST OF ACQUISITION SHOWN IN RESPECT OF THE LAND IS APPROXIMATELY RS.9 PER SQ. FT. WHICH IS DIFFICULT T O ACCEPT. 4. THE DEPARTMENTAL VALUATION OFFICER HAS GIVEN DUE OPPORTUNITY TO THE ASSESSEE TO SUBMIT FACT AND DISCUSS THE CIRC UMSTANCES AND ULTIMATELY JUSTIFY THE PROFIT SHOWN. DURING TH E COURSE OF HEARING BEFORE THE DVO THE ASSESSEES ARCHITECT CUM VALUER WAS PRESENT AND HENCE IT CANNOT BE SAID THAT THE VA LUATION HAS BEEN DONE AT THE BACK OF THE ASSESSEE. 5. DVO IS A TECHNICALLY QUALIFIED PERSON AND WHEN S UCH A PERSON QUANTIFIES COST CONSIDERING THE ALL INPUTS, THE SAM E CANNOT BE BRUSHED ASIDE IN ABSENCE OF COGENT REASONS. 6. AFTER ADOPTING THE COST AS SUGGESTED BY THE DVO, THE PROFITS ARRIVED AT ARE IN THE RANGE WHICH IS ACCEPTED, IN S UCH LINE OF BUSINESS. ITA NO. 2697/AHD/2010 A.Y. 07-08 PAGE 3 7. THE TECHNICAL OBJECTIONS SHOULD HAVE BEEN RAISED BEFORE THE DVO, RATHER THAN BEFORE THE AO. 8. THE ASSESSEE HAS NOT REQUESTED FOR CROSS EXAMINA TION OF DVO DURING THE ASSESSMENT PROCEEDINGS. IT WAS ESSE NTIAL, AS IT WAS THE RIGHT OF THE ASSESSEE WHICH COULD HAVE B EEN EXERCISED, IF THE ASSESSEE WAS NOT HAPPY WITH THE P ARAMETERS OF INPUTS TAKEN BY THE DVO. AFTER CONSIDERING THE FINDINGS OF THE DVO, THE LD. A.O. MADE UPWARD ADJUSTMENT IN THE COST OF CONSTRUCTION BY RS. 10,09 ,199/- AS WORKED OUT BY THE DEPARTMENT. THUS, HE MADE ADDITION OF RS. 10,09,19 9/- U/S. 69B OF THE IT ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND THE CIRCUMSTANCES OF THE CASE. I HAVE PAID DUE ATTENTION TO THE FINDING OF THE AO AND THE SUBMISSIONS MADE BY THE LD. AR. THE AO DOUBTED THE COST OF CONSTRUCTION OF THE HOUSING PROJECT. THE MATTER WAS REFERRED TO THE DVO FOR ESTIMATING THE COST OF THE HOUSING PROJECT. THE DVO REVISED THE COST OF CONSTRUCTION UPWARD AND ON THE BASIS OF THAT REPORT THE AO MADE ADDITION OF RS. 10,09,199/- BY I NVOKING PROVISIONS U/S. 69B. BEFORE ME THE LD. AR DEMONSTRA TED THAT DURING THE ASSESSMENT PROCEEDING, THE AR HAD BROUGHT OUT S ERIOUS DEFICIENCIES IN THE REPORT OF THE DVO. FURTHER, THE AO SUBMITTED THAT THE AO IGNORED THE EXPLANATIONS SUBMITTED BY HIM IN THE PLEA THAT DVO IS A QUALIFIED PERSON IN THAT FIELD AND THE AO FELT HELPLESS TO SEE THE DEFICIENCIES IN THAT REPORT. THE AO HAD ALSO NO T DISPUTED THE VERACITY OF THE BOOKS OF A/C MAINTAINED BY THE APPE LLANT. IN THIS CIRCUMSTANCES, CAN THE ADDITION MADE BASED ON THE E STIMATED COST BE JUSTIFIED ? I FIND FORCE IN THE ARGUMENT OF THE ID. AR. SEC.142A EMPOWERS THE AO TO REFER THE MATTER TO THE VALUATIO N OFFICER FOR ESTIMATING THE VALUE OF INVESTMENT REFERRED TO IN S EC. 69, 69B ETC. IT ITA NO. 2697/AHD/2010 A.Y. 07-08 PAGE 4 IS IMPORTANT TO NOTE HERE THAT THIS SECTION ONLY RE FER TO 'ESTIMATING THE VALUE'. EVEN SEC.69. 69A, 69B ALSO DO NOT USE THE WORDS 'FAIR MARKET VALUE'. FOR INVOKING SEC. 6GB, AO HAS TO FIR ST FIND OUT HOW MUCH AMOUNT WAS ACTUALLY PAID/INVESTED BY THE APPEL LANT AND SUCH FINDING MUST BE SUPPORTED BY DOCUMENTARY EVIDENCES AND NOT MERELY BASED ON SUSPICION. EVEN THE COURTS HAVE CONSISTENTLY HELD THAT 'VALUATION REPORT' CANNOT BY ITSELF FORM THE BASIS FOR MAKING THE ADDITION. VALUATION IS ALWAYS A QUESTION OF OPI NION AND UNLESS THERE IS CLEAR FINDING ON THE BASIS OF MATERIALS TH AT THE APPELLANT HAD PAID EXTRA AMOUNT WHILE ACQUIRING THE PROPERTY, NO ADDITION CAN BE MADE MERELY ON THE BASIS OF VALUATION REPORT. FURTH ER WHETHER ADDITION OF RS. 10,09,199/- BY INVOKING OF SEC. 69B OF THE IT ACT BY THE AO IS TENABLE? FOR INVOKING SEC. 69B, IT REQUIR ES THE AO TO SEEK APPELLANT'S EXPLANATION. IT IS ONLY IF THE APPELLAN T OFFERS NO EXPLANATION OR HIS EXPLANATION IS FOUND TO BE UNSAT ISFACTORY THAT THE AO MAY PROCEED TO ASSESS THE EXCESS PORTION AS INCO ME FROM UNDISCLOSED SOURCES U/S. 69B. THAT MEANS, THREE FI NDINGS ARE CUMULATIVE I.E. A) THE APPELLANT MUST HAVE MADE INV ESTMENT B) IT IS FOUND BY AO THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENT EXCEEDED THE AMOUNT RECORDED IN THE BOOKS OF A/C. T HE FINDING OF AO MUST BE ON CLEAR AND COGENT MATERIALS IN RESPECT OF THE AMOUNT EXPENDED, C) EITHER THE APPELLANT OFFERS NO EXPLANA TION OR THE G EXPLANATION OFFERED IS UNSATISFACTORY IN THE OPINIO N OF THE AO. THE ONUS IS ON THE REVENUE TO SHOW THAT THE A PPELLANT HAS EXPENDED EXTRA AMOUNT. THE DVO'S REPORT WHICH ESTIM ATED THE COST OF THE HOUSING PROJECTS CAN NOT ITSELF BE THE BASIS FOR ADDITION IN THIS CASE. THUS, IN MY CONSIDERED OPINION THE ADDITION M ADE BY THE AO BY INVOKING SEC.69B IS LEGALLY NOT SUSTAINABLE IN T HE ABSENCE OF CLEAR FINDING BY THE AO THAT THE APPELLANT HAD EX PENDED EXCESS MONEY APART FROM WHAT IS SHOWN IN THE BOOKS OF ACCOUNTS. THEREFORE, BASED ON THE FACTUAL AND LEGAL MATRIX AN D AFTER HAVING ITA NO. 2697/AHD/2010 A.Y. 07-08 PAGE 5 CONSIDERED THE PROVISIONS OF SEC. 69B, I DIRECT THE AO TO DELETE THE ADDITION IN THIS GROUND OF APPEAL. ACCORDINGLY THE APPELLANT'S GROUND NO. 1 IS ALLOWED. 4. NOW THE REVENUE IS BEFORE US. THE LD. SR. D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE A.O. AND REQUESTED TO CONFIRM THE ORDER OF THE A.O. AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT ARGUED THAT N O BOOKS OF ACCOUNT HAVE BEEN REJECTED BEFORE REFERRING THE PROPERTY IN QUES TION TO THE DVO. HE RELIED IN CASE SARGAM CINEMA VS. CIT (2010) 328 ITR 0513 (SC), WHEREIN IT WAS HELD THAT THE ASSESSING AUTHORITY COULD NOT HAVE RE FERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. HE FURTHER RELIED IN CASE OF NEOTRIC CONSTRUCTION PVT. LTD. VS. A.C.I.T., ITAT AGRA BENCH, WHEREIN IT WAS HELD THAT LD. CIT(A) HAS GIVEN SPECI FIC FINDING THAT THE ASSESSEE MAINTAINED PROPER BOOKS OF ACCOUNT, WH ICH HAVE BEEN AUDITED WHEREIN NO DEFECTS HAVE BEEN POINTED OUT BY THE ASS ESSING OFFICER. THEREFORE, REFERENCE TO THE DVO FOR ASCERTAINING TH E COST OF CONSTRUCTION ON ESTIMATE BASIS WAS HIGHLY UNJUSTIFIED. THE LD. CIT (A), THEREFORE, RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR QUA SHING THE REFERENCE ITSELF. FURTHER THE ASSESSEE HAS BEEN GRANTED DEDUCTION U/S . 80IB(10), WHICH WOULD CLEARLY INDICATE THAT THE REFERENCE TO THE DVO WAS HIGHLY UNJUSTIFIED. IN CASE OF GOODLUCK AUTOMOBILES (P.) LTD. VS. ACIT (2012) 254 CTR 0001, PAGE NO.1 HELD THAT A.O. HAS NOT RECORDED ANY DEFECT IN THE B OOKS OF ACCOUNT BEFORE REFERRING THE DVO. THE ASSESSING OFFICER HAD NOT B ROUGHT ANY MATERIAL ON RECORD TO ESTABLISH THAT ASSESSEE HAD MADE ANY UNAC COUNTED INVESTMENT IN THE CONSTRUCTION OF THE BUILDING IN QUESTION AND TH AT THE BOOKS OF ACCOUNT DO ITA NO. 2697/AHD/2010 A.Y. 07-08 PAGE 6 NOT REFLECT THE CORRECT COST OF CONSTRUCTION. THUS , HE REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. LD. A.O. HAD NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT BEFORE REFERRING THE CASE TO THE DVO AS HELD BY THE HONBLE APEX IN CASE OF SARGAM CINEMA VS. CIT (SUPRA) FOR DETERMINATION OF COST OF CONSTRUCTION. THE LD. A.O. MUST HAVE POINTED OUT THE DEFECTS IN THE A CCOUNT MADE BY THE ASSESSEE WHICH HAD NOT BEEN SOWN IN CASE OF APPELLA NT. THUS, OUR CONSIDERED VIEW THAT CIT(A) WAS RIGHT IN DELETING T HE ADDITION MADE BY THE A.O. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 14.08.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;