Dy. Commissioner of Income Tax, Lucknow V. M/s The Commercial Motors Ltd., Lucknow

ITA 274/LKW/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6594 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Question of law; Wrong claim; Valuation report
• Section: 69

Judgement Text

I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 2012-13 DY.C.I.T., RANGE-6, LUCKNOW. VS. M/S THE COMMERCIAL MOTORS LTD., 11, M. G. MARG, LUCKNOW. PAN:AACCT 7382 H (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THESE THREE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A) ALL DATED 28/02/2 017. THESE APPEALS WERE HEARD TOGETHER AND THEREFORE, FOR THE SAKE OF CONVE NIENCE, A COMMON AND CONSOLIDATED ORDER IS BEING PASSED. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE IN THESE APPEALS ARE REPRODUCED BELOW: I.T.A. NO.273/LKW/2017 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE PENALTY OF RS.26,20,000/- U/S 271(1)(C ) OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT THE PLANT & MACHINERY NEVER BECAME PART OF THE BUSINESS ASSET A ND HENCE WRONGFUL CLAIM OF SHORT TERM CAPITAL LOSS ON SALE OF APPELLANT BY SHRI R. K. VISHWAKARMA, D.R. RESPONDENT BY SHRI K. P. TANDON, ADVOCATE DATE OF HEARING 15/05/2018 DATE OF PRONOUNCEMENT 17/05/2018 I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 2 PLANT & MACHINERY AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME. I.T.A. NO.274/LKW/2017 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE PENALTY OF RS.24,50,000/- U/S 271(1)(C ) OF THE I.T. ACT IGNORING THE FACT THAT UNDISCLOSED INV ESTMENT OF RS.13,24,106/- IN CONSTRUCTION OF HOTEL IS BASED ON THE REPORT OF THE REGISTERED VALUER OF THE ASSESSEE AND NOT D.V.O. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), LUCKNO W HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DE LETING THE PENALTY OF RS.24,50,000/- UNDER SECTION 27I(1)( C) OF THE I.T. ACT, 1961 IGNORING THE FACT THAT THIS UNDI SCLOSED INVESTMENT HAS MADE THE BOOKS OF ACCOUNT OF THE ASSESSEE TOTALLY INACCURATE AND HELPED HIM HIDE A P ORTION OF INCOME WHICH AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. 3. THE COMMISSIONER OF INCOME TAX (APPEALS), LUCKNO W HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DE LETING THE PENALTY OF RS.24,50,000/- UNDER SECTION 271(1)( C) OF THE I.T. ACT, 1961 IGNORING THE FACT THAT BY SHOWIN G INTEREST INCOME WRONGLY AS BUSINESS INCOME, THE ASSESSEE HAS SET OFF THE EARLIER YEAR LOSSES FROM C URRENT YEARS BUSINESS INCOME WHICH AMOUNTS TO FURNISHING INACCURATE PARTICULARS OF INCOME. I.T.A. NO.275/LKW/2017 1. THAT THE LEARNED CIT(A) LUCKNOW HAS ERRED IN LA W AND ON FACTS IN DELETING THE ADDITION OF RS.77,24,270/- IG NORING THE FACT THAT THERE IS NO PROVISION U/S 142A OF THE I.T. ACT TO PROVIDE BENEFIT ON ACCOUNT OF RATE DIFFERENCE BE TWEEN UPPWD AND CPWD. 2. AS REGARDS THE APPEALS IN I.T.A. NO.273 & 274, L EARNED D. R. HEAVILY PLACED RELIANCE ON THE ORDERS OF THE ASSESSING OFFI CER. AS REGARDS APPEAL IN I.T.A. NO.275, LEARNED D. R. SUBMITTED THAT LEARNED CIT(A) HAS ALLOWED I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 3 RELIEF TO THE ASSESSEE BY HOLDING THAT THERE REMAIN S DIFFERENCE OF 25% BETWEEN THE UPPWD RATES AND CPWD RATES WHEREAS IN T HE CASE OF ASSESSEE ITSELF IN ASSESSMENT YEAR 2011-12 HAD HELD THAT THE DIFFERENCE BETWEEN UPPWD AND CPWD RATES IS 15% TO 18% AND IN THIS RESP ECT OUR ATTENTION WAS INVITED TO PARA 8 OF THE ORDER OF HON'BLE ALLAH ABAD HIGH COURT AND THEREFORE, IT WAS PRAYED THAT THE MATTER SHOULD BE SET ASIDE TO THE OFFICE OF THE ASSESSING OFFICER. 3. THE LEARNED A. R. ARGUING THE APPEAL IN I.T.A. N O.273/LKW/2017 SUBMITTED THAT THE ASSESSING OFFICER HAD IMPOSED PE NALTY U/S 271(1)(C) AS IN THE ASSESSMENT HE HAD DISALLOWED SHORT TERM CAPI TAL LOSS AND HAD FURTHER DISALLOWED 10% OUT OF BUILDING REPAIRS. IT WAS SUBMITTED THAT DISALLOWANCE OF BUILDING REPAIRS WAS DONE ON ESTIMA TE BASIS AND IN THE CASE WHERE THE DISALLOWANCE IS MADE ON ESTIMATED BASIS, THE PENALTY IS NOT IMPOSABLE AS HAS BEEN RIGHTLY HELD BY LEARNED CIT(A ). AS REGARDS THE PENALTY ON SECOND ADDITION ON THE BASIS OF DISALLOW ANCE ON SHORT TERM CAPITAL LOSS, LEARNED A. R. SUBMITTED THAT THE ASSE SSING OFFICER HAD DISALLOWED THE CLAIM FOR THE REASONS THAT PLANT & M ACHINERY WAS NOT USED FOR BUSINESS AND THE ISSUE WENT UPTO THE LEVEL OF H ON'BLE TRIBUNAL, LUCKNOW WHICH THOUGH HELD THAT MACHINERY NEVER BECAME PART OF THE BUSINESS OF THE ASSESSEE AND THEREFORE, DISALLOWED THE SHORT TERM C APITAL LOSS AS CLAIMED BY THE ASSESSEE BUT HAD ALSO ALLOWED THE TOTAL COST OF LAND TO BE INCREASED WITH THE ALLEGED LOSS SUFFERED ON SALE OF MACHINERY . IT WAS SUBMITTED THAT THE GENUINENESS OF LOSS WAS NOT DOUBTED AND INSTEAD OF CLAIM BEING ALLOWED, THE LOSS WAS ALLOWED TO BE ADJUSTED AGAINS T COST OF ANOTHER ASSET AND IT WAS NOT A WRONG CLAIM, PER SE AND ALL THE PA RTICULARS REGARDING CLAIM OF LOSS WERE FILED BEFORE THE ASSESSING OFFICER. I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 4 4. ARGUING APPEAL IN I.T.A. NO.274/LKW/2017, LEARNE D A. R. SUBMITTED THAT IN THIS CASE THE ASSESSING OFFICER HAD MADE AD DITION U/S 69 OF THE ACT TO THE TUNE OF RS.13,24,106/- AND ALSO HAD ASSESSED BUSINESS INCOME DECLARED BY ASSESSEE AS INCOME FROM OTHER SOURCES. IT WAS SUBMITTED THAT THE PENALTY FOR UNDISCLOSED INVESTMENT U/S 69 WAS M ADE ON THE BASIS OF DIFFERENCE IN VALUE OF CONSTRUCTION OF HOTEL AS PER BOOKS OF ACCOUNT OF THE ASSESSEE AND VALUATION REPORT OBTAINED FROM D.V.O. LEARNED A. R. SUBMITTED THAT LEARNED CIT(A) RELYING UPON THE ORDER OF HON'B LE DELHI TRIBUNAL IN THE CASE OF DCIT VS. JMD ADVISORS (P) LTD. IN I.T.A. NO .6230/DEL/2013 HAS HELD THAT VALUATION MADE BY THE D.V.O. IS AN ESTIMATE WH ICH CAN BE USED FOR MAKING ADDITION TO THE INCOME OF THE ASSESSEE BUT T HE SAME CANNOT BE BASIS TO CONSTRUE CONCEALMENT FOR THE PURPOSE OF IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. AS REGARDS THE SECOND ADDITION, LEARNE D A. R. SUBMITTED THAT THE ASSESSEE HAD DECLARED THE INCOME AS BUSINESS IN COME WHICH THE ASSESSING OFFICER HAD TREATED AS INCOME FROM OTHER SOURCES. LEARNED A. R. SUBMITTED THAT THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE IN THIS RESPECT ALSO AS THE ASSESSEE HAD PROVIDED ALL THE D ETAILS AND PARTICULARS AND THEREFORE, LEARNED CIT(A) RELYING ON VARIOUS CASE L AWS HAD RIGHTLY DELETED THE PENALTY. LEARNED A. R. FURTHER SUBMITTED THAT IN QUANTUM PROCEEDINGS THE ISSUE REACHED UPTO HON'BLE ALLAHABAD HIGH COURT WHICH HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREFORE, ALSO THE PENALTY IMPOSED BY THE ASSESSING OFFICER DOES NOT SURVIVE AND IN THIS RESPECT FILED A COPY OF ORDER OF HON'BLE HIGH COURT DATED 02/03/2017. 5. LEARNED A. R. ARGUING APPEAL IN I.T.A. NO.275/LK W/2017 SUBMITTED THAT IN THIS CASE THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.77,24,270/- U/S 69 OF THE ACT BEING DIFFERENCE I N THE VALUE OF CONSTRUCTION AS PER THE EXPENDITURE BOOKED IN THE B OOKS OF ACCOUNT AND AS I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 5 PER THE D.V.O. REPORT. LEARNED A. R. SUBMITTED THA T LEARNED CIT(A) RELYING ON VARIOUS CASE LAWS HAS HELD THAT THE D.V.O. SHOUL D HAVE CALCULATED THE VALUE OF INVESTMENT ON THE BASIS OF UPPWD RATES INS TEAD CPWD RATES AND THEREFORE, HAD ALLOWED A REBATE OF 25% AND AFTER AL LOWING 25% REBATE THE INVESTMENT AS DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT WAS MORE THAN THE ADJUSTED VALUE OF D.V.O. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. FIRST WE TAKE APPEAL IN I.T.A. N O.273. WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASSESSING OFFICER HAS M ADE TWO ADDITIONS BEING 10% DISALLOWANCE OUT OF BUILDING REPAIRS AND DISALL OWANCE OF SHORT TERM CAPITAL LOSS. THE ASSESSEE HAD CLAIMED THE LOSS AS SHORT TERM CAPITAL LOSS WHEREAS THE HON'BLE TRIBUNAL, LUCKNOW HAD HELD THAT IT WAS NOT A SHORT TERM CAPITAL LOSS BUT AT THE SAMETIME IT ALLOWED TH E TOTAL COST OF LAND BE INCREASED BY ALLEGED LOSS SUFFERED IN SALE OF MACHI NERY. THE ASSESSING OFFICER DID NOT DOUBT THE GENUINENESS OF LOSS SUFFE RED BY THE ASSESSEE AND THEREFORE, IT IS NOT A CASE OF WRONG CLAIM, PER SE. THE TRANSACTION OF PURCHASE AND SALE OF PLANT & MACHINERY WERE DULY DI SCLOSED IN THE BOOKS OF ACCOUNT AND THEREFORE, LEARNED CIT(A) HAS RIGHTLY H ELD THAT THERE WAS NO CONCEALMENT OF INCOME. AS REGARDS THE PENALTY ON D ISALLOWANCE OUT OF BUILDING REPAIRS, WE FIND THAT LEARNED CIT(A) HAS R IGHTLY RELIED ON THE CASE LAW OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. 230 CTR 320 (SC) WHEREIN HON'BLE COURT HAS HELD THAT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE WH ICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY U/S 271(1)(C) OF THE ACT. LEAR NED CIT(A) HAS PASSED A SPEAKING AND EXHAUSTIVE ORDER WHICH FOR THE SAKE OF COMPLETENESS IS REPRODUCED BELOW: I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 6 4(4)(I) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCE S OF THE CASE. THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEE DINGS ARE TWO DIFFERENT PROCEEDINGS UNDER THE ACT. FINDING RE LEVANT TO ASSESSMENT MAY NOT BE CONCLUSIVE AT THE STAGE OF PE NALTY PROCEEDINGS. PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LEVIED FOR CONCEALMENT OF INCOME OR FILING OF INACCURATE P ARTICULARS OF INCOME. THE FIRST ADDITION TO INCOME ON WHICH PENAL TY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN LEVIED BY THE AO IS THE ADDITION OF RS.1,61,807/- BY WAY OF DISALLOWANCE OF EXPENSES. I FIND THAT DISALLOWANCES ARE MORE IN NATURE OF UNACC EPTABLE CLAIM OF EXPENSES RATHER THAN THE EXPENSES NOT ACTU ALLY INCURRED AND CLAIMED WRONGLY. IN THIS CONNECTION A REFERENCE MAY BE MADE TO THE DECISION OF HON'BLE APEX COURT I N A RECENT JUDGMENT IN THE CASE OF CIT VS RELIANCE PETRO PRODU CTS LTD (2010) 36 DTR 449 (SC) WHEREIN IT IS LAID DOWN THAT WE DO NOT AGREE, AS THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMENT O F INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PE NALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTIO N OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECT ION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF TH E LEGISLATURE. 4(4)(II) THE ADDITION THEREFORE IS ONE WHERE A CLAI M WAS NOT FOUND ALLOWABLE BY THE AO RATHER THAN BEING A WRONG CLAIM PER SE. IN VIEW OF THE DECISION OF HON'BLE APEX COURT S UPRA, PENALTY ON ADDITIONS OF RS.1,61,807/- ON ACCOUNT OF DISALLO WANCE OF EXPENSES CLAIMED IS THEREFORE NOT JUSTIFIED. 4(5)(I) THE SECOND ADDITION MADE TO INCOME WAS RS. 82,97,750/-. THE APPELLANT HAD SHOWN DURING THE ASS ESSMENT PROCEEDINGS THAT LAND ALONG WITH PLANT AND MACHINER Y WAS I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 7 PURCHASED FOR RS.2,70,00,000/- OUT WHICH THE PLANT AND MACHINERY VALUED AT RS.1,05,00,000/- WAS SOLD FOR R S. 22,02,750/-. THE ASSESSEE CLAIMED SHORT TERM CAPITA L LOSS OF RS. 82,97,750/- WHICH WAS DISALLOWED BY THE AO ON THE R EASON THAT PLANT AND MACHINERY WAS NOT USED FOR BUSINESS. THE ISSUE WENT UP TO THE LEVEL OF HON'BLE ITAT, LUCKNOW WHICH HAS DECIDED THE ISSUE IN ITA NO.746/LKW/2014 DATED 31.08.2015 OBSER VING AS UNDER HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE IS NOT ENGAGED IN AN Y SUCH BUSINESS ACTIVITIES IN WHICH THESE MACHINERIES CAN BE USED. THE ASSESSEE IN FACT WAS ENGAGED IN CONSTRUCTION-OF BUILDING, FACTS ETC. THEREFORE, THE FACTORY BUILDING WAS PURCHASED BY THE ASSESSEE ONLY FOR CONSTRUCTION OF THE BUILDING AND FLATS. AT THE MOST , THE COST OF MACHINERIES CAN BE ADDED IN THE COST OF LAN D PURCHASED FOR RAISING FLATS AND BUILDING. THE MACHINERIES NEVER BECAME THE PART OF BUSINESS A SSET OF THE ASSESSEE, AS THE ASSESSEE WAS NEVER ENGAGED IN ANY MANUFACTURING ACTIVITY. THEREFORE, THE ALLEGED SHORT TERM CAPITAL LOSS AS CLAIMED BY THE ASSESSEE ON SAL E OF MACHINERIES CANNOT BE ALLOWED, AS THE MACHINERIES W ERE NEVER PURCHASED FOR ITS USE IN THE BUSINESS OF THE ASSESSEE. THE TOTAL COST OF LAND MAY BE INCREASED B Y THE ALLEGED LOSS SUFFERED IN SALE OF MACHINERIES. IN TH E LIGHT OF THESE FACTS, WE DO NOT SUBSCRIBE THE VIEW OF THE ID . CIT(A) ON THIS ISSUE AND ACCORDINGLY WE SET ASIDE H IS ORDER IN THIS REGARD AND RESTORE THAT OF THE ASSESS ING OFFICER. 4(5)(II) EVIDENTLY, THE HON'BLE ITAT, LUCKNOW HAS D ISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS BUT HAS ALLOWE D THE LOSS TO BE ADJUSTED BY INCREASING THE COST OF LAND BY THE A MOUNT OF LOSS. IT WOULD THEREFORE MEAN THAT THE GENUINENESS OF LOSS SUFFERED HAS NOT BEEN DOUBTED BUT INSTEAD OF CLAIM BEING ALLOWED THE LOSS HAS BEEN ADJUSTED AGAINST COST OF ANOTHER ASSET IT IS THEREFORE NOT A CASE OF A WRONG CLAIM P ER SE. THE TRANSACTIONS OF PURCHASE AND SALE OF PLANT AND MACH INERY IS DULY DISCLOSED IN BOOKS OF ACCOUNTS AND THERE IS TH EREFORE NO I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 8 CASE OF CONCEALMENT OF INCOME OR FILING OF INACCURA TE PARTICULARS OF INCOME. PENALTY UNDER SECTION 271(1)(C) OF THE A CT IS THEREFORE NOT LIVABLE ON DISALLOWANCE OF SHORT TERM CAPITAL LOSS OF RS. 2,97,750/- WHICH WAS ALLOWED TO BE ADJUSTED IN THE COST OF LAND. 5. ON THE BASIS OF MY EXAMINATION, I AM OF THE CONS IDERED VIEW THAT NO PENALTY IS LIVABLE ON THE FACTS AND CIRCUMS TANCES OF THE CASE. I THEREFORE DIRECT THAT THE PENALTY OF RS.26, 20,000/- LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT BE CAN CELLED. THE APPELLANT GETS THE CONSEQUENTIAL RELIEF. 6.1 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF LEARNED CIT(A) AND THEREFORE, THE APPEAL OF THE REV ENUE IN I.T.A. NO.273 IS DISMISSED. 7. NOW WE TAKE UP APPEAL IN I.T.A. NO.274. IN THI S CASE THE PENALTY WAS IMPOSED FOR TWO DISALLOWANCES NAMELY UNDISCLOSE D INVESTMENT U/S 69 OF RS.13,24,106/- AND INCOME ASSESSED AS INCOME FROM O THER SOURCES OF RS.64,45,020/-. IN THE QUANTUM PROCEEDINGS BOTH TH E ADDITIONS TRAVELLED UPTO HON'BLE HIGH COURT WHICH BY JUDGMENT DATED 02/ 03/2017 DELETED THE ADDITION AND DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY HOLDING AS UNDER: 5. THEN COMES QUESTIONS-(1), (2) AND (3) RELATING TO 'INVESTMENT ON CONSTRUCTION OF RS.13.24.106/-'. THI S ISSUE HAS BEEN CONSIDERED BY TRIBUNAL IN PARA 8 OF JUDGMENT W HICH READS AS UNDER: '8. REGARDING GROUND NO.2 OF THE REVENUE'S APPEAL, WE FIND THAT ADDITION WAS MADE BY THE AO IS ON THE BASIS THAT AS PER THE REPORT OF THE REGISTERED VALUER SUB MITTED FOR THE VALUE OF CAPITAL WORK IN PROGRESS REGARDING CONSTRUCTION OF HOTEL CHINA GATE, VALUE WAS DETERMI NED BY THE VALUER AT RS.4,50,00,000/- AS ON 01.04.2011 AND THE AO OBSERVED THAT THERE IS STILL A DIFFERENCE OF I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 9 RS.13.24.106/- BETWEEN INVESTMENT DECLARED BY THE ASSESSEE AND INVESTMENT ESTIMATED BY APPROVED VALUE R. HENCE, IT IS SEEN THAT ADDITION IS NOT MADE BY THE AO ON ESTIMATE BASIS BUT THIS IS ON THE BASIS OF ACTUAL B ASIS BETWEEN INVESTMENT DECLARED BY THE ASSESSEE AND VAL UED BY THE REGISTERED VALUER AS PER THE VALUERS REPORT SUBMITTED BY THE ASSESSEE ITSELF. THIS ADDITION WAS DELETED BY THE CIT(A) ON THIS BASIS THAT THE ADDITI ON WAS MADE BY THE AO SUBJECT TO RECTIFICATION AS PER OUTC OME OF DVOS REPORT THIS IS NOT THE CASE OF THE LD. CIT(A) THAT DVO HAS DETERMINED THE VALUE OF THE PROPERTY AT OR NEAR TO THE VALUE OF INVESTMENT SHOWN BY THE ASSESSES. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THE OR DER OF THE LD. C1T(A) ON THIS ISSUE IS ALSO NOT SUSTAINABL E. WE THEREFORE, REVERSE HIS ORDER ON THIS ISSUE ALSO AND RESTORE THAT OF THE AO. GROUND NO.2 OF THE REVENUE IS ALSO ALLOWED.' 6. IT IS CONTENDED THAT FINDING RECORDED BY TRIBUN AL IS PERVERSE. ASSESSING OFFICER (HEREINAFTER REFERRED T O AS 'AO') HAS MADE ADDITION NOT ON ESTIMATE BASIS BUT ON ACTUAL B ASIS, ON THE DIFFERENCE OF AMOUNT BETWEEN INVESTMENT DECLARED BY ASSESSES AND INVESTMENT ESTIMATED BY APPROVED VDUER AS PER V ALUER REPORT SUBMITTED BY ASSESSEE ITSELF. IN THIS REGARD FINDINGS OF AO CONTAINED IN RARA-3 OF ASSESSMENT ORDER READ AS UNDER: '3. THE ASSESSEE HAS CONSTRUCTED A HOTEL CHI NA GATE; CONSTRUCTION WAS STARTED DURING F.Y. 2008-09 AND CONSTRUCTION WAS COMPLETED IN FEB. 2012. TOTAL INVESTMENT UPTO F.Y. 2010-11 I.E. 31 MARCH, 2011 WA S DISCLOSED AT RS.4,36,75,894/-. THE ASSESSEE WAS AS KED VIDE THIS OFFICE QUERY LETTER DATED 15.09.2013 A ND 01.10.2013 TO SUBMIT VALUATION REPORT OF THE PROPER TY FROM THE APPROVED VALUER. ASSESSEE SUBMITTED A VALUATION REPORT OF A VALUER MR. N.K. GOD AS ON 01.04.2011. ALTHOUGH, CONSTRUCTION OF BUILDING WAS COMPLETE ON DATE OF ASKING VALUATION REPORT BUT ASS ESSES HAS NOT GET VALUATION DONE FOR TOTAL CONSTRUCTION COMPLETED UPTO FEB. 2012. REASON BEST KNOW TO THE ASSESSEE. HOWEVER, VALUER IN VALUATION REPORT AS ON 01.04.2011 HAS STATED THAT 35% WORK IS IN PROGRESS AND WORKED OUT VALUATION AT RS. 4,50,00,000/- AS ON I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 10 01.04.2011. THERE IS STILL A DIFFERENCE OF RS,13,24 ,106/- BETWEEN INVESTMENT DECLARED BY THE ASSESSEE AND INVESTMENT ESTIMATED BY APPROVED VALUER. THE ASSESS EE WAS GIVEN A SHOW CAUSE VIDE ORDER SHEET ENTRY DATED 21.10.2013 THAT WHY NOT DIFFERENCE SHOULD BE TREATE D AS INVESTMENT OUT OF UNDISCLOSED SOURCE U/S69 OF THE I .T. ACT, 1961. ASSESSEE FURNISHED A REPLY DATED NIL ON 08.11.2013 STATING THEREIN THAT COST OF CONSTRUCTIO N OF CPWD RATE IS ALWAYS HIGHER THAN THE COST OF CONSTRU CTION OF UPPWD AND IT DIFFER FROM 15% TO 18%. HE HAS ALSO STATED THAT ALLAHABAD HIGH COURT IN CASE OF CIT VS. RAJ KUMAR HELD THAT RATE OF UPPWD SHOULD BE APPLIED IN COST OF CONSTRUCTION AND NOT CPWD. THE ASSESSEE OWN APPROVED VALUER HAS ESTIMATED COST OF CONSTRUCTION AS NORMS PRESCRIBED BY CPWD/UPPWD. THE DEPARTMENT HAS NOT REFERRED MATTER TO VALUATION CEL L DUE TO REASON THAT CONSTRUCTION OF PROPERTY WAS COM PLETED IN FEB,2012 WHICH PERTAINS TO AY. 2012-13. THIS CAS E IS ALSO UNDER SCRUTINY AND THIS MATTER WILL BE REFERRE D TO VALUATION CELL TO FIND OUT ACTUAL INVESTMENT IN ITS PROPERTY. IF AT THAT TIME THERE IS DIFFERENCE IN VALUATION MA DE BY DEPARTMENTAL VALUER AND INVESTMENT MADE BY THE ASSESSEE THE MATTER WILL BE DEALT AS PER LAW AND IF NEEDED THIS ORDER WILL BE RECTIFIED. THUS, DIFFERE NCE OF RS.13,24,106/- IS ADDED AS UNDISCLOSED INVESTMENT U /S 69 OF THE IT. ACT, 1961 SUBJECT TO RECTIFICATION IF AN Y REQUIRED.' (EMPHASIS ADDED) 7. ASSESSMENT ORDER ITSELF SHOWS THAT WORK WAS NOT COMPLETE WHEN REPORT WAS SUBMITTED BY SRI N.K. GOD, VALU ER AS ON 01.04.2011 AS IT DEARLY SAID THAT 35 PER CENT WORK IS IN PROGRESS AND STILL HE WORKED OUT VALUATION. AO FOUND THAT ST ILL THERE WAS DIFFERENCE BETWEEN INVESTMENT DECLARED BY ASSESSEE AND INVESTMENT ESTIMATED BY APPROVED VALUER. 8. MOREOVER, IF THE VALUE HAS MADE ESTIMATE ON THE BASIS OF CPWD RATES, ASSESSEE REFERS TO DECISION OF THIS COU RT IN CIT VS. RAJ KUMAR SINGH 182 ITR 436 (ALL.) STATING THAT COS T OF CONSTRUCTION SHOULD BE AS PER UPPWD RATES BUT WITHO UT LOOKING TO THE AFORESAID JUDGMENT. TRIBUNAL HAS REVERSED FI NDING OF COMMISSIONER OF INCOME TAX. (APPEAL) (HEREINAFTER R EFERRED TO I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 11 AS 'CIT(A)'). THE DIFFERENCE BETWEEN UPPWD AND CPWD RATES IS 15 TO 18 PER CENT AND IF THAT IS TAKEN, THEN INV ESTMENT DECLARED BY ASSESSEE WAS LESS THAN VALUATION MADE B Y VALUER WHOSE REPORT WAS SUBMITTED BY ASSESSEE APPARENTLY, ADDITION WAS IN RESPECT TO VALUATION OF INVESTMENT ON ESTIMA TED BASIS OF VALUER AND DISCLOSURE MADE BY ASSESSEE WHICH HAS BE EN MISREAD BY TRIBUNAL BY OBSERVING THAT ADDITION WAS NOT ON THE BASIS OF ESTIMATE BUT ACTUAL BASIS. IT IS CLEARLY A MISREADING AND PERVERSE. IN VIEW THEREOF, QUESTIONS-(1), (2) AND ( 3) ARE ALSO ANSWERED IN FAVOUR OF APPELLANT. 7.1 THE OTHER ISSUE OF INTEREST INCOME ALSO HAS BEE N DECIDED BY HON'BLE COURT IN FAVOUR OF THE ASSESSEE. HON'BLE COURT HAD FRAMED THE FOLLOWING QUESTION OF LAW: WHETHER TRIBUNAL WAS JUSTIFIED IN REVERSING ORDER OF CIT(A) ON THE QUESTION THAT INTEREST INCOME OF RS.64,45,020 /- IS THE INCOME FROM OTHER SOURCE OF APPLICANT AND IS NOT AN INCOME FROM BUSINESS AS WAS HELD EARLIER BY THIS COURT IN INCOME TAX APPEAL NO. 37 OF 2007 COMMISSIONER OF INCOME TAX V S. COMMERCIAL MOTORS LTD. THE SAID QUESTION HAS BEEN ANSWERED BY HON'BLE HIGH COURT VIDE PARA 4 WHICH READS AS UNDER: WHEN QUESTIONED, LEARNED COUNSEL FOR REVENUE COULD NOT DISPUTE THAT WITH REGARD TO INTEREST INCOME ISSUE IN EARLIER ASSESSMENT YEAR HAS ALREADY BEEN ANSWERED IN FAVOUR OF ASSESSEE AND IN ASSESSMENT YEAR IN QUESTION, THERE IS NO DISTINCTION SO FAR AS INTEREST INCOME IS CONCERNE D. QUESTIONS (4) AND (5) THEREFORE, ARE ANSWERED IN FAVOUR OF A PPELLANT. 7.2 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ADDITION DO NOT SURVIVE, THE PENALTY IS NOT LEVIABL E. IN VIEW OF THE ABOVE, THE APPEAL IN I.T.A. NO. 274 IS DISMISSED. I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 12 8. NOW WE TAKE UP APPEAL IN I.T.A. NO.275. WE FIN D THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND IS A LSO ENGAGED IN THE HOTEL BUSINESS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE MADE CERTAIN INVESTMENTS AND THE VALUE OF INVESTMENT WAS REFERRE D TO THE VALUATION OFFICER AND ON THE BASIS OF DIFFERENCE IN INVESTMEN T DECLARED IN THE BOOKS OF ACCOUNT AND AS PER D.V.O., THE ADDITION WAS MADE TO THE EXTENT OF RS.77,24,270/-. THE D.V.O. HAD CALCULATED THE COST ON THE BASIS OF CPWD RATES AND THEREFORE, LEARNED CIT(A) HELD THAT RATES SHOULD HAVE BEEN APPLIED ON THE BASIS OF UPPWD RATES AND RELYING ON A NUMBER OF CASES, LEARNED CIT(A) HELD THAT THERE IS A DIFFERENCE OF 2 5% BETWEEN THE RATE OF UPPWD AND CPWD THEREFORE, HE ALLOWED A REBATE OF 25 % AND HELD THAT AFTER ALLOWING REBATE, THE VALUATION OF D.V.O. WAS LOWER THAN THE INVESTMENT BOOKED IN THE BOOKS OF ACCOUNT. HOWEVER, WE FIND T HAT IN ASSESSMENT YEAR 2012-13 IN THE CASE OF THE ASSESSEE ITSELF, HON'BLE ALLAHABAD HIGH COURT VIDE JUDGMENT DATED 02/03/2017 HAS HELD THAT DIFFERENCE BETWEEN UPPWD AND CPWD RATES IS 15% TO 18%. FOR THE SAKE OF CONVENIE NCE, THE RELEVANT PARA OF HON'BLE HIGH COURT, AS CONTAINED IN PARA 8 IS RE PRODUCED BELOW: 8. MOREOVER, IF THE VALUE HAS MADE ESTIMATE O N THE BASIS OF CPWD RATES, ASSESSEE REFERS TO DECISION OF THIS COURT IN CIT VS. RAJ KUMAR SINGH 182 ITR 436 (ALL.) STATING THAT COST OF CONSTRUCTION SHOULD BE AS PER UPPWD RATES BUT WITHO UT LOOKING TO THE AFORESAID JUDGMENT. TRIBUNAL HAS REVERSED FI NDING OF COMMISSIONER OF INCOME TAX. (APPEAL) (HEREINAFTER R EFERRED TO AS 'CIT(A)'). THE DIFFERENCE BETWEEN UPPWD AND CPWD RATES IS 15 TO 18 PER CENT AND IF THAT IS TAKEN, THEN INV ESTMENT DECLARED BY ASSESSEE WAS LESS THAN VALUATION MADE B Y VALUER WHOSE REPORT WAS SUBMITTED BY ASSESSEE APPARENTLY, ADDITION WAS IN RESPECT TO VALUATION OF INVESTMENT ON ESTIMA TED BASIS OF VALUER AND DISCLOSURE MADE BY ASSESSEE WHICH HAS BE EN MISREAD BY TRIBUNAL BY OBSERVING THAT ADDITION WAS NOT ON THE BASIS OF ESTIMATE BUT ACTUAL BASIS. IT IS CLEARLY A MISREADING AND I.T.A. NOS.273 TO 275/LKW/2017 ASSESSMENT YEARS:2010-11 TO 12-13 13 PERVERSE. IN VIEW THEREOF, QUESTIONS-(1), (2) AND ( 3) ARE ALSO ANSWERED IN FAVOUR OF APPELLANT. 8.1 IN VIEW OF THE ABOVE FINDINGS OF HON'BLE HIGH C OURT IN THE CASE OF THE ASSESSEE ITSELF, WE DEEM IT APPROPRIATE TO REMIT TH E ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHOULD DECIDE THE ISSUE O F INVESTMENT U/S 69 AFTER TAKING INTO ACCOUNT THE DIFFERENCE IN UPPWD AND PCW D RATES AT 15% TO 18%. 9. IN THE RESULT, THE APPEAL IN I.T.A. NO.273 & 274 ARE DISMISSED WHEREAS THE APPEAL IN I.T.A. NO.275 IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 17/05/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:17/05/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW