M/s. Maars Developers, JUNAGADH V. The Additional Commissioner of Income Tax, Range-1, JUNAGADH

ITA 279/RJT/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1285 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained investment; Unexplained expenditure; Corroborative evidences; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 279/RJT/2014 (ASSESSMENT YEAR: 2007-08) M/S. MAARS DEVELOPERS COLLEGE ROAD, OPP.BAHAUDDIN COLLEGE, JUNAGADH. V/S ACIT, JUNAGADH RANGE-1, JUNAGADH (APPELLANT) (RESPONDENT) PAN: AANFM3210H APPELLANT BY : SHRI D.M. RINDANI, C.A. RESPONDENT BY : SHRI AVINASH KUMAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -05-201 6 DATE OF PRONOUNCEMENT : 10 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-IV, RAJKOT DATED 28.03.2014 PERTAINING TO A. Y. 2007-08. ITA NO. 279/ RJT/2014 . A.Y. 2007-08 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSES SEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 7,50 ,000/- MADE BY THE A.O BY WAY OF UNEXPLAINED EXPENDITURE IN CONSTRUCTI ON OF MARIGOLD PROJECT. THE ASSESSEE HAS ALSO QUESTIONED THE VALID ITY OF REFERENCE MADE BY THE A.O TO THE VALUATION OFFICER U/S. 142A OF THE ACT AND IS ALSO ERRED BY THE REJECTION OF BOOK OF ACCOUNTS. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUC TION/DEVELOPMENT OF PROPERTIES. WHILE SCRUTINIZING THE RETURN OF INC OME FOR THE YEAR UNDER CONSIDERATION, THE A.O FOUND THAT THE ASSESSE E HAS PURCHASED PLOT ON WHICH THE COMMERCIAL COMPLEX KNOWN AS MARIG OLD-2 IS DEVELOPED. THE ASSESSEE WAS ASKED TO FURNISH THE DE TAILS OF CONSTRUCTION WITH SUPPORTING EVIDENCES. 4. ON PERUSING THE DETAILS FURNISHED BY THE ASSESSEE, THE A.O FOUND THAT THE PAYMENT VOUCHERS DID NOT INDICATE FULL NAME AND ADDRESS OF THE PAYEES AND THERE WAS NO DESCRIPTION/QUANTITY OF MAT ERIAL PURCHASED. 5. THE A.O REFERRED THE MATTER TO THE VALUATION OFFICE R INVOKING THE PROVISIONS OF SECTION 142A OF THE ACT, THE VALUATIO N OFFICER SUBMITTED HIS REPORT IN WHICH THE COST OF CONSTRUCTION AS SHO WN BY THE ASSESSEE AND THE COST AS ESTIMATED BY THE V.O. COMES AS UNDE R:- SR. NO. YEAR DECLARED VALUE ASSESSED VALUE DIFFERENCE COL. 1 2 3 4 1 2006 - 07 3579270.00 4437197.0 0 857927.00 2 2007 - 08 4854590.00 6018203.00 1163613.00 TOTAL 8433860.00 10455400.000 2021540.00 ITA NO. 279/ RJT/2014 . A.Y. 2007-08 3 6. THE A.O ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE GIVING DETAILS OF VOUCHERS WHEREIN THERE WAS NO MENTION OF MATERIAL I N QUANTITY NOR THE ADDRESS OF THE SUPPLIER. THE A.O. FURTHER MADE INDE PENDENT INQUIRY TO KNOW THE AVERAGE COST OF CIVIL CONSTRUCTION IN COMP ARABLE CASES AND THE ASSESSEE WAS ASKED TO EXPLAIN WHY ADDITION SHOU LD NOT BE MADE FOR UNEXPLAINED EXPENDITURE. ASSESSEE FILED A DETAI LED REPLY QUESTIONING THE COMPARABLE CASES. THE ASSESSEE STRO NGLY CONTENDED THAT VOUCHER PERTAINING TO MAJOR CONSTRUCTION LIKE CEMENT, STEEL, BRICKS ETC., CLEARLY SHOW QUANTITY AND THE AMOUNT AND IT I S ONLY IN RESPECT OF SMALLER ITEMS LIKE SAND AND METAL WHICH ARE PROCURE D FROM INDIVIDUALS AND IN SMALL LOTS AND, THEREFORE ARE NOT SUPPORTED BY PUCCA PRINTED BILLS. 7. OBJECTING TO THE COMPARABLE CASES, IT WAS BROUGHT T O THE NOTICE OF THE A.O THAT THE COMPARABLES RELATE TO INSTITUTIONS CAN NOT BE COMPARED WITH THE COMMERCIAL PROJECT OF THE ASSESSEE. THE EX PLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O. DRAWING SUPPORT FROM THE VALUATION REPORT, THE A.O ESTIMATED THE DIFFERENCE AT RS. 7,50,000/- AND TREATED THE SAME AS UNEXPLAINED INVESTMENT IN C ONSTRUCTION OF MARIGOLD PROJECT. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. WE HAVE HEARD THE RIVAL CONTENTIONS AND HA VE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS IN THE LINE OF BUILDING CONSTRUCTIO N. THIS MEANS THAT THE COST OF CONSTRUCTION IS THE LEGITIMATE EXPENDITURE OF THE ASSESSEE WHICH IT CAN LEGITIMATELY CHARGE TO ITS PROFIT AND LOSS ACCOUNT. IT GOES AGAINST THE COMMERCIAL PRUDENCE OF A BUSINESSMAN TO INCUR EXPENDITURE OUTSIDE THE BOOKS OF ACCOUNTS AND AS EX POSE ITSELF TO ITA NO. 279/ RJT/2014 . A.Y. 2007-08 4 HIGHER TAXATION. THE ALLEGATION THAT THE ASSESSEE H AS INCURRED CERTAIN EXPENDITURE OVER AND ABOVE WHAT IT HAS DISCLOSED IN ITS BOOKS OF ACCOUNTS DOES NOT HOLD ANY WATER ON THIS COUNT ITSE LF. 9. SECONDLY, EXCEPT FOR THE VALUATION REPORT, THE A.O HAS NO OTHER COGENT MATERIAL EVIDENCE IN HAND WHICH COULD SUGGEST THAT THE ASSESSEE HAS ACTUALLY INCURRED CERTAIN EXPENDITURE OUTSIDE ITS B OOKS OF ACCOUNTS. EVEN THE COMPARABLE CASES WOULD NOT SUPPORT THE CON TENTION OF THE A.O, SINCE THE ASSESSEE ITSELF IS IN THE LINE OF BU ILDING CONSTRICTION; IT CAN USE ITS EXPERTISE IN REDUCING/MINIMIZING THE CO ST OF CONSTRUCTION. 10. THERE IS ALSO NO SPECIFIC/DIRECT EVIDENCE TO SHOW T HAT THE ASSESSEE HAS REALIZED SALE CONSIDERATION OUTSIDE TH E BOOKS OF ACCOUNTS TO INCUR EXPENDITURE OUTSIDE BOOKS. THE ONLY BASIS FOR MAKING THE ADDITION IS THE VALUATION REPORT. EVEN THE REFERENC E TO THE VALUATION OFFICER IS UNWARRANTED BECAUSE AS MENTIONED ELSEWHE RE COST OF CONSTRUCTION IS THE EXPENDITURE OF THE BUSINESS OF THE ASSESSEE AND, THEREFORE, THE SAME CANNOT BE TREATED AS UNEXPLAINE D INVESTMENT AND, THEREFORE, NO REFERENCE CAN BE MADE U/S. 142A OF TH E ACT. 11. CONSIDERING THE TOTALITY OF THE FACTS AS MENTIONED ABOVE, IN OUR CONSIDERED OPINION, THE ESTIMATED ADDITION MADE BY THE A.O IN UNCALLED FOR. WE ACCORDINGLY REVERSE THE FINDINGS O F THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 7,50,00 0/-. ITA NO. 279/ RJT/2014 . A.Y. 2007-08 5 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 5 - 201 6. SD/- SD/- (RAJPALYADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT