M/s. Basera Developers, JUNAGADH V. The Additional Commissioner of Income Tax, Junagadh Range, JUNAGADH

ITA 283/RJT/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85412 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained investment; Valuation report

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL AT RAJKOT . . , , , BEFORE S/SHRI G.C. GUPTA, VICE - PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO . 283 / RJT /20 1 4 ASSTT.YEAR 2007 - 2008 M/S.BASERA DEVELOPERS C/O. BABA COMPLEX, MAHESH NAGAR CORNER, ZANZARADA ROAD JUNAGADH. / VS. ADCIT, JUNAGADH RANGE - 1 JUNAGADH. ( / APPELLANT) ( / RESPONDENT) / ASSESSEE BY : SHRI D.M. RINDANI, CA / REVENUE BY : SHRI AVINASH KUMAR, DR / DATE OF HEARING : 2 5 TH NOVEMBER, 2014 / DATE OF PRONOUNCEMENT : 25 TH NOVEMBER, 2014 / O R D E R PER G.C. GUPTA, VICE - PRESIDENT : TH IS APPEAL BY THE ASSESSEE FOR THE ASSTT.YEAR 2007 - 08 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - IV, RAJKOT. 2. THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE AS UNDER: 1. TH E LD.CIT ERRED IN UPHOLD ING THE VALIDITY OF REFERENCE MADE BY THE AO TO VALUATION OFFICER U/S.142A OF THE ACT. 2. LD.CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN REJECTING BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT., ITA NO. 283 / RJT /20 1 4 - 2 - 3. ON MERITS OF VALUATION, THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.7,75,000/ - MADE BY THE AO BY WAY OF UNEXPLAINED INVESTMENT/EXPENDITURE IN CONSTRUCTION OF DIWAN COMPLEX PROJECT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS NOW WELL SETTLED WITH SERIES OF DECISIONS THAT NO REFERENCE TO THE DEPARTMENT VALUATION OFFICER (DVO) CAN BE MADE FOR VALUING THE COST OF CONSTRUCTION OF BUILDING CONSTRUCTED BY THE ASSESSEE. HE RELIED ON THE DECISIONS OF VARIOUS COURTS VIZ. ITAT, R AJKOT BENCH DECISION IN THE CASE OF M/S.SHRADDHA ENTERPRISE VS. CIT, ITA NO.131 AND 132/RJT/2007 DATED 30 - 12 - 2009, ITAT, AHMEDABAD BENCH IN THE CASE OF RAJHANS BUILDERS VS. DCIT, 41 SOT 331 (AHD), CIT VS. AAR PEE APARTMENTS P. LTD., 319 ITR 276 (DEL) , CIT VS. BERRY PLASTICS P. LTD., 35 TAXMANN.COM 296 (GUJ), CIT VS. AMBIENCE HOTELS & RESORTS, 83 CCH 021 DELHC, AND CIT VS. STAR BUILDERS, 294 ITR 338 (GUJ). HE REFERRED TO THE ASSESSEE S APPROVED VALUER S REPORT IN THE COMPILATION AND SUBMITTED THAT THE VALUA TION ESTIMATED BY THE DVO , EVEN ON ITS MERITS , WERE ON HIGHER SIDE, AND SUITABLE DEDUCTION FOR SELF - SUPERVISION ETC. WAS NOT ALLOWED TO THE ASSESSEE. HE SUBMITTED THAT COMPLETE VOUCHERS WITH BOTH RATE, QUANTITY AND TOTAL AMOUNT WERE PRODUCED BEFORE THE AO . THE LEARNED DR HAS RELIED O N THE ORD E RS OF THE AO AND THE CIT(A). 4 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO PERUSED THE COPIES OF VARIOUS DOCUMENTS FILED BY THE ASSESSEE IN ITS COMPILATION ALONG W ITH COPY OF THE ASSESSEE S APPROVED VALUER S REPORT. WE FIND THAT THE CASE PERTAINED TO PRE - AMENDMENT IN LAW PERIOD, AND THEREFORE, THE REFERENCE FOR THE COST OF CONSTRUCTION TO THE DVO COULD NOT HAVE BEEN MADE BY THE AO. HOWEVER, THE VALUATION OF COST O F CONSTRUCTION OF A BUILDING, IS ALWAYS A MATTER OF ITA NO. 283 / RJT /20 1 4 - 3 - ESTIMATE, AND ALSO REPORT FR A MED BY THE DVO OR THE ASSESSEE S APPROVED VALUER IS A PIECE OF EVIDENCE ONLY. EVEN IF THE DVO S REPORT IS IGNORED, DUE TO INV ALID REFERENCE, FOR VALUATION TO BE MADE BY THE A O, WE ARE STILL OF THE OPINION THAT THE REVENUE AUTHORITIES ARE ENTITLED TO GO INTO THE QUESTION OF DETERMINING THE CORRECT FIGURE OF COST OF CONSTRUCTION OF A BUILDING, CONSTRUCTED BY THE ASSESSEE, WHICH WAS ON THE BA SIS OF ENTIRETY OF THE FACTS AND CIRCU MSTANCES OF THE CASE, AND THE MATERIAL BROUGHT ON RECORD ON BEHALF OF THE ASSESSEE. WE ARE UNABLE TO ACCEPT THE PROPOSITION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ONCE IT IS HELD THAT THE VALUATION REPORT OF THE DVO COULD NOT BE TAKEN INTO CONSIDERA TION, THE DEPARTMENT IS PRECLUDED FROM MAKING ANY FAIR ASSESSMENT OF THE COST OF CONSTRUCTION IN THE CASE OF THE ASSESSEE, AND THE DEPARTMENT IS LE FT WITH NO ALTERNATIVE BUT TO ACCEPT THE COST OF CONSTRUCTION ON BUILDING , AS MAY HAVE BEEN SHO W N BY THE ASSE SSEE IN ITS ACCOUNT BOOKS, EVEN IF, THE SAME WAS FOUND TO HAVE BEEN UNDERSTATED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, WE, WHILE IGNORING THE DVO S REPORT, PROCEED TO CONSIDER THE ISSUE OF ADDITION IN THE COST OF CONSTRUCTION CONFIRMED BY THE CIT(A) AT RS.7.75 LAKHS ON ITS MERITS. WE FIND THAT THE PROPER DEDUCTION FOR SELF - SUPERVISION WAS NOT ALLOWED BY THE AO AS THE SAME WAS ALLOWED AT 7.5% OF THE TOTAL ESTIMATE OF COST OF CONSTRUCTION, WHICH IS ON THE LOWER SIDE. LIKEWISE, WE FIND THAT THE ADDITI ON FOR EXTRA ITEMS MADE BY THE REVENUE AUTHORITIES IS ON THE HIGHER SIDE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, INCLUDING THE DETAILS OF CONSTRUCTION, AS GIVEN IN THE ASSESSEE S APPROVED VALUER S REPORT, AND ALSO ALLOWING SUITABLE DEDUCTION FOR SELF - S UPERVISION OF THE CONSTRUCTION MADE BY THE ASSESSEE, AND ON ACCOUNT OF HIGHER AMOUNT OF EXTRA ITEMS ADDED BY THE DEPARTMENT, WE ARE OF THE VIEW THAT ENDS OF JUSTICE SHALL BE MET, IF AN ADDITION OF RS.2,50,000/ - IS SUSTAINED OUT OF THE ITA NO. 283 / RJT /20 1 4 - 4 - TOTAL ADDITION OF RS.7,75,000/ - CONFIRMED BY THE CIT(A), AND ACCORDINGLY , THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED ON 25 TH NOVEMBER, 2014. SD / - SD/ - ( / ANIL CHATURVEDI) /ACCOUNTANT MEMBER ( . . /G.C. GUPTA) /VICE - PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, RAJKOT