Kalpana Medical Centre Private Limited, Coimbatore V. ACIT, Coimbatore

ITA 2847/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8110 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Unexplained investment; Value adopted by valuation officer; Tangible material; Valuation report; Revised return
• Section: 133A; 147; 148; 132

Judgement Text

, ' ' , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER A ND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NO.2847, 2848/MDS/2014 AND 347/MDS/2015 /ASSESSMENT YEAR : 2007-2008,2008-2009 & 2009-10 M/S. KALPANA MEDICAL CENTRE PRIVATE LIMITED, 4/5-C, KALPANA COMPLEX, KAVUNDAMPALYAM, METTUPALAYAM, COIMBATORE - 641 030. [ PAN AACCK 7724L] VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE - IV(1), COIMBATORE. (PRESENTLY CORPORATE CIRCEL-2, COIMBATORE) ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, CA. /RESPONDENT BY : SHRI CLEMENT RAMESH KUMAR, ADDL. CIT /DATE OF HEARING : 18 - 10 - 2016 /DATE OF PRONOUNCEMENT : 09 - 11 - 2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE ARE APPEALS BY ASSESSEE ARE DIRECTED AGAINS T THE DIFFERENT ORDERS OF CIT(A) FOR ASSESSMENT YEAR 2007-08, 2008-09 AND 200 9-10. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT CIT(A) ERRED IN UPHOLDING THE ACTION OF AO IN WRONGLY ASSUMING THE JURISDICTION U/S. 147 ON THE PREMISE THAT THERE WAS EXCESS INVESTMENT IN THE :-2-: I.T.A. NOS. 2847,2848/MDS/2014 & 347/MDS/2015 CONSTRUCTION OF BUILDING WITHOUT ANY TANGIBLE MATER IAL TO FORM THE BELIEF. THE ASSESSEE IS ALSO CHALLENGED ADDITION BEFORE US BASE D ON THE DVO REPORT. 2. FACTS OF THE CASE FOR THESE ASSESSMENT YEARS ARE COMMON. WE ARE CONSIDERING THE FACTS IN ITA NO. 2847/MDS/2014. TH E ASSESSEE IS A COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. A S EARCH U/S. 132 WAS CONDUCTED IN THE CASE OF DR. (MRS.) MRIDUBASHINI GOVINDARAJAN ON 22.09.2010 AND DURING THE COURSE OF SEARCH, IT WAS FOUND THAT A BRANCH OF M/S . WOMEN CENTRE OF DR. (MRS.) MRIDUBASHINI WAS FUNCTIONING IN THE PREMISES OF THE APPELLANT. SIMULTANEOUSLY, A SURVEY U/S. 133A WAS CONDUCTED IN THE PREMISES OF T HE APPELLANT ON THE SAME DAY. DURING THE COURSE OF SURVEY, BOOKS OF ACCOUNT AND O THER DOCUMENTS WERE FOUND AND IMPOUNDED. IN THE SWORN STATEMENT, IT WAS MENTIONE D THAT THE COST OF CONSTRUCTION OF THE HOSPITAL BUILDING WAS AROUND RS. 3.71 CRORES . THE ASSESSING OFFICER ESTIMATED THE CONSTRUCTION OF HOSPITAL BUILDING @RS . 1,250/- PER SQ.FT. FOR 40,000 SQ.FT., AROUND RS. 5 CRORES. AS THERE WAS DIFFEREN CE BETWEEN THE COST OF CONSTRUCTION OF BUILDING REPORTED BY THE APPELLANT AND THE AMOUNT ESTIMATED BY THE ASSESSING OFFICER, A NOTICE U/S. 148 WAS ISSUED ON 30.03.2012 AND SERVED ON THE ASSESSEE ON THE SAME DAY TO REOPEN THE ASSESSMENT. 3. THE LD.CIT(A) OBSERVED THAT DURING THE COURSE OF SURVEY OPERATION, THE AO CAME TO KNOW THAT ASSESSEE HAS SHOWN COST OF CON STRUCTION IN THE BOOKS OF ACCOUNTS LESSER THAN THE COST OF CONSTRUCTION AND T HE ASSESSEE MADE UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF BUILDING. THIS I S ALSO SUPPORTED BY THE DVO REPORT DATED 30.01.2013. ACCORDINGLY, HE CONFIRMED THE RE OPENING OF ASSESSMENT. :-3-: I.T.A. NOS. 2847,2848/MDS/2014 & 347/MDS/2015 FURTHER, HE ALSO CONFIRMED ADDITION MADE ON THE BAS IS OF VALUATION REPORT FURNISHED BY DVO AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFO RE US. FOR ALL THESE APPEALS ASSESSMENT YEARS, WE HAVE HEARD BOTH THE PARTIES AN D PERUSED MATERIAL AVAILABLE ON RECORDS. THERE WAS A SURVEY IN THE CASE OF ASSESSEE U/S. 133A OF THE INCOME TAX ACT. DURING THE COURSE OF SURVEY, BOOKS AND DOCUME NTS WERE FOUND AND IMPOUNDED. IT ALSO CAME TO THE KNOWLEDGE OF AO THA T THE CONSTRUCTION OF BUILDING MEASURING 40,000 SQ.FT BY ASSESSEE. IN THE SWORN S TATEMENT, IT WAS STATED BY THE ASSESSEE THAT COST OF CONSTRUCTION WAS RS. 3.71 CRO RES. THE ASSESSEE AS ADMITTED COST OF CONSTRUCTION AT RS. 3.5 CRORES IN ITS BOOKS OF ACCOUNTS. ACCORDING TO THE AO, ASSESSEE SHOWN LESSER VALUE OF COST OF CONSTRUCTION OF THE BUILDING. AS SUCH, AO ISSUED A NOTICE U/S 148 ACT ON 30.03.2012 FOR REOPE NING ASSESSMENT. SUBSEQUENT TO THIS, THE ASSESSEE FILED REVISED RETURN OF INCOME O N 20.04.2012. LATER, THE MATTER WAS REFERRED TO DVO TO ASCERTAIN THE COST OF CONSTR UCTION AND WAS SUBMITTED THE VALUATION REPORT BY DVO DETERMINING THE COST OF CON STRUCTION OF THE ASSESSEE PROPERTY AT RS. 5,18,86,000/- ACCORDING TO AO THIS ALSO INCLUDED RS. 19,06,738/- IN RESPECT TO VARIOUS COST LIKE LIFT, GENERATOR, SOLAR HEATER AND FIRE EQUIPMENTS AND IT WAS ALREADY DISCLOSED BY THE ASSESSEE TO THE DEPAR TMENT. HENCE, AO DETERMINED THE COST OF CONSTRUCTION OF THE BUILDING AT RS. 4,9 9,79,351/-. AFTER DEDUCTING THE SUM OF RS. 3,50,50,774/- WHICH WAS ALSO ALREADY DI SCLOSED IN ITS BOOKS OF ACCOUNT AND HE FINALLY MADE ADDITION TOWARDS UNDISCLOSED P ORTION OF COST OF CONSTRUCTION IN THESE THREE ASSESSMENT YEARS AS FOLLOWS: SL.NO ASSESSMENT UNEXPLAINED :-4-: I.T.A. NOS. 2847,2848/MDS/2014 & 347/MDS/2015 YEAR INVESTMENT 01 2007 - 08 43,31,831 02 2008 - 09 76,92,103 03 2009 - 10 29,04,643 4. NOW, THE CONTENTION OF THE LD. AR IS THAT REOPEN ING OF THE ASSESSMENT IS BAD IN LAW, AS THERE IS NO BASIS FOR AO TO COME TO THE CONCLUSION THAT THERE WAS UNDISPUTED INCOME SO AS TO BRING IT TO TAX. FURTHE R, HE SUBMITTED THAT IN THE PRESENT CASE THE WHOLE ADDITION WAS BASED ON THE DVO REPORT AS THE REFERENCE TO THE DVO IS BAD IN LAW AS THE AO REFERRED THE MATTER TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNTS. FOR THIS PURPOSE, HE RELIED ON JUDGEMENT OF THE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS CIT (328 ITR 513) WHERE IN HELD AS FOLLOWS: 'ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE, THE ASSESSING OFFICER APPLIED HIS MIND ON THE DVO REPORT AND HE HAS SEGRE GATED THE TOTAL COST OF FACTORY BUILDING FOR THREE YEARS, WHICH IS CONSC IOUS DECISION OF THE AO AND IT IS NOT SOLELY BASED ON THE DVO REPORT AND IT CANNOT BE SAID THAT DVO REPORT IS THE BASIS FOR REOPENING OF ASSESSMENT S. IN OUR OPINION, THE ARGUMENT OF LD. DR IS TOTALLY MISCONCEIVED. AS SEEN FROM THE REASONS RECORDED BY THE AO FOR REOPENING, THE SOLE BASIS FOR REOPENING OF ASSESSMENTS IS NOTHING BUT VALUATION REPORT SUBM ITTED BY THE DVO. HAD IT BEEN NO VALUATION REPORT FROM THE DVO, THE A O HAS NO BASIS FOR REOPENING OF ASSESSMENTS. THE AO CAME TO KNOW ABOU T THE ADDITIONAL AMOUNT OF INVESTMENT MADE BY THE ASSESSEE ON THE CO NSTRUCTION OF BUILDING BECAUSE OF THE DVO REPORT.' 5. ADMITTEDLY IN THIS CASE, REOPENING OF ASSESSMENT WAS ON THE BASIS OF SWORN STATEMENT RECORDED DURING THE COURSE OF SURVE Y U/S 133A OF THE ACT. IT IS TO BE NOTED THAT THERE WAS NO MATERIAL GATHERED WITH R EGARD TO THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE TOWARDS CONSTRUCTION OF BU ILDING. THE AO GOT THE SWORN STATEMENT RECORDED FROM DR. D. BALA CHANDRA, WHEREI N HE STATED THAT THE COST OF :-5-: I.T.A. NOS. 2847,2848/MDS/2014 & 347/MDS/2015 CONSTRUCTION IMPOUNDED OF PROPERTY WAS RS. 3.71 CRO RES AND ON THAT INCOME THE AO ISSUED THE NOTICE U/S 148 OF THE ACT. 6. THE SWORN STATEMENT RECORDED FROM THE ASSESSEE U /S 133A OF THE ACT CANNOT BE CONSIDERED AS THE BASIS FOR REOPENING OF ASSESSMENT AND THERE IS NO FRESH TANGIBLE MATERIAL IN THE HANDS OF ASSESSING OFFICER FOR REOPENING OF ASSESSMENT. THE AO MERELY STATED THE REASON FOR REOPENING OF ASSESS MENT THAT THERE WAS ESCAPEMENT OF INCOME BUT DO NOT STATED ANY MATERIAL ON THE BASIS OF WHICH HE HAD ARRIVED THAT CONCLUSION. AS SUCH, THERE WAS NO MAT ERIAL ON THE BASIS OF WHICH AO CAME TO SUCH BELIEF. IT CANNOT BE SAID THAT THE SW ORN STATEMENT COLLECTED FROM ASSESSEE U/S 133A CAN BE THE BASIS FOR REOPENING OF ASSESSMENT. THE SUPREME COURT IN THE CASE OF M/S. KHADAR KHAN AND SONS VS C IT (352 ITR 480) (SC), HELD THAT SWORN STATEMENT RECORDED FROM THE ASSESSEE U/S 133A CANNOT BE BASIS FOR ADDITION. HENCE, THERE IS NO BASIS FOR REOPENING O F ASSESSMENT. THUS REOPENING OF ASSESSMENT IS BAD IN LAW AS HELD IN THE CASE OF IT O VS MADAN ALI ENGINEERING WORKS LIMITED (118 ITR 1) (SC). SIMILAR VIEW WAS TAKEN AT BOMBAY HIGH COURT IN THE CASE OF SAMIR DIAMONDS EXPORT PRIVATE LIMITED VS A.K. GO UTHAM, UNDER (189 ITR 410). BEING SO REOPENING OF ASSESSMENTS IN THESE ASSESSME NT YEARS IS BAD IN LAW. ACCORDINGLY, FOR ALL THESE ASSESSMENT YEARS, THE AS SESSMENT ORDERS ARE QUASHED. SINCE, WE HAVE QUASHED THE ASSESSMENTS FOR THESE AS SESSMENT YEARS, WE ARE REFRAINED FROM GOING INTO THE MERITS OF THE ADDITIO N MADE BY AO. :-6-: I.T.A. NOS. 2847,2848/MDS/2014 & 347/MDS/2015 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 9TH DAY OF NOVEM BER, 2016 AT CHENNAI. /CHENNAI, /DATED: 9TH NOVEMBER, 2016. JPV /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. !'# ( )/CIT(A) 4. !'# /CIT 5. $ /DR 6. %&' /GF 0 SD/ - ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER SD/ - ( ) (CHANDRA POOJARI) /ACCOUNTANT MEMBER