THE ITO, Kakinada V. Praveen Kumar Jain, Kakinada

ITA 299/VIZ/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6548 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 20-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M N M NAIK
• Keywords: Value adopted by valuation officer; Valuation report; Tax effect
• Section: 143(3); 133A; 131

Judgement Text

ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO. 298/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) SHRI PRAVEEN KUMAR JAIN, KAKINADA ITO, WARD - 2, KAKINADA [PAN NO.AKFPP5718B] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO. 299/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) ITO, WARD - 2, KAKINADA SHRI PRAVEEN KUMAR JAIN, KAKINADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.N.M. NAIK, DR / DATE OF HEARING : 09.02. 20 17 / DATE OF PRONOUNCEMENT : 14.02.2017 ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE COMMISSIONER OF I NCOME-TAX(APPEAL)- 2, VISAKHAPATNAM DATED 12.5.2015 AND IT PERTAINS TO THE ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY OP ERATION U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'TH E ACT') WAS CONDUCTED IN THE ASSESSEES CASE ON 8.3.2011. CONSEQUENT TO SURVEY, THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 29.9.2011 DECLARING TOTAL INCOME OF ` 26,64,590/-. IN VIEW OF THE SURVEY, THE CASE WAS SELECTED FOR SCRUTINY. AFTER CONSIDERING THE ASSESSEES EXPLANATION, THE A.O. COMPLETED THE ASSE SSMENT U/S 143(3) OF THE ACT, MAKING ADDITIONS TOWARDS EXCESS STOCK F OUND DURING THE COURSE OF SURVEY OF ` 19,31,610/- AND DIFFERENCE IN COST OF CONSTRUCTION OF HOUSE OF ` 35,66,661/-. AGGRIEVED BY THE ASSESSMENT ORDER, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). TH E CIT(A), FOR THE DETAILED REASONS RECORDED IN HIS ORDER DATED 12.5.2 015, PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, WHEREIN HE HAS ALLOWE D PARTIAL RELIEF TOWARDS EXCESS STOCK FOUND DURING THE COURSE OF SUR VEY AND COST OF ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 3 CONSTRUCTION OF HOUSE PROPERTY. AGGRIEVED BY THE C IT(A) ORDER, THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFOR E US. 3. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. A SURVEY OPERATION U/S 133A OF THE ACT, WAS CONDUCTED IN THE ASSESSEES CASE ON 8.3.2011. DURING THE SURVEY IT WAS FOUND THAT THER E WAS EXCESS STOCK OF BULLION, GOLD ORNAMENTS AND OF SILVER ITEMS. THE V ALUE OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WAS QUANTIFIED BY ADOPTING THE RATE APPLICABLE AS ON THE DATE OF SURVEY, WHICH WORKS OU T TO ` 39,91,288/-. THE ASSESSEE WAS QUESTIONED ABOUT THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. THE ASSESSEE IN HIS STATEMENT RE CORDED U/S 133A OF THE ACT, DATED 8.3.2011 AND U/S 131 OF THE ACT, DAT ED 14.3.2011 ADMITTED ABOUT THE EXCESS STOCK AND AGREED TO PAY T AX ON SUCH UNEXPLAINED INCOME. THE ASSESSEE HAD ADMITTED SUCH UNEXPLAINED INCOME AND ALSO PAID THE CORRESPONDING TAX ON THE U NACCOUNTED INCOME ADMITTED DURING THE COURSE OF SURVEY. HOWEVER, IN THE RETURN OF INCOME FILED, THE ASSESSEE HAS ADMITTED A SUM OF ` 24.07 LAKHS ONLY, AS AGAINST ` 39.91 LAKHS DISCLOSED DURING THE COURSE OF SURVEY TOWARDS EXCESS STOCK OF BULLION AND SILVER ARTICLES. ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 4 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE BETWEEN INCOMES ADM ITTED TOWARDS EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. IN RESPONSE TO NOTICE, THE ASSESSEE VIDE HIS WRITTEN SUBMISSIONS CONTENDED THAT DURING THE COURSE OF SURVEY, I HAVE AGREED FOR THE DIFFERENCE IN VALUE OF STOCK UNDER THE IMPRESSION THAT MY BOOKS OF ACCOUNTS ARE UP TO DATE COMPLETED BY THE ACCOUNTANT WITHOUT ANY OMISSIONS. BUT, LATER ON WHEN I WAS VERIFIED WITH THE HELP OF THE ACCOUNTANT, THE ENTRIES IN THE BOOKS OF ACCOUNTS WITH REGARD TO THE PURCHASE AND SALE AR E NOT UPDATED AND ALSO TWO PURCHASE BILLS OF GOLD ORNAMENTS TO THE EX TENT OF 961 GMS. WERE NOT ENTERED INTO THE BOOKS OF ACCOUNTS BY THE ACCOUNTANT. DURING THE COURSE OF SURVEY OPERATION, WITHOUT EXAMINING T HE ABOVE DISCREPANCY, I HAVE AGREED FOR AN ADDITION TOWARDS DIFFERENCE IN VALUE OF STOCK, HOWEVER, ON RECONCILIATION OF THE PURCHASES AND SALES, IT WAS NOTICED THAT TWO PURCHASE BILLS WERE LEFT AND ACCOR DINGLY, AFTER INCORPORATING THE ABOVE TWO PURCHASE BILLS, THE DIF FERENCE TOWARDS EXCESS STOCK WORKS OUT TO 579.588 GMS. IN THIS REG ARD, THE ASSESSEE HAS FILED DETAILS OF TWO BILLS DATED 2.2.2011 AND 2 6.2.2011 FOR AN AMOUNT OF ` 5,05,550/- AND ` 14,26,095/- RESPECTIVELY, STATED TO BE PURCHASED FROM M/S. SARANYA JEWEL CRAFTS, KAKINADA. THE ASSESSEE ALSO FILED LEDGER ACCOUNT COPIES OF THE SUPPLIER OF THE JEWELLERY M/S. SARANYA ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 5 JEWEL CRAFTS AND ALSO COPIES OF VAT RETURNS FILED W ITH COMMERCIAL TAX DEPARTMENT TO PROVE THE GENUINENESS OF PURCHASE TRA NSACTION. 5. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE, HELD THAT DURING THE COURSE OF SURVEY, THE ASSESSEE HAS ADMITTED THAT HE HAD UPDATED ITS BOOKS OF ACCOUNTS UP TO 3.3.2011 AND FR OM 3.3.2011 TO THE DATE OF SURVEY I.E. 8.3.2011, THERE WERE NO TRANSAC TIONS EITHER PURCHASE OR SALE. THE A.O. FURTHER OBSERVED THAT BASED ON T HE BOOKS OF ACCOUNTS UPDATED AS ON THE DATE OF SURVEY, EXCESS STOCK WORT H ` 39,91,288/- WAS ARRIVED. THEREFORE, THERE IS NO MERITS IN THE CONT ENTION OF THE ASSESSEE THAT BOOKS OF ACCOUNTS WERE INCOMPLETE AND THE ACCO UNTANT HAS INADVERTENTLY OMITTED TO RECORD TWO PURCHASE BILLS IN THE BOOKS OF ACCOUNTS. THE A.O. FURTHER OBSERVED THAT ON VERIFI CATION OF THE XEROX COPY OF CASH BOOK FILED BY THE ASSESSEE, IT IS NOTI CED THAT THOSE TWO PURCHASE BILLS HAVE BEEN RECORDED IN THE BOOKS OF A CCOUNTS OF THE ASSESSEE PRIOR TO THE DATE OF SURVEY, WHICH WAS FUR THER SUPPORTED BY THE LEDGER EXTRACT OF THE SELLER AS WELL AS THE ASSESSE E. SINCE, THESE TWO PURCHASE BILLS HAVE BEEN RECORDED IN THE BOOKS OF A CCOUNTS PRIOR TO THE DATE OF SURVEY, IT IS ABUNDANTLY CLEAR THAT THESE P URCHASES HAVE BEEN ENTERED IN THE STOCK REGISTER AND THE DIFFERENCE IN STOCK HAS BEEN ARRIVED AFTER CONSIDERING THE PURCHASES. THEREFORE, THE CL AIM OF THE ASSESSEE ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 6 THAT PURCHASES WORTH 961 GMS. HAVE TO BE EXCLUDED F ROM THE VALUE OF EXCESS STOCK QUANTIFIED DURING THE COURSE OF SURVEY CANNOT BE ACCEPTED. 6. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT TH E LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT TWO PURCHASE BILLS HAVE BEEN OMITTED INADVERTENTLY BY THE ACCOUNTANT IN THE BOOKS OF ACC OUNTS, WHICH LEADS TO STOCK DIFFERENCE. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS PRODUCED PROOF OF PURCHASE BILLS ALONG WITH COPIES OF VAT RETURNS FILED WITH COMMERCIAL TAX DEPARTMENT PROVING THE GENUINEN ESS OF THE PURCHASES. THE ASSESSEE ALSO PROVED THE FACT THAT PAYMENT FOR THESE PURCHASES HAS BEEN MADE SUBSEQUENTLY BY CHEQUES. W HEN ALL THESE EVIDENCES HAVE BEEN FILED BEFORE THE A.O., THE A.O. WAS INCORRECT IN MAKING ADDITIONS TOWARDS STOCK DIFFERENCE BASED ON THE ADMISSION OF THE ASSESSEE AT THE TIME OF SURVEY. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX WHICH LEADS TO ADDITIONS TOWARDS STO CK DIFFERENCE OF GOLD, GOLD JEWELLERY AND SILVER ARTICLES ARE THAT DURING THE COURSE OF SURVEY OPERATIONS, THE A.O. HAS QUANTIFIED EXCESS STOCK TO THE EXTENT OF ` 39,91,288/-. WHEN THE ASSESSEE WAS QUESTIONED ABOUT THE STOCK ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 7 DIFFERENCES, HE HAD ADMITTED THE EXCESS STOCK IN HI S STATEMENT RECORDED U/S 133A OF THE ACT, DATED 8.3.2011 AND U/S 131 OF THE ACT, DATED 14.3.2011 AND AGREED TO PAY TAX ON SUCH UNEXPLAINED INCOME. THE ASSESSEE ALSO PAID CORRESPONDING TAX ON THE UNACCOU NTED INCOME ADMITTED DURING THE COURSE OF SURVEY. HOWEVER, IN THE RETURN OF INCOME FILED, THE ASSESSEE HAS ADMITTED ` 24.07 LAKHS TOWARDS THE EXCESS STOCK INSTEAD OF ` 39.91 LAKHS DISCLOSED DURING THE COURSE OF SURVEY BY STATING THAT TWO PURCHASE BILLS FOR AN AMOUNT OF ` 19,31,610/- HAS BEEN INADVERTENTLY OMITTED BY THE ACCOUNTANT TO RECORD I N THE BOOKS OF ACCOUNTS. THE ASSESSEE CLAIMS THAT HE HAD PURCHASE D JEWELLERY FROM M/S. SARANYA JEWEL CRAFT VIDE PURCHASE INVOICE DATE D 2.2.2011 FOR 251.5 GMS. FOR AN AMOUNT OF ` 5,05,515/- AND ANOTHER PURCHASE ON 26.2.2011 FOR 709.5 GMS. FOR AN AMOUNT OF ` 14,26,095/- AND THESE TWO BILLS HAVE NOT BEEN CONSIDERED IN THE BOOKS OF ACCOUNTS AT THE TIME OF SURVEY. THE ASSESSEE HAS FILED CERTAIN DOCUMENTS IN SUPPORT OF ITS CLAIMS ALONG WITH PURCHASE BILLS AND VAT RETURN COPIES FILED WITH THE COMMERCIAL TAX DEPARTMENT. 8. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE AD DITIONS MADE BY THE A.O. ARE BASED ON THE ADMISSION OF THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDINGS. THE ASSESSEE HAS ADMITTED D IFFERENCE TOWARDS ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 8 STOCK OF GOLD, GOLD JEWELLERY AND SILVER ARTICLES I N HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY AND AGREED TO PAY TAX A ND ACCORDINGLY, PAID TAXES ON SUCH INCOME. SUBSEQUENTLY, THE ASSESSEE H AS RETRACTED FROM HIS ADMISSION BY FILING TWO PURCHASE BILLS STATED T O BE PURCHASED FROM M/S. SARANYA JEWEL CRAFTS FOR AN AMOUNT OF ` 19,31,610/-. ON PERUSAL OF THE PURCHASE INVOICES FILED BY THE ASSESSEE, WE FIND THAT TWO PURCHASE INVOICES HAVE BEEN DATED PRIOR TO THE DATE OF SURVEY I.E. ON 8.3.2011. ON FURTHER VERIFICATION OF XEROX COPY OF CASH BOOK OF THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS RECORDED TH ESE TWO PURCHASES IN THE BOOKS OF ACCOUNTS BEFORE THE DATE OF SURVEY. THE ASSESSEE ALSO CLAIMS THAT HIS BOOKS OF ACCOUNTS ARE UPDATED UP TO 3.3.2011 AND THEREAFTER NO PURCHASE AS WELL AS SALE TRANSACTIONS . THUS, THE ADMITTED POSITION IS THAT AS ON THE DATE OF SURVEY, DIFFEREN CE IN STOCK OF JEWELLERY REMAINED UNACCOUNTED, AS THE ENTRY REGARDING THESE TWO PURCHASES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS PRIOR T O THE DATE OF SURVEY. ONCE THE PURCHASE HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS PRIOR TO THE DATE OF SURVEY, OBVIOUSLY THE STOCK RELATING TO THESE TWO PURCHASES HAS BEEN CONSIDERED TO ARRIVE AT EXCESS STOCK WORKE D OUT DURING THE COURSE OF SURVEY OPERATION. ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 9 9. THE ASSESSEE CLAIMS TO HAVE FILED RELEVANT DOCUM ENTS IN SUPPORT OF GENUINENESS OF THE PURCHASES, BUT THE CASE OF THE A .O. IS THAT HE HAD NEVER DOUBTED THE GENUINENESS OF PURCHASES. THE A. O. HAS ADMITTED THAT THESE PURCHASES ARE GENUINE AND HAS BEEN RECOR DED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE PRIOR TO THE DATE OF SURVE Y AND ACCORDINGLY, STOCK RELATING TO THESE TWO PURCHASE INVOICES HAS B EEN CONSIDERED TO ARRIVE AT A STOCK DIFFERENCE OF GOLD, GOLD JEWELLER Y AND SILVER ARTICLES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE THAT HE HAD INADVERTENTL Y OMITTED TO RECORD TWO PURCHASES IN THE BOOKS OF ACCOUNTS, WHICH LEADS TO DIFFERENCE IN STOCK AT THE TIME OF SURVEY. THOUGH, THE CIT(A) HA S CONCURRED WITH THE FINDINGS OF THE A.O. WITH REGARD TO THE ADDITIONS T OWARDS STOCK DIFFERENCES, GAVE HIS FINDINGS WHICH IS CONTRARY TO THE FINDINGS OF THE A.O. AT THE TIME OF ASSESSMENT, BUT THE SUM AND SUB STANCE OF THE FINDINGS OF THE CIT(A) IS THAT THE EXCESS STOCK FOU ND DURING THE COURSE OF SURVEY IS OUTSIDE THE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE FOR WHICH THE ASSESSEE HAS NOT OFFERED ANY EXPLANATIONS . HOWEVER, THE CIT(A) HAS ALLOWED PARTIAL RELIEF BY STATING THAT T HE A.O. HAS MADE ADDITIONS WHICH IS IN EXCESS OF THE AMOUNT QUANTIFI ED DURING THE COURSE OF SURVEY AND HENCE, RESTRICTED ADDITIONS MADE BY T HE A.O. TO THE EXTENT OF INCOME ADMITTED BY THE ASSESSEE TOWARDS STOCK DI FFERENCE QUANTIFIED ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 10 AT THE TIME OF SURVEY. THEREFORE, WE ARE OF THE VI EW THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITIONS MADE BY THE A.O. TO WARDS STOCK DIFFERENCE OF GOLD JEWELLERY AND SILVER ARTICLES AN D HENCE, WE UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE AS SESSEE. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRUCTION OF HO USE. DURING THE COURSE OF SURVEY, THE ASSESSEE WAS ASKED ABOUT THE COST OF CONSTRUCTION INCURRED TOWARDS CONSTRUCTION OF HIS RESIDENTIAL HO USE PROPERTY. THE ASSESSEE EXPLAINED THAT HE HAS SPENT AN AMOUNT OF ` 36 LAKHS TOWARDS CONSTRUCTION AND SOURCE FOR CONSTRUCTION HAS BEEN E XPLAINED OUT OF BANK LOAN OF ` 14 LAKHS, ` 16 LAKHS FROM HIS OWN SOURCE AND ` 4 LAKHS WAS SPENT BY HIS FATHER, ACCORDINGLY, AN AMOUNT OF ` 2 LAKHS WAS OFFERED AS UNEXPLAINED INCOME. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED P ROPER BILLS AND VOUCHERS FOR THE CONSTRUCTION EXPENSES. THEREFORE, A REFERENCE WAS MADE TO THE VALUATION OFFICER TO DETERMINE THE COST OF CONSTRUCTION. THE DVO IN HIS REPORT DETERMINED THE COST OF CONSTRUCTI ON AT ` 68.85 LAKHS. THE A.O. AFTER CONSIDERING THE OBJECTIONS OF THE AS SESSEE HAS DETERMINED DIFFERENCE IN COST OF CONSTRUCTION AT ` 35,66,661/- AND MADE ADDITIONS TO THE RETURNED INCOME. ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 11 11. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT REFE RENCE MADE BY THE A.O. TO THE VALUATION OFFICER U/S 142 OF THE ACT IS NOT VALID. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O. DID NOT FI ND ANY DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THAT IN THE A BSENCE OF ANY SUCH DISCREPANCY, REFERENCE MADE BY THE A.O. IS NOT VALI D. IN THIS REGARD, RELIED ON THE FOLLOWING DECISIONS: 1) CIT VS. NAVEEN GERA 328 ITR 516 DEL. 2) CIT VS. LAXMIN CONSTRUCTIONS 55 TAXMANN.COM 253 (AP) 3) NIRPAL SINGH VS. CIT 359 ITR 398 P&H IT WAS ALSO CONTENDED THAT WITHOUT BRINGING ON REC ORD EVIDENCE OF ANY INVESTMENTS OUTSIDE THE BOOKS OF ACCOUNTS, THE REFERENCE TO VALUATION OFFICER IS NOT JUSTIFIED. THE ASSESSEE R ELIED ON THE DECISION OF ME AND MUMMY HOSPITAL VS. ACIT TIOL-207-GUJARAT (HC ). IN SO FAR AS MERITS, THE ASSESSEE SUBMITTED THAT CONSTRUCTION CO ST AS PER THE REPORT OF THE REGISTERED VALUER WAS ` 36,95,000/-. THE VALUER HAS TAKEN UP THE COST UP TO DECEMBER, 2012. IT WAS FURTHER STATED T HAT HE HAD MADE ADDITIONAL CONSTRUCTION THEREAFTER. THE A.O. DID N OT CONSIDER THE INVESTMENT MADE BY HIS FATHER WHO IS JOINT HOLDER O F THE PROPERTY. THE ASSESSEE FURTHER STATED THAT THE AMOUNT SPENT AS RE CORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS ` 33,18,494/- AND AMOUNT SPENT FROM ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 12 THE FATHERS BOOKS OF ACCOUNTS WAS ` 24,19,300/- AND TOTAL AMOUNT SPENT WAS ` 57,37,794/- UP TO 31.3.2012. THE ASSESSEE FURTHER CONTENDED THAT THE A.O. DID NOT PROVIDE ALLOWANCE FOR RATE DI FFERENCE AND SELF- SUPERVISION, WHICH IS GENERALLY GIVEN AT 15% AND 10 % RESPECTIVELY. IN THIS REGARD, RELIED UPON THE DECISION, IN THE CASE OF KRISHNA VENTURES PVT. LTD. VS. ITO RENDERED BY THE ITAT, HYDERABAD. IF THESE ACCOUNTS ARE TAKEN INTO ACCOUNT, THERE WOULD NOT BE ANY DIFF ERENCE AND HENCE, REQUESTED TO DELETE THE IMPUGNED ADDITIONS MADE BY THE A.O. TOWARDS COST OF CONSTRUCTION. 12. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE, HELD THAT AS PER THE REGISTERED VALUER REPORT DATED 8.5.2011, THE COST OF CONSTRUCTION WAS ESTIMATED AT ` 36,95,000/-, AS AGAINST WHICH THE ASSESSEE HAD RECORDED ` 30.18 LAKHS IN HIS BOOKS OF ACCOUNTS AND AN AMOUNT OF ` 4 LAKHS IN THE BOOKS OF HIS FATHER. THUS, APPAREN TLY THERE IS AN EVIDENCE OF INVESTMENT OUTSIDE THE BOOKS AND THE ASSESSEE HAD OFFERED ` 2 LAKHS AS UNEXPLAINED INCOME ON THIS COUNT. IT I S FURTHER NOTED THAT THE REGISTERED VALUERS REPORT IS INCOMP LETE AS IT IS NOT TAKEN INTO ACCOUNT THE ENTIRE CONSTRUCTION. IN VIEW OF T HE VARIOUS DISCREPANCIES DISCUSSED ABOVE, UPHELD THE REFERENCE TO THE VALUATION OFFICER FOR DETERMINATION OF COST OF CONSTRUCTION. IN SO FAR AS MERITS OF ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 13 THE ISSUE, THE CIT(A) HELD THAT FROM THE PERUSAL OF THE VALUATION REPORT, IT IS SEEN THAT THE INSPECTION WAS MADE ON 24.9.201 1 AND IT IS CLEAR THAT THE REPORT ESTIMATES THE COST OF CONSTRUCTION AS ON THE DATE OF INSPECTION. THEREFORE, TO ASCERTAIN THE EXCESS COS T INCURRED, THE COST INCURRED BY THE ASSESSEE UP TO 31.3.2012 HAS TO BE TAKEN INTO CONSIDERATION. BUT, IT IS SEEN THAT THE A.O. HAD I GNORED THIS FACTUAL POSITION WHILE MAKING THE IMPUGNED ADDITION. THUS, APPARENTLY THE IMPUGNED ADDITION IS ERRONEOUS. THE CIT(A) FURTHER HELD THAT IN SO FAR AS ASSESSEES CLAIM OF ALLOWANCE TOWARDS SELF-SUPER VISION AND RATE DIFFERENCE, THE DVO AT THE TIME OF VALUATION HAS NO T ADOPTED THE CPWD RATES. THEREFORE, THERE IS NO MERITS IN THE CONTEN TION OF THE ASSESSEE THAT AN ALLOWANCE OF 15% HAS TO BE ALLOWED TOWARDS RATE DIFFERENCE AND HENCE, THE SAME IS REJECTED. HOWEVER, IT IS WELL S ETTLED POSITION OF LAW THAT A RELIEF OF 10% TOWARDS SELF-SUPERVISION HAS B EEN ALLOWED IN THE CASES WHERE THE ASSESSEES HAVE CONSTRUCTED THE BUIL DINGS ON ITS OWN. ACCORDINGLY, THE A.O. IS DIRECTED TO ALLOW DEDUCTIO N TOWARDS SELF- SUPERVISION AT 10% OF THE COST. WITH THESE OBSERVA TIONS, RE-WORKED EXCESS COST OF CONSTRUCTION OF ` 8,64,716/- AND DIRECTED THE A.O. TO CONSIDER THE EXCESS COST OF CONSTRUCTION EQUALLY FO R THE ASSESSMENT YEAR 2011-12 AND ASSESSMENT YEAR 2012-13 CONSIDERING THA T CONSTRUCTION WAS CARRIED OUT EVEN DURING THE ASSESSMENT YEAR 201 2-13. ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 14 13. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT T HE LD. CIT(A) ERRED IN NOT ALLOWING ALLOWANCE TOWARDS RATE DIFFERENCE I NSPITE OF THE FACT THAT THE VALUATION OF THE BUILDING HAS BEEN CARRIED OUT BY FOLLOWING THE CPWD RATES. IT IS A GENERAL PRACTICE THAT THE DVO HAS S PECIFICALLY MENTIONED THAT A SUITABLE ADJUSTMENT IS MADE TOWARDS RATE DIF FERENCE, WHEREVER CPWD RATES HAVE BEEN CONSIDERED TO ARRIVE AT THE COS T OF CONSTRUCTION. HOWEVER, THE APPELLATE AUTHORITIES HAVE CONSISTENTL Y ALLOWED FURTHER DEDUCTION OF 15% TOWARDS RATE DIFFERENCE EVEN THE D VO HAS CONSIDERED SOME ADJUSTMENTS TOWARDS RATE DIFFERENCES AND HENCE , THE CIT(A) WAS COMPLETELY ERRED IN NOT ALLOWING ALLOWANCES TOWARDS RATE DIFFERENCE. IN THIS REGARD, RELIED UPON THE DECISION OF ITAT, VISA KHAPATNAM IN THE CASE OF DR. P. ANNAVARAM VS. ITO WARD-2, KAKINADA IN ITA NO.131/VIZAG/2014 DATED 25.11.2016. 14. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPOR TING THE ORDER OF THE CIT(A) SUBMITTED THAT THE LD. CIT(A) ERRED IN A CCEPTING THE ASSESSEES PLEA OF MAINTENANCE OF EXPENDITURE ACCOU NT AND BILLS IN THE ABSENCE OF WHICH AND TOTALITY OF CIRCUMSTANCES, THE DVO HAS RESORTED TO ADOPT PLINTH AREA RATE AND COST INDEX METHOD. THE LD. CIT(A) HAS ERRED IN APPRECIATING THE FACT THAT CERTAIN ADDITIONS REF ERRED BY THE ASSESSEE ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 15 WAS AFTER THOUGHT TO GO SCOT FREE FROM THE IMPUGNED ADDITIONS, THEREFORE ADDITION MADE BY THE A.O. HAS TO BE UPHEL D. 15. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS DIFFERENCE IN COST OF C ONSTRUCTION BASED ON THE REPORT OF THE DVO. THE CIT(A) HAS RE-WORKED TH E DIFFERENCE IN COST OF CONSTRUCTION AND ARRIVED AT AN EXCESS COST OF CO NSTRUCTION OF ` 8,54,760/- AFTER ALLOWING 10% TOWARDS SELF-SUPERVIS ION. HOWEVER, CIT(A) REJECTED THE PLEA OF THE ASSESSEE WITH REGAR D TO FURTHER ALLOWANCE TOWARDS RATE DIFFERENCE. THE CIT(A) OBSE RVED THAT THE DVO HAS ARRIVED AT COST OF CONSTRUCTION AFTER SUITABLE ADJUSTMENTS TOWARDS CPWD RATE DIFFERENCES. THE RELEVANT PORTION OF THE CIT(A) ORDER IS EXTRACTED BELOW: 5.5.3 THE ASSESSEE ALSO CONTENDED THAT 15% ALLOWAN CE TO BE GIVEN FOR RATE DIFFERENCE BETWEEN THE RATES ADOPTED BY CPWD & PWD, AND RELIED ON CERTAIN JUDICIAL DECISIONS. HOWEVER, A PERUSAL OF THE VALUATION REP ORT INDICATES THAT IT HAS NOT ADOPTED THE CPWD RATES. THIS IS CLARIFIED IN THE R EPORT AT PARA 5.1 AS UNDER: RATE ADOPTED: THE REASONABLE COST OF CONSTRUCTION IS ARRIVED BASED ON STANDARD PLINTH AREA RATES OF 1992 APPROVED BY CENT RAL BOARD OF DIRECT TAXES VIDE FILE NO.319/6/92-WT DATED 13.12.98 DULY ENHANCED WI TH WEIGHTED COST INDEX OF 324.00 PREVAILING DURING THE PERIOD OF CONSTRUCTION AT KAKINADA IS FOLLOWED. THERE IS A FEELING THAT THE GOVERNMENT OF INDIA PL INTH AREA RATES IS MEANT FOR DELHI AND NOT FOR THE OTHER PLACES. IT IS NOT TRUE. THUS THE PLINTH AREA RATES APPROVED BY THE CENTRAL BOARD OF DIRECT TAXES CANNO T BE TERMED AS DELHI PLINTH AREA RATES BUT, THEY ARE RATES WORKED OUT WITH A SET OF BASIC RATES OF MATERIALS AND LABOUR WITH WELL-DEFINED SPECIFICATION OF BUILDING. THE BASE FOR COST INDEX APPLICABLE TO PLINTH AREA RATES IS 100 AS ON 1.1.92 FOR PLINTH AREA RATES APPROVED DURING 1992. ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 16 THE RATES ARE APPLICABLE TO ANY PLACE WHERE THE COS T INDEX IS 100. WHERE THE COST INDEX IS DIFFERENCE FROM100, THE PLINTH AREA RATES ARE TO BE TAKEN IN THE RATIO OF THE COST INDEX APPLICABLE FOR THE PLACE AND 100. THUS THE PLINTH AREA RATES APPROVED BY THE CENTRAL BOARD OF DIRECT TAXES ARE INDEPENDENT O F PLACE AND TIME PERIOD BUT, THEY ARE DEPENDENT ON THE BASIC RATES OF MATERIALS AND L ABOUR CONSIDERING IN WORKING OUT THE PLINTH AREA RATES. FROM THIS, IT IS CLEAR THAT THE RATES BEING ADOPTED ARE VERY REALISTIC FOR THAT PARTICULAR PLACE AND IT HAS GOT NOTHING TO DO WITH DELHI RATES. IN VIEW OF THE ABOVE CLARIFICATION GIVEN IN THE REP ORT, I DO NOT FIND MERIT IN THE ASSESSEES CLAIM FOR ALLOWANCE TOWARDS RATE DIF FERENCE. HOWEVER, IT IS A WELL SETTLED POSITION TO ALLOW 10% RELIEF TOWARDS SELF-S UPERVISION, AS SEEN FROM THE VARIOUS JUDICIAL DECISIONS. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW DEDUCTION TOWARDS SELF-SUPERVISION AT 10% OF THE COST. AS A RESULT, THE COST OF CONSTRUCTION WOULD WORK OUT AS FOLLOWS: COST DETERMINED BY DVO ` 73,16,122/- 10% TOWARDS SELF SUPERVISION ` 7,31,612/- ` 65,84,510/- OTHER EXPENSES ` 8,000/- ` 65,92,510/- COST ADMITTED BY ASSESSEE AND HIS FATHER AS ON 31.3.2012 ` 57,37,794/- EXCESS COST OF CONSTRUCTION ` 8,54,716/- IT IS REASONABLE THAT THE EXCESS COST OF CONSTRUCTI ON IS SPREAD EQUALLY FOR ASSESSMENT YEAR 2011-12 & ASSESSMENT YEAR 2012-13 CONSIDERING THAT CONSTRUCTION WAS CARRIED EVEN DURING ASSESSMENT YEA R 2012-13. 16. THE CIT(A) OBSERVED THAT ON PERUSAL OF THE VALU ATION REPORT, IT INDICATES THAT THE DVO HAS NOT ADOPTED CPWD RATES. SINCE, THE VALUATION OF THE BUILDING HAS BEEN CONSIDERED BY FO LLOWING THE RATES OTHER THAN THE CPWD RATES, DEDUCTIONS TOWARDS RATE DIFFERENCE CANNOT BE ALLOWED. FACT REMAINS UNCHANGED. THE ASSESSEE FAILS TO BRING ON RECORD ANY EVIDENCE TO PROVE THAT THE DVO HAS ADOPT ED CPWD RATES WITHOUT SUITABLE ADJUSTMENT TO ARRIVE AT THE COST O F CONSTRUCTION. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS R IGHTLY RE-WORKED DIFFERENCE IN COST OF CONSTRUCTION AND HIS ORDER DO ES NOT REQUIRE ANY ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 17 INTERFERENCE. HENCE, WE UPHOLD THE CIT(A) ORDER AN D REJECT THE GROUND RAISED BY THE ASSESSEE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.298/VIZAG/2015 IS DISMISSED. ITA NO.299/VIZAG/2015: 18. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, THE LD . COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE TAX EFFECT INVOLVED IN THIS APPEAL IS BELOW RS.10 LAKHS. AS PER THE LATEST CIRCULAR NO.2 1/2015 DATED 10.12.2015 OF CBDT BEING RETROSPECTIVE IN NATURE, T HE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. THE LD. D.R. HAS NOT RAISED ANY OBJECTION. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. HENCE, THE SAME IS DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14 TH FEB17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 14.02.2017 VG/SPS ITA NOS298&299./VIZAG/2015 SHRI PRAVEEN KUMAR JAIN, KAKINADA 18 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI PRAVEEN KUMAR JAIN, PROP M/ S. JEWEL PARK, D.NO.37-2-20, MARKET STREET, KAKINADA (A.P.) 2. / THE RESPONDENT THE ITO, WARD-2, KAKINADA 3. + / THE CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A)-2, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // ASST. REGISTRAR ITAT, VISAKHAPATNAM