HEERA CHAND JAIN, Jaipur V. ITO, Jaipur

ITA 309/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2151 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Assessee Lawyers: S R SHARMA
• Keywords: Valuation report
• Section: 143(3); 142(1); 133A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 309/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 HEERA CHAND JAIN, PROP.- M/S GAURAV JAIN STEEL CENTRE, 113, TIRPOLIA BAZAR, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD-1(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABXPJ 6901 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.R. SHARMA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/03/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 25/04/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 25/01/2016 FOR THE A .Y. 2008-09. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AGAINST CONFIRMING THE ADDITION OF RS. 15,69,673/- ON ACCOUNT OF ALLEGED UNDISCLOSED INVES TMENT IN CONSTRUCTION OF HOUSE ON THE BASIS OF REPORT OF THE DEPARTMENTAL VALUER. ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND RUNNING A SMALL RETAIL SHOP CARRYING ON BUSINES S OF PURCHASE AND SALE OF UTENSILS UNDER THE NAME AND STYLE OF M/S GAURAV S JAIN STEEL CENTRE. THE ASSESSEE HAD NOT SUBMITTED ANY RETURN OF INCOME FROM THE ASSESSMENT YEAR 2004-05 ONWARDS. THERE WAS A SURVEY OP ERATION U/S 133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT AT THE SHOP OF THE ASSESSEE ON 13/2/2008. DURING THE C OURSE OF SURVEY, PURCHASE/SALE BILLS, OTHER VOUCHERS AND LOOSE PAPER S ETC. FOR THE FINANCIAL YEAR 2003-04ONWARDS WERE FOUND AND THESE WERE IMPOUNDE D. THE ASSESSEE WAS NEITHER MAINTAINING BOOKS OF ACCOUNT NO R THE BOOKS WERE FOUND DURING THE SURVEY. THE STOCK WAS INVENTORISED A ND IT WAS VALUED AT RS. 12,78,794/- BY THE SURVEY PARTY. THE SURVEY AUTH ORITIES ALSO FOUND THAT ASSESSEE COMMENCED CONSTRUCTION OF HOUSE 5-6 M ONTHS PRIOR TO THE DATE OF SURVEY AND ESTIMATED INVESTMENT THEREIN AT RS. 15.00 LACS AND IT WAS INFERRED BY THE SURVEY PARTY THAT INVESTMENT IN THE STOCK FOUND AND IN THE CONSTRUCTION OF THE HOUSE WAS OUT OF THE INCO ME EARNED DURING THE YEAR 2003-04 TO 2007-08. DURING THE SURVEY THE ASSE SSEE ADMITTED AN INCOME OF RS. 3.00 LACS FOR ASSESSMENT YEAR 2003-04 AND 2004-05 EACH. FURTHER THE INCOME OF RS. 6.00 LACS WAS SURRENDERED FOR A.Y. 2005-06, RS. 8.00 LACS FOR A.Y. 2006-07 AND RS. 8.00 LACS FO R A.Y. 2007-08. ON THE ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 3 BASIS OF PURCHASE AND SALES BILLS AND VOUCHERS FOR HIS UTENSIL BUSINESS FOUND DURING THE SURVEY FOR THE PERIOD 2003-04 TO 2 008-09, THE ASSESSEE PREPARED BOOKS OF ACCOUNT AND FILED THE RETURN OF I NCOME DECLARING ADDITIONAL INCOME AS TO COVER THE STOCK OF UTENSILS FOUND AT THE TIME OF SURVEY. THE ASSESSMENT FOR A.Y. 2004-05 TO 2007-08 WERE COMPLETED U/S 143(3) OF THE ACT AND THE RETURNED INCOME OF THE AS SESSEE WAS ACCEPTED. AS STATED BY THE ASSESSEE AT THE TIME OF SURVEY, TH E INVESTMENT IN THE CONSTRUCTION OF THE HOUSE UP TO THE DATE OF SURVEY WAS OF RS. 15.00 LACS. THE SURVEY PARTY OBSERVED THAT THE CONSTRUCTION OF T HE HOUSE DONE AT PLOT NO. 93, CHANDRA COLONY, TONK ROAD, JAIPUR IN TH E NAME OF ASHA DEVI, W/O- ASSESSEE AND THE CONSTRUCTION WORK WAS COM MENCED AT ABOUT 5-6 MONTHS BACK PRIOR TO THE DATE OF SURVEY. TILL TH E DATE OF SURVEY, BASEMENT, GROUND FLOOR OF THE HOUSE AND FIRST FLOOR UP TO LINTERN STAGE WAS CONSTRUCTED. THE ROOF OF FIRST FLOOR WAS NOT CAST ED, CONSTRUCTION DONE WAS ALSO UNFINISHED AND OUTER WORK OF HOUSE PAVEMENTS ETC. WERE TO BE CONSTRUCTED. THE ASSESSEE STATED THAT UP TO 13/2/20 08 APPROXIMATELY RS. 15.00 LACS EXPENDITURE WAS INCURRED ON CONSTRUCTION. IT IS PLEADED THAT THE ASSESSEE STOPPED CONSTRUCTION WORK JUST AFTER SU RVEY AND RESTARTED THE CONSTRUCTION WORK AGAIN DURING ASSESSMENT YEAR 2009-10 AND REMAINING CONSTRUCTION WORK WAS COMPLETED DURING THE A.Y. 2011-12 TO ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 4 2013-14. IT IS CLAIMED THAT THIS FACT WAS EVIDENT F ROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHEREIN THE INVES TMENT IN THE CONSTRUCTION HAS BEEN SHOWN IN THE RELEVANT FINANCI AL YEARS. THE ASSESSING OFFICER REFERRED THE MATTER TO THE D.V.O. BY INVOKING THE PROVISIONS OF SECTION 142A OF THE ACT FOR VALUATION ON 06/2/2014. THE VALUATION OFFICER INSPECTED THE PROPERTY ON 06/3/20 14 AND VALUED IT AT RS. 35.64 LACS. THE VALUATION OFFICER TOOK THE RATIO OF EXPENSES DECLARED BY THE ASSESSEE IN THE FINANCIAL YEAR 2007-08 AND 2 010-11 ONLY AND DETERMINED THE COST OF CONSTRUCTION OF THE HOUSE IN THE FINANCIAL YEAR 2007-08 AT RS. 30,69,673/- AND MADE ADDITION OF RS. 15,69,673/- AFTER REDUCING RS. 15.00 LACS AS DISCLOSED AT THE TIME OF SURVEY. 3. THE LD. CIT(A) REJECTED THE THREE MAIN CONTENTION S RAISED BY THE ASSESSEE BEFORE HIM AND DISMISSED THE APPEAL OF THE ASSESSEE. THE THREE MAIN CONTENTIONS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) ARE AS UNDER:- (I) THAT CONSTRUCTION WAS NOT COMPLETED IN F.Y. 201 0-11 BUT WAS ONLY PARTLY COMPLETED TILL F.Y. 2010-11 AND SOME OU TER WORK AND FINISHING WORK WAS GRADUALLY COMPLETED IN A.Y. 2011-12, 2012-13 AND 2014-15, (II) THAT THE ADOPTING OF CPWD RATES BY AVO FOR VA LUING COST OF CONSTRUCTION OF HOUSE IS WRONG AND ONLY STATE PWD X- 3 RATES SHOULD HAVE BEEN ADOPTED AND ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 5 (III) SELF SUPERVISION DEDUCTION ALLOWED BY AVO @ 7. 5% SHOULD HAVE BEEN ALLOWED @ 15%. 4. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DISCLOSED YEAR WISE EXPENSES INCURRED BY HIM IN THE CONSTRUCTION OF THE HOUSE IN ITS BALANCE SHEET FILED ALONGWITH RETURN OF INCOME, WHICH WAS ALSO MENTIONED IN THE OBJECTIONS FILED ON 18/3/2014 TO THE ASSESSING OFFICER IN RESPONSE TO THE NOTICE U/S 142(1) OF THE ACT AND THE DETAILS OF THE AMOUNT DISCLOSED YEAR WISE IS AS UNDER:- A.Y. 2008-09 JULY 2007 TO 31/3/2008 RS. 15,00,000 /- A.Y. 2009-10 RS. 70,000/- A.Y. 2010-11 RS. 68,500/- A.Y. 2011-12 RS. 65,000/- A.Y. 2012-13 RS. 1,90,000/- A.Y. 2013-14 RS. 2,30,000/- RS. 21,23,500/- THE LD AR SUBMITTED THAT THE HOUSE WAS COMPLETED DURI NG THE F.Y. 2013- 14. THE ASSESSEE GOT ITS HOUSE VALUED BY A REGISTERE D VALUER IN THE CONSTRUCTION DONE IN F.Y. 2007-08 AND FURTHER DURIN G THE YEAR 2010-11 AND THE REGISTERED VALUER VALUED THE CONSTRUCTION O F THE HOUSE AS UNDER:- F.Y. 2007-08 RS. 15,07,744/- F.Y. THEREAFTER TILL 2010 RS. 2,82,655/- ON THE NOTICE RECEIVED FROM THE VALUATION OFFICER O F THE IT DEPARTMENT, THE ASSESSEE INFORMED THE VALUATION OFFICER ABOUT C OMMENCEMENT OF THE CONSTRUCTION WERE IN THE YEAR 2007 AND IT WAS PARTLY COMPLETED IN THE ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 6 YEAR 2010. HOWEVER, TILL THEN, THE HOUSE WAS NOT COMP LETE. THE VALUATION OFFICER INSPECTED THE PROPERTY IN THE MONTH OF FEB, 2014 AND THE VALUATION OFFICER TOOK THE PERIOD OF CONSTRUCTION F OR F.Y. 2007-08 AND COMPLETION IN THE F.Y. 2010-11. THE VALUATION OFFICE R VALUED THE CONSTRUCTION BY IGNORING THE FACTS SUBMITTED BY THE ASSESSEE REGARDING THE PERIOD OF CONSTRUCTION. THE ASSESSEE HAS INCURRE D CONSTRUCTION EXPENSES OF RS. 1.90 LACS IN F.Y. 2011-12 AND RS. 2 .30 LACS IN F.Y. 2012- 13, THIS FACT WAS IGNORED. FURTHER THE VALUATION OFF ICER ADOPTED CPWD RATES AND HAS ALLOWED THE DEDUCTION FOR SELF SUPERV ISION ONLY @ 7.5%, WHICH IS UNJUSTIFIED. THE LD AR RELIED ON THE DECISIO N OF THE HONBLE ITAT WITH REGARD TO VALUATION OF THE COST OF CONSTRUCTION OF PROPERTY ON THE BASIS OF STATE PWD RATES INSTEAD OF CPWD RATES AS P ER THE INSTRUCTION NO. 1671 DATED 06/12/1985 ISSUED BY THE CBDT. THE CA SE LAW RELIED UPON BY THE LD AR ARE AS UNDER:- (I) (1998) 21 TW 667 RAM RAJ SONI VS. ACIT (II) (1999) 22 TW 245/273 RAVI MATHUR VS. ACIT (III) (2001) 26 TW 288 SANDEEP LOOMBA VS. ACIT (PAR A 23). IT WAS ALSO SUBMITTED THAT IN ALL THESE CASES, THE I TAT HAS ALLOWED THE DEDUCTION UP TO 20% SO AS TO BRING CPWD RATES AT PA R WITH THE STATE PWD RATES AND FURTHER DEDUCTION FOR SELF SUPERVISIO N WAS ALLOWED @ 10%. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 7 RAJESH MAHAJAN (2014) 50 TAXMANN.COM 206 (P&H) HAS HELD THAT DEDUCTION UP TO 30% ON ACCOUNT OF APPLYING CPWD RAT ES IN PLACE OF STATE PWD RATES AND 15% DEDUCTION FOR SELF SUPERVIS ION IS JUSTIFIED. SUCH VIEW WAS ALSO UPHELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RAJA R. GOVIND RAJAN (2014) 49 TAXMANN.COM 52 6 (MAD). HE FURTHER SUBMITTED THAT THE ALLOCATION OF TOTAL COST VALUED BY A.V.O. IN THE RATIO OF CONSTRUCTION IN F.Y. 2007-08 AT 86.137% AN D IN A.Y. 2010-11 @ 13.877% IS NOT JUSTIFIED DUE TO CONSTRUCTION PERIOD WAS BEYOND THAT ALSO AND THE COST OF CONSTRUCTION MUST HAVE BE ALLOCATED FOR THE F.Y. 2007-08, 2008-09, 2010-11, 2011-12, 2012-13 AND 2013-14 IN T HE RATIO COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. IT WAS ALSO P RAYED THAT COST OF CONSTRUCTION FOR F.Y. 2007-08 RELEVANT TO THE ASSES SMENT YEAR 2008-09 MAY KINDLY BE ALLOWED TO BE DETERMINED ACCORDING TO THE SUBJECT TO REASONABLE DEDUCTION THEREFROM AFTER CONSIDERATION OF OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE AVO WITH REGARD TO THE DI FFERENCE IN THE CPWD RATES IN COMPARISON TO THE STATE PWD RATES AND DEDUCTION FOR SELF SUPERVISION. 5. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 8 6. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND HA VE ALSO PERUSED THE FACTUAL ASPECTS OF THE CASE. THE ASSESSEE HAS DI SCLOSED EXPENDITURE INCURRED IN THE CONSTRUCTION OF THE HOUSE IN VARIOU S YEARS STARTING FROM F.Y. 2007-08 TO 2012-13. THE ASSESSEE ALSO SUBMITTED A VALUATION REPORT WITH REGARD TO THE CONSTRUCTION WORK DONE IN THE F.Y. 2007-08 AND WORK DONE UP TO 2010 AND ON THAT BASIS THE VALUER HAS VA LUED AT RS. 15,07,744/- FOR A.Y. 2007-08 AND RS. 2,82,655/- UP TO 2010. THE SURVEY TEAM WHO VISITED ASSESSEES PREMISES IN THE MONTH OF FEB, 2008 HAVE ACCEPTED THE INVESTMENT IN HOME AT RS. 15,00,000/- AND THE SAME WAS ALSO ACCEPTED BY ASSESSEE AND DISCLOSED IN RETURN O F INCOME. THUS, THE VALUATION BY DVO FOR F.Y. 2007-08 WAS EXCESSIVE WITH REGARD TO THE ASSESSEES CLAIM THAT THE STATE PWD RATE SHOULD HAV E BEEN ADOPTED IN PLACE OF CPWD RATE OR APPROPRIATE DEDUCTION SHOULD HAVE BEEN GIVEN OUT OF CPWD RATES AS HELD IN VARIOUS CASES BY ITAT. I AG REE WITH THIS PLEA OF THE ASSESSEE. THE ITAT IN VARIOUS CASES (SUPRA) HAVE ALLOWED REDUCTION UP TO 20% FROM THE CPWD RATES. I ALSO FIND MERIT IN THE PLEA OF AR THAT 10% DEDUCTION SHOULD BE ALLOWED FOR SELF SUPERVISION . IT IS A JUSTIFIED CLAIM. THUS THE VALUATION DONE BY THE DVO BY ADOPTI NG THE CPWD RATE INSTEAD OF STATE PWD RATES AND NOT ALLOWING 10% FOR SELF SUPERVISION IS HELD AS EXCESSIVE. FURTHER THE PERIOD OF CONSTRUCTI ON ADOPTED BY THE DVO ITA 309/JP/2016_ HEERA CHAND JAIN VS ITO 9 WAS ALSO NOT JUSTIFIED IN VIEW OF VARIOUS DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE. CONSIDERING ALL THESE FACTS AND CIRCU MSTANCES, I HOLD THAT THE VALUATION REPORT SUBMITTED BY THE ASSESSEE REFL ECTS THE TRUE AFFAIRS ON THE ISSUE OF PERIOD OF CONSTRUCTION AND THE COST OF CONSTRUCTION, THEREFORE, I DIRECT TO DELETE THE ADDITION MADE ON THE BASIS OF DVOS REPORT, WHICH IS DEFECTIVE ON MANY COUNTS. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/04/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25 TH APRIL, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI HEERA CHAND JAIN, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-1(3), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 309/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR