M/s Swanthana Hospital P Ltd, Trivandrum V. DCIT, Trivandrum

ITA 346/COCH/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4566 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 11-06-2009
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: DAVIS CHAKKALAKKAL ADV
• Keywords: Rejection of books of accounts; Unexplained investment; Gift; Source of fund; Valuation report; Onus to prove; Reason to believe
• Section: 143(3); 234B; 69; 144

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.A. NO. 346/COCH/2009 ASSESSMENT YEAR:2002-03 M/S. SANTHWANA HOSPITAL PVT. LTD. PERUMPALLIL BUNGALOW, VAYILAKADU, KOWDIAR, TRIVANDRUM 695 003. [PAN:AAICS 1884P] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), TRIVANDRUM. (ASSESSEE APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI DAVIS CHAKKALAKKAL, ADV.-AR REVENUE BY SHRI T.J.VINCENT, DR O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOCHI (CIT(A) FOR SHORT) DATED 30.3.2009, AND THE ASSESSMENT YEAR (A.Y) UNDER REFERENCE IS 2002-03. 2. THE FACTS OF THE CASE, IN-SO-FAR AS ARE RELEVANT FOR OUR PURPOSE, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY UNDER THE COMPANIES AC T, 1956, RUNNING A HOSPITAL IN THE NAME OF SANTHWANA HOSPITAL AT TRIVANDRUM. IT FILED ITS RETURN OF INCOME FOR THE YEAR ON 31.10.2002, DECLARING AN INCOME OF ` 3,55,090/-, AND WHICH STOOD PROCESSED AS SUCH U/S. 143(1) OF THE INCOME-TAX ACT, 1961 ('THE ACT' HERE INAFTER). SUBSEQUENTLY, A SURVEY WAS CARRIED OUT AT ITS HOSPITAL PREMISES BY I.T.O. (TDS ), TRIVANDRUM, WHEREAT IT WAS FOUND THAT THE VALUE OF THE HOSPITAL BUILDING WAS MUCH HI GHER. THE SURVEY REPORT DATED 20.9.2002 , STATING THE ESTIMATED VALUE OF THE BUILDING AT ` 80.22 LAKHS, WAS FORWARDED BY THE I.T.O. (TDS) TO THE ASSESSING OFFICER (AO) FOR FURTHER NECESSARY ACTION. ACCORDINGLY, AFTER RECORDING REASONS FOR THE SAME, NOTICE U/S. 1 48 OF THE ACT WAS ISSUED ON 16.1.2007. THE ASSESSEE RESPONDED VIDE ITS LETTER DATED 12.2.2 007 BY RELYING ON ITS RETURN FILED ON 31.10.2002. THE MATTER WAS REFERRED BY THE AO TO T HE VALUATION OFFICER ON 5.3.2007, AND ITA NO.346 /COCH/2009 2 WHO VIDE HIS REPORT DATED 16.7.2007 (COPY ON RECORD ) VALUED THE COST OF CONSTRUCTION OF THE ASSESSEES HOSPITAL BUILDING, AS INCURRED DURIN G THE PERIOD SEPTEMBER, 1999 TO MARCH, 2002, AT ` 53.39 LAKHS. ACCORDINGLY, THE ASSESSMENT WAS PROPO SED BY ADDING THE DIFFERENCE; THE INVESTMENT ON BUILDING PER THE ASSE SSEES BOOKS AS ON 31.3.2002 BEING AT ` 36.13 LAKHS, FORWARDING THE SAID VALUATION REPORT T O THE ASSESSEE ON 17/7/2007. AFTER CONSIDERING EACH OF THE ASSESSEES OBJECTIONS RAISE D THERE-TO, FINDING THEM AS NOT ACCEPTABLE/MERITED, THE ASSESSMENT WAS MADE BY BRIN GING THE DIFFERENCE ( ` 1726203/-) TO TAX, ASSESSING THE TOTAL INCOME AT ` 20.81 LAKHS ON 31/12/2007. THE ASSESSEE CHALLENGED THE SAME ON SEVERAL, PRIMARILY FACTUAL, GROUNDS BEFORE THE FIRST APPELLATE AUTHORITY WHO, HOWEVER, FOUND THE ASSESSEES OBJECTIONS, INCLUDING LEGAL, AS NOT VALID AND CONFIRMED THE ASSESSMENT AS MADE. AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US. 3.1 THE ASSESSEE HAS BEFORE US, IMPUGNED THE ASSE SSMENT ON BOTH LEGAL AND FACTUAL GROUNDS, AND EACH OF WHICH WE SHALL TAKE UP, CONSID ERING THE LEGAL OBJECTIONS FIRST. VIDE ITS FIRST GROUND, THE ASSESSEE IMPUGNS THE ASSUMPTI ON OF JURISDICTION BY THE AO FOR ISSUE OF NOTICE U/S. 148. IT IS ON THE BASIS THAT THE RE-AS SESSMENT NOTICE HAS BEEN ISSUED BY MAKING A GENERAL REMARK AS: ` ON ENQUIRY IT WAS FOUND THAT THE VALUE OF THE BUILD ING WAS AROUND ` 80 LAKHS . THE WDV OF THE BUILDING AS PER THE ASSESSEES ACCOU NTS THE SAME, IT IS CONTENDED, IS ONLY A BALD STATEMEN T, NOT GIVING RISE TO THE FORMATION OF A BELIEF AS TO ESCAPEMENT OF INCOME FROM ASSESSM ENT. THE INSPECTOR OF THE INCOME-TAX, THROUGH WHOM THE SURVEY AT ITS PREMISES IN SEPTEMBE R, 2002 WAS CARRIED OUT BY THE I.T.O., TDS, TRIVANDRUM, IS NOT COMPETENT TO ISSUE ANY AUTH ENTIC OR RELIABLE ESTIMATE OF THE INVESTMENT AND, ACCORDINGLY, RELIANCE THEREON IS MI SPLACED. TOWARD THE SAME, THE ASSESSEE RELIES ON THE DECISION BY THE TRIBUNAL IN THE CASE OF SHREE GOVERDHAN BUILDERS VS. I.T.O. , 29 SOT 72 (JP) (URO) (IN I.T.A. NO. 402 & 403 (JP) OF 2007 DATED 16.5.2008). WE HAVE PERUSED THE SAID ORDER AS WELL AS THE IMPUGNED ORDE R IN THE PRESENT CASE. FIRSTLY, THE GROUND ON WHICH THE ASSESSMENT WAS STRUCK DOWN IN T HE CITED CASE WAS THAT THE RE- ASSESSMENT NOTICE ISSUED BY THE AO WAS PRIOR TO THE REPORT FROM THE DVO OBTAINED ON REFERENCE U/S. 142A THERE-TO, SO THAT THERE WAS NO MATERIAL BEFORE THE AO AT THE RELEVANT TIME AND, THEREFORE, NO REASON TO BELIEVE THAT THER E WAS UNDER-VALUATION AND, ITA NO.346 /COCH/2009 3 CONSEQUENTLY, ESCAPEMENT OF INCOME CHARGEABLE TO TA X FROM ASSESSMENT . THE ASSESSEE, A BUILDER, HAD, IN FACT, MUCH BEFORE MAKING OF THE SA ID REFERENCE BROUGHT TO THE NOTICE OF THE AO THAT IT WAS MAINTAINING COMPLETE BOOKS OF ACCOUN TS AND VOUCHERS. IT WAS UNDER THESE CIRCUMSTANCES THAT THE TRIBUNAL FOUND THAT THE AO A CTED WITHOUT JURISDICTION, AND THAT THE INSPECTORS REPORT COULD NOT LEAD, OR SAID TO BE TH E MATERIAL, TO FORMATION OF A BELIEF AS TO THE ESCAPEMENT OF INCOME FROM ASSESSMENT. THE REFERENCE U/S. 142A WAS INVALID FOR THE REASON THAT NO PROCEEDINGS WERE PENDING BEFORE THE AO AT THE RELEVANT TIME . 3.2 COMING TO THE FACTS OF THE PRESENT CASE, AS EXP LAINED BY THE LD. CIT(A), THE NOTICE U/S. 148 STOOD ISSUED ON 16.1.2007, WHILE REFERENCE TO THE VALUATION OFFICER WAS MADE ONLY SUBSEQUENTLY, ON 5.3.2007. AS SUCH, THE REFER ENCE WAS VALID. WITH REGARD TO THE FORMATION OF BELIEF AS TO THE ESCAPEMENT OF INCOME CHARGEABLE TO TAX FROM ASSESSMENT, WHICH ONLY WOULD ADMITTEDLY VALIDATE THE ISSUE OF N OTICE U/S. 148, OUR FIRST OBSERVATION IS THAT THE MATTER IS PURELY FACTUAL AND CANNOT BE DEC IDED DE HORS ANY MATERIAL. IT IS ONLY WHERE THE RELEVANT MATERIAL AND INFORMATION IN THE POSSESSION OF THE AO AT THE TIME OF ISSUE OF NOTICE U/S. 148 IS BEFORE US THAT WE CAN S TATE IF A CASE FOR PRIMA FACIE SATISFACTION BY THE AO IS MADE OUT OR NOT , WHILE HERE WE DO NOT EVEN HAVE THE COPY OF THE RE ASONS RECORDED U/S. 148, WHICH COULD INDICATE AS TO WHAT THESE MATERIALS AND INFORMATION IS. THE PROPER COURSE FOR THE ASSESSEE, WHERE IT WISHED TO IMPUGN THE VALIDITY OF THE NOTICE U/S. 148, WHICH WAS NEITHER DONE BEFORE THE ASSESSING AU THORITY NOR AT THE FIRST APPELLATE STAGE, WAS TO AT THE MINIMUM OBTAIN A COPY OF THE RECORDED REASONS AND ALSO A COPY OF THE MATERIAL (REPORT) FORMING THE BASIS THEREOF. THE L AW IN THE MATTER IS AMPLY CLEAR. ALL THAT IS REQUIRED FOR THE REVENUE TO ASSUME A VALID JURIS DICTION UNDER SECTION 148 - WHERE THE RE-OPENING IS WITHIN FOUR YEARS OF THE END OF THE R ELEVANT ASSESSMENT - AS IN THE PRESENT CASE, IS THE EXISTENCE OF COGENT MATERIAL THAT WOU LD LEAD A PERSON OF NORMAL PRUDENCE, ACTING REASONABLY, TO A HONEST BELIEF AS TO THE ESC APEMENT OF INCOME FROM ASSESSMENT, AND NOTHING MORE [REFER: CIT (ASSTT.) V. RAJESH JHAVERI STOCK BROKERS (P.) L TD . (2007) 291 ITR 500 (SC)]. SATISFACTION, IT MAY BE APPRECIATED, IS ESSENTIALLY A SUBJECTIVE PHENOMENON, SO THAT WHAT IS PRINCIPALLY TO BE SEEN IS WHETHER IT I S BASED ON SOME OBJECTIVE MATERIAL OR NOT; THE SUFFICIENCY OR THE CORRECTNESS OF THE MATERIAL BEING NOT RELEVANT AT THAT STAGE. IT WOULD BE OPEN TO THE ASSESSEE IN THE ASSESSMENT PROCEEDIN GS TO SHOW THAT THE ASSUMPTION OF FACTS ITA NO.346 /COCH/2009 4 AT THE TIME OF ISSUE OF NOTICE WAS ERRONEOUS, AND T HAT NO ADDITION AND/OR DISALLOWANCE IS ACTUALLY CALLED FOR. THAT WOULD, HOWEVER, EVEN IF S O, NOT INVALIDATE THE NOTICE ISSUED UNDER S. 148 [REF: INTER ALIA, RAYMOND WOOLLEN MILLS LTD. VS. I.T.O. (1999) 236 ITR 34 (SC)]. OF COURSE THE MATERIAL HAS TO BE CREDIBL E, AND THE AO CANNOT RELY ON PURE GUESS WORK. IT IS TRUE THAT THE INSPECTOR, ON WHOSE REPO RT, THE REPORT BY THE I.T.O.(TDS), TRIVANDRUM, FORWARDED TO THE AO, IS STATED TO BE B ASED, IS NOT COMPETENT TO VALUE THE COST OF CONSTRUCTION OF THE BUILDING. IN THIS REGARD, H OWEVER, THE RELEVANT MATERIAL IS NOT ON RECORD, SO THAT IT IS IMPERMISSIBLE TO GIVE CREDENC E TO ANY SUCH CONTENTION. FURTHER, EVEN FOR ARGUMENTS SAKE, THE QUESTION, IN OUR VIEW, IS NOT OF THE PROFESSIONAL COMPETENCE OF THE INSPECTOR IN THE MATTER, WHICH IS DECIDEDLY ABS ENT, BUT THE CREDIBILITY OF THE SOURCE FROM WHICH THE INFORMATION IS OBTAINED BY HIM. THE AO HAS NOT RELIED ON THE INSPECTORS JUDGMENT OR ASSESSMENT IN ANY MANNER IN FRAMING THE ASSESSMENT FOR THE ASSESSEE TO ASSAIL HIS PROFESSIONAL COMPETENCE IN THE MATTER. IN THIS CASE, AS IT APPEARS, THERE HAS BEEN A PERSONAL VISIT BY THE INSPECTOR TO THE ASSESSEES P REMISES IN THE COURSE OF A SURVEY. AS SUCH, WHAT WOULD APPEAR TO US IS THAT HE HAD FIRST- HAND EXPOSURE TO THE BUILDING AND MADE FIRST-HAND ENQUIRIES, INCLUDING QUA THE ASSESSEES ACCOUNTS. IT IS THE CREDIBILITY OF THIS INFORMATION, GATHERED FIRST-HAND, AND ON WHICH HE R ELIES, AND THE TRUTHFULNESS IN REPORTING THE SAME (WHICH CANNOT BE DOUBTED, AS ANY AUTHORITY IS STATUTORILY PRESUMED TO HAVE PERFORMED HIS DUTIES IN A REGULAR MANNER - REFER S. 114(E) OF THE INDIAN EVIDENCE ACT, 1872)), THAT IS OF RELEVANCE. ALSO, IT WAS NOT NECE SSARY FOR THE AO TO VERIFY THE INFORMATION CONVEYED TO HIM BEFORE PLACING RELIANCE THEREON, I.E., FOR THE PURPOSE OF FORMATION OF HIS BELIEF, SO THAT HE WAS ENTITLED TO CONSIDER IT AS RELIABLE. REFERENCE IN THIS CONTEXT IS MADE TO THE DECISIONS IN THE CASE OF ITO V. PURUSHOTTAM DAS BANGUR & ANR . (1997) 224 ITR 362 (SC) AND BRIJ MOHAN LAL AGGARWAL V. CIT (ASSTT.) , 268 ITR 400 (ALL.). IN OUR VIEW, THEREFORE, THE SAID REPORT, AS SUMING SO, WOULD CONSTITUTE A CREDIBLE MATERIAL AND CANNOT BE SAID TO BE PURE GUESS WORK. ANOTHER FACTOR THAT IS TO BE CONSIDERED IN THIS REGARD IS THE EXTENT OF DIFFERENCE BETWEEN THE REPORTED VALUE OF CONSTRUCTION AND THAT REFLECTED BY THE ASSESSEES BOOKS, BEING AS ST ATED IN THE NOTICE - AT ` 80 LAKHS AND ` 36.13 LAKHS RESPECTIVELY. AS SUCH, WHILE IT COULD B E SAID TO BE IMPROPER; VALUATION BEING INTRINSICALLY AN ESTIMATION EXERCISE, TO GIVE WEIGH T TO EVERY REPORTED DIFFERENCE, UNDER THE CIRCUMSTANCES, IN OUR VIEW, THE AO, OSTENSIBLY ACTI NG ON THE REPORT, WAS RELYING ON ITA NO.346 /COCH/2009 5 CREDIBLE, RELIABLE MATERIAL AND INFORMATION IN HIS POSSESSION, WHICH LED TO A BONA FIDE BELIEF AS TO NON-DISCLOSURE OF THE ACTUAL, FULL COS T OF CONSTRUCTION IN THE BOOKS AND, CONSEQUENTLY, ESCAPEMENT OF INCOME FROM ASSESSMENT TO TAX TO THE EXTENT OF SHORTFALL. THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL TO DISLO DGE THIS FACTUAL INFERENCE IN ANY MANNER. WE DECIDE ACCORDINGLY. THIS WOULD ALSO AN SWER, I.E., APART FROM GROUND NO. 1, THE FIRST LIMB OF THE ASSESSEES GROUND NO. 4. 3.3 AS REGARDS THE DECISION RELIED UPON, AS AFORE-D ISCUSSED, THE SAME IS ON A DIFFERENT SET OF FACTS. THE REPORT BY THE REGISTERED VALUER STOOD SUBMITTED BY THE ASSESSEE TO THE AO PRIOR TO THE ISSUE OF NOTICE U/S. 148, WHICH WAS NE ITHER CONTROVERTED BY THE AO NOR REFERRED BY HIM TO THE DVO, REFERENCE TO WHOM, AS A LSO NOTED EARLIER, WAS FOUND BY THE TRIBUNAL AS INVALID. THE DECISION BY THE TRIBUNAL I N THE CASE OF ITO V. AGENCIES RAJASTHAN (P.) LTD ., 117 TTJ (JP.) 542 IS ALSO ON THE SAME FOOTINGS. THE OBSERVATION BY IT (IN THE FORMER CASE) THAT THE INSPECTORS REPORT COULD NOT BE SAID TO BE A MATERIAL TO FORM A BELIEF; THE LAW NOT POSTULATING ANY QUALIFICATION FOR SUCH MATERIAL, EXCEPT FOR ITS CREDIBILITY AND NEXUS WITH THE BELIEF, THE CORRECTNESS OF WHICH CAN NOT BE DOUBTED, AND THE SUFFICIENCY OF WHICH CANNOT BE SUBJECT MATTER OF DEBATE, HAS THERE FORE, TO BE UNDERSTOOD AND READ IN THE CONTEXT OF THE FACTS AND CIRCUMSTANCES OF THAT CASE , AND CANNOT BE SAID TO BE EITHER STATING A RULE OR EVEN THE RATIO OF THE SAID CASE. AS AFORE SAID, THE MATTER IS PURELY FACTUAL, BEING ONE OF FACTUAL INFERENCE, AND THE SAID STATEMENT EV EN OTHERWISE TOO BROAD TO APPLY TO EVERY SITUATION. 4.1 THE NEXT LEGAL ISSUE RAISED BY THE ASSESSEE IS THAT THE REFERENCE U/S. 142A IS INVALID IN THE ABSENCE OF ANY DEFECTS BEING POINTED OUT BY THE AO, AND THE NON-REJECTION OF BOOKS OF ACCOUNT BY HIM; IT PURPORTEDLY MAINTAINING PROPE R BOOKS OF ACCOUNT. IN THIS REGARD, WE OBSERVE THAT THE ACT EMPOWERS THE AO, BEING NOT A P ERSON WHO COULD BE SAID TO POSSESS EXPERTISE IN VALUATION, TO, AT HIS DISCRETION, REQU IRE THE VALUATION OFFICER (VO) TO ESTIMATE ANY INVESTMENT REFERRED TO IN S. 69 OR S. 69B. SEC TIONS 69 & 69B ARE RESPECTIVELY TITLED UNEXPLAINED INVESTMENT AND AMOUNT OF INVESTMENT, ETC., NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT. CLEARLY, BUILDING BEING A DISCLO SED ASSET, REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT, THE ADDITION IN THE PRESENT CASE COULD BE AND IS ONLY U/S. 69B, AND NOT ITA NO.346 /COCH/2009 6 U/S. 69 OF THE ACT, AS MENTIONED IN THE ASSESSMENT ORDER. TO THIS EXTENT, THE ASSESSEES CONTENTION IS CORRECT, THOUGH IT WOULD BE (AND NEIT HER IT IS SO CONTENDED) OF ANY MOMENT. THIS IS AS IT IS TRITE LAW THAT MERE REFERENCE TO A WRONG SECTION, AS LONG AS THE AUTHORITY EXERCISING THE POWER OR THE JURISDICTION IS VESTED THEREWITH, OR THE INGREDIENTS FOR ITS EXERCISE ARE SATISFIED, WOULD BE OF NO CONSEQUENCE. THE AO, THUS, BEING OF THE PRIMA FACIE VIEW THAT THE ASSESSEES BOOKS OF ACCOUNT DID NOT REFLECT THE FULL VALUE OF THE INVESTMENT IN BUILDING, WAS THEREFORE OBLIGED TO FI RST ESTIMATE, AND THEN ASSESS THE SAME AS INCOME, I.E., AFTER CONFRONTING THE ASSESSEE WITH T HE SAID ESTIMATION AND CONSIDERING HIS OBJECTION/S THERETO, IF ANY, WHERE FOUND NOT SATISF ACTORY. FOR THE PURPOSE, HE WOULD EITHER PROCEED TO ESTIMATE THE SAME HIMSELF OR REFER THE M ATTER TO THE VO. IN THE PRESENT CASE, THE AO FOLLOWS THE LATTER PATH. WE HAVE ALREADY FO UND THE REFERENCE TO VO U/S. 142A AS VALID, I.E., IT SATISFIES THE REQUIREMENTS OF THE S ECTION. AS SUCH, THE ASSESSEES CONTENTION THAT THE AO OUGHT TO HAVE FIRST FOUND THE ASSESSEE S BOOKS OF ACCOUNT AS NOT RELIABLE, AND REJECT THE SAME, BEFORE HE COULD INVOKE S. 142A, IS NEITHER WARRANTED BY LAW NOR BY THE DICTATES OF A FAIR PROCEDURE, WHICH WOULD ONLY REQU IRE THAT THE ENTIRE MATERIAL ON WHICH THE ASSESSEE PLACES RELIANCE IS PROPERLY CONSIDERED AND , LIKEWISE, THE MATERIAL AND/OR INFORMATION THAT THE AUTHORITY RELIES ON (OR WISHES TO PLACE RELIANCE ON), IS CONFRONTED TO THE ASSESSEE. IN FACT, THE VO IS HIMSELF REQUIRED TO CONSIDER THE ASSESSEES CASE AND EXPLANATIONS, INCLUDING THOUGH NOT LIMITED TO I TS BOOKS OF ACCOUNT. WHEN THE LAW ITSELF CONSIDERS THAT THE AO MAY NOT BE AS PROFICIENT OR P OSSESS THE REQUISITE EXPERTISE, SO THAT HE COULD REFER FOR VALUATION OF THE INVESTMENT CONC ERNED TO THE VO, WHERE IS THE QUESTION OF HIS SITTING IN JUDGMENT IN THE MATTER, I.E., WIT HOUT HAVING THE INFORMED OPINION OF THE EXPERT, EXPRESSED AFTER CONSIDERING ALL THE RELEVAN T MATERIALS, INCLUDING THE ASSESSEES EXPLANATIONS & THE BOOKS OF ACCOUNTS. THIS WOULD AM OUNT TO TURNING THE LOGIC (OF THE REFERENCE) ON ITS HEAD. WE SHALL EXEMPLIFY THIS BY WAY OF AN EXAMPLE. THE ASSESSEES BOOKS SHOW PURCHASE OF A PARTICULAR QUANTITY AND QU ALITY OF (SAY) WOOD. THE AO HAS NO BASIS TO VERIFY THE COMPLETENESS OR CORRECTNESS OF THE SAME. IT IS ONLY WHEN THE CONSTRUCTION IS ACTUALLY INSPECTED, AND THE ASSESSE ES EXPLANATIONS CONSIDERED, THAT IT COULD BE SAID THAT WOOD OF THAT QUALITY/GRADE IN THAT QUA NTITY IS ACTUALLY USED OR NOT. HOW CAN, ONE MAY ASK, THE AO IN ITS ABSENCE SAY THAT TEAK WO OD (SAY) AND NOT DEODAR WOOD (SAY) IS ACTUALLY USED, AND HOW MUCH, AND WHICH DIFFERENCE/S HAVE A DIRECT IMPACT ON THE COST ? ITA NO.346 /COCH/2009 7 THEN THERE IS THE MATTER OF RATES; THE ASSESSEE COU LD ONLY BE CONSIDERED AS HAVING PURCHASED AT THE NORMAL, GOING MARKET RATES. THE BOOKS OF ACCOUNTS ARE ONLY THE ASSESSEES EXPLANATION TOWARD ITS CLAIM OF HAVING EXPENDED ON CONSTRUCTION THE SUM AS DISCLOSED THEREIN, AND NO MORE, AND WOULD, THUS, DE FINITELY MERIT EXAMINATION AND CONSIDERATION ON MERITS . BUT THAT IS A MATTER, FIRSTLY, OF FACT AND, SECON DLY, A MATTER SUBSEQUENT, I.E., ONLY AFTER REFERENCE UNDER S. 142 A IS MADE, AND AT THE TIME OF ITS IMPLEMENTATION BY THE VO. THE ASSESSEES ARGUMENT I S, THUS, LEGALLY NOT TENABLE. 4.2 FURTHER, THOUGH THE ASSESSEES GROUND (# 2) IS WITH RESPECT TO S. 142A, WHICH STANDS ANSWERED HEREINBEFORE, THE POSITION WOULD BE MUCH T HE SAME, WE MAY ADD, ADDRESSING THE ISSUE IN A MORE BASIC FORMAT AND IN A WIDER PERSPEC TIVE, IF INSTEAD OF INVOKING S. 142A, THE AO WAS TO PROCEED TO ESTIMATE TO VALUE THE ASSESSEE S INVESTMENT HIMSELF. THIS IS FOR THE REASON THAT THE REFERENCE TO THE VO BY THE AO IS NO T MANDATORY, AND IT MAY WELL BE THAT IN THE CIRCUMSTANCES OF THE CASE, THE AO MAY CONSIDER THE REFERENCE AS NOT PROPER, OR THE MORE PROPER COURSE TO BE NOT TO DO SO. THIS IS FOR THE REASON THAT THE PURPORT AND IMPORT OF THE REFERENCE U/S. 142A IS TO ASSIST THE AO, AT HIS OPTION TO BE EXERCISED JUDICIOUSLY TOWARD AND FOR THE PURPOSE OF S. 69 AND S. 69B, I.E ., THE MATTER IS ENTIRELY FACTUAL. SEC. 142A FOLLOWS S. 142, WHICH IS TITLED ENQUIRY BEFOR E ASSESSMENT, FALLING UNDER CHAPTER XIV PROCEDURE FOR ASSESSMENT. SEC. 142 AUTHORI ZES THE AO TO, FOR THE PURPOSE OF MAKING AN ASSESSMENT UNDER THE ACT, REQUIRE ANY PER SON TO FURNISH THE REQUISITE INFORMATION, INCLUDING THE BOOKS OF ACCOUNTS OR DOC UMENTS, I.E., AS SPECIFIED. THE POWER IS CIRCUMSCRIBED IN TERMS OF TIME PERIOD TO WHICH T HE ACCOUNTS MAY RELATE; THE NECESSARY INTERNAL APPROVALS, THAT WOULD BE REQUIRED FOR CERT AIN SPECIFIC INFORMATION OR CERTAIN SPECIFIC ACCOUNTS, ETC. AND INCLUDES THE POWER TO D IRECT THE AUDIT OF THE ASSESSEES ACCOUNTS, CONSIDERING THEIR NATURE AND COMPLEXITY. THE LEGISLATURE ONLY DEEMED IT FIT TO INCORPORATE THE PROVISION OF REFERENCE TO VO, NOT A S A SUB-SECTION OF S. 142 BUT AS A SEPARATE SECTION, FOLLOWING IT. IN OTHER WORDS, TH E SAME IS ONLY TO BE CONSIDERED AS A PART OF THE ENQUIRY BEFORE ASSESSMENT UNDERTAKEN BY THE AO, ALBEIT THROUGH A DESIGNATED EXPERT IN VALUATION, AND TOWARD GATHERING MATERIAL AND INF ORMATION, WHICH IS IN HIS OPINION RELEVANT FOR THE PURPOSE OF FRAMING THE ASSESSMENT. HOW FAR DIFFERENT, IT MAY BE ASKED, IS THE PROVISION DIFFERENT, I.E., IN CHARACTER, FROM T HAT REQUIRING AUDIT OF ACCOUNTS WHICH IS ITA NO.346 /COCH/2009 8 ALSO ONLY FROM A DESIGNATED EXPERT. THE ONLY DIFFERENCE THAT WE OBSERVE IS THAT WHILE THE PURPORT OF S. 142 IS TOWARD MAKING AN ASSESSMENT, S . 142A IS APPLICABLE ONLY WHERE THE VALUE OF INVESTMENT, REFERRED TO IN SS. 69 AND 69B, IS REQUIRED FOR MAKING AN ASSESSMENT, I.E., IS LIMITED IN SCOPE VIS--VIS THE FORMER. 4.3 WE MAY NEXT ADDRESS THE QUESTION OF WHETHER THE REJECTION OF ACCOUNTS IS A PRE- REQUISITE FOR INVOCATION OF S. 69 OR S. 69B. SEC. 69 IS IN RESPECT OF INVESTMENTS NOT DISCLOSED IN THE ASSESSEES BOOKS OF ACCOUNTS. CLE ARLY, THEREFORE, THERE IS NO SCOPE FOR THE AO BEING SATISFIED OR NOT WITH THE CORRECTNESS OR C OMPLETENESS OF THE ASSESSEES ACCOUNTS. ALL THAT HE HAS TO FIND AND STATE IS THAT THE RELEV ANT ASSET/INVESTMENT STANDS NOT RECORDED IN THE ASSESSEES BOOKS OF ACCOUNT, AND PROCEED TO SHO W CAUSE HIM AS TO WHY, THEREFORE, THE VALUE THEREOF BE NOT INCLUDED IN HIS INCOME. THAT W OULD BY ITSELF BE SUFFICIENT TO INVOKE S. 69. OF COURSE, THE ACTUAL INCLUSION OF THE VALUE O F THE INVESTMENT IN THE ASSESSEES INCOME FOR THE YEAR U/S. 69 WOULD REQUIRE A FURTHER FINDIN G AS TO WHY HE DOES NOT CONSIDER THE ASSESSEES EXPLANATION, INCLUDING THE MATERIALS ON WHICH RELIANCE FOR THE PURPOSE IS PLACED BY HIM, AS NOT SATISFACTORY. IT MAY WELL BE THAT, NOTWITHSTANDING SO, THE ASSESSEE HAS A REASONABLE EXPLANATION; HE MAY HAVE EVIDENCE OF IT (INVESTMENT) BEING SOURCED FROM WITHDRAWALS IN ITS BOOKS, CHOOSING TO KEEP THE INVE STMENT OFF ITS BOOKS AT THE SAME TIME; IT COULD BE THAT THE INVESTMENT HAS NO RELATION WITH T HE ASSESSEES BOOKS OF ACCOUNTS (FOR A PARTICULAR SOURCE OF INCOME), AND IS ACQUIRED FROM OTHER SOURCES. IT IS THE REASONABLENESS OF THE AOS FINDING AS TO THE NON-SATISFACTION WITH THE ASSESSEES EXPLANATION, ON WHICH THE VALIDITY OF THE ADDITION U/S. 69, IN THE FINAL ANALYSIS, DEPENDS. COMING TO S. 69B, THE AO HAS TO GIVE A SPECIFIC FINDING THAT THE AMOUNT EXPENDED ON MAKING THE INVESTMENT EXCEEDS THE AMOUNT RECORDE D IN ITS RESPECT IN THE ASSESSEES BOOKS OF ACCOUNTS MAINTAINED FOR ANY SOURCE OF INCO ME. THE VALUATION OF INVESTMENT, AS WOULD BE APPARENT, IS INTRINSIC TO THE APPLICATION OF S. 69 OR S. 69B, AND WHICH WE HAVE OBSERVED S. 142A TO BE TOWARD. IT IS ONLY WHERE THE VALUATION HAS BEEN MADE BY THE AO THAT THE VALUE AS REFLECTED IN THE BOOKS OF ACCOUNT S COULD POSSIBLY BE COMPARED WITH . AS SUCH, NON-ACCEPTANCE OF BOOKS, PRIOR TO SUCH VALUAT ION WOULD BE LIKE PUTTING THE CART BEFORE THE HORSE. THE BOOKS OF ACCOUNTS, IT MAY BE APPRECIATED, ARE A PART OF THE ASSESSEES EXPLANATION, AND CONSTITUTES AN EVIDENCE ON WHICH IT RELIES. IT WOULD, THEREFORE, ITA NO.346 /COCH/2009 9 BE NECESSARILY REQUIRED TO BE CONSIDERED AND MET, A ND WHICH IS IMPLIED IN THE AOS FINDING AFORESAID, ON THE TENABILITY OF WHICH, AGAI N, WOULD THE VALIDITY OF THE APPLICATION OF THE PROVISION (S.69B) DEPEND. AGAIN, THEREFORE, THE ASSESSEES BOOKS OF ACCOUNTS HAVING BEEN DULY CONSIDERED, WE DO NOT FIND OR CONS IDER THAT THERE IS ANY REQUIREMENT IN LAW FOR REJECTION OF ACCOUNTS PRIOR TO INVOCATION OF S. 69B. SECTION 69 AND SEC. 69B ARE, IN FACT, PARA MATERIA; THE LATTER BEING ONLY AN EXT ENSION OF THE FORMER . THIS IS AS IT WOULD BE CLEARLY DEFEATIVE OF THE LAW IF WHILE AN UNDISCL OSED INVESTMENT CAN BE BROUGHT TO TAX, A PARTLY UNDISCLOSED, NOT. ALL THAT ONE WOULD HAVE, T HEREFORE, TO DO IS THE RECORD THE INVESTMENT IN BOOKS AT LUDICROUSLY LOW, OR WHATEVER , VALUES; THE INVESTMENT BEING DISCLOSED, SO THAT IT COULD NOT BE BROUGHT TO TAX. INTRINSIC TO THE CONCEPT OF DISCLOSURE IS THE DISCLOSURE AT FULL VALUE, AND THIS IS WHAT S.69B IS TOWARD. THE LAW, PER THE SAID PROVISIONS, ITSELF CONTEMPLATES THAT THE ASSESSEES BOOKS OF AC COUNT, WHICH MUST ORDINARILY BE REGARDED AS A TRUE AND CORRECT RECORD (OF ALL THE T RANSACTIONS ENTERED INTO BY HIM), MAY NOT BE SO QUA ANY CREDIT (S. 68) AND DEBIT (.SS 69, 69A, 69B AND 69C) ENTRIES AND, ACCORDINGLY, EMPOWERS THE AO TO DEEM IT AS HIS INCOME WHERE, AND TO THE EXTENT, CONSIDERED AS NOT SATISFACTORILY EXPLAINED BY HIM. OF COURSE, THE ING REDIENTS OF THE SPECIFIC SECTIONS HAVE TO BE MET, WITH THE REVENUE REQUIRED TO DISCHARGE ITS BURDEN OF PROOF. THE TERM REJECTION OF BOOKS OF ACCOUNTS, IS A LOOSE, COMMON PARLANCE EXP RESSION, DENOTING AND CORRESPONDING TO THE AO BEING NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ASSESSEES ACCOUNTS, WHICH IS A PERQUISITE IF THE ASSESSMENT I S TO BE FRAMED UNDER S. 144 TO THE BEST OF THE JUDGMENT OF THE ASSESSING AUTHORITY (S. 145(3)) , I.E., OF INCOME FALLING UNDER THE HEAD OF INCOME PROFITS AND GAINS OF BUSINESS OR PROFESS ION OR INCOME FROM OTHER SOURCES, THE TWO SOURCES OF INCOME FOR WHICH THE BOOKS OF ACCOUN T IS MANDATED BY THE ACT, EXCEPT FOR SOME DEFINED EXCLUSIONS. CLEARLY, IF THE INCOME (FR OM A PARTICULAR SOURCE) IS TO BE ASSESSED BY NOT RELYING ON THE ASSESSEES BOOKS OF ACCOUNT MAINTAINED AND PRODUCED, THE AO HAS TO ISSUE A FINDING AS TO THEIR UNRELIABILITY FOR THE PURPOSE, AND IN TERMS OF THE STATED PARAMETERS THEREFOR, I.E., WHERE HE WISHES T O DISREGARD THE BOOK RESULTS. THE SCOPE OF THE SECTION IS DIFFERENT FROM THAT UNDER CHAPTER VI AGGREGATION OF INCOME AND SET OFF OF LOSS. WE ARE UNABLE TO SEE AS TO HOW THE REQUIR EMENTS OF TWO SEPARATE SECTIONS COULD BE JUXTAPOSED. THE BOOKS OF ACCOUNT ARE ONLY FOR CE RTAIN SOURCES OF INCOME, ON THE BASIS OF WHICH THE ASSESSEE DETERMINES HIS INCOME AND FIL ES HIS RETURN OF INCOME ACCORDINGLY. ITA NO.346 /COCH/2009 10 NON-ACCEPTANCE THEREOF; THE PRESUMPTION IN LAW BEIN G AS TO THEIR RELIABILITY, IS, THEREFORE, A PERQUISITE, IF THE SAME ARE NOT TO BE RELIED UPON A ND THE ASSESSMENT FRAMED ON BEST JUDGMENT BASIS, AND THE REQUIREMENT OF S. 145(3) I S TOWARD THE SAME. SS. 68 TO 69C, ON THE OTHER HAND, ARE NOT TOWARD ANY PARTICULAR SOURC E OF INCOME, AND THE ASSESSEES RELIANCE ON THE BOOKS OF ACCOUNTS IS ONLY IN EXPLANATION OF THE VERACITY OF THE RECORDED TRANSACTIONS, I.E., THE NORMAL RULE, THAT APPARENT IS REAL UNLESS PROVEN OTHERWISE BY THE PERSON WHO ALLEGES IT TO BE NOT SO IS DISPENSED WIT H, AS WHERE THE BOOKS FOR THE YEAR RECORD A CREDIT IN THE NAME OF ANOTHER PERSON (S. 6 8), AND AN OBLIGATION CAST ON THE ASSESSEE TO SHOW THAT, NOTWITHSTANDING SO, THE CRED IT, IN FACT, BELONGS TO SUCH OTHER PERSON, I.E., IS REQUIRED TO PROVE THE GENUINENESS OF THE T RANSACTION REFLECTED IN THE ACCOUNTS. SIMILARLY, WHERE THE REVENUE HAS EVIDENCE THAT THE INVESTMENT (MADE DURING THE YEAR) IS NOT RECORDED IN THE ASSESSEES BOOKS OF ACCOUNT, OR PARTIALLY RECORDED, THE DIFFERENCE, WHERE NOT SATISFACTORILY EXPLAINED, MAY BE DEEMED A S HIS INCOME. THAT IS, THE SAID SECTIONS REPRESENT SPECIFIC RULES OF EVIDENCE, STAT UTORILY MANDATED. IF THE BOOKS OF ACCOUNTS WERE THEMSELVES TO BE TAKEN AS A FINAL PRO OF OF THE TRANSACTIONS REFLECTED THEREIN, THE SAID SECTIONS WOULD NOT HOLD, AND NO ADDITION T HEREUNDER POSSIBLE [REFER: CIT V. S. KAMARAJA PANDIAN , 150 ITR 703 (MAD.)]. WHY, EVEN S. 145(3) ITSELF C ONTEMPLATES THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE MAY NOT BE CORRECT OR COMPLETE, OR OTHERWISE INCONSISTENT WITH THE ACCEPTED ACCOUNTING STANDARDS, SO THAT THE INCOME CANNOT BE ASSESSED ON THE BASIS THEREOF. THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS A RE, THUS, DEFINITE PIECES OF EVIDENCE, AND WOULD REQUIRE BEING CONSIDERED ON MERITS, AS AN Y OTHER, AND THERE IS NO REQUIREMENT IN LAW TO SEPARATELY IMPUGN THE SAME FOR THE PURPOSE O F INVOKING THE PROVISIONS OF S. 68 TO 69C; THE SAME BEING IMPLIED IN THE APPLICATION OF T HE SAID SECTIONS, THE INGREDIENTS OF WHICH STAND, INCLUDING THE ISSUE OF FINDING BY THE ASSESSING AUTHORITY, SPECIFIED THEREIN. IN FACT, IN THE WIDE VARIETY OF EVENTS IN THE ECONOMIC SPHERE, AND THE PECULIAR FACTS AND CIRCUMSTANCES OF EACH CASE, THE SAID IMPUGNING IS I TSELF NOT A CRITERION BUT ONLY INCIDENTAL. IT MAY WELL BE THAT THE SECTION (SS. 68 TO 69C) BEC OME APPLICABLE DESPITE THE BOOKS BEING NOT UNTRUE. TAKE, FOR EXAMPLE, A CASE WHERE THE AS SESSEE IS FOUND TO BE THE OWNER OF A VALUABLE OR INVESTMENT WHICH HAS BEEN ACQUIRED BY H IM OUT OF HIS PAST, UNDISCLOSED INCOME OR STANDS GIFTED TO HIM BY ANOTHER FROM THE DONORS UNDISCLOSED INCOME. IF THE ASSESSEE IS UNABLE TO PROVE THE ACQUISITION IN A DI FFERENT YEAR OR THE GIFT FROM ANOTHER ITA NO.346 /COCH/2009 11 PERSON, AS THE CASE MAY BE, THE SAME WOULD STAND TO BE INCLUDED IN HIS INCOME, THOUGH IT MAY HAVE, IN REALITY, NOTHING TO DO WITH HIS CURREN T YEARS BUSINESS. IT IS PERHAPS FOR SUCH LIKE SITUATIONS THAT IT IS OFTEN SAID THAT EQUITY A ND TAXATION ARE STRANGE BED-FELLOWS AND DO NOT ALWAYS GO HAND IN HAND. IN OTHER WORDS, THE APPLICABILITY OF THE SAID SECT IONS AND THE IMPUGNING OF THE BOOKS OF ACCOUNT ARE NOT NECESSARILY LINKED TO EACH OTHER. THE LAW CONTEMPLATES NO SUCH REQUIREMENT, WHICH HAS ONLY BEEN IMPUTED BY THE ASS ESSEE, THOUGH WHERE THE BOOKS OF ACCOUNTS ARE RELIED UPON, THE AO HAS TO NECESSARILY CONSIDER THE SAME ON MERITS, AND STATE AS TO WHY THE BOOKS OF ACCOUNTS ARE NOT RELIABLE, O R DESPITE SO, THE SECTION IS STILL INVOCABLE UNDER THE CIRCUMSTANCES. THE MATTER IS CLEARLY AN D ESSENTIALLY FACTUAL. 4.4 FURTHER ON, IN THE FACTS OF THE CASE, WE FIND T HAT THE VO HAS CONSIDERED THE BOOKS OF ACCOUNT AT PARA 1.1 OF HIS REPORT UNDER THE HEADING THE METHOD ADOPTED, STATING THEREIN AS TO WHY THE `ACCOUNTING METHOD IS NOT ADOPTED BY HIM. AGAIN, HE HAS ALLOWED A SELF- SUPERVISION REBATE AT 7.5% (ON THE GROSS COST OF ` 69.62 LAKHS), I.E., AT ` 5.23 LAKHS, AND ONLY ON THE BASIS OF THE RECORDS/DOCUMENTS PRODUCED BY THE ASSESSEE EVIDENCING DIRECT ENGAGEMENT OF MATERIALS AND LABOUR (REFER PARA 9 OF THE VOS REPORT), AND WHICH THE AO FOUND REASONABLE; THE ASSESSEE CLAIMING THE SAME BE FORE HIM AT ` 10 LAKHS. SIMILARLY, HE HAS ALLOWED ANOTHER DEDUCTION AT ` 6.20 LAKHS FOR USING GOODS OF INFERIOR SPECIFICATIO N, I.E., WHEN COMPARED WITH THE CBDT APPROVED CENTRAL PUBLIC WORKS DEPARTMENT (CPWD) SPECIFICATION SCHEDULE, AND FOR PROCURING CEMENT A ND STEEL DIRECTLY AT CHEAPER RATES (REFER: PARA 7 ANNEXURE B TO THE VOS REPORT). SURELY, THI S REDUCTION IS ONLY ON THE STRENGTH OF THE BOOKS OF ACCOUNT AND OTHER MATERIALS PRODUCED B Y THE ASSESSEE, AND WHICH HAS ALSO BEEN CONSIDERED BY THE AO. CLEARLY, THEREFORE, IT CANNOT BE SAID THAT NO RELIANCE HAS BEEN PLACED BY THE REVENUE AUTHORITIES IN ASSESSING THE VALUE OF THE INVESTMENT, AND IN ADOPTING THE SAME, ON THE ASSESSEES BOOKS OF ACCOU NTS AND OTHER SUPPORTING DOCUMENTS. (ALSO REFER PARA 7 OF THIS ORDER). 4.5 IN VIEW OF THE FOREGOING, THE ASSESSEES C ONTENTION IS NEITHER VALID LEGALLY OR IN THE FACTS OF THE CASE; THE BOOKS HAVING BEEN FOUND RELE VANT, THOUGH NOT BEARING THE FULL COST OF CONSTRUCTION. ITA NO.346 /COCH/2009 12 5. WE, NEXT, CONSIDER THE ASSESSEES OBJECTION THAT THE VALUATION HAS BEEN MADE ON THE BASIS OF CENTRAL PUBLIC WORKS DEPARTMENT (CPWD) RAT ES RATHER THAN THE KERALA PWD RATES, AND FOR WHICH RELIANCE IS PLACED ON THE DECI SION IN THE CASE OF ASST. CIT VS. UNNIAMMA ANDREW (IN I.T.A. NO. 487/COCH/2004 DATED 4.8.2005), WHER EIN THE TRIBUNAL HAS RELIED ON THE DECISION BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. DINESH TALWAR , 265 ITR 344 (RAJ.) AND CIT V. ELEGANT HOMES (P) LTD. , 259 ITR 232 (RAJ.). THE TRIBUNAL HAS DIRECTED THE EMPLOYMENT OF KERALA PWD RATES SUBJECT TO THE COST OF CONSTRUCTION NOT FALLING BELOW THAT DECLARED BY THE ASSESSEE. WE FIND THAT THIS ASPECT HAD BEEN DEALT WITH AT LENGTH BY THE DVO AT PARA 6 `RATES OF HIS REPORT. THE STATE PWD HAS NOT PUBLISHED ANY PLINTH AREA RATES FOR W ORKING OUT THE COST OF CONSTRUCTION. ONLY TECHNICAL CIRCULARS STAND ISSUED BY THE CHIEF ENGINEER, KERALA PWD, FOR WORKING OUT THE FAIR MARKET RENT FOR GOVERNMENT ACCOMMODATION. FURTHER, THERE ARE NO WELL-DEFINED SPECIFICATIONS OF CONSTRUCTION IN THE STATE PWD CIR CULARS, SUCH AS FOUNDATION, PLINTH HEIGHT; FLOOR HEIGHT; BEARING CAPACITY OF THE SOIL, TYPE OF DOORS, WINDOWS; TYPE OF FITTINGS, ETC.. THE RATES ISSUED ARE WITHOUT SPECIFICATIONS, AND SUBJECT TO ARBITRARY INCREASES FROM TIME TO TIME. THE ADOPTABILITY OF SUCH RATES IS, T HEREFORE, VERY LIMITED. THE CPWD RATES BY THE GOVERNMENT OF INDIA ARE WORKED SCIENTIFICALL Y BY ADOPTING THE MATERIAL AND LABOUR RATES AS PREVAILING AT A PARTICULAR PLACE AT A PART ICULAR TIME, AND BEAR EXHAUSTIVE SPECIFICATIONS. FURTHER, THESE RATES CANNOT BE CON SIDERED AS DELHI PLINTH AREA RATES AND, FURTHER, ARE SUBJECT TO ADJUSTMENTS ON THE BASIS OF SPECIFICATIONS OF THE SUBJECT PROPERTY, AS DONE BY HIM AT PARA 7 OF HIS REPORT, ALLOWING DEDUC TIONS AGGREGATING TO ` 21.89 LAKHS (REFER PARA 10 OF THE ABSTRACT OF COST/PB PG. 39). ALSO, HE HAS EXPRESSED HIS INABILITY TO APPRECIATE THE BASIS ON WHICH THE PLINTH AREA RATES OF ` 3900/- TO ` 4700/- HAVE BEEN ADOPTED BY THE REGISTERED VALUER, EVEN AS THE EFFEC TIVE PLINTH AREA RATE, I.E., AFTER FACTORING IN THE DEDUCTIONS, WHICH IS ONLY TOWARD MATERIAL AN D LABOUR RATES, WOULD WORK OUT TO MUCH LESS, IN LINE WITH THAT ADOPTED BY THE REGISTERED V ALUER. FURTHER, THE SPECIFIC FINDINGS BY A TECHNICAL EXPERT HAVE NOT BEEN CONTROVERTED BY THE ASSESSEE AT ANY STAGE, INCLUDING BEFORE US, THE SECOND APPELLATE AUTHORITY. IN THE CASE OF MEDICAL TRUST HOSPITAL V. ITO (IN ITA NOS. 306 TO 308/COCH/2003 DATED 01/2/2011), IT HAS BEEN, AFTER FACTUALLY EXAMINING THE MATTER, HELD BY THE TRIBUNAL (COCHIN BENCH) THAT TH E KERALA PWD RATES ARE ONLY FOR ITA NO.346 /COCH/2009 13 DETERMINING FAIR MARKET RENT AND, IN FACT, ARE NOT APPLICABLE TO RCC FRAMED STRUCTURES (BEARING RCC BEAMS, COLUMNS AND SLABS). IN VIEW OF THE FOREGOING, WE FIND NO MERIT IN THE ASSESSEES GRIEVANCE QUA NON-ADOPTION OF THE KERALA PWD RATES. WE DECIDE ACCORDINGLY, DISPOSING THE SECOND LIMB OF THE ASSES SEES GROUND # 4. 6. THE LAST ISSUE QUA THE IMPUGNED ADDITION RAISED BY THE ASSESSEES APP EAL IS IN RESPECT OF CONSIDERATION OF THE ENTIRE EXCESS INVES TMENT AS FOR THE RELEVANT ASSESSMENT YEAR, PER GD. # 3. WE FIND THE SAME AS VALID. SEC TION 69B MANDATES THE DEEMING OF UNEXPLAINED INVESTMENT MADE DURING A PARTICULAR YEA R AS THE ASSESSEES INCOME FOR THAT YEAR. AS SUCH, THERE IS NO SCOPE WHATSOEVER TO TRE AT THE ENTIRE UNEXPLAINED INVESTMENT AS HAVING BEEN MADE DURING THE CURRENT YEAR. THE ASSES SEES BOOKS OF ACCOUNT CLEARLY SHOW THE INVESTMENT AS BEING MADE SINCE F.Y. 1997-98. T HOUGH LABOUR, WHICH ONLY WOULD CONVERT MATERIAL INTO `CIVIL CONSTRUCTION, STANDS EXPENDED IN NO INSIGNIFICANT MANNER ONLY FROM F.Y.1999-2000 ONWARDS, THAT WOULD NOT BE OF MU CH CONSEQUENCE AS CONSTRUCTION CAN BE CONSIDERED AS COMMENCED FROM THAT YEAR. THE VAL UATION REPORT STATES THE PERIOD OF CONSTRUCTION AS FROM SEPTEMBER, 1999 (TO MARCH, 200 2). NEVERTHELESS, THE INVESTMENT MADE DURING F.YS. 1997-98 AND 1998-99 WOULD HAVE TO BE CONSIDERED AS IN THOSE YEARS. THIS ASPECT HAS BEEN RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) VIDE GROUND NO. 10 OF ITS GROUNDS OF APPEAL BEFORE HIM, THOUGH HAS NOT BE EN ANSWERED BY HIM VIDE HIS ORDER. THE MATTER BEING FACTUAL, WE ONLY CONSIDER IT FIT A ND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO TO CONSIDER, ON THE BASIS OF THE EVIDENCE/S LED BY THE ASSESSEE, THE %AGE (OF THE TOTAL CONSTRUCTION) UP TO 31.3.2001, I.E., PRIOR TO THE COMMENCEMENT OF THE CURRENT PREVIOUS YEAR, AND ALLOW THE ASSESSEE PROPORTIONATE REDUCTION. THAT IS, IF IT IS FOUND THAT X % OF THE CONSTRUCTION IN THE FIRST PHASE (I.E., UP TO 31.3.2002) HAS BEEN COMPLETED UP TO 31.3.2001, I.E., PHYSICALLY, THE ASSESSED COST OF C ONSTRUCTION FOR THE YEAR HAS TO BE TAKEN AT (100-X)% ONLY. REDUCING THERE-FROM THE COST OF CONS TRUCTION AS REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT AS ON 31.3.2001, WOULD YIELD THE I NVESTMENT MADE DURING THE YEAR AND, THUS, THE EXTENT TO WHICH IT IS NOT REFLECTED IN TH E BOOKS OF ACCOUNT. THIS IS STATED BY WAY OF AN EXAMPLE, AND THIS X% MUST BE CONSIDERED IN TE RMS OF THE EQUIVALENT COST (OF THE ENTIRE CONSTRUCTION), AS IT MAY WELL BE THAT THE PE RCENTAGE HAS TO BE WORKED OUT SEPARATELY FOR EACH AREA OF CONSTRUCTION, SO THAT THE X% IS DI FFERENT FOR DIFFERENT ASPECTS OF ITA NO.346 /COCH/2009 14 CONSTRUCTION AND, RESULTANTLY, REQUIRED TO BE WORKE D OUT SEPARATELY. FURTHER, BEING A TECHNICAL MATTER, IT WOULD BE PREFERABLE TO, AS IN THE FIRST INSTANCE, REFER THE MATTER TO THE VO, BEING ESSENTIALLY ONLY IN CONTINUATION OF THE S AME; THE PREMISE OF THE WHOLE EXERCISE BEING TO OBTAIN AS CLOSE AND AS CORRECT AN ESTIMATI ON OF THE ACTUAL INVESTMENT MADE BY THE ASSESSEE DURING THE RELEVANT YEAR AS POSSIBLE UNDER THE CIRCUMSTANCES, AND WHICH WOULD DEPEND IN GOOD MEASURE ON THE CREDIBLE EVIDENCES LE D BY THE ASSESSEE, WHO SHALL BE HEARD IN THE MATTER. FURTHER, CONSTRUCTION BEING AN ON-GO ING PROCESS, IT MAY BE THAT SOME MATERIAL STANDS PROCURED UP TO MARCH 2001, AND IN R ESPECT OF WHICH THE CONSTRUCTION WORK IS CARRIED OUT SUBSEQUENTLY, I.E., DURING F.Y. 2001 -02, THE RELEVANT PREVIOUS YEAR, I.E., THERE IS SOME UNUSED MATERIAL AT SITE AS ON 31.3.2001, WH ICH IS BOUND TO BE. THOUGH THE SAME WOULD DEFINITELY NOT ENTER IN THE RECKONING OF THE X%, I.E., THE PHYSICAL CONSTRUCTION UP TO 31/3/2001, PROPORTIONATE REDUCTION FOR THE MATERIAL PURCHASED HAS TO BE ALLOWED, AS THE INVESTMENT HAS BEEN MADE PRIOR TO THE COMMENCEMENT OF THE RELEVANT PREVIOUS YEAR. ALSO, IT WOULD NOT MATTER IF THE LIABILITY ARISING AGAINS T THE SAID MATERIAL HAS BEEN DISCHARGED BY THE ASSESSEE OR NOT; THE FACT OF PURCHASE ITSELF AM OUNTING TO INCURRING OF EXPENDITURE TOWARD THE INVESTMENT. WE DECIDE ACCORDINGLY. 7. WE MAY FINALLY ADVERT TO THE CASE LAW RELIED UPO N BY THE ASSESSEE, I.E., TO THE EXTENT NOT ALREADY CONSIDERED IN THE FOREGOING DISCUSSION, EVEN THOUGH THE SAME STAND ALREADY PERUSED. THE FIRST IS THE DECISION IN THE CASE OF CIT VS. PRATAPSINGH AMROSINGH RAJENDRA SINGH AND DEEPAK KUMAR, 200 ITR 788 (RAJ.), HOLDING REFERENCE TO VO IN VIE W OF THE PROPER BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, INVALID. THE SAID DECISION IS DISTINGUISHABLE ON FACTS QUA SEVERAL GROUNDS. FIRSTLY, IS THE FINDING BY THE V O THAT PROPER BOOKS OF ACCOUNT HAVE NOT BEEN MAINTAINED, AND WHIC H HE CITES AS THE REASON FOR NOT FOLLOWING THE ACCOUNTING METHOD. IN FACT, THE FULL DETAILS OF MEASUREMENTS AND DETAILED DRAWINGS WERE ALSO NOT MADE AVAILABLE, WITH REFEREN CE TO WHICH ONLY THE ESTIMATE OF QUANTITIES OF VARIOUS ITEMS COULD BE VERIFIED WITH THE BILLS/VOUCHERS, AND WHICH WERE ALSO NOT SUBMITTED, IMPELLING THE ADOPTION OF THE THIRD PLINTH AREA RATE METHOD. IN FACT, THE VALUATION REPORT (BY THE REGISTERED VALUER) OBTAINE D BY THE ASSESSEE IN RESPECT OF ITS CONSTRUCTION UP TO 31.3.2002, ITSELF WORKS OUT THE ESTIMATE OF COST AT ` 44.55 LAKHS, AS AGAINST THE BOOK FIGURE OF ` 36.13 LAKHS (ALSO REFER PARA 4.4). THE HONBLE JURISDICTIONAL ITA NO.346 /COCH/2009 15 HIGH COURT IN THE CASE OF CIT V. MEDICAL TRUST HOSPITAL (IN ITA NOS. 626, 663, 676 & 1050 OF 2009 DATED 10.11.2009), REVERSING THE ORDER OF T HE TRIBUNAL, UPHELD THE REOPENING OF THE ASSESSMENT ON THE BASIS OF THE DVOS REPORT, AND DI RECTED THE TRIBUNAL TO DECIDE THE APPEAL ON MERITS, I.E., BY CONSIDERING THE ASSESSEES CLAI M ON FACTS. SIMILAR VIEW STANDS EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF BAWA ABHAI SINGH V. DY. CIT , 253 ITR 83 (DEL.). THE SECOND DECISION RELIED UPON IS CIT VS. V.A. OLI MOHAMMED, 296 ITR 570 (MAD.). THE SAID DECISION IN FACT SUPPORTS THE REVENUES CASE IN-AS-MUCH AS THE ASSESSMENT IN THIS CASE TOO WAS UNDER S. 143(3) R.W .S. 147, I.E., AS IN THE INSTANT CASE. SECONDLY, THE HONBLE COURT UPHELD THE INVOCATION O F THE SECTION AND DIRECTED TO SPREAD THE EXCESS COST OF CONSTRUCTION OVER THE CONSTRUCTION P ERIOD. WE HAVE, LIKEWISE, DIRECTED FOR APPROPRIATE RELIEF, RESTORING THE MATTER, BEING FAC TUAL, TO BE DETERMINED ON THE EXAMINATION OF THE RELEVANT FACTS, SO THAT OUR DECISION GETS EN DORSED BY THE SAID DECISION. THE DECISION BY THE TRIBUNAL IN THE CASE OF ITO V. AGENCIES RAJASTHAN (P.) LTD ., 117 TTJ (JP.) 542 ALSO SUPPORTS THE SAID VIEW. THE DECISION QUA ADOPTION OF STATE PWD RATES STANDS ALREADY CONSIDERED WHILE ANSWERING THE ASSESSEES RELEVANT GROUND/S (ALSO REFER PARA 5). 8. THE FIFTH AND THE LAST GROUND, WHICH IS IN RESPE CT OF LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT, WAS NOT PRESSED AT THE TIME OF HEA RING. THE SAME IS EVEN OTHERWISE MANDATORY AND CONSEQUENTIAL. ACCORDINGLY, THE GROUN D IS DISMISSED. 9. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 31ST MAY, 2011 GJ COPY TO: 1. M/S. SANTHWANA HOSPITAL PVT. LTD. PERUMPALLIL BU NGALOW, VAYILAKADU, KOWDIAR, TRIVANDRUM 695 003. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1( 1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. ITA NO.346 /COCH/2009 16