Govind Kharkwal, Uttrakhand V. ITO, Uttrakhand

ITA 36/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74311 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH SENIOR
• Keywords: Opportunity of being heard; Principle of natural justice; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.36/DEL./2013 (ASSESSMENT YEAR : 2009-10) SHRI GOVIND KHARQWAL, VS. INCOME TAX OFFICER, KHARQWAL ENTERPRISES, KHATIMA. BAREILLY ROAD, TANAKPUR. (PAN : AERPK8519F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE AND SHRI V. RAJA KUMAR, ADVOCATE REVENUE BY : SHRI SATPAL SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-II, DEHRADUN. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE SALE OF CEMENT AND STEEL OF VARIOUS COMPANIES. THE ASSESSEE ALSO DEALS IN T HE BUILDING MATERIAL INCLUDING TILES, WATER TANKS, ETC. THE RETURN OF INCOME WAS FILED ON 30.09.2009 DECLARING INCOME AT RS.6,08,240/-. THE ASSESSING OFFICER MA DE AN ADDITION OF RS.8,50,000/- ON ACCOUNT OF UNDISCLOSED INVESTMENTS IN THE BUILDI NG CONSTRUCTION. THE ASSESSEE HAS REFLECTED THE COST OF CONSTRUCTION AS ON 01.04. 2008 AT RS.3,57,070/- AND ADDITION DURING THE YEAR OF RS.6,07,299/-. THUS, THE TOTAL INVESTMENT IN THE CONSTRUCTION OF ITA NO.36/DEL./2013 2 RESIDENTIAL BUILDING WAS RS.9,64,369/- AS ON 31.03. 2009. THE SOURCE OF INVESTMENT WAS REFLECTED AS HOUSING LOAN FROM STATE BANK OF IN DIA OF RS.20,44,000/-. THE ASSESSING OFFICER REFERRED THE MATTER TO THE VALUAT ION CELL AND AS PER VALUATION REPORT, THE TOTAL INVESTMENT IN THE CONSTRUCTION OF THE HOUSE WAS ESTIMATED AT RS.69,17,655/- WHICH WAS DIVIDED INTO FOUR FINANCIA L YEARS UP TO 31.03.2011. THE TOTAL COST OF CONSTRUCTION TILL 31.03.2009 WAS ESTI MATED AT RS.18,31,766/-. THE ASSESSEE REFLECTED THE COST OF CONSTRUCTION ONLY OF RS.9,64,369/-. THUS, THERE WAS A VARIATION OF RS.8,67,397/-. THE ASSESSEE SUBMITTED THE EXPLANATION THAT THE ASSESSEE IS PROPRIETOR OF M/S. KHARQWAL ENTERPRISES DEALING IN BUILDING MATERIAL AND MOST OF THE ITEMS ARE USED IN THE CONSTRUCTION OF HOUSE AND ALL MATERIAL USED IN THE BUILDING WAS AVAILABLE AT THE COST PRICE WHICH IS MUCH BELOW THE PREVALENT MARKET RATES. AS PER ASSESSING OFFICER, THE ASSESSEE WAS NOT ABLE TO PROVIDE JUSTIFICATION AND SURRENDERED THE AMOUNT OF RS.8,50,000/- IN THE COST OF BUILDING CONSTRUCTION AS NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE CIT (A) CON FIRMED THE ADDITION. 3. NOW, THE ASSESSEE IS IN APPEAL BY TAKING THE FOL LOWING GROUNDS OF APPEAL :- 1. THE LD INCOME TAX OFFICER (ITO) HAS ERRED IN LAW AND IGNORING FACTS WHILE COMPLETING ASSESSMENT U/S 143( 3) OF THE ACT AND HAS MADE ADDITIONS/DISALLOWANCES. 2. THE LD ITO HAS ADDED THE INVESTMENT IN HOUSE PRO PERTY IGNORING FACTS HAS MADE ADDITION SIMPLY BASED ON TH E REPORT OF THE DEPARTMENT VALUATION OFFICER (DVO). 3. THE LD ITO MISSED TO NOTE AND FAILED TO APPRECIA TE THAT THE REPORT OF THE DVO DATED 12-12-2011, AND RECEIVED TH EREAFTER WITHOUT APPELLANT HAVING ANY TIME TO OBJECT ON THE SAME. 4. THE LD ITO HAS MADE ADDITIONS/ DISALLOWANCES WIT HOUT GIVING THE APPELLANT PROPER OPPORTUNITY OF BEING HEARD. ITA NO.36/DEL./2013 3 5. THE LD ITO MISSED TO NOTE & FAILED TO APPRECIATE THAT THE APPELLANT IS A TRADER IN BUILDING MATERIAL AND THE EFFECTIVE COST OF CONSTRUCTION IS DEFINITELY LESS, AND THAT THE RATES APPLIED BY DVO ARE THAT OF CPWD INSTEAD OF PWD. 6. THAT THE ORDER IS BAD IN LAW AND NOT AGREEMENT W ITH THE FACTS AND IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 7. BESIDES THE ABOVE GROUNDS THE APPELLANT CRAVES T O TAKE ANY ADDITIONAL GROUND IN THE CIRCUMSTANCES OF THE MATTE RS. 4. WHILE PLEADING ON BEHALF OF THE ASSESSEE, LD. AR SUBMITTED THAT THE ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNT FOR ITS BU SINESS. THE VALUATION REPORT PREPARED BY THE DVO WAS BASED ON CPWD RATES WHILE T HE BUILDING IS SITUATED IN SMALL TOWN LIKE TANAKPUR. THEREFORE, THE CPWD RATE S SHOULD NOT HAVE BEEN APPLIED AND ONLY THE PWD RATES SHOULD HAVE BEEN APP LIED. HE RELIED ON THE DECISION OF ITAT, BENCH 'D', NEW DELHI IN THE CASE OF SHEKHAR CHAND JAIN & SONS VS. INSPECTING ASSISTANT COMMISSIONER IN ITA NO.431 4/DEL/1987 ORDER DATED 08.09.1988 WHEREIN IT IS HELD THAT WHERE THE FIGURE S OF COST OF CONSTRUCTION OF BUILDING WERE SUPPORTED BY THE REGISTERED VALUER BA SED ON THE RATE OF PWD OF CONCERNED AREA, NO ADDITION WAS CALLED FOR ON THE B ASIS OF REPORT OF DVO BASED ON CPWD RATES. HE ALSO PLEADED THAT IN THE IN THE SAM E ORDER, THE ITAT ALSO HELD THAT MOREOVER THE CONSTRUCTION WORK DONE BY PRIVATE INDI VIDUALS PARTICULARLY ONE IN TRADE IN THE SAME TOWN, IS MUCH CHEAPER THAN THE CO ST TO THE GOVERNMENT OR SIMILAR WORKS. HE FURTHER SUBMITTED THAT THE HON'BLE SUPRE ME COURT IN THE CASE OF NARAYAN BHAGWANTRAO GOSAVI BALAJIWALE VS. GOPAL VINAYAK GOS AVI & ORS. REPORTED IN AIR 1960 SUPREME COURT 100 HAS HELD IN PARA 11 THAT AN ADMISSION IS THE BEST EVIDENCE THAT AN OPPOSING PARTY CAN RELY UPON, AND THOUGH NO T CONCLUSIVE, IS DECISIVE OF THE ITA NO.36/DEL./2013 4 MATTER, UNLESS SUCCESSFULLY WITHDRAWN OR PROVED ERR ONEOUS. THE ASSESSEE HAS PROVED THAT THE ADMISSION WAS ERRONEOUS AS THE VALU ATION IS MADE ON THE BASIS OF CPWD RATES AND NO DEDUCTION WAS ALLOWED FOR THE ASS ESSEE WHO WAS ENGAGED IN THE SAME TRADE OF SMALL TOWN. HE FINALLY PLEADED TO RE STORE THE ISSUE TO THE FILE OF THE AO DECIDE DE NOVO. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE SIDES. AFTER HEARING BOT H THE SIDES, WE FIND THAT THE VALUATION REPORT IS MADE ON THE BASIS OF CPWD RATES WHILE THE BUILDING IS SITUATED IN A SMALL TOWN LIKE TANAKPUR AND THE ASSESSEE HIMS ELF IS ENGAGED IN THE BUSINESS OF BUILDING MATERIAL, THEREFORE, WE FIND IT APPROPRIAT E TO HOLD THAT IN THE INTEREST OF JUSTICE AND EQUITY, THIS CASE NEEDS TO BE RE-LOOKED AT THE LEVEL OF ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO BE DECIDED DE NOVO AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF MARCH, 2014. SD/- SD/- (A.T. VARKEY) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF MARCH, 2014/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-II, DEHRADUN. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.