Sri Rajesh Kumar, Guntur V. The ACIT, Circle-1(1)., Guntur

ITA 373/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0665 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Principle of natural justice
• Section: 6

Judgement Text

ITA NO. 221 /VIZAG/2007 RAJESH KUMAR, GUNTUR PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.221 & 373/VIZAG/2007 ASSESSMENT YEAR: 2003-04 AND 2004-05 RAJESH KUMAR, GUNTUR ACIT, CIRCLE-1(1) GUNTUR (APPELLANT) PAN NO: ABAPV 6762 B VS. (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A), GUNTUR AND THEY RELATE TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. SINCE THE ISSUES AGITATED IN THESE TWO APPEALS ARE BASED ON COMMON SET OF FACTS, THEY WERE HEARD TOGET HER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ADDITION MADE ON ACCOUNT OF THE DIFFERENCE IN COST OF CONSTRUCTION WAS DELETED BY LEARNED CIT(A) PARTIALLY. STILL AGG RIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE ASSESSEE REPORTED THE COST OF CONSTRUCTI ON OF THE BUILDING AT RS.3,86,843/- AND RS.7,39,368/- RESPECTIVELY FOR TH E ASSESSMENT YEARS 2003-04 AND 2004-05. THUS THE AGGREGATE COST DISCL OSED BY THE ASSESSEE WORKED OUT TO RS.11,26,211/-. THE DVO DETERMINED T HE COST AT RS.18,36,193/- RESULTING IN A DIFFERENCE OF RS.7,09 ,982/-. THE SAID DIFFERENCE WAS ADDED BY THE ASSESSING OFFICER U/S 6 9B OF THE ACT IN TWO ITA NO. 221 /VIZAG/2007 RAJESH KUMAR, GUNTUR PAGE 2 OF 4 YEARS IN PROPORTION TO THE COST OF CONSTRUCTION DIS CLOSED BY THE ASSESSEE AS UNDER: ASSESSMENT YEAR 2003-04 RS.2,43,871/- ASSESSMENT YEAR 2004-05 RS.4,66,111 THE LEARNED CIT(A) GAVE PARTIAL RELIEF BY ENHANCING THE DEDUCTION MADE FOR PERSONAL SUPERVISION FROM 7.5% TO 10%. 4. THE SUBMISSION OF LEARNED COUNSEL FOR THE AS SESSEE IS THAT TAX AUTHORITIES HAVE NOT GIVEN DEDUCTION OF 15% WHICH I S USUALLY GIVEN FOR THE DIFFERENCE IN RATES OF MATERIALS AND FURTHER THEY H AVE NOT TAKEN COGNIZANCE OF RS.1.00 LAC SPENT BY THE ASSESSEE IN THE FINANCI AL YEAR RELEVANT FOR THE ASSESSMENT YEAR 2005-06. LEARNED A.R. FURTHER SUBMI TTED THAT THE DIFFERENCE IN COST OF CONSTRUCTION, ON BEING GIVEN EFFECT TO THE ABOVE TWO ITEMS, WORKS OUT TO A SMALLER FIGURE WHICH MAY BE I GNORED. ACCORDINGLY HE PRAYED FOR THE DELETION OF ENTIRE ADDITION MADE BY THE ASSESSING OFFICER. WE HAVE ALSO HEARD LEARNED DEPARTMENTAL REPRESENTAT IVE IN THIS REGARD. 5. THE CLAIM OF DEDUCTION FOR RS.1.00 LAC SPENT IN THE SUCCEEDING YEAR WAS NOT MADE BEFORE THE ASSESSING OFFICER AND THE L EARNED CIT(A) ALSO DID NOT ACCEPT THE SAID CLAIM AS THE SAME WAS NOT MADE IN ACCORDANCE WITH THE PROCEDURE PRESCRIBED UNDER RULE 46A OF THE INCOME T AX RULES. EVEN BEFORE US, THE ASSESSEE DID NOT FILE ANY EVIDENCE IN SUPPO RT OF THE SAID CLAIM. HENCE WE ARE UNABLE TO ACCEPT THE SAID CLAIM AND AC CORDINGLY REJECT THE SAME. 6. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS C LAIMED THAT THE DVO HAS ADOPTED THE CONSTRUCTED AREA AT A HIGHER FIGURE. H OWEVER, WE NOTICE FROM THE ASSESSMENT ORDER THAT THE DVO HAS REPLIED ON TH AT POINT BY STATING THAT HE HAS ADOPTED DIFFERENT RATES FOR DIFFERENT TYPE O F CONSTRUCTION, I.E. SUITABLE REDUCTION WAS GIVEN FOR THE UTILITY AREAS WHICH NOR MALLY DO NOT REQUIRE ITA NO. 221 /VIZAG/2007 RAJESH KUMAR, GUNTUR PAGE 3 OF 4 HEAVY CONSTRUCTION. HOWEVER, WE NOTICE THAT THE AS SESSEE HAS NOT ADDRESSED THE REPLY OF THE DVO IN A CONVINCING WAY AND HENCE WE REJECT THE GROUND RAISED ON THAT POINT ALSO. 7. THE LEARNED A.R. HAS REQUESTED FOR A DEDUCTI ON OF 15% TOWARDS THE DIFFERENCE IN THE RATES OF MATERIALS BETWEEN DELHI AND THE GUNTUR, WHERE THE RATE OF MATERIALS ARE EXPECTED TO BE LOW. HOWE VER, IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT MADE THE SAID CLAIM BEFORE THE TAX AUTHORITIES. WITH REGARD TO THE RATES ADOPTED BY T HE DVO, IT IS PERTINENT TO EXTRACT THE COMMENTS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 BELOW. COST OF CONSTRUCTION IS ARRIVED BASED ON PLINTH AR EA RATES 1992 APPROVED BY CBDT AND DULY ENHANCED BY APPROVED WEIGHTED COST INDEX PREVAILING DURING THE PERIOD OF CONSTRUCTION IN HYDERABAD. THE BASIC COST INDEX APP LICABLE TO PLINTH AREA RATES IS 100 AS ON 1992. THESE RATES AR E APPLICABLE TO ANY PLACE WITH COST INDEX 100. IF THE COST INDEX IS DIFFERENT FROM 100, THE PLINTH AREA RATES ARE TA KEN IN THE RATIO OF COST INDEX APPLICABLE FOR THE LOCATION AND 100. THUS, THE PLINTH AREA RATES ARE INDEPENDENT OF THE PLACE, TIME AND PERIOD. THEY ARE DEPENDENT ON BASIC RATES OF MATERI ALS AND LABOUR IN WORKING OUT PLINTH AREA RATES. THUS THE R ATES ADOPTED FOR WORKING OUT THE COST OF CONSTRUCTION AR E VERY REALISTIC FOR THE PARTICULAR PLACE AND A PERIOD OF CONSTRUCTION. THE RATES ADOPTED IN THE PRESENT CASE DO NOT RELATE TO THE RATES OF DELHI. GOVT. OF INDIA PLINTH AREA RATES 19 92 APPROVED BY THE C.B.,D.T. DULY ENHANCED BY THE APPROPRIATE C OST INDEX APPLICABLE FOR THE PLACE AND PERIOD OF CONSTRUCTION OF GUNTUR WERE ADOPTED BY HIM. THUS, ACCORDING TO THE ASSESSING OFFICER, THE METHO DOLOGY ADOPTED BY THE DVO TAKES CARE OF THE DIFFERENCE IN THE RATES OF MA TERIAL. HOWEVER, FROM THE OBSERVATIONS OF THE ASSESSING OFFICER, WE NOTIC E THAT THE DVO SEEMS TO HAVE ARRIVED AT THE RATES FOR HYDERABAD. IN THE IN STANT CASE, THE CONSTRUCTION HAS TAKEN PLACE AT GUNTUR. FURTHER T HE ASSESSING OFFICER HAS NOT HIGHLIGHTED THE COST INDEX DIFFERENCE BETWEEN T HE DELHI RATES AND ITA NO. 221 /VIZAG/2007 RAJESH KUMAR, GUNTUR PAGE 4 OF 4 GUNTUR RATES. IN THESE CIRCUMSTANCES, IN THE INTER EST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT A REDUCTION OF 10% TOWARDS THE DIFFERENCE IN THE RATE OF MATERIALS WOULD MEET THE ENDS OF JUSTICE AND WE ORDER ACCORDINGLY. THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE DIF FERENCE IN COST OF CONSTRUCTION FOR BOTH THE YEARS BY GIVING A DEDUCTI ON OF 10% ON THE COST DETERMINED BY THE DVO TOWARDS THE DIFFERENCE IN THE RATE OF MATERIALS. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR B OTH THE YEARS ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30.06.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 30 TH JUNE, 2010 COPY TO 1 SHRI RAJESH KUMAR, PROP. OF M/S KUMAR SPICES D.NO .23-10-11, BANDALA BAZAR, GUNTUR 522 003 2 THE ACIT, CIRCLE-I (1), INCOME TAX OFFICE, CR BUI LDINGS, KANNAVARITHOTA, GUNTUR 522 004 3 4. THE CIT (A) GUNTUR THE CIT, GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM