B.Madhusudhana Reddy, Vijayawada V. THE ACIT, CIRCLE - 1, Vijayawada

ITA 430/VIZ/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1197 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SRINIVASA MURTHY
• Keywords: Opportunity of being heard; Valuation report
• Section: 143(3); 54

Judgement Text

ITA NO.430/VIZAG/2014 B. MADHUSUDHANA REDDY, VIJAYAWADA 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.430/VIZAG/2014 ( / ASSESSMENT YEAR: 2007-08) B. MADHUSUDHANA REDDY VIJAYAWADA VS. ACIT, CIRCLE - 1, VIJAYAWADA [PAN: AFEPD1878A ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI P. SRINIVASA MURTHY, DR / DATE OF HEARING : 21.04.2016 / DATE OF PRONOUNCEMENT : 06.05.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), VIJAYAWADA DATED 25.4.2014 FOR THE ASSESSME NT YEAR 2007-08. 2. THE FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN I NDIVIDUAL FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF ` 1,41,080/-. THE RETURN ITA NO.430/VIZAG/2014 B. MADHUSUDHANA REDDY, VIJAYAWADA 2 FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') AND THEREAFT ER THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON A TOTAL INCOME O F ` 19,03,160/-. 3. IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT THE ASSESSEE HAS CONSTRUCTED A TWO STORIED BUILDING AND THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE IS ` 42,13,860/-. IN SUPPORT OF THAT HE HAS SUBMITTED THE VALUATION REPORT OBTAINED FROM THE APPROVED VALUER, ACCORDING TO WHICH COST OF CONSTRUCTION OF THE BUILDING WAS OF ` 42.09 LAKHS AFTER CLAIMING SELF SUPERVISION CHARGES AT 7.5%. THE A.O. WAS OF THE OPINION THAT THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE WAS SO L OW, THEREFORE, HE HAS REFERRED THE CASE TO VALUATION CELL AND THE EXE CUTIVE ENGINEER, VALUATION CELL, VIJAYAWADA ESTIMATED THE COST OF CO NSTRUCTION AT ` 51.54 LAKHS BASED ON THE REPORT OF THE VALUATION CELL. A CCORDINGLY, THE A.O. HAS MADE ADDITION OF ` 9,45,000/- (COST OF CONSTRUCTION ESTIMATED BY THE VALUATION CELL I.E. ` 51.54 LAKHS MINUS ` 42.09 LAKHS = ` 9,45,000/-) AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSES SEE. IT WAS SUBMITTED BEFORE THE A.O. THAT THE ASSESSEE HAS CON STRUCTED A BUILDING FAR AWAY FROM VIJAYAWADA CITY FOR WHICH P.W.D. RATES ARE TO BE APPLIED AND IF P.W.D. RATES ARE APPLIED, THE COST OF CONSTRU CTION OF THE BUILDING AS TAKEN BY THE ASSESSEE WOULD BE ` 42.09 LAKHS AND NO ADDITION CAN BE ITA NO.430/VIZAG/2014 B. MADHUSUDHANA REDDY, VIJAYAWADA 3 MADE. IF AT ALL, CPWD RATES ARE APPLIED, IT WAS SU BMITTED THAT 15% DEDUCTION SHOULD BE GIVEN TO THE ASSESSEE. HOWEVER , THE A.O. HAS NOT ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE. THE A.O., BASED ON THE REPORT SUBMITTED BY THE EXECUTIVE ENGINEER, VAL UATION CELL, HE MADE AN ADDITION OF ` 9,45,000/-. ON APPEAL, THE CIT(A) CONFIRMED THE O RDER OF THE A.O. ON BEING AGGRIEVED, ASSESSEE CARRIED T HE MATTER IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE EXECUTIVE ENGINEER, VALUATION CELL, VIJAYAWADA HAS APPLIED TH E CPWD RATES AND IN THE CASE OF ASSESSEE, PWD RATES HAS TO BE APPLIED A ND IF THE CPWD RATES ARE APPLIED, 15% DEDUCTION TOWARDS THE RATE V ARIATION BETWEEN THE CPWD & PWD AND FURTHER DEDUCTION OF 10% FOR SELF SUP ERVISION CHARGES HAVE TO BE GIVEN. 5. ON THE OTHER HAND, THE D.R. HAS SUPPORTED THE OR DER PASSED BY THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS CONSTRUCTED A BUILDING. ACCORDING TO THE ASSESSEE, COST OF CONSTRUCTION IS ` 42,13,860/-. ACCORDING TO THE APPROVED VALUER, THE COST OF CONST RUCTION OF THE BUILDING WAS ` 42.09 LAKHS, AFTER CLAIMING THE SELF-SUPERVISION C HARGES AT ITA NO.430/VIZAG/2014 B. MADHUSUDHANA REDDY, VIJAYAWADA 4 7.5%. HOWEVER, THE A.O. HAS REFERRED THE MATTER TO THE VALUATION CELL AND AFTER OBTAINING THE REPORT FROM THE VALUATION C ELL, COST OF CONSTRUCTION IS ESTIMATED AT ` 51.54 LAKHS. THE REMAINING BALANCE OF ` 9,45,000/- I.E. THE DIFFERENCE BETWEEN COST OF CONS TRUCTION AS ESTIMATED BY THE DEPARTMENTAL VALUATION CELL AND REGISTERED V ALUER WAS ADDED TO THE INCOME OF THE ASSESSEE. 7. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HA S CONSTRUCTED A BUILDING IN A RURAL AREA THOUGH COMES UNDER THE PUR VIEW OF THE VIJAYAWADA CITY, CPWD RATES CANNOT BE APPLIED BUT O NLY PWD RATES ARE TO BE APPLIED. IN CASE WHERE CPWD RATES ARE APPLIED , 15% DEDUCTION TOWARDS THE RATE VARIATION BETWEEN CPWD & PWD SHOULD BE GIVEN TO THE ASSESSEE. THIS ASPECT WAS NOT DISPUTED BY THE DEPA RTMENT. ADMITTEDLY, THE FACT REMAINS THAT THE COST OF CONSTRUCTION WAS ESTIMATED BY THE A.O. BASED ON THE REPORT OF THE VALUATION CELL, WHICH HA S IN TURN ESTIMATED THE COST OF CONSTRUCTION BASED ON THE CPWD RATES. T HEREFORE, IN OUR OPINION, THE ASSESSEE IS ENTITLED FOR 15% DEDUCTION TOWARDS THE RATE VARIATION BETWEEN CPWD & STATE PWD AND FURTHER DEDUCT ION OF 7.5% TOWARDS SELF SUPERVISION CHARGES FROM THE VALUE ARR IVED BY THE DVO APPLYING THE CPWD RATES. ORDERED ACCORDINGLY. ITA NO.430/VIZAG/2014 B. MADHUSUDHANA REDDY, VIJAYAWADA 5 7. IN SO FAR AS ANOTHER GROUND RAISED BY THE ASSESS EE IN RESPECT OF CLAIM U/S 54 OF THE ACT EXEMPTION OF ` 7,65,717/- IS CONCERNED, NEITHER A.O. DISCUSSED THE FACTS NOR CIT(A). THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) ON THIS COUNT AND REMIT THE MA TTER BACK TO THE A.O. TO DECIDE THE ISSUE DE-NOVO AFTER GIVING A REA SONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH MAY16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 6 TH MAY16 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI B. MADHUSUDHANA REDDY, D.NO .39-08-19, DURGA RICE MILLS STREET, VENKATESWARAPURAM, VIJAYAWADA 2. / THE RESPONDENT THE ACIT, CIRCLE-1, VIJAYAWADA 3. ) / THE CIT, VIJAYAWADA 4. ) ( ) / THE CIT(A), VIJAYAWADA 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM