SHRI VISHAL JAIN, Bhopal V. The ITO 2(2), Bhopal

ITA 443/IND/2014

• Counselvise Citation: 44322714 RSA 2014
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 05-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: ARUN JAIN
• Keywords: Reopening of assessment; Value adopted by valuation officer; Charitable institution; Valuation report; Tax effect; Reason to believe
• Section: 148; 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH (SMC), INDORE BEFORE SHRI B.C. MEENA HONBLE ACCOUNTANT MEMBER ITA NOS. 443 TO 445/IND/2014 A.YS. 2004-05 TO 2006-07 SHRI VISHAL JAIN BHOPAL PAN ADAPJ-1455H ::: APPELLANT VS INCOME TAX OFFICER 2(2) BHOPAL ::: RESPONDENT ` APPELLANT BY SHRI ARUN JAIN RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 2 1 .4.2015 DATE OF PRONOUNCEMENT 1 1 . 5 .2015 O R D E R ALL THESE THREE APPEALS BY THE ASSESSEE EMANATE FROM THE COMMON ORDER OF THE LEARNED CIT(A)-I, BHOPAL , DATED 29.3.2014. 2 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM RENT AND INTEREST. IN ALL THESE THREE APPEALS, CO MMON ISSUES INVOLVED ARE WITH REGARD TO ISSUANCE OF NOTICE U/S 148 OF THE ACT ON THE BASIS OF VALUATION REPORT AND SUSTAINING THE ADDITION OF DIFFERENCE IN THE AMOUNT DECLARED BY THE ASSESSEE AND THE AMOUNT VALUED BY THE VALUATION OFFICER. THE DETAILS OF DIFFERENCE ARE AS UND ER :- S.NO. A.Y. ASSESSEES EXPENDITURE (RS.) VALUED BY A.V.O. DIFFERENCE RS, 1 2004 - 05 12,01,800 13,81,265 1,79,465 2 2005 - 06 10,76,900 12,37,425 1,60,525 3 2006 - 07 4,65,000 5,34,168 69,168 IN ALL THE THREE YEARS, THE GROUNDS OF APPEAL ARE COMMO N EXCEPT DIFFERENCE IN THE AMOUNT OF ADDITION. THE GRO UNDS IN ITA NO. 443/IND/2014 ARE AS UNDER :- 3 1. THAT IN THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACTS AND ALSO IN LAW IN CONFIRMING THE VALIDITY OF ISSUANCE OF NOTICE U/S 148 OF THE INCOME TAX ACT ON THE BASIS OF AVO REPORT OF THE PROPERTY. 2. THAT IN THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACTS AND ALSO IN LAW IN CONFIRMING ADDITION OF RS. 179465/- INTO THE INCOME ON THE BASIS OF AVO REPORT OF THE PROPERTY . 3 . THAT IN THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN FACTS AND ALSO IN LAW IN FORMING THE OPINION THAT ASSESSEE CANNOT APPEAL ON THE ISSUE ON WHICH HE HAS NOT FURNISHED APPEAL IN ANOTHER YEAR. 3. THE FIRST GROUND IS WITH REGARD TO CONFIRMING THE VALIDITY OF NOTICE U/S 148 OF THE ACT ON THE BASIS OF AVOS VALUATION REPORT. THE ASSESSING OFFICER WHILE SCRUTIN IZING THE ASSESSMENT U/S 143 OF THE ACT FOR THE A.Y. 2007- 08 MADE A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER FO R VALUING THE PROPERTY AT E-6/76, ARERA COLONY, BHOPAL, M.P. THERE WAS VARIATION IN THE AMOUNT OF INVESTMENT DECLARED BY THE ASSESSEE AND VALUATION ARRIVED AST BY THE 4 VALUATION OFFICER. ON THAT BASIS NOTICES U/S 148 WERE ISSUED FOR PRECEDING YEARS. IT IS PERTINENT TO NOT E THAT ASSESSMENTS FOR A.YS. 2005-06 AND 2006-07 WERE U/S 143(1) OF THE ACT. FOR THE A.Y. 2004-05 THE ASSESSM ENT ORDER WAS MADE U/S 143(3) OF THE ACT. IN RESPONSE TO NOTICE U/S 148 THE ASSESSEE SUBMITTED THAT THE ORIGIN AL RETURNS FILED MAY BE TREATED AS RETURN FILED IN RESP ONSE TO NOTICE U/S 148 OF THE ACT. THE ASSESSEE CONTENDED TH AT THE DIFFERENCE IN THE AMOUNT DECLARED BY THE ASSESSEE AS INVESTMENT IN THE PROPERTY AND THE VALUATION REPORT WAS NOMINAL AS IT WAS 14.94% IN THE A.Y. 2004-05, 14.91% IN THE A.Y. 2005-06, AND 14.91% IN THE A.Y. 2006-07. TH E VALUER HAS VALUED THE INVESTMENT IN FOUR FINANCIAL YEARS. THE REFERENCE WAS MADE BY THE ASSESSING OFFICER DURIN G ASSESSMENT PROCEEDINGS FOR THE A.Y. 2007-08. THUS, T HERE IS NO LEGAL INFIRMITY IN THE REFERENCE TO DVO. FURT HER THE 5 ASSESSEE ACCEPTED THE ADDITION IN THE A.Y. 2007-08 BASE D ON VALUATION REPORT. THUS, THERE WAS SUFFICIENT MATERI AL BEFORE THE ASSESSING OFFICER FOR PRIMA FACIE REASON TO BELIEVE FOR ISSUING NOTICE U/S 148 OF THE ACT. IN VIEW OF THESE FACTUAL MATRIX, THE VALIDITY OF NOTICE U/S 148 OF THE ACT ON THE BASIS OF SUCH VALUATION REPORT WAS AS PER LA W. I HOLD THAT THIS REFERENCE WAS MADE IN THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2007-08. THE ASSESSEE HAS M ADE THE INVESTMENT IN THE PROPERTY IN FOUR FINANCIAL YEARS OUT OF WHICH IN ONE YEAR THE ASSESSEE ACCEPTS THE EXCESS INVESTMENT AS PER VALUATION REPORT THEN SUFFICIENT REASON TO REOPEN THREE ASSESSMENT YEAR. IN MY CONSIDERED VIEW THERE WAS A PRIMA FACIE REASON TO BELIE VE FOR ISSUING NOTICE U/S 148 OF THE ACT AND SIMILAR VI EW HAS BEEN UPHELD BY THE HONBLE ALLAHABAD HIGH COURT IN T HE CASE OF SUNDER CARPET INDUSTRIES VS. ITO; 324 ITR 417 6 WHEREIN FOR DETERMINATION OF INVESTMENT IN THE CONSTRUCTION OF A BUILDING, VALUATION WAS REFERRED AND WHERE THE VALUATION REPORT DISCLOSED HIGHER INVESTMEN T IN THE CONSTRUCTION, THE REOPENING OF ASSESSMENT WAS HEL D JUSTIFIED ON THE BASIS OF SUCH VALUATION REPORT. RELIAN CE OF THE LEARNED AR ON THE DECISION IN THE CASE OF MAHASHAY CHUNNILAL CHARITABLE TRUST VS. DCIT; 267 CTR (DEL) 334 IS ALSO NOT OF ANY HELP TO THE ASSESSE. IN THE ASSESSEES CASE, THE VALUATION WAS REFERRED FOR ARRIVING AT THE CORRECT F IGURE OF INVESTMENT IN THE PROPERTY DURING THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2007-08 AND WHEN THE ASSESSE E CLAIMS THAT THE INVESTMENT HAS BEEN MADE IN FOUR YEARS AND THERE WAS A DIFFERENCE IN THE AMOUNT SHOWN BY THE ASSESSEE AND THE AMOUNT OF DVO REPORT. THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE REPORT OF THE DVO AND THEN ONLY PROCEEDED TO REOPEN THE ASSESSMENT BY ISSU ING 7 THE NOTICE U/S 148. KEEPING THESE FACTS IN VIEW, I SUSTAIN THE ORDER OF THE CIT(A) WITH REGARD TO VALIDITY OF RE OPENING. 4. IN GROUND NO. 2 IN ALL THESE APPEALS, THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF ADDITION BASED ON DIFFERENCE IN THE VALUATION REPORT AND THE AMOUNT DECLAR ED BY THE ASSESSE. 5. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE WAS NOMINAL AS IT WAS BELOW 15% IN THESE TH REE YEARS. HE ALSO PLEADED THAT THE CIT(A) HAS SUSTAINED THE ADDITION ON THE BASIS THAT THE ASSESSE HAS NOT FILED ANY APPEAL AGAINST THE ADDITION MADE IN THE A.Y. 2007-08. ON THIS ISSUE, THE LEARNED AR SUBMITTED THAT IN THAT YEAR THE ADDITION WAS OF NOMINAL AMOUNT OF RS. 22,087/- AND THE ASSESSEE DID NOT FILE ANY APPEAL ON ACCOUNT OF THE SMALL TAX EFFECT. THE LD. AR ALSO SUBMITTED THAT THE ASSESS EE WAS 8 NOT INCLINED TO CHALLENGE THE SMALL ADDITION AND SPEND ING LOT OF MONEY ON THE LITIGATION. THEREFORE, NON-FILI NG THE APPEAL FOR THE A.Y. 2007-08 SHOULD NOT BE TAKEN AGAINST THE ASSESSEE FOR SUSTAINING THE ADDITION. IN THESE YEAR S THE TAX AMOUNT BEING MORE, THE ASSESSEE HAS FILED THE APPEAL S. THE LD. AR FURTHER SUBMITTED THAT THE VALUATION HAS BE EN MADE ON THE BASIS OF CPWD RATES WHILE IT SHOULD HAVE BEEN MADE BY ADOPTING STATE PWD RATES TO ARRIVE AT THE COST OF CONSTRUCTION OF THE BUILDING. IT WAS ALSO PL EADED THAT IN VARIOUS DECISIONS ITAT HAS HELD 15% DEDUCTION FOR SELF-SUPERVISION AND FOR DIRECT PURCHASES AS REASONABL E. RELIANCE WAS PLACED ON THE DECISION OF ITAT IN THE CASE OF SUWALAL GIRIRAJ AJMERA VS. ITO; 86 TTJ (JD) 414. THE LD. AR ALSO RELIED ON THE DECISION OF ITAT, AGRA BENCH IN THE CASE OF ACIT VS. SMT. RAMKALI SHIVHAREY; 83 TTJ (AGRA) 824. THERE ALSO THE DEDUCTION OF 10% ON ACCOUNT OF SELF- 9 SUPERVISION AND 1% ON ACCOUNT OF ARCHITECT FEE WAS HEL D TO BE QUITE NORMAL. THE LEARNED AR ALSO RELIED UPON THE DECISION OF ITAT IN THE CASE OF DR. RAMESH KUMAR ANAND VS. ITO; 109 TTJ (ASR) 568 WHEREIN ON THE METHOD OF ESTIMATION OF COST OF CONSTRUCTION, LOCAL PWD RATES AR E PREFERRED OVER THE CPWD RATES AND RATES APPLIED BY THE VALUATION OFFICER WERE HELD TO BE EXCESSIVE AND 15% RE LIEF WAS ALLOWED FOR ESTIMATING THE COST BY THE VALUATION OFFICER. THE LEARNED AR ALSO SUBMITTED THAT THE SAME CIT(A) HAS GIVEN RELIEF IN THE CASE OF BROTHER OF THE ASSESSEE WHERE THE BUILDING IS ADJOININGLY SITUATED. H E HAS PRODUCED THE ORDER OF THE CIT(A) IN THE CASE OF HIS BROTHER, SHRI VIKAS JAIN DATED 19.5.2014. THE LD. AR SUBMITTED THAT THE VALUATION HAS BEEN MADE ON THE BASIS OF PLINTH AREA RATES WHICH INCLUDE THE EXPENDITURE INCURRED, FLOORING, ETC. WHILE THE VALUER HAS AGAIN ADDED FOR MOS AIC 10 GLAZED TILES, KOTA STONE, ETC. THE LEARNED AR PLEADED T O DELETE THE ADDITION. 6. THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. I HAVE ALSO GONE THROUGH THE REPORT OF THE ASSISTANT VALUATION OFFICER, BHOPAL, IN THE CASE OF THE ASSESSE. FIRST OF ALL, THE VALUATION OFFICER HAS GIVEN DEDUCTION FOR SELF SUPERVI SION OF 7 PER CENT ONLY WHILE IN VARIOUS DECISIONS RELIE D ON BY THE LEARNED AR, ITAT HAS HELD THAT DEDUCTION FOR SELF SUPERVISION UP TO 10% IS REASONABLE. 15% DEDUCTION WAS HELD REASONABLE FOR SELF-SUPERVISION AND DIRECT PURCH ASES. I HAVE ALSO NOTED THAT THE VALUER HAS ADOPTED CPWD RATES AND VARIOUS ITAT BENCHES HAVE HELD THAT VALUATION HAS TO BE MADE ON THE BASIS OF STATE PWD RATES. THE VALUATION OFFICER HAS ALSO ADOPTED THE PLINTH AREA RATES WHICH ALSO INCLUDE COST OF FLOOR, ETC. WHILE THE VALUER HAS ADDED 11 ADDITIONAL AMOUNT ON THIS COUNT. THE CIT(A) HAS GRANTED RELIEF IN THE CASE OF BROTHER OF THE ASSESSEE IN SIMI LAR CIRCUMSTANCES. CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES AND ALSO CONSIDERING THE CASE LAWS RELIED ON BY THE LEARNED AR, I AM OF THE VIEW THAT THE CIT(A) W AS NOT JUSTIFIED IN SUSTAINING THE ADDITION. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN OPEN COURT ON 11 TH MAY, 2015 SD/- (B.C. MEENA) ACCOUNTANT MEMBER MAY 11 TH ,2015 COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R 12 (6) GUARD FILE DN/-