SHRI MOHAN LAL AGARWAL, Jaipur V. ITO, Jaipur

ITA 444/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91887 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH JCIT DHK
• Assessee Lawyers: S C JAIN
• Keywords: Valuation report; Assessment record; Tax effect
• Section: 69C; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 444/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 . SHRI MOHAN LAL AGARWAL, PROP. M/S. MOHAN GEMS, 1269,KHOWWALON KA CHOWK, GOPAL JI KA RASTA, JOHARI BAZAR, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 1(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. ABSPA 0120 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.C. JAIN (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.05.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 24/7/2015. VKNS'K@ ORDER PER SHRI R.P. TOLANI, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A)-1, JAIPUR DATED 28.03.2012 FOR THE A.Y. 2007-08. THE GROUNDS RAISED ARE AS UNDER :- 1) THAT THE LEARNED CIT (A)-I, JAIPUR, HAD ERRED AT L AW AS WELL AS ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER OF MAKING A REFERENCE U/S 142A OF THE ACT IN RESPECT OF THE PRO PERTY FORMING PART OF THE STOCK IN TRADE. 2 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. 2) THAT THE LEARNED CIT (A)-I, JAIPUR, HAD ERRED AT L AW AS WELL AS ON FACTS IN TREATING THE DIFFERENCE IN THE VALUE OF PR OPERTY AS PER VALUATION REPORT OF RS. 7,59,156/- AS CHARGEABLE TO TAX U/S 6 9/69C. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A JEWELLER AND BUILDER, HAS CONSTRUCTED A MULTISTORIED APARTMENT LOCATED AT D-1 92/A, MOTI MARG, BAPU NAGAR, JAIPUR IN EARLIER YEARS AND IMPUGNED YEAR. THE AO REFERRED THE SAME TO THE DEPARTMENTAL VALUATION OFFICER (DVO) UNDER SECT ION 142A, WHICH WAS VALUED AT A COST OF RS. 24,07,156/- AS AGAINST RS. 16,50,0 00/- DISCLOSED BY THE ASSESSEE RESULTING INTO EXCESS CONSTRUCTION COST OF RS. 7,57 ,156/- AS DETAILED BY THE ASSESSEE. BOTH THE AUTHORITIES BELOW ADDED THIS AMO UNT TO THE INCOME OF THE ASSESSEE. THE AO MADE THE ADDITION, AND IN FIRST A PPEAL LD. CIT (A) CONFIRMED THE SAME BY FOLLOWING OBSERVATIONS :- (D) ON PERUSAL OF THE ASSESSMENT RECORDS, THE VAL UATION REPORT AND THE SUBMISSIONS FILED BY THE APPELLANT DURING T HE APPELLATE PROCEEDINGS, IT IS SEEN THAT HE HAD NOT MAINTAINED PROPER BOOKS OF ACCOUNTS, LEDGER OR BILLS OR VOUCHERS, FOR THE BUSI NESS ACTIVITY OF CONSTRUCTION DURING THIS ASSESSMENT YEAR. THESE WERE NOT PRODUCED BEFORE THE VO OR BEFORE THE AO. IN THE ABSENCE OF A NY ARCHITECTURAL DRAWINGS OR PROPER RECORDS, THE VO WAS LEFT WITH NO OP TION BUT TO APPLY HIS TECHNICAL KNOWLEDGE FOR DETERMINING THE UN EXPLAINED EXPENDITURE INCURRED ON CONSTRUCTION ACTIVITIES. IT IS ALSO NOTED THAT THE RATES AS PER RAJASTHAN PWD, BSR WERE TAKEN AND LOCAL MARKET RATES WERE ADOPTED WHEREVER APPLICABLE AS PER SECTION 8.4 OF THE 3 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. VALUATION REPORT. THE VO HAS OBSERVED THAT GIVEN THE QUALITY OF CONSTRUCTION AND LAY OUT, IT IS UNLIKELY THAT NO TE CHNICAL CONSULTATION WAS MADE. IT IS ALSO OBSERVED THAT THE APPROVED PLAN WAS NEVER SUBMITTED BEFORE THE V.O. OR BEFORE THE DEPARTMENT WHICH COULD HAVE INDICATED THE NAME OF THE ARCHITECT. IT IS SE EN THAT THE APPELLANT HAS BEEN ENGAGED IN THE BUSINESS OF PRECI OUS, SEMI PRECIOUS STONES AND JEWELLERY. NO EVIDENCE HAS BEEN FILED REGARDING HIS TECHNICAL QUALIFICATION AS A PROFESSIONALLY QUA LIFIED ARCHITECT FOR CONSTRUCTION PURPOSES. THESE DRAWINGS ARE NECE3SSARIL Y REQUIRED TO BE APPROVED BY THE JDA. THE ASSESSEE HAS NOT FURNISH ED THESE APPROVED PLANS BECAUSE THEY WOULD HAVE REVEALED THE NAME OF THE ARCHITECT. THE ASSESSEE SEEMS TO BE DELIBERATELY TRY ING TO CONCEAL THE RELEVANT INFORMATION REGARDING THE COST OF CONS TRUCTION AND HAS ADMITTEDLY NOT MAINTAINED THE REQUISITE DOCUMENTS B Y WAY OF EVIDENCE TO SUPPORT HIS CONTENTION REGARDING THE CO ST OF CONSTRUCTION ACTUALLY UNDERTAKEN. DURING THE APPELLATE PROCEEDI NGS HE HAS NOT REBUTTED THE FINDING OF THE VO AS PER THE VALUATION REPORT. IN ABSENCE OF PROPER DOCUMENTATION, BILLS AND EVIDENCE , I HOLD THAT THE VALUATION REPORT OF A TECHNICAL QUALIFIED OFFICER A PPROVED BY THE DEPARTMENT TO BE VALID EVIDENCE OF EXCESS COST OF C ONSTRUCTION FOR THE PURPOSE OF SECTION 69C. IN VIEW OF THE ABOVE FACTS AND LAW APPLICABLE TO THE FACTS OF THE APPELLANT, THE IMPUGNED ADDITION OF RS. 7,59,15 6/- IS CONFIRMED U/S 69C. 3. AGGRIEVED ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AND ADVERTING TO GROUND NO. 1 CONTENDED THAT THE PROPERTY IN 4 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. QUESTION WAS STOCK-IN-TRADE OF THE ASSESSEE CARRYING OVER FROM EARLIER YEARS. SECTION 142A IS APPLICABLE TO IMMOVABLE PROPERTY HE LD BY WAY OF INVESTMENT AND NOT TO STOCK-IN-TRADE. THEREFORE, THE REFERENCE TO D VO IS ILLEGAL AND UNTENABLE. THE VALUATION REPORT BEING OBTAINED BY ILLEGAL/UNTEN ABLE USE OF POWER CANNOT BE HELD AS EVIDENCE. 4. APROPOS GROUND NO. 2, IT IS CONTENDED THAT (1) V ALUATION SUFFERED VARIOUS INFIRMITIES IN AS MUCH AS THE APARTMENTS CONSTRUCTE D BY THE ASSESSEE HAVE BEEN ESTIMATED BY THE DVO AS OF SUPERIOR QUALITY WHEREAS THE CONSTRUCTION UNDERTAKEN BY ASSESSEE WAS REASONABLE. THE DVO GOT TH E IMPRESSION BECAUSE OCCUPANTS OF THE FLATS HAVE CARRIED OUT VARIOUS MOD IFICATIONS IN THEIR FLATS; (2) DVO HAS APPLIED FIXED RATE OF CONSTRUCTION WHEREAS T HE ASSESSEE HAS SHOWN ACTUAL EXPENDITURE OF CONSTRUCTION WHICH IS BOUND TO HAVE SOME DIFFERENCE, (3) THE INCREASE IN COST OF CONSTRUCTION WILL NOT AFFECT THE INCOME OF THE ASSESSEE AS THE ESTIMATED COST OF CONSTRUCTION WILL BE DEEMED TO BE THE COST OF CONSTRUCTION. THUS IT WILL HAVE NO TAX EFFECT. IN VIEW OF THESE FA CTS, IT IS CONTENDED THAT THE ADDITION MADE DESERVES TO BE DELETED BOTH ON THE VA LIDITY OF REFERENCE AND ON MERITS. 4.1. THE LD. D/R ON THE OTHER HAND CONTENDS THAT ASS ESSEES ENTIRE BOOKS WERE REJECTED UNDER SECTION 145(3) WHICH HAS BEEN ACCEPTE D BY THE ASSESSEE AS MENTIONED IN PARA 4 OF THE ORDER OF LD. CIT (A). 5 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. 4.2. SINCE BOOKS OF ACCOUNTS OF THE ASSESSEE STANDS REJECTED, THE COST OF CONSTRUCTION SHOWN BY IT CANNOT BE ACCEPTED. THE LD. CIT (A) UPHELD THE VALUATION REFERENCE AS THE ASSESSEE HIMSELF HAS SHO WN THE BUILDING AND CONSTRUCTION AS INVESTMENT IN HIS BALANCE SHEET. THE ASSESSEE IS NOT TAKING A DUBIOUS STAND BY PROPOSING THAT IT AMOUNTS TO STOCK -IN-TRADE. CONSEQUENTLY, THE DVOS VALUATION IS JUSTIFIED. 4.3. APROPOS MERITS, IT IS CONTENDED THAT WHEN THE B OOKS OF ACCOUNTS STANDS REJECTED, THE SANCTITY OF COST OF CONSTRUCTION SHOW N BY THE ASSESSEE HAS NO VALIDITY AND IN CASE OF REJECTION OF BOOKS, ESTIMAT E OF INCOME BECOMES INEVITABLE. IN THIS CASE THE SAME BEING IN THE FORM SCIENTIFIC OPINION OF DVO, IT CANNOT BE HELD TO BE ARBITRARY MERELY ON FLIMSY EXCUSES THAT THE ASSESSEES COST AND QUALITY OF CONSTRUCTION IS MIDDLE CLASS. IT IS NOWHERE DEMO NSTRATED THAT ASSESSEE CONVEYED HIS PURCHASERS THAT THE CONSTRUCTION WAS OF MEDIUM QUALITY. APROPOS ASSESSEES CONTENTION THAT THE ESTIMATE WILL NOT HAV E ANY AFFECT ON THE INCOME AS THE ESTIMATED COST OF CONSTRUCTION WILL BE ALLOWED WHI LE COMPUTING THE PROFIT, IS NOT TENABLE IN TERMS OF PROVISO TO SECTION 69C. THIS PROVISO FORBIDS THE ALLOWANCE OF SUCH AMOUNT AS EXPENDITURE IN ANY OTHER SECTION. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. BOOKS OF ACCOUNTS OF THE ASSESSEE STANDS REJECTED, WHICH HAVE NOT BEEN DISPUTED AS NEITHER ANY GROUND NOR ANY ARGUMENTS/CO NTENTIONS ARE RAISED IN THIS 6 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. BEHALF. THERE IS A CLEAR FINDING BY THE AO THAT AS SESSEE HAS NOT MAINTAINED BILLS, VOUCHERS ETC. FOR EXPENSES INCURRED FOR CONSTRUCTIO N OF FLATS. THE LAND WAS PURCHASED BY WAY OF INVESTMENT AND SUBSEQUENTLY IT H AS BEEN TAKEN AS AN INVESTMENT. IN VIEW OF THE ABOVE FACTS, WE FIND NO I NFIRMITY IN THE ORDER OF THE LD. CIT (A) IN HOLDING THAT THE REFERENCE FOR VALUATION UNDER SECTION 142A WAS VALID. 5.1. EVEN IF IT IS ASSUMED THAT THE VALUATION REFER ENCE WAS NOT PROPER, EVEN THEN AN EXPERT OPINION BECOMES A RELIABLE PIECE OF EVIDENCE NOT IN THE STRICT TERMS OF AO BEING BOUND BY THE DVOS REPORT BUT AS A MATERIAL FOR MAKING A PROPER ASSESSMENT. MORE SO, WHEN THE ASSESSEES BOOK S OF ACCOUNTS ARE REJECTED AND ALLEGATION IS ESTABLISHED THAT NO PROPER BILLS AND VOUCHERS ABOUT CONSTRUCTION OF BUILDING ARE MAINTAINED. IN THESE CIRCUMSTANCES THE AO HAS TO RESERVE THE ESTIMATE AND IN THIS REGARD IF THE DVOS ESTIMATE I S BEFORE HIM, ALBEIT ON A DVOS REPORT AS AN OPINION, THE VALUATION REPORT CANNOT B E OUT RIGHTLY REJECTED. IT IS SETTLED LAW THAT THE AO CAN FRAME THE ASSESSMENT BAS ED ON VARIOUS SOURCES. 5.2. CONSEQUENTLY, WE UPHOLD THE DVOS REPORT. COMI NG TO THE ISSUE OF MERITS OF THE VALUATION, WE DO NOT FIND ANY INFIRMITY IN TH E ORDER OF LD. CIT (A) IN AS MUCH AS THE BOOKS OF THE ASSESSEE ARE REJECTED, THE ALLEGATION THAT PROPER BILLS AND VOUCHERS HAVE NOT BEEN MAINTAINED HAS NOT BEEN CONTROVERTED. IN THESE CIRCUMSTANCES BESIDES THE ASSESSEE HAS NOT POINTED OUT THAT THE ESTIMATE OF 7 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO. DVO IS BASELESS OR ARBITRARY, THE OPINION SHOULD NO T BE GENERALLY INTERFERED WITH. CONSEQUENTLY WE UPHOLD THE DVOS ESTIMATION. 5.3. APROPOS ASSESSEES PLEA THAT THE INCREASE IN C OST OF CONSTRUCTION WILL REDUCE HIS PROFITABILITY, THE ISSUE HAS NOT BEEN AD JUDICATED. HOWEVER, THE LD. D/R HAS INTIMATED THAT PROVISO TO SECTION 69C WILL NOT E XTEND SUCH BENEFIT TO ASSESSEE. SINCE THIS ISSUE HAS NOT BEEN ADJUDICATED , WE DO NOT COMMENT ON THIS. IN VIEW OF THE ABOVE, BOTH THE GROUNDS OF THE ASSESS EE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.07.2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 24/7/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI MOHAN LAL AGARWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE INCOME-TAX OFFICER, WARD 1(1), J AIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 444/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR. 8 ITA NO. 444/JP/2012 A.Y. 2007-08. SHRI MOHAN LAL AGARWAL VS. ITO.