Smt Namita Panda, Cuttack V. ITO, Cuttack

ITA 451/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4431 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-04-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 21-12-2010
• Court: TRIBUNAL
• Department Lawyers: J KHANRA
• Assessee Lawyers: P R MOHANTYS ACHARYA ARS
• Keywords: Unexplained investment; Value adopted by valuation officer; Opportunity of being heard; Valuation report

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 451 OF 2010 / ASSESSMENT YEAR 1998 - 99 SMT.NAMITA PANDA, AT: PITHAPUR, P.O.BUXI BAZAR, CUTTACK 01 PAN: AWRPP 3014 - - - VERSUS - ITO, WARD 2(3), CUTTACK. ( /APPEL LANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI P.R.MOHANTY/S.ACHARYA, ARS / FOR THE RESPONDENT: / SHRI J.KHANRA, DR / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS AGITATING THE CONFIRMATION OF THE ADDITION OF A SUM OF 4,69,352 ASSESSED AS UNEXPLAINED INVESTMENT IN THE BUILDING BY THE ASSESSING OFFICER AND THEREAFTER CONFIRMED BY THE LEARNED CIT(A). 2. THE BRIEF FACTS RELATING TO THE I SSUE IN DISPUTE ARE THAT THIS ISSUE WAS BEFORE THE TRIBUNAL WHO AFTER HEARING THE RIVAL CONTENTIONS HAD RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER HOLDING A VIEW THAT ADMITTING THE VALUATION BY THE REGISTERED VALUER OF THE ASSESSEE WAS ADDITI ONAL EVIDENCE IN TERMS OF RULE 46A OF THE INCOME - TAX RULES,1962. IN THE INTEREST OF JUSTICE, THE MATTER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE ISSUE AFRESH AFTER CONSIDERING THE VALUATION REPORT OF THE REGISTERED VALUER SUBMITTED BY THE ASSESSEE AS PER LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSING OFFICER HAVING NOTED THE DIRECTION OF THE TRIBUNAL AND INVITED THE SUBMISSIONS OF THE ASSESSEE BEFORE HIM THAT THE VALUERS REPORT AS OBTAINED BY THE ASSESSING OFFICER WAS AN I.T.A.NO. 451 OF 2010 2 OPINION WHICH IS JUST AN ESTIMATE AND COULD ONLY BE REBUTTED BY THE ASSESSEE BY PUTTING FORTH OPINION OF ANOTHER VALUATION OFFICER BEING A REGISTERED VALUER WAS TO BE CONSIDERED BY THE ASSESSING OFFICER. THE ASSESSEE ALSO S UBMITTED THAT THE PLINTH AREA RATE METHOD HAS BEEN ADOPTED BY THE DVO ON THE CPWD RATE VIS - - VIS TO BE ADOPTED FOR THE PURPOSE OF THE ASSESSEE AT THE PWD RATE TO DISBELIEVE A 20/% TO 30% REDUCTION WOULD AUTOMATICALLY OCCUR SPECIFICAL1YN VIEW OF THE FACT TH AT BOTH THE VALUERS HAVE ATTEMPTED TO ESTIMATE THE VALUATION TO BE SPREAD OVER FOR THE EARLIER FOUR YEARS AS WELL. THE LEARNED ASSESSING OFFICER, THEREAFTER INSISTED THAT ONLY THE SELF SUPERVISION CHARGES COULD BE ALLOWED AND THE COST OF CONSTRUCTION AS PE R DVO REPORT COMES TO 4,41,350 AGAINST WHICH THE ASSESSEE HAS ONLY SHOWN INVESTMENT OF 9,72,000 RENDERING THE INVESTMENT FROM UNDISCLOSED SOURCES IN THE PROPERTY CONSTRUCTION TO BE TAXED AT 4,69,352. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WH O HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE THE DETAILS TO ESTABLISH THAT THE VALUATION FOR THE IMPUGNED ASSESSMENT YEAR COULD ONLY BE 9,72,000. THE ASSESSEE HAD TOTAL INVESTED IN THE PROPERTY SPREAD OVER FOUR YEARS AT 22,67,472 AGAINST WHIC H THE DVO IN HIS REPORT DT.8.3.2000 HAD DETERMINED THE COST OF CONSTRUCTION AT 36,35,386. FOR THE IMPUGNED ASSESSMENT YEAR THE COST OF CONSTRUCTION HAS BEEN DETERMINED BY THE DVO AT 15,58,218 THEREFORE THE DIFFERENCE AFTER ALLOWING SELF SUPERVISION CHA RGES LEFT AN AMOUNT OF 4,69,352 WAS CONFIRMED BY THE LEARNED CIT(A). HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSEE HAS NOT BEEN ABLE TO BRING FORTH ANY MATERIAL EVIDENCE IN SUPPORT OF ITS CLAIM. 3. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT AFTER HAVING VERIFIED THAT THE REGISTERED VALUER OF THE ASSESSEE HAD GIVEN THE VALUE OF THE PROPERTY AS WAS EXAMINED AND INSPECTED BY THE DVO WITHIN A SPAN OF ONE I.T.A.NO. 451 OF 2010 3 MONTH COULD NOT SUFFER SUCH VAST DIFFERENCE AS HAS BEEN CONTEM PLATED BY THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A). INTERESTINGLY HE POINTED OUT THAT NO EFFORT HAS BEEN MADE BY THE ASSESSING OFFICER OR THE LEARNED CIT(A) FOR DISTINGUISHING THE SALIENT FEATURES GIVEN BY THE EXPERTS IN THEIR REPORTS TO ESTABLI SH BEYOND DOUBT THAT THE ADDITION OR INCREASE IN THE VALUE WAS ALSO SPREAD OVER THE PERIOD OF FOUR YEARS THEREFORE CANNOT BE SUBJECTED TO TAX IN THE IMPUGNED ASSESSMENT YEAR ONLY. HAVING ACCEPTED THE RETURNED VALUATION FOR THE EARLIER YEARS, THE ASSESSING OFFICER IN TURN ACCEPTED THE RECORD MAINTAINED BY THE ASSESSEE FOR HOLDING THAT THE INVESTMENT IN THE PROPERTY BEGINNING THE ASSESSMENT YEAR 1993 - 94 WAS IN THE SIMILAR FASHION. FOR THIS PROPOSITION, HE PERUSED THE ORDER OF THE ASSESSING OFFICER AT PAGE 2 W HEN THE DECLARED INVESTMENT AND THE INVESTMENT BY THE ASSESSEE TALLIED WITH THE YEAR WISE VALUATION AS PER THE VALUATION OFFICER. FOR THE IMPUGNED ASSESSMENT YEAR THEREFORE WHEN THE MAJOR EXPENSE COULD NOT BE IDENTIFIED BY THE DVO, INSOFAR AS THE VALUE FOR THE IMPUGNED ASSESSMENT YEAR DID NOT INDICATE THE ACTUAL EXPENDITURE TO BE ALLOCATED TO THE IMPUGNED ASSESSMENT YEAR, AS WAS ALSO NOTED BY THE DEPARTMENTAL APPROVED REGISTERED VALUER OF THE ASSESSEE. THE TRIBUNAL HAD GIVEN A SPECIFIC FINDING WHICH SUPPORT S THE CONTENTION OF THE ASSESSEE IN VIEW OF THE FACT THE ADDITION ON ACCOUNT OF VALUATION REPORT SHOWING COST OF CONSTRUCTION BY THE DVO WAS TO BE CONSIDERED BY THE ASSESSING OFFICER IN IDENTICAL FASHION AS WAS ALSO PREPARED BY THE REGISTERED VALUE OF THE ASSESSEE FOR REBUTTAL. THE DVOS VALUATION WAS ADOPTED BY THE AO WHEN HE HIMSELF ACCEPTED THE FACTS THAT THE INCREASE IN VALUATION ON AN EARLIER DATE WAS TO BE SPREAD OVER ACCORDING TO THE CONSTRUCTION, CARRIED OUT BY THE ASSESSEE DURING THE IMMEDIATELY PR ECEDING FOUR AYS THAT JUST COULD NOT LEAD TO A FINDING THAT THE VALUATION SHOULD MATCH THE INVESTMENT MADE IN THE IMPUGNED ASSESSMENT YEAR ONLY. ANY PERSON TRAINED IN OR HAVING SOME I.T.A.NO. 451 OF 2010 4 EXPERIENCE ON BUILDING COULD ANALYZE AND CALCULATE HOW MUCH QUANTITY OF DI FFERENT MATERIALS WOULD HAVE BEEN USED FOR A GIVEN STRUCTURE WHEN RATES NOTIFIED BY THE LOCAL AUTHORITIES SHOULD BE GIVEN CREDENCE OTHER THAN AUTHORIT IES LIKE CPWD WHICH INVOLVE EXCESSIVE INPUTS INSOFAR AS THE DVO IN VALUING THE PROPERTY FOR THE IMPUGNED ASSESSMENT YEAR ADOPTED THE CPWD RATES AND THE MAJOR PORTION OF THE EXPENDITURE AS NOTED BY THE ASSESSEE MATCHED WITH THAT AS INDICATED IN A ROUGH NOTINGS IN A DIARY EQUA LS TO THE EXPENSES AS REGISTERED VALUER REPORTED. IN OTHER WORDS, THE EXCESS AS SOUGH T TO BE TAXED BY THE ASSESSING OFFICER WAS NOT EXCESS BUT ACTUALLY INCURRED IN THE IMPUGNED ASSESSMENT YEAR BY THE ASSESSEE WHO UNDER SELF - SUPERVISION HAD CONSTRUCT ED THE HOUSE AS A CONTINUING PROCESS BROUGHT FORWARD FROM EARLIER YEARS. THE VERY FACT THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE EXCESS AS NOTED BY THE DVO IN THE EARLIER YEARS WAS THEREFORE ONLY AS ACCUMULATED AS EXCESS IN THE IMPUGNED ASSESSMENT YEAR WHICH CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE INSOFAR AS THE REGISTERED VALUER OF THE ASSESSEE HAS CLEARLY GIVEN THE MAJOR CONSTRUCTION ACTIVITY SEPARATELY AS WELL AS ADDITION ON ACCOUNT OF ELECTRICAL WIRING, FITTINGS, PLUMBING AND OTHER SUPERFICIAL WORK WHICH DO INCUR EXPENDITURE BUT ARE NOT MAJOR IN THE TERMS AS CAN BE FOR THE PURPO SE OF LAYING SLAB OR ROOF AND PURCHASE OF BASIC MATERIALS SUCH AS CEMENT, IRON RODS, GUTTERS ETC. FOR THIS PURPOSE HE HAS RELIED ON THE DECISION OF ITAT, DELHI IN THE CASE OF SHEKHR CHAND JAM & SONS V. INSPECTING ACIT [32 TT] (DEL) 570], WHICH CLEARLY APPL IES TO THE FACTS OF ASSESSEES CASE WHEN THE VALUATION WERE BY THE DVO WAS MERE MATHEMATICAL EXERCISE LACKING NECESSARY SUPPORTING MATERIAL AND WAS REQUIRED WANTING BY THE LEARNED CIT(A) AS CAN BE PERUSED IN HIS ORDER. WHAT IS NOT AVAILABLE TO THE CIT(A) W AS AVAILABLE TO THE DVO THEREFORE JUSTIFIES THAT THE APPROPRIATE EXPENSES INVESTMENT IN EARLIER ASSESSMENT YEAR CANNOT BE ASSIGNED EITHER BY I.T.A.NO. 451 OF 2010 5 THE ASSESSING OFFICER OR BY THE LEARNED CIT(A) TO THE IMPUGNED ASSESSMENT YEAR WHEN THE MAJOR PORTION OF EXPENSES H AVE BEEN INCURRED IN THE IMPUGNED ASSESSMENT YEAR WAS IN ACCORDANCE WITH THE INVESTMENT CARRIED OUT BY THE ASSESSEE HAVING BEEN BROUGHT FORWARD FROM EARLIER YEARS RESULTED IN VALUING THE CONSTRUCTION PROPER IN THAT YEAR AS RETURNED BY THE ASSESSEE. 4. T HE LEARNED DR SUBMITTED THAT IN VIEW OF THESE FACTS IT WILL BE APPROPRIATE THAT BEING EXPERT IN VALUATION THE OPINION OF THE TWO VALUATION OFFICERS BE REFERRED TO A THIRD VALUATION OFFICER IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL TO THE ASSESSING OFF ICER. HE POINTED OUT THAT THE ASSESSEE WAS REQUIRED TO SUPPORT THE VALUATION IT OFFERED AS RENDERED BY THE REGISTERED VALUER WHO HAS INDICATED THAT IN SAME YEAR OF VALUATION THE WORK DONE APPEARS TO BE LITTLE MORE THAN THE EXPENDITURE DURING THAT YEAR BY T HE OWNER BUT FINALLY THE WHOLE CALCULATED COST IS ALMOST THE SAME AS EXPENDITURE INCURRED. THE YEAR WISE VARIATION IS DUE TO THE FACT THAT THE CALCULATION HAS BEEN DONE TAKING THE WORK TO BE DONE UP TO A PARTICULAR LEVEL SUCH AS UP TO ROOF LEVEL, FINISHING BUT ACTUAL EITHER THE WORK HAS NOT BEEN DONE TO THAT LEVEL AND THE WORK DONE AND COINCIDE WITH THE ACTUAL EXPENDITURE. HOWEVER, BECAUSE HE ADOPTED THE PWD RATES AS GAZETTED BY THE ORISSA SCHEDULE OF RATES THE DIFFERENCE TALLIED WITH THAT AS RETURNED BY TH E ASSESSEE SPREAD OVER THE FOUR YEARS. HE SUPPORTED THE ORDER OF THE LEARNED CIT(A) FOR HIS PART SUBMISSIONS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ADDITION HAS BEEN MADE FOR THE IMPUGNED ASSESSMENT YEAR W HEN THE TRIBUNAL WAS PLEASED TO DIRECT THE ASSESSING OFFICER TO CONSIDER THE VALUATION ON THE BASIS OF SUBMISSIONS OF THE ASSESSEE BEFORE IT. THE LEARNED CIT(A) HAS NOT BEEN ABLE TO STATE THAT THE ASSESSEE HAS NO MATERIAL TO SUBSTANTIATE IT RELEVANCE ON TH E AMOUNT OF INVESTMENT PERTAINING TO THE I.T.A.NO. 451 OF 2010 6 IMPUGNED ASSESSMENT YEAR JUSTIFIABLE BUT AS TOTAL FIGURE HAS BEEN ESTIMATED BY THE ASSESSEES REGISTERED VALUATION OFFICER IT HAD ONLY TO BE COMPARED WITH THE DVO AS ADOPTED BY THE ASSESSING OFFICER. WE FIND THAT TH E ADDITION IS THE DIFFERENCE BETWEEN THE INVESTMENT AND VALUATION REPORT AND NO EFFORT HAS BEEN MADE EITHER BY THE ASSESSING OFFICER OR THE CIT(A) TO DISTINGUISH THE SALIENT FEATURES THAT THE TWO VALUATION OFFICERS REPORTING THE VALUATION SPECIFICALLY IN V IEW OF THE FACT THAT THE EXPENDITURE INCURRED FOR THE EARLIER YEARS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AS APPEARS IN HIS ORDER AT PAGE 2. THE EXCESS HAS TO BE TAXED IN THE IMPUGNED ASSESSMENT YEAR OR BECOMES ABSORBED IN THE EARLIER YEARS INSOFAR A S THE EXPENDITURE NOTED BY THE ASSESSEE IN A ROUGH DIARY FORM OF REGISTER AND ACCUMULATED FOR THE IMPUGNED ASSESSMENT YEAR TALLIES WITH THAT OF THE ESTIMATION SPREAD OVER BY THE DVO FOR THE FOUR YEARS. THE ALLOCATION OVER THE FOUR YEARS THEREFORE WAS TO BE IN ACCORDANCE WITH THE SPECIFIC FINDING WHEN THE CONSTRUCTION WAS STILL UNDERGOING. IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THIS INVESTMENT HAS TO BE SPREAD OVER THE EARLIER YEARS. THEREFORE, KEEPING IN MIND THE ASSESSING OFFICERS HOLDING THE V IEW THAT THE CONSTRUCTION WAS TO BE SPREAD OVER AS PER THE DEPARTMENTAL VALUATION OFFICER WAS AN ESTIMATE HIGHLIGHTING THE VALUE IN A PARTICULAR ASSESSMENT YEAR WHICH LACKED BASIC CONSIDERATION SUCH AS, NATURE OF WORK RENDERED, THE QUALITY OF SUPERFICIAL ATTACHMENTS WHETHER THE ELECTRICAL WIRING WAS OUTSIDE WALL OR INSIDE WOULD LEAD MUCH TO BE DESIRED FOR SPECIFICALLY HIGHLIGHTING THAT THIS INVESTMENT WAS FROM UNDISCLOSED SOURCES. WE HAVE PERUSED THE REGISTERED VALUERS REPORT AS WELL WHICH APPEARS TO BE ON A MORE SCIENTIFIC AND REASONABLE BASIS AS APPLICABLE TO THE FACTS OF THE ASSESSEES CASE INSOFAR AS HE HAS CONSIDERED LOCAL PREVAILING RATES AND ACTUAL NATURE AND LEVEL OF CONSTRUCTION YEAR WISE TO CONCLUDE THAT THE EXPENDITURE FOR THE IMPUGNED ASSESSME NT YEAR TALLIES WITH I.T.A.NO. 451 OF 2010 7 THAT OF THE UNCONSTRUCTED PORTION OF THAT YEAR WAS APPROPRIATE. THE LEARNED ASSESSING OFFICER GAVE RELIEF ON ACCOUNT OF SUPERVISION CHARGES THEREFORE CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE ASSESSEE HAS BEEN MAINTAINING A ROUGH DIARY FOR COMPUTING THE TOTAL EXPENDITURE ON PROPERTY WOULD NOT HAVE BEEN A GUIDING FORCE FOR THE ASSESSEES REGISTERED VALUATION REPORT FURTHER LEANS IN FAVOUR TO THE ISSUE THAT T HERE WAS NO CAUSE OF ALARM FOR INVITING INDULGENCE OF THE DVO IN THE FIRST PLACE. THE TRIBUNAL IN THE FIRST INNING THEREFORE HAD RIGHTLY NOTED THAT IT WAS A FIT CASE FOR RESTORING TO THE FILE OF THE ASSESSING OFFICER TO ALLOW A REBUTTAL ON THE DVOS REPORT WHO HAD MERELY MECHANICALLY VALUED BY APPLYING AVERAGES AND WEIGHED COST S INSOFAR AS HE NOTED THAT THE ASSESSEE HAD NO OBJECTION TO ITS VALUATION. OBVIOUSLY IF HE IS ADOPTING A PARTICULAR RATE AND BASING HIS ESTIMATION THEREUPON THE ASSESSEE WOULD NOT HAV E ANY OBJECTION ONCE THE BASIS WAS CORRECT. THE REGISTERED VALUER ON THE OTHER HAND RIGHTLY ADOPTED THE VALUATION WHICH NOW ONLY REQUIRES COMPARISON ITEM WISE W HICH OTHERWISE RE - ENFORCES NOTINGS OF THE ROUGH DIARY MAINTAINED BY THE ASSESSEE CANNOT BE FURTH ER PUT TO TEST AS SUGGESTED BY THE LEARNED DR FOR REFERENCE TO A THIRD VALUATION OFFICER. IN THE LIGHT OF THE ABOVE, THE AMOUNT SO SOUGHT TO BE TAXED IN THE IMPUGNED ASSESSMENT YEAR BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) HAS NO LEGS T O STAND ON. THE ADDITION IS, THEREFORE, DELETED. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 28 TH APRIL, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRAS AD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28 TH APRIL, 2011 ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 451 OF 2010 8 - COPY OF TH E ORDER FORWARDED TO: 1 . / THE APPELLANT : SMT.NAMITA PANDA, AT: PITHAPUR, P.O.BUXI BAZAR, CUTTACK 01 2 / THE RESPONDENT: ITO, WARD 2(3), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY