ACIT, Pondicherry V. Shri Ashok Anand, Pondicherry

ITA 50/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57889 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 25-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-01-2011
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: D ANAND
• Keywords: Rejection of books of accounts; Value adopted by valuation officer; Opportunity of being heard; Additional evidence; Valuation report

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 50/MDS/2011 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, PUDUCHERRY 605 003. VS. SHRI ASHOK ANAND, C/O. M/S. ASHOK STEELS, NO.87, VAZHVOUR ROAD, PUDUCHERRY 605 009. [PAN: ACWPA6928B] (APPELLANT) (RESPONDENT) REVENUE BY : DR. I. VIJAYAKUMAR, CIT DR ASSESSEE BY : SHRI D. ANAND, ADVOCATE DATE OF HEARING : 25 . 0 1.201 2 DATE OF PRONOUNCEMENT : 25.01.2012 ORDER PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) XII, CHENNAI DATED 29.10.2010 PASSED IN ITA NO. 256/09-10 FOR THE ASSESSMENT YEAR 2007-08. DR. I. VIJAYAKUMAR, CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI D. ANAND, ADVOCATE REPRESEN TED ON BEHALF OF THE ASSESSEE. 2. GROUND NO. 1 AND 5 OF THE APPEAL OF REVENUE ARE GENERAL IN NATURE AND HENCE REQUIRES NO ADJUDICATION BY US. 3. GROUND NO. 2 OF THE APPEAL READS AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 2 2.(A) THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) HAS ERRED IN DELETING THE ADDITION OF ` .1,92,500/- (B) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS VIOLATED THE PROVISIONS OF RULE 46A BY ENTERTAINING THE ADDITIONAL EVIDENCE PRODUCED IN SUPPORT OF AGRICULT URAL INCOME, WITHOUT REFERRING THE SAME TO THE A.O. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF AGRICULTURAL INCOME OF ` .1,92,500/- ON THE GROUND THAT IT WAS NOT SUBSTANTI ATED WITH EVIDENCES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE OBSERVING THAT THE ASSESSING OFFICER HAD NOT DEALT WITH IN DETAIL THE REASONS FOR THE DISALLOWANCE, INSPITE OF THE FACT THAT THE ASSESSEE HAS PRODUCED ALL THE RELEVANT DOCUMENTS/DETAILS/PARTICULARS FROM THE AUT HORITIES AS REQUIRED. HE ALSO OBSERVED THAT THE ASSESSEE HAS BROUGHT ON RECO RD THE EXTRACTS OF LAND REVENUE RECORDS FROM THE LOCAL ADMINISTRATIVE AUTHO RITIES, CONFIRMATION LETTERS TO THE EFFECT THAT THE ASSESSEE HAS AVAILED CREDIT FACILITY FROM PORAIYUR PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY FOR CULTIVATION OF PADDY AND THAT THE ASSESSEE SOLD THE SUGARCANE TO THE PONDICH ERRY COOPERATIVE SUGAR MILLS. HE ALSO NOTED THAT IN THE SCRUTINY ASSESSMEN T MADE FOR THE ASSESSMENT YEAR 2006-07 I.E. IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE ON SIMILA R FACTS AND GROUNDS HAD BEEN ACCEPTED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 3 6. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF AGRICULTURAL INCOME AT ` .1,92,500/- BY THE ASSESSEE ON THE GROUND THAT THE SAME WAS NOT SUBSTANTIATED WITH EVIDENCES. THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AND WHILE DOING SO, HAS CONSI DERED THE EXTRACT OF LAND REVENUE RECORDS FROM THE LOCAL ADMINISTRATIVE AUTHO RITIES, CONFIRMATION LETTERS TO THE EFFECT THAT THE ASSESSEE AVAILED CREDIT FACI LITY FROM PORAIYUR PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY FOR CULTIVA TION OF PADDY AND SALE OF SUGARCANE TO THE PONDICHERRY COOPERATIVE SUGAR MILL S. THE ONLY GRIEVANCE BEFORE US OF THE REVENUE AS ARGUED BY THE LD. DR IS THAT THESE EVIDENCES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) HAS ACCEPTED THESE EVIDENCES BY VIOLATING RULE 46A OF T HE INCOME TAX RULES WITHOUT PUTTING IT TO THE ASSESSING OFFICER FOR HIS VERIFICATION. THE LD. DR FAIRLY CONCEDED BEFORE US THAT IF THE EVIDENCES WHICH WERE FILED BEFORE THE LD. CIT(A), WHICH WERE ALSO FILED BEFORE THE ASSESSING OFFICER THAN THE REVENUE HAS NO GRIEVANCE IN RESPECT OF THE ISSUE. 7. BOTH THE PARTIES, AT THE TIME OF HEARING, HAVE CONSENTED TO THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE ASSE SSING OFFICER FOR LIMITED PURPOSES TO ASCERTAIN WHETHER THE EVIDENCES I.E. TH E EXTRACT OF LAND REVENUE RECORDS FROM THE LOCAL ADMINISTRATIVE AUTHORITIES, CONFIRMATION LETTERS TO THE EFFECT THAT THE ASSESSEE AVAILED CREDIT FACILITY FR OM PORAIYUR PRIMARY AGRICULTURAL COOPERATIVE CREDIT SOCIETY FOR CULTIVA TION OF PADDY AND SALE OF SUGARCANE TO THE PONDICHERRY COOPERATIVE SUGAR MILL S WERE FILED BEFORE THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 4 ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OR NOT. THEY ALSO AGREE TO THE EFFECT THAT IF THESE EVIDENCES AR E FOUND TO BE FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S, THEN THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION STANDS CONFIRM ED. OTHERWISE, THE ASSESSING OFFICER SHALL BE AT LIBERTY TO MAKE VERIF ICATION OF THE EVIDENCES AS PER LAW AND THEN READJUDICATE THE ISSUE AFRESH AFTE R ALLOWING REASONABLE AND PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCO RDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSE. 8. GROUND NO.3 AND 4 OF THE APPEAL OF THE REVENUE READ AS UNDER: 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) HAS ERRED IN DELETING THE ADDITION OF ` .63,97,983/-. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) XII, CHENNAI SHOULD HAVE GIVEN AN OPPORTUNITY OF BEING H EARD TO THE DEPARTMENTAL VALUATION OFFICER IN VIEW OF SEC.23(3A) OF W.T. ACT.R.W.S. 16A & 38 A OF W.T. AC T AND 142 OF I.T. ACT. 9. THE ONLY GRIEVANCE PROJECTED IN THE ABOVE GROUN DS BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF ` .63,97,983/- AND THAT HE HAS NOT GIVEN OPPORTUNITY OF HEARING TO THE DVO IN VIEW OF THE SECTION 23(3A) OF W.T. ACT AND 142A OF THE I.T. ACT. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE CONSTRUCTED A SCHOOL BUILDING AND HOSTEL BUILDING AND DECLARED THE COST OF THE SAME AT ` .3,67,75,152/- ON THE BASIS OF BOOKS OF ACCOUNT MAI NTAINED BY HIM. THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 5 ASSESSING OFFICER OBSERVED THAT THE DVO HAS OPINED THE COST OF BUILDING AT ` .5,34,49,900/- AND ADDED THE DIFFERENCE OF AMOUNT O F ` .1,63,97,983/- TO THE INCOME OF THE ASSESSEE. 11. ON APPEAL, THE LD. CIT(A) DELETED THE ENTIRE A DDITION BY OBSERVING AS UNDER: HERE, IT IS PERTINENT TO POINT OUT THAT THE ASSESS ING OFFICER HAD MATERIAL AVAILABLE BEFORE HIM EVEN BEFORE THE SCRUT INY ASSESSMENT WAS SET IN MOTION TO THE EFFECT THAT THE CBI HAD REFERRED THE PROPERTY TO THE DVO, VALUATION CELL, CHENNAI AND THE DVO HAD FORWAR DED HIS REPORT TO THE ASSESSING OFFICER. HENCE, THE CONTENTION OF THE APPELLANT THAT THE ASSESSING OFFICER SHOULD HAVE REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT BEFORE ADOPTING THE VALUE ARRIVED AT BY THE DVO, VALUATION CELL, CHENNAI CANNOT BE TAKEN AS A GROUND BY THE APPELLANT SINCE THE SAME WAS REFERRED TO THE VALUAT ION CELL, CHENNAI OF THE INCOME-TAX DEPARTMENT BY ANOTHER GOV ERNMENT AGENCY, I.E. CENTRAL BUREAU OF INVESTIGATION. IN TH IS CONNECTION, IT IS PERTINENT TO POINT OUT THAT THE APPELLANT HAD RELIE D ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF K.K. S ESHAIYER VS . CIT REPORTED IN 246 ITR 351, WHEREIN THE FACTS OF THE C ASE DIFFERED WITH REFERENCE TO THE POINT OF REFERRAL TO THE VALUATION CELL. HOWEVER, IN THE INSTANT CASE, A VALUATION REPORT WAS ALREADY AV AILABLE ON RECORD WITH ASSESSING OFFICER EVEN BEFORE THE SCRUTINY PRO CEEDINGS WERE INITIATED. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT FURNISHED WRITTEN SUBMISSIONS STATING THA T THE DVO HAD ARRIVED AT THE VALUE OF THE PROPERTY BY INCLUDING T HE FOUNDATION COST FOR ALL THE FLOORS CONSTRUCTED IN THE HOSTEL AND SC HOOL BUILDINGS. IN THIS CONNECTION, THE AR OF THE APPELLANT HAD SUBMIT TED THAT INFORMATION WAS OBTAINED UNDER RTI ACT REGARDING TH E COST OF CONSTRUCTION OF SCHOOL BUILDINGS COMPLETED IN THE S AME VICINITY AND SAME PERIOD, WHEREIN THE COST ADMITTED BY THE APPELL ANT FOR THE IMPUGNED STRUCTURE WAS MUCH HIGHER THAN THE INFORMAT ION RECEIVED UNDER THE RTI ACT AND HAD SUBMITTED RELEVANT ORDERS UNDER THE RTI TO SUBSTANTIATE HIS CONTENTIONS. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 6 THE AR OF THE APPELLANT HAD ALSO SUBMITTED A COMMON SCHEDULE OF PLINTH AREA RATES ISSUED BY THE CHIEF E NGINEER, BUILDINGS, PWD, CHEPAUK, CHENNAI WHICH APPLIES FOR THE STATE OF TAMIL NADU AND LARGER PART OF PONDICHERRY. PAGE 9 O F THE SAID ORDER CONTAINS THE RATES FOR RCC FRAME STRUCTURE AND IT I S NOTICED THAT THIS RATE IS LOWER THAN THE RATE ADOPTED BY THE APP ELLANT IN THE VALUATION OF THE SCHOOL BUILDING CONSTRUCTED BY HIM . DURING THE COURSE OF APPELLATE HEARING, THE AR OF T HE APPELLANT HAD SUBMITTED DETAILED WORKINGS ON THE VA RIATION IN THE VALUATION PRINCIPLES ADOPTED BY THE VALUATION OFFIC ER, INCOME TAX DEPARTMENT AND THE ESTABLISHED VALUES DERIVED FROM R TI APPLICATIONS MADE TO THE GOVERNMENT OF PUDUCHERRY, SPECIAL BUILDING DIVISION II OF THE PUBLIC WORKS DEPARTMENT DATED 04/FEBRUARY/2010 OF SIMILAR SCHOOLS CONSTRUCTED D URING THE SAME PERIOD IN T HE SAME VICINITY AS THAT OF THE APPELLANT. THE APPE LLANT IS ALSO A DEALER OF CEMENT AND STEEL AND CONSTRUCTI ON MATERIAL WITH A FAMILY HISTORY AS 'CLASS I CIVIL CONTRACTORS', AN D HAD SUBMITTED THE COST THAT WOULD GO INTO THE CONSTRUCTION OF THE BUILDING INCLUDED HIS MATERIAL TRADED AND SERVICES RENDERED, THUS THE PROFIT/CONTRIBUTION MARGIN SHOULD BE EXCLUDED, WHIC H ARE GIVEN IN ANNEXURE -A. AN ANALYSIS OF THE VALUATION REPORT, IS AS UNDER : TABLE - A S.NO. DESCRIPTION OF ITEM ASSESSED AREA (IN SQ.MTS.) AS PER INCOME TAX REPORT - RATE AS PER INCOME TAX REPORT - VALUE 1 SCHOOL BUILDING GROUND FLOOR 884.01 6,457 5,708,053 PORCH 36.85 3,874 142,757 FIRST FLOOR 884.01 6,457 5,708,053 SECOND FLOOR 884.01 6,457 5,708,053 THIRD FLOOR 884.01 6,457 5,708,053 TOTAL 22,974,967 I FIND MERIT IN THE CONTENTION OF THE APPELLANT THA T THE VALUE OF THE GROUND FLOOR CONSISTS OF FOUNDATION AND OTHE R REQUISITES AND HENCE, THE FIRST FLOOR, SECOND FLOOR AND THE THIRD FLOOR VALUATION CANNOT HAVE THE COMPONENTS OF GROUND FLOOR CONSTRUC TION, WHICH INCLUDES FOUNDATION, SLABS ETC. FOR EXAMPLE, IN THE TABLE 'A' CITED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 7 ABOVE, A UNIFORM FIGURE OF ` .6,457/- HAD BEEN ADOPTED FOR ALL THE FLOORS AND HENCE, THE FIRST, SECOND AND THIRD FLOOR S HAVE BEEN INFLATED WITH THE AMOUNT INVOLVED IN THE GROUND FLO OR COST I.E. COST OF FOUNDATION, SLABS ETC. THE ABOVE TABLE - A IS IN RESPECT OF SCHOOL BUILDING ALONE. HOWEVER, SIMILAR VALUATION P RINCIPLES HAVE BEEN ADOPTED FOR OTHER BUILDINGS VIZ. HOSTEL BLOCK, CANTEEN-CUM- DINING BLOCK AND GENERATOR BUILDING BY THE DISTRICT VALUATION CELL OF THE INCOME-TAX DEPARTMENT. THEREFORE, IF A 20 PER CENT DISCOUNT IS GIVEN FOR T HE FIRST, SECOND AND THIRD FLOOR COSTS, WHERE COST OF CONSTRU CTION OF GROUND FLOOR LIKE FOUNDATION, SLABS ETC IS INCLUDED, THE D IFFERENCE IN THE TOTAL VALUE WILL BE ` .59.74 LAKHS (20 PER CENT OF ` .2,98,69,323/-) IN RESPECT ALL THE BUILDINGS VIZ. SCHOOL BUILDING, HOS TEL BLOCK, CANTEEN- CUM-DINING BLOCK AND GENERATOR BUILDING, REFERRED T O ABOVE . REGARDING THE CONTENTION OF THE APPELLANT THAT THE VALUATION OFFICER SHOULD HAVE TAKEN INTO CONSIDERATION THE ST ATE PWD RATES PREVAILING IN THE STATE OF PONDICHERRY RELYING ON T HE DECISION REPORTED IN THE CASE OF K. DAMODARASWAMY NAIDU VS. ACIT REPORTED IN 59 ITD 510 WHEREIN THE 'D' BENCH OF THE HON'BLE JURISDICTIONAL ITAT HAS HELD AS UNDER :- 'IT IS ALSO TRUE THAT FOR THE PURPOSE OF CONSTRUCTI ON OF A BUILDING THE SAME COST CANNOT BE INCURRED IF ONE BUILDING IS CONSTRUCTED IN A METROPOLITAN CITY LIKE BOMBAY AND THE OTHER BU ILDING IS CONSTRUCTED IN A MOFUSSIL AREA. THEREFORE, IF THE V ALUATION OFFICER ADOPTS THE STATE PWD RATE, WHICH IS A RECOG NISED RATE BY THE STATE GOVERNMENT, FOR THE PURPOSE OF VALUING TH E PROPERTY, IT CANNOT BE SAID TO BE ERRONEOUS. NOW THE QUESTION IS THAT BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE SUBMITTING TWO TYPES OF RATES CLAIMING THAT THOSE RATES ARE STATE PWD RATES. IT I S VERY DIFFICULT FOR US TO COME TO A CONCLUSION THAT WHICH RATE IS T HE ACTUAL STATE PWD RATE. ACCORDINGLY, WE REMIT THE MATTER BACK TO THE FILE OF THE COMMISSIONER (APPEALS) TO REVALUE THE PROPERTY AFTER ASCERTAINING AND FOLLOWING THE STATE PWD RATES. THE FIRST APPELLATE AUTHORITY SHALL GIVE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES FOR COMING TO A CONCLUSION IN ACCORDANCE WITH LAW.' THE ABOVE DECISION HIGHLIGHTS THE NECESSITY OF ADOP TION OF THE STATE PWO RATES PREVAILING IN THAT PARTICULAR S TATE, I.E. THE STATE OF PONDICHERRY IN THE INSTANT CASE. THE VALUATION O F THE BUILDING AS ADOPTED BY THE CENTRAL PWO RATES AND REFLECTED IN T HE VALUATION I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 8 REPORT WAS ` .5,34,49,900/-, WHEREAS THE VALUE, IF THE RTI RATES FOR THE BUILDINGS (CONSTRUCTED AND COMPLETED) IN THE ST ATE OF PONDICHERRY IS ADOPTED, IT WOULD BE AT ` .3,22,18,700/-. HOWEVER, THE VALUE RETURNED BY THE APPELLANT WAS ` .3,67,75,152.08P. THUS, IT IS VERY CLEAR THAT THE VALUE ADOPTED IN THE RETURN OF INCOME OF THE APPELLANT FOR THE IMPUGNED YEAR IS MUCH HIGHER THAN T HE COMPETITIVE RATES ESTABLISHED IN THE SAME STATE AND DURING THE SAME PERIOD FOR AN INCOMPLETE BUILDING IN COMPARISON WITH A COMPLETED STRUCTURE. ON A PERUSAL OF ANNEXURE 'A', AND ON AN UNDERSTANDI NG OF THE CONTENTIONS RAISED BY THE APPELLANT ON SPECIFIC POI NTS OF VALUATION PRINCIPLES ADOPTED BY THE DVO, I HAVE NOTICED SOME ANOMALIES AS DETAILED BELOW. THE DVO REPORT INCLUDES COMPONENTS OF ARCHITECT FEE S, PLANNING AND STRUCTURAL DESIGN WORK CHARGES. THESE CHARGES WILL NOT APPLY IN THE APPELLANT'S CASE FOR THE REASON THAT T HE APPELLANT IS A PART OF CLASS-I CONSTRUCTION CONTRACTING FAMILY WIT H IN-HOUSE ARCHITECT AND ENGINEERS AND FURTHER THE APPELLANT I S A DEALER IN CEMENTS AND STEEL ITEMS AND MANUFACTURER OF BRICKS. HENCE, THE WHOLE PICTURE SHOULD BE SEEN FROM THE AN GLE THAT THE APPELLANT BEING A PART OF CLASS-I CONSTRUCTION ENGINEERS WITH ALL THE NECESSARY INFRASTRUCTURE AND BEING DEALER IN CE MENT AND STEEL, AND FURTHER A MANUFACTURER OF BRICKS, NECESSARY DED UCTIONS FOR SUCH A MARGIN OR CONTRIBUTION ON THE ABOVE REQUIRES TO B E ELIMINATED. IN VIEW OF THE ABOVE FINDINGS, THE VALUE ADOPTED BY THE D VO ON ACCOUNT OF ARCHITECTURAL FEES, CHARGES ON ACCOUN T PLAN AND STRUCTURAL DESIGNS AND FURTHER, THE MARGIN ON PURCH ASE OF CONSTRUCTION MATERIAL AND HIRING OF EQUIPMENT AMOUN TING ABOUT RS.37.74 LAKHS SHOULD HAVE BEEN REDUCED. THE APPELLANT HAD MAINTAINED BOOKS OF ACCOUNTS AND DEBITED VARIOUS COMPONENTS OF EXPENDITURE TOWARDS BUILDING CONSTRUCTION VIZ. INTERNAL WATER SUPPLY, SANITATIONS, CERAMIC TI LE FLOORING ETC. AMOUNTING TO ` .21.41 LAKHS AND IF A LEVERAGE OF ` .2-3 LAKHS IS CONSIDERED OVER AND ABOVE THE EXPENDITURE DEBITED B Y THE APPELLANT, THE APPELLANT'S COST WOULD COME ROUGHLY AROUND ` .25.00 LAKHS. HOWEVER, THE RATES ADOPTED BY THE DVO OF ` .49.49 LAKHS, IS TOO HIGH I.E. ANOTHER 100 PER CENT OVER AND ABOVE THE COST I NCLUDING THE LEVERAGED PROFIT ON THE SAME, WHICH LOGIC IS NOT AC CEPTABLE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 9 IN RESPECT OF THE COST COMPONENT TOWARDS 'EXTRA FOR FUTURE EXPANSION' ARRIVED AT BY THE DVO, AMOUNTING TO ` .11,58,693/-, ON A PERUSAL OF THE 'ANNEXURE -A', IT IS SEEN THAT THE C OST OF CONSTRUCTION ALREADY INCLUDES COMPONENTS THAT GO INTO THE ENTIRE STRUCTURE AND THE SCHOOL BUILDING IS COMPLETE IN ALL ASPECTS AND DOES NOT REQUIRE ANY FURTHER EXPANSION OR ADDITIONS TO BE MADE IN FU TURE. AND HENCE, THIS COST REQUIRES TO BE EXCLUDED FROM THE COST OF BUILDING. THE VALUATION REPORT OF THE OVO HAD INCLUDED CERTAIN COSTS TOWARDS BORE-WELL AND EARTH FILLING FOR THE SCHOOL BUILDING. IT IS TO BE POINTED OUT THAT THE AGRICULTURAL LAND POSSESSED BY THE APPELLANT WAS CONVERTED INTO A SCHOOL BUILDING AND THAT FOR C ARRYING ON HIS AGRICULTURAL ACTIVITY, APPELLANT HAD ALREADY BORE-W ELL INSTALLED AND ALSO THAT THE SAND (EARTH) OF THE SAME AGRICULTURAL LAND HAD BEEN UTILISED FOR FILLING ACTIVITIES FOR RAISING THE SCH OOL BUILDING. HENCE, I SEE NO SCOPE FOR INCURRING ANY EXPENDITURE ON ACCOU NT OF BORE WELL AND EARTH FILLING EXCEPT FOR ` .25,000/- WHICH WOULD HAVE GONE INTO ENGAGING WORKFORCE. IN VIEW OF THE ABOVE DETAILED DISCUSSIONS AND THE D ETAILS BROUGHT OUT IN ANNEXURE A I.E. THE DISCREPANCIE S HIGHLIGHTING THE INFLATED DVO FIGURES VIS--VIS THE ANOMALIES IN (A) FOUNDATION COST INCLUDED IN THE FIRST, SECOND AND THE THIRD FL OORS; (B) ARCHITECT FEE, CHARGES ON PLANNING AND STRUCTURAL DESIGN AND EXPENDITURE ON BORE-WELL AND EARTH FILLING; (C) THE FACT THAT THE APPELLANT BEING A PART OF CLASS I CONTRACTING FAMILY AND A DEALER IN STEEL AND CEMENTS WHICH ARE PROCURED AT COMPETITIVE RATES, I FIND MERI T IN THE FACTUAL ARGUMENTS AND CIRCUMSTANCES OF THE CASE PRESENTED B Y THE AR OF THE APPELLANT AND THE SUBMISSIONS MADE BY HIM IN RESP ECT OF THE VALUATION OF THE BUILDING WITH SPECIFIED GUIDELINES AND ESTABLISHED NORMS. AND HENCE, IT IS HELD THAT NO ADDITION IS WA RRANTED ON ACCOUNT OF DIFFERENCE IN THE VALUE AS PER THE VALUA TION REPORT OF DVO AND THE VALUE ADOPTED BY THE APPELLANT IN HIS R ETURN OF INCOME, SINCE THE APPELLANT HAD SHOWN A VALUE HIGHER THAN T HE ESTABLISHED STATE PWD RATES, WHICH REQUIRES TO BE ADOPTED AS PE R THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF K. DAMODARAS WAMY NAIDU VS. ACIT REPORTED IN 59 ITD 510. THEREFORE, THE ASSESSI NG OFFICER IS DIRECTED TO ACCEPT THE CONTENTIONS OF THE APPELLANT IN REGARD TO VALUING THE SCHOOL AND HOSTEL BUILDINGS AT THE VALU E ADOPTED BY THE APPELLANT IN THE RETURN OF INCOME, AND ACCORDINGLY, THIS GROUND OF THE APPELLANT IS ALLOWED. 12. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 10 THAT THE REFERENCE TO THE DVO WAS NOT MADE BY THE A SSESSING OFFICER, BUT WAS MADE BY THE CBI. THEREFORE, THE ASSESSING OFFIC ER WAS JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF THE DVOS REPOR T. 13. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT IN THE ABSENCE OF POINTING OUT ANY ERROR IN THE REGULARLY MAINTAINED BOOKS OF ACCOUNTS, IT WAS NOT OPEN TO THE ASSESSING OFFICER TO DEVIATE FROM THE BOOK RESULT. HE ALSO SU BMITTED THAT THE DVO HAS APPLIED CPWD RATE IN VALUING THE COST OF CONSTRUCTI ON OF SCHOOL AND HOSTEL BUILDINGS. HE SUBMITTED THAT THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. SMT. V. GAJALAKSHMI [2011] 331 ITR 216 ( MAD) AND IN THE CASE OF CIT VS. D. SUBRAMANIAN [2008] 296 ITR 348 (MAD) HAS HELD THAT WHILE VALUING THE PROPERTY TO ASCERTAIN THE COST OF CONST RUCTION, THE DVO SHOULD APPLY STATE PWD RATE AND NOT CENTRAL PWD RATE. HE, THEREFORE ARGUED THAT THE LD. CIT(A) HAS RIGHTLY HELD THAT IF STATE PWD R ATE IS APPLIED THEN THE VALUE ASCERTAINED BY THE DVO WOULD BE MUCH LESS THAN THE COST OF CONSTRUCTION OF SCHOOL AND HOSTEL BUILDINGS DECLARED BY THE ASSESSE E. 14. WE FIND THAT THE LD. CIT(A) HAS POINTED OUT VA RIOUS DEFECTS IN THE REPORT OF THE DVO. THE LD. DR COULD NOT POINT OUT A NY SPECIFIC MISTAKE IN THE FINDINGS OF THE LD. CIT(A). THE LD. DR ALSO COULD N OT CONTROVERT THE CONTENTION OF THE ASSESSEE ON THE COST OF CONSTRUCTION DECLARE D IN THE RETURN OF INCOME WAS BASED ON THE REGULARLY MAINTAINED BOOKS OF ACCO UNT IN WHICH NO DEFECT COULD BE POINTED OUT BY THE ASSESSING OFFICER. FURT HER, THE CONTENTION OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 11 ASSESSEE THAT THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE COMPARED FAVOURABLY WITH THE COST OF CONSTRUCTION DECLARED B Y NEARBY SCHOOL BUILDING COULD NOT ALSO BE CONTROVERTED BY THE REVENUE BEFOR E US. STILL, FURTHER THE CONTENTION OF THE ASSESSEE IS THAT THE HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. SMT. V. GAJALAKSHMI (SUPRA) AND IN THE C ASE OF CIT VS. D. SUBRAMANIAN (SUPRA) HAS HELD THAT THE DVO, WHILE VA LUING THE COST OF CONSTRUCTION SHOULD APPLY STATE PWD RATES. IF STATE PWD RATE IS APPLIED TO THE COST OF CONSTRUCTION DETERMINED BY THE DVO THEN THE COST DECLARED BY THE ASSESSEE FOR CONSTRUCTION OF SCHOOL AND HOSTEL BUILDING IS MUCH HIGHER THAN THE VALUE ASCERTAINED BY THE DVO, ALSO COULD N OT BE CONTROVERTED BY THE LD. DR. IN OUR CONSIDERED OPINION, THE REPORT O F THE DVO IS AN OPINION ONLY. WHEN THE COST OF CONSTRUCTION IS DECLARED ON THE BASIS OF REGULARLY MAINTAINED BOOKS OF ACCOUNTS HAVING NO DEFECT THERE IN THEN IN SUCH CASES, THE COST DISCLOSED BY SUCH BOOKS OF ACCOUNT CANNOT BE BRUSHED OUT MERELY ON THE BASIS OF OPINION OF AN EXPERT OR OPINION OF AN EXPERT CANNOT BE GIVEN PREFERENCE OVER THE REGULARLY MAINTAINED BOOKS OF A CCOUNT. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE INCLUDIN G SEVERAL DEFECTS POINTED OUT BY THE LD. CIT(A) IN THE DVOS REPORT AND IN TH E ABSENCE OF ANY SPECIFIC MISTAKE POINTED OUT IN THE FINDINGS OF THE LD. CIT( A), WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A ). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.50 5050 50/ // /M/ M/M/ M/11 1111 11 12 PURPOSE. ORDER PRONOUNCED AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES ON 25.01.2012. SD/ - SD/ - (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER CHENNAI, DATED, THE 25.01.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.