ITO, Shimoga V. Smt Anasuya Naik, Shimoga

ITA 58/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0551 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: V CHANDRASEKHAR
• Keywords: Valuation report
• Section: 69B; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI K.K.GUPTA, AM AND SHRI SHAILENDRA KUMAR YADAV, JM ITA NO.58(BANG.)/2009 (ASSESSMENT YEAR : 2004-05) THE INCOME-TAX OFFICER, WARD-2, SHIMOGA APPELLANT VS SMT ANASUYA K.NAIK, B.K.NAYAK ARCARD, SOWLANGA ROAD, SHIMOGA RESPONDENT REVENUE BY : SMT JACINTA ZIMIK VASHAI ASSESSEE BY : SHRI V.CHANDRASEKHAR O R D E R PER SHRI SHAILENDRA KUMAR YADAV, JM ; THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A),HUBLI DATED 12-08-2008 WHEREIN RELIED TO ASS ESSEE WITH REGARD TO ESTIMATED ADDITION HAS BEEN OPPOSED. 2. THE ASSESSEE SMT. ANASUYA NAIK, IS AN INCOME-TAX ASSESSEE. THE ASSESSEE CONSTRUCTED A COMMERCIAL COMPLEX AND D ECLARED A TOTAL INCOME OF RS.33,60,000/-INCLUDING THE DEPOSIT OF RS .1,92,384/- GIVEN TO KARNATAKA POWER TRANSMISSION CO., LTD., THE ITO REFERRED THE MATTER TO DISTRICT VALUATION OFFICER, HUBLI WHO HAS DETERMINED THE ITA NO.58(B)/2009 2 COST OF CONSTRUCTION AT RS.46,33,766/-. BASED UPO N THE VALUATION REPORT, THE ITO RE-OPENED THE ASSESSMENT RELATING T O ASSESSMENT YEAR 2004-05 BY ISSUING NOTICE U/S 148 OF THE IT ACT. AFTER GOING THROUGH THE EXPLANATION, OBJECTIONS AND OTHER DOCUMENTS FIL ED IN RESPONSE TO THE NOTICES, BY THE APPELLANT FROM TIME TO TIME, TH E ITO FINALLY CONCLUDED THE ASSESSMENT BY LEVYING THE TAX ON RS.1 6,35,771/- U/S 69B OF THE IT ACT. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE IS IN APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED COUNSEL FOR THE ASSESSEE OBJECTED THE VALUATION AS UNDER: PLINTH AREA METHOD IS NOT APPLICABLE TO SMALL CONSTRUCTION WHEN RATES ARE NOT CONSTANT AND CONSTRUCTION WORK WAS SPREAD INTO TWO YEARS. THERE ARE NO PRESCRIBED RATES OF EACH YEAR AVAILABLE FOR SHIMOGA REGION EITHER FROM CPWD OR FROM STATE PWD. THEREFORE, APPLICATION OF PLINTH AREA METHOD ADOPTI NG CPWD RATES APPLICABLE IN OTHER AREA IS NOT CORRECT METHOD OF VALUATION MADE BY THE DVO. AO IS WRONG IN STATING THAT CROSS EXAMINATION OF DVO WAS NOT POSSIBLE SINCE THERE ARE NO PROVISIONS IN THE ACT. AO HAS BEEN OPERATING AND EXECUTING I.T PROVISION BASED ON EVIDENCE ACT WHERE HE HAS A RIGH T TO CROSS EXAMINE AND ALLOW APPELLANT TO CROSS EXAMI NE WITNESS. THUS, AO HAS FAILED IN HIS DUTIES; THEREB Y ITA NO.58(B)/2009 3 ADDITIONS ARE NOT BASED ON SOUND METHOD FOLLOWED BY THE DEPARTMENT TO CROSS EXAMINE WITNESS. SRI K. ANANTHACHAR, REGD.VALUER, HAS APPEARED BEFORE DVO AND EXPLAINED DETAILS OF CONSTRUCTION AN D ALSO FILED AN AFFIDAVIT DATED 19-11-2007 SWEARING T HAT AT THE REQUEST OF ASSESSEE HE WAS PRESENT BEFORE DV O SRI VISWANATHAN ON 15-09-2005 AND HE HAS MET HIM IN HOTEL AND EXPLAINED ALL TECHNICAL DETAILS FOR ESTIMATING COST. OBJECTION OF APPELLANT IS THAT DI STRICT VALUATION OFFICER HAS NOT CONSIDERED DETAILS READIL Y AVAILABLE ALONG WITH EVIDENCES AND BRUSHING ASIDE ACTUAL EVIDENCES, DVO HAS OPTED STRAIT LINE METHOD BASED ON ESTIMATION AND DEFENDING FALSELY THAT AS P ER CBDT CIRCULAR NO.1671 DATED 13-12-1998 HE HAS FOLLOWED PLINTH AREA METHOD TO VALUE COST WHEN ACTUALLY PRESCRIBED RATES FOR SHIMOGA REGION ARE NO T AVAILABLE. 4. FURTHER, ACCORDING TO LEARNED AR, THE DEFECT I N VALUATION REPORT BY DVO AS RAISED BEFORE FIRST APPELLATE AUTH ORITY ARE AS UNDER: I. LOCAL RATES ARE READILY AVAILABLE BUT NOT ACCE PTED BY DVO AND DIFFERENCE IS VERY HUGE. II. RATES ADOPTED ARE GLARINGLY WRONG BECAUSE GROUN D FLOOR REQUIRES FOUNDATION AND RATE IS MORE WHEREAS DVO HAS ADOPTED SAME RATE FOR GF AND FF. III. DVO HAS ESTIMATED WATER SUPPLY WHICH IS ONLY I N SECOND FLOOR AND OVER ESTIMATED SAME. ITA NO.58(B)/2009 4 IV. ESTIMATION IN RESPECT OF STAIRCASE HAS NO BASE AND IT IS OVER ESTIMATION. V. APPELLANTS HUSBAND IS A CIVIL CONTRACTOR AND CA RRIED OUT SELF SUPERVISION IN RESPECT OF PURCHASE OF MATE RIAL AND EMPLOYMENT OF LABOURS WHICH HAS SAVED TO A LARG E EXTENT BECAUSE OF EXPERT ADVICE AVAILABLE READILY T O GOOD AND CHEAP MATERIAL AVAILABLE IN LOCAL AREA. THEREFORE, SELF SUPERVISION DEDUCTION SHOULD BE ATL EAST 10% OF COST AS AGAINST ONLY 70% ALLOWED BY DVO. VI. LEGAL POSITION IS IN FAVOUR OF A PPELLANT BECAUSE JURISDICTIONAL TRIBUNAL HAS ALREADY RULED AS DISCUSSED ABOVE TO ADOPT LOCAL RATES WHEN AVAILABLE INSTEAD OF CPWD RATES. MOREOVER, PR ESCRIBED CPWD RATES AND STATE PWD RATES ARE NOT AT ALL AVAILABLE FOR SHIMOGA REGION. THUS, INSTEAD OF REL YING ON ACTUAL RATES DVO HAS ADOPTED ESTIMATED HIG HER RATES. 5. THE CIT(A) AFTER TAKING INTO CONSIDERATION THE O BJECTION ON BEHALF OF THE ASSESSEE RESTRICTED THE ADDITION TO R S.1.00 LAKH IN PLACE OF RS.16,75,771/- MADE BY THE ASSESSING OFFICER. T HE SAME HAS BEEN OPPOSED BEFORE US BY THE REVENUE, WHEREIN IT HAS BE EN SUBMITTED THAT THE CIT(A) ERRED IN GIVING MAXIMUM RELIEF TO THE AS SESSEE STATING THAT THE RATE ADOPTED BY THE DISTRICT VALUATION OFFICER ARE UNREASONABLE AND EXAGGERATED ONE AND THERE IS AN ELEMENT OF ESTI MATION INVOLVED AND THERE BY GRANTED RELIEF AS STATED ABOVE. ON TH E OTHER HAND, LEARNED AR SUPPORTED THE ORDER OF THE CIT(A). ITA NO.58(B)/2009 5 6. WE FIND THAT THE ASSESSEE HAD CONSTRUCTED A COMM ERCIAL COMPLEX DECLARING AN INVESTMENT OF RS.33,60,000/- W HEREAS THE DISTRICT VALUATION OFFICER HAS VALUED THE SAME AT R S.46,33,776/-. THE STAND OF THE ASSESSEE HAS BEEN THAT THE REGISTERED VALUER HAS APPEARED BEFORE THE DISTRICT VALUATION OFFICER EXPLAINED THE DETAILS AND ALSO FILED AN AFFIDAVIT DATED 19-11-2007 DEPOSING THAT HE WAS PERSONALLY PRESENT BEFORE DISTRICT VALUATION OFFICER SHRI VISHWANATHAN ON 15-09-2005 AND EXPLAINED ALL TECHNICAL DETAILS FOR ESTIMATING COST. THE MAIN OBJECTION ON BEHALF OF THE ASSESSEE IS THAT THE DIS TRICT VALUATION OFFICER HAS NOT CONSIDERED THE DETAILS READILY AVAI LABLE ALONGWITH THE EVIDENCES. THE RATES ADOPTED BY DISTRICT VALUATION OFFICER ARE ON HIGHER SIDE BECAUSE GROUND FLOOR AND FIRST FLOOR RE QUIRES FOUNDATION AND RATE IS MORE WHEREAS THE DISTRICT VALUATION OFF ICER HAS ADOPTED SAME RATE FOR GROUND FLOOR AND FIRST FLOOR. THE DIS TRICT VALUATION OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE WATER SUPPLY FA CILITY. IN RESPECT OF STAIRCASE NO BASIS FOR OVER ESTIMATION AND TO THE F ACT THAT THE ASSESSEE HUSBAND A CIVIL CONTRACTOR CARRIED OUT SELF SUPERVI SION IN RESPECT OF PURCHASE OF MATERIAL AND EMPLOYMENT OF LABOURS HAS SAVED A LARGE EXTENT BECAUSE OF HIS EXPERT ADVICE AVAILABLE READI LY TO GOOD AND CHEAP MATERIAL AVAILABLE IN LOCAL AREA. IN THE ABOVE BA CKGROUND, THE CIT(A) WAS RIGHT IN OBSERVING THAT THE DISTRICT VALUATION OFFICER HAS FAILED TO ITA NO.58(B)/2009 6 ADOPT THE FACTUAL RATES BY IGNORING THE READILY AVA ILABLE RATES FOR SHIMOGA REGION. THE DISTRICT VALUATION OFFICER ADO PTED IMAGINARY RATES INSTEAD OF AVAILABLE RATES. FURTHER, THE ASS ESSING OFFICER WAS NOT JUSTIFIED TO STATE THAT THERE IS NO PROVISION IN IN COME-TAX ACT FOR CROSS EXAMINATION. IT IS AGAINST THE PRINCIPLES OF NATUR AL JUSTICE. THE ACTUAL DIFFERENCE AS CLAIMED BY ASSESSEE AND AS PER THE DI STRICT VALUATION OFFICER ARE AS UNDER: THE RATE DIFFERENCE PARTICULARS DISTRICT VALUATION OFFICER SHRI K.ANANTACHARYA DIFFERENCE GROUND FLOOR 13,73,302 10,86,025 2,87,277 1 ST FLOOR 12,16,105 08,51,792 3,64,313 2 ND FLOOR 16,99,535 12,22,430 4,77,105 TOTAL 42,88,942 31,60,247 11,28,695 AS PER VALUATION OF SHRI K.ANANTACHARYA, REGD.VALUE R, COST OF FIRST FLOOR VALUE IS LESS THAN 27.51% WHEREAS, THE DIFFER ENCE AS PER DISTRICT VALUATION OFFICER IS ONLY 11.45% FOR WHOLE OF GROUN D FLOOR AND FIRST FLOOR DIFFERENCE IS MORETHAN 10%, EVEN IF REDUCTION IS GIVEN OF 10% IN TOTAL VALUE TAKEN TO FIRST FLOOR OF RS.12,16,015/- WHICH WORKS OUT TO RS.1,21,610/- WHICH IS ON HIGHER SIDE. IN RESPECT OF SECOND FLOOR , IT WAS FOUND BY THE CIT(A), THAT A BIG DIFFERENCE BETW EEN VALUE AND ACTUAL RATE AS PER SHRI K.ANANTHACHARYA WHICH IS AT RS.12,22,430/- AND VALUE ADOPTED BY DISTRICT VALUATION OFFICER IS RS.16,99,535/- ITA NO.58(B)/2009 7 DIFFERENCE WORKS OUT TO RS.4,77,105/-. IN RESPECT OF SUPERVISION CHARGES THE DISTRICT VALUATION OFFICER HAS ALLOWED 7% AND AS PER THE STAND OF THE AUTHORIZED REPRESENTTIVE THE SAME WAS TAKEN AT 10% WHICH CREATES A DIFFERENCE OF 3% WHICH WORKS OUT TO RS.1,47,994/- ON 49,33,223/- AS WORKED OUT BY DISTRICT VALUATION OFF ICER. ALL THESE DIFFERENCE WORKS OUT TO RS.13,98,296/- AND AFTER CO NSIDERING THE VALUE DECLARED BY THE ASSESSEE AS PER BOOKS FOR CURRENT Y EAR AND AFTER EXCLUDING INVESTMENT CONSIDERED FOR NEXT YEAR OF RS .2,89,180/- FOUND THAT THE DISTRICT VALUATION OFFICER REPORT IS EXAGG ERATED ONE. THUS, IT WAS RIGHTLY FOUND THAT THERE IS AN ELEMENT OF ESTIM ATION INVOLVED IN ALL VALUATION REPORTS. THE CONCEPT OF SELF SUPERVISION CHARGES HAS NOT BEEN APPRECIATED BY THE ASSESSING OFFICER AND THE B ENEFIT OF THE SAME SHOULD HAVE BEEN GIVEN TO THE ASSESSEE BY HIM. WE FIND THAT THE BANGALORE BENCHES, SMC IN CASE OF SHRI S.BANGARAPPA (HUF) VS DCIT IN ITA NO.135(B)/2003 WHEREIN THE ADDITION MADE BY THE ASSESSING OFFICER AFTER REJECTING THE REGD. VALUER REPORT REF ERRED THE MATTER TO DISTRICT VALUATION OFFICER WERE HELD NOT JUSTIFIED. WE ALSO FIND THAT THE BANGALORE BENCH IN ITA NO.858(B)/1994 IN CASE OF S HRI B.N.KALAKSHA SHANBHAG (HUF) VS ITO HELD THAT IN REGARD TO ESTI MATION OF COST OF CONSTRUCTION IN KARNATAKA, THE KARNATAKA PWD RATES ARE APPLICABLE. WE ALSO FIND THAT SIMILAR VIEW HAS BEEN TAKEN BY TH E BANGALORE BENCH ITA NO.58(B)/2009 8 IN THE CASE OF LATE S. KOTI RAO VS ITO. IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A), WHO HAS GRANTED RELIEF TO THE ASSESSEE BY HOLDING THE RATE ADOPTED BY THE DISTRICT VALUATION OFFICER ARE UNREASONABLE AND EXA GGERATED ONE. ACCORDINGLY, THE SAME IS UPHELD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE (K.K.GUPTA) (SHAIL ENDRA KUMAR YADAV) ACCOUNTANTMEMBER JUDICIAL MEMBER PLACE: BANGALORE DATED: 2009 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER AR, ITAT, BANGALORE