The ITO, S.K. Ward-3, Himatnagar V. M/s. Kumar Enterprise, Himatnagar

ITA 592/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57083 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 08-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Value adopted by valuation officer; Valuation report; Tax effect
• Section: 44AD; 145

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , . .!'#$, % & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER APPEAL(S) / CO BY APPELLANT VS. RESPONDENT SL. NO(S). ITA NO(S) / CO NO. ASSESSMENT YEAR(S) APPELLANT (S) RESPONDENT(S) 1. 592/AHD/2007 2003-04 ITO SK WARD-3 HIMATNAGAR M/S.KUMAR ENTERPRISE KUMAR HOUSE DURGA OIL MILL COMPOUND, HIMATNAGAR DIST.SABARKANTHA PAN : AAFFK 5658 P 2. CO NO.103/AHD/2007 (ARISING O/O ITA NO.592/A/07) 2003-04 ASSESSEE REVENUE 3. 2482/AHD/2009 2004-05 REVENUE ASSESSEE 4. 2345/AHD/2009 2004-05 ASSESSEE REVENUE REVENUE BY : SHRI SAMIR TEKRIWAL, SR.DR ASSESSEE BY : SHRI A.C. SHAH '( ) *%/ // / DATE OF HEARING : 12/12/2011 ,'- ) *% / DATE OF PRONOUNCEMENT : 31.1.2012 . . . . / / / / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : [A] FOR A.Y. 2003-04 , THE REVENUE HAS FILED AN APPEAL AND THE ASSESSEE IS IN CROSS OBJECTION ARISING FROM THE ORD ER OF THE CIT(A)-IX- AHMEDABAD DATED 30.11.2006. THE GROUND OF THE REVE NUE READS AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE ADDITION OF RS.8,99,062/- MADE ON ACCO UNT OF ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 2 - UNDERVALUATION OF COST OF CONSTRUCTION U/S.69C OF T HE I.T. ACT, 1961 ON THE BASIS OF DVOS VALUATION REPORT AND ALSO ON THE BASIS OF LOCAL APPROVED GOVT.VALUERS REPORT. 2. THE CROSS OBJECTION OF THE ASSESSEE IS AS FOLLOW S:- THE LEARNED CIT (APPEAL) ERRED IN OBSERVING PAGE NO .14, NINTH LINE FROM TOP, OBSERVED AS UNDER. IN VIEW OF THE ABOVE, THE ADDITION MADE IS DELETED AND THE A.O. WILL BE AT LIBERTY TO MAKE ADDITIONS AS REQUIRED WH EN THE PROJECT IS FOUND TO BE COMPLETE OR IN THE YEAR WHEN SUBSTANTIA LLY THE PROJECT HAS BEEN COMPLETED. THE REMARK IS UNWARRANTED SINCE THE ADDITION CAN NO T BE MADE IN THE YEAR OF COMPLETION OR IN THE YEAR IN WHICH WORK IS SUBSTANTIALLY COMPLETED. THEREFORE THE SAID REMARK BE DELETED. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) DATED 30/03/2006 ARE THAT THE ASS ESSEE-FIRM IS A CIVIL CONTRACTOR. FOR THE YEAR UNDER CONSIDERATION, RET URN WAS FILED DECLARING AN INCOME OF RS.6,960/-. IT HAS BEEN NOTED BY T HE AO THAT THE SAID RETURN WAS FILED SHOWING PROFIT @ 8% OF THE GROSS R ECEIPTS OF RS.8,70,000/- AS PRESCRIBED U/S.44AD OF THE ACT. ON THE AMOUNT OF 8% PROFIT OF RS.69,600/- THE ASSESSEE HAD CLAIMED A DE DUCTION OF INTEREST PAYMENT OF RS.62,640/- AND THE BALANCE WAS OFFERED AS PER THE RETURN. IT HAS ALSO BEEN OBSERVED BY THE AO THAT SINCE THE INC OME WAS SHOWN BY APPLYING THE PROVISIONS OF SECTION 44AD OF THE A CT, THEREFORE ADMITTEDLY THE ASSESSEE HAD NOT MAINTAINED THE BOOK S OF ACCOUNTS. THE ASSESSEE WAS ASKED TO FURNISH THE MASTER PLAN O F THE COMMERCIAL COMPLEX. AS PER AO, THE COST OF CONSTRUCTION W AS TOWARDS LOWER SIDE, ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 3 - THEREFORE THE SAID PROPERTY WAS REFERRED TO DISTRIC T VALUATION OFFICER U/S.142A OF THE IT ACT. THE ADMITTED FACTUAL POS ITION IS THAT DVO VIDE HIS VALUATION REPORT BEARING NO.2(2)/VO-II/2005-06/ 700 DATED 22/03/2006 HAS FORWARDED THE VALUATION REPORT TO TH E AO AND THEREIN DETERMINED THE COST OF CONSTRUCTION AT RS.50,47,804 /- IN THE SAID REPORT, THE DVO HAD SUBMITTED A YEAR-WISE BREAK UP OF THE A SSESSED COST OF THE CONSTRUCTION. THE DVO HAS ASSESSED THE TOTAL COST OF CONSTRUCTION AT RS.50,47,804/-, AS AGAINST THAT THE ASSESSEE HAD ST ATED THE TOTAL COST OF CONSTRUCTION AT RS.28,62,260/-. IT HAS ALSO BEEN N OTED THAT THE ASSESSEE HAS CONSTRUCTED A COMMERCIAL COMPLEX, VIZ. KUMAR HO USE SITUATED AT DURGA MILLS COMPOUND, HIMATNAGAR. ADMITTEDLY, THE PROPERTY WAS CONSTRUCTED BETWEEN THE PERIOD FROM F.Y. 2002 TO F. Y. 2006. AN ANOTHER ASPECT IN RESPECT OF THE MAINTENANCE OF BOO KS OF ACCOUNT HAS ALSO BEEN CONSIDERED BY THE AO. VIDE PARA-3 ON PAGE-8 O F ASSESSMENT ORDER, A CLEAR FINDING HAS BEEN GIVEN BY THE AO THAT THE A SSESSEE HAD FILED THE RETURN OF INCOME DECLARING INCOME U/S.44AD OF THE I T ACT AND IT WAS AFFIRMED THAT NO BOOKS OF ACCOUNTS HAVE BEEN MAINTA INED. ASSESSEE WAS SERVED WITH A NOTICE, HOWEVER UNABLE TO PRODUCE REG ULAR BOOKS OF ACCOUNTS REQUIRED TO BE MAINTAINED U/S.45 OF IT ACT . AS PER AO, ONLY A TRIAL BALANCE, COPIES OF CERTAIN LEDGER ACCOUNT AND BANK WERE FURNISHED. ACCORDING TO AO, THOSE DETAILS COULD NOT BE TREATED AS REGULAR BOOKS OF ACCOUNTS. NOT ONLY FOR A.Y. 2003-04 BUT FOR A.Y. 2 004-05 AND A.Y. 2005-06 INCOME-TAX RETURNS WERE FILED SHOWING INCOM E U/S.44AD OF IT ACT. THE AO HAS FINALLY CONCLUDED THAT FOR THE YE AR UNDER CONSIDERATION AS PER DVO THE COST OF EXPENDITURE WAS AT RS.19,65, 615/- AS AGAINST THAT ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 4 - THE ASSESSEE HAD SHOWN RS.10,66,553/-, THEREFORE TH E BALANCE OF RS.8,99,062/- WAS HELD AS UNACCOUNTED INVESTMENT U /S.69 OF IT ACT. 3. AT THE OUTSET, LD.AR MR.A.C. SHAH HAS STATED THA T FOR A.Y. 2003- 04, THE REVENUE HAS CHALLENGED THE ADDITION OF RS.8 ,99,062/- AND THE TAX ON THE SAID AMOUNT BEING BELOW RS.3 LACS, THEREFORE IN THE LIGHT OF THE CBDT CIRCULAR THIS APPEAL OF THE REVENUE IS NOT MAI NTAINABLE. COMPUTATION OF TAX PLACED BEFORE US IS AS FOLLOWS:- COMPUTATION OF TAX PAYABLE ADDITION RS.8,99,062 TAX PAYABLE @ 30% RS.2,69,719 SURCHARGE @ 10% RS. 26,971 TOTAL TAX PAYABLE RS.2,96,690 ========= TAX IS BELOW RS.3,00,000 INSTRUCTION NO.3 OF 2011 DATED 09-02-2011 [ITO 4(4) , INDORE V/S.HARISH KUMAR BHATIA PROP.M/S.POPULAR BRE D & FOOD PRODUCTS, INDORE ITA NO.502/IND/2010 A.Y. 2007- 08. ORDER DATED 28-07-2011. IT HAS HELD THAT INSTRUCTION NO. 3 OF 2011 DATED 09-02-2011 IS RETROSPECTIVE IN NATURE AND THEREFORE IS APPLICABLE TO PENDING APPEALS. THE COPY OF ORDER IS ENCLOSED. 4. THE LD.AR HAS ALSO PLACED ON RECORD AN ORDER OF ITAT INDORE BENCH IN THE CASE OF ITO VS. SHRI HARISHKUMAR BHATI A (ITA NO.502/IND/2010 - A.Y. 2007-08) ORDER DATED 28/07/2 011. ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 5 - 5. WE HAVE HEARD BOTH THE SIDES. AS FAR AS THE COM PUTATION OF TAX INVOLVED IN THE SAID APPEAL OF THE REVENUE IS CONCE RNED, NOTHING MUCH WAS CONTROVERTED BY LD.SR.DR MR.SAMIR TEKRIWAL, HO WEVER, HE HAS CONTESTED THAT FOR THE YEAR UNDER CONSIDERATION WHE N THIS APPEAL HAS ADMITTEDLY FILED ON 08/02/2007 AND THE IMPUGNED INS TRUCTION IS STATED 9/02/2011, THEREFORE SINCE THE TAX EFFECT INVOLVED IS MORE THAN RS.2 LACS, HENCE THIS PRELIMINARY OBJECTION OF LD.AR DESERVES TO BE REJECTED. WE HAVE EXAMINED THIS ASPECT IN THE LIGHT OF THE ORDER OF THE RESPECTED ITAT INDORE BENCH, WHEREIN RELIANCE WAS PLACED ON CIT VS . ASHOK KUMAR MANIBHAI PATEL 317 ITR 386 (M.P.). THERE IS AN ANO THER ASPECT IN THIS CASE THAT THE DVO HAS ASSESSED THE VALUATION WHICH WAS APPLICABLE FOR NUMBER OF YEARS; FOR REFERENCE, THE RELEVANT COMPU TATION IS REPRODUCED:- 100 FINAL VALUATION : HAVING CONSIDERED THE DETAILS/DOCUMENTS PROVIDED BY THE ASSESSEE AND THOS E GATHERED BY ME, THE COST OF CONSTRUCTION AS ASSESSED BY THIS OF FICE COMES TO RS.50,47,304/- AS AGAINST THE DECLARED COST OF CONS TRUCTION OF RS.28,62,260/- BY THE ASSESSEE BETWEEN THE PERIOD 2 002-2003 TO 2005-2006. THE YEAR-WISE BREAKUP OF THE ASSESSED COST OF CONST RUCTION BASED UPON THE YEAR WISE EXPENDITURE STATEMENT SUBM ITTED BY THE ASSESSEE IS AS UNDER:- SR. NO. PERIOD OF CONSTRUCTION EXPENDITURE AS STATED BY THE ASSESSEE (RS.) ASSESSED COST OF CONSTRUCTION (RS.) DIFFERENCE (RS.) 1. 2002-2003 10.,66,553/- 19,65,615/- 8,99,062/- 2. 2003-2004 15,17,332/- 26,44,545/- 11,27,213/- 3. 2 2004-2005 2005-2006 2,03,375/- 75,000/- 3,24,069/- 1,13,676/- 1,20,694/- 38,676/- TYOTAL COST OF CONSTRUCTION 28,82,260/- 50,47,804/- 21,85,544/- ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 6 - 5.1. SINCE THE YEAR-WISE DIFFERENCE CANNOT BE SEGRE GATED THEREFORE TAX EFFECT FOR ONE PARTICULAR YEAR MUST NOT BE MADE THE BASIS TO DISMISS AN APPEAL OF THE REVENUE IN LIMINE . THIS OBJECTION; WHICH IS RAISED FOR THE FIRST TIME BY THE RESPONDENT-ASSESSEE BEFORE US HAS NO FORCE, THEREFORE REJECTED. 6. AS FAR AS THE MERITS OF THE CASE IS CONCERNED, T HE BASIC FALLACY IN THE DVOS REPORT IS THAT THE ENTIRE CALCULATION WAS BASED UPON THE DELHI CPWD RATES APPLIED ON THE PROPERTY SITUATED AT HIMA TNAGAR; REFER PARA 8 & 8.1 OF THE DVOS REPORT. IN OUR CONSIDER ED OPINION, LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION, RELEVANT PO RTION IS REPRODUCED BELOW:- 10. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS . I FIND THAT CONSTRUCTION WORK OF THE COMMERCIAL COMPLEX WAS BEI NG UNDERTAKEN THROUGH AN ENGINEER WHO WAS RUNNING SUCH CONSTRUCTION WORK IN THE NAME OF SAMIR K. SHAH, HUF . THE SAID PERSON WAS ALSO EXAMINED BY THE ASSESSING OFFICER A ND HE HAD ALSO STATED THAT WORK WAS BEING CARRIED OUT BY HIM. IT IS ALSO SEEN THAT THE DVO HAS WORKED OUT THE ENTIRE COST OF CONS TRUCTION AFTER SHOPS ETC. WERE SOLD OUT AND IT IS NOT CLEAR WHETH ER HE HAS VALUED THE COST AFTER DEDUCTING THE EXTRA WORK UNDERTAKEN BY THE RESPECTIVE OWNERS OR NOT. THE VALUE HAS BEEN DETER MINED BY HIM OF THE ENTIRE COMPLEX. APART FROM THAT IT IS SEEN THAT, AS THE WORK WAS BEING DONE BY THE CONTRACTOR, ASSESSEE HAD ENTE RED ONLY THOSE AMOUNTS IN HIS BOOKS OF ACCOUNTS, BILLS IN RESPECT OF WHICH WERE RAISED BY THE CONTRACTOR. IT DOES NOT DENOTE THE A CTUAL WORK CARRIED OUT DURING THE RELEVANT PERIOD. THE DVO HA S SPREAD OVER THE COST OF CONSTRUCTION WORKED OUT BY HIM IN VARIO US YEARS IN THE RATIO OF AMOUNT OF COST OF CONSTRUCTION SHOWN IN TH E BOOKS OF THE ASSESSEE. THUS, YEAR-WISE BREAK-UP DOES NOT INDICA TE THE CORRECT AMOUNT OF COST OF CONSTRUCTION OF RESPECTIVE YEARS. APART FROM THAT IT IS SEEN THAT NO COMMENTS HAS BEEN OFFERED BY THE DVO OR THE ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 7 - ASSESSING OFFICER ABOUT THE FACT THAT THE RATES OF GUJARAT GOVERNMENT FOR THE RELEVANT PERIOD WERE LOWER WHICH IS EVIDENT FROM THE PAPERS FILED BY THE ASSESSEE IN RESPECT OF PROJECTS OF POLICE HOUSE CORPORATES, APMC, MAMLATDAR OFFICE, VA DALI ETC. WHICH WAS AWARDED BY GUJARAT GOVERNMENT AT A MUCH L ESSER RATE THAN WHAT HAS BEEN ADOPTED BY THE DVO. HOWEVER, I FIND THAT ASSESSEE HAS CLEARLY INDICATED AND DURING THE COURS E OF HEARING OF APPEAL, THE LD. A.R SAID THAT THEIR BASIC OBJECTION IS THAT YEARWISE COST OF CONSTRUCTION CANNOT BE CORRECTLY ASCERTAINE D AS THE ASSESSEE HAS ACCOUNTED ON EXPENDITURE ON THE BASIS OF BILLS RAISED BY THE CONTRACTOR WHICH MAY OR MAY NOT BE FOR THE A CTUAL WORK DONE DURING THE YEAR. THEREFORE, DIFFERENCE, IF AN Y, CAN BE ASCERTAINED ONLY WHEN THE PROJECT IS COMPLETED. TH ERE IS MERIT IN THE ARGUMENT OF THE ASSESSEE IN VIEW OF THE FACT TH AT WORK HAS BEEN CARRIED OUT THROUGH A CONTRACTOR AS PER AGREEMENT W HICH WAS AVAILABLE WITH THE ASSESSING OFFICER. THERE APPEAR S TO BE DIFFERENCE IN RATES OF COST OF CONSTRUCTION AS PER DVOS REPORT AND AS PER GUJARAT GOVERNMENT RATES AS WELL. CONSIDERI NG ALL THESE FACTORS, I AGREE THAT YEAR-WISE BREAK UP OF ACTUAL EXPENDITURE IS DIFFICULT TO ASCERTAIN AND THERE IS MERIT IN THE PL EA THAT ACTUAL DIFFERENCE CAN BE ASCERTAINED ONLY WHEN THE PROJECT IS COMPLETED. IN VIEW OF THE ABOVE, THE ADDITION MADE IS DELETED AND THE A.O. WILL BE AT LIBERTY TO MAKE ADDITIONS AS REQUIRED WHEN TH E PROJECT IS FOUND TO BE COMPLETE OR IN THE YEAR WHEN SUBSTANTIA LLY THE PROJECT HAS BEEN COMPLETED. IT IS APPARENT FROM THE DVO S REPORT AS WELL THAT MAJOR PORTION OF THE WORK HAS BEEN CARRIE D OUT IN THE LATER YEAR. THEREFORE, AS STATED BY THE ASSESSEE A S WELL, ADDITION SHOULD BE CONSIDERED WHEN THE CONSTRUCTION WORK HAS BEEN COMPLETED. THE ADDITION IS DELETED WITH THESE REMA RKS. 7. ON HEARING THE SUBMISSIONS OF BOTH SIDES AND AFT ER PERUSING THE CONTENTS OF THE PAPER BOOK, WE HEREBY AFFIRM THE VI EW TAKEN BY THE LEARNED CIT(APPEALS) WHO HAS CATEGORICALLY OVER-RUL ED THE METHOD OF VALUATION AS ADOPTED BY THE DVO. THE DELETION OF D IFFERENCE IN THE ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 8 - VALUATION FOR THE YEAR UNDER CONSIDERATION IS HEREB Y CONFIRMED. THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. [B] ASSESSEES CROSS OBJECTION NO.103/AHD/2007 8. AS FAR AS THE CROSS OBJECTION FOR A.Y. 2003-04 O F THE ASSESSEE IS CONCERNED, NO LEGAL OR FACTUAL ASPECT IS AGITATED B EFORE US, HENCE THE SAME IS HEREBY DISMISSED. [C] REVENUES APPEAL 9. FOR A.Y. 2004-05, REVENUE HAS RAISED THE FOLLOWI NG GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION MADE U/S.69 OF THE I T ACT WITHOUT PROPERL Y APPRECIATING THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICE R. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS.3,33,850/- AS AGAINST THE ADDITION O F RS.11,27,230/- MADE BY THE A.O. U/S.69 OF THE I T ACT. 9.1. IN THIS YEAR AS WELL, THE ASSESSEE HAS RAISED THE PRELIMINARY OBJECTION OF THE TAX EFFECT INVOLVED AND SUBMITTED THE FOLLOWING COMPUTATION:- COMPUTATION OF TAX PAYABLE ADDITION RS.3,33,850 TAX PAYABLE @ 30% RS.1,00,155 SURCHARGE @ 10% RS. 10,015 TOTAL TAX PAYABLE RS.1,10,170 ========= TAX IS BELOW RS.2,00,000 INSTRUCTION NO.5 OF 2008 DATED 15-05-2008 [217 CTR 1 (STAT)]. ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 9 - 10. WE ARE NOT IN AGREEMENT WITH THE ABOVE CALCULAT ION OF THE ASSESSEE, BECAUSE THE RELIEF GRANTED BY THE LD.CIT (A) IS TO THE EXTENT OF RS.7,93,364/- WHICH HAS ACTUALLY BEEN CHALLENGED BY THE REVENUE DEPARTMENT. HOWEVER, THIS PRELIMINARY LEGAL OBJEC TION OF THE ASSESSEE IS HEREBY OVER-RULED IN THE LIGHT OF THE REASONING ASS IGNED HEREINABOVE PARAS. AS FAR AS THE MERITS OF THE REVENUES GROUN DS ARE CONCERNED, THE SAME SHALL BE DEALT WITH HEREINBELOW WHILE DECIDING THE APPEAL OF THE ASSESSEE. [D] ASSESSEES APPEAL 11. FOR A.Y. 2004-05, ASSESSEE HAS PREFERRED AN APP EAL AGAINST THE ORDER OF THE CIT(A)-X AHMEDABAD ORDER DATED 18/05/2 009 AND RAISED THE FOLLOWING SUBSTANTIVE GROUNDS:- 1. THE REASSESSMENT IS INVALID AND BAD IN LAW SINC E THE ASSESSMENT IS REOPENED BASED ON DVO REPORT. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDI TION OF RS.3,33,850 BEING 30% OF RS.11,27,213 UNDER SEC.69 ON THE BASIS OF DVO REPORT IGNORING THE SUBMISSIONS MADE BY THE ASSESSEE IN AS MUCH AS THERE IS NO UNDERSTATEMENT OF COST, IF T HE EXPENDITURE INCURRED BY THE TENANTS ARE TAKEN INTO ACCOUNT FOR THE PURPOSE OF ASCERTAINMENT OF THE COST. 2.1. THE APPELLANT SAYS AND SUBMITS THAT THE REMAND REPORT CONFIRMS THE EXPENDITURE INCURRED BY THE TENANTS AN D THAT IF THE EXPENDITURE INCURRED BY THE TENANTS ARE TAKEN INTO ACCOUNT FOR THE PURPOSE OF ASCERTAINING THE COST, THERE IS NO UNDER STATEMENT OF THE COST. ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 10 - 2.2. THE LEARNED CIT(A) ERRED IN MAKING ESTIMATE @ 30% FOR SUSTAINING THE ADDITION MADE ON ACCOUNT OF DVO REPO RT IN AS MUCH AS THE ADDITION SHOULD HAVE BEEN DELETED ON TH E BASIS OF THE SUBMISSIONS MADE BY THE APPELLANT. 2.3. THE APPELLANT FURTHER SAYS AND SUBMITS THAT TH E LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE REPLY BY THE AS SESSEE TO SHOW CAUSE NOTICE BY AO AND THE CONTENTIONS RAISED AND THE WRITTEN SUBMISSIONS AT THE TIME OF HEARING BEFORE THE CIT(A ). 2.4. THE APPELLANT FURTHER SAYS AND SUBMITS THAT TH E REGISTERED VALUERS REPORT OUGHT TO HAVE BEEN ACCEPTED. 2.5. THE APPELLANT FURTHER SAYS AND SUBMITS THAT TH E ASSESSEE IS ORGANIZER AND DEVELOPER AND THAT THE CONSTRUCTION W ORK IS CARRIED OUT BY SAMIR K.SHAH HUF AND THAT THERE IS NO EVID ENCE OF ANY UNDERHAND DEALING BETWEEN THE ASSESSEE AND SAMIR K. SHAH HUF. 11.1 FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT DATED 6/ 12/2007 WERE THAT THE ASSESSEE-FIRM IS IN THE BUSINESS OF CIVIL CONSTRUCT ION. FOR THIS YEAR THE GROSS RECEIPTS WERE AT RS.6,35,000/- OVER WHICH 8% PROFIT WAS CALCULATED U/S.44AD OF IT ACT AMOUNT TO RS.50,800/-. BASED UP ON THE DVOS REPORT DATED 22/03/2006 BEARING NO.2(2)/VO-II/200-0 6/700, THE COST OF CONSTRUCTION FOR THE A.Y. 2004-05 WAS WORKED OUT AT RS.26,44,545/- AS AGAINST THAT THE ASSESSEE HAD DECLARED THE CONSTRUC TION EXPENDITURE AT RS.15,17,332/-. THE SAID DIFFERENCE, THUS HAS RESUL TED INTO AN ADDITION OF RS.11,27,213/- U/S.69 OF IT ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 11 - 12. LD.CIT(A) HAS EXAMINED THE DVOS REPORT AS ALSO THE SUBMISSIONS OF THE ASSESSEE AND, THEREAFTER, HELD AS UNDER:- 5.9. THE DVOS REPORT IS ALSO NOT FREE FROM VARIOU S INFIRMITIES ON ACCOUNT OF THE FACT THAT HE CARRIED OUT THE VALU ATION OF THE PROPERTY MUCH AFTER THE DATE OF THE COMPLETION BESI DES WHEN IT WAS OCCUPIED BY THE TENANTS. THE ALLEGATION OF THE APP ELLANT THAT THE VALUATION CARRIED OUT BY THE DVO INCLUDES THE INVES TMENT MADE BY THE TENANTS HAS NOT BEEN REPELLED COMPLETELY BY THE A.O. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE APPELLANT HA D ENGAGED THE SERVICES OF AN ARCHITECT, HOWEVER, THE DVO HAS INCL UDED 3% OF AMOUNT OF INVESTMENT FOR SUCH SERVICES WHILE WORKIN G OUT THE VALUATION OF THE PROPERTY. FURTHER, HE HAS ADOPTED THE DELHI CPWD RATES FOR VALUATION OF THE INVESTMENTS FOR THE PROPERTY SITUATED AT HIMATNAGAR. THE COST OF BUILDING MATER IAL AND THE LABOUR WOULD DEFINITELY BE LOWER AT HIMATNAGAR IN C OMPARISON TO DELHI. 5.10. I HAVE ALSO GONE THROUGH THE A.O.S REPORT ON THE FRESH EVIDENCES BROUGHT ON RECORD BY THE APPELLANT WITH R EGARD TO INVESTMENTS MADE IN THE PROPERTY BY THE TENANTS. T HERE IS NO DOUBT ABOUT THE FACT THAT THESE TENANTS MIGHT HAVE CARRIE D OUT EXTRA WORK ETC. AFTER THE POSSESSION OF THE PROPERTY TO SUIT T HEIR BUSINESS REQUIREMENTS. THIS WORK CONSISTS OF PLACING FALSE CEILING, WOODEN PARTITION, ETC. THE INVESTMENT ON SUCH FIXTURES HA VE NOT BEEN INCLUDED BY THE DVO IN HIS REPORT THEREFORE, THE AP PELLANTS ALLEGATION TO THAT EXTENT CANNOT BE HELD JUSTIFIED. FURTHER, IT IS SENT HAT THESE TENANTS HAVE NOT GIVEN COMPLETE DETAILS O F THEIR INVESTMENTS ON VARIOUS ITEM ADDED, REPLACED BY THEM AFTER TAKING POSSESSION FROM THE APPELLANT. FURTHER, YEAR-WISE INVESTMENT HAS ALSO NOT BEEN GIVEN. 5.11 IN VIEW OF THE FOREGOING DISCUSSIONS, A HOLIS TIC VIEW IS REQUIRED TO BE TAKEN TO MEET THE ENDS OF THE JUSTIC E. THEREFORE, KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCUMSTA NCES AS DISCUSSED ABOVE THE 70% OF THE VALUE ESTIMATED BY T HE DVO FOR THE RELEVANT PERIOD IS HEREBY CONFIRMED. THE A.O. IS D IRECTED TO ADOPT ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 12 - THE VALUE FOR THE RELEVANT PERIOD AT RS.18,51,181/- AS AGAINST RS.26,44,545/-. IN VIEW OF THIS THE ADDITION OF RS .3,33,850/- IS HEREBY CONFIRMED UNDER THE PROVISIONS OF SEC.69 OF THE ACT. 13. ON ONE HAND, FROM THE SIDE OF THE REVENUE, LD.D R HAS SUPPORTED THE DVOS REPORT AND ON THE OTHER HAND, LD.AR MR.A. C.SHAH HAS PLACED RELIANCE ON THE REGISTERED VALUERS REPORT. THE MAIN EMPHASIS WAS ON A DISPUTED FACT IN RESPECT OF ALLEGED RENOVA TION EXPENSES OF RS.19,96,590/- CLAIMED TO HAVE BEEN INCURRED BY TH E TENANTS. LD. AR HAS EMPHASISED THAT AFTER THE HANDING OVER THE POSS ESSION, CERTAIN MAJOR RENOVATIONS MADE BY THOSE TENANTS AND SINCE THE INS PECTION WAS DONE BY THE DVO AFTER THE SAID RENOVATION, THEREFORE VALUAT ION WAS DONE ON THE HIGHER FIGURE. LD.AR HAS EMPHASISED THAT IF THE AM OUNT OF EXPENDITURE INCURRED BY THE TENANTS IS REDUCED, THEN THERE IS N O DIFFERENCE IN THE TWO VALUATIONS. 14. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED. A FALLACY HAS BEEN POINTED OUT TO US IN THE DVOS REPORT THAT HE HAD ADOPTED THE DELHI CPWD RATES. THOSE RATES WER E TOWARDS HIGHER SIDE COMPARING THE RATE OF CONSTRUCTION IN A SMALL TOWN STATED TO BE HIMATNAGAR. THIS ARGUMENT OF THE ASSESSEE APPEARS TO BE LOGICAL. AN ANOTHER CONTENTION IS THAT THE RENOVATION EXPENDITU RE WAS INCURRED BY THE TENANTS AND FEW OF THEM HAVE GIVEN CONFIRMATION. REVENUES OBJECTION WAS THAT THE DVO HAD INSPECTED THE PROPERTY ON 19/1 2/2005 AND AT THAT TIME OF INSPECTION, IT WAS NOT REPORTED THAT THE EX PENDITURE ON RENOVATION, ETC. WAS INCURRED BY THE TENANTS. IN OUR CONSIDER ED OPINION, SINCE THE ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 13 - DATE OF HANDING OVER OF THE POSSESSION AND THE DATE OF INSPECTION BY THE DVO WERE THE MATTER OF PAST AND AFTER THE LAPSE OF TIME IT WAS NOT POSSIBLE EVEN FOR THE DVO TO ASCERTAIN THAT AT WHAT STAGE OF CONSTRUCTION THE PROPERTY WAS HANDED OVER TO THOSE TENANTS, HENC E IT WAS IMPRACTICAL TO ARRIVE AT A FAIR VALUATION. A HOLISTIC VIEW CAN AL SO NOT BE AFFIRMED BECAUSE THE LEARNED CIT(APPEALS) HAS TAKEN A CONSCI OUS DECISION IN A.Y. 2003-04 THAT THE DVO HAS WRONGLY APPLIED CPWD RATE FOR A PROPERTY SITUATED IN A TOWN HIMATNAGAR. THE LD.CI T(A) HAS HELD THAT 70% OF THE VALUE ESTIMATED BY THE DVO WAS TO BE CON FIRMED FOR A.Y. 2004-05 BUT THIS VIEW IS NOT IN CONSISTENT WITH THE EARLIER VIEW OF THE LEARNED CIT(APPEALS). CONSISTENCY IS A WELL WORTH IN JUDICIAL PROCESS. ONE IN RESPECT OF THAT VERY VALUATION REPORT A VIEW HAS BEEN EXPRESSED, THEN IT IS UNFAIR TO BE INCONSISTENT WITH THAT VIEW . THE PART RELIEF OF THE LEARNED CIT(APPEALS) IS HEREBY REVERSED AND DIRECT TO DELETE THE ADDITION. REVENUES GROUND IN THIS REGARD IS DISMI SSED AND ASSESSEES GROUNDS ARE ALLOWED. 15. THROUGH THESE GROUNDS TWO LEGAL QUESTIONS HAVE ALSO BEEN RAISED AND TO BE ADDRESSED AS FOLLOWS:- (I) FIRST, LD.AR CONTESTED THAT THE INTENT OF THE LEGISLATURE IS TO REFER TO THE VALUATION OFFICER ONLY WHEN THE PROCEE DINGS OF RE-ASSESSMENT OR ASSESSMENT ARE PENDING BEFORE THE AO. WHEN NO SUCH PROCEEDINGS ARE PENDING, THE AO HAS NO JURISDICTION TO REFER ANY PROPERTY FOR VALUATION. FOR THIS LEGAL PROPOSITION, CASE LAWS CITED ARE; CIT VS. UM IYA CO- OPERATIVE HOUSING SOCIETY 314 ITR 272 (GUJ) AND RAJ HANS ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 14 - BUILDERS VS. DCIT 41 SOT 331(AHD.). WE ARE NOT IMPRESSED BY THIS ARGUMENT BECAUSE OF THE REASON TH AT FOR A.Y. 2003-04, THE NOTICES OF HEARING U/S.143(2) R. W.S.143(3) OF THE ACT ALONG WITH NOTICE U/S.142(1)WERE ISSUED ON 20/06/2005 AND SERVED ON 27/06/2005. THE ADMITTED FACTUAL POSITION IS THAT THE LETTER OF REFERENCE BY THE DVO RECEIVED 22/11/2005 AS IS APPARENT FROM ONE OF THE COLUMN WHEREIN LETTER NUMBER AND DATE OF REFERENCE MENTION ED AS ITO S.K.WARD-3/143(2)/KE/2005-06 DATED 22/11/2005. THE ASSESSMENT FOR A.Y. 2003-04, THEREAFTER WAS COM PLETED U/S.143(3) ON 30/03/2006. HENCE IT WAS WRONG ON TH E PART OF THE ASSESSEE TO ARGUE THAT NO ASSESSMENT WAS PEN DING AT THAT POINT OF TIME. EVEN FOR A.Y. 2004-05, THE RET URN WAS FILED ON 25/10/2004 AND ON THE BASIS OF THE DVOS R EPORT, VIDE A NOTICE U/S.148 DATED 20/04/2006 THE CASE WAS RE- OPENED. A CASE CAN BE REOPENED IF THE AO HAS IN HIS POSSESSION A SPECIFIC INFORMATION SO AS TO FORM AN OPINION THAT THERE HAPPENED TO BE AN ESCAPEMENT OF INCOME. ON ACCOUNT OF THESE REASONS, THIS PLEA OF THE ASSESSEE IS HEREBY DISMISSED. (II) SECOND, THE LD.AR HAS PLEADED THAT WITHOUT REJ ECTION OF BOOKS OF ACCOUNT, A REFERENCE CANNOT BE MADE U/S.14 2A OF I.T. ACT. FOR THIS LEGAL PROPOSITION, CASE LAWS CI TED ARE; ITO VS. VIJETA EDUCATIONAL SOCIETY 118 TTD 382 (LUCK.), DR.SOORYAMANI DWIVEDI VS. ACIT 132 TTJ 240 (LUCK.) AND ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 15 - SARGAM CINEMA 328 ITR 513 (SC), WHEREIN AN OBSERVAT ION WAS MADE THAT THE PROVISIONS OF SECTION 142A CANNOT READ IN ISOLATION TO SECTION 145 OF IT ACT. WE HAVE AL READY OBSERVED WHILE DISCUSSING THE FACTS OF THE CASE, IN ABOVE PARAS, THAT FOR THE YEARS UNDER CONSIDERATION ADMIT TEDLY THE ASSESSEE HAD DECLARED THE NET INCOME BY TAKING THE SHELTER OF SECTION 44AD OF IT ACT. IT IS ALSO BEEN GATHERED T HAT REGULAR BOOKS OF ACCOUNT HAVE NOT BEEN MAINTAINED BY THE AS SESSEE. THE RETURN WAS FILED ON AN ESTIMATION AS PRESCRIBED UNDER THE SAID SECTION AT 8% OF THE GROSS RECEIPTS. DUE TO THIS BASIC REASON THAT NO BOOK OF ACCOUNT WERE MAINTAINE D, THEN THERE WAS NO QUESTION OF DETECTION OF ANY DEFECT I N THE BOOKS OF ACCOUNT BY THE ASSESSING OFFICER HAD ARIS EN. THIS PLEA OF THE ASSESSEE IS ALSO DISMISSED. 16. IN THE RESULT, REVENUES APPEALS FOR A.YS. 2 003-04 & 2004-05 & THE CROSS OBJECTION FOR A.Y. 2003-04 OF THE ASSESSE E ARE DISMISSED AND THE APPEAL OF THE ASSESSEE FOR A.Y.2004-05 IS ALLOW ED. SD/- S D/- ( . .!'#$ ) ( ) % ( A.K. GARODIA ) ( M UKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/ 01 /2012 /*..', .'../ T.C. NAIR, SR. PS ITA NOS.592/A/07,CO NO.103/A/20 07, ITA NO.2482/A/09 & 2345/A/09 ITO VS. M/S.KUMAR ENTERPRISE ASST.YEARS 2003-04 & 2004-05 - 16 - . ) 01 2 1- . ) 01 2 1- . ) 01 2 1- . ) 01 2 1-/ COPY OF THE ORDER FORWARDED TO : 1. 34 / THE APPELLANT 2. 0534 / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-IX/X, AHMEDABAD 5. 19! 0' , , / DR, ITAT, AHMEDABAD 6. !$ :( / GUARD FILE. .' .' .' .' / BY ORDER, 51 0 //TRUE COPY// ; ;; ;/ // / < < < < ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..30.1.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.1.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 31.1.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.1.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER