Shri. S.S. Uday Kumar, Shimoga V. ITO, Yellapur

ITA 651/BANG/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8559 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 25-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: SRINIVASAN
• Keywords: Reopening of assessment; Unexplained investment; Difference of opinion; Valuation report; Change of opinion
• Section: 143(3); 234B; 143(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.651/BANG/2009 ASSESSMENT YEAR : 2003-04 SRI S.S. UDAYKUMAR, PROP. M/S. JANATHA STEELS, III CROSS, GARDEN AREA, SHIMOGA. : APPELLANT VS. THE INCOME TAX OFFICER, WARD 1, SHIMOGA. : RESPONDENT APPELLANT BY : SHRI SRINIVASAN RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE CIT(APPEALS) ORDER DATED 11.3.09. THE ASSESSMENT YEAR CONCERNED IS 2003-04. 2. BRIEFLY STATED, THE FACTS ARE AS FOLLOWS. THE A SSESSEE IS AN INDIVIDUAL. FOR THE CONCERNED ASSESSMENT YEAR, HE FILED A RETURN OF INCOME ON 28.11.03 AND THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT ON 31.3.04. ASSESSMENT WAS REOPENED U/S. 148 OF THE ACT ON 13.1 1.06. THEREAFTER REASSESSMENT U/S. 143(3) R.W.S. 147 WAS COMPLETED O N 28.12.2007. THE ITA NO.651/BANG/09 PAGE 2 OF 7 ASSESSEE HAD CONSTRUCTED A RESIDENTIAL HOUSE AND TH E INVESTMENT IN CONSTRUCTION OF THE HOUSE WAS CLAIMED AT RS.11.04 L AKHS. THE DEPARTMENT VALUER HAS ESTIMATED THE COST OF CONSTRUCTION AT RS .17.48 LAKHS. THE LD. AO HAS ADDED BACK RS.6.00 LAKHS AS UNEXPLAINED INVE STMENT AS UNDER: COST AS PER DVO RS. 17,48,000 LESS: RELIEF FOR ARCHITECTURAL FEATURES 20,870 ------------------- RS.17,27,130 LESS: 2% ACROSS THE BOARD DEDUCTION 35,5 43 ------------------- BALANCE RS.16,91,700 LESS: SELF SUPERVISION RELIEF 7.5% 1,26,878 ------------------- BALANCE RS.15,64,822 LESS: SOURCES EXPLAINED 9,46,000 ------------------- BALANCE RS. 6,18,822 ------------------- WHILE ARRIVING AT THE UNEXPLAINED INVESTMENT, THE LEARNED ASSESSING OFFICER HAS DISBELIEVED RS.1,58,000/- REL ATING TO SOURCES OF INVESTMENT AS UNDER: 1. OWN MATERIALS USED RS. 51,060 2. BILLS PENDING 66,980 3. MATERIALS RECEIVED FROM FATHER 40,000 ----------------- RS. 1,58,040 ----------------- 3. BEFORE THE CIT(APPEALS), IT WAS SUBMITTED THAT T HE DEPARTMENT VALUATION REPORT IS DATED SEPTEMBER, 2003 AND RETUR N OF INCOME WAS PROCESSED ON 31.3.04. ON THE DATE OF PROCESSING T HE RETURN U/S. 143(1), THE AO HAD THE KNOWLEDGE OF THE VALUATION REPORT AN D HENCE REOPENING OF ASSESSMENT IS ON A MERE CHANGE OF OPINION. WITH RE GARD TO VALUATION, IT WAS SUBMITTED THAT THE AO SHOULD NOT HAVE RELIED ON THE DEPARTMENT ITA NO.651/BANG/09 PAGE 3 OF 7 VALUERS REPORT IGNORING THE VALUATION REPORT OF TH E CHARTERED ENGINEER FILED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THE LD. AO OUGHT NOT TO HAVE RELIED ON THE DEPARTMENT VALUERS REPORT, WHICH IS BASED ON CPWD RATES WHICH HAS NO RELEVANCE AT ALL IN SHIMOGA. 4. THE ASSESSEE ALSO CHALLENGED THE VALUATION REPOR T OF THE DEPARTMENT VALUER POINTING OUT VARIOUS FLAWS AND IN CONSISTENCIES IN THE SAME. IT WAS ALSO CONTENDED BY THE ASSESSEE THAT A O HAS ERRED IN REJECTING THE EXPLANATION IN RESPECT OF SOURCE OF I NVESTMENT IN RESPECT OF RS.1,58,040. 5. THE LD. CIT(APPEALS) UPHELD THE REASSESSMENT U/S . 147 VIDE HIS REASONING IN PARA 5.1 OF HIS ORDER. WITH REFERENCE TO VALUATION OF THE INVESTMENT IN CONSTRUCTION, THE ADDITION WAS REDUCE D TO RS.4,80,106 FROM RS.6,18,822 ORIGINALLY ESTIMATED BY THE AO. WITH RE FERENCE TO THE GROUND RAISED BY THE ASSESSEE IN REJECTING THE EXPLANATION IN RESPECT OF SOURCE OF INVESTMENT AMOUNTING TO RS.1,58,040, THERE WAS NO A DJUDICATION OF THE SAME BY THE LD. CIT(APPEALS). 6. THE ASSESSEE BEING AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) HAS FILED THE SECOND APPEAL RAISING THE FOLLOWING EFFEC TIVE GROUNDS: 2. THE ORDER OF RE-ASSESSMENT IS BAD IN LAW AND VO ID-AB-INITIO FOR WANT OF REQUISITE JURISDICTION ESPECIALLY, THE MANDATORY REQUIREMENTS TO ASSUME JURISDICTION U/S. 148 OF THE ACT DID NOT EXIST IN THAT THERE WAS NO FAILURE TO FILE THE RETU RN OF INCOME AND CONSEQUENTLY, THE REASSESSMENT REQUIRES TO BE CANCE LLED. 3.1 WITHOUT PREJUDICE TO THE ABOVE, THE CIT[A] IS NOT J USTIFIED IN SUSTAINING AN ADDITION OF RS.4,80,106/- AS AGAIN ST THE SUM OF RS.6,00,000/- CONSIDERED AS UNEXPLAINED INVESTMENT IN THE BUILDING BY THE A.O. UNDER THE FACTS AND IN THE CIR CUMSTANCES OF THE APPELLANTS CASE. ITA NO.651/BANG/09 PAGE 4 OF 7 3.2 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HERE WAS NO UNEXPLAINED INVESTMENT IN CONSTRUCTION AND T HAT THE ADDITION MADE BY THE LEARNED A.O. BASED ON THE REPO RT OF DVO WAS PURELY ON SUSPICION AND SURMISE, UNREASONABLE A ND THEREFORE LIABLE TO BE DELETED. 3.3 WITHOUT PREJUDICE TO THE ABOVE, THE ADDITION SUSTAI NED BY THE LEARNED CIT(A) IS HIGHLY EXCESSIVE AND LIABLE T O BE REDUCED SUBSTANTIALLY. 4. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN IGNOR ING A SUM OF RS.1,58,040/- IN RESPECT OF SOURCE EXPLAINED BY THE APPELLANT FOR THE INVESTMENT MADE IN THE CONSTRUCTIONS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 5. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER BE FORE THE HONBLE DG/CCIT, THE APPELLANT DENIES HIMSELF LIABL E TO BE CHARGED TO INTEREST U/S. 234A, 234B AND 234C OF THE ACT, WHICH REQUIRES TO BE CANCELLED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 7. THE LD. AR HAD FILED A PAPERBOOK CONTAINING 66 P AGES AND THE CONTENTS OF THE SAME IS CERTIFIED AS FILED BEFORE T HE AUTHORITIES BELOW. THE LD. AR SUBMITTED THAT THE RETURN OF INCOME FOR THE A.Y. 2003-04 WAS FILED ON 28.11.2003 AND RETURN WAS PROCESSED U/S. 143(1) ON 30.3.04. THE VALUATION REPORT OF THE DEPARTMENT IS DATED SEPTEMB ER, 2003 AND AS SUCH THE LEARNED ITO MUST HAVE HAD KNOWLEDGE OF VALUATIO N REPORT AS ON THE DATE OF PROCESSING OF THE RETURN AND AS SUCH THE RE OPENING OF ASSESSMENT ON 13.11.2006 IS WITHOUT JURISDICTION AND ARBITRARY AND IS BASED ON MERE CHANGE OF OPINION. 8. THE ASSESSEE ON MERITS URGED THAT VALUATION OF T HE DEPARTMENT SUFFERS FROM INCONSISTENCIES AS UNDER: (A) THE BUILDING IS CONSTRUCTED BY PROCURING MATERI AL DIRECTLY AND EMPLOYING LABOURERS ON PIECE WORK BASIS. HENCE , MINIMUM 15% ALLOWANCE IS TO BE GIVEN TOWARDS CONTRACTORS MARGIN OF PROFIT, SUPERVISION CHARGES. ITA NO.651/BANG/09 PAGE 5 OF 7 (B) THE ASSESSEE HIMSELF IS A DEALER IN INDUSTRIAL IRON AND STEEL GOODS FOR THE LAST TEN YEARS. HENCE, AN ADDITIONAL DEDUCTION OF 5% IS TO BE ALLOWED TOWARDS PURCHASE O F CONSTRUCTION STEEL, PURCHASE OF STEEL FOR WINDOWS A ND GRILLS. THE ESTIMATED VALUE OF STEEL CONSUMED IS A ROUND 4 TONS AT AN AVERAGE PURCHASE RATE OF RS.15,000/- PER TON. HENCE, AN ALLOWANCE OF RS.3000/- IS TO BE ALLOWED. (C) THE VALUATION OFFICER HAS ADOPTED PLINTH AREA RATES FOR PURPOSE OF VALUATION, WHEN PLINTH AREA RATES ARE AD OPTED, THE PLINTH AREA RATES MUST NECESSARILY INCLUDE COST OF FLOORING, WHEN SEPARATE RATES FOR MARBLE FLOORING I S ADOPTED, THE NORMAL COST OF FLOORING INCLUDED IN TH E PLINTH AREA RATES HAS TO BE DEDUCTED. HENCE, THE COST OF MARBLE FLOORING ESTIMATES AT RS.140098/- IS TO BE MODIFIED . (D) SIMILARLY, THE PLINTH AREA RATES MUST NECESSARI LY INCLUDE THE COST OF WATER SUPPLY, SANITARY AND ELECTRICAL INSTA LLATIONS. SO, THERE IS NO REASON TO INCLUDE SEPARATELY THE CO ST OF WATER SUPPLY AND SANITARY INSTALLATION OF RS.101468 /- AND RS.81669/- AND THIS ESTIMATED VALUES HAVE TO BE SUI TABLY MODIFIED. IT WAS ALSO SUBMITTED THAT THE AUTHORITIES BELOW AR E NOT JUSTIFIED IN IGNORING A SUM OF RS.1,58,040 IN RESPECT OF SOURCES EXPLAINE D BY THE ASSESSEE FOR INVESTMENT MADE IN THE CONSTRUCTION. IT WAS PRAYED NECESSARILY THE MATTER HAS TO BE REMITTED BACK TO THE FILE OF THE AO FOR F RESH CONSIDERATION SINCE THERE HAS BEE NO PROPER ADJUDICATION OF THE MATTER. 9. THE LD. DR RELIED ON THE FINDINGS/CONCLUSION OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS ADMITTED FACT, IN THE INSTANT CASE, THE RETURN WAS PROCESSED U/S. 143(1) AND THERE WAS NO SCRUTINY ASSESSMENT PR IOR TO ISSUANCE OF NOTICE U/S. 148 OF THE ACT. PROCESSING THE RETURN U/S. 143(1) OF THE ACT HAS NO ROLE OF INVESTIGATION OR DETAILED ENQUIRY. IN O THER WORDS, WHILE PROCESSING THE RETURN U/S. 143(1) OF THE ACT FOR RE LEVANT A.Y., NAMELY 2003- 04, THE RETURN IS ACCEPTED AND IF ANY TAX OR INTERE ST IS FOUND ON THE BASIS OF ITA NO.651/BANG/09 PAGE 6 OF 7 RETURN, AN INTIMATION SHALL BE SENT TO THE ASSESSEE SPECIFYING THE SUM PAYABLE AND SUCH INTIMATION SHALL BE DEEMED A DEMAN D ISSUED U/S. 156 OF THE ACT. THEREFORE THERE IS NO OPINION FORMED WHIL E PROCESSING THE RETURN U/S. 143(1) AND HENCE LD. ARS CONTENTION THAT NOTI CE U/S. 148 WAS ISSUED ON MERE CHANGE OF OPINION IS WITHOUT ANY BASIS. IN THIS CASE, THE INVESTMENT IN CONSTRUCTION WAS DETECTED BY THE ADIT (INV.), MANGALORE AND SWORN STATEMENT WAS RECORDED FROM THE ASSESSEE ON 2 0.9.02 AND AFTER DETECTION OF THE MATTER, THE ISSUE WAS REFERRED TO THE DVO. WE ARE ALSO FORTIFIED BY THE DECISION OF THE SUPREME COURT IN T HE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 , WHEREIN IT WAS CLEARLY STATED INTIMATION U/S. 143(1)(A) CANNOT BE TREATED AS AN O RDER OF ASSESSMENT AND THERE BEING NO ASSESSMENT U/S. 143(1)(A), THE QUEST ION OF CHANGE OF OPINION DOES NOT ARISE. AS STATED EARLIER, SECTION 143(1) OF THE I.T. ACT FOR THE RELEVANT ASSESSMENT YEAR IS FURTHER RESTRICTIVE WITH REGARD TO ADJUSTMENT AND SCOPE OF ENQUIRY WHILE PROCESSING RETURN U/S. 1 43(1). THEREFORE, IT CANNOT BE SAID WHEN THE RETURN WAS PROCESSED ON 31. 3.2004, THERE WAS ANY OPINION FORMED. FOR THE AFORESAID REASONS, WE UPHOLD THE REASSESSMENT MADE U/S. 143(3) R.W.S. 147 OF THE ACT . 11. WITH REFERENCE TO THE ISSUE ON MERITS, AS RIGHT LY POINTED OUT BY THE LD. AR, WE FIND THAT THE EXPLANATION WITH REFERENCE TO SOURCE OF INVESTMENT AMOUNTING TO RS.1,58,040 WAS NOT CONSIDERED IN THE ORDERS OF AUTHORITIES BELOW. THEREFORE THIS ISSUE IS RESTORED TO THE FI LE OF AO FOR CONSIDERATION OF THE MATTER AND FOR RECORDING A FINDING. 12. WITH REGARD TO VALUATION OF INVESTMENT IN CONST RUCTION, WE FIND THE DEPARTMENT VALUER HAS ADOPTED THE CPWD RATES WHICH DOES NOT HAVE ITA NO.651/BANG/09 PAGE 7 OF 7 APPLICATION TO THE FACTS OF THE CASE SINCE THE CONS TRUCTION IN QUESTION IS IN SHIMOGA, WHERE CPWD RATES ARE NOT APPLICABLE. WE H AVE COME ACROSS DECISIONS GIVING DEDUCTION UPTO THE EXTENT OF 15% I N CASES WHERE CPWD RATES ARE ADOPTED. IN THE INSTANT CASE, WE FIND TH E CIT(APPEALS) HAS GRANTED DEDUCTION @ 10%. MORE OVER, WE FIND VALUAT ION REPORT OF THE DEPARTMENT VALUER SUFFERS FROM MANY FLAWS AND INCON SISTENCIES. IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION FOR A PR OPER ADJUDICATION OF THE MATTER, THIS ISSUE ALSO HAS TO BE RESTORED TO THE F ILES OF AO AND ASSESSEE SHALL FURNISH ALL RELEVANT DETAILS AND OBJECTIONS. THE AO SHALL AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE B EFORE FRESH ORDERS OF ASSESSMENT ARE DRAWN UP. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE ON MERITS IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF FEBRUARY, 2010. SD/- SD/- (A. MOHAN ALANKAMONY ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE, DATED, THE 12 TH FEBRUARY, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.