ACIT, Kota V. ASSOCIATED ENGINEERS & ALLIED PRODUCTS, Kota

ITA 680/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5201 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R PARIKH
• Assessee Lawyers: B L BHOJWANI CA DHK
• Keywords: Unexplained investment; Business income; Business expenditure; Rectification of order; Principle of natural justice; Question of law; Fair market value; Valuation report; Reason to believe
• Section: 142(1); 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE:SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, J M VK;DJ VIHY LA-@ ITA NO. 680/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 THE ACIT CIRCLE- 1 KOTA CUKE VS. M/S. ASSOCIATED ENGINEERS & ALLIED PRODUCTS 97-(B1), INDRAPRASTHA INDUSTRIAL AREA, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAOFA 3157 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI G.R. PARIKH, JCIT -DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : B.L. BHOJWANI, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03/06/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/06/2016 VKNS'K@ ORDER PER LALIET KUMAR, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 08-07-2014 FOR THE ASSESSMENT YEAR 2010-11 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN:- (I) DELETING THE DISALLOWANCE OF RS. 25,94,176/- MA DE BY THE AO ON ACCOUNT OF REMUNERATION TO PARTNERS. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 2 (II) DELETING THE ADDITION OF RS. 70,433/- MADE BY THE AO ON ACCOUNT OF PROFIT ELEMENT IN SALES RETURNS OF R S. 4,01,101/- (III) RESTRICTING THE DISALLOWANCE MADE BY THE AO O UT OF TRANSPORTATION EXPENSES FROM RS. 53,074/- TO RS. 26 ,537/- (IV) DELETING THE ADDITION OF RS. 28,77,280/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRU CTION OF HOTEL BUILDING. 2.1 APROPOS GROUND NO. 1 OF THE REVENUE WHEREIN THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED AS DEDUCTION ON ACCOU NT OF REMUNERATION / SALARY U/S 40(B)(V) OF THE ACT AT RS. 25,94,176/- I N THE PROFIT AND LOSS ACCOUNT. THE AO ON PERUSAL OF THE RECORD AND PARTNE RSHIP DEED DATED 15- 04-2008 OF THE FIRM FOUND THAT THE SUM OF RS. 12,97 ,088/- EACH WAS PAID TO TWO PARTNERS I.E. SHRI RAM NIWAS SHARMA (50% SHA RE) AND SHRI RAJEEV SHARMA (50% SHARE). THE AO OBSERVED FROM CLAUSE 6 O F THE PARTNERSHIP DEED AS TO REMUNERATION PAID TO TWO PARTNERS, AS U NDER:- THAT ALL THE PARTNERS REFERRED TO ABOVE SHALL BE WORKING PARTNERS AND ALSO ENTITLED TO SALARY AT THE END OF EACH YEAR AS PER SECTION 40(B) OF THE I.T. ACT. HOWEVER, THE PARTNERS MAY BE THEIR MUTUAL CONSENT A DD, AMEND MODIFY, REDUCE AND CANCEL THIS CLAUSE IN ANY MANNER AS MAY BE MUTUALLY DECIDED BETWEEN THEM FROM TIME T O TIME. THE AO THUS OBSERVED THAT IT IS CLEAR THAT THE FIRM NEITHER SPECIFIED THE AMOUNT OF REMUNERATION / SALARY TO EACH WORKING PAR TNER NOR LAID DOWN ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 3 THE MANNER OF QUANTIFYING SUCH REMUNERATION / SALAR Y. THE AO OBSERVED THAT IN SUCH CASES WHERE NEITHER THE AMOUNT HAD BEE N QUANTIFIED NOR EVEN THE LIMIT OF TOTAL REMUNERATION HAD BEEN SPECIFIED BUT THE SAME HAD BEEN LEFT TO BE DETERMINED BY THE PARTIES AT THE END OF THE ACCOUNTING PERIOD AND IN SUCH CASES PAYMENT OF REMUNERATION/ SALARY A S PER SECTION 40(B) TO PARTNERS CANNOT BE ALLOWED AS DEDUCTION IN THE COMP UTATION OF FIRMS INCOME. THE AO OBSERVED THAT AS PER CBDT CIRCULAR N O. 739 DATED 25- 03-1996, FOR THE ASSESSMENT YEAR, SUBSEQUENT TO ASS ESSMENT YEAR 1996-97, NO DEDUCTION U/S 40(B)(V) WILL BE ADMISSIBLE UNLESS THE PARTNERSHIP DEED EITHER SPECIFIES THE AMOUNT OF REMUNERATION PAYABLE TO EACH INDIVIDUAL WORKING PARTNER OR LAYS DOWN THE MANNER OF QUANTIFY ING SUCH REMUNERATION. THE AO TO THIS EFFECT ISSUED A LETTER TO ASSESSEE FIRM ON 21- 12-2012 AND SHOW CAUSED AS TO WHY THE SAID SUM OF R S. 25,94,176/- SHOULD NOT BE DISALLOWED AS DEDUCTED ON ACCOUNT OF SALARY/ REMUNERATION WORKING PARTNERS AS PER SECTION 40(B)(V) FROM THE F IRMS INCOME. THE LD. AR OF THE ASSESSEE VIDE LETTER DATED 9-01-2013 REPL IED AS UNDER:- CENTRAL BOARD OF DIRECT TAXES CANNOT ISSUE A CIRC ULAR WHICH GOES AGAINST THE PROVISIONS OF THE ACT. THE CBDT CA N ONLY CLARIFY ISSUES BUT CANNOT INSERT TERMS AND CONDITIO NS WHICH ARE NOT PART OF THE MAIN STATUTE. IT IS NOT NECESSA RY THAT THE DEED SHALL PROVIDE FOR MANNER OF QUANTIFICATION OF THE REMUNERATION PAID TO EACH INDIVIDUAL PARTNER. THE H IMACHAL PRADESH HIGH COURT IN THE CASE OF DURGA DAS DEVKI N ANDAN HELD THAT THE CBDT CIRCULAR TO BE INVALID BEING INC ONSTANT ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 4 WITH THE TERMS OF SECTION 40(B). A READING OF SECTI ON 40(B) WOULD ENTAIL THAT THE STATUTORY REQUIREMENT IS THAT THE REMUNERATION TO PARTNERS SHALL BE AUTHORIZED BY, AN D IN ACCORDANCE WITH, THE TERMS OF THE PARTNERSHIP DEED. THEREFORE, IF THE DEED PROVIDES THAT THE REMUNERATI ON TO PARTNERS SHALL BE IN ACCORDANCE WITH THE LIMITS LAI D DOWN IN SECTION 40(B) OF THE ACT THEN IT SHALL BE TAKEN AS SUFFICIENT COMPLIANCE WITH THE PROVISION. FURTHER IN CASE OF EQBAL AHMED &CO. VS. ITO (2005) 3(II), ITCL (KOL.A-TRIBUNAL ) HELD THAT THE REMUN ERATION TO WORKING PARTNERS COULD NOT BE DISALLOWED SIMPLY ON THE GROUND THAT ITS QUANTIFICATION WAS NOT MENTIONED IN DEED OF PARTNERSHIP AND IT SIMPLY STATED THEREIN THAT THE S AME WILL NOT BE BEYOND THE PERMISSIBLE LIMIT AS SPECIFIED UNDER THE ACT. THE AO BY CONSIDERING THE FACTS AND REPLY OF THE LD . AR OBSERVED THAT IT IS PROVED THAT THE ASSESSEE FIRM ADMITTED THAT THEY DID NOT SATISFY THE AMOUNT OF REMUNERATION PAYABLE TO THEIR INDIVIDUAL WORKING PARTNER OR LAY DOWN THE MANNER OF QUANTIFYING SUCH REMUNERATION. T HE AO FURTHER OBSERVED THAT EVEN THE ASSESSEE FIRM HAD MENTIONED IN THEIR PARTNERSHIP DEED THAT EACH WORKING PARTNER ALSO ENTITLED TO SAL ARY AT THE END OF EACH YEAR AS PER SECTION 40(B) OF THE ACT. ON THE OTHER HAND, THE REMUNERATION PAYABLE WAS LEFT TO FUTURE MUTUAL AGREEMENT BETWEEN THE PARTNERS WHO ARE ENTITLED TO DECIDE AND QUANTIFY THE QUANTUM. THE AO OBSERVED THAT THE REMUNERATION CAN BE ANY AMOUNT OR FIGURE BUT NOT MO RE THAN THE MAXIMUM AMOUNT STATED IN SECTION 40(B)(V) OF THE AC T. THE AO THUS OBSERVED THAT THE REQUIREMENTS OF SECTION 40(B)(V) ARE NOT SATISFIED. THE ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 5 AO RELIED ON THE CASE OF SOOD BRIJ & ASSOCIATES VS. CIT XIII, NEW DELHI 15 TAXMAN.CO.76(2011) (DEL) IN THIS FACTS OF THE CASE. ULTIMATELY, THE AO DISALLOWED A SUM OF RS. 25,94,176/- AND AD DED TO THE TOTAL INCOME OF THE ASSESSEE. 2.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY O BSERVING AS UNDER:- IN MY OPINION, IT WAS SUFFICIENT TO MENTION THAT REMUNERATION WOULD BE COMPUTED AS PER SECTION 40(B) OF THE I.T. ACT. THE ASSESSEE COMPUTED THE REMUNERATION AS PER SECTION 40(B) OF THE I.T. ACT AND CREDITED 50% EACH TO BOTH THE P ARTNERS. THE ASSESSEE DID NOT DISPUTE THE FACT THAT REMUNERATION WAS PAID TO THE PARTNERS. SECONDLY THIS AMOUNT WAS TAXABLE IN THE H ANDS OF PARTNERS AND IF THE SAME IS DISALLOWED IN THE HANDS OF ASSES SEE FIRM THEN IT WOULD RESULT IN DOUBLE TAXATION. CONSIDERING THE AB OVE, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 25,94,176/-. 2.3 NOW THE REVENUE IS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A) 2.4 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO AND PRAYED THAT THE LD. CIT(A) HAS WRONGLY ALLO WED THE CLAIM OF THE ASSESSEE AMOUNTING TO RS. 25,94,176/- WHICH HAS BEE N DISALLOWED BY THE AO ON ACCOUNT OF REMUNERATION TO PARTNERS. 2.5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. THE LD. AR OF THE ASSESSEE RELIED ON FOLLOWING CASE LAWS TO THIS EFFECT. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 6 (I) EQBAL AHMED & COMPANY VS. ITO (2005) 1 SOT 202 (KOL-TRIBUNAL) (II) DURGA DAS DEVKI NANDAN VS. ITO (2011) 200 TAXM AN 318 (H.P.) (III) ACIT VS. SUMAN CONSTRUCTION (2009) 121 TTJ 84 7 (PUNE) (IV) CIT VS. ASIAN MARKETING (2012) 254 CTR 453 ( RAJ.) (V) MEDICARE INVESTMENTS LTD. VS. JCIT , 14 ITD 3 4 (DEL.) 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE COMP UTED THE REMUNERATION AS PER SECTION 40(B) OF THE ACT AND CREDITED 50% EACH TO BOTH THE PARTNERS. THE AO DID NOT DISPUTE THE FACT THAT REMU NERATION WAS PAID TO THE PARTNERS. SECONDLY, THIS AMOUNT WAS TAXABLE IN THE HANDS OF PARTNERS AND IF THE SAME IS DISALLOWED IN THE HANDS OF ASSES SEE FIRM THEN IT WOULD BE RESULT IN DOUBLE TAXATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LAWS CITED BY THE LD. AR O F THE ASSESSEE, WE FEEL THAT THE LD. CIT(A) HAS RIGHTLY DIRECTED THE AO TO DELETE THE ADDITION. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS SUSTAINED. THUS GROUND NO. 1 OF THE REVENUE IS DISM ISSED. 3.1 APROPOS GROUND NO. 2 OF THE REVENUE WHEREIN THE AO OBSERVED THAT ASSESSEE'S SALES RETURN OF RS. 4,01,101/- WAS REDUCED FROM TOTAL SALES ACCOUNT OF RS. 4,14,09,339/-EXCLUDING TAXES AND TRA NSPORTATION CHARGES. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 7 THE AO OBSERVED THAT THE ASSESSEE FIRM COULD NOT PR ODUCE ANY DETAILS OF ITEM WHICH WAS TREATED AS SALES RETURN BY THEIR CUS TOMERS DURING THE YEAR. THE ASSESSEE EVEN DID NOT SUBMIT ANY DOCUMENT WHETH ER THOSE ITEMS WERE USED FOR RESALE OR REUSE. THE AO BROUGHT THIS FACT INTO THE NOTICE AND SHOW CAUSED AS TO WHY THE SUM SHOULD NOT BE TREATED AS SALES DURING THE YEAR AND PENAL PROCEEDINGS SHOULD NOT BE INITIATED. THE LD. AR SUBMITTED THE REPLY BEFORE THE AO AS UNDER:- THE PAYMENT OF RS. 3,30,287/- (RAPP), RS. 24,575 /- (KAPP), RS. 46,239 (KAIGA) RECEIVED SHORT/ DEDUCTED FROM SALE BILL IN THE PRECEDING PREVIOUS YEAR, BUT THE ADVICE / COMMUNICATION RECEIVED DURING THE FINANCIAL YEAR 2009-10 WHILE TH E AWARDER HAS MADE ADVICE IN FINANCIAL YEAR 2006-07 WHICH WAS REC EIVED LATE. THE ADJUSTMENT HAS BEEN MADE DURING THE YEAR 2009-1 0 AS A SALES RETURN. THESE SALES ARE TAKEN IN FULL VALUE IN RESP ECTIVE PREVIOUS YEARS ALSO. THE RELEVANT DOCUMENT IS ALSO FILED IN EARLIER REPLY IN THIS REFERENCE. THE AO THUS OBSERVED THAT THE ASSESSEE FIRM ADMITTE D THAT THE MATTER WAS RELATED TO FINANCIAL YEAR 2006-07 BUT INFORMATION W AS RECEIVED LATE. IT IS ALSO CLEAR THAT THE FIRM HAD REDUCED THE ACTUAL SAL ES IN THIS FINANCIAL YEAR DEBITING THE OLD ISSUES WHICH IS NOT RELATED THIS Y EAR. THEREFORE, THE AO ADDED A SUM OF RS. 70,433/- TO THE TOTAL INCOME O F THE ASSESSEE APPLYING GROSS PROFIT RATE OF THE CASE I.E. RS. 70,433 (17.5 6% OF 4,01,101). 3.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION OF RS. 70,433/- MADE BY THE AO. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 8 3.3 NOW THE REVENUE IS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). 3.4 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO AND PRAYED THAT THE LD. CIT(A) HAS WRONGLY ALLO WED THE CLAIM OF THE ASSESSEE AMOUNTING TO RS. 70,433/-. 3.5 THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND PRAYED THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO BASED ON CAREFUL CONSIDERATION OF THE FACTS AND THE APPLICABLE LAW.TE LD. AR OF THE ASSESSEE RELIED ON DECISION OF HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. DINESH KUMAR GOEL (2011) 331 IT R 10 (DELHI) TO THIS EFFECT. 3.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT EMERGES FROM THE RECORDS TH AT THE ASSESSEE FURNISHED THE DETAILS OF THE AMOUNTS DEDUCTED BY IT S CLIENTS IN EARLIER YEARS AND THE SAME WAS COMMUNICATED TO THE ASSESSEE DURIN G THIS YEAR WHICH CANNOT BE TREATED AS BAD DEBT. HENCE, WE FIND NO RE ASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS SUSTAINED. THU S GROUND NO. 2 OF THE REVENUE IS DISMISSED. 4.1 APROPOS GROUND NO. 3 OF THE REVENUE WHEREIN BRI EF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD DEBITED FROM PROFIT AND LOSS ACCOUNT OF RS. 5,30,674/- UNDER THE HEAD OF TRANSPORTATION COST. T HE AO ASKED THE ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 9 ASSESSEE TO PRODUCE ALL THE BILLS AND VOUCHERS AND THE SAME WERE PRODUCED BY THE ASSESSEE. THE AO ON PERUSAL OF THE SAME OBSERVED THAT THE ASSESSEE HAD INCURRED EXPENSES FOR DIESEL PURCH ASE FOR VEHICLE AT SITE FOR EXECUTION OF ITS CONTRACT JOB DURING THE YEAR. MOST OF THE VOUCHERS WERE SELF MADE WHICH WERE NON-VERIFIABLE IN NATURE. THE AO OBSERVED THAT THERE IS EVERY POSSIBILITY TO INFLATE EXPENDIT URE WHILE MAKING SELF MADE VOUCHERS FOR SHOWING LOW PROFITS. THEREFORE, T HE AO DISALLOWED A SUM OF RS. 53,067 (I.E. 10% OF RS. 5,30,674) ON EST IMATE BASIS BEING NON- BUSINESS EXPENSES AND ADDED THE SAME TO THE TOTAL I NCOME OF THE ASSESSEE.. 4.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO REDUCED THE ADDITION FROM RS. 53,067/- T O RS. 26,537/- BY OBSERVING AS UNDER:- 4.32 CONSIDERING THE NON-VERIFIABLE NATURE OF EXPENSES, SOME DISALLOWANCE WAS JUSTIFIED. DISALLOW ANCE OF RS. 26,537/- (5%) IS CONSIDERED REASONABLE AND CONFIRME D. THE AO IS DIRECTED TO DELETE BALANCE DISALLOWANCE OF RS. 26,5 37/-. THIS GROUND OF ASSESSEE IS THEREFORE, PARTLY ALLOWED. 4.3 NOW THE REVENUE IS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). 4.4 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO AND PRAYED THAT THE LD. CIT(A) HAS WRONGLY RE DUCED THE CLAIM OF ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 10 THE ASSESSEE FROM RS. 53,074/- TO RS. 26,537/- UNDE R THE HEAD OF TRANSPORTATION EXPENDITURE. 4.5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT( A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS. 26 ,537/-. 4.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FEEL THAT THE LD. CIT(A) HA S RIGHTLY RESTRICTED THE ADDITION TOWARDS TRANSPORTATION EXPENDITURE TO THE EXTENT OF RS. 26,537/- CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE. HENCE, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF THE LD. CIT(A) WHICH IS SUSTAINED. THUS GROUND NO. 3 OF THE REVENU E IS DISMISSED. 5.1 APROPOS GROUND NO. 4 OF THE REVENUE WHEREIN BRI E FACTS OF THE CASE ARE THAT THE ASSESSEE HAD INVESTED A SUM OF RS . 60,48,554/- FOR CONSTRUCTION OF HOSTEL BUILDING DURING THE YEAR. TH E LD. AR HAD PRODUCED THE COPY OF LEDGER WITH BILLS. THE AO ON PERUSAL OF THE BOOKS OF ACCOUNT WITH BILLS AND VOUCHERS FOUND THAT THAT THE ASSESSE E HAD MAINTAINED CASH VOUCHES ONLY ON LABOUR CHARGES PAID OF VARIOUS TYPE S OF CIVIL CONSTRUCTION JOB WHICH WERE TOTALLY NON-VERIFIABLE IN NATURE. TH E DEPUTED HIS INSPECTOR TO ENQUIRE ABOUT THE CONSTRUCTION AND PRESENT STATU S OF HOSTEL BUILDING WHO REPORTED THAT THE PLOT OF THE BUILDING IS DIVID ED INTO TWO PARTS. IN ONE ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 11 PART, M/S. ASSOCIATED ENGG. AND ALLIED PRODUCTS IS CARRYING ITS BUSINESSS LIKE FABRICATION OF IRON ITEMS AND IN SECOND PART T HERE IS RUNNING A HOSTEL I.E. NEHA RESIDENCY. THE AO ALSO GATHERED THE I NFORMATION THAT THE HOSTEL IS RUNNING FROM THE YEAR 2010 AND SUCH HOSTE L HAS BEEN GIVEN ON LEASE. THE HOSTEL BUILDING IS IN THREE STORIES AND THERE ARE APPROX 69 ROMS AND THE BUILDING IS WELL FURNISHED AND THE ASSESSEE MADE HUGE INVESTMENT. THE AO THUS LOOKING TO THE SIZE OF CONSTRUCTION AND VALUATION SHOWN BY THE ASSESSEE OBSERVED THAT ACTUAL CONSTRUCTION COST AND INVESTMENT IN FURNISHING / FITTING SHOULD BE MORE THAN WHAT HAD B EEN DECLARED BY THE ASSESSEE. THE AO THUS REFERRED THE MATTER TO VALUAT ION CELL FOR DETERMINATION OF FAIR MARKET VALUE OF IMMOVABLE PRO PERTY U/S 142A OF THE ACT. THE DVO HAD SENT HIS REPORT ON 25-03-2013 WHER EIN VALUE OF THE BUILDING WAS DETERMINED T RS. 98,01,608/- AGAINST R S. 60,48,54/- DECLARED BY THE ASSESSEE FOR THE F.Y. 2009-10 RELEVANT TO T HIS A.Y.. THE COPY OF VALUATION REPORT ALONGWITH SHOW CAUSE LETTER NO. 34 93 AND NOTICE U/S 142(1) WAS ISSUED TO THE ASSESSEE AND THE AO DIRECT ED TO SUBMIT HIS EXPLANATION. THE LD. AR OF THE ASSESSEE REPLIED TO THE QUERY OF THE AO WITH FOLLOWING SUBMISSIONS. (I) THE DIFFERENCE OF COST OF CONSTRUCTION IS DUE T O THE COST INDEX RATES APPLIED BY THE DVO BASED ON CPWD DSR 2007 ADJ USTED INDEX INSTEAD OF PWD BSR ,KOTA CIRCLE. DEDUCTION OF 20% FOR ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 12 TAKING CPWD DSR RATS IN COMPARISON TO PWD BSR, KOTA CIRCLE SHOULD BE ALLOWED WHICH COMES TO RS. 21,40,000/- AP PROX. (II) THE ASSESSEE HAS DONE SELF SUPERVISION REGARDI NG CONSTRUCTION. THE DVO HAS ALLOWED 7.5% FOR SELF SUP ERVISION WHILE THE GENERAL PRESUMPTION IS TO ALLOW 12.5 TO 1 5% ON SELF SUPERVISION . DIFFERENCE DUE TO THIS FACT IS RS. 85 ,398/- APPROX. (III) THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT WITH ALL THE SUPPORTING VOUCHERS AND BILL OF MATERIALS E TC. AND ALSO THE SAME HAS BEEN AUDITED BY THE CHARTERED ACCOUNTANT. (IV) THE ASSESSEE IS IN SIMILAR LINE OF BUSINESS TH EREFORE, FULL KNOWLEDGE REGARDING THE SUPPLIES OF MATERIAL, LABOU R ETC. AVAILABLE AT CHEAPER RATE IS KNOWN TO THE ASSESSEE. REMAINING DIFFERENCE IN DVOS VALUATION AND SHOWN BY THE ASSESSEE ARISES DU E TO CHEAP PROCUREMENT OF RAW MATERIAL, LABOUR ETC. (V) THE ASSESSEE RECEIVED NOTICE ON DATED 26-03-201 3 TO FILE REPLY ON DATED 28-03-2013 WHICH IS VERY SHORT NOTIC E PERIOD TO CLARIFY ON DIFFERENCE IN COST OF CONSTRUCTION BY TH E DVO AND THE ACTUAL EXPENSES INCURRED IN CONSTRUCTION THIS IS AG AINST THE PRINCIPLES OF NATURAL JUSTICE. (VI) IT WOULD BE UNFAIR AND AGAINST THE PUBLIC POLI CY TO PROCEED ON THE ASSUMPTION THAT THE ASSESSEE IS DISHONEST AN D HE MUST HAVE SUBMITTED AN INCORRECT AMOUNT OF EXPENSES. CONSIDERING THE ABOVE FACTS OF THE ASSESSEE, THERE WAS NO REASON TO ADD ANY AMOUNT ON THE PRESUMPTION THAT TH E COST OF CONSTRUCTION WAS LOW, AND THEREFORE, ADDITION CANNO T BE MADE ONLY ON THE BASIS OF THE DVOS REPORT. 5.2 THE AO CONSIDERING THE SUBMISSION OF THE ASSESS EE DID NOT FIND THE SANE AS ACCEPTABLE. THE AO OBSERVED THAT IT WAS U NDISCLOSED INVESTMENT OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION . THE AO OBSERVED THAT AS THE VALUATION DONE BY THE TECHNICALLY COMPE TENT PERSON IS BINDING ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 13 ON THE DEPARTMENT AND IN VIEW OF THE DECISION OF HO N'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ELEGANT HOME (P) LTD. 259 ITR 232 (RAJ.), THE DIFFERENCE OF RS. 37,53,054/- WAS ADDED U/S 69 OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. 5.3 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CIT(A) WHO PARTLY DELETED THE ADDITION BY FOLLOWING OBSERVATION. I HAVE GONE THROUGH ASSESSEE'S SUBMISSION AND AO S FINDINGS. ALTHOUGH THE AO DID NOT REJECT THE BOOKS OF ACCOUNT SPECIFICALLY READING THE FINDINGS GIVEN BY AO, INDICATED THAT AO HAD REASON TO BELIEVE THAT THERE WAS UNDER REPORTING OF EXPENSES. THEREFORE, IT IS HELD THAT R EFERENCE TO DVO U/S 142A WAS JUSTIFIED. IT HAS BEEN HELD THAT HON'BLE RAJASTHAN HIGH COURT / ITAT THAT TO ARRIVE AT VALUATION AS PER RAJASTHAN P WD, A DEDUCTION OF 20% SHOULD BE ALLOWED ON CPWD RATES. AS THE ASSESSEE IS IN SIMILAR LINE OF BUSINESS, HIG HER DEDUCTION OF 12.5% FOR SELF SUPERVISION IS CONSIDER ED REASONABLE. CONSIDERING THE ABOVE, THE VALUE OF THE PROPERTY IS COMPUTED AS UNDER:- VALUE AS PER DVOS REPORT RS. 91,46,305 ADD: SELF SUPERVISION DEDUCTION ALLOWED BY DVO (7. 5) RS. 7,45,593 TOTAL RS. 98,91,898 LES: 20% TO ARRIVE AT PWD RATES RS. 19,78,380 BALANCE RS. 79,13,518 LESS: 12.5% FOR SELF SUPERVISION RS. 9,98,190 BALANCE RS. 62,29,328 ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 14 LESS: VALUE DECLARED BY ASSESSEE RS. 60,48,554 DIFFERENCE IN VALUE RS. 8,75,774 THEREFORE, ADDITION OF RS. 8,75,774/-IS CONFIRMED. THE AO IS DIRECTED TO DELETE BALANCE ADDITION OF RS. 22,21,97 7/-. THIS GROUND OF APPEAL IS THEREFORE, PARTLY ALLOWED. 5.4 NOW THE REVENUE IS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). 5.5 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO AND PRAYED THAT THE LD. CIT(A) HAS WRONGLY DE LETED THE ADDITION MADE BY THE AO ON ACCOUNT OF UNEXPLAINED INVESTMEN T IN CONSTRUCTION OF HOSTEL BUILDING.. 5.6 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE THROUGH HIS WRITTEN SUBMISSION PRAYED AS UNDER:- IT MAY BE MENTIONED AT THE OUTSET THAT WHILE THE LD. CIT (A) HAS DIRECTED TO DELETE ADDITION OF RS. 22,21,977/- I N CONSTRUCTION OF HOSTEL BUILDING, THE DEPARTMENT HAS MENTIONED THIS FIGURE AT RS. 28,77,280/-. THERE IS THUS A DIFFERENCE OF RS. 6,55,303. AS PER THE ORIGINAL VALUATION REPORT, THE CONSTRUCTION EXPENDITURE WAS DETERMINED BY THE DVO AT RS. 98,01,608. THE DVO LATER REVISED THE VALUATION REP ORT, AS PER WHICH THE TOTAL COST WAS DETERMINED AT RS. 91,46,305/-. T HE LD. AO HAS DULY PASSED RECTIFICATION ORDER UNDER SECTION 154, COPY WHEREOF IS ATTACHED HEREWITH AS ANNEXURE E. THEREFORE, THE CORRECT FIGU RE IN THIS GROUND OF APPEAL WILL BE RS. 22,21,977/-. IN THE APPEAL ORDER, THE CORRECT FIGURE HAS BEEN ADOPTED. A. THE LD. AO GROSSLY ERRED IN REFERRING THE CASE F OR VALUATION TO DVO WITHOUT REJECTING THE BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE FIRM. AS MANY AS NINE JUDGMENTS WERE CITED AS PER WHICH SUCH AN ACTION WAS NOT CORRECT. THESE JUDGMENTS AR E MENTIONED ON PG. NO. 14 OF THE APPEAL ORDER. THE ASSESSEE HAS MAINTA INED COMPLETE BOOKS OF ACCOUNT REGULARLY AND GOT THEM AUDITED BY CHARTERED ACCOUNTANTS. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 15 THE LD. CIT (A) HAS GIVEN A VERY VAGUE AND UNCONVIN CING REASONING ON PG. NO. 17 OF THE APPEAL ORDER, IN AN ATTEMPT TO JUSTIFY THE WRONG ACTION OF THE LD. AO. THE SAID REASONING IS R EPRODUCED BELOW: ALTHOUGH THE AO DID NOT REJECT THE BOOKS OF ACCOUN T SPECIFICALLY, READING THE FINDINGS GIVEN BY THE AO INDICATED THAT AO HAD REASON TO BELIEVE THAT THERE WAS UNDER-REPORTING OF EXPENSES. THEREFORE, IT IS HELD THAT REFERENCE TO DVO U/S 142A WAS JUSTIFIED. THUS, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE REFERENCE TO THE DVO U/S 142A WAS JUSTIFIED. IT IS, THEREFORE, P RAYED TO KINDLY DECIDE ACCORDINGLY. B. THE HONBLE ITAT, JAIPUR BENCH HAS CONSISTENTLY HELD THAT THE PWD RAJASTHAN RATES SHOULD BE APPLIED FOR ASCERTAINING COST OF CONSTRUCTION INSTEAD OF CPWD RATES. THEREFORE, THE LD. CIT (A) HAS RIGHTLY APPLIED THE RATES OF PWD RAJASTHAN INSTEAD OF CPWD RATES, AND HAS OBSERVED AS UNDER: IT HAS BEEN HELD BY HONBLE RAJASTHAN HIGH COURT/ ITAT THAT TO ARRIVE AT VALUATION AS PER RAJASTHAN P WD, A DEDUCTION OF 20% SHOULD BE ALLOWED ON CPWD RATES. RAVI MATHUR & OTHERS V. ACIT (1999) 22 TAX WORLD 245 (ITAT, JAIPUR BENCH) [ ITSSA NO. 2316/JP/96; DATE OF ORDER 28.01.1999] WHETHER ANY OTHER VALUE OF CONSTRUCTION CAN BE SUBSTITUTED FOR THE VALUE MENTIONED IN THE ACCOUNT BOOKS WITHOUT REJECTING THE ACCOUNT BOOKS AND IN ABSENCE OF ANY SPECIFIC AND COGENT MATERIAL ON RECORD. HELD NO. WHETHER COST OF CONSTRUCTION SHOULD BE DETERMINED O N LOCAL PWD RATES ? HELD YES. FURTHER HELD THAT CPW D VALUATION SHOULD BE SCALED DOWN BY 20%.ALSO HELD TH AT IN FACTS OF THE CASE, 12% SELF-SUPERVISION ALLOWANC E WOULD BE JUSTIFIABLE. THE AO HAS WRONGLY PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ELEGANT HOMES (P.) LTD. [2003] 259 ITR 232 (RAJASTHAN). COPY OF THE JUDGME NT IS ATTACHED AS ANNEXURE F . IN THIS CASE, THE HONBLE ITAT HAD APPLIED THE RAJASTHAN PWD RATES FOR WORKING OUT THE COST OF CON STRUCTION OF ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 16 PROPERTY FOR INCOME-TAX PURPOSE, INSTEAD OF CPWD RA TES. THE HONBLE HIGH COURT OBSERVED CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE, AND THE FACT THAT IT IS BASICALLY A QUESTION OF FACT BASED ON FINDINGS OF FACTS, WE ARE NOT INCLINED TO INTERFERE WITH THE VIEW TAKEN BY THE TRIBUNAL ON THE ISSUE OF INVESTMENT IN CONSTRUCTION . IT IS, THEREFORE, PRAYED THAT THE DECISION OF THE L D. CIT (A) ON THIS ISSUE MAY KINDLY BE SUSTAINED. C. THE LD. CIT (A) HAS RIGHTLY ALLOWED DEDUCTION OF 12.5% FOR SELF-SUPERVISION ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND HAS OBSERVED AS UNDER: AS THE ASSESSEE IS IN SIMILAR LINE OF BUSINESS, HI GHER DEDUCTION OF 12.5% FOR SELF-SUPERVISION IS CONSIDER ED REASONABLE. IT IS, THEREFORE, PRAYED THAT THE DECISION OF THE L D. CIT (A) ON THIS ISSUE MAY KINDLY BE SUSTAINED. THE JUDGMENT OF THE HONBLE ITAT, JAIPUR BENCH B, JAIPUR, VIDE COMPOSITE ORDER, IN THE CASE OF (1) ITO, KOTA V. NITESH MAHESHWARI, KOTA AND (2) ITO, KOTA V. MANISH MAHESHWARI, KOTA (2010) 44 TAX WORLD 131 (COPY OF THE JUDGMENT IS A TTACHED AS ANNEXURE G) SQUARELY SUPPORTS THE THREE ISSUES INVO LVED IN THE ASSESSEES CASE AND DISCUSSED ABOVE IN RELATION TO THE DETERMINATION OF COST OF CONSTRUCTION, VIZ., A. REFERRING THE CASE FOR VALUATION TO DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEE WAS HELD TO BE WRONG. B. 20% DEDUCTION WAS ALLOWED FOR APPLYING THE CPWD RATES FOR DETERMININGG THE COST OF CONSTRUCTION OF PROPERTY, INSTEAD OF RAJASTHAN PWD RATES. C. 12% DEDUCTION WAS ALLOWED FOR SELF-SUPERVISION W HILE DETERMINING THE COST OF CONSTRUCTION. SIMILARLY, THE JUDGMENT OF THE HONBLE ITAT, JODHPU R, JODHPUR, IN THE CASE OF SHRI KAMAL KISHORE BAHETI, JODHPUR V. DCIT, CENTRAL CIRCLE-2, JODHPUR ( 2012) 48 TAX WORLD 155 SUPPORTS THE FIRST TWO ISSUES INVOLVED IN THE ASSESSEES CASE AND DISCUSSE D ABOVE IN RELATION TO THE DETERMINATION OF COST OF CONSTRUCTION. IT IS, THEREFORE, PRAYED THAT THE DECISION OF THE L D. CIT (A) ON THIS GROUND MAY KINDLY BE SUSTAINED. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 17 5.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE AO IN THIS GROUND HAS OBSE RVED THAT THE ASSESSEE HAD INVESTED A SUM OF RS. 60,48,554/- FOR CONSTRUCT ION OF HOSTEL BUILDING DURING THE YEAR. THE ASSESSEE HAD PRODUCED COPY OF LEDGER WITH BILLS AND VOUCHERS BUT THE AO OBSERVED THAT THE ASSESSEE HAS MAINTAINED CASH VOUCHERS ONLY ON LABOUR CHARGES PAID TO VARIOUS TYP ES OF CIVIL CONSTRUCTION JOB WHICH ARE NON-VERIFIABLE IN NATURE . THE AO OBSERVED THAT THE PLOT OF BUILDING IS DIVIDED IN TWO PARTS I.E. O NE PART PERTAIN TO M/S. ASSOCIATED ENGG. AND ALLIED PRODUCTS WHEREIN ASSESS EE IS CARRYING ON ITS BUSINESS LIKE FABRICATION OF IRON ITEMS AND ON THE SECOND PART THE ASSESSEE IS RUNNING A HOSTEL IN THE NAME AND STYLE OFNEHA RESIDENCY. THIS HOSTEL HAS BEEN RUNNING FROM THE YEAR 2010 AND IT I S ON LEASE. THE AO DEPLOYED HIS INSPECTOR TO MAKE ENQUIRY ABOUT THE HU GE INVESTMENT OF THIS HOSTEL BUILDING IN THREE STORIES WHEREIN APPROX. 69 ROOMS ARE CONSTRUCTED. THE INSPECTOR MADE ENQUIRY ABOUT THE HOSTEL BUILDIN G. ACCORDINGLY THE AO SENT THE MATTER TO THE DVO FOR DETERMINING THE F AIR MARKET VALUE OF THE IMMOVABLE U/S 142A OF THE ACT. THE DVO HAS SENT HIS REPORT DETERMINING THE VALUE OF THE PROPERTY OF HOSTEL BUI LDING AT RS. 98,01,608/- INSTEAD OF RS. 60,48,554/- WHICH WAS COMMUNICATED T O THE ASSESSEE. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE THE AO ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 18 DETERMINED THE VALUE OF PROPERTY OF HOSTEL BUILDING AT 98,01,608 AND TAKE OUT THE DIFFERENCE OF THE PROPERTY DETERMINED BY TH E DVO MINUS DECLARED I.E. (RS. 98,01608 MINUS RS. 60,48,54 = RS. 37,53,0 54) IN VIEW OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. ELEGANT HOME (P) LTD. , 259 ITR 232. HENCE, THE AO ADDED THE DIFFERENCE AMOUNT OF RS. 37,53,054/- ADDED U/S 69 O F THE ACT TO THE TOTAL INCOME OF THE ASSESSEE. AS PER RECORD IN THE OR IGINAL VALUATION REPORT, THE CONSTRUCTION EXPENDITURE WAS DETERMINED BY THE DVO AT RS. 98,01,608 HOWEVER LATER ON DVO LATER REVISED THE VA LUATION REPORT, AS PER WHICH THE TOTAL COST WAS DETERMINED AT RS. 91,4 6,305/-. THEREAFTER. AO HAS PASSED RECTIFICATION ORDER UNDER SECTION 154 . THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS. 8,75,774/- AND DIRECT ED THE AO TO DELETE THE BALANCE ADDITION OF RS. 22,21,977/-. WE FIND THAT I N THE MATTER OF C.S. DANIEL VS DEPUTY COMMISSIONER OF INCOME-TAX, CENT RAL CIRCLE [2013] 40 TAXMANN.COM 524 (KERALA) HONBLE KERLA HIGH COUR T HELD AS UNDER :- 6. WE PLACE RELIANCE ON AN EARLIER DECISION OF THIS CO URT IN I.T.A. NO.109 OF 2008 DATED 21.10.2008 WHEREIN THEIR LORDSHIPS AT PARAGRAPH 5 ONWARDS OPINED THAT THE VALUATION OF PROPERTY HAS TO BE MAD E KEEPING IN VIEW THE KERALA PWD RATES AND NOT CENTRAL PWD RATES. IT IS A LSO PERTINENT TO MENTION THAT IN EACH STATE DEPENDING UPON THE SCARC ITY OF THE MATERIAL AVAILABLE AS WELL AS THE COST OF LABOUR, THE COST O F CONSTRUCTION MAY VERY FROM STATE TO STATE, THEREFORE IT IS JUST AND PROPE R TO PLACE RELIANCE ON THE LOCAL PWD RATES RATHER THAN CENTRAL PWD RATES IN OR DER TO ARRIVE AT THE VALUATION OF THE PROPERTY . ULTIMATELY THE ASSESSING OFFICER WILL HAVE THE OT HER MATERIALS SUPPLIED BY THE ASSESSEE TO KNOW WHAT EXA CTLY WAS THE MATERIAL USED AND WHAT WAS THE PREVAILING RATE OF SUCH MATERIAL A PART FROM ASCERTAINING THE RATES FROM PWD DEPARTMENT WHICH RATE VARIES FROM TI ME TO TIME. ULTIMATELY ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 19 THE ASSESSING OFFICER WOULD TAKE INTO CONSIDERATION WHAT WAS THE PREVAILING RATES OF PWD IN THE STATE OF KERALA ADOPTED FOR THE PARTICULAR ASSESSMENT YEAR IN ORDER TO ARRIVE AT THE COST OF RENOVATION AND CO NSTRUCTION CLAIMED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. IN THAT VIEW OF THE MATTER, WE ARE OF THE OPINION, THE ORDERS OF THE THREE AUTHORITIES BASED ON THE CENTRAL PWD RATES IS SET A SIDE BY REMANDING BACK THE MATTER TO THE ASSESSING OFFICER WHO SHALL RELY UPON THE REPORT OF THE DISTRICT VALUATION OFFICER AT THIRUVANANTHAPURAM SO FAR AS V ALUE OF THE RENOVATION AND COST OF CONSTRUCTION FOR THE ASSESSMENT YEAR 2006-0 7 AND THEN PROCEED IN ACCORDANCE WITH THE PROCEDURE CONTEMPLATED. SIMILARLY THE HON'BLE JURISDICTION HIGH COURT IN THE MATTER OF SMT. PREM KUMARI MUDRIA VS. ACIT, 303 ITR 128 HELD AS UNDER:- 9. IT IS REQUIRED TO BE NOTED THAT IN THE INSTANT CA SE, THERE WAS NO EVIDENCE AVAILABLE IN ANY MANNER REGARDING THE COST OF CONSTRUCTION AND, THEREFORE, IN ORDER TO FIND OUT THE REAL VALUE OF COST OF CONSTRUCTION, THE ASSESSING OFFICER ADOPTE D SUCH COURSE. IT IS REQUIRED TO BE NOTED THAT ON THE BASIS OF SAME, EVEN THE CIT(A) UPHELD THE ONLY CONT ENTION RAISED BY THE APPELLANT IN CONNECTION WITH GRANTING 20 PER CENT DEDUCTION FROM TOTAL VALUE OF COST OF CONSTRUCTION AS ESTIMATED BY THE DVO. IN FA CT, THE ONLY ARGUMENT WHICH WAS CANVASSED BY THE ASSESSEE B EFORE THE CIT(A) WAS IN CONNECTION WITH THE VALUATION ON THE BASIS OF CPWD RATES. THE FIRST APP ELLATE AUTHORITY, I.E., CIT(A) ACCEPTED THE SAID SUBMISSION AND 20 PER CENT DEDUCTION WAS ALSO GRANT ED. HOWEVER, BEFORE THE TRIBUNAL FOR THE FIRST TIME , THE APPELLANT ARGUED THAT THE INITIATION OF REASSESSMEN T PROCEEDINGS WAS NOT COMPETENT AS THIS WAS NOT THE PROCEEDINGS INITIATED ON THE BASIS OF SEARCH. THE T RIBUNAL HAVE FOUND THAT NO SUCH GROUND WAS RAISED A T ANY POINT OF TIME BEFORE THE APPELLATE AUTHORITY NOR AN Y SUCH ISSUE WAS RAISED BEFORE THE CIT(A). THE TRIB UNAL SPECIALLY FOUND IN PARA 4 OF THE ORDER THAT THE CIT (A) HAS ACCEPTED THE ASSESSEES REQUEST WITH REGARD TO THE APPLICATION OF PWD RATES AND ALLOWED DEDUCTION OF 2 0 PER CENT FROM THE VALUATION MADE ON THE BASIS OF CPWD RATES TO SCALE IT DOWN SO AS TO BE AT PAR WITH THE STATE PWD RATES. THE SAID PROCEDURE WAS FOUND TO BE CONSISTENTLY FOLLOWED BY THE JODHPUR BENCH OF TH E TRIBUNAL. IT IS REQUIRED TO BE NOTED THAT AGAINST THE ORDER OF CIT(A), EVEN THE REVENUE HAD ALSO PREFERRE D APPEALS AS THE REVENUE WAS NOT SATISFIED WITH THE ORDER OF CIT(A) IN CONNECTION WITH GRANTING DEDUCTION OF 20 PER CENT IN THE COST OF CONSTRUCTION. THE APPEAL S OF THE DEPARTMENT CAME FOR HEARING BEFORE JODHPUR BENC H OF THE TRIBUNAL IN CONNECTION WITH ASSESSMENT YEA RS 1995-96, 1996-97 AND 1998-99. THE JODHPUR BENCH OF THE TRIBUNAL VIDE ORDER DATED 23-7-2004 CAME TO THE FOLLOWING CONCLUSION : 'THE ONLY DISPUTE INVOLVED IN THESE REVENUE APPEALS IS RELATING TO THE RELIEF ALLOWED BY THE LEARNED C IT(A) IN RESPECT OF COST OF CONSTRUCTION. THE LEARNED CIT (A) HAS HELD THAT THE REVENUE WAS NOT JUSTIFIED IN APPLYING THE CPWD RATES IN COMPARISON TO PWD RATES. A DEDUCTION OF 20 PER CENT HAS THUS BEEN DIRECTED TO BE ALLOWED. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY T HE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. DINESH TALWAR [2004] 265 ITR 344 . RESPECTFULLY FOLLOWING THE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT, THE APPEALS OF THE REVEN UE ARE HEREBY DISMISSED.' 10. IT IS NOT IN DISPUTE THAT THE APPEALS OF THE REVEN UE WERE DISMISSED AFTER HEARING THE PRESENT APPELLANT WHO WAS RESPONDENT IN THE AFORESAID APPEA LS WHEREBY THE ORDER IN FAVOUR OF THE ASSESSEE WAS CONFIRMED. IT IS SURPRISING TO NOTE THAT AT THE TIM E OF HEARING OF THE APPEAL, THE ASSESSEE HAD NOT PO INTED OUT THAT THERE WERE CROSS-APPEALS WHICH ARE REQUIRED TO BE HEARD TOGETHER. WE ARE OF THE OPINION THAT WHEN THERE ARE TWO CROSS-APPEALS PENDING BEFORE THE DIFFERENT AUTHORITY OR TRIBUNAL OR THE COURT, THE EFFORTS SHO ULD BE MADE TO SEE THAT SUCH APPEALS ARE HEARD TOGETHER SO THAT BY A COMMON JUDGMENT, THE SAME CAN BE DECIDED . BE THAT AS IT MAY, IT IS NOT IN DISPUTE THAT AGAINS T THE VERY IMPUGNED ORDER OF CIT(A), THE REVENUE PR EFERRED THREE APPEALS FOR DIFFERENT ASSESSMENT ORDERS WHICH WERE DISMISSED BY HOLDING THAT DEDUCTION O F 20 PER ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 20 CENT HAS BEEN RIGHTLY GIVEN IN FAVOUR OF THE ASSES SEE. IT IS REQUIRED TO BE NOTED THAT THERE IS NO MA TERIAL ON RECORD TO SHOW THAT ANY REQUEST WAS MADE BY THE PRE SENT APPELLANT THAT HIS CROSS-APPEALS SHOULD BE HEA RD AND DECIDED TOGETHER AND THE APPELLANT ALLOWED THE TRIBUNAL TO DECIDE REVENUES APPEALS WHICH WERE DECIDED PRIOR IN TIME AND THE SAME WERE DISMISSED A ND THE ORDER OF THE CIT(A) WAS CONFIRMED. IN ANY CA SE WE ARE NOT DISMISSING THIS APPEAL ON THE AFORESAID GROUND AS WE ARE CONVINCED THAT REASONING GIVEN BY THE TRIBUNAL IN THE IMPUGNED ORDER IS BASED ON FINDING OF FACT AND IT IS A WELL-REASONED ORDER. THE CIT(A) HAS CATEGORICALLY FOUND THAT THE ONLY POINT WHICH WAS A RGUED BY THE ASSESSEE WAS TAKEN INTO CONSIDERATION AND THE RELIEF AS PRAYED FOR BY THE APPELLANT BEFORE TH E CIT(A) WAS GRANTED BY THE CIT(A). IT IS TRUE THAT BEFORE THE TRIBUNAL THE APPELLANT CAN RAISE QUESTION OF LA W FOR THE FIRST TIME, I.E., QUESTION OF LAW CAN BE RAISED AT ANY STAGE. HOWEVER, WHEN ON FINDING OF FACT, THE AP PELLATE AUTHORITY, I.E., CIT(A) AS WELL AS THE TRIBUNAL HAS FOUND THAT VALUATION MADE ON THE BASIS OF GIVIN G DEDUCTION OF 20 PER CENT FROM THE VALUATION MADE BY THE DVO IS THE CORRECT VALUATION AND SUCH FINDINGS OF FACT CANNOT BE DISTURBED BY THIS COURT AS THIS T AX APPEAL CAN BE ENTERTAINED ONLY ON A SUBSTANTIAL QUE STION OF LAW. IN THIS CONNECTION REFERENCE IS REQUI RED TO BE MADE TO THE DIVISION BENCH JUDGMENT OF THIS COUR T IN THE CASE OF CIT V. DINESH TALWAR [2004] 265 ITR 344. IN THE AFORESAID JUDGMENT, IT HAS BEEN HELD BY THE DIVISION BENCH AS UNDER : ' THE TRIBUNAL HAS VALUED THE PROPERTY ADOPTING THE R ATE OF PWD. WHAT SHOULD BE THE VALUE OF THE CONSTRUCTION, IS BASICALLY A QUESTION OF FACT AND T HAT DEPENDS UPON THE MATERIAL USED, THE LOCATION AN D THE QUALITY OF CONSTRUCTION. THEREFORE, STRAIGHTAWA Y, APPLYING THE PWD RATE OR CPWD RATE IS NOT JUSTIFIED IN CASE OF EACH HOUSE. WHAT SHOULD BE THE COST OF CONSTRUCTION, THE TRIBUNAL HAS APPLIED THE RATE OF PWD THAT IS ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, WHICH IS PART OF THE FINDING OF FACT. NO INTERFERENCE IS CALLED FOR.' 11. THE QUESTION OF VALUATION IS ESSENTIALLY A QUESTIO N OF FACT AND EVEN AT THE COST OF REPETITION, WE MA Y SAY THAT EVEN THAT FINDING HAS BEEN PROPERLY GIVEN BY THE AUTHORITIES BELOW BY GIVING COGENT REASONS. WE SEE NO REASON TO TAKE DIFFERENT VIEW IN THE MATTER. IN OUR VIEW, THE IMPUGNED ORDERS DO NOT SUFFER FRO M ANY INFIRMITY. NO QUESTION OF LAW MUCH LESS ANY SUBSTAN TIAL QUESTION OF LAW ARISES FOR THE DETERMINATION O F THIS COURT AS THE CIT(A) HAS DECIDED THE APPEALS ON THE BASIS OF EVIDENCE AND MATERIAL ON RECORD AND ON THE BASIS OF SUBMISSION OF THE APPELLANT BEFORE IT. IT HAS TAKEN JUST AND PROPER DECISION. IN FACT, THE RE VENUE WHICH WAS ALSO AGGRIEVED BY THE SAID DECISION HAS C HALLENGED THE SAME AND AS STATED ABOVE, THE TRIBUNA L DISMISSED THE APPEALS OF THE REVENUE BY ACCEPTING T HE VIEW TAKEN BY THE CIT(A). CONSIDERING THE AFORES AID ASPECT OF THE MATTER AS WELL AS CONSIDERING THE QUE STION REGARDING CONSISTENCY IN THE ORDERS IN CONNEC TION WITH THE SAME ASSESSEE, IN VIEW OF DISMISSAL OF REV ENUES APPEALS AND UPHOLDING THE DECISION OF CIT(A) AS WELL AS CONSIDERING THE FACT THAT THE FINDING ARRIV ED AT BY THE CIT(A) AS WELL AS THE TRIBUNAL IS A FI NDING OF FACT, NO INTERFERENCE OF THIS COURT IS CALLED FOR I N THIS APPEAL. NO OTHER POINTS WERE CANVASSED BEFOR E THIS COURT. IN VIEW OF THE ABOVE DELIBERATIONS, WE RESTORE THE ISSUE TO THE FILE OF THE AO TO RECOMPUTE THE SELF SUPERVISION CHARGES AT 7.5 %( AS DONE BY DVO) INSTEAD OF 12.5% AS DETERMINED BY THE BY THE LD. C IT(A). AS REGARDS THE COST OF CONSTRUCTION, THE RATE OF PWD, RAJASTHAN S HALL BE APPLIED INSTEAD OF CPWD RATES. THUS THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 680/JP/2014 THE ACIT, CIRCLE- 1, KOTA VS. M/S. ASSOCIATED ENGIN EERS & ALLIED PRODUCTS . 21 6.0 IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 /06/20 16. SD/- SD/- HKKXPUN YFYR DQEKJ (BHAGCHAND ) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/06/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE- 1, KOTA 2. IZR;FKHZ@ THE RESPONDENT- M/S. ASSOCIATED ENGINEERS & AL LIED PRODUCTS, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 680/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR