ITO, Salem V. Sri S.Ganesan, Salem

ITA 71/CHNY/2004

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58136 (ITAT-CHENNAI)
• Duration Of Justice: 8 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1995-1996
• Appeal Filed On: 07-01-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Value adopted by valuation officer; Retrospective amendment; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER] I.T.A.NO.71/MDS/2004 ASSESSMENT YEAR : 1995-96 THE INCOME TAX OFFICER WARD III(1) SALEM VS SHRI S.GANESAN 4-A, 5 TH CROSS NARAYANA NAGAR SALEM - 15 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : NONE DATE OF HEARING : 20-03-2012 DATE OF PRONOUNCEMENT : 23-3-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVEN UE AGAINST THE ORDER OF THE LD.CIT(A), SALEM, DATED 14.10.2003. 2. THIS APPEAL WAS DECIDED BY THIS TRIBUNAL IN I.T .A.NO. 71/MDS/2004 VIDE ORDER DATED 3.6.2004. THEREAFTER, THE REVENUE FILED APPEAL AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HON'BLE MADRAS HIGH COURT. THE HON'BLE MADRAS HIGH COURT FRAMED T WO SUBSTANTIAL QUESTIONS OF LAW AS UNDER: I.T.A.NO. 71/04 :- 2 -: I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT I N CONFIRMING THE ORDER OF THE CIT (APPEALS) REDUCING THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN TH E CONSTRUCTION OF THE SHOPPING COMPLEX FROM ` 3,27,344/- TO ` 79,797/- WITHOUT CONSIDERING THE SPECIFIC REASONS G IVEN IN THE ASSESSMENT ORDER? AND II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE INCOME TAX APPELLATE TRIBUNA L TREATING THE REFERENCE TO VALUATION OFFICER MADE BY THE ASSE SSING OFFICER REGARDING THE ESTIMATION OF COST OF CONSTRU CTION AS INVALID RELYING ON THE DECISION OF THE SUPREME COUR T IN THE CASE OF AMIYA BALA PAUL (262 ITR 407) IS SUSTAINABL E IN LAW IN VIEW OF THE RETROSPECTIVE AMENDMENT MADE BY FINA NCE (NO.2) ACT, 2004 INSERTING A NEW SECTION 142A? 3. THE HON'BLE HIGH COURT, WHILE DECIDING THE ABOV E FRAMED QUESTIONS OF LAW, HELD THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF AMIYA BALA PAUL (262 ITR 407), WHERE IT WAS HELD THAT THERE WAS NO STATUTORY PROVISION ENABLING THE ASSES SING OFFICER TO REFER THE COST OF CONSTRUCTION TO THE DEPARTMENTAL VALUAT ION OFFICER AND THEREFORE, REFERENCE TO DEPARTMENTAL VALUATION OFFI CER WAS OVERRULED BY THE AMENDMENT MADE BY THE FINANCE (NO.2) ACT, 20 04, BY INSERTION OF NEW SECTION 142A UNDER THE INCOME-TAX ACT, 1961, WHICH EMPOWERS REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER FOR ESTIMATING THE VALUE OF THE INVESTMENT AND SUCH AMENDMENT WAS GIVE N RETROSPECTIVE EFFECT. THEREAFTER, THE HON'BLE HIGH COURT ADDRES SED THE GRIEVANCE OF THE REVENUE WHICH WAS THAT AS PER THE DEPARTMENTAL VALUATION OFFICER, THE ESTIMATED COST OF CONSTRUCTION WAS ` 6.55.300/- WHILE AS PER THE REPORT OF THE ASSESSEES VALUER THE ESTIMATED COST OF CONSTRUCTION WAS I.T.A.NO. 71/04 :- 3 -: ` 3,27,356/- AND THE TRIBUNAL HAD NOT CONSIDERED BOT H THE VALUATIONS IN ARRIVING AT ITS CONCLUSION. ACCEPTING THE GRIEV ANCE OF THE REVENUE, THE HON'BLE HIGH COURT HAS RESTORED THE ISSUE BACK TO THE FILE OF THE TRIBUNAL AND HAS DIRECTED TO DECIDE THE ISSUE AFRES H IN ACCORDANCE WITH LAW AFTER TAKING INTO CONSIDERATION THE VALUATION R EPORTS SUBMITTED BY THE DEPARTMENT AS WELL AS BY THE ASSESSEE. HENCE, THIS APPEAL. 4. NOTICE OF HEARING WAS ISSUED TO THE RESPONDENT- ASSESSEE ON 10.1.2012 THROUGH REGISTERED POST WITH ACKNOWLEDGEM ENT DUE WHICH WAS SERVED ON THE RESPONDENT- ASSESSEE ON 12.1.2012 AS EVIDENCED BY THE ACKNOWLEDGEMENT CARD OF THE POST OFFICE PLACED ON RECORD. NONE APPEARED FOR THE ASSESSEE WHEN THE CASE WAS CALLED FOR HEARING. THEREFORE, THE APPEAL WAS HEARD EX-PARTE QUA THE RE SPONDENT- ASSESSEE AND DISPOSED OF ON MERITS. 5. WE HAVE HEARD THE LD. DR. 6. WE FIND THAT IN THE INSTANT CASE, THE ASSESSING OFFICER OBSERVED FROM THE RETURN OF INCOME FILED BY THE AS SESSEE THAT THE ASSESSEE HAS CONSTRUCTED A SHOPPING COMPLEX KNOWN A S SGS COMPLEX AT D.NO.1A, KALARAMPATTY MAIN ROAD, ERUMAP ALAYALAYAM, SALEM-15, DURING THE PREVIOUS YEAR RELEVANT TO ASSE SSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER OBSERVED THAT THE COST OF CONSTRUCTION WAS ADMITTED AT ` 3 LAKHS. THE ASSESSING OFFICER ALSO I.T.A.NO. 71/04 :- 4 -: OBSERVED THAT THE VALUATION REPORT OF THE VALUATION CELL DATED 3.1.1997 HAS ESTIMATED THE COST OF CONSTRUCTION AT ` 6,55,300/-. HE ALSO NOTED THAT THE ASSESSEE HAS FILED AN APPROVED VALUERS R EPORT VALUING THE PROPERTY AT ` 3,27,356/-. THE ASSESSEE ALSO FILED A LETTER DAT ED 26.3.1999 OFFERING THE COST OF CONSTRUCTION AT ` 3,27,356/- AND THE DIFFERENCE BETWEEN THE ORIGINAL COST ADMITTED AND T HE NEW ESTIMATE WAS OFFERED AS INCOME. 7. IN REPLY TO THE SHOW CAUSE NOTICE OF THE ASSES SING OFFICER, THE LD. A.R OF THE ASSESSEE APPEARED. AS PER THE A SSESSING OFFICER, THE APPROVED VALUER SHRI N.SUKUMAR, BE ALSO APPEARE D ALONGWITH THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. THE AP PROVED VALUER POINTED OUT TO THE ASSESSING OFFICER THAT THE PLINT H AREA RATE ADOPTED BY THE VALUATION OFFICER IS 15% TO 25% MORE THAN TH E ACTUAL COST WHEN COMPARED TO PWD RATES. THE APPROVED VALUER RE LIED ON THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CA SE OF R.K.GUPTA AND OTHERS VS ACIT, ITSSA NOS.18 TO 33/JP/98, DATED 23. 12.1998. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE APPROVED VALUER ON THE GROUND THAT THE DECISION RELIED UPON WAS NOT OF LOCAL JURISDICTION AND ALSO THAT THE DIFFERENCE OF 15% TO 25% BETWEEN THE CPWD RATES AND PWD RATES PERTAINED TO RAJASTHAN. T HEREAFTER THE ASSESSING OFFICER ACCEPTED THE VALUATION OF THE DEP ARTMENTAL VALUER AT ` 6,55,300/- AND THE DIFFERENCE BETWEEN THIS VALUATI ON AND THE I.T.A.NO. 71/04 :- 5 -: VALUATION OF THE REGISTERED VALUER AT ` 3,27,356/- OF THE PROPERTY IN QUESTION WAS ADDED TO THE INCOME OF THE ASSESSEE A S UNEXPLAINED INVESTMENT THEREBY MAKING AN ADDITION OF ` 3,27,944/- TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) HAD AC CEPTED THE APPEAL OF THE ASSESSEE AND HAD DIRECTED THE ASSESSING OFF ICER TO ADOPT THE VALUATION GIVEN BY THE APPROVED VALUER FOR THE PURP OSE OF COST OF CONSTRUCTION OF THE IMPUGNED PROPERTY. THUS, IT IS NOTICED THAT THE ASSESSEE HAD CHALLENGED THE VALUATION OF THE IMPUGN ED PROPERTY BY THE DEPARTMENTAL VALUATION OFFICER AT CPWD RATES AN D HAD ASKED THE ASSESSING OFFICER TO ADOPT STATE PWD RATES FOR THE VALUATION OF THE PROPERTY IN QUESTION. WE FIND THAT THE CONTENTION OF THE ASSESSEE FINDS SUPPORT FROM THE DECISION OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF CIT VS SMT.V.GAJALAKSHMI, [2011] 331 IT R 216, WHEREIN IT WAS HELD THAT THE TRIBUNAL IN ITS ORDER HAD FOUND T HAT ADOPTION OF THE RATE BY THE ASSESSING OFFICER BASED ON STATE PWD RA TES AT ` 3079/- PER SQ. MTR. WAS JUSTIFIED. WE ALSO FIND THAT THE THIR D MEMBER OF THE TRIBUNAL IN THE CASE OF M.SELVARAJ VS ITO (2002) 25 8 ITR (AT) PAGE 82, (CHENNAI) HAS HELD AS UNDER: COMING TO THE ASSESSEES PLEA THAT THE STATE P.W. D RATES SHOULD HAVE BEEN ADOPTED, I AM OF THE OPINION THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE A-BENCH OF THIS TRIBUNAL IN THE CASE OF M.S.PON RAJ (I.T.A.NOS. 1656 AND 1657/MDS OF 1996) REFERRED TO I.T.A.NO. 71/04 :- 6 -: EARLIER, A COPY OF WHICH IS PLACED ON RECORD, IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE, MORE SO BECAUSE THE REVENUE HAS NOT BROUGHT ANY DECISION TO MY KNOWLEDGE TAKING A CONTRARY VIEW. I AM, THEREFO RE, OF THE OPINION THAT IF AT ALL THE COST OF CONSTRUCT ION IS TO BE DETERMINED IT SHOULD HAVE BEEN BY ADOPTING THE STATE P.W.D. RATES AND NOT BY ADOPTING THE C.P.W.D. RATES. THE VALUATION REPORT BASED ON THE C.P.W.D RATES WAS, THEREFORE, NOT TO BE RELIED UPON. 8. STILL FURTHER, THE CHENNAI B BENCH OF THE TRIBUN AL IN THE CASE OF ACIT VS M/S T.N.NANDAGOPAL & SONS IN I.T.A.NOS.1 77 TO 179/MDS/2011 IN ASSESSMENT YEARS 2002-03 TO 2004-05 , ORDER DATED 21.6.2011 AND CHENNAI C' BENCH OF THE TRIBUNAL IN THE CASE OF M.AMUTHA VS ACIT IN I.T.A.NO. 961/MDS/2010, ASSESSM ENT YEAR 2006- 07, ORDER DATED 16.6.2011, HAS ALSO HELD ACCORDINGL Y. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE REMA ND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO RE-ADJUDICA TE THE ISSUE OF UNDISCLOSED INVESTMENT IN THE IMPUGNED SHOPPING COM PLEX BY ADOPTING THE STATE PWD RATES IN THE VALUATION REPOR T OF THE DEPARTMENTAL VALUATION OFFICER. THUS, THE GROUND O F THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A.NO. 71/04 :- 7 -: 9. IN THE RESULT, THE APPEAL FILED BY THE REVEN UE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 -3-2012. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 23 RD MARCH, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR