Banana County Resort Pvt. Ltd., Yellapur V. ITO, Hubli

ITA 741/BANG/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5502 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 24-07-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS GOSE
• Keywords: Unexplained cash credit; Value adopted by valuation officer; Corroborative evidences; Valuation report; Retraction
• Section: 40A(3); 133A; 143(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEROGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS. 647 TO 649/BANG/2009 ASSESSMENT YEARS : 2003-04 TO 2005-06 THE INCOME TAX OFFICER, WARD 3(1), HUBLI. : APPELLANT VS. M/S. BANANA COUNTY RESORT PVT. LTD., AT. BILLIGADDE, CHANDGULI, TALUK YELLAPUR (N.K.) 581 359. PAN: AACCB2634M : RESPONDENT ITA NOS. 740 TO 742/BANG/2009 ASSESSMENT YEARS : 2003-04 TO 2005-06 M/S. BANANA COUNTY RESORT PVT. LTD., AT. BILLIGADDE, CHANDGULI, TALUK YELLAPUR (N.K.) 581 359. : APPELLANT VS. THE INCOME TAX OFFICER, WARD 3(1), HUBLI. : RESPONDENT REVENUE BY : SMT. SUSAN THOMAS GOSE, JCIT (DR) ASSESSEE BY : SHRI S. PARTHASARATHI, ADVOCATE ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 2 OF 16 O R D E R PER BENCH THESE SIX APPEALS (I) THREE BY THE ASSESSEE COMPANY AND ALSO (II) THE EQUAL NUMBER BY THE REVENUE ARE DI RECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A), HUBLI IN ITA NOS.276 & 277/CIT(A) HBL/06-07 & 127/CIT(A) HBL/07-08 DATED 2.4.2009 FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06 RESPECTIVELY. I. ITA NOS.647, 648 & 649/09 AYS 2003-04, 04-05 & 05-06 [BY THE REVENUE] : 2. FOR THE AYS 2003-04 AND 2005-06, THE REVENUE HA S RAISED SIX IDENTICAL ISSUES, OUT OF WHICH GROUND NOS. 1, 5 & 6 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED, THEY HAVE BECOME INCONSEQ UENTIAL. IN THE REMAINING GROUNDS, THE SUBSTANCES OF THE ISSUES ARE , FOR THE SAKE OF CLARITY, REFORMULATED IN A CONCISE MANNER AS UNDER; (I) THE LD. CIT (A) ERRED IN RELYING ON THE REGISTERED VALUERS REPORT AND NOT THE DVOS REPORT WHICH WAS INCORRECT AND TH E DEDUCTION ALLOWED AT 5% ON THE COST OF VALUATION ARRIVED AT B Y THE DVO BE CANCELLED; & (II) THE CIT (A) ERRED IN DIRECTING TO ALLOW REBATE ON S ELF-SUPERVISION CHARGES AT 5% ON PLINTH AREA RATES AS AGAINST 2.5% ALLOWED BY THE AO. 2.1. FOR THE A.Y 2004-05 , THE REVENUE HAD RAISED SEVEN GROUNDS, IN WHICH, GROUND NOS.1, 6 & 7 BEING GENERAL IN NATURE, THEY DO NOT SURVIVE FOR ADJUDICATION. IN THE REMAINING GROUNDS, THE CRUXES OF THE ISSUES RAISED ARE THREE-FOLDS, NAMELY: (I) THE LD. CIT (A) ERRED IN RELYING ON THE REGISTERED VALUERS REPORT AND NOT THE DVOS REPORT WHICH WAS INCORRECT AND TH E DEDUCTION ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 3 OF 16 ALLOWED AT 5% ON THE COST OF VALUATION ARRIVED AT B Y THE DVO BE CANCELLED; (II) THE CIT (A) ERRED IN DIRECTING TO ALLOW REBATE ON S ELF-SUPERVISION CHARGES AT 5% ON PLINTH AREA RATES AS AGAINST 2.5% ALLOWED BY THE AO & (III) ALSO ERRED IN DELETING THE ADDITION OF RS.25 LAKHS WHICH WAS PROMISED BY THE ASSESSEE TO ADMIT AS ADDITIONAL INC OME DURING THE COURSE OF SURVEY PROCEEDINGS, BUT, SUBSEQUENTLY RETRACTED. II. ITA NOS.740, 741 & 7429/09 AYS 03-04, 04-05 & 05-06 [BY THE ASSESSEE] : 3. AY 2003-04 : THOUGH THE ASSESSEE COMPANY HAD RAISED THREE GROUN DS IN AN ELABORATE AND ILLUSTRATIVE MANNER; THE LONE G ROUND SURVIVES FOR ADJUDICATION IS THAT (I) SINCE THE VALUATION REPORT OF THE DVO BEING ERRONE OUS, DEFECTIVE AND EXCESSIVE AND THE RELIEF GRANTED BY THE LD. CIT (A) WAS INADEQUATE AND NOT IN PROPORTION TO THE ACTUAL CONDITIONS PREVAILE D THEREIN, THE ENTIRE ADDITION OF RS.3.67 LAKHS REQUIRES TO BE DELETED. AY 2004-05 : FOR THIS AY, THE ASSESSEE COMPANY HAD RAISED FOUR G ROUNDS IN A NARRATIVE MANNER; HOWEVER, THE CRUXES OF THE ISSUES ARE TWO-F OLDS, NAMELY (I) SINCE THE VALUATION REPORT OF THE DVO BEING ERRONE OUS, DEFECTIVE AND EXCESSIVE AND THE RELIEF GRANTED BY THE LD. CIT (A) WAS INADEQUATE AND NOT IN PROPORTION TO THE ACTUAL CONDITIONS PREVAILE D THEREIN, THE ENTIRE ADDITION OF RS.13.71 LAKHS REQUIRES TO BE DELETED; & (II) THE CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.1.09 LAKHS U/S 40A (3) OF THE ACT. AY 2005-06 : FOR THIS AY, THE ASSESSEE COMPANY HAD RAISED SIX GROUNDS IN AN ILLUSTRATIVE FASHION; HOWEVER, THE SUBSTANCES OF THE ISSUES ARE REFORMULATED AS UNDER: (I) THE CIT (A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS.1.35 LAKHS U/S 40A (3) OF THE ACT. ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 4 OF 16 (II) THE CIT(A) ALSO ERRED IN UPHOLDING THE ADDITION OF RS.4.6 LAKHS UNDER UNEXPLAINED CASH CREDITS: & (III) SINCE THE VALUATION REPORT OF THE DVO BEING ERRON EOUS, DEFECTIVE AND EXCESSIVE AND THE RELIEF GRANTED BY THE LD. CIT (A) WAS INADEQUATE AND NOT IN PROPORTION TO THE ACTUAL CONDITIONS PREVAILE D THEREIN, THE ENTIRE ADDITION OF RS.14.46 LAKHS REQUIRES TO BE DELETED. 4. AS THE CLAIMS AND COUNTER CLAIMS OF THE RIVAL PARTIES WERE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A) UNDER CHALLENGE, ALL THESE APPEALS WERE HEARD, CONSIDERED AND DISPOS ED OFF IN THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE AND CLARITY. 5. BRIEFLY STATED, THE ASSESSEE COMPANY, [THE ASS ESSEE HENCE- FORTH] BEING IN THE BUSINESS OF RUNNING A HOTEL-CUM -RESORT, FURNISHED A RETURN OF INCOME ON 31.3.2004 FOR THE AY 2003-04, A DMITTING NIL INCOME WHICH WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQU ENTLY, THERE WAS AN ACTION U/S 133A OF THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 20.9.2005 WHICH HAD RESULTED IN, IN IMPOUNDING OF C ERTAIN BOOKS OF ACCOUNT AND OTHER DOCUMENTS. 5.1. DURING THE COURSE OF RE-ASSESSMENT PROCEEDIN GS FOR THE AYS UNDER CHALLENGE, IT WAS NOTICED BY THE LD. AO THAT THE ASSESSEE HAD INVESTED IN CONSTRUCTION OF A RESORT OF RS.25.35 LA KHS, RS.94.59 LAKHS AND RS.2.10 CRORES FOR THE AYS 2003-04, 04-05 AND 05-06 RESPECTIVELY. THE AO WAS OF THE VIEW OF THAT THE INVESTMENTS MADE IN THE CONSTRUCTION BEING UNDERSTATED AND, ACCORDINGLY, THE ISSUE WAS REFERRE D TO DEPARTMENTAL VALUATION OFFICER [DVO] FOR VALUATION. AS PER THE DVOS REPORT, THE INVESTMENTS WORKED OUT FROM 2000 TO 2005 ON THE HOT EL-CUM-RESORT CONSTRUCTION AT RS.2.85 CRORES AS AGAINST THE CONST RUCTION COST OF RS.2.43 ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 5 OF 16 CRORES TILL 31.3.2006 AS PER THE ASSESSEES BOOKS O F ACCOUNT AND, THUS, THE LD. AO HAD WORKED OUT THE DIFFERENCE OF RS.42.36 LA KHS FOR FOUR AYS. WHEN THIS SCHEME OF THE AO WAS PROPOSED, THE ASSESS EE CAME UP WITH A STRONG REBUTTAL AND PLEADED WITH THE AO TO ALLOW 15 % FOR SELF-SUPERVISION AND UTILIZING OF CHEAP MATERIALS AND LABOUR IN CONS TRUCTION. 5.1.1. BRUSHING ASIDE THE ASSESSEES CONTENTION, T HE AO TOOK THE COST OF CONSTRUCTION AS DETERMINED BY THE DVO AT RS .2.85 CRORES AND AFTER GIVING ALLOWANCE OF 2.5% FOR SELF SUPERVISION, HE H AD ARRIVED AT THE DIFFERENCE IN THE COST OF CONSTRUCTION AT RS.35.23 LAKHS WHICH WAS APPORTIONED FOR THE AYS 2003-04 TO 2006-07 PROPORTI ONATELY AT RS.3.67 LAKHS, RS.13.71 LAKHS, RS.14.46 LAKHS AND RS.3.39 L AKHS RESPECTIVELY. 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES, AMO NG OTHERS, WITH THE LD. CIT (A) FOR ALL THE AYS UNDER DISPUTE FOR RELIEF. AFTER TAKING INTO ACCOUNT THE VARIOUS SUBMISSIONS OF THE ASSESSEE, KE EPING IN VIEW THE DVOS REPORT AND ALSO THE REMAND REPORT OF THE LD. AO, THE LD. CIT (A) HAD OBSERVED THUS I. A.YS 2003-04, 04-05 AND 05-06 : UN-EXPLAINED INVESTMENT IN THE CONSTRUCTION: THE LD. AO WAS DIRECTED TO ALLOW 5% SELF SUPERVISION REBATE AND IN RESPECT OF PLINTH AREA RATES, THE AO WAS DIRECTED TO REDUCE FURTHER BY 5% ESTIMATED VALUE BY THE DVO IN BLOCK A, B, ANCILLARY UNITS, ARCHITECTS FEE AND GARDEN EXPENSE S AND THAT THE PROPORTIONATE ADDITIONS WILL BE CONSIDERED FOR THE ASSESSMENT YEA RS UNDER CHALLENGE. II. A.Y 2004-05 : SURVEY DECLARATION : THE ASSESSEE APPEARED TO HAVE DECLARED DURING T HE COURSE OF SURVEY RS.25 LAKHS TO COVER UP ANY POSSIBLE DEFI CIENCIES, HOWEVER, NO SUCH DEFECTS WERE POINTED OUT BY THE LD. AO DURING THE R E-ASSESSMENT PROCEEDINGS AND THAT THE ADDITION WAS MADE ON ASSUMPTION AND AL SO HAD NOT POINTED OUT ANY MISTAKES OR DEFECTS IN THE BOOKS OF ACCOUNT; THAT T HE ADDITIONS IN RESPECT OF COST ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 6 OF 16 OF CONSTRUCTION WAS PURELY ON ESTIMATION BASED ON T HE REPORT OF THE DVO AND SHARE APPLICATION MONEY IN INVESTMENTS AND, THUS, T HERE WAS NO SCOPE FOR FURTHER ADDITION OF RS.25 LAKHS. III. A.YS 2004-05 AND 05-06 : DISALLOWANCE U/S 40A(3) : IN THE ABSENCE OF ANY PROOF, ADDITIONS U/S 40A(3 ) FOR THE AYS 2004-05 AND 05-06 WERE CONFIRMED. IV. A.Y 2005-06 : UNEXPLAINED CASH CREDITS : IN THE ABSENCE OF ANY DOCUMENTARY PROOF, ADDITIO N WAS CONFIRMED. 7. AGGRIEVED BY THE FINDINGS OF THE LD. CIT (A), T HE RESPECTIVE PARTIES HAVE COME UP WITH THE PRESENT APPEALS. 7.1. THE SUBMISSIONS OF THE LD. D R ARE SUMMARI ZED AS UNDER: (I) THE ASSESSEE HAD NOT FURNISHED THE REGISTERED V ALUERS REPORT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT, WAS BEFORE T HE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE SUCH REPORT WHICH WAS INCORRECT AND PRAYED THAT THE DVOS REPORT BE REFERRED TO; THAT THE LD. CIT (A) HAD FAILED TO CONSIDERED THE DVO REPORT AND ON THE CONTRARY RELIE D ON THE VALUERS REPORT, THAT THERE WAS WIDE VARIATION IN THE COST A RRIVED AT BY THE TWO VALUERS AND THAT THE DEDUCTION ALLOWED BY THE CIT(A ) AT 5% ON THE COST OF VALUATION ARRIVED AT BY THE DVO BE CANCELLED; (II) THAT THE CIT(A) HAD ERRED IN DIRECTING TO ALL OW REBATE ON SELF- SUPERVISION CHARGES AT 5% AS AGAINST 2.5% ALLOWED B Y THE AO, THAT IN THE ABSENCE OF ANY PROOF OR MATERIAL ON RECORD TO PROVE THAT THE BUILDING WAS CONSTRUCTED UNDER OWN SUPERVISION, PROCURING OF MAT ERIALS DIRECTLY, THE SELF- SUPERVISION CHARGES WERE CORRECTLY ALLOWED AT 2.5% ON THE AMOUNTS OF VALUATION OF THE DVO AND, THUS, PRAYED THAT THE SEL F-SUPERVISION CHARGES AT 2.5% BE RESTORED; (III) THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.25 LAKHS WHICH THE ASSESSEE HAD PROMISED TO DECLARE AS ADDITIONAL INCO ME DURING SURVEY OPERATION TO COVER ANY DEFICIENCIES NOTICED DURING SURVEY PROCEEDING, BUT, LATER RETRACTED FROM SUCH PROMISE; THAT THE ASSESSE E HAD OPPORTUNITIES TO PROVE THAT HE HAD WRONGLY GIVEN THE DECLARATION AND FURNISH THE EVIDENCE IN SUPPORT OF THE RETRACTION THE BURDEN LAY ON THE ASSESSEE TO ESTABLISH THAT THE ADMISSION MADE AT THE TIME OF SURVEY WAS ERRONE OUS AND THIS BURDEN HAD NOT EVEN BEEN ATTEMPTED TO BE DISCHARGED BY THE ASS ESSEE, THAT IT WAS CLEAR ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 7 OF 16 THAT THE ASSESSEE HAD NOT RETRACTED HIS STATEMENT WITH ANY CORROBORATIVE EVIDENCE AND, THUS, THE ADDITION MADE BY THE AO TO BE SUSTAINED; 7.1.1. IN ESSENCE, THE LD. D R PLEADED THAT THE STAND OF THE LD. AO REQUIRES TO BE UPHELD FOR ALL THE AYS UNDER CHALLEN GE. 7.2. ON THE OTHER HAND, SHRI S. PARTHASAR ATHI, THE LD. A R SUBMITTED THAT - THE REFERENCE TO THE DVO WAS UNCALLED FOR SINCE T HE AO HAD NOT BROUGHT OUT ANY DEFECTS IN THE ACCOUNTS MAINTAINED BY THE A PPELLANT WITH REGARD TO COST OF CONSTRUCTION INCURRED WHICH WAS SUBJECTED T O AUDIT, THAT THE ASSESSEE BEING A LIMITED COMPANY, ALL THE PARTICULA RS, VOUCHERS AND DOCUMENTS WERE KEPT WHILE COMPLETING THE AUDIT, THE RE BEING NO SPECIFIC COMMENT BY THE AUDITORS IN THIS REGARD; - THE LD. AO HAD VAGUELY MENTIONED THAT THE VALUE O F CONSTRUCTED BUILDING WAS NOT REALISTIC WITHOUT ANY SUPPORTING EVIDENCE; THAT THE REFERENCE TO DVO WAS WITHOUT ANY JURISDICTION AND THE ADDITIONS MADE ARE LIABLE TO BE DELETED RELIES ON THE CASE LAWS: (A) LAVKUSH VATIKA (P) LTD V. ACIT (2008) 12 DTR (LUCK) (TRIB) 24 (B) CIT V. PRATAP SINGH AMROSING RAJENDRA SING AND DEEP AK KUMAR (1993) 200 ITR 788 (RAJ) (C) M.SELVARAJ V. ITO (2002) 258 ITR 82 (ITAT, CHENNAI) (D) DCIT V. ROHTAS PROJECTS LTD. (2006) 100 ITR 113 (LUCK)(TM) - THAT THE DVO ADOPTED THE PLINTH AREA RATE OF CPWD W HEREAS THE ACTUAL ESTIMATE SHOULD BE MADE BY TAKING KPWD RATE SINCE THE CONSTRUCTION WAS IN A REMOTE AREA LIKE YELLAPUR TO WHICH CPWD RATES WERE NOT APPLICABLE; THAT THE DIFFERENCE IN RATES OF CPWD AND KPWD VARIES FROM 10 TO 15% AND, THUS, THE COST OF C ONSTRUCTION AS MADE BY THE DVO AND APPROVED BY THE AO WAS ON THE H IGHER SIDE. RELIES ON THE CASE LAWS: (A) IN ITA NO.858/BAN/1994 DT. 20.6.1996 IN THE CASE OF B.N.KMALAKSHA SHANBHAG V. ITO; (B) IN ITA NO.37/99 DATED 23.3.2000 IN THE CASE OF ITO V. PUSHPA M.HEGDE -HONBLE HIGH COURT OF KARNATAKA; ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 8 OF 16 - WITH REGARD TO REBATE FOR SELF SUPERVISION, THE CONSTRUCTION WAS SUPERVISED BY THE ASSESSEE AND IT WAS ABLE TO OBTAI N ALL THE MATERIALS AT A COMPETITIVE PRICE SINCE IT WAS IN A RURAL AREA, THA T THE BRICKS USED WERE AVAILABLE IN THE NEAR AREAS FREE OF COST; THAT BY T AKING OVER ALL VIEW, THE REBATE SHOULD HAVE BEEN AT 10% - RELIES ON THE CAS E LAW: PARAMANAND SINGHAL V. ITO (2008) 12 DTR (LUCKNOW) (TRIB) 66; & - THAT EVEN BY CONSIDERING THE SELF-SUPERVISION REB ATE AT 5% OF THE OVERALL COST AS DETERMINED BY THE DVO AND GIVING REBATE FOR KPWD RATE AT 8%, THE COST OF CONSTRUCTION WILL BE - COST OF CONSTRUCTION AS DETERMINED BY THE DVO AT RS.2,85,41,000 LESS: REBATE FOR KPWD RATE AT 8% 23,83,280 REBATE FOR SELF SUPERVISION AT 5% 13,12,860 35,96,140 NET COST OF CONSTRUCTION 2,49, 44,860 LESS: COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE 2.43,04,536 DIFFERENCE 6,40,324 THE DIFFERENCE, ACCORDING TO THE LD. AR, BEING 0.2% WHICH WAS NEGLIGIBLE, THE IMPUGNED ADDITIONS REQUIRED TO BE DELETED. 7.2.1. TO DRIVE HOME HIS POINT, THE LD. A R CAME U P WITH THREE VOLUMINOUS PAPER BOOKS CONTAINING, AMONG OTHERS, CO PIES OF (I) DVOS REPORT, APPROVED VALUERS REPORT; (II) CORRESPONDEN CE WITH AUTHORITIES; (III) AUDITORS REPORT, BALANCE SHEET ETC., 8. WE HAVE DECISIVELY CONSIDERED THE RIVAL SUBMISS IONS, CAUTIOUSLY PERUSED THE RELEVANT CASE RECORDS AND AL SO THE DOCUMENTARY EVIDENCES ADDUCED BY THE LD. A R IN THE SHAPE OF PA PER BOOKS. LET US NOW TAKE UP THE ISSUES RAISE D BY THE ASSESSEE FOR ADJUDICATION. 8.1. IT WAS THE CASE OF THE ASSESSEE THAT THE R EFERENCE OF THE CASE TO THE DVO ITSELF WAS UNCALLED FOR AS THE AO HAD NOT MADE OUT ANY DEFECTS IN ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 9 OF 16 THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE A LIMITED COMPANY. MOREOVER, THE AO HAD NOT REJECTED THE BOOKS OF ACCO UNT OF THE ASSESSEE. THE AOS RATHER SWEEPING REMARK, PRIMARILY, WAS THA T THE VALUE OF CONSTRUCTION OF HOTEL-CUM-RESORT NOT REALISTIC WAS BASED WITHOUT PLACING ANY DOCUMENTARY EVIDENCE ON RECORD EVEN TO REMOTELY SUG GEST THAT THERE WAS AN UNDERSTATEMENT OF COST OF CONSTRUCTION. BY CONS IDERING THE DVOS REPORT ON ITS FACE VALUE AND CONCEDING PARTIALLY TO THE ASSESSEES REQUEST FOR ALLOWING REBATE AT 2.5% FOR SELF-SUPERVISION, T HE AO HAD ARRIVED AT THE INVESTMENTS IN THE SAID PROJECT AT RS.2.78 CRORES A S AGAINST RS.2.43 CRORES AND THE DIFFERENCE IN COST OF CONSTRUCTION OF RS.35 .23 LAKHS WAS APPORTIONED FOR THE AYS 2003-04, 04-05, 05-06 AT R S.3.67 LAKHS, RS.13.71 LAKHS AND RS.14.46 LAKHS RESPECTIVELY, LEAVING RS.3 .39 LAKHS FOR THE AY 06- 07. 8.2. THE LD. CIT (A), FOR THE REASONS RECORDED IN HIS IMPUGNED ORDER UNDER DISPUTE, DIRECTED THE AO TO ALLOW 5% FO R SELF-SUPERVISION REBATE AND TO REDUCE FURTHER 5% ESTIMATED VALUE BY DVO IN BLOCK A, B, ANCILLARY UNIT, ARCHITECT FEE AND GARDEN EXPENSES. 8.2.1. AT THIS JUNCTURE, WE WOULD LIKE TO RECALL THE FINDING OF THE HONBLE EARLIER BENCH IN ITA NO.858/B/1994 DT:20.2.1996 FOR THE AY 1990-91 IN THE CASE OF B.N. KAMALKSHA SHANBHAG V. ITO WHEREIN AN I DENTICAL ISSUE HAD CROPPED UP FOR CONSIDERATION. AFTER CONSIDERING TH E RIVAL SUBMISSIONS, PERUSING THE DVOS REPORT AS WELL AS THE REGISTERED VALUERS REPORTS, THE HONBLE BENCH HAD OBSERVED THAT THE REPORT OF THE D VO CANNOT BE ACCEPTED; FIRSTLY BECAUSE IT WAS BASED ON PLINTH AR EA AND SECONDLY AS THE ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 10 OF 16 RATES ADOPTED WERE CPWD RATES. EXTENSIVELY QUOTING THE MEMORANDUM DT.29.6.1992 OF THE CENTRAL PWD ON PLINTH AREA RATE S WITH BASE 100 AS ON 1.1.1992 WHEREIN IT WAS STATED: ACCORDINGLY, FRESH PLINTH AREA RATES WITH REFERENC E TO BASE 100 AS ON 1.1.92 HAVE BEEN PREPARED FOR CALCULATION IN THE DE PARTMENT. IN FUTURE, THE PRELIMINARY ESTIMATES MAY BE PREPARED ON THE BASIS OF THESE PLINTH AREA RATES. IT WAS OBSERVED, FURTHER, THAT THE BENCHES HAVE BEEN CONSISTENTLY HOLDING THAT IN REGARD TO ESTIMATION OF COST OF CONSTRUCTIO N IN KARNATAKA, THE KARNATAKA PWD RATES ARE APPLICABLE. FURTHER, THERE IS A REPORT OF THE INSTITUTION OF VALUERS. AS PER THAT REPORT, THE VA RIATION BETWEEN KPWD RATES AND CPWD RATES WILL COME TO 44.52%. THIS REP ORT IS TAKEN NOTE OF BY THIS TRIBUNAL IN ESTIMATING THE COST OF CONSTRUCTIO N. TAKING ALL THESE FACTS INTO CONSIDERATION AND ALSO NOTING THAT THE CONSTRU CTION WAS SUPERVISED BY THE ASSESSEE, THE HONBLE BENCH DETERMINED THE SELF -SUPERVISION REBATE AT 7 %. 8.2.2. YET ANOTHER IDENTICAL ISSUE WAS PLACED BEFO RE THE HONBLE HIGH COURT OF KARNATAKA FOR CONSIDERATION IN THE CA SE OF ITO V. PUSHPA M. HEGDE IN ITA NO.37 OF 1999. THE ISSUE, IN BRIEF , WAS THAT THE ASSESSEE FURNISHED HER RETURN FOR THE AY 90-91, ADMITTING A TOTAL INCOME OF RS.27290/-. ON SCRUTINIZING THE DETAILS FURNISHED, THE AO NOTICED THAT THE ASSESSEE AND HER SON (AS CO-OWNERS) HAD CONSTRUCTED A COMMERCIAL BUILDING AT A COST OF RS.3.31 LAKHS. THE AO WAS OF THE VIEW THAT THE COST OF CONSTRUCTION ADMITTED BEING LESS, REFERRED THE CASE FOR VALUATION. THE VO DETERMINED THE COST OF CONSTRUCTION AT 5.21 LAKH S. TAKING COGNIZANCE ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 11 OF 16 OF THE VOS REPORT, THE AO, AFTER ALLOWING RS.4580 FOR REUSE OF SALVAGE MATERIAL, HELD THE DIFFERENCE IN COST OF CONSTRUCTI ON AT RS.1.85 LAKHS. BEING APPEALED, THE CIT(A) ALLOWED THE APPEAL IN PART. A GGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WITH THE TRIBUNAL FOR SUCCOR. TH E HONBLE TRIBUNAL ALLOWED THE APPEALS OF CO-OWNERS IN ITS COMMON ORDE R WITH OBSERVATIONS THAT THE ABOVE EXPLANATION IS NOT ACCEPTED BY THE AO. BUT, THE DETAILED VALUATION REPORT FILED BY THE DEPARTMENTAL VALUER W AS ACCEPTED BY THE AO AND HAS ADDED THE DIFFERENCE IN THE COST OF CONSTRU CTION TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT (A) DID NOT INTERFERE . HENCE, THOSE APPEALS BY THE ASSESSEE. WE HAVE HEARD THE RIVAL SUBMISSIONS. ADMITTEDLY, THE CONSTRUCTION IS IN DHARWAD, A MOFUSSIL AREA. THE C ONTENTION OF THE ASSESSEE IS THAT CPWD RATE WHICH IS HIGHER THAN THE KPWD RAT ES CANNOT BE ADOPTED FOR THE PURPOSE OF THE VALUATION OF THE COST OF CON STRUCTION.IN THIS CASE, THE ASST. VALUATION OFFICER OF THE DEPT. HAS GIVEN ONLY 4% TOWARDS THE SELF- SUPERVISION, HAVE BEEN GIVING REBATE FOR THE SELF-S UPERVISION RANGING FROM 10% TO 15%. HENCE, WE HOLD THAT THE REBATE GIVEN B Y THE DEPARTMENTAL VALUATION OFFICER AT 4% IS VERY LOW. HENCE, WE DIR ECT THE AO TO GIVE THE REBATE FOR SELF-SUPERVISION AT THE RATE OF 10%. COMING TO THE RATE ADOPTED BY THE DEPT. VALUATION O FFICER, WE HOLD THAT THE CPWD RATE IS HIGHER THAN KPWD RATES. KPWD RATE ALO NE CAN BE APPLICABLE TO A PLACE LIKE DHARWAD. HENCE, WE HOLD THAT THE AO AS WELL AS CIT (A) HUBLI ARE NOT JUSTIFIED IN ACCEPTING THE VA LUATION REPORT FILED BY THE DEPT. VALUER WITHOUT ANY MODIFICATION. HENCE, WE S ET ASIDE THE ORDER OF THE CIT (A), HUBLI AND DIRECT THE AO TO ADOPT KPWD RATE S APPLICABLE TO DHARWAD AND TO GIVE REBATE FOR THE SELF-SUPERVISION AT 10% AND IT IS FURTHER DIRECTED TO RE-COMPUTE THE COST OF THE CONSTRUCTION AS STATED ABOVE. 8.2.3. AFTER TAKING COGNIZANCE OF RIVAL SUBMISSION S, THE HONBLE COURT HAD OBSERVED THUS 5. THE VALUATION IS PURELY A QUESTION OF FACT. TH E ASSESSEE HAD PRODUCED THE VALUATION BY AN APPROVED VALUER..THE TRIBUNAL FOUND THAT HE HAD MADE THE VALUATION BY APPLYING THE SCHEDULE OF RATE S OF 1988-89 OF DHARWAD PWD CIRCLE AND THE SAID SCHEDULE OF RATES FURNISHED THE CORRECT RATES AND, THEREFORE, THE VALUATION AS SUBMITTED BY THE ASSESS EE IS CORRECT. THE TRIBUNAL HAS ACTED ON RELEVANT MATERIAL. THE TRIBUNAL IS TH E FINAL AUTHORITY REGARDING FACTS. TRIBUNAL HAS HELD THAT CPWD RATES ARE HIGHER THAN KPWD ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 12 OF 16 RATES AND HAVING REGARD TO THE NATURE OF CONSTRUCTI ON, THE KPWD (DHARWAD CIRCLE) RATES ARE MORE APPROPRIATE AND THAT SHOULD BE APPLIED. IT IS ALSO FOUND THAT NORMALLY 10% REBATE SHOULD BE GIVEN FOR SELF- SUPERVISION 8.3. TAKING INTO ACCOUNT OF THE FACTS AND CIRCUMST ANCES OF THE ISSUE AND ALSO IN CONFORMITY WITH THE FINDINGS OF T HE EARLIER HONBLE BENCHES OF THE TRIBUNAL, THE RULING OF THE JURISDI CTIONAL HONBLE HIGH COURT CITED SUPRA, AND AS WELL AS THE COMPUTATION FURNISH ED BY THE ASSESSEE EXTRACTED BY US HEREIN ABOVE AT PARA 7.2, WE DELETE THE ADDITION MADE BY THE LD.AO ON THIS COUNT. 9. THE OTHER ISSUE RAISED BY THE ASSESSEE FOR THE AYS 2004-05 AND 05-06 BEING THAT THE CIT (A) ERRED IN SUSTAININ G THE DISALLOWANCE OF RS.1.09 LAKHS AND RS.1.35 LAKHS U/S 40A (3) OF THE ACT. 9.1. DURING THE COURSE OF HEARING, THIS BENCHS RE FERENCE WAS DRAWN BY THE LD. A R TO THE EFFECT THAT THE ASSESSE E HAD NOT CLAIMED THESE AMOUNTS AS EXPENDITURE IN ITS P & L ACCOUNTS FOR BO TH THE AYS UNDER CONSIDERATION AND, THEREFORE, VOCIFEROUSLY ARGUED T HAT THE PROVISIONS OF S. 40A(3) OF THE ACT HAVE NO APPLICATION AT ALL. 9.1.1. WE ARE IN AGREEMENT WITH THE LD. A.RS CONTENTION ON THE ISSUE. AT A GLIMPSE OF THE IMPUGNED ORDERS, WE FIN D THAT THE ASSERTION OF THE ASSESSEE HAS NOT BEEN SPECIFICALLY DEALT WITH E ITHER BY THE LD. AO OR THE LD. CIT (A) FOR THAT MATTER. ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 13 OF 16 IN VIEW OF THE ABOVE, WE ARE OF THE FIRM VIEW THA T THE ISSUE FOR BOTH THE AYS [2004-05 & 05-06] SHOULD BE DECIDED IN FAVO UR OF THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 10. THE OTHER GRIEVANCE OF THE AS SESSEE FOR THE AY 2005-06WAS THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.4 .6 LAKHS UNDER UNEXPLAINED CASH CREDITS. IT WAS SUBMITTED THAT IN SPITE OF THE FACT THAT THE ASSESSEE PRODUCED ALL THE SAID CREDITORS BEFORE THE LD. CIT (A) AT THE TIME OF HEARING ALONG WITH CONFIRMATORY LETTERS, EVIDENCES FOR HOLD ING THE AGRICULTURAL LAND AND THE STATEMENT OF SALE OF AGRICULTURAL PRODUCE E TC., THE LD. CIT (A) HAD CHOSEN TO IGNORE THE ASSESSEES LEGITIMATE CLAIM FO R DELETION OF THE ADDITION ON THIS SCORE. 10.1. HOWEVER, AT A GLANCE OF THE IMPUGNED ORDER O F THE LD. CIT (A), WE FIND THERE WAS NO TRACE OF THE ASSESSEES C LAIM, WHEREAS THE LD. CIT (A) AVERRED THAT THE ASSESSEE HAD FILED ITS WRI TTEN SUBMISSION DATED: 18.03.2009, THE SUBSTANCES OF WHICH ARE THAT THE PA RTIES HAVE CONTRIBUTED FOR HAVING MADE CASH PAYMENT ON DIFFERENT DATES AND IN ALL CASES THEIR SOURCE OF INCOME WAS AGRICULTURE AND SO ON AND SO F ORTH WHEREAS THE LD. AO, IN HIS IMPUGNED ORDER FOR THE AY 2005-06 UNDER THE CAPTION 4. UNEXPLAINED CASH CREDITS, INTER ALIA HAD MENTIONED THAT - MOST OF THE ABOVE CREDITS ARE RECORDED AS SHARE APPLICATION MONEY. A S THE ASSESSEE HAS FAILED TO OFFER EXPLANATION, SUMMONS U/S 131 WERE SERVED O N SRI S.N.BHAT AND SRI V.D.HEBBAR TO APPEAR ON 22.11.2007. NONE OF THE AB OVE PARTIES APPEARED AND CONFIRMED THE DEPOSITS BY WAY OF SHARE APPLICAT ION MONEY. HOWEVER IN RESPECT OF 1. SRI S.N.BHAT, 2. SRI R.D.HEBBAR AND 3 . SHIVARAM D HEBBAR, THE ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 14 OF 16 ASSESSEE HAS PRODUCED CONFIRMATION LETTERS FROM THE PARTIES. ON A PERUSAL OF THE CONFIRMATION LETTERS, IT IS OBSERVED THAT TH E SIGNATURE OF THE INVESTOR IN THE CONFIRMATION LETTERS AND SIGNATURE IN THE SHARE APPLICATION FORM DIFFERS. IT APPEARS THAT THE CONFIRMATION LETTERS ARE NOT GE NUINE. AS SUCH, THE CREDITS IN THE NAMES OF SRI S.N.BHAT, R.D.HEBBAR AND SRI SH IVARAM D HEBBAR ARE HELD AS NOT GENUINE. IN RESPECT SRI V.D.HEBBAR, NO CONFIRMATION LETTER HAS BEEN FILED BY THE ASSESSEE. FURTHER, THE SHARE CAP ITALS OUGHT TO HAVE BEEN COLLECTED BY CROSSED CHEQUES OR DEMAND DRAFTS AS PE R THE COMPANY LAW. IN VIEW OF THIS, IT IS HELD THAT ALL THESE CREDITS NOT GENUINE. 10.2. HOWEVER, NO EFFORTS WERE MADE ON THE PART OF THE ASSESSEE TO COUNTER THE LD. AOS VIEW EVEN AT THE STAGE OF HEAR ING BEFORE THIS BENCH. 10.2.1. IN VIEW OF THE ABOVE, WE HAVE BEEN LEFT WITH NO OTHER ALTERNATIVE EXCEPT TO SUSTAIN THE ADDITION MADE BY THE LD. AO O N THIS COUNT. IT IS ORDERED ACCORDINGLY. LET US NOW TAKE UP THE ISSUES RA ISED BY THE REVENUE FOR ADJUDICATION. 11. AT THE OUTSET, WE WOULD LIKE TO POINT OUT THAT THE REVENUE, FOR ALL THE AYS UNDER CONSIDERATION, HAD RAISED TWIN IS SUES WHICH WERE IDENTICAL, NAMELY: - (I) THE LD. CIT (A) ERRED IN RELYING ON THE REGISTERED VALUERS REPORT AND NOT THE DVOS REPORT WHICH WAS INCORRECT AND THE DEDUCT ION ALLOWED AT 5% ON THE COST OF VALUATION ARRIVED AT BY THE DVO BE CANC ELLED; & ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 15 OF 16 (II) THE CIT (A) ERRED IN DIRECTING TO ALLOW REBATE ON SELF-SUPERVISION CHARGES AT 5% ON PLINTH AREA RATES AS AGAINST 2.5% ALLOWED BY THE AO. 11.1. WE HAVE, WHILE ADJUDICATING THE ASSESS EES APPEALS CITED SUPRA, IN CONFORMITY WITH THE FINDINGS OF THE EARLIER HON BLE BENCH AS WELL AS THE RULING OF THE JURISDICTIONAL HONBLE HIGH COURT REF ERRED SUPRA, ALLOWED THE APPEAL OF THE ASSESSEE. THE ABOVE FINDING HOLDS GO OD FOR THE ISSUES RAISED BY THE REVENUE. IT IS ORDERED ACCORDINGLY. 12. FOR THE AY 2005-06, THE REVENUES GRIEVANCE W AS THAT THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.25 LAKHS WHIC H WAS PROMISED BY THE ASSESSEE TO ADMIT AS ADDITIONAL INCOME DURING T HE COURSE OF SURVEY PROCEEDINGS, BUT, SUBSEQUENTLY RETRACTED. 12.1. HOWEVER, WE FIND A STRONG FORCE IN THE ARGUM ENT OF THE ASSESSEE THAT IT BEING A LIMITED COMPANY, ITS BOOKS OF ACCOUNT WERE AUDITED AND ALSO THE LD. AO HAD NOT POINTED OUT ANY DEFECTS OR RESORTED TO REJECT THE BOOK RESULT AND AS SUCH HE WAS NOT EXPEC TED TO MAKE FURTHER ADDITION. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE LD.AO ON THIS ISSUE. 13. IN THE RESULT : (I) THE ASSESSEES APPEALS FOR THE AYS 2003-04 AND 04-05 ARE ALLOWED. (II) THE ASSESSEES APPEAL FOR THE AY 2005-06 IS PA RTLY ALLOWED. ITA NO.647 TO 649 & 740 TO 742/BANG/2009 PAGE 16 OF 16 (III)THE REVENUES APPEALS FOR THE AYS 2003-04, 04- 05 & 05-06 ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF JULY, 2011. SD/- SD/- ( GEORGE GEORGE K.) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 29 TH JULY, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.