Sh. Ram Parkash Sharma, Dharamashala V. Addl. CIT, Palampur

ITA 89/CHANDI/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73501 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Principle of natural justice; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 89/CHD/2010 ASSESSMENT YEAR: 2006-07 SH. RAM PARKASH SHARMA VS THE ADDL. CIT, HOTEL ANAND PALACE, PALAMPUR DHARAMSHALA H.P. PAN NO. BEJPS8194B (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI SURINDER BABBAR & SUMIT KHURANA RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 03/03/2014 DATE OF PRONOUNCEMENT : 11/03/2014 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.11.2009 OF CIT (APPEALS), SHIMLA. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS:- 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) IN ACCEPTING AND CONSIDERING THE DY. COMMISSIONER O F INCOME-TAXS COMMENTS OF WRITTEN SUBMISSIONS DATED 14/09/2009 IS ILLEGAL AND BAD IN LAW AS THE SAME WE RE MADE WITHOUT JURISDICTION. 2. THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) IS WRONG AND ILLEGAL IN REJECTING THE ASSESSEES SU BMISSION THAT THE ASSESSMENT ORDER WAS DISPATCHED ON 06/01/2 009 [PARA4, PAGE 1 OF CIT(A) ORDER] AS THE COPY OF THE RECEIPT OF COURIER SERVICE FILED BY THE LD. A.O. IS OF A LOCAL AND UNREGISTERED COURIER SERVICE. 2 3. THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(A) IS WRONG AND ILLEGAL IN REJECTING THE ASSESSEE SUBMISSIONS T HAT THE LD. A.O. HAS MADE ADDITIONS ON HYPOTHETICAL BASIS FOR T HE CONSTRUCTION OF ROOMS ETC., ON THE 4 TH FLOOR OF THE BUILDING. THE FACT THAT THERE ARE NO ROOMS ON THE 4 TH FLOOR IS NOT ONLY SUPPORTED BY THE LD. VALUATION OFFICERS INSPECTION NOTE DATED 03/12/2008, VALUATION OFFICERS LETTER NO. VO /PTA/IT- 21/08-09/73 DATED 10/06/2009 AND THE INCOME-TAX INS PECTORS REPORT DATED 07/09/2009. 4. THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (A) IS WRONG AND ILLEGAL IN REJECTING IN TO, THE ASSESSEE S REBUTTLE COMMENTS AND COMING TO THE WRONG CONCLUSION THAT TH E ADDITIONS ON ACCOUNT OF CONSTRUCTION MADE BY THE LD . A.O. ARE JUSTIFIED. 5. THE ASSESSEE REQUESTS THAT THE ORDERS OF THE LD. AS SESSING OFFICER AND THE LD. COMMISSIONER OF INCOME-TAX(A) B E TOTALLY QUASHED AS THE ORDER OF THE LD. A.O. IS NOT ONLY TI ME BARRED BUT ILLEGAL AS WELL AND THE ORDER OF THE LD. COMMIS SIONER OF INCOME-TAX IS WRONG, ILLEGAL, AGAINST FACTS OF THE CASE AND THE PRINCIPLES OF NATURAL JUSTICE. 6. THE ASSESSEE RESERVES THE RIGHT TO ADVANCE ANY OTHE R ARGUMENT AT THE TIME OF HEARING OF THE APPEAL AS MA Y BE BENEFICIAL TO THE INTEREST OF THE ASSESSEE. 3. THOUGH VARIOUS GROUNDS HAVE BEEN RAISED BUT THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ONLY DISPUTE IS ADDITION MA DE ON ACCOUNT OF COST OF CONSTRUCTION. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT DURING THE YEAR THE ASSESSEE HAS SHOWN A SUM OF RS. 20,02,228/- TOWARDS COST OF CONS TRUCTION. THE ASSESSEE IS IN THE BUSINESS OF RUNNING A HOTEL AND THE HOTEL START ED FUNCTIONING FROM ASSESSMENT YEAR 2005-06. THE CONSTRUCTION OF THE H OTEL WAS STARTED IN FINANCIAL YEAR 1999-2000 AND OVER A PERIOD OF FIVE YEARS I.E FINANCIAL YEARS 1999-2000 TO 2003-04, THE ASSESSEE HAD DECLARED INVESTMENT OF RS . 1,89,88,126/-. IN EARLIER 3 YEARS, THE MATTER WAS REFERRED TO DVO WHO HAS VALUE D THE COST OF CONSTRUCTION AT RS. 1,97,04,300/-. THE DIFFERENCE BEING LESS TH AN 10% WAS IGNORED. HOWEVER, DURING THE YEAR, NO VOUCHERS FOR CONSTRUCT ION OF THE BUILDING WERE PRODUCED. WHEN THE MATTER WAS REFERRED TO DVO, NO S UCH VOUCHERS WERE PRODUCED BEFORE DVO. THE ASSESSEE IN RESPONSE HAS SUBMITTED ONLY COPY OF THE LEDGER ACCOUNT. THE VALUATION OFFICER HAS SPECIFICA LLY ASKED TO PRODUCE THE VOUCHERS AND DETAILS OF WORK DONE EARLIER. THE ASSE SSEE FAILED TO PRODUCE ANY VOUCHER AND GIVEN DETAIL OF WORK DONE EARLIER. IN T HE ABSENCE OF SUCH INFORMATION, THE VALUATION OFFICER SHOWED HIS INABI LITY TO GIVE ANY VALUATION REPORT VIDE LETTER DATED 18.12.2008. THE VALUATION OFFICER HAD ALSO MENTIONED THAT CHARTERED ACCOUNTANT HAD SUBMITTED THAT IT WAS NOT POSSIBLE TO SPECIFY ANY CONSTRUCTION MADE DURING ANY SPECIFIED PERIOD. THE G.M.. OF THE PROPERTY HAD ALSO SUBMITTED IN THE STATEMENT THAT HE WAS NOT AWA RE OF ANY CONSTRUCTION DURING FINANCIAL YEAR 2005-06 BECAUSE NO OLD STAFF MEMBER WAS AVAILABLE. IN THIS BACKGROUND, THE VALUATION REPORT SHOULD NOT BE PREP ARED. THE ASSESSING OFFICER THEN ANALYZED THE DATA OF THE EARLIER YEAR AND NOTE D THAT CONSTRUCTION DONE UP UPTO 2003-04 HAS ALREADY BEEN ACCEPTED BUT HOW WHIC H CONSTRUCTION HAS BEEN DONE AGAINST THE AMOUNT SHOWN AT RS. 2,02,228/- IS DIFFICULT TO DETERMINE. HE THEN WENT ON TO ANALYZE VARIOUS FACTORS WHICH HAVE BEEN NOTED AT PARAS 10 & 11 WHICH ARE AS UNDER:- 10. HOW MUCH ASSESSEE COULD HAVE INVESTED IN THE N EW CONSTRUCTION IS TO BE PROVED BY THE ASSESSEE BY WAY OF COOPERATION EXTENDED TO THE VALUATION OFFICER WHICH HE HAS NOT DONE. THE 3 RD FLOOR VALUATION SHOULD NOT BE MORE THAN THE VALUATION OF THE 2 ND FLOOR AND IST FLOOR. THE 4 TH FLOOR PARTLY COMPLETED HAS TO BE DISTINGUISHED FROM INCOMPLETE 3 RD FLOOR. IT APPEARS THAT THE VALUATION OFFICER AS PER HIS IN SPECTION REPORT ON 03.12.2008 USED 4 TH FLOOR PARTLY COMPLETED AND 3 RD FLOOR INCOMPLETE HAS GIVEN SUFFICIENT HINTS THAT 4 TH FLOOR HAD REALLY DIFFERS FROM THE VALUATION REPORT FURNISHED BY THE VALUATION OFFICER FOR A.Y. 2005-06 AND REQUIRES DIF FERENT YARD STICKS FOR THE INVESTMENT IN COMPARISON TO CONSTRUC TION OF THE INCOMPLETE 3 RD FLOOR. THE HOTEL BUILDING IS SITUATED AT BHAGSU NAG, DHARAMSHALA, DISTT. KANGRA THE TOP FLOOR ASSUM ES THE 4 IMPORTANCE AS VIEWERS CHOICE. HENCE, IT HAS TO BE FURNISHED AS WELL AS CONSTRUCTED WITH SPECIAL CARE IN VIEW OF THE CHOICE AND HABITS OF THE TOURISTS. THE 2 ND FLOOR VALUATION BEING THE HIGHEST ACCORDING TO VALUATION REPORT FURNISHED DUR ING A.Y. 2005-06 AT RS. 53,65,461/- AND THE 4 TH FLOOR ASSUMING THE SPECIAL IMPORTANCE AS THE VIEWERS CHOICE AND HABIT S OF THE TOURIST, THE SAME IS TO BE VALUED AT RS. 60 LAKHS. THE 3 RD FLOOR WHICH STANDS INCOMPLETE ACCORDING TO THE VALUATION OFFICER AND ALSO THE SUBMISSION OF LD. COUNSEL THAT THERE I S NO CONSTRUCTION AT ALL IN 3 RD FLOOR, THE 3 RD FLOOR VALUATION IS NOT DISTURBED AT ALL AS ITS VALUE COMES TO RS. 4628170/ - WHICH IS MARGINALLY (RS. 737291/-) LESS THAN THE INVESTMENT MADE IN 2 ND FLOOR. 11. SINCE ASSESSEE HAS ALREADY SHOWN INVESTMENT IN THE 4 TH FLOOR AT RS. 661960/- AND THE 10% DIFFERENCE HAS AL READY BEEN ALLOWED BY MY PREDECESSOR IN A.Y. 2005-06, THE DIFFERENCE IN THIS INVESTMENT IS NULLIFIED. THE ASS ESSEE HAS SHOWN NEW ADDITION IN THE BUILDING AT RS. 2002228/- AND ESTIMATION OF 4 TH FLOOR HAD BEEN MADE BY ME TOGETHER WITH THE MARGIN OF WELL FURNISHING OF 4 TH FLOOR AT RS. 60 LAKHS AND IN VIEW OF THE CLAIM OF THE ASSESSEE THAT THERE WAS NO NEW CONSTRUCTION THE BENEFIT OF ADDITION OF RS. 2002228 /- ONLY SHOWN IN BUILDING ACCOUNT WITHOUT SHOWING WHICH PAR T HAD BEEN ADDED BY THE ASSESSEE CAN NOT BE GIVEN TO THE ASSESSEE. SINCE THIS FURNISHING REQUIRES STRICT PERSONAL SUPE RVISION 10% SELF SUPERVISION IS ALLOWED WHICH COMES TO RS. 6 LA CS. THUS THE TOTAL UNEXPLAINED INVESTMENT STANDS TO RS. 54 L AKHS WHICH IS ADDED TO THE ASSESSEES TOTAL INCOME. 5. ON APPEAL BEFORE THE CIT(A), MAINLY TECHNICAL IS SUES WERE RAISED AND NOTHING WAS STATED ON ACCOUNT OF MERITS. SO, LD. CI T(A) REJECTED THE TECHNICAL OBJECTION AND CONFIRMED THE ADDITION. 6. BEFORE US, LD. COUNSEL FOR THE ASSESSEE MAINLY S UBMITTED THAT ASSESSING OFFICER ESTIMATED THE COST OF CONSTRUCTION OF 4 TH FLOOR. THE AREA OF 4 TH FLOOR IS ONLY 84.94 SQUARE METER I.E. ABOUT 1000 SQUARE FEET AGAINST WHICH THE ASSESSEE HAD ALREADY SHOWN THE COST OF CONSTRUCTION AT RS. 6 ,61,960/-, THEREFORE, THE ADDITION WAS NOT JUSTIFIED AT SUCH A HIGH VALUE. HO WEVER, THE BENCH POSED A 5 SPECIFIC QUERY WHETHER ANY CONSTRUCTION HAS BEEN DO NE ON THIRD FLOOR OR WHY DETAILS WERE NOT GIVEN BEFORE ASSESSING OFFICER AND CIT(A) AND WHY ASSESSEE HAS ITSELF SHOWN A SUM OF RS. 2,02,228/-, IT WAS AD MITTED THAT ASSESSEE HAS IN FACT SMALL CONSTRUCTION ON THIRD FLOOR WHICH REMAIN ED INCOMPLETE IN EARLIER YEARS. 7. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE ORDER OF ASSESSING OFFICER AND POINTED OUT THAT ASSESSING OFFICER WAS LEFT WITH NO OPTION BUT TO ESTIMATE THE COST OF CONSTRUCTION BECAUSE ASSESSEE DID NOT COOPERATE BY FILING ANY DETAILS BEFORE THE ASSESSING OFFICER OR VALUATI ON OFFICER. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. ADMITTEDLY, THE ASSESSEE HAS DONE SOME CONSTRUCTION IN THE THIRD FL OOR BUT ASSESSEE DOES NOT WANT TO DISCLOSE THE DETAILS. NO VOUCHERS OR DETAIL S OF CONSTRUCTION WERE GIVEN BEFORE ASSESSING OFFICER OR VALUATION OFFICER. HOW EVER, AT THE SAME TIME THE MAJOR CONSTRUCTION WAS ALREADY DONE UP TO FINANCIAL YEAR 2003-04 AND, THEREFORE, ONLY SOME ITEMS WHICH WERE NOT COMPLETED MIGHT HAVE BEEN COMPLETED DURING THE YEAR. THEREFORE, IN THESE CIRC UMSTANCES THE ONLY ALTERNATIVE IS TO ESTIMATE THE COST OF CONSTRUCTION . ACCORDINGLY, WE PROPOSE THE ADDITION OF RS. 20 LAKHS WHICH WAS ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER THE MAKE AN ADDITION OF RS. 20 LA KHS TOWARDS UNDISCLOSED INVESTMENT IN THE COST OF CONSTRUCTION DURING THE Y EAR. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11/03/20 14 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 11 TH MARCH,2014 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR