DCIT, Puducherry V. M/s. M.S.Shopping Complex, Puducherry

ITA 938/CHNY/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68653 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: V SRINIVASAN RETD
• Keywords: Unexplained investment; Value adopted by valuation officer; Valuation report
• Section: 133A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 938/MDS/2012 ASSESSMENT YEAR 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, D.P. THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. VS. M/S. M.S. SHOPPING COMPLEX, NO.135, 137 & 139, J.N. STREET, PUDUCHERRY 605 001. [PAN : AAPFM3958C] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N. BETGIRI, JCIT RESPONDENT BY : SHRI V. SRINIVASAN, RETD. ADDL.CIT DATE OF HEARING : 0 8 .0 8 .2013 DATE OF PRONOUNCEMENT : 20.08.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) XII, CHENNAI D ATED 23.01.2012 RELEVANT TO THE ASSESSMENT 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FIRM M/S. M.S. SHOPPING COMPLEX. A SURVEY UNDER SECTION 133A WAS C ONDUCTED ON 06.09.2007 IN THE GROUP CASE OF M/S. SARATHAS, POND ICHERRY. AT THE TIME OF SURVEY, IT WAS NOTICED THAT A BUILDING CONSTRUCTION WAS BEING DONE BY M/S. M.S. SHOPPING COMPLEX IN WHICH MR. M. SEVARAJ AND M RS. S. SUNDARAMBAL I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.938 938938 938/M/ /M/ /M/ /M/12 1212 12 2 ARE PARTNERS. IT WAS FOUND THAT THEY DID NOT MAINTA IN ANY BOOKS OF ACCOUNT WITH REGARD TO CONSTRUCTION OF THE BUILDING AND THA T THEY HAVE AVAILED LOAN OF ` .150 LAKHS FROM UNION BANK OF INDIA, PONDICHERRY. T HE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 143(2) OF INCOME TA X ACT. IN RESPONSE TO THAT, THE ASSESSEE HAS FILED A RETURN OF INCOME ALO NG WITH THE RETURN, THE ASSESSEE FIRM HAS ALSO FILED A VALUATION REPORT OF THE BUILDING OBTAINED FROM THE DEPARTMENTAL APPROVED ENGINEER, WHO HAS DETERMI NED THE VALUE OF THE BUILDING. AS PER HIS ESTIMATION AT ` .205.07 LAKHS, BUT THE FIRM HAS DISCLOSED THA THE VALUE OF THE BUILDING AS ` .220.15 LAKHS. SINCE AT THE TIME OF SURVEY, IT WAS STATED THAT NO BOOKS OF ACCOUNTS WAS MAINTAINED FOR THE CONSTRUCTION OF THE BUILDING BY THE FIRM M/S. M.S. SHOPPING COMPLEX , A REFERENCE WAS MADE TO THE DISTRICT VALUATION OFFICER [DVO], CHENNAI TO DETERMINE THE VALUE OF THE BUILDING. THE DVO HAS VALUED THE BUILDING AND SUBMI TTED HIS REPORT THAT THE TOTAL COST OF THE BUILDING AS ` .291.19 LAKHS SHOWING AN EXCESS OF ` .71.04 LAKHS THAN WHAT THE ASSESSEE HAD SHOWN IN THE BALAN CE SHEET. 3. BOOKS OF ACCOUNTS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ARE REJECTED SINCE THE ASSESSEES SON H AD STATED DURING THE SURVEY OPERATION THAT NO BOOKS OF ACCOUNTS WERE MAI NTAINED FOR THE CONSTRUCTION OF THE BUILDING. THE ASSESSEE HAS OBJE CTED REPORT OF THE VALUATION OF DVO. HOWEVER, THE ASSESSING OFFICER, BY CONSIDERING THE DVO REPORT, THE TOTAL COST OF BUILDING AS ` .2,91,19,000/- (-) ` .2,20,15,000 WHICH I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.938 938938 938/M/ /M/ /M/ /M/12 1212 12 3 WORKS OUT TO ` .71,03,323/- IS ADDED TO THE TOTAL INCOME OF THE AS SESSEE TOWARDS UNACCOUNTED INVESTMENT IN THE COST OF THE C ONSTRUCTION OF THE BUILDING. 4. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE LD. CIT(APPEALS). BEFORE THE LD. CIT(APPEALS), IT WAS SUBMITTED THAT THE COST OF CONSTRUCTION AS PER GOVERNMENT APPROVED VAL UER OF ` .205.7 LAKHS AND ACTUALLY THE ASSESSEE HAS SHOWN ` .220.15 LAKHS, WHICH IS HIGHER THAN THE ESTIMATED VALUE BY THE APPROVED VALUER. THE ASS ESSEE HAS FURTHER SUBMITTED BEFORE THE LD. CIT(APPEALS) THAT THE PROP ERTY CONSTRUCTED WAS IN A SMALL TOWN AND HENCE THE APPROVED VALUER ESTIMATED THE COST OF CONSTRUCTION BASED ON THE PWD RATES AND HE HAS FURTHER SUBMITTED THAT THE DEPARTMENTAL VALUATION OFFICER ESTIMATED THE COST OF CONSTRUCTIO N BASED ON THE CPWD RATES WHICH ARE APPLICABLE TO THE METROPOLITAN CITI ES AND OTHER BIGGER CITIES. THE LD. CIT(APPEALS), AFTER CONSIDERING THE SUBMISS ION OF THE ASSESSEE HAS OBSERVED AS UNDER: THE ABOVE SUBMISSIONS OF THE ASSESSEE HAVE BEEN CO NSIDERED CAREFULLY. AS STATED BY THE ASSESSEE, THE PROPERTY CONSTRUCTED BY THE ASSESSEE WAS IN A SMALL TOWN. WHEREAS THE DVO IN HI S VALUATION REPORT ADOPTED THE CPWD RATES WHILE ARRIVING AT THE ESTIMA TED COST OF CONSTRUCTION AT ` .291.19 LAKHS. THE HONOURABLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. SMT. V. GAJALAKSHMI (2011)(1 1 TAXMANN.COM 173)(MAD) HELD THAT STATE PWD RATES ARE TO BE APPLI ED. SIMILAR DECISIONS WERE ALSO RENDERED BY RAJASTHAN HIGH COUR T IN THE CASE OF CIT VS. DINESH TALWAR (265 ITR 344) (RAJ), WHEREIN IT WAS HELD THAT STATE PWD RATES ARE TO BE ADOPTED WHILE VALUING THE PROPERTY. RELIANCE IS FURTHER PLACED ON THE DECISIONS OF DELHI HIGH CO URT IN THE CASE OF CIT VS. BAJRANG LAL BHANSAL (12 TAXMANN.COM 88)(DEL ), CHENNAI I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.938 938938 938/M/ /M/ /M/ /M/12 1212 12 4 BENCH OF ITAT IN THE CASE OF ITA NO.262/MDS/2006 DA TED 30.11.2006 AND 2271/MDS/2006 DATED 16.11.2007. IN VIEW OF THE ABOVE DECISIONS, THE ASSESSING OFFIC ER IS NOT JUSTIFIED IN ADOPTING THE COST OF CONSTRUCTION AT ` .291.19 LAKHS BASED ON THE DVO'S REPORT WHICH WAS BASED ON THE CPWD RATES. ON THE OTHER HAND, THE ASSESSEE OBTAINED THE REPORT FROM AN APPR OVED VALUER WHO, ESTIMATED THE VALUE BASED ON THE STATE PWD RATES. T HE ACTUAL COST OF CONSTRUCTION SHOWN BY THE ASSESSEE AT ` .220.15 LAKHS IS HIGHER THAN THE ESTIMATED RATE OF ` .205.07 LAKHS BASED ON THE STATE PWD RATES. THEREFORE, THE ACTUAL COST OF CONSTRUCTION SHOWN BY THE ASSESSEE IN ITS RETURN OF INCOME IS REASONABLE AND NEEDS NO INTERFE RENCE. HENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN ADOPTING THE DVO'S ESTIMATION OF COST OF CONSTRUCTION BASED ON CPWD RATES. ACCORDING LY, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIB UNAL AND THE LD. DR HAS SUPPORTED THE ORDER PASSED BY THE ASSESSING OFF ICER. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUPPORTED THE ORDER PASSED BY THE LD. CIT(APPEALS). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND HAVE ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY DISPUTE IN THIS APPEAL IS DETERMINATION OF COST OF CONSTRUCTION OF BUILDING. THE ASSESSEE M/S. M.S. SHOPPING COMPLEX, IN WHICH MR. M. SELVARA J AND MRS. S. SUBDARAMBAL ARE PARTNERS. DURING THE COURSE OF SURV EY, THE SON OF THE PARTNERS STATED THAT NO BOOK OF ACCOUNTS WAS MAINTA INED WITH REGARD TO THE CONSTRUCTION OF THE BUILDING. HOWEVER, AFTER RECEIV ING NOTICE UNDER SECTION 143(2) OF THE ACT, ALONG WITH RETURN, THE ASSESSEE HAS FILED COST OF CONSTRUCTION OF BUILDING, WHICH WAS OBTAINED FROM T HE DEPARTMENTAL I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.938 938938 938/M/ /M/ /M/ /M/12 1212 12 5 APPROVED ENGINEER. AS PER THE DEPARTMENTAL APPROVED ENGINEER, THE VALUE OF THE BUILDING IS OF ` .205.07 LAKHS. HOWEVER, THE FIRM HAS DISCLOSED THE VALUE OF THE BUILDING AS ` .220.15 LAKHS. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE VALUE DISCLOSED BY THE ASSESSEE AN D REFERRED THE MATTER TO THE DVO FOR VALUATION OF THE BUILDING ON THE GROUND THAT THE PARTNERS SON HAS STATED THAT NO BOOKS OF ACCOUNTS WERE MAINTAINE D WITH REGARD TO THE CONSTRUCTION OF THE BUILDING AND REJECTED THE SAME. THERE IS NOTHING ON RECORD THAT WHETHER THE ASSESSING OFFICER HAS EXAMI NED THE BOOKS OF ACCOUNT OR NOT. IT APPEARS THAT THE ASSESSING OFFIC ER HAS REJECTED THE BOOKS FOR A SIMPLE REASON THAT THE SON OF THE PARTNERS HA S STATED THAT NO BOOKS OF ACCOUNTS WERE MAINTAINED. FROM THE FACTS, IT IS CLE AR THAT THE ASSESSEE HAS DISCLOSED THE VALUE OF THE BUILDING MUCH HIGHER THA N THE DEPARTMENTAL APPROVED ENGINEER. HOWEVER, THE ASSESSING OFFICER H AS NOT SATISFIED AND REFERRED THE MATTER TO THE DVO AND AS PER DVO, THE COST OF THE CONSTRUCTION OF BUILDING AS ` .291.19 LAKHS. THE DIFFERENCE BETWEEN THE VALUE DIS CLOSED BY THE ASSESSEE AND COST ESTIMATED BY THE DVO OF ` .71,03,323/- WAS ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT( APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING CASE LAW RELIED ON BY THE AR OF THE ASSESSEE, HAS OBSERVED T HAT THE CPWD RATES HAVE NO APPLICATION AND ONLY PWD RATES ARE APPLICAB LE TO ASSESSEES CASE AND DELETED THE ADDITION MADE BY THE ASSESSING OFFI CER. WE FIND NO I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.938 938938 938/M/ /M/ /M/ /M/12 1212 12 6 JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER PASS ED BY THE LD. CIT(APPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 20 TH OF AUGUST, 2013 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 20.08.2013 VM/- TO: THE ASSESSEE/A.O./CIT(A)/CIT/D.R.