DCIT, CHENNAI V. Shri V.Selvam (HUF), Vellore

ITA 993/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0886 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-01-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 07-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Search and seizure
• Section: 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NOS. 992 993, 994 & 995/MDS/2012 ASSESSMENT YEARS : 2002-03, 2003-04, 2004-05 & 2005-06 THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-IV(1), CHENNAI. V. SHRI V. SELVAM (HUF), BY KARTA SHRI V. SELVAM, 21, EAST MAIN ROAD, GANDHI NAGAR, VELLORE-632 006. (PAN : AAAAK1638B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JCIT RESPONDENT BY : SHRI A. MAHESH, CA DATE OF HEARING : 10.0 1.2013 DATE OF PRONOUNCEMENT : 31.01.201 3 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINS T THE CONSOLIDATED ORDER PASSED BY THE COMMISSIONER OF IN COME-TAX (APPEALS)-I, CHENNAI DATED 27-02-2012 FOR THE ASSES SMENT YEARS 2002-03 TO 2005-06. AS COMMON ISSUE IS INVO LVED IN ALL ITA NO.992-995/MDS /2012 : 2 : THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. BRIEF FACTS ARE THAT THERE WAS A SEARCH AND SEIZU RE OPERATION CARRIED OUT AT THE RESIDENCE OF SHRI V. SELVAM UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 ('THE ACT' FOR SHORT). DURING THE COURSE OF SEARCH IT WAS FOUND THAT SOME UNEXPLAINED INVESTMENT IN IMMOVABLE PROPERTIES AND UNEXPLAINED EXPENDITURE IN THE FORM OF CONSTRUCTION OF PROPERTY AT KATPADI, VELLORE-632 006. ACCORDINGLY, A NOTICE U/S 153A READ WITH SECTION 153C OF THE ACT WAS ISSUED T O THE ASSESSEE . THE ASSESSEE FILED RETURNS OF INCOME AN D ASSESSMENTS U/S 153A READ WITH SECTIONS 153C AND 14 3(3) OF THE ACT FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06 WERE COMPLETED ON 22-12-2009. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE AS SESSEE AND HIS WIFE, SMT. S. PREETHA, HAD CONSTRUCTED A HOUSE AT KATPADI, VELLORE DURING THE ASSESSMENT YEARS 2002-03 TO 2005 -06. THE ADMITTED COST OF CONSTRUCTION WAS ` 85.78 LAKHS. AT THE TIME OF SEARCH VARIOUS BILLS FOR THE HOUSE CONSTRUCTION WERE FOUND AND SEIZED. THE ASSESSEE AND HIS WIFE IN THE STATE MENT RECORDED HAD OFFERED UNEXPLAINED INCOME OF ` 50 LAKHS ITA NO.992-995/MDS /2012 : 3 : TOWARDS SHORTFALL IN THE ADMITTED COST OF CONSTRUCT ION. IN THE RETURN FILED U/S 153C AFTER EXAMINING THE SEIZED MA TERIAL THE ASSESSEE AND HIS WIFE TOGETHER OFFERED ` 77.80 LAKHS TOWARDS DISCREPANCIES IN THE COST OF CONSTRUCTION. FINALLY THE COST OF CONSTRUCTION ADMITTED ALONG WITH HIS WIFE WAS ` 163.59 LAKHS ( ` 85.78 LAKHS + ` 77.80 LAKHS). DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS OB SERVED THAT IT IS AN ADMITTED FACT BY THE ASSESSEE THAT TH E EXPENDITURE INCURRED WHICH ARE SUPPORTED BY BILLS AND INVOICES WERE NOT RECORDED IN THE BOOKS. THE ASSESSEES CLAIM THAT S UCH EXPENDITURES ARE COVERED BY LUMP SUM DEBITS IN THE BOOKS OF ACCOUNT CANNOT SATISFACTORILY EXPLAIN THAT SUCH EXP ENDITURES ARE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. TH EREFORE, IN THE GIVEN SET OF CIRCUMSTANCES, ONE HAS TO COME TO THE CONCLUSION THAT SUCH EXPENDITURES ARE NOT RECORDED IN THE BOOKS OF ACCOUNT AND HAVING BEEN MET BY THE ASSESSE E OUT OF INCOME NOT DISCLOSED IN THE RETURNS FILED PRIOR TO THE DATE OF SEARCH. THE ADDITIONAL INCOMES THAT HAVE BEEN OFFE RED BY THE ASSESSEE IN THE POST-SEARCH RETURNS FILED ARE CLEAR LY AS A DIRECT RESULT OF EVIDENCES FOUND IN THE COURSE OF SEARCH. HENCE THE ASSESSING OFFICER REFERRED THE MATTER TO THE DISTRI CT VALUATION ITA NO.992-995/MDS /2012 : 4 : OFFICER (DVO FOR SHORT) FOR ESTIMATION OF THE COS T OF CONSTRUCTION OF THE HOUSE AND THE DVO ACCORDINGLY E STIMATED THE COST OF CONSTRUCTION OF THE HOUSE AT ` 2,51,36,000/-. THE REPORT OF THE DVO WAS FURNISHED TO THE ASSESSEE AND THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE COST OF CONSTRUCTION AS PER THE REPORT OF THE DVO SHOULD NO T BE ADOPTED AND THE EXCESS COST OF CONSTRUCTION OVER AN D ABOVE THE COST OF CONSTRUCTION ADMITTED IN THE RETURN BE BROUGHT TO TAX AS THE UNEXPLAINED INVESTMENT U/S 69 OF THE ACT . THE ASSESSEE MADE WRITTEN SUBMISSION AND HE HAS RAISED VARIOUS OBJECTIONS FOR THE ADOPTION OF THE DVOS REPORT FOR ESTIMATING THE COST OF CONSTRUCTION. HOWEVER, THE ASSESSING O FFICER COMPLETED THE ASSESSMENT BY ADOPTING THE ESTIMATION MADE BY THE DVO AT ` 2,51,36,000/-. 3. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(APPEALS). BEFORE THE CIT(APPEALS) HE HAS RAISED TWO SPECIFIC OBJECTIONS, I.E. THE ESTIMATED COST AS PER THE REGISTERED VALUER AT ` 119.75 LAKHS WHICH IS BASED ON THE PWD RATES AND THE COST OF CONSTRUCTION ESTIMATED BY THE DVO IS BASED ON THE CPWD RATES WHICH ARE NOT APPLICABLE TO THE ASSESSEES CASE. HE ALSO SUBMITTED THAT THE ENTIRE ITA NO.992-995/MDS /2012 : 5 : CONSTRUCTION WAS SUPERVISED BY THE ASSESSEE AND THE REFORE THE ASSESSEE IS ENTITLED TO 10% BENEFIT TOWARDS SELF-SU PERVISION. IN THIS CONNECTION HE RELIED ON VARIOUS CASE LAWS B EFORE THE CIT(APPEALS). THE CIT(APPEALS) BY CONSIDERING THE VARIOUS DECISIONS AND BY FOLLOWING THE DECISION OF THE MADR AS B BENCH OF THE TRIBUNAL IN THE CASE OF DR. MRS. PAKKIARATHI NAM DASS V. ITO IN ITA NOS. 809 TO 814(MAD)/1992 DATED 15-12-19 95, ALLOWED 10% DEDUCTION FROM THE COST OF ESTIMATE OF DVO FOR ADJUSTMENT FROM CPWD RATE TO STATE PWD RATE AND 10% DEDUCTION ON THE COST OF ESTIMATION OF THE DVO FOR SELF- SUPERVISION WAS ALLOWED. THE TOTAL COST OF CONSTRU CTION OF THE HOUSE WAS THUS ESTIMATED BY THE CIT(APPEALS) AT ` 1,83,78,233/-. HE HAS FURTHER OBSERVED THAT AS THE REVISED ESTIMATE COST WAS ONLY ` 183.78 LAKHS AS AGAINST THE COST OF ` 163.58 LAKHS ADMITTED BY THE ASSESSEE AND HIS WIFE IN THE RETURN U/S 153C OF THE ACT, HE WAS OF THE OPINION T HAT NO ADDITION WAS CALLED FOR TOWARDS UNDER-STATEMENT IN THE COST OF CONSTRUCTION OF THE HOUSE UNDER SECTION 69-B OF THE ACT AND THE ADDITION UNDER THIS HEAD FOR THE ASSESSMENT YEA RS 2002-03 TO 2005-06 WERE DELETED. ITA NO.992-995/MDS /2012 : 6 : 4. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARNED DR SUPPORTED THE ORDER PASSEDI BY THE ASSESSING OFFICER AND SUBMITTED THAT THE CIT(APPEALS) WITHOUT CONSIDERING THE FACTS IN THE R IGHT PERSPECTIVE REDUCED THE COST BY 10% FROM CPWD RATES AND FURTHER GRANTED 10% TOWARDS SELF-SUPERVISION. THE LEARNED DR FURTHER SUBMITTED THAT THE CIT(APPEALS) WAS NOT COR RECT IN ALLOWING 10% DEDUCTION TOWARDS ARCHITECTURAL FEATUR ES. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND HAS SUPPORTED THE ORDER PASSED BY THE CIT(APPEALS). HE FURTHER SUBMITTED THAT EVEN AFTER THE DEDUCTION OF 10% TOWARDS ADJUSTMENT OF CPWD RATES TO STATE PWD RATES AND 10% DEDUCTION FROM THE COST ESTIMATED BY THE DVO FO R SELF- SUPERVISION, STILL THE VALUE IS MUCH HIGHER AND SUB MITTED THAT THE APPEALS FILED BY THE REVENUE BE DISMISSED. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THERE WAS A SEARCH AND SEIZURE ACTION CARRIED OUT UNDER SECTION 132 OF THE ACT AT THE RESIDENCE OF THE ASSESSEE. DURING THE C OURSE OF THE SEARCH IT WAS FOUND THAT THE ASSESSEE AND HIS WIFE HAD CONSTRUCTED A HOUSE AT KATPADI. THE CONSTRUCTION C ONTINUED ITA NO.992-995/MDS /2012 : 7 : FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06. THEY HAVE ADMITTED THE COST OF CONSTRUCTION AT ` 85.78 LAKHS. THEREAFTER, THE ASSESSEE AND HIS WIFE IN A STATEMENT U/S 132(4) OF THE ACT HAD FURTHER OFFERED UNDISCLOSED INCOME OF ` 50 LAKHS TOWARDS THE SHORTFALL IN THE ADMITTED COST OF CONSTRUCTION. IN THE RETURN FILED U/S 153C AFTER EXAMINING THE SEIZED MATERIAL THE ASSESSEE AND HIS WIFE TOGETHER OFFERED ` 77.80 LAKHS TOWARDS DISCREPANCIES IN THE COST OF CONSTRUCTION,. THUS TH E TOTAL COST OF CONSTRUCTION AS ADMITTED BY THE ASSESSEE AND HIS WIFE WAS ` 163.59 LAKHS. THE ASSESSING OFFICER NOT SATISFIED WITH THE COST OF CONSTRUCTION AS OFFERED BY THE ASSESSEE, REFERRE D THE MATTER TO THE DVO AND THE DVO ESTIMATED THE COST OF CONSTR UCTION AT ` 251.36 LAKHS. THE DIFFERENCE BETWEEN THE ESTIMATI ON MADE BY THE DVO AND THE COST OF CONSTRUCTION ADMITTED BY THE ASSESSEE I.E. ` 251.36 LAKHS ` 163.59 LAKHS = ` 87.77 LAKHS, HAS BEEN ASSESSED EQUALLY U/S 69 OF THE ACT IN THE HANDS OF THE ASSESSEE AND HIS WIFE. BEFORE THE CIT(APPEALS) IT WAS SUBMITTED THAT THE ESTIMATE OF COST OF CONSTRUCTION AS PER THE REGISTERED VALUER WAS ONLY ` 119.75 LAKHS AND THE COST ADMITTED BY THE ASSESSEE WAS ` 163.59 LAKHS AND THE SAME WAS MUCH HIGHER THAN THE VALUE ADOPTED BY THE REGIS TERED ITA NO.992-995/MDS /2012 : 8 : VALUER. THE VALUE ESTIMATED BY THE DVO AT ` 251.36 LAKHS IS MUCH HIGHER. THE ASSESSEE HAS SUBMITTED BEFORE THE CIT(APPEALS) THAT THE DVO ESTIMATED THE COST OF CON STRUCTION BY FOLLOWING THE CPWD RATES AND REQUESTED THAT STAT E PWD RATES MAY BE APPLIED. THE CIT(APPEALS) AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DE CISION OF THE TRIBUNAL IN THE CASE OF DR.(MRS.) PAKKIARATHINA M DASS V. ITO (SUPRA) HAS ALLOWED 10% DEDUCTION FROM THE ESTI MATE OF THE DVO TO ADJUST FOR STATE PWD RATES AND 10% DEDUC TION FROM THE COST OF ESTIMATE OF THE DVO FOR SELF-SUPER VISION. ACCORDINGLY, THE CIT(APPEALS) ESTIMATED THE COST OF CONSTRUCTION OF THE HOUSE AT ` 183.78 LAKHS. WE FIND THAT THE ORDER PASSED BY THE CIT(APPEALS) BY REDUCING 10% TO WARDS ADJUSTMENT OF CPWD RATES TO STATE PWD RATES AND 10% TOWARDS SELF-SUPERVISION IS FAIR AND JUSTIFIED. 7. INSOFAR AS THE GROUND TAKEN BY THE REVENUE WITH REGARD TO 10% DEDUCTION TOWARDS SPECIAL ARCHITECTURAL FEAT URES ADDED BY THE DVO IN HIS REPORT, THE CIT(APPEALS) HAS GRAN TED RELIEF BY OBSERVING AS UNDER : SPECIAL ARCHITECTURAL FEATURES TAKEN AGAIN @ 10% OF TOTAL COST, WHILE ALL THE ITEMS HAVE BEEN MEASURED & ITA NO.992-995/MDS /2012 : 9 : INCLUDED IN THE DETAILED VALUATION IN NO. 4.1 TO 4.54 OF VOS REPORT 22,24,386 THE CIT(APPEALS) HAS FOUND FROM THE DVOS REPORT AT PAGE 10 OF THE PAPER BOOK FILED BY THE ASSESSEE THAT THE DV O HAS TAKEN THE ARCHITECTURAL FEE TWICE. THEREFORE, THE CIT(APPEALS) ONLY CORRECTED THE MISTAKE AND NO RELIEF IS GRANTED TO THE ASSESSEE. AFTER GOING THROUGH THE ORDER PASSED BY T HE CIT(APPEALS), WE FIND NO INFIRMITY IN THE ORDER PAS SED BY HIM. THIS GROUND OF APPEAL RAISED BY THE REVENUE IS THER EFORE DISMISSED. 8. INSOFAR AS THE DECISION OF THE TRIBUNAL RELIED O N BY THE CIT(APPEALS) IN THE CASE OF DR. (MRS.) PAKKIARATHIN AM DASS (SUPRA) WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT(APPEALS). IN THE CIRCUMSTANCES, THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ALL THE YEARS UNDER CONSID ERATION ARE DISMISSED. 9. IN THE REVENUES APPEAL IN ITA NO. 993/MDS/2012 FOR THE ASSESSMENT YEAR 2003-04, THERE IS ANOTHER GROUN D RELATING TO DELETION OF INTEREST UNDER SECTION 234D OF THE I NCOME TAX ACT, 1961. THE ISSUE INVOLVED IN THIS GROUND OF AP PEAL IS WHETHER THE INTEREST U/S 234D FOR THE ASSESSMENT YE AR 2003- ITA NO.992-995/MDS /2012 : 10 : 04 IS CHARGEABLE OR NOT. THE CIT(APPEALS) HAS HEL D THAT SEC. 234D IS A SUBSTANTIVE PROVISION AND APPLY FROM ASS ESSMENT YEAR 2004-05. BEFORE US THE LEARNED DR SUBMITTED T HAT IN THE CASE OF CIT V. INFRASTRUCTURE DEVELOPMENT FINANCE C O. LTD. (340 ITR 580) (MAD), THE HONBLE JURISDICTIONAL HI GH COURT HAS HELD THAT FOR THE APPLICABILITY OF SEC. 234D WHAT I S RELEVANT IS THE DATE OF ASSESSMENT AND NOT THE YEAR OF ASSESSME NT. THE HONBLE HIGH COURT HAS HELD THAT, SINCE THE REGULAR ASSESSMENT HAS BEEN COMPLETED ONLY ON MARCH 30, 2004 AND THE AMENDED PROVISION OF LAW, I.E., SECTION 234D CAME INTO OPERATION ON A ND FROM JUNE 1, 2003, WHICH IS WELL PRIOR TO THE COMPLETION OF THE REGULAR ASSESSMENT, CERTAINLY, TH E ASSESSEE IS LIABLE TO PAY INTEREST ON THE EXCESS RE FUND AMOUNT RECEIVED AND ENJOYED BY HIM ALL THESE YEARS AS CONTEMPLATED UNDER SECTION 234D OF THE ACT.. 10. FROM THE ABOVE DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT IT IS VERY CLEAR THAT SEC. 234D IS APPLI CABLE FROM THE DATE IT CAME INTO THE STATUTE BOOK, I.E. FROM 01-06 -2003 AND THEREFORE THE ASSESSEE IS LIABLE TO PAY THE INTERES T FROM THE DATE ON WHICH THE AMENDED PROVISION OF LAW CAME INT O OPERATION. IN VIEW OF THE DECISION OF THE HONBLE H IGH COURT WE ITA NO.992-995/MDS /2012 : 11 : REVERSE THE FINDING OF THE CIT(APPEALS) AND ALLOW T HE GROUND RAISED BY THE REVENUE. 11. IN THE RESULT, THE REVENUES APPEALS IN ITA NOS . 992, 994 AND 995/MDS/2012 ARE DISMISSED AND THE APPEAL I N ITA NO. 993/MDS/2012 IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) (V.DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 31 ST JANUARY, 2013. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE