A.C.I.T., Bangalore v. M/s Nagson & Co, Bangalore

ITA 1247/BANG/2015 | 2004-2005
Pronouncement Date: 30-11-2017 | Result: Allowed

Appeal Details

RSA Number 124721114 RSA 2015
Assessee PAN AABFN1805B
Bench Bangalore
Appeal Number ITA 1247/BANG/2015
Duration Of Justice 2 year(s) 2 month(s) 8 day(s)
Appellant A.C.I.T., Bangalore
Respondent M/s Nagson & Co, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Department
Tags No record found
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-11-2017
Date Of Final Hearing 02-08-2017
Next Hearing Date 02-08-2017
First Hearing Date 02-08-2017
Assessment Year 2004-2005
Appeal Filed On 21-09-2015
Judgment Text
ITA.1247/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B' BENGALURU BEFORE SHRI. A. K. GARODIA ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR JUDICIAL MEMBER I.T.A NO.1247/BANG/2015 (ASSESSMENT YEAR : 2004-05) ASST. COMMISSIONER OF INCOME-TAX CIRCLE 6(2)(1) BENGALURU .. APPELLANT V. M/S. NAGSONS & CO. NO.4/1 TUMKUR ROAD YESHWANTPURA BENGALURU 560 022 .. RESPONDENT PAN : AABFN1805B ASSESSEE BY : SMT. VANI H ADVOCATE REVENUE BY : SMT. PADMAMEENAKSHI JCIT HEARD ON : 08.11.2017 PRONOUNCED ON : 30.11.2017 O R D E R PER LALIT KUMAR JUDICIAL MEMBER : THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A)-2 BENGALURU DATED.14.07.2015 FOR THE ASSESSMENT YEAR 2004-05 ON THE FOLLOWING EFFECTIVE GROUND : ITA.1247/BANG/2015 PAGE - 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE T HE CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO WHEN HE HAD ACTUALLY BASED IT ON A LOGICAL ESTIMATION THAT THE COST OF CONSTRUCTION UP TO THE FIRST FLOOR DECLARED IN THE BALANCE SHEET WAS THE SAME AS THE VALUATION REPORT AND HENCE THE VALUE MENTIONED IN THE VALUATION REPORT HAD BEEN ADOPTED BY THE AO AS COST OF CONSTRUCTION FOR THE 2 ND AND 3 RD FLOORS. THE DEVIATION OF VALUATION IN RESPECT OF 2 ND AND 3 RD FLOORS MADE BY THE ASSESSEE VIS-A-VIS THE VALUATION OF THE REGISTERED VALUATION OFFICER WAS THEREFORE RIGHTLY TAXED BY THE AO. 02. BRIEF FACTS ARE THE ASSESSEE WAS ENGAGED IN TH E MANUFACTURE OF MOSAIC TILES AND HOLLOW BLOCKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2006-07 IT WAS NOTICED THAT THE ASSESSEE HAD CONSTRUCTED COMMERCIAL COMPLEX DURING THE PERIOD 19 98-2004. AS PER THE VALUATION REPORT ISSUED BY THE APPROVED VAL UER OF THE ASSESSEE THE ASSESSEE HAS COMPLETED THE GROUND FLOOR AND FIR ST FLOOR AFTER COMMENCEMENT OF THE CONSTRUCTION IN THE FY 1998-99 AND THE ASSESSEE FOR THE CONSTRUCTION OF THE GROUND FLOOR A S PER THE COST OF BASEMENT FLOOR GROUND FLOOR AND FIRST FLOOR THE T OTAL COST OF CONSTRUCTION WAS RS.4 08 59 247/-. AS PER THE VALU ATION REPORT SUBMITTED AT PAGE 157 OF THE PAPER BOOK THE COST OF BASEMENT FLOOR AN FIRST FLOOR WAS TAKEN AT RS.4 08 59 247/- AND THE SAID CONSTRUCTION WAS COMPLETED IN THE YEAR 1998 TO 2004. FURTHER AS PER THE ASSESSEES OWN APPROVED VALUERS REPORT THE COST OF CONSTRUCTION F OR SECOND FLOOR AND THIRD FLOOR WORKED OUT TO RS.4 08 65 848/- AS AGAIN ST THE COST ARRIVED BY THE ASSESSEE AT RS.2 83 07 244/-. 03. AS PER THE VALUATION REPORT THE CONSTRUCTION F OR THE SECOND AND THIRD FLOORS LIFT-ROOM AND STAIRCASE AREA WAS REPORTEDLY CONSTRUCTED IN THE YEAR ITA.1247/BANG/2015 PAGE - 3 2002 TO 2004. FROM THE BARE PERUSAL OF THE VALUATI ON REPORT THERE WAS A BREAK IN THE CONSTRUCTION ACTIVITY AS THE CONSTRUC TION UP TO FIRST FLOOR WAS ENDED IN THE FY 1998-99 WHEREAS CONSTRUCTION OF SECOND AND THIRD FLOORS WAS STARTED AND COMPLETED DURING 2002-2004. 04. AS THERE WAS DIFFERENCE IN THE COST OF CONSTRUC TION OF SECOND AND THIRD FLOORS BETWEEN THE COST OF CONSTRUCTION AS ME NTIONED BY THE APPROVED VALUER AND THE COST DEBITED BY THE ASSESSEE TO THE EXTENT OF RS.1 25 58 614/-. THE AO INITIATED PROCEEDINGS U/S .148 OF THE ACT. THEREAFTER THE ASSESSEE FILED A REPLY BEFORE THE AO AND HAS SUBMITTED THAT THE TOTAL COST OF CONSTRUCTION IF TAKEN INTO ACCOUN T FROM AY 1999-2000 TO 2005-06 WOULD BE THE SAME. HOWEVER THE AO WAS NOT CONVINCED WITH THE REASONING BY THE ASSESSEE AND THEREFORE THE AO MADE AN ADDITION OF RS.1 25 58 614/- U/S.69B OF THE ACT. FEELING AGGRI EVED BY THE ADDITION THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 05. IT WAS SUBMITTED BEFORE THE CIT (A) THAT AS THE ASSESSEE HIMSELF WAS SUPERVISING THE CONSTRUCTION ACTIVITY THEREFORE TH ERE IS A DEFICIT IN THE COST OF CONSTRUCTION BETWEEN THE COST DEBITED BY THE ASS ESSEE IN ITS BOOKS OF ACCOUNT AND THE COST ESTIMATED BY THE APPROVED VALU ER. THE CIT (A) SOUGHT A REMAND REPORT AND CONSEQUENTLY DELETED THE ADDITION. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 06. BEFORE US THE LD. DR SUBMITTED THAT THE REASON ING RECORDED BY THE CIT (A) IS INCORRECT AS THE CIT (A) HAD EXAMINED TH E COST OF CONSTRUCTION FROM 03.07.1998 UP TO 31.03.2005 AND HAS COME TO TH E CONCLUSION THAT THE TOTAL COST OF CONSTRUCTION COMES TO RS.7 32 58 831. 36 AND THE CIT (A) HAS ITA.1247/BANG/2015 PAGE - 4 FURTHER TAKEN INTO ACCOUNT THE INVESTMENT OF RS.35 34 636/- IN THE COMPOUND WALL MADE IN THE YEAR 2006 AS THE SAME IS NOT RELEVANT BEING CONSTRUCTED ON 31.03.2006. AFTER DEALING WITH THIS ISSUE IN THIS MANNER THE CIT (A) HAS WRONGLY DELETED THE ADDITION ON THE PRE TEXT THAT THE VALUATION MADE BY THE REGISTERED VALUER IS MERELY AN ESTIMATI ON ONLY AND THEREFORE THE DELETION MADE BY THE CIT (A) WAS WITHOUT ANY BA SIS. 07. ON THE OTHER HAND THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IF THE ORDER OF THE CIT (A) IS TAKEN INTO CONSIDERATION TH ERE IS NOT MUCH DIFFERENCE BETWEEN THE COST ESTIMATED BY THE REGIST ERED VALUER AND THE COST DEBITED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND THEREFORE THE ORDER PASSED BY THE CIT (A) WAS IN ACCORDANCE WITH LAW. THE LD. AR RELIED UPON THE FOLLOWING JUDGMENTS : CIT V. OM OVERSEAS (P & H)-ITA.721/2010 DT.31.01.2 011 CITV. TULSIANI CONSTRUCTIONS & DEVELOPERS LTD (ALL) ITA.67/2011 DT.27.09.2012 CIT V. ABEESON HOTELS P. LTD (MP) -191 ITR 263 K K SESHAIYER V. CIT (MAD) 166 ITR 527 08. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS AN ADMITTED CASE BEFORE US THAT THE COST OF CONSTRUCTI ON OF THE BUILDING WAS FIXED AFTER TAKING INTO CONSIDERATION THE PLAN-SANC TION OF THE BUILDING DT.21.09.1998. IT IS ALSO AN ADMITTED CASE OF THE ASSESSEE THAT THE TOTAL COST OF CONSTRUCTION OF BASEMENT GROUND FLOOR AND FIRST FLOOR AS PER THE VALUATION REPORT WAS RS.2 88 59 247/-. THE ASSESSE E AS ON 31.03.2001 HAS INVESTED AN AMOUNT OF RS.4 49 51 137.36. THUS THE COST OF CONSTRUCTION OF BASEMENT GROUND AND FIRST FLOORS AS PER THE REGIST ERED VALUER WAS RS.4 08 59 247/- AND THAT AS PER THE BOOKS OF ACCOU NT WAS ITA.1247/BANG/2015 PAGE - 5 RS.4 49 51 137/-. THUS THERE WAS NO MAJOR DIFFEREN CE BETWEEN THE COST OF CONSTRUCTION OF BASEMENT GROUND AND FIRST FLOORS. THEREFORE THE VALUATION REPORT SUBMITTED BY THE ASSESSEE CANNOT BE DOUBTED OR FAULTED WITH. HAVING SAID SO THE CASE OF THE AO WITH RESPECT TO THE COST OF CONSTRUCTION WITH RESPECT OF SECOND AND THIRD FLOOR S LIFT-ROOM AND STAIRCASE AREA OF THE BUILDING CONSTRUCTED IN THE YEAR 2002-2 004 WAS THAT THE ASSESSEE HAS DEBITED IN THE BOOKS OF ACCOUNT COST OF RS.2 01 31 697/- IN THE YEAR 01.04.2002 TO 31.03.2003 AND FOR 01.04.2003 TO 31.0 3.2004 AN AMOUNT OF RS.81 75 547/- WHEREAS THE TOTAL COST OF CONSTRUCT ION OF THE SECOND FLOOR THIRD FLOOR LIFT-ROOM AND STAIRCASE AS ESTIMATED B Y THE REGISTERED VALUER WAS RS.4 08 65 858/-. THUS IT IS CLEAR THAT THE COST O F CONSTRUCTION SHOWN BY THE REGISTERED VALUER OF THE ASSESSEE WAS RS.4 08 65 85 8/- WHEREAS THE COST DEBITED BY THE ASSESSEE IN ITS BOOKS WAS RS.2 01 31 697/- + RS 8175547/- = RS 2 83 07 244/-. THUS THE ASSESSEE HAS MADE AN INVESTMENT OF RS.1 25 58 614/- {RS.4 08 65 858/- ( - ) RS 2 83 0 7 244/-} OUT OF THE BOOKS OF ACCOUNT. THE ASSESSMENT YEAR UNDER CONSIDERATIO N IS 2004-05 (FY 2003-04). IN THE FINANCIAL YEAR 2003-04 THE ASSES SEE HAD DEBITED AN AMOUNT OF RS.81 75 547/- WHEREAS IF THE INVESTMENT MADE IN THE FY 2002- 03 IS DEBITED FROM THE ESTIMATED COST THEN IT WOUL D BE RS.2 07 34 161/-. IT MAY BE PERTINENT TO RECORD THAT THE COST OF CONSTRU CTION OF THE SECOND FLOOR AS PER THE VALUATION REPORT WAS MENTIONED AS RS.2 0 0 64 088/- WHEREAS THE COST DEBITED BY THE ASSESSEE FOR THE AY 2003-04 (FY 2002-03) WAS RS.2 01 31 697/-. COST OF CONSTRUCTION SHOWN BY TH E APPROVED VALUER FOR THE SECOND FLOOR WAS RS.2 00 64 288/- AND THE COST DEBITED BY THE ASSESSEE FOR AY 2003-04 WAS RS.2 01 31 697/-. THUS BOTH THE COST AS PER THE APPROVED VALUER AND THE COST DEBITED FOR THE SECOND FLOOR FOR AY 2003-04 ITA.1247/BANG/2015 PAGE - 6 ARE IN THE SAME RANGE AND THEREFORE NO ADDITION CAN BE MADE ON THIS ACCOUNT QUA THE SECOND FLOOR. 09. HOWEVER WHEN WE SEE THE BALANCE COST REFERRED ABOVE I.E. RS.2 07 34 161/- WHICH WAS INCURRED BY THE ASSESSE E AS PER THE VALUATION REPORT FOR THE THIRD FLOOR LIFT-ROOM THEN WE NOTI CE THAT AGAINST THIS HEAD THE ASSESSEE HAS DEBITED ONLY RS.81 75 547/-. FROM THE ABOVE SAID CONCLUSION IN OUR VIEW THE VALUATION REPORT SUBMIT TED BY THE ASSESSEE CANNOT BE BRUSHED ASIDE MERELY BASED ON THE ESTIMAT ION AS THE COST REFLECTED IN THE VALUATION REPORT MATCHES WITH THE COST DEBITED BY THE ASSESSEE FOR ALL THE PREVIOUS ASSESSMENT YEARS EXCE PT THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIEW THEREOF IT IS CLEAR THAT THE ASSESSEE HAS INVESTED AN AMOUNT OF RS.1 25 58 614/- OUT OF THE B OOKS OF ACCOUNT AND THEREFORE THE ADDITION MADE BY THE AO WAS IN ACCORD ANCE WITH LAW. 10. RELIANCE PLACED BY THE ASSESSEE IN THE MATTER O F M/S. OM OVERSEAS (SUPRA) IS MISPLACED AS IN THE SAID MATTER THE AO H AS COMPLETED THE ASSESSMENT AND DETERMINED THE FINAL COST OF CONSTRU CTION BASED ON THE DVOS REPORT WHEREAS IN THE PRESENT CASE THE AO H AS COME TO THE CONCLUSION BASED ON THE APPROVED VALUERS REPORT SU BMITTED BY THE ASSESSEE ITSELF AND NOT BY A THIRD PARTY. 11. THE SECOND JUDGMENT RELIED UPON BY THE ASSESSEE WAS IN RESPECT OF TULSIANI CONSTRUCTIONS & DEVELOPERS LTD (SUPRA) WH ERE THE PRINCIPLE OF LAW LAID DOWN BY THE ALLAHABAD HIGH COURT FOR UNDER -STATEMENT OF THE INVESTMENT IN THE BUILDING. IN THE PRESENT CASE AS NOTICED HEREINABOVE THE REPORT ON WHICH THE AO RELIES IS NOT THE REPORT OF THE DVO BUT OF THE ITA.1247/BANG/2015 PAGE - 7 ASSESSEES APPROVED VALUER. THEREFORE THE JUDGMENT IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. THE NEXT JUDGMENT RELIED UPON BY THE ASSESSEE I N THE MATTER OF ABEESON HOTELS P. LTD (SUPRA). THIS JUDGMENT OF TH E MADHYA PRADESH HIGH COURT IS ALSO ON THE PRINCIPAL OF IF THERE IS A VARIATION IN THE VALUATION MADE BY THE ASSESSEE AND THAT OF THE DVO THEN THE TRIBUNAL MAY ACCEPT THE VALUATION MADE BY THE ASSESSEE IF THERE IS 10% DIFFERENCE IN THE VALUATION MADE BY BOTH OF THEM. 13. THUS IN VIEW OF THE ABOVE WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION MADE BY THE ASSESSEE. ACCORDINGLY THE O RDER PASSED BY THE CIT (A) IS REQUIRED TO BE REVERSED AND THE ORDER PASSED BY THE AO IS UPHELD. 14. IN THE RESULT APPEAL FILED BY THE REVENUE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF NOVEMBER 2017. SD/- SD/- (A. K. GARODIA) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 30.11.2017 MCN* ITA.1247/BANG/2015 PAGE - 8 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF ITAT BANGALORE BY ORDER SENIOR PRIVATE SECRETARY