The ITO, Ward-4(4),, Surat v. Valentine Cine Vision Ltd.,, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.2497/AHD/2009 A. Y.: 2003-04 THE INCOME TAX OFFICER WARD 4 (4) ROOM NO.219 AAYAKAR BHAVAN MAJURA GATE SURAT VS VALLENTINE CINE VISION LTD. DUMUS ROAD SURAT PA NO. AAACV 3889 R (APPELLANT) (RESPONDENT) APPELLANT BY SHRI R. K. DHANISTA SR. DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II I SURAT DATED 22 ND JUNE 2009 FOR ASSESSMENT YEAR 2003-04 ON THE FOLLO WING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN DELETING THE ADDITION OF RS.36 71 532/- MADE ON ACCOUNT OF UNDER VALUATION OF THE PROPERTY. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. NONE APPEARED ON BEHALF OF THE A SSESSEE DESPITE SERVICE OF NOTICE THROUGH REGISTERED POST. A/D CARD DULY SERVED UPON THE ASSESSEE IS ON RECORD. THE ASSESSEE IS THEREFO RE PROCEEDED EX- PARTE. ITA NO.2497/AHD/2009 ITO W-4(4) SURAT VS VALENTINE CINE VISION LTD. 2 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO M ADE ADDITION OF RS.36 71 532/- ON THE BASIS OF DIFFERENCE IN THE VA LUATION OF COST OF CONSTRUCTION DETERMINED BY THE DVO AND THE COST DIS CLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. IN THE ASSESSMENT ORDER THE AO HAS STATED THAT DURING THE COURSE OF ORIGINAL ASSES SMENT PROCEEDINGS THE MATTER OF DETERMINING OF FAIR VALUATION OF THE MULTIPLEX CONSTRUCTED BY THE ASSESSEE WAS REFERRED TO THE DVO HOWEVER N O REPORT WAS RECEIVED TILL COMPLETION OF THE ASSESSMENT. THEREFO RE IT WAS REOPENED SUBSEQUENTLY ON FILING THE REPORT. AS PER THE REPORT FILED BY THE DVO UNDER VALUATION OF THE PROPERTY WAS ASCERT AINED BY THE DVO. THEREFORE PROCEEDINGS U/S 148 OF THE IT ACT W AS INITIATED. THE AO ON THE BASIS OF THE DIFFERENCE IN VALUATION REPO RTED BY THE DVO AND THE COST DISCLOSED IN THE BOOKS OF ACCOUNT MADE THE ADDITION. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED CIT( A) AND IT WAS CONTENDED THAT THERE ARE SEVERAL MISTAKES IN THE RE PORT OF THE DVO WHICH HAVE BEEN POINTED OUT AT THE TIME OF ASSESSME NT BUT THE AO HAS NOT APPRECIATED THE SAME. THE ASSESSEE FILED CO PIES OF THE LEDGER ACCOUNT AND AUDITED FINANCIAL STATEMENT DISC LOSING THE COST OF IMMOVABLE ASSETS AT RS.4 17 86 389/- AS AGAINST THE AMOUNT OF RS.4 04 20 026/- TAKEN AND CONSIDERED BY THE DVO IN HIS REPORT FOR THE PURPOSE OF WORKING OUT THE DIFFERENCE IN VALUAT ION. IT WAS ALSO POINTED OUT THAT SOME EXPENDITURE HAS BEEN CONSIDER ED TWICE IN THE REPORT OF THE DVO AND ARCHITECTURAL FEES WERE ALSO WRONGLY CONSIDERED. THE ASSESSEE FILED COMPLETE DETAILS BEF ORE THE LEARNED CIT(A) AND THE SUBMISSION WHICH HAVE BEEN INCORPORA TED IN THE APPELLATE ORDER. SPECIFIC INSTANCES HAVE BEEN QUOTE D TO POINT OUT THE DEFECTS IN THE REPORT OF THE DVO. THE ASSESSEE APAR T FROM POINTING ITA NO.2497/AHD/2009 ITO W-4(4) SURAT VS VALENTINE CINE VISION LTD. 3 OUT SPECIFIC DEFECTS IN THE REPORT OF THE DVO ALSO CONTENDED THAT NO DEFECTS IN THE BOOKS OF ACCOUNT HAVE BEEN FOUND BY THE AO AND NO COGENT MATERIAL FOUND AGAINST THE ASSESSEE TO ESTAB LISH THAT ANY OF THE EXPENDITURE HAS NOT BEEN RECORDED BY THE ASSESS EE IN THE BOOKS OF ACCOUNT. IT WAS FURTHER CONTENDED THAT THERE WAS NO FAULT ON THE PART OF THE ASSESSEE FOR FILING THE SUBMISSION. IT WAS FURTHER SUBMITTED THAT THE DIFFERENCE WORKED OUT BY THE DVO IN HIS RE PORT IS NOT CONSIDERABLE AS IT WAS WORKED OUT TO 5.46% OF THE T OTAL COST INCURRED. THEREFORE THE ADDITION SHOULD NOT HAVE BEEN MADE O N MERE ESTIMATE. THE ASSESSEE RELIED UPON THE FOLLOWING DE CISIONS: (1) ACIT VS RADHESHYAM PODDAR 86 TTJ (ASR) 558 (2) ACIT VS BANDANA ROY 77 TTJ (GAU) 66 (3) CIT VS KUSHAL CHAND NIRMAL KUMAR 183 CTR 503 (M P) (4) CIT VS S. K. CONSTRUCTION 167 TAXMAN 171 (DEL) (5) CIT VS MERRUT CEMENT CO. PVT. LTD. 202 CTR 506 (ALL) IT WAS FURTHER SUBMITTED THAT IN ASSESSMENT YEAR 20 04-05 ON THE SIMILAR GROUND THE LEARNED CIT(A) DELETED THE ADDIT ION. 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD DELETED THE ADD ITION. HIS FINDINGS IN ARE REPRODUCED AS UNDER: I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS . IT IS CLEAR THAT THE AO DID NOT DISCUSS THE DEFECTS POINT ED OUT BY THE ASSESSEE IN THE VALUATION REPORT OF THE DVO. IT COULD BE ONLY AN OMISSION ON HIS PART. FURTHER THE COST INCURRED FOR IMMOVABLE ASSETS DISCLOSED IN THE BOOK S OF ACCOUNTS AND ALSO IN THE AUDITED FINANCIAL STATEMEN T OF THE ASSESSEE HAS NOT BEEN TAKEN CORRECTLY BY THE DV O IN HIS REPORT FOR THE PURPOSE OF WORKING OUT THE DIFFE RENCE. THE AO HAS FURTHER FAILED TO POINT OUT ANY DEFECT I N THE ITA NO.2497/AHD/2009 ITO W-4(4) SURAT VS VALENTINE CINE VISION LTD. 4 BOOKS OF ACCOUNTS AND OTHER DETAILS PRODUCED BEFORE HIM FOR HIS VERIFICATION DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. THE ORDER OF THE AO DOES NOT SPEAK ABO UT ANY EXPENDITURE WHICH HAS REMAINED UNACCOUNTED IN T HE BOOKS OF ACCOUNTS OR ANY ASSET CREATED BY THE ASSES SEE HAS REMAINED TO BE DISCLOSED IN THE BOOKS OF ACCOUN TS. THE AO HAS MADE THE ADDITION ONLY FOR THE REASON TH AT THE VALUE ESTIMATED BY THE DVO IS HIGHER THAN THE C OST SHOWN BY THE APPELLANT. THE AO HAS NOT POINTED OUT ANY EVIDENCE THAT CERTAIN CAPITAL EXPENDITURE HAS REMAI NED TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE COMPANY. HE WAS NOT JUSTIFIED IN MAKING THE ADDITIO N ON THE BASIS OF THE VALUATION REPORT OF THE DVO WHICH ITSELF BEARS SEVERAL DEFECTS. THESE DEFECTS HAVE BEEN MENTIONED ON PAGE SEVEN OF THIS ORDER AS MUCH AS CERTAIN VALUES HAVE BEEN TAKEN TWICE LIKE IN RESPEC T OF KITCHEN EQUIPMENT ACOUSTICS AND GLOWSIGNS ETC. SIM ILARLY FACTUAL ERRORS RESULTING IN DIFFERENCE ON ACCOUNT O F FIGURES TAKEN BY THE DVO AND AMOUNTS OF FEE PAID TO ARCHITE CT HAVE REMAINED TO BE CONSIDERED FOR WORKING OF DIFFE RENCE. ANY REASONABLE RECONCILIATION WITH ABOVE INCLUSIONS WOULD TAKE AWAY THE JUSTIFICATION FOR THE ADDITION SO MAD E BY THE AO. IN THE CIRCUMSTANCES MERELY ON THE BASIS OF TH E DIFFERENCE IN THE VALUE AS PER THE VALUATION REPORT AND THE ACTUAL COST INCURRED THE ADDITION CAN NOT BE MADE. IT SHOULD BE LOGICAL AND PROPER. THE ADDITION IS THERE FORE DIRECTED TO BE DELETED AND THE GROUNDS OF APPEAL AR E ALLOWED. IN THE RESULT THE APPEAL IS ALLOWED. 5. ON CONSIDERATION OF SUBMISSION OF THE LEARNED DR W E DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE LEARNED CIT (A) NOTED THAT THE AO HAD NOT DISCUSSED THE DEFECTS POINTED OUT BY THE ASSESSEE IN THE REPORT OF THE DVO. FURTHER THE COST INCURRED FOR I MMOVABLE ASSET ARE DISCLOSED IN THE BOOKS OF ACCOUNT AND AUDITED WHICH HAVE NOT BEEN APPRECIATED BY THE DVO. THE LEARNED CIT(A) ALSO HEL D THAT THE AO HAS FAILED TO POINT OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT AND OTHER ITA NO.2497/AHD/2009 ITO W-4(4) SURAT VS VALENTINE CINE VISION LTD. 5 DETAILS PRODUCED BEFORE HIM DURING THE ASSESSMENT P ROCEEDINGS. THUS THE FINDINGS OF THE LEARNED CIT(A) ARE SPECIF IC THAT NO DEFECTS HAVE BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE FOR THE PURPOSE OF MAINTAINING RECO RD OF THE CONSTRUCTION. EVEN THE AO HAS NOT REJECTED THE BOO KS OF ACCOUNT PREPARED BY THE ASSESSEE. FURTHER THE AO HAS NOT P OINTED OUT ANY EVIDENCE THAT CERTAIN CAPITAL EXPENDITURE WAS REMAI NING TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) ALSO NOTED THAT THE DEFECTS POINTED BEFORE HIM IN THE REPORT O F THE DVO HAVE REMAINED TO BE CONSIDERED BECAUSE THE ASSESSEE HAS EXPLAINED THE SAME. THE HONBLE SUPREME COURT ION THE CASE OF SAR GAM CINEMA VS CIT 328 ITR 513 HELD AS UNDER: HELD THAT THE ASSESSING AUTHORITY COULD NOT REFER THE MATTER TO THE DEPARTMENTAL VALUATION OFFI CER IN A CASE WHERE THERE WAS A CATEGORICAL FINDING RECORDED BY THE TRIBUNAL THAT THE BOOKS OF ACCOUNT WERE NEVER REJECTED. DECISION OF THE UTTARANCHAL HIGH COURT REVERSED. WE MAY FURTHER NOTE HERE THAT THE AO HAS NOTED THAT COST OF THE CONSTRUCTION WORKED OUT BY THE DVO FOR ASSESSMENT Y EAR UNDER APPEAL COMES TO RS.7 08 02 769/- AGAINST THE COST O F CONSTRUCTION DECLARED BY THE ASSESSEE IN A SUM OF RS.6 71 31 237 /-. THE ASSESSEE PLEADED BEFORE THE LEARNED CIT(A) THAT THE SAID DIFFERENCE IS NEGLIGIBLE BECAUSE IT IS HARDLY 5.46% OF THE TOT AL COST INCURRED. SINCE NO DEFECTS HAVE BEEN POINTED OUT IN THE MAINT ENANCE OF THE BOOKS OF ACCOUNTS BEFORE MAKING REFERENCE TO THE DV O AND THE ITA NO.2497/AHD/2009 ITO W-4(4) SURAT VS VALENTINE CINE VISION LTD. 6 DIFFERENCE IS NEGLIGIBLE AS AGAINST THE COST OF CON STRUCTION DECLARED BY THE ASSESSEE WE ARE OF THE VIEW THAT THE LEARNED C IT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RI GHTLY DELETED THE ADDITION WE THEREFORE DO NOT FIND ANY MERIT IN T HE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 25-02-2011 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 25-02-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD