The ITO, Ward-3(1)., Visakhapatnam v. Smt N Sukanya., Visakhapatnam

ITA 279/VIZ/2008 | 2003-2004
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 27925314 RSA 2008
Assessee PAN ACNPN1041R
Bench Visakhapatnam
Appeal Number ITA 279/VIZ/2008
Duration Of Justice 1 year(s) 11 month(s) 7 day(s)
Appellant The ITO, Ward-3(1)., Visakhapatnam
Respondent Smt N Sukanya., Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 23-04-2010
Assessment Year 2003-2004
Appeal Filed On 16-05-2008
Judgment Text
PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.279/VIZAG/2008 & ITA NO.390/VIZAG/2007 ASSESSMENT YEARS: 2003-04 & 2004-05 ITO WARD-3(1) VISAKHAPATNAM VS. N. SUKANYA VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO:ACNPN 1041 R APPELLANT BY: SHRI G.S.S. GOPINATH DR RESPONDENT BY: SHRI C. SUBRAHMANYAM CA ORDER PER SHRI B R BASKARAN ACCOUNTANT MEMBER: THESE TWO APPEALS FILED AT THE INSTANCE OF THE REV ENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LD CIT (A ) - I VISAKHAPATNAM FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05. SINCE TH E ISSUE CONTESTED IN THESE TWO APPEALS IS COMMON IN NATURE WE DISPOSE O FF THESE TWO APPEALS BY THIS COMMON ORDER. 2. THE ADDITION MADE BY THE AO ON ACCOUNT OF DIFFER ENCE IN COST OF THE CONSTRUCTION OF A BUILDING IN THESE TWO ASSESSMENT YEARS HAVING BEEN DELETED BY THE LD CIT THE REVENUE IS IN APPEAL BEF ORE US. 3. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN B RIEF. THE ASSESSEES RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 WA S REOPENED BY ISSUING NOTICE U/S 148 ON ACCOUNT OF OMISSION ON THE PART O F THE ASSESSEE TO DISCLOSE THE INTEREST RECEIVED BY HIM U/S 244A OF T HE ACT. DURING THE COURSE OF REASSESSMENT PROCEEDING THE AO NOTICED THAT THE ASSESSEE HAD PAGE 2 OF 8 COMPLETED CONSTRUCTION OF A MULTI STOREY BUILDING I N THAT YEAR. HENCE THE AO CALLED FOR DETAILS OF COST OF CONSTRUCTION OF TH E BUILDING. HOWEVER THE ASSESSEE DID NOT FURNISH ANY INFORMATION AT THAT PO INT OF TIME. HENCE THE AO REFERRED THE MATTER OF VALUATION TO THE DEPARTME NTAL VALUATION OFFICER (DVO) WHO ESTIMATED THE COST OF CONSTRUCTION AT RS. 1.89 CRORES. THE ASSESSEE HAD ORIGINALLY DISCLOSED THE COST OF CONST RUCTION AT RS.1 10 13 250/- DURING THE THREE YEARS MENTIONED B ELOW: ASSESSMENT YEAR 2002-03 - RS. 48 46 171.00 ASSESSMENT YEAR 2003-04 - RS. 59 93 965.00 ASSESSMENT YEAR 2004-05 - RS. 1 73 114.00 DURING THE COURSE OF THE ASSESSMENT PROCEEDING THE ASSESSEE GOT THE PROPERTY VALUED BY A REGISTERED VALUER WHO ESTIMAT ED THE COST OF CONSTRUCTION AT RS.1.09 CRORES. AFTER HEARING THE OBJECTIONS OF THE ASSESSEE TO THE ESTIMATE MADE BY THE DVO THE AO DETERMINED THE COST OF CONSTRUCTION AT RS.1.36 CRORES AFTER ALLOWING DEDUC TION OF 15% TOWARDS THE DIFFERENCE IN THE RATE OF MATERIALS AND FURTHER 10% TOWARDS PERSONAL SUPERVISION. THE AO ALSO ANALYSED THE SOURCES CLAI MED BY THE ASSESSEE AND ACCEPTED THE SOURCES ONLY TO THE EXTENT OF RS.0.91 CRORE. THUS THERE WAS A SHORTAGE OF $S.45.00 LAKHS BETWEEN THE CONSTRUCTION COST AND THE SOURCES. THE AO TOOK THE PERIOD OF CONSTRUCTION AS 20 MONTHS FROM 1.4.2002. ACCORDINGLY THE AO DISTRIBUTED THE ABOVE SAID SHOR TAGE OF RS.45.00 LAKHS ON TIME BASIS I.E. 12:8 BETWEEN THE ASSESSMENT YEA R 2003-04 AND 2004-05. ACCORDINGLY THE AO DETERMINED THE DIFFERENCE IN THE COST OF CONSTRUCTION AND SOURCES AT RS.18.11 LAKHS FOR THE ASSESSMENT YE AR 2004-05 AND ASSESSED THE SAME. BASED ON THE ABOVE INFORMATION THE AO ALSO REOPENED THE ASSESSMENT RELATING TO THE ASSESSMENT YEAR 2003 -04. 3.1 BEFORE THE COMPLETION OF THE ASSESSMENT RELATI NG TO THE ASSESSMENT YEAR 2003-04 THE APPEAL FILED BY THE ASSESSEE AGAIN ST THE ASSESSMENT ORDER RELATING TO THE ASSESSMENT YEAR 2004-05 WAS DISPOSE D OFF BY LD CIT (A) BY DELETING THE ADDITION MADE IN RESPECT OF DIFFERENCE IN COST OF CONSTRUCTION PAGE 3 OF 8 AND THE SOURCES. AT THAT TIME THE AO DECLINED TO ACCEPT THE DECISION OF THE LD CIT (A) SINCE THE DEPARTMENT PREFERRED APPEAL B EFORE THE ITAT ASSAILING THE DECISION OF THE LD CIT (A). IN THE ASSESSMENT 2 003-04 THE AO FINALIZED THE COST OF CONSTRUCTION OF THE IMPUGNED BUILDING A T RS.1.40 CRORES. HOWEVER THE AO APPORTIONED THE DIFFERENCE IN COST OF CONSTRUCTION IN PROPORTION TO THE COST INCURRED BY THE ASSESSEE AND ACCORDINGLY DETERMINED THE DIFFERENCE RELATABLE TO THE ASSESSMENT YEAR2003 -04 AT RS.16.53 LAKHS. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LD CIT (A) DELETED THE SAID ADDITION IN ACCORDANCE WITH THE VIEW TAKEN BY HIM F OR THE ASSESSMENT YEAR 2004-05. AGGRIEVED BY THE ORDERS PASSED BY THE LD CIT (A) THE REVENUE HAS FILED THESE APPEALS BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CARE FULLY PERUSED THE RECORD. APART FROM THE ISSUE OF DETERMINATION OF C OST OF CONSTRUCTION THE ASSESSEE HAS ALSO CONTENDED BEFORE THE LD CIT(A) ON THE PERIOD OF CONSTRUCTION ALSO. WHILE PASSING THE ASSESSMENT ORD ER FOR ASSESSMENT YEAR 2004-05 THE AO HAD TAKEN THE PERIOD OF CONSTRUCTIO N AS 18 MONTHS FROM 1.4.2002 I.E. PERIOD FALLING IN THE ASSESSMENT YEA RS 2003-04 AND 2004-05. HOWEVER AS PER THE RETURNS OF INCOME FILED BY THE ASSESSEE THE PERIOD OF CONSTRUCTION FALL IN THE FINANCIAL YEARS RELEVANT T O THE ASSESSMENT YEARS 2002-03 TO 2004-05. WHEN THE ISSUE RELATING TO TH E PERIOD OF CONSTRUCTION WAS RAISED BEFORE THE LD CIT(A) IN THE APPEAL FILED FOR ASSESSMENT YEAR 2004-05 THE LD CIT(A) ACCEPTED THE CLAIM OF THE AS SESSEE WITH REGARD TO THE PERIOD OF CONSTRUCTION. THE AO IN THE ORDER R ELATING TO THE ASSESSMENT YEAR 2003-04 WHICH IS PASSED SUBSEQUENT TO THE ORD ER FOR ASSESSMENT YEAR 2004-05 HAS ALLOCATED THE DIFFERENCE IN THE COST O F CONSTRUCTION IN PROPORTION TO THE COST DECLARED BY THE ASSESSEE IN THAT YEAR APPARENTLY ACCEPTING THE ORDER OF LD CIT(A). IN THE APPEAL FI LED BY THE REVENUE NO SPECIFIC GROUND HAS BEEN RAISED RELATING TO THE PER IOD OF CONSTRUCTION. HENCE IN OUR VIEW THE ISSUE RELATING TO THE PERIO D OF CONSTRUCTION HAS REACHED FINALITY. PAGE 4 OF 8 5. IN THE ASSESSMENT ORDER RELATING TO THE ASSESS MENT YEAR 2004-05 THE AO ARRIVED AT THE COST OF CONSTRUCTION OF THE IMPUG NED BUILDING AT RS.1.36 CRORES AFTER MAKING SOME ADJUSTMENT. HOWEVER IN T HE ASSESSMENT ORDER RELATING TO THE ASSESSMENT YEAR 2003-04 (SUBSEQUENT ORDER) THE AO HAS REVISED THE COST OF CONSTRUCTION BY MAKING SOME MOR E ADJUSTMENT. HENCE WE ARE TAKING THE ORDER RELATING TO THE ASSESSMENT YEAR 2003-04 AS THE BASIS AND PROCEED TO DISPOSE OF THE ISSUE. 6. THOUGH THE ASSESSEE HAS DECLARED THE COST OF CONSTRUCTION IN HER RETURNS OF INCOME RELATING TO THE ASSESSMENT YEARS 2002-03 TO 2004-05 THE FACT REMAINS THAT THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT BILLS OR VOUCHERS RELATING TO THE COST OF CONSTRUCT ION. WHILE THE REVENUE HAS PLACED ITS RELIANCE ON THE REPORT FURNISHED BY THE DVO THE ASSESSEE HAS PLACED HER RELIANCE ON THE REPORT SUBMITTED BY THE REGISTERED VALUER. ON A CAREFUL PERUSAL OF THE TWO REPORTS WE NOTICE THAT BOTH THE TECHNICAL EXPERTS HAVE ADOPTED THE PLINTH AREA RATES (PAR) METHOD OF VALUATION. HOWEVER THE DVO HAS ADOPTED THE AVERAGE PER SQ. METER RATES OF CONSTRUCTION FOR 1992 PRESCRIBED BY THE CPWD BY MAKING SUITABLE ADJU STMENT BY ADOPTING RELEVANT COST INDEXATION. HOWEVER THE REGISTERED V ALUER HAS ARRIVED AT THE AVERAGE PAR FOR EACH ITEM OF WORK BY CONSIDERIN G THE RATES FOR MATERIAL LABOUR ETC. PRESCRIBED BY THE STATE PWD A ND ALSO BY TAKING INTO ACCOUNT THE PROBABLE TECHNICAL DETAILS. 7. THE LD AR HAS PLACED RELIANCE ON CERTAIN CASE LAW WHICH WAS ALSO CONSIDERED BY THE LD CIT(A) TO GRANT RELIEF TO THE ASSESSEE. BOTH THE COUNSEL ADVANCED THEIR ARGUMENTS ON VARIOUS CASE LA W. HOWEVER IN THE INSTANT CASE THE ASSESSEE DID NOT MAINTAIN ANY BOO KS OF ACCOUNT FOR THE CONSTRUCTION ACTIVITY. THE ASSESSEE ALSO DID NOT H AVE THE DETAILED TECHNICAL DETAILS RELATING TO THE CONSTRUCTION. FROM THE RIV AL REPORTS OF THE DVO AND THE REGISTERED VALUER WE NOTICE THAT BOTH THE TECH NICAL AUTHORITIES HAVE PAGE 5 OF 8 PROCEEDED TO ARRIVE AT THE COST OF CONSTRUCTION ON SOME ESTIMATED BASIS. THUS THE UNDER LYING MATERIAL SURROUNDING THE ISSUE BEFORE US ARE ONLY THE TWO REPORTS OF THE TECHNICAL EXPERTS. IN VIEW OF T HE PECULIAR CIRCUMSTANCES AND FACTS OF THE CASE IN OUR OPINION THE CASE LAW RELIED UPON BY THE ASSESSEE MAY NOT BE HELPFUL TO DECIDE THE ISSUE. 8. THE ASSESSEE HAS FILED A COPY OF THE REGISTE RED VALUERS REPORT WHILE THE DEPARTMENT IS PLACING RELIANCE ON THE REPORT OF THE DVO. BESIDES THE ABOVE THE ASSESSEE HAS ALSO FILED A COMPARATIVE AN ALYSIS OF BOTH THE REPORTS CITED ABOVE. WHICH WAS MADE BY ANOTHER REG ISTERED VALUER. THE DVO HAS ALSO OFFERED HIS COMMENTS ON THE VARIOUS OB JECTIONS RAISED BY THE ASSESSEE/ REGISTERED VALUER AND THE AO HAVE EXTRACT ED THE SAME IN THE ASSESSMENT ORDER RELATING TO THE ASSESSMENT YEAR 20 03-04. WE HAVE CAREFULLY ANALYZED THESE DOCUMENTS AND REPORTS AND OUR COMMENTS ARE GIVEN IN THE ENSUING PARAGRAPHS. 9. THE DVO HAS MADE THE FOLLOWING OBSERVATIONS IN HIS REPORT WITH REGARD TO THE TYPE OF CONSTRUCTION. (I) THE BUILDING IN GENERAL IS PO ORLY FINISHED AND HAVING NO ARCHITECTURAL FEATURES. (II) COUNTRY WOOD FRAMES ARE PROVIDED TO D OORS AND WINDOWS. (III) NO INTERNAL DOORS ARE PROVIDED (IV) FITTING TO DOORS AND WINDOWS ARE OF SUBSTANDARD MS ALUMINIUM (V) NO CUPBOARD/WARD ROAD SHUTTERS ARE PROVIDED (VI) IN GENERAL THE QUALITY OF FINISHING IS ORDINARY. (VII) ORDINARY QUALITY SWITCHES PLUG POINTS FANS LIGHTS ETC. ARE PROVIDED. THE DVO ONCE AGAIN REITERATED THE ABOVE POINTS WHIL E SUBMITTING HIS COMMENTS ON THE OBJECTIONS OF THE ASSESSEE. FURTHE R THE DVO HAS STATED THAT HE HAS GIVEN DEDUCTION OF RS.13.51 LAKHS TO TA KE CARE OF THE DEFICIENCIES CITED ABOVE VIDE PARA V OF ANNEXURE I HIS REPORT. WE EXTRACT BELOW THE BREAK UP DETAILS OF RS.13.51 LAKHS REFERR ED BY THE DVO. PAGE 6 OF 8 V. DEDUCTIONS: 10.1 FOR NOT PROVIDING KITCHEN SINK 46 500 10.2 FOR NOT PROVIDING KITCHEN PLAT FORMS 18 600 10.3 FOR NOT PROVIDING WHITE GLAZED TILE 21 700 10.4 FOR NOT PROVIDING CUP BOARD SHUTTERS 2 79 000 10.5 FOR NOT DOING WATER PROOFING TREATMENT AND LIME TERRACING 2% 3 58 308 10.6 FOR RESTING FOUNDATION ON MOORUM 1.5% 2 68 731 10.7 FOR PROVIDING PVC PIPES 2% 3 58 368 --------------- 13 51 147 ========= IN ANNEXURE II OF THE REPORT THE DVO HAS GIVEN THE SA LIENT FEATURES OF HIS REPORT WHERE IN HE HAS STATED THAT HE HAS CONSIDER ED REDUCTION ON THE FOLLOWING ITEMS:- (A) 15% REDUCTION FOR USING COUNTRY WOOD FOR DOOR AND W INDOWS PROVIDING NO INTERNAL DOORS PIN HEADED GLASS PANEL S FOR WINDOW GLAZING POOR FINISHING OF WALLS AND PAINTING WORKS . (B) 2% REDUCTION FOR NOT PROVIDING WATER PROOFING TREAT MENT. (C) 1.5% REDUCTION FOR RESTING THE FOUNDATION ON MOORUM (D) 2% REDUCTION FOR USING PVC PIPES. ON A CAREFUL COMPARISON OF ANNEXURE II AND THE QUAN TIFICATION OF DEDUCTIONS GIVEN IN ANNEXURE I WE NOTICE THAT THE DVO HAS GIVEN DEDUCTION ONLY FOR ITEMS (B) (C) AND (D) STATED AB OVE AND NO DEDUCTION HAS BEEN GIVEN FOR ITEM (A) ABOVE. IN THE REMAND R EPORT ALSO THE DVO HAS NOT OFFERED ANY COMMENTS ON THIS ASPECT. 10. THE AO HAS GIVEN DEDUCTION OF RS.4 41 700/- TOWARDS THE COST RELATING TO THE CANTEEN FACILITIES AS THE SAME WAS MET BY THE TENANT M/S VIGNAN VIDYALAYA ON THE ADVICE OF THE DVO. HOWEVE R FROM THE REPORT OF THE DVO WE NOTICE THAT THE DVO HAS ESTIMATED THE C OST OF CONSTRUCTION OF CANTEEN FACILITIES AT RS. 7 68 955/- (ITEM 1.2 AND I TEM 6.1). THUS ACCORDING TO THE ASSESSEE M/S VIGNAN VIDYALAYA HAS SPENT A SUM OF RS.4 41 700/- WHILE THE DVO HAS ESTIMATED THE SAME AT RS.7 68 955/-. PAGE 7 OF 8 THUS THE CORRECT AMOUNT TO BE EXCLUDED FROM THE REP ORT OF DVO IS RS.7 68 955/-. 11. THE DVO HAS ESTIMATED A SUM OF RS.1 35 605/- (VIDE ITEMS 1.3 AND 3.4) TOWARDS PROJECTED SLABS. ACCORDING TO THE REG ISTERED VALUER THEY ARE PROJECTED SLABS OF STILT FLOOR AND BALCONY OF THE T ERRACE AND HENCE NO SEPARATE ESTIMATE IS WARRANTED. SIMILARLY THE DVO HAS ADDED A SUM OF RS.2 94 500/- TOWARDS EXTRA COST FOR PROVIDING CERA MIC TILE FLOORING. ACCORDING TO THE REGISTERED VALUER THE AVERAGE COS T OF CONSTRUCTION ADOPTED BY THE DVO INCLUDES THE COST OF FLOORING AN D HENCE NO SEPARATE ADDITION ON ACCOUNT OF FLOORING IS WARRANTED. 12. THE DVO HAS ESTIMATED THE A SUM OF RS.89 760/- TOWARDS WATER SUPPLY AND SANITARY INSTALLATION IN FIFTH FLOOR. A CCORDING TO THE ASSESSEE THE CONSTRUCTION IN THE FIFTH FLOOR IS AT SEMI-FINISHED STAGE AND FURTHER THE ABOVE SAID WORKS HAVE NOT BEEN CARRIED OUT IN FIFTH FLOOR. 13. THE COST OF CONSTRUCTION ARRIVED AT BY THE AO BEFORE GIVING DEDUCTION FOR THE COST MET BY M/S VIGNAN VIDYALAYA STAND AT R S.1.43 CRORES. ACCORDING TO THE ASSESSEE THE COST OF CONSTRUCTION IS RS.1.10 CRORES. THUS THERE IS A DIFFERENCE OF RS.33.00 LAKHS. THE CUMUL ATIVE EFFECT OF THE CORRECTIONS POINTED ABOVE IS GIVEN BELOW: (A) COST INCURRED BY VIGNAN VIDYALAYA 7.68 LAKHS (B) COST ON PROJECTED SLABS 1.35 LAKHS (C) COST OF FLOORING 2.95 LAKHS (D) WATER SUPPLY ITEMS IN 5 TH FLOOR 0.90 LAKH (E) 15% REDUCTION FOR SUB-STANDARD CONSTRUCTION (15% OF 179 LAKHS) 26.8 5 LAKHS ----------- 39.73 LAKHS ====== PAGE 8 OF 8 IF THE ABOVE SAID ADJUSTMENT IS CARRIED OUT; THE COS T OF CONSTRUCTION DECLARED BY THE ASSESSEE AT RS.1.10 CRORES RESULTS TO BE A REASONABLE ONE. HENCE NO ADDITION IS WARRANTED IN BOTH THE YEARS AS THERE IS NO DIFFERENCE IN THE COST OF CONSTRUCTION. WE ORDER ACCORDINGLY. 14. IN THE RESULT BOTH THE APPEALS OF THE REVE NUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 23-4-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:23 RD APRIL 2010. COPY TO 1 THE ITO WARD-3(1) VISAKHAPATNAM 530 020 2 SMT. N. SUKANYA FLAT NO.401 RAMANA RESIDENCY LB COLONY VISAKHAPATNAM 3 THE CIT(A) I VISAKHAPATNAM 4 THE CIT-1 VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM