Kasargode Institute of Medical Sciences, Kasargode v. ACIT, Calicut

ITA 388/COCH/2010 | 2005-2006
Pronouncement Date: 29-03-2012

Appeal Details

RSA Number 38821914 RSA 2010
Assessee PAN AACFK7766P
Bench Cochin
Appeal Number ITA 388/COCH/2010
Duration Of Justice 1 year(s) 9 month(s) 19 day(s)
Appellant Kasargode Institute of Medical Sciences, Kasargode
Respondent ACIT, Calicut
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2012
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 29-03-2012
Date Of Final Hearing 19-03-2012
Next Hearing Date 19-03-2012
Assessment Year 2005-2006
Appeal Filed On 10-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE S/SHRI N.R.S.GANESAN JM AND B.R.BASKAR AN AM I.T.A. NOS. 385 TO 390/COCH/2010 ASSESSMENT YEARS : 2002-03 TO 2007-08 KASARAGOD INSTITUTE OF MEDICAL SCIENCES ASHWINI NAGAR NH 17 KASARAGOD-671 121. [PAN: AACFK 7766P] THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1 CALICUT. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) I.T.A. NOS. 412-416/COCH/2010 ASSESSMENT YEARS : 2002-03 TO 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1 CALICUT. KASARAGOD INSTITUTE OF MEDICAL SCIENCES ASHWINI NAGAR NH 17 KASARAGOD-671 121. [PAN: AACFK 7766P] (REVENUE -APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI A. KESHAVA BHAT CA & SHRI DAVIS CHAKKALAKKAL ADVOCATE. REVENUE BY SMT. VIJAYAPRABHA JR. DR DATE OF HEARING 19/03/2012 DATE OF PRONOUNCEMENT 29/03/2012 O R D E R PER BENCH: THESE CROSS APPEALS ARE DIRECTED AGAINST THE SEPAR ATE ORDERS DATED 25-03-2010 PASSED BY THE LD. CIT(A)-I KOCHI AND THEY RELATE T O THE ASSESSMENT YEARS MENTIONED ABOVE. 2. BOTH THE PARTIES ARE AGGRIEVED BY THE AMOUNT OF COST OF CONSTRUCTION DETERMINED BY THE LD. CIT(A) IN RESPECT OF THE BUILDING CONSTRUCT ED BY THE ASSESSEE. IN ADDITION TO THE ITA NOS. 385-390 & 412-416/COCH/ 2010 2 GROUNDS ON MERITS OF ADDITION THE ASSESSEE IS ALSO CONTESTING THE ENTIRE ADDITION ON A LEGAL GROUND ALSO. 3. THE FACTS RELATING TO THIS ISSUE ARE STATED IN B RIEF. THE ASSESSEE-FIRM IS RUNNING A HOSPITAL AND NURSING SCHOOL IN THE NAME AND STYLE O F KIMS AT KASARAGOD. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT U/S. 132 OF THE A CT IN THE HANDS OF THE ASSESSEE ON 08- 08-2006. CONSEQUENT THERE TO THE ASSESSEE FILED I TS RETURN OF INCOME U/S. 153A OF THE ACT FOR THE YEARS MENTIONED ABOVE. THE ASSESSING OFFICE R REFERRED THE MATTER OF VALUATION OF BUILDING CONSTRUCTED BY THE ASSESSEE TO THE DISTRIC T VALUATION OFFICER ON THE BASIS OF SEARCH MATERIALS AND WITHOUT REFERRING TO THE BOOKS OF ACCOUNT. 4. THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESS EE AND DETERMINED BY THE VALUATION OFFICER ARE TABULATED BY THE AO AS UNDER IN THE ASSESSMENT ORDER:- SL. NO. BUILDING COST RETURNED COST AS PER VALUATION REPORT DIFFERENCE 1. HOSPITAL NEW BUILDING 1 15 44 169 2 14 94 000 99 49 831 2. NURSING SCHOOL 61 42 301 1 19 75 000 58 32 6 99 AFTER HEARING THE ASSESSEE THE ASSESSING OFFICER DECIDED TO ADOPT THE COST AS DETERMINED BY THE DVO AND ALOCATED THE DIFFERENCE IN THE COST OF CONSTRUCTION BETWEEN THE YEARS UNDER CONSIDERATION IN PROPORTION TO THE COST DISCL OSED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE CONTESTED THE ABOVE SA ID ADDITION BOTH ON LEGAL POINT AND ON MERITS. THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER WAS LEGALLY CORRECT IN REFERRING THE MATTER OF VALUATION TO THE VALUATION OFFICER. WITH REGARD TO THE CONTENTIONS RAISED ON THE MERITS OF THE ADDITION THE LD. CIT(A ) FORWARDED THE OBJECTIONS RAISED BY THE ASSESSEE BOTH TO THE ASSESSING OFFICER AND THE DVO. SINCE THE LD. CIT(A) DID NOT RECEIVE ANY REPLY FROM THE ASSESSING OFFICER AS WEL L AS THE DVO WITHIN THE DATE FIXED BY HIM HE PROCEEDED TO DETERMINE THE COST OF CONSTRU CTION ON HIS OWN ON THE BASIS OF AVAILABLE MATERIALS. IN THIS PROCESS HE GRANTED P ARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) BOTH THE PARTIES AR E IN APPEAL BEFORE US. ITA NOS. 385-390 & 412-416/COCH/ 2010 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WITH REGARD TO THE LEGAL ISSUE THE LD. COUNSEL FOR THE ASSESSE E MAINLY SUBMITTED THAT THE ASSESSING OFFICER HAS REFERRED THE MATTER OF VALUATION TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT AND HENCE SUCH A REFERENCE IS NOT VALID AND IS ALSO NOT IN ACCORDANCE WITH LAW. IN SUPPORT OF THIS CONTENTION THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS.CIT 328 ITR 513. HOWEVER IN THE FACTS OF THE CASE WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT T AKE SUPPORT OF THE SAID DECISION OF THE HONBLE SUPREME COURT ON THE FACTS PREVAILING IN TH IS CASE. WE SHALL ELABORATE IT HEREUNDER. IN THE INSTANT CASE THE DEPARTMENT HAS CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE AND SEIZED A CERTIFICATE DATED 01-11-2003 ISSUED BY AN APPROVED VALUER NAMED G.MANOHAR WAS FOUND. I N THE SAID CERTIFICATE THE ENGINEER HAD ESTIMATED THE COST OF CONSTRUCTION INCURRED BY THE ASSESSEE AT A PARTICULAR STAGE AT RS. 72 40 064/-. HOWEVER THE AO NOTICED THAT THE ASSE SSEE HAD DISCLOSED A SUM OF RS. 26 85 532/- ONLY IN THE RETURN OF INCOME FILED BY I T FOR THAT PERIOD. DURING THE COURSE OF SEARCH A STATEMENT WAS TAKEN FROM THE MANAGER OF TH E ASSESSEE FIRM WHEREIN THE SAID PERSON HAD DISCLOSED THAT THE COST OF CONSTRUCTION WAS AROUND RS.1.40 CRORES WHICH WAS ALSO AT VARIANCE WITH THE AMOUNT SHOWN IN THE RETUR N OF INCOME. HENCE THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE COST OF CON STRUCTION REPORTED IN THE RETURNS OF INCOME IS NOT CORRECT AND ACCORDINGLY HE HAS REFERR ED THE MATTER OF VALUATION TO THE DISTRICT VALUATION OFFICER. THUS IT CAN BE SEEN T HAT IT IS NOT A CASE WHEREIN THE ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNTS AND THEN REFERRED THE MATTER OF VALUATION TO THE DVO WITHOUT REJECTING THE SAID BOOKS WHICH WAS THE POSITION AVAILABLE IN THE CASE OF SARGAM CINEMA REFERRED SUPRA. ITA NOS. 385-390 & 412-416/COCH/ 2010 4 6. SECTION 142A OF THE ACT READS AS UNDER:- (1) FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REA SSESSMENT UNDER THIS ACT WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT RE FERRED TO IN SECTION 69 OR SECTIN 69B .. IS REQUIRED TO BE MADE THE ASSESSING OFFIC ER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPOR T THE SAME TO HIM. IN THE INSTANT CASE THE APPLICABLE SECTION IS SECT ION 69B WHICH READS AS UNDER:- 69B. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION JEWELLERY OR OTHER VA LUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCO UNTS MAINTAINED BY THE ASSESSEE FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HI M IS NOT IN THE OPINION OF THE ASSESSING OFFICER SATISFACTORY THE EXCESS AMOUNT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. A COMBINED READING OF BOTH SECTIONS 142A AND SECTIO N 69B WOULD SHOW THAT THE ASSESSING OFFICER CAN MAKE A REFERENCE TO THE VALUA TION OFFICER WHERE AN ESTIMATE IS REQUIRED TO BE MADE U/S 69B OF THE ACT FOR THE PURP OSE OF MAKING ASSESSMENT. THE AO MAY INVOKE THE PROVISIONS OF SECTION 69B IF HE FIN DS THAT THE AMOUNT EXPENDED ON MAKING THE INVESTMENT EXCEEDS THE AMOUNT RECORDED I N THAT BEHALF IN THE BOOKS OF ACCOUNT. 7. AS STATED EARLIER THE DEPARTMENT HAS SEIZED A VALUATION CERTIFICATE (CALLED STAGE CERTIFICATE) ISSUED BY AN APPROVED VALUER WHO HAD E STIMATE THE COST OF CONSTRUCTION AT A PARTICULAR STAGE AT RS.72 40 064/- WHERE AS THE AS SESSEE HAD ACCOUNTED FOR ONLY A SUM OF RS.26 85 532/- UP TO THAT STAGE IN ITS BOOKS OF ACC OUNT BY THAT POINT OF TIME. HENCE IN OUR VIEW THERE IS A BASIS FOR ARRIVING AT A FINDIN G THAT THE AMOUNT EXPENDED BY THE ASSESSEE ON THE CONSTRUCTION OF BUILDINGS EXCEEDED THE AMOUNT RECORDED IN THE BOOKS OF ACCOUNT. FURTHER THE AO HAS MADE THE REFERENCE TO THE VALUATION OFFICER FOR THE PURPOSE OF MAKING ASSESSMENT OR REASSESSMENT. HENCE WE AR E OF THE VIEW THAT THE AO WAS JUSTIFIED IN MAKING A REFERENCE TO THE VALUATION OF FICER IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS. 385-390 & 412-416/COCH/ 2010 5 8. THE OBSERVATIONS MADE BY THE LD. CIT(A) WHILE REJECTING THE CONTENTIONS OF THE ASSESSEE IN THIS LEGAL ISSUE ALSO SUPPORTS OUR VIEW . FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW HIS OBSERVATIONS:- I HAVE CAREFULLY CONSIDERED THE RELEVANT FACTS AND PROVISIONS OF LAW WITH REGARD TO THE ISSUE INVOLVED. I FIND THAT THE OBJ ECTIONS RAISED BY THE APPELLANT WITH REGARD TO THE REFERENCE MADE TO VALUATION OFF ICER HAVE BEEN PROPERLY DEALT WITH BY THE ASSESSING OFFICER IN THE ASSESSM ENT ORDER. DURING THE COURSE OF SEARCH ACTION THE APPELLANTS MANAGER D EPOSED THAT COST OF CONSTRUCTION WAS AROUND RS. 1.4 CRORE WHEREAS AS PER APPELLANTS BOOKS OF ACCOUNTS ITSELF THE COST OF CONSTRUCTION IS OF RS. 1 77 25 801. THE DIFFERENCE IS SUBSTANTIAL FOR WHICH NO PLAUSIBLE EXPLANATION WAS FURNISHED BY THE APPELLANT TO THE ASSESSING OFFICER. FURTHER TO ABOVE THE S TAGE CERTIFICATE DATED 1-01- 2003 RECOVERED DURING THE COURSE OF SEARCH AS ITEM NO. A-19 INDICATED COST OF CONSTRUCTION AT RS. 72 40 064/- AS AGAINST RS. 26 85 532 SHOWN IN THE BOOKS. EVEN IF THE EXPLANATION OF THE APPELLANT IN FIRST WRITTEN SUBMISSIONS THAT BUILDING UNDER CONSTRUCTION VALUING RS. 26 33 788 WAS NOT TAKEN INTO ACCOUNT IS CONSIDERED THE TOTAL COST WORKS OUT TO RS. 53 1 9 320 WHICH ALSO DOES NOT MATCH WITH THE FIGURE IN THE STAGE CERTIFICATE. T HE CLAIM OF THE APPELLANT IN SUBSEQUENT WRITTEN SUBMISSIONS IS THAT THE STAGE C ERTIFICATE WAS WITH REFERENCE TO ADDITIONAL WING FOR WHICH COST OF CONSTRUCTION SHOWN UPTO ASSESSMENT YEAR 2004-05 WAS RS. 73 03 641/- EVEN IF THIS CLAIM IS CONSIDERED THE SAME DOES NOT MATCH WITH THE FIGURE SHOWN IN STAGE CERTIFICATE A ND NO RE-CONCILIATION OF THE SAME HAS BEEN SUBMITTED BY THE APPELLANT EITHER DU RING ASSESSMENT PROCEEDINGS OR DURING APPELLATE PROCEEDINGS. FURT HER TO ABOVE MAJOR PORTION OF EXPENDITURE ON CONSTRUCTION ACTIVITY HA S BEEN SPENT BY THE APPELLANT IN CASH AND NOT THROUGH BANKING CHANNELS AND A SUBSTANTIAL PORTION OF EXPENDITURE IS NOT SUPPORTED BY INDEPENDENT THI RD PARTY BILLS/VOUCHERS WHICH CAN BE SUBJECTED TO CROSS VERIFICATION. WIT H THESE MATERIAL FACTS ON RECORD I THEREFORE FIND THAT THERE WAS A PRIMA FACIE CASE BEFORE THE ASSESSING OFFICER TO REFER THE VALUATION OF THE BU ILDINGS U/S. 142A TO THE DVO. THE CONTENTIONS OF THE APPELLANT IN THIS REGARD DO NOT HAVE MUCH MERIT. THE REFERENCE TO THE DVO BY THE ASSESSING OFFICER WAS JUSTIFIED WITH AN INTENT TO ASCERTAIN PROPER VALUATION OF COST OF CONSTRUCTION FROM A TECHNICALLY COMPETENT AUTHORITY. WITH THE ABOVE MATERIAL FACT S ON RECORD THEREFORE I FIND THAT THIS ACTION OF THE ASSESSING OFFICER WAS FULLY JUSTIFIED AND WAS IN ACCORDANCE WITH PROVISIONS OF LAW. IN VIEW OF THE ABOVE DISCUSSIONS WE REJECT THE CON TENTIONS RAISED BY THE ASSESSEE ON THIS LEGAL ISSUE. ITA NOS. 385-390 & 412-416/COCH/ 2010 6 9. NOW WE SHALL TURN TO THE MERITS OF THE ADDITION. WE NOTICE THAT THE ASSESSEE RAISED CERTAIN OBJECTIONS ON THE VALUATION REPORT BEFORE T HE AO BUT THE AO DID NOT FIND ANY MERIT IN THOSE OBJECTIONS AND HENCE REJECTED THE SA ME. HOWEVER DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE RAISED POINT TO POINT OBJECTIONS ON THE REPORT OF THE DVO. SINCE THEY WERE FRESH POINTS THE LD. CIT(A) FORWARDED THE SAME TO THE ASSESSING OFFICER AS WELL AS THE DVO. HOWEVER BOTH THE AUTH ORITIES FAILED TO RESPOND TO THE LD. CIT(A) WITHIN THE TIME FIXED BY HIM. HENCE THE LD CIT(A) HAS PROCEEDED TO DETERMINING THE COST OF CONSTRUCTION WHICH IS BEIN G OBJECTED TO BY BOTH THE PARTIES. IN OUR VIEW THE LD CIT(A) SHOULD HAVE OBTAINED THE VI EWS OF THE AO ON THE VARIOUS POINTS OF OBJECTIONS RAISED BY THE ASSESSEE BY GRANTING SO ME MORE TIME. SINCE THE VALUATION INVOLVES TECHNICAL MATTERS THE OPINION OF TECHNICA L EXPERTS WOULD ALWAYS HELP TO ADJUDICATE THE ISSUES ON SUCH ISSUES. IN THE ABSEN CE OF OPINION OF THE AO IT WOULD BE DIFFICULT FOR US TO APPRECIATE THE VIEW TAKEN BY TH E LD CIT(A) AT THIS STAGE. HENCE WE ARE OF THE VIEW THAT IT IS PERTINENT ON THE PART OF THE AO TO ADDRESS THE OBJECTIONS RAISED BY THE ASSESSEE. 10. IN VIEW OF THE FOREGOING DISCUSSION WE ARE OF THE VIEW THAT THE MATTER REQUIRES EXAMINATION AFRESH AT THE END OF THE ASSESSING OFFI CER BY DULY CONSIDERING THE VARIOUS OBJECTIONS RAISED BY THE ASSESSEE. THE AO IS ADVIS ED TO TAKE THE SUPPORT OF THE DISTRICT VALUATION OFFICER IN ORDER TO APPRECIATE VARIOUS OB JECTIONS RAISED BY THE ASSESSEE ON TECHNICAL MATTERS. ACCORDINGLY WE SET ASIDE THE O RDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING O FFICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. ITA NOS. 385-390 & 412-416/COCH/ 2010 7 11. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE TREATED AS PARTLY ALLOWED AND THE APPEALS OF THE REVENUE ARE TREATED AS ALLOWED FOR S TATISTICAL PURPOSES. PRONOUNCED ACCORDINGL Y ON 29-03-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 29TH MARCH 2012 GJ COPY TO: 1. KASARAGOD INSTITUTE OF MEDICAL SCIENCES ASHWINI NAGAR NH 17 KASARAGOD-671 121. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRA L CIRCLE-1 CALICUT.. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I KOCH I. 4. THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T COCHIN