DCIT, Ernakulam v. P.P.Varghese, Ernakulam

ITA 492/COCH/2011 | 2004-2005
Pronouncement Date: 17-02-2012

Appeal Details

RSA Number 49221914 RSA 2011
Assessee PAN AASPV5092P
Bench Cochin
Appeal Number ITA 492/COCH/2011
Duration Of Justice 8 month(s)
Appellant DCIT, Ernakulam
Respondent P.P.Varghese, Ernakulam
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2012
Appeal Filed By Department
Bench Allotted DB
Tribunal Order Date 17-02-2012
Date Of Final Hearing 13-02-2012
Next Hearing Date 13-02-2012
Assessment Year 2004-2005
Appeal Filed On 17-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE: SHRI N.R.S.GANESAN JUDICIAL MEMBER AND SHRI B.R. BASKARAN ACCOUNTANT MEMBER ITA NOS. 492 & 493/COCH/2011 ASSESSMENT YEARS : 2004-05 & 2005-06 THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2 ERNAKULAM. SHRI P.P.VARGHESE PUTHUVA HOUSE OORAKKADU MALAYIDAMTHURUTHU P.O. EDATHALA ERNAKULAM DISTT. PIN-683 561. [PAN: AASPV 5092P] (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SMT. VIJAYAPRABHA JR. DR RESPONDENT BY: SHRI ANIL D.NAIR ADV. DATE OF HEARING: 13/02/2012 DATE OF PRONOUNCEMENT: 17/02/2012 ORDER PER SHRI B.R.BASKARAN ACCOUNTANT MEMBER:- THESE TWO APPEALS FILED AT THE INSTANCE OF THE REV ENUE ARE DIRECTED AGAINST THE ORDER DATED 29-03-2011 PASSED BY LD CIT(A)- III KOCHI AND THEY RELATE TO THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE SOLITARY ISSUE URGED IN THESE TWO APPEALS RELATE TO THE DETERMINATION OF COST OF CONSTRUCTION OF A SHOPPING COMPLEX OWNED BY THE ASSESSEE WHICH WAS CONSTRUCTED DURING THE YEARS UN DER CONSIDERATION. HENCE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS CARRYING ON BUSINESS OF MANU FACTURE AND SALE OF GRANITE METALS UNDER THE NAME M/S KALLAN METALS. THE DEPARTMENT C ARRIED SEARCH AND SEIZURE OPERATIONS AT THE RESIDENCE OF THE ASSESSEE ON 19-1 0-2006 AND ALSO CONDUCTED SURVEY OPERATION AT THE BUSINESS PREMISES CITED ABOVE. IT WAS NOTICED THAT THE ASSESSEE HAS I.T.A. NOS.492 & 493 /COCH/2011 2 CONSTRUCTED A SHOPPING COMPLEX AT POOKATTUPADY JUNC TION. THE CONSTRUCTION HAD TAKEN PLACE DURING THE YEARS RELEVANT TO THE ASSESSMENT Y EARS 2004-05 AND 2005-06. THE ASSESSEE HAD DECLARED THE TOTAL COST OF CONSTRUCTIO N AT RS.24.00 LAKHS. THE AO REFERRED THE MATTER OF VALUATION TO THE DVO WHO ESTIMATED T HE COST OF CONSTRUCTION OF THE SHOPPING COMPLEX AT RS.61 50 910/-. THE AO TREATED THE DIFFERENCE AS UNEXPLAINED INVESTMENT AND ADDED THE SAME IN THE TWO YEARS AFOR EMENTIONED AS DETAILED BELOW:- ASST. YEAR 2004-05 - RS.20 53 641 ASST. YEAR 2005-06 - RS.16 97 269 BEFORE THE AO THE ASSESSEE FURNISHED A REPORT PREP ARED BY A REGISTERED VALUER WHO HAD DETERMINED THE COST OF CONSTRUCTION AT RS.26 59 131/-. THE AO SOUGHT THE OPINION OF DVO ON THE REGISTERED VALUERS REPORT BUT THE D VO DECLINED TO OFFER AN COMMENT SINCE THE SAID REPORT WAS NOT FURNISHED TO HIM EARL IER. THE AO NOTICED THAT THE REGISTERED VALUER HAD ADOPTED AVERAGE RATE OF CONST RUCTION AT RS.296.60 PER SQ. FT. AS AGAINST THE RATE OF RS.686.58 PER SQ. FT. ADOPTED B Y THE DVO. HENCE THE AO TOOK THE VIEW THAT THE REGISTERED VALUER HAS TAKEN VERY LOW BASIC RATES FOR DETERMINATION OF THE COST WHILE THE DVO HAS ADOPTED PREVAILING COST. T HE REGISTERED VALUER HAD GIVEN A REBATE FOR SELF SUPERVISION. HOWEVER THE DVO HAD N OT GIVEN ANY DEDUCTION TOWARDS SELF SUPERVISION. IN VIEW OF THE ABOVE THE AO REJECTED THE REGISTERED VALUERS REPORT AND BY ACCEPTING THE DVOS REPORT PROCEEDED TO MAKE TH E ADDITION AS DISCUSSED ABOVE. 3. IN THE APPELLATE PROCEEDING THE LD CIT(A) H ELD THAT THE COST OF CONSTRUCTION DETERMINED BY THE REGISTERED VALUER SHOULD BE ADOPT ED AND ACCORDINGLY DIRECTED THE AO TO MAKE ADDITION ON THE BASIS OF THE REPORT OF T HE REGISTERED VALUER. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IT IS PERTINENT TO EXTRACT FOLLOWING OBSERVATIONS MADE BY LD CIT(A). 10.4 IT IS SEEN FROM THE VALUATION REPORT OF DVO DATED 31.1.2008 THAT THE RATE ADOPTED FOR VALUATION IS PLINTH AREA RATES OF CPWD. DEFECTS POINTED OUT BY THE REGISTERED VALUER IN HIS LETTER DATED 26.5.2008 ARE NOT SEEN ADDRESSED IN THE SAID VALUATION REPORT OF DVO. UNDER THESE I.T.A. NOS.492 & 493 /COCH/2011 3 CIRCUMSTANCES THE VALUATION REPORT OF THE DVO CANN OT BE RELIED UPON FOR MAKING ADDITION ON ACCOUNT OF VALUATION DIFFERENCES THE ABOVE SAID OBSERVATIONS BRING OUT A MAJOR DEFIC IENCY VIZ. (A) THE DVO HAS FAILED TO ADDRESS THE DEFECTS POINTED OUT BY THE REGISTERED V ALUER ON THE VALUATION REPORT OF THE DVO. BESIDES THE ABOVE THE DVO HAS ALSO DECLINED TO OFFER ANY COMMENTS ON THE REPORT PREPARED BY THE REGISTERED VALUER. IN OUR V IEW THE DVO SHOULD HAVE CONSIDERED THE REPORT PREPARED BY THE REGISTERED VA LUER AND SHOULD HAVE ALSO ADDRESSED THE DEFECTS POINTED OUT IN THE REPORT PRE PARED BY HIM. WHILE THE REGISTERED VALUER HAS ADOPTED THE AVERAGE COST OF CONSTRUCTION AT RS.296.60 PER SQ. FT. THE DVO HAS ADOPTED THE SAME AT RS.686.50 PER SQ. FT. BY D ECLINING TO OFFER ANY COMMENT ON THE REPORT OF THE REGISTERED VALUER IN OUR VIEW T HE DVO HAS FAILED TO SUBSTANTIATE HIS WORKINGS AND ALSO FAILED TO FIND FAULT IN THE WORKI NGS MADE BY THE REGISTERED VALUER. WE DO NOT FIND ANY JUSTIFICATION FOR THE SAID ACTIO N OF THE DVO. 5. AS PER THE OBSERVATIONS OF LD CIT(A) THE DV O HAS ADOPTED THE PLINTH AREA RATES DETERMINED BY CPWD. DURING THE COURSE OF HEARING THE LD A.R SUBMITTED A COPY OF ORDER DATED 17-01-2012 PASSED BY THE HONOURABLE JUR ISDICTIONAL KERALA HIGH COURT IN THE CASE OF CIT VS. M.N.SAIDALAVI IN ITA NO.37 OF 2 011 WHERE IN IT IS OBSERVED THAT THE ADOPTION OF STATE PWD RATES ON A CONSISTENT BASIS F OR THE PURPOSE OF DETERMINATION OF COST OF CONSTRUCTION CANNOT BE FAULTED. IT IS ALSO NOT KNOWN WHETHER THE REGISTERED VALUER HAS PREPARED THE REPORT ON THE BASIS OF STAT E PWD RATES. 6. IN VIEW OF THE FOREGOING DISCUSSIONS WE ARE OF THE VIEW THAT THE MATTER OF DETERMINATION OF THE COST OF CONSTRUCTION OF IMPUGN ED SHOPPING COMPLEX IS REQUIRED TO BE EXAMINED AFRESH. ACCORDINGLY WE SET ASIDE THE ORDERS OF LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS UNDER CONSIDERATION AND RESTORE THE MATTER TO THE FILE OF THE AO FOR ADJUDICATION OF THE SAME AFRESH IN ACCORDANCE WITH THE LAW AFTER OBTAINING THE COMMENTS FROM THE DVO ON THE REGISTERED VALUERS RE PORT AND ALSO ON THE DEFECTS POINTED OUT BY THE REGISTERED VALUER ON THE REPORT OF THE DVO. WE ALSO DIRECT THE DVO TO ACCEDE TO THE REQUEST MADE BY THE AO IN THIS REG ARD. I.T.A. NOS.492 & 493 /COCH/2011 4 7. IN THE RESULT BOTH THE APPEALS OF THE REVEN UE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 17-02-2012 SD/- SD/- (N.R.S.GANESAN) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER ERNAKULAM DATED: 17TH FEBRUARY 2012 GJ COPY TO 1 SHRI P.P.VARGHESE PUTHUVA HOUSE OORAKKADU MALA YIDAMTHURUTHU P.O. EDATHALA ERNAKULAM DISTT. PIN-683 561. 2 THE DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CI RCLE-2 ERNAKULAM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-III KOCH I 4 THE COMMISSIONER OF INCOME-TAX CENTRAL KOCHI. 5. THE DR ITAT COCHIN BENCH. 6 GUARD FILE. BY ORDER A SSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH