M/s. Sri Girija Mahal, Hosur v. ITO, Krishnagiri

ITA 6/CHNY/2011 | 2006-2007
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 621714 RSA 2011
Assessee PAN ABGFS2260K
Bench Chennai
Appeal Number ITA 6/CHNY/2011
Duration Of Justice 2 month(s) 22 day(s)
Appellant M/s. Sri Girija Mahal, Hosur
Respondent ITO, Krishnagiri
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 25-03-2011
Assessment Year 2006-2007
Appeal Filed On 03-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER) .. I.T.A. NO. 6/MDS/2011 ASSESSMENT YEAR : 2006-07 M/S SRI GIRIJA MAHAL NO.1 SANTHI NAGAR WEST OPP. TO RAGAVENDRA THEATRE HOSUR 635 109. PAN : ABGFS2260K (APPELLANT) V. THE INCOME TAX OFFICER WARD I(1) KRISHNAGIRI. (RESPONDENT) APPELLANT BY : SHRI G. BASKAR SHRI N. CHANDIRASEKAR RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : CHALLENGE OF THE ASSESSEE IN THIS APPEAL IS ON CON FIRMATION OF AN ADDITION MADE ON ACCOUNT OF COST OF CONSTRUCTION OF A KALYANA MANDAPAM FOR THE IMPUGNED ASSESSMENT YEAR. 2. ASSESSEE IS A FIRM CONSISTING OF TWO PARTNERS B OTH OF WHOM ARE EMPLOYED AS TECHNICIANS IN TITAN WATCH CO. DURING THE RELEVANT PREVIOUS YEAR ASSESSEE HAD COMPLETED CONSTRUCTION OF A KALYANA I.T.A. NO. 6/MDS/11 2 MANDAPAM CALLED SRI GIRIJA MAHAL. TOTAL EXPENSES ADMITTED BY THE ASSESSEE FOR CONSTRUCTION OF KALYANA MANDAPAM WAS R S.50 72 030/-. AS PER THE ASSESSEE A FURTHER SUM OF RS.1 65 000/- WAS SPENT FOR ELECTRICAL FITTINGS. IN OTHER WORDS THE TOTAL EXP ENDITURE CAME TO RS.52 37 030/-. A STATEMENT WAS RECORDED BY THE A. O. DURING THE COURSE OF ASSESSMENT FROM THE MANAGING PARTNER SHR I M. MARE GOWDU WHEREIN HE STATED THAT THE CONSTRUCTION WAS S TARTED IN MARCH 2004 AND COMPLETED IN OCTOBER 2005. AS PER SHRI M . MARE GOWDU THE KALYANA MANDAPAM WAS INAUGURATED ON 10.10.2005. SHRI GOWDU ALSO STATED THAT FURTHER ADDITIONS WERE MADE TO THE KALYANA MANDAPAM IN FINANCIAL YEAR 2006-07 COST OF WHICH CA ME TO RS.6 25 200/-. THOUGH HE ADMITTED THAT NO PROPER B OOKS OF ACCOUNTS WERE MAINTAINED FOR CONSTRUCTION EXPENSES HE INSIS TED THAT THERE WAS A SMALL POCKET NOTEBOOK WHICH LISTED THE EXPEND ITURE ALBEIT WITHOUT PROPER SUPPORTING VOUCHERS. A.O. REFERRED THE KALYANA MANDAPAM TO DEPARTMENTAL VALUATION CELL FOR VALUATI ON. BASED ON INSPECTION DONE ON 1.10.2007 DVO VALUED THE PROPER TY AT RS.1 25 29 000/-. REPORT OF THE DVO WAS GIVEN TO T HE ASSESSEE. SUBMISSION OF THE ASSESSEE IN THIS REGARD WAS THAT THE KALYANA MANDAPAM WAS LOCATED AT HOSUR A SMALL TOWN AND THE VALUATION I.T.A. NO. 6/MDS/11 3 DONE BY THE DVO ON CPWD RATES WAS NOT ACCEPTABLE. ACCORDING TO THE ASSESSEE ITS PARTNERS HAD PERSONALLY SUPERVISE D THE CONSTRUCTION OF THE KALYANA MANDAPAM AND ALSO DIRECTLY PURCHASED THE BUILDING MATERIALS. IT WAS POINTED OUT THAT THE DVO HAD INC LUDED A SUM OF RS.6 25 200/- INCURRED DURING THE FINANCIAL YEAR 20 06-07 ALSO IN HIS VALUATION. THE A.O. AFTER CONSIDERING THE DVOS RE PORT AND SUBMISSIONS OF THE ASSESSEE PROCEEDED TO CALCULATE THE COST OF THE KALYANA MANDAPAM AND UNACCOUNTED INVESTMENT THEREIN AS UNDER:- 3. CIT(APPEALS) ON ASSESSEES APPEAL GAVE IT THREE RELIEFS. ONE WAS 25% REDUCTION ON DVOS VALUE FOR DIFFERENCES IN CPWD AND STATE PWD RATES; SECOND WAS A 10% REDUCTION ON DVO VALUATION SINCE THE DVO HAD CONSIDERED THE COMPLETION DATE AS OCTOBER 2006 AGAINST OCTOBER 2005; THIRD WAS AN ENHANCEMENT OF ALLOWANCE FOR VALUE OF MANDAPAM AS PER VAL UATION CELL LESS: VALUE ADDITION OF RS.6 25 200/- WHICH RELATE TO ASSESSMENT YEAR 2007-08 : : RS.1 25 29 000 RS. 6 25 200 VALUE OF MANDAPAM AS ON 31.03.2006 LESS: 10% ALLOWED FOR DIRECT PURCHASE OF MATERIAL AND SELF SUPERVISION : : RS.1 19 03 800 RS. 11 90 380 BALANCE : RS.1 07 13 420 LESS: VALUE AS ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 INCLUDING ELECTRICAL FITTINGS. : RS. 52 37 030 UNACCOUNTED INVESTMENT IN MANDAPAM : RS. 54 76 390 I.T.A. NO. 6/MDS/11 4 DIRECT SUPERVISION BY THE PARTNERS OF THE ASSESSEE- FIRM FROM 10% GRANTED BY THE A.O. TO 12.5%. RESULTANTLY HE SUST AINED AN ADDITION OF RS.16 15 856/- AS WORKED OUT HEREUNDER:- COST FIXED BY THE DISTRICT VALUERS REPORT RS. 1 25 29 000 DIFFERENCE BETWEEN CPWD AND STATE PWD RATES 25% RS. 28 19 025 RS. 97 09 975 10% REDUCTION AS THE PERIOD OF CONSTRUCTION ADOPTE D BY DISTRICT VALUATION OFFICER IS WRONGLY CONSIDERED TIL L OCTOBER 06 INSTEAD OF OCTOBER 05 RS. 12 52 900 RS. 84 57 075 VALUE ADDITION MADE AFTER 31.03.2006 AS ALLOWED BY A .O. RS. 6 25 200 RS. 78 31 875 ALLOWANCE FOR DIRECT PURCHASE OF MATERIALS AND PERS ONAL SUPERVISION @ 12-1/2% RS. 9 78 898 RS. 68 52 886 COST ADMITTED RS. 52 37 030 ADDITION SUSTAINED RS. 16 15 856 4. NOW BEFORE US THE LEARNED A.R. SUBMITTED THAT TH E ASSESSEE HAD GIVEN VALUERS REPORT DURING THE COURSE OF APPE AL PROCEEDINGS BEFORE CIT(APPEALS) AND AS PER VALUATION CELL COST OF THE BUILDING CAME TO RS.57 00 000/- ONLY. ACCORDING TO LEARNED A.R. SUCH REPORT WAS ARBITRARILY REJECTED BY THE CIT(APPEALS). FURT HER THE LEARNED A.R. SUBMITTED THAT PURCHASE OF THE MATERIALS WERE DIRECTLY DONE BY THE PARTNERS AND HENCE REDUCTION GIVEN ON ACCOUNT O F PERSONAL SUPERVISION WAS INADEQUATE. ACCORDING TO LEARNED A .R. STATE PWD I.T.A. NO. 6/MDS/11 5 RATES ALONE OUGHT HAVE BEEN CONSIDERED IN A SMALL T OWN LIKE HOSUR AND ADOPTION OF CPWD RATES WOULD GIVE A HIGHLY INFL ATED FIGURE. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE RAJA STHAN HIGH COURT IN THE CASE OF CIT V. DINESH TALWAR (2004) 265 ITR 344 (RAJ.). 5. PER CONTRA THE LEARNED D.R. SUPPORTING THE ORDE R OF THE CIT(APPEALS) SUBMITTED THAT SUBSTANTIAL RELIEF WAS ALREADY GIVEN BY THE CIT(APPEALS). 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. REGISTERED VALUERS REPORT WAS SUBMITTED BY THE ASS ESSEE BEFORE THE CIT(APPEALS). LD. CIT(APPEALS) REJECTED THE REPORT FOR A REASON THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY BY TH E DVO AS WELL AS A.O. FOR PRODUCING SUCH REPORT AND THERE WAS FAILUR E ON ITS PART. THIS MIGHT BE TRUE. NEVERTHELESS IN OUR OPINION THE V ALUATION REPORT FROM THE REGISTERED VALUER OUGHT NOT HAVE BEEN BRUSHED A SIDE JUST FOR A REASON THAT THE ASSESSEE COULD NOT PRODUCE IT BEFOR E THE A.O. OR THE DVO. IN ANY CASE THERE IS NO DISPUTE THAT DVO HAD TAKEN CPWD RATES FOR VALUATION. THE KALYANA MANDAPAM WAS CONS TRUCTED IN A SMALL TOWN CALLED HOSUR. ASSESSEES CONTENTION T HAT THE WORK WAS PERSONALLY SUPERVISED AND PURCHASES WERE ALSO PERSO NALLY DONE BY I.T.A. NO. 6/MDS/11 6 THE PARTNERS HAS NOT BEEN REBUTTED. NO DOUBT THE CIT(APPEALS) HAD GIVEN THE ASSESSEE A 25% REDUCTION FROM THE COST FI XED BY THE DVO ON ACCOUNT OF RATE DIFFERENCE BETWEEN CPWD AND STAT E PWD. THE CIT(APPEALS) HAD ALSO ENHANCED THE ALLOWANCE GIVEN BY THE A.O. FOR DIRECT SUPERVISION FROM 10% TO 12.5%. IN THE CIRCU MSTANCE IT WILL BE EASY FOR US TO SEND THE MATTER BACK TO THE A.O. FOR CONSIDERING THE REGISTERED VALUERS REPORT AND REDOING THE ASSESSME NT. BUT IN OUR OPINION THIS WILL NOT SERVE ANY PURPOSE SINCE BOTH DVOS REPORT AS WELL AS REGISTERED VALUERS REPORT ARE ONLY ESTIMAT ES AND THERE COULD BE ARGUMENTS FOR AND AGAINST THE FIGURES ADOPTED IN SUCH REPORTS. THERE COULD ALSO BE ARGUMENTS FOR AND AGAINST CPWD RATES OR PWD RATES FOR SUCH VALUATION. HENCE TO MEET THE ENDS OF JUSTICE WE ARE OF THE OPINION THAT A FURTHER REDUCTION OF 10% SHOU LD BE GIVEN TO THE ASSESSEE IN ADDITION TO 12.5% GIVEN BY THE CIT(APPE ALS) FOR PERSONAL SUPERVISION SINCE ASSESSEE WAS PROCURING THE MATERI ALS DIRECTLY. IN OTHER WORDS WE DIRECT THE A.O. TO ENHANCE THE REDU CTION FOR ALLOWANCE FOR PERSONAL SUPERVISION FROM 12.5% GRANT ED BY THE CIT(APPEALS) TO 22.5%. IN OUR OPINION THIS WILL T AKE CARE OF VARIOUS ASPECTS OF VALUATION INCLUDING THE DIFFERENCE IN R ATES BETWEEN CPWD AND STATE PWD. THUS OUT OF THE SUSTAINED ADDITION OF I.T.A. NO. 6/MDS/11 7 RS.16 15 856/- A FURTHER RELIEF OF RS.7 83 188/- I S TO BE GIVEN TO THE ASSESSEE. ORDERED ACCORDINGLY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH MARCH 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 25 TH MARCH 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) SALEM (4) CIT SALEM (5) D.R. (6) GUARD FILE