B.K. Nagendra Kumar, Bangalore v. DCIT, Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K NARAYANAN VICE PRESIDENT AND SMT. P MADHAVI DEVI JUDICIAL MEMBER ITA NO. 906/BANG/2010 (ASST. YEAR 2006-07) SHRI B.K NAGENDRA KUMAR NO.359 6 TH MAIN IDEAL HOMES I PHASE RAJARAJESHWARINAGAR BANGALORE-560 098. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-1(1) BANGALORE. . RESPONDENT APPELLANT BY : SHRI BABU PRASAD ADVOCATE RESPONDENT BY : SHRI G.V GOPALA RAO COMMISSIONER OF INCOME-TAX O R D E R PER DR. O.K NARAYANAN VICE PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDERS OF THE CIT(A) VI AT BANGALORE DATED 28.6.2010. THE APPEA LS ARISES OUT OF THE ASSESSMENTS COMPLETED U/S 153A READ WITH SEC. 1 43(3) OF THE INCOME-TAX ACT 1961. ITA NO.906/B/10 2 2. THE ONLY DISPUTE RAISED IN THE PRESENT APPEAL IS AGAINST THE ADDITION OF RS.58 68 000/- MADE BY THE ASSESSING AU THORITY WITH REFERENCE TO THE COST OF CONSTRUCTION OF THE BUILDI NG CONSTRUCTED BY THE ASSESSEE. THE ASSESSING AUTHORITY HAS MADE THE ADD ITION ON THE BASIS OF THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER . THE CASE OF ASSESSEE IS THAT HE HAS MAINTAINED PROPER ACCOUNTS IN RESPECT OF CONSTRUCTION COST OF THE BUILDING AND IN VIEW OF TH E POSITION SETTLED BY VARIOUS JUDICIAL PRONOUNCEMENTS IT IS NOT POSSIBLE FOR THE ASSESSING AUTHORITY TO REFER THE MATTER FOR VALUATION WITHOUT REJECTING THE BOOKS OF ACCOUNTS. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE FURTHER CONTENDED THAT THE INCOME-TAX VALUATION IS BASED ON CPWD RATES WHICH ARE ALWAYS HIGHER THAN THE LOCAL RATES. IT I S HIS CASE THAT IF LOCAL PWD RATES ARE ADOPTED THERE WOULD BE NO VARIATION IN THE COST OF CONSTRUCTION REPORTED BY THE ASSESSEE. THE LEARNED COUNSEL FURTHER CONTENDED THAT THE AUTHORITIES BELOW HAVE NOT GRANT ED ANY SORT OF ALLOWANCES GENERALLY GIVEN BY THE TRIBUNAL IN SO MA NY CASES LIKE SELF SUPERVISION CHARGES SERVICE TAX ETC. 3. BUT THE MAIN ARGUMENT OF THE REVENUE IS THAT THE COST OF CONSTRUCTION AS PER THE BOOKS OF ACCOUNTS WAS VITIA TED BY THE STATEMENT OF THE ASSESSEE GIVEN U/S 132(4) IN THE C OURSE OF SEARCH ITA NO.906/B/10 3 CARRIED OUT IN THE PREMISES OF THE ASSESSEE AND THE SOURCES EXPLAINED BY THE ASSESSEE WORKED OUT TO MORE THAN 1.80 CRORES WHICH SHOWS THAT THE DEPARTMENTAL VALUATION HAS WORKED OUT THE COST OF CONSTRUCTION IN A FAIR MANNER. 4. WE HEARD BOTH SIDES IN DETAIL. THE ARGUMENT OF THE LEARNED COUNSEL IS THAT IF PROPER AND CORRECT ACCOUNTS REGA RDING COST OF CONSTRUCTION HAS BEEN MAINTAINED BY AN ASSESSEE IT IS NOT POSSIBLE TO REFER THE VALUATION TO THE DEPARTMENTAL VALUER WITH OUT REJECTING SUCH ACCOUNTS IN THE COURSE OF ASSESSMENT. BUT IN THE P RESENT CASE THE ASSESSEE HAS MAINTAINED FINANCIAL ACCOUNTS REGARDIN G THE COST OF CONSTRUCTION WHICH IS NOT SUPPORTED BY QUANTITATIVE ACCOUNTS OF MATERIALS NECESSARY FOR COMPLETING THE CONSTRUCTION AS DEDUCIBLE FROM THE PLAN AND ESTIMATE OF THE BUILDING. WITHOUT A Q UANTITATIVE FRAMEWORK REGARDING THE NECESSARY CONSUMPTION OF MA TERIALS THE FINANCIAL ACCOUNTING AS SUCH DOES NOT PROVIDE ANY F ULL PROOF EVIDENCE TO COME TO THE COST. THEREFORE WE ARE NOT INCLINE D TO GO DEEP INTO THE ARGUMENTS OF THE LEARNED COUNSEL REGARDING LEGALITY OF REFERRING THE MATTER TO VALUATION. ITA NO.906/B/10 4 5. NOW COMING TO THE FACTS OF THE CASE WE FIND THA T THERE WAS A SEARCH AND THE ASSESSEE HAD ADMITTED A HIGHER AMOUN T TOWARDS COST OF CONSTRUCTION IN HIS STATEMENT MADE U/S 132(4). THI S STATEMENT HAS ALSO BEEN SUPPORTED BY THE AVAILABLE SOURCES EXPLAINED B Y THE ASSESSEE WHICH WORKED OUT TO RS.1.8 CRORES. THEREFORE THE RANGE OF ESTIMATION MADE BY THE DVO AS SUCH IS NOT PERVERSE OR WITHOUT ANY BASIS. 6. AT THE SAME TIME WE FIND THAT THE ASSESSEE SHOU LD HAVE BEEN GIVEN SOME RELIEF IN THE RATES ADOPTED AT PAR WITH THE CPWD RATES. IT IS ALSO NECESSARY TO GRANT CERTAIN ALLOWANCES OF SE LF SUPERVISION ETC. WHILE WORKING OUT THE COST OF CONSTRUCTION. TAKING INTO CONSIDERATION OF THESE ASPECTS OF THE CASE WE FIND THAT A REASON ABLE MODIFICATION IS CALLED FOR IN THE ADDITIONAL VALUATION AMOUNT DETER MINED BY THE VALUATION AUTHORITY. 7. WE MODIFY THE ADDITIONAL COST AT RS.30 LAKHS WH ICH IS FAIR AND REASONABLE AND DELETE THE BALANCE ADDITION OF RS.28 68 000/-. THE ASSESSEE GETS A RELIEF OF RS.28 68 000/-. ITA NO.906/B/10 5 8. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED ON TUESDAY THE 8TH DAY OF FEBRUARY 2011 AT BANGALORE. SD/- SD/- (P MADHAVI DEVI) (DR. O.K NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR I TAT BANGALORE.