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Income Tax Appellate Tribunal, VARANASI CIRCUIT BENCH, VARANASI
Before: SHRI. B. R. BASKARAN & SHRI AMIT SHUKLA
8.8.2023 in the case of Pramod Kumar and Kanchan Sarraf for Assessment Year 2018-19; and order dated 17.10.2022 in the case of Yogsh Kumar Verma for Assessment Year 2018-19; passed by the ld. CIT(A)-3, Lucknow for the quantum of assessments passed under section 143(3) of the Income Tax Act, 1961.
In all the appeals, one common issue is involved, i.e., the addition made under section 69B of the I.T. Act on the basis of difference between the investment shown by the assessee in the books of account and the estimate made by the DVO under section 142A of the I.T. Act. The additions made in all the three cases by the Assessing Officer are at Rs.6,45,552/- in the case of Pramod Kumar; at Rs.9,13,653/- in the case of Kanchan Sarraf; and at Rs.9,26,786/- in the case of Yogesh Kumar Verma.
The brief facts of the case are that a search and seizure action under section 132 of the I.T. Act was conducted at the residential and business premises of the assessees on 21.2.2018. During the course of assessment proceedings, the Assessing Officer noted that various members of the assessee’s family have purchased a land and formed a housing complex situated at Jeera Basti Hanuman Garh, Ballia. During the course of investigation stage itself, the valuation of said property was referred to the DVO for determining the amount of investment made by various members of the family. The DVO had valued the property at Rs.6,97,43,900/-, whereas all the three assessees have disclosed the investment at Rs.6,17,80,930/- as on 31.3.2018 in these books of account. Accordingly, the difference of Rs.79,70,160/- was treated as undisclosed investment in the property by the Assessing Officer. The Assessing Officer
:-3-: accordingly made addition of the difference amount in the ratio of investment made by the family members. For the sake of ready reference, the total investment declared by the various family members and the difference added by the Assessing Officer are reproduced as under:
S. Name of the assessee Total investment Addition of undisclosed No. declared by the investment various family members
A B C D 1 Santosh Kumar 98,45,738 12,70,167 2 Dheeraj Kumar 1,52,84,579 19,71,815 3 Yogesh Kumar 1,02,89,402 13,27,403 4 Amit Kumar 4,83,188 62,334 5 Pramod Kumar 56,62,204 7,30,463 6 Pradeep Kumar 91,16,701 11,76,116 7 Kanchan 1,10,99,120 14,31,862 Total 6,17,80,932 79,70,160 4. Before us, the only dispute is with regard to assessees at Sl. No.3,5 & 7.
The ld. CIT(A) has given part relief. For the sake of ready reference, the relevant finding given by the ld. CIT(A), in the case of Pramod Kumar, is reproduced hereunder:
“3. It has been noted that difference between the total value estimated by the DVO and total investment declared by the assessee on the basis of ratio of investment in, the building amounting to Rs.7,30,463/- has been added to the income of the assessee in terms of provision of section 69B of the Act. However, as per provision of 69B of the Act, the excess investment, which has not been shown in the accounts was :-4-: required to be added in respective assessment year. Since this is case of assessment year 2018-19, therefore, Assessing Officer should have added excess investment for the year under consideration and not the undisclosed investment of all the years, in this assessment year only. As per table produced above it has been noted that as per DVO's estimation during the year total investment stood at Rs.5,91,18,900/- and investment declared by the assessee group is Rs.5,23,70,141/-, thus during the year there was excess investment of Rs.67,48,759/- [5,91,18,900 - 5,23,70,141]. As per submission of the appellant, total investment in the year by the appellant was Rs.56,55,012/-. Therefore as per the calculation methodology of the Assessing Officer, during the year share of undisclosed investment made by the appellant will be as under: Investment by Appellant in the year* excess investment in the year as per DVO Total investment in the year by the assessee group as per DVO 56,55,012* 67,48,759 = 6,45,552 5,91,18,900 in view of above discussion, undisclosed investment of Rs.6,45,552/- is hereby confirmed out of total addition of Rs.7,30,463/-. Therefore, the appellant gets relief of Rs.84,911/- [7,30,463- 6,45,552]. Thus this ground of appeal is partly allowed.”
6. One of the alternative grounds raised by the assessee is that the DVO has allowed self-supervision charges @5% and has added 3% of the Architecture Fee, whereas self-supervision charges should be given @ 15% based on certain judicial precedents. The ld. CIT(A), however, has rejected this contention.
Before us, the ld. Counsel for the assessee submitted that apart from the fact that reference to the DVO under section :-5-:
142A of the I.T. Act was bad in law, because the reference cannot be made without rejection of the books of account and the ADIT has no power to make reference to the Valuation Cell under section 142A of the I.T. Act, because the same can be made during the course of pendency of assessment or re-assessment proceedings by the Assessing Officer. Apart from that, he submitted that if self-supervision charges @ 15% is allowed, there would be hardly any difference in the investment shown by the assessee in the books of account and estimate made by the DVO. In support of his contention, the ld. Counsel for the assessee has filed various judgments of this Co-ordinate Bench.
The ld. D.R., on the other hand, strongly relied on the orders of the Assessing Officer as well as the ld. CIT(A) and submitted that the Assessing Officer has rightly taken the estimate made by the DVO and all the contentions and objections raised by the assessee have been dealt with in detail by the ld. CIT(A), to which he referred to the findings given by the ld. CIT(A) in the impugned order. Insofar as allowing the self-supervision charges @ 15% is concerned, he submitted that the DVO has himself given deduction of 5% of self-supervision charges, which is sufficient and there is no material to show that the assessees have themselves carried out the supervision. Therefore, the order of the ld. CIT(A) is liable to be confirmed.
In rejoinder, the ld. Counsel for the assessee stated that the property has been constructed in a remote area of District Ballia where the assessees and family members have supervised whole work and the role of the Architect was merely getting the map and the plans. Thus, in such a situation, deduction on account of self-supervision charges should be more.
:-6-:
After hearing both the parties and on a perusal of the facts placed on record, the only issue which we are dealing with is, whether the assessee should be given deduction @ 15% with regard to self-supervision charges or not. First of all, we find that all the seven family members have jointly made investment in the property, which has been disclosed in the books of account as well as the return of income, in the following manner:
1.Kanchan Rs.1,10,99,120/- 2.Pramod Kumar Rs.56,62,204/- 3.Yogesh Kumar Rs.1,02,89,402/- 4.Santosh Kumar Rs.98,45,738/- 5.Dheeraj Kumar Rs.1,52,84,579/- 6.Amit Kumar Rs.4,83,188/- 7.Pradeep Kumar Rs.91,16,701/- Total Rs.6,17,80,932/-
The total valuation taken by the DVO after allowing 5% self-supervision charges and adding Architect fee is Rs.6,97,43,900/-. The ld. CIT(A) has given some part relief. However, we find substance in the arguments of the ld. Counsel for the assessee; looking to the fact that the property is situated in the remote area of District Ballia, therefore, deduction on account of self-supervision charges @ 15% is reasonable, when various Courts have allowed 10% of self-supervision charges on construction in big cities. In this regard, we find support from the decision of the ITAT Chennai ‘D’ Bench in the case of Sri. V.S.A. Arulmuthukumarasamy, Vaitheeswaran Koil, vs. DCIT,
:-7-:
Kumbakanam in I.T. Act Nos. 918 to 921/Mds/2011, order dated 19.7.2021, wherein the Tribunal has observed as under:
“6. We have considered the rival submissions. A perusal of the order of the learned CIT(A) shows that the learned CIT(A) has relied upon the decision in the case of A. Abdul Rahim, referred to supra. However, the learned CIT(A) failed to appreciate that the Hon'ble High Court has not pegged the percentage for confirming the CPWD rate to PWD rate at 25%. What is specifically noticed here is that the Hon'ble High Court in the case of A. Abdul Rahim has held that the Tribunal after taking into account the nature of the building and the location of the building has held that 25% reduction was liable to be made. Here it is further noticed that the finding of the learned CIT(A) that the PWD rate is liable to be applied has not been challenged by the Revenue. Once the finding that the valuation is to be done by adopting the PWD rates stands confirmed, then it is the valuation that is to be done by applying the PWD rates and not by reducing the CPWD rates by an ad hoc percentage. In the circumstances, the finding of the learned CIT(A) on this issue stands modified and the Assessing Officer is directed to have the property valued by applying the PWD rates.
7. It is further noticed that the percentage of deduction on account of self-supervision has been adopted by the learned CIT(A) at 10%. This we feel is on the lower side. This is also because in the decision of the Hon'ble jurisdictional High Court referred to by the learned CIT(A), i.e. in the case of A. Abdul Rahim, the Hon'ble High Court has upheld the finding of the Tribunal in fixing the percentage of deduction towards self-supervision at 15%. In the circumstances the Assessing Officer is directed to grant the assessee a deduction towards self-supervision at 15%.”
Thus, we allow deduction @ 15% on self-supervision charges. The value as per DVO before such self-supervision charges is Rs.7,26,57,710/- and if we deduct 15% of self- supervision charges, then it comes to Rs.1,09,21,507/-. The total
:-8-: value will come to Rs.6,17,84,554/-, which is almost same, what assessee had disclosed in the books of account. Thus, after giving deduction of 15% of self-supervision charges there remains no addition, which needs to be sustained. In any case, the valuation done by the DVO is an estimate only and therefore, something which has been recorded in the books of account, which has not been rejected or any defect has been pointed out by the Assessing Officer, then the estimate made by the DVO cannot be the only material to make addition. Accordingly, the addition made by the Assessing Officer and sustained by the ld. CIT(A) is deleted.
In the result, the appeals of the assessees are allowed.
Order pronounced in the open court on 5th October 2023