COMMISSIONER OF INCOME TAX RAIPUR vs. HIMALAYA COMMERCIAL COMPLEX P.LTD.

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ITA/35/2003HC ChhattisgarhCGHC01001649200323 November 2009Author: HON'BLE SHRI JUSTICE DHIRENDRA MISHRA,HON'BLE SHRI JUSTICE RANGNATH CHANDRAKAR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT's order was in accordance with the law and did not warrant interference. The Tribunal had observed that the assessee produced books of account and vouchers, which were test-checked. The reference to the DVO was made by the AO on August 4, 1998, after the assessee had produced its books of account. The AO's order sheet entries indicated that objections/defects need not be communicated to the assessee. However, the Tribunal found that the AO had not applied his judicial mind to the books of account and other evidence produced by the assessee. The Tribunal held that the reference to the DVO was made without recording any defect in the books of account maintained by the assessee and without rejecting them. Following the precedent in Smt. Kavita Khemani, the Court found that the findings of the CIT(Appeals), as confirmed by the Tribunal, were strictly in accordance with law. The appeals were dismissed.

What were the facts?

The Revenue (Commissioner of Income Tax, Raipur) appealed against the order of the Income Tax Appellate Tribunal (ITAT) which deleted additions made by the Assessing Officer (AO) under Section 69B of the Income Tax Act, 1961. The assessee, Himalaya Commercial Complex Private Limited, had filed its return for Assessment Year 1997-98 showing a loss. The company constructed a commercial complex and hotel. The AO rejected the assessee's books of account under Section 145, referred the matter to the District Valuation Officer (DVO), and made an addition of Rs. 4,24,895/- as unexplained investment. The CIT(Appeals) deleted this addition, holding that the AO had not recorded any positive finding to show the books were defective. The ITAT upheld the CIT(Appeals)'s order.

What were the issues?

1. Whether, in law and in the facts of the case, the learned Income Tax Appellate Tribunal was justified in upholding the order of the learned Commissioner of Income Tax (Appeal) in deleting the addition of Rs. 4,24,895/- made by the Assessing Officer under Section 69B as unexplained investment in the building of the commercial complex and hotel in the name of Himalaya Park? Assessee's Contentions: - It was incumbent upon the AO to reject the books of account before referring the matter to the DVO. - The Tribunals below, after scrutiny, set aside the AO's order and deleted additions based on the DVO's valuation. - Reliance was placed on the High Court's order in Commissioner of Income Tax, Raipur Vs. Smt. Kavita Khemani (ITA No. 160/99). Revenue's Contentions: - The AO found various discrepancies in the assessee's books of account and rejected them under Section 145. - Both the ITAT and CIT(Appeals) ignored the AO's categorical finding in this regard and deleted additions solely on the ground that the books were not rejected.

Which sections of the Income-tax Act were involved?

Section 69B,Section 145,Section 131(1)(d),Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
0^r IN THE HIGH COURT OF JUDICATURE AT BILASPUR (CHHATTISGARH) r~»' I. T.A^ OF 2003 ^M&:.iv. Ssffiie ^./ij j i;;y.(j^u(j A.y,^;.*^^ -APPELLANT - Commissioner, Income Tax, ^ Raipur (Chhattisgarh) •^ S'^-'AA.4 -..•^%^T .-•'" VER S U S .•'^^c;^' y.^'^^ri^^"" ...••• -1 S:I&^'" RESPONDENTS ^ HimalayaCommercialComplex z" Private Limited, Akashganga, Supela, Bhilai,Distt. Durg [CG] APPEAL UNDER SECTION 260A OF INCOME TAX ACT.l961 9 T- DEVI ION BENé‘H HGI “BLE AKR DHJJEtNDRA MiSHa-w‘k 3: HON BLE MR. RN. CHANDRAKARI JJ IAT.A. N0A35/2003; (Appeql u/s 260A of The Income Tax ACT, $61) APPELLANT of Co mm issione’r (Chhaffisgafh) Himalva Commercml Comniax Pmvm‘e L!m1fed Akushganga Dupeia Bhum Dls‘rT burg (C6) I.T.A. Na.40/2004g‘ Income! Raipur‘ Vs RESPQNDENT (Appeal uls 260A of ‘H'xe Income Tux Acf, 1961) APPELLANT Commissioner, (Chhaffisgarh) ’M/s Himulya Commercial Compiax Privare i V LTd 5upela Bhiim 1DI51'T Durg : r - , of Income, Rmpur RE$PONUENT I T A NO 39/2004‘ (Appeal u/s ¢60A of fhe Income Tax ACT 1&61) Income x CommISSIoner - (Chhm'fisgar'n) APP-cLLANT of R'aipur Vs RE$PONDENT M/S ‘Himaiya Cemmer‘ciai Complex Priva‘fa 'L'l’d, Supela' B'hijai, Dis'rf. Durg & v HA No.41/2904 K (Appea: u/s 260A ofwrhe‘ Income T4x Act 1951) APPELLANT 'Vs . . M , Commssmner of Inccme, Rmpur (CHha‘H'isgar'n) R£SPONDENT ‘ M/s Himaiya Cammercml Compiex Pmvm‘e Lfd Supeia Bhdal Dlsf‘r Durg Present Mr. S.R. Rae, Advcca're for Thé ap;§ailan?—revenue. ‘

Orai Order m £24 11 200g) ‘ 1 The above anneais are bema disposed of bv fhis common order as in oil These anneois fhe annellanT-revenue Is chaiienama 'rha order of “r a Income Tax AooeHa‘re Tribunal Naaour (for shorT fribunai’) delefma The oddmons mode bv The Ascessma Officer {for shorf ‘AO‘) unde Sechon 69B of The Income Tax Act. 1961 (for shorfi‘fhe Ac’r’). However; m fhas order reference is being made To The pleadings made in ITA No.35/O3. r

2.

This appeal preferred by The appeHanT-revenua undar Secfion 260-A of K ‘ the ACT against fhe order of The Income Tax Appaiicd‘e Tribunal (for brevi‘h/ “the fribunai') dafed 16.12.2002 (Annexure A—l) has béen admiffed for hearing on The following subsmmial question of inw:-' “Whefher in iaw and in ”rhe facTs of ‘rhe case, The learned Income Tax, Appellafe Tribunal was jusfified in ughoiding The order of The iearned Commissioner of Income Tax (Appeal) in delefing The i addi‘rion of Rs.4,.24‘.895/- mode by The Assessing Officer. uls 69-E as unexpiained inves1'men'r in The building of commercial complex and hotel in The name of fhe Himalaya Fork?" . Briefly shied? facfs of The case; as projiecl‘ed in Para-1 of The memo of appeal; are That The ossessee filed income ’rax refurn for The assessmenT year 1997-98 showing ToTal loss of Rs.4i6l2;380/—. The assessee company had consTrucTed a commercial complex é hoTel in The name and sTyle ‘Himalava Park' The consTrucTion was commenced in The financial vear i 1991 92 and was compleTed In The vear 1996 97 Durina assessmenT proceedings The assessee produced valuaTion reporT from a regIsTerecl Valuer who esTimaTed The cosT of complex aT Rs 2 41 42 O86/—,. ouT of which cosT of bmldma was esTimoTed aT Rs 1 60 00 OOO/- The maTTer was referred To The DisTricT ValuaTion Officer {for shorT ‘DVO'T of The l Income Tax DeparTmenT by issuing commisSion underéecfion 131 (1) (d) of The AcT. The DVO esTimaTed The cosTllof building aT Rs.2,55,51,283/-. The AO reiecTed The books of accounTlmainTained by The assessee bv invokina The orOVisions under SecTion 145 of The ACT AfTer considerino The reoorT of DVO and makina a lLmo—sum deducTion of 20% To The ToTal cosT assessed by The DVO and further deducTmg 10/o for self- superyisioni difference in The cosT of building esTimaTed and casT as per books was arrived aT Rs.22;66;110l-,. which was added as unexplained invesTmenT in The building. The above‘dddifion was apporTioned among differenT financial years and for The relevant year Le. 1997-98,. addiTion of Rs.4i24;8,95/- was made under SecTionl 69-8 of The AcT. On The appeal by The assessee, lThe CIT (Appeals) allowed The ame and held ThaT The AO had noT recorljded any posiTive finding To show l i s

1\ I l r fhaf The books of accoun‘r maim’ained by The assassee are defec‘rive and accordingly deleTed Th2 addifions made by fhe AO. The fribunal furTher rejecfed 'rhe aggpeul preferred by fhe revenue and upheld The order of The CIT (Appeals)

4.

Mr. Rae; learned caunsel for The appellanf referring fo The order of ‘rhe AO arau‘ed fhcn' fhe AO affer findina ouf various discrenanctes In fhe books of accoun‘r mammmed bv The assessee relecfed The books of accoun‘r bv Invoking provisions of Sec‘hon 145 of The Ac? In The final order of assessmenf daTed 29.3.2000. Bo‘l‘h ‘rhe frlbunals below have ignored The cafegorical finding of fhe AO in This regard and have deiefed The addifions only on The ground ThaT The books of accoum‘ mainTained by The assessee during The icourse of his business has noT been rejecTed. On The oTher hands Mr Sherrie learned counsel for The respondenT — assessee would aroue ThaT iT was mcumbenf uoon The AO To reiecT The books of accounT before referrina The maTTer To The DVO The Tribunals below afTer close scr uTmv of The record of The AO have seT aside The order of The AO and deleTed The addITions made bv The AO on The baSIs of voluaTion ouT forTh bv The DVO Reliance is pleoed on The order of This CourT daTed 31.8.(009;; passed in ITA No.160/99 (Commissioner of Income Tax, Raipur Vs. SmT KaviTa Khemani). .

We have heard learned counsel for The dhrTies. We have perused The impugned orders passed by The Tribunal. . The Tribunal in iTs order has observed Thb’r The cssessee had produced The books of accounT & vouchers cmd The same were TesT checked ThereafTer The maTTer was adiourned for 27 7 1998 and on ThaT daTe also The assessee was direcTed To oroduce The books of accounT and vouchers ThereoTTer iT opoears ThoT a reference To The DVO has been made bv The AO on 48 1998 and The maTTer was fixed for 14 5 1999 There is no reference abouT The cosT of consTrucTion as shown by The assessee in The books of account ThereafTer on 23 7 1999 The assessee \ was called uaon To furnish snecrfic ob IecTions To The valuaTion reoorT bv (\/ .

q The DVO. En‘rr-y aisa ghouls fha‘r The reference To The DVO was made only offer poinTing ou‘r specific defects. The AO furfher' observed That in The order sheaf enTr-y Tha‘r objecJrions/defecfs need n01 f0 be communicafed f0 The assessaa. From fhe above entries, if is very clear fha‘r The assessee had produced fhe books of accoun‘r wherein The cos? of cons‘l‘rucTion incurred in puffing-up HoTel cum Commercial compiex was duly recorded. IT also fmnspires That The AO has en‘rer'rained some doubf abouT The books of accou'nT and had chosen To make a reference under 5ecTion 131 (1) (d) on 4.8.1998. AfTer observing Thusi iT has been held in Para-6 of The impugned order ThuT The AO has noT applied his judicial mind To The books of accounT and oTher evidence produced by; The assessee evidencing The acTual cosT of consTrucTion of The hoTel cum-commercial complex. Reference To The DVO was righTly held To lale invalid by The CIT (A).

8.

Thus from The findings of focT recorded Hy The forums below iT is clear ThaT The respondenT assessee maxnTamed regular books of accounT during The course of his business and The same were produced during The assessmenT proceedings for perusal of TheVAO. However, The AO wiThouT recording any defecT in The books of occodhT mainTained by The assessee and wi‘l‘houT ejecTing The same has made reference TOaThe DVO. 9‘ Thus. followino The law laid down in The mla‘TTer of SmT. KaviTa Khemani (sunra) we are of The cons1dered omnion ThaT findinas recorded bv The CIT (Aooeals) which have been subsecuenTlv confirmed bv The Tribunal Vide impugned order; are sTricTly in accordance WiTh law and The same do noT call for anv inTerference. i 10.In The resulT, The insTanT appeals have nol subsTance, The same deserve To be dismissed and are accordingly dismissed.

11.

A copy of This order be placed in ITA No. 39/04, 40/04 6i 41/04. i Dhirendra Mishra \‘~Ti Judge \ \ y I r

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