COMMISSIONER OF INCOME TAX, BILASPUR vs. M/S SWASTIK RICE MILL, KHARASIA

PDF · subscribers
ITA/67/2003HC ChhattisgarhCGHC01009231200322 February 2007Author: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE VIJAY KUMAR SHRIVASTAVA7 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeal. The Tribunal reasoned that the assessee had maintained complete details of the investment in construction and had furnished relevant documents to the DVO, such as drawings, bills for materials, architect fees, and agreements. The DVO's report did not indicate any deficiencies in the documents provided by the assessee. The Tribunal relied on multiple High Court and ITAT judgments, including Pratap Singh Amro Singh Rajinder Singh (Rajasthan High Court), which held that if an assessee maintains proper books of account supported by vouchers and no defects are pointed out, the figures therein should be followed. A valuation report can only be considered when books of account are unreliable or defective. The Tribunal found that the AO and DVO had not pointed out any specific material to dispute the correctness of the assessee's accounts. Therefore, the addition made by the AO solely based on the difference between the assessee's cost and the DVO's estimate was not justified. The Tribunal held that the CIT(A) had rightly deleted the addition.

What were the facts?

The Revenue is in appeal before the ITAT against the order of the CIT(A) for Assessment Year 1996-97. The Assessing Officer (AO) had made an addition to the assessee's income based on a reference to the Departmental Valuation Officer (DVO) for estimating the cost of construction of a rice mill. The DVO estimated the cost at Rs. 5,70,500/-, whereas the assessee had declared Rs. 4,62,325/-. The AO also levied interest under Section 234A and 234B. The CIT(A) allowed the assessee's appeal, deleting the addition. The Revenue has now approached the ITAT challenging the CIT(A)'s order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) deleting the addition for investment in property, based on the report of the Departmental Valuation Officer, when the assessee had maintained complete details of investment in construction and the Assessing Officer had not rejected the books of account. Assessee's Contention: The assessee argued that since complete details of investment in construction were maintained, and the books of account were not rejected by the AO or DVO, no addition could be made solely on the basis of a difference between the assessee's declared cost and the DVO's estimated cost. The assessee relied on various ITAT decisions, including Western Estate (209 ITR 343), Dream Land Enterprises (81 Taxman (Mag.) 143), Baby Land Hospitals (39 Taxman (Mag.) 238), VenRatraju Modern Boilers & Raw Rice Mills (94 Taxman 178), Pitamber Inds. (P) Ltd. (42 ITD 373), Karswarup Cold Storages & Gen. Mills (27 ITD 1), and Patil Enterprises (52 TTJ 279), as well as a Rajasthan High Court decision in Pratap Singh Amro Singh Rajinder Singh (200 ITR 788). Revenue's Contention: The Revenue's specific contention is not explicitly detailed in the provided text, but their appeal is based on the AO's addition made on the basis of the DVO's report.

Which sections of the Income-tax Act were involved?

Section 260A,Section 234A,Section 234B,Section 55A

AI-generated summary — verify with the full judgment below

I. T. A. No. £'^OF 2003 @5v!SJfiP Coramissioner, Income / Tax, Bilaspur (C.G) M/s Swastik Rice Mill Kharasia [CG]

: Commissioner, income Tax. Bilaspui /^ l"t '^.^. W/s Swastik Rice Mi!i Kharasi [C.G.l la "t ^s The fo!iowino orat order of the Court •A'as passed by .L. Datti The Revsnue is befor®us in thls appea! fited undsr Section 260A of th®Income Tax Act (hereinaftei- for the sake of bi'evits' referred to as 'the Act') inter aiia eailing in question ihe legalify or otherwise ef the order passed by the income Tax Appeiiate Tribunai, JabaSpur Bsnch, JabaSpur in I.T.A. No.251/JAB/1999, for the asssssment year 1996-97, dated 30.4.2003. (2) !n fhe memorandum of appeai the Revsnue has rais oniy vwi question of law for ow consideration and decisscn. The said quesaori as under: er on t'ne facts ar in the cireumstances of i, iearned income Tax Appeilste Tribunal itified in upho ing the order of Commissioner Tsx [Appes!s] deteting the addition ?or .^^- 'f^ investrrtent in prsperty, Assessing Officer on the basis obtained in order to exactly quantify the undi oseti investment admi&edly and knowingly not recorded in assessee". (3) The assesses had filed return of income for ths asssssment year 1996-97. Before compistsng the assessnent, the Ass-essing Qfficer not beins saiisfied wlth the cost of construction deciared bv the assessee, mads a reference tc the Department Valua'dor; Officsr (DVO) for sstimating the cost of constructlon. The Vaiua'aon Officsr had estlmated the cost of constructlon of the Rice Mili for ;5i3 assessment year 1996-97 at Rs.5,70,500/- ss against Rs.4,62,32i5i'- declared by the assessse. (4) The Assesssng Officer after taking into consideration the repori of the DVO has made the addition to fhe return of the Income filed by the assessee. Further he iias aiso levied interest under Ssction 234-A, b. f~W itions so mase t?,' tne Assessing Officer tSie assessee carried on the ms Appe'late Authority i.e. the CoRimissiop.er of inc Appe!!ate Authority has allowed the appeal fll That ss how the Revenue is before us in this appeai. fore the First T' Fi, I'he* ???;^^?;%f-1;? I^ ^rf 1 (5) The Tribunal in its !engthy order has consider the aforesai issue at para 12 ofthe order. The view ofthe Tribunal is as under: 'We have aiso considered the issue on merits. Admittediy, the asssssee has maintained the complete detaite of the invsstment in the construction of property. Hon'bSe Calcutta High

,s Court in the case of Western Estate reported In 209 ITR 343 has heid that where reguEar account o? construction v/as maintained, the same should be secepted. The Ahmedabad Bench of the iTAT in the case of Dream !and Enterprises reported in 81 Taxman (Mag.) 143 Sias he!d that when the sost of construction deciared by the assessee was supported by regu!ar books of account anci vouchers, the corrsctness ofwhich was not disputecl by the A O or the D.V.O. by bringing any speclfic materia! on record. No addition could be validi" made OR account of any investment of the cost of construction mereiy on the bssis of diference between ths actual cost disclosed by ths assessse and the estimated cost construction by the D.V.O, The same view *A'as taken by Ahmedsbad Bench of the !TAT In the case of Baby Land KospitaS reported in 39 Taxman (Mag.) 238. the Hyderabad Eiench oi; She !TAT in the case of VenRatraju Modsrn Boliea' S; Raw Rice MiSis report in 94 Taxman 178, fhei Delhi Bench of the ITAT in the case of Pitambes' !nds. (P) Ltd. reported jn 42 ITD 373, in the case of Karswarup Co!d Storags & Gen. Miils reported in 27 ITD 1 (De!h! T.M) and ths Bangalore Benchof ths ITAT in the case of Pati! Entsrprises i'esort in 52' TTJ 279 have taken the same vievi'. !t mav bs mentionec in this connection that neither the Assessina Officer northe D.V.O. has found anythins iacking in the cost of sonstruction maintained by She assessee. Rather in his re.oort, the D.V.O. has mentioned that the assessee has furnished befors him the photo copies of the dravi/ings of the bui'ding, bilis / vouchers for purchase of buiiding matsnai, bili for fee paid for architect, agreement / contract papers for production of bricks at the sonstruction and the sale de of the !and. These ars only

the iiiustrative documents. He has not mentioned that any documsnt In this rsgard was iaciang. Under these cireumstances, the ratios iaid down by the various Benches of ths ITAT as msntion above, squareiy app!y iri the instant case. The Hon'bie Raj. High Court in the case of Prstap Slngh Arnro Singh Rajindsr Singh reported in 200 iTR 78$ have aiso Saken the same view. WhiEs rejecting the revenue's appiication, 'ihe Hon'ble High Court had even gone to say that the reference to the Valuatlon Ofncer was inva!id. We a'so noted the submissions of the .Departmental Representative regarding reference under Section 55-A of ths Act. We agree that the scope of refersnce under Section 55-A cf the Act sould not be !imited to the taxabiiity of the capita! gains only, 'out in view of the facts and abov< findings given, the Essue is mereiy of academic In nature. We, therefore, hoid that the CiT (A) hss rightiy deleted the addition made by the Assessing Officer. The grounds of appeal raised by ths ,11,31.31^^ . (S) The Tribuna! while holding that the Assesssng Office- vres not justified in rsiying upon the report of the D.V.O when ths books of the assessee were not rejected by him, has relied upor, severai ruiings of Courts inciuding that of Rajasfhan High Court in 'ihs cass of report in 2'30 ITR 788. In the said decision Ralasthan High Court has observed as "In respect of Investment made in propera/, thers can be only two methods to find out the correci position - (i) sxamination of books of account whlch have been maintained properly, and (ii) valuatjon

report. if the assessee has maintained books of account and ait dstails are mentioned in such books of account, which are duiy supported by vouchers and no defects are pointed out and the books are not rejected, She figures shown thereln have to be followed. The vaiuation report ean be taken into eonsideration oniy when the books of account are not reliable or are not supported by proper vouchers or the income Tax Officer is of th® opinion that no reilance can be piace on such books of account. It is true that the income Tax Officer has no option but to reSy on the vaiuation report which is 3 document prepar by ar, expert and is admissible, but thsre must be a finding by •ths Income Tax Officer that the books of accour,t maintained by ihe assessee are defectivs or are not reliable. Thsre maybe a marginai differenee in 'ihs actual investment and ths report of ths Vaiuation Officer for a number of reasons as the vaiuation report is prepared on the basis of norms prescribed bv the C.P.W.D. for the construction of buildinss and the difference may be with regard to quailty of ths materiais, etc". (7) We have carsfully pursued the orders passed by the Tribuna! and also the judgment of Rajasthan High Court. We sire in 1'uli agreernent with the findings recorded and conciusions rsached by Rajasthan High Court in more or less simiiar fsct situation. (S) in that vlew of the matter, we do not think that the Tribunal has committed any er? whatsoever by reversing the flndings of ;he sofar as the additions made by the Assesslng recort of the D.V.O. Sn visw of ';he Authorifr/ depending above, the question of law raised by the Rsvenue requires to be answered against the Revenue and in favour of the assessee. + Accordingiy, the appeal is rejected. Ordered according|y. FJustice Shriva Judge

More judgments on Section 234A

All 5,126 judgments and leading authorities on Section 234A →

Recent GST High Court judgments

Search GST case law →