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

order of the Coutt was passed by H.L. Dattu, CJ. The Revenue Is befoi'e us in this appeal filed under Section 260A of the Income Tax Act (hereinafter for the sake of brevity referred to 'as “the Act‘) inter alia calling in question the legality or otherwise of the order passed by the Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur in l.T.A. No.250/JAB/1999, for the assessment year 1995-96, dated 30.4.2003. (2) In the memorandum of appeal the Revenue has raised the following questions of law for our consideration and decision:- “(i) Whether on the facts and in the circumstances of the case, learned Income TaxJAppellate Tribunal was justified in upholding the order of Commissioner of Income Tax‘[Appeals] deleting HIGH COURT OF JUDICATURE CHHATTISGARH : BILASPUR DIVISION BENCH SH I.T.A No.69 OF 2003 APPELLANT

“F the addition for unexplained investment in property, made by the Assessing Officer on the basis of valuation report obtained in order to exactiy quantify the undisciosed investment admittediy and knowingly not recorded in the books of the assessee. (ii) Whether on the facts and in the circumstance of the case, learned income Tax Appellate Tribunal was justified in upholding the order of learned Commissioner of Income Tax [Appeals] in deleting the interest charged u/s 234A, 234B and 34C for the assessment year 1995-96“. (3) The assessee had filed return of income for the assessment year 1995-96. Before completing the assessment, the Assessing Officer not being satisfied with the cost of construction declared by the assessee, made a reference to the Department Valuation Officer (DVO) for estimating the cost of construction. The Valuation Officer had estimated the cost of construction of the Rice Mill for the assessment year 1995-96 at Rs.1 1 ,16,750/- as against Rs.9,05,000/- declared by the assessee. (4) The Assessing Officer after taking into consideration the report of the DVO has made the addition to the return of the Income tiled by the assessee. Further he has also levied interest under Section 234-A, 234—5. 234-C of the Act. Aggrieved by the additions so made by the Assessing Officer the assessee carried on ithe matter before the First Appellate Authority i.e. the Commissioner. of Income Tax. The First Appellate Authority has allowed the' appeal filed by the assessee. That is how the Revenue is before us in this appeal. ewe 2

(5) issue at para 12 of the order. The view of the Tribunal is as under: “We have aiso considered the issue on merib. Admittedly, the assessee has maintained the complete details of the investment in the construction of property. Hon’ble Calcutta High Court in the case of Western Estate reported in 209 ITR 343 has held that where regular account of construction was maintained, the same should be accepted. The Ahmedabad Bench of the ITAT in the case of Dream land Enterprises reported in 81 Taxman (Mag) 143 has held that when the cost of construction declared by the assessee was supported by regular books of account and vouchers, the correctness of which was not disputed by the A O or the D.V.O. by bringing any specific material on record. No addition could be validly made on account of any investment of the cost of construction merely on the basis of difference . between the actual cost disclosed by the assessee and the estimated cost construction by the D.V.O. The same view was taken by Ahmedabad Bench of the ITAT in the case of Baby Land Hospital reported in 39 Taxman (Mag) 238. the Hyderabad Bench of the ITAT in the case of Venkatraiu Modern Boiled & Raw Rice Mills reported in 94.Taxman 178, the Delhi Bench of the ITAT in the case of Pitamber inds. (P) Ltd. reported in 42 ITD 373, in the case of Harswarup Cold Storage & Gen. Mills reported in 27 ITD 1 (Delhi T.M) and the Bangalore Benchof the ITAT in the case of Patil Enterprises reported in 53 TTJ 279 have taken the same‘view. It may be , mentioned in this connection that neither the Assessing Officer nor the D.V.0. has found anything lacking in the cost of construction maintained by the i/, The Tribunal in its lengthy order has considered the aforesaid /

assessee. Rather in his report,‘the D.V.O. has mentioned that the assessee has furnished before him the photo copies of the drawings of the building, bilis l vouchers for purchase of buiiding materiai, bill for fee paid for architect, agreement l contract papers for production of bricks at the construction site and the sale deed of the land. These are oniy the illustrative documents. He has not mentioned that any document in this regard was lacking. Under these circumstances, the ratios laid down by the various Benches of the ITAT as mentioned above, squarely apply in the instant case. The Hon’ble Raj. High Court in the case of Pratap Singh Amro Singh Rajinder Singh reported in 200 ITR 788 have also taken the same view. While rejecting the revenue‘s application, the Hon’ble High Court had even gone to say that the reference to the Valuation Officer was invalid. We also noted the submissions of the ld.Departmental Representative regarding reference under Section 55-A of the Act. We agree that the scope of reference under Section 55—A of the Act could not be limited to the mxability of the capital gains only, but in view of the facts and above tindings given, the issue is merely of academic in nature. We, therefore, hold that the CIT (A) has rightly deleted the addition made by the Assessing Officer. The grounds of appeal raised by the revenue are, therefore, dismissed”. ” as under: (7) We have carefully pursued the orders passed by the Tribunal the judgment of Rajasthan High Court. We are in full and also agreement with the findings recorded and conclusions reached by Rajasthan High Court in more or less similar fact situation. “In respect of investment made in property, there can be only two methods to flnd out the correct position — (i) examination of books of account which have been maintained properly, and (ii) valuation report. if the assessee has maintained proper books of account and all details are mentioned in such books of account, which arei duly supported by vouchers and no defects are pointed out and the books are not rejected, the figures shown therein have to be followed. The valuation report can be taken into consideration only when the books of account are not reliable or are not supported by proper vouchers or the income Tax Officer is of the opinion that no reliance can be place on such books of account. It is true that the Income Tax Omcer has no option but to rely on the valuation report which is a document prepared by an expert and is admissible, but there must be a finding by the Income Tax Officer that the books of account maintained by the assessee are defective or are not reliable. There maybe a marginal difference in the actual investment and the report of the Valuation Officer for a number of reasons as the valuation report is prepared on the basis of norms prescribed by the C.P.W.D. for the construction of buildings and the difference may be with regard to quality of the materials, etc”.

(8) In that View of the matter, we do not think that the Tribunal has committed any error whatsoever by reversing the findings of the Assessing Authority insofar as the additions made by the Assessing Authority depending upon the report of the D.V.O. in view of the above, the questions of Iaw raised by the Revenue require to be answered against the Revenue and in favour of the assessee. Accordingly, the appeal is rejected. Ordered accordinM W # M «xx :1 ’ 5d]- \ V 1i i ‘ V.K. Shrivastava a .a ,7 sw- , [7” Chief Justice >7 ~ 5‘, i We g e Judge; " r .rg