COMMISSIONER OF INCOME TAX (CENTRAL) LUDHIANA vs. PARMINDER SINGH

PDF · subscribers
ITA/365/2013HC Punjab & HaryanaPHHC01105236201321 May 2015Bench: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the questions sought to be raised were not substantial questions of law but pure questions of fact. The Tribunal, being the final forum for deciding such issues, had rightly exercised its discretion. The Tribunal's decision to reduce the addition to Rs. 15 lacs each for both brothers was justified. The reasoning was that the Departmental Valuation Officer had adopted CPWD rates instead of PWD rates, and a builder could obtain materials at cheaper rates due to wholesale purchases, especially when constructing multiple houses. Furthermore, the Tribunal correctly considered that some houses were in a semi-finished state, while the valuation was done for completed houses, and that the assessee was entitled to a margin for such incomplete construction. The Court found that the Tribunal had rightly granted the benefit of the margin for partially completed houses and that the addition of Rs. 15 lacs each was a reasonable exercise of discretion. Therefore, no substantial question of law arose for consideration. The appeals were dismissed.

What were the facts?

The Revenue (Commissioner of Income Tax) filed appeals against the Income Tax Appellate Tribunal's (ITAT) order for assessment year 2008-09. The assessee, Parminder Singh, a builder, was subjected to a search under Section 132 of the Income Tax Act, 1961, on 11.09.2007. Loose papers and documents were found, leading to a notice under Section 142. The assessee filed a return declaring a total income of Rs. 55,25,000, including surrendered income. Ten properties under construction, purchased by the assessee and his brother, were referred for valuation. The Assessing Officer (AO) made an addition of Rs. 1,12,25,326 after confronting the assessee with the valuation report and objections. The Commissioner (Appeals) confirmed an addition of Rs. 49,43,391, allowing a 5% benefit for material purchase. The ITAT, however, reduced the addition to Rs. 15 lacs each for both brothers, considering CPWD rates, wholesale purchase of materials, and semi-finished nature of some properties.

What were the issues?

1. Whether the ITAT was right in directing the AO to make an addition of Rs. 15 lacs on account of expenditure on undisclosed construction, instead of Rs. 49,43,391 as sustained by the CIT(A)? (Question of law) 2. Whether the ITAT, not being an expert in property valuation, was right in directing the AO to make an addition of Rs. 15 lacs, ignoring the expert opinion of the Valuation Officer? (Question of law) 3. Whether the ITAT was right in ignoring the fact that there is no provision for referring cases for valuation to the Valuation Cell to apply PWD rates, as the Income Tax department is a Central Government department and CPWD rates should be applied by the attached Valuation Cell? (Question of law) 4. Whether the ITAT was right in ignoring the assessment order's facts that the assessee was given a reasonable opportunity to be heard and that objections regarding construction rates, builder's efforts, and incomplete construction were forwarded to the Valuation Cell, which did not accept them? (Question of law) Assessee's contentions (as inferred from the ITAT's decision): The valuation was done as if houses were complete, whereas some were sold as semi-finished and completed by buyers. A builder can procure materials at cheaper rates due to wholesale purchases. The Departmental Valuation Officer adopted CPWD rates instead of PWD rates. The ITAT rightly considered the margin for semi-furnished houses and the benefit of wholesale material purchase. Revenue's contentions: The ITAT erred in reducing the addition, ignoring the expert opinion of the Valuation Officer, and not adhering to the prescribed valuation methods and departmental rates. The assessee's objections were duly considered and rejected by the Valuation Cell.

Which sections of the Income-tax Act were involved?

Section 260A,Section 132,Section 142,Section 80C

AI-generated summary — verify with the full judgment below

ITA No.365 & 368 of 2013 (O&M) -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No.365 of 2013 (O&M) Date of decision:21.05.2015 Commissioner of Income Tax (Central) Ludhiana ....Appellant Versus Parminder Singh ....Respondent

ITA No.368 of 2013 (O&M) Commissioner of Income Tax (Central) Ludhiana ....Appellant Versus Parminder Singh ....Respondent

CORAM : HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr.Ravi Shankar, Advocate, for the appellant. Mr.Rohit Kaura, Advocate, for the respondent. **** G.S.Sandhawalia J. 1. This judgment shall dispose of ITA Nos.365 & 368 of 2013, since the questions of law are common between the parties. However, to dictate orders, facts have been taken from ITA No.365 of 2013 titled Commissioner of Income Tax (Central), Ludhiana Vs. Parminder Singh. 2. Challenge in the present appeal, filed under Section 260A of the Income Tax Act, 1961 (for short, the 'Act'), is to the order of the Income Tax Appellate Tribunal, Chandigarh (for short, the 'Tribunal'), passed in ITA No.453/CHD/2012 dated 14.06.2013, for the assessment year 2008-09. 3. The following substantial questions of law have been sought to be raised in the present appeal: SAILESH RANJAN 2015.07.01 09:52 I attest to the accuracy and integrity of this document

ITA No.365 & 368 of 2013 (O&M) -2- “1.(a) Whether the ITAT is right in directing the Assessing Officer to make any addition of Rs. 15 lacs on account of expenditure on undisclosed construction instead of Rs.49,43,391/- as sustained by the Ld. CIT(A). 1.(b) Whether the ITAT, not being an authority expert in valuation of property, is right in directing the AO to make an addition of Rs. 15 lacs ignoring the expert opinion of the Valuation Officer. 2. Whether the ITAT is right in ignoring the facts that there is no provision to refer the case for valuation to the Valuation Cell to apply PWD rates as the Income Tax is a Central Govt. department and CPWD rates have to be applied by the Valuation Cell attached with the department. 3. Whether the ITAT is right in ignoring the facts mentioned in the assessment order that the assessee was given reasonable opportunity of being heard and the objection raised by the assessee regarding rate of construction, allowance for builder efforts and rebate for incomplete construction etc. were duly forwarded to the Valuation Cell and the Valuation Cell after giving a thoughtful consideration had not accepted the objections of the assessee.” 4. A search was conducted under Section 132 of the Act by the Revenue upon the respondent-assessee, who is a builder, on 11.09.2007 and loose papers/documents were found. The assessee filed a return on 26.03.2009 declaring total income at `55,25,000/- in response to the notice under Section 142 of the Act, after claiming deduction under Section 80C to the tune of `1 lac. The income included the surrendered income. Various properties were under construction which had been purchased by the respondent and his brother, who has been arrayed as respondent in the other appeal. The 10 properties were referred for valuation. On the report being received from the Valuation Cell, they were confronted with the same. The assessees filed their written objections which were not accepted and the rebate for incomplete work was also not granted and the Assessing Officer SAILESH RANJAN 2015.07.01 09:52 I attest to the accuracy and integrity of this document

ITA No.365 & 368 of 2013 (O&M) -3- assessed the amount of income at `1,12,25,326/- after giving the benefit of the amount disclosed. 5. The respondent-assessee filed an appeal before the Commissioner, Income Tax (Appeals) (for short, the 'CIT') who vide his order dated 13.03.2012 (Annexure A2), took into account the valuation done with respect to one property at 153-A, Model Town, Ludhiana only by coming to the conclusion that the issue involved in respect of other properties were on the same lines. The CIT only gave the benefit of 5% of the total cost for the purchase of the material as the builder was doing the business of construction and was expected to get cheaper products from the market and confirmed the addition made by the Assessing Officer to the extent of `49,43,391. The matter was taken up in appeal to the Tribunal by both the brothers taking the plea that the valuation has been done as if the houses were complete and some of the houses were sold as semi-finished houses and were completed by their respective buyers and the addition had been made in the hands of the assesses. 6. The Tribunal noticed that the Departmental Valuation Officer had adopted the CPWD rates rather than the PWD rates and secondly a builder was able to get material at a cheaper rate, especially when he was constructing a large number of houses on account of wholesale purchase and also expected that very little margin were given for the semi-furnished houses. Accordingly, keeping in mind that `1.05 crores was already surrendered by both the brothers, the orders were modified by making further addition of `15 lacs each towards expenditure on the undisclosed income in case of both the assessees and thus, a benefit of `40 lacs roughly was given to both the brothers. SAILESH RANJAN 2015.07.01 09:52 I attest to the accuracy and integrity of this document

ITA No.365 & 368 of 2013 (O&M) -4- 7. A perusal of the paperbook would go on to show that the houses were situated at different places in the town of Ludhiana and as noticed, the construction was also at various stages and the Tribunal had rightly granted the benefit of the margin that some houses were half complete whereas the valuation had been done for the finished houses and additions were made accordingly. Thus, the questions which are sought to be raised for consideration are not questions of law, as such, but are pure questions of fact. The Tribunal being the final forum for deciding such issues, has rightly exercised this discretion by adding a sum of `15 lacs each, to both the brothers, over and above the income which was declared and in the opinion of this Court, no substantial question of law, thus, arises for consideration. 8. Accordingly, both the appeals are dismissed. (S.J.Vazifdar) (G.S.Sandhawalia) Acting Chief Justice JUDGE 21.05.2015 sailesh

SAILESH RANJAN 2015.07.01 09:52 I attest to the accuracy and integrity of this document

More judgments on Section 132

All 14,598 judgments and leading authorities on Section 132 →

Recent GST High Court judgments

Search GST case law →