ITO, BEHROR vs. TRIPUTI COTTAGE, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM

vk;dj vihy la-@ITA No. 01/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Tirupati Cottage, Income Tax Officer, Vs. N.H. 8, village Sangtera, Ward-Behror, Behror- Kotputli- 303108 301701, distt- Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 179/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Income Tax Officer, M/s Tirupati Cottage, Vs. Ward-Behror, Behror- N.H. 8, village Sangtera, 301701, distt- Alwar. Kotputli- 303108 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 495/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke Tirupati Cottage, Income Tax Officer, N.H. 8, village Sangtera, Vs. Ward-Behror, Behror- Kotputli- 303108 301701, distt- Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 614/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke Income Tax Officer, M/s Tirupati Cottage, Vs. Ward-Behror, Behror- N.H. 8, village Sangtera, 301701, distt- Alwar. Kotputli- 303108 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 2 cross appeals_M/s Tirupati Cottage Vs ITO vk;dj vihy la-@ITA No. 496/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2010-11 cuke Tirupati Cottage, Income Tax Officer, Vs. N.H. 8, village Sangtera, Ward-Behror, Behror- Kotputli- 303108 301701, distt- Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 615/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2010-11 cuke Income Tax Officer, M/s Tirupati Cottage, Vs. Ward-Behror, Behror- N.H. 8, village Sangtera, 301701, distt- Alwar. Kotputli- 303108 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 497/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Tirupati Cottage, Income Tax Officer, Vs. N.H. 8, village Sangtera, Ward-Behror, Behror- Kotputli- 303108 301701, distt- Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 616/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Income Tax Officer, M/s Tirupati Cottage, Vs. Ward-Behror, Behror- N.H. 8, village Sangtera, 301701, distt- Alwar. Kotputli- 303108 LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 711/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Tirupati Cottage, Income Tax Officer, Vs. N.H. 8, village Sangtera, Ward-Behror, Behror- Kotputli- 303108 301701, distt- Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAEFT 9922 E vihykFkhZ@Appellant izR;FkhZ@Respondent

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 3 cross appeals_M/s Tirupati Cottage Vs ITO

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya(Adv)& Shri Hemang Gargieya (Adv) jktLo dh vksj ls@ Revenue by : Shri Rajendra Jha (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 07/08/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 21/08/2018

vkns'k@ ORDER

PER: BENCH

These are four set of cross appeals by the assessee and the revenue

for the A.Ys. 2008-09 to 2011-12 and an appeal by the assessee for the

A.Y. 2012-13 directed against the respective orders of the ld. CIT(A),

Alwar dated 18/12/2016, 11/05/2017 and 23/08/2017 respectively.

convenience, a common order is being passed.

appeals for the A.Y. 2008-09 to 2011-12 are common, thus, the grounds

raised in the cross appeals for the A.Y. 2009-10 are reproduced as under:

Ground of assessee’s appeal: “1. The A.O. has erred in initiating the reassessment proceedings U/s 147 & 148 and CIT(A) has erred in confirming the action of A.O. 2. The A.O. has erred in making addition of Rs. 1,68,10,437/- on account of difference in valuation of investment and CIT(A) has erred in restricting the said addition up to Rs. 10,00,000/- out of total addition of Rs. 1,68,10,437/-.” Ground of revenue’s appeal: “1. That the ld. CIT(A), Alwar has erred on the facts and circumstances of the case in restricting the addition of Rs.

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 4 cross appeals_M/s Tirupati Cottage Vs ITO

1,68,10,437/- to Rs. 10,00,000/- which was made by the A.O. on account of undisclosed investment in construction of hotel on the basis of DVO’s report.”

the name and style of M/s Tirupati Cottage. In the reassessment

completed by the Assessing Officer U/s 143(3) read with Section 147 of

the Income Tax Act, 1961 (in short the Act), the Assessing Officer made

addition on account of cost of construction/investment on the basis of

valuation determined by the DVO estimating the cost of construction of

hotel building.

before the ld. CIT(A) and also challenged the validity of reopening of the

assessment. The ld. CIT(A) while passing the impugned orders has

accepted the claim of the assessee that estimation cost of construction

should be determined by applying State PWD rates as against CPWD rates

applied by the DVO. Thus, the ld CIT(A) has granted substantial relief to

the assessee and restricted the addition made by the Assessing Officer.

Thus, both the assessee and the revenue have challenged the orders of

the ld. CIT(A) on the issue of cost of construction determined by the DVO

which is restricted by the ld. CIT(A) by applying the PWD rates. The

assessee has also raised ground of validity of reopening in the A.Y. 2009-

10 to 2011-12 but not raised such issue in the A.Y. 2008-09.

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 5 cross appeals_M/s Tirupati Cottage Vs ITO

relevant material on record. The ld AR of the assessee has relied upon the

various decisions on the point of applicability of State PWD rates for

determination of cost of construction in respect of a building falling in the

jurisdiction of State PWD. He has relied upon the following decisions:

(i) Gopal Kumar Deewan Vs. ITO, ITA No. 498& 499, 617 & 618, 02, 178/JP/2017.

(ii) CIT Vs. Sunita Mansingha (2017) 295 CTR 0590 (SC)

(iii) M/s Ganpati Plaza Vs. ITO in ITA No. 466 & 467/JP/2016 vide order dated 16/2/2018.

determined the cost of construction by considering all the relevant facts as

well as evidence. Further the assessee has not maintained separate books

of account for the cost of construction of the hotel building in question and

therefore, the DVO has estimated the cost of construction based on CPWD

rates which is justified. He has relied upon the order of the Assessing

Officer.

material on the record at the outset we note that the assessee has

declared cost of investment for the A.Y. 2008-09 to 2011-12, which is

about 1.11 crores to 1.75 crores year wise. This cost of investment

declared by the assessee was not accepted by the Assessing Officer for

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 6 cross appeals_M/s Tirupati Cottage Vs ITO

want of necessary record and evidence and further the assessee has not

maintained proper accounts of expenditure. Accordingly, the Assessing

Officer referred the issue of estimation of cost of construction to the DVO.

After receiving the valuation determined by the DVO in its report, the

Assessing Officer made addition of differential amount on account of cost

of construction. The said addition made by the Assessing Officer was

challenged before the ld. CIT(A) by the assessee and contended that the

DVO while determining the cost of construction has applied CPWD rates

instead of State PWD rates. The ld. CIT(A) has accepted the contention of

the assessee that the CPWD rates are applicable in respect of building in

question as against CPWD rates applied by the DVO. The year wise cost of

investment declared by the assessee, the cost of construction determined

by the DVO and addition made by the Assessing Officer which was

restricted by the ld. CIT(A) are as under:

A.Y. Cost of investment Estimated by DVO Difference Addition sustained declared by assessee by CIT(A) 2008-09 1,11,61,321/- 2,28,65,791/- 1,17,04,470/- 7,00,000/- 2009-10 1,60,30,344/- 3,28,40,781/- 1,68,10,437/- 10,00,000/- 2010-11 1,75,11,795/- 3,58,75,775/- 1,83,63,980/- 11,00,000/- 2011-12 1,08,43,040/- 2,22,13,740/- 1,13,70,700/- 6,00,000/-

Thus, the ld. CIT(A) has granted substantial relief on this issue and held

that State PWD rates are application for determination of cost of

construction as against CPWD rates applied by the DVO. We further note

that an identical issue has been considered by the Coordinate Bench of

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 7 cross appeals_M/s Tirupati Cottage Vs ITO

this Tribunal in the case of Gopal Kumar Deewan Vs. ITO (supra). In para

12 of the order, the Coordinate Bench has held as under:

“12. We have heard the rival contentions of both the parties and perused the material available on the record. We have also considered the case laws relied upon by the ld AR. After hearing both the sides we find that the ld. CIT(A) has rightly held that the State PWD rates have to be applied to the plinth area of construction of each floor. The ld. CIT(A) has also held that the assessee has shown cost of construction in the books of account, which is almost adhere to the valuation done as per the State PWD rates. However, he has sustained the ad hoc disallowance of Rs. 4.00 lacs for the A.Y. 2011-12 and 2013-14 and Rs. 8.00 lacs for the A.Y. 2012-13 for the reason that complete set of bills and vouchers for the material purchased for construction of hotel were not available. In our view, once he has given finding that the State PWD rate has to be applied to estimate the cost of construction and he has also given a finding that cost of construction in the books of account almost adhere to the valuation done as per State PWD rate then there is no justification in sustaining such ad hoc disallowances. Once the estimate has been made on the State PWD rates then in absence of complete set of bills and vouchers for the material, no such disallowance is justified. Hence, we direct to delete the same. In the result, ground No. 2 of all these three appeals are allowed and ground raised by the revenue in these years is dismissed.”

We note that the Coordinate Bench of this Tribunal while deciding this

issue has followed the decision of Hon'ble Supreme Court in the case of

CIT Vs. Sunita Mansingha (supra) as well as various other decisions

including the decision of Hon’ble Jurisdictional High Court in the case of

CIT Vs. Hotel Joshi (242 ITR 478). In absence of any contrary precedent

brought to our notice, we follow the earlier decision of this Tribunal and

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 8 cross appeals_M/s Tirupati Cottage Vs ITO

hold that the ld. CIT(A) has rightly applied State PWD rates for estimation

of cost of construction of hotel building, which is situated in the jurisdiction

of the State PWD. Accordingly, to that extent, the order of the ld. CIT(A) is

upheld. However, the ld. CIT(A) has sustained the additions of lump sum

amount varying from Rs. 6.00 lacs to Rs. 11.00 lacs for each year on ad

hoc basis. It is pertinent to note that once the cost of construction is

estimated on the basis of valuation determined by applying PWD rates

then making an ad hoc addition for want of bills and vouchers is not

justified and called for. The assessee has also filed cross appeals and

raised this issue regarding the addition sustained by the ld. CIT(A).

Though the cost of construction has to be determined by applying the

State PWD rates, however, it is not clear from the valuation report of the

assessee that the same is prepared by applying the State PWD rates.

Therefore, only for limited purpose and determining the cost of

construction by applying State PWD states and then compared the same

with the cost of construction claimed by the assessee, we remit this issue

to the record of the Assessing Officer. In case where the cost of

construction arrived by applying the State PWD rates is more than the cost

of construction claimed by the assessee, an addition can be made. Hence

the Assessing Officer has to do the necessary exercise after giving an

opportunity of hearing to the assessee.

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 9 cross appeals_M/s Tirupati Cottage Vs ITO

assessment, we note that the Coordinate Bench of this Tribunal in the case

of Gopal Kumar Deewan Vs. ITO (supra) has also considered this issue in

para 8 as under:

“8. We have heard both the sides on this issue and perused the material available on the record. We have also considered the case laws relied upon by the ld. AR of the assessee. In this case, the assessee was engaged in the business of running hotel and restaurants. During the assessment proceedings, for the A.Y. 2012-13, the Assessing Officer observed that the assessee has shown amount of Rs. 1,66,58,798/- under the head new building work in progress in the schedule of fixed asset in its balance sheet. The Assessing Officer asked to furnish the head wise details of cost of construction incurred on the hotel building alongwith supporting bills and vouchers failing which the Assessing Officer made a reference U/s 142A of the Act to the DVO of I.T. department, Jaipur on 17/11/2014 and the DVO report was received back in his office on 03/3/2015. The DVO has estimated the cost of investment as under: F.Y. Cost of investment Estimated by the DVO Difference declared by the assessee 2010-11 3785819 7711916 3926097 2011-12 11865730 24171129 12305399 2012-13 5351136 14974659 9623523 2013-14 5044489 10276302 5231613 2014-15 5584435 11375794 5791359

The Assessing Officer after giving opportunity to the assessee made addition of Rs. 1,23,05,399/- and finalized the order U/s 143(3) of the Act on 25/3/2015. Thereafter he has issued notices U/s 148 of the Act for the A.Y. 2011-12 and 2013-14 on 09/6/2015. Thus, the Assessing Officer has applied his mind on the valuation report and has made basis for making assessment for the A.Y. 2012-13. Thereafter, the reasons has been recorded and issued notice U/s 148 of the Act. In such a situation, the

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 10 cross appeals_M/s Tirupati Cottage Vs ITO

ratio laid down in the case laws relied upon by the ld AR does not apply to the assessee’s case as in these cases the reopening was based only on the basis of valuation report and nothing else. Hence, this ground of assessee’s appeal for the A.Y. 2011-12 and 2013-14 has no merit and the same stand dismissed.”

The facts and circumstances in the case of Gopal Kumar Deewan Vs. Ito

(supra) as well as in the case of assessee are identical on the basis of

which the Assessing Officer has reopened the assessment for the A.Ys.

2009-10 to 2011-12. We further note that the reopening is not merely

based on the report of the DVO but prior to the notice issued U/s 148 of

the Act, the assessment for the A.Y. 2012-13 was passed U/s 143(3)

wherein the Assessing Officer conducted inquiry on the issue. Therefore,

the assessment for the A.Y. 2009-10 to 2011-12 were reopened on the

basis of the findings of the Assessing Officer in the assessment for the A.Y.

2012-13. Accordingly, following the earlier order of this Tribunal, we do

not find any merit or substance in the ground raised by the assessee

against the reopening of the assessment. Hence, the cross appeals filed by

the assessee as well as the revenue for the A.Y. 2008-09 to 2011-12 are

partly allowed.

following grounds of appeal:

“1. The A.O. has erred in making trading addition of Rs. 1,00,000/- and the CIT(A) has erred in confirming the same.

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 11 cross appeals_M/s Tirupati Cottage Vs ITO

that the assessee does not press ground No. 1 of the appeal, the same

may be dismissed as not pressed.

assessee’s appeal is dismissed as not pressed. Accordingly, ground No. 1

of the assessee’s appeal is dismissed being not pressed.

made by the Assessing Officer on account of difference in the valuation of

investment in building based on DVO’s report which was restricted by the

ld. CIT(A) to Rs. 1.50 lacs. The revenue has not challenged the order of ld.

CIT(A) because of low tax effect and the assessee has challenged the ad

hoc disallowance sustained by the ld. CIT(A). In view of out finding on this

issue for the A.Y. 2008-09 to 2011-12, this ground of assessee’s appeal

stands allowed for statistical purposes.

13 are partly allowed and the appeals of the revenue for the A.Y. 2008-09

to 2011-12 are also partly allowed.

ITA 01/JP/2017 & 179/JP/2017 with 3 Ors. 12 cross appeals_M/s Tirupati Cottage Vs ITO Order pronounced in the open court on 21/08/2018.

Sd/- Sd/- ¼foØe flag ;kno½ ¼fot; iky jko½ (VIKRAM SINGH YADAV) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member ys[kk lnL;@ U;kf;d lnL;@ U;kf;d lnL;@Judicial Member ys[kk lnL;@ ys[kk lnL;@ U;kf;d lnL;@ U;kf;d lnL;@ Tk;iqj@Jaipur fnukad@Dated:- 21st August, 2018. *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Tirupati Cottage, Kotputli. 1. izR;FkhZ@ The Respondent- The ITO, Ward-Behror, Behror. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 01,495,496, 497 & 711/JP/2017 & 6. 179, 614, 615 & 616/JP/2017) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत