ITO, CHENNAI vs. USHA ANANDAN, CHENNAI

आदेश / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER:

The appeal filed by the Revenue and Cross Objection filed by the

assessee are directed against the order of the Commissioner of Income Tax

(Appeals)-6, Chennai, dated 27.12.2012 and pertains to assessment year

2003-04. The assessee had also filed appeal against the order of the

Commissioner of Income Tax (Appeals)-2, Chennai, dated 06.03.2017 and

for the assessment year 2004-05. Since, the facts are identical and issues

are common, for the sake of convenient, the appeal filed by the Revenue

and Cross Objection filed by the assessee are being heard together and

disposed off, by this consolidated order.

ITA No.1298/Chny/2013 & CO No.128/Chny/2013 for the AY 2003-04:

2.1 The CTT(A) failed to appreciate that the AO had reason to believe that income has escaped assessment which was formed on the basis of a tangible material in possession of the AO in the form of affidavit produced before the Hon'bie High Court that construction of the building was completed in the previous year relevant to the assessment year under consideration;

2.2 The Id CIT(A) ought to have appreciated the fact that in this case the return was processed u/s. 143(1) and the case was reopened u/s.147 after a period of four years and before six years which is well within the time limit prescribed under the Act;

2.3 Reliance is placed on the decision of the Apex Court in the case of Rajesh 3haveri Stock Brokers Ltd. (291 ITR 500) wherein it has been held that mere intimation u/s.!43(l) cannot be treated as assessment and the reopening u/s.147 is valid in law;

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2.4 It is submitted that according to the Explanation under Sec. 149(1)(a) & (b), in determining the income escaping assessment as per this section, the provisions of Explanation 2 to Sec. 147 shall apply as they apply for the purposes of that section. The assessee's case is covered under clause (b) of Explanation 2 to Sec. 147 of the Act and the reopening of assessment is valid in law.

2.5 The Id CIT(A) ought to have appreciated the fact that the completion certificate has been issued by an authority from State Government which had once again been confirmed by the Assistant Commissioner Zone X along with'3 other Engineers on 21.12.2010 in which they have stated that "Completion Certificate shall be issued only if the completed building satisfies the sanctioned plan in all aspects". Which implies that the building has been completed as per approved plan on the date of issue of such a certificate.

2.6 The Id CIT(A) ought to have appreciated the fact that if the assessee is following project completion method, all the expenses should have been incurred in the year in which the construction had been completed i.e., in the financial year 2002-03 which had merely been brought forward to financial year 2003-04 only because the assessee had sold the flats during that year and had sufficient income to explain the expenditure incurred.

2.7 The Id C1T(A) ought to have considered the assessee's husband's statement before the Judicial Authority which reads: “I further submit that I have completed the construction and got the completion certificate dated 20.01.2013 from the Corporation of Chennai and subsequently obtained electricity connection."

2.8 The Id CIT(A) ought to have appreciated the 'fact that completion certificate issued by Corporation of Chennai on 20.01.2003 cannot vary from place to place and person to person. Completion cannot be at different dates for Income Tax Department, Corporation of Chennai, Madras High Court etc., depending on the place and reason.

3.1 The I'd CIT(A) failed to consider the above issues oh merits and only relied upon the documentary evidences produced by the assessee on the above additions / disallowances;

3.2 The Id CIT(A) failed to consider the remand report given by the AO on 30.11.2011 regarding the loan received from bank authorities and the statement recorded from the Bank Manager with regard to the inspection of the properties;

3.3 The Id CIT(A) ought to have called for a remand report on other issues wherever relief was granted based on the documentary evidences furnished before the CIT(A) under Rule 46A since the assessee could not prove these expenses / loans with proper evidences before the AO at the time of scrutiny proceedings;

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 4 ::

engaged in the business of civil construction, filed its return of income for

the AY 2003-04 on 29.03.2004 declaring total income of Rs.1,26,500/-.

The assessment has been, subsequently re-opened u/s.147 of the Act, for

the reasons recorded, as per which, during the FY relevant to the AY 2003-

04, the assessee has constructed a building at Dr.No.93 & 98, R.K.Mutt

Road, Mandaveli, Chennai, and the construction was completed in the

accounting year 2002-03 relevant to the AY 2003-04 as evident from the

records of Corporation of Chennai. The reasons recorded for re-opening,

further stated that actual expenditure for construction of flat, basement,

car park and jewellery shop was not shown in the statement that

accompanied the return of income. Therefore, the AO was of the opinion

that income chargeable to tax had escaped assessment and thus, notice

u/s.148 of the Act was issued and served on the assessee. In response to

the notice issued u/s.148 of the Act, the assessee filed a letter dated

15.04.2010 and stated that return of income was filed on 29.03.2004, be

treated as return filed in response to notice issued u/s.148 of the Act. The

case was taken up for scrutiny and during the course of assessment

proceedings, the AO noticed that the assessee had constructed a building

at R.K.Mutt Road, Mandaveli, Chennai, during the FY relevant to the AY

2003-04, however, expenditure incurred for construction was not shown in

the return of income. The AO further noted that as per the WP

No.1202/2006 filed by Mr.V.Anandan, husband of the assessee, before the

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 5 ::

Hon’ble High Court of Madras, clearly stated that building construction was

completed and Completion Certificate was obtained from Corporation of

Chennai on 20.01.2003. Therefore, called upon the assessee to explain as

to why addition should not be made towards amount incurred for

construction of building as unexplained expenditure u/s.69 of the Act. In

response to show cause notice, the assessee submitted that, although the

husband of the assessee filed a sworn affidavit before the Hon’ble High

Court of Madras in connection with the case filed against the Asst. Executive

Engineer, for obtaining electricity connection, but the claim of the assessee

that the building Completion Certificate was obtained on 20.01.2003 is only

for the limited purpose for obtaining electricity and water connection. But,

the building has been subsequently completed in the FY relevant to the AY

2004-05 and expenditure incurred for construction was duly declared in the

return for the AY 2004-05.

by the assessee and according to the AO, the building construction was

completed in the FY relevant to the AY 2003-04, which is evident from the

fact that the assessee had obtained Completion Certificate on 20.01.2003

from the Corporation of Chennai and thus, opined that expenditure incurred

for construction of building should be assessed for the AY 2003-04 but not

for the AY 2004-05. Therefore, after considering the relevant details filed

by the assessee, has made addition of Rs.40,59,983/- towards expenditure

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 6 ::

incurred for construction of building as unexplained expenditure u/s.69C of

the Act. Similarly, the AO had made additions towards unexplained credits

in the bank accounts of the assessee to the extent of Rs.28,49,651/- on

the ground that the assessee has failed to explain the nature and source of

credits found in United Bank of India, Mylapore Branch. The AO had also

made addition towards unexplained credit to the capital account of the

assessee at Rs.4,00,000/- and had also made unexplained loan taken from

Mr.V.Anandan on the ground that the assessee could not produce necessary

evidence to justify the loan taken from her husband. Similarly, the AO had

made addition towards advance received from Mrs.Kanthi Saravanan

amounting to Rs.6,31,000/- on the ground that no proof or confirmation

from Mrs.Kanthi Saravanan has been filed. Likewise, the AO had also made

addition towards unproved sundry creditors of Rs.3,77,275/-.

appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has

challenged re-opening of assessment on the ground that re-opening of

assessment is bad in law, because the AO has failed to arrive at reason to

believe that any income chargeable to tax has escaped assessment. The

assessee further contended that the AO has relied upon the Completion

Certificate to form reasonable belief of escapement, but, Completion

Certificate cannot indicate suppression of income, since income will arise

only when the flats are sold not when the building is completed. The

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assessee had also challenged the addition made by the AO towards various

additions including unexplained expenditure incurred for construction of

building.

assessee and also taken note of various facts, opined that the re-opening

of assessment u/s.147 of the Act is bad in law, because the AO has formed

reasonable belief of escapement of income only on the basis of Completion

Certificate of building issued by the Corporation of Chennai, without

establishing the fact that the assessee has made payment for the

construction and the same is unexplained. The Ld.CIT(A) has discussed

the issue in light of various evidences filed by the assessee, including the

building demolition and re-construction permission obtained from the

authorities in the month of November, 2002 and observed that when the

demolition permission itself was obtained in November, 2002, the

argument of the AO that the building was completed in the month of

January, 2003 itself cannot be accepted. Therefore, the Ld.CIT(A) opined

that the reasonable belief of escapement of income formed by the AO is

without any basis and thus, the Ld.CIT(A) opined that re-opening of

assessment is bad in law and thus, quashed the re-assessment order

passed by the AO.

addition on unexplained expenditure u/s.69C of the Act, on the ground that

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Sec.69C of the Act would come into play only when the payments were

made, but not accounted for in the books. The AO has failed to provide

any iota of evidence to state that the construction has been finished by the

assessee from sources not explained. Since, the construction of building

was completed in the FY 2004-05 and the assessee has explained the

sources for construction of building, the AO was erred in applying the

provisions of Sec.69C of the Act to make addition towards construction

expenses for the AY 2003-04. Accordingly, deleted the additions made by

the AO. Likewise, other additions such as unexplained credits in the bank

accounts, unexplained loan from Mr.V.Anandan and unexplained credits

from Mrs.Kanthi Saravanan, the Ld.CIT(A) deleted the additions made by

the AO by holding that advance taken from Mrs.Kanthi Saravanan towards

sale of flat, has been treated as income in the next year and thus, the same

cannot be treated as unexplained income. The unexplained credit in the

bank account and in the capital account of the assessee also do not stand

on footing, since all were thoroughly explained before the AO. Therefore,

directed the AO to delete the additions. Likewise, the Ld.CIT(A) deleted

the additions made towards unproved sundry creditors by holding that once

expenditure incurred for building has been treated as unexplained, then

creditors arises out of said expenditure, cannot be treated as unproved,

because it results into double addition. Aggrieved by the Ld.CIT(A)’s order,

the Revenue is in appeal before us.

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assessment order passed u/s.143(3) r.w.s147 of the Act, without

appreciating the fact that the AO had reason to believe that income had

escaped assessment, which was formed on the basis of tangible material in

possession of the AO in the form of Affidavit produced before the Hon’ble

High Court of Madras that construction of the building was completed in the

previous year relevant to the AY under consideration. The Ld.DR further

submitted that the Ld.CIT(A) ought to have appreciated the fact that in this

case, the return was processed u/s.143(1) and the case was re-opened

u/s.147 of the Act, after a period of four years and before six years and

thus, the re-opening of assessment is valid in law. The Ld.CIT(A) without

appreciating all these evidences, simply quashed the re-assessment order

passed by the AO by holding that the AO has not formed reasonable belief

of escapement of income.

of the Ld.CIT(A), submitted that the AO had formed reasonable belief of

escapement of income on the basis of building Completion Certificate issued

by the Corporation of Chennai that the building was completed in the FY

2002-03 relevant to the AY 2003-04 without any tangible material in the

possession of the AO to believe that there is an escapement of income on

account of unexplained expenditure. The Ld.AR further submitted that

although in the Affidavit filed before the Hon’ble High Court of Madras, it

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was stated that the building construction was completed on 20.01.2003,

but fact remains that said building Completion Certificate was obtained for

limited purpose of getting power connection. However, fact remains that

the building has been completed in the FY 2003-04 relevant to the AY 2004-

05, where the assessee has explained expenditure incurred for construction

of building. The assessee has produced all the evidences to prove that the

building construction was completed in the FY relevant to the AY 2004-05,

including Metro Water Board and Electricity Board payment vouchers dated

22.04.2003 and 24.07.2003 respectively. As per which, the building was

completed in the AY 2004-05. The AO only on the basis of Certificate issued

by the Corporation of Chennai, came to the conclusion that income

chargeable to tax had escaped assessment without any live nexus between

the escapement of income and reasons recorded for re-opening of

assessment. The Ld.CIT(A) after considering the relevant facts has rightly

held that the re-opening of assessment is invalid and thus, quashed the re-

assessment proceedings.

record and gone through orders of the authorities below. The provisions of

Sec.147 of the Act deals with re-assessment and as per which, if the AO

has reason to believe that any income chargeable to tax has escaped

assessment which comes to his notice, subsequently in the course of the

proceedings, then, the AO may re-open the assessment for that

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assessment year. Therefore, from the provisions of Sec.147, it is

abundantly clear that re-opening of assessment, should be based on

reasonable belief of escapement of income and such reasonable belief

should be formed on the basis of fresh tangible material come to the

possession of the AO subsequent to completion of assessment u/ss.143(1)

/143(3) of the Act. In the present case, the AO has formed reasonable

belief of escapement of income on the basis of Completion Certificate of

building issued by the Corporation of Chennai dated 20.01.2003 as claimed

by the assessee in the Affidavit filed before the Hon’ble High Court of

Madras in connection with dispute with TNEB. Except this, reasons

recorded by the AO does not show any light on tangible material, which

suggest escapement of income. In our view, Completion Certificate may

throw a light on completion of building in a particular year, but it cannot

indicate suppression of income, unless the AO demonstrate with other

tangible material that the assessee has completed construction of building

in the year 2003 and has incurred expenditure for construction of building

and further, the same is unexplained. Merely from the Completion

Certificate, it cannot be presumed that income has escaped assessment.

At best, the Completion Certificate may be a reason for suspicion that some

expenses have not been accounted or expenses incurred for the

construction of building, is not met out of known source of income. In this

case, the AO has attempted to link the Completion Certificate with the

accounting of the expenditure and has opined that the assessee had

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 12 ::

allegedly not accounted the entire expenditure in the year under appeal.

Even though, the material relied upon by the AO does not show escapement

of income. We further noted that except Completion Certificate, there is

nothing in the possession of the AO to form a reasonable belief that

expenditure incurred for construction of building is unexplained and it is

taxable u/s.69C of the Act. Therefore, we are of the considered view that

there is no live nexus between reasons recorded for re-opening of

assessment and material relied upon by the AO to form such reasonable

belief. On the other hand, the evidences filed by the assessee clearly shows

that the building construction was completed in the FY relevant to the AY

2004-05 and the assessee has accounted expenditure incurred for

construction in the relevant assessment year. The other evidences filed by

the assessee including Metro Water and Electricity payment receipts also

clearly shows that the building was completed in the AY 2004-05 but not in

the AY 2003-04 as alleged by the AO. In our considered view, the AO has

re-opened the assessment on the basis of suspicion that building was

completed in the FY relevant to the AY 2003-04 and the assessee has

incurred expenditure for building, which is unexplained, but such belief of

the AO is without any evidence. The AO has not brought out any evidence

to show that the assessee had made payment for expenses for the year

under appeal, but has merely contended that since the Completion

Certificate was obtained in the year under appeal, all expenses on

construction ought to be brought into account in the year under appeal.

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Therefore, we are of the considered view that the re-opening of assessment

by the AO is based on suspicion, presumption, conjectures and surmises,

which is not permissible in law. In our considered view, direct nexus or live

link between the reasons and formation of belief, is necessary. In the

absence of direct nexus between the reasons and formation of belief, the

re-opening of assessment u/s.147 is bad in law. In this case, there is no

direct nexus or live link between the reasons and formation of belief of

escapement. Because, the AO has formed belief of escapement of income

on the basis of Completion Certificate, but such Completion Certificate may

give an input for believing that building is completed, but it cannot suggest

escapement of income on account of expenditure incurred for construction

of building. Therefore, we are of the considered view that in the absence

of reasonable belief of escapement of income, the assessment cannot be

re-opened. The Ld.CIT(A) after considering the relevant facts has rightly

held that re-opening of assessment is bad in law. Hence, we are inclined

to uphold the findings of the Ld.CIT(A) and reject the ground taken by the

Revenue.

additions made towards unexplained expenditure incurred for construction

of building, additions made towards unexplained cash credit in the bank

account of Rs.28,49,651/-, unexplained credit in the capital account of

Rs.4,00,000/-, unexplained loan from Mr.V.Anandan of Rs.4,00,000/-,

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 14 ::

unexplained advance from Mrs.Kanthi Saravanan of Rs.6,31,000/- and

unconfirmed sundry creditors of Rs.3,77,275/-. We find that although the

Revenue has challenged deletion of various additions made by the AO, but

because the re-assessment proceedings u/s.147 of the Act, held to be

invalid and re-assessment order passed by the AO u/s.143(3) r.w.s.147 of

the Act, is quashed, we are of the considered view that the other additions

made by the AO becomes academic in nature. Hence, other grounds taken

by the Revenue are dismissed as infructuous.

No.1298/Chny/2013 is dismissed.

CO No.128/Chny/2013

of order of the Ld.CIT(A) and also an alternative ground to reduce the

additions made towards expenditure incurred for construction of building

as unexplained expenditure to the extent of amount shown in ‘work in

progress’ account in the balance sheet for the year under appeal. Since,

we have quashed re-assessment proceedings and consequent re-

assessment order passed u/s.143(3) r.w.s.147 of the Act, the Cross

objection filed by the assessee becomes infructuous and thus, the same is

dismissed as not maintainable.

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 15 ::

No.128/Chny/2013 is dismissed as infructuous.

ITA No.964/Chny/2017 for the AY 2004-05:

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PRAYER

For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Hon'ble Tribunal may be pleased to

(a) Quash the order of reassessment, and / or

(b) Delete the addition of Rs.3 lakhs made u/s.38, and / or

(c) Delete the disallowance of cost of construction of Rs.40,59,983/-, and / or

(d) Delete the addition of Rs.18,68,500/- made on account of unaccounted cost of construction of basement, and / or

(e) Pass such other orders as the Hon'ble Tribunal may deem fit.

of income for the AY 2004-05 on 31.03.2005 admitting a total income of

Rs.52,175/-. The assessment has been, subsequently re-opened u/s.147

of the Act and the assessment has been completed u/s.143(3) r.w.s.147 of

the Act and determined total income at Rs.4,52,175/- by making additions

towards variation in construction receipts amounting to Rs.1,00,000/- and

also additions towards unexplained cash credit in capital account of

Rs.3,00,000/-. The assessee carried the matter before the First Appellate

Authority and challenged the additions made by the AO towards variation

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in the income admitted towards construction charges and unexplained cash

credits in capital introduction. The assessee had also challenged re-opening

of assessment. The Ld.CIT(A) for the reasons stated in his appellate order

dated 06.03.2017, rejected the legal ground taken by the assessee

challenging re-opening of assessment on the ground that there is a tangible

material in the possession of the AO to form a reasonable belief of

escapement of income and thus, re-opening of assessment is valid. The

Ld.CIT(A) had also sustained additions made by the AO towards difference

in construction receipts and unexplained cash credits in capital account.

on the basis of inputs received from Tax Evasion Petitioner. According to

the Ld.CIT(A), the assessee has constructed an extra building admeasuring

1850 sq.ft. and the same has been not disclosed in the return of income

filed for the AY 2004-05. Therefore, show cause notice was issued to the

assessee and called up the assessee to explain, as to why, the

enhancement should be made for amount incurred for construction of

additional building. In response, the assessee claimed that the AO has

made additions towards construction expenses u/s.69C of the Act as

unexplained for the AY 2003-04 and the assessee has challenged the

additions made by the AO in appeal before the Ld.CIT(A) and the Ld.CIT(A)

very categorically held that the building construction was completed in the

FY relevant to the AY 2004-05 and thus, deleted additions made by the AO

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towards expenditure incurred for construction of building and thus, the

same cannot be considered for the AY under consideration. The assessee

had also objected the proposal of the Ld.CIT(A) in enhancement of income

to the extent of construction cost incurred for alleged additional

construction of building of 1850 sq.ft. and argued that once the AO held

that the building construction was completed in the FY relevant to the AY

2003-04, then it cannot be held that the basement of the building and

jewellery shop was constructed in the AY 2004-05. The Ld.CIT(A) after

considering the relevant submissions of the assessee and also Tax Evasion

Petition filed by Dr.V.S.Jaganathan, forwarded the evidences to the AO for

his Remand Report. The AO has submitted a Remand Report dated

16.10.2014 and observed that assessment has been completed for the AY

2003-04 and has made various additions including additions towards

expenditure incurred for construction of building. Further, as regards

additional building constructed by the assessee on the basis of Tax Evasion

Petition, the AO observed that the assessee has constructed 1850 sq.ft. in

the basement area, which has been let out to a factory and jewellery shop.

The AO had also arrived at average cost of construction of the building and

observed that cost of construction of building works out to Rs.1,010/- per

sq.ft. and for 1850 sq.ft. of additional building, the estimated cost of

construction would be Rs.18,68,500/-.

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Tax Evasion Petition filed by the third party and Remand Report of the AO

and also taken into account the appellate order of the Ld.CIT(A) for the AY

2003-04 observed that the AO has made additions towards entire

expenditure incurred for construction in the FY 2002-03 relevant to the AY

2003-04. However, the Ld.CIT(A) has deleted the additions made by the

AO by holding that the building construction was completed in the FY

relevant to the AY 2004-05. Therefore, the Ld.CIT(A) opined that although

the AO has made additions towards construction expenses for the AY 2003-

04 after analyzing the evidences, the Ld.CIT(A) has deleted the additions

made by the AO. Therefore, the Ld.CIT(A) opined that based on direct

application of provisions of Sec.69C of the Act, the expenditure incurred for

construction of building needs to be assessed for the AY 2004-05.

Accordingly, directed the AO to disallow the claim of cost of construction of

Rs.40,59,983/-. Similarly, the Ld.CIT(A) has enhanced the assessment and

made additions of Rs.18,68,500/- towards cost incurred for construction of

additional building of 1850 sq.ft. by taking into account average cost

inferred by the assessee for construction of building. Aggrieved by the

Ld.CIT(A), the assessee is in appeal before us.

of assessee’s appeal is additions made towards unexplained cash credits

into capital account. The AO has made additions towards unexplained cash

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credits in the capital account of the assessee on the ground that the

assessee has failed to prove the sources for credits found in the capital

account.

record and gone through orders of the authorities below. Although, the

assessee claims to have received cash loan of Rs.3,00,000/- from her

husband, Mr.V.Anandan. the assessee has failed to prove the claim with

necessary evidences. Although, the assessee has filed her personal cash

book and claimed that loan transactions with her husband were recorded

in her personal cash book, but the claim of the assessee was an

afterthought. Therefore, we are of the considered view that the assessee

has failed to prove the source for a sum of Rs.3,00,000/- introduced in the

capital account by way of cash and hence, we are inclined to uphold the

findings of the Ld.CIT(A) and reject the ground taken by the assessee.

appeal is addition of Rs.40,59,983/- u/s.69C of the Act as unexplained

expenditure. We find that although the Ld.CIT(A) had recorded categorical

findings that addition made by the AO towards expenditure incurred for

construction of building in the FY relevant to the AY 2003-04, has been

deleted by the Ld.CIT(A), but he went on to make additions only on the

ground that expenditure incurred for construction of building is

unexplained. We find that the reasons given by the Ld.CIT(A) to make

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additions towards construction expenses for the impugned AY is not correct

, because when the assessee has claimed that construction of building was

completed for the AY 2004-05 and further, expenditure incurred for

construction of building was duly recorded in the books of accounts of the

assessee with known source of income, then, the Ld.CIT(A) cannot invoke

the provisions of Sec.69C of the Act, to make additions towards expenditure

incurred for construction of building u/s.69C of the Act. It was not a case

of the Ld.CIT(A) that the assessee has not disclosed expenditure incurred

for construction of building. In fact, the Ld.CIT(A) has accepted the fact

that the assessee has recorded expenditure in the books of accounts and

further, source for such expenditure has been explained. Once having

accepted the fact that the assessee has recorded expenditure in the books

of accounts and has also explained source for such expenditure, then the

Ld.CIT(A) cannot make additions towards expenditure u/s.69C of the Act

merely, for the reason that the Ld.CIT(A) has deleted the addition made by

the AO for construction expenses in the earlier AY 2003-04. Therefore, we

are of the considered view that the reasons given by the Ld.CIT(A) to make

additions towards construction expenses u/s.69C of the Act as unexplained

expenditure is contrary to the provisions of Sec.69C of the Act and thus,

we are not inclined to uphold the findings of the Ld.CIT(A) and thus, we

direct the AO to delete the additions made towards construction

expenditure u/s.69C of the Act.

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 22 ::

appeal is enhancement of income to the extent of additional construction

of 1850 sq.ft. and cost incurred for construction. The Ld.CIT(A) has

enhanced the assessment and made additions of Rs.18,68,500/- towards

cost of construction incurred for 1850 sq.ft. building in the basement and

ground floor of the building. The assessee has challenged enhancement of

income made by the Ld.CIT(A) in light of certain judicial precedents,

including the decision of the Hon’ble Delhi High Court in the case of CIT v.

Sardari Lal reported in 251 ITR 864 (Delhi) argued that the Ld.CIT(A) does

not have power to enhance the assessment, in case, the proposed

enhancement is on account of the issue other than the issue challenged by

the assessee before the Ld.CIT(A). We do not find any forces in the

arguments of the assessee for the simple reason that the subject matter of

the appeal before the CIT(A) was with reference to the additions made by

the AO towards cost of construction and thus, we are of the considered

view that the proposed enhancement on account of expenditure incurred

for additional construction of 1850 sq.ft. building is linked to the issue

before the Ld.CIT(A) and thus, there is no merit in the ground taken by the

assessee challenging the enhancement of assessment and thus, the same

is rejected.

enhanced the assessment towards cost incurred for construction of 1850

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 23 ::

sq.ft. building in the basement and ground floor of the building constructed

by the assessee. The assessee has not denied construction of 1850 sq.ft.

building in the basement floor. However, it was the arguments of the

assessee before us that without construction of basement, the building

construction cannot be completed and thus, when the assessee has

incurred certain expenditure for building, it also includes cost of

construction incurred for basement floor. We have given our thoughtful

consideration to the reasons given by the Ld.CIT(A) to make additions

towards cost of construction of 1850 sq.ft. building in light of arguments of

the assessee and we ourselves do not subscribe to the arguments of the

assessee for the simple reason that it is an admitted fact that the assessee

has not disclosed additional construction of 1850 sq.ft. building in the

basement. The assessee had also not accounted cost incurred for additional

building constructed in the basement. Further, cost of construction

accounted by the assessee pertains to building constructed and admitted

by the assessee, but it does not include cost incurred for basement. Even

this fact was brought out by the Tax Evasion Petitioner in the petition filed

before the authorities, as per which, the assessee had constructed

additional building in violation of sanctioned building plan to the extent of

1850 sq.ft. and cost incurred for said building was also not accounted in

the books of accounts of the assessee. Therefore, we are of the considered

view that there is no error in the reasons given by the Ld.CIT(A) to enhance

the assessment and direct the AO to make additions towards cost incurred

ITA No.1298/Chny/2013 CO No.128/Chny/2013 & ITA No.964/Chny/2017 :: 24 ::

for additional construction of building. Hence, we are inclined to uphold the

findings of the Ld.CIT(A) and reject the ground taken by the assessee.

is partly allowed.

& Cross Objection filed by the assessee in CO No.128/Chny/2013 are

dismissed and appeal filed by the assessee in ITA No.964/Chny/2017 is

partly allowed.

Order pronounced on the 28th day of February, 2022, in Chennai.

Sd/- Sd/- (वी. दुगा� राव) (जी. मंजूनाथा) (G. MANJUNATHA) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 28th February, 2022. TLN, Sr.PS आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF