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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER Appellant, M/s. Vishnu Apartments Pvt. Ltd. (hereinafter referred to as ‘the assessee’) by filing the present appeal sought to set aside the impugned order dated 14.08.2014 passed by the Commissioner of Income-tax (Appeals)-I, New Delhi qua the assessment year 2010-11 on the grounds inter alia that :-
“Ground No.1: The Ld. Commissioner of Income Tax (Appeals) -1, New Delhi (hereinafter referred to as 'CIT(A)'} has erred in law and in the fact & circumstances of the case by passing the order dated 14.08.2014 under section 250 of the Income Tax Act, 1961 (hereinafter referred to as 'The Act'). Ground No.2: a) The CIT(A} has erred on facts and circumstances of the case in confirming the addition amounting to 1,60,41,193 (i.e., Rs.13,94,459 on account of the cost of Mall plus Rs.1,46,46,734 on account of the cost of Hotel) on the basis of the valuation report of the District Valuation Officer, Jaipur ("DVO"). b) The CIT(A) has erred on facts and circumstances of the case in relying on the valuation report of DVO. c) The CIT(A) has erred on facts and circumstances in not appreciating the fact that DVO has determined the cost of Mall and Hotel on the basis of Plinth Area Rates and Cost Index Method for the basic structural work of the building and accounts method for finishing items in the building, however the determination of cost by the appellant is based on actual cost which has actually been incurred and claimed by the appellant in its audited financial statements. d) The CIT(A} has erred on facts and circumstances in not appreciating the fact that the difference between the cost of construction as per the books of accounts and the estimated cost of construction (according to the ova's report) is only a marginal, and an acceptable one, therefore, the cost determined by the appellant should be considered in view of the decision of Hon'ble Delhi High Court i.e., Commissioner of Income-tax vs. Ambience Developers and Infrastructure (P.) Ltd. (IT Appeal Nos. 195 to 199 & 203 of 2012) July 27, 2012. Hence, the appellant prays that the total addition confirmed of Rs.1,60,41,193 (Rs. 13,94,459 plus Rs. 1,46,46,734) is only on surmises conjectures and should be deleted.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee company is into the business of real estate development as it has developed commercial shopping complex-cum-hotel complex at Jaipur and part of the shopping complex have been sold and partly leased out. Assessing Officer (AO) noticed that the assessee has completed the part of the project in Jaipur pertaining to shopping mall. AO made addition of Rs.2,54,44,286/- being difference in the cost of construction declared by the assessee at Rs.85,22,37,406/- and the cost valued by District Valuation Officer (DVO) at Rs.82,67,93,120/- by relying upon the report given by the DVO to ascertain the cost of construction incurred by the assessee on construction of integrated project at Jaipur comprising of shopping mall and hotel. AO noticed that out of excess cost of Rs.2,54,44,286/-, some of the amounts have already been taxed in FY 2007-08 relating to AY 2008-09 and balance thereof amounting to Rs.1,63,93,392/- has been added to the total income of the assessee on account of excess claim of cost of integrated project.
The assessee carried the matter before the ld. CIT (A) by way of filing the appeal who has confirmed the addition by partly allowing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
5. At the very outset, it is brought to our notice by the ld. AR for the assessee that the identical issue has already been decided by the coordinate Bench of the Tribunal in its own case in AY 2008-09 and 2009-10 in & 5309/Del/2013 vide order dated 10.10.2019 in favour of the assessee.
Ld. DR for the Revenue, on the other hand, relied upon the orders passed by the lower Revenue authorities.
We have perused the order passed by the coordinate Bench of the Tribunal in assessee’s own case for AYs 2008-09 and 2009-10 (supra) wherein identical issue has been decided by relying upon the decision of Hon’ble Supreme Court in case of Sargam Cinema vs. CIT 328 ITR 513 and the order passed by the Hon’ble Delhi High Court in case of CIT vs. Ambience Developers and Infrastructure (P) Ltd. 210 taxman 187.
Undisputedly, books of account of the assessee have never been rejected by the lower Revenue authorities. So, it is settled principle of law that without rejecting books of account, AO is not empowered to call upon the report of the DVO. Operative part of the judgment passed by Hon’ble Supreme Court in case of Sargam Cinema (supra) is extracted for ready perusal as under :-
"4. In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived.
For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the assessee succeeds."
Furthermore, when we examine the difference of Rs.2.54 crores in the cost of construction declared by the assessee (on Rs.85.22 crores and the value determined by the DVO at Rs.82.68 crores), it is less than 3% of the total cost of construction which has been accepted as minor variation by the Hon’ble Delhi High Court (supra) by returning following findings :-
“16. In view of the above, it is evident that the valuation in this case was uncritically accepted by the AO. As can be seen from a comparison of the valuation by the assessee, with that of the DVO, the variation is 3.86 %. This is a very minor variation, having regard to the large amounts involved. Besides, the fact that the AO did not examine the variations, with specific reference to any items of expenditure that were unreasonable, or showed wide variation, these differences can also be put down to differing perceptions, and the practice adopted by the concerned business activity.
In view of the above discussion, and having regard to the fact that the variation in valuation, in this case between what was disclosed by the assessee and what was indicated by the DVO is not significant, this court is of opinion that there is no infirmity in the findings contained in the impugned order of the Tribunal. No substantial question of law arises for consideration. The appeals are, therefore, dismissed.”
In view of what has been discussed above and following the order passed by the coordinate Bench of the Tribunal in assessee’s own case for AY 2008-09 (supra), we are of the considered view that when assessee has duly maintained his books of account corroborated with bills and vouchers for the construction of mall and hotel and financials of the assessee are audited one and same has never been rejected by the AO and the report of the DVO cannot be looked into. Moreover, variation in the value determined by the DVO and cost of construction declared by the assessee is less than 3% which is insignificant to make the addition in question. Consequently, addition made by the AO and confirmed by the ld. CIT (A) is not sustainable in the eyes of law, hence ordered to be deleted. Resultantly, the appeal filed by the assessee is allowed. Order pronounced in open court on this 31st day of December, 2019.