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Income Tax Appellate Tribunal, BANGALORE BENCHES “ A ” BENCH: BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI VIKRAM SINGH YADAV
O R D E R PER SHRI VIKRAM SINGH YADAV, AM : These are the cross appeals filed by the Revenue and the assessee against the order of Commissioner of Income Tax (Appeals)-6, Bangalore Dt.12.10.2015.
Briefly, the facts of the case are that during the course of assessment proceedings, matter relating to valuation of two properties namely residential 2 & 1477/Bang/2015 building behind Jawali Complex as well as commercial property namely Jawali Complex was referred by the Assessing Officer to the District Valuation Officer (DVO). Based on the valuation carried out by the DVO and that of the value shown by the assessee, the difference comes to Rs.1,93,49,250 as per the details as under:
The said amount of undisclosed investment was brought to tax by the Assessing Officer vide his order dt.22.3.2013 passed under Section 143(3) of the Income Tax Act, 1961 (in short 'the Act').
Being aggrieved, the assessee carried the matter in appeal before the CIT (Appeals). The CIT (Appeals) after taking into consideration the DVO Valuation Report as well as the Remand Report of the Assessing Officer stated that the DVO Report itself states that residential building was constructed during the period from 1.10.2005 to 1.7.2009 spreading over five financial years. As per the DVO Report, cost of construction during the financial year relevant to assessment year under consideration comes to Rs.4,11,734 out of the total estimated cost of construction of Rs.61,76,000. The learned CIT (Appeals) further held that the Assessing Officer has taken entire cost of construction of Rs.61.76 lakhs as pertaining to F.Y.
3 & 1477/Bang/2015 2009-10 relevant to Asst. Year 2010-11 which contradicts the finding of the DVO where he states that the construction was carried over five financial years. Therefore, the Assessing Officer was directed to estimate the cost of construction of residential building during the F.Y. relevant to the impugned A.Y. at Rs.4.11 lakhs as per the DVO Report. Similarly, in respect of commercial cum residential complex was concerned, similar finding has been recorded by the CIT (Appeals) wherein the Assessing Officer was directed to estimate the cost of construction of commercial cum residential complex at Jawali @ Rs.12.98 lakhs as against the total estimated cost of construction at Rs.195.49 lakhs as per the DVO Report.
The learned CIT (Appeals) further stated that during the appellate proceedings, the assessee has furnished details of investment made in the immovable properties which are for the period from 1.4.2002 to 31.3.2010 totalling to Rs.95,49,049 The learned CIT (Appeals) further recorded a finding that the Assessing Officer has passed the assessment order on 30.3.2015 for Asst. Year 2007-08 under Section 143(3) r.w.s. 147 of the Act determining the income at Rs.79,56,340 which includes undisclosed income. Similarly for Asst. Years 2007- 08, 2008-09, 2009-10 and 2010-11, the return of income has been filed wherein the investment made in respective financial years have been shown. In the light of the same, the learned CIT (Appeals) held that the investment which have already been disclosed cannot be considered for taxation again during the impugned assessment year and the Assessing Officer’s action of taxing the entire undisclosed income in the current assessment year was held to be not fair and the matter was decided partly in favour of the assessee.
Against the said finding of the learned CIT (Appeals), the Revenue is in appeal and the only grievance raised by the Revenue is that the learned CIT 4 & 1477/Bang/2015 (Appeals) has not considered whether the assessee has shown investment in the previous four financial years and consequently, the learned CIT (Appeals) ought to have directed the Assessing Officer to examine the above investment in the previous four assessment years starting from Asst. Year 2006-07 to Asst. Year 2009-10. As we have noted above, the matter before the learned CIT (Appeals) was limited to Asst. Year 2010-11 and based on the DVO’s Report wherein he has given a clear finding that the cost of construction which can be estimated for the F.Y. relevant to the impugned A.Y. comes to Rs.4,11,734 in respect of residential building and Rs.12.98 lakhs in respect of commercial cum residential complex at Jawali Complex, the learned CIT (Appeals) following the DVO Report directed the Assessing Officer to estimate the cost of construction accordingly. We therefore do not find any infirmity in the said finding of the learned CIT (Appeals) which has followed the specific finding given by the DVO in his Valuation Report.
Further regarding the direction not been given by the learned CIT (Appeals) in respect of examining the investments in the previous four assessment years, we find that the DVO report was well before the Assessing officer where there is a finding that construction has been carried out over past five financial years and there was nothing which stopped the Assessing officer to verify the investment in the past financial years. Further, the CIT (Appeals) has stated that for Asst. Year 2007-08 an amount of Rs.79,56,340 has already been taxed as undisclosed income and for Asst. Year 2009-10 and the investment has been shown by the assessee in the respective FYs in its return filed for the respective assessment years. Therefore, we do not see any infirmity in the said finding of learned CIT (Appeals) and where the Assessing Officer was of the opinion that the undisclosed investment made in the previous FYs has escaped taxation, the Revenue was 5 & 1477/Bang/2015 having relevant material in its possession and need not wait for the direction of the ld CIT(A). 7. In the result, the appeal of the Revenue is dismissed. 8. Now coming to the Cross appeal filed by the assessee. During the course of hearing, the learned AR submitted that though the assessee has taken various grounds of appeal
in its appeal, the effective ground relates to taking CPWD rate as against PWD rates by the DVO while carrying out the valuation in respect of aforesaid two properties. In this regard, our attention was drawn to the additional submissions made before the CIT (Appeals) which are available at Paper Book pages 88 & 89 wherein it was brought to the notice of CIT (Appeals) that the DVO has not followed the Valuation guidelines issued by the Directorate of Income Tax where it has been specified that PWD rates of valuation be adopted to arrive at value of construction of building. Further our attention was drawn to the Co- ordinate Bench decision in the case of C. Shankar Reddy Vs. DCIT (2017) 49 CCH 80 Bang Trib (ITA Nos.1490 to 1492/Bang/2015 Dt.8.3.2017) wherein it was held as under : “
10. We have considered the rival submissions as well as the relevant material on record. The limited grievance of the assessee in respect of this issue is application of CPWD rates or state PWD rates while computing the cost of construction. There is no dispute that the DVO while computing the valuation as per the valuation report has considered the CPWD rates despite the objections raised by the assessee. It is pertinent to note that this issue of applicability of state PWD rates has been considered by this 6 & 1477/Bang/2015 tribunal in series of decisions. The tribunal has taken a consistent view that when the property is situated in the state PWD jurisdiction then the state PWD rates should be applied to ascertain the cost of construction instead of CPWD rates. Hon’ble Rajasthan High Court in case of CIT Vs Dinesh Talwar 265 ITR 344(Raj) has affirmed the decision of the tribunal directing the AO to apply state PWD rate while computing the cost of construction of the building. Similar view has been taken by the Hon’ble Madras High Court in case of CIT Vs K. Jayakumar(supra). Thus when the property in question comes under the state PWD jurisdiction then the state PWD rates has to be applied for the purpose of computing the cost of construction on estimate basis. The DVO’s valuation of cost of construction is only an estimated valuation based on CPWD rates. Therefore the AO is directed to apply the state PWD rates for estimating the cost of construction of the house in question.”
9. After hearing both the parties and perusing the material available on record, following the decision of the co-ordinate bench in the case of C. Shankar Reddy Vs. DCIT (supra), the matter is remanded to the file of the Assessing Officer to consider the PWD rates as against the CPWD rates in respect of the two properties whose valuation is under dispute. Accordingly, the matter is remanded to the file of the Assessing Officer for the limited purposes of considering the PWD rates against the CPWD rates and the ground of the assessee is thus allowed for statistical purposes.