HEERA CHAND JAIN,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 309/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Heera Chand Jain, Income Tax Officer, Vs. Prop.- M/s Gaurav Jain Steel Ward-1(3), Centre, 113, Tirpolia Bazar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABXPJ 6901 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma (CA) jktLo dh vksj ls@ Revenue by : Smt. Poonam Rai (DCIT) lquokbZ dh rkjh[k@ Date of Hearing : 10/03/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 25/04/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-I, Jaipur dated 25/01/2016 for the A.Y. 2008-09. The only issue involved in this appeal is against confirming the addition of Rs. 15,69,673/- on account of alleged undisclosed investment in construction of house on the basis of report of the Departmental Valuer.

ITA 309/JP/2016_ 2 Heera Chand Jain Vs ITO

and running a small retail shop carrying on business of purchase and sale

of utensils under the name and style of M/s Gaurav’s Jain Steel Centre.

The assessee had not submitted any return of income from the

assessment year 2004-05 onwards. There was a survey operation U/s

133A of the Income Tax Act, 1961 (in short the Act) was carried out at

the shop of the assessee on 13/2/2008. During the course of survey,

purchase/sale bills, other vouchers and loose papers etc. for the financial

year 2003-04onwards were found and these were impounded. The

assessee was neither maintaining books of account nor the books were

found during the survey. The stock was inventorised and it was valued at

Rs. 12,78,794/- by the survey party. The survey authorities also found

that assessee commenced construction of house 5-6 months prior to the

date of survey and estimated investment therein at Rs. 15.00 lacs and it

was inferred by the survey party that investment in the stock found and

in the construction of the house was out of the income earned during the

year 2003-04 to 2007-08. During the survey the assessee admitted an

income of Rs. 3.00 lacs for assessment year 2003-04 and 2004-05 each.

Further the income of Rs. 6.00 lacs was surrendered for A.Y. 2005-06,

Rs. 8.00 lacs for A.Y. 2006-07 and Rs. 8.00 lacs for A.Y. 2007-08. On the

ITA 309/JP/2016_ 3 Heera Chand Jain Vs ITO

basis of purchase and sales bills and vouchers for his utensil business

found during the survey for the period 2003-04 to 2008-09, the assessee

prepared books of account and filed the return of income declaring

additional income as to cover the stock of utensils found at the time of

survey. The assessment for A.Y. 2004-05 to 2007-08 were completed U/s

143(3) of the Act and the returned income of the assessee was accepted.

As stated by the assessee at the time of survey, the investment in the

construction of the house up to the date of survey was of Rs. 15.00 lacs.

The survey party observed that the construction of the house done at

plot No. 93, Chandra Colony, Tonk Road, Jaipur in the name of Asha

Devi, W/o- assessee and the construction work was commenced at about

5-6 months back prior to the date of survey. Till the date of survey,

basement, ground floor of the house and first floor up to lintern stage

was constructed. The roof of first floor was not casted, construction done

was also unfinished and outer work of house pavements etc. were to be

constructed. The assessee stated that up to 13/2/2008 approximately Rs.

15.00 lacs expenditure was incurred on construction. It is pleaded that

the assessee stopped construction work just after survey and restarted

the construction work again during assessment year 2009-10 and

remaining construction work was completed during the A.Y. 2011-12 to

ITA 309/JP/2016_ 4 Heera Chand Jain Vs ITO

2013-14. It is claimed that this fact was evident from the books of

account maintained by the assessee wherein the investment in the

construction has been shown in the relevant financial years. The

Assessing Officer referred the matter to the D.V.O. by invoking the

provisions of Section 142A of the Act for valuation on 06/2/2014. The

Valuation Officer inspected the property on 06/3/2014 and valued it at

Rs. 35.64 lacs. The valuation officer took the ratio of expenses declared

by the assessee in the financial year 2007-08 and 2010-11 only and

determined the cost of construction of the house in the financial year

2007-08 at Rs. 30,69,673/- and made addition of Rs. 15,69,673/- after

reducing Rs. 15.00 lacs as disclosed at the time of survey.

assessee before him and dismissed the appeal of the assessee. The three

main contentions raised by the assessee before the ld. CIT(A) are as

under:-

“(i) that construction was not completed in F.Y. 2010-11 but was only partly completed till F.Y. 2010-11 and some outer work and finishing work was gradually completed in A.Y. 2011-12, 2012-13 and 2014-15, (ii) that the adopting of CPWD rates by AVO for valuing cost of construction of house is wrong and only State PWD X-3 rates should have been adopted and

ITA 309/JP/2016_ 5 Heera Chand Jain Vs ITO

(iii) self supervision deduction allowed by AVO @ 7.5% should have been allowed @ 15%.

disclosed year wise expenses incurred by him in the construction of the

house in its balance sheet filed alongwith return of income, which was

also mentioned in the objections filed on 18/3/2014 to the Assessing

Officer in response to the notice U/s 142(1) of the Act and the details of

the amount disclosed year wise is as under:-

A.Y. 2008-09 July 2007 to 31/3/2008 Rs. 15,00,000/- A.Y. 2009-10 Rs. 70,000/- A.Y. 2010-11 Rs. 68,500/- A.Y. 2011-12 Rs. 65,000/- A.Y. 2012-13 Rs. 1,90,000/- A.Y. 2013-14 Rs. 2,30,000/- Rs. 21,23,500/- The ld AR submitted that the house was completed during the F.Y. 2013-

construction done in F.Y. 2007-08 and further during the year 2010-11

and the registered valuer valued the construction of the house as under:-

F.Y. 2007-08 Rs. 15,07,744/- F.Y. thereafter till 2010 Rs. 2,82,655/-

On the notice received from the valuation officer of the IT department,

the assessee informed the valuation officer about commencement of the

construction were in the year 2007 and it was partly completed in the

ITA 309/JP/2016_ 6 Heera Chand Jain Vs ITO

year 2010. However, till then, the house was not complete. The valuation

officer inspected the property in the month of Feb, 2014 and the

valuation officer took the period of construction for F.Y. 2007-08 and

completion in the F.Y. 2010-11. The valuation officer valued the

construction by ignoring the facts submitted by the assessee regarding

the period of construction. The assessee has incurred construction

expenses of Rs. 1.90 lacs in F.Y. 2011-12 and Rs. 2.30 lacs in F.Y. 2012-

13, this fact was ignored. Further the valuation officer adopted CPWD

rates and has allowed the deduction for self supervision only @ 7.5%,

which is unjustified. The ld AR relied on the decision of the Hon’ble ITAT

with regard to valuation of the cost of construction of property on the

basis of State PWD rates instead of CPWD rates as per the instruction

No. 1671 dated 06/12/1985 issued by the CBDT. The case law relied

upon by the ld AR are as under:-

(i) (1998) 21 TW 667 Ram Raj Soni Vs. ACIT (ii) (1999) 22 TW 245/273 Ravi Mathur Vs. ACIT (iii) (2001) 26 TW 288 Sandeep Loomba Vs. ACIT (Para 23).

It was also submitted that in all these cases, the ITAT has allowed the

deduction up to 20% so as to bring CPWD rates at par with the State

PWD rates and further deduction for self supervision was allowed @

10%. The Hon’ble Punjab & Haryana High Court in the case of CIT Vs.

ITA 309/JP/2016_ 7 Heera Chand Jain Vs ITO

Rajesh Mahajan (2014) 50 taxmann.com 206 (P&H) has held that

deduction up to 30% on account of applying CPWD rates in place of

State PWD rates and 15% deduction for self supervision is justified. Such

view was also upheld by the Hon’ble Madras High Court in the case of

CIT vs. Raja R. Govind Rajan (2014) 49 Taxmann.com 526 (Mad). He

further submitted that the allocation of total cost valued by A.V.O. in the

ratio of construction in F.Y. 2007-08 at 86.137% and in A.Y. 2010-11 @

13.877% is not justified due to construction period was beyond that also

and the cost of construction must have be allocated for the F.Y. 2007-08,

2008-09, 2010-11, 2011-12, 2012-13 and 2013-14 in the ratio cost of

construction declared by the assessee. It was also prayed that cost of

construction for F.Y. 2007-08 relevant to the assessment year 2008-09

may kindly be allowed to be determined according to the subject to

reasonable deduction therefrom after consideration of objections raised

by the assessee before the AVO with regard to the difference in the

CPWD rates in comparison to the State PWD rates and deduction for self

supervision.

authorities below.

ITA 309/JP/2016_ 8 Heera Chand Jain Vs ITO

the factual aspects of the case. The assessee has disclosed expenditure

incurred in the construction of the house in various years starting from

F.Y. 2007-08 to 2012-13. The assessee also submitted a valuation report

with regard to the construction work done in the F.Y. 2007-08 and work

done up to 2010 and on that basis the valuer has valued at Rs.

15,07,744/- for A.Y. 2007-08 and Rs. 2,82,655/- up to 2010. The survey

team who visited assessee’s premises in the month of Feb, 2008 have

accepted the investment in home at Rs. 15,00,000/- and the same was

also accepted by assessee and disclosed in return of income. Thus, the

valuation by DVO for F.Y. 2007-08 was excessive with regard to the

assessee’s claim that the State PWD rate should have been adopted in

place of CPWD rate or appropriate deduction should have been given out

of CPWD rates as held in various cases by ITAT. I agree with this plea of

the assessee. The ITAT in various cases (supra) have allowed reduction

up to 20% from the CPWD rates. I also find merit in the plea of AR that

10% deduction should be allowed for self supervision. It is a justified

claim. Thus the valuation done by the DVO by adopting the CPWD rate

instead of State PWD rates and not allowing 10% for self supervision is

held as excessive. Further the period of construction adopted by the DVO

ITA 309/JP/2016_ 9 Heera Chand Jain Vs ITO was also not justified in view of various documentary evidences filed by

the assessee. Considering all these facts and circumstances, I hold that

the valuation report submitted by the assessee reflects the true affairs on

the issue of period of construction and the cost of construction,

therefore, I direct to delete the addition made on the basis of DVO’s

report, which is defective on many counts.

Order pronounced in the open court on 25/04/2017.

Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25th April, 2017 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Heera Chand Jain, Jaipur. 1. izR;FkhZ@ The Respondent- The ITO, Ward-1(3), Jaipur. 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. 309/JP/2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत