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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI GEORGE MATHAN
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
Order of the Commissioner of Income Tax (Appeals)-1, Madurai, in dated 30.11.2016 for the AY 2013-14.
Dr.S.Pandian, JCIT, represented on behalf of the Revenue and Shri K.Balasubramanian, Adv. represented on behalf of the assessee.
ITA No.338/Mds/2017 :- 2 -:
In the Revenue’s appeal, the Revenue has raised the following grounds:
1. The order of the CIT(A) is opposed to law, on the facts and in the circumstances of the case. 2.1 The CIT(A) has erred in holding that the cost admitted by the assessee up to 24.02.2016 in the books of accounts has to be taken into account for the purpose of determining the unexplained investment in the construction of the building. 2.2 The CIT(A) further erred in holding that the building Reva Plaza was completed during the F.Ys 2014-15 and 2015-16 whereas the building was completed in the F.Y. 2012-13 relevant to the AY 2013-14 as is evident from the property tax paid in the Financial Year 2012-13 itself. 2.3 The CIT(A) ought to have seen that during the survey proceedings the survey team collected the photograph of the building from the survey premises which revealed the building was completed during the F.Y. 2012-13 relevant to AY 2013- 14. 2.4 The CIT(A) ought to have further seen that the department had required the District Valuation Officer to determine the cost of construction as on 31.03.2013 and the District Valuation Officer also estimated the cost of the investment of the above said building only up to 31.03.2013 and hence ought to have sustained the addition of Rs.98,43,379/- towards unexplained investment. 2.5 The CIT(A) has erred in relying on the judgment of the Madras High Court in the case of CIT Vs S. Khader Khan Sons [300 ITR 157] since the facts are distinguishable. In the instant case addition has been made after considering all relevant material evidences collected during the survey. 3. For these and such other grounds that may be adduced at the time of hearing it is prayed that the order of the CIT(A) may be reversed and that of the Assessing Officer restored.
It is submitted by the Ld.DR that there was a survey on the premises of the assessee which is a partnership firm. The survey was conducted on 13.12.2012. In the course of the survey, a sworn statement was recorded from one of the partners of the assessee firm, wherein, the partner has disclosed that the total investment in the building put up by the assessee up to 31.03.2012 was Rs.2.66 Crs. and the investment in the building up to the date of survey i.e. 13.12.2012 was Rs.3.41 Crs. It was a submission that the partner has submitted that the cost of construction was approximately Rs.2,000/- per sq.ft. and the total area 22,531 sq.ft.
ITA No.338/Mds/2017 :- 3 -:
The actual cost of the construction was determined at Rs.4,50,62,000/- after reducing the cost of construction disclosed by the assessee up to the date of survey of Rs.3.41 Crs., a difference of Rs.1,25,00,000/- had been determined along with the cost of renovation of two Bars being run by the assessee. It was stated in the statement recorded that the total difference in the cost of construction representing the excess expenditure would be to an extent of Rs.1.25 Crs. and that the same would be admitted for the AY 2013-14. It was submitted by the Ld.DR that the assessee did not produce any day-book, ledger or bills & vouchers in respect of the business of the assessee as also the construction.
Consequently, the AO had after taken into consideration the total investment in the building for the relevant AY determined the difference in the cost of construction at Rs.98,43,379/- and added the same as an unexplained expenditure. It was a submission that, on appeal, the Ld.CIT(A) had deleted the addition by holding that the cost of construction disclosed by the assessee for the AY 2015-16, was to an extent of Rs.5,23,92,661/- and the cost of construction as estimated by the District Valuation Officer (in short “DVO”) was Rs.5,68,43,000/-. As the difference between the valuation as done by the District Valuation Officer and as disclosed by the assessee for the AY 2015-16 varied by only less than 10%, no addition was called for.
It was a submission that the DVO had estimated the cost of investment as on 31.03.2013. It was a submission that admittedly, the ITA No.338/Mds/2017 :- 4 -:
DVO had inspected the property only on 24.02.2016. It was a submission that as of 31.03.2013, the DVO had estimated the cost of construction at Rs.5,68,43,000/-. It was also a submission that the DVO specifically mentioned that the existence of the building has been verified as per the Google Map and as the assessee has not produced any evidence to prove any construction after March, 2013, the period of construction is taken as between April, 2010 and 2013. For this, the Ld.DR drew our attention to Para No.3.4 of the DVO’s Report. It was a submission that the DVO had valued the property as on 31.03.2013 at Rs.5,68,43,000/-. The Ld.CIT(A) erred in considering such valuation for comparison for the amount disclosed by the assessee towards the cost of construction till 31.03.2015.
It was a submission that the order of the Ld.CIT(A) was liable to be reversed.
In reply, the Ld.AR submitted that the DVO had inspected the premises only on 24.02.2016, by which time, the construction was completed. It was a submission that the valuation done by the DVO was in respect of the completed building, whereas for the year ended 31.03.2013, the building was incomplete. It was a submission that the order of the Ld.CIT(A) was liable to be confirmed.
We have considered the rival submissions. A perusal of the order of the Ld.CIT(A) shows that the Ld.CIT(A) has found that the difference between the Valuation Report provided by the DVO and the cost of ITA No.338/Mds/2017 :- 5 -:
construction disclosed by the assessee as on 31.03.2015 to vary by difference of less than 10%. Here, it is noticed that the Ld.CIT(A) fell into error in comparing the Valuation Report of the DVO which has been specifically given in respect for 31.03.2013 with the cost of construction disclosed by the assessee in its accounts for the year ended 31.03.2015.
A perusal of the DVO’s Report clearly shows that the assessee has not provided the details such as drawings of the building, plan approval, temporary EB connection, permanent EB connection, Completion Certificate, Property Tax, Assessment Order, etc., as has been mentioned in Para No.1.4 of the DVO’s Report. Further, in Para No.3.4 of the DVO’s Report, again the DVO has specifically submitted that the assessee has not submitted the plan approval or the temporary EB connection details or the permanent EB connection details. He, further, specifically records that no documentary evidence like proof of purchase of materials were submitted, no expenditure was shown during the AY 2013-14 either. Even before us, the assessee has not produced any evidence to show that the assessee has made any investment beyond 31.03.2013. This being so, we are of the view that the order of the Ld.CIT(A) in comparing the cost of construction determined by the DVO till the year ending 31.03.2013 with the cost of construction disclosed by the assessee in its return for the year ended 31.03.2015 is erroneous and consequently, set-aside.
As it is noticed that the DVO’s Report has been obtained only after the Assessment Order has been passed, the issues in respect of the ITA No.338/Mds/2017 :- 6 -:
addition representing the cost of construction is restored to the file of the AO for re-adjudication. The AO shall examine the cost of construction as disclosed by the assessee in respect of the said building till 31.03.2013 and to such extent that which is falling short when compare to the cost of construction as estimated by the DVO, the addition shall be made. The AO shall grant the assessee liberty to produce evidences to show that there has been construction activity in respect of the said building beyond 31.03.2013, if it is submitted along with the satisfactory explanation as to why the same was not produced before the AO in the course of the original assessment and before the DVO in the course of the valuation by the DVO.
In the result, the appeal filed by the Revenue stands partly allowed for statistical purposes.