CIT vs. AMBIENCE HOTELS & RESORTS LTD

versus

AMBIENCE PROJECTS & INFRA PVT LTD ..... Respondent

ITA 588/2012

CIT

..... Appellant

versus

AMBIENCE DEVELOPERS PVT LTD ..... Respondent

ITA 589/2012

CIT

..... Appellant

versus

AMBIENCE PROJECTS & INFRA PVT LTD ..... Respondent

ITA 590/2012

CIT

..... Appellant

versus

AMBIENCE PROJECTS & INFRA PVT LTD ..... Respondent

ITA 591/2012

CIT

..... Appellant

versus

AMBIENCE HOTELS & RESORTS LTD ..... Respondent

ITA 592/2012

CIT

..... Appellant

versus

AMBIENCE PROJECTS & INFRA PVT LTD ..... Respondent

ITA-581-593/2012 Page 3

ITA 593/2012

CIT

..... Appellant

versus

AMBIENCE DEVELOPERS PVT LTD ..... Respondent

Appearance: Mr. N.P. Sahni, Sr. Standing Counsel on behalf of CIT. Ms. Rani Kiyala, proxy for Dr. Rakesh Gupta, Advocate for respondents.

CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR

MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT) % The Revenue has preferred these 13 appeals which are directed against a common order made by the ITAT in respect of three group companies which are connected with M/s. Ambience Developers and Infrastructure Pvt. Ltd. The correctness of the impugned order dated 10.02.2012 in the said 13 appeals relatable to M/s Ambience Developers Pvt Ltd, M/s Ambience Projects & Infra Pvt. Ltd. and Ambience Hotels & Resorts Ltd. is sought to be questioned. The Tribunal had by the impugned common order rejected the Revenue’s appeals, holding that there was no reason to interfere with the directions to delete the disallowance, originally ordered by the Assessing Officer on account of cost of construction and sought to be brought to tax under Section-69C of the Income Tax Act. 2. At the outset, it is submitted by counsel that the main order made in

ITA-581-593/2012 Page 4

the case of M/s. Ambience Developers and Infrastructure Pvt. Ltd. (ITA Nos.2376-2381/del/2011) by the ITAT had, in almost identical circumstances - where a report of the valuer had been called for under Section-142A - been rejected. In that case, variations between the cost of construction shown by the assessee and what was estimated in the valuer’s report, was to the extent of 3.86%. 3. This Court notices that the facts pertaining to the present three respondents/assessees and those pertaining to M/s. Ambience Developers and Infrastructure Pvt. Ltd., the respondent in the appeals which were decided by the Tribunal on 5.8.2011 (ITA 2376-2381/del/2011) are identical. In fact, the search took place in the premises of the group companies leading to reference under Section-142A. The Assessing Officer based his conclusions on the report of the Valuation Officer under Section-142A. The said common order of the Tribunal was challenged in appeal before this Court being ITA-195-199 and 203/2012. Those appeals were dismissed on 27.7.2012. The Court took into consideration the judgment of the Division Bench of this Court in Commissioner of Income-tax v. Aar Pee Apartments P. Ltd. (2009) 319 ITR 206 as well as judgment of the Supreme Court in Sargam Cinema v. Commissioner of Income Tax (2011) 241 CTR (SC) 179 where it was held that the Assessing Officer could not have referred the matter to the Valuation Officer without rejecting the books of accounts. In the said appeals decided by this Court in ITA-195/2012 and connected cases, i.e., CIT v. M/s. Ambience Developers and Infrastructure Pvt. Ltd., the variation between the cost of construction shown by the assessee and what was assessed by the Valuation Officer was to the extent of 3.86%. The Court had concluded as follows: -

ITA-581-593/2012 Page 5

“15. It is also a matter of record that an Office Note had been made by the AO, when the assessment order was issued. That contained details of what were examined, in respect of the assessee’s books and accounts, and also adverted to an Appraisal Report, and stated that:

“as per the Appraisal Report, the bank accounts of the group companies also reveals a large number of other current and saving bank accounts, which need to be investigated. In this case, there are very few transactions which have been examined and found to be normal business transactions with other concerns, and have been explained satisfactorily. Therefore, no adverse inference is drawn.

ITA-581-593/2012 Page 6

“4. Before CIT (A) both these assessees challenged the addition of aforementioned amounts to its income in respect of each of the year firstly; on the ground that reference of valuation u/s 142A to the Departmental Valuation Officer is not in accordance with law as Section 142A does not apply on section 69C and reliance was placed mainly on the decision of Hon’ble Delhi High Court in the case of CIT vs. AAR PEE Apartments Pvt. Ltd. (2009) 319 ITR 276 (Del). Secondly, the reference to DVO was challenged on the ground that no defect has been pointed out in the books of account which are regularly maintained by the assessee and are audited. Without pointing out any defects in the books of account no addition, whatsoever, could be made on account of difference in the cost of construction shown by the assessee and estimated by DVO and for raising such contention the reliance was mainly placed on the decision of Hon’ble Supreme Court in the case of Sargam Cinema vs. CIT (2010) 328 ITR 513 (SC). Thirdly, the addition was challenged on the ground that the difference in the cost of construction and estimate made by the DVO was less than 5% (2.43% in the case of Ambience Developers Pvt. Ltd. and 3.71% in the case of Ambience Hotels and Resorts Pvt. Ltd.) To assail the addition on this basis, the assessee placed reliance on the decision of Hon’ble Madras High Court in the case of CIT vs. V.T. Rajendran (2007) 288 ITR 312.

ITA-581-593/2012 Page 7

submitted that the issues raised by the department in the present appeals are covered by the aforementioned decision of the Tribunal.

S. RAVINDRA BHAT, J

R.V.EASWAR, J OCTOBER 05, 2012 /vks/