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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
Both these appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited Centre (NFAC), Delhi [hereinafter in short “Ld.CIT(A)”] for the A.Ys .2012-13 & 2013-14. Since the grounds raised by the assessee for both these appeals are identical in nature, these appeals are being clubbed and heard together and a consolidated order being passed. We now take up the appeal in A.Y.2012-13 as the lead appeal.
2. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1051765108(1) dated 31.03.2023 for the A.Y.2012-13 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 27.03.2015.
Brief facts of the case are that, assessee being a Private Limited Company running a multi-speciality hospital and filed its return of income for the A.Y.2012-13 on 30.09.2012 admitting a total income of Rs.16,18,920/-. The return was summarily processed under section 143(1) of the Act and subsequently, the case was selected for scrutiny under CASS and statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response to the notice, assessee’s representative appeared from time to time and produced information as called for. On examining the Page No. 2 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited submissions, the Ld. AO noticed that the assessee-Company has taken RCC framed structure and started developing the building as hospital at Sri Ramachandra Nagar, Vijayawada on lease and completed the same by March 2013. Assessee invested an amount of Rs.12,19,98,620/- towards construction of the hospital. Consequent to survey operations conducted on 10.12.2013 the case was referred to the Valuation Officer on 04.07.2014. Accordingly, the District Valuation Officer, Valuation Cell, Hyderabad [hereinafter in short “DVO”] submitted his report vide letter dated 09.03.2015 estimating the cost of construction of the property at Rs.15,56,25,619/-. A copy of the Valuation Report was given to the assessee calling for objections, if any. The Assessee submitted a letter dated 24.03.2015 seeking three weeks’ time. The Ld. AO did not accept the time sought by the assessee stating that the assessment is getting time barred on 31.03.2015. Ld. AO arrived at the difference in cost of construction and distributed it equally at Rs.1,68,13,500/- for A.Y. 2012-13 & 2013-14 respectively.
4. Aggrieved by the order of the Ld. AO, assessee filed an appeal before the Ld. CIT(A). Before Ld. CIT(A), assessee’s representative challenged the additions and also raised ground with respect to the DVO report being time barred. Assessee also contested that no opportunity was provided to the assessee to raise objections with respect to DVO report. Considering the similar submissions made by the assessee and the objections raised by the assessee in Page No. 3 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited the grounds of appeal, Ld. CIT(A) rejected the contentions of the assessee by dismissing the appeal of the assessee.
On being aggrieved by the order of the Ld. CIT(A), assessee filed an appeal before us by raising the following revised grounds of appeal: - “1. The order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as'CIT(A)'), under section 250 of the IT Act dated 31-03-2023, is against the facts of the case and provisions of law.
The Ld. CIT(A) failed to appreciate that reference to the Departmental Valuation Officer (DVO), under section 142A of the IT Act, arises only when the books of accounts rejected by the AO. In this case, AO accepted the books of accounts maintained by the assessee, therefore, making the reference to the DVO is unjustified.
3. The Ld. CIT(A) incorrectly accepted the contents of the remand report of the Assessing Officer (AO) regarding the non-production of books ofaccounts by the assessee. The issue of non-production of books of accounts does not arise when these records are available with the AOduring the assessment proceedings.
The Ld. CIT(A) should have granted relief with respect to self- supervision to the extent of 10% and material cost to the extent of15%, following judicial precedents in this regard.
5. The Ld. CIT(A) disregarded the fact that the jurisdictional assessing officer is ITO Ward 2(3), Vijayawada, while the reference to the DVO under section 142A of the IT Act was made by DCIT, Circle 2(1), whohas no authority to make such reference.
6. The finding of the Ld. CIT(A) that the amended provisions of section142A of the IT Act operate from 01-10-2014, and thus do not apply to the present case, is misconceived and based on an erroneous interpretation of the provisions of the section.
7. The Ld. CIT(A) erred in treating the revised return filed by the assessee under section 139(5) of the IT Act as invalid, despite the said return being filed within the time prescribed under section 139(5) of the ITAct.
Page No. 4 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited
8. The Ld. CIT(A) ignored the petition filed by the assessee company under rule 46A of IT Rules, which contained material evidence pertaining to the cost of construction, without providing any reason for such disregard.
9. The appellant prays that the disallowance made by the AO in this regard be deleted in the interest of justice, and reserves the right to adduce further grounds at the time of hearing.”
Assessee also filed a petition for admission of additional grounds as follows: -
“Additional Grounds:
1. 1. The statutory notice as required to be issued u/s 143(2) for initiating the scrutiny assessment proceedings is barred by limitation,therefore, in the absence of such notice issued by Assessing Officer the assessment completed u/s 143(3) is void ab-initio.
2. Without prejudice to the above ground even if it is to be assumed thatnotice u/s 143(2) was issued by DCIT Circle 2(1), Vijayawada but it was not issued by ITO Ward 2(3) who completed the assessment.
3. The Assessing Officer i.e. ITO Ward 2(3) who passed the order u/s143(3) of the IT Act, is not the Jurisdictional Assessing Officer to complete the assessment. When that is so the jurisdictional issue goes to the root of the matter, therefore, the impugned order passed by ITO Ward 2(3) is null and void and liable to be quashed.”
Later, assessee filed a petition withdrawing the Ground Nos. 1 & 3 of the additional grounds, at the same time modifying the Ground No.2 of the additional ground as follows: -
“Modified Additional Ground: 2. The Ld. Assessing officer passed the order u/s 143(3) of the ITAct without issuing notice u/s 143(2) of the IT Act, therefore, the impugned order suffers from jurisdictional defect and such order is void-ab-initio and liable to be quashed.”
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The main grievance of the assessee is with respect to the Valuation Report made under section 142A of the Act by the DVO, Hyderabad. On this ground, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee was not provided sufficient opportunity to provide the required information contesting the valuation made by the DVO. Ld.AR submitted that assessee has obtained the Valuation Report from a Registered Valuer valuing the property at Rs.1052.00 Lakhs which was not considered by the Revenue Authorities. He also further submitted that DVO while valuing the property has adopted CPWD rates but has not considered adjustments with respect to Self-Supervision and Cost of Materials as per the prevailing rates in Vijayawada. Ld.AR also further submitted that Ld. AO has not rejected the books of accounts while referring the valuation of the property to the DVO. He further submitted that the Ld. AO has stated in his Remand Report that the books of accounts were not produced till 04.07.2014 and therefore the case was referred to the DVO, Hyderabad, whereas, the fact remains that the books of accounts has been impounded on 10.12.2013 and was with the Department till 30.06.2015. Further, Ld.AR also submitted that he placed heavy reliance on the various cases as listed out in the case law paper book. Ld.AR placed heavy reliance in the case of DCIT v. M/s. Hillocks Hotels Pvt Ltd., in dated 15.06.2022 wherein this bench has allowed a rebate of 15% towards difference between CPWD rates and State PWD rates and also Page No. 6 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited allowed relief of 10% towards Self-Supervision charges from the cost estimated by the DVO. Ld.AR further pleaded that this bench has consistently held in various cases and allowed 15% towards cost of materials and 10% towards Self-Supervision. He therefore pleaded that 10% towards Self-Supervision as against 4% allowed bythe DVO and 15% towards cost of material be allowed.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that the DVO has already allowed 4% towards Self-Supervision and hence pleaded that the order of the Revenue Authorities be upheld.
We have heard both the sides and perused the material available on record including the cases cited in the paper book and the Valuation Report. The Ld.AO made addition in two different assessment years towards difference between cost of construction estimated by the DVO and the cost of construction declared by the assessee. The DVO has considered plinth area rates (PAR 2007) approved by the CBDT. However, he has clearly stated that since there are no specifications floor heights, plinth heights available for these plinth area rates and hence the AP State Plinth rates cannot be adopted for evaluation of cost of construction. The DVO did not allow deduction towards difference in material cost but has estimated rebate of 4% towards Self-Supervision. The Assessee has also submitted the Valuation Report from the Registered Valuer of Page No. 7 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited the Income Tax Department, Hyderabad. The method of valuation adopted by the Registered Valuer is on the basis of total quantity survey method whereas he has failed to understand the why the DVO has valued it on the basis of Plinth area rates. The contention of the Ld.AR is with respect to not allowing rate of 10% towards Self-Supervision and 15% towards difference in material cost as has been held in various cases relied on by him. Ld.AR submitted a calculation considering the 15% and 10% towards material cost and Self-Supervision as per details given below: -
Calculation by considering 15% and 10% towards Material Cost and Self-Supervision Particulars Amount Value arrived by DVO including 16,19,77,685 Architect Fee of Rs. 31,76,033/- Deduct: 10% Self-Supervision 1,61,97,769 Deduct: 15% Material Cost 2,42,96,653 DVO cost after giving benefit of 12,14,83,264 self-supervision and material cost As per Books 12,19,98,620
The assessee has also capitalised the cost of construction in the books of accounts which was subjected to audit. Moreover, considering the fact that CPWD rates are always higher than local rates, we find force in the arguments of the Ld.AR. Additionally, after the deductions on account of rates and self-supervision is adopted the cost of construction will be Rs 12,14,83,264/- as stated in table above. Further, the decisions relied on by the Ld.AR, it was Page No. 8 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited consistently held by the Co-ordinate Bench of this Tribunal, and other judicial pronouncements we are of the opinion that the assessee is entitled for 15% deduction towards difference between CPWD rates and local rates and further 10% deduction towards Self-Supervision charges, from valuation made by DVO, we have no hesitation to direct the Ld. AO to determine the cost of construction of the building by allowing 15% and 10% respectively towards material difference and Self-Supervision charges. We therefore direct the Ld.AO to delete the addition of Rs. 1,68,13,500/- being the amount allocated by the Ld AO during the impugned AY, arising out of the difference between the Valuation Report of the DVO and the value declared by the assessee in the books of accounts. Thus, we allow the ground raised by the assessee.
Ground No 6 being not pressed by the assessee and hence dismissed as not pressed.
The other grounds raised by the assessee are not adjudicated as Ground No. 4 has been adjudicated in favour of the assessee.
In the result, appeal of the assessee allowed.
ITA No. 136/VIZ/2023 (A.Y. 2013-14)
Coming to the appeal relating to A.Y. 2013-14, since the issues and facts in this case are identical, the decision taken in assessee’s case for the Page No. 9 & 136/VIZ/2023 Aayush NRI LEPL Healthcare Private Limited A.Y.2012-13 as in preceding paras shall mutatis mutandis, applicable to ITA No.136/VIZ/2023. Accordingly, appeal filed by the assessee is allowed.
To sum-up, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 30th October, 2024.