Income Tax Appellate Tribunal - Chennai
S.Ganesan, Salem vs Department Of Income Tax on 20 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH : CHENNAI
[BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER]
I.T.A.No.71/Mds/2004
Assessment year : 1995-96
The Income Tax Officer vs Shri S.Ganesan
Ward III(1) 4-A, 5th Cross
Salem Narayana Nagar
Salem - 15
(Appellant) (Respondent)
Appellant by : Shri Shaji P. Jacob
Respondent by : None
Date of Hearing : 20-03-2012
Date of Pronouncement : 23-3-2012
ORDER
PER N.S. SAINI, ACCOUNTANT MEMBER
This is an appeal filed by the Revenue against the order of the ld.CIT(A), Salem, dated 14.10.2003.
2. This appeal was decided by this Tribunal in I.T.A.No. 71/Mds/2004 vide order dated 3.6.2004. Thereafter, the Revenue filed appeal against the order of the Tribunal before the Hon'ble Madras High Court. The Hon'ble Madras High Court framed two substantial questions of law as under:
:- 2 -: I.T.A.No. 71/04
"i. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in confirming the order of the CIT (Appeals) reducing the addition on account of unexplained investment in the construction of the shopping complex from ` 3,27,344/- to ` 79,797/- without considering the specific reasons given in the assessment order? and ii. Whether on the facts and in the circumstances of the case, the order of the Income Tax Appellate Tribunal treating the reference to Valuation Officer made by the Assessing Officer regarding the estimation of cost of construction as invalid relying on the decision of the Supreme Court in the case of Amiya Bala Paul (262 ITR 407) is sustainable in law in view of the retrospective amendment made by Finance (No.2) Act, 2004 inserting a new section 142A?"
3. The Hon'ble High Court, while deciding the above framed questions of law, held that the decision of Hon'ble Supreme Court in the case of Amiya Bala Paul (262 ITR 407), where it was held that there was no statutory provision enabling the Assessing Officer to refer the cost of construction to the Departmental Valuation Officer and therefore, reference to Departmental Valuation Officer was overruled by the amendment made by the Finance (No.2) Act, 2004, by insertion of new section 142A under the Income-tax Act, 1961, which empowers reference to the Departmental Valuation Officer for estimating the value of the investment and such amendment was given retrospective effect. Thereafter, the Hon'ble High Court addressed the grievance of the Revenue which was that as per the Departmental Valuation Officer, the estimated cost of construction was ` 6.55.300/- while as per the report of the assessee's valuer the estimated cost of construction was :- 3 -: I.T.A.No. 71/04 ` 3,27,356/- and the Tribunal had not considered both the valuations in arriving at its conclusion. Accepting the grievance of the Revenue, the Hon'ble High Court has restored the issue back to the file of the Tribunal and has directed to decide the issue afresh in accordance with law after taking into consideration the valuation reports submitted by the Department as well as by the assessee. Hence, this appeal.
4. Notice of hearing was issued to the respondent- assessee on 10.1.2012 through Registered Post with Acknowledgement Due which was served on the respondent- assessee on 12.1.2012 as evidenced by the Acknowledgement card of the Post Office placed on record. None appeared for the assessee when the case was called for hearing. Therefore, the appeal was heard ex-parte qua the respondent- assessee and disposed of on merits.
5. We have heard the ld. DR.
6. We find that in the instant case, the Assessing Officer observed from the return of income filed by the assessee that the assessee has constructed a Shopping Complex known as 'SGS Complex' at D.No.1A, Kalarampatty Main Road, Erumapalayalayam, Salem-15, during the previous year relevant to assessment year under consideration. The Assessing Officer observed that the cost of construction was admitted at ` 3 lakhs. The Assessing Officer also :- 4 -: I.T.A.No. 71/04 observed that the valuation report of the Valuation Cell dated 3.1.1997 has estimated the cost of construction at ` 6,55,300/-. He also noted that the assessee has filed an approved valuer's report valuing the property at ` 3,27,356/-. The assessee also filed a letter dated 26.3.1999 offering the cost of construction at ` 3,27,356/- and the difference between the original cost admitted and the new estimate was offered as income.
7. In reply to the show cause notice of the Assessing Officer, the ld. A.R of the assessee appeared. As per the Assessing Officer, the approved valuer Shri N.Sukumar, BE also appeared alongwith the Authorized Representative of the assessee. The approved valuer pointed out to the Assessing Officer that the plinth area rate adopted by the Valuation Officer is 15% to 25% more than the actual cost when compared to PWD rates. The approved valuer relied on the decision of Jaipur Bench of the Tribunal in the case of R.K.Gupta and Others vs ACIT, ITSSA Nos.18 to 33/JP/98, dated 23.12.1998. The Assessing Officer did not accept the contention of the approved valuer on the ground that the decision relied upon was not of local jurisdiction and also that the difference of 15% to 25% between the CPWD rates and PWD rates pertained to Rajasthan. Thereafter the Assessing Officer accepted the valuation of the Departmental Valuer at ` 6,55,300/- and the difference between this valuation and the :- 5 -: I.T.A.No. 71/04 valuation of the Registered Valuer at ` 3,27,356/- of the property in question was added to the income of the assessee as unexplained investment thereby making an addition of ` 3,27,944/- to the income of the assessee. On appeal, the ld.CIT(A) had accepted the appeal of the assessee and had directed the Assessing Officer to adopt the valuation given by the approved valuer for the purpose of cost of construction of the impugned property. Thus, it is noticed that the assessee had challenged the valuation of the impugned property by the Departmental Valuation Officer at CPWD rates and had asked the Assessing Officer to adopt State PWD rates for the valuation of the property in question. We find that the contention of the assessee finds support from the decision of the Hon'ble Madras High Court in the case of CIT vs Smt.V.Gajalakshmi, [2011] 331 ITR 216, wherein it was held that the Tribunal in its order had found that adoption of the rate by the Assessing Officer based on State PWD rates at ` 3079/- per sq. mtr. was justified. We also find that the Third Member of the Tribunal in the case of M.Selvaraj vs ITO (2002) 258 ITR (AT) page 82, (Chennai) has held as under:
"Coming to the assessee's plea that the State P.W.D rates should have been adopted, I am of the opinion that this issue is squarely covered by the decision of the A-Bench of this Tribunal in the case of M.S.Ponraj (I.T.A.Nos. 1656 and 1657/Mds of 1996) referred to :- 6 -: I.T.A.No. 71/04 earlier, a copy of which is placed on record, in favour of the assessee and against the Revenue, more so because the Revenue has not brought any decision to my knowledge taking a contrary view. I am, therefore, of the opinion that if at all the cost of construction is to be determined it should have been by adopting the State P.W.D. rates and not by adopting the C.P.W.D. rates. The valuation report based on the C.P.W.D rates was, therefore, not to be relied upon."
8. Still further, the Chennai 'B' Bench of the Tribunal in the case of ACIT vs M/s T.N.Nandagopal & Sons in I.T.A.Nos.177 to 179/Mds/2011 in assessment years 2002-03 to 2004-05, order dated 21.6.2011 and Chennai 'C' Bench of the Tribunal in the case of M.Amutha vs ACIT in I.T.A.No. 961/Mds/2010, assessment year 2006- 07, order dated 16.6.2011, has also held accordingly. Therefore, respectfully following the above decisions, we remand the matter back to the file of the Assessing Officer to re-adjudicate the issue of undisclosed investment in the impugned shopping complex by adopting the State PWD rates in the valuation report of the Departmental Valuation Officer. Thus, the ground of the appeal of the Revenue is allowed for statistical purposes.
:- 7 -: I.T.A.No. 71/04
9. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 23-3-2012.
Sd/- Sd/-
(GEORGE MATHAN) (N.S.SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 23rd March, 2012
RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR