Income Tax Appellate Tribunal - Indore
Income Tax Officer vs Prakashchand Soni [Alongwith Ita Nos. ... on 30 July, 2004
Equivalent citations: (2005)94TTJ(INDORE)631
ORDER
I.C. Sudhir, J.M.
1. ITA Nos. 143 to 145/Ind/2002 : In these appeals the Revenue has questioned the first appellate Order on the following common grounds that the learned CIT(A) has erred in;
1. deleting the addition in house construction holding that the valuation of cost of construction is not foolproof technique and the addition to the income cannot be made on the basis of valuation report;
2. not cross-examining the valuation officer for allowing opportunity to-the AO to produce the valuation officer while -deleting the addition being difference in house construction;
3. deleting the addition being addition in business income;
4. not recording finding oh the application of provisions of Section 115 whereas the AO had recorded categorical finding after pinpointing specific defects; and
5. deleting the addition made on account of household expenses.
2. Ground Nos. 1 and 2 : The facts in brief are that the assessee, an individual, derived income from goldsmith business. The additions of Rs. 37,091, Rs. 90,952 and Rs. 57,576 on account of house property- construction in the asst. yrs. 1994-95, 1995-96 and 1996-97, respectively, totalling Rs. 1,45,619 were made by the AO, which have been deleted by the learned CIT(A), against which the Revenue is in appeal before us. The valuation officer has determined the cost of construction at Rs. 13,94,902 against the shown investment of Rs. 10,21,750 by the assessee. The learned Departmental Representative submits that the AO has rightly made the additions as the assessee could not explain the difference between the cost of construction determined by the valuation officer and one by the assessee, The learned Authorised Representative, on the other hand, reiterates the contentions raised before the lower authorities and submits that all the necessary details were filed by the assessee as separate accounts were maintained. He refers contents of the documents filed at pp. 66 to 124 of the paper book.
3. After considering the arguments advanced by the parties, in view of the material available on record and the orders of the lower authorities, we find that the contentions of the assessee before the lower authorities remained that the major area of difference is the basic cost of construction of basement, ground floor and the first floor. The rates applied are on the basis of CBDT circular of 1976. The basic cost (without electric and sanitary fitting, furnishing, etc.) is determined by the DVO at Rs. 10,80,609. The valuation of Rs. 10,80,609 is on estimation basis by applying- a formula. The electric and sanitary fittings are also taken at a very high figure, particularly internal water supply, internal electrical fitting, external services with extra items have all been taken on estimate basis. The total cost determined is Rs. 13,94,902 for the construction area. It was further submitted that the basic difference is on account of basic cost which has been determined by the DVO on the basis of index and reproduce production cost basis. The area is 3,917 sq, ft. The basic cost is taken at Rs. 10,80,609 against which the AO has taken Rs. 8,61,027. The difference here is Rs. 2,19,582 which is about 20 per cent of the cost determined by the DVO. The rates adopted by the DVO are based on CPWD rates and Delhi index. It was also pointed out that Ujjain being a mufassil area where the popular is around 3 to 4 lakhs, PWD rates should have been applied. The PWD rates are always 25 per cent less than CPWD rates. So far as the other items are concerned, the additions on account of sanitary installation, electrical installation, etc. are taken on the higher side also by applying the formula. The difference between the cost of construction determined at Rs. 13,94,902 and shown by the assessee at Rs. 10,22,000 is Rs. 3,72,902 which is 26 per cent of the cost of construction determined by the DVO. This difference is covered by the PWD rates. Besides, the assessee submitted that once the books have been maintained, the same should have been accepted. Neither the DVO nor the AO has been able to point out that there is unaccounted investment in the house property. If the AO determines the income from undisclosed sources, it has to be proved: Not a single instance has been pointed out about the expenditure which has not been recorded in the books. The assessee also raised several objections to the valuation report which have been mentioned by the learned CIT(A) in para 8 of the first appellate order. In para 9 the learned CIT(A) has mentioned the evidence filed by the assessee before the AO in the course of assessment in support of the cost of construction declared by the assessee which included books of account, pass book, labour register, etc., bank account, cash book for house construction and bills of materials and fittings, etc. After considering the objections raised by the assessee,-the learned CIT(A) has come to the following conclusion :
"12. I have considered the above contentions and submissions, and examined the details on record, and also perused the decisions cited by the appellant's counsel. I, firstly, find that the valuation of cost of construction is not a foolproof technique and where different methods of valuation are there, the method which is more appropriate and beneficial to the assessee is to be adopted. Secondly, I find that when proper books are maintained by the appellant and expenditures are supported by vouchers, addition to income cannot be made on the basis of valuation report, without rejecting the accounts. Further, I find that as regards the major area of difference, i.e., basic cost of construction of basement, ground floor and first floor, the rates applied by the DVO are as per CBDT circular and on the basis of index and reproduced production cost basis. Ujjain being a mofussil area, as against metropolitan area like Delhi, I am of the opinion that PWD rates should have been applied which are 25 per cent lower than rates. The difference in cost of construction arrived at by the ITO for making the additions is covered by the PWD rates. So also the fittings like electrical and sanitary and others, are taken on higher side. On examining the item-wise facts and clarifications submitted by the appellant, I find the same to be reasonable and acceptable. Besides, I also find that the AO has not pointed out any specific defects or discrepancies in the house construction account maintained by the appellant and has summarily rejected the contentions. Accordingly, keeping in view the facts and circumstances and relying on the High Court decisions and Tribunal decisions cited by the appellant, I am unable to sustain the additions of Rs. 37,091, Rs. 90,952 and Rs. 57,576 made in these three years and I deem it fit to delete the same.
4. After having gone through the first appellate order, in view of the arguments advanced by the parties, we do not find reason to interfere therewith as the appellate Order is comprehensive and reasoned one. We confirm the same as the learned CIT(A) after considering the objections of the assessee has rightly deleted the additions made towards investment in house construction for the assessment years under appeal. The grounds in this regard are thus dismissed.
5. Ground No. 3 : The AO has made additions of Rs, 20,000 in the asst. yr. 1994-95, Rs. 25,000 in the asst. yr. 1995-96 and Rs. 30,000 in the asst. yr. 1996-97 towards business income which have been deleted by the learned CIT (A) against which the Revenue is in appeal before us.
6. In support of this ground, the learned Departmental Representative submits that labour register produced before the AO was written in one day and, therefore, the same was not reliable and in this register the assessee has mentioned only the names of persons without addresses who had ordered for making of ornaments. Hence, it was also not verifiable. In these circumstances, the AO has invoked the provisions of Section 145 of the Act and has made the aforesaid additions in the assessment years under consideration. The learned Authorised Representative, on the other hand, reiterates the contentions raised before the lower authorities while justifying the first appellate Order in this regard.
7. After having gone through the orders of the lower authorities in view of the arguments advanced by the parties, we find that the learned CIT{A) has deleted the additions on the basis that all the relevant details were maintained in the labour register and no specific defect or discrepancy was located by the AO. The learned CIT(A) has further observed that the job work for which the assessee had procured labour work was regulated under the Gold Control Act. The same register was produced before us, on perusal of which we find force in the observations of the learned AO that the labour register was written in one sitting in the similar ink and handwriting. At the same time we find force in the contention of the assessee that the AO has not pointed out any particular amount of labour charges .which is not included in the books of account. Considering these facts we restrict the addition respectively to Rs. 10,000 in the asst. yr. 1994-95, Rs. 13,000 in the, asst. yr. 1995-96 and Rs. 15,000 in the asst. yr. 1996-97. The AO is directed to make the additions in these years accordingly. In the result, the ground is partly allowed.
8. Ground No. 4 : We have already adjudicated this ground in ground No. 3 hereinabove. Thus, the. issue involved in this ground does not require separate adjudication.
9. Ground No. 5 : The AO made the additions of Rs. 17,802 in the asst. yr. 1994-95, Rs. 23,527 in the asst. yr. 1995-96 and Rs. 22,369 in the asst. yr. 1996-97 on account of household expenses. The learned Departmental Representative justifies the assessment Order whereas the first appellate Order has been relied on by the learned Authorised Representative with the submission that the assessee, his brother, father and wife are all income-tax assessees and have been filing IT returns. During these years withdrawals made by Lalchand, father of the assessee, both the brothers and their family members for household expenses were at Rs. 82,410 in the asst. yr. 1994-95, Rs. 92,871 in the asst. yr. 1995-96 and Rs. 1,30,503 in the asst. yr. 1996-97. He submits that these withdrawals were for ten family members including one minor member and the AO had no reason or evidence or finding to say that the above household expenses for family of ten members .including one minor are inadequate.
10. After having gone through the orders of the lower authorities and the arguments of the parties, we find that the learned CIT{A) has deleted the additions in question on the basis that the expenses shown by the assessee were reasonable and adequate and the AO has not made out a valid case for additions nor had brought on record and adverse material to support the same. We do not find reason to interfere with the first appellate Order as considering these facts, the learned CIT(A) has rightly deleted the additions made by the AO. The ground is thus rejected.
11. In the result, the appeals are partly allowed.
12. Cross-objections Nos. 19 to 21/Ind/2003 : The cross-objections preferred by the assessees are in support of the first appellate Order which we have already discussed and considered in the aforesaid appeals of the Revenue. In view of the finding therein, the cross-objections become infructuous and dismissed as such.
13. ITA Nos. 146 to 148/Ind/2001 : The first appellate Order in these years has been questioned by the Revenue on similar grounds as in the aforesaid appeals. Both the parties have also adopted the same arguments as advanced in the aforesaid appeals in support of their respective cases.
14. We have considered the arguments advanced by the parties in view of the material available on record. We find that in these years the additions on account of house construction have been made by the AO at Rs. 54,654 in the asst. yr. 1994-95, Rs. 79,129 in the asst. yr. 1995-96 and Rs. 53,749 in the asst. yr. 1996-97. The same have been deleted by the learned CIT(A) on the basis mentioned hereinabove in the aforesaid appeals. We do not find reason to interfere with the first appellate Order as the additions made in this regard in these years have rightly been deleted by the learned CIT(A) after considering the objections raised by the assessee. Ground Nos. 1 and 2 are thus rejected.
15. So far as the ground Nos. 3 and 4 are concerned, these relate to additions of Rs. 20,000 in the asst. yr. 1994-95, Rs. 25,000 in the asst. yr. 1995-96 and Rs. 30,000 in the asst. yr. 1996-97 on account of business income which have been deleted by the learned CIT(A) on the basis which we have already dealt within the aforesaid similar appeals. However, considering the totality of the facts and circumstances of the case, we, while confirming the rejection of books of account by the AO, restrict the additions to Rs. 10,000 in the asst. yr. 1994-95, Rs. 13,000 in the asst. yr. 1995-96 and Rs. 15,000 in the asst. yr. 1996-97. Ground Nos. 3 and 4 are thus partly allowed..
16. So far as ground No. 5 is concerned, it relates to the additions made on account of household expenses by the AO at Rs. 6,308 for the asst. yr. 1994-95, Rs, 13,578 for the asst. yr. 1995-96 and Rs. 14,070 for the asst. yr. 1996-97. We have already dealt with similar issue in the aforesaid appeals of the Revenue. Following the same, we do not interfere with the first appellate Order as after considering the submissions of the assessee the learned CIT(A) has rightly deleted these additions. This ground is thus rejected.
17. In the result, the appeals are partly allowed.
18. C.O, Nos. 22 to 24/Ind/2001 : The cross objections preferred by the assessee are in support of the first appellate Order which we have already discussed and considered in the aforesaid appeals of the Revenue. In view of the finding therein, the cross-objections become infructuous and are dismissed as such.