Sachin Kapoor, Rohtak vs Assessee

PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned addition of Rs.8,61,132 made by the

Learned CIT(Appeals) against the addition of Rs.5,95,363 made by the

Assessing Officer on account of unexplained investment in construction (

ground Nos. 1 to 5.1). In ground No.6, which is without prejudice to the

above grounds, the assessee has questioned the action of the Learned

CIT(Appeals) in enhancement of the addition without issuing the proposed

enhancement notice under sec. 251(2) of the Act.

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2. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

3. The relevant facts are that the assessee had made an investment of

Rs.10,64,105 and Rs.1,58,132 in assessment years 2001-02 and 2002-03

respectively in construction of industrial shed in the factory, which was

supported by a valuation report from registered valuer. The registered

valuer valued the property at Rs.10,64,700. The Assessing Officer did not

agree and estimated the cost of construction at Rs.16,92,600 by applying an

average rate of Rs.200 per sq. ft. on declared area of 8436 sq. ft. The

Assessing Officer thus made addition of Rs. 5,95,363. The Learned

CIT(Appeals) thereafter made reference to the valuation officer under sec.

142A read with sec. 131(1)(d) of the Act for determination of cost of

construction/property. The valuation officer assessed the cost of construction

at Rs.19,58,369 for the assessment year 2001-02. The Learned CIT(Appeals)

following the said valuation made by the valuation officer enhanced the

addition from Rs.5,95,363 made by the Assessing Officer to Rs.8,61,132.

This action of the Learned CIT(Appeals) has been questioned by the

assessee.

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4. The Learned AR contended that actual investment can be known only

when the construction is completed. He submitted that the investment in

construction cannot be assumed as there was no data available to determine

the extent of construction, particularly when no addition has been made in

the assessment year 2002-03. In this regard, he placed reliance on the

decisions in the cases of WTO vs. Champa Lal Singh Prahalad Singh, 36

TTJ 205 (Indore); & CIT vs. Nabha Sovex (P) Ltd. - 343 ITR 178 ( P& H ).

He reiterated that there is no dispute that the building was completed in the

assessment year 2002-03 and, therefore, estimation by the DVO in the year

under consideration is not in accordance with law.

5. The Learned AR submitted further that the report of DVO is based on

CPWD rates whereas PWD rates should have been adopted by the DVO. In

this regard, he placed reliance on several decisions including the decision of

Hon'ble jurisdictional Punjab & Haryana High Court in the case of CIT vs.

Harchand Palace- 269 ITR 251 ( P&H ). The Learned AR submitted further

that even otherwise it is well settled law that since the expenditure incurred

is supported by bills and registered valuer's report, the same could not be

disregarded. He referred page Nos. 9 to 19, 88 to 203 of the paper book

wherein copy of registered valuer's reports supported by bills and vouchers 4

have been made available. He submitted that these documents were not filed

before the Assessing Officer since no proper opportunity was provided. He

placed reliance on the following decisions in support of his contentions that

issuance of notice under sec. 251(2) is mandatory for the Learned

CIT(Appeals) before making enhancement:

i) Veerappa T. Shetty - ITA No. 5276/Mumbai/2011 dated 30.5.2012;

ii) Manoj Jindal - ITA No. 242/JP/2011 dated 22.7.2011; &

iii) CIT vs. Lotte India Corporation Ltd. - 290 ITR 248 (Mad.). 5.1 The Learned AR also placed reliance on several decisions including

the decision of Hon'ble Supreme Court in the case of Sergam Cinema vs.

CIT, 328 ITR 513 (S.C) in support of his contention that since the

expenditure incurred was supported by bills and registered valuer's report,

the same could not be disregarded.

6. The Learned DR on the other hand placed reliance on the First

Appellate Order.

7. Having gone through the orders of the authorities below, we find that

they have assigned several reasons for non-reliance upon the report of 5

registered valuer. We, however, find that the Learned CIT(Appeals) while

enhancing the addition based upon the report of DVO referred by him, has

not issued notice under sec. 251(2) of the Act to the assessee. At page No.5,

the Learned CIT(Appeals) has noted that the representative of the assessee

did not avail the opportunity to rebut the valuation report. Thus, it is obvious

that the assessee was having no occasion to confront the valuation report of

the DVO or the proposed enhancement of addition by the Learned

CIT(Appeals) from an amount added on this account by the Assessing

Officer. We, thus in the interest of justice remand the matter back to the file

of the Learned CIT(Appeals) to comply with the provisions laid down under

sec. 251(2) of the Income-tax Act, 1961 and to decide the matter accordingly

after affording adequate opportunity of being heard to the assessee. The

ground is accordingly allowed for statistical purposes.

8. In result, the appeal is allowed for statistical purposes.

Decision pronounced in the open court on 11.03.2015

Sd/- Sd/-

( B.C. MEENA ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 11/03/2015 Mohan Lal 6

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR

Date Draft dictated on Computer 11.03.2015 Draft placed before author 11.03.2015 Draft proposed & placed before the second 11.03.2015 member Draft discussed/approved by Second Member. Approved Draft comes to the Sr.PS/PS 12.03.2015 Kept for pronouncement on File sent to the Bench Clerk 13.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order.