2012 (10) TMI 1261 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening of assessments.
2. Determination of cost of construction.
3. Power of CIT(Appeals) to give directions for another year.
4. Adoption of CPWD vs. State PWD rates for valuation.

Summary:

1. Validity of Reopening of Assessments:
The assessees challenged the validity of the reopening of assessments, except for Shri Shivlal, whose assessment was a regular one. The CIT(Appeals) initially held that the reopenings based on the DVO report were not valid. However, this Tribunal, in its order dated 20.11.2009, held the reopening to be valid and remitted the case back to the CIT(Appeals) for adjudicating the issue relating to the cost of construction.

2. Determination of Cost of Construction:
The CIT(Appeals) directed the adoption of State PWD rates for determining the cost of construction, reducing the CPWD rates by 20% as per the Tribunal's decision in Prabhu Deva v. ITO. The CIT(Appeals) also spread the cost of construction over two assessment years (2003-04 and 2004-05) based on the DVO's report. The Revenue argued that the addition should not be split over two years, citing the decision of the Hon'ble Kerala High Court in Sakthi Tourist Home v. CIT. The Tribunal found that the matter required a re-visit by the Assessing Officer to determine the cost of construction with cogent reasons, whether based on CPWD or State PWD rates, and to consider the books maintained by the assessees.

3. Power of CIT(Appeals) to Give Directions for Another Year:
The Revenue contended that the CIT(Appeals) did not have the power to give directions for another year. The Tribunal referred to the Hon'ble Apex Court's decision in Rajinder Nath v. CIT, which clarified that a finding necessary for the disposal of the case could involve directions for another year if intimately involved in the process. The Tribunal concluded that the CIT(Appeals) had the power to direct the spreading of the unexplained investment over the period of construction.

4. Adoption of CPWD vs. State PWD Rates for Valuation:
The assessees argued that State PWD rates should be adopted instead of CPWD rates. The Tribunal noted that the CIT(Appeals) relied on the decision in Prabhu Deva v. ITO, which allowed a 20% reduction on CPWD rates to align with State PWD rates. The Tribunal emphasized that the determination of cost of construction should be based on the facts of each case and remitted the issue back to the Assessing Officer for fresh consideration.

Conclusion:
The Tribunal set aside the orders of the authorities below and remitted the issue back to the Assessing Officer for fresh consideration, directing the A.O. to determine the cost of construction in accordance with the law and provide the assessees an opportunity to justify their declared cost of construction. The appeals of the Revenue and the cross-objections of the assessees were partly allowed for statistical purposes.