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2020 (4) TMI 433 - AT - Income TaxReopening of assessment u/s 147 - re-opening was done based on the report of the Valuation Officer - additional ground was not raised while filing of appeal - HELD THAT - The contention that, Reference to DVO made when no proceeding pending and re-opening made is devoid of any merit and based on wrong and misleading facts and contrary to record. Additional ground is neither maintainable as no argument and justification is given and how it has come to be raised in second round of assessment proceedings which was carried out at the behest of Tribunal for supplying reasons for reopening of assessment only, Nor this grounds of appeal was taken before the AO, hence, it is not maintainable in law and also liable to be dismissed on merits due to facts as discussed above. - Additional grounds dismissed. Addition being difference between the value determined by the DVO - HELD THAT - The assessee has failed to adduce any evidence of cost of construction before the DVO. The perusal of DVO report showed that the AO even try to stop the DVO for making inspection of property and it was done in the presence of Inspector of Department. Therefore, the objection relating to DVO Report is not correct hence, it is not acceptable. Further, seen that the construction was started from 1996-97 and reached finality in the A.Y. 1999-2000. The assessee has not shown any work in progress as no return for A.Y. 1996-97 to 1999-2000 has been ever filed. - As per the records, the assessee has shown project completion method, hence, the profit is liable to be taxed in the assessment year under consideration only , hence, we hold the same. In the Registered Valuer report, the assessee shown rate of construction at 325 per Sq. Ft. for the total construction area of 16980 sq. Ft. However, these figures are not supported by the books of accounts as the assessee failed to produce any books of accounts before the income-tax authorities as well as DVO. The assessee has not cooperated with DVO also nor filed any details. The assessee has not established its claim of cost by producing books of accounts before the AO. In such circumstances and non corporative attitude of the assessee, the AO could not do justice with the assessee. The assessee himself has total cost at ₹ 66,77,000 and expenses at ₹ 65,97,000 of which difference comes to ₹ 87,000 which is the net profit according to the assessee. - Same is also not disclosed as no return of income was filed. Similarly, in such type of project where 21 flats have been constructed, it would be reasonable to adopt Net Profit Rate as applicable to construction business. It is settled law that entire receipts cannot be taxed. In the light of these facts, only net profit is required to be taxed not the entire receipts. Therefore, real income is only to be taxed. - it would meet the end of justice if 5% of net profit rate is to be applied to gross receipts - Decided partly in favor of assessee.
Issues Involved:
1. Validity of reopening the assessment based on the DVO report. 2. Addition of ?39,48,225 based on the difference between the DVO valuation and the cost reported by the assessee. 3. Justification for making the entire addition in one year when construction was spread over multiple years. 4. Whether the DVO's adoption of CPWD rates was appropriate. 5. Whether the DVO's valuation should be ignored due to lack of show-cause notice to the assessee. Issue-Wise Detailed Analysis: 1. Validity of Reopening the Assessment Based on the DVO Report: The assessee contended that the reopening of the assessment under section 148 was invalid as it was based on a DVO report obtained when no proceedings were pending. The assessee argued that the reference to the DVO could only be made during pending assessment proceedings. The Tribunal noted that the reference to the DVO was made during the assessment proceedings of M/s. Deep Laxmi Apartment and not directly in the assessee's case. The Tribunal found that the DVO's valuation report was obtained during valid assessment proceedings in the case of M/s. Deep Laxmi Apartment, and thus, the reopening of the assessment in the assessee's case was valid. The additional ground raised by the assessee regarding the invalidity of the reopening was dismissed. 2. Addition of ?39,48,225 Based on the Difference Between the DVO Valuation and the Cost Reported by the Assessee: The assessee argued that the addition based on the DVO report was not justified, citing various case laws. The Tribunal observed that the assessee did not cooperate during the assessment proceedings and failed to produce books of accounts or any supporting evidence for the cost of construction. The DVO's report showed a significant difference between the declared cost and the assessed value. The Tribunal found that the assessee's claim of ?36,00,000 as the cost of construction was not supported by books of accounts. The Tribunal decided to adopt a reasonable net profit rate for the construction business, ultimately sustaining an addition of ?3,36,561 and deleting the balance addition of ?36,11,663. 3. Justification for Making the Entire Addition in One Year: The assessee argued that the construction was spread over four years, and thus, the addition should not be made in one year. The Tribunal noted that the assessee did not file any returns or show work in progress for the relevant years. The Tribunal held that since the assessee followed the project completion method and failed to provide year-wise income details, the entire profit was taxable in the assessment year under consideration. 4. Whether the DVO's Adoption of CPWD Rates Was Appropriate: The assessee contended that the DVO adopted CPWD rates instead of local PWD rates, which was not appropriate. The Tribunal found that the assessee did not raise any objections before the DVO during the valuation process. The Tribunal held that the DVO's adoption of CPWD rates was not a valid ground for challenging the valuation. 5. Whether the DVO's Valuation Should Be Ignored Due to Lack of Show-Cause Notice to the Assessee: The assessee claimed that the DVO did not provide a show-cause notice before finalizing the valuation. The Tribunal noted that the DVO had issued several notices and even made telephonic contact with the assessee, who failed to cooperate. Therefore, the Tribunal rejected this ground, stating that the DVO followed due process. Conclusion: The Tribunal dismissed the additional ground regarding the invalidity of reopening the assessment. It partially allowed the appeal by sustaining an addition of ?3,36,561 based on a reasonable net profit rate and deleting the balance addition. The Tribunal found that the assessee's non-cooperation and failure to produce supporting evidence justified the addition made by the AO, albeit with adjustments. The order was pronounced on 04.02.2020.
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