2022 (6) TMI 946 - AT - Income Tax

Valuation of property - cost of construction of the property which was let out to Incor Hospitals - unexplained investment U/s. 69B - matter referred to DVO - CIT (A) granted relief towards construction above Terrace B and towards steel fire escape - HELD THAT - AR demonstrated before us from the DVO s report dated 29/06/2017 that the construction above Block-B Terrace and steel fire escape is included in the valuation report submitted by the DVO. AR pleaded that this was also demonstrated before the Ld. CIT(A) and hence the Ld. CIT(A) granted relief on this issue. We also note DVO has considered the valuation in valuing the construction of the property. AR pointed that these expenses were incurred by the lessee and hence adding it to the cost of construction of the assessee is not valid. We find from the valuation report of the DVO that this cost of construction has been included in the valuation report and being considered as cost of construction of the assessee. We therefore find merit in the arguments of the Ld. AR and from the materials placed before us, we find that there is no infirmity in the order of the Ld. CIT(A) on this ground and hence no interference is required. Addition to cost of lifts - As submitted by the Ld. AR the copies of bills have been made available to us and before the Ld. CIT(A). CIT(A) has therefore rightly considered the cost of invoices given by Kone Elevator India Private Limited for Rs. 16,05,000/- for 13 passenger capacity and Rs. 10,82,000/- for 8 passenger capacity. The cost of lifts is evidenced by the invoices issued by the supplier which was also produced before us. Therefore, on going through these documents and the facts involved in this issue, we find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on this ground. Cost of transformers estimated by the DVO - We find from the paper book page No. 66 that the invoice from Esennar Transformers Pvt Limited is placed before us where the cost of transformer is only Rs. 5,14,609/- and the Ld. CIT(A) has rightly considered the same in his order. We therefore find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on this ground. Allowing of rebate of 25% (15% towards difference between CPWD rates and local rates and 10% towards self supervision) as against 7.5% granted by the DVO - We find merit in the argument of the Ld. AR that CPWD rates are generally higher than the State PWD rates which was not at all considered by the DVO. The DVO has erred in adopting the CPWD rates in lieu of local State PWD rates in the valuation of the property. CIT(A) has referred to the Hon ble ITAT, Vizag Bench decision in many cases cited by the assessee before him and allowed the rebate of 15% towards the difference between the CPWD rates and State PWD rate and also allowed the relief of 10% towards self-supervision from the cost estimated by the DVO. We find that the Ld. CIT(A) has rightly observed the difference between the CPWD rates and local State PWD rates and we find that the rates adopted by Ld.CIT(A) is reasonable and we are of the considered view that there is no infirmity in the order of the Ld.CIT(A) and no interference is required. Cost of construction of the property subsequent to handing over of possession to the lessee - DR could not demonstrate that the capital work in progress shown in the books of accounts pertains to any other property. We find force in the argument of the Ld. AR and we are of the considered view that the construction activities as disclosed in the books of accounts for the impugned property after the submission of documents from GVMC on 2/4/2013 deserves consideration towards cost of construction. The Ld. CIT(A) has rightly considered the same and therefore we find no infirmity in the order of the Ld. CIT(A) and no interference is required on this ground. DVO has not submitted the report within six months as specified U/s. 142A of the Act and therefore it is not valid - Ld. DR countered that section 142A(6) came into force only from 1/10/2014 and the case of the assessee pertains to AY 2014-15 and hence no limitation applies in the instant case. We agree with the contentions of the Ld. DR that since the amendment came into force from 1/10/2014, the limitation specified therein shall be applicable for the AY 2015-16 and shall not be applicable for the AY 2014-15.

Summary

Issues Involved:

1. Relief of Rs. 26,82,067/- towards construction above Terrace B and steel fire escape.
2. Relief of Rs. 15,65,500/- towards cost of lifts.
3. Relief of Rs. 4,85,391/- towards cost of transformers.
4. Rebate of 25% (15% towards difference between CPWD rates and local rates and 10% towards self-supervision).
5. Cost of construction incurred by the assessee and the inclusion of capital work in progress.
6. Disallowance of Rs. 4,43,02,416/- towards unexplained investment U/s. 69B of the Act.
7. Validity of the DVO report submitted beyond the six-month period specified U/s. 142A of the Act.

Detailed Analysis:

1. Relief of Rs. 26,82,067/- towards construction above Terrace B and steel fire escape:

The Ld. CIT(A) granted relief of Rs. 26,82,067/- by holding that the DVO failed to exclude these amounts. The Ld. DR argued that the DVO considered the cost of construction and the assessee did not submit any details. The Ld. AR demonstrated that the expenses were incurred by the lessee and were included in the DVO's valuation report. The Tribunal found merit in the Ld. AR's arguments and upheld the Ld. CIT(A)'s decision, finding no infirmity in the order.

2. Relief of Rs. 15,65,500/- towards cost of lifts:

The Ld. CIT(A) allowed relief by considering invoices submitted by Kone Elevator India Pvt Ltd. The Ld. DR contended that the bills were not provided to the DVO. However, the Tribunal found that the invoices were available and the Ld. CIT(A) rightly considered them. The Tribunal upheld the Ld. CIT(A)'s order, finding no infirmity.

3. Relief of Rs. 4,85,391/- towards cost of transformers:

The Ld. AR presented an invoice from Esennar Transformers Pvt Ltd for Rs. 5,14,609/-. The Ld. DR argued that the invoice was not presented before the AO or the DVO. The Tribunal found the invoice in the paper book and upheld the Ld. CIT(A)'s decision, finding no infirmity.

4. Rebate of 25% (15% towards difference between CPWD rates and local rates and 10% towards self-supervision):

The Ld. AR argued that the DVO did not consider the difference between CPWD and local State PWD rates and only allowed 7.5% for self-supervision. The Tribunal found that the Ld. CIT(A) correctly observed the difference and allowed a reasonable rebate. The Tribunal upheld the Ld. CIT(A)'s decision, finding no infirmity.

5. Cost of construction incurred by the assessee and the inclusion of capital work in progress:

The Ld. AR argued that the Ld. AO erred by not considering the cost of construction shown as capital work in progress. The Ld. DR contended that no construction after the period should be considered for valuation. The Tribunal found force in the Ld. AR's argument and upheld the Ld. CIT(A)'s decision to consider the construction activities disclosed in the books of accounts. The Tribunal found no infirmity in the Ld. CIT(A)'s order.

6. Disallowance of Rs. 4,43,02,416/- towards unexplained investment U/s. 69B of the Act:

The Ld. AR argued that the additions made by the Ld. AO were addressed item by item and recorded in the books of accounts. The Tribunal found no infirmity in the Ld. CIT(A)'s order and upheld the decision, finding no interference required.

7. Validity of the DVO report submitted beyond the six-month period specified U/s. 142A of the Act:

The Ld. AR argued that the DVO's report was not submitted within six months as specified U/s. 142A of the Act. The Ld. DR countered that the limitation applied from 1/10/2014 and was not applicable for AY 2014-15. The Tribunal agreed with the Ld. DR and found that the limitation did not apply in this case.

Conclusion:

The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, upholding the Ld. CIT(A)'s decisions on all grounds. The Tribunal found no infirmity in the Ld. CIT(A)'s orders and required no interference.