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TMI Blog2015 (2) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals) is bad in law and the Assessing Officer is directed to delete the addition so made. On merit also, the valuation report issued by the Departmental Valuation Officer is not reliable as there are several limitations of plinth area rate method applied. Also the valuation report submitted by the assessee has not been refuted by the Departmental Valuation Officer in spite of many opportunities given to the Departmental Valuation Officer during the course of proceedings under section 263 of the Act. It is also a fact on record that the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer has not cast upon any doubt in the entries in the cash flow statement and has not pointed out any defect in the same, which in fact, has been considered by the Assessing Officer for making addition to the returned income of the assessee. Thus no addition on this account can be made and so directed to be deleted - Decided in favour of assessee. Non deletion of addition of 8,18,998 on account of rental income from house property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, i.e., 1999-2000 to 2002-03. During the assessment years 1999-2000 to 2002-03, grounds Nos. 1, 8, 9 and 10 are general in nature and therefore, do not require any adjudication. In each of the four assessment years, i.e., 1999-2000 to 2002-03, grounds Nos. 2 to 6 are related to difference in valuation of immovable property located at Raj Villa, Kanti Factory Road, Patna, against the additions sustained the learned Commissioner of Income-tax (Appeals). Whereas ground No. 7 in each of the four said assessment years relate to the addition confirmed on account of rental income, i.e., income from house property with regard to the property at Raj Villa, Kanti Factory Road, Patna. Since grounds Nos. 2 to 6 and ground No.7 in each of the said four assessment years are identical except the amounts referred to therein, therefore, we proceed to decide the appeal of the assessee in I. T. A. No. 27(Asr)/2011 for the assessment year 1999-2000 and our decision hereinbelow for the assessment year 1999-2000 shall be identically applicable in other assessment years, i.e., 2000-01, 2001-02 and 2002-03. The difference of amount in grounds Nos. 2 to 6 with respect to the assessment year 2000-01 is &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers from per versity and is liable to be set aside as such. 7. That the learned Commissioner of Income-tax (Appeals) has erred in not deleting the addition of ₹ 8,18,998 on account of rental income from house property, located at Raj Villa, Kanti Factory Road, Patna." 2. As regards grounds Nos. 2 to 6 for the assessment year 1999-2000, the brief facts of the case are that a search and seizure operation under section 132 of the Act was conducted on November 5, 2004, at the residential premises of Dr. Rajeshwar Prasad Singh, his family members and associates. Dr. Binoy Kumar Singh, karta of the appellant HUF, is the son of Dr.Rajeshwar Prasad Singh. During the course of original assessment proceedings, the Assessing Officer had referred the matter to the Departmental Valuation Officer (DVO) for estimation of the cost of construction of the building "Raj Villa", Kanti Factory Road, Patna. The Departmental Valuation Officer's report was, however, received after the completion of assessment proceedings and finalisation of the assessment order. The Departmental Valuation Officer estimated the cost of investment in the property Raj Villa at ₹ 30,54,000, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the opposing contentions, I find that the appellant has not been able to establish with credible evidence the actual investment made in the construction of the property. Further, the report of the registered valuer was also not based, on item wise method, but the valuation was based on estimation, by applying the rates applicable in 1976 when the construction was made after 1995. The authorised representative sought to rely on a CPWD memorandum, dated June 29, 1992 which, while laying down the plinth area rate as on January 1, 1992, indicated that plinth area rate as applicable on October 1, 1976, will continue to be applicable for work-in- progress. However, in the present case, the valuation of the building constructed earlier had been made earlier on the basis of 1976 rates, and the Departmental Valuation Officer adopted the same valuation in the new valuation report also. There was a clear demarcation of the construction already made earlier and the construction made after 1995, which formed the subject matter of the present Departmental Valuation Officer's valuation. The building could not be thus categorised as a work-in-progress for the purpose of the valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The difference between the investment disclosed by the appellant and the investment as per the Departmental Valuation Officer's report in respect of the assessment years relevant to these appeals should be worked out. The addition is sustained to the extent of such difference. The Assessing Officer is directed accordingly." 4. Learned counsel for the assessee argued on the similar lines, as submitted in the written submission/synopsis placed on record during the course of hearing and the learned Departmental representative, on the other hand, relied upon the orders of the authorities below. 5. We have heard the rival contentions and perused the facts of the case. Learned counsel for the assessee submitted that the requirement in search proceedings is not mechanical in nature but has to be based on any cogent material seized during the course of search and seizure proceedings or otherwise. The learned Commissioner of Income-tax (Appeals) has wrongly concluded that the Income-tax Appellate Tribunal has adjudicated the issue under section 142(A) which, in fact, has been adjudicated on the matter of specific ground, whether reference under section 142(1) was made by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence of unexplained investment, the registered valuer report, as submitted by the assessee cannot be rejected, in view of the decision of the hon'ble Allahabad High Court in the case of CIT v. Sheikhar Chand and Sons [1990] 186 ITR 269 (All). Learned counsel for the assessee has relied upon the decision of the Income-tax Appellate Tribunal, Patna Bench, which has been affirmed by the Third Member in the case of Shanti Complex v. ITO [1999] 237 ITR (AT) 27 (Patna), where the relevant decision of the Income-tax Appellate Tribunal, Patna Bench, is reproduced, as under (page 45) : "3. Not only this, I feel confronted with another legal dilemma. The report obtained by the assessee from a registered valuer referred to supra as very much before the Assessing Officer. He has not only preferred the report of the Valuation Officer over the report of the registered valuer but has totally ignored the latter report. There is no quarrel that the report of an expert only acts as a opinion before a judicial or quasi-judicial/statutory authority to whom it is submitted and who is entitled to prefer one over the other in a case here there are more reports than one on the same subject, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee spent more than what they claimed for the relevant construction." 6. Accordingly, in the facts and circumstances of the case, the addition so made on the basis of Departmental Valuation Officer' report by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is against the law and facts of the present case. Accordingly, the addition so confirmed by the learned Commissioner of Income-tax (Appeals) is bad in law and the Assessing Officer is directed to delete the addition so made. 7. On merit also, the valuation report issued by the Departmental Valuation Officer is not reliable as there are several limitations of plinth area rate method, which has been stated to be as under : "-The method of measurement of plinth area as prescribed in IS : 3861-1997 differs significantly and vastly from the rules for working out plinth area as prescribed by DG, CPWD. The guidelines issued by the CPWD are antiquated and leads to inconsistent and erratic results. -The rates given in the plinth area rates are average rate for all floors. Certain buildings do not provide for roof treatment. No deduc tions have been provided in plinth area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental Valuation Officer and the fact of having furnishing the same has been noted on paper book at page 182 of the paper book (page 183 being typed replica of page 182). During the course of assessment, the Assessing Officer has requisitioned the books of account as well as cash flow and fund. Flow statements vide questionnaire, dated July 30, 2009. Copies of questionnaire, dated July 30, 2009, is being placed on pages 90 to 102 of paper book." 9. It is also a fact on record that the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer has not cast upon any doubt in the entries in the cash flow statement and has not pointed out any defect in the same, which in fact, has been considered by the Assessing Officer for making addition to the returned income of the assessee. Such cash flow statement has not been rejected by the Assessing Officer, in fact, is the replica of the books of account, though actual books of account have not been produced by the assessee. In the facts and circumstances of the case, no addition on this account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years 1999-2000 and 2000-01 and ₹ 15,45,075 and ₹ 13,85,572 during the assessment years 2001-02 and 2002-03 respectively. 13. The learned Commissioner of Income-tax (Appeals) after considering the submissions of the assessee decided the issue as per pages 11, 12 and 13 of the order, which for the sake of convenience is reproduced as under : "I have considered the submissions of the appellant and perused the material brought on record during appellate proceedings. A chart showing rent receipt from the various flats from the assessment years 1999-2000 to 2005-06 was filed by the authorised representative and the reduction in declared rental receipts was attributed to the lower rent fetched from the second floor of block A. Perusal of the chart showed that during the assessment years 1999-2000, 2000-01 and 2001-02, the entire second floor was shown as rented out the Ground Water Board. The rent during the first two years was shown as ₹ 9,45,732. In the assessment year 2001-02, however, rent was shown as only ₹ 1,57,622 from the same tenant. In the assessment year 2002-03, the entire floor is shown rented out to one Sh. Sanjiv Kumar for ₹ 18,000, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction till the assessment year 2002-03. The entire block B was shown as under construction till the assessment year 2000-01. In the assessment year 2001-02, except for the ground floor, the entire block B is shown as under construction. In the assessment year 2002-03 also, only eight flats are shown as rented out, while the rest of the flats are shown as being under construction. Since no evidence of the dates of completion of respective floors has been adduced by the appellant, it would be helpful to advert to the report of the registered valuer filed by the appellant in this regard. As per the report, the percentage progress of completion till the assessment year 1998-99, i.e., assessment year 1999-2000 was 73.49 per cent. The statement of the appellant on this issue is not in harmony with the report of the registered valuer. I have gone through the case law cited by the authorised representative. It is observed that, the case law are not relevant to the facts of the case, since they pertain to the period prior to insertion of section 24(1)(b) into the Act. The position as it stands now is that the municipal valuation or the fair rental value, whichever is higher is taken to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions cannot be accepted. The appel lant's claim is also at variance with the market position regarding rents, which have shown a geometric increase during the last decade. After considering the totality of facts and circumstances, the addition is upheld in respect of the assessment years 2001-02 and 2002-03, when the building was substantially complete as per the registered valuer's report. The Assessing Officer is directed to accept the income from house property as disclosed in respect of the assessment year 1999-2000. Taking into account the percentage/progress of comple tion, the income from house property during the assessment year 2000-01 is directed to be estimated as ₹ 15,00,000." 14. Learned counsel for the assessee argued on the similar lines, as submitted in the written submission/synopsis, placed on record, during the course of hearing and the learned Departmental representative, on the other hand, relied upon the orders of the authorities below. 15. We have heard the rival contentions and perused the facts of the case. On perusal of the chart of flat-wise rent receipts for each of the blocks A and B submitted before the authorities below and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to let from year to year, the annual rent received or receivable shall be taken as the annual value of the property." 16. The reliance is placed on the following decisions : (i) Mrs. Sheila Kaushish v. CIT [1981] 131 ITR 435 (SC) ; (ii) CIT v. Prabhabati Bansali [1983] 141 ITR 419 (Cal) ; (iii) M. V. Sonavala v. CIT [1989] 177 ITR 246 (Bom) ; (iv) Smt. Smitaben N. Ambani v. CWT [2010] 323 ITR 104 (Bom) ; and (v) Kashi Prasad Kataruka v. CIT [1975] 101 ITR 810 (Patna). 17. Accordingly, as submitted by learned counsel for the assessee and which matter is on record that the assessee has declared more rental income than municipal rental valuation and in view of the decisions relied upon by learned counsel for the assessee and our findings hereinabove and Circular No. 204, dated July 24, 1976 (supra), we are of the view that there is no evidence with the Revenue to show that the assessee had collected more rent than what has been declared in the returns of income filed regularly with the Income-tax Department. Accordingly, no addition is called for on such account. Thus, the addition so made and sustained by the learned Commissioner of Income-tax (Appeals) is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which no clarification in the bank was filed by the assessee. Accordingly, the Assessing Officer made an addition of ₹ 3,51,000 during the assessment year 2004-05 and ₹ 1,21,000 during the assessment year 2005-06, which additions have been confirmed by the learned Commissioner of Income-tax (Appeals) in each of the year. 24. Learned counsel for the assessee made written submissions and argued on the similar lines whereas the learned Departmental representative relied upon the orders of the authorities below. 25. We have heard the rival contentions and perused the facts of the case. The assessee has declared professional receipts of ₹ 3,40,000, which fact is evident from cash flow statement submitted before both authorities below and according to us, it is an undisclosed deposit which covers the said addition and which cash flow statement has been approved by us hereinabove. In the facts and circumstances, the learned Commissioner of Income-tax (Appeals) is not justified in confirming the additions made by the Assessing Officer for both assessment years, i.e., 2004-05 and 2005-06 and the additions so made are directed to be deleted in each of the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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