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TMI Blog2023 (3) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... ws that he has allowed only 10% towards reduction in cost of material purchased by the assessee. Since the assessee is a reputed doctor, it is quite possible that he has purchased the material from sources known to him and is expected to get some further discount. Considering the totality of the facts of the case, we direct the AO to consider the discount for the material purchased by the assessee at 20% as against 10% allowed by the DVO. Similarly, the cost of self-supervision charges has been allowed by the DVO at 5% only whereas the Coordinate Benches of the Tribunal are allowing such self-supervision charges varying from 12.5% to 15%. We direct the AO to allow self-supervision charges at 12.5% as against 5% allowed by the DVO. AO is directed to recompute the cost of construction after reducing the discount for purchase of material at 20%, allowing self-supervision charges at 12.5% and whatever value is arrived by the AO, the same shall be deducted from the value arrived at by the DVO and the difference so arrived at shall be spread over A.Y 2009-10 to A.Y 2017-18 and the AO shall calculate the income of the assessee on the basis of such spread over. Applicability of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference is only Rs.66,09,203/- and not Rs.1,76,55,000/- as proposed. Since the assessee did not file any other objection except stating that due to COVID 19, they were unable to get the valuation done by the Govt. Valuer, therefore, the valuation was done by Satya Constructions. The Assessing Officer, therefore, inferred that the assessee failed to establish the actual cost of construction of the hospital building which involved huge amount of Rs.66,09,203/- as per the valuation report of the DVO. Since the assessee did not file any objection to the report of the DVO and failed to establish the source of income for the investment in the hospital building, the Assessing Officer made addition of Rs.66,09,203/- u/s 69 of the I.T. Act and treating the same as unexplained investment. 5. Before the CIT (A), the assessee made elaborate arguments. It was submitted that the valuation done by the DVO is faulty. It was argued that the assessee being the Managing Partner of the firm is a well-known person and obtained construction materials at a discount of 30 to 35% of the general market rate. Further, the DVO has adopted different method for calculating the cost per sq. meter in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction of the hospital building. During the assessment proceedings, the Assessing Officer had referred to the Valuation Officer of the Income Tax Department for valuation of the hospital cum residential building constructed by the appellant. Subsequently, the Valuation Officer submitted valuation report 30.03.2021, as per which the hospital building was valued at Rs. 1,76,55,000/-. Further, during the assessment proceedings, the appellant submitted a valuation certificate issued by one M/s. Sathya Construction, as per which cost of construction of hospital building was valued at Rs. 1,10,45,797/-. The Assessing Officer treated the difference in the cost of construction of hospital building as per the Valuation Officer of the Department and that of the one submitted by the appellant, i.e., amount of Rs. 66,09,203/- as unexplained investment u/s. 69 of the IT Act. During the appeal proceedings, the appellant filed written submission in response to the hearing notices issued. The appellant raised its contentions with respect to the valuation report of the DVO in its submissions. The appellant claimed that the managing partner of the appellant firm is a well-known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material was used and specification of material used was not at par with the Govt. Standard and accordingly gave a deduction of 10% of the total value of construction. The appellant's claim that the DVO adopted full value as per the rate approved by competent authority' is therefore incorrect. In view of the discussion in preceding paragraphs, the appellants contentions with respect the valuation report of the DVO are not acceptable and accordingly 2, 3 and 4 are dismissed and the addition made by the Assessing Officer is hereby confirmed. During the course of appeal proceedings, the appellant raised two additional grounds and contended that the hospital cum residential building was constructed over a period of time from FY 2010-11 to FY 2014-15 and made in the said years therefore the addition should have been proportionately. However, the appellant did not submit any books of account or any other documentary evidences in support the appellant's claim of incurring the expenditure over and above what was accounted in the books toward the building under consideration in different years. In absence of such material evidences, the unaccounted portion of cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted various case laws contending that the applicability in such a scenario would be from the date of Hon'ble Presidential assent which was 15.12.2016 according to the appellant. The above law has been laid by the Parliament and has its applicability for A.Y. 2017-18 onwards and the same has not been held otherwise by any of the Hon'ble Courts till date. This section was amended during the demonetization period and with the intent to curb the black money and also make the unaccounted income liable for higher amount of taxation. This has been consciously laid out law with its applicability from A.Y. 2017-18. It is important to note that as per the provisions of Section 271AAB of the IT Act, the words or after the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President' are explicitly included in the section for applicability of penalty as per this section. Relevant portion of the section 27 1AAB is as under. 271AAB. (1) The Assessing Officer 20-21jor the Commissioner Appeals) may, notwithstanding anything contained in any other provisions of this Act, direct that, in a, Case where search has been initiated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration. The finding of the ld. Commissioner (Appeals) that in the absence of books of accounts, the alleged unaccounted investment in cost of construction of building can only be taxed in the year of completion of the building is incorrect and is unsustainable. 4. Without prejudice to the grounds 2 3 above, the ld. Commissioner (Appeals) erred in rejecting the reliefs as pointed out by the Appellant and which ought to have been granted by the DVO while arriving at the cost of construction of the hospital building. 5. The learned Commissioner (Appeals) erred in dismissing the grounds raised by ne Appellant with respect applying special rate of tax at 60 percent and Surcharge at 25 percent on the addition of Rs.66,09,203 made under section 69A of the Act. 6. The Commissioner (Appeals) failed to appreciate that the amendment 6DrOught in by Taxation laws (Second Amendment) Act, 2016, to the provisions of section 115BBE as amended by Finance Act, 2016, are substantive and therefore cannot be made applicable prior to the date on which it received ascent of Hon'ble President of India on 15.12.2016. The reasons given by the ld. Commissioner (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one A.Y instead of spreading it over the period of construction i.e. from financial year 2009-10 to 2016-17 is not correct. 8. The learned Counsel for the assessee further submitted that the DVO has adopted the rate per sq. meter for hospital at Rs.13,905 as against the rate of Rs.12,441/- adopted for the residential building despite the quality of construction of the hospital building being inferior to the quality of the residential building. He submitted that when the assessee has purchased the cost of material at cheaper rate due to his personal contacts being a Doctor, therefore, the report of the DVO allowing only 10% discount on such material is not justified. Referring to various decisions he submitted that the Coordinate Benches of the Tribunal are granting supervision charges from 15% to 20% whereas DVO has allowed only 5% towards self-supervision charges which is unjustified. The learned Counsel for the assessee further submitted that the Assessing Officer has applied the rate of 60% u/s 115BBE of the Act which is not correct. He accordingly submitted that the addition made by the Assessing Officer and sustained by the CIT (A) be deleted and the grounds raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uare meter is higher than the cost of construction rate adopted by the same DVO for the residential building. According to him, since the quality of construction of the residential building is higher than the quality of the construction of the hospital building and the quality of material used in the residential building is better than the quality of material used for the hospital building, therefore, the rate per sq. meter for construction of the hospital building cannot exceed the rate per sq. meter for the residential building. It is also his submission that the discount at 10% towards purchase of material by the DVO against 30% claimed by the assessee is also on the lower side. Further, the self-supervision charges allowed by the DVO at 5% is much lower than the self-supervision charges allowed in various decisions starting from 15% to 20% It is also his submission that the applicability of 60% tax rate u/s 115BBE is not justified. 11. We find some force in the above arguments of the learned Counsel for the assessee. A perusal of the report of the DVO dated 30.03.2021 shows that at Para 6.5, the construction work was stated to have taken place in phased manner during 2009 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en allowed by the DVO at 5% only whereas the Coordinate Benches of the Tribunal are allowing such self-supervision charges varying from 12.5% to 15%. Considering the totality of the facts of the case, we direct the Assessing Officer to allow self-supervision charges at 12.5% as against 5% allowed by the DVO. 15.2 The Assessing Officer is directed to recompute the cost of construction after reducing the discount for purchase of material at 20%, allowing self-supervision charges at 12.5% and whatever value is arrived by the Assessing Officer, the same shall be deducted from the value arrived at by the DVO and the difference so arrived at shall be spread over A.Y 2009-10 to A.Y 2017-18 and the Assessing Officer shall calculate the income of the assessee on the basis of such spread over. 16. So far as the ground relating to applicability of provisions of section 115BBE is concerned, since the addition has been made u/s 69 of the I.T. Act, therefore, the learned CIT (A) is fully justified in upholding the order of the Assessing Officer on this issue. Therefore, the additions so made after the calculations shall be taxed u/s 115BBE for A.Y 2017-18. Grounds raised by the assessee ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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