2012 (9) TMI 983 - HC - Income Tax

Summary

Issues involved:
The judgment involves the following Issues:
1. Interpretation of Section 260-A of the Income Tax Act, 1961.
2. Validity of decision based on cross-objection filed by the assessee.
3. Applicability of the decision in CIT vs. Abeson Hotel (P) Ltd.
4. Justification of not deciding the appeal after referring to the D.V.O.
5. Consideration of supervision cost in valuation.

Issue 1:
The Income Tax Appeal under Section 260-A of the Income Tax Act, 1961 was raised by the department against the order of the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad dated 8.10.2010 in I.T.A. No. 223 (Alld)/2010 for the assessment year 2006-07.

Issue 2:
The department questioned the Tribunal's decision to prioritize the cross-objection of the assessee, which raised a factual controversy, over the departmental appeal without deciding the controversy on merits. The Tribunal relied on its own decision in a previous case involving M/s Rohtas Projects Ltd., Lucknow, which was not accepted by the department and was subject to appeal u/s 260-A of the Act before the High Court.

Issue 3:
The department raised concerns regarding the applicability of the decision in CIT vs. Abeson Hotel (P) Ltd., which held that no deduction should be made for understatement of investment in the building if the valuation estimated by the D.V.O is within 10%. The department argued that the Act and Rules do not mandate acceptance of the difference up to 10% between the valuation shown by the assessee and that by the DVO.

Issue 4:
After referring the matter to the D.V.O, the Tribunal did not decide the appeal filed by the department, despite the DVO's report not aligning with the investment disclosed by the assessee in the case of Tulsiani Plaza and Chandan Vihar.

Issue 5:
The department contested the reliance on the decision in the case of Abeson Hotels by the CIT (A) and the Tribunal, as the addition of supervision cost resulted in a percentage difference of 22.15% and 17.80% in the cases of Tulsiani Plaza and Chandan Vihar, respectively.

The judgment highlighted the importance of rejecting accounts before referring the matter to the DVO, as per the decision in Sergam Cinema v. Commissioner of Income-Tax. It emphasized that the AO should not refer the matter to the DVO without rejecting the account books, as was done in this case. The Tribunal's decision to follow the principle laid down by the Supreme Court in Sergam Cinema v. Commissioner of Income-Tax was deemed appropriate in this context.