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ITO, Ward-4, Sector-12, Karnal Versus Siri Guru Ram Dass Rice Co.

2015 (4) TMI 178 - ITAT DELHI

Unexplained investment in building - difference in the cost of construction shown by the assessee and that determined by the D.V.O. on the basis of reference made u/s 142A - CIT(A) deleted the addition - Held that:- No defect in the books of accounts has been pointed out by the department. The fact of assessee incurring expense of ₹ 10,35,797/- during the period 2007-08 & 2008-09 assessment years has not been factored in by the DVO. The finding on record in regard thereto has not been upse .....

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essee also remains unassailed - Decided in favour of assessee.

Fall in G.P. rate - failure to furnish evidence for claim of production of chhilka and driage, fall in production of rice and under valuation of closing stock of bardana - CIT(A) deleted the addition - Held that:- No good reason to interfere to the order of the CIT(A) where evidently books of accounts had not been rejected and no defect in the books of accounts maintained has been pointed out either by the AO or the Sr. DR .....

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/- claimed by the assessee he found that it consisted of payment against three freight vouchers of ₹ 12,000/- each and hence consisted of three independent contracts consequently he concluded that TDS was not required to be deducted. - Decided in favour of assessee in part. - I.T.A. No. 3870/Del/2009, CO No. 369/Del/2009 - Dated:- 31-3-2015 - Sh. G. D. Agrawal And Smt. Diva Singh,JJ. For the Appellant : Sh. B.R.R.Kumar, Sr. DR For the Respondent : Sh. P. S. Sharda, Adv. ORDER Per Diva Sing .....

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eration on the basis of reference made u/s 142A. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of ₹ 25,000/- made on various counts such as fall in G.P. rate from 36.71 % to 27.88%, failure to furnish evidence for claim of production of chhilka and driage at 27.2% as against 26.82% of last year, fall in production of rice from 10.87% of last year to 10% and on account of under valuation of closing stock of bardana. 3. On the .....

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30.10.2006 which was subjected to a scrutiny assessment. The facts relatable to the first issue are found discussed at paras 2 to 2.2 at pages 1 to 4 of the assessment order. A perusal of the same shows that the assessee is earning income from running a rice mill. The AO noticed from the details of the fixed assets filed that the assessee had shown increase in building account at ₹ 21,61,172/- as compared to ₹ 17,37,148/- in the preceding year. He further observed that net addition .....

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ssessee the AO confronted the same to the assessee. The assessee as per record is found to have replied vide letter dated 22.12.2008 objecting to the reference being made to the DVO in view of the fact that the day to day record of construction supported by vouchers of each expense had been maintained and no discrepancy or mistake in regard thereto had been pointed out. For ready-reference, we extract the submissions from pages 2 & 3 of the AO:- "Even on merits proposal of your good sel .....

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hat the DVO could not see the figure of ₹ 4,90,0001- , which was received by the assessee as incentive given by the APEDA. Hence, the alleged difference is ₹ 13,88,7281- ₹ 42,69,877 minus ₹ 2881149) and not ₹ 21,08,705 as mentioned in your notice. In this connection it is submitted that D.V.O. has calculated the value on estimate basis by adopting the specifications of government godowns and applied the same rates which are prevalent in cities. Whereas the assessee .....

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it done in his own supervision. Moreover Sir, D.V.O. has made an addition of ₹ 1,63,269/- regarding builders profit. This should have been deducted instead of making addition of it. Further rebate for self supervision & procurement of material is generally allowed at 10% whereas DVO has allowed this at 7.5% only. Moreover Sir, Each and every item of this construction have been shown in the account books including the labour work and the learned D.V.O. could not point out any thing whic .....

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before the CIT(A) summarized the facts as under:- 3. The facts of the case are that the assessee had shown addition in the building account of ₹ 21,61,172/- during the year and ₹ 17,31,148/- in the preceding year, whereas, the factory building was not complete as yet but for the purpose of knowing the investment in the factory building, AO made reference to the DVO. The DVO valued the investment in the building at ₹ 77,02,000/- in total out of which he apportioned ₹ 42,69 .....

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O and therefore, objected to the value estimated by the DVO. Whereas, the AO did not agree with the objections of the assessee and finally held that ₹ 13,88,728/- is the net difference in the expenditure shown by the assessee and the valuation estimated by the DVO and therefore, made addition of ₹ 13,88,7281- to the income of the assessee. 3.1. The record shows that the CIT(A) after going through a marathon exercise of bringing all facts on record and confronting the same to the conc .....

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r receiving the report from the DVO, the AO should give the opportunity to the assessee which has been given in the case of the assessee by the AO and therefore, the reference u/s 142A has been rightly made, hence this objected of the assessee is rejected. Assessee has also referred to section 69 and claimed that addition can not be made u/s 69 by reference to the investment to the DVO unless the books of accounts are rejected and for this purpose, assessee has relied on the judgment of Hon' .....

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counts or rejecting them, addition made by AO on account of cost of construction on the basis of report of D VO obtained under an invalid reference was rightly deleted by CIT(A). CIT(A) was justified in observing that higher plinth area was taken by DVO, that PWD rates should have been applied as against CPWD rates and that expenditure should have been spread over the period of construction consisting of more than one year" The case law cited by the assessee as above squarely applies to the .....

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report but he merely insisted on supply of structural drawings and architectural drawings. The assessee started construction on 01.08.2004 and claimed to have completed the construction of the factory building (sheller) on 31.03.2008 which is spread over four assessment years, i.e. AY 2005-06 to AY 2008-09, whereas, AO neither made any reference to valuer nor made any other addition to the income of the assessee in any other year except the AY 2006-07 for ₹ 13,88,728/-and the DVO has also .....

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before the AO and the DVO both and the same has again been filed during appellate proceedings also and it has also been mentioned in the valuation report submitted by the assessee from chartered engineer. Whereas, the DVO has not given any benefit of this expenditure to the assessee, therefore, there is no doubt that assessee has shown further expenditure on construction of factory building to the extent of ₹ 10,35,797/- during the period relevant to A.Y. 2007-08 and 2008-09, whereas, no b .....

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In the comments, the DVO has claimed that it is for obtaining drawings and other engineering details etc by the builder but there is no evidence to have spent money for any such expenditure by the assessee and therefore, such an addition to the estimated cost of construction is unwarranted. The assessee has objected since beginning that the rate applied by the DVO are CPWD rates applicable to the first class godowns, whereas, the construction of the assessee's sheller is not of that quality .....

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se of godowns is much more than the case of the assessee, whereas, the DVO has merely claimed that it has taken the height of the plinth as per site but no explanation w.r.t. the quality difference has been given. Further differences on account of provisions for rolling shutter, number of bays, the quality of the rat proof platforms applicable in case of god owns but not in the case of the assessee and other defects like less number of side walls etc. are the points on which DVO has not given an .....

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ointed out and discussed as above, if any difference remains then such a difference is bound to be there because DVO has merely estimated the cost of construction, whereas, the assessee has shown the actual expenditure incurred. Hence in view of the above discussion, no addition can be made on the basis of the estimate of construction furnished by the DVO. In view of the above discussion, it is clear that the addition of ₹ 13,88,728/- on account of unexplained investment in factory buildin .....

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incorrect in law. It was also his submission that all the arguments of the assessee had been met by the DVO as such the impugned order may be set aside and the assessment order upheld. 5. The Ld. AR relied upon the submissions advanced before the CIT(A) and detailed arguments and counter arguments recorded in the impugned order submitted that firstly no defect in the details maintained of the books has been pointed out by the AO or by the Sr. DR in support of his action thus in the absence of an .....

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defect in the books of accounts has been pointed out by the department. The fact of assessee incurring expense of ₹ 10,35,797/- during the period 2007-08 & 2008-09 assessment years has not been factored in by the DVO. The finding on record in regard thereto has not been upset by the Revenue in any manner before us. The application of rate by way of applying CPWD rates which are applicable to First class godowns as opposed to the quality of construction supervised by the assessee being .....

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detailed arguments and the comments of the AO which too have been extracted at page 6. This has been followed by the comments of the DVO extracted at page 7 of the impugned order including the assessee s re-joinder to these comments which is found extracted at pages 8 to 10 in the impugned order alongwith the extract of valuation report, relied upon by the assessee from the Chartered Engineer determining the total investment of ₹ 46,67,400/-. It is seen that the CIT(A) has forwarded the sa .....

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s favour. Being satisfied with the reasoning and finding contained therein which we have already addressed Ground No.-1 of the Revenue is dismissed. 7. The facts relatable to Ground no-2 are found discussed at pages 4 to 5 of the assessment order in para 3 wherein the AO made a lump-sum addition of ₹ 25,000/- on account of fall in GP from 36.71% to 27.88%. The argument of the assessee that it was due to fall in production of rice shown at 10% in the year under consideration as against 10.8 .....

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ete books of accounts were produced before the AO and the same are audited, therefore, the addition is without any basis and without even rejection of books of accounts, hence it is merely a guess work, therefore, it is deleted and the ground of appeal of the assessee is allowed. 9. Aggrieved by this the Revenue is in appeal before the Tribunal. Ld. Sr. DR places reliance on the assessment order and the Ld. AR relies upon the impugned order. 10. Considering the material facts on record in the li .....

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Revenue are found discussed at page 5 para 5 of the assessment order and for ready-reference the same is reproduced hereunder:- 5. In the P&L A/c, the assessee has claimed freight expenses at ₹ 11,62,940/-. The details of these expenses have been obtained. These expenses include an expenditure of ₹ 45,000/- paid in cash on 20.02.2006 on account of freight charges of boiler from Bombay to Karnal and ₹ 36,000/- paid in cash on 31.03.2006 on account of freight charges of machi .....

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