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2011 (2) TMI 1496 - ITAT COCHIN

2011 (2) TMI 1496 - ITAT COCHIN - TMI - I.T.A. Nos. 306,307,308/Coch/2003, I.T.A. No. 684/Coch/2006 & C.O. No. 03/Coch/2007 - Dated:- 1-2-2011 - S/SHRI N.VIJAYAKUMARAN, JM and SANJAY ARORA, AM Assessee by Shri Hari Sankar V.Menon, Adv. Revenue by Shri T.J.Vincent, DR O R D E R Per Bench: These are three Appeals by the Assessee and one by the Revenue, along with a Cross Objection by the assessee (for that year) for four years, i.e., for assessment years (AYs) 1996-97, 1998-99, 1999-2000 and 2000- .....

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tion of the assessee s (a partnership firm running a hospital) new block of the hospital at ₹ 41,11,736/- as against the disclosed figure of ₹ 29,09,201/- per its accounts. The Revenue pursued the matter with the Hon ble Jurisdictional High Court, which, vide its Order dated 10.11.2009 (in I.T.A. Nos. 626,663, 676 & 1050/2009, copy on record), reversed the decision by the tribunal, holding that the DVO, being a specialized, professionally qualified person for the purpose of valua .....

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fourth year, i.e., A.Y. 2000-01(as against the assessee for the first three); its appeal (as well as the assessee s Cross Objection) for that year, also relating to the same cause of action; the assessment having been likewise set aside by the ld. CIT(A) following the decision by the tribunal for the earlier years. 3.1 Opening the arguments on behalf of the assessee, it was submitted by the ld. AR, the assessee s counsel, that the hon ble apex court, vide its decision in the case of Sargam Cinem .....

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ific rejection of the assessee s accounts by the AO. When queried by the Bench that in that case, would not the proper forum or recourse for the assessee lie with the hon ble high court in a review petition, the ld. AR would submit that it is not so as the hon ble high court had decided the issue before it, i.e., whether the valuation report by the DVO constituted a valid basis for the AO to initiate re-opening proceedings, and which it held in the affirmative; the said report being an expressio .....

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he tribunal in the first instance. The DVO had adopted the CPWD rates, which yield an average plinth area rate of ₹ 4347 per sq. mtr. The corresponding rate by the State PWD, for which there is precedence in the form of the decision by the tribunal (Cochin Bench) in the case of P.V.Rajamma vs. CIT (Assistant) (I.T.A. 42/coch/1995 dated 23.5.1995), is at ₹ 1945 and ₹ 1851 per sq. metre for the ground/second floor and the first floor respectively. Even if a later circular dated 7 .....

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m rates as the major and reputed suppliers are the companies with pan-India presence, as is also the case with sanitary goods, etc., he conceded there-to, stating that even so, there are other local purchases as well. 3.2 The ld. DR submitted that the assessee has not been able to point out any infirmity in the valuation report, which is by an officer of the rank of an Executive Engineer, valuing the assessee s property at ₹ 41.12 lakhs, as against its declared value of ₹ 29.09 lakhs .....

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allow foundation on rocky formation (at ₹ 1.58 lakhs); for not using teakwood (at ₹ 2.64 lakhs); for not applying emulsion on wall surface (at ₹ 3.16 lakhs); for construction in remote area due to availability of some materials at low rates ( 2.24 lakhs); mosaic flooring, etc, including for direct purchase of materials and engagement of labour, i.e., a self-supervision rebate of ₹ 3.96 lakhs at the rate of 7.5%. As such, no further relief is exigible under the circumstanc .....

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issue first, and on both its legal and factual aspects. In our view, the assessee cannot seek shelter of the order by the hon ble apex court in the case of Sargam Cinema vs. CIT (supra) as the purview of the tribunal is to carry out directions by the jurisdictional high court. This follows the settled law on precedence. The proper course for the assessee, in case it considers that the decision by the hon ble high court requires reconsideration in light of the said decision by the apex court, as .....

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t, it is not so for the purpose of relying thereon for framing the assessment? The formation of belief and the consequent initiation of reassessment proceedings is, it may be appreciated, only toward bringing such escaped income to tax, and no other. In fact, section 142A, brought on statute by Finance (No. 2) Act, 2004 (w.r.e.f. 15.11.1972), is only to facilitate such referral by the AO to the Valuation Officer (except where the assessment stands conclusively finalized before 30/9/2004, so as n .....

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based on the non-rejection of the assessee s accounts by the AO, and which could only be in the course of some proceedings under the Act, implying valid proceedings. The said decision is thus rendered in the context of some valid proceedings. Reading the same harmoniously, i.e., in consistence with the law in the matter as well as the other applicable provisions, we understand it as to hold that the referral to the Valuation Officer by the assessing authority is to be preceded by, and on, some v .....

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as to the escapement of taxable income for the relevant year/s from assessment, and which is justiciable. The exercise of power in such cases (i.e., in reopening an assessment), being in relation to assessments that have otherwise attained finality, is rather subject to a qualitatively higher threshold qualification, besides being subject to review procedure and, in appropriate cases, writ jurisdiction. That is, the test of a cogent basis for interference with completed assessment process is inb .....

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(Inv.) (1974) 93 ITR 505 (SC), clarified that the AO is empowered to rely for the purpose of framing assessment on materials gathered (subject to following the due process of law), even if the same are obtained or secured in a manner that cannot be said to be legal or the legality of which is suspect, stating that it is the relevancy of the materials/evidence, and not the mechanism per which it stands obtained, that is pertinent and material. Further on, in the facts of the present case, the AO .....

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egal ground is not tenable, both on legal as well as factual considerations. 4.2 Coming to the merits of the case, i.e., of the addition/s effected u/s. 69B, we find that the matter has been examined in extenso by the first appellate authority, dealing with each of the issues raised by the assessee before him, delineating his findings at pgs. 9 to 14 of his impugned order (for the first three years). The same stands unrebutted. No infirmity therein, or in the Valuation Report dated 18.1.2000, wh .....

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ating to ₹ 19.62 lakhs allowed by him (in valuing the structure at ₹ 41.12 lakhs). The plinth area rate/s has been applied as, except for archaeological drawings, no working drawings/service drawings with details of measurement; bills of materials, etc. were supplied to the DVO to proceed to apply the detailed estimation method. (refer para 4.2). As regards the non-application of State PWD rates, which constitutes the assessee s principal grievance before us, the same is as the Keral .....

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s of specifications; the assessee s building being a hospital building. The assessee s claim of a fixed rate having been applied for all the years, i.e., to a construction which spanned a period of five years, has been found incorrect on facts by the ld. CIT(A); the VO having applied the cost index, and worked out the separate rate for the cellar and the three (ground, first and second) floors on that basis. The assessee s claim of having been allowed self supervision rebate at only 1% was again .....

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construction cost, allowing it substantial relief on account of the various evidences collected/claims preferred by it in relation thereto, that the application of State PWD rates would, even as pointed out by the Bench during hearing, lead to a reduction in its valuation even below that adopted or conceded to by it per its books of accounts as well as the Registered Valuer s report. The decision by the tribunal in the case of P.V. Rajamma vs. CIT (Assistant) (supra) would, therefore, not apply .....

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