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2010 (10) TMI 1198

..... 605/Hyd/2009, 389/Hyd/2010 - 29-10-2010 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER For the Appellant : Shri A.V. Raghu Ram For the Respondent : Smt. Vasundhara Sinha & Shri Amlan Tripathy ORDER PER BENCH: All the 15 appeals of three independent assessees are directed against the respective orders of CIT(A), Tirupati and CIT(A), Guntur. Since all the appeals arise out of the search and seizure operation conducted on 31.1.2006 and common issues arise for consideration in all these appeals, we heard the same together and are disposing of the same by this common order. 2. The first issue arises for consideration is with regard to chit transaction. This issue arises for consideration in the case of Dr. S.V. Krishna Reddy for the A.Ys. 2003-04, 2004-05 and 2005-06 in I.T.A. Nos. 514, 515 and 516/Hyd/2009. Shri A.V. Raghu Ram, the learned counsel for the assessee submitted that during the course of search operation, the Revenue authorities claimed that a spiral notebook was found which contained the details of chit contribution made to unregistered chits. According to the learned counsel for the assessee the said notebook does not relate to the .....

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..... of the Revenue to show that the details contained in the spiral notebook relate to the assessee. In this case as submitted by the learned DR, the Department has not taken any pains to corroborate the details contained in the spiral notebook by making enquiry with the concerned chit companies. Had the Assessing Officer enquired the matter with the concerned chit companies, the truth of the matter would have come to the light. Since the revenue authorities had not taken such pains to make enquiry to find out whether in fact the assessee has subscribed to the unrecorded chit transactions, in our opinion, there cannot be any addition on the basis of the details contained in the spiral notebook. Therefore, the lower authorities are not justified in making such an addition in the absence of any other material to corroborate the details contained in the spiral notebook. Accordingly, we set aside the orders of the lower authorities and delete the addition with regard to unrecorded chit transactions. 5. The next issue arises for consideration is difference in the cost of construction declared by the assessee and estimated by the Departmental Valuation Officer (DVO). This issue arises for c .....

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..... e, according to the learned counsel for the assessee the reference to the valuation officer is not justified at all. 7. Even on merit, according to the learned counsel for the assessee the addition made by the lower authorities is not justified. According to the learned counsel for the assessee in hall types of construction 15% reduction has to be given. Moreover, the lower authorities are expected to give 15% further reduction on the rate estimated on the basis of CPWD rate. According to the learned counsel for the assessee there is a rate difference between CPWD and state PWD. Therefore, this Tribunal in normal circumstances grants 15% reduction due to difference in the cost. Moreover the assessee is also entitled for reduction due to personal supervision. According to the learned counsel for the assessee the assessee's personal friend who recently retired from Government service had personally supervised the construction. Therefore, the assessee is entitled to get the benefit of personal supervision. The learned counsel for the assessee placed his reliance on the decisions reported in 200 ITR 288, 246 ITR 351, 258 ITR 82 (AT), 63 ITD 235. The learned counsel for the assessee .....

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..... ment proceedings, the assessee furnished the construction account as per which the total investment towards construction of the building is ₹ 1,11,29,430/- as on 31.03.2005 and ₹ 2,23,01,722/- as on 31.03.2006. In order to ascertain the cost of construction of the nursing school building, the issue was referred to Superintending Engineer, Valuation Cell, Hyderabad by ADIT (Inv) vide his letter dated 31.01.2005. The SE, Valuation cell has estimated the cost of construction at ₹ 3,22,22,000/- as on 18.09.2005 (till the date of inspection by the S.E., Valuation Cell). As against the same, the investment debited in the books by the assessee up to 18.09.2005 amounted to ₹ 1,83,87,760/-." 10. The CIT(A) has considered the objection raised by the assessee and found that since the reduction has been given on the basis of objection raised by the assessee there is no need for reduction of hire charges and other miscellaneous items claimed by the assessee. Therefore, it is obvious that the books of account maintained by the assessee are not rejected. In fact, the assessee produced the books of account maintained before the Revenue authorities during the search ope .....

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..... raising the issue of valuation for the first time before this Tribunal. Right from the Assessing Officer level the assessees claimed that they maintained the books of account. Therefore, reference to the valuation cell may not be required. Therefore, in our opinion, judgement of the MP High Court may not be any assistance to the Revenue in the facts of this case. Since admittedly the books of account were not rejected and no specific defects was pointed out, in our opinion, it may not be required to make any reference to the valuation cell for estimating the cost of construction. Reference to valuation cell may be required in case the assessee has not maintained the books of account for the purpose of construction or the books of account were not properly maintained and the same were rejected by the Assessing Officer. In the case before us since the books of account were not rejected the very reference to the valuation cell, in view of the decision of the co-ordinate Bench of this Tribunal in the case of Sasi Educational Institutes (supra), is not required. In fact, the Rajasthan High Court in the case of Hotel Joshi (supra) has observed as follows at page 483 of the ITR: "If .....

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..... ven on merit this Tribunal in the case of G. Pulla Reddy found that 15% reduction should be given in respect of hall types of construction. Fifteen per cent reduction shall be given for rate difference and another 15% for self-supervision. In this case the CIT(A) has granted 6% reduction for self-supervision. The claim of the assessee is that his personal friend who is recently retired from Government service has supervised the construction personally. This fact is not in dispute. It is also not the case of the Revenue that the assessee has paid any amount for supervision. Once the CIT(A) found that the assessee's friend supervised the construction the reduction 15% shall be given on the construction instead of 6%. The matter would be entirely different if the Revenue found some material to show that assessee's personal friend was not supervising the construction. In this case the personal supervision was not in dispute. As observed by the Rajasthan High Court in the case of Hotel Joshi (supra) the CPWD instructions are broad guideline and its application to individual cases may vary on facts of the particular case. Moreover, the CIT(A) was expected to give further reductio .....

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..... ted periods for a particular purpose. The students use the hostel temporarily for a period of one or two years so long as they pursue their education in the particular educational institution. Therefore, a place for temporary accommodation for the students during the course of their academic period cannot be construed as a residential house. Therefore, in our opinion, the assessee is not entitled for any exemption u/s. 54F of the Income-tax Act. In view of the above, the lower authorities have rightly disallowed the claim of the assessee and accordingly the same is confirmed. 15. The next issue arises for consideration is unrecorded investment. This issue arises for consideration in the Departmental appeal in the case of S. Vijaya Lakshmi for A.Y. 2004-05 in the case of S. Sudarsanamma for A.Y. 2003-04. We heard the learned DR. The learned DR submitted that she is placing reliance on the grounds of appeal and the observation of the Assessing Officer. On the contrary the learned counsel for the assessee submitted that he is placing reliance on the observations made by the CIT(A). 16. From the order of the lower authorities it appears promissory notes to the extent of ₹ 14.5 la .....

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