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2010 (10) TMI 1198

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..... hna 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 assessee. It was said to be found in the hospital premises which is a public place. It is not found in the chamber of the assessee or any particular place where the assessee has control over the premises. Therefore, according to the learned counsel for the assessee the spiral notebook does not relate to the assessee at all. This was explained to the Assessing Officer at the earliest point of time. Therefore, according to the learned counsel for the assessee in the absence of any material to corroborate the subscription to chit by the assessee, there cannot be any addition towards unexplained investment. 3. On the contrary, Smt. Vasundhara Sinha, the learned DR submitted that admittedly the spiral notebook was found in the premises of the ho .....

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..... t 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 consideration in Dr. S.V. Krishna Reddy's case for A.Y. 2005-06 in ITA No. 516/H/09 and for A.Y. 2006-07 in ITA No. 587/H/2010 and Departmental appeal in ITA No. 615/H/2010. The very same issue arises for consideration in the case of Smt. S. Vijaya Lakshmi in ITA No. 520/H/2009 and the Departmental appeal ITA No. 480/H/2009. Similarly, for the A.Y. 2006-07 the very same issue arises for consideration in ITA No. 375/H/2010 and the Department appal in ITA No.371/H/2010. In the same of Smt. S. Sudarsanamma this issue arises for consideration in A.Y. 2003-04 and 2006-07 in Department appeal in ITA No. 605/H/2009 and ITA No. 389/H/2010. Similarly in the assessee's appeal in ITA No. 519/H/2009 and ITA No. 374/H/2010 the .....

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..... s 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 further submitted the first valuation report filed by the valuation officer was rejected by the CIT(A) himself and the second valuation report was prepared on the basis of the assessee's books of account. Therefore, there is no question of making any reference to the valuation officer. In the absence of rejection of books of account, the Assessing Officer is not justified in making any reference to the valuation officer. 8. On the contrary, the learned DR submitted that the valuation of the building was referred to the valuation officer to find out the cost of construction. The valuation officer estimated the cost of construction as on 18.9.2005 at ₹ 3,22,22,000. The difference in .....

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..... ted 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 operation. No mistake, whatsoever, was pointed out by the Revenue authorities in the books of account maintained by the assessee. Therefore, as rightly submitted by the learned counsel for the assessee, there may not be any requirement for the Assessing Officer to refer the matter to the valuation officer for estimating the cost of construction. Under identical situation a co-ordinate Bench of this Tribunal in the case of Sasi Educational Institutes (supra) considered this issue and after referring to its earlier order the Vizag Bench of this Tribunal held that reference to the valuation officer is bad in law since specific defects were not pointed out by the Assessing Offic .....

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..... d 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 the account of the expenses of the construction of the asset are maintained regularly in the books of account and an assessee also produces the vouchers, there should be no reason not to accept the same for assessing the value of the assets. It is unfair and against public policy to proceed on the assumption that the assessee is dishonest and he must have submitted the incorrect account of expenses. In case, the assessee has not maintained the regular books of account of the construction of asset and he relies upon the reports of the registered valuer, it will be open for the Assessing Officer under the provisions of section 55A of the Act to refer to the .....

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..... nstruction 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 reduction of 15% on the cost difference between the CPWD rate and the State PWD rate for all material used in the construction. In this case, the CIT(A) has granted 15% reduction only in respect of wood and sanitary ware. In view of the above, we do not find any justification for making addition towards cost of construction. However, it appears from the order of the Assessing Officer that a voucher for ₹ 2,03,184/- was found during the course of search and it was not recorded in the books of account. Therefore, at the best, the addition of ₹ 2,03,184/0 may be justified. In view of the judgement of the Rajasthan High Court in Hotel Joshi ( .....

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..... 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 lakhs were found During the course of search operation. The CIT(A) after referring to the suit filed by the assessee before the learned District Judge at Nellore came to the conclusion that it may not be a self-serving agreement with the help of Smt. Darsanamma. The CIT(A) also found that the promissory note to the extent of ₹ 14.5 lakhs cannot be delinked to the pro-note of ₹ 18.5 lakhs drawn on 16.202001 for the very same debtor. All the pro-notes were admittedly preceding the date of search. Therefore, as rightly observed by the CIT(A) it cannot be created. In view of the finding recorded by the CIT( .....

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