Commissioner Of Income Tax, Hisar v. M/S Grover Nursing Home

ITA No. 49 of 2005 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 49 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar Versus M/s Grover Nursing Home ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 49 to 51 of 2005 ascommon questions of law and facts are involved therein. For brevity,the facts are being extracted from ITA No. 49 of 2005. 2.ITA No. 49 of 2005 was admitted by this Court vide orderdated 10.12.2007 for determination of the following substantialquestions of law:- “1.Whether on the facts and in the circumstances of thecase, the Tribunal is right in law in holding that thecase is squarely covered in favour of the assesseeby the judgment of Hon'ble the Supreme Court in the case of Smt. Amiya Bala Paul Vs. CIT (2003) 262ITR 407 (SC) especially when the reference withregard to the construction of house building wasmade to the Valuation Officer under Section 131(1)(d) and not under Section 55A of the Income Tax Act,1961? 2.Whether on the facts and in the circumstances of thecase, the Tribunal is right in law in following thejudgment of Hon'ble the Supreme Court in spite ofprovisions of Section 142A of the Income Tax Act,1961 inserted by the Finance Act 2004 withretrospective effect from 15.11.1972 giving the powerto the Assessing Officer to refer the questionregarding determination of the cost of theconstruction to the Valuation Officer?” 3.Fact necessary for adjudication of the present appeal maybe noticed. The assessee constructed a Nursing Home at Sirsa.Assessment proceedings were initiated and for valuation of the cost ofconstruction of the Nursing Home, the matter was referred to theDepartmental Valuation Officer (DVO). The DVO vide his reportdetermined the cost of construction at Rs.5,38,011/- as againstRs.3,41,537/- shown by the assessee, the difference of which comes toRs.1,96,474/-. The assessee raised objections against the valuation ofthe DVO and the Assessing Officer referred the matter to the DVO forhis comments. Finally, the DVO revised his valuation report and finallythe difference in valuation was worked out to be Rs.98,524/-. The ITA No. 49 of 2005 Assessing Officer considered the said amount as investment made fromundisclosed sources and accordingly made an addition of Rs.98,524/-.Feeling aggrieved, the assessee went in appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT (A)”] who videhis order dated 24.2.2003 deleted the addition made by the AssessingOfficer. The department feeling dissatisfied approached the Tribunal,who vide order dated 17.5.2004 affirmed the view of the CIT(A) anddismissed the appeal. Hence, the present appeal by the revenue. 4.We have heard learned counsel for the parties and perused the record. 5.On appeal by the assessee, the CIT(A) while discussingthe report of DVO noticed that the valuation as determined thereinrequired to be reduced by Rs.4,00,203/- and cost of construction asestimated by DVO would stand reduced to Rs.22,66,936/- lessRs.4,00,203/- = Rs.18,66,733/- as against depicted in the books ofaccount of the assessee at Rs.17,59,694/-. The amount ofRs.4,00,203/- was held to be deductible from the valuation of DVO onaccount of the following: (a)Weighted cost deductionRs.30,430/- (b)Economy in bricks, steel & wood ]Rs.1,29,968/- ] Rs.67,319/- ]Rs.66,735/- ] Rs.67,319/- ]Rs.66,735/- (c)Unfinished walls on external surface Rs.45,719/- (d)Items relating to Kota Stone andRs.60,032/-marblemarble 6.The findings recorded by the CIT(A) read thus:- the record. 5.On appeal by the assessee, the CIT(A) while discussingthe report of DVO noticed that the valuation as determined thereinrequired to be reduced by Rs.4,00,203/- and cost of construction asestimated by DVO would stand reduced to Rs.22,66,936/- lessRs.4,00,203/- = Rs.18,66,733/- as against depicted in the books ofaccount of the assessee at Rs.17,59,694/-. The amount ofRs.4,00,203/- was held to be deductible from the valuation of DVO onaccount of the following: (a)Weighted cost deductionRs.30,430/- (b)Economy in bricks, steel & wood ]Rs.1,29,968/- ] Rs.67,319/- ]Rs.66,735/- ] Rs.67,319/- ]Rs.66,735/- (c)Unfinished walls on external surface Rs.45,719/- (d)Items relating to Kota Stone andRs.60,032/-marblemarble 6.The findings recorded by the CIT(A) read thus:- “13.In view of the discussion above, the assesseewould become entitled to a further deduction to thewould become entitled to a further deduction to the extent of Rs.4,00,203/- (30430+264002+45719+60032 = 4,00,203/-). After giving effect to thedifferent items considered above, the cost ofconstruction as estimated by the Valuation Officer willstand reduced to Rs.22,66,936/- - 400203/- =18,66,733/-. The cost as per assessee's books ofaccount is Rs.17,59,694/-. Accordingly, thisdifference would now only be to the extent ofRs.1,07,039/-. In terms of percentage, this works outto little over 6%. 14.While considering the two reports i.e. of theValuation Officer and the registered valuer, one hasto bear in mind that after all both reports are onlyestimates as to the real cost of construction and arebased on a laid down procedure. The report of theGovernment registered valuer too is a piece of goodevidence, since this is also based on the sameapproved guidelines. There can be no dispute thatthe reports of the two experts i.e. DVO and theregistered valuer, only act as opinions before a quasijudicial and statutory authority to whom they aresubmitted and who is entitled to prefer one over theother, though such appreciation has to be guided byscrupulous and sound reasons. It is always to beremembered that law does not admit any substantialdifferent between the two experts from the same genus, namely DVO and a government registeredvaluer, both of whom are statutory creations. Theregistered valuer is also a qualified person vestedwith legal powers to make reasonable estimate of thecost of construction and in the matter of makingestimates, exactitude and precision is virtuallyimpossible, as held by the Chandigarh Tribunal in thecase of ITO Vs. Kamboj Rice & General Millsreported in 138 Taxation 56. Similarly, the AmritsarBench, if the ITAT have held in the reported decision18 TLR 277 in the case of ITO Vs. JMP Enterprisesthat reasonable variation in the two estimates shouldbe no reason to make an addition. In a case beforethe Amritsar Bench in the case of Smt. Veena Vs.ITO 2(1), Jalandhar reported in (1998) 5 I.T.REP330, the difference in the two estimates was about13.7%. The Tribunal concluded that such adifference is within reasonable limits and declaredthat “we feel, no addition is called for unless and untilthere is apparent and specific mistake in thevaluation report and therefore directed that theaddition was not warranted where the difference iswithin reasonable limit.” In view of the cited judicialjudgments/decisions and the fact that difference inthis case is a little over 6% and considering the factthat both estimates were made by responsible authorities, no addition on the basis of difference ofabout 6% was required to be made in the case andthe same is, therefore, deleted.” 7.It would be relevant to notice the observations made by theTribunal on merits regarding valuation in paras 5 and 6 which are asunder:- authorities, no addition on the basis of difference ofabout 6% was required to be made in the case andthe same is, therefore, deleted.” 7.It would be relevant to notice the observations made by theTribunal on merits regarding valuation in paras 5 and 6 which are asunder:- “5.It is relevant to point out here that in the instantcase, the assessee was maintaining proper books ofaccount and no material defects have been pointedout in the books. It is also stated that the expenseswere duly supported by the vouchers. The Ld.counsel for the assessee Shri P.C.Jain, alsocontended that the full details were also mentioned inrespect of each item in the books. The AssessingOfficer has no where stated that the booksmaintained by the assessee were unreliable. It isalso relevant to point out that the Assessing Officerhas not rejected the book result while accepting thecost of construction on the basis of revised valuationreport of the DVO. In this connection, the Hon'bleRajasthan High Court in the case of CIT v. PartapSingh Amrosingh Rajendra Singh and Deepak Kumar(1993) 200 ITR 788 held that “if the assessee hasmaintained proper books of account and all detailsare mentioned in such books of account, which areduly supported by vouchers and no defects were pointed out and the books are not rejected, thefigures shown therein have to be followed.” TheHon'ble High Court further observed that thevaluation report can be taken into consideration onlywhen the books of account are not reliable or notsupported by proper vouchers or the Income TaxOfficer is of the opinion that no reliance can beplaced on such books of account. 6.In the instant case, the Assessing Officer hadnot stated that the assessee was not maintainingproper books of account. In that view of the matteralso the addition made by him was not justified andthe Ld. CIT(A) rightly deleted the same. The netresult of the above discussion is that the AssessingOfficer was not justified in making the addition on thebasis of DVO's report and therefore, Ld. CIT(A)rightly deleted the same.” 8.The Tribunal had concluded that the books of accounts ofthe assessee could not be doubted as the assessee was maintainingproper books of account and no material defect could be pointed outtherein. The expenses were also supported by the vouchers and fulldetails were also mentioned in respect of each item in the books. Theaccounts produced by the assessee were never rejected by theAssessing Officer. Moreover, the revised valuation report of the DVOand that of the government registered valuer produced by the assesseewere opinions of two experts and in the present case, as noticed above, the difference was mere little over 6% as per assessee's books ofaccount. The revised DVO report, thus, could not be held to be thebasis for sustaining the addition. Learned counsel for the revenue couldnot point out any defect in the approach of the CIT(A) and the Tribunalwhich may warrant interference by this Court under Section 260A of theAct. 9.The appeal was admitted for determination of thesubstantial question s of law as the Tribunal had also adjudicated thematter on the basis of the judgment of the Apex Court in Smt. Amiya Bala Paul v. Commissioner of Income-Tax [2003] 262 ITR 407 (SC).10.In the light of findings recorded by the CIT(A) and theTribunal and also the conclusion arrived at, as noticed above, thesubstantial questions of law on which appeal had been admitted arerendered academic. 11.Finding no merit in these appeals, the same areaccordingly dismissed. (AJAY KUMAR MITTAL) JUDGE October 13, 2010gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 49 of 2005 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 50 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar Versus M/s Grover Nursing Home ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. Bala Paul v. Commissioner of Income-Tax [2003] 262 ITR 407 (SC).10.In the light of findings recorded by the CIT(A) and theTribunal and also the conclusion arrived at, as noticed above, thesubstantial questions of law on which appeal had been admitted arerendered academic. 11.Finding no merit in these appeals, the same areaccordingly dismissed. (AJAY KUMAR MITTAL) JUDGE October 13, 2010gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 49 of 2005 -9- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 50 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar Versus M/s Grover Nursing Home ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. This appeal is dismissed. For orders, see ITA No. 49 of 2005 (Commissioner of Income Tax, Hisar v. M/s Grover Nursing Home). (AJAY KUMAR MITTAL) JUDGE October 13, 2010gbs (ADARSH KUMAR GOEL) JUDGE ITA No. 49 of 2005 -10- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 51 of 2005 Date of Decision: 13.10.2010 Commissioner of Income Tax, Hisar Versus M/s Grover Nursing Home ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla, Advocate and Mr. Jaginder Singh, Advocate for the respondent. AJAY KUMAR MITTAL, J. This appeal is dismissed. For orders, see ITA No. 49 of 2005 (Commissioner of Income Tax, Hisar v. M/s Grover Nursing Home). (AJAY KUMAR MITTAL) JUDGE October 13, 2010gbs (ADARSH KUMAR GOEL) JUDGE