Ita/251/2012 Of C.s.daniel v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 11TH DAY OF NOVEMBER 2013/20TH KARTHIKA, 1935 ITA.No. 251 of 2012 -------------------- AGAINST THE ORDER IN ITA 154/COCH/2011 of I.T.A.TRIBUNAL,COCHIN BENCH, DATED 10-08-2012 ............. APPELLANT/APPELLANT :---------------------------- C.S.DANIEL PROPRIETOR, DAN AND COMPANY, COLLEGE ROAD PATHANAMTHITTA. PAN-ASJPS 6562D BY ADVS.SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SRI.R.SREEJITH SMT.NIVEDITA A.KAMATH RESPONDENT : ----------------- THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, KOTTAYAM-686 001. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 11-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. No. 251 OF 2012 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 11[th] day of November, 2013 Manjula Chellur, C.J. JUDGMENT By consent of both the parties, we heard the appeal on merits. The entire issue revolves around whether theappellant had incurred an additional expenditure of `22,10,000/-for additional construction of one room and renovation ascontended by the learned counsel for the appellant, for theassessment year 2006-07. The following substantial questionsof law would arise for consideration: “(i) In the facts and circumstances of the case, ought not the Tribunal have held that the valuationreport relied on by the authority below was factuallywrong and erroneous ? (ii) In the facts and circumstances of the case, ought not the Tribunal have held that theassessment completed and confirmed adopting theChennai rates for the purpose of valuation was wrongand that the valuation had to be done as per the StateOWD rates ? (iii) In the facts and circumstances of thecase, ought not the Tribunal have allowed the appeal on the premises that the valuation adopted was erroneousand against the settled position in law? (iv) In the facts and circumstances of the case, ought not the Tribunal have held that the estimationof household expenses is highly exaggerated.” 2. It is not in dispute that the appellant herein had constructed a house in the year 1995-96. He claimed expenditureof `20 lakhs and odd for the assessment year 2006-07 towardsextension and renovation. However, the Department estimatedthe cost of renovation and construction at `42,10,000 i.e.`22,10,000/- over and above what was claimed by the appellantassessee. It is also not in dispute that this happened pursuant toa search in the premises of the appellant on 22.03.2007. Theentire issue revolves round the valuation made by theDepartment after personal inspection of the building in questionas per Annexure B. It is not in dispute that neither the assessingofficer nor the Commissioner of Income Tax(Appeals) agreed withthe claim of the appellant assessee. Therefore he went before theTribunal. Even the Tribunal accepted the report of the District ITA No. 251 of 2012 Valuation Officer, Chennai and opined that assessee did not pointout any flaw in the valuation report and therefore the assessingofficer as well as the Commissioner of Income Tax(Appeals) werejustified in rejecting the contention of the assessee. Aggrievedby the same the assessee is before this Court. 3. According to the learned counsel for the assessee, ITA No. 251 of 2012 Valuation Officer, Chennai and opined that assessee did not pointout any flaw in the valuation report and therefore the assessingofficer as well as the Commissioner of Income Tax(Appeals) werejustified in rejecting the contention of the assessee. Aggrievedby the same the assessee is before this Court. 3. According to the learned counsel for the assessee, District Valuation Officer is very much available atThiruvananthapuram, therefore there was no need for theDepartment to secure the information of the District ValuationOfficer from Chennai who proceeded to value the renovation andcost of construction based on Central Public Works Departmentrates and not based on State Public Works Department rates.According to the learned counsel for the appellant, settledposition is, when the rates declared by State PWD are available,that alone would govern the issue and not the CPWD rates. 4. As against this, learned Standing Counsel forrevenue contends that the assessee never raised the contentionthat District Valuation Officer is placing reliance on CPWD rates, ITA No. 251 of 2012 at any stage of proceedings, therefore, it is not open for him toraise such controversy before this Court. 5. As a matter of fact we have gone through the valuation report at Annexure B. There is specific statement thatthe valuation is arrived at based on CPWD rates. On goingthrough the orders of the three authorities what we notice is theconsistent stand of the revenue was that the assessee was notable to explain any flaw in the valuation report. Therefore, thevaluation report has to be relied upon. What rate has to be thebasis to arrive at valuation of the renovation and additionalconstruction, definitely is a question of law, therefore, even ifsuch issue was not raised earlier before any authority, as the saidissue would go to the root of the matter, we are of the opinion,such issue could be entertained before this Court. 6. We place reliance on an earlier decision of thisCourt in I.T.A. No.109 of 2008 dated 21.10.2008 wherein theirLordships at paragraph 5 onwards opined that the valuation ofproperty has to be made keeping in view the Kerala PWD rates ITA No. 251 of 2012 and not Central PWD rates. It is also pertinent to mention that ineach State depending upon the scarcity of the material availableas well as the cost of labour, the cost of construction may veryfrom State to State, therefore it is just and proper to placereliance on the local PWD rates rather than Central PWD rates inorder to arrive at the valuation of the property. Ultimately theassessing officer will have the other materials supplied by theassessee to know what exactly was the material used and whatwas the prevailing rate of such material apart from ascertainingthe rates from PWD department which rate varies from time totime. Ultimately the assessing officer would take intoconsideration what was the prevailing rates of PWD in the Stateof Kerala adopted for the particular assessment year in order toarrive at the cost of renovation and construction claimed by theassessee for the assessment year 2006-07. In that view of the matter, we are of the opinion, theorders of the three authorities based on the Central PWD rates isset aside by remanding back the matter to the assessing officer ITA No. 251 of 2012 -:6:- who shall rely upon the report of the District Valuation Officer atThiruvananthapuram so far as value of the renovation and cost ofconstruction for the assessment year 2006-07 and then proceedin accordance with the procedure contemplated. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge. ttb/11/11