The Commissioner Of Income-Tax,Tiruchirapalli v. K.rajapandian

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.08.2007 CORAM : THE HONOURABLE MR.JUSTICE D.MURUGESAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.1126 of 2007 The Commissioner of Income-tax,Tiruchirapalli. Vs. .. Appellant/Respondent. K.Rajapandian .. Respondent/Appellant. Appeal under Section 260A of the Income-tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Chennai 'D' Bench, Chennai inI.T.A.No.2145/Mds/2003 dated 13.04.2007 for the assessment year 1993-94against the order of the Office of the Commissioner of Income Tax[appeals] Cantonment, Tiruchirappalli 1 in ITA.No.196/2003-2004 dated24.9.2003 and against the order of the Office of the Income Tax Officer,Ward IV [2] Trichy dated 18.2.2003 in G.I.No./PA.No.3740 R/AAPPR 2107 E. For Appellant :Mr.N.Muralikumaran,, Sr.Standing Counsel forIncome-tax Department JUDGMENT (Judgment of the Court was delivered by P.P.S.JANARTHANA RAJA, J.) This appeal is filed under Section 260A of the Income Tax Act, 1961 bythe Revenue, against the order of the Income Tax Appellate Tribunal,Chennai 'D' Bench, Chennai in I.T.A.No.2145/Mds/2003 dated 13.04.2007,raising the following substantial question of law:- "Whether on the facts and in the circumstances of thecase, the Income-tax Appellate Tribunal was right inlaw in holding that the reopening of the assessmentunder section 147 of the Income-tax Act is bad in lawand the reopened assessment is annulled, even thoughthe assessing officer complied with the order of theCommissioner of Income-tax (Appeals) for the assessmentyears 1991-92 to 1994-95?" 2.The facts leading to the above substantial question of law are asunder:- The assessee is an individual. The relevant assessment year is 1993-94 and the corresponding accounting year ended on 31.03.1993. Theassessee filed Return of income on 08.12.1996 admitting income atRs.55,530/- from maligai business and Rs.20,000/- from agriculture. Theassessee has constructed a shopping space cum Kalyana Mandapam during theprevious years relevant to the assessment years 1991-92 to 1994-95. Thecost of construction as per the Approved Valuer's Report wasRs.18,50,000/- whereas the assessee had admitted the cost atRs.16,70,000/-. The difference in the cost of construction works out toRs.1,80,000/-. The C.I.T.(A) in his earlier order dated 01.01.1997 inI.T.A. Nos.321 and 322/94-95/TRY, relating to the assessee's own case forthe assessment years 1991-92 and 1992-93, had given a direction that thedifference between the total cost fixed and the total cost disclosed bythe assessee, should be brought to tax for the assessment years 1991-92 to1994-95. In view of the same, the Assessing Officer issued notice underSection 148 of the Income-tax Act ("Act" in short) to the assessee. Byletter dated 30.05.2001, the assessee has stated that the original Returnfiled may be treated as Return filed in response to notice under Section148 of the Act. The assessment was completed under Section 143(3) r/wSection 147 of the Act. While completing the assessment, the AssessingOfficer made an addition of Rs.84,073/-. Aggrieved by the order, theassessee filed an appeal to the Commissioner of Income-tax (Appeals). TheC.I.T.(A) dismissed the appeal and confirmed the order of reassessment.Aggrieved, the assessee filed an appeal to the Income-tax AppellateTribunal ("Tribunal" in short). The Tribunal allowed the appeal filed bythe assessee on the ground that reopening of the assessment is bad in lawand also relied on this Court judgment in the case of Commissioner ofIncome-tax Vs. V.T.Rajendran, [2007] 288 ITR 312 (Mad). Hence the presenttax case by the Revenue. 3.Learned Senior Standing Counsel appearing for the Revenuesubmitted that the Assessing Officer has reopened and completed theassessment in view of the direction given by the earlier C.I.T.(A)'sorder, stated supra and hence the reopening of the assessment is valid inlaw. Therefore, the order passed by the Tribunal holding that reopeningis bad in law is wrong, illegal, without basis and justification. 4.Heard the counsel. The assessee constructed a shopping space-cum-Kalyana Mandapam during the previous years relevant to the assessmentyears 1991-92 to 1994-95. During the course of assessment proceedings forthe assessment years 1991-92 and 1992-93, the Assessing Officer made areference to the Valuation Cell of the Income-tax Department to estimatethe cost of construction of the Shopping space-cum-Kalyana Mandapam. Inhis report, the Valuation Officer estimated the cost at Rs.24,81,000/-.The assessments for the assessment years 1991-92 and 1992-93 werefinalised by taking the cost of construction on the basis of estimate madeby the Valuation Cell. In these assessments, the additions were madetowards excess cost in proportion to the cost disclosed in the Returns for https://hcservices.ecourts.gov.in/hcservices/ the relevant assessment years. Aggrieved against these additions, theassessee preferred an appeal before the C.I.T.(A). The C.I.T.(A), in hisorder in I.T.A. Nos.321 and 322/94-95/TRY dated 01.01.1997, fixed thetotal cost of construction at Rs.18.50 lakhs. The C.I.T.(A) also directedthat the difference between the total cost thus fixed and the total costdisclosed by the assessee should be brought to tax for the assessmentyears 1991-92 to 1994-95 in as much as construction of the Shopping space-cum-Kalyana Mandapam had taken place during the previous years relevant tothese four assessment years. In order to assess the proportionatedifference for the present assessment year, the Assessing Officer reopenedthe assessment under Section 147 of the Act. There is no dispute that thedirection given in the earlier order of the C.I.T.(A) is on the basis ofthe Departmental Valuer's Report. In this case, the Tribunal came to theconclusion that reopening of the assessment is on the basis of theDepartmental Valuer's Report. The Tribunal also relied on this Courtjudgment in the case of Commissioner of Income-tax Vs. V.T.Rajendran,[2007] 288 ITR 312 (Mad), wherein it was held as follows:- "That apart, we do not hesitate to hold that thereport of the Departmental Valuation Officer cannot bea basis because the valuation cannot be anarithmetical appreciation of the materials used forthe construction nor the expenses incurred by theassessee in that regard, as variations are bound to bethere, as fairly conceded by learned counsel appearingfor the Revenue that there is variation in the valueof the construction between the Central PWD rates andthe State PWD rates themselves." In the present case, there is no dispute that the cost of construction isfixed by the earlier C.I.T.(A)'s order relating to the earlier assessmentyear at Rs.18,50,000/- which was based on the Approved Valuer's Report,whereas the assessee had admitted the cost at Rs.16,70,000/-. Thedifference of Rs.1,80,000/- was to be assessed proportionately in view ofthe C.I.T.(A)'s order relating to the earlier assessment years. TheTribunal had correctly followed the principles enunciated in this Court'sjudgment in the case of Commissioner of Income-tax Vs. V.T.Rajendran,cited supra, holding that reopening is bad in law. Further, it is notedin this case that the tax effect arising out of addition made by theAssessing Officer, is a negligible one. In the present case, there is no dispute that the cost of construction isfixed by the earlier C.I.T.(A)'s order relating to the earlier assessmentyear at Rs.18,50,000/- which was based on the Approved Valuer's Report,whereas the assessee had admitted the cost at Rs.16,70,000/-. Thedifference of Rs.1,80,000/- was to be assessed proportionately in view ofthe C.I.T.(A)'s order relating to the earlier assessment years. TheTribunal had correctly followed the principles enunciated in this Court'sjudgment in the case of Commissioner of Income-tax Vs. V.T.Rajendran,cited supra, holding that reopening is bad in law. Further, it is notedin this case that the tax effect arising out of addition made by theAssessing Officer, is a negligible one. 5.In view of the foregoing reasons, we do not find any error orlegal infirmity in the order of the Tribunal so as to warrantinterference. Hence no substantial question of law arises forconsideration of this Court and accordingly the tax case is dismissed. Nocosts. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. km To 1. The Asst. Registrar,The Income Tax Appellate Tribunal,Besant Nagar, Madras 90. 2. The Assistant Registrar, Income Tax Appellate Tribunal, Chennai 'D' Bench, Chennai. 3. The Commissioner of Income-tax (Appeals), Tiruchirapalli. 4. The Income-tax Officer, Ward IV(2), Trichy. + 1 CC To Mr.N.Muralikumaran, Advocate SR NO.50823 T.C.(A) No.1126 of 2007 bs[co]gp/24.8.