If variation in estimated and recorded cost is less than 10% is allowed to the assessee towards self supervision

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- ‘B” CALCUTTA

Before  Shri C.D. Rao, Accountant Member and

Shri George Mathan, Judicial Member

ITA No. 1492/Kol/2011

Assessment Year: 2007-08

I.T.O Ward 4, Bankura

(APPELLANT)

-Versus-.

Pranab Prakash Dutta

PAN: AHAPD 1441R

 (RESPONDENT)

C.O No.70/Kol/2011

[Arising out of ITA No. 1492/Kol/2011 A.Y 2007-08]

Pranab Prakash Dutta

PAN: AHAPD 1441R

(APPELLANT)

-Versus-.

I.T.O Ward 4, Bankura

(RESPONDENT)

For the Appellant/Department: Shri Apurba Kr. Das, ld.CIT/DR

For the Cross bjector/Respondent: S/Shri S.M Surana & D.K Sen, Advocate, ld.ARs

Date of Hearing: 25-06-2012

Date of Pronouncement: 25-06-2012

ORDER

Per Bench

The appeal in ITA No.1492/Kol/2011 is filed by the revenue against the order of the learned Commissioner of Income-tax (Appeals), Durgapur in Appeal No. 84/CIT(A)/DGP/2009-10 dated 12- 08-2011 for the assessment year 2007-08 and Cross Objection No.70/Kol/2011 is the cross objection filed by the assessee in revenue’s appeal No.1492/Kol/2011.

2. As both the revenue’s appeal and .Cross Objections of the assessee involve identical issues, the same are disposed of by this common order for the sake of convenience.

3. Shri Apurba Kr. Das, learned CIT/DR represented on behalf of the revenue and S/Shri S.M Surana & D.K Sen, Advocate, learned ARs represented on behalf of the assessee.

4. It was submitted by the learned CIT/DR that the assessee had taken loan from West Bengal Finance Corporation for the house construction, which had not disclosed in his balance sheet. It was the submission that the learned Commissioner of Income-tax (Appeals) had erred in deleting the addition. He vehemently supported the order of the Assessing Officer.

5. In reply, the learned ARs for the assessee submitted a copy of balance sheet for the year ended

on 31-3-2007 and submitted that the said loan was shown under the head Term Loan’ in the said balance sheet. It was the submission that the addition deleted by the learned Commissioner of Income tax (Appeals) was liable to be upheld.

6. We have considered the rival submissions. A perusal of page-2 2nd paragraph of the assessment order, it begins with the words ‘in his balance sheet it appears that the assessee has taken loan of Rs. 29,50,464.84 from West Bengal Finance Corporation, Kolkata…..’ This clearly shows that the loan amount has been shown in the balance sheet of the assessee. A perusal of the balance sheet filed by the assessee also categorically shows that the loan amount was under the head ‘term loan’. In the circumstances, we are of the view the finding of the learned Commissioner of Income-tax (Appeals) on this issue is on a right footing and does not call for any interference. In the circumstances, this issue of revenue’s appeal is dismissed.

7. In the result, above revenue’s appeal is dismissed. C.O No. 70/Kol/2011 [ITA No. 1492/Kol/11] A.Y 2007-08 [by the assessee]

8. It was submitted by the learned AR for the assessee that in the course of assessment the Assessing Officer made an estimated addition being the difference between the departmental valuation officer’s cost of construction of the building named Dhruva Tara lodge and as disclosed by the assessee in his books of account. It was the submission that the books of account of the assessee has not been rejected and as long as books of account of the assessee has not been rejected in respect of cost of construction, no addition on estimate basis can be made. It was the submission that this view was accepted by the learned Commissioner of Income-tax (Appeals), however, it was the submission that the learned Commissioner of Income-tax (Appeals) retained an estimated addition of Rs. 1 lakh. It was the submission that the addition as sustained by the learned Commissioner of Income-tax (Appeals) may be deleted. The learned AR for the assessee has relied upon the decision in the case of Sargam Talkies reported in 328 ITR 513(SC).

9. In reply, the learned DR submitted that there was a difference between the cost of construction

as disclosed by the assessee and as adopted by the departmental valuation officer. It was the submission that the addition as sustained by the learned Commissioner of Income-tax (Appeals) was reasonable and should be sustained. He vehemently supported the order of the learned Commissioner of Income-tax (Appeals) on this issue.

10. We have considered the rival submissions. A perusal of the decision of the Hon’ble Supreme

Court in the case of Sargam Talkies (refer to supra) clearly shows that in absence of rejection of books of account maintained by the assessee in respect of cost of construction, no addition on estimate basis can be made. In the present case, a perusal of the assessment order clearly shows that the books of account in respect of cost of construction of the lodge, Dhruva Tara has not been rejected. In the circumstances, we are of the view that in view of principle laid down by the Hon’ble Supreme Court in the case of Sargam Talkies (refer to supra), no addition is called for in the hands of the assessee. In the circumstances, the addition of Rs. 1 lakh as confirmed by the learned Commissioner of Income-tax (Appeals) stands deleted.

11. Even on the facts, it is noticed that the D.V.O has estimated the cost of construction at Rs.. 29,06,032/- as against the cost of construction recorded by the assessee of Rs.26,29,160/-. The variation is amount of Rs. 2,76,863/,- which is less than 10% margin, which could normally be granted to the assessee towards self supervision. In the circumstances, the addition as confirmed by the learned Commissioner of Income-tax (Appeals) on this issue stands deleted. In the circumstances, the cross objection of the assessee stands allowed.

12. In the result, the appeal of the revenue is dismissed and cross objection of the assessee is allowed.

THIS ORDER IS PRONOUNCED IN OPEN COURT AS DICTATED ON Dt 25-06-2012

                                                  Sd/-                                    Sd/-

                     (C.D.Rao, Accountant Member) (George Mathan, Judicial Member)

Copy of the order forwarded to:

1. The Appellant: ITO, W 4, Bankura, Bilash Bhavan, Chandmaridang, PO & DT;Bankura

2 The Respondent- Shri Pranab Prakash Dutta Vill & PO Ranibandh, Dist: Bankura

3 The CIT,

4. The CIT (A)

5. DR, Kolkata Bench

6. Guard file.

True Copy,

By order,

Asstt Registrar