IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 109 of 2008()
1. THE COMMISSIONER OF INCOME TAX
... Petitioner
Vs
1. SMT.S.VASANTHA
... Respondent
For Petitioner :SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)
For Respondent : No Appearance
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice A.K.BASHEER
Dated :21/10/2008
O R D E R
H.L.DATTU, C.J. & A.K.BASHEER, J.
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I.T.A.No.109 of 2008
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Dated, this the 21st day of October, 2008
JUDGMENT
H.L.Dattu, C.J.
This appeal arises out of an order passed by the Income Tax
Appellate Tribunal, Cochin Bench in I.T.A.No.1060 of 2005 dated 13th
July, 2006.
(2) The assessee’s business premises as well as the
residential building were surveyed by the Department in exercise of their
powers under Section 133-B of the Income Tax Act (‘the Act’ for short)
sometime in the month of October, 1995. It was found that the assessee
owns 10 cents of land with a double storeyed building. Since the assessee
has no known source of income for investment in the construction of
residential building, a notice under Section 148 of the Act came to be
issued. In reply to the said notice the assessee had stated that the cost of
construction of the double storeyed building is in a sum of Rs.9,25,000/-
and the source of income was sale proceeds of the gold ornaments worth
Rs.1,25,000/-, loan amounts of Rs.70,000/- and Rs.40,000/- borrowed
from her two brothers and Rs.1,70,000/- advanced by her another brother
by name Sasidharan. She had also stated that a sum of Rs.5,20,000/-
was advanced by one Sri.Sundara Rajan.
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(3) The assessing authority while completing the
proceedings under Section 148 of the Act had noticed that neither the
assessee’s brothers had appeared before him nor had they confirmed the
payment of the loans to their sister. The assessing authority has further
noticed that in addition to Rs.5,20,000/- said to have been advanced by
Sri.Sundara Rajan another sum of Rs.1,67,500/- was also advanced by him
which was adjusted from the amount given by Sri.Sasidharan.
(4) The assessing authority has further noticed that as per the
valuation report of the residential building done by the Assistant
Valuation Officer of the Income Tax Department, the value of the
building works out at Rs.15,03,200/-. This valuation report differs from
the valuation report prepared by the registered valuer which was produced
by the petitioner showing the cost of construction of the building as
Rs.9,41,700/- and, therefore, the total source available to the assessee was
Rs.8,77,500/- plus the agricultural income of Rs.75,000/-. Accordingly,
the assessing officer was of the opinion that the balance amount of
Rs.5,50,700/- was found to be undisclosed income, and accordingly had
quantified the tax liability in a sum of Rs.1,95,280/- and also had levied
interest under Sections 234A and 234B of the Act. Thus the total demand
that was made was in a sum of Rs.6,14,960/-.
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(5) The assessee had called in question the orders passed by
the assessing authority in exercise of his powers under Section 148 of the
Act. The first appellate authority has granted partial relief to the assessee
by giving a deduction of Rs.75,000/- keeping in view that the Kerala PWD
rates and CPWD rates vary and, therefore, the assessing authority was not
justified in relying upon the valuation report of the Valuation Officer of
the Department who had valued the property taking into consideration the
CPWD rates.
(6) The assessee, being aggrieved by the orders passed by
the first appellate authority, had carried the matter in second appeal before
the Tribunal. The Tribunal, by its orders dated 13.7.2006, had remanded
the matter to the assessing authority with a specific direction that the
assessing authority will apply the PWD rates prevailing in the State of
Kerala and quantify the tax liability.
(7) Aggrieved by the said order passed by the Tribunal, the
Department is before us in this Income Tax Appeal filed under Section
260A of the Act.
(8) The Department has raised the following questions of
law for our consideration and decision. They are as under:
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“(1) Whether on the facts and in the circumstances
of the case and in the light of the contents in the annexures
to the assessment order the Tribunal is right in law and fact
in holding that the assessing officer has not given any
reason for rejecting the valuation report and is not the
finding perverse and without application of mind?
(2) Whether on the fact and in the circumstances of
the case the Tribunal is right in law in ignoring the detailed
reasoning given in the assessment order and in directing the
Assessing Officer to adopt the state PWD rate for valuation
of the property and is not the order one without application
of mind and hence perverse and nonest?
(3) Whether on the fact and in the circumstances of
the case did not the Tribunal erred in directing adoption of
the state PWD rate for valuation based on decision of
unspecified orders of the Tribunal and High Court in other
case without examining the fact of the case in hand is not
such direction in effect based on conjectures and surmises?
(4) Whether on the fact and in the circumstances of
the case did not the Tribunal erred in not upholding the
order of the Commissioner of Income Tax (Appeals)
confirming the order of the Assessing Officer?”
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(9) Sri.Jose Joseph, learned counsel appearing for the
Revenue, in support of the questions of law framed by him, would submit
that the Tribunal was not justified in directing the assessing authority to
take only the PWD rates prevailing in the State of Kerala, and, therefore,
the direction issued by the Tribunal to the assessing authority is arbitrary
and violative of the statutory provisions.
(10) The Tribunal while deciding the assessee’s appeal has,
in fact, relied upon number of case laws decided by various High Courts
wherein the High Courts are of the opinion that there is variation between
CPWD rates and PWD rates prevailing in the State and since the building
that is constructed is within the State, naturally, the Department is
expected to take into consideration the PWD rates prevailing in the State.
Having come to that conclusion, as we have already noticed, the Tribunal
had remanded the matter to the assessing authority.
(11) In view of the settled legal position that it is only the
PWD rates that can be taken into consideration for the purpose of
valuation of the building, in our opinion, the Tribunal was justified in
allowing the assessee’s appeal and issuing a specific direction to the
assessing authority.
(12) We do not find any error in the orders passed by the
Tribunal. Therefore, while answering the questions of law framed by the
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Revenue against the Revenue and in favour of the assessee, we reject this
Income Tax Appeal.
Ordered accordingly.
(H.L.DATTU)
CHIEF JUSTICE
(A.K.BASHEER)
JUDGE
vns