Shri. Sanjay Sahu, Durg V. Income Tax Officer Ward-3, Durg

CO 15/BIL/2011

• Counselvise Citation: [2014] 123 COUNSELVISE.COM (IT) 0190 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 4 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 29-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHEETAL VERMA
• Assessee Lawyers: S R RAO
• Keywords: Opportunity of being heard; Valuation report; Reason to believe; Reassessment proceedings
• Section: 143(3); 133A; 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI REJENDRA, ACCOUNTANT MEMEBR ITA NO.105/BLPR/2011 A.Y. 2001-02 INCOME TAX OFFICER 3, VS. SHRI SANJAY KUMAR SAH U, BHILAI. PROP. SUNDARAM RESTAURANT, STATION ROAD, DURG (PAN: AJBPS 7412 B). C.O. NO.15/BLPR/2011 (ITA NO.105/BLPR/2011) A.Y. 2001-02 SHRI SANJAY KUMAR SAHU, VS. INCOME TAX OFFICER 3, PROP. SUNDARAM RESTAURANT, BHILAI. STATION ROAD, DURG (PAN: AJBPS 7412 B). (APPELLANTS) (RESPONDENTS) REVENUE BY : SMT. SHEETAL VERMA ASSESSEE BY : SHRI S.R. RAO DATE OF HEARING : 24.12.2014 DATE OF PRONOUNCEMENT : 24.12.2014 ORDER PER H.L. KARWA, PRESIDENT APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE AS SESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), BILASPUR DATED 30. 11.2010 RELATING TO A.Y. 2001-02. 2 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 2. ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UDNE : WHETHER IN LAW AND ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.11,25,538/- MADE BY THE AO ON ACCOUNT OF SUPPRES SION INVESTMENT IN CONSTRUCTION. 3. FOR THE A.Y. 2001-02 THE ASSESSEE FILED ITS RETU RN OF INCOME ON 31.10.2001 DECLARING TOTAL INCOME OF RS.75,200/-. THE ASSESSM ENT WAS COMPLETED ON 19.03.2004 UNDER SECTION 147/143(3) OF THE INCOME T AX ACT, 1961(IN SHORT THE ACT). SURVEY UNDER SECTION 133A OF THE ACT WAS CO NDUCTED AT THE BUSINESS PREMISES OF SHRI TIKARAM SAHU, PROP. OF M/S INDORE SEV BHANDAR ON 20.05.2002. SHRI TIKARAM SAHU IS FATHER OF THE ASSESSEE. THE A SSESSEE CONSTRUCTED A COMMERCIAL BUILDING JOINTLY WITH HIS FATHER. DURING THE COURS E OF SURVEY PROCEEDINGS, SHRI TIKARAM SAHU STATED THAT 50% OF HOTEL BUILDING UNDE R CONSIDERATION BELONGED TO HIS SON SHRI SANJAY SAHU. THE A.O. OBSERVED THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI TIKARAM SAHU FOR TH E A.Y. 2003-04, THE MATTER WAS REFERRED TO DVO IN ORDER TO ELUCIDATE AND TO DETERM INE CORRECT COST OF CONSTRUCTION UNDER SECTION 142A OF THE ACT. THE DVO IN HIS REPO RT DATED 30.12.2005 ESTIMATED THE INVESTMENT MADE IN CONSTRUCTION OF THE PORTION RELATING TO THE ASSESSEE AT RS.13,24,538/- AGAINST RS.2,00,000/- SHOWN BY THE A SSESSEE IN THE A.Y. 2001-02. THUS, THERE WAS A DIFFERENCE OF RS.11,24,538/- IN T HE CONSTRUCTION OF HOTEL BUILDING. THE A.O. ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 09.03.2006 AFTER RECORDING REASONS AND GETTING APPROVAL FROM ADDL. CIT, BHILAI RANGE, BHILAI. IN RESPONSE TO 3 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 THE NOTICE UNDER SECTION 148 OF THE ACT, THE ASSESS EE REQUESTED THE A.O. TO TREAT THE ORIGINAL RETURN AS RETURN FILED IN RESPONSE TO THE ABOVE NOTICE. AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE, THE A.O. OBSERVED THAT SHRI TIKARAM SAHU AND SHRI SANAJAY SAHU (ASSESSEE) CONSTRUCTED A HOTEL BUILDING WITHOUT KEEPING RECORDS, BILLS, CONSTRUCTION REGIST ER ETC. AND AMOUNT OF INVESTMENT SHOWN IN THEIR RESPECTIVE RETURN WAS ALSO DIFFERENT . AS PER THE REPORT OF DVO, THE INVESTMENT OF THE PORTION OF THE ASSESSEE IS RS.13, 24,538/- AS AGAINST THE INVESTMENT OF RS.2,00,000/- SHOWN BY THE ASSESSEE. THUS, THER E WAS S DIFFERENCE OF RS.11,24,538/- WHICH WAS ADDED UNDER SECTION 69 OF THE ACT TO THE TOTAL INCOME OF THE ASSESSEE AS INVESTMENT MADE FROM THE UNDISCLOSE D SOURCES. 4. ON APPEAL, THE LD. CIT(A) HELD THAT THE REOPENIN G OF THE ASSESSMENT UNDER SECTION 147OF THE ACT WAS NOT VALID. ACCORDING TO THE LD. CIT(A), PROCEEDINGS UNDER SECTION 147 WERE INITIATED BY THE A.O., AFTER RECORDING THE FOLLOWING REASONS:- IN THIS CASE A SURVEY UNDER SECTION 133A WAS CONDU CTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 20.05.2002 REL EVANT TO AY 2003- 04. THE ASSESSEE CONSTRUCTED A COMMERCIAL BUILDING JOINTLY WITH HIS FATHER SHRI TEKARAM SAHU. THE 50% PORTION OWNED BY THE ASSESSEE IS NAMED AS HOTEL SHIVAM, KNOWN AS SAUNDARAM RESTAURAN T, IN FRONT OF DURG RAILWAY STATION. IN THIS CASE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2003-004, IT WAS NOTICED THA T INVESTMENTS SHOWN AT RS.2 LACS + LAND RS.6,32,000/- IN THE BALA NCE SHEET WERE FAR BELOW FROM THE ACTUAL, LACKING ANY DOCUMENTARY EVID ENCE EXCEPT VALUATION REPORT FROM A REGISTERED APPROVED VALUER. THE ASSESSEE HAS NOT MAINTAINED ANY ACCOUNT OF CONSTRUCTION. HE COU LD NOT FURNISH SINGLE BILL/VOUCHER AND REGISTERED VALUER HAS NOT G IVEN BASIS OF 4 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 ADOPTING RATES AND NOT ENCLOSED ACTUAL CONSTRUCTION DRAWINGS. THE APPROVED VALUER ESTIMATED EXPENDITUR4 INCURRED ON C OST OF CONSTRUCTION OF RS.2 LAS. IN ORDER TO ELUCIDATE AN D TO DETERMINE THE CORRECT COST OF CONSTRUCTION THE MATTE WAS REFERRED UNDER SECTION 142A(1) TO THE DVO BHOPAL WHO IN HIS REPORT DATED 3 0.12.2005 RECEIVED IN THIS OFFICE ON 24.01.2006 HAS ESTIMATED COST OF CONSTRUCTION OF THE PORTION RELATED TO THE ASSESSEE AT RS.13,24, 538/- AGAINST RS.2 LACS SHOWN BY THE ASSESSEE. I HAVE THEREFORE REASO N TO BELIEVE THAT INCOME OF RS.11,24,538 (13,24,538 2,00,000) BEING THE INVESTMENTS MADE IN THE CONSTRUCTION OF HOTEL BUILDING NOT DISC LOSED BY THE ASSESSEE IN THE AY 2001-02 HAS ESCAPED FROM ASSESSMENT. THE REFORE, IN ORDER TO ASSESSEE SUCH ESCAPED INCOME, THE NECESSARY SANC TION FOR ISSUE OF NOTICE U/S. 148 OF THE INCOME TA ACT, 1961 MAY KIND LY BE ACCORDED. 5. THE LD. CIT(A) OBSERVED THAT ON THE DATE WHEN TH E A.O. REFERRED THE MATTER TO THE DVO UNDER SECTION 142A OF THE ACT ON 23.02.2005 , THERE WAS NO INFORMATION/MATERIAL IN POSSESSION OF THE AO FOR FO RMATION OF BELIEF OF ESCAPEMENT OF INCOME. HE FURTHER OBSERVED THAT THE NATURE AN D QUALITY OF THE REASONS RECORDED HAVE ALWAYS BEEN THE SUBJECT MATTER OF JUDICIAL CON SIDERATION. IT IS EVIDENT FROM THE REASONS RECORDED THAT THE AO WAS OF THE OPINION THA T AS PER THE ESTIMATION OF THE DVO, THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSES SMENT. THUS, THE REASONS RECORDED WERE MERELY FOR ASSESSING THE PRESUMED UNE XPLAINED INVESTMENT IN CONSTRUCTION ON THE BASIS OF THE ESTIMATION OF THE DVO AND THERE WAS NO OTHER MATERIAL AVAILABLE ON RECORD, FOR FORMATION OF BELI EF OF ESCAPEMENT OF INCOME. THE LD. CIT(A) OPINED THAT THE REASONS RECORDED APP EAR TO BE MORE FOR THE SAKE OF FORMALITY AS THEY WERE NOT EXHAUSTIVE AND DO NOT AD EQUATELY JUSTIFY THE REQUIREMENT OF LAW. THE REASONS RECORDED ALSO EVIDENCES THE FA CT THAT NOWHERE THE AO HAD SATISFIED THE CONDITION OF REASON TO BELIEVE. TH US IN THE ABSENCE OF THE MANDATORY 5 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 CONDITION, IN MY CONSIDERED VIEW, THE INITIATION OF PROCEEDINGS UNDER SECTION 147ITSELF WAS ILLEGAL. THUS, THE ASSUMPTION OF JUR ISDICTION ON THE BASIS OF THE VALUATION REPORT WAS ITSELF ILLEGAL AS THERE WAS NO MATERIAL FOR FORMATION OF BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSES SMENT. 6. WHILE TAKING ABOVE VIEW, THE LD. CIT(A) RELIED O N THE DECISIONS OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF HOTEL MOUNT V IEW VS. CIT, 280 ITR 51 (CAL) AND ALSO THAT OF HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. SMT. SOHAN DEVI SODANI (2006) 205 CTR (RAJ) 446. 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, WE MAY OBSERVE HERE THAT THE REVENUE HAS NOT RAISED ANY GROUND AGAINST THE ORDER OF LD. CIT(A) IN QUASHING THE REASSESSMENT ORDER PASSED UNDER SECTIO N 147 OF THE ACT. ON THIS SCORE ALONE, THE APPEAL OF THE REVENUE IS NOT MAINTAINABL E. EVEN OTHERWISE ALSO, WE HOLD THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN QUASHING THE REASSESSMENT ORDER DATED 20.11.2006 PASSED UNDER SECTION 147 READ WITH SECTI ON 143(3) OF THE ACT. IN THE INSTANT CASE, THE A.O. REFERRED THE MATTER TO THE D VO AND ON THE BASIS OF REPORT OF DVO, PROCEEDINGS FOR REASSESSMENT WERE INITIATED. O N THE BASIS OF REPORT OF THE DVO, THE A.O. MADE THE ADDITION ON ACCOUNT OF INVES TMENT MADE IN THE CONSTRUCTION OF HOTEL BUILDING. IN OUR VIEW, MEREL Y ON THE BASIS OF DVOS REPORT, REASSESSMENT PROCEEDINGS CANNOT BE INITIATED IN THE ABSENCE OF A.O.S SATISFACTION ABOUT THE ESCAPEMENT OF INCOME FROM TAX. IN FACT, THE A.O. HAS NOT APPLIED HIS 6 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 MIND ON THE INFORMATION, IF ANY, COLLECTED AND MUST FORM BELIEF THEREON. THEREFORE, REOPENING OF THE ASSESSMENT WAS BAD IN LAW. THE HO NBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY (2010 ) 328 ITR 515 (SC) HELD AS UNDER :- HAVING EXAMINED THE RECORDS, WE FIND THAT IN THIS CASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DVO. OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER S. 1 47 OF THE I.T. ACT, 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMAT ION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CI RCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS N OT ENTITLED TO REOPEN THE ASSESSMENT. 8. RECENTLY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF MAHASHAY CHUNNILAL VS. DCIT (2014) 44 TAXMANN.COM 321 (DELHI) HELD AS UNDER IT IS WELL SETTLED THAT THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO ANY INFORMATION IN FORM OF THE VALUATION RE PORT AND MUST FORM A BELIEF THEREON THAT THERE IS ESCAPEMENT OF INCOME . THE OPINION OF THE DVO IS PER SE NOT AN INFORMATION FOR THE PURPOSE OF REOPENING OF AN ASSESSMENT. THE ASSESSING OFFICE HAS TO APPLY HIS MIND TO THE REPORT OF THE DVO AND ONLY IF ON APPLICATION OF MIND, IF HE F ORMS A BELIEF THAT THERE IS ESCAPEMENT OF INCOME, HE CAN SEEK TO REOPE N THE ASSESSMENT. 9. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE REVENUE. AS WE HAVE ALREADY OBSERVED HEREINABOVE THAT REVENU E HAS NOT CHALLENGED ORDER OF LD.CIT(A) REGARDING QUASHING OF REASSESSMENT AND , THEREFORE, ON THIS SCORE ALONE THE APPEAL DESERVES TO BE DISMISSED. 7 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 10. SHRI S.R. RAO, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN THIS CASE, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSE SSEE ON 09.03.2006 WHICH WAS SERVED ON HIM ON 17.03.2006. THE LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT WHEN THE NOTICE UNDER SECTION 148 WAS ISSUED, THE ASSESS EES APPEAL IN ITA NO.214/NAG/2006 WAS PENDING FOR ADJUDICATION BEFORE THE ITAT, NAGPUR BENCH, NAGPUR. IN THE SAID APPEAL, THE ISSUE REGARDING AD DITION OF RS.13,450/- MADE UNDER SECTION 69 OF THE ACT BEING INVESTMENT IN THE CONST RUCTION OF LODGE-CUM-RESTAURANT FROM UNDISCLOSED SOURCES WAS PENDING. THE INITIAL INVESTMENT SHOWN BY THE ASSESSEE IN THE BALANCE SHEET WAS AT RS.2,00,000/-. THE THEN A.O. OBSERVED THAT IN THE STATEMENT RECORDED DURING THE SURVEY, THE ASSES SEE ADMITTED INVESTMENT OF RS.2,13,450/- MADE IN THE CONSTRUCTION OF HOTEL AS AGAINST RS.2,00,000/- SHOWN IN THE BALANCE SHEET. THE ADDITION MADE BY THE A.O. U NDER SECTION 69 OF THE ACT WAS A SUBJECT MATTER OF ASSESSEES APPEAL BEFORE THE IT AT, NAGPUR BENCH, NAGPUR IN ITA NO.214/NAG/2006 RELEVANT TO A.Y. 2001-02. THE TRIBUNAL VIDE ITS ORDER DATED 31.08.2006 SET ASIDE THE ORDER OF CIT(A) AND REMANDED THE MATTER TO THE A.O. FOR CONSIDERING AFRESH IN ACCORDANCE WITH LAW. ADMITTEDLY, THE A.O. ISSUED NOTICE UNDER SECTION 148 ON 09.03.2006 WHEN THE ISS UE RELATING TO INVESTMENT MADE IN HOTEL BUILDING WAS PENDING BEFORE THE TRIBUNAL. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME STATED TO HAVE ESCAPED AS SESSMENT , THE SAME HAVING BEEN SUBJECT MATTER OF APPEAL WOULD NOT FALL WITHIN THE AMBIT OF SECTION 147 OF THE ACT AND, AS SUCH, THE A.O. LACKS JURISDICTION TO REOPEN THE ASSESSMENT ON THE SAID GROUND. 8 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 11. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE REOPENING OF THE ASSESSMENT WAS INVALID AND, THEREF ORE, THE LD. CIT(A) HAS CORRECTLY HELD THE REASSESSMENT ORDER PASSED UNDER SECTION 14 7 READ WITH SECTION 143(3) OF THE ACT, AS UNLAWFUL AND INVALID. WE FULLY AGREE W ITH THE VIEW TAKEN BY THE LD. CIT(A). 12. AS REGARDS THE MERITS OF THE CASE, WE ALSO ENDO RSE THE VIEW TAKEN BY THE LD. CIT(A). LD. CIT(A) HAS HELD THAT THE IMPUGNED REFE RENCE UNDER SECTION 142A MADE ON 23.02.2005 TO ISSUE NOTICE UNDER SECTION 14 8 ON 09.03.2006 ON THE BASIS OF DVOS ESTIMATION, AND CONSEQUENTLY ADDITION OF RS.1 1,24,538/- MADE BY THE A.O., ARE UNSUSTAINABLE ON FACTS AND IN LAW, SINCE THE SA ME IS OPPOSED TO THE RATIO LAID DOWN IN VARIOUS DECISIONS REFERRED TO IN THE ORDER, INCLUDING THAT OF HONBLE SUPREME COURT, IN THE CASE OF DHARIYA CONSTRUCTION COMPANY REFERRED TO ABOVE. FURTHER, THE LD. CIT(A) HAS CATEGORICALLY HELD THAT NEITHER THE SURVEY TEAM NOR THE A.O. HAD BROUGHT ANY EVIDENCE ON RECORD TO PROVE TH AT THE ASSESSEE HAD IN FACT INVESTED MORE THAN THAT RETUNED AS PER INVESTMENT D ISCLOSED IN THE BALANCE SHEET FILED WITH THE ORIGINAL RETURN OF THE ASSESSMENT YE AR UNDER CONSIDERATION. 13. IN VIEW OF THE ABOVE DISCUSSION, WE DISMISS THE APPEAL OF THE REVENUE C.O. NO.15/BLPR/2011 9 ITA NO.105 & CO NO.15/BLPR/2011 A.Y. 2001-02 14. KEEPING IN VIEW THE SMALLNESS OF THE AMOUNT INV OLVED, SHRI S.R. RAO, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS FOR THE GROU NDS RAISED IN THE CROSS OBJECTION. ACCORDINGLY, WE DISMISS THE CROSS OBJECTION SUBMITT ED BY THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE REVENUE AND CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.12.2014. SD/- SD/- (RAJENDRA) (H.L. KARWA) ACCOUNTANT MEMBER PRESIDENT RAIPUR, DATED: 24.12.2014 PBN/* COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. D.R. ITAT, RAIPUR BENCH, RAIPUR 6. GUARD FILE //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, RAIPUR