COMMR. OF INCOME TAX, KARNAL V. ROSHAN KAASHYAP

ITA/251/2005

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Karnal, challenging the decision of the Income Tax Appellate Tribunal, which favored the respondent, Dr. Roshan Kashyap. The dispute originated from the assessment year 1998-99, where the Income Tax Department questioned the cost of construction reported by the assessee compared to the valuation by the DVO. The Tribunal found that the DVO's reference was improper as the books of account were not rejected, leading to the dismissal of the revenue's appeal. The High Court's decision focused on the legal validity of the DVO's reference and the application of Section 142A of the Income Tax Act, 1961, particularly in the context of the amendments made by the Finance Act, 2004.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 717901 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 24-10-2013
• Assessment Year: misc
• Other Referred Cases: Smt. Amiya Bala Paul v. CIT, Sargam Cinema v. CIT, CIT v. Chohan Resorts, CIT and another v. Bhawani Shankar Vyas
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S K MUKHI
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Cost of construction; Income Tax; Unexplained investment; Valuation Officer; Reference to DVO
• Section: 69; 55A; 260A; 142A; 131(1)(d)

Judgement Text

"ITA No.251 of 2005 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.251 of 2005 Date of decision: 24.10.2013 Commissioner of Income Tax, Karnal …Appellant Vs. Dr. Roshan Kashyap …Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr. Yogesh Putney, Advocate for the appellant. Mr. S.K.Mukhi, Advocate for the respondent. Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 31.8.2004, Annexure A.3, passed by the Income Tax Appellate Tribunal, Delhi Bench, SMC-II, New Delhi (in short, “the Tribunal”) in ITA No.4003/D/2003, for the assessment year 1998-99 claiming following substantial questions of law:- i)Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the case is squarely covered in favour of the assessee by the judgment of Hon’ble Supreme Court in the case of Smt.Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC) especially when the reference with regard to the construction of house building was made to the Valuation Officer under Singh Gurbax 2013.11.19 10:04 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.251 of 2005 2 section 131(1) (d) and not under section 55A of the Income Tax Act, 1961 and further keeping in view the provisions of section 142A of the Act? ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in deleting the addition of ` 2,35,933/- made on account of difference in cost of construction shown and that determined by the Valuation Officer in the year under consideration which stood confirmed in appeal by the CIT(A)? 2. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in the appeal, may be noticed. The assessee filed his return for the assessment year in question declaring his income at `1,16,360/-. Subsequently, the case of the assessee was taken up for scrutiny and statutory notices were issued. During the course of assessment proceedings, it was noticed that the assessee made construction on Plot No.104A, Yamuna Enclave, Khasra No.3715, Pati Insar, G.Y.Road, Panipat and invested ` 9,49,540/- during the year in question. Since the assessee had not furnished the information in response to questionnaire issued, the case for valuation of house building was referred to the Departmental Valuation Officer, Chandigarh (DVO) for determining the cost of construction. The DVO vide his letter dated 7.2.2001 submitted his report estimating the cost of construction as `15,43,500/-. Thus, there was difference of ` 3,42,225/- for the year under consideration. The assessee was called upon to show cause as to why the difference of ` 3,42,225/- should not be assessed as unexplained investment in the construction of house building. After considering the objections raised by the assessee on different points of valuation report, relief to the extent of ` 1,23,477/- was given to the assessee. Since the assessee failed to explain the source of Singh Gurbax 2013.11.19 10:04 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.251 of 2005 3 investment in the construction of the above house building to the extent of `2,37,883/- during the year in question, the same was deemed to be the income of the assessee and added back under section 69 of the Act. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 27.3.2003, Annexure A.2, the CIT(A) dismissed the appeal. Still not satisfied with the order, the assessee filed appeal before the Tribunal. Vide order dated 31.8.2004, Annexure A.3, the Tribunal allowed the appeal of the assessee holding that since the departmental authorities had no power to refer the matter to the DVO for the purpose of valuation of the cost of construction, no addition on the basis of that report could be sustained. Hence the present appeal by the revenue. 3. Learned counsel for the appellant submitted that the Tribunal had not decided the issue on merits and followed Smt.Amiya Bala Paul's case (supra) and after amendment of Finance Act, 2004 which has been made effective from 15.11.1972 whereby Section 142A of the Act has been incorporated, the matter is required to be remanded to the Tribunal to adjudicate in the light of the said Section. The next contention raised is that during the pendency of the appeal, the same would amount to continuation of assessment proceedings and therefore, in view of the decision of this court in ITA No.57 of 2005 decided on 27.1.2011, The CIT, Karnal v. Shri Ramesh Chaudahry, the provisions of section 142A of the Act were fully applicable. Relying upon judgment of the Uttarakhand High Court in CIT and another v. Bhawani Shankar Vyas, (2009) 311 ITR 8, it was submitted that it was not essential or mandatory for the revenue to have rejected the Singh Gurbax 2013.11.19 10:04 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.251 of 2005 4 books of account before making the reference under section 142A of the Act. It was thus urged that the substantial questions of law claimed by the revenue are required to be answered in its favour and the matter be remanded to the Tribunal to adjudicate the dispute on merits in accordance with law. 5. On the other hand, controverting the submissions made by learned counsel for the revenue, learned counsel for the assessee submitted that without rejection of the valuation of the property shown in the books of account, in view of the judgment of the Apex Court in Sargam Cinema v. CIT, (2010) 328 ITR 513, reference to the DVO was bad in law. It was argued that once the reference itself was bad and the amount which was sought to be added amounting to ` 2,35,933/- was only on estimate basis, the Tribunal had rightly decided the issue in favour of the assessee. 6. After hearing learned counsel for the parties, we do no find any merit in the appeal. 7. The Apex Court in Sargam Cinema’s case (supra) had held as under:- “In the present case, we find that the Tribunal decided the matter rightly in favour of the assesseee inasmuch as the tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived.” 8. Following the aforesaid judgment, in CIT v. Chohan Resorts, Singh Gurbax 2013.11.19 10:04 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.251 of 2005 5 (2012) 253 CTR (P&H) 106, it has been held by this Court that without there being rejection of the valuation of the property constructed as shown in the books of account, the reference under section 142A of the Act was not justified. Thus, the difference in the valuation which has been claimed by the revenue as per the valuation report of the DVO amounting to ` 2,35,933/- on estimate basis cannot be said to be unexplained investment in the facts and circumstances of the present case. 9. The judgment of Uttrakhand High Court in Bhawani Shankar Vyas's case (supra) was prior to the pronouncement of the Apex Court in Sargam Cinema's case (supra) and being contrary to the enunciation of law laid down by this Court in Chohan Resorts's case (supra), we are unable to subscribe to the said view. 10. Accordingly, we do not find any ground to interfere with the impugned order dated 31.8.2004, Annexure A.3 passed by the Tribunal. The substantial questions of law are answered accordingly. The appeal stands dismissed. (Ajay Kumar Mittal) Judge October 24, 2013 (Jaspal Singh) 'gs' Judge Singh Gurbax 2013.11.19 10:04 I attest to the accuracy and integrity of this document High Court Chandigarh "