MOUNT VIEW CLUB & RESORTS P. LTD, NAVI MUMBAI V. ITO 10(3)(4), MUMBAI

ITA 1358/MUM/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3704 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Keywords: Reopening of assessment; Rejection of books of accounts; Unexplained investment; Value adopted by valuation officer; Valuation report; Reassessment proceedings
• Section: 143(3); 147; 69; 145; 148; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER / I .TA NOS.1358 TO 1360 & 1362/MUM/2011 ( / ASSESSMENT YEARS: 2003-04 TO 2006-07 M/S. MOUNT VIEW CLUB & RESORTS PVT. LTD., 27, MAHAVIR CENTRE, SECTOR-17, VASHI NAVI MUMBAI / VS. THE ITO - 10(3)(4), MUMBAI ./ ./ PAN/GIR NO. AACCM 5353M ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI PRAKASH PANDIT / RESPONDENT BY: SHRI ASGHAR ZAIN VP / DATE OF HEARING :10.02.2016 ! / DATE OF PRONOUNCEMENT :29.04.2016 / O R D E R PER C.N. PRASAD, JM: ALL THESE APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE ORDERS OF THE LD. CIT(A)-22, MUMBAI DATED 29.12.2010 PERTAINING TO ASSESSMENT YEARS 2003-04 TO 2006-07. IN ALL THESE ASSESSMENT YEARS, THE ASSESSEE FILED APPEALS RAISING SEVERAL GROUNDS ON J URISDICTION AND REOPENING THE ASSESSMENT AND ALSO ON THE MERITS MAK ING VARIOUS ADDITIONS WHILE COMPLETING THE REASSESSMENTS FOR TH E ASSESSMENT YEARS 2003-04 TO 2006-07. SO FAR AS THE APPEAL FOR THE ASSESSMENT YEAR 2005-06 IS CONCERNED, IT ARISES OUT OF THE ASS ESSMENT ORDER PASSED U/S. 143(3) R.W. SEC. 263 OF THE ACT. THE A SSESSMENTS I.E. FOR ITA NOS. 1358 TO 60 & 1362/M/11 2 ASSESSMENT YEARS 2003-04 & 2004-05 WERE REOPENED BY ISSUE OF NOTICE U/S. 148 OF THE ACT IN THE COURSE OF THE PRO CEEDINGS FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSMENT FOR THE AS SESSMENT YEAR 2006-07 IS COMPLETED IN THE REGULAR COURSE. 2. THE PRELIMINARY GROUND/OBJECTION RAISED BY THE A SSESSEE FOR THE ASSESSMENT YEAR 2005-06 IN ITS APPEAL IN GROUND NO. 1 & 2 IS AS UNDER: IN THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING ASSESSING OFFICERS ACT ION OF REFERRING THE MATTER TO THE VALUATION CELL U/S. 142 A WITHOUT REJECTING BOOKS OF ACCOUNTS. 2. REASONS GIVEN BY LD. CIT(A) FOR CONFIRMING ASSES SING OFFICERS ACTION OF REFERRING THE MATTER TO THE VAL UATION CELL U/S. 142A WITHOUT REJECTING BOOKS OF ACCOUNTS, ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS AND EVIDENCE S ON RECORD. 3. APART FROM THE ABOVE GROUND, THE ASSESSEE ALSO C HALLENGED THE ORDER OF THE LD. CIT(A) STATING THAT THE CIT(A) ERR ED IN CONFIRMING THE ASSESSING OFFICERS ACTION OF MAKING ADDITION OF RS . 6,18,011/- BY ADJUDICATING THE ISSUES WHICH WERE NOT A SUBJECT MA TTER OF THE ORDER U/S. 263 OF THE ACT. AT THE TIME OF HEARING, THE LD . COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS GROUND IS NOT PRESSED, H ENCE THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 4. BRIEF FACTS ARE THAT THE ASSESSEE IS A PRIVATE L IMITED COMPANY ENGAGED IN THE BUSINESS ACTIVITIES OF CLUB HOUSE & RESORT AND PROVIDES RECREATION FACILITIES OF CLUB HOUSE, RESTA URANT, SWIMMING POOL, INDOOR GAMES, JOYRIDE AND ENTERTAINMENTS. THE ASSESSEE FILED ITS ITA NOS. 1358 TO 60 & 1362/M/11 3 RETURN OF INCOME ON 30.10.2005 DECLARING NIL INCOME . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 17.12.2007 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 7,63, 856/- BY ASSESSING THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME F ROM HOUSE PROPERTY AS AGAINST INCOME FROM BUSINESS REPORTE D FOR THE ASSESSEE. IN THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER BY LETTER DATED 23.2.2007 REFERRED THE VALU ATION OF COST OF CONSTRUCTION OF ASSESSEES PROPERTY AT VILLAGE VIN EGAON, RAIGAD DISTRICT FOR VALUATION AND OBTAINED VALUATION REPOR T ON 21.8.2008 AFTER COMPLETION OF ASSESSMENT ON 17.12.2007. SUBS EQUENTLY, THE LD. CIT HAS SET ASIDE THE ASSESSMENT BY ORDER DATED 8.5 .2009 U/S. 263 OF THE ACT WITH A DIRECTION TO MAKE FRESH ASSESSMENT A FTER GIVING THE ASSESSEE AN OPPORTUNITY. PURSUANT TO THE ORDER PAS SED BY THE CIT U/S. 263, THE ASSESSMENT WAS COMPLETED ON 30.9.2010 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 50,37,935/-. WHI LE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MADE ADDITION U/S . 69B OF THE ACT TOWARDS UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF THE PROPERTY FOR THIS ASSESSMENT YEAR AT RS. 34,24,826/-. THIS ADDITION WAS MADE BASED ON THE VALUATION REPORT DATED 21.8.2008 OBTAI NED BY THE ASSESSING OFFICER FROM THE VALUATION CELL FOR THE P ROPERTY SITUATED AT VINEGAON VILLAGE, RAIGAD DISTRICT. 4.1. SIMILARLY, THE ASSESSING OFFICER BY REOPENING THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 MADE A DDITIONS U/S. 69B OF THE ACT TOWARDS COST OF CONSTRUCTION THE DIF FERENCE AS PER THE VALUATION REPORT AND THE COST OF CONSTRUCTION RECOR DED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. IN THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSEE OBJECTED FOR REOPENING OF ASSESSMENTS FOR ITA NOS. 1358 TO 60 & 1362/M/11 4 ASSESSMENT YEARS 2003-04 & 2004-05 AS WELL AS THE R EFERENCE TO VALUATION CELL BY THE ASSESSING OFFICER TO ESTIMATE THE COST OF CONSTRUCTION OF THE PROPERTY WITHOUT SATISFYING HIM SELF WITH THE COST OF CONSTRUCTION RECORDED IN THE BOOKS OF ACCOUNTS B Y THE ASSESSEE. THE ASSESSEE OBJECTED THE REFERENCE ITSELF TO VALUA TION CELL WITHOUT POINTING OUT ANY DEFECTS IN ITS BOOKS OF ACCOUNTS I N RECORDING THE COST OF CONSTRUCTION AND WITHOUT REJECTING SUCH BOOKS OF ACCOUNTS. HOWEVER, THE ASSESSING OFFICER COMPLETED THE ASSESS MENTS FOR ALL THESE ASSESSMENT YEARS 2003-04 TO 2006-07 BY MAKING ADDITION U/S. 69B OF THE ACT IN RESPECT OF DIFFERENCE IN COST OF CONSTRUCTION AS PER VALUATION REPORT AND THE COST OF CONSTRUCTION RECOR DED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE. 5. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE CIT(A) SUSTAINED THE REOPENING OF ASSESSMENTS AND A LSO THE REFERENCE TO VALUATION CELL BY THE ASSESSING OFFICER AND THE ADDITIONS MADE CONSEQUENT TO THE REFERENCE TO VALUATION CELL AND B ASED ON REVALUATION REPORT. 6. THE LD. COUNSEL FOR THE ASSESSEE IN SO FAR AS TH E ISSUE OF REFERENCE MADE TO VALUATION CELL FOR ESTIMATING THE COST OF CONSTRUCTION WITHOUT REJECTION OF BOOKS OF ACCOUNTS IS CONCERNED, SUBMITS THAT THE ASSESSEE COMPANY STARTED CONSTRUCT ION OF THE NEW BUILDING DURING THE FINANCIAL YEAR 2002-03 AND THE CONSTRUCTION WORK WAS COMPLETED IN FINANCIAL YEAR 2007-08. HE SUBMIT S THAT THE COST OF CONSTRUCTION OF THE BUILDING WAS DULY DISCLOSED IN THE ACCOUNTS OF THE ASSESSEE COMPANY, THE BREAK UP OF THE YEAR-WISE CON STRUCTION EXPENSES, INTEREST OTHER CHARGES ARE AS FOLLOWS:- ITA NOS. 1358 TO 60 & 1362/M/11 5 FINANCIAL YEAR CONSTRUCTION EXPENSES INTEREST AND OTHER CHARGES TOTAL COST 2002 - 03 7,71,338 --- 7,71,338 2003 - 04 75,35,191 6,37,652 81,72,843 2004 - 05 49,54,917 14,53 386 64 , 08 , 303 2005 - 06 1,30,154 11,69,989 13,00,143 2006 - 07 37,20,268 9,18,230 46,38,498 2007 - 08 3,43 209 7 63,649 11,06,858 TOTAL 1,74,55,078 49,42,906 2,23,97,984 7. IT IS SUBMITTED THAT THE DATE ON WHICH REFERENCE TO VALUATION CELL WAS MADE I.E. ON 23.2.2007 ASSESSMENT PROCEEDI NGS FOR A. Y. 2005-06 WERE IN PROGRESS AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 17.12.2007 BY ACCEPTING THE BOOKS OF ACCOUNTS AND THEREFORE IT IS SUBMITTED THAT THERE WAS NO MATERIA L WITH THE ASSESSING OFFICER TO INVOKE THE PROVISION OF SECTIO N- 142A IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2005-06. THE LD. COUNSEL FURTHER SUBMITS THAT THE PROVISIONS OF SECTION 142A CANNOT BE READ IN ISOLATION WITH SECTION 145 IN OTHER WORDS IF THE BO OKS OF ACCOUNTS ARE FOUND TO BE CORRECT AND COMPLETE IN ALL RESPECTS AN D NO DEFECTS ARE POINTED OUT THEREIN AND THE COST OF THE CONSTRUCTIO N OF THE BUILDING IS RECORDED THEREIN THEN ADDITION ON ACCOUNT OF DIFFER ENCE ON THE COST OF CONSTRUCTION CANNOT BE MADE EVEN IF THE REPORT IS O BTAINED WITHIN THE MEANING OF SECTION 142A FROM D.V.O. THE LD. COUNSE L FURTHER SUBMITS THAT REFERENCE TO VALUATION IS DISCRETIONAR Y AND THEREFORE, AS REFERENCE TO D.V.O. IS INVALID, THE ASSESSMENT OR R EASSESSMENT FRAMED THEREUNDER WILL BE INVALID. 8. THE LD. COUNSEL PLACING RELIANCE ON THE APEX COU RT DECISION IN THE CASE OF SARGAM CINEMA VS. COMMISSIONER OF INCOM E TAX IN [328 ITR 513] SUBMITS THAT THE HONBLE SUPREME COURT HEL D THAT 'THE ITA NOS. 1358 TO 60 & 1362/M/11 6 ASSESSING OFFICER CANNOT REFER THE MATTER TO DEPART MENT VALUATION OFFICER WITHOUT THE BOOKS OF ACCOUNTS BEING REJECTE D'. 9. IN SO FAR AS THE REOPENING OF ASSESSMENTS U/S. 1 47 OF THE ACT FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 ARE CONCERNE D, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT FOR A. Y. 20 03-04 THE RETURN OF INCOME WAS FILED ON 2.9. 2003 ALONG WITH DULY AUDIT ED ACCOUNTS. THE SAID ACCOUNTS DULY DISCLOSE COST OF CONSTRUCTION OF THE NEW BUILDING. THE SAID RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT. THE ASSESSING OFFICER ISSUED NOTICE DATED 29.3.2010 U/ S.148 OF THE ACT. THE ASSESSEE IMMEDIATELY OBJECTED THE REOPENING AND ASKED FOR THE COPY OF THE REASONS RECORDED. 10. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE VIDE HIS LETTER DATED 26.08.2010 OBJECTED THE REASSESSMENT PROCEEDINGS AN D SUBMITTED THAT FOR INVOKING PROVISIONS OF SECTION 142A OF THE ACT, THE FIRST REQUIREMENT IS WHERE AN ESTIMATE VALUE OF ANY INVE STMENT REFERRED TO IN SECTION 69 OR SECTION 69A OR SECTION 69B OF T HE ACT IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY IN HIS DISCRETIO N REQUIRE THE VALUATION OFFICER TO MAKE ESTIMATE OF SUCH VALUE, B UT THE OPENING PORTION OF SUB-SECTION 1 OF SECTION 142A OF THE ACT STIPULATES THAT THE A.0 CAN UNDERTAKE SUCH AN EXERCISE ONLY FOR THE PUR POSE OF MAKING AN ASSESSMENT OR RE-ASSESSMENT UNDER THE ACT. HOWEV ER ON THE DATE ON WHICH REFERENCE WAS MADE TO THE VALUATION OFFICE R, NO ASSESSMENT OR REASSESSMENT WAS PENDING FOR A. Y. 2003-04 AND 2 004-05. IT WAS SUBMITTED THAT REASONS RECORDED BY THE A. O. CATEGO RICALLY SHOW THAT THERE IS NOTHING TO INDICATE THEREIN TO ESTABLISH T HAT THE COST OF CONSTRUCTION HAS NOT BEEN DISCLOSED FULLY OR TRULY BY THE ASSESSEE, WHICH CONSTITUTE A MATERIAL FACT NECESSARY FOR THE ASSESSMENT. ITA NOS. 1358 TO 60 & 1362/M/11 7 THEREFORE REASON RECORDED DO NOT PRIMA FACIE INDICATE AS TO WHAT WAS NOT DISCLOSED BY THE ASSESSEE. THEREFORE IT IS SUBM ITTED THAT FOR ALL THE YEARS REASONS RECORDED ARE COMMON AND ALSO THE REFERENCE MADE TO VALUATION OFFICER IS COMMON. THEREFORE IT IS SUB MITTED THAT REOPENING OF THE ASSESSMENT BASED ON GENERALIZE VAG UE STATEMENT WITHOUT APPLICATION OF MIND IN ROUTINE MANNER REQUI RES TO BE DROPPED. 11. THE LD. COUNSEL SUBMITS THAT THE ASSESSING OFFI CER WITHOUT DISPOSING THE ASSESSEE'S OBJECTION FOR REOPENING OF THE ASSESSMENT PROCEEDED WITH THE ASSESSMENT PROCEEDINGS AND IN TH E ASSESSMENT ORDER, OBSERVED THAT THE OBJECTIONS OF THE ASSESSEE ARE NOT TENABLE FOR THE REASONS MENTIONED IN PARA 3 OF THE ASSESSME NT ORDER. 12. THE LD. COUNSEL SUBMITS THAT IN THE CASE OF THE INCOME TAX OFFICER, LUCKNOW VS. VIJETA EDUCATIONAL SOCIETY [11 8 ITD 382), IT WAS HELD THAT THE PROVISIONS OF SECTION 142A CANNOT BE READ IN ISOLATION TO SECTION 145 IN OTHER WORDS IF THE BOOKS OF ACCOUNTS ARE FOUND TO BE CORRECT AND COMPLETE THEN THE ADDITION ON ACCOUNT O F DIFFERENCE IN COSTS OF CONSTRUCTION CANNOT BE MADE EVEN IF THE RE PORT IS OBTAINED WITHIN SECTION 142A FROM D.V.O. IT IS BECAUSE THE U SE OF THE REPORT OF THE D.V.O. OBTAINED U/S.142A IS NOT MANDATORY BUT I T IS DISCRETIONARY. ACCORDINGLY, REFERENCE TO THE D.V.O. IS INVALID AND ASSESSMENT AND RE- ASSESSMENT FRAMED THEREUNDER WILL BE ALSO INVALID. 13. IT IS SUBMITTED THAT THE CIT(A) IN HIS ORDER DA TED 16.11.2010 HAS REJECTED ASSESSEE'S BASIC OBJECTION THAT ASSESS MENT CANNOT BE REOPENED WITHOUT REJECTING BOOKS OF ACCOUNTS ON THE GROUND THAT HIS PREDECESSOR IN HIS ORDER FOR THE AY 2005-06 DATED 2 4.09.2009 ITA NOS. 1358 TO 60 & 1362/M/11 8 PARTICULARLY IN PARA 3.1 AND 3.2 OF THE SAID ORDER HAS CLEARLY BROUGHT OUT THE DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT AND OBSERVED THAT THE BOOKS OF ACCOUNTS ARE NOT REL IABLE WHICH AMOUNT TO REJECTION OF BOOKS OF ACCOUNTS. 14. IT IS SUBMITTED THAT THE REPORT OF THE DEPARTME NT VALUATION OFFICER CANNOT BE A BASIS FOR REOPENING OF THE ASSE SSMENT BECAUSE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATERIAL USED FOR CONSTRUCTION NOR THE EXPENSES INCURRED BY THE A SSESSEE IN THAT REGARD, AS VARIATIONS ARE BOUND TO BE THERE AND THE REFORE, REOPENING OF THE ASSESSMENT ONLY ON THE BASIS OF D.V.OS. REPO RT IS NOT PERMISSIBLE AND THEREFORE, REOPENING OF THE ASSESSM ENT FOR A.Y. 2003-04 IS BAD IN LAW. 15. IT IS SUBMITTED THAT ADMITABLY CIT(A) HAS PASS ED THE ORDER ON 24.07.2009 WHILE REFERENCE TO THE VALUATION WAS ON 6.11. 2007. THEREFORE SUBSEQUENT OBSERVATION CAN SUBSTANTIATE T HE REFERENCE MADE ON 6.11.2007. IT IS FURTHER SUBMITTED THAT PRI OR TO MAKING A REFERENCE TO VALUATION CELL ON 6.11.2007, AO HAS NO T ASCERTAINED AS TO WHAT IS THE DEFECT IN THE COST OF CONSTRUCTION AS D ISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME. FURTHER, AFTER MA KING THE SAID REFERENCE, ASSESSMENT WAS COMPLETED ON 17.12.2007. IN THE SAID ASSESSMENT ORDER, THERE IS NO IOTA OF EVIDENCE TO S HOW THAT BOOKS OF ACCOUNTS ARE DEFECTIVE AND THE COST OF CONSTRUCTION AS SHOWN IN THE BOOKS OF ACCOUNTS IS NOT TRUE COST OF CONSTRUCTION. IN OTHER WORDS, WHILE MAKING THE SAID ASSESSMENT, AO HAS NOT POINTE D OUT ANY DEFECTS AS CONTEMPLATED BY SEC 145 (2). ITA NOS. 1358 TO 60 & 1362/M/11 9 16. IT IS THEREFORE SUBMITTED THAT REFERENCE TO THE VALUATION OFFICER U/S 142A IS INVALID AND THEREFORE THE REOPENING BAS ED ON THE SAID VALUATION OFFICER'S REPORT IS ALSO VOID AB-INITIO A ND THE SAID PROPOSITION IS SUPPORTED BY THE APEX COURT IN THE D ECISION IN THE CASE OF ASST. COMMISSIONER OF INCOME TAX VS. DHARIYA CON STRUCTION CO. [328 ITR 515) WHEREIN IT WAS HELD THAT 'THE OPINION OF THE D.V.O. PER SE IS NOT AN INFORMATION FOR THE PURPOSE OF THE REO PENING OF THE ASSESSMENT U/S.147 OF THE INCOME TAX ACT, 1961. IT WAS SUBMITTED THAT THE APEX COURT BY THE SAID D ECISION HAS CONFIRMED THE VIEW TAKEN BY:- (1) THE CALCUTTA HIGH 'COURT IN HOTEL REGAL INTERN ATIONAL AND ANR. VS. INCOME TAX OFFICER & ANR. [320 ITR 573]. (2) THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INC OME-TAX VS. IQBAL HUSSAIN [328 ITR 142]. (3) THE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX VS. NAVEEN GERA [328 ITR 516]. IT WAS FURTHER SUBMITTED THAT FOLLOWING THE ABOVE APEX COURT JUDGEMENT, THE GUJARAT HIGH COURT IN GOODLUCK AUTOM OBILES PRIVATE LIMITED V. ACIT [359 ITR 306] AND ALLAHABAD HIGH CO URT IN CIT V. LUCKNOW PUBLIC EDUCATION SOCIETY [359 ITR 588] HAS HELD THAT REFERENCE TO VALUATION OFFICER WITHOUT REJECTING TH E BOOKS OF ACCOUNTS IS INVALID. THE LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED RE LIANCE ON THE DECISION OF HONBLE (T&AP) HIGH COURT IN THE CAS E OF LAXMI ITA NOS. 1358 TO 60 & 1362/M/11 10 CONSTRUCTIONS (369 ITR 271) SUBMITS THAT REFERENCE TO DVO WITHOUT REJECTION OF BOOKS OF ACCOUNTS IS BAD IN LAW. 17. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES. HE FURTHER SUBMIT S THAT THERE IS NO SEPARATE MENTION OF REJECTION OF BOOKS OF ACCOUNTS IN THE ASSESSMENT ORDER. THE ASSESSMENTS WERE MADE BASED ON THE VALU ATION REPORT WHICH IS A MATERIAL EVIDENCE THEREFORE, THE ASSESSI NG OFFICER IS JUSTIFIED IN REOPENING THE ASSESSMENTS. 18. HEARD BOTH SIDES, PERUSED THE MATERIAL AVAILABL E ON RECORD AND THE DECISION RELIED ON BY THE LD. COUNSEL. IN THIS CASE REOPENING OF ASSESSMENTS FOR THE ASSESSMENT YEARS 2003-04 AND 20 04-05 GOT TRIGGERED BASED ON THE ASSESSMENT PROCEEDINGS FOR T HE ASSESSMENT YEAR 2005-06 AND THE VALUATION REPORT OF THE DISTRI CT VALUATION OFFICER ON THE CONSTRUCTION OF THE PROPERTY BY THE ASSESSEE AT VINEGAON VILLAGE, RAIGAD DISTRICT . THE ASSESSEE F ILED RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 30.10.2005 DE CLARING NIL INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS BY LETTER DATED 23.2.2007, THE ASSESSING OFFICER MADE A REFERENCE T O THE DISTRICT VALUATION OFFICER FOR THE COST OF CONSTRUCTION OF T HE PROPERTY SITUATED AT VINEGAON, RAIGAD DISTRICT. THE ASSESSMENT WAS C OMPLETED ON 17.12.2005 U/S. 143(3) OF THE ACT TREATED THE INCOM E OF THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AS AGAINST INCOME FRO M BUSINESS REPORTED. BY THE DATE OF COMPLETION OF ASSESSMENT I.E. 17.12.2007, THE ASSESSING OFFICER DID NOT RECEIVE THE VALUATION REPORT FROM THE DISTRICT VALUATION OFFICER. THE SAID REPORT DATED 21.8.2008 WAS RECEIVED BY THE ASSESSING OFFICER AFTER COMPLETION OF ASSESSMENT. ITA NOS. 1358 TO 60 & 1362/M/11 11 LATER THE CIT PASSED ORDER U/S. 263 SETTING ASIDE T HE ASSESSMENT WITH A DIRECTION TO MAKE FRESH ASSESSMENT. CONSEQUENT T O THE ORDER PASSED BY THE CIT U/S. 263, THE ASSESSING OFFICER F RAMED ASSESSMENT U/S. 143(3) R.W. SEC. 263 FOR THE ASSESSMENT YEAR 2 005-06 AND PASSED ORDER ON 30.9.2010 BY MAKING ADDITION U/S. 69B OF T HE ACT BEING THE DIFFERENCE IN COST OF CONSTRUCTION AS PER THE VALUA TION REPORT AND THE COST OF CONSTRUCTION RECORDED BY THE ASSESSEE IN IT S BOOKS OF ACCOUNTS. 19. BASED ON THE VALUATION REPORT, THE ASSESSING OF FICER REOPENED THE ASSESSMENT OF THE ASSESSEE FOR THE ASSESSMENT Y EARS 2003-04 AND 2004-05 AND MADE ADDITION U/S. 69B OF THE ACT TOWAR DS UNEXPLAINED INVESTMENT IN THE PROPERTY BEING THE DIFFERENCE IN THE VALUORS REPORT AND THE COST OF CONSTRUCTION REPORTED IN THE BOOKS OF ACCOUNTS. IN SO FAR AS THE ASSESSMENT YEAR 2006-07 IS CONCERN ED, THE ASSESSING OFFICER APART FROM TREATING THE INCOME REFERRED INC OME FROM THE PROPERTY AS INCOME FROM HOUSE PROPERTY DISALLOWED D EPRECIATION ON THE BUILDING IS NOT A BUSINESS ASSET. HE ALSO MADE ADDITION U/S. 69 OF THE ACT BEING THE DIFFERENCE BETWEEN THE COST OF CO NSTRUCTION ESTIMATED BY THE VALUATION OFFICER AND THE COST REC ORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. 20. THE PRELIMINARY OBJECTION OF THE ASSESSEE IS WI THOUT REJECTION OF BOOKS OF ACCOUNTS REFERENCE TO VALUATION OFFICER IS BAD IN LAW. IN SO FAR AS ASSESSMENT YEARS 2003-04 AND 2004-05, THE PRELIMINARY OBJECTION IS THAT THE REOPENING OF ASSESSMENT FOR T HE REASON THAT ASSESSMENTS WERE REOPENED ONLY BASED ON THE VALUATI ON REPORT WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF AC COUNTS. WE FIND CONSIDERABLE FORCE IN THE SUBMISSION OF THE LD. COU NSEL FOR THE ITA NOS. 1358 TO 60 & 1362/M/11 12 ASSESSEE. ON THE DATE WHEN REFERENCE TO THE VALUAT ION CELL WAS MADE, THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005-06 IS IN PROGRESS AND THE ASSESSING OFFICER COMPLETED THE AS SESSMENT BY ACCEPTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. TH E ASSESSING OFFICER NEVER REJECTED THE BOOKS OF ACCOUNTS BEFORE MAKING THE REFERENCE TO THE VALUATION OFFICER. THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS CIT 328 ITR 513 HAS HELD THAT THE ASSESSING OFFICER CANNOT REFER THE MATTER TO THE DISTRICT VA LUATION OFFICER WITHOUT REJECTING THE BOOKS OF ACCOUNT. SIMILAR VI EW HAS TAKEN BY THE HONBLE TELANGANA & ANBDHRA PRADESH HIGH COURT IN T HE CASE OF LAXMI CONSTRUCTIONS (SUPRA) BY FOLLOWING THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA (SUPRA). RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOLD THAT THE REFER ENCE MADE BY THE ASSESSING OFFICER TO DVO IS BAD IN LAW. CONSEQUENT LY THE ADDITIONS MADE BASED ON THE VALUATION REPORT FOR THE ASSESSME NT YEAR 2005-06 IS BAD IN LAW. HENCE, THE ADDITION MADE U/S. 69 IN RESPECT OF COST OF CONSTRUCTION IS DIRECTED TO BE DELETED. AS WE HAVE HELD THAT THE REFERENCE ITSELF IS BAD IN LAW, THE REOPENING OF AS SESSMENTS FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 BASED ON THE VAL UATION REPORT WILL NOT SURVIVE. HENCE, WE HOLD THAT THESE TWO AS SESSMENTS MADE U/S. 143(3) R.W.S. 147 ARE ALSO BAD IN LAW. IN TH E CIRCUMSTANCES, WE QUASH THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEAR S 2003-04 AND 2004-05 PASSED U/S. 143(3) R.W.S 147 OF THE ACT. 21. COMING TO THE ASSESSMENT YEAR 2006-07, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT GROUND NO. 1 & 2 RAISED BY TH E ASSESSEE CHALLENGING THE ORDER OF THE LD. CIT(A) IN ASSESSIN G THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY AND THE CLAIM OF DEPR ECIATION. IT IS SUBMITTED THAT THESE ISSUES ARE DECIDED AGAINST THE ASSESSEE BY THE ITA NOS. 1358 TO 60 & 1362/M/11 13 TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 5451/MUM /2009 DATED 26.11.2010 FOR ASSESSMENT YEAR 2005-06. RESPECTFUL LY FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2005-06, WE DISMISS THESE GROUNDS. 22. IN SO FAR AS THE GROUNDS RAISED IN RESPECT OF T HE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ASSESSING OFFICERS ACTION OF REFERRING THE MATTER TO THE VALUATION CELL WITHOUT REJECTING THE BOOKS OF ACCOUNTS, WE HAVE ALREADY HELD THAT REFERENCE IS BAD IN LAW I N THE PRECEDING PARAGRAPHS. THE DECISION APPLIES MUTATIS MUTANDIS TO THE APPEAL FOR THIS ASSESSMENT YEAR ALSO. THUS, WE ALLOW THE GROU ND OF APPEAL ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELE TE THE ADDITION MADE U/S. 69 IN RESPECT OF COST OF CONSTRUCTION. 23. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR ASSESSMENT YEARS 2003-04 AND 2004-05 ARE ALLOWED AND THE APPEA LS FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 ARE PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016. SD/- SD/- (RAJESH KUMAR) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED : 29 TH APRIL, 2016 . % . ./ RJ , SR. PS ITA NOS. 1358 TO 60 & 1362/M/11 14 !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI