The Dy.CIT, Circle 16(1), Hyderabad V. M/s. Legend Estates Pvt Ltd., Hyderabad

ITA 1582/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74717 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P VINOD
• Keywords: Reopening of assessment; Unexplained investment; Unexplained expenditure; Business expenditure; Income from undisclosed sources; Opportunity of being heard; Retrospective amendment; Corroborative evidences; Valuation report; Reason to believe; Revenue expenditure; Reassessment proceedings
• Section: 69C; 142(1); 133A; 147; 131; 69; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1581/HYD/2013 ASSESSMENT YEAR 2005-06 ITA NO. 1582/HYD/2013 ASSESSMENT YEAR 2008-09 THE DEPUTY CIT CIRCLE-16(1) HYDERABAD VS. M/S. LEGEND ESTATES PVT. LTD., HYDERABAD PAN: AAACL9640A APPELLANT RESPONDENT APPELLANT BY: SRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: SRI P. VINOD DATE OF HEARING: 25.03.2014 DATE OF PRONOUNCEMENT: 25.03.2014 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED A GAINST DIFFERENT ORDERS OF THE CIT(A) DATED 26.8.2013 FOR A. YS. 2005-06 AND 2008-09. 2. THE GROUNDS RAISED IN BOTH THE APPEALS ARE COMMON I N NATURE WHICH ARE AS FOLLOWS: 1. THE CIT (A) ALLOWED ASSESSEE'S APPEAL WITHOUT GOING INTO THE MERITS OF THE CASE. THE ORDER OF THE HON'BLE IT AT ON WHICH THE CIT (A) RELIED UPON IS NOT ACCEPTABLE FOR VARIOUS DEFICIENCIES CONTAINED IN THEIR FINDINGS; 2. THE CIT(A) ERRED ON BOTH FACTS AND CIRCUMSTANCES OF THE CASE IN NOT CONSIDERING THE DIFFERENCE IN VALUATION AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDINGS ; 3. THE CIT (A) OUGHT TO HAVE APPRECIATED THE EFFORTS O F THE ASSESSING OFFICER THAT THE DIFFERENCE IN COST OF CO NSTRUCTION WAS ADDED AS UNEXPLAINED EXPENDITURE AFTER GIVING A SSESSEE DUE OPPORTUNITY OF BEING HEARD; ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 2 4. THE CIT (A) OUGHT TO HAVE CONSIDERED THE FACT THAT INVESTMENT OF UNACCOUNTED INCOME IN CONSTRUCTION OF FLATS HAS BEEN CORRECTLY BROUGHT TO TAX INVOKING THE PROV ISIONS OF SEC. 69C OF THE IT ACT, 1961 ; 5. THE CIT (APPEALS) ERRED IN LAW IN GRANTING RELIEF T O THE ASSESSEE ON THE GROUND THAT UNEXPLAINED EXPENDITURE UNDER SEC. 69C DOES NOT FALL UNDER THE AMBIT OF THE PROVISIONS OF SEC. 142A FOR REFERENCE TO DVO. IN FA CT THE PROPERTIES WERE REFERRED TO THE DVO FOR THE PURPOSE OF VALUATION OF UNACCOUNTED INVESTMENTS MADE BY THE AS SESSEE INTO THOSE PROPERTIES. THEREFORE, THE REFERENCE MAD E IS VALID IN LAW; 6. EVEN IF THE REFERENCE TO DVO IS HELD TO BE BAD IN L AW, THE INFORMATION GATHERED WITH REGARD TO VALUATION OF PR OPERTIES CAN ALWAYS BE USED AS EVIDENCE FOR MAKING ASSESSMEN T ; 7. THE CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT O NCE THE VALUATION REPORT IS HELD TO BE AS NOT A BASIS FOR DETERMINATION OF COST OF CONSTRUCTION, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE GAINS SIGNIFICANCE AND A RE TO BE TREATED AS THE BASIS FOR MAKING AN ASSESSMENT; 8. THE CIT (A) OUGHT TO HAVE APPRECIATED THE ACTION OF THE AO THAT THE DISALLOWANCE ON CLAIM OF EXPENDITURE ON SA ND WAS BASED ON THE IMPOUNDED REGISTERS AND THAT THE EXPEN DITURE RECORDED IN THESE REGISTERS IS MUCH LOWER THAN THE EXPENDITURE DEBITED TO THE P&L ACCOUNT; 9. THE CIT (A) OUGHT TO HAVE APPRECIATED THE ACTION OF THE AO THAT THE DISALLOWANCE ON CLAIM OF EXPENDITURE ON BR ICKS WAS BASED ON THE IMPOUNDED REGISTERS AND THAT THE EXPEN DITURE RECORDED IN THESE REGISTERS IS MUCH LOWER THAN THE EXPENDITURE DEBITED TO THE P&L ACCOUNT. 3. SINCE FACTS ARE SIMILAR IN BOTH THE YEARS, THE FACT S AS NARRATED IN A.Y. 2008-09 ARE TAKEN. THERE WAS A SURVEY U/S. 133A OF THE ACT AT THE PREMISES OF THE ASSESSEE ON 23.08.2006. DUR ING THE COURSE OF SURVEY, CERTAIN PAYMENTS AND STOCKS WERE FOUND TO B E UNVERIFIABLE FROM THE EXISTING RECORDS. ACCORDINGLY, THE MATTER WAS REFERRED U/S. 142A BY THE AO TO THE DVO. THE DVO FURNISHED THE VALUA TION REPORT OF CONSTRUCTION AT RS. 55,83,06,733. ACCORDING TO T HE ASSESSEE'S BOOKS OF ACCOUNT THE COST OF CONSTRUCTION WAS RS. 3 8,58,53,602. THE ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 3 DIFFERENCE WAS WORKED OUT AT RS. 17,24,54,131. THE DIFFERENCE WAS APPORTIONED AMONG THE FYS 2004-05 TO 2008-09 AND TH E AMOUNT ATTRIBUTABLE TO THE ASSESSMENT YEAR UNDER CONSIDERA TION WAS RS. 2,51,50,267. THE AO MADE THIS ADDITION U/S. 69 OF T HE ACT. THE AO OBSERVED THAT THE ASSESSEE MADE INVESTMENT IN THE I MMOVABLE PROPERTIES TO THE EXTENT OF RS. 6,81,14,338 AND THE AMOUNT EXPENDED ON MAKING SUCH INVESTMENT IN ACQUIRING THE ABOVE PR OPERTIES EXCEED THE AMOUNT OF RS. 4,29,64,271 RECORDED IN THIS BEHA LF IN THE BOOKS OF ACCOUNT AND THE ASSESSEE OFFERED NO EXPLANATION ABO UT EXCESS AMOUNT OF RS. 2,51,50,067 AND ADDED THE SAME. 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINIO N THAT SAME ISSUE WAS CONSIDERED BY THIS TRIBUNAL FOR A.Y. 2007-08 IN ASSESSEES OWN CASE VIDE ORDER DATED 30.3.2012 IN I TA NO. 1542/HYD/2010 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: '8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FIRST OF A LL, WE HAVE TO GO THROUGH THE PROVISION OF SEC. 142A OF THE ACT TO CONSIDER THE ISSUE IN HAND. THE RELEVANT PROVISION SUB-SECTION-1 OF SEC. 142A READS AS UNDER:- '142A (1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF T HE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE A RTICLE REFERRED TO IN SECTION 69A OR SECTION 69B IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HI M. 9. WE FIND FROM THE FACTS OF THE CASE THAT THERE WAS A SURVEY U/S 133A OF THE INCOME TAX ACT ON 23-08-2006. DURING C OURSE OF SURVEY, IT WAS FOUND THAT THERE WERE CERTAIN CASH P AYMENTS TOWARDS CONSTRUCTION MATERIAL LIKE SAND, BRICKS ETC AND OTHER ITEMS WHOSE EXPENDITURE WAS NOT FULLY VERIFIABLE. THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGISTERS. THE QUANTIFICATION OF LABOUR PAYMENTS WAS ALSO NOT AVAI LABLE. SINCE THE EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT FULLY SUPPORTED BY VOUCHERS AND PROPER EVIDENCE, THE ASSE SSEE OFFERED ADDITIONAL INCOME TO THE TUNE OF RS. 1.60 C RORES. IN MEAN TIME THE ASSESSING OFFICER MADE REFERENCE TO T HE DISTRICT VALUATION OFFICER ON 04-09-2006 AND THE DVO SUBMITT ED THE ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 4 VALUATION REPORT ON 14-09-2009 AS PER WHICH THE COS T OF CONSTRUCTION OF THE 22 PROPERTIES WAS ARRIVED AT RS . 55,83,05,733/-. THE ASSESSEE HAS DISCLOSED THE COS T OF CONSTRUCTION OF THESE PROPERTIES IN ITS BOOKS AT RS . 38,58,53,602. THE DIFFERENCE BETWEEN THESE TWO WAS WORKED AT RS. 17,24,53,131/- WHICH WAS SPREAD OVER TO 5 ASSES SMENT YEARS. THE UNEXPLAINED EXPENDITURE RELATING TO THIS ASSESSMENT YEAR 2007-08 WAS WORKED OUT AT RS. 6,51,01,056/-. PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THERE IS NO REFEREN CE TO ANY MATERIAL/EVIDENCE/INFORMATION ON THE BASIS OF WHICH IT COULD BE SAID THAT THE COST OF CONSTRUCTION WAS SHOWN BY ASS ESSEE WAS UNDERSTATED OR ANYTHING ABOVE WHAT WAS DISCLOSED BY ASSESSEE IN THE BOOKS OF ACCOUNT. IT IS A CLEAR CUT CASE THA T THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNT BUT THE ASSESSING OFFICER HAS NOT REJECTED OR NO DEFECT WAS POINTED OUT IN TH E BOOKS OF ACCOUNT REGARDING COST OF CONSTRUCTION OF THE PROJE CT BEFORE REFERENCE TO THE DVO. WE FURTHER FIND FROM THE CASE RECORDS THAT EVEN BEFORE VERIFYING THE BOOKS OF ACCOUNT REG ULARLY MAINTAINED AND WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS THE COST OF CONSTRUCTION WAS REFERRED TO DVO. WE AR E OF THE VIEW, ON THE BASIS OF EVIDENCES PRODUCED BEFORE US, THAT THE ASSESSEE HAS REGULARLY MAINTAINED BOOKS OF ACCOUNT AND VARIOUS RECORDS ALONG WITH SUPPORTING EVIDENCES OF VARIOUS RAW MATERIALS LIKE CEMENT, STEEL, BRICKS, SAND, WOOD, L ABOUR COST, SANITARY WARES ETC. BUT THE AO HAS NOT FOUND OUT AN Y DEFECT IN THE BOOKS/RECORDS/BILLS ETC. AND HAS NOT REJECTED B OOKS OF ACCOUNT. WITHOUT CAUSING ANY DEFECTS IN BOOKS REGUL ARLY MAINTAINED AND WITHOUT REJECTING THE BOOKS U/S. 145 , OF THE ACT THERE IS NO REASON TO ADD ANY AMOUNT ON THE PRESUMP TION THAT THE COST/INVESTMENT IN CONSTRUCTION IS LOW. THUS, W ITHOUT REJECTING THE BOOKS OF ACCOUNT REGULARLY MAINTAINED , THE ADDITION CANNOT BE MADE ONLY ON THE BASIS OF THE DV OS REPORT. WE FURTHER FIND THAT THE ASSESSEE HAS SUPPLIED REQ UISITE INFORMATION TO DVO AND ALSO PRODUCED BEFORE ASSESSI NG OFFICER WHICH HE HAS SEEN AND VERIFIED BUT HAS NOT COMMENTED ON THE GENUINENESS OF THE BILLS AND NOT POINTED OUT ANY DEFECTS IN THE BILLS AND HENCE NOT REJECTED THE RECORDS MAI NTAINED AND PRODUCED BY ASSESSEE. 10. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, T HE PROVISION OF SEC. 142A OF THE ACT, WE ARE OF THE VIEW THAT NO PROCEEDINGS WERE PENDING AT THE TIME OF REFERENCE MADE TO THE D VO I.E. 04.09.2006 ON REGARDING ASCERTAINMENT OF COST OF C ONSTRUCTION OF THE PROJECT AS THE RETURN OF INCOME IN THIS CASE IS FILED ONLY ON 01.12.2007. WE FIND FROM THE STARTING WORDS OF T HE SECTION THAT FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REA SSESSMENT UNDER THIS ACT, ONCE THE PROCESS OF ASSESSMENT IS I NITIATED, THE WORD MAKING SHOULD BE PRESUMED TO BE ASSOCIATED W ITH BOTH ASSESSMENT OR REASSESSMENT, THE REFERENCE U/S. 142A OF THE ACT CAN BE MADE. WHEN THERE IS PROCESS OF ASSESSMEN T, WHICH IS ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 5 INITIATED AFTER FILING OF THE RETURN OF INCOME OR I SSUANCE OF NOTICE U/S. 142(1) AND SIMILARLY, THE PROCESS OF RE ASSESSMENT COULD BE INITIATED ONLY AFTER ISSUANCE OF NOTICE U/ S. 148(1) AFTER DULY FULFILLING THE FORMALITIES MENTIONED THEREIN, THE REFERENCE U/S. 142A OF THE ACT CAN BE MADE. IT CLEARLY SHOWS THAT THE INVOKING OF SEC. 142A IS A PROCESS AFTER THE INITIA TION OF THE ASSESSMENT PROCEEDINGS. FURTHER, IT IS MENTIONED IN THIS SECTION THAT WHERE ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SEC. 69 IS REQUIRED TO BE MADE. THIS ALSO SHOWS THAT A REFERENCE TO DVO U/S. 142A CAN BE MADE ONLY WHEN A REQUIREMENT IS FELT BY THE AO FOR MAKING SUCH REFER ENCE. REQUIREMENT WOULD ARISE OR COULD BE FELT ONLY WHEN THERE IS SOME MATERIAL WITH THE AO TO SHOW THAT WHATEVER EST IMATE ASSESSEE HAS SHOWN IS NOT CORRECT OR NOT RELIABLE. THE USE OF WORD REQUIRE IS NOT SUPERFLUOUS BUT SIGNIFIES A D EFINITE MEANING WHEREBY SOME PRELIMINARY FORMATION OF MIND BY THE AO IS NECESSARY WHICH REQUIRES HIM TO MAKE A REFERE NCE TO THE DVO U/S 142A. IT CAN ONLY BE DURING THE COURSE OF P ENDENCY OF ASSESSMENT OR REASSESSMENT THAT THE AO FRAME HIS MI ND TO REFER THE PROPERTY TO VALUATION CELL OF THE DEPARTMENT. S UCH MIND CAN BE FRAMED IF THERE IS A BASIS TO THINK THAT THE ASS ESSEE MAY HAVE UNDERSTATED THE COST OF CONSTRUCTION OR WHATEVER IS DECLARED BY HIM IN THIS REGARD IS NOT BELIEVABLE. THEREFORE, IT IS QUITE APPARENT THAT REFERENCE TO VALUATION CELL U/S. 142A CAN BE MADE DURING THE COURSE OF ASSESSMENT AND REASSESSMENT AN D NOT FOR THE PURPOSE FOR INITIATING ASSESSMENT. THIS VIEW IS CLEARLY SUPPORTED BY THE DECISION OF AHMEDABAD BENCH IN THE CASE OF UMIYA CO-OPERATIVE HOUSING SOCIETY LTD. V ITO (2005 ) 94 TTJ 392 (AHD), WHEREIN IT IS HELD AS UNDER:- 7. FROM THE ABOVE, IT IS EVIDENT THAT S. 142A EMPO WERS THE AO TO REQUIRE THE VALUATION OFFICER FOR MAKING THE EST IMATE OF THE VALUE OF ANY ASSET PROVIDED THE AO, REQUIRED THE SA ME FOR THE PURPOSE OF MAKING THE ASSESSMENT OR REASSESSMENT. H E ABOVE PROVISION DOES NOT EMPOWER THE AO TO REFER THE MATT ER TO THE DVO FOR GATHERING INFORMATION FOR REOPENING OF ASSE SSMENT. MAKING THE REASSESSMENT AND REOPENING OF ASSESSMENT ARE TWO DIFFERENT THINGS. 8. WHEN THE PROCESS OF REOPENING OF ASSESSMENT ENDS AND THE ASSESSMENT IS VALIDLY REOPENED THEREAFTER THE PROCE SS OF MAKING REASSESSMENT STARTS. THEREFORE EVEN AFTER THE INSER TION OF S. 142A, THE AO SHOULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AS PROVIDE D UNDER S. 147 AND THEREAFTER ONLY THE NOTICE FOR REASSESSMENT CAN BE ISSUED UNDER S. 148. EVEN AFTER THE INSERTION OF S. 142A, THERE IS NO AMENDMENT IN THE LANGUAGE OF S. 147. THEREFORE, THE CONDITION PRESCRIBED UNDER S. 147 FOR REOPENING OF ASSESSMENT STILL EXITS. THE HONBLE GAUHATI HIGH COURT IN THE CASE OF BHOLA NATH MAJUMDAR AND THE TRIBUNAL, JODHPUR BENCH, IN T HE CASE OF ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 6 VIJAY KUMAR (SUPRA) HAVE TAKEN THE VIEW THAT THE VA LUATION REPORT IS ONLY AN OPINION OF THE VALUER AND AN OPIN ION OF A THIRD PARTY CANNOT BE A REASON TO BELIEVE OF THE ITO. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JAMNADAS MADHAVJI & CO. (SUPRA) HAS HELD THAT THE AO CANNOT ISSUE SUMMONS U NDER S. 131 FOR THE PURPOSE OF MAKING INVESTIGATION FOR REO PENING OF THE ASSESSMENT. 11. THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN CONFIRM ED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. UMIYA CO-OPERATIVE HOUSING SOCIETY LTD. IN TAX APPE ALS NO. 1496 TO 1498 OF 2005 DATED 12-07-2006, WHEREIN IT I S HELD AS UNDER:- THE SHORT CONTROVERSY INVOLVED IN THESE APPEALS WH ETHER THE ASSESSING OFFICER CAN REFER ANY MATTER FOR VALUATIO N OF THE PROPERTY OF AN ASSESSEE THOUGH ASSESSMENT AND / OR REASSESSMENT PROCEEDINGS ARE NOT PENDING. THE TRIBU NAL IS OF THE VIEW THAT WHEN THE ASSESSMENT PROCEEDINGS ARE N OT PENDING THE ASSESSING OFFICER HAS NO JURISDICTION AND IS NO T EMPOWERED TO REFER ANY PROPERTY FOR VALUATION TO THE VALUATI ON OFFICER. THE TRIBUNAL HAS DISCUSSED THIS ISSUE AS UNDER: 8. WHEN THE PROCESS OF REOPENING OF ASSESSMENT ENDS AND THE ASSESSMENT IS VALIDLY REOPENED THEREAFTER, THE PROC ESS OF MAKING REASSESSMENT STARTS. THEREFORE, EVEN AFTER T HE INSERTION OF SECTION 142A, THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT AS PROVIDED U/S. 147 AND THEREAFTER ONLY THE NOTICE FOR REASSESSMENT CAN BE ISSUED U/S. 148. EVEN AFTER THE INSERTION OF SECTION 142A THERE IS NO AMENDMENT IN THE LANGUA GE OF SECTION 147. THEREFORE, THE CONDITION PRESCRIBED U/ S. 147 FOR REOPENING OF ASSESSMENT STILL EXISTS. THE HONBLE G AUHATI HIGH COURT IN THE CASE OF BHOLA NATH MAJUMDAR AND THE I TAT JODHPUR BENCH IN THE CASE OF VIJAY KUMAR (SUPRA) HA VE TAKEN THE VIEW THAT THE VALUATION REPORT IS ONLY AN OPINI ON OF THE VALUER AND AN OPINION OF A THIRD PARTY CANNOT BE A REASON TO BELIEVE OF THE ITO. THE HONBLE BOMBAY HIGH COURT I N THE CASE OF JAMNADAS MADHAVJI AND CO.(SUPRA) HAVE HELD THAT THE ASSESSING OFFICER CANNOT ISSUE SUMMONS U/S. 131 FOR THE PURPOSE OF MAKING INVESTIGATION FOR REOPENING OF TH E ASSESSMENT. 9. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THE ISSUE OF NOTICES U/S. 148 IN ALL THREE YEARS UNDER CONSIDERA TION WAS NOT IN ACCORDANCE WITH LAW. WE, THEREFORE QUASH THE NO TICES ISSUED U/S. 148 AND CONSEQUENTLY THE ASSESSMENTS COMPLETED IN PURSUANCE TO NOTICES U/S. 148 ARE ALSO QUASHED. SIN CE THE ASSESSMENT ITSELF HAS BEEN QUASHED, THE GROUNDS RAI SED BY BOTH THE PARTIES WITH REGARD TO THE MERITS OF THE ADDITI ONS FOR ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 7 UNDISCLOSED INVESTMENTS IN THE HOUSE PROPERTY NEED NO ADJUDICATION AT THIS STAGE BECAUSE ONCE THE ASSESSM ENT IS CANCELLED, THE ADDITION DOES NOT SURVIVED. MR. BHATT HAS MAINLY EMPHASIZED ON SECTION 142A OF THE ACT. HE SUBMITS THAT THE ASSESSING OFFICER AT ANY TIME C AN MAKE REFERENCE TO THE VALUATION OFFICER FOR VALUING THE PROPERTY FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT, WHERE TH E VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR SECTIONS 69A & 69B IS REQUIRED TO BE MADE. WHETHER ANY INCOME CAN BE TAXED BY DEEMING THE VALUE OF INVESTM ENT NOT DISCLOSED, ARE ISSUES WHERE SUCH TYPES OF QUESTIONS ARISE WHILE SOME PROCEEDINGS ARE PENDING FOR ASSESSMENT. IN ABS ENCE OF SUCH PROCEEDINGS, THE ASSESSING OFFICER CANNOT REFE R ANY PROPERTY FOR VALUATION TO VALUATION OFFICER. IN OPENING PART OF SECTION 142A THE WORDS USED ARE FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UN DER THE ACT. THE INTENT OF THE LEGISLATION IS THAT THE MATT ER CAN BE REFERRED TO THE VALUATION OFFICER ONLY WHEN THE PRO CEEDINGS OF ASSESSMENT OR REASSESSMENT ARE PENDING BEFORE THE A SSESSING OFFICER. WHEN NO SUCH PROCEEDINGS ARE PENDING, THE ASSESSING OFFICER HAS NO JURISDICTION TO REFER ANY PROPERTY F OR ASSESSMENT. WHEN THE NOTICE U/S. 148 HAS BEEN ISSUED, AND ADDIT ION HAS BEEN MADE BY ADOPTING THE VALUE ESTIMATED BY THE VA LUATION OFFICER, AND WHEN WE FOUND THAT THE ASSESSING OFFIC ER IS NOT EMPOWERED TO REFER ANY PROPERTY FOR VALUATION IN A CASE WHERE NO ASSESSMENT PROCEEDINGS OR REASSESSMENT PROCEEDIN GS OF THE ASSESSEE IS PENDING BEFORE HIM, WE SEE NO JUSTIFICA TION TO MAKE ANY ADDITION IN SUCH CASES. EVEN THE HONBLE APEX COURT HAS ALSO DISMISSED THE SLP OF THE REVENUE IN THIS CASE AND AFFIRMED THE JUDGMENT OF HONBLE HIGH COURT IN SLP NO. CC 187 OF 2007 DATED 07-03-20 07. AS THE ISSUE IN THESE APPEALS OF THE PRESENT ASSESSEE BEFORE US IS EXACTLY IDENTICAL, WHAT WAS BEFORE THE HONBLE HIGH COURT IN THE CASE OF UMIYA COOPERATIVE HOUSING SOCIETY LTD.( SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE CONS IDERED OPINION THAT THE REFERENCE U/S. 142A OF THE ACT CAN BE MADE ONLY WHEN THE PROCEEDINGS UNDER THIS ACT IS PENDING AND NOT OTHERWISE. ACCORDINGLY, THIS LEGAL ISSUE, WE DECIDE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 12. WE FURTHER FIND FROM THE CASE RECORDS THAT EVEN IF A REFERENCE U/S. 142A IS MADE BY THE ASSESSING OFFICE R ON CERTAIN CONSIDERATION SUCH AS ANYTHING FIND DURING THE COUR SE OF SURVEY U/S 133A OF THE ACT OR ON THE BASIS OF A TAX EVASION PETITION OR A REFERENCE IS REQUIRED TO BE MADE DURI NG THE COURSE OF OTHER PROCEEDINGS OR A REPORT OF THE DVO IS AVAI LABLE TO THE ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 8 AO BEFORE MAKING AN ASSESSMENT OR REASSESSMENT THEN SAME CAN BE UTILIZED ONLY IN ACCORDANCE WITH SUB-SEC.(3) OF SEC. 142A I.E., THE ASSESSEE HAS TO BE GIVEN AN OPPORTUN ITY OF BEING HEARD BEFORE SUCH A REPORT IS UTILIZED AND IN ACCOR DANCE WITH SEC. 145 WHERE BOOKS OF ACCOUNT ARE REQUIRED TO BE REJECTED BY POINTING OUT SOME APPARENT DEFECTS. IN OUR CONSIDER ED VIEW THE PROVISIONS OF SEC. 142A CANNOT BE READ IN ISOLATION TO SEC. 145. IN OTHER WORDS, IF BOOKS OF ACCOUNT ARE FOUND TO BE CORRECT AND COMPLETE IN ALL RESPECT AND NO DEFECT IS POINTED OU T THEREIN AND COST OF CONSTRUCTION OF BUILDING IS RECORDED THEREI N, THEN THE ADDITION ON ACCOUNT OF DIFFERENCE IN COST OF CONSTR UCTION COULD NOT BE MADE EVEN IF A REPORT IS OBTAINED WITHIN THE MEANING OF SEC. 142A FROM THE DVO. IT IS BECAUSE THE USE OF TH E REPORT OF THE DVO OBTAINED U/S. 142A IS NOT MANDATORY BUT IS DISCRETIONARY AS THE WORD USED IS MAY THEREIN. AC CORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT C ASE WHEN AO HAS NOT REJECTED THE BOOKS OF ACCOUNT BY POINTING O UT ANY DEFECTS REFERENCE TO THE DVO WILL NOT BE VALID AND, THEREFORE, DVOS REPORT COULD NOT BE UTILIZED FOR FRAMING ASSE SSMENT EVEN IF SUCH A REPORT IS CONSIDERED TO BE OBTAINED U/S. 142A. SINCE REFERENCE TO DVO BEING HELD AS INVALID, THE ASSESSM ENT/ REASSESSMENT FRAMED THEREAFTER WOULD ALSO BE INVALI D. EVEN OTHERWISE, THE ISSUE OF UNEXPLAINED EXPENDITURE U/S . 69C OF THE ACT IS NOT COVERED UNDER THE POWERS OF SEC. 142A OF THE ACT AND THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF AAR PEE APARTMENTS (P) LTD. (S UPRA). THE HONBLE DELHI HIGH COURT HELD AS UNDER:- 6. BEFORE WE ADVERT TO THE INTERPRETATION TO THE A FORESAID PROVISION WE DEEM IT PROPER TO REPRODUCE THE FOLLOW ING DISCUSSIONS DETAINED IN THE ORDER OF TRIBUNAL ON TH IS ASPECT:- THE NEXT POINT TO BE DETERMINED IS WHETHER THE AO IS JUSTIFIED IN REFERRING TO THE DVO FOR COMPUTING COST OF CONST RUCTION CLAIMED AS REVENUE EXPENDITURE. PRIOR TO INSERTION OF SEC. 142A BY FINANCE (NO. 2) ACT, 2004 WITH RETROSPECTIVE EFF ECT FROM 15TH NOV. 1972, THE REFERENCE TO DVO IN ASSESSMENT PROCEEDINGS OTHER THAN AS PERMISSIBLE UNDER S. 55A WAS HELD TO BE INVALID AS HELD BY HONBLE SUPREME COURT IN THE CASE OFF SMT. AMIYA BALA PAUL VS. CIT (2003) 182 CTR (SC) 48 9 : (2003) 262 ITR 407 (SC). SEC. 142A, WAS INSERTED WI TH RETROSPECTIVE EFFECT FROM 15TH NOV., 1972, HOWEVER, EVEN UNDER S. 142A, A REFERENCE CAN BE MADE FOR ASSESSMENT OR REASSESSMENT WHERE AN ESTIMATE OF VALUE OF ANY INV ESTMENT REFERRED TO IN S. 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES REFERRED IN S. 69A OR 69B IS REQUIRED TO BE MADE. THE AO MAY REQUIRE THE VALUATI ON OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT UNDER S. 142A(1), FOR THE PURPOSE OF MAKING AS ASSESSMENT UNDER ACT, WHERE AN ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 9 ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN S. 69A OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OT HER VALUABLE ARTICLE REFERRED TO IN S. 69A OR S. 69B IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HI M. THUS THE POWER AVAILABLE UNDER S. 142(1) IS REQUIRING THE VA LUATION OFFICER TO VALUE ANY INVESTMENT OR BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLE REFERRED IN S. 69, S 69A OR S. 69B OF THE ACT,. THESE POWERS DO NOT EXTEND TO ESTIMATE THE AMOUNT O F UNEXPLAINED EXPENDITURE REFERRED IN S. 69C OF THE A CT. ADMITTEDLY, IN THE PRESENT CASE THE EXPENDITURE ON CONSTRUCTION ARE CLAIMED AND ALLOWED AS REVENUE EXPENDITURE AND CANNOT BE CONSIDERED AS AN INVESTMENT OR BULLION, JEWELLERY E TC. REFERRED IN S. 69, S. 69A OR S. 69B, OF THE ACT. WE ACCORDIN GLY HOLD THAT THE REFERENCE TO DVO IS NOT IN ACCORDANCE WITH THE PROVISIONS OF S. 142A. HENCE THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF SMT. AMIYA BALA PAUL (SUPRA) WILL STILL APPLY TO HOLD THAT NO ADDITION CAN BE MADE MERELY RELYING UP ON THE VALUE ARRIVED AT BY DVO. IN VIEW OF THE ABOVE DISCU SSION, ADDITION OF RS. 19,69,881 IS DIRECTED TO BE DELETED . 7. WE ARE IN AGREEMENT WITH THE AFORESAID INTERPRET ATION GIVEN BY THE TRIBUNAL TO SEC. 142(A) OF THE ACT. OUR DISC USSION ON THIS ASPECT PROCEEDS AS UNDER: 8. SEC. 142(A) IS TO THE FOLLOWING EFFECT:- 142A. FOR THE PURPOSES OF MAKING AN ASSESSMENT OF REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF T HE VALUE OF ANY INVESTMENT REFERRED TO IN S 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERR ED TO IN S. 69A OR S. 69B IS REQUIRED TO BE MADE, THE AO MAY REQUIR E THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO B HIM. 9. IT IS CLEAR FROM THE READING OF SUB-S.(1) OF THI S PROVISION THAT IT ENABLES THE AO TO GET THE VALUATION DONE FROM TH E VALUATION OFFICER IN CERTAIN SPECIFIC TYPES OF CASES. THESE W OULD BE THE CASES WHEREIN AN ESTIMATE OF THE VALUE OF ANY INVES TMENT REFERRED TO IN S. 69 OR S. 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES REFERRED TO IN S. 69A OR 69B IS REQUIRED. THERE IS NO MENTION ABOUT S. 69C OF TH E ACT. AS IS CLEAR FROM THE ABOVE, S 69A DEALS WITH UNEXPLAINED MONEY. SEC. 69B LIKEWISE RELATES TO THE AMOUNT OF INVESTME NT ETC. NOT FULLY DISCLOSED IN BOOKS OF ACCOUNTS. ON THE OTHER HAND, THE PROVISION RELATES TO UNEXPLAINED EXPENDITURE IS IN S. 69C. 10. IN THE PRESENT CASE THE AO HAD DOUBTS ABOUT THE EXPENDITURE INCURRED ON THE PROJECT. AS POINTED OUT ABOVE THE A SSESSEE HAD SHOWN THE EXPENDITURE ON THE AT RS. 38,58,53,602. S INCE AO ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 10 HAD DOUBTED THIS EXPENDITURE, HE REFERRED THE MATTE R TO DVO FOR THE PURPOSE OF DETERMINING THE COST OF CONSTRUCTION OF SAID PROJECT. HOWEVER, AS POINTED OUT ABOVE, FOR THE PUR POSE OF GETTING HIMSELF SATISFIED ABOUT THE PURPORTED UNEXP LAINED EXPENDITURE UNDER S. 69C POWERS UNDER S. 142A COULD NOT BE INVOKED. 11. LEARNED COUNSEL FOR REVENUE SUBMITTED THAT SUCH A POWER COULD BE TRACED TO S. 69B OF THE ACT WHICH RELATES TO AMOUNT OF INVESTMENT ETC. NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. 12. HER SUBMISSION WAS THAT THE EXPENDITURE INCURR ED SHOULD BE CONSIDERED AS COMING WITHIN THE EXPRESSION INVE STMENT. 13. WE CANNOT AGREE WITH THIS SUBMISSION OF LEARNED COUNSEL FOR REVENUE. IF INVESTMENTS COULD INCLUDE WITHIN IT S FOLD HE EXPENDITURE AS WELL WHICH IS INCURRED BY A BUSINESS MAN DURING THE COURSE OF HIS BUSINESS, THERE WAS NO NECESSITY OF HAVING A SEPARATE PROVISION UNDER S. 69C OF THE ACT WHICH DE ALS WITH UNEXPLAINED EXPENDITURE AND READS AS UNDER: 69C. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS I NCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATIO N, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE AO SAT ISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSES SEE FOR SUCH FINANCIAL YEAR. 14. THE SCOPE AND AMBIT OF SS. 69B AND 69C ARE ALTO GETHER DIFFERENT. THE CONNOTATION TO THE INVESTMENT APPEAR ING IN S. 69B HAS TO BE IN THE CONTEXT OF INVESTMENTS MADE IN SOME PROPERTY OR ANY OTHER TYPE OF INVESTMENT AND IT COU LD NOT BE THE BUSINESS EXPENDITURE. THE WORD INVESTMENT CONTAIN ED IN S. 69B DEALS WITH INVESTMENT IN BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES, ETC. IF THE CONTENTION OF LEARNE D COUNSEL FOR REVENUE IS ACCEPTED AND THE IS GIVEN WIDER MEANING AS SOUGHT TO BE MADE OUT, THE PROVISIONS OF S. 69C SHALL BE R ENDERED OTIOSE. 15. THE LEARNED COUNSEL FOR REVENUE HOWEVER TOOK AN OTHER PLEA TO BUTTRESS HER SUBMISSION. HE SUBMITTED THAT HAVIN G REGARD TO THE CIRCUMSTANCES UNDER WHICH S. 142A WAS INSERTED BY THE FINANCE ACT, 2004, IT BE DEEMED THAT THE INTENTION OF LEGISLATURE WAS TO INCLUDE EVEN THOSE UN-EXPLAINED EXPENDITURE STIPULATED IN S. 69C. NO DOUBT THE NEED BEHIND INSERTING S. 14 2A WAS TO EMPOWER THE AO TO MAKE A REFERENCE TO THE VALUATION OFFICER AS THERE WAS NO SUCH SPECIFIC POWERS AND EXISTING P ROVISION CONTAINED IN S. 131 WERE INADEQUATE. HOWEVER, EVEN THIS STATEMENT OF OBJECT AND REASON CLEARLY CONFINED AND LIMITED THE ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 11 REFERENCE TO HOLD A SCIENTIFIC, TECHNICAL AND EXPE RT INVESTIGATION ETC. LEARNED COUNSEL FOR THE ASSESSE E HAS DRAWN OUR ATTENTION TO CBDT CIRCULAR ISSUED BY IT EXPLAI NING THE FINANCE BILL, 2004 WHICH SPECIFICALLY OMITS THE WOR D EXPENDITURE AS WELL AS S. 69C. IT IS ON THIS BASI S THAT THE S. 142A WAS INSERTED IN THE FORM AS IT APPEARS ON THE STATUTE BOOK NOW. IF THE INTENTION WAS TO INCLUDE UNEXPLAINED EX PENDITURE AS CONTEMPLATED IN S. 69C OF THE ACT AS WELL THIS PROV ISION SHOULD HAVE BEEN SPECIFICALLY MENTIONED IN S. 142A OF THE ACT. 16. FROM THE READING OF SUB-S.(1) OF S. 142A, IT IS CLEAR THAT THE LEGISLATURE REFERRED TO THE PROVISIONS OF SS. 69, 6 9A AND 69B BUT SPECIFICALLY EXCLUDED 69C. THE PRINCIPLE OF CASUS O MISSUS BECOMES APPLICABLE IN A SITUATION LIKE THIS. WHAT I S NOT INCLUDED BY THE LEGISLATURE AND RATHER SPECIFICALLY EXCLUDED , CANNOT BE INCORPORATED BY THE COURT THROUGH THE PROCESS OF IN TERPRETATION. THE ONLY REMEDY IS TO AMEND THE PROVISIONS. IT IS N OT THE FUNCTION OF THE COURT TO LEGISLATE OR TO PLUG THE L OOPHOLES IN THE LAW. 17. IN THE PRESENT CASE EXCEPT THE REPORT OF DVO ON WHICH THE AO RELIED UPON, THERE WAS NOTHING ON RECORD TO SUGG EST THAT THERE WAS ANY OF THE EVIDENCE TO DISBELIEVE THE EXP ENDITURE SHOWN BY THE ASSESSEE. IN FACT DURING THE COURSE OF ARGUMENTS, LEARNED COUNSEL FOR THE ASSESSEE PRODUCED THE ASSES SMENT ORDER WHICH CLEARLY DEMONSTRATES THAT THE EXPENDITURE SHO WN BY THE ASSESSEE FROM THE TIME, WHEN IT WAS AN ON-GOING PRO JECT, WAS EXAMINED AND ACCEPTED BY, THE AO 13. IN VIEW OF THE ABOVE FACTS AND THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF AAR PEE APARTMENTS PVT. LTD. (SUPRA) WE ARE OF THE CONSIDERED VIEW THAT THE LEGI SLATURE HAS NOT INCLUDED UNEXPLAINED EXPENDITURE STIPULATED IN SEC. 69C OF THE ACT FOR INVOCATION OF PROVISIONS OF SEC. 142A OF THE ACT. WE FURTHER FIND THAT EVEN THE CBDT CIRCULAR ISSUED BY IT, EXPLAINING THE FINANCE BILL, 2004, SPECIFICALLY OMI TTED THE WORD EXPENDITURE AS WELL AS SEC. 69 FROM THE AMBIT OF SEC. 142A OF THE ACT AS INSERTED IN THE FORM AS IT APPEARS ON TH E STATUE BOOK. IF THE INTENTION OF THE LEGISLATURE TO INCLUDE UNEX PLAINED EXPENDITURE AS CONTEMPLATED IN SEC. 69C OF THE PROV ISION OF SEC. 142A SHOULD HAVE BEEN SPECIFICALLY MENTIONING THE SAME. FURTHER THE COST OF FLAT BEING SHOWN BY THE ASSESSE E AS CURRENT ASSETS NOT AS AN INVESTMENT, IT CANNOT BE SUBJECT M ATTER OF REFERENCE U/S. 142A. EVEN OTHERWISE, THE ASSESSIN G OFFICER REFERRING THE MATTER TO THE DVO FOR VALUATION OF CU RRENT ASSETS IN ONE ASSESSMENT YEAR, HE CANNOT DISTURB THE CONCL UDED ASSESSMENTS OF OTHER ASSESSMENT YEARS. ACCORDINGL Y, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. ITA NOS. 1581&1582/HYD/2013 M/S. LEGEND ESTATES PVT. LTD. ======================== 12 14. IN VIEW OF THE ABOVE DECISION ON BOTH THE LEGA L ISSUES, WE DECIDE THIS APPEAL OF THE ASSESSEE IN FAVOUR OF THE ASSESSEE AND THE ISSUES ON MERITS HAVE BECOME ACADEMIC AND N EEDS NO ADJUDICATION. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D.' 5. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, TAKING A CONSISTENT VIEW, WE ARE INCLINED TO DISMISS THE APPEALS OF THE REVENUE AS THE CIT(A) FOLLOWED EARLIER ORDER OF THE TRIBUNAL. BEIN G SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND TH E SAME IS CONFIRMED. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2014. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 25 TH MARCH, 2014 COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE - 16(1), ROOM NO. 612, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. LEGEND ESTATES PVT. LTD., 6 - 3 - 1238, 6 TH FLOOR, LEGEND APTS., SOMAJIGUDA, HYDERABAD-500 082. 3. THE CIT(A) - V, HYDERABAD. 4. THE CIT - IV, HYDERABAD. 5. THE DR 'B' BENCH, ITAT, HYDERABAD. TPRAO