Pawan Kumar Agarwal, Lucknow V. ITO, Lucknow

ITA 16/LKW/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48328 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: M L AGRAWAL
• Keywords: Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B - BENCH, LUCKNOW. BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER I.T.A.NO.16(LKW.)/2011 A.Y.: 2005-06 PAWAN KUMAR AGARWAL, VS. THE ITO, RANGE- IV(1), 7, SHASTRI NAGAR, LUCKNOW. LUCKNOW. PAN ACIPA2576K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.L.AGRAWAL, ADVOCATE RESPONDENT BY : SHRI P.K.BAJAJ, SR.D.R. O R D E R PER H.L.KARWA, VICE PRESIDENT THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-II, LUCKNOW DATED 16.8.2010 RELATING TO T HE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS: 1. THAT THE PROCEEDINGS U/S 147/148 HAVE NOT BEEN VALIDLY INITIATED NOR HAVE BEEN VALIDLY CONCLUDED AND THE A SSESSMENT FLOWING THERE FROM IS VOID AB INITIO. 2. THAT THE NOTICE U/S 148 HAS BEEN ISSUED ONLY ON THE BASIS OF THE OPINION OF DVO AND LEARNED ASSESSING OFFICER ISSUIN G THE NOTICE HAS NOT APPLIED HIS MIND TO ANY MATERIAL OR INFORMATION ON RECORD TO ARRIVE AT A REASON TO BELIEVE THAT INC OME HAS ESCAPED ASSESSMENT. 2 3. THAT THE NOTICE ISSUED U/S 147/148 IS AGAINST TH E LAW. 4. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE LEARNED ASSESSING OFFICER HAS ERRED BOTH IN LAW AS WELL AS IN FACTS IN ADDING RS.87267/- AS INCOME FROM UNDISCLOSED SOURCE BEING THE DIFFERENCE BETWEEN THE COST ESTIMATED BY THE DVO AN D THE ACTUAL COST INCURRED BY THE APPELLANT IN THE CONSTR UCTION OF THE BUILDING IN THIS YEAR. 5. THAT THE LEARNED CIT(APPEAL) HAS ERRED IN RETAIN ING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BY R ELYING ON THE REPORT OF THE DVO. 6. THAT THE CIT(APPEAL) HAD ERRED BOTH IN LAW AS WE LL AS IN FACTS IN IGNORING THE FACTS THAT THIS HON'BLE COURT HAD D ELETED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER FOR A.Y. 2003- 04 AND 2004-05 WHICH WERE BASED ON THE SAME REPORT OF THE DVO. 7. THAT THE ORDERS OF THE AUTHORITIES BELOW ARE AGA INST THE MERITS CIRCUMSTANCES AND LEGAL ASPECT OF THE CASE. 3. VIDE GROUNDS NO.1 TO 3 OF THE APPEAL, THE ASSESS EE HAS CHALLENGED THE VALIDITY OF RE-OPENING OF THE ASSESSMENT U/S 147/14 8 OF THE INCOME-TAX ACT,1961 (IN SHORT THE ACT). 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE CONSTRUCTED ONE PROPERTY AT PLOT NO.B-1, TRANSPORT NAGAR, KANPU R ROAD, LUCKNOW FROM 1.12.2002 TO 31.9.2006 AND RECORDED THE INVESTMENTS MADE THEREIN IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM. DURING THE ASS ESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05, THE AO REQUIRED THE ASSESS EE TO FURNISH THE DETAILS OF INVESTMENT MADE IN THE PROPERTY WHICH WAS DONE AND A COPY OF THE REGISTERED VALUERS REPORT DATED 10.10.2006 WAS FIL ED. HOWEVER, WITHOUT 3 APPLYING HIS MIND TO THE MATERIAL ON RECORD AND WIT HOUT RECORDING HIS SATISFACTION ABOUT THE NECESSITY FOR REQUISITION, THE THEN AO ISSUED A REQUISITION UNDER SECTION 142A TO THE DISTRICT VALU ATION OFFICER. THE DISTRICT VALUATION OFFICER PREPARED A REPORT DATED 22.12.2006, WHICH WAS CONFRONTED TO THE ASSESSEE ON 26.12.2006 TO FILE OB JECTION, IF ANY, TO THE REPORT DATED 18.12.2006. ON 28.12.2006, THE ASSESS EE FILED OBJECTIONS TO THE DVOS REPORT WHICH WERE SUPPORTED THE BY REPORT OF THE REGISTERED VALUER SHRI K.CHANDRA. THE AO DID NOT REFER THE OBJECTI ONS TO THE REPORT OF THE DVO AND HIMSELF GRANTED DEDUCTION OF 7.5% FROM THE COST ESTIMATED BY THE DVO FOR SELF SUPERVISION AND ADDED THE DIFFERENCE B ETWEEN THE ESTIMATED COST AND THE ACTUAL COST INCURRED BY THE ASSESSEE DURING THAT YEAR. FOR THIS YEAR, THE AO ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 18.1.2007 ON THE BASIS OF THE DVOS REPORT OBTAINED BY HIM DURING TH E ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05. THE AS SESSEE TOOK THE PLEA BEFORE THE AO THAT THE NOTICE UNDER SECTION 148 CAN NOT BE ISSUED ON THE BASIS OF THE REPORT OF THE DVO. THE ASSESSEE OBJEC TED TO THE NOTICE AND THE AO DISPOSED OF THE OBJECTIONS STATING THAT THE CASE S QUOTED BY THE ASSESSEE DID NOT APPLY TO HIS CASE AND ALSO QUOTED TWO CASES . THEREAFTER, THE ASSESSEE ASKED THE AO TO FORWARD THE OBJECTIONS FILED BY HIM TO THE DVO. THE SPECIFIC OBJECTIONS REQUIRED BY THE DVO WERE SUPP LIED AND WERE FORWARDED BY THE AO TO THE DVO. HOWEVER, THE AO RE LIED ON THE DVOS REPORT AND HAS ADDED RS.87,267 AS INCOME FROM UNDIS CLOSED SOURCES BEING THE DIFFERENCE BETWEEN THE COST ESTIMATED BY THE DV O FOR THIS YEAR AND THE COST INCURRED BY THE ASSESSEE. HE ALSO DID NOT GRA NT THE DEDUCTION OF 7.5% ALLOWED BY HIM FROM THE ESTIMATED COST OF CONSTRUC TION GRANTED BY HIM IN THE CASE FOR A.Y. 2004-05. IN THIS CASE, THE DVO ESTIMATED THE INVESTMENT OF RS.3,04,000 FOR THE RELEVANT ASSESSMENT YEAR AS AGAINST RS.2,16,333 4 DISCLOSED BY THE ASSESSEE. THUS, FOR THE YEAR UNDE R CONSIDERATION, THERE IS DIFFERENCE OF RS.87,267 BETWEEN THE INVESTMENT SHO WN BY THE ASSESSEE AND ESTIMATED BY THE AO. CONSEQUENTLY, THE ADDITION OF RS.87,267 WAS MADE BY THE AO. 5. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C HALLENGED THE ORDER OF THE AO BEFORE THE LD.CIT(A). THE LD.CIT(A) CONFI RMED THE ADDITION AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. FOR THIS YEAR, THE A O ISSUED A NOTICE UNDER SECTION 148 DATED 18.1.2007. THE ASSESSEE FILED A L ETTER REQUESTING THE AO TO TREAT THE RETURN FILED ON 30.10.2005 FOR THIS YEAR AS A RETURN FILED IN RESPONSE TO THIS NOTICE. THE ASSESSEE ALSO REQUESTED THE AO TO ISSUE A COPY OF THE REASONS RECORDED, WHICH WAS SUPPLIED AND THE SAM E IS REPRODUCED BELOW: DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF A .Y. 2004-05 OF ASSESSEE, A REFERENCE U/S. 142A OF THE I.T. ACT, 1961 WAS MADE TO THE DISTRICT VALUATION OFFICER, KANPUR TO ASCERTAIN THE CORRECT INVESTMENT IN PROPERTY NO. B-1, TRANSPORT NAGAR, KA NPUR ROAD, LUCKNOW. THE DVO VIDE HIS REPORT DATED 22.12.2006 E STIMATED THE INVESTMENT OF RS.3,04, 000/- FOR THE RELEVANT YEAR I.E. A.Y. 2005-06 AS AGAINST RS.2,16,733/- AS DISCLOSED BY ASSESSEE. THU S FOR THE YEAR UNDER CONSIDERATION THERE IS DIFFERENCE OF RS.87267 /- BETWEEN THE INVESTMENT AS SHOWN AND AS ESTIMATED BY DVO. IN ABSENCE OF DETAILED BUILDING ACCOUNT BY A SSESSEE AS IS DISCUSSED IN PARA 3 (PAGE 3) OF ASSESSEES ASSESSME NT ORDER OF A.Y. 2004-05, I HAVE REASON TO BELIEVE THAT ASSESSEES I NCOME FOR A.Y. 2005-06 HAS ESCAPED ASSESSMENT TO THE EXTENT OF RS. 87,267. ACCORDINGLY, NOTICE U/S 148 OF THE I.T.ACT, 196 1 IS ISSUED FOR A.Y. 2005-06. 5 6.1 SHRI M.L.AGRAWAL, ADVOCATE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT RE-OPENING OF ASSESSMENT ON THE BASIS OF THE REPORT OF THE VALUATION OFFICER DETERMINING THE COST OF CONSTRUCTION AT A F IGURE HIGHER THAN WERE DISCLOSED BY THE ASSESSEE, IS NOT JUSTIFIED. RELIAN CE WAS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ACIT VS. DHARIYA CONSTRUCTION CO., (2010) 328 ITR 515(SC). WHEREIN T HE HON'BLE SUPREME COURT HELD AS UNDER : HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS C ASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASE D ON THE OPINION GIVEN BY THE DISTRICT VALUATION OFFICER (DVO). THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT , 1961. THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INF ORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CI RCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. CIVIL APPEAL IS, ACCORDINGLY, DISMISSED. NO ORDER AS TO COSTS. 6.2 SHRI M.L.AGRAWAL, ADVOCATE, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN THE INSTANT CASE ALSO THE AO HA S NOT APPLIED HIS MIND. THE NOTICE UNDER SECTION 148 WAS ISSUED SOLELY ON THE B ASIS OF THE REPORT OF THE DVO. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES O F RE-OPENING ASSESSMENT UNDER SECTION 147 OF THE ACT. HE, THEREF ORE, SUBMITTED THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF DHARIYA CONSTRUCTION CO.(SUPRA), RE-ASSESSMENT FRAMED BY TH E AO MAY BE ANNULLED AND THE RETURNED INCOME BE ACCEPTED. IN OUR VIEW, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF DHARIYA CONSTR UCTION CO. (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. IN THE INSTANT CASE, THE 6 AO HAS RE-OPENED THE ASSESSMENT SOLELY ON THE BASIS OF THE REPORT OF THE DVO, WHICH FACT IS APPARENT FROM THE REASONS RECORD ED BY HIM. NO OTHER MATERIAL WAS AVAILABLE WITH THE AO TO DRAW A CONCLU SION THAT THE ASSESSEE HAS SHOWN LESSER VALUE OF CONSTRUCTION. IT IS ALSO SETTLED LAW THAT THE REPORT OF THE VALUATION OFFICER IS AN OPINION AND IT MAY CREA TE SUSPICION AND DOUBT. THUS, THE RE-OPENING MADE SOLELY ON THE BASIS OF D VOS REPORT IS NOT TENABLE IN LAW. IN VIEW OF THE ABOVE, WE ANNUL THE RE-ASSESSMENT O RDER DATED 31.12.2007 AND ALLOW GROUNDS NO.1 TO 3 OF THE APPEA L. 7. SINCE WE HAVE ANNULLED THE RE-ASSESSMENT ORDER A ND THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE THE GROUNDS RAISED BY THE ASSESSEE ON MERITS. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 6.4.201 1. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT APRIL 6TH ,2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R.,ITAT, LUCKNOW. SRIVASTAVA.